Bio-Gene Technology Limited
Annual Report 2017

Plain-text annual report

BIO-GENE TECHNOLOGY LIMITED (ABN 32 071 735 950) 2017 ANNUAL REPORT CONTENTS Directors’ Report Auditor’s Independence Declaration Statement of Profit or Loss and Other Comprehensive Income Statement of Financial Position Statement of Changes in Equity Statement of Cash Flows Notes to the Financial Statements Declaration by Directors Independent Auditor’s Report Board of Directors and Company Particulars 3 13 14 15 16 17 18 34 35 37 BIO-GENE TECHNOLOGY LIMITED – 2017 ANNUAL REPORT 2 DIRECTORS’ REPORT The Board of Directors of Bio-Gene Technology Limited (“Bio-Gene” or the “Company”) has resolved to submit the following report together with the financial statements of the Company for the year ended 30 June 2017. Directors The following persons were directors of the Company during the whole of the financial year and up to the date of this report: Mr. Robert Klupacs (Managing Director and CEO) Mr. Kevin Rumble (Non-Executive Director) Mr. Peter May (Non-Executive Director) Mr. Donald Brumley was appointed as Non-Executive Chairman of the Company on 26 April 2017 replacing Mr. Kevin Rumble in that role. Mr Richard Jagger was appointed as a Non-Executive Director on 26 April 2017 and as Head of Commercial Development on 26 May 2017. Mr. John Cornelius was a Non-Executive Director of the Company from the beginning of the financial year until his retirement on 11 May 2017. Details of each director’s qualifications and special responsibilities, together with meetings attended, are set forth in other parts of this report. Company Secretary: Mr. Roger McPherson was appointed on 26 April 2017, replacing Kevin Rumble in this role. Over the past year John Cornelius assisted Kevin with these duties. Principal activities The principal activity of the Company is to develop Flavocide™ as an insecticide with applications in a number of markets including public health, animal health and agriculture. The Company’s objective is to achieve the registration of the active molecule within Flavocide™ (flavesone) by major regulatory bodies throughout the world including the Environment Protection Agency (EPA) in the USA and with the APVMA (Australian Pesticides & Veterinary Medicines Authority) in Australia. The Company aims to market products through partnerships with major market players across a range of different market segments. It aims to control its intellectual property and manufacturing and to obtain a return on invested capital through licensing fees, sales royalties and sales of manufactured product to its partners for re-sale. A Variation Agreement in respect to the Intellectual Property rights to the use of the beta triketone class of molecules as insecticides which include Flavesone was entered into in December 2016 between the Company, Medibio Limited and University of Western Sydney. The Variation Agreement confirms the ownership of these Intellectual Property Rights by the Company and the milestone payments to be paid by the Company upon certain commercial events. Review of operations Improvement of the financial position of the Company In conjunction with Henslow Pty Ltd, the Company completed two capital raisings from placements to existing and new professional investors which raised a total of $3.7 million. The first was completed in March 2017 for $1 million. The second was in June 2017 for a further $2.7 million. The Board has resolved to seek to undertake an initial public offering (IPO) of the Company on the ASX within the next 12 months but will seek to list as quickly as possible subject to market conditions. Accordingly, Henslow Pty Ltd has been appointed as Corporate Adviser and Lead Manager to the Company to lead the IPO process. Virbac Collaboration In June 2017 the Company announced that it had signed a research collaboration agreement with Virbac (EPA:VIRP), one of the largest animal health dedicated companies in the world. Under the terms of the agreement, Virbac and Bio-Gene will evaluate Flavocide™ as a new agent for insect control (including tick, flies and lice) in ruminant animals. As part of its strategy the Company will continue to seek further partners in discrete market segments. BIO-GENE TECHNOLOGY LIMITED – 2017 ANNUAL REPORT 3 DIRECTORS’ REPORT Flavocide™ Mosquitos, Flies and Fleas Over the past twelve months the Company has continued to focus its efforts on expanding the data package through further efficacy testing of Flavocide. The testing program is being undertaken with a number of groups to demonstrate activity across a number of pests in a number of different sectors. A series of detailed tests were conducted by specialist entomologists at the University of Technology Sydney (UTS). The program assessed the “knockdown” and residual activity of Flavocide™ at a range of doses against two strains of mosquitos (including Aedes aegypti which carries both Zika and Dengue viruses), house flies and fleas compared to water and/or commercial Permethrin controls. Under this program, UTS has shown that Flavocide™ is as effective as the permethrin against all insects and more effective against house flies in certain settings. Initial field testing conducted by UTS in Cairns in the past few months indicated that Flavocide™ is efficacious against mosquitos in this setting. The results of the UTS testing were presented by our UTS collaborator, Prof. Peter Miller at the prestigious International Conference on Urban Pests meeting, held in Birmingham, UK in early July 2017. In parallel with the UTS studies the Company recently entered into a research collaboration with Prof. Catherine Hill and colleagues from Purdue University in the USA. Prof. Hill is a world recognised expert on mosquito insecticide resistance and control as well as a leading researcher in assessing new agents for tick and cockroach control. She is currently advising the US government on their Zika vector control programs. Her lab is one of the very few labs in the world with access to pyrethrin and oganophosphate insecticide resistant insects. She has obtained promising initial results with Flavocide™ in pilot studies. Her group is currently undertaking more detailed studies in these and other insect species with results expected throughout the second half of 2017. Ticks and Buffalo Fly As advised in June 2016, the Company entered into an Evaluation Agreement with a major global multi-national animal health company to undertake a staged evaluation assessing Flavocide™ in treatment and prevention of ectoparasites in cattle (ticks, buffalo fly) and sheep (lice). The initial results indicated extremely positive results against tick larvae and buffalo fly. Based on these results the Company was able to secure a development agreement with Virbac. The goal of the collaboration with Virbac is to assess Flavocide™ in field trials in cattle for tick and buffalo fly control in both Australia and South America in the next 12-18 months. Grain Storage Pests Bio-Gene also engaged the Queensland Department of Agriculture and Fisheries (QDAF) to assess Flavocide™ against a range of grain storage pests including insecticide resistant pests. This is a major issue in the grain industry. Very promising results have been developed in both standard and resistant insect populations and the Company is now expanding these studies to other grain pests with the plan to assess in “silo trials” in the next 12 months. Unique Mode of Action The Company has collaborated with a UK company, Neurosolutions Limited, which specialises in identifying method of action of chemicals using their in-house proprietary assays. Neurosolutions has confirmed that the insecticidal effects of Flavocide™ appear to work through a novel/unique mode of action (i.e. it appears to act via a chemical pathway no current insecticide uses). The Company is now undertaking additional and more detailed studies to elucidate this mechanism in finer detail. The Company has recently filed further patent applications at the Australian Patent Office based on these findings. Qcide™ The Company has continued to work with its growers in North Queensland to expand its plantation as well as to increase inventory of the product. The Company is currently exploring collaborations with third parties who may be able to utilise Qcide as an alternative in product formulations they currently market using Eucalyptus oil. These third parties are currently undertaking exploratory reviews before moving to the next stage of commercial supply discussions. Broadening the composition of board of directors In April 2017, following the completion of the first capital raising and to accelerate Bio-Gene’s transformation into a world class insecticide development company over the next few years, the Company sought to add two additional directors to the Board. The Company sought out specific high level international agrichemical company expertise as well as well credentialed corporate governance expertise. Donald Brumley, a former senior audit partner of Ernst & Young Australia, with 30 years partnership experience has joined the Board as Non-Executive Chairman. In addition, Richard Jagger who, most recently was Managing Director of Sinochem Australia and prior to that worked for Monsanto in senior roles in Australia and USA, also agreed to join the Board as an Executive Director and Head of Commercial Development. Further details on their credentials are included elsewhere in this report. As a planned consequence of these Board changes, John Cornelius advised the Board that he wished to resign as a Director to enable the Board to appoint a Chief Financial Officer. John resigned from the Board in May 2017. Roger McPherson joined Bio-Gene as CFO and Company Secretary in April. Roger is a seasoned CFO with experience with both private and public companies across a range of industries. BIO-GENE TECHNOLOGY LIMITED – 2017 ANNUAL REPORT 4 DIRECTORS’ REPORT Financial summary The financial results of the Company for the year ended 30 June 2017 are summarised as follows: Statement of financial position:  Cash and term deposits held of $2,860,324 (2016: $101,646) at reporting date. This increase is due to the successful capital raisings referred to above.  The Company’s policy is to hold its cash and cash equivalent deposits in “A” rated or better deposits.  The Company’s strategy is to outsource product development expenses including manufacturing, regulatory and trial expenses, to specialist, best of breed partner organisations. As a consequence the Company has not incurred any major capital expenditure for the period and does not intend to incur substantial commitments for capital expenditure in the immediate future. Operating results:  The Company produced a loss from ordinary activities after income tax of $1,054,902 (2016: $322,518).  Consolidated revenue including other income during the period was $106,725 (2016: $186,415). This revenue included an estimated R&D Tax Incentive of $100,000 (2016: $186,367), Licence Fees of $6,316 (2016: $Nil) and interest of $409 (2016: $48).  Total consolidated operating expenses for the period were $1,161,627 (2016: $508,933). Research and development costs have been expensed in the year in which they were incurred. The increase in expenditure is primarily due to the recent acceleration of the research program.  Basic and diluted net loss per share increased to 0.96¢ (2016: 0.37¢) due to a combination of an increase of the loss and an increase in the number of shares on issue. Statement of cash flows:  The Company’s cash outflow from operations over the period was $729,152 (2016: $419,345).  The increase is due to the increased investment in the Flavocide™ development program. Business strategies and prospects The Company’s strategy is to develop its proprietary technologies to a point where they can be licensed and/or partnered with an agricultural or biotech partner for further development and ultimately released to the market. Bio-Gene would generate milestone payments and royalty revenues from such transactions. Material business risks: The Company’s operations and business prospects are subject to a number of risks. The Board regularly reviews the possible impact of these risks and seeks to minimise this impact through a commitment to its corporate governance principles and risk management function. However, not all risks are manageable or within the control of the Company. The key business risks faced by the Company that are likely to have an effect on its future prospects include: Laboratory and Field Trials 1. Development of the Company’s products may fail for a number of reasons including lack of efficacy, toxicity or adverse side effects. Failure can occur at any stage of the trials, requiring the Company to abandon or repeat trials. The Company or the relevant regulatory authorities may suspend the Company’s trials at any time if it appears that the trials could potentially result in unacceptable health risks. 