More annual reports from Genetic Technologies Ltd:
2023 ReportPeers and competitors of Genetic Technologies Ltd:
VeruGenetic
Technologies
Limited
AN NUA L REP ORT 2018
GE NE TIC TE CHN OLOGI ES LIMI TED
01/ WHO WE ARE
05/ ALIGNING STRUCTURE WITH STRATEGY
LETTER TO OUR SHAREHOLDERS / 02
REFRESHED BOARD OF DIRECTORS AND
SENIOR MANAGEMENT / 05
EXPANSION INTO SOUTHEAST ASIA / 07
MOVING TOWARD POPULATION SCALE
SCREENING / 07
ACCELERATING PRODUCT DEVELOPMENT / 08
BLOCKCHAIN FOR GENETICS / 08
CONSUMER EMPOWERMENT / 09
CORPORATE BRAND / 09
GENETIC RISK ASSESSMENT
THE HISTORY OF BREVAGenplus / 11
2018 AND BEYOND: COLORECTAL CANCER
RISK ASSESSMENT TEST / 12
11/
14/ STATUTORY REPORTS
WH O WE ARE
Listed on the ASX (GTG) in 2000 and
Nasdaq (GENE) in 2005, Genetic Technologies is
a leader in the development and commercialisation
of genetic risk assessment technology.
Our patented tests are designed to predict an individual’s risk of developing
chronic disease. We embrace blockchain technology focusing on genomics and
precision medicine as a means to promote better health outcomes.
Our purpose is to empower individuals to make informed decisions about their
health by offering predictive testing and assessment tools that enable individuals
and physicians to proactively develop personalised health management plans.
Our lead product, BREVAGenplus®, is a clinically validated risk assessment test
for non-hereditary breast cancer and is first in its class.
01
A NN UAL REP ORT 2 01 8
TO O UR SH ARE HOLDER S
We recognise that a critical element of our success
is the continued support of our shareholders.
We appreciate your confidence in us during this
period of intense research and development.
0 2
Dear Shareholders,
The coming year will mark the
20th anniversary of GTG. Over
the past two decades, we’ve
seen the field of genetics evolve
from an academic discipline to a
crime-fighting tool, a means of
determining paternity and a way
of understanding your heritage.
Today, we’re approaching a critical
inflection point in the market, as
genetic testing moves into the
healthcare mainstream as a tool
for predicting disease occurrence.
Individuals increasingly are
demonstrating their willingness
to self-test at their own expense.
Physicians now recommend genetic
testing to their patients as part of
an overall health program. The FDA
is quickly changing regulations in
recognition of the value of genetic
testing for disease risk profiling.
As a company, we are in an ideal
position to take advantage of
these market forces. Our uniquely
patented technologies and
significant expertise in the field of
genetic risk assessment are major
“assets” as we strive to achieve
global market adoption of our
expanding portfolio of tests.
In January, we welcomed three new
executives to the Board, presenting
the Company with the opportunity
to pursue new technologies and
commercialisation strategies,
including those presented by rapidly
expanding blockchain technologies
in the biomedical space. We are
actioning a bold plan that will take
us beyond Australia, beyond the
US, and into the global community.
Whilst the blockchain opportunities
under investigation are currently still
in their infancy, our collaboration
with Blockchain Global Limited
will provide GTG with significant
advantage to accelerate projects in
this emerging space.
Our flagship product,
BREVAGenplus® continues to be
used by physicians and cancer
specialists in the US as a tool for
developing personalised health
plans for their patients. The test
goes beyond traditional BRCA
screening which only addresses
genetic risk for women who have
a history of breast cancer in their
immediate family.
Development of an enhanced
version of the BREVAGenplus®
test is nearing completion, seeking
to broaden the applicability of
BREVAGenplus and enabling its use
by women with an extended family
history of disease. By increasing the
range of risk factors analyzed, the
test will provide clinically actionable
insight for approximately 95%
of women.
