SKIN ELEMENTS LIMITED — Interim / Quarterly Report 2021

Feb 28, 2021

26 February 2021

Half Year Report and Appendix 4D

Skin Elements Limited (SKN, the Company) is pleased to provide its Half Year Report and Appendix 4D for the six months ended 31 December 2020.

SKN also advises that pursuant to ASX listing rule 18.1 and ASIC Corporations (Amendment) Instruments 2020/1080 (the 'ASIC Relief"), SKN is relying on the ASIC Relief and class waiver from ASX listing rule 4.2B to extend the lodgment date for its audit reviewed Interim Financial Report required to be lodged with ASIC under s320 of the Corporations Act to ASX.

SKN is relying upon the ASIC Relief to provide the auditors additional time to obtain sufficient audit evidence given the increased difficulties caused by the recent COVID-19 restrictions including additional time required to complete the options underwriting shortfall.

The Company further confirms it will immediately make further announcement to ASX if it becomes aware that there will be a material difference between its unaudited and its audit reviewed Half Year Report.

This announcement is approved by the Board of Directors of Skin Elements Limited.

END

For further information, please contact:

Executive Chairman James Moses E: peter@skinelementslimited.com E: james@mandatecorporate.com.au

Peter Malone Media and Investor Inquiries Skin Elements Limited Mandate Corporate T: +61 439 430 770 T: +61 420 991 574

About Skin Elements

Skin Elements is an award winning Australian owned and operated ASX-listed skin care company focused on the development of natural and organic skin care products. Skin Elements innovative approach to organic chemical free products has enabled the creation of a portfolio of products that have been sold and distributed across the world. Its flagship products include Invisi-Shield Organics natural alcohol-free sanitiser range, Soléo Organics 100% natural and organic sunscreen, PapayaActivs natural therapeutics skincare, and Elizabeth Jane Natural Cosmetics brand.

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

SCIENCE

KNOWLEDGE

Half Year Report Incorporating Appendix 4D 31 December 2020

NATURE

Skin Elements Limited

ABN 90608047794 and its controlled entities

AND CONTROLLED ENTITIES ABN 90 608 047 794

Corporate directory

Current Directors
Peter Malone	Executive Chairman
Phil Giglia	Non-Executive Director
John Poulsen	Non-Executive Director

Joint Company Secretaries Steven Wood Kate Sainty

Registered Office			Share Registry
Street:	1242 Hay Street		Link Market Services Limited
	WEST PERTH WA 6005	Street:	Level 12, QV1 Building, 250 St Georges Terrace
Postal:	1242 Hay Street		PERTH WA 6000
	WEST PERTH WA 6005	Telephone:	1300 554 474 (within Australia)
Telephone:	+61 (0)8 6311 1900		+61 1300 554 474 (International)
Facsimile:	+61 (0)8 6311 1999	Facsimile:	+61 (0)8 6370 4203
Email:	info@senatural.com	Email:	registrars@linkmarketservices.com.au
Website:	www.skinelementslimited.com	Website:	www.linkmarketservices.com.au

Auditors Securities Exchange

BDO Audit (WA) Pty Ltd Australian Securities Exchange 38 Station Street Level 40, Central Park, 152-158 St Georges Terrace SUBIACO WA 6008 Perth WA 6000 Telephone: 131 ASX (131 279) (within Australia) Telephone: +61 (0)2 9338 0000 Facsimile: +61 (0)2 9227 0885 Website: www.asx.com.au ASX Code SKN

31 December 2020

HALF YEAR REPORT

31 December 2020

AND CONTROLLED ENTITIES

ABN 90 608 047 794

Contents

Results for announcement to the market 1
Directors' report3
Condensed consolidated statement of profit or loss and other comprehensive income6
Condensed consolidated statement of financial position 7
Condensed consolidated statement of changes in equity8
Condensed consolidated statement of cash flows9
Notes to the condensed consolidated financial statements 10
Directors' declaration 24

SKIN ELEMENTS LIMITED APPENDIX 4D

Results for announcement to the market

for the half-year ended 31 December 2020

1	REPORTING PERIOD (item 1)
	Report for the period ended:	31 December 2020
	Previous corresponding period is half-year ended:	31 December 2019
2	RESULTS FOR ANNOUNCEMENT TO THE MARKET	Movement	Percentage%	Amount$
	Revenues from ordinary activities (item 2.1)	Increase	74.70	148,200to
	Loss from ordinary activities after tax attributable to members(item 2.2)	Increase inloss	21.71	(1,349,203)to
	Loss after tax attributable to members (item 2.3)	Increase inloss	21.71	(1,349,203)to
	a.Dividends (items 2.4 and 5)		Amount perSecurity₵	Franked amountper security%
	Interim dividend		nil	n/a
	Final dividend		nil	n/a
	Record date for determining entitlements to the dividend(item 2.5)	n/a
	b.Brief explanation of any of the figures reported above necessary to enable the figures to be understood (item 2.6):
	The revenue and losses for the period reflect continued focus on the development of the Company's SE Formulaincluding the Invisi Shield® sanitiser and disinfectant range.
3	DIVIDENDS (item 6) AND RETURNS TO SHAREHOLDERS INCLUDING DISTRIBUTIONS AND BUY BACKS
	Nil.
	a.Details of dividend or distribution reinvestment plans in operation are described below (item 6):Not applicable
				Previous
4	RATIOS		Currentperiod	correspondingperiod
	a.Financial Information relating to 4b:		$	$
	Earnings for the period attributable to owners of the parent		(1,349,203)	(1,108,530)
	Net assets		9,438,423	9,212,353
	Less: Intangible assets and deferred tax balances		(8,504,162)	(8,653,824)
	Net tangible (liabilities)/assets		934,261	558,529
			No.	No.
	Fully paid ordinary shares		361,148,695	323,284,299
			₵	₵

