Analysis Of Adalta Limited And Acrux Limited’s Annual Reports

Owners’ Equity

The company chosen for review are Adalta Limited and Acrux Limited. Both of these companies belong to the sector of Pharmaceuticals.

Adalta limited is the company deals in the technology that copies the shape and the stability of the crucial antigen binding domain that was initially discovered in the sharks and then were successfully developed as the human protein. It contains a unique I-body which is then used for the purposes of treating the serious illnesses or the diseases. The initial focus of such a company was the creation of the pipeline for the drugs, and were used for the purposes of treating the fibrotic diseases (Adalta, 2018).

The seocn company is Acrux limited which is the company which is concerned with the development and the commercialisation of the topical pharmaceuticals. The company came into being in the year 1998 and uses many of the in house facilities and capabilities. The company has successfully developed and commercialised through many of the licensees through a number of different topically applied pharmaceuticals products in the countries of the US and Europe. The company is in the course of developing an increased range of the generic products for the market of the United States and the company had achieved this through its on-site laboratories so that the products could be brought into the market at lower prices (Acrux, 2018).

Part i:

The following are the desired statements:

Adalta:

Owner’s equity:
	(Amounts in $ in millions)
Particulars	2017	2016	Understanding	Change	Change in %
Issued capital	175,60,338.00	81,50,331.00	this is the amount of the money that each shareholder has invested in the company	could be due to new capital/investment by the shareholders	115.46%
Reserves	3,908.00	3,908.00	this is the amount of money that the company has put aside fom the net profits earned in the previous years for some contingency that may arise in future or for future unforseen circumstances	could be due to addition of previous years profit	0.00%
Retained earnings	-98,18,868.00	-69,86,351.00	these are the part of the profits earned in the previous years after paying off dividend etc	could be due to previous year’s profits being transferred in this account	40.54%
Total	77,45,378.00	11,67,888.00

Acrux:

Particulars	2017	2016	Understanding	Change	Change in %
Contributed equity	95,873.00	95,873.00	this is the amount of the money that each shareholder has invested in the company	could be due to no change in the new capital/investment by the shareholders	0.00%
Retained earnings	1,215.00	1,454.00	these are the part of the profits earned in the previous years after paying off dividend etc	could be due to previous years profits/(losses) being transferred in this account	-16.44%
Reserves	-53,163.00	-53,438.00	this is the amount of money that the company has put aside fom the net profits earned in the previous years for some contingency that may arise in future or for future unforseen circumstances	could be due to addition of previous years profit/(losses)	-0.51%
Total	43,925.00	43,889.00

Part ii:

The following is the desired analysis:

	Adalta	Acrux
Particulars	2017	2017
Issued capital	17,560.34	95,873.00
Reserves	3 79/87	-53,163.00
Retained earnings	-9,818.87	1,215.00
Total	7,745.38	43,925.00

Part iii:

Adalta:

Cash flow statement:
	(Amounts in $ in millions)
Particulars	2017	2016	Understanding	Change in %

