More annual reports from Cyclopharm Limited:
2023 ReportCyclopharm LimitedAnnual Report 2020Annual Report 2020Cyclopharm Limited Nuclear MedicineNuclear Medicinewww.cyclopharm.com Cyclopharm Limited and its Controlled Entities
ABN 74 116 931 250
Cyclopharm head office, Sydney
Warehouse, Kingsgrove
Manufacturing of Technegas™ Generators
Innovative solutions
Cyclopharm Limited is a leading health technology company
operating in the diagnostic lung imaging field. Our market leading
nuclear medicine imaging product Technegas™ is available in over
60 countries. We are a world leader in functional lung ventilation
imaging technology. Our primary near term catalyst for growth is
the commencement of sales in the USA in 2021.
Comparison of V/Q SPECT and CT Angiography for the
Diagnosis of Chronic Thromboembolic Pulmonary Hypertension
A
B
B
—
A
Ventilation scan (with Technegas™)
CT imaging
Fusion of Ventilation and CT imaging
1
Contents
01
02
08
18
33
34
38
73
74
78
79
Summary Financials
Chairman’s Letter
Managing Director’s Review
Directors’ Report
Auditor’s Independence Declaration
Consolidated Financial Statements
Notes to the Financial Statements
Directors’ Declaration
Independent Audit Report
Shareholder Information
Corporate Directory
in nuclear medicine
Summary Financials
Full Year ending 31 December
Sales Revenue
– Technegas™ Division
– Molecular Imaging Division
Total Sales Revenue
Net (Loss)/Profit Before Tax
– Technegas™ Division
– Molecular Imaging Division
Total Net (Loss)/Profit Before Tax
Loss After Tax
Full Year ending 31 December
Diluted Loss Per Share
2020
$'000
2019
$'000
2018
$'000
14,523
153
14,676
14,079
13,404
–
–
14,079
13,404
(5,983)
(3,171)
139
(5,844)
(6,044)
2020
cents
(7.89)
746
(2,425)
(2,912)
2019
cents
(4.28)
455
(377)
118
(35)
2018
cents
(0.05)
2
Chairman’s Letter
Dear Shareholders,
2020 was a pivotal year for Cyclopharm. Your company delivered
on its strategic goals for the year despite disruption from the COVID-19
pandemic affecting all our markets.
In 2020 we recorded sales of our core Technegas™
products in 60 countries; we progressed our
‘Beyond PE’ research and development initiatives
and generated new revenue streams by leveraging
our high quality global distribution capabilities.
We are very proud that Technegas™ has now been
used in over 4.3 million patient procedures globally.
Importantly, during the year we received approval
to file our New Drug Application (NDA) for
Technegas™ with the US regulator, the Food and
Drug Administration (FDA). We have worked closely
with the FDA and expect the final major procedural
step in their approval process, an onsite inspection
of our manufacturing facility in Sydney, to be
completed in early April 2021. As a result we have
even greater confidence that we will be in a position
to commence sales of Technegas™ in the US
market by H2 2021.
The existing market for nuclear medicine
ventilation imaging for Pulmonary Embolism
in the US is estimated to be approximately
US$90 million annually and your Board remains
confident that Technegas™ can achieve a 50%
share over 2 to 3 years, rising to an 80% share
over a 5- to 7-year period. We believe another
US$90 million annually can be converted over
similar periods from competing technologies
once Technegas™ is established. To prepare for
a rapid entry into the US market, we are investing
in building our US management team, distribution
capabilities and manufacturing inventory.
Importantly, the company is now fully funded,
following the successful capital raising of $33
million in February 2021, which included an
institutional placement of $30 million and a heavily
oversubscribed retail share purchase plan, which
raised an additional $3 million. These funds will
support the rapid commercialisation of Technegas™
in the USA; be selectively invested into new and
larger growth opportunities for Technegas™
in respiratory conditions beyond Pulmonary
Embolism, what we describe as our ‘Beyond PE’
initiatives and support ongoing research and
development activities; product and systems
enhancement and working capital.
It was also pleasing to see the initiation of the new
3rd party distribution revenue stream in 2020. The
company generated $2.2 million of revenues from
distributing third party products across Europe on
behalf of Jubilant Draximage Inc of Canada; TEMA
Sinergie based in Italy and ROTOP Pharmaka
based in Germany. This additional revenue helped
the business to deliver record revenues in 2020,
despite the COVID-19 pandemic.
Our expectations for 2021 is that the culmination of
many years of hard work will see us commence sales
of Technegas™ in the US, which will significantly
improve the underlying profitability of Cyclopharm.
In addition, we expect sales of Technegas™ in our
existing markets to continue to rebound as the
world emerges from the COVID-19 pandemic and
we expect third-party distribution revenues to be a
growing and important source of additional earnings
for Cyclopharm as we expand those relationships to
include distribution in Australia.
2021 will also be a year of continued investment in
our ‘Beyond PE’ initiatives, supported by our strong
balance sheet, with a view to unlocking this next
phase of significant growth in shareholder value.
In line with good corporate governance practices,
Cyclopharm's Board continues to evaluate its skills
and composition. In anticipation of US market
entry and to support our plans to expand the use
of Technegas™ beyond the PE market, the Board is
considering appointing an additional director, with
the requisite skills and experience in those markets,
during 2021. The appointment will only be made
following a thorough and rigorous selection process.
On behalf of the Board, I thank our Managing
Director, all our staff and wider stakeholders for
their commitment to the company and I thank you,
the shareholders, for your continuing support.
David Heaney
Chairman
Cyclopharm Limited Annual Report 2020 3
2020 Highlights
2H Technegas™
sales up 51.4%
vs 1H
After pandemic
impacted first half
USFDA
clinical trial for
Technegas™
trials have met Primary and
Secondary endpoints
Record Group
sales revenue
$14.68m
up 4.2%
New third party
distribution
revenues $2.2m
H1 $0.7 m0illion +
H2 $1.5 million
Maintained
full year dividends
at 1.0cps
4
To date, Technegas™
has been used in over
4.3 million
patient procedures
globally
and Technegas™ is available
in over 60 countries
Available Now
Coming Soon
CYC Subsidiaries
HQ
Cyclopharm Limited Annual Report 2020
5
2020 Revenue by region
15% Asia Pacific (2019: 17%)
12% Canada (2019: 18%)
57% Europe (2019: 62%)
1% Rest of World (2019: 3%)
15% Third Party Sales
Opportunity
6
The market for nuclear medicine ventilation
imaging for Pulmonary Embolism in the US is
estimated to be approximately
US$180 million*
annually
* The current addressable existing market of US$90 million plus the projected increase of
pulmonary embolism imaging through nuclear medicine from 15% to 30% through the adoption
of Technegas™ and Single Photon Emission Tomography (SPECT) 3-D imaging.
Photo: Atlanta, Georgia, USA Piedmont Park skyline in autumn
Cyclopharm Limited Annual Report 2020 7
The process for approving Technegas™ sales
in the United States is in its final stages.
Securing approval to sell Technegas™ in the US market is a significant opportunity for
Cyclopharm. The USFDA’s decision to conduct an in person site inspection of the company’s
manufacturing facility in Sydney in late March 2021 represents a significant step in the final
approval process. In preparation for a rapid entry into the US market, early in H2 2020, the
company has been investing to build inventory; sales capabilities and infrastructure.
8
Managing Director’s Review
Cyclopharm delivered another solid financial performance in 2020 and
we continue to make progress in executing on our growth objectives.
These achievements are even more noteworthy given the disruption
to medical procedures from the SARS-CoV-2 (COVID-19) pandemic,
negatively impacting our core Technegas™ business, particularly in the
first half of the year.
In 2020, Cyclopharm made progress against our four major strategies
for growth.
1
Grow
2
Expand
3
Develop
4
Leverage
Grow Technegas™
sales
Expand the use
of Technegas™ –
Beyond PE
Identify, develop
and commercialise
complementary
innovative technology
Leverage our core
strengths to seek
out complementary
technologies and
businesses
We have worked closely with the United States
Food and Drug Administration (USFDA) to advance
the approval process to start sales of Technegas™
in the USA, which will create an opportunity to
significantly grow the business.
We have continued to invest in trials and support for
clinicians to expand the use of Technegas™ beyond
the traditional diagnosis of Pulmonary Embolism
(PE) into chronic respiratory disease management
which could deliver exponential growth.
We continued to add new markets for Technegas™,
and now supply it to over 60 countries. During
the year we increased direct customer access,
establishing offices in Brussels, Belgium and Bristol,
United Kingdom.
We have also leveraged our operational
infrastructure, regulatory resources and direct
marketing capabilities to expand our third party
distribution partnerships and create a valuable
new revenue stream.
Cyclopharm Limited Annual Report 2020 9
Financial performance
In 2020, Cyclopharm generated total sales revenues
of $14.68 million, with sales revenues from our
core Technegas™ business rebounding strongly
in the second half. Consumable revenues in the
second half were $5.4 million, 45.9% higher than the
first half, driven by the resumption of orders in all
markets. The second half recovery was underpinned
by improved patient processing procedures and
availability of personal protection equipment
(PPE) for health care workers that allowed imaging
procedures to take place, following a global trend to
delay them in response to COVID-19 in the first half.
It was also pleasing to see earnings from the
distribution of third party products in the second
half of $1.5 million, which helped establish a new
revenue stream that contributed $2.2 million for
the full year. Margins on our third party distribution
revenues are lower than our core Technegas™
business but third party distribution is expected to
be an ongoing source of complementary profits that
will grow as we expand into new markets.
Cyclopharm recorded a loss before tax of
approximately $5.84 million, an increase of
$3.42 million on the prior year. This performance
primarily reflects the ongoing investment required
for Cyclopharm to meet global regulatory
requirements and complete the USFDA approval
process. The loss includes $0.6 million of foreign
exchange losses linked to the timing of the payment
and refund of the US$2.9 million USFDA New Drug
application deposit.
Subsequent to the year end, in February 2021,
Cyclopharm announced it had successfully raised
$33.0 million via an oversubscribed institutional
placement and retail share purchase plan (SPP).
The placement and SPP were made at a discount of
10.2% to the Company’s volume weighted average
closing price of a Share traded on the ASX over the
five trading days prior to the announcement of the
capital raising.
The funds raised, after costs, will be used to support
the rapid USA commercialisation of Technegas™
following USFDA approval, targeted in H2 2021. In
addition, some of the proceeds will be selectively
invested into new larger growth opportunities for
Technegas™ in the Beyond PE respiratory medicine
market as well as ongoing research and development
activities; product and systems enhancement; and
working capital.
A portion of Cyclopharm’s costs, associated with
the Group’s overseas research and development
activity not able to be executed in Australia, have
been approved for inclusion in an R&D Tax Incentive
program administered by AusIndustry. This has
allowed the Company to report other income of
$3.0 million for the year compared to $2.9 million
in 2019.
Investment in current USFDA approval program for Technegas™
2019: $3.84m
2020: $3.31m
Total to 31 December 2020: $12.71m
10
2020 Operational highlights
USFDA New
Drug Application
lodged in
March 2020
Process to
allow Technegas™
approval in the
US in H2 2021
on track
Technegas™
Beyond PE and
post COVID-19
infection pilot
trials underway
Technegas™
procedures and
sales rebound
from COVID-19 impact
in H2 2020
Managing Director’s ReviewCyclopharm Limited Annual Report 2020 11
Operations and strategy
During the year, we continued to successfully execute the Company’s growth strategy
while, as an essential service, we continued to supply our markets and prioritise employee
safety and welfare.
1
Grow
Grow Technegas™ sales
Technegas™ sales in the first half declined in
response to imaging procedures being postponed
as healthcare providers around the global adapted
to the COVID-19 pandemic. Whilst our forecast that
sales would recover strongly in the second half
was born out by a 51.4% increase compared to
the first half, it was not sufficient to prevent a 12%
decline in Technegas™ revenues for the full year
to $12.35 million.
In total PAS sales fell by 860 units or 23.6%,
however PAS revenues only fell 15% reflecting a
more favorable sales mix towards more profitable
regions. Generator sales fell by seven units or 12%
with revenues down 6% reflecting the inclusion of
generator services revenue.
Regional review
PAS sales declined in every region, however there
was an increase in generator sales across the Asia
Pacific region and the initiation of new third party
sales of Rotop, TEMA and Draximage products,
initially in Europe, supported a 3% increase in
total sales.
Canada returned as the largest country market by
volume in 2020 with 696 PAS kits sold, down 23%,
while generator sales declined by two to seven to
give a 31% decline in total sales compared to the
record performance in 2019.
The resumption of sales in France, 600 PAS
kits sold, made it the biggest European market
in 2020. PAS sales in Germany increased 22%
compared to 2019, while PAS sales in Scandinavia
were in line with the previous year. Overall sales
of Technegas™ products and services in Europe
declined 5%.
The Asia Pacific region delivered a resilient
performance in 2020 with generator sales up by
30% to 10 units driven by three additional generator
sales in Australia. Although PAS sales were down
15% to 642 the impact of COVID-19 masked a
recovery in PAS sales following a fault at ANSTO’s
manufacturing facility which disrupted the supply
of the Molybdenum-99 isotope, a key input into
PAS kits.
In the Rest of the World region PAS sales in Latin
America were down 74%, from 117 to 34, and
generator sales declined 88%, from eight to one in
2020. In South Africa, PAS sales declined 73% from
56 to 15 in 2020, with no generator sales for the
second year running.
Technegas™ division sales by region
$2.26m
$1.76m
$8.27m
$0.06m
$2.17m
2020: $14.52m
2019: $14.08m
2018: $13.40m
Asia Pacific
Canada
Europe
Rest of World
Third Party Sales
12
1
Grow
USFDA approval process
Clinical support for Technegas™ in the USA
The most significant business opportunity for
Cyclopharm is gaining USFDA approval to sell
Technegas™ in the US market. The process for
approving Technegas™ sales in the US is in its
final stages.
Cyclopharm’s Phase 3 trials to support its USFDA
application for US market entry were confirmed
to have met their Primary and Secondary Efficacy
Endpoints in September 2020. The Company
continues its ongoing positive dialogue with the
USFDA and remains highly confident the approval
process is on track to complete in H2 2021.
In March 2020 the USFDA announced, as a result
of the COVID-19 pandemic, that it was suspending
all onsite inspections. This announcement
was updated in August 2020 when the FDA
issued guidance that foreign pre-approval and
for-cause inspection assignments that were
deemed mission-critical would be considered for
inspection on a case-by-case basis.1
The USFDA will be conducting a pre-approval
inspection of Cyclopharm’s manufacturing facility
at Kingsgrove, NSW during the week commencing
29 March 2021. This audit is a critical step in the
final approval process and the Company views it
as an acknowledgement to the vital importance of
Technegas™ to US patient care.
During the course of 2020 and into 2021 Nuclear
Medicine Physicians and Technologists have,
independent of Cyclopharm, wrote to the FDA
requesting it to expedite approval of Technegas™
for use in the US market. The correspondence
underscores the observation that Technegas™
has a superior safety profile in relation to
COVID-19 when compared to its peers.
In the most recent letter, dated January 2021,
Nuclear Medicine Technologists requested
‘Fast Track Approval’ for Technegas™, stating
“We ask the FDA to finalize the approval of the
Technegas™ application with utmost expediency
to bring this ventilation agent with the least
likelihood of spreading the virus to healthcare
professionals supervising the performance
of ventilation scintigraphy”. This unsolicited
correspondence from frontline health-workers
in the US supports the Cyclopharm Board’s
expectation there will be strong initial sales
demand for Technegas™ following USFDA
approval.
1 Manufacturing, Supply Chain, and Drug and Biological Product Inspections During COVID-19
Public Health Emergency Questions and Answers (https://www.fda.gov/media/141312/download)
Managing Director’s ReviewClinical support correspondenceDateTypeJune 2020 77 Nuclear Medicine PhysiciansNovember 202090 Nuclear Medicine PhysiciansDecember 2020102 Nuclear Medicine Technologists January 2021Society of Nuclear Medicine and Molecular Imaging representing over 16,000 membersCyclopharm Limited Annual Report 2020 13
US Market entry and sales model
Over the course of 2020 Cyclopharm has been
preparing for a rapid roll out of Technegas™ in the
USA once USFDA approval has been achieved.
The Company has grown its inventories by
$2.2 million to $4.7 million at year end; pursued
agreements for third party distribution, service and
installation, and administrative support.
It is very important to note Technegas™ will be
reimbursable by health insurers from day-one.
Reimbursement for Technegas™ is based on
established nuclear medicine procedures that are
agnostic to the approved agents being used.
In order to accelerate entry into the US market, the
Company plans to supply Technegas™ generators
to US hospitals and generate revenues through an
ongoing service model rather than upfront sales
of generators. This approach removes the upfront
capital expenditure processes and consequential
time delays in adopting Technegas™.
Under the service model, Cyclopharm will retain
ownership of the generators over their lifecycle and
provide consumables, generator maintenance and
operator training on an ongoing basis to hospitals,
in return for a continuing, long duration service fee
and consumable sales. This approach also allows
Cyclopharm to adhere to the ongoing regulatory
requirements for Technegas™, as a drug-device
combination product, which is expected by
the USFDA.
The financial impact of this model will result in
Cyclopharm expanding the value of the plant and
equipment on its balance sheet and replacing
lumpy generator and consumables sales revenue
with a more predictable and growing recurring
revenue base over the generators’ lifecycle.
The initial existing market for nuclear medicine
ventilation imaging in the USA for pulmonary
embolism alone is estimated to be approximately
US$180 million annually and will be accessed in two
stages. The first stage is the current addressable
existing market of US$90 million, representing
approximately 600,000 individual procedures.
Based on Cyclopharm’s experience in the Canadian
market, it remains confident that Technegas™ can
achieve a 50% share of the USA market over 2 to
3 years, post US market entry, with an 80% share
achievable over a 5 to 7-year period.
The second stage will be increasing the pulmonary
embolism diagnostic market imaged through
nuclear medicine from 15% to 30%. In the USA,
85% of all imaging to rule out PE is performed with
CTPA. Based on global experience, the unique
properties of Technegas™ and the reliability of
imaging outcomes enabled by our product, it is
projected that the USA nuclear medicine market
will adopt the 3-D imaging technique referred to
as Single Photon Emission Tomography (SPECT)
as opposed to the current 2-D imaging or Planar
Imaging predominantly being used in the USA.
SPECT imaging provides superior outcomes to
both Planar and CTPA in the diagnosis of PE.
In parallel with the clinical elements of our
USFDA New Drug Application, Cyclopharm is
implementating an updated Quality Management
System including an Electronic Management
System (EQMS) at our manufacturing facility in
Sydney. Furthermore, the Company has initiated
a comprehensive documentation review of both
our medical devices and pharmaceutical products
to ensure Cyclopharm meets the compliance
requirements of the most recent USFDA guidelines
as well as the new International Medical Device
Single Audit Program (MDSAP) implemented in
2019 and upcoming compliance with European
Medical Device Regulations (MDR) that will be
effective as of 2021.
14
2
Expand
Expand the use of Technegas™ –
Beyond PE
Cyclopharm is confident that the extension of
Technegas™ into new applications Beyond PE,
such as the diagnosis and monitoring of COPD,
asthma and other respiratory disease states, will
create opportunities to materially expand the
market for Technegas™ and drive shareholder
value over the medium term.
Technegas™ remains the recognised functional
ventilation imaging agent used in diagnosing
Pulmonary Embolism as referenced in both the
recently published Canadian Association of
Nuclear Medicine Guidelines2 and the updated
2019 European Association of Nuclear Medicine
Guidelines3. Both guidelines also reinforce superior
outcomes from the use of Technegas™ for nuclear
medicine imaging in patients with COPD.
Cyclopharm estimates the global COPD market
is approximately 30 times the size of the PE
market and over 500 million patients suffering
with COPD and Asthma could benefit from the
use of Technegas™ in diagnosis and ongoing
patient monitoring/management. Cyclopharm is
involved with several Beyond PE clinical research
projects using Technegas™ in a range of respiratory
diseases. Patient recruitment for these research
initiatives slowed during the first half of 2020 and
in some cases research trials were put on hold in
response to COVID-19. The Company understands
these trials have recommenced.
In 2020 we invested over $170,000 in Beyond PE
trials, which follows on from approximately
$350,000 in 2019.
In addition, the Company has received enquiries
from several third parties in the USA interested
in conducting trials on Technegas™, including
with patients who had contracted COVID-19.
Advancing these initiatives could expand the use
of Technegas™ by improving the diagnosis and
management of patients with COPD; other small
airways diseases and those who are recovering
from COVID-19 related lung injuries.
Investment in Beyond PE trials
2019: $350,000
2020: $170,000
Cyclopharm’s Beyond PE research projects
Study
CYC-009
HMRI
McMasters University
CHUM
Woolcock Institute
Dalhousie University
Indication
Status: 1 February 2021
Ventilation comparison of
Technegas™ vs Xe133
Asthma/COPD
Lung resection surgery
COVID-19 related lung ventilation and
perfusion injury
COPD
Asthma/COPD
Lung transplant complications
Primary and secondary endpoints met.
Results reported September 2020.
Fully recruited 100 patients. First publication pending.
Recruitment resumed. 19 of 115 patients recruited.
Recruiting. 25 of 92 patients recruited.
Recruitment resumed. 4 of 30 patients recruited.
5 of 70 patients recruited.
Recruitment resumed. 12 of 30 patients recruited.
2 Leblanc et. Al. CANM Guidelines for Ventilation/Perfusion (V/P SPECT) In Pulmonary Embolism. November 2018
3 Bajc et. Al. EANM guideline for ventilation/perfusion single-photon emission computed tomography (SPECT) for diagnosis of pulmonary
embolism and beyond. European Journal of Nuclear Medicine and Molecular Imaging. July 2019. https://doi.org/10.1007/s00259-019-04450-0
Managing Director’s ReviewCyclopharm Limited Annual Report 2020 15
3
Develop
4
Leverage
Commercialising new technologies –
Ultralute™
Ultralute™ is a proprietary technology, developed
and owned by Cyclopharm, which allows nuclear
medicine departments to increase the productivity
of their Technetium 99m generators by up to 50%.
