2020
ANNUAL
REPORT
CORPORATE
DIRECTORY
Roby Zomer
Managing Director and CEO
Ross Walker
Non-Executive Director
Evan Hayes
Non-Executive Director
Directors
Brett Mitchell
Executive Chairman
Nativ Segev
Non-Executive Director
Stephen Parker
Non-Executive Director and
Chairman of the Corporate Governance Committees
Company Secretary
Rachel Kerr
Registered Office and Principal Place of Business
1202 Hay Street
West Perth WA 6005
Tel: +61 8 6382 3390
Solicitors
Steinepreis Paganin
Level 4, The Read Buildings
16 Milligan Street
Perth WA 6000
Auditors
Ernst & Young
EY Building
11 Mounts Bay Road
Perth WA 6000
Securities Exchange Listing
MGC Pharmaceuticals Ltd securities are listed on the Australian Securities Exchange (ASX) and the OTC Pink Market
ASX Code: MXC, OTC: MGCLF
Share Registry
Computershare Investor Services Pty Limited
Level 11
172 St Georges Terrace
Perth WA 6000
Website
www.mgcpharma.com.au
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ANNUAL REPORT FOR THE YEAR ENDED 30 JUNE 2020 CONTENTS
CORPORATE DIRECTORY
MANAGING DIRECTORS LETTER TO SHAREHOLDERS
REVIEW OF OPERATIONS
DIRECTORS’ REPORT
AUDITOR’S INDEPENDENCE DECLARATION
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
CONSOLIDATED STATEMENT OF CASH FLOWS
NOTES TO THE FINANCIAL STATEMENTS
DIRECTORS’ DECLARATION
INDEPENDENT AUDITOR’S REPORT TO MEMBERS
ADDITIONAL ASX INFORMATION
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ANNUAL REPORT FOR THE YEAR ENDED 30 JUNE 2020 MANAGING
DIRECTOR’S
LETTER TO
SHAREHOLDERS
Dear shareholders,
I would firstly like to thank you for your
unwavering support this year amidst
what has been an unprecedented
year of challenges and uncertainty for
the global economy. The outbreak of
COVID-19 and subsequent challenges
meant that we had to act quickly, review
our operations and respond with the
appropriate strategies to ensure there
was minimal impact on our operations
and commercial progress. These
strategies included the implementation
of Board and Management salary
reductions in March 2020. I am
delighted to report the changes
implemented have been successful
and MGC Pharma remains in a strong
position to continue on its commercial
growth trajectory.
The 2020 financial year has been one of
great achievements for the Company as
it focused on executing a pure biopharma
strategy of commercialising its proprietary
phytocannabinoid derived medicines
to patients globally. This agenda has
been achieved by a combined focus
on clinical trials, R&D and effective
commercialization of new product lines
that take advantage of immediate
market openings.
Notably, we delivered a material increase
in product sales which was supported
by the launch of a new product line
– Mercury Pharma – in Australia and
New Zealand. Mercury Pharma is the
Company’s affordable prescription only
product range which now includes
seven individual products. The launch
of Mercury Pharma products has
considerably strengthened the Company’s
market penetration globally and it has
achieved significant and fast-growing
market share in Australia. We anticipate
market entry into additional major new
markets for the Mercury Pharma line in
the coming six months.
Our research and development program
has also delivered material progress
and significant achievements. These
successes demonstrate our focus on the
biopharma agenda we have adopted, in
addition to how effective the company has
become at implementing this experience
and positioning under difficult conditions.
During this year, in the midst of COVID-19
limitation and lockdowns, we commenced
a Phase II, placebo controlled clinical trial
for the natural anti-inflammatory (non-
cannabinoid) plant- based formulation
ArtemiCTM on COVID-19 patients. This trial
is taking place at multiple medical sites
across Israel and India.
At the end of FY2020, we prescribed
3,590 units to 1,428 patients representing
a 65% increase in the six months to
30 June 2020. This is an excellent
achievement and clearly demonstrates
the quality of MGC Pharma’s products
and the rapidly increasing demand for
affordable phytocannabinoid derived
medicines. As a result, the Company
delivered revenues of $2,079,169 for the
financial year, an increase of 216% on the
2019 financial year.
The Company has recently received
consecutive record week on week sales
and revenue growth through September
and October. This is a key operational
milestone with MGC Pharma surpassing
over 7,000 units sold across key global
markets, led by Australia delivering a
substantial increase in sales since
30 June 2020.
Encouraging results from the trial on
the first 10 patients were received and
show all primary end points were met,
and we also received promising results
from ArtemiCTM’s safety and toxicity pre-
clinical study which delivered no adverse
results in standard toxicity measures
from the full panel of haematology and
chemistry blood tests. This followed
in-vitro pre-clinical study results which
showed effective immunological activity
for the use of ArtemiCTM as an immune-
modulatory agent for the treatment of
COVID-19.
The trial remains on track to
complete in October 2020 and has
the potential to offer major commercial
opportunities for the Company should
the full results remain in line with initial
results and expectations. The ArtemiCTM
trials are a demonstration of a full “Nature
to Medicine” agenda embraced by the
company, meaning our accrued experience
with phytocannabinoid allows us to look
at all natural ingredients in a new light, an
exciting development for the industry as a
whole.
4
ANNUAL REPORT FOR THE YEAR ENDED 30 JUNE 2020 MGC PHARMA HAS RECENTLY
SURPASSED 7,000 UNITS SOLD
ACROSS KEY GLOBAL MARKETS,
A SUBSTANTIAL INCREASE IN
SALES SINCE 30 JUNE 2020.
Additionally, excellent progress has
been delivered at our ongoing pre-
clinical in-vitro research program
focused on cannabinoid formulations
in the development of treatment for
glioblastoma multiforme which is being
conducted in collaboration with the
National Institute of Biology (‘NIB’) and
the Neurosurgery Department at the
University Medical Centre in Ljubljana,
Slovenia. Results to date have shown brain
tissue samples from a total of 24 patients
confirm that the cannabinoid preparations
can successfully inhibit tumour cell viability
and cause a significant percentage
of glioblastoma cells to undergo
“programmed cell death”. Data from NIB
conducted on 14 of the glioblastoma
tumour tissue samples, support the direct
novel cannabinoid formulations in the
treatment of glioblastoma.
This is a great achievement and also
demonstrates how versatile and effective
our phytocannabinoids are in treating a
range of medical conditions. Further, it
demonstrates how the company’s long
term focus on our “Nature to Medicine”
strategy will position us to take advantage
of this research and development in the
future. Glioblastoma is currently viewed as
an untreatable cancer, and this research
positions MGC Pharma in line with
biopharma companies who have spent
tens if not hundreds of millions on this
indication. Investing in these kinds of
activities solidify MGC Pharma’s product
pipeline for the coming decades, not years.
Some other notable achievements from
the year are;
• Multiple strategic distribution
agreements were signed across new
and existing regions to expand our
international and commercial footprint.
These include countries such as Brazil,
Russia, Israel, the CIS and Balkan
counties and support our strategy
to expedite commercialisation of
products globally.
• Ethics approval received in Israel for a
Phase IIb clinical trial to evaluate the
safety and efficacy of CannEpil®
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Total Accumulated Unit Sales to September
Units
On behalf of the Board and Management
of MGC Pharmaceuticals’, I would like
to thank all of our shareholders for their
support this year, especially in light of the
global challenges we have faced. The
achievements we have delivered this
year are extremely encouraging for our
commercial development next year and
I look forward to updating shareholders
on our progress as we continue to grow
operationally and commercially.
Yours Sincerely,
Roby Zomer
Managing Director
• We also received a three-year EU GMP
licence granted to MXC cannabinoid
medicine production facility in Slovenia
following successful regulatory
audit, demonstrating high levels of
confidence in our standards and
reputation with the licensing agency.
With these achievements having been
delivered, the Company is now fast
approaching its goal of prescribing 5,000
units per month in CYH1 2021 which will
achieve cash-flow break even status and
take the Company forward into its next
phase of growth.
I would like to say that considering the
global situation, the various logistical
difficulties that took place as a result, the
personal toll that COVID-19 took on the
MGC Pharma family, spread out as we
are all over the world – that I am even
more proud of the achievements the hard
working and dedicated employees have
reached in this most challenging of times.
We have ensured a seamless delivery of
medications to our patients all over the
globe, we have increased our ability to
produce and made our systems more
efficient, and have prepared ourselves for
the impending scale-up ahead, all while
remembering to consider the difficulties
that many of us are experiencing.
MANAGING DIRECTOR’S LE T TER TO SHAREHOLDERS
5
750070006500600055005000450040003500300025002000150010000500Jul 19Aug 19Sep 19Oct 19Nov 19Dec 19Jan 20Feb 20Mar 20Apr 20May 20Jun 20Jul 20Aug 20Sep 20UnitsTotal Accumulated Unit Sales to September
FY
20H I G H L I G H T S
6
ANNUAL REPOR T 2020
FY
20H I G H L I G H T S
AS AT 30 JUNE 2020
3,590 PRESCRIBED PRODUCTS
1,428 PATIENTS
Three-year EU GMP licence
granted to MXC’s cannabinoid
medicine production facility
following successful
regulatory audit, confirming
MXC’s current and future
production capacity
Key distribution agreements
signed to expand MXC’s
international footprint and
expedite commercialisation
of products through next
6-12 months towards 5,000
units/per month for cashflow
breakeven status
Launch of a new product line
– Mercury Pharma. Mercury
Pharma is MGC Pharma’s
affordable prescription only
product range which has
considerably strengthened
the Company’s market
penetration globally
Commencement of Phase II
placebo controlled clinical trial to
evaluate the safety and efficacy
of a natural anti-inflammatory
based formulation ArtemiCTM
on COVID-19 patients, with
results from the first 10 patients
meeting all primary endpoints
Ethics Committee approval
received for a Phase IIb clinical
trial to evaluate the safety and
efficacy of CannEpil® in Israel
Successful research results of
MXC cannabinoid formulation
on glioblastoma brain cancer,
from ongoing pre-clinical
in-vitro research program in
Europe
F Y 2020 HIGHLIGHT S
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The Company was
successfully granted a
three-year renewal of its
EU Good Manufacturing
Practice (EU GMP)
licence for its Slovenian
cannabinoid medicine
manufacturing and
compounding facility,
following an annual
licence audit conducted
by the JAZMP
ANNUAL REPOR T 2020
HIGHLIGHTS
Research & development
• Commencement of Phase II
Pharma operations
• MGC Pharma prescribed 3,590
placebo-controlled double-blind
clinical trial in Israel to evaluate
the safety and efficacy of a natural
anti-inflammatory based formulation
ArtemiCTM on COVID-19 patients,
with results post financial year end
from the first 10 patients meeting all
primary endpoints
• Successful research results
continued from the ongoing
pre-clinical research program
that supports and directs novel
cannabinoid formulations in the
development of treatment for
glioblastoma multiforme
• Ethics committee approval from
Schneider Children’s Medical
Centre of Israel to commence
a Phase IIb clinical trial at the
Schneider Hospital for MGC
Pharma’s proprietary epilepsy
treatment, CannEpil®
units to 1,428 patients by the end
of June 2020, a 65% increase since
January 2020. MXC is now focused
on entering new, high growth
markets such as Brazil to achieve its
target of 5,000 prescribed units per
month by CYH1 2021
• Early in 2020 the Company
launched Mercury Pharma, a new
proprietary affordable prescription
medicine line, specifically for
the Australian and New Zealand
markets and sales to date have
been strong with the Company
expanding the line to include
additional products
• Sales in Australia have started to
increase further on the back of the
Company’s own Import License
and controlling its own stock and
logistics to market
Licences, approvals and
distributions agreements
• The Company has successfully
granted a three-year renewal
of its EU Good Manufacturing
Practice (EU GMP) licence for its
Slovenian cannabinoid medicine
manufacturing and compounding
facility, following an annual licence
audit conducted by the JAZMP
• MXC was awarded an Import
Licence and a cannabis cultivation
research permit from the Australian
Office of Drug Control, progressing
MXC’s Australian operations
and supporting its fully vertically
integrated nature to medicine
business model
• MGC Pharma executed a binding
amendment to the supply and
distribution agreement with ONIX
Empreendimentos e Participações,
which established a minimum order
volume of 20,000 units for year one
and a down payment of ~$107,000
(€65,000) was received Binding
term sheet signed with KS Kim, a
wholly owned division of SK-Pharma
Group, for the sales and distribution
of ArtemiCTM in Russia, Israel, the
CIS and Balkan countries
RE VIE W OF OPER ATIONS
9
Subsequent to the financial year end
• MGC Pharma signed a binding term
sheet to acquire 100% of Cannvalate’s
Australian operating doctor to
patient clinic-based assets, data and
intellectual property of its wholly
owned subsidiary Medicinal Cannabis
Clinic, a leading Australian medicinal
cannabis clinic with a large and
existing doctor and patient network
• Distribution agreement signed with
leading UK medicinal cannabis
provider LYPHE Group Limited
and first purchase order received
for MXC’s Mercury Pharma line
products
• Binding term sheet signed to
register ArtemiCTM and other MXC
formulations in the Russian and
CIS markets with Dr. Svetlana
Kopachevskaja, a leading Russian
doctor and medical researcher
through the establishment of a joint
venture company
• Evan Hayes appointed as an
independent Non-Executive
Director to the Board, bringing 20+
years of commercial healthcare and
biotechnology experience, including
senior executive roles within
Blackmores Limited
• Material equity financing
agreement signed with Mercer
Street to provide up to $15m in
working capital to the Company,
with the first tranche of $2.25m
drawn down in September 2020
• Financial Conduct Authority
(FCA) in the UK publishes new
policy guidance note for assessing
applications from cannabis-related
companies for listing on the
London Stock Exchange (LSE). In
full compliance with this new FCA
guidance policy MGC Pharma
now plans to be one of the first
cannabis-related companies listed
on the LSE
• Binding Term Sheet signed with IM
Cannabis Corp. (IMC) for exclusive
importation, sale and distribution of
CannEpil® in Israel for a period of
five years
• Distribution agreement executed
with Anden Bio Naturals S.A for
the exclusive distribution and
commercialisation of its medicines
in Peru and Bolivia for five years
Corporate
• In response to the COVID-19
outbreak, the Board implemented
salary reductions for directors (up to
60%) and senior management team
(up to 30%), combined with material
reduction of operational costs
including partial cash salary offsets
with MXC equity for staff
• Acquisition agreement signed for
MXC to spin out 100% of MGC
Nutraceuticals to leading US CBD
& Hemp Wellness company for
US$6m worth of shares in Onassis,
to settle in 2020 (OTC:ONSS)
10
ANNUAL REPORT FOR THE YEAR ENDED 30 JUNE 2020 RESEARCH AND
DEVELOPMENT AND
CLINICAL TRIALS
The Company reached multiple
significant landmarks in its commercial
development during the financial
year and has delivered on its pharma
strategy of working with top-tier
research departments, healthcare
institutions and doctors to remain a
pioneer in the pharma industry. As
part of this, MGC Pharma commenced
clinical trials and continued an
investigative research project. More
details of these are below.
ArtemiCTM clinical trial and
pre‑clinical studies for COVID‑19
infected patients
MXC commenced a Phase II double-
blind, randomized, placebo controlled
clinical trial in Israel to evaluate
the safety and efficacy of a natural
anti-inflammatory based formulation
ArtemiCTM on patients diagnosed
with COVID-19. This followed receipt
of Ethics Committee approval on the
17th April 2020 for approval of the trial
at Nazareth Hospital EMMS in Israel
and on 28th of April 2020 at Hillel Yaffe
Hospital in Israel.
First patients were recruited in early
May and the trial commenced shortly
thereafter. In July, the trial received
ethics committee approval to be
expanded to the Mahatma Gandhi
Mission’s Medical College & Hospital
in India, which has commenced in
September. Patient recruitment also
commenced at the leading Rambam
Academic Hospital in Israel following
Ethics Committee approval, with
3 patients enrolled for the Trial in
September 2020.
MXC was also selected by the World
Health Organisation to participate in a
COVID-19 taskforce by reporting on the
ArtemiCTM trial.
Subsequent to the financial year end,
the Board was pleased to receive the
interim results of the trial showing
ArtemiCTM met all its primary end
points for the safety and efficacy of the
treatment on the first 10 patients. The
statistically proven results show two
important clinical outcomes. Firstly,
a significant improvement in clinical
parameters of patients in the treatment
group and secondly, that no adverse
events (AE) occurred, demonstrating
the preliminary safety of the treatment
based on the initial 10 patients.
Also subsequent to the financial year
end, the Company was encouraged
by the results from the two pre-clinical
study’s which included an in-vivo
safety and toxicity study on mice
and an in-vitro laboratory study. The
safety and toxicity pre-clinical study
results showed ArtemiCTM delivering
no adverse results in standard toxicity
measures from the full panel of
hematology and chemistry blood tests.
A final report of results from pre-clinical
in-vitro laboratory testing clearly
supported the claim that ArtemiCTM can
modify the function of human immune
cells in response to inflammatory
stimuli. These findings support the
clinical study hypothesis that ArtemiCTM
can have a beneficial impact on the
malignant “Cytokine Storm” which
plays an important role in the clinical
deterioration of those severely affected
by infection with the COVID-19 virus.
Successful research results
for cannabinoid formulation on
Glioblastoma – brain cancer
MGC Pharma’s ongoing pre-clinical
in-vitro research program focused
on cannabinoid formulations in
the development of treatment for
glioblastoma multiforme (‘GBM’),
the most aggressive and, so far,
therapeutically resistant, primary brain
tumour has yielded successful results.
RE VIE W OF OPER ATIONS
11
The research is being conducted in
collaboration with the National Institute
of Biology (‘NIB’) and the Neurosurgery
Department at the University Medical
Centre in Ljubljana, Slovenia.
• Multi compound cannabinoid
formulations are more effective than
single cannabinoid preparations
and importantly are the intellectual
property of MGC Pharma
In light of these positive results, the
pre-clinical studies will continue
in-vitro and this will guide the
company in determining the content
of cannabinoids and their ratios in its
pursuit of the most efficient formula
purposed to inhibit the viability of
patients-derived glioblastoma cells
and/or their stem cells.
Results to date are as follows.
• Brain tissue samples from a total of
24 patients (including the 10 patients
reported on in July 2019) confirm
that the cannabinoid preparations
can successfully inhibit tumour cell
viability and cause a significant
percentage of glioblastoma cells to
undergo “programmed cell death”
• Recent data from NIB, conducted
on 14 additional GBM tumour tissue
samples, support the direct novel
cannabinoid formulations in the
treatment of glioblastoma
Phase IIb Epilepsy trial in Israel
In late May MGC Pharma received
ethics committee approval from
Schneider Children’s Medical Centre
of Israel to commence a phase IIb
clinical trial at the Schneider Hospital
for MXC’s proprietary epilepsy
treatment, CannEpil®.
The clinical trial will be a randomised,
double blind, placebo controlled,
parallel design Phase IIb study to
evaluate the safety and efficacy of
CannEpil® as an add on treatment in
children and adolescents with drug
resistant epilepsies.
The clinical trial will recruit 103 patients
between the ages of one and eighteen
years old and will be led by Principal
Investigator Dr. Dror Kraus at the
Schneider Hospital in Israel. The
trial will last for 12 weeks per patient.
Recruitment of patients will commence
immediately following receipt of the
final Israel Ministry of Health approval.
12
ANNUAL REPORT FOR THE YEAR ENDED 30 JUNE 2020 PHARMA
OPERATIONS
3,590 prescriptions issued to
1,428 patients
At the end of 30 June 2020, the
Company had issued a total of 3,590
prescribed units of its standardised
affordable cannabinoid medicines
across the UK, Australia, NZ and Brazil,
passing its 3,250 milestone in
May 2020. This brought the total
number of patients prescribed MXC
products to 1,428, a 65% increase since
the beginning of January 2020.
This represents a significant
achievement for MGC Pharma and
the Company is ramping up its sales
strategy to focus its future sales growth
on high volume markets, such as Brazil,
to meet its prescriptions targets and
issue 5,000 prescriptions per month
in CYH1 2021 and become cashflow
break-even.
Launch of Mercury Pharma
phytocannabinoid products
In January 2020, the Company
launched a new proprietary affordable
prescription medicine line, specifically
aimed at the Australian and New
Zealand markets, branded as Mercury
Pharma. The first product in this
product line was ‘Mercury Pharma
100’ (‘MP100’). MP100, a 100mg/mL
CBD solution, which is currently being
prescribed by health care professionals
in Australia and New Zealand.
Sales of Mercury Pharma product
line have been strong to date and the
Company is confident in its ability to
meet its goal of issuing prescriptions
for 5,000 units per month in CYH1 2021.
RE VIE W OF OPER ATIONS
13
LICENCES AND
DISTRIBUTION
AGREEMENTS
Three‑year EU GMP licence granted
MXC was successfully granted a three-
year renewal of its EU GMP license
for its Slovenian manufacturing and
compounding facility, following an
annual audit conducted by the JAZMP,
the government agency of medicinal
products and medical devices of the
Republic of Slovenia.
The EU GMP licence is the most
highly credentialled in the world for
compliance and is essential for the
production and manufacturing of
pharma grade medicinal products.
