ANNUAL REPORT • YEAR ENDED 31 DECEMBER 2019
NEXT SCIENCE LIMITED ACN 622 382 549
CONTENTs
01 OUR PURPOsE
02 OVERVIEW
03 CHAIRMAN’s LETTER
04 MANAGING DIRECTOR’s REPORT
05 OUR JOURNEY
06 DIRECTORs’ REPORT
07 LEAD AUDITOR’s INDEPENDENCE DECLARATION
08 CONsOLIDATED sTATEMENT OF PROFIT OR LOss
AND OTHER COMPREHENsIVE INCOME
09 CONsOLIDATED sTATEMENT OF FINANCIAL POsITION
10 CONsOLIDATED sTATEMENT OF CHANGEs IN EQUITY
11 CONsOLIDATED sTATEMENT OF CAsH FLOWs
12 NOTEs TO FINANCIAL sTATEMENTs
13 DIRECTORs’ DECLARATION
14 INDEPENDENT AUDITOR’s REPORT
15 INVEsTOR INFORMATION
16 CORPORATE DIRECTORY
4
5
6
7
8
11
27
28
29
30
32
34
65
66
72
75
Contents 3
01 OUR PURPOsE
01 OUR PURPOsE
“Our purpose at Next Science
is to heal patients and save lives
by addressing the impacts of
biofilms on human health, and to
commercialise our Xbio technology
platform for shareholders. We have
a unique opportunity to change the
trajectory of the war on infection
by providing solutions that eliminate
biofilms, and their incumbent
bacteria, fungi and viruses.”
our PurPose 4
02 OVERVIEW
02
Utilising a novel patented technology platform (Xbio), Next Science (ASX:NXS) is
bringing to market a portfolio of products to eliminate biofilms and their incumbent
bacteria, fungus and viruses that are often the cause of chronic infections in humans.
With some products already approved in certain markets, Next Science has provided answers
for more than 130,000 patients by the end of 2019 using products designed for use in:
• Prosthetic Joint Infection
• Treatment of Chronic Wounds
• Treatment of Acne
• Prevention of Surgical Site infection
DR THOMAs sERENA
DR MATHEW REGULsKI
RIPRECOVERY – KHAN PORTER
PATIENT TEsTIMONIAL
HEAR ABOUT sOME OF OUR CLINICIANs’ AND PATIENTs’ EXPERIENCEs
The strategic growth of Next Science will come from a combination of broadening the product portfolio to:
• more applications including more prevention products,
• widening our geographic access beyond the US, to more markets with more channels and
• deepening our penetration in accounts across hospitals and ambulatory care centres,
ultimately helping many, many more patients.
02 overview 5
03
03 CHAIRMAN's LETTER
On behalf of the Board of Next Science, I am pleased to provide my comments on the performance and activities of your
Company covering the 2019 reporting year and subsequent achievements to the end of the first quarter of 2020.
It is hard to believe it was only a year ago in April 2019, that Next Science commenced trading its shares on the ASX after its
successful capital raising. At the time we had just two products in market, both in the US. Just a year later, we have six products in
market and another four scheduled from May to December of this year. At the same time, in addition to the US approvals, we have
gained regulatory approval to market Bactisure in Europe, as well as BlastX and Bactisure in Canada, New Zealand and South Africa.
We at Next Science are passionate about healing patients and saving lives by addressing the impacts of biofilm and their
embedded bacteria and viruses. Our growth in patents demonstrates the unique capability of our Xbio technology to lead
in the elimination of infection in human health and related domains.
When investors ask about how the organisation is progressing, I find it easier to describe our major activities in three streams and
comment on the progress across each of the three streams. They comprise firstly, our Xbio application research. Secondly, our product
development, including the regulatory and manufacturing approvals. Thirdly, our commercial partnering and revenue generation.
As we look back on the progress made by our MD, Judith Mitchell, and her management team in 2019 we have much to
be proud of as well as some learnings for how to accelerate clinical adoption.
As I scan across the first stream, I find our progress on Xbio application research led by Dr Matt Myntti has produced more
product application opportunities than we had anticipated in the year including one opportunity that takes Next Science
beyond our core field of medical devices into a pharmaceutical treatment for skin cancer. This higher value domain will
enrich our future product pipeline and will require us to identify an appropriate Pharma partner. Some of the new Xbio
applications produced by our lab teams are being fast tracked, including a skin wash and a surface disinfectant.
When looking at the second stream of product development and regulatory, the team has developed several products as
planned including our Acne treatment and skin repair product. The main product development project was our new surgical
rinse, called XPerience, that has come through on plan and is scheduled for market release in the US in the third quarter of 2020.
The third stream of commercial partnering and revenue growth has received an enormous effort but is behind
expectations due primarily to forces beyond our control. The unplanned acquisition of KCI by our distribution partner
3M in mid 2019 resulted in a delayed expansion of the sales force deployment for our BlastX wound gel. This was put back
on track in January 2020 with the new KCI salesforce within 3M.
At the time of writing this letter, we are working through the challenges and opportunities presented by the COVID outbreak. While
restrictions on travel and meetings in the US are impacting sales and marketing growth initiatives with new customers, we continue
to service existing accounts with remote support. We also expect the increase in awareness around viruses and the need for clean
and safe surfaces to drive increased long term demand for our products. If COVID19 has a silver lining for Next Science, it will be
the much more heightened attention placed on bacterial infection and prevention.
In summary, across the three streams of our work at Next Science, our teams have delivered a very fruitful portfolio of
new Xbio powered product opportunities, more than expected. Our teams have achieved a big lift in marketable products
in the US market with some gaining registration in additional markets described above. As these products go to market
we have the opportunity in the coming years to bring stronger revenue growth to the business.
I wish to thank Judith Mitchell for her professional leadership of the organisation and her tireless investment in travel
and engagement with our various partners and work teams. I also want to convey our appreciation to Dr Matt Myntti
who has led a big year in our research centre in Jacksonville as well as making many presentations to professional
groups demonstrating the power of our Xbio patented technology.
Finally, I would like to thank my fellow board members who bring with them a wide range of skills and experience,
which they have applied enthusiastically to the governance of Next Science.
George savvides Chairman
03 Chairman's Letter 6
04
04 MANAGING DIRECTOR's REPORT
2019 was a year of achievements and learnings – we listed on the ASX in April raising A$35m to fund our product
development and growth and we launched two new products to market. We also learnt many lessons about bringing
disruptive technologies to market including partnership management, proving our product value and continuing
to develop clinical support with key opinion leaders.
Our key activities in Next Science for the year were:
• Through our Research and Development team, we continued to build the pipeline of new applications
for our Xbio technology platform;
• We expanded our patent coverage to 22 patents, including dedicated coverage for Oral Care and Acne
• We discovered two new methods of action for our technology that may allow us to treat a wider range
of diseases and these are now under patent submission
• We built a database of case evidence on which to base future developments in both treatment and prevention
products as well as support products in the market.
• We finished development on the XPerience Surgical Wash and the Middle Ear Wash, as well as a non-salicylic acid
acne treatment and face cleanser and a repair cream for the treatment of skin injuries and protection from infection.
The acne cream and cleanser launched on 18 March, the skin repair and protection cream will launch in H1 2020.
The XPerience Surgical Wash and the Middle Ear wash will be subject to regulatory clearance by the FDA.
• Revenue increased by 43%, overall underlying operating expenses were reduced by $0.9M and the cash in bank to
fund further developments and market expansion in 2020, was $16.9M USD at 31 December 2019.
• With our business partners we continued to build revenue through further market penetration, new channels and
partnerships and direct distribution in the Surgical Site Infection prevention market in the US:
• Bactisure clearance expanded into Canada (with the commercial launch planned for 2020), along with South Africa
and New Zealand. With receipt of the CE Mark in March 2020, Zimmer Biomet, our distribution partner, plans
to launch the product into Europe during 2020. Regulatory clearance in Australia is being pursued with product
launches anticipated for Q4 2020/Q1 2021.
• With the 3M purchase of KCI completed, now in 2020, BlastX is being promoted by the 3M/KCI Advanced Wound
Care team and Post Acute care team of over 140 personnel in the US. Plans are underway to launch in Canada
and New Zealand post the Covid 19 crisis and regulatory clearance.
• The Prevention of Surgical Infection market is being serviced through a network of sales agents across the US.
At the time of publication, coverage has been contracted across 22 states.
• The distribution partnership for TorrentX with Triad Life Sciences is expected to go to market in H2 2020
(subject to regulatory approvals). Triad are bringing a disruptive tissue substitute, which they are pairing
with TorrentX, to the $1B tissue substitute market in the US.
Covid 19
Like the majority of medical companies in the world, Next Science is disrupted by the elective surgery and elective treatment
shut down that has occurred in the US in March 2020 as part of the strategy to stem the growth of infected cases for the
COVID 19 virus. Demand for our surgical products will be delayed until elective patients are once again being scheduled in
the hospital systems. During the COVID 19 Crisis, Next Science has donated BlastX Antimicrobial Wound Gel to several home
health organisations to help support those chronic wound patients who were unable to get to Outpatient Clinics for treatment.
This shut down affects our short-term sales but has not materially affected our R&D and product development work which
continues through a split shift approach at our research centre in Jacksonville, Florida. I do not expect the shutdown to
have a longer term impact as the market for Next Science’s technologies continues to grow as the awareness of issues
and complications caused by infection get an even wider understanding.
Judith Mitchell Managing Director
04 managing DireCtor's rePort 7
05
05 OUR JOURNEY
OUR JOURNEY sO FAR
In market sales
of Bactisure
commenced with
Zimmer Biomet
In market BlastX
sales commenced
via NXS sales
team to VA
hospitals
Q1
3M started
commercial
sales of BlastX
Q4
AST commenced
sales of Acne
treatments
2012
2013 2014 2015 2016
2017
2018
2019
2020
NEXT sCIENCE
founded
FDA Clearances
August
November
April
January
Bactisure
and BlastX
Global distribution
agreement signed
with Zimmer
Biomet for
Bactisure
Global distribution
agreement
signed with
3M for Blast X
Over 130,000
patients treated
successfully to
date within the
USA and Canada
with BlastX and
Bactisure
Listed on ASX
raising A$35m.
Acquired future
distribution
partners:
TorrentX –
Triad Life Sciences
Sinus Wash –
Grace Medical
“Helping patients daily while broadening and strengthening
our patent portfolio to support our revenue growth ambitions”
J MITCHELL MANAGING DIRECTOR
PATENTs AWARDED
22
14
10
06
01
2015
2016
2017
2018
2019
40 PATENTs
PENDING
05 our journey 8
05 OUR JOURNEY
OUR 2020 PLAN
• Expand product portfolio to address infection prevention.
•
Focus on larger market opportunities to increase potential revenue,
supported by level one clinical evidence.
2020
Quarter 1
• tbh skincare Launch
Quarter 2
• RipRecovery and Protection
(Acne cream and cleanser)
handcream launch
• Expand Surgical Product
distribtion Network
• CE Mark Clearance Bactisure
• Release of BlastX wound care
studies: Under VAC, DFU
with Promogram
• FDA clearance to start
Phase 2, Skin Cancer
Topical Treatment
2nd Half
• XPerience surgical Rinse Us Launch
• 4 RCTs in Prevention of Surgical Site infection with
the use of novel biofilm disrupting technology:
- Joint replacement skin incision protection (SurgX)
- Joint replacement surgical rinse (XPerience)
- Surgically treated Orthopaedic Trauma
in compound fractures (XPerience)
- Head and Neck reconstructive surgery (XPerience)
• TorrentX Launch with Triad Life sciences
• Advancement to Phase II/III Skin Cancer
Topical Treatment trials by year end
• CE Mark Clearance BlastX
With a total global addressable market in excess
of USD15 billion annually, XPerience Surgical Rinse
represents Next Science’s key opportunity.
05 our journey 9
06
06
07
06
06 DIRECTORs' REPORT
The Directors present their report together with the consolidated financial
statements of the Group comprising of Next Science Limited (the ‘Company’),
and the entities it controlled at the end of, or during, the year ended 31 December
2019. All amounts are presented in US dollars (USD) unless otherwise stated.
DIRECTORs
The Directors of the Company at any time during
or since the end of the financial year are:
George savvides
Daniel spira
Judith Mitchell
Bruce Hancox
DIVIDENDs
Mark Compton
Aileen stockburger
No dividends were paid or declared since the
commencement of the year and the directors
do not recommend the declaration of a dividend.
OPERATING AND FINANCIAL REVIEW
PRINCIPAL ACTIVITIEs
The principal activities of the Group during the course
of the year were the research, development and
commercialisation of technologies which solve issues
in human health caused by biofilms. The company is
headquartered in Sydney, Australia and has a research
and development centre in Florida, USA.
sIGNIFICANT CHANGEs IN THE sTATE OF AFFAIRs
On 24 January 2019, the Company changed from being
a proprietary company with the name Next Science
Group Pty Limited to being a public company with the
name Next Science Limited. The Company also adopted,
with effect from this date, a new constitution suitable
for a public ASX listed company pursuant to shareholder
approval obtained at a general meeting held on
14 December 2018.
On 24 January 2019, a share split was completed on
the basis that every one ordinary share and each option
on issue in the Company be divided into 6,500 ordinary
shares and 6,500 ordinary options respectively.
On 8 April 2019, the non-redeemable converting notes
converted to ordinary shares on the occurrence of an
Initial Public Offering event. The conversion price of
converting notes to ordinary shares was AUD$0.80.
On 16 April 2019, Next Science Limited was admitted
to the Official List of the Australian Securities Exchange
(‘ASX’) and trading commenced on the ASX on18 April
2019 after successful completion of an Initial Public
Offering (‘IPO’) of 35 million ordinary shares to raise
AUD$35 million.
In the opinion of the Directors, other than the events
previously stated, there were no further significant
changes in the state of affairs of the Group that occurred
during the financial year.
REVIEW OF OPERATIONs
The loss for the Group for the financial year to
31 December 2019 after providing for income tax
amounted to $14,351,828 (2018: $13,747,504).
Revenue increased by 43% for the period, increasing
from $2,844,502 in the prior corresponding
period to $4,060,800.
Gross profit was $3,510,320 compared to $2,474,013
in the prior corresponding period. Gross margin as a
percent of sales was 86% compared with 87% in the
prior corresponding period.
Sales and marketing expenses were $650,318, an
increase of $151,268 compared with $499,050 in the
prior corresponding period. $48,147 of the expenses
relate to IPO investor relations activity, with the balance
of the increase resulting from a strengthened focus on
customer education and training programs for existing
and upcoming products.
General and administration expenses were $3,055,729,
an increase of $534,711 compared with $2,521,018 in
the prior corresponding period. This increase comprises
of $312,106 related directly to IPO associated expenses
and increases in compliance costs associated with
becoming a listed entity.
Consulting and regulatory expenses were $2,137,717, an
increase of $736,301 compared with $1,401,416 in the
prior corresponding period. This comprises of $451,736
which relates to IPO associated expenses and expenses
related to the pre-IPO capital raising, with the balance
of increased spend relating to increased regulatory costs
and compliance required for a listed entity.
06 DireCtors' rePort 11
07 DIRECTORs' REPORT
Research and development expenses were $1,731,653,
an increase of $489,201 compared with $1,242,452
in the prior corresponding period, reflecting an increase
in product development activity and associated
product validation costs.
Finance expenses of $2,129,424 in the current period
are mainly attributable to interest expense recognised
in the profit and loss on the converting notes, for the
period prior to their conversion to ordinary shares
on 8 April 2019.
Cash and cash equivalents at 31 December 2019
amounted to $16,910,605 compared to $7,211,102
at 31 December 2018.
LIKELY DEVELOPMENTs AND
EXPECTED REsULTs OF OPERATIONs
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.
MATTERs sUBsEQUENT TO
THE END OF THE FINANCIAL YEAR
There has not arisen in the interval between the end
of the financial year and the date of this report any item,
transaction or event of a material and unusual nature
likely, in the opinion of the directors of the Group, to
affect significantly the operations of the Group, the
results of those operations, or the state of affairs of
the Group, in future financial years.
ENVIRONMENTAL REGULATION
The Group’s operations are not subject to significant
environment regulations under both Commonwealth or
State legislation. The Board believes that the Group has
adequate systems in place for the management of its
environmental requirements.
GOVERNMENT REGULATION
The Group is subject to varying degrees of governmental
regulation in the countries in which operations are
conducted, and the general trend is toward increasingly
stringent regulation. In the U.S., the drug, device,
diagnostics and cosmetic industries have long been
subject to regulation by various federal and state
agencies, primarily as to product safety, efficiency,
manufacturing, advertising, labelling and safety
reporting. The exercise of broad regulatory powers by
the U.S. Food and Drug Administration (the ‘FDA’) results
in increases in the amounts of testing and documentation
required for FDA clearance of new drugs and devices
and a corresponding increase in the expense of product
introduction. Similar trends are also evident in major
markets outside of the U.S.
