BTC Health
Annual Report 2018

Plain-text annual report

Annual Report Year ended 30th June 2018 19 BTC health Limited Contents Chairman’s Letter ........................................................................................................................... 2 Directors Report .............................................................................................................................. 3 Corporate Governance Statement ................................................................................................. 9 Financial Report ............................................................................................................................. 14 Directors Declaration .................................................................................................................... 35 Auditors Independence Declaration ............................................................................................ 36 Independent Auditor Report ........................................................................................................ 37 Shareholder Information .............................................................................................................. 41 Corporate Directory ...................................................................................................................... 43 1 BTC health Limited Chairman's letter Over the last year we have continued to focus on building capabilities within our investee companies that will ultimately assist us in transforming the group into a high growth and sustainable business. We have remained disciplined in the way that we operate our investee companies, and at the same time remained very active in scoping and evaluating new and transformative opportunities. We are particularly interested in potential acquisitions that we believe could add significantly to our scale and long-term growth prospects. The Board maintains a high level of confidence in the company's ability to identify, fund and to complete such investments, all the while ensuring that we operate within the prescribed rules of a Pooled Development Fund. Our cash position at 30 June 2018 was $2.65 million and our investment plan remains fully compliant with the requirements of being a registered Pooled Development Fund (PDF). The Board recognises the tremendous potential value that the PDF status confers and will continue to take all reasonable steps to maintain this. In April we divested our interests in the advisory firm Biointelect, given that this investment did not deliver the anticipated outcomes and returns to the group. This re-enforced our view that shareholders’ interests are better served by keeping a clear focus on the in-licensing and product distribution elements of our business. In November we changed the company name to BTC health in order to more effectively communicate the strategic intent of the group and better position the business as a credible provider of innovative pharmaceutical products and medical devices. We believe that our growth strategy will in time benefit from the combined factors of an ageing population, broader access to healthcare and a constant stream of new medical technologies that are being brought to market. Our Bio101 business which provides accounting, tax and company administration services continued to grow its client base and service offering during the year. I am pleased to report that the business consistently performed ahead of expectations and as such we increased the fair value of this investment by $144,900. We expect this positive trend will continue over the next 12 months. BioImpact is our investee company which has the specific purpose of acquiring intellectual property rights to novel pharmaceutical products and medical devices from a range of third parties around the world. It has successfully acquired the distribution rights for three products from RLS Global in Sweden and more recently it has established a strong pipeline of potential new product opportunities, some of which are presently under evaluation and/or negotiation. BTC Speciality Health was established during the year as the operating entity which is responsible for the commercialisation of our in-licensed products. It now has third party logistics and wholesaling arrangements in place and in June launched two dental products, CariSolv and PeriSolv into the Victorian market. The team will be working towards national distribution for these products during the current financial year, as well as seeking TGA approval for the novel wound care product ChloraSolv. We are optimistic about the company's prospects for the year ahead and we look forward to providing relevant updates to shareholders as appropriate. On behalf of the Board, I wish to thank you for your continued support of BTC health. Dr. Richard S Treagus Chairman 2 BTC health Limited Directors’ Report The directors of BTC health Limited present their report on the audited financial statements of BTC health Limited (formerly Biotech Capital Limited) for the year ended 30 June 2018. Directors The following persons were directors of BTC health Limited (“the Company”) during the whole of the financial year and up to the date of this report, unless stated otherwise: Richard Spencer Treagus Peter John Jones Bruce Alan Hancox (resigned 31 May 2018) Jonathan Charles Pilcher Jennifer Rachel Herz (resigned 20 April 2018) Principal Activities BTC health is a Pooled Development Fund, registered under the Pooled Development Funds Act 1992. The Company continues to actively seek investment opportunities in entities operating in the biotechnology / life-science sectors. Review of Operations and Results BTC health invested in one new investee company during the financial year being BTC Speciality Health Pty Ltd. BTC health invested a total of $175,100 in a combination of share capital and loans to BTC Speciality Health Pty Ltd. BTC Speciality Health commercialises and distributes the BTC health group’s in-licenced pharmaceuticals and medical devices in the Asia/Pacific region. BTC health Limited changed its company name from Biotech Capital Limited in November 2017. BTC health Limited disposed of its fully owned investment in Biointelect Pty Ltd for $700,000 in April 2018 to a related party of Jennifer Herz. The transaction was deemed to be fair and reasonable by an independent expert and was approved at an extraordinary meeting of shareholders. The sale of Biointelect Pty Ltd for $700,000 resulted in an impairment loss of $721,815 and a loan write-off of $280,000. Revenue from continuing operations for the year increased to $62,937 (2017: $28,496). Operating loss after income tax increased to $1,467,834 (2017: $516,527), mainly due to the loss on sale of Biointelect, partially offset by an increase of $144,900 in the fair value recorded for 100% owned investment Bio101group Pty Ltd. Net cash used in operating activities was $555,524 (2017: 388,366). Net cash generated by investing activities was $118,940 with the proceeds from sale of Biointelect partly offset by increases in loans to investee companies. Net cash generated by financing activities was nil, compared with $2,324,128 in the prior year due to the capital raise in February 2017. At the annual general meeting of shareholders in November 2017, shareholders approved the issue to Directors, Officers and related parties the shares that were taken up as a part of the February 2017 capital raise. Financial Position At 30 June 2018, the company’s net assets were $2,973,002 compared with $3,978,873 at 30 June 2017. Net assets fell in the year mainly due to the loss on sale of Biointelect. Cash reserves as at 30 June 2018 were $2,649,629, compared with $3,086,213 at 30 June 2017. The net tangible asset backing per share as at 30 June 2018 equated to 2.27 cents (2017: 3.13 cents). Dividends No dividends have been declared in respect of the financial year ended 30 June 2018. (2017: nil) Business Strategies and Future Prospects BTC health’s investee company Bio101 provides a range of professional services to high-growth biotech, medtech and pharmaceutical companies. BioImpact will continue to invest in and hold intellectual property rights for pharmaceuticals and medical devices and BTC Speciality Health will continue to commercialise and distribute the BTC health group’s in-licenced pharmaceuticals and medical devices in the Asia/Pacific region. BTC health is committed to supporting its investee companies’ business objectives in order that they grow their respective service offerings, client base, revenues and ultimately their profitability. BTC health will carefully evaluate additional investment opportunities in the life sciences sector, more specifically, technologies and companies that in the Board’s view will benefit from greater access to management expertise and development capital. 3 BTC health Limited Information on Directors Director Experience R S Treagus P J Jones J C Pilcher BScMed, MBChB, MPharmMed, MBA, MAICD. Dr Treagus is a physician and entrepreneur with over 20 years’ experience in all aspects of the international pharmaceutical and biotechnology industry. Currently a Director of Neuren Pharmaceuticals Limited. Appointed 4 August 2014. Age 52. Chartered Accountant. Mr Jones is a successful investor in public and private companies and has considerable investment experience in the biotechnology and life sciences sector. Currently a Director of Site International Limited. Appointed 4 August 2014. Age 66. Chartered Accountant. Mr Pilcher holds a degree in biotechnology from the University of Reading in the UK. Currently the CFO and Company Secretary of Neuren Pharmaceuticals Limited. Appointed 1 September 2015. Age 52. Company Secretary Special Responsibilities Executive Chairman Particulars of Directors’ Interest at the date of this report Shares 22,237,698 Options - Non-Executive Director 15,711,823 - Non-Executive Director - - Mr Stuart Jones was appointed as Company Secretary on the 18 November 2015. Mr Jones has over 10 years’ financial management and administration experience within the accounting profession and commerce. He is a member of Chartered Accountants Australia and New Zealand. Remuneration Report (Audited) This report outlines the remuneration arrangements in place for key management personnel of BTC health Limited - (the “company”). The following persons acted as directors and were also the key management personnel of the company during the financial year: Richard Spencer Treagus Peter John Jones Bruce Alan Hancox (resigned 31/05/2018) Jonathan Charles Pilcher Jennifer Rachel Herz (resigned 20/04/2018) Remuneration Policy The performance of the company depends upon the quality of its directors and executives. To prosper, the company must attract, motivate and retain highly skilled directors and executives. The Company has only one employee and fees for services provided by Directors have been determined contractually at arm’s length. For these reasons, the Board has not appointed a Remuneration Committee and this function is being undertaken by the Board. Peter Jones was paid a fixed non-executive director fee of $20,000 per annum. Bruce Hancox was paid a non-executive director fee of $18,333 for the 11 months of service prior to resigning. Jonathan Pilcher was paid a fixed non-executive director and audit committee chairman fee of $40,000 per annum. The director fees are determined by the board. Richard Treagus is an executive director and receives a monthly executive director fee of $10,000, which totalled $120,000 for the financial year. A service contract with PharmaConnect Pty Ltd (an entity associated with Richard Treagus) may be terminated with one day’s written notice. No Directors are entitled to long service leave or annual leave. 