Globally recognised
medical innovation
Annual Report 2021
Vision
PolyNovo is prepared for an exciting
future with expansion into new markets
and continued growth in NovoSorb BTM
production within our facilities.
The talent within our team continues
to grow ensuring we have the resources
to execute our strategy of bringing
disruptive medical devices to market.
These devices are focused on our
mission: Improving outcomes and
changing people’s lives.
CONTENTS
Global Reach
Our Performance
World Leading — Life Changing
Clinical Trials
Chairman and Managing Director Report
Directors’ Report
ESG Statement and Corporate Governance
Remuneration Report – Audited
Auditor’s Independence Declaration
Consolidated Statement of Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Cash Flow Statement
Notes to the Financial Statements
Directors’ Declaration
Independent Auditor’s Report
Shareholder Information
Corporate Directory
PolyNovo Limited ABN 96 083 866 862
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01
PolyNovo Limited | Annual Report 2021
GLOBAL REACH
PolyNovo has continued to invest in
expanding sales teams throughout
the pandemic. In FY21 this strategy
has generated new account acquisitions,
significant growth in sales, greater
geographical coverage, and achievement
of a small profit (excluding non-cash
items) FY22 has started strong
with excellent sales performance
in July 2021.
FY21 has been challenging with restricted
travel, customer access for face-to-face
interactions and reduced hospital activity
due to COVID-19 congestion.
Our early pivoting to digital sales and marketing
strategies has been very rewarding. We have
conducted many webinars across a wide variety
of surgical applications that have allowed our
surgeons to share their excellent outcomes with
their peers.
We have continued to win new accounts,
expand existing account sales, and enter new
geographies. Our European market entries have
been outstanding throughout FY21. This has laid
the foundations for strong sales growth in FY22
as these distributors win hospital accounts.
This profitable strategy enables PolyNovo to
reinvest in new markets and support the general
business expansion.
Logistics to support sales growth has required
extra effort with freight routing and forecasting
however we have stayed ahead of future
demands with high stock holdings in all our
markets. We will have greater flexibility and
market responsiveness in FY22 with our
EU 3PL Movianto coming on stream in Belgium.
Our US business is rapidly expanding in both
personnel and sales revenue. We have continued
the investment in sales and marketing roles
throughout FY21. The US business is profitable,
and we see further expansion of our sales team
in FY22.
Our Clinical Trial programs continue with the
BARDA pivotal burn trial and chronic wound
reimbursement trial. Our SynPath chronic wound
scaffold will allow us to service the $US400M
Chronic wound segment in FY23.
Iceland
United States
+49%
US FY21 sales growth
in local currency USD
United States
Our US business is profitable and our largest revenue contributor.
We have continued to expand our sales and marketing team. We see
further investment in expanding the capacity to drive revenue growth.
The NovoSorb SynPath chronic wound study has completed the first 10
patients and we now embark on the second phase of this clinical trial.
Our BARDA funded pivotal trial is in progress with 20 sites being enrolled
and a further five Canadian sites to be added.
Scan QR code to view a short performance summary
by Ed Graubart – Sr. Vice President Sales & Marketing
Europe
Our European expansion has been significant in FY21. Our distributor model
in Europe is allowing PolyNovo to rapidly expand across Europe without
significant cost and should generate profit in FY22. We have a new 3PL
partner for Europe commencing 1 Sept ‘21 allowing us to efficiently
service many markets.
Scan QR code to view a short performance summary
by David Hollis – EMEA Business Development Manager
South Africa
Our South African distributor, Ascendis Medical, is achieving reasonable sales
through the public hospital system. Access to the Private Health system has
been limited due to reimbursement constraints of health insurers. We will
continue to support Ascendis in their endeavours for reimbursement.
Scan QR code to view a short performance summary
by David Hollis - EMEA Business Development Manager
PolyNovo Limited | Annual Report 2021
02
Sweden
Finland
Austria
Norway
Denmark
Poland
Luxembourg
United Kingdom
Ireland
Belgium
Poland
Netherlands
Greece
Switzerland
Germany
Italy
Saudi Arabia
Israel
Turkey
+53%
Global Distributors
FY21 sales growth
India
Taiwan
First sales achieved in
Taiwan and Singapore.
South Africa
Singapore
+25%
Australia FY21
sales growth
Australia
New Zealand
Asia
Direct sales in Singapore are progressing well with eight
hospitals purchasing NovoSorb BTM for use in a wide range
of elective and trauma cases in FY21. We also appointed
a distributor in Taiwan in October 2020 with a first sale in
December 2020. Taiwan is an advanced medical market,
and we anticipate FY22 to be a strong year. Surgeon
feedback is excellent.
UK / Ireland
Until January UK/Ireland has been highly restricted by
COVID-19. We are seeing a gradual increase in surgical activity
and the re-engagement of face-to-face sales calls. Sales are
trending well, and we have added a sales role in Ireland, and
a further three roles in the UK. Ireland has seen a rapid uptake
of NovoSorb BTM and we see good growth opportunities
throughout UK/Ireland.
Australia
Very strong sales growth in FY21 despite COVID-19 restrictions.
Our penetration of the burn market is significant, and we have
achieved solid growth in elective surgery with sales to many
public and private hospitals. We added two additional
salespeople and see strong growth continuing throughout FY22.
Scan QR code to view a short performance
summary by Andy Eakins – Marketing Manager
UK & EMEA
Scan the QR code to view a short performance
summary by Valerie Young – Sales Director,
Australia / New Zealand
Middle East
Good potential delayed due to COVID-19. As vaccination
programs allow greater access, we anticipate market entries
in H2 FY22.
New Zealand
Strong sales growth in New Zealand across all major hospitals.
The expansion of BTM use across a wide variety of surgical
applications has been exciting with market penetration
expected to continue in FY22. Peer to peer referrals are
strong and the surgical outcomes are outstanding.
Scan QR code to view a short performance
summary by David Hollis – EMEA Business
Development Manager
Scan QR code to view a short performance
summary by Valerie Young – Sales Director
Australia/New Zealand
03
PolyNovo Limited | Annual Report 2021
OUR PERFORMANCE
NovoSorb BTM USA Sales ($USD)
49.0%
2021:
$15.5m
2020:
$10.4m
Net Profit / (Loss) After Tax
EXCLUDING NON-CASH ITEMS*
EBITDA
EXCLUDING NON-CASH ITEMS*
121.5%
2021:
$0.2m
2020:
-$1.2m
161.1%
2021:
$0.6m
2020:
-$1.0m
Cash on Hand FY21 / 1H21
NovoSorb BTM Group Sales
0.4%
FY21:
$7.69m
1H21:
$7.66m
33.8%
2021:
$25.5m
2020:
$19.1m
* Non-cash items comprises of unrealised forex losses, share based payments and depreciation & amortisation
04
PolyNovo Limited | Annual Report 2021 BARDA Revenue
Employee Related Expenditure
EXCLUDING SHARE BASED PAYMENTS
18.1%
2021:
$3.7m
2020:
$3.1m
28.7%
2021:
$16.7m
2020:
$13.0m
Cash on Hand YoY
Capital Expenditure
-34.0%
2021:
$7.7m
2020:
$11.6m
-59.8%
2021:
$3.6m
2020:
$8.9m
Total Employees
Inventory Value
35.9%
2021:
106
2020:
78
61.0%
2021:
$2.0m
2020:
$1.2m
Total Group Revenue
Net Loss After Tax
INCLUDING NON-CASH ITEMS
9.8%
2021:
-$4.6m
2020:
-$4.2m
32.0%
2021:
$29.3m
2020:
$22.2m
Net Cash Outflow Operating Activities
-41.4%
2021:
-$0.3m
2020:
-$0.4m
05
PolyNovo Limited | Annual Report 2021
WORLD LEADING — LIFE CHANGING
Robust in the
presence of infection
Does not act as a food source
for infections, often allowing
retention while the infection
is treated.
Generation of a neodermis
over exposed tendons
and bones
Can offer alternative treatment
for complex wounds.
Designed to
minimise contracture
over functionally
important areas
and improve cosmesis
(uniformity of texture)
Compared with
primary skin grafting.
Dermal repair to
support limb salvage
By creating a vascularised
neodermis for definitive
closure.
06
PolyNovo Limited | Annual Report 2021 CLINICAL TRIALS
USA Burns Trial
Approval for the Pivotal Trial to
commence, comprising up to 150 full
thickness burn patients was received
from the FDA on 8 January 2021.
The clinical research team is currently
working to initiate all 25 North American
and 5 Canadian research sites, which
are a mixture of prestigious academic
institutions and ABA verified burn centers.
Three sites are currently actively
screening potential subjects, with another
3 study sites coming on-board in August.
The first patient to be recruited into the
study is imminent, with a two-year
enrollment period to recruit all subjects.
The virtual investigator meeting was a
great success and was attended by over
98 study personnel over the course of
two days. Dr Tina Palmieri, UC Davis,
Sacramento, CA., our Co-Principal
Investigator provided a clear overview
of the study protocol in conjunction
with our other Co-Principal Investigator
Dr. Blome Ebverwein, Lehigh Valley
Hospital, Allentown, PA. Representatives
from our industry partners and
government sponsor also attended the
meeting and provided a clear message on
the importance of this study to both the
burn community and the US Government.
The Biomedical Advanced Research
and Development Authority (BARDA)
contract, funded by the U.S. Department
of Health and Human Services (Office of
the Assistant Secretary for Preparedness
and Response) originally commenced
on 28 September 2015 funding our
feasibility study which concluded in
March 2020. The Company has previously
announced the result of this trial on
21 April 2020. The completion of the
pivotal study is the final piece to fulfill the
BARDA contract which will end in 2025.
Patients were seen weekly from their
baseline visit until healing, for up to
12 weeks, and a 2-week post healing
(confirmation of closure assessment) in
those that healed. If a participant’s foot
ulcer healed before the final 12-week visit,
they attended a healing confirmation visit
two weeks post the original heal date.
The initial results appear positive with
70% of ulcers achieving complete closure.
The median time to healing was 7 weeks
(range 3-13 weeks). The initial clinician’s
feedback was that SynPath appeared to
have a high degree of clinical efficacy and
helped promote wound closure in many
hard to heal DFU’s in a faster time period
compared to conventional standard of
care treatments in this patient population.
The full study results from this pilot study
will be available in late August / early
September 2021, before moving onto
the next phase in the project which is a
randomised control trial (RCT) of 100
patients compared to the Standard of Care.
“SynPath has exceeded our expectations
in this pilot and is a very viable treatment
for diabetic wounds, we look forward
to the final statistical analysis of the
pilot and the upcoming RCT ,”
said Charles Zelen, DPM, principal
investigator, Podiatry Section Chief;
Department of Orthopedics;
HCA Lewis-Gale Medical Center.
The data from this study will be used
to submit for insurance reimbursement
coverage for chronic wound applications
in the US market. This market segment
has a total addressable market of
USD $400m with market entry
anticipated in 2024.
The pivotal trial will be funded by BARDA
up to USD $15 million. PolyNovo will also
contribute to the trial through provision
of product, staff resources, and
infrastructure support. The contract is on
a cost-plus monthly reimbursement basis.
Successful completion of the pivotal trial
will lead to a PMA application with the
US FDA for the use of our scaffold in full
thickness acute burns. The finalised list
of trial hospitals will be published via
an ASX announcement later in the year.
Dr. Marcus Wagstaff is acting as
PolyNovo Medical Director overseeing
the clinical conduct of PolyNovo trials
and providing valuable clinical support
for our global medical teams.
On completion of the trial and approval
of our application for a PMA from the
US FDA we anticipate the US Government
may add NovoSorb BTM to its national
stockpile for critical healthcare products.
SynPathTM DFU
Pilot Study
A Single Arm Pilot Study Evaluating
Wound Closure with Application of
SynPath™ in the Treatment of
Non-Healing Diabetic Foot Ulcers.
The purpose of this pilot study was to
assess the safety and clinical efficacy of
SynPath™ to promote wound closure in
non-healing diabetic foot ulcers, DFU,
and to collect patient outcome data and
clinician feedback in the first formal
evaluation of SynPath in this chronic
wound etiology.
Ten eligible subjects who presented with
a Wagner Grade 1 Diabetic Foot ulcer, and
who met the inclusion/exclusion criteria
of the protocol were enrolled into the
evaluation. All patients that consented
to taking part in the study were treated
with SynPath over a period of 12 weeks,
or until 100% wound closure.
07
PolyNovo Limited | Annual Report 2021
CHAIRMAN AND MANAGING DIRECTOR REPORT
Dear Shareholder,
COVID-19 in FY21 had a significant
impact on hospital trauma, burn and
elective surgery activity. Notwithstanding
limited hospital access, lockdowns,
and travel restrictions, we adapted our
business and had continued material
sales growth with global BTM sales up
by 33.8% (AUD), US BTM sales up by
49.0% in local currency (USD) and the
Group achieved a small underlying profit
(excluding non-cash items) of $258,756.
We signed three General Purchasing
Organisation (GPO) contracts during
the year to 30 June 2021 with further
negotiations currently in progress. These
contracts will enable faster account
acquisition and deeper US market
penetration in FY22.
We continued our investment in building
our platform for post COVID-19 growth
with personnel growing from 78 to 106.
Growth in our sales team was a significant
driver of our sales momentum. Advanced
digital programs including webinar and
promotional activities are now part of our
“normal” business processes. Many virtual
trade shows have been conducted where
we established new leads, presented
NovoSorb BTM to large audiences,
and reached new markets.
Sales in all our direct markets continue
to grow with the second half providing
strong improvement in revenues, new
account acquisitions and sales team
expansion. Importantly PolyNovo
achieved a small profit (excluding
non-cash items) and was cash breakeven,
a significant company milestone. Our cash
on hand position is strong as at 30 June
2021 and forward cashflows are building
despite forecast expenditure required
for growing sales teams and investing
in new product development.
Continued manufacturing of inventory
completed during FY21 means we have
stock available for customers in all
markets. Production capacity is high,
and we increased capacity including
redundancy through the completion
of our new manufacturing facility.
This new facility will house our polymer
laboratories, film extrusion, new foam
cutting machinery and ultrasonic welding
capabilities. Our new equipment and skills
in production enable PolyNovo to rapidly
develop new medical devices constructed
from our existing NovoSorb polymers.
“FY22 has begun with positive sales momentum,
continued sales force expansion, Syntrel VP (hernia)
study commencement and improved customer access
with the (hopefully) receding of COVID-19 restrictions.“
The new manufacturing facility has been
commissioned and is currently undergoing
internal qualification which is expected to
be completed by the end of September.
New, smaller NovoSorb BTM sizes will
enter specific markets in October 2021
addressing the European, UK, Australia
and New Zealand demands for
economically treating lesion excisions,
diabetic foot ulcers, arterial ulcers and
venous leg ulcers. Recent publications
and presentations by Flinders University
(South Australia) demonstrate great
promise for the role of NovoSorb BTM in
arterial leg ulcers. PolyNovo is supporting
further investigations of this application.
The first phase of a diabetic foot ulcer
study in the US concluded in July 2021
with enrolment of the first ten patients.
We will now review the progress of these
patients and adjust any trial protocols to
embark on the recruitment of the next
40 patients. The data from this study
will be used to submit for insurance
reimbursement coverage for chronic
wound applications in the US market.
This market segment has a total
addressable market of USD $400 million
with market entry anticipated in 2024.
The BARDA funded pivotal burn trial has
commenced and we are in the process
of enrolling 20 US based and 5 Canadian
based burn centres in performing the
pivotal burn trial. BARDA revenues are
expected to increase commensurate with
the trial activity in the year ahead.
The R&D team has demonstrated an
ability to adapt by producing finalised
hernia devices called Syntrel VP in FY21.
We commenced a large animal study
in July 2021 to generate the data
on resorption, toxicology and
biocompatibility that will support our
dossier submission to the US FDA in
approximately March/April 2023 for
our hernia product. We anticipate gaining
approval to sell in the US by August 2023.
FY22 has begun with positive sales
momentum, continued sales force
expansion, Syntrel VP (hernia) animal
study commencement and improved
customer access with the expectation
of receding of COVID-19 restrictions.
Clinical Trials FY21
Our $15m USD BARDA funded US pivotal
burns trial is underway. This trial will
compare NovoSorb BTM with the
selected hospitals’ standard of care
looking at wound closure together
with cosmetic and functional outcomes.
Enrolling Canadian burn centres into the
program will also facilitate our market
entry to Canada in FY22.
PolyNovo will continue the health
economic and clinical trial for diabetic
foot ulcers and venous leg ulcers to
generate the data required by US health
insurance groups for a reimbursement
code. This clinical data will ultimately lead
to entering the US chronic wound care
market and generate supporting clinical
data for NovoSorb BTM in the treatment
of these wounds in all markets. NovoSorb
BTM already has regulatory approval for
use in all chronic wound applications in
all markets we are in.
New Markets FY21
PolyNovo has expanded its European
and Asian markets during the period
to 30 June 2021. To enable faster
EU penetration, we have adopted
a distributor model in key European
countries supported by our existing
UK based marketing and business
development team. We have entered
Belgium, Luxembourg, Netherlands
(Benelux), Norway, Denmark, Finland,
Sweden, Poland, Italy, Turkey, and Greece.
Although European markets have also
been impacted by COVID-19, we
have seen NovoSorb BTM sales with
continued growth over the six months
to 30 June 2021.
08
PolyNovo Limited | Annual Report 2021 We have taken a direct market entry into
the Irish market in FY21 and have realised
NovoSorb BTM sales following entry.
We anticipate the Irish market will grow
strongly in FY22.
Taiwan has been added to our Asian
markets and we see great potential
in this advanced market.
New Markets for FY22
PolyNovo is currently working on market
entry in Canada, France, Kuwait, UAE,
Cyprus, Lebanon, and further Middle
Eastern markets this financial year. Japan
is an attractive market, and whilst we are
exploring the best market entry strategy
for this market, it may take until 2023 for
market entry due to complex regulatory
requirements.
Hernia - Syntrel
Our Syntrel hernia devices are being
manufactured in our new facility.
These devices are currently undergoing
biocompatibility, toxicology, and
resorption studies. Data from this trial
is required for the US FDA regulatory
dossier which we anticipate submitting
in March/April 2023 and gaining approval
to sell in the US by August 2023.
Much of the pre-clinical trial data relating
to our NovoSorb film and ultrasonic
welding processes from this development
activity will be applicable to other devices
in development.
PolyNovo’s development teams have
worked with our global suppliers to
commission complex machinery
throughout COVID-19. Consequently,
the teams have developed new and
advanced skillsets which will provide
ongoing benefits to our other new
product development programs.
Tissue Reinforcement
PolyNovo has employed additional
scientific and marketing support to drive
this program. Tissue reinforcement is the
use of the NovoSorb foam that can be
used alone or with the NovoSorb film
reinforcement to fill internal tissue
defects. We are currently scoping the
unmet needs of surgeons so that we
can capture their requirements within
the design of novel NovoSorb products.
We will share an estimated development
timeline with the market once we have
reached later stage gate milestones.
Beta-Cell Diabetes
application
PolyNovo is collaborating with BetaCell
Technologies Pty Ltd on a research
project exploring the potential of
integrated NovoSorb BTM to host
pancreatic islets in the skin. Animal
studies have demonstrated that
NovoSorb foam is a safe and viable
environment for Islet cell transplants.
BetaCell has secured funding and plans
to start human trials using NovoSorb BTM
in FY22 for Type I diabetics who have
undergone renal transplants.
New Product pipeline
PolyNovo sees multiple device
development opportunities for
NovoSorb applications, and we are
actively screening near term programs.
Summary of FY21
• Annual NovoSorb BTM revenue
growth of 33.8%
• Annual US revenue growth
in $USD of 49.0%
• Annual Distributor sales growth
of 53.1%
• Increased gross margin by 2.8%
on product sales
• Commenced the $15M ($USD)
BARDA funded Pivotal trial
• Signed three General Purchasing
Organisations (GPO’s) in the US
• Achieved profitability/breakeven
(excluding non-cash Items)
• Staff increased from 78 to 106
with a US sales team of 36
• Appointed a Director of R&D
• Signed Taiwan distributor and
achieved first sales
• Signed 6 European distributors which
covers an additional 8 markets
• Expanded German distributor’s territory
to include Belgium, Netherlands,
Luxemburg, and Sweden
• Implemented advanced digital marketing
strategies to drive sales and marketing
during COVID-19
• Completed the build of the new
production facility for hernia, film,
foam, and polymer (redundancy
capacity for BTM)
• Implemented Business Intelligence
software including an electronic Quality
Management System
• Initiated a US chronic wound study
for health insurance reimbursement
• Initiated a chronic wound study with
Flinders University South Australia
David Williams
Chairman
Paul Brennan
Managing Director
09
PolyNovo Limited | Annual Report 2021
DIRECTORS' REPORT
The Directors of PolyNovo Limited
(PolyNovo) present the Directors’
Report, together with the Financial
Report, of the Company and its
controlled entities (the Group) for
the year ended 30 June 2021 and
the related Auditor’s Report.
Board of Directors and
Senior Management
The details of Directors and Senior
Management during the year and until
the date of this report are set out below.
Directors were in office for the entire
period unless otherwise stated.
Mr David Williams
B.Ec (Hons), M.Ec, FAICD
Non-executive Chairman
Dr Robyn Elliott
BSc (Hons) Chemistry,
PhD Inorganic Chemistry
Non-executive Director
Mr Williams was appointed as a
Non-executive Director on 28 February
2014 and Chairman on 13 March 2014.
Mr Williams is an experienced Director
and investment banker with a track record
in business development as well as in
mergers and acquisitions and capital
raising. He has 30+ years’ experience
working with and advising ASX-listed
companies in the food, medical device,
and pharmaceutical sectors.
Mr Williams is currently a Director
of ASX listed Medical Developments
International Ltd (ASX: MVP), Chairman
of RMA Global Limited and is Managing
Director of corporate advisory firm
Kidder Williams Ltd.
Dr Elliott was appointed a Director of
PolyNovo on 28 October 2019. Dr Elliott
is currently Executive Director, Strategic
Fractionation Program Delivery at CSL
Behring, a global role that is responsible
for business value delivery from a
billion-dollar capital expansion portfolio.
Dr Elliott previously held Strategic
Expansion and Quality Senior Director
roles within CSL, was the Managing
Director at IDT Australia and commenced
her career at DBL Faulding. Dr Elliott
has a proven track record in product
development, clinical trials, regulatory
affairs, audits, quality management,
project management and operational
strategy. Her worldwide experience in
new facility delivery, production scale up,
strategy, regulatory affairs and audit will
be invaluable to PolyNovo as the company
scales its operations globally.
10
PolyNovo Limited | Annual Report 2021
Ms Christine Emmanuel
BSc (Hons) Chemistry, MSc Enterprise,
FIPTA, MAICD
Non-executive Director
Ms Emmanuel was appointed a
Director of PolyNovo on 13 May 2020.