The Group relies on global supply chains, and production
and distribution processes, that are complex and are
subject to increasing regulatory requirements that may
affect sourcing, supply and pricing of materials used in
the Group’s products, and which are subject to lengthy
regulatory approvals.
07 DireCtors' rePort 12
07 DIRECTORs' REPORT
INFORMATION ON DIRECTORs
Name:
Title:
George savvides
Chairman and Independent Non-Executive Director
special responsibilities:
Member of the Audit and Risk Committee and Member of the Remuneration
and Nomination Committee
Qualifications:
Experience and expertise
Other current directorships:
Bachelor of Engineering (Honours), University of New South Wales and MBA,
University of Technology, Sydney.
Fellow of the Australian Institute of Company Directors.
George has 30 years of experience in the Australian & New Zealand healthcare
sector. He was CEO of two successful IPO listings on the ASX, being Sigma in
1999 and Medibank Private in 2014. He served as Medibank CEO for 14 years.
George served as Chairman of Kings Consolidated Group Pty Ltd (2016 to 2018)
and Macquarie University Hospital (2016 to 2018) and retired as Chairman of World
Vision Australia after 18 years of service in February 2018. He was a board member
of the International Federation of Health Plans for 10 years including a period as
Deputy President, retiring in 2016.
He currently serves as Deputy Chairman of the public broadcaster, SBS (since 2017)
and Non-Executive Director of IAG (since 2019) and NZX listed Ryman Healthcare,
a residential aged care provider in New Zealand and Australia (since 2013).
Former listed directorships
(last 3 years):
None
Name:
Title:
Judith Mitchell
Managing Director and Chief Executive Officer
special responsibilities:
None
Qualifications:
MBA, University of Hull
Graduate of the Australian Institute of Company Directors
Experience and expertise:
Prior to joining Next Science in 2017, Judith served as President of DePuy
Synthes Asia Pacific, the Orthopaedics Division of Johnson & Johnson, before
which Judith was President of Asia Pacific for Synthes GmbH, the world leaders
in orthopaedic trauma care.
Judith commenced her medical technology career at GE Medical Systems,
where over 14 years, she held positions in sales, marketing and management.
She also held a variety of positions at Cochlear Limited in Product Development,
Global Marketing and Education.
Other current directorships:
Former listed directorships
(last 3 years):
None
None
07 DireCtors' rePort 13
07 DIRECTORs' REPORT
Name:
Title:
Bruce Hancox
Non-Executive Director
special responsibilities:
Chair, Audit and Risk Committee
Qualifications:
Bachelor of Commerce, Canterbury University New Zealand
Experience and expertise:
Bruce has over 35 years of corporate experience across a broad spectrum of
commerce, including 16 years with Brierley Investments Limited in New Zealand.
He held a number of senior roles at Brierley Investments as general manager and
chairman, and served on the board of a number of their subsidiaries in New Zealand,
Australia and the US.
Bruce has been a financial advisor to interests of Lang Walker since 2008. He serves
as a director of investments and wealth management at Walker Corporation Pty Ltd
and works with the Walker group of companies to pursue investment opportunities
outside the property market.
Other current directorships:
Director of Walker Group Holdings Pty Limited.
Former listed directorships
(last 3 years):
Name:
Title:
Carbonxt Group Limited (ASX:CG1)
Neuren Pharmaceuticals Limited (ASX: NEU)
BTC Health Limited (ASX:BTC)
Daniel spira
Independent Non-Executive Director
special Responsibilities:
Chair, Remuneration and Nomination Committee
Qualifications:
Bachelor of Commerce, University of New South Wales
Experience and expertise:
Daniel is the CEO of iNova Pharmaceuticals (since 2017) which is a leading
multinational consumer healthcare and pharmaceutical company with operations
across Asia Pacific and Africa. Previously he was at Bausch Health (2011-2015)
as Vice President and GM-North America (with responsibility for a portfolio of
businesses spanning Vision Care, Dermatology and Aesthetic Devices) and was also
Managing Director, Pacific region.
Prior to that, Daniel spent over 15 years at Johnson & Johnson Inc in various roles
including Vice President, Country Manager, Chief Marketing Officer and other
sales and marketing roles across the Asia Pacific, Europe/Middle East and North
American regions.
Other current directorships:
Former listed directorships
(last 3 years)
None
None
07 DireCtors' rePort 14
07 DIRECTORs' REPORT
Name:
Title:
Mark Compton
Independent Non-Executive Director
special responsibilities:
Member, Remuneration and Nomination Committee
Qualifications:
Bachelor of Science (Pharmacology, Physiology and Biochemistry) and an MBA,
University of New South Wales.
Fellow of the Australian Institute of Company Directors, the Australasian College of
Health Services Management and The Australian Institute of Management and the
Royal Society (New South Wales).
Experience and expertise:
Mark is Lord Prior of the International Order of St John and Chairman
of the Board of Trustees of St John International.
Mark is Chairman of Sonic Healthcare Limited, a global medical diagnostics and
healthcare organisation which is a Top 50 ASX listed entity. He is also Chairman of
St Luke’s Care Limited, a not for profit health and aged care organisation. Mark has
held various CEO and managing director roles, including at St Luke’s Care Limited,
Immune System Therapeutics Limited, Royal Flying Doctor Service of Australia,
SciGen Limited and Alpha Healthcare Limited. He is an Adjunct Professor at
Macquarie University in healthcare leadership and management (since 2012).
Other current directorships:
Chairman and Non-Executive Director of Sonic Healthcare Limited (ASX:
SHL). Chairman of the Board of Trustees of St John International and St
Luke’s Care Limited.
Former listed directorships
(last 3 years):
None
Name:
Title:
Aileen stockburger
Independent Non-Executive Director
special responsibilities:
Member, Audit and Risk Committee
Qualifications:
Bachelor of Science and MBA, The Wharton School, University of
Pennsylvania, Graduate AICD.
Experience and expertise:
Prior to joining Next Science, Aileen was the Worldwide Vice President of Business
Development for the DePuy Synthes Group of Johnson & Johnson, where she
oversaw the group’s merger and acquisition activities, including deal structuring,
negotiations, contract design and review, and deal terms. She led Johnson &
Johnson’s efforts to acquire Synthes for approximately $21 billion, Johnson &
Johnson’s largest medical device acquisition. She also led the efforts to divest the
DePuy Trauma business and acquire Micrus Endovascular. Aileen was also involved in
numerous other M&A transactions including Pfizer Consumer Healthcare (US$16.5
billion), Aveeno, BabyCenter, OraPharma, DePuy, DePuy Miket, Kodak Clinical
Diagnostics and Neutrogena.
Other current directorships:
Former listed directorships
(last 3 years):
None
None
07 DireCtors' rePort 15
07 DIRECTORs' REPORT
COMPANY sECRETARY
Gillian Nairn, BA/LLB, LLM, FGIA, has held the role of Company Secretary since 21 June 2018. Gillian is an
experienced corporate governance professional with more than 20 years legal and governance experience
gained in private practice and in various company secretarial roles, predominantly with listed entities,
in a variety of sectors including manufacturing, oil and gas, professional services and education.
MEETINGs OF DIRECTORs
The number of meetings held and attended by each of the Directors of the Company during the year ended
31 December 2019 were as follows:
Name of director
Board meetings
Remuneration and
Nomination Committee
Audit and Risk
Committee
George Savvides
Judith Mitchell
Bruce Hancox
Daniel Spira
Mark Compton
Aileen Stockburger
A
17
17
17
17
17
17
B
17
17
15
16
16
17
A
4
-
-
4
4
-
B
4
-
-
4
4
-
A
6
-
6
-
-
6
B
6
-
6
-
-
6
A – Number of meetings held when director was eligible to attend during the year.
B – Number of meetings attended during the time the director held office during the year.
DIRECTORs’ INTEREsTs
The relevant interest of each director in shares and options over such instruments issued by the Group, as notified
by the directors to the ASX in accordance with section 205G(1) of the Corporations Act 2001 at the date of this
report is as follows:
Director
George Savvides
Judith Mitchell
Bruce Hancox
Daniel Spira
Mark Compton
Aileen Stockburger
Total
Fully paid ordinary shares Number
share options Number
625,000
4,732,000
-
36,729
125,000
33,554
5,552,283
650,000
2,340,000
520,000
1,300,000
520,000
520,000
5,850,000
07 DireCtors' rePort 16
The directors are of the opinion that the services as
disclosed in note 32 to the financial statements do
not compromise the external auditor’s independence
requirements under the Corporations Act 2001 for the
following reasons:
• All non-audit services have been reviewed and
approved to ensure that they do not impact the
integrity and objectivity of the auditor; and
• None of the services undermine the general principles
relating to auditor independence as set out in APES
110 Code of Ethics for Professional Accountants
issued by the Accounting Professional and Ethical
Standards Board, including reviewing or auditing
the auditor’s own work, acting in a management or
decision-making capacity for the Company, acting as
advocate for the Company or jointly sharing economic
risks and rewards.
OFFICERs OF THE COMPANY WHO ARE FORMER
PARTNERs OF KPMG
No officer of the Company was an audit partner of KPMG,
being the auditors during the financial year, at a time
when the audit firm undertook an audit of the Company.
AUDITOR’s INDEPENDENCE DECLARATION
The auditor’s independence declaration is set out on page
27 and forms part of the directors’ report for the financial
year ended 31 December 2019.
AUDITOR
KPMG continues in office in accordance with section
327 of the Corporations Act 2001.
07 DIRECTORs' REPORT
sHAREs UNDER OPTION
At the date of this report, and following the share split, there
are 9,249,500 options over ordinary shares on issue (2018:
10,985,000 options), representing 5.1% (2018: 8.5%) of
the Company’s undiluted total share capital, granted to
employees and directors under an Equity Incentive Plan.
INDEMNITY AND INsURANCE OF OFFICERs
The Group has indemnified the directors and executives
of the Group for costs incurred, in their capacity as
a director or executive, for which they may be held
personally liable, except where there is
a lack of good faith.
During the financial year, the Group has paid a premium
in respect of a contract to insure the directors and
executives of the Company against a liability to the extent
permitted by the Corporations Act 2001. The contract of
insurance prohibits disclosure of the nature of the liability
and the amount of the premium.
INDEMNITY AND INsURANCE OF AUDITOR
The Company and the Group have not, during or since
the end of the financial year, indemnified or agreed to
indemnify the auditor of the Company or any related
entity against a liability incurred by the auditor.
During the financial year, the Company has not paid
a premium in respect of a contract to insure the auditor
of the company or any related entity.
PROCEEDINGs ON BEHALF OF THE COMPANY
No person has applied to the Court under section
237 of the Corporations Act 2001 for leave to bring
proceedings on behalf of the Company, or to intervene in
any proceedings to which the Company is a party for the
purpose of taking responsibility on behalf of the Company
for all or part of those proceedings.
NON-AUDIT sERVICEs
Details of the amounts paid or payable to the auditor
for non-audit services provided during the financial
year by the auditor are outlined in note 32 to the
financial statements.
The directors are satisfied that the provision of non-
audit services by the auditor during the financial year is
compatible with the general standard of independence for
auditors imposed by the Corporations Act 2001.
07 DireCtors' rePort 17
07 DIRECTORs' REPORT
REMUNERATION REPORT (AUDITED)
The remuneration report details the key management
personnel remuneration arrangements for the
consolidated entity, in accordance with the requirements
of the Corporations Act 2001 and its Regulations.
The remuneration report is set out under the
following main headings:
Remuneration governance
Key management personnel
service agreements and remuneration policy
Employee incentive arrangements and link between
performance and reward
share option plan
Remuneration of key management personnel
Key management personnel equity holdings
REMUNERATION GOVERNANCE
The Remuneration and Nomination Committee
currently comprises of:
Daniel spira (Chair)
George savvides
Mark Compton
The role and responsibilities, composition, structure
and membership requirements of the Remuneration
and Nomination Committee are documented in the
Remuneration and Nomination Committee Charter
available at www.nextscience.com/corp-governance.
The purpose of the Remuneration and Nomination
Committee is to assist the Board in ensuring that:
•
•
•
the Group’s remuneration policies and practices
enable the Group to fairly and responsibly attract,
retain, motivate and reward employees and directors
and comply with the law and the ASX Listing Rules;
the Board has and maintains an appropriate
balance of skills, knowledge, experience, expertise,
independence, diversity and commitment to
enable it to discharge its responsibilities and duties
effectively; and
the Company has in place an appropriate process for
periodically evaluating the performance of the Board,
its committees, each Director and the Company’s
senior executives. These reviews were undertaken
during the reporting period.
The Remuneration and Nomination Committee Charter
provides that the committee should comprise of at least
three members, all of whom are Non-Executive Directors
and a majority of whom are independent Directors and
a Chairman who is an independent Director and is not
Chairman of the Board.
The Chair of the Committee should be an independent
Director who is not Chairman of the Board.
The Committee will meet at least three times each year.
All of the current members of the Remuneration and
Nomination Committee are independent Non-Executive
Directors and the Chair of the Committee is not
Chairman of the Board.
KEY MANAGEMENT PERsONNEL
Key management personnel (KMP) are those persons
having authority and responsibility for planning, directing
and controlling the activities of the consolidated entity,
directly or indirectly, including all directors (non-executive
and executive) of the consolidated entity.
The directors and other key management personnel
(KMP) of the consolidated entity during or since the end
of the financial year were:
NON-EXECUTIVE DIRECTORs
George savvides
Bruce Hancox
Daniel spira
Mark Compton
Aileen stockburger
MANAGING DIRECTOR
Judith Mitchell
OTHER KEY MANAGEMENT PERsONNEL
Jacqueline Butler (Chief Financial Officer)
Matthew Myntti (Chief Technology Officer)
Jon swanson (Chief Operating Officer)
Byron Darroch (Executive Vice President, Partnerships:
until his engagement ceased on 31 August 2019)
07 DireCtors' rePort 18
07 DIRECTORs' REPORT
sERVICE AGREEMENTs AND REMUNERATION POLICY
The Board of Directors, in consultation with the Remuneration and Nomination Committee determines executive
remuneration considering competitiveness with the market whilst ensuring acceptability to shareholders.
Executive incentives comprise of fixed and variable elements linked to performance as detailed in this report.
During the financial year ended 31 December 2019, the Company engaged Julia Lipski to provide independent advice
in relation to the Company’s incentive plans for the executive team for a total fee including GST of $17,750. Any advice
prepared by Julia Lipski was provided to the Chair of the Remuneration and Nomination Committee, or directly to the
Board, as an input to the Board’s decision-making process. Julia Lipski did not make any remuneration recommendations
in relation to key management personnel.
sERVICE AGREEMENTs
Name:
Title:
Details:
Name:
Title:
Details:
Judith Mitchell
Managing Director
Ongoing service agreement inclusive of superannuation and to be reviewed annually
by the Company.
The Company may terminate the service agreement:
i. by giving a 3-month termination notice; or
ii. without notice, in the event of serious misconduct or for any other reason that enables summary
dismissal at law.
Judith is entitled to participate in the Company’s short term and long-term incentive plans.
Jacqueline Butler
Chief Financial Officer (CFO)
Ongoing service agreement inclusive of superannuation and to be reviewed annually
by the Company.
The Company may terminate the service agreement:
i. by giving a 3-month termination notice; or
ii. without notice, in the event of serious misconduct or for any other reason that enables summary
dismissal at law.
Jacqueline is entitled to participate in the Company’s short term and long-term incentive plans.
07 DireCtors' rePort 19
07 DIRECTORs' REPORT
EMPLOYMENT AGREEMENTs
Name:
Title:
Detail:
Name:
Title:
Details:
Dr Matthew Myntti
Chief Technology Officer (CTO)
Ongoing employment agreement to be reviewed annually by the Company.
The Company may terminate the employment agreement:
i. by giving 90 days written notice; or
ii. without notice, in the event of serious misconduct or for any other reason that enables summary
dismissal at law.
Matthew is entitled to participate in the Company’s short term and long-term incentive plans.
Jon swanson
Chief Operating Officer (COO)
Ongoing employment agreement to be reviewed annually by the Company.
The Company may terminate the employment agreement:
i. by giving 90 days written notice; or
ii. without notice, in the event of serious misconduct or for any other reason that enables summary
dismissal at law.
Jon is entitled to participate in the Company’s short term and long-term incentive plans.
sERVICE AGREEMENTs AND REMUNERATION POLICY
Name:
Title:
Details:
Byron Darroch
Executive Vice President Partnerships Remuneration
Employment agreement ceased on 31 August 2019.
NON-EXECUTIVE REMUNERATION
Each of the Non-Executive Directors has entered into appointment letters with Next Science confirming the terms of their
appointment and their roles and responsibilities. The appointment letters are on standard commercial terms.
