BTC Health
Annual Report 2019

Plain-text annual report

BTC HEALTH | ANNUAL REPORT PG 0 Contents 2 Chairman’s Letter 17 Financial Report 42 Independent Auditor Report 4 Directors Report 40 Directors Declaration 46 Shareholder Information 11 Corporate Governance Statement 41 Auditors Independence Declaration 48 Corporate Directory BTC HEALTH | ANNUAL REPORT PG 1 Chairman's letter Last year we changed the company name to BTC health in order to more effectively communicate the strategic intent of the group and to position the business as a provider of innovative pharmaceutical products and medical devices. We believe that the combined factors of an ageing population, increased healthcare expenditure, new technologies and the constant striving for better health outcomes makes this a particularly exciting and relevant space in which to invest and build. BTC health has a vision to become a leading supplier of innovative medical products in Australia and New Zealand and our team is motivated by the opportunity to provide patients with greater access to some of the best specialised therapeutics and medical devices from around the world I am pleased to report that in the last 12-months we have taken decisive steps toward building BTC health as a group of high-growth businesses in the healthcare space. On 31 May 2019, BTC Speciality Health acquired the hospital infusion business from Admedus Australia for a purchase price of $6.3m. The acquisition included $1.75m of working capital, the novation of an 8-year agreement for the exclusive distribution rights for the ambIT® infusion pumps in Australia and New Zealand, as well as the transfer of ten experienced hospital sales personnel and an established customer base. We recognised the ambIT® infusion pumps to be high quality devices with good growth potential in both the private and public hospitals throughout Australia and New Zealand. This business acquisition is in itself transformative, providing us a strong platform for growth and an infrastructure which will allow for a range of new product introductions in the hospital channel. Since completion of the transaction we have moved quickly to integrate the people, operations, IT and administration into BTC health and the product distribution and customer service functions into Sigma. We have also taken this opportunity to invest in our quality and inventory control systems in anticipation of future growth. We are planning to launch episil® mouth spray later this year as a new treatment for oral pain in cancer patients and subject to TGA approval we will introduce Chlorasolv, a novel wound care product, in the second half of next year. In May we raised $9.2m of new equity capital in order to fund the hospital infusion acquisition. We received very strong support from existing shareholders, and we were furthermore pleased to welcome Sigma Healthcare as a new 10% shareholder. Our cash position at 30 June 2019 was $3.9m and our investment plan remains fully compliant with the requirements of being a registered Pooled Development Fund (PDF). Given the potential value that the PDF status confers to shareholders, the Board will continue to take all reasonable steps to maintain this. 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 35% to $375,000. We expect this positive trend will continue over the next 12 months. In August 2019 we welcomed Bruce Hewett to the board as a non-executive Director. Bruce brings a wealth of relevant industry experience and insights and we look forward to him making a very positive contribution to our growth plans. Peter Mears, previously of Device Technologies has joined as an advisor on new business opportunities and we consider ourselves very fortunate to be able to benefit from his many years of industry expertise. We have created a strong platform for growth, and we are optimistic about the company's prospects for the year ahead. Our focus will be on ensuring optimum operational effectiveness of the hospital business, while pursuing organic growth within the business and incremental growth from new products or new businesses. BTC HEALTH | ANNUAL REPORT PG 2 Our goal is to deliver strong underlying growth and create a sustainable and profitable business within a compliant Pooled Development Fund. On behalf of the Board, I wish to thank you for your continued support of BTC health. Dr. Richard S Treagus Chairman BTC HEALTH | ANNUAL REPORT PG 3 Directors’ Report The directors of BTC health Limited present their report on the audited financial statements of BTC health Limited for the year ended 30 June 2019. 