BPH Energy Limited
Annual Report 2019

Plain-text annual report

HEALTH TECHNOLOGY RESOURCES 9 1 0 2 T R O P E R L A U N N A TABLE OF CONTEN TS BPH ENERGY LIMITED AND IT’S CONTROLLED ENTITIES Chairman’s Letter Company Focus and Development Review of Operations 1-2 3-5 6-9 COMPANY INFORMATION Directors David Breeze – Chairman/Managing Director Charles Maling – Non Executive Director Anthony Huston - Non Executive Director Directors’ Report 10-17 Auditor’s Independence Declaration Corporate Governance Statement Consolidated Statement of Profit or Loss and Other Comprehensive Income Consolidated Statement of Financial Position Consolidated Statement of Changes in Equity Consolidated Statement of Cash Flows 18 19 20 21 22 23 Notes to the Consolidated Financial Statements 24-58 Directors’ Declaration Independent Auditor’s Report Additional Securities Exchange Information 59 60-63 64-65 Scientific Advisors 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 Website: www.bphenergy.com.au E-mail: 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 ASX Limited (Home Exchange: Perth, Western Australia) ASX Code: BPH Australian Business Number 41 095 912 002 Photographis and images used throughout this report do not depict assets of the company unless expressly indicated. CHAI RMAN’S LETTE R Dear Shareholder BPH Energy (BPH or Company) is the second largest shareholder in Advent Energy Ltd (Advent) with a direct interest of 22%. The primary objective of Advent is the drilling of a well at the Baleen drilling target in the PEP 11 permit in the offshore Sydney basin in 2020 (Advent Energy holds an 85 % interest in PEP 11). Advent has conducted a focused seismic campaign around this key drilling prospect in PEP 11 at Baleen as a precursor to drilling. The gas supply crisis on the east coast of Australia has created a significant market opportunity to raise the funding to drill with the objective of developing the PEP11 project and we are now engaging with investors to fund this drilling. The Australian Competition and Consumer Commission (ACCC) have confirmed that domestic wholesale gas prices have risen two to three times higher than historical prices (the 2020 average of expected LNG netback gas price is around $9 per gigajoule.) This has put many trade-exposed Australian manufacturers under extreme pressure. There is also continuing uncertainty about the longer-term supply outlook. In its latest Gas Statement of Opportunities (GSOO), the Australian Energy market Operator (AEMO) has warned about potential supply shortages emerging on the east coast within five years, particularly in the southern states. Advent has demonstrated considerable gas generation and migration within PEP 11, with the mapped prospects and leads highly prospective for the discovery of gas. PEP 11 is a significant offshore exploration area with large scale structuring and potentially multi-Trillion cubic feet (Tcf) gas charged Permo-Triassic reservoirs located less than 50km from the Sydney-Wollongong-Newcastle greater metropolitan area and gas pipeline network. Our funding initiatives address both of Advent’s projects in the Bonaparte and PEP11 permits. Successful Settlement of legal actions has enabled a focus on these commercial objectives. On 9 August 2019 BPH, together with other plaintiffs in an oppression of minority shareholders action, reached a settlement with MEC Resources Limited (MEC) in relation to the oppression proceedings BPH commenced in the Supreme Court of Western Australia with Grandbridge Limited and others. As part of the settlement it was agreed that the Advent board would be restructured. Other key terms of the settlement included that MEC agreed to not directly or indirectly interfere with the board composition and/or management of Advent and that MEC would initiate an in-specie distribution to MEC shareholders of the shares it holds in Advent. Debt owed by Advent to MEC will be recoverable by MEC only by the issue of shares in Advent one month prior to the scheduled commencement date for the drilling of a well within the PEP 11 Permit Area. Advent has been granted a renewal of Retention Licence 1 (RL1) in the Northern Territory by the NT Department of Primary Industry and Resources for a five-year term concluding in July 2023. Advent will be making further application to extend the EP 386 permit to the State Government of Western Australia. 11 11 BPH Energy I Annual Report 2018 BPH Energy I Annual Report 2018 BPH Energy I Annual Report 2018 BPH Energy I Annual Report 2018 HEALTH TECHNOLOGY RESOURCES Developments continue in the company’s biotech/medtech investments BPH investee Cortical Dynamics Ltd announced a number of developments during the period which included: • The appointment of Mr Gary Todd as Managing Director on 16 October 2018. • Successful trials of the Brain Anesthesia Response Monitor (BARM) continued at St. Luke’s Private Hospital and Strathfield Private Hospital in Sydney. The trials were conducted by Dr Adrian Sultana MD FRCP (Glasg) FANZCA, a consultant anaesthetist. Key conclusions from these trials by Dr Sultana trialling BARM during 2018 and in 2019 included (i) The BARM has shown significant reduction in patients’ anaesthesia recovery time using TIVA (Total Intravenous Anaesthesia), and; (ii) was “Remarkably stable and the responsive signal permitted a new level of belief in the awareness monitoring technique and the BARM had impressive stability and speed of response.” Cortical believes these conclusions have significant implications for hospital operations: including: • Optimising the dose of anaesthetic agent used can reduce the dosage use of anaesthetic agents, and improve patient turnaround times and lead to cost savings • Facilitate the delivery of higher quality and more reliable service to hospitals and patients Cortical engaged an international testing and certification organization to test and certify the BARM to comply with the Korean certification process. The certification also includes the latest medical safety standard deviations for Australia, New Zealand, European Union and the USA. The regulatory compliance process to enable distribution of the BARM in Korea is now almost completed. BPH has also initiated a complementary strategy of making investments in the medical cannabis sector. On 2 September 2019 BPH announced it had agreed to acquire an initial investment of 10% (with the option to increase its percentage to 49%) in Patagonia Genetics Pty Ltd (“PG Aust”), the entity that owns a 100% interest in Patagonia Genetics SPA (“PG”), a Chilean entity. The medical cannabis sector is showing significant growth with current developments boosting the sector. These developments offer the capacity for strong growth in the Company’s investments. Yours Sincerely David Breeze Chairman 22 BPH Energy I Annual Report 2018 BPH Energy I Annual Report 2018 CO MPANY F OCU S & DEVELOPMENT BPH ENERGY LIMITED AND IT’S CONTROLLED ENTITIES BPH Energy’s major investment is in Advent Energy Ltd, an unlisted oil and gas exploration and development company with onshore and offshore exploration and near-term development assets around Australia. 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. In addition, a geochemical report has provided support for a potential exploration well in PEP11. The report reviewed the hydrocarbon analysis performed on sediment samples obtained in 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. ADVENT ENERGY LTD BPH Energy has a direct interest in Advent Energy of 22.6%. Advents 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. 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. Advent Energy has conducted a focused seismic campaign around a key drilling prospect in PEP11 at Baleen, in the offshore Sydney Basin. The high resolution 2D seismic survey covering approximately 200-line km was 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 at a depth of 2150 metres subsea 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. 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. 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 and gas pipeline network. Advent has previously interpreted significant seismically indicated gas features. Key indicators of hydrocarbon accumulation features have been 33 BPH Energy I Annual Report 2018 BPH Energy I Annual Report 2018 HEALTH TECHNOLOGY RESOURCES COMPANY FOCUS & DEVELOPMENT BPH ENERGY LIMITED AND IT’S CONTROLLED ENTITIES Western Australia / Northern Territory – Onshore Bonaparte Basin be supplied by Advent Energy’s conventional gas projects in EP386 and RL1. 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. 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. In the NT, Advent holds Retention Licence RL1 (166 square kilometres in area), which covers the Weaber Gas Field, originally discovered in 1985. 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 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 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 has identified significant shale areas in EP386 and RL1 .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. MEDICINAL CANNABIS The medical cannabis sector is showing significant growth. BPH has acquired an initial investment of 10% (with the option to increase its percentage to 49%) in Patagonia Genetics Pty Ltd (PG Aust), the entity that owns a 100% interest in Patagonia Genetics SPA (PG), a Chilean entity. PG is a craft cannabis company based in Patagonia, Chile with a genetic collection of over 260 unique cannabis and hemp strains, carefully collected from industrial hemp cultivations of the late 1980’s whose germination rates where verified in late 2016. A large proportion of these are unhybridized landraces not seen in domestic markets in over 30 years, hence their genetic value. Cortical Dynamics Ltd (BPH interest of 4.56% with right to increase to approx. 14%) BARM TECHNOLOGY Cortical is an Australian based medical device technology company that has developed an industry disruptive brain function monitor independently described as “a paradigm busting technology from an Australian based device house that really gives a significant advantage in this space”. Its competitive advantage has been recognized by leading world experts in anaesthesia. Cortical has received both TGA approval and the CE mark and has now commenced its sales campaign. The core product, the Brain Anaesthesia Response (BARM) monitor, was developed to better detect the effect of anaesthetic agents on brain activity, aiding anaesthetists in keeping patients optimally anaesthetised. The product is focused on integrated distribution with the leading global brands in Production testing at Wagon Creek 44 BPH Energy I Annual Report 2018 BPH Energy I Annual Report 2018 operation theatre monitoring equipment. The approach used is fundamentally different from all other devices currently available in the market in that its underlying algorithm produces EEG indexes which are directly related to the physiological state of the patient’s brain. Such monitoring is gaining significant use during surgery, however even with the use of EEG monitors, it is not uncommon for there to be a critical imbalance between the patient’s anaesthetic requirements and the anaesthetic drugs administered. While a number of EEG monitors are commercially available, one that is reliably able to quantify the patient’s anaesthetic state is still desperately needed. To date, all of the existing EEG based depth of anaesthesia monitors operate in the context of a number of well documented limitations: (i) Inability to monitor the analgesic effects; and (ii) Not all hypnotic agents are reliably measured. The global market for anaesthetic monitoring is predicted to reach $1.6 billion by 2020. Around 312 million major surgical procedures are undertaken every year worldwide (W.H.O 2016) The pain monitoring market is predicted to grow to over $8 billion. Initial marketing will focus on Total Intravenous Anaesthesia (TIVA), a method of inducing and maintaining general anaesthesia without the use of any inhalation agent. This is becoming more widely accepted, particularly in Western Europe. Approximately 29 million major general surgery general anaesthesias are conducted in the European Union each year, of which 55% are balanced anaesthesia (using a combination of intravenous agents such as propofol and volatile gases) and 20% are total intravenous anaesthesia using propofol. “The use of EEG-based depth of anaesthesia monitors has been recommended in patients receiving total intravenous anaesthesia because it is cost effective and because it is not possible to measure end-tidal anaesthetic concentration in this group” (source: nice.org.uk) This creates an immediate market opportunity to Cortical in Europe alone. Cortical’s technology has a versatility that goes beyond depth of anaesthesia and may be applied to other EEG based markets, such as neuro-diagnostic, drug discovery, drug evaluation and the emerging Brain computer Interface (BCI) market and pain response and tranquiliser monitoring for trauma patients in intensive care units. The BAR monitor is protected by five patent families in multiple jurisdictions worldwide consisting of 22 granted patents. MOLECULAR DISCOVERY SYSTEMS -HLS5 TECHNOLOGY (BPH DIRECT INTEREST IN MDS OF 20%) Research conducted at the Perkins Institute has shown that HLS5 has significant tumour suppressor properties. The Perkins findings are supported by the two independent peer reviewed scientific publications, identifying a role for HLS5 in cancer, demonstrating that the loss of HlS5 expression may be a critical event in the development and progression of liver cancer. 55 BPH Energy I Annual Report 2018 BPH Energy I Annual Report 2018 HEALTH TECHNOLOGY RESOURCES REVI EW OF OPERATIONS BPH ENERGY LIMITED AND IT’S CONTROLLED ENTITIES OPERATIONS On 21 August 2019 the Company announced that it intended to pursue a complementary strategy of making an investment (or investments) in the medical cannabis sector, as it is considered that an investment of this nature is in line with its investee company strategy and, in particular, its biomedical business. The medical cannabis sector is showing significant growth with current developments boosting the sectors viability including the move to legalise cannabis in Canada and the announcement by the UK Government to legalise medical cannabis. shareholder approval. There was be no requirement for a shareholder approval for the T1 transaction as the consideration will be met from the current cash position and the shares issued from the existing 15% ASX Listing Rule 7.1 capacity of BPH. It is acknowledged as part of the terms sheet and it will be acknowledged in the warranties and representations in the formal agreement that the licence applications are owned by PG and that PG Aust and PG will not apply for or pursue recreational cannabis licences nor make investments in the recreational cannabis space or in any activities or projects using Mistella (unless the transactions have been otherwise approved by ASX). INVESTMENTS Cortical Dynamics Ltd (“Cortical”), BPH 4.39% Cortical announced a number of developments during the period which included:- On 2 September 2019 BPH announced it had agreed to acquire an initial investment of 10% (with the option to increase its percentage to 49%) in Patagonia Genetics Pty Ltd (“PG Aust”), the entity that owns a 100% interest in Patagonia Genetics SPA (“PG”), a Chilean entity. > On 16 October 2018 Mr. Gary Todd was appointed as Managing Director of BPH investee Cortical. Mr Todd has extensive sales experience gained over the last thirty years both in Australia and internationally in Medical Devices, FMCG and IT&T markets The key terms are: (a) BPH agreed to acquire a total 10% interest in PG Aust in consideration for a subscription amount of $50,000 in cash into the entity and the issue of 150,000,000 BPH shares and payment of $50,000 by equal instalments over 6 months to the shareholders of PG Aust (“T1 transaction”). The amount of capital issued by BPH for the consideration represents approximately 5.5% of the capital of BPH. The 150,000,000 BPH shares were issued on 30 August 2019 ; and (b) BPH is granted the option to acquire a total shareholding of 49% in PG Aust (that is, an additional 39% when added to the original acquisition of a 10% interest) in consideration for a subscription amount of $700,000 into the entity and the issue of 450,000,000 shares in the capital of BPH (“T2 transaction”). The transaction will be conditional on appropriate due diligence, and for the T2 transaction, > Sydney Adventist Private Hospital in Sydney trialled the Brain Anaesthesia Response Monitoring System known as “BARM” during the first two weeks of July 2019 and positive comments were received from all four anaesthetists that trialled BARM > LiDCO Ltd UK is currently trialling the “BARM” at Southampton University Hospital through September 2019. In the UK, the LiDCO Group enjoys a leading market share, with over 50% of NHS acute care hospitals using its technology. > Successful trials of the BARM were carried out at St. Luke’s Private Hospital and Strathfield Private Hospital in Sydney. Strathfield is part of the Ramsay Hospital Group. The trials were conducted by Dr Adrian Sultana MD FRCP (Glasg) FANZCA, a consultant anaesthetist. He is a Clinical Lecturer in Anaesthesia at the Australian School of Advanced Medicine, Macquarie University. He is also a director of the International Society for the Perioperative Care of the Obese Patient. 