HEALTH
TECHNOLOGY
RESOURCES
2014
A N N U A L R E P O R T
Contents
Chairman’s Letter
Company Focus and Developments
Directors’ Report
Auditor’s Independence Declaration
Corporate Governance Statement
Consolidated Statement of Profit or Loss and Other
Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Consolidated Financial Statements
Directors’ Declaration
Independent Auditor’s Report
Additional Securities Exchange Information
Company Information
1
3
15
28
29
39
40
41
42
43
80
81
83
Directors
David Breeze
Chairman/Managing Director
Registered Office
14 View Street
North Perth WA 6006
Hock Goh
Non-Executive Director
Deborah Ambrosini
Executive Director and
Company Secretary
Scientific Advisors
Professor Peter Klinken
Dr Robin Scaife
Associate Professor David Liley
Principal Business Address
14 View Street
North Perth WA 6006
Telephone: (08) 9328 8366
Facsimile: (08) 9328 8733
www.bphenergy.com.au
admin@bphenergy.com.au
Auditor
Nexia Perth Audit Services
Pty Ltd
Level 3, 88 William Street
Perth WA 6000
Share Registry
Security Transfer Registrars
Pty Ltd
770 Canning Highway
Applecross WA 6153
Australian Securities
Exchange Listing
Australian Securities
Exchange Limited
(Home Exchange: Perth,
Western Australia)
ASX Code: BPH
Australian Business Number
41 095 912 002
HEALTH
TECHNOLOGY
RESOURCES
Chairman’s Letter
Dear Shareholder,
The past year has been a tough year for all with difficult market
conditions contributing to a moderate growth in the economy.
However, in this challenging time BPH Energy has remained steady
in the further development of its assets making difficult decisions
where required.
Advent Energy Ltd
Cortical Dynamics Ltd
During the year BPH has continued to maintain its
oil and gas exploration investments through investee
company Advent Energy Ltd (Advent Energy).
During the period Cortical Dynamics continued with
the development of the BAR monitor moving closer
to its goal of commercialisation.
In 2013 Cortical Dynamics completed its first human
clinical trial using the complete BAR monitoring
system within the operating room. The clinical trial,
involving 25 patients undergoing elective coronary
artery bypass surgery, was designed to evaluate the
ability of the BAR monitor to distinguish between two
different doses of the widely used intravenous
Advent Energy received substantial independent
confirmation of the Bonaparte Basin prospectivity
for shale gas resource. A report titled Engineering
energy: unconventional gas production by the
Australian Council of Learned Academies (ACOLA)
described a 6 trillion cubic feet shale gas resource for
the onshore Bonaparte Basin. In energy equivalence,
this was assessed as a resource of 1.09 billion
barrels of oil equivalent.
In August 2013 Advent Energy, through its wholly
owned subsidiary Asset Energy Pty Ltd (Asset),
settled the legal dispute involving Fugro Survey Pty
Ltd (Fugro), RPS Energy Pty Ltd and Asset. This was
settled at a court appointed mediation. The dispute
arose over performance and fees in connection with
pre-drilling site survey works conducted by Fugro
at PEP11 in 2010. Asset settled Fugro’s claim of
$2.2 million with a payment of $100,000.
During the year Advent Energy continued with
commercial discussions, planning and engineering
evaluation for development of its gas resources in
EP386 and RL1. It signed a letter of intent for gas
supply and has maintained ongoing discussion on
potential gas offtake agreements. In addition,
Advent Energy has evaluated the optimum
production process of
CNG and LNG delivery of gas to mine sites
and other potential customers.
bph energy | ANNUAL REPORT 2014
1
Chairman’s Letter
Cortical Dynamics Ltd (continued)
analgesic fentanyl, in addition to assessing the
immunity of the BAR monitor to a range of intra-
operative mechanical and electrical artifacts known
to complicate the EEG measurement of anaesthetic
action. During the current year Cortical Dynamics
principal scientist Dr Mehrnaz Shoushtarian was given
the opportunity to present the findings of this trial
at the American Society of Anesthesiologists annual
meeting in San Francisco where it was well received
by all who attended this notable event.
The BAR monitor also received further confirmation
recently when it was acknowledged in an article
published in the ABC’s Health and Wellbeing. The
article sought the thoughts of key opinion leaders in
anaesthesiology and identified the BAR monitor as a
new and novel method to monitor anaesthesia levels
in the surgical patient.
Molecular Discovery Systems Ltd
BPH investee Molecular Discovery Systems
(MDSystems) continued its drug discvery program
during the year however; after careful consideration
of general market conditions and of its available
resources it was decided to temporarily suspend its
early stage drug discovery program. MDSystems will
however, continue its work with the Harry Perkins
Institute of Medical Research (“Perkins Institute”) in
relation to the tumour suppressor gene, HLs5. This
collaboration is working to develop and validate HLs5
as a tumour suppressor.
The team at the Perkins Institute have uncovered
a role for HLs5 in leukaemia and breast cancer.
HLs5, also known as TRIM 35, is a member of the
family of tripartite motif (TRIM) containing proteins.
Recent studies have indicated that several TRIM
proteins function as important regulators in cancer
development and progression. Research conducted
at the Perkins Institute has shown that HLs5 has
significant tumour suppressor properties. MDSystems
will continue working with Professor Peter Klinken and
his research group at the Perkins Institute with the aim
of developing the HLs5 research to its full potential.
We once again thank you for your continued support
during a tough year and look forward to meeting the
challenges head-on in 2015.
Yours Sincerely,
Mr David Breeze
Chairman
2
bph energy | annual report 2014
HEALTH
TECHNOLOGY
RESOURCES
Company Focus and Developments
Molecular Discovery Systems
Drug Discovery and High-Content Screening
Technology
After careful consideration of general market
conditions and of its available resources, Molecular
Discovery Systems Limited (MDSystems) has decided
to temporarily suspend its early stage drug discovery
program. Although the Company has suspended its
early stage drug discovery program, MDSystems is
continuing its work with the Harry Perkins Institute
of Medical Research (“Perkins Institute”) in relation
to the tumour suppressor gene, HLs5. MDSystems
will continue working with the Perkins Institute to
develop and validate HLs5 as a tumour suppressor.
MDSystems also has core expertise in high-content imaging and analysis. MDSystems’ owned IN Cell Analyser
1000 (GE Healthcare) is a semi-automated cellular imaging and analysis platform that combines high-resolution
imaging and high-content analysis to provide a technology that rapidly detects and quantifies cellular
properties much faster than conventional methods. MDSystems has developed and applied a range of high-
content analysis protocols to analyse diverse cellular processes such as cell proliferation, cell cycle progression,
apoptosis, cytoskeletal changes and dynamics of intracellular organelles.
Screening of chemical libraries using high content imaging has become a powerful tool in drug discovery, widely
used in the many stages of drug development. High-content screening (HCS) not only enables the end user
to monitor the effects of drugs on complex molecular events but phenotypic changes of the whole cell can be
observed. HCS thereby offers a valuable platform to identify modulators of a multitude of intractable molecular
and cellular targets.
Using high-content imaging and computational analyses MDSystems has previously screened for the effects of
small molecules and natural extracts on cancer cell proliferation, these image-based drugs screening has now
yielded several new compounds that potently inhibit cancer cell proliferation.
In light of the encouraging results obtained previously using image-based drug screening, MDSystems
has endeavoured to further develop and exploit this technology in an effort to identify new oncology drug
candidates. By employing the semi-automated high-throughput imaging platform MDSystems has continued to
develop a number of high content drug screens. These screens have identified compounds which have shown to
interfere with a number of cancer associated signalling pathways. The identified compounds will require further
optimisation before pre-clinical studies can be initiated.
bph energy | ANNUAL REPORT 2014
3
Company Focus and Developments
HLS5 Technology
MDSystems is working with Professor Peter Klinken and his team at the Perkins Institute to develop and validate
HLS5 as a novel tumour suppressor gene. A concerted research effort by leading Australian scientists has
revealed that HLS5 works through multiple pathways that may target cancer as well as a range of other diseases
such as Huntington’s, Parkinson’s and HIV infection.
The team at the Perkins Institute have uncovered a role for HLs5 in leukaemia and breast cancer. HLs5, also
known as TRIM 35, is a member of the family of tripartite motif (TRIM) containing proteins. Recent studies
have indicated that several TRIM proteins function as important regulators in cancer development and
progression. Research conducted at the Perkins Institute has shown that HLs5 has significant tumour suppressor
properties. Their findings are supported by an independent publication implicating the role of HLs5 in cancer,
demonstrating that the loss of Hls5 expression may be a critical event in liver cancer. MDSystems will continue
working with Professor Peter Klinken and his research group at the Perkins Institute with the aim of developing
the HLs5 research to its full potential.
MDSystems has an extensive patent portfolio encapsulating the tumour suppressor gene HLS5 both as a
potential therapeutic target and also underpinning its involvement in a variety of disease pathways. The patent
portfolio surrounding HLS5 is currently going through the various stages of the patent application process
in Australia, Europe and the US. The patent “Tumour Suppressor Factor” has been issued as a patent in the
United States of America and Australia. Additionally, the patents titled ‘Sumoylation control agent and uses
thereof’, ‘Agent for the treatment of hormone-dependent disorders and uses thereof’ and ‘Transcription factor
modulator’ have been issued in Australia.
4
bph energy | annual report 2014
HEALTH
TECHNOLOGY
RESOURCES
Cortical Dynamics Limited
BAR Technology
Cortical Dynamics Limited (“Cortical”) is working with
BPH and the Swinburne University of Technology
(SUT) to develop and commercialise a unique depth
of anaesthesia monitoring system for use during
major surgery. The core technology is based on
real time analysis of the patient’s brain electrical
activity, electroencephalograph (EEG), using a
proprietary algorithm based on a mathematically and
physiologically detailed understanding of the brain’s
rhythmic electrical activity.
The theory developed by Professor David Liley, who
heads the scientific team at Cortical, provides for the
first time a meaningful way of relating brain electrical
activity to the underlying physiological processes
that generate EEG. Using this physiological
approach Cortical has developed the Brain
Anaesthesia Response (BAR) monitor, a monitor
designed to better detect the effect of anaesthetic
agents on brain activity and assist anaesthetists in
keeping patients optimally anaesthetised. The BAR
monitor distinguishes between changes in higher
brain function that occur as result of anaesthetic
action using two uniquely defined measures Cortical
State (CS) and Cortical Input (CI).
Cortical’s physiological approach is fundamentally different from all other devices currently available on the
market which produce EEG indexes based on black boxed statistical approaches. Such data mining requires
no physiological knowledge of how anaesthetic agents affect the brain. Cortical is confident that the BAR’s
methodology and unique indicies will be a more sensitive measure of the state of the brain during anaesthesia
than the current alternatives. Moreover, this unique physiological approach may allow the BAR monitor to be
applied to markets beyond that of anaesthesia monitoring and may be applied to neuro-diagnostic applications,
including the detection of the early onset of neurodegenerative diseases such as Alzheimer’s and Parkinson’s,
and in development of drugs associated with these conditions.
Funding received from a National Health and Medical Research Council Development Grant enabled substantial
improvements in the performance of the BAR monitor. In particular, it has resulted in the development of
a modified sensor layout having improved performance and sensitivity, as well as an upgrade of the data
acquisition module to enable a greater resilience to the effects of noise and artefact in a range of clinical
monitoring situations.
Using data collected from a third party’s hardware, two clinical trials were initially completed to evaluate the
BAR algorithm. The first trial was designed to test the sensitivity of a new method in quantifying the effect
various levels of nitrous oxide have on measures of anaesthetic depth. The results were published in the peer
reviewed international journal Computers in Biology and Medicine. The second trial was designed to evaluate
the sensitivity of the BAR methodology to opioids and other intravenous anaesthetic drugs. These trials have
provided evidence that the BAR algorithm is more sensitive than competitive monitors in detecting the effects of
anaesthetics on brain activity.
bph energy | ANNUAL REPORT 2014
5
Company Focus and Developments
BAR Technology (continued)
In order to corroborate the results of the trial
above, a data set, from a similarly constructed trial,
was obtained from Professor Michel Struys from
the Department of Anaesthesia, Ghent University
Hospital Belgium and Professor Tarmo Lipping from
the Tampere University in Finland. The analysis of
this European data set using the BAR’s methodology
unambiguously indicated that the effects of
remifentanil (a powerful synthetic opioid) and propofol
(a widely used intravenous general anaesthetic agent)
on brain electrical activity can be differentiated. These
results suggest that analgesia and anaesthesia may be monitored independently using the EEG. The results of
this analysis have been presented at the Australian and New Zealand College of Anaesthetists (ANZCA), and
also published in the prestigious journal Anesthesiology in 2010.
In what has already been a methodical validation process Cortical has completed its first human clinical trial
using the BAR monitor end-to-end (from electrode to monitor). The aim of trial was to (a) evaluate the BAR
monitor’s ability to distinguish between two doses of fentanyl, a commonly used analgesic agent, and (b) assess
the immunity of the BAR monitor to a range of mechanical and electrical artifacts known to complicate EEG
measurement. In the study a total of 25 patients undergoing coronary artery graft bypass surgery were recruited
in to the trial.
Significantly, the analysis concluded that CI could differentiate between the different doses of fentanyl while
CS was well correlated with the Bispectral Index (BIS), a generally accepted measure of sedation. In addition
this trial demonstrated the ability of the BAR monitor to operate effectively in an electrically noisy operating
room environment. The trial’s findings suggest that the BAR monitor may find significant utility in the delivery
of optimal and balanced surgical anaesthesia. The validation of the BAR monitor within the operating room is a
significant step in the BAR’s development program.
Cortical has partnered with the University of Melbourne in an Australian Research Council (ARC) Linkage
Agreement. The project is using advanced computing methods applied to EEG recordings to track how the
brain changes as a person undergoes general anaesthesia. Cortical anticipates the ARC project will add new
processing capabilities to the BAR monitor, providing the framework for an improved depth of anaesthesia
monitor.
Cortical has 5 patent families that have all matured into National patent applications variously in Australia,
Europe, New Zealand the United States, China and Japan. “Method of monitoring brain function” has been
issued as a patent in New Zealand (541615), Australia (2004206763), Japan (4693763) and the United States
(7937138). The patent “Brain Function Monitoring and Display System” has been issued in the People’s Republic
of China (ZL200780027482.8), New Zealand (573460), Japan (5194290), Australia (2007257335) and the United
States (8175696). Additionally, the patent “EEG Analysis System” has been issued in New Zealand (573459),
Australia (2007257336), Japan (5194291)*, China (ZL200780027483.2) and the United States (8483815). The patent
“Neurodiagnostic Monitoring and Display System” has been issued as a patent within Australia (2007354331).
Cortical will continue to drive the development of the BAR monitor, maintain its intellectual property and
concentrate on obtaining regulatory approval for the BAR monitor.
* Due to a requirement of Japanese law the original patent application title of ‘EEG Analysis System’ was
changed to ‘Method for displaying the activity of a brain and system for displaying the activity of the brain’.
6
bph energy | annual report 2014
HEALTH
TECHNOLOGY
RESOURCES
Diagnostic Array Systems
Diagnostic Array Systems (DAS) has created the BacTrak™ System which is a diagnostic test for the detection
of respiratory infections (e.g. diagnosis of pneumonia, Tuberculosis (TB) and Legionella disease). Our system
identifies the cause of disease by testing for multiple bacteria in a single sputum sample quickly, efficiently
and more accurately than current techniques. The test has important implications for the clinical management
of infectious diseases by identifying the specific bacteria responsible for a disease and suggesting the most
effective therapy. Utilisation of the novel test is intended to provide more information, quicker than alternative
methods. It has the potential to accelerate therapeutic treatment, lead to a reduction in hospitalisations and
help reduce the overuse of antibiotics.
Amongst all infectious diseases, respiratory diseases are the most common illnesses in the world. They are
highly contagious and are easily spread. The disease causing bacteria can remain in the air where they can easily
reach other individuals by inhalation. The number of patients suffering from respiratory infections is increasing,
as is the number of deaths caused by these diseases. DAS has completed its research with in-house validation
and has held discussions with third parties to license the technology.
BPH has assisted with funding the development of BacTrak™ which includes a number of key features that
underpin its commercial potential. These include:
• Rapid simultaneous detection of 16 respiratory pathogens including Tuberculosis (TB), Legionella, and
Methicillin Resistant Staphylococcus Auus (MRSA).
• Results within hours rather than days using the current culture gold standard.
• Sensitivity and positive confirmation for the 16 pathogens from easily obtained clinical sputum samples.
Direct benefits from the project development include:
• Earlier, pathogen specific treatment;
• Shorter length of hospital stay;
• Earlier potential isolation of hospital patients; and
• Reduction in the over-prescription of broad-spectrum antibiotics.
The core technology underlying this multiplexed screening has been granted in the US, Australia and Japan.
bph energy | ANNUAL REPORT 2014
7
Company Focus and Developments
Advent Energy
Western Australia / Northern Territory – Onshore Bonaparte Basin
Advent Energy, through wholly owned subsidiary Onshore Energy Pty Ltd, holds 100% of each of EP386 and RL1
in the onshore Bonaparte Basin in northern Australia. The Bonaparte Basin is a highly prospective petroliferous
basin, with significant reserves of oil and gas. Most of the basin is located offshore, covering 250,000 square
kilometres, compared to just over 20,000 square kilometres onshore.
Location of EP386 and RL1 including Weaber, Waggon Creek and Vienta gas fields, and other prospects
and leads.
Advent Energy holds Exploration Permit EP386 (2,568 square kilometres in area) which is the sole petroleum
permit in the Western Australian section of the onshore Bonaparte Basin. Since 1960 twelve wells have been
drilled in or near EP386 and only sixteen in the whole of the onshore basin, with a resultant excellent technical
success rate of encountering hydrocarbons.
Waggon Creek-1, drilled in 1995, provided strong evidence of a significant sweet gas-charged stratigraphic
trap with fair to good quality sandstone reservoir within the upper Milligans Formation. Drilling of Vienta-1 in
1998 demonstrated numerous gas shows within Enga Sandstone units, with dry gas flowed to surface and visual
porosity described in the cuttings. Both Waggon Creek-1 and Vienta-1 were cased and suspended for future
production.