Through our established network
of research collaborators and
a revitalised internal research
and development focus in 2018
subsequent to the changes to
the Board in January, we have
accelerated our development
timelines and defined a pipeline of
products. GTG has now commenced
discussions with local and
international stakeholders to help
identify and develop pathways to
market for our colorectal cancer risk
assessment test, and in addition,
we will seek to introduce a range of
new genetic risk assessment tests
to the market for multiple diseases,
including:
❚ Cardiovascular Disease
❚ Type 2 Diabetes
❚ Prostate Cancer
❚ Melanoma
1 in 8 women are diagnosed with
breast cancer in their lifetime and
the majority of women diagnosed
with breast cancer have little to
no family history of disease.
A simple cheek swab is all it takes
to know your personalised 5 year
risk and to discover breast cancer
prevention strategies.
Ask your physician about
BREVAGenplus today.
03
All of our tests will launch under
a new brand identity, GeneType.
The new brand will allow us to build
awareness for our entire suite of
products as we push beyond breast
cancer and introduce additional
tests for chronic disease. Our
messaging to the market will look
to empower individuals to initiate
discussions with their physician
on how to use our genetic tests to
inform their personal health plan
and lifestyle choices.
As we expand our footprint into
Southeast Asia, we’ve established
relationships with key partners,
including The Shivom Project in
India and Zishan Bejing in China.
These collaborations offer GTG
the opportunity to deliver large-
scale population health initiatives
that will dramatically increase the
effectiveness of existing screening
and treatment programs.
Our invitation to enter the market
in China through the Hainan Free
Trade Zone represents an important
milestone for our company. For
perspective, cancer is the leading
cause of death in China, with over
4 million new cases diagnosed each
year. China also has the highest
prevalence of Type 2 diabetes in
the world.
To support our continued execution
of these initiatives over the course
of the coming fiscal year, Kentgrove
Capital Pty Ltd, a Melbourne-
based investment management
firm, has been engaged to assist in
strengthening our funding position
through a A$20m placement
facility. Additionally we will pursue
opportunistic funding initiatives to
strengthen our balance sheet.
We recognise that a critical element
of our success is the continued
support of our shareholders.
We appreciate your confidence
in us during this period of intense
research and development.
As we move into our third decade
as a business, we know that this will
be a defining year for the company,
for the field of genetics and for the
millions of people who will come
to rely on genetic risk assessment
testing as a key preventive measure
in the fight against chronic disease.
We believe in the power of genetic
risk assessment testing and in
our ability to deliver better health
outcomes to people around
the world.
Regards
Paul Kasian
Executive Chairman
and Interim CEO
Genetic Technologies Limited
A NN UAL RE PORT 2018
The world’s
most advanced,
scientifically
validated genetic
based health risk
assestment test.
ALIGNING STR UCT URE
WI TH STRAT EGY
Impacting health outcomes on a global scale
requires an exceptional level of commitment and
the ability to employ new technologies, pursue
new channels to market and partner with a range
of organisations around the world.
REFRESHED BOARD OF
DIRECTORS AND SENIOR
MANAGEMENT
In January, GTG refreshed the Board
of Directors, introducing skills that
combine expertise in blockchain
with commercialisation experience
in the med-tech sector.
05
Australian Institute of Company
Directors. Dr Kasian is also a non-
executive director and the Chairman
of IODM Limited (ASX: IOD), and
former Non-Executive Director of
ELK OrthoBiologics and Blockchain
Global Limited.
Dr Paul Kasian,
Chairman and Chief Executive Officer
Dr Kasian was appointed to the
Board on 12 December 2013 and
became Chairman of the Company
on 31 January 2018 and interim, part
time CEO on 6 February 2018. He
brings to the Board a combination
of expertise in strategic business
leadership and biotech investment
giving him a deep understanding of
key value drivers for companies in
generating shareholder value. He is
an experienced executive director
with demonstrated domestic and
international success in funds
management, encompassing senior
leadership, investment and risk roles.