2. Manufacturing/production The Company has successfully manufactured product at a scale sufficient to conduct the trials that have been undertaken to date. The Company is now working on improving the production process to allow for cost effective manufacturing at scale. With any chemical production process, however, there is inherent variability which cannot be controlled and therefore the yields of finished product can vary. The Company’s production technologies have also not been tested at a scale sufficient to make commercial quantities of a product in the event that it proves successful and can be brought to market and are therefore subject to risk of failure or high costs. 3. Out-licensing The Company is relying on its ability to be able to out-license its products at a time deemed appropriate. The agricultural industry is highly competitive and numerous entities around the world compete with the Company to discover, validate and commercialise insecticides. The Company’s competitors may discover and develop products in advance of the Company and/or products that are more effective than those developed by the Company. As a consequence, the Company may not be able to out-license its products or not be able to out-license its products for the desired returns, resulting in adverse effects on revenue and profitability. BIO-GENE TECHNOLOGY LIMITED – 2017 ANNUAL REPORT 5 DIRECTORS’ REPORT 4. Sufficiency of funding The Company has limited financial resources and may need to raise additional funds from time to time to finance the development and commercialisation of its products and its other objectives. The Company’s product development activities may never generate revenues and the Company may never achieve profitability. The Company’s ability to raise funds in the future will be subject, among other things, to factors beyond the control of the Company and its Directors including cyclical factors affecting the economy and share markets generally. The Directors can give no assurance that future funds can be raised by the Company on favourable terms, if at all. 5. Third party collaborations The Company has established and intends to continue to establish collaborative relationships to achieve its product development objectives. The Company does not have all the resources that it needs to internally develop its product candidates through to full development and to launch marketable products and relies on its ability to maintain and enter into collaborative and licensing relationships to achieve this objective, and relies on its collaborators to fulfil their responsibilities. Any failure by these collaborators to fulfil their responsibilities could adversely impact the Company. Earnings per share Basic loss per share from continuing operations Basic diluted loss per shares from continuing operations Significant changes in state of affairs 2017 (0.96¢) (0.96¢) 2016 (0.37¢) (0.37¢) Other than the raising of additional capital, the execution of the deal with Virbac and the enhancement of the Board (detailed earlier in this report) there were no significant changes to the state of affairs of Bio-Gene during the year. Likely developments and expected results of operations The Company will continue to fully evaluate Flavocide™ in a range of market applications, and to develop a comprehensive data package to support product registrations in Australia and internationally. Disclosure of information, in addition to that provided in this report, regarding likely developments in the operations of the Company in future financial years and the expected results of those operations is likely to result in unreasonable prejudice to the Company. Accordingly, this information has not been disclosed in this report. Events since the end of the financial year No matter or circumstance has arisen since 30 June 2017, other than as disclosed in this report, that has significantly affected or may significantly affect: -    Bio-Gene Technology Limited’s operations in future financial years, or the results of those operations in future financial years, or Bio-Gene Technology Limited’s state of affairs in future years. Dividends No dividends were paid or declared during the course of the financial year and no dividends are recommended in respect to the financial year ended 30 June 2017. Insurance and indemnification During the financial year, the Company paid a premium in respect of a contract insuring the Directors and Company Secretary (as named above), and all executive officers of the Company against a liability incurred when acting in their capacity as a Director, Company Secretary or executive officer to the extent permitted by the Corporations Act 2001. Further disclosure required under section 300(9) of the Corporations Act 2001 is prohibited under the terms of the insurance contract. Other than to the extent permitted by law, the Company has not otherwise, during or since the end of the financial year, indemnified or agreed to indemnify an officer or auditor of the Company or any other related body corporate against a liability incurred as such by an officer or auditor. BIO-GENE TECHNOLOGY LIMITED – 2017 ANNUAL REPORT 6 DIRECTORS’ REPORT Meetings of directors The number of meetings of the Company’s Directors held during the year ended 30 June 2017 and the numbers of meetings attended by each Director were: Director Donald Brumley1 Robert Klupacs Richard Jagger1 Peter May Kevin Rumble John Cornelius2 Held and Eligible to Attend 3 9 3 9 9 7 Attended 3 9 3 9 9 7 1. Donald Brumley and Richard Jagger were appointed as directors on 26 April 2017. 2. John Cornelius ceased to be a director on 11 May 2017. Proceedings on behalf of the Company No person has applied to the Court under Section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the Company, or to intervene in any proceedings to which the Company is a party, for the purpose of taking responsibility on behalf of the Company for all or part of those proceedings. No proceedings have been brought or intervened in on behalf of the Company with leave of the Court under Section 237 of the Corporations Act 2001. Environmental issues The company’s operations are not currently regulated by any significant environmental regulation under a law of the Commonwealth or of a state or territory. Capital Raising During the year the Company raised $3,721,753 (2016: $360,000) by the issue of 60,062,032 (2016: 14,400,000) shares. At 30 June 2017 the Company had 177,470,133 (2016: 109,553,101) shares on issue. Refer to Note 11(a) for further detail of movements in issued capital. Options issued During the current and previous financial years the Company issued options to Financial Advisors as part consideration for capital raisings. Details of these options are: Options issued – 20/6/16 Options issued – 16/6/17 Options Issued 7,548,400 1,300,000 Exercise Price 2.5 cents 4.6 cents Expiry 20/6/21 16/6/20 The Company will issue 1,500,000 options in the 2018 financial year which are associated with the 7 cents round. The term of these options will be 3 years. 750,000 will have an exercise price of 7 cents and the balance of 750,000 options will have an exercise price of 8.75 cents. Further details in respect of these options are included in Note 11(b). BIO-GENE TECHNOLOGY LIMITED – 2017 ANNUAL REPORT 7 DIRECTORS’ REPORT Information on directors and key management personnel in office during or since the end of the financial year and to the date of this report Particulars of interests in shares and options of Bio-Gene Technology Limited LSP* Shares Options Shares 100,000 2,000,000 Nil 100,000 6,640,000 Nil Name and Position Non-Executive Chairman Donald Brumley FCA, MAICD Managing Director and Chief Executive Officer Robert Klupacs BSc (Hons) Grad Dip IP Law, Australian Registered Patent and Trademark Attorney Qualifications and Experience Don has 30 years’ experience as a senior partner of Ernst & Young, Oceania, has extensive experience in IPO’s, transactions and audit. Don has advised and worked with Boards of organisations, ranging from some of the largest in Australia to fast growing entrepreneurial and medium sized organisations. Don was the Oceania IPO Leader at Ernst & Young and worked with clients listing on the Australian, US, UK and key Asian stock exchanges. He held positions as Biotech Markets Leader, National Leader of Strategic Growth Markets and on the Board of Partners of Ernst & Young. Don is a Fellow of Chartered Accountants Australia & New Zealand, a member of the Australian Institute of Company Directors and a Director of Murray River Organics Group Limited. Director of Bio-Gene Technology Limited since 26 April 2017. Other Directorships of listed companies over the past three years: Murray River Organics Group Limited since September 2016. Robert is a highly experienced professional uniquely experienced in translating and commercialising early stage intellectual property from a variety of technology areas into commercial product or investable corporate vehicles. He is an Australian registered patent attorney who has had a wide and successful career to date within both private and publically traded companies as well as the academic arena. He has over 30 year’s corporate experience in the international technology development arena. corporate development, focused primarily on biotechnology and He has biotechnology particularly healthcare related, but has also been involved in the commercialisation of software, scientific instrumentation, food technologies and enabling agricultural technology. He has deep expertise and experience in all facets of corporate development and technology transfer including: IP licensing, patenting, intellectual property strategy and management, joint venture creation and management, fund-raising (private and public markets), corporate and technology and corporate scientific due diligence, corporate acquisitions, governance and academic liaison. He is the Founder of 23 companies in Australia and Singapore. He is a highly experienced professional Director having been an Executive or Non-Executive Chairman/Director on over 21 different corporate entities. He was previously a member of the Pharmaceutical Industry Group and a past member of the Victorian Biotechnology Advisory Committee. He has also been involved as a director or advisor to a number of Australian companies and CRCs. compliance and corporate Director of Bio-Gene Technology Limited since 29 May 2015. Other Directorships of listed companies over the past three years: None. BIO-GENE TECHNOLOGY LIMITED – 2017 ANNUAL REPORT 8 Particulars of interests in shares and options of Bio-Gene Technology Limited LSP* Shares Options Shares 100,000 1,250,000 Nil 100,000 1,532,000 Nil DIRECTORS’ REPORT Name and Position Executive Director and Head of Commercial Development Richard Jagger B.Sc.