8
bph energy | annual report 2014
HEALTH
TECHNOLOGY
RESOURCES
Following application by Advent Energy, the WA Department of Mines & Petroleum granted a suspension of the
condition requiring the completion of the Year 2 work by 31 March 2015.
In the NT, Advent Energy holds Retention Licence RL1 (166 square kilometres in area), which covers the Weaber
Gas Field, originally discovered in 1985.
Advent Energy has previously advised that the 2C Contingent Resources* for the Weaber Gas Field in RL1
are 11.5 billion cubic feet (Bcf) of natural gas following an independent audit by RISC. Significant upside 3C
Contingent Resources of 45.8 Bcf have also been assessed by RISC.
The results are summarised below:
Weaber Field
Gas Initially In Place (Bcf)
Contingent Resources (Bcf)
1C
0.33
0.25
2C
13.9
11.5
3C
54.1
45.8
Mean1
21.9
18.4
1 The mean is the average of the probabilistic resource distribution
* Contingent Resources, as defined under the Society of Petroleum Engineers Petroleum Resource Management System (SPE
PRMS) guidelines.
bph energy | ANNUAL REPORT 2014
9
Company Focus and Developments
Production testing at Waggon Creek-1 during 2012.
The current rapid development of the Kununurra region in northern Western Australia, including the Ord River
Irrigation Area phase 2, the township of Kununurra, and numerous regional resource projects provides an
exceptional opportunity for Advent Energy to potentially develop its nearby gas resources.
Advent Energy is in an exceptional position to potentially satisfy this growing regional demand where it remains
the operator and 100% owner of key petroleum permits in this region.
Unconventional Resources Within EP386 and RL1
The prospectivity of the Bonaparte Basin is evident from the known oil and gas fields in both the offshore and
onshore portions of the basin. Advent Energy’s onshore EP386 and RL1 contain many large structures with
conventional reservoir gas discoveries.
Advent Energy has identified significant shale areas in EP386 and RL1 and is continuing to assess these
resources. The following data illustrates detail from that study showing results from the re-analysis of the well
logs from prior drilling in Advent Energy’s areas using enhanced computer processes.
• Advent Energy has indicated significant potential upside in prospective shale gas resources with estimated
unrisked original gas in place (OGIP) in the range from 19 Tcf to 141 Tcf for the 100% Advent Energy owned
EP386 and RL1;
• The thickness of the prospective shale gas play varies from 300m to over 1500m;
•
In addition to the existing gas discoveries in conventional petroleum reservoirs, composite wireline and
mudlog gas display of these wells have consistently indicated the presence of continuous elevated gas
shows. Source rock analyses on core, sidewall core and cuttings samples have indicated the presence of
source rocks with up to 4.3 % Total Organic Carbon (TOC) and mature for gas and oil generation; and
• Advent Energy has calculated 9.8 Tcf prospective resource (best estimate) for the shale gas areas of
the Bonaparte permits of EP386 and RL1. The low estimate is 1.9 Tcf and the high estimate is 25.4 Tcf
prospective resources.
10
bph energy | annual report 2014
Garimala-1: Elevated Gas Shows over Milligans-Langfield Section
HEALTH
TECHNOLOGY
RESOURCES
Example well
composite log
from Garimala-1
demonstrating
elevated gas shows
over a considerable
shale sequence.
Composite well
logs from all
onshore Bonaparte
Basin wells
demonstrate similar
characteristics.
Example well composite log from Garimala-1 demonstrating elevated gas shows over a considerable shale
sequence. Composite well logs from all onshore Bonaparte Basin wells demonstrate similar characteristics.
Advent Energy has recognised a considerable potential hydrocarbon resource and is working toward identifying
and understanding the nature of the unconventional shale gas/condensate play in its 100% owned EP386 and
RL1 permits.
A recently published independent report has assessed the shale gas potential in Australia’s sedimentary basins,
and has described a 6 trillion cubic feet (Tcf) resource for the onshore Bonaparte Basin, equal to a 1.09 billion
barrels of oil equivalent (BOE) resource.
The report, titled Engineering energy: unconventional gas production, as a study of shale gas in Australia was
undertaken by the Australian Council of Learned Academies (ACOLA). The ACOLA resource assessment made in
the onshore Bonaparte Basin was assessed from the Milligans Formation gas zone.
In calculating the recoverable gas resource of 6 Tcf (over 1 billion BOE), the ACOLA report uses a figure of only
120 feet (36 metres) as a shale thickness.
Advent Energy has previously analysed the well logs of 16 conventional wells drilled in its areas in the Bonaparte
Basin.
The thickness of the shales in these wells within the Milligans Formation varies from 300 metres to 1700 metres
(984 feet to 5574 feet), and is materially thicker than the ACOLA figure.
bph energy | ANNUAL REPORT 2014
11
Company Focus and Developments
Unconventional Resources Within EP386 and RL1 (continued)
The ACOLA report also used a TOC of 1.8% in deriving its assessment of shale source. Advent Energy has
reprocessed its well logs and observed TOC of up to 5% in a number of wells. Gas flow results from the
conventional gas wells in Advent Energy’s acreage have been up to 4.5 million standard cubic feet per day
(MMscf/d).
Whilst encouraging that one of Australia’s premier petroleum producing basins is finally getting the recognition
it deserves for its rich petroleum potential, the report’s assessment of the onshore Bonaparte Basin’s shale gas
potential has not had the benefit of using information now available from the reprocessed petrophysical logs
from the numerous wells in the area. This additional information provides further confidence in their findings and
impacts positively on the potential estimates of unconventional gas resources in the area.
PEP11 Oil and Gas Permit
Advent Energy, through wholly owned subsidiary Asset, holds 85% of Petroleum Exploration Permit PEP11 –
an exploration permit prospective for natural gas located in the Offshore Sydney Basin. Joint Venture partner
Bounty Oil & Gas NL holds the remaining 15%.
PEP11 is a significant offshore exploration area with large scale structuring and potentially multi-Trillion cubic feet
(Tcf) gas charged Permo-Triassic reservoirs.
The prospectivity of this proven petroleum basin has been enhanced by the confirmation of the presence of
apparent ongoing hydrocarbon seeps. Sub-bottom profile data, swath bathymetry, seismic and echosounder
data collected by Geoscience Australia along the continental slope / permit margin has demonstrated active
erosional features in conjunction with geophysical indications of gas escape.
Gas flowing during production testing at Advent Energy’s Waggon Creek-1 well in EP386.
12
bph energy | annual report 2014
HEALTH
TECHNOLOGY
RESOURCES
Advent Energy has previously interpreted significant seismically indicated gas features. Key indicators of
hydrocarbon accumulation features have been interpreted following review of the 2004 seismic data (reprocessed
in 2010). The seismic features include apparent Hydrocarbon Related Diagenetic Zones (HRDZ), Amplitude
Versus Offset (AVO) anomalies and potential flat spots.
Mapped prospects and leads within the Offshore Sydney Basin are generally located less than 50km from the
Sydney-Wollongong-Newcastle greater metropolitan area. This area has a population of approximately 5,000,000
people.
Advent Energy has demonstrated considerable gas generation and migration within PEP11, with the mapped
prospects and leads highly prospective for the discovery of gas.
On 21 August 2013, Asset settled its dispute with Fugro Services Pty Ltd and RPS Energy following a court
appointed mediation. The dispute between Asset, Fugro and RPS arose over performance and fees in
connection with pre-drilling site survey works conducted by Fugro in PEP11 in 2010. Asset settled Fugro’s claim
of $2.2 million with a payment of $100,000.
Advent Energy has commenced preparations for seismic acquisition in PEP11 in the offshore Sydney Basin,
offshore NSW. Pending the necessary regulatory approvals and contracting of a suitable seismic vessel, the
survey is intended to take place over a 4 – 5 week period between November 2014 and May 2015.
bph energy | ANNUAL REPORT 2014
13
Company Focus and Developments
Western Australia – Exmouth Sub-Basin (EP325)
Advent Energy Ltd has an 8.3% interest (Permit Operator: Strike Energy Ltd) in a shallow, near shore permit in the
Exmouth sub-Basin region of the Carnarvon Basin, which contains the undeveloped Rivoli Gas Field. The Rivoli
Gas Field contains approximately 6.8 – 18 PJ of gas. The permit also contains the Rivoli Deep prospect and other
leads. The Joint Venture has applied to the Western Australian Department of Mines and Petroleum (DMP) for a
conversion of the graticular blocks comprising Rivoli and nearby prospects and leads into a Retention Lease.
14
bph energy | annual report 2014
HEALTH
TECHNOLOGY
RESOURCES
Directors’ Report
The directors of BPH Energy Ltd (”BPH Energy” or the “Company”) present their report on
the company and its controlled entities for the financial year ended 30 June 2014.
Directors
The names of directors in office at any time during or since the end of the year are:
D L Breeze
G Gilbert (resigned 11 December 2013)
H Goh
D Ambrosini
Company Secretary
Ms Deborah Ambrosini continues in her role of Company Secretary. She also holds the position of Chief Financial
Officer of the Company and has over 15 years’ experience in Corporate accounting roles.
Principal Activities
The principal activities of the consolidated entity during the financial year were investments in biotechnology
entities and an oil and gas exploration entity.
Operating Results
The consolidated loss of the economic entity after providing for income tax was $1,266,079 (2013: loss $594,908).
Dividends
The directors recommend that no dividend be paid in respect of the current period and no dividends have been
paid or declared since the commencement of the period.
bph energy | ANNUAL REPORT 2014
15
Directors’ Report
Review of Operations
Investment in Oil and Gas Exploration Company
Advent Energy Ltd (“ Advent Energy”):
BPH Energy currently holds an interest of 27% in unlisted Australian exploration company Advent Energy
(“Advent Energy”).
Advent Energy has assembled a range of hydrocarbon permits which contain near term production opportunities
with pre-existing infrastructure and exploration upside.
Advent Energy’s assets include EP386 and RL1 (100%) in the onshore Bonaparte Basin in the north of Western
Australia and Northern Territory, PEP11 (85%) in the offshore Sydney Basin and EP325 (8.3%) in the Exmouth
Sub-basin of the Carnarvon Basin near Exmouth in WA. Advent Energy’s portfolio of assets has an estimated
AUD $156m invested historically on exploration.
Advent Energy is investigating a considerable potential shale gas resource within EP386 and RL1. Studies
indicate significant potential upside in prospective shale gas resources with an estimated (Best Estimate)
prospective recoverable resource of 9.8 Tcf (Low Estimate is 1.9 Tcf and High Estimate is 25.4 Tcf).
A 2C Contingent Resource of 11.5 Bcf (1C is 0.3 Bcf and 3C is 45.8 Bcf) for the Weaber Gas Field (RL1) has
been assessed by an independent third party as a component of Advent Energy’s drive to commercialise its
100% owned onshore Bonaparte Basin assets. The rapid development of the Kununurra region in northern
Western Australia, including the Ord Irrigation Expansion Project and numerous resource projects, provides an
exceptional opportunity for Advent Energy to potentially develop its nearby gas resources for the benefit of the
region along with Advent Energy and its shareholders.
The Sydney Basin is a proven petroleum basin with excellent potential for the discovery of gas and oil. Advent
Energy has demonstrated an active hydrocarbon system with seeps reported in the offshore area and sampling
has indicated the presence of thermogenic hydrocarbon gas. This is considered to occur in basins actively
generating hydrocarbons and/or that contain excellent migration pathways. Previous drilling has shown that the
early Permian geological sequence is mature for hydrocarbons.
Undiscovered prospective recoverable gas resources for structural targets within the PEP11 offshore permit have
been estimated at 5.7 Tcf (at the Best Estimate level). A Low Estimate of 0.3 Tcf and High Estimate of 67.8 Tcf has
been assessed by Pangean Resources in 2010. PEP11 lies adjacent to the most populous region of Australia and
the major industrial hub and port of Newcastle.
16
bph energy | annual report 2014
HEALTH
TECHNOLOGY
RESOURCES
Investment in Biotechnology Companies
BPH Energy’s existing Biotechnology investments include its 3.89% interest in Cortical Dynamics Limited; 51.82%
interest in Diagnostic Array Systems Pty Ltd and its 20% interest in Molecular Discovery Systems Limited.
Molecular Discovery Systems Limited (”MDSystems”)
Drug Discovery:
To date, utilising the automated high resolution imaging platform, In-Cell analyzer, MDSystems has developed a
number of high content drug screens. These screens have led to the identification of several compounds which
have been shown to interfere with a number of cancer associated cell signalling pathways.
However, during the year after careful consideration of general market conditions and available resources,
MDSystems made a decision to temporarily suspend its early stage drug discovery program. This change was
made effective from July 2014.
HLs5 Project:
MDSystems will continue working with the Harry Perkins Institute of Medical Research (formerly Western
Australian Institute of Medical Research) (“Perkins Institute”) to develop and validate HLs5 as a novel tumour
suppressor gene. A concerted research effort by leading Australian scientists has revealed that HLs5 works
through multiple pathways that may target cancer as well as a range of other diseases such as Huntington’s,
Parkinson’s and HIV infection.
MDSystems has an extensive patent portfolio encapsulating the tumour suppressor gene HLs5 both as a
potential therapeutic target and also underpinning its involvement in a variety of disease pathways.
Cortical Dynamics Limited (“Cortical Dynamics”):
Cortical Dynamics is working with BPH Energy and the Swinburne University of Technology (”SUT”) to develop
and commercialise a unique depth of anaesthesia monitoring system for use during major surgery. The core
technology is based on real time analysis of the patients electroencephalograph (EEG) using a proprietary
algorithm based on a mathematically and physiologically detailed understanding of the brain’s rhythmic electrical
activity.
The Cortical Dynamics’ team lead by Professor David Liley had previously analysed a comprehensive data set
obtained from Europe using the Brain Anaesthesia Response (“BAR”) methodology. The detailed results were
published in the prestigious peer-reviewed international Journal of Anesthesiology, 2010. The paper indicated
the potential of the BAR’s methodology to separately monitor hypnotic and analgesic state.
Cortical Dynamics has completed its first clinical trial utilising the BAR monitor. The trial is a significant event in
the BAR monitor’s development program as it is the first time the complete monitoring system has been used
in the operating room. A detailed analysis of the clinical trial data indicated that the BAR monitor’s Cortical
Input (CI) index can discriminate between two doses of fentanyl, a commonly used analgesic agent. The study
also concluded that the BAR monitor’s Cortical State (CS) index was highly correlated with the Bispectral Index
(BISTM), a generally accepted measure of sedation. The trial’s findings in combination with the results of the
2010 publication suggest that the BAR monitor may find significant utility in the delivery of optimal and balanced
surgical anaesthesia.
bph energy | ANNUAL REPORT 2014
17
Directors’ Report
Review of Operations (continued)
Investment in Biotechnology Companies (continued)
Diagnostic Array Systems (“DAS”)
DAS is working to develop and commercialise BacTrak™, a diagnostic tool that will enable pathology
laboratories and the emergency departments of hospitals to provide patients with fast and accurate
identification of disease causing bacteria from a single sputum sample. The test has important implications for
the clinical management of infectious diseases by identifying the specific bacteria responsible for a disease.
Utilisation of the novel test is intended to provide more information, more quickly, than alternative methods. It
has the potential to accelerate therapeutic treatment, lead to a reduction in hospitalisations and help reduce the
overuse of antibiotics.
Financial Position
The net assets of the economic entity decreased by $1,249,999 to $46,947,298 at 30 June 2014. This has
largely resulted from cash balances decreasing as BPH Energy continued to provide financial support to its
investee companies MDSystems and Cortical Dynamics Ltd and the impairment of the company’s investment in
MDSystems, due primarily to the temporary suspension of MDSystem’s drug discovery program.
The consolidated entity has incurred losses for the year ended 30 June 2014 of $1,266,079 (2013: losses of
$594,908) and has a net cash outflow from operating activities of $400,388 (2013: $412,426). The Group has a
working capital deficit of $1,177,793 (See note 18 b) (2013: surplus of 1,838,120).
Included in trade creditors and payables is director fee accruals of $806,902 (30 June 2013: $598,111). The
directors have reviewed their expenditure and commitments for the consolidated entity and have implemented
methods of costs reduction. The directors as a part of their cash monitoring, have voluntarily suspended cash
payments for their directors’ fees to conserve cash resources.
The group has current financial liabilities of $561,836. Subsequent to year end the Group has received
confirmation from the lender that the current financial liabilities of $561,836 $ (2013: $502,978) will not be called
for a period of 12 months from the date of this financial report or until such time as the Group it’s financially
independent. The directors have prepared cash flow forecasts that indicate that the consolidated entity will have
sufficient cash flows via debt and equity funding for a period of at least 12 months from the date of this report.
Based on the cash flow forecasts and the monitoring of operational costs, the directors are satisfied that, the
going concern basis of preparation is appropriate. The financial report has therefore been prepared on a going
concern basis, which assumes continuity of normal business activities and the realisation of assets and the
settlement of liabilities in the ordinary course of business.
18
bph energy | annual report 2014
HEALTH
TECHNOLOGY
RESOURCES
Significant Changes in State Of Affairs
The major activities throughout the period were:
• During the year Cortical Dynamics completed its first human clinical trial using the BAR monitoring system
which was conducted at St Vincent’s Hospital, Melbourne. The findings of the St Vincent’s trial were
presented at the 2013 Annual Scientific Meeting of the Australian and New Zealand College of Anaesthetists;
• During the year Cortical Dynamics partnered with the University of Melbourne in an Australian Research
Council (ARC) Linkage Agreement. Cortical expects the project will add new processing capabilities to the
Brain Anaesthesia Response (BAR) monitoring system. This project will use advanced computing methods
applied to electroencephalographic (EEG) recordings, to track how the brain changes as a person undergoes
general anaesthesia during surgery. These methods will provide a framework for developing improved
devices to monitor depth of anaesthesia;
• A key patent family relating to the BAR monitor had applications granted in Australia and Japan, the patents
were entitled ‘ Brain function monitoring and display system’;
• A key patent family relating to the BAR monitor had three applications granted in China, Australia and Japan,
the patents are from the patent family entitled ‘EEG Analysis System’;
• MDSystems signed a collaboration agreement with the Peter MaCallum Centre. The collaborative research
program is aimed at the discovery and development of new cancer drugs that normalise the function of the
key tumour suppressor p53;
• Two Australian patents have been granted in the HLs5 patent portfolio. The issued patents are entitled
‘Agent for the treatment of hormone-dependent disorders and uses thereof’ and ‘Transcription factor
modulator’;
• BPH investee Advent Energy has commenced preparations for seismic acquisition in PEP11 in the offshore
Sydney Basin, offshore NSW;
• During the period, Advent Energy’s wholly owned subsidiary Asset Energy Pty Ltd applied to NOPTA for a
12 month suspension and extension of the Year 2 permit obligations for the key offshore Sydney Basin permit
Petroleum Exploration Permit 11 (PEP11) The suspension and extension was being assessed at year end.