66 BPH Energy I Annual Report 2018 BPH Energy I Annual Report 2018 Key conclusions from these trials by Dr Sultana trialling BARM during 2018 and in 2019 to date include: • The BARM has shown significant reduction in patients’ anaesthesia recovery time using TIVA (Total Intravenous Anaesthesia) (i) Optimising the dose of anaesthetic agent used can reduce the use of anaesthetic agents, and improve patient turn-around times and lead to cost savings (ii) Facilitate the delivery of higher quality and more reliable service to hospitals and patients • The Cortical BARM was “Remarkably stable and the responsive signal permitted a new level of belief in the awareness monitoring technique and allowed him to run cases at a Composite Cortical State (CCS) index of 45 with confidence in early tapering of the patients anaesthesia using TCI (infusions of propofol and remifentanil) • The BARM had impressive stability and speed of response. He was able to administer significantly less Dr Sultana reported that “Often when using the BIS/Entropy (monitors), they dramatically lag the patents emergence and I have had patients that take up to 20 minutes to wake up • In usage with NMB (Neuromuscular Block) he was able to “achieve accuracy, predictability and a smooth wake up” The BAR Monitor has now been used with approximately 160 patients at Strathfield and St Luke’s Hospitals. Cortical believes these conclusions have significant implications for hospital operations: - Cortical advised that it has issued an Offer Information Statement to undertake a capital raising. Cortical had previously announced it had signed two five-year exclusive distribution agreements, one with a European distribution company, Innomed, covering Belgium, Netherlands and Luxembourg and the other with a South Korean distribution company, Globaluck. In early November, Mr Louis Delacretaz, Cortical’s Chief Technical Officer, attended the Korea Anesthesia 2018 congress in Seoul. Prior to the congress start, Mr. Delacretaz attended a series of meetings organised by Austrade with anaesthesiology professors from the Seoul National University College of Medicine, Konkuk University School of Medicine and the Catholic University of Korea College of Medicine. Each Professor was actively looking for a substitute for their current monitors as they had strong concerns about the credibility of the current monitors reading. In several meetings they were very interested in a means to determine the patients’ pain levels and interested in trialing the BARM as a substitute device. 77 BPH Energy I Annual Report 2018 BPH Energy I Annual Report 2018 HEALTH TECHNOLOGY RESOURCES REVIEW OF OPERATIONS BPH ENERGY LIMITED AND IT’S CONTROLLED ENTITIES Cortical engaged an international testing and certification organization to test and certify the BARM to comply with the Korean certification process .The assessment also includes the latest medical safety standard deviations for Australia, New Zealand, European Union and the USA. The regulatory compliance process to enable distribution of the BARM in Korea has now been significantly advanced. MEC Resources Limited (“MEC”), BPH 0.9% Settlement of Legal Matters with MEC On 9 August 2019 BPH announced that it had reached a settlement with MEC in relation to the oppression proceedings it commenced in the Supreme Court of Western Australia with Grandbridge, Trandcorp Pty Ltd (“Trandcorp”), and Mr David Breeze. In addition to the settlement of the oppression proceedings, BPH, MEC, GBA, Trandcorp and Mr David Breeze settled a number of other proceedings and entered into a deed of settlement and release with Advent Energy Ltd (“Advent”) and other relevant parties. As part of the settlement it was agreed that Messrs Matthew Battrick and Tobias Foster would appoint Messrs Steven James, Tony Huston and Thomas Fontaine as directors of Advent, and that Messrs Matthew Battrick and Tobias Foster would then resign from the Board of Advent. The Incoming Directors have since confirmed and acknowledged Mr David Breeze as a duly elected director of Advent. The key terms of the settlement are as follows: > The appointment of the Incoming Directors and the resignation of the Resigning Directors > Until 23 July 2021, MEC agrees to not directly or indirectly interfere with the board composition and/or management of Advent. > For a period of one year commencing from 6 August 2019 MEC must not sell or otherwise dispose of any shares it holds in Advent, other than by an in-specie distribution to MEC if requested in writing to do so by Advent. If notice is given, MEC must do all that is required to effect and support the In-Specie Distribution. > The loan of $3,600,000 owed by Advent to MEC will be recoverable by MEC only by the following means and only in the following circumstances: One month prior to the scheduled commencement date for the drilling of a well within the PEP 11 Permit Area, Advent will issue to MEC ordinary shares to the face value of the debt calculated at 80% of: (a) the volume-weighted average price of Advent shares over the 5 days trading immediately prior to that date; or (b) if as at that date Advent shares are not listed on any securities exchange, the price at which ordinary shares in Advent were last issued. Advent Energy Ltd (“Advent”), BPH 22.6% (i) PEP 11 PEP11, offshore Sydney Basin adjacent to Newcastle- Sydney offshore New South Wales, is held 85% and operated by Asset Energy Pty Ltd (“Asset”), a wholly owned subsidiary of Advent Energy Ltd (“Advent”). PEP11 holds significant structural targets potentially capable of comprising multi-Tcf natural gas resources. The offshore Sydney Basin has been lightly explored to date, including a multi-vintage 2D seismic data coverage and a single exploration well, New Seaclem-1 (2010). Its position as the only petroleum title offshore New South Wales provides a significant opportunity should natural gas be discovered in commercial quantities in this petroleum title. It lies adjacent to the Sydney- Newcastle region and the existing natural gas network servicing the east coast gas market. Advent’s two core prospects in PEP11 have previously been calculated via external assessment to have the potential for un-risked (P50) prospective gas resources of 472 and 2,131 billion cubic feet (“BCF”) respectively, with multi-trillion cubic feet upside (“multi-TCF”, Pmean). Advent’s prior presentation ‘Strategic Summary: Tactics to Success ‘ confirmed the strategy of “Complete current 2D seismic commitment to deliver shallow hazard survey work …to deliver ‘drill ready’ gas prospect ....for early drilling ,capturing near-term rig availability off Australia’s coast.” 88 BPH Energy I Annual Report 2018 BPH Energy I Annual Report 2018 In April 2018 Advent undertook a high resolution 2D seismic data over the Baleen prospect designed to evaluate (amongst other things) shallow geohazard indications including shallow gas accumulations that can affect future potential drilling operations. It is a drilling prerequisite that a site survey is made prior to drilling at the Baleen location. On 31 December 2018 MEC announced that there were “no ‘seismically defined shallow gas hazards “at the proposed well location on the Baleen Prospect. (ii) EP386 and RL1 EP386 and RL1 are held by Advent’s 100% subsidiary Onshore Energy Pty Ltd. The petroleum titles lie in the onshore Bonaparte Basin, one of Australia’s most prolific hydrocarbon producing basins. The petroleum wells Waggon Creek-1, Vienta-1 (EP386) and Weaber-4 (RL1) are cased and suspended. MEC has previously announced a two year extension to the EP386 permit till March 2019. Molecular Discovery Systems Limited, BPH 20% Molecular Discovery Systems Limited (“MDSystems”), launched in 2006 and spun off from BPH in 2010, is an associate of BPH. MDSystems has been 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 Molecular Cancer Research Group has developed a pre-clinical model of liver cancer where the expression of Hls5 is ablated i.e. it mimics, in part, patients that have low HLS5 (TRIM35) and develop liver cancer. Research conducted at the Perkins Institute has shown that HLS5 has significant tumour suppressor properties. The Perkins findings are supported by the two independent peer reviewed scientific publications, identifying a role for HLS5 in cancer, demonstrating that the loss of HlS5 expression may be a critical event in the development and progression of liver cancer. The publications — a collaboration between Fudan University Shanghai Cancer Centre and other Chinese Institutes, including Shanghai Cancer Institute, Liver Cancer Institute, Second Military Medical University and Qi Dong Liver Cancer Institute —focused on identifying the role of HLS5 in liver cancer. The first article demonstrated that HLS5 binds a key enzyme involved in the production of energy for cancer cells (Pyruvate Kinase isoform M2 (PKM2)). They showed that HLS5 binds PKM2 to form a complex which inhibits the activation of PKM2. The formation of this HLS5/PKM2 complex ultimately limits the cancer cell’s means of energy production and its ability to proliferate. In the second publication the expression levels of HLS5 and PKM2 were assessed for potential use as a prognostic marker for hepatocellular carcinoma (HCC) - (liver cancer) .The study analysed liver samples of 688 patients who had HCC. The study found that patients who were positive for PKM2 expression and negative for HLS5 expression had poorer overall survival and shorter time to recurrence. Taken together, the findings of both papers further support the research into HLS5 by MDS and the Harry Perkins Institute of Medical Research. 99 BPH Energy I Annual Report 2018 BPH Energy I Annual Report 2018 HEALTH TECHNOLOGY RESOURCES DIREC TOR’ S REPORT BPH ENERGY LIMITED AND IT’S CONTROLLED ENTITIES The directors of BPH Energy Ltd (”BPH Energy” or “the Company”) present their report on the Company and its controlled entities (“consolidated entity” or “Group”) for the financial year ended 30 June 2019. Directors The names of directors in office at any time during or since the end of the year are: D L Breeze A Huston C Maling Company Secretary Mr David Breeze was appointed Company Secretary on 23 November 2016. He has many years’ experience in the management of listed entities. Principal Activities The principal activities of the consolidated entity during the financial year were investments in biotechnology entities and an oil and gas exploration entity. paid in respect of the current period and no dividends have been paid or declared since the commencement of the period. Financial Position The consolidated entity has a working capital deficit of $941,825 (2018: deficit $1,101,201). The net assets of the consolidated entity decreased by $1,559,556 to $2,002,259 at 30 June 2019. Included in trade creditors and payables is current director fee accruals of $812,783 (2018: $765,027). The directors have reviewed their expenditure and commitments for the consolidated entity and have implemented methods of costs reduction. The directors as a part of their cash monitoring, have voluntarily suspended cash payments for their directors’ fees to conserve cash resources. Significant Changes in State Of Affairs Capital raisings During the year BPH issued 1,186,040,241 shares under a one for one non-renounceable entitlement issue (“Rights Issue”) at an issue price of $0.001 per share of which $1,027,504 was received in cash and $158,536 satisfied by debt set-off. In addition, during the period BPH raised $148,000 cash from the issue of placement shares, issued 100,000,000 shares in exchange for 5,555,556 shares in MEC Resources Limited, issued 123,050,000 shares as settlement of consulting fees, and issued 20,000,000 shares as part of director remuneration. Operating Results Subsequent Events The consolidated entity has reported a net loss after tax for the year ended 30 June 2019 of $3,013,043 (2018: loss of $1,506,758) and has a net cash outflow from operating activities of $487,427 (2018: outflow of $466,968). Revenue increased by 17.8% to $278,227 as the company continued to accrue interest on its secured loans to its investee companies. The net loss from ordinary activities after tax is after recognising (i) a fair value gain of $280,372 (2018: $Nil) (ii) $Nil impairment charge with respect to Advent Energy Limited (2018: charge of $1,003,001) and; (iii) $332,102 consulting and legal costs (2018: $311,680) (iv) loan provisions of $2,889,033 (2018: $77,155) Dividends The directors recommend that no dividend be On 9 August 2019 BPH announced that it had reached a settlement with MEC in relation to the oppression proceedings it commenced in the Supreme Court of Western Australia with Grandbridge, Trandcorp Pty Ltd (“Trandcorp”), and Mr David Breeze. In addition to the settlement of the oppression proceedings, BPH, MEC, GBA, Trandcorp and Mr David Breeze settled a number of other proceedings and entered into a deed of settlement and release with Advent Energy Ltd (“Advent”) and other relevant parties. As part of the settlement it was agreed that Messrs Matthew Battrick and Tobias Foster would appoint Messrs Steven James, Tony Huston and Thomas Fontaine as directors of Advent, and that Messrs Matthew Battrick and Tobias Foster would 1010 BPH Energy I Annual Report 2018 BPH Energy I Annual Report 2018 then resign from the Board of Advent. The Incoming Directors have since confirmed and acknowledged Mr David Breeze as a duly elected director of Advent. The key terms of the settlement are as follows: > The appointment of the Incoming Directors and the resignation of the Resigning Directors > Until 23 July 2021, MEC agrees to not directly or indirectly interfere with the board composition and/or management of Advent. > For a period of one year commencing from 6 August 2019 MEC must not sell or otherwise dispose of any shares it holds in Advent, other than by an in-specie distribution to MEC if requested in writing to do so by Advent. If notice is given, MEC must do all that is required to effect and support the In-Specie Distribution. > The loan of $3,600,000 owed by Advent to MEC will be recoverable by MEC only by the following means and only in the following circumstances: One month prior to the scheduled commencement date for the drilling of a well within the PEP 11 Permit Area, Advent will issue to MEC ordinary shares to the face value of the debt calculated at 80% of: (a) the volume-weighted average price of Advent shares over the 5 days trading immediately prior to that date; or (b) if as at that date Advent shares are not listed on any securities exchange, the price at which ordinary shares in Advent were last issued. On 9 August 2019 the Company issued 20,000,000 share options with an exercise price of $0.002 and an expiry date of 9 August 2024 as part of remuneration arrangements with a contractor. On 21 August 2019 the Company announced that it intended to pursue a complementary strategy of making an investment (or investments) in the medical cannabis sector, as it is considered that an investment of this nature is in line with its investee company strategy and, in particular, its biomedical business. The medical cannabis sector is showing significant growth with current developments boosting the sectors viability including the move to legalise cannabis in Canada and the announcement by the UK Government to legalise medical cannabis. On 2 September 2019 BPH announced it had agreed to acquire an initial investment of 10% (with the option to increase its percentage to 49%) in Patagonia Genetics Pty Ltd (“PG Aust”), the entity that owns a 100% interest in Patagonia Genetics SPA (“PG”), a Chilean entity. On 30 August 2019 the Company issued 150,000,000 fully paid ordinary shares as partial consideration for the acquisition of the initial investment