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SKIN ELEMENTS LIMITED Interim / Quarterly Report 2019
65803_rns_2019-02-28_873475e2-029c-42b9-8088-335f49b3babd.pdf
Interim / Quarterly Report
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28 February 2019
2018 Half-Year Report –Commercialization Programme
Australian natural skin care company Skin Elements Limited (ASX: SKN) (Skin Elements, the Company) is pleased to present its Half-Year Report to 31 December 2018.
The six months represented a highly significant period in Skin Elements' growth and development in terms of its commercialization programme.
The Company fore shadowed at the Annual General Meeting the focus on commercial sales growth opportunities across its key international regions of Europe, North America and Asia, with particular emphasis on China.
Your Company has seen immediate dividends in terms of sales in Europe over the current half year period and similarly looks to success in regard to the broader client programme over the course of 2019. This investment by your Company has seen the opportunity for on-line distribution in the North American markets of the USA and Canada with recent meetings in Perth with a US on- line distribution group. In the Asian segment the focus has been on the China market with again very advanced discussions in progress with a significant health and cosmetics group.
We expect to be able to bring updates to these opportunities over the coming weeks.
Our product offering to the international markets has seen an expansion of the award winning Soléo Organics 100% natural and organic sunscreen range which now includes an additional five new products, namely Soléo for babies, Soléo for face, Soléo for everyday use and with a coconut fragrance together with the original high performance and also a coconut variant.
Together with the natural PapayaActivs range of active skincare treatments, the Complete Esscience range of natural skincare and the soon to be released Elizabeth Jane range of natural cosmetics sees the Company with 40 natural organic skincare products entering commercialization.
Skin Elements continues to maintain a prudential approach to its capital management, and as part of this process it regularly assesses its working capital requirements and capital raising options to ensure it has sufficient capital to support the operation and growth of the business. During the half-year the Company completed successful capital raising initiatives – by way of a fully underwritten nonrenounceable pro-rata rights issue (Entitlement Offer) to existing shareholders and a Placement – which raised a total of $1.439 million (before costs).
The Skin Elements' Board and management team acknowledges the continued support of its loyal shareholder base, and looks forward to sharing news of the Company's growth and progress in the year ahead.
For further information, please contact:
Peter Malone Executive Chairman Skin Elements Limited T: +61 439 430 770 E: [email protected]
Media and Investor Inquiries James Moses Mandate Corporate T: +61 420 991 574 E: [email protected]
About Skin Elements
Skin Elements is an Australian ASX-listed skin care company that has developed and internationally launched a range of 40 natural and organic skin care products. The portfolio of products includes the award winning Soléo Organics 100% natural and organic sunscreen, its PapayaActivs natural therapeutics range, the Complete Esscience natural skincare, and the Elizabeth Jane Natural Cosmetics brand.
The current key international markets include North America, Europe and Asia, particularly China.
Further information is available via the Company website: http://skinelementslimited.com
Natural Science by Skin Elements
32 Ord Street, West Perth Western Australia, 6005 P 08 6311 1900 F 08 6311 1999
www.mcarthurskincare.com www.soleoorganics.com www.skinelementslimited.com
SKIN ELEMENTS LIMITED Appendix 4D HALF YEAR REPORT
1. COMPANY DETAILS
| Name of Entity | Skin Elements Limited |
|---|---|
| ABN | 90608 047 794 |
| Reporting Period | Half year ended 31 December 2018 |
| Previous Reporting Period | Year end 30 June 2018 |
2. RESULTS FOR ANNOUNCEMENT TO THE MARKET
| $'000 | |||
|---|---|---|---|
| Revenues from ordinary | down | 33% to | 264 |
| activities | |||
| Profit(Loss)from continuingactivities after taxattributable to the owners ofSkin Elements Limited | down | 9% to | (1,432) |
| Profit (Loss) for the half year | down | 9% to | (1,432) |
| attributable to the owners of | |||
| Skin Elements Limited |
3. NET TANGIBLE ASSETS
| Reporting PeriodCents | Previous PeriodCents | |
|---|---|---|
| Net tangible assets per ordinary security | 0.001 | 0.001 |
4. CONTROL GAINED OVER ENTITIES
The Group did not gain any entities during the period
LOSS OF CONTROL OVER ENTITIES
The Group did not dispose of any entities during the period.
5. DIVIDENDS
The Group did not declare or pay any dividends during the period.
6. DIVIDEND REINVESTMENT PLAN
Not applicable
-
DETAILS OF ASSOCAITES AND JOINT VENTURE ENTITIES Not applicable
-
FOREIGN ENTITIES
Not applicable
9. AUDIT QUALIFICATION OR REVIEW
The financial statements were subject to a review by the auditors and the review report is attached as part of the Interim Report.
ATTACHMENTS
The Interim Report of Skin Elements Limited for the half year ended 31 December 2018 is attached.