• Following application by Advent Energy through its wholly owned subsidiary Onshore Energy Pty Ltd, the WA
Department of Mines & Petroleum granted a suspension of the condition requiring the completion of the
Year 2 work (one exploration well) by 31 March 2015 within EP386. EP386 lie in the onshore Bonaparte Basin,
north-eastern Western Australia; and
• A report titled Engineering energy: unconventional gas production by the Australian Council of Learned
Academies (ACOLA) described a 6 trillion cubic feet (Tcf) shale gas resource for the onshore Bonaparte Basin.
This assessment is equivalent to a resource of 1.09 billion barrels of oil equivalent (boe).
After Balance Date Events
There have not been any other matters or circumstances that have arisen since the end of the financial year
that have significantly affected, or may significantly affect, the operations of the company, the results of those
operations, or the state of affairs of the company in future financial years.
Environmental Issues
The consolidated group’s operations are not regulated by any significant environmental regulation under law of
the Commonwealth or of a state or territory.
bph energy | ANNUAL REPORT 2014
19
Directors’ Report
Future Developments
The entity will continue its investment in energy resources and to assist its investee companies to commercialise
breakthrough biomedical research developed in universities, medical institutes and hospitals.
Information on Directors
D L Breeze
Managing Director and Executive Chairman – Age 60
Shares held – 6,509,811
Unlisted Options held – 1,000,000
David is a Corporate Finance Specialist with extensive experience in the stock broking industry and capital
markets. He has been a corporate consultant to Daiwa Securities; was formerly Manager of Corporate Services
for Eyres Reed McIntosh and the State Manager and Associate Director for the stock broking firm BNZ North’s.
David has a Bachelor of Economics and a Masters of Business Administration, and is a Fellow of the Financial
Services Institute of Australasia, and a Fellow of the Institute of Company Directors of Australia. He has
published in the Journal of Securities Institute of Australia and has also acted as an Independent Expert under
the Corporations Act. He has worked on the structuring, capital raising and public listing of over 70 companies
involving in excess of $250M. These capital raisings covered a diverse range of areas including oil and gas, gold,
food, manufacturing and technology.
David is Chairman of Grandbridge Limited, a publicly listed investment and advisory company and an Executive
Director of MEC Resources Ltd, Advent Energy Ltd and Cortical Dynamics Limited.
G Gilbert (resigned 11 December 2013)
Non-Executive Director – Age 66
Shares held – nil
Unlisted Options held – nil
Greg is a specialist in strategy and planning and works in the health and aged care sector. He has a Masters
in Science from Cranfield University in the UK and, in addition, has a Masters in Health Administration from La
Trobe University, an MBA from Deakin University, a BA from the University of Queensland, and a Dip.App Sc from
the Royal Military College Duntroon.
Greg has an extensive background in merchant banking and banking, having held the positions of Global Head
of Strategy and Finance and Project Director Global Credit Review with the National Australia Bank, as well as
having worked in executive roles with Capel Court Investment Bank, CIBC Australia Limited and Bentley and
Chau.
Greg has also worked with the National Australia Bank as an Internal Consultant on strategic operational reviews
with Mckinsey and Company and Booz Allen and Hamilton consultants.
A former Lieutenant Colonel in the Australian Defence Force, he has extensive senior management experience
in strategic planning, financial management, change management and project management as well as merchant
banking and corporate advisory experience in mergers and acquisitions and valuations.
20
bph energy | annual report 2014
HEALTH
TECHNOLOGY
RESOURCES
H Goh
Non-Executive Director – Age 59
Shares held – 480,769
Unlisted Options held – nil
Hock was formerly President of Network and Infrastructure Solutions, a division of Schlumberger Limited, based
in London with revenue in excess of US$1.5 billion. He had global responsibility of Schlumberger’s outsourcing
services, security, business continuity and networked related business units.
Prior to that, Hock was President of Schlumberger Asia based in Beijing, China where he managed their Asian
operations consisting of a broad range of services including oil field services, outsourcing, financial software and
smartcards. Hock was responsible for US$800 million in revenue and more than 2,000 employees spread across
17 countries.
In his 25 year career with Schlumberger, Hock held several other field and management responsibilities in the
oil and gas industry spanning more than ten countries in Asia, the Middle East and Europe. Hock started as
an oil field service engineer in Indonesia in 1980 before moving to Australia where he worked on rigs in Roma,
Queensland, Bass Strait in Victoria and the Northwest Shelf, offshore Western Australia.
Hock is also an operating partner with Baird Capital Partners, the U.S. based buyout fund of Baird Private Equity,
providing change-of-control and growth capital to middle-market companies. Baird Private Equity has raised and
managed $1.7 billion in capital.
Hock is the Chairman of Netgain Systems, a network monitoring software provider. He also serves on the Board
of Xaloy Holdings, a US based steel components manufacturer for the plastic industry, as well as an independent
director of THISS Technologies Pte Limited, a Singapore based satellite communication provider. He received
his B Eng (Hons) in Mechanical Engineering from Monash University, Australia. He also completed an Advanced
Management Program at INSEAD/ France in 2004.
Hock is Chairman of ASX listed company MEC Resources Ltd.
D Ambrosini
Executive Director – Age 40
Shares held – nil
Unlisted Options held – 500,000
Deborah is a chartered accountant with over 15 years’ experience in accounting and business development
spanning the biotechnology, mining, IT communications and financial services sectors. She has extensive
experience both nationally and internationally in financial and business planning, compliance and taxation.
Deborah is a member of the Institute of Chartered Accountants and was a state finalist in the 2009 Telstra
Business Woman Awards. Deborah was also a recipient of the highly regarded 40 under 40 award held by WA
Business News.
Deborah is also a Director of ASX listed MEC Resources Ltd and Grandbridge Limited and unlisted entities
Advent Energy Ltd, Cortical Dynamics Limited and Molecular Discovery Systems Limited.
bph energy | ANNUAL REPORT 2014
21
Directors’ Report
Remuneration Report (Audited)
This report details the nature and amount of remuneration for key management personnel of BPH Energy.
D L Breeze – Executive Chairman and Managing Director
H Goh – Non Executive Director
G Gilbert – Non Executive Director (resigned 11 December 2013)
D Ambrosini – Executive Director and Company Secretary
All the parties have held their current position for the whole of the financial year and since the end of the
financial year unless otherwise stated.
Remuneration Policy
The remuneration policy of BPH Energy Limited has been designed to align director and executive objectives
with shareholder and business objectives by providing a fixed remuneration component and offering specific
long-term incentives as determined by the board and/or shareholders. The remuneration report as contained
in the 2013 financial accounts was adopted at the Company’s 2013 annual general meeting. The board believes
the remuneration policy to be appropriate and effective in its ability to attract and retain the best executives
and directors to run and manage the economic entity, as well as create goal congruence between directors,
executives and shareholders.
The board’s policy for determining the nature and amount of remuneration for board members and senior
executives of the economic entity is as follows:
• The remuneration policy, setting the terms and conditions for the executive directors and other senior
executives, was developed and approved by the board.
• All executives receive a base salary (which is based on factors such as length of service and experience),
superannuation, fringe benefits and options.
• The board reviews executive packages annually by reference to the economic entity’s performance, executive
performance and comparable information from industry sectors and other listed companies in similar
industries.
The performance of executives is measured against criteria agreed biannually with each executive and is based
predominantly on the amount of their workloads and responsibilities for the company. The board may, however,
exercise its discretion in relation to approving incentives, bonuses and options, and can recommend changes to
recommendations. Any changes must be justified by reference to measurable performance criteria. The policy is
designed to attract the highest calibre of executives and reward them for performance that results in long-term
growth in shareholder wealth.
Executives are also entitled to participate in the employee share and option arrangements.
The executive directors and executives which receive salaries receive a superannuation guarantee contribution
required by the government, which is currently 9.50%, and do not receive any other retirement benefits.
22
bph energy | annual report 2014
HEALTH
TECHNOLOGY
RESOURCES
Shares given to directors and executives are valued as the difference between the market price of those
shares and the amount paid by the director or executive. Options are valued using an appropriate valuation
methodology.
The board policy is to remunerate non executive directors at market rates for comparable companies for time,
commitment and responsibilities. Payments to non-executive directors are based on market practice, duties and
accountability. Independent external advice is sought when required on payments to non-executive directors.
The maximum aggregate amount of fees that can be paid to non executive directors is subject to approval by
shareholders at the Annual General Meeting. Fees for non executive directors are not linked to the performance
of the economic entity. However, to align directors’ interests with shareholder interests, the directors are
encouraged to hold shares in the company and are able to participate in the employee option plan.
The board does not have a policy in relation to the limiting of risk to directors and executives in relation to the
shares and options provided.
Employment contracts of key management personnel
The employment conditions of the managing director and all of the key management personnel are formalised
in contracts of employment. The employment contracts stipulate a six month resignation period. The Company
may terminate an employment contract without cause by providing six months written notice or making payment
in lieu of notice, based on the individual’s annual salary component together with a redundancy payment of
six months of the individual’s fixed salary component. Termination payments are generally not payable on
resignation or dismissal for serious misconduct. In the instance of serious misconduct the company can terminate
employment at any time. Any options not exercised before or on the date of termination will lapse.
The remaining directors are consultants to BPH Energy and each party can terminate their services by
written notice.
bph energy | ANNUAL REPORT 2014
23
Directors’ Report
Details of Remuneration for the year ended 30 June 2014
The remuneration for each key management personnel of the consolidated entity during the year was as follows:
2014
Key Management
Person
D L Breeze
G Gilbert
H Goh
D Ambrosini
2014 (continued)
Short-term Benefits
Post-employment
Benefits
Cash and fees
Bonus
Non-cash
benefit
Other
Superannuation
148,000
10,416
25,000
25,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Key Management
Person
Long-term
Benefits
Share-based
payment
Total
Performance
Related
Other
Equity
Options
$
-
-
-
-
-
-
-
-
-
-
-
-
148,000
10,416
25,000
25,000
%
-
-
-
-
D L Breeze
G Gilbert
H Goh
D Ambrosini
2013
Compensation
Relating to
Options
%
-
-
-
-
Key Management
Person
Short-term Benefits
Post-employment
Benefits
Cash and fees
Bonus
Non-cash
benefit
Other
Superannuation
D L Breeze
G Gilbert
H Goh
D Ambrosini
148,000
25,000
25,000
25,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
24
bph energy | annual report 2014
HEALTH
TECHNOLOGY
RESOURCES
2013 (continued)
Key Management
Person
Long-term
Benefits
Share-based
payment
Total
Performance
Related
D L Breeze
G Gilbert
H Goh
D Ambrosini
Other
Equity
Options
$
-
-
-
-
-
-
-
-
-
-
-
-
148,000
25,000
25,000
25,000
%
-
-
-
-
Compensation
Relating to
Options
%
-
-
-
-
Company performance, shareholder wealth and director and executive remuneration
The following table shows the gross revenue and the operating result for the last 5 years for the listed entity, as
well as the share price at the end of the respective financial years. Analysis of the actual figures shows a slight
decrease in the revenue from the previous year accompanied by an increase in the loss in the current year which
can be attributed to the reduced tax credit calculated for the current year and the impairment of the company’s
investment in MDSystems, due primarily to the temporary suspension of MDSystem’s drug discovery program.
Actions have been taken by the Board to ensure that expenses remained constant or were reduced during the
last 12 months with a focus on further significant reductions in the coming year.
Revenue and other income
339,253
604,748
300,978
301,808
265,663
2010
2011
2012
2013
2014
Operating loss attributable to
members of the company
Share price at Year end
Earnings per shares (cents)
Share based payments:
(208,785)
(220,903)
(739,165)
(568,454)
(1,253,563)
$0.068
(0.80)
$0.03
(0.13)
$0.017
(0.41)
$0.01
(0.33)
$0.008
(0.73)
The following are the share payments payment arrangement in existence during the year:
Grant Date
Date of Expiry
Fair Value at
Grant Date
Exercise Price
Vesting Date
24 December 2009
31 December 2014
$0.0266
$0.894
At grant date
There were no grants of share based payment compensation to directors and senior management during
the year.
There were no grants of share based payment compensation to directors and senior management during the
year. There are no further service or performance criteria that need to be met in relation to options granted.
No options were granted or exercised during the year (2013:nil).
End of remuneration report.
bph energy | ANNUAL REPORT 2014
25
Directors’ Report
Additional Information
Meetings of Directors
During the financial year, one meeting of directors was held. Attendances by each director during the year were:
D L Breeze
D Ambrosini
G Gilbert
H Goh
Directors’ Meetings
Number eligible to attend
Number attended
1
1
1
1
1
1
1
1
Indemnifying Officers or Auditors
During or since the end of the financial year the company has given an indemnity or entered an agreement to
indemnify, or paid or agreed to pay insurance premiums as follows:
The company has paid premiums to insure each of the following directors against liabilities for costs and
expenses incurred by them in defending any legal proceedings arising out of their conduct while acting in
the capacity of director of the company, other than conduct involving a wilful breach of duty in relation to the
company. The amount of the premium was $22,144.
• D Breeze
• D Ambrosini
• H Goh
The company has not indemnified the current or former auditor of the Company.
Non-audit Services
The board of directors is satisfied that the provision of non-audit services during the year is compatible with the
general standard of independence for auditors imposed by the Corporations Act 2001. The directors are satisfied
that the services disclosed below did not compromise the external auditor’s independence for the following
reasons:
• all non-audit services are reviewed and approved by the board prior to commencement to ensure they do
not adversely affect the integrity and objectivity of the auditor; and
•
the nature of the services provided do not compromise the general principles relating to auditor
independence in accordance with APES 110: Code of Ethics for Professional Accountants set by the
Accounting Professional and Ethical Standards Board.
No fees for non-audit services were paid/payable to the external auditors during the year ended 30 June 2014
(2013: Nil).
26
bph energy | annual report 2014
HEALTH
TECHNOLOGY
RESOURCES
Options
At the date of this report, the unissued ordinary shares of BPH Energy Ltd under option are as follows:
Unlisted Options
Grant Date
Date of Expiry
Exercise Price
Number Under Option
25 September 2009
30 September 2014
24 December 2009
31 December 2014
21 January 2011
21 January 2016
1 July 2013
30 June 2018
$0.594
$0.894
$0.16
$0.08
75,000
1,500,000
325,000
1,075,000
During the year ended 30 June 2014 nil ordinary shares of BPH Energy Ltd were issued on the exercise of
options granted under the BPH Energy Ltd Incentive Option Scheme (2013: Nil). No amounts are unpaid on any
of the shares.
No person entitled to exercise the option had or has any right by virtue of the option to participate in any share
issue of any other body corporate.
No shares or interest have been issued during or since the end of the financial year as a result of exercise of an
option.
Proceedings on Behalf of Company
No person has applied for leave of Court to bring proceedings on behalf of the company or intervene in any
proceedings to which the company is a party for the purpose of taking responsibility on behalf of the company
for all or any part of those proceedings. The company was not a party to any such proceedings during the year.
Auditor’s Independence Declaration
The lead auditor’s independence declaration for the year ended 30 June 2014 has been received and can be
found on page 28.
The directors’ report is signed in accordance with a resolution of directors made pursuant to S298(2) of the
Corporations Act 2001.
David Breeze
Dated this 13th August 2014
bph energy | ANNUAL REPORT 2014
27
Auditor’s Independence Declaration
Lead auditor’s independent declaration under section
307C of the Corporations Act 2001.
To the directors of BPH Energy Limited
I declare that, to the best of my knowledge and belief, in relation to the audit for the financial year ended
30 June 2014 there has been:
(i) no contraventions of the auditor’s 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.
Nexia Perth Audit Services Pty Ltd
Amar Nathwani B.Eng, CA
Director
Perth
13 August 2014
28
bph energy | annual report 2014
HEALTH
TECHNOLOGY
RESOURCES
Corporate Governance Statement
The Board of Directors of BPH Energy Limited (“BPH Energy” or “the Company”)
(“Group”) is responsible for the corporate governance of the economic entity. The
Board guides and monitors the business and affairs of the Company on behalf of the
shareholders by whom they are elected and to whom they are accountable.
To ensure that the Board is well equipped to discharge its responsibilities, it has
established guidelines and accountability as the basis for the administration of corporate
governance.
Corporate Governance Disclosures
BPH Energy Limited and the board are committed to achieving and demonstrating the highest standards of
corporate governance. The board continues to review the framework and practices to ensure they meet the
interests of shareholders. The company and its controlled entities together are referred to as the Group in this
statement.
Composition of the Board
The composition of the Board is determined in accordance with the following principles and guidelines:
•
•
•
the Board should have at least one independent non-executive director;
the Board should have at least one director with an appropriate range of qualifications and expertise; and
the Board shall meet at regular intervals and follow meeting guidelines set down to ensure all directors are
made aware of, and have available all necessary information, to participate in an informed discussion of all
agenda items.
When a vacancy exists, through whatever cause, or where it is considered that the Board would benefit from
the service of a new director with particular skills, the Board selects a candidate or panel of candidates with the
appropriate expertise.
The Board then appoints the most suitable candidate, who must stand for election at the next general meeting
of shareholders. The Company does not have a formal Nomination Committee.
Remuneration and Nomination Committees
The Company does not have a formal Remuneration or Nomination Committee. The full Board attends to the
matters normally attended to by a Remuneration Committee and a Nomination committee. Remuneration levels
are set by the Company in accordance with industry standards to attract suitably qualified and experienced
Directors and senior executives.