(Hons), Masters of International Business, GAICD Qualifications and Experience Richard has over 20 years’ experience in the Agricultural sector, working for Fortune 500 companies around the world. He managed the introduction of Australia’s first agricultural biotech products into the cotton sector. Having worked as a senior executive manager for Monsanto’s Roundup business within Australia and New Zealand, he has extensive knowledge of the local business and distribution network, as well as the major Crop Protection companies globally. Over the past five years he co-created the Australian subsidiary of Sinochem – one of the largest Crop Protection companies in China – in the role of Managing Director. He was previously a board member of Crop Life Australia, the peak national industry organisation representing the agricultural chemical and biotechnology (plant science) sector in Australia. experience extensive continuous in improvement, business has Richard management, strategy development, culture evolution, technology and innovation implementation. With the opportunity to work with different cultures and business styles across the globe, he has a solid understanding of what is required to make a success of cross cultural, or cross geographic businesses. Non-Executive Director Peter May B.App.Sc (Rural Technology) (Hons), MBA, GAICD, AFAIM Director of Bo-Gene Technology Limited since 26 April 2017. Other Directorships of listed companies over the past three years: None. Peter’s career has included over 20 years of experience in the Australian and international crop protection market with companies Orica and Crop Care Australasia (now part of Nufarm). His various roles included management of non-crop pesticide products, export sales & toll formulation operations. During this period Peter developed extensive experience in international crop protection markets. In 2001, he founded Xavca Pty Ltd, providing marketing & consultancy services to companies such as Syngenta, Sorex (now part of BASF), Babolna Bioenvironmental (Hungary) and Proplan Plant Protection (Spain). Peter continues to operate Xavca with a focus on market research & marketing activities in both crop and non-crop sectors in Australia, New Zealand and the Asian region. In 2008 Peter joined BioProspect Limited (ASX: BPO) as Chief Executive Officer and subsequently was appointed Non-Executive Director and then Non-Executive Chairman of that company. In 2012 Peter joined Xenex Associates, a UK-based international consultancy company, as a Senior Associate. Peter is a graduate member of the Australian Institute of Company Directors (AICD), an associate fellow of the Australian Institute of Management (AIM), and member of the Australian Environmental Pest Managers Association (AEPMA) and the Mosquito Control Association of Australia (MCAA). Director of Bio-Gene Technology Limited since 29 May 2015. Other Directorships of listed companies over the past three years: None. BIO-GENE TECHNOLOGY LIMITED – 2017 ANNUAL REPORT 9 DIRECTORS’ REPORT Name and Position Non-Executive Director Kevin Rumble AFAIA Qualifications and Experience Kevin is a founding director of Bio-Gene. Kevin has had an extensive career in the fields of Advertising and Marketing having run his own Advertising Agency for more than 20 years. He has more than 20 years’ experience in new plant propagation, farming, and processing and live plant transport techniques. Kevin was instrumental in securing the contract with the University of Western Australia to grow Boronia megastigma and producing essential oil that was regarded as the best of its type in the world and was highly valued. He also secured the contract in Western Australia for exclusive access to that State’s native flora. He has been involved in the development of Qcide™ from the outset and has a vast knowledge of the plant husbandry and the extraction methods used to produce natural Qcide™. Kevin was also involved in development of the synthesis of flavesone as a first step in the commercialisation of Flavocide™. Director of Bio-Gene Technology Limited since 16 June 2004. Other Directorships of listed companies over the past three years: None. Former Non- Executive Director John Cornelius MAICD, SAFin, MAusIMM John has had a career in accounting, company secretarial, and director roles primarily within the resources industry as well as consulting to a range of corporate clients involved in enterprise development, marketing, mining, and forestry. Director of Bio-Gene Technology Limited since 26 June 2016 until his retirement on 11 May 2017. Other Directorships of listed companies over the past three years: None. Chief Financial Officer and Company Secretary Roger McPherson B.Bus, CPA, GAICD Roger has more than 20 years’ experience in senior finance roles in a wide variety of industries. His early career included working with a Chartered Accounting practice and two years with the Australian Taxation Office. Before Bio-gene, Roger was CFO and Company Secretary for a number of SMEs both listed and unlisted including Patrys Limited, TPI Enterprises Ltd and eChoice Home Loans. In these roles he was responsible for all financial affairs and corporate administration as well as assisting in investor relations activities. He has over 15 years of biotechnology and pharmaceutical experience. * Loan Share Plan - refer Note 11(c) for details Particulars of interests in shares and options of Bio-Gene Technology Limited LSP* Shares Options Shares 10,958,746 6,384,000 Nil N/A Nil Nil 100,000 Nil Nil BIO-GENE TECHNOLOGY LIMITED – 2017 ANNUAL REPORT 10 DIRECTORS’ REPORT Remuneration of directors and key management personnel The directors and key management personnel are remunerated under Service Contracts entered into with the Company. Fees include Directors’ Fees and fees for additional consulting services where applicable. The aggregate remuneration paid to each individual or their related parties was: Mr. Donald Brumley1 Mr. Richard Jagger1 Mr. Robert Klupacs Mr. Peter May Mr. Kevin Rumble Mr. John Cornelius2 Mr. Roger McPherson1 Totals 2017 Value of compensation under LSP 11,663 7,289 5,831 5,831 5,831 - - 36,445 Fees 8,125 16,801 156,000 69,800 78,200 94,000 26,730 449,656 Total Fees 19,788 24,090 161,831 75,631 84,031 94,000 26,730 486,101 - - 108,000 32,400 57,120 - - 197,520 2016 Value of compensation under LSP - - 10,688 3,206 6,413 - - 20,307 Total - - 118,688 35,606 63,533 - - 217,827 1. Donald Brumley, Richard Jagger and Roger McPherson were appointed on 26 April 2017. 2. John Cornelius retired as a Director on 11 May 2017, Further details of remuneration paid by the Company is included in Note 16 Equity held by directors and key management personnel The number of fully paid ordinary shares and shares under the LSP held by key management personnel or their related parties: 2017 Mr. Donald Brumley1 Mr. Richard Jagger1 Mr. Robert Klupacs Mr. Peter May Mr. Kevin Rumble Mr. Roger McPherson1 Totals Balance at 1 July No. - - 5,640,000 532,000 16,342,746 - 22,514,746 Issued as compensation under LSP No. 2,000,000 1,250,000 1,000,000 1,000,000 1,000,000 - 6,250,000 Purchased during the year No. 100,000 100,000 100,000 100,000 - 100,000 500,000 Disposals No. Balance at 30 June No. Total vested 30 June No. - - - - - - 0 2,100,000 1,350,000 6,740,000 1,632,000 17,342,746 100,000 29,264,746 100,000 100,000 5,740,000 632,000 16,342,746 100,000 23,014,746 1. Donald Brumley, Richard Jagger and Roger McPherson were appointed on 26 April 2017. 2. John Cornelius retired as a Director on 11 May 2017, he held 1,000,000 shares at the beginning of the financial year and at the date of his retirement. Further details of equity holding of key management personnel is included in Note 16 Auditor’s Independence Declaration A copy of the auditor’s declaration under Section 307C in relation to the audit for the year ended 30 June 2017 is attached. Auditor JTP Assurance continues in office in accordance with Section 327 of the Corporations Act 2001. BIO-GENE TECHNOLOGY LIMITED – 2017 ANNUAL REPORT 11 DIRECTO ORS’ REPO ORT Non-audit se ervices The Company did not employ the auditor on a assignments ad dditional to their r statutory audit duties during th he year. Accordingly, no amounts paid o o amount was p or payable for a paid or payable audit services ar e to the auditor ( re set out below (JTP Assurance w. e) for non-audit services provid ded during the y f year. Details of The Board of with the genera Directors has c al standard of in considered the p ndependence fo position and is or auditors impo satisfied that th osed by the Corp he planned prov porations Act 20 vision of the no 001 for the follow on-audit service owing reasons: e es is compatible  All non-aud dit services hav ve been reviewe ed to ensure the ey do not impact t the impartiality y and objectivity y of the auditor.  None of th 110, inclu Company, he services unde ding reviewing acting as advo ermine the gen or auditing th cate for the Com eral principles r e auditor’s ow mpany or jointly relating to audit wn work, acting y sharing econo or independenc in a managem mic risk and rew ce as set out in ment or a dec wards. Professional S cision-making c tatement APES S e capacity for the During the yea non-related au ar the following udit firms: fees were paid d or payable for r services provid ded by the aud itor of the Com s Audit services e : JTP Assurance d review of finan Audit and ncial reports an d other audit wo ork under the C orporations Act 2001 Other advisor Total remuner ry services ration No officers we re previously pa artners of the au udit firm JTP As ssurance. This report is m made in accorda ance with a reso olution of the Di irectors. Mr. Donald Bru Chairman umley Date: 25 July 2 2017 BIO-GENE TECHN NOLOGY LIMITED – 2017 ANNUAL REP ORT pany, its relate d d practices and 2017 $ 10,500 - 10,500 2016 $ 7,000 - 7,000 2 12 BIO-GENE TECHNOLOGY LIMITED ABN 32 071 735 950 STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2017 Revenues from continuing operations Expenses from continuing operations Research & Development Management and Employment Expenses Directors Expenses Financial Advisory Professional Services Intellectual Property Depreciation & Amortisation Other Expenses Note 3(a) 3(b) 2017 $ 2016 $ 106,725 186,415 (440,876) (378,615) (125,273) (22,000) (46,646) (25,157) (39,745) (83,315) (173,684) (197,520) (20,307) (16,470) (26,206) (27,401) (15,806) (31,539) Loss from continuing operations before tax Income tax (expense) (1,054,902) (322,518) - - Loss for the year from continuing operations after income tax (1,054,902) (322,518) Other comprehensive income Items that may be reclassified subsequently to profit or loss Total comprehensive loss for the year attributable to members of the Company - - (1,054,902) (322,518) Earnings per share: Basic loss per share - from continuing operations Diluted loss per share - from continuing operations 4 4 (0.96¢) (0.96¢) (0.37¢) (0.37¢) The above consolidated Statement of Profit or Loss and Other Comprehensive Income should be read in conjunction with the accompanying notes. BIO-GENE TECHNOLOGY LIMITED – 2017 ANNUAL REPORT 14 BIO-GENE TECHNOLOGY LIMITED ABN 32 071 735 950 STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2017 Current assets Cash and cash equivalents Trade and other receivables Total current assets Non-current assets Property, plant and equipment Intangible assets Total non-current assets Total assets Current liabilities Trade and other payables Financial liabilities Total current liabilities Non-current liabilities Financial liabilities Total non-current liabilities Total liabilities Net assets Equity Issued capital Reserves Accumulated losses Total equity Note 5 6 7 8 9 10 10 11 12 12 2017 $ 2,860,324 160,562 3,020,886 30,203 461,784 491,987 3,512,873 223,935 226,000 449,935 150,000 150,000 599,935 2,912,938 2016 $ 101,646 227,956 329,602 28,020 498,727 526,747 856,349 7,000 - 7,000 376,000 376,000 383,000 473,349 5,208,852 366,053 1,779,147 301,268 (2,661,967) (1,607,066) 2,912,938 473,349 The above consolidated Statement of Financial Position should be read in conjunction with the accompanying notes. BIO-GENE TECHNOLOGY LIMITED – 2017 ANNUAL REPORT 15 BIO-GENE TECHNOLOGY LIMITED ABN 32 071 735 950 STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2017 2017 At 1 July 2016 Loss for the period Other comprehensive income Total comprehensive income/(loss) for the year Transactions with owners in their capacity as owners: Issued capital Transaction costs related to shares issued Cost of share based payment At 30 June 2017 2016 At 1 July 2015 Loss for the period Other comprehensive income Total comprehensive income/(loss) for the year Transactions with owners in their capacity as owners: Issued capital Transaction costs related to shares issued Cost of share based payment At 30 June 2016 Fully paid ordinary shares Share option reserve Share loan plan reserve Accumulated losses Total $ $ $ $ $ 1,779,147 110,961 190,307 (1,607,066) 473,349 - - - 3,721,753 (292,048) - 5,208,852 - - - - - - - - (1,054,901) - (1,054,901) - (1,054,901) (1,054,901) - 3,721,753 - 28,340 139,301 - 36,445 226,752 - - (2,661,967) (292,048) 64,785 2,912,938 $ $ $ $ $ 1,549,908 - - - 360,000 (130,761) - 1,779,147 - - - - - 170,000 (1,284,548) 435,360 - - - - (322,518) - (322,518) - (322,518) (322,518) - 360,000 - 110,961 110,961 - 20,307 190,307 - - (1,607,066) (130,761) 131,268 473,349 The above consolidated Statement of Changes in Equity should be read in conjunction with the accompanying note. BIO-GENE TECHNOLOGY LIMITED – 2017 ANNUAL REPORT 16 BIO-GENE TECHNOLOGY LIMITED ABN 32 071 735 950 STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2017 Cash flows from operating activities Payments to suppliers and employees inclusive of GST (922,114) (498,802) Note 2017 $ 2016 $ Interest received R&D tax incentive Licence fees 279 186,367 6,316 48 79,409 - Net cash used in operating activities 13(b) (729,152) (419,345) Cash flows from investing activities Payments for property, plant and equipment Payments for intangible assets Net cash used in investing activities Cash flows from financing activities Net proceeds from issue of shares Payment for share issue expenses Net cash provided by financing activities Net (decrease)/increase in cash and cash equivalents Cash and cash equivalent at beginning of year Cash and cash equivalents at end of year 13(a) (4,985) (28,020) - - (4,985) (28,020) 3,704,753 (211,938) 3,492,815 2,758,678 101,646 2,860,324 360,000 (19,800) 340,200 (107,165) 208,811 101,646 The above consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes. BIO-GENE TECHNOLOGY LIMITED – 2017 ANNUAL REPORT 17 BIO-GENE TECHNOLOGY LIMITED ABN 32 071 735 950 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017 Introduction The financial report covers Bio-Gene Technology Limited (“Bio-Gene” or “Company”), as an individual entity. Bio-Gene is an unlisted public company limited by shares, incorporated and domiciled in Australia. The presentation currency and functional currency of the Company is Australian dollars. The principal activity of the Company during the financial year was developing insecticides/pesticides. The Registered office address of the Company is Quinert Rodda and Associates, Suite 1, Level 6, 50 Queen Street, Melbourne, Victoria 3000. The financial report was authorised for issue by the Board of Directors of Bio-Gene on the date shown on the Declaration by Directors attached to the Financial Statements. Note 1: Statement of significant accounting policies The principal accounting policies which have been adopted in the preparation of these financial statements are set out below. These policies have been consistently applied to all years presented unless otherwise stated. a) Statement of compliance The financial report is a general purpose financial report which has been prepared in accordance with the Corporations Act 2001, Accounting Standards and Interpretations, and complies with other requirements of the law. Bio-Gene is a for-profit entity for the purpose of preparing these financial statements. These financial statements also comply with International Financial Reporting Standards as issued by the International Accounting Standards Board (IASB). b) Basis of preparation The financial report has been prepared on the basis of historical cost, except for the revaluation of certain non-current assets and financial instruments. Cost is based on the fair values of the consideration given in exchange for assets. All amounts are presented in Australian dollars unless otherwise noted. All values are rounded to the nearest dollar. The accounting policies have been consistently applied and, except where there is a change in accounting policy, are consistent with those of the previous year. c) Going concern The financial report has been prepared on the going concern basis, which contemplates the continuity of normal business activity and the realisation of assets and the settlement of liabilities in the normal course of business for the following reasons:  At 30 June 2017, the Company had net current assets of $2,570,951 (2016: $322,602);  The Board of directors has the ability to downscale its operations and discontinue programs should the need arise, whilst meeting minimum expenditure commitments;  Cash flow forecasts prepared by the Board indicated that the company currently has sufficient cash reserves and working capital to fund its planned activities for a period beyond 12 months from the date of signing of financial report;  Directors have a number of external funding alternatives available such as out-licensing arrangements or raising additional equity funds; and  The Company has a history of successfully undertaking capital raisings during the last 3 years. Based on the above, the directors believe the consolidated entity will continue as a going concern and that it is appropriate to adopt that basis of accounting in the preparation of the financial report. d) Earnings per share Basic earnings per share Basic earnings per share is calculated by dividing the profit attributable to equity holders of the Company, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the year. Shares issued under the Loan Share Plan and options issued under the Employee Share Option Plan are excluded from this calculation. Refer to Note 4 for further details. Diluted earnings per share Diluted earnings per share adjusts the figures used in the determination of 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. Shares issued under the Loan Share Plan and options issued under the Employee Share Option Plan are excluded from this calculation. Refer to Note 4 for further details. BIO-GENE TECHNOLOGY LIMITED – 2017 ANNUAL REPORT 18 BIO-GENE TECHNOLOGY LIMITED ABN 32 071 735 950 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017 e) Critical accounting judgements and key sources of estimation uncertainty In the application of the Company’s accounting policies, which are described below, management is required to make judgements, estimates and assumptions about carrying values of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstance, the results of which form the basis of making the judgements. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods. Judgements made in applying accounting policies that have the most significant effect on the amounts recognised in the financial statements concerns management’s review of finite life intangibles for indicators of impairment. The carrying amount of intangibles at 30 June 2017 is $461,784 (2016: $498,727). Refer to Note 8 for details of the assumptions made on the carrying value of Intangibles. At each reporting period the Company assesses whether finite life intangibles have suffered any impairment in accordance with the accounting policy stated in Note 1(h). The Going Concern assumption also requires significant estimates, mainly in relation to expected cash inflows and outflows from various alternatives available to the Company. Other areas that require significant judgement and key assumptions include share based payments, which are calculated at fair value using industry standard option pricing models, and the estimated useful life of intangibles, which is based understanding of competitive forces, and general familiarity with the market. There have been no other significant judgments made in applying accounting policies that the Directors consider would have a significant effect on the amounts recognised in the financial statements. There have been no key assumptions made concerning the future, and there are no other key sources of estimation uncertainty at the reporting date, that the Directors consider would have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year. f) Property, plant and equipment The purchase method of accounting is used for all acquisitions of assets. Cost is measured as the fair value of the assets given up, shares issued or liabilities undertaken at the date of acquisition plus incidental costs directly attributable to the acquisition. Property, plant and equipment is recognised at cost and are depreciated over their estimated useful lives using the straight line method. The expected useful life for property, plant and equipment is 10 years. Profits and losses on disposal of plant and equipment are taken into account in determining the result for the year. Impairment The carrying values of plant and equipment are reviewed for impairment at each reporting date with recoverable amount being estimated when events or changes in circumstances indicate that the carrying value may be impaired. Impairment exists when the carrying value of an asset exceeds its estimated recoverable amount. The asset is then written down to its recoverable amount. Impairment losses are recognised in the statement of profit or loss and other comprehensive income. g) Intangible assets Licences Licences have a finite useful life and are carried at cost less accumulated amortisation and impairment losses. Amortisation is calculated using the straight line method, over the assets estimated useful lives of 20 years. h) Impairment of non-financial assets Intangible assets that have an indefinite useful life and intangible assets not yet available for use are not subject to amortisation and are tested annually for impairment or more frequently if events or changes in circumstances indicate that they might be impaired. Other non-financial assets are tested for impairment whenever events or changes in circumstances indicate the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount may not be recoverable. At each reporting date, the Company reviews the carrying amounts of its finite life tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where the asset does not generate cash flows that are independent from other assets, the consolidated entity estimates the recoverable amount of the cash-generating unit to which the asset belongs. BIO-GENE TECHNOLOGY LIMITED – 2017 ANNUAL REPORT 19 BIO-GENE TECHNOLOGY LIMITED ABN 32 071 735 950 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017 i) Cash and cash equivalents Cash and cash equivalents comprise cash on hand, held at call with financial institutions, and other short-term deposits with an insignificant risk of change in value. j) Trade and other receivables Trade receivables and other receivables represent the principal amounts due at reporting date less, where applicable, any provision for doubtful debts. An estimate for doubtful debts is made when collection of the full amount is no longer probable. Debts which are known to be uncollectable are written off. All trade receivables and other receivables are recognised at the amounts receivable as they are due for settlement within 90 days. k) Research and development costs Research and development expenditure is expensed as incurred except to the extent that its future recoverability can reasonably be regarded as assured, in which case it is deferred and amortised on a straight line basis over the period in which the related benefits are expected to be realised. The carrying value of development costs that have been capitalised are reviewed for impairment annually when the asset is not yet in use or when an indicator of impairment arises during the reporting year indicating that the carrying value may not be recoverable. l) Trade and other payables Payables represent the principal amounts outstanding at reporting date plus, where applicable, any accrued interest. Liabilities for payables and other amounts are carried at cost which approximates fair value of the consideration to be paid in the future for goods and services received, whether or not billed. The amounts are unsecured and are usually paid within 30 days of recognition. ANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2008 – CONTINUE m) Income taxes Income taxes are accounted for using the comprehensive statement of financial position liability method whereby:     the tax consequences of recovering (settling) all assets (liabilities) are reflected in the financial statements; current and deferred tax is recognised as income or expense except to the extent that the tax relates to equity items or to a business combination; a deferred tax asset is recognised to the extent that it is probable that future taxable profit will be available to realise the asset; and deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realised or the liability settled. n) Issued capital Ordinary shares are classified as equity (Note 11). Transaction costs arising on the issue of equity instruments are recognised directly in equity as a reduction of the proceeds of the