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 Jonathan Charles Pilcher - Bruce Alwyn Hewett (appointed 5 August 2019) 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’s wholly owned investee company BTC Speciality Health acquired the Hospital Infusion Business from Admedus Limited during the financial year. The acquisition was funded via a two-tranche capital raise by BTC health to institutional and sophisticated investors along with a share purchase plan for existing shareholders. The acquisition gives the BTC health group an infrastructure and a strong platform for growth. Revenue from continuing operations for the year increased to $187,763 (2018: $62,937). Operating loss after income tax decreased to $692,742 (2018: $1,467,834), mainly due to the 2018 loss on sale of Biointelect, partially offset by an increase of $130,000 in the fair value of the investment in Bio101group Pty Ltd in 2019. Financial Position At 30 June 2019, the company’s net assets were $11,341,485 compared with $2,973,002 at 30 June 2018. The increase in net assets was mainly due to the capital raise and additional investment into BTC Speciality Health Pty Ltd. Cash reserves as at 30 June 2019 were $3,942,921, compared with $2,649,629 at 30 June 2018. The net tangible asset backing per share as at 30 June 2019 equated to 4.64 cents (2018: 2.27 cents). Dividends No dividends have been declared in respect of the financial year ended 30 June 2019 (2018: 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 invests in and holds intellectual property rights for pharmaceuticals and medical devices. BTC Speciality Health, which has recently expanded via the acquisition of the hospital in-licenced infusion business, commercialises and distribute the BTC health group’s 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 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. investment opportunities in the BTC HEALTH | ANNUAL REPORT PG 4 Information on Directors Director Experience Special Responsibilities Particulars of Directors’ Interest as at 16 August 2019 R S Treagus P J Jones J C Pilcher B A Hewett Shares Options Executive Chairman 23,050,198 - Non-Executive Director 17,074,323 - BScMed, MBChB, MPharmMed, MBA, MAICD. Dr Treagus is a physician and entrepreneur with over 20 years’ the experience in all aspects of and international pharmaceutical biotechnology industry. Currently a Director of Neuren Pharmaceuticals Limited. Appointed 4 August 2014. Age 53. and Chartered Accountant. Mr Jones is a successful investor in public and private considerable companies investment the experience biotechnology and life sciences sector. Currently a Director of Site International Limited. has in Appointed 4 August 2014. Age 67. 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 53. Bruce graduated as a pharmacist and has had over 30 years’ experience in all aspects of the pharmaceutical industry. Appointed 5 August 2019. Age 65 Non-Executive 125,000 - Director Non-Executive 45,000 - Director Company Secretary Mr Stuart 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. BTC HEALTH | ANNUAL REPORT PG 5 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 Jonathan Charles Pilcher 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 fees for services provided by Directors have been determined contractually at arm’s length. 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. 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. 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. 2015 2016 2017 2018 2019 Revenue from continuing operations 11,350 71,184 28,496 62,937 187,763 Investment fair value adjustment - - - 144,900 130,000 Net Profit/ (Loss) after tax (507,019) (870,780) (516,527) (1,467,834) (692,742) Other Comprehensive Income (Loss) Dividend Paid Share Placement Net Assets - - - - - - - - - - 277,143 2,318,124 1,973,346 347,628 8,849,798 1,036,015 2,489,135 3,978,873 2,973,002 11,341,485 Share price at Year end (in cents) 0.10 0.11 0.16 0.20 0.085 Basic earnings per Share (in cents) (0.60) (0.88) (0.45) (1.14) (0.51) BTC HEALTH | ANNUAL REPORT PG 6 Remuneration of Directors: 2019 SHORT TERM EMPLOYEE BENEFITS POST- EMPLOYMENT BENEFITS SHARE BASED PAYMENTS OTHER LONG- TERM BENEFITS $ $ Salary and Fees Superannuation R S Treagus (Chairman) P J Jones (non-executive) J C Pilcher (non-executive) 120,000 20,000 36,530 Total Remuneration 176,530 - - 3,470 3,470 $ - - - - $ - - - - SHORT TERM EMPLOYEE BENEFITS POST- EMPLOYMENT BENEFITS SHARE BASED PAYMENTS OTHER LONG- TERM BENEFITS 2018 R S Treagus (Chairman) P J Jones (non-executive) B A Hancox * (non-executive) J C Pilcher (non-executive) J R Herz # (non-executive) $ $ Salary and Fees Superannuation 120,000 20,000 18,333 - - - 36,530 3,470 $ - - - - - - (10,498) Total Remuneration 194,863 3,470 (10,498) * Resigned 31 May 2018 # Resigned 20 April 2018 Share based payments $ - - - - - - TOTAL $ 120,000 20,000 40,000 180,000 TOTAL $ 120,000 20,000 18,333 40,000 (10,498) 187,835 No directors of the Company received any share-based payments as part of their remuneration during the financial year ended 30 June 2019 or 2018. BTC HEALTH | ANNUAL REPORT PG 7 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 2019 NAME BALANCE AT THE START OF THE YEAR ADDITIONS OTHER NET CHANGES DURING THE YEAR BALANCE AT THE END OF THE YEAR Ordinary shares R S Treagus P J Jones J C Pilcher 22,237,698 187,500 15,711,823 1,272,500 - 125,000 - - - 22,425,198 16,984,323 125,000 Year ended 30 June 2018 NAME BALANCE AT THE START OF THE YEAR ADDITIONS OTHER NET CHANGES DURING THE YEAR BALANCE AT THE END OF THE YEAR Ordinary shares R S Treagus P J Jones B A Hancox J C Pilcher J R Herz Unlisted Options 17,313,371 13,787,496 4,924,327 1,924,327 - - - - 10,100,000 924,327 - - - - (5,000,000)^ (6,024,327)* J R Herz 1,000,000 - (1,000,000)# 22,237,698 15,711,823 - - - - *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 Transactions with directors and director related entities The terms and conditions of 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 