Annual Report 2019
For personal use only SHARE REGISTRY
Link Market Services Limited
Level 4 Central Park
152 St Georges Terrace
PERTH WA 6000
Telephone (within Australia) : 1300 554 474
Telephone (outside Australia): +61 1300 554 474
Email: registrars@linkmarketservices.com.au
Web: www.linkmarketservices.com.au
AUDITORS
BDO Audit (WA) Pty Ltd
38 Station Street
SUBIACO WA 6000, Australia
SOLICITORS
DLA Piper Australia
Level 31, Central Park
152-158 St Georges Tce
PERTH WA 6000
SKIN ELEMENTS LIMITED
ABN 90 608 047 794
DIRECTORS
Peter Malone (Executive Chairman)
Phil Giglia (Non-executive Director)
COMPANY SECRETARY
Craig Piercy
REGISTERED OFFICE AND PRINCIPAL
PLACE OF BUSINESS
32 Ord Street
WEST PERTH WA 6005
Telephone: +61 (0)8 6311 1900
Fax: +61 (0)8 6311 1999
Email: info@skinelementslimited.com
Web: www.skinelementslimited.com
BANKERS
ANZ (Australia and New Zealand Banking
Group Limited)
1275 Hay Street
WEST PERTH WA 6005
SECURITIES EXCHANGE LISTING
ASX Limited
Level 40, Central Park 152-158 St George’s
Terrace, PERTH WA 6000
ASX Code: SKN
For personal use only
CONTENTS
02
04
06
08
10
12
13
Executive Chairman’s Report
Born Global -The Opportunity
Building A Global SKNlife Brand Strategy
The Science Behind SKNlife
Introducing SKNlife
Key Officers of The Company
Financial Contents
SKIN ELEMENTS LIMITED ANNUAL REPORT 2019
1
For personal use only
CHAIR MAN’S R EPORT
Dear Shareholder,
upon its plan to build a significant distribution
and sales footprint in major international
I am pleased to present the Skin Elements
markets, and achieve our stated aim of
Limited Annual Report for the year ended
becoming a leading global skincare
30 June 2019, and to take the opportunity
company.
to provide an update on your Company’s
activities and its plans the next exciting phase
This represents an exciting juncture in the
in the Skin Elements’ journey.
evolution of your Company, as we look
forward to accelerating product manufacture
The year is best summed up as one of
and ramping up global sales of our natural
growth, consolidation and transition. This
and organic skincare range. Simply put,
has culminated in the finalisation of the re-
under the SKNLife banner, we are now in a
branding of the entire Skin Elements’ product
position to take our products to the world,
range under the ‘SKNLife’ banner and the
and build on the solid foundation achieved
addition of new products lines to our flagship
to date.
Soléo sunscreen range.
This ‘scale-up’ of our product range and
The UK market represents a major current
the associated positioning and branding
opportunity, and we continue to advance very
has been the result of a systematic, carefully
positive discussions with a major UK retail
planned and executed business plan by
chemist chain for the potential roll-out of a
the Skin Elements’ management team -
large-scale distribution agreement, which
commencing with our ASX listing in 2017, the
would see our products on the shelves of
strategic and complementary acquisition of
around 2,000 of their retail stores. Separate
McArthur Skincare and our ongoing research
to this initiative, we are also in discussions
and development focus which has delivered
over a distribution agreement with a major
new offerings to the product range.
With this scale-up now complete, Skin
Elements is ready to aggressively embark
health store retail chain in the UK.
2
SKIN ELEMENTS LIMITED ANNUAL REPORT 2019
For personal use only
“The UK market represents a major current
opportunity, and we continue to advance very positive
discussions with a major UK retail chemist chain for
the potential roll-out of a large-scale distribution
agreement, which would see our products on the
shelves of around 2,000 of their retail stores.”
We also have exciting plans for the massive
I would like to conclude by acknowledging
US market, where we are in discussions with a
the ongoing support of our very loyal
major online retailer with a view to launching
shareholders, and I look forward to sharing
a dedicated North American-focused SKNLife
news of our continued progress in the year
on-line store for our product range.
ahead.
In addition to these major opportunities,
we are working with distributors in major
European and Asian markets, as well as
Brazil and closer to home, in Australia and
New Zealand. I look forward to being in a
Yours sincerely
Peter Malone
position to share details of material progress
Executive Chairman and CEO
on these opportunities in the year ahead.
While much hard work has gone into
positioning the Company to now be in sight
of achieving its objectives, now is not the time
to rest on our efforts to date, and I and the
rest of the Skin Elements’ team cannot wait to
embark upon the next exciting phase in the
growth and evolution of your Company.
None of this would be possible without the
focus and commitment of the entire Skin
Elements’ team, and I would like to take this
opportunity to thank them for their continued
commitment to achieving our goals.
SKIN ELEMENTS LIMITED ANNUAL REPORT 2019
3
For personal use only BOR N GLOBAL - THE OPPORTUNIT Y
THE USA
Ongoing discussions with
a major online retailer in
respect of launching a
dedicated North
American-focused SKNLife
on-line store to market and
sell the entire SKNLife
product range into the
massive North American
market.
BRAZIL
Company is currently
applying for Brazilian
Health Regulatory Agency
(ANVISA) approval to
market and sell its product
range in the substantial
Brazilian market. A
distribution agreement
with Soleo Organics Brasil
- Comercio de Produtos
Organicos Ltda to be the
exclusive Skin Elements’
distributor in Brazilian
market is already in place.
“In addition to these major opportunities, we are working with
distributors in major European and Asian markets, as well as
Brazil and closer to home, in Australia and New Zealand.
I look forward to being in a position to share details of material
progress on these opportunities in the year ahead.”
4
SKIN ELEMENTS LIMITED ANNUAL REPORT 2019
For personal use only JAPAN & MALAYSIA
Skin Elements continues to
pursue distribution
opportunities in the
burgeoning Asian skincare
markets. These include
Japan and Malaysia, and
also in China.
EUROPE
Company is in discussions
with distributors with a view
to entering distribution
agreements in a number of
European markets, with a
focus on providing entry to
the very large supermarket
segment in continental
Europe.
THE UK
This represents a major
current opportunity, in the
retail pharmacy segment.
Company is advancing
discussions with a major
UK chemist chain for the
potential roll-out of a
large-scale distribution
agreement, which would
see Skin Elements’ products
in around 2,000 of their
retail outlets. Company
is also discussions over a
potential distribution
agreement with a major
UK health store retail chain.
AUSTRALIA &
NEW ZEALAND
Skin Elements is well
represented in different
geographical markets in
Australia and New
Zealand by highly
regarded distributors of
quality health-related
products including; Rener
Health Products, Oborne
Health Supplies, Global by
Nature and CeresOrganics.
The main target market is
the early innovator retail
market, predominantly the
health shop segment, plus
online sales.
SKIN ELEMENTS LIMITED ANNUAL REPORT 2019
5
For personal use only BUILDING A GLOBAL SKNLIFE BR AND STR ATEGY
SKNLife
KEY PRODUCTS
40
CHANNEL /
TARGET MARKET
17
KEY STATISTICS
10
SKNProtect
SKNActivs
SKNCare
SKNCosmetics
• Everyday Formula Extra Lite
• PapayaActivs Arthritis
• Complete Esscience Hydrating
• EJNC Anti Aging Signature
40g / 80g / 150g
Cream 75g
Facial Cream 50ml
50ml
• Everyday Formula Extra Lite
Coconut 40g / 80g / 150g
• Original High Performance
40g / 80g / 150g
• Original High Performance
Coconut 40g / 80g / 150g
• Baby Formula Extra Sensitive
80g / 150g
• PapayaActivs Psoriasis,
Dermatitis & Rashes
Cream 75g
• PapayaActivs Eczema
Cream 75g
• PapayaActivs Wounds &
Burns Cream 75g
• PapayaActivs Muscle Aches
• Complete Esscience Complete
Skincare Soap (3 bars)
• Complete Esscience Complete
Skincare Body wash 350ml
• Complete Esscience Scalp
Care Shampoo 250ml
• Complete Esscience Scalp
Care Conditioner 250ml
• EJNC Daily Forming & Lifting
Hydrating Cream 100ml
• EJNC Intensive Recovery
Rejuvenating Night Cream
100ml
• EJNC Daily Purely Whitening
Essence 120ml
• EJNC Anti-Aging Eye Serum
• Face formula Moisturising
& Pains Cream 75g
• Complete Esscience Replenish-
30ml
40g / 80g
• Face formula Moisturising
Tinted 40g / 80g
• SunProtect Packs x 4 kinds
• PapayaActivs Complete
Skincare Cream 240ml
• PapayaActivs Complete
Skincare Cream 240ml No
Added Fragrance
ing Shampoo 250ml
• EJNC Gentle Micro-
• Complete Esscience Replenish-
ing Conditioner 250ml
dermabrasion facial polish
125ml
• Combined Skincare Packs x
• EJNC Ultra C+ serum 20ml
11 kinds
• USA - through online store
created in San Francisco
• Japan - through retail outlets
via chain of sport stores
• UK - through chain of
Pharmacy stores
• Europe- through Slovakian
health store / Poland - through
chain of Health stores
• Malaysia through online
health stores
• Australia - through online store
• Australia - through distributors
and wholesalers
• China - through direct mail
• Australia - through online store
• Australia - through distributors
• Australia - through online store
• Australia - through distributors
• Australia - through online store
• Australia - through distributors
and wholesalers
and wholesalers
and wholesalers
• USA - through online store
created in San Francisco
• Japan - through retail outlets
via chain of sport stores
• UK - through chain of
Pharmacy stores
• China - through online sales
• USA - through online store
created in San Francisco
• Japan - through retail outlets
via chain of sport stores
• UK - through chain of
• Europe- through Slovakian
Pharmacy stores
health store / Poland - through
chain of Health stores
• Malaysia through online
health stores
• Europe- through Slovakian
health store / Poland - through
chain of Health stores
• Malaysia through online
• China - through direct mail
health stores
• UK - through department store
• Malaysia through online
health stores
• USA - through online store
created in San Francisco
• Japan - through retail outlets
via chain of sport stores
• UK - through chain of
Pharmacy stores
• Europe- through Slovakian
health store / Poland - through
chain of Health stores
• 18 Skus plus combination
packs
• All natural and Organic
• 3 hour water resistance
• Vegan
• No Animal Testing-Cruelty
Free
• No. 1 rated by the EWG
• Reef Safe Sunscreen
• Biodegradable
• Australian Made
• 5 Skus
• No Animal Testing-Cruelty
Free
• Biodegradable
• 60% McArthur Pawpaw
Extract
• No Petrochemicals
• All Natural active ingredients
• No Sulphates
• No Parabens
• Australian Made
• 11 Skus
• No Petrochemicals
• No Animal Testing-Cruelty
Free
• Biodegradable
• 60% McArthur Pawpaw
Extract
• No Petrochemicals
• All Natural active ingredients
• No Sulphates
• No Parabens
• Australian Made
• 5 Skus
• No Animal Testing-Cruelty
Free
• Biodegradable
• All Natural / Organic active
ingredients
• Australian Made
6
SKIN ELEMENTS LIMITED ANNUAL REPORT 2019
For personal use only BUILDING A GLOBAL SKNLIFE BR AND STR ATEGY
SKNLife
SKNProtect
SKNActivs
SKNCare
SKNCosmetics
BRAND
POSITION
Soléo Organics protecting
you from the sun...naturally
Pawpaw skincare cream at
its most powerful-5 x more
Pawpaw in a cream than any
other brand. Your health &
wellness is really all that matters
care for it ... naturally
Complete Esscience -
a lifetime of naturally
healthy skin - Your complete
skincare partner...naturally
EJNC -uncover younger healthier
looking skin.
CHANNEL
STATEMENT
Soléo Organics is sold online,
in health stores and
Pharmacies.
PapayaActivs is sold in
Pharmacies and online.
Complete Esscience is sold
in Pharmacies & online.
Will be sold through department
stores and online also through
direct retail outlets.
PRICE
POSITIONING
Premium Natural and organic
segment.
Affordable mid-tier for a
therapeutic range.
Skincare /Hair care for the
entire family from children
to the elderly mid-tier pricing.
Top tier natural organic cosmetics.
BRAND
ESSCIENCE
Soléo Organics is a healthy
alternative to traditional
chemical sunscreens which is also
safe for our environment.
60% McArthur Pawpaw
Extract by far the strongest
Pawpaw cream on the market
(Lucas Pawpaw = 3.8% Pawpaw).
Healthy natural pawpaw
skincare creams that benefit
health & wellness.
Natural organic cosmetics that are
effective in rejuvenating and
revitalising the skin and are safe
for the environment.
SKIN ELEMENTS LIMITED ANNUAL REPORT 2019
7
For personal use only THE SCIENCE BEHIND SKNLIFE
Skin Elements is driven by a quest to
It is innovatively designed with a
provide the very best natural and
patented non-whitening (micronised)
organic skincare products to an
clear zinc, and uses zinc oxide as the
increasingly discerning market place.
active ingredient to provide broad
Core to achieving this is an unwavering
spectrum, UVA and UVB protection from
commitment to adopt the best science
the harsh rays of the sun, while providing
and technology available to ensure that
all natural moisturising care for the skin,
its products protect the skin and don’t
via botanical extracts and anti-oxidants.
harm the body or environment.
Soléo Organics forms a protective layer
To date the Company has invested in
on the skin so that both UVA rays, which
excess of $10 million over the past
are the leading cause of premature
10 years in developing its portfolio of
ageing of the skin, and UVB rays, the
skincare products, and has secured
leading cause of sunburn, are reflected
regulatory approval in key target
from the skin’s surface.
markets – including the US FDA, the TGA
in Australia, Health Canada and Japan
The product is also designed to be
Ministry of Health – and has won
environmentally friendly from its
multiple global awards as the number
packaging to its contents. The packaging
one sun care product.
material and container vessel are made
from 100% recyclable material, and the
The success of this research and
contents of Soléo Organics is 100% all
development program has seen Skin
natural and biodegradable.
Elements’ team of naturopaths and
formulating chemists deliver the
Similarly, Skin Elements has adopted a
breakthrough Soléo Organics sunscreen
natural approach to its pawpaw-based
product that not only provides a SPF30,
PapayaActivs and Complete Esscience
3-hour protection from both UVA
product ranges, which are the only
and UVB solar radiation but is made
products in this market segment with
entirely from only organic and natural
600mg/g (60%) of natural pawpaw
ingredients.
extract concentration. Pawpaw is rich
in vitamins A, C and E, minerals and
Soléo Organics is formulated according
enzymes and is acknowledged to have
to naturopathic principles and its key
traditional natural healing benefits.
ingredients have been specially selected
based on scientific research. It is totally
The PapayaActivs therapeutic creams are
free of synthetic preservatives, chemical
listed on the Australian Register of
UV absorbers, nano particles, titanium
Therapeutic Goods and contain high
dioxide, SLS and petroleum by-products.
concentrations of the active McArthur
8
SKIN ELEMENTS LIMITED ANNUAL REPORT 2019
For personal use only
Leo Fung (Chief Technical Advisor) working on new formulas at
the UWA labrator y facilities along with Bio tech master graduates
who form part of the training team that Skin Elements has
designed and instigated at the UWA
Pawpaw ExtractTM plus traditional
(UWA) biotechnology faculty.
herbal medicines such as chickweed,
Under this arrangement, UWA students
arnica, chamomile and aloe vera. The
have worked with the Company on its
Complete Esscience skincare range
product research and development
utilises the high level of enzymes and
programs and Skin Elements’ has
vitamins in the pawpaw extract to aid
implemented an intern program which
in exfoliating, cleansing, hydrating and
has helped mentor and develop UWA
revitalising the appearance of skin.
students, and provide them with
employment opportunities within the
Skin Elements’ ongoing commitment to
business.
research and development, which is
designed to deliver new and enhanced
This aim of this program is to help ensure
product formulations is a core pillar of the
Skin Elements remains at the forefront
business. Over the past three years it has
of applying the latest science and best
engaged in a collaborative arrangement
practice to it research and development
with the University of Western Australia’s
activities – so it can deliver the best
products to its customers.
SKIN ELEMENTS LIMITED ANNUAL REPORT 2019
9
For personal use only INTRODUCING SKNLIFE
The 2019 year represented a period
Consistent with the Company ’s ongoing
of ‘scale -up’ within the business. Key
focus on product development and the
tothis was the re -branding of the entire
desire to meet the needs of different
product range to position the Company ’s
market segments, it completed the
natural and organic skincare products to
development of three new formulations
best match their individual target market
for its flagship Soléo sunscreen range.
segments.
These were a coconut formulation for
the original 100% natural and organic
This process included the re -branding of
sunscreen and also the everyday
the McArthur Skincare papaya-based
formula, plus a face moisturising
products into two new natural skincare
formulation and a tinted moisturising
product ranges; the PapayaActivs
offering. The expanded Soléo sunscreen
therapeutic product range and the
product range now includes a total of 18
Complete Esscience skincare range. The
individual stock keeping units (or skus).
