post COVID20
20
12future ready
12future ready
S K I N E L E M E N T S
L I M I T E D ABN 90 608 047 794
and its controlled entities
Annual Report 2021
2021
highlights
Skin Elements develops
the world’s first plant
based technology
Hospital Grade
Disinfectant~SuprCuvr
SuprCuvr is the first
and only approved
disinfectant globally
with a 99.99999%
effectiveness against
COVID-19 coronavirus
SuprCuvr is
included on the
Australian Register of
Therapeutic Goods
SuprCuvr is certified by
NASAA certified organic
(National Association for Sustainable
Agriculture Australia)
In 2021 Skin Elements
invested over 15,000
hours on R&D
$35 million invested
in research and
development
(AusIndustry certified Research and
development programme)
Skin Elements Limited is well funded to deliver on its business strategy:
$2.1 million
placement
completed
$20 million
funding facility
secured
$2.0 million
Rights Issue to shareholders announced
SuprCuvr is certified by
NASAA certified organic
(National Association for Sustainable
Agriculture Australia)
New online ecommerce website to be
launched Early November 2021
www.suprcuvr.com
ANNUAL REPORT 2021
Page 1
Contents
1 Highlights
2 Corporate Directory
4 Chairmans Report
6 Review of Operations
The creation of
SuprCuvr
10 Market Opportunities
12 Our Brands
16 Board of Directors
17 Financial Contents
Corporate
Directory
SKIN ELEMENTS LIMITED
and controlled entities
ABN 90 608 047 794
CURRENT DIRECTORS
Peter Malone (Executive Chairman)
Phil Giglia (Non-executive Director)
Lee Christensen (Non-executive
Director)
COMPANY SECRETARY
Phil Giglia
REGISTERED OFFICE AND
PRINCIPAL PLACE OF BUSINESS
1242 Hay 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
SECURITIES EXCHANGE
Australian Securities Exchange
Level 40, Central Park 152-158 St
George’s Terrace, PERTH WA 6000
Telephone: 131 ASX (131 279)
(within Australia)
Telephone: +61 (0)2 9338 0000
Facsimile: +61 (0)2 9227 0885
Website:
ASX Code: SKN
www.asx.com.au
AUDITORS
BDO Audit (WA) Pty Ltd
38 Station Street
Subiaco WA 6008
SHARE REGISTRY
Link Market Services Limited
Level 12, QV1 Building,
250 St Georges Terrace
PERTH WA 6000
Telephone (within Australia):
1300 554 474
Telephone (outside Australia):
+61 1300 554 474
Facsimile +61 (0)8 6370 4203
Email:
registrars@linkmarketservices.com.au
Page 2
ANNUAL REPORT 2021
Safety and health
are fundamental
requirements to reach
educational goals
ANNUAL REPORT 2021
Page 3
Chief Executive
Officer’s Report
CEO Peter Malone
Future ready
means we
have the
technology to
help our
planet survive
and recover.
Dear Shareholder,
I am pleased to present the Skin
by the Company in life sciences
The TGA registration allows the
Elements Limited Annual Report for the
research, over a 15 year period.
Company to make detailed and specific
year ended 30 June 2021.
product and label claims in respect
In addition, independent laboratory
of the product. It also allows us to
As the impact of the COVID-19
testing of SuprCuvr confirmed that
commence our commercialisation and
coronavirus pandemic continued to
the product has 99.99999% (7 log
growth strategy for SuprCuvr - as many
be felt globally throughout the year,
reduction) effectiveness against
distributors and potential sales partners
Skin Elements continued our focus on
COVID-19 coronavirus. The Company’s
require TGA registration as a pre-
advancing the development, regulatory
research indicates that this result
requisite for any disinfectant products
registration and plans to commercialise
makes SuprCuvr the first and only
they propose to use.
the SuprCuvr, plant based Hospital
approved disinfectant globally with
Grade disinfectant and the alcohol-free
such a high score against COVID-19
This marketing strategy for SuprCuvr
sanitiser product range.
coronavirus.
is now a prime focus. We are seeking
to enter into commercial-scale sales
This work culminated in the Company
The combination of world leading,
and distribution opportunities in
securing Therapeutic Goods
exceptionally high efficacy in a 100%
hospitals and aged care settings, as well
Administration (TGA) registration
plant-based formula represents
as in hotels, offices, airports, public
for SuprCuvr as a Hospital-Grade
an significant opportunity for the
transport hubs – and for use within the
disinfectant. This body of work is
Company and SuprCuvr in large-
home.
something that we are immensely
scale settings where disinfectants are
During the year, SuprCuvr was also
proud of, and the TGA registration is
deployed.
the result of a $35 million investment
certified as a 100% botanical-based
certified organic input by NASAA
With SuprCuvr now TGA registered,
(National Association for Sustainable
Skin Elements is future ready to play its
Agriculture Australia) Organic and
part in helping global communities to
recover and survive.
Page 4
ANNUAL REPORT 2021
SuprCuvr
Biodynamic Standard. This is an
based institutional investment group,
in what continues to be challenging
important certification as it is a
LDA Capital. This facility will provide
times for communities, business and
reflection of the Company’s
substantial funding to help us execute
individuals alike in a COVID impacted
commitment to its natural and organic
our growth plans for SuprCuvr, and
world.
philosophy across its entire product
the entire product range. Separately,
range.
we also completed a placement, which
I look forward to sharing news of our
raised $2.1 million to support our
progress in the year ahead.
In addition to the focus on SuprCuvr,
business plans.
the Company’s commitment to its
range of other natural and organic skin
We have announced a $2.0 million
care products remained unchanged.
Rights Issue for all shareholders and I
recommend shareholders to partake in
These products include the flagship
this issue.
Soléo Organics sunscreen range,
PapayaActivs range of therapeutic
I would like to acknowledge the
skin treatments and the Elizabeth Jane
dedication and commitment of the
Natural Cosmetics range, and we look
Skin Elements’ team - from board
forward to expanding the distribution
and management, and staff, to our
and sales of these exciting products in
contractors and consultants – to
the year ahead.
achieving our goals for the business.
During the year, we secured a $20
Finally, I would like to thank all
million equity funding facility with US-
shareholders for their ongoing support,
Peter Malone
Executive Chairman and CEO
ANNUAL REPORT 2021
Page 5
Review of
Operations
The creation of SuprCuvr
As announced in the second half of
As part of Skin Elements ongoing
The use of sanitisers and disinfectants
2020 our company pivoted its natural
assessment of its R&D and product
has increased exponentially since the
technology programme to develop
development programs, it pays close
onset of the pandemic. People all over
an organic range of sanitisers and
attention to market needs and the
the globe have become accustomed
disinfectants to combat the COVID-19
opportunities they present. With the
to continuous sanitising practices, and
coronavirus problems that we have all
impact of the COVID-19 coronavirus
to date the overwhelming majority of
had to endure.
pandemic continuing to be felt across
these products have chemicals as their
The launch of SuprCuvr - the world’s
the globe, the Company has assessed
active ingredient.
first and only approved disinfectant
that one of the most important
People’s first and foremost concern is
with 99.99999% effectiveness
goals for people will be to protect
safety and protection against the virus,
against COVID-19 coronavirus is the
themselves and their families from viral
but in parallel there is a growing shift
culmination of a $35 million investment
infections.
in Life Sciences research over a 15 year
in consumer buying patterns towards
safer and environment friendly options.
period.
One of the key planks of the global
If there is a choice between a natural
public health response to the COVID-19
product over a synthetic or chemical-
SuprCuvr has secured Therapeutic
coronavirus pandemic has been to
based product, conscious consumers
Goods Administration (TGA)
ensure that people regularly sanitise
are happy to choose the former,
registration as a Hospital Grade
or disinfect in order to minimise the
especially if it provides a similar, or
Disinfectant, and Skin Elements is
chance of spreading the virus.
higher level of protection – as is the
future ready, to play an active role in
case with SuprCuvr.
helping global communities to recover,
This extends to large public settings
survive and thrive.
such as hospitals, hotels, transport hubs
The response, Skin Elements has
and stadiums, where a similar focus on
developed a plant-based antimicrobial
disinfecting surfaces has been adopted
disinfectant product to combat
to stem the spread of the virus.
COVID-19 coronavirus.
SuprCuvr the
world’s highest rated-
COVID-19 coronavirus killing
disinfectant.
Page 6
ANNUAL REPORT 2021
We have
developed
plant based
antimicrobial
products to
combat
COVID-19
coronavirus.
ANNUAL REPORT 2021
Page 7
Review of
Operations
The creation of SuprCuvr
Skin Elements has secured Therapeutic
commercial-scale distribution and sales
Goods Administration (TGA)
agreements and this activity will be
registration for SuprCuvr as a Hospital
increased over the year ahead.
Grade disinfectant product, and the
Target sectors include hospitals
product has been issued with an ARTG
and aged-care settings, which are
number, 373328. The ARTG is the
restricted to using only TGA registered
register of therapeutic goods that can
disinfectants in their cleaning
be lawfully supplied in Australia.
protocols, and other large-scale
opportunities such as hotels, offices,
The TGA registration of SuprCuvr
airports, public transport hubs – as well
represents a major milestone in the
as for home use.
product’s development timeline. It
Driving sales for SuprCuvr will be a
allows Skin Elements to make detailed
core focus for the Company in the year
and specific product and label claims in
ahead and beyond.
respect of the product.
Skin Elements’ Executive Chairman Mr
It has also paved the way for
Peter Malone said:
Skin Elements to commence its
“We are delighted to have secured
commercialisation and marketing
registration for SuprCuvr with the
strategy for SuprCuvr. Many
Therapeutic Good Administration as a
distributors, potential sales partners
Hospital-Grade Disinfectant. We see
and end users require disinfectant
the potential to provide an efficacious,
products to have TGA registration,
100% plant-based disinfectant in
before they will consider entering into
large commercial settings as a major
any contractual agreements.
opportunity for SuprCuvr and the
With the TGA registration now
Company. With TGA registration now
in place, the Company is pursuing
in place, we plan to drive our sales
and distribution plans for SuprCuvr,
Page 8
ANNUAL REPORT 2021
Conscious consumerism:
Increasing awareness amongst
masses leading to a shift in
buying patterns opting for
natural products over
synthetic chemicals.
with the aim of delivering significant
SuprCuvr has also been approved by
more effective the product is at killing
revenues to the Company, and value
NASAA Certified Organic as a Certified
COVID-19 coronavirus, bacteria
for shareholders.”
Input.
or other pathogens that can cause
infections.
What makes SuprCuvr Different?
The independent laboratory analysis
was conducted by internationally
For example, each higher Log reduction
SuprCuvr has benefited from
recognised Eurofins AMS Laboratories
number is ten times stronger at killing
more than 15 years research and
Pty Ltd, which provides chemical,
pathogens than the last, as is shown in
development by the Skin
microbiological and physical analytical
the following;
Elements’ team in the area of plant-
testing services to many industry
• Log 4 reduction (99.99%) to Log 7
based ingredients and antimicrobials.
sectors.
It is Australian made from a 100%
reduction (99.99999%)
is 1000x stronger.
plant-based proprietary formula that
This world-leading efficacy coupled
is biodegradable, vegan, non-corrosive
with the fact that the product is made
and non-flammable. And, as with all
from plant-based, ingredients, positions
Skin Elements’ products it is cruelty-
SuprCuvr to be a world leader in
free – it has not been tested on
disinfectant COVID-19 coronavirus
animals.
control.
The product does not contain
benzalkonium chloride, hydrogen
In terms of infection control, log
peroxides, quaternary ammonium
reduction conveys the level of
compounds, bleach/chlorine
effectiveness in reducing pathogens.
compounds or other typical chemical
The greater the log reduction, the
ingredients of disinfectant products.
ANNUAL REPORT 2021
Page 9
Future Ready
Markets and
opportunities
Education
Transport
As the world returns to a more
‘normal’ way of life as more people
are vaccinated, public transport will
become more widely used again as a
means of daily transport for people.
This presents a setting for the spread
of COVID-19 coronavirus, with a high
density of people in close proximity to
Against the backdrop of
the impact of COVID-19
coronavirus, the global
antiseptic/disinfectant
market is forecast to
grow from a current
estimated value of
USD23.7 billion to an
estimated value of
USD102 billion by 2028,
The education sector, from primary
each other, in a closed environment.
school age through to secondary
SuprCuvr disinfectant can be safely
schools and university environments, is
sprayed on buses, trains, ferries and
one of concern in terms of virus spread,
other forms of public transport at
as the impact of COVID-19 coronavirus
regular intervals to kill COVID-19
on children continues to evolve. The
coronavirus and provide peace of mind
safety of teachers and other education
to public transport operators and the
personnel is also a key consideration.
travelling public.
As the level of vaccination increases
across populations, and students and
Similarly, the high volume of people
teachers return to face-to-face learning,
typically associated with airports, bus
maintaining a safe environment is of
terminals and other mass transport
vital importance in ensuring there are
hubs will return in time. These
no further disruptions to students’
environments are prime settings for
according to research
learning.
the transmission of viruses, and the
ability to regularly and safely spray
group Grand View
Research.
Skin Elements is future
ready to strongly
pursue this massive
market opportunity.
SuprCuvr can be used safely and
these venues with SuprCuvr offers the
regularly to help ensure a COVID-19
potential to minimise the risk of an
coronavirus free environment for all in
outbreak.
educational settings.
The plant-based formula of SuprCuvr
also means it can be safely used on
surfaces which come into regular
contact with people and food, including
dining settings on board passenger
aircraft and cruise-ships.
Page 10
ANNUAL REPORT 2021
Aged and
Childcare
Stadiums
Hospitals
Medical
Aged care is one of the sectors most
impacted by the COVID-19 coronavirus
pandemic, with aged members of the
population acknowledged as being one
of the highest risk segments of the
community. The ability to use SuprCuvr
proactively and also as an ongoing
maintenance and prevention measure
in aged care facilities has the potential
to form a key part of cleaning protocols
in aged care facilities.
The TGA registration of SuprCuvr
As communities begin to move away
There is increasing concern about the
allows it to be used as an approved
from lockdowns and return to previous
safety of children, including young
disinfectant and comprehensive deep
pastimes and pursuits, crowds are
children, in the community, and
clean of hospitals and medical centres,
starting to be welcomed back to
whether or not they are susceptible to
which have been at the centre of
sporting events at stadiums across the
catching and spreading the COVID-19
COVID-19 coronavirus outbreaks.
globe. Stadiums are a setting which
coronavirus. SuprCuvr not onIy kills all
Ensuring the safe operation of
are susceptible to a viral outbreak,
COVID-19 coronavirus particles, but
hospitals and other medical facilities
with high numbers of people in close
is also able to be sprayed on surfaces
on an ongoing basis will be essential
proximity to each other over an
which young children contact.
in making sure that health systems
extended period of time.
SuprCuvr has the ability to be widely
sprayed throughout venues, safely
and quickly. The Company is also
investigating innovative ways to deploy
SuprCuvr in large settings such as
stadiums, to spray targeted surfaces.
can adequately meet the demands
and needs of their populations, and
SuprCuvr has the potential to be widely
deployed in hospitals and other medical
environments.
Testing results of SuprCuvr have
also shown its ability to kill other
potentially-dangerous pathogenic
bacteria, including E.coli and
Staph.aureus that can be present in
hospital settings.
ANNUAL REPORT 2021
Page 11
Our Brands
The SE Formula story
Soléo Organics is the product that
Washington Post, Elle magazine and
began the journey for Skin Elements
EWG. Its key ingredients have been
to offer a range of high-performing
specially selected based on scientific
skincare products that utilise only
research, and it is totally free of
natural, plant-based ingredients.
synthetic preservatives, chemical UV
The Company began formulating its
dioxide, SLS and petroleum by-
absorbers, nano particles, titanium
SE Formula in 2005, with a vision to
products.
provide consumers with a naturally
formulated alternative to common
The product is innovatively designed
synthetic skincare products. The
with a patented non-whitening
result is a breakthrough, all natural
(micronised) clear zinc, and uses zinc
and organic sunscreen, innovatively
oxide as the active ingredient to
formulated according to naturopathic
provide broad spectrum (UVA and
principles.
UVB) protection from the harsh rays
of the sun, while providing care and
Soléo Organics is very high protection
protection for the skin, via botanical
SPF30, broad spectrum sunscreen
extracts and anti-oxidants.
which protects from both UV-A and
UV-B solar radiation while providing
Soléo Organics forms a protective layer
natural moisturising skin care from its
on the skin so that both UVA rays, the
botanical-extract ingredients.
leading cause of premature ageing of
Soléo Organics has won multiple
cause of sunburn, are reflected from
the skin, and UVB rays, the leading
global awards as the number one sun
the skin’s surface.
care product, including from The
The product is also designed to
be environmentally friendly, from
its packaging to its contents. The
packaging material and container
vessel are made from 100% recyclable
material, and the contents of Soléo
Organics is 100% all natural and
biodegradable.
Skin Elements’ mission is to improve
the health and well-being of people
globally, by providing a natural
alternative to typical mass-produced
chemical sunscreens, and the Soléo
Organics range is now shipped to
international markets across the globe.
The product is suitable for use by all
ages, in fresh water and salt water, and
is non comedogenic.
Page 12
ANNUAL REPORT 2021
Skin Elements mission is
to improve the health and
well-being of people
globally, by providing a
natural alternative to
typical mass-produced
chemical sunscreen.
PapayaActivs is the only
pawpaw cream to have a 60%
(600mg/g) concentration of
natural pawpaw extract -
the highest concentration of
pawpaw extract in the
market.
brands’ products contain just 3% to 8%
pawpaw extract, making our products
up to 20 times more concentrated than
rival brands.
PapayaActivs contain 100% natural
natural ingredients including
chickweed, aloe vera, chamomile and
arnica. The product range does not
contain any parabens, petrochemicals
Indevelopment, the Elizabeth Jane
or sodium lauryl sulphate.
product range seeks to deliver a
cosmetics skincare range utilising
The product range is listed on
only high quality natural and organic
the TGA’s Australian Register of
ingredients. Cosmetics represents a
Therapeutic Goods and is designed
multi-billion-dollar global industry,
to help relieve skin conditions like
and Skin Elements has developed the
psoriasis, dermatitis, rashes and
Elizabeth Jane Natural Cosmetics range
eczema; assist in healing minor burns
with a vision to offer a natural, plant-
and wounds; and relieve mild muscle,
based alternative to typical chemical-
joint and arthritic pain
based cosmetics.
Skin Elements ~
Elizabeth Jane
Natural Cosmetics
The product range includes; age-defy
renewal cream, snow white brightening
essence, delicate eyes rejuvenation
gel, intensive recovery night cream,
purifying foam cleanser, hydra-fresh
revitalizing spritzer, daily revival
moisturising cream, ultra C+ serum and
gentle micro-dermabrasion facial polish
Elizabeth Jane Natural Cosmetics
formulae are a unique combination of
cutting-edge science and innovation
partnering with all natural ingredients
plus vitamins, and is made in Australia.
Key ingredients are specially selected
based on independent scientific
research
Skin Elements ~
PapayaActivs
PapayaActivs - natural therapeutics
product range
Skin Elements’ PapayaActivs natural
therapeutics product range was
born out of the Company’s strategic
acquisition of McArthur Skincare in
2017, and has helped expand its natural
skincare product portfolio.
Skin Elements continued to research
the process of extracting SE Papaya
Formula and to enhance and refine
the benefits of SE Papaya Formula in
providing relief for a range of skin
conditions.
This body of work resulted in the
launch of the PapayaActivs range
including: Psoriasis, Dermatitis and
Rashes Cream, Eczema Cream, Arthritis
Cream, Wounds and Burns Cream, and
Muscle Aches and Pain Cream.
The PapayaActivs product range
combines the power of Papaya with
proven ingredients traditionally used in
herbal medicine. It is the only pawpaw
The Elizabeth Jane Natural Cosmetics
cream to have a 60% (600mg/g)
skincare range has been developed
concentration of natural pawpaw
utilising the same philosophy, of using
extract - the highest concentration of
natural, plant-based ingredients, which
pawpaw extract in the market. Other
underpins the Company’s approach to
all its R&D and product development
activities.
ANNUAL REPORT 2021
Page 15
The combination
of world-leading,
exceptionally high
efficacy in a 100%
plant-based
formula represents
an opportunity for
the Company.
Your Directors
Mr Peter Malone Executive Chairman
Mr Phil Giglia Independent
Mr Lee Christensen Independent
Mr Malone has over 30 years’
Non-Executive Director
Non-Executive Director
experience in global financial markets
Mr Giglia is a Chartered Accountant
Mr Christensen is the principal of CX
in key leadership roles. Mr Malone is
with more than 30 years’ experience,
Law, a progressive legal practice in Perth,
an international entrepreneur and has
with a strong depth of expertise in the
Western Australia. He has over 30 years’
been responsible for raising in excess
small to medium enterprise sector.
experience as a barrister and solicitor in
of AUD$150 million for innovative
He is also a Registered Tax Agent and
corporate and commercial law particularly
technology development programmes.
Company Auditor. Mr Giglia worked
restructuring and solvency, and ASX
He has a proven track record in
for leading global accountancy firm
and ASIC regulatory matters. He is also
developing and managing the
Price Waterhouse Coopers from 1985
the Chairman of ASX listed company
commercialisation of disruptive new
to 1991. He is the founder and principal
Titanium Sands Limited. Mr Christensen
technology companies from idea stage
of Perth accountancy practice, Giglia &
has a Bachelor of Laws, Bachelor of
through to reality.