SIGNED
Signed______________________________ Dated: 28 February 2019
Peter Malone Executive Chairman
Interim Financial Report
For the six months ended 31 December 2018 Skin Elements Limited ABN 90 608 047 794
Corporate Directory
SKIN ELEMENTS LIMITED
ABN 90 608 047 794
DIRECTORS
Mr Peter Malone – Executive Chairman Mr Luke Martino – Non-Executive Director Mr Phil Giglia – Non-Executive Director
COMPANY SECRETARY Mr Craig Piercy
REGISTERED AND PRINCIPAL OFFICE 32 Ord Street WEST PERTH WA 6005 Telephone: 08 6311 1900 www.skinelementslimited.com www.soleoorganics.com
SHARE REGISTRY
Link Market Services Limited Level 4 Central Park 152 St George's Terrace PERTH WA 6000 Telephone (within Australia): 1300 554 474 Telephone (outside Australia): +61 1300 554 474 Facsimile: 02 9287 0303
AUDITOR
BDO Audit (WA) Pty Ltd 38 Station Street Subiaco WA 6008
AUSTRALIAN SECURITIES EXCHANGE LISTING ASX Code: SKN
Contents
| Directors' Report | 2 |
|---|---|
| Auditor's Independence Declaration | 4 |
| Interim Financial Report | |
| Consolidated Statement of Profit or Loss and Other Comprehensive Income | 5 |
| Consolidated Statement of Financial Position | 6 |
| Consolidated Statement of Changes in Equity | 7 |
| Consolidated Statement of Cash Flows | 8 |
| Consolidated Condensed Notes to the Interim Financial Report | 9 |
| Directors' Declaration | 23 |
| Independent Auditor's Review Report | 24 |
he Directors present the interim financial report of Skin Elements Limited (the C)'*(34 ,)/* or SEL) for the halfyear ended 31 December 2018 and the auditor's review report thereon:
DIRECTORS
he Directors of the Company at any time during or since the end of the half year and until the date of this report are noted below.
, ., &)( Executive Chairman
, L/% ,.#() Inepenent on"Executive irector
, "#& #!&# Inepenent on"Executive irector
RINCIAL ACTIITIES
During the half-year ended 31 December 2018, the principal continuing activity of the roup consisted of the development and commercialisation of its proprietary all natural skincare technology.
REIE O OERATIONS
C)'',#&#-.#)( 9 I(.,(.#)(& ,%.-
he Company's ma#or focus for commercialisation of the natural skincare products are on the three key areas of orth America, Europe and Asia with the Company targeting strong results over forthcoming period.
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he e1pansion and refinement of its product range was completed , in con#unction with a strategic re-branding across the entire product range. his process resulted in the Company now having a total of 40 therapeutic and cosmetic skin care products in production, including five new products in the flagship Solo rganics sunscreen range, as well as PapayaActivs range of therapeutic treatments and its range of Complete Esscience skincare.
he Company refers to this product and branding platform as S?Life. With this now in place, Skin Elements is well positioned to drive sale growth through its S?Life website and physical distribution network by offering a comprehensive and diverse range of natural and organic products to protect and care for the skin. Also, in line with the establishment of the S?Life business model, the Company has streamlined operations and cost structures to better fit its operations moving forward.
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Skin Elements completed a fully underwritten non-renounceable pro-rata rights issue (Entitlement ffer) to e1isting shareholders at an issue price of D0.025 per new share, on the basis of one new share for every two ordinary shares held. Shareholders also received one new free option for every four new shares, e1ercisable at D0.10 on or before 31 December 2020. nder the Entitlement ffer, 43,02M,519 shares and 10,N5M,M30 options were issued, which raised D1,0N5,MM3 (before costs).
he Company completed a further placement of 13,954,N1N ordinary fully paid shares and 3,488,M89 free attaching options (e1ercisable at D0.10 each on or before 31 December 2020) raising D3M3,800.
Skin Elements reviews its working capital requirements and capital raising options on an ongoing basis to ensure it has sufficient capital to support the operation and growth of the business.
RESLTS
he Company incurred a loss of D1,432,181 after income ta1 for the half-year (201N: loss D1,3N4,440) predominantly due to the e1pansion of the product range as it positions the business for growth.
ISSE O S ARES AND OTIONS
During the half year, Skin Elements Limited issued the following shares and options:
Fully underwritten non-renounceable pro-rata entitlement offer of 43,02M,519 ordinary fully paid shares and 10,N5M,M30 free attaching options (e1ercisable at D0.10 each on or before 31 December 2020) under an Entitlement ffer prospectus dated M August 2018 raising D1,0N5,0M3.
Placement of 13,954,N1N ordinary fully paid shares and 3,488,M89 free attaching options (e1ercisable at D0.10 each on or before 31 December 2020) in ctober raising D3M3,800.
Issue of 8N3,353 ordinary fully paid shares for services rendered during the period with the fair value per share being D0.034 each for value of D29,M94.
n 31 ctober 2018, 38,NN5,000 listed D0.20 options (S?) e1pired and on 30 ovember 2018, 2N,500,000 unlisted D0.30 options (S?) e1pired. At the Company's Annual eneral Meeting on 30 ovember 2018, shareholders approval was obtained and the Company issued on an entitlement basis M1,801,381 loyalty options (S?A) which are e1ercisable at D0.10 per share on or before 31 December 2020.
Issue of 425,000 ordinary fully paid shares for services rendered during the period with the fair value per share being D0.02 each for value of D8,500.
EENTS SSEENT TO REORTIN DATE
here have been no other significant events after the end of the reporting period to the date of this report.
SINIICANT C ANES IN T E STATE O AAIRS
In the opinion of the Directors, there were no significant changes in the state of affairs of the roup that occurred during the half year not otherwise disclosed in this report and the interim financial statements.
ADITOR'S INDEENDENCE DECLARATION
Section 30NC of the Corporations Act 2001 requires our auditors, BD Audit (WA) Pty Ltd, to provide the directors of the Company with an Independence Declaration in relation to the review of the interim financial report. his Independence Declaration is set out on page 4 and forms part of this directors' report for the half-year ended 31 December 2018.
his report is signed in accordance with a resolution of the Board of Directors made pursuant to section 30M(3) of the Corporations Act 2001.
Peter Malone E1ecutive Chairman
Dated at Perth, Western Australia this 28 February 2019.