Dr Kasian has held senior leadership
positions in a number of investment
groups, and has significant funds
management experience in Australia
leading investment in the healthcare
and life sciences sector. He holds a
PhD in Microbiology and a Master
of Business Administration, both
from The University of Melbourne,
and is a Graduate Member of the
A NN UAL RE PORT 2018
Dr Lindsay Wakefield,
Non-Executive Director
Dr Wakefield was appointed to
the Board on 24 September 2014.
He started Safetech in 1985 and
over the next 25 years Safetech
became a force in the Australian
material handling and lifting
equipment market, designing and
manufacturing a wide range of
industrial products. In 1993, he
left medicine to become the full
time CEO of Safetech. In 2006
Safetech was awarded the Telstra
Australian National Business of the
Year. In 2013 Safetech merged and
ultimately acquired Tieman Materials
Handling.
ALIGNING STRU CTU RE W ITH STRATE GY
06
Dr Wakefield continues as the CEO
of Safetech. It is Australia’s largest
manufacturer and supplier of dock
equipment, freight hoists and
custom lifting solutions. Safetech
employs approximately 100 people.
Dr Wakefield has been a biotech
investor for more than 20 years.
Dr Jerzy “George” Muchnicki,
Executive Director and
Head of Business Development
Dr Muchnicki was appointed to the
Board on 31 January 2018 and has
also been appointed to the role of
part time Business Development
Director. George graduated from
Monash University and has held
positions in private practice for
over 25 years, and was Head of
Student Health at The University
of Melbourne. For the past 14
years he has been involved in
commercialisation and funding
R&D in the biotechnology sector
from gene silencing to regenerative
medicine.
Dr Muchnicki brings with him strong
commercial and medical skills,
including broad interests in software
development, blockchain and
sustainable building materials. He
is a co-founder and Non-Executive
Director of Speed Panel Holdings
a world leader in fire rated and
acoustic wall solutions. He is also
the co-founder of Candlebets, a
software development company
that is creating blockchain enabled
platforms for the gaming industry.
blockchain advisory company.
Mr Peter Rubinstein,
Non-Executive Director
Mr Rubinstein was appointed to the
Board on 31 January 2018. He has
over 20 years’ experience in early
stage technology commercialisation
through to public listings on the ASX.
He is a lawyer, having worked at a
large national firm prior to moving
in-house at Montech, the commercial
arm of Monash University.
Mr Rubinstein has had significant
exposure to the creation, launch and
management of a diverse range of
technology companies in biotech,
digital payments and renewable
energy. Mr Rubinstein is also
Chairman of DigitalX Limited
(ASX: DCC) and a Director of
Blockchain Global Limited.
Kevin Fischer,
Chief Financial Officer and
Company Secretary
Mr Fischer was appointed to the
role of Chief Financial Officer in
November 2015 and on January
13, 2016 was appointed Company
Secretary. He has over ten years
of experience in senior finance
roles with successful diagnostic
companies, such as QIAGEN and
Cellestis. Mr Fischer is a Fellow
CPA and Chartered Secretary
who has significant experience
in the administration, financial
management and reporting for
international operations similar
to those of Genetic Technologies.
Dr Richard Allman,
Scientific Director
Dr Allman joined the Company in
2004 and was appointed Scientific
Director in December 2012. He
has over 20 years of scientific and
research experience in both the
academic arena in the UK and the
commercial sector in Australia. He
has wide experience in research
leadership, innovation management,
and intellectual property strategy,
covering oncology, diagnostics,
and product development. Prior
to entering the biotech sector,
Dr Allman’s academic career
encompassed oncology research,
drug development, and assay design.
