dorsaVi
Annual Report 2021

Plain-text annual report

dorsaVi Ltd and controlled entities ABN: 15 129 742 409 APPENDIX 4E - YEAR ENDED 30 JUNE 2021 dorsaVi Ltd and controlled entities APPENDIX 4E PRELIMINARY FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2021 Provided to the ASX under listing rule 4.3A ABN: 15 129 742 409 ASX CODE: DVL dorsaVi Ltd and controlled entities ABN: 15 129 742 409 APPENDIX 4E - YEAR ENDED 30 JUNE 2021 CONTENTS Appendix 4E Details of the reporting period and the previous corresponding period Results for Announcement to the Market Explanation of Results Statement of Accumulated Losses Details of entities over which control has been gained or lost during the period Audit of the Financial Report Attachment Annual Report for the year ended 30 June 2021 dorsaVi Ltd and controlled entities ABN: 15 129 742 409 APPENDIX 4E - YEAR ENDED 30 JUNE 2021 Details of the reporting period and the previous corresponding period Reporting period: Year ended 30 June 2021 Previous corresponding period: Year ended 30 June 2020 Results for announcement to the market June 2021 June 2020 Change Change ($) ($) ($) (%) Revenue 2,779,633 2,397,059 382,574 16% Loss from ordinary activities after tax attributable to members (2,028,267) (7,593,079) 5,564,812 -73% Loss for the period attributable to members (2,028,267) (7,593,079) 5,564,812 -73% Net Tangible asset per share Explanation of Results June 2021 (cents) June 2020 (cents) Change (cents) 0.62 0.20 0.42 The economies in which the Group operates continue to be impacted by the COVID-19 pandemic. The Group continues to be focused on: protecting its people, maintaining and growing recurring revenue, and, controlling cost. Total revenue for the 2021 financial year was $2,779,633 (2020: $2,397,059), an increase of 16%. Sales revenue was $1,868,982 (2020: $2,019,220). Total revenue also included government grants, including Job Keeper payments, of $493,778 (2020: $250,276) and the change in the fair value of the derivative liability (included in the carrying value of the convertible note) of $349,925 (2020: an expense of $278,151). The loss from continuing operations after income tax for the 2021 financial year was $2,028,267 (2020: $7,593,079), a decrease of 73% on the 2020 financial year. Total expenditure was $5,225,730 for the 2021 financial year (2020: $10,447,502), a decrease of 50%. The reduction of expenditure from the prior year was largely a result of: a reduction in depreciation and amortisation expense from $1,039,365 in the prior year to $210,203 in the current year; a reduction in the provision for impairment of intangible assets from $4,018,354 in the prior year to $Nil in the current year; and a reduction the change in fair value of the derivative liability from $278,151 in the prior year as compared to revenue of $349,925 in the current year. During the financial year there were no returns to shareholders in any form. This report should be read in conjunction with any public announcements made by dorsaVi Ltd in accordance with the continuous disclosure requirements arising under the Corporations Act 2001 and ASX Listing Rules. The information provided in this report contains all the information required by ASX Listing Rule 4.3A. dorsaVi Ltd and controlled entities ABN: 15 129 742 409 APPENDIX 4E - YEAR ENDED 30 JUNE 2021 Consolidated Statement of Profit or Loss and Other Comprehensive Income Refer to the attached annual report Consolidated Statement of Financial Position Refer to the attached annual report Consolidated Statement of Changes in Equity Refer to the attached annual report Consolidated Statement of Cash Flows Refer to the attached annual report Dividends The board has declared no dividend for the years ended 30 June 2021 (2020: $Nil). There are no dividend reinvestment plans in operation. Statement of Accumulated Losses Consolidated Entity 2021 $ 2020 $ Balance at the beginning of year (40,854,577) (33,315,228) Net loss attributable to members of the parent entity Reversal of share-based payment reserve Total available for appropriation Dividends paid Balance at end of year (2,028,267) 111,683 (42,771,161) (7,593,079) 53,730 (40,854,577) - - (42,771,161) (40,854,577) Details of entities over which control has been gained or lost during the period There was no gain or loss in control of entities during the year ended 30 June 2021. Audit of the Financial Report The financial report has been audited and an unqualified opinion has been issued with an Emphasis of Matter in relation to Going Concern. Date: 26 August 2021 Finance Disclosure Committee dorsaVi Ltd ANNUAL REPORT 2021 dorsaVi Ltd and controlled entities ABN: 15 129 742 409 dorsaVi Ltd (ABN: 15 129 742 409) Annual Report For the Year Ended 30 June 2021 CONTENTS CHAIRMAN’S REVIEW CEO REPORT FINANCIAL REPORT Financial Report Directors’ Report Auditor’s Independence Declaration Financial Report for the Year Ended 30 June 2021 Notes to the Financial Statements Directors’ Declaration Independent Auditor’s Report to the Members of dorsaVi Ltd Shareholder Information dorsaVi Annual Report 2021 3 5 10 11 12 27 28 32 60 61 66 2 dorsaVi Ltd and controlled entities ABN: 15 129 742 409 CHAIRMAN’S REVIEW Dear Shareholders On behalf of the dorsaVi Board, it gives me great pleasure to present our FY21 Annual Report. The year has been marked by several challenges born from the dynamic and unpredictable global pandemic. In what has been a challenging year operationally, we are excited by the early signs of positive momentum building into a post-COVID turnaround. We managed to maintain a resilient recurring revenue stream despite the challenging conditions and saw growth in the third and fourth quarters, which was underpinned by the continued execution of our strategy to target large customers in the robust Clinical market. We have continued to re-shape our business, with a core focus on generating recognised recurring revenue while simultaneously focusing on our lean cost strategy. Running lean has given us the ability to invest in our product, resulting in a market leading sensor design with secure data privacy that provides a platform to engage new Clinical market customers. It is reassuring to see our improved second half results, which represented an uplift in revenues coinciding with the COVID- 19 recovery and subsequent return to work in the US and UK. As these regions continue to return to work, we are confident that dorsaVi’s recovery will continue accordingly, even as Australia faces the possibility of further lockdowns and an extended COVID-19 recovery timeline. Our well diversified business across our key geographies has provided some protection to localised lockdowns leading to a more stable business, which has been complemented by our ability to work from home. This has been reflected by our CEO, Andrew Ronchi, who has moved back to Australia from the US to leverage his in-depth knowledge of their Workplace and Clinical markets, to increase the local business profile. This move is made possible by the 3-year period Andrew spent in the US, developing our operations in the US and establishing robust relationships which can now be maintained virtually. Andrew’s hard work has put us in a strong position to grow in the US and we look forward to him replicating the success in Australia. In terms of our clinical applications, we continue to transform the management of patients with digital health solutions which provide objective assessment, remote monitoring and immediate biofeedback. The Clinical market has seen growth despite COVID-19 related challenges. dorsaVi has been executing on its strategy to win large-scale customers, substantiated by the ongoing partnership with Medtronic. We continue to deliver on our promise of creating shareholder value through partnerships with large reputable institutions, which in turn allows dorsaVi’s products to be improved and validated in the eyes of the wider clinical market. Importantly, our ongoing work with leading clinical institutions has led to optimised sensor technology, as these organisations have stringent product requirements, leading to a product with enhanced data privacy and security features and up-to-date technological advancements. Having a better product with features required by market leading companies provides dorsaVi with added sales capabilities and greater potential to grow. The Workplace market is primed for growth as people return to work and the COVID-19 recovery continues worldwide. dorsaVi is positioned strongly to capitalise on this trend, which we aim to do through the execution of our channel partnership strategy and enhanced product capabilities. The Company’s strategy to align with channel partners, such as QBE Australia, aims to provide these customers with our market leading wearable sensor technology thereby lowering insurance premiums, driving safer work environments, and gaining exposure to high-quality corporate customers. In the Workplace market, dorsaVi enables employers to assess risk of injury for their employees as well as test the effectiveness and implement improvements to OH&S workplace design, equipment or methods based on objective evidence. We are pleased to have advanced the Company’s goal to improve workplace safety culture, which ultimately helps minimise injuries. dorsaVi continues to pursue its lean management strategy by reducing our cost base through FY21. Running lean was initially a response to COVID-19, but now forms an integral part of the Company’s strategy and has allowed for important investment in R&D. By investing strategically in product development, dorsaVi has ensured it will continue to meet the advanced compliance requirements of sophisticated customers, while simultaneously increasing the appeal of our products to win new top tier customers. dorsaVi Annual Report 2021 3 dorsaVi Ltd and controlled entities ABN: 15 129 742 409 Finally, on behalf of the Board, I would like to take this opportunity to thank CEO, Andrew Ronchi, my fellow Board directors, and the entire dorsaVi team for their outstanding contribution. We look forward to the coming year as we continue to assist patients in their recovery process and work towards our goal of significantly reducing injuries in the workplace. With a strengthened product, increased marketability, US market coming back to life and Andrew back in Australia to help drive local and international growth, the future looks promising for dorsaVi. Yours sincerely Greg Tweedly Chairman dorsaVi Annual Report 2021 4 dorsaVi Ltd and controlled entities ABN: 15 129 742 409 CEO REPORT Introduction This past year has taught us all how to re-think our work environments, as we have navigated through challenging and complicated times due to the Coronavirus (COVID-19) pandemic. From the perspective of dorsaVi, this has brought new and difficult obstacles to overcome, but has also presented us with growth opportunities and potential investment pathways. Fortunately, the tide of lockdowns in some of our key markets (USA and UK) is turning and evidenced by our recent quarterly results, there appears to be an increase in activity in both the Clinical and Workplace markets. I am eager for us to build on our positive momentum by leveraging the ‘return to normal’ environment to sign new customers and drive growth. The strategic foundations we have set over the last few years are underpinned by a focus on generating recurring revenue through large customers in the Workplace and Clinical markets. Large clients are attractive to target given their bespoke requirements and need for analytical insights. The scope of signing these customers requires a consulting style revenue early in the agreement, followed by more predictable recurring revenues later. This structure typically results in larger contracts and provides industry validation for our technology by demonstrating a proven ability to work with industry leaders. These benefits illustrate what makes large-scale multinational customers so appealing and substantiate the Company’s decision to continue to target leading organisations. Given the uncertainty surrounding the current trading environment, and a large part of the working population not physically going to work, we have adopted a lean strategy to ensure our operational spend reflects the current climate. This mindset has enabled us to dynamically adjust to the challenges presented, leading us to decrease our expenses, while simultaneously presenting us the chance to invest in necessary upgrades to ensure our product remains best in class. Further, we have made inroads in product design which has led to material cost reductions in our sensor production which we aim to leverage in the coming years. We continue to focus on our channel partners in the insurance, medical device and the emergency services sectors and hope to grow these relationships in the near future. I believe with an improved product complemented by a materially lower production cost, established partnerships with market leaders and industry tailwinds supportive of back-to-work initiatives, we are well positioned to capitalise on a return to normality. Strategic overview Our strategic focus is underpinned by core strategic pillars; a focus on recurring revenue, targeting large-scale customers, running a lean operation, and optimising our product offering. Focus on recurring revenue Our strategy to transition away from a historical reliance on one-off consulting revenue, to the more reliable recognised recurring revenue (RRR) model, is already proving prudent given how resilient our revenue profile has been. Our RRR in FY21 was $1.4m which was marginally lower than our FY20 RRR of $1.5m. Given the direct influence COVID-19 had on workplace utilisation and the ability for patients to see practitioners in the lockdown periods, we believe this result provides a great foundation for revenue growth as we move away from of a lockdown environment. dorsaVi Annual Report 2021 5 dorsaVi Ltd and controlled entities ABN: 15 129 742 409 FIGURE 1: Recurring revenue over the last 5 years (A$’000) 1,600 1,400 1,200 1,000 800 600 400 200 0 329 293 355 304 FY19 373 340 396 395 Q4 Q3 Q2 Q1 386 356 346 333 FY20 FY21 176 148 140 178 FY17 247 214 213 180 FY18 Pleasingly, we achieved $742k in recurring revenue in the second half of FY21, up 9% from $679k in the first half of FY21 and up 4% from $713k in the pcp. We believe these results are early signs of positive momentum which we hope will continue to build as our key markets rebound out of COVID-19. The mix of recurring revenue against consulting revenue continues to grow, and we expect this trend to continue with further product enhancements. FIGURE 2: Recurring revenue as percentage of customer sales revenue 74% 76% 51% 19% 26% FY17 FY18 FY19 FY20 FY21 Targeting large scale customers Our strategic focus on targeting large scale customers in both the clinical and the workplace markets is starting to pay dividends, as we have seen with Medtronic. Subsequent to the year end, we signed a third agreement with Medtronic. Across the three agreements we have generated a combined revenue value of >US$570k ($760k AUD) with the majority of the revenue to be recognised in FY22. Not only has this given us stable financial cash flow, but it has also provided us with industry validation, as our products have been recognised by a sector leader. We aim to leverage off this confirmation to increase our funnel of large-scale enterprises in both the clinical and workplace markets, and ultimately grow our recurring revenues and average contract size. Running a lean operation Reflective of the current environment, and the size of our current operations, we have continued to optimise our cost structure by employing a lean management strategy. To achieve this, we have been realising various operational efficiencies such as reducing our office spend by transitioning our sales staff to work from home arrangements, optimising our technology stack to reduce non-essential subscription costs, and customising our marketing strategy resulting in reduced overheads. These, among other levers, have allowed us to decrease our operational expenditure. We are pleased to report our total expenses dorsaVi Annual Report 2021 6 dorsaVi Ltd and controlled entities ABN: 15 129 742 409 reduced from $6.4m in FY20 to $5.2m on a normalised basis (removing provision for impairment of intangibles from FY20), which includes our added investment in new product development. We will continue to focus on our lean execution, and firmly believe that our reductions are sustainable in the near term. FIGURE 3: Total costs in FY20, FY21 (A$m) 7.0 6.0 5.0 4.0 3.0 2.0 1.0 0.0 Employee Other D&A Software Advertising Occupancy Cost of sales FY20 FY21 Product update Our sensors and products are now better than ever due to strategic investment during the past 2 years. In line with our strategic objectives, we have made important upgrades to the data privacy and security features of our sensors which are a necessary pre-requisite for partnering with increasingly sophisticated companies. Many large-scale entities require their IT infrastructure and any data capturing systems to have a high level of sophistication and data protection. The decision to make this investment has proven wise as it has enabled us to present a point of difference versus our competitors. Further, ongoing work with these larger institutions has given us early insight into specific industry trends and the associated areas for product enhancement and optimisation. This has allowed us to design our sensors, software, apps, algorithms and our data platform to be what we believe is best in class, with market leading and on-trend features. Through our refinements, we have been able to substantially lower the unit cost of our product, with translational benefits in other markets and sales channels that weren’t previously available. With a materially lower cost of production, we can now look to explore various growth opportunities. One such opportunity could be a further push into the lucrative US market via lower cost selling (direct online) channels, and a more flexible approach to contract negotiation, allowing for wider trial periods of the product which can be recovered through a recurring revenue monthly contract. As this lower cost of production is relatively recent, we look forward to exploring new ways to capitalise on the flexibility afforded to us by a lower cost of production. Overview of our key markets (Clinical and Workplace) Clinical market The Clinical market has remained robust despite COVID-19 related challenges. The promising developments in this market has been predominantly driven by the need for sophisticated sensor technology, as our core client base of esteemed physiotherapists (Physical Therapists in the US market) and medical researchers continues to evolve. dorsaVi has been well placed to benefit from this trend, as not only is our technology highly regarded, but it can also be adjusted to fit more customised requirements. Pleasingly, we have managed to maintain our revenue from the Clinical market in FY21 of $1.13m ($1.13m in FY20) despite the challenges associated with our client base of physical therapists, who had reduced face-to-face client engagements during COVID lockdowns. As more communities come out of lockdown, and people recommence their daily activities, we expect increased organic growth in the Clinical space, coupled by further agreements with Medtronic and other leading medical organisations. As mentioned earlier, our lower product costs enable us to open new sales channels, which are more apparent in the Clinical market. One such pathway is for dorsaVi to offer its products online, increasing the Company’s reach to general practitioners and physiotherapists throughout the world. This material cost difference gives us confidence we can grow our practitioner market share, with a market leading product at a significantly lower price point. The numerous industry tailwinds prevalent in the clinical space highlight my confidence and enthusiasm for dorsaVi’s immediate future. dorsaVi Annual Report 2021 7 dorsaVi Ltd and controlled entities ABN: 15 129 742 409 Workplace market The Workplace market has been challenging over FY21 due to the lockdowns, resulting in customers in our key markets working from home wherever possible. Fewer people going to work has a direct relationship to our revenue, as organisations have less of a desire to invest in ergonomics and staff well-being if people are working from home. With that being said, we have managed to record a FY21 $739k revenue result in the Workplace market ($894k in FY20). While on the surface our revenue has fallen, our FY21 result has been materially impacted by the recent on-going lockdowns in Australia. We have actively had to delay numerous projects (signed contracts) with institutional Australian clients as we have physically been unable to travel interstate or gain access to their premises. This will remain an ongoing issue for us until Australia returns to pre-COVID levels of