4 BTC health Limited Company Performance and Link to Company Performance Non-executive directors receive fixed rate remuneration, with no link to company performance. The following table shows the revenue, the operating result and net assets of the company for the last 5 years as well as the share price and earnings per share at the end of the respective financial years. Revenue from continuing operations Investment fair value adjustment Net Profit/ (Loss) after tax Other Comprehensive Income (Loss) Dividend Paid Share Placement Net Assets Share price at Year end (in cents) Basic earnings per Share (in cents) 2014 15,596 - (1,888,973) - - - 1,265,891 0.025 (2.53) 2015 11,350 - (507,019) - - 277,143 1,036,015 0.10 (0.60) 2016 71,184 - (870,780) - - 2,318,124 2,489,135 0.11 (0.88) 2017 28,496 - (516,527) - - 1,973,346 3,978,873 0.16 (0.45) 2018 62,937 144,900 (1,467,834) - - 347,628 2,973,002 0.20 (1.14) Remuneration of Directors: 2018 Short Term Employee Benefits $ Salary and Fees Post-Employment Benefits Share Based Payments $ Superannuation R S Treagus (Chairman) 120,000 P J Jones (non-executive) 20,000 B A Hancox (non-executive) 18,333 - - - J C Pilcher (non-executive) 36,530 3,470 J R Herz (non-executive) - - Total Remuneration 194,863 3,470 (10,498) (10,498) 2017 Short Term Employee Benefits $ Salary and Fees Post-Employment Benefits Share Based Payments $ Superannuation R S Treagus (Chairman) 95,000 P J Jones (non-executive) 20,000 B A Hancox (non-executive) 20,000 - - - J C Pilcher (non-executive) 16,819 3,181 J R Herz (non-executive) - - Total Remuneration 151,819 3,181 $ - - - - $ - - - - 26,831 26,831 Other Long-Term Benefits $ - - - - - - Other Long-Term Benefits $ - - - - - - Total $ 120,000 20,000 18,333 40,000 (10,498) 187,835 Total $ 95,000 20,000 20,000 20,000 26,831 181,831 5 BTC health Limited Share based payments Jennifer Herz received share-based payments in the form of unlisted options during 2017. As detailed in note 10, share options awarded to Jennifer and Karl Herz were forfeited as at 20 April 2018 resulting in the reversal of share-based payment expense recognised in prior years. No other director of the Company received any share-based payments as part of their remuneration during the financial year ended 30 June 2017 or 2018. Remuneration Practices No director appointed during the period received a payment as part of his or her consideration for agreeing to hold the position. The remuneration of each director has been established on the basis of a flat fee, inclusive of any superannuation benefit. Thus, there is no direct link between performance and the level of remuneration. Share holdings The numbers of shares in the company held during the financial year by each director of BTC health Limited, including their personally-related entities, are set out below: Year ended 30 June 2018 Name Ordinary shares R S Treagus P J Jones B A Hancox J C Pilcher J R Herz Unlisted Options J R Herz Year ended 30 June 2017 Name Ordinary shares R S Treagus P J Jones B A Hancox J C Pilcher J R Herz Unlisted Options J R Herz Balance at the start of the year 17,000,000 13,651,133 - - 10,000,000 Balance at the start of the year 17,313,371 13,787,496 - - 10,100,000 Additions 4,924,327 1,924,327 - - 924,327 Other net changes during the year - - - - (5,000,000)^ (6,024,327)* Balance at the end of the year 22,237,698 15,711,823 - - - 1,000,000 - (1,000,000)# - Additions Other net changes during the year Balance at the end of the year 313,371 136,363 - - 100,000 - - - - - - 17,313,371 13,787,496 - - 10,100,000 1,000,000 1,000,000 - *Net change relates to the balance of the shares held at the date of resignation of key management personnel. ^Sale of shares to facilitate the purchase of Biointelect Pty Ltd from BTC health. # Options were forfeited as part of the Biointelect sale to a related party of Jennifer Herz 6 BTC health Limited Transactions with directors and director related entities On 20 April 2018, Jennifer Herz’s related party the Herz Family Trust purchased 100% of the share capital of Biointelect Pty Ltd which was an investment wholly owned by BTC health. Biointelect was sold for cash consideration of $700,000. In determining the sale price, the BTC health Board reviewed the financial performance of the Biointelect business, made a reasonable estimation of future returns on capital employed and considered the realisable value of the investment. The BTC board obtained an independent expert report for the transaction which was distributed to shareholders. The related party transaction was considered both fair and reasonable by an independent valuer and was approved at an extraordinary meeting of shareholders. The terms and conditions of other transactions with directors and their director related entities were no more favourable than those available or which might reasonably be expected to be available, on similar transactions to non-director entities on an arm’s length basis. End of Remuneration Report Directors Meetings The number of meetings of the company’s board of directors (including committees of directors) held for the year ended 30 June 2018, and the number of meetings attended by each director were: R S Treagus P J Jones B A Hancox J C Pilcher J R Herz Number of Director Meetings whilst person a Director 8 8 8 8 6 Number of Director Meetings Attended Number of Audit Committee Meetings Number of meetings eligible to attend Number of meetings Attended 8 7 6 8 6 - 3 3 3 - - 3 3 3 - - 2 3 3 - Auditor Independence Declaration to the Directors The directors have received the auditors’ independence declaration which is included on page 36 of this report. Insurance of Directors and Officers During the financial year, the company paid a premium of $18,595 (2017: $9,795) including GST to insure the directors and officers of the company. The liabilities insured are costs and expenses that may be incurred in defending civil or criminal proceedings that may be brought against the officers in their capacity as officers of the company or a related body corporate. Share Options At the date of this report, BTC health Limited has 3,000,000 (2017: 3,000,000) unissued ordinary shares under option. Significant Events after the Balance Date There are no other matters or circumstances that have arisen since the end of the financial year which 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. Likely Developments and Expected Results of Operations BTC health is committed to supporting the business objectives of its wholly owned investee companies in order that they grow their revenues and ultimately their profitability. BTC health also continues to seek and carefully evaluate additional investment opportunities in the life sciences sector, more specifically, technologies and companies that in the Board’s view will benefit from greater access to management expertise and development capital. Environmental Regulation The company is not subject to any significant environmental regulation in respect of its activities. 7 BTC health Limited Proceedings on Behalf of the Board 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. Auditor & Non-Audit Services Other than audit fees, Deloitte Touché Tohmatsu were not paid a fee for other services during the year (2017: $Nil). This directors’ report is signed in accordance with a resolution of directors made pursuant to s.298(2) of the Corporations Act 2001. R S Treagus Chairman Melbourne 21 August 2018 8 BTC health Limited Corporate Governance Statement BTC health’s board of directors (“Board”) aims to ensure that the company operates with a corporate governance framework and practices that promote an appropriate governance culture throughout the organisation and that are relevant, practical and cost-effective for the current size and stage of development of the business. The Board will continue to review the framework and practices as the business size and complexity changes. The corporate governance statement was adopted 21 August 2018. A description of the framework and practices is set out below, laid out under the structure of the ASX Listing Rules and the Corporate Governance Principles (the “Principles”) and Recommendations (the “Recommendations”) 3rd Edition issued by the ASX Corporate Governance Council in March 2014. Principle 1. Lay solid foundations for management and oversight: The Board is responsible for the overall corporate governance of the company. The Board acts on behalf of and is accountable to the shareholders. The Board seeks to identify the expectations of shareholders as well as other regulatory and ethical expectations and obligations. The Board is responsible for identifying areas of significant business risk and ensuring mechanisms are in place to manage those risks adequately. In addition, the Board sets the overall strategic goals and objectives, and monitors achievement of goals. The Board has delegated the responsibility for the operation and administration of the company to the Executive Chairman and the Company Secretary. The Board will ensure that management is appropriately qualified to discharge its responsibilities. The Board will ensure management’s objectives and activities are aligned with the expectations and risks identified by the Board through a number of mechanisms including the following: • • • • • establishment of the overall strategic direction and leadership of the company; approving and monitoring the implementation by management of the company’s strategic plan to achieve those objectives; reviewing performance against its stated objectives, by receiving regular management reports on business situation, opportunities and risks; monitoring and review of the companies controls and systems including those concerned with regulatory matters to ensure statutory compliance and the highest ethical standards; and review and adoption of budgets and forecasts and monitoring the results against stated targets. The Board sets the corporate strategy and financial targets with the aim of creating long-term value for shareholders. In accordance with Recommendation 1.2, the Board undertakes appropriate checks before appointing a new director, or putting forward to shareholders a candidate for election and provides shareholders with all material information in its possession relevant to a decision on whether or not to elect or re-elect a director. The company has written agreements with each director of the company in accordance with Recommendation 1.3. The Company Secretary is accountable directly to the Board on all matters to do with the proper functioning of the Board, in accordance with Recommendation 1.4. At this stage of the company’s development, considering the very small size of the workforce, the Board has chosen not to establish a formal diversity policy or formal objectives for gender diversity, as described in Recommendation 1.5. The company does not discriminate on the basis of age, ethnicity or gender and when a position becomes vacant the company seeks to employ the best candidate available for the position. Currently all three directors are male. Given the size and nature of the company a formal process for evaluating the performance of the Board and the directors in accordance with Recommendation 1.6 has not been developed. The company currently has no senior executives other than the Chairman and therefore does not have a process for evaluating their performance, as described in Recommendation 1.7. Principle 2. Structure the Board to add value The Board has not considered it necessary or value-adding to establish a separate Nomination Committee (Recommendation 2.1). The selection, appointment and retirement of directors is considered by the full Board, within the framework of the skills required. The Board may also engage an external consultant where appropriate to identify and assess suitable candidates who meet the Board’s specifications. The composition of the board is discussed regularly and each director may propose changes for discussion. 