Mr Xue “Sam” Lee,
Non-Executive Director
Mr Lee was appointed to the
Board on 31 January 2018. He is the
founder and CEO of Blockchain
Global Limited, which offers one of
Australia’s largest cryptocurrency
exchanges, blockchain consulting
and blockchain incubation services.
Blockchain Global has assisted
with over $200m in blockchain
related investments with offices
in Melbourne, New York, Kobe,
Shanghai and Dalian.
Mr Lee is a frequent speaker
at Blockchain Summits, DLT
Conferences and has been a panellist
at the World Economic Forum.
Mr Lee is also a Director of DigitalX
Limited (ASX: DCC), a leading
SPORADIC
BREAST
CANCER
85%
HEREDITARY
BREAST
CANCER
5%
FAMILIAL
BREAST
CANCER
10%
Our flagship test,
BREVAGenplus®,
predicts a woman's risk
of developing breast
cancer in the next five
years, even with no
family history.
07
EXPANSION INTO
SOUTHEAST ASIA
In July of this year, GTG was invited
to China to explore participation
in the Hainan Medical Pilot Zone,
part of the Hainan Free Trade
Zone Initiative. The invitation
was extended to GTG via Beijing
Zishan Health Consultancy Limited,
a China-based company with
whom GTG have signed a Heads
of Agreement for a proposed joint
venture. Discussions in Hainan are
part of an official review to evaluate
the feasibility of offering GTG’s suite
of genetic risk assessment tests
into China.
Following these meetings, the
Hainan Ecological Smart City
Group formally approved GTG’s
planned market entry into China
via the Hainan Free Trade Zone
Initiative. Participants in the Hainan
Medical Pilot Zone gain access
to the Chinese healthcare market
valued at more than $800B USD.
With a growing clinical market and
increased government investment in
health-related technology, China is
poised to become one of the largest
markets for genomic testing.
Companies approved to operate
in China as part of the Hainan
Free Trade Zone Initiative can
take advantage of tax benefits,
subsidies and investment. GTG
will be supported by the Hainan
Resort Software Community, an
organisation that can accelerate
market entry plans through the
provision of services including:
❚ Chinese company registration
❚ Free office space in the zone
❚ Marketing assistance and access
to government sectors, hospitals
and enterprise
❚ Assistance navigating the
process to obtain CFDA approval
for GTG’s risk assessment tests
❚ Support for gathering the test
samples necessary to optimise
GTG’s tests for the Chinese
population
Cancer is the leading cause of death
in China, with 4.3 million new cancer
cases and 2.8 million cancer deaths
estimated to occur each year. That
burden is expected to increase
in the coming decades due to an
aging population as well as changes
in lifestyle that increase cancer risk,
such as excessive calorie intake and
physical inactivity.
Breast cancer in China is increasing
at a rate of 3.5% per year.
MOVING TOWARDS
POPULATION-SCALE
SCREENING
Our work in China represents a
significant opportunity for GTG to
demonstrate the benefits of genetic
risk assessment as a public health
initiative for entire populations.
The cost of healthcare globally
is expected to reach $8.7 trillion
by 2020. Healthcare providers
are looking for ways to improve
efficiency through preventive
medicine. Detecting chronic disease
in its early stages is a key initiative in
many countries that offer healthcare
services to their citizens.
Genetic risk assessment can
potentially optimise the cost
effectiveness of national disease
screening programs. Screening
programs that test everyone at
the same intervals will be over-
screening some individuals and
under-screening others. Our goal is
to better stratify individuals into risk
categories that can be used to tailor
screening decisions and strategies
for clinical management of the
individual patient.
Early detection leads to better
outcomes for the individual. It
also impacts the burden that
chronic illness imposes on society
by lowering treatment costs and
minimising productivity losses.
A NN UAL REP ORT 2 01 8
ALIGNING STRUCTURE WITH STRATE GY
Blockchain technology
presents a unique
opportunity for GTG
to contribute to the
advancement of cancer
research and to improve
the health of individuals
around the world.