Associates, and is also a director of Global
Jurisprudence and Bachelor of Commerce
CEO to listed companies, he has a Masters
Marine Enclosures Pty Ltd. Mr Giglia has
from the University of Western Australia
degree from University of Western
a Bachelor of Business (with Distinction)
and was formerly Partner of Gadens in
Australia and has taught and consulted
from the Western Australian Institute
Perth.
in Australia, USA, Europe and Asia in
of Technology, and is a Member of the
business and management. Mr Malone is
Institute of Chartered Accountants in
responsible for the strategic direction
Australia and New Zealand.
of the Company and is the chairman and
Chief Executive Officer of the Company.
Page 16
ANNUAL REPORT 2021
Financial
Contents
Directors’ report
Remuneration report
Auditor’s declaration of independence
Consolidated statement of profit or loss and other comprehensive income
Consolidated statement of financial position
Consolidated statement of changes in equity
Consolidated statement of cash flows
Notes to the consolidated financial statements
Directors’ declaration
Independent auditor’s report
Corporate governance statement
Additional Information for Listed Public Companies
18
26
33
34
35
36
37
38
80
81
85
86
ANNUAL REPORT 2021
Page 17
ANNUAL REPORT
30 June 2021
Directors' report
SKIN ELEMENTS LIMITED AND CONTROLLED ENTITIES
ABN 90 608 047 794
Your directors present their report on the Group, consisting of Skin Elements Limited (Skin Elements or the Company) and its
controlled entities (collectively the Group), for the financial year ended 30 June 2021.
Skin Elements is listed on the Australian Securities Exchange (ASX: SKN).
1. Directors
The names of Directors in office at any time during or since the end of the year are:
Peter Malone
Phil Giglia
Lee Christensen
John Poulsen
Craig Piercy
Executive Chairman and Chief Executive Officer
Independent Non-Executive Director
Independent Non-Executive Director (Appointed on 31 August 2021)
Independent Non-Executive Director (Appointed on 29 October 2020, resigned on 31 August 2021)
Executive Director (Appointed on 29 November 2019, resigned on 29 October 2020)
(the Directors or the Board)
Directors have been in office since the start of the financial year to the date of this report unless otherwise stated. For additional
information on Directors including details of the qualifications of Directors please refer to paragraph 6 Information relating to
the Directors of this Directors Report.
Company secretary
2.
The following persons held the position of Company Secretary at the end of the financial year:
Phil Giglia
Stephen Wood
Kate Sainty
Craig Piercy
Appointed on 9 March 2021. Please refer to paragraph 6 Information relating to the
Directors of this Directors Report.
Appointed on 9 October 2020, resigned on 9 March 2021.
Appointed on 9 October 2020, resigned on 9 March 2021.
Resigned on 9 October 2020.
3. Dividends paid or recommended
There were no dividends paid or recommended during the financial year ended 30 June 2021.
4.
4.1.
Significant changes in the state of affairs
Issue of shares, options, and notes
During the year, Skin Elements Limited had the following changes in its capital structure:
Raised $120,000 cash in August 2020 through placement of 2,000,000 ordinary fully paid shares and 200,000 attaching
options.
Raised $1,417,737 cash from the exercise into fully paid ordinary shares of 30,981,466 SKNUOA unlisted options and
4,882,930 SKNOA listed options and received a further $632,857 from issue of 6,328,570 short fall shares.
Received further $1,200,000 cash from the placement of 12,000,000 ordinary shares to State Securities Pty Ltd as part
of the completion of their options underwriting obligations.
Entered into LDA Capital put option equity facility to provide the Company with up to $20 million in committed equity
capital over the next 36 months. As part considerations for entering into this agreement the Company issued to LDA
Capital 26,000,000 unlisted options and 27,500,000 Collateral Shares. Further details are set out in 5.2.h.
There have been no other significant changes in the state of affairs of the Group during the financial year ended 30 June
2021 other than disclosed elsewhere in this Annual Report.
5. Operating and financial review
5.1. Nature of Operations and Principal Activities
Skin Elements Limited is a developer, manufacturer, distributor, and retailer of its leading proprietary all-natural skincare
SE FormulaTM. The SE FormulaTM includes the Soleo Organics natural sunscreen brand, the PapayaActivs therapeutic
skincare range, Elizabeth Jane Natural Cosmetics, and the recently developed Invisi-Shield SuprCuvr plant-based hospital
grade disinfectant range.
P a g e | 18
SKIN ELEMENTS LIMITED AND CONTROLLED ENTITIES
ABN 90 608 047 794
ANNUAL REPORT
30 June 2021
Directors' report
5.2. Operations Review
a.
Invisi Shield SuprCuvr Hospital Grade Disinfectant
Since launching Invisi Shield SuprCuvr, a plant based, anti-microbial disinfectant designed to deliver superior protection
against viruses and bacteria, SKN has continued to investigate the use of the SE FormulaTM in a range of applications
for Invisi Shield SuprCuvr as a hospital grade disinfectant.
Invis Shield SuprCuvr (AUST-L 373328) has been registered with the Therapeutic Goods Administration (TGA) as a
hospital grade hard surface disinfectant that is 99.99999% (7-log) effective against COVID-19 and is also effective
against pathogenic bacteria. Invisi Shield SuprCuvr is 100% plant based and is certified as an input for organic
production by National Association for Sustainable Agriculture Australia (NASAA) Organic and Biodynamic Standard
(NOS).
Successful TGA registration will now allow the Company to make more detailed and specific product and label claims
in respect to Invisi Shield SuprCuvr which has the potential to open up significant new commercial scale sales and
distribution opportunities for Invisi Shield SuprCuvr.
b. SKN receives R&D Rebate
With focus on continued development and testing of its natural anti-microbial technologies, SKN obtained R&D
Registration approval from AusIndustry for 2021, and received a R&D Tax Rebate of $988,711 in July and August 2021.
c. SKN relocates to new Head Office at 1242 Hay Street West Perth
SKN has relocated to a new Head Office at 1242 Hay Street, West Perth, Western Australia. This new leased premises
provides for sufficient space for Skin Elements’ corporate, product development, and sales & marketing operations
including a retail shop front.
d. SKN enters into Distribution Agreement for Invisi Shield
SKN entered into a binding Distribution Agreement with Prudential Consultants Pty Ltd (Prudential Consultants) for the
distribution of its Invisi Shield® hand sanitiser in Australia. Prudential Consultants has agreed to minimum sales
commitments of $2.4 million over three years for the exclusive distribution of Invisi Shield® sanitiser in New South
Wales and Tasmania, and the distribution of Invisi Shield® sanitiser outside of these territories on a non-exclusive basis.
Prudential Consultants has commenced marketing activities for Invisi Shield SuprCuvr sanitiser.
e. Global Opportunity
Skin Elements continues to maintain its focus on developing sales of all of its natural products range in Australia and
global markets including major retail pharmacy and health chains in the United Kingdom, the expansion of its online
sales portal, and the support to its distributors in Europe.
f. Manufacturing Underway
Skin Elements continues to use approved contract production laboratories in Australia to produce its SE Formula
product ranges in accordance with Good Manufacturing Practices and TGA requirements. Notwithstanding that these
manufacturers have production capacity to meet the Company’s requirements for the foreseeable future, the
restrictions caused by COVID-19 have delayed production and the delivery of inventories from its contract
manufacturers.
g. Funding of Growth Strategies
The Company continually reviews its financial position to ensure that it has sufficient working capital to undertake its
growth programs. During the year to the date of this report Skin Elements:
Raised $120,000 cash in August 2020 through placement of 2,000,000 ordinary fully paid shares and 200,000
attaching options.
Raised $1,417,737 cash from the exercise into fully paid ordinary shares of 30,981,466 SKNUOA unlisted options
and 4,882,930 SKNOA listed options and received a further $632,857 from issue of 6,328,570 short fall shares.
Received further $1,200,000 cash from the placement of 12,000,000 ordinary shares to State Securities Pty Ltd as
part of the completion of their options underwriting obligations. The Company advised on 6 April 2021 that it will
not rely on its rights pursuant to the Underwriting Agreement to pursue the underwriter to fulfill any remaining
obligations and will not pay any fees to the underwriter.
In September 2021, placed 26,250,000 shares at $0.08 each in a private placement to sophisticated investors for
$2,100,000 cash (before costs).
Announced a non-renounceable Entitlement Issue on the basis of one new share for every fifteen shares held by
eligible shareholders at an issue price of $0.08 per share together with one attaching new option for every two new
shares to raise approximately $2.023 million (before costs).
Entered into a $20 million equity placement facility with LDA Capital as detailed below.
P a g e | 19
ANNUAL REPORT
30 June 2021
Directors' report
SKIN ELEMENTS LIMITED AND CONTROLLED ENTITIES
ABN 90 608 047 794
h. LDA Capital put option equity facility
On 6 April 2021, the Company announced it had entered into a Put Option Agreement (POA) with LDA Capital Limited
and LDA Capital LLC (together LDA Capital), a United States based investment group, to provide the Company with up
to A$20 million in committed equity capital over the next 36 months. The Company would control the timing and
maximum amount of the draw down under this facility. The Company has committed to an Initial Drawdown with the
size to be determined by the Company.
Under the POA, the subscription price for the shares is set at 90% of the higher of the average VWAP of shares in the
30-trading day period after the issue of the capital call notice, and the minimum acceptable price notified to LDA Capital
by the Company upon exercise of the put option. The VWAP calculation and the number of subscription shares is
subject to adjustment as a result of certain events occurring including trading volumes falling below an agreed
threshold level or a material adverse event occurring in relation to the Company.
As part consideration for entering into POA, the Company issued to LDA Capital 26,000,000 unlisted options all expiring
on 15 March 2024 comprising:
10,000,000 unlisted options exercisable at A$0.12
10,000,000 unlisted options exercisable at A$0.15
4,000,000 unlisted options exercisable at A$0.18
2,000,000 unlisted options exercisable at A$0.22.
The Company is also required to pay a commitment fee of A$400,000 to LDA Capital which is payable in cash in four
equal instalments at closing of the Company’s first four capital calls.
On 18 May 2021, the Company issued to LDA Capital 27,500,000 shares (Collateral Shares) for nil consideration. LDA
Capital will hold these shares until such time that the Company issues the initial call notice. At that time, and subject
to certain limitations set out in the POA, LDA Capital may sell collateral shares on market. Under the POA, unused
Collateral Shares may be used for a subsequent call, bought back by the Company for nominal consideration or
transferred to a trustee or nominee of the Company for nominal consideration.
Agreement
On entering into the POA, The Company recognised the $400,000 cash commitment fee as a prepayment (asset) and
liability to pay this fee. When each of the first four capital calls are closed, the Company will pay each $100,000
instalment, reduce the liability and the prepaid commitment fee, and recognise this amount to cost of capital.
The issue of the 26,000,000 unlisted options is initially recognised using a fair value assessment of $604,000 as a
prepayment (asset) and derivative liability as LDA Capital can elect to take a lower number of shares in lieu of paying
the option exercise price. At balance date, the fair value of the derivative liability has been reassessed to $545,208 due
to the time value of money, and the amount of $58,792 is recognised as a fair value gain in profit or loss.
The 27,500,000 Collateral Shares have been issued for nil consideration and are held as by LDA Capital until such time
that the Company issues the initial call notice. No amount is recognised in the accounts as at balance date, however,
treasury shares are disclosed.
i. Termination of Supply Agreement with Holista Colltech
On 19 October 2020, SKN announced that the term sheet dated 1 April 2020 with Holista Colltech (HCT) for HCT to
supply the Company an ingredient for the Company’s Invisi Shield formula had been terminated. The Company has
sourced alternative suppliers and the termination of the term sheet is not expected to have a material impact on the
operations and production of the Company.
j. Not Proceeding with option to acquire strategic stake in Beach Toes
Further to the option granted to SKN on 7 December 2020 for the Company to acquire up to 40% of Sambora Pty Ltd,
which owns the Australian nail polish business Beach Toes, SKN has not proceeded with the acquisition and has no
further obligations under the agreement.
k. Recommencement of Trading on ASX
SKN requested voluntary suspension of trading over the Company’s securities on 28 January 2021 pending an
announcement by the Company in regard to a material update to the Options Underwriting and Shortfall. SKN provided
an announcement on 6 April 2021 confirming that it had finalised the Options Underwriting Agreement. The Company
continues to be in voluntary suspension due to the fact the Company is in continuing negotiations with ASX in relation
to re-quotation.
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SKIN ELEMENTS LIMITED AND CONTROLLED ENTITIES
ABN 90 608 047 794
ANNUAL REPORT
30 June 2021
Directors' report
5.3. Financial Review
a. Key profit and loss measures
Revenues from ordinary activities
Movement
(increase/
decrease)
decreased
Movement
$
136,426
30 June
2021
$
288,741
30 June
2020
$
425,167
Loss from ordinary activities after tax
increased
1,132,289
(3,042,523)
(1,910,234)
EBITDA
b. Key net asset measures
Cash and cash equivalents
Working capital (excluding prepayments)
Net tangible assets
Net assets
increased
(1,119,675)
(2,638,615)
(1,518,940)
Movement
(increase/
decrease)
increased
increased
increased
increased
Movement
$
81,685
444,716
753,896
390,222
30 June
2021
$
287,632
810,343
1,312,425
30 June
2020
$
205,947
365,627
558,529
9,602,575
9,212,353
The financial statements have been prepared on a going concern basis, which contemplates the continuity of normal
business activity and the realisation of assets and the settlement of liabilities in the ordinary course of business.
5.4.
Impact of Coronavirus (COVID-19) Pandemic
Whilst SKN has continued to operate from West Perth premises during the period, the impact of COVID-19 restrictions has
seen delay of orders from national and international distributors, restrictions on travel and reduced ability to meet with
distributors and new customers, increased costs and shipment timeframes for national and international freight, and
delayed production and the delivery of inventories from its contract manufacturers in Victoria and Queensland.
During the year the Company received the Federal Government’s Jobkeeper subsidy and Cashflow boost incentives of
$92,500.
5.5. Events Subsequent to Reporting Date
On 31 August 2021, SKN has appointed Mr Lee Christensen to the Board as a Non-Executive Director. Mr Christensen’s
appointment brings broad experience and skills to the Board, assisting the Company to develop its corporate strategy and
governance as it transitions from research & development to commercial operations.
Mr Christensen’s appointment follows the resignation of Mr John Poulsen as a Non-Executive Director. Mr Poulsen had
been appointed earlier in the year following the resignation of Mr Craig Piercy as an Executive Director.
On 31 August 2021, the Company has announced that it has raised $2.1 million in cash (before costs) to fund its stated
business plans including the launch of its new TGA registered Invisi Shield CuprCuvr hospital grade disinfectant. The
Company has issued 26,250,000 ordinary fully paid shares at $0.08 each for $2,100,000 in cash (before costs) in a private
placement to sophisicated investors.
Subsequent to 30 June 2021, the Company received $988,711 from Research and Development Tax Incentives.
There are no other significant after balance date events that are not covered in this Directors' Report or within the financial
statements as disclosed in Note 13 Events subsequent to reporting date.
5.6. Future Developments, Prospects, and Business Strategies
Likely developments in the operations, business strategies and prospects of the Group include:
The Company will undertake future capital raising through an entitlement issue and LDA Capital equity placement
facility; and
The Company will continue to focus on development and commercialisation of its SE Formula technology as set out in
its review of operations.
Other likely developments, future prospects, and business strategies of the operations of the Group and the expected
results of those operations have not been included in this report particularly given the early stage of the Company’s
commercial operations with its new expanded range of natural and organic products. The Directors believe that the
inclusion of such information would be likely to be unreasonably prejudicial to the Group.
P a g e | 21
ANNUAL REPORT
30 June 2021
Directors' report
5.7. Environmental Regulations
SKIN ELEMENTS LIMITED AND CONTROLLED ENTITIES
ABN 90 608 047 794
The Group's operations are not subject to significant environmental regulations in the jurisdictions it operates in, namely
Australia.
The Directors have considered the enacted National Greenhouse and Energy Reporting Act 2007 (the NGER Act) which
introduced a single national reporting framework for the reporting and dissemination of information about the greenhouse
gas emissions, greenhouse gas projects, and energy use and production of corporations. At the current stage of
development, the Directors have determined that the NGER Act has no effect on the Company for the current, nor
subsequent, financial year. The Directors will reassess this position as and when the need arises.
6.
Information relating to the Directors
Peter Malone
Qualifications
Experience
◼
Executive Chairman and Chief Executive Officer (Appointed 4 September 2015)
Non-independent
◼ B B.Arch. MBA
◼
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 master’s 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 Group and is its Managing Director and Chief
Executive Officer of the Company.
Interest in Shares and
Options
◼
26,452,596
27,000,000
Ordinary Shares
Performance rights
◼
None
Directorships held in
other listed entities
during the three years
prior to the current year
Phil Giglia
◼
Non-Executive Director (Appointed 22 November 2017)
Chairman of the Audit Committee, Remuneration Committee and Nomination Committee,
Company Secretary (Appointed 9 March 2021)
Independent
Qualifications
Experience
◼ B B.Bus, CA, Registered Company Auditor, Registered Tax Agent
◼
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 Curtain
University, and is a Member of the Institute of Chartered Accountants in Australia and New
Zealand.
Interest in Shares and
Options
Directorships held in
other listed entities
during the three years
prior to the current year
Lee Christensen
Qualifications
Experience
◼
4,224,397
Ordinary Shares
◼
None
◼
Non-Executive Director (Appointed 31 August 2021)
Independent
◼ B B.Law (Hons), B.Jurisprudence, B.Com
◼
Mr Christensen is the principal of CX Law, a progressive legal practice in Perth Western
Australia. He has over 30 years’ experience as a barrister and solicitor in corporate and
commercial law particularly restructuring and solvency, and ASX and ASIC regulatory matters.
P a g e | 22
SKIN ELEMENTS LIMITED AND CONTROLLED ENTITIES
ABN 90 608 047 794
ANNUAL REPORT
30 June 2021
Directors' report
Interest in Shares and
Options
Directorships held in
other listed entities
during the three years
prior to the current year
Former Directors
John Poulsen
Qualifications
Experience
Interest in Shares and
Options
Directorships held in other
listed entities during the
three years prior to the
current year
Craig Piercy
Qualifications
Experience
◼
37,500
Ordinary Shares
◼
Mr Christensen currently is Non-executive Chairman of Titanium Sands Limited (ASX: TSL) since
April 2015.
◼
Non-Executive Director (Appointed 29 October 2020, resigned 31 August 2021)
Independent
◼ B B.Law (Hons), B.Jurisprudence
◼
Mr Poulsen joined the Skin Elements Board in October 2020. Mr Poulsen has over 37 years’
experience in finance, commercial and public policy law in Australia. He was formerly the
Managing Partner and CEO of Squire Patton Boggs (previously Minter Ellison) a top 10 Global
Law Firm.
◼
120,000
Ordinary Shares
◼
None
◼
◼
◼
Executive Director (Appointed on 29 November 2019, Resigned on 29 October 2020)
Company Secretary (Resigned on 9 October 2020)
Non-independent
B.Bus, CA
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.
Interest in Shares and
Options
◼
18,906,425
10,369,588
Ordinary Shares (at date of resignation 29 October 2020)
Options (at date of resignation 29 October 2020 which expired on
31 December 2020, subsequent to Mr Piercy’s resignation)
◼
None
Directorships held in
other listed entities
during the three years
prior to the current year
7. Meetings of directors and committees
During the financial year, seven meetings of Directors (including committees of Directors) were held.
DIRECTORS
MEETINGS
REMUNERATION AND
AUDIT AND RISK
FINANCE AND OPERATIONS
NOMINATION COMMITTEE
COMMITTEE
COMMITTEE
Number
eligible to
attend
Number
Attended
Number
eligible to
attend
Number
Attended
Number
eligible to
attend
Number
Attended
Number
eligible to
attend
Number
Attended
Peter Malone
Phil Giglia
John Poulsen1
Craig Piercy
7
7
4
3
7
7
4
3
1
1
-
-
1
1
-
-
2
2
1
1
1 Mr John Poulsen was appointed on 29 October 2020 and resigned on 31 August 2021.
P a g e | 23
2
2
1
1
At the date of this report, the
Finance and Operations Committee
comprise the full Board. The Board
believes the Company is not
currently of a size nor are its affairs
of such complexity as to warrant
the establishment of a separate
committee. Accordingly, all matters
capable of delegation to such
committees are considered by the
full Board.
ANNUAL REPORT
30 June 2021
Directors' report
7.1. Risk management
SKIN ELEMENTS LIMITED AND CONTROLLED ENTITIES
ABN 90 608 047 794
The Board takes a pro-active approach to risk management. The Board is ultimately responsible for ensuring that risks and
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 and Risk Committee that operates under a charter approved by the Board. The purpose
of the Audit and Risk Committee is to assist the Board in fulfilling its corporate governance, oversight, risk management
and compliance practices responsibilities.
8.
Indemnifying officers or auditor
8.1.
Indemnification
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 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.
8.2.
Insurance premiums
During the year, the Company paid insurance premiums to insure directors and officers against certain liabilities arising out
of their conduct while acting as an officer of the Group. In accordance with the policy, the amount of premium cannot be
disclosed.
9. Options
9.1. Unissued shares under option
At the date of this report, the unissued ordinary shares of the Company under option (listed and unlisted) are as follows:
Grant Date
Date of Expiry
Exercise Price
$
Number under
Option
1 March 2021
15 March 2024
1 March 2021
15 March 2024
1 March 2021
15 March 2024
1 March 2021
15 March 2024
0.12
0.15
0.18
0.22
10,000,000
10,000,000
4,000,000
2,000,000
26,000,000
No person entitled to exercise the option has or has any right by virtue of the option to participate in any share issue of the
Company or any other body corporate.