9 BTC health Limited The company does not currently have a skills matrix setting out the mix of skills that the Board seeks to achieve in its membership (recommendation 2.2), due to the current structure and size of the company. The current Board consists of 2 non-executive directors and 1 executive director. The skills and experience of each of the directors are detailed in the Directors’ Report. Each of the current directors has held office continuously since their date of appointment and these details are: Current Directors R S Treagus appointed 4 August 2014* P J Jones appointed 4 August 2014* J C Pilcher appointed 1 September 2015 (independent director) * R S Treagus and P J Jones are not considered to be independent as they are a related person to substantial shareholders in BTC health. The directors believe that the current structure, small size and membership profile of the Board provides the maximum value to the business at this stage of its development, notwithstanding that they do not follow Recommendations 2.4 and 2.5. The Board currently does not have a majority of independent directors (Recommendation 2.4) and the chair is not independent (Recommendation 2.5). The Board will continue to assess whether this is the optimum membership and structure for the business as it grows and develops. The company currently does not have a formal program for inducting new directors (Recommendation 2.6), due to the current structure and size of the company. Principle 3. Promote ethical and responsible decision-making The Board established a formal Code of Conduct on 19 of October 2016, which requires that Board members and executives: • will act honestly, in good faith and in the best interests of the whole company • • owe a fiduciary duty to the company as a whole have a duty to use due care and diligence in fulfilling the functions of office and exercising the powers attached to that office • will undertake diligent analysis of all proposals placed before the Board • will act with a level of skill expected from Directors and key executives of a publicly listed company • will use the powers of office for a proper purpose, in the best interests of the company as a whole • will demonstrate commercial reasonableness in decision-making • will not make improper use of information acquired as Directors and key executives • will not disclose non-public information except where disclosure is authorised or legally mandated • will keep confidential information received in the course of the exercise of their duties and such information remains the property of the company from which it was obtained and it is improper to disclose it, or allow it to be disclosed, unless that disclosure has been authorised by the person from whom the information is provided, or required by law • will not take improper advantage of the position of Director or use the position for personal gain or to compete with the company • will not take advantage of company property or use such property for personal gain or to compete with the company • will protect and ensure the efficient use of the company’s assets for legitimate business purposes • will not allow personal interests, or the interest of any associated person, to conflict with the interests of the company • have an obligation to be independent in judgement and actions and Directors will take all reasonable steps to be satisfied as to the soundness of all decisions of the Board • will make reasonable enquiries to ensure that the company is operating efficiently, effectively and legally, towards achieving its goals • will not engage in conduct likely to bring discredit upon the company 10 BTC health Limited • will encourage fair dealing by all employees with the company’s customers, suppliers, competitors and other employees • will encourage the reporting of unlawful/unethical behaviour and actively promote ethical behaviour and protection for those who report violations in good faith • will give their specific expertise generously to the company • have an obligation, at all times, to comply with the spirit, as well as the letter of the law and with the principles of this Code of Conduct Principle 4. Safeguard integrity in financial reporting With regards to Recommendation 4.1, The Board has established an Audit Committee, which currently consists of two non- executive directors, Jon Pilcher and Peter Jones, both of whom have financial qualifications and experience. Bruce Hancox was a member of the Audit Committee prior to his resignation. The independent director Jon Pilcher chairs the Committee. The Audit Committee currently does not have three members or have a majority of independent directors. The Audit Committee prior to the resignation of Bruce Hancox met three times during 2018 and these meetings were attended by all members apart from one absence by Peter Jones. The current Committee operates under a charter approved by the Board on the 19 October 2016, a summary of which is available on the BTC health website. It is responsible for undertaking a broad review of, ensuring compliance with, and making recommendations in respect of, the company's internal financial controls and legal compliance obligations. It is also responsible for: • • • • • • • review of audit assessment of the adequacy and effectiveness of internal controls over the company’s accounting and financial reporting systems, including controls over computerised systems; review of the audit plans and recommendations of the external auditors; evaluating the extent to which the planned scope of the audit can be relied upon to detect weaknesses in internal control, fraud and other illegal acts; review of the results of audits, any changes in accounting practices or policies and subsequent effects on the financial statements and make recommendations to management where necessary and appropriate; review of the performance and fees of the external auditor; oversight of legal compliance including trade practices, corporations law, occupational health and safety and environmental statutory compliance, and compliance with the Listing Rules of the ASX; supervision of special investigations when requested by the Board; In undertaking these tasks, the Audit Committee meets separately with management and external auditors where required. In accordance with Recommendation 4.2, the Board sought assurances in writing from the Executive Chairman and the Company Secretary that in their opinion the financial records of the company for the financial year 30 June 2018 were; (a) properly maintained in accordance with section 286 of the Corporations Act 2001; and (b) the financial statements, and the notes to the financial statements, of the entity, for the financial year ended 30 June 2018: a. comply with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements; and b. give a true and fair view of the entity's financial position as at 30 June 2018 and of its performance, as represented by the results of its operations and its cash flows, for the financial year ended on that date. The Board received those assurances on 21 August 2018. In accordance with Recommendation 4.3, the Board ensures that its external auditor attends the AGM and is available to answer questions from security holders relevant to the audit. 11 BTC health Limited Principle 5. Make timely and balanced disclosure In accordance with ASX Listing rules, the company will notify ASX of any information which the Board considers would be likely to have a material effect on the price or value of the company’s securities, or which could influence a person to buy, sell or hold its securities. Due to the size and stage of development of the business, the company does not have a formal written policy for complying with its continuous disclosure obligations (Recommendation 5.1). However, the Board employs review and approval processes that ensure timely, and balanced disclosure of material information concerning the company, to shareholders and the general public. The company also has a policy of ensuring that all media comment is provided by the Chairman only. Principle 6. Respect the rights of shareholders The Board strives to communicate effectively with shareholders, give them ready access to balanced and understandable information about the business and make it easy for them to participate in shareholder meetings. In accordance with Recommendation 6.1, comprehensive information about the company and its governance is provided via the website www.btchealth.com.au. This includes information about the Board, as well as corporate governance policies. All announcements, presentations, financial information and meetings materials disclosed to the ASX are placed on the website, so that current and historical information can be accessed readily. The company’s investor relations program facilitates effective two-way communication with investors (Recommendation 6.2). The Chairman interacts with institutional investors, private investors, analysts and media on an ad hoc basis, conducting meetings in person or by teleconference and responding personally to enquiries. The Board seeks practical and cost-effective ways to promote informed participation at shareholder meetings (Recommendation 6.3). This includes providing access to clear and comprehensive meeting materials and electronic proxy voting. In accordance with Recommendation 6.4, shareholders are provided with and encouraged to use electronic methods to communicate with the company and with the share registry. Principle 7. Recognise and manage risk The Directors have not formed a separate Risk Committee. The Board thus retains direct responsibility, oversight and management for material business risks. (Recommendation 