PapayaActivs range has six products
Also, production of the first five products
including arthritis, eczema and associated
from the Elizabeth Jane Natural
products and Complete Esscience offers a
Cosmetics range is now underway.
range of 16 skincare products.
With the Company ’s expanded
product range and product branding
now in place, the entire expanded
product range has been re -branded
Soléo Organics protecting you
and your family from the sun...naturally
Soléo Organics Creating a...
Complete Esscience your complete skincare partner...naturally
Your health & wellness is really all that matters, care for it...naturally.
Complete Esscience creating a...
PapayaActivs creating a...
Soléo Organics is totally free of synthetic chemicals. It is formulated
according to naturopathic principles, using only organic and all
natural ingredients which are packed with botanical extracts, natural
moisturisers, antioxidants and vitamins. Soléo Organics is free from
synthetic preservatives, chemical UV absorbers, nano particles,
enriching health + wellness naturally
titanium dioxide, SLS and petroleum by-products.
Visit www.soleoorganics.com
Soléo Organics natural science by
enhancing health + wellness naturally
Complete Esscience features the highest percentage of McArthur Pawpaw
ExtractTM in a cream - 5 x more pawpaw (papaya) than any other brand.
Our range of papaya based skincare moisturises, rejuvenates and smoothes
the skin and relieves redness. Our products are Australian owned and
enriching health + wellness naturally
manufactured, are not tested on animals, contain no petrochemicals,
sulphates or parabens and are suitable for the entire family from infants to
the elderly. Visit www.sknlife.com.au
Complete Esscience natural science by
c o m p l e t e
ESSCIENCE
P L E
T E ESSC
I
E
M
O
C
C
O
M
P
LETE E S
S
N
C
E
E
C
N
CIE
enhancing health + wellness naturally
PapayaActivs is the most powerfull papaya (pawpaw) cream
on the market. It has 5 x more papaya in a cream than
any other brand with 60% McArthur Pawpaw ExtractTM. It
contains active ingredients, chickweed, arnica, aloe vera and
enriching health + wellness naturally
chamomile traditionally used in herbal medicine to assist in
the relief of Psoriasis, Dermatitis & Rashes / Eczema / Arthritis
and Wounds & Burns.
PapayaAc tivs natural science by
*Always read the label. Use only as directed. If symptons persist see your healthcare professional.
enhancing health + wellness naturally
10
SKIN ELEMENTS LIMITED ANNUAL REPORT 2019
For personal use only
“Fantastic! Highly recommended. I had reser vations about buying a sunscreen
that was natural as I was worried it wouldn’t work. However, I have been
happily surprised.... a lovely peace of mind that my children (and us parents!)
have protection from the sun without the product we are putting on being
harmful to our health. We will definately be back for more after we run out.”
Shannon N (Soléo advocate)
under the ‘SKNLife’ banner. Under the
SKNLife banner, the Company plans
to deliver sales into global markets via
existing distributors, its new SKNLife
on-line store to be launched soon (with a
separate dedicated SKNLife on-line store
to be launched in the North American
market) and other major distribution
agreements it is pursuing.
Developing the SKNLife on-line store
A key component of the Company ’s sales
and distribution strategy is its ability to
maximise the impact and sales from its
e -commerce channel. It has identified the
opportunity to refine and enhance its on-
line sales offering to better reflect and
market the entire SKNLife product range
as one that has the potential to drive
very significant sales growth.
Plans to implement this strategy are well
advanced, and will involve rationalising
the existing Soléo Organics sunscreen
website and McArthur sales website into
the SKNLife on-line store, which will be
a new fully functional on-line shopping
and market place for the entire range of
SKNLife skincare products.
The SKNLife on-line store will be rolled
out and be accessible for the global
online market. In the massive US market,
the Company is in discussions with a
major online retailer and plans to launch
a separate, dedicated North
American-focused SKNLife on-line store
in the year ahead.
enhancing health + wellness naturally
enhancing health + wellness naturally
Natural Parent Issue 35 Full Page Winter ad 22/05/19 Outlines.indd 1
23/5/19 4:33 pm
Natural Parent #34 full page 8/3/19 outlines 1
8/3/19 9:19 am
enriching health + wellness naturally
SKIN ELEMENTS LIMITED ANNUAL REPORT 2019
11
For personal use only
KEY OFFICER S OF THE COMPANY
Mr Peter Malone
Executive Chairman
Mr Malone has over 30 years’
experience in global financial
markets and has been responsible
for raising AUD$100m+ for
technology development
companies. He has a proven track
record in developing and managing
technology development programs,
from idea stage to reality. Previous
CEO to listed companies, he has a
Masters degree from UWA and has
taught and consulted in Australia,
USA, Europe and Asia in business
and management. Mr Malone
is responsible for the strategic
direction of the Company and is
its Managing Director and Chief
Executive Officer of the Company.
Mr Phil Giglia
Independent
Non-Executive Director
Mr Giglia joined the Skin Elements’
board in November 2017. Mr
Giglia is a Chartered Accountant
with more than 25 years’ experience
in senior roles, with a strong depth
of expertise in the small to medium
enterprise sector. Mr Giglia worked
for leading global accountancy firm
Price Waterhouse Coopers from
1985 to 1991. He is the founder
and principal of Perth accountancy
practice, Giglia & Associates, and
is also a director of Global Marine
Enclosures Pty Ltd. Mr Giglia has a
Bachelor of Business (with Distinction)
from the Western Australian Institute
of Technology, and is a Member of
the Institute of Chartered Accountants
in Australia and New Zealand.
Mr Craig Piercy
Company Secretary & CFO
Mr Piercy has over 25 years’
experience in corporate, accounting
and finance. He has worked
extensively in development of
technology ventures into successful
commercial businesses. Mr Piercy
is a member of the Institute of
Chartered Accountants, and he has
been previously responsible for
listing and ongoing management of
public companies in Australia and
the USA.
12
SKIN ELEMENTS LIMITED ANNUAL REPORT 2019
For personal use only F I N A N C I A L C O N T E N T S
14
30
Directors’ Report
Auditor’s Independence Declaration
31
Consolidated Statement of Profit or Loss and Other Comprehensive Income
32
Consolidated Statement of Financial Position
33
Consolidated Statement of Cash Flows
34
Consolidated Statement of Changes in Equity
35
Notes to the Consolidated Annual Report
62
63
66
Directors’ Declaration
Independent Auditor’s Report
Additional Information
SKIN ELEMENTS LIMITED ANNUAL REPORT 2019
13
For personal use only Your directors submit the annual report of the consolidated entity consisting of Skin Elements Limited (the
Company, Group or SEL) and the entity it controlled during the financial year ended 30 June 2019. In order to
comply with the provisions of the Corporations Act 2001, the directors’ report as follows:
DIRECTORS
The names of directors who held office during or since the end of the year and until the date of this report are as
follows. Directors were in office for this entire period unless otherwise stated.
Mr Peter Francis Malone B.Arch MBA
Executive Chairman – Appointed: 4 September 2015
Mr Malone has over 30 years experience as Chief Executive Officer (CEO) of technology programs and listed
companies and holds a Masters in Business Administration from the University of Western Australia. He has
been the CEO of the Skin Elements program since inception in 2005.
Mr Malone holds an interest in the following securities in the Company at the date of this report:
Number of fully paid
ordinary shares
Convertible notes – converting
one year from the date of issue
at $0.15 per share
Listed Options over ordinary shares
Exercisable at $0.10 on or
before 31 Dec 2020
15,196,172
66,351
11,397,128
Mr Luke John Martino B.Com FCA FAICD
Non-Executive Director – Appointed: 4 September 2015
Mr Martino has over 20 years senior leadership experience in major Australian accounting firms. He is a former
non-executive director of Pan Asia Corporation Limited (ASX: PZC), and the current non-executive chairman
of Jador Lithium Limited (JDR). Mr Martino also holds the position of Company Secretary for South East Asia
Resources Limited (ASX: SXI).
Mr Martino holds an interest in the following securities in the Company at the date of this report:
Number of fully paid
ordinary shares
Convertible notes – converting
one year from the date of issue
at $0.15 per share
Listed Options over ordinary shares
Exercisable at $0.10 on or
before 31 Dec 2020
3,050,00
175,431
1,468,750
Mr Filippo (Phil) Giglia B.Bus (Dist.) CA
Non-Executive Director – Appointed: 22 November 2017
Chairman of the Audit Committee, Remuneration Committee and Nomination Committee
Mr Giglia is a Chartered Accountant with more than 30 years experience in the accounting profession, with
a strong depth of accounting and taxation expertise in the small to medium enterprise sector. He is also a
Registered Tax Agent and Company Auditor.
Mr Giglia holds an interest in the following securities in the Company at the date of this report:
Number of fully paid
ordinary shares
Convertible notes – converting
one year from the date of issue
at $0.15 per share
Listed Options over ordinary shares
Exercisable at $0.10 on or
before 31 Dec 2020
2,217,469
9,767
323,397
14
DIRECTORS’ REPORTSKIN ELEMENTS LIMITED | ANNUAL REPORT 2019For personal use only
Mr Zeling Li
Non-Executive Director – Appointed: 3 May 2019
Mr Li is a qualified lawyer in the People’s Republic of China. In 2006 he established the Beijing Yishoujin
Biotechnology Development Co Ltd specialising in research and development and sales in the health
products sector.
Mr Li holds an interest in the following securities in the Company at the date of this report:
Number of fully paid
ordinary shares
0
Listed Options over ordinary shares
Exercisable at $0.10 on or before 31 Dec 2020
0
Ms Jialin Li
Non-Executive Director – Appointed: 3 May 2019
Ms Li is a graduate of the Henan University of Economics and Law in 1999 with a career as a journalist and editor
in the media sector in China. She has recently founded Henan Zhibai Biotechnology Co Ltd which focuses on the
research and development and production of cosmetics and skincare products.
Ms Li holds an interest in the following securities in the Company at the date of this report:
Number of fully paid
ordinary shares
0
Listed Options over ordinary shares
Exercisable at $0.10 on or before 31 Dec 2020
0
Mr Craig Leslie Piercy B.Bus CA
Company Secretary – Appointed: 4 September 2015
Mr Piercy is a Chartered Accountant with over 25 years experience in corporate accounting, finance and compliance.
He has been the Company Secretary and CFO of the Skin Elements program since inception in 2005.
Mr Piercy holds interest in the following securities in the Company as at the date of this report:
Number of fully paid
ordinary shares
Convertible notes – converting
one year from the date of issue
at $0.15 per share
Listed Options over ordinary shares
Exercisable at $0.10 on or
before 31 Dec 2020
6,855,488
39,811
5,141,608
15
DIRECTORS’ REPORT (CONTINUED)SKIN ELEMENTS LIMITED | ANNUAL REPORT 2019For personal use only PRINCIPAL ACTIVITIES
During the year ended 30 June 2019, the principal continuing activity of the Group consisted of the development
and commercialisation of its proprietary all natural skincare technology.
REVIEW OF OPERATIONS
Over the 2019 financial year, Skin Elements Limited has continued to execute its business plan and growth
strategy to position itself as a leading global supplier of natural and organic skin care products.
The key highlights for the year include:
(i) Focus on the the development of the brand extension and increased scale manufacture and distribution
of the Soléo Organics sunscreen, PapayaActivs Therapeutics and Complete Esscience skincare product
ranges and the reintroduction of the Elizabeth Jane Natural Cosmetics product range with a view to
achieving a market launch in 2020.
(ii) Sales income of $798,107 through existing online sales channels, wholesaler and distributor networks
including health and lifestyles sectors in Australia, New Zealand, Japan, United States of America,
Hong Kong, Indonesia and European Union and entry into new international sectors including China.
(iii) Cash and non-cash expenses of $3,014,993 (a decrease from $3,623,683 in 2018) as a result of
completion of the integration of the MacArthur business and focus on the brand extension and increased
product scale manufacture and distribution.
(iv) Other non-cash expenses include amortisation of the Soleo Organics, McArthur Skincare and Elizabeth
Jane Natural Cosmetics intangible assets of $390,794, and share based payments on performance rights
of $96,833.
(v) Research and Development Tax rebate of $689,976 income at 30 June 2019 (2018: $450,255).
(vi) A net loss for the year ended 30 June 2019 of $1,967,761 (2018: $2,728,114).
(vii) On 8 August 2018 the Company completed a capital raising of $1,075,663 through a fully underwritten non
renounceable entitlement offer to existing shareholders.
(viii) On 4 October the Company raised $363,800 through placement of 13,954,717 ordinary fully paid shares
and 3,488,679 attaching free options exercisable at $0.10 on or before 31 December 2020.
(ix) On 25 March 2019 Skin Elements announced the execution of a binding term sheet with Henan Huatoa
Health Management Co Ltd (HHHM) for a proposed sales and distribution agreement for at last $20 million
of new sales for its skin care product range into the Chinese skincare market together with proposed $2.4
million strategic investment. The completion of these transactions is subject to completion of various
conditions precedent including the negotiation of long form agreements and shareholder approvals. As at
the date of this report, the Company has received $200,000 of the strategic investment under a convertible
note and $300,000 in sales orders for product, and has not yet finalised long form agreements or obtained
shareholder approvals.
(x) On 3 May the Company raised $140,000 through placement of 7,000,000 ordinary fully paid shares.
(xi) On 14 June the Company raised $311,675 through placement of 11,131,250 ordinary fully paid shares
and 5,565,625 attaching free options exercisable at $0.10 on or before 31 December 2020. $198,000 was
received and 7,071,412 shares were issued at 30 June 2019. The remaining was completed in July and
August 2019.
16
DIRECTORS’ REPORT (CONTINUED)SKIN ELEMENTS LIMITED | ANNUAL REPORT 2019For personal use only RESULTS
Results for the Year
The Company incurred a loss of $1,967,761 after income tax for the year (2018: loss $2,728,114).
Skin Elements delivered progress in the sales and distribution of its Soleo Organics product range during the
year. Revenues from all product sales for the year ending 30 June 2019 were $798,107 (2018: $838,292).
Sales for the Soléo Organics sunscreen included China, Japan, Slovenia, Hong Kong and Australia, and in
the US, via online retailer Amazon - and the Company will continue to work to expand its sales and distribution
footprint for its entire product range in the year ahead.
The 2019 results include cash expenses of $2,527,365 (a decrease from $3,321,706 in 2018) as a result of the
completion of the integration of the MacArthur business and expansion of the Company’s product ranges, made
up of $899,672 in direct product development, $643,257 in administration expenditure, $297,175 in corporate
expenditure, and $587,534 in contracting and consulting fees.
Non-cash expenses include an amount for amortisation of the Soléo Organics, McArthur Skincare and
Elizabeth Jane Natural Cosmetics intangibles of $390,794, and share based payments on performance rights
at fair value of $96,833.
Financial position
The Company financial statements show the following key movements in the group’s assets and liabilities over
the two periods:
(i) Decrease in cash assets by $0.079m to $0.116m (2018: $0.195m);
(ii) Decrease in trade receivables by $0.020m to $0.016m (2018: $0.036m);
(iii) Decrease in trade and other payables by $0.302m to $0.508m (2018: $0.810m);
(iv) Increase in R&D Tax receivables by $0.119m to $0.649m (2018: $0.450m);
(v) Decrease in non-current assets by $0.385m to $8.995m (2018: $9.380m);
At 30 June 2019 the Consolidated Group had a working capital position of $0.201m (2018: $0.109m).
DIVIDENDS
During the financial year the Company did not pay a dividend (2018: nil).
RISK MANAGEMENT
The Board of Directors takes a pro-active approach to risk management. The Board is ultimately responsible
for ensuring that risks and also opportunities are identified on a timely basis and the Group’s objectives and
activities are aligned with the risks and opportunities identified by the Board.
The Board has established an Audit & Risk Committee that operates under a charter approved by the Board.
The purpose of the Audit & Risk Committee is to assist the Board in fulfilling its corporate governance,
oversight, risk management and compliance practices responsibilities.
ENVIRONMENT REGULATIONS
The Group’s operations are not regulated by any environment regulations including the National Greenhouse
and Energy Reporting Act 2007.
17
DIRECTORS’ REPORT (CONTINUED)SKIN ELEMENTS LIMITED | ANNUAL REPORT 2019For personal use only ISSUE OF SHARES OPTIONS AND NOTES
During the year, Skin Elements Limited had the following changes in its capital structure:
(i) On 8 August 2018 the Company completed a fully underwritten non-renounceable rights issue for
43,026,519 ordinary fully paid shares and 10,756,630 free attaching options (exp 31/12/20: $0.10) raising
$1,075,662 in cash.
(ii) On 4 October the Company completed a placement through the issue of 13,954,717 ordinary fully paid
shares and 3,488,679 free attaching options (exp 31/12/20: $0.10) raising $363,800 in cash.
(iii) On 4 October 2018 the Company issued 873,353 ordinary fully paid shares to an external consultant for
project services rendered for a fair value of $29,694.
