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2021 ReportAnalytica Limited ABN 12 006 464 866 ANNUAL REPORT YEAR ENDED 30 JUNE 2021 Table of Contents Table of Contents Directors Report ____________________________________________________________________ 1 General information _________________________________________________________________ 1 Information on directors _________________________________________________________ 1 Dr Michael Monsour _____________________________________________________________ 1 Dr. Peter B. Corr. ________________________________________________________________ 2 Dr Thomas Lönngren. ____________________________________________________________ 2 Mr Ross Mangelsdorf ____________________________________________________________ 3 Principal activities and significant changes in nature of activities _____________________________ 4 Operating results and review of operations for the year ____________________________________ 4 Operating results _______________________________________________________________ 4 Review of Operations ____________________________________________________________ 4 Financial Review ____________________________________________________________________ 8 Financial position _______________________________________________________________ 8 Other items ________________________________________________________________________ 8 Significant changes in state of affairs________________________________________________ 8 Changes in the controlled entities and divisions _______________________________________ 8 Events after the reporting date ____________________________________________________ 9 Environmental issues ____________________________________________________________ 9 Future developments and results __________________________________________________ 9 Non-audit services ______________________________________________________________ 9 Auditors independence declaration________________________________________________ 10 Company secretary _____________________________________________________________ 10 Meetings of directors ___________________________________________________________ 10 Employees ____________________________________________________________________ 11 Options ______________________________________________________________________ 11 Remuneration report (audited) ___________________________________________________ 12 Corporate Governance __________________________________________________________ 17 Key Management and Staff __________________________________________________________ 23 Geoff Daly, Chief Executive Officer ________________________________________________ 23 Chelsea Cornelius – Product Development and Operations Manager _____________________ 23 Table of Contents Auditor’s Independence Declaration ___________________________________________________ 24 Consolidated Statement of Profit or Loss and Other Comprehensive Income ___________________ 25 Consolidated Statement of Financial Position ____________________________________________ 26 Consolidated Statement of Changes in Equity ____________________________________________ 27 Consolidated Statement of Cash Flows _________________________________________________ 28 Notes to the Financial Statements _____________________________________________________ 29 1: Summary of Significant Accounting Policies _______________________________________ 29 2. Result for the year _______________________________________________________________ 49 Revenue from continuing operations __________________________________________________ 49 Expenditure _______________________________________________________________________ 49 3. Income Tax _____________________________________________________________________ 50 4. Key management personnel options and rights holdings _____________________________ 51 4. Key management personnel shareholdings ____________________________________________ 53 5 Remuneration of Auditors __________________________________________________________ 53 6 Earnings per Share ________________________________________________________________ 54 7 Cash and cash equivalents __________________________________________________________ 54 8 Trade and other receivables ________________________________________________________ 55 9 Inventories ______________________________________________________________________ 55 10 Other financial assets ____________________________________________________________ 55 11 Property, plant and equipment _____________________________________________________ 56 (a) Movements in carrying amounts of property, plant and equipment ___________________ 56 12 Intangible Assets ________________________________________________________________ 57 13 Other assets ____________________________________________________________________ 57 14 Trade and other payables _________________________________________________________ 58 15 Provisions ______________________________________________________________________ 58 16 Employee Benefits _______________________________________________________________ 58 17 Reserves _______________________________________________________________________ 59 Share option reserve ___________________________________________________________ 59 18 Issued Capital ___________________________________________________________________ 59 (b) Options ___________________________________________________________________ 60 (c) Capital Management _________________________________________________________ 60 19 Contingencies ___________________________________________________________________ 60 20 Operating Segments _____________________________________________________________ 61 Table of Contents Segment information ___________________________________________________________ 61 Geographical information _______________________________________________________ 63 21 Cash Flow Information ____________________________________________________________ 64 22 Share-based Payments ___________________________________________________________ 64 23 Related Parties __________________________________________________________________ 65 The Group's main related parties are as follows: _____________________________________ 65 Transactions with related parties _________________________________________________ 65 24 Financial Risk Management ________________________________________________________ 66 Specific risks __________________________________________________________________ 66 Financial instruments used_______________________________________________________ 66 Objectives, policies and processes _________________________________________________ 66 Liquidity risk __________________________________________________________________ 66 Market risk ___________________________________________________________________ 67 Credit risk ____________________________________________________________________ 68 25 Fair Value Measurement __________________________________________________________ 69 Financial assets ________________________________________________________________ 69 26 Events Occurring After the Reporting Date ___________________________________________ 70 27 Company Details ________________________________________________________________ 70 Directors' Declaration _______________________________________________________________ 71 Independent Auditor’s Report ________________________________________________________ 72 ASX Additional Information __________________________________________________________ 77 Substantial shareholders ____________________________________________________________ 77 Distribution of equity security holders _________________________________________________ 77 Twenty largest share holders _________________________________________________________ 77 Voting rights ______________________________________________________________________ 78 Ordinary Shares _______________________________________________________________ 78 Options ______________________________________________________________________ 78 Pg. 01 Directors Report Directors Report General information Information on directors The names, qualifications, experience and special responsibilities of each person who has been a director during the year and to the date of this report are as follows. Directors have been in office since the start of the year to the date of this report unless otherwise stated. Dr Michael Monsour MBBS-HONS, FACRRM, FAICD Chairman of the Board (appointed 28 June 2004) Dr Michael Monsour is a Medical Practitioner with extensive interests in Queensland medical and dental centres. Michael Monsour graduated from the University of Queensland in 1977 in medicine with honours. He operates a medical management company, which provides management support to medical and dental practitioners. He is the principal of Godbar Software (established 1988) which is one of the leading software developers of Occupational Health, Safety and Medical Accounting software packages in Australia. Interest in shares and options, Direct and indirect • Dr MP Monsour ordinary shares – 4,180,999 • MPAMM Pty Ltd ordinary shares – 233,042,390 • Halonna Pty Ltd ordinary shares – 696,890,604 • MP Monsour Medical Practice Pty Ltd ordinary shares – 156,379,178 Other related parties • Ordinary shares 4,071,208 Unlisted options • 20,000,000 @ 1.30c expires 21/12/2021 Pg. 02 Directors Report Dr. Peter B. Corr. Non-Executive Director (appointed 23 May 2017) Received his doctorate from Georgetown University School of Medicine. Dr. Corr has extensive experience in the discovery and development of medicines as well as the sale of assets to major multinational corporations. Dr. Corr co-founded and is Managing General Partner of Auven Therapeutics, a private equity firm pursuing a life science investment strategy where products are acquired, developed and then sold to multinational pharmaceutical firms. Dr. Corr was previously a Professor of Medicine and Pharmacology at Washington University for 18 years. He then joined Searle as Senior VP of Discovery Research, and subsequently was President of Research and Development at Warner Lambert / Parke Davis and then President, worldwide Development at Pfizer, and Corporate Senior Vice President of Science and Technology at Pfizer. Dr Corr is currently executive chairman of InVax Inc. Interest in shares and options Indirect • INOV8 LLC - Ordinary shares 360,790,157 Unlisted options • 10,000,000 @ 1.30c expires 30/11/2022 Dr Thomas Lönngren. Non-Executive Director (appointed 10th August 2015) (resigned 17 August 2020) Thomas is the former Executive Director of the European Medicines Agency, EMA (Jan 01-Dec 10) he previously served with the Swedish Medical Products Agency (MPA) as Director of Operations (1978-93) and Deputy Director General, (Jan 93 – Dec 00). Thomas established the EMA from a small unknown agency in 2001 to a world-renowned regulatory agency in 2011 and was responsible for all of its operations. He is currently Director of his own independent consultancy company PharmaExec Consulting AB, Sweden giving strategic advice to the healthcare, pharmaceutical/Biotech and medical device industry in the areas of Drug Development, Regulatory Affairs and Market Access. Through his consultancy his main work is for the NDA Group where he has for the past 4 years been active in Cambridge, Boston US advising biotech companies on getting regulatory approval and market access in EU and he is frequently invited to speak at conferences around the world. Pg. 03 Directors Report Interest in shares and options Unlisted options: • 10,000,000 @ 1.30c expires 21/12/2021 Mr Ross Mangelsdorf B.Bus, FCA, CTA, MAICD Executive Director (appointed 7 October 2008) Mr Mangelsdorf performs the function of Chief Financial Officer. Mr Mangelsdorf is a Director/partner of a chartered accounting firm for 38 years. He works with SME production, manufacturing and retail firms assisting with business, taxation and management services. Interest in shares and options, direct and indirect • RJ Mangelsdorf - Ordinary shares 348,763 • RJ & JM Mangelsdorf - Ordinary shares 348,763 • • Tambien Pty Ltd - Ordinary shares 67,685,119 Edmonmont Pty Ltd – Ordinary shares 39,515,600 Other related parties • Ordinary shares 3,555,820 Listed options • 50,000,000 @ 0.35c expires 28/06/2023 Unlisted options • • 10,000,000 @ 1.30c expires 21/12/2021 10,000,000 @ 1.30c expires 30/11/2022 Pg. 04 Directors Report Principal activities and significant changes in nature of activities The principal activities of the Group during the year were: • • • • • The development of strategies on commercial sales of PeriCoach; The development of intellectual property of medical device and mobile health application in relation to patents and systems in the pelvic floor exercise field (PeriCoach); The development of intellectual property in the medical device field in relation to patents in the burette field (AutoStart/Flush Enhanced Infusion System); The development of strategies for commercial sales of burette products; There were no significant changes in the Group's principal activities during the year. Operating results and review of operations for the year Operating results The consolidated loss of the Group amounted to $1,507,406 (2020: loss $1,620,156), after providing for income tax. This represented a decrease on the loss of $112,750 result reported for the year ended 30 June 2020 of $1,620,156. Increase for market development of $52,691 to $184,331 (2020: $131,640). Research and development expenditure decreased by $380,176 to $1,091,471 (2020: $1,471,647) was incurred due to the continued development of the PeriCoach system. Administration costs increased by $44,071 to $841,414 (2020: $797,343). Review of Operations PeriCoach Executing the commercialisation strategy for the PeriCoach is focussed on the flowing milestones: • Building ‘best-in-class’ conservative treatment for pelvic floor conditions, with a particular focus on urinary incontinence. • Validate and extend clinical credibility and effectiveness of PeriCoach. • • Confirming market acceptance while creating a positive sales environment. Securing a competitive partnering agreements with multinational companies with the resources to make the PeriCoach a global success. Best-In-Class • The PeriCoach system qualifies for the Australian Government’s Research and Development Tax incentive. The company continues to make substantial investment in the PeriCoach to establish this unique approach as ‘best in class’. As a result of this investment Analytica received a $656,895 refund for 2020 year. Substantial investment in the development of PeriCoach has continued through 2020-2021. Pg. 05 Directors Report The board strongly believe development must continue to secure and enhance the partnering value of the PeriCoach. • • The PeriCoach is a sophisticated medical device designed to collect valuable behavioural and performance data during treatment of pelvic floor dysfunction that has not been available previously outside of a clinical environment. The intuitive and patent-protected design of the PeriCoach incorporates sensors which provide an ongoing flow of data collected in real-time. This data is transmitted to Analytica’s proprietary cloud database for further analysis. The PeriCoach smartphone app simplifies the sensor information providing immediate feedback to the user which drives performance and motivation. The development of the software, sensor hardware and algorithms is an ongoing task as we continue to use the data and develop the science from our unique insights into women’s pelvic health. • A significant feature is feedback on technique. This most valuable and unique ability to accurately assist women is a result of sophisticated algorithms developed from the continuing real world data collection. • The data collected also provide a resource to demonstrate not only the efficacy of the product at a particular point in time, but how our product development program has improved efficacy over time. This improvement trajectory demonstrates to potential acquirers the first-mover advantage we have. Analytica has the world’s biggest database of pelvic floor exercise. We have the data, we can analyse the data and we can improve our treatments based on the evidence we possess. • Australian (TGA) and European (CE) registration was achieved in 2014 supported by extensive documentation and testing. United States Food and Drug Administration (FDA) approval in March 2015 as a prescription only product and an ‘Over the Counter’ (OTC) product, meaning it does not require a prescription in July 2016. • A recent randomized controlled trial concluded that the PeriCoach® biofeedback system with no formal instruction is non-inferior to Pelvic Floor Muscle Therapy under the supervision of a physical therapist, making this system the most cost-effective form of treatment for stress and mixed urinary incontinence. Establish and extend clinical credibility of effectiveness • Data is the core of the PeriCoach system. Every user is contributing to the growth and diversity of the world’s largest pelvic floor database. • PeriCoach all comers, prospective study was performed to assess the change in key clinical measures: Applied Strength, Leak Events, Leak Volume. PeriCoach users encouraged to participate in “8 week Challenge” with reminders to exercise a minimum of five sessions a week, enter information into a bladder diary three days a week, and respond to a quality of life survey at onset, four and eight weeks. Pg. 06 Directors Report • Analysis by an independent biostatistician reveals significant improvements in pelvic floor strength in five weeks, and reduction in urine volume and leakage episodes in only three weeks. More than 60% of V3 users who used the system for at least three weeks reported highly significant reduction in leakage episodes (p=.0059) and volume (p=.0017) by week three and beyond. The post-approval all comers observational study, reviewed women using the version 3 