Under the Constitution, the Board decides the amount paid to each Non-Executive Director as remuneration for their services
as a Director. However, under the ASX Listing Rules, the amount of fees paid to all Directors for their services (excluding, for
these purposes, the salary of any Executive Director) must not exceed in aggregate in any financial year the amount fixed
by the Company’s shareholders in general meeting. This amount has been fixed initially in the Company’s Constitution at
A$750,000 per annum and may only be varied by ordinary resolution in general meeting.
The Chairman, George Savvides receives AUD$250,000 per annum (inclusive of superannuation) and each Non-Executive
Director receives AUD$90,000 per annum (inclusive of superannuation), increased from AUD$60,000 on 1 May 2019.
Additionally, from 1 May 2019, Bruce Hancox and Daniel Spira received an additional amount of AUD$10,000 per
annum for the performance of their roles as Chairs of the Audit and Risk Committee and Remuneration and Nomination
Committee respectively.
07 DireCtors' rePort 20
07 DIRECTORs' REPORT
EMPLOYEE INCENTIVE ARRANGEMENTs AND LINK BETWEEN PERFORMANCE AND REWARD
sHORT TERM INCENTIVE (sTI) PLAN FOR EXECUTIVEs
LONG-TERM INCENTIVE (LTI) PLAN FOR EXECUTIVEs
The Managing Director, CFO, CTO, COO and Executive
Vice President, Partnerships were invited to participate in
the STI plan, effective from Admission to the ASX in April
2019. Participants of the plan, must be employed with the
Company, or any wholly owned subsidiary of the Company,
for at least six months during the plan year and still be
employed until after the announcement of Group’s results
to the ASX following each plan year. Participation is by
invitation from the Board and is not automatic. Participants
who resign or who are terminated before the end of the
plan year are not eligible for any payments.
The STI plan objectives are to:
•
reward executives for their contribution in ensuring
that the Group achieves its annual financial
performance targets;
• enhance the Group’s opportunity to attract,
motivate and retain high calibre and high performing
executives; and
•
link part of executive remuneration directly to the
achievement of the Group and individual KPIs.
The making of any payment under the STI plan is subject
to gateway hurdles relating to Group revenue, EBITDA and
individual performance. All payments made under the STI
Plan will be paid in cash.
The making of any payment under the STI plan is subject
to the achievement of all three gateway hurdles; at least
90% of a base consolidated revenue target; 100% of
a base consolidated EBITDA target; and an individual
performance rating of a least 3 out of 5.
The maximum STI opportunity is 100% of Total Fixed
Remuneration (TRF) for the Managing Director and
80% of TFR for the CFO, CTO, and COO. To receive
the maximum STI opportunity, executives must
achieve performance targets for consolidated revenue,
consolidated EBITDA and individual performance.
As a number of the members of the executive team
already have significant security holdings in Next Science
Limited, all payments under the STI Plan will be paid in cash
to ensure that STI opportunities operate as true incentives.
No STI payments were made in respect of the financial
year ended 31 December 2019 as revenue and EBITDA
targets were not achieved.
At the time of the Company’s IPO in April 2019, the
Board of the Company established a long-term incentive
plan, to be paid by way of Performance Rights to eligible
participants (LTI plan). The Managing Director, CFO, CTO
and COO are entitled to participate in the LTI plan.
There will be no Performance Rights issued in relation to
the financial year ending 31 December 2019 due to targets
not having been achieved. The LTI plan will operate in future
years with grants based on the relevant revenue and/or other
Group performance measures. It is not intended to change
the size of the grant to participants or the vesting conditions.
Provided Group performance hurdles are met in the
financial year ending 31 December 2020, and thereafter,
the Managing Director will be granted performance
rights worth 200% of her Total Fixed Remuneration (TFR)
and the other participants in the plan will be granted
performance rights worth 150% of their TFR.
The number of Performance Rights granted will be based
on the volume weighted average price (VWAP) of shares
for the period 1 January until the day before the release on
ASX of the Company’s relevant preliminary full year results.
Subject to vesting conditions being satisfied, the
Performance Rights will automatically convert to
Shares, on a one-for one basis, three years after the
date on which they are granted. If the vesting conditions
have not been satisfied by this date, the Performance
Rights will automatically lapse. Participants must still be
employed by the Company or a wholly owned subsidiary
at the date of vesting. The number of Performance
Rights that vest is dependent on satisfaction of the
following vesting conditions:
•
if the compound total shareholder return (TSR) is less
than 15% per annum, no Performance Right will vest;
• 50% of Performance Rights will vest if the compound
annual TSR is at least 15% per annum; and
• 100% of Performance Rights will vest if the
compound annual TSR is at least 30% per annum.
07 DireCtors' rePort 21
07 DIRECTORs' REPORT
sHARE OPTION PLAN
Prior to the Company being listed on the ASX, the Group had an Equity Incentive Plan (ECP) in place for US
employees and an Employee Share Options Plan (ESOP) for Australian employees and directors (see note 29).
With the exception of the Managing Director, Judith Mitchell, as described below, the only vesting condition
applicable to the options granted under these earlier plans was that the individual be employed by the Company,
or any wholly owned subsidiary of the Company at the vesting date.
There were no options over ordinary shares issued as compensation to directors and key management personnel
during the year ended 31 December 2019. All remaining options over ordinary shares granted to directors and key
management personnel in the previous years and their status are set out below:
IN UsD
KMP
EXECUTIVE DIRECTOR
Grant date
Expiry date
Vesting date
Fair value at grant date
Exercise price
PRE-sHARE
sPLIT
POsT-sHARE
sPLIT
Judith Mitchell
16 Apr 2018
16 April 2021
Various (i)
1,284
0.20
NON-EXECUTIVE DIRECTORs
George Savvides
17 Dec 2018
17 Dec 2023
17 Dec 2021
Bruce Hancox
17 Dec 2018
17 Dec 2023
17 Dec 2021
16 Apr 2018
16 Apr 2021
16 Apr 2018
2,138
2,138
1,284
17 Dec 2018
17 Dec 2023
17 Dec 2021
2,138
Daniel Spira
(Tranche 1)
Daniel Spira
(Tranche 2)
Mark Compton
17 Dec 2018
17 Dec 2023
17 Dec 2021
Aileen Stockburger
17 Dec 2018
17 Dec 2023
17 Dec 2021
OTHER KMP
Matthew Myntti
-
-
-
Jon Swanson
17 Dec 2018
17 Dec 2023
17 Dec 2020
Jacqueline Butler
16 Apr 2018
16 Apr 2021
16 Apr 2019
Byron Darroch
-
-
-
2,138
2,138
-
2,138
1,284
-
0.33
0.33
0.20
0.33
0.33
0.33
-
0.33
0.20
-
i. There are various vesting conditions applicable to the options granted to Judith Mitchell as Managing Director,
which include financial and non-financial conditions.
07 DireCtors' rePort 22
0.42
0.56
0.56
0.42
0.56
0.56
0.56
-
0.56
0.42
-
07 DIRECTORs' REPORT
The table below provides details of movements in share options for key management personnel for the year ended
31 December 2019. As the Company listed in April 2019 with no remuneration report required for the prior year,
comparatives for the year ended 31 December 2018 have not been provided.
KMP
Balance as at
1 Jan 2019 No.
Post share split
No. (i) (ii)
Granted/
exercised No.
Balance as at 31
Dec 2019 No.
Vested and
exercisable No.
Unvested No.
EXECUTIVE DIRECTOR
Judith Mitchell
360
2,340,000
NON-EXECUTIVE DIRECTORs
George Savvides
Bruce Hancox
Daniel Spira
Mark Compton
Aileen Stockburger
OTHER KMP
Matthew Myntti
Jon Swanson
Jacqueline Butler
Byron Darroch
100
80
200
80
80
-
100
100
-
650,000
520,000
1,300,000
520,000
520,000
-
650,000
650,000
-
-
-
-
-
-
-
-
-
-
-
2,340,000
1,560,000
780,000
650,000
520,000
-
-
1,300,000
1,040,000
520,000
520,000
-
650,000
650,000
-
-
-
-
-
650,000
-
650,000
520,000
260,000
520,000
520,000
-
650,000
-
-
i. On 24 January 2019, a share split was completed on the basis that every one ordinary share option on issue
in the Company be divided into 6,500 ordinary options.
ii. There were no share options granted or exercised from 1 January 2019 until the share split on 24 January 2019.
07 DireCtors' rePort 23
07 DIRECTORs' REPORT
REMUNERATION OF KEY MANAGEMENT PERsONNEL
The table below details remuneration for key management personnel based on the policies discussed in this
report for the year ended 31 December 2019. As the Company listed in April 2019 with no remuneration report
required for the prior year, comparatives for the year ended 31 December 2018 have not been provided.
YEAR ENDED 31 DECEMBER 2019
IN UsD
KMP
Cash
salary
and fees
Other cash
benefits
(i), (ii), (iii)
Long
service
Leave
super-
annuation
share-based
payments
Total Performance
Related
(vi)
Other
(iv)
shares in lieu
of fees (v)
$
$
$
$
%
$
EXECUTIVE DIRECTOR
Judith Mitchell
254,461
NON-EXECUTIVE DIRECTORs
George Savvides
159,577
Bruce Hancox
Daniel Spira
Mark Compton
Aileen Stockburger
56,216
10,751
50,685
10,751
$
-
-
-
-
-
-
OTHER KMP
Matthew Myntti
304,911
44,665
Jon Swanson
Jacqueline Butler
Byron Darroch
250,000
166,817
120,447
-
-
69,057
1,384,616
113,722
14,467
162,985
14,454
3,982
-
4,815
-
-
-
14,453
14,649
52,022
41,618
20,809
41,618
41,618
-
91,736
29,022
-
-
-
-
-
-
-
-
-
-
-
-
$
-
-
-
431,913
226,053
101,816
49,326
80,886
-
44,749
97,118
97,118
-
-
-
-
349,576
341,736
210,292
204,153
-
-
-
-
-
-
13%
-
-
-
66,820
481,428
94,075
2,140,661
i. For the year ended 31 December 2019 threshold Group performance targets were not met and hence no amounts were
awarded to key management personnel under the STI plan or the LTI plan.
ii. Other cash benefits include an amount of $69,057 paid to Byron Darroch as part of the arrangements agreed in respect
of the termination of his engagement on 31 August 2019.
iii. Prior to the existence of the STI plan, Matthew Myntti was awarded a discretionary bonus of $44,665 during the year,
paid in November 2019.
iv. The value of the share options granted to key management personnel is calculated at the grant date using the
Black-Scholes formula. This value is allocated to each reporting period evenly over the period from grant date to vesting
date. The value disclosed is the portion of the fair value of the options recognised as an expense in each reporting period.
v. Amounts included under share-based payments for Daniel Spira and Aileen Stockburger are in relation to shares paid in
lieu of their Directors’ fees. The Company received confirmation from the ASX that a waiver of ASX Listing Rule 10.11 had
been given to allow Aileen and Daniel, as Non-Executive Directors, to elect to be issued shares in lieu of their fees for the
first 12 months after the Company’s admission to the ASX.
vi. Disclosed above are the relative proportions of each individual’s remuneration that are related to performance;
the remaining proportion being fixed remuneration.
07 DireCtors' rePort 24
07 DIRECTORs' REPORT
KEY MANAGEMENT PERsONNEL EQUITY HOLDINGs
The table below details movements in equity holdings for KMP for the year ended 31 December 2019.
As the Company listed in April 2019 with no remuneration report required for the prior year, comparatives
for the year ended 31 December 2018 have not been provided.
YEAR ENDED 31 DECEMBER 2019
IN UsD
KMP
EXECUTIVE DIRECTOR
Judith Mitchell
NON-EXECUTIVE DIRECTORs
George Savvides (iii)
Bruce Hancox
Daniel Spira (iv)
Mark Compton (iii)
Aileen Stockburger (iv)
OTHER KMP
Matthew Myntti
Jon Swanson
Jacqueline Butler
Byron Darroch (v)
Balance as at
1 Jan 2019 No.
Post share-split
No. (i) (ii)
Purchased/other
changes during the
year No.
Balance as at
31 Dec 2019 No.
728
4,732,000
-
4,732,000
-
-
-
-
-
-
-
-
-
-
3,178
20,657,000
-
-
100
-
-
650,000
625,000
625,000
-
36,729
125,000
33,554
-
-
-
-
-
36,729
125,000
33,554
20,657,000
-
-
650,000
i. On 24 January 2019, a share split was completed on the basis that every one ordinary share on issue in the Company be divided
into 6,500 ordinary shares.
ii. There were no other movements in equity holdings from 1 January 2019 until the share split on 24 January 2019.
iii. George Savvides and Mark Compton received shares on the conversion of their converting notes (see note 20) post the share-split.
iv. The Company has been granted a waiver from Listing Rule 10.11 to the extent necessary to permit the Company to issue shares
without shareholder approval to non-executive directors, Aileen Stockburger and Daniel Spira, in lieu of directors’ fees for the first
12 months after the Company’s admission to the official list of the ASX. The shares issued are fully paid ordinary shares in the capital
of the Company on the same terms and conditions as the Company’s existing shares and issued at the Offer Price of AUD $1 for the
first quarter after admission. For later quarters, the shares are being issued at the 10 day Volume Weighted Average Price (VWAP)
for the first 10 trading days of the relevant quarter.
v. Byron Darroch holds 650,000 ordinary shares which are funded through a shareholder loan. The balance of $180,357 was
outstanding as at 31 December 2019 (see note 13), due for payment in April 2020.
THIs CONCLUDEs THE REMUNERATION REPORT (AUDITED).
This report is made in accordance with a resolution of directors, pursuant to section 298(2)(a) of the Corporations Act 2001.
On behalf of the directors:
George savvides Chairman – Dated at Sydney this 28th day of February 2020
07 DireCtors' rePort 25
07
07 LEAD AUDITOR's INDEPENDENCE DECLARATION
08
07 LeaD auDitor's inDePenDenCe DeCLaration 27
08 CONsOLIDATED sTATEMENT OF PROFIT OR LOss
AND OTHER COMPREHENsIVE INCOME
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2019
IN UsD
Revenue
Cost of sales
Gross profit
Other income
Employee expenses
Research and development
Sales and marketing
Consultancy and regulatory
General and administration expenses
Depreciation and amortisation expenses
Results from operating activities
Finance income
Finance costs
Net finance income/(expense)
Loss before income tax
Income tax expense
Loss for the year
Other comprehensive income
Foreign currency translation differences for foreign operations
Total comprehensive income for the year
Earnings per share
From continuing operations
. Basic earnings
. Diluted earnings
The notes on pages 34 to 64 are an integral part of these financial statements.
Note
6
7
8(a)
8(b)
8(c)
9
10
11
33
33
2019
2018
4,060,800
(550,480)
3,510,320
35,365
(7,906,151)
(1,731,653)
(650,318)
(2,137,717)
(3,055,729)
(565,239)
2,844,502
(370,489)
2,474,013
-
(10,380,125)
(1,242,452)
(499,050)
(1,401,416)
(2,521,018)
(244,466)
(12,501,122)
(13,814,514)
278,718
(2,129,424)
(1,850,706)
145,180
(78,170)
67,010
(14,351,828)
(13,747,504)
-
-
(14,351,828)
(13,747,504)
(971,282)
(249,730)
(15,323,110)
(13,997,234)
Cents
(8.65)
(8.65)
Cents
(11.16)
(11.16)
07 ConsoLiDateD statement of Profit or Loss anD other ComPrehensive inCome 28
09 CONsOLIDATED sTATEMENT OF FINANCIAL POsITION
As AT 31 DECEMBER 2019
IN UsD
AssETs
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Other current assets
Total current assets
Non-current assets
Trade and other receivables
Property, plant and equipment
Intangible assets
Right of use asset
Total non-current assets
Total assets
LIABILITIEs
Current liabilities
Trade and other payables
Loans and borrowings
Contract liabilities
Lease liabilities
Employee benefits
Total current liabilities
Non-current liabilities
Contract liabilities
Lease liabilities
Employee benefits
Total non-current liabilities
Total liabilities
Net assets
EQUITY
Share capital
Common control reserve
Foreign currency translation reserve
Share option reserve
Converting notes reserve
Accumulated losses
Total equity
Note
2019
2018
12(a)
13
14
15
13
16
17
18
19
20
21
22
24
21
22
24
25(a)
25(b)
25(b)
25(b)
25(b)
16,910,605
1,640,382
400,360
332,504
19,283,851
36,656
812,587
2,164,345
402,291
3,415,879
22,699,730
1,076,672
-
375,106
196,442
69,552
1,717,772
1,328,809
286,012
3,691
1,618,512
3,336,284
7,211,102
784,358
308,957
379,404
8,683,821
124,129
638,634
1,183,490
-
1,946,253
10,630,074
1,152,916
7,069,417
222,130
-
108,835
8,553,298
1,670,896
-
2,143
1,673,039
10,226,337
19,363,446
403,737
90,693,590
(42,596,715)
(1,198,574)
1,648,704
-
(29,183,559)
19,363,446
56,589,405
(42,596,715)
(227,292)
968,831
415,562
(14,746,054)
403,737
The notes on pages 34 to 64 are an integral part of these financial statements.
