Announcement PDF Avecho Biotechnology Limited Appendix 4E Preliminary final report 1. Company details Name of entity: ABN: Reporting period: Previous period: Avecho Biotechnology Limited 32 056 482 403 For the year ended 31 December 2020 For the year ended 31 December 2019 2. Results for announcement to the market $ Revenue from ordinary activities decreased 90.9% to 384,627 Loss from ordinary activities after tax attributable to the owners of Avecho Biotechnology Limited increased 410.0% to (2,634,853) Loss for the year attributable to the owners of Avecho Biotechnology Limited increased 410.0% to (2,634,853) Explanation of loss from ordinary activities after tax Total revenue was decreased by 90.9% for the year to $384,627 (2019: $4,238,113), mainly due to prior period revenue including one-time licence fee from Ashland for the global exclusive manufacturing rights to Vital ET® and TPM® for use in personal care products. Total loss for the Consolidated Entity after providing for income tax amounted to $2,634,853 (2019: profit of $849,955). Other income was increased by 66.6% to $778,476 (2019: $467,300), attributed to COVID-19 PAYG and payroll tax subsidy of $120,245 from the Australian Federal and State Government (2019: nil), $64,072 EMDG grant (2019: nil), and net foreign exchange gain of $173,058 (2019: 25,421). Expenses from continuing operations were $3,654,241 (2019: $3,640,885), consisting of: ● ● higher employment costs due to non-cash ESOP expenses of $530,322 (2019: $18,684); and lower travel costs of $7,448 (2019: $116,6464) as a result of COVID-19 travel restrictions. 3. Net tangible assets Reporting period Cents Net tangible assets per ordinary security 0.14 4. Control gained over entities Not applicable. 5. Loss of control over entities Name of entities (or group of entities) Preform Technologies Pty Ltd Adoil Pty Ltd Previous period Cents 0.25 Avecho Biotechnology Limited Appendix 4E Preliminary final report Date control lost 26 July 2020 Both companies were non-operating subsidiaries which were deregistered during 2020 financial year. 6. Dividends Current period There were no dividends paid, recommended or declared during the current financial period. Previous period There were no dividends paid, recommended or declared during the previous financial period. 7. Dividend reinvestment plans Not applicable. 8. Details of associates and joint venture entities Not applicable. 9. Foreign entities Details of origin of accounting standards used in compiling the report: Not applicable. 10. Audit status The financial statements are currently in the process of being audited by Grant Thornton. The Company expects to receive an unqualified audit opinion. 11. Attachments Details of attachments (if any): The preliminary 2020 annual report of Avecho Biotechnology Limited is attached. 12. Signed Signed ___________________________ Dr Greg Collier Chairman Date: 26 February 2021 Avecho Biotechnology Limited ABN 32 056 482 403 Preliminary Annual Report - 31 December 2020 Avecho Biotechnology Limited Contents 31 December 2020 Corporate directory Consolidated statement of profit or loss and other comprehensive income Consolidated statement of financial position Consolidated statement of changes in equity Consolidated statement of cash flows Notes to the consolidated financial statements 1 2 3 4 5 6 7 Avecho Biotechnology Limited Corporate directory 31 December 2020 Directors Dr Greg Collier (Executive Chairman) Dr Ross Murdoch (Non-Executive Director) Mr David Segal (Non-Executive Director) Mr Matthew McNamara (Non-Executive Director) Chief Executive Officer Dr Paul Gavin Company Secretary Ms Melanie Leydin Registered office and Principal place of business Unit A8, 2A Westall Road Clayton VIC 3168 Australia Telephone: +61 3 9002 5000 Email: info@avecho.com.au Share register Computershare Investor Services Pty Limited Yarra Falls, 452 Johnston Street Abbotsford VIC 3067 Australia Telephone: +61 3 9415 5000 Fax: +61 3 9473 2500 Auditor Grant Thornton Audit Pty Ltd Collins Square Tower 5 727 Collins Street Melbourne VIC 3008 Stock exchange listing Avecho Biotechnology Limited securities are listed on the Australian Securities Exchange. (ASX code: AVE) Website www.avecho.com.au 2 Avecho Biotechnology Limited Consolidated statement of profit or loss and other comprehensive income For the year ended 31 December 2020 Note Revenue from contracts with customers Cost of sales 2 Gross profit Consolidated 2020 2019 $ $ 384,627 (143,715) 4,238,113 (214,573) 240,912 4,023,540 Other income 3 778,476 467,300 Employee and directors benefits expenses Legal expenses Research expenses Consultancy and professional fees Amortisation and depreciation Impairment losses