Ms Emmanuel is an accomplished patent
and trademark attorney, and a business
development professional with more
than 30 years’ local and international
experience. Ms Emmanuel has a Bachelor
of Science with a major in Economics
(Hons: Chem) from Monash University,
Certificate in Intellectual Property Law
from Queen Mary College, University
of London, Masters of Enterprise from
Melbourne University. She is Vice
President of the Board of the Institute
of Patent and Trade Mark Attorneys of
Australia on Springboard Enterprises
Life Sciences Council, is a non-executive
director on the board of Medical
Developments International and is a
member of the Australian Institute of
Company Directors. Ms Emmanuel is
currently IP & Commercialisation manager
at RMIT University and was previously
Executive Manager of Business
Development and Commercial at the
CSIRO, having founded and led the
management of CSIRO’s IP portfolio for
over 10 years and managed the growth
of the CSIRO equity portfolio for the last
5 years. Previously she was in-house
IP Counsel for Unilever in the UK and
practised as a patent and trademark
attorney for Wilson Gunn (UK) and
Davies Collison.
Mr Leon Hoare
GradDipBus, AssocDipAppSc (Ortho), GAICD
Dr David McQuillan
BSc (Hons) Biochemistry, PhD Biochemisty
Non-executive Director
Non-executive Director
Mr Hoare was appointed a Director
of PolyNovo on 27 January 2016.
He is currently the Managing Director
of Lohmann & Rauscher, Australia &
New Zealand (ANZ), a private EU
based medical device company.
Previously he was Managing Director of
Smith & Nephew ANZ (all divisions) until
2015, one of Smith & Nephew’s largest
global subsidiaries outside the USA.
He served as President of Smith &
Nephew’s Asia-Pacific Advanced Wound
Management (AWM) businesses for 5
years and was a member of the Global
Executive Management for the AWM
Division. In his 24 years with Smith &
Nephew, he also held roles in marketing,
divisional and general management.
His career has also included a senior
role at Bristol-Myers Squibb (medical
devices), and as Vice Chair of Australia’s
peak medical device body, Medical
Technology Association of Australia.
He is currently a Non-executive Director
of Medical Developments International
Ltd (ASX: MVP).
Dr McQuillan was appointed a Director
of PolyNovo on 6 August 2012. He has
extensive technical, medical, scientific,
and regulatory knowledge, as well as
merger and acquisition expertise.
Previously he was a Fellow at the NIH
(Bethesda, MD), an NH&MRC Fellow
at the University of Melbourne, and
Associate Professor at Texas A&M
University (Houston, TX) where he
studied Tissue Engineering, Regenerative
Medicine, and Biochemistry of the
Extracellular Matrix. Dr McQuillan was
with LifeCell Inc/Kinetic Concepts Inc
(KCI) for 12 years, holding a number of
senior roles, including Vice President for
Research and Development at LifeCell
and Senior Vice President of Advanced
Research and Technology at KCI.
He was Chief Science Officer for TELA
Bio, a VC-funded development-stage
biotechnology company from 2013 to
2015. He is currently a Non-executive
Director for Cell Care Therapeutics Inc
(a privately held stem cell company based
in Monrovia, CA) and Non-executive
Director and Co-Founder of ECM
Technologies Inc (a privately held
biotechnology company based in
Houston, TX).
11
PolyNovo Limited | Annual Report 2021 DIRECTORS' REPORT CONTINUED
Mr Bruce Rathie
B. Comm, LLB, MBA, FAIM, FAICD, FGIA
Non-executive Director
Mr Andrew Lumsden
MA (Hons) in Accountancy & Finance,
CA, AGIA ACG, MAICD
Non-executive Director
Mr Paul Brennan
MBA, BSc (Nursing) RN RM
Managing Director
Mr Lumsden was appointed a Director
of PolyNovo on 4 June 2021. He is an
accomplished Chartered Accountant and
finance executive with more than 20
years’ experience locally and internationally.
He holds a Master of Arts in Accountancy
and Finance (First Class Hons), is an
Associate of The Chartered Governance
Institute and a member of the Australian
Institute of Company Directors.
Mr Lumsden is currently Global Chief
Operating Officer of Wellcom Group Pty
Ltd (formerly Wellcom Group Limited)
having previously held the roles of Chief
Financial Officer and Company Secretary.
Prior to joining Wellcom, Mr Lumsden
was a Senior Manager within the
Audit and Assurance practice of
PricewaterhouseCoopers.
Mr Rathie was appointed a Director
of PolyNovo on 18 February 2010.
He is an experienced Company Director
with a finance and legal background.
He practised as a partner in a large legal
firm and acted as Senior Corporate Counsel
to Bell Resources Limited in its early years.
He then studied for his MBA in Geneva
and embarked on his 15-year investment
banking career. When Head of the
Industrial Franchise Group at Salomon
Smith Barney he led Salomon’s roles in
the Federal Government’s privatisation
of Qantas, Commonwealth Bank (CBA3)
and Telstra (T1). He now has over 20
years’ experience as a full time professional
Non-executive Director. He is currently
Chairman of Capricorn Mutual Limited
and a Non-executive Director of ASX
listed Cettire Limited (ASX:CTT), Capricorn
Society Limited and Australian Meat
Processors Limited. In the medical device
space, he is currently Chairman of ASX
listed 4DMedical Limited (ASX: 4DX) and
was previously Chairman of ASX listed
Anteo Diagnostics Limited and a Director
of Compumedics Limited and USCOM
Limited.
Mr Brennan was appointed Chief
Executive Officer (CEO) of PolyNovo
Limited on 13 February 2015. He was
subsequently appointed Managing
Director on 23 April 2020. Mr Brennan
has extensive knowledge, exposure and
understanding of the health system
through his clinical background and
commercial exposure with various
multinational companies. He has co-
ordinated the marketing, global strategy
development, new product development
and regulatory processes for the
Asia-Pacific region for industry-leading
organisations in relation to medical
products and devices. Mr Brennan has an
intimate knowledge of the manufacturing
and production processes. Previously he
was Marketing Director Australia and
New Zealand and Sales Director New
Zealand for Smith & Nephew Healthcare
from 2008 to his commencement with
PolyNovo in February 2015. Mr Brennan
holds an MBA from Swinburne University,
a Bachelor of Science (Nursing) from
the University of New England in NSW,
Certificate in Midwifery Central Coast
Area Health Service NSW, and General
Nursing certificate from St Vincent’s
Hospital Darlinghurst NSW.
12
PolyNovo Limited | Annual Report 2021 Mr Jan Gielen
CA, Bachelor Bus (Acc)
Chief Financial Officer
and Company Secretary
Dr Anthony Kaye
BSc (Hons) Chemistry PhD
Organic Chemistry
Chief Operating Officer
Dr Anthony Kaye joined PolyNovo on
9 November 2020. Dr Kaye holds a
Ph.D. in Synthetic Organic Chemistry
from Latrobe University and commenced
his career with Biota holdings undertaking
post-Doctoral research. Since then,
Dr Kaye has held senior operational roles
in the pharmaceutical and advanced
materials industries initially at IDT
Australia and Boron Molecular. Most
recently Dr Kaye held senior operational
and capital expansion project roles with
CSL Behring, based at the Broadmeadows
manufacturing facility.
Dr Kaye has extensive experience
in product development, process
scale-up, advanced manufacturing,
process automation, end to end supply
chain and cleanroom facility design.
Mr Gielen joined PolyNovo Limited on
12 December 2018. Mr Gielen holds a
Bachelor of Business (Accounting) degree
from Monash University, is a member of
the Institute of Chartered Accountants
and commenced his career with Pitcher
Partners. Since then, Mr Gielen has held
senior finance roles for various businesses
across a range of industries such as retail,
ICT, logistics (3PL) & medical, both
locally and internationally. Mr Gielen has
extensive experience in CFO and Finance
Director roles for fast growing PE and
VC backed businesses and played an
important part in expanding these
businesses globally, both from a financial
and operational perspective. Mr Gielen
had a long involvement from inception
with ICIX, a leading SaaS platform
supporting global retailers and
manufacturers where he served as
Finance Director in Silicon Valley.
Mr Gielen’s most recent role was CFO
of CardioScan for 6 years, Australia’s
largest cardiac reporting provider, which
during his tenure expanded to HK,
Singapore & North America.
13
PolyNovo Limited | Annual Report 2021 DIRECTORS' REPORT CONTINUED
Review of Operations
Corporate and
Organisational structure
PolyNovo Limited, the ultimate parent
entity of the PolyNovo Group, is a
public company listed on the Australian
Securities Exchange. As at 30 June 2021,
PolyNovo Limited had eight wholly owned
subsidiaries: PolyNovo Biomaterials Pty
Limited, NovoSkin Pty Ltd, NovoWound
Pty Ltd, PolyNovo NZ Ltd, PolyNovo UK
Ltd, PolyNovo North America LLC (PNA
LLC), PolyNovo Singapore Private Ltd and
PolyNovo Ireland Ltd. The first three
subsidiary companies listed above are
Australian proprietary companies whilst
the other entities are the trading and
employment entities for those countries.
PolyNovo NZ Ltd does not employ direct
staff and is currently managed by the
Australian sales team.
Principal Activities
and Operations
PolyNovo’s principal activity is the
development of innovative medical devices
for a number of medical applications,
utilising the patented bioabsorbable
polymer technology NovoSorb.
NovoSorb is a family of proprietary medical
grade polymers that can be utilised to
manufacture novel medical devices
designed to support tissue repair and which
then bio absorb in a defined fashion in-situ
to harmless by-products. NovoSorb has
significant advantages over competitor
bioabsorbable polymers in terms of its
design flexibility and biocompatibility.
PolyNovo can manufacture NovoSorb
polymer devices with the ability to elute
drugs, antimicrobials as well as be
expressed in a variety of physical formats
including:
• Films
• Foam
• Coatings/sprays
• Fibres
• Plastic structures
• Biologic carrier
NovoSorb is currently covered by 56
patents all fully owned by PolyNovo.
PolyNovo has no royalty or licence
obligations to any other parties.
A summary of PolyNovo’s lead projects
is on next page.
PolyNovo Limited | Annual Report 2021
14
NovoSorb BTM
NovoSorb Biodegradable Temporising
Matrix (BTM) is used in a fully debrided
clean surgical wound to physiologically
‘close the wound’. With the BTM scaffold in
place the dermal layer is regenerated within
the scaffold. Once fully integrated, the
outer layer is delaminated and the wound
closes through secondary intention (smaller
wounds) or through application of a split
skin graft. BTM is commercially sold in
Australia, USA, Canada (by exemption),
New Zealand, United Kingdom, Ireland,
Germany, Austria, Switzerland, Sweden,
Finland, Norway, Benelux, Italy, Poland,
Singapore, Malaysia, South Africa, India,
Saudi Arabia, Israel, Greece, and Taiwan.
Further markets are under consideration
for FY22.
Key attributes of the NovoSorb technology
include an unparalleled range of mechanical
properties and bio absorption times,
excellent biocompatibility and safety
profile and harmless degradants.
Publications and videos relating to
NovoSorb BTM applications can be found
on our website: www.polynovo.com
NovoSorb BTM continues to feature in
major clinical conference presentations
around the world. Many new clinical papers
have been published in peer review journals
and the surgeon-to-surgeon referral of the
benefits of NovoSorb BTM continues to
accelerate.
NovoSorb BTM indication
for full thickness burns
NovoSorb BTM is an innovative treatment
for any loss of the dermis. NovoSorb BTM
is indicated for full thickness/ third degree
burns in markets outside of the USA.
Full thickness burns treatment for US FDA
regulatory ‘claim’ requires additional clinical
evidence generation (trials). This pivotal
trial is in progress and funded by BARDA.
Successful completion of this trial will
enable PolyNovo to file a PMA claim for full
thickness burn use and may lead to BARDA
acquiring a stockpile of NovoSorb BTM for
disaster management.
“NovoSorb BTM continues to feature in major
clinical conference presentations around the
world. Many new clinical papers have been
published in peer review journals and the
surgeon to surgeon referral of the benefits
of NovoSorb BTM continues to accelerate.“
Regulatory approvals for
NovoSorb BTM in FY21
Taiwan
PolyNovo achieved Taiwan FDA regulatory
approval for NovoSorb BTM in FY21.
First sales followed in Q2 FY21.
South Korea
PolyNovo successfully passed the
South Korean FDA audit in Q3 of FY21.
Regulatory application for approval as a
class III device for NovoSorb BTM is now
in progress.
Hernia Repair
PolyNovo has completed the building and
commissioning of the Unit 1 facility, and
the internal qualification is expected to
be completed by end of September. This
facility enables PolyNovo to manufacture
a wide variety of NovoSorb products
including polymer, pellets, extruded films
and fully converted medical devices such
as Syntrel VP (hernia) devices. Pre-clinical
trials are currently underway to develop
the biocompatibility, toxicology and
resorbsion data required for regulatory
filings. We anticipate submitting for a US
FDA 510(k) in March/April 2023 and
gaining approval to sell in US by August
2023.There remains some risk in the
timeline as we work through the
regulatory processes and trials.
USA Burns Trial – BARDA
Our Biomedical Advanced Research
and Development Authority (BARDA)
contract funded by the U.S. Department
of Health and Human Services
(Office of the Assistant Secretary for
Preparedness and Response) commenced
on 28 September 2015. The feasibility
trial concluded in March 2020 and the
Company has announced the excellent
result of this trial on 21 April 2020.
PolyNovo completed the swine toxicology
study mapping the full degradation
pathway of NovoSorb BTM during FY20.
The data generated in this study will
support our Premarket Approval (PMA)
application and add to the body of
evidence demonstrating the mode
of action of NovoSorb BTM.
The pivotal trial is funded by BARDA
to USD $15 million after extending the
contract in FY21. PolyNovo will also
contribute to the trial through provision
of product, staff resources and
infrastructure support. We are currently
recruiting patients into the trial through
a planned 20 US burn centres and five
Canadian burn centres. Successful
completion of the pivotal trial will lead to
a PMA application with the US FDA and
the use of our scaffold in full thickness
acute burns. The contract is a cost-plus
monthly reimbursement basis.
Dr Marcus Wagstaff is acting as PolyNovo
Medical Director overseeing the clinical
conduct of PolyNovo trials and providing
valuable clinical support for our global
medical teams. Dr Tina Palmieri, UC Davis
Sacramento, and Dr Sigrid Eberwein,
Lehigh Valley, are the principal
investigators for this study.
15
PolyNovo Limited | Annual Report 2021
DIRECTORS' REPORT CONTINUED
Tissue Reinforcement (Breast)
PolyNovo’s internal development program
for a portfolio of products for use in
reconstructive and aesthetic surgery is
well defined and has shared technologies.
Our Hernia product is exciting but
importantly it serves as an effective
building block for tissue reinforcement
products in orthopaedics, breast, etc.
We anticipate that manufacturing
processes and the technology will be
shared across a range of new products.
NovoSorb Dermal Beta
Cell Implant
PolyNovo is collaborating with BetaCell
Technologies Pty Ltd, on a research
project exploring the potential of
integrated NovoSorb BTM to host
pancreatic islets in the skin. Betacell has
completed several swine studies with
good results. It is currently refining the
surgical procedure before determining
the timeline to human trials. PolyNovo
will manufacture unique shapes and sizes
of NovoSorb BTM for the application.
BetaCell, has funding supported from
the Juvenile Diabetes Research
Foundation (JDRF, US). BetaCell will
manage the trial program.
NovoSorb Drug Elution Depot
(pellet)
PolyNovo produced polymers with up
to 45% of the weight being a bound
drug. Our initial work is focused on low
temperature extrusion for optimal drug
stabilisation. Further development will
continue with the addition of further
research and development resources.
Capital Investment
PolyNovo has completed the majority
of our capital program with completion
of the Unit 1 manufacturing facility. We
have a low capital investment program
for FY22. The Unit 1 facility brings a
wealth of new capacity and manufacturing
technologies to PolyNovo, such as
NovoSorb film extrusion, microsphere
“PolyNovo has invested further into the upgrade
of our Enterprise Resource Planning (ERP)
system by enabling an advanced manufacturing
module and a Client Relationship Management
(CRM) tool to actively manage the business and
customer needs across multiple countries.“
manufacturing, ultrasonic welding,
higher speed foam cutting, NovoSorb
BTM manufacturing redundancy/capacity
and high-volume polymer manufacturing.
PolyNovo has invested in enhanced IT
systems that bring increased efficiencies
in finance, quality management and
building/manufacturing operations.
We will, in FY22, further add to our IT
infrastructure enabling faster global data
transfer and business intelligence through
fully encrypted cloud-based systems.
COVID-19
COVID-19 in FY21 had a significant
impact on hospital trauma, burn and
elective surgery activity. Hospital and
surgeon access was restricted due to
the priority in treating patients with
COVID-19, the many lockdowns and
travel restrictions imposed across all
geographies.
To maintain customer engagement and
drive sales we adapted our business to
reduce the impact on traditional sales
techniques and achieved 33.8% BTM
sales growth globally. Notably in the US
revenue was up by 49% in local currency
(USD). In markets such as the US, high
vaccination rates have led to population
movement and lifestyles being “COVID-
resilient”, which in turn increased sales
with record results in Q4. The growth
achieved is significant when considering
the impact of COVID-19 globally.
Focusing on digital sales and marketing
campaigns was effective in servicing
existing customers and winning new
customers in all markets we operate.
Status of Markets:
US
• Vaccinations are increasing hospital
capacity. Some areas in the US remain
challenging with low vaccination rates
but overall the country’s vaccination rate
is amongst the highest globally.
• In many states people are moving around
freely and activities potentially leading to
trauma events are occurring.
• Improved face to face access for sales
teams and access to operating rooms,
however sales calls will be a mix of digital
and face to face.
UK/Ireland
• Hospital access has improved. Elective
surgery rates are recovering. Steady
revenue improvements reflecting high
vaccination rates and removing of
restrictions.
Australia
• Maintaining surgeon engagement in
Australia, however we continue to see
fluctuations in elective surgery rates
due to lockdowns. Vaccination rates
are increasing which should lead to
relaxation of restrictions.
New Zealand
• Intermittent access to NZ from
Australia, good digital engagement,
good growth in sales and wide
indications use.
EU
• Continued expansion in FY22. Virtual
market support throughout FY21
however we see improving face
to face access.
PolyNovo Limited | Annual Report 2021
16
Forecasting revenue is more challenging
due to COVID-19 but we have a well-
established demand forecasting process
in place. To counteract any demand
planning and supply chain issues caused
by COVID-19, stock levels in all direct
markets have been increased and
continue to be maintained at high levels.
Logistics costs have increased and
we update our cash flow forecasts to
include the impact of changes in costs.
The Group has a level of discretion in
managing cash outflows in response to
changes to the impact of COVID-19.
A global COVID-safe plan has been
implemented across the business in line
with government guidelines to ensure
the safety of staff and minimise business
interruption. The Group will continue to
monitor the impact of COVID-19 and
adapt where required to ensure customer
service is maintained, and business
expansion plans are executed.
Significant Changes
in the State of Affairs
Other than the above and except as
otherwise set out in this report, the
Directors are unaware of any significant
changes in the principal activities
of PolyNovo during the year ended
30 June 2021.
Strategic Overview and
Likely Developments
PolyNovo’s focus over the next twelve
months will be to:
• Continue to accelerate revenue from
NovoSorb BTM in the existing markets
and expand our geographic reach as
outlined
• Conduct validation and verification
processes for the Syntrel hernia devices
leading to the filing of US FDA 510(K)
March/April 2023
• Establish 20 US and 5 Canadian
recruitment sites for the US pivotal
burn trial
• Advance our new product pipeline
with the addition of scientist and
other resources
• Support the BetaCell expansion of
NovoSorb BTM use as a dermal deposit
for Type 1 diabetes
Financial Results
PolyNovo Limited reported revenue
for the year ended 30 June 2021 of
$29,339,324 an increase of $7,110,823
from the prior year’s $22,228,501. The
net loss after tax (NLAT) of $4,605,032
for FY21 was an increase of $411,294
from the prior year’s $4,193,738.
Excluding non-cash items of share-based
payments $2,626,897, unrealised forex
loss $1,120,568, and depreciation &
amortisation $1,116,323 the underlying
net profit after tax is $258,756 (2020:
loss $1,204,839).
Several factors contributed to the result
as follows:
• Revenue from the sale of commercial
products for FY21 increased by 34%
to $25,507,859 from the prior year’s
$19,064,983.
• Finalise recruitment of the next
patient’s cohort in the US DFU/VLU
reimbursement trial
• Exploit our GPO/IDN agreements in the
US to further accelerate sales revenue
• Establish a European warehousing and
logistics hub with 3PL provider Movianto
in Belgium which will enable customer
order fulfilment from 1 September 2021.
Significant Events After
the Balance Date
Trade finance facility was extended
to 31 August 2021. The Directors are
not aware of any other matters or
circumstances since the end of the
financial year other than those described
above, nor otherwise dealt with in this
report, which have significantly affected,
or may significantly affect, the operations
of the Group, the results of those
operations or the state of affairs of the
Group in subsequent financial years.
17
PolyNovo Limited | Annual Report 2021 DIRECTORS' REPORT CONTINUED
• Revenue from BARDA for FY21
increased by 18% to $3,650,065
from the prior year’s $3,091,140.
This increase is reflective of the
commencement of the pivotal trial.
Revenue is expected to increase in
FY22 as patients are recruited into
the Pivotal trial.
• Included in other income is payments
from the Australian Government for
COVID-19 assistance for $180,034.
• Employee related expenses increased by
29% to $19,376,331. This increase is
due to share-based payments expense
provided to key management personnel
and headcount increase to drive growth
primarily within sales, marketing,
production, quality, and finance.
• Depreciation and amortisation
increased by $126,165 attributable to
property, plant and equipment acquired
for the new manufacturing facility.
• Corporate, administrative, and
overhead expenses increased by 29%
to $8,068,493 reflecting the increased
growth and activity in the business.
R&D Tax Incentives
During the 2021 financial year, the
Company received a 38.5% non-
refundable tax offset of $506,381
(non-cash) in relation to the FY20
R&D tax incentive scheme.
As the Company has exceeded the
$20.0 million R&D cash tax threshold
being the maximum revenue allowable for
the claiming of a cash refund, a deduction
is recognised against taxable income.
Closing share price
Date
30 June 2017
30 June 2018
30 June 2019
30 June 2020
30 June 2021
$
$0.21
$0.54
$1.54
$2.54
$2.82
A high of $4.01 was reached on
29 December 2020.
Accordingly, the Company relies on
section 300(9) of the Corporations Act
2001 to exempt it from the requirement
to disclose the nature of the liability
insured against and the premium amount
of the relevant policy.
Indemnification of Auditors
To the extent permitted by law, the
Company has agreed to indemnify its
auditors, Ernst & Young Australia, as
part of the terms of its engagement
agreement against claims by third parties
arising from the audit (for an unspecified
amount). No payment has been made to
indemnify Ernst & Young Australia during
or since the financial year.
Inherent Risks of Investment
in Biotechnology Companies
There are many inherent risks associated
with the development of pharmaceutical
and medical products to a marketable
stage. The clinical trial process is designed
to assess the safety and efficacy of
a drug or medical device prior to
commercialisation and a significant
proportion of drugs and medical devices
fail one or both of these criteria. Other
risks include uncertainty of patent
protection and proprietary rights,
whether patent applications and issued
patents will offer adequate protection
to enable product development, the
obtaining of necessary regulatory
authority approvals and difficulties caused
by the rapid advancements in technology.