PeriCoach system. By week eight, more than 75% of the users have at least 80% improvement in both episodes and volume. Assessment of strength was conducted through measurement of direct force exerted on the vaginal sensor by a user during each session. This is an objective measure rather than subjective digital examination common for pelvic strength assessment. PeriCoach users demonstrated week-on-week improvement in strength with nearly a third, on average, having at least a 50% improvement in strength, resulting in predictive improvement by week five (p=.004). • • Established data indicate women performing un-assisted pelvic exercises report limited progress outcomes of only 3% almost continent, 87% unchanged and 10% worse. Clinical papers and case studies using PeriCoach in treatment have been published in leading clinical urology journals. Data from the PeriCoach clinical trial was accepted and presented at international urogynaecology, physiotherapy and sexual health clinical conferences. • An independent clinical trial from the University of New Mexico published in the in the official journal of the American Urogynecologic Society, demonstrated PeriCoach non-inferiority to in-clinic pelvic floor physical therapy. Expansion of TGA and CE-Mark Clinical Indicators including Pelvic Organ Prolapse. In April 2018 the PeriCoach system expands European CE-Marked clinical Indication to include Pelvic Organ Prolapse. Pelvic organ prolapse is a very common condition with one in twelve women in the UK reporting symptoms. The data shows that up to one in two women that have given birth have some degree of POP and prevalence increases with age. It is estimated that half of women over 50 experiencing symptoms and by the age of 80 more than one in ten will have had a surgical intervention, with incidence of surgery peaking in women aged 60-69. Estimates state women have a lifetime risk of up to one in eight of undergoing a surgical intervention. The PeriCoach system with its patent protected force sensing technology assists women to properly perform pelvic floor exercises. It is widely recognised that pelvic floor muscle exercises are an effective tool in reducing the burdensome POP symptoms. In a 2015 case study, Analytica demonstrated that when the PeriCoach was used in coordination with a pelvic floor physiotherapist, symptoms of POP were reduced, quality of life improvements were reported, and the requirement of an assistive inserted pessary was no longer needed. In the US alone, as many as 60 Million women experience POP, urinary incontinence and sexual wellness concerns. As the population ages, more women are at risk for surgery, leaving room for complications and a large burden on healthcare systems Pg. 07 Directors Report Testing market acceptance and create a positive sales environment • The company has been represented at top urogynaecology and physiotherapy clinical conferences in Australia, United States, Europe, and the United Kingdom. These conferences are a platform to introduce product, gain clinical perspective on conservative management of PFD as well as disseminate PeriCoach clinical evidence and core differentiators to non-clinical competitors. • Developing video training and promotional assets. • Data driven programming to build awareness and derive evidence-based insights about our core audience, messaging and content triggers that prompt visits to www.pericoach.com. Partnership Despite the corona virus pandemic Analytica has continued to develop opportunities and negotiate sales and distribution agreements. Uncertainty and inability to travel together with partners attention demanded on response to the virus, progress has slowed. This corona virus has amplified the need for more home delivery of essential, effective exercise, which the PeriCoach is the ideal solution. The US, EU and Chinese markets are considered the largest medical device markets in the world. Addressing these markets competitively will require significantly more marketing and sales resources than Analytica has available. The company is actively engaged in discussions with potential partners that have the capacity to maximise the sales of PeriCoach in these important regions. In November 2020 a distribution agreement was signed for the Middle East, servicing 10 countries with a market of 260 million people. This agreement includes Egypt, Saudi Arabia, UAE, Kuwait, Bahrain, Jordan, Lebanon and Iran. The magnitude of Urinary Incontinence among Middle Eastern and North African women stands at 54% compared to 33% in western countries. In March 2021 Analytica announced expansion of PeriCoach pelvic health solution into China entering into a joint venture agreement to manufacture, distribute and market the system in China, Macau, Hong Kong and Taiwan. PeriCoach will be distributed though postpartum care centres, hospitals, pharmacy chains, and other platforms serviced by the JV partners. AutoStart/Flush Enhanced Infusion System In April 2021, Analytica announced the signing of a distribution agreement for the Middle East including 9 countries. Pg. 08 Directors Report Intellectual Property Analytica continues to develop and protect its intellectual property through patents, trademarks and design registrations. Protection of intellectual property is critical in partnering negotiations and assists in securing a potential partner’s freedom to operate in the market. The PeriCoach has patent protection in Australia, Japan and China providing patent coverage until 2032. Analytica also has PeriCoach patents pending in the PCT national phase in Brazil, India, Germany, and France. Design registrations have also been granted in these jurisdictions. Analytica's R&D team continues to develop additional novel ideas for future products and product enhancements during the PeriCoach product development process. Analytica also maintains registered trademarks in the various jurisdictions above and owns top-level (.com) and regional internet domains with these trademarks. Financial Review Financial position The net assets of the Group have increased from a net liability of $6,244 from 30 June 2020 to a net asset position of $2,091,844 at 30 June 2021. The directors have arranged an unsecured revolving working capital facility for up to $400k at a commercial unsecured overdraft rate of 8.51% from Halonna Pty Ltd an entity associated with the chairman Dr Monsour. This secures the company’s financial position to continue the development of the PeriCoach, and marketing efforts for partnering agreements. Other items Significant changes in state of affairs The following significant changes in the state of affairs of the parent entity occurred during the year: • China joint venture agreement to manufacture and distribute PeriCoach® for the China market. • Middle Eastern distribution agreement for Enhanced Infusion System. • Randomised controlled clinical trial concluded that the PeriCoach® biofeedback system with no formal instruction is non inferior to pelvic floor muscle training under the supervision of a physical therapist, making this system the most cost effective form of treatment for stress and mixed urinary incontinence. • Capital raising of $3.8 million in June 2021 Changes in the controlled entities and divisions No changes. Pg. 09 Directors Report Events after the reporting date Update of manufacturing strategy announced 6th September 2021 that Analytica is to bring manufacturing inhouse with a phased plan over 5 years moving from R&D to commercialisation. The Queensland Government has announced financial support under its Advance Queensland Industry Attraction Fund (AQIAF). Grant payments are paid retrospectively on the completion of agreed milestones and there is no obligation on Analytica to continue the Project should circumstances change, noting the Queensland Government has the right to terminate the grant if Analytica is not able to meet the agreed milestones. Other than this announcement no other matters or circumstances have arisen since the end of the year which significantly affected or could significantly affect the operations of the Group, the results of those operations or the state of affairs of the Group in future financial years. Environmental issues The Group's operations are not regulated by any significant environmental regulations under a law of the Commonwealth or of a state or territory of Australia Future developments and results Continue the commercialisation strategy for the PeriCoach namely: • Executing the commercialisation strategy for the PeriCoach is focussed on the following milestones: • Building ‘best-in-class’ conservative treatment for pelvic floor conditions, with expansion from the current focus on urinary incontinence, which affects one in 3 women, to include pelvic organ prolapse, a condition which affects up to 10% of all women at some stage of their lives. • Validate and extend clinical credibility and effectiveness of PeriCoach • • Confirming market acceptance while creating a positive sales environment Securing competitive partnering agreements with multinational companies with the resources to make the PeriCoach a global success. Non-audit services The Board of Directors is satisfied that the provision of non-audit services during the year is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The directors are satisfied that the services disclosed below did not compromise the external auditor's independence for the following reasons: • all non-audit services are reviewed prior to commencement to ensure they do not adversely affect the integrity and objectivity of the auditor; and Pg. 10 Directors Report • • the nature of the services provided do not compromise the general principles relating to auditor independence in accordance with APES 110: Code of Ethics for Professional Accountants set by the Accounting Professional and Ethical Standards Board. The following fees were paid or payable to the external auditors for non-audit services provided during the year ended 30 June 2021: Bentleys QLD Pty Ltd Preparation of Tax Return Auditors independence declaration 2021 $2,750 2020 $3,000 The lead auditors, independence declaration for the year ended 30 June, 2021 has been received and can be found on page 24 of the financial report. Company secretary The following person held the position of Company secretary at the end of the year: Bryan Dulhunty (COSA Pty Ltd) has been the company secretary since 15 October 2012. COSA provides specialised Company Secretarial and CFO services to Life Science Companies. Bryan Dulhunty has extensive experience in the biotech industry having held roles covering Chairman, Managing Director, Company Secretary, CFO, and Non-Executive Director of listed and non-listed biotech companies. Meetings of directors During the year, 11 meetings of directors were held. Attendances by each director during the year were as follows: Dr Michael Monsour Mr Ross Mangelsdorf Dr Thomas Lönngren Dr Peter Corr Number eligible to attend Number Attended 11 11 1 11 11 11 1 11 Pg. 11 Directors Report No indemnities have been given or insurance premiums paid, during or since the end of the year, for any person who is or has been an officer or auditor of Analytica Limited. Employees Analytica recognises the value of diversity in the workplace and is committed to providing equal opportunity for all of its staff. Over 46% of current full-time equivalent employees are female. Where possible Analytica offers flexible work practices and work life balance as a key retention tool. Analytica is also committed to providing a workplace free from any form of harassment, bullying and discrimination. Options Unissued shares under option At the date of this report, the unissued ordinary shares of Analytica Limited under option are as follows Grant Date Date of Expiry Exercise Price Number under Option Unlisted Options 24-Nov-16 09-Jun-17 09-Jun-17 28-Jun-17 30-Nov-17 22-Dec-21 08-Jun-22 08-Jun-22 22-Dec-21 30-Nov-22 0.01300 0.01300 0.01036 0.01300 0.01300 Listed Options 14-Jun-21 28-Jun-23 0.003500 70,000,000 41,000,000 33,350,000 2,500,000 20,000,000 166,850,000 75,000,000 75,000,000 Option holders do not have any rights to participate in any issues of shares or other interests in the Company or any other entity. For details of options issued to directors and other key management personnel as remuneration, refer to the remuneration report. Pg. 12 Directors Report Remuneration report (audited) Remuneration policy The remuneration policy of Analytica Limited has been designed to align key management personnel (KMP) objectives with shareholder and business objectives by providing a fixed remuneration component and offering specific long-term incentives based on key performance areas affecting the Group's financial results. The Board of Analytica Limited believes the remuneration policy to be appropriate and effective in its ability to attract and retain the best key management personnel to run and manage the Group, as well as create goal congruence between directors, executives and shareholders. The Board's policy for determining the nature and amount of remuneration for key management personnel of the Group is as follows: • The remuneration policy has been developed by the Board, following professional advice from independent external consultants when required. • All key management personnel receive a base salary (which is based on factors such as length • • of service and experience), superannuation, fringe benefits, and performance incentives. Performance incentives are based on predetermined key performance indicators. Incentives paid in the form of options or rights are intended to align the interests of the KMP and the Group with those of the shareholders. In this regard, key management personnel are prohibited from limiting risk attached to those instruments by use of derivatives or other means. The performance of key management personnel is measured against criteria agreed with each executive and is based predominantly on the forecast growth of the Group’s profits and shareholders’ value. All bonuses and incentives must be linked to predetermined performance criteria. The Board may, however, exercise its discretion in relation to approving incentives, bonuses and options. Any changes must be justified by reference to measurable performance criteria. The policy is designed to attract the highest calibre of executives and reward them for performance that results in long-term growth in shareholder wealth. Key management personnel receive a superannuation guarantee contribution required by the law, which is currently 9.5%, and do not receive any other retirement benefits. Some individuals, however, have chosen to sacrifice part of their salary to increase payments towards superannuation. Upon retirement, key management personnel are paid employee benefit entitlements accrued to the date of retirement. Key management personnel are paid a percentage of between 5-10% of their salary in the event of redundancy. Any options not exercised before or on the date of termination will lapse. All remuneration paid to key management personnel is valued at the cost to the Group and expensed. Pg. 13 Directors Report The Board's policy is to remunerate non-executive directors at market rates for time, commitment, and responsibilities. The board determines payments to the non-executive directors and reviews their remuneration annually, based on market practice, duties and accountability. Independent external advice is sought when required. The maximum aggregate amount of fees that can be paid to non-executive directors is subject to approval by shareholders at the Annual General Meeting, the current maximum is $550,000 which was approved at the 2011 AGM. In November 2004, the Board set individual directors fees at $50,000 per annum plus statutory superannuation and the chairman's fee at $75,000 plus statutory superannuation. Based on the current board structure total fees paid on a yearly basis will be $175,000 plus statutory superannuation. Key management personnel employed by the Company during the year, in addition to the Company’s Directors, is the Company’s Chief Executive Officer, Mr Geoff Daly (appointed on the 7 November 2005) and accepted the position of CEO on the 12 February 2014. Mr Daly has extensive experience in the design of medical devices, prototyping and manufacturing. Mr Daly is employed by the Company under the terms and conditions set out in an employment contract. Due to the size of the company and the nature of its operations, the contract is open-ended and not for a specific time frame. Mr Daly’s contract can be terminated by either party giving notice commensurate with the period of employment. There is no provision in the employment contract for the payment of any termination payments other than accrued statutory entitlements. Mr Mangelsdorf is employed by the Company as CFO. Mr Mangelsdorf has 41 years in the accounting profession. Due to the size of the company and the nature of its operations, the employment contract is open- ended and not for a specific time frame. Mr Mangelsdorf can be terminated by either party giving notice commensurate with the period of employment. There is no provision for the payment of any termination payments other than accrued statutory entitlements. Key management personnel are also entitled and encouraged to participate in the employee share and option arrangements to align their interests with shareholders' interests. Options granted under these arrangements do not carry dividend or voting rights. Each option is entitled to be converted into one ordinary share and is valued using the Black-Scholes methodology. Key management personnel who are subject to these arrangements are subject to a policy governing the use of external hedging arrangements. Such personnel are prohibited from entering into hedge arrangements, i.e. put options, on unvested shares and options which form part of their remuneration package. Terms of employment signed by such