BTC HEALTH | ANNUAL REPORT PG 8 Directors Meetings The number of meetings of the company’s board of directors (including committees of directors) held for the year ended 30 June 2019, and the number of meetings attended by each director were: NUMBER OF DIRECTOR MEETINGS NUMBER OF DIRECTOR MEETINGS ATTENDED NUMBER OF AUDIT COMMITTEE MEETINGS NUMBER OF MEETINGS ATTENDED R S Treagus P J Jones J C Pilcher 8 8 8 8 8 8 - 2 2 - 2 2 Auditor Independence Declaration to the Directors The directors have received the auditors’ independence declaration which is included on page 41 of this report. Insurance of Directors and Officers During the financial year, the company paid a premium of $24,795 (2018: $18,595) 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 7,500,000 (2018: 3,000,000) unissued ordinary shares under option. Significant Events after the Balance Date On 3 July 2019, 625,000 ordinary shares were issued to a related party of Richard Treagus as part of the capital raise, as approved at the company’s extraordinary general meeting on the 21 June 2019. No other 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. BTC HEALTH | ANNUAL REPORT PG 9 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 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. investment opportunities in the Environmental Regulation The company is not subject to any significant environmental regulation in respect of its activities. 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 paid a fee of $85,736 for corporate finance assistance related to the business acquisition by BTC Speciality Health Pty Ltd from Admedus (2018: $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 16 August 2019 BTC HEALTH | ANNUAL REPORT PG 10 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 16 August 2019. A description of the framework and practices is set out below, laid out under the structure of the ASX Listing Rules and (the “Recommendations”) 3rd Edition issued by the ASX Corporate Governance Council in March 2014. (the “Principles”) and Recommendations the Corporate Governance Principles 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. BTC HEALTH | ANNUAL REPORT PG 11 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 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. 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 3 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) B A Hewett appointed 5 August 2019 (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. BTC HEALTH | ANNUAL REPORT PG 12 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 • 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. 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 met two times during 2019 and these meetings were attended by all members. BTC HEALTH | ANNUAL REPORT PG 13 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 2019 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 2019: comply with Accounting Standards, the Corporations Regulations 2001 and other mandatory a. professional reporting requirements; and b. give a true and fair view of the entity's financial position as at 30 June 2019 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 16 August 2019. 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. 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. BTC HEALTH | ANNUAL REPORT PG 14 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 considered it necessary to form 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. 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. BTC HEALTH | ANNUAL REPORT PG 15 The Board reviewed the company’s risk management framework and satisfied itself that it continues to be sound on 16 August 2019. (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 Due to the current size and structure of the company, the Board has not considered it necessary to form 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. 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. 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. BTC HEALTH | ANNUAL REPORT PG 16 Financial Report - 30 June 2019 Contents Page Financial Report Statement of Profit or Loss and Other Comprehensive Income Statement of Financial Position Statement of Cash Flows Statement of Changes in Equity Notes to the Financial Statements 18 19 20 21 22 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 BTC HEALTH | ANNUAL REPORT PG 17 Statement of Profit or Loss and Other Comprehensive Income For the year ended 30 June 2019 Notes 2019 $ 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 Due Diligence expenses Listing and Chess Fees Legal Fees Share based payments Share registry fees Other expenses from operations 2 6 6 10 Loss before income tax 187,763 130,000 - - (97,344) (120,000) (60,000) (4,810) (113,949) (38,057) (145,048) (211,427) (27,326) (192,544) (692,742) Income tax benefit 3 - 62,937 144,900 (721,815) (280,000) (61,875) (120,000) (78,333) (82,686) - (30,855) (17,156) (114,335) (23,319) (145,297) (1,467,834) - Loss after income tax attributable to members of BTC health Limited (692,742) (1,467,834) Total comprehensive loss for the year (692,742) (1,467,834) Loss per share Basic and diluted loss per share 19 (0.51) cents (1.14) cents The above statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes. BTC