Other expenses Impairment of financial assets Finance costs 4 (1,718,769) (19,576) (187,600) (516,475) (536,629) (668,879) (388) (5,925) (1,204,339) (72,340) (166,043) (543,311) (683,457) (108,324) (851,746) (293) (11,032) (2,634,853) 849,955 - - (2,634,853) 849,955 Items that may be reclassified subsequently to profit or loss Foreign currency translation - 4,099 Other comprehensive income for the year, net of tax - 4,099 (2,634,853) 854,054 Cents Cents 5 Profit/(loss) before income tax expense Income tax expense Profit/(loss) after income tax expense for the year attributable to the owners of Avecho Biotechnology Limited Other comprehensive income Total comprehensive income for the year attributable to the owners of Avecho Biotechnology Limited Basic earnings per share Diluted earnings per share 15 15 (0.17) (0.17) 0.05 0.05 The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes 3 Avecho Biotechnology Limited Consolidated statement of financial position As at 31 December 2020 Note Consolidated 2020 2019 $ $ Assets Current assets Cash and cash equivalents Trade and other receivables Inventories Other current assets Total current assets 6 7 8 1,872,776 479,115 100,006 238,704 2,690,601 3,210,540 755,432 148,764 163,412 4,278,148 67,912 165,076 431,000 663,988 93,710 86,218 857,000 1,036,928 3,354,589 5,315,076 241,192 73,031 289,358 603,581 188,061 89,493 267,275 544,829 Non-current liabilities Lease liabilities Provisions Total non-current liabilities 93,200 3,388 96,588 7,696 3,600 11,296 Total liabilities 700,169 556,125 2,654,420 4,758,951 Non-current assets Plant and equipment Right-of-use assets Intangibles Total non-current assets 9 Total assets Liabilities Current liabilities Trade and other payables Lease liabilities Provisions Total current liabilities 10 11 Net assets Equity Issued capital Reserves Accumulated losses 12 13 Total equity 232,778,295 232,632,424 28,537,271 28,152,820 (258,661,146) (256,026,293) 2,654,420 4,758,951 The above consolidated statement of financial position should be read in conjunction with the accompanying notes 4 Avecho Biotechnology Limited Consolidated statement of changes in equity For the year ended 31 December 2020 Issued capital $ Consolidated Balance at 1 January 2019 Accumulated losses Total equity $ $ Reserves $ 232,632,424 30,415,923 (259,162,134) 3,886,213 Profit after income tax expense for the year Other comprehensive income for the year, net of tax - 4,099 849,955 - 849,955 4,099 Total comprehensive income for the year - 4,099 849,955 854,054 Transactions with owners in their capacity as owners: Share-based payments Transfer - 18,684 (2,285,886) 2,285,886 18,684 - 28,152,820 (256,026,293) 4,758,951 Balance at 31 December 2019 232,632,424 Issued capital $ Consolidated Balance at 1 January 2020 Accumulated losses Total equity $ $ Reserves $ 232,632,424 28,152,820 (256,026,293) 4,758,951 Loss after income tax expense for the year Other comprehensive income for the year, net of tax - - (2,634,853) - (2,634,853) - Total comprehensive income for the year - - (2,634,853) (2,634,853) 120,000 25,871 384,451 - - 384,451 120,000 25,871 28,537,271 (258,661,146) 2,654,420 Transactions with owners in their capacity as owners: Share-based payments Issue of share as sign-on bonus Issue of shares as part of short term incentive plan Balance at 31 December 2020 232,778,295 The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes 5 Avecho Biotechnology Limited Consolidated statement of cash flows For the year ended 31 December 2020 Note Cash flows from operating activities Receipts from customers (inclusive of GST) Receipt of recoveries Receipt of government grants and subsidy Other receipts Payments to suppliers and employees (inclusive of GST) Finance costs paid Consolidated 2020 2019 $ $ 390,032 779,596 65,750 (2,653,413) (5,925) 4,503,030 87,500 (3,405,550) (7,230) (1,423,960) 1,177,750 Cash flows from investing activities Interest received Payments for plant and equipment 793 (5,150) 11,058 - Net cash from/(used in) investing activities (4,357) 11,058 Cash flows from financing activities Payment of principal element of lease liabilities (82,503) (89,439) Net cash used in financing activities (82,503) (89,439) (1,510,820) 3,210,540 173,056 1,099,369 2,111,171 - 1,872,776 3,210,540 Net cash from/(used in) operating activities 14 Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at the beginning of the financial year Effects of exchange rate changes on cash and cash equivalents Cash and cash equivalents at the end of the financial year 6 The above consolidated statement of cash flows should be read in conjunction with the accompanying notes 6 Avecho Biotechnology Limited Notes to the consolidated