(iv) On 7 December 2018 the Company issued 425,000 shares to an associate of a director for services
rendered for a fair value of $8,500.
(v) 38,775,000 Listed Options expired on 31 October 2018 and 27,500,000 Unlisted Options expired on
30 November 2018. On 24 December 2018, the Company issued 61,801,381 new loyalty options (exp
31/12/20: $0.10) on entitlement prorata basis for nil consideration.
(vi) On 3 May 2019 the Company issued 7,000,000 ordinary fully paid shares raising $140,000.
(vii) On 14 June 2019 the Company issued 11,131,250 ordinary fully paid shares and 5,565,625 free attaching
options (exp 31/12/20: $0.10 raising $311,675 in cash. $198,000 was received and 7,071,412 shares were
issued at 30 June 2019. The remaining was completed in July and August 2019.
SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
The significant changes in the capital structure of the Company during the year is detailed above.
In the opinion of the Directors, there were no other significant changes in the state of affairs of the Group that
occurred during the year not otherwise disclosed in this report and the financial statements.
LIKELY DEVELOPMENTS AND EXPECTED RESULTS OF OPERATIONS
Likely developments in the operations, business strategies and prospects of the Group include:
Continued expansion of the Groups’ natural skincare products offering including developing additional products in
established brands Soleo Organics suncare, PapayaActivs and Complete Esscience pawpaw based therapeutic
skincare, launch of its Elizabeth Jane Natural Cosmetics (EJNC) organic skincare range, and acquiring or
developing additional brands in the natural and organic skincare space.
Growth in sales revenue of these products through development and support of existing wholesale and distributor
sales networks, development and management of online and social media programs, and expansion from
Australia into international markets.
As detailed in the Review of Operations above, on 25 March 2019 Skin Elements announced the execution of a
binding term sheet with Henan Huatoa Health Management Co Ltd (HHHM) for a proposed sales and distribution
agreement for at least $20 million of new sales for its skin care product range into the Chinese skincare market
together with proposed $2.4 million strategic investment. The completion of these transactions is subject to
completion of various conditions precedent including the negotiation of long form agreements and shareholder
approvals. The parties are continuing to work together to finalize the long form agreements, obtain shareholder
and other necessary regulatory approvals and the other conditions precedent so that the proposed sales and
distribution agreement and strategic investment can proceed as envisaged.
18
DIRECTORS’ REPORT (CONTINUED)SKIN ELEMENTS LIMITED | ANNUAL REPORT 2019For personal use only
REMUNERATION REPORT (AUDITED)
This report outlines the remuneration arrangements in place for the key management personnel of Skin Elements
Limited (the “Company” or ”Group” or individually “SEL”) for the financial year ended 30 June 2019 and
comparatives for the year ended 30 June 2018. The information provided in this remuneration report has been
audited as required by Section 308(3C) of the Corporations Act 2001.
The remuneration report details the remuneration arrangements for key management personnel (“KMP”) who
are defined as those persons having authority and responsibility for planning, directing and controlling the major
activities of the Company and the Group, directly or indirectly, including any director (whether executive or
otherwise) of the Company.
No remuneration consultants were used during the year.
The following table shows the gross revenue, profits/losses and share price of the Group at the end of the
respective financial years.
Revenue from continuing operations
Net loss
Share Price
Key Management Personnel
2019
Consolidated
30 Jun 2019
Consolidated
30 Jun 2018
$
$
$798,107
$838,292
($1,967,761)
($2,728,114)
$0.025
$0.027
(i) Directors
Peter Malone
Luke Martino
Filippo (Phil) Giglia
Zeling Li
Jialin Li
(ii) Executives
Craig Piercy
Leo Fung
2018
(i) Directors
Peter Malone
Luke Martino
Filippo (Phil) Giglia
David Humann
(ii) Executives
Craig Piercy
Leo Fung
Executive Chairman
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
appointed 4 September 2015
appointed 4 September 2015
appointed 22 November 2017
appointed 3 May 2019
appointed 3 May 2019
Chief Financial Officer
Company Secretary
Chief Technical Advisor
appointed 1 January 2017
appointed 4 September 2015
appointed 1 January 2017
Executive Chairman
Non-Executive Director
Non-Executive Director
Non-Executive Director
appointed SEO March 2005
appointed 4 September 2015
appointed 22 November 2017
appointed 4 September 2017 - died 20 November 2017
Company Secretary
Chief Technical Advisor
appointed SEO March 2005
appointed SEO March 2005
19
DIRECTORS’ REPORT (CONTINUED)SKIN ELEMENTS LIMITED | ANNUAL REPORT 2019For personal use only REMUNERATION REPORT (cont’d)
Remuneration Philosophy
The Board of Directors has established a Nomination and Remuneration Committee. The Committee shall provide
assistance to the Board in fulfilling its corporate governance and oversight responsibilities, however, ultimate
responsibility for the Company’s nomination and remuneration practices remains with the Board. The main
functions and responsibilities of the Committee include the following:
•
•
•
•
•
•
•
•
assisting the Board in examining the selection and appointment practices of the Company;
ensuring remuneration arrangements are equitable and transparent and enable the Company to attract and
retain executives and directors (executive and non-executive) who will create sustainable value for members
and other stakeholders;
ensuring the Board is of an effective composition, size and commitment to adequately discharge its
responsibilities and duties;
reviewing Board succession plans and Board renewal;
reviewing the processes for evaluating the performance of the Board, its committees and individual directors
and ensuring that a fair and responsible reward is provided to executives and directors having regard to their
performance evaluation;
reviewing levels of diversity within the Company and Board and reporting on achievements pursuant to any
diversity policy developed by the Board;
reviewing the Company’s remuneration, recruitment, retention and termination policies for the Board and
senior executives; and
complying with all relevant legislation and regulations including the ASX Listing Rules and Corporations Act
2001 (Cth).
The Group’s policy for determining the nature and amount of remuneration of board members and senior
executives is as follows:
(i) Non-Executive Directors
The remuneration of non-executive Directors will be determined by the Board having regard to the Remuneration
Committee’s recommendations and evaluation of each individual director’s contribution to the Board.
The maximum aggregate annual remuneration of non-executive directors is subject to approval by the shareholders
in general meeting in accordance with the Company’s Constitution, the ASX Listing Rules and the Corporations
Act 2001(Cth). The current maximum aggregate remuneration amount to non-executive directors approved by
shareholders under the Constitution is $500,000 per year. The directors have resolved that fees payable to non-
executive directors for Board activities are $24,000 per year with an additional fee of $2,000 per year payable to the
Chairman of the Audit and Risk Committee and the Nomination and Remuneration Committee.
(ii) Key management personnel
The Company’s remuneration policy reflects the Company’s obligation to align executive remuneration with shareholders’
interests and to engage appropriately qualified executive talent for the benefit of the Company. In particular, reward
should reflect the competitive global market in which the Company operates, individual reward should be linked to
performance criteria, and should reward both financial and non-financial performance of the executive.
The Board of Directors and the Nomination & Remuneration Committee are in the process of assessing and
implementing the Company’s executive reward framework to ensure reward for performance is competitive and
appropriate for the results delivered.
The Company has in place an Equity Incentive Plan to provide Performance Rights, Options, or Restricted Shares
to directors, employees or contractor of the Company. For the year ended 30 June 2019 other than as set out in the
share based payments – Employee Incentive Plan all executive remuneration is set at base level fixed amounts at
commensurate market rates or lower. The Employee Incentive Plan aligns shareholder and stakeholder values with
executives as the hurdles embedded in the incentive plans include target share price milestones which are typically
set at prices above the current share price at the date of issue and expire within a defined timeframe.
20
DIRECTORS’ REPORT (CONTINUED)SKIN ELEMENTS LIMITED | ANNUAL REPORT 2019For personal use only REMUNERATION REPORT (cont’d)
Directors of SEL
Peter Malone (appointed 4 September 2015)
Luke Martino (appointed 4 September 2015)
Filippo (Phil) Giglia (appointed 22 November 2017)
David Humann (ceased 20 November 2017)
Zeling Li (appointed 3 May 2019)
Jialin Li (appointed 3 May 2019)
Executives of SEL
Craig Piercy
Leo Fung
Service agreements
Fixed Remuneration
At risk - STI
2019
2018
2019
2018
73%
75%
100%
100%
-
-
100%
100%
83%
87%
100%
100%
-
-
100%
100%
27%
25%
17%
13%
-
-
-
-
-
-
-
-
-
-
-
-
Remuneration and terms of employment for other key management personnel are formalised in consultancy and
employment agreements. The major provisions relating to remuneration to existing directors are set out below.
Executive agreements
Peter Malone, Executive Chairman
The Company has entered into a consultancy agreement with Boston Technology Management Pty Ltd
(Boston Consultancy Agreement) to provide services to the Group. Mr Peter Malone will be engaged by
Boston Technology Management Pty Ltd to act as the Executive Chairman of the Group. Boston Technology
Management Pty Ltd will be paid a consulting fee of A$20,000 (plus GST) per month for at least 100 hours of
service per month and will also be reimbursed for reasonable expenses incurred in the performance of its duties.
The Boston Consultancy Agreement continues for a period of 2 years from 1 January 2017, with the option
to extend the term by mutual written agreement of the parties. The Boston Consultancy Agreement contains
standard termination provisions under which the Company must give 3 months written notice of termination (or
shorter period in the event of a material breach) or alternatively payment in lieu of service. At the end of the notice
period the Company must pay to Boston Technology Management Pty Ltd an amount equal to the consulting
fee that would otherwise be payable to Boston Technology Management Pty Ltd over the 3 month period if the
engagement had not been terminated.
Craig Piercy, CFO / Company Secretary
The Company has entered into a consultancy agreement with Boston Technology Management Pty Ltd (Boston
Consultancy Agreement) to provide services to the Group. Mr Craig Piercy will be engaged by Boston Technology
Management Pty Ltd to act as the Company Secretary and Chief Financial Officer of the Group. Boston Technology
Management Pty Ltd will be paid a consulting fee of A$13,000 (plus GST) per month for at least 100 hours of service
per month and will also be reimbursed for reasonable expenses incurred in the performance of its duties.
The Boston Consultancy Agreement continues for a period of 2 years from 1 January 2017, with the option to
extend the term by mutual written agreement of the parties. The Boston Consultancy Agreement contains standard
termination provisions under which the Company must give 3 months written notice of termination (or shorter period
in the event of a material breach) or alternatively payment in lieu of service. At the end of the notice period the
Company must pay to Boston Technology Management Pty Ltd an amount equal to the consulting fee that would
otherwise be payable to Boston Technology Management Pty Ltd over the 3 month period if the engagement had
not been terminated. These amounts have been included in the remuneration report below.
21
DIRECTORS’ REPORT (CONTINUED)SKIN ELEMENTS LIMITED | ANNUAL REPORT 2019For personal use only REMUNERATION REPORT (cont’d)
Service agreements (cont’d)
Leo Fung, Chief Technical Advisor
The Company has entered into a consultancy agreement with Blackridge Group Pty Ltd (Blackridge Consultancy
Agreement) to provide services to the Group. Mr Leo Fung will be engaged by Blackridge Group Pty Ltd to act
as the Chief Technical Advisor of the Group. Blackridge Group Pty Ltd will be paid a consulting fee of A$13,000
(plus GST) per month for at least 100 hours of service per month and will also be reimbursed for reasonable
expenses incurred in the performance of its duties.
The Blackridge Consultancy Agreement continues for a period of 2 years from 1 February 2017, with the option
to extend the term by mutual written agreement of the parties. The Blackridge Consultancy Agreement contains
standard termination provisions under which the Company must give 3 months written notice of termination (or shorter
period in the event of a material breach) or alternatively payment in lieu of service. At the end of the notice period
the Company must pay to Blackridge Group Pty Ltd an amount equal to the consulting fee that would otherwise be
payable to Blackridge Group Pty Ltd over the 3 month period if the engagement had not been terminated.
Non-executives
The non-executive directors’ appointments are on the following basis:
Luke Martino – Non-Executive Director
The Company has entered into an agreement with LJM Capital Corporation Pty Ltd (Martino Agreement). Mr Martino
is engaged by LJM Capital Corporation Pty Ltd to provide non-executive director services to the Company. LJM
Capital Corporation Pty Ltd will be paid a fee of A$24,000 (plus GST) per annum. Mr Martino will also be reimbursed
for reasonable expenses incurred in the performance of his duties as a non-executive Director of the Company.
Filippo (Phil) Giglia – Non-Executive Director
The Company has entered into an agreement with Colosseum Securities Pty Ltd (Giglia Agreement). Mr Giglia is
engaged by Colosseum Securities Pty Ltd to provide non-executive director services to the Company. Colosseum
Securities Pty Ltd will be paid a fee of A$24,000 (plus GST) per annum and $2,000 (plus GST) per annum as
Chairman of the Audit Committee, Remuneration Committee and Nomination Committee. Mr Giglia will also be
reimbursed for reasonable expenses incurred in the performance of his duties as a non-executive Director of the
Company.
Zeling Li – Non-Executive Director
The Company has appointed Mr Li to the Board of Directors on 3 May 2019 pursuant to the Term Sheet with HHHM
dated 25 March 2019. Mr Li’s appointment has not yet been ratified by shareholders and the Company has not yet
entered into any agreement with regard to fee for director services to the Company.
Jialin Li – Non-Executive Director
The Company has appointed Ms Li to the Board of Directors on 3 May 2019 pursuant to the Term Sheet with HHHM
dated 25 March 2019. Ms Li’s appointment has not yet been ratified by shareholders and the Company has not yet
entered into any agreement with regard to fee for director services to the Company.
22
DIRECTORS’ REPORT (CONTINUED)SKIN ELEMENTS LIMITED | ANNUAL REPORT 2019For personal use only REMUNERATION REPORT (cont’d)
Details of remuneration 2018/19
Details of the remuneration of the key management personnel of the Group are set out in the following tables.
Cash Salary &
fees (excl. GST)
Non-cash
benefits
Super-
annuation
Share-based
payments
$
$
$
$
Total
$
Directors
Peter Malone1
Luke Martino2
Filippo (Phil) Giglia3
Zeling Li4
Jialin Li5
Executives of SEL
Craig Piercy6
Leo Fung7
240,000
27,000
29,000
-
-
156,000
156,000
608,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
88,030
8,803
-
-
-
-
-
96,833
328,030
35,803
29,000
-
-
156,000
156,000
704,833
1 Peter Malone, fees paid to Boston Technology Management Pty Ltd.
2 Luke Martino, fees paid to LJM Capital Corporation Pty Ltd, agreement commenced on 1 January 2017. He agreed to a fee reduction from his
original contract in FY19 to allow for further reinvestment of funds into the Company for research and development purposes.
3 Filippo (Phil) Giglia, fees paid to Colosseum Securities Pty Ltd, agreement commenced on 22 November 2017. He agreed to a fee reduction
from his original contract in FY19 to allow for further reinvestment of funds into the Company for research and development purposes
4 Zeling Li was appointed on 3 May 2019.
5
Jialin Li was appointed on 3 May 2019
6 Craig Piercy, fees paid to Boston Technology Management Pty Ltd.
7 Leo Fung, the above fees paid to Blackridge Group Pty Ltd who engage Leo Fung, refer to the service agreement section for details of the
changes for the period.
Details of remuneration in the prior period 2017
Directors
Peter Malone1
Luke Martino2
Filippo (Phil) Giglia3
David Humann4
Executives of SEL
Craig Piercy5
Leo Fung6
Cash Salary &
fees
Non-cash
benefits
Super-
annuation
Share-based
payments
$
$
$
$
Total
$
240,000
60,000
36,500
33,333
156,000
156,000
681,833
-
-
-
-
-
-
-
-
-
-
-
-
-
-
51,130
5,113
-
-
-
-
56,243
291,130
65,113
36,500
33,333
156,000
156,000
738,276
1 Peter Malone, fees paid to Empire Services Pty Ltd and Boston Corporate Pty Ltd, refer to the service agreement section for details of the
changes for the periods pre and the Company post listing on ASX.
2 Luke Martino, fees paid to LJM Capital Corporation Pty Ltd, agreement commenced on 1 January 2017.
3 Filippo (Phil) Giglia, fees paid to Colosseum Securities Pty Ltd, agreement commenced on 22 November 2017.
4 David Humann, fees paid to James Anne Holdings Pty Ltd, agreement commenced on 1 January 2017. Mr Humann died on 20 November 2017.
5 Craig Piercy, fees paid to Equities Services Pty Ltd and Boston Corporate Pty Ltd, refer to the service agreement section for details of the
changes for the periods pre and post the Company listing on ASX.
6 Leo Fung, the above fees paid to Blackridge Group Pty Ltd and Essential Property Pty Ltd who engage Leo Fung, refer to the service
agreement section for details of the changes for the periods pre and post the Company listing on ASX.
23
DIRECTORS’ REPORT (CONTINUED)SKIN ELEMENTS LIMITED | ANNUAL REPORT 2019For personal use only
REMUNERATION REPORT (cont’d)
Termination benefits
No termination benefits are payable to executive or non-executive directors.