activity. Last year we commenced our channel partner strategy with insurance firm QBE Australia. This partnership allows us to provide QBE’s customers with our world leading technology to help improve their health and safety outcomes, and ultimately reduce insurance premiums. This initiative, in many cases, resulted in dorsaVi undertaking additional work for these clients. As people return to work, we expect demand to increase through our channel partners, as there will be a greater need to ensure staff are safe considering lengthy times away from the office and the risk of deconditioned people returning to physically demanding work tasks. Outlook and FY21 results In what has been arguably our most challenging year operationally, it is satisfying to see our total revenue number of $2.8m exceed last financial year’s result ($2.4m in FY20). While an element of this year’s top line number does include benefits from both the Australian and United States governments, we believe these have supplemented income that we would have been able to realise had it not been for the pandemic. Our total revenue from customers in FY21 of $1.9m was largely in line with last year ($2.0m in FY20), which was underpinned by the strong performance and resilience of the clinical market, and our client’s reliance on our products. FIGURE 4: Revenue by key market (A$’000) 2,500 2,000 1,500 1,000 500 0 894 1,125 739 1,130 Workplace Clinical FY20 FY21 Further, our continued focus on lean execution has resulted in the Company reporting a materially stronger result than in FY20. The total loss for the year was $2.0m, a dramatic $5.6m* improvement on FY20. Our diversified sales strategy across different geographies has allowed us to manage the COVID-19 impact and associated risks. The need for a diversified customer group is more paramount than ever, as each individual region can be thrown into lockdown at short notice. This has been highlighted by the current situation we find ourselves in throughout Eastern Australia. Thankfully, our decreased activity in Australia has been more than offset by the increased activity in both the UK and the US, with the latter being our largest market. *Note that $4.6m of the $5.6m was related to removing provision for impairment of intangibles dorsaVi Annual Report 2021 8 dorsaVi Ltd and controlled entities ABN: 15 129 742 409 Thank you for your support I would like to thank the Board of dorsaVi for their continued help and guidance as we navigated through FY21. As a show of character, and in line with last year, the Company’s non-executive directors accepted options in lieu of directors’ fees, which highlights their alignment to creating long term value for the Company and their belief in its future. I would also like to extend my thanks to both the Australian and United States governments, who helped provide us with a supportive footing in the height of uncertainty. From a staffing perspective, I would like to thank Matt May who started with dorsaVi close to 7 years ago as Head of Australian Sales and Operations and moved into a GM role with dorsaVi, while I was located in the US for the past 3 years. Matt has been a long serving teammate and friend for these years and is moving on from his role with dorsaVi. I’d like to wish Matt the very best of luck in his future endeavours and thank him for his efforts. Lastly, I would like to especially thank our shareholders for their continued support in what has been a year filled with challenge. I firmly believe we have laid the foundations for growth. I wish you all a safe year ahead and hope to see us leverage the favourable industry tailwinds into new clients, new contracts, and more growth. Andrew Ronchi Chief Executive Officer dorsaVi Annual Report 2021 9 FINANCIAL REPORT For the Year Ended 30 June 2021 dorsaVi Annual Report 2021 10 dorsaVi Ltd and controlled entities ABN: 15 129 742 409 Financial Report For the Year Ended 30 June 2021 TABLE OF CONTENTS Financial Report Directors’ Report Auditor’s Independence Declaration Financial Report for the Year Ended 30 June 2021 Consolidated Statement Of Profit Or Loss And Other Comprehensive Income Consolidated Statement Of Financial Position Consolidated Statement Of Changes In Equity Consolidated Statement Of Cash Flows Notes to the Financial Statements Directors’ Declaration Independent Auditor’s Report to the Members of dorsaVi Ltd Shareholder Information dorsaVi Annual Report 2021 11 12 27 28 28 29 30 31 32 60 61 66 11 dorsaVi Ltd and controlled entities ABN: 15 129 742 409 Directors’ Report The directors present their report together with the financial report of the Group consisting of dorsaVi and the entities it controlled, for the financial year ended 30 June 2021 and auditor’s report thereon. Directors The names of directors in office at any time during or since the end of the year are: Name Greg Tweedly Ashraf Attia Caroline Elliott Michael Panaccio Andrew Ronchi Designation Non-Executive Chairman Non-Executive Director Non-Executive Director Non-Executive Director Chief Executive Officer, Executive Director Appointed 29 October 2013 14 July 2008 24 November 2017 16 May 2008 18 February 2008 The directors have been in office since the start of the year to the date of this report unless otherwise stated. Principal Activities The principal activity of dorsaVi Ltd and its controlled entities during the financial year was the development and sale of innovative motion analysis technologies. These technologies are commercialised via license, sale or fixed fee consultancy. There has been no significant change in the nature of these activities during the financial year. Results The consolidated loss from continuing operations, after income tax, attributable to the members of dorsaVi Ltd was $2,028,267 (2020: $7,593,079). Review of Operations The Group consists of four entities: 1. dorsaVi Ltd; 2. dorsaVi Europe Ltd, a wholly owned subsidiary incorporated and domiciled in the UK; 3. dorsaVi USA, Inc., a wholly owned subsidiary incorporated and domiciled in the US; and 4. Australian Workplace Compliance Pty Ltd, a wholly owned subsidiary domiciled in Australia. As at 30 June 2021, net assets of the Group were $2,163,173 (2020: $459,029). Total revenue for the 2021 financial year was $2,779,633 (2020: $2,397,059). Sales revenue was $1,868,982 (2020: $2,019,220). Total revenue also included government grants, including Job Keeper payments, of $493,778 (2020: $250,276) and the change in the fair value of the derivative liability included in the carrying value of the convertible note of $349,925 (2020: expense $278,151). Clinical Despite the ongoing impact of COVID – 19 on the broader economy, Clinical income was $1,130,045 for the 2021 financial year (2020: $1,125,151). Workplace Workplace income, utilising ViSafe technology, was $738,937 for the 2021 financial year (2020: $894,069). The COVID-19 pandemic has continued to significantly impact Workplace sales revenues in the year to 30 June 2021. Expenditure Total expenditure was $5,225,730 for the 2021 financial year (2020: $10,447,502). The reduction of expenditure from the prior year was largely a result of: a reduction in depreciation and amortisation expense from $1,039,365 in the prior year to $210,203 in the current year; a reduction in the provision for impairment of intangible assets from $4,018,354 in the prior year to $Nil in the current year; and a reduction the change in fair value of the derivative liability from $278,151 in the prior year as compared to revenue of $349,925 in the current year. dorsaVi Annual Report 2021 12 dorsaVi Ltd and controlled entities ABN: 15 129 742 409 The material business risks that are likely to have an effect on the financial prospects of the Group include: ▪ Over time, dorsaVi may be subjected to increased competition if potential competitors develop new technologies or ▪ make scientific or systems advances that compare with or compete with dorsaVi’s products. In the medical sector (but not the Elite Sports or OHS sectors), sales and adoption rates of dorsaVi’s system are, in part, likely to be influenced by the availability and level of reimbursement from government and/or insurance payers. Whilst dorsaVi’s products already benefit from reimbursement in some circumstances, there is no guarantee that the use of dorsaVi’s products will receive further reimbursement. ▪ General economic conditions, movements in interest and inflation rates and currency exchange rates may have an adverse effect on dorsaVi’s activities, as well as on its ability to fund those activities. In particular, much of its future income is expected to come from the US and European markets and therefore dorsaVi’s activities will be affected by currency exchange fluctuations. The COVID-19 pandemic has significantly impacted economic conditions in the year to 30 June 2021 and is expected to continue to have an economic impact in the near future. ▪ dorsaVi is not currently profitable. Proceeds from the initial float and subsequent capital raisings were and are primarily being used to fund, both, the commercial rollout of dorsaVi’s products and continued product development. There is no guarantee that the commercial rollout will result in profitability for the Group. If the commercial roll out is slower or less successful than planned, dorsaVi may need to raise additional capital in the future. Significant Changes in the State of Affairs The following changes in the state of affairs occurred during the period: • • • • • • • • • On 9 July 2020, dorsaVi Ltd announced the grant of 3,693,714 options to non-executive directors, in lieu of directors’ fees, at an exercise price of $0.016 per share and an expiry date of 7 July 2025. The impact of the grant of these options was recognised in share based payments as at 30 June 2020. On 13 October 2020, dorsaVi Ltd announced the grant of 1,412,303 options to non-executive directors, in lieu of directors’ fees, at an exercise price of $0.049 per share and an expiry date of 7 October 2025. On 30 October 2020, dorsaVi Ltd announced the placement, to institutional and sophisticated investors, of 57,856,881 fully paid ordinary shares at $0.032 per share raising $1,851,420 before issue costs. On 20 November 2020, dorsaVi Ltd, pursuant to a 1 for 4 non-renounceable share purchase plan to eligible shareholders (announced 22 October 2020), issued 9,353,245 fully paid ordinary shares at $0.032 per share raising $299,304 before costs. On 23 December 2020, dorsaVi Ltd issued 2,707,286 fully paid ordinary shares, at $Nil per share, to the Managing Director in lieu of a reduction in cash wages and other entitlements of $75,804. This share issue was approved by shareholders at the Annual General Meeting held on 27 November 2020. On 13 January 2021, dorsaVi Ltd announced the grant of 1,171,178 options to non-executive directors, in lieu of directors’ fees, at an exercise price of $0.061 per share and an expiry date of 8 January 2026. On 2 February 2021, dorsaVi Ltd announced the completion of a shortfall placement, to professional and sophisticated investors, and issued 48,503,636 fully paid ordinary shares at $0.032 per share raising $1,552,116 before costs. The terms and issue price of the shortfall placement were in accordance with the entitlement offer that closed on 13 November 2020. On 12 March 2021, dorsaVi Ltd announced the issue of 1,084,000 fully paid ordinary shares, at $Nil per share, to employees, under the dorsaVi ESOP. The issue of these shares arose on the vesting of 1,084,000 performance rights previously granted as a result of those employees meeting the performance conditions attached to the rights. On 14 April 2021, dorsaVi Ltd announced the grant of 1,297,792 options to non-executive directors, in lieu of directors’ fees, at an exercise price of $0.063 per share and an expiry date of 8 April 2026. After Balance Date Events No matters or circumstances have arisen since the end of the financial year that have significantly affected or may significantly affect the operations of the Group, the results of those operations, or the state of affairs of the Group in future financial years with the exception of the following: • On 7 July 2021, dorsaVi Ltd announced the issue of 1,778,455 options to non-executive directors, in lieu of directors’ fees, at an exercise price of $0.041 per share and an expiry date of 5 July 2026. The impact of the grant of these options was recognised in share based payments as at 30 June 2021. Likely Developments The following likely developments, in the business of the Group, are expected to influence its future financial results: ▪ The Group expects to increase, year on year, the annuity revenue proportion of total clinical and workplace revenue. ▪ The Group expects that product, released globally in recent years, will continue to support revenue growth. dorsaVi Annual Report 2021 13 dorsaVi Ltd and controlled entities ABN: 15 129 742 409 Environmental Regulation The Group’s operations are not subject to any significant environmental Commonwealth or State regulations or laws. Dividend Paid, Recommended and Declared No dividends were paid, declared or recommended since the start of the financial year. Equity Instruments There were no options over unissued ordinary shares granted to executives by dorsaVi Ltd during the financial year. During the financial year, 1,000,000 performance rights were granted to executives and 1,084,000 vested into shares. Further details regarding performance rights and shares granted as remuneration are provided in the Remuneration Report below. There were 5,659,728 options over unissued ordinary shares granted to non-executive directors during or since the financial year end in lieu of the payment of directors’ fees. Further details regarding options granted as remuneration are provided in the Remuneration Report below. Shares under Option Unissued ordinary shares of dorsaVi Ltd under option at the date of this report are as follows: Date Options Granted Number of Unissued Ordinary Shares under Option Exercise Price of Options Expiry Date of the Options 15 May 2017 15 May 2017 15 May 2017 4 December 2019 4 December 2019 7 January 2020 7 April 2020 7 July 2020 7 October 2020 8 January 2021 8 April 2021 5 July 2021 500,000 55,000 24,166 1,280,488 1,116,703 1,846,856 4,801,827 3,693,714 1,412,303 1,171,178 1,297,792 1,778,455 18,978,482 $0.33 $0.33 $0.33 $0.084 $0.070 $0.034 $0.022 $0.016 $0.049 $0.061 $0.063 $0.041 15 May 2022 1 October 2022 1 October 2023 4 December 2024 4 December 2024 7 January 2025 7 April 2025 7 July 2025 7 October 2025 8 January 2026 8 April 2026 5 July 2026 No option holder has any right under the options to participate in any other share issue of the Group. Shares Issued on Exercise of Options To the date of this report, there have been no shares issued during or since the end of the year as a result of the exercise of an option over unissued shares. dorsaVi Annual Report 2021 14 dorsaVi Ltd and controlled entities ABN: 15 129 742 409 Shares Subject to Performance Rights Unissued ordinary shares of dorsaVi Ltd subject to performance rights at the date of this report are as follows: Date Performance Rights Granted 18 September 2019 Number of Unissued Ordinary Shares subject to Performance Rights 200,000 200,000 Issue Price of Shares - Vesting Date of Performance Rights 1 September 2022 A performance right holder does not have any right to participate in any other share issue of the Group until the performance rights vest and are converted to ordinary shares. Shares Issued on Vesting of Performance Rights During the year ended 30 June 2021 and to the date of this report, 1,084,000 shares were allocated on the vesting of 1,084,000 performance rights. During the year ended 30 June 2021 and to the date of this report, 146,000 performance rights lapsed. There remain 200,000 performance rights that do not convert to issued shares unless performance conditions are met, and they vest. Information on Directors and Company Secretary Greg Tweedly, B. Com, CPA, GAICD – Non-executive Chairman Greg Tweedly is Chairman of dorsaVi Ltd and serves on the Nomination and Remuneration Committee. He was appointed to the Board on 29 October 2013. Greg is a Director of Melbourne Health, Deputy Chair of Environment Protection Authority Victoria, Chair of the Personal Injury Education Foundation and was a Director and CEO of the Victorian WorkCover Authority (WorkSafe) from 2003 to 2012. Prior to joining WorkSafe, Greg was an executive with the Transport Accident Commission from 1996 to 2002 in various senior roles including Chief Operating Officer. He was formerly a Director of the Emergency Services and Telecommunications Authority, Director of the Institute of Safety Compensation and Recovery Research, a Director of the Personal Injury Education Foundation, a Director and Chair of the Victorian Trauma Foundation, Chair of the Heads of Workers’ Compensation Authorities of Australia and New Zealand and Member of SafeWork Australia and its predecessor organisation. No other directorships of listed companies were held during the three years to 30 June 2021. Ashraf Attia, PhD, FAICD – Non-executive Director Ash Attia was appointed as a director of dorsaVi on 14 July 2008 and chairs the Nomination and Remuneration Committee and serves on the Audit and Risk Committee. Ash has had senior management experience in multinational operations for over 30 years within the medical devices, biotechnology and diagnostics industries. He is currently Chief Executive Officer of Bionic Vision Technologies, a company developing an implantable device to restore sight to the blind. Prior to Bionic Vision , Ash held the position of Vice President of Asia Pacific, Middle East and Israel at TransMedics Inc, a company based in Boston, USA and has commercialized a revolutionary system in the area of heart, lung and Liver organ transplants and preservation. He has held several senior executive roles with global medical devices organizations and has special expertise in the areas of commercialization, business development, clinical, regulatory, R&D, strategic marketing, sales and distribution management. No other directorships of listed companies were held during the three years to 30 June 2021. Michael Panaccio, BSc (Hons), MBA, PhD, FAICD – Non-executive Director Michael Panaccio serves on the Audit and Risk Committee and the Nomination and Remuneration Committee. He was appointed to the Board on 16 May 2008. Michael is one of the founding directors of Starfish Ventures Pty Ltd, an Australian based venture capital manager. He was formerly an Investment Manager with JAFCO Investment (Asia Pacific). Prior to joining JAFCO, Michael was Head of the Department of Molecular Biology at the Victorian Institute of Animal Sciences. Michael has previously been a director of numerous technology businesses in Australia and the US including ImpediMed Ltd, SIRTeX Medical Ltd, Protagonist Therapeutic Inc and Energy Response Pty Ltd. dorsaVi Annual Report 2021 15 dorsaVi Ltd and controlled entities ABN: 15 129 742 409 No other Directorships of listed companies were held during the three years to 30 June 2021. Michael is also a director of Starfish Ventures Pty Ltd. Caroline Elliott, B. Ec, CA, GAICD – Non-executive Director Caroline Elliott is chair of the Audit and Risk Committee and was appointed to the Board on 24 November 2017. Caroline is currently a Director of the National Film and Sound Archive of Australia, St John’s Ambulance Australia (Vic) and Wiltrust Nominees Pty Ltd. She has previously held non-executive director roles at Cell Therapies Pty Ltd, Peter MacCallum Cancer Centre and the Public Transport Ombudsman Limited. She is currently the Chief Executive Officer at apparel business, The Propel Group Pty Ltd, and was previously the CFO and Company Secretary at Optal Ltd. No other directorships of listed companies were held during the three years to 30 June 2021. Andrew Ronchi, B. App. Sci. (Physio), PhD (RMIT Eng), GAICD – Chief Executive Officer, Director Andrew Ronchi was appointed to the Board on 18 February 2008. Before co-founding dorsaVi, Andrew was a practising physiotherapist both at an AFL club and in private practice. He has also been founding partner in two physiotherapy centres, the largest of these employing 28 staff (including 13 physiotherapists). Andrew completed a PhD in Computer and Systems Engineering, investigating the reliability and validity of transducers for measuring lumbar spine movement. As CEO of dorsaVi Ltd, Andrew is responsible for all aspects of the Group’s operations. No other directorships of listed companies were held during the three years to 30 June 2021. Brendan Case, MComLaw (Melb), BEc, CPA, Grad Dip App Fin, Dip FP, FCIS Brendan Case has served as dorsaVi Ltd’s secretary since 29 October 2013 and has more than 20 years of company secretarial, corporate governance and finance experience. He is a former Associate Company Secretary of National Australia Bank Limited (NAB), former secretary of NAB’s Audit and Risk Committees and has held senior management roles in risk management and