2016 ANNUAL REPORT HEALTH TECHNOLOGY RESOURCES For personal use only Company Information Directors David Breeze Chairman/Managing Director Thomas Fontaine Non-Executive Director Bruce Whan Non-Executive Director Greg Gilbert Non-Executive Director (appointed 4 March 2016) Scientific Advisors Professor Peter Klinken Professor David Liley Registered Office 14 View Street NORTH PERTH WA 6006 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 HLB Mann Judd Level 4 130 Stirling Street PERTH WA 6000 Share Registry Advanced Share Registry Limited 110 Stirling Highway NEDLANDS WA 6009 Australian Securities Exchange Listing Australian Securities Exchange Limited (Home Exchange: PERTH, Western Australia) ASX Code: BPH Australian Business Number 41 095 912 002 Contents Chairman’s Letter Company Focus and Developments Directors’ Report Auditor’s Independence Declaration Corporate Governance Statement Statement of Profit or Loss and Other Comprehensive Income Statement of Financial Position Statement of Changes in Equity Statement of Cash Flows Notes to the Financial Statements Directors’ Declaration Independent Auditor’s Report Additional Securities Exchange Information 1 3 13 27 28 29 30 31 32 33 64 65 67 For personal use only Chairman’s Letter Dear Shareholder, Despite difficult market conditions continuing during 2016 there have been significant developments for the company’s investments with some notable achievements being made. Cortical Dynamics Ltd Molecular Discovery Systems Ltd 2016 was an exciting year for our investee company, Cortical Dynamics Ltd (“Cortical”), which achieved a major milestone in the commercialisation of its Brain Anaesthesia Response (“BAR”) Monitor. During the year it received notification from the Therapeutic Goods Administration (“TGA”) that a decision was made to issue a conformity assessment certificate to Cortical under section 41EC of the Therapeutic Goods Act 1989. In addition to this Cortical also received notification that it would be issued MRA EC certification (“CE Mark”) under the Mutual Recognition Agreement (MRA) with the European Union therefore allowing the CE mark to be applied to the BAR monitor. Having achieved TGA certification and the CE Mark, Cortical is now able to market the BAR monitor within Australia and Europe for clinical applications. Further to the above, Cortical signed a Letter of Intent (“LOI”) with Device Technologies Australia (“Device”) for the BAR Monitor. Under the LOI, Device will have exclusive distribution rights for Australia and New Zealand for the sale of products for a period of six (6) months. Subject to the overall market assessment outcome, Device will have the right to continue the exclusive distribution rights for an additional 4 and a half (4.5) years. Cortical is now focussed on commercial sales, distribution and development of the market in Europe as well as other markets where the CE Mark now enables commencement of sales. The team at the Perkins Institute continued their research activities for the gene target HLS5 during the year making further developments. In a significant further phase of this research the Perkins Institute researchers developed a pre-clinical model of liver cancer and were able to demonstrate, in this model, that removing the expression of HLS5 (also known as TRIM35) accelerated the development of liver disease. The focus of this work was to: 1. Understand how reduced expression of HLS5 (TRIM35) influences biochemical and molecular pathways resulting in the development of liver cancer. 2. Develop molecules that can increase HLS5 (TRIM35) expression to overcome this deficit in liver cancer patients. Importantly, lead compounds from a chemical library screen have been identified, which increase the activity of the HLS5 (TRIM35) gene. Research undertaken by the Perkins Institute team, and laboratories in China, has revealed that HLS5 (TRIM35) is capable of slowing the growth of tumour cells in culture, including suppression of liver cancer cells. It is anticipated that the work currently being undertaken by the Perkins Institute researchers will be prepared for publication. The development of this pre- clinical model may enable Molecular Discovery Systems to pursue research and partnering relationships with a significant new range of collaborators and investors. 1 BPH ENERGY | 2016 ANNUAL REPORTHEALTH TECHNOLOGY RESOURCESFor personal use only Chairman’s Letter Advent Energy Ltd Prior to the election, the Coalition government announced a funding package of $130 million for regional roads in the Northern Territory conditional upon its re-election. This package included the construction of an all-weather highway to upgrade the existing unsealed Keep River Road. The Keep River Road runs through Advent Energy’s RL1 permit and within 4.5km of the 45.8 Bcf (3C contingent resource level) Weaber Gas Field in the Northern Territory. Its promised upgrade would provide much needed stimulus to the region north and east of Kununurra in Western Australia. Potential projects to benefit include the planned Project Sea Dragon aquaculture development, the expanded Ord River irrigation scheme, and the potential development of the Weaber Gas Field in RL1. We strongly encourage the elected Government to rapidly develop this crucial infrastructure by this investment in the north of Australia that was initiated through the Northern Australia Infrastructure Facility, especially including the upgrade of the Keep River Road. Advent Energy Ltd is pushing ahead with a seismic acquisition survey around a key drilling prospect in PEP11, in the offshore Sydney Basin. Your Company is highly supportive of this activity considering the present conditions in Australia’s east coast gas 2 market. Developed gas reserves will fail to meet market demand as early as 2019 as reported by the Australian Energy Market Operator, and the NSW and Victorian governments effectively ruling out progressive exploration efforts in those states. Further heightening the excitement around the PEP11 project is the recent gas pricing observed in the eastern markets. The Sydney wholesale spot gas price recently rose to nearly $29 per gigajoule as a result of winter energy demand and the expansion of LNG exportation in Queensland. As a result of the developments of our investee companies we are now looking forward to an exciting year in 2017 and we are excited to see what lies ahead. We once again thank you for your continued support in these difficult conditions and look forward to providing you with further updates as our investments continue on their paths. Yours Sincerely, Mr David Breeze Chairman BPH ENERGY | 2016 ANNUAL REPORTFor personal use only Company Focus and Developments Molecular Discovery Systems HLS5 Technology Molecular Discovery Systems (“MDSystems”) is working with the Molecular Cancer Research Group at the Harry Perkins Institute of Medical Research to validate HLS5 as a novel tumour suppressor gene, particularly for liver cancer. The researchers at the Perkins Institute originally identified HLS5 (TRIM35) as a tumour suppressor associated with leukemia. However, in a separate study conducted in China, low levels of HLS5 (TRIM35) was found to correlate with human liver cancer development, and that reduced HLS5 (TRIM35) expression could potentially be used as prognostic marker for the disease. In a significant further phase of this research the Perkins Institute researchers have developed a pre-clinical model of liver cancer and have demonstrated, in this model that removing the expression of HLS5 (TRIM35) can accelerate the development of liver disease. Research undertaken by the Perkins Institute team, and laboratories in China, has revealed that HLS5 (TRIM35) is capable of slowing the growth of tumour cells in culture, including suppression of liver cancer cells. Liver cancer ranks as the second leading cause of cancer-related deaths in developing countries. An estimated 782,500 new cases of liver cancer and 745,500 deaths occurred worldwide in 2012, of which China alone accounted for almost 50% of cases. While survival rates for many cancers have improved over the past two decades, there has been no major improvement in liver cancer prognosis. Liver cancer also looms as one of Australia’s greatest cancer challenges, with new analyses predicting increased mortality from the disease in the future. At present, limited treatment options exist for patients with liver cancer. Drug Discovery and High-Content Screening Technology MDSystems 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 and is ideally suited for screening compounds that modulate complex cellular responses. The IN Cell Analyser 1000 is utilised for the discovery and development of new cancer drugs. However, in 2014 after careful consideration of general market conditions and available resources, MDSystems made a decision to indefinitely suspend its early stage drug discovery program. This change was made effective from July 2014. 3 BPH ENERGY | 2016 ANNUAL REPORTHEALTH TECHNOLOGY RESOURCESFor personal use only Company Focus and Developments 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. 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. 4 BPH ENERGY | 2016 ANNUAL REPORTFor personal use only 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. During the year Cortical has achieved a major milestone in the commercialisation of its BAR monitor. Cortical received notification from the Therapeutic Goods Administration (“TGA”) that a decision was made to issue a conformity assessment certificate to Cortical under section 41EC of the Therapeutic Goods Act 1989. In addition to this Cortical also received notification that to it would be issued MRA EC certificates (“CE Mark”) under the Mutual Recognition Agreement (MRA) with the European Union therefore allowing the CE mark to be applied to the BAR monitor. Having achieved TGA certification and the CE Mark, Cortical is now able to market the BAR monitor within Australia and Europe. In addition the above milestone achievement Cortical signed a Letter of Intent (“LOI”) with Device Technologies Australia (“Device”) for the BAR Monitor. Under the LOI Device have exclusive distribution rights for Australia and New Zealand for the sale of products for a period of six (6) months. Subject to the overall market assessment outcome Device will have the right to continue the exclusive distribution rights for an additional 4 and a half (4.5) years. 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), Europe (4701863.5), Japan (4693763) and the United States (7937138). The patent “Brain Function Monitoring and Display System” has been issued in New Zealand (573460), Europe (7719043.7), Japan (5194290), Australia (2007257335) and the United States (8175696). Additionally, the patent “EEG Analysis System” has been issued in New Zealand (573459), Australia (2007257336), Europe (7719044.5), 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) and Europe (7815566). 