Companies such as PolyNovo are
dependent on the success of their
research projects and their ability
to attract funding to support these
activities. Investment in research and
development projects cannot be assessed
on the same fundamentals as other
trading enterprises and access to capital
and funding for the Group and its projects
going forward cannot be guaranteed.
Investment in companies specialising
in research projects, such as PolyNovo,
should be regarded as highly speculative.
PolyNovo strongly recommends that
professional investment advice be
sought prior to individuals making
such investments.
Loss Per Share
In Australian dollars $
Basic loss per share – cents
Diluted loss per share – cents
Cents
(0.69)
(0.69)
As the Group made a loss for the year
ended 30 June 2021, potential ordinary
shares, being options or performance
rights to acquire ordinary shares, are
considered non-dilutive and therefore
not included in the diluted earnings per
share calculation.
As at 30 June 2021, there are 2,700,000
share options and 3,300,330 share
awards unissued.
Dividends
No amounts have been recommended by
the Directors to be paid by way of
dividend during the current financial year.
No cash dividends have been paid or
declared by PolyNovo since the beginning
of the financial year.
Indemnification and
Insurance of Directors
and Officers
During the year ended 30 June 2021,
the Company indemnified its Directors,
Company Secretary and Executive
Officers in respect of any acts or
omissions giving rise to a liability to
another person (other than the Company
or a related party) unless the liability
arose out of conduct involving a lack
of good faith. In addition, the Company
indemnified the Directors and the
Company Secretary against any liability
incurred by them in their capacity as
Directors or Company Secretary in
successfully defending civil or criminal
proceedings in relation to the Company.
No monetary restriction was placed on
this indemnity.
The Company has insured its Directors,
Company Secretary and Executive
Officers for the period under review.
Under the Company’s Directors’ and
Officers’ Liability Insurance Policy, the
Company shall not release to any third
party or otherwise publish details of the
nature of the liabilities insured by the
policy or the amount of the premium.
18
PolyNovo Limited | Annual Report 2021 Forward-looking Statements
Certain statements in this Annual Report contain forward-looking statements regarding the Company’s business and the therapeutic
and commercial potential of its technologies and products in development. Any statement describing the Company’s goals, expectations,
intentions, or beliefs is a forward-looking statement and should be considered an at-risk statement. Such statements are subject
to certain risks and uncertainties, particularly those risks or uncertainties inherent in the process of discovering, developing and
commercialising drugs and medical devices that can be proven to be safe and effective for use in humans, and in the endeavour of
building a business around such products and services. PolyNovo undertakes no obligation to publicly update any forward-looking
statement, whether as a result of new information, future events, or otherwise. Actual results could differ materially from those
discussed in this Annual Report. As a result, readers of this report are cautioned not to rely on forward-looking statements.
Board and Committee Meetings
Details of the number of meetings of the Board of Directors and Board committees, and Directors’ attendance at those meetings,
during the year under review are set out in the table below.
Board and Committee Meetings
Directors
Total number of
meetings held
Role
Mr David Williams
Non-Executive Director
Dr Robyn Elliott
Non-Executive Director
Ms Christine Emmanuel
Non-Executive Director
Dr David McQuillan
Non-Executive Director
Mr Leon Hoare*
Non-Executive Director
Mr Bruce Rathie**
Non-Executive Director
Mr Andrew Lumsden
Non-Executive Director
Mr Paul Brennan
Executive Director
Mr Max Johnston***
Non-Executive Director
Mr Philip Powell***
Non-Executive Director
Full Board
Audit and Risk
Committee
Remuneration
Committee
Meetings
Attended
Meetings
eligible to
attend
Meetings
Attended
Meetings
eligible to
attend
Meetings
Attended
Meetings
eligible to
attend
11
2
3
11
11
10
11
11
11
1
11
4
4
11
11
11
11
11
11
1
11
4
4
-
1
-
-
-
2
-
-
1
1
-
1
-
-
-
2
-
-
1
1
3
-
2
-
3
-
-
-
-
-
3
-
2
-
3
-
-
-
-
-
* Mr Leon Hoare is Chair of the Remuneration Committee.
** Mr Bruce Rathie is Chair of the Audit Committee.
*** Mr Max Johnson and Mr Philip Powell resigned on 13 November 2020.
Directors’ Shareholdings and Declared Interests
At 30 June 2021, the Directors of PolyNovo collectively hold 33,039,500 shares in the Company.
As at the date of this report the interests of the Directors in the Company’s shares are:
Name Directors
Mr David Williams
Mr Bruce Rathie
Dr David McQuillan
Mr Leon Hoare
Dr Robyn Elliott
Ms Christine Emmanuel
Mr Andrew Lumsden
Mr Paul Brennan
Total
19
Shares held
directly
-
-
608,313
-
-
-
-
Shares held
indirectly
18,900,000
3,050,000
-
1,180,220
-
-
-
5,115,872
4,185,095
5,724,185
27,315,315
PolyNovo Limited | Annual Report 2021 DIRECTORS’ REPORT CONTINUED
As at 30 June 2021 and as at the date of
this report, no Director has an interest in
any contract or proposed contract with
PolyNovo other than disclosed below or in
the Groups 2021 Annual Report. Further
details of the equity interests of Directors
can be found in the Remuneration Report.
Auditor
Ernst & Young (EY) continues in office in
accordance with section 327b(2) of the
Corporations Act 2001.
Non-audit Services
During the year ended 30 June 2021, the
amount received, or due and receivable
for non-audit services provided by
PolyNovo’s auditor Ernst & Young were as
shown below. The directors are satisfied
that the provision of non-audit services is
compatible with the general standard
of independence for auditors imposed by
the Corporations Act 2001. The nature
and scope of each type of non-audit
service provided means that auditor
independence was not compromised.
Non-audit services
$
Tax compliance and corporate
secretarial services
93,461
Auditor’s Independence
Declaration
The auditor has provided a written
declaration that no professional
engagement for the Group has been
carried out during the financial year
that would impair Ernst & Young’s
independence as auditor. The
declaration is set out on page 37.
20
PolyNovo Limited | Annual Report 2021 ESG STATEMENT AND
CORPORATE GOVERNANCE
PolyNovo brings disruptive, innovative
and regenerative medical device products
to market that improve the clinical,
functional and cosmetic outcomes for
our patients. Our products offer significant
health economic benefits to patients,
surgeons and health systems.
To our knowledge no NovoSorb BTM
treated area of our patients have had to
undergo scar revision surgery. This reduces
the social, economic, physiological, and
emotional demands of our patients
allowing them to recover to their best
possible lives. It is also encumbered upon
us to realise our social and ecological
responsibilities. We strive to improve on
all aspects of our business year on year
in line with our phase of commercial
development.
Our Approach to ESG
PolyNovo acknowledges the importance
of an integrated and consistent approach
to Environmental, Social and Governance
(ESG) risk factors across our business.
We have added additional resources
dedicated to delivering a holistic and
integrated robust ESG framework
and package.
Environment
PolyNovo acknowledges we have
an important role in protecting the
environment and recognises the
contribution we can make towards
transitioning to a low carbon economy.
Our BTM manufacturing process is
already low emitting, with approximately
560 grams of carbon emitted per batch.
We are currently in the process of gaining
Climate Active Certification and will be
developing a carbon reduction strategy
upon achieving certification. PolyNovo is
fully committed to achieving carbon
neutral certification by the end of FY23.
PolyNovo only utilises environmentally
certified commercial waste disposal
providers, with minimal waste produced
in our manufacturing process. To further
improve our waste management processes,
we have engaged a specialised third-party
consultancy to develop a waste
management and reduction plan in FY22.
We are committed to reducing our
operational waste and water use.
Our recycling programs will be further
enhanced by the ongoing migration
to paperless documentation systems
in our business support functions.
PolyNovo’s Environment Policy can be
found on its website: https://polynovo.
com/about-us/
Social
Our People
At PolyNovo, every employee plays
a role in our success. Working together,
we develop new opportunities for our
customers and products, communities,
and shareholders.
The company has a strong focus on
learning and development. All staff
at PolyNovo have an appraisal and
development program to ensure we
continue to develop our skill base, improve
the productivity of the business, and give
our staff the opportunity for personal and
professional growth. Training is achieved
through targeted educational programs
and mentorship from colleagues
and managers.
21
PolyNovo Limited | Annual Report 2021 ESG STATEMENT AND
CORPORATE GOVERNANCE CONTINUED
“ PolyNovo acknowledges the
importance of an integrated
and consistent approach to
Environmental, Social and
Governance (ESG) risk factors
across our business.”
“PolyNovo is fully committed
to achieving carbon neutral
certification by the end of FY23.”
22
PolyNovo Limited | Annual Report 2021 PolyNovo’s Gender
Diversity Profile
PolyNovo aims to provide an inclusive
workplace where everyone is valued and
treated with respect, without discrimination
or bias. We have developed a company-
wide Diversity Profile, which is actively
monitored to ensure we are a leading
example of a diverse organisation in the
industry in which we operate. We celebrate
religious and cultural events of our teams
with learnings from these informing our
international operations. Embracing our
existing national and international diversity
makes PolyNovo an interesting, exciting,
and dynamic workplace where alternative
thinking provides us with an innovative
edge.
The following graphs and table highlight
the proportion of women and men on the
Board, in senior management positions
as well as all employees across the whole
organisation as of 13 August 2021.
Health & Safety
Safety is central to the responsible
operation of our business, and the
health and safety of our employees and
contractors is our top priority. We maintain
a strong focus on preventing injuries and
continuously improving our practices.
Our Health & Safety Policy affirms our
aspiration to avoid harm, empower our
people to perform their tasks safely and
responsibly, and continuously improve
our performance.
In FY21, we started measuring our safety
performance monthly to track progress
and enable comparison with published
industry data. Over the financial year
reporting period, there was one (1) lost
time injury and zero (0) medical treatment
injuries to our employee and contractor
workforce. The company Total Recordable
Injury Frequency Rate (TRIFR) for this base
year is 5.62. This number may appear high
however it is a result of a small workforce
that amplifies the ratio.
PolyNovo’s Health & Safety Policy can be
found on its website: https://polynovo.
com/about-us/
COVID-19
Our manufacturing operations continued
as an “essential service” throughout the
COVID-19 pandemic. Sales and account
acquisition in FY21 was strong in all our
direct markets. We continued to build
inventories throughout lockdowns and
successfully navigated logistical challenges
to ensure ample stock was available
for our customers.
With the safety of our personnel at
the forefront, PolyNovo responded
to COVID-19 dynamically, whilst
simultaneously and successfully
meeting customer demand, we expanded
hygiene and safety measures, implemented
‘work from home’ arrangements and
redesigned our office spaces to enable
physical distancing.
Figure 2
Total Recordable Injury Frequency
Rate (TRIFR)
Figure 1
All Employees
Managers / Supervisors
Board of Directors
36%
38%
64%
62%
29%
71%
Male
Female
Male
Female
Male
Female
5.62
6.00
5.00
4.00
3.00
2.00
1.00
0.00
FY21
Total Recordable Injury Frequency Rate (TRIFR)
is the rate of injuries resulting in a fatality, lost
time from work of one day/shift or more, and
medical treatment beyond first aid. Calculation
method: TRIFR = (# Injuries) x (1,000,000) /
(Hours Worked). Data is calculated over a rolling
12-month period of time.
Total Staff by Dept
Staff #s
Female
Sales
Marketing
Rest of Company
Total Staff
Managers/Supervisors
C Suite
43
9
58
110
35%
26
4
15
4
21
40
10
0
Middle
East /
African
1
1
5
7
1
0
Middle
East /
African
2%
11%
9%
6%
4%
0%
Hispanic
Asian
2%
0%
3%
3%
0%
0%
9%
11%
48%
30%
31%
0%
Hispanic
Asian
Female
4
1
28
33
8
0
35%
44%
36%
36%
38%
0%
1
0
2
3
0
0
23
PolyNovo Limited | Annual Report 2021 ESG STATEMENT AND
CORPORATE GOVERNANCE CONTINUED
Our Community
We support a number of charitable
and community-based programs, whose
principles align with PolyNovo’s, including
organisations that advance the lives of
those in disadvantaged social situations.
An example of this engagement is our
partnership with Angel Faces, a charity
focused on the social and personal
recovery of young women who
have suffered burn injuries.
We are committed to engaging with
research and clinical activities that advance
the quality of life for those impacted by
burn, trauma, and infectious diseases.
We are proud to provide NovoSorb BTM
at no-cost for surgical applications when
surgeons are participating in charitable
or out-reach programs.
Bioethics
PolyNovo is committed to upholding
best-practice bioethics principles and
conducts its operations in accordance
with the highest standards of bioethics,
including in the conduct of clinical trials.
PolyNovo only commissions animal testing
where required for regulatory approval.
Any necessary animal studies required are
conducted externally through specialised
providers and institutes, under ethics
committee approval. Such studies meet
audited GLP standards and have the
appropriate level of oversight in place
from health regulators, including the
US Food and Drug Administration (FDA).
PolyNovo’s Commercial Code of Conduct
can be found on its website: https://
polynovo.com/about-us/
Modern slavery
PolyNovo respects ethical labour practices
and takes a zero-tolerance approach to
any form of human rights abuses, including
modern slavery in our operations and
supply chains. We expect that all our
employees, suppliers, subcontractors,
and agents uphold these values.
PolyNovo has developed a Modern Slavery
Statement that outlines our process for
complying with local and international
Modern Slavery laws. PolyNovo surveys
suppliers for compliance to this policy
and only sources materials from
accredited manufacturers.
PolyNovo’s Slavery Statement can be
found on its website: https://polynovo.
com/about-us/
Figure 3
Principle
1 Lay solid foundations for management and oversight
2 Structure the board to be effective and add value
3 Instil a culture of acting lawfully, ethically, and responsibly
4 Safeguard the integrity of corporate reports
5 Make timely and balanced disclosure
6 Respect the rights of security holders
7 Recognise and manage risk
8 Remunerate fairly and responsibly
Governance
PolyNovo recognises the importance of
good corporate governance and the part
it plays ensuring business is conducted
honestly, fairly, and legally. PolyNovo is
committed to adopting corporate
governance policies to achieve the
objectives of acting ethically and
responsibly, safeguarding the integrity in
corporate reporting, making timely and
balance disclosures, and recognising
and managing risk.
The Board of PolyNovo reviews its policies
and governance practices in reference
to the eight Principles of Good Corporate
Governance (Principles) established by the
ASX Corporate Governance Council.
The policies and governance practices
in place are listed under Principles of
Good Corporate Governance below:
PolyNovo Policy
PolyNovo Board Charter
PolyNovo Board Charter
Commercial Code of Conduct
Whistle-blower Policy
Gender Diversity Policy
Share Trading Policy
Environment Policy
Modern Slavery Statement
Audit and Risk Committee Charter
Market Disclosure Protocol
Communications Policy
PolyNovo Risk Management Policy
Health and Safety Policy
Remuneration and Nomination
Committee Charter
PolyNovo’s Corporate Governance Statement and policies can be found on its website https://polynovo.com/about-us/
24
PolyNovo Limited | Annual Report 2021 25
PolyNovo Limited | Annual Report 2021
REMUNERATION REPORT – AUDITED
The Directors of PolyNovo present the Remuneration Report prepared in accordance with section 300A of the Corporations Act 2001
for the Company and its controlled entities (the Group) for the year ended 30 June 2021
This Remuneration Report is audited. Variable pay arrangements to key management personnel are subject to the governance and
approval of the Remuneration Committee. This Remuneration Report forms part of the Directors’ Report and includes details of the
Group’s remuneration strategy and arrangements for the 2021 financial year.
This report outlines the compensation arrangements for the key management personnel of PolyNovo and explains how these
arrangements are linked to Company performance.
Key management personnel
Key management personnel are those persons who are responsible for planning, directing and controlling the activities of the Group.
The Board has determined that the key management personnel of the Group are the Non‑executive Directors and Senior Managers
(Executives) of PolyNovo, whose details are set out below. The following are Key Management Personnel during the period unless
otherwise stated.
Non‑executive Directors
• Mr David Williams – Non‑executive Chairman
• Dr Robyn Elliott – Non‑executive Director
• Ms Christine Emmanuel – Non‑executive Director
• Mr Leon Hoare – Non‑executive Director
• Mr Max Johnston – Non‑executive Director (resigned 13 November 2020)
• Dr David McQuillan – Non‑executive Director
• Mr Philip Powell – Non‑executive Director (resigned 13 November 2020)
• Mr Bruce Rathie – Non‑executive Director
• Mr Andrew Lumsden – Non‑executive Director (appointed 4 June 2021)
Managing Director and Senior Managers
• Mr Paul Brennan – Managing Director
• Mr Jan Gielen – Chief Financial Officer/Company Secretary
• Dr Anthony Kaye – Chief Operating Officer (appointed 9 November 2020)
Remuneration Strategy
PolyNovo has designed its compensation policies to ensure significant linkage between rewards and specific achievements that are
intended to improve shareholder wealth. In assessing the link between Group performance and compensation policy, it must be recognised
that biotechnology companies generally do not make a profit until a drug or device is licensed or commercialised, either of which takes
a number of years.
Furthermore, the biotechnology sector as a whole is highly volatile, significantly driven by market sentiment and inherently high risk.
Therefore, the direct correlation of compensation policy and key financial performance measures such as total shareholder return (TSR),
net earnings per share or Company earnings, in the view of the Board, are inappropriate. As an alternative, key milestones are a more
meaningful measure of performance to correlate levels of compensation. These milestones are discrete achievements that can be used
to evaluate PolyNovo’s progress towards commercialising its various projects.
PolyNovo’s annual expenditure has predominantly been driven by research and development activities. The Group has not made a
profit and therefore no dividends have been declared, nor has there been a return of capital. The Group’s performance is based on its
key milestones and with more of the Group’s activities slanted towards the commercialisation stage, additional milestones in relation
to the achievement of product sales and production targets will be added to the traditional clinical trials and licensing deals milestones.
Such milestones are directly linked to performance conditions set within the short‑term incentives that form a significant proportion
of Senior Management compensation. The Board continues to review the Group’s compensation policy to ensure competitive and
appropriate rewards that endeavour to result in greater shareholder wealth.
PolyNovo’s compensation policy for key management personnel is designed to provide competitive and appropriate rewards that are
transparent and fully aligned to shareholder interests. In accordance with corporate governance best practice, the Company has a
compensation policy for Non‑executive Directors and a separate policy for the Managing Director and Senior Managers.
26
PolyNovo Limited | Annual Report 2021 Non‑executive Director Remuneration
The compensation of Non‑executive Directors is based on market practice, Directors’ duties and the level of Director accountability.
The compensation policy is designed to attract and retain competent and suitably qualified Non‑executive Directors and aims to align
Directors’ interests with the interests of shareholders. Non‑executive Directors are paid a set fee plus statutory superannuation, where
appropriate, and are reimbursed for out‑of‑pocket expenses. In addition, as medium‑and long‑term incentives, Non‑executive Directors
may be invited to participate in the PolyNovo Employee Share Option Plan. Non‑executive Directors are encouraged to own shares in
PolyNovo. Non‑executive Directors’ fees are determined within an aggregate Directors’ fee pool limit, which is approved by shareholders.
This limit has been set at $850,000 (2020: $600,000).
Total Non‑executive Directors’ fees (including superannuation but excluding share‑based payments and consulting fees) for the year
ended 30 June 2021 were $511,409 (2020: $490,663). The Directors’ fees are considered within the average range for similar
sized companies in the biotechnology industry and are reviewed periodically.
Executive Remuneration
PolyNovo’s compensation policy for its senior managers is determined by the Board and Remuneration Committee and is designed
to link performance and retention strategies to ensure that:
• the balance between fixed and variable (performance) components for each position is appropriate in light of internal and external
factors;
• the objectives set for each person will result in sustainable beneficial outcomes for PolyNovo;
• all variable (performance) components are appropriately linked to measurable personal, business unit or Company outcomes; and
• total compensation (the sum of fixed and variable components) for each Senior Manager is fair, reasonable and market competitive.
Generally, there are three components of Senior Management compensation, as follows:
1. Fixed annual compensation comprising salary and benefits, superannuation, and non‑monetary benefits.
2. Medium‑and long‑term incentives, through participation in the PolyNovo Employee Share Option Plan (the Plan) with share
price thresholds to be achieved.
3. Short‑term incentives, through a bonus scheme dependent upon performance against objectives and targets which are linked
to PolyNovo’s overall corporate strategy.
Fixed Annual Compensation
Senior Managers are offered a market competitive base salary, which reflects their competencies, job description as well as the size
of the Group. Base salaries are reviewed against market data for comparable positions. Adjustments to base salary are made based
on significant role responsibility changes, pay relativities to market and relative performance in the role.
Medium and Long Term Incentives
PolyNovo’s medium‑and long‑term incentive policy for Senior Managers encourages high‑quality performance and long‑term
retention. Carefully designed and performance linked equity incentive plans are widely recognised as an effective way of providing
performance incentives. Long‑term incentive plans are measured over 3 years.
Short Term Incentives
PolyNovo’s short‑term incentive policy for Senior Managers encourages high‑quality performance in achieving key performance
indicators during the current financial year. Bonus schemes are widely recognised as an effective way of providing performance
incentives.
Short‑term incentives are based on the Company achieving budgeted total group revenue and EBITDA and exceeding budgeted total
group revenue and EBITDA by at least ten percent (10%). The maximum incentive is twenty percent (20%) of salary.
Mr Anthony Kaye is entitled for a bonus of $19,433 inclusive of superannuation during the financial year 2021 in relation to service
performed in the financial year 2021.
2727
PolyNovo Limited | Annual Report 2021PolyNovo Limited | Annual Report 2021 REMUNERATION REPORT – AUDITED CONTINUED
Service Contracts
Managing Director (MD)
Mr Paul Brennan was appointed CEO of PolyNovo Limited on 23 February 2015. He was subsequently appointed MD on 23 April 2020.
Effective 1 October 2020, his employment contract was updated to align with executive positions in other similar companies to improve
retention and to reward performance in line with Company strategy.
The key terms of his contract are as follows:
• a salary of $400,160 per annum;
• superannuation of 9.50%;
• a short‑term annual performance bonus of up to 20% of salary inclusive of superannuation, dependent upon the Company’s
performance against key targets;
• a long‑term incentive plan in the form of equity interest. Details of the Long‑term incentive plan and the fair value of awards and
other compensation are included in the ‘MD Performance Incentives’ section of the Remuneration Report and in Tables A, B, C
and D below;
• no fixed employment term; and
• the Group may terminate the employment contract by providing three months’ notice or payment in lieu of notice. In the event
of resignation, a notice period of three months is required.
Company Secretary and Chief Financial Officer (CFO)
Mr Jan Gielen was appointed CFO and Company Secretary on 12 December 2018.
Effective 1 October 2020, his employment contract was updated to align with executive positions in other similar companies to improve
retention and to reward performance in line with Company strategy.
The terms of his contract are as follows:
• a salary of $210,000 per annum;
• superannuation of 9.50%;
• a long‑term incentive plan in the form of equity interest. Details of the options package and the fair value of options and other
compensation are included in the ‘CFO Performance Incentives’ section of the Remuneration Report and in Tables A, B, C and D below;
• no fixed employment term; and
• the Group may terminate the employment contract by providing three months’ notice or payment in lieu of notice. In the event
of resignation, a notice period of three months is required.