Audit Committee
The Company does not have a formal Audit Committee. The full Board carries out the functions of an Audit
Committee. Due to the status of the Company and the relatively straight forward accounts of the Company
anticipated in the financial year, the Directors believe that there presently would be no additional benefits
obtained by establishing such a committee. The Board follows the Audit Committee Charter, a copy of which is
available on request.
bph energy | ANNUAL REPORT 2014
29
Corporate Governance Statement
Board Responsibilities
As the Board acts on behalf of and is accountable to the shareholders, it seeks to identify the expectations of
the shareholders, as well as other regulatory and ethical expectations and obligations. In addition, the Board
is responsible for identifying areas of significant business risk and ensuring arrangements are in place to
adequately manage those risks. The Board seeks to discharge these responsibilities in a number of ways.
The responsibility for the operation and administration of the economic entity is delegated by the Board to the
Managing Director. The Board ensures that the Managing Director is appropriately qualified and experienced to
discharge his responsibilities, and has in place procedures to assess the performance for the Company’s officers,
employees, contractors and consultants.
The Board is responsible for ensuring that management’s objectives and activities are aligned with the
expectations and risks identified by the Board. It has a number of mechanisms in place to ensure this is achieved,
including the following:
• Board approval of a strategic plan, designed to meet shareholder needs and manage business risk;
•
Implementation of operating plans and budgets by management and Board monitoring progress against
budget; and
• Procedures to allow directors, in the furtherance of their duties, to seek independent professional advice at
the Company’s expense.
Monitoring of the Board’s Performance
In order to ensure that the Board continues to discharge its responsibilities in an appropriate manner, the
performance of all directors is to be reviewed annually by the chairperson. Directors whose performance is
unsatisfactory are asked to retire.
30
bph energy | annual report 2014
HEALTH
TECHNOLOGY
RESOURCES
Best Practice Recommendation
Outlined below are the 8 Essential Corporate Governance Principles as outlined by the ASX and the
Corporate Governance Council. The Company has complied with the Corporate Governance Best Practice
Recommendations except as identified below.
Action taken and reasons if not adopted
Principle 1: Lay solid foundations for management and oversight
The relationship between the board and senior management is critical to the Group’s long-term success. The
directors are responsible to the shareholders for the performance of the Group in both the short and the longer
term and seek to balance sometimes competing objectives in the best interests of the Group as a whole. Their
focus is to enhance the interests of shareholders and other key stakeholders and to ensure the Group is properly
managed.
The responsibilities of the board include:
• providing strategic guidance to the Group including contributing to the development of and approving the
corporate strategy;
•
reviewing and approving business plans, and financial plans including major capital expenditure initiatives;
• overseeing and monitoring:
- organisational performance and the achievement of the Group’s strategic goals and objectives; and
- progress of major capital expenditures and other significant corporate projects including any acquisitions
or divestments;
• monitoring financial performance including approval of the annual and half-year financial reports;
• appointment, performance assessment and, if necessary, removal of the Managing Director;
•
ratifying the appointment and/or removal and contributing to the performance assessment for the members
of the senior management team including the CFO and the Company Secretary (Deborah Ambrosini);
• ensuring there are effective management processes in place and approving major corporate initiatives;
• enhancing and protecting the reputation of the organization; and
• overseeing the operation of the Group’s system for compliance and risk management reporting to
shareholders.
Day to day management of the Group’s affairs and the implementation of the corporate strategy and policy
initiatives are formally delegated by the board to the Managing Director and senior executives.
bph energy | ANNUAL REPORT 2014
31
Corporate Governance Statement
Action taken and reasons if not adopted
Principle 2: Structure the board to add value
The board operates in accordance with the broad principles set out in its charter. The charter details the board’s
composition and responsibilities.
The board seeks to ensure that :
• at any point in time, its membership represents an appropriate balance between directors with experience
and knowledge of the Group and directors with an external or fresh perspective; and
•
the size of the board is conducive to effective discussion and efficient decision-making.
Directors’ independence
The board has adopted specific principles in relation to directors’ independence. These state that when
determining independence, a director must be a non-executive and the board should consider whether the
director:
•
•
is a substantial shareholder of the company or an officer of, or otherwise associated directly with, a
substantial shareholder of the company;
is or has been employed in an executive capacity by the company or any other Group member within three
years before commencing to serve on the board;
• within the last three years has been a principal of a material professional adviser or a material consultant to
the company or any other Group member, or an employee materially associated with the service provided;
• has a material contractual relationship with the company or a controlled entity other than as a director of the
Group; and
•
is free from any business or other relationship which could, or could reasonably be perceived to, materially
interfere with the director’s independent exercise of their judgement.
Materiality for these purposes is determined on both quantitative and qualitative bases. A transaction of any
amount or a relationship is deemed material if knowledge of it may impact the shareholders’ understanding of
the director’s performance.
The board assesses independence each year. To enable this process, the directors must provide all information
that may be relevant to the assessment.
Board members
Details of the members of the board, their experience, expertise, qualifications, term of office, relationships
affecting their independence and their independent status are set out in the directors’ report under the heading
‘’Information on directors’’. At the date of signing the directors’ report, there is one non-executive director
and two executive directors, two of whom have no relationships adversely affecting independence and so are
deemed independent under the principles set out above.
• Mr Breeze has business dealings with the Group as disclosed in note 25 to the financial report.
32
bph energy | annual report 2014
HEALTH
TECHNOLOGY
RESOURCES
Action taken and reasons if not adopted
Term of office
The company’s Constitution specifies that all non-executive directors must retire from office no later than the
third annual general meeting (AGM) following their last election. Where eligible, a director may stand for
re-election, subject to the following limitations:
• on attaining the age of 72 years a director will retire, by agreement, at the next AGM and will not seek
re-election.
Chair and Managing Director
The Chair is responsible for leading the board, ensuring directors are properly briefed in all matters relevant
to their role and responsibilities, facilitating board discussions and managing the board’s relationship with
the company’s senior executives. In accepting the position, the Chair has acknowledged that it will require a
significant time commitment and has confirmed that other positions will not hinder his effective performance in
the role of Chair.
The Managing Director is responsible for implementing Group strategies and policies.
The Chairman does not satisfy the Independence test as the role of the Chairman and the Managing Director is
exercised by the same person. The board is of the opinion that the Chairman’s role as Chairman of the Board is
appropriate given his experience and knowledge of the business.
Committees
The number of meetings of the company’s board of directors and of each board committee held during the year
ended 30 June 2014, and the number of meetings attended by each director is disclosed on page 26.
It is the company’s practice to allow its executive directors to accept appointments outside the company. No
appointments of this nature were accepted during the year ended 30 June 2014.
The Company is not of a size at the moment that justifies having a separate Nomination Committee. However,
matters typically dealt with by such a committee are dealt with by the Board of Directors.
Notices of meetings for the election of directors comply with the ASX Corporate Governance Council’s best
practice recommendations.
bph energy | ANNUAL REPORT 2014
33
Corporate Governance Statement
Action taken and reasons if not adopted
Principle 3: Promote ethical and responsible decision making
The company has developed a statement of values which has been fully endorsed by the board and applies to
all directors and employees. The Statement is regularly reviewed and updated as necessary to ensure it reflects
the highest standards of behaviour and professionalism and the practices necessary to maintain confidence in
the Group’s integrity and to take into account legal obligations and reasonable expectations of the company’s
stakeholders.
The Statement requires that at all times all company personnel act with the utmost integrity, objectivity and in
compliance with the letter and the spirit of the law and company policies.
The Company’s share trading policy is set out on the Company’s website.
The purchase and sale of company securities by directors and employees is monitored by the Board.
The Company’s policy regarding diversity is set out on the Company’s website.
The Company’s diversity policy does not include measurable objectives as the Board believes that the Company
will not be able to successfully meet these given the size and stage of development of the Company. If the
Company’s activities increase in size, nature and scope in the future, the suitable measurable objectives will be
agreed and put into place. Notwithstanding this, the Company strives to provide the best possible opportunities
for current and prospective employees of all backgrounds in such a manner that best adds to overall shareholder
value and which reflects the values, principles and spirit of the Company’s Diversity Policy.
The company is committed to Diversity and Equal Opportunity within its workforce placing particular focus on
the level of gender diversity at senior levels of the organisation. The company ensures this is achieved by:
• ensuring recruitment and selection practices enable the availability of a diverse candidate pool for
appointments at senior levels;
• development of high potential women;
•
implementation of flexible working arrangements; and
• ensuring remuneration practices are free from gender bias.
At conclusion of the reporting year, one of BPH Energy’s three directors is female.
34
bph energy | annual report 2014
HEALTH
TECHNOLOGY
RESOURCES
Action taken and reasons if not adopted
Principle 4: Safeguard integrity in financial reporting
Adopted except as follows:-
The Company does not have a separate Audit Committee. The full Board carries out the functions of an Audit
Committee. The Board has the authority, within the scope of its responsibilities, to seek any information it
requires from any employee or external party.
Due to the status of the Company and the relatively straight forward accounts of the Company, the Directors at
the moment can see no additional benefits to be obtained by establishing such a committee.
The Board follows the Audit Committee Charter, a copy of which is available on request.
External auditors
The Board’s policy is to appoint external auditors who clearly demonstrate quality and independence. The
performance of the external auditor is reviewed annually and applications for tender of external audit services
are requested as deemed appropriate, taking into consideration assessment of performance, existing value and
tender costs. Nexia was appointed as the external auditor in 2012. It is the Corporation Act’s policy to rotate
audit engagement partners on listed companies at least every five years. A partner should not be re-assigned
to a listed entity audit engagement if this equates to the partner serving in this role for more than 5 out of 7
successive years.
An analysis of fees paid to the external auditors, including a break-down of fees for non-audit services, is
provided in the directors’ report and in note 5 to the financial statements. It is the policy of the external auditors
to provide an annual declaration of their independence to the Board.
The external auditor will attend the annual general meeting and be available to answer shareholders’ questions
about the conduct of the audit and the preparation and content of the audit report. The Company is not of a
size at the moment that justifies having an internal audit division.
bph energy | ANNUAL REPORT 2014
35
Corporate Governance Statement
Action taken and reasons if not adopted
Principle 5&6: Make timely and balanced disclosures and respect the rights of shareholders
Continuous disclosure and shareholder communication
The company has policies and procedures on information disclosure that focus on continuous disclosure of any
information concerning the Group that a reasonable person would expect to have a material effect on the price
of the company’s securities. These policies and procedures also include the arrangements the company has in
place to promote communication with shareholders and encourage effective participation at general meetings.
The Company Secretary has been nominated as the person responsible for communications with the ASX.
This role includes responsibility for ensuring compliance with the continuous disclosure requirements in the
ASX Listing Rules and overseeing and co-ordinating information disclosure to the ASX, analysts, brokers,
shareholders, the media and the public.
All information disclosed to the ASX is posted on the company’s website as soon as it is disclosed to the ASX.
When analysts are briefed on aspects of the Group’s operations, the material used in the presentation is released
to the ASX and posted on the company’s web site. Procedures have also been established for reviewing whether
any price sensitive information has been inadvertently disclosed and, if so, this information is also immediately
released to the market.
All shareholders receive a copy of the company’s annual and half-yearly reports. In addition, the company seeks
to provide opportunities for shareholders to participate through electronic means. Recent initiatives to facilitate
this include making all company announcements, media briefings, details of company meetings, and financial
reports available on the company’s website.
36
bph energy | annual report 2014
HEALTH
TECHNOLOGY
RESOURCES
Action taken and reasons if not adopted
Principle 7: Recognise and manage risk
The board and senior executives are responsible for ensuring there are adequate policies in relation to risk
management, compliance and internal control systems. In summary, the company policies are designed to
ensure strategic, operational, legal, reputational and financial risks are identified, assessed, effectively and
efficiently managed and monitored to enable achievement of the Group’s business objectives.
Considerable importance is placed on maintaining a strong control environment. There is an organisation
structure with clearly drawn lines of accountability and delegation of authority. The board actively promotes a
culture of quality and integrity.
The responsibility for the operation and administration of the economic entity is delegated by the board to the
Managing Director. The board ensures that the Managing Director is appropriately qualified and experienced to
discharge his responsibilities, and has in place procedures to assess the performance for the Company’s officers,
employees, contractors and consultants. The board receives monthly updates as to the effectiveness of the
company’s management of material risks that may impede meeting business objectives.
The board is responsible for ensuring that management’s objectives and activities are aligned with the
expectations and risks identified by the Board. It has a number of mechanisms in place to ensure this is achieved,
including the following:
• Board approval of a strategic plan, designed to meet shareholder needs and manage business risk;
•
Implementation of operating plans and budgets by management and board monitoring progress against
budget; and
• Procedures to allow directors, in the furtherance of their duties, to seek independent professional advice at
the Company’s expense.
Control procedures cover management accounting, financial reporting, project appraisal, IT security, compliance
and other risk management issues. The Managing Director is required to ensure that appropriate controls are in
place to effectively manage the identified risks. This is monitored by the board on a monthly basis.
The environment
Information on compliance with significant environmental regulations is set out in the directors’ report.
Corporate reporting
The Managing Director and CFO have made the following certifications to the board:
•
•
•
that the company’s financial reports are complete and present a true and fair view, in all material respects, of
the financial condition and operational results of the company and Group and are in accordance with relevant
accounting standards;
that the above statement is founded on a sound system of risk management and internal compliance and
control which implements the policies adopted by the board; and
that the company’s risk management and internal compliance and control is operating efficiently and
effectively in all material respects in relation to financial reporting risks.
bph energy | ANNUAL REPORT 2014
37
Corporate Governance Statement
Action taken and reasons if not adopted
Principle 8: Remunerate fairly and responsibly
The Company is not of a size at the moment that justifies having a separate Remuneration Committee. However,
matters typically dealt with by such a committee are dealt with by the board.
The board makes specific recommendations on remuneration packages and other terms of employment for
executive directors, other senior executives and non-executive directors. The board also reviews gender pay
equity on an annual basis to ensure equality.
Each member of the senior executive team signs a formal employment contract at the time of their appointment
covering a range of matters including their duties, rights, responsibilities and any entitlements on termination.
The standard contract refers to a specific formal job description.
Further information on directors’ and executives’ remuneration, including principles used to determine
remuneration, is set out in the directors’ report under the heading ‘’Remuneration report’’. In accordance with
Group policy, participants in equity-based remuneration plans are not permitted to enter into any transactions
that would limit the economic risk of options or other unvested entitlements.
The board with the Managing Director also assumes responsibility for overseeing management succession
planning, including the implementation of appropriate executive development programmes and ensuring
adequate arrangements are in place, so that appropriate candidates are recruited for later promotion to senior
positions.
38
bph energy | annual report 2014
HEALTH
TECHNOLOGY
RESOURCES
Consolidated Statement of Profit or Loss and
Other Comprehensive Income
for the year ended 30 June 2014
Revenue from ordinary activities
Other income
Share of associates’ loss
Impairment of investment in associate
Administration expenses
Advertising and Promotion expenses
Consulting and Legal expenses
Research and Development expenses
Depreciation and amortisation expense
Employee expense
Insurance expenses
Service Fees
Other expenses
Operating Loss Before Income Tax
Income tax (expense) /benefit
Operating Loss for the Period
Other Comprehensive Income
Items that will never be reclassified to profit or loss
Items that are or may be reclassified to profit or loss
Total Comprehensive loss for the period
Operating loss attributable to non-controlling interests
Operating Loss attributable to members of the parent entity
Total Comprehensive loss attributable to owners of the Company
Total Comprehensive loss attributable to non-controlling interests
Earnings Per Share – Basic and diluted earnings
per share (cents per share)
The accompanying notes form part of these financial statements.
Note
2
2
13
13
3
3
Consolidated
2014
$
151,563
114,100
2013
$
187,708
114,100
(312,867)
(562,945)
(736,965)
(109,486)
-
-
(34,700)
(1,815)
(148,612)
(159,867)
(18,902)
(49,840)
(302)
(800)
(344,728)
(336,365)
(29,867)
(35,907)
(137,585)
(137,585)
(6,988)
(8,744)
(1,580,639)
(1,026,760)
14
314,560
431,852
(1,266,079)
(594,908)
-
-
-
-
(1,266,079)
(594,908)
(12,516)
(26,454)
(1,253,563)
(568,454)
(1,253,563)
(568,454)
(12,516)
(26,454)
6
(0.73)
(0.33)
bph energy | ANNUAL REPORT 2014
39
Consolidated Statement of Financial Position
as at 30 June 2014
Consolidated
2014
$
2013
$
Note
7
8
10
9
10
13
11
12
15
16
17
29
16
17
181,111
900,599
3,848
97,625
27,863
1,977
1,637,691
29,660
310,447
2,569,927
2,995,145
995,119
48,640,707
49,690,539
72,454
169
72,454
471
51,708,475
50,758,583
52,018,922
53,328,510
898,541
561,836
23,409
1,483,786
702,147
-
26,432
728,579
3,583,290
3,899,656
-
502,978
4,548
-
3,587,838
4,402,634
5,071,624
5,131,213
46,947,298
48,197,297
18
19
41,511,195
41,511,195
15,450,726
15,434,646
(9,896,412)
(8,642,849)
(118,211)
(105,695)
46,947,298
48,197,297
Current Assets
Cash and cash equivalents
Trade and other receivables
Financial Assets
Other current assets
Total Current Assets
Non-Current Assets
Financial assets
Investments in associates
Intangible assets
Property, plant & equipment
Total Non-Current Assets
Total Assets
Current Liabilities
Trade and other payables
Financial liabilities
Provisions
Total Current Liabilities
Non-Current Liabilities
Deferred Tax liabilities
Financial liabilities
Provisions
Total Non-Current Liabilities
Total Liabilities
Net Assets
Equity
Issued capital
Reserve
Accumulated losses
Non-controlling interest
Total Equity
The accompanying notes form part of these financial statements.