0 8
ACCELERATING PRODUCT
DEVELOPMENT
As a company, we have refocused
on accelerating product
development as a strategic
objective. Our first-to-market
genetic risk assessment test for
colon cancer is on track to be
introduced in early 2019. Following
that, we plan to deliver a suite of
new products in the next 12 months,
including genetic risk assessment
tests for:
❚ Cardiovascular Disease
❚ Type 2 Diabetes
❚ Prostate Cancer
❚ Melanoma
Our ambitious goals for the
coming year are supported by a
re-allocation of funding across the
business to leverage the patents we
hold and build on our intellectual
property through investment in
research and development.
Key Collaborators
BLOCKCHAIN FOR GENETICS
The University of Melbourne
The research collaboration we
initiated last year with The University
of Melbourne received an NHMRC
Partnership Grant early in the year.
GTG’s Scientific Director, Dr Richard
Allman is co-investigator on the
award. The research team is led
by Professor John Hopper of The
University of Melbourne’s Centre
for Epidemiology and Biostatistics.
This grant demonstrates the
growing acceptance of SNP-based
genetic risk assessment in both
the medical and the scientific
communities. The work addresses
clinical validity, one of the key
barriers to commercialisation of
genetic risk assessment tests. As
the sole commercial partner, GTG
will have the right of first refusal to
commercialise any new scientific
discoveries.
The University of Melbourne is
Australia’s highest ranking Research
University.
One of the first actions taken by the
new Board was the establishment
of a division within GTG to explore
the potential of blockchain in the
medical and biotech sector. Gene
Ventures is a wholly-owned division
of GTG, supporting blockchain-
based healthcare platforms as an
emerging distribution channel for
our genomic screening tests.
Blockchain technology presents
a unique opportunity for GTG to
contribute to the advancement of
cancer research and to improve
the health of individuals around
the world. The security and privacy
inherent in the blockchain provides
a means by which individuals can
share their genomic information
while retaining control of their
personal medical records.
Building on GTG’s strategic
alliance with Blockchain Global
Limited, Gene Ventures entered
into a collaboration agreement
with The Shivom Project in March.
This relationship opens channels
for market entry into India and
accelerates the validation of our
testing protocols for the Indian
population.
09
CORPORATE BRAND
In preparation for the introduction
of a suite of new risk assessment
tests, we are consolidating our
product identities under the
GeneType brand. Going forward,
all products will be marketed under
a single brand architecture and
contribute to the company’s brand
awareness in the market. We are
redesigning our web presence,
digital assets and product materials
to reflect the new brand.
A pilot launch of a US based
marketing campaign will seek
to raise consumer awareness of
the benefits of GTG's genetic risk
assessment tests. We will reach out
directly to individuals in our target
demographic and support them
and their physician through the
process of:
❚ Evaluating whether the test is
right for them
❚ Collecting and submitting a
cheek-swab sample
❚ Communicating the results of
the test
❚ Assisting the physician and the
patient with the development
of a personalised risk reduction
plan
CONSUMER EMPOWERMENT
Today, consumers are empowered
to take control of their health in
unprecedented ways. Over the
coming months, we will introduce
a platform that showcases our tests
directly to consumers, while still
maintaining their relationship with
their primary care physician.
We have seen the proliferation of
at-home genealogy tests and are
aware that some of these companies
are venturing into health-related
genetic testing. These “direct-
to-consumer” products are not
clinically validated tests and, as such,
are not actionable by physicians.
Our tests are clinically validated
and actionable. They must be
ordered by a physician. Physician
oversight ensures that the patient
fully comprehends the results of the
test and is supported by ongoing
healthcare management.
A NN UAL RE PORT 2018
BREVAGenplus®
offers a clearer picture
of breast cancer risk,
combining clinical
risk factors and
genetic markers.
