Biotron Limited
Annual Report 2015

Plain-text annual report

BIOTRON LIMITED ABN 60 086 399 144 WWW . WWW . . COM . AU 2015 ANNUAL REPORT 41 BIOTRON ANNUAL REPORT 2015CONTENTS Operating and Financial Review ........................................ 1 Corporate Governance Statement .................................. 5 Directors’ Report ................................................................ 6 Lead Auditor’s Independence Declaration .................... 15 Statement of Profi t or Loss and Other Comprehensive Income ........................................ 16 Statement of Financial Position ...................................... 17 Statement of Changes in Equity .................................... 18 Statement of Cash Flows ................................................. 19 Notes to the Financial Statements ................................ 20 Directors’ Declaration ..................................................... 35 Independent Auditor’s Report ....................................... 36 Additional Stock Exchange Information ....................... 38 Corporate Directory ....................................................... IBC CORPORATE DIRECTORY Directors Mr Michael J. Hoy (Chairman) Dr Michelle Miller (Managing Director) Dr Susan M. Pond Mr Robert B. Thomas Dr Denis N. Wade Company Secretary Mr Peter J. Nightingale Registered Offi ce Level 2, 66 Hunter Street SYDNEY NSW 2000 Phone: Fax: E‑mail: + 61 2 9300 3344 + 61 2 9221 6333 enquiries@biotron.com.au Homepage: www.biotron.com.au Principal Administration Offi ce Computershare Investor Services Pty Limited Suite 1.9, 56 Delhi Road NORTH RYDE NSW 2113 Phone: + 61 2 9805 0488 Fax: + 61 2 9805 0688 Share Registrar Level 4, 60 Carrington Street SYDNEY NSW 2000 Phone: 1300 787 272 Fax: +61 3 9473 2500 Auditors KPMG Level 16, Riparian Plaza 71 Eagle Street BRISBANE QLD 4000 Home Exchange ASX Limited 20 Bridge Street SYDNEY NSW 2000 Solicitors Minter Ellison 88 Phillip Street SYDNEY NSW 2000 Biotron Limited, incorporated and domiciled in Australia, is a publicly listed company limited by shares. 4796 Designed and Produced by RDA Creative www.rda.com.au OPERATING AND FINANCIAL REVIEW REVIEW OF OPERATIONS Executive Summary Biotron’s strategy is to systematically grow the value of the Company and work towards a commercial outcome for shareholders. This is best achieved by the demonstration of positive data, from clinical trials and other supporting studies. To date, focus has been on the planned, step‑wise clinical development of the Company’s lead antiviral drug, BIT225. Significant progress has been made with all the Company’s clinical programs, which include clinical trials in HIV, Hepatitis C virus (‘HCV’) and in HIV/HCV co‑infected patients. Positive data has been reported in all clinical studies completed to date, which have demonstrated that BIT225 has activity (the antiviral effectiveness) against both HIV and HCV. A summary of significant events achieved in the period under review includes: zz zz Report of positive data from the Phase 2 trial (BIT225‑006) of BIT225 in patients co‑infected with HIV and HCV. This study showed that all genotype 3 patients who completed dosing were HCV‑virus free 12 weeks after completing all drug treatment (known as SVR12), indicating that they were cured of HCV infection. zz Completion of enrolment of a longer term, 12 week dosing, Phase 2 trial (BIT225‑008) of BIT225 in HCV genotype 1 and 3 patients. zz An independent Data and Safety Monitoring Committee (DSMC) review of preliminary interim data from the BIT225‑008 trial recommended the Company focus further development of BIT225 in combination with new classes of HCV drugs. zz Report that BIT225 is able to reverse HIV‑induced immune activation in HIV‑infected patients. zz Showcasing the Company to the international investment community at various events in the USA and Australia. Successful completion of a fully underwritten rights issue, raising $4.06 million in November 2014, and a placement, raising $2 million in June 2015. Subsequent to the end of the 2015 financial year, an additional $2 million was raised via a share purchase plan to eligible shareholders. HCV and HIV Clinical Programs As summarised below, significant progress has been made by the Company to date with clinical programs, which include clinical trials in HIV, HCV and HIV/HCV co‑infected populations. BIT225 is in mid‑stage clinical development with 7 clinical trials completed and one trial currently in progress. Encouraging efficacy results against both HCV and HIV in clinical studies completed to date include: zz zz 100% of HCV genotype 1 patients receiving 400mg of BIT225 plus interferon and ribavirin (IFN/RBV) were HCV virus free at 48 weeks (BIT225‑005), compared to 75% of controls who received IFN/RBV alone. 100% of HCV genotype 3 and HIV co‑infected patients completing dosing with 300mg of BIT225 plus 48 weeks of IFN/RBV were HCV virus free 12 weeks after completing treatment (SVR12) (BIT225‑006). 1 BIOTRON ANNUAL REPORT 2015OPERATING AND FINANCIAL REVIEW zz BIT225 accelerated viral load reductions in HCV genotype 3 patients (BIT225‑006). zz BIT225 shown to have HCV pan‑genotype activity (i.e. activity against the 6 major strains of HCV) in in vitro laboratory studies. zz BIT225 shown to target HIV in monocyte reservoir cells, reducing virus production from these long‑lived viral pools that are not cleared with current anti‑HIV drugs (BIT225‑004). zz BIT225 shown to reduce HIV‑induced impairment of the immune system (BIT225‑004). BIT225 has a unique mode of action compared to other antiviral drugs in development. It works by targeting the assembly of virus particles and has dual activity against both HIV and HCV. Chronic viral diseases such as HCV and HIV need to be treated with two or more different classes of drugs in combination to stop the virus mutating and becoming resistant to treatment. Both markets are large and growing. The worldwide anti‑HCV drug market is forecast to grow from the current US$4.7 billion to US$19 billion by end of the decade. HIV drug sales in the major markets, which include the USA, Europe and Japan, were US$11.9 billion in 2013. Due to growth in the HIV drug market, stimulated by new drug launches and increasing prevalence of HIV, this market is projected to reach US$16.8 billion by 2020. The Company aims to position BIT225 to maximise its chances of being licensed for use in combination with other anti‑HCV drugs. To this end, a series of clinical trials have been undertaken in different HCV patient populations, designed to determine BIT225’s anti‑HCV activity profile. As demonstrated by the above summary of results of clinical trials, BIT225 has shown encouraging activity against HCV. BIT225 is being positioned to fill treatment gaps that are being left by other new HCV drug classes, in particular in HCV genotype 3 and HIV/HCV co‑infected patients. In trials to date, BIT225 has been used in combination with existing drugs IFN/RBV, which are being replaced with new, safer HCV drugs used in combination. To be considered for inclusion in future HCV drug combinations treatment regimes, BIT225 will need to be tested in patients in combination with other new HCV drugs. During the 2015 financial year, the Company has progressed BIT225 along the path to commercialisation. Clinical data from the BIT225‑006 HIV/HCV trial supports ongoing development of BIT225, in particular for the treatment of HCV genotype 3. Other new classes of HCV drugs are not as effective against this type of HCV. There is a real needs for alternative classes of HCV drugs that can improve viral clearance and/or reduce the treatment time for genotype 3. The completion of enrolment in the Phase 2 HCV 3‑month dosing trial is a key milestone for the Company. This trial is important as it will provide key data for future dosing regimens with BIT225, as well as important longer‑term dosing safety data. It will also provide additional efficacy data against HCV genotypes 1 and 3. The review of the preliminary interim data by the independent DSMC, which recommended that Biotron should focus on groups with unmet needs such as the HCV genotype 3 population in future studies with BIT225. This is in line with the Company’s previously stated strategy. The extent to which any virus remains in the blood 12 weeks after stopping all drug treatment (SVR12 = Sustained Virological Response at Week 12) is the measure of successful treatment with HCV drugs. The BIT225‑008 trial protocol required administration of IFN/RBV to G1 and G3 patients for different periods after the 12 weeks of treatment with BIT225. This means that SVR12 will be reached at Week 36 of the trial for HCV genotype 3, and at Week 60 of the trial for HCV genotype 1. It is anticipated that SVR12 for G3 will be reported in 3Q15, and SVR12 for G1 will be reported in 1Q16. Significant treatment gaps remain for HCV, such as genotype 3, despite new drugs coming on the market. There remains a need for additional drugs that will shorten treatment time and improve outcomes for particular patients who currently have limited treatment options. In addition, it is becoming apparent that more patients than anticipated are failing treatment with the new HCV drugs. The DSMC noted this and said that this population, which has very limited choices, may be an area of advantage for BIT225 given its novel and different anti‑viral mechanism of action. BIT225 also has antiviral activity against HIV. Despite advances in HIV treatments, significant hurdles remain. The incidence of infections is on the rise, with rates in Australia at a 20‑year high. The number new cases being diagnosed increased by over 10% in the last 12 months. Estimates are that there could be up to 10,000 Australians who do not know that they are HIV positive. In the USA, over 1.1 million people are living with HIV infection, with almost 1 in 6 unaware of their infection. Reservoirs of HIV exist in patients despite treatment with current anti‑HIV drugs. Biotron’s BIT225 has shown that it can target HIV in one of the main reservoirs, with the potential to reduce viral burdens in patients, and reverse HIV‑induced impairment of the immune system. BIT225 is able to cross the blood‑brain barrier, and may have an impact on HIV associated dementia. 