equity instruments to which the costs relate. Transaction costs are the costs that are incurred directly in connection with the issue of those equity instruments and which would not have been incurred had those instruments not been issued. o) Revenue recognition Licence revenue Licence revenue is recognised in accordance with the underlying agreement. Upfront milestone payments are brought to account as revenues at the time of execution of the agreement and subsequent milestones when the relevant milestone has been achieved. Interest income Interest income is recognised on a time proportion basis using the effective interest method. When a receivable is impaired, the Company reduces the carrying amount to its recoverable amount, being the estimated future cash flow discounted at the original effective interest rate of the instrument, and continues unwinding the discount as interest income. Interest income on impaired loans is recognised using the original effective interest rate. R&D tax incentive Income from the R&D Tax Incentive is recognised on an accruals basis when AusIndustry accept the claim or there is a reasonable probability that AusIndustry will accept the claim. Grant income Grant income is recognised on a receipts basis. p) Comparative figures Comparatives have been reclassified so as to be consistent with the figures presented in the current year. BIO-GENE TECHNOLOGY LIMITED – 2017 ANNUAL REPORT 20 BIO-GENE TECHNOLOGY LIMITED ABN 32 071 735 950 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017 q) Goods and services tax (GST) Revenues, expenses and assets are recognised net of the amount of GST except where the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the GST is recognised as part of the cost of acquisition of the asset or as part of the expense. Receivables and payables are stated with the amount of GST included. The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the statement of financial position. Cash flows are included in the statement of cash flows on a gross basis and the GST component of cash flows arising from investing and financing activities, which is recoverable from, or payable to, the taxation authority, is classified as operating cash flows. r) Foreign currency translation Functional and presentation currency Items included in the financial statements are measured using the currency of the primary economic environment in which the entity operates (“the functional currency”). The financial statements are presented in Australian dollars, which is Bio-Gene’s functional and presentation currency. Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the statement of profit or loss and other comprehensive income, except when they are deferred in equity as qualifying cash flow hedges and qualifying net investment hedges or are attributable to part of the net investment in a foreign operation. Monetary assets and liabilities denominated in foreign currencies are translated at the rates of exchange ruling at reporting date. Foreign exchange gains or losses resulting from the translation of monetary assets and liabilities at year end exchange rates are recognised in the statement of profit or loss and other comprehensive income. s) Financial assets Investments are recognised and derecognised on trade date where the purchase or sale of an investment is under a contract whose terms require delivery of the investment within the time frame established by the market concerned, and are initially measured at fair value, net of transaction costs. Term Deposits The Company has financial assets in the nature of term deposits which are held to maturity. Loans and receivables Trade receivables, loans and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as ‘loans and receivables’. Loans and receivables are measured at amortised cost using the effective interest method less impairment. Interest is recognised by applying the effective interest rate. Effective interest method The effective interest method is a method of calculating the amortised cost of a financial asset and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset, or, where appropriate, a shorter period. Income is recognised on an effective interest rate basis for debt instruments other than those financial assets ‘at fair value through profit or loss’. Impairment of financial assets Financial assets, other than those at fair value through profit or loss, are assessed for indicators of impairment at each statement of financial position date. Financial assets are impaired where there is objective evidence that as a result of one or more events that occurred after the initial recognition of the financial asset the estimated future cash flows of the investment have been impacted. For financial assets carried at amortised cost, the amount of the impairment is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables where carrying amount is reduced through the use of an allowance account. When a trade receivable is uncollectable, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognised in profit or loss. With the exception of available-for-sale equity instruments, if, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed through profit or loss to the extent the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised. In respect of available-for-sale equity instruments, any subsequent increase in fair value after an impairment loss is recognised directly in equity. BIO-GENE TECHNOLOGY LIMITED – 2017 ANNUAL REPORT 21 BIO-GENE TECHNOLOGY LIMITED ABN 32 071 735 950 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017 t) Prior period error The comparative figures have been adjusted in accordance with AASB 108 Accounting Policies, Changes in Accounting Estimates and Errors. The shares issued to directors under the loan share plan were previously recognised as receivables in the Statement of Financial Position however should have been recognised in the Share Loan Plan Reserve as an equity instrument as required by AASB 2 Share-based Payment. The options issued to the Financial Advisors were incorrectly valued per AASB 2 Share-based Payment. The value of these equity instruments should have been calculated and then recognised in the financial statements using the valuation methodology is outlined in Note 11(d). A retrospective restatement of the accounts has been applied to correct this. The impact of this restatement is shown below: Area of Financial Statements Statement of Comprehensive Income Directors Expenses Loss for the Period Statement of Financial Position Receivables - Loan to Directors Share Option Reserve Share Loan Plan Reserve Contributed Equity Brought Forward Retained Losses 2016 Original Balance $ - (302,211) 280,400 - 170,000 2,170,508 (1,416,759) Adjustment $ (20,307) (20,307) (280,400) 110,961 20,307 (391,361) (190,307) 2016 Revised Balance $ (20,307) (322,518) - 110,961 190,307 1,779,147 (1,607,066) The value of the 10 million shares issue under the LSP in 2015 of $170,000 has been adjusted against opening retained losses and the Share Loan Plan Reserve for 2016. u) New, revised or amending accounting standards and Interpretations adopted New Accounting Standards for Application in Future Periods The AASB has issued a number of new and amended Accounting Standards and Interpretations that have mandatory application dates for future reporting periods, some of which are relevant to the Company. The directors have decided not to early adopt any of the new and amended pronouncements. Their assessment of the pronouncements that are relevant to the Company but applicable in future reporting periods is set out below: AASB 9: Financial Instruments and associated Amending Standards (applicable to annual reporting periods beginning on or after 1 January 2018).  The Standard will be applicable retrospectively (subject to the provisions on hedge accounting outlined below) and includes revised requirements for the classification and measurement of financial instruments, revised recognition and derecognition requirements for financial instruments and simplified requirements for hedge accounting.  The key changes that may affect the Company on initial application include certain simplifications to the classification of financial assets, simplifications to the accounting of embedded derivatives, upfront accounting for expected credit loss, and the irrevocable election to recognise gains and losses on investments in equity instruments that are not held for trading in other comprehensive income. AASB 9 also introduces a new model for hedge accounting that will allow greater flexibility in the ability to hedge risk, particularly with respect to hedges of non-financial items. Should the entity elect to change its hedge policies in line with the new hedge accounting requirements of the Standard, the application of such accounting would be largely prospective.  Although, the directors anticipate that the adoption of AASB 9 may have an impact on the Company’s financial instruments, including hedging activity, it is impracticable at this stage to provide a reasonable estimate of such impact. AASB 15: Revenue from Contracts with Customers (applicable to annual reporting periods beginning on or after 1 January 2018 as deferred by AASB 2015-8: Amendments to Australian Accounting Standards – Effective Date of AASB 15).  When effective, this Standard will replace the current accounting requirements applicable to revenue with a single, principles-based model. Apart from a limited number of exceptions, including leases, the new revenue model in AASB 15 will apply to all contracts with customers as well as non-monetary exchanges between entities in the same line of business to facilitate sales to customers and potential customers.  The core principle of the Standard is that an entity will recognise revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for the goods or services. To achieve this objective, AASB 15 provides the following five-step process:      identify the contract(s) with a customer; identify the performance obligations in the contract(s); determine the transaction price; allocate the transaction price to the performance obligations in the contract(s); and recognise revenue when (or as) the performance obligations are satisfied.  The transitional provisions of this Standard permit an entity to either: restate the contracts that existed in each prior period presented as per AASB 108: Accounting Policies, Changes in Accounting Estimates and Errors (subject to certain practical expedients in AASB 15); or recognise the cumulative effect of retrospective application to incomplete contracts on the date of initial application. There are also enhanced disclosure requirements regarding revenue. BIO-GENE TECHNOLOGY LIMITED – 2017 ANNUAL REPORT 22 BIO-GENE TECHNOLOGY LIMITED ABN 32 071 735 950 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017  Although the directors anticipate that the adoption of AASB 15 may have an impact on the Company’s financial statements, it is impracticable at this stage to provide a reasonable estimate of such impact. AASB 16: Leases (applicable to annual reporting periods beginning on or after 1 January 2019).  When effective, this Standard will replace the current accounting requirements applicable to leases in AASB 117: Leases and related Interpretations. AASB 16 introduces a single lessee accounting model that eliminates the requirement for leases to be classified as operating or finance leases.  The main changes introduced by the new Standard are as follows:      recognition of a right-of-use asset and liability for all leases (excluding short-term leases with less than 12 months of tenure and leases relating to low-value assets); depreciation of right-of-use assets in line with AASB 116: Property, Plant and Equipment in profit or loss and unwinding of the liability in principal and interest components; inclusion of variable lease payments that depend on an index or a rate in the initial measurement of the lease liability using the index or rate at the commencement date; application of a practical expedient to permit a lessee to elect not to separate non-lease components and instead account for all components as a lease; and inclusion of additional disclosure requirements.  