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28February2020
2019Half-YearReport
AustraliannaturalskincarecompanySkinElementsLimited(ASX:SKN)(SkinElements,theCompany)ispleasedtopresentitsHalf-YearReportto31December2019.GlobalOpportunityAsoutlinedintheCompany’srecentquarterlyreport,SkinElementscontinuestodrivesalesintoglobalmarketsincludingEurope,Japan,anditsexistingAustraliandistributors.SalestoSlovakia,Slovenia,JapanaswellasOborneHealthandonlinesalesinAustraliatotalover$200,000sincetheendofthehalfyear,withordersforSoleoOrganicsforMarchtargetedtoexceedover$300,000.ExpandedProductRangeinProductionSoleoOrganicsnaturalsunscreenfullproductrangeisinproductionfordeliveryinApriltofulfillsalesoverthenorthernsummer.TheCompanyhascommitted$500,000totheproductionprogram.AdditionallytheCompanyhasproductionordersinplaceforitsPapayaActivsrangebasedaroundsalestoEuropeaswellasitsAustraliandistributorsNewProductLaunch–InvisiShieldTheCompanyconfirmsitsdevelopmentprograminvolvingitsInvisiShieldskinmedicalrangehasseentheconsolidationofmarkettestingonitsproducts.ThisisbeingboughtforwardforimmediatereleasegiventheglobalissuesassociatedwiththeCOVID-19pandemic.CapitalRaisingSkinElementswillcompleteon10March2020,afullyunderwrittennonrenounceablerightsissueraisingapproximately$1millionworkingcapitaltosupportproductionoftheCompany’sproducts.TheCompanyalsohasinplacea$270,000productionfundingfacilitytoprovidetheworkingcapitalforinitialproductionordersforitsexpandedSoleoOrganicsandPapayaActivsranges.ENDS
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Forfurtherinformation,pleasecontact:PeterMalone MediaandInvestorInquiriesExecutiveChairman JamesMosesSkinElementsLimited MandateCorporateT:+61439430770 T:+61420991574E:peter@senatural.com E:james@manadatecorporate.com.au AboutSkinElementsSkinElementsisanASX-listedskincarecompanyfocusedonthedevelopmentofnaturalandorganicskincareproducts,asanalternativetocurrentchemical-basedproducts.Ithasdevelopedaportfolioofproductswhichincludes,theSoléoOrganics100%naturalandorganicsunscreen,pawpawbasedPapayaActivsnaturaltherapeuticskincare,theElizabethJaneNaturalCosmeticsbrand,andtheInvisiShieldskincarerange.TheCompanyhascompletedahighlysuccessfultestmarketingphaseinmajorinternationalmarketsforSoléoOrganicsandhasregulatoryapprovalwiththeUSAFDA,TGAandothersignificantregulators.SkinElementsaimstobecomethenumberonerecognisednationalandinternationalsunscreenbrand.FurtherinformationisavailableviatheCompanywebsite:http://skinelementslimited.com
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SKINELEMENTSLIMITEDAppendix4DHALFYEARREPORT1. COMPANYDETAILSNameofEntity SkinElementsLimitedABN 90608047794ReportingPeriod Halfyearended31December2019PreviousReportingPeriod Yearend30June2019
2. RESULTSFORANNOUNCEMENTTOTHEMARKET $’000Revenuesfromordinaryactivities
down 68%to 85
Profit(Loss)fromcontinuingactivitiesaftertaxattributabletotheownersofSkinElementsLimited
down 23%to (1,108)
Profit(Loss)forthehalfyearattributabletotheownersofSkinElementsLimited
down 23%to (1,108)
3. NETTANGIBLEASSETS ReportingPeriod
CentsPreviousPeriod
CentsNettangibleassetsperordinarysecurity 0.001 0.001
4. CONTROLGAINEDOVERENTITIESTheGroupdidnotgainanyentitiesduringtheperiodLOSSOFCONTROLOVERENTITIESTheGroupdidnotdisposeofanyentitiesduringtheperiod.5. DIVIDENDSTheGroupdidnotdeclareorpayanydividendsduringtheperiod.6. DIVIDENDREINVESTMENTPLANNotapplicable7. DETAILSOFASSOCAITESANDJOINTVENTUREENTITIESNotapplicable8. FOREIGNENTITIESNotapplicable
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9. AUDITQUALIFICATIONORREVIEWThefinancialstatementsweresubjecttoareviewbytheauditorsandthereviewreportisattachedaspartoftheInterimReport.ATTACHMENTSTheInterimReportofSkinElementsLimitedforthehalfyearended31December2019isattached.SIGNEDSigned______________________________ Dated:28February2020PeterMaloneExecutiveChairman
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Interim Financial ReportFor the six months ended 31 December 2019
Skin E lements L imi ted ABN 90 608 047 794
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Corporate Directory
SKIN ELEMENTS LIMITEDABN 90 608 047 794 DIRECTORSMr Peter Malone – Executive ChairmanMr Phil Giglia – Non-Executive DirectorMr Craig Piercy – -Executive Director
COMPANY SECRETARYMr Craig Piercy REGISTERED AND PRINCIPAL OFFICE32 Ord StreetWEST PERTH WA 6005Telephone: 08 6311 1900www.skinelementslimited.comwww.soleoorganics.com
SHARE REGISTRYLink Market Services LimitedLevel 4 Central Park152 St George’s TerracePERTH WA 6000Telephone (within Australia): 1300 554 474Telephone (outside Australia): +61 1300 554 474Facsimile: 02 9287 0303 AUDITORBDO Audit (WA) Pty Ltd38 Station StreetSubiaco WA 6008 AUSTRALIAN SECURITIES EXCHANGE LISTINGASX Code: SKN
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Contents
Directors' Report 2
Auditor’s Independence Declaration 5
Interim Financial Report
Consolidated Statement of Profit or Loss and Other Comprehensive Income 6
Consolidated Statement of Financial Position 7
Consolidated Statement of Changes in Equity 8
Consolidated Statement of Cash Flows 9
Condensed Notes to the Consolidated Interim Financial Report 10
Directors' Declaration 22
Independent Auditor’s Review Report 23
Interim Financial Report For the six months ended 31 December 2019 Page 1
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Interim Financial Report For the six months ended 31 December 2019 Page 2
2
DIR E C TOR S ’ R E POR T
TheDirectorspresenttheinterimfinancialreportofSkinElementsLimited(theCompany,GrouporSEL)forthehalf-yearended31December2019andtheauditor’sreviewreportthereon:
DIRECTORS
TheDirectorsoftheCompanyatanytimeduringorsincetheendofthehalfyearanduntilthedateofthisreportarenotedbelow.