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’. 5 BPH ENERGY | 2016 ANNUAL REPORTHEALTH TECHNOLOGY RESOURCESFor personal use only Company Focus and Developments 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. Advent Energy Western Australia / Northern Territory – Onshore Bonaparte Basin Advent Energy Ltd (“Advent”), through wholly owned subsidiary Onshore Energy Pty Ltd, holds 100% of each of EP 386 and RL 1 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. The Bonaparte Basin is currently Australia’s third most prolific offshore hydrocarbon-producing basin (after the Northern Carnarvon and Gippsland basins) with 4.2 MMbbl (0.7Gl) of oil and 153.1Bcf (4.3 Bcm) of gas produced in 2010. Advent holds Exploration Permit EP 386 (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 EP 386 and only sixteen in the whole of the onshore basin, with a resultant excellent technical success rate of encountering hydrocarbons. 6 BPH ENERGY | 2016 ANNUAL REPORTFor personal use only Location of EP 386 and RL1 including Weaber, Waggon Creek and Vienta gas fields, and other prospects and leads. 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. Production testing of the Waggon Creek-1 well has demonstrated flows of over 1 million standard cubic feet of natural gas per day (MMscf/d), and a gas column over a 217 metre gross interval. Production testing of the Vienta-1 well has demonstrated flows of over 2 MMscf/d. Gas production at Waggon Creek was from zones less than 1000m sub surface. Within EP386, recoverable resource estimates range from 53.3 Bcf (Low) to 1,326.3 Bcf (High) of Prospective Resources, with a Best Estimate of 355.9 Bcf of gas. Application has been made to the Western Australian Department of Mines and Petroleum (DMP) for a variation, suspension and extension to the conditions and term of the EP386 permit. This application is pending as of the date of writing. In the NT, Advent holds Retention Licence RL1 (166 square kilometres in area), which covers the Weaber Gas Field, originally discovered in 1985. 7 BPH ENERGY | 2016 ANNUAL REPORTHEALTH TECHNOLOGY RESOURCESFor personal use only Company Focus and Developments Western Australia / Northern Territory – Onshore Bonaparte Basin (continued) Advent 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. 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 to potentially develop its nearby gas resources. Market studies have identified a current market demand of up to 30.8 TJ per day of power generation capacity across the Kimberley region that could potentially be supplied by Advent’s conventional gas projects in EP386 and RL1. In addition, the Federal Government’s White Paper on Developing Northern Australia described an estimated increase in electricity consumption of 52 per cent by 2018 for northern Western Australia. 8 BPH ENERGY | 2016 ANNUAL REPORTFor personal use only The release of the Federal Government’s White Paper on Developing Northern Australia provides great confidence for an ongoing expansion of the east Kimberley region. The Commonwealth Government is providing a new $5 billion Northern Australian Infrastructure Facility to provide concessional loans for the construction of major infrastructure such as ports, roads, rail, pipelines, electricity and water supply. This will greatly assist Advent in further market development and potential reduced costs through the government funded infrastructure developments that may improve roads and ports in the vicinity of Advent’s EP386 and RL1 resources. Prior to the election, the Coalition government announced a $130 million funding package for regional roads in the Northern Territory conditional upon its re-election. This package included the construction of an all-weather highway on the Keep River Road. The Keep River Road runs through Advent Energy’s RL1 permit and brings the highway to within 4.5km of our Weaber gas wells in the Northern Territory. Its promised upgrade would provide much needed stimulus to the region north and east of Kununurra in Western Australia. Potential projects to benefit include the planned Project Sea Dragon aquaculture development, the expanded Ord River irrigation scheme, and the potential development of our Weaber Gas Field in RL1. The Seafarms Group is progressing the potential development of Project Sea Dragon, a proposed world scale aquaculture operation adjacent to Advent’s EP386 and RL1 gas resources spanning the border of northern Western Australia and Northern Territory. Land access rights for Legune Station have been acquired by the Seafarms Group which will allow progression to application for regulatory approvals and commencement of a bankable feasibility study. A Letter Of Intent was signed by Advent Energy with the proponents of Project Sea Dragon in 2013 for the potential supply of energy to the aquaculture operation. In addition, Advent Energy signed an LOI with Northern Minerals in March 2016 for the potential supply of energy to their proposed heavy rare earth elements project, southeast of Halls Creek in Western Australia. Advent 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 the vicinity of this region. Production testing at Waggon Creek-1. 9 BPH ENERGY | 2016 ANNUAL REPORTHEALTH TECHNOLOGY RESOURCESFor personal use only Company Focus and Developments Garimala-1: Elevated Gas Shows over Milligans-Langfield Section 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. Unconventional Resources Within EP 386 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’s onshore EP386 and RL1 contain many large structures with conventional reservoir gas discoveries. Advent 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’s areas using enhanced computer processes. • Advent has indicated significant potential upside in prospective shale gas resou rces with estimated unrisked original gas in place (OGIP) in the range from 19 TCF to 141 TCF for the 100% Advent 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 Contact and mature for gas and oil generation; and • Advent has calculated a Prospective Resource (best estimate) of 9.8 TCF for the shale gas areas of the Bonaparte permits of EP386 and RL1. 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. 10 BPH ENERGY | 2016 ANNUAL REPORT For personal use only Advent 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. An 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 used a figure of only 120 feet (36 metres) as a shale thickness. Advent 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. The ACOLA report also used a total organic carbon (TOC) of 1.8% in deriving its assessment of shale source. Advent 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’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. PEP 11 Oil and Gas Permit Advent, through wholly owned subsidiary Asset Energy Pty Ltd, holds 85% of Petroleum Exploration Permit PEP 11 – an exploration permit prospective for natural gas located in the Offshore Sydney Basin. Joint Venture partner Bounty Oil & Gas NL holds the remaining 15%. PEP 11 is a significant offshore exploration area with large scale structuring and potentially multi-Trillion cubic feet (Tcf) gas charged Permo-Triassic reservoirs. 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. 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. Advent 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. 11 BPH ENERGY | 2016 ANNUAL REPORTHEALTH TECHNOLOGY RESOURCESFor personal use only Company Focus and Developments PEP 11 Oil and Gas Permit (continued) In addition, a new geochemical report was received during the year that provided support for a potential exploration well in PEP11. The report reviewed the hydrocarbon analysis performed on sediment samples obtained with PEP11 during 2010. The 2010 geochemical investigation utilised a proprietary commercial hydrocarbon adsorption and laboratory analysis technique to assess the levels of naturally occurring hydrocarbons in the seabed sediment samples. The report supports that the area surrounding the proposed drilling site on the Baleen prospect appears best for hydrocarbon influence relative to background samples. In addition, the report found that the Baleen prospect appears to hold a higher probability of success than other prospects. Importantly, “a recent review of more than 850 wildcat wells – all drilled after geochemical surveys – finds that 79% of wells drilled in positive anomalies resulted in commercial oil and gas discoveries.” (Surface geochemical exploration for oil and gas: New life for an old technology, D. Schumacher, 2000, The Leading Edge) Advent has demonstrated considerable gas generation and migration within PEP11, with the mapped prospects and leads highly prospective for the discovery of gas. Heightening the prospectivity and critical positioning of PEP11, the Australian Energy Market Operator warned during the year that the developed gas reserves in eastern and south-eastern Australia can only meet forecast demand until 2019. The NSW onshore gas industry is in turmoil and gas reserves are declining in the Bass Strait and Cooper Basin. The east coast gas prices have recently hit staggering prices, due to gas shortages as a result of winter temperatures and LNG exports from Gladstone, Queensland. Spot prices on wholesale markets in Sydney have reached nearly $29 per gigajoule, as reported in the Australian Financial Review (1st July 2016). Advent is pushing ahead with a focussed seismic campaign around a key potential drilling prospect in PEP11, in the offshore Sydney Basin. A high resolution 2D seismic survey covering approximately 200 line km will be performed to assist in the drilling of the Baleen target approximately 30 km south east of Newcastle, New South Wales. A drilling target on the Baleen prospect with total depth of 2150 metres has been identified in a review of previous seismic data. Intersecting 2D lines suggest an extrapolated 6000 acre (24.3 km2) seismic amplitude anomaly area at that drilling target. The report on this drilling target noted previous 2D seismic data showed that the Permian aged section of the Bowen Basin has producing conventional gas fields at a similar time and depth to PEP11 at the Triassic/Permian age boundary. Ocean bottom seismographs or nodes (OBS) are being considered for deployment in association with the planned seismic program in PEP11. Application has been made to Geoscience Australia for their potential use in PEP11. Geoscience Australia is home to a new generation of broadband OBS, which are precise and highly advanced instruments engineered to withstand ocean depths down to 6000m and can remain on the seafloor continuously recording for up to 12 months. An OBS can be deployed prior to or during acquisition of traditional seismic surveys. They have the benefit of a direct coupling with the seabed, thereby eliminating the noise associated with seismic wave travel through the water column, leading to improved data quality. In conjunction with surface towed seismic surveys, an OBS program can yield a much more robust image of the subsurface than previously known. 