regulatory affairs. Directors’ Meetings The number of meetings of the board of directors and of each board committee held during the financial year and the numbers of meetings attended by each director were: G Tweedly A Attia C Elliott M Panaccio A Ronchi G Tweedly A Attia M Panaccio Board of Directors Audit and Risk Committee Eligible to Attend 12 12 12 12 12 Attended 12 12 12 12 12 Eligible to Attend - 2 2 2 - Attended - 2 2 2 - Nomination and Remuneration Committee Eligible to Attend 2 2 2 Attended 2 2 2 Directors’ Interest in Shares, Performance Rights or Options as at the date of this report. Names of Holders M Panaccio A Ronchi G Tweedly A Attia C Elliott Ordinary Shares 102,875,786 17,103,889 1,018,911 576,898 462,963 Options 4,214,910 - 5,754,586 4,214,910 4,214,910 The directors have no interests in performance rights. As approved by shareholders at the 2019 and 2020 Annual General Meetings (AGM), non-executive directors have been progressively granted 5,659,728 options over ordinary shares in dorsaVi Ltd over the course of the year ended 30 June 2021 and up to the date of this report (2020: 12,739,588 options). dorsaVi Annual Report 2021 16 dorsaVi Ltd and controlled entities ABN: 15 129 742 409 The details of each non-executive director’s entitlement to options granted and a summary of the related terms is included in Table 5 of this report. Indemnification and Insurance of Directors and Officers The Group has insured its Directors, Secretary and executive officers for the financial year ended 30 June 2021. Under the Group’s Directors and Officers Liability Insurance Policy, the Group cannot release to any third party or otherwise publish details of the nature of the liabilities insured by the policy or the amount of the premium. The Group also indemnifies every person who is or has been an officer of the Group against any liability (other than for legal costs) incurred by that person as an officer of the Group where the Group requested the officer to accept appointment as Director. To the extent permitted by law and subject to the restrictions in section 199A and 199B of the Corporations Act 2001, the Group indemnifies every person who is or has been an officer of the Group against reasonable legal costs incurred in defending an action for a liability incurred by that person as an officer of the Group. ASIC Instrument on Rounding of Amounts In accordance with ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191, the amounts in the directors’ report and in the financial statements have been rounded to the nearest dollar. Indemnification and Insurance of Auditors No indemnities have been given or insurance premiums paid during or since the end of the financial year for any auditors of the Group. Proceedings on behalf of the Group No person has applied for leave of Court to bring proceedings on behalf of the Group. Auditor’s Independence Declaration A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 in relation to the audit for the financial year is provided with this report. Non-audit Services Non-audit services are approved by resolution of the audit committee and approval is provided in writing to the board of directors. Non-audit services were provided by the auditors of entities in the consolidated group during the year, namely Pitcher Partners (Melbourne), network firms of Pitcher Partners, and other non-related audit firms, as detailed below. The directors are satisfied that the provision of the non-audit services during the year by the auditor is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001 for the following reasons: ▪ all non-audit services were subject to the corporate governance procedures adopted by dorsaVi Ltd and have been reviewed and approved by the Audit Committee to ensure they do not impact on the integrity and objectivity of the auditor; and ▪ the non-audit services provided do not undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants (including Independence Standards), as they did not involve reviewing or auditing the auditor’s own work, acting in a management or decision making capacity for dorsaVi Ltd or any of its related entities, acting as an advocate for dorsaVi Ltd or any of its related entities, or jointly sharing risks and rewards in relation to the operations or activities of dorsaVi Ltd or any of its related entities. Amounts Paid and Payable to Pitcher Partners Melbourne for Non-audit Services: Taxation and Other Compliance Services Total Remuneration for Non-audit Services 2021 $ 11,100 11,100 2020 $ 14,901 14,901 dorsaVi Annual Report 2021 17 dorsaVi Ltd and controlled entities ABN: 15 129 742 409 Remuneration Report (Audited) The Directors present the Group’s 2021 Remuneration Report, which details the remuneration information for dorsaVi Ltd’s, Directors and other Key Management Personnel (KMP). A. Details of the Key Management Personnel Period of Responsibility Position Non-Executive Directors: Greg Tweedly Caroline Elliott Ashraf Attia Michael Panaccio Executive Director: Andrew Ronchi Executives: Matthew May Damian Connellan David Erikson Joanna Goldin Yasmine Pateras Full Year Full Year Full Year Full Year Full Year Chairman, Non-Executive Director Independent, Non-Executive Director Independent, Non-Executive Director Non-Executive Director Chief Executive Officer/Director Full Year Full Year Resigned 22/10/2020 Full Year Full Year General Manager Chief Financial Officer Chief Technical Officer Clinical Manager Workplace Manager B. Remuneration Policies Nomination and Remuneration Committee (N&RC) The N&RC of the Board of Directors is responsible for making recommendations to the Board on the remuneration arrangements for each Non-Executive Director, Executive Director/Chief Executive Officer (CEO) and each Executive reporting to the CEO. The current members of the N&RC are: Ashraf Attia, Michael Panaccio and Greg Tweedly. The N&RC assess the appropriateness of the nature and amount of remuneration of executives on a periodic basis by reference to relevant employment market conditions with the overall objective of ensuring maximum stakeholder benefit from the retention of high quality, high performing directors and executive team. In determining the level and composition of executive remuneration, the N&RC may also engage external consultants to provide independent advice. The primary responsibility of the N&RC is to review and recommend to the Board: ▪ Executive remuneration and incentive policies and practices; ▪ The Executive Director's total remuneration having regard to remuneration and incentive policies; ▪ The design and total proposed payments from any executive incentive plan and reviewing the performance hurdles for any equity-based plan; ▪ The remuneration and related policies of Non-Executive Directors for serving on the board and any committee (both individually and in total); and ▪ Any other responsibilities as determined by the N&RC or the Board from time to time. Remuneration Strategy The remuneration strategy of dorsaVi Ltd is designed to attract, motivate and retain Employees, Executives and Non- Executive Directors in Australia, the United States and Europe by identifying and rewarding high performers and recognising the contribution of each employee to the continued growth and success of the Group. To this end, the key objectives of the Group’s reward framework are to: ▪ Align remuneration with the Group’s business strategy; ▪ Offer an attractive mix of remuneration benchmarked against the applicable market’s region and country practices; ▪ Provide strong linkage between individual and Group performance and rewards; ▪ Offer remuneration based on merit and individual skill matching the role requirements with their experience and responsibilities; ▪ Align the interests of executives with shareholders and share the success of the Group with the employees; and ▪ Support the corporate mission statement, values and policies through the approach to recruiting, organizing and managing people. dorsaVi Annual Report 2021 18 dorsaVi Ltd and controlled entities ABN: 15 129 742 409 Remuneration Structure In accordance with best practice corporate governance, the structure of the Non-Executive Directors and Executive remuneration is separate and distinct. Non-Executive Director Remuneration Structure The ASX Listing Rules specify that an entity must not increase the total aggregate amount of remuneration of Non-Executive Directors without the approval of holders of its ordinary securities. The Board, and since its inception the N&RC, considers the level of remuneration required to attract and retain Non- Executive Directors with the necessary skills and experience for the Group’s Board. This remuneration is reviewed with regard to market practice and Non-Executive Directors’ duties and accountability. The constitution provides that the Non-Executive Directors are entitled to remuneration for their services as determined by the Board up to an aggregate limit of $500,000 (which may be increased with Shareholder approval). The Group has previously obtained advice about remuneration levels for Directors of listed companies and, based on that advice, set the following annual Non-Executive Directors’ fees: ▪ Chairman: $75,092 plus superannuation; ▪ Other Directors: $50,000 plus superannuation; and ▪ Further fees for acting as chairman of a committee: $5,000 plus superannuation per committee. The Group determines the maximum amount for remuneration, including thresholds for share-based remuneration for Executives, by resolution. The remuneration received by the Non-Executive Directors for the year ended 30 June 2021 is detailed in Table 1 of this section of the report. As approved at the 2020 AGM, Non-Executive Directors were, in lieu of the payment of directors’ fees, granted 5,659,728 options over ordinary shares. Refer table 5 below for details of the options granted. Executive Remuneration Structure The Group provides a remuneration package that incorporates both cash-based remuneration and share-based remuneration. The contracts for service between the Group and Executives are on a continuing basis the terms of which are not expected to change in the immediate future. Share-based remuneration is conditional upon continuing employment thereby aligning Executives with shareholder interests. Remuneration consists of the following key elements: ▪ Fixed remuneration (base salary and superannuation); and ▪ Variable remuneration – short term incentives (STI) in the form of an annual incentive plan and long-term equity incentive (LTI). STI and LTI are currently only provided to KMP by way of share-based payments and include no cash component. Fixed Remuneration Objective Fixed remuneration is reviewed annually by the Board and N&RC. The process consists of a review of the Group and individual performance, relevant comparative remuneration from external and internal sources and where appropriate, external advice on policies and practices. Structure Executives are given the opportunity to receive their fixed remuneration in a variety of forms including cash and allowances (such as motor vehicle allowance). It is intended that the manner of payment chosen will be optimal for the recipient without creating undue cost for the Group. dorsaVi Annual Report 2021 19 dorsaVi Ltd and controlled entities ABN: 15 129 742 409 Variable Remuneration – Short-Term Incentive (STI) Objective The key objective of the STI program is to link the achievement of the Group’s operational targets with the remuneration received by the Executives charged with meeting those targets. Structure Any STI granted depend on the extent to which specific targets set at the beginning of the financial year or on appointment are met. The Key Milestones or Key Performance Indicators (KPI’s) cover individual, team and organisational financial measures of performance. Typically included are measures such as: Achieving sales/revenue targets and/or growth, and meeting Group compliance requirements. These measures were chosen as they represent the key drivers for the short-term success of dorsaVi. The Group has predetermined benchmarks that must be met in order to trigger STI under the STI scheme. Either on an annual or financial year basis, after consideration of performance against the Key Milestones or KPIs, the N&RC, in line with their responsibilities determine the amount, if any, of the STI to be awarded to each Executive. This process usually occurs within one month after the trigger date. Typically, STI awards are made under the Employee Share Ownership Plan (ESOP) and are delivered in the form of share options or performance rights. Each option entitles the holder to one fully paid ordinary share of dorsaVi Ltd at an exercise price to be determined in accordance with the ESOP or by determination by the N&RC. Each performance right vested entitles the holder to one fully paid ordinary share of dorsaVi Ltd at $Nil price. The annual STI available for executives across the Group are subject to the approval of the N&RC. Variable Remuneration – Long-Term Incentive (LTI) Objective The objectives of providing long term incentives are: To motivate and retain key dorsaVi employees; to attract quality employees; to create commonality of purpose between dorsaVi and its employees; to add wealth for all shareholders of the Group through the motivation of dorsaVi’s employees; and by allowing dorsaVi’s employees to share in the rewards of the success of dorsaVi through the acquisition of, or entitlements to, shares and options. Structure The Board offers LTIs to reward the performance of employees, which is in alignment with shareholders’ interests and the long-term benefit of the Group. LTI awards are made under the Employee Share Ownership Plan (ESOP) and are delivered in the form of share options, performance rights or loan for shares. Each option entitles the holder to one fully paid ordinary share of dorsaVi Ltd at an exercise price to be determined in accordance with the ESOP or by determination by the N&RC. Each performance right vested entitles the holder to one fully paid ordinary share of dorsaVi Ltd at $Nil price. Where an LTI participant ceases employment prior to vesting in their award, the options and unvested performance rights are forfeited unless the N&RC applies its discretion to allow vesting at or post cessation of employment in appropriate circumstances. Options and performance rights have been granted, under the ESOP. Refer Table 5 for details of options and performance rights granted to Executives under the ESOP. Employment Agreements The Group has entered into employment agreements with all Executives, including the CEO. The Group may terminate an Executive’s employment agreement by providing written notice or providing payment in lieu of the notice period (based on the fixed component of the Executive’s remuneration). The Group may terminate the contract at any time without notice if serious misconduct has occurred. The notice periods for key management personnel are as follows: Name Andrew Ronchi Matthew May Damian Connellan Joanna Goldin Yasmine Pateras Notice Period 5 months 3 months 3 months 1 month 1 month dorsaVi Annual Report 2021 20 dorsaVi Ltd and controlled entities ABN: 15 129 742 409 CEO Remuneration At the commencement of the 2021 financial year, Andrew Ronchi’s fixed remuneration was US$203,712, including medical benefits insurance, plus director’s fees of A$5,000 per annum. Subsequent to the start of the 2021 financial year Andrew Ronchi returned to Australia. In June 2021 he agreed to a fixed remuneration of A$190,000 plus superannuation. Upon termination of Andrew Ronchi’s employment contract, he will be subject to a restraint of trade for a maximum of 12 months. C. Details of Key Management Personnel Remuneration (a) Non-Executive Directors’ Remuneration: Table 1 2021 Non-Executive Directors G Tweedly A Attia C Elliott M Panaccio (i) Short-Term Salary fees $ Post-employment Pension Plan $ - - - - - - - - Share-based payments Options $ 60,072 44,000 44,000 44,000 TOTAL $ 60,072 44,000 44,000 44,000 - - 192,072 192,072 Total performance related Options as % of total % - - - - - % 100% 100% 100% 100% (i) Michael Panaccio provides his services via Starfish Ventures Pty Ltd. 2020 Non-Executive Directors G Tweedly A Attia C Elliott M Panaccio (i) Short-Term Salary fees $ Post-employment Pension Plan $ Share-based payments (ii) Options $ TOTAL $ - - - - - - - - 80,096 58,667 58,667 58,667 80,096 58,667 58,667 58,667 - - 256,097 256,097 Total performance related Options as % of total % - - - - - % 100% 100% 100% 100% (i) (ii) Michael Panaccio provides his services via Starfish Ventures Pty Ltd. Includes fees for the period 1 March 2019 through 30 June 2019, subsequently approved by shareholders at the 2019 AGM. (b) Executives’ Remuneration: Table 2 2021 Executive Director: A Ronchi (iii) Executives: D Connellan D Erikson (iv) J Goldin (iii) M May Y Pateras Short-Term Salary, fees $ Other (i) $ Post- employment Pension Plan $ Share-based payments Equity (ii) $ Total Total performance related Share based payments as % of total $ % % 195,240 7,938 12,469 75,804 291,451 26.0 26.0 69,996 67,598 141,158 198,462 81,532 753,986 - - - - - 7,938 - - 5,479 - 3,648 33,000 18,854 7,746 44,548 - - 112,452 69,996 76,725 174,158 217,316 89,278 918,924 - 4.8 18.9 - - 12.2 - 4.8 18.9 - - 12.2 (i) Other benefits include the payment of certain health insurance premiums in the US. (ii) Share based payments comprise the grant of performance rights and shares, and, for accounting purposes, are valued the same as options. (iii) Foreign currency amounts are converted into AUD at the average exchange rates applicable throughout the year. (iv) Resigned 22 October 2020 dorsaVi Annual Report 2021 21 dorsaVi Ltd and controlled entities ABN: 15 129 742 409 Short-Term Post- employment Share-based payments Total Total performance related Share based payments as % of total 2020 Executive Director: A Ronchi (iii) Executives: D Connellan D Erikson M May Salary, fees $ Other (i) $ Pension Plan $ Equity (ii) $ $ % 285,473 31,996 5,000 30,356 352,825 8.6 71,205 188,009 210,128 754,815 - - - 31,996 - 17,861 19,962 42,823 19,091 14,737 2,690 66,874 90,296 220,607 232,780 896,508 21.1 6.7 1.2 7.5 % 8.6 21.1 6.7 1.2 7.5 (i) Other benefits include the payment of certain health insurance premiums in the US. (ii) Share based payments comprise the grant of performance rights and shares, and, for accounting purposes, are valued the same as options. (iii) Foreign currency amounts are converted into AUD at the average exchange rates applicable throughout the year. D. (a) Relationship between Remuneration and Group Performance Remuneration Not Dependent on Satisfaction of Performance Condition The non-executive remuneration policy is not directly related to Group performance. The Board considers a remuneration policy based on short-term returns may not be beneficial to the long-term creation of wealth by the Group for shareholders. (b) Remuneration Dependent on Satisfaction of Performance Condition A portion of the Executive Remuneration is based on attainment of performance conditions. Performance-based remuneration may include short-term and long-term incentive plans. Performance-based remuneration granted to key management personnel has regard to Group performance over a twelve month to 3-year period. Summary of the performance conditions for KMP with performance-linked equity instruments: Table 3 KMP Andrew Ronchi Matthew May Damian Connellan David Erikson Joanna Goldin Yasmine Pateras Conditions for vesting of Options and Performance Rights Key Milestones as determined by and at the discretion of the Board Key Milestones as determined by and at the discretion of the Board Key Milestones as determined by and at the discretion of the Board Key Milestones as determined by and at the discretion of the Board Key Milestones as determined by and at the discretion of the Board Key Milestones as determined by and at the discretion of the Board The conditions were selected to promote the creation of shareholder wealth during the period. (c) Consequences of Group’s Performance on Shareholder Wealth Summary of Group Performance and Key Performance Indicators: Table 4 Company Performance Revenue % increase/(decrease) Loss after tax % (increase)/decrease Change in share price Dividend paid to shareholders Return of capital Total remuneration of KMP Total performance based remuneration 2021 2,779,633 16% 2020 2,397,059 (26%) 2019 3,223,869 (27%) 2018 4,394,271 13% 2017 3,897,882 20% (2,028,267) (7,593,079) (4,020,751) (3,727,073) (3,876,248) 73% 69% - - 1,110,996 112,452 (89%) (68%) - - 1,152,605 66,874 (8%) (58%) - - 1,543,180 142,567 4% (59%) - - 2,433,653 369,702 26% 7% - - 2,182,038 290,885 dorsaVi Annual Report 2021 22 dorsaVi Ltd and controlled entities ABN: 15 129 742 409 E. (a) Key Management Personnel’s Share-Based Compensation Details of Compensation Equity Table 5 2021 Grant Date (i), (ii) Number Granted Non-Executive Directors: G Tweedly: 28-Nov-19 28-Nov-19 7-Jan-20 7-Apr-20 7-Jul-20 7-Oct-20 8-Jan-21 8-Apr-21 5-Jul-21 A