HEALTH | ANNUAL REPORT PG 18 Statement of Financial Position As at 30 June 2019 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 2019 $ 2018 $ 4 5 6 7 8 3,942,921 163,639 4,106,560 6,375,100 1,237,691 7,612,791 2,649,629 83,719 2,733,348 245,200 336,885 582,085 11,719,351 3,315,433 158,032 219,834 377,866 377,866 90,479 251,952 342,431 342,431 11,341,485 2,973,002 9 10 11 53,104,855 346,914 (42,110,284) 44,255,057 158,455 (41,440,510) Total Equity 11,341,485 2,973,002 The above statement of financial position should be read in conjunction with the accompanying notes. BTC HEALTH | ANNUAL REPORT PG 19 Statement of Cash Flows For the year ended 30 June 2019 Cash Flows from Operating Activities Receipts from customers Interest received Payments to suppliers and directors Notes 2019 $ 2018 $ 90,080 17,763 (731,525) - 22,937 (578,461) Net cash used in operating activities 12 (632,682) (555,524) Cash Flows from Investing Activities Transfer from unclaimed monies account Payments for investments Proceeds from the sale of investments Loans to investee companies 6 (32,118) (5,999,900) - (900,806) (964) (100) 700,000 (579,996) Net cash (used in)/ generated by investing activities (6,932,824) 118,940 Cash Flows from Financing Activities Share placement (net of capital raising costs) Proceeds from borrowings Repayment of borrowings Net cash generated by financing activities 6 6 8,849,798 4,000,000 (4,000,000) 8,849,798 - - - - Net increase/ (decrease) in cash and cash equivalents held Cash and cash equivalents at the beginning of the financial year 1,293,292 2,649,629 (436,584) 3,086,213 Cash and cash equivalents at the end of the Financial Year 4 3,942,921 2,649,629 The above statement of cash flows should be read in conjunction with the accompanying notes. BTC HEALTH | ANNUAL REPORT PG 20 Statement of Changes in Equity For the year ended 30 June 2019 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 Issued capital $ Accumulated losses $ Other reserves $ Total $ 43,907,429 (40,018,133) 89,577 3,978,873 - - - (1,467,834) - (1,467,834) 347,628 - - - - 45,457 - - - - 114,335 (45,457) (1,467,834) - (1,467,834) 347,628 114,335 - At 30 June 2018 44,255,057 (41,440,510) 158,455 2,973,002 At 1 July 2018 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 Expiry of share options 44,255,057 (41,440,510) 158,455 - - - (692,742) - (692,742) 8,849,798 - - - - 22,968 - - - - 211,427 (22,968) 2,973,002 (692,742) - (692,742) 8,849,798 211,427 - At 30 June 2019 53,104,855 (42,110,284) 346,914 11,341,485 The above statement of changes in equity should be read in conjunction with the accompanying notes. BTC HEALTH | ANNUAL REPORT PG 21 Note 1 Summary of Significant Accounting Policies The Financial Report of BTC health Limited for the year ended 30 June 2019 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 16 August 2019 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, except for share-based payment transactions that are within the scope of AASB 2. 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 New and amended Australian Accounting Standards that are effective for the current year Impact of initial application of AASB 9 - Financial Instruments This standard replaces AASB 139 Financial Instruments: Recognition and Measurement. AASB 9 includes revised guidance on the classification and measurement of financial instruments, including a new expected credit loss model for calculation of impairment on financial assets and new general hedge accounting requirements. It also carries forward guidance on recognition and derecognition of financial instruments from AASB 139. BTC HEALTH | ANNUAL REPORT PG 22 Loans to investee companies and trade receivables – expected credit losses The implementation of AASB 9 has resulted in a change to the methodology by which the Company has assessed the provision for doubtful debts from the incurred loss model to the expected credit loss model. The Company has adopted the simplified approach to measuring expected credit losses, which uses lifetime expected loss allowance for all loans to investee companies and trade receivables. The expected credit loss model requires the Company to determine the lifetime expected credit losses for groups of financial assets with shared credit risk characteristics. An expected credit loss rate is then determined for each group, based on the historic credit loss rates for each group, adjusted for any other current observable data that may materially impact the group’s future credit risk. The requirements of AASB 9 were adopted on 1 July 2018 and applied to the Company’s loans to investee companies and trade receivables at that time. The application of this policy did not result in changes to the amounts previously reported. Impact of AASB 15 - Revenue from Contracts with Customers The requirements of AASB 15 replace AASB 118 Revenue. AASB 15 establishes a single comprehensive five- step model for entities to use in accounting for all revenue streams arising from contracts with customers with two separate approaches for recognising revenue: at a point in time or over time. The company’s only revenue stream is management fees earned through the provision of advisory and consulting services to investee companies. Management fee revenue is recognised over time as the customer simultaneously receives the benefits provided by the entity’s performance. The company adopted AASB 15 using the modified retrospective method of adoption. The application of this policy did not result in changes to the amounts previously reported. 