12 BPH ENERGY | 2016 ANNUAL REPORTFor personal use only 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 2016. Directors The names of directors in office at any time during or since the end of the year are: D L Breeze T Fontaine B Whan G Gilbert (appointed 4 March 2016) 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 Group during the financial year were investments in biotechnology entities and an oil and gas exploration entity. Operating Results The consolidated loss of the Group after providing for income tax was $511,446 (2015: loss $26,490,513). 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. Review of Operations Investment in Oil and Gas Exploration Company Advent Energy Ltd (“Advent”): BPH Energy currently holds an interest of 27% in unlisted Australian exploration company Advent Energy Ltd (“Advent”). Advent has assembled a range of hydrocarbon permits which contain near term production opportunities with pre-existing infrastructure and exploration upside. Advent’s assets include EP386 and RL1 (100%) in the onshore Bonaparte Basin in the north of Western Australia and Northern Territory and PEP11 (85%) in the offshore Sydney Basin. Advent 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). 13 BPH ENERGY | 2016 ANNUAL REPORTHEALTH TECHNOLOGY RESOURCESFor personal use only Directors’ Report Review of Operations Advent Energy Ltd (“Advent”) (continued): 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’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 to potentially develop its nearby gas resources for the benefit of the region along with Advent and its shareholders. The Sydney Basin is a proven petroleum basin with excellent potential for the discovery of gas and oil. Advent 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 gross 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. PEP 11 lies adjacent to the most populous region of Australia and the major industrial hub and port of Newcastle. Investment in Biotechnology Companies BPH Energy’s existing Biotechnology investments include its 3.8% 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”) MDSystems was established to acquire high content information from large scale sample analysis to create a range of direct and indirect commercial opportunities. Research and development is focused on oncology drug discovery and further validating HLS5 as a novel tumour suppressor gene. Drug Discovery: MDSystems 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 and is ideally suited for screening compounds that modulate complex cellular responses. The IN Cell Analyser 1000 is utilised for the discovery and development of new cancer drugs. However, in 2014 after careful consideration of general market conditions and available resources, MDSystems made a decision to indefinitely suspend its early stage drug discovery program. This change was made effective from July 2014. 14 BPH ENERGY | 2016 ANNUAL REPORTFor personal use only HLS5 Project: MDSystems is working with the Molecular Cancer Research Group at the Harry Perkins Institute of Medical Research to validate HLS5 as a novel tumour suppressor gene, particularly for liver cancer. The researchers at the Perkins Institute originally identified HLS5 (TRIM35) as a tumour suppressor associated with leukemia. However, in a separate study conducted in China, low levels of HLS5 (TRIM35) was found to correlate with human liver cancer development, and that reduced HLS5 (TRIM35) expression could potentially be used as prognostic marker for the disease. In a significant further phase of this research the Perkins Institute researchers have developed a pre-clinical model of liver cancer and have demonstrated, in this model that removing the expression of HLS5 (TRIM35) can accelerate the development of liver disease. Research undertaken by the Perkins Institute team, and laboratories in China, has revealed that HLS5 (TRIM35) is capable of slowing the growth of tumour cells in culture, including suppression of liver cancer cells. Liver cancer ranks as the second leading cause of cancer-related deaths in developing countries. An estimated 782,500 new cases of liver cancer and 745,500 deaths occurred worldwide in 2012, of which China alone accounted for almost 50% of cases. While survival rates for many cancers have improved over the past two decades, there has been no major improvement in liver cancer prognosis. Liver cancer also looms as one of Australia’s greatest cancer challenges, with new analyses predicting increased mortality from the disease in the future. At present, limited treatment options exist for patients with liver cancer. Cortical Dynamics Limited (“Cortical”): Cortical 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. During the year Cortical has achieved a major milestone in the commercialisation of its Brain Anaesthesia Response Monitor (BAR). Cortical received notification from the Therapeutic Goods Administration (“TGA”) that a decision was made to issue a conformity assessment certificate to Cortical under section 41EC of the Therapeutic Goods Act 1989. In addition to this Cortical also received notification that to it would be issued MRA EC certificates (“CE Mark”) under the Mutual Recognition Agreement (MRA) with the European Union therefore allowing the CE mark to be applied to the BAR monitor. Having achieved TGA certification and the CE Mark, Cortical is now able to market the BAR monitor within Australia and Europe. Further to the above Cortical signed a Letter of Intent (“LOI”) with Device Technologies Australia (“Device”) for the BAR Monitor. Under the LOI Device will have exclusive distribution rights for Australia and New Zealand for the sale of products for a period of six (6) months. Subject to the overall market assessment outcome Device will have the right to continue the exclusive distribution rights for an additional 4 and a half (4.5) years. 15 BPH ENERGY | 2016 ANNUAL REPORTHEALTH TECHNOLOGY RESOURCESFor personal use only Directors’ Report Financial Position The Consolidated Group has incurred a net loss for the year ended 30 June 2016 of $511,446 (2015: loss of $26,490,513) and has a net cash outflow from operating activities of $218,606 (2015: $424,043). The Group has a working capital deficit of $1,988,138 (note 17 b) (2015: $1,546,221). The net assets of the Consolidated Group decreased by $425,389 to $20,314,026 at 30 June 2016. Included in trade creditors and payables is director fee accruals of $1,151,613 (2015: $947,380). The directors have reviewed their expenditure and commitments for the Consolidated Group 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. On 1 June 2016 BPH announced a Share Purchase Plan. Under the SPP eligible shareholders would be entitled to purchase up to a maximum of $15,000 worth of shares at a price of $0.00533 per share. The offer was capped to a maximum of 30% of the Company’s share capital. The plan closed on 5 July 2016 significantly oversubscribed with an amount of approximately $374,000 being raised. Further to the SPP the Company also undertook a placement to professional and sophisticated investors who were existing shareholders of the Company. Under the placement a further $245,000 was raised. The directors have prepared cash flow forecasts that indicate that the Consolidated Group will have sufficient cash flows for a period of at least 12 months from the date of this report. Based on the cash flow forecasts including directors voluntarily suspending cash payments for their director fees 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. Significant Changes in State Of Affairs The major activities throughout the period were: • During the year Cortical received notification from the Therapeutic Goods Administration (“TGA”) that a decision was made to issue a conformity assessment certificate to Cortical under section 41EC of the Therapeutic Goods Act 1989. In addition to this Cortical also received notification that to it would be issued MRA EC certificates (“CE Mark”) under the Mutual Recognition Agreement (MRA) with the European Union therefore allowing the CE Mark to be applied to the BAR monitor. Having achieved TGA certification and the CE Mark, Cortical is now able to market the BAR monitor within Australia and Europe. • During the period the results from the clinical trial written by Cortical’s principal research scientist Dr Mehrnaz Shoushtarian, “Evaluation of the Brain Anaesthesia Response Monitor during anaesthesia for cardiac surgery: a double-blind, randomised controlled trial using two doses of fentanyl” were accepted for publication in the Journal of Clinical Monitoring and Computing. • During the period the poster entitled “Comparisons of EEG measures of Hypnosis and Anti-Nociception in Response to Stimuli During Propofol Remifentanil Anesthesia” was presented at the 2015 Annual Meeting of the American Society of Anesthesiologists in San Diego. The paper was presented by Mr Marko Sahinovic who was one of the co-authors on this paper with Cortical’s principal research scientist Dr Mehrnaz Shoushtarian. 16 BPH ENERGY | 2016 ANNUAL REPORTFor personal use only • During the period Cortical Dynamics successfully completed a small scale offering to existing shareholders of the company. A total of 1,005,000 shares were issued at $0.10 per share raising $100,500 for the Company. • During the period Cortical Dynamics signed a letter of intent (“LOI”) with Device Technologies Australia Pty Ltd (“Device”). Under the LOI Device will have exclusive distribution rights for Australia and New Zealand for the sale of products for a period of six (6) months. Subject to the overall market assessment outcome Device will have the right to continue the exclusive distribution rights for an addition 4 and a half (4.5) years. • On 28 January 2016 Advent announced that the National Offshore Petroleum Titles Administrator (NOPTA) had approved a suspension of the PEP11 Year 2 work program of a 200 km 2D seismic survey and geotechnical studies until 12th August 2016. Further application has been made to NOPTA to allow the planned seismic program to occur in 2017. As at the time of writing this report, that application is still pending. • Following application by Onshore Energy Pty Ltd the WA Department of Mines & Petroleum granted a suspension of the condition requiring the completion of the existing work commitments for a period of twelve (12) months to 31 March 2017. • Advent signed a Letter Of Intent (“LOI”) with Northern Minerals (ASX: NTU) for the potential future supply of gas to their Browns Range heavy rare earth element project in north-eastern Western Australia. The non- binding LOI provides an initial framework for discussion, information sharing and negotiation towards a possible gas supply agreement. • During the period Asset Energy Pty Ltd executed a contract for the seismic activities within PEP11 in the offshore Sydney Basin. The contracted vessel will perform a high resolution 2D seismic survey covering approximately 200 line km to assist in the drilling of the Baleen target approximately 30 km south east of Newcastle, New South Wales. • The Molecular Cancer Research Group at the Harry Perkins Institute of Medical Research continued with their research of HLS5 during the year. In a significant further phase of this research the Perkins Institute researchers have developed a pre-clinical model of liver cancer and have demonstrated, in this model that removing the expression of HLS5 (TRIM35) can accelerate the development of liver disease. After Balance Date Events On the 1st June 2016 BPH announced a Share Purchase Plan. Under the SPP eligible shareholders would be entitled to purchase up to a maximum of $15,000 worth of shares at a price of $0.00533 per share. The offer was capped to a maximum of 30% of the Company’s share capital. The plan closed on 5 July 2016 significantly oversubscribed with an amount of approximately $374,000 being raised. Further to the SPP the Company also undertook a placement to professional and sophisticated investors who were existing shareholders of the Company. Under the placement a further $245,000 was raised. 