SKIN ELEMENTS LIMITED — Interim / Quarterly Report 2020

Oct 30, 2019

==> picture [566 x 85] intentionally omitted <==

31 October 2019

Quarterly Activity Report - Period ending 30 September 2019

Australian natural skin care company Skin Elements Limited (ASX: SKN) (Skin Elements, the Company) is pleased to present its Quarterly Activity Report for the period ending 30 September 2019.

Expanded Product Range in Production

During the quarter, the Company commenced production of its expanded unique Soleo Organics sunscreen range, natural PapayaActivs therapeutic range and Complete Esscience pawpaw based natural skincare range, and the first five products from the Elizabeth Jane Natural Cosmetics range, for global market launch over the 2019/20 year.

The expanded range of over 40 natural sunscreen and skincare product SKUs is a result of its strong research and development focus over the previous year with Skin Elements receiving in the quarter $500,000 advance on the Federal Government’s 2019 R&D Tax Rebate and anticipates receiving in excess of $150,000 of the rebate balance in the current quarter.

Global Opportunity

Skin Elements continues to maintain its focus on developing sales in global markets including a major retail pharmacy chain in the United Kingdom, the development of an online sales channel in the USA, and a skincare distributor in Europe.

The Company also retained a core focus on balance sheet management and continues to review cost structures and working capital requirements to ensure an appropriate level of capital is available to support the increased production demand for its natural skincare product range required to fulfil sales growth.

Capital Raising

Skin Elements has foreshadowed that it will undertaking a fully underwritten non renounceable rights issue to raise approximately $1 million working capital to support production of the Company’s products, with details expected to be announced in the current quarter.

==> picture [511 x 33] intentionally omitted <==

==> picture [227 x 54] intentionally omitted <==

==> picture [512 x 11] intentionally omitted <==

Chinese distribution Agreement not proceeding

As set out in the ASX Announcement on 9 October 2019, Skin Elements has advised that it will not be proceeding with the Term Sheet Agreement with Henan Huatuo Health Management Co, Ltd (HHHM) and will finalise the settlement of the $200,000 convertible note in the current quarter.

Commenting on the quarter, Skin Elements Executive Chairman Mr Peter Malone said;

”Skin Elements ongoing focus on prudent cashflow management helps ensure that the Company is able to build on the solid foundation of proprietary natural skincare technology to delivery production and revenue cashflows in the coming quarters. ”

Peter Malone Media and Investor Inquiries Executive Chairman James Moses Skin Elements Limited Mandate Corporate T: +61 439 430 770 T: +61 420 991 574 E: peter@senatural.com E: james@manadatecorporate.com.au

About Skin Elements

Skin Elements is an Australian owned and operated ASX-listed skin care company focused on the development of natural and organic skin care products, as an alternative to current chemical-based products. It has developed a portfolio of products which includes its lead product, the Soléo Organics 100% natural and organic sunscreen, PapayaActivs natural therapeutics, Complete Esscience natural skincare, and the Elizabeth Jane Natural Cosmetics brand. The Company has completed a highly successful test marketing phase in major international markets for Soléo Organics and has regulatory approval with the USA FDA, TGA and other significant regulators. Skin Elements aims to become the number one recognised national and international sunscreen brand.

Further information is available via the Company website: http://skinelementslimited.com