40
bph energy | annual report 2014
HEALTH
TECHNOLOGY
RESOURCES
Consolidated Statement of Changes in Equity
for the year ended 30 June 2014
Ordinary
Share
Capital
$
Accumu-
lated
losses
$
Option
Reserve
$
Note
Consolidated
Fair
value
Adjust-
ment
$
Total
attributable
to owners of
the parent
entity
$
Non-
controlling
Interest
$
Total
$
Balance at 1 July 2012
41,511,195
(8,074,395)
416,590 15,015,000
48,868,390
(79,241) 48,789,149
Loss attributable to members
of consolidated entity
Other Comprehensive
income (net of tax)
Total Comprehensive
income for the year
Transactions with owners
in their capacity as owners
Employee options
expense
-
-
-
-
-
(568,454)
-
(568,454)
-
-
-
-
-
-
3,056
-
-
-
-
-
(568,454)
(26,454)
(594,908)
-
-
-
(568,454)
(26,454)
(594,908)
-
3,056
-
-
-
3,056
Balance at 30 June 2013
41,511,195
(8,642,849)
419,646 15,015,000
48,302,992
(105,695) 48,197,297
Balance at 1 July 2013
41,511,195
(8,642,849)
419,646 15,015,000
48,302,992
(105,695) 48,197,297
Loss attributable to members
of consolidated entity
Other Comprehensive
income (net of tax)
Total Comprehensive
income for the year
Transactions with owners
in their capacity as owners
Employee options
expense
-
-
-
-
(1,253,563)
-
(1,253,563)
-
-
-
-
-
16,080
-
-
-
-
-
(1,253,563)
(12,516)
(1,266,079)
-
-
-
(1,253,563)
(12,516)
(1,266,079)
16,080
-
16,080
Balance at 30 June 2014
41,511,195
(9,896,412)
435,726 15,015,000
47,065,509
(118,211) 46,947,298
The accompanying notes form part of these financial statements.
bph energy | ANNUAL REPORT 2014
41
Consolidated Statement of Cash Flows
for the year ended 30 June 2014
Cash Flows From Operating Activities
Receipts from customers
Payments to suppliers and employees
Income taxes paid
Interest received
Consolidated
2014
$
2013
$
Note
-
-
(408,868)
(448,802)
(1,806)
10,286
-
36,376
Net cash used in operating activities
21
(400,388)
(412,426)
Cash Flows From Investing Activities
Loans to related parties
Repayments received
Net cash used in investing activities
Net decrease in Cash Held
Cash At the Beginning Of The Financial Year
Cash At The End Of The Financial Year
The accompanying notes form part of these financial statements.
(394,100)
(485,899)
75,000
-
(319,100)
(485,899)
(719,488)
(898,325)
900,599
1,798,924
7
181,111
900,599
42
bph energy | annual report 2014
HEALTH
TECHNOLOGY
RESOURCES
Notes to the Financial Statements
for the year ended 30 June 2014
1.
Statement of Significant Accounting Policies
Corporate Information
The financial report includes the consolidated financial statements and the notes of BPH Energy Limited and its
controlled entities (‘Consolidated Group’ or ‘Group’).
BPH Energy Limited is a company incorporated and domiciled in Australia and listed on the Australian Securities
Exchange.
The financial report was authorised for issue on 13 August 2014 by the board of directors.
Basis of Preparation
The financial report is a general purpose financial report that has been prepared in accordance with Australian
Accounting Standards other authoritative pronouncements of the Australian Accounting Standards Board
(“AASB”) and the Corporations Act 2001. BPH Energy Ltd is a for-profit entity for the purpose of preparing the
financial statements.
Australian Accounting Standards set out accounting policies that the AASB has concluded would result in a
financial report containing relevant and reliable information about transactions, events and conditions to which
they apply. Material accounting policies adopted in the preparation of this financial report are presented below.
They have been consistently applied unless otherwise stated.
The financial report has been prepared on an accruals basis and is based on historical costs, modified, where
stated below.
Compliance with IFRS
The consolidated financial statements of BPH Energy Limited Group comply with International Financial
Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB).
Financial Position
The consolidated entity has incurred losses for the year ended 30 June 2014 of $1,266,079 (2013: losses of
$594,908) and has a net cash outflow from operating activities of $400,388 (2013: $412,426). The Group has a
working capital deficit of $1,177,793 (See note 18 b) (2013: surplus of 1,838,120).
Included in trade creditors and payables is director fee accruals of $806,902 (30 June 2013: $598,111). The
directors have reviewed their expenditure and commitments for the consolidated entity and have implemented
methods of costs reduction. The directors as a part of their cash monitoring, have voluntarily suspended cash
payments for their directors’ fees for at least a period of 12 months to conserve cash resources.
The group has current financial liabilities of $561,836. Subsequent to year end the Group has received
confirmation from the lender that the current financial liabilities of $561,836 $ (2013: $502,978) will not be called
for a period of 12 months from the date of this financial report or until such time as the Group is financially
independent. The directors have prepared cash flow forecasts that indicate that the consolidated entity will have
sufficient cash flows via debt and equity funding for a period of at least 12 months from the date of this report.
Based on the cash flow forecasts and the monitoring of operational costs, the directors are satisfied that, the
going concern basis of preparation is appropriate. The financial report has therefore been prepared on a going
concern basis, which assumes continuity of normal business activities and the realisation of assets and the
settlement of liabilities in the ordinary course of business.
bph energy | ANNUAL REPORT 2014
43
Notes to the Financial Statements
for the year ended 30 June 2014
1.
Statement of Significant Accounting Policies (continued)
Accounting Policies
(a)
Principles of Consolidation
(i) Subsidiaries
Subsidiaries are all entities (including structured entities) over which the Group has control. The Group
controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement
with the entity and has the ability to affect those returns through its power to direct the activities of the
entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They
are deconsolidated from the date that control ceases.
A list of controlled entities is contained in Note 20 to the financial statements. All controlled entities have
a June financial year-end.
As at reporting date, the assets and liabilities of all controlled entities have been incorporated into the
consolidated financial statements as well as their results for the year then ended.
The results of subsidiaries acquired or disposed of during the year are included in the consolidated
statement of profit or loss and other comprehensive income from the effective date of acquisition and up
to the effective date of disposal, as appropriate.
The acquisition method of accounting is used to account for business combinations by the Group.
Intercompany transactions, balances and unrealised gains on transactions between Group companies
are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an
impairment of the transferred asset. Accounting policies of subsidiaries have been changed where
necessary to ensure consistency with the policies adopted by the Group.
Non-controlling interests in the results and equity of subsidiaries are shown separately in the consolidated
income statement, statement of comprehensive income, statement of changes in equity and balance
sheet respectively.
(ii) Changes in ownership interests
Changes in the Group’s interests in subsidiaries that do not result in a loss of control are accounted for as
equity transactions. The carrying amounts of the Group’s interests and the non-controlling interests are
adjusted to reflect the changes in their relative interests in the subsidiaries. Any difference between the
amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or
received is recognised directly in equity and attributed to owners of the Company.
When the Group loses control of a subsidiary, the profit or loss on disposal is calculated as the difference
between (i) the aggregate of the fair value of the consideration received and the fair value of any retained
interest and (ii) the previous carrying amount of the assets (including goodwill), and liabilities of the
subsidiary and any non-controlling interests. Amounts previously recognised in other comprehensive
income in relation to the subsidiary are accounted for (i.e. reclassified to profit or loss or transferred
directly to retained earnings) in the same manner as would be required if the relevant assets or liabilities
were disposed of. The fair value of any investment retained in the former subsidiary at the date when
control is lost is regarded as the fair value on initial recognition for subsequent accounting under
AASB 139 Financial Instruments: Recognition and Measurement or, when applicable, the cost on initial
recognition of an investment in an associate or jointly controlled entity.
44
bph energy | annual report 2014
HEALTH
TECHNOLOGY
RESOURCES
(b)
Income Tax
The charge for current income tax expense is based on the profit for the year adjusted for any non-
assessable or disallowed items. It is calculated using the tax rates that have been enacted or are
substantially enacted by the statement of financial position date.
Deferred tax is accounted for using the statement of financial position liability method in respect of
temporary differences arising between the tax bases of assets and liabilities and their carrying amounts
in the financial statements. No deferred income tax will be recognised from the initial recognition of an
asset or liability, excluding a business combination, where there is no effect on accounting or taxable
profit or loss.
Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is
realised or liability is settled. Deferred tax is recognised in the statement of comprehensive income
except where it relates to items that may be recognised directly to equity, in which case the deferred tax
is adjusted directly against equity.
Deferred income tax assets are recognised to the extent that it is probable that future tax profits will be
available against which deductible temporary differences or unused tax losses and tax credits can be
utilised.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax
assets and liabilities and when the deferred tax balances relate to the same taxation authority. Current tax
assets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends
either to settle on a net basis, or to realise the asset and settle the liability simultaneously.
The amount of benefits brought to account or which may be realised in the future is based on the
assumption that no adverse change will occur in income taxation legislation and the anticipation that the
economic entity will derive sufficient future assessable income to enable the benefit to be realised and
comply with the conditions of deductibility imposed by the law.
BPH Energy Limited and its wholly-owned Australian subsidiaries have formed an income tax
consolidated Group under the tax consolidation regime. The Group notified the Australian Taxation
Office on 30 June 2006 that it had formed an income tax consolidated Group to apply from 30 June 2006.
The tax consolidated Group has entered a tax funding agreement whereby each company in the Group
contributes to the income tax payable in proportion to their contribution to the net profit before tax of
the tax consolidated Group.
Tax incentives
The company may be entitled to claim special tax deductions in relation to qualifying expenditure. As the
company is not in a position to recognise current income tax payable or current tax expense, a refundable
tax offset will be received in cash and recognised as rebate revenue in the period the underlying
expenses have been incurred.
bph energy | ANNUAL REPORT 2014
45
Notes to the Financial Statements
for the year ended 30 June 2014
1.
(c)
Statement of Significant Accounting Policies (continued)
Property, Plant & Equipment
Each class of property, plant and equipment is carried at cost less, where applicable, any accumulated
depreciation and impairment losses.
Plant and equipment
Plant and equipment are measured on the cost basis.
The carrying amount of plant and equipment is reviewed annually by directors to ensure it is not in excess
of the recoverable amount from these assets. The recoverable amount is assessed on the basis of the
expected net cash flows that will be received from the assets employment and subsequent disposal.
The expected net cash flows have been discounted to their present values in determining recoverable
amounts.
The cost of fixed assets constructed within the economic entity includes the cost of materials, direct
labour, borrowing costs and an appropriate proportion of fixed and variable overheads.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as
appropriate, only when it is probable that future economic benefits associated with the item will flow
to the Group and the cost of the item can be measured reliably. All other repairs and maintenance are
charged to the income statement during the financial period in which they are incurred.
Depreciation
The depreciable amount of fixed assets is depreciated on a straight-line basis over their useful lives.
The depreciation rates used for each class of depreciable assets are:
Class of Fixed Asset
Plant and equipment
Depreciation Rate
15 - 33 %
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each statement of
financial position date.
An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying
amount is greater than its estimated recoverable amount.
Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These
gains and losses are included in the income statement. When revalued assets are sold, amounts included
in the revaluation reserve relating to that asset are transferred to retained earnings.
46
bph energy | annual report 2014
HEALTH
TECHNOLOGY
RESOURCES
(d)
Financial Instruments
Recognition and Initial Measurement
Financial instruments, incorporating financial assets and financial liabilities, are recognised when the entity
becomes a party to the contractual provisions of the instrument. Trade date accounting is adopted for
financial assets that are delivered within timeframes established by marketplace convention.
Financial instruments are initially measured at fair value plus transactions costs where the instrument is not
classified as at fair value through profit or loss. Transaction costs related to instruments classified as at fair
value through profit or loss are expensed to profit or loss immediately. Financial instruments are classified
and measured as set out below.
Derecognition
Financial assets are derecognised where the contractual rights to receipt of cash flows expires or the asset
is transferred to another party whereby the entity is no longer has any significant continuing involvement
in the risks and benefits associated with the asset. Financial liabilities are derecognised where the related
obligations are either discharged, cancelled or expire. The difference between the carrying value of the
financial liability extinguished or transferred to another party and the fair value of consideration paid,
including the transfer of non-cash assets or liabilities assumed, is recognised in profit or loss.
Classification and Subsequent Measurement
(i) Financial assets at fair value through profit or loss
Financial assets are classified at fair value through profit or loss when they are held for trading for
the purpose of profit taking, where they are derivatives not held for cash flow hedging purposes, or
designated as such to avoid an accounting mismatch or to enable performance evaluation where a group
of financial assets is managed by key management personnel on a fair value basis in accordance with a
documented risk management or investment strategy. Realised and unrealised gains and losses arising
from changes in fair value are included in profit or loss in the period in which they arise.
(ii) Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not
quoted in an active market and are subsequently measured at amortised cost using the effective interest
rate method.
(iii) Available-for-sale financial assets
Available-for-sale (AFS) financial assets are non-derivative financial assets that are either designated as
such or that are not classified in any of the other categories.
Listed shares held by the Group that are traded in an active market are classified as AFS and are stated at
fair value. The Group also has investments in unlisted shares that are not traded in an active market but
that are also classified as AFS financial assets and stated at fair value (because the directors consider that
fair value can be reliably measured). Gains and losses arising from changes in fair value are recognised in
other comprehensive income and accumulated in the investments revaluation reserve, with the exception
of impairment losses, interest calculated using the effective interest method, and foreign exchange gains
and losses on monetary assets, which are recognised in profit or loss.
bph energy | ANNUAL REPORT 2014
47
Notes to the Financial Statements
for the year ended 30 June 2014
1.
(d)
Statement of Significant Accounting Policies (continued)
Financial Instruments (continued)
Classification and Subsequent Measurement (continued)
(v) Financial Liabilities
Non-derivative financial liabilities are subsequently measured at amortised cost using the effective interest
rate method.
Fair value
Fair value is determined based on current bid prices for all quoted investments. Valuation techniques are
applied to determine the fair value for all unlisted securities, including recent arm’s length transactions,
reference to similar instruments and valuation models using non-market inputs prepared by independent
experts.
Impairment
At each reporting date, the Group assesses whether there is objective evidence that a financial instrument
has been impaired. In the case of available-for-sale equity financial instruments, a significant or prolonged
decline in the value of the instrument below cost is considered to determine whether an impairment
has arisen. Impairment losses are recognised in the statement of profit or loss and other comprehensive
income.
Assets carried at amortised cost
For loans and receivables, the amount of the loss is measured as the difference between the asset’s
carrying amount and the present value of estimated future cash flows (excluding future credit losses that
have not been incurred) discounted at the financial asset’s original effective interest rate. The carrying
amount of the asset is reduced and the amount of the loss is recognised in profit or loss. If a loan or held-
to-maturity investment has a variable interest rate, the discount rate for measuring any impairment loss is
the current effective interest rate determined under the contract. As a practical expedient, the group may
measure impairment on the basis of an instrument’s fair value using an observable market price.
If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related
objectively to an event occurring after the impairment was recognised (such as an improvement in the
debtor’s credit rating), the reversal of the previously recognised impairment loss is recognised in profit
or loss.
Assets classified as available-for-sale
If there is objective evidence of impairment for available-for-sale financial assets, the cumulative loss –
measured as the difference between the acquisition cost and the current fair value, less any impairment
loss on that financial asset previously recognised in profit or loss – is removed from equity and recognised
in profit or loss.
Impairment losses on equity instruments that were recognised in profit or loss are not reversed through
profit or loss in a subsequent period.
If the fair value of a debt instrument classified as available-for-sale increases in a subsequent period and
the increase can be objectively related to an event occurring after the impairment loss was recognised in
profit or loss, the impairment loss is reversed through profit or loss.
48
bph energy | annual report 2014
HEALTH
TECHNOLOGY
RESOURCES
(e)
Impairment of Assets
The group reviews non-financial assets, other than deferred tax 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. For goodwill, and intangible assets that have indefinite useful
lives or that are not yet available for use, the recoverable amount is estimated each year at the same time.
The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair
value less costs to sell. 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. For the purpose of impairment testing, assets that cannot be
tested individually 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 groups of assets
(the “cash-generating unit” or “CGU”). An impairment loss is recognised if the carrying amount of an
asset or its CGU exceeds its estimated recoverable amount. Impairment losses are recognised in profit or
loss. Impairment losses recognised in respect of CGUs are allocated first to reduce the carrying amount
of any goodwill allocated to the units, and then to reduce the carrying amounts of the other assets in the
unit (group of units) on a pro rata basis.
An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses
recognised in prior periods are assessed at each reporting date for any indications that the loss has
decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates
used to determine the recoverable amount. 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.
(f)
Investments in Associates
Associates are all entities over which the Group has significant influence but not control or joint control,
generally accompanying a shareholding of between 20% and 50% of the voting rights. Investments in
associates are accounted for in the parent entity financial statements using the cost method and in the
consolidated financial statements using the equity method of accounting, after initially being recognised
at cost. The equity method of accounting recognises the Group’s share of post-acquisition reserves of its
associates.
The Group’s share of its associates’ post-acquisition profits or losses is recognised in the profit or loss,
and its share of post-acquisition movements in reserves is recognised in other comprehensive income.
The cumulative post-acquisition movements are adjusted against the carrying amount of the investment.
Dividends receivable from associates are recognised in the parent entity’s profit or loss, while in the
consolidated financial statements they reduce the carrying amount of the investment. When the Group’s
share of losses in an associate equals or exceeds its interest in the associate, including any other
unsecured long-term receivables, the Group does not recognise further losses, unless it has incurred
obligations or made payments on behalf of the associate.
bph energy | ANNUAL REPORT 2014
49
Notes to the Financial Statements
for the year ended 30 June 2014
1.
(f)
Statement of Significant Accounting Policies (continued)
Investments in Associates (continued)
Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the
Group’s interest in the associates. Unrealised losses are also eliminated unless the transaction provides
evidence of an impairment of the asset transferred. Accounting policies of associates have been changed
where necessary to ensure consistency with the policies adopted by the Group. Where an investment is
classified as a financial asset in accordance with AASB 139, at the date significant influence is achieved,
the fair value of the investment needs to be assessed. Any fair value gains are recognised in accordance
with the treatment the classification the financial asset as required by AASB 139.