of 10% On 28 August 2019 the Company issued (i) 282,000,000 fully paid ordinary shares for cash to make investments in oil and gas, medical devices and biotechnology, working capital, debt reduction, and due diligence and review and consideration of proposed investment in medical cannabis, and (ii) 15,000,000 fully paid ordinary shares as an introductory fee for a business transaction. On 17 September 2019 the Company announced that Advent has now terminated by mutual consent the RL Energy Joint Venture Agreement for the PEP11 permit. As a result Advent, through wholly owned subsidiary Asset Energy Pty Ltd, now holds an 85% interest and is operator of the permit (and RL Energy has no further interest). Bounty Oil and Gas NL (ASX: BUY) holds the remaining 15%. The Joint Venture is now reviewing the work program and evaluating proceeding with the drilling of a well at the Baleen drill target subject to approvals of NOPTA and other regulatory authorities. On 17 September 2019 the Company announced that PG had purchased its first 1,300ltrs of Wonderland Agronutrients products to send samples to major licensed producers and grow shops internationally. PG has secured the exclusive worldwide distribution rights (excluding Chile & Argentina) to Chile’s leading cannabis fertilizer and biostimulant range, Wonderland Agronutrients. On 19 September 2019 the Company announced that Advent has been granted a renewal of Retention Licence 1 (RL1) in the Northern Territory by the NT Department of Primary Industry and Resources for a five-year term concluding in July 2023. Advent, through its wholly owned subsidiary Onshore Energy Pty Ltd, holds a 100 % interest in RL1 and is operator of the Retention Licence. Advent, through Onshore Energy, also holds 100% of EP 386 in addition to RL 1 in the onshore Bonaparte Basin in northern Australia. There are no other matters or circumstances that have arisen since the end of the financial year other than outlined elsewhere in this financial report that 1111 BPH Energy I Annual Report 2018 BPH Energy I Annual Report 2018 HEALTH TECHNOLOGY RESOURCES DIRECTOR’S REPORT BPH ENERGY LIMITED AND IT’S CONTROLLED ENTITIES have significantly affected, or may significantly affect, the operations of the company, the results of those operations, or the state of affairs of the company in future financial years. Review of Operations A Review of Operations is set out on pages 1 to 4 and forms part of this Directors’ Report. Environmental Issues The consolidated entity’s operations are not regulated by any significant environmental regulation under law of the Commonwealth or of a state or territory. Non-Audit Services No fees for non-audit services were paid/payable to the external auditors during the year ended 30 June 2019 (2018: $Nil). 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. 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. INFORMATION ON DIRECTORS D L Breeze Managing Director and Executive Chairman – Age 66 Shares held – 310,677,944 / 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. During the last 3 years David has held the following listed company directorships: Grandbridge Limited (from December 1999 to present) MEC Resources Limited (from April 2005)* *David Breeze was a Director of MEC Resources Limited (“MEC”) from April 2005 and was removed from the ASIC register by MEC directors on 23 November 2016. He has neither resigned nor been removed by shareholders and disputes the actions taken by the Directors of MEC. David is also a director of Cortical Dynamics Limited, Molecular Discovery Systems Limited, Diagnostic Array Systems Limited, Advent Energy Limited, Onshore Energy Pty Ltd, and Asset Energy Pty Ltd. A Huston Non-Executive Director – Age 64 Shares held – 20,000,000 / Unlisted options held – 2,000,000 Tony Huston has been involved for over 35 years in engineering and hydrocarbon industries for both on and off shore exploration/development. Early career experience commenced with Fitzroy Engineering Ltd, primarily working on development of onshore oil fields. In 1996 Tony formed his own E&P Company on re-entry of onshore wells, primarily targeting shallow pay that had been passed or ignored from previous operations. This was successful and the two plays opened up 15 years ago are still in operation. 1212 BPH Energy I Annual Report 2018 BPH Energy I Annual Report 2018 Recent focus (10 years) has been to utilise new technology for enhanced resource recovery and has been demonstrated in various fields, including US, Mexico, Oman, Italy and Turkmenistan. During the last 3 years Tony has not held any other listed company directorships. C Maling The Company has paid premiums to insure directors and officers 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 or officer of the Company, other than conduct involving a wilful breach of duty in relation to the Company. The Company has not indemnified the current or former auditors of the Company. Non-Executive Director – Age 65 Shares held – 44,536 / Unlisted options held – 2,000,000 Remuneration Report (Audited) Mr Charles Maling was formerly the Communications Officer for the Office of the Western Australian State Government Environmental Protection Authority with a responsibility for advising the Chairman of the EPA on media issues. He has a Bachelor of Sociology and Anthropology with a Media minor. Charles worked with the Western Australian State Government Department of the Environment for 14 years and further 8 years for the EPA. His administrative roles included environmental research (including a major study on Perth Metropolitan coastal waters and Western Australian estuaries) environmental regulation and enforcement and media management. In the past three years Charles has held the following listed company directorships: Grandbridge Limited (November 2016 to present) Meetings of Directors The board consults regularly by phone on matters relating to the Company’s operations. Resolutions are passed by circulatory resolution. The Company held 2 meetings of directors during the financial year. Attendance by each director during the year were: Name D Breeze A Huston C Maling Number eligible to attend Number attended 2 2 2 2 2 2 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: This report details the nature and amount of remuneration for key management personnel of BPH Energy. The Remuneration Report details the remuneration arrangements for KMP who are defined as those persons having authority and responsibility for planning, directing and controlling the major activities of the consolidated entity, directly or indirectly, including any Director (whether executive or otherwise) of the consolidated entity. The information provided in the 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, Managing Director and Company Secretary Non-Executive Director Non-Executive Director A Huston - C Maling - 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 2018 financial accounts was not adopted at the Company’s 2018 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. 1313 BPH Energy I Annual Report 2018 BPH Energy I Annual Report 2018 HEALTH TECHNOLOGY RESOURCES DIRECTOR’S REPORT BPH ENERGY LIMITED AND IT’S CONTROLLED ENTITIES 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 with each executive and is based predominantly on the amount of their workloads and responsibilities for the Company. The board may, however, exercise its discretion in relation to approving incentives, bonuses and options, and can recommend changes to recommendations. Any changes must be justified by reference to measurable performance criteria. The policy is designed to attract the highest calibre of executives and reward them for performance that results in long-term growth in shareholder wealth. Executives are also entitled to participate in the employee share and option arrangements. The executive directors and executives which receive salaries receive a superannuation guarantee contribution required by the government, which is currently 9.50%, and do not receive any other retirement benefits. 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. The maximum pool of non-executive director fees approved by shareholders is $250,000. 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 Directors and Senior Executives The employment conditions of the Managing Director, David Breeze, is formalised in a Product Development Agreement. The engagement is automatically extended for a period of 2 years at each anniversary date unless the Managing Director or the Company give notice of termination prior to the expiry of each term. The agreement stipulates the Managing Director may terminate the engagement with a six month notice period. The company may terminate the agreement 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 up to twelve 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. 1414 BPH Energy I Annual Report 2018 BPH Energy I Annual Report 2018 Details of Remuneration for the year ended 30 June 2019 The remuneration for each key management personnel of the consolidated entity during the year was as follows: 2019 Key Management Person Short-term Benefits Post-employment Benefits Salary and fees Bonus Non-cash benefit Other Superannuation D L Breeze C Maling A Huston 148,000 25,000 36,335 - - - - - - - - - - - 665 Key Management Person Long-term Benefits Share-based payment Total Performance Related Compensation Relating to Securities D L Breeze C Maling A Huston Other Equity Options $ - - - - - 20,000 - - - 148,000 25,000 57,000 % - - - % - - 35.1% 2018 Key Management Person Short-term Benefits Post-employment Benefits Salary and fees Bonus Non-cash benefit Other Superannuation D L Breeze 148,000 C Mailing (appointed 17.10.17) 17,637 T Fontaine (resigned 17.10.17) 7,363 A Huston 25,000 - - - - - - - - - - - - - - - - Key Management Person Long-term Benefits Share-based payment Total Performance Related Compensation Compensation Relating to Options Other Equity Options $ D L Breeze C Mailing (appointed 17.10.17) T Fontaine (resigned 17.10.17) A Huston - - - - - - - - - 717 - 717 148,000 18,354 7,363 25,717 % - - - - % - 3.9% - 2.8% 1515 BPH Energy I Annual Report 2018 BPH Energy I Annual Report 2018 HEALTH TECHNOLOGY RESOURCES DIRECTOR’S REPORT BPH ENERGY LIMITED AND IT’S CONTROLLED ENTITIES 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 key management personnel as at the date of this report. Option holdings Balance 1.7.2018 or date of appointment Granted as Compensation Options Exercised Balance 30.6.2019 Total Vested 30.6.2019 Total Exercisable and Vested 30.6.2019 Total Unexercisable 30.6.2019 D L Breeze - A Huston 2,000,000 C Maling 2,000,000 - - - - - - - - - 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 - - - Shareholdings Balance 1.7.2018 Received as Options Exercised Acquired Compensation Balance 30.6.2019 D L Breeze 155,338,972 - A Huston C Maling - 22,268 20,000,000 - - - - 155,338,972 310,677,944 - 22,268 20,000,000 44,536 Share Based Payments The following are the share based payment arrangements in existence for those key management personnel at year end: Grant Date Date of Expiry Fair Value at Grant Date Exercise Price Number of options Vesting Date 29 November 30 November $0.0004 $0.020 4,000,000 At grant date 2017 2022 There are no further service or performance criteria that need to be met in relation to options granted. There were no grants of share based payment compensation to directors and senior management in the current financial year. No options attributable to key management personnel were exercised or lapsed during the year. Company performance, shareholder wealth and director and executive remuneration The following table shows the gross revenue and the operating result for the last 5 years for the listed entity, as well as the share price at the end of the respective financial years. Revenue from ordinary activities 224,420 181,758 216,925 235,824 278,227 Net (loss) (26,490,513) (511,446) (2,544,301) (1,506,758) (3,013,043) 2015 2016 2017 2018 2019 Share price at year end 0.53 Earnings / (loss) per share (cents) (11.31) 0.19 (0.59) 0.08 (0.20) 0.1 (0.17) 0.53 (0.22) 1616 BPH Energy I Annual Report 2018 BPH Energy I Annual Report 2018 OPTIONS At the date of this report, the unissued ordinary shares of BPH Energy Ltd under option are as follows: Grant Date 2 April 2015 20 April 2015 Date of Expiry 31 March 2020 31 March 2020 27 November 2015 30 November 2020 23 November 2016 30 November 2021 29 November 2017 30 November 2022 20 June 2019 9 August 2019 20 June 2024 9 August 2024 Exercise Price Number Under Option $0.02 $0.02 $0.02 $0.02 $0.02 $0.002 $0.002 795,000 9,000,000 2,000,000 2,000,000 4,000,000 30,000,000 20,000,000 During the year ended 30 June 2019 no ordinary shares of the Company were issued on the exercise of options granted under the BPH Energy Ltd Incentive Option Scheme (2018: Nil). 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 have been issued during or since the end of the financial year as a result of exercise of an option. No options lapsed unexercised during the year. AUDITOR’S INDEPENDENCE DECLARATION The lead auditor’s independence declaration for the year ended 30 June 2019 has been received and can be found on page 14. 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 28 September 2018 1717 BPH Energy I Annual Report 2018 BPH Energy I Annual Report 2018 AUDITOR’S INDEPENDENCE DECLARATION HEALTH TECHNOLOGY RESOURCES As lead auditor for the audit of the consolidated financial report of BPH Energy Limited for the year ended 30 June 2019, I declare that to the best of my knowledge and belief, there have been no contraventions of: AUD I TOR ’S the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and IND EPENDENCE DECL ARATION any applicable code of professional conduct in relation to the audit. b) a) Perth, Western Australia 30 September 2019 B G McVeigh Partner 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 2019, I declare that to the best of my knowledge and belief, there have been no contraventions of: a) the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and b) any applicable code of professional conduct in relation to the audit. Perth, Western Australia 30 September 2019 B G McVeigh Partner 14 1818 BPH Energy I Annual Report 2018 BPH Energy I Annual Report 2018 14 COR PORATE GOVERNANCE BPH ENERGY LIMITED AND IT’S CONTROLLED ENTITIES 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 1919 BPH Energy I Annual Report 2018 BPH Energy I Annual Report 2018 HEALTH TECHNOLOGY RESOURCES STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME for the year ended 30 June 2019 BPH ENERGY LIMITED AND IT’S CONTROLLED ENTITIES Revenue from ordinary activities Other income Share of associates’ loss Impairment charge Fair value gain Interest expense Administration expenses Derecognition of financial liability Provision for doubtful debts Consulting and legal expenses Directors fees Insurance expenses Service Fees Share based payments Other expenses (Loss) before income tax Income tax expense (Loss) for the year Other comprehensive income: Items that will not be reclassified subsequently to profit and loss Reclassification of revaluation reserve (net of tax) Other comprehensive profit (net of tax) 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 Note 2 2 10 3 3 Consolidated 2019 $ 278,227 17,625 (28,006) 2018 $ 235,824 3,720 (28,500) - (1,003,001) 280,372 (774) (73,928) 83,956 - (1,805) (65,591) - (2,889,033) (77,155) (332,102) (311,680) (100,000) (100,174) (9,029) (17,960) (128,640) (128,640) (82,422) (29,289) (1,434) (10,362) (3,013,043) (1,506,758) 11 - - (3,013,043) (1,506,758) - - - - (3,013,043) (1,506,758) (245) (918) (3,012,798) (1,505,840) (3,012,798) (1,505,840) Total comprehensive (loss) attributable to non-controlling interests (245) (918) Earnings per share 4 (0.17) (0.20) Basic and diluted (loss) per share (cents per share) The accompanying notes form part of, and should be read in conjunction with, these financial statements. 2020 BPH Energy I Annual Report 2018 BPH Energy I Annual Report 2018 STATEMENT OF FINANCIAL POSITION for the year ended 30 June 2019 BPH ENERGY LIMITED AND IT’S CONTROLLED ENTITIES 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 Total Non-Current Assets Total Assets Current Liabilities Trade and other payables Financial liabilities Total Current Liabilities Non-Current Liabilities Financial liabilities Total Non-Current Liabilities Total Liabilities Net Assets Equity Issued capital Reserves Accumulated losses Non-controlling interest Total Equity Note 7 8 9 9 10 12 13 15 14 15 Consolidated 2019 $ 437,316 20,969 190,342 33,869 682,496 2018 $ 447,214 19,658 165,058 4,051 635,981 2,507,543 4,284,920 436,541 464,547 2,944,084 4,749,467 3,626,580 5,385,448 1,424,235 1,323,541 200,086 413,641 1,624,321 1,737,182 - - 86,451 86,451 1,624,321 1,823,633 2,002,259 3,561,815 45,574,507 44,135,442 508,436 494,014 (43,920,864) (40,908,066) (159,820) (159,575) 2,002,259 3,561,815 The accompanying notes form part of, and should be read in conjunction with, these financial statements. 