Share-based compensation – Employee Incentive Plan
The Company has established an Employee Incentive Plan (EIP) to assist in the motivation, retention and reward
of senior management and other employees. The EIP is designed to align the interest of senior management and
other employees with the interest of Shareholders by providing an opportunity for the participants to receive an
equity interest in the Company. The securities issued under the Employee Incentive Plan currently do not include
individual performance conditions for the recipients, instead, the milestones hurdles for these securities include
share price targets which align all shareholder and stakeholder interests with the executives.
During the year up to the date of this report the Company did not issue any new EIP securities and has on issue
the following EIP securities:
Type of
rights
Number of
rights at
the start of
the year
Value of
rights at
grant date*
$
Number
of rights
vested
during the
year
Value of
rights at
vesting
date*
$
Number
of rights
lapsed
during the
year
Value at
lapse date
$
Directors of Skin Elements Limited
Peter Malone
Peter Malone
Luke Martino
Luke Martino
Tranche A
2,000,000
100,000
Tranche B
2,000,000
Tranche A
200,000
Tranche B
200,000
64,000
10,000
6,400
-
-
-
-
-
-
-
-
2,000,000
100,000
-
-
200,000
10,000
-
-
* The value at grant date calculated in accordance with AASB2 Share-based payment of rights granted during the year as part of remuneration.
These have been valued based on the share price on the grant date of the performance rights. No adjustment has been made for the value of
rights which lapsed during the year.
The rights have the following performance hurdles, Tranche A, 5 Day VWAP of more than $0.34, Tranche B. 5
Day VWAP of more than $0.51 per share.
The assessed fair value at grant date of rights granted to the individual is allocated equally over the period from
grant date to vesting date, and the amount is included in the remuneration tables above.
The fair value of the rights has been determined as $0.05 to $0.032 per right. The Company used a Monte Carlo
simulation model to value the rights with the following inputs:
Particulars
Consideration
Grant date
Expiry date
Share price
Expected volatility
Dividend yield
Risk free rate
Terms
Nil
30 November 2017
30 June 2019 (Tranche A) and 30 June 2020 (Tranche B)
$0.177
40%
0%
1.75% (Tranche A) and 1.89% (Tranche B)
24
DIRECTORS’ REPORT (CONTINUED)SKIN ELEMENTS LIMITED | ANNUAL REPORT 2019For personal use only REMUNERATION REPORT (cont’d)
Transaction with KMP’s
The Group had the following related party transactions with the key management personnel during the year:
Other Transactions with Key Management Personnel
Boston Technology Management Pty Ltd (a company of which Mr Piercy is a
director) provided office facilities on monthly rental basis at commercial rates.
Indian Ocean Advisory Group (a company associated with Mr Martino), provided
professional accounting and corporate advisory services. The services are at
commercial arms-length hourly rates.
2019
$
2018
$
-
20,909
79,038
217,075
Loans to / from KMP’s
The following information relates to the loans provided by associates of key management personnel during the
previous year 2017/18.
Movement in the loan balance are presented below:
Balance at the
start of the year
1/7/2017
$
18,711
10,988
14,502
44,201
Amount
borrowed
Amounts
extinguished
$
31,212
16,807
14,643
62,662
$
(49,923)
(27,795)
(29,145)
(106,863)
Closing
balance
30/6/2018
$
-
-
-
-
Boston Corporate Pty Ltd
Boston Corporate Pty Ltd
Essential Property Pty Ltd
The terms of the loans are as follows:
Particulars
Principal
Interest rate
Period
Repayment
Security
Terms
No fixed amount, funding provided when needed.
0%
No fixed term.
On commencement of listing, at the Company’s discretion and subject to available funds.
The borrowing is unsecured and there are no covenants in place for the loan.
The total benefit to directors and executives is $106,863. These balances due under these loans result from the
provision of consulting services unpaid during the period.
25
DIRECTORS’ REPORT (CONTINUED)SKIN ELEMENTS LIMITED | ANNUAL REPORT 2019For personal use only
REMUNERATION REPORT (cont’d)
Convertible notes
The Company entered into arrangements to extinguish the related party borrowings in exchange for convertible
notes on the same terms and conditions as the third party convertible notes issued during the period December
2017 to March 2018.
Boston Corporate Pty Ltd
LJM Capital Corporation PL
Colosseum Securities Pty Ltd
Essential Property Pty Ltd
Balance at the
start of the year
1/7/2017
$
Amount of
notes issued
$
Amounts
extinguished
$
Closing
balance
30/6/2018
$
Fair Value
$
-
-
-
-
77,718
60,500
7,150
29,145
174,513
-
-
-
-
77,718
60,500
7,150
29,145
106,162
82,644
9,767
39,812
174,513
238,385
There is no movement of above convertible notes in current financial year.
The terms of the convertible notes are set out below:
Particulars
Principal
Interest rate
Period
Repayment
Security
Fair value
Terms
Face value of the consideration provided.
10%
1 year
Convertible at any time during the year and automatically after one year.
The borrowing is unsecured and there are no covenants in place for the notes.
The loans were extinguished by issuing convertible notes. The Company has fair valued the securities issued
to extinguish the loans. These include a share at $0.15 in addition to the note holder receiving an option
exercisable at $0.10 on or before 31 December 2020. The instruments have been values as follows:
Particulars
Share
Terms
Share price at date of issue $0.15
Option – Exercise price
$0.10
Option – Grant date
31 January 2018
Option – Expiry date
31 December 2020
Option – Expected volatility
86.81%
Option – Dividend yield
Option – Risk free rate
0%
1.77%
26
DIRECTORS’ REPORT (CONTINUED)SKIN ELEMENTS LIMITED | ANNUAL REPORT 2019For personal use only
Interest in Securities
The number of securities in the Company held during the financial year by each director and other members of
key management personnel of the Group including their personally related parties, is set out below:
Balance at
beginning
of year or
appointment
date
10,130,781
5,065,390
5,065,390
4,000,000
66,350
Directors
Peter Malone
-
-
-
-
-
Ordinary shares
Options
Unlisted options
Performance rights
Convertible notes
Luke Martino
Ordinary shares
1,250,000
-
-
-
-
-
Options
Unlisted options
Performance rights
Convertible notes
Filippo (Phil) Giglia
-
-
-
-
Ordinary shares
Options
Unlisted options
Convertible notes
Zeling Li
-
-
Ordinary shares
Options
Jialin Li
-
-
Ordinary shares
Options
Executives of SEL
Craig Piercy
-
-
-
-
Ordinary shares
Options
Unlisted options
Convertible notes
Issued on
exercise of
options
Other
changes*
New
Issues
Balance at
end of year
or date of
resignation
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
5,065,3903
15,196,172
(5,065,390)1
11,397,1283,4
11,397,128
(5,065,390)1
(2,000,000)2
-
-
(625,000)1
(625,000)1
(200,000)2
-
-
-
-
-
-
-
-
-
-
-
-
-
1,800,0003
1,468,7503,4
-
-
-
2,177,4693
323,3973
-
-
-
-
-
-
2,285,1613
(2,285,162)1
5,141,6083,4
(2,285,162)1
-
-
-
-
2,000,000
66,350
3,050,000
1,468,750
-
200,000
128,425
2,217,469
323,397
-
7,150
-
-
-
-
6,855,488
5,141,608
-
39,811
625,000
625,000
400,000
128,425
40,000
-
-
7,150
-
-
-
-
4,570,325
2,285,162
2,285,162
-
1 Options (SKNO) and unlisted options expired on 31 October 2018 and 30 November 2018 respectively.
2 Performance Rights lapsing on 30 June 2019.
3
4 As approved at the 2018 Annual General Meeting, the holders of the legacy options were awarded one-for-one basis were issued replacement
Includes entitlement issue taken up.
options converting at $0.10 and expiring on 31 December 2020.
27
DIRECTORS’ REPORT (CONTINUED)SKIN ELEMENTS LIMITED | ANNUAL REPORT 2019For personal use only
Voting of shareholders at last year’s annual general meeting
The Company received 99.9% of “yes” votes on its remuneration report for the 2018 financial year. The Company
did not receive any specific feedback at the AGM or throughout the year on its remuneration practices.
END OF THE REMUNERATION REPORT, WHICH HAS BEEN AUDITED
Directors’ Meetings
The number of meetings of the Company’s Board of Directors and each Board Committee held during the year
ended 30 June 2019, and the number of meetings attended by each Director were:
Peter Malone
Luke Martino
Phil Giglia
Zeling Li
Jialin Li
Directors’
Meetings*
Audit and risk
Committee
Remuneration
Committee
Held
Attended
Held
Attended
Held
Attended
4
4
4
-
-
4
4
4
-
-
1
-
1
-
-
1
-
1
-
-
-
-
-
-
-
-
-
-
-
-
* Matters considered by the Board during the year have also been effected by execution of circulated resolutions by directors.
Indemnification and insurance of Directors and Officers
During the financial year the Company paid a premium in respect of a contract insuring the directors and
officers of the Company against a liability incurred by such directors and officers to the extent permitted by the
Corporations Act 2001. The nature of the liability and the amount of the premium has not been disclosed due to
confidentiality of the insurance contracts. The Company has not otherwise during or since the end of the year,
indemnified, or agreed to indemnify an officer or an auditor of the Company, or of any related body corporate,
against a liability incurred by such an officer or auditor.
No person has applied for leave of Court to bring proceedings on behalf of the Company or intervene in any
proceedings to which the Company is a party for the purpose of taking responsibility on behalf of the Company for
all or any part of the proceedings.
The Company was not a party to any such proceedings in the year.
Shares under Options
Unissued ordinary shares of Skin Elements Limited under option as at the date of this report are:
Date
83,112,315
338,000
Options
Options exercisable at $0.10 each on or before 31 December 2020 (SKNOA)
Unlisted Options exercisable at $0.22 each on or before 6 March 2020 (convertible notes).
Events subsequent to the end of the financial year
In the opinion of the directors, no items, transactions or events of a material and unusual nature have arisen in the
interval between the end of the financial year and the date of this report which have been significantly affected, or
may significantly affect, the operations of the Group.
28
DIRECTORS’ REPORT (CONTINUED)SKIN ELEMENTS LIMITED | ANNUAL REPORT 2019For personal use only
Auditor Independence and Non-Audit Services
Section 307C of the Corporations Act 2001 requires our auditors, BDO Audit (WA) Pty Ltd to provide the directors
of the Company with an Independence Declaration in relation to the audit of the annual report. This Independence
Declaration is set out on page 30 and forms part of this directors’ report for the year ended 30 June 2019.
Non-audit services provided by the auditors, BDO Audit (WA) Pty Ltd, and their related entities, are set out below.
BDO Audit (WA) Pty Ltd and their related entities received or are due to receive the following amounts for the
provision of non-audit services:
BDO Audit (WA) Pty Ltd associated entities:
Independent Expert Report
2019
$
2018
$
48,815
48,815
-
-
This report is signed in accordance with a resolution of the Board of Directors made pursuant to section
306(3) of the Corporations Act 2001.
Peter Malone
Executive Chairman
Dated at Perth, Western Australia this 30th day of September 2019.
29
DIRECTORS’ REPORT (CONTINUED)SKIN ELEMENTS LIMITED | ANNUAL REPORT 2019For personal use only SKIN ELEMENTS LIMITED | ANNUAL REPORT 2019
AUDITOR’S INDEPENDENCE DECLARATION
30
For personal use only Revenue
Revenue from continuing operations
Cost of sales
- Gross profit
Other Income
Expenses
Administration expenses
Corporate expenses
Consultants fees
Occupancy expenses
Research and development expenses
Amortisation
Advertising and marketing expenses
Total Expenditure
Profit / (loss) before income tax expense
Income tax (expense) / benefit
Profit / (Loss) after income tax from continuing operations
attributable to equity holders of Skin Elements Limited
Other comprehensive income
Items that may be realised through to profit and loss
Movement in reserve
Total comprehensive income for the year
Year Ended
30 Jun 2019
Year Ended
30 Jun 2018
Notes
$
$
2
2
2
2
9
3
798,107
(440,851)
357,256
838,292
(392,979)
445,314
689,976
450,255
(643,257)
(297,175)
(587,534)
(104,268)
(857,701)
(325,458)
(826,108)
(122,519)
(899,672)
(1,003,955)
(390,794)
(92,294)
(301,977)
(185,965)
(3,014,993)
(3,623,683)
(1,967,761)
(2,728,114)
-
-
(1,967,761)
(2,728,114)
-
-
-
-
Profit / (loss) and total comprehensive income
attributable to equity holders of Skin Elements Limited
(1,967,761)
(2,728,114)
Basic earnings per share
Diluted earnings per share
15
(0.014)
N/A
(0.035)
N/A
This consolidated statement of profit or loss and other comprehensive income should be read in conjunction
with the notes to this Annual Report.
31
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2019SKIN ELEMENTS LIMITED | ANNUAL REPORT 2019For personal use only CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2019
Current Assets
Cash and cash equivalents
Trade and other receivables
Prepayment
Inventories
Research and development receivable
Total Current Assets
Non-Current Assets
Intangible assets
Total Non-Current Assets
Total Assets
Current Liabilities
Trade and other payables
Borrowings
Total Current Liabilities
NON-CURRENT LIABILITIES
TOTAL NON-CURRENT LIABILITIES
Total Liabilities
Net Assets
Shareholders Equity
Issued capital
Reserves
Accumulated losses
Total Shareholder Equity
As at
30 Jun 2019
As at
30 Jun 2018
Notes
$
$
4
5
6
8
7
9
10
11
12
14
13
116,238
25,689
97,136
17,721
649,452
906,236
195,661
82,567
-
191,255
450,181
919,664
8,995,117
8,995,117
9,379,763
9,379,763
9,901,353
10,299,427
506,208
200,000
706,208
-
-
810,386
-
810,386
-
-
706,208
810,386
9,195,145
9,489,041
15,286,784
13,679,321
804,743
738,340
(6,896,382)
(4,928,620)
9,195,145
9,489,041
This consolidated statement of financial position should be read in conjunction with the notes to this Annual Report.
32
SKIN ELEMENTS LIMITED | ANNUAL REPORT 2019For personal use only
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2019
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Receipt of Research and development tax incentive
Interest paid
Interest received
Net cash inflow / (outflow) from operating activities
Cash flows from investing activities
Payments for businesses
Receipt of Research and development tax incentive
Payments for intangibles
Net cash inflow / (outflow) from investing activities
Cash flow from financing activities
Proceeds from the issue of equity
Payment for share issue costs
Proceeds from Share applications
Proceeds from Convertible Note
Proceeds from borrowings
Net cash inflow / (outflow) from financing activities
Year Ended
30 Jun 2019
Year Ended
30 Jun 2018
Notes
$
$
4
18
798,166
851,395
(3,096,304)
(2,151,496)
490,630
(11,010)
75
-
-
74
(1,818,443)
(1,300,027)
-
(6,148)
(6,148)
(205,847)
196,584
(183,702)
(192,965)
1,744,963
(199,795)
-
200,000
-
1,745,168
150,000
-
32,500
-
99,000
281,500
Cash and cash equivalents at the beginning of the financial year
Net increase / (decrease) in cash and cash equivalents
Cash and cash equivalents at the end of the financial year
4
195,661
(79,423)
116,238
1,407,153
(1,211,492)
195,661
This consolidated statement of cash flows should be read in conjunction with the notes to this Annual Report.
33
SKIN ELEMENTS LIMITED | ANNUAL REPORT 2019For personal use only CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2019
Issued
Capital
Share based
Payments
Reserves
Convertible
Note
Reserve
Accumulated
losses
Total
Equity
$
$
$
$
Balance at 1 July 2018
13,679,321
215,505
522,835
(4,928,620)
9,489,041
Loss for the period
Other comprehensive income
Total comprehensive income
for the period
Transactions with owners in
their capacity as owners
Repayment of convertible notes
Cost associated with share
issues
-
-
-
-
(208,195)
Issue of shares (consultants)
38,194
-
-
-
-
-
Share based payments
-
96,883
Issue of shares (shareholders)
1,777,464
1,607,463
-
96,883
(30,430)
-
-
(1,967,761)
(1,967,761)
(1,967,761)
(1,967,761)
(30,430)
-
-
-
-
-
-
-
-
-
-
(30,430)
(208,195)
38,194
96,833
1,777,464
1,673,866
Balance at 30 June 2019
15,286,784
312,338
492,405
(6,896,381)
9,195,145
Balance at 1 July 2017
13,033,994
116,816
Loss for the year
Other comprehensive income
Total comprehensive income for
the year
-
-
Transactions with owners in
their capacity as owners
Equity Issued - consultants
233,000
Issue of convertible notes
Conversion of convertible notes
Equity Issued - consultants
Share issued
Share issue costs
Share based payments
-
69,257
200,000
150,000
(6,930)
-
645,327
-
-
-
-
-
-
-
-
98,689
98,689
-
-
-
-
592,092
(69,257)
-
-
-
-
(2,200,506)
10,950,304
(2,728,114)
(2,728,114)
(2,728,114)
(2,728,114)
-
-
-
-
-
-
-
233,000
592,092
-
200,000
150,000
(6,930)
98,689
522,835
1,266,851
Balance as at 30 June 2018
13,679,321
215,505
522,835
(4,928,620)
9,489,041
The above consolidated statement of changes in equity should be read in conjunction with the notes to this
Annual Report.