personnel contain details of such restrictions. Relationship between remuneration policy and company performance The remuneration policy has been tailored to increase goal congruence between shareholders, directors and executives. Two methods have been applied to achieve this aim, the first being a Pg. 14 Directors Report performance-based bonus based on key performance indicators, and the second being the issue of options to directors and executives to encourage the alignment of personal and shareholder interests. The following table shows the gross revenue, profits and dividends for the last five years for the Company, as well as the share prices at the end of the respective financial years. Revenue 2021 $ 801,647 2020 $ 2019 $ 2018 $ 2017 $ 809,919 829,556 1,010,565 1,254,337 Net Profit/(Loss) (1,507,406) (1,620,156) (2,054,174) (2,159,091) (3,254,704) Share Price at Year end Dividends Paid (cents) 0.01 - 0.01 0.01 0.01 - - - 0.01 - Performance conditions linked to remuneration Company executive fees are not linked to the performance of the Group. However, to align executives' interests with shareholder interests, the executives are encouraged to hold shares in the Group. Employment details of members of key management personnel The following table provides employment details of persons who were, during the financial year, members of key management personnel of the Group. The table also illustrates the proportion of remuneration that was performance based, non-performance based, and the proportion of remuneration received in the form of options. Pg. 15 Directors Report Group KMP Position Held as at 30 June 2021 and any Change during the Year Contract Details Duration and Termination Proportions of Elements of Remuneration Related to Performance Proportions of Elements of Remuneration Not Related to Performance l y r a a s - n o N d e s a b - h s a C % s t i n U s e r a h S i % s t h g R s n o i t p O % s e e F l y r a a S d e x i F % l a t o T Directors Dr M Monsour Mr R Mangelsdorf Dr T Lönngren Dr P Corr KMP G Daly Chairman Annual Review Executive Director and Chief Financial Officer Non-executive Director Non-executive Director Annual Review* Resigned 17 August 2020 Annual Review - - - - - - 100 100 - 23 77 100 - - - - - 100 100 100 100 100 100 Chief Executive Officer * - - * Open - ended contract; Termination by 5 weeks notice or 4 weeks employee. Service Agreements On appointment to the Board, all non-executive directors enter into a service agreement with the Company in the form of a letter of appointment. The letter summarises the Board policies and terms, including remuneration, relevant to the office of director. The remuneration and other terms of employment for the Managing Director and senior executives are set out in formal service agreements as summarised below. All service agreements are for an unlimited duration. The agreements for executives (other than the Managing Director, Chief Executive Officer and Chief Finance Officer which require 5 weeks’ notice, may be terminated by giving 4 weeks’ notice (except in cases of termination for cause where termination is immediate). In cases of resignation, no separation payment is made to the executive, except for amounts due and payable up to the date of ceasing employment, including accrued leave entitlements. Pg. 16 Directors Report Remuneration details for the year ended 30 June 2021 The following tables of benefits and payment represents components of the current year and comparative year remuneration for each member of the key management personnel of the Group. Such amounts have been calculated in accordance with Australian Accounting Standards. 2021 short term Total s e e f y r a l a s h s a c $ s u n o b y r a t e n o m n o n r e h t o $ $ $ $ post employment long ter m share based payments Total n o i t a u n n a r e p u s $ t s o p r e h t o t n e m y o p m e l n o i t a n m r e t i $ $ s t h g i r & s n o i t p o $ s t i n u & s e r a h s d e l t t e s - h s a c $ $ $ Directors Dr M Monsour Mr R Mangelsdorf Dr T Lönngren Dr P Corr KMP G Daly 75,000 176,000 6,586 50,000 270,000 577,586 - - - - - - - - - - - - - 75,000 9,500 - 176,000 18,303 - - - - 6,586 2,209 50,000 6,333 270,000 25,650 577,586 61,995 - - - - - - - - - - - - - 59,664 - - - 59,664 - - - - - - - 84,500 - 253,967 - - - - 8,795 56,333 295,650 699,245 2020 short term Total s e e f y r a l a s h s a c $ s u n o b y r a t e n o m n o n r e h t o $ $ $ $ post employment long ter m share based payments Total n o i t a u n n a r e p u S $ t s o p r e h t o t n e m y o p m e l n o i t a n m r e t i $ $ s t h g i r & s n o i t p o $ s t i n u & s e r a h s d e l t t e s - h s a c $ $ $ Directors Dr M Monsour Mr R Mangelsdorf Dr T Lönngren Dr P Corr KMP G Daly 75,000 176,000 50,000 50,000 258,333 609,333 - - - - - - - - - - - - - 75,000 7,125 - 176,000 16,720 - - - - 50,000 4,750 50,000 4,750 250,000 24,542 609,333 57,887 - - - - - - - - - - - - - - - - - - - - - - - - - 82,125 - 192,720 - - - - 54,750 54,750 282,875 667,220 Pg. 17 Directors Report Securities received that are not performance related No members of key management personnel are entitled to receive securities which are not performance-based as part of their remuneration package Cash performance-related bonuses There were no bonuses granted as remuneration to key management personnel and other executives during the year ended 30 June 2021 (2020: nil). Description of options/rights granted as remuneration Details of the options granted as remuneration to those key management personnel and executives during the year: 2021 Granted as remuneration Value of options at grant date Vested during the year Lapsed during the year No. $ No. No. Value of lapsed options at lapse date $ Directors Mr R Mangelsdorf Dr T Lönngren 50,000,000 59,664 50,000,000 - - - - 10,000,000 - 13,873 2020 Granted as remuneration Value of options at grant date Vested during the year Lapsed during the year Value of lapsed options at lapse date No. $ No. No. $ Directors NIL There have not been any alterations to the terms or conditions of any share based payment arrangements since grant date. Corporate Governance Analytica Ltd is committed to implementing the highest possible standards of corporate governance. In determining what those high standards should involve, Analytica Ltd has turned to the ASX Corporate Governance Council’s Corporate Governance Principles and Recommendations (ASX Principles) and has a corporate governance framework that reflects those recommendations within the structure of the Company. Pg. 18 Directors Report The Board of Analytica Ltd approved an updated series of policies and charters in line with the amendments to the ASX Principles. The Company’s policies and charters together form the basis of the Company’s governance framework at the date of signing of the directors’ report. Within this framework: • • • • the Board of Directors is accountable to shareholders for the performance of the Company; the Company’s goals to achieve milestones are set and promulgated; the risks of the business are identified and managed, and the Company’s established values and principles underpin the way in which it undertakes its operations. The Company has in place an entrenched, well developed governance culture which has its foundations in the ethical values that the Board, management and staff bring to the Company and their commitment to positioning the Company as a leader in its field. In certain instances, due to the size and stage of development of Analytica and its operations, it may not be practicable or necessary to implement the ASX Principles in their entirety. In these instances, Analytica Ltd has identified the areas of divergence. Pg. 19 Directors Report Key management personnel options and rights holdings 2021 Balance beginning of year s a d e t n a r G n o i t a r e n u m e r d e s i c r e x E Directors Unlisted Options @ 1.62 cents, Expire 10/12/20 Dr T Lonngren 10,000,000 - Unlisted Options @ 1.30 cents, Expire 21/12/21 Dr M Monsour 20,000,000 Mr R Mangelsdorf 10,000,000 Dr T Lonngren 10,000,000 - - - Unlisted Options @ 1.30 cents, Expire 30/11/22 Dr P Corr 10,000,000 Mr R Mangelsdorf 10,000,000 - - Listed Options @ 0.35 cents, Expire 28/06/23 Mr R Mangelsdorf Other KMP 50,000,000 Unlisted Options @ 1.30 cent, Expire 8/06/22 G Daly 10,000,000 - Unlisted Options @ 1.036 cent, Expire 8/06/22 G Daly 10,000,000 - Unlisted Options @ 1.036 cent, Expire 8/06/22 G Daly 14,000,000 - Unlisted Options @ 1.036 cent, Expire 8/06/22 G Daly 4,250,000 - 108,250,000 50,000,000 - - - - - - - - - - - Lapsed Balance at the end of year Vested during the year Vested and exercisable (10,000,000) - 20,000,000 10,000,000 10,000,000 10,000,000 10,000,000 - - - - - - - - - - - - 50,000,000 50,000,000 50,000,000 10,000,000 10,000,000 14,000,000 4,250,000 - - - - 10,000,000 10,000,000 14,000,000 4,250,000 - - - - - - - - - (10,000,000) 148,250,000 50,000,000 88,250,000 Pg. 20 Directors Report Key management personnel options and rights holdings 2020 Balance beginning of year s a d e t n a r G n o i t a r e n u m e r d e s i c r e x E Directors Unlisted Options @ 1.62 cents, Expire 10/12/20 Dr T Lonngren 10,000,000 - - Unlisted Options @ 1.30 cents, Expire 21/12/21 Dr M Monsour 20,000,000 Mr R Mangelsdorf 10,000,000 - - Dr T Lonngren - Unlisted Options @ 1.30 cents, Expire 30/11/22 10,000,000 Dr P Corr Mr R Mangelsdorf Other KMP 10,000,000 10,000,000 - - Unlisted Options @ 1.30 cent, Expire 8/06/22 G Daly 10,000,000 - Unlisted Options @ 1.30 cent, Expire 8/06/22 G Daly 10,000,000 - - - - - - - - Unlisted Options @ 1.036 cent, Expire 8/06/22 G Daly 14,000,000 - - Unlisted Options @ 1.036 cent, Expire 8/06/22 G Daly 4,250,000 108,250,000 - - - - Lapsed Balance at the end of year Vested during the year Vested and exercisable - - - - - - - - - - - 10,000,000 20,000,000 10,000,000 10,000,000 10,000,000 10,000,000 10,000,000 10,000,000 14,000,000 4,250,000 108,250,000 - - - - - - - - - - - 10,000,000 - - - - - 10,000,000 10,000,000 14,000,000 4,250,000 48,250,000 Pg. 21 Directors Report Key management personnel shareholdings The number of ordinary shares in Analytica Limited held by each key management person of the Group during the year is as follows: 2021 Balance at beginning of year On exercise of options Other changes during the year Balance at end of year Directors Dr M Monsour Mr R Mangelsdorf Dr P Corr KMP Mr G Daly 876,207,457 107,898,245 360,790,157 1,344,895,859 2,081,658 1,346,977,517 - - - - - - 214,285,714 1,090,493,171 - - 107,898,245 360,790,157 214,285,714 1,559,181,573 - 2,081,658 214,285,714 1,561,263,231 2020 Balance at beginning of year On exercise of options Other changes during the year Balance at end of year Directors Dr M Monsour Mr R Mangelsdorf Dr P Corr KMP Mr G Daly 876,207,457 107,898,245 360,790,157 1,344,895,859 2,081,658 1,346,977,517 - - - - - - - - - - - - 876,207,457 107,898,245 360,790,157 1,344,895,859 2,081,658 1,346,977,517 Pg. 23 Directors Report Key Management and Staff Geoff Daly, Chief Executive Officer Mr Daly is a Chartered Biomedical and Mechanical Engineer with 25 years of professional engineering experience, the last 20 in the medical device industry. Mr Daly has expertise in design processes, quality systems, and business system improvement, and is trained in the use of Six Sigma tools. He has extensive hands- on design experience of product development in FDA QSR and ISO 13485 environments in some of Australia's largest and smallest medical device companies. Chelsea Cornelius – Product Development and Operations Manager Chelsea started at Analytica in 2008 and has been a key developer of the PeriCoach. Chelsea has a double degree of Arts (Cultural Studies) and Engineering (Mechanical; Hons) at Swinburne University, and a Masters of Biomedical Engineering at Melbourne University. In 2016 Chelsea received the Medical Technology Association of Australia Outstanding Achievement Award. AUDITOR’S INDEPENDENCE DECLARATION UNDER SECTION 307C OF THE CORPORATIONS ACT 2001 TO THE DIRECTORS OF ANALYTICA LIMITED I declare that, to the best of my knowledge and belief, during the year ended 30 June 2021 there has been: i. no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the audit; and ii. no contraventions of any applicable code of professional conduct in relation to the audit. Bentleys Brisbane Partnership Chartered Accountants Ashley Carle Partner 30 September 2021 Pg. 25 Consolidated Statement of Profit or Loss and Other Comprehensive Income Consolidated Statement of Profit or Loss and Other Comprehensive Income Continuing operations Sales Revenue Cost of Sales Gross Profit Grant Income Government Business Support Investment revenue Royalty Income Administration expense Depreciation, amortisation and impairments Finance expenses Foreign Currency Gains and Losses Investments Fair Value Adjustment Marketing expenses Occupancy expenses Option expenses Patent maintenance expenses Research and development expense Loss before income tax Income tax expense Loss for the year Other comprehensive income for the year Total comprehensive income for the year Loss attributable to: Members of the parent entity Total comprehensive income attributable to: Members of the parent entity Note 2 2 2 2 2 2 2 2 2 2 2 3 2021 $ 7,244 (3,495) 3,749 656,895 131,300 212 5,996 (841,414) (9,202) (58,497) (8,458) 5,553 (184,331) (5,094) (89,496) (23,148) (1,091,471) (1,507,406) - (1,507,406) - (1,507,406) - (1,507,406) - (1,507,406) 2020 $ 11,367 (16,795) (5,428) 708,447 74,000 4,014 12,091 (797,343) (8,634) (227) (11,327) (7,643) (131,640) (6,045) 49,005 (27,779) (1,471,647) (1,620,156) - (1,620,156) - (1,620,156) - (1,620,156) - (1,620,156) Earnings per share Basic earnings per share (dollars) Diluted earnings per share (dollars) 6 6 (0.0004) (0.0004) (0.0005) (0.0005) Pg. 26 Consolidated Statement of Financial Position Consolidated Statement of Financial Position Assets Current Assets Cash and cash equivalents Inventories Prepayments Trade and other receivables Non-current Assets Intangible assets Other financial assets Property, plant and equipment Total Assets Liabilities Current Liabilities Directors loans Employee benefits Short-term provisions Trade and other payables Non-Current Liabilities Provision for Long Service Leave Total Liabilities Net Assets Equity Issued capital Reserves Retained Earnings Total Equity Consolidated Group Notes 2021 $ 2020 $ 7 9 13 8 12 10 11 16 15 14 16 1,890,683 177,802 114,836 18,934 2,202,255 384,092 13,581 8,690 406,363 2,608,618 - 263,785 70,295 171,448 505,528 66,215 111,578 138,032 20,323 336,148 315,914 8,028 7,562 331,504 667,652 75,154 254,999 66,900 267,289 664,342 11,246 9,554 516,774 673,896 2,091,844 (6,244) 18 17 107,383,796 900,065 (106,192,017) 103,867,798 852,188 (104,726,230) 2,091,844 (6,244) Pg. 27 Consolidated Statement of Changes in Equity Consolidated Statement of Changes in Equity 2021 Balance at 1 July 2020 Profit/(Loss) attributable to members of the parent entity Options issued during the year Options lapsed/forfeited during the year Transaction costs Shares issued during the year Balance at 30 June 2021 2020 Balance at 1 July 2019 Profit/(Loss) attributable to members of the parent entity Options reversed during the year Options lapsed during the year Transaction costs Balance at 30 June 2020 Note Ordinary Shares $ 103,867,798 Retained Earnings $ (104,726,230) Option Reserve $ 852,188 Total $ (6,244) - - - (1,507,406) - (1,507,406) - 89,496 89,496 41,619 (41,619) - (313,663) 3,829,661 107,383,796 - - (106,192,017) - - 900,065 (313,663) 3,829,661 2,091,844 Ordinary Shares $ 103,873,113 Retained Earnings $ (103,132,370) Option Reserve $ Total $ 927,489 1,668,232 - (1,620,156) - (1,620,156) 17, 18 Note - - (5,315) 103,867,798 - 26,296 - (104,726,230) (49,005) (26,296) - 852,188 (49,005) - (5,315) (6,244) 17, 18 Pg. 28 Consolidated Statement of Cash Flows Consolidated Statement of Cash Flows Consolidated Group Receipts from customers Receipts from grants Receipts from Government Support Receipts from royalties Payments to suppliers and employees Interest received Finance costs Interest paid Net cash provided by (used in) operating activities 21 Cash flows from investing activities: Payment for intangible asset Payment for Plant & Equipment Net cash used by investing activities Cash flows from financing activities: Proceeds from borrowings Repayment of borrowings Proceeds from issue of shares Costs of fund raising Net cash used by financing activities Net increase (decrease) in cash and cash equivalents held Cash and cash equivalents at beginning of year Cash and cash equivalents at end of financial year 7 2021 $ 7,244 656,895 131,300 5,996 (2,281,018) 212 - (58,497) (1,537,868) (74,029) (4,479) (78,508) - (75,154) 3,829,661 (313,663) 3,440,844 1,824,468 66,215 1,890,683 2020 $ 11,367 708,447 74,000 12,091 (2,497,988) 4,014 - (73) (1,688,142) (84,631) - (84,631) 75,000 - - (5,315) 69,685 (1,703,088) 1,769,303 66,215 Pg. 29 Notes to the Financial Statements Notes to the Financial Statements These consolidated financial statements and notes represent those of Analytica Limited and Controlled Entities (the “consolidated group” or “group”). The separate financial statements of the parent entity, Analytica Limited, have not been presented within this financial report as permitted by the Corporations Act 2001. The financial statements were authorised for issue on 30th September 2021 by the directors of the company. 