This provides certainty for the ability of
MGC Pharma to continue to research,
development and, manufacture its
suite of proprietary cannabinoid IMP
products from its Slovenian EU GMP
production facility for the next 3 years
until its next EU GMP audit.
Import licence and cannabis
cultivation research permit received
MGC Pharma was awarded a
standalone Import Licence and a
cannabis cultivation research permit
from the Australian Office of Drug
Control, progressing MXC’s Australian
operations and supporting its fully
vertically integrated nature to medicine
business model.
The receipt of an Import Licence
marks a significant step forward for the
Company’s commercialisation strategy
as it allows the importation of any MGC
Pharma Schedule 4 and Schedule
8 medicinal cannabis products into
Australia directly by the Company,
which was previously facilitated by
third parties.
This also now allows MXC to bulk
import its products directly resulting
in significant cost savings to the
Company including logistics and
handling costs.
The cannabis cultivation research
permit enables MXC to proceed with
its botanical research projects in
collaboration with Royal Melbourne
Institute of Technology which includes
cultivating and breeding strains in order
to test against cancer cells. The botanical
research projects are initially focusing on
melanoma and prostate cancers.
This approval also allows MXC to
register its genetics and research
findings in Australia which can be used
and leveraged to meet future needs and
collaborate with other establishments
across Australia to create new genetics
and improve the genetics available
within the Australian market.
Binding term sheet signed for sales
& distribution of ArtemiCTM in Russia,
Israel and the CIS & Balkan countries
A binding term sheet was signed with
KS Kim, a wholly owned division of
SK-Pharma Group, for the sales and
distribution of ArtemiCTM in Russia,
Israel, the CIS and Balkan countries
(the “Territories”) once conditions have
been met in the clinical trial currently
underway, noted in the ASX release
13 May 2020. SK-Pharma operates
in more than 19 countries worldwide
and is one of the largest distributors of
medicines across the Territories.
Extensive market research has
commenced through SK-Pharma’s
network of more than 120 partners,
which has already confirmed strong
interest for the Product through their
established distribution channels. Such
sales channels will be activated once
the current Phase II clinical trial is
completed, and the results are deemed
positive by independent analysis.
14
ANNUAL REPORT FOR THE YEAR ENDED 30 JUNE 2020 New ONIX Supply Agreement and
Receipt of Down Payment
At the beginning of March 2020,
MGC Pharma executed a binding
amendment to the supply and
distribution agreement with ONIX
Empreendimentos e Participações,
which established a minimum order
volume of 20,000 units for year one. A
down payment of ~$107,000 (€65,000)
was received as part payment for the
first purchase order of 4,000 units,
which has a total value of ~$330,000.
The minimum order volume will increase
to 50,000 units per annum from year
two onwards, carrying an estimated
value of at least $4.1 million (€2.5 million)
per annum. The agreement has a
minimum seven-year term, which may
be renewed for an additional five-year
term by mutual agreement.
ONIX will purchase a bulk order of
a combination of MGC Pharma’s
pharmaceutical grade products
including CannEpil®, CogniCann® and
products including MP100 from Mercury
Pharma line, which is now to be
produced under EU GMP guidelines, to
enable distribution in key European and
South American markets.
Relevant in-country approvals to
commence import of MGC Products
under the Agreement were obtained
in March 2020. Under the agreement
MGC Pharma will also produce a
white label nutraceutical product for
Anden to exclusively commercialise in
Peru and Bolivia, provided it will not
compete with MGC Pharma brands.
Other Mercury Pharma products to
be provided under the agreement
will include MP1:30, MP1:1, MP7:1,
MP15:1 ratios and Mercury Pharma
Wide Spectrum line dedicated for the
Brazilian market.
Expansion into Peru and Bolivia
MGC Pharma signed a distribution
agreement with Anden Bio Naturals
S.A (‘Anden’) for the exclusive
distribution and commercialisation of
its medicines in Peru and Bolivia for
five years.
This Agreement helps to solidify MGC
Pharma’s footprint in Latin America.
Term Sheet executed for CannEpil®
into Israel
MGC Pharma signed a binding term
sheet with IM Cannabis Corp. (‘IMC’),
one of the leading cannabis companies
in Israel with operations in Europe, for
the exclusive wholesale import, sales
and distribution of CannEpil® in Israel.
IMC will also import CannEpil® for the
phase IIb clinical trial due to commence
in Q4 2020 following Ministry of Health
final approvals.
RE VIE W OF OPER ATIONS
15
CORPORATE
Sale of MGC Nutraceuticals to US
CBD and Hemp Wellness company
MXC signed a binding acquisition
agreement to sell 100% of its MGC
Nutraceuticals subsidiary to US listed
Onassis Holdings Corp (OTC:ONSS)
along with an exclusive CBD and raw
materials supply agreement.
Under the terms of the agreement,
MXC will receive shares equating to
a value of US$6 million in Onassis
Holdings Corp as consideration
for the 100% sale of the MGC
Nutraceutical business.
As part of the sale, the Company
secures an exclusive supply
agreement for the provision of
MXC’s CBD, raw materials and
proprietary production intellectual
property (IP) to Onassis for the future
manufacturing and production of
nutraceuticals products. Settlement
of the transaction is expected by
CYQ4 2020, to occur upon the
completion of a successful US$8m
capital raising by Onassis on the OTC
market in the USA.
Response to COVID‑19
The Company took prompt action
in early March to protect the health
and welfare of its staff in light of the
COVID-19 outbreak, whilst managing
the significant challenge to continue
production of phytocannabinoid
medicines at its Slovenian EU GMP
manufacturing facility. The Company’s
actions ensured that the production
and supply of its cannabinoid-
based medicines continued despite
disruptions encountered to the
supply of raw materials, export permit
approvals and delivery of product
caused by border and operating
restrictions imposed in Europe with the
COVID-19 lockdowns.
Further to the corporate cost saving
measures implemented earlier in the
year due to the COVID-19 outbreak,
the Board agreed from 1 March
2020 to implement remuneration
reductions, with minimum 50% salary
cuts for all Directors. Effective 1 July
2020, the Company formally revised
remuneration agreements with its
directors and signed new director
agreements which include a salary
decrease of up to 60% for the 2021
financial year, with senior management
remuneration has also decreased by
up to 30%. Additionally, there is no
longer a termination payment due to
directors Brett Mitchell, Roby Zomer
and Nativ Segev as detailed in their
original service agreements, as was
referenced in the ASX announcement
of 15 April 2020.
16
ANNUAL REPORT FOR THE YEAR ENDED 30 JUNE 2020 POST FINANCIAL
YEAR END
Binding term sheet for the acquisition
of Medicinal Cannabis Clinics
MGC Pharma also signed a binding
term sheet with Cannvalate Pty Ltd to
acquire 100% of the operating clinic-
based assets, data and intellectual
property of its wholly owned subsidiary
Medicinal Cannabis Clinic (MCC).
MCC is a leading Australian medicinal
cannabis clinic with a large and existing
doctor and patient network. MXC’s
acquisition of MCC’s assets, along with
its import and distribution capability
will reduce supply chain costs which
will in turn lead to increasingly more
affordable, high-quality cannabinoid
medications for an expanding patient
base across Australia. Settlement of
the acquisition is expected during
October 2020.
Distribution agreement signed
with leading UK medicinal cannabis
provider
MGC Pharma also signed a distribution
agreement for its EU GMP cannabinoid
medicines with leading United
Kingdom medical cannabis provider,
LYPHE Group Limited which provides
MGC Pharma direct access to LYPHE’s
established distribution channels into
the growing UK market for medical
cannabis products.
Under the terms of the agreement,
LYPHE will prescribe and dispense
Mercury Pharma medicinal cannabis
products under LYPHE labels, to
patients at its clinics, while reporting
real-world anonymised data
investigating efficacy, safety, quality of
life, and patient-reported outcomes to
MGC Pharma.
Joint venture for registration of
ArtemiCTM and generic oncology
medicines in Russia
MXC signed a term sheet to partner
with Dr Svetlana Kopachevskaja, and
key associated investment partners
to establish a joint venture company
to register ArtemiCTM as a medicine in
Russia and register 15 MGC Pharma
formulations and generic oncology
medicines for the Russian market.
The joint venture company will be
70% owned by MGC Pharma and
30% owned by Dr Svetlana
Kopachevskaja, and key associated
investment partners.
Russia represents a key market of
strategic growth for MGC Pharma
and ArtemiCTM as it has recorded over
960,000 cases of COVID-19 to date,
the fourth highest country globally,
and is still recording significantly high
COVID-19 infection rates.
Strategic biopharma industry
appointments to strengthen Board
and senior management team
To ensure the Company meets its
pharma objectives over the coming
financial year it strengthened its
Board and leadership team with
biopharma industry expertise with
the appointment of Evan Hayes as an
Independent Non-Executive Director
and Strategic Advisor.
Evan Hayes is a highly experienced
Board member and brings over
20+ commercial and leadership
experience within the healthcare and
biotechnology sectors. Mr Hayes is
currently the Asia Pacific Managing
Director of Factors Group, Canada’s
largest natural health company. Prior
to this Mr Hayes was the Director of
Sourcing and Product Development
at Australia’s largest natural health
company, Blackmores, leading the
Procurement, Technical, New product
development, and Strategic sourcing
divisions and managed a budget
of $250m.
RE VIE W OF OPER ATIONS
17
FCA Policy Guidance on Listing of
Cannabis‑related businesses in
the UK
On 18 September 2020, the Financial
Conduct Authority (FCA) in the
United Kingdom (UK) published a
policy guidance note for assessing
applications from cannabis-related
companies for listing on the London
Stock Exchange (LSE). MGC Pharma’s
LSE listing status has been pending
approval following lodgement of the
Company’s prospectus, legal opinions
and listing documents in December
2019, this new guidance has now
paved the way for MXC’s LSE listing
application to proceed. The Company
has already commenced updating
lodgement documents for submission
and the Company’s UK advisors are
confident MGC Pharma meets the
requirements for LSE listing.
Sabina Suljaković was appointed as
Qualified Person and Head of the
Quality Assurance in Slovenia. Sabina
previously managed the product
quality division at PharmaSwiss and
Amir Polak was appointed as Chief
Technology Officer and Head of
Pharmaceutical Production, Amir was
previously head of chemical production
at Nano-Dimension, and project co-
ordinator for Teva Pharmaceuticals.
Agreement for equity funding of up to
$15m signed with US based strategic
investor
MGC Pharma entered into a material
equity financing agreement with
Mercer Street Global Opportunity Fund
LLC, a United States based investment
group, to provide the Company with
funding of up to a total of $15m. The
first tranche of $2.25 million has been
provided to the Company and under
the financing facility, the Company
may request additional drawdowns of
up to a further $12.75 million over the
next 12 months (refer ASX release 10
September 2020).
18
ANNUAL REPORT FOR THE YEAR ENDED 30 JUNE 2020 ’
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DIREC TORS’ REPOR T
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19
DIRECTORS’
REPORT
The Directors present their report on MGC Pharmaceuticals Limited (“the Company” or “the Parent”) and its controlled entities
(collectively, “the Group” or “MGC Pharma”) for the financial year ended 30 June 2020.
Directors
The names of Directors in office at any time during or since the end of the year are:
Director
Brett Mitchell
Roby Zomer
Nativ Segev
Ross Walker
Stephen Parker
Evan Hayes
Title
Executive Chairman
Managing Director & CEO
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Appointment Date
4 April 2013
15 February 2016
15 February 2016
15 February 2016
13 March 2019
1 September 2020
Resignation Date
-
-
-
-
-
-
Directors were in office for the entire year and up to the date of this report unless otherwise indicated.
Company Secretary
Rachel Kerr held the position of Company Secretary for the full financial year.
Principal Activities
MGC Pharmaceuticals Ltd (ASX: MXC) is a European based bio-pharma company developing and supplying affordable
standardised phytocannabinoid derived medicines to patients globally. The Company’s founders were key figures in the global
medical cannabis industry and the core business strategy is to develop and supply high quality phytocannabinoid derived
medicines for the growing demand in the medical markets globally. MGC Pharma has a robust product offering targeting two
widespread medical conditions – epilepsy and dementia – and has further products in the development pipeline.
Employing its ‘Nature to Medicine’ strategy, MGC Pharma has partnered with renowned institutions and academia to
optimise cultivation and the development of targeted phytocannabinoid derived medicines products prior to production in the
Company’s EU-GMP Certified manufacturing facility.
MGC Pharma has a number of research collaborations with world renowned academic institutions, and including recent
research highlighting the positive impact of using specific phytocannabinoid formulations developed by MGC Pharma in the
treatment of glioblastoma, the most aggressive and, so far, therapeutically resistant primary brain tumour. MGC Pharma has a
growing patient base in Australia, the UK, Brazil and Ireland and has a global distribution footprint via an extensive network of
commercial partners meaning that it is poised to supply the global market.
Operating Results
The consolidated loss of the Group from continued operations amounted to $18,769,799 (2019 (Restated): $11,053,913).
Dividends Paid or Recommended
No dividends have been paid or declared for payment during, or since, the end of the financial year.
20
ANNUAL REPORT FOR THE YEAR ENDED 30 JUNE 2020 Significant Changes in State of Affairs
In the opinion of the directors, there have been no significant changes to the state of affairs of the Group during the year other
than those disclosed elsewhere in the financial report or the notes thereto.
After Reporting Date Events (other than noted in the Review of Operations)
Date
14 July 2020
Event
MXC Cannabis Research Permit Granted for RMIT Programs
The Permit enables MXC to proceed with its botanical research projects in
collaboration with Royal Melbourne Institute of Technology (RMIT University)
including cultivation and genetics
25 August 2020
14 September 2020
JV to be Established for Registration of ArtemiCTM In Russia
Term sheet signed to partner with Dr Svetlana Kopachevskaja, and key associated
investment partners to establish a JV company to facilitate registration of
ArtemiCTM as a medicine in Russia, and register 15 MGC Pharma formulations and
generic oncology medicines for the Russian market.
MXC Well Positioned for TGA Down‑Schedule of CBD Products
TGA has recently confirmed its intention to down-schedule certain low-dose
medicinal cannabidiol (CBD) products from Schedule 4 to Schedule 3 status.
MGC Pharma is uniquely positioned to benefit from the proposed changes through
its existing EU production facilities, increasing market penetration, and clinical
programs.
Environmental Regulations and Performance
The Group’s operations are subject to various environmental laws and regulations under the relevant Governments’ legislation.
Full compliance with these laws and regulations is regarded as a minimum standard for all operations to achieve. There have
been no significant known breaches by the Group during the financial year.
Future Developments, Prospects and Business Strategies
The Company will continue to pursue its policy of enhancing the prospect of greater returns to its investors through further
strategic investments during the next financial year. Further information about likely developments in the operations of the
Group and the expected results of those operations in future financial years has not been included in this report, because
disclosure of the information would be likely to result in unreasonable prejudice to the Group.
Information on Directors and Secretary
Names, special responsibilities, qualifications and experience of current directors and company secretaries:
Brett Mitchell, B.Ec ‑ Executive Chairman
Mr Mitchell is a corporate finance executive with over 25 years of experience in the venture capital, capital markets, tech and
resources industries. He has been involved in the founding, financing and management of both private and publicly-listed
companies, including the second listed medical cannabis company on the ASX – MGC Pharmaceuticals Ltd (MXC).
Mr Mitchell is a founder and director of Chieftain Securities Pty Ltd, a Perth based Corporate Advisory & Venture Capital
firm and founder and shareholder of Graft Polymer (UK) Ltd. Mr Mitchell is also currently Executive Chairman of ASX Listed
company TNT Mines Ltd (TIN).
Interest in shares and options held as at date of this report
Mr Brett Mitchell and Mrs Michelle Mitchell (jointly controlled)
22,264,444 Ordinary Shares
3,750,000 Performance Rights
277,777 Listed Options exercisable at $0.045 expiring 31 August 2021
21
DIRECTORS’ REPORT Mr Brett and Mrs Michelle Mitchell (jointly controlled)
8,140,560 Ordinary Shares
3,750,000 Performance Rights
277,777 Listed Options exercisable at $0.045 expiring 31 August 2021
Chieftain Securities Pty Ltd (Mr Mitchell is a Director and holds a 33% shareholding)
5,000,000 unlisted options exercisable at $0.15 each expiring 30 June 2021
1,500,000 unlisted options exercisable at $0.05 expiring 31 August 2023
1,500,000 unlisted options exercisable at $0.06 expiring 31 August 2023
1,500,000 unlisted options exercisable at $0.07 expiring 31 August 2023
Directorships held in other ASX listed entities in the past three years
TNT Mines Limited (27 June 2017 – current)
Sky and Space Global Ltd (12 May 2016 – 31 October 2018)
Roby Zomer – Managing Director and CEO
Mr. Zomer was recruited into MGC by its founders at the inception of the company, and has since served in multiple roles in
the company, culminating with his current role as MD and CEO. With ten years of experience in large scale projects in the
Biotech and Agrotech sectors, Mr. Zomer has been crucial in moving MGC from a cannabis concept to a fully functioning
biopharma company with global activities. This was part of the vision that has allowed MGC to launch, and divest itself of, both
a Cannabis Cosmetic company (MGC Derma) and a Lifestyle Company (MGC Nutra), which were both crucial building blocks
to centralizing the company’s pharma vision and activities.
Over the past year, Mr Zomer has been crucial to solidifying the company’s standing as a leading provider of phytomedicines
in several regions globally, has successfully launched a product, ArtemiCTM, which is from initial results proving an effective
treatment against symptoms of COVID-19, backed by ongoing clinical trials. Additionally, he has put his engineering and
medical background into play, and has put a significant emphasis on the company’s research and development activities,
leading to possibilities of distribution and collaboration in several compelling markets around the globe.
Interest in shares and options held as at date of this report
Chitta Lu Limited (an entity controlled by Mr Zomer)
3,000,001 Ordinary Shares
7,500,000 Performance Rights
HSBC Custody Nominees (Australia) Limited (shares held via custodial account)
30,000,000 Ordinary Shares
Directorships held in other ASX listed entities in the past three years
Nil.
Nativ Segev – Non‑Executive Director
Mr Segev founded MGC Pharma in 2014 with a goal to expand into international markets and raise the quality of medicinal
phytocannabinoid products, in addition to making them accessible to patients all over the world. Prior to establishing MGC
Pharma, Mr. Segev was a leader in the Medical Cannabis industry with a sizeable patient-base.
He has over 10 years of experience in implementation, legislation and lobbying in the global Medical Cannabis industry,
combined with over 15 years of experience in diverse executive roles.
Interest in shares and options held as at date of this report
Nativ Segev
1 Ordinary Share
Brighght Global Limited (an entity controlled by Mr Segev)
500,000 Ordinary Shares
HSBC Custody Nominees (Australia) Limited (shares held via custodial account)
52,500,000 Ordinary Shares
22
ANNUAL REPORT FOR THE YEAR ENDED 30 JUNE 2020 Directorships held in other ASX listed entities in the past three years
Nil.
Dr Ross Walker, MBBS (Hons), FRACP, FCSANZ ‑ Non‑Executive Director and Chairman of Strategic Advisory Board
Dr Ross Walker is an eminent practicing cardiologist with over 35 years’ experience as a clinician. For the past 20 years, he has
been focusing on preventative cardiology and is one of Australia’s leading preventative health experts.
Dr Walker is considered one of the world’s best keynote speakers and life coaches, he is the author of seven best-selling books
and a health presenter in the Australian Media
Interest in shares and options held as at date of this report
4,370,370 Ordinary Shares
185,185 Listed Options exercisable at $0.045 expiring 31 August 2021
Directorships held in other ASX listed entities in the past three years
Nil.
Dr Stephen Parker, D.Phil, MBA – Non‑Executive Director and Chairman of the Corporate Governance Committees
Dr Stephen Parker is a seasoned executive with over thirty years’ experience in the pharmaceuticals and biotechnology
sectors, as a senior executive in the sector, a strategic consultant, a venture capitalist and a senior corporate financier with
Baring’s, Warburg’s and Apax Partners. Dr Parker is currently Chairman of Sareum Holdings plc and a non-Executive Director
of Eternans Limited. Stephen has a D.Phil. from Oxford University and an MBA from City University Business School.
Interest in shares and options held as at date of this report
Nil.
Directorships held in other ASX listed entities in the past three years
Nil.
Evan Hayes, MSC Biotech, BSC BioChem, NICM Adjunct Fellow, GAICD, MASM – Non‑Executive Director
Evan Hayes is a highly experienced Board member and brings over 20+ commercial and leadership experience within the
healthcare and biotechnology sectors. Mr Hayes graduated with a Master of Science 1st Class Honours (Biotechnology) from
the National University of Ireland, Galway and prior to this he finished first in his class from the National University of Ireland,
Cork with a Bachelor of Science degree (Honours). Mr Hayes’ has also won the Daniel O’Carroll Award for Scientific Research.
Mr Hayes is currently the Asia Pacific Managing Director of Factors Group, Canada’s largest natural health company. Prior
to this Mr Hayes was the Director of Sourcing and Product development at Australia’s largest natural health company,
Blackmores, leading the Procurement, Technical, New product development, and Strategic sourcing divisions and managed
a budget of $250m. Evan has served on multiple boards, worked in Europe the USA and in Australia evidenced by his strong
knowledge of both the FDA and the TGA. Mr Hayes is an author of multiple patents including one world patent.