AND CONTROLLED ENTITIES

ABN 90 608 047 794

Results for announcement to the market

for the half-year ended 31 December 2020

5	DETAILS OF ENTITIES OVER WHICH CONTROL HAS BEEN GAINED OR LOST DURING THE PERIOD: (item 4)
	a.	Control gained over entities
		Name of entities (item 4.1)		Nil
		Date(s) of gain of control (item 4.2)		n/a
	b.	Loss of control of entities
		Name of entities (item 4.1)		Nil
		Date(s) of loss of control (item 4.2)		n/a
	c.	Contribution to consolidated loss from ordinary activities after tax bythe controlled entities to the date(s) in the current period whencontrol was gained / lost (item 4.3).
	d.	Loss from ordinary activities after tax of the controlled entities for thewhole of the previous corresponding period (item 4.3)		n/a
6		DETAILS OF ASSOCIATES AND JOINT VENTURES: (item 7)
		Name of entities (item 7)	Nil
		Percentage holding in each of these entities (item 7)	N/A
					Current period	Previouscorrespondingperiod
		Aggregate share of profits (losses) of these entities (item 7)			N/A		N/A
7	The financial information provided in the Appendix 4D is based on the interim final report (attached), which has beenprepared in accordance with Australian Accounting Standards.
8		The Interim Financial Report will be audit reviewed. The Company has applied for ASIC relief and class waiver from ASXlisting rule 4.2B to extend the lodgement date for its audit reviewed Interim Financial Report required to be lodged withASIC under s320 of the Corporations Act to ASX.

AND CONTROLLED ENTITIES ABN 90 608 047 794

Directors' report

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 half-year ended 31 December 2020.

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 half-year are:

• Peter Malone Executive Chairman and Chief Executive Officer
• Phil Giglia Independent Non-Executive Director
• John Poulsen Independent Non-Executive Director (Appointed on 29 October 2020)
• Craig Piercy 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 half-year to the date of this report unless otherwise stated.

2. Operating and financial review

• 2.1. Operations Review
  • a. Invisi Shield® Natural Disinfectant and Sanitiser

Since launching Invisi Shield® Organics, a natural alcohol-free, anti-microbial sanitiser designed to deliver superior protection, SKN has continued to investigate the use of the SE FormulaTM in a range of applications for Invisi Shield® Organics as a sanitiser and as a disinfectant.

SKN has submitted its application for Therapeutic Goods Administration (TGA) registration of the new formula Invisi Shield® Organics as a hospital grade disinfectant. A successful registration with the TGA will allow the Company to make more detailed and specific product and label claims in respect to Invisi Shield® which has the potential to open up significant new commercial scale sales and distribution opportunities for Invisi Shield®.

b. 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

c. SKN appoints new Director

SKN has appointed Mr John Poulsen to the Board as a Non-Executive Director. Mr John Poulsen'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.

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® Organics in Australia.

Prudential Consultants has agreed to minimum sales commitments of $2.4 million over three years for the exclusive distribution of Invisi Shield® Organics in New South Wales and Tasmania, and also the distribution of Invisi Shield® Organics outside of these territories on a non-exclusive basis.

Prudential Consultants has taken delivery of samples and training materials and has commenced marketing activities for the Invisi Shield® Organics, with orders under the Distribution Agreement expected to commence once TGA registration is obtained.

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

ABN 90 608 047 794

Directors' report

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 period Skin Elements:

• Placement completed the issue of 2,000,000 ordinary fully paid shares and 200,000 attaching options to raise $120,000 cash.
• Options exercising exercise into fully paid ordinary shares 29,092,632 SKNUOA unlisted options for $872,778 cash received and 4,882,930 SKNOA listed options for $488,293 cash received.
• Research and Development rebate received funds amounting to $668,418 in relation to the 2020 R&D program and has accrued a further $335,640 in relation to the 2021 R&D program.
• Pre-production financing facility Repaid $500,000 drawdown under the pre-factoring financing facility with Custodian Australia Pty Ltd.

2.2. Financial Review

a. Key profit and loss measures

	Movement		6 months to31 December	6 months to31 December
	(increase/decrease)	Movement$	2020$	2019$
Revenues from ordinary activities	increased	63,369	148,200	84,831
Loss from ordinary activities after tax	increased	240,673	(1,349,203)	(1,108,530)
EBITDA	decreased	239,829	(1,152,931)	(913,102)

b. Key net asset measures

	Movement		31 December	30 June
	(increase/	Movement	2020	2019
	decrease)	$	$	$
Cash and cash equivalents	increased	659,946	865,893	205,947
Working capital	increased	345,260	653,589	308,329
Net tangible assets	increased	375,732	934,261	558,529
Net assets	increased	226,070	9,438,423	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.