1: Summary of Significant Accounting Policies Basis of Preparation These general purpose financial statements have been prepared in accordance with the Corporations Act 2001, Australian Accounting Standards and Interpretations of the Australian Accounting Standards Board and International Financial Reporting Standards as issued by the International Accounting Standards Board. The Group is a for-profit entity for financial reporting purposes under Australian Accounting Standards. Material accounting policies adopted in the preparation of these financial statements are presented below and have been consistently applied unless stated otherwise. Except for cash flow information, the financial statements have been prepared on an accruals basis and are based on historical costs, modified, where applicable, by the measurement at fair value of selected non-current assets, financial assets and financial liabilities. a. Principles of Consolidation The consolidated financial statements incorporate all of the assets, liabilities and results of the parent (Analytica Limited) and all of the subsidiaries (including any structured entities). Subsidiaries are entities the parent controls. The parent controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. A list of the subsidiaries is provided in Note 23. The assets, liabilities and results of all subsidiaries are fully consolidated into the financial statements of the Group from the date on which control is obtained by the Group. The consolidation of a subsidiary is discontinued from the date that control ceases. Intercompany transactions, balances and unrealised gains or losses on transactions between group entities are fully eliminated on consolidation. Accounting policies of subsidiaries have been changed and adjustments made where necessary to ensure uniformity of the accounting policies adopted by the Group. Equity interests in a subsidiary not attributable, directly or indirectly, to the Group are presented as “non-controlling interests”. The Group initially recognises non-controlling interests that are present ownership interests in subsidiaries and are entitled to a proportionate share of the subsidiary’s net assets on liquidation at either fair value or at the non- Pg. 30 Notes to the Financial Statements controlling interests’ proportionate share of the subsidiary’s net assets. Subsequent to initial recognition, non-controlling interests are attributed their share of profit or loss and each component of other comprehensive income. Non-controlling interests are shown separately within the equity section of the statement of financial position and statement of comprehensive income. Business combinations Business combinations occur where an acquirer obtains control over one or more businesses. A business combination is accounted for by applying the acquisition method, unless it is a combination involving entities or businesses under common control. The business combination will be accounted for from the date that control is obtained, whereby the fair value of the identifiable assets acquired and liabilities (including contingent liabilities) assumed is recognised (subject to certain limited exemptions). When measuring the consideration transferred in the business combination, any asset or liability resulting from a contingent consideration arrangement is also included. Subsequent to initial recognition, contingent consideration classified as equity is not remeasured and its subsequent settlement is accounted for within equity. Contingent consideration classified as an asset or liability is remeasured in each reporting period to fair value, recognising any change to fair value in profit or loss, unless the change in value can be identified as existing at acquisition date. All transaction costs incurred in relation to business combinations, other than those associated with the issue of a financial instrument, are recognised as expenses in profit or loss when incurred. The acquisition of a business may result in the recognition of goodwill or a gain from a bargain purchase. Goodwill Goodwill is carried at cost less any accumulated impairment losses. Goodwill is calculated as the excess of the sum of: i. ii. iii. the consideration transferred; any non-controlling interest (determined under either the full goodwill or proportionate interest method); and the acquisition date fair value of any previously held equity interest; over the acquisition date fair value of net identifiable assets acquired. The acquisition date fair value of the consideration transferred for a business combination plus the acquisition date fair value of any previously held equity interest shall form the cost of the investment in the separate financial statements. Fair value re-measurements in any pre-existing equity holdings are recognised in profit or loss in the period in which they arise. Where changes in the value of such equity holdings had previously been recognised in other comprehensive income, such amounts are recycled to profit or loss. Pg. 31 Notes to the Financial Statements The amount of goodwill recognised on acquisition of each subsidiary in which the Group holds less than 100% interest will depend on the method adopted in measuring the non-controlling interest. The Group can elect in most circumstances to measure the non-controlling interest in the acquired either at fair value (full goodwill method) or at the non-controlling interest's proportionate share of the subsidiary's identifiable net assets (proportionate interest method). In such circumstances, the Group determines which method to adopt for each acquisition and this is stated in the respective notes to these financial statements disclosing the business combination. Under the full goodwill method, the fair value of the non-controlling interest is determined using valuation techniques which make the maximum use of market information where available. Under this method, goodwill attributable to the non-controlling interest is recognised in the consolidated financial statements. Goodwill on acquisition of subsidiaries is included in intangible assets. Goodwill on acquisition of associates is included in investments in associates. Goodwill is tested for impairment annually and is allocated to the Group's cash-generating units or groups of cash-generating units, representing the lowest level at which goodwill is monitored and not larger than an operating segment. Gains and losses on the disposal of an entity include the carrying amount of goodwill related to the entity disposed of. Changes in the ownership interests in a subsidiary that do not result in a loss of control are accounted for as equity transactions and do not affect the carrying amounts of goodwill. b. Income Tax The income tax expense (income) for the year comprises current income tax expense (income) and deferred tax expense (income). Current income tax expense charged to profit or loss is the tax payable on taxable income. Current tax liabilities (assets) are measured at the amounts expected to be paid to (recovered from) the relevant taxation authority. Deferred income tax expense reflects movements in deferred tax asset and deferred tax liability balances during the year as well as unused tax losses. Current and deferred income tax expense (income) is charged or credited outside profit or loss when the tax relates to items that are recognised outside profit or loss. Except for business combinations, no deferred income tax is recognised from the initial recognition of an asset or liability, where there is no effect on accounting or taxable profit or loss. Deferred tax assets and liabilities are calculated at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled and their measurement also reflects the manner in which management expects to recover or settle the carrying amount of the related asset or liability. Pg. 32 Notes to the Financial Statements With respect to non-depreciable items of property, plant and equipment measured at fair value and items of investment property measured at fair value, the related deferred tax liability or deferred tax asset is measured on the basis that the carrying amount of the asset will be recovered entirely through sale. Deferred tax assets relating to temporary differences and unused tax losses are recognised only to the extent that it is probable that future taxable profit will be available against which the benefits of the deferred tax asset can be utilised. Where temporary differences exist in relation to investments in subsidiaries, branches, associates, and joint ventures, deferred tax assets and liabilities are not recognised where the timing of the reversal of the temporary difference can be controlled and it is not probable that the reversal will occur in the foreseeable future. Current tax assets and liabilities are offset where a legally enforceable right of set-off exists and it is intended that net settlement or simultaneous realisation and settlement of the respective asset and liability will occur. Deferred tax assets and liabilities are offset where: (i) a legally enforceable right of set-off exists; and (ii) the deferred tax assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where it is intended that net settlement or simultaneous realisation and settlement of the respective asset and liability will occur in future periods in which significant amounts of deferred tax assets or liabilities are expected to be recovered or settled. c. Fair Value of Assets and Liabilities The Group measures some of its assets and liabilities at fair value on either a recurring or non-recurring basis, depending on the requirements of the applicable Accounting Standard. Fair value is the price the Group would receive to sell an asset or would have to pay to transfer a liability in an orderly (i.e. unforced) transaction between independent, knowledgeable and willing market participants at the measurement date. As fair value is a market-based measure, the closest equivalent observable market pricing information is used to determine fair value. Adjustments to market values may be made having regard to the characteristics of the specific asset or liability. The fair values of assets and liabilities that are not traded in an active market are determined using one or more valuation techniques. These valuation techniques maximise, to the extent possible, the use of observable market data. To the extent possible, market information is extracted from either the principal market for the asset or liability (ie the market with the greatest volume and level of activity for the asset or liability) or, in the absence of such a market, the most advantageous market available to the entity at the end of the reporting period (ie the market that maximises the receipts from the sale of the asset or minimises the Pg. 33 Notes to the Financial Statements payments made to transfer the liability, after taking into account transaction costs and transport costs). For non-financial assets, the fair value measurement also takes into account a market participant’s ability to use the asset in its highest and best use or to sell it to another market participant that would use the asset in its highest and best use. The fair value of liabilities and the entity’s own equity instruments (excluding those related to share- based payment arrangements) may be valued, where there is no observable market price in relation to the transfer of such financial instruments, by reference to observable market information where such instruments are held as assets. Where this information is not available, other valuation techniques are adopted and, where significant, are detailed in the respective note to the financial statements. d. Inventories Inventories are measured at the lower of cost and net realisable value. The cost of manufactured products includes direct materials, direct labour and an appropriate proportion of variable and fixed overheads. Cost of inventory is determined using the first-in-first-out basis and are net of any rebates and discounts received. e. Property, Plant and Equipment Each class of property, plant and equipment is carried at cost or fair value as indicated less, where applicable, any accumulated depreciation and impairment losses. Property Freehold land and buildings are carried at their fair value (being the amount for which an asset could be exchanged between knowledgeable, willing parties in an arm’s length transaction), based on periodic, but at least triennial, valuations by external independent valuers, less accumulated depreciation for buildings. Increases in the carrying amount arising on revaluation of land and buildings are credited to a revaluation surplus in equity. Decreases that offset previous increases of the same asset are recognised against revaluation surplus directly in equity; all other decreases are recognised in profit or loss. Any accumulated depreciation at the date of revaluation is eliminated against the gross carrying amount of the asset and the net amount is restated to the revalued amount of the asset. Plant and equipment Plant and equipment are measured on the cost basis and therefore carried at cost less accumulated depreciation and any accumulated impairment. In the event the carrying amount of plant and equipment is greater than the estimated recoverable amount, the carrying amount is written down immediately to the estimated recoverable amount and impairment losses are recognised either in profit Pg. 34 Notes to the Financial Statements or loss or as a revaluation decrease if the impairment losses relate to a revalued asset. A formal assessment of recoverable amount is made when impairment indicators are present. The carrying amount of plant and equipment is reviewed annually by directors to ensure it is not in excess of the recoverable amount from these assets. The recoverable amount is assessed on the basis of the expected net cash flows that will be received from the asset’s employment and subsequent disposal. The expected net cash flows have been discounted to their present values in determining recoverable amounts. The cost of fixed assets constructed within the consolidated group includes the cost of materials, direct labour, borrowing costs and an appropriate proportion of fixed and variable overheads. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance are recognised as expenses in profit or loss during the financial period in which they are incurred. Depreciation The depreciable amount of all fixed assets including buildings and capitalised lease assets, but excluding freehold land, is depreciated on a straight-line basis over the asset’s useful life to the consolidated group commencing from the time the asset is held ready for use. Leasehold improvements are depreciated over the shorter of either the unexpired period of the lease or the estimated useful lives of the improvements. The depreciation rates used for each class of depreciable assets are: Class of Fixed Asset Plant and equipment Office equipment Computer equipment Depreciation Rate 13.33% – 20% 10% – 66.67% 20% - 100% The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount. Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These gains and losses are recognised in profit or loss in the period in which they arise. When revalued assets are sold, amounts included in the revaluation surplus relating to that asset are transferred to retained earnings. Pg. 35 Notes to the Financial Statements f. Leases At inception of a contract, the Group assesses if the contract contains or is a lease. If there is a lease present, a right-of-use asset and a corresponding lease liability is recognised by the Group where the Group is a lessee. However, all contracts classified as short-term leases (with a remaining lease term of 12 months or less) and leases of low value assets are recognised as an operating expense on a straight- line basis over the term of the lease. Initially the lease liability is measured at the present value of the lease payments still to be paid at commencement date. The lease payments are discounted at the interest rate implicit in the lease. If this rate cannot be readily determined, the Group uses the incremental borrowing rate. Lease payments included in the measurement of the lease liability are as follows: - - - - - - Fixed lease payments less any lease incentives; Variable lease payments that depend on an index or rate, initially measured using the index or rate at the commencement date; The amount expected to be paid by the lessee under residual value guarantees; The exercise price of purchase options, if the lessee is reasonably certain to exercise the options; Lease payments under extension options, if the lessee is reasonably certain to exercise the options; and Payments of penalties for terminating the lease, if the lease term reflects the exercise of an option to terminate the lease. The right-of-use assets comprise the initial measurement of the corresponding lease liability as mentioned above, any lease payments made at or before the commencement date, as well as any initial direct costs. The subsequent measurement of the right-of-use assets is at cost less accumulated depreciation and impairment losses. Right-of-use assets are depreciated over the lease term or useful life of the underlying asset, whichever is the shortest. Where a lease transfers ownership of the underlying asset, or the cost of the right-of- use asset reflects that the Group anticipates to exercise a purchase option, the specific asset is depreciated over the useful life of the underlying asset. Pg. 36 Notes to the Financial Statements Variable rents that do not depend on an index or rate are not included in the measurement of the lease liability and the right-of-use asset. The related payments are recognised as an expense in the period in which the event or condition that triggers those payments occurs and are included in the line ‘Other expenses" in the statement of profit or loss and other comprehensive income. g. Financial Instruments Initial recognition and measurement Financial assets and financial liabilities are recognised when the Group becomes a party to the contractual provisions to the instrument. For financial assets, this is the date that the Group commits itself to either the purchase or sale of the asset (i.e. trade date accounting is adopted). Financial instruments (except for trade receivables) are initially measured at fair value plus transaction costs, except where the instrument is classified “at fair value through profit or loss”, in which case