Interest in shares and options held as at date of this report
Nil.
Directorships held in other ASX listed entities in the past three years
Nil.
Rachel Kerr – Company Secretary
Mrs Kerr has over 10 years’ experience as a Company Secretary on both private and public companies, managing a number of
acquisitions, capital raisings, IPO’s, due diligence reviews and the compliance of public companies.
DIREC TORS’ REPOR T
23
DIRECTORS’ REPORT REMUNERATION
REPORT (AUDITED)
This report details the nature and amount of remuneration for each key management person of MGC Pharmaceuticals Ltd,
and for the executives receiving the highest remuneration.
Remuneration Policy
The remuneration policy of MGC Pharmaceuticals Ltd has been designed to align key management personnel objectives with
shareholder and business objectives by providing a fixed remuneration component and offering specific long-term incentives
based on key performance areas affecting the consolidated group’s financial results. The Board of MGC Pharmaceuticals Ltd
believes the remuneration policy to be appropriate and effective in its ability to attract and retain the best key management
personnel to run and manage the Group, as well as create goal congruence between directors, executives and shareholders.
The Board’s policy for determining the nature and amount of remuneration for key management personnel of the Group is
as follows:
• The remuneration policy, setting the terms and conditions for the key management personnel, was developed and
approved by the Board.
• All key management personnel receive a base salary (which is based on factors such as length of service and experience),
superannuation, fringe benefits, options and performance incentives.
• The Board reviews key management personnel packages annually by reference to the consolidated group’s performance,
executive performance and comparable information from industry sectors.
The performance of key management personnel is measured against criteria agreed annually with each executive and is based
predominantly on the forecast growth of the Group’s profits and shareholders’ value. All bonuses and incentives must be linked to
predetermined performance criteria. The Board may, however, exercise its discretion in relation to approving incentives, bonuses
and options. Any changes must be justified by reference to measurable performance criteria. The policy is designed to attract the
highest calibre of executives and reward them for performance that results in long-term growth in shareholder wealth.
Key management personnel are also entitled to participate in the employee share and option arrangements.
All remuneration paid to key management personnel is valued at the cost to the Company and expensed. Shares given to key
management personnel are valued as the difference between the market price of those shares and the amount paid by key
management personnel. Options are valued using the Black-Scholes methodology.
The Board policy is to remunerate Non-Executive Directors at market rates for time, commitment and responsibilities. The
Board determines payments to the Non-Executive Directors and reviews their remuneration annually, based on market
practice, duties and accountability. Independent external advice is sought when required. The maximum aggregate amount of
fees that can be paid to Non-Executive Directors is subject to approval by shareholders at the Annual General Meeting. Fees
for Non-Executive Directors are not linked to the performance of the consolidated group. However, to align directors’ interests
with shareholder interests, the Directors are encouraged to hold shares in the Company and are able to participate in the
employee option plan.
Performance‑based Remuneration
As part of each member of the key management personnel’s remuneration package there is a performance-based component,
consisting of key performance indicators (KPIs). The intention of this program is to facilitate goal congruence between key
management personnel with that of the business and shareholders. The KPIs are set, with a certain level of consultation
with key management personnel to ensure buy-in. The measures are specifically tailored to the areas each key management
personnel are involved in and have a level of control over. The KPIs target areas the Board believes hold greater potential for
24
ANNUAL REPORT FOR THE YEAR ENDED 30 JUNE 2020 Group expansion and profit, covering financial and non-financial as well as short- and long-term goals. The level set for each
KPI is based on budgeted figures for the Group and respective industry standards.
Performance in relation to the KPIs is assessed annually, where relevant, with bonuses being awarded depending on the
number and deemed difficulty of the KPIs achieved. Following the assessment, the KPIs are reviewed by the Board in light
of the desired and actual outcomes, and their efficiency is assessed in relation to the Group’s goals and shareholder wealth,
before the KPIs are set for the following year.
Company Performance, Shareholder Wealth and Director and Executive Remuneration
Overview of Company Performance
The table below sets out information about MGC Pharmaceuticals Ltd’s earnings and movements in shareholder wealth for
the past five years up to and including the current financial year.
30 June 2020
30 June 2019
(restated)
30 June 2018
(restated)*
30 June 2017
(restated)*
30 June 2016
(restated)*
Net loss after tax ($)
(19,370,226)
(8,623,856)
(7,089,432)
(7,212,025)
(4,450,063)
Share price at year end ($) 0.02
Basic loss per share (cents) (1,40)
Dividends paid
-
0.052
(0.71)
-
0.066
(0.56)
-
0.046
(0.71)
-
0.044
(0.74)
-
* The net loss after tax and basic loss per share presented for each period prior to 30 June 2020 have been restated as a result
of the correction of the prior period error disclosed in Note 4 to the financial statements.
Key Management Personnel Remuneration Policy
The Board’s policy for determining the nature and amount of remuneration of key management for the Group is as follows:
The remuneration structure for key management personnel is based on a number of factors, including length of service,
particular experience of the individual concerned, and overall performance of the Company. The contracts for service
between the Company and key management personnel are on a continuing basis, the terms of which are not expected to
change in the immediate future. Upon retirement key management personnel are paid employee benefit entitlements accrued
to date of retirement.
All Directors had contracts in place with the Company during the financial year as detailed below. Subsequent to year end,
these agreements have been replaced effective 1 July 2020 (the terms of the new agreements are summarised from page 27).
Material terms of agreements in place during the financial year:
Brett Mitchell, Executive Chairman
• Director Letter of Appointment dated 20 February 2016, no termination date or payment on termination;
• MGC Pharma (UK) Ltd Non-Executive Director agreement commenced 30 June 2016; no termination date or payment
on termination;
° Fees of £910 per month
Addendum to Services Agreement with Sibella Capital Pty Ltd, an entity controlled by Mr Mitchell valid from 1 January
2019 to 30 June 2020
• MGC Pharmaceuticals Ltd executive services agreement. This agreement continues for 3 years unless terminated prior and
will thereafter automatically renew every 12 months;
° Fees reduced to $20,000 per month. From 1 March -30 June 2020 fees were decreased by 50% to $10,000 per month;
An additional benefit of $60,000 in cash plus 2,500,000 performance rights (subject to shareholder approval) per
achievement, based on share performance and operational milestones are as follows:
– GMP approval for Malta facility
– Holding a Director position on the Board of MGC Pharmaceuticals Ltd by 31 December 2019
– Holding a Director position on the Board of MGC Pharmaceuticals Ltd by 31 December 2020 and achieving share
value of minimum of 8c for a minimum of 10 consecutive trading days
– Holding a Director position on the Board of MGC Pharmaceuticals Ltd by 31 December 2021 and achieving share
value of minimum of 10c for a minimum of 10 consecutive trading days
• A termination fee is payable and is dependent upon the Company terminating the services contract at its election, unless
terminated by a just cause, and the payment would be €800,000
25
DIRECTORS’ REPORT Roby Zomer, CEO & Managing Director
• MGC Pharma (UK) Ltd Non-Executive Director agreement commenced 30 June 2016; no termination date or payment on
termination;
° Fees of £910 per month
• MGC Pharmaceuticals d.o.o director agreement commenced 1 July 2018; no termination date or payment on termination;
° Fees of €1,000 per month
Addendum to Services Agreement with Chitta Lu Limited, an entity controlled by Mr Zomer, valid from 1 January 2019
to 30 June 2020
• MGC Pharmaceuticals Ltd executive services agreement. This agreement continues for 3 years unless terminated prior and
will thereafter automatically renew every 12 months;
° Fees of $25,000 per month. From 1 March - 30 June 2020 fees were decreased by 50% to $12,500 per month;
An additional benefit of $60,000 in cash plus 2,500,000 performance rights (subject to shareholder approval) per
achievement, based on share performance and operational milestones are as follows:
– GMP approval for Malta facility
– Holding a Director position on the Board of MGC Pharmaceuticals Ltd by 31 December 2019
– Holding a Director position on the Board of MGC Pharmaceuticals Ltd by 31 December 2020 and achieving share
value of minimum of 8c for a minimum of 10 consecutive trading days
– Holding a Director position on the Board of MGC Pharmaceuticals Ltd by 31 December 2021 and achieving share
value of minimum of 10c for a minimum of 10 consecutive trading days
° A termination fee is payable and is dependent upon the Company terminating the services contract at its election, unless
terminated by a just cause, and the payment would be €800,000
Nativ Segev, Non‑Executive Director
• MGC Pharma (UK) Ltd Non-Executive Director agreement commenced 30 June 2016; no termination date or payment on
termination;
° Fees of £910 per month
• MGC Pharmaceuticals d.o.o Director agreement commenced 1 July 2016; no termination date or payment on termination;
° Fees of €1,000 per month
Addendum to Services Agreement with Brighght Global Limited, an entity controlled by Mr Segev, valid from 1 January
2019 to 30 June 2020
• MGC Pharmaceuticals Ltd executive services agreement. This agreement continues for 3 years unless terminated prior and
will thereafter automatically renew every 12 months;
° Fees reduced to $20,000 per month. From 1 March - 30 June 2020 fees were decreased by 50% to $10,000 per month;
An additional benefit of $60,000 in cash plus 2,500,000 performance rights (subject to shareholder approval) per
achievement, based on share performance and operational milestones are as follows:
– GMP approval for Malta facility
– Holding a Director position on the Board of MGC Pharmaceuticals Ltd by 31 December 2019
– Construction of Malta facility Completed
– Holding a Director position on the Board of MGC Pharmaceuticals Ltd by 31 December 2020 and achieving share
value of minimum of 8c for a minimum of 10 consecutive trading days
– Holding a Director position on the Board of MGC Pharmaceuticals Ltd by 31 December 2021 and achieving share
value of minimum of 10c for a minimum of 10 consecutive trading days
° A termination fee is payable and is dependent upon the Company terminating the services contract at its election, unless
terminated by a just cause, and the payment would be €800,000
Dr Ross Walker, Non‑Executive Director valid from 20 October 2015 to 30 June 2020
• MGC Pharmaceuticals Ltd Director Letter of Appointment was implemented on 20 October 2015, no termination date and
no payment upon termination;
° Non-Executive Director fees of $3,000 per month and fees for Chairman of Strategic Advisory Board of $2,000 per
month. From 1 March - 30 June 2020 fees were decreased to a total of $3,000 per month.
26
ANNUAL REPORT FOR THE YEAR ENDED 30 JUNE 2020 Dr Stephen Parker, Non‑Executive Director valid from 13 March 2019 to 30 June 2020
• MGC Pharmaceuticals Ltd Director Letter of Appointment was implemented on 13 March 2019, no termination date and no
payment upon termination;
° Non-Executive Director fees of $5,000 per month. From 1 March - 30 June 2020 fees were decreased to a total of $3,000
per month.
Material terms of current agreements in place with Directors effective from 1 July 2020:
Mr Brett Mitchell, Executive Chairman ‑ Current Director Agreement
• Director Agreement dated 1 July 2020, no termination date or payment on termination;
° Standard director fee of $4,000 per month
• MGC Pharma (UK) Ltd Non-Executive Director agreement commenced 30 June 2016; no termination date or payment on
termination;
° Fees of £910 per month
Service Agreement with Sibella Capital Pty Ltd, an entity controlled by Mr Mitchell, valid from 1 July 2020 to current
• MGC Pharmaceuticals Ltd executive services agreement this automatically renews every 12 months unless terminated;
° Fees reduced to $12,000 per month with no termination fee payable
Mr Roby Zomer, CEO & Managing Director ‑ Current Director Agreement
• Director Agreement dated 1 July 2020, no termination date or payment on termination;
° Standard director fee of $4,000 per month
• MGC Pharmaceuticals d.o.o director agreement commenced 1 July 2018; no termination date or payment on termination;
° Fees of €1,000 per month
• MGC Pharma (UK) Ltd Non-Executive Director agreement commenced 30 June 2016; no termination date or payment on
termination;
° Fees of £910 per month
Services Agreement with Chitta Lu Limited, an entity controlled by Mr Zomer, valid from 1 July 2020 to current
• MGC Pharmaceuticals Ltd executive services agreement this automatically renews every 12 months unless terminated;
° Fees reduced to $12,500 per month with no termination fee payable
Mr Nativ Segev, Non‑Executive Director ‑ Current Director Agreement
• Director Agreement dated 1 July 2020, no termination date or payment on termination;
° Standard director fee of $4,000 per month
Services Agreement with Brighght Global Limited, an entity controlled by Mr Segev, valid from 1 July 2020 to current
• MGC Pharmaceuticals Ltd services agreement this automatically renews every 12 months unless terminated;
° Fees reduced to $5,000 per month
° No termination fee payable
Dr Ross Walker, Non‑Executive Director and Chairman of Strategic Advisory Board
• Director Agreement dated 1 July 2020, no termination date or payment on termination;
° Non-Executive Director fees of $4,000 per month
Dr Stephen Parker, Non‑Executive Director and Chairman of the Corporate Governance Committees
• Director Agreement dated 1 July 2020, no termination date or payment on termination;
° Non-Executive Director fees of $4,000 per month plus $1,000 per annum as Chairman of the Corporate Governance
Committees
Dr Evan Hayes, Non‑Executive Director
• Director Agreement dated 1 September 2020, no termination date or payment on termination;
° Non-Executive Director fees of $4,000 per month
27
DIRECTORS’ REPORT DETAILS OF
REMUNERATION
Key Management Personnel Remuneration
Short-term Benefits
Post-employment benefits
Cash
Non-Cash
Directors
2020
Brett Mitchell
Roby Zomer
Nativ Segev
Ross Walker
Stephen Parker
Cash and
salary
230,532
290,319
240,319
52,000
60,608
Perfor-
mance
Bonus
30,000 i
30,000 i
30,000 i
-
-
-
28,211 ii
53,722 ii
-
-
Total
873,778
90,000
81,933
2019
Brett Mitchell
Roby Zomer
Nativ Segev
Ross Walker
Stephen Parker
289,765
329,838
321,181
60,000
18,213
30,000*
30,000*
30,000*
-
-
-
76,571
72,360
-
1,845
Total
1,018,997
90,000*
150,776
Super-
annuation
Other
Termi-
nation
benefits
Share
based
Payments
Equity
Perfor-
mance
related
Total
%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
91,456i
91,456i
(58,521)i
-
-
351,988
439,986
265,520
52,000
60,608
124,391
1,170,102
58,521*
58,521*
58,521*
-
-
378,286
494,930
482,062
60,000
20,058
175,563* 1,435,336
22.43%
17.95%
5.26%
-
-
19.17%
14.65%
15.04%
-
-
All Directors have contracts with the Company.
i Refer to Share-based and other performance based compensation section below for detail.
ii “Other” includes expat expenses in Malta and Slovenia.
* Restated, due to the omission of accrued expenses for the performance bonuses and share-based payments in the prior
period, for which the service period commenced 1 January 2019.
Option Holdings of Key Management Personnel
Directors
2020
Brett Mitchell
Roby Zomer
Nativ Segev
Ross Walker
Stephen Parker
Total
2019
Brett Mitchell
Roby Zomer
Nativ Segev
Ross Walker
Stephen Parker
Total
Granted as
Compensation
Opening
Balance
Options
Exercised
Net Other
Changes
(vested and
exercisable)
Closing Balance
5,000,000
-
-
-
-
5,000,000
5,000,000
-
-
-
-
5,000,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
4,500,000
-
-
-
-
4,500,000
-
-
-
-
-
-
9,500,000 i
-
-
-
-
9,500,000
5,000,000 i
-
-
-
-
5,000,000
i Chieftain Securities Pty Ltd holds these options of which Mr Mitchell is a director and 33.33% shareholder
28
ANNUAL REPORT FOR THE YEAR ENDED 30 JUNE 2020 Performance Shares held by Key Management Personnel
Details of performance shareholdings held directly, indirectly or beneficially by KMP and their related parties are as follows:
Directors
2020
Brett Mitchell
Roby Zomer
Nativ Segev
Ross Walker
Stephen Parker
Total
2019
Brett Mitchell
Roby Zomer
Nativ Segev
Ross Walker
Stephen Parker
Total
Opening Balance
Granted as
Compensation
Performance
Shares Exercised
Net Other
Changes Closing Balance
-
-
-
-
-
-
-
10,000,000
20,000,000
-
-
30,000,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(10,000,000)
(20,000,000)
-
-
(30,000,000)i
-
-
-
-
-
-
-
-
-
-
-
-
i Performance Shares granted on 27 September 2016 expired due to not meeting the performance milestone
Performance Rights held by Key Management Personnel
Details of performance rights held directly, indirectly or beneficially by KMP and their related parties are as follows:
Opening Balance
Granted as
Compensation
Performance
Rights Exercised
Net Other
Changes Closing Balance
Directors
2020
Brett Mitchell
Roby Zomer
Nativ Segev
Ross Walker
Stephen Parker
Total
2019
Brett Mitchell
Roby Zomer
Nativ Segev
Ross Walker
Stephen Parker
Total
-
-
-
-
-
-
10,000,000i
10,000,000i
-
-
-
20,000,000
-
-
-
-
-
-
10,000,000
-
-
-
-
10,000,000
-
-
-
-
-
-
10,000,000
-
-
-
-
10,000,000
-
-
-
-
-
-
-
-
-
-
-
-
10,000,000ii
10,000,000ii
-
-
-
20,000,000
i Refer to “Share-based and other performance-based compensation” section below for details of rights granted and vested
during the period.
ii 2,500,000 vested and exercisable; 7,500,000 unvested at balance date per director.
-
-
-
-
-
-
29
DIRECTORS’ REPORT Shareholdings of Key Management Personnel
Details of equity instruments (other than options and rights) held directly, indirectly or beneficially by KMP and their parties are
as follows:
Shareholdings
Directors
2020
Brett Mitchell
Roby Zomer
Nativ Segev
Ross Walker
Stephen Parker
Total
2019
Brett Mitchell
Roby Zomer
Nativ Segev
Ross Walker
Stephen Parker
Total
Opening Balance
Granted as
Compensation
Performance
Rights Exercised
Net Other
Changes1 Closing Balance
26,793,894
30,500,001
53,000,001
4,000,000
-
114,293,896
16,193,894
30,000,000
52,500,000
4,000,000
-
102,693,894
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,111,110
-
-
370,370
-
27,905,004
30,500,001
53,000,001
4,370,370
-
1,481,480
115,775,376
10,000,000
-
-
-
-
600,000
500,001
500,001
-
-
26,793,894
30,500,001
53,000,001
4,000,000
-
10,000,000
1,600,002
114,293,896
1 Net other changes are as a result of rights allotted as part of the Share Purchase Plan issue and other movement due to
changes in directors and directors’ related entities.
Share‑based and other performance‑based compensation
Performance rights
On 23 December 2019, the Company issued performance rights to two Directors, Brett Mitchell (10m) and Roby Zomer (10m),
following approval at its AGM on 29 November 2019 (the grant date), with the following key terms and conditions:
#
1.
2.
3.
4.
Vesting milestone
GMP approval for Malta facility
Holding of Director position on the Board of the Company by 31
December 2019
Holding of Director position on the Board of the Company by 31
December 2020 and achieving share value of minimum 8c for a
minimum 10 consecutive days
Holding of Director position on the Board of the Company by 31
December 2021 and achieving share value of minimum 10c for a
minimum 10 consecutive days
Performance rights Milestone date
5,000,000
31 Dec 21
5,000,000
31 Dec 19
5,000,000
31 Dec 20
5,000,000
31 Dec 21
20,000,000
The performance conditions were chosen to best align with the Company’s strategic goals and objectives to enhance
shareholder value. There was no performance condition associated with Milestone 2. The grant of the performance rights,
including those without performance conditions, is considered by the Company to be a reasonable and appropriate method to
provide cost effective remuneration as the non-cash form of this benefit will allow the Company to spend a greater proportion
of its cash reserves on its operations than it would if alternative cash forms of remuneration were given to the Related Parties
The fair value of the performance rights for milestones 1 and 2 was determined to be $0.034/right, based on the Company’s share
price on the grant date. A Monte Carlo valuation was applied to milestones 3 and 4, with the following inputs and assumptions:
30
ANNUAL REPORT FOR THE YEAR ENDED 30 JUNE 2020 Valuation date
Share price
Exercise price
Vesting date
Expiry date
Expected future volatility
Risk free rate
Vesting hurdle
Dividend yield
Value per right
Milestone 3
29 Nov 19
$0.0340
Nil
N/A
31 Dec 20
70%
0.68%
$0.08
nil
$0.00848
Milestone 4
29 Nov 19
$0.0340
Nil
N/A
31 Dec 21
70%
0.68%
$0.10
nil
$0.01213
A total of 5,000,000 performance rights (25%) vested during the period (2,500,000 each for Brett Mitchell and Roby Zomer,
respectively) upon achievement of Milestone 2. The remaining 15,000,000 total performance rights remained on issue but
unvested at 30 June 2020. The vesting expense in relation to the rights was recognised from the commencement of the
service period (1 January 2019), which was prior to the grant date. The maximum potential amount to be recognised in future
periods in relation to the unvested rights is $143,095 in total.
The performance rights proposed to be issued to Nativ Segev under the terms of his contract were not issued as the issue was
not approved by shareholders at the Company’s AGM. The estimated vesting expense recognised from the commencement of
the service period (1 January 2019) to 30 June 2019 was therefore reversed in full in the current period.