==> picture [428 x 132] intentionally omitted <==

==> picture [511 x 33] intentionally omitted <==

==> picture [227 x 54] intentionally omitted <==

==> picture [511 x 11] intentionally omitted <==

Appendix 4C Quarterly report for entities subject to Listing Rule 4.7B

+Rule 4.7B

Appendix 4C

Quarterly report for entities subject to Listing Rule 4.7B

Introduced 31/03/00 Amended 30/09/01, 24/10/05, 17/12/10, 01/09/16

==> picture [428 x 499] intentionally omitted <==

----- Start of picture text -----

Name of entity
Skin Elements Limited
ABN Quarter ended (“current quarter”)
90 608 047 794 30 September 2019
Consolidated statement of cash flows Current quarter Year to date
$A’000
(3 months)
$A’000
1. Cash flows from operating activities
1.1 Receipts from customers 50 50
1.2 Payments for
(a) research and development ( note 4 ) (220) (220)
(b) product manufacturing and
operating costs (10) (10)
(c) advertising and marketing (26) (26)
(d) leased assets (26) (26)
(e) staff costs (54) (54)
(f) administration costs (49) (49)
(g) corporate costs (106) (106)
1.3 Dividends received - -
1.4 Interest received - -
1.5 Interest and other costs of finance paid - -
1.6 Income taxes paid - -
1.7 Government grants and tax incentives - -
1.8 Other - -
1.9 Net cash from / (used in) operating (441) (441)
activities
----- End of picture text -----

• See chapter 19 for defined terms

1 September 2016

Page 1

Appendix 4C Quarterly report for entities subject to Listing Rule 4.7B

==> picture [428 x 612] intentionally omitted <==

----- Start of picture text -----

Consolidated statement of cash flows Current quarter Year to date
$A’000
(3 months)
$A’000
2. Cash flows from investing activities
2.1 Payments to acquire:
(a) property, plant and equipment - -
(b) businesses (see note 5 ) - -
(c) investments - -
(d) intellectual property - -
(e) other non-current assets - -
2.2 Proceeds from disposal of:
(a) property, plant and equipment - -
(b) businesses (see item 10) - -
(c) investments - -
(d) intellectual property - -
(e) other non-current assets - -
2.3 Cash flows from loans to other entities - -
2.4 Dividends received - -
2.5 Other (provide details if material) - -
2.6 Net cash from / (used in) investing - -
activities
3. Cash flows from financing activities
3.1 Proceeds from issues of shares 134 134
3.2 Proceeds from issue of convertible - -
notes
3.3 Proceeds from exercise of share - -
options
3.4 Transaction costs related to issues of
shares, convertible notes or options - -
3.5 Proceeds from borrowings (R&D 500 500
Funding)
3.6 Repayment of borrowings - -
----- End of picture text -----

• See chapter 19 for defined terms 1 September 2016

Page 2

Appendix 4C Quarterly report for entities subject to Listing Rule 4.7B

==> picture [428 x 423] intentionally omitted <==

----- Start of picture text -----

Consolidated statement of cash flows Current quarter Year to date
$A’000
(3 months)
$A’000
3.7 Transaction costs related to loans and
borrowings - -
3.8 Dividends paid - -
3.9 Other (provide details if material) - -
3.10 Net cash from / (used in) financing 634 634
activities
4. Net increase / (decrease) in cash and cash
equivalents for the period
4.1 Cash and cash equivalents at beginning
of quarter/year to date 116 116
4.2 Net cash from / (used in) operating
activities (item 1.9 above) (441) (441)
4.3 Net cash from / (used in) investing
activities (item 2.6 above) - -
4.4 Net cash from / (used in) financing
activities (item 3.10 above) 634 634
4.5 Effect of movement in exchange rates
on cash held - -
4.6 Cash and cash equivalents at end of
quarter 309 309
----- End of picture text -----