7.1) The multiple risks inherent in operating the company and managing its investments are managed by a number of means designed to avoid or minimise any adverse material financial impact. These include: - - - reviews by the Board of the scope, practical application and thoroughness of the system of internal control and the company’s means of recognising and protecting itself against material business risk; reports from the company’s insurance broker concerning the adequacy of insurance cover. reports and recommendations received from the external auditor during the process of reviewing the accounts and internal controls. The Board has reviewed the required reports noted above (Recommendation 7.2) and consider them adequate to monitor the effectiveness of managing material business risks. Given that the company’s business focus is upon providing patient equity capital to new Australian enterprises endeavouring to exploit commercial opportunities in the life-sciences field, the major financial risk is that the company’s investment will be lost or will materially lose value. This could occur under a variety of circumstances including where the underlying enterprise subsequently fails, or commercially suffers in a significant way, e.g. due to marketing difficulties or delays, product failure, serious management or funding problems, etc. The innovative nature of the investee enterprises also tends to increase the investment risk involved. The Board endeavours to reduce investment risk by a number of means, including: - - - - - - requiring all investments to be made in full compliance with the Pooled Development Funds Act 1992 and the general rationale of the PDF Program; ensuring proper evaluation of new investment opportunities by means of a thorough due diligence assessment; ensuring investees have taken proper steps to secure their intellectual property rights; ensuring each investee has a proper business plan, financial budgets and has established clear, achievable, commercial goals; diversifying investment over a number of different companies, each aiming at a different potential market area or niche; appointing a director to the board of an investee company when possible. 12 BTC health Limited The Board reviewed the company’s risk management framework and satisfied itself that it continues to be sound on 21 August 2018. (Recommendation 7.2) The Board considers that it is not necessary to have an internal audit function. The Board processes described above are adequate, given the size and complexity of the business (Recommendation 7.3). The company does not have a material exposure to economic, environmental or social sustainability risks. (Recommendation 7.4) Principle 8. Remunerate fairly and responsibly The total remuneration pool for non-executive directors is approved by shareholders. There is currently only one executive director and his executive fee has been determined and agreed upon by the board. The level of the fee was determined by the directors based on professional experience, market forces and the amount of time required to execute the role. For these reasons, the Board has not appointed a Remuneration Committee (Recommendation 8.1) and any remuneration matters are dealt with by the Board. Particulars concerning Directors’ remuneration are set out in the Directors’ Report. The company’s current policy is that non-executive directors receive only fixed cash remuneration. In accordance with Recommendation 8.3, any participants in an equity-based remuneration scheme are not permitted to enter into any transactions (whether through the use of derivatives or otherwise) which limit the economic risk of participating in the scheme. 13 BTC health Limited Financial Report - 30 June 2018 Contents Financial Report Page Statement of Profit or Loss and Other Comprehensive Income 15 Statement of Financial Position Statement of Cash Flows Statement of Changes in Equity Notes to the Financial Statements 16 17 18 19 BTC health Limited is a company limited by shares, incorporated and domiciled in Australia. Its registered office and principal place of business is: BTC health Limited Suite 201 697 Burke Road, Camberwell VIC 3124 14 BTC health Limited Statement of Profit or Loss and Other Comprehensive Income For the year ended 30 June 2018 Revenue from continuing operations Investment fair value adjustment Loss on disposal of unlisted investments Loan write-off Accounting and Company Secretarial expenses Executive Directors fees Non-Executive Directors fees Employment expenses Listing and Chess Fees Share based payments Other expenses from operations Loss before income tax Income tax benefit Notes 2018 $ 2017 $ 2 6 6 7 10 3 62,937 144,900 (721,815) (280,000) (61,875) (120,000) (78,333) (82,686) (30,855) (114,335) (185,772) (1,467,834) 28,496 - - - (50,600) (90,000) (65,000) (74,168) (29,068) (83,800) (152,387) (516,527) - - Loss after income tax attributable to members of BTC health Limited (1,467,834) (516,527) Total comprehensive loss for the year (1,467,834) (516,527) Loss per share Basic and diluted loss per share 19 (1.14) cents (0.45) cents The above statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes. 15 BTC health Limited Statement of Financial Position As at 30 June 2018 Current Assets Cash and cash equivalents Other Assets Total Current Assets Non-Current Assets Financial assets Loans to investee companies Total Non-Current Assets Total Assets Current Liabilities Trade and other payables Unclaimed monies Total Current Liabilities Total Liabilities Net Assets Equity Issued capital Other reserves Accumulated losses Notes 2018 $ 2017 $ 4 5 6 7 8 2,649,629 83,719 2,733,348 245,200 336,885 582,085 3,086,213 22,193 3,108,406 1,522,015 36,889 1,558,904 3,315,433 4,667,310 90,479 251,952 342,431 342,431 435,521 252,916 688,437 688,437 2,973,002 3,978,873 9 10 11 44,255,057 158,455 (41,440,510) 43,907,429 89,577 (40,018,133) Total Equity 2,973,002 3,978,873 The above statement of financial position should be read in conjunction with the accompanying notes. 16 BTC health Limited Statement of Cash Flows For the year ended 30 June 2018 Cash Flows from Operating Activities Interest received Other income Payments to suppliers and directors Notes 2018 $ 22,937 - (578,461) Net cash used in operating activities 12 (555,524) Cash Flows from Investing Activities Transfer (from)/ to unclaimed monies account Payments for investments Proceeds from the sale of investments Loans to investee companies Net cash generated by/ (used in) investing activities Cash Flows from Financing Activities Share placement (net of capital raising costs) Capital raising subscription funds from directors and officers Net cash generated by financing activities (964) (100) 700,000 (579,996) 118,940 - - - Net increase/ (decrease) in cash and cash equivalents held Cash and cash equivalents at the beginning of the financial year Cash and cash equivalents at the end of the Financial Year (436,584) 3,086,213 2,649,629 4 The above statement of cash flows should be read in conjunction with the accompanying notes. 2017 $ 17,408 11,080 (416,854) (388,366) 2,232 (100) - (36,889) (34,757) 1,973,346 350,782 2,324,128 1,901,005 1,185,208 3,086,213 17 BTC health Limited Statement of Changes in Equity For the year ended 30 June 2018 At 1 July 2016 Loss for the year Other comprehensive income Total comprehensive loss for the year Transaction with owners in their capacity as owners: Share placement (net of capital raising costs) Share based payments Prior period unclaimed monies Issued capital $ Accumulated losses $ Other reserves $ Total $ 41,934,083 - - - (39,450,725) (516,527) - (516,527) 5,777 - - - 2,489,135 (516,527) - (516,527) 1,973,346 - - - - (50,881) - 83,800 - 1,973,346 83,800 (50,881) At 30 June 2017 43,907,429 (40,018,133) 89,577 3,978,873 At 1 July 2017 Loss for the year Other comprehensive income Total comprehensive (loss) for the year Transaction with owners in their capacity as owners: Share placement (net of capital raising costs) Share based payments Forfeiture of share options 43,907,429 - - - (40,018,133) (1,467,834) - (1,467,834) 89,577 - - - 3,978,873 (1,467,834) - (1,467,834) 347,628 - - - - 45,457 - 114,335 (45,457) 347,628 114,335 - At 30 June 2018 44,255,057 (41,440,510) 158,455 2,973,002 The above statement of changes in equity should be read in conjunction with the accompanying notes. 18 Note 1 Summary of Significant Accounting Policies The Financial Report of BTC health Limited for the year ended 30 June 2018 This general purpose financial report has been prepared in accordance with the requirements of Australian Accounting Standards (including Australian Accounting Interpretations) and the Corporations Act 2001. The financial report was authorised for issue in accordance with a resolution of the directors on 21 August 2018 BTC health Limited is a company limited by shares incorporated in Australia whose shares are publicly traded on the Australian Securities Exchange. Basis of Preparation The financial statements are prepared in accordance with the historical cost convention, except for certain assets which, as noted, are at fair value. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability, the Company takes into account the characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date. Fair value for measurement and/or disclosure purposes in these financial statements is determined on such a basis. In addition, for financial reporting purposes, fair value measurements are categorised into Level 1, 2 or 3 based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows: • Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date; • Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly; and • Level 3 inputs are unobservable inputs for the asset or liability. Both the functional currency and presentation currency of BTC health Limited is Australian dollars ($AUD). For the purpose of preparing the financial statements, the Company is a for-profit entity. Statement of Compliance Compliance with Australian Accounting Standards ensures that the financial report, comprising the financial statements and notes, complies with International Financial Reporting Standards (‘IFRS’). Adoption of New and Revised Accounting Standards Amendments to Accounting Standards and new Interpretations that are mandatorily effective for the current reporting period The Company has adopted the following new and revised Standards and Interpretations issued by the Australian Accounting Standards Board (the AASB) that are relevant to their operations and effective for the current year: • AASB 2016-2 Amendments to Australian Accounting Standards – Disclosure Initiative: Amendments to AASB 107 The adoption of new and revised Standards and Interpretations did not have any material impact on the Company’s financial statements. New and revised Australian Accounting Standards in issue but not yet effective At the date of authorisation of the financial statements, the Company has not applied the following new and revised Australian Accounting Standards that have been issued but are not yet effective: 19 AASB 9 Financial Instruments is effective for annual reporting periods beginning