Performance bonuses
Upon achievement of Milestone 2 during the period, cash bonuses of $60,000 each vested and were paid to Brett Mitchell,
Roby Zomer and Nativ Segev under the terms of their contracts. The vesting expense for these bonuses was recognised
over the service period from 1 January 2019 to the vesting date on 31 December 2019. Under the revised director agreements
effective 1 July 2020 (described above) there is no further entitlement to performance bonuses under the remaining milestones.
Options
There were no options over ordinary shares granted to and vested by directors and other key management personnel as part
of compensation during the year ended 30 June 2019 or 30 June 2020.
Transactions with Director related entities
Directors and officers, or their personally-related entities, hold positions in other entities that result in them having controls or
significant influence over the financial or operating policies of those entities.
31
DIRECTORS’ REPORT Details of non-remuneration related transactions including amounts receivable and payable at the end of the year are
as follows:
Relationship Nature of transactions
Related Party
Brighght Global Ltd
(Brighght)
Chieftain Securities
Pty Ltd (Chieftain)
Chieftain Securities
Pty Ltd (Chieftain)
Chitta Lu Ltd (Chitta
Lu)
Sibella Capital Pty Ltd
(Sibella)
Graft Polymer d.o.o
(GPO)
(i)
(ii)
(ii)
(iii)
(iv)
(v)
TNT Mines Ltd (TNT)
(vi)
Reimbursement from Brighght for
corporate administration costs
Charges from Chieftain for
corporate advisory fees
Charges from Chieftain for capital
raising costs
Reimbursement from Chitta Lu for
corporate administration costs
Reimbursement from Sibella for
corporate administration costs
Services charges from /
(recharges to) GPO for
development for MGC proprietary
drug delivery technology
(Re-charges) to TNT for corporate
administration costs
Balances
Transactions
Full Year
30-Jun-20
Full Year
30-Jun-19
(owing to)/ owed by
Full Year
30-Jun-20
Full Year
30-Jun-19
$
-
$
5,702
$
-
60,000
61,748
(5,500)
116,594
-
-
1,010
388
14
-
-
-
$
-
-
-
-
-
510,859
(27,114)
40,000
33,079
-
(5,320)
-
-
i. Brighght Global Ltd is an entity controlled by Mr Nativ Segev.
ii. Mr Brett Mitchell Mitchell is a Director and holds a 33% shareholding in Chieftain Securities Pty Ltd.
iii. Chitta Lu Ltd is an entity controlled by Mr Roby Zomer.
iv. Sibella Capital Pty Ltd is an entity controlled by Mr Brett Mitchell.
v. Mr Roby Zomer is Executive Chairman of Graft Polymer d.o.o, who are developing the proprietary nano-emulsion and
nano-particle drug delivery platform for MGC Pharma medicines.
vi. Mr Brett Mitchell is an Executive Director of TNT Mines Limited.
End of Remuneration Report
32
ANNUAL REPORT FOR THE YEAR ENDED 30 JUNE 2020 Meetings of Directors
The Directors attendances at Board meetings held during the year were:
Brett Mitchell
Nativ Segev
Roby Zomer
Ross Walker
Stephen Parker
Held
7
7
7
7
7
Board Meetings
Attended
7
7
7
7
7
The Company has remuneration, nomination and audit and risk committees in place. The attendances of the Committee
Members for the meetings held during the year were:
Brett Mitchell
Ross Walker
Stephen Parker
Remuneration Committee
Held
2
2
2
Attended
2
2
2
Nomination Committee
Attended
1
1
1
Held
1
1
1
Audit and Risk Committee
Held
3
3
3
Attended
3
3
3
Corporate Governance
In recognising the need for the highest standards of corporate behaviour and accountability, the Directors of MGC
Pharmaceuticals Ltd support and have adhered to the principles of sound corporate governance. The Board recognises the
recommendations of the Australian Securities Exchange Corporate Governance Council, and considers that the Company is
in compliance with many of those guidelines which are of importance to the commercial operation of the Company. During the
financial year, shareholders continued to receive the benefit of an efficient and cost-effective corporate governance policy for
the Company. The Company’s Corporate Governance Policy is available for review on the Company’s website
www.mgcpharma.com.au
Options
At the date of this report the options on issue for MGC Pharmaceuticals Ltd are as follows:
Issue Date
2 March 2018, 23 March 2018
17 April 2018
12 April 2019
16 September 2019, 23 December 2019
16 September 2019, 23 December 2019
23 December 2019
12 May 2020
Total
Date of Expiry
31 March 2021
30 June 2021
31 March 2021
31 August 2023
31 August 2023
31 August 2023
31 August 2021
Exercise Price
$0.125
$0.15
$0.065
$0.05
$0.06
$0.07
$0.045
Number under Option
19,900,000
10,000,000
16,000,000
17,500,000
17,500,000
17,500,000
85,934,538
184,334,538
Convertible Notes
At the date of this report the convertible notes on issue for MGC Pharmaceuticals Ltd are as follows:
Issue Date
15 September 2020
Price per Security
$0.90909
Face Value per security
$1.00
Maturity Date
14 September 2021
Number
2,475,000
Indemnifying Officers or Auditor
The Company has given an indemnity or entered into an agreement to indemnify, or paid or agreed to pay insurance premiums
as follows:
The Company has paid premiums to insure all of the Directors of the Company as named above, the company secretary and
all executive officers of the Company against any liability incurred as such by a director, secretary or executive officer to the
extent permitted by the Corporations Act 2001. The contract of insurance prohibits disclosure of the notice of the liability and
the amount of the premium.
33
DIRECTORS’ REPORT To the extent permitted by law, the Company has agreed to indemnify its auditors, Ernst & Young Australia, as part of the
terms of its audit engagement agreement against claims by third parties arising from the audit (for an unspecified amount). No
payment has been made to indemnify Ernst & Young Australia during or since the financial year.
Proceedings on behalf of Company
No person has applied for leave of Court to bring proceedings on behalf of the Company or 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 any part of those
proceedings. The Company was not a party to any such proceedings during the year.
Non‑audit Services
During the year, there were no fees paid or payable for non-audit services by Ernst & Young and its related practices.
Auditor’s Independence Declaration
The lead auditor’s independence declaration for the year ended 30 June 2020 has been received and can be found on page 35
of the financial report.
This report is made in accordance with a resolution of Directors. These financial statements were authorised for issue in
accordance with a resolution by the Directors of the Company on 30 September 2020.
Roby Zomer
Managing Director
Dated 30 September 2020
34
ANNUAL REPORT FOR THE YEAR ENDED 30 JUNE 2020 Auditor’s Independence Declaration
Ernst & Young
11 Mounts Bay Road
Perth WA 6000 Australia
GPO Box M939 Perth WA 6843
Tel: +61 8 9429 2222
Fax: +61 8 9429 2436
ey.com/au
Auditor’s independence declaration to the directors of MGC
Pharmaceuticals Limited
As lead auditor for the audit of the financial report of MGC Pharmaceuticals Limited for the financial
year ended 30 June 2020, I declare to the best of my knowledge and belief, there have been:
a.
no contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
b.
no contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of MGC Pharmaceuticals Limited and the entities it controlled during the
financial year.
Ernst & Young
T G Dachs
Partner
30 September 2020
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
TD:TGF:MGC:011
35
DIRECTORS’ REPORT
Consolidated Statement of Profit or Loss and
Other Comprehensive Income
For the year ended 30 June 2020
30-Jun-20
Note
$
30-Jun-19
Restated
$
656,237
(356,642)
299,595
327,565
(5,635,303)
(3,711,003)
(501,027)
(2,011,542)
2,079,169
(1,904,504)
174,665
518,851
(6,609,147)
(5,520,556)
(2,098,064)
(5,117,767)
(18,652,018)
(11,231,715)
(135,582)
12,336
5,465
(18,769,799)
-
(18,769,799)
(444)
201,850
3,711
(11,026,598)
(27,315)
(11,053,913)
(600,427)
2,430,057
(19,370,226)
(8,623,856)
(19,363,089)
(7,137)
(19,370,226)
(8,579,331)
(44,525)
(8,623,856)
51,356
-
51,356
(127,067)
24,295
(102,772)
(19,318,870)
(8,726,628)
(19,311,733)
(7,137)
(19,318,870)
(8,682,103)
(44,525)
(8,726,628)
(1.40)
(1.40)
(1.36)
(1.36)
(0.71)
(0.71)
(0.91)
(0.91)
Continuing operations
Revenue from contracts with customers
Cost of sales
Gross profit
Other operating income
Administrative expenses
Other operating expenses
Fair value movement on financial instruments
Write-off/impairment expense
Operating loss
Finance costs
Finance income
Other income
Loss before income tax from continuing operations
Income tax expense
Loss for the year from continuing operations
Discontinued operations
(Loss) / gain after tax for the year from discontinued operations
Loss for the year
Attributable to:
Members of the parent entity
Non-controlling interest
Other comprehensive income for the year
Items that may be reclassified subsequently to profit or loss
Exchange differences on the translation of foreign operations
Derecognition of foreign currency reserve
Other comprehensive income (net of tax) for the year
Total comprehensive loss for the year
Total comprehensive loss attributable to:
Members of the parent entity
Non-controlling interest
Earnings per share
Basic, loss for the year attributable to ordinary equity holders of the parent
Diluted, loss for the year attributable to ordinary equity holders of the parent
Earnings per share for continuing operations
Basic, loss for the year attributable to ordinary equity holders of the parent
Diluted, loss for the year attributable to ordinary equity holders of the parent
The accompanying notes form part of these financial statements
6a)
7a)
6c)
7b)
7c)
21
7d)
7e)
6b)
9
5
19
19
19
19
36
ANNUAL REPORT FOR THE YEAR ENDED 30 JUNE 2020 Consolidated Statement of Financial Position
As at 30 June 2020
30-Jun-20
Note
$
CURRENT ASSETS
Cash and cash equivalents
Inventory
Trade and other receivables
Prepayment
Non-current assets classified as held for sale
Total Current Assets
NON-CURRENT ASSETS
Plant and equipment
Intangible assets
Financial assets
Right-of-use assets
Total Non-Current Assets
TOTAL ASSETS
CURRENT LIABILITIES
Trade and other payables
Deferred revenue
Liabilities directly associated with non-current
assets classified as held for sale
Lease liabilities - current
Total Current Liabilities
NON-CURRENT LIABILITIES
Loans from third parties
Deferred revenue
Provisions
Lease liabilities – non-current
Total Non-Current Liabilities
TOTAL LIABILITIES
NET ASSETS
EQUITY
Contributed equity
Share based payment reserve
Foreign currency translation reserve
Consolidation reserve
Accumulated losses
Equity attributable to equity holders of the
parent
Non-controlling interest
TOTAL EQUITY
10
11
12
5
13
14
21
16
15a)
15b)
5
16
16
17a)
17bi)
17bii)
The accompanying notes form part of these financial statements
1,873,373
402,237
521,684
71,032
362,657
3,230,983
2,192,974
-
673,740
1,831,377
4,698,091
7,929,074
2,705,818
100,440
109,254
53,924
2,969,436
-
-
19,982
1,845,300
1,865,282
4,834,718
3,094,356
60,149,457
5,380,904
85,284
(382,404)
(62,127,918)
3,105,323
(10,967)
3,094,356
30-Jun-19
Restated
$
2,354,086
138,800
1,139,952
87,333
-
3,720,171
1,470,479
5,034,309
2,771,804
-
9,276,592
12,996,763
1,593,707
587,688
-
-
2,181,395
-
-
17,195
-
17,195
2,198,590
10,798,173
49,133,819
4,556,418
33,928
-
(42,764,829)
10,959,336
(161,163)
10,798,173
1-Jul-18
Restated
$
9,858,977
712,315
468,967
463,352
-
11,503,611
1,334,492
7,082,904
72,857
-
8,490,253
19,993,864
960,575
-
-
-
960,575
21,556
47,280
3,669
-
72,505
1,033,080
18,960,784
48,440,990
4,685,229
136,700
-
(33,060,342)
20,202,577
(1,241,793)
18,960,784
37
ANNUAL REPORT FOR THE YEAR ENDED 30 JUNE 2020 Consolidated Statement of Changes in Equity
For the year ended 30 June 2020
Share
Based
Payment
Reserve
$
Foreign
Currency
Translation
Reserve
$
Contribut-
ed Equity
$
Conso
lidation
Reserve
$
Retained
Earnings
$
Non-
Controlling
Interest
$
Total
$
48,440,990 3,385,229
136,700
- (38,030,342)
(1,241,793) 12,690,784
-
1,300,000
-
-
4,970,000
- 6,270,000
48,440,990 4,685,229
136,700
- (33,060,342)
(1,241,793) 18,960,784
(102,772)
-
(102,772)
-
-
-
-
-
-
-
-
-
-
-
(102,772)
(8,579,332)
(44,525) (8,623,857)
(8,579,332)
(44,525) (8,726,629)
-
-
-
-
692,829
(128,811)
(1,125,155)
1,125,155
-
-
-
(128,811)
-
49,133,819
4,556,418
33,928
- (42,764,829)
(161,163) 10,798,173
49,133,819
4,556,418
33,928
- (42,764,829)
(161,163) 10,798,173
Shares issued during the year
(net of share issue costs)
692,829
Balance at 1 July 2018 –
as previously stated
Deferred consideration
restatement (note 4)
Balance at 1 July 2018 -
restated
Other comprehensive income
Loss after income tax expense -
restated
Total comprehensive loss for
the year
Share based payment
Acquisition of non-controlling
interest
Balance at 30 June 2019
(Restated)
Balance at 1 July 2019 -
restated
Other comprehensive income
Loss after income tax expense
Total comprehensive loss for
the year
-
-
-
-
-
-
51,356
-
-
-
-
-
51,356
(19,363,089)
(7,137) (19,370,226)
51,356
- (19,363,089)
(7,137) (19,318,870)
-
-
-
-
-
-
-
(382,404)
-
-
-
-
-
-
-
9,911,672
-
1,694,417
157,333
8,964
Shares issued during the year
(net of share issue costs)
9,911,672
Transfer to issued capital
869,931
(869,931)
Share based payment
-
1,694,417
Acquisition of non-controlling
interest
234,035
-
-
-
-
-
-
-
-
-
Balance at 30 June 2020
60,149,457 5,380,904
85,284 (382,404) (62,127,918)
(10,967) 3,094,356
The accompanying notes form part of these financial statements
38
ANNUAL REPORT FOR THE YEAR ENDED 30 JUNE 2020 Consolidated Statement of Cash Flows
For the year ended 30 June 2020
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Payments for research expenses
Research and development rebate
Government grant received
Interest received
Interest paid
Income tax paid
Net cash used in operating activities
Cash flows from investing activities
Subsidiary disposed; net of cash disposed of
Proceeds from sales of plant and equipment
Purchase of plant and equipment / assets under construction
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issue of shares and options
Payment of lease liabilities
Transaction costs on issue of shares
Net cash provided by financing activities
Net (decrease) in cash and cash equivalents held
Cash and cash equivalents at beginning of year
Foreign exchange movement in cash
Cash and cash equivalents at end of year
The accompanying notes form part of these financial statements
Note
6c
25
10
30-Jun-20
$
2,072,246
(8,452,920)
(3,973,805)
429,401
89,551
14,242
(135,582)
-
(9,956,867)
(13,252)
5,465
(962,097)
(969,884)
11,433,193
(183,611)
(787,677)
10,461,905
(464,846)
2,354,086
(15,867)
1,873,373
30-Jun-19
$
985,195
(4,905,359)
(2,892,045)
327,565
-
158,193
(444)
(27,315)
(6,354,210)
(569,992)
(14,893)
(362,150)
(947,035)
35,962
-
(8,948)
27,014
(7,274,231)
9,858,977
(230,660)
2,354,086
39
ANNUAL REPORT FOR THE YEAR ENDED 30 JUNE 2020 E
H
T
S
T
N
E
M
E
T
A
T
S
L
A
I
O
T
C
N
A
N
I
F
S
E
T
O
N
40
ANNUAL REPORT FOR THE YEAR ENDED 30 JUNE 2020
Contents of the Notes
to the Financial Statements
1
2
3
4
5
6
7
8
9
CORPORATE INFORMATION
SIGNIFICANT ACCOUNTING POLICIES
CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
RESTATEMENT FOR PRIOR PERIOD ERROR
NON-CURRENT ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS
REVENUE AND OTHER INCOME
COST OF SALES AND EXPENSES
EMPLOYEE EXPENSES
INCOME TAX
10 CASH AND CASH EQUIVALENTS
11
12
13
14
15
16
INVENTORY
TRADE AND OTHER RECEIVABLES
PLANT AND EQUIPMENT
INTANGIBLE ASSETS
PAYABLES AND DEFERRED REVENUE
LEASES
17 CONTRIBUTED EQUITY AND RESERVES
18 DIVIDENDS
19
EARNINGS PER SHARE
20 FINANCIAL RISK MANAGEMENT
21
FAIR VALUE MEASUREMENT OF FINANCIAL INSTRUMENTS
22 CONTROLLED ENTITIES
23 SEGMENT REPORTING
24 CONTINGENCIES AND COMMITMENTS
25 CASH FLOW INFORMATION
26 AUDITOR’S REMUNERATION
27 PARENT COMPANY DISCLOSURES
28 RELATED PARTY TRANSACTIONS
29 SHARE BASED PAYMENTS
30 APPLICATION OF NEW AND REVISED ACCOUNTING STANDARDS
31
EVENTS AFTER THE REPORTING DATE
42
42
46
46
47
48
49
49
50
51
51
51
52
52
53
53
55
57
57
57
59
60
60
61
61
62
62
63
64
67
68
41
NOTES TO FINANCIAL STATEMENTS 1. CORPORATE INFORMATION
The financial statements of MGC Pharmaceuticals Limited for the year ended 30 June 2020 were authorised for issue in
accordance with a resolution of Directors on 30 September 2020. These consolidated financial statements and notes represent
those of MGC Pharmaceuticals Limited (the “Company”) and Controlled Entities (the “consolidated group” or “Group”). MGC
Pharmaceuticals Limited is a for-profit company limited by shares incorporated and domiciled in Australia whose shares are
publicly traded on the Australian Securities Exchange (“ASX”). The nature of the operations and principal activities of the Group
are described in Note 23. The registered office of the Company is 1202 Hay Street, West Perth WA 6005.
2. SIGNIFICANT ACCOUNTING POLICIES
a) Statement of Compliance
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 as appropriate for ‘for-profit’ orientated entities.
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 (“IFRS”)
as issued by the International Accounting Standard Board (“IASB”). Material accounting policies adopted in the preparation of
these financial statements are presented below and they have been consistently applied unless otherwise stated.
b) Basis of Preparation
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 financial assets.
The preparation of the financial statements requires the use of certain critical accounting estimates. It also requires
management to exercise its judgement in the process of applying the consolidated group’s accounting policies. The areas
involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the
financial statements are disclosed in note 3.
The consolidated financial statements provide comparative information in respect of the previous period. The consolidated
financial statements present reclassified comparative information where required for consistency with the current year’s
presentation. The gain on disposal of subsidiary of $2,880,242 in the prior period has been reclassified into discontinued
operations in the comparative information presented in this report, to more accurately reflect the nature of the gain as relating
to the discontinued operation.
Financial report prepared on a going concern basis
The financial statements have been prepared on the going concern basis of accounting, which assumes the continuity of
normal business activities and the realisation of assets and settlement of liabilities in the ordinary course of business.
During the year ended 30 June 2020 the consolidated group incurred a loss from continuing operations of $18,769,799 (2019
(Restated): $11,053,913) and net operating cash outflows of $9,956,867 (2019: $6,354,210). Net losses for the period included
impairment expenses of $5,117,767 (2019: $2,011,542). At 30 June 2020, the consolidated group had net current assets of
$261,547 (2019: $1,538,776), including a cash and cash equivalents balance of $1,873,373 (2019: $2,354,086).
The consolidated group cashflow forecasts for the 12 months ending 30 September 2021 indicate that the ability of the group
to conduct its planned activities and continue as a going concern is dependent on having access to additional funding. The
Directors are satisfied that the going concern basis of preparation is appropriate due to the availability of funding under the
convertible securities financing agreement signed with Mercer Street Global Opportunity Fund, LLC (“the investor”) (“the
agreement”) and announced subsequent to year end. The first tranche of funding under the agreement of $2,250,000 was
received on 14 September 2020, as detailed at note 31, Events After the Reporting Date. At the discretion of both the Company
and the investor, up to a further $12,750,000 can be drawn down under the agreement via the issue of further convertible
notes, subject to certain operational milestones being achieved and the Company having sufficient capacity under Chapter 7
of the ASX Listing Rules to issue the convertible notes, or shareholder approval being obtained. In addition, the group has a
history of successfully raising capital to fund its operations
In the Directors’ opinion there are therefore reasonable grounds to believe that the consolidated group will be able to pay its
debts as and when they become due and payable, however further funding under the agreement is at the discretion of the
investor, which is not entirely within the control of the Company.