GENETIC RISK ASSE SSMEN T
Estimating the susceptibility of an individual
to disease (risk prediction) is central to clinical
decision-making, especially in the context of
early disease detection and prevention
of common adult-onset chronic diseases.
11
Additionally, it can be a powerful
motivational tool for personal health
management when communicated
and understood effectively.
Traditionally, clinical risk prediction
for the common chronic diseases
has relied upon basic demographic
characteristics, such as age and
gender; basic clinical and lifestyle
factors, such as body mass
index, smoking status, alcohol
consumption and physical exercise
habits; measurement of clinical
risk factors such as blood pressure
levels, blood sugar levels, etc.
Notably absent has been the
incorporation of a genetic risk
assessment.
Building upon the science and
academic collaborations which
delivered the first commercially
available breast cancer risk
assessment test to combine
clinical and genetic risk factors
into a single test (BREVAGen and
BREVAGenplus), The Company
is embarking upon an ambitious
research and development program
to fast-track the development
of multiple new risk assessment
products. Over the course of
this financial year, we will seek to
introduce genetic risk assessment
tests for a range of chronic diseases.
Concomitant with the research
and development will be the
establishment of new joint ventures
to support the introduction and
market penetration of these tests
to new geographical areas, outside
of our traditional US sales base.
THE HISTORY OF
BREVAGenplus
The identification in 2007 of
a number of single nucleotide
polymorphisms (SNPs), each with an
associated small relative risk of breast
cancer, led to the development of the
first commercially available genetic
risk test for sporadic breast cancer,
BREVAGen™. The Company launched
the product, in the US in June 2011.
In October 2014, Genetic
Technologies released its next-
generation breast cancer risk
assessment test, BREVAGenplus.
This version of the test incorporates
a 10-fold expanded panel of genetic
markers (SNPs), known to be
associated with the development of
sporadic breast cancer, providing an
increase in predictive power relative
to its first-generation predecessor
test. In addition, the test is clinically
validated in a broader population of
women including, African American
and Hispanic women.
This increases the applicable
market beyond the Caucasian-only
indication of the first generation
test, and simplifies the marketing
messaging to medical clinics and
breast health centres in the US.
The Company re-evaluated its test
in order to increase widespread
adoption as a general population
screen, and in January 2017 released
the ‘Enhanced’ BREVAGenplus. This
new version of the test retains the
accuracy of the previous model,
while removing some of the clinical
risk factors to streamline the test for
ease-of-use. Additionally, this new
version enables strict compliance
with current guidelines for general
population screening by reporting
results on the 5 year risk score.
The expanded panel of SNPs
incorporated into BREVAGenplus
were identified from multiple large-
scale genome-wide association
studies and subsequently tested in
case-control studies utilising specific
Caucasian, African American and
Hispanic patient samples. Proof
of concept of the ‘Enhanced’
BREVAGenplus was independently
validated within a JNCI manuscript
published in 2015.
A NN UAL RE PORT 2018
8) “Economic Evaluation of Using
a Genetic Test to Direct Breast
Cancer Chemoprevention in
White Women with a Previous
Breast Biopsy”. Applied Health
Economics and Health Policy.
2014 Apr; Vol. 12 (2):203-17.
9) “Using SNP genotypes to
improve the discrimination
of a simple breast cancer risk
prediction model”. Breast Cancer
Res Treat. 2013 Jun; Vol. 139
(3):887-96.
10) “Assessment of clinical validity
of a breast cancer risk model
combining genetic and clinical
information”. J Natl Cancer Inst.
2010 Nov 3; Vol. 102 (21):1618-27.
1 2
GENET IC RISK ASS ESSMEN T
2018 AND BEYOND:
COLORECTAL CANCER RISK
ASSESSMENT TEST
In 2016, Genetic Technologies
announced the signing of an
exclusive worldwide license
agreement with The University of
Melbourne for the development
and commercialisation of a novel
colorectal cancer risk assessment
test. The core technology behind
this test was developed by Professor
Mark Jenkins and his research
team at the University’s Centre for
Epidemiology and Biostatistics.