Chief Operating Officer (COO)
Mr Anthony Kaye was appointed COO on 9 November 2020.
His employment contract is aligned with executive positions in other similar companies to improve retention and to reward performance
in line with Company strategy.
The terms of his contract are as follows:
• a salary of $228,311 per annum;
• superannuation of 9.50%;
• a short‑term annual performance bonus of up to 20% of salary inclusive of superannuation, dependent upon the Company’s
performance against key targets;
• a long‑term incentive plan in the form of equity interest. Details of the options package and the fair value of options and other
compensation are included in the ‘COO Performance Incentives’ section of the Remuneration Report and in Tables A, B, C and
D below;
• no fixed employment term; and
• the Group may terminate the employment contract by providing three months’ notice or payment in lieu of notice. In the event
of resignation, a notice period of three months is required.
2828
PolyNovo Limited | Annual Report 2021PolyNovo Limited | Annual Report 2021 MD Performance Incentives
The performance evaluation of the MD is conducted by the Board.
On 1 October 2019, PolyNovo granted shares up to the value of $10 million dollars in three equal tranches to the Managing Director,
Mr Paul Brennan. Details of the three equal tranches are set out below.
The vesting hurdle for the share awards is aligned to PolyNovo’s market capitalisation reaching and maintaining at all times, $2 billion
dollars for a minimum period of three consecutive months in the relevant financial year. This is equivalent to PolyNovo’s share price
trading at all times above $3.03 for a continuous three‑month period.
Once vested, the shares can be allotted in three tranches as follows:
• Tranche 1: 1,100,110 shares, vest over 2 years;
• Tranche 2: 1,100,110 shares, vest over 2 years; and
• Tranche 3: 1,100,110 shares, vest over 3 years.
Any unvested shares will be cancelled at expiry on 30 June 2023 or on the date of termination or cessation of employment.
Once vested, fifty percent (50%) of the shares will be in escrow for twelve months and the remaining fifty percent (50%) for
twenty‑four months.
The fair value of the shares relating to the incentive scheme was $4,891,089. The expense relating to the incentive scheme shares
during the financial year was $2,184,268 (2020: $1,633,713).
Amendment to Managing Director’s Long Term Incentive (subject to shareholder approval)
The Group issued an ASX announcement on 7 July 2021 outlining the proposed modification to the MD’s existing share awards
addressing issues relating to the strike against the prior year’s Remuneration Report. The modification is being taken to shareholders
for approval at the upcoming AGM on 26 October 2021. Given shareholder approval for modification of the award has not yet been
obtained, there has been no change to initial share award expense recognised in the period to 30 June 2021.
CFO Performance Incentives
The performance evaluation of the Chief Financial Officer is conducted by the Board.
On 6 March 2019, PolyNovo issued an options package comprising three tranches totalling 1,000,000 options to the CFO,
Mr Jan Gielen. Details of the three tranches are set out below.
The vesting hurdle for the options is linked to Mr Jan Gielen’s length of employment and the PolyNovo volume weighted average
market price. The vesting hurdles are as follows:
• First hurdle – 12 months of employment with the Company; and
• Second hurdle – a share price of 90 cents must be sustained over a period of at least continuous 3 months.
Once vested, the options can be exercised in three tranches as follows:
• Tranche 1: 300,000 options – not to be exercised before 31 December 2020 and not later than 30 June 2021;
• Tranche 2: 300,000 options – not to be exercised before 31 December 2021 and not later than 30 June 2022; and
• Tranche 3: 400,000 options – not to be exercised before 31 December 2022 and not later than 30 June 2023.
The options whether they have vested or not will be cancelled on the date of termination or cessation of employment.
The exercise price is $0.60 per option tranche.
All shares issued under the incentive scheme are escrowed for a period of 12 months from date of issue. Sixty percent (60%) of the
shares issued on the exercise of options are restricted shares subject to rule 9 of the Employee Option Plan for a period of 12 months
from the date of issue.
The fair value of the option expense in the period was $nil, as the option expense fully incurred as at 30 June 2020.
2929
PolyNovo Limited | Annual Report 2021PolyNovo Limited | Annual Report 2021 REMUNERATION REPORT – AUDITED CONTINUED
COO Performance Incentives
The performance evaluation of the Chief Operating Officer is conducted by the Board.
On 9 November 2020, PolyNovo issued an options package comprising three tranches totalling 500,000 options to the COO,
Mr Anthony Kaye. Details of the three tranches are set out below.
The vesting hurdle for the options is linked to Mr Anthony Kaye’s length of employment and the PolyNovo volume weighted
average market price. The vesting hurdles are as follows:
• First hurdle – 12 months of employment with the Company; and
• Second hurdle – a share price of $2.25 must be sustained over a period of at least continuous 3 months.
Once vested, the options can be exercised in three tranches as follows:
• Tranche 1: 150,000 options – not to be exercised before 9 November 2021 and not later than 31 December 2024;
• Tranche 2: 150,000 options – not to be exercised before 9 May 2022 and not later than 31 December 2024; and
• Tranche 3: 200,000 options – not to be exercised before 9 November 2022 and not later than 31 December 2024.
The options whether they have vested or not will be cancelled on the date of termination or cessation of employment.
The exercise price is $2.25 per option tranche.
Once vested, sixty percent (60%) of the shares will be in escrow for a period of 12 months from date of issue and are restricted
shares subject to rule 9 of the Employee Option Plan. The remaining forty percent (40%) are available immediately.
The fair value of the options relating to the incentive scheme shares was $418,450. The expense relating to the incentive scheme
shares during the financial year was $211,660 (2020: $nil).
3030
PolyNovo Limited | Annual Report 2021PolyNovo Limited | Annual Report 2021 Remuneration of Key Management Personnel
Details of the remuneration for key management personnel for the years ended 30 June 2020 and 30 June 2021 are set out
in Table A below.
Short‑Term
Cash
salary &
fees
$
Cash
bonus
$
Con‑
sulting
fees
$
Non‑
mone‑
tary
benefits
$
Post
employ‑
ment
Super‑
annuat‑
ion
$
Leave
allow‑
ance
Annual
and long
service
leave
$
Termin‑
ation
benefits
$
Share‑
based
pay‑
ments
Share
options
& share
awards
$
%
Perfor‑
mance
based
Total
$
2020
84,133
2021 100,457
2020
59,030
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
63,927
59,463
63,927
59,030
23,767
59,030
23,767
59,030
63,927
42,651
63,927
8,523
2021
2020
63,927
–
2021
5,081
2020
430,889
2021 472,708
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
24,490
–
–
–
–
–
–
–
–
–
–
–
–
–
24,490
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
7,993
9,410
5,608
6,073
–
–
5,608
2,258
5,608
2,258
5,608
6,073
4,052
6,073
810
6,073
–
483
35,285
38,701
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
92,126
– 109,867
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
64,637
70,000
83,953
63,927
64,637
26,025
64,637
26,025
64,637
70,000
46,703
70,000
9,333
70,000
–
5,564
490,663
– 511,409
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Table A
Directors
Mr David Williams
(Chairman/
Non‑Executive
Director)
Mr Bruce Rathie
(Non‑Executive
Director)
Dr David McQuillan
(Non‑Executive
Director)1
Mr Max Johnston
(Non‑Executive
Director)2
Mr Philip Powell
(Non‑Executive
Director)2
Mr Leon Hoare
(Non‑Executive
Director)
Ms Robyn Elliott
(Non‑Executive
Director)
Ms Christine
Emmanuel
(Non‑Executive
Director)
Mr Andrew Lumsden3
(Non‑executive
Director)
Subtotal
compensation
for Directors
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PolyNovo Limited | Annual Report 2021PolyNovo Limited | Annual Report 2021 REMUNERATION REPORT – AUDITED CONTINUED
Short‑Term
Post
employ‑
ment
Long‑
term
Cash
salary &
fees
$
Cash
bonus
$
Con‑
sulting
fees
$
Non‑
mone‑
tary
benefits
$
Super‑
annuat‑
ion
$
Annual
and long
service
$
Termin‑
ation
benefits
$
Share‑
based
pay‑
ments
Options
and
Perfor‑
mance
rights
$
%
Perfor‑
mance
based
Total
$
Table A (continued)
KMP
Key Management Personnel
2020
359,589
68,493
Mr Paul Brennan (MD)
2021
397,152
2020
195,662
2021 207,500
2020
2021
2020
69,231
–
–
–
–
–
–
–
–
2021
147,231
19,433
2020
624,482
68,493
2021 751,883
19,433
2021 1,055,370
68,493
24,490
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
40,668
31,524
– 1,633,713 2,133,987
37,729
18,588
3,751
13,135
19,712
8,275
6,577
–
–
–
–
– 2,184,268 2,622,900
–
–
3,741
–
–
264,787
492,172
– 235,488
79,549
–
–
–
–
13,987
6,688
– 211,660 398,999
65,833
44,659
3,741 1,898,500 2,705,708
71,429
18,713
– 2,395,928 3,257,387
101,118
44,659
3,741 1,898,500 3,196,371
80%
83%
54%
–
–
–
–
53%
73%
74%
62%
Mr Jan Gielen
(CFO/Company
Secretary)
Mr Ashok Srinivasan
(COO)4
Mr Anthony Kaye5
(COO)
Subtotal
compensation
for Other Key
Management
Personnel
Total compensation
for all Key
Management
Personnel
2021 1,224,591
19,433
–
–
110,130
18,713
– 2,395,928 3,768,795
64%
Notes
1. Mr David McQuillan and Associates LLC, an entity associated with Dr David McQuillan was contracted to provide hernia consulting services, this contract
ended in October 2019. The consulting fees were excluded from the aggregate Directors’ fee pool limit.
2. Mr Max Johnston and Mr Philip Powell resigned on 13 November 2020.
3. Mr Andrew Lumsden was appointed as Non‑executive Director on 4 June 2021.
4. Mr Ashok Srinivasan resigned on 20 December 2019 and annual leave balance was paid on termination of employment.
5. Mr Anthony Kaye was appointed as Chief Operating Officer on 9 November 2020.
3232
PolyNovo Limited | Annual Report 2021PolyNovo Limited | Annual Report 2021 Share options and awards granted as part of remuneration
During the year ended 30 June 2021, 500,000 share options (2020: nil) and nil share awards (2020: 3,300,330) were granted,
no share options and awards were cancelled (2020: nil), and no share options and awards were forfeited (2020: nil). The options
issued are pursuant to the PolyNovo Employee Share Option Plan.
Details of the share‑based payment component included in total remuneration in Table B are set out below.
Fair Value
of options
and awards
granted
during the
year
$
Number
of shares
and awards
issued upon
exercise of
options
Value of
options
and awards
exercised
during the
year2
$
Value of
shares
received
upon
exercise of
options and
awards3
$
Value of
options
and awards
yet to be
expensed
$
Average fair
value per
option at
grant date1
$
Grant
number
Table B
Grant date
Mr Paul Brennan
Share awards
Share awards
Share awards
Subtotal
Mr Jan Gielen
Options
Options
Options
Subtotal
Mr Anthony Kaye
Options
Options
Options
Subtotal
Total
Table B (continued)
Mr Paul Brennan
Share awards
Share awards
Share awards
Subtotal
Mr Jan Gielen
Options
Options
Options
Subtotal
Mr Anthony Kaye
Options
Options
Options
Subtotal
01/10/2019
01/10/2019
01/10/2019
06/03/2019
06/03/2019
06/03/2019
09/08/2020
09/08/2020
09/08/2020
1,100,110
1,100,110
1,100,110
3,300,330
300,000
300,000
400,000
1,000,000
150,000
150,000
200,000
500,000
4,800,330
0.514
0.493
0.475
0.236
0.311
0.394
0.789
0.838
0.872
–
–
–
–
–
–
–
–
118,350
125,700
174,400
418,450
418,450
–
–
–
–
300,000
–
–
300,000
–
–
–
–
300,000
–
–
–
–
543,000
–
–
543,000
–
–
–
–
543,000
–
–
–
–
213,789
205,054
654,264
1,073,107
723,000
–
–
723,000
–
–
–
–
–
–
–
–
58,403
61,752
86,635
206,790
723,000 1,279,898
Fair Value of options
and awards included in
remuneration during the year
$
% compensation consisting of
options and awards during
the year
%
848,185
813,531
522,552
2,184,268
–
–
–
–
59,947
63,948
87,765
211,660
2,395,928
32%
31%
20%
83%
–
–
–
–
24%
26%
36%
86%
–
Note:
1. Determined at the time of grant per AASB 2. For details on the valuation of the options, including models and assumptions used, please refer to not 34.
2. Determined at the time of exercise at the intrinsic value. Exercise price was $0.6, market price was $2.41.
3. Determined at the time of exercise at the market value.
4. Nil options were forfeited or lapsed during the year. Refer to note 34.
3333
PolyNovo Limited | Annual Report 2021PolyNovo Limited | Annual Report 2021 REMUNERATION REPORT – AUDITED CONTINUED
Share options and awards granted in year ended 30 June 2020
The fair value of share awards granted during the year, as included in Table B, was determined using a Monte Carlo simulation‑based
pricing model due to it analysing options where the exercise condition is dependent on outcomes associated with factors other than
or in addition to, the share price. The fair value of the share awards included in remuneration during the year was $1,633,713.
This represents 80% allocation to the year ended 30 June 2020 as the share awards have not yet vested.
Share options granted in year ended 30 June 2021
The fair value of options granted during the year, as included in Table B, was determined using a Monte Carlo simulation‑based pricing
model due to it analysing options where the exercise condition is dependent on outcomes associated with factors other than or in
addition to, the share price. The fair value of options included in remuneration during the year was $211,660. This represents 86%
allocation to the year ended 30 June 2021 as the options have not yet vested.
Share awards and options expiry dates
Participant
Mr Paul Brennan
• Tranche 1
• Tranche 2
• Tranche 3
Expiry Date
30 June 2023
30 June 2023
30 June 2023
Other terms of the share awards include:
• Vesting hurdles – the Company market capitalisation reaching and maintaining $2 billion for a minimum period of three consecutive
months in the relevant financial year. This is equivalent to the Company’s share price trading at all times above $3.03 for a continuous
three‑month period.
• Allocation – if market capitalisation is not achieved in the relevant financial year, the share awards are available in the following year.
• Escrow period – once vested, fifty percent (50%) of the share awards will be in escrow for a period of 12 months and the remaining
fifty percent (50%) will be in escrow for a period of 24 months.
Participant
Mr Jan Gielen
• Tranche 1
• Tranche 2
• Tranche 3
Expiry Date
30 June 2021
30 June 2022
30 June 2023
Other terms of the share options include:
• Vesting hurdles – 12 months of employment with the Company and a share price of 90 cents must be sustained over a period
of at least 90 consecutive calendar days.
• Exercise price – $0.60 per option tranche.
• Escrow period –Sixty percent (60%) of the shares issued on the exercise of options are restricted shares subject to rule 9 of the
Employee Option Plan for a period of 12 months from the date of issue.
Participant
Mr Anthony Kaye
• Tranche 1
• Tranche 2
• Tranche 3
Expiry Date
31 December 2024
31 December 2024
31 December 2024
3434
PolyNovo Limited | Annual Report 2021PolyNovo Limited | Annual Report 2021 Other terms of the share options include:
• Vesting hurdles – 12 months of employment with the Company.
• Exercise price – $2.25 per option tranche.
• Escrow period –Sixty percent (60%) of the shares issued on the exercise of options are restricted shares subject to rule 9 of the
Employee Option Plan for a period of 12 months from the date of issue. The remaining forty percent (40%) are available immediately.
Movements in shares of the Company
The movement during the reporting period in the number of shares in the Company held either directly or indirectly by each of the
key management personnel, including their related parties, is set out in the table below:
Balance at
1 July 20202
Granted as
compen‑
sation
On exercise
of options
Net change
other1
Balance at
30 June
2021
Balance at
end of year
– directly
held
Balance at
end of year
– indirectly
held
Table C
Directors
Mr David Williams
18,000,000
Dr Robyn Elliott
Ms Christine Emmanuel
Mr Leon Hoare
Dr David McQuillan
Mr Bruce Rathie
Mr Andrew Lumsden
Other key management
personnel
Mr Paul Brennan
Mr Jan Gielen
Mr Anthony Kaye
–
–
1,280,220
608,313
3,605,555
–
9,500,967
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
900,000 18,900,000
–
–
–
–
(100,000)
1,180,220
–
–
–
–
–
608,313
608,313
(555,555) 3,050,000
–
–
–
–
18,900,000
–
–
1,180,220
–
3,050,000
–
(200,000) 9,300,967
5,115,872
4,185,095
300,000
–
–
–
300,000
300,000
–
–
–
–
Note:
1. ‘Net Change Other’ reflects shares privately acquired or disposed during the period.
2. Opening balance excludes shares held by closely related parties where there is no control or significant influence by the KMP.
Share options and awards of key management personnel
The share options, share awards and share holdings of key management personnel for the year ended 30 June 2021 are set out in the
following table:
Balance at
1 July
2020
Granted as
compen‑
sation
Options
exercised
Balance at
30 June
2021
Total
vested
at end of
year
Total
exercisable
at end of
year
Total not
exercisable
at end of
year
Total
vested
during
year
Table D
Other Key
Management
Personnel
Mr Paul Brennan
3,300,330
Mr Jan Gielen
1,000,000
–
–
Mr Anthony Kaye
–
Total
4,300,330
500,000
500,000
–
3,300,330
300,000
–
700,000
500,000
–
700,000
–
300,000
4,500,330
700,000
–
–
–
–
3,300,330
700,000
500,000
4,500,330
–
–
–
–
3535
PolyNovo Limited | Annual Report 2021PolyNovo Limited | Annual Report 2021 REMUNERATION REPORT – AUDITED CONTINUED
Loans to Key Management Personnel
No loans have been made to Directors of PolyNovo or to any other key management personnel, including their personally related entities.
Other Key Management Personnel Transactions
David McQuillan and Associates LLC, an entity associated with Dr David McQuillan was contracted to provide hernia consulting
services, this contract ended in October 2019.
No other transactions between the Group and any of the Directors of PolyNovo or any other key management personnel have
been identified.
This Directors’ Report, incorporating the Corporate Governance Statement and Remuneration Report, has been signed in accordance
with a Resolution of the Directors made on 26 August 2021.
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.
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
Mr David Williams
Chairman
26 August 2021
3636
PolyNovo Limited | Annual Report 2021PolyNovo Limited | Annual Report 2021 AUDITOR’S INDEPENDENCE DECLARATION
Ernst & Young
8 Exhibition Street
Melbourne VIC 3000 Australia
GPO Box 67 Melbourne VIC 3001
Tel: +61 3 9288 8000
Fax: +61 3 8650 7777
ey.com/au
Auditor’s independence declaration to the directors of PolyNovo Limited
As lead auditor for the audit of the financial report of PolyNovo Limited for the financial year ended
30 June 2021, I declare to the best of my knowledge and belief, there have been:
a. No contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
b. No contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of PolyNovo Limited and the entities it controlled during the financial
year.
Ernst & Young
Ashley Butler
Partner
26 August 2021
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
37
PolyNovo Limited | Annual Report 2021
CONSOLIDATED STATEMENT OF PROFIT OR LOSS
AND OTHER COMPREHENSIVE INCOME
For the year ended 30 June 2021
Revenue
Revenue from contracts with customers
Research and development tax benefit
Interest income
Other income
Expenses
Changes in inventories of finished goods and work in progress
Employee‑related expenses
Research and development expenses
Depreciation and amortisation expenses
Corporate, administrative and overhead expenses
Interest expense
Finance costs
Loss before income tax expense
Income tax expense
Loss after income tax expense for the year
attributable to the owners of PolyNovo Limited
Other comprehensive income
Items that may be reclassified subsequently to profit or loss
Gain/ (Loss) on translation of foreign operation
Other comprehensive income for the year, net of tax
Total comprehensive income for the year
attributable to the owners of PolyNovo Limited
Earnings per share for loss attributable to the owners of PolyNovo Limited
Basic earnings per share
Diluted earnings per share
Consolidated
30 June 2021
$
30 June 2020
$
Note
4
5
6
7
29,157,924
22,156,123
–
1,103
180,297
36,956
35,311
111
29,339,324
22,228,501
(1,555,393)
(1,703,521)
8
(19,376,331)
(15,073,365)
9
10
11
22
12
(3,647,424)
(2,352,698)
(920,684)
(837,175)
(8,068,493)
(6,271,861)
(321,403)
–
(98,977)
(18,000)
(4,550,404)
(4,127,096)
(54,628)
(66,642)
(4,605,032)
(4,193,738)
338,156
338,156
(152,132)
(152,132)
(4,266,876)
(4,345,870)
Cents
Cents
33
33
(0.69)
(0.69)
(0.63)
(0.63)
The above statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes.
38
PolyNovo Limited | Annual Report 2021 CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 30 June 2021
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Contract cost assets
Inventories
Other financial assets
Prepayments
Total current assets
Non‑current assets
Contract cost assets
Property, plant and equipment
Right‑of‑use assets
Intangibles
Other assets
Total non‑current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Interest‑bearing loans and borrowings
Lease liability
Income tax payable
Provisions
Deferred tax liability
Total current liabilities
Non‑current liabilities
Interest‑bearing loans and borrowings
Lease liability
Provisions
Total non‑current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Accumulated losses
Total equity
Consolidated
30 June 2021
$
30 June 2020
$
Note
13
14
15
16
25
20
15
17
18
19
20
21
22
18
12
23
22
18
23
7,688,554
5,667,055
146,315
1,959,835
50,000
732,403
11,647,701
3,921,519
–
1,217,042
50,000
2,441,740
16,244,162
19,278,002
475,522
–
17,584,398
13,890,380
2,238,759
1,652,320
144,137
22,095,136
38,339,298
2,646,521
1,900,168
141,870
18,578,939
37,856,941
4,961,148
2,525,006
350,368
74,093
739,010
–
3,171,995
5,304,372
323,876
54,729
608,722
10,837
8,649,625
9,474,531
5,058,338
2,063,331
215,959
7,337,628
15,987,253
22,352,045
1,983,494
2,420,058
166,834
4,570,386
14,044,917
23,812,024
24
24
24
139,250,502
139,070,502
(1,637,216)
(4,602,269)
(115,261,241)
(110,656,209)
22,352,045
23,812,024
The above statement of financial position should be read in conjunction with the accompanying notes.