Any excess of the cost of acquisition over the Group’s share of the net fair value of the identifiable assets,
liabilities and contingent liabilities of the associate recognised at the date of acquisition is recognised
as goodwill, which is included within the carrying amount of the investment. Any excess of the Group’s
share of the net fair value of the identifiable assets, liabilities and contingent liabilities over the cost of
acquisition, after reassessment, is recognised immediately in profit or loss.
(g)
Intangibles
Research
Expenditure during the research phase of a project is recognised as an expense when incurred.
Patents and Trademarks
Patents and trademarks are recognised at cost of acquisition. Patents and trademarks have a finite
life and are carried at cost less any accumulated amortisation and any impairment losses. Patents and
trademarks are amortised over their useful life of 10 years.
(h)
Employee Benefits
Provision is made for the company’s liability for employee benefits arising from services rendered by
employees to balance date. Short term employee benefits have been measured at the amounts expected
to be paid when the liability is settled, plus related on-costs. Long term employee benefits have been
measured at the present value of the estimated future cash outflows to be made for those benefits.
(i)
Provisions
Provisions are recognised when the Group has a legal or constructive obligation, as a result of past
events, for which it is probable that an outflow of economic benefits will result and that outflow can be
reliably measured.
(j)
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand, deposits held at call with banks, other short-term highly
liquid investments, and bank overdrafts. Bank overdrafts are shown within short-term borrowings in
current liabilities on the statement of financial position.
50
bph energy | annual report 2014
HEALTH
TECHNOLOGY
RESOURCES
(k)
Revenue and Other Income
Interest revenue is recognised when it is probable that the economic benefits will flow to the Group
and the amount of revenue can be measured reliably. Interest revenue is accrued on a timely basis, by
reference to the principal outstanding and at the effective interest rate applicable.
Dividend revenue is recognised when the right to receive a dividend has been established.
Revenue from the rendering of a service is recognised by reference to the stage of completion of the
contract.
All revenue is stated net of the amount of goods and services tax (GST).
(l)
Goods and Services Tax (GST)
Revenues, expenses and assets are recognised net of the amount of GST, except where the amount
of GST incurred is not recoverable from the Australian Tax Office. In these circumstances the GST is
recognised as part of the cost of acquisition of the asset or as part of an item of the expense.
Receivables and payables in the statement of financial position are shown inclusive of GST.
Cash flows are presented in the cash flow statement on a gross basis, except for the GST component of
investing and financing activities, which are disclosed as operating cash flows.
(m)
Trade and other payables
Liabilities are recognized for amounts to be paid in the future for goods or services received, whether or
not billed to the consolidated entity. The amounts are unsecured and are usually paid within 30 days.
(n)
Share based payments
The fair value of options granted under the Company’s Employee Option Plan is recognized as an
employee benefit expense with a corresponding increase in equity. The fair value is measured at grant
date and recognized over the period during which the employees become unconditionally entitled to the
options.
The fair value at grant date is independently determined using an appropriate option pricing model
that takes into account the exercise price, the term of the option, the vesting and performance criteria,
the impact of dilution, the share price at grant date and expected volatility of the underlying share, the
expected dividend yield and risk free interest rate for the term of the option.
The fair value of the options granted excludes the impact of any non-market vesting conditions
(for example, profitability and sales growth targets). Non-market vesting conditions are included in
assumptions about the number of options that are expected to vest. At each statement of financial
position date, the entity revises its estimate of the number of options that are expected to vest. The
employee benefit expense recognised each period takes into account the most recent estimate. Upon
the exercise of options, the balance of the share-based payments reserve relating to those options is
transferred to share capital.
(o)
Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief
operating decision maker, the directors (see Note 23).
bph energy | ANNUAL REPORT 2014
51
Notes to the Financial Statements
for the year ended 30 June 2014
1.
(p)
Statement of Significant Accounting Policies (continued)
Earnings per share
Basic earnings per share (EPS) is calculated as net profit/loss attributable to members, adjusted to
exclude costs of servicing equity (other than dividends) and preference share dividends, divided by the
weighted average number of ordinary shares, adjusted for any bonus element.
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to
take into account the after income tax effect of interest and other financing costs associated with dilutive
potential ordinary shares, and the weighted average number of additional ordinary shares that would
have been outstanding assuming the conversion of all dilutive potential ordinary shares.
(q)
Critical accounting estimates and judgments
The directors evaluate estimates and judgments incorporated into the financial report based on historical
knowledge and best available current information.
Estimates assume a reasonable expectation of future events and are based on current trends and
economic data, obtained both externally and within the Group.
Key judgements — Provision for Impairment of Loans Receivables
Included in the accounts of Consolidated entity are amounts from current loan receivables of $97,625
(2013: $1,637,691) and non-current loan receivables of $2,995,145 (2013: $941,679). The directors believe
that the full amount of the debt will be recoverable from each entity and that no provision for impairment
of receivables has been made at 30 June 2014. The directors obtained an independent expert’s valuation
report at year end which supports the recoverable amount of loan receivables. The recoverable amount
exceeded the carrying value of the loans and hence no impairment loss was recognised.
Key Judgments —Impairment of Intangible Assets
No impairment has been recognised in respect of intangible assets for the year ended 30 June 2014
(2013: $nil). The directors believe that the carrying value of all intangibles is appropriate after reviewing
the status of each entity’s developments. The directors are confident that the products will provide the
necessary returns to the Company.
Key Judgments —Provision for impairment of Investments in Associates
The directors obtained an independent expert’s valuation report at year end which supports the
recoverable amount of the investments in associates of $48,640,707 (2013: $49,690,539).
Investment in Molecular Discovery Systems
The recoverable amount of the investment in Molecular Discovery Systems Limited was less than the
carrying amount of the investment and hence an impairment loss of $736,965 was recognised (2013 $nil) –
refer to note 13.
Investment in Advent Energy Ltd
Refer to note 13.
52
bph energy | annual report 2014
HEALTH
TECHNOLOGY
RESOURCES
(r)
Application of New and Revised Accounting Standards
Standards adopted in the current year
The group has adopted a number of new or revised accounting standards this year that have resulted in
changes in accounting policies in the financial statements.
(i) AASB 10 Consolidated Financial Statements, AASB 12 Disclosure of Interests in Other
Entities (2011)
AASB 10 Consolidated Financial Statements was issued in August 2011 and replaces the guidance on
control and consolidation in AASB 127 Consolidated and Separate Financial Statements.
The group has reviewed its investments in other entities to assess whether the conclusion to consolidate
is different under AASB 10 than under AASB 127. No differences were found and therefore no
adjustments to any of the carrying amounts in the financial statements are required as a result of the
adoption of AASB 10.
AASB 12 brings together into a single standard all the disclosure requirements about an entity’s interests
in subsidiaries, joint arrangements, associates and unconsolidated structured entities. AASB 12 requires
the disclosure of information about the nature, risks and financial effects of these interests. The adoption
of these standards has not had a significant impact.
(ii) AASB 11 Joint Arrangements
AASB 11 replaces AASB 131 Interests in Joint Ventures and the guidance contained in a related
interpretation, Interpretation 113 Jointly Controlled Entities – Non-Monetary Contributions by Venturers,
has been incorporated in AASB 128 (as revised in 2011). AASB 11 deals with how a joint arrangement
of which two or more parties have joint control should be classified and accounted for. Under AASB 11,
there are only two types of joint arrangements – joint operations and joint ventures. The classification
of joint arrangements under AASB 11 is determined based on the rights and obligations of parties to
the joint arrangements by considering the structure, the legal form of the arrangements, the contractual
terms agreed by the parties to the arrangement, and, when relevant, other facts and circumstances.
A joint operation is a joint arrangement whereby the parties that have joint control of the arrangement
(i.e. joint operators) have rights to the assets, and obligations for the liabilities, relating to the
arrangement. A joint venture is a joint arrangement whereby the parties that have joint control of the
arrangement (i.e. joint venturers) have rights to the net assets of the arrangement.
Previously, AASB 131 Interests in Joint Ventures contemplated three types of joint arrangements – jointly
controlled entities, jointly controlled operations and jointly controlled assets. The classification of joint
arrangements under AASB 131 was primarily determined based on the legal form of the arrangement
(e.g. a joint arrangement that was established through a separate entity was accounted for as a jointly
controlled entity).
bph energy | ANNUAL REPORT 2014
53
Notes to the Financial Statements
for the year ended 30 June 2014
1.
(r)
Statement of Significant Accounting Policies (continued)
Application of New and Revised Accounting Standards (continued)
Standards adopted in the current year (continued)
(ii) AASB 11 Joint Arrangements (continued)
The initial and subsequent accounting of joint ventures and joint operations is different. Investments
in joint ventures are accounted for using the equity method (proportionate consolidation is no longer
allowed). Investments in joint operations are accounted for such that each joint operator recognises
its assets (including its share of any assets jointly held), its liabilities (including its share of any liabilities
incurred jointly), its revenue (including its share of revenue from the sale of the output by the joint
operation) and its expenses (including its share of any expense incurred jointly). Each joint operation
accounts for the assets and, liabilities, as well as revenue and expenses, relating to its interest in the joint
operation in accordance with the applicable Standards.
During the period, the Company did not hold investments in joint arrangements and consequently, the
new standard did not have any impact in the financial report.
(iii) AASB 13 Fair Value Measurement (2011)
AASB 13 Fair Value Measurement aims to improve consistency and reduce complexity by providing a
precise definition of fair value and a single source of fair value measurement and disclosure requirements
for use across Australian Accounting Standards. The standard does not extend the use of fair value
accounting but provides guidance on how it should be applied where its use is already required or
permitted by other Australian Accounting Standards.
Previously the fair value of financial liabilities (including derivatives) was measured on the basis that the
financial liability would be settled or extinguished with the counterparty. The adoption of AASB 13 has
clarified that fair value is an exit price notion, and as such, the fair value of financial liabilities should be
determined based on a transfer value to a third party market participant. As a result of this change, the fair
value of derivative liabilities changed on transition to AASB 13, due to incorporating own credit risk into
the valuation.
As required under AASB 13, the change to fair value measurements on adoption of the standard is applied
prospectively, in the same way as a change in an accounting estimate. Comparative amounts have not
been restated.
(iv) AASB 2011-4 ‘Amendments to Australian Accounting Standards to Remove Individual Key
Management Personnel Disclosure Requirements’
This standard removes the individual key management personnel disclosure requirements in AASB
124 ‘Related Party Disclosures’ As a result the Group only discloses the key management personnel
compensation in total and for each of the categories required in AASB 124.
In the current year the individual key management personnel disclosure previously required by AASB 124
is now disclosed in the remuneration report due to an amendment to Corporations Regulations 2001
issued in June 2013.
Standards in issue not yet adopted
A number of new standards and amendments to standards are effective for annual periods beginning after
1 July 2013, and have not been applied in preparing these consolidated financial statements. Those which
may be relevant to the Group are set out below. The Group does not plan to adopt these standards early.
54
bph energy | annual report 2014
HEALTH
TECHNOLOGY
RESOURCES
(i) AASB 9 Financial Instruments (2010), AASB 9 Financial Instruments (2009)
AASB 9 (2009) introduces new requirements for the classification and measurement of financial assets.
Under AASB 9 (2009), financial assets are classified and measured based on the business model in which
they are held and the characteristics of their contractual cash flows. AASB 9 (2010) introduces additional
changes relating to financial liabilities.
The IASB currently has an active project that may result in limited amendments to the classification and
measurement requirements of AASB 9 and add new requirements to address the impairment of financial
assets and hedge accounting.
AASB 9 (2010 and 2009) are effective for annual periods beginning on or after 1 January 2017 with early
adoption permitted. The standard is not expected to have a material impact on the group financial
instruments.
(ii) AASB 1031 Materiality (2013)
The revised AASB 1031 is an interim standard that cross-references to other Standards and the Framework
for the Preparation and Presentation of Financial Statements (issued December 2013) that contain
guidance on materiality. The AASB is progressively removing references to AASB 1031 in all Standards
and Interpretations, and once all these references have been removed, AASB 1031 will be withdrawn. The
revised AASB 1031 is effective from 1 January 2014 and early adoption is not permitted.
AASB 1031 (2013) is effective for annual periods beginning on or after 1 January 2014 and not available
for early adoption.
(iii) AASB 2013-9 Amendments to Australian Accounting Standards – Conceptual Framework,
Materiality and Financial Instruments
The AASB approved amending Standard AASB 2013-9 Amendments to Australian Accounting Standards
– Conceptual Framework, Materiality and Financial Instruments on 20 December 2013. AASB 2013-9
incorporates the IASB’s Standard IFRS 9 Financial Instruments (Hedge Accounting and amendments to
IFRS 9, IFRS 7 and IAS 39).
Part A of AASB 2013-9 makes consequential amendments arising from the issuance of AASB CF 2013-1
Amendments to the Australian Conceptual Framework. Part B mainly makes amendments to particular
Australian Accounting Standards to delete references to AASB 1031.
Part C makes amendments to a number of Australian Accounting Standards, including incorporating
Chapter 6 Hedge Accounting into AASB 9 Financial Instruments. The main amendments regarding
financial instruments are as follows:
-
-
-
to add Hedge Accounting and make consequential amendments to AASB 9 and numerous other
Standards;
to permit requirements relating to the ‘own credit risk’ of financial liabilities measured at fair value to
be applied without applying any other requirements of AASB 9 at the same time; and
to amend the mandatory application date of AASB 9 so that AASB 9 is required to be applied for
annual reporting periods beginning on or after 1 January 2017 instead of 1 January 2015.
AASB 2013-9 is effective for annual periods beginning on or after 1 January 2014.
bph energy | ANNUAL REPORT 2014
55
Notes to the Financial Statements
for the year ended 30 June 2014
2.
Revenue
Revenue
Interest revenue cash accounts
Interest revenue: other entities
Other income
Consultancy fees
3.
Expenses Included in Loss for the year
Depreciation
- Depreciation
Employee costs
- Salary
- Superannuation
- Director fees
- Share based payments
- Other payroll costs
Total employee costs
Consolidated
2014
$
2013
$
10,286
141,277
151,563
36,376
151,332
187,708
114,100
114,100
114,100
114,100
302
800
201,095
15,622
110,416
16,080
1,515
187,933
14,015
125,000
3,056
6,361
344,728
336,365
56
bph energy | annual report 2014
HEALTH
TECHNOLOGY
RESOURCES
4.
Key Management Personnel Compensation
Names and positions held of economic and parent entity key management personnel in office at any time
during the financial year are:
Key Management Personnel
D L Breeze – Executive Chairman
H Goh – Non-Executive Director
G Gilbert – Non-Executive Director (resigned 11 December 2013)
D Ambrosini – Executive Director and Company Secretary
Short term employee benefits
Consolidated
2014
$
208,416
208,416
2013
$
223,000
223,000
Key management personnel remuneration has been included in the Remuneration report section of the
Directors Report.
Options and Rights Holdings
2014 Number of Options Held by Key Management Personnel
Balance
1.7.2013
Granted as
Compen-
sation
Options
Exercised
Net
Change
Other*
Balance
30.6.2014
Total Vested
30.6.2014
Total
Exercisable
and Vested
30.6.2014
Total
Unexercis-
able
30.6.2014
D L Breeze
1,000,000
G Gilbert
H Goh
-
-
D Ambrosini
500,000
-
-
-
-
-
-
-
-
-
-
-
-
1,000,000
1,000,000
1,000,000
-
-
-
-
-
-
500,000
500,000
500,000
-
-
-
-
2013 Number of Options Held by Key Management Personnel
Balance
1.7.2012
Granted as
Compen-
sation
Options
Exercised
Net
Change
Other *
Balance
30.6.2013
Total Vested
30.6.2013
Total
Exercisable
and Vested
30.6.2013
Total
Unexercis-
able
30.6.2013
D L Breeze
1,000,000
G Gilbert
H Goh
-
-
D Ambrosini
1,000,000
-
-
-
-
-
-
-
-
-
-
-
1,000,000
1,000,000
1,000,000
-
-
-
-
-
-
(500,000)
500,000
500,000
500,000
-
-
-
-
*The Net Change Other reflected above includes those options that have been forfeited by holders, directors
that have resigned, options that have expired and recompliance of holdings during the year.
bph energy | ANNUAL REPORT 2014
57
Notes to the Financial Statements
for the year ended 30 June 2014
4.
Key Management Personnel Compensation (continued)
Shareholdings
2014 Number of Shares Held by Key Management Personnel
D L Breeze
G Gilbert
H Goh
D Ambrosini
Balance
1.7.2013
6,509,811
480,769
480,769
-
Received as
Compensation
Options
Exercised
Net Change
Other
Balance
30.6.2014
-
-
-
-
-
-
-
-
-
(480,769)
-
-
6,509,811
-
480,769
-
2013 Number of Shares Held by Key Management Personnel
D L Breeze
G Gilbert
H Goh
D Ambrosini
Balance
1.7.2012
6,509,811
480,769
480,769
-
Received as
Compensation
Options
Exercised
Net Change
Other
Balance
30.6.2013
-
-
-
-
-
-
-
-
-
-
-
-
6,509,811
480,769
480,769
-
*The Net Change Other reflected above includes those shares of directors that have resigned during
the year.
5. Auditors’ Remuneration
Remuneration of the auditor of the parent entity for:
- auditing or reviewing the financial report
Nexia Perth Audit Services
Consolidated
2014
$
2013
$
37,655
37,655
34,000
34,000
58
bph energy | annual report 2014
HEALTH
TECHNOLOGY
RESOURCES
Consolidated
2014
$
2013
$
(1,253,563)
(568,454)
(1,253,563)
(568,454)
(0.73)
(0.73)
(0.33)
(0.33)
6.
Earnings per share
For basic and diluted Earnings Per Share
Total earnings per share attributable to ordinary equity
holders of the company
Earnings used in the calculation of basic earnings per share
and diluted earnings per share
For basic and diluted Earnings Per Share
From continuing operations
Total Basic Earnings per Share and Diluted Earnings per Share
Weighted average number of ordinary shares outstanding during
the year used in calculating basic EPS and diluted EPS
No.
172,562,245
No.
172,562,245
7.