2 BIOTRON ANNUAL REPORT 2015OPERATING AND FINANCIAL REVIEW “During the 2015 financial year, the Company has progressed BIT225 along the path to commercialisation. Clinical data from the BIT225‑006 HIV/HCV trial supports ongoing development of BIT225, in particular for the treatment of HCV genotype 3.” Other Viral Programs Biotron has a portfolio of clinical and preclinical antiviral programs developing drugs targeting HCV, HIV, Dengue virus and Influenza virus. At present, focus is on the development of its lead compounds for the treatment of HCV and HIV. Resources will be committed to additional projects once the more advanced programs have been successfully commercialised or as more resources become available. Outlook for the Next 12 Months The Company’s objective is to progress its HIV and HCV programs, with specific focus on ensuring the programs comply with US Food and Drug Administration (‘FDA’) regulatory guidelines, to position BIT225 within the HCV and HIV drug landscapes. As detailed in the Prospectus released with the recent successful Rights Issue, Biotron proposes to continue to progress these programs through to a commercial outcome. A key milestone on this commercialisation pathway is the filing of Investigational New Drug (‘IND’) applications with the USA FDA. IND filings are necessary to undertake clinical trials in the USA and are key steps on the process towards final drug approvals. The Company is currently well funded to complete its stated objectives, achievement of which will be important in the selection of a partner for the further development of BIT225 within the HCV treatment landscape. These include: zz The Phase 2 trial (BIT225‑008) evaluating BIT225 as a potential new therapy for treatment of HCV in HCV genotype 1 (G1) and genotype 3 (G3) subjects and to extend efficacy data against HCV G1 and G3, and to provide further information regarding BIT225’s safety and tolerability profile in longer term dosing using the capsule formulation of the drug. zz Modelling of pharmacokinetic data from previous trials to determine optimal BIT225 dose and frequency in future trials. zz Additional in vitro laboratory studies of BIT225’s antiviral activity, including studies in combination with other HCV drugs. zz Determination of potential drug‑drug interactions between BIT225 and other HCV drug(s), to assist with design of the proposed IND study. zz Progressing towards filing an IND with the US FDA. The data from the BIT225‑008 trial is key for completing pre‑IND activities. With the data received, the Company expects to progress to an IND filing for the BIT225 HCV program. There is renewed industry interest in eradicating HIV reservoirs from patients. This is likely to require several different drug strategies working in combination and BIT225, with its unique anti‑HIV activity, has the potential to be a key part of future HIV eradication strategies. The Company has been in discussions with international HIV experts, designing a pivotal clinical study that will facilitate positioning BIT225 within the HIV treatment arena. The safety and pharmacokinetic data on BIT225 from the recent HCV trials have served a dual purpose ‑ supporting both the HCV and HIV programs. One of the primary purposes of the recent successful capital raising is to fund preparation and submission of regulatory and ethics documentation, and if approved, initiate a Phase 2 HIV trial. The results of these studies will assist with positioning BIT225 in the commercial HCV and HIV landscapes. In parallel with undertaking activities associated with the IND filings, the Company plans to progress discussions with potential partners. Patents Biotron is focused on progressing patents related to its antiviral programs through the international patenting process. The Company recognises that the key to establishment of partnerships is the expansion and continued strengthening of Biotron’s intellectual property portfolio. Strong, defensible, international patents are essential to attract partners and to ensure a competitive advantage for the Company’s products in the marketplace. 3 BIOTRON ANNUAL REPORT 2015OPERATING AND FINANCIAL REVIEW A summary of Biotron’s patent portfolio is as follows: Title WO0021538 Method of modulating ion channel functional activity Priority ‑ 12 October 1998 Status Granted in Australia, Canada, China, Germany, France, United Kingdom, The Netherlands, Japan, New Zealand and USA. WO9813514 Granted in Australia, Canada, Japan, Europe, United Kingdom and USA. Method of determining ion channel activity of a substance Priority ‑ 27 September 1996 WO04112687 Antiviral compounds and methods Priority ‑ 26 June 2003 WO06135978 Antiviral compounds and methods Priority ‑ 24 June 2005 WO2009/018609 Granted in Australia, Canada, China, India, Japan, Korea, New Zealand, Singapore, and South Africa. Under or awaiting examination in Brazil, Europe, Hong Kong, and USA. Granted in Australia, Canada, China, Japan, Europe and United Kingdom, New Zealand, Singapore, South Africa, and USA. Under or awaiting examination in Brazil and India. Granted in Australia, Europe, Japan, New Zealand, Singapore, and South Africa. Hepatitis C antiviral compounds and methods Priority ‑ 3 August 2007 Under or awaiting examination in Brazil, Canada, China, Hong Kong, India, Korea, and USA. Corporate In April 2015, the Company received an R&D Tax Incentive rebate of $1.7 million for the 2014 financial year. The R&D Tax Incentive is an Australian Government program under which companies receive cash refunds for 45% of eligible expenditure on research and development. The cash refund results from expenditure on Biotron’s HCV and HIV drug development programs. It is an important source of funds for the Company’s ongoing research and development activities. During the financial year and subsequent to the end of the financial year, the Company raised ~$8 million in equity capital. The funds will be used to support the Company’s ongoing activities described above, and will, by strengthening the Company’s balance sheet, improve the Company’s position to engage in the negotiation of a commercialisation transaction. On behalf of the Board we would like to thank the Biotron staff for their commitment and dedication during the year. Biotron is poised to achieve the outcome that we have all been working towards ‑ demonstration that its systematic approach to antiviral drug development can result in significant clinical benefit to patients and generate value for our shareholders. We look forward to the next year with confidence. Michael J. Hoy Chairman Michelle Miller Managing Director 4 BIOTRON ANNUAL REPORT 2015CORPORATE GOVERNANCE STATEMENT The Board is committed to maintaining the highest standards of Corporate Governance. Corporate Governance is about having a set of core values and behaviours that underpin the Company’s activities and ensure transparency, fair dealing and protection of the interests of stakeholders. The Company has reviewed its corporate governance practices against the Corporate Governance Principles and Recommendations (3rd edition) published by the ASX Corporate Governance Council. The 2015 corporate governance statement is dated as at 6 August 2015 and reflects the corporate governance practices throughout the 2015 financial year. The 2015 corporate governance was approved by the board on 6 August 2015. A description of the Company’s current corporate governance practices is set out in the Company’s corporate governance statement which can be viewed at http://www.biotron.com.au/corporate‑governance/ “Positive data has been reported in all clinical studies completed to date, which have demonstrated that BIT225 has activity (the antiviral effectiveness) against both HIV and HCV.” 5 BIOTRON ANNUAL REPORT 2015DIRECTORS’ REPORT The directors present their report together with the financial statements of Biotron Limited (‘the Company’) for the year ended 30 June 2015 and the auditor’s report thereon. Directors The names and particulars of the directors of the Company at any time during or since the end of the financial year are: Mr Michael J. Hoy Independent and Non‑Executive Chairman Mr Hoy has more than 30 years’ corporate experience in Australia, the United Kingdom, USA and Asia. He is Chairman of Telesso Technologies Limited and Lipotek Pty Limited and a former director of John Fairfax Holdings Limited and FXF Trust. Mr Hoy has been a director since 7 February 2000 and Chairman since 16 March 2000. Dr Michelle Miller BSc, MSc, PhD, GCertAppFin (Finsia) Managing Director Dr Miller has worked for over 20 years in the bioscience industry, with extensive experience in commercial development of early to mid stage technologies. She completed her PhD in the Faculty of Medicine at Sydney University investigating molecular models of cancer development. Her experience includes several years at Johnson and Johnson developing anti‑HIV gene therapeutics through preclinical research to clinical trials. She has finance industry experience from time spent as an Investment Manager with a specialist bioscience venture capital fund. Dr Miller was appointed as Managing Director on 21 June 2002. Dr Susan M. Pond AM, MD DSc, FTSE Independent and Non‑Executive Director Dr Pond has a strong scientific and commercial background having held executive positions in the biotechnology and pharmaceutical industry for 12 years, most recently as chairman and managing director of Johnson & Johnson Research Pty Limited (2003 ‑ 2009). She has held many previous board positions including as executive director of Johnson & Johnson Pty Limited, non‑executive director and chairman of AusBiotech Limited, director of the Australian Nuclear Science and Technology Organisation and board member of Innovation Australia. Dr Pond is currently on the boards of the Australian Academy of Technological Sciences and Engineering, of which she is Vice‑President. She is a Fellow of the Australian Institute of Company Directors and the Australian Academy of Health and Medical Sciences. Dr Pond holds a first class honours degree in Bachelor of Medicine and Surgery from the University of Sydney and a Doctor of Medicine degree from the University of New South Wales. She obtained specialist clinical credentials in internal medicine, clinical pharmacology and clinical toxicology and has held academic appointments at the University of California, San Francisco and the University of Queensland before joining the industry. Dr Pond was appointed as a director on 7 March 2012. 6 BIOTRON ANNUAL REPORT 2015DIRECTORS’ REPORT Mr Robert B. Thomas BEc, MSDIA, SF Fin, FICD Independent and Non‑Executive Director Mr Thomas has over 35 years’ experience in the securities industry, with Potter Partners (now UBS), County NatWest and Citigroup. He is the chairman of Starpharma Holdings Limited and a director of Aus Bio Limited, Heartware Inc, REVA Medical Limited and Virgin Australia Limited. He chairs Grahger Capital Securities and is a director of O’Connell Street Associates Pty Limited. Mr Thomas has a Bachelor of Economics degree from Monash University (1963 ‑ 1966). He has been a member of the Securities Institute of Australia since 1976 and was appointed as a Fellow to the Institute in 1997. He is a Master Stockbroker and is a Fellow of the Institute of Company Directors. Mr Thomas was appointed as a director on 7 March 2012. Dr Denis N. Wade Independent and Non‑Executive Director Dr Wade has been involved for over 40 years with the development of research based pharmaceuticals and medical devices in both industry and academia. He has been a director of several private and public companies in the healthcare sector, including Heartware Limited and subsequently Heartware International Inc., since December 2004. He was a director and chairman of Gene Shears Pty Limited and, from 1987 until his retirement in 2002, was managing director and chairman of Johnson & Johnson Research Pty Ltd, a research and development company of Johnson & Johnson Inc. He was also a member of the J&J Corporate Office of Science and Technology. Prior to that, Dr Wade was the Foundation Professor of Clinical Pharmacology at the University of New South Wales and served as a member of a number of state and federal bodies related to the drug industry, including the P3 Committee. He is a former chairman of the Australian Academy National Committee for Pharmacology, the Australasian Society for Clinical and Experimental Pharmacology and Toxicology and a former chairman of the Clinical Pharmacology Section of the International Union of Pharmacology. Dr Wade holds a first class honours degree in Medicine and Science from the University of Sydney and a Doctorate of Philosophy from the University of Oxford. He was awarded an Honorary Doctorate of Science by the University of New South Wales and is a Fellow of the Royal Australasian College of Physicians and of the Australian Academy of Technological Sciences and Engineering. In 1999 he was made a Member of the Order of Australia. Dr Wade was appointed as a director on 30 April 2010. Mr Peter J. Nightingale Company Secretary Mr Nightingale graduated with a Bachelor of Economics degree from the University of Sydney and is a member of the Institute of Chartered Accountants in Australia. He has worked as a chartered accountant in both Australia and the USA. As a director or company secretary Mr Nightingale has, for more than 25 years, been responsible for the financial control, administration, secretarial and in‑house legal functions of a number of private and public listed companies in Australia, the USA and Europe including Bolnisi Gold N.L., Callabonna Uranium Limited, Cockatoo Coal Limited, Mogul Mining N.L., Pangea Resources Limited, Perseverance Corporation Limited, Sumatra Copper & Gold plc, Timberline Minerals, Inc. and Valdora Minerals N.L. Mr Nightingale is currently a director of ASX listed Augur Resources Ltd, Planet Gas Limited and unlisted public companies Nickel Mines Limited and Prospech Limited. Mr Nightingale has been Company Secretary since 23 February 1999. 