on or after 1 January 2018 and for reporting by the Company in the 30 June 2019 financial year. This standard principally addresses the classification, measurement and recognition approaches for financial assets and liabilities. The directors do not expect this standard to have a material impact on the recognition and measurement of its financial instruments. AASB 15 Revenue from Contracts with Customers is effective for annual reporting periods beginning on or after 1 January 2018 and for reporting by the Company in the 30 June 2019 financial year. The standard addresses revenue recognition and establishes principles for reporting information about the nature, timing and uncertainty of revenue and cash flows arising from an entity’s contracts with customers. The Company only generates revenue from interest income and related party management fees for which no significant changes in timing or measurement have been identified under the principles of the AASB 15. Accordingly, the directors do not anticipate that the application of the new standard will have a material impact on the Company’s financial statements. AASB 16 Leases is effective for annual reporting periods beginning on or after 1 January 2019 and for reporting by the Company in the 30 June 2020 financial year. The standard will result in almost all leases being recognised on the balance sheet, as the distinction between operating and finance leases has been removed. Under the new standard, an asset (the right to use the leased item) and a financial liability to pay rentals are recognised. The only exceptions are short term and low-value leases. The accounting for lessors will not significantly change. The directors do not anticipate that the application of the new standard will have a material impact on the Company’s financial statements as the Company does not presently have any long-term lease commitments. Significant Accounting Policies The following significant accounting policies have been adopted in the preparation and presentation of the financial report. (a) Income Tax Current tax payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the statement of comprehensive income because of items of income or expense that are taxable or deductible in other years and items that are never taxable or deductible. The company’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period. Deferred income tax is provided on all temporary differences at the statement of financial position date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred income tax liabilities are recognised for all taxable temporary differences except where the deferred income tax liability arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss. Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry-forward of unused tax credits and unused tax losses can be utilised. The carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised. Deferred income tax assets and liabilities are measured at the tax rates expected to apply to the year when the asset is realised, or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the statement of financial position date. 20 (b) Impairment of Financial Assets Financial assets, other than those financial assets at fair value through profit or loss, are assessed for indicators of impairment at the end of each reporting period. Financial assets are considered to be impaired when there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been affected. (c) Revenue Recognition Interest revenue is recognised as the interest accrues (using the effective interest method, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial instrument) to the net carrying amount of the financial asset. Management fee revenue is recognised in the accounting period in which the services are rendered and measured in accordance with the underlying agreement. (d) Investment Entity The company meets the definition of investment entities which are exempt from consolidation under AASB10 Consolidated Financial Statements. Instead of consolidating controlled investments the company measures its investments at fair value in the Statement of Financial Position and recognises changes in the fair value through the profit or loss. (e) Investments and other Financial Assets All financial assets are recognised and derecognised on trade date where the purchase or sale of a financial asset is under a contract whose terms require delivery of the financial asset within the timeframe established by the market concerned, and are initially measured at fair value, plus transaction costs, except for those financial assets classified as at fair value through profit or loss, which are initially measured at fair value. (i) Available-for-sale Available for sale financial assets are initially recognised at fair value, being the fair value of the consideration given and including transaction costs that are directly attributable to the acquisition or issue of the financial assets. After initial recognition, financial assets, which are classified as available-for-sale, are measured at fair value. Gains or losses on available-for-sale financial assets are recognised as a separate component of equity until the financial asset is sold, collected or otherwise disposed of, or until the financial assets is determined to be impaired, at which time the cumulative gain or loss previously reported in equity is included in the profit or loss. (ii) 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 short term profit taking, where they are derivatives not held for 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 or losses arising from changes in fair value are included in profit or loss in the period in which they arise. 21 (iii) Held-to-maturity Non-derivative financial assets with fixed or determinable payments and fixed maturity are classified as held- to-maturity when the company has the positive intention and ability to hold to maturity. Investments that are intended to be held-to-maturity, such as term deposits, are initially recognised at fair value and subsequently measured at amortised cost. This cost is computed as the amount initially recognised minus principal repayments, plus or minus the cumulative amortisation using the effective interest method of any difference between the initially recognised amount and the maturity amount. (f) Cash and cash equivalents Cash and short-term deposits in the statement of financial position comprises of cash at bank and in hand and short-term deposits with an original maturity of three months or less that are readily convertible to known amounts of cash and which are subject to insignificant risk of change in value. For the purposes of the Statement of Cash Flows, cash and cash equivalents consist of cash and cash equivalents as defined above, net of outstanding bank overdrafts. (g) Trade and other creditors These amounts represent liabilities for goods and services provided to the company prior to the end of the financial year and which are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition. Trade and other creditors are initially measured at fair value and are subsequently measured at amortised cost. (h) Earnings / (Loss) per share (i) Basic earnings / (loss) per share Basic earnings per share is determined by dividing net profit after income tax attributable to members of the company, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the year. (ii) Diluted earnings / (loss) per share Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after-income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares. (i) Goods and services tax (GST) Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable from the Australian Tax Office. In these circumstances, the GST is recognised as part of the cost of acquisition of the asset or as part of an item of the expense. Receivables and payables in the statement of financial position are shown inclusive of GST. Cash flows are presented in the statement of cash flows on a net basis. (j) Critical accounting judgments, estimates and assumptions In applying the Company's accounting policies, management continually evaluates judgments, estimates and assumptions based on experience and other factors, including expectations of future events that may have an impact on the Company. All judgments, estimates and assumptions made are believed to be reasonable based on the most current set of circumstances available to management. Actual results may differ from the judgments, estimates and assumptions. Significant judgments, estimates and assumptions made by management in the preparation of these financial statements are outlined below: 22 Valuation of investments The fair values of unlisted securities not traded in an active market are determined in accordance with the directors’ valuations which are based on their experience in the industry. The directors have used assumptions, such as estimated cash flows, project business growth plans and other market data available in determining their valuation of the unlisted investments. Should these assumptions change in subsequent periods the fair value may be impacted and accounted for through the profit or loss. The directors have used a number of different valuation tools together to determine the fair value of the investee companies, including projected discounted cash flows and multiples of projected revenues and profits. Note 2 Revenues from Ordinary Activities Interest income Other revenue Management Fee Note 3 Income Tax 30 June 2018 $ 30 June 2017 $ 22,937 - 40,000 62,937 17,408 11,088 - 28,496 Major components of income tax expense for the years ended 30 June 2018 and 2017 are: Statement of Profit or Loss and other Comprehensive Income Current Income Current income tax benefit Deferred Income Tax Relating to origination and reversal of temporary differences Income tax expense reported in the statement of profit or loss and other comprehensive income A reconciliation of income tax expense / (benefit) applicable to accounting profit / (loss) before income tax at the statutory income tax rate to income tax expense at the company’s effective income tax rate for the years ended 30 June 2018 and 2017 is as follows: 30 June 2018 $ 30 June 2017 $ - - - - - - Accounting profit / (loss) before tax from continuing operations (1,467,834) (516,527) At the statutory income tax rate of 25% (2016: 25%) (366,959) (129,132) Temporary differences and tax losses not brought to account as a deferred tax asset Permanent differences Temporary differences and tax losses not brought to account as a deferred tax asset to retained earnings At effective income tax rate of (0%) (2017: (0%)) Income tax expense reported in statement of profit or loss The Company is a Pooled Development Fund (PDF) and is taxed at 15% on income and gains from investments in small to medium enterprises and taxed at 25% on all other income. 