Cash and cash equivalents
Cash at Bank and in hand
Short-term bank deposits
Reconciliation of cash
Consolidated
2014
$
2013
$
173,133
892,836
7,978
7,763
181,111
900,599
Cash at the end of the financial year as shown in the statement of
cash flows is reconciled to items in the statement of financial
position as follows:
Cash and cash equivalents
181,111
900,599
bph energy | ANNUAL REPORT 2014
59
Notes to the Financial Statements
for the year ended 30 June 2014
8.
Trade and other receivables
Current
Other receivables
9. Other Assets
Prepaid insurance
10. Financial Assets
Loans and receivables at amortised cost
Current
Unsecured Loans to other entities: (a)
Grandbridge Limited
MEC Resources Limited
Advent Energy Ltd
Secured Loans to other entities: (b)
Cortical Dynamics Limited
Molecular Discovery Systems Limited
Non - Current
Loans and receivables at amortised cost
Unsecured Loans to other entities: (a)
Cortical Dynamics Limited
Molecular Discovery Systems Limited
Secured Loans to other entities: (b)
Cortical Dynamics Limited
Molecular Discovery Systems Limited
Available for sale financial assets at fair value
Investments in unlisted entities (c)
60
bph energy | annual report 2014
Consolidated
2014
$
2013
$
3,848
3,848
1,977
1,977
27,863
27,863
29,660
29,660
55,645
2,494
39,486
55,645
2,494
39,486
-
-
1,142,376
397,690
97,625
1,637,691
485,070
575,200
485,070
461,100
1,469,827
416,099
-
-
48,949
2,995,145
48,949
995,119
HEALTH
TECHNOLOGY
RESOURCES
(a)
Unsecured loans
These loans to other entities are non-interest bearing and payable on demand. The company has,
however, issued letters to these entities confirming that they will not call upon their loans for at least 12
months from signing the financial report or until such time the company is financially independent.
(b)
Secured loans
These loans are secured by a charge over all of the assets and undertakings of each entity and interest
bearing. Subject to the conditions of the agreement BPH Energy has the right to conversion to satisfy the
debt on or before the termination date.
The company has a convertible loan agreement with MDSystems. The loan is for a maximum amount of
$500,000 and is to be used for short term working capital requirements. Subject to MDSystems being
admitted to the Official list, BPH Energy has a right of conversion to satisfy the debt on or before the
termination date. As at reporting date the loan had been drawn down by an amount of $416,099 (2013:
$397,690).
The company has two convertible loan agreements with Cortical Dynamics. One loan is for a maximum
amount of $500,000 and is to be used for short term working capital requirements. Subject to Cortical
being admitted to the Official list, BPH Energy has a right of conversion to satisfy the debt on or before
the termination date. As at reporting date the loan had been drawn down by an amount of $464,561
(2013: $479,371).
On 28th February 2012 BPH Energy entered into a second convertible loan agreement with Cortical
Dynamics. The facility is for a maximum amount of $1,000,000 and has an annual interest rate of 9.40%.
The loan will be used for short term working capital requirements and funding further development of
the BAR monitor. The loan is convertible at BPH’s election if Cortical is unsuccessful in its application
for admission to the Official List. As at reporting date the loan had been drawn down by an amount of
$1,005,266 (2013: $663,005).
(c)
Available for sale financial assets at fair value
Cortical Dynamics Limited
Consolidated
2014
$
48,949
48,949
2013
$
48,949
48,949
bph energy | ANNUAL REPORT 2014
61
Notes to the Financial Statements
for the year ended 30 June 2014
11.
Intangible assets
Patent costs capitalised
Cost
Accumulated amortisation and impairment
Net carrying value
Total intangibles
Patent costs include all costs associated with the filing and
maintenance of the patents for the company’s technologies.
12. Property, Plant and Equipment
Plant and Equipment:
At cost
Accumulated depreciation
Total Property, Plant and Equipment
(a) Movements in Carrying Amounts
Movements in the carrying amounts for each class of property,
plant and equipment between the beginning and the end of
the current financial year.
Consolidated
2014
$
2013
$
72,454
72,454
-
72,454
72,454
-
72,454
72,454
41,486
(41,317)
169
41,486
(41,015)
471
Balance at the beginning of the year
471
1,271
Additions
Disposals
Depreciation expense
Carrying amount at the end of the year
-
-
(302)
169
-
-
(800)
471
62
bph energy | annual report 2014
HEALTH
TECHNOLOGY
RESOURCES
Consolidated
2014
$
2013
$
48,028,838
48,296,464
611,869
1,394,075
48,640,707
49,690,539
13.
Investments accounted for using the equity method
Shares in Associates
Advent Energy Limited
Molecular Discovery Systems Limited
Investments in associates are accounted for in the consolidated financial statements using the equity
method of accounting.
Name of Entity
Ownership
Interest
%
2014 2013
Country of
Incorporation
Principal Activity
Molecular Discovery Systems Limited
Australia
20% 20%
Biomedical Research
Advent Energy Limited
Australia
27% 27%
Oil and Gas Exploration
The consolidated group’s associate, Advent Energy Ltd, has commitments for its exploration permits of
$3,997,500 over the next 12 months. To assist in meeting these commitments Advent Energy is continually
seeking and reviewing potential sources of both equity and debt funding. Advent Energy is currently
in negotiations with a number of parties on the terms of investment, however there is no certainty at
this stage that those discussions will result in further funding being made available. Advent Energy’s
wholly owned subsidiary, Asset Energy, has lodged an application with the National Offshore Petroleum
Titles Administrator (“NOPTA”) to suspend the year 2 work commitment for Petroleum Exploration
Permit 11(“PEP11”) and request a subsequent extension of the permit term. Asset is currently required
to complete 200km of 2D seismic within the PEP11 area by 12 August 2014. Asset recently announced
that it has commenced preparations for seismic and it is intending to perform a 3D seismic survey of
approximately 225 km2 over a 4 – 5 week period between November 2014 and May 2015.The application
for deferral is currently being assessed by NOPTA.
In addition, Advent Energy is committed to drill an exploration well by March 2015 for EP386. These 2
commitments comprise the significant balance of $3,997,500.
While management is confident the commitments under the exploration permits or as varied by the
relevant authorities will be met, the above conditions indicate the uncertainty that may affect the ability of
the group to realise the carrying value of the group’s investment in Advent Energy in the ordinary course
of business.
bph energy | ANNUAL REPORT 2014
63
Notes to the Financial Statements
for the year ended 30 June 2014
13.
Investments accounted for using the equity method (continued)
(a)
Summarised financial information of associates
The results of its associates aggregated assets (including goodwill) and liabilities, including the group’s share
of net assets and net loss for the period are as follows:
Total of Associate
Reconciliation to the Carrying Amount
Current
Assets
Non-
Current
Assets
Current
Liabilities
Non-
Current
Liabilities
Reve-
nues
Loss for
the Year
Total
Compre-
hensive
Loss for
the Year
Net
Assets
of Asso-
ciate
Owner-
ship
interest
% Goodwill
Carrying
Amount
of the
Group’s
Interest
Other
Adjust-
ments*
2014
Molecular Discovery Systems Limited
172,838
393,585
455,623
803,083
56,000
(226,207)
(226,207)
(138,457)
20
1,487,291
(736,965)
611,869
172,838
393,585
455,623
803,083
56,000
(226,207)
(226,207)
(138,457)
1,487,291
(736,965)
611,869
Advent Energy Ltd
259,999 29,843,078
1,143,34 3,600,000
12,364
(989,727)
(989,727) 6,950,089 27.4
19,628,749 21,450,000 48,028,838
259,999 29,843,078
1,143,34 3,600,000
12,364
(989,727)
(989,727) 6,950,089 27.4
19,628,749 21,450,000 48,028,838
2013
Molecular Discovery Systems Limited
218,752
465,300
431,705
718,425
128,000
(198,589)
(198,589)
(93,216)
20
1,487,291
218,752
465,300
431,705
718,425
128,000
(198,589)
(198,589)
(93,216)
1,487,291
-
-
1,394,075
1,394,075
Advent Energy Ltd
1,768,195 29,871,792 5,297,962
1,768,195 29,871,792 5,297,962
-
-
80,866 (2,209,604)
(2,209,604) 7,217,715 27.4
19,628,749 21,450,000 48,296,464
80,866 (2,209,604)
(2,209,604) 7,217,715 27.4
19,628,749 21,450,000 48,296,464
* Other adjustments comprise:
Molecular Discovery Systems Ltd – Impairment Loss: At 30 June 2014, the directors obtained an independent
expert’s valuation report which indicated that the carrying value of BPH’s investment was impaired. Accordingly,
an adjustment for the difference in the carrying value and fair value of BPH’s investment in MDS was recognised
this year.
Advent Energy Ltd – Revaluation Gain: In 2010, BPH performed a step acquisition of Advent Energy to eventually
hold a significant influence (20%) in the company. At the time that Advent Energy was first recognised as an
associate, the increase in fair value was recognised through other comprehensive income.
64
bph energy | annual report 2014
HEALTH
TECHNOLOGY
RESOURCES
Consolidated
2014
$
2013
$
1,806
-
-
-
(316,366)
(431,852)
(314,560)
(431,852)
(54,350)
-
(262,016)
(431,852)
(316,366)
(431,852)
(474,192)
(308,028)
4,609
(1,806)
58,309
98,520
6,127
-
-
(129,951)
14.
Income Tax Expense
(a)
The components of tax expense/(benefit) comprise:
Adjustments recognised in the current year in
relation to the current tax of prior years
Current tax
Deferred income tax credit
Deferred income tax (credit)/expense included
in income tax expense comprises:
Increase in deferred tax assets (note 29)
Decrease in deferred tax liabilities (note 29)
(b)
The prima facie tax on profit from operations before income
tax is reconciled to the income tax as follows:
Prima facie tax payable on profit from operations before
income tax at 30% (2013: 30%)
Add tax effect of:
Non deductible expenses
Tax benefit of revenue losses not recognised
Effect of previously unrecognised and unused
tax losses now recognised as deferred tax
assets
Temporary differences
Income tax expense/(benefit) recognised
(314,560)
(431,852)
(c)
Income tax expense recognised in other
comprehensive income
Fair value gain adjustments
(d)
Current tax liabilities
Income tax
-
-
-
-
-
-
-
-
bph energy | ANNUAL REPORT 2014
65
Notes to the Financial Statements
for the year ended 30 June 2014
15. Trade and other payables
Trade payables
Sundry payables and accrued expenses
16. Financial Liabilities
Current
Current borrowings – unsecured
Non - Current
Non - Current borrowings – unsecured
17. Provisions
Employee entitlements:
Opening balance at 1 July 2013
Reduction/addition to provision
Balance at 30 June 2014
Current
Non-Current
Consolidated
2014
$
2013
$
24,183
874,358
898,541
32,236
669,911
702,147
561,836
561,836
-
-
-
-
502,978
502,978
26,432
1,525
20,072
6,360
27,957
26,432
23,409
4,548
27,957
26,432
-
26,432
Provision for Employee Entitlements
Provisions have been recognised for employee entitlements relating to annual leave. The measurement
and recognition criteria relating to employee benefits has been included in Note 1 to this report.
66
bph energy | annual report 2014
HEALTH
TECHNOLOGY
RESOURCES
Consolidated
2014
$
2013
$
18.
Issued Capital
172,562,245 (2013: 172,562,245) fully paid ordinary shares
41,511,195
41,511,195
The Company has no authorised capital and the issued shares
do not have a par value.
Consolidated
Consolidated
2014
$
2013
$
2014
No.
2013
No.
(a) Ordinary Shares
At the beginning of reporting period
41,511,195
41,511,195
172,562,245
172,562,245
At reporting date
41,511,195
41,511,195
172,562,245
172,562,245
Capital Raising
There were nil options exercised during the year (2013: nil).
Fully Paid Ordinary Share Capital
Fully paid ordinary shares carry one vote per share and carry the right to dividends.
Options
There were 2,975,000 employee options on issue at the end of the year:
Total number
Exercise price
Expiry date
75,000
1,500,000
325,000
1,075,000
2,975,000
$0.594
$0.894
$0.160
$0.080
30 September 2014
31 December 2014
21 January 2016
30 June 2018
The market price of the company’s ordinary shares at 30 June 2014 was 0.008 cents.
The holders of options do not have the right, by virtue of the option, to participate in any share issue or
interest issue of any other body corporate or registered scheme.
bph energy | ANNUAL REPORT 2014
67
Notes to the Financial Statements
for the year ended 30 June 2014
18.
Issued Capital (continued)
(b) Capital risk management
The Group’s and the parent entity’s objectives when managing capital are to safeguard their ability to
continue as a going concern, so that they may continue to provide returns for shareholders and benefits
for other stakeholders.
The focus of the Group’s capital risk management is the current working capital position against the
requirements of the Group to meet corporate overheads. The Group’s strategy is to ensure appropriate
liquidity is maintained to meet anticipated operating requirements, with a view to initiating appropriate
capital raisings as required. The working capital position of the Group at 30 June 2014 and 30 June 2013
are as follows:
Cash and cash equivalents
Trade and other receivables
Trade payables and financial liabilities
Working capital position*
*Refer to note 1 for further details of the Group’s financial position
and plans to manage the working capital deficit at 30 June 2014.
19. Reserves
Options Reserve (a)
Asset Revaluation Reserve (b)
(a)
Option Reserve
The option reserve records items recognized as expenses
on the valuation of Director and Employee share options.
Reconciliation of movement
Opening balance
Option charges during the year
Closing balance
(b)
Asset Revaluation Reserve
The asset revaluation reserve records the revaluation of
available for sale investments to fair value.
Opening balance
Available for sale asset revalued to fair value (net of tax)
Closing balance
68
bph energy | annual report 2014
Consolidated
2014
$
2013
$
181,111
900,599
101,473
1,639,668
(1,460,377)
(702,147)
(1,177,793)
1,838,120
435,726
419,646
15,015,000
15,015,000
15,450,726
15,434,646
419,646
16,080
435,726
416,590
3,056
419,646
15,015,000
15,015,000
-
-
15,015,000
15,015,000
HEALTH
TECHNOLOGY
RESOURCES
20. Controlled Entities
Name of
Entity
Principal
Activity
Country of
Incorporation
Ownership Interest
%
2014 2013
Parent Entity
BPH Energy Ltd
Subsidiaries of BPH Energy Ltd
Diagnostic Array Systems Pty Ltd
Investment
Australia
BioMedical Research
Australia
51.82 51.82
21. Cash Flow Information
(a)
Reconciliation of Cash Flow from Operations with
Profit after income tax
Operating loss after income tax
Non-cash flows in profit:
Depreciation and amortisation
Interest Revenue
Share based payment expense
Intercompany recharges
Share of Associates’ Losses
Impairment of investment in associate
Changes in net assets and liabilities, net of effects of purchase
and disposal of subsidiaries
(Increase)/decrease in trade and other receivables
Decrease/(increase) in other assets
Increase/(decrease) in provisions
Increase in trade payables and accruals
(Decrease) in deferred tax liabilities
Cash outflow from operations
(b)
Financing Facilities
Credit card facility (limit)
Used credit card facility
Consolidated
2014
$
2013
$
(1,266,079)
(594,908)
302
800
(141,277)
(151,332)
16,080
59,275
312,867
736,965
(1,871)
1,797
1,525
3,056
73,496
562,945
-
-
(11,471)
6,360
196,394
130,480
(316,366)
(431,852)
(400,388)
(412,426)
20,000
20,000
-
-
bph energy | ANNUAL REPORT 2014
69
Notes to the Financial Statements
for the year ended 30 June 2014
22. Financial Risk Management
(a)
Financial Risk Management
The Group’s financial instruments consist mainly of deposits with banks, investments, accounts receivable
and payable, and loans to and from subsidiaries. The main purpose of non-derivative financial instruments
is to raise finance for Group operations policies.
i. Financial Risk Exposures and Management
The main risks the Group is exposed to through its financial instruments are interest rate risk, liquidity risk,
credit risk and equity price risk.
Interest rate risk
Interest rate risk is managed with a mixture of fixed and floating rate financial assets. The group’s financial
liabilities are currently not exposed to interest rate risk as the group has no interest bearing financial
liabilities.
Liquidity risk
The Group manages liquidity risk by maintaining adequate reserves, by continuously monitoring forecast
and actual cash flows.
Credit risk
The maximum exposure to credit risk, excluding the value of any collateral or other security, at balance
date to recognised financial assets, is the carrying amount, net of any provisions for impairment of those
assets, as disclosed in the statement of financial position and notes to the financial statements. The
directors obtained an independent expert’s valuation report at year end which supports the recoverable
amount of loan receivables. The recoverable amount exceeded the carrying value of the loans and hence
no impairment loss was recognised.
Foreign currency risk
The Group is not exposed to any material risks in relation to fluctuations in foreign exchange rates.
70
bph energy | annual report 2014
HEALTH
TECHNOLOGY
RESOURCES
(b)
Financial Instruments
i.
Interest rate risk
The economic entity’s exposure to interest rate risk, which is the risk that a financial instrument’s value will
fluctuate as a result of changes in market interest rates and the effective weighted average interest rates
on classes of financial assets and financial liabilities, based on contractual maturities, is as follows:
Consolidated Group
2014
Financial Assets
Weight
Effective
Interest Rate
%
Floating
Interest Rate
$
Fixed Interest
Rate
1 Year of less
Fixed Interest
Rate
1 to 5 Years
Non-Interest
Bearing
$
Total
$
Cash and cash equivalents
2.27
181,111
Trade and other receivables
Other financial assets
8.58
-
-
-
-
1,885,926
Total Financial Assets
Financial Liabilities
Trade and sundry payables
Financial liabilities
Total Financial Liabilities
181,111
1,885,926
-
-
-
-
-
-
-
-
-
-
-
-
-
-
181,111
3,848
3,848
1,157,895
3,043,821
1,161,743
3,228,780
898,541
561,836
898,541
561,836
1,460,377
1,460,377
* The non-interest bearing loans made to other entities are repayable on demand. The company has, however,
issued letters to these entities confirming that they will not call upon their loans for at least 12 months from
signing the financial report or until such time the company is financially independent.