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. Future Developments The Company 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. 17 BPH ENERGY | 2016 ANNUAL REPORTHEALTH TECHNOLOGY RESOURCESFor personal use only Directors’ Report Information on Directors D L Breeze Managing Director and Executive Chairman – Age 62 Shares held – 17,945,643 Unlisted Options held – nil 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; and held executive and director positions in the stock broking industry. 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. T Fontaine Executive Director – Age 51 Shares held – 2,192,223 Unlisted Options held – 2,000,000 Tom is a reservoir engineer with over 25 years of experience in project evaluation management, development and capital raising. Tom has been part owner of petroleum engineering companies Epic Consulting in Canada and Focal Petroleum in Australia and has provided technical services to many companies worldwide. He is also primarily responsible for the startup and subsequent listing on the Australian Stock Exchange of Bounty Oil & Gas NL in 2002, and Coal Bed Methane Company Pure Energy Resources Pty Ltd in 2006 which was acquired in 2009 by BG Group PLc in a $1 billion takeover. Tom is also currently involved with several small exploration companies in Canada, Russia, Cuba, Nepal, Timor Leste and Africa. 18 BPH ENERGY | 2016 ANNUAL REPORTFor personal use only B Whan Non-Executive Director – Age 67 Shares held – nil Unlisted Options held – 2,000,000 Bruce Whan, BEng, PhD, FAICD, has a background in industry covering a range of research, operations and management positions, followed by a long career in the management of innovation and commercialisation of R&D, in particular from the public research sector. For 12 years he was a Director of Swinburne Knowledge and CEO of Swinburne Ventures Limited, Swinburne University’s commercialisation company. Bruce was a member of the Commercialisation Australia board and has been director of several companies, mostly start-ups out of Swinburne, and for 10 years was Chairman of the Victorian Innovation Centre Limited (INNOVIC), a non-profit company assisting innovators at all levels. He is also a Director of one Cooperative Research Centre. Bruce has in-depth knowledge and working experience of the challenges of the innovation process and of bringing the outputs of R&D through the commercialisation process to successful market entry. Bruce is also a Director of Molecular Discovery Systems Limited and Cortical Dynamics Limited. G Gilbert (appointed 4 March 2016) Executive Director – Age 68 Shares held – nil Unlisted Options held – nil Greg is a specialist in strategy and planning and most recently was the Science Adviser to the Federal Minister for Industry and Science. 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. He is currently undertaking a doctorate with a research interest in productivity efficiency. Greg has an extensive background in the health and aged care sector as well as in merchant banking and banking, having held the positions in global strategy and finance with the National Australia Bank, as well as having worked in executive roles with Capel Court Investment Bank, and CIBC Australia Limited. 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. 19 BPH ENERGY | 2016 ANNUAL REPORTHEALTH TECHNOLOGY RESOURCESFor personal use only Directors’ Report Remuneration Report (Audited) This report details the nature and amount of remuneration for key management personnel of BPH Energy. The remuneration report details the remuneration arrangements for key management personnel who are defined as those persons having authority and responsibility for planning, directing and controlling the major activities of the Group, directly or indirectly, including any Director (whether executive or otherwise) of the Group. This information provided in this remuneration report has been audited as a required by Section 308(3C) of the Corporations Act 2001. Key Management Personnel The Directors and other key management personnel of the Group during or since the end of the financial year were: D L Breeze – Executive Chairman and Managing Director T Fontaine – Non Executive Director G Gilbert – Non Executive Director (appointed 4 March 2016) B Whan – Non-Executive Director D Ambrosini – 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 2015 financial accounts was adopted at the Company’s 2015 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 Company, 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 Company 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 Company’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. 20 BPH ENERGY | 2016 ANNUAL REPORTFor personal use only 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. 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 Company. 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 not lapse. The remaining directors are consultants to BPH Energy and each party can terminate their services by written notice. Details of Remuneration for the year ended 30 June 2016 The remuneration for each key management personnel of the consolidated entity during the year was as follows: 2016 Key Management Person Short-term Benefits Post-employment Benefits Salary and fees Bonus Non-cash benefit Other Superannuation D L Breeze T Fontaine B Whan G Gilbert D Ambrosini 148,000 25,000 25,000 8,333 - - - - - - - - - - - - - - - - - - - - - 21 BPH ENERGY | 2016 ANNUAL REPORTHEALTH TECHNOLOGY RESOURCESFor personal use only Directors’ Report Details of Remuneration for the year ended 30 June 2016 (continued) 2016 (continued) Key Management Person Long-term Benefits Share-based payment Total Performance Related Compensation Relating to Options D L Breeze H Goh T Fontaine B Whan D Ambrosini 2015 Other Equity Options $ - - - - - - - - - - - 148,000 14,000 - - - 39,000 25,000 8,333 - % - - - - - % - 36 - - - Key Management Person Short-term Benefits Post-employment Benefits Salary and fees Bonus Non-cash benefit Other Superannuation 148,000 20,833 4,167 10,417 14,583 - - - - - - - - - - - - - - - - - - - - D L Breeze H Goh T Fontaine B Whan D Ambrosini 2015 (continued) Key Management Person Long-term Benefits Share-based payment Total Performance Related Compensation Relating to Options D L Breeze H Goh T Fontaine B Whan D Ambrosini Other Equity Options $ - - - - - - - - - - - 148,000 6,000 - 6,000 15,000 26,833 4,167 16,417 29,583 % - - - - - % - 22 - 37 50 22 BPH ENERGY | 2016 ANNUAL REPORTFor personal use only Interest in the shares and options of the Company and related bodies corporate The following relevant interests in shares and options of the Company or a related body corporate were held by Directors as at the date of this report Options and Rights Holdings 2016 Number of Options Held by Key Management Personnel Balance 1.7.2015 Granted as Compen- sation Options Exercised Net Change Other* Balance 30.6.2016 Total Vested 30.6.2016 Total Exercisable and Vested 30.6.2016 Total Unexercis- able 30.6.2016 D L Breeze T Fontaine B Whan G Gilbert - - - 2,000,000 2,000,000 - - - - - - - - - - - - - - - - - 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 - - - 2,000,000 2,000,000 2,000,000 - - - - - D Ambrosini 2,000,000 *The Net Change Other reflected above includes those options that have been forfeited by holders, directors that have resigned, options that have expired. Shareholdings 2016 Number of Shares Held by Key Management Personnel D L Breeze G Gilbert T Fontaine B Whan D Ambrosini Balance 1.7.2015 17,945,643 - 2,192,223 - - Received as Compensation Options Exercised Net Change Other* - - - - - - - - - - - - - - - Balance 30.6.2016 17,945,643 - 2,192,223 - - *The Net Change Other reflected above includes those shares of directors that have resigned or has been appointed during the year. 23 BPH ENERGY | 2016 ANNUAL REPORTHEALTH TECHNOLOGY RESOURCESFor personal use only Directors’ Report Share based payments: The following are the share payment arrangements in existence during the year: Grant Date 20 April 2015 Date of Expiry 31 March 2020 27 November 2015 30 November 2020 Fair Value at Grant Date $0.0030 $0.0070 Exercise Price Vesting Date $0.020 $0.020 At grant date At grant date There are no further service or performance criteria that need to be met in relation to options granted. The following grants of share based payment compensation to directors and senior management relate to the current financial year: Name Option Series Granted No. vested No. % of grant vested % of grant forfeited % of compensation for the year consisting of options T Fontaine 27 November 2015 2,000,000 2,000,000 100% - 35.89% The following table summarises the value of options granted, exercised or lapsed during the year to directors and senior management: Name T Fontaine Value of options granted at grant date (i) Value of options exercised at the exercise date Value of options lapsed at the date of lapse 14,000 Nil Nil No options were exercised during the year (2015: nil). During the year nil options lapsed (2015:1,500,000). End of remuneration report. 24 BPH ENERGY | 2016 ANNUAL REPORTFor personal use only 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 G Gilbert T Fontaine B Whan Directors’ Meetings Number eligible to attend Number attended 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 $24,338. • D Breeze • T Fontaine • B Whan • G Gilbert 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 2016 (2015: Nil). 