transaction costs are expensed to profit or loss immediately. Where available, quoted prices in an active market are used to determine fair value. In other circumstances, valuation techniques are adopted. Trade receivables are initially measured at the transaction price if the trade receivables do not contain a significant financing component. Classification and subsequent measurement Financial liabilities Financial liabilities are subsequently measured at: – amortised cost; or – fair value through profit or loss. A financial liability is measured at fair value through profit or loss if the financial liability is: – held for trading; or – initially designated as at fair value through profit or loss. All other financial liabilities are subsequently measured at amortised cost using the effective interest method. The effective interest method is a method of calculating the amortised cost of a debt instrument and of allocating interest expense in profit or loss over the relevant period. The effective interest rate is the internal rate of return of the financial asset or liability, that is, it is the rate that exactly discounts the estimated future cash flows through the expected life of the instrument to the net carrying amount at initial recognition. A financial liability is held for trading if it is: Pg. 37 Notes to the Financial Statements – incurred for the purpose of repurchasing or repaying in the near term; – part of a portfolio where there is an actual pattern of short-term profit taking; or – a derivative financial instrument (except for a derivative that is in a financial guarantee contract or a derivative that is in an effective hedging relationship). Any gains or losses arising on changes in fair value are recognised in profit or loss to the extent that they are not part of a designated hedging relationship. The change in fair value of the financial liability attributable to changes in the issuer's credit risk is taken to other comprehensive income and is not subsequently reclassified to profit or loss. Instead, it is transferred to retained earnings upon derecognition of the financial liability. If taking the change in credit risk in other comprehensive income enlarges or creates an accounting mismatch, then these gains or losses should be taken to profit or loss rather than other comprehensive income. A financial liability cannot be reclassified. Financial guarantee contracts A financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due in accordance with the terms of a debt instrument. Financial guarantee contracts are initially measured at fair value (and if not designated as at fair value through profit or loss and do not arise from a transfer of a financial asset) and subsequently measured at the higher of: – the amount of loss allowance determined in accordance to AASB 9.3.25.3; and – the amount initially recognised less accumulative amount of income recognised in accordance with the revenue recognition policies. Financial assets Financial assets are subsequently measured at: – amortised cost; – fair value through other comprehensive income; or – fair value through profit or loss. Measurement is on the basis of two primary criteria: – the contractual cash flow characteristics of the financial asset; and – the business model for managing the financial assets. Pg. 38 Notes to the Financial Statements A financial asset that meets the following conditions is subsequently measured at amortised cost: – the financial asset is managed solely to collect contractual cash flows; and – the contractual terms within the financial asset give rise to cash flows that are solely payments of principal and interest on the principal amount outstanding on specified dates. A financial asset that meets the following conditions is subsequently measured at fair value through other comprehensive income: – the contractual terms within the financial asset give rise to cash flows that are solely payments of principal and interest on the principal amount outstanding on specified dates; and – the business model for managing the financial asset comprises both contractual cash flows collection and the selling of the financial asset. By default, all other financial assets that do not meet the measurement conditions of amortised cost and fair value through other comprehensive income are subsequently measured at fair value through profit or loss. The Group initially designates a financial instrument as measured at fair value through profit or loss if: – it eliminates or significantly reduces a measurement or recognition inconsistency (often referred to as an “accounting mismatch”) that would otherwise arise from measuring assets or liabilities or recognising the gains and losses on them on different bases; – it is in accordance with the documented risk management or investment strategy and information about the groupings is documented appropriately, so the performance of the financial liability that is part of a group of financial liabilities or financial assets can be managed and evaluated consistently on a fair value basis; and – it is a hybrid contract that contains an embedded derivative that significantly modifies the cash flows otherwise required by the contract. The initial designation of the financial instruments to measure at fair value through profit or loss is a one-time option on initial classification and is irrevocable until the financial asset is derecognised. Equity instruments At initial recognition, the Group made an irrevocable election to measure any subsequent changes in fair value of equity instruments. Dividend revenue received on underlying equity instruments investments is also recognised in profit or loss. Regular way purchases and sales of financial assets are recognised and derecognised at settlement date in accordance with the Group's accounting policy. Pg. 39 Notes to the Financial Statements Derecognition Derecognition refers to the removal of a previously recognised financial asset or financial liability from the statement of financial position. Derecognition of financial liabilities A liability is derecognised when it is extinguished (ie when the obligation in the contract is discharged, cancelled or expires). An exchange of an existing financial liability for a new one with substantially modified terms, or a substantial modification to the terms of a financial liability, is treated as an extinguishment of the existing liability and recognition of a new financial liability. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable, including any non-cash assets transferred or liabilities assumed, is recognised in profit or loss. Derecognition of financial assets A financial asset is derecognised when the holder's contractual rights to its cash flows expires, or the asset is transferred in such a way that all the risks and rewards of ownership are substantially transferred. All the following criteria need to be satisfied for the derecognition of a financial asset: – the right to receive cash flows from the asset has expired or been transferred; – all risk and rewards of ownership of the asset have been substantially transferred; and – the Group no longer controls the asset (ie it has no practical ability to make unilateral decisions to sell the asset to a third party). On derecognition of a financial asset measured at amortised cost, the difference between the asset's carrying amount and the sum of the consideration received and receivable is recognised in profit or loss. On derecognition of a debt instrument classified as fair value through other comprehensive income, the cumulative gain or loss previously accumulated in the investment revaluation reserve is reclassified to profit or loss. On derecognition of an investment in equity which the Group elected to classify under fair value through other comprehensive income, the cumulative gain or loss previously accumulated in the investments revaluation reserve is not reclassified to profit or loss, but is transferred to retained earnings. Impairment The Group recognises a loss allowance for expected credit losses on: Pg. 40 Notes to the Financial Statements – financial assets that are measured at amortised cost or fair value through other comprehensive income; – lease receivables; – contract assets (eg amount due from customers under construction contracts); – loan commitments that are not measured at fair value through profit or loss; and – financial guarantee contracts that are not measured at fair value through profit or loss. Loss allowance is not recognised for: – financial assets measured at fair value through profit or loss; or – equity instruments measured at fair value through other comprehensive income. Expected credit losses are the probability-weighted estimate of credit losses over the expected life of a financial instrument. A credit loss is the difference between all contractual cash flows that are due and all cash flows expected to be received, all discounted at the original effective interest rate of the financial instrument. The Group uses the following approaches to impairment, as applicable under AASB 9: Financial Instruments: – the general approach; and – the simplified approach. General approach Under the general approach, at each reporting period, the Group assessed whether the financial instruments are credit impaired, and: – if the credit risk of the financial instrument increased significantly since initial recognition, the Group measured the loss allowance of the financial instruments at an amount equal to the lifetime expected credit losses; and – if there was no significant increase in credit risk since initial recognition, the Group measured the loss allowance for that financial instrument at an amount equal to 12-month expected credit losses. Simplified approach The simplified approach does not require tracking of changes in credit risk at every reporting period, but instead requires the recognition of lifetime expected credit loss at all times. This approach is applicable to: – trade receivables or contract assets that result from transactions that are within the scope of AASB 15: Revenue from Contracts with Customers, and which do not contain a significant financing component; and Pg. 41 Notes to the Financial Statements – lease receivables. In measuring the expected credit loss, a provision matrix for trade receivables is used taking into consideration various data to get to an expected credit loss (ie diversity of its customer base, appropriate groupings of its historical loss experience, etc). Recognition of expected credit losses in financial statements At each reporting date, the Group recognises the movement in the loss allowance as an impairment gain or loss in the statement of profit or loss and other comprehensive income. The carrying amount of financial assets measured at amortised cost includes the loss allowance relating to that asset. Pg. 42 Notes to the Financial Statements Assets measured at fair value through other comprehensive income are recognised at fair value with changes in fair value recognised in other comprehensive income. The amount in relation to change in credit risk is transferred from other comprehensive income to profit or loss at every reporting period. For financial assets that are unrecognised (eg loan commitments yet to be drawn, financial guarantees), a provision for loss allowance is created in the statement of financial position to recognise the loss allowance. h. Impairment of Assets At the end of each reporting period, the Group assesses whether there is any indication that an asset may be impaired. The assessment will include the consideration of external and internal sources of information including dividends received from subsidiaries, associates or joint ventures deemed to be out of pre-acquisition profits. If such an indication exists, an impairment test is carried out on the asset by comparing the recoverable amount of the asset, being the higher of the asset’s fair value less costs of disposal and value in use, to the asset’s carrying amount. Any excess of the asset’s carrying amount over its recoverable amount is recognised immediately in profit or loss, unless the asset is carried at a revalued amount in accordance with another Standard (eg in accordance with the revaluation model in AASB 116: Property, Plant and Equipment). Any impairment loss of a revalued asset is treated as a revaluation decrease in accordance with that other Standard. Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. Impairment testing is performed annually for goodwill, intangible assets with indefinite lives and intangible assets not yet available for use. i. Intangibles Other than Goodwill Patents and trademarks Patents and trademarks are recognised at cost of acquisition. They have a finite life and are carried at cost less any accumulated amortisation and any impairment losses. Patents and trademarks are amortised over their useful lives ranging from 0 to 20 years. Research and development expenditure during the research phase of a project is recognised as an expense when incurred. Development costs are capitalised only when technical feasibility studies identify that the project is expected to deliver future economic benefits and these benefits can be measured reliably. Capitalised development costs have a finite useful life and are amortised on a systematic basis based on the future economic benefits over the useful life of the project. Pg. 43 Notes to the Financial Statements j. Foreign Currency Transactions and Balances Functional and presentation currency The functional currency of each of the Group’s entities is measured using the currency of the primary economic environment in which that entity operates. The consolidated financial statements are presented in Australian dollars, which is the parent entity’s functional currency. Transactions and balances Foreign currency transactions are translated into functional currency using the exchange rates prevailing at the date of the transaction. Foreign currency monetary items are translated at the year- end exchange rate. Non-monetary items measured at historical cost continue to be carried at the exchange rate at the date of the transaction. Non-monetary items measured at fair value are reported at the exchange rate at the date when fair values were determined. Exchange differences arising on the translation of monetary items are recognised in profit or loss, except where deferred in equity as a qualifying cash flow or net investment hedge. Exchange differences arising on the translation of non-monetary items are recognised directly in other comprehensive income to the extent that the underlying gain or loss is recognised in other comprehensive income; otherwise the exchange difference is recognised in profit or loss. Group companies The financial results and position of foreign operations, whose functional currency is different from the Group’s presentation currency, are translated as follows: – assets and liabilities are translated at exchange rates prevailing at the end of the reporting period; – income and expenses are translated at average exchange rates for the period; and – retained earnings are translated at the exchange rates prevailing at the date of the transaction. Exchange differences arising on translation of foreign operations with functional currencies other than Australian dollars are recognised in other comprehensive income and included in the foreign currency translation reserve in the statement of financial position. The cumulative amount of these differences is reclassified into profit or loss in the period in which the operation is disposed of. k. Employee Benefits Short-term employee benefits Provision is made for the Group’s obligation for short-term employee benefits. Short-term employee benefits are benefits (other than termination benefits) that are expected to be settled wholly before 12 months after the end of the annual reporting period in which the employees render the related service, including wages, salaries and annual leave. Short-term employee benefits are measured at the (undiscounted) amounts expected to be paid when the obligation is settled. Pg. 44 Notes to the Financial Statements Other long-term employee benefits Provision is made for employees’ long service leave and annual leave entitlements not expected to be settled wholly within 12 months after the end of the annual reporting period in which the employees render the related service. Other long-term employee benefits are measured at the present value of the expected future payments to be made to employees. Expected future payments incorporate anticipated future wage and salary levels, durations of service and employee departures and are discounted at rates determined by reference to market yields at the end of the reporting period on corporate bonds that have maturity dates that approximate the terms of the obligations. Any re measurements for changes in assumptions of obligations for other long-term employee benefits are recognised in profit or loss in the periods in which the changes occur. The Group’s obligations for long-term employee benefits are presented as non-current provisions in its statement of financial position, except where the Group does not have an unconditional right to defer settlement for at least 12 months after the end of the reporting period, in which case the obligations are presented as current provisions. Termination benefits When applicable, the Group recognises a liability and expense for termination benefits at the earlier of: (i) the date when the Group can no longer withdraw the offer for termination benefits; and (ii) when the Group recognises costs for restructuring pursuant to AASB 137: Provisions, Contingent Liabilities and Contingent Assets and the costs include termination benefits. In either case, unless the number of employees affected is known, the obligation for termination benefits is measured on the basis of the number of employees expected to be affected. Termination