Cyclopharm is currently seeking to register
Ultralute™, in Europe, as a medical device to
support better acceptance of this new first-in-class
technology. A change in European Union regulations
requiring recertification of existing medical devices
has created a significant backlog of medical device
applications awaiting registration. The Company
does not anticipate Ultralute™ receiving registration
in Europe in 2021, but remains confident of its
ultimate revenue potential.
Leverage core strengths – third party
distribution
Cyclopharm has leveraged its regulatory expertise
and operational footprint to secure third party
distribution agreements in Europe, following the
acquisition of certain of the Company’s European
distributors.
In 2020 we commenced sales with TEMA Sinergie
based in Italy, ROTOP Pharmaka based in Germany
and Jubilant Draximage Inc of Canada; generating
$2.2 million of revenue at solid margins.
Third party distribution revenues
2020: $2.2 million
16
Molecular Imaging Division
Cyclopet Business Venture Collaboration
In late 2019, a business venture collaboration
agreement between Cyclopharm, Pettech Solutions
Limited, a wholly owned subsidiary of the Australian
Nuclear Science and Technical Organisation
(ANSTO) and Cyclotek Aust Pty Ltd was executed.
The collaboration combined CycloPet and Pettech’s
cyclotron facilities under a single operating
enterprise known as Cyclotek NSW Pty Ltd with the
aim of realising the inherent value of Cyclopharm’s
legacy Cyclotron assets both to generate profits
and contribute to enhanced health outcomes for
the Australian community.
During the year, Cyclotek NSW Pty Ltd made a
$0.15 million positive contribution to the Group’s
results.
Macquarie Medical Imaging
Cyclopharm continues to maintain its 20% equity
ownership in Macquarie Medical Imaging (MMI). It is
anticipated that MMI will be de-registered upon the
finalisation of its accounts payable and receivables.
Ongoing litigation
Cyclopharm continues to defend its valuable
Intellectual Property vigorously and successfully.
In 2019, the company successfully brought an
initial civil case against its former employee in the
German market, Mr Bjorn Altmann and Almedis
Altmann GmbH (Almedis).
In 2020, further actions were launched in both
German and Australian courts. Favourable progress
is being made in both jurisdictions and the Board
remains confident that it will achieve successful
outcomes from these actions in 2021.
Leadership Team
Cyclopharm has, over several years, been
building the team to take advantage of the
transformational opportunity the expected entry
into the US market in 2021 represents. We have
gathered some of the best talent in the industry,
whether that be through internal appointments
such as Peter Wynne, our Operations Manager
or attracting external talent with the appointment,
in 2017, of Chief Operating Officer Mathew Farag.
The management team has been further
strengthened with the appointments in 2019 of
Niamh McAree as Head of Quality and Regulatory,
Dr. Mark Doverty as Global Head of Regulatory
Compliance and Clinical Research, Sally Ann
Cornelius as Head of Sales and Chris Quinn as
Head of Service.
The breadth and depth of experience and the
complementary skills across the Cyclopharm
management team will ensure we can rapidly take
advantage of entry into the US market and the
opportunities that will flow from our Beyond PE
initiatives.
Summary and outlook
Cyclopharm’s ability to deliver record revenues,
despite the global pandemic, validates our decision
to take control of our distribution arrangements in
Europe allowing for the creation of new revenue
streams from 3rd party distribution agreements and
also the clinical importance of Technegas™ in the
fight against COVID-19.
During 2020 we maintained our focus on securing
approval from the USFDA to commence sales
of Technegas™ in the US market, while also
supporting clinical trials to advance our Beyond PE
strategy and delivered solid sales and earnings that
support our ability to maintain dividend payments.
Revenue from Technegas™ generator and PAS
sales in existing markets is expected to continue to
rebound in 2021. Third party distribution revenues
are also expected to grow as we initiate distribution
in Australia.
Managing Director’s ReviewCyclopharm Limited Annual Report 2020 17
The combination of the Company’s resilient financial
performance and successful capital raising in
February 2021 means we are fully funded, have a
strong capital position and are able to maintain a
consistent dividend policy. In this regard the final
dividend was maintained at 0.5 cents per share (cps),
giving a total dividend for 2020 of 1.0 cps.
Finally, I thank all my colleagues, the Cyclopharm
Board and the entire global team, who collectively
have contributed to the growth of the Company
over recent years. On behalf of the Cyclopharm
management team, with the ongoing support of the
Board, we are absolutely committed to delivering
positive health outcomes for our patients and
growing financial rewards to our shareholders.
James McBrayer
Managing Director
Securing approval to sell Technegas™ in the US
market is a significant opportunity for Cyclopharm.
The USFDA’s decision to conduct an in-person site
inspection of the company’s manufacturing facility
in Sydney in April 2021 represents a significant step
in the final approval process. In preparation for a
rapid entry into the US market, early in H2 2021,
the company has been investing to build inventory;
sales capabilities and infrastructure.
Cyclopharm is also progressing the Company’s
Beyond PE strategy with multiple studies
underway to demonstrate Technegas’™ potential
as a diagnostic tool that can be deployed in the
treatment of conditions such as Chronic Obstructive
Pulmonary Disease (COPD). Cyclopharm’s view
is our Beyond PE initiatives have the potential to
significantly expand Technegas’™ revenue and
profitability over the medium to longer term in
indications valued at US $900 million per annum.
In anticipation of US market entry and recognition
of the ongoing work to expand the use of
Technegas™ Beyond PE, the Board is considering
appointing an additional director to bring additional
skills and experience to support both opportunities
during 2021. No final decision has been made
regarding such appointment, and an appointment
will only be made following a thorough and rigorous
selection process.
In February 2021 Cyclopharm completed a highly
successful institutional placement and retail share
purchase plan (SPP) that raised $33.0 million.
The Company will use this additional capital
to support the rapid USA commercialisation of
Technegas™ following expected USFDA approval
in H2 2021. The funds will also be used selectively
to support the Beyond PE strategy designed to
allow Cyclopharm to access new larger growth
opportunities.
18
David Heaney
Non Executive Chairman
(Independent)
James McBrayer
Managing Director and
Company Secretary
Tom McDonald
Non Executive Director
(Independent)
Mr Heaney was appointed to the
Cyclopharm Board on 20 November
2006 and is currently the Chairman
of Cyclopharm and Chairman of the
Remuneration and Board Nomination
Committees. He was formerly
Chairman of the Audit and Risk
Committee until 28 February 2019.
Mr Heaney served as a non-executive
director of Colorpak Limited from
February 2004 until May 2016 and
has also previously been a non-
executive director of several other
listed and non-listed companies.
Mr Heaney has more than 40 years
experience in all aspects of wholesale
banking and finance, gained in senior
management roles with National
Australia Bank Limited and subsidiary
companies in both Australia and
the US.
BSPharm, GDM, FAICD, AIM
B.Com, FCPA
Mr McBrayer has been a member
of the Board since 3 June 2008 at
which time he accepted the role of
Managing Director. Mr McBrayer
serves as a member of the Board
Nominations Committee.
Mr McBrayer has more than 30 years
experience in nuclear medicine and
is a trained Nuclear Pharmacist.
Mr McBrayer held the role of Managing
Director at Lipa Pharmaceuticals,
Australia’s largest contract
manufacturer of over-the-counter
products and senior management
positions with Brambles Cleanaway
business and Syncor, the world’s
largest radioactive diagnostic and
therapeutic pharmaceutical provider.
Company Secretary
Mr McBrayer was appointed as
Company Secretary on 25 March
2011.
Mr McDonald was appointed to
the Board on 3 April 2017 and has
been appointed Chairman of the
Audit and Risk Committee effective
1 March 2019. He holds a Bachelor of
Commerce from UNSW and is a Post
Graduate of University of Technology
Sydney in Business Finance. He is a
Fellow of CPA Australia, a member of
the Australian Institute of Company
Directors, an Associate with the
Governance Institute Australia and
Associate of Chartered Governance
Institute (UK).
Mr McDonald has more than 30 years
experience in the pharmaceutical
and technology industries and has
held global senior executive roles
with international biotech Beckman
Instruments Inc, with roles based in
USA and Asia Pacific.
Mr McDonald currently does not
hold any other listed directorships
but has previously served as a non-
executive director of ASX-listed FE
Investments Group Limited (finance)
and ASX-listed Wolfstrike Group
Limited (technology). He has also
previously held senior positions with
ASX-listed Allomak Limited, CK Life
Sciences Int’l Inc., ASX-listed LIPA
Pharmaceuticals Limited and ASX-
listed Keycorp Limited.
Directors’ ReportCyclopharm Limited Annual Report 2020 19
Dividends
On 25 February 2021, the Directors declared a final
unfranked dividend of 0.5 cents per share in respect of
the financial year ended 31 December 2020, to be paid
on 13 April 2021 to those shareholders registered on
6 April 2021. An interim unfranked dividend of 0.5 cents
per share was paid on 14 September 2020.
A final unfranked dividend of 0.5 cents per share in
respect of the financial year ended 31 December 2019
was paid on 7 April 2020.
The balance of franking credits available for future
dividend payments is $1,059.
Principal Activities
During the year, the principal activities of the consolidated
entity consisted of the manufacture and sale of medical
equipment and radiopharmaceuticals, including associated
research and development. Distribution of third-party
products to the diagnostic imaging sector commenced
during the current financial year.
Other than the above, there were no significant changes
in the nature of the consolidated entity’s principal activities
during the financial year.
The Directors of Cyclopharm submit their report for the
year ended 31 December 2020.
Directors
The names and details of the Company’s Directors in
office during the financial year and until the date of this
report are as follows.
— Mr D J Heaney
— Mr J S McBrayer
— Mr T A McDonald
The qualifications, experience and special responsibilities
of the Directors are provided on page 18. Directors were in
office for this entire year unless otherwise stated.
Directors’ Interests
Interests in the shares and options of the Company
and related bodies corporate.
The number of ordinary Cyclopharm shares and options
on issue held directly, indirectly or beneficially, by Directors,
including their personally-related entities as at the date of
this report is as follows:
Directors
Mr D J Heaney
Mr J S McBrayer
Mr T A McDonald
Interest
BI
BI
NBI
BI: Beneficial interest
NBI: Non beneficial interests
As at report date
No. of
shares
No. of
options
244,500
5,109,580
57,592
5,411,672
–
200,000
–
200,000
20
Operating and Financial Review
Operating Results for the Year
For the financial year, Cyclopharm recorded a consolidated
loss after tax of $6,043,636. Loss after tax from the
operations of the Technegas™ division was $6,053,767.
Technegas™ divisional revenue of $14,523,071 was 3.2%
higher than the previous year (2019: $14,078,801) with
$2,173,227 from a new revenue stream distributing third
party products to the diagnostic imaging sector.
Technegas™ division Loss Before Tax of $5,983,277
(2019: $3,170,891) recorded an unfavourable variance of
$2,812,386 impacted by higher employee benefits expense
of $7,852,257 (2019: $5,475,889) associated with ongoing
investment in human capital to ensure compliance to the
most recent USFDA guidelines and meet global regulatory
requirements. USFDA clinical trial costs totalling $3,311,715
(2019: $3,841,534) also contributed to the Technegas™
division Loss Before Tax.
Cyclopet recorded a Profit Before Tax of $139,168 to the
group (2019: $745,948) in the absence of the previous
year’s one-off rent abatement of $976,044 pursuant to
the execution of a business transfer agreement resulting
in Macquarie University taking over the operations of the
imaging services provided by Macquarie Medical Imaging,
an associate of Cyclopet.
Financial Position
Net assets decreased to $17,115,850 at 31 December
2020 (2019: $23,203,945) principally due to a net loss of
$6,043,636.
Cashflow used in operations of $8,934,868 supported
ongoing investment in USFDA and pilot clinical trials.
Net cash balance was $1,874,285 at 31 December 2020.
Further details of Cyclopharm’s Operating and Financial
Review are set out on pages 9 to 17 of the Managing
Director’s Review.
Significant Changes in State of Affairs
Shares Issued during the Year
(i)
(ii)
1,045,000 Long Term Incentive Plan shares
were issued on 4 May 2020,
1,015,500 shares comprising 757,750 LTIP shares
and 257,750 ordinary shares were issued on
24 July 2020, and
(iii) 24,443 expired LTIP shares were cancelled on
5 May 2020.
There were no other shares issued and cancelled
during the year.
Options Issued during the Year
No options were issued and cancelled during the year.
Other than as set out above, there were no significant
changes in the state of affairs of the Cyclopharm Group
during the year.
Significant Events after Balance Date
Final Dividend
On 25 February 2021, the Directors declared a final
unfranked dividend of 0.5 cents per share in respect of
the financial year ended 31 December 2020, payable on
13 April 2021.
Shares Issued
(i)
(ii)
On 1 February 2021, 11,538,462 ordinary shares were
issued at a price of $2.60 per new share in connection
with an institutional share placement.
On 19 February 2021, 1,153,847 ordinary shares were
issued at a price of $2.60 per new share in connection
with a share purchase plan to eligible shareholders
and 408,059 LTIP shares were issued at an exercise
price of $3.20 per share.
Other than the above, no matters or circumstances have
arisen since the end of the financial year, not otherwise
dealt with in the financial report, which significantly affected
or may significantly affect the operations of the Group,
financial position or the state of affairs of the Group in
future financial periods.
Directors’ ReportCyclopharm Limited Annual Report 2020 21
Likely Developments and Future Results
Technegas™
The opportunities for developing additional Technegas™
indications, particularly for asthma and COPD, will continue
to be a key priority. If successful, there is significant
potential to expand Technegas’ revenue and profitability
over the medium to longer term.
The Directors maintain their view that FDA approval to sell
Technegas™ into the USA market provides Cyclopharm
with the opportunity to significantly expand its sales and
profitability. The USFDA Office of Regulatory Affairs, Office
of Pharmaceutical Quality Operations have confirmed
that they will conduct an onsite pre-approval audit of the
Company’s manufacturing facility located at Kingsgrove,
NSW during the week commencing 29 March 2021.
We anticipate a successful conclusion to the Phase 3
USFDA clinical trial of Technegas™ with approval for
sales and USA commercialisation in 2021. As the USFDA
approval process moves forward, the Directors advise that
additional expenditure on the USFDA trials will continue
to be expensed until approval is achieved. Significant
investments will also be made to build our inventory
reserves, sales capabilities and infrastructure to facilitate
rapid market entry in the USA, following the anticipated
USFDA approval.
Molecular Imaging
In December 2019, a business venture collaboration
agreement between the Company, Pettech Solutions
Limited a wholly owned subsidiary of the Australian
Nuclear Science and Technical Organisation (‘ANSTO’)
and Cyclotek was executed. The collaboration combines
CycloPet and Pettech’s cyclotron facilities under a single
operating enterprise known as Cyclotek NSW.
With Cyclotek NSW Pty Ltd‘s commencement of operations
in 2020, Cyclopharm has benefited from eliminating an
ongoing non-productive lease expense and gained access
to an income stream from what was a suspended business.
Additionally, outcomes from Cyclotek NSW’s R&D and
commercial activities will provide for additional opportunities
via the international commercial rights to IP developed.
Ultralute™
Cyclopharm is currently seeking to register Ultralute™, in
Europe, as a medical device to support better acceptance
of this new first in class technology. As previously advised,
following a change in European Union regulations requiring
recertification of existing medical devices, there is now
significant backlogs of medical device applications
awaiting registration. Consequently, the Company does not
anticipate Ultralute™ receiving registration in Europe in 2021
but remains confident of its ultimate revenue potential.
Further details are set out on page 15 of the Managing
Director’s Review.
Material Business Risks
The Directors have identified the following material business
risks which may, if they eventuate, substantially impact on
the future performance of the Cyclopharm Group, along
with its approach to managing these risks. The risk factors
listed below are not exhaustive. Additional risks may also
adversely affect the financial performance of Cyclopharm.
Competition
To date, Cyclopharm has demonstrated that it can
compete effectively in the medical equipment/drug market
in Australia and many other parts of the world.
The medical equipment/drug industry is very competitive
and characterised by large international companies
supplying much of the global market requirements.
The emergence of new and/or unauthorised generic
technologies could in certain circumstances make the
Technegas™ System redundant or negatively impact on
the Cyclopharm Group’s plans to develop its Ultralute™
business.
Accordingly, there is a business risk in that Cyclopharm’s
key revenue source from the Technegas™ System could
be severely disrupted or reduced. There are products that
do compete with Technegas™, in particular Computed
Tomography and DTPA. These products could replace
Technegas™ and therefore negatively impact Cyclopharm
Group’s revenue and profitability. The Directors note that the
lengthy periods it takes to achieve regulatory approval and
gain medical practitioners’ approval and acceptance of new
or generic products, Cyclopharm Group’s reputation for
timely and quality service, the safety record of Technegas™
and its competitive pricing, mitigate these risks.
In addition, the Cyclopharm Group’s business plan and
stated strategy is to continue to develop sales in new and
existing international markets and to develop new diagnostic
purposes for Technegas™.
Reputation
The performance of Cyclopharm Group’s products is
critical to its reputation and to its ability to achieve market
acceptance of these products. Any product failure could
have a material adverse effect on Cyclopharm Group’s
reputation as a supplier of these products. Technegas™ has
had no contraindications or adverse patient events since the
commencement of sales.
COVID-19
In many markets around the world, imaging procedures
continue to be temporarily delayed. The Directors believe
that any delays in the use of Technegas™ in non-critical
procedures are short term and are expected to rebound
once restrictions are fully lifted.
22
Disruption of Business Operations
Currency and Exchange Rate Fluctuations
As a manufacturer, the Cyclopharm Group is exposed
to a range of operational risks relating to both current
and future operations. Such operational risks include
supply chain disruptions, equipment failures, IT system
failures, external services failure (including energy supply),
industrial action or disputes and natural disasters. If one
or more such operational risks materialize, they may
have an adverse impact on the operating and financial
performance of Cyclopharm.
Reliance on Distributors/Loss of key customers
The Cyclopharm Group operates through a series of
contractual relationships with customers, suppliers,
distributors and independent contractors. To date, the
Cyclopharm Group has generally provided products and
services on the basis of tenders submitted to customers,
followed by purchase orders incorporating the customer’s
standard terms and conditions of trade as a condition of
the acceptance.
Cyclopharm Group maintains a spread of customers
through direct and indirect sales channels. The loss of a
major distributor could have a significant, adverse impact
on Cyclopharm’s projected earnings. The majority of
sales through distributors or agents are managed through
contractual arrangements. Whilst the Cyclopharm Group
has distribution agreements in place, some may be
terminated by the distributor with up to six months’ notice
prior to the expiration of the current terms (which vary).
Other sales arrangements are not in writing and depend
on the ongoing goodwill of the parties. The Directors
are concerned to ensure that all such relationships are
formalised.
All contracts, including those entered into by the
Cyclopharm Group, carry a risk that the respective parties
will not adequately or fully comply with their respective
contractual rights and obligations or that these contractual
relationships may be terminated.
Cyclopharm’s financial result could be adversely affected
by the loss of large customers, a change in the terms of
business with a large customer, or by such customers
not adequately or fully complying with their respective
contractual rights and obligations. However, the risks
are mitigated by the existence of numerous alternatives
available given that Technegas™ is a highly sought
after product.
The financial contribution to the Cyclopharm Group of
the Technegas™ System will depend on the movement in
exchange rates between the Australian dollar and a number
of foreign currencies, particularly the Euro.
The exchange rate between various currencies may
fluctuate substantially and the result of these fluctuations
may have a material adverse impact on Cyclopharm’s
operating results and financial position. In the long term,
Cyclopharm’s ability to compete against imported products
may be adversely affected by an expectation of a sustained
period of a high Australian dollar that would reduce the
Cyclopharm Group’s price competitiveness.
The majority of the Cyclopharm Group’s operational
expenses are currently payable in Australian dollars. The
Cyclopharm Group also supplies its product to overseas
markets and hence is exposed to movements in the A$
exchange rate. The Cyclopharm Group does not enter
into forward exchange contracts to hedge its anticipated
purchase and sale commitments denominated in foreign
currencies. As such, Cyclopharm is exposed to exchange
rate fluctuations.
Doing Business Internationally
As the Cyclopharm Group is and will continue operating
in numerous countries, the Cyclopharm Group will be
exposed to risks such as unexpected changes in regulatory
requirements (including taxation), longer payment cycles,
problems in collecting debts, fluctuation in currency
exchange rates, foreign exchange controls which restrict
or prohibit repatriation of funds and potentially adverse
tax consequences, all of which could adversely impact on
Cyclopharm.
The Cyclopharm Group currently requires, and in the future
may require further, licenses to operate in foreign countries
which may be difficult to obtain and retain depending on
government policies and political circumstances.
Regulatory
Future expansion of Cyclopharm’s range of products
and services may be governed by regulatory controls in
each target market and it is not possible for Cyclopharm
to guarantee that approvals in all target markets will be
obtained and maintained in the future.
The Technegas™ System is required to be registered with
the relevant regulatory bodies in each country or relevant
jurisdiction. If for any reason such product registrations are
withdrawn, cancelled (or otherwise lose their registered
status) or are not renewed, it may have a significant effect
on the sales of products which rely on them in the relevant
country or countries.
Directors’ ReportCyclopharm Limited Annual Report 2020 23
Patents
Unless challenged, the validity of a patent or trademark
may be assumed. Any patent or trademark may be
challenged on a number of grounds but the onus is on
the party seeking revocation to establish those grounds.
All patents and trademarks require renewal at regular
dates and if not renewed will expire. It is the Cyclopharm
Group’s practice to renew its patents and trademarks
as required. The Directors note that whilst some patents
have expired or have not been renewed, or remain to be
transferred or licensed to Cyclopharm Group companies,
there remains sufficient protection in these countries
through other patent arrangements in place or being put
in place.