2.3. Impact of COVID 19 Coronavirus

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 period the Company received the Federal Government's Jobkeeper subsidy and Cashflow boost incentives of $92,500.

2.4. Events Subsequent to Reporting Date

Subsequent to the reporting date, the Company has provided the options Underwriter (State Securities Pty Ltd) with a shortfall notice advising that 90,713,005 SKNOA options and 1,018,992 SKNUOA options have expired.

In regard to this underwriting obligation, the Underwriter has provided the Company with a total of $1,832,857 in cash comprising $632,857 for the issue of 6,628,571 shares pursuant to the shortfall, and a further $1,200,000 for the issue of 12,000,000 ordinary fully paid shares to the Underwriter.

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 7 Events subsequent to reporting date on page 17.

AND CONTROLLED ENTITIES ABN 90 608 047 794

Directors' report

2.5. 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 a placement, and the consideration of other equity and debt proposals
• The Company will continue to focus on development and commercialisation of its natural skin care 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.

This Report of the Directors, is signed in accordance with a resolution of directors made pursuant to section 306(3) of the Corporations Act 2001 (Cth).

PETER MALONE Executive Chairman Dated this Friday, 26 February 2021

AND CONTROLLED ENTITIES

ABN 90 608 047 794

Condensed consolidated statement of profit or loss and other comprehensive income

for the half-year ended 31 December 2020

	Note	Unaudited	Audited
		6 months to	6 months to
		31 December	31 December
		2020	2019
Continuing operations		$	$
Revenue	1.1	148,200	84,831
Cost of sales		(60,019)	(67,107)
Gross profit		88,181	17,724
Other income	1.2	428,130	294,162
Administration expenses	2.1	(497,361)	(367,689)
Advertising and marketing expenses		(145,795)	(90,732)
Amortisation		(196,272)	(195,428)
Corporate expenses	2.2	(181,947)	(156,317)
Consultants fees	2.3	(112,849)	(192,496)
Occupancy costs		(47,511)	(55,221)
Research and development expenses		(683,779)	(362,533)
Loss before tax		(1,349,203)	(1,108,530)
Income tax expense		-	-
Net loss for the half-year		(1,349,203)	(1,108,530)
Other comprehensive income, net of income tax
Other comprehensive income for the period, net of tax		-	-
Total comprehensive income attributable to members of the parent entity		(1,349,203)	(1,108,530)
Earnings per share:
Basic and diluted loss per share (cents per share)	10.4	(0.410)	(0.680)

The condensed consolidated of profit or loss and other comprehensive income is to be read in conjunction with the accompanying notes.

AND CONTROLLED ENTITIES ABN 90 608 047 794

Condensed consolidated statement of financial position

as at 31 December 2020

	Note	Unaudited	Audited
		31 December	30 June
		2020	2020
Current assets		$	$
Cash and cash equivalents	3.1	865,893	205,947
Trade and other receivables	3.2.1	484,720	764,153
Inventories	4.1	212,106	155,705
Other current assets	3.3.1	451,321	441,865
Total current assets		2,014,040	1,567,670
Non-current assets
Right of use asset - property, plant, and equipment		30,472	-
Intangible assets	4.1	8,504,162	8,653,824
Total non-current assets		8,534,634	8,653,824
Total assets		10,548,674	10,221,494
Current liabilities
Trade and other payables	3.4.1	476,132	509,141
Borrowings	3.5.1	634,119	500,000
Total current liabilities		1,110,251	1,009,141
Total liabilities		1,110,251	1,009,141
Net liabilities		9,438,423	9,212,353
Equity		-	-
Issued capital	5.1.1	19,145,737	17,607,998
Reserves	5.5	66,637	29,103
Accumulated losses		(9,773,951)	(8,424,748)
Total equity		9,438,423	9,212,353

The condensed consolidated of financial position is to be read in conjunction with the accompanying notes.