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: AASB 16 - Leases 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. BTC HEALTH | ANNUAL REPORT PG 23 Significant Accounting Policies The following significant accounting policies have been adopted in the preparation and presentation of the financial report. (a) 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. (b) Revenue Recognition The company recognises revenue from management fees for services rendered to investee companies. Revenue is measured based on the consideration to which the Company expects to be entitled in a contract with a customer and excludes amounts collected on behalf of third parties. Management fee revenue is recognised over time as the customer simultaneously receives the benefits provided by the entity’s performance. (c) Interest Income Interest income 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. (d) 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. BTC HEALTH | ANNUAL REPORT PG 24 (e) Financial Instruments Financial assets and financial liabilities are recognised in the Company’s statement of financial position when the Company becomes a party to the contractual provisions of the instrument. Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognised immediately in profit or loss. Financial Assets All regular way purchases or sales of financial assets are recognised and derecognised on a trade date basis. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame established by regulation or convention in the marketplace. All recognised financial assets are measured subsequently in their entirety at either amortised cost or fair value, depending on the classification of the financial assets. Classification of financial assets The company classifies its financial assets as debt instruments measured subsequently at amortised cost only if both the following criteria are met: • the financial asset is held within a business model whose objective is to hold financial assets in order to collect contractual cash flows; and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. • Impairment of financial assets The Company recognises a loss allowance for expected credit losses (ECL) on investments in debt instruments that are measured at amortised cost and trade receivables. The amount of expected credit losses is updated at each reporting date to reflect changes in credit risk since initial recognition of the respective financial instrument. The Company always recognises lifetime ECL for trade receivables. The expected credit losses on these financial assets are estimated based on the Company’s historical credit loss experience, adjusted for factors that are specific to the debtors, general economic conditions and an assessment of both the current as well as the forecast direction of conditions at the reporting date, including time value of money where appropriate. For all other financial instruments, the Company recognises lifetime ECL when there has been a significant increase in credit risk since initial recognition. However, if the credit risk on the financial instrument has not increased significantly since initial recognition, the Company measures the loss allowance for that financial instrument at an amount equal to 12-month ECL. Financial liabilities and equity Classification as debt or equity Debt and equity instruments are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument. BTC HEALTH | ANNUAL REPORT PG 25 Equity instruments An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all its liabilities. Equity instruments issued by the Group are recognised at the proceeds received, net of direct issue costs. Financial liabilities All the Company’s financial liabilities are measured subsequently at amortised cost using the effective interest method. (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) Share-based payments Equity-settled share-based payments to employees and others providing similar services are measured at the fair value of the equity instruments at the grant date. The fair value excludes the effect of non-market-based vesting conditions. The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Company’s estimate of the number of equity instruments that will eventually vest. At each reporting date, the Company revises its estimate of the number of equity instruments expected to vest as a result of the effect of non-market-based vesting conditions. The impact of the revision of the original estimates, if any, is recognised in profit or loss such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to reserves. Equity-settled share-based payment transactions with parties other than employees are measured at the fair value of the goods or services received, except where that fair value cannot be estimated reliably, in which case they are measured at the fair value of the equity instruments granted, measured at the date the entity obtains the goods or the counterparty renders the service. (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. BTC HEALTH | ANNUAL REPORT PG 26 (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: 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 Management Fee 30 June 2019 $ 17,763 170,000 187,763 30 June 2018 $ 22,937 40,000 62,937 BTC HEALTH | ANNUAL REPORT PG 27 Note 3 Income Tax Major components of income tax expense for the years ended 30 June 2019 and 2018 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 2019 and 2018 is as follows: 30 June 2019 $ 30 June 2018 $ - - - - - - Accounting profit / (loss) before tax from continuing operations (692,742) (1,467,834) At the statutory income tax rate of 25% (2018: 25%) (173,186) (366,959) 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%) (2018: (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. 