The validity and breadth of claims covered in patents
involve complex legal and factual questions and therefore
may be highly uncertain. No assurance can be given
that the pending applications will result in patents being
issued, that such patents or the current patents will
provide a competitive advantage or that competitors of
the Cyclopharm Group will not design around any patents
issued. Further, any information contained in the patent
applications will become part of the public domain, so
that it will not be protected as confidential information. As
legal regulations and standards relating to the validity and
scope of patents evolve, the degree of future protection
of the Cyclopharm Group’s proprietary rights is uncertain.
However, those regulations and standards in the field
of nuclear medicine (in which the Cyclopharm Group’s
technology resides) are relatively well established and
non-controversial.
The manufacture of Technegas™ does not involve the
emission of any environmentally sensitive materials
and the Cyclopharm Group is not required to hold any
environmental licence or consent under the Environmental
Protection Act (Cth). However, in order to expand the
Company’s research and development capabilities, in
2018, Cyclopharm secured a Radiation Management
Licence from the NSW EPA to sell, possess or store
regulated materials.
It is possible that licensing requirements could change
with the development of new products and any additional
regulatory requirements could impact upon the profitability
of the group.
The Cyclopharm Group has obtained:
— a listing on the Australian Register of Therapeutic Goods
Register for the Technegas™ generator and the patient
administration set (radio-aerosol set);
— two separate CE Mark approvals for the device elements
TechnegasPlus Technegas™ generator and patient
administration set (PAS) of the Technegas™ System in EU;
— a marketing authorisation for the Pulmotec carbon crucible,
which is the drug (medicine) aspect of Technegas™ in EU;
and
— a Medical Device Single Assessment Program (MDSAP)
certificate and operates a Quality Management System
which has been assessed as complying complies with the
requirements of ISO13485:2016 for the design, manufacture,
installation and repair service of the Technegas™ System.
Ongoing regulatory audits/inspections are necessary
for the retention and re-certification of the above-named
certificates/licences for continued international distribution
of the Technegas™ System.
Audits of the Kingsgrove manufacturing premises by the
Australian Government’s Therapeutic Goods Administration
and the British Standards Institute (a European Notified
Body), along with other regulatory bodies required to market
Technegas™ have been successfully completed in 2020.
Cyclopet Pty Limited, which is involved in the operations
of the cyclotron, is subject to significant environmental
regulations under the Radiation Control Act, 1990 by the
Department of Environment, Climate Change and Water.
Intellectual Property Rights
The Cyclopharm Group’s success may be affected by
its ability to maintain patent protection for products and
processes, to preserve its trade secrets and to operate
without infringing the proprietary rights of third parties.
24
The Officers of the Company covered by the insurance
policy include the Directors, the Company Secretary and
Executive Officers. The indemnification of the Directors
and Officers will extend for a period of at least 6 years in
relation to events taking place during their tenure (unless the
Corporations Act 2001 otherwise precludes this time frame
of protection).
The liabilities insured include costs and expenses that may
be brought against the Officers in their capacity as Officers
of the Company that may be incurred in defending civil
or criminal proceedings that may be brought against the
Officers of the Company or a controlled entity.
Auditor’s Independence Declaration
A copy of the Auditor’s Independence Declaration as
required under section 307C of the Corporations Act 2001
is set out on page 33.
Fees of $38,170 (2019: $38,784) have been paid for share
registry services and fees of $30,771 (2019: $15,448) for
taxation services to an associate of Nexia Sydney Audit
Pty Ltd for the year ended 31 December 2020 for non-
audit related services. The Board of Directors is satisfied
that the provision of non-audit services during the year is
compatible with the general standard of independence
for auditors imposed by the Corporations Act 2001. The
nature and scope of each type of non-audit service does
not compromise the general principles relating to auditor
independence in accordance with APES 110: Code of
Ethics for Professional Accountants set by the Accounting
Professional and Ethical Standards Board.
The Company has not otherwise, during or since the
financial year, indemnified or agreed to indemnify an auditor
of the Company or any related body corporate.
Environmental Regulations
Cyclopet Pty Limited, a member of the consolidated
group’s operations is subject to significant environmental
regulations under the Radiation Control Act, 1990 by
the Department of Environment, Climate Change and
Water. The Board believe that the consolidated group
has adequate systems in place for the management
of its environmental requirements as they apply to the
consolidated group.
Retirement, Election and Continuation
in Office of Directors
In accordance with the Company’s Constitution, all
Directors have been elected by members at the Annual
General Meeting (AGM) with the exception of Mr McBrayer.
Mr McBrayer was appointed as Managing Director on
3 June 2008 and under the Constitution is exempt from
election by members.
Indemnification and Insurance of Officers
In accordance with clause 49.1 of Cyclopharm’s constitution
and section 199A of the Corporations Act 2001 the
Company has resolved to indemnify its Directors and
Officers for a liability to a third party provided that:
1.
2.
the liability does not arise from conduct involving a
lack of good faith; or
the liability is for costs and expenses incurred by the
Director or Officer in defending proceedings save as
not permitted by law.
During or since the financial year, the Company has paid
premiums in respect of a contract insuring all the Directors
against legal costs incurred in defending proceedings for
conduct involving:
a)
b)
a wilful breach of duty; or
a contravention of sections 182 or 183 of the
Corporations Act 2001, as permitted by section 199B of
the Corporations Act 2001.
The total amount of insurance contract premiums paid for
the year ending 31 December 2020 is $31,397 (for the year
ended 31 December 2019: $25,761).
Directors’ ReportCyclopharm Limited Annual Report 2020 25
Remuneration Report (Audited)
The Remuneration Report outlines the director and
executive remuneration arrangements of the Company
and the group and the remuneration disclosures required
in accordance with the requirements of the Corporations
Act 2001 and its Regulations. For the purposes of
this report Key Management Personnel 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.
For the purposes of this report, the term ‘executive’
encompasses the Chief Executive, senior executives,
general managers and secretaries of the parent and
the group.
Director and Executive Remuneration Table
Short-term employee benefits
Post
employment
benefits
Other
long-term
benefits
Share-
based
payment
Perform-
ance
related
Total
Salary
and Fees
$
Cash
Bonus
$
Non-
monetary
benefits
$
Super-
annuation
$
Consolidated
2020
Directors
David Heaney
Non-Executive Director
Tom McDonald
Non-Executive Director
Executive Director
James McBrayer*
Managing Director
Total Directors’ Compensation
Key Management Personnel
Mathew Farag
Chief Operating Officer
Total Key Management
Personnel’s Compensation
Total Compensation
75,559
53,971
–
–
406,251
535,781
50,000
50,000
292,600
–
292,600
828,381
–
50,000
–
–
–
–
–
–
–
$
%
$
–
–
$
–
–
75,559
53,971
–
–
41,835
41,835
37,840
37,840
650,662
650,662
1,186,588
1,316,118
27,797
4,883
63,822
389,102
27,797
69,632
4,883
42,723
63,822
714,484
389,102
1,705,220
0%
0%
59%
53%
16%
16%
45%
* Mr McBrayer is employed on a rolling contract and his bonus, up to a maximum of $50,000, is based on achieving certain benchmarks and targets,
which in the absence of any formal agreement will default to achieving the budgeted underlying operating EBITDA approved by the Board of Directors
effective 2017.
26
Director and Executive Remuneration Table
Short-term employee benefits
Salary
and Fees
$
Cash
Bonus
$
Non-
monetary
benefits
$
Post
employ-
ment
benefits
Super-
annuation
$
Other
long-term
benefits
Share-
based
payment
Perform-
ance
related
Total
$
$
$
%
72,709
47,303
51,935
–
–
–
341,198
513,145
50,000
50,000
269,858
30,000
269,858
783,003
30,000
80,000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
72,709
47,303
51,935
35,929
35,929
6,616
6,616
319,618
319,618
753,361
925,308
28,487
28,487
64,416
–
40,200
368,545
–
6,616
40,200
359,818
368,545
1,293,853
0%
0%
0%
49%
40%
19%
19%
34%
Consolidated
2019
Directors
David Heaney
Non-Executive Director
Vanda Gould*
Non-Executive Director
Tom McDonald
Non-Executive Director
Executive Director
James McBrayer**
Managing Director
Total Directors’ Compensation
Key Management Personnel
Mathew Farag
Chief Operating Officer
Total Key Management
Personnel’s Compensation
Total Compensation
* Mr Gould ceased as a member of the Board on 27 November 2019 following his disqualification from serving as a director by reason of section 206B(1)
(b)(ii) of the Corporations Act 2001.
** Mr McBrayer is employed on a rolling contract and his bonus, up to a maximum of $50,000, is based on achieving certain benchmarks and targets,
which in the absence of any formal agreement will default to achieving the budgeted underlying operating EBITDA approved by the Board of Directors
effective 2017.
Directors’ ReportCyclopharm Limited Annual Report 2020
27
Details of Managing Director and Key Management Personnel’s Share-based payments 2020
Number
of LTIP
shares
granted
250,000
Fair
Value
at grant
date
$0.153
Exercise
price
per LTIP
share
scheme
$1.550
Amount
payable
– limited
recourse
loan
$387,500
Term
3 years
Name
Mathew Farag
Mathew Farag
250,000
$0.153
$1.550
$387,500
3 years
200,000
$0.318
$1.500
$300,000
2 years
Expiry
date Performance Hurdle
1/7/2021 Approval of Technegas' use and
distribution in the United States by
the United States Food and Drug
Administration (USFDA)
1/7/2021 Continuous employment with the
Cyclopharm Group until 31 March 2021
29/5/2021 The USFDA has approved the use and
distribution of Technegas in the United
States and continuous employment with
the Cyclopharm Group until 23 May 2021
200,000
$1.310
$0.000
$0
6 years
31/7/2025 The Company receiving approval from the
USFDA for the distribution of Technegas
products in the United States
215,000
$0.308
$1.220
$262,300
2 years
3/5/2022 Continuous employment with the
Cyclopharm Group until 30 April 2022
500,000
$0.380
$1.220
$610,000
3 years
3/5/2023 50% on approval by the USFDA on the
use and distribution of Technegas in the
United States and 50% upon continuous
employment with the Cyclopharm Group
until 30 April 2023
330,000
$0.380
$1.220
$402,600
3 years
3/5/2023 1. 25% on achievement of 2020 revenue
Other non-Key
Management
Personnel
James McBrayer
(options)
Other non-Key
Management
Personnel
Mathew Farag
Other non-Key
Management
Personnel
and gross margin budget, 25% on
achievement of 2021 revenue and
gross margin budget and 50% upon
continuous employment with the
Cyclopharm Group until 30 April 2023
2. USFDA approval and continuous
employment with the Cyclopharm until
Group 30 April 2023
31/5/2022 Continuous employment with the
Cyclopharm Limited as Managing
Director for 2 years until the Annual
General Meeting held in 2022
James McBrayer
500,000
$0.315
$1.830
$915,000
1.85 years
2,445,000
$3,264,900
Vested but
unexercised during
the year
James McBrayer
James McBrayer
James McBrayer
Mathew Farag
Other non-Key
Management
Personnel
Other non-Key
Management
Personnel
1,721,554
269,614
257,750
225,000
$0.061
$1.065
$1.410
$0.196
$0.900
$0.000
$0.000
$0.900
$1,549,399
$0
$0
$202,500
5 years
2.41 years
1.80 years
5 years
9/5/2022
9/5/2022
9/5/2022
18/4/2025
41,318
$0.061
$0.900
$37,186
5 years
31/8/2022
75,000
2,590,236
$0.270
$1.200
$90,000
$1,879,085
5 years
25/7/2023
28
Details of Managing Director and Key Management Personnel’s Share-based payments 2019
Number
of LTIP
shares
granted
225,000
Fair
Value
at grant
date
$0.196
Exercise
price
per LTIP
share
scheme
$0.900
Amount
payable
– limited
recourse
loan
$202,500
Term
3 years
Name
Mathew Farag
Mathew Farag
250,000
$0.153
$1.550
$387,500
3 years
Mathew Farag
250,000
$0.153
$1.550
$387,500
3 years
200,000
$0.318
$1.500
$300,000
2 years
Expiry
date Performance Hurdle
18/4/2020 Continuous employment with the
Cyclopharm Group until 22 January 2020
1/7/2021 Approval of Technegas’ use and
distribution in the United States by
the United States Food and Drug
Administration (USFDA)
1/7/2021 Continuous employment with the
Cyclopharm Group until 31 March 2021
29/5/2021 The USFDA has approved the use and
distribution of Technegas in the United
States and continuous employment with
the Cyclopharm Group until 23 May 2021
200,000
$1.310
$0.000
$0
6 years
31/7/2025 The Company receiving approval from the
USFDA for the distribution of Technegas
products in the United States
1,125,000
$1,277,500
1,721,554
269,614
96,408
$0.061
$1.065
$0.061
$0.900
$0.000
$0.900
$1,549,399
$0
$86,767
5 years
2.41 years
5 years
9/5/2022
9/5/2022
31/8/2022
106,000
$0.270
$1.200
$127,200
5 years
25/7/2023
2,193,576
$1,763,366
Other non-Key
Management
Personnel
James McBrayer
(options)
Vested but
unexercised during
the year
James McBrayer
James McBrayer
Other non-Key
Management
Personnel
Other non-Key
Management
Personnel
Directors’ ReportCyclopharm Limited Annual Report 2020 29
Interests in the shares and options of
the Company and related bodies corporate
The movement during the reporting period in the number
of ordinary Cyclopharm shares and options on issue held
directly, indirectly or beneficially, by Directors and key
management personnel, including their personally-related
entities is as follows:
31
December
2019
No. of
shares
200,000
4,094,080
34,800
4,328,880
Granted
under
long term
incentive
schemes
No. of
shares
–
1,015,500
–
1,015,500
On market
purchases
No. of
shares
32,000
–
8,414
40,414
31
December
2020
No. of
shares
232,000
5,109,580
43,214
5,384,794
735,000
500,000
10,000
1,245,000
Interest
BI
BI
NBI
BI
Directors
Mr DJ Heaney
Mr JS McBrayer
Mr TA McDonald
Key Management Personnel
Mr M Farag
BI: Beneficial interest
NBI: Non beneficial interests
As at 31 December 2020, Mr McBrayer holds
200,000 share options (2019: 200,000).
30
Remuneration Committee
The Remuneration Committee currently comprises of
Mr Heaney, who is the Chairman of the Remuneration
Committee and Mr McDonald..
The Remuneration Committee is responsible for:
— reviewing and approving the remuneration of Directors
and other senior executives; and
— reviewing the remuneration policies of the Company
generally.
Remuneration philosophy
The performance of the Company depends upon the quality
of its Directors and executives. To prosper, the Company
must attract, motivate and retain highly skilled Directors
and executives.
To this end, the Company embodies the following principles
in its remuneration framework:
— provide competitive rewards to attract high calibre
executives;
— link executive rewards to shareholder value;
— have a significant portion of executive remuneration
‘at risk’; and
— establish appropriate, demanding performance hurdles
for variable executive remuneration.
Remuneration structure
In accordance with best practice corporate governance,
the structure of non-executive Director and executive
remuneration is separate and distinct.
Each director receives a fee as set out in the Director and
Executive Remuneration Table for being a director of the
Company. Directors’ fees cover all main Board activities
and the membership of committees. There are no additional
fees for committee membership. These fees exclude any
additional ‘fee for service’ based on arrangements with the
Company, which may be agreed from time to time. Agreed
out of pocket expenses are payable in addition to Directors’
fees. There is no retirement or other long service benefits
that accrue upon appointment to the Board. Retiring non-
executive Directors are not currently entitled to receive a
retirement allowance.
Executive remuneration
Objective
The Company aims to reward executives with a level and
mix of remuneration commensurate with their position and
responsibilities within the Company so as to:
— reward executives for Company, business unit and individual
performance against targets set by reference to appropriate
benchmarks;
— align the interests of executives with those of
Shareholders; and
— ensure total remuneration is competitive by market standards.
In determining the level and make-up of executive
remuneration, the Remuneration Committee engages external
consultants as needed to provide independent advice.
The Remuneration Committee has entered into a detailed
contract of employment with the Managing Director and a
standard contract with other executives. Details of these
contracts are provided below.
Remuneration consists of the following key elements:
Non-executive Director remuneration
— Fixed remuneration (base salary, superannuation and
non-monetary benefits); and
— Variable remuneration
» short term incentive (STI); and
» long term incentive (LTI).
The proportion of fixed remuneration and variable
remuneration (potential short term and long term incentives)
for each executive is set out in the Director and Executive
Remuneration Table.
Objective
The Board seeks to set aggregate remuneration at a level
that provides the Company with the ability to attract and
retain Directors of the highest calibre, whilst incurring a cost
that is acceptable to Shareholders.
Structure
The Constitution and the ASX Listing Rules specify that the
aggregate remuneration of non-executive Directors shall
be determined from time to time by a general meeting. The
latest determination was at the Annual General Meeting held
in May 2019 when Shareholders approved an aggregate
remuneration increase from $225,000 to $250,000 per year.
The amount of aggregate remuneration sought to be
approved by Shareholders and the fee structure is reviewed
annually. The Board considers advice from external
consultants as well as the fees paid to non-executive
Directors of comparable companies when undertaking the
annual review process.
Directors’ ReportCyclopharm Limited Annual Report 2020 31
Fixed Remuneration
Objective
Fixed remuneration is reviewed annually by the
Remuneration Committee. The process consists of
a review of Company, business unit and individual
performance, relevant comparative remuneration in the
market and internally and, where appropriate, external
advice on policies and practices. As noted above, the
Committee has access to external advice independent
of management.
Structure
Executives are given the opportunity to receive their fixed
(primary) remuneration in a variety of forms including
cash and fringe benefits. It is intended that the manner of
payment chosen will be optimal for the recipient without
creating undue cost for the Group. All forms of executive
remuneration are detailed in the Remuneration Report.
Variable remuneration – Short Term Incentive (STI)
The objective of the STI is to link the achievement of the
Group’s operational targets with remuneration received
by the executives charged with meeting those targets.
The total potential STI available is set at a level so as to
provide sufficient incentive to the executive to achieve the
operational targets and such that the cost to the Group is
reasonable in the circumstances.
Actual STI payments granted to each executive depends
on the extent to which specific targets set at the beginning
of the year are met. The targets consist of a number of
Key Performance Indicators (KPI’s) covering both financial
and non-financial, corporate and individual measures of
performance. Typically included measures are sales, net
profit after tax, customer service, risk management and
leadership/team contribution. These measures were chosen
as they represent the key drivers for short term success of
the business and provide a framework for long term value.
The Group has predetermined benchmarks that must be
met in order to trigger payments under the STI scheme.
On an annual basis, after consideration of performance
against KPI’s, the Remuneration Committee, in line with their
responsibilities, determine the amount, if any, of the short
term incentive to be paid to each executive. This process
usually occurs within 3 months of reporting date.
The aggregate of annual STI payments available for
executives across the Group is subject to the approval of
the Remuneration Committee. Payments are delivered as a
cash bonus in the following reporting period. Participation in
the Short Term Incentive Plan is at the Directors’ discretion.
Variable remuneration – Long Term Incentive (LTI)
Long Term incentives are delivered under the Long
Term Incentive Plan (LTIP), which is designed to reward
sustainable, long-term performance in a transparent
manner. Under the LTIP, individuals are granted LTIP shares,
which have a two or three year performance periods (Term).
The number of LTIP shares is determined by the Board. The
number of LTIP shares that an individual will be entitled to at
the end of the Term will depend on the extent to which the
hurdle has been met. Performance hurdles are determined
by the Board to align individual performance with the
Company’s performance.
At the Annual General Meeting held on 8 May 2007,
Shareholders approved the Company’s Long Term
Incentive Plan (“Plan”). An updated Plan was approved by
Shareholders on 29 May 2018.
The purpose of the Plan is to encourage employees,
Directors and officers to share in the ownership of the
Company and therefore retain and motivate senior
executives to drive performance at both the individual and
corporate level. Performance hurdles have been determined
by the Board to align individual performance with the
Company’s key success factors.
Employment contracts
Managing Director
The Managing Director, Mr McBrayer, is employed under
a rolling contract. Mr McBrayer’s current contract was
executed on 13 May 2008. Mr McBrayer’s remuneration for
2020 and 2019 is disclosed in the tables on pages 25 and
26. Under the terms of the present contract:
— Each year from 1 January to 31 December, Mr McBrayer
may be entitled to receive additional amounts up to
a maximum of $50,000 based on achieving certain
benchmarks and targets, which in the absence of any
formal agreement will default to achieving the budgeted
underlying operating EBITDA approved by the Board
of Directors effective 2017 (previously Profit After Tax).
This amount is entirely performance based and seeks
to strengthen the alignment of the Managing Director’s
interests with those of the Company’s shareholders.
— Mr McBrayer may resign from his position and thus
terminate this contract by giving 6 months written notice
unless a mutually agreeable date can be agreed upon.
— The Company may terminate this employment agreement
by providing 6 months written notice or providing payment
in lieu of the notice period.
— The Company may terminate the contract at any time
without notice if serious misconduct has occurred. Where
termination with cause occurs the Managing Director is only
entitled to that portion of remuneration that is fixed, and
only up to the date of termination.
32
— Mr McBrayer is entitled to receive strictly limited recourse
loans under the Company’s LTIP to purchase shares.
— On 13 July 2015, a strictly limited recourse loan was made
to Mr McBrayer under the Company’s LTIP to purchase
shares for a period of 2 years. The loan was to enable the
purchase of 1,721,554 shares at the price of 90 cents per
share. The LTIP shares vested on 9 May 2017, the date of
the 2017 AGM.
— On 9 May 2017, Mr McBrayer exercised his rights to
purchase 1,721,554 LTIP shares and the Company extended
a loan totalling $1,549,398.60 for the purchase of the Plan
Shares. The loan is repayable in full within 5 years.
— As approved by shareholders at the May 2019 AGM,
200,000 options were granted on 27 May 2019 and
539,525 shares comprising 269,911 ordinary shares and
269,614 LTIP shares were issued in accordance with the
Company’s Long Term Incentive Plan on 11 December 2019
to Mr McBrayer.