2121 BPH Energy I Annual Report 2018 BPH Energy I Annual Report 2018 HEALTH TECHNOLOGY RESOURCES STATEMENT OF CHANGES IN EQUITY for the year ended 30 June 2019 BPH ENERGY LIMITED AND IT’S CONTROLLED ENTITIES Balance as at 30 June 2017 Loss for the period Total comprehensive loss for the year Transactions with owners in their capacity as owners Shares issued for cash Share issue costs Shares issued in lieu of consulting fees Shares issued as set-off against loans payable Balance at 30 June 2018 Loss for the period Total comprehensive loss for the year Transactions with owners in their capacity as owners Shares issued for cash Share issue costs Shares issued in lieu of consulting fees Shares issued as set-off against loans payable Shares issued as director remuneration Shares issued in exchange for ordinary shares in listed entity Ordinary Share Capital $ Accumulated Losses Option reserve $ Total attributable to owners of the parent entity $ Non-controlling Interest $ Total $ 43,454,632 (39,402,226) 492,580 4,544,986 (158,657) 4,386,329 (1,505,840) (1,505,840) (918) (918) (1,506,758) (1,506,758) - - (1,505,840) (1,505,840) 566,940 (74,161) 22,000 166,031 - - - - - - - - - - 566,940 (74,161) 22,000 166,031 1,175,504 (153,025) 138,050 158,536 20,000 100,000 - - - - - - - - - - - - - 566,940 (74,161) 22,000 166,031 1,434 - - - - - - - 1,175,504 (153,025) 138,050 158,536 20,000 100,000 14,422 1,175,504 (153,025) 138,050 158,536 20,000 100,000 - - - - - - - Share based payments expense - 1,434 1,434 44,135,442 (40,908,066) 494,014 3,721,390 (159,575) 3,561,815 (3,012,798) (3,012,798) - - - (3,012,798) (3,012,798) (245) (245) (3,013,043) (3,013,043) Share based payments expense - 14,422 14,422 Balance at 30 June 2019 45,474,507 (43,920,864) 508,436 2,162,079 (159,820) 2,002,259 The accompanying notes form part of, and should be read in conjunction with, these financial statements. 2222 BPH Energy I Annual Report 2018 BPH Energy I Annual Report 2018 STATEMENT OF CASH FLOWS for the year ended 30 June 2019 BPH ENERGY LIMITED AND IT’S CONTROLLED ENTITIES Cash flows from operating activities Payments to suppliers and employees Interest received Interest paid Note Consolidated 2019 $ 2018 $ (488,458) (467,999) 1,805 (774) 2,836 (1,805) Net cash used in operating activities 17(a) (487,427) (466,968) Cash flows from investing activities Loans to other entities Net cash used in investing activities Cash flows from financing activities Proceeds from issue of securities (net of share issue costs) Repayment of borrowings 17(c) Net cash provided by financing activities Net (decrease) / increase in cash held Cash and cash equivalents at the beginning of the financial year Cash and cash equivalents at the end of the financial year (505,000) (505,000) (68,000) (68,000) 1,112,529 492,778 (130,000) 982,529 (9,898) 447,214 (124,254) 368,524 (166,444) 613,658 17(b) 437,316 447,214 The accompanying notes form part of, and should be read in conjunction with, these financial statements. 2323 BPH Energy I Annual Report 2018 BPH Energy I Annual Report 2018 HEALTH TECHNOLOGY RESOURCES NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2019 BPH ENERGY LIMITED AND IT’S CONTROLLED ENTITIES 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 entity’ 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 30 September 2019 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. Financial Position The consolidated entity has reported a net loss after tax for the year ended 30 June 2019 of $3,013,043 (2018: loss of $1,506,758) and has a net cash outflow from operating activities of $487,427 (2018: outflow of $466,968). Revenue increased by 17.8% to $278,227 as the company continued to accrue interest on its secured loans to its investee companies. The net profit from ordinary activities after tax is after recognising (i) a fair value gain of $280,372 (2018: $Nil) (ii) $Nil impairment charge with respect to Advent Energy Limited (2018: charge of $1,003,001) (iii) $332,102 consulting and legal costs (2018: $311,680) and; (iv) loan provisions of $2,889,033 (2018: $77,155). The consolidated entity has a working capital deficit of $941,825 (2018: deficit $1,101,201). The net assets of the consolidated entity decreased by $1,559,556 to $2,002,259 at 30 June 2019. Included in trade creditors and payables is current director fee accruals of $812,783 (2018: $765,027). The directors have reviewed their expenditure and commitments for the consolidated entity and have implemented methods of costs reduction. The directors as a part of their cash monitoring, have voluntarily suspended cash payments for their directors’ fees to conserve cash resources. Subsequent to year end Grandbridge Limited has confirmed that the $200,086 loans provided to the consolidated entity at 30 June 2019 will not be called upon for repayment if the BPH directors are of the opinion that such an action would compromise BPH’s financial solvency. The directors have prepared cash flow forecasts, including potential capital raisings, which indicate that the consolidated entity should 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. 2424 BPH Energy I Annual Report 2018 BPH Energy I Annual Report 2018 Should the consolidated entity not be successful in raising additional funds through the issue of new equity, should the need arise there is a material uncertainty that may cast significant doubt as to whether or not the consolidated entity will be able to continue as a going concern and therefore, whether it will realise its assets and discharge its liabilities as and when they fall due and in the normal course of business and at the amounts stated in the financial report. The financial statements do not include any adjustments relative to the recoverability and classification of recorded asset amounts or, to the amounts and classification of liabilities that might be necessary should the entity not continue as a going concern. 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). 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 16 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. 2525 BPH Energy I Annual Report 2018 BPH Energy I Annual Report 2018 HEALTH TECHNOLOGY RESOURCES NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2019 BPH ENERGY LIMITED AND IT’S CONTROLLED ENTITIES When the Group loses control of a subsidiary, the profit or loss on disposal is calculated as the difference between (i) the aggregate of the fair value of the consideration received and the fair value of any retained interest and (ii) the previous carrying amount of the assets (including goodwill), and liabilities of the subsidiary and any non-controlling interests. Amounts previously recognised in other comprehensive income in relation to the subsidiary are accounted for (i.e. reclassified to profit or loss or transferred directly to retained earnings) in the same manner as would be required if the relevant assets or liabilities were disposed of. The fair value of any investment retained in the former subsidiary at the date when control is lost is regarded as the fair value on initial recognition for subsequent accounting under AASB 139 Financial Instruments: Recognition and Measurement or, when applicable, the cost on initial recognition of an investment in an associate or jointly controlled entity. (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. 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. 2626 BPH Energy I Annual Report 2018 BPH Energy I Annual Report 2018 (c) 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: Depreciation Rate 15 - 33 % Class of Fixed Asset Plant and equipment 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. (d) Financial Instruments Current Year Recognition and derecognition Financial assets and financial liabilities are recognised when the Group becomes a party to the contractual provisions of the financial instrument. Financial assets are derecognised when the contractual rights to the cash flows from the financial asset expire, or when the financial asset and substantially all the risks and rewards are transferred. A financial liability is derecognised when it is extinguished, discharged, cancelled or expires. Classification and initial measurement of financial assets Except for those trade receivables that do not contain a significant financing component and are measured at the transaction price in accordance with AASB 15, all financial assets are initially measured at fair value adjusted for transaction costs (where applicable). For the purpose of subsequent measurement, financial assets, other than those designated and effective as hedging instruments, are classified into the following categories: 2727 BPH Energy I Annual Report 2018 BPH Energy I Annual Report 2018 HEALTH TECHNOLOGY RESOURCES NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2019 BPH ENERGY LIMITED AND IT’S CONTROLLED ENTITIES fair value through profit or loss (FVTPL) > amortised cost > > equity instruments at fair value through other comprehensive income (FVOCI) > debt instruments at fair value through other comprehensive income (FVOCI). All income and expenses relating to financial assets that are recognised in profit or loss are presented within finance costs, finance income or other financial items, except for impairment of trade receivables which is presented within other expenses. The classification is determined by both: > > the entity’s business model for managing the financial asset, and the contractual cash flow characteristics of the financial asset. Subsequent measurement of financial assets (i) Financial assets at amortised cost Financial assets are measured at amortised cost if the assets meet the following conditions (and are not designated as FVTPL): > they are held within a business model whose objective is to hold the financial assets to collect its contractual cash flows the contractual terms of the financial assets give rise to cash flows that are solely payments of principal and interest on the principal amount outstanding. > After initial recognition, these are measured at amortised cost using the effective interest method. Discounting is omitted where the effect of discounting is immaterial. The Group’s cash and cash equivalents, trade and most other receivables fall into this category of financial instruments. (ii) Financial assets at fair value through profit or loss (FVTPL) Financial assets that are held within a different business model other than ‘hold to collect’ or ‘hold to collect and sell’ are categorised at fair value through profit and loss. Further, irrespective of business model financial assets whose contractual cash flows are not solely payments of principal and interest are accounted for at FVTPL. All derivative financial instruments fall into this category, except for those designated and effective as hedging instruments, for which the hedge accounting requirements apply. The category also contains an equity investment. The Group accounts for the investment at FVTPL and did not make the irrevocable election to account for the investment in unlisted and listed equity securities at fair value through other comprehensive income (FVOCI). The fair value was determined in line with the requirements of AASB 9, which does not allow for measurement at cost. Assets in this category are measured at fair value with gains or losses recognised in profit or loss. The fair values of financial assets in this category are determined by reference to active market transactions or using a valuation technique where no active market exists. (iii) Equity instruments at fair value through other comprehensive income (Equity FVOCI) Investments in equity instruments that are not held for trading are eligible for an irrevocable election at inception to be measured at FVOCI. Under Equity FVOCI, subsequent movements in fair value are recognised 2828 BPH Energy I Annual Report 2018 BPH Energy I Annual Report 2018 in other comprehensive income and are never reclassified to profit or loss. Dividend from these investments continue to be recorded as other income within the profit or loss unless the dividend clearly represents return of capital. This category includes unlisted equity securities that were previously classified as ‘available-for-sale’ under AASB 139. Any gains or losses recognised in other comprehensive income (OCI) are not recycled upon derecognition of the asset. (iv) Debt instruments at fair value through other comprehensive income (Debt FVOCI) Financial assets with contractual cash flows representing solely payments of principal and interest and held within a business model of collecting the contractual cash flows and selling the assets are accounted for at debt FVOCI. The Group accounts for financial assets at FVOCI if the assets meet the following conditions: > they are held under a business model whose objective it is to “hold to collect” the associated cash flows and sell financial assets; and the contractual terms of the financial assets give rise to cash flows that are solely payments of principal and interest on the principal amount outstanding. > Any gains or losses recognised in other comprehensive income (OCI) will be recycled upon derecognition of the asset. Impairment of financial assets AASB 9’s impairment requirements use more forward-looking information to recognise expected credit losses – the ‘expected credit loss (ECL) model’. This replaced AASB 139’s ‘incurred loss model’. Instruments within the scope of the new requirements included loans and other debt-type financial assets measured at amortised cost and FVOCI, trade receivables, contract assets recognised and measured under AASB 15 and loan commitments and some financial guarantee contracts (for the issuer) that are not measured at fair value through profit or loss. Recognition of credit losses is no longer dependent on the Group first identifying a credit loss event. Instead the Group considers a broader range of information when assessing credit risk and measuring expected credit losses, including past events, current conditions, reasonable and supportable forecasts that affect the expected collectability of the future cash flows of the instrument. In applying this forward-looking approach, a distinction is made between: > financial instruments that have not deteriorated significantly in credit quality since initial recognition or that have low credit risk (‘Level 1’) and > financial instruments that have deteriorated significantly in credit quality since initial recognition and whose credit risk is not low (‘Level 2’). ‘Level 3’ would cover financial assets that have objective evidence of impairment at the reporting date. > ‘12-month expected credit losses’ are recognised for the first category while ‘lifetime expected credit losses’ are recognised for the second category. Measurement of the expected credit losses is determined by a probability- weighted estimate of credit losses over the expected life of the financial instrument. Trade and other receivables and contract assets The Group makes use of a simplified approach in accounting for trade and other receivables as well as contract assets and records the loss allowance as lifetime expected credit losses. These are the expected shortfalls in contractual cash flows, considering the potential for default at any point during the life of the financial instrument. In calculating, the Group uses its historical experience, external indicators and forward-looking information to calculate the expected credit losses using a provision matrix. The Group assess impairment of trade receivables on a collective basis as they possess shared credit risk characteristics they have been grouped based on the days past due. Classification and measurement of financial liabilities The Group’s financial liabilities include borrowings, trade and other payables and derivative financial instruments. 