9.2. Shares issued on exercise of options
At the date of this report, 35,864,396 ordinary shares have been issued by the Company during the financial year as a result
of the exercise of options (2020: 4,492,881). During the year, 90,339,638 options expired.
10. Auditor's independence and non-audit services
10.1. Auditor independence
The Company’s auditor’s, BDO Audit (WA) Pty Ltd’s (BDO), independence declaration under section 307C of the
Corporations Act 2001 (Cth) for the year ended 30 June 2021 has been received and can be found on page 33 and forms
part of this Directors’ report for the year ended 30 June 2021.
10.2. Non-audit services
During the year, BDO Corporate Tax (WA) Pty Ltd provided professional advisory services to assist the Group with the
preparation of Research & Development Tax rebate registration. Fees for this service amounted to $18,777 of which $9,269
was included at 30 June 2021.
Details of remuneration paid to the auditor can be found within the financial statements at Note 17 Auditor's Remuneration
on page 69.
P a g e | 24
SKIN ELEMENTS LIMITED AND CONTROLLED ENTITIES
ABN 90 608 047 794
Directors' report
ANNUAL REPORT
30 June 2021
As non-audit services are provided by BDO, the Board followed certain procedures to ensure that the provision of non-
audit services are compatible with, and do not compromise, the auditor independence requirements of the Corporations
Act 2001 (Cth). These procedures include:
non-audit services will be subject to the corporate governance procedures adopted by the Company and will be
reviewed by the Board to ensure they do not impact the integrity and objectivity of the auditor; and
ensuring non-audit services do not involve reviewing or auditing the auditor's own work, acting in a management or
decision-making capacity for the Company, acting as an advocate for the Company or jointly sharing risks and rewards.
11. Proceedings on behalf of the Company
No person has applied to the Court under section 237 of the Corporations Act 2001 (Cth) for leave to bring proceedings on behalf
of the Company, or to intervene in any proceedings to which the Company is a party, for the purpose of taking responsibility on
behalf of the Company for all or part of those proceedings.
No proceedings have been brought or intervened in on behalf of the Company with leave of the Court under section 237 of the
Corporations Act 2001 (Cth).
P a g e | 25
ANNUAL REPORT
30 June 2021
Directors' report
12. Remuneration report (audited)
SKIN ELEMENTS LIMITED AND CONTROLLED ENTITIES
ABN 90 608 047 794
This report outlines the remuneration arrangements in place for the key management personnel of Skin Elements Limited
(the Company or Group or individually Skin Elements) for the financial year ended 30 June 2021 and comparatives for the
year ended 30 June 2020. The information in this remuneration report has been audited as required by s308(3C) of the
Corporations Act 2001 (Cth).
12.1. Key management personnel (KMP) covered in this report
For the purposes of this report KMP of Skin Elements are defined as those persons having authority and responsibility for
planning, directing, and controlling the major activities of the Company, directly or indirectly, including any director
(whether executive or otherwise) of the Company and all KMP. KMP comprise:
a. Directors
Peter Malone
Phil Giglia
John Poulsen
Craig Piercy
b. Other key management
Executive Chairman and Chief Executive Officer
Independent Non-Executive Director
Independent Non-Executive Director (Appointed 29 October 2020, resigned 31 August 2021)
Executive Director (Appointed 29 November 2019, resigned 29 October 2020)
Leo Fung
Chief Technical Advisor
c. Changes since the end of the reporting period
Mr John Poulsen resigned as independent non-executive director on 31 August 2021 and Mr Lee Christensen was
appointed as independent non-executive director on 31 August 2021.
There have been no other changes since the end of the reporting period.
12.2. Principles used to determine the nature and amount of remuneration
a. Remuneration Policy
The Board 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 ASX Listing Rules and Corporations Act 2001 (Cth).
b. Remuneration structure
The Group’s policy for determining the nature and amount of remuneration of KMP is as follows:
P a g e | 26
SKIN ELEMENTS LIMITED AND CONTROLLED ENTITIES
ABN 90 608 047 794
ANNUAL REPORT
30 June 2021
Directors' report
12. Remuneration report (audited)
(1) 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.
(2) Executive Directors and other Senior Executives
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
Director.
The Board 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.
c. Performance Based Remuneration – Short-term and long-term incentive structure
The Board will review short-term and long-term incentive structures from time to time. Any incentive structure will be
aligned with shareholders' interests.
Short-term incentives
No short-term incentives in the form of cash bonuses were granted during the year.
Long-term incentives
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 2021 other than as set out in the
Share-based Compensation – Employee Incentive Plan all executive remuneration is set at base level fixed amounts
at commensurate market rates or lower. The Equity 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.
The executive Directors will be eligible to participate in any short term and long-term incentive arrangements operated
or introduced by the Company (or any subsidiary) from time to time.
The relative proportions of executive remuneration that is fixed or at risk is outlined below:
Group KMP
Contract
Commencement /
Termination Date
Peter Malone
Appt 4.9.2015(1)
Phil Giglia
Appt 22.11.2017
John Poulsen
Ceased 31.08.2021
Craig Piercy
Appt 29.11.2019(1)
Leo Fung
Appt 18.02.2019(1)
Luke Martino
Ceased 10.10.2019
Proportions of Elements of Remuneration
Not Related to Performance
(Fixed remuneration)
Proportions of Elements of Remuneration
Related to Performance
(At Risk – LTI)
2021
%
89
100
100
100
100
-
2020
%
85
100
-
100
100
71
2021
%
11
-
-
-
-
-
2020
%
15
-
-
-
-
29
(1) These appointment dates are for the ultimate holding company Skin Elements Limited. Mr Malone, Mr Piercy, and Mr Fung
were appointed as executives of wholly owned subsidiary SE Operations Pty Ltd on 1 March 2005.
d. Service agreements
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.
P a g e | 27
SKIN ELEMENTS LIMITED AND CONTROLLED ENTITIES
ABN 90 608 047 794
ANNUAL REPORT
30 June 2021
Directors' report
12. Remuneration report (audited)
(1) Executive Agreement
(A) 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 is engaged by Boston Technology
Management Pty Ltd to act as the Executive Chairman and Chief Executive Officer of the Group. Boston
Technology Management Pty Ltd is paid a consulting fee of A$20,000 (plus GST) per month for at least
100 hours of service per month and is reimbursed for reasonable expenses incurred in the performance of its
duties.
The Boston Consultancy Agreement is on a continuing basis unless terminated by either party. 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.
(B) 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 is engaged by Blackridge Group Pty Ltd to act as the
Chief Technical Advisor of the Group. Blackridge Group Pty Ltd is paid a consulting fee of A$13,000 (plus GST)
per month for at least 100 hours of service per month and is reimbursed for reasonable expenses incurred in
the performance of its duties.
The Blackridge Consultancy Agreement is on a continuing basis unless terminated by either party. 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.
(C) Craig Piercy Former Executive Director, Company Secretary and Chief Financial Officer
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 is 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 is paid a consulting fee of A$13,000 (plus GST) per month for at least 100
hours of service per month and is reimbursed for reasonable expenses incurred in the performance of its duties.
The Boston Consultancy Agreement is on a continuing basis unless terminated by either party. 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.
(2) Non-executive Director Agreement
(A) 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 and Company Secretary
to the Company. Colosseum Securities Pty Ltd is paid a fee of A$24,000 (plus GST) per annum and $2,000 (plus
GST) per annum as chairman of the audit and risk 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.
(B) John Poulsen Non-executive Director Appointed on 29 October 2020, resigned on 31 August 2021)
The Company has entered into an agreement with Mr Poulsen. Mr Poulsen is engaged to provide non-executive
director services to the Company. Mr Poulsen will be paid a fee of A$24,000 (plus GST) per annum. Mr Poulsen
will also be reimbursed for reasonable expenses incurred in the performance of his duties as a non-executive
Director of the Company.
e. Engagement of Remuneration Consultants
During the financial year, the Company did not engage any remuneration consultants.
P a g e | 28
SKIN ELEMENTS LIMITED AND CONTROLLED ENTITIES
ABN 90 608 047 794
Directors' report
12. Remuneration report (audited)
f. Relationship between Remuneration of KMP and Earnings
ANNUAL REPORT
30 June 2021
In considering the Group’s performance and benefits for shareholders wealth, the Board has regard to the following indices
in respect of the current financial year and the previous four financial years (where applicable):
As at 30 June
Revenue ($)
2021
2020
2019
2018
2016
288,741
425,167
798,107
838,292
Net loss before tax ($)
(3,042,523)
(1,910,234)
(1,967,761)
(2,728,114)
Share price (cents per share)
10.001
8.002
2.50
2.70
1 At last trade date, 14 January 2021. Company is suspended as at the date of this report.
2 At last trade date, 8 May 2020. Company was suspended until reinstatement on 16 October 2020.
12.3. Directors and KMP remuneration
The following table of benefits and payments represents the components of the current year and comparative year
remuneration expenses for each member of KMP of the Group. Such amounts have been calculated in accordance with
Australian Accounting Standards.
2021– Group
Group KMP
Peter Malone(1)
Filippo (Phil) Giglia(2)
John Poulsen(3)
Craig Piercy(4)
Leo Fung(5)
Short-term benefits
Salary, fees
and leave
$
240,000
26,000
16,000
156,000
156,000
594,000
Profit share
and bonuses
$
-
-
-
-
-
-
Non-
monetary
$
-
-
-
-
-
-
Other
$
-
-
-
-
-
-
Post-
employment
benefits
Super-
annuation
$
-
-
-
-
-
-
Long-term
benefits
Termination
benefits
Equity-settled share-
based payments
Total
Other
Equity
$
-
-
-
-
-
-
$
-
-
-
-
-
-
$
-
-
-
-
-
-
Performance
Rights
$
$
28,515
268,515
-
-
-
-
26,000
16,000
156,000
156,000
28,515
622,515
(1) Peter Malone, fees paid to Boston Technology Management Pty Ltd.
(2) Filippo (Phil) Giglia, fees paid to Colosseum Securities Pty Ltd, agreement commenced on 22 November 2017.
(3) John Poulsen was appointed on 29 October 2020 and resigned on 31 August 2021.
(4) Craig Piercy, fees paid to Boston Technology Management Pty Ltd. Mr Piercy resigned as executive director on 29 October 2020.
(5) Leo Fung, fees paid to Blackridge Group Pty Ltd who engage Leo Fung.
P a g e | 29
ANNUAL REPORT
30 June 2021
Directors' report
12. Remuneration report (audited)
SKIN ELEMENTS LIMITED AND CONTROLLED ENTITIES
ABN 90 608 047 794
2020 – Group
Group KMP
Peter Malone(1)
Luke Martino(4)
Filippo (Phil) Giglia(2)
Zeling Li(5)
Jialin Li(5)
Craig Piercy(3)
Leo Fung(6)
Short-term benefits
Salary, fees
and leave
$
240,000
6,000
26,000
-
-
156,000
156,000
584,000
Profit share
and bonuses
$
-
-
-
-
-
-
-
-
Non-
monetary
$
-
-
-
-
-
-
-
-
Other
$
-
-
-
-
-
-
-
-
Post-
employment
benefits
Super-
annuation
$
-
-
-
-
-
-
-
-
Long-term
benefits
Termination
benefits
Equity-settled share-
based payments
Total
Other
Equity
$
-
-
-
-
-
-
-
-
$
-
-
-
-
-
-
-
-
$
-
-
-
-
-
-
-
-
Performance
Rights
$
$
41,559
281,559
2,477
8,477
-
-
-
-
-
26,000
-
-
156,000
156,000
44,036
628,036
(1) Peter Malone, fees paid to Boston Technology Management Pty Ltd.
(2) Filippo (Phil) Giglia, fees paid to Colosseum Securities Pty Ltd, agreement commenced on 22 November 2017.
(3) Craig Piercy, appointed on 29 November 2019, fees paid to Boston Technology Management Pty Ltd.
(4) Luke Martino resigned on 10 October 2019.
(5) Zeling Li and Jailin Li resigned on 29 November 2019.
(6) Leo Fung, fees paid to Blackridge Group Pty Ltd who engage Leo Fung.
12.4. Share-based compensation
a. As at the date of this report the Company had the following securities on issue/lapse in connection with KMP share-
based payments:
2021– Group
Group KMP
Number of
rights at the
start of the year
No.
Value of
rights at
grant date(1)
$
Number of
Rights vested
during the year
No.
Value of
rights at
vesting date(1)
$
Number of
Rights lapsed
during the year
No.
Type of
rights
Value at
lapse date
$
Peter Malone
2019 Tranche A
2,700,000
2019 Tranche B
5,400,000
2019 Tranche C
8,100,000
2019 Tranche D
10,800,000
11,664
23,328
34,992
46,656
27,000,000
116,640
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(1) The value at grant date calculated in accordance with AASB2 Share-based payments of rights granted as part of remuneration. These
have been valued at fair value determined using Black Scholes option pricing model. No adjustment has been made for the value of
rights which lapsed during the year.
b. Employee Incentive Plan
The Company has established an Equity 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.
P a g e | 30
SKIN ELEMENTS LIMITED AND CONTROLLED ENTITIES
ABN 90 608 047 794
ANNUAL REPORT
30 June 2021
Directors' report
12. Remuneration report (audited)
12.5. KMP equity holdings
a. Fully paid ordinary shares of Skin Elements Limited held by each KMP
The number of ordinary shares in the Company held during the financial year by each Director of Skin Elements Limited
and any other KMP of the Company, including their personally related parties, are as follows.
2021– Group
Group KMP
Peter Malone
Filippo (Phil) Giglia
John Poulsen(1)
Craig Piercy(2)
Leo Fung
Balance at
start of year or
date of
appointment
No.
Received during
the year as
compensation
No.
23,638,490
3,535,409
-
18,906,425
-
46,080,324
-
-
-
-
-
-
Received during
the year on
the exercise of
options
No.
2,814,106
744,281
-
Other changes
during the year
No.
Balance at end
of year
No.
-
26,452,596
(55,293)
120,000
4,224,397
120,000
2,250,766
(1,137,647)
20,019,544
-
-
-
5,809,153
(1,072,940)
50,816,537
(1) John Poulsen was appointed on 29 October 2020 and resigned on 31 August 2021.
(2) Craig Piercy resigned on 29 October 2020.
b. Options in Skin Elements Limited held by each KMP
The number of options over ordinary shares in the Company held during the financial year by each Director of Skin
Elements Limited and any other KMP of the Group, including their personally related parties, are as follows:
2021– Group
Group KMP
Peter Malone
Filippo (Phil) Giglia
John Poulsen(1)
Craig Piercy(2)
Leo Fung
Balance at
start of year or
date of
appointment
No.
Granted as
Remuneration
during the year
No.
Exercised
during the year
No.
Other changes
during the year
No.
Balance at end
of year or date
of resignation
No.
Expired
No.
14,211,234
799,572
-
10,369,588
-
25,380,394
-
-
-
-
-
-
(2,814,106)
-
(11,397,128)
(744,281)
52,293
(107,584)
-
(2,250,766)
-
-
-
-
-
(8,118,822)
-
(5,809,153)
52,293
(19,623,534)
-
-
-
-
-
-
(1)
(2)
John Poulsen was appointed on 29 October 2020.
Craig Piercy resigned on 29 October 2020. Options since expired on 31 December 2020, subsequent to Craig Piercy’s resignation.
c. Performance Rights of Skin Elements Limited held by each KMP
The number of Performance Shares in Skin Elements Limited held, directly, indirectly or beneficially, by each KMP,
including their personally-related entities for the year ended 30 June 2021 is as follows:
2021– Group
Group KMP
Peter Malone
Filippo (Phil) Giglia
John Poulsen
Craig Piercy
Leo Fung
P a g e | 31
Balance at
start of year or
date of
appointment
No.
27,000,000
-
-
-
-
27,000,000
Received during
the year as
compensation
No.
Other changes
during the year
No.
-
-
-
-
-
-
-
-
-
-
-
-
Balance at end
of year or date
of resignation
No.
Maximum value
yet to vest
$
27,000,000
71,406
-
-
-
-
-
-
-
-
27,000,000
71,406
ANNUAL REPORT
30 June 2021
Directors' report
12. Remuneration report (audited)
12.6. Other Equity-related KMP Transactions
SKIN ELEMENTS LIMITED AND CONTROLLED ENTITIES
ABN 90 608 047 794
There have been no other transactions involving equity instruments other than those described in the tables above relating
to options, rights, and shareholdings.
12.7. Other transactions with KMP and or their Related Parties
a. Other Transactions with Key Management Personnel
Indian Ocean Advisory Group (a company associated with Mr Martino,
up to the date he ceased being a Director of the Company), provided
professional accounting and corporate advisory services. The services
are at commercial arms-length hourly rates.
2021
$
2020
$
-
-
19,682
19,682
During the year, an amount of $100,000 recorded at half year ended 31 December 2020 as a short-term payable to non-
related third parties was assigned to Boston Technologies Management Pty Ltd, of which Mr Craig Piercy is sole director.
This amount was included in the normal commercial fees and expenses working capital account provided by Boston
Technology Management Pty Ltd and was repaid in the ordinary course. No interest is paid to Boston Technology
Management Pty Ltd on outstanding amounts.
During the year, an amount of $100,000 was provided by Boston Technology Management Pty Ltd and Blackridge Group
Pty Ltd to a third-party supplier as part of the Invisi Shield development project. This amount was included in the normal
commercial fees and expenses working capital account provided by Boston Technology Management Pty Ltd and Blackridge
Group Pty Ltd and was repaid in the ordinary course. No interest is paid to Boston Technology Management Pty Ltd and
Blackridge Group Pty Ltd on outstanding amounts.
There have been no other transactions in addition to those described in the tables or as detailed in Note 16 Related party
transactions.
12.8. Voting of shareholders at last year’s annual general meeting (AGM)
The Company received 99.45% proxy votes and 100% poll votes of “yes” votes on its remuneration report for the 2020
financial year. The Company did not receive any specific feedback at the AGM or throughout the year on its remuneration
practices.
END OF REMUNERATION REPORT
This Report of the Directors, incorporating the Remuneration Report, is signed in accordance with a resolution of directors made
pursuant to s.298(2) of the Corporations Act 2001 (Cth).
PETER MALONE
Executive Chairman
Dated this Wednesday, 29 September 2021
P a g e | 32
SKIN ELEMENTS LIMITED AND CONTROLLED ENTITIES
ABN 90 608 047 794
ANNUAL REPORT
30 June 2021
AUDITOR’S DECLARATION OF INDEPENDENCE
P a g e | 33
ANNUAL REPORT
30 June 2021
SKIN ELEMENTS LIMITED AND CONTROLLED ENTITIES
ABN 90 608 047 794
Consolidated statement of profit or loss and other comprehensive income
for the year ended 30 June 2021
Continuing operations
Revenue
Cost of sales
Gross profit
Other income
Administration expenses
Advertising and marketing expenses
Amortisation
Corporate expenses
Consultants’ fees
Occupancy costs
Research and development expenses
Loss before tax
Income tax expense
Net loss for the year
Other comprehensive loss for the year, net of tax
Note
1.1
1.2
2.1
6.2
2.2
2.3
2021
$
2020
$
288,741
(98,302)
425,167
(216,270)
190,439
208,897
1,140,003
812,982
(1,093,886)
(206,429)
(403,908)
(414,485)
(206,852)
(88,931)
(1,958,474)
(740,985)
(192,877)
(391,294)
(320,145)
(277,044)
(123,669)
(886,099)
(3,042,523)
(1,910,234)
4.1
-
-
(3,042,523)
(1,910,234)
-
-
Total comprehensive loss attributable to members of the parent entity
(3,042,523)
(1,910,234)
Loss per share:
Basic and diluted loss per share (cents per share)
18.4
(0.870)
(2,638,615)
(0.850)
(1,518,940)
The consolidated statement of profit or loss and other comprehensive income is to be read in conjunction with the accompanying notes.
P a g e | 34
SKIN ELEMENTS LIMITED AND CONTROLLED ENTITIES
ABN 90 608 047 794
Consolidated statement of financial position
as at 30 June 2021
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Other current assets
Financial Assets
Total current assets
Non-current assets
Right of use asset - property, plant, and equipment
Financial Assets
Intangible assets
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Borrowings
Derivative liabilities
Total current liabilities
Non-current liabilities
Trade and other payables
Derivative liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Accumulated losses
Total equity
Note
5.1
5.2.1
6.1
5.3.1
5.6.1
5.6.1
6.2
5.4.1
5.5.1
5.6.2
5.4.2
5.6.2
ANNUAL REPORT
30 June 2021
2021
$
287,632
1,122,891
223,225
72,225
502,000
2020
$
205,947
764,153
155,705
441,865
-
2,207,973
1,567,670
26,648
502,000
-
-
8,290,150
8,653,824
8,818,798
8,653,824
11,026,771
10,221,494
647,998
30,990
272,604
509,141
500,000
-
951,592
1,009,141
200,000
272,604
472,604
-
-
-
1,424,196
1,009,141
9,602,575
9,212,353
-
-
7.1.1
7.5
20,978,594
17,607,998
91,252
29,103
(11,467,271)
(8,424,748)
9,602,575
1,239,739
1,312,425
9,212,353
365,627
558,529
The consolidated statement of financial position is to be read in conjunction with the accompanying notes.