SKIN ELEMENTS LIMITED

AND CONTROLLED ENTITIES

ABN 90 608 047 794

Condensed consolidated statement of changes in equity

for the half-year ended 31 December 2020

	Note	Contributed	Accumulated	Convertiblenote	Share-basedpayment	Total
		equity	losses	reserve	reserve	equity
Audited		$	$	$	$	$
Balance at 1 July 2019		15,286,784	(6,896,381)	492,405	312,338	9,195,146
Loss for the half-year attributable to the owners of the parent		-	(1,108,530)	-	-	(1,108,530)
Adjustment to fair value of convertible note		-	42,206	(42,206)		-
Other comprehensive income for the half-year attributable to theowners of the parent		-	-	-	-	-
Total comprehensive income for the half-year attributable to theowners of the parent		-	(1,066,324)	(42,206)	-	(1,108,530)
Transaction with owners, directly in equity
Shares issued during the half-year (net of costs)	5.1.1	113,675	-	-	-	113,675
Share-based payments during the half-year	5.2	75,351	-	-	18,088	93,439
Converting note funds received and conversion	5.1.1	650,199	-	(450,199)	-	200,000
Balance at 31 December 2019		16,126,009	(7,962,705)	-	330,426	8,493,730
Unaudited
Balance at 1 July 2020		17,607,998	(8,424,748)	-	29,103	9,212,353
Loss for the half-year attributable to the owners of the parent		-	(1,349,203)	-	-	(1,349,203)
Adjustment to fair value of convertible note		-		-	-	-
Other comprehensive income for the half-year attributable to theowners of the parent		-	-	-	-	-
Total comprehensive income for the half-year attributable to theowners of the parent		-	(1,349,203)	-	-	(1,349,203)
Transaction with owners, directly in equity
Shares issued during the half-year (net of costs)	5.1.1	1,537,737	-	-	-	1,537,737
Share-based payments during the half-year	5.2	-	-	-	37,534	37,534
Balance at 31 December 2020		19,145,735	(9,773,951)	-	66,637	9,438,421

The condensed consolidated of changes in equity is to be read in conjunction with the accompanying notes.

AND CONTROLLED ENTITIES ABN 90 608 047 794

Condensed consolidated statement of cash flows

for the half-year ended 31 December 2020

	Note	Unaudited	Audited
		6 months to	6 months to
		31 December	31 December
		2020$	2019$
Cash flows from operating activities
Receipts from customers		146,363	798,166
Payments to suppliers and employees		(1,697,664)	(3,096,304)
Receipt of research and development tax incentive		668,418	490,630
Interest paid and facility fees		(89,949)	(11,010)
Interest received		-	75
JobKeeper payment scheme and ATO cash flow boost		92,500	-
Net cash used in operating activities		(880,332)	(1,818,443)
Cash flows from investing activities
Purchase of intangibles		(46,610)	(6,148)
Net cash used in investing activities		(46,610)	(6,148)
Cash flows from financing activities
Proceeds from issue of shares		1,486,888	1,744,963
Share issue costs		-	(199,795)
Proceeds from convertible notes		-	200,000
Proceeds of borrowings		600,000	-
Repayments of borrowings		(500,000)	-
Net cash provided by financing activities		1,586,888	1,745,168
Net increase in cash and cash equivalents held		659,946	(79,423)
Cash and cash equivalents at the beginning of the half-year		205,947	195,661
Cash and cash equivalents at the end of the half-year-	3.1	865,893	116,238

The condensed consolidated of cash flows is to be read in conjunction with the accompanying notes.

AND CONTROLLED ENTITIES

ABN 90 608 047 794

Notes to the condensed consolidated financial statements

for the half-year ended 31 December 2020

In preparing the December 2020 interim financial statements, Skin Elements Limited has grouped notes into sections under the same key categories as used in the June 2020 Annual Report:

Section A: How the numbers are calculated11
Section B: Unrecognised items17
Section C: Other Information18

The presentation of the notes to the financial statements is supported by the IASB's Disclosure Initiative. As part of this project, the AASB made amendments to AASB 101 Presentation of Financial Statements which have provided preparers with more flexibility in presenting the information in their financial reports.

The financial report is presented in Australian dollars, except where otherwise stated.

AND CONTROLLED ENTITIES

Notes to the condensed consolidated financial statements

for the half-year ended 31 December 2020

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.

Note 1	Revenue and other income	Unaudited	Audited
		6 months to	6 months to
		31 December2020	31 December2019
		$	$
1.1	Revenue
	Sales to customers	148,200	84,831
		148,200	84,831
1.2	Other Income
	Research and development tax incentives grant income	335,630	294,162
	JobKeeper Payment scheme grant income	67,500	-
	ATO Cash flow boost grant income	25,000	-
		428,130	294,162
Note 2	Loss before income tax	Unaudited	Audited
		6 months to	6 months to
		31 December	31 December
		2020$	2019$
	The following significant revenue and expense items are relevant in explaining the
	financial performance:
2.1	Administration expenses
	Accounting expenses	65,075	145,617
	Wages and salaries	247,441	122,939
	Travel expenses	18,088	15,851
	Interest expenses and finance facility costs	89,949	-
	Other expenses	76,808	83,282
		497,361	367,689
2.2	Corporate expenses
	ASX fees	32,176	20,583
	Audit expenses	36,400	34,985
	Directors fees	18,000	20,000
	Filing fees	6,735	4,912
	Legal expenses	77,788	51,492
	Share Registry and shareholder communications	10,848	24,345
		181,947	156,317
2.3	Contract and consulting fees
	Executive services contracts	39,327	173,085
	Share-based performance rights	37,53411.2.1a,c	18,088
	External consulting fees	35,988	1,323
		112,849	192,496

SKIN ELEMENTS LIMITED

AND CONTROLLED ENTITIES

ABN 90 608 047 794

Notes to the condensed consolidated financial statements

for the half-year ended 31 December 2020

Note 3	Financial assets and financial liabilities
3.1	Cash and cash equivalents	Unaudited31 December2020$	Audited30 June2020$
	Cash at bank	865,893	205,947
		865,893	205,947
3.2	Trade and other receivables	UnauditedNote31 December2020$	Audited30 June2020$
3.2.1	Current
	Trade receivables	23,461	21,625
	Goods and Services Tax receivable	57,513	73,733
	Research and Development Grant receivable	3.2.2335,630	668,418
	Other receivables	68,116	377
		484,720	764,153

3.2.2 The Group continued its development program during the half-year ended 31 December 2020 resulting in a claim for research and development tax incentive, for the 2021 financial year, which has been included as a receivable at half-year end.