The consolidated financial statements have been prepared on a going concern basis which contemplates continuity of normal
42
ANNUAL REPORT FOR THE YEAR ENDED 30 JUNE 2020 business activities and realisation of assets and settlement of liabilities in the normal course of business. In the event that the
Group is unable to obtain additional funding, when required, there is significant uncertainty as to whether the Group will be
able to meet its debts as and when they fall due and thus continue as a going concern. The consolidated financial statements
do not include any adjustments relating to the recoverability and classification of the recorded asset amounts, nor to the
amounts or classification of liabilities that might be necessary should the Group not be able to continue as a going concern.
c) Principles of Consolidation
The consolidated financial statements comprise the financial statements of MGC Pharmaceuticals Ltd and its subsidiaries as
at 30 June 2020 (“the Group”).
Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and
has the ability to affect those returns through its power over the investee. Specifically, the Group controls an investee if and
only if the Group has:
• Power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities of the investee);
• Exposure, or rights, to variable returns from its involvement with the investee; and
• The ability to use its power over the investee to affect its returns.
When the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts
and circumstances in assessing whether it has power over an investee, including:
• The contractual arrangement with the other vote holders of the investee;
• Rights arising from other contractual arrangements; and
• The Group’s voting rights and potential voting rights.
The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to
one or more of the three elements of control. Consolidation of a subsidiary begins when the Group obtains control over the
subsidiary and ceases when the Group loses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary
acquired or disposed of during the year are included in the statement of comprehensive income from the date the Group gains
control until the date the Group ceases to control the subsidiary.
Profit or loss and each component of other comprehensive income (“OCI”) are attributed to the equity holders of the parent
of the Group and to the non-controlling interests, even if this results in the non-controlling interests having a deficit balance.
When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line
with the Group’s accounting policies. All intra-group assets and liabilities, equity, income, expenses and cash flows relating to
transactions between members of the Group are eliminated in full on consolidation.
A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction. If
the Group loses control over a subsidiary it, de-recognises the assets (including goodwill) and liabilities of the subsidiary;
de-recognises the carrying amount of any non-controlling interests; de-recognises the cumulative translation differences
recorded in equity; recognises the fair value of the consideration received; recognises the fair value of any investment retained;
recognises any surplus or deficit in profit or loss; and reclassifies the parent’s share of components previously recognised in
OCI to profit or loss or retained earnings, as appropriate, as would be required if the Group had directly disposed of the related
assets or liabilities.
d) Trade Receivables and other Debtors
Trade receivables and other debtors are all classified as financial assets held at amortised cost on the basis they are held
with the objective of collecting contractual cash flows and the cash flows relate to payments of principal and interest on the
principal amount outstanding.
The Group applies the simplified approach in measuring expected credit losses (ECLs) for trade receivables and other short-
term debtors, whereby an allowance for impairment is considered across all trade receivables and other short-term debtors,
regardless of whether a credit event has occurred, based on the expected losses over the lifetime of the receivable. Therefore,
the Group does not track changes in credit risk but instead recognises a loss allowance based on lifetime ECLs at each
reporting date. The Group’s exposure to bad debts is not significant and default rates have historically been very low. Trade
receivables are written off when there is no reasonable expectation of recovery, which may be indicated by the debtor failing to
engage in a payment plan or the debtor failing to make timely contractual payments.
e) Other Financial Assets
Financial assets are initially measured at fair value. Transaction costs are included as part of the initial measurement, except
for financial assets at fair value through profit or loss. They are subsequently measured at either amortised cost or fair value
43
NOTES TO FINANCIAL STATEMENTS depending on their classification. Classification is determined based on both the business model within which such assets are
held and the contractual cash flow characteristics of the financial asset unless, an accounting mismatch is being avoided.
Financial assets are derecognised when the rights to receive cash flows have expired or have been transferred and the
consolidated entity had transferred substantially all the risks and rewards of ownership. When there is no reasonable
expectation of recovering part, or all, of a financial asset, it’s carrying value is written off.
Financial assets at fair value through profit or loss
Financial assets not measured at amortised cost or at fair value through other comprehensive income are classified as
financial assets at fair value through profit or loss. Typically, such financial assets will be either: (i) held for trading, where they
are acquired for the purpose of selling in the short-term with an intention of making a profit, or a derivative; or (ii) designated
as such upon initial recognition where permitted. Fair value movements are recognised in profit or loss.
Impairment of Non‑Financial Assets
f)
Non-financial assets are tested for impairment when there is an indication that the asset may be impaired (which is assessed
at least each reporting date).Impairment exists when the carrying value of an asset or cash generating unit exceeds its
recoverable amount, which is the higher of its fair value less costs of disposal and its value in use. Fair value less costs of
disposal calculations are based on available data from binding sales transactions, conducted at arm’s length, for similar
assets or observable market prices less incremental costs of disposing of the asset. Value in use calculations are based on a
discounted cash flow (“DCF’) model, where relevant. The cash flows are derived from the budget for the next five years and do
not include restructuring activities that the Group is not yet committed to or significant future investments that will enhance
the performance of the assets of the CGU being tested.
g) Current and Non‑Current Classification
The Group presents assets and liabilities in the statement of financial position based on current/non-current classification.
An asset is current when it is:
• Expected to be realised or intended to be sold or consumed in the normal operating cycle;
• Held primarily for the purpose of trading;
• Expected to be realised within twelve months after the reporting period; or
• A Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months
after the reporting period.
All other assets are classified as non-current. A liability is current when it is:
• Expected to be settled in normal operating cycle;
• Held primarily for the purpose of trading;
• It is due to be settled within twelve months after the reporting period; or
• There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period.
The Group classifies all other liabilities as non-current.
Deferred tax assets and liabilities are classified as non-current assets and liabilities.
h) Government Grants
Government grants are recognised when there is a reasonable assurance that the grant will be received and all attached
conditions will be compiled with. When the grant relates to an expense item, it is recognised as income on a systematic basis
over the periods that the costs, which it is intended to compensate, are expensed. When the grant relates to an asset, it is
recognised as income in equal amounts over the expected useful life of the related asset.
i) Goods and Services Tax (GST)
Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is not
recoverable from the Australian Tax Office. In these circumstances the GST is recognised as part of the cost of acquisition
of the asset, or as part of an item of the expense. Receivables and payables in the statement of financial position are shown
inclusive of GST.
Cash flows are presented in the consolidated statement of cash flows on a gross basis, except for the GST component of
investing and financing activities, which are disclosed as operating cash flows.
j) Rounding of Amounts
4 4
ANNUAL REPORT FOR THE YEAR ENDED 30 JUNE 2020 The Company is a kind referred to in Legislative Instrument 2016/191 issued by the Australian Securities and Investment
Commission, relating to the “rounding off” of amounts in the financial statements. Amounts in the financial statements have
been rounded off in accordance with that class order to the nearest dollar.
New and amended Accounting Standards and Interpretations adopted by the Group
The Group has adopted all of the new and revised Accounting Standards and Interpretations issued by the Australian
Accounting Standards Board (the AASB) that are relevant to its operations and effective from 1 July 2019.
The adoption of these new and amended Accounting Standards and Interpretations did not result in any significant changes to
the Group’s accounting policies, with the exception of the adoption of AASB 16 Leases (“AASB 16”) (see below).
The Group has not early adopted any new or amended Accounting Standards or Interpretations issued but not yet effective.
Refer to note 30 for details.
Impact of adopting AASB 16
AASB 16 supersedes AASB 117 Leases, Interpretation 4 Determining whether an Arrangement contains a Lease, Interpretation
115 Operating Leases-Incentives and Interpretation 127 Evaluating the Substance of Transactions Involving the Legal Form of a
Lease. The new standard sets out the principles for the recognition, measurement, presentation and disclosure of leases and
requires lessees to recognise most leases on the balance sheet.
Before the adoption of AASB 16, the Group classified each of its leases (as lessee) at inception as either a finance lease or an
operating lease. For operating leases, the leased item was not capitalised and the lease payments were recognised in the profit
or loss on a straight-line basis.
The Group adopted AASB 16 from 1 July 2019 using the modified retrospective method of adoption. The Group has applied
practical expedients allowing the standard to be applied only to contracts that were previously identified as leases applying
AASB 117 and Interpretation 4 at the date of initial application. The Group also elected to apply practical expedients in relation
to lease contracts that, at the date of initial application, have a lease term of 12 months or less and do not contain a purchase
option (‘short-term leases’), and lease contracts for which the underlying asset is of low value (‘low-value assets’), and the
practical expedient to apply a single discount rate to a portfolio of leases with reasonably similar characteristics.
During the period, the Group entered into a long-term site lease agreement with Malta Industrial Parks, through its subsidiary
MGC Pharma (Malta) Property Limited. Further to this the Group also incurs rental on its Slovenian office and lab, both of
which are recognized as leases under AASB 16. Refer to note 16 for full details, including the impact on adoption.
On adoption of IFRS 16 Leases, set out below are the new accounting policies of the Group applied from 1 July 2019:
Group as Lessee
The Group assesses at contract inception whether a contract is, or contains, a lease. That is, if the contract conveys the right to
control the use of an identified asset for a period of time in exchange for consideration.
Right-of-use assets
The Group recognises right-of-use assets at the commencement date of the lease (i.e. the date the underlying asset is
available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and
adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities
recognised, initial direct costs incurred, and lease payments made at or before the commencement date less any lease
incentives received. Unless the Group is reasonably certain to obtain ownership of the leased asset at the end of the lease
term, the recognised right-of-use assets are depreciated on a straight-line basis over the shorter of its estimated useful life and
the lease term. Right-of-use assets are subject to impairment.
Lease liabilities
At the commencement date of the lease, the Group recognises lease liabilities measured at the present value of lease
payments to be made over the lease term. The lease payments include fixed payments (including in substance fixed payments)
less any lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to be
paid under residual value guarantees. The lease payments also include the exercise price of a purchase option reasonably
certain to be exercised by the Group and payments of penalties for terminating a lease, if the lease term reflects the Group
exercising the option to terminate. The variable lease payments that do not depend on an index or a rate are recognised as
expense in the period on which the event or condition that triggers the payment occurs. In calculating the present value of
lease payments, the Group uses the incremental borrowing rate at the lease commencement date if the interest rate implicit
in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect
45
NOTES TO FINANCIAL STATEMENTS the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is
remeasured if there is a modification, a change in the lease term, a change in the in-substance fixed lease payments or a
change in the assessment to purchase the underlying asset.
Short-term leases and leases of low-value assets
The Group applies the short-term lease recognition exemption to its short-term leases of office rental (i.e. those leases that
have a lease term of 12 months or less from the commencement date and do not contain a purchase option). It also applies
the lease of low-value assets recognition exemption to leases of office equipment that are considered of low value. Lease
payments on short-term leases and leases of low-value assets are recognised as expense on a straight-line basis over the
lease term.
3. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
The Directors evaluate estimates and judgements incorporated into the financial report based on historical knowledge and
best available current information. Estimates assume a reasonable expectation of future events and are based on current
trends and economic data, obtained both externally and within the Group. Judgements and estimates which are material to the
financial report are found at the following notes:
1) Share Based Payments (refer note 29).
2) Impairment Assessments for Non-current Assets (refer note 14).
3) Leases (refer note 16)
4) Research and Development Rebate (refer note 6)
COVID-19
In applying critical accounting estimates and judgements for the period, the Group has taken into account the impacts of the
ongoing COVID-19 pandemic, in particular in assessment of expected credit losses and impairment.
4. RESTATEMENT FOR PRIOR PERIOD ERROR
During the year, the Company re-assessed its accounting treatment of the initial asset acquisition of MGC UK and, following
careful consideration, determined that the performance shares issued as consideration payable for the net assets acquired
should have been accounted for as an equity-settled share-based payment under the requirements of AASB 2 Share Based
Payments (“AASB 2”). As an equity-settled share-based payment transaction the fair value of the consideration payable
should have been recognised directly in equity without subsequent remeasurement. In prior periods, the Group had incorrectly
recognised the performance shares as a financial liability which was subsequently carried at fair value through profit and loss.
The Company has therefore restated the relevant comparatives in the consolidated statements of financial position, statements
of comprehensive loss and statements of changes in equity, as detailed below. As a share-based payment, the transaction
should have originally been recognised and measured with reference to the fair value of the equity instruments granted
at the date control of the asset was obtained, estimated to be $1,300,000 as the Company determined that it could not
reliably measure the fair value of the asset obtained. Non-vesting conditions attached to the equity instruments have been
incorporated into the fair value at acquisition date.
During the prior financial year end these performance shares expired as it was determined that the milestone was not
achieved. In line with the terms and conditions pertaining to these performance shares, the performance shares were
consolidated and converted into one ordinary share.
46
ANNUAL REPORT FOR THE YEAR ENDED 30 JUNE 2020 Impact of restatements
Consolidated Statements of Financial Position at 30 June 2019 and beginning of comparative period
Share based payment reserve
Accumulated losses
Total equity
Share based payment reserve
Accumulated losses
Current liabilities
Total equity
30-Jun-19
Restated
$
(4,556,418)
42,764,829
10,798,173
1-Jul-18
Restated
$
(4,685,229)
33,060,342
(960,575)
12,690,784
Adjustment
$
(1,300,000)
1,300,000
-
Adjustment
$
(1,300,000)
(4,970,000)
6,270,000
-
Consolidated Statement of Profit or Loss and Other Comprehensive Income for the comparative period
Gain on re-measurement of performance shares
Net loss for the period from continuing activities
30 June 2019
Restated
$
-
8,173,671
Adjustment
$
(6,270,000)
6,270,000
30-Jun-19
As previously
disclosed
$
(3,256,418)
41,464,829
10,798,173
1-Jul-18
As previously
disclosed
$
(3,385,229)
38,030,342
(7,230,575)
12,690,784
30-Jun-19
As previously
disclosed
$
(6,270,000)
1,903,671
As a result of the above adjustment, loss per share has been restated to (0.71) cents per share for the twelve months ended
30 June 2019 (previously disclosed: earnings per share of (0.19) cents per share).
5. NON‑CURRENT ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS
Towards the end of the financial year MGC Pharma signed an acquisition agreement to sell 100% interest in subsidiary MGC
Nutraceuticals to US OTC publicly traded company, Onassis Holdings Corp. (OTC: “ONSS”). The sale is expected to complete
in Q4 of 2020 following a capital raising by Onassis Holdings Corp.
During the financial year MGC Nutraceuticals has been classified as a disposal group held for sale and as a discontinued operation.
The result of MGC Nutraceuticals for the period was as follows (MGC Nutraceuticals did not have operations in the prior period):
Revenue
Expenses
Pre-tax loss
Income tax expense/benefit
30 June 2020
148,544
(748,971)
(600,427)
-
47
NOTES TO FINANCIAL STATEMENTS Assets and liabilities of MGC Nutraceuticals d.o.o classified as held for sale:
Non-current assets classified as held for sale
Cash and cash equivalents
Trade and other debtors
Inventory
Liabilities directly associated with non-current assets classified held for sale
Trade and other payables
Deferred revenue
Net assets of disposal group
30-Jun-20
$
13,252
155,640
193,765
362,657
43,841
65,413
109,254
253,403
In the prior reporting period, the discontinued operation presented related to the Group’s disposal of its subsidiary MGC Derma d.o.o.
6. REVENUE AND OTHER INCOME
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
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 initially recognised as deferred revenue in the form of a separate refund liability.
Revenue from sale of pharma products
Revenue from the sale of cannabinoids is recognised when the goods have been delivered, at which point the customer
obtains control of the goods.
Revenue from sale of non-pharma products
Revenue from the sales of cosmetics is recorded when the products have been delivered to the consumer, signifying transfer
of ownership and the point the customer obtains control of the goods.
Interest revenue
Interest revenue is recognized using the effective interest rate method.
a) Revenue from contracts with customers
Pharma sales
Non-pharma sales
b) Finance income
Interest income calculated using the effective interest rate method
c) Other operating income
Refund on research and development claim1
Government grants received
48
30-Jun-20
$
1,197,130
882,039
2,079,169
12,336
12,336
429,401
89,450
518,851
30-Jun-19
$
36,273
619,964
656,237
201,850
201,850
327,565
-
327,565
ANNUAL REPORT FOR THE YEAR ENDED 30 JUNE 2020
1During the year ended 30 June 2020, the Group received a research and development rebate following lodgement of a claim
for its financial year ended 30 June 2019.
Research and development rebate
Research and development rebates are accounted for as a government grant and recognised as income when there is
reasonable assurance that the rebate will be received. Management judgement is required to assess that the rebate meets
the recognition criteria and in determining the measurement of the rebate including the assessment of the eligibility and
appropriateness of the apportionment of eligible expenses based on research and development activities undertaken by the
consolidated entity and taking into consideration relevant legislative requirements.
Further, the Research and Development Tax Incentive Offset program in Australia is a self-assessment regime and there is a
four-year period from the date of lodgement where the claim may be subject to a review by the Australian Taxation Office or
AusIndustry, with any amounts over-claimed being potentially subject to full repayment with interest and penalties.
7. COST OF SALES AND EXPENSES
a) Cost of sales
Cost of goods sold - Pharma
Cost of goods sold – Non-pharma
b) Administrative expenses
Corporate costs
Professional and consultancy fees
Directors’ fees
Employee benefit expenses
Employee share based payment expense
Travel expenses
Marketing expenses
Depreciation
Office and administrative expenses
c) Other operating expenses
Unrealised foreign exchange
Realised foreign exchange
Laboratory operation expenses
Research expense
d) Impairment expense
Write off/impairment of intangible assets (note 14)
e) Finance cost
Finance costs
30-Jun-20
$
1,242,311
662,193
1,904,504
303,681
1,819,532
1,178,114
485,412
854,915
399,934
562,125
481,130
524,304
6,609,147
69,896
80,506
3,285,946
2,084,208
5,520,556
5,117,767
5,117,767
135,582
135,582
30-Jun-19
$
65,034
291,608
356,642
235,527
1,025,476
1,194,852
537,906
537,004
511,689
574,983
259,744
758,122
5,635,303
2,486
5,070
2,040,128
1,663,319
3,711,003
2,011,542
2,011,542
444
444
8. EMPLOYEE EXPENSES
Liabilities for wages and salaries, including non-monetary benefits, annual leave and accumulating sick leave expected to be
settled within 12 months after the period end in which the employees render the related service are recognised in respect of
employees’ services up to the end of the reporting period and are measured at the amounts expected to be paid when the
liabilities are settled. The liability for annual leave and accumulating sick leave is recognised in the provision for employee
benefits. All other short-term employee benefit obligations are presented as payables.
Wages and salaries
Employee share-based payment expense (note 29)
30-Jun-20
$
485,412
854,915
1,340,327
30-Jun-19
$
537,906
537,004
1,074,910
49
NOTES TO FINANCIAL STATEMENTS 9. INCOME TAX
The income tax expense for the period is the tax payable on the current period’s taxable income based on the applicable
income tax rate for each jurisdiction adjusted by changes in the deferred tax assets and liabilities attributable to temporary
differences and to unused tax losses.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the
reporting period in the countries where the company’s subsidiaries and associates operate and generate taxable income.
Deferred income tax is provided on all temporary differences at the statement of financial position date, arising between the
tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements, and are recognised for
all taxable temporary differences,
• Except where the deferred income tax liability arises from the initial recognition of an asset or liability in a transaction that
is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or
loss; and
• In respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint
ventures, except where the timing of the reversal of the temporary differences can be controlled and it is probable that the
temporary differences will not reverse in the foreseeable future.
Deferred income tax assets are recognised for all deductible temporary differences, the carry-forward of unused tax credits and
unused tax losses. Deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against
which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilised:
• Except where the deferred income tax asset relating to the deductible temporary difference arises from the initial
recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction,
affects neither the accounting profit nor the taxable profit or loss; and
• In respect of taxable temporary differences associated with investments in subsidiaries, associates and interests and joint
ventures, deferred tax assets are only recognised to the extent that it is probable that the temporary differences will reverse
in the foreseeable future extent that it is probable that the temporary differences can be utilised.
Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset
is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the
statement of financial position date.
Income taxes relating to items recognised directly in equity are recognised in equity and not in the statement of profit or loss
and other comprehensive income.
Tax Consolidation
The Company and its wholly-owned Australian subsidiaries have formed an income tax consolidated group under the tax
consolidated legislation. Each entity in the Group recognises its own current and deferred tax assets and liabilities. Such taxes
are measured using the ‘stand-alone taxpayer’ approach to allocation. The Group notified the Australian Taxation Office that
it had formed an income tax consolidated group to apply from 21 October 2005. The tax consolidated group has entered a tax
funding agreement whereby each company in the Group contributes to the income tax payable by the Group in proportion to
their contributions to the Group’s taxable income.
The Group has carried forward tax losses which have not been recognised as deferred tax assets as it is not considered
sufficiently probable that these losses will be recouped by means of future profits taxable in the relevant jurisdictions.