34
SKIN ELEMENTS LIMITED | ANNUAL REPORT 2019For personal use only Note 1 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, Australian Accounting standards and Australian Accounting
Interpretations and complies with other requirements of the law. The Company is a public company limited
by shares incorporated and domiciled in Australia whose shares are traded on the Australian Securities
Exchange. The financial report has also been prepared on a historical cost basis except for assessing the
fair value of the business combination and the fair value of the share based payments. As at 30 June 2019
the activities of the Company were the manufacture and distribution of skincare products.
Reporting convention
This annual report has been prepared on an accruals basis and are based on historical cost with the
exception of the business combination, share based payments and convertible note fair values. The
annual report is presented in Australian dollars and all values are rounded to the nearest dollar unless
otherwise stated. The accounting policies adopted are consistent with the accounting policies adopted in
the Company’s last annual financial statements for year ended 30 June 2018.
b. Statement of Compliance
The financial report was authorised for issue on in accordance with a resolution of directors on
30 September 2019.
The financial report complies with Australian Accounting Standards, which include Australian equivalents
to International Financial Reporting Standards, as adopted in Australia. Compliance with Australian
Accounting Standards ensures that the financial report, comprising the financial statements and notes
thereto, complies with International Financial Reporting Standards (IFRS) as adopted by the AASB.
c. Going concern
For the year ended 30 June 2019 the Group recorded a loss of $1,967,761 (30 June 2018: $2,728,114 loss),
a net working capital surplus of $200,028 (30 June 2018: $109,278) and had net cash outflows from operating
activities of $1,818,443 (30 June 2018: $1,300,027). Included in the current liabilities there is a convertible
liability of $200,000 which is expected to be converted to shares.
The ability of the entity to continue as a going concern is dependent on securing additional funding through
issue of debt or equity, increasing revenues from sale of the Group’s products and government R&D tax rebates
to continue to fund its operational and marketing activities. These conditions indicate a material uncertainty that
may cast a significant doubt about the entity’s ability to continue as a going concern and, therefore, that it may
be unable to realise its assets and discharge its liabilities in the normal course of business.
Management believe there are sufficient funds to meet the entity’s working capital requirements and as at the
date of this report. Subsequent to year end the entity expects to receive additional funds by the placement
of equity. The financial statements have been prepared on the basis that the entity is a going concern, which
contemplates the continuity of normal business activity, realisation of assets and settlement of liabilities in the
normal course of business for the following reasons:
Positive cash flows from securing major distribution agreements,
•
• Will be able to raise additional equity to contribute to the Group’s working capital position in the near term,
•
•
The group expects to continue to receive the full support of its related party creditors, and
Ability to raise additional finance from debt or equity if and when required
35
NOTES TO THE CONSOLIDATED ANNUAL REPORTFOR THE YEAR ENDED 30 JUNE 2019SKIN ELEMENTS LIMITED | ANNUAL REPORT 2019For personal use only
NOTES TO THE CONSOLIDATED ANNUAL REPORT
FOR THE YEAR ENDED 30 JUNE 2019
NOTE 1 SIGNIFICANT ACCOUNTING POLICIES (cont’d)
Should the entity not be able to continue as a going concern, it may be required to realise its assets and
discharge its liabilities other than in the ordinary course of business, and at amounts that differ from those
stated in the financial statements and that the financial report does not include any adjustments relating to
the recoverability and classification of recorded asset amounts or liabilities that might be necessary should
the entity not continue as a going concern
d. Business Combination
The acquisition method of accounting is used to account for all business combinations, regardless of
whether equity instruments or other assets are acquired. The consideration transferred for the acquisition
of a subsidiary comprises of the fair value of assets transferred, liabilities incurred to the former owner,
equity interests issued and the fair value of any contingent consideration.
Identifiable assets acquired and liabilities assumed in a business combination are measured initially at their
fair value at the acquisition date. Acquisition related costs are expensed as incurred.
e. Principles of Consolidation
General consolidation principles
The consolidated financial statements comprise Skin Elements Limited and its controlled entity as at
30 June 2019.
A subsidiary is fully consolidated from the date on which control is obtained by the Group and cease to be
consolidated from the date at which the group ceases to have control. Intercompany transactions, balances
and unrealised gains on transactions between entities in the Group are eliminated. Unrealised losses
are also eliminated unless the transaction provides evidence of the impairment of the asset transferred.
Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the
policies adopted by the Group. The Group treats transactions with non-controlling interests that do not
result in a loss of control as transactions with equity owners of the Group. When the group ceases to have
control, joint control or significant influence, any retained interest in the entity is remeasured to its fair value
with the change in carrying amount recognised in profit or loss.
f. Critical accounting judgements and key sources of estimation uncertainty
The preparation of the annual report requires the use of accounting estimates and judgements which, by
definition, will seldom equal the actual results. This note provides an overview of the areas that involve a
degree of judgement or complexity in preparing the annual report.
All judgements, estimates and assumptions made are believed to be reasonable based on the most current
set of circumstances known to management. Facts and circumstances may come to light after the event
which may have significantly varied the assessment used which result in a materially different value being
recorded at the time of preparing these annual report. The estimates and underlying assumptions are
reviewed on an ongoing basis. Revisions are recognised in the period in which the estimate is revised if it
affects only that period, or in the period of the revision and future periods if the revision affects both current
and future periods.
36
SKIN ELEMENTS LIMITED | ANNUAL REPORT 2019For personal use only
NOTES TO THE CONSOLIDATED ANNUAL REPORT
FOR THE YEAR ENDED 30 JUNE 2019
NOTE 1 SIGNIFICANT ACCOUNTING POLICIES (cont’d)
Impairment of assets
i.
The Company assesses the impairment of assets at each reporting date by evaluating conditions specific
to the asset that may lead to impairment of the assets recoverable amount. The assessment of impairment
is based on the best estimate of future cash flows available at the time of preparing the report. However,
facts and circumstances may come to light in later periods which may change this assessment if these
facts had been known at the time.
ii. Deferred taxes
Deferred tax assets relating to income tax losses have not been brought to account as it is not considered
probable that the Company will make taxable profits over the next 12 months. The Company will make a
further assessment at the next reporting period.
iii. Amortisation rates
The Company has assessed the effective life of its Soléo and McArthur intangible assets taking into
account sector practices, the expected product life cycle and its own internal knowledge of the sunscreen
and skincare markets to determine an appropriate amortization rate. This rate is an estimate of what the
Company anticipates the intangible will be able to generate future benefits from the production and sale of
the product and this may differ from the future results. The directors will continue to assess the effective
life at each reporting date.
iv. Share based payments
The Company has assessed the fair value of the options issued using on Black Scholes Option Pricing
model and the fair value of performance rights using a Monte Carlo simulation model. These models
includes a number of estimated inputs including the Company’s volatility, the risk-free rate and an
estimated shares price of the Company’s shares into the future. These inputs were considered to be a
reasonable basis available information at the time the valuations were undertaken but the outcome may be
materially difference if the Company had used other inputs.
v. Convertible notes
During the previous period the Company extinguished debt by way of issuing convertible notes. The
Company assessed the fair value of instruments issued using the fair value of the equity instruments
issued to extinguish the debt. The fair value of the instruments included the fair value of ordinary shares
issued and the fair value of options using a Black Scholes Option Pricing model. This model includes a
number of estimated inputs including the Company’s volatility, the risk-free rate and the shares price of
the Company’s shares. These inputs were considered to be a reasonable basis available information at
the time the valuations were undertaken but the outcome may be materially difference if the Company had
used other inputs.
g. Segment Reporting
Operating Segments – AASB 8 requires a management approach under which segment information
is presented on the same basis as that used for internal reporting purposes. This is consistent to the
approach used for the comparative period. Operating segments are reported in a uniform manner to which
is internally provided to the chief operating decision maker. The chief operating decision maker has been
identified as the Board of Directors.
An operating segment is a component of the group that engages in business activity from which it
may earn revenues or incur expenditure, including those that relate to transactions with other group
components. Each operating segment’s results are reviewed regularly by the Board to make decisions
about resources to be allocated to the segments and assess its performance, and for which discrete
financial information is available.
37
SKIN ELEMENTS LIMITED | ANNUAL REPORT 2019For personal use only
NOTE 1 SIGNIFICANT ACCOUNTING POLICIES (cont’d)
The Board monitors the operations of the Company based on two segments, operational and corporate.
The financial results of each segment are reported to the board to assess the performance of the Group.
The Board has determined that strategic decision making is facilitated by evaluation of the operations of
the legal parent and subsidiary which represent the operational performance of the group’s revenues and
the research and development activities as well as the finance, treasury, compliance and funding elements
of the Group.
h. Foreign Currency Translation
Both the functional and presentation currency of the Company and its Australian subsidiary is Australian dollars.
Transactions in foreign currencies are initially recorded in the functional currency by applying the exchange
rates ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies
are retranslated at the rate of exchange ruling at the reporting date. All exchange differences in the annual
report are taken to profit or loss.
Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using
the exchange rate as at the date of the initial transaction. Non-monetary items measured at fair value in a
foreign currency are translated using the exchange rates at the date when the fair value was determined.
i. Revenue Recognition
AASB 15 was adopted without restating comparative information. This means that revenue will be
recognised when control of goods or services is transferred, rather than on transfer of risks and rewards as
is currently the case under IAS 18 Revenue. The Company generates revenue from the delivery of goods as
follows: Revenue from selling goods The Company sells products to external customers using a number of
mediums which include internet sales, employees direct selling and the use of wholesalers and businesses
whom purchase the product and are then responsible for their own on selling processes. The internet sales
are driven by the Company’s website which sets out pricing for the product and delivery. Each wholesalers
and business customer order is specific to the client’s requirements, however, for each category of customer
the performance obligations cease when the Company has delivered the goods to the customers. As at 30
June the Company did not have any material customer contracts at the reporting date:
i. Sale of goods
Revenue for sale of suncare and skincare products, is recognised when the customers obtain control of
the goods. This usually occurs when the goods are delivered. No other products or services are bundled in
such contracts. Invoices are usually payable within 30 days and no element of financing is deemed present
as the services are charged within standard credit terms which is consistent with industry practice.
38
NOTES TO THE CONSOLIDATED ANNUAL REPORTFOR THE YEAR ENDED 30 JUNE 2019SKIN ELEMENTS LIMITED | ANNUAL REPORT 2019For personal use only
NOTE 1 SIGNIFICANT ACCOUNTING POLICIES (cont’d)
j.
Income Tax
The income tax expense or benefit for the year is the tax payable on the current period’s taxable income
based on the applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets
and liabilities attributable to temporary difference and to unused tax losses.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted
at the end of the reporting period in the countries where the Company’s subsidiaries and associates
operate and generate taxable income. Management periodically evaluates positions taken in tax returns
with respect to situations in which applicable tax regulation is subject to interpretation. It establishes
provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.
Current tax assets and liabilities for the current and prior periods are measured at the amount expected
to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the
amount are those that are enacted or substantively enacted by the reporting date.
Deferred income tax is provided on all temporary differences at the reporting date between the tax bases
of assets and liabilities and their carrying amounts for financial reporting purposes.
Deferred income tax liabilities are recognised for all taxable temporary differences except:
. when the deferred income tax liability arises from the initial recognition of goodwill or of 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 profit nor taxable profit or loss; or
. when the taxable temporary difference is associated with investments in subsidiaries, associates or
interests in joint ventures, and the timing of the reversal of the temporary difference can be controlled
and it is probable that the temporary difference will not reverse in the foreseeable future.
Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of
unused tax assets and unused tax losses, to the extent that it is probable that taxable profit will be
available against which the deductible temporary differences and the carry-forward of unused tax credits
and unused tax losses can be utilised, except:
. when the deferred income tax asset relating to the deductible temporary difference arises from the
initial recognition of an asset or liability in a transaction that is not a business combination
.
and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; or
. when the deductible temporary difference is associated with investments in subsidiaries, associates or
interests in joint ventures, in which case a deferred tax asset is only recognised to the extent that it is
probable that the temporary difference will reverse in the foreseeable future and taxable profit will be
available against which the temporary difference can be utilised.
The carrying amount of deferred income tax assets is reviewed at each reporting date and reduced to the
extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the
deferred income tax asset to be utilised.
39
NOTES TO THE CONSOLIDATED ANNUAL REPORTFOR THE YEAR ENDED 30 JUNE 2019SKIN ELEMENTS LIMITED | ANNUAL REPORT 2019For personal use only
NOTE 1 SIGNIFICANT ACCOUNTING POLICIES (cont’d)
Unrecognised deferred income tax assets are reassessed at each reporting date and are recognised to the
extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered.
Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the
year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been
enacted or substantively enacted at the reporting date.
Income taxes relating to items recognised directly in equity are recognised in equity and not in profit or loss.
Deferred tax assets and deferred tax liabilities are offset only if a legally enforceable right exists to set off
current tax assets against current tax liabilities and the deferred tax assets and liabilities relate to the same
taxable entity and the same taxation authority.
k. Goods and services taxes
Revenues, expenses and assets are recognised net of the amount of GST except:.
. when the GST incurred on a purchase of goods and services is not recoverable from the taxation
authority, in which case the GST is recognised as part of the cost of acquisition of the asset or as part
of the expense item as applicable; and
.
receivables and payables, which are stated with the amount of GST included.
The net amount of GST recoverable from, or payable to, the taxation authority is included as part of
receivables or payables in the consolidated statement of financial position.
Cash flows are included in the consolidated statement of cash flows on a gross basis and the GST
component of cash flows arising from investing and financing activities, which is recoverable from, or
payable to, the taxation authority are classified as operating cash flows.
Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to,
the taxation authority.
40
NOTES TO THE CONSOLIDATED ANNUAL REPORTFOR THE YEAR ENDED 30 JUNE 2019SKIN ELEMENTS LIMITED | ANNUAL REPORT 2019For personal use only NOTE 1 SIGNIFICANT ACCOUNTING POLICIES (cont’d)
l.
Impairment of assets
The Group assesses at each reporting date whether there is an indication that an asset may be impaired.
If any such indication exists, or when annual impairment testing for an asset is required, the Group makes
an estimate of the asset’s recoverable amount. An asset’s recoverable amount is the higher of its fair value
less costs to sell and its value in use and is determined for an individual asset, unless the asset does not
generate cash inflows that are largely independent of those from other assets or groups of assets and the
asset’s value in use cannot be estimated to be close to its fair value. In such cases the asset is tested for
impairment as part of the cash-generating unit to which it belongs. When the carrying amount of an asset
or cash-generating unit exceeds its recoverable amount, the asset or cash-generating unit is considered
impaired and is written down to its recoverable amount.
In assessing value in use, the estimated future cash flows are discounted to their present value using a
pre-tax discount rate that reflects current market assessments of the time value of money and the risks
specific to the asset. Impairment losses relating to continuing operations are recognised in those expense
categories consistent with the function of the impaired asset unless the asset is carried at revalued amount
(in which case the impairment loss is treated as a revaluation decrease).
An assessment is also made at each reporting date as to whether there is any indication that previously
recognised impairment losses may no longer exist or may have decreased. If such indication exists,
the recoverable amount is estimated. A previously recognised impairment loss is reversed only if there
has been a change in the estimates used to determine the asset’s recoverable amount since the last
impairment loss was recognised. If that is the case the carrying amount of the asset is increased to its
recoverable amount. That increased amount cannot exceed the carrying amount that would have been
determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such
reversal is recognised in profit or loss unless the asset is carried at revalued amount, in which case the
reversal is treated as a revaluation increase. After such a reversal the depreciation charge is adjusted in
future periods to allocate the asset’s revised carrying amount, less any residual value, on a systematic
basis over its remaining useful life.
m. Cash and cash equivalents
Cash comprises cash at bank and on hand. Cash equivalents are short term, highly liquid investments that
are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes
in value. Bank overdrafts are shown within borrowings in current liabilities in the consolidated statement of
financial position.
For the purposes of the consolidated statement of cash flows, cash and cash equivalents consist of cash
and cash equivalents as defined above, net of outstanding bank overdrafts.
n. Trade and other receivables
Trade receivables are measured on initial recognition at fair value and are subsequently measured at
amortised cost using the effective interest rate method, less any allowance for impairment. Trade receivables
are generally due for settlement within periods ranging from prepaid or cash on delivery to 60 days.
Impairment of trade receivables is continually reviewed and those that are considered to be uncollectible
are written off by reducing the carrying amount directly. An allowance account is used when there is
objective evidence that the Group will not be able to collect all amounts due according to the original
contractual terms.