S?IN ELEENTS LIITED Consolidated Statement of Profit or Loss and Other Comprehensive Income
| ,#) (DB D CABI | RESTATED,#) E(DB D CABH | ||
|---|---|---|---|
| N).- | > | > | |
| R0(/ | |||
| Sale of suncare B skincare products | 2M3,MN1 | 393,4NM | |
| Cost of sales | (125,333) | (229,082) | |
| ross profit | 138,338 | 1M4,394 | |
| ther income | 24N,222 | 181,4M5 | |
| E2*(-- | |||
| Administration e1penses | 2 | (M99,025) | (45M,00M) |
| Consultants fees | 2 | (3MM,848) | (491,515) |
| ccupancy e1penses | (M1,280) | (M4,M80) | |
| esearch B development e1penses | (414,M42) | (421,340) | |
| Advertising B marketing e1penses | (124,85N) | (13M,MM4) | |
| Amortisation | 8 | (150,989) | (150,095) |
| T).& E2*(#./, | (1,81N,M41) | (1,N20,299) | |
| ,) #. 7 :&)--; ), #()' .2 2*(- | (1,432,081) | (1,3N4,440) | |
| Income ta1 e1pense | - | - | |
| ,) #. 7 :L)--; ., #()' .2 ,)' )(.#(/#(! )*,.#)(- | |||
| ,#/.& .) +/#.3 ")&,- ) S%#( E&'(.- L#'#. | (1,432,081) | (1,3N4,440) | |
| O.", )'*,"(-#0 #()' | |||
| T).& )'*,"(-#0 #()' ), ." 3, | - | - | |
| ,) #. 7 :&)--; ( .).& )'*,"(-#0 #()' | |||
| ,#/.& .) +/#.3 ")&,- ) S%#( E&'(.- L#'#. | 14 | (1,432,081) | (1,3N4,440) |
| Basic loss per share | (0.011) | (0.018) | |
| Diluted loss per share | ;A | ;A |
he above Consolidated Statement of Profit or Loss and ther Comprehensive Income should be read in con#unction with the accompanying notes.
Consolidated Statement of Financial Position
| As at 31 Dec2018 | As at 30 Jun2018 | ||
|---|---|---|---|
| Notes | $ | $ | |
| Current Assets | |||
| 3 | |||
| Cash and cash equivalentsTrade receivables | 4 | 69,888 | 195,66136,509 |
| 45,634 | |||
| Other receivables | 5 | 185,966 | 46,058 |
| Inventories | 7 | 275,940 | 191,255 |
| Research and development receivable | 6 | 206,773 | 450,181 |
| Total Current Assets | 784,201 | 919,664 | |
| Non Current Assets | 8 | ||
| Intangible assets | 9,228,775 | 9,379,763 | |
| Total Non Current Assets | 9,228,775 | 9,379,763 | |
| Total Assets | 10,012,976 | 10,299,427 | |
| Current Liabilities | |||
| Trade and other payables | 9 | 597,887 | 810,386 |
| Total Current Liabilities | 597,887 | 810,386 | |
| Total Liabilities | 597,887 | 810,386 | |
| Net Assets | 9,415,089 | 9,489,041 | |
| Shareholders Equity | |||
| Issued Capital | 11 | 15,027,382 | 13,679,321 |
| Reserves | 12 | 748,508 | 738,340 |
| Accumulated losses | 13 | (6,360,801) | (4,928,620) |
| Total Shareholders Equity | 9,415,089 | 9,489,041 |
The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes.
Consolidated Statement of Changes in Equity
| Period Ended 31 December 2018 | |||||
|---|---|---|---|---|---|
| Issuedcapital | Accumulatedlosses | Share basedpaymentsreserves | ConvertingNote reserve | TotalEquity | |
| $ | $ | $ | $ | ||
| Balance at 1 July 2018 | 13,679,321 | (4,928,620) | 215,505 | 522,835 | 9,489,041 |
| Loss for the half-year | (1,432,181) | (1,432,181) | |||
| Other comprehensive income | |||||
| Total comprehensive income for the half-year | (1, 432, 181) | (1,432,181) | |||
| Transactions with owners in their capacity asowners | |||||
| Issue of share capital | 1,309,867 | 1,309,867 | |||
| Share based payments | 38,194 | 48,417 | 86,611 | ||
| Converting note conversion | (38, 249) | (38, 249) | |||
| 1,348,061 | 48,417 | (38, 249) | 1,358,229 | ||
| Balance at 31 December 2018 | 15,027,382 | (6,360,801) | 263,922 | 484,586 | 9,415,089 |
| RESTATED Period Ended 31 December 2017 | |||||
|---|---|---|---|---|---|
| Issuedcapital | Accumulatedlosses | Share basedpaymentsreserves | ConvertingNote reserve | TotalEquity | |
| Balance at 1 July 2017 | 13,033,994 | (2,221,984) | 116,816 | 10,928,826 | |
| Prior Period Adjustment | 61,533 | 61,533 | |||
| Loss for the half-year | (1,374,440) | (1,374,440) | |||
| Other comprehensive income | $\qquad \qquad \blacksquare$ | $\overline{\phantom{a}}$ | |||
| Total comprehensive income for the half-year | Ξ. | (1,312,907) | ۰ | (1,312,907) | |
| Transactions with owners in their capacity asowners | |||||
| Issue of share capital | 233,000 | 233,000 | |||
| Share based payments | 14,431 | 14,431 | |||
| Issue of converting note | $\blacksquare$ | 24,000 | 24,000 | ||
| 33,000 | 14,431 | 24,000 | 71,431 | ||
| Balance at 31 December 2017 | 13,266,994 | (3,334,891) | 131,247 | 24,000 | 9,887,350 |
The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes.