205,686 (32,500) 222,730 144,229 - - - - - - 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 2019 $ 30 June 2018 $ 6,555,944 6,434,138 191,935 225,000 23,688 225,000 6,972,879 6,682,826 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. BTC HEALTH | ANNUAL REPORT PG 28 Note 4 Cash and cash equivalents Cash at bank and on hand 30 June 2019 $ 30 June 2018 $ 3,942,921 3,942,921 2,649,629 2,649,629 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 2019 $ 14,795 28,100 120,744 163,639 30 June 2018 $ 14,795 23,742 45,182 83,719 Trade debtors as at 30 June 2019 are all related party transactions from BTC health’s subsidiaries. The estimated loss allowance for trade debtors at 30 June 2019 is $nil (2018: $nil). Note 6 Financial assets 30 June 2019 $ 30 June 2018 $ Non - Current Financial assets carried at fair value through profit or loss Bio101group Pty Ltd BioImpact Pty Ltd BTC Speciality Health Pty Ltd Total Financial assets carried at fair value through profit or loss 375,000 100 6,000,000 6,375,100 245,000 100 100 245,200 Total Non-Current Financial Assets 6,375,100 245,200 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. 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 HEALTH | ANNUAL REPORT PG 29 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 2019 $ 245,200 - - 130,000 5,999,900 6,375,100 30 June 2018 $ 1,522,015 (721,815) (700,000) 144,900 100 245,200 Bio101group Pty Ltd.’s valuation was increased in the period by $130,000 to $375,000. Additions of $5,999,900 relate to an increased investment in the ordinary share capital of BTC Speciality Health Pty Ltd. The cash advanced through this investment provided BTC Speciality Health with the necessary funds to acquire the hospital infusion business from Admedus Limited in the year. The investment was financed in part through a short term loan of $4,000,000 which was settled on 27 June 2019 with proceeds from the share placement (refer to note 9). Note 7 Loans to investee companies Non- Current Loans to investee companies BioImpact Pty Ltd BTC Speciality Health Pty Ltd 30 June 2019 $ 30 June 2018 $ 347,691 890,000 1,237,691 161,885 175,000 336,885 The loans issued to BioImpact Pty Ltd and BTC Speciality Health Pty Ltd are non-interest bearing and have no fixed terms of repayment. The estimated loss allowance for loans to investee companies at 30 June 2019 is $nil (2018: $nil). BTC HEALTH | ANNUAL REPORT PG 30 Note 8 Trade and other payables Current Trade creditors Accruals 30 June 2019 $ 142,832 15,200 158,032 30 June 2018 $ 76,479 14,000 90,479 Trade and other payables are non-interest bearing and are generally settled on 30-day terms. Note 9 Issued Capital 2019 Shares 2019 $ 2018 Shares 2018 $ (a) Ordinary Shares Issued and fully paid – Opening Balance 130,296,532 44,255,057 127,107,604 43,907,429 Share Placement 28 November 2017 Capital raising costs - - - - 3,188,928 - 350,783 (3,155) Share Placement 22 May 2019 Capital raising costs 31,841,127 - 2,547,290 (90,707) Share Placement 13 June 2019 Capital raising costs 14,871,250 - 1,189,700 (17,850) Share Placement 27 June 2019 Capital raising costs 67,533,874 - 5,402,710 (181,345) - - - - - - - - - - - - Closing Balance 244,542,783 53,104,855 130,296,532 44,255,057 (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 Expiry of options Closing balance 30 June 2019 $ 158,455 211,427 - (22,968) 346,914 30 June 2018 $ 89,577 114,335 (45,457) - 158,455 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 7,500,000 unlisted ordinary shares under option (2018: 3,000,000). 7,000,000 of the 7,500,000 options granted have vested. BTC HEALTH | ANNUAL REPORT PG 31 The following share-based payment arrangements in the form of share options were in existence during the current reporting period: 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 0.169 5 May 2019 5 May 2017 500,000 20 April 2017 0.076 0.169 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 ended 30 June 2018 of $36,390. 2018 Financial Year Grant Options Granted 1,000,000 500,000 500,000 Grant Date Grant date fair value $ Exercise Price $ Expiry Date Vesting Date 28 November 2017 28 November 2017 28 November 2017 0.061 0.079 0.093 0.24375 0.24375 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. 2019 Financial Year Grant Options Granted Grant Date Grant date fair value $ Exercise Price $ Expiry Date Vesting Date 5,000,000 21 June 2019 0.03 0.10 21 June 2022 21 June 2019 The above options were granted in relation to the settlement of a short term loan that was issued and repaid in the year. There has been no alteration of the terms and conditions of the above share-based payment arrangements since the grant date. BTC HEALTH | ANNUAL REPORT PG 32 Fair value of share options granted in the year The weighted average fair value of the share options granted during the 2019 financial year is $0.034 (2018: $0.073). 