39
PolyNovo Limited | Annual Report 2021 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 30 June 2021
Consolidated
Balance at 1 July 2019
Loss after income tax expense for the year
Other comprehensive income for the year,
net of tax
Total comprehensive income for the year
Share‑based payments (note 34)
Balance at 30 June 2020
Consolidated
Balance at 1 July 2020
Loss after income tax expense for the year
Other comprehensive income for the year,
net of tax
Total comprehensive income for the year
Contributed
Equity
$
Other
Reserves
$
Acquisition
of Non‑
Controlling
Interest
Reserves
$
Accumulated
Losses
$
Total
equity
$
139,070,502
2,782,047
(9,293,956)
(106,462,471)
26,096,122
–
–
–
–
–
(152,132)
(152,132)
2,061,772
–
–
–
–
(4,193,738)
(4,193,738)
–
(152,132)
(4,193,738)
(4,345,870)
–
2,061,772
139,070,502
4,691,687
(9,293,956)
(110,656,209)
23,812,024
Contributed
Equity
$
Other
Reserves
$
Acquisition
of Non‑
Controlling
Interest
Reserves
$
Accumulated
Losses
$
Total
equity
$
139,070,502
4,691,687
(9,293,956) (110,656,209)
23,812,024
–
–
–
–
338,156
338,156
–
–
–
–
–
–
(4,605,032)
(4,605,032)
–
338,156
(4,605,032)
(4,266,876)
–
–
180,000
2,626,897
Exercise of options
180,000
Transactions with owners in their capacity
as owners:
Share‑based payments (note 34)
–
2,626,897
Balance at 30 June 2021
139,250,502
7,656,740
(9,293,956)
(115,261,241)
22,352,045
The above statement of changes in equity should be read in conjunction with the accompanying notes.
40
PolyNovo Limited | Annual Report 2021 CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 30 June 2021
Cash flows from operating activities
Receipts from customers
Receipts from BARDA reimbursements and advances
Receipts of research and development benefit
Receipts from royalty revenue
Payment of interest on borrowings
Payment of interest on lease liabilities
Payments to suppliers and employees
Consolidated
30 June 2021
$
30 June 2020
$
Note
24,780,651
18,419,968
4,379,446
36,956
289
(211,916)
(98,771)
3,385,242
694,182
245
–
(98,977)
(29,136,876)
(22,827,983)
Net cash used in operating activities
13
(250,221)
(427,323)
Cash flows from investing activities
Payments for property, plant and equipment
Interest received
17
(3,568,717)
(8,869,219)
1,484
24,759
Net cash used in investing activities
(3,567,233)
(8,844,460)
Cash flows from financing activities
Proceeds from borrowings
Repayment of principal on borrowings
Repayment of principal on lease liabilities
Proceeds from the exercise of options
Net cash from/(used in) financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
Effects of exchange rate changes on cash and cash equivalents
7,253,987
(7,141,826)
(362,528)
180,000
7,287,866
–
(260,584)
–
(70,367)
7,027,282
(3,887,821)
(2,244,501)
11,647,701
13,920,695
(71,326)
(28,493)
Cash and cash equivalents at the end of the financial year
13
7,688,554
11,647,701
The above statement of cash flows should be read in conjunction with the accompanying notes.
41
PolyNovo Limited | Annual Report 2021 NOTES TO THE FINANCIAL STATEMENTS
30 June 2021
Note 1. Corporate Information
The Financial Report of Polynovo Limited (the Company) and its controlled entities (the Group) for the year ended 30 June 2021
was authorised for issue in accordance with a resolution of the Directors on 26 August 2021.
PolyNovo Limited, a for‑profit entity, is a Company incorporated in Australia, whose shares are publicly traded on ASX Limited
(ASX code: PNV). The Company operates predominantly in the medical device and healthcare industry and has operations in Australia,
New Zealand, United Kingdom, Ireland, Singapore and the USA.
Note 2. Summary of Significant Accounting Policies
(a) Basis of preparation
The financial report is a general‑purpose financial report, which has been prepared in accordance with the requirements of the
Corporations Act 2001, applicable Australian Accounting Standards and other mandatory professional reporting requirements.
The Financial Report has been prepared on a historical cost basis. The Financial Report is presented in Australian dollars.
The financial statements have been prepared in compliance with Legislative Instrument 2016/191 ‘ASIC Corporations (Rounding in
Financial/Directors’ Reports)’ and rounded to the nearest dollar.
The consolidated financial statements provide comparative information in respect of the previous period. Where necessary,
comparatives have been reclassified and repositioned for consistency with current year disclosures.
(b) Going concern
The financial statements of the Group have been prepared on a going concern basis. The Group’s operations are subject to major risks
due primarily to the nature of the research, development and commercialisation to be undertaken, and the ongoing need to fund these
activities through the Group’s working capital movements, budgeted growth in sales and existing finance facilities. These risks may
materially impact the financial performance and position of the Group, including the value of recorded assets and the future value
of its shares, options and performance rights. The financial statements take no account of the consequences, if any, of the effects of
unsuccessful research, development and commercialisation of the Group’s projects. The Group considered the impact of COVID‑19
pandemic in making their going concern assessment assuming how the business, research and development activities might be affected
as well as the Group’s ability to meet its debts and obligations during such environment taking into account all available information
about the future. The Group has a level of discretion in managing cash outflows in a response to changes of the impact of the pandemic,
together with continuing to consider possible geographic licensing expansion and capital management strategies if required.
(c) Statement of compliance
The Financial Report complies with Australian Accounting Standards as issued by the Australian Accounting Standards Board and
International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board.
The Group has adopted all applicable new and amended Australian Accounting Standards and AASB Interpretations that apply as of
1 July 2020. Those Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet
effective, have not been adopted.
(d) Changes in accounting policy, disclosures, standards and interpretations
The preparation of the Group’s consolidated financial statements requires management to make judgements, estimates and assumptions
that affect the reported amounts of revenue, expenses, assets and liabilities, and the accompanying disclosures, and the disclosure
of contingent liabilities.
In preparing the consolidated financial statements, the significant estimates, judgements and assumptions made by management
in applying the Group’s accounting policies and the key sources of estimation uncertainty were disclosed in note 2 (v).
(e) Basis of consolidation
The consolidated financial statements comprise the financial statements of the Group and its subsidiaries as at 30 June 2021.
The Group controls an investee if and only if the Group has:
• power over the investee (that is, rights that give it the ability to direct the relevant activities of the investee);
• exposure, or rights, to variable returns from its involvement with the investee; and
• the ability to use its power over the investee to affect its returns.
42
PolyNovo Limited | Annual Report 2021 (f) Revenue from Contracts with Customers
The Group is in the business of designing, manufacturing and selling biomedical devices. Revenue from contracts with customers
is recognised when performance obligations pursuant to that contract are satisfied by the Group.
The Group has identified the following main categories of revenue:
Commercial product sales
The group revenue primarily consists of the sale of its NovoSorb BTM product. Revenue is recorded when the customer takes
possession of the product. All contracts with customers are standardised and satisfy the criteria of transaction approval, identification
of each party’s rights, payment terms, commercial substance, and probable collection based on the customer’s ability and intention to
pay. Revenue is recognised at a point in time when control over the product transfers to the customer, which is assessed to be at the
time of receipt of goods by the customer.
Distribution sales
The group sells its BTM product in certain overseas territories via a distributor model. The sales are made direct to a distributor being
the customer of PolyNovo Limited, with the distributor permitted to resell the BTM product to an end user. The group has assessed
these arrangements to consider that control passes to the distributor at the point the distributor takes possession of the product.
The group consider themselves to be acting as principal in the sale of goods to distributors and recognise revenue on a gross basis.
All contracts with distributors are standardised, and satisfy the criteria of transaction approval, identification of each party’s rights,
payment terms, commercial substance, and probable collection based on the customer’s ability and intention to pay. Revenue is
recognised at a point in time when control over the product transfers to the distributor as the customer, which is assessed to be
at the time of receipt of goods by the distributor.
BARDA revenue
The BARDA arrangement requires the group to provide to BARDA a solution for severe thermal burns, with the performance obligation
as defined in the terms of the arrangement being to perform research and development for specific clinical and trial tasks to support
the product development of Biodegradable Temporal Matrix (BTM) for severe thermal burns. Judgement has been applied to consider
that the license of intellectual property and research and development activities are not distinct. Revenue is recognised over time
based on input measures of specified costs, with the performance obligations being achieved through delivery to BARDA of the
contracted clinical studies and trial tasks to support the development of the BTM product for severe thermal burns.
BARDA is considered a customer in accordance with AASB 15 as the nature of services performed by PolyNovo are considered part
of the group’s licence of intellectual property and normal research and development operating activities and in exchange, consideration
is to be paid as the group progresses with its research and development of a mass scalable severe thermal burns product.
Licence revenue
The Group entered into a fixed term licence arrangement with a customer to provide use of specific intellectual property owned by
the group to permit certain research and development activity to be performed by the customer with the objective to develop new
commercial products. The arrangement’s performance condition is satisfied on delivery of the licence, with no further requirements
to enhance the intellectual property. The revenue recognised reflects the consideration to which the Group expects to be entitled to
for transfer of the licence, and is recognised on a point in time basis, based on control of the licence being transferred and there being
no further ongoing obligations required over the licence term.
The Group is entitled to further revenue from the delivery of the licence upon the customer’s achievement of certain milestones.
However, given there is uncertainty as to whether these milestones will be achieved, revenue is currently constrained and will be
recognised when uncertainty is resolved.
(g) Contract cost asset
A contract cost asset is the costs incurred in fulfilling a contract with a customer. The costs relate directly to a contract that the Group
can specifically identify, enhance resources of the Group that will be used in satisfying performance obligations in the future and are
expected to be recovered.
(h) Trade receivables
A receivable represents the Group’s right to an amount of consideration that is unconditional (i.e. only the passage of time is required
before payment of the consideration is due).
4343
PolyNovo Limited | Annual Report 2021PolyNovo Limited | Annual Report 2021 NOTES TO THE FINANCIAL STATEMENTS CONTINUED
(i) Intangible Assets
Intangible assets acquired separately or in a business combination are initially measured at cost. The cost of an intangible asset acquired
in a business combination is its fair value as at the date of acquisition. The intangible assets carried by the Group, being intellectual
property assets had an initial indefinite useful life on acquisition. In the prior period, and following the first commercial sales of
NovoSorb BTM, amortisation was recognised across the finite life of the intangible assets. See note 19 for further detail.
Internally generated intangible assets are not capitalised, excluding capitalised development costs, and expenditure is recognised
in the Statement of Comprehensive Income (profit or loss) in the year in which the expenditure is incurred.
(j) Impairment of intangible and other assets
Intangible assets that have an indefinite useful life are not subject to amortisation. They are tested annually for impairment or more
frequently if events or changes in circumstances indicate that they might be impaired. Other assets including definite lived intangible
assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.
The Group conducts an annual impairment assessment review of asset values, which is used as a source of information to assess for any
indicators of impairment. External factors, such as changes in expected future processes, technology and economic conditions, are also
monitored to assess for indicators of impairment. If any indication of impairment exists, an estimate of the asset’s recoverable amount
is calculated which is based on – higher of its fair value less cost of disposal and its ‘value‑in‑use’. Value‑in‑use is calculated by discounting,
the estimated future cash flows derived from use of the asset, using a pre‑tax discount rate that reflects current market assessments
of the time value of money and the risks specific to the asset.
(k) Share‑based payments
The Group provides benefits to employees in the form of share‑based payment transactions, whereby employees render services
in exchange for shares or rights over shares.
The PolyNovo Employee Share Option Plan was in place for the year ended 30 June 2021. Information relating to this Plan is set out
in note 34 and in the Remuneration Report section of the Directors’ Report.
The cost of share‑based payments under the terms of the Share Option Plan is measured by reference to the fair value of options at
the date at which they are granted. The fair value of options granted is determined by using the Monte Carlo simulation model or the
binomial option valuation model. The assumptions and models used for estimating fair value for share‑based payment transactions are
disclosed in the Remuneration Report, and/or note 34. All option and performance right arrangements are settled in equity.
The fair value of options is recognised as an employee benefit expense with a corresponding increase in equity. The fair value is
measured at grant date and recognised over the vesting period. The employee benefit expense recognised each period takes into
account the most recent estimate of the number of options that are expected to vest
(l) Group as a lessee
The Group applies a single recognition and measurement approach for all leases, except for short‑term leases and leases of low‑value
assets. The Group recognises lease liabilities to make lease payments and right‑of‑use assets representing the right to use the
underlying assets.
Right of use assets
The Group recognises right of use assets at the commencement of a lease. Right of use assets are measured at cost, less any
accumulated depreciation and impairment losses, and adjusted for any remeasurement liabilities. The cost of right of use assets includes
the amount of lease liabilities recognised, initial direct costs incurred, and lease payments made at or before the commencement date
less any lease incentives received. Right of use assets are depreciated on a straight‑line basis over the shorter of the lease term and the
estimated useful life of the assets, as follows:
Property
Office equipment
Manufacturing Equipment
4 to 10 years
4 to 5 years
3 years
Lease liabilities
At the commencement date of the lease, the Group recognises lease liabilities measured at the present value of lease payments to
be made over the lease term.
In calculating the present value of lease payments, the Group uses its incremental borrowing rate at the lease commencement date
if the interest rate implicit in the lease is not readily determinable. The lease payments include fixed payments (including in‑substance
fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate and amounts expected
to be paid under residual value guarantees. Lease payments on short‑term leases and leases of low‑value assets are recognised as an
expense on a straight‑line basis over the lease term.
4444
PolyNovo Limited | Annual Report 2021PolyNovo Limited | Annual Report 2021 (m) Plant and equipment
Construction in progress is stated at cost, net of accumulated impairment losses. Plant and equipment is stated at cost, net of
accumulated depreciation and accumulated impairment losses. Depreciation is calculated on a straight‑line basis over the estimated
useful life of the asset, as follows:
Property
Office equipment
Laboratory plant and equipment
Leasehold improvements
25 years
3 to 10 years
3 to 13.33 years
3 to 10 years
Impairment
The carrying values of plant and equipment are reviewed for impairment at each reporting date, when events or changes in
circumstances indicate that the carrying value may be impaired. An asset is impaired when its carrying value exceeds its estimated
recoverable amount. In this instance, the asset is written down to its recoverable amount and the impairment loss recognised in the
Statement of Comprehensive Income.
For impairment testing purposes, the recoverable amount of an asset is estimated as the higher of its fair value less cost of disposal
and its ‘value‑in‑use’. Value‑in‑use is calculated by discounting, the estimated future cash flows derived from use of the asset, using
a pre‑tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.
Disposal
Plant and equipment is de‑recognised upon disposal or when no future economic benefits are expected to arise from the continued use
of the asset. Any gain or loss arising on de‑recognition of the asset (calculated as the difference between the net disposal proceeds and
the carrying amount of the item) is recognised in the Statement of Comprehensive Income.
(n) Research and development costs
Research and development costs are expensed as incurred. An intangible asset arising from development expenditure on an individual
project is recognised only when the Group can demonstrate the technical feasibility of completing the intangible asset so that it will be
available‑for‑use or sale. No development expenditure has been capitalised.
(o) Cash and cash equivalents
Cash at bank and short‑term deposits are stated at nominal value. Cash at bank and short‑term deposits are amounts with a maturity
of three months or less. If greater than three months, these amounts are recognised within ‘other financial assets’.
(p) Employee leave benefits
Liabilities for wages, salaries and annual leave expected to be settled within 12 months of the reporting date and pro‑rata long service
leave for employees with over seven years of service, are recognised in current liabilities. Wages, salaries, annual leave and long service
leave are measured at the amounts expected to be paid when the liabilities are settled.
Liabilities for pro‑rata long service leave for employees with less than seven years of service are recognised in non‑current liabilities
and are measured as the present value of the expected future payments to be made.
(q) Interest income
Interest income is recognised when the Group has the right to receive the interest payment using the effective interest rate method.
(r) Inventory
Inventory is measured at cost for raw materials and packaging materials. A standard cost has been derived for finished goods and
semi‑finished goods. The standard cost includes an allocation of materials, direct labour and manufacturing overheads. The value of
finished goods and semi‑finished goods may include an allocation of manufacturing variances incurred during the period if it is determined
that the relevant production remains in inventory at balance date.
(s) Government grants
Government grants are recognised until there is reasonable assurance that the grant will be received and all attaching conditions will
be complied with.
4545
PolyNovo Limited | Annual Report 2021PolyNovo Limited | Annual Report 2021 NOTES TO THE FINANCIAL STATEMENTS CONTINUED
(t) Trade and other payables
Trade and other payables are carried at amortised cost. They represent liabilities for goods and services provided to the Group prior to
the end of the financial year that are unpaid. The amounts are unsecured and are normally settled on 30‑day terms. Due to the short‑term
nature of these payables amortised cost equates to fair value.
(u) Income tax
Deferred income tax is provided on all temporary differences at balance date, calculated as the difference between the tax cost base
of assets and liabilities and their carrying amounts for financial reporting purposes.
Deferred income tax assets are recognised for all deductible temporary differences to the extent that it is probable that taxable profit
will be available against which the deductible temporary differences can be utilised. The same criteria apply for recognition of tax assets
relating to unused tax losses.
Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised
or the liability is settled, based on tax rates (and tax laws) effective at balance date.
Income taxes relating to items recognised directly in equity are recognised in Other Comprehensive Income (equity) and not in the
Statement of Comprehensive Income (profit and loss).
(v) Significant accounting estimates and assumptions
Deferred taxes
The deferred tax liability (DTL) arising from the carrying value of PolyNovo’s intangible assets is offset by deferred tax assets (DTAs)
recognised for unused tax losses, where the continuity of ownership test is satisfied. Significant management judgement is required
to determine whether these are probable of realisation and the amount of the DTA that can be used to offset the impact of the DTL.
Judgment is also required in assessing whether any deferred tax assets can be recorded for unbooked tax losses and other timing
differences. Further details on deferred taxes are disclosed in note 12.
Share‑based payments
Estimating fair value for share‑based payment transactions requires selection of the most appropriate valuation model, which in turn
is dependent on the terms and conditions of the share‑based payment granted. Determination of the most appropriate inputs to the
valuation model, including the expected life of the share option, volatility and dividend yield, is also required. The models and related
assumptions used for estimating the fair value of share‑based payment transactions are disclosed in note 34 and in the Remuneration
Report.
Contract cost assets
Estimating the utilisation of contract cost assets requires selection of an appropriate amortisation method. The Group adopted straight
line method to amortise contract cost assets over the period of the contract, consistently with the transfer of the services to which
the asset relates. Further details on contract cost assets are disclosed in note 15.
Impairment of intangibles
Impairment exists when the carrying value of an asset exceeds its recoverable amount. PolyNovo considers indicators of impairment
and if an indicator exists, will determine the recoverable amount of the intangible asset. An estimate is provided on the useful life of
the current intangible asset based on the existing patent period. The assessment for the current period is further explained in note 19.
Expected Credit Loss
Estimating the expected credit loss (ECL) for trade receivables and BARDA income receivables requires selection of an appropriate
method and significant judgement to determine the amount. The method applied categorises trade receivables and BARDA income
receivables into various customer segments, then to determine the ECL amount, an assessment of the correlation between historical
observed default rates and forecast economic conditions is applied. Further details on expected credit loss are disclosed in note 14.
(w) Goods and services tax (GST)
Revenues, expenses and assets are recognised net of GST except:
• where the GST incurred on purchase of goods and services is not recoverable from the taxation authority, in which case the GST
is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and
• receivables and payables, which are stated with the amount of GST (if any) included.
4646
PolyNovo Limited | Annual Report 2021PolyNovo Limited | Annual Report 2021 The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the
Statement of Financial Position. Cash flows are included in the Cash Flow Statement on a gross basis (that is, including GST) and the
GST component of cash flows arising from investing and financing activities, which is recoverable from, or payable to, the taxation
authority are classified as operating cash flows. Commitments and contingencies are disclosed exclusive of the amount of GST
recoverable from, or payable to, the taxation authority.
(x) Earnings per share (EPS)
Basic EPS is calculated as the net profit/(loss) attributable to shareholders, adjusted to exclude costs of servicing equity
(other than dividends), divided by the weighted average number of ordinary shares.
Diluted EPS is calculated as the net profit/(loss) attributable to members, adjusted for:
• the costs of servicing equity (other than dividends);
• the after‑tax effect of dividends and interest associated with dilutive potential ordinary shares that have been recognised
as expenses; and
• other non‑discretionary changes in revenues or expenses during the period that would result from the dilution of potential
ordinary shares. The resultant net profit/(loss) is divided by the weighted average number of ordinary shares and dilutive
potential ordinary shares.
(y) Contributed equity
Ordinary shares are classified as equity and recognised at the fair value of the consideration received by the Company.
Any transaction costs arising on the issue of ordinary shares are recognised directly in equity as a reduction of the share
proceeds received.
(z) Foreign currency translation
The functional currency of each of the entities in the Group must reflect the primary economic environment in which the entity
operates. Accordingly, the relevant functional currencies are Australian dollars for Australian entities and US dollars for the US entity,
Singapore dollars for Singapore entity, New Zealand dollars for New Zealand entity and Euro for European entities. Foreign currency
items are translated to Australian currency on the following basis.
• Transactions are converted at exchange rates approximating those in effect at the date of the transaction.
• On consolidation, the assets and liabilities of the foreign operation are translated into Australian dollars at the rate of exchange
prevailing at the reporting date except for retained earnings which is translated at a historic rate of exchange pertaining to the
relevant financial year. The Statement of Comprehensive Income is translated at an average exchange rate over the financial year.
• The exchange difference arising on translation for consolidation are recognised in the balance sheet as a foreign currency translation
reserve. On disposal of a foreign operation, the reserve is reclassified to profit or loss.
(aa) Security deposits
Security deposits are recorded at amortised cost in the Statement of Financial Position.
(ab) Financial Instruments
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument
of another entity.
Financial Assets
Classification and measurement
Except for certain trade receivables, the group initially measures a financial asset at its fair value. Financial assets are subsequently
measured at fair value through profit or loss (FVPL), amortised cost, or fair value through other comprehensive income (FVOCI).
The classification is based on two criteria: The Group’s business model for managing the assets; and whether the instruments’
contractual cash flows represent ‘solely payments of principal and interest’ on the principal amount outstanding (the SPPI criterion).
Impairment
The Group recognises an allowance for expected credit losses (ECLs). ECLs are based on the difference between the contractual cash
flows due in accordance with the contract and all the cash flows that the Group expects to receive. The shortfall is then discounted
at an approximation to the asset’s original effective interest rate. For trade receivables, the Group has applied the standard’s simplified
approach and has calculated ECLs based on lifetime expected credit losses. The Group has established a provision matrix that is based
on the Group’s historical credit loss experience, adjusted for forward looking factors specific to the debtors and the economic environment.
4747
PolyNovo Limited | Annual Report 2021PolyNovo Limited | Annual Report 2021 NOTES TO THE FINANCIAL STATEMENTS CONTINUED
The provision matrix is initially based on the Group’s historical observed default rates. At every reporting date, the historical observed
default rates are updated and changes in the forward‑looking estimates are analysed. Generally, trade receivables are written off if
past due for more than one year. The total expected credit loss is disclosed in note 14.
The assessment of the correlation between historical observed default rates, forecast economic conditions and ECLs is a significant
estimate. The amount of ECLs is sensitive to changes in circumstances and of forecast economic conditions. The Group has assessed
forecast economic conditions and impact of the pandemic (COVID‑19) in all regions. This assessment is reflected in the application
of the provision matrix to calculate ECL’s. The Group’s historical credit loss experience and forecast of economic conditions may also
not be representative of customer’s actual default in the future.
Financial Liabilities
Classification and measurement
The Group’s financial liabilities include loans and borrowings and payables that are classified at fair value through profit or loss as
appropriate.
All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of directly
attributable transaction costs.