Consolidated Statement of Cashflows
| Notes | Period Ended31 Dec 2018$. | Period Ended31 Dec 2017$. |
|---|---|---|
| Cash flows from operating activities | ||
| Receipts from customers | 251,495 | 335,235 |
| Payments to suppliers and employees | (1,997,119) | (1, 113, 520) |
| Interest paid | (2,765) | |
| Interest received | 74 | |
| Net cash inflow / (outflow) from operating activities3 | (1,748,389) | (778, 211) |
| Cash flows from investing activities | ||
| Payments for businesses | (194, 284) | |
| Receipt of Research and development tax incentive | 490,630 | 196,584 |
| Net cash inflow / (outflow) from investing activities | 490,630 | 2,300 |
| Cash flow from financing activities | ||
| Proceeds from the issue of equity | 1,261,582 | |
| Payment for share issue costs | (129, 596) | |
| Proceeds from borrowings | 24,000 | |
| Net cash inflow / (outflow) from financing activities | 1,131,986 | 24,000 |
| Cash and cash equivalents at the beginning of the financial year | 195,661 | 1,407,153 |
| Net increase / (decrease) in cash and cash equivalents | (125, 773) | (751, 911) |
| Cash and cash equivalents at the end of the financial year3 | 69,888 | 655,242 |
This consolidated statement of cash flows should be read in conjunction with the notes to this interim financial report
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES $\mathbf{1}$ .
The half yearly report of Skin Elements Limited (the Company, Group or Skin Elements) for the half-year ended 31 December 2018 was authorised for issue in accordance with a resolution of directors on 28 February 2019.
The Company is a public company limited by shares incorporated and domiciled in Australia whose securities are traded on the Australian Securities Exchange.
The nature of the operations and principal activities of the Company are described in the director's report above.
$(a)$ Basis of preparation
The principle accounting policies adopted for the preparation of interim financial report are set out below. These accounting policies have been applied consistently to all periods presented unless otherwise stated.
$(i)$ Statement of compliance
This interim financial report for the half-year reporting period ended 31 December 2018 has been prepared in accordance with accounting standard AASB 134 Interim Financial Reporting and the Corporations Act 2001. Compliance with AASB 134 ensures compliance with International Financial Reporting Standard IAS 34 'Interim Financial Reporting'.
This interim financial report does not include full disclosures of the type normally included in an annual financial report. Therefore, it cannot be expected to provide as full an understanding of the financial performance, financial position and cash flows of the Company as in the full financial report.
It is recommended that this interim financial report be read in conjunction with the any public announcements made by Skin Elements Limited up to the date of this report in accordance with the continuous disclosure requirements arising under the Corporations Act 2001 and the ASX Listing Rules.
$(ii)$ Basis of measurement and reporting convention
This interim financial report has been prepared on an accruals basis and are based on historical cost. The interim financial report is presented in Australian dollars and all values are rounded to the nearest dollar unless otherwise stated.
The accounting policies adopted are consistent with the accounting policies adopted in the Company's last annual financial statements for year ended 30 June 2018 unless otherwise stated.
(b) Going Concern
For the half-year ended 31 December 2018 the Group recorded a loss of $1,432,081 (31 December 2017: $1,374,440 loss), a net working capital surplus of $186,314 (30 June 2018: $109,278) and had net cash outflows from operating activities of $1,748,389. The ability of the entity to continue as a going concern is dependent on securing additional funding through issue of debt or equity, increasing revenues from sale of the Group's products and government R&D tax rebates to continue to fund its operational and marketing activities.
These conditions indicate a material uncertainty that may cast a significant doubt about the entity's ability to continue as a going concern and, therefore, that it may be unable to realise its assets and discharge its liabilities in the normal course of business.
Management believe there are sufficient funds to meet the entity's working capital requirements and as at the date of this report. Subsequent to year end the entity expects to receive additional funds by the placement of equity.
The financial statements have been prepared on the basis that the entity is a going concern, which contemplates the continuity of normal business activity, realisation of assets and settlement of liabilities in the normal course of business for the following reasons:
- Positive cash flows from securing major distribution agreements
- Will be able to raise additional equity to contribute to the Group's working capital position in the near term
- The group expects to continue to receive the full support of its creditors
- Ability to raise additional finance from debt or equity if and when required.
Should the entity not be able to continue as a going concern, it may be required to realise its assets and discharge its liabilities other than in the ordinary course of business, and at amounts that differ from those stated in the financial statements and that the financial report does not include any adjustments relating to the recoverability and classification of recorded asset amounts or liabilities that might be necessary should the entity not continue as a going concern.
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perating Segments = AASB 8 requires a management approach under which segment information is presented on the same basis as that used for internal reporting purposes. his is consistent to the approach used for the comparative period. perating segments are reported in a uniform manner to which is internally provided to the chief operating decision maker. he chief operating decision maker has been identified as the Board of Directors.
An operating segment is a component of the group that engages in business activity from which it may earn revenues or incur e1penditure, 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.
he Board monitors the operations of the Company based on two segments, operational and corporate. he financial results of each segments are reported to the board to assess the performance of the roup.
he 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 roup.
:; E-.#'.- ( $/!'(.-
he preparation of the interim financial report requires the use of accounting estimates and #udgements which, by definition, will seldom equal the actual results. his note provides an overview of the areas that involve a degree of #udgement or comple1ity in preparing the interim financial report. Facts and circumstances may come to light after the event which may have significantly varied the assessment used which result in a materially different value being recorded at the time of preparing these interim financial report.