25 BPH ENERGY | 2016 ANNUAL REPORTHEALTH TECHNOLOGY RESOURCESFor personal use only Directors’ Report 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 1 July 2013 2 April 2015 20 April 2015 30 June 2018 31 March 2020 31 March 2020 27 November 2015 30 November 2020 $0.08 $0.02 $0.02 $0.02 1,075,000 967,500 9,000,000 2,000,000 During the year ended 30 June 2016 nil ordinary shares of BPH Energy Ltd were issued on the exercise of options granted under the BPH Energy Ltd Incentive Option Scheme (2015: 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 2016 has been received and can be found on page 27. 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 26th August 2016 26 BPH ENERGY | 2016 ANNUAL REPORTFor personal use only Auditor’s Independence Declaration As lead auditor for the audit of the consolidated financial report of BPH Energy Limited for the year ended 30 June 2016, I declare that to the best of my knowledge and belief, there have been no contraventions of: a) b) the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and any applicable code of professional conduct in relation to the audit. Perth, Western Australia 26 August 2016 B G McVeigh Partner HLB Mann Judd (WA Partnership) ABN 22 193 232 714 Level 4, 130 Stirling Street Perth WA 6000. PO Box 8124 Perth BC 6849 Telephone +61 (08) 9227 7500. Fax +61 (08) 9227 7533. Email: hlb@hlbwa.com.au. Website: http://www.hlb.com.au Liability limited by a scheme approved under Professional Standards Legislation HLB Mann Judd (WA Partnership) is a member of International, a worldwide organisation of accounting firms and business advisers. 27 BPH ENERGY | 2016 ANNUAL REPORTHEALTH TECHNOLOGY RESOURCESFor personal use only Corporate Governance Statement The Board of Directors of BPH Energy Limited 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. A copy of the Company’s Corporate Governance Statement can be found on the Company’s website at www.bphenergy.com.au 28 BPH ENERGY | 2016 ANNUAL REPORTFor personal use only Statement of Profit or Loss and Other Comprehensive Income for the year ended 30 June 2016 Revenue from ordinary activities Other income Share of associates’ loss Impairment of investment in associate Administration expenses Provision against loans Consulting and Legal expenses Research and Development expenses Depreciation and amortisation expense Employee expense Insurance expenses Service Fees Other expenses Loss Before Income Tax Income tax benefit Loss for the Year 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 Loss attributable to non-controlling interests 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 10 3 3 Consolidated 2016 $ 2015 $ 181,758 224,420 3,000 - (161,787) (603,131) - (27,959,823) (116,932) (135,490) - (1,084,370) (140,188) (148,650) - (72) (716) (75) (123,303) (202,591) (21,151) (29,176) (116,945) (123,256) (15,826) (10,945) (511,446) (30,073,803) 14 - 3,583,290 (511,446) (26,490,513) - - - - (511,446) (26,490,513) (1,988) (2,803) (509,458) (26,487,710) (509,458) (26,487,710) (1,988) (2,803) 6 (0.22) (11.31) 29 BPH ENERGY | 2016 ANNUAL REPORTHEALTH TECHNOLOGY RESOURCESFor personal use only Note 7 8 10 9 10 13 11 12 15 16 Consolidated 2016 $ 111,648 8,155 97,625 24,417 2015 $ 98,562 4,071 97,625 27,313 241,845 227,571 2,289,308 2,108,025 19,915,966 20,077,753 72,454 72,454 22 94 22,277,750 22,258,326 22,519,595 22,485,897 1,217,748 1,013,259 987,818 733,220 2,205,566 1,746,479 2,205,566 1,746,479 20,314,029 20,739,418 17 18 41,828,904 41,759,904 15,501,707 15,484,650 (36,893,580) (36,384,122) (123,002) (121,014) 20,314,029 20,739,418 Statement of Financial Position as at 30 June 2016 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 Total 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. 30 BPH ENERGY | 2016 ANNUAL REPORTFor personal use only Statement of Changes in Equity for the year ended 30 June 2016 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 2014 41,511,195 (9,896,412) 435,726 15,015,000 47,065,509 (118,211) 46,947,298 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 Shares issued under Share Purchase Plan Shares issued to related party post approval at GM Employee options expense - (26,487,710) - - - (26,487,710) 203,709 45,000 - - - - - - - - 33,924 - - - - - - (26,487,710) (2,803) (26,490,513) - - - (26,487,710) (2,803) (26,490,513) 203,709 45,000 33,924 - - - 203,709 45,000 33,924 Balance at 30 June 2015 41,759,904 (36,384,122) 469,650 15,015,000 20,860,432 (121,014) 20,739,418 Balance at 1 July 2015 41,759,904 (36,384,122) 469,650 15,015,000 20,860,432 (121,014) 20,739,418 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 Shares issued under Share Purchase Plan Employee options expense (18a) - - - (509,458) - (509,458) - - - 69,000 - - - 17,057 - - - - - (509,458) (1,988) (511,446) - - - (509,458) (1,988) (511,446) 69,000 17,057 - - 69,000 17,057 Balance at 30 June 2016 41,828,904 (36,893,580) 486,707 15,015,000 20,437,031 (123,002) 20,314,029 The accompanying notes form part of these financial statements. 31 BPH ENERGY | 2016 ANNUAL REPORTHEALTH TECHNOLOGY RESOURCESFor personal use only Statement of Cash Flows for the year ended 30 June 2016 Cash Flows From Operating Activities Payments to suppliers and employees Income taxes paid Consolidated 2016 $ 2015 $ Note (219,083) (424,043) 477 - Net cash used in operating activities 20 (218,606) (424,043) Cash Flows From Investing Activities Loans to related parties Repayments received Net cash used in investing activities Cash Flows From Financing Activities Proceeds from issue of securities (net of share issue costs) Proceeds from borrowings Net cash provided by financing activities Net increase/(decrease) in Cash Held Cash at the Beginning of the Financial Year Cash at the End of the Financial Year 7 The accompanying notes form part of these financial statements. 2,692 (22,215) - 2,692 50,000 27,785 69,000 160,000 229,000 13,086 98,562 111,648 203,709 110,000 313,709 (82,549) 181,111 98,562 32 BPH ENERGY | 2016 ANNUAL REPORTFor personal use only Notes to the Financial Statements for the year ended 30 June 2016 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 26th August 2016 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 Group has incurred a net loss for the year ended 30 June 2016 of $511,446 (2015: loss of $26,490,513) and has a net cash outflow from operating activities of $218,606 (2015: $424,043). The Group has a working capital deficit of $1,988,138 (note 17 b) (2015: $1,546,221). The net assets of the Consolidated Group decreased by $425,389 to $20,314,026 at 30 June 2016. Included in trade creditors and payables is director fee accruals of $1,151,613 (2015: $947,380). The directors have reviewed their expenditure and commitments for the Consolidated Group 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. On 1 June 2016 BPH announced a Share Purchase Plan. Under the SPP eligible shareholders would be entitled to purchase up to a maximum of $15,000 worth of shares at a price of $0.00533 per share. The offer was capped to a maximum of 30% of the Company’s share capital. The plan closed on 5 July 2016 significantly oversubscribed with an amount of approximately $374,000 being raised. Further to the SPP the Company also undertook a placement to professional and sophisticated investors who were existing shareholders of the Company. Under the placement a further $245,000 was raised. The directors have prepared cash flow forecasts that indicate that the Consolidated Group will have sufficient cash flows for a period of at least 12 months from the date of this report. 33 BPH ENERGY | 2016 ANNUAL REPORTHEALTH TECHNOLOGY RESOURCESFor personal use only Notes to the Financial Statements for the year ended 30 June 2016 1. Statement of Significant Accounting Policies (continued) Financial Position (continued) Based on the cash flow forecasts including directors voluntarily suspending cash payments for their director fees 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. 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 19 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 statement of profit or loss and other comprehensive income, statement of changes in equity and statement of financial position 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 34 BPH ENERGY | 2016 ANNUAL REPORTFor personal use only 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. (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 profit or loss and other 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 Company 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 Company 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. 35 BPH ENERGY | 2016 ANNUAL REPORTHEALTH TECHNOLOGY RESOURCESFor personal use only Notes to the Financial Statements for the year ended 30 June 2016 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 Company 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 statement of profit or loss and other comprehensive income 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 statement of profit or loss. When revalued assets are sold, amounts included in the revaluation reserve relating to that asset are transferred to retained earnings. 36 BPH ENERGY | 2016 ANNUAL REPORTFor personal use only (d) Financial Instruments Recognition and Initial Measurement Financial instruments, incorporating financial assets and financial liabilities, are recognised when the Company 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 Company 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. 37 BPH ENERGY | 2016 ANNUAL REPORTHEALTH TECHNOLOGY RESOURCESFor personal use only Notes to the Financial Statements for the year ended 30 June 2016 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. 38 BPH ENERGY | 2016 ANNUAL REPORTFor personal use only (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. 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. 39 BPH ENERGY | 2016 ANNUAL REPORTHEALTH TECHNOLOGY RESOURCESFor personal use only Notes to the Financial Statements for the year ended 30 June 2016 1. (f) Statement of Significant Accounting Policies (continued) Investments in Associates (continued) 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 using the corporate bond rate. (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. (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). 40 BPH ENERGY | 2016 ANNUAL REPORTFor personal use only (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 recognised for amounts to be paid in the future for goods or services received, whether or not billed to the Consolidated Group. 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 recognised 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 22). (p) 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. 