07 ConsoLiDateD statement of finanCiaL Position 29
10
10 CONsOLIDATED sTATEMENT OF CHANGEs IN EQUITY
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2019
IN UsD
share
capital
Common
control
reserve
Foreign
currency
translation
reserve
share
option
reserve
Converting
notes
reserve
Accumulated
losses
Total
equity
56,589,405
(42,596,715)
(227,292)
968,831
415,562
(14,746,054)
403,737
-
-
-
-
-
(85,677)
(85,677)
56,589,405
(42,596,715)
(227,292)
968,831
415,562
(14,831,731)
318,060
Balance at
1 January 2019
AASB 16 adjustment
(net of tax (Note 5)
Restated total at the
beginning of the year
Loss for the year
OTHER COMPREHENsIVE INCOME
Foreign currency
translation differences
Total other
comprehensive income
Total comprehensive
income for the year
-
-
-
-
-
-
-
-
-
(971,282)
(971,282)
(971,282)
TRANsACTIONs WITH OWNERs, RECORDED DIRECTLY IN EQUITY
Share-based payment
FX impact
Converting notes issued
-
-
-
Issue of ordinary shares
35,626,554
Capital raising costs
(1,522,369)
34,104,185
Total transactions
with owners
Balance at 31
December 2019
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
652,826
27,047
-
-
-
-
-
-
-
-
-
(415,562)
-
-
679,873
(415,562)
(14,351,828)
(14,351,828)
-
-
(971,282)
(971,282)
(14,351,828)
(15,323,110)
-
-
-
-
-
-
652,826
27,047
(415,562)
35,626,554
(1,522,369)
34,368,496
90,693,590 (42,596,715)
(1,198,574)
1,648,704
-
(29,183,559)
19,363,446
The notes on pages 34 to 64 are an integral part of these financial statements.
10 ConsoLiDateD statement of Changes in equity 30
10 CONsOLIDATED sTATEMENT OF CHANGEs IN EQUITY
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2018
IN UsD
share
capital
Common
control
reserve
Foreign
currency
translation
reserve
share
option
reserve
Converting
notes
reserve
Accumulated
losses
Total
equity
46,064,500
(42,596,715)
22,438
224,734
-
-
-
-
46,064,500
(42,596,715)
22,438
224,734
-
-
-
-
-
-
-
-
-
(48,550)
3,666,407
(950,000)
(950,000)
(998,550)
2,716,407
(13,747,504)
(13,747,504)
-
-
(249,730)
(249,730)
(13,747,504)
(13,997,234)
-
-
-
-
-
-
734,865
9,232
415,562
10,792,100
(267,195)
11,684,564
-
-
-
-
-
-
-
-
-
(249,730)
(249,730)
(249,730)
-
-
-
-
734,865
9,232
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
415,562
-
-
744,097
415,562
Balance at
1 January 2018
AASB 15 adjustment
Restated total at the
beginning of the year
Loss for the year
OTHER COMPREHENsIVE INCOME
Foreign currency
translation differences
Total other
comprehensive income
Total comprehensive
income for the year
Issue of share options
FX impact
Converting notes issued
-
-
-
Issue of ordinary shares
10,792,100
Capital raising costs
(267,195)
10,524,905
Total transactions
with owners
Balance at
31 December 2018
56,589,405
(42,596,715)
(227,292)
968,831
415,562
(14,746,054)
403,737
TRANsACTIONs WITH OWNERs, RECORDED DIRECTLY IN EQUITY
The notes on pages 34 to 64 are an integral part of these financial statements.
10 ConsoLiDateD statement of Changes in equity 31
11 CONsOLIDATED sTATEMENT OF CAsH FLOWs
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2019
IN UsD
CAsH FLOWs UsED IN OPERATING ACTIVITIEs
Receipts from customers
Payments to suppliers and employees
Payments for research and development
Interest received
Grant income
Note
2019
2018
3,262,752
(13,202,785)
(2,651,188)
224,299
35,365
3,133,314
(14,156,348)
(1,242,452)
12,573
-
Net cash used in operating activities
12(b)
(12,331,556)
(12,252,913)
CAsH FLOWs UsED IN INVEsTING ACTIVITIEs
Payments for intangible assets
Payments for property, plant and equipment
Net cash used in investing activities
CAsH FLOWs FROM FINANCING ACTIVITIEs
Proceeds from issue of ordinary shares
Proceeds from issue of converting notes
Capital raising costs
Repayment of lease liabilities
Net cash from financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of the year
Effect of exchange rate changes on cash and cash equivalents
Cash and cash equivalents at end of the year
The notes on pages 34 to 64 are an integral part of these financial statements.
17
16
25(a)
20
12(a)
12(a)
(1,233,341)
(374,683)
(1,608,024)
25,541,869
70,798
(1,717,999)
(210,334)
23,684,334
9,744,754
7,211,102
(45,251)
16,910,605
(647,926)
(344,849)
(992,775)
10,792,100
7,743,581
(556,689)
-
17,978,992
4,733,304
2,597,767
(119,969)
7,211,102
10 ConsoLiDateD statement of Cash fLows 32
08
12
12 NOTEs TO FINANCIAL sTATEMENTs
12
14
1. CORPORATE INFORMATION
Next Science Limited (the ‘Company’) is a company
domiciled in Australia.
The key judgements, estimates and assumptions are
discussed below:
Impairment of non-financial assets
The Group is a for-profit entity and primarily involved
in the research, development and commercialisation of
technologies which solve bacterial related issues.
These consolidated financial statements comprise the
Company and its subsidiaries (collectively the ‘Group’
and individually ‘Group companies’) for the year ended
31 December 2019 and comparative information for the
year ended 31 December 2018.
2. BAsIs OF PREPARATION
2a. sTATEMENT OF COMPLIANCE
The consolidated financial statements are general
purpose financial statements which have been
prepared in accordance with AASBs adopted by the
Australian Accounting Standards Board (‘AASB’) and
the Corporations Act 2001. The consolidated financial
statements comply with International Financial Reporting
Standards (‘IFRS’) adopted by the International
Accounting Standards Board (‘IASB’).
The financial statements were approved by the Board of
Directors and authorised for issue on 28 February 2020.
2b. BAsIs OF MEAsUREMENT
The financial statements have been prepared on
a historical cost basis.
2c. FUNCTIONAL AND PREsENTATION CURRENCY
The financial statements are presented in United States
Dollars, which is the Group’s presentation currency.
Entities within the Group hold functional currencies of
AUD or USD as appropriate to the individual entity.
2d. UsE OF JUDGEMENTs AND EsTIMATEs
In preparing these financial statements, management has
made judgements, estimates and assumptions that affect
the application of the Group’s accounting policies and the
reported amounts of assets, liabilities, income, expenses
and disclosure of contingent liabilities. Actual results may
differ from these estimates. Estimates and underlying
assumptions are reviewed on an ongoing basis. Revisions
to accounting estimates are recognised prospectively.
The consolidated entity assesses impairment of non-
financial assets at each reporting date by evaluating
conditions specific to the consolidated entity and to
the particular asset that may lead to impairment. If an
impairment trigger exists, the recoverable amount of the
asset is determined. This involves fair value less costs of
disposal or value-in-use calculations, which incorporate a
number of key estimates and assumptions.
Recoverable amount being the net amount of discounted
future cash flows materially exceeds the carrying value
of non-current assets. The recoverable amount of
this business, at balance date, was estimated based on
its value in use.
Value in use for the cash-generating units (‘CGU’) was
determined by discounting the future cashflows to be
generated from the CGUs and is based on the following
key assumptions:
• Cashflows were projected based on forecast operating
results over a 5 year period.
• Average annual revenue growth rates agreed in
revenue contracts with customers and approved
budgets were used for revenue projections. This
growth was referenced against the average annual
historical growth rates.
• Discount rate of 10% based on the weighted average
cost of capital
Estimation of useful lives of assets
The consolidated entity determines the estimated useful
lives and related depreciation and amortisation charges for
its property, plant and equipment and finite life intangible
assets. The useful lives could change significantly as a
result of technical innovations or some other event. The
depreciation and amortisation charge will increase where
the useful lives are less than previously estimated lives, or
technically obsolete or non-strategic assets that have been
abandoned or sold will be written off or written down.
12 notes to finanCiaL statements 34
12 NOTEs TO FINANCIAL sTATEMENTs
12
Leases
For the purpose of measuring the right-of-use asset lease
term, duration is estimated. This requires judgement and
is based on an assessment as to whether an option to
extend or terminate a lease will be exercised. The Group
must also consider each contract held to assess whether
a contract includes a lease under AASB 16.
Recovery of deferred tax assets
Deferred tax assets for tax losses are only recognised
if the Group considers it is probable that future taxable
amounts will be available to utilise those tax losses against.
2e. GOING CONCERN
The financial report has been prepared on a going
concern basis, which assumes continuity of normal
business activities and the realisation of assets and
settlement of liabilities in the ordinary course of business
for a period of at least twelve months from the date this
financial report is approved.
For the financial year ended 31 December 2019,
the Group incurred a loss of $14,351,828 and had
net cash outflows from operations of $12,331,556.
As at 31 December 2019, the Group had net current
asset and net asset positions of $17,566,079 and
$19,363,446 respectively.
The Group raised AUD$35 million after successfully
completing an Initial Public Offering (‘IPO’) in April 2019.
As at 31 December 2019, the Group has cash of $16.9m
which is expected to be sufficient to fund its operations
and activities for a period of at least twelve months from
the date of signing this financial report.
After considering the above, the Directors have concluded
that the Group will be able to fulfil all obligations as and
when they fall due for the foreseeable future, being
at least twelve months from the date of signing this
financial report.
3. sIGNIFICANT ACCOUNTING POLICIEs
This is the first set of the Group’s annual financial
statements in which AASB 16 Leases has been applied.
Changes to accounting policies are described in note 5.
The Group has consistently applied the following accounting
policies to all periods in these financial statements.
3a. BAsIs OF CONsOLIDATION
i. BUsINEss COMBINATIONs
The Group accounts for business combinations using
the acquisition method when control is transferred to
the Group, unless it is a combination involving entities
or businesses under common control. The consideration
transferred in the acquisition is generally measured at
fair value, as are the identifiable net assets acquired.
Any goodwill that arises is tested annually for impairment.
Any gain on a bargain purchase is recognised in profit
or loss immediately. Transaction costs are expensed
as incurred, except if related to the issue of debt or
equity securities.
Common control transactions record assets and liabilities
acquired at their book value at the date of acquisition,
rather than their fair value. The difference between
the fair value of the consideration given and the carrying
value of the assets and liabilities acquired is recognised
as a common control reserve.
The consideration transferred does not include amounts
related to the settlement of pre-existing relationships.
Such amounts are generally recognised in profit or loss.
ii. sUBsIDIARIEs
Subsidiaries are entities controlled by the Group.
The Group controls an entity when it is exposed to,
or has rights to, variable returns from its involvement
with the entity and has the ability to affect those
returns through its power over the entity. The financial
statements of subsidiaries are included in the consolidated
financial statements from the date on which control
commences until the date on which control ceases.
iii. LOss OF CONTROL
When the Group loses control over a subsidiary,
it derecognises the assets and liabilities of the
subsidiary, and any related non-controlling interest
and other components of equity. Any resulting gain
or loss is recognised in profit or loss. Any interest
retained in the former subsidiary is measured at
fair value when control is lost.
iv. TRANsACTIONs ELIMINATED ON CONsOLIDATION
Intra-group balances and transactions, and any
unrealised income and expenses arising from intra-group
transactions, are eliminated. Unrealised gains arising
from transactions with equity-accounted investees are
eliminated against the investment to the extent of the
Group’s interest in the investee. Unrealised losses are
eliminated in the same way as unrealised gains, but only
to the extent that there is no evidence of impairment.
12 notes to finanCiaL statements 35
12 NOTEs TO FINANCIAL sTATEMENTs
3b. FOREIGN CURRENCY
i. FOREIGN CURRENCY TRANsACTIONs
Transactions in foreign currencies are translated to the
functional currency of the Group at exchange rates at the
dates of the transactions.
Monetary assets and liabilities denominated in foreign
currencies are translated into the functional currency at
the exchange rate at the reporting date. Non-monetary
assets and liabilities that are measured at fair value in
a foreign currency are translated into the functional
currency at the exchange rate when the fair value was
determined. Non-monetary items that are measured
based on historical cost in a foreign currency are translated
at the exchange rate at the date of the transaction.
Foreign currency differences are generally recognised in
profit or loss and presented within finance costs.
ii. FOREIGN CURRENCY OPERATIONs
The assets and liabilities of foreign operations, including
goodwill and fair value adjustments arising on acquisition,
are translated into the presentation currency at the
exchange rates at the reporting date. The income and
expenses of foreign operations are translated into the
functional currency at the average exchange rates for
the period, unless exchange rates fluctuated significantly
during that period, in which case the exchange rates at
the dates of the transaction are used.
ii. TRANsFER OF GOODs
Title and control pass to the customer at the point when
the Group fulfils its obligation to deliver and goods
are available at the customer’s premises. As such, the
performance obligation (including the license) transfers at
the point in time when each good is delivered.
Therefore, revenue is recognised at the point in time
when the product is delivered.
iii. MEAsUREMENT OF TRANsACTION PRICE
Consideration of the contract can comprise a fixed
element (upfront payment plus minimum annual purchase
amounts) and variable elements (milestone payments).
Under AASB 15 the variable consideration is only included
in the transaction price if it is ‘highly probable that a
significant reversal in the amount of cumulative revenue
recognised will not occur’.
In the case where milestone payments are received upon
signing the contract and are not subject to regulatory
approval, these amounts will be initially recognised as contract
liabilities to be recognised over the life of the contract
once product sales have commenced. However, where the
milestone payments are subject to regulatory approval, for
the variable consideration to be deemed ‘most likely’, this will
only be included once regulatory approval has been received
and recognised over the remaining life of the contract.
Foreign currency differences are recognised in OCI and
accumulated in the translation reserve.
3d. EMPLOYEE BENEFITs
i. sHORT-TERM EMPLOYEE BENEFITs
3c. REVENUE FROM CONTRACTs
WITH CUsTOMERs
Revenue from contracts with customers is recognised
when a customer obtains control of the goods or services
and when performance obligations have been satisfied
assessing the following criteria:
i. IDENTIFICATION OF DIsTINCT ELEMENTs AND
sEPARATE PERFORMANCE OBLIGATIONs
In the case where there the customer contract includes
a sublicense and transfer of goods the assessment must
be made as to whether a separate performance obligation
exists for each element. For current contracts held,
whilst a license to specific IP has been given related to the
Group’s product, this only includes rights to distribute, not
to use, the IP to manufacture the product.
Therefore, the licence transferred is not deemed to be a
distinct element of the contract and only one performance
obligation exists to transfer product to the distributor.
Short-term employee benefits are benefits (other than
termination benefits) that are expected to be settled
within 12 months of the end of the financial year in which
employees render the related service. Short-term employee
benefits include salaries and wages plus related on-costs such
as payroll tax, superannuation and workers compensation
insurance and are measured at the undiscounted amounts
expected to be paid when the obligation is settled.
ii. LONG-TERM EMPLOYEE BENEFITs
Long-term employee benefits include employees’ long
service leave and annual leave entitlements not expected to
be settled within 12 months of the end of the financial year
in which employees render the related service. Other long-
term employee benefits are measured at the present value
of the expected future payments to be made to employees.
Expected future payments incorporate anticipated
future wage and salary levels, duration of service and
employee departures and are discounted at rates
determined by reference to market yields at the end of the
reporting period on corporate bonds that have maturity
12 notes to finanCiaL statements 36
12 NOTEs TO FINANCIAL sTATEMENTs
dates that approximate the terms of the obligations.
Any remeasurements for changes in assumptions of
obligations for long-term employee benefits are recognised
in profit or loss in the periods in which the changes occur.
iii. DEFINED CONTRIBUTION PLANs
A defined contribution plan is a post-employment benefit
plan under which an entity pays fixed contributions into
a separate entity and will have no legal or constructive
obligation to pay further amounts. Obligations for
contributions to employees’ defined contribution plans
are recognised as an expense as the related service is
provided. Prepaid contributions are recognised as an asset
to the extent that a cash refund or a reduction in future
payments is available.
iv. sHARE-BAsED PAYMENT ARRANGEMENTs
The grant date fair value of options granted to employees
(equity-settled) is recognised as an employee expense,
with a corresponding increase in equity, over the period
in which the employees become entitled to the options.
The amount recognised as an expense is adjusted to
reflect the number of options for which the related service
and non-market performance conditions are expected
to be met, such that the amount ultimately recognised
is based on the number of options that meet the related
service and non-market performance conditions at
the vesting date.