The transitional provisions of AASB 16 allow a lessee to either retrospectively apply the Standard to comparatives in line with AASB 108 or recognise the cumulative effect of retrospective application as an adjustment to opening equity on the date of initial application.  Although the directors anticipate that the adoption of AASB 16 may impact the Company's financial statements, it is impracticable at this stage to provide a reasonable estimate of such impact. AASB 2014-10: Amendments to Australian Accounting Standards – Sale or Contribution of Assets between an Investor and its Associate or Joint Venture (applicable to annual reporting periods beginning on or after 1 January 2018, as deferred by AASB 2015-10: Amendments to Australian Accounting Standards – Effective Date of Amendments to AASB 10 and AASB 128).  This Standard amends AASB 10: Consolidated Financial Statements with regards to a parent losing control over a subsidiary that is not a “business” as defined in AASB 3: Business Combinations to an associate or joint venture, and requires that:  a gain or loss (including any amounts in other comprehensive income (OCI)) be recognised only to the extent of the unrelated investor's interest in that associate or joint venture; the remaining gain or loss be eliminated against the carrying amount of the investment in that associate or joint venture; and any gain or loss from remeasuring the remaining investment in the former subsidiary at fair value also be recognised only to the extent of the unrelated investor's interest in the associate or joint venture. The remaining gain or loss should be eliminated against the carrying amount of the remaining investment.    The application of AASB 2014-10 will result in a change in accounting policies for transactions of loss of control over subsidiaries (involving an associate or joint venture) that are businesses per AASB 3 for which gains or losses were previously recognised only to the extent of the unrelated investor's interest.  The transitional provisions require that the Standard should be applied prospectively to sales or contributions of subsidiaries to associates or joint ventures occurring on or after 1 January 2018.  Although the directors anticipate that the adoption of AASB 2014-10 may have an impact on the Company's financial statements, it is impracticable at this stage to provide a reasonable estimate of such impact. Note 2: Remuneration of auditors Audit services JTP Assurance : Audit and review of financial reports and other audit work under the Corporations Act 2001 Other advisory services Total remuneration 2017 $ 10,500 - 10,500 2016 $ 7,000 - 7,000 BIO-GENE TECHNOLOGY LIMITED – 2017 ANNUAL REPORT 23 BIO-GENE TECHNOLOGY LIMITED ABN 32 071 735 950 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017 Note 3: Revenue and expenses from continuing operations (a) Revenue Interest received – bank deposits R&D tax incentive1 Licence fees Total revenue from continuing operations 2017 $ 409 100,000 6,316 106,725 2016 $ 48 186,367 - 186,415 1. During the year the Company undertook a number of its research activities overseas as the necessary experience and facilities are not available in Australia. As a result the Company has lodged an Advanced Overseas Finding with AusIndustry to seek approval to claim these costs as part of its R&D Incentive. As this approval had not been received at the time of completion of these financial statements the Directors have elected to only include an estimate of the anticipated revenue from the AusIndustry incentive claim in respect of its Australian based expenditure in these accounts. If the Company is successful in its request to claim the overseas activities as well which will result in additional revenue, this revenue will be recognised in the 2018 financial year. (b) Expenses Depreciation, amortisation and impairment of non-current assets: Plant and equipment License and registered patents Total depreciation and amortisation expenses Operating expenses: Loss on disposal of non-current assets Note 4: Earnings per share Net loss used in calculating basic earnings per share: Net loss used in calculating diluted earnings per share: Weighted average number of ordinary shares used in calculating basic earnings per share Dilutive potential ordinary shares Weighted average number of ordinary shares and potential ordinary shares used in calculating diluted earnings per share Information concerning the classification of securities 2,802 36,943 39,745 6,715 9,091 15,806 - 40,702 2017 $ 1,054,902 1,054,902 2016 $ 322,518 322,518 No. of Shares No. of Shares 110,351,100 87,653,641 - - 110,351,100 87,653,641 Fully paid ordinary shares Fully paid ordinary shares carry the right to participate in dividends and the proceeds on winding up of the Company in equal proportion to the number of shares held. At shareholder meetings each ordinary share is entitled to one vote when a poll is called, otherwise each shareholder has one vote on a show of hands. Fully paid ordinary shares are included as ordinary shares in the determination of basic earnings per share. Loan Share Plan The Loan Share Plan (“LSP”) allows non-recourse, interest free loans to be provided to eligible participants to acquire shares under the plan. When an issue is made it will be treated as an in-substance grant of options and expensed over the vesting period because of the limited recourse nature of the loans. Shares offered under the LSP may be subject to Vesting Conditions, Forfeiture Conditions and Disposal Restrictions (collectively referred to as “Conditions”) as determined by the Board and specified in the Offer documents sent to participants. The Board has discretion to waive or deem Conditions to have been satisfied. Shares under the LSP cannot be dealt with (including traded on the ASX) unless they are not subject to any Conditions and there is no outstanding Loan on the shares. Generally shares issued under the plan will vest over a 6 or 12 month period. The shares are acquired in the name of the participant and each participant authorises and appoints the Company Secretary to act on their behalf. Any dividends paid on the shares are used to repay the loan. In all other respects the shares issued under the LSP carry the same rights as other ordinary shares on issue. If the participant leaves the Company, any shares that have not vested will be bought back by the Company and cancelled along with the loan. In respect of shares that have vested the loan balance must be paid in full within six months of termination or the shares will be sold and the proceeds applied to settle the loan balance. The issue price of the shares in the Company held under the LSP is not included in equity until the loan has been repaid. BIO-GENE TECHNOLOGY LIMITED – 2017 ANNUAL REPORT 24 BIO-GENE TECHNOLOGY LIMITED ABN 32 071 735 950 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017 Amounts unpaid on shares held under the LSP are treated as the equivalent of options to acquire ordinary shares and are excluded as potential ordinary shares in the determination of diluted earnings per share and basic earnings per share. Details relating to the LSP are set out in Note 11(c). The 17,666,000 shares on issue at reporting date that were granted under the LSP are not included in the calculation of diluted earnings per share because they are anti-dilutive for the year ended 30 June 2017. These shares could potentially dilute basic earnings per share in the future. Options Options granted by the Company are considered to be potential ordinary shares and have been excluded in the determination of diluted earnings per share to the extent to which they are dilutive. The options have not been included in the determination of basic earnings per share because they are anti-dilutive for the year ended 30 June 2017. Details relating to the options are set out in Note 11(b). Note 5: Cash and cash equivalents Cash at bank Deposit at call Term deposits Note 6: Trade and other receivables 2017 $ 60,055 800,269 2,000,000 2,860,324 2017 $ R&D tax incentive GST refund due Other receivables 100,000 53,431 7,130 160,561 The balance of other receivables of $160,561 (2016: $227,956) is not past due and not considered impaired. Note 7: Property, plant and equipment Plant and equipment At cost Accumulated depreciation Total net plant and equipment Movements in the carrying amounts for each class of property, plant and equipment between the beginning and the end of the current financial year Plant and equipment at cost: Balance at the beginning of year Additions Disposals Depreciation expense, impairment and asset write off Carrying amount at the end of year Note 8: Intangible assets Licences - Qcide Less: Accumulated amortisation Total net intangible assets Movements in the carrying amounts for intangible assets between the beginning and the end of the current financial year Carrying amount at the beginning of year Additions – acquisitions Amortisation expense (i) Carrying amount at the end of year (ii) BIO-GENE TECHNOLOGY LIMITED – 2017 ANNUAL REPORT 2017 $ 33,005 (2,802) 30,203 28,020 4,985 - (2,802) 30,203 2017 $ 557,818 (96,034) 461,784 498,727 - (36,943) 461,784 2016 $ 101,646 - - 101,646 2016 $ 186,367 11,589 30,000 227,956 2016 $ 28,020 - 28,020 40,702 28,020 - (40,702) 28,020 2016 $ 557,818 (59,091) 498,727 131,818 376,000 (9,091) 498,727 25 BIO-GENE TECHNOLOGY LIMITED ABN 32 071 735 950 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017 (i) Intangible assets comprise licences in relation to Qcide, which has a finite useful life and is recorded at cost. Amortisation has been historically calculated using straight line method over the estimated useful life of 20 years. (ii) Intangible assets are reviewed on a regular basis and where a decision has been made not to pursue a product, the remaining value recorded as an asset is impaired. At balance date, the directors also review the intellectual property portfolio to determine whether there are any indicators of impairment related to intellectual property. Note 9: Trade and other payables Current Trade creditors Other creditors and accruals Total trade and other payables Note 10: Financial liabilities Current Amount payable for IP licences Non-current Amount payable for IP licences 2017 $ 46,804 177,131 223,935 2017 $ 226,000 226,000 150,000 150,000 2016 $ - 7,000 7,000 2016 $ - - 376,000 376,000 In December 2016 the company signed a variation agreement to the Intellectual Property Assignment Deed originally signed 16 November 2009. This variation agreed additional fees of $376,000 to be paid to the licensor following the successful completion of an IPO and signing of 2 licencing agreements. Note 11: Contributed equity The Company does not have authorised capital nor par value in respect of its issued shares. Ordinary shares participate in dividends and the proceeds on winding up of the Company in equal proportion to the number of shares held. At shareholder meetings each ordinary share is entitled to one vote when a poll is called, otherwise each shareholder has one vote on a show of hands. (a) Movements in issued capital during the year were as follows: Issued shares: 2017 No. 2016 No. 2017 $ 2016 $ At the beginning of the reporting period 109,553,101 93,937,101 1,779,147 1,549,908 Shares issued at 2.5 cents Shares issued at 4.6 cents Shares issued at 7 cents Value of shares issued to Financial Advisors1 Transaction costs arising on issue of shares Shares issued pursuant to the Loan Share Plan (LSP) Employee share plan loans At end of the reporting period Issued shares are comprised as follows: Ordinary shares (net of transaction costs) Restricted shares issued under the LSP Accumulated transaction costs on issue of shares Balance at end of the year - 21,789,127 38,277,905 1,600,000 - 6,250,000 - 177,470,133 160,004,133 17,466,000 177,470,133 - 177,470,133 14,400,000 - - - - 1,216,000 - 109,553,101 98,337,101 11,216,000 109,553,101 - 109,553,101 - 1,002,300 2,679,453 40,000 (292,048) 287,500 (287,500) 5,208,852 5,208,852 567,900 5,776,752 422,809 6,199,561 360,000 - - - (130,761) 30,400 (30,400) 1,779,147 1,779,147 280,400 2,059,547 130,761 2,190,308 1. On the 25 October 2016 the Company issued shares to Henslow Pty Ltd as part of the remuneration due in respect of the 2.5 cent capital raising which closed during the 2016 financial year. BIO-GENE TECHNOLOGY LIMITED – 2017 ANNUAL REPORT 26 BIO-GENE TECHNOLOGY LIMITED ABN 32 071 735 950 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017 (b) Movements in share options over ordinary shares during the year were as follows: Balance at beginning of the year Granted during the year1 Exercised during the year Expired during the year Lapsed during the year Balance at end of the year Terms of options issued Options issued – 20/6/16 Options issued – 16/6/17 2017 No. 7,548,400 1,300,000 - - - 8,848,400 Value $ 110,961 28,340 2016 No. - 7,548,400 - - - 7,548,400 Expiry 20/6/21 16/6/20 Options Issued 7,548,400 1,300,000 Exercise Price 2.5 cents 4.6 cents 1. Share options granted carry no rights to dividends and no voting rights. 