41 BPH ENERGY | 2016 ANNUAL REPORTHEALTH TECHNOLOGY RESOURCESFor personal use only Notes to the Financial Statements for the year ended 30 June 2016 1. (q) Statement of Significant Accounting Policies (continued) 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 the Consolidated Group are amounts from receivables of $97,625 (2015: $97,625) and non-current loan receivables of $2,289,308 (2015: $2,108,025). In 30 June 2015 financial year the Company raised a provision against its unsecured loans with Cortical Dynamics Ltd and Molecular Discovery Systems Ltd resulting in a non-cash expense of $1,084,370. This provision can be reversed upon payment of the loans. Key Judgments — Impairment of Intangible Assets No impairment has been recognised in respect of intangible assets for the year ended 30 June 2016 (2015: $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 have obtained an independent expert’s valuation report at 30 June 2015 which supports the recoverable amount of the investments in associates of $19,915,966 (2015: $20,077,753). Investment in Molecular Discovery Systems The recoverable amount of the investment in Molecular Discovery Systems Limited was greater than the carrying amount of the investment and hence no impairment loss was recognised (2015: nil) – refer to note 13. Investment in Advent Energy Ltd The recoverable amount of the investment in Advent Energy Limited was greater than the carrying amount of the investment and hence no impairment loss was recognised (2015: nil) – refer to note 13. (r) Application of New and Revised Accounting Standards Standards and Interpretations applicable to 30 June 2016 In the year ended 30 June 2016, the Directors have reviewed all of the new and revised Standards and Interpretations issued by the AASB that are relevant to the Company and effective for the current annual reporting period. As a result of this review, the Directors have determined that there is no material impact of the new and revised Standards and Interpretations on the Company and, therefore, no material change is necessary to Group accounting policies. Standards and Interpretations in issue not yet adopted The Directors have also reviewed all new Standards and Interpretations that have been issued but are not yet effective for the year ended 30 June 2016. As a result of this review the Directors have determined that there is no material impact, of the new and revised Standards and Interpretations on the Group and, therefore, no change is necessary to Group accounting policies. 42 BPH ENERGY | 2016 ANNUAL REPORT For personal use only 2. Revenue Revenue Interest revenue: other entities Interest revenue cash accounts Other income ATO refund 3. Expenses Included in Loss for the year Depreciation - Depreciation Employee costs - Salary - Superannuation - Director fees - Share based payments - Share based payments to directors - Other payroll costs Total employee costs Consolidated 2016 $ 2015 $ 181,292 223,219 466 1,201 181,758 224,420 3,000 3,000 - - 72 - - 75 89,379 7,244 106,246 100,000 3,057 14,000 6,924 27,000 - (27,956) 123,303 202,591 43 BPH ENERGY | 2016 ANNUAL REPORTHEALTH TECHNOLOGY RESOURCESFor personal use only Notes to the Financial Statements for the year ended 30 June 2016 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 T Fontaine – Non-Executive Director B Whan – Non-Executive Director G Gilbert – Non-Executive Director (appointed 4 March 2016) D Ambrosini – Company Secretary Short term employee benefits Consulting fee Share based payments Consolidated 2016 $ 2015 $ 106,246 100,000 98,000 14,000 98,000 27,000 218,246 225,000 Included in trade creditors and payables is director and consulting fee accruals of $1,151,613 (30 June 2015: $947,380). Director David Breeze Thomas Fontaine Greg Gilbert ( appointed 4 March 2016) Bruce Whan Directors who have previously resigned Balance owing at 30 June 2016 Amount Owing 30 June 2016 699,591 29,166 116,648 35,417 270,791 1,151,613 Key management personnel remuneration has been included in the Remuneration report section of the Directors Report. 5. Auditors’ Remuneration Remuneration of the auditor of the parent entity for: - auditing or reviewing the financial report HLB Mann Judd Nexia Perth Audit Services 44 Consolidated 2016 $ 2015 $ 16,000 10,525 26,525 - 31,454 31,454 BPH ENERGY | 2016 ANNUAL REPORTFor personal use only 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 Consolidated 2016 $ 2015 $ (509,458) (26,487,710) (509,458) (26,487,710) (0.22) (0.22) (11.31) (11.31) Weighted average number of ordinary shares outstanding during the year used in calculating basic EPS and diluted EPS No. 235,766,727 No. 234,167,061 The Company’s potential ordinary shares, being its options granted, are not considered dilutive as the conversion of these options will result in a decreased net loss per share. 7. Cash and cash equivalents Cash at Bank and in hand Short-term bank deposits Reconciliation of cash 103,172 8,476 111,648 90,346 8,216 98,562 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 111,648 98,562 8. Trade and other receivables Current Other receivables 9. Other Assets Current Prepaid insurance 8,155 8,155 4,071 4,071 24,417 24,417 27,313 27,313 45 BPH ENERGY | 2016 ANNUAL REPORTHEALTH TECHNOLOGY RESOURCESFor personal use only Notes to the Financial Statements for the year ended 30 June 2016 10. Financial Assets Loans and receivables at amortised cost Current Unsecured Loans to other entities: (c) Grandbridge Limited MEC Resources Limited Advent Energy Ltd Non-Current Loans and receivables at amortised cost Unsecured Loans to other entities: Cortical Dynamics Limited (c) Molecular Discovery Systems Limited (c) Secured Loans to other entities: (a) Cortical Dynamics Limited Molecular Discovery Systems Limited Available for sale financial assets at fair value Investments in unlisted entities (b) (a) Secured loans Consolidated 2016 $ 2015 $ 55,645 2,494 39,486 97,625 55,645 2,494 39,486 97,625 - - - - 1,738,359 1,585,417 502,000 473,659 48,949 48,949 2,289,308 2,108,025 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 $502,000 (2015: $473,659). 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 $533,560 (2015: $490,326). On 28th February 2012 BPH Energy entered into a second convertible loan agreement with Cortical Dynamics. The facility is for an 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 $1,205,286 (2015: $1,095,091) which includes the fully drawn down facility and accrued interest. 46 BPH ENERGY | 2016 ANNUAL REPORTFor personal use only (b) Available for sale financial assets at fair value Cortical Dynamics Limited (c) Unsecured loans The has Company raised a provision against its unsecured loans with Cortical Dynamics Ltd and Molecular Discovery Systems Ltd for $494,170 and $590,200 respectively resulting in a non- cash expense of $1,084,370. The provision can be reversed upon payment of the loans.. 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. Balance at the beginning of the year Depreciation expense Carrying amount at the end of the year Consolidated 2016 $ 48,949 48,949 2015 $ 48,949 48,949 72,454 72,454 - 72,454 72,454 - 72,454 72,454 41,486 (41,464) 22 41,486 41,392 94 94 (72) 22 169 (75) 94 47 BPH ENERGY | 2016 ANNUAL REPORTHEALTH TECHNOLOGY RESOURCESFor personal use only Notes to the Financial Statements for the year ended 30 June 2016 13. Investments accounted for using the equity method Shares in Associates Advent Energy Limited Molecular Discovery Systems Limited Consolidated 2016 $ 2015 $ 19,380,613 19,511,430 535,353 566,323 19,915,966 20,077,753 Opening Balance of Investment in Advent Energy Limited on 1 July 2015 19,511,430 Share of Associate losses for the year Balance at 30 June 2016 Opening Balance of Investment in Molecular Discovery Systems Limited on 1 July 2015 Share of Associate losses for the year Balance at 30 June 2016 (130,817) 19,380,613 566,323 (30,970) 535,353 Based on a valuation prepared by an independent expert at 30 June 2015 and recent commercial discussions, management have made an assessment and believe that there is not a material change in the fair value of their investments at reporting date. Valuation processes The directors informally assess the fair value of its investments biannually. A formal assessment is performed as necessary by obtaining an external independent valuation report. The fair value of the Group’s investment in Advent Energy Ltd as at 30 June 2015 has been supported by a valuation report prepared at 30 June 2015 by an independent expert valuer. The expert holds appropriate qualifications and recent experience in the valuation of investments of this nature. The fair value was determined using the expected monetary value and enterprise value valuation methods; valuation estimations have been undertaken in accordance with the requirements of the Valmin Code (2005) for the technical assessment and valuation of mineral and petroleum assets. The fair value of the Group’s investment in MDS has been supported by a recent capital raising completed in MDS in January 2016. MDS successfully completed the capital raising at $0.02 per share. 48 BPH ENERGY | 2016 ANNUAL REPORTFor personal use only Valuation inputs and relationships to fair value The following table summaries the quantitative information about the significant unobservable inputs used in level 3 fair value measurements. See above for the valuation techniques adopted. Description Fair value at 30 June 2016 Significant inputs Range of inputs Advent Energy Ltd $19,380,613 Discount rate 10 – 15% Gas price $5 - $12 per mcf Exchange rate AUD$1:USD$0.7693 Gas resource PEP11: 5.7 Tcf (best estimate) EP386: 344.5 bcf (best estimate) RL1: 11.5 bcf (best estimate) Molecular Discovery Systems Ltd $535,353 Most recent sale price $0.02 per share Advent and its subsidiaries have current commitments for its exploration permits of $5,150,000 over the next 12 months. To assist in meeting these commitments, the Group is continually seeking and reviewing potential sources of both equity and debt funding. Advent is currently in negotiations with a number of parties on the terms of investment and management has confidence that a suitable outcome will be achieved however there is no certainty at this stage that those discussions will result in further funding being made available. In relation to the Group’s exploration commitments (which include Asset Energy Pty Ltd completing 200km of 2D seismic and geotechnical studies within the PEP 11 area by 12 August 2016 Advent’s wholly owned subsidiary, Asset Energy Pty Ltd, lodged an application in respect of Petroleum Exploration Permit 11 (“PEP11”) with the National Offshore Petroleum Titles Administrator (“NOPTA”) prior to 30 June 2016 to vary a condition of PEP11, suspend the years 2 and 3 work commitments and request a subsequent extension of the PEP11 permit term. NOPTA is currently assessing the application. Asset Energy Pty Ltd has invested over $25 million in the PEP11 title in recent history, and, along with its JV partner Bounty Oil and Gas NL, is committed to continuing to explore for and ultimately exploit any petroleum accumulations which may be identified in this title area. In addition to the 2D seismic commitment, Advent is committed to drill an exploration well and perform a seismic survey by the end of March 2017 for EP 386. These 2 commitments comprise the significant balance of $4,797,500. The application to vary a condition of the title and suspend the years 2 and 3 work commitments was prepared following discussions with NOPTA, however a decision has not been received by the Company from NOPTA. The above conditions indicate the uncertainty that may affect the ability of the Group to realise the carrying value of the exploration assets in the ordinary course of business. 