41
NOTES TO THE CONSOLIDATED ANNUAL REPORTFOR THE YEAR ENDED 30 JUNE 2019SKIN ELEMENTS LIMITED | ANNUAL REPORT 2019For personal use only
NOTE 1 SIGNIFICANT ACCOUNTING POLICIES (cont’d)
o. Inventories
Raw materials and stores, work in progress and finished goods are stated at the lower of cost and net
realisable value. Cost comprises direct materials, direct labour and an appropriate proportion of variable
and fixed overhead expenditure, the latter being allocated on the basis of normal operating capacity. Costs
are assigned to individual items of inventory on the basis of weighted average costs. Costs of purchased
inventory are determined after deducting rebates and discounts. Net realisable value is the estimated
selling price in the ordinary course of business less the estimated costs of completion and the estimated
costs necessary to make the sale inventories are valued at the lower of cost and net realisable value.
p. Intangible assets
i. Formula and technology
Separately acquired formula and technology are shown at historical cost. Formula and technology acquired in
a business combination are recognised at fair value at the acquisition date. They have a finite useful life and
are subsequently carried at cost less accumulated amortisation and impairment losses.
ii. Software
Costs associated with maintaining software programmes are recognised as an expense as incurred. Costs
that are directly attributable to the improvement of identifiable and unique software products controlled
by the Group are recognised as intangible assets when the Company meets to capitalisation criteria to
recognise the asset list in development costs above.
iii. Criteria for capitalising development costs of Formula and technology and Software
Development costs of Formula and technology and Software which meet the criteria below are
capitalised to the asset to which they relate in the year the costs were incurred. Research expenditure
and development expenditure that do not meet the criteria are recognised as an expense as incurred.
Development costs previously recognised as an expense are not recognised as an asset in a subsequent
period. The criteria for recognising development assets are as follows:
it is technically feasible to complete and will be available for use;
.
. management intends to complete the asset and use it;
.
.
.
there is an ability to use or sell the asset;
it can be demonstrated how the asset will generate probable future economic benefits;
adequate technical, financial and other resources to complete the development and to use or sell
the asset are available, and
the expenditure attributable to the asset during its development can be reliably measured.
.
. Directly attributable costs that are capitalised as part of the asset include employee costs and an
appropriate portion of relevant overheads.
. Capitalised development costs are recorded as intangible assets and amortised from the point at
which the asset is available for commercial production.
42
NOTES TO THE CONSOLIDATED ANNUAL REPORTFOR THE YEAR ENDED 30 JUNE 2019SKIN ELEMENTS LIMITED | ANNUAL REPORT 2019For personal use only
NOTE 1 SIGNIFICANT ACCOUNTING POLICIES (cont’d)
q. Intangible asset amortisation
The Company commences amortisation where the development process is at a stage where the products
can be produced in commercial quantities. The Company has assessed that the Soléo intangible assets
and the McArthur intangibles assets are at a stage where they meet this test. The Company has assessed
the effective life for these assets to be 25 years and amortised the asset carrying values on a straight-line
basis for the period. The Company has a policy to regularly review the effective life of each asset.
r. Research and development tax incentives (government funding)
Research and development tax incentives received or receivable from the government are recognised at
their fair value where there is a reasonable assurance that the amount will be received and the Group will
comply with all attached conditions. The value of the research and development tax incentives received
or receivable is recognised as income where the expenses to which it relates are included in the profit or
loss or alternatively as a reduction to the asset where the costs have been capitalised to the statement of
financial position.
s. Financial assets
Financial assets and financial liabilities are recognised when the Group becomes a party to the contractual
provisions of the financial instrument. Financial assets are derecognised when the contractual rights to the cash
flows from the financial asset expire, or when the financial asset and substantially all the risk and rewards are
transferred. A financial liability is derecognised when it is extinguished, discharged, cancelled or expires.
Financial assets are classified according to their business model and the characteristics of their contractual
cash flows and are initially measured at fair value adjusting for transaction costs (where applicable).
For the purpose of subsequent measurement, financial assets, other than those designated and effective as
hedging instruments, are classified into the following four categories:
Financial assets at amortised cost
Financial assets at fair value through profit or loss (FVTPL)
.
.
. Debt instruments at fair value through other comprehensive income (FVTOCI)
.
Equity instruments at FVTOCI
Financial assets carried at amortised cost
i.
Financial assets with contractual cash flows representing solely payments of principal and interest and held
within a business model of ‘hold to collect’ contractual cash flows are accounted for at amortised cost using
the effective interest method. The Group’s trade and other receivables fall into this category of financial
instruments.
The Group first assesses whether objective evidence of impairment exists individually for financial assets that
are individually significant, and individually or collectively for financial assets that are not
individually significant. If it is determined that no objective evidence of impairment exists for an individually
assessed financial asset, whether significant or not, the asset is included in a group of financial assets with
similar credit risk characteristics and that group of financial assets is collectively assessed for impairment.
Assets that are individually assessed for impairment and for which an impairment loss is or continues to be
recognised are not included in a collective assessment of impairment.
If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related
objectively to an event occurring after the impairment was recognised, the previously recognised impairment
loss is reversed. Any subsequent reversal of an impairment loss is recognised in profit or loss, to the extent that
the carrying value of the asset does not exceed its amortised cost at the reversal date.
43
NOTES TO THE CONSOLIDATED ANNUAL REPORTFOR THE YEAR ENDED 30 JUNE 2019SKIN ELEMENTS LIMITED | ANNUAL REPORT 2019For personal use only
NOTE 1 SIGNIFICANT ACCOUNTING POLICIES (cont’d)
t. Trade and Other Payables
Trade payables and other payables are carried at amortised cost and represent liabilities for goods and
services provided to the Group prior to the end of the financial year that are unpaid and arise when the
Group becomes obliged to make future payments in respect of the purchase of these goods and services.
u. Borrowings
Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are
subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs)
and the redemption amount is recognised in profit or loss over the period of the borrowings using the
effective interest method. Fees paid on the establishment of loan facilities are recognised as transaction
costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this
case, the fee is deferred until the draw down occurs.
Borrowings are removed from the statement of financial position when the obligation specified in the
contract is discharged, cancelled or expired. The difference between the carrying amount of a financial
liability that has been extinguished or transferred to another party and the consideration paid, including
any non- cash assets transferred or liabilities assumed, is recognised in profit or loss as other income or
finance costs.
Where the terms of a financial liability are renegotiated and the entity issues equity instruments to a
creditor to extinguish all or part of the liability (debt for equity swap), a gain or loss is recognised in profit or
loss, which is measured as the difference between the carrying amount of the financial liability and the fair
value of the equity instruments issued.
Borrowings are classified as current liabilities unless the group has an unconditional right to defer
settlement of the liability for at least 12 months after the reporting period.
v. Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of
a past event, it is probable that an outflow of resources embodying economic benefits will be required to
settle the obligation and a reliable estimate can be made of the amount of the obligation. Provisions are not
recognised for future operating losses.
When the Group expects some or all of a provision to be reimbursed, for example under an insurance
contract, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually
certain. The expense relating to any provision is presented in the statement of profit or loss and other
comprehensive income net of any reimbursement.
Provisions are measured at the present value of management’s best estimate of the expenditure required
to settle the present obligation at the end of the reporting period. The discount rate used to determine the
present value is a pre-tax rate that reflects current market assessments of the time value of money and
the risks specific to the liability. The increase in the provision due to the passage of time is recognised as
interest expense.
44
NOTES TO THE CONSOLIDATED ANNUAL REPORTFOR THE YEAR ENDED 30 JUNE 2019SKIN ELEMENTS LIMITED | ANNUAL REPORT 2019For personal use only
NOTE 1 SIGNIFICANT ACCOUNTING POLICIES (cont’d)
w. Employee leave benefits
i. Wages, salaries, annual leave and sick leave
Liabilities for wages and salaries, including non-monetary benefits, and annual leave expected to be settled
within 12 months of the reporting date are recognised in other payables in respect of employees’ services up
to the reporting date. They are measured at the amounts expected to be paid when the liabilities are settled.
Liabilities for non-accumulating sick leave are recognised when the leave is taken and are measured at the
rates paid or payable.
ii. Long service leave
The liability for long service leave is recognised in the provision for employee benefits however due to the
infancy of the Group, no long service leave has been accrued.
x. Share-based payment transactions
The grant by the Company of options over its equity instruments to contractors or to its employees is measured
at the fair value of contractor’s services (where the services can be valued) or at the fair value of the equity
instruments provided (which includes employee services received) during the period. The measurement date is
the grant date and the cost is recognised over the vesting period for the services received by the Company with
an increase to the expense (or asset if it directly relates to the development of an asset) with a corresponding
increase to equity or reserves.
y.
Issued capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or
options are shown in equity as a deduction, net of tax, from the proceeds. Incremental costs directly attributable
to the issue of new shares or options for the acquisition of a new business are not included in the cost of
acquisition as part of the purchase consideration.
z. Earnings per share
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or
options are shown in equity as a deduction, net of tax, from the proceeds. Incremental costs directly attributable
to the issue of new shares or options for the acquisition of a new business are not included in the cost of
acquisition as part of the purchase consideration.
Basic earnings per share is calculated as net profit attributable to members of the Parent, adjusted to exclude
any costs of servicing equity (other than dividends) and preference share dividends, divided by the weighted
average number of ordinary shares, adjusted for any bonus element.
Diluted earnings per share is calculated as net profit attributable to members of the Parent, adjusted for:
•
•
•
costs of servicing equity (other than dividends) and preference share dividends;
the after tax effect of dividends and interest associated with dilutive potential ordinary shares that have
been recognised as expenses; and
other non-discretionary changes in revenues or expenses during the period that would result from the
dilution of potential ordinary shares; divided by the weighted average number of ordinary shares and
dilutive potential ordinary shares, adjusted for any bonus element.
45
NOTES TO THE CONSOLIDATED ANNUAL REPORTFOR THE YEAR ENDED 30 JUNE 2019SKIN ELEMENTS LIMITED | ANNUAL REPORT 2019For personal use only
NOTE 1 SIGNIFICANT ACCOUNTING POLICIES (cont’d)
aa. Convertible note
The financial instruments issued by the Group comprise convertible notes and attaching options that can
be converted to ordinary shares at the option of the holder. The number of the shares and options to be
issued is fixed. These convertible notes are recognised as equity and are not re-measured subsequent to
initial recognition.
bb. New standards and interpretations adopted during the current year
This note explains the impact of the adoption of AASB 9 Financial Instruments, AASB 15 Revenue from
Contracts with Customers on the Group’s financial statements, and also discloses the new accounting
policies that have been applied from 1 July 2018, where they are different to those applied in prior periods.
Impact on Financial Statements
AASB 9 was adopted without restating comparative information. This change in methodology has not
had an impact on the financial statements. The Company applies the AASB 9 simplified approach to
measuring expected credit losses, which requires expected lifetime credit losses to be recognised from
initial recognition of trade receivables with maturities of 12 months or less. The Company has made an
assessment of the expected credit losses within its debtors balance. For the periods presented, a majority
of the Groups’ sales are made directly to retail customers who pay in advance for the products. The
Company’s history of returns is extremely low and therefore the historical credit losses will not be material.
AASB 15 was adopted without restating comparative information. This means that revenue will be
recognised when control of goods or services is transferred, rather than on transfer of risks and rewards
as is currently the case under IAS 18 Revenue. The Company generates revenue from the delivery of
goods as follows: Revenue from selling goods The Company sells products to external customers using
a number of mediums which include internet sales, employees direct selling and the use of wholesalers
and businesses whom purchase the product and are then responsible for their own on selling processes.
The internet sales are driven by the Company’s website which sets out pricing for the product and delivery.
Each wholesalers and business customer order is specific to the client’s requirements, however, for each
category of customer the performance obligations cease when the Company has delivered the goods to
the customers. As at 30 June the Company did not have any material customer contracts at the reporting
date and will assess the impact of AASB 15 going forward.
The Group has applied AASB 15 using the cumulative effect method and therefore the comparative
information has not been restated and continues to be reported under AASB 118. The details of accounting
policies under AASB 118 are disclosed separately if they are different from those under AASB 15.
cc. New accounting standards and interpretations that are not yet mandatory
Any new, revised or amending Accounting Standards or Interpretations that are not yet mandatory have
not been early adopted.
AASB 16 Leases eliminates the operating and finance lease classifications for leases currently accounted
for under AASB 117 Leases. It instead requires an entity to bring most leases onto its Statement of
Financial Position in a similar way to how existing finance leases are treated under AASB 117. An entity
will be required to recognise a lease liability and a right of use asset in its Statement of Financial Position
for most leases. As at 30 June 2019, the Company has identified one contract that would be classified as
leases under the new standard being the lease of office premises. Due to the short term and low value
nature of this lease, the Company will apply the exemption and elected to recognise the lease payments in
profit and loss on a straight line basis instead of applying the recognition and measurement requirements
in AASB 16.
46
NOTES TO THE CONSOLIDATED ANNUAL REPORTFOR THE YEAR ENDED 30 JUNE 2019SKIN ELEMENTS LIMITED | ANNUAL REPORT 2019For personal use only
NOTE 1 SIGNIFICANT ACCOUNTING POLICIES (cont’d)
2. LOSS FOR THE YEAR
Loss for the year included the following items:
(a) Administration expenses
Year ended
30 Jun 2019
$
Year ended
30 Jun 2018
$
Accounting expenses
Wages and salaries
Travel expenses
Other expenses
(b) Corporate expenses
ASX fees
Audit expenses
Directors fees
Filing fees
Legal expenses
Share Registry and shareholder communications
(c) Contract and consulting fees
Executive services contracts (i)
Share based performance rights
External consulting fees
144,308
331,794
28,998
138,157
643,257
54,185
58,923
53,570
9,978
68,043
52,476
297,175
420,804
96,833
69,897
587,534
98,362
474,828
112,391
172,120
857,701
31,667
47,337
179,590
2,170
40,631
24,063
325,458
317,245
98,689
410,173
826,108
(i) The Company engages the executives under consulting agreements to provide their services. These
services are disclosed in note 18.
(d) Other income
Interest
R&D Grant income
-
689,976
689,976
74
450,181
450,255
47
NOTES TO THE CONSOLIDATED ANNUAL REPORTFOR THE YEAR ENDED 30 JUNE 2019SKIN ELEMENTS LIMITED | ANNUAL REPORT 2019For personal use only 3. INCOME TAX BENEFIT
Current tax
Deferred tax
Year ended
30 Jun 2019
$
Year ended
30 Jun 2018
$
-
-
-
-
-
-
Numerical reconciliation between tax benefit and pre-tax net loss
Loss before income tax benefit
(1,967,761)
(2,728,114)
Income tax (expense) / benefit calculated at 27.5%. (2018: 27.5%)
Effect of non-(assessable) / deductible item
Movements in unrecognised temporary differences
Income tax benefit
(541,134)
(107,468)
616,796
-
(750,231)
(67,243)
817,474
-
4. CASH AND CASH EQUIVALENTS
Cash at bank (i)
Balance per statement cash flows
(i) Refer to the note 22 for commentary on risk management.
Loss for the year
Non-cash items
Amortisation
Acquisition stock margin
Shared based payments
Decrease / (increase) in trade receivables
(Increase) / decrease in other receivables
(Increase) / decrease in inventories/prepayments
Decrease / (increase) in tax receivable
Increase in trade and other payables
As at
30 Jun 2019
$
As at
30 Jun 2018
$
116,238
116,238
195,661
195,661
(1,967,761)
(2,728,114)
390,794
-
135,027
20,357
36,576
76,397
(199,271)
(310,562)
301,977
(26,149)
600,946
12,147
(59,718)
(393,607)
(196,584)
882,932
Net cash (outflow) / inflows from operating activities
(1,818,443)
(1,300,027)
48
NOTES TO THE CONSOLIDATED ANNUAL REPORTFOR THE YEAR ENDED 30 JUNE 2019SKIN ELEMENTS LIMITED | ANNUAL REPORT 2019For personal use only 5. TRADE RECEIVABLES
Trade receivables (i)
GST
Other
Total
As at
30 Jun 2019
$
As at
30 Jun 2018
$
16,152
9,159
377
25,689
36,509
45,681
377
82,567
(i) Classification and impairment of trade and other receivables
Trade debtors are amounts due from customers for the sale of goods in the ordinary course of business. The
trade receivables are generally due for settlement within 30 days and therefore are classified as current. The
group does not currently have any provision for expected credit loss in respect to their receivables as at 30
June 2019 (30 June 2018: Nil). Due to the short-term nature of the current receivables, their carrying amounts
approximate their fair value. The trade debtor’s balance does not currently have any amounts that are past due
but not impaired.
6. PREPAYMENTS
Raw material
7. GRANT RECEIVABLE
Research and development receivable (i)
As at
30 Jun 2019
$
As at
30 Jun 2018
$
97,136
97,136
-
-
As at
30 Jun 2019
$
As at
30 Jun 2018
$
649,452
649,452
450,181
450,181
(i) The Group continued its development program during the year ended 30 June 2019 resulting in a claim for
research and development tax incentive. The claim has been approved subsequent to 30 June 2019.