MrPeterMaloneExecutiveChairman
MrPhilGigliaIndependentNon-ExecutiveDirector
MrCraigPiercyExecutiveDirector–Appointedon29November2019
MrLukeMartinoIndependentNon-ExecutiveDirector–Resignedon10October2019
MrZelingLiIndependentNon-ExecutiveDirector–Resignedon29November2019
MsJialinLiIndependentNon-ExecutiveDirector–Resignedon29November2019
PRINCIPALACTIVITIES
During the half-year ended 31 December 2019, the principal continuing activity of the Group consisted of thedevelopmentandcommercialisationofitsproprietaryallnaturalskincaretechnology.
REVIEWOFOPERATIONS
SKNLifeproductandbrandingplatformestablishedDuring theperiod, Skin Elements completed the strategic re-branding, expansion and refinement across its entirenaturalskincareandsuncareproductrange.ThisprocessresultedintheCompanynowhavingatotalof40therapeuticandcosmeticskincareproductsinproduction,includingfivenewproductsintheflagshipSoléoOrganicssunscreenrange,aswellasPapayaActivsrangeoftherapeutictreatmentsandeverydayskincare,andthefirstfiveproductsformtheElizabethJaneNaturalCosmeticsrange.
GlobalOpportunitySkinElementscontinuestomaintainitsfocusondevelopingsalesinglobalmarketsincludingmajorretailpharmacyandhealthchainsintheUnitedKingdom,theexpansionofitsonlinesalesportalfortheUSAmarket,andthesupporttoitsdistributorsinEuropewithfurtherinitialordersanddepositsbeingreceived.
KeyincentivisationToassistwithsecuringthesecustomer,SkinElementshasengagedPalmerWilsonAssociatesLtd(PWA),aUnitedKingdombasedspecialistbusinessdevelopmentconsultancyaimedatprovidingcosteffectivesolutionstodevelopingmarketentryforbrandsinglobalmarket,especiallytheUnitedKingdom,Europe,MiddleEast&Asia.
PWAtogetherwithExecutiveChairmanMrPeterMaloneareincentivisethroughtheissueofperformancerightswhichconverttosharesontheachievementofsalestargets.
In line with the establishment of the SKNLife business model, the Company has streamlined operations and coststructurestobetterfititsoperationsmovingforwardSkinElementsreviewsitsworkingcapitalrequirementsandcapitalraising options on an ongoing basis to ensure it has sufficient capital to support the operation and growth of thebusiness.
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.D I R E C T O R S ’ R E P O R T ( C O N T I N U E D )
CapitalRaiseof$1.0millionInFebruary2020,SkinElementscommencedafullyunderwrittennon-renounceablepro-ratarightsissue(EntitlementOffer)toexistingshareholdersatanissuepriceof$0.01pernewshare,onthebasisoffivenewshareforeverynineordinarysharesheld.Shareholdersalsoreceivedonenewfreeunlistedoptionforeverythreenewshares,exercisableat$0.03onorbefore31December2020.UndertheEntitlementOffer,whichcloseson10March2020,TheCompanywillissue100,479,601sharesand33,493,200optionsraising$1,004,796(beforecosts).
ChinesedistributionAgreementcompletedOn9October2019,SkinElementsLimitedadvisedthatitwasnotproceedingwiththeTermSheetAgreementwithHenanHuatuoHealthManagementCo,Ltd(HHHM)andon29November2019,SkinElementssettledthe$200,000convertiblenoteundertheTernSheetthroughtheissueoftheconvertiblenotetothirdpartiesonsimilarterms.Thisnowcompletesthisproject.
RESULTS
TheCompanyincurredalossof$1,108,530afterincometaxforthehalf-yearended31December2019(31December2018:loss$1,432,081)predominantlyduetotheexpansionoftheproductrangeasitpositionsthebusinessforgrowth.
ISSUEOFSHARES,OPTIONSANDPERFORMANCERIGHTS
Duringthehalfyear,SkinElementsLimitedissuedthefollowingsharesandoptions:
• Placementof4,059,838ordinaryfullypaidsharesand3,535,706freeattachingoptions(exercisableat$0.10eachonorbefore31December2020)inJuly&Augustraising$113,675.
• Issueof761,538ordinaryfullypaidsharesforservicesrenderedduringtheperiodwiththefairvaluepershareof$0.026eachforvalueof$19,800.
• Issueof2,136,577ordinaryfullypaidsharesforservicesrenderedduringtheperiodwiththefairvaluepershareof$0.026eachforvalueof$55,551.
• Issueof3,001,326ordinaryfullypaidsharesand3,001,326freeattachingoptions(exercisableat$0.10eachonorbefore31December2020)pursuanttocontrovertiblenotesissued2018asapprovedbyshareholdersatthe2019AnnualGeneralMeetingatafairvaluepershareof$0.15foratotalvalueof$450,199.
• Issueof12,500,000ordinaryfullypaidsharesand9,375,000freeattachingoptions(exercisableat$0.10eachonorbefore31December2020)pursuanttoacontrovertiblenoteissuedduringtheperiodatafairvaluepershareof$0.016foratotalvalueof$200,000.
On29November2019,theCompanyobtainedshareholderapprovaltoissue27,000,000performancerightstoMrPeterMalone–ExecutiveChairmanand20,000,000performancerightstoPalmerWilsonAssociatesLtdaUKbasedspecialistbusinessdevelopmentconsultancy.Theseperformancerightswillconvertintosharesuponperformancemilestonesofsalesrevenueof$20,000,000beingachievedoverafouryearperiodto31December2023.Thefairvalueperrightis$0.0108whichisthesharepriceatgrantdate29November2019.Therightsareexpensedoverthevestingperiodwhichisupto49monthsfromthedateofissue.
EVENTSSUBSEQUENTTOREPORTINGDATE
In February 2020 the Company commenced a fully underwritten non renounceable pro-rata entitlement issue of100,479,601ordinaryfullypaidshares(onaratioof5newsharesfor9existingsharesattherecorddateof11February2020)and33,493,200freeattachingunlistedoptionsexercisableat$0.03onorbefore31December2020(onaratioof1optionforevery3newshares).Theoffercloseson10March2020.
Therehavebeennoothersignificanteventsaftertheendofthereportingperiodtothedateofthisreport.
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SIGNIFICANTCHANGESINTHESTATEOFAFFAIRS
IntheopinionoftheDirectors,therewerenosignificantchangesinthestateofaffairsoftheGroupthatoccurredduringthehalfyearnototherwisedisclosedinthisreportandtheinterimfinancialstatements.
AUDITOR’SINDEPENDENCEDECLARATION
Section307CoftheCorporationsAct2001requiresourauditors,BDOAudit(WA)PtyLtd,toprovidethedirectorsofthe Company with an Independence Declaration in relation to the review of the interim financial report. ThisIndependenceDeclaration is set out on page 5 and forms part of this directors’ report for the half-year ended 31December2019.
ThisreportissignedinaccordancewitharesolutionoftheBoardofDirectorsmadepursuanttosection306(3)oftheCorporationsAct2001.