2929 BPH Energy I Annual Report 2018 BPH Energy I Annual Report 2018 HEALTH TECHNOLOGY RESOURCES NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2019 BPH ENERGY LIMITED AND IT’S CONTROLLED ENTITIES Financial liabilities are initially measured at fair value, and, where applicable, adjusted for transaction costs unless the Group designated a financial liability at fair value through profit or loss. Subsequently, financial liabilities are measured at amortised cost using the effective interest method except for derivatives and financial liabilities designated at FVTPL, which are carried subsequently at fair value with gains or losses recognised in profit or loss (other than derivative financial instruments that are designated and effective as hedging instruments). Prior Year 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. 3030 BPH Energy I Annual Report 2018 BPH Energy I Annual Report 2018 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. (iv) 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. 3131 BPH Energy I Annual Report 2018 BPH Energy I Annual Report 2018 HEALTH TECHNOLOGY RESOURCES NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2019 BPH ENERGY LIMITED AND IT’S CONTROLLED ENTITIES (e) Impairment of Assets The Group reviews non-financial assets, other than deferred tax assets, 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) 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. (g) 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. (h) 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. 3232 BPH Energy I Annual Report 2018 BPH Energy I Annual Report 2018 (i) 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. (j) 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 9, 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 9. 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. The consolidated entity discontinues the use of the equity method from the date when the investment ceases to be an associate or a joint venture, or when the investment is classified as held for sale. When the a consolidated entity retains an interest in the former associate or joint venture and the retained interest is a financial asset, the consolidated entity measures the retained interest at fair value at that date and the fair value is regarded as its fair value on initial recognition in accordance with AASB 9. The difference between the carrying amount of the associate or joint venture at the date the equity method was discontinued, and the fair value of any retained interest and any proceeds from disposing of a part interest in the associate or joint venture is included in the determination of the gains or loss on disposal of the associate or joint venture. In addition, the consolidated entity accounts for all amounts previously recognised other comprehensive income in relation to that associate or joint venture on the same basis as would be required if that associate or joint venture had directly disposed of the related assets or liabilities. Therefore, if a gain or loss recognised in other comprehensive income by that associate or joint venture would be reclassified to profit or loss on the disposal of the related assets or liabilities, the consolidated entity reclassifies the gain or loss from equity to profit or loss (as a reclassification adjustment) when the equity method is discontinued. 3333 BPH Energy I Annual Report 2018 BPH Energy I Annual Report 2018 HEALTH TECHNOLOGY RESOURCES NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2019 BPH ENERGY LIMITED AND IT’S CONTROLLED ENTITIES (k) Revenue and Other Income Interest revenue is recognised when it is probable that the economic benefits will flow to the Group and the amount of revenue can be measured reliably. Interest revenue is accrued on a timely basis, by reference to the principal outstanding and at the effective interest rate applicable. Dividend revenue is recognised when the right to receive a dividend has been established. Revenue from the rendering of a service is recognised by reference to the stage of completion of the contract. All revenue is stated net of the amount of goods and services tax (“GST”). (l) Goods and Services Tax 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 entity. The amounts are unsecured and are usually paid within 45 days. Trade and other payables are recognised at amortised cost. (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 and the fiar value of shares and options issued to consultants is measured at the fair value of services received. 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. 3434 BPH Energy I Annual Report 2018 BPH Energy I Annual Report 2018 (o) Segment reporting Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker, the directors (see Note 23). (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. (q) Critical accounting estimates and judgments The directors evaluate estimates and judgments incorporated into the financial report based on historical knowledge and best available current information. Estimates assume a reasonable expectation of future events and are based on current trends and economic data, obtained both externally and within the Group. Key judgements — Provision for Impairment of loan receivables Included in the accounts of the consolidated entity are loan receivables of $162,564 (2018: $2,295,029). The Company recognized a provision of $2,889,033 against its loans in the reporting period (2018: provision of $77,155). Key judgements — Investment in Advent Energy Ltd (“Advent”) As of 1 January 2017 a judgement was made that, despite owning 27% of Advent, the Company no longer exercised significant influence over Advent and it ceased to be treated as an associate entity from that date. In particular, the Company was not involved in the operational decision making of Advent and did not have access to its operational and financial records. As a consequence of a legal settlement reached in August 2019 and David Breeze’s confirmation as a director of Advent the Company has resumed significant influence over Advent Energy Limited. The Company currently has a 22.6% direct interest in Advent, and, as part of the legal settlement reached with MEC in August 2019, if at any time before 23 July 2021 Advent has less than 51 members then MEC will, upon written request by BPH, execute an irrevocable proxy in favour of BPH in respect of all business to be considered at any meeting of members of Advent. An impairment charge of $Nil (2018: charge of $1,003,001) has been recognised against this investment in respect of the current reporting period. Key estimates - Investment in Molecular Discovery Systems The investment in Molecular Discovery Systems Limited is carried at fair value, refer to Note 10. Key estimates - Investment in Cortical The investment in Cortical is carried at fair value, refer to Note 9. (r) Application of New and Revised Accounting Standards Standards and Interpretations in issue not yet adopted The Directors have reviewed new accounting standards and interpretations that have been published that are not mandatory for 30 June 2019 reporting periods. 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 likely to company accounting policies. 3535 BPH Energy I Annual Report 2018 BPH Energy I Annual Report 2018 HEALTH TECHNOLOGY RESOURCES NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2019 BPH ENERGY LIMITED AND IT’S CONTROLLED ENTITIES AASB 16 Leases AASB 16 replaces AASB 117 Leases. AASB 16 removes the classification of leases as either operating leases of finance leases-for the lessee – effectively treating all leases as finance leases. AASB 16 is applicable to annual reporting periods beginning on or after 1 July 2019. Impact on operating leases AASB 16 will change how the Group accounts for leases previously classified as operating leases under AASB 117, which were off-balance sheet. The Group has elected not to early adopt AASB 16 but has conducted an assessment of the impact of the new standard and have determined that there is no material impact. Impact on finance leases The main differences between AASB 16 and AASB 117 with respect to assets formerly held under a finance lease is the measurement of the residual value guarantees provided by the lessee to the lessor. The consolidated entity does not have any finance leases. Standards and Interpretations applicable to 30 June 2019 In the 12 month period ended 30 June 2019, 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. AASB 9 Financial Instruments AASB 9 replaces AASB 139 Financial Instruments: Recognition and Measurement and makes changes to a number of areas including classification of financial instruments, measurement, impairment of financial assets and hedge accounting model. Financial instruments are classified as either held at amortised cost or fair value. Financial instruments are carried at amortised cost if the business model concept can be satisfied. All equity instruments are carried at fair value and the cost exemption under AASB 139 which was used where it was not possible to reliably measure the fair value of an unlisted entity has been removed. Equity instruments which are non-derivative and not held for trading may be designated as fair value through other comprehensive income (FVOCI). Previously classified available-for-sale investments, now carried at fair value are exempt from impairment testing and gains or loss on sale are no longer recognised in profit or loss. The AASB 9 impairment model is based on expected loss at day 1 rather than needing evidence of an incurred loss, this is likely to cause earlier recognition of bad debt expenses. Most financial instruments held at fair value are exempt from impairment testing. The company has applied AASB 9 with the effect of initially applying this standard recognised at the date of initial application, being 1 July 2018 and has elected not to restate comparative information Accordingly, the information presented for 30 June 2018 has not been restated. An expected credit loss provision of $2,823,038 was recognised during the year on the loans with Cortical. 3636 BPH Energy I Annual Report 2018 BPH Energy I Annual Report 2018 (r) Application of New and Revised Accounting Standards AASB 15 Revenue from Contracts with Customers AASB 15 replaces AASB 118 Revenue and AASB 111 Construction Contracts and related interpretations and it applies to all revenue arising from contracts with customers, unless those contracts are in the scope of other standards. AASB 15 establishes a comprehensive framework for determining whether, how much and when revenue is recognised, including in respect of multiple element arrangements. The core principle of AASB 15 is that it requires identification of discrete performance obligations within a transaction and associated transaction price allocation to these obligations, Revenue is recognised upon satisfaction of these performance obligations, which occur when control of goods or services is transferred, rather than on transfer of risks or rewards. Revenue received for a contract that includes a variable amount is subject to revised conditions for recognition, whereby it must be highly probable that no significant reversal of the variable component may occur when the uncertainties around its measurement are removed. There is no material impact to profit or loss or net assets on the adoption of this new standard in the current or comparative years. 3737 BPH Energy I Annual Report 2018 BPH Energy I Annual Report 2018 HEALTH TECHNOLOGY RESOURCES NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2019 BPH ENERGY LIMITED AND IT’S CONTROLLED ENTITIES 2. Revenue Revenue Interest revenue: other entities Interest revenue : cash accounts Other Income Loan establishment fees 3. Expenses Included in Profit / (Loss) for the Year Impairment Charge Investment in unlisted entity – Advent Fair value gain Fair value loss on listed investments Fair value gain on unlisted investments 4. Earnings per Share Consolidated 2019 $ 2018 $ 276,422 1,805 278,227 17,625 17,625 233,455 2,369 235,824 3,720 3,720 - - 1,003,000 1,003,000 (72,222) 352,594 280,372 - - - Total earnings attributable to ordinary equity holders of the Company (3,012,798) (1,505,840) Earnings used in the calculation of basic earnings per share and diluted earnings per share (3,012,798) (1,505,840) For Earnings Per Share (cents per share) From continuing operations (0.17) (0.17) (0.20) (0.20) Total basic earnings per share and diluted earnings per share Number Number Weighted average number of ordinary shares outstanding during the year used in calculating EPS 1,790,200,291 742,486,388 3838 BPH Energy I Annual Report 2018 BPH Energy I Annual Report 2018 5. 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: D L Breeze - Executive Chairman, Managing Director and Company Director C Maling - A Huston - Non Executive Director Non Executive Director Short term employee benefits Post-employment benefits - superannuation Consulting fee Share based payments Consolidated 2019 $ 2018 $ 99,335 100,000 665 110,000 20,000 - 98,000 1,434 230,000 199,434 Included in trade and other payables is current and former director and consulting fee accruals of $1,310,055 (30 June 2018: $1,265,496). Director David Breeze Charles Maling Tony Huston Directors who have previously resigned Balance owing at 30 June 2019 Amount owing 30 June 2019 $ 727,400 42,637 42,746 497,272 1,310,055 Key management personnel remuneration has been included in the Remuneration Report section of the Directors Report. 6. Auditors’ Remuneration Remuneration of the auditor of the parent entity for: - auditing or reviewing the financial report HLB Mann Judd 22,656 25,161 Consolidated 2019 $ 2018 $ 3939 BPH Energy I Annual Report 2018 BPH Energy I Annual Report 2018 HEALTH TECHNOLOGY RESOURCES NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2019 BPH ENERGY LIMITED AND IT’S CONTROLLED ENTITIES 7. Cash and Cash Equivalents Cash at Bank and in hand Consolidated 2019 $ 2018 $ 437,316 437,316 447,214 447,214 Cash at bank earns interest at floating rates based on daily bank deposit rates Reconciliation of cash 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 437,316 447,214 8. Trade and other Receivables Current Other receivables 9. Financial Assets Current Unsecured loans to other entities (interest free): MEC Resources Ltd Secured loans to other entities (interest free): Advent Energy Ltd Investments in listed entities MEC Resources Ltd (Level 1) Non - current Financial assets at fair value: Secured loans to other entities: Cortical Dynamics Limited 20,969 20,969 19,658 19,658 - 2,494 162,564 162,564 27,778 - 190,342 165,058 - 2,129,971 Investments in unlisted entities - Cortical Dynamics Limited (Level 2) 501,543 148,949 Investments in unlisted entities – Advent Energy Ltd (c) (Level 2) 2,006,000 2,006,000 2,507,543 4,284,920 4040 BPH Energy I Annual Report 2018 BPH Energy I Annual Report 2018 Loan receivables are stated net of the following provisions: Cortical Dynamics Limited Gross receivable – secured (b) Gross receivable – unsecured (a) Less provision Molecular Discovery Systems Limited (d) Gross receivable Less provision 2,290,538 2,624,141 1,026,670 - (3,317,208) (494,170) - 2,129,971 1,284,517 1,218,522 (1,284,517) (1,218,522) - - An expected credit loss provision of $2,823,038 was recognised during the year on the loans with Cortical. It is anticipated that Cortical shareholders will be asked for approval to convert part of the Cortical loans to equity at its upcoming 2019 Annual General Meeting. (a) Subsequent to year end the Company has provided a letter confirming these amounts will not be called upon for repayment for at least 12 months from signing the financial report or until such time the Cortical is financially independent. The borrower has provided the Company with an option to convert the loans into ordinary shares in the at the lower of $0.10 per share and the most recent share placement price achieved by the borrower in the 6 months prior to conversion, being $0.10 per share. $532,500 of these loans have an annual interest rate of 8% and the remainder are non-interest bearing. (b) 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 agreements the Company has the right to conversion to satisfy the debt on or before the termination date. The Company has two convertible loan agreements with Cortical. One loan is for a maximum amount of $500,000 at an interest rate of 8.16% per annum 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, being 19 July 2021. As at reporting date the loan had been drawn down by an amount of $699,978, including capitalised interest (2018: $639,751). Interest charged on the loan for the period was $60,227 (2018: $55,340). On 28th February 2012 BPH Energy entered into a second convertible loan agreement with Cortical. The facility is for an amount of $1,000,000 at an interest rate of 9.4% per annum. The loan will be used for short term working capital requirements and funding further development of the BAR monitor. BPH Energy has a right of conversion to satisfy the debt on or before the termination date, being 28 July 2021. As at reporting date the loan had been drawn down by an amount of $1,590,560, including capitalised interest (2018: $1,450,707). Interest charged on the loan for the period was $140,272 (2018: $183,559). (c) As of 1 January 2017 a judgement was made that, despite a shareholding of 27%, the Company no longer exercised significant influence over Advent Energy Ltd as required by the accounting standards and therefore it has ceased to be treated as an associate of BPH Energy Limited from that date. As a consequence of a legal settlement reached in August 2019 the Company has resumed significant influence over Advent Energy Limited. The investment was accounted for as fair value through profit and loss at 30 June 2019. In MEC Resources Limited’s (“MEC”) June 2019 Annual Financial Report it was stated that in order to maintain an interest in the exploration tenements, the group is committed to meet the conditions under which the tenements were granted. These are the subject of applications for variation that remains outstanding as at the time of reporting. Capital expenditure forecasted for at the reporting date but not recognised as liabilities within a period of one year was $12,750,000, and greater than one year and less than 5 years was $5,475,000. 