2. The two tranches of options granted formed part of the capital raising costs associated with the 2.5 cents and 4.6 cent rounds conducted during the 2016 calendar year. The Company will issue a further 1,500,000 options in the 2018 financial year which are associated with the 7 cents round. 3. The valuations of options issued are determined by using an industry standard option pricing model taking into account the terms and conditions upon which the instruments were issued. (c) Loan share plan The Company issues shares to Bio-Gene directors and key consultants under the Loan Share Plan (LSP). Under the plan, participants are issued with equity to foster an ownership culture within the Company and to motivate them to achieve performance targets Participation in the plan is at the Board’s discretion and no individual has a contractual right to participate in the plans or to receive any guaranteed benefits. The Company introduced the LSP. The plan allows non-recourse, interest free loans to be provided to eligible participants to acquire shares under the plan. When an issue is made it is treated as an in-substance grant of options and expensed over the vesting period because of the limited recourse nature of the loans. Generally shares issued under the plan vest over twelve months. Each participant authorises and appoints the Company Secretary to act on their behalf. Any dividends paid on the shares are used to repay the loan. If the participant leaves the Company, any shares that have not vested are bought back by the Company and cancelled along with the loan. In respect of shares that have vested, generally, the loan balance must be paid in full within six months of termination of appointment or the shares are sold and the proceeds applied to settle the loan balance. The issue price of the shares in the Company held under the LSP is not included in equity until the loan has been repaid. The valuations of shares issued under the LSP are determined by using an industry standard option pricing model taking into account the terms and conditions upon which the instruments were issued. The following share-based payment arrangements were in existence during the current and/or prior reporting period: Shares in existence in the current and past period under the Loan Share Plan: Tranche 1 Tranche 2 Tranche 3a Tranche 3b Loan Share Plan Tranche Number Issue date Vesting Date 10,000,000 1,216,000 3,125,000 3,125,000 17,466,000 29/06/2015 30/06/2016 11/05/2017 11/05/2017 29/06/2015 30/06/2016 11/11/2017 11/05/2018 Loan expiry date 29/06/2022 30/06/2023 11/05/2024 11/05/2024 Unit Price $ 0.017 0.0167 0.0311 0.0311 Fair Value at Issue Date Amount $ 170,000 20,307 97,188 97,188 384,683 (d) Fair values of share based payments  The fair value of all loan shares granted to Directors and key consultants and the financial advisor have been calculated using the Binomial Option Pricing Model. Where relevant, the expected life used in the model has been adjusted based on management’s best estimate for the effects of non-transferability, exercise (including the probability of meeting market conditions attached to the option), and behavioural considerations. The model requires the Company share price volatility to be measured. The share price volatility has been measured with reference to the historical share prices of the Company and other similar Companies. The fair value of share based payments is calculated on the date of issue less any consideration paid. The values are not revised if there is a subsequent change in terms. Details in respect of the fair value of equity, on issue/grant date, that was in existence at reporting date are outlined below. BIO-GENE TECHNOLOGY LIMITED – 2017 ANNUAL REPORT 27 BIO-GENE TECHNOLOGY LIMITED ABN 32 071 735 950 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017 Equity Instrument LSP Tranche 1 Options Tranche 1 LSP Tranche 2 LSP Tranche 3 Options Tranche 2 (e) Share based payments Loan /Exercise price $ 0.025 0.025 0.025 0.046 0.046 Share price on issue Date $ 0.025 0.025 0.025 0.046 0.046 Volatility Maturity date Time to maturity 74% 74% 74% 74% 74% 29/06/2022 20/06/2021 30/06/2023 11/05/2024 16/06/2020 7 years 5 years 7 years 7 years 3 years Risk free interest rate 2.61% 1.73% 1.81% 2.39% 1.79% Expected dividend yield - - - - - The amount expensed in relation to equity settled share based payments to the statement of profit or loss and other comprehensive income was $36,445 (2016: $20,307). Note 12: Reserves and accumulated losses Share options reserve Share loan plan reserve Total reserves (a) Share option reserve Opening balance 1 July Value of options granted to financial advisors Closing balance (b) Share loan plan reserve  Opening balance 1 July Value of shares recognised over vesting period 1 Closing balance Note (a) (b) 2017 $ 139,301 226,752 366,053 2017 $ 110,961 28,340 139,301 2017 $ 190,307 36,445 226,752 2016 $ 110,961 190,307 301,268 2016 $ - 110,961 110,961 2016 $ 170,000 20,307 190,307 1. The equity settled reserves arise on issue of equity under the LSP or the issue of options. Amounts are transferred out of the reserves and into issued capital when the loans are repaid or the options are exercised. Amounts are transferred to accumulated losses when the shares or options are cancelled. (c) Movement in accumulated losses  Opening balance 1 July Net loss attributable to the members of the parent entity for the period Closing balance 2017 $ (1,607,066) (1,054,902) (2,661,968) 2016 $ (1,284,548) (322,518) (1,607,066) Note 13: Cash flow Information (a) Reconciliation of cash  Cash at bank Deposit at call Term deposits Total cash and cash equivalents BIO-GENE TECHNOLOGY LIMITED – 2017 ANNUAL REPORT 2017 $ 60,055 800,269 2,000,000 2,860,324 2016 $ 101,646 - - 101,646 28 BIO-GENE TECHNOLOGY LIMITED ABN 32 071 735 950 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017 (b) Reconciliation of cash used in operating activities with loss after income tax Loss from continuing operations after income tax Non cash movements: Depreciation and amortisation expense Equity settled share based payment Changes in assets and liabilities: (Increase)/decrease in trade and other receivables Increase/(decrease) in trade creditors and accruals Cash used in operating activities (c) Non cash financing and investing activities  There were no non cash financing activities during the year. Note 14: Commitments and contingencies (a) Capital expenditure commitments 2017 $ (1,054,902) 39,745 36,445 44,394 205,166 (729,152) 2016 $ (322,518) 15,806 20,307 (139,940) 7,000 (419,345) As at reporting date the Company had committed to the purchase of equipment with a supplier. Committed but unrecognised expenditure as at reporting date amounted to $4,985 (2016: $NIL). (b) Other contingencies Research and development incentive Research and Development grants received may be subject to review by AusIndustry and subsequent claw back of funds should there be a determination of non-conforming claims. During the year the Company undertook a number of its research activities overseas as the necessary experience and facilities are not available in Australia. As a result the Company has lodged an Advanced Overseas Finding with AusIndustry to seek approval to claim these costs as part of its R&D Incentive. As this approval had not been received at the time of completion of these financial statements the Directors have elected to only include an estimate of the anticipated revenue from the AusIndustry incentive claim in respect of its Australian based expenditure in these accounts. If the Company is successful in its request to claim the overseas activities as well which will result in additional revenue, this revenue will be recognised in the 2018 financial year. Bio-Gene supplier arrangements As at reporting date projects had been committed to with suppliers and to the extent that work had been completed expenditure has been provided for in the accounts. Committed but unrecognised expenditure as at reporting date amounted to $217,338 (2016: $NIL). Issue of options The Company will issue 1,500,000 options in the 2018 financial year which are associated with the 7 cents round. The term of these options will be 3 years. 750,000 will have an exercise price of 7 cents and the balance of 750,000 options will have an exercise price of 8.75 cents. Note 15: Financial instruments (a) Capital risk management The Company manages its capital to ensure that it will be able to continue as a going concern while maximising the return to stakeholders through the optimisation of the debt and equity balance. The Company’s overall strategy remains unchanged from the prior financial year. The capital structure of the Company consists of cash and cash equivalents and equity attributable to equity holders, comprising issued capital, reserves and retained earnings as disclosed in Notes 11, and 12, respectively. The Company operates globally, primarily through arrangements with suppliers established in the markets in which the Company trades. Operating cash flows are used to maintain and expand the Company’s assets. Gearing ratio The Company’s Board reviews the capital structure on a half-yearly basis. As a part of this review the Board considers the cost of capital and the risks associated with each class of capital. The Company has a target gearing of 0% in line with the industry norm that is determined as the proportion of net debt to equity. Based on recommendations of the Board the Company will balance its overall capital structure through new share issues. BIO-GENE TECHNOLOGY LIMITED – 2017 ANNUAL REPORT 29 BIO-GENE TECHNOLOGY LIMITED ABN 32 071 735 950 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017 The gearing ratio at year end was as follows: Financial assets Debt (i) Cash and cash equivalents Net cash/(debt) Equity (ii) Net debt to equity ratio Note 6 14,15 2017 $ - 2,860,324 2,860,324 2,912,938 - 2016 $ - 101,646 101,646 473,349 - (i) Debt is defined as long-term and short-term borrowings. (ii) Equity includes all capital and reserves as detailed in Note 11 and 12. (b) Market risk The Company’s activities expose it primarily to the financial risks of changes in foreign currency rates. The Company undertakes a number of its research activities overseas, as the necessary experience and facilities are not available in Australia, and as such has exposure to foreign currency movements which are predominately in US dollars and Pounds Sterling. The Board and Chief Financial Officer monitor the potential impact of movements in foreign exchange exposure. The Company does not currently have a policy in place in respect of hedging this risk and therefore acquires the foreign currency required to settle any liabilities at the rate available on the day of payment. (c) Financial risk management objectives The Company’s CFO monitors and manages the financial risks relating to the operations of the Company through internal risk reports which analyse exposures by degree and magnitude of risks. These risks include market risk (including currency risk, fair value interest rate risk and price risk), credit risk and liquidity risk. There have been no changes to these risks since the previous financial year. The Board of Directors ensures that the Company maintains a competent management structure capable of defining, analysing, measuring and reporting on the effective control of risk inherent in the Company’s underlying financial activities and the instruments used to manage risk. Key financial risks including interest rate risk and foreign currency risk are reviewed by management on a regular basis and are communicated to the Board so that it can evaluate and impose its oversight responsibility. The Company does not