7 BIOTRON ANNUAL REPORT 2015DIRECTORS’ REPORT Directors’ Meetings The number of directors’ meetings held and number of meetings attended by each of the directors of the Company, while they were a director, during the year are: Director Michael J. Hoy Michelle Miller Susan M. Pond Robert B. Thomas Denis N. Wade Directors’ Interests Directors’ Meetings No. of Eligible Meetings to Attend No. of Meetings Attended 8 8 8 8 8 8 8 8 8 8 At the date of this report, the beneficial interests of each director of the Company in the issued share capital of the Company and options, each exercisable to acquire one fully paid ordinary share of the Company are: Fully Paid Ordinary Shares Options Option Terms (Exercise Price and Term) Directors Michael J. Hoy Michelle Miller Susan M. Pond Robert B. Thomas Denis N. Wade 3,855,283 ‑ ‑ 305,556 5,265,000 1,506,871 700,961 2,000,000 3,000,000 55,556 1,237,038 273,977 $0.12 at any time up to 30 September 2016 $0.21 at any time up to 30 October 2015 $0.24 at any time up to 30 October 2015 $0.12 at any time up to 30 September 2016 $0.12 at any time up to 30 September 2016 $0.12 at any time up to 30 September 2016 In November 2014 the options issued to Michelle Miller were repriced. The 2,000,000 options issued were repriced from $0.22 to $0.21 and the 3,000,000 options issued were repriced from $0.25 to $0.24. There were no options over unissued ordinary shares granted as compensation to directors or executives of the Company during or since the end of the financial year. Unissued Shares Under Option At the date of this report, unissued ordinary shares of the Company under option are: Number of Shares Exercise Price 2,000,000 3,000,000 50,720,453 $0.21 $0.24 $0.12 Expiry Date 30 October 2015 30 October 2015 30 September 2016 All options expire on the earlier of their expiry date or termination of the employee’s employment provided the exercise period has been reached. In the event that the employment of the option holder is terminated, any options which have not reached their exercise period will lapse and any options which have reached their exercise period may be exercised within three months of the date of termination of employment. Any options not exercised within this three month period will lapse. The persons entitled to exercise the options do not have, by virtue of the options, the right to participate in a share issue of the Company or any other body corporate. 8 BIOTRON ANNUAL REPORT 2015 DIRECTORS’ REPORT Shares Issued on Exercise of Options During or since the end of the financial year, the Company issued ordinary shares as a result of the exercise of options as follows (there are no amounts unpaid on the shares issued): Number of Shares 12,201 Principal Activities Amount paid on each share $0.12 The principal activities of the Company during the financial year were the funding and management of intermediate and applied biotechnology research and development projects. Financial Result and Review of Operations The operating loss of the Company for the financial year after income tax was $2,723,221 (2014 ‑ $3,085,814 loss). A review of the Company’s operations for the year is set out in the Operating and Financial Review. Impact of Legislation and Other External Requirements There were no changes in environmental or other legislative requirements during the year that have significantly impacted the results or operations of the Company. Dividends The directors recommend that no dividend be paid by the Company. No dividend has been paid or declared since the end of the previous financial year. State of Affairs In the opinion of the directors, there were no significant changes in the state of affairs of the Company that occurred during the year ended 30 June 2015. Environmental Regulations The Company’s operations are not subject to significant environmental regulations under Commonwealth or State legislation in relation to its research projects. Events Subsequent to Balance Date On 18 June 2015, the company offered all eligible shareholders the opportunity to participate in a Share Purchase Plan (“SPP”). The offer closed on 10 July 2015. The Shareholders subscribed for 17,361,111 ordinary shares under the SPP at $0.1152 per share, raising $2,000,000 before issue costs. All shares were issued 15 July 2015. Other than the matter discussed above, there has not arisen in the interval between the end of the financial year and the date of this report any item, transaction or event of a material and unusual nature likely, in the opinion of the directors of the Company, to affect significantly the operations of the Company, the results of those operations, or the state of affairs of the Company in future financial years. 9 BIOTRON ANNUAL REPORT 2015DIRECTORS’ REPORT Likely Developments During the year ended 30 June 2015, the Company continued to fund and manage its research and development projects. The success of these research projects, which cannot be assessed on the same fundamentals as trading and manufacturing enterprises, will determine future likely developments. Indemnification of Officers and Auditors During or since the end of the financial year, the Company has not indemnified or made a relevant agreement to indemnify an officer or auditor of the Company against a liability incurred by such an officer or auditor. In addition, the Company has not paid or agreed to pay, a premium in respect of a contract insuring against a liability incurred by an officer or auditor. Remuneration Report ‑ Audited Principles of compensation ‑ Audited Key management personnel have authority and responsibility for planning, directing and controlling the activities of the Company. Key management personnel comprise the directors of the Company and the Company Secretary. No other employees have been deemed to be key management personnel. The policy of remuneration of directors and senior executives is to ensure the remuneration package properly reflects the person’s duties and responsibilities, and that remuneration is competitive in attracting, retaining and motivating people of the highest quality. The Board is responsible for reviewing its own performance. The non‑executive directors are responsible for evaluating the performance of the executive directors who, in turn, evaluate the performance of all other senior executives. The evaluation process is intended to assess the Company’s business performance, whether long term strategic objectives are being achieved and the achievement of individual performance objectives. Remuneration generally comprises salary and superannuation. Longer term incentives are able to be provided through the Company’s Incentive Option Plan which acts to align the directors and senior executives’ actions with the interests of the shareholders. The remuneration disclosed below represents the cost to the Company for the services provided under these arrangements. No directors or senior executives receive performance related remuneration. Options issued in prior periods as remuneration were subject to minimum service periods being met. All outstanding options have fully vested at 30 June 2015. There were no remuneration consultants used by the Company during the year ended 30 June 2015, or in the prior year. Consequences of performance on shareholder wealth ‑ Audited In considering the Company’s performance and benefits for shareholders wealth, the Board have regard to the following indices in respect of the current financial year and the previous four financial years. 2015 2014 2013 2012 2011 Net loss attributable to equity holders of the Company Dividends paid Change in share price $2,723,221 $3,085,814 $3,850,745 $2,378,052 $1,907,527 ‑ ‑ ‑ ‑ ‑ 3.0 cents 2.0 cents (2.0) cents (1.0) cents 4.8 cents The overall level of key management personnel’s compensation is assessed on the basis of market conditions, status of the Company’s projects, and financial performance of the Company. 10 BIOTRON ANNUAL REPORT 2015DIRECTORS’ REPORT Details of remuneration for the year ended 30 June 2015 ‑ Audited Details of director and senior executive remuneration and the nature and amount of each major element of the remuneration of each director of the Company, and other key management personnel of the Company are set out below: Directors Non‑executive Michael J. Hoy (Chairman) Susan M. Pond Robert B. Thomas Denis N. Wade Bruce Hundertmark Executive Michelle Miller (Managing Director) Executives Peter J. Nightingale (Company Secretary) Year 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 Primary Fees $ 68,807 68,807 36,697 36,697 36,697 36,697 36,697 36,697 ‑ 13,106 328,846 343,254 75,000 75,000 Superannuation $ 6,537 6,365 3,486 3,394 3,486 3,394 3,486 3,394 ‑ 1,212 31,240 29,885 ‑ ‑ Share Based Payments ‑ Options $ Total $ Value of Options as a % of Remuneration ‑ ‑ ‑ ‑ ‑ ‑ ‑ ‑ ‑ ‑ ‑ ‑ ‑ ‑ 75,344 75,172 40,183 40,091 40,183 40,091 40,183 40,091 ‑ 14,318 360,086 373,139 75,000 75,000 ‑ ‑ ‑ ‑ ‑ ‑ ‑ ‑ ‑ ‑ ‑ ‑ ‑ ‑ No bonuses were paid during the financial year and no performance based components of remuneration exist. The Company employed no other key management personnel. Options granted as compensation ‑ Audited There were no options granted as compensation to key management personnel during the 2015 and 2014 financial years. Modification of terms of equity‑settled share‑based payment transactions ‑ Audited In November 2014 the 5,000,000 options on issue to Michelle Miller were repriced. The modification resulted in an immaterial change to the fair value of the options and no expense has been recognised as a result. No other terms of equity‑settled share‑based payment transactions (including options granted as compensation to a key management person) have been altered or modified by the issuing entity during 2015 and 2014 financial year. Exercise of options granted as compensation ‑ Audited There were no shares issued on the exercise of options previously granted as compensation during the 2015 and 2014 financial years. 11 BIOTRON ANNUAL REPORT 2015DIRECTORS’ REPORT Analysis of options and rights over equity instruments granted as compensation ‑ Audited All options refer to options over ordinary shares of Biotron Limited, which are exercisable on a one‑for‑one basis. Options granted Director Number Date % vested in year Michelle Miller 1,000,000 24 December 2010 1,000,000 24 December 2010 3,000,000 24 December 2010 ‑% ‑% ‑% % forfeited in year Financial year in which grant vests ‑% ‑% ‑% 1 July 2010 1 July 2011 1 July 2012 The number of options that had vested as at 30 June 2015 is 5,000,000 (2014 ‑ 5,000,000). No options were granted subsequent to year end. Analysis of movements in options ‑ Audited Director Michelle Miller Granted in the year Valuation of options exercised in the year Lapsed in the year ‑ ‑ ‑ Options and rights over equity instruments ‑ Audited The movement during the reporting period in the number of options over ordinary shares in the Company held directly, indirectly or beneficially, by each key management person, including their personally related entities, is as follows: Option holdings 2015 ‑ Audited Held at 1 July 2014 Purchased Exercised Expired Held at 30 June 2015 Vested and exercisable at 30 June 2015 Directors Michael J. Hoy Michelle Miller Susan M. Pond Robert B. Thomas Denis N. Wade Executives Peter J. Nightingale ‑ 700,961 5,000,000 ‑ ‑ ‑ ‑ ‑ 55,556 1,237,038 273,977 1,151,924 ‑ ‑ ‑ ‑ ‑ ‑ ‑ ‑ ‑ ‑ ‑ ‑ 700,961 700,961 5,000,000 5,000,000 55,556 55,556 1,237,038 1,237,038 273,977 273,977 1,151,924 1,151,924 Loans to key management personal and their related parties ‑ Audited There were no loans made to key management personnel or their related parties during the 2015 and 2014 financial years and no amounts were outstanding at 30 June 2015 (2014 ‑ $nil). 