8. INVENTORIES
Finished goods
Raw materials
As at
30 Jun 2019
$
As at
30 Jun 2018
$
17,721
-
17,721
129,636
61,619
191,255
49
NOTES TO THE CONSOLIDATED ANNUAL REPORTFOR THE YEAR ENDED 30 JUNE 2019SKIN ELEMENTS LIMITED | ANNUAL REPORT 2019For personal use only 9. INTANGIBLE ASSETS
Soléo Organics – formula and technology
McArthur skincare – formula and technology
Website development costs
Elizabeth Jane Natural Cosmetics – formula and technology
Movements in Soléo Organics – formula and technology
Opening balance
Less: Amortisation
Closing balance
Movements in McArthur – formula and technology
Opening balance
Cost on acquisition
Less: Amortisation
Closing balance
Movements in website development costs
Opening balance
Less: Amortisation
Closing balance
As at
30 Jun 2019
As at
30 Jun 2018
$
6,052,125
806,503
10,807
2,125,683
8,995,117
6,315,261
(263,136)
6,052,125
835,642
6,148
(35,287)
806,503
14,607
(3,800)
10,807
$
6,315,261
835,642
14,607
2,214,253
9,379,763
6,578,397
(263,136)
6,315,261
870,683
-
(35,041)
835,642
18,407
(3,800)
14,607
Movements in Elizabeth Jane Natural Cosmetics – formula and technology
Opening balance
Less: Amortisation
Closing balance
Profit or loss expense
Soléo amortisation
McArthur amortisation
Website costs
Elizabeth Jane Natural Cosmetics
2,214,253
(88,570)
2,125,683
2,214,253
-
2,214,253
263,136
35,287
3,800
88,570
390,793
263,136
35,041
3,800
301,977
50
NOTES TO THE CONSOLIDATED ANNUAL REPORTFOR THE YEAR ENDED 30 JUNE 2019SKIN ELEMENTS LIMITED | ANNUAL REPORT 2019For personal use only 10. TRADE PAYABLES
Trade creditors (i) (ii)
Other creditors (ii)
Year ended
30 Jun 2019
$
Year ended
30 Jun 2018
$
184,880
321,328
506,208
236,139
574,247
810,386
(i) Fair value of trade and other payables
Trade payables are unsecured and are usually paid within 60 days of recognition.
(ii) The carrying amount of trade and other payables are assumed to be the same as their fair values, due to
their short-term nature.
11. BORROWINGS
Loans - related parties
Convertible Note (iii)
Movements in related party loans
Opening balance
Amounts borrowed (i)
Conversion of debt to notes (ii)
Closing balance
(i) Terms of the borrowings
Year ended
30 Jun 2019
$
Year ended
30 Jun 2018
$
-
200,000
200,000
-
-
-
-
-
-
-
44,201
62,662
(106,863)
-
The operating company and the Company obtained working capital funding from the executives of the
Company to allow the Group to continue operating and pay its debts as and when they fell due. The loan is
provided on the following terms:
Particulars
Terms
Principal
No fixed amount, funding provided when needed.
Interest rate
0%
Period
No fixed term.
Repayment
On commencement of listing, at the Company’s discretion and subject to available funds.
Security
The borrowing is unsecured and there are no covenants in place for the loan.
(ii) On 1 March 2018, the Company agreed to issue 106,863 convertible notes to extinguish borrowings.
(iii) During the year the company entered into a convertible note arrangement with Henan Hetuo Health
Management Co, Ltd (HHHM) with the following key terms:
Interest rate: 0%
Maturity: 31 December 2019
Conversion terms: $0.016 per share
51
NOTES TO THE CONSOLIDATED ANNUAL REPORTFOR THE YEAR ENDED 30 JUNE 2019SKIN ELEMENTS LIMITED | ANNUAL REPORT 2019For personal use only As at
30 Jun 2019
As at
30 Jun 2018
As at
30 Jun 2019
As at
30 Jun 2018
12. ISSUED CAPITAL
Shares
Shares
$
$
Ordinary Shares
158,404,002
86,053,001
15,283,784
13,679,321
(ii) Movement in share capital
Date
Details
Number of shares
$
1/07/2018
Opening balance
1/08/2018
Issue of non renounceable rights issue shares
4/10/2018
Issue of placement shares for cash
4/10/2018
Issue of consultant shares pursuant to a contract for services (i)
20/12/2018
Issue of consultant shares pursuant to a contract for services (i)
2/05/2019
Issue of placement shares for cash
14/06/2019
Issue of placement shares for cash (ii)
Less: Transaction costs
Closing balance
86,053,001
13,676,321
43,026,519
1,075,664
13,954,717
363,800
873,353
425,000
7,000,000
7,071,412
29,694
8,500
140,000
198,000
(208,195)
158,404,002
15,283,784
(i)
Issue of shares is a share based payment based on value of services provided.
(ii) Total share placement is 11,131,233 shares. The remaining shares have been issued subsequent to 30 June
2019 following the receipt of funds.
13. ACCUMULATED LOSSES
Opening balance
Loss for the year
Closing balance
As at
30 Jun 2019
$
As at
30 Jun 2018
$
4,928,620
1,967,761
6,896,381
2,200,506
2,728,114
4,928,620
52
NOTES TO THE CONSOLIDATED ANNUAL REPORTFOR THE YEAR ENDED 30 JUNE 2019SKIN ELEMENTS LIMITED | ANNUAL REPORT 2019For personal use only 14. RESERVES
Options Reserve
Share based payment reserve
Convertible note reserve
As at
30 Jun 2019
$
As at
30 Jun 2018
$
116,816
195,522
492,405
804,743
116,816
98,689
522,835
738,340
As at
30 Jun 2019
Options
As at
30 Jun 2018
Options
As at
30 Jun 2019
$
As at
30 Jun 2018
$
(i) Options
Options
The above options expired during the period.
-
2,000,000
116,816
116,816
As at
30 Jun 2019
Rights(a)
As at
30 Jun 2018
Rights(a)
As at
30 Jun 2019
$
As at
30 Jun 2018
$
(ii) Performance rights
Performance rights
2,200,000
4,400,000
195,522
98,689
(a) The Company has previously issued performance rights to directors which will convert into ordinary fully paid
shares on achieving certain share market price hurdles. The fair value of the rights has been valued at $0.075
to $0.077 per right. The rights are subject to performance conditions and are amortised over the vesting period
which is up to 20 months from the date of issue. On 30 June 2019, 2,200,000 of these performance rights
expired without achieving the performance hurdle. The relevant expenses are still recognised up to expiry date in
accordance with accounting standard AASB 2.
As at
30 Jun 2019
As at
30 Jun 2018
As at
30 Jun 2019
As at
30 Jun 2018
Notes
Notes
$
$
(iii) Convertible Note reserve
Convertible Note
378,842
409,272
492,405
522,835
(a) The Company has issued the convertible notes in January 2018. The convertible notes were mandatorily
convertible into shares at a fixed price of $0.15 per share in January 2019. Upon conversion, each note
holder will also receive a free attaching $0.10 option for each share issued. The conversion has not
occurred as issue of shares has to be approved by shareholders.
Movement in Convertible Note
Date
Details
1/07/2018
26/10/2018
26/10/2018
30/06/2019
Opening balance
Converting Note repaid
Adjustment to fair value resulting from repayment
Closing balance
Number of notes
$
409,272
(28,000)
(2,430)
378,842
522,835
(28,000)
(2,430)
492,405
53
NOTES TO THE CONSOLIDATED ANNUAL REPORTFOR THE YEAR ENDED 30 JUNE 2019SKIN ELEMENTS LIMITED | ANNUAL REPORT 2019For personal use only 15. EARNINGS PER SHARE
Loss attributable to ordinary shareholders
Weighted average number of ordinary shares used as the
denominator in calculated basis earnings per shares
Year Ended
30 Jun 2019
Year Ended
30 Jun 2018
$
$
(1,967,761)
(2,728,114)
136,771,476
78,062,200
Basic loss per share calculation (12mths loss / weighted ave shares)
(0.014)
(0.0359
16. SEGMENT REPORTING
Year ended 30 June 2019
Segment Revenue*
Expenses
Interest income
Consultants fees
Amortisation
Share Based Payments
Operations
Corporate &
Administration
Company
798,107
-
798,107
-
(278,604)
(390,793)
74
(212,097)
-
-
(96,833)
74
(490,701)
(390,793)
(96,833)
Segment net operating loss after tax
(1,329,388)
(638,373)
(1,967,761)
Year ended 30 June 2018
Segment Revenue*
Significant items
Interest income
Consultants fees
Amortisation
Share Based Payments
838,292
-
838,292
-
(156,391)
(301,977)
74
(669,717)
-
-
(98,689)
74
(826,108)
(301,977)
(98,689)
Segment net operating loss after tax
(1,372,056)
(1,356,058)
(2,728,114)
* Revenue in both 2018 and 2019 financial years are from the sale of goods and are recognised at a point in time.
Segment assets
At 30 June 2019
At 30 June 2018
Segment liabilities
At 30 June 2019
At 30 June 2018
9,766,820
10,095,169
134,533
204,258
9,901,353
10,299,427
(207,322)
(338,438)
(498,886)
(471,948)
(706,208)
(810,386)
54
NOTES TO THE CONSOLIDATED ANNUAL REPORTFOR THE YEAR ENDED 30 JUNE 2019SKIN ELEMENTS LIMITED | ANNUAL REPORT 2019For personal use only 17. KEY MANAGEMENT PERSONNEL
Short term
Post employment benefits
Share based payments
Year Ended
30 Jun 2019
$
Year Ended
30 Jun 2018
$
608,000
-
96,833
704,833
681,333
-
56,243
738,076
Detailed remuneration disclosures are provided in the remuneration report within the directors’ report.
18. RELATED PARTY TRANSACTIONS
The Group may enter into agreements for services rendered with individuals (or an entity that is associated with
the individuals) during the ordinary course of business.
A number of entities associated with the directors and select technical staff have consulting agreements in
place which have resulted in transactions between the Group and those entities during the year. The terms and
conditions of those transactions were no more favourable than those available, or which might reasonably be
expected to be available, on similar transactions to unrelated entities on an arm’s length basis.
Transaction Value
Outstanding Balance
30 Jun 2019
30 Jun 2018
30 Jun 2019
30 Jun 2018
$
$
$
$
Director
Transaction
Luke Martino (i)
Corporate advisory services
79,038
223,283
11,437
67,201
Technical personnel
Craig Piercy (ii)
Office facilities
-
23,000
-
-
(i) A company associated with Mr Martino, Indian Ocean Advisory Group, to which Mr Martino is one of the
directors, provided professional accounting and corporate advisory services in the both periods. In the prior
year the Company also settled part of amounts owing in respect of service provided during the Company’s
IPO by the issue of 500,000 shares with a fair value of $100,000.
(ii) A company of which Mr Piercy is a Director, Boston Corporate Pty Ltd, provides consulting services in
connection with the operations of the Company in addition to provision of office facilities to the Company.
Convertible notes
During prior year the Company extinguished borrowings by way of issuing convertible notes. The following
transactions occurred with related parties during the prior period 2017/18:
Boston Corporate Pty Ltd
LJM Capital Corporation Pty Ltd
Colosseum Securities Pty Ltd
Essential Property Pty Ltd
Balance at the
start of the year
1/7/2017
$
-
-
-
-
Amount of
notes issued
Amounts
extinguished
$
77,718
60,500
7,150
29,145
174,513
$
-
-
-
-
Closing
balance
30/6/2018
$
77,718
60,500
7,150
29,145
Fair Value
$
106,162
82,644
9,767
39,812
174,513
238,385
The Company fair valued the notes at $238,385. The convertible notes were mandatorily convertible into shares
at a fixed price of $0.15 per share in January 2019. Upon conversion, each note holder will also receive a free
attaching $0.10 option for each share issued. The conversion has not occurred as issue of shares has to be
approved by shareholders.
55
NOTES TO THE CONSOLIDATED ANNUAL REPORTFOR THE YEAR ENDED 30 JUNE 2019SKIN ELEMENTS LIMITED | ANNUAL REPORT 2019For personal use only Borrowings
Convertible Notes*
As at 30 June 2019
As at 30 June 2018
$
$
200,000
200,000
-
-
* During the year the company entered into a convertible note arrangement with Henan Hetuo Health Management
Co, Ltd (HHHM) with the following key terms:
Interest rate: 0%
.
. Maturity: 31 December 2019
. Conversion terms: $0.016 per share
The Group also obtained funding from entities and associates of three executives of the Company during the
previous year:
Movements in related party loans
Opening balance
Amounts borrowed
Amounts repaid
Conversion of debt to notes (refer above)
Closing balance
For the terms and conditions, refer to note 14 above.
As at
30 June 2019
$
As at
30 June 2018
$
-
-
-
-
-
44,201
62,662
-
(106,863)
-
Director / Technical personnel
Peter Malone
Luke Martino
Craig Piercy
No. of Listed Options
in SEL (i) (iii)
No. of Unlisted Options
in SEL (ii) (iii)
5,065,390
625,000
2,285,162
5,065,390
625,000
2,285,162
(i) Listed options exercisable at $0.20 each on or before 31 October 2018 (expired).
(ii) Unlisted options exercisable at $0.30 each on or before 30 November 2018 (expired).
(iii) As approved at the 2018 Annual General Meeting, the holders of the legacy options were awarded
one-for-one basis were issued replacement options converting at $0.10 and expiring on 31 December 2020.
56
NOTES TO THE CONSOLIDATED ANNUAL REPORTFOR THE YEAR ENDED 30 JUNE 2019SKIN ELEMENTS LIMITED | ANNUAL REPORT 2019For personal use only
19. FINANCIAL RISK MANAGEMENT
General
This note explains the Group’s exposure to financial risks and how these risks could affect the Group’s future
financial performance. Current year profit or loss information has been included where relevant to add further
context.
The Groups financial instruments consist mainly of bank deposit accounts, trade accounts receivable, other
amounts receivable, trade accounts payable, and other payable including amounts payable to related parties.
The totals for each category of financial instrument, measured in accordance with AASB9 Financial Instruments
as detailed in the accounting policies are as follows:
Categories of financial instruments
Financial assets
Cash and cash equivalents
Trade and other receivables
Financial liabilities
Trade and other payables
Convertible Note - HHHM
As at
30 June 2019
As at
30 June 2018
$
$
116,238
25,689
141,927
(506,208)
(200,000)
(706,208)
195,661
36,509
232,170
(810,386)
-
(810,386)
Financial Risk Management Policies
The Boards overall risk management strategy seeks to assist the Company in meeting its financial targets,
while minimising potential adverse effects on financial performance. Risk management policies are approved
and reviewed by the Board on a regular basis. These include the credit risk policies and future cash flow
requirements. Senior executives meet on a regular basis to analyse financial risk exposure in the context of
the most recent economic conditions and forecasts. The overall risk management strategy seeks to assist the
Group in meeting its financial targets, while minimising potential adverse effects on financial performance.
Specific Financial Risk Exposures and Management
The main risk of the Company is exposed to, through its financial instruments, are credit risk, liquidity risk,
and market risk relating to interest rate risk and other price risk. There have been no substantive changes in
the types of risks the Company is exposed to, how these risks arise, or the Boards objectives, policies and
processes for managing or measuring the risks from the previous period.
57
NOTES TO THE CONSOLIDATED ANNUAL REPORTFOR THE YEAR ENDED 30 JUNE 2019SKIN ELEMENTS LIMITED | ANNUAL REPORT 2019For personal use only 19. FINANCIAL RISK MANAGEMENT (cont’d)
Credit Risk
Exposure to credit risk relating to financial assets arises from the potential non-performance by counterparties
of contract obligations that could lead to a financial loss to the Company. The Company’s objective in managing
credit risk is to minimise the credit losses incurred, mainly on trade and other receivables. Credit risk is
managed through maintaining procedures that ensure, to the extent possible, that clients and counterparties to
transactions are of sound credit worthiness and their financial stability is monitored and assessed on a regular
basis. Such monitoring is used in assessing receivables for impairment. Credit terms for normal sales income
are generally 30 days from the day of invoice. For sales with longer settlements, terms are specified in the
individual client contracts. The maximum exposure to credit risk by class of recognised financial assets at the
end of the reporting period is equivalent to the carrying amount and classification of those financial assets as
presented in the statement of financial position. The Company has no significant concentrations of credit risk
with any single counterparty or group of counterparties. Details with respect to credit risk of trade and other
receivables are provided in note 5. Trade and other receivables that are neither past due nor impaired are
considered to be of high credit quality. All cash and cash equivalents are held with large reputable financial
institutions within Australia and therefore credit risk is considered minimal.