P a g e | 35
ANNUAL REPORT
30 June 2021
SKIN ELEMENTS LIMITED AND CONTROLLED ENTITIES
ABN 90 608 047 794
Consolidated statement of changes in equity
for the year ended 30 June 2021
Note
Contributed
equity
Accumulated
losses
$
$
Convertible
note
reserve
Share-based
payment
reserve
$
Total
equity
$
Balance at 1 July 2019
15,286,784
(6,896,381)
492,405
312,338
9,195,146
Loss for the year attributable to the owners of the parent
Adjustment to fair value of convertible note
Other comprehensive income for the year attributable to the
owners of the parent
Total comprehensive income for the year attributable to the
owners of the parent
Transaction with owners, directly in equity
Shares issued during the year (net of costs)
Share based payments during the year
Converting note funds received and conversion
Transfer to / from reserves: performance shares expired
Transfer to / from reserves: options expired
-
-
-
-
(1,910,234)
-
42,206
(42,206)
-
-
(1,868,028)
(42,206)
7.1.1
7.2
7.1.1
1,475,664
195,351
650,199
-
-
-
-
-
(450,199)
-
-
222,845
116,816
Balance at 30 June 2020
17,607,998
(8,424,748)
Balance at 1 July 2020
17,607,998
(8,424,748)
Loss for the year attributable to the owners of the parent
Other comprehensive loss for the year attributable to the owners
of the parent
Total comprehensive loss for the year attributable to the owners
of the parent
-
-
-
(3,042,523)
-
(3,042,523)
Transaction with owners, directly in equity
Shares issued during the year (net of costs)
Share based payments during the year
7.1.1
7.3
3,370,596
-
-
-
Balance at 30 June 2021
20,978,594
(11,467,271)
The consolidated statement of changes in equity is to be read in conjunction with the accompanying notes.
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
56,426
-
(222,845)
(116,816)
(1,910,234)
-
-
(1,910,234)
1,475,664
251,777
200,000
-
-
29,103
9,212,353
29,103
9,212,353
-
-
-
-
(3,042,523)
-
(3,042,523)
3,370,596
62,149
62,149
91,252
9,602,575
P a g e | 36
SKIN ELEMENTS LIMITED AND CONTROLLED ENTITIES
ABN 90 608 047 794
Consolidated statement of cash flows
for the year ended 30 June 2021
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Receipt of research and development tax incentive
Interest paid and facility fees
JobKeeper payment scheme and ATO cash flow boost
ANNUAL REPORT
30 June 2021
Note
2021
$
2020
$
286,286
419,695
(3,659,726)
(3,085,726)
668,418
(89,128)
92,500
689,016
(25,953)
105,000
Net cash used in operating activities
5.1.2
(2,701,650)
(1,897,968)
6.2.1
(36,410)
(30,000)
(36,410)
(30,000)
7.1.1
2,719,745
1,805,532
5.5.1
-
600,000
(500,000)
(87,855)
1,000,000
(700,000)
2,819,745
2,017,677
81,685
89,709
205,947
287,632
116,238
205,947
Cash flows from investing activities
Purchase of intangibles
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issue of shares
Share issue costs
Proceeds of borrowings
Repayments of borrowings
Net cash provided by financing activities
Net increase in cash and cash equivalents held
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year
-
5.1
The consolidated statement of cash flows is to be read in conjunction with the accompanying notes.
P a g e | 37
ANNUAL REPORT
30 June 2021
SKIN ELEMENTS LIMITED AND CONTROLLED ENTITIES
ABN 90 608 047 794
Notes to the consolidated financial statements
for the year ended 30 June 2021
In preparing the 2021 financial statements, Skin Elements Limited has grouped notes into sections under five key categories:
Section A: How the numbers are calculated ............................................................................................................................ 39
Section B: Risk.......................................................................................................................................................................... 60
Section C: Group structure ...................................................................................................................................................... 65
Section D: Unrecognised items ................................................................................................................................................ 67
Section E: Other Information ................................................................................................................................................... 68
Significant accounting policies specific to each note are included within that note. Accounting policies that are determined to be
non-significant are not included in the financial statements.
The financial report is presented in Australian dollars, except where otherwise stated.
Company details
The registered office of the Company is:
Street + Postal: 1242 Hay Street
WEST PERTH WA 6005
P a g e | 38
SKIN ELEMENTS LIMITED AND CONTROLLED ENTITIES
ABN 90 608 047 794
Notes to the consolidated financial statements
for the year ended 30 June 2021
ANNUAL REPORT
30 June 2021
SECTION A. HOW THE NUMBERS ARE CALCULATED
This section provides additional information about those individual line items in the financial statements that the Directors
consider most relevant in the context of the operations of the entity, including:
(a) accounting policies that are relevant for an understanding of the items recognised in the financial statements. These cover
situations where the accounting standards either allow a choice or do not deal with a particular type of transaction.
(b) analysis and sub-totals.
(c)
information about estimates and judgements made in relation to particular items.
Note 1
Revenue and other income
Note
1.1
Revenue
Sales to customers
1.2 Other Income
Interest income
Research and development tax incentives grant income
JobKeeper Payment scheme grant income
ATO Cash flow boost grant income
Fair value adjustment of fee options
5.6.6
2021
$
288,741
288,741
-
988,711
67,500
25,000
58,792
2020
$
425,167
425,167
57
707,925
30,000
75,000
-
1,140,003
812,982
1.3
Accounting policies
1.3.1 Revenue from contracts with customers
a. Recognition
The Group generates revenue from the delivery of goods as follows:
◼ The Group sells products to external customers using several mediums which include internet sales, employees direct
selling, and the use of wholesalers and businesses who purchase the product and are then responsible for their own on
selling processes.
◼ The internet sales are driven by the Skin Element's website which sets out pricing for the product and delivery. Each
wholesaler and business customer order is specific to the client's requirements; however, for each category of customer
the performance obligations cease when the Group has delivered the goods to the customers. As at 30 June 2021 the
Company did not have any material customer contracts at the reporting date.
b. Revenue from selling goods
Revenue for sale of sun care 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.
1.3.2 Government Grants
Grants from the government are recognised at their fair value where there is a reasonable assurance that the grant will be
received, and the Group will comply with all attached conditions. The Group received the following government grants:
a. Research and development tax incentives received or receivable are recognised at 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 incentive received or receivable income is presented as part of profit or loss as other
income.
b. JobKeeper Payment scheme and ATO Cash flow boost received have no unfulfilled conditions or other contingencies
attaching to these grants. Grants related to income are presented as part of profit or loss as other income.
The Group did not benefit directly from any other forms of government assistance.
1.3.3
Interest income
Interest revenue is recognised in accordance with Note 3.2 Finance expenses.
P a g e | 39
ANNUAL REPORT
30 June 2021
SKIN ELEMENTS LIMITED AND CONTROLLED ENTITIES
ABN 90 608 047 794
Notes to the consolidated financial statements
for the year ended 30 June 2021
Note 2
Loss before income tax
The following significant revenue and expense items are relevant in explaining the
financial performance:
2.1
Administration expenses
Accounting expenses
Wages and salaries
Travel expenses
Interest expenses and finance facility costs
Other expenses
2.2
Corporate expenses
ASX fees
Audit expenses
Directors’ fees
Filing fees
Legal expenses
Share Registry and shareholder communications
2.3
Contract and consulting fees
Executive services contracts
Share-based performance rights
External consulting fees
2.3.1
2021
$
2020
$
207,442
522,851
130,457
89,128
144,008
146,591
367,324
11,566
90,394
125,110
1,093,886
740,985
58,808
72,404
42,000
18,266
200,389
22,618
414,485
78,655
62,149
66,048
51,735
57,938
32,000
16,138
103,891
58,443
320,145
78,655
56,426
141,963
206,852
277,044
2.3.1 The Company has issued performance rights to Directors and Consultants which will convert into fully paid shares on
achieving certain performance hurdles. These performance rights are recorded at fair value which is amortised over the
vesting period (up to four years from date of issue), as detailed in Note 19.2.1a and c.
Note 3
Other Significant Accounting Policies related to items of profit and loss
3.1
Employee benefits
3.1.1 Short-term benefits
Liabilities for employee benefits for wages, salaries and annual leave that are expected to be settled within 12 months of
the reporting date represent present obligations resulting from employees' services provided to the reporting date and are
calculated at undiscounted amounts based on remuneration wage and salary rates that the Group expects to pay at the
reporting date including related on-costs, such as workers compensation insurance and payroll tax.
Non-accumulating non-monetary benefits, such as medical care, housing, cars and free or subsidised goods and services,
are expensed based on the net marginal cost to the Group as the benefits are taken by the employees.
3.1.2 Other long-term benefits
The Group's obligation in respect of long-term employee benefits other than defined benefit plans, such as long service
leave, is the amount of future benefit that employees have earned in return for their service in the current and prior periods
plus related on-costs; that benefit is discounted to determine its present value, and the fair value of any related assets is
deducted. The discount rate is the Reserve Bank of Australia's cash rate at the report date that have maturity dates
approximating the terms of the Company's obligations. Any actuarial gains or losses are recognised in profit or loss in the
period in which they arise. However due to the infancy of the Group, no long service leave has been accrued.
P a g e | 40
SKIN ELEMENTS LIMITED AND CONTROLLED ENTITIES
ABN 90 608 047 794
Notes to the consolidated financial statements
for the year ended 30 June 2021
ANNUAL REPORT
30 June 2021
Note 3
Other Significant Accounting Policies related to items of profit and loss (cont.)
3.1.3 Equity-settled compensation
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. The amount recognised
is adjusted to reflect the actual number of share options that vest except where forfeiture is only due to market conditions
not being met.
3.2
Finance expenses
Financial expenses comprise interest expense on borrowings calculated using the effective interest method, unwinding
of discounts on provisions, changes in the fair value of financial assets at fair value through profit or loss and impairment
losses recognised on financial assets. All borrowing costs are recognised in profit or loss using the effective interest
method and include:
interest on the bank overdraft;
interest on short-term and long-term borrowings; and
interest on finance leases.
Borrowing costs directly attributable to the acquisition, construction or production of assets that necessarily take a
substantial period of time to prepare for their intended use or sale, are added to the cost of those assets, until such time
as the assets are substantially ready for their intended use or sale. All other borrowing costs are recognised in income in
the period in which they are incurred.
Note 4
Income tax
4.1
Income tax expense
Current tax
Deferred tax
Deferred income tax expense included in income tax expense comprises:
◼
Increase / (decrease) in deferred tax assets
4.5
◼ (Increase) / decrease in deferred tax liabilities
4.2
Reconciliation of income tax expense to prima facie tax payable
The prima facie tax payable/(benefit) on loss from ordinary activities
before income tax is reconciled to the income tax expense as follows:
Accounting loss before tax
Prima facie tax on operating loss at 26% (2020: 27.5%)
Add / (Less) tax effect of:
Other non-deductible expenses / (non-assessable income)
Other temporary differences not recognised
Income tax expense/(benefit) attributable to operating loss
2021
$
2020
$
-
-
-
-
-
-
-
-
-
-
-
-
(3,042,523)
(1,910,234)
(796,532)
(525,314)
420,796
375,736
-
0%
388,327
136,987
-
0%
P a g e | 41
ANNUAL REPORT
30 June 2021
SKIN ELEMENTS LIMITED AND CONTROLLED ENTITIES
ABN 90 608 047 794
Notes to the consolidated financial statements
for the year ended 30 June 2021
Note 4
Income tax (cont.)
Note
4.3
The applicable weighted average effective tax rates attributable to
operating profit are as follows:
a. The tax rates used in the above reconciliations is the corporate tax rate
of 26% payable by the Australian corporate entity on taxable profits
under Australian tax law. Company tax rate reduced from 27.5% to
26%.
4.4
Balance of franking account at year end of the parent
4.5
Deferred tax assets
Tax losses
Capital raising costs
Net deferred tax assets
Less deferred tax assets not recognised
Net deferred tax assets
4.6
Tax losses and deductible temporary differences
Unused tax losses and deductible temporary differences for which no
deferred tax asset has been recognised, that may be utilised to offset tax
liabilities:
◼ Tax losses
2021
%
-
2021
$
nil
2020
%
-
2020
$
nil
1,734,086
1,447,591
-
107,571
1,734,086
1,555,162
1,734,086
1,555,162
(1,734,086)
(1,555,162)
-
-
1,734,086
1,447,591
1,734,086
1,447,591
Potential deferred tax assets attributable to tax losses have not been brought to account at 30 June 2021 because the
Directors do not believe it is appropriate to regard realisation of the deferred tax assets as probable at this point in time.
These benefits will only be obtained if:
i.
the Group derives future assessable income of a nature and of an amount sufficient to enable the benefit from the
deductions for the loss to be realised;
ii. the Company continues to comply with conditions for deductibility imposed by law; and
iii. no changes in tax legislation adversely affect the Group in realising the benefit from the deductions for the loss.
Balances disclosed in the financial statements and the notes thereto, related to taxation, are based on the best estimates
of directors. These estimates consider both the financial performance and position of the Company as they pertain to
current income taxation legislation, and the Directors understanding thereof. No adjustment has been made for pending
or future taxation legislation. The current income tax position represents that directors' best estimate, pending an
assessment by tax authorities in relevant jurisdictions.
The parent company has accumulated tax losses of $6,669,563 (2020: $5,263,967) which are expected to be available
indefinitely for offset against future taxable profits of the parent company in which the losses arose. The recoupment of
these losses is subject to assessment of the Australian Taxation Office.
P a g e | 42
SKIN ELEMENTS LIMITED AND CONTROLLED ENTITIES
ABN 90 608 047 794
Notes to the consolidated financial statements
for the year ended 30 June 2021
Note 4
Income tax (cont.)
4.7
Accounting policy
Note
ANNUAL REPORT
30 June 2021
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 based on 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 based on 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 balance date.
Deferred income tax is provided on all temporary differences at the balance 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 balance 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.
Unrecognised deferred income tax assets are reassessed at each balance 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 balance 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.
Where the Group receives the Australian Government's Research and Development Tax Incentive, the Group accounts for
the refundable tax offset under AASB 112. Funds are received as a rebate through the parent company's income tax return.
P a g e | 43
ANNUAL REPORT
30 June 2021
SKIN ELEMENTS LIMITED AND CONTROLLED ENTITIES
ABN 90 608 047 794
Notes to the consolidated financial statements
for the year ended 30 June 2021
Note 5
Financial assets and financial liabilities
5.1
Cash and cash equivalents
Cash at bank
2021
$
2020
$
287,632
205,947
287,632
205,947
5.1.1 The Group's exposure to interest rate risk and a sensitivity analysis for financial assets and liabilities are disclosed in Note
8 Financial risk management.
5.1.2 Cash Flow Information
2021
$
2020
$
a. Reconciliation of cash flow from operations to loss after income tax
Loss after income tax
(3,042,523)
(1,910,234)
Cash flows excluded from loss attributable to operating activities
Non-cash flows in (loss)/profit from ordinary activities:
Depreciation and amortisation
Share-based payments expensed
Fair value movement in derivative liabilities
Changes in assets and liabilities, net of the effects of purchase and
disposal of subsidiaries:
Decrease/(increase) in receivables
(Increase)/decrease in inventories
Increase/(decrease) in payables
Cash flow (used in) from operations
b. Reconciliation of liabilities arising from financing activities
403,908
62,149
(58,792)
79,156
(67,520)
(78,028)
391,294
181,777
-
(433,742)
(137,984)
10,921
-
(2,701,650)
-
(1,897,968)
-
2019
$
Cash flows
$
Acquisitions
$
Non-cash changes
Foreign
Exchange
$
Other
Changes
$
Changes due
to AASB 16
$
Short-term borrowings
200,000
300,000
Total liabilities from
financing activities
200,000
300,000
-
-
-
-
-
-
-
-
2020
$
Cash flows
$
Acquisitions
$
Non-cash changes
Foreign
Exchange
$
Other
Changes(i)
$
Changes due
to AASB 16
$
Short-term borrowings
500,000
(500,000)
Other payable
Derivative liabilities
Total liabilities from
financing activities
-
-
-
-
500,000
(500,000)
-
-
-
-
-
-
-
-
-
-
400,000
545,208
945,208
-
-
-
-
2020
$
500,000
500,000
-
2021
$
-
400,000
545,208
945,208
(641,614)
(i) Other changes related to non-cash movements related to the recognition and reduction in derivative liabilities refer to Note 5.6.6.
c. Credit and loan standby arrangement with banks
The Group has no credit standby facilities.
P a g e | 44
ANNUAL REPORT
30 June 2021
SKIN ELEMENTS LIMITED AND CONTROLLED ENTITIES
ABN 90 608 047 794
Notes to the consolidated financial statements
for the year ended 30 June 2021
Note 5
Financial assets and financial liabilities (cont.)
5.1
Cash and cash equivalents (cont.)
d. Non-cash investing and financing activities
2021
As detailed in Note 5.6.3:
27,500,000 collateral shares and 26,000,000 fee options issued to LDA Capital for nil consideration.
2020
As detailed in Note 7.1.1 and 7.2:
15,501,326 shares and 12,376,326 options issued to settle $650,199 in convertible notes (debt and equity)
250,000 ordinary shares issued in connection with the acquisition of Invisi® Shield Hand Sanitiser ($20,000).
2,300,000 ordinary shares issued as facility fees amounting to $50,000.
4,500,000 ordinary shares issued in connection with lead manager ($25,000) and underwriting fees ($25,000).
5.1.3 Accounting policy
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.
5.2
Trade and other receivables
5.2.1 Current
Trade receivables
Goods and Services Tax receivable
Research and Development Grant receivable
Other receivables
Note
5.2.3
5.2.4
2021
$
24,068
45,133
988,711
64,979
1,122,891
2020
$
21,625
73,733
668,418
377
764,153
5.2.2 The Group's exposure to credit rate risk is disclosed in Note 8 Financial risk management.
5.2.3 Trade receivables 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 periods ranging from prepaid or cash on delivery to 60 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 2021 (30 June 2020: Nil). Due to the short-term nature of the current receivables, their carrying
amounts approximate their fair value. The trade receivable’s balance does not currently have any amounts that are past due
but not impaired.
5.2.4 The Group continued its development program during the year ended 30 June 2021 resulting in a claim for research and
development tax incentive which has been included as a receivable at year end and received subsequent to year end.
5.2.5 Accounting policy
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 30 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. (see also Note 5.7.1).
The amount of the impairment loss is recognised in the statement of profit or loss and other comprehensive income within
other expenses. When a trade receivable for which an impairment allowance had been recognised becomes uncollectible in
a subsequent period, it is written off against the allowance account. Subsequent recoveries of amounts previously written
off are credited against other expenses in the statement of profit or loss and other comprehensive income.
P a g e | 45
ANNUAL REPORT
30 June 2021
SKIN ELEMENTS LIMITED AND CONTROLLED ENTITIES
ABN 90 608 047 794
Notes to the consolidated financial statements
for the year ended 30 June 2021
Note 5
Financial assets and financial liabilities (cont.)
5.3 Other assets
5.3.1 Current
Prepayments – Raw materials
Other deposits
Note
5.3.1a
a. Other deposits relate to inventory and will be recovered within 12 months.
5.4
Trade and other payables
5.4.1 Current
Unsecured
Trade payables
Sundry payables and accrued expenses
Commitment Fee payable
5.6.6
2021
$
16,642
55,583
72,225
2021
$
277,637
170,361
200,000
2020
$
192,902
248,963
441,865
2020
$
300,377
208,764
-
5.4.2 Non-Current
Unsecured
Commitment Fee payable
647,998
509,141
5.6.6
200,000
200,000
-
-
5.4.3 Trade payables are non-interest bearing and usually settled within the lower of terms of trade or 60 days.
5.4.4 The Group's exposure to interest rate risk and a sensitivity analysis for financial assets and liabilities are disclosed in
Note 8.
5.4.5 Accounting policy
a.
Trade and other payables
Trade other payables are recognised initially at fair value and subsequently 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. Amounts are
unsecured, non-interest bearing, and usually settled within the lower of terms of trade or 60 days.
5.5
Borrowings
5.5.1 Current
Pre-factoring financing facility
Leases – motor vehicle
5.5.2 Terms and conditions: Pre-factoring financing facility
Note
2021
$
2020
$
5.5.2
-
500,000
30,990
30,990
-
500,000
$10,000,000
$500,000
During the year the Company repaid the existing pre-factoring financing facility withdrawn with Custodian Australia Pty Ltd,
with the following key terms:
◼ Total facility
◼ Drawdown
◼ Repayment Date 9 November 2020
◼
15%
◼ Security
The drawdown can also be secured against the inventory produced
The Company has not made any further drawdown and this facility is no longer available.
Interest rate
P a g e | 46
SKIN ELEMENTS LIMITED AND CONTROLLED ENTITIES
ABN 90 608 047 794
Notes to the consolidated financial statements
for the year ended 30 June 2021
Note 5
Financial assets and financial liabilities (cont.)
5.5
Borrowings (cont.)
5.5.3 Accounting policy
ANNUAL REPORT
30 June 2021
a. 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. To the extent there is no evidence that it is
probable that some or all of the facility will be drawn down, the fee is capitalised as a prepayment for liquidity services and
amortised over the period of the facility to which it relates.
Where there is an unconditional right to defer settlement of the liability for at least 12 months after the reporting date, the
loans or borrowings are classified as non-current.
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 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. 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.
b. Convertible notes
The component parts of convertible notes issued by the Group are classified separately as financial liabilities and equity
in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity
instrument. Conversion options that will be settled by the exchange of a fixed amount of cash or another financial asset
for a fixed number of the Company’s own equity instruments is an equity instrument.
At the date of issue, the fair value of the liability component is estimated using the prevailing market interest rate for
similar non-convertible instruments. This amount is recognised as a liability on an amortised cost basis using the effective
interest method until extinguishment upon conversion or at the instrument’s maturity date.
The conversion option classified as equity is determined by deducting the amount of the liability component from the
fair value of the compound instrument as a whole. This is recognised and included in equity, net of income tax effects,
and is not subsequently remeasured. In addition, the conversion option classified as equity will be transferred to share
premium. Where the conversion option remains unexercised at the maturity date of the convertible note, the balance
recognised in equity will be transferred to retained profits. No gain or loss is recognised in the profit or loss upon
conversion or expiration of the conversion option.