12 BIOTRON ANNUAL REPORT 2015DIRECTORS’ REPORT Other transactions with key management personnel ‑ Audited The following key management personnel holds a position in another entity that results in them having control or joint control over the financial or operating policies of that entity, and this entity transacted with the Company during the year as follows: zz During the year ended 30 June 2015, Peter J. Nightingale had a controlling interest in an entity, MIS Corporate Pty Limited, which provided full administrative services, including rental accommodation, administrative staff, services and supplies, to the entity. Fees paid to MIS Corporate Pty Limited during the year amounted to $144,000 (2014 ‑ $144,000). There were no outstanding amounts at 30 June 2015 (2014 ‑ $nil). zz During the year ended 30 June 2015, Peter J. Nightingale had a controlling interest in an entity, Rosignol Consultants Pty Limited, which provided consulting services specifically in relation to the capital raise conducted by the Company in October 2014. The additional fees paid to Rosignol Consultants Pty Limited during the period amounted to $5,000. There were no outstanding amounts at 30 June 2015. Movements in shares ‑ Audited The movement during the reporting period in the number of ordinary shares in the Company held directly, indirectly or beneficially, by each key management person, including their personally‑related entities, is as follows: Directors Michael J. Hoy Michelle Miller Susan M. Pond Robert B. Thomas Denis N. Wade Executives Peter J. Nightingale Held at 1 July 2014 Purchased Received on exercise of options Sales Held at 30 June 2015 3,154,322 700,961 ‑ 250,000 5,566,666 1,232,894 ‑ 55,556 1,237,038 273,977 4,348,076 1,151,924 ‑ ‑ ‑ ‑ ‑ ‑ ‑ ‑ ‑ 1,538,704 ‑ ‑ 3,855,283 ‑ 305,556 5,265,000 1,506,871 5,500,000 Service contracts ‑ Audited There are no service contracts for the key management personnel. Non‑executive directors ‑ Audited Total compensation for all non‑executive directors is determined by the Board based on market conditions. Non‑audit Services During the year KPMG, the Company’s auditor, performed no other services in addition to their statutory duties. A copy of the auditors’ independence declaration as required under Section 307C of the Corporations Act 2001 is included in the Directors’ Report. Details of the amounts paid and accrued to the auditor of the Company, KPMG, and its related practices for audit and non‑audit services provided during the year are set out below. Statutory audit Audit and review of financial reports ‑ KPMG 2015 $ 2014 $ 38,500 31,300 13 BIOTRON ANNUAL REPORT 2015DIRECTORS’ REPORT Lead Auditor’s Independence Declaration The Lead Auditor’s Independence Declaration is set out on page 15 and forms part of the Directors’ Report for the year ended 30 June 2015. This report has been signed in accordance with a resolution of the directors and is dated 28 August 2015: Michael J. Hoy Chairman Michelle Miller Managing Director 14 BIOTRON ANNUAL REPORT 2015 DIRECTORS’ REPORT Lead Auditor’s Independence Declaration under Section 307C of the Corporations Act 2001 To: the Directors of Biotron Limited I declare that, to the best of my knowledge and belief, in relation to the audit for the financial year ended 30 June 2015, there have been: (i) no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the audit; and (ii) no contraventions of any applicable code of professional conduct in relation to the audit. KPMG Brisbane 28 August 2015 Adam Twemlow Partner KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. Liability limited by a scheme approved under Professional Standards Legislation. 15 BIOTRON ANNUAL REPORT 2015 STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2015 Continuing operations Other income Administration and consultants' expenses Depreciation Employee and director expenses Direct research and development expenses Rent and outgoings expenses Travel expenses Other expenses from ordinary activities Operating loss before financing income Interest income Net financing income Loss before tax Income tax expense Loss for the year Other comprehensive income Total comprehensive loss for the year Notes 2015 $ 2014 $ 5 1,672,265 1,722,481 12 6 (300,112) (302,636) (16,957) (11,193) (801,660) (831,497) (2,882,954) (3,237,229) (85,289) (44,776) (65,825) (90,842) (311,429) (339,045) (2,770,912) (3,155,786) 47,691 47,691 69,972 69,972 (2,723,221) (3,085,814) 9 ‑ ‑ (2,723,221) (3,085,814) ‑ ‑ (2,723,221) (3,085,814) Basic and diluted loss per share (cents) 7 (1.04) cents (1.35) cents The above Statement of Profit or Loss and Other Comprehensive Income should be read in conjunction with the accompanying notes. 16 BIOTRON ANNUAL REPORT 2015STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2015 Current assets Cash and cash equivalents Trade and other receivables Other assets Total current assets Non‑current assets Plant and equipment Total non‑current assets Total assets Current liabilities Trade and other payables Employee entitlements Total current liabilities Total liabilities Net assets Equity Issued capital Reserves Accumulated losses Total equity Notes 2015 $ 2014 $ 8 10 11 12 13 14 15 15 4,523,224 1,764,181 10,184 35,025 ‑ 35,033 4,568,433 1,799,214 47,769 47,769 64,726 64,726 4,616,202 1,863,940 283,319 189,857 473,176 473,176 295,327 179,317 474,644 474,644 4,143,026 1,389,296 37,207,759 32,548,656 1,339,848 522,000 (34,404,581) (31,681,360) 4,143,026 1,389,296 The above Statement of Financial Position should be read in conjunction with the accompanying notes. 17 BIOTRON ANNUAL REPORT 2015STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2015 Attributable to equity holders of the Company Notes Issued Capital $ Option Reserves $ Accumulated Losses $ Total $ Balance at 1 July 2013 32,548,656 522,000 (28,595,546) 4,475,110 Total comprehensive income for the year Loss for the year Other comprehensive income Total comprehensive loss for the year ‑ ‑ ‑ ‑ ‑ ‑ (3,085,814) (3,085,814) ‑ ‑ (3,085,814) (3,085,814) Balance at 30 June 2014 15 32,548,656 522,000 (31,681,360) 1,389,296 Balance at 1 July 2014 32,548,656 522,000 (31,681,360) 1,389,296 Total comprehensive income for the year Loss for the year Other comprehensive income Total comprehensive loss for the year Transactions with owners, recorded directly in equity Contribution by and distribution to owners Ordinary shares/options issued Cost of shares issued Exercise of options ‑ ‑ ‑ ‑ ‑ ‑ (2,723,221) (2,723,221) ‑ ‑ (2,723,221) (2,723,221) 5,242,032 (583,126) 197 818,045 ‑ (197) ‑ ‑ ‑ 6,060,077 (583,126) ‑ Balance at 30 June 2015 15 37,207,759 1,339,848 (34,404,581) 4,143,026 The above Statement of Changes in Equity should be read in conjunction with the accompanying notes. 18 BIOTRON ANNUAL REPORT 2015STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2015 Cash flows from operating activities Cash receipts in the course of operations Payments for research and development Cash payments in the course of operations Interest received Notes 2015 $ 2014 $ 1,672,265 1,722,481 (2,932,696) (3,162,882) (1,507,222) (1,605,482) 47,953 70,035 Net cash used in operating activities 16 (2,719,700) (2,975,848) Cash flows from investing activities Payments for plant and equipment Net cash used in investing activities Cash flows from financing activities Proceeds from issue of shares and options Cost of issue of shares and options Net cash from financing activities Net increase/(decrease) in cash held Cash and cash equivalents at 1 July Effect of exchange rate adjustments on cash held ‑ ‑ (52,408) (52,408) 6,060,077 (583,126) 5,476,951 ‑ ‑ ‑ 2,757,251 (3,028,256) 1,764,181 4,792,437 1,792 ‑ Cash and cash equivalents at 30 June 8 4,523,224 1,764,181 The above Statement of Cash Flows should be read in conjunction with the accompanying notes. 19 BIOTRON ANNUAL REPORT 2015 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2015 1. REPORTING ENTITY 3. SIGNIFICANT ACCOUNTING POLICIES Biotron Limited (the ‘Company’) is a company domiciled in Australia. The address of the Company’s registered office is at Level 2, 66 Hunter Street, Sydney, NSW 2000. The Company is a for‑profit entity and is primarily engaged in the funding and management of intermediate and applied biotechnology research and development projects. 2. BASIS OF PREPARATION The accounting policies set out below have been applied consistently to all periods presented in these financial statements, and have been applied consistently by the Company. (a) Cash and cash equivalents Cash and cash equivalents comprise cash balances and call deposits with an original maturity of three months or less. (a) Statement of compliance (b) Trade and other receivables These financial statements are general purpose financial statements which have been prepared in accordance with Australian Accounting Standards (‘AASBs’) adopted by the Australian Accounting Standards Board (‘AASB’) and the Corporations Act 2001. The financial statements of the Company also comply with International Financial Reporting Standards (‘IFRSs’) adopted by the International Accounting Standards Board (‘IASB’). The financial report was authorised for issue by the directors on 28 August 2015. (b) Basis of measurement The financial statements have been prepared on the historical cost basis. (c) Functional and presentation currency These financial statements are presented in Australian dollars, which is the Company’s functional currency. (d) Use of estimates and judgements The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. 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 and in any future periods affected. In particular, information about significant areas of estimation uncertainty and critical judgements in applying accounting policies that have the most significant effect on the amounts recognised in the financial statements are described in the following notes: zz Note 9 ‑ Unrecognised deferred tax asset Trade and other receivables are stated at their amortised cost less impairment losses. (c) Property, plant and equipment Property plant and equipment are stated at their historical cost less accumulated depreciation and accumulated impairment losses. Depreciation is recognised in profit or loss using the reducing balance method from the date of acquisition at rates between 13% and 40% per annum. (d) Research and development Grants Where a grant is received relating to research and development costs that have been expensed, the grant is recognised as other income when the grant becomes receivable and the Company complies with all attached conditions. Costs Expenditure on research activities, undertaken with the prospect of gaining new scientific or technical knowledge and understanding, is recognised in profit and loss when incurred. Development activities involve a plan or design for the production of new or substantially improved products and processes. Development expenditure is capitalised only if development costs can be measured reliably, the product or process is technically and commercially feasible, future economic benefits are probable, and the Company intends to and has sufficient resources to complete development and to use or sell the asset. The expenditure capitalised includes the cost of materials, direct labour and overhead costs that are directly attributable to preparing the asset for its intended use. Other development expenditure is recognised in profit or loss when incurred. Capitalised development expenditure is measured at cost less accumulated amortisation and accumulated impairment losses. 