For the purposes of subsequent measurement, after initial recognition, interest‑bearing loans and borrowings are subsequently
measured at amortised cost using the EIR method. Amortised cost is calculated by taking into account any discount or premium on
acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included as finance costs in the statement
of profit and loss. For more information, refer to note 22.
Note 3. Segment Information
Business Segment
PolyNovo has only one business segment being the development of the NovoSorb technology for use in a range of biodegradable
medical devices.
The chief operating decision‑maker is the Managing Director of PolyNovo Limited.
The chief operating decision‑maker reviews the results of the business on a single entity basis.
For financial results refer to the Consolidated Statement of Comprehensive Income and Consolidated Statement of Financial Position.
The chief operating decision maker monitors the operating results of the Group for the purpose of making decisions about resource
allocation in order to progress the commercialisation of the PolyNovo technology.
During the period, sales to BARDA in the United States of America, represented 13% (2020: 14%) of total sales revenue from
contracts with customers.
Revenue from contracts with customers
Geographical areas
United States of America
Australia and New Zealand
Other countries
Non‑current assets
Geographical areas
United States of America
Australia and New Zealand
Other countries
4848
Consolidated
30 June 2021
$
30 June 2020
$
24,323,537
18,665,595
3,243,920
1,590,467
2,822,146
668,382
29,157,924
22,156,123
Consolidated
30 June 2021
$
30 June 2020
$
500,612
722,817
21,569,409
15,930,338
25,115
–
22,095,136
16,653,155
PolyNovo Limited | Annual Report 2021PolyNovo Limited | Annual Report 2021 Note 4. Revenue from contracts with customers
BARDA revenue
Commercial product sales
Note 5. Research and development tax benefit
Research and development tax benefit
Consolidated
30 June 2021
$
30 June 2020
$
3,650,065
3,091,140
25,507,859
19,064,983
29,157,924
22,156,123
Consolidated
30 June 2021
$
30 June 2020
$
–
36,956
Research and development tax benefit was not refundable in FY2021, as the aggregated turnover of the Group exceeded $20 million.
Receivable of $36,956 was recognised as other income in the Statement of Comprehensive Income in last financial year, as it related
to financial year 2019.
Note 6. Interest income
Term deposit interest
Bank account interest
Other
Note 7. Other income
Other income
Consolidated
30 June 2021
$
30 June 2020
$
–
974
129
1,103
22,905
10,067
2,339
35,311
Consolidated
30 June 2021
$
30 June 2020
$
180,297
111
During the year the Group received government support of $180,034 (2020: $nil) in response to COVID‑19. The support was provided
in the form of a cash flow boost to reduce cash liabilities and to assist with retaining employees during a period of economic uncertainty.
Note 8. Employee‑related expenses
Wages and salaries (including sales commission)
Superannuation
Share‑based payments expense
Other
Consolidated
30 June 2021
$
30 June 2020
$
13,438,931
10,522,502
705,162
2,626,897
2,605,341
532,366
2,061,772
1,956,725
19,376,331
15,073,365
Included in other employee related expenses are directors’ fees of $520,738 (2020: $466,174), payroll taxes and employer
contribution of $784,456 (2020: $515,073) and health insurance contribution of $422,982 (2020: $301,830).
4949
PolyNovo Limited | Annual Report 2021PolyNovo Limited | Annual Report 2021 NOTES TO THE FINANCIAL STATEMENTS CONTINUED
Note 9. Depreciation and amortisation expenses
Depreciation – property, plant and equipment
Depreciation – laboratory equipment
Depreciation – leasehold improvements
Subtotal
Depreciation – lease assets
Amortisation – intangible assets
Consolidated
30 June 2021
$
30 June 2020
$
165,057
60,817
115,492
341,366
331,470
247,848
920,684
121,973
46,955
76,798
245,726
343,601
247,848
837,175
In addition to the depreciation and amortisation expenses listed above, depreciation relating to manufacturing of $195,639
($127,061 for depreciation of fixed assets and $68,578 for depreciation of lease assets) is included in the cost of inventory.
Total depreciation and amortisation expenses amount in FY21 is $1,116,323.
Refer to note 17 for property, plant and equipment reconciliation and note 18 for lease assets reconciliation.
Note 10. Corporate, administrative and overhead expenses
Insurances
Accounting and audit fees
Investor relations and share registry expenses
Consultants and contractors
Communication expenses
Travel
Marketing costs
Realised foreign exchange (gain)/ loss
Unrealised foreign exchange (gain)/ loss
Other
Consolidated
30 June 2021
$
30 June 2020
$
1,438,629
1,003,364
498,799
473,763
826,471
292,173
617,034
802,135
142,343
1,120,568
1,856,578
8,068,493
476,386
459,685
559,962
191,002
1,320,545
801,401
5,234
(63,031)
1,517,313
6,271,861
Included in other administrative expenses are software licences $144,124 (2020: $165,243), third party logistic fees $292,438
(2020: $279,258) and freight $597,063 (2020: $357,158).
Note 11. Interest expense
Lease liability interest expenses
Loan facility interest expense
Consolidated
30 June 2021
$
30 June 2020
$
98,771
222,632
321,403
98,977
–
98,977
The Group has lease contracts for various items of property, office equipment and lease equipment used in its operation. Further details
on leases are disclosed in note 18.
The Group has secured two finance facilities, further details on loan facility are disclosed in note 22.
5050
PolyNovo Limited | Annual Report 2021PolyNovo Limited | Annual Report 2021 Note 12. Income tax expense
(a) Income tax expense
Current income tax
Deferred income tax
Relating to origination and reversal of temporary differences
Aggregate income tax expense
Reconciliation of income tax expense to prima facie tax payable
Loss before income tax expense
Tax at the statutory tax rate of 27.5%
Tax effect amounts which are not deductible/(taxable) in calculating taxable income:
Research and development
Non‑assessable R&D income tax credit
Share‑based payments
Meals and entertainment
Other
Current year tax losses not recognised
Current year temporary differences not recognised
Income tax expense
(b) Deferred tax assets and liabilities
Deferred tax assets
Deferred tax liabilities
Deferred tax balance reflects temporary differences attributable to:
Amounts recognised in profit and loss
Recognised on temporary differences
Tax effect of new accounting standard changes
Amount recognized due to acquisition of PolyNovo (intangibles)
Net deferred tax assets/ (liabilities) as 30 June
Consolidated
30 June 2021
$
30 June 2020
$
54,628
66,642
–
–
–
–
54,628
66,642
(4,550,404)
(1,251,361)
(4,127,096)
(1,134,951)
–
(164,790)
722,397
22,612
(54,256)
(725,398)
459,752
320,274
54,628
399,879
(87,142)
567,056
–
–
(255,158)
476,670
(154,870)
66,642
Consolidated
30 June 2021
$
30 June 2020
$
437,318
(437,318)
–
565,994
(565,994)
–
(437,318)
–
(437,318)
–
(518,580)
(47,414)
(565,994)
–
5151
PolyNovo Limited | Annual Report 2021PolyNovo Limited | Annual Report 2021 NOTES TO THE FINANCIAL STATEMENTS CONTINUED
(c) Deferred tax assets not brought to account
Deferred tax assets not recognised
Deferred tax assets not recognised comprises temporary differences attributable to:
Unrecognised, unconfirmed tax losses for which no deferred tax asset has been recognised
93,031,756
95,483,316
Consolidated
30 June 2021
$
30 June 2020
$
Deductible temporary differences – no deferred tax asset has been recognised
Unrecognised, unconfirmed R&D offsets for which no deferred tax asset has been recognised
Total
Potential tax benefit at 27.5%
757,592
1,083,147
563,162
–
94,872,495
96,046,478
Consolidated
30 June 2021
$
30 June 2020
$
26,875,218
26,412,781
Deferred tax assets and liabilities are recognised for temporary differences at the rates expected to be applied when the assets are
recovered, or liabilities are settled, based on those tax rates that are enacted or substantively enacted, except for when the deferred
income tax asset or liability arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business
combination and that, at the time of the transaction, affects neither the accounting nor taxable profits.
Deferred tax assets are recognised for deductible temporary differences including leases, provision for employee entitlements, other
provisions and accrued expenses.
Deferred tax liabilities are recognised for taxable temporary differences including prepayments, differences in accounting and tax base
of intangible assets and depreciable assets, and the deferred recognition of income for tax purposes.
The availability of the tax losses in future periods is uncertain and will be dependent on the Group satisfying strict requirements with
respect to continuity of ownership and the same business test, imposed by income tax legislation. The recoupment of available tax
losses as at 30 June 2021 is contingent upon the following:
• the Group deriving future assessable income of a nature and of an amount sufficient to enable the benefit from the losses to be realised;
• the conditions for deductibility imposed by tax legislation continuing to be complied with; and
• there being no changes in tax legislation that would adversely affect the Group from realising the benefit from the losses.
Given the Group’s history of recent losses, the Group has not recognised a net deferred tax asset with regard to unused tax losses,
as it has not been determined that the Group will generate sufficient taxable profit against which the unused tax losses can be utilised.
(d) Current tax liability
Provision for Income Tax
Consolidated
30 June 2021
$
30 June 2020
$
74,093
54,729
5252
PolyNovo Limited | Annual Report 2021PolyNovo Limited | Annual Report 2021 Note 13. Cash and cash equivalents
Cash and cash equivalents are denominated in:
Australian dollars
US dollars
NZ dollars
GBP
Consolidated
30 June 2021
$
30 June 2020
$
1,299,765
5,585,170
420,571
383,048
6,260,340
5,291,876
93,112
2,373
7,688,554
11,647,701
(i) Cash at bank earns interest at floating rates based on daily bank deposit rates.
For the purpose of the Consolidated Cash Flow Statement, cash and cash equivalents comprises cash at bank and investments
in short‑term deposits as listed above.
Reconciliation of net loss before income tax to net cash flow from operating activities
Consolidated
30 June 2021
$
30 June 2020
$
(4,550,404)
(4,193,738)
1,116,323
2,626,897
–
10,716
56,606
711,087
(1,745,536)
896,623
(621,837)
(742,793)
(2,267)
837,175
2,061,772
18,000
(35,311)
87,722
152,132
(870,525)
(347,668)
–
(1,592)
28,897
1,789,153
1,030,247
179,413
25,798
(250,221)
415,646
389,920
(427,323)
Net loss
Adjustments for non‑cash items:
Depreciation and amortisation
Share‑based payment expense
Finance cost
Interest
Loss on inventory write‑off
Unrealised foreign exchange rate differences
Change in assets and liabilities during the financial year:
(Increase)/decrease in trade receivables
(Increase)/decrease in prepayments
(Increase)/decrease in contract cost assets
(Increase)/decrease in inventory
(Increase)/decrease in other assets
Increase/(decrease) in payables
Increase/(decrease) in provisions
Increase/(decrease) in other liabilities
Net cash outflows from operating activities
5353
PolyNovo Limited | Annual Report 2021PolyNovo Limited | Annual Report 2021 NOTES TO THE FINANCIAL STATEMENTS CONTINUED
Note 14. Trade and other receivables
Trade receivables
R&D tax concession
BARDA Income Receivables
GST recoverable
Sundry receivables
Interest receivables
Consolidated
30 June 2021
$
30 June 2020
$
5,022,587
2,901,346
–
201,852
–
442,564
52
36,956
782,716
179,386
20,785
330
5,667,055
3,921,519
Trade receivables relates to invoices to customers for sale of goods and PolyNovo’s BARDA project representing invoiced and
un‑invoiced services for labour and sub‑contractor expenses.
Short‑term deposits of $418,980 was recognised as sundry receivables during the period, including deposits for hernia packaging
tools and other machines.
The changes in the balance of trade receivables and the information about the credit exposure are disclosed in note 25.
BARDA Income Receivables
BARDA income receivables are initially recognised for revenue earned from the provision of research and development services as
receipt of consideration is conditional on the acceptance by the customer. Upon completion of the milestone and acceptance by the
customer, the amounts recognised as BARDA income receivables are reclassified to trade receivables. As at 30 June 2021, the Group
has BARDA income receivables of $201,852 (2020: $782,716). Amounts are invoiced in the month following satisfaction of the
performance obligation. There are no significant expected credit losses related to the BARDA income receivables. The Group has an
agreement with BARDA to provide research and development services which was extended during the period until August 2025
for the Pivotal Trial. BARDA has committed funding of USD $15m for the Pivotal Trial.
Expected credit loss
Based on the business failure rates by class of customers and Dun & Bradstreet credit score the Expected Credit Losses relating to
trade receivables and BARDA income receivables the Group has recognised $6,306 as at 30 June 2021 (2020: $40,412). $nil trade
and other receivables were written off during the year.
The Group uses a provision matrix to measure its expected credit loss. The Group has considered the impact of COVID‑19 in assessing
the expected credit loss. Set out below is information about the credit risk exposure on the Group’s trade receivables and BARDA
income receivables using a provision matrix as at 30 June 2021:
Trade and other receivables
Not due
June
1‑30 Days
May
30‑60 Days
Apr
60‑90 Days
Mar+
90+ Days
Total
Expected credit loss rate
(average)
0%
0.57%
0.43%
Gross carrying amount ($)
4,052,737
707,751
170,424
Expected credit loss ($)
Net balance ($)
–
(4,018)
(733)
1.42%
95,192
(1,354)
7.2%
2,789
5,028,893
(201)
(6,306)
5,022,587
Trade and other receivables which are not due as at 30 June 2021 was $4,052,737, which was not expected to have any credit loss.
Trade receivables and BARDA income receivables due in less than 30 days and other financial assets have an expected credit loss which
are not significant.
5454
PolyNovo Limited | Annual Report 2021PolyNovo Limited | Annual Report 2021 Note 15. Contract cost assets
Contract cost assets (Current)
Contract cost assets (Non‑current)
Consolidated
30 June 2021
$
30 June 2020
$
146,315
475,522
621,837
–
–
–
In FY2021, the Group engaged subcontractor to fulfill specific performance obligations with regards to the Group’s BARDA
arrangement. The Group was required to prepay a specific amount to the subcontractor upfront to support the delivery of the
Group’s responsibility under the BARDA contract. Amortisation is calculated on a straight‑line basis over the life of the contract.
Note 16. Inventories
Raw materials
Work in progress
Finished goods
Provision for finished goods
Subtotal ‑ finished goods
Consolidated
30 June 2021
$
30 June 2020
$
49,121
420,539
1,504,792
(14,617)
1,490,175
1,959,835
73,048
323,594
907,441
(87,041)
820,400
1,217,042
The total of inventory is held at lower of cost or net realisable value (NRV). During the period, the loss on inventory write off was $1,160.
Note 17. Property, plant and equipment
Reconciliations of the carrying amount at the beginning and end of the current and previous financial year are set out below:
Land and
Buildings
Laboratory
Plant &
Equipment
Office
Equipment
Leasehold
Improve‑
ments
Construction
in Progress
Total
As at 30 June 2021
Cost
5,338,322
1,984,386
1,408,060
2,099,893
10,745,338
21,575,999
Accumulated depreciation
(212,536)
(1,447,365)
(670,588)
(1,661,112)
–
(3,991,601)
Carrying amount at
30 June 2021
Carrying amount at
1 July 2020
Additions (at cost)
Disposals (at cost)
Depreciation expense
5,125,786
537,021
737,472
438,781
10,745,338
17,584,398
5,235,319
–
–
564,220
113,363
–
767,671
148,324
–
475,458
6,847,712
13,890,380
16,598
3,897,626
4,175,910
–
(109,533)
(140,562)
(165,057)
(53,275)
–
–
–
–
(468,427)
(13,466)
Foreign exchange difference
–
–
(13,466)
–
Carrying amount at
30 June 2021
5,125,786
537,021
737,472
438,781
10,745,338
17,584,398
5555
PolyNovo Limited | Annual Report 2021PolyNovo Limited | Annual Report 2021 Carrying amount at
30 June 2020
Carrying amount at
1 July 2019
Additions (at cost)
Disposals (at cost)
Depreciation expense
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
Land and
Buildings
Laboratory
Plant &
Equipment
Office
Equipment
Leasehold
Improve‑
ments
Construction
in Progress
Total
As at 30 June 2020
Cost
5,338,322
1,871,021
1,276,399
2,083,291
6,847,712
17,416,745
Accumulated depreciation
(103,003)
(1,306,801)
(508,728)
(1,607,833)
–
(3,526,365)
5,235,319
564,220
767,671
475,458
6,847,712
13,890,380
4,894,863
443,459
–
498,435
198,411
(9,298)
174,452
713,692
–
381,170
140,511
–
(103,003)
(123,328)
(121,971)
(46,223)
59,299
6,008,219
6,788,413
8,284,486
–
–
–
(9,298)
(394,525)
1,498
Foreign exchange difference
–
–
1,498
–
Carrying amount at
30 June 2020
5,235,319
564,220
767,671
475,458
6,847,712
13,890,380
Note 18. Right‑of‑use assets
Group as a lessee
Right‑of‑use assets (Non‑current)
Lease liability (Current)
Lease liability (Non‑current)
Consolidated
30 June 2021
$
30 June 2020
$
2,238,759
2,646,521
Consolidated
30 June 2021
$
30 June 2020
$
350,368
2,063,331
2,413,699
323,876
2,420,058
2,743,934
The Group has lease contracts for various items of property, office equipment and lease equipment used in its operations. Leases of
property generally have lease terms between 3 and 10 years, while office and manufacturing equipment generally have lease terms
between 3 and 5 years.
Set out below are the carrying amounts of right‑of‑use assets recognised and the movements during the period:
Reconciliation of carrying amounts
Balance as at 1 July 2020
Additions
Depreciation expense
Exchange difference
Balance as at 30 June 2021
Reconciliation of carrying amounts
Transition adjustment t 1 July 2019
Additions
Depreciation expense
As at 30 June 2020
Property
$
2,605,889
–
(372,622)
(39,981)
2,193,284
Property
$
2,461,155
469,187
(324,453)
2,605,889
Office
Equipment
$
Manufacturing
Equipment
$
Motor Vehicle
$
Total
$
8,828
–
31,804
–
2,646,521
–
32,294
32,294
(7,563)
(12,714)
(7,149)
(400,048)
–
1,265
–
(27)
(40,008)
19,093
25,117
2,238,759
Office
Equipment
$
Manufacturing
Equipment
$
Motor Vehicle
$
16,395
–
(7,567)
8,828
5656
22,374
21,011
(11,581)
31,804
–
–
–
–
Total
$
2,499,924
490,198
(343,601)
2,646,521
PolyNovo Limited | Annual Report 2021PolyNovo Limited | Annual Report 2021 The following are the amounts recognised in profit or loss in addition to low value and short term leases of $3,044 per month.
Depreciation expense of right‑of‑use assets
Interest expense on lease liabilities
Total amount recognised in profit or loss
The Group had total cash outflows for leases of $461,299 (2020: $359,561).
Group as Lessor
The Group has not entered into any leases as lessor.
Consolidated
30 June 2021
$
30 June 2020
$
400,048
98,771
498,819
343,601
98,977
442,578
Note 19. Intangibles
Intangible assets, comprising intellectual property, were acquired through the business combination with PolyNovo Biomaterials Pty Ltd
on 17 December 2008. The acquired intangible assets were initially recognised at fair value.
Following the consistent commercial sales of NovoSorb BTM, amortisation of intangible assets commenced in FY2018 over the remaining
finite life through to March 2028 being the remaining patent life period over which economic benefits will be consumed. No indicators
of impairment related to the NovoSorb technology have been identified as at 30 June 2021.
Intangibles
(i) Cost
Opening balance
Additions
Closing balance
(ii) Accumulated amortisation
Opening balance
Amortisation for the year
Closing balance
Net book value
Note 20. Other assets
Security deposits
Consolidated
30 June 2021
$
30 June 2020
$
2,519,788
2,519,788
–
–
2,519,788
2,519,788
(619,620)
(247,848)
(867,468)
(371,772)
(247,848)
(619,620)
1,652,320
1,900,168
Consolidated
30 June 2021
$
30 June 2020
$
144,137
141,870
The non‑current security deposit relates predominantly to PolyNovo’s long‑term lease of office premises in Port Melbourne and
San Diego, USA.
The current prepayment relates predominantly to prepaid insurance $335,144 (2020: $283,621).
5757
PolyNovo Limited | Annual Report 2021PolyNovo Limited | Annual Report 2021 NOTES TO THE FINANCIAL STATEMENTS CONTINUED
Note 21. Trade and other payables
Trade payables
Other payables
Consolidated
30 June 2021
$
30 June 2020
$
1,814,219
3,146,929
4,961,148
1,611,945
1,560,050
3,171,995
Trade payables are non‑interest bearing and are normally settled on 30‑day terms.
Included in other payables are deferred income on upfront fees paid under BARDA contract of $857,006 (2020: $nil), accrued
commission of $460,539 (2020: $514,009), accrued other liabilities of $410,015 (2020: $265,643). BARDA contract liability
will be recognised over the period of the contract. Revenue recognised in FY21 was $85,936 in relation to the BARDA contract
deferred income.
Note 22. Interest‑bearing loans and borrowings
Current
Equipment Finance
Trade Finance
Total current interest‑bearing loans and borrowings
Non‑Current
Equipment Finance
Trade Finance
Total non‑current interest‑bearing loans and borrowings
Consolidated
30 June 2021
$
30 June 2020
$
1,466,246
1,058,760
2,525,006
495,873
4,808,499
5,304,372
5,058,338
1,983,494
–
–
5,058,338
1,983,494
(a) Interest bearing facility details
The Group had secured two finance facilities in FY20 with National Australia Bank (NAB). The facilities detailed below are used to fund
capital expenditure items.
Facility
Amount
$
Interest rate
$
Repayment Terms
Maturity Date**
Financing Facilities
Trade finance*
Equipment finance*
6,000,000
9,300,000
BBSY+1.7 Interest only
2.82% 5 years principal and interest
from initial drawdown
31 July 2021
June‑Dec 2025
Total
15,300,000
Interest
amount during
the period
$
67,105
155,527
222,632
* Drawdown on the facilities commenced in late June 2020, therefore no interest has been paid nor has any interest expense been accrued in FY20.
Finance cost of $18,000 incurred in FY20 to set up the loan facilities.
** In July 2021, the Trade finance facility was extended to 31 August 2021.
Trade finance facility
The purpose of this facility is to fund deposits and progress payments for capital expenditure items.
The facility is an interest only facility and repayment of the facility is funded by drawing down on the equipment finance facility.
The facility has a limit of $6.0 million and was made available on the 22 May 2020. The facility limit reduced to $1.0 million on
30 September 2020 and the facility was extended to 31 August 2021. The facility will be closed on this date. The limit reduction
to $1.0 million on 30 September 2020 is tailored to meet capital expenditure requirements.
This facility is secured over the property at 1/320 Lorimer St, Port Melbourne VIC 3207.
5858
PolyNovo Limited | Annual Report 2021PolyNovo Limited | Annual Report 2021 Equipment finance facility
Purpose of this facility is to fund repayment of the trade finance facility used for purchasing capital expenditure items such as hernia
manufacturing equipment and construction of the cleanroom.
The facility has a limit of $9.3 million and was made available on the 22 May 2020. The facility is non‑revolving. In FY21, a total of
$7,253,987 has been drawn down.