4141 BPH Energy I Annual Report 2018 BPH Energy I Annual Report 2018 HEALTH TECHNOLOGY RESOURCES NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2019 BPH ENERGY LIMITED AND IT’S CONTROLLED ENTITIES Advent is continually seeking and reviewing potential sources of both equity and debt funding. Advent is now embarking on a fresh marketing campaign to attract new investors and/or joint venture partners. Management has confidence that a suitable outcome will be achieved however there is no certainty at this stage that this will result in further funding being made available. 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. If Advent is unable to source further funding for each of PEP11, RL1 and EP 386 each of these permits are at risk. The above conditions indicate a material uncertainty that may affect the ability of Advent to realise the carrying value of the exploration assets in the ordinary course of business and may affect the ability of the Company to realise the carrying value of its loan receivable and its investment in Advent in the ordinary course of business. On 17 September 2019 the Company announced that Advent has now terminated by mutual consent the RL Energy Joint Venture Agreement for the PEP11 permit. As a result Advent, through wholly owned subsidiary Asset Energy Pty Ltd, now holds an 85% interest and is operator of the permit (and RL Energy has no further interest). Bounty Oil and Gas NL (ASX: BUY) holds the remaining 15%. The Joint Venture is now reviewing the work program and evaluating proceeding with the drilling of a well at the Baleen drill target subject to approvals of NOPTA and other regulatory authorities. On 19 September 2019 the Company announced that Advent has been granted a renewal of Retention Licence 1 (RL1) in the Northern Territory by the NT Department of Primary Industry and Resources for a five-year term concluding in July 2023. Advent, through its wholly owned subsidiary Onshore Energy Pty Ltd, holds a 100 % interest in RL1 and is operator of the Retention Licence. Advent, through Onshore Energy, also holds 100% of EP 386 in addition to RL 1 in the onshore Bonaparte Basin in northern Australia. The Company currently has a 22.6% direct interest in Advent. An impairment charge of $Nil (2018: charge of $1,003,001) has been recognised against this investment. (d) The Company has a convertible loan agreement with MDS at an interest rate of 7.69% per annum. The loan is for a maximum amount of $500,000 and is to be used for short term working capital requirements. Subject to MDS being admitted to the Official List of ASX (“Official List”), BPH Energy has a right of conversion to satisfy the debt on or before the termination date, being 26 January 2021. As at reporting date the loan had been drawn down by an amount of $649,818, including capitalised interest (2018: $596,322). Interest charged on the loan for the period was $53,496 (2018: $49,155). 4242 BPH Energy I Annual Report 2018 BPH Energy I Annual Report 2018 10. Investments Accounted for Using Equity Method Investments in associates are accounted for in the consolidated financial statements using the equity method of accounting. Name of Entity Country of Incorporation Molecular Discovery Systems Limited Australia % 2018 20% 2017 20% Ownership Interest Principal Activity Biomedical Research Consolidated 2019 $ 2018 $ 436,541 436,541 464,547 464,547 464,547 (28,006) 436,541 493,047 (28,500) 464,547 Shares in Associates Molecular Discovery Systems Limited (a) Movements in Carrying Amounts Movements in the carrying amounts between the beginning and the end of the current financial year: Molecular Discovery Systems Limited: Balance at the beginning of the year Share of associate loss for the year Balance at end of the year As of 1 January 2017 a judgement was made that, despite owning 27% of Advent, the Company no longer exercised significant influence over Advent and it ceased to be treated as an associate entity from that date. In particular, the Company was not involved in the operational decision making of Advent and did not have access to its operational and financial records. As a consequence of a legal settlement reached in August 2019 and David Breeze’s confirmation as a director of Advent the Company has resumed significant influence over Advent. The Company currently has a 22.6% direct interest in Advent, and, as part of the legal settlement reached with MEC in August 2019, if at any time before 23 July 2021 Advent has less than 51 members then MEC will, upon written request by BPH, execute an irrevocable proxy in favour of BPH in respect of all business to be considered at any meeting of members of Advent. 4343 BPH Energy I Annual Report 2018 BPH Energy I Annual Report 2018 HEALTH TECHNOLOGY RESOURCES s a e r a d o i r e p e h t r o f s s o l t e n d n a s t e s s a t e n f o e r a h s ’ s p u o r G e h t g n d u c n l i i , s e i t i l i b a i l d n a ) l l i w d o o g g n d u c n l i i ( s t e s s a d e t a g e r g g a s e t a c o s s a s t i i f o s t l u s e r e h T . s w o l l o f i s e t a c o s s a f o n o i t a m r o f n i l i a c n a n fi d e s i r a m m u S ) b ( g n i y r r a C t n u o m A ’ s p u o r G t s e r e t n I e h t f o - t s u d A j s t n e m % t s e r e t n I r e h t O l l i w d o o G i p h s r e n w O f o s t e s s A e t a i c o s s A e r a h S t e N f o t n u o m A g n i y r r a C e h t o t n o i t a i l i c n o c e R - e r p m o C e v i s n e h r o f s s o L r a e Y e h t r a e Y t n e r r u C s e i t i l i b a i L s e i t i l i b a i L l a t o T e h t r o f s s o L s e u n e v e R - n o N t n e r r u C e t a i c o s s A f o l a t o T t n e r r u C s t e s s A - n o N t n e r r u C s t e s s A 9 1 0 2 1 4 5 6 3 4 , ) 8 6 7 8 4 7 , ( 1 4 5 6 3 4 , ) 8 6 7 8 4 7 , ( 7 4 5 4 6 4 , ) 8 6 7 8 4 7 , ( 7 4 5 4 6 4 , ) 8 6 7 8 4 7 , ( , 1 9 2 7 8 4 1 , , 1 9 2 7 8 4 1 , , 1 9 2 7 8 4 1 , , 1 9 2 7 8 4 1 , 0 2 ) 2 8 9 1 0 3 , ( ) 0 3 0 0 4 1 , ( ) 0 3 0 0 4 1 , ( - 2 8 2 9 5 6 , 3 2 0 8 8 8 , 1 4 4 6 3 , 5 5 9 0 2 ) 2 8 9 1 0 3 , ( ) 0 3 0 0 4 1 , ( ) 0 3 0 0 4 1 , ( 0 2 ) 6 7 9 3 7 2 , ( ) 6 9 4 2 4 1 , ( ) 6 9 4 2 4 1 , ( - - 2 8 2 9 5 6 , 3 2 0 8 8 8 , 1 4 4 6 3 , 5 5 9 6 8 7 5 0 6 , , 6 0 4 3 7 8 5 8 7 7 0 1 , 9 2 5 1 , l r a u c e o M l y r e v o c s i D s m e t s y S d t L 8 1 0 2 l r a u c e o M l 0 2 ) 6 7 9 3 7 2 , ( ) 6 9 4 2 4 1 , ( ) 6 9 4 2 4 1 , ( - 6 8 7 5 0 6 , 6 0 4 3 7 8 , 5 8 7 7 0 1 , 9 2 5 1 , y r e v o c s i D s m e t s y S d t L 4444 BPH Energy I Annual Report 2018 BPH Energy I Annual Report 2018 . t r o p e r n o i t a u a v l t n e d n e p e d n i l i i a n r e t x e n a g n n a t b o y b y r a s s e c e n s a d e m r o f r e p s i t n e m s s e s s a l a m r o f A . y l l a u n n a s t n e m t s e v n i s t i f o e u a v l r i a f e h t s s e s s a y l l a m r o f n i s r o t c e r i d e h T s e s s e c o r p n o i t a u a V l i g n o g - n o h t i w r e h t e g o t , e r a h s . r e p 2 0 0 $ t a 6 1 0 2 y r a u n a J n i S D M n i l d e t e p m o c g n i s i a r l a t i p a c a y b d e t r o p p u s s i S D M n i t n e m t s e v n i ’ s p u o r G e h t l f o e u a v g n i y r r a c e h T a e b y a m n o i s s e r p x e 5 S H l f o s s o l e h t t a h t g n i t a r t s n o m e d , r e c n a c n i 5 S L H l r o f e o r a g n i y f i t n e d i , s n o i t a c i l i b u p c fi i t n e c s d e w e i v e r r e e p t n e d n e p e d n i o w t e h t y b d e t r o p p u s e r a i e s e n h C r e h t o d n a e r t n e C r e c n a C i a h g n a h S y t i s r e v i n U n a d u F n e e w t e b n o i t a r o b a l l o c a — s n o i t a c i l b u p e h T . r e c n a c r e v i l f o n o i s s e r g o r p d n a t n e m p o e v e d e h t n l i t n e v e l a c i t i r c l e o r e h t g n i y f i t n e d i n o d e s u c o f — e t u t i t s n I r e c n a C r e v i L g n o D i Q d n a y t i s r e v i n U l i a c d e M y r a t i l i M d n o c e S , e t u t i t s n I r e c n a C r e v i L , e t u t i t s n I r e c n a C i a h g n a h S g n d u c n l i i , s e t u t i t s n I . ) ) 2 M K P ( 2 M m r o f o s i i e s a n K e t a v u r y P ( s l l e c r e c n a c r o f y g r e n e f o n o i t c u d o r p e h t n i d e v l o v n i e m y z n e y e k a s d n b 5 S L H i t a h t d e t a r t s n o m e d e c i t r a t s r fi e h T l . r e c n a c r e v i l n i 5 S L H f o s ’ l l e c r e c n a c e h t s t i m i l y l e t a m l i t l u x e p m o c 2 M K P / 5 S L H s i h t f o n o i t a m r o f e h T . 2 M K P f o n o i t a v i t c a e h t s t i b h n i i i l h c h w x e p m o c a m r o f o t 2 M K P s d n b 5 S L H i t a h t d e w o h s y e h T r o f e v i t i s o p e r e w o h w s t n e i t a p t a h t d n u o f y d u t s e h T . C C H d a h o h w s t n e i t a p 8 8 6 f o s e p m a s l r e v i l d e s y l a n a y d u t s e h T . ) r e c n a c r e v i l ( - ) C C H i ( a m o n c r a c r a u l l l e c o t a p e h r o f r e k r a m e h t t r o p p u s r e h t r u f s r e p a p h t o b i f o s g n d n fi e h t , r e h t e g o t n e k a T . e c n e r r u c e r o t e m i t r e t r o h s d n a l a v i v r u s l l a r e v o r e r o o p d a h n o i s s e r p x e 5 S L H r o f e v i t a g e n d n a n o i s s e r p x e 2 M K P . h c r a e s e R l i a c d e M f o e t u t i t s n I i s n k r e P y r r a H e h t d n a S D M y b 5 S L H o t n i h c r a e s e r c i t s o n g o r p a s a e s u l a i t n e t o p r o f d e s s e s s a e r e w 2 M K P d n a 5 S L H f o s l e v e l n o i s s e r p x e e h t n o i t a c i l b u p d n o c e s e h t n I . e t a r e f i l o r p o t y t i l i b a s t i d n a n o i t c u d o r p y g r e n e f o s n a e m i s g n d n fi s n k r e P e h T i . s e i t r e p o r p r o s s e r p p u s r u o m u t t n a c fi n g i s i s a h 5 S L H t a h t n w o h s s a h e t u t i t s n I i s n k r e P e h t t a d e t c u d n o c h c r a e s e R . y t i t n e t a h t f o s e i t i v i t c a l a n o i t a r e p o NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2019 BPH ENERGY LIMITED AND IT’S CONTROLLED ENTITIES Consolidated 2019 $ 2018 $ 11. Income Tax Expenses (a) The prima facie tax on loss from operations before income tax is reconciled to the income tax as follows: Accounting loss before tax (3,013,043) (1,506,758) Prima facie tax payable on loss from operations before income tax at 27.5% (2018: 27.5%) (828,586) (414,358) Add tax effect of: Tax benefit of revenue losses and temporary differences not recognised 828,586 414,358 Income tax expense recognised - - (b) Tax losses Unused tax losses for which no deferred tax asset has been recognised 10,225,453 9,639,475 Potential tax benefit at 27.5% (2018: 27.5%) 2,812,000 2,650,856 12. Trade and Other Payables Current Trade payables Sundry payables and accrued expenses - unrelated Related party payables Trade payables are non-interest bearing and normally settled within 60 days 13. Financial Liabilities Current Borrowings – unsecured interest free Non-Current Borrowings – unsecured interest free As a result of a legal settlement reached in August 2019 the Company has derecognised a non-current financial liability of $86,451 to MEC Resources Limited. 4545 BPH Energy I Annual Report 2018 BPH Energy I Annual Report 2018 72,463 538,989 812,783 29,305 529,209 765,027 1,424,235 1,323,541 200,086 200,086 413,641 413,641 - - 86,451 86,451 HEALTH TECHNOLOGY RESOURCES NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2019 BPH ENERGY LIMITED AND IT’S CONTROLLED ENTITIES Consolidated 2019 $ 2018 $ 14. Issue Capital 2,543,277,658 (2018: 966,187,417) fully paid ordinary shares 45,574,507 44,135,412 The Company has no authorised capital and the issued shares do not have a par value. (a) Ordinary Shares At the beginning of reporting period 44,135,442 43,454,632 966,187,417 588,702,017 Consolidated Consolidated 2019 $ 2018 $ 2019 Number 2018 Number Shares issued for cash Share issue costs Shares issued in lieu of consulting fees Shares issued as set-off against loans payable and payables Shares issued in exchange for ordinary shares in listed entity 1,175,504 566,940 1,175,504,193 283,469,930 (153,025) (74,161) - - 138,050 158,536 100,000 22,000 123,050,000 11,000,000 166,031 158,536,048 83,015,470 - - 100,000,000 20,000,000 - - Shares issued as director remuneration 20,000 At reporting date 45,574,507 44,135,442 2,543,277,658 966,187,417 Fully paid ordinary shares do not have a par value, have one vote per share, and carry the right to dividends. The market price of the Company’s ordinary shares at 30 June 2019 on ASX was 0.1 cents per share. (b) Options Refer to Note 21 for options on issue at the end of the financial year. There were no options exercised during the year (2018: Nil). 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. (c) 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 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 2019 and 30 June 2018 is as follows: 4646 BPH Energy I Annual Report 2018 BPH Energy I Annual Report 2018 Cash and cash equival Cash and cash equivalents Other current assets Trade receivables and financial assets Trade payables and financial liabilities Net working capital position Consolidated 2019 $ 2018 $ 437,316 447,214 33,869 4,051 211,311 184,716 (1,624,321) (1,737,182) (941,825) (1,101,201) Refer to Note 1 for further details of the Group’s financial position and plans to manage the working capital deficit at 30 June 2019. 15. Reserves Options Reserve (a) (a) Option Reserve The option reserve records items recognised as expenses on the valuation of director and employee share options. Opening balance Share based payments Closing balance 16. Controlled Entities Name of Entity Principal Activity Country of Incorporation Consolidated 2019 $ 2018 $ 508,436 508,436 494,014 494,014 494,014 492,580 14,422 1,434 508,436 494,014 Ownership Interest % 2019 2018 Parent Entity BPH Energy Ltd Subsidiaries 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. BPH owns 51.82% equity interest in Diagnostic Array Systems Pty Ltd (“DAS”) 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 DAS. DAS is controlled by the Group and is consolidated in these financial statements. DAS’s loss for the year was $509 (2018: loss of $1,908) of which $245 (2018: $918) was attributable to minority interests. DAS’s total assets at year-end were $218 (2018: $727), total liabilities $364,281 (2018: $364,281), and net equity negative $364,063 (2018: negative $363,554). 