Weight
Effective
Interest Rate
%
Floating
Interest Rate
$
Fixed Interest
Rate
1 Year of less
Fixed Interest
Rate
1 to 5 Years
Non-Interest
Bearing
$
Total
$
2013
Financial Assets
Cash and cash equivalents
2.5
900,599
Trade and other receivables
Other financial assets
8.58
-
-
-
-
1,540,066
Total Financial Assets
Financial Liabilities
Trade and sundry payables
Financial liabilities
Total Financial Liabilities
900,599
1,540,066
-
-
-
-
-
-
-
-
-
-
-
-
-
-
900,599
1,977
1,977
1,043,795
2,583,861
1,045,772
3,486,437
702,147
502,978
702,147
502,978
1,205,125
1,205,125
bph energy | ANNUAL REPORT 2014
71
Notes to the Financial Statements
for the year ended 30 June 2014
22. Financial Risk Management (continued)
(b)
Financial Instruments (continued)
ii. Fair Values
The fair values of:
• Term receivables are determined by discounting the cash flows, at the market interest rates of similar
securities, to their present value.
• Other loans and amounts due are determined by discounting the cash flows, at market interest rates
of similar borrowings to their present value.
• For unlisted investments where there is no organised financial market, the fair value has been based
on valuation techniques incorporating non-market data prepared by independent valuers.
No financial assets and financial liabilities are readily traded on organised markets in standardised form.
2014
2013
Carrying
Amount
Fair Value
Carrying
Amount
Fair Value
Financial Assets
Available-for-sale financial assets
48,949
48,949
48,949
48,949
Loans and receivables
Financial Liabilities
Other loans and amounts due
Trade payables
iii. Sensitivity Analysis
Interest Rate Risk
3,043,821
3,043,821
2,585,838
2,585,838
3,092,770
3,092,770
2,634,787
2,634,787
561,836
898,541
561,836
898,541
502,978
702,147
502,978
702,147
1,460,377
1,460,377
1,205,125
1,205,125
The Group has performed sensitivity analysis relating to its exposure to interest rate risk at balance date.
This sensitivity analysis demonstrates the effect on the current year results and equity which could result
from a change in these risks.
The effect on profit and equity as a result of changes in the interest rate, with all other variables remaining
constant would be as follows:
Change in profit
— Increase in interest rate 1%
— Decrease in interest rate by 0.5%
Consolidated Group
2014
2013
9,005
(4,503)
14,412
(7,206)
72
bph energy | annual report 2014
HEALTH
TECHNOLOGY
RESOURCES
iv. Liquidity risk
The Group manages liquidity risk by maintaining adequate reserves and borrowing facilities, by
continuously monitoring forecast and actual cash flows, and by matching the maturity profiles of financial
assets and liabilities.
Liquidity is the risk that the company will encounter difficulty in meeting the obligations associated with
its financial liabilities that are settled by delivering cash or another financial asset.
The following are the contractual maturities at the end of the reporting period of financial liabilities.
30 June 2014
Contractual cash flows
Carrying
amount
Total
2 mths or
less
2-12 mths 1-2 years
2-5 years
More than
5 years
Financial liabilities
Trade and other
payables
898,541
(898,541)
Unsecured loan
561,836
(561,836)
1,460,377
(1,460,377)
30 June 2013
-
-
-
(898,541)
(561,836)
(1,460,377)
-
-
-
-
-
-
-
-
-
Contractual cash flows
Carrying
amount
Total
2 mths or
less
2-12 mths 1-2 years
2-5 years
More than
5 years
Financial liabilities
Trade and other
payables
702,147
(702,147)
Unsecured loan
502,978
(502,978)
1,205,125
(1,205,125)
-
-
-
(702,147)
-
-
(502,978)
(702,147)
(502,978)
-
-
-
-
-
-
(c)
Fair value measurements recognised in the statement of financial position
The following table provides an analysis of financial instruments that are measured subsequent to initial
recognition at fair value, grouped into Levels 1 to 3 based on the degree to which the fair value is
observable.
• Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets
for identical assets or liabilities.
• Level 2 fair value measurements are those derived from inputs other than quoted prices included
within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly
(i.e. derived from prices).
• Level 3 fair value measurements are those derived from valuation techniques that include inputs for
the asset or liability that are not based on observable market data (unobservable inputs).
There were no transfers between and of the levels for recurring fair value measurements during the year.
bph energy | ANNUAL REPORT 2014
73
Notes to the Financial Statements
for the year ended 30 June 2014
22. Financial Risk Management (continued)
(c)
Fair value measurements recognised in the statement of financial position (continued)
Specific valuation techniques used to value financial instruments include:
• For unlisted investments where there is no organised financial market, the fair value has been based
on valuation techniques incorporating non-market data prepared by independent valuers.
30 June 2014
Available for sale financial assets
— Investments in unlisted entities
Total
30 June 2013
Available for sale financial assets
— Investments in unlisted entities
Total
Reconciliation of fair value measurements of financial assets
Opening balance
Reclassifications
Purchases
Total gains or losses in other comprehensive income
Total gains or losses in the profit and loss
Level 1
Level 2
Level 3
Total
-
-
-
-
-
-
-
-
48,949
48,949
48,949
48,949
48,949
48,949
48,949
48,949
2014
2013
Level 3
Level 3
48,949
48,949
-
-
-
-
-
-
-
-
Closing balance
48,949
48,949
Based on valuations prepared by independent experts, management have made an assessment and
believe that there is no material change in the fair value of their investments at reporting date
The fair value of the Group’s investment in Cortical Dynamics as at 30 June 2014 has been arrived at
on the basis of a valuation performed on the respective date by an independent expert valuer to the
company. The valuer holds the appropriate qualifications and recent experience in the valuation of
investments of this nature. The fair value was determined using the relative valuation methodology.
The approach considers the value of broadly comparable listed entities which are at a similar stage of
biotechnology product life cycle to Cortical Dynamics. The valuation supported the carrying value of
BPH’s AFS investment in the company.
74
bph energy | annual report 2014
HEALTH
TECHNOLOGY
RESOURCES
23. Operating Segment
Operating segments have been identified on the basis of internal reports of the Company that are
regularly reviewed by the chief operating decision maker in order to allocate resources to the segments
and to assess their performance. The chief operating decision maker has been identified as the Board
of Directors. On a regular basis, the board receives financial information on the consolidated entity
on a basis similar to the financial statements presented in the financial report, to manage and allocate
their resources.
The consolidated entity’s only operating segment is investments. The consolidated entity holds
investments in two principal industries and these are biotechnology, and oil and gas exploration and
development, as disclosed in Note 10 (c) and Note 13.
24. Events after the Statement of financial position Date
There have not been any matters or circumstances that have arisen since the end of the financial year, that
have significantly affected, or may significantly affect, the operations of the company, the results of those
operations, or the state of affairs of the company in future financial years.
25. Related Party Transactions
(a)
Equity interests in controlled entities
Details of the percentage of ordinary shares held in controlled entities are disclosed in note 20 to the
financial statements.
(b)
Directors’ Remuneration
Details of the directors’ remuneration and retirement benefits is located in the Directors Report and in
note 4.
(c)
Directors’ Equity Holdings
Ordinary Shares
Held as at the date of this report by directors
and their director-related entities in:
BPH Energy Limited
Other Equity Instruments
Options
Held as at the date of this report by directors
and their director-related entities in:
BPH Energy Limited
Parent
2014
No.
2013
No.
6,990,580
7,471,349
1,500,000
1,500,000
bph energy | ANNUAL REPORT 2014
75
Notes to the Financial Statements
for the year ended 30 June 2014
25. Related Party Transactions (continued)
(d)
Directors
The Company has an agreement with Trandcorp Pty Limited on normal commercial terms procuring the
services of David Breeze to provide product development services. $98,000 (2013: $98,000) was paid
during the year.
(e)
Interest in Associates
A loan receivable exists between BPH Energy and MDSystems $575,200 (2013: $461,100). This amount is
unsecured, non interest bearing and repayable on demand.
A loan payable exists between BPH Energy and MDSystems $61,310 (2013: $61,310). This amount is
unsecured, non interest bearing and repayable on demand.
A convertible loan agreement exists between BPH Energy and MDSystems. The loan is for a maximum
amount of $500,000 and is to be used for short term working capital requirements. Subject to MDSystems
being admitted to the Official list, BPH Energy has a right of conversion to satisfy the debt on or before
the termination date. As at reporting date, the loan has been drawn down by an amount of $416,099
(2013: $397,690). Interest charged on the loan totalled $23,408 (2013: $46,700).
During the year, BPH Energy provided consultancy services to MDSystems of $114,100
(2013: $114,100).
A loan payable exists between Advent Energy and BPH Energy of $39,486 (2013: $39,486). This amount is
unsecured, non interest bearing and repayable on demand.
(f) Other
Cortical Dynamics is a related party of BPH Energy. Refer to Note 10 for the investment and loan
receivables it has with the company.
76
bph energy | annual report 2014
HEALTH
TECHNOLOGY
RESOURCES
26. Share-Based Payments
The following share-based payment arrangements existed at 30 June 2014:
Total number
Grant Date
Exercise price
75,000
25 September 2009
1,500,000
24 December 2009
325,000
1,075,000
2,975,000
21 January 2011
1 July 2013
$0.594
$0.894
$0.160
$0.080
Fair value
at grant date
$0.0423
$0.0266
$0.0220
$0.0013
Expiry date
30 September 2014
31 December 2014
21 January 2016
30 June 2018
All options granted to key management personnel are to purchase ordinary shares in BPH Energy Limited, which
confer a right of one ordinary share for every option held.
Outstanding at the beginning of
the year
Granted
Forfeited
Expired
Cancelled
Outstanding at year-end
Exercisable at year-end
Number of
Options
2,400,000
1,075,000
-
(500,000)
-
2,975,000
2,258,333
Consolidated Group
2014
2013
Weighted
Average Exercise
Price
$
0.68
0.08
-
0.29
-
0.51
0.65
Number of
Options
4,075,000
-
-
(1,375,000)
(300,000)
2,400,000
2,291,667
Weighted
Average Exercise
Price
$
0.25
-
-
0.24
0.16
0.66
0.68
No options were exercised during the year ended 30 June 2014 (2013: nil).
Included under employee benefits expense in the profit and loss is $16,080 (2013: $3,056), and relates, in full,
to equity.
bph energy | ANNUAL REPORT 2014
77
Notes to the Financial Statements
for the year ended 30 June 2014
27. Commitments and Contingencies
At reporting date there are no contingent liabilities.
28. Parent Entity Disclosures
Financial Position
Assets
Current assets
Non-current assets
Total asset
Liabilities
Current liabilities
Non-current liabilities
Total liabilities
Equity
Issued Capital
Retained earnings
Reserves
Option Reserve
Asset Revaluation Reserve
Total equity
Financial Performance
Profit/Loss for the year
Other comprehensive income
Total comprehensive income
78
bph energy | annual report 2014
Parent
2014
$
2013
$
306,407
3,531,426
52,700,498
50,686,130
53,006,905
54,217,556
1,439,629
714,411
3,675,724
4,361,115
5,115,353
5,075,526
41,511,195
41,511,195
(9,070,369)
(7,803,811)
435,726
419,646
15,015,000
15,015,000
47,891,552
49,142,030
(1,266,558)
(662,697)
-
-
(1,266,558)
(662,697)
29. Tax
(a)
Liabilities
Current
Income tax
Non Current
Deferred tax liabilities comprises:
Prepayments
Fair value gain adjustments
(b)
Assets
Deferred tax assets comprise:
Provisions
Accrued expenses
Tax losses
(c) Deferred tax
Deferred tax balances are presented in the
statement of financial position as follows:
Deferred tax assets
Deferred tax liabilities
Closing balance
HEALTH
TECHNOLOGY
RESOURCES
Consolidated
2014
$
2013
$
-
-
8,359
3,442
6,023,740
6,290,673
6,032,099
6,294,115
8,387
6,562
7,229
190,953
2,433,860
2,196,277
2,448,809
2,394,459
2,448,809
2,394,459
(6,032,099)
(6,294,115)
(3,583,290)
(3,899,656)
bph energy | ANNUAL REPORT 2014
79
Directors’ Declaration
The directors of the company declare that:
1.
the financial statements and notes, as set out on pages 39 to 79 are in accordance with the Corporations
Act 2001 and:
(a) comply with Accounting Standards and the Corporations Regulations 2001 and other mandatory
professional reporting requirements;
(b) give a true and fair view of the financial position as at 30 June 2014 and of the performance for the
year ended on that date of the consolidated entity;
2.
3.
in the Directors’ opinion, there are reasonable grounds to believe that the company will be able to pay its
debts as and when they become due and payable:
the financial statements and notes comply with International Financial Reporting Standards as disclosed in
Note 1.
4.
the directors have been given the declarations required by S295A of the Corporations Act 2001.
Signed in accordance with a resolution of the directors made pursuant to S295(5) of the
Corporations Act 2001.
David Breeze
Executive Chairman
Dated this 13th day of August 2014
80
bph energy | annual report 2014
HEALTH
TECHNOLOGY
RESOURCES
Independent Auditor’s Report
Independent auditor’s report to the members of BPH Energy Limited
Report on the financial report
We have audited the accompanying financial report of BPH Energy Limited, which comprises the consolidated
statement of financial position as at 30 June 2014, and the consolidated statement of profit or loss and other
comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash
flows for the year ended on that date, a summary of significant accounting policies, other explanatory notes and
the directors’ declaration of the consolidated entity comprising the company and the entities it controlled at the
year’s end or from time to time during the financial year.
Directors’ responsibility for the financial report
The directors of the company are responsible for the preparation and fair presentation of the financial report in
accordance with the Australian Accounting Standards and the Corporations Act 2001. This responsibility includes
establishing and maintaining internal control relevant to the preparation and fair presentation of the financial
report that is free from material misstatement, whether due to fraud or error; selecting and applying appropriate
accounting policies; and making accounting estimates that are reasonable in the circumstances. In Note 1,
the directors also state that the financial report, comprising the financial statements and notes, complies with
International Financial Reporting Standards as issued by the International Accounting Standards Board.
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. Those 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, we consider internal controls relevant to the entity’s preparation and fair presentation of the
financial report 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 controls. 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 believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
audit opinion.
bph energy | ANNUAL REPORT 2014
81
Independent Auditor’s Report
Independent auditor’s report to the members of BPH Energy Limited (continued)
Independence
In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001.
We confirm that the independence declaration required by the Corporations Act 2001, which has been given to
the directors of BPH Energy Limited, would be in the same terms if given to the directors as at the time of this
auditor’s report.
Opinion
In our opinion:
(a) the financial report of BPH Energy Limited is in accordance with the Corporations Act 2001, including:
(i) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2014 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 1.
Emphasis of Matter
We draw attention to Note 13 to the financial statements which describes the uncertainty around the basis of
recognising the carrying value of an investment in an associate. Our opinion is not modified in respect of this
matter.
Report on the remuneration report
We have audited the remuneration report included in pages 22 to 25 of the directors’ report for the year ended
30 June 2014. 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 Australian Auditing
Standards.
Opinion
In our opinion, the remuneration report of BPH Energy Limited for the year ended 30 June 2014, complies with
Section 300A of the Corporations Act 2001.
Nexia Perth Audit Services Pty Ltd
Amar Nathwani B.Eng, CA
Director
Perth, 13 August 2014
82
bph energy | annual report 2014
HEALTH
TECHNOLOGY
RESOURCES
Additional Securities Exchange Information
Additional information required by Australian Securities Exchange Limited and not shown
elsewhere in this report as follows.
The information is made up to 11th August 2014
1.
Substantial Shareholder
The name of the substantial shareholder listed in the company’s register is:
Shareholder
MEC Resources Ltd
Shares
14,366,095
2.
(a) Distribution of Shareholders
Range of Holding
Shareholders
Number Ordinary
Shares
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
416
506
387
1,051
263
2,623
179,684
1,673,544
2,996,286
38,146,295
129,566,436
172,562,245
%
8.33
%
0.10
0.97
1.74
22.11
75.08
100.00
The number of shareholders with less than a marketable parcel is 2,193, holding in total 27,440,878 shares.
(b) Distribution of Unlisted Optionholders
Range of Holding
Shareholders
10,001 – 100,000
100,001 and over
3
5
10
Number Ordinary
Shares
225,000
2,750,000
2,975,000
%
7.56
92.44
100.00
3.
Voting Rights - Shares
All ordinary shares issued by BPH Energy Limited carry one vote per share without restriction.
4.
Voting Rights - Options
The holders of employee options do not have the right to vote.
5.
Restricted Securities
Shares
Number of Shares free of escrow
172,562,245
bph energy | ANNUAL REPORT 2014
83
Additional Securities Exchange Information
6.
Twenty Largest Shareholders as at 11th August 2014
The names of the twenty largest shareholders of the ordinary shares of the company are:
Name
MEC Resources Ltd
BT Portfolio Svcs Ltd
Trandcorp Pty Ltd
Gleneagle Sec Aust PL
JP Morgan Nom Aust Ltd
Lam Terry Luong
Grandbridge Limited
Jomot PL
Avatar Equities PL
Batras One PL
Pannu PL
Lam Terry L and Chan PS
Cottee Enid Ruth
Trandcorp Pty Ltd
Tre PL
Jamber Inv PL
Cox Leonard Keith and EM
Baruta Mark
Mccreed Simon Charles
Yewfong Co Pl
Number of ordinary
fully paid shares
% held of issued
ordinary capital
14,366,095
5,877,013
4,772,500
4,596,450
3,649,371
3,600,000
3,389,100
2,260,735
2,192,223
2,149,872
1,958,800
1,931,267
1,789,000
1,591,926
1,460,000
1,350,000
1,305,237
1,300,000
1,300,000
1,250,000
8.33
3.41
2.77
2.66
2.11
2.09
1.96
1.31
1.27
1.25
1.14
1.12
1.04
0.92
0.85
0.78
0.76
0.75
0.75
0.72
62,089,589
35.99
84
bph energy | annual report 2014
14 View Street, North Perth
Western Australia 6006
Telephone: (08) 9328 8366
Facsimile:
(08) 9328 8733
Email: admin@bphenergy.com.au
www.bphenergy.com.au
m
o
c
.
f
i
t
8
e
r
c
y
b
d
e
n
g
i
s
e
D