Repayments are made over 5 years and comprise of principal and interest. The facility currently attracts an interest rate of 2.82% p.a.
The facility is secured over the property at 1/320 Lorimer St, Port Melbourne VIC 3207.
As required by NAB’s terms and conditions the parent entity PolyNovo Limited, has provided a cross‑guarantee in conjunction with
wholly owned subsidiaries Novoskin Pty Ltd and Novowound Pty Ltd for the facilities. The aggregate amount payable by the
cross‑guarantors is limited to $15,300,000 excluding interest and penalties.
Note 23. Provisions
Current provisions
Annual leave
Long service leave
Total current provisions
Non‑current provisions
Long service leave
Make good
Total non‑current provisions
Consolidated
30 June 2021
$
30 June 2020
$
654,364
84,646
739,010
140,959
75,000
215,959
530,973
77,749
608,722
91,834
75,000
166,834
Provisions are recognised when all three of the following conditions are met:
• The Group has a present or constructive obligation arising from a past transaction or event
• It is probable that an outflow of resources will be required to settle the obligation
• A reliable estimate can be made of the obligation
Provisions recognised reflect our best estimate of the expenditure required to settle the present obligation at the reporting date.
Note 24. Reserves
(a) Movement in contributed equity
Contributed equity at beginning of year
Exercise of options
Contributed equity at end of year
Number of shares authorized and fully paid
On issue at beginning of year
Exercise of options
On issue at end of year
5959
Consolidated
30 June 2021
$
30 June 2020
$
139,070,502
139,070,502
180,000
–
139,250,502
139,070,502
661,088,044
661,088,044
300,000
–
661,388,044
661,088,044
PolyNovo Limited | Annual Report 2021PolyNovo Limited | Annual Report 2021 NOTES TO THE FINANCIAL STATEMENTS CONTINUED
(b) Reserves
Share‑based payments reserve (i)
Foreign currency translation reserve (ii)
Acquisition of non‑controlling interest reserve (iii)
Balance at end of period
(i) Share‑based payments reserve
Balance at beginning of year
Share‑based payments movement
Balance at end of year
Consolidated
30 June 2021
$
30 June 2020
$
7,846,655
(189,915)
5,219,758
(528,071)
(9,293,956)
(9,293,956)
(1,637,216)
(4,602,269)
Consolidated
30 June 2021
$
30 June 2020
$
5,219,758
2,626,897
7,846,655
3,157,986
2,061,772
5,219,758
This reserve represents the nominal consideration paid for subscriber or employee options and the fair value of options and
performance rights.
(ii) Foreign currency translation reserve
Opening balance
Translation of foreign operations
Balance at end of period
Consolidated
30 June 2021
$
30 June 2020
$
(528,071)
338,156
(189,915)
(375,939)
(152,132)
(528,071)
This reserve represents on consolidation, the translation of the foreign operation into Australian dollars. The exchange difference is
recognised in the balance sheet as a reserve.
(iii) Acquisition of non‑controlling interest reserve
Opening balance
Balance at end of year
Consolidated
30 June 2021
$
30 June 2020
$
(9,293,956)
(9,293,956)
(9,293,956)
(9,293,956)
This reserve represents the premium paid by PolyNovo Limited for the non‑controlling interest in a previous period in subsidiary entities
PolyNovo Biomaterials Pty Ltd, NovoSkin Pty Ltd and NovoWound Pty Ltd.
(c) Accumulated losses
Accumulated losses at beginning of year
Net loss attributable to members of the parent
Accumulated losses at end of financial year
Consolidated
30 June 2021
$
30 June 2020
$
(110,656,209)
(106,462,471)
(4,605,032)
(4,193,738)
(115,261,241)
(110,656,209)
6060
PolyNovo Limited | Annual Report 2021PolyNovo Limited | Annual Report 2021 Note 25. Financial Risk Management Objectives and Policies
(a) Financial instruments
The Group’s financial instruments comprise cash and cash equivalents, trade and other receivables, trade and other payables and other
financial liabilities.
Cash and cash equivalents
Trade and other receivables
Other financial assets1
Trade and other payables
Lease liabilities
Trade finance facility
Equipment finance facility
Consolidated
30 June 2021
$
30 June 2020
$
7,688,554
5,225,292
50,000
11,647,701
3,921,519
50,000
(3,611,201)
(3,171,995)
(2,413,700)
(2,743,934)
(1,058,760)
(4,808,499)
(6,524,584)
(2,479,367)
1. As at t 30 June 2021 $50,000 is held in a term deposit maturing on 16 March 2022 at an interest rate of 0.36%.
(b) Risk management policy
The Group has a formal risk management policy and framework. The Group’s approach to risk management involves identifying,
assessing and managing risk, including consideration of identified risks, in the context of the Group’s values, objectives and strategies.
The Board is responsible for overseeing the implementation of the risk management system and reviews and assesses the effectiveness
of the Group’s implementation of that system.
The Group seeks to ensure that its exposure to risks that are likely to impact its financial performance, continued growth and survival
are minimised in a cost‑effective manner
(c) Significant accounting policies
Details of the significant accounting policies and methodologies adopted in respect of each class of financial asset, financial liability
and equity instrument are disclosed in note 2.
(d) Capital risk management
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern and to maintain an
optimal capital structure so as to maximise shareholder value. In order to maintain an optimal capital structure, the Group may issue
new shares or reduce its capital, subject to the provisions of the Company’s Constitution and any relevant regulatory requirements.
The capital structure of the Group consists of debt and equity attributed to equity holders of the Group comprising contributed equity,
reserves and accumulated losses as disclosed in note 24. The Board monitors the need to raise additional equity from the equity
markets based on its ongoing review of PolyNovo’s actual and forecast cash flows, which are provided by management.
(e) Financial risk management
The key financial risks the Group is exposed to through its operations are:
• interest rate risk;
• credit risk;
• liquidity risk; and
• foreign currency risk
Interest rate risk
Interest rate risk arises when the value of a financial instrument fluctuates as a result of changes in market interest rates.
The Group is exposed to interest rate risks in relation to its holdings in cash and cash equivalents and its trade finance and equipment
finance facilities. The objective of managing interest rate risk is to minimise the Group’s exposure to fluctuations in interest rates.
To manage this risk, the Group locks a portion of the Group’s cash and cash equivalents into term deposits. The required maturity
period of term deposits is determined based on the Group’s cash flow forecast with particular focus on the timing of cash requirements.
In addition, the Group considers the lower interest rate received on cash held in the Group’s operating account compared to placing
funds on term deposit. Account is also taken of the costs associated with early withdrawal of a term deposit should access to cash
and cash equivalents be required.
6161
PolyNovo Limited | Annual Report 2021PolyNovo Limited | Annual Report 2021 NOTES TO THE FINANCIAL STATEMENTS CONTINUED
The Group’s exposure to interest rate risk and the interest rates (current at the end of each year) on the Group’s financial assets and
financial liabilities as at 30 June 2021, along with prior year comparatives, was as follows:
Weighted
average
effective
interest rate
Floating
interest rate
$
Fixed
interest rate
0 to 90 days
$
Fixed
interest rate
91 to 365
days
$
Fixed
interest rate
1 to 5 years
$
Fixed
interest
rate over 5
years
$
Non‑
interest
bearing
$
Total
2021
Financial assets
Cash and cash
equivalents
0.05% 7,688,554
Other financial assets
0.36%
Trade and other
receivables
Total financial assets
Financial liabilities
Trade and other
payables
–
–
7,688,554
–
Trade Finance Facility
BBSY +1.7% 1,058,760
Equipment Finance
Facility
Leases liabilities
2.82% 6,524,584
3.90% 2,413,700
Total financial liabilities
9,997,044
2020
Financial assets
Cash and cash
equivalents
0.27% 11,647,701
Other financial assets
1.43%
Receivables
Total financial assets
Financial liabilities
Trade and other
payables
–
–
–
–
11,647,701
–
Trade Finance Facility
BBSY+1.7% 4,808,499
Equipment Finance
Facility
Equipment Finance
Facility
3.16% 2,479,367
7,287,866
–
–
–
–
–
–
–
–
–
–
50,000
–
50,000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
– 7,688,554
–
50,000
– 5,225,292 5,225,292
– 5,225,292 12,963,846
– 3,611,201 3,611,201
–
–
–
– 1,058,760
– 6,524,584
– 2,413,700
– 3,611,201 13,608,245
–
–
–
–
–
–
–
–
–
50,000
–
50,000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
– 11,647,701
–
50,000
3,921,519
3,921,519
3,921,519 15,619,220
3,171,995
3,171,995
– 4,808,499
–
2,479,367
3,171,995 10,459,861
Weighted
average
effective
interest rate
Floating
interest rate
$
Fixed
interest rate
0 to 90 days
$
Fixed
interest rate
91 to 365
days
$
Fixed
interest rate
1 to 5 years
$
Fixed
interest
rate over
5 years
$
Non‑
interest
bearing
$
Total
$
As noted above, cash is invested in term deposits of varying maturity terms to maximise interest income as well as to meet the timing
of operational cash flow requirements. All term deposits are with the NAB, to ensure market interest rates are achieved without
compromising the security of funds on deposit.
6262
PolyNovo Limited | Annual Report 2021PolyNovo Limited | Annual Report 2021 The analysis below details the impact on the Group’s loss after tax and equity if the interest rate associated with the closing balance
of financial assets was to fluctuate by the margins below, assuming all other variables had remained constant:
+0.5% (50 basis points)
‑0.5% (50 basis points)
Loss (higher)/lower
Equity higher/(lower)
2021
$
Loss (higher)/lower
Equity higher/(lower)
2020
$
38,943
(38,943)
58,239
(58,239)
The range of +0.5%/‑0.5% as an assumption is based on current macro‑market economic conditions in which the group holds its
cash and cash equivalent balances.
Credit risk
Credit risk arises when a counterparty defaults on its contractual obligations, resulting in a financial loss to the Group.
The Group is exposed to credit risk via its cash and cash equivalents and receivables. To reduce risk exposure in relation to its holdings
of cash and cash equivalents, they are placed on deposit with the Group’s main bankers, the National Australia Bank (S&P Rating
AA/A‑1+, Moody’s rating Aa1/P‑1). A change to the Group’s bankers requires Board approval. BARDA income receivables have low
credit risk as it is a project with USA government.
In 2021, trade receivables has grown and this is expected to continue as commercial product sales to hospitals and distributors
increase. The ageing analysis of trade and other receivables is as follows.
0‑30 days
$
30‑60 days
$
60‑90 days
$
90+ days
$
Total
$
2021
Trade and other receivables
4,959,176
169,690
93,838
2,588
5,225,292
The Group considers the maximum credit risk from potential default of the counter party to be equal to the carrying amount of the
asset. Receivable balances are monitored on an ongoing basis with the result that the Group’s exposure to credit loss is not significant.
Liquidity risk
Liquidity risk arises if the Group encounters difficulty in raising funds to meet its financial liabilities.
The Group is exposed to liquidity risk via its trade and other payables and its trade finance and equipment finance facilities.
Responsibility for managing liquidity risk rests with the Board, who regularly review liquidity risk by monitoring the undiscounted cash
flow forecasts and actual cash flows provided to them by management. This process is undertaken to ensure that the Group continues
to be able to meet its debts as and when they fall due. Contracts are not entered into unless the Board is satisfied that there is sufficient
cash flow to fund the additional commitment. The Board determines when reviewing the undiscounted cash flow forecasts whether the
Group needs to raise additional working capital from its existing shareholders, the equity capital markets or other available external
sources. The Board may also review the timing of internal programs if necessary to moderate cash requirements.
A maturity analysis of trade and other payables is set out below:
Year ended 30 June 2021
Less than
3 months
$
3 to 12
months
$
1 to 5
years
$
over 5
years
$
Total
$
Interest‑bearing loans and borrowings1
1,421,199
1,103,807
5,058,338
–
7,583,344
Lease Liabilities
Trade and other payables
Year ended 30 June 2020
Interest‑bearing loans and borrowings1
Lease Liabilities
Trade and other Payables
86,624
263,744
1,206,118
857,214
2,413,700
3,611,201
–
–
–
3,611,201
5,119,024
1,367,551
6,264,456
857,214
13,608,245
Less than
3 months
$
4,808,499
104,219
3,121,925
8,034,643
3 to 12
months
$
495,873
319,831
–
1 to 5
years
$
1,983,494
1,869,319
–
over 5
years
$
–
906,590
–
Total
$
7,287,866
3,199,959
3,121,925
815,704
3,852,813
906,590
13,609,750
* Interest‑bearing loans and borrowings include Trade finance loan facility ($1,058,760) and Equipment finance loan facility ($6,524,584).
6363
PolyNovo Limited | Annual Report 2021PolyNovo Limited | Annual Report 2021 NOTES TO THE FINANCIAL STATEMENTS CONTINUED
Foreign currency risk
Foreign currency risk arises when foreign currency exchange rates fluctuate against the Australian dollar, resulting in a foreign currency
exchange loss or gain to the Group.
The Group is exposed to foreign currency risk via its cash and cash equivalents, trade receivables and trade payables as part of its
normal business.
The Group incurs foreign currency expenses predominantly in USD, NZD and EURO. To reduce foreign currency risk exposure, the
Group maintains an amount of cash and cash equivalents in USD, NZD, GBP and EURO. The Group receives payment from its overseas
customers in USD, NZD, GBP and EURO and pays US, NZD, GBP, SGD and EURO trade payables from its funds. GBP and SGD denominated
payable balances carry some foreign currency risk, however these payable balances are typically infrequent and low in value and are
therefore considered to expose the Group to minimal risk. The Company had opened a EURO and GBP bank account to mitigate foreign
currency exposure and will open a SGD bank account in near future.
The holdings of cash and cash equivalents, trade receivables and trade payables analysed by nominated currency at 30 June 2021,
along with prior year comparatives, were as follows.
Denominated
in AUD
$
Denominated
in USD
$
Denominated
in NZD
$
Denominated
in GBP
$
Denominated
in EUROP
$
Denominated
in SGD
$
Total
$
2021
Financial assets
Cash and cash equivalents
1,349,765
5,585,170
420,571
383,048
Trade and receivables
1,389,545
3,476,854
Total financial assets
2,739,310
9,062,024
156,176
576,747
48,560
431,608
–
105,016
105,016
–
7,738,554
49,141
5,225,292
49,141 12,963,846
Financial liabilities
Trade and other payables
(1,670,994)
(1,725,514)
(64,409)
(87,634)
(20,012)
(42,638)
(3,611,201)
Total financial liabilities
(1,670,994)
(1,725,514)
(64,409)
(87,634)
(20,012)
(42,638) 3,611,201
Total headroom/
(shortfall)
2020
Financial assets
1,068,316
7,336,510
512,338
343,974
85,004
6,503
9,352,645
Denominated
in AUD
$
Denominated
in USD
$
Denominated
in NZD
$
Denominated
in GBP
$
Denominated
in EURO
$
Denominated
in SGD
$
Total
$
Cash and cash equivalents
6,260,340
5,291,876
Receivables
408,753
3,139,094
93,112
9,673
Total financial assets
6,669,093
8,430,970
102,785
2,373
335,321
337,694
–
27,582
27,582
–
11,647,701
1,096
3,921,519
1,096
15,569,220
Financial liabilities
Trade and other payables
(1,969,251)
(1,135,066)
(19,100)
(1,465)
(35,009)
(12,104)
(3,171,995)
Total headroom/
(shortfall)
4,699,842
7,295,904
83,685
336,229
(7,427)
(11,008) 12,397,225
A hypothetical 10% strengthening in the exchange rate of the Australian dollar against the local currencies of the Parents’ overseas
subsidiaries (as at 30 June 2021) with all other variables held constant would have the following effect on the loss and equity for
the 2021 financial year for the Group:
Country
United States of America
United Kingdom
New Zealand
Singapore
Ireland
Total
$
(361,849) Unfavourable
(92,195) Unfavourable
25,870
Favourable
(19,409) Unfavourable
(2,372) Unfavourable
(449,955)
A 10% strengthening in the exchange rate has been applied based on current market economic conditions.
6464
PolyNovo Limited | Annual Report 2021PolyNovo Limited | Annual Report 2021 Note 26. Key management personnel disclosures
(a) Details of key management personnel
The key management personnel of the Group are those persons having the authority and responsibility for planning, directing and
controlling the activities of the Group, directly or indirectly, during the 2021 and 2020 financial years.
PolyNovo’s key management personnel are its Directors’ and members of the Senior Management team. Details of each Director
and Senior Executive, who are classified as key management personnel, are provided in the Remuneration Report.
(b) Compensation by category: key management personnel
Short term
Post‑employment – superannuation
Leave allowances
Share‑based payments
Termination benefits
Consolidated
30 June 2021
$
30 June 2020
$
1,244,024
1,148,354
110,130
18,713
101,118
44,659
2,395,928
1,898,500
–
3,741
3,768,795
3,196,372
(c) Interests held by key management personnel
Share options and awards held by key management personnel to purchase ordinary shares have the following expiry dates and exercise
prices:
Issue date
Jan Gielen
01/10/2019
01/10/2019
01/10/2019
Paul Brennan
06/03/2019
06/03/2019
06/03/2019
Anthony Kaye
09/08/2020
09/08/2020
09/08/2020
Expiry date
30/06/2021
30/06/2022
30/06/2023
30/06/2023
30/06/2023
30/06/2023
31/12/2024
31/12/2024
31/12/2024
Exercise price
2021 number
outstanding
2020 number
outstanding
$0.60
$0.60
$0.60
–
–
–
$2.25
$2.25
$2.25
–
300,000
400,000
700,000
1,100,110
1,100,110
1,100,110
300,000
300,000
400,000
1,000,000
1,100,110
1,100,110
1,100,110
3,300,330
3,300,330
150,000
150,000
200,000
500,000
150,000
150,000
200,000
500,000
4,500,330
4,800,330
(d) Loans to key management personnel
No loans have been made to Directors of PolyNovo or to any other key management personnel, including their personally related entities.
(e) Other transactions with Directors
There were transactions with Directors during the year ended 30 June 2021 as follows:
• David McQuillan and Associates LLC, an entity associated with Dr David McQuillan, provided consulting service to PolyNovo
North America LLC in last financial year. The consulting service was in relation to advisory and consulting services for the hernia
project and it was completed in this financial year, $nil was charged in this financial year (2020: $24,490).
No other transactions between the Group and any of the Directors of PolyNovo or any other key management personnel have
been identified.
6565
PolyNovo Limited | Annual Report 2021PolyNovo Limited | Annual Report 2021 NOTES TO THE FINANCIAL STATEMENTS CONTINUED
Note 27. Auditor’s Remuneration
The auditor of PolyNovo Limited is Ernst & Young. The amounts received or due and receivable by Ernst & Young for audit and other
services were as follows:
During the financial year the following fees were paid or payable for services provided by Ernst & Young, the auditor of the company,
and its network firms:
Fees to Ernst & Young (Australia)
Audit or review of the financial statements
Fees for other services:
• Tax compliance
Fees for assurance services that are required by legislation to be provided by the auditor
Fees for other assurance and agreed‑upon‑procedures services under other legislation
or contractual arrangements where there is discretion as to whether the service is provided
by the auditor or another firm
Total fees to Ernst & Young (Australia)
Fees to other overseas member firm of Ernst & Young (Australia)
Audit or review of the financial statements
Other services:
• Tax compliance and secretarial support
Fees for assurance services that are required by legislation to be provided by the auditor
Fees for other assurance and agreed‑upon‑procedures services under other legislation
or contractual arrangements where there is discretion as to whether the service is provided
by the auditor or another firm
Total fees to overseas member firms of Ernst & Young (Australia)
Consolidated
30 June 2021
$
30 June 2020
$
231,650
171,401
35,010
22,000
–
–
–
–
35,010
266,660
22,000
193,401
19,825
10,395
93,461
186,693
–
–
–
–
93,461
113,286
186,693
197,088
The Directors are satisfied that the provision of non‑audit services during the current period is compatible with the general standard
of independence for auditors imposed by the Corporations Act 2001. The nature and scope of each type of non‑audit service provided
means that auditor’s independence was not compromised.
Note 28. Commitments and Contingencies
Manufacturing equipment commitments
The Group has entered into new contractual agreements with suppliers for the supply of manufacturing equipment. The equipment will
be received in FY21 and the remaining balance of $386,801 will be paid accordingly during FY22.
Contingencies
The Directors are not aware of any other contingent liabilities or contingent assets at 30 June 2021. There has been no change in this
assessment up to the date of this report.
Note 29. Related party transactions
Related party transactions are disclosed under note 26 Key management personnel.
6666
PolyNovo Limited | Annual Report 2021PolyNovo Limited | Annual Report 2021 Note 30. Parent entity information
Loss after income tax
Total comprehensive income
Statement of financial position
Total current assets
Total assets
Total current liabilities
Total liabilities
Equity
Issued capital
General reserve
Accumulated losses
Total equity
Parent
30 June 2021
$
30 June 2020
$
(4,231,283)
(4,231,283)
(3,435,457)
(3,435,457)
Parent
30 June 2021
$
30 June 2020
$
47,751,864
47,527,016
53,783,437
53,558,589
4,516,166
4,516,166
2,689,410
2,689,410
139,250,502
139,070,502
1,882,436
(744,462)
(91,865,667)
(87,456,861)
49,267,271
50,869,179
In accordance with the terms and conditions of the NAB facility arrangements disclosed in note 22, the parent entity, PolyNovo Limited,
has provided a cross‑guarantee in conjunction with wholly owned subsidiaries Novoskin Pty Ltd and Novowound Pty Ltd. The aggregate
amount payable by the cross‑guarantors is limited to $15,300,000 excluding interest and penalties.
Note 31. Controlled Entities
The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance with the
accounting policy described in note 2:
Name
PolyNovo Limited
PolyNovo North America LLC
PolyNovo Biomaterials Pty Ltd
NovoSkin Pty Ltd
NovoWound Pty Ltd
PolyNovo NZ Limited
PolyNovo Singapore Private Ltd
PolyNovo UK Limited
PolyNovo Ireland Ltd
Principal place of business /
Country of incorporation
30 June 2021
%
30 June 2020
%
Ownership interest
Australia
United States
Australia
Australia
Australia
New Zealand
Singapore
United Kingdom
Ireland
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
–
Note 32. Events after the reporting period
In July 2021, the trade financial facility was extended to 31 August 2021. The Group is in the process of drawing down on the
equipment facility to close out the trade finance facility. Details refer to note 22.
Other than above, no matter or circumstance has arisen since 30 June 2021 that has significantly affected, or may significantly affect
the consolidated entity’s operations, the results of those operations, or the consolidated entity’s state of affairs in future financial years.
6767
PolyNovo Limited | Annual Report 2021PolyNovo Limited | Annual Report 2021
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
Note 33. Earnings per share
Loss after income tax attributable to the owners of PolyNovo Limited
Consolidated
30 June 2021
$
30 June 2020
$
(4,605,032)
(4,193,738)
Number
Number
Weighted average number of ordinary shares used in calculating basic earnings per share
661,189,962
661,088,044
Adjustments for calculation of diluted earnings per share:
Unexercised share options and awards
2,193,151
2,700,000
Weighted average number of ordinary shares used in calculating diluted earnings per share
663,383,113
663,788,044
Basic earnings per share
Diluted earnings per share
Cents
(0.69)
(0.69)
Cents
(0.63)
(0.63)
Basic earnings per share
Basic earnings per share is calculated by dividing the profit attributable to the owners of PolyNovo Limited, 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.
