2019 half-year report · slovakia, slovenia, japan as well as oborne health and online sales in...

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:[email protected] E:[email protected] 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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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

$


$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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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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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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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


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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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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(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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13



$ $

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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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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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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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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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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(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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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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(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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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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Skin Elements Limited

(ASX: SKN)

32 Ord Street West Per th,

WA 6005, Australia

skinelementsl imited.com

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2019 half-year report · slovakia, slovenia, japan as well as oborne health and online sales in...

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