Attia: 28-Nov-19 28-Nov-19 7-Jan-20 7-Apr-20 7-Jul-20 7-Oct-20 8-Jan-21 8-Apr-21 5-Jul-21 C Elliott: 28-Nov-19 28-Nov-19 7-Jan-20 7-Apr-20 7-Jul-20 7-Oct-20 8-Jan-21 8-Apr-21 5-Jul-21 M Panaccio: 28-Nov-19 28-Nov-19 7-Jan-20 7-Apr-20 7-Jul-20 7-Oct-20 8-Jan-21 8-Apr-21 5-Jul-21 Executives: A Ronchi: 400,486 349,261 577,625 1,501,824 1,155,249 441,713 366,299 405,898 556,231 293,334 255,814 423,077 1,100,001 846,155 323,530 268,293 297,298 407,408 293,334 255,814 423,077 1,100,001 846,155 323,530 268,293 297,298 407,408 293,334 255,814 423,077 1,100,001 846,155 323,530 268,293 297,298 407,408 Value per unit at grant date $ 0.026 0.026 0.026 0.010 0.029 0.034 0.041 0.037 0.027 0.026 0.026 0.026 0.010 0.029 0.034 0.041 0.037 0.027 0.026 0.026 0.026 0.010 0.029 0.034 0.041 0.037 0.027 0.026 0.026 0.026 0.010 0.029 0.034 0.041 0.037 0.027 Vested during the year Year in which equity may vest 400,486 349,261 577,625 1,501,824 1,155,249 441,713 366,299 405,898 556,231 293,334 255,814 423,077 1,100,001 846,155 323,530 268,293 297,298 407,408 293,334 255,814 423,077 1,100,001 846,155 323,530 268,293 297,298 407,408 293,334 255,814 423,077 1,100,001 846,155 323,530 268,293 297,298 407,408 2020 2020 2020 2020 2020 2021 2021 2021 2021 2020 2020 2020 2020 2020 2021 2021 2021 2021 2020 2020 2020 2020 2020 2021 2021 2021 2021 2020 2020 2020 2020 2020 2021 2021 2021 2021 Vest % 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% Terms and conditions for each grant Lapsed/re- moved during the year Exercise Price Expiry Date First Exercise Date Last Exercise Date $ 0.084 0.070 0.034 0.022 0.016 0.049 0.061 0.063 0.041 0.084 0.070 0.034 0.022 0.016 0.049 0.061 0.063 0.041 0.084 0.070 0.034 0.022 0.016 0.049 0.061 0.063 0.041 0.084 0.070 0.034 0.022 0.016 0.049 0.061 0.063 0.041 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 4-Dec-24 4-Dec-24 7-Jan-25 7-Apr-25 7-Jul-25 7-Oct-25 8-Jan-26 8-Apr-26 5-Jul-26 4-Dec-24 4-Dec-24 7-Jan-25 7-Apr-25 7-Jul-25 7-Oct-25 8-Jan-26 8-Apr-26 5-Jul-26 4-Dec-24 4-Dec-24 7-Jan-25 7-Apr-25 7-Jul-25 7-Oct-25 8-Jan-26 8-Apr-26 5-Jul-26 4-Dec-24 4-Dec-24 7-Jan-25 7-Apr-25 7-Jul-25 7-Oct-25 8-Jan-26 8-Apr-26 5-Jul-26 4-Dec-20 4-Dec-20 7-Jan-20 7-Apr-20 7-Jul-20 7-Oct-20 8-Jan-21 8-Apr-21 5-Jul-21 4-Dec-20 4-Dec-20 7-Jan-20 7-Apr-20 7-Jul-20 7-Oct-20 8-Jan-21 8-Apr-21 5-Jul-21 4-Dec-20 4-Dec-20 7-Jan-20 7-Apr-20 7-Jul-20 7-Oct-20 8-Jan-21 8-Apr-21 5-Jul-21 4-Dec-20 4-Dec-20 7-Jan-20 7-Apr-20 7-Jul-20 7-Oct-20 8-Jan-21 8-Apr-21 5-Jul-21 4-Dec-24 4-Dec-24 7-Jan-25 7-Apr-25 7-Jul-25 7-Oct-25 8-Jan-26 8-Apr-26 5-Jul-26 4-Dec-24 4-Dec-24 7-Jan-25 7-Apr-25 7-Jul-25 7-Oct-25 8-Jan-26 8-Apr-26 5-Jul-26 4-Dec-24 4-Dec-24 7-Jan-25 7-Apr-25 7-Jul-25 7-Oct-25 8-Jan-26 8-Apr-26 5-Jul-26 4-Dec-24 4-Dec-24 7-Jan-25 7-Apr-25 7-Jul-25 7-Oct-25 8-Jan-26 8-Apr-26 5-Jul-26 23-Dec-20 2,707,286 0.037 2,707,286 2021 100% M May: 5-Nov-14 20,000 0.27 - 2025 100% - - - N/A 0.40 5-Nov-24 N/A N/A N/A N/A D Erikson: 18-Sep-19 18-Sep-19 18-Sep-19 J Goldin 11-Mar-21 115,000 115,000 200,000 0.04 0.04 0.04 84,000 - - 2021 2022 2023 73% - - 1,000,000 22,556,602 0.033 1,000,000 22,190,602 2021 100% 31,000 115,000 - - 146,000 - - - N/A N/A 1-Sep-22 N/A N/A 1-Sep-22 N/A N/A 1-Sep-22 N/A N/A N/A (i) The options granted to non-executive directors are in lieu of the payment of directors' fees. (ii) The performance rights granted to executives are subject to performance and retention conditions. dorsaVi Annual Report 2021 23 dorsaVi Ltd and controlled entities ABN: 15 129 742 409 2020 Grant Date (i), (ii) Number Granted Non-Executive Directors: G Tweedly: Vested during the year Year in which equity may vest Terms and conditions for each grant Lapsed/re- moved during the year Exercise Price Expiry Date First Exercise Date Last Exercise Date Vest % 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% Value per unit at grant date $ 0.026 0.026 0.026 0.010 0.029 0.026 0.026 0.026 0.010 0.029 0.026 0.026 0.026 0.010 0.029 0.026 0.026 0.026 0.010 0.029 400,486 349,261 577,625 1,501,824 1,155,249 293,334 255,814 423,077 1,100,001 846,155 293,334 255,814 423,077 1,100,001 846,155 293,334 255,814 423,077 1,100,001 846,155 400,486 349,261 577,625 1,501,824 1,155,249 293,334 255,814 423,077 1,100,001 846,155 293,334 255,814 423,077 1,100,001 846,155 293,334 255,814 423,077 1,100,001 846,155 150,000 450,000 0.45 0.45 63,000 450,000 20,000 125,000 200,000 0.27 0.31 0.31 100,000 70,000 115,000 115,000 200,000 200,000 1,071,071 15,555,659 0.04 0.04 0.04 0.04 0.04 0.04 0.01 - 75,750 200,000 100,000 68,250 - - - 200,000 1,071,071 14,967,659 2020 2020 2020 2020 2020 2020 2020 2020 2020 2020 2020 2020 2020 2020 2020 2020 2020 2020 2020 2020 2020 2020 2025 2020 2020 2020 2020 2021 2022 2023 2020 2020 42% 100% 87,000 - 100% 61% 100% 100% 98% - - - 100% 100% - 49,250 - - 1,750 - - - - - 138,000 - - - - - - - - - - - - - - - - - - - - $ 0.086 0.072 0.036 0.024 0.018 0.086 0.072 0.036 0.024 0.018 0.086 0.072 0.036 0.024 0.018 0.086 0.072 0.036 0.024 0.018 - - 0.40 - - - - - - - 4-Dec-24 4-Dec-24 7-Jan-25 7-Apr-25 7-Jul-25 4-Dec-24 4-Dec-24 7-Jan-25 7-Apr-25 7-Jul-25 4-Dec-24 4-Dec-24 7-Jan-25 7-Apr-25 7-Jul-25 4-Dec-24 4-Dec-24 7-Jan-25 7-Apr-25 7-Jul-25 N/A N/A 5-Nov-24 N/A N/A N/A N/A 1-Oct-20 1-Oct-21 1-Sep-22 4-Dec-20 4-Dec-20 7-Jan-20 7-Apr-20 7-Jul-20 4-Dec-20 4-Dec-20 7-Jan-20 7-Apr-20 7-Jul-20 4-Dec-20 4-Dec-20 7-Jan-20 7-Apr-20 7-Jul-20 4-Dec-20 4-Dec-20 7-Jan-20 7-Apr-20 7-Jul-20 N/A N/A N/A N/A N/A 4-Dec-24 4-Dec-24 7-Jan-25 7-Apr-25 7-Jul-25 4-Dec-24 4-Dec-24 7-Jan-25 7-Apr-25 7-Jul-25 4-Dec-24 4-Dec-24 7-Jan-25 7-Apr-25 7-Jul-25 4-Dec-24 4-Dec-24 7-Jan-25 7-Apr-25 7-Jul-25 N/A N/A N/A N/A N/A N/A N/A 1-Oct-20 1-Oct-21 1-Sep-22 N/A N/A 1-Oct-20 1-Oct-21 1-Sep-22 N/A N/A N/A N/A N/A N/A 28-Nov-19 28-Nov-19 7-Jan-20 7-Apr-20 7-Jul-20 A Attia: 28-Nov-19 28-Nov-19 7-Jan-20 7-Apr-20 7-Jul-20 C Elliott: 28-Nov-19 28-Nov-19 7-Jan-20 7-Apr-20 7-Jul-20 M Panaccio: 28-Nov-19 28-Nov-19 7-Jan-20 7-Apr-20 7-Jul-20 Executives: A Ronchi: 29-Nov-16 29-Nov-16 M May: 5-Nov-14 5-Jun-17 5-Jun-17 D Erikson: 18-Sep-19 18-Sep-19 18-Sep-19 18-Sep-19 18-Sep-19 D Connellan: 18-Sep-19 25-Jun-20 (i) The options granted to non-executive directors are in lieu of the payment of directors’ fees. (ii) The performance rights granted to executives are subject to performance and retention conditions. As at 30 June 2021, no options have been exercised and, accordingly, no shares have been issued as a result of options previously vested. F. (a) Key Management Personnel’s Equity Holdings Number of Equity Holdings held by Key Management Personnel As at 30 June 2021, no key management personnel held options, under the Group’s Employee Share Ownership Plan 2013. The non-executive directors, as approved at the 2019 and 2020 AGMs, were granted 5,659,728 options over ordinary shares in lieu of the payment of directors’ fees, refer table 5 above. As at 30 June 2021, key management personnel held 200,000 performance rights under the Group’s Employee Share Ownership Plan 2013, which, on vesting, convert to 200,000 ordinary shares of the Group. As at 30 June 2021, none of these performance rights had vested and converted to shares. dorsaVi Annual Report 2021 24 dorsaVi Ltd and controlled entities ABN: 15 129 742 409 (b) Number of Shares held by Key Management Personnel (Consolidated) The relevant interest of each key management personnel in the share capital of the Group as notified the ASX as at 30 June 2021 is as follows: Table 7 2021 Balance 30 June 2020 Vested on Achievement of KPI Participation in share Issue Net Change Other Balance 30 June 2021 Non-Executive Directors A Attia C Elliott M Panaccio M Panaccio (relevant interest) G Tweedly Executive Director A Ronchi Executives D Connellan D Erikson J Goldin M May Y Pateras 461,518 370,370 101,749,921 - - - 115,380 92,593 1,055,865 70,000 - - - - 576,898 462,963 102,805,786 - 70,000 815,129 - 203,782 - 1,018,911 13,803,027 2,707,286 593,576 17,103,889 1,971,071 168,250 - 470,750 - 119,880,036 - 84,000 1,000,000 - - 3,791,286 492,768 - - - - 20,000 (181,220) - (252,250) 51,030 - 2,553,964 2,463,839 - 1,051,030 470,750 20,000 126,044,066 G. (a) Loans to Key Management Personnel Aggregate of Loans Made There were no loans made to key management personnel during the 2021 financial year (2020: $Nil). There were no outstanding loans to key management personnel as at 30 June 2021 (30 June 2020: $Nil). H. (a) Other Transactions with Key Management Personnel Transactions with Key Management Personnel of the Entity or its Parent and their Personally Related Entities During the year, dorsaVi Ltd did not enter into any transactions with key management personnel or their personally related entities. (b) Transactions with Other Related Parties During the year ended 30 June 2021, dorsaVi Ltd paid $Nil (2020: $Nil) to Starfish Ventures Pty Ltd on behalf of Michael Panaccio for director’s fees. As approved by shareholders at the 2019 and 2020 AGMs, Non-Executive Directors were granted options over ordinary shares in lieu of the payment of directors’ fees. During the year ended 30 June 2021, Starfish Ventures Pty Ltd was granted 1,296,529 options (refer table 5) on behalf of Michael Panaccio (2020: 2,918,381). dorsaVi Annual Report 2021 25 dorsaVi Ltd and controlled entities ABN: 15 129 742 409 I. Use of Remuneration Consultants During the year the Board did not engage remuneration consultants. J. Voting and Comments made at the Group’s 2020 Annual General Meeting (AGM) At the Group’s most recent AGM, resolution to adopt the prior year remuneration report was put to the vote and at least 75% of ‘yes’ votes were cast for adoption of that report. No comments were made on the remuneration report that was considered at the AGM. -----------------------------------End of the Remuneration Report------------------------------------------ Signed in accordance with a resolution of the directors Greg Tweedly Chairman Andrew Ronchi Director and CEO Melbourne Date: 26 August 2021 Melbourne Date: 26 August 2021 dorsaVi Annual Report 2021 26 dorsaVi Ltd and controlled entities ABN 15 129 742 409 AUDITOR’S INDEPENDENCE DECLARATION To the Directors of dorsaVi Ltd In relation to the independent audit for the year ended 30 June 2021, to the best of my knowledge and belief there have been: (i) (ii) No contraventions of the auditor independence requirements of the Corporations Act 2001; and No contraventions of APES 110 Code of Ethics for Professional Accountants. This declaration is in respect of dorsaVi Ltd and the entities it controlled during the year. S SCHONBERG Partner 26 August 2021 PITCHER PARTNERS Melbourne Pitcher Partners. An independent Victorian Partnership ABN 27 975 255 196. Level 13, 664 Collins Street, Docklands, VIC 3008 Pitcher Partners is an association of independent firms. Liability limited by a scheme approved under Professional Standards Legislation. Pitcher Partners is a member of the global network of Baker Tilly International Limited, the members of which are separate and independent legal entities Adelaide Brisbane Melbourne Newcastle Sydney Perth 27 pitcher.com.au dorsaVi Ltd and controlled entities ABN: 15 129 742 409 Financial Report for the Year Ended 30 June 2021 CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2021 Revenue and other income: Sales revenue Change in fair value of derivative liability Other income Less: Expenses: Cost of sales Advertising expenses Conference expenses Consultancy expenses Depreciation and amortisation expenses Employee benefits expenses Provision for impairment of intangibles Finance costs Change in fair value of derivative liability Occupancy expenses Professional fees Software expenses Travel expenses Other expenses Loss before income tax benefit Income tax benefit Loss from continuing operations Notes 2021 $ 2020 $ 4 4 4 5 5 5 5 1,868,982 2,019,220 349,925 560,726 - 377,839 2,779,633 2,397,059 (166,328) (139,241) - (372,593) (210,203) (96,967) (212,323) (83,460) (55,644) (1,039,647) (2,862,227) (3,040,365) - (274,154) (4,018,354) (167,451) - (49,939) (461,308) (314,539) (16,717) (358,481) (278,151) (100,084) (486,184) (291,562) (141,929) (435,381) (5,225,730) (10,447,502) (2,446,097) (8,050,443) 6 417,830 457,364 (2,028,267) (7,593,079) Other comprehensive income: Items that may be reclassified subsequently to profit and loss: Exchange differences on translation of foreign subsidiaries net of tax Other comprehensive income for the year Loss for the year (21,784) (21,784) (2,050,051) 19,511 19,511 (7,573,568) Loss per share for loss from continuing operations attributable to equity holders of the parent entity: Basic loss per share Diluted loss per share 22 22 (0.68 cents) (0.68 cents) (3.49 cents) (3.49 cents) The above statement should be read in conjunction with the accompanying notes. dorsaVi Annual Report 2021 28 dorsaVi Ltd and controlled entities ABN: 15 129 742 409 CONSOLIDATED STATEMENT OF FINANCIAL POSITION FOR THE YEAR ENDED 30 JUNE 2021 Current assets Cash and cash equivalents Receivables Inventories Other assets Total current assets Non-current assets Plant and equipment Total non-current assets Total assets Current liabilities Payables Borrowings Lease liability Provisions Total current liabilities Non-current liabilities Borrowings Lease liability Provisions Total non-current liabilities Total liabilities Net assets Equity Share capital Reserves Accumulated losses Total equity Notes 2021 $ 2020 $ 8 9 10 11 2,796,175 1,685,288 1,237,222 931,220 626,697 683,139 148,286 149,721 4,808,380 3,449,368 13 253,621 378,411 253,621 378,411 5,062,001 3,827,779 14 15 16 17 15 16 17 18 19 19 996,016 1,240,480 246,253 181,941 101,737 144,269 202,677 206,911 1,546,683 1,773,601 1,349,304 - 2,841 1,482,993 102,715 9,441 1,352,145 1,595,149 2,898,828 3,368,750 2,163,173 459,029 44,532,862 41,080,353 401,472 233,253 (42,771,161) (40,854,577) 2,163,173 459,029 The above statement should be read in conjunction with the accompanying notes. dorsaVi Annual Report 2021 29 dorsaVi Ltd and controlled entities ABN: 15 129 742 409 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2021 Consolidated Entity Share capital Reserves $ $ Accumulated losses $ Total Equity $ Balance as at 1 July 2019 Loss for the year 40,381,715 - (77,193) (33,315,228) - (7,593,079) 6,989,294 (7,593,079) Exchange differences on translation of foreign operations, net of tax Total comprehensive income for the year Transactions with owners in their capacity as owners: Issue of shares Cost of raising capital Employee share ownership plan Equity instruments lapsed - 19,511 - 19,511 - 19,511 (7,593,079) (7,573,568) 746,760 (48,122) - - - 344,665 - (53,730) 290,935 698,638 - 746,760 - (48,122) - 344,665 53,730 53,730 - 1,043,303 Balance as at 30 June 2020 41,080,353 233,253 (40,854,577) 459,029 Balance as at 1 July 2020 Loss for the year Exchange differences on translation of foreign operations, net of tax Total comprehensive income for the year Transactions with owners in their capacity as owners: Issue of shares Cost of raising capital Employee share ownership plan Equity instruments lapsed 41,080,353 - 233,253 (40,854,577) - (2,028,267) 459,029 (2,028,267) - (21,784) - (21,784) - (21,784) (2,028,267) (2,050,051) 3,702,840 (250,331) - - - 301,686 - (111,683) 190,003 3,452,509 - 3,702,840 - (250,331) - 301,686 111,683 111,683 - 3,754,195 Balance as at 30 June 2021 44,532,862 401,472 (42,771,161) 2,163,173 The above statement should be read in conjunction with the accompanying notes. dorsaVi Annual Report 2021 30 dorsaVi Ltd and controlled entities ABN: 15 129 742 409 CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2021 Cash flow from operating activities Receipts from customers Payments to suppliers and employees Interest paid Grants and sundry income received Interest received Income tax refunded Net cash used in operating activities Cash flow from investing activities Payment for plant and equipment Payment for intangibles Net cash used in investing activities Cash flow from financing activities Proceeds from share issue Proceeds from convertible note issue Cost of raising capital and issuing convertible note Proceeds from borrowings Repayment of borrowings Payment of principal portion lease liability Net cash provided by financing activities Reconciliation of cash Cash at beginning of the financial year Net increase / (decrease) in cash held Cash at end of the year Notes 2021 $ 2020 $ 1,562,306 (4,684,478) (141,348) 549,601 11,125 432,397 (2,270,397) 2,300,250 (5,331,856) (104,844) 278,252 99,587 579,057 (2,179,554) 20 (b) (51,829) (33,584) (85,413) (4,073) (784,729) (788,802) 3,702,840 - (250,331) 256,097 (96,662) (145,247) 3,466,697 746,760 1,155,000 (105,872) 240,317 (34,970) (114,010) 1,887,225 1,685,288 1,110,887 2,796,175 2,766,419 (1,081,131) 1,685,288 20 (a) The above statement should be read in conjunction with the accompanying notes. dorsaVi Annual Report 2021 31 dorsaVi Ltd and controlled entities ABN: 15 129 742 409 Notes to the Financial Statements TABLE OF CONTENTS NOTE 1: NOTE 2: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES SIGNIFICANT ACCOUNTING ESTIMATES AND JUDGEMENTS NOTE 3: FINANCIAL RISK MANAGEMENT NOTE 4: NOTE 5: REVENUE FROM CONTRACTS WITH CUSTOMERS AND OTHER INCOME LOSS FROM CONTINUING OPERATIONS NOTE 6: INCOME TAX NOTE 7: DIVIDENDS NOTE 8: CASH AND CASH EQUIVALENTS NOTE 9: RECEIVABLES NOTE 10: INVENTORIES NOTE 11: OTHER ASSETS NOTE 12: INTANGIBLE ASSETS NOTE 13: PLANT AND EQUIPMENT NOTE 14: PAYABLES NOTE 15: BORROWINGS NOTE 16: LEASE LIABILITY NOTE 17: PROVISIONS NOTE 18: SHARE CAPITAL NOTE 19: RESERVES AND ACCUMULATED LOSSES NOTE 20: CASH FLOW INFORMATION NOTE 21: COMMITMENTS AND CONTINGENCIES NOTE 22: LOSS PER SHARE NOTE 23: SHARE BASED PAYMENTS NOTE 24: SUBSIDIARIES AND RELATED PARTY DISCLOSURES NOTE 25: AUDITOR'S REMUNERATION NOTE 26: PARENT ENTITY INFORMATION NOTE 27: SEGMENT INFORMATION NOTE 28: SUBSEQUENT EVENTS dorsaVi Annual Report 2021 33 40 41 44 44 45 45 45 45 46 46 46 47 49 49 50 50 50 51 52 53 54 54 57 57 58 58 59 32 dorsaVi Ltd and controlled entities ABN: 15 129 742 409 NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 30 JUNE 2021 NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES The following is a summary of significant accounting policies adopted by the Group in the preparation and presentation of the financial report. The accounting policies have been consistently applied, unless otherwise stated. (a) Basis of Preparation of the Financial Report This financial report is a general purpose financial report that has been prepared in accordance with the Corporations Act 2001, Australian Accounting Standards, Interpretations and other applicable authoritative pronouncements of the Australian Accounting Standards Board (AASB). The financial report covers dorsaVi Ltd and controlled entities as a Group. dorsaVi Ltd is a company limited by shares, incorporated and domiciled in Australia at: 86 Denmark Street, Kew, Victoria, 3101. dorsaVi Ltd is a for-profit entity for the purpose of preparing the financial statements. The financial report was authorised for issue by the directors on the date of the directors’ report. Compliance with International Financial Reporting Standards: The consolidated financial statements of dorsaVi Ltd also comply with the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB). Historical Cost Convention: The financial report has been prepared under the historical cost convention, as modified by revaluations to fair value for certain classes of assets and liabilities as described in the accounting policies. Significant Accounting Estimates and Judgements: The preparation of the financial report requires the use of certain estimates and judgements in applying the entity’s accounting policies. Those estimates and judgements significant to the financial report are disclosed in Note 2. (b) New and Revised Accounting Standards Effective at 30 June 2021 The Group has applied all new and revised Australian Accounting Standards that apply to annual reporting periods beginning on or after 1 July 2020. (c) Going Concern The financial report has been prepared on a going concern basis. The Group incurred a loss from ordinary activities after income tax of $2,028,267 during the year ended 30 June 2021 (2020: $7,593,079). The group had a net increase in cash of $1,110,887 (2020: decrease $1,081,131) after raising additional share capital of $3,702,840 before costs. As at 30 June 2021, the Group’s current assets exceed current liabilities by $3,261,697 (2020: $1,675,767). COVID-19 had a detrimental effect on the ability to grow revenues during the 2021 financial year. Whilst the future duration of COVID-19’s impact remains uncertain, the effect on sales revenue is considered to be temporary. COVID-19 has also caused the Group to more aggressively reduce costs than would have otherwise been the case, and the Group has also been the recipient of various COVID-19 government assistance packages. In determining the basis for preparation of the financial report, the Directors have assessed the financial performance, future operating plans, financial forecasts, existing financial position and