PeterMaloneExecutiveChairman
DatedatPerth,WesternAustraliathis28February2020.
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Auditor’s Independence Declaration
BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050 110 275,an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited by guarantee, andform part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation other than forthe acts or omissions of financial services licensees
Tel: +61 8 6382 4600Fax: +61 8 6382 4601www.bdo.com.au
38 Station StreetSubiaco, WA 6008PO Box 700 West Perth WA 6872Australia
DECLARATION OF INDEPENDENCE BY WAYNE BASFORD TO THE DIRECTORS OF SKIN ELEMENTSLIMITED
As lead auditor for the review of Skin Elements Limited for the half-year ended 31 December 2018, Ideclare that, to the best of my knowledge and belief, there have been:
1. No contraventions of the auditor independence requirements of the Corporations Act 2001 inrelation to the review; and
2. No contraventions of any applicable code of professional conduct in relation to the review.
This declaration is in respect of Skin Elements Limited and the entities it controlled during the period.
Wayne Basford
Director
BDO Audit (WA) Pty Ltd
Perth, 28 February 2018
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Half-Year Ended 31 December 2019
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SKINELEMENTSLIMITEDHALF-YEARENDED31DECEMBER2019
CONSOLIDATEDSTATEMENTOFPROFITORLOSSANDOTHERCOMPREHENSIVEINCOME
Periodended31Dec2019
$
Periodended31Dec2018
$Notes $ $
RevenueSaleofsuncare&skincareproducts 84,831 263,671Costofsales (67,107) (125,333)Grossprofit 17,724 138,338
Otherincome 294,162 247,222
ExpensesAdministrationexpenses 2 (542,094) (699,025)Consultantsfees 2 (174,408) (366,848)Occupancyexpenses (55,221) (61,280)Research&developmentexpenses (362,533) (414,642)Advertising&marketingexpenses (90,732) (124,857)Amortisation 9 (195,428) (150,989)TotalExpenditure (1,108,530) (1,817,641)
Profit/(loss)beforeincometaxexpense (1,108,530) (1,432,081)Incometaxexpense - -Profit/(Loss)afterincometaxfromcontinuingoperationsattributabletoequityholdersofSkinElementsLimited (1,108,530) (1,432,081)
Othercomprehensiveincome
TotalcomprehensivelossattributabletoequityholdersofSkinElementsLimited 16 (1,108,530) (1,432,081)
Basiclosspershare 17 (0.007) (0.011)Dilutedlosspershare N/A N/A
The above Consolidated Statement of Profit or Loss andOther Comprehensive Income should be read in conjunctionwith theaccompanyingnotes.
Consolidated Statement of Profit or Loss and Other Comprehensive Income
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SKINELEMENTSLIMITEDHALF-YEARENDED31DECEMBER2019
CONSOLIDATEDSTATEMENTOFFINANCIALPOSITION
Asat31Dec2019
Asat30June2019
Notes $ $
CurrentAssetsCashandcashequivalents 3 36,679 116,238Tradereceivables 4 4,537 16,152Otherreceivables 5 41,036 9,536Researchanddevelopmentreceivable 6 253,767 649,452Prepayments 7 31,001 97,137Inventories 8 88,005 17,721TotalCurrentAssets 455,025 906,236
NonCurrentAssetsIntangibleassets 9 8,799,721 8,995,117TotalNonCurrentAssets 8,799,721 8,995,117
TotalAssets 9,254,746 9,901,353
CurrentLiabilitiesTradepayables 10 158,546 184,880Otherpayables 11 163,280 321,328Borrowings 12 - 200,000TotalCurrentLiabilities 321,826 706,208
Non-CurrentLiabilitiesOtherpayables 13 439,190 -TotalNon-CurrentLiabilities 439,190 -TotalLiabilities 761,016 706,208
NetAssets 8,493.730 9,195,145
ShareholdersEquityIssuedCapital 14 16,126,009 15,286,784Reserves 15 330,426 804,743Accumulatedlosses 16 (7,962,705) (6,896,382)
TotalShareholdersEquity 8,493,730 9,195,145
TheaboveConsolidatedStatementofFinancialPositionshouldbereadinconjunctionwiththeaccompanyingnotes.
Consolidated Statement of Financial Position
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SKINELEMENTSLIMITEDHALF-YEARENDED31DECEMBER2019
CONSOLIDATEDSTATEMENTOFCHANGESINEQUITY
PeriodEnded31December2019
Issuedcapital
Accumulatedlosses
Sharebasedpaymentsreserves
ConvertingNotereserve
TotalEquity
$ $ $ $Balanceat1July2019 15,286,784 (6,896,381) 312,338 492,405 9,195,146
Lossforthehalf-year - (1,108,530) - - (1,108,530)Adjustmenttofairvalueofconvertiblenote - 42,206 - (42,206) -Othercomprehensiveincome - - - - -Totalcomprehensiveincomeforthehalf-year - (1,066,324) - (42,206) (1,108,454)
TransactionswithownersintheircapacityasownersIssueofsharecapital 113,675 - - - 113,675Sharebasedpayments 75,351 - 18,088 - 93,439Convertingnoteconversion 650,199 - - (450,199) 200,000
839,225 - 18,088 (450,199) 407,114Balanceat31December2019 16,126,009 (7,962,705) 330,426 - 8,493,730
PeriodEnded31December2018
Issuedcapital
Accumulatedlosses
Sharebasedpaymentsreserves
ConvertingNotereserve
TotalEquity
Balanceat1July2018 13,679,321 (4,928,620) 215,505 522,835 9,489,041
Lossforthehalf-year - (1,432,181) - - (1,432,181)Othercomprehensiveincome - - - - -Totalcomprehensiveincomeforthehalf-year - (1,432,181) - - (1,432,181)TransactionswithownersintheircapacityasownersIssueofsharecapital 1,309,867 - - 1,309,867Sharebasedpayments 38,194 - 48,417 - 86,611Convertingnoteconversion - - - (38,249) (38,249)
1,348,061 - 48,417 (38,249) 1,358,229
Balanceat31December2018 15,027,382 (6,360,801) 263,922 484,586 9,415,089
TheaboveConsolidatedStatementofChangesinEquityshouldbereadinconjunctionwiththeaccompanyingnotes.