222,730 144,229 - - - 129,132 - 12,720 - - 23 Unrecognised deferred tax assets Deferred tax assets have not been recognised in respect of the following items: Tax Losses - Revenue Temporary differences Tax Losses - Capital 30 June 2018 $ 30 June 2017 $ 6,434,138 23,688 225,000 6,682,826 6,226,733 12,442 44,546 6,283,721 The tax losses do not expire under current tax legislation. Deferred tax assets have not been recognised in respect of this item because it is not probable that future taxable profit will be available in the immediate future against which the company can utilise the benefits from. Note 4 Cash and cash equivalents Cash at bank and on hand 30 June 2018 $ 30 June 2017 $ 2,649,629 2,649,629 3,086,213 3,086,213 Cash at bank and on hand earns interest at floating rates based on daily bank deposit rates. Note 5 Other assets Office bond Prepayments Trade debtors 30 June 2018 $ 30 June 2017 $ 14,795 23,742 45,182 83,719 22,193 - - 22,193 Trade debtors includes $44,000 as a related party receivable from Bio101group Pty Ltd Note 6 Financial assets Non - Current Financial assets carried at fair value through profit or loss Biointelect Pty Ltd Bio101group Pty Ltd BioImpact Pty Ltd BTC Speciality Health Pty Ltd Total Financial assets carried at fair value through profit or loss 30 June 2018 $ 30 June 2017 $ - 245,000 100 100 245,200 1,421,815 100,100 100 - 1,522,015 Total Non-Current Financial Assets 245,200 1,522,015 BTC health Limited, as an investment entity, has applied the exception to consolidation and instead accounts for its investments in its subsidiaries at fair value through profit or loss in accordance with AASB 10. 24 Bio101group Pty Ltd is 100% owned by BTC health Limited. Bio101 provides a range of finance and administration services to private, public and listed companies in the Australian life sciences sector. These services include accounting, company secretarial, taxation, grant applications, payroll administration, business development, royalty and partner management. BioImpact Pty Ltd is 100% owned by BTC health Limited. BioImpact invests in and holds intellectual property rights for pharmaceuticals and medical devices for the development and commercialisation in the Asia/Pacific region. Technologies and products are sourced from a range of global third parties. BTC Speciality Health Pty Ltd is 100% owned by BTC health Limited. BTC Speciality Health commercialises and distributes the BTC health group’s in-licenced pharmaceuticals and medical devices in the Asia/Pacific region. Bio101group, BioImpact and BTC Speciality Health’s principal place of business is 201/ 697 Burke Road, Camberwell VIC 3124. Unlisted shares The fair value of each unlisted investment is determined by directors’ valuation, which is based on their experience in the industry. The directors have used assumptions, such as estimated cash flows, project plans and other market data available in determining their valuation of the unlisted investments. Should these assumptions change in subsequent periods the fair value may be impacted and accounted for through the profit or loss. The directors have used several different valuation tools to determine the fair value of the investee companies, including discounted cash flows and multiples of revenues and profits. Summary of changes in investments in financial assets Opening Loss on disposal of unlisted investment Disposal of unlisted investment Revaluation of unlisted investment Additions Closing 30 June 2018 $ 30 June 2017 $ 1,522,015 (721,815) (700,000) 144,900 100 245,200 1,521,915 - - - 100 1,522,015 BTC health sold all interest in its wholly-owned consulting business Biointelect Pty Ltd during the year. Under the terms of a Sale Agreement between BTC health and the Herz Family Trust, a related party of Jennifer Herz, Biointelect was sold for cash consideration of $700,000. The sale of Biointelect Pty Ltd for $700,000 resulted in an impairment loss of $721,815. Bio101group Pty Ltd.’s valuation was increased in the period by $144,900 to $245,000. Note 7 Loans to investee companies Non- Current Loans to investee companies BioImpact Pty Ltd BTC Speciality Health Pty Ltd 30 June 2018 $ 30 June 2017 $ 161,885 175,000 336,885 36,889 - 36,889 A loan advanced to Biointelect Pty Ltd of $280,000 during the year was subsequently written off as a part of the investment sale agreement to the Herz Family Trust. The loans issued to BioImpact Pty Ltd and BTC Speciality Health Pty Ltd are non-interest bearing and have no fixed terms of repayment. 25 Note 8 Trade and other payables Current Trade creditors Accruals Provision for annual leave Directors & Officers Capital Raising Subscription funds 30 June 2018 $ 30 June 2017 $ 76,479 14,000 - - 90,479 56,362 24,000 4,377 350,782 435,521 Trade and other payables are non-interest bearing and are generally settled on 30-day terms. Note 9 Issued Capital 2018 Shares 2018 $ 2017 Shares 2017 $ (a) Ordinary Shares Issued and fully paid – Opening Balance 127,107,604 43,907,429 108,597,807 41,934,083 Share Placement 22 February 2017 Capital raising costs Share Placement 8 March 2017 Capital raising costs - - - - - - - - 13,100,742 - 1,441,081 (48,570) 5,409,055 - 594,996 (14,161) Share Placement 28 November 2017 Capital raising costs 3,188,928 - 350,783 (3,155) - - - - Closing Balance 130,926,532 44,255,057 127,107,604 43,907,429 (b) Ordinary shares Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the company in proportion to the number of and amounts paid on the shares held. On a show of hands every holder of ordinary shares present at a meeting in person or by proxy, is entitled to one vote, and upon a poll each share is entitled to one vote. The company does not have authorised capital or par value in respect of its issued capital. Note 10 Share options Reserve Opening balance Amortisation of unlisted share options Forfeiture of options Closing balance 30 June 2018 $ 30 June 2017 $ 89,577 114,335 (45,457) 158,455 5,777 83,800 - 89,577 Unlisted options are valued using the Black-Scholes valuation model and are amortised over the vesting period of the options. At the date of the report, there are 3,000,000 unlisted ordinary shares under option (2017: 3,000,000). 2,000,000 of the 3,000,000 options granted have vested. 26 The following share-based payment arrangements in the form of share options were in existence during the current reporting period: 2016 Financial Year Grant Options Granted Grant Date Grant date fair value $ Exercise Price $ Expiry Date Vesting Date Status 660,000 660,000 680,000 4 April 2016 4 April 2016 4 April 2016 0.069 0.077 0.083 0.159 4 April 2020 4 April 2018 0.159 4 April 2021 4 April 2019 0.159 4 April 2022 4 April 2020 Options Forfeited Options Forfeited Options Forfeited All the above options were forfeited upon the sale of Biointelect Pty Ltd from BTC health to the related party of Jennifer Herz. 2017 Financial Year Grant Options Granted Grant Date Grant date fair value $ Exercise Price $ Expiry Date Vesting Date 500,000 20 April 2017 0.046 500,000 20 April 2017 0.076 0.169 0.169 5 May 2019 5 May 2017 20 April 2022 or 2 years after vesting 25 February 2018* *The options vested on receipt of marketing approval in Australia of the first licensed drug or device resulting in an accelerated vesting charge in the year of $36,390. 2018 Financial Year Grant Options Granted Grant Date Grant date fair value $ Exercise Price $ Expiry Date Vesting Date 1,000,000 28 November 2017 0.061 0.24375 500,000 28 November 2017 0.079 0.24375 500,000 28 November 2017 0.093 0.24375 28 November 2019 28 November 2020 28 November 2021 28 November 2017 28 November 2018 28 November 2019 The above options will only vest if the eligible recipients are employed or contracted by the BTC health Group of companies on the date of vesting. There has been no alteration of the terms and conditions of the above share-based payment arrangements since the grant date. Fair value of share options granted in the year The weighted average fair value of the share options granted during the 2018 financial year is $0.073 (2017: $0.058). Options were priced using a Black Scholes option pricing model. Where relevant, the expected life used in the model has been adjusted based on management’s best estimate for the effects of non-transferability and exercise restrictions, including the probability of meeting market and service conditions attached to the option. 27 Expected volatility was based on the historical share price volatility in the period from September 2015 to the grant date. Inputs into the model Grant date share price Exercise price Attribution Period Options Granted Volatility Dividend Yield Risk free rate Note 11 Accumulated Losses Options Tranche 2018 Tranche 1 0.195 0.24375 0 1,000,000 68.38% 0.00% 1.76% 2018 Tranche 2 0.195 0.24375 1 500,000 69.85% 0.00% 1.88% 2018 Tranche 3 0.195 0.24375 2 500,000 69.85% 0.00% 1.99% Accumulated losses at the beginning of the year Prior period correction for unclaimed monies Forfeiture of share options Total comprehensive loss for the year Accumulated losses at the end of the year 30 June 2018 $ 30 June 2017 $ (40,018,133) - 45,457 (1,467,834) (41,440,510) (39,450,725) (50,881) - (516,527) (40,018,133) Note 12 Reconciliation of Operating Loss after Income Tax to the Net Cash Flow from Operating Activities Loss after income tax Adjustment for: Increase in valuation of unlisted investment Loan write-off Loss on disposal of unlisted investment Capital raising costs Share based payments Increase / (Decrease) in trade and other payables (Increase) / Decrease in other assets 30 June 2018 $ 30 June 2017 $ (1,467,834) (516,527) (144,900) 280,000 721,815 (3,155) 114,335 5,741 (61,526) - - - - 83,800 66,554 (22,193) Net cash used in operating activities (555,524) (388,366) Note 13 Subsequent Events No matters or circumstances have arisen since the end of the financial year which 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. 28 Note 14 Key Management Personnel Name and position of key management personnel of the company in office at any time during the financial year: (i) Directors R Treagus – Executive Chairman P Jones – Non-executive B Hancox – Non-executive (resigned 31 May 2018) J Pilcher – Non-executive J Herz – Non-executive (resigned 20 April 2018) (ii) Executives R Treagus – Executive Chairman Remuneration of key management personnel Information on remuneration of key management personnel is set out in the Remuneration Report in the Directors Report. Short term benefits Post-employment benefits Share based payments Note 15 Remuneration of Auditors Deloitte Touché Tohmatsu Remuneration for audit or review of the financial statements Remuneration for non-audit - taxation and other services Note 16 Related Party Disclosures 30 June 2018 $ 194,863 3,470 (10,498) 187,835 30 June 2017 $ 151,819 3,181 26,831 181,831 30 June 2018 $ 30 June 2017 $ 36,500 - 36,500 36,500 - 36,500 Mr. Karl Herz, an employee of Biointelect Pty Ltd (which up to 20 April 2018 was a wholly owned investment of BTC health), is a related party of Mrs. Jennifer Herz (non-executive director) as Karl is her spouse. Karl’s remuneration was determined by Dr. Richard Treagus (Chairman) to whom he reported. Remuneration received (salary and superannuation) in Biointelect in 2018 up to sale of the investment in April 2018 by BTC health was $92,922 (2017: $150,000) The 1,000,000 unlisted options issued to Karl in 2016 were forfeited upon the sale of Biointelect in the current year. Mrs. Jennifer Herz, is an employee of Biointelect Pty Ltd (which up to 20 April 2018 was a wholly owned investment of BTC health), Jennifer was a Director of BTC health up to 20 April 2018. Jennifer’s remuneration as an employee of Biointelect was determined by Dr. Richard Treagus (Chairman) to whom she reported. Remuneration received (salary and superannuation) in Biointelect in 2018 up to sale of the investment in April 2018 by BTC health was $138,750. (2017: $200,000) The 1,000,000 unlisted options issued to Jennifer in 2016 were forfeited upon the sale of Biointelect in the current year. Biointelect Pty Ltd was sold to a related party of Jennifer Herz during the year. The agreed selling price of Biointelect was $700,000 which was received in cash and resulted in a loss of $721,815 being recognised on disposal of the investment. As a part of the sale the outstanding loan of $280,000 to Biointelect was also written off. This transaction was deemed fair and reasonable by an independent expert. BTC health received management fee income from consulting services to Bio101group Pty Ltd during the year of $40,000. (2017: Nil). 