3e. FINANCE INCOME AND FINANCE COsTs
Finance income comprises interest income, dividend
income and foreign currency gains. Interest income
is recognised in profit or loss as it accrues using the
effective interest method.
The ‘effective interest rate’ is the rate that exactly
discounts estimated future cash payments or receipts
through the expected life of the financial instruments to
the gross carrying amount of the financial asset or the
amortised cost of the financial asset.
In calculating income and expense, the effective interest
rate is applied to the gross carrying amount of the asset
(when the asset is not credit-impaired) or to the amortised
cost of the liability. However, for financial assets that have
become credit-impaired subsequent to initial recognition
interest income is calculated by applying the effective
interest rate to the amortised cost of the financial
asset. If the asset is no longer credit impaired, then the
calculation of interest income reverts to the gross basis.
Finance costs comprise interest expense on borrowings,
lease liabilities and converting notes, foreign currency
losses and impairment losses recognised on financial assets.
Foreign exchange gains and losses on intercompany assets
and liabilities that are not eliminated upon consolidation are
recognised in OCI. Borrowing costs that are not directly
attributable to the acquisition, construction or production
of a qualifying asset are recognised in profit or loss using
the effective interest method.
Interest expenses includes interest in relation to lease
liabilities and is calculated based on the bank borrowing
rate as appropriate for the lease contract, with a range
of 5.4% to 5.5% on current leases held.
Foreign currency gains and losses are reported on a net
basis as either finance income or finance cost depending
on whether foreign currency movements are in a net gain
or net loss position.
3f. INCOME TAX
Income tax expense comprises current and deferred tax.
It is recognised in profit or loss except to the extent that
it relates to a business combination, or items recognised
directly in equity or in OCI.
The amount of current tax payable or receivable is the best
estimate of the tax amount expected to be paid or received.
i. CURRENT TAX
Current tax comprises the expected tax payable or
receivable on the taxable income or loss for the year and
any adjustment to tax payable or receivable in respect of
previous years. It is measured using tax rates enacted or
substantively enacted at the reporting date. Current tax
also includes any tax liability arising from dividends.
Current tax assets and liabilities are offset only if certain
criteria are met.
ii. DEFERRED TAX
Deferred tax is recognised in respect of temporary
differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts
used for taxation purposes. Deferred tax is not recognised
for temporary differences on the initial recognition of
assets or liabilities in a transaction that is not a business
combination and that affects neither accounting nor
taxable profit or loss, or on taxable temporary differences
arising on the initial recognition of goodwill.
Deferred tax assets are recognised for unused tax losses,
tax credits and deductible temporary differences, to the
extent that it is probable that future taxable profits will be
available against which they can be utilised. Deferred tax
assets are reviewed at each reporting date and are reduced
to the extent that it is no longer probable that the related
tax benefit will be realised; such reductions are reversed
when the probability of future taxable profits improves.
12 notes to finanCiaL statements 37
12 NOTEs TO FINANCIAL sTATEMENTs
Unrecognised deferred tax assets are reassessed at
each reporting date and recognised to the extent that it
has become probable that future taxable profits will be
available against which they can be used.
Deferred tax is measured at the tax rates that are
expected to be applied to temporary differences when
they reverse, using tax rates enacted or substantively
enacted at the reporting date.
The measurement of deferred tax reflects the tax
consequences that could follow the manner in which the
Group expects, at the reporting date, to recover or settle
the carrying amount of its assets and liabilities.
Deferred tax assets and liabilities are offset only if certain
criteria are met.
3g. INVENTORIEs
Inventories are measured at the lower of cost and net
realisable value. The cost of inventories is based on the
first in, first out principle.
3h. PROVIsIONs
A provision is recognised if, as a result of a past event,
the Group has a present legal or constructive obligation
that can be estimated reliably and if it is probable that an
outflow of economic benefits will be required to settle the
obligation. Provisions are determined by discounting the
expected future cash flows at a pre-tax rate that reflects
current market assessments of the time value of money
and the risks specific to the liability. The unwinding of the
discount is recognised as a finance cost.
3i. PROPERTY, PLANT AND EQUIPMENT
i. RECOGNITION AND MEAsUREMENT
Items of property, plant and equipment are measured
at cost less accumulated depreciation and accumulated
impairment losses. Cost includes expenditure that is directly
attributable to the acquisition of the asset. If significant
parts of an item of property, plant and equipment have
different useful lives, they are accounted for as separate
items (major components) of property, plant and
equipment. Any gain and loss on disposal of an item of
property, plant and equipment is recognised in profit or loss.
ii. sUBsEQUENT EXPENDITURE
Subsequent expenditure is capitalised only when it is
probable that the future economic benefits associated
with the expenditure will flow to the Group.
iii. DEPRECIATION
Depreciation is calculated based on the cost of property,
plant and equipment less their estimated residual values
using the straight-line basis over their estimated useful
lives, and is generally recognised in profit or loss. Right-
of-use assets are depreciated over the shorter of the
lease term and their useful lives unless it is reasonably
certain that the Group will obtain ownership by the
end of the lease term. Land is not depreciated.
The estimated useful lives of property, plant and
equipment are as follows:
Leasehold improvements
Plant and equipment
Furniture and fittings
5-15 years
5 years
5 years
Depreciation methods, useful lives and residual values are
reviewed at each reporting date and adjusted if appropriate.
3j. INTANGIBLE AssETs
i. RECOGNITION AND MEAsUREMENT
Research and development expenditure
Expenditure on research activities is recognised in
profit or loss as incurred. Development expenditure is
capitalised only if development costs can be measured
reliably, the product or process is technically and
commercially feasible, future economic benefits are
probable, and the Group intends to and has sufficient
resources to complete development and to use or sell
the asset. Otherwise it is recognised in profit or loss as
incurred. Subsequent to initial recognition, development
expenditure is measured at cost less accumulated
amortisation and any accumulated impairment losses.
Patents
Expenditure is capitalised in relation to patent application
costs and amortised over the remaining life of the base
patent as relevant. Costs will be no longer capitalised
in the event that a patent application is no longer being
pursued with any existing capitalised costs being impaired
as an expense in the profit or loss.
Computer software
Computer software comprises computer application
system software and licenses. Costs incurred in developing
products or systems and costs incurred in acquiring
software and licenses that will contribute to future period
financial benefits through revenue generation and/or cost
reduction are capitalised to computer software. Costs
capitalised include external direct costs of materials and
services, direct payroll and payroll-related costs.
12 notes to finanCiaL statements 38
12 NOTEs TO FINANCIAL sTATEMENTs
ii. sUBsEQUENT EXPENDITURE
Financial liabilities
Subsequent expenditure is capitalised only when it
increases the future economic benefits embodied in the
specific asset to which it relates. All other expenditure,
including expenditure on internally generated goodwill
and brands, is recognised in profit or loss as incurred.
iii. AMORTIsATION
Amortisation is calculated based on the cost of intangible
assets less their estimated residual values using the
straight-line method over their estimated useful lives,
and is generally recognised in profit or loss.
The estimated useful lives of intangible assets
are as follows:
Research and development expenditure 8 years
Computer software
Patents
2-3 years
8-15 years
Amortisation methods, useful lives and residual values
are reviewed at each reporting date and adjusted
if appropriate.
Intangible assets, other than goodwill, have finite useful lives.
3k. FINANCIAL INsTRUMENTs
i. RECOGNITION AND INITIAL MEAsUREMENT
The Group initially recognises trade receivables issued
on the date that they are originated. All other financial
assets and financial liabilities are recognised initially on
the trade date.
ii. CLAssIFICATION AND sUBsEQUENT MEAsUREMENT
Financial assets
On initial recognition, a financial asset is classified as
measured at amortised cost or fair value through profit
or loss (‘FVTPL’).
Financial assets at amortised cost are subsequently
measured at amortised cost using the effective interest
method. The amortised cost is reduced by impairment
losses. Interest income, foreign exchange gains and losses
and impairment are recognised in profit or loss. Any gain
or loss on derecognition is recognised in profit or loss.
Financial assets at FVTPL are subsequently measured
at fair value. Net gains and losses, including any interest
or dividend income, are recognised in profit or loss.
Financial liabilities are classified as measured at amortised
cost or FVTPL. A financial liability is classified as at FVTPL
if it is classified as held-for-trading, it is a derivative or it is
designated as such on initial recognition. Financial liabilities
at FVTPL are measured at fair value and net gains and
losses, including any interest expense, are recognised in
profit or loss. Other financial liabilities are subsequently
measured at amortised cost using the effective interest
method. Interest expense and foreign exchange gains and
losses are recognised in profit or loss. Any gain or loss on
derecognition is also recognised in profit or loss.
iii. DERECOGNITION
Financial assets
The Group derecognises a financial asset when the
contractual rights to the cash flows from the asset expire,
or it transfers the rights to receive the contractual cash
flows in a transaction in which substantially all the risks
and rewards of ownership of the financial asset are
transferred or it neither transfers nor retains substantially
all of the risks and rewards of ownership and does not
retain control over the transferred asset. Any interest in
transferred financial assets that is created or retained by
the Group is recognised as a separate asset or liability.
Financial liabilities
The Group derecognises a financial liability when its
contractual obligations are discharged or cancelled, or expire.
iv. OFFsETTING
Financial assets and financial liabilities are offset and
the net amount presented in the statement of financial
position when, and only when, the Group currently has
a legally enforceable right to set off the amounts and it
intends either to settle them on a net basis or to realise
the asset and settle the liability simultaneously.
3l. IMPAIRMENT
i. NON-DERIVATIVE FINANCIAL AssETs
The Group recognises loss allowances for expected credit
losses (‘ECL’) on financial assets and contract assets. Loss
allowances where relevant are measured at an amount
equal to a 12 month ECL.
When determining whether the credit risk of a financial
asset has increased significantly since initial recognition
and when estimating ECL’s, the Group considers reasonable
and supportable information that is relevant and
available without undue cost or effort. This includes both
quantitative and qualitative information and analysis, based
on the Group’s historical experience and informed credit
assessment and including forward-looking information.
12 notes to finanCiaL statements 39
12 NOTEs TO FINANCIAL sTATEMENTs
The Group assumes that the credit risk on a financial
asset has increased significantly if it is more than
90 days past due.
The Group considers a financial asset to be in default
when the borrower is unlikely to pay its obligations
to the Group in full or the financial asset is more than
130 days past due.
ECLs are a probability-weighted estimate of credit
losses and are measured as the present value of all cash
shortfalls discounted at the effective interest rate. Loss
allowances for financial assets measured at amortised
cost are deducted from the gross carrying amount.
An impairment loss in respect of a financial asset measured
at amortised cost is calculated as the difference between
its carrying amount and the present value of the estimated
future cash flows discounted at the asset’s original
effective interest rate. Losses are recognised in profit or
loss and reflected in an allowance account against loans
and receivables. Interest on the impaired asset continues
to be recognised. When a subsequent event causes the
amount of impairment loss to decrease, the decrease in
impairment loss is reversed through profit or loss.
3m. sHARE CAPITAL
ORDINARY sHAREs
Financial assets not classified as at fair value through profit
or loss are assessed at each reporting date to determine
whether there is objective evidence of impairment.
Incremental costs directly attributable to the issue of
ordinary shares, net of any tax effects, are recognised as a
deduction from equity.
Objective evidence that financial assets are
impaired can include:
• default or delinquency by a debtor,
•
•
restructuring of an amount due to the Group on terms
that the Group would not consider otherwise,
indications that a debtor or issuer will enter
bankruptcy or economic conditions that
correlate with defaults,
• adverse changes in the payment status of
borrowers or issuers,
•
the disappearance of an active market
for a security, or
• observable data indicating that there is a measurable
decrease in the expected cash flows from a group of
financial assets.
The Group considers evidence of impairment for
receivables at both a specific asset and collective level.
All individually significant receivables are assessed for
impairment. Those found not to be impaired are then
collectively assessed for any impairment that has been
incurred but not yet individually identified. Assets that
are not individually significant are collectively assessed
for impairment. Collective assessment is carried out by
grouping together assets with similar risk characteristics.
Loans and receivables that are not individually significant
are collectively assessed for impairment by grouping
together receivables with similar risk characteristics.
In assessing collective impairment the Group uses
historical trends of the probability of default, timing of
recoveries and the amount of loss incurred, adjusted
for management’s judgement as to whether current
economic and credit conditions are such that the actual
losses are likely to be greater or less than suggested by
historical trends.
3n. CONVERTING NOTEs
Converting notes issued by the Company were converted
to ordinary shares in accordance with the terms
detailed in note 20.
The liability component of the converting notes is
initially recognised at fair value. Any directly attributable
transaction costs are allocated against the liability.
Subsequent to initial recognition, the liability component
of a converting note is measured at amortised cost using
the effective interest method.
Interest related to the financial liability is recognised
in profit or loss. On conversion, the financial liability is
reclassified to equity and no gain or loss is recognised.
3o. FAIR VALUE MEAsUREMENT
‘Fair value’ is the price that would be received to sell an
asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date
in the principal or, in its absence, the most advantageous
market to which the Group has access at that date. The fair
value of a liability reflects its non-performance risk.
A number of the Group’s accounting policies and
disclosures require the measurement of fair values, for
both financial and non-financial assets and liabilities. When
one is available, the Group measures the fair value using
the quoted price in an active market. A market is regarded
as ‘active’ if transactions for the asset or liability take
place with sufficient frequency and volume to provide
pricing information on an ongoing basis.
If there is no quoted price in an active market, then the
Group uses valuation techniques that maximise the use
of relevant observable inputs and minimise the use of
unobservable inputs.
12 notes to finanCiaL statements 40
12 NOTEs TO FINANCIAL sTATEMENTs
The chosen valuation technique incorporates all of the
factors that market participants would take into account
in pricing a transaction.
3p. sEGMENT REPORTING
Operating segments are reported in a manner consistent
with the internal reporting provided to the Chief Operating
Decision Maker (‘CODM’). The CODM is responsible for
allocating resources and assessing performance of the
operating segments.
3q. EARNINGs PER sHARE
BAsIC EARNINGs PER sHARE
Basic earnings per share is calculated by dividing the
profit or loss attributable to the owners 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 financial year.
DILUTED EARNINGs PER sHARE
Diluted earnings per share adjusts the figures used in
the determination of basic earnings per share to take
into account the after income tax effect of interest and
other financing costs associated with dilutive potential
ordinary shares and the weighted average number of
shares assumed to have been issued for no consideration
in relation to dilutive potential ordinary shares.
4. sTANDARDs IssUED
BUT NOT YET EFFECTIVE
A number of new standards are effective for annual
periods beginning after 1 January 2019 and earlier
application is permitted; however, the Group has not early
adopted the new or amended standards in preparing
these consolidated financial statements.
The following amended standards and interpretations are
not expected to have a significant impact on the Group’s
consolidated financial statements:
• Amendments to References to Conceptual Framework
in Australian Accounting Standards;
• Definition of a Business (Amendments to AASB 3); and
• Definition of material (Amendments to AASB
101 and AASB 108).
5. CHANGEs TO sIGNIFICANT
ACCOUNTING POLICIEs
The Group has initially adopted AASB 16 Leases
from 1 January 2019.
5a. AAsB 16 LEAsEs
GENERAL IMPACT OF APPLICATION OF AAsB 16 LEAsEs
The Group has applied AASB 16 initially from
1 January 2019, using the modified retrospective
approach. Therefore, the cumulative effect of adopting
AASB 16 has been recognised as an adjustment to the
opening balance of retained earnings at 1 January 2019,
with no restatement of comparative information.
AASB 16 introduces new requirements with respect
to lease accounting by removing the distinction
between operating and finance leases, requiring the
recognition of a right-of-use asset and a lease liability
at commencement for all leases except for short-term
leases, being those less than 12 months and leases of
low-value assets.
AASB 16 replaces existing leases guidance, including
AASB 117, Leases, IFRIC 4 Determining whether an
Arrangement contains a Lease, SIC-15 Operating Leases
– Incentives and SIC-27 Evaluation the Substance of
Transactions Involving the Legal Form of a Lease.
IMPACT OF THE DEFINITION OF A NEW LEAsE
The change in definition of a lease mainly relates to the
concept of control. AASB 16 determines whether a
contract contains a lease on the basis of whether the
customer has the right to control the use of an identified
asset for a period of time in exchange for consideration.
The Group has applied this definition to all lease
contracts currently held.
LEAsEs IN WHICH THE GROUP Is A LEssEE
Previously, under AASB 117 for the comparative period,
all leases were classified as operating leases and were
not recognised in the Group’s statement of financial
position. The Group recognised operating lease expenses
on a straight-line basis over the term of the lease.
Under AASB 16, the Group recognises new right-of-
use assets and lease liabilities for its operating leases
of rented premises. The nature of expenses related
to those leases has changed because the Group will
recognise a depreciation charge for right-of-use assets
and interest expense on lease liabilities. Lease incentives,
if relevant, are recognised as part of the measurement
of the right-of-use assets and lease liabilities.