Consolidated Statement of Changes in Equity
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SKINELEMENTSLIMITEDHALF-YEARENDED31DECEMBER2019
CONSOLIDATEDSTATEMENTOFCASHFLOWS
PeriodEnded31Dec2019
PeriodEnded31Dec2018
Notes $ $
CashflowsfromoperatingactivitiesReceiptsfromcustomers 149,388 251,495
Paymentstosuppliersandemployees (1,069,333) (1,997,119)
Interestpaid (14,289) (2,765)Interestreceived 888 -ReceiptofResearchanddevelopmenttaxincentive 688,959 490,630
Netcashinflow/(outflow)fromoperatingactivities (244,387) (1,257,759)
CashflowsfrominvestingactivitiesPaymentsforbusinesses - -
Netcashinflow/(outflow)frominvestingactivities - -
CashflowfromfinancingactivitiesProceedsfromtheissueofequity 364,833 1,261,582Paymentforshareissuecosts - (129,596)Repaymentofborrowings (200,000) -
Netcashinflow/(outflow)fromfinancingactivities 164,833 1,131,986
Cashandcashequivalentsatthebeginningofthefinancialperiod 116,233 195,661Netincrease/(decrease)incashandcashequivalents (79,554) (125,773)
Cashandcashequivalentsattheendofthefinancialperiod 3 36,679 69,888
Thisconsolidatedstatementofcashflowsshouldbereadinconjunctionwiththenotestothisinterimfinancialreport
Consolidated Statement of Cashflows
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Half-Year Ended 31 December 2019Condensed Notes to the Consolidated Interim Financial Report
SKINELEMENTSLIMITEDHALF-YEARENDED31DECEMBER2019
CONDENSEDNOTESTOTHECONSOLIDATEDINTERIMFINANCIALREPORT
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1. SUMMARYOFSIGNIFICANTACCOUNTINGPOLICIES
ThehalfyearlyreportofSkinElementsLimited(theCompany,GrouporSkinElements)forthehalf-yearended31December2019wasauthorisedforissueinaccordancewitharesolutionofdirectorson28February2020.
TheCompany isapublic company limitedby shares incorporatedanddomiciled inAustraliawhosesecuritiesare tradedon theAustralianSecuritiesExchange.
ThenatureoftheoperationsandprincipalactivitiesoftheCompanyaredescribedinthedirector’sreportabove.
(a) Basisofpreparation
Theprincipleaccountingpoliciesadoptedforthepreparationofinterimfinancialreportaresetoutbelow.Theseaccountingpolicieshavebeenappliedconsistentlytoallperiodspresentedunlessotherwisestated.
(i) Statementofcompliance
This interim financial report for thehalf-year reportingperiodended31December2019hasbeenprepared inaccordancewithaccounting standardAASB 134 Interim Financial Reporting and theCorporations Act 2001. CompliancewithAASB 134 ensurescompliancewithInternationalFinancialReportingStandardIAS34‘InterimFinancialReporting’.
Thisinterimfinancialreportdoesnotincludefulldisclosuresofthetypenormallyincludedinanannualfinancialreport.Therefore,it cannotbeexpected toprovideas full anunderstandingof the financialperformance, financialpositionand cash flowsof theCompanyasinthefullfinancialreport.
ItisrecommendedthatthisinterimfinancialreportbereadinconjunctionwiththeanypublicannouncementsmadebySkinElementsLimiteduptothedateofthisreportinaccordancewiththecontinuousdisclosurerequirementsarisingundertheCorporationsAct2001andtheASXListingRules.
(ii) Basisofmeasurementandreportingconvention
Thisinterimfinancialreporthasbeenpreparedonanaccrualsbasisandarebasedonhistoricalcost.TheinterimfinancialreportispresentedinAustraliandollarsandallvaluesareroundedtothenearestdollarunlessotherwisestated.
The accounting policies adopted are consistent with the accounting policies adopted in the Company’s last annual financialstatementsforyearended30June2019unlessotherwisestated.
(b) GoingConcern
Forthehalf-yearended31December2019theGrouprecordedalossof$1,108,530(31December2018:$1,432,081loss),anetworkingcapitalsurplusof$133,199(30June2019:surplusof$200,028)andhadnetcashoutflowsfromoperatingactivitiesof$244,387(31December2018:$1,257,759).TheabilityoftheGrouptocontinueasagoingconcernisdependentonsecuringadditionalfundingthroughissueofdebtorequity,increasingrevenuesfromsaleoftheGroup’sproductsandgovernmentR&Dtaxrebatestocontinuetofunditsoperationalandmarketingactivities.
Theseconditionsindicateamaterialuncertaintythatmaycastasignificantdoubtabouttheentity’sabilitytocontinueasagoingconcernand,therefore,thatitmaybeunabletorealiseitsassetsanddischargeitsliabilitiesinthenormalcourseofbusiness.
Managementbelievetherearesufficientfundstomeettheentity’sworkingcapitalrequirementsandasatthedateofthisreport.Subsequenttoyearendtheentityexpectstoreceiveadditionalfundsbytheplacementofequity.
Thefinancialstatementshavebeenpreparedonthebasisthattheentityisagoingconcern,whichcontemplatesthecontinuityofnormalbusinessactivity,realisationofassetsandsettlementofliabilitiesinthenormalcourseofbusinessforthefollowingreasons:
• Positivecashflowsfromsecuringmajordistributionagreements;• Fundingtosupportworkingcapitalrequirement;• WillbeabletoraiseadditionalequitytocontributetotheGroup’sworkingcapitalpositioninthenearterm;• Thegroupexpectstocontinuetoreceivethefullsupportofitscreditors;• Non-callofamountspayabletorelatedparties;and• Abilitytoraiseadditionalfinancefromdebtorequityifandwhenrequired.
Shouldtheentitynotbeabletocontinueasagoingconcern,itmayberequiredtorealiseitsassetsanddischargeitsliabilitiesotherthanintheordinarycourseofbusiness,andatamountsthatdifferfromthosestatedinthefinancialstatementsandthatthe
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Half-Year Ended 31 December 2019Condensed Notes to the Consolidated Interim Financial Report
SKINELEMENTSLIMITEDHALF-YEARENDED31DECEMBER2019
CONDENSEDNOTESTOTHECONSOLIDATEDINTERIMFINANCIALREPORT
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financialreportdoesnotincludeanyadjustmentsrelatingtotherecoverabilityandclassificationofrecordedassetamountsorliabilitiesthatmightbenecessaryshouldtheentitynotcontinueasagoingconcern.
(c) Principlesofconsolidation
Subsidiaries
Subsidiariesareallentities(includingstructuredentities)overwhichthegrouphascontrol.Thegroupcontrolsanentitywhenthegroupisexposedto,orhasrightsto,variablereturnsfromitsinvolvementwiththeentityandhastheabilitytoaffectthosereturnsthroughitspowertodirecttheactivitiesoftheentity.Subsidiariesarefullyconsolidatedfromthedateonwhichcontrolistransferredtothegroup.Theyaredeconsolidatedfromthedatethatcontrolceases.
Intercompany transactions, balances andunrealisedgainson transactionsbetweengroup companies areeliminated.Unrealisedlossesarealsoeliminatedunlessthetransactionprovidesevidenceofanimpairmentofthetransferredasset.Accountingpoliciesofsubsidiarieshavebeenchangedwherenecessarytoensureconsistencywiththepoliciesadoptedbythegroup.