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. Expected volatility was based on the historical share price volatility in the 3 year period leading up to the grant date. Inputs into the model Grant date share price Exercise price Options Granted Volatility Dividend Yield Risk free rate 2019 Tranche 0.08 0.10 5,000,000 73.95% 0.00% 1.25% Note 11 Accumulated Losses Accumulated losses at the beginning of the year Forfeiture of share options Expiry of share options Total comprehensive loss for the year Accumulated losses at the end of the year Note 12 Cash Flow from Operating Activities Reconciliation of Operating Loss after Income Tax to the Net 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 2019 $ 30 June 2018 $ (41,440,510) - 22,968 (692,742) (42,110,284) (40,018,133) 45,457 - (1,467,834) (41,440,510) 30 June 2019 $ 30 June 2018 $ (692,742) (1,467,834) (130,000) - - - 211,427 67,553 (79,920) (144,900) 280,000 721,815 (3,155) 114,335 5,741 (61,526) Net cash used in operating activities (623,682) (555,524) BTC HEALTH | ANNUAL REPORT PG 33 Note 13 Subsequent Events On 3 July 2019, 625,000 ordinary shares were issued to a related party of Richard Treagus as part of the capital raise, as approved at the company’s extraordinary general meeting on the 21 June 2019. No other 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. Note 14 Key Management Personnel Name and position of key management personnel of the company in office at any time during the financial year: Directors and Executives R Treagus – Executive Chairman P Jones – Non-executive J Pilcher – Non-executive 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 - corporate finance assistance related to the business acquisition by BTC Speciality Health Pty Ltd 30 June 2019 $ 30 June 2018 $ 176,530 3,470 - 180,000 194,863 3,470 (10,498) 187,835 30 June 2019 $ 30 June 2018 $ 38,325 85,736 124,061 36,500 - 36,500 Note 16 Related Party Disclosures BTC health received management fee income from consulting services to Bio101group Pty Ltd during the year of $170,000 (2018: $40,000). The trade debtors balance receivable from Bio101 group Pty Ltd at 30 June 2019 amounted to $105,632 (2018: $45,182). These debtors have been received since year end. 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 2019 was $97,344 (2018: $65,750). 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 2019 was $130,000 (2018: $109,600). BTC HEALTH | ANNUAL REPORT PG 34 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 2019 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 0.26% N/A - 3,942,921 3,942,921 158,032 158,032 3,784,889 BTC HEALTH | ANNUAL REPORT PG 35 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 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 2019 would decrease/increase by $34,200 (2018: decrease/increase by $11,646). 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: 30 June 2019 Trade and other payables Unclaimed monies 30 June 2018 Trade and other payables Unclaimed monies Carrying amount Contractual cash flows 6 months or less $ $ $ (158,032) (219,834) (377,866) (158,032) (219,834) (377,866) (158,032) (219,834) (377,866) (90,479) (251,952) (342,431) (90,479) (251,952) (342,431) (90,479) (251,952) (342,431) Greater than 6 months, less than 1 year Greater than 1 year $ - - - - - - $ - - - - - - BTC HEALTH | ANNUAL REPORT PG 36 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. 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 2018. 30 June 2019 Financial assets carried at fair value through profit or loss: Unlisted investments 30 June 2018 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 $ $ $ $ $ 6,375,100 1,275,020 1,275,020 (1,275,020) (1,275,020) 1,275,020 1,275,020 (1,275,020) (1,275,020) 245,200 49,040 49,040 (49,040) (49,040) 49,040 49,040 (49,040) (49,040) 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. BTC HEALTH | ANNUAL REPORT PG 37 Name of Investment Core Activity Bio101group Pty Ltd Finance and administration for life science clients Basis of Valuation • Multiple of revenue based on actual results for the year ended 30 June 2019 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: 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 2019 Financial assets Unlisted investments– Financial assets carried at fair value through profit or loss 30 June 2018 Financial assets Unlisted investments– Financial assets carried at fair value through profit or loss Level 1 Level 2 Level 3 Total $ - - - - $ - - - - $ $ 6,375,100 6,375,100 6,375,100 6,375,100 245,200 245,200 245,200 245,200 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 2019 Total $ 245,000 5,999,900 - 130,000 - 6,375,100 2018 Total $ 1,522,015 100 (700,000) 144,900 (721,815) 245,200 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. BTC HEALTH | ANNUAL REPORT PG 38 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 2018. 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. 