Cash flows from operating activities:
Payments to suppliers and employees	-46,32,076.00	-20,61,656.00	these are the amounts that are paid to the suppliers and the employees for the services that they have rendered	124.68%
R & D tax incentive	7,38,046.00	8,78,394.00	amounts received by the company towards research and development	-15.98%
Interest received	1,47,483.00	8,902.00	Amounts received from the company towards the loan given to the outsiders	1556.74%
Grants received	19,724.00	–	amounts received by the company towards grants	#DIV/0!
Net cash provided by operating activities	-37,26,823.00	-11,74,360.00
Cash flows from investing activities:
Proceeds from disposal of property, plant and equipment	1,000.00	–	these are the amounts that the company has received from the sale of assets held by them	#DIV/0!
Payments for property, plant and equipment	-6,745.00	–	these are the amounts that the company has paid from the purchase of assets	#DIV/0!
Payments for other assets	-2,600.00	–	these are the amounts that the company has paid from the purchase of assets	#DIV/0!
Net cash used in investing activities	-8,345.00	–
Cash flows from financing activities
Proceeds from convertible notes	–	16,25,000.00	amounts received from the convertible notes	-100.00%
Proceeds from share capital	100,00,000.00	54.00	amounts received from the issue of new shares of the company	18518418.52%
Proceeds from option conversions	58,984.00	–	amounts received from the issue of new options of the company	#DIV/0!
Payment of share issue costs	-5,84,757.00	–	amounts paid towards the share issue costs	#DIV/0!
Net cash used in financing activities	94,74,227.00	16,25,054.00
Net decrease in cash and cash equivalents	57,39,059.00	4,50,694.00	Net cash from aggregate of the activties in the year
Cash and cash equivalents at start of period	4,85,558.00	34,864.00	Cash in the start
Cash and cash equivalents at end of period	62,24,617.00	4,85,558.00	Net cash at the end of the year

Acrux:

Particulars	2017	2016	Understanding	Change	Change in %
Cash flows from operating activities
Receipts from product agreements	21,822.00	28,208.00	these are the amounts received by the company towards the agreements entered into for its products	could be due to lesser revenue from product agreements	-22.64%
Payments to suppliers and employees	-10,748.00	-7,923.00	these are the maounts paid by the company towards the payments to the suppliers and the salaries of the employees	could be due to an increase in the salaries and wages to the employers and more purchases from the suppliers	35.66%
Interest received	637.00	515.00	amounts received by the company on the investments amd eoutside	could be due to more invetsment made by the company	23.69%
Income tax paid	-6,335.00	-4,294.00	this is the amount of money paid by the company to Income tax authorities for the income earned during the year	could be due to more income earned during the year	47.53%
Net cash flows used in operating activities	5,376.00	16,506.00
Cash flows from investing activities
Payment for property, plant and equipment	-629.00	236.00	amounts paid by the company towards the purchase of property, plant and equipment	could be due to additional payments towards plant purchase made during the year	-366.53%
Net cash flows used in investing activities	-629.00	236.00
Cash flows from financing activities
Equity dividends paid	–	-9,992.00	amounts of dividends paid to shareholders	Could be due to no dividend paid during the current year	-100.00%
Net cash flows used in financing activities	–	-9,992.00
Net decrease in cash and cash equivalents	4,747.00	6,750.00	Net cash from aggregate of the activties in the year
Cash and cash equivalents at start of period	29,227.00	23,082.00	Cash in the start
Cash and cash equivalents at end of period	33,974.00	29,832.00	Net cash at the end of the year

Part IV:

The following is the desired comparative statement:

	Adalta	Acrux
Particulars	2017	2016	2015	2017	2016	2015

Net cash from operating activities	-3,726.82	-1,174.36	-1,382.44	5,376.00	16,506.00	10,519.00
Net cash from financing activities	-8 10/29	–	–	-629.00	-236.00	-66.00
Net cash from investing activities	9,474.23	1,625.05	1,035.00	–	-9,992.00	-13,322.00



Total	5,739.06	450.69	-347.44	4,747.00	6,278.00	-2,869.00

In respect of Adalta, it could be said that the company could have been facing some cash shortage during the year 2015 but then the company had picked up and in the next years, the company has had a positive cash balance.

In respect of Acrux, it could be said that the company could have been facing some cash shortage during the year 2015 but then the company had picked up and in the next years, the company has had a positive cash balance.