financial statements 31 December 2020 Note 1. Significant accounting policies This preliminary final report has been prepared in accordance with ASX Listing Rule 4.3A and the disclosure requirements of ASX Appendix 4E. This report is to be read in conjunction with any public announcements made by Avecho Biotechnology Limited during the reporting period in accordance with continuous disclosure requirements of the Corporations Act 2001 and the Australian Securities Exchange Listing Rules. The principal accounting policies adopted in the preparation of the financial statements are set out either in the respective notes or below. These policies have been consistently applied to all the years presented, unless otherwise stated. Basis of preparation These general purpose financial statements have been prepared in accordance with Australian Accounting Standards and Interpretations issued by the Australian Accounting Standards Board and the Corporations Act 2001. Avecho Biotechnology Limited is a for-profit entity for the purposes of preparing the financial statements. i) Compliance with IFRS The consolidated financial statements of the Avecho Biotechnology Limited group also comply with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). ii) Historical cost convention These financial statements have been prepared on a historical cost basis except for financial instruments and intangible assets, which have been measured at fair value. Note 2. Revenue from contracts with customers Consolidated 2020 2019 $ $ From continuing operations Sale of goods and services Royalties and licences fees 365,235 19,392 633,095 3,605,018 Total revenue from contracts with customers 384,627 4,238,113 7 Avecho Biotechnology Limited Notes to the consolidated financial statements 31 December 2020 Note 2. Revenue from contracts with customers (continued) Disaggregation of revenue The disaggregation of revenue from contracts with customers is as follows: Consolidated 2020 2019 $ $ Major product lines Production Human Health Geographical regions Australia Switzerland United States India Timing of revenue recognition Sale of goods and services transferred at a point in time Licence fees recognised at a point in time Royalties and licence fees recognised over time 365,235 19,392 4,204,523 33,590 384,627 4,238,113 4,100 323,885 56,642 26,296 533,794 3,571,429 106,594 384,627 4,238,113 365,235 19,392 633,095 3,571,429 33,589 384,627 4,238,113 Note 3. Other income Consolidated 2020 2019 $ $ Net foreign exchange gain Income from government grants Interest income Legal cost refund Project income Other 173,058 544,626 792 57,500 2,500 25,421 346,008 8,371 87,500 - Other income 778,476 467,300 8 Avecho Biotechnology Limited Notes to the consolidated financial statements 31 December 2020 Note 4. Employee and directors benefits expenses Consolidated 2020 2019 $ $ Director fees Research and development employee expenses Redundancy costs ESOP expenses Other employee expenses 295,718 527,544 530,322 365,185 237,543 389,333 12,673 18,684 546,106 1,718,769 1,204,339 Note 5. Other expenses Consolidated 2020 2019 $ $ Travel Insurance Shareholder and listing expenses Patent portfolio expenses Occupancy expenses Other 7,448 154,738 88,919 297,309 67,945 52,520 116,664 201,057 88,048 345,274 89,105 11,598 668,879 851,746 Note 6. Current assets - cash and cash equivalents Consolidated 2020 2019 $ $ Cash at bank Short term deposit 1,787,046 85,730 3,124,810 85,730 1,872,776 3,210,540 Note 7. Current assets - trade and other receivables Consolidated 2020 2019 $ $ Trade receivables Less: Allowance for expected credit losses 37,189 37,189 151,990 (109,398) 42,592 R&D tax incentive credit receivable Other receivables 418,830 23,096 441,926 674,045 38,795 712,840 479,115 755,432 9 Avecho Biotechnology Limited Notes to the consolidated financial statements 31 December 2020 Note 7. Current assets - trade and other receivables (continued) Allowance for expected credit losses An allowance for expected credit loss is recognised when there is objective evidence that the group may not be able to collect all the amounts due under the original terms of the invoice. Impaired debts are derecognised when they are assessed as uncollectable. Debts totalling $109,398 were deemed impaired at 31 December 2019, which had been derecognised in 2020 financial year. Debts totalling $388 were written off in 2020 financial year (2019: $293). Other balances within trade and other receivables do not contain impaired assets and are not past due. It is expected that these other balances will be received when due. The ageing of the receivables and allowance for expected credit losses provided for above are as follows: Consolidated