20 BIOTRON ANNUAL REPORT 2015NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2015 3. SIGNIFICANT ACCOUNTING POLICIES (Cont.) (e) Trade and other payables Trade and other payables are stated at their amortised cost, are non‑interest bearing and are normally settled within 60 days. (f) Employee entitlements Short‑term employee benefits Short‑term employee benefits are expensed as the related service is provided. A liability is recognised for the amount expected to be paid under short term cash bonus or profit sharing plans if the Company has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee, and the obligation can be estimated reliably. Long term employee benefits The Company’s net obligation in respect of long term employee benefits is the amount of future benefit that employees have earned in return for their service in the current and prior periods. That benefit is discounted to determine its present value. Remeasurements are recognised in profit or loss in the period in which they arise. Share‑based payment transactions The grant‑date fair value of share‑based payment awards granted to employees is recognised as an employee expense, with a corresponding increase in equity, over the period that the employees become unconditionally entitled to the awards. The amount recognised as an expense is adjusted to reflect the number of awards for which the related service and non‑market vesting conditions are expected to be met, such that the amount ultimately recognised as an expense is based on the number of awards that meet the related service and non‑market performance conditions at the vesting date. For share‑based payment awards with non‑vesting conditions, the grant date fair value of the share‑based payment is measured to reflect such conditions and there is no true‑up for differences between expected and actual outcomes. (g) Financial Instruments Non‑derivative financial assets The Company holds loans and receivables. Loans and receivables are non‑derivative financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are recognised at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, loans and receivables are measured at amortised cost using the effective interest method, less any impairment losses. They are included in current assets, except for those with maturities greater than 12 months after the reporting period, which are classified as non‑current assets. Loans and receivables comprise cash and cash equivalents and trade and other receivables. The Company initially recognises loans and receivables on the date that they are originated. The Company derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows on the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred. Any interest in such transferred financial assets that is created or retained by the Company is recognised as a separate asset or liability. Financial assets and liabilities are offset and the net amount presented in the Statement of Financial Position when, and only when, the Company has a legal right to offset the amounts and intends either to settle them on a net basis or to realise the asset and settle the liability simultaneously. Non‑derivative financial liabilities The Company initially recognises debt securities issued and subordinated liabilities on the date that they are originated. All other financial liabilities are recognised initially on the trade date, which is the date that the Company becomes a party to the contractual provisions of the instrument. The Company derecognises a financial liability when its contractual obligations are discharged, cancelled or expire. Other financial liabilities comprise trade and other payables. (h) Share Capital Ordinary Shares Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares are recognised as a deduction from equity, net of any tax effects. (i) Tax Income tax comprises of current tax and deferred tax and is recognised in profit or loss except to the extent that it relates to a business combination, or items recognised directly in equity or in other comprehensive income. 21 BIOTRON ANNUAL REPORT 2015NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2015 3. SIGNIFICANT ACCOUNTING POLICIES (Cont.) Current tax Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantially enacted at the reporting date, and any adjustment to tax payable in respect of previous years. Receivables and payables are stated with the amount of GST included. The net amount of GST recoverable from, or payable to, the ATO is included as a current asset or liability in the balance sheet. Cash flows are included in the statement of cash flows on a gross basis. The GST components of cash flows arising from investing and financing activities which are recoverable from, or payable to, the ATO are classified as operating cash flows. Current tax assets and liabilities are offset only if certain criteria are met. (j) Finance income Deferred tax Deferred tax is recognised in respect of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for temporary differences on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss. The measurement of deferred tax reflects the tax consequences that would follow the manner in which the Company expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities. Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, using tax rates enacted or substantively enacted at the reporting date. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously. A deferred tax asset is recognised for unused tax losses, tax credits and deductible temporary differences, to the extent that it is probable that future taxable profits will be available against which they can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised. Goods and services tax Revenue, expenses and assets are recognised net of the amount of goods and services tax (‘GST’), except where the amount of GST incurred is not recoverable from the taxation authority. In these circumstances, the GST is recognised as part of the cost of acquisition of the asset or as part of the expense. Finance income comprises interest income on funds invested. Interest income is recognised as it accrues in profit or loss, using the effective interest method. (k) Earnings per share The Company presents basic and diluted earnings per share (‘EPS’) data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the period. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding for the effects of all dilutive potential ordinary shares, which comprise share options granted to employees. (l) Impairment Non‑derivative financial assets A financial asset not classified as at fair value through profit or loss is assessed at each reporting date to determine whether there is any objective evidence that it is impaired. A financial asset is considered to be impaired if objective evidence indicates that one or more events have had a negative effect on the estimated future cash flows of that asset. Financial assets measured at amortised cost Individually significant financial assets are tested for impairment on an individual basis. The remaining financial assets are assessed collectively in groups that share similar credit risk characteristics. An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying amount, and the present value of the estimated future cash flows discounted at the original effective interest rate. Losses are recognised within profit or loss. When an event occurring after the impairment was recognised causes the amount of impairment loss to decrease, the decrease in impairment loss is reversed through profit or loss. 22 BIOTRON ANNUAL REPORT 2015NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2015 3. SIGNIFICANT ACCOUNTING POLICIES (Cont.) Non‑financial assets The carrying amounts of the Company’s non‑financial assets are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists then the asset’s recoverable amount is estimated. An impairment loss is recognised whenever the carrying amount of an asset or its cash‑generating unit (‘CGU’) exceeds its recoverable amount. The recoverable amount of an asset or CGU is the greater of their fair value less costs of disposal and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre‑tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU. For impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or CGUs. Impairment losses are recognised in profit or loss. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. (m) Provisions A provision is recognised if, as a result of a past event, the Company has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre‑tax rate that reflects the current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognised as a finance cost. (n) Segment reporting Determination and presentation of operating segments The Company determines and presents operating segments based on the information that is provided internally to the Managing Director, who is the Company’s chief operating decision maker. An operating segment is a component of the Company that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Company’s other components. All operating segments’ operating results are regularly reviewed by the Company’s Managing Director to make decisions about resources to be allocated to the segment and assess its performance. Segment results that are reported to the Managing Director include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly corporate assets (primarily the Company’s headquarters), head office expenses, and income tax assets and liabilities. (o) New standards and interpretations not yet adopted A number of new standards, amendments to standards and interpretations are effective for annual periods beginning after 1 July 2014, and have not been applied in preparing these financial statements. Those which may be relevant to the Company are set out below. The Company does not plan to adopt these standards early. AASB 9 Financial Instruments AASB 9 replaces the existing guidance in AASB 139 Financial Instruments: Recognition and Measurement. AASB 9 includes revised guidance on the classification and measurement of financial instruments, including a new expected credit loss model for calculating impairment on financial assets and the new general hedge accounting requirements. It also carries forward the guidance on recognition and derecognition of financials instruments from AASB 139. AASB 9 is effective for the Company’s annual reporting period beginning 1 July 2018 and can be early adopted. The Company does not plan to adopt this standard early and the standard is not expected to have a significant effect on the financial statements. 