Also, when comparing the 2, the following could be said:

In year 2017, Adalta was better in terms of cash in hand
In year 2016, Acrux was better in terms of cash in hand
In year 2015, Adalta was better in terms of cash in hand

Adalta:

Statement of profit and loss and the other comprehensive income
	(Amounts in $)
Particulars	2017	2016

Revenue
Interest Received	1,70,926.00	8,902.00
Other Revenue	17,96,754.00	7,38,046.00

Total revenue	19,67,680.00	7,46,948.00

Expenses
Cost of services	-35,98,678.00	-14,13,975.00
Depreciation and amortisation expenses	-5,435.00	-684.00
Employee benefit expense	-4,04,669.00	-2,24,620.00
Travel expense	-76,575.00	-57,127.00
Board fees	-2,07,037.00	-50,000.00
Patent and legal costs	-73,310.00	-44,556.00
Other expenses	-4,34,493.00	-1,19,042.00
Profit (loss) before income tax	-28,32,517.00	-11,63,056.00
Tax expense	–	–
Profit (loss) for the year	-28,32,517.00	-11,63,056.00

Acrux:

Statement of comprehensive income
	(Amounts in $ in thousands)
Particulars	2017	2016
Revenue	23,934.00	28,557.00
Employee benefits expense	-4,277.00	-3,582.00
Directors’ fees	-382.00	-284.00
Share options expense	-279.00	-275.00
Depreciation and amortisation expense	-1,560.00	-1,492.00
Impairment losses	-10,680.00	–
Occupancy expense	-493.00	-417.00
External research and development expense	-3,239.00	-1,430.00
Professional fees	-1,827.00	-632.00
Royalty expense	-136.00	-988.00
Foreign exchange loss	-457.00	-772.00
Other expenses	-698.00	-593.00
(Loss)/profit before income tax	-94.00	18,092.00
Income tax expense	-149.00	-5,111.00
Net (loss)/profit for the year	-243.00	12,981.00
Total comprehensive income for the year	-243.00	12,981.00

Both of the companies have the same statement of profit and loss account and the statement of comprehensive income.

Part vii:

There are many of the items that are not allowed to be reported in the financial statements due to their nature. These could be nay expenses such as the unrealised expense etc. and since, these items have no effect on the income or the expense of the company, these are not required to be reported in the statement of profit or loss. These are the expenses that are not allowed to be reported under the Generally Accepted Principles of Accounting and hence, these are not disclosed in the statement of profit of loss. But since these items relates with the regular transactions of the company, therefore, these are reported in the statement of comprehensive income instead which is quiet fine.

If these could have been shown in the financial statements, then the company could have paid an income tax on these which would not have been alright. That would have resulted in an inaccurate picture of the financial statements of the company (Accounting tools, 2018).

Part viii:

Cash Flow Statement

The following is the desired statement:

	Adalta	Acrux
Particulars	2017	2016

Comprehensive income	-2,832.52	-243.00

In the present case, the company does not have a separate statement of comprehensive income. It has combined in the net income that has been earned during the year and the income shown in the statement of comprehensive income.

Part x:

The expenses that pertain to taxes are the amounts that are paid in by the company on the net revenue that the company has generated during the year. But there is only a small part which is paid in by the company in the current year since the company always pays in the taxes in small amounts. And these amounts are indicated in the statement of cash flows.

Part xi:

The following is the desired table:

	Effective tax rate
	Adalta	Acrux
Particulars	2017	2017

Effective tax rate:	0%	-159%

Income taxes	–	149.00
Earnings before taxes	-28,32,517.00	-94.00

Both of the companies have reported a loss during the year and hence, the effective rate of the income tax is in negative.

Part xii:

There are few of the expenses that are not allowed to be reported in the income statement due to their timing difference. The timing difference arises due to the taxation rules and regulations. There are some cases when the company did not pay the amount within some specified date and as the result, the company could not deduct that expense in that year and so, it can now claim the deduction of the expense in the next year. In such cases, though the expense is deductible but only in the next year (Taxman, 2018).

Part xiii:

In respect of Adalta, there has been no deferred tax assets or no deferred tax liabilities.

In respect of Acrux, there has been an increase in the amounts of the deferred tax assets and the company has no deferred tax liabilities..