12 notes to finanCiaL statements 41
12 NOTEs TO FINANCIAL sTATEMENTs
For short-term leases (lease term of 12 months or less) and leases of low-value assets, the Group has opted to
recognise a lease expense on a straight-line basis as permitted by AASB 16. This expense is presented within other
expenses in the consolidated statement of profit or loss.
FINANCIAL IMPACT OF INITIAL APPLICATION OF AAsB 16
Upon adoption of AASB 16, on initial application as at 1 January 2019, the Group has recognised additional lease
liabilities of $668,181 and corresponding right of use assets of $582,504 with the balance being recognised in
retained earnings.
When measuring these lease liabilities, the Group discounted lease payments using a borrowing rate of 5.4-5.5%.
IN UsD
Operating lease commitment as at 31 Dec 2018 as disclosed in the Group’s financial statements
Discounted using the borrowing rate as at 1 January 2019
Adjustments to variable lease payments
Lease liabilities recognised as at 1 January 2019
6. REVENUE
IN UsD
As at 1 Jan 2019
731,687
666,891
1,290
668,181
2019
2018
Revenue from contracts with customers
4,060,800
2,844,502
IDENTIFICATION OF REPORTING OPERATING sEGMENTs
The Group operates in one segment, based on the internal reports that are reviewed and used by the Board of Directors
(who are identified as the Chief Operating Decision Makers (CODM)) in assessing performance and in determining
the allocation of resources. The geographical non-current assets below are exclusive of, where applicable, financial
instruments, deferred tax assets and post-employment benefits assets.
IN UsD
Country
Revenue from contracts with customers
Geographical non-current assets
2019
2018
2019
2018
United States of America
3,973,254
2,844,502
1,681,987
1,223,307
Australia
87,546
-
1,733,892
722,946
4,060,800
2,844,502
3,415,879
1,946,253
MAJOR CUsTOMERs
Revenues from two major customers of the Group represented 97% of the Group’s total revenue.
7. OTHER INCOME
IN UsD
Grant income
As at 31 Dec 2019
As at 31 Dec 2018
35,365
35,365
-
-
Income received in relation to grants will only be recognised when there is reasonable assurance when all conditions
attaching to the grant have been complied with and upon receipt of cash.
12 notes to finanCiaL statements 42
12 NOTEs TO FINANCIAL sTATEMENTs
Note
2019
2018
7,186,191
67,134
652,826
9,571,671
73,589
734,865
7,906,151
10,380,125
284,493
135,878
975,658
303,275
405,186
205,218
87,821
658,200
96,574
323,823
987,652
205,838
128,710
104,713
154,161
519,547
3,055,729
2,521,018
198,171
175,443
191,625
565,239
2019
235,821
4,567
38,330
278,718
146,259
-
98,207
244,466
2018
12,583
4,145
128,452
145,180
8. EXPENsEs
IN UsD
a. Employee expenses
Salaries and wages
Contributions to defined contribution funds
Share-based payments
b. General and administration expenses
Insurance
Rent and utilities
Travel and entertainment
Accounting fees
Directors’ fees
Product scrap
Telecommunications and software license fees
Other expenses
c. Depreciation and amortisation expenses
Depreciation expense: Property, plant and equipment
Depreciation: right of use asset
Amortisation expense
16
18
17
9. FINANCE INCOME
IN UsD
Interest income
Interest income (loan to shareholder)
Net foreign exchange gain
Finance income
12 notes to finanCiaL statements 43
12 NOTEs TO FINANCIAL sTATEMENTs
10. FINANCE COsTs
IN UsD
Interest on lease liabilities
Interest on converting note
Notional interest expense – converting notes
Finance costs
11. INCOME TAX EXPENsE
2019
28,280
183,275
1,917,869
2,129,424
2018
-
78,170
-
78,170
Income tax expense comprises current and deferred tax expense and is recognised in profit or loss, except to the extent
that it relates to a business combination or items recognised directly in equity or other comprehensive income. The
components of tax expense comprise:
IN UsD
Income tax (expense)/benefit
Current tax
Deferred tax
Aggregate income tax (expense)/benefit
2019
2018
-
-
-
-
-
-
The prima facie tax on loss before income tax is reconciled to the income tax expense as follows:
IN UsD
Loss before income tax
Tax using the Company’s domestic Australian tax rate of 27.5%
Add back: permanent differences
Effect of tax rate in foreign jurisdictions
Tax losses not brought to account
Total income tax expense
The unused tax losses as at 31 December were as follows:
IN UsD
Australia unused tax losses (in AUD)
USD unused tax losses (in USD)
2019
(14,351,828)
(3,946,753)
993,799
68,203
2,884,751
-
2018
(13,747,504)
(3,780,564)
115,344
(493,648)
4,158,868
-
2019
22,594,311
17,635,432
2018
6,142,859
18,684,706
12 notes to finanCiaL statements 44
12 NOTEs TO FINANCIAL sTATEMENTs
AUsTRALIAN ENTITIEs
Movement in deferred tax assets and liabilities using the Company’s domestic Australian tax rate of 27.5%
IN UsD
2019
Cost
Intangibles
Employee benefits
Accrued expenses
Deferred revenue
Unused tax losses carried forward
Other items
Tax losses not recognised
Deferred tax assets/(liabilities)
2018
Cost
Intangibles
Employee benefits
Accrued expenses
Deferred revenue
Unused tax losses carried forward
Other items
Tax losses not recognised
Deferred tax assets/(liabilities)
Us ENTITIEs
Opening balance
Recognised
in profit or loss
Closing balance
(169,542)
11,563
42,004
520,582
1,323,725
(48,596)
(1,679,736)
-
-
4,579
-
261,250
673
(76,778)
(189,724)
-
(290,291)
4,327
(23,492)
(52,005)
3,295,843
20,411
(2,954,793)
-
(169,542)
6,985
42,004
259,332
1,323,052
28,182
(1,490,013)
-
(459,833)
15,890
18,512
468,577
4,619,568
(28,185)
(4,634,529)
-
(169,542)
11,564
42,004
520,582
1,323,725
(48,596)
(1,679,737)
-
Movement in deferred tax assets and liabilities using the US tax rate of 26.5%
IN UsD
2019
Cost
Intangibles
Employee benefits
Accrued expenses
Deferred revenue
Unused tax losses carried forward
Other items
Tax losses not recognised
Deferred tax assets/(liabilities)
Opening balance
Recognised
in profit or loss
Closing balance
(150,248)
18,267
86,627
-
4,951,447
(29,259)
(4,876,834)
-
19,809
(14,170)
(9,320)
-
(278,058)
20,367
261,372
-
(130,439)
4,097
77,307
-
4,673,389
(8,892)
(4,615,462)
-
12 notes to finanCiaL statements 45
12 NOTEs TO FINANCIAL sTATEMENTs
IN UsD
2018
Cost
Intangibles
Employee benefits
Accrued expenses
Deferred revenue
Unused tax losses carried forward
Other items
Tax losses not recognised
Deferred tax assets/(liabilities)
Opening balance
Recognised
in profit or loss
Closing balance
-
-
46,610
-
2,938,883
(73,986)
(2,911,507)
-
(150,248)
(150,248)
18,267
40,018
-
2,012,564
44,728
18,267
86,628
-
4,951,447
(29,258)
(1,965,329)
(4,876,836)
-
-
12. CAsH AND CAsH EQUIVALENTs
12a. CAsH AND CAsH EQUIVALENTs IN sTATEMENT OF CAsH FLOW
IN UsD
Cash at bank
2019
16,910,605
16,910,605
2018
7,211,102
7,211,102
12 notes to finanCiaL statements 46
12 NOTEs TO FINANCIAL sTATEMENTs
12b. RECONCILIATION OF CAsH FLOWs FROM OPERATING ACTIVITIEs
IN UsD
Loss for the year
Adjustments for:
Depreciation and amortisation
Interest income
Accrued interest on converting notes
Share based payments
Unrealised foreign currency translation (gain)/loss
Directors fees paid as shares
Notional interest expense on converting notes
Interest expense on right-of-use assets
Gain on sale of fixed asset
Impairment of intangible assets
Amortisation element of capital raising fee
Note
2019
2018
(14,351,828)
(13,747,504)
9
10
8(a)
25
20
18
16
17
565,239
(4,567)
183,275
652,826
8,612
93,096
1,917,869
28,281
2,367
60,603
273,798
244,466
(4,145)
78,170
734,865
(35,134)
-
-
-
-
-
-
Operating profit before changes in working capital and provisions
(10,570,429)
(12,729,282)
CHANGE IN OPERATING AssETs AND LIABILITIEs
Change in trade and other receivables
Change in inventories
Change in other current assets
Change in trade and other payables
Change in employee benefits
Change in contract liabilities
(578,351)
(223,094)
(833,790)
(30,736)
93,955
(189,111)
(1,761,127)
(692,536)
(228,817)
(195,584)
552,288
97,992
943,026
476,369
Net cash from operating activities
(12,331,556)
(12,252,913)
13. TRADE AND OTHER RECEIVABLEs
IN UsD
CURRENT
Trade and other receivables
Loan to shareholders
NON-CURRENT
Loan to shareholders
Security deposit
2019
2018
1,460,025
180,357
1,640,382
-
36,656
36,656
694,847
89,511
784,358
87,473
36,656
124,129
The carrying value of receivables is considered a reasonable approximation of fair value due to the short-term nature of the
balances. The Group has assessed any potential credit risk associated with these counterparties and deemed ECL to be insignificant.
12 notes to finanCiaL statements 47
12 NOTEs TO FINANCIAL sTATEMENTs
14. INVENTORIEs
IN UsD
Raw materials – at cost
Finished goods – at cost
Less provision for obsolete stock
15. OTHER CURRENT AssETs
IN UsD
CURRENT
2019
161,939
380,112
542,051
(141,691)
400,360
2018
77,550
241,407
318,957
(10,000)
308,957
2019
2018
Prepayments and other assets
332,504
379,404
16. PROPERTY, PLANT AND EQUIPMENT
IN UsD
Leasehold improvements, at cost
Accumulated depreciation
Net book value
Plant and equipment, at cost
Accumulated depreciation
Net book value
Furniture and fittings, at cost
Accumulated depreciation
Net book value
Total
2019
198,975
(40,061)
158,914
954,375
(412,124)
542,251
207,025
(95,603)
111,422
2018
200,124
(20,092)
180,032
649,963
(297,641)
352,322
172,434
(66,154)
106,280
812,587
638,634
12 notes to finanCiaL statements 48
12 NOTEs TO FINANCIAL sTATEMENTs
Reconciliations of the written down values at the beginning and end of the current financial year
and previous financial period are set out below.
IN UsD
Balance at 1 January 2018
Additions
Depreciation expense
Foreign exchange
Balance at 31 December 2018
Additions
Disposals
Depreciation expense
Foreign exchange
Balance at 31 December 2019
17. INTANGIBLE AssETs
IN UsD
Research and development expenditure, at cost
Accumulated amortisation
Net book value
Patents, at cost
Accumulated amortisation
Net book value
Computer software, at cost
Accumulated amortisation
Net book value
Total
Leasehold
improvements
Plant and
equipment
Furniture
and fittings
154,423
40,109
(14,580)
80
180,032
-
(400)
(20,528)
(190)
158,914
183,622
273,728
(105,069)
41
352,322
332,422
(1,967)
(140,524)
(2)
542,251
101,878
31,012
(26,610)
-
106,280
42,261
-
(37,119)
-
111,422
2019
1,369,252
(81,388)
1,287,864
1,078,679
(231,058)
847,621
121,276
(92,416)
28,860
Totals
439,923
344,849
(146,259)
121
638,634
374,683
(2,367)
(198,171)
(192)
812,587
2018
393,180
(14,201)
378,979
892,878
(153,934)
738,944
119,987
(54,420)
65,567
2,164,345
1,183,490
12 notes to finanCiaL statements 49
12 NOTEs TO FINANCIAL sTATEMENTs
IN UsD
Balance at 1 January 2018
Additions
Amortisation expense
Foreign exchange
Balance at 31 December 2018
Additions
Impairment loss
Amortisation expense
Foreign exchange
R&D
-
393,180
(14,714)
513
378,979
976,072
-
(67,395)
208
Balance at 31 December 2019
1,287,864
Patents
Computer software
603,453
191,634
(56,483)
340
738,944
254,269
(60,603)
(85,122)
133
847,621
29,229
63,112
(27,010)
236
65,567
3,000
-
(39,108)
(599)
28,860
Totals
632,682
647,926
(98,207)
1,089
1,183,490
1,233,341
(60,603)
(191,625)
(258)
2,164,345
An impairment loss of $60,603 was recognised during the financial year in relation to legal costs previously capitalised for
patents under application now no longer being pursued.
18. RIGHT-OF-UsE AssETs
The Group holds leases for properties with lease terms ranging from 3 to 4.5 years. AASB 16, Leases, has been adopted
with a modified retrospective transition approach so there are no right-of-use assets recognised for the comparative year
to 31 December 2018.
IN UsD
Right-of-use assets: property – cost
Less: depreciation
Net carrying value
IN UsD
As at 31 Dec 2019
As at 31 Dec 2018
577,734
(175,443)
402,291
-
-
-
Amounts recognised in profit or loss
As at 31 Dec 2019
As at 31 Dec 2018
Depreciation expensed
Interest expense
Expense relating to variable lease payments not included
in the measurement of the lease liability
175,443
28,281
84,290
288,014
-
-
-
-
The total cash outflow in relation to lease payments amounted to USD $210,334.
12 notes to finanCiaL statements 50
12 NOTEs TO FINANCIAL sTATEMENTs
19. TRADE AND OTHER PAYABLEs
IN UsD
CURRENT
Trade payables
Other payables and accrued expenses
2019
2018
628,035
448,637
522,141
630,775
1,076,672
1,152,916
All amounts are short term and the carrying values are considered to be a reasonable approximation of fair value.
20. LOANs AND BORROWINGs
CONVERTING NOTEs
IN UsD
Proceeds from issue of convertible notes
Less: transaction costs
Net proceeds at the date of issue
Interest expense accrued
Amount classified as equity (net of transaction costs)
Carrying amount of liability at 31 December 2018
IN UsD
Balance as at 1 January 2019
Proceeds from issue of convertible notes
Interest expense accrued
Transaction costs recognised in profit or loss
Notional interest on converting notes
Effect of movement in exchange rates
Issue of ordinary shares upon conversion in April 2019
Carrying amount of liability at 31 December 2019
2018
7,743,581
(289,493)
7,454,088
30,891
7,484,979
(415,562)
7,069,417
2019
7,069,417
70,798
183,275
289,493
1,917,869
285,433
(9,816,285)
-
On 8 April 2019, the non-redeemable converting notes converted to ordinary shares following the Initial Public Offering
(IPO). The conversion price of converting notes to ordinary shares was AUD$0.80.
12 notes to finanCiaL statements 51
12 NOTEs TO FINANCIAL sTATEMENTs
21. CONTRACT LIABILITIEs
IN UsD
DEFERRED REVENUE ARIsING FROM CONTRACTs WITH CUsTOMERs
Current
Non-current
Total
2019
2018
375,106
1,328,809
1,703,915
222,130
1,670,896
1,893,026
Contract liabilities relate to consideration received in advance from customers for which revenue will be recognised
as and when products are delivered.
22. LEAsE LIABILITIEs
AASB 16 Leases has been adopted with a modified retrospective transition approach so there are no disclosures
for the comparative period.
IN UsD
Amounts due for settlement within less than 12 months (current liabilities)
Amounts due for settlement in more than 12 months (non-current liabilities)
IN UsD
Maturity analysis In UsD
Not later than 1 year
Later than 1 year but not later than 5 years
Later than 5 years
23. LEAsE COMMITMENT
IN UsD
Within one year
Later than one year but not later than five years
As at 31 Dec 2019
As at 31 Dec 2018
196,442
286,012
482,454
-
-
-
As at 31 Dec 2019
As at 31 Dec 2018
196,442
286,012
-
482,454
2019
-
-
-
-
-
-
-
2018
212,519
519,168
731,687
Following the adoption of AASB 16, Leases (see note 5), significant property leases reporting as operating leases are now
recognised as finance leases. The maturity analysis for lease liabilities as at 31 December 2019 is detailed in note 22.
Operating lease commitments for the year ended 31 December 2018 included contracted amounts for rented premises
under operating leases. Leases have various terms, including some options to extend the terms. A lease expense of
$285,616 was recognised in other expenses in the profit and loss statement for the year ended 31 December 2018.