3.3 Other assets Unaudited

		2020	2020
		$	$
3.3.1	Current
	Prepayments – Raw materials	250,200	192,902
	Other deposits	201,121	248,963
		451,321	441,865
3.4	Trade and other payables	Unaudited	Audited
		31 December	30 June
		2020	2020
		$	$
3.4.1	Current
	Unsecured
	Trade payables	289,123	300,377
	Sundry payables and accrued expenses	170,121	208,764
	Unissued shares	16,888	-
		476,132	509,141

31 December

Audited 30 June

ABN 90 608 047 794

Notes to the condensed consolidated financial statements

for the half-year ended 31 December 2020

Note 3		Financial assets and financial liabilities (cont.)
3.5		Borrowings	Note	Unaudited31 December2020$	Audited30 June2020$
3.5.1	Current	Pre-factoring financing facility	3.5.2	-	500,000
		Other short-term borrowingsLeases – motor vehicle	3.5.3	600,00034,119	--
				634,119	500,000

3.5.2 Terms and conditions: Pre-factoring financing facility

During the half-year pre-factoring financing facility with Custodian Australia Pty Ltd, with the following key terms:

• ◼ Total facility $10,000,000
• ◼ Drawdown $nil
• ◼ Interest rate 15%
• ◼ Maturity 9 November 2020
• ◼ Repaid $500,000
• ◼ Security The drawdown can also be secured against the inventory produced

3.5.3 Terms and conditions: Short-term borrowings

• a. During the period, the underwriter advances $500,000 of its shortfall obligation under the underwriting agreement dated 16 April 2020. Subsequent to reporting date, the amount was applied to the shortfall obligation and 5,000,000 ordinary fully paid shares were issued. No interest was payable.
• b. During the period, the Company received $100,000 cash advance from a third-party shareholder, to be repaid in cash or applied to a placement application. Subsequent to reporting date, the amount was applied to a placement application and $1,000,000 ordinary fully paid shares were issued. No interest was payable.

Note 4 Non-financial assets and financial liabilities

4.1	Inventories	Unaudited	Audited
		31 December	30 June
		2020	2020
		$	$
	Finished goods	212,106	155,705
		212,106	155,705
4.1	Intangible assets	Unaudited	Audited
		31 December	30 June
		2020	2020
		$	$
	Skin Elements formula and technology	9,859,296	9,859,296
	Accumulated amortisation	(1,406,848)	(1,212,476)
		8,452,448	8,646,820
	Website development costs	65,610	19,000
	Accumulated amortisation	(13,896)	(11,996)
		51,714	7,004
	Total intangibles	8,504,162	8,653,824

31 December 2020

AND CONTROLLED ENTITIES

ABN 90 608 047 794

Notes to the condensed consolidated financial statements

for the half-year ended 31 December 2020

Note 5	Equity
5.1	Issued capital	Note	Unaudited	Audited	Unaudited	Audited
			31 December	30 June	31 December	30 June
			2020	2020	2020	2020
			No.	No.	$	$
	Fully paid ordinary shares at no par value		361,148,695	323,284,299	19,145,737	17,607,998
			6 months to		6 months to
			31 December	12 months to	31 December	12 months to
			2020	30 June 2020	2020	30 June 2020
5.1.1	Ordinary shares		No.	No.	$	$
	At the beginning of the period		323,284,299	158,404,002	17,607,998	15,286,784
	Shares movement during the period:
	31.07.19 Placement		-	4,059,838	-	113,675
	29.11.19 Convertible note		-	3,001,326	-	450,199
	31.12.19 Corporate advisory		-	761,538	-	19,800
	31.12.19 Project managementservices		-	2,734,892	-	55,551
	31.12.19 Convertible note		-	12,500,000	-	200,000
	01.02.20 Placement		-	100,479,822	-	1,004,798
	20.03.20 Placement		-	29,800,000	-	350,000
	20.03.20 Lead Manager fee		-	2,500,000	-	25,000
	20.03.20 Underwriting fee		-	2,000,000	-	25,000
	20.03.20 Facility fee		-	2,000,000	-	25,000
	14.05.20 Facility fee		-	300,000	-	25,000
	22.06.20 Acquisition of IP		-	250,000	-	20,000
	30.06.20 Options exercise		-	4,492,881	-	134,786
	17.08.20 Options exercise		483,333	-	14,500	-
	21.08.20 Share issue		2,000,000	-	120,000	-
	19.09.20 Options exercise		975,001	-	29,250	-
	30.09.20 Options exercise		1,247,167	-	37,414	-
	30.11.20 Options exercise		2,958,465	-	88,754	-
	11.12.20 Options exercise		6,799,688	-	203,991	-
	23.12.20 Options exercise		4,159,266	-	124,779	-
	31.12.20 Options exercise		14,358,546	-	430,757	-
	31.12.20 Options exercise		4,882,930	-	488,294	-
	Transaction costs relating to share
	issues		-	-	-	(127,595)
	At reporting date		361,148,695	323,284,299	19,145,737	17,607,998