benefits that are expected to be settled wholly before 12 months after the annual reporting period in which the benefits are recognised are measured at the (undiscounted) amounts expected to be paid. All other termination benefits are accounted for on the same basis as other long-term employee benefits. Equity-settled compensation The Group operates an employee share and option plan. Share-based payments to employees are measured at the fair value of the instruments issued and amortised over the vesting periods. Share- based payments to non-employees are measured at the fair value of goods or services received or the fair value of the equity instruments issued, if it is determined the fair value of the goods or services cannot be reliably measured, and are recorded at the date the goods or services are received. The corresponding amount is recorded to the option reserve. The fair value of options is determined using the Black-Scholes pricing model. The number of shares and options expected to vest is reviewed and adjusted at the end of each reporting period such that the amount recognised for services received as consideration for the equity instruments granted is based on the number of equity instruments that eventually vest. Pg. 45 Notes to the Financial Statements l. Provisions Provisions are recognised when the Group has a legal or constructive obligation, as a result of past events, for which it is probable that an outflow of economic benefits will result and that outflow can be reliably measured. Provisions are measured using the best estimate of the amounts required to settle the obligation at the end of the reporting period. m. Provision for Warranties Provision is made in respect of the Group’s best estimate of the liability on all products and services under warranty at the end of the reporting period. The provision is measured as the present value of future cash flows estimated to be required to settle the warranty obligation. The future cash flows have been estimated by reference to the consolidated group’s history of warranty claims. n. Cash and Cash Equivalents Cash and cash equivalents include cash on hand, deposits available on demand with banks, other short- term highly liquid investments with original maturities of 12 months or less, and bank overdrafts. Bank overdrafts are reported within borrowings in current liabilities on the statement of financial position. o. Revenue and Other Income Revenue is measured at the fair value of the consideration received or receivable after taking into account any trade discounts and volume rebates allowed. When the inflow of consideration is deferred, it is treated as the provision of financing and is discounted at a rate of interest that is generally accepted in the market for similar arrangements. The difference between the amount initially recognised and the amount ultimately received is interest revenue. Revenue from the sale of goods is recognised at the point of delivery as this corresponds to the satisfaction of the performance obligation within the contract. Interest revenue is recognised using the effective interest method. Dividend revenue is recognised when the right to receive a dividend has been established. Dividends received from associates and joint ventures are accounted for in accordance with the equity method of accounting. Royalty revenue is recognised in the consolidated statement of profit or loss and other comprehensive income when the later of the subsequent sale or usage occurs and the performance obligation to which the sale-based or usage based royalty has been allocated has been satisfied. The Group is eligible for research and development incentives from the Federal Government. Such amounts are recognised as revenue upon receipt. All revenue is stated net of the amount of goods and services tax. Pg. 46 Notes to the Financial Statements p. Trade and Other Receivables Trade and other receivables include amounts due from customers for goods sold and services performed in the ordinary course of business. Receivables expected to be collected within 12 months of the end of the reporting period are classified as current assets. All other receivables are classified as non-current assets. Trade and other receivables are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method, less any provision for impairment. q. Trade and Other Payables Trade and other payables represent the liabilities for goods and services received by the entity that remain unpaid at the end of the reporting period. The balance is recognised as a current liability with the amounts normally paid within 30 days of recognition of the liability. r. Borrowing Costs Borrowing costs directly attributable to the acquisition, construction or production of assets that necessarily take a substantial period of time to prepare for their intended use or sale are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. All other borrowing costs are recognised in profit or loss in the period in which they are incurred. s. Goods and Services Tax (GST) Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable from the Australian Taxation Office (ATO). Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable to, the ATO is included with other receivables or payables in the statement of financial position. Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities which are recoverable from, or payable to, the ATO are presented as operating cash flows included in receipts from customers or payments to suppliers. t. Comparative Figures When required by Accounting Standards, comparative figures have been adjusted to conform to changes in presentation for the current financial year. Where the Group retrospectively applies an accounting policy, makes a retrospective restatement or reclassifies items in its financial statements, an additional (third) statement of financial position as at the beginning of the preceding period in addition to the minimum comparative financial statements is presented. Pg. 47 Notes to the Financial Statements u. Rounding of Amounts The parent entity has applied the relief available to it under ASIC Corporations (Rounding in financial statements (Directors’ Report Instrument) 2016/191. Accordingly, amounts in the financial statements have been rounded off to the nearest $1. v. Going concern The financial statements have been prepared on a going concern basis. This basis has been adopted as the company has sufficient cash at 30 June 2021 to conduct its affairs. The company has a guarantee of continuing financial support from Dr Monsour to allow the company to meet its liabilities and it is the belief that such financial support will continue to be made available. The company’s forward cash flow projections currently indicate that the company will be required to raise additional funds to meet forecast needs. The Directors have considered this position and have assessed available funding options and believe should funding be required that sufficient funds could be sourced to satisfy creditors as and when they fall due. The company also expects to generate sales income during the 2022 year from the sales of its PeriCoach. However, if adequate capital raising is not achieved the company may be unable to continue as a going concern. No adjustments have been made relating to the recoverability and classification of recorded assets amounts and classification of liabilities that might be necessary should the company not continue as a going concern. w. Earnings per share The Group presents basic and diluted earnings per share information for its ordinary shares. Basic earnings per share is calculated by dividing the profit/loss attributable to owners of the company by the weighted average number of ordinary shares outstanding during the year. Diluted earnings per share adjusts the basic earnings per share to take into account the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average number of additional ordinary shares that would have been outstanding assuming the conversion of all dilutive potential ordinary shares. x. Share capital Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares and share options which vest immediately are recognised as a deduction from equity, net of any tax effect. Pg. 48 Notes to the Financial Statements y. Critical accounting estimates and judgements The directors evaluate estimates and judgements incorporated into the financial statements based on historical knowledge and best available current information. Estimates assume a reasonable expectation of future events and are based on current trends and economic data, obtained both externally and within the Group. Key estimates – impairment The Group assesses impairment at the end of each reporting year by evaluating conditions specific to the Group that may be indicative of impairment triggers. Recoverable amounts of relevant assets are reassessed using value-in-use calculations which incorporate various key assumptions. z. New Accounting Standards for Application in Future Periods Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet mandatory, have not been early adopted by the consolidated entity for the annual reporting period ended 30 June 2021. The Group anticipates to adopt these standards from their relevant application dates. Based on the preliminary assessment these standards are not expected to have a material effect. Pg. 49 Notes to the Financial Statements 2. Result for the year Revenue from continuing operations 2. Revenue from continuing operations Sale of goods revenue Other Revenue R & D tax incentive revenue Investment revenue Government Business Support Royalty Income Total Revenue Expenditure Consolidated Group 2021 $ 7,244 656,895 212 131,300 5,996 794,403 801,647 2020 $ 11,367 708,447 4,014 74,000 12,091 798,552 809,919 2. Results for the year Profit before income tax from continuing operations includes the following specific expenses Consolidated Group 2021 $ 2020 $ Finance expenses Directors' Loan External Administration expense Administration - compliance Administration - employment Administration - general Depreciation, amortisation and impairments Intangible assets Property, plant and equipment Marketing expenses Marketing - employment Marketing - Other Marketing - PeriCoach 58,437 60 58,497 568,795 261,424 11,195 841,414 5,851 3,351 9,202 1,312 1,300 181,719 184,331 154 73 227 463,200 320,806 13,337 797,343 3,941 4,693 8,634 2,759 1,966 126,915 131,640 Pg. 50 Notes to the Financial Statements Patent maintenance expenses Patent Maintenance - AutoStart Burette Patent Maintenance - PeriCoach Research and development expense R & D - Employment R & D - PeriCoach 3. Income Tax Loss for the year Tax Add: Tax effect of: - non deductible expenses Less: Tax effect of: - non assessable income Temporary differences and tax losses not brought to account Income tax attributable to parent entity Consolidated Group 2021 $ 12,132 11,016 23,148 587,287 504,184 1,091,471 2020 $ 8,013 19,766 27,779 648,208 823,439 1,471,647 Consolidated Group 2021 $ (1,507,406) 26.0% (391,925) 2020 $ (1,620,156) 27.5% (445,543) 214,899 (177,026) 342,904 (102,639) (184,980) (210,235) 362,006 312,874 - - Carried forward tax losses of $22,692,385 (2020:$ 22,078,920) have not been brought to account as a deferred tax asset because it is not yet considered probable that they will reverse to the extent of being utilised in the future. Pg. 51 Notes to the Financial Statements 4. Key management personnel options and rights holdings 2021 Balance beginning of year Granted as remuneration d e s i c r e x E Lapsed/ forfeited Balance at the end of year Vested during the year Vested and exercisable - (10,000,000) - Directors Unlisted Options @ 1.62 cents, Expire 10/12/20 Dr T Lonngren Unlisted Options @ 1.3 cents, Expire 21/12/21 10,000,000 Dr M Monsour Mr R Mangelsdorf Dr T Lonngren Unlisted Options @ 1.3 cents, Expire 20/11/22 20,000,000 10,000,000 10,000,000 Dr P Corr Mr R Mangelsdorf Listed Options @ 0.35 cents Expire 18/6/22 Mr R Mangelsdorf 10,000,000 10,000,000 - 50,000,000 - - - - - - Other KMP Unlisted Options @ 1.30 cent, Expire 8/06/22 G Daly Unlisted Options @ 1.30 cent, Expire 8/06/22 10,000,000 G Daly Unlisted Options @ 1.036 cent, Expire 8/06/22 10,000,000 G Daly Unlisted Options @ 1.036 cent, Expire 8/06/22 14,000,000 G Daly 4,250,000 - - - - - - - - - - - - - - - - - - - - - - - - 20,000,000 10,000,000 10,000,000 10,000,000 10,000,000 - - - - - - - - - - - - 50,000,000 50,000,000 50,000,000 10,000,000 10,000,000 - - 10,000,000 10,000,000 14,000,000 14,000,000 4,250,000 - 4,250,000 108,250,000 50,000,000 - (10,000,000) 148,250,000 50,000,000 88,250,000 Pg. 52 Notes to the Financial Statements Balance beginning of year Granted as remuneration 2020 Directors Unlisted Options @ 1.62 cents, Expire 10/12/20 Dr T Lonngren Unlisted Options @ 1.3 cents, Expire 21/12/21 10,000,000 Dr M Monsour 20,000,000 Mr R Mangelsdorf 10,000,000 Dr T Lonngren Unlisted Options @ 1.3 cents, Expire 20/11/22 10,000,000 Dr P Corr Mr R Mangelsdorf 10,000,000 10,000,000 Other KMP Unlisted Options @ 1.30 cent, Expire 8/06/22 G Daly Unlisted Options @ 1.30 cent, Expire 8/06/22 10,000,000 G Daly Unlisted Options @ 1.036 cent, Expire 8/06/22 10,000,000 G Daly Unlisted Options @ 1.036 cent, Expire 8/06/22 14,000,000 G Daly 4,250,000 - - - - - - - - - d e s i c r e x E - - - - - - - - - - 108,250,000 - - Lapsed/ forfeited Balance at the end of year Vested during the year Vested and exercisable - - - - - - - - - - - 10,000,000 20,000,000 10,000,000 10,000,000 10,000,000 10,000,000 10,000,000 10,000,000 14,000,000 4,250,000 108,250,000 - - - - - - - - - - - 10,000,000 - - - - - 10,000,000 10,000,000 14,000,000 4,250,000 48,250,000 Pg. 53 Notes to the Financial Statements 4. Key management personnel shareholdings Balance at beginning of year On exercise of options Other changes during the year Balance at end of year 2021 Directors Dr M Monsour 876,207,457 Mr R Mangelsdorf Dr P Corr KMP Mr G Daly 107,898,245 360,790,157 1,344,895,859 2,081,658 1,346,977,517 - - - - - - 214,285,714 1,090,493,171 - - 214,285,714 107,898,245 360,790,157 1,559,181,573 - 214,285,714 2,081,658 1,561,263,231 Balance at beginning of year On exercise of options Other changes during the year 2020 Directors Dr M Monsour 876,207,457 Mr R Mangelsdorf Dr P Corr KMP Mr G Daly 107,898,245 360,790,157 1,344,895,859 2,081,658 1,346,977,517 5 Remuneration of Auditors - - - - - - Balance at end of year - - - - - - 876,207,457 107,898,245 360,790,157 1,344,895,859 2,081,658 1,346,977,517 Remuneration of the auditor of the company, Bentleys, for auditing or reviewing the financial report other services 68,400 2,750 67,300 3,000 Consolidated Group 2021 $ 2020 $ Pg. 54 Notes to the Financial Statements 6 Earnings per Share (a) Reconciliation of earnings to profit or loss from continuing operations Loss from continuing operations Earnings used to calculate basic EPS from operations (b) Earnings used to calculate overall earnings per share Consolidated Group 2021 $ (1,507,406) (1,507,406) 2020 $ (1,620,156) (1,620,156) Earnings used to calculate overall earnings per share (1,507,406) (1,620,156) (c) Weighted average number of ordinary shares outstanding during the year used in calculating basic EPS Consolidated Group 2021 No. 2020 No. Weighted average number of ordinary shares outstanding during the year used in calculating basic EPS 3,567,576,772 3,519,612,332 Weighted average number of dilutive options outstanding - - Weighted average number of ordinary shares outstanding during the year used in calculating dilutive EPS 3,567,576,772 3,519,612,332 Earnings per share Basic earnings per share (dollars) Diluted earnings per share (dollars) 7 Cash and cash equivalents Cash at bank and in hand Short term bank deposits (0.0004) (0.0004) (0.0005) (0.0005) Consolidated Group 2021 $ 30,468 1,860,215 1,890,683 2020 $ 65,212 1,003 66,215 Pg. 55 Notes to the Financial Statements 8 Trade and other receivables Accrued Revenue GST Refundable Sundry Debtors Trade Debtors Consolidated Group 2021 $ 4,567 10,746 153 3,468 18,934 2020 $ 6,046 14,125 152 - 20,323 The Group has no significant concentration of credit risk with respect to any single counterparty or group of counterparties. The class of assets described as “trade and other receivables” is considered to be the main source of credit risk related to the Group. 