12 notes to finanCiaL statements 52
12 NOTEs TO FINANCIAL sTATEMENTs
24. EMPLOYEE BENEFITs
IN UsD
CURRENT
Liability for annual leave
NON-CURRENT
Liability for long service leave
25. CAPITAL AND REsERVEs
25a. sHARE CAPITAL
IN UsD
IN NUMBER OF sHAREs
Balance as at 1 January 2018
Shares issued 2 February 2018
Shares issued 28 February 2018
Shares issued 25 May 2018
Shares issued 26 June 2018
Shares issued 25 September 2018
Balance at 31 December 2018
Share split on 24 January 2019
Shares issued in February 2019
(on conversion of employee share options)
Shares issued in April 2019 on conversion
of converting notes to shares
Shares issued in April 2019 upon IPO
Shares issued in September 2019
(on conversion of employee share options)
Shares issued in September 2019
in lieu of Non-Executive Director fees
Shares issued in December 2019
(on conversion of employee share options)
Shares issued in December 2019
in lieu of Non-Executive Director fees
Shares issued in December 2019
(on conversion of employee share options)
Balance as at 31 December 2019
2019
2018
69,552
69,552
3,691
3,691
108,835
108,835
2,143
2,143
Note
Fully paid
Partly paid
Total
16,678
100
16,778
364
728
1,587
497
50
-
-
-
-
-
364
728
1,587
497
50
19,904
100
20,004
129,376,000
650,000
130,026,000
314,502
13,824,063
35,000,010
650,000
53,441
565,500
16,842
260,000
-
-
-
-
-
-
-
-
314,502
13,824,063
35,000,010
650,000
53,441
565,500
16,842
260,000
180,060,358
650,000
180,710,358
(i)
(ii)
(iii)
(iv)
(v)
(vi)
(vii)
(viii)
(ix)
12 notes to finanCiaL statements 53
12 NOTEs TO FINANCIAL sTATEMENTs
25a. sHARE CAPITAL (CONTINUED)
IN UsD
Balance at 1 January 2018
45,864,501
199,999
46,064,500
Note
Fully paid
Partly paid
Total
Shares issued 2 February 2018
Shares issued 28 February 2018
Shares issued 25 May 2018
Shares issued 26 June 2018
Shares issued 25 September 2018
1,001,000
2,002,000
5,792,550
1,814,050
182,500
-
-
-
-
-
1,001,000
2,002,000
5,792,550
1,814,050
182,500
Balance at 31 December 2018, pre-costs
56,656,601
199,999
56,856,600
Capital raising costs
Balance at 31 December 2018
Shares issued in February 2019
(on conversion of employee share options)
Shares issued in April 2019 on
conversion of converting notes to shares
Shares issued in April 2019 upon IPO
Shares issued in September 2019
(on conversion of employee share options)
Shares issued in September 2019 in lieu
of Non-Executive Director fees
Shares issued in December 2019
(on conversion of employee share options)
Shares issued in December 2019 in lieu
of Non-Executive Director fees
Shares issued in December 2019
(on conversion of employee share options)
Capital raising costs
Balance at 31 December 2019
(267,195)
-
(267,195)
56,389,406
199,999
56,589,405
(ii)
(iii)
(iv)
(v)
(vi)
(vii)
(viii)
(ix)
178,856
9,816,285
25,052,313
201,500
60,443
175,305
32,652
109,200
(1,522,369)
-
-
-
-
-
-
-
-
-
178,856
9,816,285
25,052,313
201,500
60,443
175,305
32,652
109,200
(1,522,369)
90,493,591
199,999
90,693,590
i. On 24 January 2019, a share split was completed on the basis that every one ordinary share on issue
in the Company be divided into 6,500 ordinary shares.
ii. During February 2019 the following employee share options were converted into ordinary shares:
• On 22 February 2019, part A of round 5 Equity Incentive Plan (ECP) options converted to 173,299 ordinary
shares at a price of AUD $0.80;
• On 25 February 2019, part B of round 5 ECP options converted to 134,784 ordinary shares at a price of AUD $0.80; and
• On 26 February 2019, part C of round 5 ECP options converted to 6,419 ordinary shares at a price of AUD $0.80.
iii. On 8 April 2019, the non-redeemable converting notes converted to ordinary shares on th. occurrence of an Initial Public Offering
event. The conversion price of converting notes to ordinary shares was AUD$0.80
iv. On 16 April 2019, Next Science Limited was admitted to the Official List of the ASX Limited (‘ASX’) and commenced trading
on 18 April 2019 after successfully completing an Initial Public Offering (‘IPO’) of 35 million shares to raise AUD$35 million.
v. On 25 September 2019, 325,000 round 1 ECP employee share options converted to 325,000 ordinary shares at a price of
AUD$0.46 and 325,000 round 2 ECP employee share options converted to 325,000 ordinary shares at a price of AUD$0.46
vi. On 25 September 2019, the following ordinary shares were issued in lieu of non-executive directors fees:
• 21,666 ordinary shares were issued at a price of AUD$1.00 to Daniel Spira
• 20,000 ordinary shares were issued at a price of AUD$1.00 to Aileen Stockburger
• 6,198 ordinary shares were issued at a price of AUD$4.03 to Daniel Spira
• 5,577 ordinary shares were issued at a price of AUD$4.03 to Aileen Stockburger
12 notes to finanCiaL statements 54
12 NOTEs TO FINANCIAL sTATEMENTs
vii. On 19 December 2019, 565,500 round 1 ECP employee shares options converted to 565,500
ordinary shares at a price of AUD$0.45
viii. On 19 December 2019, the following ordinary shares were issued in lieu of non-executive directors fees:
• 8,865 ordinary shares were issued at a price of AUD$2.82 to Daniel Spira
• 7,977 ordinary shares were issued at a price of AUD$2.82 to Aileen Stockburger
ix. On 19 December 2019 260,000 round 3 Employee Share Option Plan (ESOP) options converted
to 260,000 ordinary shares at a price of AUD$0.61
ORDINARY sHAREs
Fully paid ordinary shares
Ordinary shares participate in dividends and the proceeds on winding up of the Company in proportion to the
number of shares held. At shareholders’ meetings, each ordinary share is entitled to one vote when a poll is called.
Partly paid ordinary shares
The partly paid ordinary shares are called on in accordance with their underlying arrangements (due for payment
April 2020) and as required by the Company. In any case, on winding up the company, the balance of partly paid shares,
if any, may be called up. The proceeds on winding up are proportional to the amounts paid on partly paid shares.
Partly paid shares carry equal dividend participation and voting rights as fully paid shares, although any dividends
must be first be applied to the unpaid balance on the shares.
25b. REsERVEs
IN UsD
Foreign currency translation reserve
Common control reserve
Share option reserve
Converting notes reserve
2019
(1,198,574)
(42,596,715)
1,648,704
-
2018
(227,292)
(42,596,715)
968,831
415,562
(42,146,585)
(41,439,614)
FOREIGN CURRENCY TRANsLATION REsERVE
The translation reserve comprises all foreign currency differences arising from the translation of the financial statements
of foreign operations where their functional currency is different to the Group’s presentation currency.
COMMON CONTROL REsERVE
The acquisition of the share capital of Microbial Defense Systems Holdings Inc (‘MDS’) by the Company on 22 December
2017 was accounted for as a common control transaction. As a consequence, the difference between the fair value of the
consideration paid ($43,862,500) and the existing book values of assets and liabilities of MDS ($1,265,785) were debited
to a common control reserve, directly within equity.
sHARE OPTION REsERVE
The share option reserve comprises the value of the share-based payment arrangements recognised in equity.
CONVERTING NOTEs REsERVE
The reserve for converting notes comprises the amount allocated to the equity component for the converting notes
issued by the Group for the year ended 31 December 2018. The converting notes converted in April 2019 (see note 20).
25c. DIVIDENDs
No dividends were paid or declared by the Company during the period.
25d. DIVIDEND FRANKING ACCOUNT
The Company has franking credits available to shareholders of Nil.
12 notes to finanCiaL statements 55
12 NOTEs TO FINANCIAL sTATEMENTs
25e. CAPITAL MANAGEMENT
The Group’s objectives when managing capital are to safeguard its ability to continue as a going concern so that it can
continue to provide returns for shareholders and benefits for other stakeholders, maintain sufficient financial flexibility
to pursue its growth objectives and maintain an optimal capital structure to reduce the cost of capital.
26. PARENT ENTITY INFORMATION
As at, and throughout, the financial year to 31 December 2019 the parent entity of the Group was Next Science Limited.
sTATEMENT OF PROFIT OR LOss AND OTHER COMPREHENsIVE INCOME
IN UsD
Loss after income tax
Other comprehensive income
Total comprehensive income
sTATEMENT OF FINANCIAL POsITION
IN UsD
AssETs
Total current assets
Total non-current assets
Total assets
LIABILITIEs
Total current liabilities
Total non-current liabilities
Total liabilities
Total net assets
EQUITY
Share capital
Common control reserve
Foreign currency translation reserve
Share option reserve
Converting notes reserve
Accumulated losses
Total equity
Parent
2019
(11,904,021)
(1,042,968)
2018
(13,965,244)
(73,943)
(12,946,989)
(14,039,187)
2019
2018
1,407,127
19,363,446
20,770,573
(70)
-
(70)
20,770,503
934,834
8,227,347
9,162,181
(7,852,288)
-
(7,852,288)
1,309,893
90,693,590
56,589,406
(27,257,549)
(27,257,549)
(1,116,913)
1,648,704
-
(43,197,329)
20,770,503
(73,947)
968,830
415,562
(29,332,409)
1,309,893
The parent entity did not have any contingent liabilities or capital commitments as at 31 December 2019.
The parent entity had not entered into a deed of cross guarantee as at 31 December 2019.
12 notes to finanCiaL statements 56
12 NOTEs TO FINANCIAL sTATEMENTs
27. GROUP ENTITIEs
Set out below is the Group structure listing all subsidiaries as at 31 December 2019.
NEXT sCIENCE LIMITED
Australian Parent Entity
100%
NEXT sCIENCE
TECHNOLOGIEs PTY LTD
Australian Entity
100%
NEXT sCIENCE IP
HOLDINGs PTY LTD
Australian Entity
AUsTRALIA
UsA
100%
MICROBIAL DEFENsE
sYsTEMs HOLDINGs INC
UsA Entity
100%
NEXT sCIENCE, LLC
UsA Entity
100%
NEXT sCIENCE
MANUFACTURING, LLC
UsA Entity
100%
NEXT sCIENCE
HEALTH CARE, LLC
UsA Entity
12 notes to finanCiaL statements 57
12 NOTEs TO FINANCIAL sTATEMENTs
28. RELATED PARTIEs
28a. KEY MANAGEMENT PERsONNEL COMPENsATION
Key management personnel (‘KMP’) are defined as those persons having authority and responsibility for planning,
directing and controlling the activities of the Group, directly and indirectly, and include the Directors, executive
and non-executive, as well as certain other senior executives. The totals of remuneration of the KMP of the
Company included within employee expenses are as follows:
IN UsD
Short term employee benefits
Post employment benefits
Share-based payment benefits
Total KMP remuneration
sHORT TERM EMPLOYEE BENEFITs
2019
1,498,338
66,820
575,503
2,140,661
2018
1,304,446
46,041
548,908
1,899,395
Short term employee benefits include fees and benefits paid to the executive directors and other KMP as well as salary,
fringe benefits and cash bonuses awarded to the non-executive directors.
POsT-EMPLOYMENT BENEFITs
Post-employment benefits are the cost of superannuation contributions made during the year.
28b. KEY MANAGEMENT PERsONNEL TRANsACTIONs
Directors of the Company hold 3.1% of the issued capital of the Company as at 31 December 2019.
12 notes to finanCiaL statements 58
12 NOTEs TO FINANCIAL sTATEMENTs
29. sHARE-BAsED EMPLOYEE INCENTIVE ARRANGEMENTs
EQUITY INCENTIVE PLAN (EQUITY-sETTLED)
Prior to listing on the ASX, the Group established an Equity Incentive Plan (ECP) and an Employee Share Option Plan
(ESOP). The purpose of the Plans is to attract and retain the types of employees, consultants and directors who will
contribute to the Company’s long term success; provide incentives that align the interests of Employees, Consultants
and Directors with those of the shareholders of the Company; and promote the success of the Company’s business.
As at 31 December 2019, there are 9,249,500 options over ordinary shares on issue (2018: 1,690 options),
representing 5.12% (2018: 8.45%) of the Company’s total share capital, granted to the employees of the Company.
The grant dates, vesting dates and exercise prices vary and are as follows:
Grant date
and vesting
conditions (i)
Expiry
date
No of
options as at
31 Dec 2018
No of options
post share
split
Granted
Exercised
(ii)
Lapsed
No of
options as at
31 Dec 2019
Vested
as at
31 Dec 2019
9-Nov-16 (1)
9-Nov-19
9-Nov-16 (2)
9-Nov-20
1-Mar-17 (1)
1 Mar-20
1 Mar-17 (2)
1-Mar-21
1-Sep-17 (1)
1-Sep-20
1-Sep-17 (2)
1-Sep-21
16-Apr-18 (1)
16-Apr-21
16-Apr-18 (5)
16-Apr-21
16-Apr-18 (4)
16-Apr-21
16-Apr-18 (2)
16-Apr-22
17-Dec-18 (3)
17-Dec-23
17-Dec-18 (2)
17-Dec-23
19-Feb-19 (4)
26-Feb-19
87
88
50
50
25
25
153
360
160
12
380
300
N/A
565,500
572,000
325,000
325,000
162,500
162,500
994,500
2,340,000
1,040,000
78,000
2,470,000
1,950,000
(565,500)
(325,000)
(325,000)
-
-
-
(260,000)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
247,000
247,000
-
-
325,000
325,000
162,500
162,500
162,500
162,500
734,500
734,500
2,340,000
1,560,000
1,040,000
1,040,000
-
-
-
-
-
-
-
-
-
-
-
78,000
2,470,000
(260,000)
1,690,000
-
-
-
-
N/A
314,502
(314,502)
-
-
Totals
1,690
10,985,000 314,502 (1,790,002)
(260,000)
9,249,500
4,231,500
i. Vesting conditions are as follows:
1. 1 year service from grant date
2.
3.
4.
2 years service from grant date
3 years service from grant date
Immediately upon grant
5. Various, including financial and non-financial conditions; relating to Judith Mitchell’s share options
ii. The weighted average share price for the options exercised during the year was USD$0.37.
As at 31 December 2019, 4,231,500 options have vested (2018: 2,665,000 post share split).
12 notes to finanCiaL statements 59
12 NOTEs TO FINANCIAL sTATEMENTs
The fair value has been measured using the Black-Scholes formula. Service and non-market performance conditions
attached to the arrangements were not taken into account in measuring fair value.
The inputs used in the measurement of the fair values at grant date and measurement date were as follows:
9-NOV-16
1-MAR-17
1-sEP-17
16-APR-18
17-DEC-18
19-FEB-19
Grant date
FV at grant date (USD)
0.14-0.16
0.14-0.16
0.20-0.22
0.20-0.22
Share price at grant (USD)
Exercise price (USD)
Expected volatility
Expected life
Expected dividends
Risk-free interest rate
0.31
0.31
0.31
0.31
0.42
0.42
0.42
0.42
91%
0%
3-4 years
2.25%-5.50%
0.33
0.56
0.56
0.02
0.57
0.57
7 days
2.13%
Expected volatility is measured based on peer companies and expected life is the number of days until expiry.
30. COMMITMENTs AND CONTINGENCIEs
The Group has no capital commitments or contingencies as at 31 December 2019 (2018: nil).
31. EVENTs AFTER THE REPORTING PERIOD
There has not arisen in the interval between the end of the financial year and the date of this report any item, transaction
or event of a material and unusual nature likely, in the opinion of the directors of the Group, to affect significantly the
operations of the Group, the results of those operations, or the state of affairs of the Group, in future financial years.
32. AUDITOR’s REMUNERATION
IN UsD
AUDIT AND AssURANCE RELATED sERVICEs
KPMG Australia
Audit of financial statements
Total audit and assurance services
OTHER sERVICEs
KPMG Australia
Taxation services
Other services
Total other services
2019
2018
72,825
72,825
43,335
95,829
139,164
73,958
73,958
33,228
151,305
184,533
Total auditor’s remuneration
211,989
258,491
12 notes to finanCiaL statements 60
12 NOTEs TO FINANCIAL sTATEMENTs
33. EARNINGs PER sHARE
IN UsD
Loss after tax
Basic and diluted earnings per share (USD cents)
Weighted average number of shares
2019
2018
(14,351,828)
(13,747,504)
(8.65)
(11.16)
165,978,735
123,188,000
The weighted average number of ordinary shares used in the calculation for earnings per share for 2018 has been
amended to reflect the share split as detailed in note 25.
34. FINANCIAL RIsK MANAGEMENT
34a. OVERVIEW
The Group’s activities expose it to various financial risks including: credit risk, liquidity risk and market risk.
This note presents information about the Group’s exposure to each of these risks, its objectives,
policies and processes for measuring and managing risk.