Results from preliminary modelling
studies were first published
online in Future Oncology on
1 February 2016, in a paper entitled
“Quantifying the utility of single
nucleotide polymorphisms to guide
colorectal cancer screening”.
This simulated case-control study
of 1 million patients indicated that
a panel of 45 known susceptibility
SNPs can stratify the population
into clinically useful risk categories.
In practice, the technology could
be used to identify people at high
risk for colon cancer who should be
subjected to intensive screening.
Those identified as low risk can
be spared costly and invasive
screening, thereby preventing
adverse events and unjustified
expenses.
The University of Melbourne
and Genetic Technologies have
embarked on a robust, ongoing
research collaboration enabling
us to leverage the University’s
renowned world-class expertise
in SNP-based risk assessment
and risk model development. The
partnership with the University is
comprehensive and highlights the
Company’s overall corporate mission
to become a leader in the genomics
sector while enhancing its pipeline
of risk assessment products.
Following is a list of peer-
reviewed publications supporting
the performance of both the
BREVAGenplus and colorectal
cancer tests to date:
1) “Bridging the Data Gap in
Breast Cancer Risk Assessment
to Enable Widespread Clinical
Implementation across the
Multiethnic Landscape of the
US” Journal of Cancer Treatment
and Diagnosis. 201;8 2(4):1-6.
2) “Ability of known susceptibility
SNPs to predict colorectal
cancer risk for persons with
and without a family history”.
https://doi.org/10.1101/267666.
3) “Quantifying the utility of single
nucleotide polymorphisms
to guide colorectal cancer
screening”. Future oncology
(London, England), 12(4),
503-513 (2016).
4) “Prediction of breast cancer risk
based on profiling with common
genetic variants”. J Natl Cancer
Inst. 2015; 107(5):doi:10.1093/jnci/
djv036. doi: 10.1093/jnci/djv036.
5) “Breast cancer risk prediction
using clinical models and 77
independent risk-associated
SNPs for women aged under 50:
Australian Breast Cancer Family
Registry” Cancer Epidemiology,
Biomarkers and Prevention.
2016 Feb; 25(2):359-65.
6) “SNPs and breast cancer risk
prediction for African American
and Hispanic women”. Breast
Cancer Research & Treatment.
2015 Dec; 4(3):583-9.
7) "Cost-effectiveness of a Genetic
Test for Breast Cancer Risk”.
Cancer Prevention Research.
2013 Dec; Vol. 6 (12):1328-36.
The University of
Melbourne and
Genetic Technologies
have embarked on
a robust, ongoing
research collaboration.
13
A NN UAL RE PORT 2018
GE NE TI C TECHN OLOGI ES LI MI TE D
STATU TORY R EPORTS
FOR THE Y EA R EN DE D
30 JU NE 2 018
DIRECTORS’ REPORT
15/
33/ CORPORATE GOVERNANCE STATEMENT
CONSOLIDATED STATEMENT OF
COMPREHENSIVE INCOME/(LOSS) / 34
CONSOLIDATED BALANCE SHEET / 35
CONSOLIDATED STATEMENT OF CASH FLOWS / 36
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY / 37
38/ NOTES TO THE FINANCIAL STATEMENTS
DIRECTORS’ DECLARATION / 71
AUDITOR’S INDEPENDENCE DECLARATION / 72
AUDITOR’S REPORT / 73
78/ ASX ADDITIONAL INFORMATION
CORPORATE INFORMATION / 80
DIREC TORS’ R EPORT
The Directors submit their Report
for the year ended 30 June 2018.
15
DIRECTORS
The names and details of the
Directors of Genetic Technologies
Limited who held office during
the 2018 financial year and until
the date of this Report are stated
below. Unless otherwise stated
the following persons were
directors during the whole of the
financial year and up to the date of
this report.