Transaction costs that relate to the issue of the convertible notes are allocated to the liability and equity components in
proportion to the allocation of the gross proceeds. Transaction costs relating to the equity component are recognised
directly in equity. Transaction costs relating to the liability component are included in the carrying amount of the liability
component and are amortised over the lives of the convertible notes using the effective interest method.
P a g e | 47
ANNUAL REPORT
30 June 2021
SKIN ELEMENTS LIMITED AND CONTROLLED ENTITIES
ABN 90 608 047 794
Notes to the consolidated financial statements
for the year ended 30 June 2021
Note 5
Financial assets and financial liabilities (cont.)
5.6
Derivative assets and liabilities
Note
5.6.1 Financial assets
Prepaid commitment fee - current
Prepaid commitment fee – non-current
5.6.2 Derivative liabilities
LDA Commitment fee liability – current
LDA Commitment fee liability – non-current
5.6.3 LDA Capital Agreement
2021
$
502,000
502,000
1,004,000
272,604
272,604
545,208
2020
$
-
-
-
-
On 6 April 2021, the Company announced it had entered into a Put Option Agreement (POA) with LDA Capital Limited and LDA
Capital LLC (together LDA Capital), a United States based investment group, to provide the Company with up to A$20 million in
committed equity capital over the next 36 months. The Company would control the timing and maximum amount of the draw
down under this facility. The Company has committed to an Initial Drawdown with the size to be determined by the Company.
The effect of the key terms as described below gave rise to a derivative liability and prepaid asset held at fair value through profit
and loss.
Key terms and conditions:
a.
In accordance with the POA, as part consideration, the Company issued to LDA Capital 26,000,000 unlisted options all
expiring on 15 March 2024 comprising:
10,000,000 unlisted options exercisable at A$0.12
10,000,000 unlisted options exercisable at A$0.15
4,000,000 unlisted options exercisable at A$0.18
2,000,000 unlisted options exercisable at A$0.22
These options were valued at $604,000 using a Binomial options pricing model and classified as derivative liabilities. Refer
Note 5.6.8 for the valuation inputs.
b. On 18 May 2021, the Company issued to LDA Capital 27,500,000 shares (Collateral Shares) for nil consideration. LDA Capital
will hold these shares until such time that the Company issues the initial call notice. At that time, and subject to certain
limitations set out in the POA, LDA Capital may sell collateral shares on market. Under the POA, unused Collateral Shares
may be used for a subsequent call, bought back by the Company for nominal consideration or transferred to a trustee or
nominee of the Company for nominal consideration. LDA Capital holds 27,500,000 Collateral Shares at 30 June 2021 which
are included in Treasury Shares (Note 7.1.3)
c. Under the POA, the subscription price for the shares is set at 90% of the higher of the average VWAP of shares in the 30-
trading day period after the issue of the capital call notice, and the minimum acceptable price notified to LDA Capital by the
Company upon exercise of the put option. The VWAP calculation and the number of subscription shares is subject to
adjustment as a result of certain events occurring including trading volumes falling below an agreed threshold level or a
material adverse event occurring in relation to the Company.
d. The Company is also required to pay a commitment fee of A$400,000 to LDA Capital which is payable in cash in four equal
instalments at closing of the Company’s first four capital calls. When each of the first four capital calls are closed, the
Company will pay each $100,000 instalment, reduce the liability and the prepaid commitment fee, and recognise this
amount to cost of capital.
5.6.4 Recognition and reduction in derivative liability and other payables
On entering the POA, the Company recognised a commitment fee payable of $400,000, and fair value of 26,000,000
unlisted options, recognised as a derivative liability totalling $604,000 determined using a Binomial options pricing model.
Details of the assumptions used in the valuation of the options are summarised in Note 5.6.8.
The Company has not issued a Capital Call Notice under the POA to LDA Capital.
The derivative liability relating to the unlisted options issued to LDA Capital were revalued at the year-end for the unexercised
options. The remeasurement of the derivative liability resulted in a fair value gain of $58,792, refer to Note 1.2.
P a g e | 48
SKIN ELEMENTS LIMITED AND CONTROLLED ENTITIES
ABN 90 608 047 794
Notes to the consolidated financial statements
for the year ended 30 June 2021
Note 5
Financial assets and financial liabilities (cont.)
5.6
Derivative assets and liabilities (cont.)
5.6.5 Movement in prepaid assets
As at 1 July
Prepayment Commitment Fee (cash)- at inception
Fair value recognition of Fee Options – on issue
As at 30 June
5.6.6 Movement in other payables
As at 1 July
Commitment Fee payable
As at 30 June
5.6.7 Movement in derivative liabilities
As at 1 July
Derivative liability recognised on fee options issue
Re-measurement to fair value through profit or loss
1.2
As at 30 June
5.6.8 Fair value of options granted during the year
ANNUAL REPORT
30 June 2021
2021
$
-
400,000
604,000
1,004,000
-
400,000
400,000
-
604,000
(58,792)
545,208
2020
$
-
-
-
-
-
-
-
-
-
-
-
Tranche 1
Tranche 2
Tranche 3
Tranche 4
Grant date
Expiry date
1 March 2021
1 March 2021
1 March 2021
1 March 2021
15 March 2024
15 March 2024
15 March 2024
15 March 2024
Valuation date
30 June 2021
30 June 2021
30 June 2021
30 June 2021
Number of options
10,000,000
10,000,000
4,000,000
2,000,000
Grant date share price
Exercise price
Risk free interest rate
Volatility
$0.10
$0.12
0.10%
50%
$0.10
$0.15
0.10%
50%
Indicative Value per Option
$0.0265
$0.0198
Value per tranche
$265,000
$198,000
$0.10
$0.18
0.10%
50%
$0.0150
$60,000
$0.10
$0.22
0.10%
50%
$0.0107
$21,400
P a g e | 49
ANNUAL REPORT
30 June 2021
SKIN ELEMENTS LIMITED AND CONTROLLED ENTITIES
ABN 90 608 047 794
Notes to the consolidated financial statements
for the year ended 30 June 2021
Note 5
Financial assets and financial liabilities (cont.)
5.6
Derivative assets and liabilities (cont.)
5.6.9 Fair value hierarchy
The following tables detail the Group's assets and liabilities, measured or disclosed at fair value, using a three-level
hierarchy, based on the lowest level of input that is significant to the entire fair value measurement, as disclosed in note
22.4.2.
2021
Derivatives liabilities
LDA Commitment fee liability
Total derivative liabilities
Level 1
$
Level 2
$
Level 3
$
Total
$
-
-
-
-
545,208
545,208
545,208
545,208
There were no financial assets and financial liabilities at fair value for the year ended 30 June 2020.
5.6.10 Key Judgements – Accounting Policy
The POA is to facilitate the raising of equity, consequently the costs associated with the transaction have been offset against
the cost of equity that is ultimately raised.
To the extent that transaction costs are paid in advance of the equity being raised, these amounts have been capitalised as
a prepayment which is systematically released to equity as the equity is raised.
In the event that equity is not raised the prepayments will be charged to the income statement.
The POA contains a derivative liability from the inception, as LDA can elect to take a lower number of shares in lieu of paying
the option price, therefore the Company does not know how many shares it will issue or the amount of cash (if any) it will
receive. This is accounted for in accordance with AASB 132.11(b)(ii).
At each reporting period and when the option is exercised the derivative liability is remeasured, with any movement going
to the income statement.
When a call is made and the Company issues LDA shares to sell a derivative asset exists up until the point the amount the
Company is going to receive for selling those shares to LDA is determined (being 90% of the average VWAP of Shares during
the Pricing Period). At the end of the pricing period the derivative asset is remeasured with the movement going to the
income statement.
The fair value of financial assets and liabilities is measured using a Binomial option pricing model. The inputs to this model
are taken from observable markets where possible, but where this is not feasible, a degree of judgement is required in
establishing fair values. Judgements include considerations of input such as liquidity risk, credit risk and volatility. Changes
in assumptions relating to these factors could affect the reported fair value of the financial instruments. Refer Note 5.6.8 for
the detail inputs assumptions.
P a g e | 50
SKIN ELEMENTS LIMITED AND CONTROLLED ENTITIES
ABN 90 608 047 794
Notes to the consolidated financial statements
for the year ended 30 June 2021
Note 5
Financial assets and financial liabilities (cont.)
ANNUAL REPORT
30 June 2021
5.7 Other Significant Accounting Policies related to Financial Assets and Liabilities
5.7.1
Investments and other financial assets
a. Classification
The Group classifies its financial assets in the following measurement categories:
those to be measured subsequently at fair value (either through OCI or through profit or loss), and
those to be measured at amortised cost.
The classification depends on the entity’s business model for managing the financial assets and the contractual terms of
the cash flows.
For assets measured at fair value, gains and losses will either be recorded in profit or loss or OCI. For investments in
equity instruments that are not held for trading, this will depend on whether the Group has made an irrevocable election
at the time of initial recognition to account for the equity investment at fair value through other comprehensive income
(FVOCI).
The Group reclassifies debt investments when and only when its business model for managing those assets changes.
b. Recognition and derecognition
Regular way purchases and sales of financial assets are recognised on trade-date, the date on which the Group commits
to purchase or sell the asset. Financial assets are derecognised when the rights to receive cash flows from the financial
assets have expired or have been transferred and the Group has transferred substantially all the risks and rewards of
ownership.
c. Measurement
At initial recognition, the Group measures a financial asset at its fair value plus, in the case of a financial asset not at fair
value through profit or loss (FVPL), transaction costs that are directly attributable to the acquisition of the financial asset.
Transaction costs of financial assets carried at FVPL are expensed in profit or loss.
Financial assets with embedded derivatives are considered in their entirety when determining whether their cash flows
are solely payment of principal and interest.
i. Debt instruments
Subsequent measurement of debt instruments depends on the Group’s business model for managing the asset and
the cash flow characteristics of the asset. There are three measurement categories into which the Group classifies its
debt instruments:
Amortised cost: Assets that are held for collection of contractual cash flows where those cash flows represent
solely payments of principal and interest are measured at amortised cost. Interest income from these financial
assets is included in finance income using the effective interest rate method. Any gain or loss arising on
derecognition is recognised directly in profit or loss and presented in other gains/(losses) together with foreign
exchange gains and losses. Impairment losses are presented as separate line item in the statement of profit or
loss.
FVOCI: Assets that are held for collection of contractual cash flows and for selling the financial assets, where the
assets’ cash flows represent solely payments of principal and interest, are measured at FVOCI. Movements in the
carrying amount are taken through OCI, except for the recognition of impairment gains or losses, interest income
and foreign exchange gains and losses which are recognised in profit or loss. When the financial asset is
derecognised, the cumulative gain or loss previously recognised in OCI is reclassified from equity to profit or loss
and recognised in other gains/(losses). Interest income from these financial assets is included in finance income
using the effective interest rate method. Foreign exchange gains and losses are presented in other gains/(losses)
and impairment expenses are presented as separate line item in the statement of profit or loss.
FVPL: Assets that do not meet the criteria for amortised cost or FVOCI are measured at FVPL. A gain or loss on a
debt investment that is subsequently measured at FVPL is recognised in profit or loss and presented net within
other gains/(losses) in the period in which it arises.
P a g e | 51
ANNUAL REPORT
30 June 2021
SKIN ELEMENTS LIMITED AND CONTROLLED ENTITIES
ABN 90 608 047 794
Notes to the consolidated financial statements
for the year ended 30 June 2021
Note 5
Financial assets and financial liabilities (cont.)
5.7 Other Significant Accounting Policies related to Financial Assets and Liabilities (cont.)
ii. Equity instruments
The Group subsequently measures all equity investments at fair value. Where the Group’s management has elected
to present fair value gains and losses on equity investments in OCI, there is no subsequent reclassification of fair
value gains and losses to profit or loss following the derecognition of the investment. Dividends from such
investments continue to be recognised in profit or loss as other income when the Group’s right to receive payments
is established.
Changes in the fair value of financial assets at FVPL are recognised in other gains/(losses) in the statement of profit
or loss as applicable. Impairment losses (and reversal of impairment losses) on equity investments measured at FVOCI
are not reported separately from other changes in fair value.
d. Impairment
From 1 January 2019, the Group assesses on a forward-looking basis, the expected credit losses associated with its debt
instruments carried at amortised cost and FVOCI. The impairment methodology applied depends on whether there has
been a significant increase in credit risk.
For trade receivables, the Group applies the simplified approach permitted by AASB 9, which requires expected lifetime
losses to be recognised from initial recognition of the receivables.
Note 6
Non-financial assets and financial liabilities
6.1
Inventories
Finished goods
6.1.1 Accounting policy
2021
$
223,225
223,225
2020
$
155,705
155,705
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 based on normal operating capacity. Costs are assigned to individual items of inventory based on
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 a g e | 52
SKIN ELEMENTS LIMITED AND CONTROLLED ENTITIES
ABN 90 608 047 794
Notes to the consolidated financial statements
for the year ended 30 June 2021
Note 6
Non-financial assets and financial liabilities (cont.)
6.2
Intangible assets
SE FormulaTM
Accumulated amortisation
Website development costs
Accumulated amortisation
Total intangibles
6.2.1 Movements in Carrying Amounts
Carrying amount at 1 July 2019
Additions
Amortisation expense
Carrying amount at 30 June 2020
Carrying amount at 1 July 2020
Additions
Amortisation expense
Carrying amount at 30 June 2021
6.2.2 Accounting policies
ANNUAL REPORT
30 June 2021
2021
$
2020
$
9,859,296
9,859,296
(1,601,478)
(1,212,476)
8,257,818
8,646,820
55,410
(23,078)
32,332
19,000
(11,996)
7,004
8,290,150
8,653,824
Skin Elements
formula and
technology
$
Website
development
costs
$
Total
$
8,984,310
50,000
(387,490)
8,646,820
-
8,646,820
-
(389,002)
8,257,818
-
10,807
8,995,117
-
50,000
(3,803)
(391,293)
7,004
-
7,004
36,410
(11,082)
32,332
-
8,653,824
-
8,653,824
36,410
(400,084)
8,290,150
-
Intangible assets acquired separately
a.
Intangible assets acquired separately are recorded at cost less accumulated amortisation and impairment. Amortisation is
charged on a straight-line basis over their estimated useful lives. The estimated useful life and amortisation method is
reviewed at the end of each annual reporting period, with any changes in these accounting estimates being accounted for
on a prospective basis.
i. Formula and technology
Separately acquired formula and technology are shown at historical cost. Skin Elements formula and technology
(hereafter SE FormulaTM), comprises the following, which utilise the same propriety formula in their ingredients:
Soléo Organics formula and technology
McArthur Skincare formula and technology
Elizabeth Jane Natural Cosmetics formula and technology
Invisi® Shield SuprCuvr Disinfectant
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.
P a g e | 53
ANNUAL REPORT
30 June 2021
SKIN ELEMENTS LIMITED AND CONTROLLED ENTITIES
ABN 90 608 047 794
Notes to the consolidated financial statements
for the year ended 30 June 2021
Note 6
Non-financial assets and financial liabilities (cont.)
6.2
Intangible assets (cont.)
b. 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
Expenditure on research activities is recognised as an expense in the period in which it is incurred.
An internally-generated intangible asset arising from development (or from the development phase of an internal project)
is recognised if, and only if, all of the following have been demonstrated:
the technical feasibility of completing the intangible asset so that it will be available for use or sale;
the intention to complete the intangible asset and use or sell it;
the ability to use or sell the intangible asset;
how the intangible asset will generate probable future economic benefits;
the availability of adequate technical, financial, and other resources to complete the development and to use or sell
the intangible asset; and
the ability to measure reliably the expenditure attributable to the intangible asset during its development.
The amount initially recognised for internally-generated intangible assets is the sum of the expenditure incurred from the
date when the intangible asset first meets the recognition criteria listed above. Where no internally-generated asset can be
recognised, development expenditure is recognised in profit or loss in the period in which it is incurred.
Subsequent to initial recognition, internally-generated intangible assets are reported at cost less accumulated amortisation
and accumulated impairment losses, on the same basis as intangible assets that are acquired separately.
Intangible assets acquired in a business combination
Expenditures in relation to the development of identifiable and unique products, and that will probably generate economic
benefits exceeding costs beyond one year, are recognised as intangible assets and amortised over their estimated useful
lives. Any expenditure related to research is expensed as incurred.
c.
Intangible assets acquired as part of a business combination, other than goodwill, are initially measured at their fair value at
the date of the acquisition. Intangible assets acquired separately are initially recognised at cost. Indefinite life intangible
assets are not amortised and are subsequently measured at cost less any impairment. Finite life intangible assets are
subsequently measured at cost less amortisation and any impairment. The gains or losses recognised in profit or loss arising
from derecognition of intangible assets are measured as the difference between net disposal proceeds and the carrying
amount of the intangible asset. The method and useful lives of finite life intangible assets are reviewed annually. Changes in
the expected pattern of consumption or useful life are accounted for prospectively by changing the amortisation method or
period.
d. Subsequent measurement
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 SE FormulaTM is 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. The following useful
lives are used in the calculation of amortisation:
SE FormulaTM
Website development costs
2021
Years
25
5
2020
Years
25
5
P a g e | 54
SKIN ELEMENTS LIMITED AND CONTROLLED ENTITIES
ABN 90 608 047 794
Notes to the consolidated financial statements
for the year ended 30 June 2021
Note 6
Non-financial assets and financial liabilities (cont.)
6.2
Intangible assets (cont.)
6.2.3 Key estimates
ANNUAL REPORT
30 June 2021
Impairment
a.
The Group 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.
To assist the Group with the impairment assessment of the intangible assets, Moore Australia Corporate Finance (WA) Pty
Ltd were engaged to undertake an independent expert report of the indicative fair market value of the intangible assets of
the Group. The preferred valuation of the assets did not result in a requirement to impair the carrying value of the intangible
assets. The Independent Expert used a range of valuation methodologies to assess fair market value.
Directors are satisfied with the sensitivity and objectivity of the expert and the reasonableness of the key assumptions in the
valuation.
b. Amortisation rates
The Group has assessed the effective life of its SE FormulaTM intangible asset (comprising Soléo Organics formula and
technology; McArthur Skincare formula and technology; Elizabeth Jane Natural Cosmetics formula and technology; and
Invisi® Shield Hand Sanitiser) taking into account sector practices, the expected product life cycle and its own internal
knowledge of the underlying markets to determine an appropriate amortisation rate. This rate is an estimate of what the
Group anticipates the intangible will be able to generate future benefits from the commercialisation formula and technology
and this may differ from the future results. The Directors will continue to assess the effective life at each reporting date
6.3 Other Significant Accounting Policies related to Non-Financial Assets and Liabilities
6.3.1
Impairment of non-financial assets
The carrying amounts of the Group's non-financial assets, other than deferred tax assets (see accounting policy at Note 4.7)
are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists,
then the asset's recoverable amount is estimated.
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.
P a g e | 55
ANNUAL REPORT
30 June 2021
SKIN ELEMENTS LIMITED AND CONTROLLED ENTITIES
ABN 90 608 047 794
Notes to the consolidated financial statements
for the year ended 30 June 2021
Note 6
Non-financial assets and financial liabilities (cont.)
6.3 Other Significant Accounting Policies related to Non-Financial Assets and Liabilities
6.3.2 Leases
a. Recognition and measurement
Until the 2019 financial year, leases of property, plant and equipment were classified as either finance leases or
operating leases. 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. From 1 July 2019, leases are recognised as a right-of-use asset
and a corresponding liability at the date at which the leased asset is available for use by the Group.
i. Right of Use Asset
The Group recognises a right of use asset at the commencement date of the lease. The right of use asset is initially
measured at cost. The cost of right of use assets includes the amount of lease liabilities recognised, adjusted for any
lease payments made at or before the commencement date, plus initial direct costs incurred and an estimate of costs
to dismantle, remove or restore the leased asset, less any lease incentives received.
Right-of-use assets are measured at cost comprising the following:
the amount of the initial measurement of lease liability;
any lease payments made at or before the commencement date less any lease incentives received;
any initial direct costs; and
restoration costs.
Subsequent to initial measurement, the right of use asset is depreciated on a straight-line basis over the shorter of the
lease term and the estimated useful life.
Right of use assets are subject to impairment and are adjusted for any remeasurement of lease liabilities.
ii. Lease liabilities
At the commencement date of the lease, the Group recognises lease liabilities at the present value of lease payment to
be made over the lease term. The lease payments include fixed payments (including in substance fixed payments) less
any lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to be
paid under residual value guarantees. The lease payments also include the exercise price of a purchase option
reasonably certain to be exercised by the Group and payments of penalties for terminating a lease, if the assessment of
lease term reflects the Group exercising the option to terminate. The variable lease payments that do not depend on an
index or a rate are recognised as expense in the period on which the event or condition that triggers the payments
occurs. The present value of lease payments is discounted using the interest rate implicit in the lease or, if the rate
cannot be readily determined, the Group's incremental borrowing rate.
The lease liability is measured at amortised cost using the effective interest method. After the commencement date, the
amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made.
The amount of lease liability is remeasured when there is a change in future lease payments arising from a change in an
index or rate, if there is a change in the Group's estimate of the amount expected to be payable under a residual value
guarantee, or if the Group changes its assessment of whether it will exercise a purchase, extension or termination
option. When the lease liability is remeasured, a corresponding adjustment is made to the carrying amount of the right
of use asset, or is recognised in profit or loss if the carrying amount of the right of use asset has been reduced to zero.
The Group has elected not to recognise right of use assets and lease liabilities for short term leases that have a lease
term of 12 months or less and do not contain a purchase option, and leases of low value assets. The Group recognises
the lease payments associated with these leases as an expense on a straight-line basis over the lease term.