(i) Impairment of assets
he Company assesses the impairment of assets at each reporting date by evaluating conditions specific to the asset that may lead to impairment. he assessment of impairment is based on the best estimate of future cash flows available at the time of preparing the report. owever, facts and circumstances may come to light in later periods which may change this assessment if these facts had be known at the time.
Due to sustained operating losses of the group, the roup has undertaken an impairment assessment of its Intangible assets in accordance with AASB13M Impairment o assets. he recoverable amount of Intangible assets is determined from a value in use model. he key assumptions for the value in use calculations are those regarding the future forecast cashflows which takes into account discount rates, growth rates and direct costs during the period. As a result of the assessment no impairment loss was recognised for the period.
(ii) Deferred ta1es
Deferred ta1 assets have not been brought to account as it is not considered probable that the Company will make ta1able profits over the ne1t 12 months. he Company will make a further assessment at the ne1t reporting period.
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usiiaries
Subsidiaries are all entities (including structured entities) over which the group has control. he group controls an entity when the group is e1posed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the group. hey are deconsolidated from the date that control ceases.
Intercompany transactions, balances and unrealised gains on transactions between group companies are eliminated. nrealised losses are also eliminated unless the transaction provides evidence of an impairment of the transferred asset. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the group.
10
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asic earnings per share
Basic earnings per share is calculated by dividing the profit attributable to the owners of the Company, e1cluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial year, ad#usted for bonus elements in ordinary shares issued during the financial year.
ilute earnings per share
Diluted earnings per share ad#usts the figures used in the determination of basic earnings per share to take into account the after income ta1 effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares.
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he note e1plains the impact of the adoption of AASB 9 Financial Instruments and AASB 15 evenue from Contracts with Customers on the roup's financial statements and also discloses the new accounting policies that have been applied from 1 uly 2018, where they are different to those applied in prior periods.
Impact on the inancial statements
AASB 9 was adopted without restating comparative information. his change in methodology has not had an impact on the financial statements. he Company applies the AASB 9 simplified approach to measuring e1pected credit losses, which requires e1pected lifetime credit losses to be recognised from initial recognition of trade receivables with maturities of 12 months or less.
AASB 15 had no impact on the Company. he adoption of these new accounting policies did not have any effect on the financial position or performance of the Company.
he roup has applied AASB 15 using the cumulative effect method and therefore the comparative information has not been restated and continues to be reported under AASB 118. he details of accounting policies under AASB 118 are disclosed separately if they are different from those under AASB 15.
In the comparative period 31 December 201N, revenue was recognised at fair value of the consideration received net of the amount of S payable to ta1ation authorities. Sales of products were recognised when the significant risks and rewards of ownership of the goods have passed to the buyer and can be measured reliably. isks and rewards were considered passed to the buyer at the time of delivery of the goods to the customer or at the point where billing threshold has been met.
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evenue for sale of suncare and skincare products, is recognised when the customers obtain control of the goods. his usually occurs when the goods are delivered. o 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.
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Any new, revised or amending Accounting Standards or Interpretations that are not yet mandatory have not been early adopted.
11
S?IN ELEENTS LIITED AL8EAR ENDED DB DECEER CABI Condensed Notes to the Consolidated Interim Financial Report
| A- .DB D CABI> | A- .DB D CABH> | ||
|---|---|---|---|
| ROIT OR LOSS ITES | |||
| C | LOSS OR T E AL EARLoss for the half year included the following items: | ||
| (a) Administration e1penses | |||
| Accounting e1penses | 41,5M1 | 44,583 | |
| Audit e1penses | 38,181 | 11,844 | |
| Legal e1penses | 44,N0N | 13,5N5 | |
| Wages, super B leave | 1M8,021 | 125,2N1 | |
| Directors fees | 49,N51 | N0,000 | |
| ravel e1penses | MM,242 | 30,921 | |
| ther e1penses | 290,5M2 | 159,811 | |
| M99,025 | 45M,00M | ||
| c) Consulting fees | |||
| elated party consulting fees (i) | 208,MN2 | 23N,350 | |
| E1ternal consulting fees | 158,1NM | 254,1M5 | |
| 3MM,848 | 491,515 |
(i) he Company engages the e1ecutives under consulting agreements to provide their services. A description of the services and the amounts paid or payable are listed in note 1M.
S?IN ELEENTS LIITED Condensed Notes to the Consolidated Interim Financial Report
| DCAS | A- .DB D CABI> | A- .DA /( CABI> | |
|---|---|---|---|
| Cash at bank | M9,888 | 195,MM1 | |
| Balance per statement cash flows | M9,888 | 195,MM1 | |
| ,#) (DB D CABI | ,#) (DB D CABH | ||
| > | > | ||
| (a) econciliation of loss after income ta1 to netcash flows from operating activities | |||
| Loss for the half year | (1,432,181) | (1,3N4,440) | |
| on-cash items | |||
| Amortisation | 150,989 | 150,095 | |
| Share based payments | 48,41N | 24N,431 | |
| Acquisition of stock margin B deferred ta1 | (13,888) | 43,51N | |
| Increase in traded receivables | (15,831) | (58,241) | |
| Increase in other receivables | (24N,222) | (182,821) | |
| Decrease in inventories | (N2,552) | (M0,901) | |
| Increase ; (decrease) in trade and other payables | (1MM,121) | 45N,149 | |
| et cash outflow from operating activities | (1,N48,389) | (NN8,211) |
(b) on-cash financing and investing activities (i) Issue of Shares to consultants
he Company issued 8N3,353 and 425,000 shares to consultants for services rendered during the period. he total value attributed to the shares was D38,194 (refer note 11).
| A- .DB D CABI | A- .DA /( CABI | ||
|---|---|---|---|
| E | TRADE RECEIALES | > | > |
| rade receivables | 45,M34 | 3M,509 | |
| 45,M34 | 3M,509 | ||
| (i) Classification of trade and other receivables |
rade debtors are amounts due from customers for sale of goods in the ordinary course of business. he trade receivables are generally due for settlement within 30 days and therefore are classified as current. he group does not currently have any provision for doubtful debts in respect to their receivables as at 31 December 2018 (30 une 2018: il). Due to the short term nature of the current receivables, their carrying amounts appro1imate their fair value.