additional funding opportunities potentially available to the Group. The Directors believe there are reasonable grounds to expect the Group to be able to continue as a going concern for at least 12 months from the date of issue of the financial report, which contemplates continuity of normal business activities and the realisation of assets and the settlement of liabilities in the ordinary course of business. It is acknowledged however that there are uncertainties associated with the forecast assumptions regarding the ability to maintain and grow revenues, contain and further reduce costs, and the ability to obtain additional debt or equity funding if required. As a result of the above, the Directors have concluded that the going concern basis is appropriate. Given the circumstances detailed above, there exists a material uncertainty that may cast significant doubt on the ability of the Group to continue as a going concern and therefore, whether it will be able to realise its assets and extinguish its liabilities in the normal course of business, and at the amounts stated in the financial report. dorsaVi Annual Report 2021 33 dorsaVi Ltd and controlled entities ABN: 15 129 742 409 (d) Principles of Consolidation The consolidated financial statements are those of the Group, comprising the financial statements of the parent entity and all of the entities which the parent controls. The Group controls an entity when it is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The financial statements of subsidiaries are prepared for the same reporting period as the parent entity, using consistent accounting policies. Adjustments are made to bring into line any dissimilar accounting policies, which may exist. All inter-company balances and transactions, including any unrealised profits or losses have been eliminated on consolidation. Subsidiaries are consolidated from the date on which control is established and are de-recognised from the date that control ceases. (e) Revenue from contracts with customers The Group derives revenue from the sale of wearable sensors and software. The devices, when used with Group software, allow the accurate measurement of movement at a variety of different places on the human body or the activity of muscles. Revenue from integrated sales of devices and software: The Group’s contracts with customers are typically integrated and requires the provision of devices and software which is not separately identifiable and so is considered a bundle of goods and services. Revenue from the sale or lease of devices and licencing of software is recognised over the licence term. Revenue from consulting: Revenue from consulting contracts is recognised over time, as the services are provided to the customer, based on service hours performed as a percentage of estimated total service hours under the contract. Recognising revenue on the basis of service hours is considered an appropriate method of recognising revenue as it is consistent with the manner in which services are provided to the customer. Revenue from the sale of consumables: The Group sells various consumables goods to customers to support their ongoing use of their wearable sensors. Revenue from the consumables is recognised at the point in time when control of the goods is transferred to the customer, which generally occurs at the time of delivery. Customers are, either, required to pay in full for all goods received at the time of purchase, or, are invoiced on a monthly basis depending on the contract. Outstanding invoices are due for payment within 30 days of the invoice date. Consideration included in the measurement of revenue: The consideration to be received from customers is generally fixed and based on the customer contract. Receivables from contracts with customers: A receivable from a contract with a customer represents the Group’s unconditional right to consideration arising from the transfer of goods or services to the customer (i.e. only the passage of time is required before payment of the consideration is due). Subsequent to initial recognition, receivables from contracts with customers are measured at amortised cost and are tested for impairment. Contract assets: A contract asset represents the Group’s right to consideration (not being an unconditional right recognised as a receivable) in exchange for goods or services transferred to the customer. Contract assets are measured at the amount of consideration that the Group expects to be entitled in exchange for goods or services transferred to the customer. Contract liabilities: A contract liability represents the Group’s obligation to transfer goods or services to the customer for which the company has received consideration (or an amount of consideration is due) from the customer. Amounts recorded as contract liabilities are subsequently recognised as revenue when the Group transfers the contracted goods or services to the customer. dorsaVi Annual Report 2021 34 dorsaVi Ltd and controlled entities ABN: 15 129 742 409 (f) Cash and Cash Equivalents Cash and cash equivalents include cash on hand and at banks, short-term deposits with an original maturity of three months or less held at call with financial institutions, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities on the statement of financial position. (g) Inventories Inventories are measured at the lower of cost and net realisable value. Cost comprises all costs of purchase, cost of conversion and other costs incurred in bringing inventories to their present location and condition. (h) Plant and Equipment Each class of plant and equipment is carried at cost less, where applicable, any accumulated depreciation and any accumulated impairment loss. Depreciation: The depreciable amount of all fixed assets is depreciated over their estimated useful lives commencing from the time the asset is held ready for use. Class of Fixed Asset Testing equipment Leased devices Office equipment Furniture, fixtures and fittings Right to use asset Tooling (i) Leases Lease assets: Depreciation Rates 10-50% 20% 10-67% 10-20% 31% 10% Depreciation Basis Diminishing value Straight line Diminishing value Diminishing value Straight line Straight line At the commencement date of a lease (other than leases of 12-months or less and leases of low value assets), the company recognises a lease asset representing its right to use the underlying asset and a lease liability representing its obligation to make lease payments. Lease assets are initially recognised at cost, comprising the amount of the initial measurement of the lease liability, any lease payments made at or before the commencement date of the lease, less any lease incentives received, any initial direct costs incurred by the company, and an estimate of costs to be incurred by the company in dismantling and removing the underlying asset, restoring the site on which it is located or restoring the underlying asset to the condition required by the terms and conditions of the lease, unless those costs are incurred to produce inventories. Subsequent to initial recognition, lease assets are measured at cost (adjusted for any remeasurement of the lease liability), less accumulated depreciation and any accumulated impairment loss. Lease assets are depreciated over the shorter of the lease term and the estimated useful life of the underlying asset, consistent with the estimated consumption of the economic benefits embodied in the underlying asset. Lease liabilities: At the commencement date of a lease (other than leases of 12-months or less and leases of low value assets), the company recognises a lease asset representing its right to use the underlying asset and a lease liability representing its obligation to make lease payments. Lease liabilities are initially recognised at the present value of the future lease payments (i.e. the lease payments that are unpaid at the commencement date of the lease). These lease payments are discounted using the interest rate implicit in the lease, if that rate can be readily determined, or otherwise using the company’s incremental borrowing rate. Subsequent to initial recognition, lease liabilities are measured at the present value of remaining lease payments (i.e. the lease payments that are unpaid at the reporting date). Interest expense on lease liabilities is recognised in profit or loss (presented as a component of finance costs). Lease liabilities are remeasured to reflect changes to lease terms, changes to lease payments and any lease modifications not accounted for as separate leases. Variable lease payments not included in the measurement of lease liabilities are recognised as an expense when incurred. dorsaVi Annual Report 2021 35 dorsaVi Ltd and controlled entities ABN: 15 129 742 409 Leases of 12-months or less and leases of low value assets: Lease payments made in relation to leases of 12-months or less and leases of low value assets (for which a lease asset and a lease liability has not been recognised) are recognised as an expense on a straight-line basis over the lease term. (j) Intangibles Patents: Patents, trademarks and licenses are recognised at cost and depreciated on a straight-line basis over their effective lives, which is estimated to be 10 and 20 years. Research: Expenditure on research activities is recognised as an expense when incurred. Development Expenditure: Development expenditure encompasses the cost of developing new products including mobile applications, algorithms, sensors, hardware and firmware. Development expenditure is capitalised when the entity can demonstrate all of the following: the technical feasibility of completing the asset so that it will be available for use or sale; the intention to complete the asset and use or sell it; the ability to use or sell the asset; how the asset will generate probable future economic benefits; the availability of adequate technical, financial and other resources to complete the development and to use or sell the asset; and the ability to measure reliably the expenditure attributable to the asset during its development. Capitalised development expenditure is carried at cost less any accumulated amortisation and any accumulated impairment losses. Amortisation is calculated using a straight-line method to allocate the cost of the intangible asset over its estimated useful life, which range from 5 to 10 years. Amortisation commences when the intangible asset is available for use. Other development expenditure is recognised as an expense when incurred. (k) Impairment of Non-Financial Assets Intangible assets not yet ready for use and intangible assets with indefinite useful lives are not subject to amortisation and are therefore tested annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. For impairment assessment purposes, assets are generally grouped at the lowest levels for which there are largely independent cash flows - Cash Generating Units (CGU). Accordingly, most assets are tested for impairment at the cash- generating unit level. Intangible assets not yet ready for use and intangible assets with indefinite useful lives are assessed for impairment whenever events or circumstances arise that indicate the asset may be impaired. An impairment loss is recognised when the carrying amount of an asset or CGU exceeds the asset’s or CGU’s recoverable amount. The recoverable amount of an asset or CGU is defined as the higher of its fair value less costs to sell and value in use. Refer to Note 2 for a description of how management determines value in use. Impairment losses in respect of individual assets are recognised immediately in profit or loss unless the asset is carried at a revalued amount in which case the impairment loss is treated as a revaluation decrease in accordance with the applicable Standard. Impairment losses in respect of CGU’s are allocated first against the carrying amount of any goodwill attributed to the CGU with any remaining impairment loss allocated on a pro rata basis to the other assets comprising the relevant CGU. (l) Income Tax Current income tax benefit is the tax receivable on the current period's taxable income based on the applicable income tax rate adjusted by changes in deferred tax assets and liabilities. Current income tax benefit incudes refundable research and development tax offsets. Deferred tax assets and liabilities are recognised for temporary differences at the applicable tax rates when the assets are expected to be recovered or liabilities settled. Deferred tax liabilities are not recognised if they arise from the initial recognition of goodwill. Deferred income tax is also not accounted for if it arises from initial recognition of an asset or liability in a transaction, other than a business combination, that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses. dorsaVi Annual Report 2021 36 dorsaVi Ltd and controlled entities ABN: 15 129 742 409 Current and deferred tax balances attributable to amounts recognised directly in equity are also recognised directly in equity. Tax Consolidation: dorsaVi Ltd (parent entity) and its wholly owned subsidiary, Australian Workplace Compliance Pty Ltd, have applied tax consolidation legislation and formed a tax-consolidated group from 1 July 2014. The parent entity and subsidiary in the tax- consolidated group have entered into a tax funding agreement such that each entity in the tax-consolidated group recognises the assets, liabilities, expenses and revenues in relation to its own transactions, events and balances only. This means that: ▪ The parent entity recognises all current and deferred tax amounts relating to its own transactions, events and balances only; ▪ The subsidiary recognises current or deferred tax amounts arising in respect of their own transactions, events and balances; ▪ Current tax liabilities and deferred tax assets arising in respect of tax losses, are transferred from the subsidiary to the head entity as inter-company payables or receivables. The tax-consolidated group also has a tax sharing agreement in place to limit the liability of the subsidiary in the tax- consolidated group arising under the joint and several liability requirements of the tax consolidation system, in the event of default by the parent entity to meet its payment obligations. (m) Employee Benefits (i) Short-Term Employee Benefit Obligations: Liabilities arising in respect of wages and salaries, annual leave and any other employee benefits expected to be settled within twelve months of the reporting date are measured at the amounts based on remuneration rates which are expected to be paid when the liability is settled. The expected cost of short-term employee benefits in the form of compensated absences such as annual leave is recognised in the provision for employee benefits. All other short-term employee benefit obligations are presented as payables. (ii) Long-Term Employee Benefit Obligations: The provision for employee benefits in respect of long service leave and annual leave which, are not expected to be settled within twelve months of the reporting date, are measured at the present value of the estimated future cash outflow to be made in respect of services provided by employees up to the reporting date. Employee benefit obligations are presented as current liabilities in the balance sheet if the entity does not have an unconditional right to defer settlement for at least twelve months after the reporting date, regardless of when the actual settlement is expected to occur. (iii) Retirement Benefit Obligations: The Group makes contributions to defined contribution superannuation plans in respect of employee services rendered during the year. These superannuation contributions are recognised as an expense in the same period when the employee services are received. (iv) Share-Based Payments: The Group operates share-based payment employee share and option schemes. The fair value of the equity to which employees become entitled is measured at grant date and recognised as an expense over the vesting period, with a corresponding increase to an equity account. In respect of share-based payments that are dependent on the satisfaction of performance conditions, the number of shares and options expected to vest is reviewed and adjusted at each reporting date. The amount recognised for services received as consideration for these equity instruments granted is adjusted to reflect the best estimate of the number of equity instruments that eventually vest. (v) Bonus Plan: The Group recognises a provision when a bonus is payable in accordance with the employee’s contract of employment and the amount can be reliably measured. dorsaVi Annual Report 2021 37 dorsaVi Ltd and controlled entities ABN: 15 129 742 409 (n) Borrowing Costs Borrowing costs include interest expense calculated using the effective interest method, finance charges in respect of leases, and exchange differences arising from foreign currency borrowings to the extent that they are regarded as an adjustment to interest costs. Borrowing costs are expensed as incurred. (o) Financial Instruments Initial recognition and measurement: Financial assets and financial liabilities are recognised when the Group becomes a party to the contractual provisions of the instrument. For financial assets, this is equivalent to the date that the Group commits itself to either the purchase or sale of the asset. Financial instruments are initially measured at fair value adjusted for transaction costs, except where the instrument is classified as fair value through profit or loss, in which case transaction costs are immediately recognised as expenses in profit or loss. Classification of financial assets: Financial assets recognised by the Group are subsequently measured in their entirety at either amortised cost or fair value, subject to their classification and whether the Group irrevocably designates the financial asset on initial recognition at fair value through other comprehensive income (FVtOCI) in accordance with the relevant criteria in AASB 9. Financial assets not irrevocably designated on initial recognition at FVtOCI are classified as subsequently measured at amortised cost, FVtOCI or fair value through profit or loss (FVtPL) on the basis of both: the Group’s business model for managing the financial assets; and (a) the contractual cash flow characteristics of the financial asset. (b) Classification of financial liabilities: Financial liabilities classified as held-for-trading, contingent consideration payable by the Group for the acquisition of a business, and financial liabilities designated at FVtPL, are subsequently measured at fair value. All other financial liabilities recognised by the Group are subsequently measured at amortised cost. Trade and other receivables: Trade and other receivables arise from the Group’s transactions with its customers and are normally settled within 30 days. Consistent with both the Group’s business model for managing the financial assets and the contractual cash flow characteristics of the assets, trade and other receivables are subsequently measured at amortised cost. Impairment of financial assets: The following financial assets are tested for impairment by applying the ‘expected credit loss’ impairment model: (a) (b) (c) debt instruments measured at amortised cost; debt instruments classified at fair value through other comprehensive income; and receivables from contracts with customers and contract assets. The Group applies the simplified approach under AASB 9 to measuring the allowance for credit losses for both receivables from contracts with customers and contract assets. Under the AASB 9 simplified approach, the Group determines the allowance for credit losses for receivables from contracts with customers and contract assets on the basis of the lifetime expected credit losses of the financial asset. Lifetime expected credit losses represent the expected credit losses that are expected to result from default events over the expected life of the financial asset. For all other financial assets subject to impairment testing, when there has been a significant increase in credit risk since the initial recognition of the financial asset, the allowance for credit losses is recognised on the basis of the lifetime expected credit losses. When there has not been an increase in credit risk since initial recognition, the allowance for credit losses is recognised on the basis of 12-month expected credit losses. ’12-month expected credit losses’ is the portion of lifetime expected credit losses that represent the expected credit losses that result from default events on a financial instrument that are possible within the 12 months after the reporting date. The Group consider a range of information when assessing whether the credit risk has increased significantly since initial recognition. This includes such factors as the identification of significant changes in external market indicators of credit risk, significant adverse changes in the financial performance or financial position of the counterparty, significant changes in the value of