— As approved by shareholders at the July 2020 AGM,
1,015,500 shares comprising 257,750 ordinary shares and
757,750 LTIP shares were issued in accordance with the
Company’s Long Term Incentive Plan on 24 July 2020 to
Mr McBrayer.
Other Executives (standard contracts)
All executives have rolling contracts. The Company may
terminate the executive’s employment agreement by
providing (depending on the individual’s contract) between
1 to 3 months’ written notice or providing payment in lieu of
the notice period. 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.
Related Parties
The Directors disclose any conflict of interests in Directors’
meetings as per the requirements under the Corporations
Act (2001). Any disclosures that are considered to fall under
the definition of related parties as per AASB 124 ‘Related
Party Disclosures’ are made in the Directors’ meetings
and minuted.
End of Remuneration Report
Directors’ Meetings
The number of meetings of Directors (including meetings of
committees of Directors) held during the year and the number
of meetings attended by each Director were as follows:
Board
Meetings
Audit & Risk
Committee
Board
Nomination
Committee
Remuneration
Committee
Director
Mr D J Heaney
Mr J S McBrayer
Mr T A McDonald
H
8
8
8
H: Held, A: Attended
A
8
8
8
H
4
–
4
A
4
–
4
H
1
1
1
A
1
1
1
H
2
–
2
A
2
–
2
Share Options
200,000 share options (2019: 200,000) are in issue as at
year end.
Proceedings on behalf of the company
No person has applied to the Court under section 237 of the
Corporations Act 2001 for leave to bring proceedings on behalf
of the 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.
No proceedings have been brought or intervened in on behalf
of the Company with leave of the Court under section 237 of
the Corporations Act 2001.
This report is made and signed in accordance with a
resolution of the Directors:
James McBrayer
Managing Director and CEO
Sydney, 29 March 2021
Directors’ ReportCyclopharm Limited Annual Report 2020 33
Auditor’s Independence Declaration
To the Board of Directors of Cyclopharm Limited
Auditor’s Independence Declaration under section 307C
of the Corporations Act 2001
As lead audit partner for the audit of the financial statements of Cyclopharm Limited
for the financial year ended 31 December 2020, I declare that to the best of my
knowledge and belief, there have been no contraventions of:
(a) the auditor independence requirements of the Corporations Act 2001 in relation
to the audit; and
(b) any applicable code of professional conduct in relation to the audit.
Yours sincerely
Nexia Sydney Audit Pty Limited
Andrew Hoffman
Director
Date: 29 March 2021
34
Consolidated Statement of Profit or Loss
and Other Comprehensive Income
For the year ended 31 December 2020
Continuing Operations
Sales revenue
Finance revenue
Other revenue
Total revenue
Cost of materials and manufacturing
Employee benefits expense
Advertising and promotion expense
Depreciation and amortisation expense
Freight and duty expense
Research and development expense
Administration expense
Other (expense)/income
Loss before tax and finance costs
Finance costs
Loss before income tax
Income tax
Loss for the year
Other comprehensive income after income tax
Items that will be re-classified subsequently to profit and loss when specific
conditions are met:
Exchange differences on translating foreign controlled entities
(net of tax)
Total comprehensive loss for the year
Loss per share (cents per share)
– basic loss per share from continuing operations
– basic loss per share
– diluted loss per share
Notes
Consolidated
2020
$
Consolidated
2019
$
5
5
5
5a
5e
5c
5d
5f
5g
5b
6
Notes
7
14,676,157
4,410
3,004,893
17,685,460
(3,963,469)
(7,852,257)
(212,876)
(910,291)
(632,846)
(3,537,517)
(5,649,611)
(562,843)
(5,636,250)
(207,859)
(5,844,109)
(199,527)
(6,043,636)
14,078,801
25,513
2,934,187
17,038,501
(2,908,664)
(5,475,889)
(235,463)
(999,939)
(409,155)
(4,192,577)
(5,747,946)
786,448
(2,144,684)
(280,259)
(2,424,943)
(487,497)
(2,912,440)
(143,856)
(6,187,492)
(11,273)
(2,923,713)
2020
cents
(7.89)
(7.89)
(7.89)
2019
cents
(4.28)
(4.28)
(4.28)
The Statement of Profit or Loss and Other Comprehensive Income is to be read in conjunction
with the notes to the financial statements.
Cyclopharm Limited Annual Report 2020 Consolidated Statement of
Financial Position
As at 31 December 2020
Assets
Current Assets
Cash and cash equivalents
Trade and other receivables
Inventories
Current tax asset
Other assets
Total Current Assets
Non-current Assets
Property, plant and equipment
Right-of-use assets
Investments
Intangible assets
Deferred tax assets
Total Non-current Assets
Total Assets
Liabilities
Current Liabilities
Trade and other payables
Lease liabilities
Provisions
Tax liabilities
Total Current Liabilities
Non-current Liabilities
Lease liabilities
Provisions
Deferred tax liabilities
Deferred income liabilities
Total Non-current Liabilities
Total Liabilities
Net Assets
Equity
Contributed equity
Employee equity benefits reserve
Foreign currency translation reserve
Accumulated losses
Total Equity
35
Notes
Consolidated
2020
$
Consolidated
2019
$
8
9
10
6
11
12
13
14
6
15
16
17
6
16
17
6
18
19
28
28
1,874,285
8,837,397
4,736,017
233,904
297,366
15,978,969
1,903,129
3,911,432
–
5,291,899
1,189,696
12,296,156
28,275,125
4,400,270
148,567
1,021,395
114,053
5,684,285
4,557,905
23,885
–
893,200
5,474,990
11,159,275
17,115,850
31,632,219
1,836,973
(696,100)
(15,657,242)
17,115,850
12,660,323
3,979,595
2,495,443
225,585
249,674
19,610,620
2,070,854
4,207,931
–
5,145,349
1,493,663
12,917,797
32,528,417
2,632,362
172,582
652,254
22,932
3,480,130
4,749,883
23,023
277,568
793,868
5,844,342
9,324,472
23,203,945
31,576,003
1,041,373
(552,244)
(8,861,187)
23,203,945
The Statement of Financial Position is to be read in conjunction with the notes to the financial statements.
Consolidated Statement of
Cash Flows
For the year ended 31 December 2020
Operating activities
Receipts from customers
Receipt from Cyclotek NSW Pty Ltd
Payments to suppliers and employees
Interest received
Borrowing costs paid
Income tax (paid)/received
Net cash flows used in operating activities
Investing activities
Payment of deferred consideration on acquisition of subsidiary
Purchase of property, plant and equipment
Payments for intangible assets
Net cash flows used in investing activities
Financing activities
Proceeds from issue of shares
Share issue cost (net of tax)
Settlement of loan for Long Term Incentive Plan Shares
Dividends paid
Repayment of bank borrowings
Payment for lease liabilities
Net cash flows used in financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents
– at beginning of the period
– net foreign exchange differences from translation
of cash and cash equivalents
– at end of the year
36
Consolidated
2019
$
15,509,819
–
(19,866,221)
25,513
(280,259)
4,121,808
(489,340)
(343,209)
(38,198)
(439,084)
(820,491)
9,775,000
(413,032)
–
(660,501)
(58,985)
(551,229)
8,091,253
6,781,422
Consolidated
2020
$
14,659,216
153,086
(23,296,949)
4,410
(207,859)
(246,772)
(8,934,868)
(343,209)
(193,796)
(337,186)
(874,191)
–
–
56,216
(752,419)
–
(289,758)
(985,961)
(10,795,020)
12,660,323
5,854,959
8,982
1,874,285
23,942
12,660,323
Notes
8
8
The Statement of Cash Flows is to be read in conjunction with the notes to the financial statements.
Cyclopharm Limited Annual Report 2020 Consolidated Statement of
Changes in Equity
For the year ended 31 December 2020
Contributed
Equity
Other
Contributed
Equity
Total
Contributed
Equity
Retained
Earnings/
(Accumulated
Losses)
Foriegn
Currency
Translation
Reserve
(Note 28(b))
Employee
Equity
Benefits
Reserve
(Note 28(a))
Consolidated
$
$
$
$
$
$
37
Total
$
Balance at
1 January 2019
Adjustment on adoption of AASB 16
Restated balance at
1 January 2019
27,238,193
–
(5,333,158)
–
21,905,035
–
(5,011,100)
(277,146)
(540,971)
–
663,005
–
17,015,969
(277,146)
27,238,193
(5,333,158)
21,905,035
(5,288,246)
(540,971)
663,005
16,738,823
Loss for the year
Other comprehensive loss
Total comprehensive loss
for the year
–
–
–
Issue of shares
Share issue cost (net of tax)
Dividends paid
Cost of share based payments
Total transactions with
owners and other transfers
10,084,000
(413,032)
–
–
9,670,968
–
–
–
–
–
–
–
–
–
–
–
(2,912,440)
–
–
(11,273)
(2,912,440)
(11,273)
–
–
–
(2,912,440)
(11,273)
(2,923,713)
10,084,000
(413,032)
–
–
–
–
(660,501)
–
9,670,968
(660,501)
–
–
–
–
–
–
–
–
378,368
10,084,000
(413,032)
(660,501)
378,368
378,368
9,388,835
Balance at
31 December 2019
Balance at
1 January 2020
Loss for the year
Other comprehensive loss
Total comprehensive loss
for the year
Payment of loan for Long Term
Incentive Plan shares
Dividends paid
Cost of share based payments
Total transactions with
owners and other transfers
Balance at
31 December 2020
36,909,161
(5,333,158)
31,576,003
(8,861,187)
(552,244)
1,041,373
23,203,945
36,909,161
(5,333,158)
31,576,003
(8,861,187)
(552,244)
1,041,373
23,203,945
–
–
–
56,216
–
–
56,216
–
–
–
–
–
–
–
–
–
–
(6,043,636)
–
–
(143,856)
(6,043,636)
(143,856)
–
–
–
(6,043,636)
(143,856)
(6,187,492)
56,216
–
–
–
(752,419)
–
56,216
(752,419)
–
–
–
–
–
–
795,600
56,216
(752,419)
795,600
795,600
99,397
36,965,377
(5,333,158)
31,632,219
(15,657,242)
(696,100)
1,836,973
17,115,850
The Statement of Changes in Equity is to be read in conjunction with the notes to the financial statements.
38
1. Corporate Information
The financial report of Cyclopharm Limited (“Cyclopharm”
or “the Company”) for the year ended 31 December 2020
was authorised for issue by a resolution of the Directors as
at the date of this report.
Cyclopharm is a Company limited by shares incorporated
and domiciled in Australia. The shares are publicly traded
on the Australian Securities Exchange (ASX) under the
code CYC.
During the year, the principal continuing activities of the
consolidated entity (“the Group”) consisted of the manufacture
and sale of medical equipment and radiopharmaceuticals,
including associated research and development. The Group
commenced distribution of third party products to the
diagnostic imaging sector during the current financial year.
2. Summary of Significant Accounting Policies
(a) Basis of Preparation
The financial statements are general purpose financial
statements that have been prepared in accordance with
Australian Accounting Standards, Australian Accounting
Interpretations, other authoritative pronouncements of the
Australian Accounting Standards Board (AASB) and the
Corporations Act 2001. The Group is a for-profit entity for
financial reporting purposes under Australian Accounting
Standards.
Australian Accounting Standards set out accounting policies
that the AASB has concluded would result in financial
statements containing relevant and reliable information
about transactions, events and conditions. Compliance with
Australian Accounting Standards ensures that the financial
statements and notes also comply with International
Financial Reporting Standards as issued by the IASB.
Material accounting policies adopted in the preparation of
these financial statements are presented below and have
been consistently applied unless stated otherwise.
Except for cash flow information, the financial statements
have been prepared on an accruals basis and are based
on historical costs, modified, where applicable, by the
measurement at fair value of selected non-current assets,
financial assets and financial liabilities.
The financial report is presented in Australian dollars.
(b) New and Amended Accounting Policies
Adopted by the Group
Consolidated financial statements
The Group has adopted all of the new or amended
Accounting Standards and Interpretations issued by the
Australian Accounting Standards Board (AASB) that are
mandatory for the current reporting period.
Any new or amended Accounting Standards or
Interpretations that are not yet mandatory have not been
early adopted.
The following Accounting Standards and Interpretations
are most relevant to the consolidated entity:
Conceptual Framework for Financial Reporting
(Conceptual Framework)
The Group has adopted the revised Conceptual Framework
from 1 January 2020. The Conceptual Framework contains
new definition and recognition criteria as well as new
guidance on measurement that affects several Accounting
Standards, but it has not had a material impact on the
Group’s financial statements.
(c) New Accounting Standards and Interpretations
Not Yet Mandatory or Early Adopted
Australian Accounting Standards and Interpretations that
have recently been issued or amended but are not yet
mandatory, have not been early adopted by the Group for
the annual reporting period ended 31 December 2020. The
Group has not yet assessed the impact of these new or
amended Accounting Standards and Interpretations.
(d) Principles of consolidation
Cyclopharm Limited is the ultimate parent entity (the
Parent) in the wholly owned group. The consolidated
financial statements comprise the financial statements of
Cyclopharm and its subsidiaries as at 31 December each
year (the Group).
The Group’s financial statements consolidate those
of the parent company and all of its subsidiaries as of
31 December 2020. All subsidiaries have a reporting date
of 31 December.
Subsidiaries
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. Where there is loss of control of a
subsidiary, the consolidated financial statements include the
results for the part of the reporting period during which the
Parent has control.
The financial statements of subsidiaries are prepared for
the same reporting period as the parent Company, using
consistent accounting policies. Adjustments are made
to bring into line any dissimilar accounting policies that
may exist.
Transactions eliminated on consolidation
Intercompany transactions, balances and unrealised gains
on transactions between entities in the consolidated entity
are eliminated. Unrealised losses are also eliminated unless
the transaction provides evidence of the impairment of the
asset transferred. Accounting policies of subsidiaries have
been changed where necessary to ensure consistency with
the policies adopted by the consolidated entity.
For business combinations involving entities under common
control, which are outside the scope of AASB 3 Business
Combinations, the Company applies the purchase method
of accounting by the legal parent.
Notes to the Consolidated Financial StatementsFor the year ended 31 December 2020Cyclopharm Limited Annual Report 2020 39
2. Summary of Significant Accounting Policies (continued)
(e) Foreign currency translation
(f)
Income tax
Functional and presentation currency
The functional currency of each of the group’s entities is
measured using the currency of the primary economic
environment in which that entity operates. The consolidated
financial statements are presented in Australian dollars
(AUD $) which is the parent entity’s functional and
presentation currency.
Transactions and balances
Transactions in foreign currencies are initially recorded
in the functional currency at the exchange rates ruling at
the date of the transaction. Foreign currency monetary
items are translated at the year-end exchange rate. Non-
monetary items that are measured in terms of historical
cost continue to be carried at the exchange rate at the date
of the transaction. Non-monetary items measured at fair
value are reported at the exchange rate when the fair value
was determined.
Exchange differences arising on the translation of monetary
items are recognised in the Statement of Profit or Loss and
Other Comprehensive Income, except where deferred in
equity as a qualifying cash flow hedge or net investment
hedge. On disposal of a foreign entity the deferred
cumulative amount in equity is recognised in the Statement
of Profit or Loss and Other Comprehensive Income.
Group companies
The functional currency of the overseas subsidiaries
Cyclomedica Ireland Limited, Cyclomedica Germany
GmbH, Cyclomedica Europe Limited, and Cyclomedica
Benelux bvba, is European Euro (Euro €), Cyclomedica
Nordic AB is Swedish Kroner (SEK) and Cyclomedica
Canada Limited is Canadian dollars (Can $).
The financial results and position of foreign operations
whose functional currency is different from the group’s
presentation currency are translated as follows:
— Assets and liabilities are translated at year-end exchange
rates prevailing at the reporting date.
— Income and expenses are translated at the average
exchange rates for the period.
— Retained profits/equity are translated at the exchange rates
prevailing at the date of the transaction.
Exchange differences arising on the translation of foreign
operations are recognised in other comprehensive income
and are transferred directly to the Group’s foreign currency
translation reserve in the Statement of Financial Position.
On disposal of a foreign operation, the related cumulative
translation differences recognised in equity are reclassified
to profit or loss and are recognised as part of the gain or
loss on disposal. Exchange differences are charged or
credited to other comprehensive income and recognised in
the currency translation reserve in equity.
Income tax on the profit and loss for the year comprises
current and deferred tax. Income tax is recognised in the
Statement of Comprehensive Income, except to the extent
that it relates to items recognised directly to equity, in which
case it is recognised in equity. Current tax is the expected
tax payable on the taxable income for the year, using tax
rates enacted or substantially enacted at the Statement of
Financial Position date, and any adjustment to tax payable
in respect of previous years.
Deferred tax is provided using the Statement of Financial
Position liability method, providing for temporary differences
between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for
taxation purposes. The amount of deferred tax provided is
based on the expected manner of realisation or settlement
of the carrying amount of assets and liabilities, using tax
rates enacted or substantially enacted at the Statement of
Financial Position date and are expected to apply when the
deferred tax asset is realised or the deferred tax liability is
settled. A deferred tax asset is recognised only to the extent
that it is probable that future taxable profits will be available
against which the asset can be utilised. Deferred tax assets
are reduced to the extent that it is no longer probable that
the related tax benefit will be realised.
Tax consolidation
Cyclopharm Limited is the head entity of the tax
consolidated group comprising all the Australian wholly
owned subsidiaries. The implementation date for the tax
consolidated group was 31 May 2006. Current tax expense/
income, deferred tax liabilities and deferred tax assets
arising from temporary differences of the members of the
tax consolidated group are recognised in the separate
financial statements of the members of the tax consolidated
group using a “stand-alone basis without adjusting for
intercompany transactions” approach by reference to the
carrying amounts of assets and liabilities in the separate
financial statements of each entity and the tax values
applying under consolidation.
Any current Australian tax liabilities (or assets) and deferred
tax assets arising from unused tax losses of the subsidiaries
is assumed by the head entity in the tax consolidated group
and are recognised as amounts payable (receivable) to
(from) other entities in the tax consolidated group. Any
difference between these amounts is recognised by the
head entity as an equity contribution or distribution.
Cyclopharm Limited recognises deferred tax assets arising
from unused tax losses of the tax consolidated group to the
extent that it is probable that future taxable profits of the tax
consolidated group will be available against which the asset
can be utilised.
Any subsequent period adjustments to deferred tax
assets arising from unused tax losses as a result of
revised assessments of the probability of recoverability is
recognised by the head entity only.
40
2. Summary of Significant Accounting Policies (continued)
(g) Right-of-use assets
A right-of-use asset is recognised at the commencement
date of a lease. The right-of-use asset is measured at cost,
which comprises the initial amount of the lease liability,
adjusted for, as applicable, any lease payments made at or
before the commencement date net of any lease incentives
received, any initial direct costs incurred, and, except where
included in the cost of inventories, an estimate of costs
expected to be incurred for dismantling and removing the
underlying asset, and restoring the site or asset.
Right-of-use assets are depreciated on a straight-line basis
over the unexpired period of the lease or the estimated
useful life of the asset, whichever is the shorter. Where the
Group expects to obtain ownership of the leased asset
at the end of the lease term, the depreciation is over its
estimated useful life. Right-of-use assets are subject to
impairment or adjusted for any remeasurement of lease
liabilities.
The Group has elected not to recognise a right-of-use asset
and corresponding lease liability for short-term leases with
terms of 12 months or less and leases of low-value assets.
Lease payments on these assets are expensed to profit or
loss as incurred.
(h) Property, plant and equipment
Plant and equipment is measured at cost less accumulated
depreciation and impairment losses.
The cost of fixed assets constructed within the economic
entity includes the cost of materials, direct labour, borrowing
costs and an appropriate proportion of fixed and variable
overheads. Subsequent costs are included in the asset’s
carrying amount or recognised as a separate asset, as
appropriate, only when it is probable that future economic
benefits associated with the item will flow to the group and
the cost of the item can be measured reliably. All other
repairs and maintenance are charged to the Statement of
Comprehensive Income during the financial period in which
they are incurred.
Impairment
The carrying amount of plant and equipment is reviewed
annually by Directors to consider impairment. The
recoverable amount is assessed on the basis of the
expected net cash flows that will be received from the
assets employment and subsequent disposal. The
expected net cash flows have been discounted to their
present values in determining recoverable amounts.
Depreciation
The depreciable amount of all fixed assets including
capitalised lease assets are depreciated on a straight-line
basis over their useful lives commencing from the time
the asset is held ready for use. Leasehold improvements
are depreciated over the shorter of either the unexpired
period of the lease or the estimated useful lives of the
improvements.
Depreciation is calculated on a straight-line basis over the
estimated useful life of the asset as follows:
Plant and equipment
Leasehold Improvements
Motor vehicles
Basis
5 – 33%
20 – 50%
20 – 25%
Method
Straight-line method
Straight-line method
Straight-line method
An item of property, plant and equipment is derecognised
upon disposal or when no future economic benefits are
expected to arise from the continued use of the asset.
Any gain or loss arising on de-recognition of the asset
(calculated as the difference between the net disposal
proceeds and the carrying amount of the item) is included
in the Statement of Comprehensive Income in the year the
item is derecognised.
(i)
Investments accounted for using the
equity method
Associates are companies in which the Group has
significant influence through holding, directly or indirectly,
20% or more of the voting power of the Group. Investments
in associates are accounted for in the financial statements
by applying the equity method of accounting, whereby
the investment is initially recognised at cost and adjusted
thereafter for the post-acquisition change in the Group’s
share of net assets of the associate company. In addition,
the Group’s share of the profit or loss of the associate
company is included in the Group’s profit or loss.
The carrying amount of the investment includes goodwill
relating to the associate. Any discount on acquisition
whereby the Group’s share of the net fair value of the
associate exceeds the cost of investment is recognised
in profit or loss in the period in which the investment is
acquired. The carrying amount of the investment also
includes loans made to the associate which are not
expected to be repaid in the short term.
Profit and losses resulting from transactions between the
Group and the associate are eliminated to the extent of the
Group’s interest in the associate.