50
ANNUAL REPORT FOR THE YEAR ENDED 30 JUNE 2020 a) Major components of income tax expense for the periods presented:
Current tax
Deferred tax
Income tax expense reported in the Statement of Comprehensive Income
b) The prima facie tax on (loss) from continuing operations and discontinued
operations before income tax is reconciled to the income tax as follows:
Prima facie tax payable on (loss) from continuing operations and discontinued
operations before income tax at 27.5% (2019: 27.5%)
Adjustments due to permanent differences
Deferred tax assets not brought to account
Under/over provision of prior year
Income tax expense/(benefit)
Deferred Tax Assets Not Brought to Account, the benefits of which will only
be realised if the conditions for deductibility set out in note above
Tax Losses
Temporary Differences
Total
30-Jun-20
$
30-Jun-19
$
-
-
-
-
-
-
(5,326,812)
483,339
2,732,232
-
-
(515,998)
(1,488,334)
2,031,647
27,315
27,315
6,164,503
428,686
6,593,189
4,747,381
312,579
5,059,960
10. CASH AND CASH EQUIVALENTS
For the purpose of presentation in the statement of cash flows, cash and cash equivalents includes cash on hand, deposits
held at call with financial institutions, other short-term, highly liquid investments with original maturities of three months or less
that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value, and
bank overdrafts.
Cash at bank
30-Jun-20
$
1,873,373
1,873,373
30-Jun-19
$
2,354,086
2,354,086
11. INVENTORY
Inventories are stated at the lower of cost and net realisable value. Costs of inventories are determined on a first-in-first-out
basis. Net realisable value represents the estimated selling price for inventories less all estimated costs of completion and
costs necessary to make the sale.
At net realisable value
Finished goods
Work in progress
At cost
Raw materials
30-Jun-20
$
30-Jun-19
$
92,511
18,786
290,940
402,237
21,050
-
117,750
138,800
12. TRADE AND OTHER RECEIVABLES
Trade receivables are generally due for settlement between thirty (30) and ninety (90) days from the date of recognition. They
are presented as current assets unless collection is not expected for more than 12 months after reporting date.
Current
Trade receivables
Other receivables
GST/VAT receivable
Short term loan to third party
Other receivables are non-interest bearing and are generally on terms of 30 days.
30-Jun-20
$
-
214,209
254,297
53,178
521,684
30-Jun-19
$
271,022
710,298
158,632
-
1,139,952
51
NOTES TO FINANCIAL STATEMENTS 13. PLANT AND EQUIPMENT
Plant and equipment are stated at historical cost less accumulated depreciation and impairment. Historical cost includes
expenditure that is directly attributable to the acquisition of the items.
Depreciation is calculated on a straight-line basis to write off the net cost of each item of plant and equipment over their
expected useful lives as follows:
Plant and equipment
3-5 years
The residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each reporting date.
An item of property, plant and equipment is derecognised upon disposal or when there is no future economic benefit to the
Group. Gains and losses between the carrying amount and the disposal proceeds are taken to profit or loss. Any revaluation
surplus reserve relating to the item disposed of is transferred directly to retained profits.
Plant and equipment*
• gross carrying amount at cost
• accumulated depreciation
Construction in progress
• gross carrying amount at cost
• accumulated depreciation
30-Jun-20
$
1,964,672
(905,455)
1,059,217
1,133,757
-
1,133,757
30-Jun-19
$
1,814,706
(576,987)
1,237,719
232,760
-
232,760
Total property, plant and equipment
2,192,974
1,470,479
*Plant and equipment primarily comprises laboratory fixtures and fittings and equipment.
Property, plant and equipment movement
Opening balance at 1 July
Additions
Disposal
Disposal on derecognition of subsidiary
Depreciation
Foreign currency translation
Impairment testing
Slovenia
30-Jun-20
$
1,470,479
1,120,963
(28,830)
-
(320,943)
(48,695)
2,192,974
30-Jun-19
$
1,334,492
343,566
(21,365)
(44,219)
(259,744)
117,749
1,470,479
The Group did not identify any indicators of impairment in relation to the Slovenia CGU.
Malta
The Group’s plant and equipment balance in Malta consisted of construction in progress, relating to design and engineering
work for its planned Malta operations. The temporary delay in the project as disclosed in note 16 was identified as an
impairment trigger during the period. The Group determined based on its internally developed feasibility estimates for the
project that no impairment existed at 30 June 2020.
14. 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 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. 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 asset. The useful lives of finite life intangible assets are reviewed annually. Changes in the
expected pattern of consumption or useful life are accounted for prospectively by changing the amortisation method or period.
52
ANNUAL REPORT FOR THE YEAR ENDED 30 JUNE 2020 Licenses/permit costs
The intangible asset of the Group related to a license to grow industrial cannabis in Slovenia, which was subject to an annual
renewal process. As the license expired during the current period and was not renewed on the basis that it is not required for
the Group’s current operations in Slovenia, the intangible asset value was written off in full. A write-off expense of $5,038,064
was taken to the statement of profit or loss.
Intangible assets – Licence in Slovenia
Opening balance at 1 July
• write-off/provision for impairment
• other
• foreign currency translation
30-Jun-20
$
5,034,309
(5,038,064)
-
3,755
-
30-Jun-19
$
7,082,904
(2,011,542)
(38,942)
1,889
5,034,309
15. PAYABLES AND DEFERRED REVENUE
These amounts represent liabilities for goods and services provided to the Group prior to the end of the financial year, which
remain unpaid at year end. The amounts are unsecured and are usually paid within 60 days of recognition. They are recognised at
fair value on initial recognition and subsequently measured at amortised cost, using the effective interest rate method.
a) Current trade and other payables
Trade payables
Accruals
Other payables
b) Deferred revenue
Deferred revenues - current
30-Jun-20
$
2,003,677
556,205
145,936
2,705,818
100,440
100,440
30-Jun-19
$
1,164,819
333,036
95,852
1,593,707
587,688
587,688
Deferred revenue represents the Group’s obligation to transfer goods or services to a customer for which the Group has
received consideration at 30 June 2020. Revenue recognised in the current period relating to opening deferred revenue
totalled $535,656.
Refer to note 20 for details on management of financial risk.
16. LEASES
During the period the Group entered into a long-term lease for a period of 65 years for the use of the land for the construction
of the Malta facility. The Group also has leases for office and lab rental. The average incremental borrowing rate applied,
determined based on market comparative inputs, adjusted for the Group’s circumstances was 7.4%.
Below are the carrying amounts of right-of-use assets recognised for the period:
Right-of-use assets
Opening balance at 1 July on adoption of AASB 16
Additions of right-of-use assets in period
Depreciation of right-of-use assets
As at 30 June 2020
30-Jun-20
$
185,908
1,805,656
(160,187)
1,831,377
53
NOTES TO FINANCIAL STATEMENTS Below are the carrying amounts of lease liabilities for the period:
Lease liabilities
Opening balance at 1 July on adoption of AASB 16
Additions to lease liabilities
Interest on lease liabilities
Lease payments
As at 30 June 2020
Current
Non-current
Total lease liability
30-Jun-20
$
185,908
1,805,656
130,637
(222,977)
1,899,224
53,924
1,845,300
1,899,224
The following amounts were recognised in the consolidated statement of profit or loss and comprehensive income for the period:
Depreciation on right-of-use asset
Interest expense on lease liabilities
Expense related to short-term leases
Total amounts recognised in profit or loss
The following are amounts recognised in the consolidated statement of cash flows:
Total cash outflows for leases
30-Jun-20
$
160,187
130,637
183,611
474,435
30-Jun-20
$
314,248
The following is a reconciliation of the Group’s operating lease commitments under AASB 117 at 30 June 2020 to the lease
liability recognized at 1 July 2020 on transition to AASB 116.
Operating lease commitments at 30 June 2019
Less: Short-term leases
Less: Impact of discounting
Lease liabilities recognised at 1 July 2019
Malta long-term lease agreement
$
268,468
(70,939)
(11,621)
185,908
As disclosed in note 24, the Malta lease agreement included the following obligations:
• The Group was to commence construction of buildings on the site to the value of not less than EUR 2.7 million within three
months of receiving the necessary permits, and complete their construction within 18 months.
• Over a period of 3 years from the date of the deed (8 August 2019), the Group is to invest the total sum of EUR 6 million in
improvements on the site, plant, machinery and equipment.
To the extent that these or other conditions under the lease agreement are not met, the lessor may issue a notice of breach,
30 days after which it may elect to begin imposing a penalty of EUR 12,000 per day that the breach persists, or may at its
discretion terminate the lease agreement. Due to circumstances outside of the Group’s control, including the impacts of the
COVID-19 pandemic and associated travel restrictions, construction on the site was not able to commence within 3 months of
the permits being granted. At 30 June 2020, and to the date of this report, the Group has not received a notice of breach from
the lessor.
54
ANNUAL REPORT FOR THE YEAR ENDED 30 JUNE 2020 17. CONTRIBUTED EQUITY AND RESERVES
a) Contributed equity
Issued and paid up capital is recognised at the fair value of the consideration received by the Group. Any transaction costs
arising on the issue of ordinary shares are recognised directly in equity as a reduction of the proceeds received.
30-Jun-20
NUMBER
30-Jun-19
NUMBER
1,575,612,348
-
1,575,612,348
1,203,048,174
10,335,511
1,213,383,685
30-Jun-20
$
60,149,457
-
60,149,457
30-Jun-19
$
49,133,819
-
49,133,819
Ordinary shares on issue, fully paid
VHL shares
Reconciliation of movement in share capital
30 June 2020
Opening balance of 1 July 2019
Exercise of listed options – 5 Jul 2019
Issue of capital raising placement shares – 29 Aug 2019
Conversion of M3 performance rights – 9 Sep 2019
Issue of shares to vendor of Panax s.r.o – 9 Sep 2019
Issue of priority offer placement shares – 16 Sep 20191
Release of VHL Shares – 12 November 2019
Issue of Shares as part consideration for services – 29 Nov 20192
Issue of capital raising placement shares – 26 Feb 2020
Issue of share purchase plan – 18 Mar 2020
Issue of capital raising placement shares – 4 May 2020
Issue of shares in lieu of cash payment – 4 May 2020
Less: costs of issue
Closing balance at 30 June 2020
30 June 2019
Opening balance of 1 July 2018
Conversion of Milestone 1 Performance Rights – 18 Jul 2018
Conversion of Milestone 2 Performance Rights – 18 Jul 2018
Release of VHL shares – 18 Jul 2018
Release of VHL shares – 5 Dec 2018
Conversion of Performance Shares – 19 Feb 2019
Exercise of listed options – 21 June 2019
Less: costs of issue
Closing balance at 30 June 2019
No. Of Shares
1,213,383,685
Issue Price
Amount
49,133,819
87,426
118,750,000
3,638,000
5,850,875
25,001,000
-
4,411,765
31,250,000
42,313,301
129,630,000
1,296,296
1,575,612,348
0.065
0.04
0.041
0.04
0.04
0.06974
0.034
0.032
0.027
0.027
0.027
5,683
4,750,000
149,158
234,035
1,000,040
720,773
150,000
1,000,000
1,142,459
3,500,010
35,000
(1,671,520)
60,149,457
No. Of Shares
1,202,830,412
Issue Price
Amount
48,440,990
6,000,000
4,000,000
-
-
7
553,266
1,213,383,685
0.048
0.048
0.069
0.069
0.040
0.065
288,000
192,000
24,237
161,578
-
35,962
(8,948)
49,133,819
1. In line with agreement held with the minority shareholder of the Group’s subsidiary, Panax s.r.o, 5,850,875 shares were issued
following the exercise of an option and a further 6.67% interest in the subsidiary was acquired, resulting in a total holding of
86.67% (2019: 80%).
2. Pursuant to agreement with Cannvalate Pty Ltd, it was agreed that 50% of their services would be paid as ordinary shares,
valued using a 30-day VWAP. During the period 4,411,765 shares were issued at $0.0343/share for services rendered during
the year.
Ordinary shares participate in dividends and the proceeds on winding up of the parent entity in proportion to the number of
shares held.
At the shareholders’ meetings each ordinary share is entitled to one vote when a poll is called, otherwise each shareholder has
one vote on a show of hands. Ordinary shares have no par value.
55
NOTES TO FINANCIAL STATEMENTS Capital risk management
The Group’s objective when managing capital is to safeguard their ability to continue as a going concern, so that they can
continue to provide returns to shareholders and benefits to other stakeholders and to maintain an optimal capital structure to
reduce the cost of capital.
In order to maintain or adjust the capital structure the Group may adjust the amount of dividends paid to shareholders, return
capital to shareholders, issue new shares or sell assets to reduce debt.
Consistent with others in the industry, the Group manages its capital by assessing the Group’s financial risk and adjusts its
capital structure in response to changes in these risks and in the market. These responses include the management of debt
levels, distributions to shareholders and share issues.
There have been no changes in the strategy adopted by management to control the capital of the Group since the prior year.
The Group is not subject to any externally imposed capital requirements.
b) Reserves
i. Share based payment reserve
Opening balance at 1 July – as previously stated
Deferred consideration restatement
Balance at 1 July – restated
Conversion of performance rights (note 29)
Release of VHL shares (note 17)
Share based payment vesting expense (note 29)
ii. Foreign currency translation
Functional and Presentation Currency
30-Jun-20
$
4,556,418
-
4,556,418
(149,158)
(720,773)
1,694,417
5,380,904
30-Jun-19
$
3,385,229
1,300,000
4,685,229
(480,000)
(185,815)
537,004
4,556,418
Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary
economic environment in which the entity operates (“the functional currency”). The consolidated financial statements are
presented in Australian dollars, which is the Company’s functional and presentation currency.
Transactions and Balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the
transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation
at period-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the
statement of profit and loss and other comprehensive income, except when they are attributable to part of the net investment
in a foreign operation.
Foreign exchange gains and losses that relate to borrowings are presented in the statement of comprehensive income, within
finance costs. All other foreign exchange gains and losses are presented in the statement of profit or loss on a net basis within
other income or other expenses.
Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date
when the fair value was determined. Transaction differences on assets and liabilities carried at fair value are reported as part of
the fair value gain or loss.
Group companies
On consolidation, the assets and liabilities of foreign operations are translated into Australian dollars at the rate of exchange
prevailing at the reporting date and their statements of profit or loss are translated at exchange rates prevailing at the dates
of the transactions. The exchange differences arising on translation for consolidation purposes are recognised in other
comprehensive income. On disposal of a foreign operation, the component of other comprehensive income relating to that
particular foreign operation is recognised in profit or loss.
Any goodwill arising on the acquisition of a foreign operation and any fair value adjustments to the carrying amounts of assets
and liabilities arising on the acquisition are treated as assets and liabilities of the foreign operation and translated at the spot
rate of exchange at the reporting date.
56
ANNUAL REPORT FOR THE YEAR ENDED 30 JUNE 2020
Opening balance at 1 July
Currency translation differences arising during the year
Derecognition upon disposal of subsidiary
30-Jun-20
$
33,928
51,356
-
85,284
30-Jun-19
$
136,700
(127,067)
24,295
33,928
Exchange differences arising on translation of the foreign controlled entities are taken to the foreign currency translation
reserve as described above. The reserve is recognised in profit and loss when the net investment is disposed of.
18. DIVIDENDS
No dividends have been paid or provided during the year.
19. EARNINGS PER SHARE
Basic earnings per share
Basic earnings per share is calculated by dividing the net profit or loss after income tax attributable to equity holders of the
Company, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary
shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the year.
Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the
post income tax effect of interest and other financing costs associated with dilutive potential ordinary share and the weighted
average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares.
Earning per share
Basic loss per share (cents)
Diluted loss per share (cents)
Reconciliation of earnings to profit or loss
(Loss) used in calculating basic and diluted EPS
Earnings per share for continuing operations
Basic loss per share (cents)
Diluted loss per share (cents)
Reconciliation of earnings to profit or loss
(Loss) used in calculating basic and diluted EPS
30-Jun-20
(1.40)
(1.40)
30-Jun-19
restated
(0.71)
(0.71)
$
(19,370,226)
$
(8,623,856)
(1.36)
(1.36)
(0.71)
(0.71)
$
(18,769,799)
$
(11,053,913)
Number
Number
Weighted average number of ordinary shares and potential ordinary shares
Weighted average number of ordinary shares used in calculating basic and
diluted EPS
1,382,194,646
1,209,142,408
At 30 June 2020, the Company had on issue 20,000,000 performance rights (2019: Nil) and 184,334,538 options (2019:
45,900,000). Given the Group made a loss during the current financial year, these potential shares are considered non-dilutive
and therefore not included in the diluted EPS calculation.
Refer to note 31 for details of post-balance date events, including the issue of 2,475,000 convertible notes with a face value of
$1 each on 10 September 2020.
20. FINANCIAL RISK MANAGEMENT
The Group’s financial instruments consist mainly of cash at bank, payables and receivables.
The Group has not formulated any specific management objectives and policies in respect to debt financing, derivatives or
hedging activity. As a result, the Group has not formulated any specific management objectives and policies in respect to
57
NOTES TO FINANCIAL STATEMENTS these types of financial instruments. Should the Group change its position in the future, a considered summary of these
policies will be disclosed at that time.
The Group’s current exposure to the risk of changes in the market is managed by the Board of Directors.
Market risks
The Group is exposed to a variety of financial risks through its financial instruments for example, interest rate risk, liquidity risk
and credit risk, as well as foreign currency risk.
Interest rate risk
At reporting date, other than leases, the Group does not have long term borrowings and its exposure to interest rate risk is
assessed as low. The risk monitors its interest rate risk through sensitivity analysis, as outlined below.
The consolidated group’s exposure to interest rate risk which is the risk that a financial instrument’s value will fluctuate as a
result of changes in market interest rates and the effective weighted average interest rates on classes of financial assets of the
Group are summarised in the following tables:
30 June 2020
Financial assets
Cash and cash equivalents
Trade and other receivables
Financial liabilities
Other payables and sundry accruals
Lease liabilities
30 June 2019
Financial assets
Cash and cash equivalents
Trade and other receivables
Financial liabilities
Other payables and sundry accruals
Floating
interest rate 1 Year or less
$
$
Over 1 to 5
years
$
Non-interest
bearing
$
Remaining
contractual
maturities
$
Weighted
average
interest rate
%
1,873,373
-
1,873,373
1,873,373
-
1,873,373
-
-
-
-
468,506
468,506
1,873,373
468,506
2,341,879
0.65%
-
1,899,224
1,899,224
-
53,924
53,924
-
1,845,300
1,845,300
2,705,818
-
2,705,818
2,705,818
1,899,224
4,605,042
2,354,086
-
2,354,086
2,354,086
-
2,354,086
-
-
-
-
-
-
-
-
-
-
1,139,952
1,139,952
2,354,086
1,139,952
3,494,038
1,593,707
1,593,707
1,593,707
1,593,707
5.83%
At 30 June 2020, a reasonably possible change in interest rates would not have resulted in a material change to the Group’s
post-tax loss or net assets for the year.
Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s approach
to managing liquidity is to ensure, as far as possible, that it will always have sufficient cash to meet its liabilities when
due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s
reputation. The Group monitors forecast cash flows on regular basis to manage its liquidity risk.
Credit risk
Management has assessed the credit risk exposure as minimal at reporting date. Credit risk arises from exposure to customers
deposits with banks and other receivables. Management monitors its exposure to ensure recovery and repayment of
outstanding amounts. Cash deposits are only made with reputable banking institutions.
Foreign currency risk
The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily
with respect to the GBP (£), Euro (€) and CZK (Kč).
Foreign exchange risk arises from future commercial transactions and recognised assets and liabilities denominated in a
currency that is not the entity’s functional currency. The risk is measured using cash flow forecasting.
58
ANNUAL REPORT FOR THE YEAR ENDED 30 JUNE 2020 The consolidated entity has not entered into any derivative financial instruments to hedge such transactions and anticipated
future receipts or payments that are denominated in a foreign currency. The board manages the purchase of foreign currency
to meet operational requirements.
The consolidated entity’s exposure to foreign currency risk at the reporting date was not material. A reasonably possible
change in the value of the Australian dollar against the above currencies at 30 June would not have had a material effect on
the Group’s post-tax loss or net assets.
21. FAIR VALUE MEASUREMENT OF FINANCIAL INSTRUMENTS
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair
value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:
• Level 1 — Quoted (unadjusted) market prices in active markets for identical assets or liabilities
• Level 2 — Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or
indirectly observable
• Level 3 — Valuation techniques for which the lowest level input that is significant to the fair value measurement is
unobservable
For assets and liabilities that are recognised in the financial statements on a recurring basis, the Group determines whether
transfers have occurred between Levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is
significant to the fair value measurement as a whole) at the end of each reporting period.
The following table presents the Group’s financial assets and liabilities measured and recognised at fair value.
30 June 2020
Financial assets
Other financial assets (equity investments) – opening
balance
Fair value movement in the period
Closing balance at 30 June 2020
30 June 2019
Financial assets
Financial assets at fair value through profit or loss
Fair value movement in the period
Closing balance at 30 June 2019
Level 1
$
Level 2
$
Level 3
$
Total
$
53,429
60,714
114,143
Level 1
$
72,858
(19,429)
53,429
-
-
-
2,718,375
(2,158,778)
559,597
2,771,804
(2,098,064)
673,740
Level 2
$
Level 3
$
Total
$
-
-
-
3,199,973
(481,598)
2,718,375
3,272,831
(501,027)
2,771,804
a) Valuation techniques used to derive Level 1 fair values
The fair value of financial instruments recognised under Level 1 are measured based on the active market value, determined in
this case by the value a third party is willing to pay for the assets (refer note 21).
b) Valuation techniques used to derive Level 3 fair values
The fair value of financial instruments that are not traded in an active market are determined using valuation techniques.