(ii) eceivables and impairment
he trade debtors balance does not currently have any amounts that are past due but not impaired.
S?IN ELEENTS LIITED Condensed Notes to the Consolidated Interim Financial Report
| A- . | A- . | ||
|---|---|---|---|
| DB D CABI | DA /( CABI | ||
| > | > | ||
| F | OT ER RECEIALES | ||
| S receivable (net) | 40,208 | 45,M81 | |
| AB Withholding | 3NN | 3NN | |
| Share Application Funds | 145,381 | - | |
| 185,9MM | 4M,058 | ||
| A- . | A- . | ||
| DB D CABI | DA /( CABI | ||
| > | > | ||
| G | RESEARC AND DEELOENT TA INCENTIE | ||
| esearch and development receivable | 20M,NN3 | 450,181 | |
| 20M,NN3 | 450,181 |
he roup continued its development program during the half year ended 31 December 2018. his program will result in a claim for research and development ta1 incentive which will subsequently be received after the year end. he roup will continue to develop its all natural skincare technology during the ne1t year and assess the availability of applicable government assistance.
| A- .DB D CABI | A- .DA /( CABI | ||
|---|---|---|---|
| > | > | ||
| H | INENTOR | ||
| aw materials | 95,0N2 | M1,M19 | |
| Finished goods | 180,8M8 | 129,M3M | |
| 2N5,940 | 191,255 |
| >>IINTANILE ASSETSSolo rganics = formula B technologyM,183,M94McArthur = formula B technology818,121835,M42Website development costs12,N0N14,M0NEli3abeth ane atural Cosmetics = formula Btechnology2,214,2532,214,2539,228,NN59,3N9,NM3Movements in Solo rganics = formula B technologypening balanceM,315,2M2M,5N8,398Development cost additions-Less: BD ta1 incentives--Less: Write-off or impairments--Less: Amortisation(131,5M8)(2M3,13M)Closing balanceM,183,M94M,315,2M2Movements in McArthur = formula B technologypening balance835,M428N0,M83Development cost additions--Less: BD ta1 incentives-Less: Write-off or impairments-Less: Amortisation(1N,521)(35,041)Closing balance818,121835,M42Movements in Website development costspening balance14,M0N18,40NDevelopment cost additions-Less: BD ta1 incentives-Less: Write-off or impairments-Less: Amortisation(1,900)Closing balance12,N0N14,M0NMovements in Eli3abeth ane atural Cosmetics = formula Btechnologypening balance2,214,2532,214,253Development cost additions-Less: BD ta1 incentives-Less: Write-off or impairments-Less: Amortisation- | A- .DB D CABI | A- .DA /( CABI | |
|---|---|---|---|
| M,315,2M1 | |||
| - | |||
| - | |||
| - | |||
| - | |||
| - | |||
| - | |||
| (3,800) | |||
| 0 | |||
| 0 | |||
| 0 | |||
| 0 | |||
| Closing balance | 2,214,253 | 2,214,253 |
he company assess the impairment of assets at each reporting date as disclosed in note 1(d)(i).
15 Interim Financial Report For the six months ended 31 December 2018 Page 15
| 9 | TRADE PAYABLES | As at31 Dec 2018 | As at30 June 2018 |
|---|---|---|---|
| Trade creditors | 236,327 | 236,139 | |
| Other creditors | 361,560 | 574,247 | |
| 597.887 | 810.387 |
(a) Fair value of trade payables
Trade payables are unsecured and are usually paid within 60 days of recognition.
The carrying amount of trade and other payables are assumed to be the same as their fair values, due to their short term nature.
| As at31 Dec 2018 | As at30 June 2018 | ||
|---|---|---|---|
| 10 | BORROWINGS | ||
| Loans - related parties | |||
| Movements in related party loans | |||
| Opening balance | 44,201 | ||
| Amounts borrowed | |||
| Amounts repaid | (44, 201) | ||
| Closing balance |
(i) Terms of the borrowings
The operating company and the Company obtained working capital funding from the executives of the Company to allow the group to continue operating and pay its debts as and when they fell due. The loan is provided on the following terms:
| Particulars | Terms |
|---|---|
| Principal | No fixed amount, funding provided when needed. |
| Interest rate | 0% |
| Period | No fixed term. |
| Repayment | On commencement of listing, at the Company's discretion and subject to available funds. |
| Security | The borrowing is unsecured and there are no covenants in place for the loan. |
| 11 | Issued capital |
|---|---|
| As at31-Dec-18 | As at30-Jun-18 | As at31-Dec-18 | As at30-Jun-18 | ||
|---|---|---|---|---|---|
| (i) Share Capital | Shares No. | Share No. | $ | $ | |
| Ordinary Shares | 144,332,590 | 86,053,001 | 15,027,382 | 13,679,321 | |
| (ii) Movement in share capital | |||||
| Date | Details | Number ofshares | $ | ||
| $01$ -Jul-18 | Opening balance | 86,053,001 | 13,679,321 | ||
| 08-Aug-18 | Issue of shares rights issue | 43,026,519 | 1,075,663 | ||
| 04-Oct-18 | Issue of shares placement | 13,954,717 | 363,800 | ||
| 04-Oct-18 | Issue of shares consultants | 873,353 | 29,694 | ||
| 20-Dec-18 | Issue of shares consultants | 425,000 | 8,500 | ||
| Less: Transaction Costs | $-129,596$ | ||||
| 31-Dec-18 | Closing balance | 144,332,590 | 15,027,382 |
| As at31-Dec-18 | As at30-Jun-18 | ||
|---|---|---|---|
| 12 | RESERVES | ||
| Share based payment reserve | 263,922 | 215,505 | |
| Converting Note Reserve | 484,586 | 522,835 | |
| 748,508 | 738,340 |
| Options No.Options No. | |
|---|---|
| Options2,000,0002,000,000 | 116,816116,816 |
| (i) Performance Rights | As at31-Dec-18No. | As at30-Jun-18No. | As at31-Dec-18 | As at30-Jun-18 |
|---|---|---|---|---|
| Performance Rights | 4,400,000 | 4,400,000 | 147,106 | 98,689 |
On 30 November 2017, at the Company obtained shareholder approval to issue 4,400,000 performance rights to Directors. The company has used a Monte Carlo statistical calculation to determine the value of the rights (being hurdle 1 - $0.0751 and hurdle 2 -$0.0768) using the inputs as set out below. 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. The amortisation for the period was $48,417.