(d) Estimatesandjudgements
Thepreparationoftheinterimfinancialreportrequirestheuseofaccountingestimatesandjudgementswhich,bydefinition,willseldomequaltheactualresults.Thisnoteprovidesanoverviewoftheareasthatinvolveadegreeofjudgementorcomplexityinpreparingtheinterimfinancialreport.Factsandcircumstancesmaycometolightaftertheeventwhichmayhavesignificantlyvariedtheassessmentusedwhichresultinamateriallydifferentvaluebeingrecordedatthetimeofpreparingtheseinterimfinancialreport.
(i) Impairmentofassets
TheCompanyassessestheimpairmentofassetsateachreportingdatebyevaluatingconditionsspecifictotheassetthatmayleadtoimpairment.Theassessmentofimpairmentisbasedonthebestestimateoffuturecashflowsavailableatthetimeofpreparingthereport.However,factsandcircumstancesmaycometolightinlaterperiodswhichmaychangethisassessmentifthesefactshadbeknownatthetime.
Duetosustainedoperatinglossesofthegroup,theGrouphasundertakenanimpairmentassessmentofitsIntangibleassetsinaccordancewithAASB136Impairmentofassets.TherecoverableamountofIntangibleassetsisdeterminedfromavalueinusemodel.Thekeyassumptionsforthevalueinusecalculationsarethoseregardingthefutureforecastcashflowswhichtakes into account discount rates, growth rates and direct costs during the period. As a result of the assessment noimpairmentlosswasrecognisedfortheperiod.
(ii) Deferredtaxes
DeferredtaxassetshavenotbeenbroughttoaccountasitisnotconsideredprobablethattheCompanywillmaketaxableprofitsoverthenext12months.TheCompanywillmakeafurtherassessmentatthenextreportingperiod.
(iii) Amortisationrates
TheCompanyhasassessedtheeffectivelifeofitsSoleoOrganicsandMcArthurintangibleassetstakingintoaccountsectorpractices, the expected product life cycle and its own internal knowledge of the sunscreen and skincare markets todetermineanappropriateamortizationrate.ThisrateisanestimateofwhattheCompanyanticipatestheintangiblewillbeabletogeneratefuturebenefitsfromtheproductionandsalesoftheproductandthismaydifferfromthefutureresults.Thedirectorswillcontinuetoassesstheeffectivelifeateachdate.
(iv) ShareBasedPayments
The Company has assessed the fair value of options using a Black ScholesOption Pricingmodel and the fair value ofperformancerightsusingaMonteCarlosimulationmodel.ThesemodelsincludeanumberofestimatedinputsincludingtheCompany’svolatility,theriskfree-rateandanestimatedsharepriceoftheCompany’ssharesinthefuture.TheseinputswereconsideredbeareasonablebasisavailableinformationatthetimethevaluationswereundertakenbuttheoutcomemaybemateriallydifferentiftheCompanyhadusedotherinputs.
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Half-Year Ended 31 December 2019Condensed Notes to the Consolidated Interim Financial Report
SKINELEMENTSLIMITEDHALF-YEARENDED31DECEMBER2019
CONDENSEDNOTESTOTHECONSOLIDATEDINTERIMFINANCIALREPORT
12
(e) SegmentInformation
OperatingSegments–AASB8requiresamanagementapproachunderwhichsegmentinformationispresentedonthesamebasisasthatusedforinternalreportingpurposes.Thisisconsistenttotheapproachusedforthecomparativeperiod.Operatingsegmentsarereportedinauniformmannertowhichisinternallyprovidedtothechiefoperatingdecisionmaker.ThechiefoperatingdecisionmakerhasbeenidentifiedastheBoardofDirectors.
Anoperating segment is a componentof the group that engages inbusiness activity fromwhich itmayearn revenuesor incurexpenditure,includingthosethatrelatetotransactionswithothergroupcomponents.Eachoperatingsegment’sresultsarereviewedregularlybytheBoardtomakedecisionsaboutresourcestobeallocatedtothesegmentsandassessitsperformance,andforwhichdiscretefinancialinformationisavailable.
TheBoardmonitorstheoperationsoftheCompanybasedontwosegments,operationalandcorporate.Thefinancialresultsofeachsegmentsarereportedtotheboardtoassess theperformanceof theGroup. TheBoardhasdeterminedthatstrategicdecisionmakingisfacilitatedbyevaluationoftheoperationsofthelegalparentandsubsidiarywhichrepresenttheoperationalperformanceof the group’s revenues and the research and development activities aswell as the finance, treasury, compliance and fundingelementsoftheGroup.
(f) Impactofadoptionofnewaccountingstandards
ThenoteexplainstheimpactoftheadoptionofAASB16Leaseswheretheyaredifferenttothoseappliedinpriorperiods..
ImpactonthefinancialstatementsAASB16LeaseseliminatestheoperatingandfinanceleaseclassificationsforleasescurrentlyaccountedforunderAASB117Leases.ItinsteadrequiredanentitytobringmostleasesontoitsStatementofFinancialPositioninasimilarwaytohowexistingfinanceleasesaretreatedunderAASB117.AnentitywillberequiredtorecognisealeaseliabilityandarightofuseassetinitsStatementofFinancialPositionformostleases.Asat1July2019and31December2019,theCompanyhasidentifiedonecontactthatwouldbeclassifiedasleasesunderthenewstandardbeingtheleaseofitsofficepremises.Duetotheshorttermandlowvalueofthislease,theCompanyhasappliedtheexemptionandelectedtorecognisetheleasepaymentsinprofitandlossonastraightlinebasisinsteadofapplyingtherecognitionandmeasurementrequirementsinAASB16.Asaresult,theadoptionofthestandardhasnomaterialimpactonthehalf-yearfinancialreport.
(g) Newaccountingstandardsandinterpretationsthatarenotyetmandatory
Anynew,revisedoramendingAccountingStandardsorInterpretationsthatarenotyetmandatoryhavenotbeenearlyadopted.
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Half-Year Ended 31 December 2019Condensed Notes to the Consolidated Interim Financial Report
SKINELEMENTSLIMITEDHALF-YEARENDED31DECEMBER2019
CONDENSEDNOTESTOTHECONSOLIDATEDINTERIMFINANCIALREPORT
13
Periodended31Dec2019
Periodended31Dec2018
$ $
PROFITORLOSSITEMS
2 LOSSFORTHEHALFYEARLossforthehalfyearincludedthefollowingitems:
(a)Administrationexpenses
Accountingexpenses 145,617 41,561Auditexpenses 34,985 38,181Legalexpenses 51,492 44,707Wages,super&leave 122,939 168,021Directorsfees 20,000 49,751Travelexpenses 15,851 66,242Otherexpenses 151,210 290,562
542,094 699,025
b)Consultingfees
Relatedpartyconsultingfees(i) 173,085 208,672
Externalconsultingfees 1,323 158,176174,408 366,848
(i)TheCompanyengagestheexecutivesunderconsultingagreementstoprovidetheirservices.Adescriptionoftheservicesandtheamountspaidorpayablearelistedinnote19.