49 BPH ENERGY | 2016 ANNUAL REPORTHEALTH TECHNOLOGY RESOURCESFor personal use only Notes to the Financial Statements for the year ended 30 June 2016 13. Investments accounted for using the equity method (continued) Investments in associates are accounted for in the consolidated financial statements using the equity method of accounting. Name of Entity Country of Incorporation Ownership Interest % 2016 2015 Principal Activity Molecular Discovery Systems Limited Advent Energy Limited Australia Australia 20% 20% Biomedical Research 27% 27% Oil and Gas Exploration (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* 2016 Molecular Discovery Systems Limited 30,525 312,003 1,358,382 30,525 312,003 1,358,382 Advent Energy Ltd 110,131 28,055,584 5,351,194 110,131 28,055,584 5,351,194 2015 Molecular Discovery Systems Limited 16,187 383,503 1,319,698 16,187 383,503 1,319,698 Advent Energy Ltd 320,978 28,059,222 5,082,545 320,978 28,059,222 5,082,545 * Other adjustments comprise: - - - - - - - - 173 173 (154,837) (154,837) (203,170) (154,837) (154,837) (203,170) 20 20 1,487,291 (748,768) 535,353 1,487,291 (748,768) 535,353 1,708 1,708 (483,134) (483,134) 6,169,046 27.04 (483,134) (483,134) 6,169,046 27.04 - - 13,211,567 19,380,613 13,211,567 19,380,613 1,623 1,623 (227,734) (227,734) (184,003) (227,734) (227,734) (184,003) 20 20 1,487,291 (736,965) 566,323 1,487,291 (736,965) 566,323 1,463 (2,062,077) (2,062,077) 6,299,686 27.04 1,463 (2,062,077) (2,062,077) 6,299,686 27.04 - - 13,211,744 19,511,430 13,211,744 19,511,430 Advent Energy Ltd – Impairment Loss: The directors have obtained an independent expert’s valuation report which indicated that the carrying value of BPH’s investment was not impaired. 50 BPH ENERGY | 2016 ANNUAL REPORTFor personal use only 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 28) Decrease in deferred tax liabilities (note 28) (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% (2015: 30%) Add tax effect of: Non deductible expenses Tax benefit of revenue losses and temporary differences not recognised (Note 28) Effect of previously unrecognised and unused tax losses now recognised as deferred tax assets Temporary differences Income tax benefit recognised (c) Income tax expense recognised in other comprehensive income Fair value gain adjustments (d) Current tax liabilities Income tax (e) Tax losses Consolidated 2016 $ 2015 $ - - - - - - - - - (3,583,290) (3,583,290) (2,440,615) 6,023,905 (3,583,290) (153,424) (9,021,141) 57,788 12,073 95,646 5,425,778 - - - - - - - - - (3,583,290) - - - - Unused tax losses for which no deferred tax asset has been recognised (Note 28) Potential tax benefit @30% 8,466,212 8,343,648 2,539,864 2,503,094 51 BPH ENERGY | 2016 ANNUAL REPORTHEALTH TECHNOLOGY RESOURCESFor personal use only Notes to the Financial Statements for the year ended 30 June 2016 15. Trade and other payables Trade payables Sundry payables and accrued expenses 16. Financial Liabilities Current Current borrowings – unsecured Consolidated 2016 $ 2015 $ 28,594 1,189,154 14,553 998,706 1,217,748 1,013,259 987,818 987,818 733,220 733,220 Loans payable are unsecured, non-interest bearing and repayable on demand. 17. Issued Capital 235,766,727 (2015: 235,766,727) fully paid ordinary shares 41,828,904 41,759,904 The Company has no authorised capital and the issued shares do not have a par value. Consolidated Consolidated 2016 $ 2015 $ 2016 No. 2015 No. (a) Ordinary Shares At the beginning of reporting period 41,759,904 41,511,195 235,766,727 172,562,245 Share issued during the year - 248,709 Shares to be issued at closure of SPP 69,000 63,204,482 - - At reporting date 41,828,904 41,759,904 235,766,727 235,766,727 On 1 June 2016 BPH announced a Share Purchase Plan. Under the SPP eligible shareholders would be entitled to purchase up to a maximum of $15,000 worth of shares at a price of $0.00533 per share. The offer was capped to a maximum of 30% of the Company’s share capital. The plan closed on 5 July 2016 significantly oversubscribed with an amount of approximately $374,000 being raised. Further to the SPP the Company also undertook a placement to professional and sophisticated investors who were existing shareholders of the Company. Under the placement a further $245,000 was raised. At balance date $69,000 was received in related to the SPP. Capital Raising There were nil options exercised during the year (2015: nil). Fully Paid Ordinary Share Capital Fully paid ordinary shares carry one vote per share and carry the right to dividends. 52 BPH ENERGY | 2016 ANNUAL REPORTFor personal use only Options There were 13,042,500 employee options on issue at the end of the year: Total number Exercise price 1,075,000 967,500 9,000,000 2,000,000 13,042,500 $0.080 $0.02 $0.02 $0.02 Expiry date 30 June 2018 31 March 2020 31 March 2020 30 November 2020 The market price of the company’s ordinary shares at 30 June 2016 was 0.007 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. (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 2016 and 30 June 2015 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 2016. Consolidated 2016 $ 111,648 105,750 2015 $ 98,562 101,696 (2,205,566) (1,746,479) (1,988,138) (1,546,221) 53 BPH ENERGY | 2016 ANNUAL REPORTHEALTH TECHNOLOGY RESOURCESFor personal use only Notes to the Financial Statements for the year ended 30 June 2016 18. 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 19. Controlled Entities Consolidated 2016 $ 2015 $ 486,707 469,650 15,015,000 15,015,000 15,501,707 15,484,650 469,650 17,057 486,707 435,726 33,924 469,650 15,015,000 15,015,000 - - 15,015,000 15,015,000 Name of Entity Principal Activity Country of Incorporation Ownership Interest % 2016 2015 Parent Entity BPH Energy Ltd Subsidiaries of BPH Energy Ltd Diagnostic Array Systems Pty Ltd Investment Australia BioMedical Research Australia 51.82 51.82 Balances and transactions between the Company and its subsidiaries, which are related parties of the Company, have been eliminated on consolidation and not disclosed in this note. Details of transactions between the Group and other related entities are disclosed below. BPH owns 51.82% equity interest in Diagnostic Array Systems Pty Ltd and consequentially controls more than half of the voting power of those shares. Mr David Breeze is the Chairman of both entities. BPH therefore has control over the financial and operating policies of Diagnostic Array Systems Pty Ltd. Diagnostic Array Systems Pty Ltd is deemed to be controlled by the Group and is consolidated in these financial statements. 54 BPH ENERGY | 2016 ANNUAL REPORTFor personal use only 20. 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 Provision against loans Interest expense 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) in trade and other receivables Decrease in other assets (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 21. Financial Risk Management (a) Financial Risk Management Consolidated 2016 $ 2015 $ (511,446) (26,490,513) 72 75 (181,283) (224,420) 17,057 59,473 33,924 56,524 - 1,084,370 10,530 161,787 4,245 603,131 - 27,959,823 - 2,896 (223) 550 - (27,957) 222,308 159,718 - (3,583,290) (218,606) (424,043) 20,000 20,000 - - 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. 55 BPH ENERGY | 2016 ANNUAL REPORTHEALTH TECHNOLOGY RESOURCESFor personal use only Notes to the Financial Statements for the year ended 30 June 2016 21. Financial Risk Management (continued) (a) Financial Risk Management (continued) 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. (b) Financial Instruments i. Interest rate risk The Group’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 2016 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 .009 111,648 Trade and other receivables Other financial assets 8.58 - - - - 2,240,359 Total Financial Assets Financial Liabilities Trade and sundry payables Financial liabilities 8.97 Total Financial Liabilities 111,648 2,240,359 - - - - - - - - - - - - 111,648 8,155 8,155 97,625 2,337,984 105,780 2,457,787 1,217,748 1,217,748 282,897 704,921 987,818 282,897 1,922,669 2,205,566 56 BPH ENERGY | 2016 ANNUAL REPORTFor personal use only Consolidated Group 2015 Financial Assets Cash and cash equivalents Trade and other receivables Other financial assets Total Financial Assets Financial Liabilities Trade and sundry payables Weight Effective Interest Rate % .009 8.58 Financial liabilities 8.97 Total Financial Liabilities ii. Fair Values The fair values of: Floating Interest Rate $ Fixed Interest Rate 1 Year of less Fixed Interest Rate 1 to 5 Years Non-Interest Bearing $ Total $ 98,562 - - - - 2,059,076 98,562 2,059,076 - - - - - - - - - - - - 4,071 98,562 4,071 97,625 2,156,701 101,696 2,259,334 1,013,259 1,013,259 114,859 618,361 733,220 114,859 1,631,620 1,746,479 • 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. 2016 2015 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 2,337,987 2,337,987 2,156,701 2,156,701 2,386,933 2,386,933 2,205,650 2,205,650 987,818 987,818 733,220 733,220 1,217,748 1,217,748 1,013,259 1,013,259 2,205,566 2,205,566 1,746,479 1,746,479 57 BPH ENERGY | 2016 ANNUAL REPORTHEALTH TECHNOLOGY RESOURCESFor personal use only Notes to the Financial Statements for the year ended 30 June 2016 21. Financial Risk Management (continued) (b) Financial Instruments (continued) iii. Sensitivity Analysis Interest Rate Risk 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% iv. Liquidity risk Consolidated Group 2016 2015 621 (310) 986 (483) 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 2016 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 1,217,748 (1,217,748) Unsecured loan 987,818 (987,818) 2,205,566 (2,205,566) - - - (1,217,748) (987,818) (1,922,669) - - - - - - - - - 30 June 2015 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 1,013,259 (1,013,259) Unsecured loan 733,220 733,220 1,746,479 (1,746,479) - - - (1,013,259) (733,220) (1,631,620) - - - - - - - - - 58 BPH ENERGY | 2016 ANNUAL REPORTFor personal use only (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. 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 2016 Level 1 Level 2 Level 3 Total Available for sale financial assets — Investments in unlisted entities Total 30 June 2015 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 - - - - 48,949 48,949 48,949 48,949 48,949 48,949 48,949 48,949 2015 2015 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 as at 30 June 2016 has been arrived at on the basis of a valuation performed on 30 June 2014 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. 