4747 BPH Energy I Annual Report 2018 BPH Energy I Annual Report 2018 HEALTH TECHNOLOGY RESOURCES NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2019 BPH ENERGY LIMITED AND IT’S CONTROLLED ENTITIES 17. Cash Flow Information Operating loss after income tax Non-cash items: Fair value gain Interest revenue on loans Impairment charge Derecognition of financial liability Share based payments Provision against loans Share of Associates’ losses Changes in net assets and liabilities, (Increase) / decrease in other assets (Increase) / decrease in trade and other receivables Increase in trade payables and accruals Net cash (used in) operating activities (b) Reconciliation of cash 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 (c) Financing facilities Credit card limit: Cash and cash equivalents (d) Changes in liabilities arising from financing activities – unsecured borrowings Balance at 1 July Net cash used in financing activities Shares issued as set off against loans payable Loan derecognised Balance at 30 June Consolidated 2019 $ 2018 $ (3,013,043) (1,506,758) (280,372) (253,992) - (232,714) - 1,003,001 (83,956) 82,422 2,889,033 28,006 (29,818) (1,310) 175,603 - 23,434 77,155 28,500 13,909 5,401 121,104 (487,427) (466,968) 437,316 447,214 20,000 20,000 500,092 707,902 (130,000) (124,254) (83,555) (86,451) 200,086 (83,556) - 500,092 4848 BPH Energy I Annual Report 2018 BPH Energy I Annual Report 2018 18. Subsequent Events On 9 August 2019 BPH announced that it had reached a settlement with MEC in relation to the oppression proceedings it commenced in the Supreme Court of Western Australia with Grandbridge, Trandcorp Pty Ltd (“Trandcorp”), and Mr David Breeze. In addition to the settlement of the oppression proceedings, BPH, MEC, GBA, Trandcorp and Mr David Breeze settled a number of other proceedings and entered into a deed of settlement and release with Advent Energy Ltd (“Advent”) and other relevant parties. As part of the settlement it was agreed that Messrs Matthew Battrick and Tobias Foster would appoint Messrs Steven James, Tony Huston and Thomas Fontaine as directors of Advent, and that Messrs Matthew Battrick and Tobias Foster would then resign from the Board of Advent. The Incoming Directors have since confirmed and acknowledged Mr David Breeze as a duly elected director of Advent. The key terms of the settlement are as follows: > The appointment of the Incoming Directors and the resignation of the Resigning Directors > Until 23 July 2021, MEC agrees to not directly or indirectly interfere with the board composition and/or management of Advent. > For a period of one year commencing from 6 August 2019 MEC must not sell or otherwise dispose of any shares it holds in Advent, other than by an in-specie distribution to MEC if requested in writing to do so by Advent. If notice is given, MEC must do all that is required to effect and support the In-Specie Distribution. > The loan of $3,600,000 owed by Advent to MEC will be recoverable by MEC only by the following means and only in the following circumstances: One month prior to the scheduled commencement date for the drilling of a well within the PEP 11 Permit Area, Advent will issue to MEC ordinary shares to the face value of the debt calculated at 80% of: (a) the volume-weighted average price of Advent shares over the 5 days trading immediately prior to that date; or (b) if as at that date Advent shares are not listed on any securities exchange, the price at which ordinary shares in Advent were last issued. On 9 August 2019 the Company issued 20,000,000 share options with an exercise price of $0.002 and an expiry date of 9 August 2024 as part of remuneration arrangements with a contractor. On 21 August 2019 the Company announced that it intended to pursue a complementary strategy of making an investment (or investments) in the medical cannabis sector, as it is considered that an investment of this nature is in line with its investee company strategy and, in particular, its biomedical business. The medical cannabis sector is showing significant growth with current developments boosting the sectors viability including the move to legalise cannabis in Canada and the announcement by the UK Government to legalise medical cannabis. On 2 September 2019 BPH announced it had agreed to acquire an initial investment of 10% (with the option to increase its percentage to 49%) in Patagonia Genetics Pty Ltd (“PG Aust”), the entity that owns a 100% interest in Patagonia Genetics SPA (“PG”), a Chilean entity. On 30 August 2019 the Company issued 150,000,000 fully paid ordinary shares as partial consideration for the acquisition of the initial investment of 10% On 28 August 2019 the Company issued (i) 282,000,000 fully paid ordinary shares for cash to make investments in oil and gas, medical devices and biotechnology, working capital, debt reduction, and due diligence and review and consideration of proposed investment in medical cannabis, and (ii) 15,000,000 fully paid ordinary shares as an introductory fee for a business transaction. On 17 September 2019 the Company announced that Advent has now terminated by mutual consent the RL Energy Joint Venture Agreement for the PEP11 permit. As a result Advent, through wholly owned subsidiary Asset Energy Pty Ltd, now holds an 85% interest and is operator of the permit (and RL Energy has no further interest). Bounty Oil and Gas NL (ASX: BUY) holds the remaining 15%. The Joint Venture is now reviewing the 4949 BPH Energy I Annual Report 2018 BPH Energy I Annual Report 2018 HEALTH TECHNOLOGY RESOURCES NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 201 BPH ENERGY LIMITED AND IT’S CONTROLLED ENTITIES work program and evaluating proceeding with the drilling of a well at the Baleen drill target subject to approvals of NOPTA and other regulatory authorities. On 17 September 2019 the Company announced that PG had purchased its first 1,300ltrs of Wonderland Agronutrients products to send samples to major licensed producers and grow shops internationally. PG has secured the exclusive worldwide distribution rights (excluding Chile & Argentina) to Chile’s leading cannabis fertilizer and biostimulant range, Wonderland Agronutrients. On 19 September 2019 the Company announced that Advent has been granted a renewal of Retention Licence 1 (RL1) in the Northern Territory by the NT Department of Primary Industry and Resources for a five-year term concluding in July 2023. Advent, through its wholly owned subsidiary Onshore Energy Pty Ltd, holds a 100 % interest in RL1 and is operator of the Retention Licence. Advent, through Onshore Energy, also holds 100% of EP 386 in addition to RL 1 in the onshore Bonaparte Basin in northern Australia. There are no other matters or circumstances that have arisen since the end of the financial year other than outlined elsewhere in this financial report that have significantly affected, or may significantly affect, the operations of the company, the results of those operations, or the state of affairs of the company in future financial years. 19. Financial Risk Management a) Financial Risk Management The Group’s financial instruments consist mainly of deposits with banks, investments, accounts receivable and payable, and loans to and from subsidiaries. The main purpose of non-derivative financial instruments is to raise finance for Group operations policies. The main risks the Group is exposed to through its financial instruments are interest rate risk, liquidity risk, credit risk and equity price risk. Interest rate risk Interest rate risk is managed with a mixture of fixed and floating rate financial assets. The Group’s financial liabilities are currently not exposed to interest rate risk as the Group has no interest bearing financial liabilities. Liquidity risk The Group manages liquidity risk by maintaining adequate reserves, by continuously monitoring forecast and actual cash flows. Credit risk The maximum exposure to credit risk, excluding the value of any collateral or other security, at balance date to recognised financial assets, is the carrying amount, net of any provisions for impairment of those assets, as disclosed in the statement of financial position and notes to the financial statements. Equity price risk The Group is exposed to equity price risk through its shareholdings in publicly listed entities. Material investments are managed on an individual basis. Foreign currency risk The Group is not exposed to any material risks in relation to fluctuations in foreign exchange rates. 5050 BPH Energy I Annual Report 2018 BPH Energy I Annual Report 2018 b) Financial Instruments 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 with floating rates, based on contractual maturities, is as follows: Weighted Effective Interest Rate % Floating Interest Rate $ Fixed Interest Rate 1 Year or less Fixed Interest Rate Non- Interest Bearing 1 to 5 Years $ Total $ 2019 Consolidated Assets Cash and cash equivalents 0.46 437,316 Trade and other receivables Financial assets Liabilities Trade and sundry payables Financial liabilities 2018 Consolidated Assets - - 437,316 - - - Weighted Effective Interest Rate % Floating Interest Rate $ Fixed Interest Rate 1 Year or less Cash and cash equivalents 0.55 447,214 Trade and other receivables Financial assets 9.00 Liabilities Trade and sundry payables Financial liabilities - Fair Values The fair values of: - - 447,214 - - - - - - - - - - - - - - - - - - - - - - - - - 437,316 20,969 20,969 2,697,885 2,697,885 2,718,854 3,145,170 1,424,235 1,424,235 200,086 200,086 1,624,321 1,624,321 Fixed Interest Rate Non- Interest Bearing 1 to 5 Years $ Total $ - - - 447,214 19,658 19,658 2,129,971 2,320,007 4,449,978 2,129,971 2,339,665 4,916,850 - - - 1,323,541 1,323,541 500,092 500,092 1,823,633 1,823,633 > 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. 5151 BPH Energy I Annual Report 2018 BPH Energy I Annual Report 2018 HEALTH TECHNOLOGY RESOURCES NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2019 BPH ENERGY LIMITED AND IT’S CONTROLLED ENTITIES No financial assets and financial liabilities are readily traded on organised markets in standardised form. Consolidated 2019 Consolidated 2018 Carrying Amount $ Fair Value $ Carrying Amount $ Fair Value $ Financial Assets Available-for-sale financial assets 2,507,543 2,507,543 2,154,949 2,154,949 Loans and trade and other receivables 27,778 27,778 - - 162,564 162,564 2,295,029 2,295,029 2,697,885 2,697,885 4,449,978 4,449,978 Financial Liabilities Other loans and amounts due 200,086 200,086 500,092 500,092 Trade payables 1,424,235 1,424,235 1,323,541 1,323,541 1,624,321 1,624,321 1,823,633 1,823,633 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 variable interest rate, with all other variables remaining constant would be as follows: Change in profit (loss) Increase in interest rate 1% Decrease in interest rate by 0.5% Consolidated 2019 $ 4,373 (1,661) 2018 $ 4,472 (2,059) 5252 BPH Energy I Annual Report 2018 BPH Energy I Annual Report 2018 Liquidity risk The Group manages liquidity risk by maintaining adequate reserves and borrowing facilities, by continuously monitoring forecast and actual cash flows, and by matching the maturity profiles of financial assets and liabilities. Liquidity is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The following are the contractual maturities at the end of the reporting period of consolidated financial liabilities. Contractual cash flows Carrying amount $ Total $ 2 mths or less $ 2-12 mths $ 1-2 years $ 2-5 years $ 30 June 2019 Financial liabilities Trade and other payables 1,424,235 1,424,235 72,463 1,351,772 Unsecured loans 200,086 200,086 - 200,086 1,624,321 1,624,321 72,463 1,551,858 Contractual cash flows Carrying amount $ Total $ 2 mths or less $ 2-12 mths $ 1-2 years $ 1,323,541 1,323,541 29,305 1,294,236 30 June 2018 Financial liabilities Trade and other payables Unsecured loans 500,092 500,092 - 413,641 1,823,633 1,823,633 29,305 1,707,877 86,451 86,451 (c) Fair value measurements recognised in the statement of financial position - - - - 2-5 years $ - - - - - - The following table provides an analysis of consolidated 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 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. 5353 BPH Energy I Annual Report 2018 BPH Energy I Annual Report 2018 HEALTH TECHNOLOGY RESOURCES NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2019 BPH ENERGY LIMITED AND IT’S CONTROLLED ENTITIES 30 June 2019 Financial assets at fair value through profit and loss $ Level 1 $ Level 2 $ Level 3 $ Total - Investments in unlisted entities - Investments in listed entities Total 30 June 2018 Available for sale financial assets - Investments in unlisted entities Total Reconciliation of fair value measurements of financial assets: Opening balance Acquisition of listed investments Fair value adjustment Closing balance Opening balance Impairment charge Closing balance - 2,507,543 - 2,507,543 - - - 2,507,543 27,228 2,535,321 $ Level 2 $ Level 3 $ Total 27,228 27,778 $ Level 1 - - 2,006,000 148,949 2,154,949 2,006,000 148,949 2,154,949 2019 ($) Level 1 2019 ($) Level 2 - 2,006,000 2019 ($) Level 3 148,949 - 100,000 (72,222) - 501,543 (148,949) 27,778 2,507,543 - 2018 ($) Level 1 - - - 2018 ($) Level 2 3,306,001 (1,003,001) 2018 ($) Level 3 148,949 - 2,006,000 148,949 The $501,543 fair value of the investment in Cortical is regarded as Level 2 based on the share price Cortical is currently raising capital under its Offer Information Statement 5454 BPH Energy I Annual Report 2018 BPH Energy I Annual Report 2018 22. Related Party Transactions (a) Equity interests in controlled entities Details of the percentage of ordinary shares held in controlled entities are disclosed in Note 16 to the financial statements. (b) Directors’ remuneration Details of directors’ remuneration and retirement benefits are located in the Directors Report and Note 5. Held as at the date of this report by directors and their director-related entities in BPH Energy Limited Ordinary Shares Share options Parent 2019 Number 2018 Number 330,722,480 155,361,240 4,000,000 4,000,000 Refer to the Remuneration Report in the Directors’ Report for details of options granted to directors. (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 for $98,000 (2018: $98,000), included as part of his fees in the Remuneration Report. (e) Director related entities Grandbridge Limited (“Grandbridge”) has a common Managing Director, Mr David Breeze, and is therefore a related party of the Company. During the period Grandbridge charged the Company $139,140 in administration and service fees (2018: $152,210). At balance date $200,083 (2018: $413,640) was payable to Grandbridge. Grandbridge’s 100% subsidiary, Grandbridge Securities Limited, charged the Company $17,790 (2018: $Nil) in respect of the management of a share issue. David Breeze was a Director of MEC Resources Limited (“MEC”) from April 2005 and was removed from the ASIC register by MEC directors on 23 November 2016. He has neither resigned nor been removed by shareholders and disputes the actions taken by the Directors of MEC. (f) Receivables, payables and transactions with associates MDS is a related party of the Company. Refer to Notes 9 and 10 for the Company’s loan receivable and investment. During the period the Company charged MDS $53,495 (2018: $49,155) in loan interest on a convertible loan with a balance of $649,818 at year end (2018: $596,323). The Company has raised a provision against the full amount of this loan. In addition, a loan receivable exists between the consolidated entity and MDS of $634,700 (2018: $622,200). This amount is unsecured, non-interest bearing and repayable on demand. The Company has raised a provision against the full amount of this loan. Advent Energy is a related party of the Company. Refer to Notes 9 for the Company’s investment and loan receivables. (g) Other Interests Refer to Note 9 for the Company’s investment in and loan receivables with Cortical. During the period the Company charged Cortical $240,793 (2018: $184,301) in loan interest and fees. 5555 BPH Energy I Annual Report 2018 BPH Energy I Annual Report 2018 HEALTH TECHNOLOGY RESOURCES NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2019 BPH ENERGY LIMITED AND IT’S CONTROLLED ENTITIES 23. Share-Based Payments The following share-based payment arrangements existed at 30 June 2019: Total number Grant Date Exercise price 795,000 9,000,000 2,000,000 2,000,000 4,000,000 30,000,000 47,795,000 2 April 2015 20 April 2015 27 November 2015 23 November 2016 29 November 2017 24 June 2019 $0.020 $0.020 $0.020 $0.020 $0.020 $0.002 Fair value at grant date Expiry date $0.0004 $0.0030 $0.0070 $0.0030 $0.0004 $0.0005 31 March 2020 31 March 2020 30 November 2020 30 November 2021 30 November 2022 24 June 2024 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. 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. Fair value at grant date Share price at grant date Exercise price Expected volatility Expected life Expected dividends Risk-free interest rate Valuation $0.0005 $0.001 $0.02 75% 5 years Nil 2.5% $14,422 Consolidated Group 2019 2018 Number of Options Weighted Average Exercise Price $ Number of Options Weighted Average Exercise Price $ Outstanding at the beginning of the year 17,795,000 Granted Expired / cancelled Outstanding at year-end Exercisable at year-end 30,000,000 0.02 0.002 15,042,500 4,000,000 - - (1,247,500) 47,795,000 47,795,000 0.01 0.01 17,795,000 17,795,000 0.02 0.02 0.08 0.02 0.02 No options were exercised during the year (2018: Nil). 