Part xiv:

The following is the desired computation:

Particulars	Adalta	Acrux
Net income	-28,32,517.00	-243.00
Less: deferred tax assets	–	92.00
Income on which taxes would have been paid	-28,32,517.00	-335.00

Part xv:

Both of these companies have a loss and so, the cash effective tax rate would not be possible.

Particulars	Adalta	Acrux
Income tax provision	–	–
Increase in deferred tax assets	–	92.00
Current income taxes	–	92.00
Other income	17,96,754.00	–
Taxes paid on other income	–	–
Unlevered cash taxes	–	92.00
EBITA	-28,32,517.00	-243.00
Cash tax rate	0.00%	-37.86%

Part xvi:

The cash tax rate is always different from the amount of the taxes that are paid in by the company. The company usually as a general practise follows the rule of paying off the taxes that pertains to the previous year and records the tax expense of the current year as “income taxes payable”. But there is only a small part which is paid in by the company in the current year since the company always pays in the taxes in small amounts. And these amounts are indicated in the statement of cash flows. Also, the company does have the deferred tax assets and the deferred tax liabilities that are considered while paying the taxes of the current year. And it is due to this reason that the cash tax rate and the other tax rate are very much different.

Conclusion:

The above report talks about the equity breakup of the company. The equity or the contributed capital as it is generally called is one of the most important components when it comes to the calculating in the debt to equity ratio. This is very much fine. The amount that has been invested into the company has to be determined and the return that the company is able to generate on it is also very important since every shareholder would like to have a return on his investment.

The statement of cash flows have bene discussed above, the various difference have ben calculated and the reasons for such changes have been listed down. This statement of very important since it shows in the cash that is readily available in the hands of the company to meet its cash expenses or other such expenses.

Deferred taxes have been discussed, Adalta does not have any deferred taxes but Acrux has. These assets or liabilities are very much important for the company. Both of the companies have reported losses during the year and hence, there is as such no effective tax rate.

References:

Bragg, S. and Bragg, S. (2018). Other comprehensive income. [online] AccountingTools. Available at: https://www.accountingtools.com/articles/what-is-other-comprehensive-income.html [Accessed 2 Sep. 2018].

https://www.taxmann.com. (2018). Difference between Deferred Tax Asset (DTA) and Deferred Tax Liability (DTL). [online] Available at: https://www.taxmann.com/blogpost/2000000449/difference-between-deferred-tax-asset-dta-and-deferred-tax-liability-dtl.aspx [Accessed 2 Sep. 2018].

Acrux. (2018). About Acrux – Acrux. [online] Available at: https://www.acrux.com.au/about/ [Accessed 17 Sep. 2018].

AdAlta – Developing i-body drugs to treat fibrotic diseases. (2018). Home – AdAlta – Developing i-body drugs to treat fibrotic diseases. [online] Available at: https://adalta.com.au/ [Accessed 17 Sep. 2018].

Asx.com.au. (2018). The official list. [online] Available at: https://www.asx.com.au/asx/research/listedCompanies.do?coName=A [Accessed 17 Sep. 2018].

www.acrux.au. (2018). Annual report 2015. [online] Available at: https://www.annualreports.com/HostedData/AnnualReportArchive/a/ASX_ACR_2015.pdf [Accessed 17 Sep. 2018].

www.acrux.au. (2018). Annual report 2017. [online] Available at: https://www.annualreports.com/HostedData/AnnualReportArchive/a/ASX_ACR_2017.pdf [Accessed 17 Sep. 2018].

www.adalta.au. (2018). Annual report 2015. [online] Available at: https://1ad.live.irmau.com/irm/PDF/1012_0/2015AnnualReport [Accessed 17 Sep. 2018].

www.adalta.au. (2018). Annual report 2017. [online] Available at: https://1ad.live.irmau.com/irm/PDF/1180_0/AnnualReporttoshareholders [Accessed 17 Sep. 2018].

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