59 BPH ENERGY | 2016 ANNUAL REPORTHEALTH TECHNOLOGY RESOURCESFor personal use only Notes to the Financial Statements for the year ended 30 June 2016 22. 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 13. 23. Events after the Statement of financial position Date On 1 June 2016 BPH announced a Share Purchase Plan. Under the SPP eligible shareholders would be entitled to purchase up to a maximum of $15,000 worth of shares at a price of $0.00533 per share. The offer was capped to a maximum of 30% of the Company’s share capital. The plan closed on 5 July 2016 significantly oversubscribed with an amount of approximately $374,000 being raised. Further to the SPP the Company also undertook a placement to professional and sophisticated investors who were existing shareholders of the Company. Under the placement a further $245,000 was raised. 24. Related Party Transactions (a) Equity interests in controlled entities Details of the percentage of ordinary shares held in controlled entities are disclosed in note 19 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 Parent 2016 No. 2015 No. 20,137,866 20,137,866 4,000,000 2,000,000 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 Refer to note 4 for details of options granted to directors during the year. 60 BPH ENERGY | 2016 ANNUAL REPORTFor personal use only (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 (2015: $98,000) was accrued during the year. (e) Interest in Associates A loan receivable exists between BPH Energy and MDSystems $590,200 (2015:$590,200). This amount is unsecured, non interest bearing and repayable on demand. During the 2015 financial year the Company raised a provision against the full amount of this loan. The provision can be reversed upon payment of this loan. A loan payable exists between BPH Energy and MDSystems $61,310 (2015:$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 $502,000 (2015: $473,659). Interest charged on the loan totalled $28,341 (2015: $39,118). A loan payable exists between Advent Energy and BPH Energy of $39,486 (2015: $ 39,486). This amount is unsecured, non-interest bearing and repayable on demand. (f) Other Interests Cortical Dynamics is a related party of BPH Energy. Refer to Note 10 for the investment and loan receivables it has with the company. 25. Share-Based Payments The following share-based payment arrangements existed at 30 June 2016: Total number Grant date Exercise price 1,075,000 967,500 9,000,000 1 July 2013 2 April 2015 20 April 2015 2,000,000 27 November 2015 13,042,500 $0.080 $0.020 $0.020 $0.020 Fair value at grant date $0.0013 $0.0004 $0.0030 $0.0070 Expiry date 30 June 2018 31 March 2020 31 March 2020 30 November 2020 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. During the year, 2,000,000 options were issued under the company’s employee share option plan. The options were issued on 27 November 2015 and expire on 30 November 2020 with a strike price of $0.02. The fair value of the options granted is estimated as at the date of grant using a Black-Scholes model taking into account the terms and conditions upon which the options were granted. The following table lists the inputs to the model used. 61 BPH ENERGY | 2016 ANNUAL REPORTHEALTH TECHNOLOGY RESOURCESFor personal use only Notes to the Financial Statements for the year ended 30 June 2016 25. Share-Based Payments (continued) Fair value at grant date Share price at grant date Exercise price Expected volatility Expected life Expected dividends Risk-free interest rate Valuation $0.007 $0.007 $0.02 75% 5 years Nil 2.5% $14,000 The total value of these options was $14,000 at the date that they were granted Consolidated Group 2016 2015 Weighted Average Exercise Price $ 0.02 0.02 - 0.16 0.03 0.02 Number of Options 11,367,500 2,000,000 - (325,000) 13,042,500 12,039,167 Number of Options 2,975,000 9,967,500 - (1,575,000) 11,367,500 10,041,667 Weighted Average Exercise Price $ 0.51 0.02 - 0.88 0.02 0.03 Outstanding at the beginning of the year Granted Forfeited Expired Outstanding at year-end Exercisable at year-end No options were exercised during the year ended 30 June 2016 (2015: nil). Included under employee benefits expense in the profit and loss is $17,057 of which $14,000 relates to options granted to directors (2015: $33,924), and relates, in full, to equity. 26. Commitments and Contingencies At reporting date there are no contingent liabilities. 62 BPH ENERGY | 2016 ANNUAL REPORTFor personal use only 27. 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 28. Tax (a) Unrecognised Deferred Tax Assets Deductible temporary differences not recognised Tax losses not recognized (Note 14) (b) Deferred tax Deferred tax balances are presented in the statement of financial position as follows: Deferred tax assets Deferred tax liabilities Closing balance Parent 2016 $ 2015 $ 241,292 219,740 23,218,574 23,188,955 23,459,866 23,408,695 2,102,742 1,631,307 - - 2,102,742 1,631,307 41,828,904 41,759,904 (35,973,487) (35,466,166) 486,707 469,650 15,015,000 15,015,000 21,357,124 21,778,388 (507,321) (26,395,795) - - (507,321) (26,395,795) Consolidated 2016 $ 2015 $ 2,987,898 2,922,684 2,539,864 2,503,094 5,527,762 5,425,778 8,194 (8,194) - 8,194 (8,194) - 63 BPH ENERGY | 2016 ANNUAL REPORTHEALTH TECHNOLOGY RESOURCESFor personal use only Directors’ Declaration The directors of the company declare that: 1. the financial statements and notes, as set out on pages 29 to 63 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 2016 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 26th day of August 2016 64 BPH ENERGY | 2016 ANNUAL REPORTFor personal use only 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 (“the company”), which comprises the consolidated statement of financial position as at 30 June 2016, the consolidated statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flow for the year then ended, notes comprising a summary of significant accounting policies and other explanatory information, and the directors’ declaration, of the Group 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 of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In Note 1, the directors also state, in accordance with Accounting Standard AASB 101: Presentation of Financial Statements, the consolidated financial statements comply with International Financial Reporting Standards. Auditor’s Responsibility Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. Those standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance about whether the financial report is free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Group’s preparation of the financial report that gives a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s and its controlled entities’ internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report. Our audit did not involve an analysis of the prudence of business decisions made by directors or management. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Independence In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001. HLB Mann Judd (WA Partnership) ABN 22 193 232 714 Level 4, 130 Stirling Street Perth WA 6000. PO Box 8124 Perth BC 6849 Telephone +61 (08) 9227 7500. Fax +61 (08) 9227 7533. Email: hlb@hlbwa.com.au. Website: http://www.hlb.com.au Liability limited by a scheme approved under Professional Standards Legislation HLB Mann Judd (WA Partnership) is a member of International, a worldwide organisation of accounting firms and business advisers. 65 BPH ENERGY | 2016 ANNUAL REPORTHEALTH TECHNOLOGY RESOURCESFor personal use only Independent Auditor’s Report Auditor’s 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 Group’s financial position as at 30 June 2016 and its performance for the year ended on that date; and (ii) complying with Australian Accounting Standards and the Corporations Regulations 2001; and (b) the financial report also complies with International Financial Reporting Standards as disclosed in Note 1. Report on the Remuneration Report We have audited the Remuneration Report included in the directors’ report for the year ended 30 June 2016. 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 2016 complies with section 300A of the Corporations Act 2001. HLB Mann Judd Chartered Accountants Perth, Western Australia 26 August 2016 B G McVeigh Partner 66 BPH ENERGY | 2016 ANNUAL REPORTFor personal use only 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 16th August 2016. 1. (a) Distribution of Shareholders Range of Holding Shareholders 1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 and over 425 464 349 902 463 2,603 Number Ordinary Shares 179,722 1,520,140 2,716,697 34,567,313 319,107,905 358,091,777 % 0.05 0.42 0.76 9.65 89.12 100.00 The number of shareholders with less than a marketable parcel is 2,093 holding in total 28,309,980 shares. (b) Distribution of Unlisted Optionholders Range of Holding Shareholders 10,001 – 100,000 100,001 and over 2 9 10 Number Ordinary Shares 142,500 12,900,000 13,042,500 % 0.01 99.99 100.00 2. Voting Rights - Shares All ordinary shares issued by BPH Energy Limited carry one vote per share without restriction. 3. Voting Rights - Options The holders of employee options do not have the right to vote. 4. Restricted Securities Shares Number of Shares free of escrow 358,091,777 67 BPH ENERGY | 2016 ANNUAL REPORTHEALTH TECHNOLOGY RESOURCESFor personal use only Additional Securities Exchange Information 5. Twenty Largest Shareholders as at 16th August 2016 The names of the twenty largest shareholders of the ordinary shares of the company are: Name Trandcorp Pty Ltd MEC Resources Ltd Spelta Gary John and Spelta Narelle Bollam Christopher Lyndsay BT Portfolio Svcs Ltd S3 Consortium Pty Ltd Chin Tong Lim JP Morgan Nominees Australia Limited Mansour Maher Cox Leonard Keith and Cox Eva Marie Alderman Richard Gibbs Gary Robert and Gibbs Karen Pamela Humphries Malcolm Randall and Humphries Betty Lorraine Gleneagle Sec Aust PL Yi Gemma Eastwood Financial and Investment Services Lam Terry Luong Peterson Victor Harold Durnin Valentine and Durnin Pauline Barlow Janet Winifred Number of ordinary fully paid shares % held of issued ordinary capital 16,208,332 14,366,095 10,903,341 7,504,700 5,877,013 5,628,518 5,519,873 5,139,266 5,107,546 5,093,187 5,000,000 4,814,258 4,023,896 3,846,450 3,790,784 3,743,280 3,600,000 3,482,246 3,415,057 3,414,258 4.53 4.01 3.04 2.10 1.64 1.57 1.54 1.44 1.43 1.42 1.40 1.34 1.12 1.07 1.06 1.05 1.01 0.97 0.95 0.95 125,617,366 35.08 68 BPH ENERGY | 2016 ANNUAL REPORTFor personal use only For personal use only ABN 41 095 912 002 14 View Street, North Perth Western Australia 6006 Telephone: (08) 9328 8366 Facsimile: (08) 9328 8733 Email: admin@bphenergy.com.au bphenergy.com.au Photographs and images used throughout this report do not depict assets of the company unless expressly indicated otherwise. f i t 8 e r c y b d e c u d o r p d n a d e n g i s e D For personal use only