When the Group’s share of losses in an associate
equals or exceeds its interest in the associate, the Group
discontinues recognising its share of further losses unless
it has incurred legal or constructive obligations or made
payments on behalf of the associate. When the associate
subsequently makes profits, the Group will resume
recognising its share of those profits once its share of the
profits equals the share of the losses not recognised.
Details of the Group’s investments in associates are
provided in Note 13.
Notes to the Consolidated Financial StatementsFor the year ended 31 December 2020Cyclopharm Limited Annual Report 2020 41
2. Summary of Significant Accounting Policies (continued)
(j)
Intangibles
Intangible assets
Intangible assets acquired as part of a business
combination other than goodwill, are initially measured
at their fair value at the date of the acquisition. Intangible
assets acquired separately are initially recognised at cost.
Indefinite life intangible assets are not amortised and are
subsequently measured at cost less any impairment. Finite
life intangible assets are subsequently measured at cost
less amortisation and any impairment.
The gains and losses recognised in profit or loss arising
from the derecognition of intangible assets are measured
as the difference between net disposal proceeds and the
carrying amount of the intangible assets. The method
and useful lives of finite life intangible assets are reviewed
annually.
Internally generated intangible assets, excluding
development costs, are not capitalised and are recorded
as an expense in the Statement of Profit or Loss.
Intangible assets are tested for impairment where an
indicator of impairment exists, and in the case of indefinite
life intangibles, at each reporting date, either individually
or at the cash generating unit level. Useful lives are also
examined on an annual basis and adjustments, where
applicable, are made on a prospective basis.
Expenditure on the development of the Technegas Plus
and Ultralute generator has been capitalised. Costs will
be amortised once the asset development is completed
and the asset ready for use. No impairment provision has
been deemed appropriate. The Directors are satisfied that
the future economic benefits will eventuate to justify the
capitalisation of the expenditure incurred. Development
expenditure is tested annually for impairment or more
frequently if events or changes in circumstances indicate
that it might be impaired.
Basis
New Patents
and licences
Patents – Finite
Licenses – Finite
8–10 years –
Straight-line
Annually and where
an indicator of
impairment exists
Useful lives
Method used
Impairment test/
Recoverable
Amount testing
Method
Technegas
Development costs
Finite
9 years –
Straight-line
Amortisation
method reviewed
at each financial
year-end;
Reviewed annually
for indicator of
impairment
Research and development costs
Expenditure on research activities is recognised as an
expense when incurred.
Expenditure on development activities is capitalised only
when it is probable that the project will be a success
considering its commercial and technical feasibility; the
Group is able to use or sell the asset; the Group has sufficient
resources; and intend to complete the development and its
costs can be measured reliably. Development expenditure
is measured at cost less any accumulated amortisation
and impairment losses. Amortisation is calculated using a
straight-line method to allocate the costs over a period during
which the related benefits are expected to be realised.
(k) Inventories
Inventories are valued at the lower of cost and net
realisable value where 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.
Costs incurred in bringing each product to its present
location and conditions are accounted for as follows:
— Raw materials: purchase cost on a first-in, first-out basis;
— Finished goods and work-in-progress: cost of direct
materials and labour and an appropriate portion of
manufacturing overheads based on normal operating
capacity but excluding borrowing costs.
(l) Trade and other receivables
Trade receivables are initially recognised at fair value
and subsequently measured at amortised cost using the
effective interest method, less any allowance for expected
credit losses. Trade receivables are generally due for
settlement within 90 days. The Group has applied the
simplified approach to measuring expected credit losses,
which uses a lifetime expected loss allowance. To measure
the expected credit losses, trade receivables have been
grouped based on days overdue.
(m) Cash and cash equivalents
Cash and cash equivalents comprise cash on hand,
deposits held at call with banks, short-term deposits with
an original maturity of three months or less and bank
overdrafts. For the purposes of the Statement of Cash
Flows, cash and cash equivalents consist of cash and
cash equivalents as defined above.
(n) Trade and other payables
Trade payables and other payables are carried at amortised
cost and 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. Trade payables are normally settled
within 30 to 60 days.
42
2. Summary of Significant Accounting Policies (continued)
(o) Interest-bearing loans and borrowings
All loans and borrowings are initially recognised at cost,
being the fair value of the consideration received net of
issue costs associated with the borrowing. After initial
recognition, interest-bearing loans and borrowings are
subsequently measured at amortised cost using the
effective interest rate method. Amortised cost is calculated
by taking into account any issue costs and any discount or
premium on settlement. Gains and losses are recognised
in the Statement of Comprehensive Income when the
liabilities are derecognised and as well as through the
amortisation process.
(p) Lease liabilities
A lease liability is recognised at the commencement date
of a lease. The lease liability is initially recognised at the
present value of the lease payments to be made over the
term of the lease, discounted using the interest rate implicit
in the lease or, if that rate cannot be readily determined,
the Group’s incremental borrowing rate. Lease payments
comprise of fixed payments less any lease incentives
receivable, variable lease payments that depend on an
index or a rate, amounts expected to be paid under residual
value guarantees, exercise price of a purchase option when
the exercise of the option is reasonably certain to occur, and
any anticipated termination penalties. The variable lease
payments that do not depend on an index or a rate are
expensed in the period in which they are incurred.
Lease liabilities are measured at amortised cost using
the effective interest method. The carrying amounts are
remeasured if there is a change in the following: future lease
payments arising from a change in an index or a rate used;
residual guarantee; lease term; certainty of a purchase
option and termination penalties. When a lease liability is
remeasured, an adjustment is made to the corresponding
right-of-use asset, or to profit or loss if the carrying amount
of the right-of-use asset is fully written down.
(q) Provisions
Provisions are recognised when the Group has a present
obligation (legal or constructive) as a result of past events,
for which it is probable that an outflow of economic benefits
will result and that an outflow can be reliably measured.
Where the Group expects some or all of a provision to be
reimbursed, for example under an insurance contract, 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.
(r) Employee entitlements
Provision is made for employee benefits accumulated as a
result of employees rendering services up to the reporting
date. These benefits include wages and salaries, annual
leave and long service leave.
Employee benefits expected to be settled within twelve
months of the reporting date are measured at their nominal
amounts based on remuneration rates which are expected
to be paid when the liability is settled plus related on-costs.
All other employee benefit liabilities are measured at the
present value of the estimated future cash outflow (after
applying probability) to be made in respect of services
provided by employees up to the reporting date. In
determining the present value of future cash outflows, the
market yield as at the reporting date on national government
bonds, which have terms to maturity approximating the
terms of the related liability, are used.
Employee benefit expenses and revenues arising in respect
of wages and salaries, non-monetary benefits, annual leave,
long service leave and other leave benefits; and other types
of employee benefits are recognised against profits on a net
basis in their respective categories.
(s) Employee share and performance share schemes
The fair value of performance rights issued under the
Cyclopharm Long Term Incentive Plan are recognised
as a personnel expense over the vesting period with a
corresponding increase in Employee Equity Benefits
Reserve.
The fair value of the implied option attached to shares
granted is determined using a pricing model that takes
into account factors that include exercise price, the term
of the performance option, the vesting and performance
criteria, the share price at grant date and the expected price
volatility of the underlying share. The fair value calculation
excludes the impact of any non-market vesting conditions.
Non-market vesting conditions are included in assumptions
about the number of performance options that are expected
to become exercisable. At each balance date, the entity
revises its estimate of the number of performance rights
that are expected to become exercisable. The personnel
expense recognised each period takes into account the
most recent estimate.
Shares issued under employee and executive share plans
are held in trust until vesting date. Unvested shares held
by the trust are consolidated into the group financial
statements.
(t) Revenue recognition
The consolidated entity recognises revenue as follows:
Revenue from contracts with customers
Revenue is recognised at an amount that reflects the
consideration to which the consolidated entity is expected
to be entitled in exchange for transferring goods or
services to a customer. For each contract with a customer,
the consolidated entity: identifies the contract with a
customer; identifies the performance obligations in the
contract; determines the transaction price which takes
into account estimates of variable consideration and the
time value of money; allocates the transaction price to
Notes to the Consolidated Financial StatementsFor the year ended 31 December 2020Cyclopharm Limited Annual Report 2020 43
2. Summary of Significant Accounting Policies (continued)
the separate performance obligations on the basis of
the relative stand-alone selling price of each distinct good
or service to be delivered; and recognises revenue when
or as each performance obligation is satisfied in a manner
that depicts the transfer to the customer of the goods or
services promised.
Variable consideration within the transaction price, if any,
reflects concessions provided to the customer such as
discounts, rebates and refunds, any potential bonuses
receivable from the customer and any other contingent
events. Such estimates are determined using either the
'expected value' or 'most likely amount' method. The
measurement of variable consideration is subject to
a constraining principle whereby revenue will only be
recognised to the extent that it is highly probable that a
significant reversal in the amount of cumulative revenue
recognised will not occur. The measurement constraint
continues until the uncertainty associated with the
variable consideration is subsequently resolved. Amounts
received that are subject to the constraining principle are
recognised as a refund liability.
Sale of goods
Revenue from the sale of goods is recognised at the point
in time when the customer obtains control of the goods,
which is generally at the time of delivery.
Rendering of services
Revenue from a contract to provide services is recognised
over time as the services are rendered based on either a
fixed price or an hourly rate.
Interest
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.
Rent
Rent revenue from investment properties is recognised on
a straight-line basis over the lease term. Lease incentives
granted are recognised as part of the rental revenue.
Contingent rentals are recognised as income in the period
when earned.
(u) Other Revenue
Interest
Revenue is recognised as the interest accrues using the
effective interest rate method, which is the rate that exactly
discounts estimated future cash receipts through the
expected life of the financial instrument to the net carrying
amount of the financial asset.
Research & Development Tax Incentive
Government grants, including Research and Development
incentives, are recognized at fair value where there is
reasonable assurance that the grant will be received and
all grant conditions will be met.
Grants relating to cost reimbursements are recognized as
other income in profit or loss in the period when the costs
were incurred or when the incentive meets the recognition
requirements (if later)
All revenue is stated net of the amount of goods and
services tax (“GST”).
(v) Other taxes
Revenues, expenses and assets are recognised net of
the amount of GST except where the GST incurred is not
recoverable from the Australian Taxation Office (“ATO”) and
is therefore recognised as part of the asset’s cost or as part
of the expense item. Receivables and payables are stated
inclusive of GST. The net amount of GST recoverable from,
or payable to, the ATO is included as part of receivables
or payables in the Statement of Financial Position. Cash
flows are presented 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.
(w) Financial instruments
Financial assets and liabilities are recognised when the
entity becomes a party to the contractual provisions to the
instrument.
Loans and receivables
Loans and receivables are non-derivative financial assets
with fixed or determinable payments that are not quoted in
an active market and are stated at amortised cost using the
effective interest rate method.
Derivative financial instruments
Derivatives are initially recognised at fair value on the date
a derivative contract is entered into and are subsequently
remeasured to their fair value at each reporting date. The
accounting for subsequent changes in fair value depends
on whether the derivative is designated as a hedging
instrument, and if so, the nature of the item being hedged.
De-recognition of financial instruments
Financial liabilities
A financial liability is derecognised when the obligation
under the liability is discharged or cancelled or expires.
When an existing financial liability is replaced by another
from the same lender on substantially different terms, or the
terms of an existing liability are substantially modified, such
an exchange or modification is treated as a de-recognition
of the original liability and the recognition of a new liability,
and the difference in the respective carrying amounts is
recognised in profit or loss.
Impairment of financial assets
The Group assesses at each Statement of Financial
Position date whether a financial asset or group of financial
assets is impaired.
44
2. Summary of Significant Accounting Policies (continued)
(x) Contributed equity
Share capital
Ordinary shares are classified as equity. Incremental costs
directly attributable to the issue of new shares or options are
shown in equity as a deduction, net of tax, from the proceeds.
Other contributed equity
In accordance with AASB112 Income Taxes, additional
contributed equity was recorded to recognise the transfer of
tax liabilities from Vita Medical Limited to Vita Life Sciences
Limited, being the parent of the Australian tax consolidated
group at the relevant time. This event occurred prior to
Cyclopharm Limited acquiring its interests in the net assets
of Vita Medical Limited.
As part of the restructure a subsidiary of Cyclopharm
Limited, Vita Medical Australia Pty Ltd acquired all the
assets, liabilities and business from Vita Medical Limited,
the former group parent.
With effect from 31 May 2006, Cyclopharm Limited also
acquired 100% of the other group operating subsidiaries
from the ultimate holding company, Vita Life Sciences
Limited. Accordingly, the group comprises Cyclopharm
Limited and the following wholly owned subsidiaries:
— Cyclomedica Australia Pty Ltd (formerly Vita Medical
Australia Pty Ltd)
— Cyclomedica Ireland Ltd (formerly Vitamedica Europe Ltd)
— Cyclomedica Europe Ltd
— Cyclomedica Canada Limited (formerly Vita Medical
Canada Ltd)
— Cyclomedica Germany GmbH
— Allrad 28 Pty Ltd (deregistered 16 July 2017)
— Allrad 29 Pty Ltd (deregistered 16 July 2017)
These entities collectively comprise the medical diagnostic
equipment and associated consumables business formerly
operated as the Vita Medical Group – now known as the
Cyclopharm Group. The transaction has been accounted
for as a ‘reverse acquisition’ as defined in AASB 3 Business
Combinations whereby Cyclopharm Limited is the legal
parent and Cyclomedica Australia Pty Limited is the
financial parent, which for accounting purposes is deemed
to be the acquirer.
The consideration for the minority interests of the controlled
entities and costs of acquisition have been charged to
other contributed equity in accordance with AASB 127
Consolidated and Separate Financial Statements.
(y) Earnings per share
Basic earnings per share
Basic earnings per share is determined by dividing the net
profit/(loss) after income tax attributable to members of
the Company by the weighted average number of ordinary
shares outstanding during the financial year. Where there is
a change in the number of ordinary shares on issue without
a corresponding change in recognised resources during
the year, the number of ordinary shares for all periods
presented are correspondingly adjusted as if the event had
occurred at the beginning of the earliest period presented.
Diluted earnings per share
Diluted earnings per share adjusts the figures used in
the determination of basic earnings per share to take into
account the after-income tax effect of interest and other
financing costs associated with dilutive potential ordinary
shares and the weighted average number of shares
assumed to have been issued for no consideration in
relation to dilutive potential ordinary shares. Where there is
a change in the number of ordinary shares on issue without
a corresponding change in recognised resources during
the year, the number of ordinary shares for all periods
presented are correspondingly adjusted as if the event had
occurred at the beginning of the earliest period presented.
(z) Fair Value
The Group subsequently measures some of its assets
at fair value on a non-recurring basis. Fair value is the
price the Group would receive to sell an asset in an
orderly (i.e. unforced) transaction between independent,
knowledgeable and willing market participants at the
measurement date.
As fair value is a market-based measure, the closest
equivalent observable market pricing information is used
to determine fair value. Adjustments to market values may
be made having regard to the characteristics of the specific
asset. The fair values of assets that are not traded in an
active market are determined using one or more valuation
techniques. These valuation techniques maximise, to the
extent possible, the use of observable market data.
To the extent possible, market information is extracted
from either the principal market for the asset (i.e. the
market with the greatest volume and level of activity for
the asset) or, in the absence of such a market, the most
advantageous market available to the entity at the end of
the reporting period (i.e. the market that maximises the
receipts from the sale of the asset after taking into account
transaction costs and transport costs). For non-financial
assets, the fair value measurement also takes into account
a market participant’s ability to use the asset in its highest
and best use or to sell it to another market participant that
would use the asset in its highest and best use.
(aa) Significant Accounting Judgements
and Estimates
The preparation of financial statements requires
management to make judgements, estimates and
assumptions that effect the application of accounting
policies and the reported amounts of assets, liabilities,
income and expenses.
The following are the critical judgements and estimates
that the directors have made in the process of applying
the Group’s accounting policies and that have the most
significant effect on the amounts recognised in the
financial statements.
Notes to the Consolidated Financial StatementsFor the year ended 31 December 2020Cyclopharm Limited Annual Report 2020 45
2. Summary of Significant Accounting Policies (continued)
Key Estimates
Impairment – general
The Group assesses impairment at the end of each
reporting period by evaluating conditions and events
specific to the Group that may be indicative of impairment
triggers. Recoverable amounts of relevant assets are
reassessed using value-in-use calculations which
incorporate various key assumptions.
The Group’s property, plant and equipment relating to
the Cyclotron facility have been fully impaired, based on
management’s assessment that the fair value of those
assets is nil in the current industry circumstances and the
condition of the damaged assets. Extensive damage to
the Cyclotron facility caused by substantial water damage
in June 2014, delayed any decisions about the future use
of the Cyclotron facility until it is restored to its former
operational status. In 2019, the Company entered into a
Business Venture Collaboration Agreement with Cyclotek
Australia Pty Ltd and Pettech, a wholly owned subsidiary
of ANSTO. In parallel the Company entered into a Business
Sale Transfer agreement for the operations conducted at
the Company’s Cyclotron facility located at Macquarie
University Hospital.
The assumptions used in the estimation of recoverable
amount and the carrying amount of intangible assets
are discussed in Note 14. No impairment has been
recognised in respect of intangible assets at the end of
the reporting period.
Useful lives of property, plant and equipment
The estimation of the useful lives of assets has been
based on historical experience as well as lease terms and
turnover policies. In addition, the condition of the assets is
assessed at least once per year and considered against
the remaining useful life. Adjustments to useful lives are
made when considered necessary.
Lease term
The lease term is a significant component in the
measurement of both the right-of-use asset and lease
liability. Judgement is exercised in determining whether
there is reasonable certainty that an option to extend
the lease or purchase the underlying asset will be
exercised, or an option to terminate the lease will not
be exercised, when ascertaining the periods to be
included in the lease term. In determining the lease term,
all facts and circumstances that create an economical
incentive to exercise an extension option, or not to
exercise a termination option, are considered at the lease
commencement date. Factors considered may include
the importance of the asset to the Company’s operations;
comparison of terms and conditions to prevailing market
rates; incurrence of significant penalties; existence of
significant leasehold improvements; and the costs and
disruption to replace the asset. The Company reassesses
whether it is reasonably certain to exercise an extension
option, or not exercise a termination option, if there is a
significant event or significant change in circumstances.
Incremental borrowing rate
Where the interest rate implicit in a lease cannot be
readily determined, an incremental borrowing rate is
estimated to discount future lease payments to measure
the present value of the lease liability at the lease
commencement date. Such a rate is based on what the
Company estimates it would have to pay a third party to
borrow the funds necessary to obtain an asset of a similar
value to the right-of-use asset, with similar terms, security
and economic environment.
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 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 expenses and equity.
The Group measures the cost of share-based payments
at fair value at the grant date using the Black-Scholes
formula, taking into account the terms and conditions
upon which the instruments were granted. Refer to Note 26
for details of the Company’s Share Based Payment Plan.
Key Judgements
Taxation
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 on 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.
Judgements are also required about the application
of income tax legislation. These judgements and
assumptions are subject to risk and uncertainty, hence
there is a possibility that changes in circumstances will
alter expectations, which may impact the amount of
deferred tax assets and deferred tax liabilities 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 consolidated
statement of comprehensive income.
46
3. Revenue from contracts with customers
Set out below is the disaggregation of the Group’s revenue from contracts with customers:
Segments
Type of goods or service
Sales of equipment and consumables – Technegas
Sales of equipment and consumables – third party products
Income from Cyclotek NSW Pty Ltd
After sales services – Technegas
After sales services – third party products
Total revenue from contracts with customers
Geographical markets
Asia Pacific
Europe
Canada
Other
Total revenue from contracts with customers
Timing of revenue recognition
Goods transferred at a point in time
Services transferred over time
Total revenue from contracts with customers
Segments
Type of goods or service
Sales of equipment and consumables – Technegas
After sales services – Technegas
Total revenue from contracts with customers
Geographical markets
Asia Pacific
Europe
Canada
Other
Total revenue from contracts with customers
Timing of revenue recognition
Goods transferred at a point in time
Services transferred over time
Total revenue from contracts with customers
There are no impairment losses on receivables.
For the year ended 31 December 2020
Technegas
$
11,075,305
2,014,557
–
1,274,539
158,670
14,523,071
2,235,541
10,135,320
2,051,757
100,453
14,523,071
14,333,375
189,696
14,523,071
Molecular
Imaging
$
–
–
153,086
–
–
153,086
153,086
–
–
–
153,086
153,086
–
153,086
Total
$
11,075,305
2,014,557
153,086
1,274,539
158,670
14,676,157
2,388,627
10,135,320
2,051,757
100,453
14,676,157
14,486,461
189,696
14,676,157
For the year ended 31 December 2019
Technegas
$
12,774,045
1,304,756
14,078,801
2,313,912
8,742,760
2,558,344
463,785
14,078,801
13,840,520
238,281
14,078,801
Molecular
Imaging
$
–
–
–
–
–
–
–
–
–
–
Total
$
12,774,045
1,304,756
14,078,801
2,313,912
8,742,760
2,558,344
463,785
14,078,801
13,840,520
238,281
14,078,801
Notes to the Consolidated Financial StatementsFor the year ended 31 December 2020Cyclopharm Limited Annual Report 2020 47
4. Operating segments
The Group has identified its operating segments based on the internal reports that are reviewed and used by the Board of Directors
(chief operating decision makers) in assessing performance and determining the allocation of resources. The Group is managed
primarily on the basis of product category as the Group's risks and returns are affected predominantly by differences in the products
and services produced. The Group also monitors the performance of the business on a geographical basis.
The operating businesses are organised and managed separately according to the nature of the products and services provided,
with each segment representing a strategic business unit that offers different products and serves different markets.
The Technegas segment is a supplier of diagnostic equipment and consumables used by physicians in the detection of pulmonary
embolism. Distribution of third party products to the diagnostic imaging sector commenced during the current financial year.
The Molecular Imaging segment will produce radiopharmaceuticals to be used by physicians in the detection of cancer, neurological
disorders and cardiac disease.
Transfer prices between business segments are set on an arm's length basis in a manner similar to transactions with third parties.