collateral, and past due information. dorsaVi Annual Report 2021 38 dorsaVi Ltd and controlled entities ABN: 15 129 742 409 The Group assumes that the credit risk on a financial asset has not increased significantly since initial recognition when the financial asset is determined to have a low credit risk at the reporting date. The Group considers a financial asset to have a low credit risk when the counterparty has an external ‘investment grade’ credit rating (if available) of BBB or higher, or otherwise is assessed by the Group to have a strong financial position and no history of past due amounts from previous transactions with the Group. The Group determines expected credit losses using a provision matrix based on the Group’s historical credit loss experience, adjusted for factors that are specific to the financial asset as well as current and future expected economic conditions relevant to the financial asset. When material, the time value of money is incorporated into the measurement of expected credit losses. There has been no change in the estimation techniques or significant assumptions made during the reporting period. The Group has identified expected credit loss rates for the purpose of measuring expected credit losses. These credit loss rates have been selected based on the Group’s historical experience. Because contract assets are directly related to unbilled work in progress, contract assets have a similar credit risk profile to receivables from contracts with customers. Accordingly, the Group applies the same approach to measuring expected credit losses of receivables from contracts with customers as it does to measuring impairment losses on contract assets. The measurement of expected credit losses reflects the Group’s ‘expected rate of loss’, which is a product of the probability of default and the loss given default, and its ‘exposure at default’, which is typically the carrying amount of the relevant asset. Expected credit losses are measured as the difference between all contractual cash flows due and all contractual cash flows expected based on the Group’s exposure at default, discounted at the financial asset’s original effective interest rate. Financial assets are regarded as ‘credit-impaired’ when one or more events have occurred that have a detrimental impact on the estimated future cash flows of the financial asset. Indicators that a financial asset is ‘credit-impaired’ include observable data about the following: (a) (b) (c) significant financial difficulty of the issuer or the borrower; breach of contract; the lender, for economic or contractual reasons relating to the borrower’s financial difficulty, has granted concessions to the borrower that the lender would not otherwise consider; or it is becoming probable that the borrower will enter bankruptcy or other financial reorganisation. (d) The gross carrying amount of a financial asset is written off (i.e. reduced directly) when the counterparty is in severe financial difficulty and the Group has no realistic expectation of recovery of the financial asset. Financial assets written off remain subject to enforcement action by the Group. Recoveries, if any, are recognised in profit or loss. (p) Foreign Currency Translations and Balances Functional and Presentation Currency: The financial statements of each entity within the Group are measured using the currency of the primary economic environment in which that entity operates (the functional currency). The consolidated financial statements are presented in Australian dollars which is the Group’s functional and presentation currency. Transactions and Balances: Transactions undertaken in foreign currencies are recognised in the Group’s functional currency at the rate of exchange ruling at the date of the transaction. Foreign currency monetary items that are outstanding at the reporting date (other than monetary items arising under foreign currency contracts where the exchange rate for that monetary item is fixed in the contract) are translated using the spot rate at the end of the financial year. Except for certain foreign currency hedges, all resulting exchange differences arising on settlement or re-statement are recognised as revenues and expenses in the financial year in which they arose. Foreign Subsidiaries: Entities that have a functional currency different to the presentation currency are translated as follows: ▪ Assets and liabilities are translated at the closing rate on reporting date; ▪ Income and expenses are translated at actual exchange rates or average exchange rates for the period, where appropriate; and ▪ All resulting exchange differences are recognised in other comprehensive income. dorsaVi Annual Report 2021 39 dorsaVi Ltd and controlled entities ABN: 15 129 742 409 (q) 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 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 gross basis, except for the GST component of investing and financing activities, which are disclosed as operating cash flows. (r) Comparatives Where necessary, comparative information has been reclassified and repositioned for consistency. (s) Rounding of Amounts In accordance with ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191, the amounts in the directors’ report and in the financial statements have been rounded to the nearest dollar. NOTE 2: SIGNIFICANT ACCOUNTING ESTIMATES AND JUDGEMENTS Certain accounting estimates include assumptions concerning the future, which, by definition, will seldom represent actual results. Estimates and assumptions based on future events have a significant inherent risk, and where future events are not as anticipated there could be a material impact on the carrying amounts of the assets and liabilities discussed below: (a) Impairment of Non-Financial Assets other than Goodwill All assets are assessed for impairment at each reporting date by evaluating whether indicators of impairment exist in relation to the continued use of the asset by the Group. Impairment triggers include declining product performance, technology changes, adverse changes in the economic or political environment or future product expectations. If an indicator of impairment exists, the recoverable amount of the asset is determined. The recoverable amount of a CGU is based on value in use calculations. The Directors have determined that there is one CGU applicable to the cash flows generated. Value in use calculations are based on projected cash flows approved by management covering a maximum five-year period. Management’s determination of cash flow projections are based on past performance and its expectations of the future. (b) Income Tax Deferred tax assets and liabilities are based on the assumption that no adverse change will occur in the income tax legislation and the anticipation that the Group will derive sufficient future assessable income to enable the benefit to be realised and comply with the conditions of deductibility imposed by the law. (c) Employee Benefits The calculation of long-term employment benefits requires estimation of the retention of staff, future wage levels and timing of the settlement of employee entitlements. The estimates are based on historical trends. (d) Share Based Payments The Group measures the cost of equity settled transactions with employees by reference to the fair value of the equity instruments on the date at which they are granted. The value of equity instruments granted is determined according to the fair value of goods or services received unless that fair value cannot be estimated reliably, in which case the fair value is determined by reference to the underlying value of equity instruments granted. dorsaVi Annual Report 2021 40 dorsaVi Ltd and controlled entities ABN: 15 129 742 409 NOTE 3: FINANCIAL RISK MANAGEMENT The Group is exposed to a variety of financial risks comprising: Interest rate risk ▪ Currency risk ▪ ▪ Credit risk ▪ Liquidity risk The Board of directors has overall responsibility for identifying and managing operational and financial risks. The Group holds the following financial instruments: Financial assets: Cash and cash equivalents Trade receivables Other receivables Finance liabilities: Trade payables Borrowings Lease liability Other payables (a) Currency Risk 2021 $ 2020 $ 2,796,175 617,092 620,130 4,033,397 1,685,288 284,886 646,334 2,616,508 75,258 1,595,557 101,737 920,758 2,693,310 79,656 1,664,934 246,984 1,160,824 3,152,398 The Group undertakes transactions denominated in foreign currencies. Currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Group is exposed to foreign currency risk through the operation of wholly owned subsidiaries in the United Kingdom and the United States of America and transactions occurring with countries in currencies that differ to the presentation currency of the Group. Whilst operations in these geographical regions are in their infancy, the Group has not established a hedging policy to mitigate adverse currency risk. The carrying amount of foreign currency denominated monetary assets and monetary liabilities at reporting date are: Current assets Current liabilities Sensitivity: 2021 $ 2020 $ USD GBP USD GBP 645,218 393,388 251,830 51,228 108,910 (57,683) 366,204 224,352 141,853 202,301 244,044 (41,743) If foreign exchange rates were to increase/decrease by 10% from rates used in the profit or loss during the financial year, assuming all other variables that might impact on fair value remain constant, then the impact on loss for the year and equity is as follows: +/- 10% Impact on loss after tax Impact on equity (b) Interest Rate Risk 2021 $ 61,137 61,137 2020 $ 96,780 96,780 Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate as a result of changes in market interest rates. dorsaVi Annual Report 2021 41 dorsaVi Ltd and controlled entities ABN: 15 129 742 409 The Group’s exposure to interest rate risk in relation to future cash flows and the effective weighted average interest rates on classes of financial assets and financial liabilities, is as follows: 2021 Financial Instruments Financial assets Cash Term Deposit Term Deposit Term Deposit Trade receivables Other receivables Financial liabilities Trade payables Insurance finance facility Paycheck Protection Program loans Convertible note Lease liability Other payables 2020 Financial Instruments Financial assets Cash Term Deposit Term Deposit Term Deposit Trade receivables Other receivables Non-interest bearing $ Total carrying amount $ Interest Bearing $ 2,676,182 51,381 28,612 40,000 - - - - 2,676,182 51,381 28,612 40,000 617,092 620,130 4,033,397 - - 2,796,175 617,092 620,130 1,237,222 Weighted average effective interest rate 0.51% Floating 0.20% Fixed 0.50% Fixed 0.25% Fixed 0.00% 0.00% - 75,258 66,310 286,779 1,242,468 101,737 - - - - - 1,697,294 920,758 996,016 75,258 66,310 286,779 1,242,468 101,737 920,758 2,693,310 0.00% 4.1% Fixed 1% Fixed 10% Fixed 12% Fixed 0.00% Non-interest bearing $ Total carrying amount $ Weighted average effective interest rate Interest Bearing $ 1,556,908 51,381 27,932 49,067 - - - - 1,556,908 51,381 27,932 49,067 284,886 646,334 2,616,508 0.70% Floating 2.65% Fixed 2.20% Fixed 1.92% Fixed 0.00% 0.00% - - 1,685,288 284,886 646,334 931,220 Financial liabilities Trade payables Insurance finance facility Paycheck Protection Program loan Convertible note Lease liability Other payables - 79,656 52,455 152,892 1,459,587 246,984 - - - - - 1,911,918 1,160,824 1,240,480 79,656 52,455 152,892 1,459,587 246,984 1,160,824 3,152,398 0.00% 3.9% Fixed 1% Fixed 10% Fixed 12% Fixed 0.00% No other financial assets or financial liabilities are expected to be exposed to interest rate risk. There are no variable interest borrowings in the Group. The Group is exposed to variable interest cash and cash deposits held; however, fluctuations due to interest rates are considered immaterial. dorsaVi Annual Report 2021 42 dorsaVi Ltd and controlled entities ABN: 15 129 742 409 (c) Credit Risk Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation. The maximum exposure to credit risk, excluding the value of any collateral or other security, at balance date of recognised financial assets is the carrying amount of those assets, net of any provisions for impairment of those assets, as disclosed in consolidated statement of financial position and notes to the consolidated financial statements. The Group does not have any material credit risk exposure to any single debtor or group of debtors under financial instruments entered into by the Group. The Group minimises concentrations of credit risk in relation to trade receivables by undertaking transactions with a number of known and existing customers and reputable organisations. (i) Cash Deposits: Credit risk for cash deposits is managed by holding all cash deposits with major Australian banks. (ii) Trade Receivables: Credit risk for trade receivables is managed by setting credit limits and completing credit checks for new customers. Outstanding receivables are regularly monitored for payment in accordance with credit terms. The ageing analysis of trade and other receivables is provided in Note 9. As the Group undertakes transactions with a large number of customers and regularly monitors payment in accordance with credit terms, the financial assets that are neither past due nor impaired, are expected to be received in accordance with the credit terms. (iii) Other Receivables: Other receivables relate to research and development tax concessions receivable from the Australian Taxation Office and do not pose a material credit risk and unbilled debtors in relation to accrued income. (d) Liquidity Risk The Group’s approach to managing liquidity risk is to ensure, as far as possible, that, at all times, it has sufficient liquidity to meet its liabilities. The Group has cash reserves and expects to settle all financial liabilities when they fall due. (e) Fair Value The fair value of financial assets and financial liabilities approximates their carrying amounts as disclosed in the consolidated statement of financial position and notes to the consolidated financial statements. dorsaVi Annual Report 2021 43 dorsaVi Ltd and controlled entities ABN: 15 129 742 409 NOTE 4: REVENUE FROM CONTRACTS WITH CUSTOMERS AND OTHER INCOME Revenue recognised at a point in time: Clinical income Workplace income Revenue recognised over time: Clinical income Workplace income Revenue from contracts with customers is disclosed in the segment note as follows: Clinical income Workplace income Other income: Grant and other income Interest income Change in fair value of derivative liability 2021 $ 2020 $ 169,264 278,224 447,488 134,482 381,529 516,011 963,478 458,016 1,421,494 1,868,982 990,669 512,540 1,503,209 2,019,220 1,130,045 738,937 1,868,982 1,125,151 894,069 2,019,220 549,601 11,125 560,726 349,925 2,779,633 278,252 99,587 377,839 - 2,397,059 Revenue from device sales is recognised over time and not at a point in time in accordance with AASB 15. NOTE 5: LOSS FROM CONTINUING OPERATIONS Loss before income tax has been determined after: Depreciation Amortisation of patents and intangibles Provision for impairment of patents and intangibles Employee benefits expense: - Share based payments - Other employee benefits Less employee benefits capitalised Research and development expense Cost of sales Bad debts 176,619 33,584 - 210,203 203,357 836,290 4,018,354 5,058,001 301,686 2,560,541 2,862,227 - 2,862,227 960,529 166,328 98,103 344,665 3,353,872 3,698,537 658,172 3,040,365 1,051,411 96,967 27,375 dorsaVi Annual Report 2021 44 dorsaVi Ltd and controlled entities ABN: 15 129 742 409 NOTE 6: INCOME TAX (a) Components of tax benefit Current tax (b) Prima facie tax payable The prima facie tax refundable on loss before income tax is reconciled to the income tax benefit as follows: Prima facie income tax refundable on loss before income tax at 26% (2020: 27.5%) Add tax effect of: - Accounting R&D expenditure - Impairment of capitalised development expenditure - Deferred tax assets / liabilities not recognised - Share based payments expense - Tax losses not recognised Less tax effect of: - R&D tax offset - Under provision for tax in prior year - Deduction under 240-880 - Effect of foreign tax rates Income tax benefit attributable to loss (c) Deferred tax assets not brought to account Temporary differences Operating tax losses NOTE 7: DIVIDENDS There were no dividends paid during the period. NOTE 8: CASH AND CASH EQUIVALENTS Cash at bank and on hand Deposits at call NOTE 9: RECEIVABLES CURRENT Receivables from contracts with customers Allowance for credit losses Contract assets R&D tax offset refundable 2021 $ 2020 $ (417,830) (457,365) (635,985) (2,213,872) 249,738 - 28,709 78,438 356,672 713,447 281,293 1,105,047 27,255 94,783 786,660 2,295,038 417,830 - 40,039 37,533 495,402 (417,830) 444,955 12,409 49,566 31,601 538,531 (457,365) 195,731 8,207,823 8,403,554 229,734 7,832,197 8,061,931 2,676,182 119,993 2,796,175 1,556,908 128,380 1,685,288 694,090 (76,998) 617,092 374,727 (89,841) 284,886 189,742 430,388 1,237,222 201,379 444,955 931,220 dorsaVi Annual Report 2021 45 dorsaVi Ltd and controlled entities ABN: 15 129 742 409 Credit losses: The group applies the simplified approach under AASB 9 to measuring the allowance for credit losses for both receivables from contracts with customers and contract assets. Under the AASB 9 simplified approach, the group determines the allowance for credit losses for receivables from contracts with customers and contract assets on the basis of the lifetime expected credit losses of the instrument. Lifetime expected credit losses represent the expected credit losses that are expected to result from default events over the expected life of the financial asset. The group determines expected credit losses using a provision matrix based on the group’s historical credit loss experience, adjusted for factors that are specific to the financial asset as well as current and future expected economic conditions relevant to the financial asset. When material, the time value of money is incorporated into the measurement of expected credit losses. There has been no change in the estimation techniques or significant assumptions made during the reporting period. Loss allowance at 1 July Net remeasurement of loss allowance Amounts written off Loss allowance at 30 June 30 June 2021: Estimated total gross carrying amount at default Expected credit loss rate Expected credit loss 30 June 2020: Estimated total gross carrying amount at default Expected credit loss rate Expected credit loss NOTE 10: INVENTORIES CURRENT Finished goods, at cost Work in progress, at cost NOTE 11: OTHER ASSETS 2021 $ (89,841) (98,103) 110,946 2020 $ (126,611) (27,375) 64,145 (76,998) (89,841) Not past due Past due 0-30 days Past due 30-90 days Past due 90+ days Total 66,833 0.0% 22 427,227 0.0% 164 89,003 20.5% 18,284 111,027 52.7% 58,528 694,090 11.1% 76,998 69,457 0.0% - 107,223 0.0% 31 37,928 1.3% 475 160,119 55.8% 89,335 374,727 24.0% 89,841 2021 $ 2020 $ 617,338 9,359 626,697 661,342 21,797 683,139 Prepayments 148,286 149,721 NOTE 12: INTANGIBLE ASSETS Patents, at cost Less accumulated amortisation Less provision for impairment Development expenditure, at cost Less accumulated amortisation Less provision for impairment 1,191,858 (289,208) (902,650) 1,158,274 (255,624) (902,650) - - 5,261,956 (2,146,252) (3,115,704) - - 5,261,956 (2,146,252) (3,115,704) - - dorsaVi Annual Report 2021 46 dorsaVi Ltd and controlled entities ABN: 15 129 742 409 (a) Reconciliations Reconciliation of the carrying amounts of intangible assets at the beginning and end of the current financial year: Patents Development Expenditure Total 2021 $ 2020 $ 2021 $ 2020 $ 2021 $ 2020 $ Opening carrying amount Additions Amortisation expense Provision for impairment Closing carrying amount 33,584 (33,584) - 848,097 112,737 (58,184) - (902,650) - - - - - - - 3,221,818 671,992 (778,106) (3,115,704) - - 33,584 (33,584) 4,069,915 784,729 (836,290) - (4,018,354) - - During the year ended 30 June 2020 the Group assessed carrying value of its intangible assets for impairment based on value in use calculations. This arose due to a change in the Group’s business strategy during that year (i.e. the transition to a SaaS recurring revenue strategy), the Group’s forecasts were updated based upon reasonable and prudent assumptions including growth rates (2.5%), discount rates (16%) and terminal values. This resulted in a provision for impairment of $4,018,354 in the year ended 30 June 2020. Development expenditure incurred during the year ended 30 June 2021 has been fully expensed. Should future performance exceed Group forecasts, the current impairment provision may be reversed in future periods. NOTE 13: PLANT AND EQUIPMENT Testing equipment, at cost Accumulated depreciation Leased devices, at cost Accumulated depreciation Office equipment, at cost Accumulated depreciation Furniture, fixtures and fittings, at cost Accumulated depreciation Right to use asset, at cost Accumulated depreciation Tooling, at cost Accumulated depreciation Total 2021 $ 2020 $ 128,760 (123,500) 5,260 128,760 (120,764) 7,996 267,743 (260,492) 7,251 267,743 (244,265) 23,478 342,068 (249,173) 92,895 290,239 (228,823) 61,416 63,691 (25,419) 38,272 63,691 (21,137) 42,554 401,718 (329,604) 72,114 401,718 (206,004) 195,714 94,258 (56,429) 37,829 253,621 94,258 (47,005) 47,253 378,411 (i) On 15 November 2018, the Group entered into a 39-month property lease. The agreement does not include variable lease payments or residual guarantees. Standard extension options are not expected to be exercised. dorsaVi Annual Report 2021 47 dorsaVi Ltd and controlled entities ABN: 15 129 742 409 (a) Reconciliations Reconciliation of the carrying amounts of plant and equipment at the beginning and end of the current financial year: Testing equipment: Opening carrying amount Additions Depreciation expense Closing carrying amount Leased devices: Opening carrying amount Depreciation expense Closing carrying amount Office equipment: Opening carrying amount Additions Depreciation expense Closing carrying amount Furniture, fixtures and fittings: Opening carrying amount Depreciation expense Closing carrying amount Right to use asset: Opening carrying amount Depreciation expense Closing carrying amount Tooling: Opening carrying amount Depreciation expense Closing carrying amount Total: Opening carrying amount Additions Depreciation expense Closing carrying amount 2021 $ 2020 $ 7,996 - (2,736) 5,260 12,475 125 (4,604) 7,996 23,478 (16,227) 7,251 59,558 (36,080) 23,478 61,416 51,829 (20,350) 92,895 82,362 3,948 (24,894) 61,416 42,554 (4,282) 38,272 47,307 (4,753) 42,554 195,714 (123,600) 72,114 319,314 (123,600) 195,714 47,253 (9,424) 37,829 56,679 (9,426) 47,253 378,411 51,829 (176,619) 253,621 577,695 4,073 (203,357) 378,411 dorsaVi Annual Report 2021 48 dorsaVi Ltd and controlled entities ABN: 15 129 742 409 NOTE 14: PAYABLES CURRENT Unsecured liabilities Trade payables Contract liabilities Sundry creditors and accruals NOTE 15: BORROWINGS CURRENT Unsecured liabilities Premium finance facility (i) Convertible note host debt (iv) NON-CURRENT Unsecured liabilities Paycheck Protection Program loan No 1 (ii) Paycheck Protection Program loan No 2 (iii) Convertible note host debt (iv) Derivative liability (iv) 2021 $ 2020 $ 75,258 791,233 129,525 996,016 79,656 866,136 294,688 1,240,480 66,310 179,943 246,253 52,455 129,486 181,941 139,572 152,892 147,207 - 702,725 620,376 359,800 1,349,304 1,595,557 709,725 1,482,993 1,664,934 (i) (ii) (iii) (iv) In March 2021, the Group entered into a finance facility for the annual insurance liability of dorsaVi Ltd. The facility is repayable monthly over a 10 month period ending in December 2021 at an interest rate of 4.1%. A similar finance facility was in place in the prior year. Under USA federal government Covid19 relief measures, dorsaVi’s US subsidiary was, on 23 June 2020, provided a Small Business Administration (SBA) Paycheck Protection Program (PPP) loan of US$104,930. The facility is 60 month facility bearing fixed interest at the rate of 1% p.a. If certain conditions are met the SBA may forgive up to 100% of the PPP loan balance and associated accrued interest. A loan forgiveness application was lodged with the finance provider in February 2021. Systematic principal and interest payments, on any unforgiven loan balance, commence after the amount of loan forgiveness is determined or 9 October 2021 whichever occurs first. Under USA federal government Covid19 relief measures, dorsaVi’s US subsidiary was, on 25 March 2021, provided a second Small Business Administration (SBA) Paycheck Protection Program (PPP) loan of US$110,670. The facility is 60 month facility bearing fixed interest at the rate of 1% p.a. If certain conditions are met, within a covered 24 week period commencing 25 March 2021, the SBA may forgive up to 100% of the PPP loan balance and associated accrued interest. Systematic principal and interest payments, on any unforgiven loan balance, commence after the amount of loan forgiveness is determined or June 2022 whichever occurs first. In December 2019 1,155,000 convertible notes were issued with a face value of $1 each. The notes will mature in December 2022. Interest is payable at a rate of 10% p.a., monthly in arrears. As reflected in the above table, and, in accordance with Accounting Standards, the convertible notes are considered a financial liability with a host debt contract, held at amortised cost, and an embedded derivative liability, held at fair value through the profit and loss. Accordingly, the derivative liability will be revalued at each reporting date. Upon maturity the notes will convert into fully paid ordinary shares according to a 40 day VWAP calculation. In accordance with the terms of the note agreement the maximum number of fully paid ordinary shares that can be issued will be 38,500,000 and the minimum number will be 16,500,000. dorsaVi Annual Report 2021 49 dorsaVi Ltd and controlled entities ABN: 15 129 742 409 NOTE 16: LEASE LIABILITY On 15 November 2018, the Group entered into a 39-month property lease and, in accordance with AASB 16: Leases, a lease liability and a corresponding non-current asset, Right of Use Asset, refer Note 13, have been recognised. Future minimum lease payments and the present value of the net minimum lease payments: 2021 $ 2020 $ - Not later than one year - Later than one year and not later than 5 years Total minimum lease payments - Future finance charges Present value of minimum lease payment Current lease liability Non-current lease liability NOTE 17: PROVISIONS CURRENT Employee benefits NON-CURRENT Employee benefits 106,155 - 106,155 163,500 104,949 268,449 (4,418) (21,465) 101,737 246,984 101,737 - 101,737 144,269 102,715 246,984 202,677 206,911 2,841 9,441 (a) Aggregate employee benefits liability 205,518 216,352 NOTE 18: SHARE CAPITAL The Group’s share capital is as follows: Ordinary Shares Parent Equity 2021 No of Shares $ Parent Equity 2020 No of Shares $ Beginning of the financial year Issued during the financial year: - Employee share scheme (i) - Other shares issued (ii) - Shares issued in capital raising (iii) - Cost of raising capital End of the financial year 231,427,524 41,080,353 204,016,783 40,381,715 1,084,000 2,707,286 115,713,762 - 350,932,572 - - 3,702,840 (250,331) 44,532,862 - - 27,410,741 - 231,427,524 - - 746,760 (48,122) 41,080,353 (i) Shares Issued under the Employee Share Ownership Plan: During the year 1,084,000 performance rights previously granted to employees under the Employee Share Ownership Plan (ESOP) vested into shares. The shares were issued for $Nil consideration. During the prior year no performance rights previously granted to employees under the Employee Share Ownership Plan (ESOP) vested into shares. dorsaVi Annual Report 2021 50 dorsaVi Ltd and controlled entities ABN: 15 129 742 409 (ii) Other Shares Issued As approved at the 2020 AGM, 2,707,286 shares were issued, at $Nil per share, to the Managing Director in lieu of a reduction in cash wages and other entitlements of $75,804. (iii) Shares Issued in a Capital Raising: During the year ended 30 June 2021, the Group issued: ▪ 106,360,517 fully paid ordinary shares, at $0.032 per share, to sophisticated and institutional investors raising $3,403,537 before costs; and ▪ 9,353,245 fully paid ordinary shares, at $0.032 per share, under a share purchase plan to eligible shareholders, raising $299,304 before costs. During the year ended 30 June 2020, the Group issued: ▪ 20,740,741 fully paid ordinary shares, at $0.027 per share, to sophisticated and institutional investors raising $560,000 before costs; and ▪ 6,670,000 fully paid ordinary shares, at $0.028 per share, under a share purchase plan to eligible shareholders, raising $186,760 before costs. Rights of each Type of Share Ordinary shares participate in dividends and the proceeds on winding up of the parent entity in proportion to the number of shares held. At shareholders’ meetings, each ordinary share is entitled to one vote when a poll is called, otherwise each shareholder has one vote on a show of hands. Capital Management When managing capital, management's objective is to ensure the Group continues as a going-concern as well as to maintain optimal returns to shareholders and benefits for other stakeholders. This is achieved through the monitoring of historical and forecast performance and cash flows. Employee Share Ownership Plan (ESOP) The Group continued to offer employee participation in short-term and long-term incentive schemes as part of the remuneration packages for the employees of the Group. Refer to Note 23, Share Based Payments, for detailed disclosures. NOTE 19: RESERVES AND ACCUMULATED LOSSES Notes 2021 $ 2020 $ Share-based payment reserve Foreign currency translation reserve 19(a) 19(b) 1,173,557 (772,079) 401,478 983,554 (750,301) 233,253 Accumulated losses 19(c) (42,771,161) (40,854,577) (i) Nature and Purpose of Reserves The share-based payment reserve is used to record the fair value of options and shares issued to employees as part of their remuneration. The balance is transferred to share capital when options are granted, and the balance is transferred to retained earnings when options lapse. dorsaVi Ltd has monetary items receivable and payable to and from its subsidiaries. Under AASB 121: The Effects of Changes in Foreign Exchange Rates, these items are reviewed annually. During the financial year ending 30 June 2020 it was determined that these items would be treated as an investment in those foreign operations. As a result, exchange differences on these items are recognised initially in other comprehensive income and reclassified from equity to profit or loss on disposal of the net investment. dorsaVi Annual Report 2021 51 dorsaVi Ltd and controlled entities ABN: 15 129 742 409 (ii) Movements in reserve (a) Share-based payment reserve Balance at beginning of year Employee share ownership plan Transfers to retained earnings Balance at end of year (b) Foreign currency translation reserve Balance at beginning of year Exchange differences on translation of foreign operations Balance at end of year (c) Accumulated losses Balance at beginning of year Net loss attributable to members of dorsaVi Ltd Transfers from share-based payment reserve Balance at end of year NOTE 20: CASH FLOW INFORMATION (a) Reconciliation of Cash: 2021 $ 2020 $ 983,554 301,686 (111,683) 1,173,557 692,619 344,665 (53,730) 983,554 (750,301) (21,784) (772,085) (769,812) 19,511 (750,301) (40,854,577) (2,028,267) 111,683 (33,315,228) (7,593,079) 53,730 (42,771,161) (40,854,577) Cash at the end of the financial year as shown in the statement of cash flows is reconciled to the related items in the statement of financial position as follows: Cash at bank and on hand Cash on deposit 2,676,182 119,993 2,796,175 1,556,908 128,380 1,685,288 dorsaVi Annual Report 2021 52 dorsaVi Ltd and controlled entities ABN: 15 129 742 409 (b) Reconciliation of cash flow used in operations with loss after income tax: Loss from ordinary activities after income tax Adjustments and non-cash items: Amortisation Depreciation Provision for impairment of intangibles Share Based Payments Movement in debtor provision Foreign exchange differences on operating assets Unrealised foreign exchange differences through profit and loss Change in fair value of derivative liability Interest adjustment on convertible note host debt Adjustment to carrying value of convertible note through the profit and loss Changes in assets and liabilities: (Increase)/decrease in receivables (Increase) / decrease in other assets (Increase) / decrease in inventories Increase in payables (Increase) / decrease in R&D tax offset receivable Increase / (decrease) in provisions 2021 $ 2020 $ (2,028,267) (7,593,079) 33,584 176,619 - 301,686 (12,843) (33,477) - (349,925) 132,806 - 836,290 203,357 4,018,354 344,665 (36,770) 19,511 - 278,151 62,607 21,579 (307,726) 1,435 56,442 (244,464) 14,567 (10,834) (242,130) 347,464 (7,143) (374,619) (272,727) 121,693 (148,887) 5,413,525 Cash flows used in operating activities (2,270,397) (2,179,554) (c) Reconciliation of liabilities arising from financing activities: Balance at the beginning of the year New leases acquired Interest accrued Payments made Balance at the end of the year 246,984 - 21,833 (167,080) 101,737 360,994 - 37,836 (151,846) 246,984 NOTE 21: COMMITMENTS AND CONTINGENCIES (a) Expenditure commitments There are no material expenditure commitments at balance date. (b) Contingent asset and liabilities There are no contingent assets or contingent liabilities at balance date. dorsaVi Annual Report 2021 53 dorsaVi Ltd and controlled entities ABN: 15 129 742 409 NOTE 22: LOSS PER SHARE Reconciliation of loss used in calculating loss per share: Loss from continuing operations Loss used in calculating basic loss per share Loss used in calculating diluted loss per share Weighted average number of ordinary shares used in calculating basic earnings per share Effect of dilutive securities: Equity instruments Adjusted weighted average number of ordinary shares used in calculating diluted earnings per share NOTE 23: SHARE BASED PAYMENTS (a) Employee Shares 2021 $ (2,028,267) (2,028,267) (2,028,267) 2020 $ (7,593,079) (7,593,079) (7,593,079) 2021 No of Shares 2020 No of Shares 296,433,675 217,396,418 - - 296,433,675 217,396,418 In 2013 the Board established an ESOP to facilitate the acquisition of Shares, Options and Performance Rights by those employed, or otherwise engaged by, or holding a position of office in, dorsaVi Ltd. They key objective of the plan is to provide an incentive for employees to align their interests with those of the shareholders. Other objectives of the ESOP include: ▪ To attract, motivate and retain quality employees and Directors of dorsaVi Ltd; ▪ To create a committed and united purpose between the employees and Directors and dorsaVi Ltd; and ▪ To add wealth for all shareholders of dorsaVi through the motivation of dorsaVi’s employees and Directors. Only a person who is an Eligible Person may be invited and authorised by the Board to participate in this plan. An Eligible person means: ▪ An employee of dorsaVi Ltd or a subsidiary of dorsaVi Ltd; or ▪ A Director of dorsaVi Ltd or a subsidiary of dorsaVi Ltd who holds a salaried employment or office in dorsaVi Ltd or a subsidiary of dorsaVi Ltd; or ▪ A contractor engaged by dorsaVi Ltd or a subsidiary of dorsaVi and whom the Group has determined is an Eligible Person to participate in this plan. There is no maximum limit on the number of Securities that may be acquired by Eligible Persons under the ESOP. However, the Board intends to restrict further issues of Securities to no more than 5% of the Group’s issued share capital. This limit will be maintained unless shareholder approval is subsequently sought to increase this level. (b) Loan Shares and Options The plan allows for dorsaVi to offer employees non-recourse and interest-free loans to acquire fully paid shares. On 20 September 2013, the Group’s shareholders approved the giving of such financial assistance. Loan shares are treated as options in accordance with accounting standards. Loan Shares are subject to restriction agreements imposing loan repayment obligations, and, that the holders of Shares are not able to trade them within 12 months of issuance. After 12 months, 1/3rd of the issued shares can be traded. Contingent upon continued employment with the Group and meeting loan repayment obligations, the remaining shares become available for trading at a monthly rate of 1/36th of the shares issued over the subsequent 24 months. During the year ended 30 June 2021 and to the date of this report no options over ordinary shares or loan shares were granted to employees (2020: Nil) and 5,659,728 options over ordinary shares were granted to non-executive directors in lieu of the payment of directors’ fees (2020: 12,739,588). During the year a total of 200,000 options were cancelled (2020: 50,000 options cancelled). At 30 June 2021, 18,978,482 options had been granted but not converted into ordinary shares (2020: 13,518,754). dorsaVi Annual Report 2021 54 dorsaVi Ltd and controlled entities ABN: 15 129 742 409 (c) Employee Performance Rights Performance rights are subject to performance vesting conditions in accordance with each agreement. The performance rights do not vest into shares unless the performance conditions are met. During the year ended 30 June 2021, 1,000,000 performance rights were granted (2020: 2,331,071). During the year ended 30 June 2021, 1,084,000 (2020: 2,826,601) performance rights vested into shares. During the year ended 30 June 2021, 146,000 performance rights lapsed (2020: 155,470). At 30 June 2021, 200,000 performance rights remain outstanding (2020: 430,000). Details of shares, options and performance rights granted are as follows: 2021 Grant date Expiry date Exercise price Balance at 1/7/2020 Granted during the year Vested during the year Expired during the year Balance at 30/6/2021 Exercisable at year end 5-Nov-14 25-Feb-15 24-Mar-16 15-May-17 15-May-17 15-May-17 18-Sep-19 18-Sep-19 18-Sep-19 4-Dec-19 4-Dec-19 7-Jan-20 7-Apr-20 7-Jul-20 7-Oct-20 8-Jan-21 8-Apr-21 5-Jul-21 TOTAL 5-Nov-24 25-Feb-25 24-Mar-21 15-May-22 1-Oct-22 1-Oct-23 1-Oct-20 1-Oct-21 18-Sep-22 4-Dec-24 4-Dec-24 7-Jan-25 7-Apr-25 7-Jul-25 7-Oct-25 8-Jan-26 8-Apr-26 5-Jul-26 $0.40 $0.36 $0.40 $0.33 $0.33 $0.33 - - - $0.084 $0.070 $0.034 $0.022 $0.016 $0.049 $0.061 $0.063 $0.041 20,000 50,000 200,000 500,000 55,000 24,166 115,000 115,000 200,000 1,280,488 1,116,703 1,846,856 4,801,827 3,693,714 - - - - 14,018,754 - - - - - - - - - 20,000 50,000 - - 20,000 50,000 500,000 55,000 24,166 - 200,000 - - - 84,000 - 500,000 - 55,000 - 24,166 31,000 - 115,000 - - - - - - - - - - - - - - 1,412,303 1,412,303 1,171,178 1,171,178 1,297,792 1,297,792 1,778,455 1,778,455 5,659,728 5,743,728 - - - - - 1,280,488 1,116,703 1,846,856 4,801,827 3,693,714 1,412,303 1,171,178 1,297,792 1,778,455 19,048,482 - 200,000 - 1,280,488 - 1,116,703 - 1,846,856 - 4,801,827 - 3,693,714 - 1,412,303 - 1,171,178 - 1,297,792 - 1,778,455 19,248,482 346,000 Other additional information associated with these share performance rights and option grants include: ▪ The weighted average remaining contractual life for equity entitlements outstanding at the end of the period was 3.5 years. ▪ The weighted average share price for performance rights vesting into shares during the year was $Nil (2020: $Nil). ▪ There were no options exercised during the year (2020: none exercised). ▪ The fair value was determined using the binomial tree method or the Black-Scholes option-pricing models: a. The share price at grant date ranged from: $0.01 to $0.40 b. Expected price volatility of the Group’s shares: 80% c. Dividends: $Nil d. Risk free interest rate: 1.51% to 2.50% dorsaVi Annual Report 2021 55 dorsaVi Ltd and controlled entities ABN: 15 129 742 409 2020 Grant date Expiry date Exercise price Balance at 1/7/2019 Granted during the year Vested during the year Expired during the year Balance at 30/6/2020 Exercisable at year end 5-Nov-24 5-Nov-14 25-Feb-25 25-Feb-15 24-Mar-21 24-Mar-16 1-Oct-19 29-Nov-16 29-Nov-16 29-Nov-19 15-May-17 15-May-22 1-Oct-22 15-May-17 1-Oct-23 15-May-17 1-Oct-19 15-May-17 1-Jul-19 15-May-17 1-Oct-19 5-Jun-17 1-Jul-19 5-Jun-17 18-Sep-19 18-Sep-19 1-Oct-19 18-Sep-19 1-Oct-20 18-Sep-19 1-Oct-21 18-Sep-19 18-Sep-22 18-Sep-19 4-Dec-24 4-Dec-19 4-Dec-24 4-Dec-19 7-Jan-25 7-Jan-20 7-Apr-25 7-Apr-20 25-Jun-20 25-Jun-20 7-Jul-25 7-Jul-20 TOTAL $0.40 $0.36 $0.40 $0.33 $0.33 $0.33 20,000 50,000 200,000 - 150,000 - 450,000 550,000 55,000 24,166 - 39,000 - 117,000 - 125,000 - 200,000 - - 760,000 - - 70,000 - - 115,000 - - 115,000 - - 200,000 - 1,280,488 - 1,116,703 - 1,846,856 - 4,801,827 - - 1,071,071 - 3,693,714 15,070,659 1,980,166 20,000 - - - 20,000 50,000 - - 50,000 100,000 - - - 200,000 - - 87,000 - 63,000 - - - - 450,000 500,000 - - 50,000 500,000 55,000 - - - 55,000 - - - 24,166 24,166 - - 17,470 - 21,530 - - - - 117,000 49,250 - 75,750 - - - - - - 200,000 - - - 760,000 - - 68,250 1,750 - - - 115,000 - - - 115,000 - - - 200,000 1,280,488 - 1,280,488 1,280,488 1,116,703 - 1,116,703 1,116,703 1,846,856 - 1,846,856 1,846,856 - 4,801,827 4,801,827 4,801,827 - - - 1,071,071 3,693,714 - 3,693,714 3,693,714 13,488,754 14,018,754 205,470 15,566,189 $0.086 $0.072 $0.036 $0.024 $0.018 (d) Expenses Recognised from Share-Based Payment Transactions The expense recognised in relation to the share-based payment transactions was recorded within employee benefits expense in the statement of comprehensive income were as follows: 2021 $ 2020 $ Share options Performance rights Total expenses recognised from share-based payment transactions 192,072 109,614 301,686 256,097 88,568 344,665 dorsaVi Annual Report 2021 56 dorsaVi Ltd and controlled entities ABN: 15 129 742 409 NOTE 24: SUBSIDIARIES AND RELATED PARTY DISCLOSURES The consolidated financial statements include the financial statements of dorsaVi Ltd and its controlled entities listed below: dorsaVi Europe Ltd dorsaVi USA, Inc. Australian Workplace Compliance Pty Ltd Country of incorporation Ownership interest held by DVL UK