P a g e | 56
SKIN ELEMENTS LIMITED AND CONTROLLED ENTITIES
ABN 90 608 047 794
Notes to the consolidated financial statements
for the year ended 30 June 2021
Note 7
Equity
ANNUAL REPORT
30 June 2021
7.1
Issued capital
Note
2021
No.
2020
No.
2021
$
2020
$
Fully paid ordinary shares at no par value
379,477,266
323,284,299
20,978,594
17,607,998
7.1.1 Ordinary shares
At the beginning of the year
323,284,299
158,404,002
17,607,998
15,286,784
7.4
19.2.1b
19.2.1b
19.2.1b
19.2.1b
19.2.1b
19.2.1b
19.2.1b
7.2
Shares issued during the year:
31.07.19 Placement
29.11.19 Convertible note
31.12.19 Corporate advisory
31.12.19 Project management
services
31.12.19 Convertible note
01.02.20 Placement
20.03.20 Placement
20.03.20 Lead Manager fee
20.03.20 Underwriting fee
20.03.20 Facility fee
14.05.20 Facility fee
22.06.20 Acquisition of IP
30.06.20 Options conversion
17.08.20 Options exercise
21.08.20 Share issue
19.09.20 Options exercise
30.09.20 Options exercise
30.11.20 Options exercise
11.12.20 Options exercise
23.12.20 Options exercise
31.12.20 Options exercise
31.12.20 Options exercise
22.01.21 Shortfall
25.02.21 Placement
Transaction costs relating to share
issues
-
-
-
-
-
-
-
-
-
-
-
-
-
4,059,838
3,001,326
761,538
2,734,892
12,500,000
100,479,822
29,800,000
2,500,000
2,000,000
2,000,000
300,000
250,000
4,492,881
483,333
2,000,000
975,001
1,247,167
2,958,465
6,799,688
4,159,266
14,358,546
4,882,930
6,328,571
12,000,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
14,500
120,000
29,250
37,414
88,754
203,991
124,779
430,757
488,294
632,857
1,200,000
113,675
450,199
19,800
55,551
200,000
1,004,798
350,000
25,000
25,000
25,000
25,000
20,000
134,786
-
-
-
-
-
-
-
-
-
-
-
-
(127,595)
At end of the year
379,477,266
323,284,299
20,978,594
17,607,998
7.1.2 Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the Company in
proportion to the number of and amounts paid on the shares held. On a show of hands every holder of ordinary shares
present at a meeting in person or by proxy, is entitled to one vote, and upon a poll each share is entitled to one vote.
Ordinary shares have no par value and the Company does not have a limited amount of authorised capital.
7.1.3 Treasury shares
Ordinary shares issued to LDA Capital as Collateral Shares for Nil
consideration
Note
2021
No.
5.6.3
27,500,000
27,500,000
2020
No.
-
-
P a g e | 57
ANNUAL REPORT
30 June 2021
SKIN ELEMENTS LIMITED AND CONTROLLED ENTITIES
ABN 90 608 047 794
Notes to the consolidated financial statements
for the year ended 30 June 2021
Note 7
Equity (cont.)
7.1.4 Accounting policy
Issued and paid-up capital is recognised at the fair value of the consideration received by the Company. Incremental costs
directly attributable to the issue of ordinary shares and share options are recognised as a deduction from equity, net of any
related income tax benefit. 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. Ordinary issued capital
bears no special terms or conditions affecting income or capital entitlements of the shareholders.
7.2 Options
Options
2021
No.
2020
No.
2021
$
26,000,000
126,004,034
At the beginning of the year
126,004,034
81,965,315
Options movement during the year:
31.12.19 Convertible note
31.12.19 Convertible note
06.03.20 Expiry of options
17.03.20 Placement
20.03.20 Placement
30.06.20 Conversion
17.08.20 Options exercise
21.08.20 option issue
19.09.20 Options exercise
30.09.20 Options exercise
30.11.20 Options exercise
11.12.20 Options exercise
23.12.20 Options exercise
31.12.20 Options exercise
31.12.20 Options exercise
31.12.20 Expiry of options
Previously expired options
30.03.21 Fee options issued to
LDA Capital
-
-
-
-
-
-
3,001,326
9,375,000
(338,000)
33,493,274
3,000,000
(4,492,881)
(483,333)
200,000
(975,001)
(1,247,167)
(2,958,465)
(6,799,688)
(4,159,266)
(14,358,546)
(4,882,930)
(90,339,638)
-
5.6.3
26,000,000
-
-
-
-
-
-
-
-
-
-
-
-
At end of the year
26,000,000
126,004,034
Comprising the following options:
Listed, ex. price $0.10 exp. date
31.12.20
Unlisted, ex. price $0.03 exp.
date 31.12.20
Unlisted, ex. price $0.12 exp.
date 15.03.24
Unlisted, ex. price $0.15 exp.
date 15.03.24
Unlisted, ex. price $0.18 exp.
date 15.03.24
Unlisted, ex. price $0.22 exp.
date 15.03.24
-
-
97,003,641
29,000,393
10,000,000
10,000,000
4,000,000
2,000,000
-
-
-
-
At end of the year
26,000,000
126,004,034
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2020
$
-
116,816
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(116,816)
-
-
-
-
-
-
-
-
-
P a g e | 58
SKIN ELEMENTS LIMITED AND CONTROLLED ENTITIES
ABN 90 608 047 794
Notes to the consolidated financial statements
for the year ended 30 June 2021
Note 7
Equity (cont.)
7.3
Performance rights
Note
2021
No.
2020
No.
Performance rights
47,000,000
47,000,000
At the beginning of the year
Performance rights movement
during the year:
47,000,000
2,200,000
Issued
Fair value adjustments
Lapsed
Amortise of Performance shares
issued in 30 June 2020 financial
year
19.2.1a,c
19.2.1c
19.2.1c
-
-
-
-
47,000,000
-
(2,200,000)
-
At reporting date
47,000,000
47,000,000
2021
No.
-
-
-
-
-
-
2020
No.
-
378,842
-
-
(378,842)
-
7.4
Convertible notes (equity)
Convertible Note
At the beginning of the year
Convertible notes movement during
the year:
Fair value adjustments
Repayment
Conversion to ordinary shares
At reporting date
7.5
Reserves
Share-based payment reserve
7.5.1 Share-based payment reserve
ANNUAL REPORT
30 June 2021
2021
$
91,252
29,103
2020
$
29,103
195,522
-
-
-
29,103
27,323
(222,845)
62,149
91,252
2021
$
-
-
-
-
-
-
2021
$
91,252
91,252
-
29,103
2020
$
-
492,405
(42,206)
-
(450,199)
-
2020
$
29,103
29,103
The share-based payment reserve records the value of options and performance rights issued the Company to its
employees or consultants.
P a g e | 59
ANNUAL REPORT
30 June 2021
SKIN ELEMENTS LIMITED AND CONTROLLED ENTITIES
ABN 90 608 047 794
Notes to the consolidated financial statements
for the year ended 30 June 2021
SECTION B. RISK
This section of the notes discusses the Group’s exposure to various risks and shows how these could affect the Group’s
financial position and performance.
Note 8
Financial risk management
This note presents information about the Group's exposure to each of the above risks, its objectives, policies, and procedures for
measuring and managing risk, and the management of capital.
The Group's financial instruments consist mainly of deposits with banks, short-term investments, accounts payable and
receivable, borrowings (including convertible instruments), and leases.
The Group does not speculate in the trading of financial instruments or derivative instruments.
A summary of the Group's financial assets and liabilities, measured in accordance with AASB9 Financial Instruments as detailed
in the accounting policies, is shown below:
Floating
Interest
Rate
$
Fixed
Interest
Rate
$
Non-
interest
Bearing
$
2021
Total
$
Floating
Interest
Rate
$
Fixed
Interest
Rate
Non-
interest
Bearing
Financial Assets
Cash and cash equivalents
287,632
Trade and other receivables
Financial assets – LDA
prepayments
-
-
Total Financial Assets
287,632
Financial Liabilities
Trade and other payables
Borrowings
Derivative liabilities
Total Financial Liabilities
Net Financial Assets /
(Liabilities)
-
-
-
-
287,632
-
-
-
-
-
-
-
-
-
-
287,632
205,947
1,122,891
1,122,891
1,004,000
1,004,000
-
-
2,126,891
2,414,523
205,947
847,998
847,998
30,990
30,990
545,208
545,208
1,424,196
1,424,196
-
-
-
-
2020
Total
$
205,947
$
-
764,153
764,153
-
-
764,153
970,100
509,141
509,141
$
-
-
-
-
-
500,000
-
-
-
500,000
-
500,000
509,141
1,009,141
702,695
990,327
205,947
(500,000)
255,012
(39,041)
8.1
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.
8.2
Specific Financial Risk Exposures and Management
The main risk the Group is exposed to through its financial instruments are credit risk, liquidity risk and market risk
consisting of interest rate and equity price risk.
P a g e | 60
SKIN ELEMENTS LIMITED AND CONTROLLED ENTITIES
ABN 90 608 047 794
Notes to the consolidated financial statements
for the year ended 30 June 2021
Note 8
Financial risk management (cont.)
ANNUAL REPORT
30 June 2021
The Board has overall responsibility for the establishment and oversight of the risk management framework. The Board
adopts practices designed to identify significant areas of business risk and to effectively manage those risks in accordance
with the Group's risk profile. This includes assessing, monitoring, and managing risks for the Group and setting
appropriate risk limits and controls. The Group is not of a size nor complexity to justify the establishment of a formal
system for risk management and associated controls. Instead, the Board approves all expenditure, is intimately
acquainted with all operations, and discuss all relevant issues at the Board meetings. The operational and other
compliance risk management have also been assessed and found to be operating efficiently and effectively.
8.2.1 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 Group. The Group’s exposure to credit risk is primarily in relation to
its cash at bank, short-term deposits, and receivables. The Group does not have any other significant credit risk exposure
to a single counterparty or any group of counterparties having similar characteristics.
Credit risk refers to the risk that counterparty will default on its contractual obligations resulting in financial loss to the
Group. The Group has adopted a policy of only dealing with creditworthy counterparties and obtaining sufficient
collateral where appropriate, as a means of mitigating the risk of financial loss from defaults. 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 ranging
from prepaid and payment on delivery to 60 days from the day of invoice. For sales with longer settlements, terms are
specified in the individual client contracts.
The Group establishes an allowance for impairment that represents its estimate of incurred losses in respect of trade and
other receivables.
Credit risk exposures
The maximum exposure to credit risk is that to its alliance partners and that is limited to the carrying amount, net of
any provisions for impairment of those assets, as disclosed in the statement of financial position and notes to the
financial statements.
Credit risk related to balances with banks and other financial institutions is managed by the Group in accordance with
approved Board policy. Such policy requires that surplus funds are only invested with reputable financial institutions
residing in Australia, wherever possible. There are no significant concentrations of credit risk, whether through
exposure to individual customers, specific industry sectors and/or regions.
Impairment losses
Impairment losses are recorded against receivables unless the Group is satisfied that no recovery of the amount
owing is possible; at that point the amount is considered irrecoverable and is written off against the financial asset
directly. Trade and other receivables that are neither past due nor impaired are considered to be of high credit
quality. The ageing of the Group's trade and other receivables at reporting date was as follows:
Gross
2021
$
10,087
13,981
24,068
1,098,823
1,122,891
Impaired
2021
$
Past due but not
impaired
2021
$
Net
2021
$
-
-
-
-
-
10,087
13,981
24,068
1,098,823
1,122,891
-
13,981
13,981
-
13,981
Trade receivables
Not past due to 30 days
Past due 31 days to 90 days
Other receivables
Not past due
Total
P a g e | 61
ANNUAL REPORT
30 June 2021
SKIN ELEMENTS LIMITED AND CONTROLLED ENTITIES
ABN 90 608 047 794
Notes to the consolidated financial statements
for the year ended 30 June 2021
Note 8
Financial risk management (cont.)
8.2.2 Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group's
approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its
liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage
to the Group's reputation.
Ultimate responsibility for liquidity risk management rests with the Board, who have built an appropriate liquidity risk
management framework for the management of the Group's short, medium, and long-term funding and liquidity
management requirements. The Group manages liquidity risk by:
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.
Typically, the Group ensures that it has sufficient cash to meet expected operational expenses for a period of 60 days,
including the servicing of financial obligations; this excludes the potential impact of extreme circumstances that cannot
reasonably be predicted, such as natural disasters.
The financial liabilities of the Group include trade and other payables as disclosed in the statement of financial position.
All trade and other payables are non-interest bearing and due within 60 days of the reporting date.
Contractual Maturities
The following are the contractual maturities of financial assets and liabilities of the Group:
Financial liabilities due for payment
Trade and other payables
Borrowings
Derivative liabilities
Within 1 Year
Greater Than 1 Year
2021
$
647,998
30,990
272,604
2020
$
509,141
500,000
-
2021
$
200,000
-
272,604
Total contractual outflows
951,592
1,009,141
472,604
Financial assets
Cash and cash equivalents
Trade and other receivables
Financial assets – LDA prepayments
287,632
1,122,891
502,000
205,947
764,153
-
-
-
502,000
Total anticipated inflows
1,912,523
970,100
502,000
Net inflow / (outflow) on financial
instruments
960,931
(39,041)
29,396
Total
2021
$
847,998
30,990
545,208
2020
$
509,141
500,000
-
1,424,196
1,009,141
287,632
1,122,891
1,004,000
205,947
764,153
-
2,414,523
970,100
990,327
(39,041)
2020
$
-
-
-
-
-
-
-
-
-
Cash flows realised from financial instruments reflect management's expectation as to the timing of realisation timing
may therefore differ from that disclosed. It is not expected that the cash flows included in the maturity analysis could
occur significantly earlier or at significantly different amounts.
P a g e | 62
SKIN ELEMENTS LIMITED AND CONTROLLED ENTITIES
ABN 90 608 047 794
Notes to the consolidated financial statements
for the year ended 30 June 2021
Note 8
Financial risk management (cont.)
8.2.3 Market risk
ANNUAL REPORT
30 June 2021
Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will
affect the Group's income or the value of its holdings of financial instruments. The objective of market risk management
is to manage and control market risk exposures within acceptable parameters, while optimising the return.
The Group's activities minimally expose it to the financial risks of changes in foreign currency exchange rates, commodity
prices and exchange rates. The Group does not enter into derivative financial instruments including foreign exchange
forward contracts to hedge against financial risk. There has been no change to the Group's exposure to market risks or
the manner in which it manages and measures the risk from the previous period.
a.
Interest rate risk
The Group is exposed to interest rate risk as the Group borrows funds at both fixed and floating interest rates. The
risk is managed by the Group by maintaining an appropriate mix between fixed and floating rate borrowings. Group’s
exposures to interest rate in financial assets and financial liabilities are detailed in the liquidity risk management
section of this note.
b. Foreign exchange risk
The Group is not exposed to any material foreign exchange risk.
c. Price risk
Price risk relates to the risk that the fair value or future cash flows of a financial instrument will fluctuate because of
changes in market prices. The Group does not presently hold material amounts subject to price risk. As such the Board
considers price risk as a low risk to the Group.
8.2.4 Sensitivity Analyses
The Group is not subject to material market risk sensitivities.
8.2.5 Net Fair Values
a. Fair value estimation
The fair values of financial assets and financial liabilities are presented in the table in Note 8 and can be compared to
their carrying values as presented in the statement of financial position. Fair values are those amounts at which an
asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm's length transaction.
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 whose carrying value is equivalent to fair value due to their nature include:
Cash and cash equivalents;
Trade and other receivables;
Trade and other payables; and
Derivative liabilities (recognised at fair value).
The methods and assumptions used in determining the fair values of financial instruments are disclosed in the
accounting policy notes specific to the asset or liability.
P a g e | 63
ANNUAL REPORT
30 June 2021
SKIN ELEMENTS LIMITED AND CONTROLLED ENTITIES
ABN 90 608 047 794
Notes to the consolidated financial statements
for the year ended 30 June 2021
Note 9
Capital Management
9.1.1 Capital
The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while
maximising the return to stakeholders through the optimisation of the debt and equity balance.
The Groups objectives when managing capital are to:
a. 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
b. Maintain an optimal capital structure to reduce the cost of capital.
The capital structure of the Group consists of debt (loans and convertible instruments), cash and cash equivalents, and
equity attributable to equity holders of the parent, comprising issued capital, reserves and accumulated losses. None of
the Group's entities are subject to externally imposed capital requirements.
Operating cash flows are used to maintain and expand operations, as well as to make routine expenditures such as tax,
dividends and general administrative outgoings. Gearing levels are reviewed by the Board on a regular basis in line with
its target gearing ratio, the cost of capital and the risks associated with each class of capital.
9.1.2 Working Capital
The working capital position of the Group was as follows:
Note
Cash and cash equivalents
Trade and other receivables
Inventories
Other current assets (excluding prepayments)
Trade and other payables
Borrowings
Working capital position
5.1
5.2
6.1
5.3
5.4
5.5
2021
$
287,632
1,122,891
223,225
55,583
(847,998)
(30,990)
2020
$
205,947
764,153
155,705
248,963
(509,141)
(500,000)
810,343
365,627
P a g e | 64
SKIN ELEMENTS LIMITED AND CONTROLLED ENTITIES
ABN 90 608 047 794
Notes to the consolidated financial statements
for the year ended 30 June 2021
SECTION C. GROUP STRUCTURE
ANNUAL REPORT
30 June 2021
This section provides information which will help users understand how the Group structure affects the financial
position and performance of the Group as a whole. In particular, there is information about:
(a) changes to the structure that occurred during the year as a result of business combinations and the disposal of a
discontinued operation
(b) transactions with non-controlling interests, and
(c)
interests in joint operations.
A list of significant subsidiaries is provided in Note 10. This note also discloses details about the Group’s equity
accounted investments.
Note 10
Interest in subsidiaries
10.1
Information about subsidiaries
The subsidiaries listed below have share capital consisting solely of ordinary shares which are held directly by the Group
and the proportion of ownership interest held equals the voting rights held by the Group. Investments in subsidiaries are
accounted for at cost. Each subsidiaries country of incorporation is also its principal place of business:
SE Operations Pty Ltd
Place of incorporation
and operation
Western Australia
Percentage Owned
2021
100%
2020
100%
Note 11 Other Significant Accounting Policies related to Group Structure
11.1 Basis of consolidation
As at reporting date, the assets and liabilities of all controlled entities have been incorporated into the consolidated financial
statements as well as their results for the year then ended. Where controlled entities have entered (left) the Consolidated
Group during the year, their operating results have been included (excluded) from the date control was obtained (ceased).
11.1.1 Business combinations
Business combinations are accounted for using the acquisition method as at the acquisition date, which is the date on which
control is transferred to the Group. Control exists when the Group is exposed to variable returns from another entity and
has the ability to affect those returns through its power over the entity.
The Group measures goodwill at the acquisition date as:
the fair value of the consideration transferred; plus
the recognised amount of any non-controlling interests in the acquire; plus
if the business combination is achieved in stages, the fair value of the existing equity interest in the acquiree;
less
the net recognised amount of the identifiable assets acquired and liabilities assumed.
The excess of the consideration transferred the amount of any non-controlling interest in the acquiree and the acquisition-
date fair value of any previous equity interest in the acquiree over the fair value of the Group's share of the net identifiable
assets acquired is recorded as goodwill.
If those amounts are less than the fair value of the net identifiable assets of the subsidiary acquired and the measurement
of all amounts has been reviewed, the difference is recognised directly in profit or loss as a bargain purchase.
The consideration transferred does not include amounts related to settlement of pre-existing relationships. Such amounts
are generally recognised in profit or loss.
Costs related to the acquisition, other than those associated with the issue of debt or equity securities, that the Group incurs
in connection with a business combination are expensed as incurred.
Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to their
present value as at the date of exchange. The discount rate used is the entity's incremental borrowing rate, being the rate
at which a similar borrowing could be obtained from an independent financier under comparable terms and conditions.
P a g e | 65
ANNUAL REPORT
30 June 2021
SKIN ELEMENTS LIMITED AND CONTROLLED ENTITIES
ABN 90 608 047 794
Notes to the consolidated financial statements
for the year ended 30 June 2021
Note 11 Other Significant Accounting Policies related to Group Structure
Any contingent consideration payable is recognised at fair value at the acquisition date. If the contingent consideration is classified
as equity, it is not remeasured and settlement is accounted for within equity. Otherwise, subsequent changes to the fair value of
the contingent consideration are recognised in profit or loss.
11.1.2 Subsidiaries
Subsidiaries are entities controlled by the Group. The financial statements of subsidiaries are included in the consolidated
financial statements from the date that control commences until the date that control ceases.
The accounting policies of subsidiaries have been changed when necessary, to align them with the policies adopted by the
Group.
Equity interests in a subsidiary not attributable, directly or indirectly, to the Group are presented as non-controlling interests.
The Group initially recognises non-controlling interests that are present ownership interests in subsidiaries and are entitled
to a proportionate share of the subsidiary's net assets on liquidation at either fair value or at the non-controlling interests'
proportionate share of the subsidiary's net assets. Subsequent to initial recognition, non-controlling interests are attributed
their share of profit or loss and each component of other comprehensive income. Non-controlling interests are shown
separately within the equity section of the statement of financial position and statement of comprehensive income.
The grant by the Company of options over its equity instruments to the employees of subsidiary undertakings in the Group
is treated as a capital contribution to that subsidiary undertaking. The fair value of employee services received, measured
by reference to the grant date fair value, is recognised over the vesting period as an increase to investment in subsidiary
undertakings, with a corresponding credit to equity.