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Half-Year Ended 31 December 2019Condensed Notes to the Consolidated Interim Financial ReportSKINELEMENTSLIMITED
HALF-YEARENDED31DECEMBER2019CONDENSEDNOTESTOTHECONSOLIDATEDINTERIMFINANCIALREPORT
14
Asat31Dec2018
Asat30June2019
3 CASH $ $
Cashatbank 36,679 116,238
Non-cashfinancingandinvestingactivities(i)IssueofSharestoconsultants
TheCompanyissuedatotalof2,898,115sharestoconsultantsforservicesrenderedduringtheperiod.Thetotalvalueattributedtotheshareswas$75,351(refernote14).
Asat31Dec2019
Asat30June2019
4 TRADERECEIVABLES $ $
Tradereceivables 4,537 16,1524,537 16,152
(i)Classificationoftradeandotherreceivables
Tradereceivablesareamountsduefromcustomersforsaleofgoods intheordinarycourseofbusiness.Thetradereceivablesaregenerallydueforsettlementwithin30daysandthereforeareclassifiedascurrent.Thegroupdoesnotcurrentlyhaveanyprovisionfordoubtfuldebtsinrespecttotheirreceivablesasat31December2019(30June2019:Nil).Duetotheshorttermnatureofthecurrentreceivables,theircarryingamountsapproximatetheirfairvalue.
(ii)Receivablesandimpairment
Thetradedebtorsbalancedoesnotcurrentlyhaveanyamountsthatarepastduebutnotimpaired.
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Half-Year Ended 31 December 2019Condensed Notes to the Consolidated Interim Financial ReportSKINELEMENTSLIMITED
HALF-YEARENDED31DECEMBER2019CONDENSEDNOTESTOTHECONSOLIDATEDINTERIMFINANCIALREPORT
15
Asat31Dec2019
Asat30June2019
$ $
5 OTHERRECEIVABLES
GSTreceivable(net) 40,659 9,159ABNWithholding 377 378
41,036 9,537
Asat31Dec2019
Asat30June2019
$ $6 RESEARCHANDDEVELOPMENTTAXINCENTIVE
Researchanddevelopmentreceivable 253,767 649,452253,767 649,452
TheGroupcontinueditsdevelopmentprogramduringthehalfyearended31December2019. Thisprogramwillresultinaclaimforresearchanddevelopmenttaxincentivewhichwillsubsequentlybereceivedaftertheyearend.TheGroupwillcontinuetodevelopitsallnaturalskincaretechnologyduringthenextyearandassesstheavailabilityofapplicablegovernmentassistance.
Asat31Dec2019
Asat30June2019
$ $7 PREPAYMENTS
Rawmaterials 31,001 97,13631,001 97,136
8 INVENTORY
Packaging 70,715 -Finishedgoods 17,290 17,721
88,005 17,721
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Half-Year Ended 31 December 2019Condensed Notes to the Consolidated Interim Financial Report
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CONDENSEDNOTESTOTHECONSOLIDATEDINTERIMFINANCIALREPORT
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Asat31Dec2019
Asat30June2019
$ $9 INTANGIBLEASSETS
SoléoOrganics–formula&technology 5,920,558 6,052,125McArthur–formula&technology 788,859 806,503Websitedevelopmentcosts 8,906 10,807ElizabethJaneNaturalCosmetics–formula&technology 2,081,398 2,125,683
8,799,723 8,995,117
MovementsinSoléoOrganics–formula&technologyOpeningbalance 6,052,125 6,315,263Less:Amortisation (131,567) (263,136)Closingbalance 5,920,558 6,052,125
MovementsinMcArthur–formula&technologyOpeningbalance 806,503 835,642Developmentcostadditions - 6,148Less:Amortisation (17,644) (35,041)Closingbalance 788,859 806,503
MovementsinWebsitedevelopmentcostsOpeningbalance 10,807 14,607Less:Amortisation (1,901) (3,800)Closingbalance 8,906 10,807
MovementsinElizabethJaneNaturalCosmetics–formula&technologyOpeningbalance 2,125,683 2,214,253Less:Amortisation (44,285) (88,570)Closingbalance 2,081,398 2,125,683
Thecompanyassesstheimpairmentofassetsateachreportingdateasdisclosedinnote1(d)(i).
Asat31Dec2019
Asat30June2019
$ $10 TRADEPAYABLES
Tradecreditors 158,546 184,880158,546 184,880
(a) FairvalueoftradepayablesTradepayablesareunsecuredandareusuallypaidwithin60daysofrecognition.Thecarryingamountoftradeandotherpayablesareassumedtobethesameastheirfairvalues,duetotheirshorttermnature.
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Half-Year Ended 31 December 2019Condensed Notes to the Consolidated Interim Financial Report
SKINELEMENTSLIMITEDHALF-YEARENDED31DECEMBER2019
CONDENSEDNOTESTOTHECONSOLIDATEDINTERIMFINANCIALREPORT
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Asat31Dec2019
Asat30June2019
11 OTHERPAYABLES $ $
CustomerPrepaymentsonOrders 86,486 1,087PayrollPayables 68,100 54,049OtherPayables 8,694 266,192
163,280 321,328
Customerprepaymentsonordersaredepositsreceivedfromcustomerswhichwillberecordedassalesrevenueupondelivery.
Asat31Dec2019
Asat30June2019
12 BORROWINGS $ $
ConvertibleNotes - 200,000- 200,000
SkinElementssettledthe$200,000convertiblenoteundertheTernSheetthroughtheissueoftheconvertiblenotetothirdpartiesonsimilarterms.
Asat31Dec2019
Asat30June2019
13 OTHERPAYABLES–NON-CURRENT $ $
Thirdparties 142,161Relatedparties* 297,029 -Total 439,190 -
*RelatedrartypayablesarisefromfundsloanedtotheGrouporfromunpaidconsultingservicesfromtheRelatedPartiestotheGroup.Theamountsoutstandingarenotatcallandmaybepaidfromfuturecashflowsorbytheissueofequitysubjecttoshareholderapprovals.Seenote19.