29 Mr. Stuart Jones (Company Secretary) is a related party of Mr Peter Jones (non-executive director) as he is his son. Stuart is paid by the hour for his services to BTC health, Stuart reports to and has all invoices approved by Dr. Richard Treagus (Chairman). Remuneration received in 2018 was $65,750 of which $3,875 was on-charged to Bio101group at cost for service rendered resulting in a net expense to BTC health of $61,875 (2017: $50,600). During the year Stuart Jones received 1,000,000 unlisted share options in BTC health. The options were issued at a 125% premium to the 5- day weighted average price prior to issuance. The total value of the share-based award for the options issued were $73,391 of which $48,812 has been expensed in 2018. Mr. Cameron Jones the Managing Director of Bio101group Pty Ltd (a wholly owned subsidiary of BTC health), is also a related party of Mr. Peter Jones (non-executive director) as he is his son. Cameron’s remuneration was determined by, and he reports to, Dr. Richard Treagus (Chairman). Remuneration received from Bio101group Pty Ltd in 2018 was $109,600 (2017: $89,600). During the year Cameron Jones received 1,000,000 unlisted share options in BTC health. The options were issued at a 125% premium to the 5-day weighted average price prior to issuance. The total value of the share-based award the options issued were $73,391 of which $48,812 has been expensed in 2018. Note 17 Operating Segments 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 Executive Chairman. BTC health has a single operating segment, being the making and managing of investments in biotechnology and pharmaceutical ventures. Note 18 Financial Risk Management Objectives and Policies Financial Risk Management Overview The company has exposure to the following risks from their use of financial instruments – interest rate risk, credit risk, liquidity risk and market price risk. This note presents information about the Company’s exposure to each of the above risks, their objectives, policies and processes for measuring and managing risk, and the management of capital. The Board of Directors has overall responsibility for the establishment and oversight of the risk management framework. The board reviews regularly the adequacy of the risk management framework in relation to the risks faced by the company. The company’s principal financial instruments comprise cash and short-term deposits and financial assets. The company has other financial instruments such as trade debtors and trade creditors that arise directly from its operations. The company’s policy in relation to the valuation of investments traded on organised markets, and unlisted investments has been described in Note 1(e). Interest Rate Risk Interest rate risk is the risk that the value of a financial instrument or cash flows associated with the instrument will fluctuate due to changes in market interest rates. Interest rate risk arises from fluctuations in interest bearing financial assets and liabilities that the company uses. The company’s financial assets which are affected by interest rate risk are the company’s cash and cash equivalents and term deposits held. The company manages its interest risk by using a mix of fixed and variable rates and trades only with recognised credit worthy third parties. The following table sets out the carrying amount, by maturity, of the financial instruments that are exposed to interest rate risk: 30 June 2018 Financial Assets Cash Total financial assets Financial liabilities - Trade and other payables Total financial liabilities Net Financial Assets Balance $ Interest Rate Weighted Average Effective Interest Rate Floating 0.98% N/A - 2,649,629 2,649,629 90,479 90,479 2,559,150 30 30 June 2017 Financial Assets Cash Total financial assets Financial liabilities - Trade and other payables Total financial liabilities Net Financial Assets Balance $ Interest Rate Weighted Average Effective Interest Rate Floating 0.98% N/A - 3,086,213 3,086,213 435,521 435,521 2,650,692 Fair value sensitivity analysis for fixed rate instruments The company does not account for any fixed rate financial assets and liabilities at fair value through profit or loss. Therefore, a change in interest rates at the reporting date would not affect profit or loss. Cash flow sensitivity analysis for variable rate instruments If interest rates had been 50 basis points higher/lower and all other variables were held constant, the company’s: - Loss for the year ended 30 June 2018 would decrease/increase by $11,646 (2017: decrease/increase by $8,925). This is mainly attributable to the company’s exposure to interest rates on its variable rate savings. Credit Risk Credit risk is the risk of financial loss to the company if a customer or counterparty to a financial instrument fails to meet its contractual obligations and arises principally from the company's cash and cash equivalents, other assets and loans to investee companies. The company’s maximum exposure to credit risk at balance date in relation to each class of recognised financial asset is the carrying amount of these assets. Liquidity Risk Liquidity risk is the risk that the company will not be able to meet its financial obligations as they fall due. The Company’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company’s reputation. The following are the contractual maturities of financial liabilities: Greater than 6 months, less than 1 year Greater than 1 year 30 June 2018 Trade and other payables Unclaimed monies 30 June 2017 Trade and other payables Unclaimed monies Carrying amount $ (90,479) (251,952) (342,431) Contractual cash flows 6 months or less $ $ (90,479) (251,952) (342,431) (90,479) (251,952) (342,431) (435,521) (252,916) (688,437) (435,521) (252,916) (688,437) (435,521) (252,916) (688,437) $ - - - - - - Fair Value of Financial Assets and Liabilities There is no difference between the fair values and the carrying amounts of the company’s financial instruments. The company has no unrecognised financial instruments at balance date. $ - - - - - - 31 Market Price Risk Equity price risk arises from financial assets held at fair value through profit or loss held as a part of the company's operations. Investments within the portfolio are managed on an individual basis and all buy and sell decisions are approved by the Board of Directors. The primary goal of the Company’s investment strategy is to maximise investment returns on sale of investments. Unlisted investments are designated as a financial asset held at fair value through profit or loss their performances are actively monitored, and they are managed on a fair value basis. Sensitivity analysis on changes in market equity prices A change of 20% (based on the Board’s assessment of similar movements in the life sciences industry) in equity prices at the reporting date would have increased (decreased) equity and profit or loss by the amounts shown below. The analysis is performed on the same basis for 2017. 30 June 2018 Financial assets carried at fair value through profit or loss: Unlisted investments 30 June 2017 Financial assets carried at fair value through profit or loss: Unlisted investments Profit or loss Equity Carrying Value 20% increase 20% decrease 20% increase 20% decrease $ $ $ $ $ 245,200 49,040 49,040 (49,040) (49,040) 49,040 49,040 (49,040) (49,040) 1,522,015 304,403 304,403 (304,403) (304,403) 304,403 304,403 (304,403) (304,403) Fair value of financial instruments: Valuation techniques and assumptions applied for the purposes of measuring fair value The fair values of unlisted investments are determined in accordance by directors’ valuations, which are based on their experience in the industry. Directors have used assumptions, such as estimated cash flows, project plans and other market data available in determining their valuation of unlisted investments. Directors have reviewed discounted cash flows and multiple of revenue and profit calculations to determine the fair value holding costs of the investments. Name of Investment Core Activity Basis of Valuation Bio101group Pty Ltd Finance and administration for life science clients • Multiple of revenue based on actual results for the year ended 30 June 2018 BioImpact Pty Ltd In licence speciality pharmaceuticals and medical devices BTC Speciality Health Pty Ltd Commercialisation and distribution of pharmaceuticals and medical devices • • Investment valuation on cost incurred basis Investment valuation on cost incurred basis Fair value measurements recognised in the statement of financial position: 32 The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value, grouped into Levels 1 to 3 based on the degree to which the fair value is observable. a) Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities. b) 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). c) 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). 30 June 2018 Financial assets Unlisted investments– Financial assets carried at fair value through profit or loss 30 June 2017 Financial assets Unlisted investments– Financial assets carried at fair value through profit or loss Level 1 Level 2 Level 3 Total $ - - - - $ - - $ $ 245,200 245,200 245,200 245,200 - - 1,522,015 1,522,015 1,522,015 1,522,015 There were no transfers between levels during the year. Reconciliation of Level 3 fair value measurements of financial assets Opening balance Total gains or losses: - acquisitions - disposals - investment fair value adjustment - loss on disposal of unlisted investments Closing balance 2018 Total $ 1,522,015 100 (700,000) 144,900 (721,815) 245,200 2017 Total $ 1,521,915 100 - - 1,522,015 Significant assumptions used in determining fair value of financial assets and liabilities The fair value of unlisted investments are determined by directors’ valuations and assumptions, such as impacts on estimated cash flows, project plans and market data available. Capital risk management The Company objectives when managing capital are to safeguard the Company’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. The management of the Company's capital is performed by the Board. The company is not subject to externally imposed capital requirements. The Company’s overall strategy remains unchanged from 2017. The capital structure of the Company consists of cash and cash equivalents and equity attributable to equity holders, comprising issued capital, reserves and retained earnings. Operating cash flows are used to maintain and expand operations, as well as to make routine expenditu.res such as tax and general administrative outgoings. 