Segment revenue, segment expense and segment result include transfers between business segments. Those transfers are
eliminated on consolidation.
Business segments
The tables under the heading business segments present revenue and profit information and certain asset and liability information
regarding business segments for the years ended 31 December 2020 and 31 December 2019.
Geographical segments
The tables under the heading geographical segment present revenue and asset information regarding geographical segments for
the years ended 31 December 2020 and 31 December 2019.
Business segments
For the year ended 31 December 2020
Revenue
Sales – Technegas
Income from Cyclotek NSW Pty Ltd
Sales – third party products
Sales to external customers
Finance revenue
Other revenue
Total revenue
Result
(Loss)/profit before tax and finance costs
Finance costs
(Loss)/profit before income tax
Income tax
(Loss)/profit after income tax
Assets and liabilities
Segment assets
Segment asset increases for the period :
– capital expenditure
Segment liabilities
Other segment information
Depreciation and amortisation
Technegas
$
12,349,844
–
2,173,227
14,523,071
3,407
3,004,893
17,531,371
(5,777,936)
(205,341)
(5,983,277)
(70,490)
(6,053,767)
Consolidated
Molecular
Imaging
$
–
153,086
–
153,086
1,003
–
154,089
141,686
(2,518)
139,168
(129,037)
10,131
Total
$
12,349,844
153,086
2,173,227
14,676,157
4,410
3,004,893
17,685,460
(5,636,250)
(207,859)
(5,844,109)
(199,527)
(6,043,636)
27,103,927
1,171,198
28,275,125
316,214
(11,122,986)
–
(36,289)
316,214
(11,159,275)
(910,291)
–
(910,291)
48
Technegas
$
14,078,801
23,980
2,934,187
17,036,968
(2,903,095)
(267,796)
(3,170,891)
(1,019,968)
(4,190,859)
Consolidated
Molecular
Imaging
$
Total
$
–
1,533
–
1,533
14,078,801
25,513
2,934,187
17,038,501
758,411
(12,463)
745,948
532,471
1,278,419
(2,144,684)
(280,259)
(2,424,943)
(487,497)
(2,912,440)
31,172,974
1,355,443
32,528,417
238,446
(9,287,959)
–
(36,513)
238,446
(9,324,472)
(737,653)
(262,286)
(999,939)
Asia Pacific
$
2,388,627
4,055
3,004,893
5,397,575
Europe
$
Consolidated
Canada
$
10,135,320
355
–
10,135,675
2,051,757
–
–
2,051,757
Other
$
100,453
–
–
100,453
Total
$
14,676,157
4,410
3,004,893
17,685,460
18,569,675
8,442,980
1,127,708
–
28,140,363
Asia Pacific
$
2,313,912
15,893
2,934,187
5,263,992
Europe
$
8,742,760
9,620
–
8,752,380
Consolidated
Canada
$
2,558,344
–
–
2,558,344
Other
$
463,785
–
–
463,785
Total
$
14,078,801
25,513
2,934,187
17,038,501
24,608,560
7,007,539
912,318
–
32,528,417
4. Operating segments (continued)
Business segments
For the year ended 31 December 2019
Revenue
Sales to external customers
Finance revenue
Other revenue
Total revenue
Result
(Loss)/profit before tax and finance costs
Finance costs
(Loss)/profit before income tax
Income tax expense
(Loss)/profit after income tax
Assets and liabilities
Segment assets
Segment asset increases for the period:
– capital expenditure
Segment liabilities
Other segment information
Depreciation and amortisation
Geographical segments
For the year ended 31 December 2020
Revenue
Sales to external customers
Finance revenue
Other revenue
Total segment revenue
Assets
Segment assets
For the year ended 31 December 2019
Revenue
Sales to external customers
Finance revenue
Other revenue
Total segment revenue
Assets
Segment assets
Notes to the Consolidated Financial StatementsFor the year ended 31 December 2020Cyclopharm Limited Annual Report 2020
49
Notes
Consolidated
2020
$
2019
$
14,523,071
153,086
14,676,157
4,410
14,078,801
–
14,078,801
25,513
3,004,893
3,004,893
2,934,187
2,934,187
3,963,469
2,908,664
18,215
189,644
207,859
143,522
340,417
289,758
136,594
910,291
3,311,715
173,851
51,951
3,537,517
6,397,977
529,150
129,530
795,600
7,852,257
3,567,193
1,617,731
(5,601)
470,288
5,649,611
43,786
609,085
(2,969)
–
–
(491,500)
404,441
562,843
46,868
233,391
280,259
122,283
222,337
551,229
104,090
999,939
3,841,534
350,844
199
4,192,577
4,564,313
361,261
171,947
378,368
5,475,889
4,121,851
900,579
17,534
707,982
5,747,946
(54,171)
(100,275)
(338,908)
309,000
(976,044)
–
373,950
(786,448)
26a
5. Revenues and expenses
Revenue
Sales revenue
Income from Cyclotek NSW Pty Ltd
Total revenue
Finance revenue – Interest received from other parties
Other Revenue
R&D Tax incentive refund
Total other revenue
(Note 3 discloses the disaggregation of the Group’s revenue from contracts with customers)
Expenses
(a) Cost of materials and manufacturing
Cost of materials and manufacturing
(b) Finance costs
Interest paid on loans from external parties
Interest on leased assets (AASB 16)
Total finance costs
(c) Depreciation and amortisation
Depreciation of plant and equipment
Depreciation of leasehold improvements
Depreciation of leased assets (AASB 16)
Amortisation of intangibles
(d) Research & development expense
FDA expenses
Pilot Clinical Trial expenses
Research expenses
(e) Employee benefits expense
Salaries and wages
Defined contribution superannuation expense
Non-Executive Director fees
Share-based payments expense
(f) Administration expense
Legal and professional costs
Office and facility costs
(Reversal of)/provision for doubtful debts
Travel and motor vehicle costs
(g) Other expense/(income)
Realised Foreign exchange losses/(gains)
Unrealised Foreign exchange losses/(gains)
Recoveries from litigation
Costs of terminating put option
Rent waiver from landlord of Cyclotron facility
Jobkeeper grant
Other
50
2020
$
2019
$
(173,128)
(26,399)
(199,527)
(423,756)
(63,741)
(487,497)
(5,844,109)
(2,424,943)
1,215,570
168,208
(1,627,043)
826,346
(26,399)
–
(756,209)
–
(199,527)
3.4%
666,859
197,077
(2,093,312)
806,901
(64,132)
391
–
(1,281)
(487,497)
20.1%
233,904
114,053
–
225,585
22,932
156,668
(667,429)
1,517,795
339,330
1,189,696
1,493,663
–
(303,967)
1,189,696
1,110,124
24,195
359,344
1,493,663
1,043,521
80,164
369,978
1,493,663
(277,568)
277,568
–
(517)
(277,051)
(277,568)
636,836
1,078,595
20,503
826,669
–
21,686
6.
Income tax
The components of income tax expense comprise:
Current income tax expense
Deferred tax expense
A reconciliation of income tax expense applicable to accounting loss before income tax
at the statutory income tax rate to income tax expense at the Group’s effective income tax
rate is as follows:
Accounting loss before income tax
Statutory income tax rate of 27.5% (2019: 27.5%)
Effects of lower rates on overseas income
Expenditure not allowable for income tax purposes
Non-assessable income
Temporary differences recognised (reversed) in Australian group
Temporary differences recognised (reversed) overseas
Tax losses not recognised in Australia
Tax losses not recognised overseas
Total income tax expense
Effective income tax rate
Current income tax asset
Current income tax liability
Deferred tax relating to capital raising costs, credited directly to equity
Deferred tax assets
Deferred tax assets from temporary differences on:
Investments
Provisions and accruals
Other
Total deferred tax assets
Movements in deferred tax assets
Opening balance
Adjustment on adopting AASB 16 Leases
Temporary differences brought to account (reversed)
Closing balance
Deferred tax liabilities
Movements in deferred tax liabilities
Opening balance
Temporary differences brought to account (reversed)
Closing balance
Deferred tax assets for which no benefit has been recognised:
– arising from temporary differences – at 26% (2019: 27.5%)
– arising from revenue tax losses – at 26% (2019: 27.5%)
– arising from capital tax losses – at 26% (2019: 27.5% )
Notes to the Consolidated Financial StatementsFor the year ended 31 December 2020Cyclopharm Limited Annual Report 2020
51
Consolidated
2020
$
0.21
0.15
2019
$
0.30
0.23
Number
80,274,455
Number
78,238,398
2020
$
17,115,850
(5,291,899)
11,823,951
2019
$
23,203,945
(5,145,349)
18,058,596
7. Net tangible assets and loss per share
Net Tangible Assets per share
Net assets per share
Net tangible assets per share
Number of ordinary shares for net assets per share
Net assets
Less: Intangible assets
Net tangible assets
The number of ordinary shares includes the effects of 1,045,000 Long Term Incentive Performance (LTIP) shares issued on 4 May
2020 and 757,750 LTIP shares issued on 24 July 2020 (2019: 269,614 LTIP shares issued on 11 December 2019 and 200,000 LTIP
shares issued on 30 May 2019) and excludes 24,443 expired LTIP shares cancelled on 5 May 2020 as set out in Note 19. The net
assets includes both right-of-use assets and lease liabilities accounted for in accordance with AASB 16 Leases.
Loss per share
Basic loss per share for continuing operations
Basic loss per share
Diluted loss per share
Weighted average number of ordinary shares for basic loss per share
Weighted average number of ordinary shares for diluted loss per share
Loss used to calculate basic earnings per share
Loss used to calculate diluted earnings per share
Consolidated
2020
cents
(7.89)
(7.89)
(7.89)
2019
cents
(4.28)
(4.28)
(4.28)
Number
76,590,677
76,590,677
Number
68,121,079
68,121,079
2020
$
(6,043,636)
(6,043,636)
2019
$
(2,912,440)
(2,912,440)
The weighted average number of ordinary shares for basic loss per share excludes the effects of 1,045,000 LTIP shares issued on
4 May 2020, 757,750 LTIP shares issued on 24 July 2020, 269,614 LTIP shares issued on 11 December 2019, 200,000 LTIP shares
issued on 30 May 2019 and 500,000 LTIP shares issued on 2 July 2018 set out in Note 19 as they are contingently returnable.
52
Consolidated
2020
$
2019
$
1,874,285
1,874,285
12,660,323
12,660,323
Consolidated
2020
$
2019
$
1,874,285
1,874,285
12,660,323
12,660,323
(6,043,636)
(2,912,440)
773,697
136,594
–
–
370,003
(152,838)
795,600
(5,601)
(4,126,181)
(1,783,104)
(2,240,574)
(3,122,390)
(8,319)
303,967
2,128,848
91,121
(277,568)
99,332
(8,934,868)
895,849
104,090
213,548
309,000
(194,502)
(35,215)
378,368
(268,813)
(1,510,115)
2,681,053
276,103
178,288
(147,208)
(450,142)
(1,303,967)
(620,712)
277,051
130,309
(489,340)
8. Cash and cash equivalents
Cash at bank and in hand
Total cash and cash equivalents
Cash at bank and in hand earns interest at floating rates based on daily bank deposit rates.
The fair value of cash equivalents is $1,874,285 (2019: $12,660,323).
Reconciliation of Statement of Cash Flows
For the purpose of the Statement of Cash Flows, cash and cash equivalents
comprise the following:
Cash at bank and in hand
(a) Reconciliation of net loss after tax to net cash flows from operations
Net loss after tax
Adjustments for non-cash income and expense items:
Depreciation
Amortisation
Property, plant and equipment written off
Cost of terminating put option
Movement provision for employee benefits
Movement in foreign exchange
Movement in employee benefits reserve
Movement in other provisions
Increase/decrease in assets and liabilities:
(Increase)/Decrease in receivables
(Increase)/Decrease in inventories
(Increase)/Decrease in other receivables
Increase in current tax asset
Decrease/(Increase) in deferred tax assets
Increase/(Decrease) in creditors
Increase/(Decrease) in current tax liabilities
(Decrease)/Increase in deferred tax liabilities
Increase in deferred income liability
Net cash flow used in operating activities
(b) Non-cash financing and investing activities
All LTIP shares as set out in Note 26 Share Based Payment Plans are issued by way of loans.
During 2020, 225,000 LTIP shares vested and an election was made to extend the exercise period for up to 5 years, whilst 24,443
LTIP shares lapsed and were cancelled. Refer to Note 19 Contributed Equity and Note 26 Share Based Payment Plans.
The following Long Term Incentive Plan (LTIP) shares were issued by way of loans:
— 200,000 Long Term Incentive Plan (LTIP) shares were issued on 30 May 2019,
— 500,000 Long Term Incentive Plan (LTIP) shares were issued on 2 July 2018.
Notes to the Consolidated Financial StatementsFor the year ended 31 December 2020Cyclopharm Limited Annual Report 2020 53
Notes
(i)
(ii), (iii)
Consolidated
2020
$
2019
$
5,453,528
(104,412)
5,349,116
3,488,281
8,837,397
8,837,397
3,673,271
(107,259)
3,566,012
413,583
3,979,595
3,979,595
9. Trade and other receivables
Current
Trade receivables, third parties
Allowance for expected credit loss
Net Trade receivables, third parties
Other receivables
Total Current trade and other receivables
Total trade and other receivables
Terms and conditions
Terms and conditions relating to the above financial instruments.
Trade receivables are non-interest bearing and generally on 30 and 60-day terms.
Other receivables are non-interest bearing and have repayment terms between 30 and 90 days.
(i)
(ii)
(iii) Other receivables for the financial year ended 31 December 2020 included accrued R&D Tax Incentive of $3,104,225 which
was received in February 2021. The R&D Tax Incentive for the previous financial year was received in November 2019.
(iv) Related party details are set out in the Note 22 Related Party Disclosures.
Movements in the allowance for expected credit losses are as follows:
Opening balance
Unused amounts reversed
Closing balance
10. Inventories
Current
Raw materials at cost
Finished goods at lower of cost or net realisable value
Provision for obsolescence
Total inventory
Consolidated
2020
$
107,259
(2,847)
104,412
2019
$
417,610
(310,351)
107,259
Consolidated
2020
$
2019
$
2,938,687
1,840,807
(43,477)
4,736,017
1,334,713
1,199,849
(39,119)
2,495,443
54
11. Property, plant and equipment
Consolidated
Year ended 31 December 2020
1 January 2020
at written down value
Additions/Transfers
Depreciation for the year
31 December 2020
at written down value
1 January 2020
Cost value
Impairment – Molecular Imaging*
Accumulated depreciation
Net carrying amount
31 December 2020
Cost value
Impairment – Molecular Imaging*
Accumulated depreciation
Net carrying amount
Year ended 31 December 2019
1 January 2019
at written down value
Additions/Transfers
Disposals/Transfers
Depreciation for the year
31 December 2019
at written down value
1 January 2019
Cost value
Impairment – Molecular Imaging*
Accumulated depreciation
Net carrying amount
31 December 2019
Cost value
Impairment – Molecular Imaging*
Accumulated depreciation
Net carrying amount
Leasehold
Land and
Buildings
$
Leasehold
Improvements
Plant and
Equipment
$
$
299,655
724
(10,513)
1,288,500
53,133
(340,417)
411,038
242,297
(133,009)
289,866
1,001,216
520,326
2,393,609
(1,881,960)
(211,994)
299,655
4,818,811
(2,608,912)
(921,399)
1,288,500
8,430,524
(4,369,291)
(3,650,195)
411,038
2,394,333
(1,881,960)
(222,507)
289,866
4,871,944
(2,608,912)
(1,261,816)
1,001,216
8,672,821
(4,369,291)
(3,783,204)
520,326
Leased
Plant and
Equipment
$
–
–
–
–
120,901
–
(120,901)
–
120,901
–
(120,901)
–
Capital
Work in
Progress
$
Total
$
71,661
20,060
–
2,070,854
316,214
(483,939)
91,721
1,903,129
71,661
–
–
71,661
91,721
–
–
91,721
15,835,506
(8,860,163)
(4,904,489)
2,070,854
16,151,720
(8,860,163)
(5,388,428)
1,903,129
299,890
10,006
–
(10,241)
1,702,595
21,790
(213,548)
(222,337)
388,091
134,989
–
(112,042)
299,655
1,288,500
411,038
–
–
–
–
–
77,830
71,661
(77,830)
–
2,468,406
238,446
(291,378)
(344,620)
71,661
2,070,854
2,383,603
(1,881,960)
(201,753)
299,890
5,010,569
(2,608,912)
(699,062)
1,702,595
8,295,535
(4,369,291)
(3,538,153)
388,091
2,393,609
(1,881,960)
(211,994)
299,655
4,818,811
(2,608,912)
(921,399)
1,288,500
8,430,524
(4,369,291)
(3,650,195)
411,038
120,901
–
(120,901)
–
120,901
–
(120,901)
–
77,830
–
–
77,830
71,661
–
–
71,661
15,888,438
(8,860,163)
(4,559,869)
2,468,406
15,835,506
(8,860,163)
(4,904,489)
2,070,854
*
Impairment arising from the Group’s decision to cease commercial production at its cyclotron facility at the end of April 2014. Extensive damage
to the cyclotron facility caused by substantial water damage in June 2014 has delayed any final decisions about the future use of the cyclotron
facility until its restoration to its former operational status. Accordingly, the suspended cyclotron business is not considered to be a discontinued
operation pending that decision and its outcome. The Group initially recognises and measures its Land and Buildings, Plant and Equipment and
Leasehold Improvements at cost. The Group subsequently measures some of its Buildings, Plant and Equipment and its Leasehold Improvements
at fair value on a non-recurring basis in accordance with AASB 136: Impairment of Assets. Refer Note 2(aa).
Notes to the Consolidated Financial StatementsFor the year ended 31 December 2020Cyclopharm Limited Annual Report 2020 55
11. Property, plant and equipment (continued)
Fair Value Measurement
AASB 13 Fair Value Measurement requires the disclosure
of fair value information by level of the fair value hierarchy,
which categorises fair value measurements into one of three
possible levels based on the lowest level that an input that
is significant to the measurement can be categorised into,
as follows:
— Level 1: Measurements based on quoted prices in active
markets for identical assets that the entity can access at the
measurement date.
— Level 2: Measurements based on inputs other than the
quoted prices included in Level 1, but that are observable
for the asset, either directly or indirectly.
— Level 3: Measurements based on unobservable inputs for
the asset or liability.
Cyclopharm’s management considers that the inputs used
for the fair value measurement are Level 2 inputs.
Valuation techniques
AASB 13 requires the valuation technique used to be
consistent with one of the following valuation approaches:
— Market approach: techniques that use prices and other
information generated by market transactions for identical
or similar assets.
— Income approach: techniques that convert future cash flows
or income and expenses into a single discounted present
value.
— Cost approach: techniques that reflect the current
replacement cost of an asset at its current service capacity.
The Cyclopharm Board decided to cease commercial
production at its Cyclotron facility at the end of April 2014
due to the impact on the Group’s profits of the government-
owned competition. In making that decision, the Board
valued the Cyclotron facility, comprised of buildings,
leasehold improvements and plant and equipment at a
fair value of nil, using the market approach and income
approach techniques. The market technique predominantly
used recent observable market data for similar new
equipment in Australia, adjusted for loss in value caused by
physical deterioration, functional obsolescence, economic
obsolescence and the industry specific aspects affecting
this highly specialised asset i.e. the government-owned
competition which had rendered further participation
in the molecular imaging industry uneconomic and its
future use uncertain. The same industry specific factors
were applied to the income approach technique. Both
techniques resulted in a fair value of nil being recognised
for the Cyclotron facility as at 31 December 2014.
Cyclopharm considers that the same conditions still apply
at 31 December 2020 as the Cyclotron facility has not
been restored to its former functionality after substantial
water damage in June 2014. Accordingly, Cyclopharm has
concluded that as a result of this uncertainty, the fair value
of the Cyclotron remains at nil as at 31 December 2020.
Inputs used in the market approach technique to measure
Level 2 fair values were:
— current replacement cost of the property being appraised
less the loss in value caused by physical deterioration,
functional obsolescence and economic obsolescence, and
industry specific factors set out above.
— historical cost and relevant market data and industry
expertise.
— sales comparison for assets where available.
The assessments of the physical condition, functional
obsolescence and economic obsolescence are considered
Level 3 inputs.
Non-Recurring fair value measurements:
Buildings
Plant and equipment
Leasehold improvements
Total non-financial assets
recognised at fair value
Level 2
Level 2
2020
$
–
–
–
–
2019
$
–
–
–
–
The highest and best use of the assets in normal
circumstances is the value in continued use, using the
income approach technique. However, in the current unusual
circumstances as set out above, the fair value using this
approach is nil.
12. Right-of-use assets
Land and buildings –
right-of-use
Less: Accumulated depreciation
Motor vehicle –
right-of-use
Less: Accumulated depreciation
Total right-of-use assets
Consolidated
2020
$
2019
$
5,196,359
(1,309,943)
3,886,416
5,200,067
(1,030,860)
4,169,207
151,046
(126,030)
25,016
3,911,432
260,097
(221,373)
38,724
4,207,931
The Group leases land and buildings for its offices,
manufacturing facilities and warehouse under agreements
of between two to ten years with, in some cases, options
to extend. The leases have various escalation clauses. On
renewal, the terms of the leases are negotiated. The Group
also leases plant and equipment under agreements of
four years.
56
13. Investments
Equity accounted investments
Associated companies
Name
Macquarie Medical Imaging Pty Ltd
Principal
Activities
Imaging
centre
Principal
place of
business
Sydney,
Australia
Measurement
Method
Equity
method
Notes
(a)
Consolidated
2020
$
–
2019
$
–
Ownership Interest
2020
20%
2019
20%
Macquarie Medical Imaging Pty Ltd (MMI) is a private entity that provided medical imaging facilities for Macquarie University
Hospital. From 7 December 2019, the business operations of MMI have been transferred to MQ Health, an entity associated with
Macquarie University Hospital.