AND CONTROLLED ENTITIES

ABN 90 608 047 794

Notes to the condensed consolidated financial statements

for the half-year ended 31 December 2020

Note 5	Equity (cont.)
5.2	Options	Unaudited31 December2020No.	Audited30 June2020No.	Unaudited31 December2020$	Audited30 June2020$
	Options	-	126,004,034	-	-
		6 months to31 December2020No.	12 months to30 June 2020No.	6 months to31 December2020$	12 months to30 June 2020$
	At the beginning of the period	126,004,034	81,965,315	-	116,816
	Options movement during theperiod:
	31.12.19 Convertible note	-	3,001,326	-	-
	31.12.19 Convertible note	-	9,375,000	-	-
	06.03.20 Expiry of options	-	(338,000)	-	-
	17.03.20 Placement	-	33,493,274	-	-
	20.03.20 Placement	-	3,000,000	-	-
	30.06.20 Exercise	-	(4,492,881)	-	-
	17.08.20 Options exercise	(483,333)	-	-	-
	21.08.20 option issue	200,000	-	-	-
	19.09.20 Options exercise	(975,001)	-	-	-
	30.09.20 Options exercise	(1,247,167)	-	-	-
	30.11.20 Options exercise	(2,958,465)	-	-	-
	11.12.20 Options exercise	(6,799,688)	-	-	-
	23.12.20 Options exercise	(4,159,266)	-	-	-
	31.12.20 Options exercise	(14,358,546)	-	-	-
	31.12.20 Options exercise	(4,882,930)	-	-	-
	31.12.20 Expiry of options	(90,339,638)	-	-	-
	Previously expired options	-	-	-	(116,816)
	At reporting date	-	126,004,034	-	-
	Comprising the following options:
	Listed, ex. price $0.10 exp. date31.12.20	-	97,003,641	-	-
	Unlisted, ex. price $0.03 exp.date 31.12.20	-	29,000,393	-	-
	At reporting date	(90,339,638)	126,004,034	-	(116,816)

SKIN ELEMENTS LIMITED

AND CONTROLLED ENTITIES

ABN 90 608 047 794

Notes to the condensed consolidated financial statements

for the half-year ended 31 December 2020

Note 5	Equity (cont.)
5.3	Performance rights	Note	Unaudited	Audited	Unaudited	Audited
			31 December	30 June	31 December	30 June
			2020	2020	2020	2020
			No.	No.	$	$
	Performance rights		47,000,000	47,000,000	29,103	29,103
			6 months to		6 months to
			31 December	12 months to	31 December	12 months to
			2020No.	30 June 2020No.	2020$	30 June 2020$
	At the beginning of the period		47,000,000	2,200,000	29,103	195,522
	Performance rights movementduring the period:
	Issued	11.2.1a,c	-	47,000,000	-	29,103
	Fair value adjustments	11.2.1c	-	-	-	27,323
	Lapsed	11.2.1c	-	(2,200,000)	-	(222,845)
	Converted to ordinary shares		-	-	-	-
	At reporting date		47,000,000	47,000,000	29,103	29,103
			Unaudited	Audited	Unaudited	Audited
			31 December	30 June	31 December	30 June
			2020	2020	2020	2020
5.4	Convertible notes (equity)		No.	No.	$	$
	Convertible Note		-	-	-	-
			6 months to		6 months to
			31 December	12 months to	31 December	12 months to
			2020	30 June 2020	2020	30 June 2020
			No.	No.	$	$
	At the beginning of the period		-	378,842	-	492,405
	Convertible notes movement duringthe period:
	Fair value adjustments		-	-	-	(42,206)
	Conversion to ordinary shares		-	(378,842)	-	(450,199)
	At reporting date		-	-	-	-

5.5	Reserves	Unaudited	Audited
		31 December	30 June
		2020	2020
		$	$
	Share-based payment reserve	66,637	29,103
	Convertible note reserve	-	-
		66,637	29,103

AND CONTROLLED ENTITIES

Notes to the condensed consolidated financial statements

for the half-year ended 31 December 2020

SECTION B. UNRECOGNISED ITEMS

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 6 Commitments

6.1 Capital commitments

At reporting date, the Group does not have any capital commitments

Note 7 Events subsequent to reporting date

Subsequent to the reporting date, the Company has provided the options Underwriter (State Securities Pty Ltd) with a shortfall notice advising that 90,713,005 SKNOA options and 1,018,992 SKNUOA options have expired.

In regard to this underwriting obligation, the Underwriter has provided the Company with a total of $1,832,857 in cash comprising $632,857 for the issue of 6,628,571 shares pursuant to the shortfall, and a further $1,200,000 for the issue of 12,000,000 ordinary fully paid shares to the Underwriter.

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 8 Contingent liabilities

There are no other contingent liabilities as at 31 December 2020 (30 June 2020: Nil).