33 Categories of financial instruments Financial assets Cash and cash equivalents Other assets Loans to investee companies Financial assets carried at fair value through profit or loss Financial liabilities Trade and other payables Note 18 Loss Per Share 30 June 2018 $ 30 June 2017 $ 2,649,629 83,719 336,885 245,200 90,479 3,086,213 22,193 36,889 1,522,015 435,521 30 June 2018 30 June 2017 Basic and diluted loss per share, based on the after tax loss of $1,467,834 (2017: ($516,527)) * (1.14) cents per share (0.45) cents per share Weighted average number of ordinary shares used as the denominator in calculating basic earnings per share 128,977,277 shares 114,567,560 shares *The options issued are not included in the diluted EPS as they are anti-dilutive. Note 19 Contingent Liabilities There were no contingencies of which the company is aware as at the date of this report. 34 Directors’ Declaration The directors declare that, a) b) c) in the director’s 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, in the director’s opinion, the attached financial statements are in compliance with International Financial Reporting Standards as disclosed in Note 1 to the financial statements, in the director’s opinion, the attached financial statements and notes thereto are in accordance with the Corporations Act 2001, including compliance with accounting standards and giving a true and fair view of the financial position and performance of the entity, and d) the directors have been given the declarations required by s.295A of the Corporations Act 2001. This declaration is made in accordance with a resolution of the board of directors pursuant to section 295(5) of the Corporations Act 2001. R S Treagus Chairman Melbourne 21 August 2018 35 Deloitte Touche Tohmatsu ABN 74 490 121 060 550 Bourke Street MELBOURNE VIC 3000 PO Box 78 MELBOURNE VIC 3001 Australia Tel: +61 (0) 3 9671 7000 Fax: +61 (0) 3 9671 7001 www.deloitte.com.au 21 August 2018 The Board of Directors BTC Health Limited Suite 201/697 Burke Road CAMBERWELL VIC 3124 Dear Board Members BTC Health Limited (formerly Biotech Capital Limited) In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the following declaration of independence to the directors of BTC Health Limited. As lead audit partner for the audit of the financial statements of BTC Health Limited for the financial year ended 30 June 2018, I declare that to the best of my knowledge and belief, there have been no contraventions of: (i) the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and (ii) any applicable code of professional conduct in relation to the audit. Yours sincerely DELOITTE TOUCHE TOHMATSU Anneke du Toit Partner Chartered Accountants Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee, and its network of member firms, each of which is a legally separate and independent entity. Please see www.deloitte.com/au/about for a detailed description of the legal structure of Deloitte Touche Tohmatsu Limited and its member firms. The entity named herein is a legally separate and independent entity. In providing this document, the author only acts in the named capacity and does not act in any other capacity. Nothing in this document, nor any related attachments or communications or services, have any capacity to bind any other entity under the ‘Deloitte’ network of member firms (including those operating in Australia). Liability limited by a scheme approved under Professional Standards Legislation. Member of Deloitte Touche Tohmatsu Limited Deloitte Touche Tohmatsu ABN 74 490 121 060 550 Bourke Street Melbourne VIC 3000 GPO Box 78 Melbourne VIC 3001 Australia Tel: +61 (0) 3 9671 7000 Fax: +61 (0) 3 9671 7001 www.deloitte.com.au Independent Auditor’s Report to the Members of BTC Health Limited (formerly Biotech Capital Limited) Report on the Audit of the Financial Report Opinion We have audited the financial report of BTC health Limited (the “Company”) which comprises the statement of financial position as at 30 June 2018, the statement of profit or 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 the Company is in accordance with the Corporations Act 2001, including: (i) giving a true and fair view of the Company’s financial position as at 30 June 2018 and of its financial performance for the year then ended; and (ii) complying with Australian Accounting Standards and the Corporations Regulation 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 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 confirm that the independence declaration required by the Corporations Act 2001, which has been given to the directors of the Company, would be in the same terms if given to the directors as at the time of this auditor’s report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. 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 for 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. Liability limited by a scheme approved under Professional Standards Legislation. Member of Deloitte Touche Tohmatsu Limited Key Audit Matter Unlisted shares held at fair value Refer Note 6 The company invests in a portfolio of life science organisations. As at 30 June 2018, the company’s investment portfolio consisted of three unlisted companies carried at a fair value of $245,200. The valuation of these assets requires significant management judgement. How the scope of our audit responded to the Key Audit Matter Our procedures included, but were not limited to:  Obtaining an understanding of the processes undertaken by management to determine the fair value of investments in the unlisted companies within their portfolio;  Assessing and challenging management’s valuation methodology and assumptions applied, in conjunction with our valuation specialists;  Evaluating the actual financial performance of each of the investments by: o Comparing the forecast financial information for the year and the plans included in the investment business case, to the actual financial and operational results; o Agreeing key account balances to supporting reconciliations; o Obtaining an understanding of key customers contracts in place; o Performing analytical procedures to identify unusual trends or movements in account balances; and o Discussing business performance and future business plans and forecasts, including the adequacy of existing funding, with management of the assess company investment whether are appropriate and are consistent with the investment business case. forecasts those to We also assessed the appropriateness of the disclosures in note 6 to the financial statements. Other information The directors are responsible for the other information. The other information comprises the information included in the Company’s annual report for the year ended 30 June 2018, 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 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 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 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 to cease operations, or has 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 the 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 Company’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 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 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 disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. Report on the Remuneration Report Opinion on the Remuneration Report We have audited the Remuneration Report included in pages 4 to 7 of the Directors’ Report for the year ended 30 June 2018. In our opinion, the Remuneration Report of BTC health Limited, for the year ended 30 June 2018, complies with section 300A of the Corporations Act 2001. Responsibilities 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. DELOITTE TOUCHE TOHMATSU Anneke du Toit Partner Chartered Accountants Melbourne, 21 August 2018 Shareholder Information as at 13 August 2018 A. Spread of equity security holdings Size of Holding 1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 and over Total Ordinary Shareholders 21 320 206 414 69 1,030 Unlisted Option holders - - - - 3 3 B. Substantial holders Notices under Section 671B of the Corporations Act, disclosing a relevant interest in the company’s shares, have been received from the following substantial holders as at the date of this report: Name Number of shares/votes Voting power RICHARD AND KAREN TREAGUS NAOS ASSET MANAGEMENT LIMITED STUART ANDREW PTY LTD WALKER GROUP HOLDINGS PTY LIMITED C. Equity security holders 22,237,698 22,038,246 13,651,133 12,860,583 17.07% 16.91% 11.22% 11.84% The names of the twenty largest holders of quoted equity securities are listed below: Rank Name A/C designation 1 2 3 4 5 6 MRS KAREN ELIZABETH TREAGUS NATIONAL NOMINEES LIMITED STUART ANDREW PTY LTD WALKER GROUP HOLDINGS PTY LIMITED MRS SUSAN MAREE WHITING MR CAMPBELL DINWOODIE TAYLOR 7 WINDARRI INVESTMENTS PTY LTD 8 MS DESPINA MAKRIS BNP PARIBAS NOMINEES PTY LTD HUB24 CUSTODIAL SERV LTD DRP MR NICHOLAS DERMOTT MCDONALD LINWIERIK INVESTMENTS PTY LTD PRITDOWN PTY LTD 9 10 11 12 13 GRAY LANE HOLDINGS PTY LTD 14 MR ROBERT BEAUMONT FROST YORKSHIRE INVESTMENTS PTY LTD GP SECURITIES PTY LTD 16 17 MRS LILIANA TEOFILOVA 15 871,644 818,182 814,000 Ordinary Shares held 22,237,698 22,128,246 15,711,823 Percentage of issued shares 17.07 16.98 12.06 13,784,910 10.58 4,300,000 4,261,305 4,213,727 2,890,863 1,710,600 1,678,000 1,581,152 1,455,465 1,440,304 1,000,000 3.30 3.27 3.23 2.22 1.31 1.29 1.21 1.12 1.11 0.77 0.67 0.63 0.62 41 Rank Name A/C designation BEAUMY PTY LTD 18 19 MRS TRUDIE ANNE HOOPER 20 MR WILLIAM KEARSLEY WHITING Total Ordinary Shares held 800,000 754,148 700,000 103,152,067 Percentage of issued shares 0.61 0.58 0.54 79.17 D. Less than marketable parcel holders The number of holders holding less than a marketable parcel based on the market price was 83. E. Voting rights The voting rights attaching to each class of equity securities are set out below: Ordinary shares On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each share shall have one vote. Options There are no voting rights attached to unlisted options until they are exercised. 42 Corporate Directory Registered Office BTC health Limited Suite 201 697 Burke Road CAMBERWELL VIC 3124 Principal Contacts Richard Treagus Chairman T +61 417 520 509 rtreagus@btchealth.com.au Stuart Jones Company Secretary T+ 61 3 9092 0470 sjones@btchealth.com.au Link Market Services Limited Tower 4, 727 Collins Street MELBOURNE VIC 3008 Locked Bag A14 SYDNEY SOUTH NSW 1235 T 1300 554 474 F 02 9287 0303 Auditors Deloitte Touché Tohmatsu 550 Bourke Street, MELBOURNE VIC 3000 43 45 

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