| Particulars | Inputs | |
|---|---|---|
| Hurdle 1 | Hurdle 2 | |
| Consideration | Nil | Nil |
| Rights Issued | 2,200,000 | 2,200,000 |
| Grant Date | 30-Nov-17 | 30-Nov-17 |
| Expiry Date | 30-Jun-19 | 30-Jun-20 |
| Hurdle | 5 Day VWAP of $0.34 | 5 Day VWAP of $0.51 |
| Expected volatility | 90% | 90% |
| Dividend yield | 0 | 0 |
| Risk free rate | 1.75% and 1.89% | 1.75% and 1.89% |
| As at | As at | |
|---|---|---|
| (b) Convertible note reserve | 31-Dec-18 | 30-Jun-18 |
| Convertible Note | 484,586 | 522,835 |
| 484,586 | 522,835 |
Movements in convertible notes
| Details | Number of | |||
|---|---|---|---|---|
| Date | Notes | $ | ||
| 01/07/2016 | Opening balance | 522,835 | 522,835 | |
| 26/10/2018 | Revision to notes for previous director | $-28,000$ | ||
| 26/10/2018 | Fair value adjustment | $-10,249$ | ||
| 484,586 | 322,835 |
(i) Terms of Convertible Notes
The Company entered into a transaction with a sophisticated investor to issue convertible notes during the period. The convertible notes are provided on the following terms:
| Particulars | Terms |
|---|---|
| Principal | No fixed amount, value of subscription amount equals face value of the note |
| Interest rate | 10% (simple interest) |
| Period | 12 Months from date of agreement |
| Conversion | Automatically converts to shares at $0.15 in 12 months (if not before) |
| Bonus option issues | For each share issued the holder receives a free attaching option exercisable at $0.22 (first option) andon conversion of the first option a second option exercisable at $0.34. |
| Security | No security |
| As at31-Dec-18e | As at30-Jun-18Ś | ||
|---|---|---|---|
| 13 | Accumulated Losses | ||
| Opening balance | 4,928,620 | 2,200,505 | |
| Loss for the period / year | 1,432,181 | 2,728,114 | |
| Closing balance | 6,360,801 | 4,928,619 |
| 31 Dec 2018 | 31 Dec 2017 | ||
|---|---|---|---|
| s | 5 | ||
| 14 | EARNINGS PER SHARE | ||
| Loss attributable to ordinary shareholders | (1,432,081) | (1,374,440) | |
| Weighted average number of ordinary shares (i) | |||
| Balance before transaction | 86,053,001 | 76,550,001 | |
| Effect of shares issued for the rights issue | 33,906,768 | ||
| Effect of shares issued for the placement | 6,673,995 | ||
| Effect of shares issued to consultants | 417,691 | ||
| Effect of shares issued to consultants | 25,408 | ||
| Shares issued to consultants (165,000 shares * (121/184 days) | 766,114 | ||
| 127,076,863 | 77,316,115 | ||
| Basic loss per share calculation (6mths loss / weighted ave shares) | (0.011) | (0.018) |
15 SEGMENT REPORTING
| Operations | Corporate &Administration | Company | |
|---|---|---|---|
| Half Year ended 31 December 2018 | |||
| Segment Revenue | 263,571 | 263,571 | |
| Significant items | |||
| Consultants fees | (91, 978) | (274, 869) | (366, 847) |
| Employment costs | (119, 605) | (49, 751) | (169, 356) |
| Amortisation | (150, 989) | (150, 989) | |
| Other expenses | (450, 937) | (245, 635) | (696, 572) |
| Share based payments | (48, 417) | (48, 417) | |
| Segment net operating loss after tax | (813,509) | (718, 566) | (1,432,181) |
| Half Year ended 31 December 2017 | |||
| Segment Revenue | 393,476 | $\overline{a}$ | 393,476 |
| Significant items | |||
| Interest Income | 74 | 74 | |
| Consultants fees | (238, 450) | (441, 450) | (679,900) |
| Employment costs | (359, 240) | (72, 885) | (432, 125) |
| Amortisation | (150,095) | (150,095) | |
| Other expenses | (491, 439) | (491, 439) | |
| Share based payments | (14, 431) | (14, 431) | |
| Segment net operating loss after tax | (845, 748) | (528, 692) | (1,374,440) |
| Segment assets | |||
| At 31 December 2018 | 9,756,873 | 256,103 | 10,012,977 |
| At 30 June 2018 | 10,095,169 | 204,258 | 10,299,427 |
| Segment liabilities | |||
| At 31 December 2018 | (264, 210) | (333, 677) | (597, 887) |
| At 30 June 2018 | (338, 438) | (471, 948) | (810, 386) |
Interim Financial Report For the six months ended 31 December 2018 Page 19
BG RELATED ART TRANSACTIONS
he roup 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 roup and those entities during the period. he terms and conditions of those transactions were no more favourable than those available, or which might reasonably be e1pected to be available, on similar transactions to unrelated entities on an arm's length basis.