14 ISSUEDCAPITAL Asat Asat Asat Asat
31Dec19 30Jun19 31Dec19 30Jun19
(i)ShareCapital SharesNo. ShareNo. $ $
OrdinaryShares 180,863,281 158,404,002 16,126,009 15,286,784
(ii)Movementinsharecapital
Date Details Numberofshares $
01-Jul-19 Openingbalance 158,404,002 15.286,784
31-July-19 Issueofsharesplacement 4,059,838 113,675
31-Dec-19 Issueofsharesconsultants 761,538 19,800
31-Dec-19 Issueofsharesconsultants 2,136,577 55,551
31-Dec-19 Issueofsharesconvertiblenote 3,001,326 450,199
31-Dec-19 Issueofsharesconvertiblenote 12,500,000 200,000
ISSUED CAPITAL
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Half-Year Ended 31 December 2019Condensed Notes to the Consolidated Interim Financial ReportSKINELEMENTSLIMITED
HALF-YEARENDED31DECEMBER2019CONDENSEDNOTESTOTHECONSOLIDATEDINTERIMFINANCIALREPORT
18
31-Dec-19 Closingbalance 180,863,281 16,126,009
Asat Asat31Dec19 30Jun19
$ $
15 RESERVESOptionreserve 116,816 116,816Sharebasedpaymentreserve 213,610 195,522ConvertingNoteReserve - 492,405
330,426 804,743
(i)OptionsAsat Asat Asat Asat
31Dec19 30Jun19 31Dec19 30Jun19
OptionsNo. OptionsNo. $ $
Options(expired) - - 116,816 116,816
(ii)ShareBasedPayments Asat Asat Asat Asat31Dec19 30Jun19 31Dec19 30Jun19
No. No. $ $
PerformanceRights 49,200,000 2,200,000 213,535 98,689
Movementsinsharebasedpaymentsreserve
Date DetailsNumberof
$PerformanceRights
01/07/2019 Openingbalance 2,200,000 195,522
31/12/2019 Expenserecognisedfortheperiodforrightsissuedinpriorperiod - 13,736
29/11/2019 PerformancerightsissuedtoMrPeterMalone 27,000,000 2,500
29/11/2019 PerformancerightsissuedtoPalmerWilsonAssociatesLtd 20,000,000 1,852
49,200,000 213,610
On29November2019,theCompanyobtainedshareholderapprovaltoissue27,000,000performancerightstoMrPeterMalone–ExecutiveChairmanand20,000,000performancerightstoPalmerWilsonAssociatesLtdaUKbasedspecialistbusinessdevelopmentconsultancy.Theseperformancerightswillconvertintosharesuponperformancemilestonesofsalesrevenueof$20,000,000beingachievedoverafouryearperiodto31December2023.Thefairvalueperrightis$0.0108whichisthesharepriceatgrantdate29November2019..Therightsaresubjecttoperformanceconditionsandareexpensedoverthevestingperiodwhichisupto49monthsfromthedateofissue.Therelevantexpenserecognisedfortheperiodwas$4,352.
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Half-Year Ended 31 December 2019Condensed Notes to the Consolidated Interim Financial Report
SKINELEMENTSLIMITEDHALF-YEARENDED31DECEMBER2019
CONDENSEDNOTESTOTHECONSOLIDATEDINTERIMFINANCIALREPORT
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(iii)ConvertiblenoteAsat Asat
31Dec19 30Jun19$ $
ConvertibleNote - 492,405
- 492,405
Movementsinconvertiblenotes
Date DetailsNumberof
$Notes
01/07/2019 Openingbalance 378,842 492,405
31/12/2019 Fairvalueadjustment - (42,206)
31/12/2019 Convertiblenotesconvertedtoshares (378,842) (450,199)
- -
Asat Asat31Dec19 30Jun19
$ $
16 AccumulatedLosses
Openingbalance (6,896,381) (4,928,620)FairValueadjustmentonConvertiblenote 42,206 -Lossfortheperiod/year (1,108,530) (1,967,761)
Closingbalance (7,962,705) (6,896,381)
31Dec2019 31Dec2018$ $
17 EARNINGSPERSHARE
Lossattributabletoordinaryshareholders (1,108,530) (1,432,081)
Weightedaveragenumberofordinaryshares(i)
Balancebeforetransaction 158,404,002 86,053,001Effectofsharesissuedforrightsissue - 33,906,768Effectofsharesissuedfortheplacement 3,375,844 6,673,995Effectofsharesissuedfortheconsultants 15,748 43,099Effectofsharesissuedforconvertiblenote 84,247 -
161,879,841 127,07,863
Basiclosspersharecalculation(6mthsloss/weightedaveshares) (0.007) (0.011)
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Half-Year Ended 31 December 2019Condensed Notes to the Consolidated Interim Financial Report
SKINELEMENTSLIMITEDHALF-YEARENDED31DECEMBER2019
CONDENSEDNOTESTOTHECONSOLIDATEDINTERIMFINANCIALREPORT
20
18 SEGMENTREPORTING
OperationsCorporate&
Administration Company
HalfYearended31December2019SegmentRevenue 84,831 - 84,831
SignificantitemsConsultantsfees (71,100) (103,307) (174,407)Employmentcosts (122,939) - (122,939)Amortisation (195,642) - (195,642)Otherexpenses (464,447) (217,913) (682,360)Sharebasedpayments - (18,013) (18,013)Segmentnetoperatinglossaftertax (769,297) (339,233) (1,108,530)
HalfYearended31December2018SegmentRevenue 263,571 - 263,571
SignificantitemsConsultantsfees (91,978) (274,869) (366,847)Employmentcosts (119,605) (49,751) (169,356)Amortisation (150,989) - (150,989)Otherexpenses (450,937) (245,635) (696,572)Sharebasedpayments - (48,417) (48,417)Segmentnetoperatinglossaftertax (813,509) (618,672) (1,432,081)
SegmentassetsAt31December2019 9,233,063 21,683 9,254,746At30June2019 9,766,820 134,533 9,901,353SegmentliabilitiesAt31December2019 (358,523) (402,492) (761,016)At30June2019 (207,322) (498,886) (706,208)
19 RELATEDPARTYTRANSACTIONS
The Groupmay enter into agreements for services renderedwith individuals (or an entity that is associatedwith theindividuals)duringtheordinarycourseofbusiness.
Anumberofentitiesassociatedwiththedirectorsandselecttechnicalstaffhaveconsultingagreementsinplacewhichhaveresulted in transactions between the Group and those entities during the period. The terms and conditions of thosetransactionswerenomore favourable thanthoseavailable,orwhichmightreasonablybeexpectedtobeavailable,onsimilartransactionstounrelatedentitiesonanarm’slengthbasis.
TransactionValue OutstandingBalance31Dec2019 31Dec2018 31Dec2019 31Dec2018
$ $ $ $Director TransactionPeterMalone Executiveservices(i) 120,000 120,000 86,866 40,570PhilGiglia Directorsfees(ii) 14,000 30,000 41,800 27,500CraigPiercy ExecutiveDirector(iii) 13,000 - 13,000 -
LukeMartino Corporateadvisoryservices(ii) 16,932 22,141 - 306Directorsfees(iii) 6,000 30,000 53,675 50,375
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Half-Year Ended 31 December 2019Condensed Notes to the Consolidated Interim Financial Report
SKINELEMENTSLIMITEDHALF-YEARENDED31DECEMBER2019
CONDENSEDNOTESTOTHECONSOLIDATEDINTERIMFINANCIALREPORT
21
(i) AcompanyassociatedwithMrMalone,BostonCorporatePtyLtd,providesconsultingservicesinconnectionwiththeoperationsoftheCompany.