These valuation techniques maximise the use of observable market data where it is available and rely as little as possible on
entity specific estimates.
If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3. A
significant unobservable input to the valuation of the Group’s investment in an unlisted entity classified within level 3 of the
fair value hierarchy was information obtained from the investee in relation to the value per share of the most recent capital
raising announced by the entity, which was CAD 0.21/share ($0.22/share). A 10% increase or decrease in the value per share
of the unlisted entity would have a corresponding fair value movement on the carrying value of the Group’s investment. The
classification of the investment has been amended from level 2 to level 3 in the current period and the comparative has been
reclassified to conform to the current period presentation.
59
NOTES TO FINANCIAL STATEMENTS c) Fair value of other financial instruments
The Group also has a number of financial instruments that are not measured at fair value in the balance sheet. The carrying
value of cash, trade receivables and payables is a reasonable approximation of their fair values due to their short-term nature.
22. CONTROLLED ENTITIES
The consolidated financial statements of the Group include:
Country of
incorporation
Percentage
Owned (%)*
30-Jun-20
30-Jun-19
Parent Entity:
MGC Pharmaceuticals Limited
Subsidiaries of MGC Pharmaceuticals Limited:
MGC Pharma (UK) Limited
MGC Research (Aus) Pty Ltd
Subsidiaries of MGC Pharma (UK) Limited:
MGC Pharmaceuticals d.o.o
Panax Pharma s.r.o1
MGC Nutraceuticals d.o.o2
MGC Pharma (Malta) Holdings Limited
MGC Pharma (Malta) R&D Limited
Subsidiaries of MGC Pharma (Malta) Holdings Limited
MGC Pharma (Malta) Property Limited1
MGC Pharma (Malta) Operations Limited1
Australia
UK
Australia
Slovenia
Czech Republic
Slovenia
Malta
Malta
Malta
Malta
100
100
100
87
100
100
100
100
100
100
100
100
80
100
100
-
100
100
* Percentage of voting power in proportion to ownership
1 During the year shares were issued following the exercise of an option and a further 6.67% interest in the subsidiary was
acquired (refer note 17)
2 Refer note 5 for further details
23. SEGMENT REPORTING
The Group identifies operating segments on the basis of internal reports about components of the Group that are regularly reviewed
by the chief operating decision maker (“CODM”) in order to allocate resources to the segments and to assess their performance.
In prior periods, the Group reported two operating segments based on its geographical locations which were determined to be:
• Australia – corporate and administrative function
• Slovenia – production and supply of medicinal cannabis products
During the current period, the Group has reassessed its operating segments and has determined that the Group’s operations
comprise one segment, being production and supply of medicinal cannabis products, on the basis that the Group’s CODM
reviews financial information in relation to operating results at the whole of Group level.
Geographic information on the Group’s revenue by location of operations for the period and non-current assets at 30 June
2020 is as follows:
30 June 2020
Sales revenues
Total non-current assets
30 June 2019
Sales revenues
Total non-current assets
Malta
$
Slovenia
$
-
2,957,260
1,938,4281
1,009,824
Australia
$
140,741
-
-
232,760
652,5951
1,148,808
3,642
-
1 Two external customers individually contributed greater than 10 per cent of Group revenue ($1,056,390 and $573,772 respectively)
(30 June 2019: one external customers, $437,203)
60
ANNUAL REPORT FOR THE YEAR ENDED 30 JUNE 2020 24. CONTINGENCIES AND COMMITMENTS
a) Commitments
No later than one year
Later than one year and not later than five years
Total commitments
30-Jun-20
$
779,070
536,023
1,315,093
30-Jun-19
$
1,143,460
202,214
1,345,674
Commitment mainly related to management recharges, as well as Research and Development Agreements held with Royal
Melbourne Institute of Technology, for both the Breeding and Pre-clinical Research and the Library of Cannabinoids Project, in
addition to the University of Notre Dame CogniCann® Clinical Trial.
Malta long-term lease – construction commitments
Further to the approval of the Company’s planned project in Malta, following its initial Letter of Intent with Malta Enterprise in
the prior financial year, the Company agreed to invest a minimum of €6,000,000 in improvements to site, plant, machinery and
equipment within 3 years from the date of allocation of the site.
On allocation of a site, the Company also entered into a long-term lease with Malta Industrial Parks (refer note 9 for further
details). The Emphyteutical lease requires that the allocated site is used solely for industrial purposes and that the erection
of proper, solid buildings costing no less than €2,700,000, net of value added tax, is to commence within 3 months, but be
completed no later than eighteen months from the date all permits by law are issued.
25. CASH FLOW INFORMATION
Reconciliation of Cash Flow from Operations with Loss after Income Tax
(Loss) after income tax
Cash flows excluded from loss attributable to operating activities
Non-cash flows in loss
Depreciation and amortisation
Impairment expense
Share based payment expense
(Gain)/loss revaluation of investment held
Discontinued operations
Lease liability
Exchange differences
Changes in assets and liabilities, net of the effects of purchase of subsidiaries
Decrease / (Increase) in inventory
(Increase) in trade and other receivables
Increase in trade payables and accruals
Cash flow from operations
30-Jun-20
$
30-Jun-19
Restated
$
(19,370,226)
(8,623,856)
481,130
5,117,767
854,916
2,098,064
600,427
(183,611)
(82,205)
(263,437)
271,912
518,396
(9,956,867)
259,744
2,011,542
537,004
501,027
(2,430,057)
-
478,706
573,515
(294,966)
633,131
(6,354,210)
61
NOTES TO FINANCIAL STATEMENTS 26. AUDITOR’S REMUNERATION
Fees to Ernst & Young (Australia):
Fees for auditing the statutory financial report of the parent covering the group
and auditing the statutory financial reports of any controlled entities
Total fees to Ernst & Young (Australia)
Fees to PKF (Australia):
Fees for auditing the statutory financial report of the parent covering the group
and auditing the statutory financial reports of any controlled entities
Fees for other services
• Tax compliance
• Others
Total fees to PKF (Australia)
Fees to other overseas member firms of PKF (Australia):
Fees for auditing the financial report of any controlled entities
Total fees to overseas member firms of PKF (Australia)
Total auditor’s remuneration
30-Jun-20
$
30-Jun-19
$
163,350
163,350
-
-
8,548
51,150
-
1,900
10,448
1,771
1,771
175,569
-
-
51,150
66,055
66,055
117,205
27. PARENT COMPANY DISCLOSURES
The financial information for the parent entity, MGC Pharmaceuticals Limited, disclosed in note 22 has been prepared on the
same basis as the consolidated financial statements, except as set out below:
i) Summary of financial information
The individual financial statements for the parent entity show the following aggregate amounts:
Current assets
Non-current assets
Total Assets
Current liabilities
Total Liabilities
Contributed equity
Share based payment reserve
Accumulated losses
Total Equity
30-Jun-20
$
1,723,652
2,400,695
4,124,347
1,029,991
1,029,991
60,149,458
4,080,904
(61,136,006)
3,094,356
30-Jun-19
$
1,947,520
9,335,256
11,282,776
484,603
484,603
49,133,820
3,256,419
(41,592,066)
10,798,173
Loss for the year
Total comprehensive loss for the year
(19,543,940)
(19,543,940)
(2,456,629)
(2,456,629)
ii) Commitments and contingent liabilities of the parent
The parent entity did not have any contingent liabilities or commitments, as at 30 June 2020 (30 June 2019: nil) other than as
disclosed at note 24.
iii) Guarantees entered into the parent entity
There were no guarantees entered into by the parent entity.
62
ANNUAL REPORT FOR THE YEAR ENDED 30 JUNE 2020
28. RELATED PARTY TRANSACTIONS
a) Key Management Personnel Remuneration
Compensation
The aggregate compensation made to directors and other members of key management personnel of the consolidated entity
is set out below:
Short-term employee benefits
Post-employment benefits
Long-term benefits
Share-based payments
30-Jun-20
$
1,045,709
-
-
124,391
1,170,100
30-Jun-19
$
1,259,773
-
-
175,563
1,435,336
b) Transactions with Director related entities
Directors and officers, or their personally-related entities, hold positions in other entities that result in them having controls or
significant influence over the financial or operating policies of those entities.
Details of non-remuneration related transactions including amounts receivable and payable at the end of the year are as follows:
Related Party
RelationshipNature of transactions
Brighght Global Ltd
(Brighght)
Chieftain Securities
Pty Ltd (Chieftain)
Chieftain Securities
Pty Ltd (Chieftain)
Chitta Lu Ltd
(Chitta Lu)
Sibella Capital Pty Ltd
(Sibella)
Graft Polymer d.o.o
(GPO)
(i)
(ii)
(ii)
(iii)
(iv)
(v)
TNT Mines Ltd (TNT)
(vi)
Reimbursement from Brighght for
corporate administration costs
Charges from Chieftain for corporate
advisory fees
Charges from Chieftain for capital
raising costs
Reimbursement from Chitta Lu for
corporate administration costs
Reimbursement from Sibella for
corporate administration costs
Services charges from / (recharges
to) GPO development for MGC
proprietary drug delivery technology
(Re-charges) to TNT for corporate
administration costs
Transactions
Full Year
30-Jun-20
Full Year
30-Jun-19
Balances
(owing to)/ owed by
Full Year
30-Jun-20
Full Year
30-Jun-19
$
-
$
5,702
$
-
60,000
61,748
(5,500)
116,594
-
-
1,010
388
14
-
-
-
$
-
-
-
-
-
510,859
(27,114)
40,000
33,079
-
(5,320)
-
-
(i) Brighght Global Ltd is an entity controlled by Mr Nativ Segev .
(ii) Mr Mitchell is a Director and holds a 33% shareholdings in Chieftain Securities Pty Ltd.
(iii) Chitta Lu Ltd is an entity controlled by Mr Roby Zomer.
(iv) Sibella Capital Pty Ltd is an entity controlled by Mr Brett Mitchell.
(v) Mr Roby Zomer is Executive Chairman of Graft Polymer d.o.o, who are developing the proprietary nano-emulsion and
nano-particle drug delivery platform for MGC Pharma medicines.
(vi) Mr Brett Mitchell is an Executive Director of TNT Mines Limited.
Other related party transactions
There were no other related party transactions.
63
NOTES TO FINANCIAL STATEMENTS 29. SHARE BASED PAYMENTS
Share based compensation relating to share options are recognised at fair value.
The fair value of the options is recognised as an employee benefit expense in the statement of profit or loss and other
comprehensive income, with a corresponding increase in equity. The total amount to be expensed is determined by reference
to the fair value of the options granted, which includes any market performance conditions and the impact of any non-vesting
conditions but excludes the impact of any service and non-market performance vesting conditions.
The total expense is recognised over the vesting period, which is the period over which all of the specified vesting conditions
are to be satisfied.
Upon exercise of share options, the proceeds received net of any directly attributable transaction costs are allocated to
share capital.
The fair value for all share options, as detailed below, are determined using a binomial option pricing method that takes into
account the exercise price, the term of the option, the probability of exercise, the share price at grant date and expected
volatility of the underlying share, the expected dividend yield and the risk-free interest rate for the term of the option.
The inputs used for the valuations are tabled below for each class of option issued.
The expected life of the options is based on historical data and is not necessarily indicative of exercise patterns that may occur.
The expected volatility reflects the assumption that the historical volatility is indicative of future trends, which may also not
necessarily be the actual outcome. The probability of the performance conditions occurring, where applicable are included in
determining the fair value of the options.
The assessed fair value at grant date of share based payments granted during the period was determined using a binomial option
pricing model that takes into account the exercise price, the price of the underlying share at grant date, the life of the option, the
volatility of the underlying share, the risk-free rate and expected dividend payout and any applicable vesting conditions.
Management was required to make assumptions and estimates in order to determine the inputs into the binomial option
pricing model.
a) Voluntary Holding Lock Shares
As part of the acquisition consideration of Erin Mineral Resources Limited (EMRL), Voluntary Holding Lock shares were issued
to the EMRL shareholders as performance-based consideration relating to the EMRL assets. These shares were released from
their holding lock during the current period and have therefore been transferred into issued capital as ordinary shares.
b) Performance Rights
Directors
During the period, on 23 December 2019, the Company issued performance rights to two Directors following approval at its
AGM on 29 November 2019, with the following key terms and conditions:
# Vesting milestone
Performance rights Milestone date
1. GMP approval for Malta facility
2. Holding of Director position on the Board of the Company by 31 December 2019
Holding of Director position on the Board of the Company by 31 December 2020
and achieving share value of minimum 8c for a minimum 10 consecutive days
Holding of Director position on the Board of the Company by 31 December 2021
and achieving share value of minimum 10c for a minimum 10 consecutive days
3.
4.
5,000,000
5,000,000
31 Dec 21
31 Dec 19
5,000,000
31 Dec 20
5,000,000
20,000,000
31 Dec 21
64
ANNUAL REPORT FOR THE YEAR ENDED 30 JUNE 2020 The fair value of the performance rights for milestones 1 and 2 was determined to be $0.034/right, based on the Company’s
share price on the grant date. A Monte Carlo valuation was applied to milestones 3 and 4, with the following inputs and
assumptions:
Valuation date
Share price
Exercise price
Vesting date
Expiry date
Expected future volatility
Risk free rate
Vesting hurdle
Dividend yield
Value per right
Milestone 3
29 Nov 19
$0.0340
Nil
N/A
31 Dec 20
70%
0.68%
$0.08
nil
$0.00848
Milestone 4
29 Nov 19
$0.0340
Nil
N/A
31 Dec 21
70%
0.68%
$0.10
nil
$0.01213
Milestone 2 was met during the period and the associated performance rights vested. The remaining rights remain on issue
but unvested at 30 June 2020.
Employees
The Group also issued 8m performance rights to certain key employees following shareholder approval on 29 November 2019,
with both of the following key conditions to be met (upon conversion, these shares are restricted until 30 June 2020):
# Conditions
1. Continuous service of the holder in their capacity as an eligible participant, or in a role otherwise agreed by the Board by
31 January 2020
2. The Company achieves more than 2,000 prescribed products of its phytocannabinoid-derived medicines
The fair value of the performance rights was determined to be $0.031/right based on the Company’s share price on the grant
date. These rights vested on 31 January 2020.
c) Options
Equity Capital Markets Advisor
Pursuant to agreement with the Group’s Equity Capital Markets Advisor, the Company agreed to issue 43.5m options over 3
tranches, with the first two tranches issued on 16 September 2019, and the final tranche following shareholder approval.
The following table highlights the terms, conditions and inputs used for the valuation of the options using the Hoadley EOS2
valuation model; a valuation model was applied as the Company were unable to define a suitable fair value on the services
being provided:
Number options issued
Issue date
Valuation date
Spot price
Exercise price
Expiry date
Expected future volatility
Risk free rate
Dividend yield
Value per right
Joint Leading Managers
Tranche 1
14,500,000
16 Sept 19
16 Sept 19
$0.040
$0.05
31 Aug 23
85%
0.91%
nil
$0.00182
Tranche 2
14,500,000
16 Sept 19
16 Sept 19
$0.040
$0.06
31 Aug 23
85%
0.91%
nil
$0.0173
Tranche 3
14,500,000
23 Dec 19
18 Oct 19
$0.035
$0.07
31 Aug 23
85%
0.75%
Nil
$0.0135
Pursuant to agreement with two of the Group’s leading managers, the Company agreed to issue 9m options over 3 tranches,
issued following shareholder approval at the AGM on 29 November 2019.
The following table highlights the terms, conditions and inputs used for the valuation of the options using the Hoadley EOS2
valuation model; a valuation model was applied as the Company were unable to define a suitable fair value on the services
being provided:
65
NOTES TO FINANCIAL STATEMENTS Number options issued
Issue date
Valuation date
Spot price
Exercise price
Expiry date
Expected future volatility
Risk free rate
Dividend yield
Value per right
Tranche 1
3,000,000
23 Dec 19
18 Oct 19
$0.035
$0.05
31 Aug 23
85%
0.91%
nil
$0.0152
Tranche 2
3,000,000
23 Dec 19
18 Oct 19
$0.035
$0.06
31 Aug 23
85%
0.91%
nil
$0.0143
Tranche 3
3,000,000
23 Dec 19
18 Oct 19
$0.035
$0.07
31 Aug 23
85%
0.75%
Nil
$0.0135
Prior period - 16m unlisted options
On 12 April 2019 the company issued 16m unlisted options as approved by shareholders at the AGM held on 22 November
2017, exercisable at $0.065 each with an expiry date of 31 March 2021.
The following table lists the inputs to the model used for valuation of options:
Valuation date
Dividend yield (%)
Expected volatility (%)
Risk-free interest rate (%)
Expected life of option (years)
Option exercise price ($)
Share price at grant date ($)
Expiry date
Valuation of option
Total value of option
12 April 2019
Nil
87%
1.50%
2
$0.065
$0.035
31 Mar 2021
$0.058
$928,000
These options vested in full in the current period upon completion of the relevant vesting conditions.
Share-based payment expense
For the year ended 30 June 2020, the Group has recognised $854,915 of share-based payment expenses in the statement
of profit or loss (30 June 2019: $537,004) relating to share-based payments to directors and employees. The Group has also
recognised $839,500 (30 June 2019: nil) of share-based payment expense in relation to capital raising costs (refer to note 17).
66
ANNUAL REPORT FOR THE YEAR ENDED 30 JUNE 2020 30. APPLICATION OF NEW AND REVISED ACCOUNTING STANDARDS
a) New or revised standards and interpretations that are first effective in the current reporting period
The Group has adopted all of the new and revised Accounting Standards and Interpretations issued by the Australian
Accounting Standards Board (the AASB) that are relevant to its operations and effective from 1 July 2019.
The adoption of these new and amended Accounting Standards and Interpretations did not result in any significant changes to
the Group’s accounting policies, with the exception of the adoption of AASB 16 Leases (“AASB 16”) (see below).
The Group has not early adopted any new or amended Accounting Standards or Interpretations issued but not yet effective, as
follows:
Reference
Description
AASB 2018-7 Amendments to
The application of this Standard is effective from 1 January 2020 and will be adopted by the Group
Australian Accounting Standards -
on 1 July 2020. This Standard makes amendments to the definition of ‘material’ to reference the effect
Definition of Material
of obscuring information to be similar to omitting or misstating information and states that an entity
assesses materiality in the context of the financial statements as a whole.
Conceptual Framework for
The application of this Standard is effective from 1 January 2020 and will be adopted by the Group on 1
Financial Reporting
July 2020. The revised Conceptual Framework includes a new chapter on measurement, guidance on
reporting financial performance, improved definitions and guidance, in particular, the definitions of an
asset and a liability and clarifications in important areas, such as the roles of stewardship, prudence and
measurement uncertainty in financial reporting.
AASB 2019-1 Amendments to
The application of this Standard is effective from 1 January 2020 and will be adopted by the Group
Australian Accounting Standards
on 1 July 2020. The Standard makes amendments to a number of Australian Accounting Standards,
- References to the
Interpretations and other pronouncements to reflect the issuance of the Conceptual Framework for
Conceptual Framework
Financial Reporting (Conceptual Framework).
AASB 2018-6 Amendments to
The application of this Standard is effective from 1 January 2020 and will be adopted by the Group on 1
Australian Accounting Standards -
July 2020. This Standard amends the de!nition of a business in AASB 3 Business Combinations.
Definition of a Business
AASB 2019-5 Amendments to
The application of this amendment is effective from 1 January 2020 and will be adopted by the Group
Australian Accounting Standards -
on 1 July 2020. This Standard amends AASB 1054 Australian Additional Disclosures by adding a
Disclosures of the Effect of
requirement for entities complying with IFRS Standards to disclose the potential effect of an IFRS
New IFRS Standards Not Yet
Standard that has not yet been issued by the AASB so that an entity complying with Australian
Issued in Australia
Accounting Standards can assert compliance with IFRS standards.
AASB 2020-1 Amendments to
The application of this amendment is effective from 1 January 2022 and will be adopted by the Group
Australian Accounting Standards
on 1 July 2022. This amendment to AASB 101 Presentation of Financial Statements clarifies the
- Classification of Liabilities as
requirements for classifying liabilities as current or non-current.
Current or Non-current
AASB 2020-3 Amendments to
The application of this amendment is effective from 1 January 2022 and will be adopted by the Group on
Australian Accounting Standards -
1 July 2022. This standard makes amendments to AASB 1, AASB 3, AASB 9, AASB 116, AASB 137 and
Annual Improvements 2018-2020
AASB 141.
and Other Amendments
67
NOTES TO FINANCIAL STATEMENTS 31. EVENTS AFTER THE REPORTING DATE
Date
Event
2 July 2020
8 July 2020
14 July 2020
20 July 2020
27 July 2020
7 August 2020
14 August 2020
20 August 2020
25 August 2020
COVID-19 Clinical Trial Site Expansion into India
The Company announced the site expansion of the Phase II Clinical Trial of ArtemiCTM on COVID-19 infected
patients to India, this will provide the wider statistical data which will be required for registration of ArtemiCTM
MGC Pharma awarded Import Licence by Office of Drug Control
The import licence provides MXC with the ability to directly import Schedule 4 - and Schedule 8,
medicinal cannabis products into Australia, a process that was previously facilitated by Cannvalate and
Health House International.