9 Inventories PC Stock - Finished Goods PC Stock - Materials 10 Other financial assets Consolidated Group 2021 $ 19,476 158,326 177,802 2020 $ 15,859 95,719 111,578 Financial assets at fair value through profit or loss are shares held for trading for the purpose of short - term profit taking. Changes in fair value are included in the consolidated statement of profit or loss and other comprehensive income. Listed investments at fair value Investments in Invion Financial assets at fair value through profit and loss Listed shares at cost less fair value adjustment Consolidated Group 2021 $ 2020 $ 13,581 8,028 522,026 (508,445) 13,581 522,026 (513,998) 8,028 Pg. 56 Notes to the Financial Statements 11 Property, plant and equipment Computer Equipment Computer Equipment Dep'n Accum Office Equipment Office Equipment Dep'n Accum Plant & Equipment Plant & Equipment Dep'n Accum Consolidated Group 2021 $ 115,114 (114,709) 405 22,467 (17,863) 4,604 28,253 (24,572) 3,681 8,690 2020 $ 115,114 (114,577) 537 17,988 (15,763) 2,225 28,253 (23,453) 4,800 7,562 (a) Movements in carrying amounts of property, plant and equipment Movement in the carrying amounts for each class of property, plant and equipment between the beginning and the end of the current year: Consolidated Plant & Equipment $ Office Equipment $ Computer Equipment $ Total $ Year ended 30 June, 2021 Balance at the beginning of year Additions Depreciation expense Balance at the end of the year Year ended 30 June, 2020 Balance at the beginning of year Depreciation expense Balance at the end of the year 4,800 - (1,119) 3,681 5,918 (1,118) 4,800 2,225 4,479 (2,100) 4,604 3,804 (1,579) 2,225 537 - (132) 405 2,533 (1,996) 537 7,562 4,479 (3,351) 8,690 12,255 (4,693) 7,562 Pg. 57 Notes to the Financial Statements 12 Intangible Assets Patents, trademarks and other rights Cost Accumulated amortisation/impairment Net carrying value Licences and franchises Accumulated amortisation/impairment Consolidated Year ended 30 June, 2021 Balance at the beginning of the year Additions Amortisation Balance at the end of the year Year ended 30 June, 2020 Balance at the beginning of the year Additions Amortisation Balance at the end of the year 13 Other assets Prepayments Prepayments - Suppliers Consolidated Group 2021 $ 640,979 (256,887) 384,092 20,000 (20,000) - 384,092 2020 $ 566,950 (251,036) 315,914 20,000 (20,000) - 315,914 Patents, trademarks Licences & Franchises Total $ $ $ 315,914 74,029 (5,851) 384,092 235,224 84,631 (3,941) 315,914 - - - - - - - - 315,914 74,029 (5,851) 384,092 235,224 84,631 (3,941) 315,914 Consolidated Group 2021 $ 106,163 8,673 114,836 2020 $ 104,162 33,870 138,032 Pg. 58 Notes to the Financial Statements 14 Trade and other payables Trade payables Other payables 15 Provisions Provision for Audit Fees Provision for Tax Return Costs 16 Employee Benefits Current liabilities Provision for Holiday Pay Provision for Holiday Pay Super Provision for Long Service Leave - ST Provision for long-term employee benefits Provision for long service leave Consolidated Group 2021 $ 149,714 21,734 171,448 2020 $ 166,620 100,669 267,289 Consolidated Group 2021 $ 50,295 20,000 70,295 2020 $ 47,900 19,000 66,900 Consolidated Group 2021 $ 2020 $ 122,052 11,595 130,138 263,785 11,246 122,150 11,604 121,245 254,999 9,554 Provision for employee benefits represents amounts accrued for annual leave and long service leave. The current portion for this provision includes the total amount accrued for annual leave entitlements and the amounts accrued for long service leave entitlements that have vested due to employees having completed the required period of service. Based on past experience, the Group does not expect the full amount of annual leave or long service leave balances classified as current liabilities to be settled in the next 12 months. However, these amounts must be classified as current liabilities since the group does not have an unconditional right to defer the settlement of these amounts in the event the employees wish to use their leave entitlement. The non-current portion for this provision includes amounts accrued to long service leave entitlements that have not yet vested in relation to those employees who have not yet completed the required period of service. In calculating the present value of future cash flows in respect of long service leave, the probability of long service leave being taken is based on historic data. Pg. 59 Notes to the Financial Statements 17 Reserves Opening balance Options reversed Options Issued Options lapsed/forfeited Share option reserve Consolidated Group 2021 $ 852,188 - 89,496 (41,619) 900,065 2020 $ 927,489 (49,005) - (26,296) 852,188 This reserve records the cumulative value of share based payments including employee service received for the issue of share options. When the option is exercised the amount in the share option reserve is transferred to share capital 18 Issued Capital Consolidated Group 2021 $ 2020 $ Fully paid 4,613,801,129 (2020: 3,519,612,332) Ordinary shares Total 107,383,796 107,383,796 103,867,798 103,867,798 (a) Ordinary shares At the beginning of the reporting period Shares issued during the year 14 June 2021 Placement Offer @ 0.035 cents per share At the end of the reporting period Consolidated Group 2021 No. 2020 No. 3,519,612,332 3,519,612,332 1,094,188,797 4,613,801,129 - 3,519,612,332 The holders of ordinary shares are entitled to participate in dividends and the proceeds on winding up of the Company. On a show of hands at meetings of the Company, each holder of ordinary shares has one vote in person or by proxy, and upon a poll each share is entitled to one vote. The Company does not have authorised capital or par value in respect of its shares. Pg. 60 Notes to the Financial Statements (b) Options Listed Options Consolidated Group 2021 No. 2020 No. At the beginning of the reporting period Options issued during the year exercise @ 0.05 cents expire 18th June 2023 14 June 2021 Placement Offer - 18 June 2021 Grant At the end of the reporting period 1,094,188,797 75,000,000 1,169,188,797 - - - - (i) For information relating to the Analytica Limited employee option plan, including details of options issued, exercised and lapsed during the year and the options outstanding at year-end, refer to Note 22 Share-based payments. (ii) For information relating to share options issued to key management personnel during the year, refer to Note 23. (c) Capital Management Management controls the capital of Analytica Limited in order to ensure the entity continues as a going concern as well as to maintain optimal returns to shareholders and benefits for other stakeholders. Capital consists of share capital, reserves and retained profit. There are no externally imposed capital requirements. The Group monitors capital through the gearing ratio, which is calculated as net debt divided by total capital. Net debt is calculated as total borrowings less cash and cash equivalents. Total capital is defined as equity per the consolidated statement of financial position plus net debt. The target for Analytica Limited's gearing ratio is between 0% and 50%. The gearing ratios at the current and prior years are shown below: Debt to equity gearing ratio for 2021 is 0% (2020: 0.65%). There have been no changes in the strategy adopted by management during the year. 19 Contingencies In the opinion of the Directors, the Company did not have any contingencies at 30 June 2021 (30 June 2020: None). Pg. 61 Notes to the Financial Statements 20 Operating Segments Segment information Identification of reportable segments The Group has identified its operating segments based on the internal reports that are reviewed and used by the Board of Directors (chief operating decision makers) in assessing performance and determining the allocation of resources. The Group is managed primarily on the basis of product category and service offerings as the diversification of the group's operations inherently have notably different risk profiles and performance assessment criteria. Operating segments are therefore determined on the same basis. Reportable segments disclosed are based on aggregating operating segments where the segments are considered to have similar economic characteristics and are also similar with respect to the following: • • • • • the products sold and/or services provided by the segment; the manufacturing process; the type or class of customer for the products or services; the distribution method; and any external regulatory requirements. Performance is measured based on segment profit before income tax as included in the internal financial reports. Types of products and services by reportable segment (i) Medical Devices • AutoStart Burette • PeriCoach (Perineometer) Analytica's lead product is the Perineometer device branded PeriCoach, to assist women and their clinicians in treatment of Stress Urinary Incontinence. The PeriCoach entered controlled market release in June 2014, with clinical trials undertaken in November 2014, with its public release in Australia and United Kingdom January 2015 and release in the United States in June 2015. The PeriCoach V3 was released in May 2017. The PeriCoach has a TGA ARTG entry, CE-marking, and USFDA 510(k) 'approval'. Pg. 62 Notes to the Financial Statements Analytica is also commercialising the AutoStart Burette infusion system. The AutoStart Burette set automatically restarts the delivery of intravenous fluid once the burette has dispensed its predetermined amount of liquid or drug. Automatic restart of the IV fluid, once the drug is dispensed can provide enormous savings in nursing time during and following a medication event, and reduces the risk of blood clots forming that may obstruct the intravenous cannula. Analytica has licensed the AutoStart Burette and other burette intellectual property to ICU Australia (Formerly Medical Australia) for distribution in the Australian Market. The AutoStart Burette has a TGA ARTG entry and USFDA 510(k) clearance. (ii) Corporate The corporate segment includes all other operations including the administration, and associated listed public company expenditure. Basis of accounting for purposes of reporting by operating segments (a) Accounting policies adopted Unless stated below, all amounts reported to the Board of Directors, being the chief operating decision maker with respect to operating segments, are determined in accordance with accounting policies that are consistent to those adopted in the annual financial statements of the Group. Income tax expense Income tax expense is calculated based on the segment operating net profit using a notional charge of 27.5%. The effect of taxable or deductible temporary difference is not included for internal reporting purposes. (b) Segment assets Where an asset is used across multiple segments, the asset is allocated to the segment that receives the majority of economic value from the asset. In the majority of instances, segment assets are clearly identifiable on the basis of their nature and physical location. (c) Segment liabilities Liabilities are allocated to segments where there is direct nexus between the incurrence of the liability and the operations of the segment. Borrowings and tax liabilities are generally considered to relate to the Group as a whole and are not allocated. Segment liabilities include trade and other payables and certain direct borrowings. Pg. 63 Notes to the Financial Statements Medical Devices Corporate 2021 $ 2020 $ 2021 $ 2020 $ Total 2021 $ Total 2020 $ - - 7,244 5,996 - - 13,240 (5,851) (3,495) - (184,331) (23,148) - (1,091,471) (1,308,296) (1,295,056) - - 11,367 12,091 - - 23,458 (3,941) (16,795) - (131,640) (27,779) - (1,471,647) (1,651,802) (1,628,344) 656,895 131,300 - - 212 - 788,407 (3,351) - (58,497) - - (938,909) - (1,000,757) (212,350) 708,447 74,000 - - 4,014 - 786,461 (4,693) - (227) - - (773,353) - (778,273) 8,188 656,895 131,300 7,244 5,996 212 - 801,647 (9,202) (3,495) (58,497) (184,331) (23,148) (938,909) (1,091,471) (2,309,053) (1,507,406) 708,447 74,000 11,367 12,091 4,014 - 809,919 (8,634) (16,795) (227) (131,640) (27,779) (773,353) (1,471,647) (2,430,075) (1,620,156) 580,828 447,815 2,014,209 211,809 2,595,037 659,624 REVENUE Grant revenue Government assistance Sales revenue Royalty revenue Interest revenue Loss sale of equipment Total segment revenue Depreciation/amortisation Cost of sales Interest expense Marketing Patent Maintenance Other expense Research & development Total segment expense Segment profit (loss) (e) Segment assets Segment assets Financial assets at fair value through profit and loss (f) Segment liabilities Segment liabilities - - - - Geographical information 13,581 8,028 13,581 8,028 516,774 673,896 516,774 673,896 In presenting information on the basis of geographical segments, segment revenue is based on the geographical location of customers whereas segment assets are based on the location of the assets. Australia China Middle East United Kingdom United States 2021 Revenue 798,277 774 2,596 - - 2020 Revenue 802,351 - - 754 6,814 Pg. 64 Notes to the Financial Statements 21 Cash Flow Information Consolidated Group 2021 $ 2020 $ (1,507,406) Loss for the year Cash flows excluded from profit attributable to operating activities Non-cash flows in profit: - amortisation - depreciation - interest on directors loan - fair value adjustment Invion Limited - share options adjusted Changes in assets and liabilities, net of the effects of purchase and disposal of subsidiaries: Directors Loan - (increase)/decrease in trade and other receivables - (increase)/decrease in prepayments - (increase)/decrease in inventories - increase/(decrease) in trade and other payables - increase/(decrease) in provisions - increase/(decrease) in employee benefits Cashflow from operations - 1,389 23,196 (66,224) (95,841) 3,395 10,478 (1,537,868) 5,851 3,351 - (5,553) 89,496 (1,620,156) 3,941 4,693 154 7,643 (49,005) 1,221 (70,419) 6,535 (2,744) 1,200 28,795 (1,688,142) 22 Share-based Payments Grant Date Unlisted Options Date of Expiry Exercise Price Start of Year Granted during the year 26-11-15 10-12-20 0.0162 14,000,000 24-11-16 22-12-21 0.0130 70,000,000 9-06-17 8-06-22 0.0130 41,000,000 9-06-17 8-06-22 0.0104 33,350,000 28-06-17 22-12-21 0.0130 2,500,000 30-11-17 30-11-22 0.0130 20,000,000 180,850,000 - - - - - - - Grant Date Listed Options Date of Expiry Exercise Price Start of Year Granted during the year 18-06-21 18-06-23 0.0035 - 75,000,000 - 75,000,000 g n i r u d d e s i c r e x E r a e y e h t - - - - - - - g n i r u d d e s i c r e x E r a e y e h t - - Forfeited during the year Balance at the end of the year Vested & exercisable end of year (14,000,000) - - - - - - - - 70,000,000 41,000,000 41,000,000 33,350,000 33,350,000 2,500,000 2,500,000 20,000,000 - (14,000,000) 166,850,000 76,850,000 Forfeited during the year Balance at the end of the year Vested & exercisable end of year - - 75,000,000 75,000,000 75,000,000 75,000,000 Pg. 65 Notes to the Financial Statements 23 Related Parties The Group's main related parties are as follows: (i) Key management personnel: Any person(s) having authority and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly, including any director (whether executive or otherwise) of that entity are considered key management personnel. For details of remuneration disclosures relating to key management personnel, refer to Note 4: Key Management Personnel (KMP) options and rights holdings and the remuneration report in the Directors' Report. Other transactions with KMP and their related entities are shown below. Loan facility to the company up to $400,000 provided by Dr Monsour. Funds have been drawn-down as at reporting date of nil. (2020: $75,154). Interest rate of 8.51% is applicable on this loan. (ii) Subsidiaries: The consolidated financial statements include the financial statements of Analytica Limited and the following subsidiaries: Name of subsidiary % ownership interest % ownership interest PeriCoach Pty Ltd Analytica Operations Pty Ltd Analytica Export ME Pty Ltd Transactions with related parties 2021 100 100 100 2020 100 100 100 Transactions between related parties are on normal commercial terms and conditions no more favourable than those available to other parties unless otherwise stated. Pg. 66 Notes to the Financial Statements 24 Financial Risk Management The Company is exposed to a variety of financial risks through its use of financial instruments. This note discloses the Company‘s objectives, policies and processes for managing and measuring these risks. The Company‘s overall risk management plan seeks to minimise potential adverse effects due to the unpredictability of financial markets. The Company does not speculate in financial assets. The most significant financial risks to which the Company is exposed to are described below: Specific risks • Market risk - currency risk, cash flow interest rate risk and price risk • • Credit risk Liquidity risk Financial instruments used The principal categories of financial instrument used by the Company are: • • Trade receivables Cash at bank • Bank overdraft • • Investments in listed shares Trade and other payables Objectives, policies and processes The CFO has primary responsibility for the development of relevant policies and procedures to mitigate the risk exposure of the Company, these policies and procedures are tabled at the board meeting following their approval. Reports are presented at each Board meeting regarding the implementation of these policies and any risk exposure which the CEO or CFO believes the Board should be aware of. Specific information regarding the mitigation of each financial risk to which Company is exposed is provided below. Liquidity risk Liquidity risk arises from the Company’s management of working capital and the finance charges and principal repayments on its debt instruments. It is the risk that the Company will encounter difficulty in meeting its financial obligations as they fall due. Pg. 67 Notes to the Financial Statements The Company’s policy is to ensure that it will always have sufficient cash to allow it to meet its liabilities when they become due. The Company maintains cash and marketable securities to meet its liquidity requirements for up to 30-day periods. Funding for long-term liquidity needs is additionally secured by an adequate amount of committed credit facilities and the ability to sell long-term financial assets. The Company manages its liquidity needs by carefully monitoring scheduled debt servicing payments for long-term financial liabilities as well as cash-outflows due in day-to-day business. Liquidity needs are monitored in various time bands, on a day-to-day and week-to-week basis, as well as on the basis of a rolling 30-day projection. Long-term liquidity needs for a 180-day and a 360-day period are identified monthly. At the reporting date, these reports indicate that the Company expected to have sufficient liquid resources to meet its obligations under all reasonably expected circumstances and will not need to draw down any of the financing facilities. The Company‘s liabilities have contractual maturities which are summarised below Not later than 1 month Trade payables Other payables Market risk 2021 $ 149,714 21,734 171,448 2020 $ 166,620 100,669 267,289 (i) Foreign currency sensitivity Most of the Company transactions are carried out in Australian Dollars. Exposures to currency exchange rates arise from the Company's overseas sales and purchases, which are primarily denominated in USD and CHF. The Company did not actively reduce exposure of foreign currency risk by utilising forward exchange contracts for non-Australian Dollar cash flows