(ii) AcompanyofwhichMrGigliaisadirector,ColosseumSecuritiesPtyLtd,provideddirectorsservicesduringthehalfyear
(iii) MrCraigPiercywasappointedaDirectoron29November2019.ACompanyofwhichMrPiercyisaDirector,BostonTechnologyManagementPtyLtd,providesconsultingservicesinconnectionwiththeoperationsoftheCompany.
(iv) MrLukeMartinoresignedasDirectoron10October2019.AcompanyofwhichMrMartinoisadirector,IndianOceanAdvisoryGroup,providedprofessionalaccountingandIPOcorporateadvisoryservicesduringperiod.
(iii) AcompanyofwhichMrMartinoisadirector,LJMCorporateCapitalPtyLtd,provideddirectorsservicesduringthehalfyearupuntohisresignationon10October2019.
TransactionValue OutstandingBalance31Dec2019 31Dec2018 31Dec2019 31Dec2018
Technicalpersonnel Transaction $ $ $ $CraigPiercy Consultancyservices(v) 65,000 78,000 51,958 20,355
Officefacilities - - - -LeoFung Consultancyservices(vi) 78,000 78,000 103,405 37,944
(v)AcompanyofwhichMrPiercyisaDirector,BostonCorporatePtyLtd,providesconsultingservicesinconnectionwiththeoperationsoftheCompany.(vi)Acompany,BlackridgeGroupPtyLtd,providesconsultingservicesofMrFunginconnectionwiththeoperationsoftheCompany.
Convertiblenotes1) DuringprioryearstheCompanyextinguishedborrowingsbywayofissuingconvertiblenotes.Theconvertiblenotes
weremandatorilyconvertibleintosharesatafixedpriceof$0.015pershare.Uponconversion,eachnoteholderwillalsoreceiveafreeattaching$0.22optionforeachshareissued.Duringtheperiodallthenoteswereconvertedresultingtotalnumberof1,927,677shareswereissuedtorelatedparties.
2) DuringprioryearthecompanyenteredintoaconvertiblenotearrangementwithHenanHetuoHealthManagementCo,Ltd(HHHM).Thecompanysettledthe$200,000convertiblenoteundertheTernSheetthroughtheissueoftheconvertiblenotetothirdpartiesonsimilarterms.
19 CONTINGENTLIABILITIES
Thedirectorsarenotawareofanycontingentliabilitiesasat31December2019(30June2019:none).
20 SUBSEQUENTEVENTS
InFebruary2020theCompanycommenceda fullyunderwrittennonrenounceablepro-rataentitlement issueof100,479,601ordinary fullypaidshares (ona ratioof5newshares for9existingsharesat the recorddateof11February2020)and33,493,200freeattachingunlistedoptionsexercisableat$0.03onorbefore31December2020(onaratioof1optionforevery3newshares).Theoffercloseson10March2020
Therehavebeennoothersignificanteventsaftertheendofthereportingperiodtothedateofthisreport.
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Directors’ Declaration
22
DIR E C TOR S ’ D E C L A RA T I ON
IntheopinionofthedirectorsofSkinElementsLimited:
(a) theconsolidatedfinancialstatementsandnotessetoutonpages6to21areinaccordancewiththeCorporationsAct2001,including:
(i) giving a true and fair view of the consolidated entity’s financial position as at 31 December 2019 and of itsperformanceforthehalf-yearendedonthatdate;and
(ii) complyingwithAccountingStandardsAASB134InterimFinancialReporting,theCorporationsRegulations2001andothermandatoryprofessionalreportingrequirements;and
(b) therearereasonablegroundstobelievethattheCompanywillbeabletopayitsdebtsasandwhentheybecomedueandpayable.
Signedinaccordancewitharesolutionofthedirectors.
PeterMaloneExecutiveChairman
DatedatPerth,WesternAustraliathis28thdayofFebruary2020.
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Independent Auditor’s Review Report
BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation.
38 Station Street Subiaco, WA 6008 PO Box 700 West Perth WA 6872 Australia
Tel: +61 8 6382 4600 Fax: +61 8 6382 4601 www.bdo.com.au
INDEPENDENT AUDITOR’S REVIEW REPORT
To the members of Skin Elements Limited
Report on the Half-Year Financial Report
Qualified conclusion
We have reviewed the half-year financial report of Skin Elements Limited (the Company) and itssubsidiaries (the Group), which comprises the consolidated statement of financial position as at 31December 2019, the consolidated statement of profit or loss and other comprehensive income, theconsolidated statement of changes in equity and the consolidated statement of cash flows for the half-year then ended, and notes comprising a statement of accounting policies and other explanatoryinformation, and the directors’ declaration.
Based on our review, which is not an audit, with the exception of the matter described in the Basis forqualified conclusion section, we have not become aware of any matter that makes us believe that thehalf-year financial report of the Group is not in accordance with the Corporations Act 2001 including:
(i) Giving a true and fair view of the Group’s financial position as at 31 December 2019 and of itsfinancial performance for the half-year ended on that date; and
(ii) Complying with Accounting Standard AASB 134 Interim Financial Reporting and the CorporationsRegulations 2001.
Basis for qualified conclusion
Included in the consolidated statement of financial position as at 31 December 2019 is technology andformula Intangible assets of $8,799,721 as disclosed in note 9 and note 1(d)(i). Due to sustainedoperating losses, the Group has undertaken an impairment assessment of its Intangible in accordancewith AASB 136 Impairment of assets.
Due to the significant variability of the future cash flows of the asset, we were unable to satisfyourselves as to the appropriateness and reliability of the forecast of future cash flows that wasincluded in the impairment model. Therefore we were unable to obtain sufficient appropriate evidenceabout the carrying value of the Intangible assets as at 31 December 2019.
Consequently we were unable to determine whether any adjustments to the carrying value of theIntangible asset in the consolidated statement of financial position are necessary for the period ended31 December 2019.
Emphasis of matter – Material uncertainty relating to going concern
We draw attention to Note 1 (b) in the financial report which describes the events and/or conditionswhich give rise to the existence of a material uncertainty that may cast significant doubt about theGroup’s ability to continue as a going concern and therefore the Group may be unable to realise itsassets and discharge its liabilities in the normal course of business. Our conclusion is not modified inrespect of this matter.F
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Interim Financial Report For the six months ended 31 December 2019 Page 24
Independent Auditor’s Review Report (Continued)
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 2019 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 2020
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