Extract from the associate’s statement of financial position:
Current Assets
Non-current Assets
Current Liabilities
Non-current Liabilities
Net Liabilities
Share of associate’s Net Liabilities
Extract from the associate’s statement of comprehensive income:
Revenue
Net Loss
Consolidated
2020
$
4,130,592
–
(17,533,962)
–
(13,403,370)
(2,680,674)
2019
$
5,470,644
1,577,468
(19,647,135)
–
(12,599,023)
(2,519,805)
Consolidated
2020
$
131,905
(804,347)
2019
$
14,650,032
(39,973)
Notes
(a)
Notes
(a)
(a)
The share of the associate’s loss not recognised during the year was $160,869 (2019: loss of $7,994) and the cumulative
share of the associate’s loss not recognised as at 31 December 2020 was $2,726,061 (31 December 2019: $2,718,067). The
comparative amounts have been revised after the receipt of the audited financial report of the associate subsequent to the last
financial report of the Group.
The share of loss of associate not recognised as at 31 December 2020 is extracted from the unaudited financial report of the
associate, and it may be revised when that financial report has been audited.
The fair value of the Group’s investment in Macquarie Medical Imaging Pty Ltd was $nil (2019: $nil). It is anticipated that MMI
will be de-registered upon the finalisation of its accounts payable and receivables.
Contingent liabilities
(b)
In December 2019, a business venture collaboration agreement combined CycloPet Pty Ltd and Pettech Solutions Limited’s
cyclotron facilities under a single operating enterprise known as Cyclotek NSW Pty Limited (Cyclotek NSW). Cyclopharm and
Cyclotek NSW have entered into a sub-lease agreement as tenants in common whereby Cyclotek NSW is solely responsible for
the tenant’s obligations except for make good obligations until such time as it exercises the right to transfer its interest as tenant
in common to Cyclopharm. Being a tenant in common, Cyclopharm’s contingent liabilities as at 31 December 2020 amounts
to $3,366,657 (2019: $3,366,657) if Cyclotek NSW is unable to fulfil its obligations as tenant. The amount comprises payments
under a sub-lease agreement commencing 1 January 2020 until the expiry of two options to renew expiring on 31 December
2039 with a rent-free period until 31 December 2022.
There were no other contingent liabilities as at the date of this report (2019: $nil). In December 2019, Cyclopharm issued
300,000 ordinary shares in exchange for the termination of a put option to a 50% shareholder of Macquarie Medical Imaging
Pty Limited (MMI). The cost had the put option been exercised at 31 December 2018 was estimated not to exceed $2,838,442.
Notes to the Consolidated Financial StatementsFor the year ended 31 December 2020Cyclopharm Limited Annual Report 2020
57
14. Intangible assets
Consolidated
Balance at 1 January 2020
Additions
Amortisation
Balance at 31 December 2020
31 December 2020
Non-Current
Total
31 December 2019
Non-Current
Total
Intellectual
Property
Goodwill on
consolidation*
$
379,632
82,552
(48,940)
413,244
413,244
413,244
379,632
379,632
$
865,273
–
–
865,273
865,273
865,273
865,273
865,273
Licences
$
665,537
–
(87,654)
577,883
577,883
577,883
665,537
665,537
Technegas
Development
$
788,588
–
–
788,588
788,588
788,588
788,588
788,588
Target
$
27,419
–
–
27,419
Ultralute
$
2,418,900
200,592
–
2,619,492
Total
$
5,145,349
283,144
(136,594)
5,291,899
27,419
27,419
2,619,492
2,619,492
5,291,899
5,291,899
27,419
27,419
2,418,900
2,418,900
5,145,349
5,145,349
* Goodwill on consolidation arising upon the acquisition of Inter Commerce Medical bvba on 1 October 2017 and Medicall Analys AB on 1 May 2018.
The following assumptions are noted in respect of the following intangible assets: (a) Goodwill, (b) Technegas Development and
(c) Ultralute.
The recoverable amount of intangible assets have been assessed using a discounted cash flow methodology forecasting five years
of pre-tax cash flows.
The following describes each key assumption on which management has based its value in use calculations:
(a)
(b)
Five-year pre-tax cash flow projections, based upon management approved budgets and growth rates covering a one year
period, with the subsequent periods based upon management expectations of growth excluding the impact of possible future
acquisitions, business improvement capital expenditure and restructuring, together with a terminal value.
The pre-tax discount rates used were between 12% to 25% (2019: 25%). The discount rate reflects management’s estimate of
the time value of money and the Group’s adjusted weighted average cost of capital to reflect the current market risk–free rate
but also price for the uncertainty inherent in the assets.
(c)
Management believes the projected 4% revenue growth rate for existing markets (no sales to the US market is assumed) is
prudent and justified, based on the rebound in Technegas sales after the first half pandemic impact.
No changes in estimations were made by management compared to prior years. The key assumptions used for assessing the
carrying value of intangible assets reflects the risk estimates of the business and respective assets.
There were no other key assumptions for Goodwill, Technegas Development costs and Ultralute costs.
The Directors have concluded that the recoverable amount of Goodwill, Technegas Development costs, and Ultralute costs exceed
their carrying values. Based on the above, no impairment charge was recognised.
Sensitivity
As disclosed in note 2(aa), the Directors have made judgements and estimates in respect of impairment. Should these judgements
and estimates not occur the resulting carrying amounts may change.
Goodwill
All other assumptions remaining constant, the sensitivity in the value of goodwill is that revenue would need to decrease by more
than 3%.
Management believes that other reasonable changes in the key assumptions on which the recoverable amount of Goodwill would
not cause the carrying amount to exceed its recoverable amount.
Technegas development and Ultralute development costs
Sensitivity analysis has been performed by adjusting underlying assumptions by up to 10%. The analysis indicated that headroom
exists in the cash flow projections to support the carrying value of the intangible assets.
58
15. Trade and other payables
Current
Trade payables, third parties
Other payables and accruals
Total current trade and other payables
Total trade and other payables
Notes
(i)
(ii)
Consolidated
2020
$
2019
$
3,296,913
1,103,357
4,400,270
4,400,270
1,407,567
1,224,795
2,632,362
2,632,362
Terms and conditions
Terms and conditions relating to the above financial instruments:
(i) Trade payables are non-interest bearing and are normally settled on 30-60 day terms.
(ii) Other payables and accruals are non-interest bearing and have an average term of 4 months.
(iii) The non-interest bearing loan, related party loan is payable when called upon. Related party details are set out in the Note 22
Related party disclosures.
16. Lease liabilities
Current
Lease liability
Lease liability (current)
Non-current
Lease liability
Borrowings (non-current)
Total borrowings
Consolidated
2020
$
2019
$
148,567
148,567
172,582
172,582
4,557,905
4,557,905
4,706,472
4,749,883
4,749,883
4,922,465
Notes to the Consolidated Financial StatementsFor the year ended 31 December 2020Cyclopharm Limited Annual Report 2020
59
Consolidated
Employee
Entitlements
$
675,277
461,714
(91,711)
1,045,280
Total
$
675,277
461,714
(91,711)
1,045,280
1,021,395
23,885
1,045,280
1,021,395
23,885
1,045,280
652,254
23,023
675,277
652,254
23,023
675,277
48
37
17. Provisions
Balance at 1 January 2020
Arising during the year
Utilised
Balance at 31 December 2020
31 December 2020
Current
Non-Current
Total
Number of employees
Number of employees at year end
31 December 2019
Current
Non-Current
Total
Number of employees
Number of employees at year end
A provision has been recognised for employee entitlements relating to long service and annual leave. The measurement and
recognition criteria relating to employee benefits have been disclosed in Note 2(r).
18. Deferred income liabilities
Deferred income liabilities
2020
$
2019
$
893,200
793,868
A portion of the Research & Development Grant refund received during the year has been recognised as deferred income liabilities
and will be amortised over the same period as the amortisation of the related intangible development asset.
60
19. Contributed equity
Issued and paid up capital
Ordinary shares
Other contributed equity
Total issued and paid up capital
(a) Ordinary shares
Balance at the beginning of the period
Issue of Long Term Incentive Plan shares
Issue of shares to Managing Director
Issue of shares to settle obligations under put option
Issue of shares via institutional placement
Share issue cost (net of tax)
Cancellation of expired Long Term Incentive Plan shares
Settlement of loan for Long Term Incentive Plan shares
Balance at end of period
(b) Other contributed equity
Balance at the beginning and end of the period
Notes
2020
Number
2019
Number
2020
$
2019
$
Consolidated
(a)
(b)
(i)
(ii)
(iii)
(iv)
(v)
(vi)
80,274,455
–
80,274,455
78,238,398
–
78,238,398
36,965,377
(5,333,158)
31,632,219
36,909,161
(5,333,158)
31,576,003
78,238,398
1,802,750
257,750
–
–
–
(24,443)
–
80,274,455
68,698,873
469,614
269,911
300,000
8,500,000
–
–
–
78,238,398
36,909,161
–
–
–
–
–
–
56,216
36,965,377
27,238,193
–
–
309,000
9,775,000
(413,032)
–
–
36,909,161
–
–
(5,333,158)
(5,333,158)
Ordinary shares have the right to receive dividends as declared and, in the event of winding up the Company, to participate in the
proceeds from the sale of all surplus assets in proportion to the number of and amounts paid up on shares held. Ordinary shares
entitle their holder to one vote, either in person or by proxy, at a meeting of the Company.
(i)
(ii)
269,614 LTIP shares were issued on 11 December 2019, 200,000 LTIP shares were issued on 30 May 2019, 1,045,000 LTIP
shares were issued on 4 May 2020 and 757,750 LTIP shares were issued on 24 July 2020 as set out in Note 26.
On 24 July 2020, the Company issued 257,750 (2019: 269,911) ordinary shares to the Managing Director for nil consideration
as approved by shareholders on 9 July 2020 and 21 May 2019.
(iii) On 18 December 2019, 300,000 ordinary shares were issued in exchange for the termination of a put option to a shareholder
of MMI as set out in Note 13(b).
(iv) On 24 December 2019, 8,500,000 ordinary shares were issued at a price of $1.15 per new share in connection with an
institutional share placement.
(v) 24,443 expired LTIP shares were cancelled on 5 May 2020.
(vi) Proceeds from settlement of loan to acquire LTIP shares.
When managing capital, management’s objective is to ensure the entity continues as a going concern as well as to maintain optimal
returns for shareholders and benefits for other stakeholders. Management also aims to maintain a capital structure that ensures the
lowest cost of capital available to the entity.
Management constantly assesses the capital structure to take advantage of favourable costs of capital and/or high returns on
assets. As the market is continually changing, management may issue dividends to shareholders, issue new shares, increase the
entity’s short or long term borrowings or sell assets to reduce borrowings.
As at 31 December 2020, the Group has no interest bearing loans and borrowings.
Total interest bearing loans and borrowings
Less: cash and cash equivalents
Net interest bearing loans and borrowings/(cash
Total equity
Gearing ratio
Notes
8
Consolidated
2020
$
–
(1,874,285)
(1,874,285)
17,115,850
0.0%
2019
$
–
(12,660,323)
(12,660,323)
23,203,945
0.0%
Notes to the Consolidated Financial StatementsFor the year ended 31 December 2020Cyclopharm Limited Annual Report 2020 61
19. Contributed equity (continued)
Dividends
During the current financial year, the Directors declared an unfranked interim dividend of 0.5 cent per share in respect of the
financial year ended 31 December 2020 and an unfranked final dividend of 0.5 cent per share in respect of the financial year ended
31 December 2019. During the 2019 financial year, the Directors declared an unfranked interim dividend of 0.5 cent per share
in respect of the financial year ended 31 December 2019 and an unfranked final dividend of 0.5 cent per share in respect of the
financial year ended 31 December 2018.
The final unfranked dividend of 0.5 cent per share has not been recognised in these consolidated financial statements as it was
declared subsequent to 31 December 2020.
Fully paid ordinary shares
Final dividend in respect of the previous financial year
– No franking credits attached
Interim dividend in respect of the current financial year
– No franking credits attached
20. Financial risk management objectives
Consolidated
2020
Cents
per share
2019
Cents
per share
2020
$
2019
$
0.50
0.50
1.00
0.50
0.50
1.00
375,566
330,250
376,853
752,419
330,251
660,501
The Group’s principal financial instruments comprise receivables, payables, bank loans, cash and short-term deposits. The Group
manages its exposure to key financial risks, including interest rate and currency risk in accordance with the Group’s financial risk
management policy. The objective of the policy is to support the delivery of the Group’s financial targets while protecting future
financial security.
The Group uses different methods to measure and manage different types of risks to which it is exposed. These include monitoring
levels of exposure to interest rate, foreign exchange risk and assessments of market forecasts for interest rate, foreign exchange and
commodity prices. Ageing analysis and monitoring of specified credit allowances are undertaken to manage credit risk. Liquidity
risk is monitored through the development of future rolling cash flow forecasts.
The Board reviews and agrees policies for managing each of these risks as summarised below.
Primary responsibility for identification and control of financial risks rests with the Audit and Risk Committee under the authority from
the Board. The Board reviews and agrees policies for managing each of the risks identified below, including for interest rate risk,
credit allowances and cash flow forecast projections. It is, and has been throughout the year under review, the Group’s policy that
no trading in financial instruments shall be undertaken.
Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement
and the basis on which income and expenses are recognised, in respect of each class of financial asset, financial liability and equity
instrument are disclosed in Note 2.
(a) Interest rate risk
As the Group has moved into a no debt, strong cash position, the main interest rate risk is now in cash assets exposure.
The following sensitivity analysis is based on the interest rate risk exposures in existence at the Statement of Financial Position date.
At 31 December 2020, if interest rates had moved, as illustrated in the table below, with all other variables held constant, pre-tax
profit would have been affected as follows:
Judgements of reasonably possible movements:
Loss before income tax
+1.0% (100 basis points)
–0.5% (50 basis points)
The movements in profit are due to possible higher or lower interest income from cash balances.
Consolidated
2020
$
2019
$
18,743
(9,371)
126,396
(63,198)
62
Total
$
20. Financial risk management objectives (continued)
At balance date, the Group had the following mix of financial assets and liabilities exposed to variable interest rate risk:
(a) Interest rate risk (continued)
Consolidated
Year ended 31 December 2020
Financial Assets
Cash and cash equivalents
Trade and other receivables
Total financial assets
Financial Liabilities
Trade payables, third parties
Leases, third party
Total financial liabilities
Net exposure
Consolidated
Year ended 31 December 2019
Financial Assets
Cash and cash equivalents
Trade and other receivables
Total financial assets
Financial Liabilities
Trade payables, third parties
Leases, third party
Total financial liabilities
Net exposure
Weighted
average
interest rate
Non
interest
bearing
Fixed interest maturing in
Floating
interest rate
1 year
or less
1 to 5
years
More than
5 years
Note
%
$
$
$
0.08%
n/a
–
8,837,397
8,837,397
1,874,285
–
1,874,285
$
–
–
–
$
–
–
–
1,874,285
–
8,837,397
–
– 10,711,682
n/a
4.50%
4,400,270
–
4,400,270
4,437,127
–
–
–
1,874,285
–
148,567
148,567
(148,567)
4,400,270
–
–
4,706,472
3,846,042
711,863
711,863
9,106,742
3,846,042
(711,863) (3,846,042) 1,604,940
Weighted
average
interest rate
Non
interest
bearing
Fixed interest maturing in
Floating
interest rate
1 year
or less
1 to 5
years
More than
5 years
Note
%
$
$
0.35%
n/a
– 12,660,323
3,979,595
–
3,979,595 12,660,323
$
–
–
–
$
–
–
–
Total
$
$
– 12,660,323
–
3,979,595
– 16,639,918
n/a
4.50%
–
2,632,362
–
–
2,632,362
–
1,347,233 12,660,323
–
172,582
172,582
(172,582)
2,632,362
–
–
4,922,465
4,052,866
697,017
697,017
7,554,827
4,052,866
(697,017) (4,052,866) 9,085,091
8
9
15
16
8
9
15
16
Notes to the Consolidated Financial StatementsFor the year ended 31 December 2020Cyclopharm Limited Annual Report 2020 63
20. Financial risk management objectives (continued)
(b) Credit risk
Credit risk arises from the financial assets of the Group, which comprise cash and cash equivalents and 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 does not hold any credit derivatives to offset its credit exposure.
The Group trades only with recognised, creditworthy third parties and as such collateral is not requested nor is it the Group’s policy
to scrutinise its trade and other receivables. It is the Group’s policy that all customers who wish to trade on credit terms are subject to
credit verification procedures such as reviewing their industry reputation, financial position and credit rating. In addition, receivable
balances are monitored on an ongoing basis with the result that the Group’s exposure to bad debts is constantly managed.
There are no significant unprovided concentrations of credit risk within the Group.
(c) Liquidity risk
The Group’s objective is to maintain a balance between continuity of funding and flexibility through the use of bank overdrafts and
bank loans. The Group has no borrowings as at 31 December 2020.
Refer to the table above in Note 20(a) Interest Rate Risk, which reflects all contractually fixed pay-offs for settlement of financial
liabilities and collection of financial assets. Trade payables and other financial liabilities generally originate from the financing of
assets used in our ongoing operations such as investments in working capital e.g. inventories and trade receivables and investment
in property, plant and equipment. These assets are considered in the Group’s overall liquidity risk. To monitor existing financial
assets and liabilities as well as to enable an effective controlling of future risks, the Board and management monitor the Group’s
expected settlement of financial assets and liabilities on an ongoing basis.
The Group monitors the rolling forecast of liquidity reserves based on expected cash flow.
Consolidated
Year ended 31 December 2020
Trade payables, third parties
Leases, third party
Consolidated
Year ended 31 December 2019
Trade payables, third parties
Leases, third party
Note
15
16
Note
15
16
Less than
6 months
$
4,400,270
79,797
4,480,067
Less than
6 months
$
2,632,362
86,485
2,718,847
6 months
to 1 year
1 year
to 5 years
Greater than
5 years
$
–
68,770
68,770
$
–
711,863
711,863
$
–
3,846,042
3,846,042
6 months
to 1 year
1 year
to 5 years
Greater than
5 years
$
–
86,097
86,097
$
–
697,017
697,017
$
–
4,052,866
4,052,866
Total
$
4,400,270
4,706,472
9,106,742
Total
$
2,632,362
4,922,465
7,554,827
(d) Commodity price risk
The Group’s exposure to commodity price risk is minimal.
64
20. Financial risk management objectives (continued)
(e) Foreign currency risk
As a result of significant investment operations in Europe, the Group’s Statement of Financial Position can be affected significantly
by movements in the EURO / A$ exchange rates. The Group does not hedge this exposure.
The Group also has transactional currency exposures. Such exposure arises from sales or purchases by an operating unit in
currencies other than the unit’s functional currency. Approximately 83% (2019: 83%) of the Group’s sales are denominated in
currencies other than the functional currency of the operating unit making the sale, whilst approximately 56% (2019: 54%) of costs
are denominated in the unit’s functional currency.
At 31 December 2020, the Group had the following financial instrument exposure to foreign currency fluctuations:
United States dollars
Amounts payable
Amounts receivable
Euros
Amounts payable
Amounts receivable
Canadian dollars
Amounts payable
Amounts receivable
Swedish Kroners
Amounts payable
Amounts receivable
Japanese Yen
Amounts payable
Amounts receivable
Net exposure
Consolidated
2020
$
2019
$
694,078
–
594,663
109,299
3,811,291
3,444,878
191,107
2,132,103
48,144
569,256
5,757
922,566
–
562,159
67,161
391,166
10,648
–
(366,782)
10,033
3,056
(2,334,819)
Management believe the balance date risk exposures are representative of the risk exposure inherent in the financial instruments.
Forward Exchange Contracts
The Company has not entered into foreign exchange forward contracts as at 31 December 2020.
Fair values
All of the Group’s financial instruments recognised in the Statement of Financial Position have been assessed at their fair values
using Level 1 inputs: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the
measurement date.
Notes to the Consolidated Financial StatementsFor the year ended 31 December 2020Cyclopharm Limited Annual Report 2020 65
20. Financial risk management objectives (continued)
Foreign currency sensitivity
Currency risk is measured using sensitivity analysis. A portion of Cyclopharm’s receivables and payables are exposed to movements
in the values of those currencies relative to the Australian dollar. Cyclopharm management have determined that it is not cost
effective to hedge against other foreign currency fluctuations.
Cyclopharm is most exposed to European Euro (Euro), Canadian Dollar (CAD), US Dollar (USD) and Swedish Kroner (SEK)
movements. The following table details Cyclopharm’s sensitivity to a 10% change in the Australian dollar against those respective
currencies with all other variables held constant as at reporting date for unhedged foreign exposure risk. A positive number indicates
an increase in net profit/equity
A sensitivity has been selected as this is considered reasonable given the current level of exchange rates and the volatility observed
on a historic basis and market expectation for future movement.
Euro
31 December 2020
Net profit/(loss)
Equity increase/(decrease)
31 December 2019
Net (loss)/profit
Equity (decrease)/increase
CAD
31 December 2020
Net (loss)/profit
Equity (decrease)/increase
31 December 2019
Net (loss)/profit
Equity (decrease)/increase
USD
31 December 2020
Net profit/(loss)
Equity increase/(decrease)
31 December 2019
Net profit/(loss)
Equity increase/(decrease)
SEK
31 December 2020
Net (loss)/profit
Equity (decrease)/increase
31 December 2019
Net (loss)/profit
Equity (decrease)/increase
Consolidated
Increase in
AUD of 10%
$
Decrease in
AUD of 10%
$
74,164
74,164
(81,580)
(81,580)
(171,487)
(171,487)
188,636
188,636
(47,374)
(47,374)
(51,105)
(51,105)
63,098
63,098
44,124
44,124
(83,346)
(83,346)
(29,455)
(29,455)
52,111
52,111
56,216
56,216
(69,408)
(69,408)
(48,536)
(48,536)
91,681
91,681
32,401
32,401
66
21. Commitments & contingencies
(a) Capital commitments
Cyclopharm has entered into agreements to fund research projects with unrelated institutions. The commitments for these projects
total $476,291 (2019: $423,473) and will be expensed when incurred. Payments will be made based on the achievement of certain
milestones.