23 BIOTRON ANNUAL REPORT 2015NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2015 4. DETERMINATION OF FAIR VALUES A number of the Company’s accounting policies and disclosures require the determination of fair value, for both financial and non‑financial assets and liabilities. Fair values have been determined for measurement and/or disclosure purposes based on the following methods. Where applicable, further information about the assumptions made in determining fair values is disclosed in the notes specific to that asset or liability. Trade and other receivables The fair value of trade and other receivables is estimated as the present value of future cash flows, discounted at the market rate of interest at the measurement date. Fair value is determined at initial recognition and, for disclosure purposes, at each annual reporting date. Share‑based payment transactions The fair value of employee share options is measured using the Black‑Scholes formula. Measurement inputs include share price on measurement date, exercise price of the instrument, expected volatility (based on weighted average historic volatility adjusted for changes expected due to publicly available information), weighted average expected life of the instruments (based on historical experience and general option holder behaviour), expected dividends, and the risk‑free interest rate (based on government bonds). Service and non‑market performance conditions attached to the transactions are not taken into account in determining fair value. Share‑based payment arrangements in which the Company receives goods or services as consideration for its own equity instruments are accounted for as equity‑settled share‑based payment transactions. Non‑derivative financial liabilities Non‑derivative financial liabilities are measured at fair value, at initial recognition, and for disclosure purposes, at each annual reporting date. Fair value is calculated based on the present value of future principal and interest cash flows, discounted at the market rate of interest at the measurement date. 5. OTHER INCOME Research and development rebate 6. LOSS FROM OPERATING ACTIVITIES Loss from ordinary activities has been arrived at after charging the following items: Auditors' remuneration paid to KPMG ‑ Audit and review of financial reports Depreciation ‑ Office equipment ‑ Plant and equipment Direct research and development expenditure expensed as incurred Provision for employee entitlements Superannuation expense 2015 $ 2014 $ 1,672,265 1,722,481 38,500 31,300 15,817 1,140 9,351 1,842 2,882,954 3,237,229 10,540 109,051 7,062 99,464 24 BIOTRON ANNUAL REPORT 2015NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2015 7. LOSS PER SHARE The calculation of basic and diluted loss per share at 30 June 2015 was based on the loss attributable to ordinary shareholders of $2,723,221 (2014 ‑ $3,085,814 loss) and a weighted average number of ordinary shares outstanding during the financial year ended 30 June 2015 of 260,882,383 (2014 ‑ 228,296,944), calculated as follows: Net loss for the year Weighted average number of ordinary shares (basic and diluted) Issued ordinary shares at 1 July Weighted average number of ordinary shares at 30 June As the Company is loss making, none of the potentially dilutive securities are currently dilutive. 8. CASH AND CASH EQUIVALENTS Cash at bank Cash and cash equivalents in the statement of cash flows 2015 $ 2014 $ 2,723,221 3,085,814 2015 Number 2014 Number 228,296,944 228,296,944 260,882,383 228,296,944 2015 $ 2014 $ 4,523,224 4,523,224 1,764,181 1,764,181 25 BIOTRON ANNUAL REPORT 2015NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2015 9. INCOME TAX EXPENSE Current tax expense Current year Tax losses not recognised Deferred tax expense Current year De‑recognition of temporary differences 2015 $ 2014 $ (1,351,580) (1,459,680) 1,351,580 1,459,680 ‑ ‑ 33,987 (33,987) ‑ 18,570 (18,570) ‑ Numerical reconciliation between tax expense and pre‑tax net profit Loss before tax ‑ continuing operations (2,723,221) (3,085,814) Prima facie income tax benefit at the Australian tax rate of 30% (2014 ‑ 30%) (816,966) (925,744) Increase in income tax expense due to: ‑ Adjustments not resulting in temporary differences ‑ Effect of tax losses not recognised ‑ Unrecognised temporary differences Income tax expense current and deferred Deferred tax assets have not been recognised in respect of the following items Deductible temporary differences (net) Tax losses Net (500,626) 1,351,580 (33,988) ‑ (515,366) 1,459,680 (18,570) ‑ 226,406 9,549,564 9,775,970 85,455 9,312,955 9,398,410 The deductible temporary differences and tax losses do not expire under the current tax legislation. Deferred tax assets have not been recognised in respect of these items because it is not probable that future taxable profit will be available against which the Company can utilise the benefits of the deferred tax asset. 10. TRADE AND OTHER RECEIVABLES Current Other debtors 11. OTHER ASSETS Current prepayments Security deposits 26 10,184 ‑ 19,894 15,131 35,025 19,902 15,131 35,033 BIOTRON ANNUAL REPORT 2015NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2015 12. PLANT AND EQUIPMENT Office equipment ‑ at cost Accumulated depreciation Plant and equipment ‑ at cost Accumulated depreciation Total plant and equipment ‑ net book value Reconciliations Reconciliations of the carrying amounts for each class of plant and equipment are set out below: Office equipment Balance at 1 July Additions Depreciation Carrying amount at the end of the financial year Plant and equipment Balance at 1 July Depreciation Carrying amount at the end of the financial year Total carrying amount at the end of the financial year 13. TRADE AND OTHER PAYABLES Current Creditors Accruals 14. EMPLOYEE ENTITLEMENTS Current Employee annual leave provision Long service leave provision Number of employees at the end of the financial year 2015 $ 2014 $ 201,088 (159,084) 42,004 506,463 (500,698) 5,765 47,769 201,088 (143,267) 57,821 506,463 (499,558) 6,905 64,726 57,821 ‑ (15,817) 42,004 6,905 (1,140) 5,765 47,769 14,765 52,408 (9,352) 57,821 8,746 (1,841) 6,905 64,726 249,213 34,106 283,319 267,077 28,250 295,327 78,694 111,163 189,857 4 79,051 100,266 179,317 4 27 BIOTRON ANNUAL REPORT 2015NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2015 15. CAPITAL AND RESERVES Issued and paid up capital 296,402,910 (2014 ‑ 228,296,944) fully paid ordinary shares 37,207,759 32,548,656 2015 $ 2014 $ Fully paid ordinary shares Balance at the beginning of the financial year Issue of shares Exercise of options Costs of issue 32,548,656 32,548,656 5,242,032 197 (583,126) ‑ ‑ ‑ 37,207,759 32,548,656 The Company does not have authorised capital or par value in respect of its issued shares. All issued shares are fully paid. During the year ended 30 June 2015 the following shares and options were issued: zz In October 2014 the Company offered eligible shareholders to purchase one new share and one new listed option through a pro‑rata renounceable rights issue. Under this offer, the Company issued 50,732,654 ordinary shares and 50,732,654 listed options for cash totalling $4,058,613. Total issue cost of $403,709 was recognised as a reduction in proceeds of issue of these shares. The listed options are each exercisable at 12 cents to acquire one fully paid ordinary share exercisable at any time up to 30 September 2016. zz In June 2015 the Company issued 17,361,111 ordinary shares through a share placement offer for cash totalling $2,000,000. Total issue costs of $179,417 were recognised as a reduction in the proceeds of the issue of these shares. In addition to the above share issues 12,201 ordinary shares were issued through the exercise of the listed options for cash totalling $1,464. The fair value of the options issued was $197. Terms and conditions ‑ Shares Holders of ordinary shares are entitled to receive dividends as declared and, are entitled to one vote per share at shareholders’ meetings. In the event of winding up of the Company, ordinary shareholders rank after creditors and are fully entitled to any proceeds of liquidation. Option Reserves Equity based compensation reserve (a) Option premium reserve (b) Movements during the period (a) Equity based compensation reserve Balance at the beginning of period Balance at end of period (b) Option premium reserve Balance at the beginning of period Issue of options Exercise of options Balance at end of period 28 522,000 817,848 522,000 ‑ 1,339,848 522,000 522,000 522,000 522,000 522,000 ‑ 818,045 (197) 817,848 ‑ ‑ ‑ ‑ BIOTRON ANNUAL REPORT 2015NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2015 15. CAPITAL AND RESERVES (Cont.) Nature and purpose of reserves Equity based compensation reserve: The equity based compensation reserve is used to recognise the grant date fair value of options issued but not exercised. Option premium reserve: The option premium reserve is used to accumulate proceeds received from the issuing of options. 16. STATEMENT OF CASH FLOWS Reconciliation of cash flows from operating activities Loss for the period Adjustments for: Depreciation of plant and equipment Provisions Effect of exchange rate adjustments Changes in assets and liabilities Decrease/(Increase) in receivables Decrease in prepayments Decrease/(Increase) in payables Net cash used in operating activities 17. RELATED PARTIES 2015 $ 2014 $ (2,723,221) (3,085,814) 16,957 10,540 (1,792) (10,184) 8 (12,008) 11,193 7,062 ‑ 1,723 13,485 76,503 (2,719,700) (2,975,848) Key management personnel and director transactions The following key management personnel holds a position in another entity that results in them having control or joint control over the financial or operating policies of that entity, and this entity transacted with the Company during the year as follows: zz During the year ended 30 June 2015, Peter J. Nightingale had a controlling interest in an entity, MIS Corporate Pty Limited, which provided full administrative services, including rental accommodation, administrative staff, services and supplies, to the entity. Fees paid to MIS Corporate Pty Limited during the year, amounted to $144,000 (2014 ‑ $144,000). There were no outstanding amounts at 30 June 2015 (2014 ‑ $nil). zz During the year ended 30 June 2015, Peter J. Nightingale had a controlling interest in an entity, Rosignol Consultants Pty Limited, which provided consulting services specifically in relation to the capital raise conducted by the Company in October 2014. The additional fees paid to Rosignol Consultants Pty Limited during the period amounted to $5,000. There were no outstanding amounts at 30 June 2015. Key management personnel compensation During the year ended 30 June 2015 compensation of key management personnel totalled $630,979 (2014 ‑ $657,902), which comprised primary salary and fees of $582,744 (2014 ‑ $610,257), superannuation of $48,235 (2014 ‑ $47,645), and share based payments of Nil (2014 ‑ Nil). During the 2015 and 2014 financial years, no long term benefits or termination payments were paid. 29 BIOTRON ANNUAL REPORT 2015NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2015 18. SHARE BASED PAYMENTS The Company has an Incentive Option Plan to provide eligible persons, being employees or directors, or individuals whom the Plan Committee determine to be employees for the purposes of the Plan, with the opportunity to acquire options over unissued ordinary shares in the Company. The number of options granted or offered under the Plan will not exceed 10% of the Company’s issued share capital and the exercise price of options will be the greater of the market value of the Company’s shares as at the date of grant of the option or such amount as the Plan Committee determines. Options have no voting or dividend rights. The vesting conditions of options issued under the plan are based on minimum service periods being achieved. There are no other vesting conditions attached to options issued under the plan. In the event that the employment or office of the option holder is terminated, any options which have not reached their exercise period will lapse and any options which have reached their exercise period may be exercised within three months of the date of termination of employment. Any options not exercised within this three month period will lapse. During the 2015 and 2014 financial years, no options were issued under the Incentive Option Plan. Options outstanding at 30 June 2015 Grant date 24 December 2010 24 December 2010 24 December 2010 Number of options 1,000,000 1,000,000 3,000,000 Exercise price Fair value at grant date Vesting