5656 BPH Energy I Annual Report 2018 BPH Energy I Annual Report 2018 Included under employee benefits expense in the profit and loss is $82,422 for share based expense (2018: $1,434) of which $14,422 (2018: $1,434) relates to options granted to directors, and $68,000 (2018: $Nil) relates to equity. 22. Commitments and Contingencies At reporting date there are no capital commitments other than those of Advent Energy Limited, an entity in which the Company currently has a 22.6% direct interest as disclosed in Note 9. The Company is a party to the following legal actions. Statutory Demand The company received a statutory demand from Deborah Ambrosini, a former Director of the company for an amount of $117,481. The Company disputes this position. The company has advised Mrs Ambrosini that the conditions precedent for payment has not occurred and that any Directors fees are not due and owing. Statutory Demand The company received a statutory demand from Goh Hock, a former Director of the company for an amount of $145,832. The Company disputes this position. The company has advised Hock Goh that the conditions precedent for payment has not occurred and that any Directors fees are not due and owing. 23. Operating Segment Operating segments have been identified on the basis of internal reports of the Company that are regularly reviewed by the chief operating decision maker in order to allocate resources to the segments and to assess their performance. The chief operating decision maker has been identified as the Board of Directors. On a regular basis, the board receives financial information on the consolidated entity on a basis similar to the financial statements presented in the financial report, to manage and allocate their resources. The consolidated entity’s only operating segment is investments. The consolidated entity holds investments in two principal industries and these are biotechnology, and oil and gas exploration and development. On 21 August 2019 the Company announced that it intended to pursue a complementary strategy of making an investment (or investments) in the medical cannabis sector, as it is considered that an investment of this nature is in line with its investee company strategy and, in particular, its biomedical business. The medical cannabis sector is showing significant growth with current developments boosting the sectors viability including the move to legalise cannabis in Canada and the announcement by the UK Government to legalise medical cannabis. On 2 September 2019 BPH announced it had agreed to acquire an initial investment of 10% (with the option to increase its percentage to 49%) in Patagonia Genetics Pty Ltd (“PG Aust”), the entity that owns a 100% interest in Patagonia Genetics SPA (“PG”), a Chilean entity. 5757 BPH Energy I Annual Report 2018 BPH Energy I Annual Report 2018 HEALTH TECHNOLOGY RESOURCES NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2019 BPH ENERGY LIMITED AND IT’S CONTROLLED ENTITIES 24. Parent Entity Disclosures Financial Position Assets Current assets Non-current assets Total asset Liabilities Current liabilities Non-current liabilities Total liabilities Equity Issued Capital Accumulated losses Option Reserve Total equity Financial Performance Loss after tax for the year Other comprehensive income Total comprehensive loss Parent 2019 $ 2018 $ 682,277 635,185 2,963,289 4,769,154 3,645,566 5,404,339 1,643,307 1,756,073 - 86,451 1,643,307 1,842,524 45,574,507 44,135,442 (44,080,684) (41,067,641) 508,436 494,014 2,002,259 3,561,815 (3,013,043) (1,506,758) - - (3,013,043) (1,506,758) 5858 BPH Energy I Annual Report 2018 BPH Energy I Annual Report 2018 DI RECTOR’S DECL ARATION BPH ENERGY LIMITED AND IT’S CONTROLLED ENTITIES The directors of the Company declare that: 1. (a) (b) 2. 3. the financial statements and notes, as set out on pages 16 to 54 are in accordance with the Corporations Act 2001 and: comply with Accounting Standards and the Corporations Regulations 2001 and other mandatory professional reporting requirements; give a true and fair view of the financial position as at 30 June 2019 and of the performance for the year ended on that date of the consolidated entity; 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 30 September 2019 5959 BPH Energy I Annual Report 2018 BPH Energy I Annual Report 2018 INDEPENDENT AUDITOR’S REPORT To the members of BPH Energy Limited Report on the Audit of the Financial Report Opinion We have audited the financial report of BPH Energy Limited (“the Company”) and its controlled entities (“the consolidated entity”), which comprises the statement of financial position as at 30 June 2019, the statement profit and loss and other comprehensive income, the statement of changes in equity and the statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies, and the directors’ declaration. In our opinion, the accompanying financial report of BPH Energy Limited is in accordance with the Corporations Act 2001, including: a) giving a true and fair view of the Company’s and the consolidated entity’s financial position as at 30 June 2019 and of their financial performance for the year then ended; and b) complying with Australian Accounting Standards and the Corporations Regulations 2001. Basis for opinion We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report. We are independent of the Company and the consolidated entity in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (“the Code”) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Material uncertainty related to going concern We draw attention to Note 1 in the financial report, which indicates that a material uncertainty exists that may cast significant doubt on the entity’s ability to continue as a going concern. Our opinion is not modified in respect of this matter. Material uncertainty related to carrying value of investment in and loan to Advent Energy Limited and subsidiaries We draw attention to Note 9 in the annual financial report, which indicates a material uncertainty in relation to the consolidated entity’s ability to realise the carrying value of its investment in and recoverability of loans to Advent Energy Limited and subsidiaries in the ordinary course of business. Our opinion is not modified in respect of this matter. 56 6060 BPH Energy I Annual Report 2018 BPH Energy I Annual Report 2018 Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report of the current period. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. In addition to the matter described in the Material uncertainty related to going concern and the material uncertainty related to carrying value. Key Audit Matter Valuation of financial assets Notes 9 and 19 As at 30 June 2019, the consolidated entity had financial assets of loan receivables with a carrying value $162,564 and financial assets at fair value of $2,535,321 at balance date. We considered this to be a key audit matter as it is important to users’ understanding of the financial statements as a whole and involves judgement in relation to the determination of fair value. The consolidated entity adopted AASB 9 on 1 July 2018. The consolidated entity also recorded a fair value gain of $280,372 on its financial assets at fair value. The consolidated entity recorded a provision for doubtful debts expense of $2,889,033 on its loan receivables. We considered this to be a key audit matter as it is important to users’ understanding of the financial statements as a whole and involves judgement in relation to the determination of fair value. How our audit addressed the key audit matter Our procedures included but were not limited to the following: - We considered the ability of the other party to repay its loan with the consolidated entity to determine if any additional provisions were required. - We assessed the consolidated entity’s valuation of individual investment holdings. Where readily observable data was available, we sourced that independently. - For investments where there was less or little observable market data, including level 2 and level 3 holdings as disclosed in note 19, we obtained and assessed other relevant valuation data. - We assessed the appropriateness of the disclosures included in the relevant notes to the financial report. - An emphasis of matter is included in relation to recoverability of investment and loans in Advent Energy Limited. Information other than the financial report and auditor’s report thereon The directors are responsible for the other information. The other information comprises the information included in the consolidated entity’s annual financial report for the year ended 30 June 2019, but does not include the financial report and our auditor’s report thereon. Our opinion on the financial report does not cover the other information and accordingly we do not express any form of assurance conclusion thereon. In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of the directors for the financial report The directors of the 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 57 6161 BPH Energy I Annual Report 2018 BPH Energy I Annual Report 2018 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In preparing the financial report, the directors are responsible for assessing the ability of the Company and the consolidated entity to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Company or the consolidated entity or to cease operations, or have no realistic alternative but to do so. Auditor’s responsibilities for the audit of the financial report Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report. As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgement and maintain professional scepticism throughout the audit. We also: - Identify and assess the risks of material misstatement of the financial report, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. - - - Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the consolidated entity’s internal control. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors. Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s or Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial report or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company or the consolidated entity to cease to continue as a going concern. Evaluate the overall presentation, structure and content of the financial report, including the disclosures, and whether the financial report represents the underlying transactions and events in a manner that achieves fair presentation. - We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with the directors, we determine those matters that were of most significance in the audit of the financial report of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public 58 6262 BPH Energy I Annual Report 2018 BPH Energy I Annual Report 2018 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In preparing the financial report, the directors are responsible for assessing the ability of the Company and the consolidated entity to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Company or the consolidated entity or to cease operations, or have no realistic alternative but to do so. Auditor’s responsibilities for the audit of the financial report Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report. As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgement and maintain professional scepticism throughout the audit. We also: - Identify and assess the risks of material misstatement of the financial report, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. - - - Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the consolidated entity’s internal control. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors. Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s or Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial report or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company or the consolidated entity to cease to continue as a going concern. - Evaluate the overall presentation, structure and content of the financial report, including the disclosures, and whether the financial report represents the underlying transactions and events in a manner that achieves fair presentation. We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with the directors, we determine those matters that were of most disclosure about the matter or when, in extremely rare circumstances, we determine that a matter significance in the audit of the financial report of the current period and are therefore the key audit should not be communicated in our report because the adverse consequences of doing so would matters. We describe these matters in our auditor’s report unless law or regulation precludes public reasonably be expected to outweigh the public interest benefits of such communication. disclosure about the matter or when, in extremely rare circumstances, we determine that a matter 58 should not be communicated in our report because the adverse consequences of doing so would Report on the Remuneration Report reasonably be expected to outweigh the public interest benefits of such communication. Opinion on the Remuneration Report Report on the Remuneration Report We have audited the Remuneration Report included within the directors’ report for the year ended 30 June 2019. Opinion on the Remuneration Report In our opinion, the Remuneration Report of BPH Energy Limited for the year ended 30 June 2019 We have audited the Remuneration Report included within the directors’ report for the year ended complies with section 300A of the Corporations Act 2001. 30 June 2019. Responsibilities In our opinion, the Remuneration Report of BPH Energy Limited for the year ended 30 June 2019 complies with section 300A of the Corporations Act 2001. 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 Responsibilities responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. 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. HLB Mann Judd Chartered Accountants Perth, Western Australia HLB Mann Judd 30 September 2019 Chartered Accountants Perth, Western Australia 30 September 2019 Brad McVeigh Partner Brad McVeigh Partner 59 6363 BPH Energy I Annual Report 2018 BPH Energy I Annual Report 2018 59 ADDITIONAL SECURITIES EXCHANGE INFORMATION for the year ended 30 June 2019 BPH ENERGY LIMITED AND IT’S CONTROLLED ENTITIES Additional information required by Australian Securities Exchange Limited and not shown elsewhere in this report as follows. The information is stated as at 24 September 2019 1. Substantial Shareholder The name of the shareholder who has lodged a substantial shareholder notice with ASX is: Shareholder David Breeze, Trandcorp Pty Limited, Grandbridge Limited Hongmen Capital Holdings Pty Ltd Shares 310,677,944 161,992,266 % 10.38% 5.42% 2. (a) Distribution of Shareholders Range of Holding Shareholders Number Ordinary Shares 1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 and over 388 363 294 789 1,020 2,854 159,980 1,136,200 2,311,611 30,664,497 2,956,005,370 2,990,277,658 (b) Distribution of Unlisted Option Holders Range of Holding 10,001 to 100,000 100,001 and over Option Holders Number of Options 1 12 13 45,000 47,750,000 47,795,000 % 0.01% 0.04% 0.08% 1.03% 98.85% 100% % 0.09 99.91 100.00 3. Voting Rights - Shares All ordinary shares issued by BPH Energy Limited carry one vote per share without restriction. 4. Voting Rights - Options The holders of employee options do not have the right to vote. 5. Restricted Securities There are no restricted securities on issue. 6464 BPH Energy I Annual Report 2018 BPH Energy I Annual Report 2018 6. Twenty Largest Shareholders as at 24 September 2019 The names of the twenty largest shareholders of the ordinary shares of the Company are: Name Hongmen Capital Holdings Pty Ltd Grandbridge Securities Pty Ltd Trandcorp Pty Ltd Mr Bilal Ahmad Mr Sufian Ahmad Mr Mobeen Iqbal Protax Nominees Pty Ltd Protax Nominees Pty Ltd Jgm Property Investments Pty Ltd Patagonia Funds Pty Ltd Mr Bin Liu Miguel Serrano Avanteos Investments Limited <1823205 Superannuation A/C> Mr Greg Hugh Priestley Mr Bin Liu Mr Ming Li Blueknight Corporation Pty Ltd Grandbridge Limited Mr Mark Andrew Tkocz Mr David Nolan Number of ordinary fully paid shares % held of issued ordinary capital 161,992,266 140,000,000 129,666,656 112,055,575 100,000,000 100,000,000 100,000,000 100,000,000 100,000,000 98,175,000 95,035,249 51,825,000 38,000,000 35,185,160 35,000,000 34,007,734 29,000,000 27,112,800 26,301,458 25,000,000 5.42 4.68 4.34 3.75 3.34 3.34 3.34 3.34 3.34 3.28 3.18 1.73 1.27 1.18 1.17 1.14 0.97 0.91 0.88 0.84 Total 1,538,356,898 51.45 6565 BPH Energy I Annual Report 2018 BPH Energy I Annual Report 2018 BPHENERGY.COM.AU 14 VIEW STREET, NORTH PERTH WESTERN AUSTRALIA 6006 08 9328 8366 TEL FAX EMAIL ADMIN@BPHENERGY.COM.AU 08 9328 8733 

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