Losses applicable to the non-controlling interests in a subsidiary are allocated to the non-controlling interests even if doing
so causes the non-controlling interests to have a deficit balance.
A list of controlled entities is contained in Note 10 Interest in subsidiaries of the financial statements.
11.1.3 Loss of control
Upon the loss of control, the Group derecognises the assets and liabilities of the subsidiary, any non-controlling interests
and the other components of equity related to the subsidiary. Any surplus or deficit arising on the loss of control is recognised
in profit or loss. If the Group retains any interest in the previous subsidiary, then such interests are measured at fair value at
the date control is lost. Subsequently it is accounted for as an equity-accounted investee or as an available-for-sale financial
asset depending on the level of influence retained.
11.1.4 Transactions eliminated on consolidation
All intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions,
are eliminated in preparing the consolidated financial statements.
P a g e | 66
SKIN ELEMENTS LIMITED AND CONTROLLED ENTITIES
ABN 90 608 047 794
Notes to the consolidated financial statements
for the year ended 30 June 2021
SECTION D. UNRECOGNISED ITEMS
ANNUAL REPORT
30 June 2021
This section of the notes includes other information that must be disclosed to comply with the accounting standards
and other pronouncements, but that is not immediately related to individual line items in the financial statements.
Note 12 Commitments
12.1 Capital commitments
The Group does not have any capital commitments. (2020: $157,072)
Note 13 Events subsequent to reporting date
13.1.1 Director appointment and resignation.
On 31 August 2021, the Company appointed Mr Lee Christensen as a Non-executive director to the Board and Mr John
Poulsen resigned as Non-executive director.
13.1.2 Equity Issues
On 31 August 2021, the Company has announced that it has raised $2.1 million (before costs) in cash working capital to fund
its stated business plans including the launch of its new TGA registered Invisi Shield CuprCuvr hospital grade disinfectant.
The Company proposes to issue 26,250,000 ordinary fully paid shares for $2,100,000 in cash (before costs) in a private
placement to sophisicated investors.
13.1.3 Research and Development Tax Incentives
Subsequent to 30 June 2021, the Company received $988,711 from Research and Development Tax Incentives.
There has not been any other matter or circumstance that has arisen after balance date that has significantly affected, or may
significantly affect, the operations of the Group, the results of those operations, or the state of affairs of the Group in future
financial periods.
Note 14 Contingent liabilities
There are no other contingent liabilities as at 30 June 2021 (30 June 2020: Nil).
P a g e | 67
ANNUAL REPORT
30 June 2021
SKIN ELEMENTS LIMITED AND CONTROLLED ENTITIES
ABN 90 608 047 794
Notes to the consolidated financial statements
for the year ended 30 June 2021
SECTION E. OTHER INFORMATION
This section of the notes includes other information that must be disclosed to comply with the accounting standards
and other pronouncements, but that is not immediately related to individual line items in the financial statements.
Note 15 Key Management Personnel compensation (KMP)
The names and positions of KMP are as follows:
Directors
Peter Malone
Phil Giglia
John Poulsen
Former Directors
Craig Piercy
Other key management
Leo Fung
Executive Chairman
Independent Non-Executive Director
Independent Non-Executive Director (Appointed on 29 October 2020, resigned on 31 August
2021)
Executive Director (Appointed on 29 November 2019, resigned 29 October 2020)
Chief Technical Advisor
Information regarding individual directors and executives’ compensation and some equity instruments disclosures as required
by the Corporations Regulations 2M.3.03 is provided in the Remuneration report table on page 29.
Short-term employee benefits
Post-employment benefits
Share-based payments
Other long-term benefits
Termination benefits
Total
Note 16 Related party transactions
2021
$
2020
$
594,000
584,000
-
28,515
-
-
-
44,036
-
-
622,515
628,036
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.
Transactions between related parties are on normal commercial terms and conditions no more favourable than those available
to other parties unless otherwise stated.
Balances and transactions between the Company and its subsidiaries, which are related parties of the Company, have been
eliminated on consolidation and are not disclosed in this note. Details of transactions between the Group and other related
parties are disclosed below.
Entity
Nature of transactions
KMP
Total Transactions
Payable Balance
2021
$
2020
$
2021
$
2020
$
Indian Ocean Advisory
Group
Transaction corporate
advisory services
Luke Martino
-
19,682
-
12,643
During the year, an amount of $100,000 recorded at half year ended 31 December 2020 as a short-term payable to non-related third parties was
assigned to Boston Technologies Management Pty Ltd, of which Mr Craig Piercy is sole director. This amount was included in the normal
commercial fees and expenses working capital account provided by Boston Technology Management Pty Ltd and was repaid in the ordinary
course. No interest is paid to Boston Technology Management Pty Ltd on outstanding amounts.
During the year, an amount of $100,000 was provided by Boston Technology Management Pty Ltd and Blackridge Group Pty Ltd to a third-party
supplier as part of the Invisi Shield development project. This amount was included in the normal commercial fees and expenses working capital
account provided by Boston Technology Management Pty Ltd and Blackridge Group Pty Ltd and was repaid in the ordinary course. No interest is
paid to Boston Technology Management Pty Ltd and Blackridge Group Pty Ltd on outstanding amounts.
P a g e | 68
SKIN ELEMENTS LIMITED AND CONTROLLED ENTITIES
ABN 90 608 047 794
Notes to the consolidated financial statements
for the year ended 30 June 2021
Note 17 Auditor's remuneration
Remuneration of the auditor, BDO Audit (WA) Pty Ltd, for:
Assurance services:
◼ Auditing or reviewing the financial reports
Non-Assurance Services:
◼ Other – non-audit – Research and Development Tax Incentives
Note 18 Earnings per share (EPS)
Note
18.1 Reconciliation of loss to profit or loss
Loss for the year
ANNUAL REPORT
30 June 2021
2021
$
2020
$
72,404
57,052
18,777
91,181
2021
$
-
57,052
2020
$
(3,042,523)
(1,910,234)
Loss used in the calculation of basic and diluted EPS
(3,042,523)
(1,910,234)
18.2 Weighted average number of ordinary shares outstanding
during the year used in calculation of basic EPS
351,137,666
223,746,949
Weighted average number of dilutive equity instruments outstanding
18.5
N/A
N/A
2021
No.
2020
No.
18.3 Weighted average number of ordinary shares outstanding
during the year used in calculation of basic EPS
18.4 Earnings per share
Basic EPS (cents per share)
Diluted EPS (cents per share)
351,137,666
223,746,949
2021
₵
(0.87)
N/A
18.5
18.5
2020
₵
(0.85)
N/A
18.5 As at 30 June 2021 the Group has 26,000,000 unissued shares under options (2020: 126,004,034) and 47,000,000 performance
shares on issue (2020: 47,000,000). The Group does not report diluted earnings per share on losses generated by the Group.
During the year, the Group's unissued shares under option and performance shares were anti-dilutive.
18.6 Accounting policy
Basic EPS 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 EPS is calculated as net profit attributable to the Group, 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
year 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.
P a g e | 69
ANNUAL REPORT
30 June 2021
SKIN ELEMENTS LIMITED AND CONTROLLED ENTITIES
ABN 90 608 047 794
Notes to the consolidated financial statements
for the year ended 30 June 2021
Note 19 Share-based payments
19.1 Share-based payments:
Recognised in profit and loss (expenses)
Recognised in equity (transaction costs)
Recognised in net assets (intangible assets)
Note
2021
$
19.2.1a b.i,c
62,149
19.2.1b.ii
19.2.1b.iii
-
-
2020
$
181,777
50,000
20,000
Gross share-based payments
62,149
251,777
19.2 Share-based payment arrangements in effect during the year
19.2.1 Share-based payments recognised in profit or loss
a. Director and Consultants Performance Rights (2019)
At the Company's 2019 AGM, shareholder approval was obtained to issue performance rights that will convert into
shares upon Performance Milestones being achieved, to incentivise the development of existing Australian and
international distribution and online sales channels, and negotiations with major international customers including a
major UK retail chemist chain and the development of a major online retailer in the USA, for the sale and delivery of
its proprietary expanded natural skincare and suncare product ranges.
These performance rights are issued to Peter Malone, Executive Chairman, and to Palmer Wilson Associates Ltd
(PWA), a United Kingdom based specialist business development consultancy and have been valued and issued on
terms as detailed below and as detailed below and in Note 5.6.8:
Class of
Performance
Right
Performance Condition
Performance rights
No.
Milestone
Date
Expiry
Date
Performance
Condition
Satisfied
A
B
C
D
The Company receiving revenue from
the sale of its products to an aggregate
value of $2,000,000
The Company receiving revenue from
the sale of its products to an aggregate
value of $6,000,000
The Company receiving revenue from
the sale of its products to an aggregate
value of $12,000,000
The Company receiving revenue from
the sale of its products to an aggregate
value of $20,000,000
Peter Malone
PWA
2,700,000
2,000,000
5,400,000
4,000,000
8,100,000
6,000,000
10,800,000
8,000,000
31 Dec 2023 4 years from
the date of
issue
31 Dec 2023 4 years from
the date of
issue
31 Dec 2023 4 years from
the date of
issue
31 Dec 2023 4 years from
the date of
issue
No
No
No
No
b. Equity-settled Payments
During the prior year settled the following transactions were settled by way of equity, in lieu of cash:
i. Recognised in profit and loss (2020):
761,538 shares with total fair value of $19,800, were issued to third party consultants for consulting services.
2,734,892 shares with total fair value of $55,551, were issued to third party consultants for consulting services.
2,300,000 shares with total fair value of $50,000 were issued to third party consultants as facility fees.
ii. Recognised in equity (2020):
2,500,000 shares with total fair value of $25,000 were issued to third party consultants for lead manager services
performed.
2,000,000 shares with total fair value of $25,000 were issued to third party consultants as an underwriting fee.
iii. Recognised in net assets - intangible assets (2020):
250,000 shares with total fair value of $20,000 were issued as consideration for an intangible asset and recognised
in net assets.
P a g e | 70
SKIN ELEMENTS LIMITED AND CONTROLLED ENTITIES
ABN 90 608 047 794
Notes to the consolidated financial statements
for the year ended 30 June 2021
Note 19 Share-based payments (cont.)
c. Director and Consultants Performance Rights (2017)
ANNUAL REPORT
30 June 2021
The Company has previously issued performance rights to Directors which convert into ordinary fully paid shares on
achieving certain share market price hurdles. The fair value of the rights has been valued at $0.032 to $0.050 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. On 30 June 2020, the remaining 2,200,000 of these performance rights expired without
achieving the performance hurdles. The relevant expenses were recognised up to expiry date in accordance with
accounting standard AASB 2 Share-based payments
Class of
Performance
Right
Performance Condition
Performance rights
No.
Milestone
Date
Expiry
Date
Peter Malone Luke Martino
A
B
The Company attaining a 5-day VWAP
of more than $0.34 per share
The Company attaining a 5-day VWAP
of more than $0.51 per share
2,200,000
2,000,000
30 Jun 2019
Expired
2,200,000
4,000,000
30 Jun 2020
Expired
Performance
Condition
Satisfied
No
No
19.3 Fair value of options granted during the year
The fair value of the options granted is deemed to represent the value of the services received over the vesting period.
A 40% probability is applied to non-market 2019 Performance Rights.
P a g e | 71
ANNUAL REPORT
30 June 2021
SKIN ELEMENTS LIMITED AND CONTROLLED ENTITIES
ABN 90 608 047 794
Notes to the consolidated financial statements
for the year ended 30 June 2021
Note 19 Share-based payments (cont.)
19.4 Accounting policy
The Group may provide benefits to employees (including directors) and consultants of the Group in the form of share-based
payment transactions, whereby services are rendered in exchange for shares or rights over shares (equity-settled
transactions).
The cost of equity-settled transactions is measured at fair value on grant date. Fair value is independently determined using
either the Binomial or Black-Scholes option pricing model that takes into account the exercise price, the term of the option,
the impact of dilution, the share price at grant date and expected price volatility of the underlying share, the expected
dividend yield and the risk free interest rate for the term of the option, together with non-vesting conditions that do not
determine whether the Group receives the services that entitle the employees to receive payment. No account is taken of
any other vesting conditions.
The cost of equity-settled transactions is recognised as an expense with a corresponding increase in equity over the vesting
period. The cumulative charge to profit or loss is calculated based on the grant date fair value of the award, the best estimate
of the number of awards that are likely to vest and the expired portion of the vesting period. The amount recognised in
profit or loss for the period is the cumulative amount calculated at each reporting date less amounts already recognised in
previous periods.
The cost of cash-settled transactions is initially, and at each reporting date until vested, determined by applying either the
Binomial or Black-Scholes option pricing model, taking into consideration the terms and conditions on which the award was
granted. The cumulative charge to profit or loss until settlement of the liability is calculated as follows:
during the vesting period, the liability at each reporting date is the fair value of the award at that date multiplied by the
expired portion of the vesting period;
from the end of the vesting period until settlement of the award, the liability is the full fair value of the liability at the
reporting date.
All changes in the liability are recognised in profit or loss. The ultimate cost of cash-settled transactions is the cash paid to
settle the liability.
Market conditions are taken into consideration in determining fair value. Therefore, any awards subject to market conditions
are considered to vest irrespective of whether that market condition has been met, provided all other conditions are
satisfied.
If equity-settled awards are modified, as a minimum an expense is recognised as if the modification has not been made. An
additional expense is recognised, over the remaining vesting period, for any modification that increases the total fair value
of the share-based compensation benefit as at the date of modification.
If the non-vesting condition is within the control of the Group or employee, the failure to satisfy the condition is treated as
a cancellation. If the condition is not within the control of the Group or employee and is not satisfied
during the vesting period, any remaining expense for the award is recognised over the remaining vesting period, unless the
award is forfeited.
If equity-settled awards are cancelled, it is treated as if it has vested on the date of cancellation, and any remaining expense
is recognised immediately. If a new replacement award is substituted for the cancelled award, the cancelled and new award
is treated as if they were a modification
19.5 Key estimate
The Group measures the cost of equity-settled transactions by reference to the fair value of the equity instrument at the
date at which they are granted. The fair value of options granted is measured using the Black-Scholes option pricing model.
The model uses assumptions and estimates as inputs.
P a g e | 72
SKIN ELEMENTS LIMITED AND CONTROLLED ENTITIES
ABN 90 608 047 794
Notes to the consolidated financial statements
for the year ended 30 June 2021
Note 20 Operating segments
ANNUAL REPORT
30 June 2021
20.1
Identification of reportable segments
The Group has identified its operating segments based on the internal reports that are reviewed and used by the Board
(chief operating decision makers) in assessing performance and determining the allocation of resources. The Group is
managed primarily based on business category and geographical areas. Operating segments are therefore determined
on the same basis. Reportable segments disclosed are based on aggregating operating segments where the segments are
considered to have similar economic characteristics.
20.2 Basis of accounting for purposes of reporting by operating segments
20.2.1 Accounting policies adopted
AASB 8 Operating Segments 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 Board.
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.
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.
Unless stated otherwise, all amounts reported to the Board, are determined in accordance with accounting policies that
are consistent to those adopted in the annual financial statements of the Group.
20.2.2 Inter-segment transactions
All such transactions are eliminated on consolidation of the Group's financial statements.
Inter-segment loans payable and receivable are initially recognised at the consideration received/to be received net of
transaction costs. If inter-segment loans receivable and payable are not on commercial terms, these are not adjusted to
fair value based on market interest rates. This policy represents a departure from that applied to the statutory financial
statements.
20.2.3 Segment assets
Where an asset is used across multiple segments, the asset is allocated proportionately to the applicable segments based
on its use. Typically segment assets are clearly identifiable based on their nature and physical location.
Unless indicated otherwise in the segment financial position note, deferred tax assets and intangible assets have not
been allocated to operating segments.
20.2.4 Segment liabilities
Liabilities are allocated to segments where there is direct nexus between the incurrence of the liability and the operations
of the segment. Borrowings and tax liabilities are generally considered to relate to the Group as a whole and are not
allocated. Segment liabilities include trade and other payables.
The Group has identified its operating segments based on the internal reports that are reviewed and used by the Board
in assessing performance and determining the allocation of resources.
20.2.5 Unallocated items
The following items of revenue, expenses, assets and liabilities are not allocated to operating segments as they are not
considered part of the core operations of any segment:
Income tax expense
P a g e | 73
ANNUAL REPORT
30 June 2021
SKIN ELEMENTS LIMITED AND CONTROLLED ENTITIES
ABN 90 608 047 794
Notes to the consolidated financial statements
for the year ended 30 June 2021
Note 20 Operating segments (cont.)
20.3 Types of products and services by segment
20.3.1 Operations
This operating segment is involved in the designing and formulating natural, organic, health and wellness products.
20.4 Segment Financial Performance
Year ended 30 June 2021
Revenue and other income
◼ External sales
◼ Other income
Total segment revenue and other income
Total group revenue and other income
Segment profit/(loss) before income tax
◼ Cost of sales
◼ Administration expenses
◼ Advertising and marketing expenses
◼ Amortisation
◼ Corporate expenses
◼ Consultants’ fees
◼ Share-based payments
◼ Occupancy costs
◼ Research and development expenses
Operations
$
288,741
1,140,003
1,428,744
(98,302)
(982,291)
(76,675)
(403,908)
(32,473)
(78,655)
-
(68,216)
(1,958,474)
Corporate and
administration
$
-
-
-
_
-
(111,595)
(129,754)
-
(382,012)
(66,048)
(62,149)
(20,715)
Total
$
288,741
1,140,003
1,428,744
1,428,744
(98,302)
(1,093,886)
(206,429)
(403,908)
(414,485)
(144,703)
(62,149)
(88,931)
-
(1,958,474)
Segment profit/(loss) from continuing operations before tax
(2,270,250)
(772,273)
(3,042,523)
Group loss before income tax
Year ended 30 June 2020
Revenue and other income
◼ External sales
◼ Other income
Total segment revenue and other income
Total group revenue and other income
Segment profit/(loss) before income tax
◼ Cost of sales
◼ Administration expenses
◼ Advertising and marketing expenses
◼ Amortisation
◼ Corporate expenses
◼ Consultants’ fees
◼ Share-based payments
◼ Occupancy costs
◼ Research and development expenses
_
-
-
-
_
-
(62,452)
(43,082)
-
(314,196)
(230,600)
(56,426)
(39,165)
-
(3,042,523)
425,167
812,982
1,238,149
1,238,149
(216,270)
(740,985)
(192,877)
(391,294)
(320,145)
(220,618)
(56,426)
(123,669)
(886,099)
425,167
812,982
1,238,149
(216,270)
(678,533)
(149,795)
(391,294)
(5,949)
9,982
-
(84,504)
(886,099)
Segment profit/(loss) from continuing operations before tax
(1,164,313)
(745,921)
(1,910,234)
Group loss before income tax
_
(1,910,234)
P a g e | 74
SKIN ELEMENTS LIMITED AND CONTROLLED ENTITIES
ABN 90 608 047 794
Notes to the consolidated financial statements
for the year ended 30 June 2021
ANNUAL REPORT
30 June 2021
Note 20 Operating segments (cont.)
20.5 Segment Financial Position
At as 30 June 2021
Segment Assets
Reconciliation of segment assets to group assets:
◼ Intra-segment eliminations
Total assets
Segment Liabilities
Reconciliation of segment liabilities to group liabilities
◼ Intra-segment eliminations
Total liabilities
As at 30 June 2020
Segment Assets
Reconciliation of segment assets to group assets:
◼ Intra-segment eliminations
Total assets
Segment Liabilities
Reconciliation of segment liabilities to group liabilities
◼ Intra-segment eliminations
Total liabilities
20.6 Geographical Segments
Operations
$
Corporate and
administration
$
Total
$
9,657,909
8,429,463
18,087,372
(7,060,601)
(7,060,601)
_
11,026,771
7,066,888
1,417,909
8,484,797
(7,060,601)
2,591,021
_
7,011,554
(7,060,601)
1,424,196
9,602,575
9,999,376
5,327,787
15,327,163
-
(5,105,669)
(5,105,669)
_
10,221,494
5,299,048
815,762
6,114,810
(5,105,669)
-
(5,105,669)
4,700,328
_
4,512,025
1,009,141
9,212,353
The Group is domiciled in Australia and all revenue from external parties is generated in Australia.
P a g e | 75
ANNUAL REPORT
30 June 2021
SKIN ELEMENTS LIMITED AND CONTROLLED ENTITIES
ABN 90 608 047 794
Notes to the consolidated financial statements
for the year ended 30 June 2021
Note 21 Parent entity disclosures
Skin Elements Limited is the ultimate Australian parent entity and ultimate parent of the Group.
Skin Elements Limited did not enter into any trading transactions with any related party during the year.
21.1 Financial Position of Skin Elements Limited
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Net liabilities
Equity
Issued capital
Reserve
Accumulated losses
Total equity
21.2 Financial performance of Skin Elements Limited
Loss for the year
Other comprehensive loss
Total comprehensive loss
21.3 Guarantees
2021
$
866,862
502,000
2020
$
221,781
-
1,368,862
221,781
945,305
472,604
1,417,909
814,698
-
814,698
(49,047)
(592,917)
20,978,594
17,607,998
91,252
29,103
(21,118,893)
(18,230,018)
(49,047)
(592,917)
2021
$
2020
$
(2,888,875)
(722,066)
-
-
(2,888,875)
(722,066)
There are no guarantees entered into by Skin Elements Limited for the debts of its subsidiary as at 30 June 2021 (2020:
none).
21.4 Contractual commitments
The parent company has no capital commitments as at 30 June 2021 (2020: $157,072), as disclosed in Note 12.1.
21.5 Contingent liabilities
There are no contingent liabilities as 30 June 2021 (2020: none).