date* Expiry date $0.21 $0.21 $0.24 $0.105 $0.105 $0.104 24 December 2010 30 October 2015 30 October 2011 30 October 2015 30 October 2012 30 October 2015 *Vesting conditions are based on minimum service periods being achieved. The options on issue at 30 June 2015 were modified in November 2014. The strike price of the options was reduced by 1c for each option. The modification had an immaterial impact on the fair value of each option on issue, and accordingly no expense has been recognised in relation to the modification. Options outstanding at 30 June 2014 Grant date 24 December 2010 24 December 2010 24 December 2010 Number of options 1,000,000 1,000,000 3,000,000 Exercise price Fair value at grant date Vesting date* Expiry date $0.22 $0.22 $0.25 $0.105 $0.105 $0.104 24 December 2010 30 October 2015 30 October 2011 30 October 2015 30 October 2012 30 October 2015 * Vesting conditions are based on minimum service periods being achieved. Movement of options in the equity based compensation reserve during the year Number of options 2015 Weighted average exercise price 2015 Number of options 2014 Weighted average exercise price 2014 Outstanding at 1 July 5,000,000 $0.23 5,000,000 $0.24 The equity based compensation reserve is used to record the options issued to directors and executives of the Company as compensation. Options are valued using the Black‑Scholes option pricing model. The weighted average remaining contractual life of share options outstanding at the end of the year in the equity based compensation reserve was 0.33 years (2014 ‑ 1.33 years). No ordinary shares have been issued as a result of the exercise of any option granted pursuant to the Incentive Option Plan during the current and prior financial year. 30 BIOTRON ANNUAL REPORT 2015NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2015 18. SHARE BASED PAYMENTS (Cont.) Fair value of options The fair value of options granted is measured at grant date and recognised as an expense over the period during which the employee becomes unconditionally entitled to the options. The fair value of the options granted is measured using an option valuation methodology, taking into account the terms and conditions upon which the options were granted. The amount recognised as an expense is adjusted to reflect the actual number of options that vest. When options on issue are modified and the modification is beneficial to the other party the incremental fair value at the date of the modification is recognised over the remaining modified vesting period and the original grant‑date fair value is recognised over the remaining original vesting period. When the modification is to options on issue that have fully vested the incremental fair value is recognised as an expense in the period the modification occurs. The incremental fair value is the difference between the fair value of the share based payment at the date of modification between the old and new terms. Expenses arising from share‑based payment transactions No expenses arising from share based payment transactions were recognised during the year ended 30 June 2015 (2014 ‑ $Nil). 19. FINANCIAL INSTRUMENTS Financial risk management objectives and policies The Company’s financial instruments comprise deposits with banks, receivables, trade and other payables and from time to time short term loans from related parties. The Company does not trade in derivatives or in foreign currency. The Company manages its risk exposure of its financial instruments in accordance with the guidance of the Board of Directors. The main risks arising from the Company’s financial instruments are market risk, credit risk and liquidity risks. This note presents information about the Company’s exposure to each of these risks, its objectives, policies and processes for measuring and managing risk, and the Company’s management of capital. Risk management framework The Board has overall responsibility for the establishment and oversight of the risk management framework. Informal risk management policies are established to identify and analyse the risks faced by the Company. The primary responsibility to monitor the financial risks lies with the Managing Director and the Company Secretary under the authority of the Board. Credit risk Credit risk arises mainly from the risk of counterparties defaulting on the terms of their agreements. The carrying amounts of the following assets represent the Company’s maximum exposure to credit risk in relation to financial assets: Cash and cash equivalents Trade and other receivables Security deposits Note 8 10 11 Carrying amount 2015 $ 2014 $ 4,523,224 1,764,181 10,184 15,131 ‑ 15,131 4,548,539 1,779,312 31 BIOTRON ANNUAL REPORT 2015NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2015 19. FINANCIAL INSTRUMENTS (Cont.) Cash and cash equivalents The Company mitigates credit risk on cash and cash equivalents by dealing with regulated banks in Australia. Trade and other receivables Credit risk of trade and other receivables is very low as it usually consists predominantly of amounts recoverable from taxation and other government authorities in Australia. All financial assets are current and are not past due or impaired and the Company does not have any material credit risk exposure to any single debtor or group of debtors under financial instruments entered into by the Company. Liquidity risk Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company’s reputation. Ultimate responsibility for liquidity management rests with the Board. The Company monitors rolling forecasts of liquidity on the basis of expected fund raisings, trade payables and other obligations for the ongoing operation of the Company. At balance date, the Company has available funds of $4,523,224 for its immediate use. The following are the contractual maturities of financial liabilities, including estimated interest payments: Company 30 June 2015 Carrying amount $ Contractual cash flows $ Less than one year $ Between one and five years $ Interest $ Trade and other payables 283,319 (283,319) (283,319) 30 June 2014 Trade and other payables 295,327 (295,327) (295,327) ‑ ‑ ‑ ‑ It is not expected that the cash flows included in the maturity analysis could occur significantly earlier, or at significantly different amounts. Market Risks Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the Company’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return. 32 BIOTRON ANNUAL REPORT 2015NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2015 19. FINANCIAL INSTRUMENTS (Cont.) Interest rate risk The Company’s income statement is affected by changes in interest rates due to the impact of such changes on interest income from cash and cash equivalents and interest bearing security deposits. The average interest rate on funds held during the year was 1.64% (2014 ‑ 2.41%). At balance date, the Company had the following mix of financial assets exposed to variable interest rate risk that are not designated as cash flow hedges: Financial assets Cash and cash equivalents Security deposits Net exposure Note 8 11 2015 $ 2014 $ 4,523,224 15,131 4,538,355 1,764,181 15,131 1,779,312 The Company did not have any interest bearing financial liabilities in the current or prior year. The Company does not have interest rate swap contracts. The Company always analyses its interest rate exposure when considering renewals of existing positions including alternative financing. Sensitivity analysis The following sensitivity analysis is based on the interest rate risk exposures at balance date. An increase of 100 basis points in interest rates throughout the reporting period would have decreased the loss for the period by the amounts shown below, whilst a decrease would have increased the loss by the same amount. The Company’s equity consists of fully paid ordinary shares. There is no effect on fully paid ordinary shares by an increase or decrease in interest rates during the period. 29,270 29,018 Currency risk The Company is exposed to currency risk on cash and cash equivalents that are denominated in United States currency. The company’s gross financial exposure to foreign currency risk at balance date was US$433,934 (2014 ‑ nil). Sensitivity analysis The following sensitivity analysis is based on the currency risk exposures at balance date. A 5% strengthening of the United States dollar to Australian dollar at 30 June 2015 would have decreased post tax profit and net assets for the period by the amounts shown below, while weakening would have increased the post‑tax profit and net assets for the period. 28,334 ‑ The Company is not exposed to price risks. 33 BIOTRON ANNUAL REPORT 2015NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2015 19. FINANCIAL INSTRUMENTS (Cont.) Capital management The Board’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. The Board ensures costs are not incurred in excess of available funds and will seek to raise additional funding through issues of shares for the continuation of the Company’s operations. There were no changes in the Company’s approach to capital management during the year. The Company is not subject to externally imposed capital requirements. Estimation of fair values The carrying amounts of financial assets and liabilities approximate their net fair values, given the short time frames to maturity and or variable interest rates. 20. FINANCIAL REPORTING BY SEGMENTS The Company operates in one reportable operating and geographical segment, being the biotechnology industry in Australia. 21. OPERATING LEASES The Company leases an office in North Ryde, Sydney. The lease is for a period of 3 years starting from November 2013 with an option to renew lease after that 3 years. During the year ended 30 June 2015, $85,289 was recognised as an expense in profit or loss in respect of the operating lease (2014 ‑ $65,825). The future minimum leases payments under non‑cancellable operating leases are payable as follows: Less than one year Between one and five years 22. COMMITMENTS AND CONTINGENCIES 2015 $ 66,640 24,250 2014 $ 66,640 90,890 The Company may be party to commercial disputes and litigation in the normal course of business. No material liabilities are expected to arise in respect of the commercial disputes and litigation existing at balance date. There are no capital commitments at the date of these financial statements. 23. SUBSEQUENT EVENTS On 18 June 2015, the company offered all eligible shareholders the opportunity to participate in a Share Purchase Plan (“SPP”). The offer closed on 10 July 2015. The Shareholders subscribed for 17,361,111 ordinary shares under the SPP raising $2,000,000 before issue costs. All shares were issued 15 July 2015. Other than the matter discussed above, there has not arisen in the interval between the end of the financial year and the date of this report any item, transaction or event of a material and unusual nature likely, in the opinion of the directors of the Company, to affect significantly the operations of the Company, the results of those operations, or the state of affairs of the Company in future financial years. 34 BIOTRON ANNUAL REPORT 2015DIRECTORS’ DECLARATION 1. In the opinion of the directors of Biotron Limited: a) the financial statements and notes set out on pages 16 to 34, and the Remuneration Report in the Directors’ Report, set out on pages 10 to 13, are in accordance with the Corporations Act 2001, including: (i) giving a true and fair view of the Company’s financial position as at 30 June 2015 and of its performance for the financial year ended on that date; and (ii) complying with Australian Accounting Standards (including Australian Accounting Interpretations) and the Corporations Regulations 2001; b) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable. 2. The directors have been given the declarations required by Section 295A of the Corporations Act 2001 from the chief executive officer and chief financial officer for the financial year ended 30 June 2015. 