during the 2021 or 2020 year. Foreign currency denominated assets translated into Australian Dollars at the closing rate are included in the inventory balance of $177,802 (2020: $111,578). Net currency losses of $8,458 (2020: $11,327) are disclosed in the statement of profit or loss and other comprehensive income. Any increase or decrease in exchange rates would not significantly impact users of the financial statements, as such no sensitivity analysis is disclosed. Pg. 68 Notes to the Financial Statements (ii) Cash flow interest rate sensitivity The Company is exposed to interest rate risk as funds are borrowed at floating and fixed rates. Borrowings issued at fixed rates expose the Group to fair value interest rate risk. The Company's policy is to minimise interest rate cash flow risk exposures on long-term financing. The following table illustrates the sensitivity of the net result for the year and equity to a reasonably possible change in interest rates of +2.00% and -2.00% (2020: +2.00%/-2.00%), with effect from the beginning of the year. These changes are considered to be reasonably possible based on observation of current market conditions. The calculations are based on the financial instruments held at each reporting date. All other variables are held constant. Cash and cash equivalents Net results Equity (iii) Other price risk 2021 2020 2.00% $ (2.00%) $ 2.00% $ (2.00%) $ 37,814 37,814 (37,814) (37,814) (179) (179) 179 179 The Company are exposed to equity securities price risk. This arises from listed and unlisted investments held by the Company and classified as available-for-sale on the consolidated statement of financial position. Equity instruments are held for strategic rather than trading purposes and the Company does not actively trade these investments. The Company is not exposed to commodity price risk. There is no profit impact, except for investments held at fair value through profit or loss. Equity would increase / decrease as a result of fair value movements through the investment reserve. Credit risk Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in a financial loss to the Company. Credit risk arises from cash and cash equivalents, derivative financial instruments and deposits with banks and financial institutions, as well as credit exposure to wholesale and retail customers, including outstanding receivables and committed transactions. The Company has adopted a policy of only dealing with creditworthy counterparties as a means of mitigating the risk of financial loss from defaults. The utilisation of credit limits by customers is regularly monitored by line management. Customers who subsequently Pg. 69 Notes to the Financial Statements fail to meet their credit terms are required to make purchases on a prepayment basis until creditworthiness can be re-established. Trade receivables consist of a number of customers, spread across diverse industries and geographical areas. Ongoing credit evaluation is performed on the financial condition of accounts receivable. The Board receives monthly reports summarising the turnover, trade receivables balance and aging profile of each of the key customers individually and the Company's other customers analysed by industry sector as well as a list of customers currently transacting on a prepayment basis or who have balances in excess of their credit limits. Management considers that all the financial assets that are not impaired for each of the reporting dates under review are of good credit quality, including those that are past due. The credit risk for liquid funds and other short-term financial assets is considered negligible, since the counterparties are reputable banks with high quality external credit ratings. 25 Fair Value Measurement The Group measures the following assets and liabilities at fair value on a recurring basis Financial assets AASB 13 Fair Value Measurement requires all assets and liabilities measured at fair value to be assigned to a level in the fair value hierarchy as follows: Level 1 Unadjusted quoted prices in active markets for identical assets or liabilities that the entity can access at the measurement date. Level 2 Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 3 Unobservable inputs for the asset or liability. The table below shows the assigned level for each asset and liability held at fair value by the Group: Fair value hierarchy 2021 Recurring fair value measurements Listed shares 2020 Recurring fair value measurements Listed shares Level 1 $ Level 2 $ Level 3 $ Total $ 13,581 Level 1 $ Level 2 $ 8,028 - - - 13,581 Level 3 $ Total $ - 8,028 Pg. 70 Notes to the Financial Statements 26 Events Occurring After the Reporting Date No matters or circumstances have arisen since the end of the year which significantly affected or could significantly affect the operations of the Group, the results of those operations, or the state of affairs of the Group in future financial years. 27 Company Details The registered office of the company is: Share Registry: Analytica Limited Link Market Services c/o Avance Chartered Accountants Level 15, 324 Queen Street 222 Bazaar Street, Brisbane, Queensland 4000 Maryborough Qld 4655 Telephone: +61 1300 554 474 Telephone: (07) 3278 1950 Email: registrars@linkmarketservices.com.au The postal address for the registered office of the company is: The principal place of business is: Analytica Limited PO Box 438 320 Adelaide Street Brisbane Qld 4000 Maryborough Qld 4650 Telephone: (07) 3278 1950 INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF ANALYTICA LIMITED Report on the Audit of the Financial Report Opinion We have audited the financial report of Analytica Limited (The Company and its subsidiaries, together, the “Group”), which comprises the consolidated statement of financial position as at 30 June 2021 and the consolidated statement of profit or loss and other comprehensive income, consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, notes comprising a summary of significant accounting policies and other explanatory information, and the director’s declaration. In our opinion the consolidated financial report of the Group is in accordance with the Corporations Act 2001, including: (i) giving a true and fair view of the Group’s financial position as at 30 June 2021 and of its performance for the year then ended; and (ii) complying with Australian Accounting Standards and the Corporations Regulations 2001. Basis for Opinion We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report. We are independent of the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Australian Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Material Uncertainty Related to Going Concern Without modifying our opinion, we draw attention to Note 1(v) in the financial report, which indicates the company has sufficient cash at 30 June 2021 but will be required to raise additional funds to meet forecast cash needs beyond the next 12 months. These conditions, along with other matters as set forth in Note 1(v), indicate the existence of a material uncertainty that may cast significant doubt about the ability to continue as a going concern and therefore, the company may be unable to realise its assets and discharge its liabilities in the normal course of business. Key Audit Matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report of the current period. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. In addition to the matter described in the ‘Material Uncertainty Relating to Going Concern’ section, we have determined the matters described below to be the key audit matters to be communicated in our report. INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF ANALYTICA LIMITED (Continued) Key Audit Matter How Our Audit Addressed the Key Audit Matter Accounting For and Disclosure of Options We focused on this area as a key audit matter due to: • Options, including the movements in option holdings, option expenditure and option reserves are material in nature and can have a material dollar value impact on the financial report. The inherent complexity and level of judgment involved in correctly valuing and accounting for options, especially in regard to unlisted options. • • Our procedures included, amongst others: • • Verifying the completeness of options on issue with reference to ASX announcements and other third party supporting information. Testing the valuation of options by agreeing to valuation reports completed by independent valuers, and confirming assumptions used were appropriate. • Checking vesting calculations and correct accounting for options in accordance with AASB 2 Share-based Payment. The for importance and requirement adequate and appropriate disclosure of options in the financial report and the remuneration report. • Ensuring the disclosure of options in the financial report was adequate and appropriate, verifying movements relevant supporting information. in options to Existence and Valuation of Inventory We focused on this area as a key audit matter due to: • • • inventory is a material Analytica’s balance on the statement of financial position, and is at high risk of impairment due to technological obsolescence. In recent years Analytica has impaired the overall inventory balance by material amounts as a result of impairment reviews by Analytica’s management and Audit. conducted A significant amount of Analytica’s inventory is held by third parties. Our procedures included, amongst others: • • • Verifying the existence of inventory by agreeing the client’s year end balances and records to third party confirmations from those entities that hold inventory on Analytica’s behalf. Those entities performed stocktakes at 30 June 2021, and we obtained copies of these stocktake reports. Testing the adequacy of the provision for impairment and write offs recorded during the year, based on our knowledge of the client and the specific inventory items at risk of obsolescence. Where impairment indicators were noted, further enquiries were made with management and recalculation of potential impairment was compared to the provision in the financial report. Ensuring the accuracy of the Analytica’s inventory records by checking that the correct cost per unit was applied to inventory on hand at year end. Given there has been minimal purchases in recent times, the applied cost per unit was compared to the rates applied in the prior year. INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF ANALYTICA LIMITED (Continued) Existence and Valuation of Intangibles – Patents and Trademarks We focused on this area as a key audit matter due to: Our procedures included, amongst others: • • • Intangibles being material in nature and having a material dollar value impact on the financial report. The inherent complexity and level of judgment correctly accounting for intangibles like patents and trademarks. involved in • • Verifying on a substantive basis the existence and cost of eligible expenditure on patents and trademarks. and Verifying that the capitalisation of costs in relation to in trademarks was patents accordance and relevant measurement requirements of Australian accounting standards. recognition completed with The potential risk of impairment, given the intangibles relate to hi-tech products. • Challenging management’s impairment review and overall assessment of the fair value of intangibles recognised at year end. Information Other than the Financial Report and Auditor's Report Thereon The directors are responsible for the other information. The other information comprises the information included in the Group’s annual report for the year ended 30 June 2021, but does not include the financial report and our auditor's report thereon. Our opinion on the financial report does not cover the other information and accordingly we do not express any form of assurance conclusion thereon. In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of the Directors for the Financial Report The directors of the Group are responsible for the preparation of the 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 financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In preparing the financial report, the directors are responsible for assessing the ability of the Group to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so. INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF ANALYTICA LIMITED (Continued) Auditor’s Responsibilities for the Audit of the Financial Report Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report. As part of an audit in accordance with Australian Auditing Standards, we exercise professional judgement and maintain professional scepticism throughout the audit. We also: • Identify and assess the risks of material misstatement of the financial report, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control. • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors. • Conclude on the appropriateness of the directors' use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the financial report or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Group to cease to continue as a going concern. • Evaluate the overall presentation, structure and content of the financial report, including the disclosures, and whether the financial report represents the underlying transactions and events in a manner that achieves fair presentation. • Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the financial report. We are responsible for the direction, supervision and performance of the Group audit. We remain solely responsible for our audit opinion. We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF ANALYTICA LIMITED (Continued) From the matters communicated with the directors, we determine those matters that were of most significance in the audit of the financial report of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. Report on the Remuneration Report Opinion on the Remuneration Report We have audited the Remuneration Report included in pages 15 to 24 of the directors' report for the year ended 30 June 2021. In our opinion, the Remuneration Report of Analytica Limited, for the year ended 30 June 2021, complies with section 300A of the Corporations Act 2001. Responsibilities The directors of Analytica Limited are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. Bentleys Brisbane Partnership Chartered Accountants Ashley Carle Partner Brisbane 30 September 2021 Pg. 77 ASX Additional Information ASX Additional Information Additional information required by the ASX Listing Rules and not disclosed elsewhere in this report is set out below. This information is effective as at 24 September, 2021. Substantial shareholders The number of substantial shareholders and their associates are set out below: HALONNA PTY LTD INOV8 LLC Distribution of equity security holders Range 100,001 and Over 50,001 to 100,000 10,001 to 50,000 5,001 to 10,000 1,001 to 5,000 1 to 1,000 Total Securities % No. of holders % 4,572,754,796 99.11 1,297 22,955,949 16,140,484 951,053 639,211 359,636 0.50 0.35 0.02 0.01 0.01 298 586 111 236 777 39.24 9.02 17.73 3.36 7.14 23.51 4,613,801,129 100.00 3,305 100.00 Twenty largest share holders Top holders Top 20 holders Balance Of Register Total Issued Capital Rank Name Securities % 2,660,720,303 1,953,080,826 57.67 42.33 4,613,801,129 100.00 1 2 3 4 5 6 7 8 9 HALONNA PTY LTD INOV8 LLC M P A M M PTY LTD MS CHUNYAN NIU M P MONSOUR MEDICAL PRACTICE PTY LTD IGNATIUS LIP PTY LTD 1215 CAPITAL PTY LTD DR TERESA MARGARET MULLINS & DR PETER JAMES MULLINS MR MARK ARUNDEL & MRS SIGRID ARUNDEL 10 VAN AM MARKETING PTY LTD 24 Sep 2021 %IC 636,734,354 13.80 360,790,157 233,042,390 213,571,429 156,379,178 151,073,534 134,385,213 117,062,340 80,000,000 68,375,148 7.82 5.05 4.63 3.39 3.27 2.91 2.54 1.73 1.48 Pg. 78 ASX Additional Information 11 12 13 14 15 16 17 18 19 20 DR KELVIN RICHARDS KHONG HALONNA PTY LIMITED YUCAJA PTY LTD WINS ASSET MANAGEMENT PTY LTD TAMBIEN PTY LTD FITZWILL SUPERANNUATION PTY LTD CMONSUPER PTY LTD MR RICHARD THOMAS HAYWARD DALY & MRS SARAH KAY DALY NEATFORD PTY LTD 62,464,171 60,156,250 55,785,714 52,000,000 51,633,561 50,000,000 49,632,352 49,453,538 40,009,545 MRS SABINA LIP Total Balance of register Grand total 38,171,429 2,660,720,303 1,953,080,826 4,613,801,129 1.35 1.30 1.21 1.13 1.12 1.08 1.08 1.07 0.87 0.83 57.67 42.33 100.00 Voting rights Ordinary Shares On a show of hands, every member present at a meeting in person or by proxy shall have one vote and upon a poll each share shall have one vote. Options Top holders Top 20 holders Balance Of Register Total Issued Capital Range 100,001 and Over 50,001 to 100,000 10,001 to 50,000 5,001 to 10,000 1,001 to 5,000 1 to 1,000 Total Securities % 994,205,749 174,983,048 85.03 14.97 1,169,188,797 100.00 Securities % 1,169,188,797 100.00 0 0 0 0 0 0.00 0.00 0.00 0.00 0.00 1,169,188,797 100.00 Pg. 79 ASX Additional Information Rank Name 1 2 3 4 5 6 7 8 8 9 10 11 12 12 13 14 15 16 16 16 17 18 18 19 20 20 20 MS CHUNYAN NIU HALONNA PTY LTD YUCAJA PTY LTD TAMBIEN PTY LTD HIRSCH FINANCIAL PTY LTD DR KELVIN RICHARDS KHONG MR KEVIN DANIEL LEARY & MRS HELEN PATRICIA LEARY SPICEME CAPITAL PTY LTD 180 MARKETS PTY LTD 1215 CAPITAL PTY LTD CERTANE CT PTY LTD MR RABI ABU ABAREH MR STACEY HUBERT CARTER GREGORY DENISE PTY LTD MR JIAMING QI MR KALPESH VARSANI & MRS RITA VARSANI DRAGONBACK CAPITAL PTY LTD MR MARK ANDREW TKOCZ DR TERESA MARGARET MULLINS & DR PETER JAMES MULLINS RIYA INVESTMENTS PTY LTD MR ROBERT REVIS SARISAN CONSULTANTS PTY LTD MR GEOFFREY LEIGH SAFFER & MRS RACHEL SAFFER MRS SABINA LIP MS CAROLINE LIP BLUE BLITZ INVESTMENTS PTY LTD MAYHEW CAPITAL PTY LTD 24 Sep 2021 228,571,429 214,285,714 94,285,714 50,000,000 42,857,142 31,000,000 28,000,000 25,000,000 25,000,000 24,434,326 21,142,857 19,428,571 17,142,857 17,142,857 16,971,428 16,071,428 14,300,000 14,285,714 14,285,714 14,285,714 11,428,571 10,000,000 10,000,000 8,571,429 8,571,428 8,571,428 Total Balance of register 8,571,428 994,205,749 174,983,048
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