• See chapter 19 for defined terms 1 September 2016

Page 3

Appendix 4C Quarterly report for entities subject to Listing Rule 4.7B

==> picture [428 x 594] intentionally omitted <==

----- Start of picture text -----

5. Reconciliation of cash and cash Current quarter Previous quarter
equivalents $A’000 $A’000
at the end of the quarter (as shown in
the consolidated statement of cash
flows) to the related items in the
accounts
5.1 Bank balances 309 309
5.2 Call deposits - -
5.3 Bank overdrafts - -
5.4 Other (provide details) - -
5.5 Cash and cash equivalents at end of 309 309
quarter (should equal item 4.6 above)
6. Payments to directors of the entity and their associates Current quarter
$A'000
6.1 Aggregate amount of payments to these parties included in (44)
item 1.2
6.2 Aggregate amount of cash flow from loans to these parties
included in item 2.3 -
6.3 Include below any explanation necessary to understand the transactions included
in items 6.1 and 6.2
Executive and Non Executive Directors remuneration (per service agreements) ($44,000)
7. Payments to related entities of the entity and their associates Current quarter
$A'000
7.1 Aggregate amount of payments to these parties included in -
item 1.2
7.2 Aggregate amount of cash flow from loans to these parties
included in item 2.3 -
7.3 Include below any explanation necessary to understand the transactions included
in items 7.1 and 7.2
----- End of picture text -----

• See chapter 19 for defined terms 1 September 2016

Page 4

Appendix 4C Quarterly report for entities subject to Listing Rule 4.7B

==> picture [428 x 247] intentionally omitted <==

----- Start of picture text -----

8. Financing facilities available Total facility Amount drawn at
Add notes as necessary for an amount at quarter quarter end
understanding of the position end $A’000
$A’000
8.1 Loan facilities - -
8.2 Credit standby arrangements - -
8.3 Other
8.4 Include below a description of each facility above, including the lender, interest
rate and whether it is secured or unsecured. If any additional facilities have been
entered into or are proposed to be entered into after quarter end, include details
of those facilities as well.
R&D Tax Rebate: Subsidiary SE Operations Pty Ltd has lodged R&D Tax Rebate claim of
$650,000 of which $500,000 has been received in the quarter under a R&D financing
arrangement with the balance expected to be received in December 2019 quarter.
----- End of picture text -----

==> picture [428 x 181] intentionally omitted <==

----- Start of picture text -----

9. Estimated cash outflows for next quarter $A’000
9.1 Research and development (45)
9.2 Product manufacturing and operating costs (125)
9.3 Advertising and marketing (25)
9.4 Leased assets (25)
9.5 Staff costs (55)
9.6 Administration costs (30)
9.7 Corporate Costs (75)
9.8 Total estimated cash outflows (380)
----- End of picture text -----

==> picture [430 x 173] intentionally omitted <==

----- Start of picture text -----

10. Acquisitions and disposals of Acquisitions Disposals
business entities
(items 2.1(b) and 2.2(b) above)
10.1 Name of entity N/A N/A
10.2 Place of incorporation or N/A N/A
registration
10.3 Consideration for acquisition or N/A N/A
disposal
10.4 Total net assets N/A N/A
10.5 Nature of business N/A N/A
----- End of picture text -----

• See chapter 19 for defined terms

1 September 2016

Page 5

Appendix 4C Quarterly report for entities subject to Listing Rule 4.7B

Compliance statement

• 1 This statement has been prepared in accordance with accounting standards and policies which comply with Listing Rule 19.11A.

• 2 This statement gives a true and fair view of the matters disclosed.

Sign here:

............................................................

Date: 31 October 2019

(Company Secretary)

Print name: Craig Piercy

Notes

1. The quarterly report provides a basis for informing the market how the entity’s activities have been financed for the past quarter and the effect on its cash position.

2. This quarterly report has been prepared in accordance with Australian Accounting Standards, the definitions in, and provisions of, AASB 107: Statement of Cash Flows apply to this report with the exception of the additional detail presented in item 1.2 above.

3. The Group comprises parent entity Skin Elements Limited (ACN 608 047 794) and wholly owned subsidiary Skin Elements Operations Pty Ltd (ACN 110 352 424) acquired on 31 December 2016.

4. The Group has undertaken research and development activities as part of its on-going operations. The costs associated with the research and development process have been identified and disclosed separately from the additional cost categories such as lease, staff and administration costs.

5. See chapter 19 for defined terms 1 September 2016

Page 6