USA AUS 2020 % 100 100 100 2019 % 100 100 100 ▪ dorsaVi Europe Ltd was incorporated on 3 February 2014. ▪ dorsaVi USA, Inc. was incorporated on 19 May 2014. ▪ Australian Workplace Compliance Pty Ltd was purchased on 3 July 2014. (a) Transactions with Entities with Associates: There were no transactions with associates or their entities during the year ended 30 June 2021 (2020: $Nil). (b) Transactions with Directors, Key Management Personnel and Other Related Parties: During the year ended 30 June 2021, dorsaVi Ltd paid $Nil (2020: $Nil) to Starfish Ventures Pty Ltd on behalf of Michael Panaccio for director’s fees. As approved by shareholders at the 2019 and 2020 AGMs, non-executive directors were granted options over ordinary shares in lieu of the payment of directors’ fees. During the year ended 30 June 2021, Starfish Ventures Pty Ltd was granted 1,296,529 options on behalf of Michael Panaccio (2020: 2,918,381). NOTE 25: AUDITOR'S REMUNERATION Audit and Other Assurance Services Amounts paid and payable to Pitcher Partners (Melbourne) for: (i) An audit or review of the financial report of the entity and any other entity in the consolidated entity Total remuneration for audit and other assurance services (ii) Taxation and other compliance services Total remuneration for non-audit services Total remuneration of Pitcher Partners (Melbourne) Other Non-audit Services 2021 $ 107,300 107,300 11,100 11,100 118,400 2020 $ 109,900 109,900 14,901 14,901 124,801 dorsaVi Annual Report 2021 57 dorsaVi Ltd and controlled entities ABN: 15 129 742 409 NOTE 26: PARENT ENTITY INFORMATION (a) Summarised statement of financial position Assets: Current assets Non-current assets Total assets Liabilities: Current liabilities Non-current liabilities Total liabilities Net assets Equity: Share capital Share-based payment reserve Accumulates losses Total equity (b) Summarised statement of comprehensive income Loss for the year Other comprehensive income for the year Total comprehensive income for the year NOTE 27: SEGMENT INFORMATION (a) Description of Segments 2021 $ 2020 $ 4,916,284 253,621 5,169,905 4,135,287 378,411 4,513,698 2,050,022 2,095,663 1,065,366 3,115,388 2,054,517 1,339,542 3,435,205 1,078,493 44,532,862 1,173,557 (43,651,902) 2,054,517 41,080,353 983,554 (40,985,414) 1,078,493 (2,112,797) (20,260,016) - - (2,112,797) (20,260,016) For the years ended 30 June 2021 and 2020, management has differentiated operating segments based on product. The Group’s chief operating decision maker has identified the following reportable segments: ▪ Segment 1: Clinical; ▪ Segment 2: Workplace The operating segments have been identified based on internal reports reviewed by the Group’s chief operating decision makers in order to allocate resources to the segment and assess its performance. Assets and liabilities are reported to management on a consolidated basis. (b) Segment Information The Group’s chief operating decision maker’s use segment revenue and segment result to assess the financial performance of each operating segment. Amounts for segment information are measured in the same way in the financial statements. They include items directly attributable to the segment and those that can reasonably be allocated to the segment based on the operations of the segment. There has been no inter-segment revenue during the year. dorsaVi Annual Report 2021 58 dorsaVi Ltd and controlled entities ABN: 15 129 742 409 Segment information is reconciled to financial statements and underlying profit disclosure notes as follows: 2021 Segment revenue: Segment revenue from external source Non-segment revenue Total revenue Segment result: Segment result from external source Non-segment revenue Non-segment expenses Income tax benefit Loss from continuing operations 2020 Segment revenue: Segment revenue from external source Non-segment revenue Total revenue Segment result: Segment result from external source Non-segment revenue Non-segment expenses Income tax benefit Loss from continuing operations Revenue by geographic location: 2021 Revenue by geographic location Total revenue from external source 2020 Revenue by geographic location Total revenue from external source (c) Major Customers Clinical $ Workplace $ Total $ 1,130,045 738,937 - - 1,868,982 910,651 2,779,633 984,757 - - - 717,897 1,702,654 - 910,651 - (5,059,402) 417,830 - (2,028,267) 1,125,151 894,069 - - 2,019,220 377,839 2,397,059 1,054,240 - - - 868,013 1,922,253 377,839 - - (10,350,535) 457,364 - (7,593,079) Australia $ Europe $ USA $ Total $ 1,399,037 1,399,037 277,272 277,272 1,103,324 1,103,324 2,779,633 2,779,633 902,619 902,619 436,250 436,250 1,058,190 1,058,190 2,397,059 2,397,059 In 2021 and 2020 no customer contributed greater than 10% of the Group’s total revenue. NOTE 28: SUBSEQUENT EVENTS No matters or circumstances have arisen since the end of the financial year that have significantly affected or may significantly affect the operations of the Group, the results of those operations, or the state of affairs of the Group in future financial years with the exception of the following: • On 7 July 2021, dorsaVi Ltd announced the issue of 1,778,455 options to non-executive directors, in lieu of directors’ fees, at an exercise price of $0.041per share and an expiry date of 5 July 2026. The impact of the grant of these options was recognised in share-based payments as at 30 June 2021. dorsaVi Annual Report 2021 59 dorsaVi Ltd and controlled entities ABN: 15 129 742 409 Directors’ Declaration The directors declare that the financial statements and notes set out on pages 28 to 59 in accordance with the Corporations Act 2001: a) Comply with Accounting Standards and the Corporations Regulations 2001, and other mandatory professional reporting requirements; b) As stated in Note 1(a) the consolidated financial statements also comply with International Financial Reporting Standards; and c) Give a true and fair view of the financial position of the Group as at 30 June 2021 and of its performance for the year ended on that date. In the directors’ opinion, there are reasonable grounds to believe that dorsaVi Ltd will be able to pay its debts as and when they become due and payable. This declaration has been made after receiving the declarations required to be made by the chief executive officer and chief financial officer to the directors in accordance with section 295A of the Corporations Act 2001 for the financial year ending 30 June 2021. This declaration is made in accordance with a resolution of the directors. Greg Tweedly Chairman Andrew Ronchi Director and CEO Melbourne Date: 26August 2021 Melbourne Date: 26 August 2021 dorsaVi Annual Report 2021 60 dorsaVi Ltd and controlled entities ABN 15 129 742 409 INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF dorsaVi Ltd Report on the Audit of the Financial Report Opinion We have audited the financial report of dorsaVi Ltd “the Company” and its controlled entities “the Group”, which comprises the consolidated statement of financial position as at 30 June 2021, the consolidated statement of profit or loss and other comprehensive income, consolidated statement of changes in equity and consolidated 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 dorsaVi Ltd, is in accordance with the Corporations Act 2001, including: (a) giving a true and fair view of the Group’s financial position as at 30 June 2021 and of its financial performance for the year then ended; and (b) complying with Australian Accounting Standards and the Corporations Regulations 2001. Basis for Opinion We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of a 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 (including Independence Standards) “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. Material Uncertainty Related to Going Concern We draw attention to Note 1(c) in the financial report that conditions exist that indicate a material uncertainty exists that may cast significant doubt on the Group’s ability to continue as a going concern. Our opinion is not modified in respect of this matter. Key Audit Matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report of the current period. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Pitcher Partners. An independent Victorian Partnership ABN 27 975 255 196. Level 13, 664 Collins Street, Docklands, VIC 3008 Pitcher Partners is an association of independent firms. Liability limited by a scheme approved under Professional Standards Legislation. Pitcher Partners is a member of the global network of Baker Tilly International Limited, the members of which are separate and independent legal entities Adelaide Brisbane Melbourne Newcastle Sydney Perth 61 pitcher.com.au 60 dorsaVi Ltd and controlled entities ABN 15 129 742 409 INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF dorsaVi Ltd Key Audit Matter How our audit addressed the key audit matter Our procedures included amongst others: • Understanding the groups controls and processes for recognising and recording revenue transactions. Evaluating processes managements regarding recognition of revenue for sales and services provided. Evaluating a sample of managements recognised, accrued and deferred revenue recognition calculations, including review of terms and conditions of relevant customer contracts. Testing existence of revenue transactions to supporting documentation. Analysing general journal entries impacting revenue. Assessing the adequacy of the disclosures in the financial statements. • • • • • Revenue Recognition Refer to Note 4 – Revenue - $2,779,633 The Group’s revenue of $2,779,633 (2020: $2,397,059) is derived from clinical revenue, workplace revenue and other income. We focused on the existence and appropriate recognition of revenue as a key audit matter as these are a key contributor to the determination of profit and loss, and judgement is required in assessing revenue recognition and associated accrued or deferred revenue (contract assets and contract liabilities) in accordance with AASB 15 Revenue from contracts with customers. ` Pitcher Partners. An independent Victorian Partnership ABN 27 975 255 196. Level 13, 664 Collins Street, Docklands, VIC 3008 Pitcher Partners is an association of independent firms. Liability limited by a scheme approved under Professional Standards Legislation. Pitcher Partners is a member of the global network of Baker Tilly International Limited, the members of which are separate and independent legal entities Adelaide Brisbane Melbourne Newcastle Sydney Perth 62 pitcher.com.au dorsaVi Ltd and controlled entities ABN 15 129 742 409 INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF dorsaVi Ltd Key Audit Matter Convertible Note Liability Refer to Note 15 – Convertible note host debt - $882,868 Refer to Note 15 – Derivative liability- $359,800 How our audit addressed the key audit matter Our procedures included amongst others: • Obtaining an understanding of and evaluating the accounting processes and internal controls relating to convertible notes; • Reviewing the terms of the Convertible notes; • Assessing the appropriate treatment of the Convertible notes in accordance with AASB 9: Financial Instruments; • Reviewing the external valuation obtained by • • • the Group; Evaluating the credentials of the external valuer; Assessing the appropriateness of the valuation methodology and inputs utilised by the external valuer; Assessing the adequacy of the disclosures in the financial statements. The measurement of the Convertible notes issued during the year is considered a key audit matter due to the following: • The terms of the Convertible notes were assessed as being a financial liability with a host debt contract held at amortised cost, and an embedded derivative liability, held at fair value through the profit and loss. Accordingly, the host debt and derivative liability components of the Convertible notes require valuation upon initial recognition, and the derivative liability is required to be revalued at each reporting date. The initial valuation of the respective components, and the subsequent valuation of the derivative liability contains complexity. The recognition of the host debt as at 30 June 2020 was $749,861 and the fair value of the derivative liability was $709,725. The fair value adjustment of the derivative liability at 30 June 2021 was a decrease to $359,800 with the $349,925 change of fair value being recognised as income in the profit and loss. We focused on the fair value adjustment of the derivative liability at balance date as a key audit matter due to the complexity of the valuations required. Other Information The directors are responsible for the other information. The other information comprises the information included in the Group’s annual report for the year ended 30 June 2021, but does not include the financial report and our auditor’s report thereon. Our opinion on the financial report does not cover the other information and accordingly we do not express any form of assurance conclusion thereon. In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Pitcher Partners. An independent Victorian Partnership ABN 27 975 255 196. Level 13, 664 Collins Street, Docklands, VIC 3008 Pitcher Partners is an association of independent firms. Liability limited by a scheme approved under Professional Standards Legislation. Pitcher Partners is a member of the global network of Baker Tilly International Limited, the members of which are separate and independent legal entities Adelaide Brisbane Melbourne Newcastle Sydney Perth 63 pitcher.com.au dorsaVi Ltd and controlled entities ABN 15 129 742 409 INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF dorsaVi Ltd 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 Group’s ability 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 Group or to cease operations, or have no realistic alternative but to do so. Auditor’s Responsibilities for the Audit of the Financial Report Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with 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 Group’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 Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial report or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group 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. • Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the financial report. We are responsible for the direction, supervision and performance of the Group audit. We remain solely responsible for our audit opinion. Pitcher Partners. An independent Victorian Partnership ABN 27 975 255 196. Level 13, 664 Collins Street, Docklands, VIC 3008 Pitcher Partners is an association of independent firms. Liability limited by a scheme approved under Professional Standards Legislation. Pitcher Partners is a member of the global network of Baker Tilly International Limited, the members of which are separate and independent legal entities Adelaide Brisbane Melbourne Newcastle Sydney Perth 64 pitcher.com.au dorsaVi Ltd and controlled entities ABN 15 129 742 409 INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF dorsaVi Ltd We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions to eliminated threats or safeguards applied. 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 18 to 26 of the directors’ report for the year ended 30 June 2021. In our opinion, the Remuneration Report of dorsaVi Ltd, for the year ended 30 June 2021 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. S SCHONBERG Partner 26 August 2021 PITCHER PARTNERS Melbourne Pitcher Partners. An independent Victorian Partnership ABN 27 975 255 196. Level 13, 664 Collins Street, Docklands, VIC 3008 Pitcher Partners is an association of independent firms. Liability limited by a scheme approved under Professional Standards Legislation. Pitcher Partners is a member of the global network of Baker Tilly International Limited, the members of which are separate and independent legal entities Adelaide Brisbane Melbourne Newcastle Sydney Perth 65 pitcher.com.au dorsaVi Ltd and controlled entities ABN: 15 129 742 409 Shareholder Information Corporate Governance: The Group’s Corporate Governance Statement can be obtained at https://www.dorsavi.com/au/en/investor- relations/ Overview: The Group’s securities are listed for quotation in the form of Ordinary Shares on the Australian Securities Exchange (ASX) and trade under the symbol “DVL”. The shareholder information below was applicable as at 13 August 2021. The Group’s share capital was as follows: Type of Security: Ordinary Shares Options Performance Rights Substantial Holders: Names of Holders Starfish Technology Fund II, LP, Starfish Ventures, Michael Panaccio and Cristiana Panaccio and Micana Family Trust Unmarketable Parcels: Number of Securities 350,932,572 18,978,482 200,000 Number of Holders 1,394 5 1 Number of Shares Held % of Total Shares 102,875,786 29% Based on the closing market price on 13 August 2021, there were 549 shareholders holding less than a marketable parcel (i.e. a parcel of securities of less than $500). Options and Performance Rights (not listed on ASX): There were 18,978,482 unquoted options on issue to purchase ordinary shares under the Group’s Incentive Stock Option Agreement. The Options have been issued in accordance with the terms and conditions of the dorsaVi Ltd 2013 Share Ownership Plan. There were 200,000 unquoted Performance Rights granted, but not vested into ordinary shares, under the Group’s Incentive Agreements. The Performance Rights have been granted in accordance with the terms and conditions of the dorsaVi Ltd 2013 Share Ownership Plan. Restricted Securities and Escrow Agreements: There are no securities which are restricted or subject to escrow agreements. Voting Rights: At a general meeting, each Shareholder present (in person or by proxy, attorney or representative) has one vote on a show of hands and one vote for each share held when voting is done via a poll. Proxy forms will be included in each notice of meeting sent to Shareholders. Holders of issued but unexercised options are not entitled to vote. dorsaVi Annual Report 2021 66 dorsaVi Ltd and controlled entities ABN: 15 129 742 409 Required Statements: a) b) There is no current on-market buy-back of the Group’s securities. The Group’s securities are not quoted on any exchange other than the ASX. Distribution Schedule: Number of Shares 1 – 1,000 1,001 - 5,000 5,001 - 10,000 10,001 – 100,000 100,001 and above Total dorsaVi Ltd’s Top 20 Shareholders: Set out below is a schedule of the 20 largest holders of each class of securities quoted. Rank 1 Name STARFISH TECHNOLOGY FUND II LP 2 2 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 STARFISH TECHNOLOGY FUND II NOMINEES A PTY LTD STARFISH TECHNOLOGY FUND II NOMINEES B PTY LTD PUSEN MEDICAL TECHNOLOGY AUSTRALIA PTY LTD MS CHUNYAN NIU MR BILAL AHMAD AR BSM PTY LTD MR SALVATORE DI VINCENZO ANDREW RONCHI BANNABY INVESTMENTS PTY LIMITED 449 INVESTMENTS PTY LTD TANARNY SUPER FUND PTY LTD MR BILAL AHMAD SHADEBRIDGE PTY LTD MS GABRIELLE BANAY DRNEWNHAM SUPER PTY LTD VALENCE HOLDINGS PTY LTD THE PW & CM STINTON J P MORGAN NOMINEES AUSTRALIA PTY LIMITED MR STUART ANDREW LEWIN BUTTONWOOD NOMINEES PTY LTD Number of Holders 54 148 131 675 386 1,394 No of Shares Held 60,597,345 18,464,557 18,464,557 13,500,000 11,542,752 8,000,000 7,021,814 5,844,201 5,675,171 4,428,497 3,762,500 3,703,704 3,367,233 3,268,563 3,233,482 3,231,516 3,000,000 2,913,893 2,829,000 2,631,000 % of Total Shares 17.27 5.26 5.26 3.85 3.29 2.28 2.00 1.67 1.62 1.26 1.07 1.06 0.96 0.93 0.92 0.92 0.85 0.83 0.81 0.75 Total ordinary fully paid shares held by top 20 shareholders Total ordinary fully paid shares held by all other shareholders 185,479,785 165,452,787 52.85 47.15 dorsaVi Annual Report 2021 67 dorsaVi Ltd and controlled entities ABN: 15 129 742 409 Corporate Directory: Board of Directors and Company Secretary: Mr Gregory Tweedly Mr Ashraf Attia Ms Caroline Elliott Dr Michael Panaccio Dr Andrew Ronchi Chairman Non-Executive Director Non-Executive Director Non-Executive Director Chief Executive Officer and Executive Director Company Secretary Mr Brendan Case Executive Team: Dr Andrew Ronchi Mr Damian Connellan Ms Joanna Goldin Ms Jasmine Pateras Chief Executive Officer Chief Financial Officer Clinical Manager Workplace Manager Registered Office in Australia: C/- Pitcher Partners, Level 13, 664 Collins Street, Docklands, VIC 3008 Tel: +61 3 8610 5000 Principal Administrative Office: 85 Denmark Street, Kew, VIC 3101 Tel: 1800 367 728 Auditor: Pitcher Partners Level 13, 664 Collins Street, Docklands, VIC 3008 Tel: +61 3 8610 5000 Annual General Meeting Date and Venue: The Annual General Meeting will be held Friday, 26 November 2021 at 9:00 am. Due to the COVID 19 pandemic, the AGM will be a virtual meeting held online. Share Registry: Computershare Investor Services Pty Limited GPO Box 2975, Melbourne, VIC 3001 Tel: + 61 3 9415 4062 dorsaVi Annual Report 2021 68 dorsaVi Ltd and controlled entities ABN: 15 129 742 409 dorsaVi Annual Report 2021 69 

Continue reading text version or see original annual report in PDF format above