enter into or trade financial instruments, including derivative financial instruments, for speculative purposes. The Company currently does not have a policy regarding foreign exchange risk management. This and other financial risks are managed prudently by the Chief Financial Officer and the Board. The consolidated entity holds the following financial instruments: Financial assets Cash and cash equivalents Trade and other receivables Financial liabilities Trade and other payables Financial liabilities (d) Interest rate risk management Note 5 6 11 12 2017 $ 2,860,324 160,562 3,020,886 2017 $ 223,935 376,000 599,935 2016 $ 101,646 227,956 329,602 2016 $ 7,000 376,000 383,000 The Company’s exposure to market interest rates relates primarily to the Company’s short term deposits held and deposits at call. The interest income earned from these balances can vary due to interest rate changes. The sensitivity analysis below has been determined based on the exposure to interest rates for both derivatives and non-derivative instruments at the end on the reporting period. If interest rates had been 100% higher/lower and all other variables were held constant, the Company’s loss for the year ended 30 June 2017 would increase/decrease by $409 (2016: $48). BIO-GENE TECHNOLOGY LIMITED – 2017 ANNUAL REPORT 30 BIO-GENE TECHNOLOGY LIMITED ABN 32 071 735 950 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017 (e) Liquidity risk Liquidity risk is the risk that the Company will not be able to pay its debts as and when they fall due. The Company has no borrowings at reporting date and the Directors ensure that the cash on hand is sufficient to meet the commitments of the Company at all times during the research and development phase. The Company manages liquidity risk by monitoring forecast cash flows and ensuring that adequate cash and where necessary unutilised borrowing facilities are maintained. Financing arrangements The Company does not have access to any borrowing facilities at the reporting date. Maturities of financial liabilities The tables below analyse the Company’s financial liabilities. 30 June 2017 Financial Liabilities Trade and other payables Financial liabilities 30 June 2016 Financial Liabilities Trade and other payables Financial liabilities 0 -12 months Maturing 1 to 3 years Total 223,935 226,000 449,935 7,000 - 7,000 - 150,000 150,000 - 376,000 376,000 223,935 376,000 599,935 7,000 376,000 383,000 All current balances mature within one year; all non-current balances are expected to mature in between one and three years. (f) Foreign currency risk management The Company undertakes certain transactions denominated in foreign currencies, hence exposures to exchange rate fluctuation arise. Exchange rate exposures are managed within approved policy parameters. The Company manages the currency risk by monitoring the trend of the US dollar and Pound Sterling. The consolidated entity’s foreign currency risk denominated financial assets and financial liabilities at the reporting date are as follows: Consolidated Financial Assets Cash and cash equivalents Trade and other receivables Financial Liabilities Trade and other payables 30 June 2017 30 June 2016 USD GBP USD GBP - - - - 71,067 12,483 - - - - - - The following sensitivity analysis is based on the foreign currency risk exposures in existence at the statement of financial position date. A 10 percent increase or decrease in the foreign exchange rate is used and represents management’s assessment of the possible change in foreign exchange rates and historically is within a range of rate movements. A positive number indicates an increase in result and other equity. A negative number indicates a decrease in result and other equity. At 30 June 2017, if foreign exchange rates had moved, as illustrated in the table below, with all other variables held constant, pre-tax result and equity would have been affected as follows: 30 June 2017 Financial Assets Cash and cash equivalents Trade and other receivables Financial Liabilities Trade and other payables Financial liabilities BIO-GENE TECHNOLOGY LIMITED – 2017 ANNUAL REPORT - 10% Profit $ Equity $ + 10% Profit $ Equity $ - - - (12,611) - (12,611) - - - (12,611) - (12,611) - - - 10,318 - 10,318 - - - 10,318 - 10,318 31 BIO-GENE TECHNOLOGY LIMITED ABN 32 071 735 950 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017 30 June 2016 Financial Assets Cash and cash equivalents Trade and other receivables Financial Liabilities Trade and other payables Financial liabilities (g) Price risk - - - - - - - - - - - - - - - - - - - - Price risk is the risk that future cashflows derived from financial instruments will be changed as a result of a market price movement, other than foreign currency rates and interest rates. The Company is not exposed to any material commodity price risks, other than those already described above. Net fair values The carrying amount of financial assets and financial liabilities recorded in the financial statements approximates their net fair values. The net fair values of financial assets and financial liabilities are determined as follows:   the net fair value of financial assets and financial liabilities with standard terms and conditions and traded on active liquid markets are determined with reference to quoted market prices; and the net fair value of other financial assets and financial liabilities are determined in accordance with generally accepted pricing models based on discounted cash flow theory. (h) Credit risk management Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in a financial loss to the Company. The Company has adopted a policy of only dealing with creditworthy counterparties and obtaining sufficient collateral where appropriate as a means of mitigating the risk of financial loss from defaults. In addition, receivable balances are monitored on an ongoing basis with the result that the Company's exposure to bad debts is not significant. There are no significant concentrations of credit risk within the Company. Note 16: Key management personnel (a) Details of key management personnel The Directors and other members of key management personnel of the Company during the year were: Name Mr. Donald Brumley Mr. Richard Jagger Mr. Robert Klupacs Mr. Peter May Mr. Kevin Rumble Mr. John Cornelius Mr. Roger McPherson Position Non-Executive Chairman (appointed 26/4/17) Head of Commercial Development and Executive Director (appointed 26/4/17) Managing Director and Chief Executive Officer Non-Executive Director Non-Executive Director Non-Executive Director (retired 11/5/17) Chief Financial Officer and Company Secretary (appointed 26/4/17) (b) Key management personnel compensation The aggregate compensation made to Directors and other members of key management personnel or their director related entities were: Name Fees3 Mr. Donald Brumley1 Mr. Richard Jagger1 Mr. Robert Klupacs Mr. Peter May Mr. Kevin Rumble Mr. John Cornelius2 Mr. Roger McPherson1 Totals 8,125 16,801 156,000 69,800 78,200 94,000 26,730 449,656 2017 Value of compensation under LSP 11,663 7,289 5,831 5,831 5,831 - - 36,445 Total Fees 19,788 24,090 161,831 75,631 84,031 94,000 26,730 486,101 - - 108,000 32,400 57,120 - - 197,520 2016 Value of compensation under LSP - - 10,688 3,206 6,413 - - 20,307 Total - - 118,688 35,606 63,533 - - 217,827 1. Donald Brumley, Richard Jagger and Roger McPherson were appointed on 26 April 2017. 2. 3. Fees include Directors’ Fees and fees for additional consulting services where applicable. John Cornelius retired as a Director on 11 May 2017 BIO-GENE TECHNOLOGY LIMITED – 2017 ANNUAL REPORT 32 BIO-GENE TECHNOLOGY LIMITED ABN 32 071 735 950 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2017 (c) Key management personnel equity holdings Shareholdings Fully paid ordinary shares and shares under the Loan Share Plan held by key management personnel or their related parties: 2017 Mr. Donald Brumley1 Mr. Richard Jagger1 Mr. Robert Klupacs Mr. Peter May Mr. Kevin Rumble Mr. Roger McPherson1 Totals Balance at 1 July No. - - 5,640,000 532,000 16,342,746 - 22,514,746 Issued as compensation under LSP No. 2,000,000 1,250,000 1,000,000 1,000,000 1,000,000 - 6,250,000 Purchased during the year No. 100,000 100,000 100,000 100,000 - 100,000 500,000 Disposals No. Balance at 30 June No. Total vested 30 June No. - - - - - - 0 2,100,000 1,350,000 6,740,000 1,632,000 17,342,746 100,000 29,264,746 100,000 100,000 5,740,000 632,000 16,342,746 100,000 23,014,746 1. Donald Brumley, Richard Jagger and Roger McPherson were appointed on 26 April 2017. 2. John Cornelius retired as a Director on 11 May 2017, he held 1,000,000 shares at the beginning of the financial year and at the date of his retirement. 2016 Mr. Robert Klupacs Mr. Peter May Mr. Kevin Rumble Mr. John Cornelius1 Totals Balance at 1 July No. 5,000,000 340,000 15,958,746 - 21,298,746 Issued as compensation under LSP No. Purchased during the year No. 640,000 192,000 384,000 - 1,216,000 - - - 1,000,000 1,000,000 Disposals No. Balance at 30 June No. Total vested 30 June No. - - - - 0 5,640,000 532,000 16,342,746 1,000,000 23,514,746 5,640,000 532,000 16,342,746 1,000,000 23,514,746 1. John Cornelius was appointed as a director on 26 June 2016. Note 17: Related party transactions (a) Receivable from and payable to related parties The following balances were outstanding at 30 June 2017 in relation to transactions with related parties: Current payables Trade payables to director related entity of Mr. Robert Klupacs for consultancy fees for his services 2017 $ 16,500 2016 $ - There were no other loans to or from related parties at the current and previous reporting date. All transactions were made on normal commercial terms and conditions and at market rates. (b) Transactions with key management personnel Details of key management personnel compensation are disclosed in Note 16. Note 18: Segment information A segment is a component of the Company that engages in business activities to provide products or services within a particular economic environment. The Company operates in one business segment, being the conduct of research and development activities in the agricultural sector. The Board of Directors assess the operating performance of the Company based on management reports that are prepared on this basis. The Company invests excess funds in short term deposits but this is not regarded as being a separate segment. Note 19: Events occurring after the reporting period No matter or circumstance has arisen since 30 June 2017, other than as disclosed in this report, that has significantly affected or may significantly affect: -    Bio-Gene Technology Limited’s operations in future financial years, or the results of those operations in future financial years, or Bio-Gene Technology Limited’s state of affairs in future years. BIO-GENE TECHNOLOGY LIMITED – 2017 ANNUAL REPORT 33 DECLAR FOR THE RATION BY E YEAR EN Y DIRECTO NDED 30 J ORS 7 JUNE 2017 The directors o of the company d declare that: 1. The financ cial statements a and notes, as se et out in the follow wing pages, are e in accordance w with the Corpora ations Act 2001: a) b) comply with app give a true and date of the com plicable Account fair view of the pany. ting Standards a financial positio and the Corpora on as at 30 June ations Regulation e 2017 and of th ns 2001; and he performance for the year en ded on that 2. In the dire become du ctors' opinion th ue and payable. here are reasona able grounds to o believe that the e company will b be able to pay it its debts as and d when they resolution of the e board of direct tors. This declaratio on is made in acc cordance with a Mr. Donald B Director Brumley Date: 25 July y 2017 BIO-GENE TE ECHNOLOGY LIMIT TED – 2017 ANNUAL L REPORT 34 BOARD OF DIRECTORS AND COMPANY PARTICULARS Auditors JTP Assurance Level 10, 446 Collins Street Melbourne VIC 3000 Australian Company Number 071 735 950 Share Registry Automic Pty Ltd Level 3, 50 Holt Street Surry Hills NSW 2010 Directors  Donald Brumley  Robert Klupacs  Richard Jagger  Peter May  Kevin Rumble Secretary  Roger McPherson Registered Office Suite 1, Level 6 50 Queen Street Melbourne VIC 3000 Business Address Level 13 575 Bourke Street Melbourne VIC 3000 Tel: +61 3 9628 4178 Website www.bio-gene.com.au BIO-GENE TECHNOLOGY LIMITED – 2017 ANNUAL REPORT 37 

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