There were no other capital commitments as at the date of this report (2019: $nil).
(b) Contingent liabilities
In December 2019, a business venture collaboration agreement combined CycloPet Pty Ltd and Pettech Solutions Limited’s
cyclotron facilities under a single operating enterprise known as Cyclotek NSW Pty Limited (“Cyclotek NSW”). Cyclopharm and
Cyclotek NSW have entered into a sub-lease agreement as tenants in common whereby Cyclotek NSW is solely responsible for
the tenant’s obligations except for make good obligations until such time as it exercises the right to transfer its interest as tenant
in common to Cyclopharm. Being a tenant in common, Cyclopharm’s contingent liabilities as at 31 December 2020 amounts to
$3,366,657 (2019: $3,366,657) if Cyclotek NSW is unable to fulfil its obligations as tenant. The amount comprises payments under
a sub-lease agreement commencing 1 January 2020 until the expiry of two options to renew expiring on 31 December 2039 with a
rent-free period until 31 December 2022.
There were no other contingent liabilities as at the date of this report (2019: $nil). In December 2019, Cyclopharm issued 300,000
ordinary shares in exchange for the termination of a put option to a 50% shareholder of Macquarie Medical Imaging Pty Limited
(“MMI”). The cost had the put option been exercised at 31 December 2018 was estimated not to exceed $2,838,442
Notes to the Consolidated Financial StatementsFor the year ended 31 December 2020Cyclopharm Limited Annual Report 2020 67
22. Related party disclosures
The consolidated financial statements include the financial statements of Cyclopharm and its subsidiaries as listed below. Balances
and transactions between the Company and its subsidiaries, which are related parties of the Company have been eliminated on
consolidation and are not disclosed in this note.
The following table provides the total amount of transactions that were entered into with related parties for the relevant financial year
(for information regarding outstanding balances at year-end, refer to Note 9 Trade and Other Receivables and Note 15 Trade and
Other Payables):
Cell Structures Pty Ltd
Cell Structures Pty Ltd
Purchases
from related
parties
Amounts
owed by/(to)
related parties
$
53,971
51,935
$
(25,035)
(28,611)
2020
2019
Ultimate parent entity
Cyclopharm Limited is the ultimate parent entity in the wholly owned group.
Terms and conditions of transactions with related parties
During the year, payments of $53,971 (2019: $51,935) were made to Cell Structures Pty Ltd (an entity controlled by Director, Mr. Tom
McDonald). All payments relate to Mr. McDonald’s role as a non-executive director including consultancy services provided by him.
Transactions between related parties are at normal commercial prices and on normal commercial terms and conditions no more
favourable than those available to other parties unless otherwise stated.
Controlled Entities
Name
Cyclopharm Limited
Controlled entities
CycloPET Pty Ltd
Cyclomedica Australia Pty Limited
Cyclomedica Ireland Limited
Cyclomedica Europe Limited
Cyclomedica Benelux bvba (formerly known as
Inter Commerce Medical bvba)
Cyclomedica Nordic AB (formerly known as
Medicall Analys AB)
Cyclomedica Germany GmbH
Cyclomedica Canada Limited
Cyclomedica USA LLC
Cyclomedica UK Ltd
Country of
Incorporation
Percentage of equity
interest held
2020
2019
Australia
Australia
Australia
Ireland
Ireland
Belgium
Sweden
Germany
Canada
United States of America
United Kingdom
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Note
1,2
2
2
3
3
4
5
6
7
8
9
Notes
1. Cyclopharm Limited is the ultimate parent entity in the wholly owned group.
2. Audited by Nexia Sydney Audit Pty Ltd, Australia.
3. Audited by Andrew P.Quinn & Associates Limited, Republic of Ireland.
4. Audited by HLB Dodemont – Van Impe, Belgium, acquired on 1 October 2017.
5. Audited by Nexia Revision, Stockholm, Sweden, acquired on 1 May 2018.
6. Audited by Bilanzia GmbH Wirtschaftsprufungsgesellschaft, Germany.
7. Audited by Schwartz Levitsky & Feldman LLP, Toronto, Canada.
8. Dormant.
9. Unaudited as results are not material.
68
23. Events after the balance date
Final dividend
On 25 February 2021, the Directors declared a final unfranked dividend of 0.5 cent per share in respect of the financial year ended
31 December 2020, payable on 13 April 2021.
Shares issued
(i)
On 1 February 2021, 11,538,462 ordinary shares were issued at a price of $2.60 per new share in connection with an institutional
share placement.
(ii)
On 19 February 2021, 1,153,847 ordinary shares were issued at a price of $2.60 per new share in connection with a share
purchase plan to eligible shareholders and 408,059 LTIP shares were issued at an exercise price of $3.20 per share.
No other matters or circumstances have arisen since the end of the financial year, not otherwise dealt with in the financial report,
which significantly affected or may significantly affect the operations of the economic entity, the results of those operations, or the
state of affairs of the economic entity in future financial periods.
24. Auditors’ remuneration
The following total remuneration was received, or is due and receivable, by auditors of the Company in respect of:
Amounts received or due and receivable by the auditor of the parent entity
and associated entities for:
Audit and review of the financial statements
Other services:
– tax compliance
– share registry
Amounts received or due and receivable by other audit firms for:
Audit of the financial statements of controlled entities
Other services
Consolidated
2020
$
2019
$
139,611
164,016
30,771
38,170
208,552
132,809
113,559
246,368
15,448
38,784
218,248
127,704
94,471
222,175
Notes to the Consolidated Financial StatementsFor the year ended 31 December 2020Cyclopharm Limited Annual Report 2020 69
25. Director and key management personnel disclosures
Individual Directors and executives compensation disclosures
Information regarding individual Directors and executives’ compensation and some equity instruments disclosures as required by
Corporations Regulation 2M.3.03 are provided in the Remuneration Report Section of the Directors’ report.
Summary of remuneration of Directors & Key Management Personnel:
2020
2019
Short-term
employee benefits
Post
employment
benefits
Other
long-term
benefits
Share-
based
payment
Total
Salary
and Fees
$
828,381
783,003
Cash
Bonus
$
50,000
80,000
Super-
annuation
$
69,632
64,416
$
42,723
6,616
$
714,484
359,818
$
1,705,220
1,293,853
Short-term salary, bonus, fees and leave
These amounts include fees and benefits paid to the non-executive Chair and non-executive directors as well as salary, paid leave
benefits, fringe benefits and cash bonuses awarded to executive directors and other Key Management Personnel.
Post-employment benefits
These amounts are the current-year’s estimated cost of providing for superannuation contributions made during the year.
Other long term benefits
These amounts represent long service leave benefits accruing during the year.
Termination benefits
These amounts represent termination benefits paid out during the year.
Share based payment expense
These amounts represent the expense related to the participation of Key Management Personnel in equity-settled benefit schemes
as measured by the fair value of the Implied Options granted on grant date.
Further information in relation to Key Management Personnel remuneration can be found in the Directors’ Report.
70
26. Share based payment plans
(a) Recognised share-based payment expenses
The expense recognised for employee services received in relation to share based payments during the year is shown in the
table below:
Expense arising from equity-settled share-based payment transactions (note 5)
The share-based payment reserve at 31 December 2020 was $1,836,973 (2019: $1,041,373).
Consolidated
2020
$
795,600
2019
$
378,368
(b) Share-based payment other than implied options
(i)
(ii)
During the previous year, the Company issued shares to settle a contingent liability in relation to Macquarie Medical Imaging
Pty Limited (“MMI”) as set out in Note 13 (b), and
During the year on 24 July 2020, the Company issued 257,750 (2019: 269,911) ordinary shares to the Managing Director for nil
consideration. These shares are freely traded on and from the date of issue as approved by shareholders on 9 July 2020.
(c) Type of share-based payment plans
The share-based payment plan is described below. There have not been any modifications to the Long-Term Incentive Plan (“Plan”)
following its approval by members at the Annual General Meeting held on 8 May 2007 other than an amendment to allow allotment
or transfer of Plan shares to an entity wholly owned and controlled by the participant. The amendment was approved by members
at the Annual General Meeting held on 26 May 2015. An updated Plan was approved by members at the Annual General Meeting
held on 29 May 2018.
Shares
Long Term Incentive Plan (“Plan”) Shares (“Shares”) are granted to certain Directors and certain employees.
In valuing transactions settled by way of issue of shares, performance conditions and market conditions linked to the price of
the shares of Cyclopharm Limited are taken into account. All shares issued have market performance conditions so as to align
shareholder return and reward for the Company’s selected management and staff (“Participants”).
The Shares vest upon the satisfaction of certain performance conditions (“Hurdles”) within the term (“Term”) specified for Participants
in the Plan. The Board has residual discretion to accelerate vesting (i.e. reduce or waive the Hurdles) and exercise of Shares in the
event of a takeover or merger or any other circumstance in accordance with the terms of the Plan.
Shares in relation to which Hurdles have not been satisfied (i.e. that do not vest) will lapse and will not be able to be exercised,
except in the circumstances described below. Shares which have not vested will lapse where a Participant ceases employment with
Cyclopharm other than on retirement, redundancy, death or total and permanent disablement or unless as otherwise determined
by the Board in its absolute discretion.
Where a Participant has ceased employment with Cyclopharm as a result of resignation, retirement, redundancy, death or total and
permanent disablement prior to the end of a performance period, only shares that have vested may be retained by the Participant
on a pro-rata basis. If a Participant ceases employment for any reasons mentioned above prior to the first anniversary of the grant
date, the Participant forfeits all entitlement to Shares.
LTIP Shares issued
At the Annual General Meeting held on 8 May 2007, Shareholders approved the Company’s Plan with an updated Plan approved
by Shareholders on 29 May 2018.
Implied Options
AASB 2 Share Based Payments requires that the benefit to an employee arising from an employee share scheme such as the
Cyclopharm Long Term Incentive Plan be treated as an expense over the vesting period. All of the issues of Plan shares have been
treated as Plan Share Options (“Implied Options”) in accordance with AASB 2. The employee benefit is deemed to be the Implied
Option arising from the Plan. Consequently, the value of the discount which has been determined using the Black Scholes option
pricing model will be charged to the Statement of Comprehensive Income and credited to the Employee Equity Benefits Reserve
over the vesting period.
Where employee shares are issued under a non-recourse loan payment plan, the loan assets and the increments to Contributed
Equity are not recognised at grant date but rather the increments to Contributed Equity are recognised when the share loans are
settled by the relevant employees.
Notes to the Consolidated Financial StatementsFor the year ended 31 December 2020Cyclopharm Limited Annual Report 2020 71
26. Share based payment plans (continued)
(d) Summary of Options and Implied Options granted
The following table summarises the movements in Options during the current year:
Balance at the beginning of the year
Granted during the year
Vested but unexercised during the year
Balance at the end of the year
Vested but unexercised at the end of the year
(i) 225,000 LTIP shares (2019: nil) vested during the year.
Consolidated
Weighted Average
Exercise Price
2020
Number
1,125,000
1,802,750
(482,750)
2,445,000
2,590,236
2019
Number
725,000
669,614
(269,614)
1,125,000
2,193,576
(i)
2020
$
1.14
1.38
–
1.34
2019
$
1.35
0.45
–
1.14
(e) Range of exercise price, weighted average remaining contractual life and weighted average fair value
The weighted average exercise price for Options and Implied Options at the end of the year was $1.02 (2019: $0.92). The weighted
average remaining contractual life for the Options and Implied Options outstanding as at 31 December 2020 is 1.61 years (2019:
3.93 years). The weighted average fair value of Options and Implied Options granted during the year was $0.50 (2019: $0.98).
(f)
Implied Option pricing models
The following assumptions were used to derive a value for the Implied Options granted using the Black Scholes Option model as at
the grant date, taking into account the terms and conditions upon which the Shares were granted:
Exercise price per Option
Number of recipients
Number of Options
Grant date
Dividend yield
Expected annual volatility
Risk-free interest rate
Expected life of Option (years)
Fair value per Option
Share price at grant date
Model used
Options
$0.00
1
200,000
27/05/19
–
42.99%
1.23%
6.18 years
$1.431
$1.47
Expensed
at market
price at
grant date
over
expected
life of
Option
Implied
Options
$1.55
1
500,000
2/07/18
–
41.00%
2.09%
0.5 years
$0.153
$0.99
Black
Scholes
Implied
Options
$1.50
2
200,000
30/05/19
–
42.99%
1.23%
2 years
$0.366
$1.49
Black
Scholes
Implied
Options
$0.00
1
269,614
11/12/19
–
42.99%
0.80%
2.5 years
$1.065
$1.065
Expensed
at market
price at
grant date
over
expected
life of
Option
Implied
Options
$1.22
23
215,000
4/05/20
–
51.00%
0.22%
2 years
$0.308
$1.16
Black
Scholes
Implied
Options
$1.22
4
830,000
4/05/20
–
51.00%
0.26%
3 years
$0.380
$1.16
Black
Scholes
Implied
Options
Implied
Options
$1.83
1
500,000
24/07/20
–
58.00%
0.26%
1.85 years
$0.315
$1.41
Black
Scholes
$0.00
1
257,750
24/07/20
–
58.00%
0.26%
1.80 years
$1.410
$1.41
Expensed
at market
price at
grant date
over
expected
life of
Option
Expected volatility percentages used for the Option pricing calculations were determined using historic data over 24 months and
were adjusted to reflect comparable companies in terms of industry and market capitalisation. The Options are not listed and as
such do not have a market value.
72
2020
$
2019
$
3,564,080
30,193,540
33,757,620
10,335,490
22,410,228
32,745,718
752,575
10,319,193
11,071,768
22,685,852
180,645
10,469,275
10,649,920
22,095,798
31,832,959
1,836,973
(10,984,080)
22,685,852
31,776,534
1,041,373
(10,722,109)
22,095,798
490,449
–
490,449
953,905
–
953,905
27. Parent entity disclosure
(i) Financial Position
Assets
Current Assets
Non-current Assets
Total Assets
Liabilities
Current Liabilities
Non-current Liabilities
Total Liabilities
Net assets
Equity
Contributed equity
Employee equity benefits reserve
Accumulated Losses
Total Equity
(ii) Financial Performance
Profit for the year
Other comprehensive income
Total Profit for the year
28. Reserves
Nature and purpose of reserves:
(a) Employee equity benefits reserve
The employee share based payments reserve is used to record the value of share based payments provided to employees,
including key management personnel, as part of their remuneration.
(b) Foreign currency Translation Reserve
The foreign currency translation reserve is used to record exchange differences arising from the translation of the financial
statements of foreign subsidiaries.
Notes to the Consolidated Financial StatementsFor the year ended 31 December 2020Cyclopharm Limited Annual Report 2020 73
Directors’ Declaration
In the opinion of the Directors of Cyclopharm Limited:
1. (a) The financial statements and notes of the
consolidated entity as set out on pages 34 to 72
are in accordance with the Corporations Act 2001,
including:
(i) giving a true and fair view of the consolidated
entity’s financial position as at 31 December
2020 and of its performance for the year ended
on that date; and
(ii) complying with Accounting Standards which,
as stated in accounting policy Note 2(a) to
the financial statements, constitutes explicit
and unreserved compliance with International
Financial Reporting Standards (IFRS); and
(b) There are reasonable grounds to believe that the
consolidated entity will be able to pay its debts as
and when they become due and payable.
2. The Directors have been given the declarations required by
section 295A of the Corporations Act 2001 from the chief
executive officer and chief financial officer for the financial
year ended 31 December 2020.
Signed in accordance with a resolution of the Directors:
James McBrayer
Managing Director and CEO
Sydney, 29 March 2021
74
Independent Audit Report
Independent Auditor’s Report to the Members of Cyclopharm Limited
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of Cyclopharm Limited (the Company and its subsidiaries (the Group)), which
comprises the consolidated statement of financial position as at 31 December 2020, the consolidated statement
of profit or loss and other comprehensive income, consolidated statement of changes in equity and consolidated
statement of cash flows for the year then ended, and notes to the financial statements, including a summary of
significant accounting policies, and the directors’ declaration.
In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001,
including:
i)
giving a true and fair view of the Group’s financial position as at 31 December 2020 and of its financial
performance for the year then ended; and
ii) complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for 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 Corporations Act 2001 and the ethical requirements
of the Accounting Professional & Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants
(including Independence Standards) (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 Company, 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 judgement, were of most significance in our audit of
the financial report of the current period. These matters were addressed in the context of our audit of the financial
report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
Cyclopharm Limited Annual Report 2020 75
Independent Auditor’s Report to the Members of Cyclopharm Limited
(continued)
Key audit matter
How our audit addressed the key audit matter
Capitalised Development Costs for Ultralute
($2,619,492)
Refer to note 14
Included in the Group’s intangible assets are
capitalised development costs $2,619,492 in respect
of the Ultralute product. Capitalised Ultralute
development costs are considered to be a key
audit matter due to the quantum of the asset; the
degree of management judgement and assumptions
applied in measuring the carrying value of the asset;
and assessing the presence of impairment of a
development phase asset.
The most significant and sensitive judgments
incorporated into the assessment for impairment of
capitalised development costs include projections of
cash flows, discount rates applied and assumptions
regarding the Group’s ability to exploit new markets.
Other considerations and judgments include whether
the capitalised costs qualify for capitalisation as
development phase costs in accordance with AASB
138 Intangible Assets. This includes an understanding
of the Group’s process for recording and measuring
internally developed assets and the Group's ability to
complete the development and demonstrate its ability
to generate future cash flows from that asset.
Inventory Valuation and existence
($4,736,017)
Refer to note 10
The Group holds a significant amount of inventory
which are complex medical machines with significant
useful lives. Inventory may be held for long periods of
time before sale making it vulnerable to obsolescence
or theft. Further, deterioration in global economic
conditions can potentially lead to this inventory
being sold at reduced prices or lead to a reduction in
revenue. The inventory is considered to be a key audit
matter due to the significant increase of inventory at
year end in anticipation of entering new markets and
also due to the change in assembly method of the
generators from full assembly to sub-assemblies.
As a result, there is a risk that inventory is carried in
excess of its net realizable value.
Our procedures included, amongst others:
— We assessed the project against the requirements
for capitalisation contained in AASB 138 Intangible
Assets.
— We tested material expenditure capitalised during
the year and checked that they were appropriately
allocated to the development asset.
— We assessed management’s determination of
the Group’s cash generating units based on our
understanding of the nature of the Group’s business
and how earnings streams are monitored and
reported.
— We tested the Group’s assumptions and estimates
used to determine the recoverable value of
its assets, including those relating to forecast
revenue, cost, capital expenditure, and discount
rates by corroborating the key market related
assumptions to external data and by reference to
our understanding of the business.
— We performed sensitivity analysis in two main
areas to assess whether the carrying value of
the capitalised development costs exceeded its
recoverable amount. These were the discount rate
and growth assumptions.
Our procedures included, amongst others:
— We performed stocktake procedures on a sample
of inventory items to ascertain their existence at
balance date.
— We agreed a sample of inventory items to purchase
invoices to test that costs assigned to inventories
are appropriate.
— We agreed a sample of raw materials through to the
assembled finish good to determine whether these
were assembled in accordance with the underlying
sub-assemblies and related bill of materials.
— We obtained evidence that inventory did not exceed
its net realizable value by:
» Checking a sample of inventory items to
subsequent selling price;
» Reviewing aged inventory report for any slow
moving items; and
» Considering management’s plans for entering
new markets.
76
Independent Auditor’s Report to the Members of Cyclopharm Limited
(continued)
Other information
The directors are responsible for the other information. The other information comprises the information in
Cyclopharm Limited’s annual report for the year ended 31 December 2020, but does not include the financial report
and the auditor’s report thereon. Our opinion on the financial report 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 report, our
responsibility is to read the other information and, in doing so, consider whether the other information is materially
inconsistent with the financial report 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 the other information
we are required to report that fact. We have nothing to report in this regard.
Directors’ responsibility for the financial report
The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view
in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as
the directors determine is necessary to enable the preparation of the 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 Group's ability 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 responsibility 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 this financial report.
A further description of our responsibilities for the audit of the financial report is located at The Australian Auditing
and Assurance Standards Board website at: www.auasb.gov.au/admin/file/content102/c3/ar1_2020.pdf. This
description forms part of our auditor’s report.
Cyclopharm Limited Annual Report 2020 77
Independent Auditor’s Report to the Members of Cyclopharm Limited
(continued)
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 25 to 32 of the Directors’ Report for the year ended
31 December 2020.
In our opinion, the Remuneration Report of Cyclopharm Limited for the year ended 31 December 2020, complies
with section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the Remuneration Report
in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the
Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards.
Nexia Sydney Audit Pty Limited
Andrew Hoffman
Director
Date: 29 March 2021
78
Shareholder Information
The following information is current at 28 February 2021
A. Substantial Shareholders
The following have advised that they have a relevant interest in the capital of Cyclopharm Limited. The holding of a relevant interest
does not infer beneficial ownership. Where two or more parties have a relevant interest in the same shares, those shares have been
included for each party.
Shareholder
National Nominees Limited
Anglo Australian Christian and Charitable Fund
Barings Acceptance Limited
HSBC Custody Nominees (Australia) Limited - A/c 2
Chemical Overseas Limited
CVC Limited
Mr James McBrayer
B. Distribution of Equity Security Holders
(i) Analysis of numbers of equity security holders by size of holding as at 28 February 2021
Category
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
Total
(ii) There were 47 holders of less than a marketable parcel of ordinary shares.
C. Equity Security Holders
Citicorp Nominees Pty Limited
Twenty largest quoted equity security holders
National Nominees Limited
Anglo Australian Christian and Charitable Fund
Barings Acceptance Limited
HSBC Custody Nominees (Australia) Limited - A/c 2
Chemical Overseas Limited
CVC Limited
CS Third Nominees Pty Limited
1
2
3
4
5
6
7
8 McBrayer Reid Investments Pty Ltd
Continue reading text version or see original annual report in PDF format above