AND CONTROLLED ENTITIES

ABN 90 608 047 794

Notes to the condensed consolidated financial statements

for the half-year ended 31 December 2020

SECTION C. 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 9 Related party transactions

				Total Transactions				Payable Balance
	Entity	Nature oftransactions	KMP	Unaudited6 months to31 December2020$	31 December	Audited6 months to2019$	Unaudited31 December2020	Audited31 December2019$$
	Peter Malone	Executive services	Director	120,000		120,000	64,102	86,866
Phil Giglia		Directors' fees	Director	14,000		14,000	45,400	41,800
	John Poulsen	Directors' fees	Director	4,000		-	2,200	-
Craig Piercy		Executive services	Former director(resigned 29.10.20)	-		13,000		-13,000
Note 10		Earnings per share (EPS)			Note		Unaudited6 months to31 December2020$	Audited6 months to31 December2019$
10.1		Reconciliation of earnings to profit or loss
	Loss for the half-year						(1,349,203)	(1,108,530)
		Loss used in the calculation of basic and diluted EPS					(1,349,203)	(1,108,530)
							Unaudited6 months to31 December2020No.	Audited6 months to31 December2019No.
10.2			Weighted average number of ordinary shares outstandingduring the half-year used in calculation of basic EPS				327,630,920	161,897,841
			Weighted average number of dilutive equity instruments outstanding		10.5		N/A	N/A
10.3			Weighted average number of ordinary shares outstanding

• during the half-year used in calculation of basic EPS 327,630,920 161,897,841
• 10.4 Earnings per share Unaudited 6 months to 31 December 2020 ₵ Audited 6 months to 31 December 2019 ₵ Basic EPS (cents per share) 10.5 (0.41) (0.68) Diluted EPS (cents per share) 10.5 N/A N/A
• 10.5 As at 31 December 2020 the Group has nil unissued shares under options (December 2019: 126,004,034) and 47,000,000 performance shares on issue (December 2019: 47,000,000). The Group does not report diluted earnings per share on losses generated by the Group. During the half-year, the Group's unissued shares under option and performance shares were antidilutive.

Notes to the condensed consolidated financial statements

for the half-year ended 31 December 2020

Note 11	Share-based payments	Note	6 months to31 December2020$	6 months to31 December2019$
11.1	Share-based payments:Recognised in profit and loss (expenses)	11.2.1a	37,534	18,088
	Gross share-based payments		37,534	18,088

11.2 Share-based payment arrangements in effect during the half-year

11.2.1 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 11.4:

Class ofPerformanceRight	Performance Condition	Performance rightsNo.		MilestoneDate	ExpiryDate	PerformanceCondition
		Peter Malone	PWA			Satisfied
A	The Company receiving revenue fromthe sale of its products to an aggregatevalue of $2,000,000	2,700,000	2,000,000	31 Dec 2023	4 years fromthe date ofissue	No
B	The Company receiving revenue fromthe sale of its products to an aggregatevalue of $6,000,000	5,400,000	4,000,000	31 Dec 2023	4 years fromthe date ofissue	No
C	The Company receiving revenue fromthe sale of its products to an aggregatevalue of $12,000,000	8,100,000	6,000,000	31 Dec 2023	4 years fromthe date ofissue	No
D	The Company receiving revenue fromthe sale of its products to an aggregatevalue of $20,000,000	10,800,000	8,000,000	31 Dec 2023	4 years fromthe date ofissue	No

11.3 Fair value of options granted during the half-year

The fair value of the options granted to employees is deemed to represent the value of the employee services received over the vesting period.

No options were granted during the half-year.

11.4 Fair value of performance rights granted during the half-year

No performance rights were granted during the half-year.

SKIN ELEMENTS LIMITED

AND CONTROLLED ENTITIES

ABN 90 608 047 794

Notes to the condensed consolidated financial statements

for the half-year ended 31 December 2020

Note 12 Operating segments

12.1Segment Financial Performance
		Corporate and
Unaudited	Operations	administration	Total
Half-year ended 31 December 2020	$	$	$
Revenue and other income
◼External sales	148,200	-	148,200
◼Other income	428,130	-	428,130
Total segment revenue and other income	576,330	-	576,330
Total Group revenue and other income		_	576,330
Segment profit/(loss) before income tax
◼Cost of sales	(60,019)	-	(60,019)
◼Administration expenses	(347,697)	(149,664)	(497,361)
◼Advertising and marketing expenses	(45,772)	(100,023)	(145,795)
◼Amortisation	(196,272)	-	(196,272)
◼Corporate expenses	(16,651)	(165,296)	(181,947)
◼Consultants fees	(39,327)	(35,988)	(75,315)
◼Share-based payments	-	(37,534)	(37,534)
◼Occupancy costs	(38,004)	(9,507)	(47,511)
◼Research and development expenses	(683,779)	-	(683,779)
Segment profit/(loss) from continuing operations before tax	(851,191)	(498,012)	(1,349,203)
Group loss before income tax		_	(1,349,203)
Audited
Half-year ended 31 December 2019
Revenue and other income
◼External sales	84,831	-	84,831
◼Other income	294,162	-	294,162
Half-year segment revenue and other income	378,993	-	378,993
Total Group revenue and other income		_	378,993
Segment profit/(loss) before income tax
◼Cost of sales	(67,107)	-	(67,107)
◼Administration expenses	(149,776)	(217,913)	(367,689)
◼Advertising and marketing expenses	(90,732)	-	(90,732)
◼Amortisation	(195,428)	-	(195,428)
◼Corporate expenses	(156,317)	-	(156,317)
◼Consultants fees	(71,086)	(103,307)	(174,393)
◼Share-based payments	-	(18,103)	(18,103)
◼Occupancy costs	(55,221)	-	(55,221)
◼Research and development expenses	(362,533)	-	(362,533)
Segment profit/(loss) from continuing operations before tax	(769,207)	(339,323)	(1,108,530)
Group loss before income tax		_	(1,108,530)