At 30 June 2021 there existed share options that if vested, would result in the issue of additional ordinary shares over the period to
FY2026. In the current period, these potential ordinary shares are considered antidilutive as their conversion to ordinary shares would
reduce the loss per share. Accordingly, they have been excluded from the dilutive earnings per share calculation. There were no further
transactions involving ordinary shares or potential ordinary shares between the reporting date and the date of completion of these
financial statements.
Between the reporting date and the issue date of the 30 June 2021 Financial Report, there have been no transactions involving
ordinary shares or potential ordinary shares that would impact the calculation of EPS disclosed in the table above.
Note 34. Share‑based payments
(a) Employee share‑based payment plans
The Company provides benefits to employees and Non‑executive Directors in the form of share‑based payment transactions,
whereby employees and Non‑executive Directors render services in exchange for shares or rights over shares. The expense
recognised in the Statement of Comprehensive Income for the years ended 30 June 2021 and 30 June 2020 were $2,626,897
and $2,061,772 respectively.
(b) Share‑based payments for the year ended 30 June 2021
During the 2021 financial year, 1,000,000 options were issued. Details of the share options granted pursuant to the terms of the
PolyNovo Employee Share Option Plan (ESOP) are as follows:
On 9 November 2020, the Company granted employee share options to the Chief Operating Officer, Mr Anthony Kaye. He was granted
500,000 options exercisable at $2.25. The options vest upon 12 months of employment with the Company and a share price of $2.25
being sustained over a period of at least 3 months. Once vested, the options can be exercised as follows:
• Tranche 1: 150,000 options – not to be exercised before 9 November 2021 and not later than 31 December 2024;
• Tranche 2: 150,000 options – not to be exercised before 9 May 2022 and not later than 31 December 2024; and
• Tranche 3: 200,000 options – not to be exercised before 9 November 2022 and not later than 31 December 2024.
The options package will expire on 31 December 2024. The expense relating to the options package during the year was $211,660.
Any unvested options will be cancelled on the date of termination or cessation of employment.
6868
PolyNovo Limited | Annual Report 2021PolyNovo Limited | Annual Report 2021
On 10 May 2021, the Company granted employee share options to the Director of Research and Development, Mr Joshua Cheetham.
He was granted 500,000 options exercisable at $2.74. The options vest upon 12 months of employment with the Company and a
share price of $2.74 being sustained over a period of at least 3 months. Once vested, the options can be exercised as follows:
• Tranche 1: 150,000 options – not to be exercised before 10 May 2022 and not later than 30 May 2026;
• Tranche 2: 150,000 options – not to be exercised before 10 November 2022 and not later than 30 May 2026; and
• Tranche 3: 200,000 options – not to be exercised before 10 May 2023 and not later than 30 May 2026.
The options package will expire on 30 May 2026. The expense in relation to the options package during the year was $42,380.
Any unvested options will be cancelled on the date of termination or cessation of employment.
2021
Balance at
1 July 2020
Granted as
compen‑
sation
Options
exercised
Balance at
30 June
2021
Total
vested at
end of
year
Total not
exercisable
at end of
year
Total
vested
during
year
Share‑
based
payments
expense
$
Key management personnel
Mr Paul Brennan
3,300,330
Mr Jan Gielen
1,000,000
–
–
– 3,300,330
–
3,300,330
300,000
700,000
700,000
700,000
Mr Anthony Kaye
–
500,000
–
500,000
–
500,000
4,300,330
500,000
300,000 4,500,330
700,000
4,500,330
Other employees
Mr Ed Graubart
1,000,000
–
– 1,000,000
Mr Joshua
Cheetham
–
500,000
1,000,000
500,000
–
500,000
– 1,500,000
–
–
–
1,000,000
500,000
1,500,000
Total
5,300,330
1,000,000
300,000 6,000,330
700,000
6,000,330
–
–
–
–
–
–
–
–
2,184,268
–
211,660
2,395,928
188,589
42,380
230,969
2,626,897
The fair value of options granted during FY21, as included in the above table, were determined using a Monte Carlo simulation‑based
model. A Monte Carlo simulation‑based model simulates the path of the share price according to a probability distribution assumption.
After a large number of simulations, the arithmetic average of the outcomes, discounted to the valuation date, is calculated to represent
the option value. This model can accommodate complex exercise conditions when the number of options exercised depends on some
function of the whole path followed by the share price.
Options issued during the period
Anthony Kaye
Grant date
Number of
options
Exercise
Price
Vesting
hurdle
Risk‑free
interest
rate
Volatility Expiry
09/11/2020
500,000
$2.25 12 months
T1 0.30%
55.15%
31 Dec 2024
service period and
3 months share
price exceeds
$2.25
T2 0.30%
55.15%
31 Dec 2024
T3 0.30%
55.15%
31 Dec 2024
Joshua Cheetham
Grant Date
Number of
options
Exercise
Price
Vesting
hurdle
Risk‑free
interest
rate
Volatility Expiry
10/05/2021
500,000
$2.74 12 months
T1 0.80%
54.23%
30 May 2026
service period and
3 months share
price exceeds
$2.74
T2 0.80%
54.23%
30 May 2026
T3 0.80%
54.23%
30 May 2026
Dividend
yield
Average
fair value
per option
–
–
–
$0.789
$0.838
$0.872
Dividend
yield
Average
fair value
per option
–
–
–
$0.779
$0.863
$0.954
6969
PolyNovo Limited | Annual Report 2021PolyNovo Limited | Annual Report 2021 NOTES TO THE FINANCIAL STATEMENTS CONTINUED
Key valuation assumptions for the Employee Share Options:
Parameters
Valuation date
Share price
Expected life
Assumptions
Grant Date.
Closing share price as at the valuation Date.
Assumed that the share appreciation rights will be exercised at the first opportunity
i.e. as early as possible.
Risk‑free interest rate
The risk‑free interest rates are derived from the Australian Government Bonds as at Valuation Date.
The terms to maturity have been selected to align with the expected life of the options.
Dividend yield
The dividend yield is the rate of dividend expressed as a continually compounded percentage
of the share price.
In determining an appropriate dividend yield, forecasted dividend information provided by the
management of Polynovo Limited has been relied upon.
Expected volatility
A share’s volatility measure captures the characteristics of fluctuations in the share’s price.
The value of options is extremely sensitive to the volatility measure and as a result great care should be
taken in determining the appropriate volatility percentage. To accurately value options, a volatility
measure should be selected that is most likely to represent the future volatility of the shares during the
life of the options: the implied volatility.
Accordingly, in determining the expected volatility, the historical market price volatility has been taken
into account.
Other
Other assumptions that have not been incorporated into our valuation model include:
(i) any change of control events and reorganisation of capital during the relevant performance periods
or service periods.
(ii) any dilution effect from the issue of options noting that they will not likely have a material impact
on the Polynovo Limited security price.
(c) Share‑based payments for the year ended 30 June 2020
During the 2020 financial year, 4,300,330 share options and awards were issued. Details of the share options granted pursuant
to the terms of the PolyNovo Employee Share Option Plan (ESOP) are as follows:
On 13 August 2019, the Company granted employee share options to Sr VP Sales & Marketing (Americas), Mr Ed Graubart.
He was granted 1,000,000 options exercisable at $1.55. The options vest upon 12 months of employment with the Company
and a share price of $1.55 being sustained over a period of 90 consecutive calendar days. Once vested, the options can be
exercised as follows:
• Tranche 1: not to be exercised before 13 August 2021 and not later than 13 August 2022.
• Tranche 2: not to be exercised before 13 August 2022 and not later than 13 August 2023.
• Tranche 3: not to be exercised before 13 August 2023 and not later than 13 August 2024.
• Tranche 4: not to be exercised before 13 August 2024 and not later than 13 August 2025.
If not exercised the options become void. The options package will expire on 13 August 2025. The expense relating to the options
package during the year was $163,272. Should Mr Graubart leave employment prior to the exercise date, the share options will be
forfeited and option expenses will be reversed.
On 1 October 2019, the Company granted up to the value of $10 million dollars of employee shares to the Managing Director,
Mr Paul Brennan. He was granted 3,300,330 share awards at $3.03. The share awards vest upon the Company market capitalisation
reaching and maintaining at all times, $2 billion dollars for a minimum period of three consecutive months in the relevant financial year.
Once vested, the shares can be allocated as follows:
• Tranche 1: 1,100,110 shares, to vest over 2 years.
• Tranche 2: 1,100,110 shares, to vest over 2 years.
• Tranche 3: 1,100,110 shares, to vest over 3 years.
The share awards package will expire on 30 June 2023. The expense in relation to the share awards package during the year was
$1,633,713. Any unvested shares will be cancelled on the date of termination or cessation of Mr Brennan’s employment.
7070
PolyNovo Limited | Annual Report 2021PolyNovo Limited | Annual Report 2021 2020
Key management
personnel
Mr Paul Brennan
Balance
at 1 July
2019
Granted as
compen‑
sation
Options
exercised
Balance at
30 June
2020
Total
vested
at end of
year
Total not
exercis‑
able at end
of year
Total
vested
during
year
Share‑
based
payments
expense
– 3,300,330
– 3,300,330
– 3,300,330
–
1,633,713
Mr Jan Gielen
1,000,000
–
– 1,000,000 1,000,000 1,000,000 1,000,000
264,787
Other employees
– 1,000,000
– 1,000,000
– 1,000,000
–
163,272
1,000,000 4,300,330
– 5,300,330 1,000,000 5,300,330 1,000,000
2,061,772
Options issued during financial year 2020
Grant date
Number of
options
Exercise
price
Vesting
hurdle
Risk‑free
interest
rate
Volatility Expiry
Dividend
yield
Average
fair value
per option
13/08/2019
1,000,000
$1.55 12 months
T1 0.66%
47.04%
13‑Aug‑22
service period and
3 months share
price exceeds
$1.55
T2 0.67%
57.03%
13‑Aug‑23
T3 0.68%
59.30%
13‑Aug‑24
T4 0.73%
61.59%
13‑Aug‑25
–
–
–
–
$0.423
$0.588
$0.704
$0.720
7171
PolyNovo Limited | Annual Report 2021PolyNovo Limited | Annual Report 2021 DIRECTORS’ DECLARATION
30 June 2021
In accordance with a resolution of the Directors of PolyNovo Limited, I state that:
In the opinion of the Directors:
The Financial Report and the Remuneration Report included in the Directors’ Report, of the Company and of the Group are
in accordance with the Corporations Act 2001, including:
• giving a true and fair view of the Company and the Group’s financial position as at 30 June 2021 and of their performance
for the year ended on that date;
• complying with Australian Accounting Standards and Corporations Regulations 2001; and
• complying with International Financial Reporting Standards as issued by the International Accounting Standards Board.
There are reasonable grounds to believe that the Company and the Group will be able to pay their debts as and when they become
due and payable.
This declaration has been made after receiving the declarations required to be made to Directors in accordance with section 295A
of the Corporations Act 2001 for the financial period ended 30 June 2021.
On behalf of the directors
Mr David Williams
Chairman
26 August 2021
72
PolyNovo Limited | Annual Report 2021 INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF POLYNOVO LIMITED
Ernst & Young
8 Exhibition Street
Melbourne VIC 3000 Australia
GPO Box 67 Melbourne VIC 3001
Tel: +61 3 9288 8000
Fax: +61 3 8650 7777
ey.com/au
Independent Auditor's Report to the Members of PolyNovo Limited
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of PolyNovo Limited (the Company) and its subsidiaries
(collectively the Group), which comprises the consolidated statement of financial position as at 30
June 2021, the consolidated statement of comprehensive income, consolidated statement of changes
in equity and consolidated statement of cash flows for the year then ended, notes to the financial
statements, including a summary of significant accounting policies, and the directors' declaration.
In our opinion, the accompanying financial report of the Group is in accordance with the Corporations
Act 2001, including:
a)
b)
giving a true and fair view of the consolidated financial position of the Group as at 30 June
2021 and of its consolidated financial performance for the year ended on that date; and
complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for Opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial
Report section of our report. We are independent of the Group in accordance with the auditor
independence requirements of the Corporations Act 2001 and the ethical requirements of the
Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional
Accountants (including Independence Standards) (the Code) that are relevant to our audit of the
financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with
the Code.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in
our audit of the financial report of the current year. These matters were addressed in the context of
our audit of the financial report as a whole, and in forming our opinion thereon, but we do not provide
a separate opinion on these matters. For each matter below, our description of how our audit
addressed the matter is provided in that context.
We have fulfilled the responsibilities described in the Auditor’s Responsibilities for the Audit of the
Financial Report section of our report, including in relation to these matters. Accordingly, our audit
included the performance of procedures designed to respond to our assessment of the risks of
material misstatement of the financial report. The results of our audit procedures, including the
procedures performed to address the matters below, provide the basis for our audit opinion on the
accompanying financial report.
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PolyNovo Limited | Annual Report 2021
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF POLYNOVO LIMITED CONTINUED
Going concern basis of preparation of financial statements
Why significant
How our audit addressed the key audit matter
As described in Note 2 of the financial report, the
financial statements have been prepared on a
going concern basis.
Our audit considered the requirements of Australian Auditing
Standard ASA 570 Going Concern. Our audit procedures
included but were not limited to:
The Group incurred a loss of $4.3 million during
the year and had net operating cash outflows of
$0.3 million. It is anticipated that further
investment will be incurred by the Group in its
planned growth and ongoing product
commercialisation over the next 12 months. The
Group’s forecast growth in revenues and cash
inflows may be impacted by COVID-19 differently
in each of the geographies it operates within,
which could impact on the Group’s ability to pay
its debts and obligations as they fall due.
The Directors have considered existing cash and
working capital balances, available current
financing facilities, and forecasts of future cash
flows for a period of at least 12 months from the
date of the financial report. The Cash flow
forecasts involve judgements and estimations
based on management’s view of business
operations, expected growth and market
conditions.
Assessing the appropriateness of the Group’s
basis of preparation of the financial statements
on a going concern basis required judgement in
assessing the Group’s forecast cashflows for a
period of at least 12 months from the date of the
audit report.
The availability of sufficient cash flows and/or
funding is critical to the ongoing viability of the
business and, as such, was a significant aspect of
our audit.
► Obtained and evaluated management’s assessment of the
Group’s ability to continue as a going concern, including the
related forecast cash flows for the 12 month period ending
31 August 2022 including all relevant information based on
our knowledge of the Group as a result of our audit.
► Reviewed the financial condition of the Group taking into
consideration the debts on the statement of financial
position at year end and the Group’s ability to settle its
debts as and when they become due.
► Assessed the forecast cash flow assumptions based on
historical results, current economic and industry indicators,
publicly available information and the Group’s strategic
plans. This included assumptions in relation to customer
sales values and retention rates, cashflow saving initiatives
including deferral of identified projects and growth rates.
► Reviewed relevant external information to assess a range of
possible scenarios, including those associated with the
impact of COVID-19 in the different geographies the Group
operates within.
► Obtained evidence with respect to the Group’s forecast
modelling including support for customer growth, sales
ordering, current and recent sales run rates and identified
cash savings.
► Inquired of management as to whether they are aware of
any events or conditions through to the date of our audit
report that may cast significant doubt on the entity’s ability
to continue as a going concern.
► Assessed the appropriateness of the Groups’ going concern
basis of preparation disclosures for financial statements for
consistency with Australian Accounting Standards.
Recognition of revenue
Why significant
How our audit addressed the key audit matter
The Group has recognised revenue from the sale
of commercial products and revenue from
services performed in respect of research and
development activities.
For sales of commercial products, revenue is
recognised upon delivery of the product to the
customer. The Group sells to customers in
various geographic territories. Commercial
product sales have significantly increased this
financial year. Services revenue is recognised as
the services are delivered.
Our audit procedures with respect to the Group’s revenue
recognition included:
► Assessed new contracts with customers for terms and
conditions that could impact the timing of recognition and
measurement of revenue.
► Assessed the operating effectiveness of the Group’s
revenue controls by testing a sample of controls with
respect to the initiation and recording of commercial sales
transactions.
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PolyNovo Limited | Annual Report 2021PolyNovo Limited | Annual Report 2021
Recognition of revenue (continued)
Why significant
How our audit addressed the key audit matter
Notes 2, 3 and 4 of the financial statements
outline the Company’s accounting policies with
respect to revenue recognition and revenue
disclosures.
Revenue recognition was considered a key audit
matter due to the increasing sales volumes and
customer arrangements entered into by the
Group.
► Assessed on a sample basis, whether revenue was correctly
recognised based on the products delivered as at 30 June
2021 with reference to supporting documentation including
contracts, purchase orders proof of delivery, cash receipts
and credit notes.
► Assessed the Group’s performance obligations under the
services contracts to check that revenue is recognised only
for services provided during the year and at the contracted
rate.
► Assessed whether the Company’s revenue disclosures as
outlined in Notes 2, 3 and 4 are complete and meet the
requirements of Australian Accounting Standards.
Existence and valuation of inventory
Why significant
How our audit addressed the key audit matter
At 30 June 2021, the Group held inventory of
$1.98 million which comprised raw materials,
work in progress and finished goods. The
disclosure in respect of inventory is included in
note 16 of the financial statements.
Material inventories were held at a central
warehouse in Australia and by third-party
logistics providers in the United States of
America (‘US’).
The cost of inventory is determined based on the
standard cost of production including overheads
and, where applicable, capitalisable
manufacturing variances. The net realisable
value of the inventory is assessed at year end
considering sale price of product, forecast usage,
expiry dates of products and quality
assessments.
The existence and valuation of inventory was
considered a key audit matter given the
significance to the group of inventory and the
judgements required in determining the valuation
of inventory.
Our procedures with respect to existence and valuation of
inventory included:
► Attended inventory counts that occurred at the year end,
reperforming a sample of the inventory counts and
agreeing count results into the year-end inventory listing.
Due to travel and social distancing restrictions resulting
from the COVID-19 pandemic, we could not physically
attend the US third-party logistics provider inventory count.
However, we observed the inventory counts using video
streaming and other technologies.
► Assessed that the nature of costs included in inventory,
including allocations of labour and manufacturing
overheads, were consistent with the requirements of
Australian Accounting Standards.
► Agreed, on a sample basis, the amount of costs capitalised
into inventory to supporting documentation.
► Assessed and recalculated the Group’s manufacturing
variances.
► Assessed inventory net realisable values with reference to
the ageing of inventory, expiry dates, gross margins
achieved, sales forecasts and outcomes of quality
assessments.
► Assessed whether the Group’s disclosures in respect of
inventory in the financial statements are complete and
meet the requirements of Australian Accounting Standards.
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INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF POLYNOVO LIMITED CONTINUED
Information Other than the Financial Report and Auditor’s Report Thereon
The directors are responsible for the other information. The other information comprises the
information included in the Company’s 2021 annual report other than the financial report and our
auditor’s report thereon. We obtained the directors’ report that is to be included in the annual report,
prior to the date of this auditor’s report, and we expect to obtain the remaining sections of the annual
report after the date of this auditor’s report.
Our opinion on the financial report does not cover the other information and accordingly we do not
express any form of assurance conclusion thereon, with the exception of the Remuneration Report
and our related assurance opinion.
In connection with our audit of the financial report, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial
report or our knowledge obtained in the audit or otherwise appears to be materially misstated.
If, based on the work we have performed on the other information obtained prior to the date of this
auditor’s report, we conclude that there is a material misstatement of this other information, we are
required to report that fact. We have nothing to report in this regard.
Responsibilities of the Directors for the Financial Report
The directors of the Company are responsible for the preparation of the financial report that gives a
true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
and for such internal control as the directors determine is necessary to enable the preparation of the
financial report that gives a true and fair view and is free from material misstatement, whether due to
fraud or error.
In preparing the financial report, the directors are responsible for assessing the Group’s ability to
continue as a going concern, disclosing, as applicable, matters relating to going concern and using the
going concern basis of accounting unless the directors either intend to liquidate the Group or to cease
operations, or have no realistic alternative but to do so.
Auditor's Responsibilities for the Audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is
free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of this financial report.
As part of an audit in accordance with the Australian Auditing Standards, we exercise professional
judgment and maintain professional scepticism throughout the audit. We also:
•
Identify and assess the risks of material misstatement of the financial report, whether due to
fraud or error, design and perform audit procedures responsive to those risks, and obtain audit
evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not
detecting a material misstatement resulting from fraud is higher than for one resulting from
error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the
override of internal control.
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PolyNovo Limited | Annual Report 2021PolyNovo Limited | Annual Report 2021
•
•
•
•
•
Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Group’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by the directors.
Conclude on the appropriateness of the directors’ use of the going concern basis of accounting
and, based on the audit evidence obtained, whether a material uncertainty exists related to
events or conditions that may cast significant doubt on the Group’s ability to continue as a going
concern. If we conclude that a material uncertainty exists, we are required to draw attention in
our auditor’s report to the related disclosures in the financial report or, if such disclosures are
inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up
to the date of our auditor’s report. However, future events or conditions may cause the Group
to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the financial report, including the
disclosures, and whether the financial report represents the underlying transactions and events
in a manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities
or business activities within the Group to express an opinion on the financial report. We are
responsible for the direction, supervision and performance of the Group audit. We remain solely
responsible for our audit opinion.
We communicate with the directors regarding, among other matters, the planned scope and timing of
the audit and significant audit findings, including any significant deficiencies in internal control that we
identify during our audit.
We also provide the directors with a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with them all relationships and other
matters that may reasonably be thought to bear on our independence, and where applicable, actions
taken to eliminate threats or safeguards applied.
From the matters communicated to the directors, we determine those matters that were of most
significance in the audit of the financial report of the current year and are therefore the key audit
matters. We describe these matters in our auditor’s report unless law or regulation precludes public
disclosure about the matter or when, in extremely rare circumstances, we determine that a matter
should not be communicated in our report because the adverse consequences of doing so would
reasonably be expected to outweigh the public interest benefits of such communication.
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PolyNovo Limited | Annual Report 2021PolyNovo Limited | Annual Report 2021
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF POLYNOVO LIMITED CONTINUED
Report on the Audit of the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 26 to 36 of the directors' report for the
year ended 30 June 2021.
In our opinion, the Remuneration Report of PolyNovo Limited for the year ended 30 June 2021,
complies with section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the
Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our
responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in
accordance with Australian Auditing Standards.
Ernst & Young
Ashley Butler
Partner
Melbourne
26 August 2021
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PolyNovo Limited | Annual Report 2021PolyNovo Limited | Annual Report 2021
SHAREHOLDER INFORMATION
30 June 2021
Additional Information Required by ASX
For the year ended 30 June 2021.
Ordinary Shares
As at 13 August 2021 there were 661,388,044 ordinary shares on issue held by 21,588 shareholders.
Each ordinary share carries one vote per share.
Top 20 Shareholders as at 13 August 2021
Shareholder
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
J P MORGAN NOMINEES AUSTRALIA PTY LIMITED
CITICORP NOMINEES PTY LIMITED
MOGGS CREEK PTY LTD
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