3. The directors draw attention to note 2(a) of the financial statements, which includes a statement of compliance with International Financial Reporting Standards. This report has been signed in accordance with a resolution of the directors and is dated 28 August 2015: Michael J. Hoy Chairman Michelle Miller Managing Director 35 BIOTRON ANNUAL REPORT 2015 INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF BIOTRON LIMITED Report on the Financial Report We have audited the accompanying financial report of Biotron Limited (the Company), which comprises the Statement of Financial Position as at 30 June 2015, and the Statement of Profit or Loss and Other Comprehensive Income, Statement of Changes in Equity and Statement of Cash Flows for the year ended on that date, notes 1 to 23 comprising a summary of significant accounting policies and other explanatory information and the directors’ declaration. Directors’ responsibility for the financial report The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that is free from material misstatement, whether due to fraud or error. In note 2(a), the directors also state, in accordance with Australian Accounting Standard AASB 101 Presentation of Financial Statements, that the financial statements comply with International Financial Reporting Standards. Auditor’s responsibility Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. These Auditing Standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial report is free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation of the financial report that gives a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report. We performed the procedures to assess whether in all material respects the financial report presents fairly, in accordance with the Corporations Act 2001 and Australian Accounting Standards, a true and fair view which is consistent with our understanding of the Company’s financial position and of its performance. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Independence In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001. KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. Liability limited by a scheme approved under Professional Standards Legislation. 36 BIOTRON ANNUAL REPORT 2015INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF BIOTRON LIMITED Auditor’s opinion In our opinion: a) the financial report of Biotron Limited is in accordance with the Corporations Act 2001, including: (i) giving a true and fair view of the Company’s financial position as at 30 June 2015 and of its performance for the year ended on that date; and (ii) complying with Australian Accounting Standards and the Corporations Regulations 2001. b) the financial report also complies with International Financial Reporting Standards as disclosed in note 2(a). Report on the remuneration report We have audited the Remuneration Report included in pages 10 to 13 of the directors’ report for the year ended 30 June 2015. The directors of the Company are responsible for the preparation and presentation of the remuneration report in accordance with Section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with auditing standards. Auditor’s opinion In our opinion, the Remuneration Report of Biotron Limited for the year ended 30 June 2015 complies with Section 300A of the Corporations Act 2001. KPMG Brisbane 28 August 2015 Adam Twemlow Partner KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. Liability limited by a scheme approved under Professional Standards Legislation. 37 BIOTRON ANNUAL REPORT 2015 ADDITIONAL STOCK EXCHANGE INFORMATION Home Exchange The Company is listed on the ASX Limited. The home exchange is Sydney. Use of Cash and Assets Since the Company’s listing on the ASX, the Company has used its cash and assets in a way consistent with its stated business objectives. Class of Shares and Voting Rights There is only one class of shares in the Company, fully paid ordinary shares. The rights attaching to shares in the Company are set out in the Company’s Constitution. The following is a summary of the principal rights of the holders of shares in the Company. Every holder of shares present in person or by proxy, attorney or representative at a meeting of shareholders has one vote on a vote taken by a show of hands, and, on a poll every holder of shares who is present in person or by proxy, attorney or representative has one vote for every fully paid share registered in the shareholder’s name on the Company’s share register. A poll may be demanded by the chairperson of the meeting, by at least 5 shareholders entitled to vote on the resolution or shareholders with at least 5% of the votes that may be cast on the resolution on a poll. Distribution of Equity Securityholders As at 31 July 2015, the distribution of each class of equity was as follows: Range 1 ‑ 1,000 1,001 ‑ 5,000 5,001 ‑ 10,000 10,001 ‑ 100,000 100,001 and over Fully Paid Ordinary Shares 30 October 2015 $0.22 Unlisted Options 30 October 2015 $0.25 Unlisted Options 30 September 2016 $0.12 Listed Options 95 445 433 1,278 464 2,715 ‑ ‑ ‑ ‑ 1 1 ‑ ‑ ‑ ‑ 1 1 63 209 81 291 96 740 At 31 July 2015, 442 shareholders held less than a marketable parcel of shares and 340 listed option holders held less than a marketable parcel of options. 38 BIOTRON ANNUAL REPORT 2015ADDITIONAL STOCK EXCHANGE INFORMATION Twenty Largest Quoted Shareholders At 31 July 2015 the twenty largest fully paid ordinary shareholders held 29.87% of fully paid ordinary as follows: Name Bond Street Custodians Limited Armco Barriers Pty Ltd Scott’s A V Pty Ltd Mr Mark Hamish Lochtenberg + Mr Michael Lochtenberg CBDF Pty Limited Warman Investments Pty Ltd Mr Robert Thomas +Mrs Kyrenia Thomas Pathold No 222 Pty Ltd Rigi Investments Pty Limited Umbiram Pty Ltd Twynam Agricultural Group Pty Ltd 1 2 3 4 5 6 7 8 9 10 11 12 Mr. Peter James Nightingale 13 Mrs Narelle Fay 14 15 16 17 18 19 Fordholm Investments Pty Ltd Mrs Wishny Sritharan Krishnarajah Jey Investments Pty Ltd Linkenholt Pty Limited Ramsab Pty Ltd Rosignol Pty Ltd 20 Dr Peter Mun Sun Chan There are no current on‑market buy‑backs. Fully Paid Ordinary Shares 10,000,000 9,150,000 9,014,000 7,827,755 6,060,000 5,280,556 5,086,805 4,800,000 4,308,746 3,985,491 3,830,208 3,594,903 3,279,402 3,200,000 2,620,000 2,560,445 2,500,000 2,444,445 2,165,513 2,000,000 % 3.19 2.92 2.87 2.49 1.93 1.68 1.62 1.53 1.37 1.27 1.22 1.15 1.05 1.02 0.84 0.82 0.80 0.78 0.69 0.64 39 BIOTRON ANNUAL REPORT 2015ADDITIONAL STOCK EXCHANGE INFORMATION BIOTRON LIMITED ABN 60 086 399 144 Twenty Largest Quoted Option Holders At 31 July 2015 the twenty largest option holders held 43.50% of listed options as follows: Name Armco Barriers Pty Ltd Rigi Investments Pty Limited Mr Russell Dean Thomson BMMDH Pty Ltd Mr Robert Thomas +Mrs Kyrenia Thomas CBDF Pty Limited Bond Street Custodians Limited Mr Daryl John Halder Viking Management Services Pty Ltd 1 2 3 4 5 6 7 8 9 10 Mr Russel Wayne Halder 11 12 13 Pudd & Co Pty Ltd Umbiram Pty Ltd Fordholm Investments Pty Ltd 14 Mr Mark Hamish Lochtenberg + Mr Michael Lochtenberg 15 Mrs Narelle Fay 16 Mr. Peter James Nightingale 17 18 Altinova Nominees Pty Ltd Lenvat Pty Ltd Lenvat Super Fund A/C 19 Mr Donal Francis O’Sullivan 20 Rosignol Pty Ltd Fully Paid Ordinary Shares 4,650,000 2,003,112 1,760,000 1,444,000 1,181,482 1,077,891 1,000,000 955,000 822,223 800,000 727,278 700,961 666,666 666,666 632,619 629,945 625,000 600,000 600,000 521,979 % 9.17 3.95 3.47 2.85 2.33 2.13 1.97 1.88 1.62 1.58 1.43 1.38 1.31 1.31 1.25 1.24 1.23 1.18 1.18 1.03 WWW . WWW . . COM . AU 40 2015 ANNUAL REPORT BIOTRON ANNUAL REPORT 2015CONTENTS CONTENTS Operating and Financial Review ........................................ 1 Operating and Financial Review ........................................ 1 Corporate Governance Statement .................................. 5 Corporate Governance Statement .................................. 5 Directors’ Report ................................................................ 6 Directors’ Report ................................................................ 6 Lead Auditor’s Independence Declaration .................... 15 Lead Auditor’s Independence Declaration .................... 15 Statement of Profi t or Loss and Statement of Profi t or Loss and Other Comprehensive Income ........................................ 16 Other Comprehensive Income ........................................ 16 Statement of Financial Position ...................................... 17 Statement of Financial Position ...................................... 17 Statement of Changes in Equity .................................... 18 Statement of Changes in Equity .................................... 18 Statement of Cash Flows ................................................. 19 Statement of Cash Flows ................................................. 19 Notes to the Financial Statements ................................ 20 Notes to the Financial Statements ................................ 20 Directors’ Declaration ..................................................... 35 Directors’ Declaration ..................................................... 35 Independent Auditor’s Report ....................................... 36 Independent Auditor’s Report ....................................... 36 Additional Stock Exchange Information ....................... 38 Additional Stock Exchange Information ....................... 38 Corporate Directory ....................................................... IBC Corporate Directory ....................................................... IBC CORPORATE DIRECTORY CORPORATE DIRECTORY Directors Directors Mr Michael J. Hoy (Chairman) Mr Michael J. Hoy (Chairman) Dr Michelle Miller (Managing Director) Dr Michelle Miller (Managing Director) Dr Susan M. Pond Dr Susan M. Pond Mr Robert B. Thomas Mr Robert B. Thomas Dr Denis N. Wade Dr Denis N. Wade Company Secretary Company Secretary Mr Peter J. Nightingale Mr Peter J. Nightingale Registered Offi ce Registered Offi ce Level 2, 66 Hunter Street Level 2, 66 Hunter Street SYDNEY NSW 2000 SYDNEY NSW 2000 Phone: Phone: Fax: Fax: E‑mail: E‑mail: Homepage: www.biotron.com.au Homepage: www.biotron.com.au + 61 2 9300 3344 + 61 2 9221 6333 enquiries@biotron.com.au + 61 2 9300 3344 + 61 2 9221 6333 enquiries@biotron.com.au Principal Administration Offi ce Principal Administration Offi ce Suite 1.9, 56 Delhi Road Suite 1.9, 56 Delhi Road NORTH RYDE NSW 2113 NORTH RYDE NSW 2113 Phone: Phone: Fax: Fax: + 61 2 9805 0488 + 61 2 9805 0688 + 61 2 9805 0488 + 61 2 9805 0688 Share Registrar Share Registrar Computershare Investor Services Pty Limited Computershare Investor Services Pty Limited Level 4, 60 Carrington Street Level 4, 60 Carrington Street SYDNEY NSW 2000 SYDNEY NSW 2000 Phone: Phone: Fax: Fax: 1300 787 272 1300 787 272 +61 3 9473 2500 +61 3 9473 2500 Auditors Auditors KPMG Level 16, Riparian Plaza KPMG Level 16, Riparian Plaza 71 Eagle Street 71 Eagle Street BRISBANE QLD 4000 BRISBANE QLD 4000 Home Exchange Home Exchange ASX Limited ASX Limited 20 Bridge Street 20 Bridge Street SYDNEY NSW 2000 SYDNEY NSW 2000 Solicitors Solicitors Minter Ellison Minter Ellison 88 Phillip Street 88 Phillip Street SYDNEY NSW 2000 SYDNEY NSW 2000 Biotron Limited, incorporated and domiciled in Australia, is a publicly listed company limited by shares. Biotron Limited, incorporated and domiciled in Australia, is a publicly listed company limited by shares. 4796 Designed and Produced by RDA Creative www.rda.com.au 4796 Designed and Produced by RDA Creative www.rda.com.au BIOTRON LIMITED ABN 60 086 399 144 WWW . WWW . . COM . AU 2015 ANNUAL REPORT 

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