34b. RIsK MANAGEMENT FRAMEWORK
The Company’s board of directors has overall responsibility for the establishment and oversight of the Group’s
risk management framework with advice from the Audit and Risk Committee (as detailed below). The Group’s risk
management policies have been established to identify and analyse the risks faced by the Group, to set appropriate
risk limits and controls and to monitor risks and adherence to limits. Risk management policies and systems are
reviewed regularly to reflect changes in market conditions and the Group’s activities. The Group, through its standards
and procedures, aims to maintain an effective control environment in which all employees understand their roles
and obligations.
AUDIT AND RIsK COMMITTEE
The purpose of the Audit and Risk Committee is to assist the Board with:
• oversight of financial reporting and internal and external audit functions;
• oversight of accounting, business, clinical and patient risk policies and practices;
• oversight of legal and regulatory compliance;
• oversight of internal control structure and risk management procedures;
• promoting a culture of compliance across the Group companies; and
• providing a forum of communication between the Board and the Company’s external auditor, internal auditor (if any)
and Company’s management in relation to audit and risk matters.
The Audit and Risk Committee Charter has responsibility pursuant to its Charter for oversight of the Company’s financial
and risk management procedures. The Board currently considers these processes appropriate for the size and level of
operations of the Company.
34c. CREDIT RIsK CAsH AND CAsH EQUIVALENTs
The Group held cash and cash equivalents of USD $16,910,605 at 31 December 2019 (2018: USD $7,211,102). The cash
and cash equivalents are held with credit worthy bank and financial institution counterparties. The ECL of each of these banks
and counterparties are considered to be extremely low; accordingly any expected credit losses are deemed to be insignificant.
12 notes to finanCiaL statements 61
12 NOTEs TO FINANCIAL sTATEMENTs
34d. LIQUIDITY RIsK
Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with its financial
liabilities that are settled by delivering cash or another financial asset. The Group’s approach to managing liquidity is to
ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when they are due, under both normal
and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation. The Group
manages liquidity risk by monitoring net cash balances, actual and forecast operating cash flows.
EXPOsURE TO LIQUIDITY RIsK
The following are the remaining contractual maturities of financial liabilities at the reporting date. The amounts are gross
and undiscounted and include estimated interest payments and exclude the impact of netting agreements.
IN UsD
At 31 December 2019
Trade and other payables
IN UsD
At 31 December 2018
Trade and other payables
Loans and borrowings
Less than
6 months
Between 6
and 12 months
Between
1 and 5 years
Total contracted
amounts
1,076,672
1,076,672
-
-
-
-
1,076,672
1,076,672
Less than
6 months
Between 6 and
12 months
Between 1 and
5 years
Total contracted
amounts
1,152,916
7,069,417
8,222,333
-
-
-
-
-
-
1,152,916
7,069,417
8,222,333
The cash flows in the maturity analysis are not expected to occur significantly earlier or be for a significantly different
amount than contractually disclosed above.
34e. MARKET RIsK
Market risk is the risk that changes in market prices, such as foreign exchange rates and interest rates, will affect the
Group’s income or the value of its holdings of financial instruments. The objective of market risk management is to
manage and control market risk exposures within acceptable parameters, while optimising the return.
INTEREsT RATE RIsK
The Group is not exposed to any significant interest rate risk. There is minimal exposure to the impact of adverse changes
in benchmark interest rates. The Group is exposed to variable interest rate risks at the reporting date on the cash and
short-term deposits. A reasonably possible change of 100 basis points in interest rates at the reporting date would have
increased or decreased profit after tax by $166,849 (2018: $66,336). This analysis assumes that all other variables, in
particular foreign currency rates, remain constant.
CURRENCY RIsK
Currency risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes
in foreign exchange rates. The source and nature of this risk arise from operations and translation risks. The Group’s
reporting currency is United States Dollars (‘USD’). However, the international operations give rise to an exposure
to changes in foreign exchange rates as amounts of expenditure are from Australia and denominated in currencies
other than USD.
12 notes to finanCiaL statements 62
12 NOTEs TO FINANCIAL sTATEMENTs
The carrying amounts of the Group’s foreign currency denominated financial assets (trade and other receivables including
accrued income) and financial liabilities (trade and other payables) at the reporting date were as follows:
IN UsD
AUD financial assets converted to USD
AUD financial liabilities converted to USD
2019
3,160,154
(229,180)
2018
6,633,702
(7,635,423)
Net exposure in statement of financial position
2,930,974
(1,001,721)
A reasonably possible strengthening (weakening) of the Unites States Dollar against all other currencies at 31 December
would have affected the measurement of financial instruments denominated in a foreign currency and affected profit or
loss and equity by the amounts shown below. This analysis assumes that all other variables, in particular interest rates,
remain constant and ignores any impact of forecast sales and purchases.
IN UsD
2019
Australian Dollars
2018
Australian Dollars
%
Profit before tax
Equity
Change
strengthen
Weaken
strengthen
Weaken
10%
(293,097)
293,097
(293,097)
293,097
10%
(100,172)
100,172
(100,172)
100,172
The percentage change is the expected overall volatility of the significant currencies, which is based on management’s
assessment of reasonable possible fluctuations taking into consideration movements over the last 12 months and the spot
rate at each reporting date.
12 notes to finanCiaL statements 63
13 DIRECTORs' DECLARATION
14
DIRECTORs’ DECLARATION
1. In the opinion of the directors of Next Science Limited (the ‘Company’):
a. The consolidated financial statements and notes that are set out on pages 28 to 63 and the Remuneration
report on pages page 18 to page 25 in the Directors’ report, are in accordance with the Corporations Act
2001, including:
i. giving a true and fair view of the financial position of the Group as at 31 December 2019 and of its
performance for the financial year ended on that date; and
ii. complying with Australian Accounting Standards and the Corporations Regulations 2001; and
b. there are reasonable grounds to believe that the Company will be able to pay its debts as
and when they become due and payable.
2. The directors have been given the declarations required by Section 295A of the Corporations Act 2001
from the chief executive officer and chief financial officer for the financial year ended 31 December 2019.
3. The directors draw attention to Note 2(a) to the consolidated financial statements,
which includes a statement of compliance with International Financial Reporting Standards.
Signed in accordance with a resolution of directors:
sIGNED
George savvides Chairman – Dated at Sydney this 28th day of February 2020
14 DireCtors' DeCLaration 64
14
14 INDEPENDENT AUDITOR’s REPORT
14
14 inDePenDent auDitor's rePort 66
14 INDEPENDENT AUDITOR's REPORT
Key Audit Matters
The Key Audit Matters we identified
are:
• Revenue recognition from sale of
products
• Carrying value of non-current assets
Key Audit Matters are those matters that, in our
professional judgement, were of most significance in our
audit of the Financial Report of the current period.
These matters were addressed in the context of our audit of
the Financial Report as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on these
matters.
Revenue recognition from sale of products
Refer to Note 6 of the Financial Report (USD 4.06m)
The key audit matter
How the matter was addressed in our audit
We focused on revenue recognition as
a key audit matter due to the significant
audit effort required by us to test the
Group's revenue given the:
•
significance of revenue to the
financial statements;
•
•
varying terms and conditions within
each contract such as product
sales, advance deposits and
milestone payments which
increases the complexity of
appropriately recording the timing
and measurement of revenue
recognised by the Group.
Group has manual processes and
controls which may increase the
risk of bias in the recognition of
revenue, in particular in the last two
weeks of the reporting period and
the first two weeks of the next
reporting period.
Our procedures included:
•
Evaluated the appropriateness of the Group's revenue
recognition policies against the requirements of AASB 15
Revenue from Contracts with Customers.
•
•
For a sample of transactions, across each product
line, we:
-
-
checked the terms and conditions of the customer
contract for consistency to the Group's policy for
timing and measurement of revenue recognition;
checked the amount, nature and date of revenue
recognition to the underlying sales invoices and bank
statement cash receipts.
Selected a sample of revenue transactions for the last
two weeks of the reporting period and the first two
weeks of the next reporting period. For each sample
selected, we:
-
checked the amount of revenue recorded to the
underlying sales invoice and to freight documents,
confirming the date control of the goods passes to
the customer.
14 inDePenDent auDitor's rePort 67
14 INDEPENDENT AUDITOR's REPORT
Carrying value of non-current assets
Refer to Notes 16, 17 and 18 of the Financial Report (USD 3.38m)
The key audit matter
How the matter was addressed in our audit
A key audit matter for us was the
Group's annual testing of non-current
assets for impairment. We focused on
the significant forward-looking
assumptions the Group applied in their
value in use models including:
•
forecast cash flows including the
growth rates in light of current
market conditions and historical
results.
•
discount rates are complicated in
nature and vary according to the
conditions and environment the
specific Cash Generating Unit
(CGU) is subject to from time to
time.
The Group uses complex models to
perform their annual impairment testing
of non-current assets. Complex
modelling, particularly those containing
judgemental forward-looking
assumptions tend to be prone to
greater risk of potential bias, error and
inconsistent application. Such
conditions necessitate additional
scrutiny by us, in particular to address
the objectivity of sources used to derive
assumptions, and their consistent
application.
Our procedures included:
•
we considered the appropriateness of the value in use
method applied by the Group to perform the annual test
of impairment for non-current assets against the
requirements of the accounting standards.
• we assessed the integrity of the value in use models
used, including the accuracy of the underlying calculation
formulas.
in relation to the key assumptions in the Group's value in
use model, we:
challenged the Group's forecast cash flow and growth
rate assumptions in light of current customer demand
and against historical results of the group;
-
-
applied increased scepticism to assumptions in areas
where previous forecasts were not achieved;
compared forecast growth rates to the Board
approved plan and strategy and historical growth rates;
• we considered the sensitivity of the models by varying
key assumptions, such as forecast growth rates and
discount rates, within a reasonably possible range.
• we independently assessed the discount rate applied,
across the different CGUs which are based on product
lines. We did this using publicly available market data for
comparable entities, adjusted by risk factors specific to
the Group.
• we assessed the disclosures in the financial report using
our understanding obtained from our testing and against
the requirements of the accounting standards.
14 inDePenDent auDitor's rePort 68
14 INDEPENDENT AUDITOR's REPORT
14 inDePenDent auDitor's rePort 69
14 INDEPENDENT AUDITOR's REPORT
14 inDePenDent auDitor's rePort 70
15
15 INVEsTOR INFORMATION
15
INVEsTOR INFORMATION As AT 28 FEBRUARY 2020
NUMBER OF sECURITYHOLDERs
At the specified date, there were 5,035 holders of ordinary shares (quoted and unquoted) and 16 holders of options
(unquoted) over ordinary shares. These were the only classes of equity securities on issue.
sHAREHOLDING DIsTRIBUTION
size of shareholding
Number of holders
Number of shares
% of Issued Capital
1-1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,000 and above
Total
1,450
1,918
850
731
86
5,035
804,222
5,620,492
7,021,931
18,826,029
148,437,684
180,710,358
0.45
3.11
3.89
10.42
82.14
100
TWENTY LARGEsT HOLDERs OF ORDINARY sHAREs
Name
shares held
% of issued capital
Auckland Trust Company Ltd
Walker Group Holdings Pty Ltd
Matthew Myntti
HSBC Custody Nominees (Australia) Limited
James Mozley
Christopher Samuel
Judith Mitchell
National Nominees Limited
UBS Nominees Pty Ltd
Citicorp Nominees Pty Limited
Charles Robert Dirck Wittenoom
HSBC Custody Nominees (Australia) Limited - A/C 2
Scone Investments Pty Ltd
Merrill Lynch (Australia) Nominees Pty Limited
Mr Yong Cao
G & N Lord Superannuation Pty Ltd
Ka-tet Pty Ltd
Byron James Darroch
Insync Investments Pty Ltd
46,507,500
29,553,000
20,657,000
5,543,626
5,000,000
5,000,000
4,732,000
2,715,373
1,940,157
1,528,062
2,145,833
1,351,033
1,333,803
1,189,999
1,151,000
1,000,000
890,500
1,262,500*
625,000
25.74
16.05
11.43
3.07
2.77
2.77
2.62
1.5
1.07
0.85
0.84
0.75
0.74
0.66
0.64
0.55
0.49
0.36
0.35
Total
134,126,386
74.24
*
This number includes 650,000 partly paid shares issued to Byron Darroch as part of employee remuneration arrangements. The partly paid shares have US$200,000
unpaid, due and payable on 30 April 2020.The Company will not apply for quotation of the partly paid shares unless and until the shares are fully paid up.
15 investor information 72
15 INVEsTOR INFORMATION
sUBsTANTIAL HOLDERs
Substantial holders as disclosed in substantial holding notices given to the Company were as follows:
Name of substantial holder
Auckland Trust Company Ltd
Walker Group Holdings Pty Ltd
Matthew Myntti
Number of shares over which
relevant interest is held
% of issued capital
46,507,500
29,003,000
20,657,000
25.96%
16.19%
11.53%
QUOTED sHAREs sUBJECT TO VOLUNTARY EsCROW
There were 39,173,525 quoted ordinary shares subject to a voluntary escrow period
(excluding shares subject to ASX restrictions) as follows:
Voluntary escrow period
Number of shares
Date escrow period ends
12 months from date of admission to official list
39,173,525
20 April 2020
Total
UNQUOTED REsTRICTED sECURITIEs
There were 73,497,807 unquoted ordinary shares and 5,850,000 options over ordinary
shares subject to a restriction period or voluntary escrow period as follows:
Restriction period
Class of security
Number
Number of holders
Date escrow period ends
24 months ASX restriction
from date of official quotation
24 months ASX restriction
from date of official quotation
12 months voluntary escrow
from date of admission to official list
ORD
72,847,807
Options
5,850,000
ORD
650,000
7
7
1
18 April 2021
18 April 2021
16 April 2020
OPTION HOLDING DIsTRIBUTION
size of optionholding
Number of holders
Number of options
% of Issued Options
1-1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,000 and above
Total
0
0
0
1
15
16
0
0
0
84,500
9,165,000
9,249,500
0
0
0
0.91
99.09
100
15 investor information 73
15 INVEsTOR INFORMATION
UNQUOTED OPTIONs OVER ORDINARY sHAREs
There were 9,249,500 unquoted options over ordinary shares on issue, 5,850,000 of which
were restricted securities as follows:
Unquoted options – description
Number of options
Number of holders
Options exercisable at US$0.56 per option expiring 17 December 2023
(subject to 24 month ASX escrow restriction ending 18 April 2021)
Options exercisable at US$0.56 per option expiring 17 December 2023
Options exercisable at US$0.42 per option expiring 16 April 2022
Options exercisable at US$0.42 per option expiring 1 November 2021
Options exercisable at US$0.42 per option expiring on 16 April 2021 (includes 3,380,000
securities subject to 24 month ASX escrow restriction ending 18 April 2021)
Options exercisable at US$0.31 per option expiring 1 March 2021
Options exercisable at US$0.31 per option expiring 9 November 2020
Options exercisable at US$0.42 per option expiring 1 September 2020
2,470,000
1,690,000
78,000
162,500
4,114,500
325,000
247,000
162,500
5
5
1
1
4
1
2
1
Total options on issue
9,249,500
20
The Managing Director of the Company is the only person who holds 20% or more of the unquoted
options on issue and the options issued to her were issued under an employee incentive scheme.
VOTING RIGHTs
Ordinary shares (including partly paid shares) carry voting rights on a one for one basis and unlisted options
do not carry voting rights.
UNMARKETABLE PARCELs
There no holders of an unmarketable parcel of shares based on the closing market price of $1.84 at the specified date.
OTHER AsX REQUIRED INFORMATION
During the period between admission to the Official List of ASX and the end of the reporting period, the Company
used the cash and assets in a form readily convertible to cash that it had at the time of admission to the ASX,
in a way consistent with its business objectives. This statement is made pursuant to ASX Listing Rule 4.10.19.
15 investor information 74
16 CORPORATE DIRECTORY
17
Corporate Directory
Board of Directors:
Independent Non-Executive Chairman
George Savvides
Managing Director
Judith Mitchell
Non-Executive Directors
Bruce Hancox
Daniel Spira
Mark Compton
Aileen Stockburger
Company secretary:
Gillian Nairn
Registered office:
share Registry:
Auditor:
solicitors:
Tower A, The Zenith Building
Suite 1902, Level 19
821 Pacific Highway
Chatswood NSW 2067
Tel: +61 2 8607 5124
Link Market Services Limited
Level 12, 680 George Street
Sydney, NSW 2000
Tel: 1300 554 474
KPMG Australia
300 Barangaroo Avenue
Sydney NSW 2000
HWL Ebsworth Lawyers
Level 14, Australia Square
264-278 George Street
Sydney, NSW 2000
stock exchange listing:
Next Science Limited shares are listed on the Australian Securities
Exchange (ASX code:NXS)
Website:
www.nextscience.com
17 CorPorate DireCtory 75
JUDITH MITCHELL MANAGING DIRECTOR
Jmitchell@nextscience.com | +61 2 8607 5125 | NextScience.com