MXC Cannabis Research Permit Granted for RMIT Programs
The Permit enables MXC to proceed with its botanical research projects in collaboration with Royal
Melbourne Institute of Technology (RMIT University) including cultivation and genetics
MGC Pharma to acquire 100% of Medicinal Cannabis Clinic
MGC Pharma signed a Term Sheet to acquire 100% of the operating business, data and proprietary
assets of Medicinal Cannabis Clinic Pty Ltd, one of Australia’s leading medicinal cannabis clinics.
Results from ArtemiCTM Safety and Toxicity Pre-clinical Study
Safety and toxicity pre-clinical study results received by MXC for ArtemiCTM following in vivo testing on
mice in Israel, with ArtemiCTM delivering no adverse results in standard toxicity measures.
Study Confirms Effectiveness of ArtemiCTM On Human Immune Cell
A final report of results from preclinical in-vitro laboratory testing clearly support the claim that
ArtemiCTM can modify the function of human immune cells in response to inflammatory stimuli
UK Distribution Agreement Signed for MGC Pharma Medicines
Distribution agreement signed for MGC Pharma’s EU GMP cannabinoid medicines with leading UK
medical cannabis provider, LYPHE Group Limited. The Agreement provides MGC Pharma direct access
to LYPHE’s established distribution channels into the growing UK market for medical cannabis products.
COVID-19 Interim Trial Results Meet All Primary Objectives
Interim results of the Phase II double-blind, placebo-controlled clinical trial for anti-inflammatory
treatment ArtemiCTM on persons diagnosed with COVID-19, met all its primary end points for the safety
and efficacy of the treatment on the first 10 patients.
JV to be Established for Registration of ArtemiCTM In Russia
Term sheet signed to partner with Dr Svetlana Kopachevskaja, and key associated investment partners
to establish a JV company to facilitate registration of ArtemiCTM as a medicine in Russia, and register 15
MGC Pharma formulations and generic oncology medicines for the Russian market.
1 September 2020 Biopharma Appointments Strengthen Board and Leadership Team
MXC strengthened its Board and leadership team with biopharma industry expertise following the
appointment of Evan Hayes as an Independent Non-Executive Director and Strategic Advisor, Sabina
Suljaković as Qualified Person and Head of the Quality Assurance in Slovenia and Amir Polak as CTO
and Head of Pharmaceutical Production.
10 September 2020 $15m Finance Facility to Fund Revenue Growth for Key Markets
Convertible securities financing agreement signed Mercer Street Global Opportunity Fund, LLC, to
provide the Company with funding of up to a total of $15m. The first tranche of $2.25 million has been
provided to the Company through the issue of 2,475,000 convertible notes with a face value of $1 each
to Mercer Street.
14 September 2020 MXC Well Positioned for TGA Down-Schedule of CBD Products
TGA has recently confirmed its intention to down-schedule certain low-dose medicinal cannabidiol
(CBD) products from Schedule 4 to Schedule 3 status. MGC Pharma is uniquely positioned to benefit
from the proposed changes through its existing EU production facilities, increasing market penetration,
and clinical programs.
21 September 2020 MXC Welcomes New FCA Guidance for Cannabis Sector in the UK
MGC welcomed the FCA’s guidance note on its approach to assessing applications from cannabis-
related companies for listing in the UK and is accelerating its plans to be one of the first cannabis-
related companies listed on the LSE.
28 September 2020 Update on ArtemiCTM Phase II Trial on Covid-19 Patients
Patient recruitment already commenced for Phase II Clinical Trial on COVID-19 Patients at the leading
Rambam Academic Hospital in Israel, with 3 patients already enrolled for the Trial. Patient recruitment
also commenced at Mahatma Gandhi Mission’s Medical College & Hospital (MGM Hospital) in India.
68
ANNUAL REPORT FOR THE YEAR ENDED 30 JUNE 2020 Directors’ Declaration
The Directors’ of the Company declare that in their opinion:
1. The financial statements and notes, as set out in pages 36 to 68, are in accordance with the Corporations Act 2001 and:
a) comply with Accounting Standards and the Corporations Regulations 2001;
b) are in accordance with International Financial Reporting Standards, as stated in note 2a to the financial statements; and
c) give a true and fair view of the consolidated group’s financial position as at 30 June 2020 and its performance for the
year ended on that date.
2. The Directors have been given the declaration required by section 295A of the Corporations Act 2001.
3. The remuneration disclosures contained in the Remuneration Report comply with s300A of the Corporations Act 2001.
4. In the Directors opinion, subject to the matters set out in note 2(b) to the financial statements, there are reasonable grounds
to believe that the Company will be able to pay its debts as and when they become due and payable.
This declaration is made in accordance with a resolution of the Board of Directors.
Roby Zomer
Managing Director
30 September 2020
DIRECTORS’ DECL AR ATION
69
Independent Auditor’s Report to Members
Ernst & Young
11 Mounts Bay Road
Perth WA 6000 Australia
GPO Box M939 Perth WA 6843
Tel: +61 8 9429 2222
Fax: +61 8 9429 2436
ey.com/au
Independent auditor's report to the members of MGC Pharmaceuticals
Limited
Report on the audit of the financial report
Opinion
We have audited the financial report of MGC Pharmaceuticals Limited (the Company) and its
subsidiaries (collectively the Group), which comprises the consolidated statement of financial position
as at 30 June 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, 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:
a)
giving a true and fair view of the consolidated financial position of the Group as at 30 June
2020 and of its consolidated financial performance for the year ended on that date; and
b)
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 auditor
independence requirements of the Corporations Act 2001 and the ethical requirements of the
Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional
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 believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our opinion.
Material uncertainty related to going concern
We draw attention to Note 2(b) of the financial report, which describes the principal conditions that
raise doubt about the Group’s ability to continue as a going concern. These events or conditions
indicate that a material uncertainty exists that may cast significant doubt on the Group’s ability to
continue as a going concern. Our opinion is not modified in respect of this matter.
A member firm of Ernst & Young Global Limited
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TD:TGF:MGC:012
70
ANNUAL REPORT FOR THE YEAR ENDED 30 JUNE 2020
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in
our audit of the financial report of the current year. In addition to the matter described in the Material
uncertainty related to going concern section of our report, we have determined the matters described
below to be the key audit matters to be communicated in our report. These matters were addressed in
the context of our audit of the financial report as a whole, and in forming our opinion thereon, but we
do not provide a separate opinion on these matters. For each matter below, our description of how
our audit addressed the matter is provided in that context.
We have fulfilled the responsibilities described in the Auditor’s Responsibilities for the Audit of the
Financial Report section of our report, including in relation to these matters. Accordingly, our audit
included the performance of procedures designed to respond to our assessment of the risks of
material misstatement of the financial report. The results of our audit procedures, including the
procedures performed to address the matters below, provide the basis for our audit opinion on the
accompanying financial report.
1.
Impairment assessment for non-current assets
Why significant
How our audit addressed the key audit matter
The quantum of the Group’s non-current assets
is material to the Group’s financial statements
and the assessment of whether impairment
existed at 30 June 2020 in relation to these
assets required significant management
judgement.
Intangible asset
As disclosed in Note 14 to the financial
statements, during the year ended 30 June
2020, the Group wrote off the balance of the
intangible asset amounting to $5.03 million,
upon expiry of the associated license to cultivate
industrial cannabis in Slovenia.
Malta
As disclosed in Notes 13 and 16 to the financial
statements, the Group held total non-current
assets in Malta amounting to $2.9 million,
primarily comprising construction in progress
and the right-of-use asset associated with the
long-term lease of land.
Our audit procedures included the following:
► We obtained and reviewed the Group’s
assessment of impairment triggers for its non-
current assets
► We confirmed the expiry of the licence to
cultivate industrial cannabis
► As a consequence of the global COVID-19
pandemic, the Group was unable to meet the
conditions set out in the Malta long-term lease
agreement. Through enquiry and review we
determined that the lease agreement remains
active and that no penalties have been imposed
by the lessor
► We considered the Group’s assessment of
impairment in relation to the construction in
progress and right-of-use asset at 30 June
2020
► We considered the adequacy of the financial
report disclosures.
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71
INDEPENDENT AUDITOR’S REPORT TO MEMBERS
As disclosed in Note 16, the Group has not been
able to comply with all conditions under the long-
term lease agreement, including the requirement
to commence construction of the facility within
three months of the lease agreement being
signed. At 30 June and to the date of this report,
no breach notice had been received from the
lessor in this regard.
The Group assessed the construction in progress
and right-of-use assets for impairment at 30
June 2020 and concluded that they were not
impaired.
2. Revenue recognition
Why significant
How our audit addressed the key audit matter
As disclosed in note 6 to the financial
statements, the Group earned revenue from
contracts with customers of $2.08 million during
the year ended 30 June 2020, which was
material to the Group’s performance.
Our audit procedures included the following:
► We selected a sample of revenue transactions
recorded for the period and tested whether
appropriate documentation existed supporting
the recognition and measurement of the
transactions in accordance with the Group’s
accounting policy
► We inspected the terms of supply
arrangements to test management’s
assessment of the composition of performance
obligations and their determination of when the
performance obligations in relation to the sale
of goods were fulfilled
► On a sample basis, we inspected customer
invoices and proof of deliveries made near 30
June 2020 to confirm whether revenue was
recognised in the correct accounting period
► We searched for evidence of material post
balance date credit notes to test whether
revenue recognised was subsequently reversed
►
Through enquiry and review, we searched for
evidence of material customer rebates
► We considered the adequacy of the financial
report disclosures.
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72
ANNUAL REPORT FOR THE YEAR ENDED 30 JUNE 2020
3. AASB 16 Leases
Why significant
How our audit addressed the key audit matter
The new accounting standard AASB 16 Leases
(“AASB 16”) was effective for the Group from 1
July 2019 and is applicable to lease agreements
existing on that date and any new leases entered
into thereafter.
The adoption of the new standard has had a
significant impact on the Group’s financial position
and performance, as disclosed in note 16 to the
financial statements.
Adopting AASB 16 involved a number of key
judgements and estimates, including:
►
The application of available practical
expedients
►
The incremental borrowing rates applied.
Our audit procedures included the following:
► We assessed the Group’s processes for
implementing the standard and for the ongoing
accounting for leases under AASB 16
► We evaluated the Group’s key judgements and
estimates applied in adopting the standard and
assessed whether the Group’s accounting
principles comply with AASB 16, including
application of available practical expedients
► We tested the Group’s lease contracts to assess
whether the associated balances had been
calculated in accordance with contract terms
and the requirements of AASB 16, including
the identification of fixed and variable
components of lease consideration
► We assessed the completeness of the Group’s
identified lease arrangements
► We involved our capital and debt advisory
specialists to evaluate the appropriateness of
the Group’s methodology and calculations used
to determine the incremental borrowing rates
applied
► We considered the adequacy of the financial
report disclosures.
Information other than the financial report and auditor’s report thereon
The directors are responsible for the other information. The other information comprises the
information included in the Company’s 2020 Annual Report, but does not include the financial report
and our auditor’s report thereon.
Our opinion on the financial report does not cover the other information and accordingly we do not
express any form of assurance conclusion thereon, with the exception of the Remuneration Report
and our related assurance opinion.
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 this
other information, we are required to report that fact. We have nothing to report in this regard.
A member firm of Ernst & Young Global Limited
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73
INDEPENDENT AUDITOR’S REPORT TO MEMBERS
Responsibilities of the directors 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 relating to going concern and using the
going concern basis of accounting unless the directors either intend to liquidate the Group or to cease
operations, or have no realistic alternative but to do so.
Auditor's responsibilities for the audit of the financial report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is
free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of this financial report.
As part of an audit in accordance with the Australian Auditing Standards, we exercise professional
judgment and maintain professional scepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the financial report, whether due to
fraud or error, design and perform audit procedures responsive to those risks, and obtain audit
evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not
detecting a material misstatement resulting from fraud is higher than for one resulting from
error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the
override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Group’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by the directors.
Conclude on the appropriateness of the directors’ use of the going concern basis of accounting
and, based on the audit evidence obtained, whether a material uncertainty exists related to
events or conditions that may cast significant doubt on the Group’s ability to continue as a going
concern. If we conclude that a material uncertainty exists, we are required to draw attention in
our auditor’s report to the related disclosures in the financial report or, if such disclosures are
inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up
to the date of our auditor’s report. However, future events or conditions may cause the Group
to cease to continue as a going concern.
A member firm of Ernst & Young Global Limited
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74
ANNUAL REPORT FOR THE YEAR ENDED 30 JUNE 2020
Evaluate the overall presentation, structure and content of the financial report, including the
disclosures, and whether the financial report represents the underlying transactions and events
in a manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities
or business activities within the Group to express an opinion on the financial report. We are
responsible for the direction, supervision and performance of the Group audit. We remain solely
responsible for our audit opinion.
We communicate with the directors regarding, among other matters, the planned scope and timing of
the audit and significant audit findings, including any significant deficiencies in internal control that we
identify during our audit.
We also provide the directors with a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with them all relationships and other
matters that may reasonably be thought to bear on our independence, and where applicable, actions
taken to eliminate threats or safeguards applied.
From the matters communicated to the directors, we determine those matters that were of most
significance in the audit of the financial report of the current year and are therefore the key audit
matters. We describe these matters in our auditor’s report unless law or regulation precludes public
disclosure about the matter or when, in extremely rare circumstances, we determine that a matter
should not be communicated in our report because the adverse consequences of doing so would
reasonably be expected to outweigh the public interest benefits of such communication.
Report on the audit of the remuneration report
Opinion on the remuneration report
We have audited the Remuneration Report included in the directors' report for the year ended 30
June 2020.
In our opinion, the Remuneration Report of MGC Pharmaceuticals Limited for the year ended 30 June
2020, complies with section 300A of the Corporations Act 2001.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
75
INDEPENDENT AUDITOR’S REPORT TO MEMBERS
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.
Ernst & Young
T G Dachs
Partner
Perth
30 September 2020
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
76
ANNUAL REPORT FOR THE YEAR ENDED 30 JUNE 2020
Additional ASX Information
EXCHANGE LISTING
MGC Pharmaceuticals Ltd shares and options are listed on the Australian Securities Exchange under ASX code MXC for
Ordinary Shares and MXCOE for Listed Options. The Company also is listed on the OTC Market under OTC Code MXCLF.
SUBSTANTIAL SHAREHOLDERS (HOLDING NOT LESS THAN 5%)
As at 1 September 2020, the Company did not have any substantial shareholders.
CLASS OF SHARES AND VOTING RIGHTS
At 1 September 2020, there were 9,470 holders of 1,631,416,907 ordinary fully paid shares of the Company. The voting rights
attaching to the ordinary shares are in accordance with the Company’s Constitution being that:
a. each Shareholder entitled to vote may vote in person or by proxy, attorney or Representative;
b. on a show of hands, every person present who is a Shareholder or a proxy, attorney or Representative of a shareholder has
one vote; and
c. on a poll, every person present who is a shareholder or a proxy, attorney or Representative of a shareholder shall, in respect
of each fully paid Share held by him, or in respect of which he is appointed a proxy, attorney or Representative, have one
vote for the Share, but in respect of partly paid Shares, shall, have such number of votes as bears the proportion which the
paid amount (not credited) is of the total amounts paid and payable (excluding amounts credited).
The number of shareholders holding less than a marketable parcel is 1,137.
ESCROWED SECURITIES
There are currently no securities subject to escrow.
CASH USAGE
Since the time of listing on ASX, the entity has used its cash and assets in a form readily converted to cash that it had at the
time of admission to the official list of ASX in a manner which is consistent with its business objectives.
UNLISTED SECURITIES AS AT 1 SEPTEMBER 2020
Securities
Options exercisable at $0.125
expiring 31/03/2021
Options exercisable at $0.065
expiring 31/03/2021
Options exercisable at $0.15
expiring 31/06/2021
Options exercisable at $0.05
expiring 31/08/2023
Options exercisable at $0.06
expiring 31/08/2023
Options exercisable at $0.07
expiring 31/08/2023
Convertible Notes
Performance Rights
ADDITIONAL ASX INFORMATION
Number of
Securities on
issue
Number
of
Holders Name of Holders holding more than 20%
19,900,000 18
16,000,000 18
N/A
N/A
Number
Held
N/A
N/A
10,000,000 3
CHIEFTAIN SECURITIES PTY LTD
5,000,000
17,500,000 4
CG NOMINEES (AUSTRALIA) PTY LTD
14,500,000
BELL POTTER NOMINEES LTD
3,000,000
17,500,000 4
CG NOMINEES (AUSTRALIA) PTY LTD
14,500,000
17,500,000 4
CG NOMINEES (AUSTRALIA) PTY LTD
14,500,000
2,475,000
1
MERCER STREET GLOBAL OPPORTUNITY FUND LLC
2,475,000
15,000,000 3
CHITTA LU LIMITED
MR BRETT MITCHELL + MRS MICHELLE MITCHELL
MR BRETT MITCHELL + MRS MICHELLE MITCHELL
7,500,000
3,750,000
3,750,000
77
TOP 20 SHAREHOLDERS AS AT 1 SEPTEMBER 2020
Rank Name
Number of Shares % of Shares
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
MGC PHARMACEUTICALS LTD
MR GEORGE BISHAY
CITICORP NOMINEES PTY LIMITED
MR BRETT MITCHELL + MRS MICHELLE MITCHELL
C Y T INVESTMENT PTY LTD
J P MORGAN NOMINEES AUSTRALIA PTY LIMITED
MR SHADY ESKANDER
MR BRETT MITCHELL + MRS MICHELLE MITCHELL
MR DAVID CLEMENT HOBBY
MR BENJAMIN THOMAS LANGLEY
FADCO INVESTMENTS LIMITED
MR MICHAEL SEAN NEWTON
NETWEALTH INVESTMENTS LIMITED
CARDAZE PTY LIMITED
MERRILL LYNCH (AUSTRALIA) NOMINEES PTY LIMITED
J & D PEOS SUPER PTY LTD
BNP PARIBAS NOMS PTY LTD
CANNVALATE PTY LTD
20
MS AUTUMN BLOOM
Total
RANGE OF ORDINARY SHARES AS AT 1 SEPTEMBER 2020
120,080,182
45,993,000
36,822,890
30,000,091
22,264,444
14,000,000
10,167,392
8,311,111
8,140,560
8,000,000
7,388,430
6,772,613
6,500,000
6,042,727
5,764,059
5,616,522
5,585,262
5,210,062
5,139,037
5,000,000
7.36
2.82
2.26
1.84
1.36
0.86
0.62
0.51
0.50
0.49
0.45
0.42
0.40
0.37
0.35
0.34
0.34
0.32
0.32
0.31
362,798,382
22.24
Total Holders
108
113
397
6,286
2,566
9,470
Shares
8,590
492,524
3,319,722
291,785,211
1,335,810,860
%
0.00
0.03
0.20
17.86
81.90
1,631,416,907
100.00
Range
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 and Over
Total
78
ANNUAL REPORT FOR THE YEAR ENDED 30 JUNE 2020 TOP 20 MXCOE HOLDERS AS AT 1 SEPTEMBER 2020
Listed Options exercisable at $0.045 expiring 31 August 2021
Rank Name
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
CAPRICORN INVESTMENT PARTNERS (NOMINEES) PTY LTD
FIRST INVESTMENT PARTNERS PTY LTD
MR JOHAN SOESANDY SETIAWAN
MR SAMUEL GERSHON JACOBS + MRS SARITA DEVI JACOBS + MISS
MANEKHA BRIDGETTE JACOBS
MR ELAD SEGEV
AJAVA HOLDINGS PTY LTD
MERCHANT FUNDS MANAGEMENT PTY LTD
COSSACK HOLDINGS (AUS) PTY LTD
MAX ASSET HOLDINGS PTY LTD
MERRIWEE PTY LTD
MR JASON JOHN STEPHENS
MISS MONTANA PATTERSON
JACOB’S LADDER INVESTMENTS PTY LTD
AUTO MANAGEMENT PTY LTD
EMAC INVESTMENTS HOLDINGS PTY LTD
MUTUAL TRUST PTY LTD
AGRICO PTY LTD
ANDORYKA HOLDINGS PTY LTD
MR SHADY ESKANDER
20
MR PETER HOWELLS
Total
RANGE OF LISTED OPTIONS AS AT 1 SEPTEMBER 2020
Number of
Listed Options
% of Listed
Options
24,074,450
28.01
8,493,264
3,857,142
2,805,000
2,776,852
1,851,850
1,851,850
1,756,852
1,566,666
1,487,500
1,375,000
1,240,655
1,036,210
925,925
925,925
745,000
555,555
555,555
555,555
555,555
9.88
4.49
3.26
3.23
2.15
2.15
2.04
1.82
1.73
1.60
1.44
1.21
1.08
1.08
0.87
0.65
0.65
0.65
0.65
58,992,361
68.64
Range
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 and Over
Total
Total Holders
Shares
0
0
0
215
84
299
0
0
0
8,831,773
77,102,765
85,934,538
%
0
0
0
10.28
89.72
100
ADDITIONAL ASX INFORMATION
79
MGC Pharmaceuticals Limited ABN 30 116 800 269
1202 Hay Street
West Perth WA 6005
Tel
Email
+61 8 6382 3390
info@mgcpharma.com.au
mgcpharma.com.au
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