P a g e | 76
SKIN ELEMENTS LIMITED AND CONTROLLED ENTITIES
ABN 90 608 047 794
Notes to the consolidated financial statements
for the year ended 30 June 2021
Note 22 Statement of significant accounting policies
ANNUAL REPORT
30 June 2021
This note provides a list of the significant accounting policies adopted in the preparation of these consolidated financial statements
to the extent they have not already been disclosed in the other notes above. These policies have been consistently applied to all the
years presented, unless otherwise stated.
22.1 Basis of preparation
22.1.1 Reporting Entity
Skin Elements Limited (Skin Elements or the Company) is a listed public company limited by shares, domiciled, and
incorporated in Australia. These are the consolidated financial statements and notes of Skin Elements and controlled entities
(collectively the Group). The financial statements comprise the consolidated financial statements of the Group. For the
purposes of preparing the consolidated financial statements, the Company is a for-profit entity. The Group is a for-profit
entity and is primarily involved in businesses which deliver accredited and non-accredited vocational education and training
solutions throughout Australia and internationally.
The separate financial statements of Skin Elements, as the parent entity, have not been presented with this financial report
as permitted by the Corporations Act 2001 (Cth).
22.1.2 Basis of accounting
These financial statements are general purpose financial statements which have been prepared in accordance with
Australian Accounting Standards and Interpretations of the Australian Accounting Standards Board (AAS Board) and
International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB), and the
Corporations Act 2001 (Cth).
Australian Accounting Standards (AASBs) set out accounting policies that the AAS Board has concluded would result in a
financial report containing relevant and reliable information about transactions, events, and conditions to which they apply.
Compliance with AASBs ensures that the financial statements and notes also comply with IFRS as issued by the IASB.
The financial statements were authorised for issue on 29 September 2021 by the Directors of the Company.
22.1.3 Going Concern
The financial report has been prepared on a going concern basis, which contemplates the continuity of normal business
activity and the realisation of assets and the settlement of liabilities in the ordinary course of business.
The Group incurred a loss for the year of $3,042,523 (2020: $1,910,234 loss) and a net cash out-flow from operating activities
of $2,701,650 (2020: $1,897,968 out-flow). As at 30 June 2021, the Group working capital of $810,343 (2020: $365,627
working capital), as disclosed in Note 9 of the Capital Management note.
Since 30 June 2021, the Group has:
Received $988,711 from Research and Development Tax Incentives.
Received $2,100,000 (before costs) from placement to sophisticated investors.
Confirmed that it is proceeding with the $20 million LDA Capital equity placement facility.
The Directors have prepared a cash flow forecast, which indicates that the Group will have sufficient cash flows to meet all
commitments and working capital requirements for the 12-month period from the date of signing this financial report.
Based on the cash flow forecasts and other factors referred to above, the Directors are satisfied that the going concern basis
of preparation is appropriate. In particular, given the Group’s history of raising capital to date, and the LDA Capital facilities
the Directors are confident of the Group’s ability to raise additional funds as and when they are required.
Should the Group be unable to continue as a going concern it may be required to realise its assets and extinguish its liabilities
other than in the normal course of business and at amounts different to those stated in the financial statements.
The financial statements do not include any adjustments relating to the recoverability and classification of asset carrying
amounts or to the amount and classification of liabilities that might result should the Group be unable to continue as a going
concern and meet its debts as and when they fall due.
22.1.4 Comparative figures
Where required by AASBs comparative figures have been adjusted to conform to changes in presentation for the current
financial year.
Where the Group retrospectively applies an accounting policy, makes a retrospective restatement or reclassifies items in its
financial statements, an additional (third) statement of financial position as at the beginning of the preceding period in
addition to the minimum comparative financial statements is presented.
P a g e | 77
ANNUAL REPORT
30 June 2021
SKIN ELEMENTS LIMITED AND CONTROLLED ENTITIES
ABN 90 608 047 794
Notes to the consolidated financial statements
for the year ended 30 June 2021
Note 22 Statement of significant accounting policies
22.1.5 New and Amended Standards Adopted by the Group
The Group has applied the following standards and amendments for the first time for their annual reporting period
commencing 1 January 2020:
AASB 2018-6 Amendments to Australian Accounting Standards – Definition of a Business
AASB 2018-7 Amendments to Australian Accounting Standards – Definition of Material
AASB 2019-1 Amendments to Australian Accounting Standards – References to the Conceptual Framework
AASB 2019-3 Amendments to Australian Accounting Standards – Interest Rate Benchmark Reform
AASB 2019-5 Amendments to Australian Accounting Standards – Disclosure of the Effect of New IFRS Standards Not Yet
Issued in Australia
AASB 2020-4 Amendments to Australian Accounting Standards – COVID-19-Related Rent Concessions.
The amendments listed above did not have any impact on the amounts recognised in prior periods and are not expected to
significantly affect the current or future periods.
22.2 Goods and Services Tax (GST)
Revenues, expenses, and assets are recognised net of the amount of GST, except where the amount of GST incurred is not
recoverable from the taxation authority. In these circumstances the GST is recognised as part of the cost of acquisition of
the asset or as part of an item of the expense. Receivables and payables in the statement of financial position are shown
inclusive of GST. Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to,
the taxation authority.
The net amount of GST recoverable from, or payable to, the Australian Taxation Office is included as a current asset or
liability in the statement of financial position.
Cash flows are presented in the statement of cash flows on a gross basis, except for the GST component of investing and
financing activities, which are disclosed as operating cash flows.
22.3 Use of estimates and judgments
The preparation of consolidated financial statements requires management to make judgements, estimates and
assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses.
These estimates and associated assumptions are based on historical experience and various factors that are believed to be
reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of
assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised
in the period in which the estimate is revised and in any future periods affected.
Judgements made by management in the application of AASBs that have significant effect on the consolidated financial
statements and estimates with a significant risk of material adjustment in the next year are discussed in Note 22.3.1.
22.3.1 Critical Accounting Estimates and Judgments
Management discusses with the Board the development, selection and disclosure of the Group's critical accounting policies
and estimates and the application of these policies and estimates. The estimates and judgements that have a significant risk
of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed
below.
a. Key estimate – Taxation
Refer Note 4 Income Tax.
b. Key estimate – Impairment of intangibles
Refer Note 6.2 Intangible assets.
c. Key estimate – Amortisation rates of intangibles
Refer Note 6.2 Intangible assets.
d. Key estimate – Share-based payments
Refer Note 19 Share-based payments.
e. Treatment of LDA options and commitment fee
Refer Note 5.6 Derivative assets and liabilities.
P a g e | 78
SKIN ELEMENTS LIMITED AND CONTROLLED ENTITIES
ABN 90 608 047 794
Notes to the consolidated financial statements
for the year ended 30 June 2021
Note 22 Statement of significant accounting policies
22.3.2 Coronavirus (COVID-19) pandemic
ANNUAL REPORT
30 June 2021
Judgement has been exercised in considering the impacts that the COVID-19 pandemic has had, or may have, on the
consolidated entity based on known information. This consideration extends to the nature of the supply chain, staffing and
geographic regions in which the consolidated entity operates. Other than as addressed in specific notes, there does not
currently appear to be either any significant impact upon the financial statements or any significant uncertainties with
respect to events or conditions which may impact the consolidated entity unfavourably as at the reporting date or
subsequently as a result of the COVID-19 pandemic.
22.4 Fair Value
22.4.1 Fair Value of Assets and Liabilities
The Group measures some of its assets and liabilities at fair value on either a recurring or non-recurring basis, depending on
the requirements of the applicable AASB.
Fair value is the price the Group would receive to sell an asset or would have to pay to transfer a liability in an orderly
unforced transaction between independent, knowledgeable, and willing market participants at the measurement date.
As fair value is a market-based measure, the closest equivalent observable market pricing information is used to determine
fair value. Adjustments to market values may be made having regard to the characteristics of the specific asset or liability.
The fair values of assets and liabilities that are not traded in an active market are determined using one or more valuation
techniques. These valuation techniques maximise, to the extent possible, the use of observable market data.
To the extent possible, market information is extracted from either the principal market for the asset or liability (i.e. the
market with the greatest volume and level of activity for the asset or liability) or, in the absence of such a market, the most
advantageous market available to the entity at the end of the reporting period (i.e. the market that maximises the receipts
from the sale of the asset or minimises the payments made to transfer the liability, after taking into account transaction
costs and transport costs).
For non-financial assets, the fair value measurement also considers a market participant's ability to use the asset in its
highest and best use or to sell it to another market participant that would use the asset in its highest and best use.
The fair value of liabilities and the entity's own equity instruments (excluding those related to share-based payment
arrangements) may be valued, where there is no observable market price in relation to the transfer of such financial
instruments, by reference to observable market information where such instruments are held as assets. Where this
information is not available, other valuation techniques are adopted and, where significant, are detailed in the respective
note to the financial statements.
22.4.2 Fair value hierarchy
AASB 13 Fair Value Measurement requires the disclosure of fair value information by level of the fair value hierarchy, which
categorises fair value measurements into one of three possible levels based on the lowest level that an input that is
significant to the measurement can be categorised into as follows:
Level 1
Level 2
Level 3
Measurements based on quoted prices
(unadjusted) in active markets for
identical assets or liabilities that the
entity can access at the measurement
date.
Measurements based on inputs other than
quoted prices included in Level 1 that are
observable for the asset or liability, either
directly or indirectly.
Measurements based on unobservable
inputs for the asset or liability.
The fair values of assets and liabilities that are not traded in an active market are determined using one or more valuation
techniques. These valuation techniques maximise, to the extent possible, the use of observable market data. If all significant
inputs required to measure fair value are observable, the asset or liability is included in Level 2. If one or more significant
inputs are not based on observable market data, the asset or liability is included in Level 3.
The Group would change the categorisation within the fair value hierarchy only in the following circumstances:
if a market that was previously considered active (Level 1) became inactive (Level 2 or Level 3) or vice versa; or
if significant inputs that were previously unobservable (Level 3) became observable (Level 2) or vice versa.
When a change in the categorisation occurs, the Group recognises transfers between levels of the fair value hierarchy (i.e.
transfers into and out of each level of the fair value hierarchy) on the date the event or change in circumstances occurred.
22.4.3 Valuation techniques
The Group selects a valuation technique that is appropriate in the circumstances and for which sufficient data is available to
measure fair value. The availability of sufficient and relevant data primarily depends on the specific characteristics of the
asset or liability being measured. The valuation techniques selected by the Group are consistent with one or more of the
following valuation approaches:
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30 June 2021
SKIN ELEMENTS LIMITED AND CONTROLLED ENTITIES
ABN 90 608 047 794
Notes to the consolidated financial statements
for the year ended 30 June 2021
Note 22 Statement of significant accounting policies
Market approach: valuation techniques that use prices and other relevant information generated by market transactions
for identical or similar assets or liabilities.
Income approach: valuation techniques that convert estimated future cash flows or income and expenses into a single
discounted present value.
Cost approach: valuation techniques that reflect the current replacement cost of an asset at its current service capacity.
Each valuation technique requires inputs that reflect the assumptions that buyers and sellers would use when pricing the
asset or liability, including assumptions about risks. When selecting a valuation technique, the Group gives priority to those
techniques that maximise the use of observable inputs and minimise the use of unobservable inputs. Inputs that are
developed using market data (such as publicly available information on actual transactions) and reflect the assumptions that
buyers and sellers would generally use when pricing the asset or liability are considered observable, whereas inputs for
which market data is not available and therefore are developed using the best information available about such assumptions
are considered unobservable.
22.5 New Accounting Standards and Interpretations not yet mandatory or early adopted
Certain new accounting standards and interpretations have been published that are not mandatory for 30 June 2021
reporting periods and have not been early adopted by the Group. The Group’s assessment of the impact of these new
standards and interpretations is set out below. These standards are not expected to have a material impact on the entity in
the current or future reporting periods and on foreseeable future transactions.
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SKIN ELEMENTS LIMITED AND CONTROLLED ENTITIES
ABN 90 608 047 794
ANNUAL REPORT
30 June 2021
Directors' declaration
The Directors of the Company declare that:
1. The financial statements and notes, as set out on pages 34 to 80, are in accordance with the Corporations Act 2001 (Cth) and:
(a) comply with Accounting Standards;
(b) are in accordance with International Financial Reporting Standards issued by the International Accounting Standards
Board, as stated in Note 22.1 to the financial statements; and
(c) give a true and fair view of the financial position as at 30 June 2021 and of the performance for the year ended on that
date of the Group.
(d) the Directors have been given the declarations required by s.295A of the Corporations Act 2001 (Cth);
2.
in the Directors' opinion there are reasonable grounds to believe that the Company will be able to pay its debts as and when
they become due and payable.
This declaration is made in accordance with a resolution of the Board of Directors and is signed for and on behalf of the Directors
by:
PETER MALONE
Managing Director
Dated this Wednesday, 29 September 2021
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30 June 2021
Independent auditor's report
SKIN ELEMENTS LIMITED AND CONTROLLED ENTITIES
ABN 90 608 047 794
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ANNUAL REPORT
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SKIN ELEMENTS LIMITED AND CONTROLLED ENTITIES
ABN 90 608 047 794
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ABN 90 608 047 794
Corporate governance statement
The Board is responsible for establishing the Company’s corporate governance framework. In establishing its corporate
governance framework, the Board has referred to the 4th edition of the ASX Corporate Governance Councils’ Corporate
Governance Principles and Recommendations.
The Corporate Governance Statement discloses the extent to which the Company follows the recommendations. The Company
will follow each recommendation where the Board has considered the recommendation to be an appropriate benchmark for its
corporate governance practices. Where the Company’s corporate governance practices will follow a recommendation, the Board
has made appropriate statements reporting on the adoption of the recommendation. In compliance with the “if not, why not”
reporting regime, where, after due consideration, the Company’s corporate governance practices will not follow a
recommendation, the Board has explained its reasons for not following the recommendation and disclosed what, if any,
alternative practices the Company will adopt instead of those in the recommendation.
The Company’s governance-related documents can be found on its website at www.skinelementslimited.com/investors.html#cg.
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SKIN ELEMENTS LIMITED AND CONTROLLED ENTITIES
ABN 90 608 047 794
ANNUAL REPORT
30 June 2021
Additional Information for Listed Public Companies
The following additional information is required by the Australian Securities Exchange in respect of listed public companies.
1
Capital as at 29 September 2021.
a. Ordinary share capital
433,227,266 ordinary fully paid shares held by 1,274 shareholders.
b. Unlisted Options over Unissued Shares
Number of
Options
10,000,000
10,000,000
4,000,000
2,000,000
26,000,000
Exercise Price
$
0.12
0.15
0.18
0.22
c. Performance Rights over Unissued Shares
Class of
Performance
Right
Performance Condition
Expiry
Date
15 March 2024
15 March 2024
15 March 2024
15 March 2024
Performance
rights
No.
Milestone Date
Expiry Date
A
B
C
D
The Company receiving revenue from the sale of
its products to an aggregate value of $2,000,000
The Company receiving revenue from the sale of
its products to an aggregate value of $6,000,000
The Company receiving revenue from the sale of
its products to an aggregate value of
$12,000,000
The Company receiving revenue from the sale of
its products to an aggregate value of
$20,000,000
4,700,000
31 Dec 2023
9,400,000
31 Dec 2023
14,100,000
31 Dec 2023
18,800,000
31 Dec 2023
4 years from the
date of issue
4 years from the
date of issue
4 years from the
date of issue
4 years from the
date of issue
d. Voting Rights
The voting rights attached to each class of equity security are as follows:
47,000,000
◼ Ordinary shares: Each ordinary share is entitled to one vote when a poll is called, otherwise each member present
at a meeting or by proxy has one vote on a show of hands.
◼ Unlisted Options: Options do not entitle the holders to vote in respect of that equity instrument, nor participate
in dividends, when declared, until such time as the options are exercised or performance shares convert and
subsequently registered as ordinary shares.
◼ Performance Rights: A Performance Right does not entitle a Holder to vote on any resolutions proposed at a
general meeting of shareholders of the Company. A Performance Right does not entitle a Holder to any dividends.
A Performance Right does not entitle the Holder to participate in the surplus profits or assets of the Company
upon winding up of the Company. A Performance Right is not transferable.
e. Substantial Shareholders as at 29 September 2021.
Name
LDA Capital Limited
Sovereign Empire Pty Ltd
Number of Ordinary
Fully Paid Shares Held
% Held of Issued Ordinary
Capital
27,500,000
26,452,596
6.35
6.11
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ANNUAL REPORT
30 June 2021
SKIN ELEMENTS LIMITED AND CONTROLLED ENTITIES
ABN 90 608 047 794
Additional Information for Listed Public Companies
f. Distribution of Shareholders as at 29 September 2021
Category (size of holding)
Total Holders
100,001 – and over
10,001 – 100,000
5,001 – 10,000
1,001 – 5,000
1 – 1,000
360
550
277
61
26
Number
Ordinary
408,199,454
22,445,666
2,317,810
259,317
5,019
% Held of Issued
Ordinary Capital
94.22
5.18
0.54
0.06
0.00
1,274
433,227,266
100.00
g. Distribution of Holders of Unlisted Options as at 29 September 2021
Category (size of holding)
Total Holders
100,001 – and over
10,001 – 100,000
5,001 – 10,000
1,001 – 5,000
1 – 1,000
1
-
-
-
-
Number
Ordinary
% Held of Issued
Ordinary Capital
26,000,000
100.00
-
-
-
-
0.00
0.00
0.00
0.00
h. Unmarketable Parcels as at 29 September 2021
As at 29 September 2021 there were 59 shareholders who held less than a marketable parcel of shares holding 124,336
shares.
1
26,000,000
100.00
i. On-Market Buy-Back
There is no current on-market buy-back.
j. Restricted Securities
The Company has no restricted securities
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SKIN ELEMENTS LIMITED AND CONTROLLED ENTITIES
ABN 90 608 047 794
ANNUAL REPORT
30 June 2021
Additional Information for Listed Public Companies
k. 20 Largest Shareholders — Ordinary Shares as 29 September 2021
Rank Name
Number of Ordinary
Fully Paid Shares
Held
% Held of Issued
Ordinary Capital
1.
LDA CAPITAL LIMITED
SOVEREIGN EMPIRE PTY LTD
2.
3. MANDALUP INVESTMENTS PTY LTD
4.
STATE SECURITIES PTY LTD
LAKEHOUSE ENTERPRISES PTY LTD
5.
6. MGOLD PTY LTD
7.
SOVEREIGN EQUITIES PTY LTD
8.
9.
10.
CITICORP NOMINEES PTY LIMITED
KASSETT PTY LTD
EQUITIES SERVICES PTY LTD
EMIRATE INVESTMENTS PTY LTD
SAMBOR TRADING PTY LTD
11.
12. BAYROAD NOMINEES PTY LTD
13. MR RUSSELL WAYNE ALLEN
14. NABAWA PTY LTD
15.
16. BLACKRIDGE GROUP PTY LTD
17. NEVILE SUPERANNUATION FUND PTY LTD
18. RAXIGI PTY LIMITED
19.
20. BRAUNII PTY LTD
TOP OCEANIA INTERNATIONAL LIMITED
27,500,000
26,452,596
16,750,000
16,500,000
14,977,644
14,665,290
11,933,628
10,438,501
8,450,000
8,082,011
7,865,047
7,632,653
6,912,154
6,875,000
6,370,000
5,611,183
5,000,000
4,920,746
4,715,000
4,068,234
6.35
6.11
3.87
3.81
3.46
3.39
2.75
2.41
1.95
1.87
1.82
1.76
1.60
1.59
1.47
1.30
1.15
1.14
1.09
0.94
TOTAL
215,719,687
49.83
l. Unquoted Securities Holders Holding More than 20% of the Class as at 29 September 2021
◼ Unlisted Options (Exercise price $0.12, Expiry Date:15.03.2024)
Rank Name
LDA Capital Limited
TOTAL
TOTAL UNLISTED OPTIONS
◼ Unlisted Options (Exercise price $0.15, Expiry Date:15.03.2024)
Rank Name
LDA Capital Limited
TOTAL
TOTAL UNLISTED OPTIONS
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Number of
Unquoted Securities
% Held of Unquoted
Security Class
10,000,000
10,000,000
10,000,000
100.00
100.00
Number of
Unquoted Securities
% Held of Unquoted
Security Class
10,000,000
10,000,000
10,000,000
100.00
100.00
ANNUAL REPORT
30 June 2021
SKIN ELEMENTS LIMITED AND CONTROLLED ENTITIES
ABN 90 608 047 794
Additional Information for Listed Public Companies
◼ Unlisted Options (Exercise price $0.18, Expiry Date:15.03.2024)
Rank Name
LDA Capital Limited
TOTAL
TOTAL UNLISTED OPTIONS
◼ Unlisted Options (Exercise price $0.22, Expiry Date:15.03.2024)
Rank Name
LDA Capital Limited
TOTAL
TOTAL UNLISTED OPTIONS
2
3
The Company Secretary is Phil Giglia.
Principal registered office and contact details
Number of
Unquoted Securities
% Held of Unquoted
Security Class
4,000,000
4,000,000
4,000,000
100.00
100.00
Number of
Unquoted Securities
% Held of Unquoted
Security Class
2,000,000
2,000,000
2,000,000
100.00
100.00
As disclosed in the Corporate directory on page i and in Company details on page 38 of this Annual Report.
4
Registers of securities
As disclosed in the Corporate directory on page i of this Annual Report.
5
Stock exchange listing
Quotation has been granted for all the ordinary shares of the Company on all Member Exchanges of the Australian
Securities Exchange Limited, as disclosed in the Corporate directory on page i of this Annual Report.
6
Use of funds
The Company has used its funds in accordance with its initial business objectives.
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