Expected credit loss rate 2020 2019 % % 0 to 3 months overdue Over 6 months overdue R&D tax incentive credit receivable Other receivables Carrying amount 2020 2019 $ $ Allowance for expected credit losses 2020 2019 $ $ - 100% 37,189 - 42,562 109,398 - 109,398 - - 418,830 23,096 674,075 38,795 - - 479,115 864,830 - 109,398 Note 8. Current assets - inventories Consolidated 2020 2019 $ $ Raw materials (at cost) Finished goods (at cost) 68,713 31,293 14,946 133,818 100,006 148,764 Note 9. Non-current assets - intangibles Consolidated 2020 2019 $ $ Intellectual property Less: Accumulated amortisation and impairment 121,362,000 121,362,000 (120,931,000) (120,505,000) 431,000 10 857,000 Avecho Biotechnology Limited Notes to the consolidated financial statements 31 December 2020 Note 9. Non-current assets - intangibles (continued) Reconciliations Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out below: Intellectual property $ Consolidated Total $ Balance at 1 January 2019 Amortisation expense 1,395,000 (538,000) 1,395,000 (538,000) Balance at 31 December 2019 Amortisation expense 857,000 (426,000) 857,000 (426,000) Balance at 31 December 2020 431,000 431,000 Impairment testing Intellectual Property Intellectual property asset cost represents the fair value of nine patents acquired by the Company at 31 December 2004, less accumulated amortisation and adjusted for any accumulated impairment loss. Intellectual property is amortised over its useful life, being the patent life of between 15 -19 years at acquisition (to between 2020 and 2023), and tested for indicators of impairment at each reporting date. In 2010 one of the purchased patents was abandoned. The carrying value of the acquired patents is dependent on the continued sales of Vital ET® and the commercialisation of TPM®/Oxycodone prior to the expiry of the patents. Revenue assumptions related to this have been assessed for delays in revenue receipts, with delays of one year not materially impacting the value of the assets. Note 10. Current liabilities - trade and other payables Consolidated 2020 2019 $ $ Trade payables Accrued expenses Other payables 110,313 57,500 73,379 96,576 58,700 32,785 241,192 188,061 Note 11. Current liabilities - provisions Consolidated 2020 2019 $ $ Annual leave Long service leave 11 83,617 205,741 74,125 193,150 289,358 267,275 Avecho Biotechnology Limited Notes to the consolidated financial statements 31 December 2020 Note 12. Equity - issued capital 2020 Shares Ordinary shares - fully paid 1,598,894,680 Consolidated 2019 2020 Shares $ 2019 $ 1,577,457,420 232,778,295 232,632,424 Shares Issue price $ Movements in ordinary share capital Details Date Balance 1 January 2019 1,577,457,420 232,632,424 Balance Issue of shares to key management personnel as sign-on bonus Issue of shares as part of short term incentive 31 December 2019 1,577,457,420 232,632,424 27 April 2020 23 December 2020 20,000,000 1,437,260 Balance 31 December 2020 1,598,894,680 $0.006 $0.018 120,000 25,871 232,778,295 Note 13. Equity - reserves Consolidated 2020 2019 $ $ Business combination reserve Other equity-settled benefits Foreign currency reserve Employee equity-settled benefits reserve 12 27,812,871 305,323 24,626 394,451 27,812,871 305,323 24,626 10,000 28,537,271 28,152,820 Avecho Biotechnology Limited Notes to the consolidated financial statements 31 December 2020 Note 14. Reconciliation of profit/(loss) after income tax to net cash from/(used in) operating activities Consolidated 2020 2019 $ $ Profit/(loss) after income tax expense for the year (2,634,853) 849,955 Adjustments for: Depreciation and amortisation Share-based payments Foreign exchange differences Interest received Interest expense Impairment losses 536,629 530,322 (185,973) (793) 5,925 - 683,457 18,684 6,771 (11,058) 11,035 108,324 Change in operating assets and liabilities: Decrease/(increase) in trade and other receivables Decrease/(increase) in inventories (Increase)/decrease in other current assets Increase/(decrease) in trade and other payables (Decrease)/Increase in provisions 276,316 48,758 (75,292) 53,131 21,870 (78,403) (48,914) 87,479 (390,375) (59,205) (1,423,960) 1,177,750 Net cash from/(used in) operating activities Note 15. Earnings per share Consolidated 2020 2019 $ $ Profit/(loss) after income tax attributable to the owners of Avecho Biotechnology Limited (2,634,853) 849,955 Number Number Weighted average number of ordinary shares used in calculating basic earnings per share 1,591,077,963 1,577,457,420 Weighted average number of ordinary shares used in calculating diluted earnings per share 1,591,077,963 1,577,457,420 Cents Cents Basic earnings per share Diluted earnings per share (0.17) (0.17) 13 0.05 0.05