| T,(-.#)( &/ | O/.-.(#(! &( | ||||
|---|---|---|---|---|---|
| DB D CABIDB D CABH | DB D CABI | DB D CABH | |||
| > | > | > | > | ||
| D#,.), | T,(-.#)( | ||||
| Peter Malone | E1ecutive services (i) | 120,000 | 120,000 | 40,5N0 | 83,N8M |
| Luke Martino | Corporate advisory services (ii) | 22,141 | 158,810 | 30M | 23,M3N |
| Directors fees (iii) | 30,000 | 30,000 | 50,3N5 | M0,500 | |
| Phil iglia | Directors fees (iv) | 30,000 | 30,000 | 2N,500 | N,150 |
(i) A company associated with Mr Malone, Boston Corporate Pty Ltd, provides consulting services in connection with the operations of the Company.
(ii) A company of which Mr Martino is a director, Indian cean Advisory roup, provided professional accounting and IP corporate advisory services during the half year. LM Corporate Capital Pty Ltd.
(iii) A company of which Mr Martino is a director, LM Corporate Capital Pty Ltd, provided directors services during the half year.
(iv) A company od which Mr iglia is a director, Colosseum Securities Pty Ltd, provided directors services during the half year.
| T,(-.#)( &/ | O/.-.(#(! &( | ||||
|---|---|---|---|---|---|
| DB D CABI | DB D CABH | DB D CABI | DB D CABH | ||
| T"(#&*,-)((& | T,(-.#)( | > | > | > | > |
| Craig Piercy | Consultancy services (v) | N8,000 | 99,300 | 20,355 | 3M,305 |
| ffice facilities | - | 12,545 | - | - | |
| Leo Fung | Consultancy services (vi) | N8,000 | N8,000 | 3N,944 | 105,152 |
(v) A company of which Mr Piercy is a Director, Boston Corporate Pty Ltd, provides consulting services in connection with the operations of the Company.
(vi) A company, Blackridge roup Pty Ltd, provides consulting services of Mr Fung in connection with the operations of the Company.
he roup also previously obtained funding from entities and associates of three e1ecutives of the Company:
| A- .DB D CABI | A- .DA /( CABI | |
|---|---|---|
| Borrowings | > | > |
| Loans = related parties | - | 3N4,8NN |
| - | 3N4,8NN | |
| Movements in related party loans | ||
| pening balance | 3N4,8NN | 44,M11 |
| Amounts borrows | - | 505,N42 |
| Amounts repaid | (3N4,8NN) | (1N5,4NM) |
| Closing balance | - | 3N4,8NN |
For the terms and conditions, refer to note 10 above.
Page 20 Interim Financial Report For the six months ended 31 December 2018
BH CONTINENT LIAILITIES
he directors are not aware of any contingent liabilities as at 31 December 2018.
BI SSEENT EENTS
here have been no other significant events after the end of the reporting period to the date of this report.
Interim Financial Report For the six months ended 31 December 2018 Page 21
DIRECTORS ' DECLARATION
In the opinion of the directors of Skin Elements Limited:
- (a) the consolidated financial statements and notes set out on pages 5 to 21 are in accordance with the Corporations Act 2001, including:
- (i) giving a true and fair view of the consolidated entity's financial position as at 31 December 2018 and of its performance for the half-year ended on that date; and
- (ii) complying with Accounting Standards AASB 134 Interim Financial Reporting, the Corporations Regulations 2001 and other mandatory professional reporting requirements; and
- (b) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.
Signed in accordance with a resolution of the directors.
Peter Malone Executive Chairman
Dated at Perth, Western Australia this 28th day of February 2019.
Directors' responsibility for the Half-Year Financial Report
The directors of the company are responsible for the preparation of the half-year financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the half-year financial report that is free from material misstatement, whether due to fraud or error.
Auditor's responsibility
Our responsibility is to express a conclusion on the half-year financial report based on our review. We conducted our review in accordance with Auditing Standard on Review Engagements ASRE 2410 Review of a Financial Report Performed by the Independent Auditor of the Entity, in order to state whether, on the basis of the procedures described, we have become aware of any matter that makes us believe that the half-year financial report is not in accordance with the Corporations Act 2001 including giving a true and fair view of the Group's financial position as at 31 December 2018 and its financial performance for the half-year ended on that date and complying with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001. As the auditor of the Group, ASRE 2410 requires that we comply with the ethical requirements relevant to the audit of the annual financial report.
A review of a half-year financial report consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Australian Auditing Standards and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Independence
In conducting our review, we have complied with the independence requirements of the Corporations Act 2001. We confirm that the independence declaration required by the Corporations Act 2001, which has been given to the directors of the Group, would be in the same terms if given to the directors as at the time of this auditor's review report.
BDO Audit (WA) Pty Ltd
Wayne Basford Director
Perth, 28 February 2018
Skin Elements Limited (ASX: SKN) 32 Ord Street West Perth, WA 6005, Australia skinelementslimited.com