Liquidity Risk
Liquidity risk arises from the possibility that the Company might encounter difficulty in settling its debts or
otherwise meeting its obligations related to financial liabilities. The Company is not currently exposed to any
significant liquidity risk on the basis that the realisable value of financial assets is significantly greater than
the financial liabilities due for settlement after the receipt of cash from the capital raising in August 2018. The
Company manages its liquidity risk through the following mechanisms: preparing forward looking cash flow
analysis in relation to its operating, investing and financing activities; maintaining a reputable credit profile;
managing credit risk related to financial assets; only investing surplus cash with major financial institutions; and
comparing the maturity profile of financial liabilities with the realisation profile of financial assets. Cash flows
realised from financial liabilities reflect management’s expectation as to the timing of realisation timing may
therefore differ from that disclosed.
Less
than 6
months
6 – 12
months
Between
1 and 2
years
Between
2 and 5
years
Total
contractual
cash
flows
Carrying
Amount
(assets)/
liabilities
$
$
$
$
$
$
(184,880)
(321,328)
(200,000)
(506,208)
(200,000)
(236,139)
(574,247)
(810,386)
(184,880)
(184,880)
(321,328)
(321,328)
(200,000)
(200,000)
(706,208)
(706,208)
(236,139)
(236,139)
(574,247)
(574,247)
(810,386)
(810,386)
Contractual maturities of
financial liabilities
At 30 June 2019
Trade payables
Other Payables
Convertible note
At 30 June 2018
Trade payables
Other Payable
Market Risk
The Company has minimal exposure to foreign exchange risk or interest rate risk.
58
NOTES TO THE CONSOLIDATED ANNUAL REPORTFOR THE YEAR ENDED 30 JUNE 2019SKIN ELEMENTS LIMITED | ANNUAL REPORT 2019For personal use only 19. FINANCIAL RISK MANAGEMENT (cont’d)
Capital Management
The Groups objectives when managing capital are to:
(i) Safeguard their ability to continuing as a going concern so that they can continue to provide returns for
shareholders and benefits for other stakeholders; and
(ii) Maintain an optimal capital structure to reduce the cost of capital.
In order to maintain or adjust the capital structure the Group may issue new shares or obtain additional
borrowing facilities. The group monitors capital based on the assessment of the working capital requirements
and net cash available on a monthly basis. The 30 June net cash available calculation is set out below:
Cash and cash equivalents
Trade and other receivables
Research and development receivable
Trade and other payables
Convertible Note
As at
30 June 2019
$
As at
30 June 2018
$
116,238
25,688
649,452
791,378
(506,208)
(200,000)
195,661
82,567
450,181
919,664
(810,386)
-
Working capital available
85,170
109,278
Fair value estimation
The fair value of financial assets and liabilities must be estimated for recognition and measurement or for
disclosure purposes. The directors consider that the carrying amount of financial assets and financial liabilities
recorded in the financial statements approximates their fair values as the carrying value less impairment
provision of trade receivables and payables are assumed to approximate their fair values due to their short-
term nature.
Financial Instruments Measured at Fair Value
The Company does not currently have a significant fair value issues with regard to level 1 (active market for
the financial instruments, level 2 (not traded in an active market) or level 3 (significant inputs is not based on
observable market data) as the fair value estimates relate trade payables and receivables.
The Company considers capital to include, share capital, loans and borrowings and convertible notes.
59
NOTES TO THE CONSOLIDATED ANNUAL REPORTFOR THE YEAR ENDED 30 JUNE 2019SKIN ELEMENTS LIMITED | ANNUAL REPORT 2019For personal use only
20. COMMITMENTS
Year Ended
30 Jun 2019
$
Year Ended
30 Jun 2018
$
The Group has entered into commercial leases on office premises at 32 Ord Street. The lease runs for three
years on commercial terms. The remaining commitments are below.
Within one year
After one year but not more than five years
More than five years
85,333
-
-
85,833
103,000
85,833
-
188,833
21. PARENT ENTITY DISCLOSURE
As at
30 June 2019
$
As at
30 June 2018
$
3,788,557
5,593,377
9,381,934
(281,181)
-
(281,181)
17,135,129
997,215
(8,937,199)
9,195,145
2,807,137
7,112,813
9,919,950
(430,908)
-
(430,908)
15,433,333
738,341
(6,682,632)
9,489,042
Year Ended
30 Jun 2019
Year Ended
30 Jun 2018
(735,131)
-
(735,131)
(1,438,778)
-
(1,438,778)
Financial position
Assets
Current assets
Non-current assets
Total assets
Liabilities
Current liabilities
Non-current liabilities
Total liabilities
Equity
Issued capital
Reserves
Accumulated losses
Total equity
Financial performance
(Loss) for the year
Other comprehensive income
Total comprehensive loss
60
NOTES TO THE CONSOLIDATED ANNUAL REPORTFOR THE YEAR ENDED 30 JUNE 2019SKIN ELEMENTS LIMITED | ANNUAL REPORT 2019For personal use only
22. SUBSIDIARIES
The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries
in accordance with the accounting policy described in note 1(c).
Name
Country of Incorporation
Class of share
SE Operations Pty Ltd
Australia
Ordinary shares
2019
%
100
2018
%
100
23. AUDITOR REMUNERATION
Amounts received or due and receivable by BDO
Audit (WA) Pty Ltd and its associated entities for:
Assurance Services
An audit and review of the financial report for the Group
Non- Assurance Services
Independent Expert Report
Year Ended
30 Jun 2019
$
Year Ended
30 Jun 2018
$
54,841
48,815
103,656
47,337
-
47,337
24. CONTINGENT LIABILITIES
The directors are not aware of any contingent liabilities as at 30 June 2019.
25. SUBSEQUENT EVENTS
In the opinion of the directors, no items, transactions or events of a material and unusual nature have arisen
in the interval between the end of the financial year and the date of this report which have been significantly
affected the amount disclosed in the annual report.
61
NOTES TO THE CONSOLIDATED ANNUAL REPORTFOR THE YEAR ENDED 30 JUNE 2019SKIN ELEMENTS LIMITED | ANNUAL REPORT 2019For personal use only
In the opinion of the directors of Skin Elements Limited:
a.
the financial statements and notes set out on pages 31 to 61 are in accordance with the Corporations Act
2001, including:
i.
giving a true and fair view of the consolidated entity’s financial position as at 30 June 2019 and of its
performance for the year then ended; and
ii. complying with Australian Accounting Standards (including the Australian Accounting Interpretations)
and the Corporations Regulations 2001; and other mandatory professional reporting requirements;
b. there are reasonable grounds to believe that the Company will be able to pay its debts as and when they
become due and payable.
c.
the consolidated financial statements and notes thereto are in accordance with International Financial
Reporting Standards issued by the International Accounting Standards Board.
d. this declaration has been made after receiving the declarations required to be made to the directors in
accordance with Section 295A of the Corporations Act 2001 for the financial year ended 30 June 2019.
This declaration is signed in accordance with a resolution of the board of directors made pursuant to section
295(5)(a) of the Corporations Act 2001.
Signed in accordance with a resolution of the directors.
Peter Malone
Executive Chairman
Dated at Perth, Western Australia this 30th day of September 2019.
62
DIRECTORS’ DECLARATIONSKIN ELEMENTS LIMITED | ANNUAL REPORT 2019For personal use only
Tel: +61 8 6382 4600
Fax: +61 8 6382 4601
www.bdo.com.au
38 Station Street
Subiaco, WA 6008
PO Box 700 West Perth WA 6872
Australia
INDEPENDENT AUDITOR'S REPORT
To the members of Skin Elements Limited
Report on the Audit of the Financial Report
Qualified opinion
We have audited the financial report of Skin Elements Limited (the Company) and its subsidiaries (the
Group), which comprises the consolidated statement of financial position as at 30 June 2019, the
consolidated statement of profit or loss and other comprehensive income, the consolidated statement
of changes in equity and the consolidated statement of cash flows for the year then ended, and notes
to the financial report, including a summary of significant accounting policies and the directors’
declaration.
In our opinion, except for the effects of the matter described in the Basis for qualified opinion section
of our report, the accompanying financial report of the Group, is in accordance with the Corporations
Act 2001, including:
(i)
Giving a true and fair view of the Group’s financial position as at 30 June 2019 and of its
financial performance for the year ended on that date; and
(ii)
Complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for qualified opinion
Included in the consolidated statement of financial position as at 30 June 2019 is technology and
formula Intangible assets of $8,995,117 as disclosed in note 9 and note 1(p)(i). Due to sustained
operating losses, the Group has undertaken an impairment assessment of its Intangible in accordance
with AASB 136 Impairment of assets.
Due to the significant variability of the future cash flows of the asset, we were unable to satisfy
ourselves as to the appropriateness and reliability of the forecast of future cashflows that was included
in the impairment model. Therefore we were unable to obtain sufficient appropriate audit evidence
about the carrying value of the Intangible assets as at 30 June 2019.
Consequently we were unable to determine whether any adjustments to the carrying value of the
Intangible asset in the statement of financial position are necessary for the year ended 30 June 2019.
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s responsibilities for the audit of the Financial
Report section of our report. We are independent of the Group in accordance with the Corporations
Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s
APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the
financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance
with the Code.
We confirm that the independence declaration required by the Corporations Act 2001, which has been
given to the directors of the Company, would be in the same terms if given to the directors as at the
time of this auditor’s report.
BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050 110 275,
an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited by guarantee, and
form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation.
63
SKIN ELEMENTS LIMITED | ANNUAL REPORT 2019INDEPENDENT AUDITOR’S REPORTFor personal use only We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our qualified opinion.
Emphasis of matter – Material uncertainty relating to going concern
We draw attention to Note 1(c) in the financial report which describes the events and/or conditions
which give rise to the existence of a material uncertainty that may cast significant doubt about the
Group’s ability to continue as a going concern and therefore the Group may be unable to realise its
assets and discharge its liabilities in the normal course of business. Our conclusion is not modified in
respect of this matter.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in
our audit of the financial report of the current period. These matters were addressed in the context of
our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide
a separate opinion on these matters. In addition to the matters described in the Basis for qualified
opinion and Material uncertainty related to going concern sections, we have determined there are no
key audit matters to be communicated in our report.
Other information
The directors are responsible for the other information. The other information comprises the
information contained in Directors’ report for the year ended 30 June 2019, but does not include the
financial report and our auditor’s report thereon, which we obtained prior to the date of this auditor’s
report, and the Annual report, which is expected to be made available to us after that date.
Our opinion on the financial report does not cover the other information and we do not express any
form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information
identified above 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 that we 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.
When we read the Annual report, if we conclude that there is a material misstatement therein, we are
required to communicate the matter to the directors and will request that it is corrected. If it is not
corrected, we will seek to have the matter appropriately brought to the attention of users for whom
our report is prepared.
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.
64
INDEPENDENT AUDITOR’S REPORTSKIN ELEMENTS LIMITED | ANNUAL REPORT 2019For personal use only In preparing the financial report, the directors are responsible for assessing the ability of the group to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to liquidate the Group or to cease
operations, or has 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.
A further description of our responsibilities for the audit of the financial report is located at the
Auditing and Assurance Standards Board website (http://www.auasb.gov.au/Home.aspx) at:
http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf
This description forms part of our auditor’s report.
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 19 to 28 of the directors’ report for the
year ended 30 June 2019.
In our opinion, the Remuneration Report of Skin Elements Limited, for the year ended 30 June 2019,
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.
BDO Audit (WA) Pty Ltd
Wayne Basford
Director
Perth, 30 September 2019
65
SKIN ELEMENTS LIMITED | ANNUAL REPORT 2019INDEPENDENT AUDITOR’S REPORTFor personal use only SKIN ELEMENTS LIMITED | ANNUAL REPORT 2019
ADDITIONAL INFORMATION
ADDITIONAL INFORMATION IN ACCORDANCE WITH LISTING RULES OF THE ASX LIMITED.
Fully paid ordinary shares
Substantial Shareholder Information as at 25 September 2019
Shareholder Name
Sovereign Empire Pty Ltd
Prosperity Finance Co Limited
Mgold Pty Ltd
Securities
%
15,196,172
10,000,500
9,112,572
Listed options exercisable at $0.10 on or before 31 December 2020
Holder of 5% or more listed options expiry 31 December 2020 as at 25 September 2019
Options Holder Name
Sovereign Empire Pty Ltd
Prosperity Finance Co Limited
Mgold Pty Ltd
Sovereign Equities Pty Ltd
Fully paid ordinary shares
Distribution of Shareholders as at 25 September 2019
Securities
%
11,397,128
10,000,650
8,334,429
5,141,608
10.04
6.61
6.02
14.71
12.91
10.76
6.64
Spread of Holdings
NIL holding
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 - 9,999,999
Listed Options exercisable at $0.10 on or before 31 December 2020
Distribution of Options holders as at 25 September 2019
Spread of Holdings
NIL holding
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 - 9,999,999
Holders
Securities
-
12
27
111
191
165
506
-
4,501
103,866
1,078,168
7,845,235
153,432,070
162,463,840
Holders
Securities
-
9
122
34
122
100
387
-
4,577
551,547
281,209
5,705,615
76,476,461
83,019,409
66
For personal use only SKIN ELEMENTS LIMITED | ANNUAL REPORT 2019
ADDITIONAL INFORMATION
ADDITIONAL INFORMATION IN ACCORDANCE WITH LISTING RULES OF THE ASX LIMITED.
Fully paid ordinary shares
Top Twenty Shareholders as at 25 September 2019
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
SOVEREIGN EMPIRE PTY LTD
PROSPERITY FINANCE CO LIMITED
MGOLD PTY LTD
CITICORP NOMINEES PTY LIMITED
SOVEREIGN EQUITIES PTY LTD
BRAUNII PTY LTD
EQUITIES SERVICES PTY LTD
TOP OCEANIA INTERNATIONAL LIMITED
PLATYPUS INVESTMENTS GROUP PTY LTD
POLARITY B PTY LTD
PERPETUAL CAPITAL INVESTMENTS PL
TOM MCARTHUR PTY LTD
BLACKRIDGE GROUP PTY LTD
FLYHALF WA PTY LTD
NINETY THREE PTY LTD
CLARE MALONE
JAMES OWEN MOSES
LJM CAPITAL CORPORATION PTY LTD
Q SERVICES HOLDINGS PTY LTD
IMPACT NOMINEES PTY LTD
15,196,172
10,000,500
9,112,572
6,867,042
6,855,488
5,768,234
4,642,857
4,475,000
4,000,000
3,637,476
3,021,429
3,000,000
3,000,000
2,500,000
2,250,000
2,250,000
1,921,062
1,875,000
1,753,177
1,500,000
Total
93,626,009
Balance of register
68,837,831
Grand total
162,463,840
The shares carry the right to one vote for each ordinary share held
Unmarketable parcels
The number of shareholders with Holdings less than a marketable parcel of ordinary shares as at 25
September 2019 was 150, holding 1,186,535 shares.
Restricted Securities
There are no restricted voting rights attaching to ordinary shares.
On-Market Buy Back
There is no current on-market buy-back.
10.04
6.16
5.61
4.23
4.22
3.55
2.86
2.75
2.46
2.24
1.86
1.85
1.85
1.54
1.38
1.74
1.18
1.15
1.08
0.92
57.63
42.37
100.00
67
For personal use only SKIN ELEMENTS LIMITED | ANNUAL REPORT 2019
ADDITIONAL INFORMATION
ADDITIONAL INFORMATION IN ACCORDANCE WITH LISTING RULES OF THE ASX LIMITED.
Listed Options exercisable at $0.10 on or before 31 December 2020
Top Twenty Listed options Holders as at 24 September 2019
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
SOVEREIGN EMPIRE PTY LTD
PROSPERITY FINANCE CO LTD
MGOLD PTY LTD
SOVEREIGN EQUITIES PTY LTD
EQUITIES SERVICES PTY LTD
TOP OCEANIA INTERNATIONAL LIMITED
CLARE MALONE
BRAUNII PTY LTD
LJM CAPITAL CORPORATION PTY LTD
HEKIMA PTY LTD
POLARITY B PTY LTD
PLATYPUS INVESTMENTS GROUP PL
ROBIN ARMSTRONG
CALIBRE CAPITAL INC
BLACKRIDGE GROUP PTY LTD
ROBIN GERALD ARMSTRONG
ENRICO MATTIACCIO
CHRIS SMAILES & SHARON SMAILES
MR GEORGE ADAM MITCHELL TENNENT
LAKEHOUSE ENTERPRISES PTY LTD
11,397,128
10,000,500
8,334,429
5,141,608
2,321,429
2,237,500
1,687,500
1,515,357
1,406,250
1,333,334
1,000,000
1,000,000
900,000
875,000
750,000
750,000
657,354
625,000
587,500
571,154
Total
53,051,043
Balance of register
29,928,366
Grand total
83,019,409
13.73
12.05
10.04
6.19
2.80
2.70
2.03
1.83
1.69
1.61
1.20
1.20
1.08
1.05
0.90
0.90
0.79
0.75
2.01
0.69
63.95
36.05
100.00
68
For personal use only For personal use only Skin Elements Limited (ASX:SKN)
32 Ord Street West Perth, Western Australia, 6005
Australia
P 08 6311 1900
F 08 6311 1999
www.skinelementslimited.com
For personal use only