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 Unclaimed monies Note 19 Loss Per Share 30 June 2019 $ 30 June 2018 $ 3,942,921 163,639 1,237,691 6,375,100 158,032 219,834 2,649,629 83,719 336,885 245,200 90,479 251,952 Basic and diluted loss per share, based on the after tax loss of $692,742 (2018: ($1,467,834)) * (0.51) cents per share (1.14) cents per share Weighted average number of ordinary shares used as the denominator in calculating basic earnings per share 134,946,441 shares 128,977,277 shares 30 June 2019 30 June 2018 *The options issued are not included in the diluted EPS as they are anti-dilutive. Note 20 Contingent Liabilities There were no contingencies of which the company is aware as at the date of this report. BTC HEALTH | ANNUAL REPORT PG 39 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 16 August 2019 BTC HEALTH | ANNUAL REPORT PG 40 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 16 August 2019 The Board of Directors BTC health Limited Suite 201/697 Burke Road CAMBERWELL VIC 3124 Dear Board Members Auditor’s Independence Declaration to BTC health 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 2019, 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 (“DTTL”), its global network of member firms, and their related entities. DTTL (also referred to as “Deloitte Global”) and each of its member firms and their affiliated entities are legally separate and independent entities. DTTL does not provide services to clients. Please see www.deloitte.com/about to learn more. Liability limited by a scheme approved under Professional Standards Legislation. Member of Deloitte Asia Pacific Limited and the Deloitte Network. 41 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 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 2019, 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) (ii) giving a true and fair view of the Company’s financial position as at 30 June 2019 and of its financial performance for the year then ended; and complying with Australian Accounting Standards and the Corporations Regulations 2001. Basis for Opinion We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report. We are independent of the Company 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 Asia Pacific Limited and the Deloitte Network 42 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 2019, the company’s investment portfolio consisted of three unlisted companies carried at a fair value of $6,375,100. 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 investment company to assess whether those forecasts are appropriate and are consistent with the investment business case. 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 2019, but does not include the financial report and our auditor’s report thereon. Our opinion on the financial report does not cover the other information and 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. 43 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. 44 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 6 to 8 of the Directors’ Report for the year ended 30 June 2019. In our opinion, the Remuneration Report of BTC health Limited, for the year ended 30 June 2019, 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, 16 August 2019 45 Shareholder Information As at 15 August 2019 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 B. Substantial holders Ordinary Shareholders 23 305 194 393 135 1,050 Unlisted Option holders - - - - 4 4 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 NAOS ASSET MANAGEMENT LIMITED LHC CAPITAL PARTNERS PTY LTD SIGMA COMPANY LIMITED RICHARD AND KAREN TREAGUS PETER AND HELEN JONES C. Equity security holders 48,165,801 26,284,910 25,000,000 23,050,198 16,984,323 19.65% 10.72% 10.22% 9.40% 6.95% The names of the twenty largest holders of quoted equity securities are listed below: Rank Name A/C designation Ordinary Shares held 1 2 3 4 5 6 7 8 9 NATIONAL NOMINEES LIMITED UBS NOMINEES PTY LTD MRS KAREN ELIZABETH TREAGUS SIGMA COMPANY LIMITED STUART ANDREW PTY LTD SIGMA COMPANY LIMITED MR CAMPBELL DINWOODIE TAYLOR MRS SUSAN MAREE WHITING WINDARRI INVESTMENTS PTY LTD 10 BNP PARIBAS NOMINEES PTY LTD 11 MS DESPINA MAKRIS 12 13 LINWIERIK INVESTMENTS PTY LTD NAMARONG INVESTMENTS PTY LTD 14 PRITDOWN PTY LTD 15 THIRTY SIXTH VILMAR PTY LTD 16 MR NICHOLAS DERMOTT MCDONALD HANSEN INVESTMENT 60,687,968 28,134,910 23,050,198 16,856,467 16,009,323 8,143,533 4,448,805 4,300,000 4,213,727 3,500,000 3,078,363 2,473,102 2,107,058 2,005,480 1,875,000 1,800,000 Voting Percentage 24.75 11.48 9.40 6.88 6.53 3.32 1.81 1.75 1.72 1.43 1.26 1.01 0.86 0.82 0.76 0.73 BTC HEALTH | ANNUAL REPORT PG 46 Rank Name A/C designation Ordinary Shares held 17 BNP PARIBAS NOMINEES PTY LTD HUB24 CUSTODIAL SERV LTD DRP GRAY LANE HOLDINGS PTY LTD 18 19 MR NICHOLAS DERMOTT MCDONALD 20 YORKSHIRE INVESTMENTS PTY LTD Total D. Less than marketable parcel holders Voting Percentage 0.73 0.66 0.57 0.53 1,780,600 1,627,804 1,386,363 1,309,144 188,787,845 77.00 The number of holders holding less than a marketable parcel based on the market price was 286. 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. BTC HEALTH | ANNUAL REPORT PG 47 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 BTC HEALTH | ANNUAL REPORT PG 48 BTC HEALTH | ANNUAL REPORT PG 49 BTC HEALTH | ANNUAL REPORT PG 50 

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