AND CONTROLLED ENTITIES ABN 90 608 047 794

for the half-year ended 31 December 2020

	31 December 2020

Note 12 Operating segments (cont.)

12.2Segment Financial Position
Unaudited	Operations	Corporate andadministration	Total
At as 31 December 2020	$	$	$
Segment Assets	9,680,168	6,547,156	16,227,324
Reconciliation of segment assets to group assets:
◼Intra-segment eliminations		(5,678,650)	(5,678,650)
Total assets		_	10,548,674
Segment Liabilities	5,697,658	1,091,243	6,788,901
Reconciliation of segment liabilities to group liabilities
◼Intra-segment eliminations	(5,678,650)	-	(5,678,650)
Total liabilities		_	1,110,251
Audited	3,982,510	5,455,913	9,438,423
As at 30 June 2020
Segment Assets	9,999,376	5,327,787	15,327,163
Reconciliation of segment assets to group assets:
◼Intra-segment eliminations	-	(5,105,669)	(5,105,669)
Total assets		_	10,221,494
Segment Liabilities	5,299,048	815,762	6,114,810
Reconciliation of segment liabilities to group liabilities
◼Intra-segment eliminations	(5,105,669)	-	(5,105,669)
Total liabilities		_	1,009,141

SKIN ELEMENTS LIMITED

AND CONTROLLED ENTITIES

ABN 90 608 047 794

Notes to the condensed consolidated financial statements

for the half-year ended 31 December 2020

Note 13 Statement of significant accounting policies

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 periods presented, unless otherwise stated.

13.1 Basis of preparation

13.1.1 Reporting Entity

Skin Elements Limited (Skin Elements or the Company) is a listed public company limited by shares, domiciled and incorporated in Australia. This interim financial report is intended to provide users with an update on the latest annual financial statements of Skin Elements Limited and controlled entities. As such, it does not contain information that represents relatively insignificant changes occurring during the half-year within the Group. It is therefore recommended that this financial report be read in combination with the annual financial statements of the Group for the half-year ended 30 June 2020, together with any public announcements made during the half-year.

13.1.2 Basis of accounting

The half-year financial report is a general purpose financial report prepared in accordance with the Corporations Act 2001 and AASB 134 Interim Financial Reporting. Compliance with AASB 134 ensures compliance with International Financial Reporting Standard IAS 34 Interim Financial Reporting. The half-year report does not include notes of the type normally included in an annual financial report and shall be read in conjunction with the most recent annual financial report.

The financial statements were authorised for issue on 19 February 2021 by the Directors of the Company.

13.1.3 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 lossfor the half-year of $1,349,203 (31 December 2019: $1,108,530 loss) and a net cash out-flow from operating activities of $880,332 (31 December 2019: $1,818,443 out-flow). As at 31 December 2020, the Group has working capital of $653,589 (30 June 2020: $308,329 working capital).

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, the Directors are confident of the Group's ability to pay its debts as and when they fall due.

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.

13.1.4 Comparative figures

Where required by AASBs comparative figures have been adjusted to conform to changes in presentation for the current half-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.

13.1.5 New and Amended Standards Adopted by the Group

The Group has adopted all of the new and revised Standards and Interpretations issued by the Australian Accounting Standards Board (the AASB) that are relevant to their operations and effective for the current half-year. New and revised Standards and amendments thereof and Interpretations effective for the current year that are relevant to the Group are:

• 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

AND CONTROLLED ENTITIES

Notes to the condensed consolidated financial statements

for the half-year ended 31 December 2020

Note 13 Statement of significant accounting policies

13.2 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.

13.2.1 Coronavirus (COVID-19) pandemic

Judgement has been exercised in considering the impacts that the Coronavirus (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 Coronavirus (COVID-19) pandemic.

Note 14 Company details

The registered office of the Company is: Street + Postal: 1242 Hay Street WEST PERTH WA 6005

HALF YEAR REPORT

31 December 2020

Directors' declaration

The Directors of the Company declare that:

• 1. The financial statements and notes, as set out on pages 6 to 23, are in accordance with the Corporations Act 2001 (Cth) and:
  • (a) comply with Accounting Standard AASB 134: Interim Financial Reporting; and
  • (b) give a true and fair view of the financial position as at 31 December 2020 and of the performance for the half-year ended on that date of the Company.
• 1. 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 pursuant to s303(5) of the Corporations Act 2001 (Cth) and is signed for and on behalf of the directors by:

PETER MALONE Managing Director Dated this Friday, 26 February 2021