Directors in office as at
the date of this Report
Dr Paul A. Kasian PhD, MBA, GAICD
(Chairman and Chief Executive Officer)
Dr Kasian was appointed to the
Board on 12 December 2013 and
became Chairman of the Company
on 31 January 2018 and interim, part
time CEO on 6 February 2018. He
brings to the Board a combination
of expertise in strategic business
leadership and biotech investment
giving him a deep understanding on
key value drivers for companies in
generating shareholder value. He is
an experienced executive director
with demonstrated domestic and
international success in funds
management, encompassing senior
leadership, investment and risk roles.
Dr Kasian has held senior leadership
positions in a number of investment
groups, and has significant funds
management experience in Australia
leading investment in the healthcare
and life sciences sector. He holds
a PhD in Microbiology and a Master
of Business Administration, both
from The University of Melbourne,
and is a Graduate Member of the
Australian Institute of Company
Directors. Dr Kasian is also a non-
executive director and the Chairman
of IODM Limited (ASX: IOD), and
former Non-Executive Director of
ELK OrthoBiologics and Blockchain
Global Limited.
Dr Lindsay Wakefield MBBS
(Non-Executive)
Dr Wakefield was appointed to
the Board on 24 September 2014.
He started Safetech in 1985 and
over the next 25 years Safetech
became a force in the Australian
material handling and lifting
equipment market, designing and
manufacturing a wide range of
industrial products. In 1993, he left
medicine to become the fulltime
CEO of the Company. In 2006
Safetech was awarded the Telstra
Australian National Business of the
Year. In 2013 Safetech merged and
ultimately acquired Tieman Materials
Handling. Dr Wakefield continues
as the CEO of the Company.
It is Australia’s largest manufacturer
and supplier of dock equipment,
freight hoists and custom lifting
solutions. Safetech employs
approximately 100 people.
Dr Wakefield has been a Biotech
investor for more than 20 years.
Dr Jerzy (George) Muchnicki
(Executive)
Dr Muchnicki was appointed to the
Board on 31 January 2018 and has
also been appointed to the role of
part time Business Development
Director. George graduated from
Monash University having held
positions in private practice for
some 25 years to head of student
health at Melbourne University. For
the past 14 years he has been mostly
involved in commercialisation and
funding R&D in the biotechnology
sector from gene silencing to
regenerative medicine.
Dr Muchnicki brings with him strong
commercial and medical skills,
including broad interests in software
development, blockchain and
sustainable building materials. He
is a co-founder and Non-Executive
Director of Speed Panel Holdings
a world leader in fire rated and
acoustic wall solutions. He is also
the co-founder of Candlebets,
a software development company
that is creating blockchain enabled
platforms for the gaming industry.
A NN UAL REP ORT 2 01 8
DIR ECTORS’ REPORT
and development and in building
successful companies which have
commercialised a wide range
of Australian and international
technologies.
Mr Eutillio Buccilli
(Executive) Stepped Down as CEO and
Director on 6 February 2018
Mr Buccilli was appointed to the
Board in June 2015. He joined the
Company in June 2014 as Chief
Financial Officer. In November
2014, he was appointed to the
position of Chief Operating Officer
and Chief Financial Officer and
was subsequently appointed Chief
Executive Officer in February 2015.
Mr Buccilli brought more than
35 years of senior management
experience in the financial
services, contracting and
recruitment, property and retail
industries in Australia and the US
to the role. He has held senior
management positions with blue
chip corporations such as General
Electric (“GE”), Computer Science
Corporation, Coles Myer and
Challenger Limited. Whilst at GE,
Mr Buccilli was seconded to the US,
where he worked at the GE Capital
Headquarters located in Stamford
Connecticut.
Company Secretary as at
the date of this Report
Kevin Fischer
FCPA, FGIA, FCIS, B. Com
Mr Fischer was appointed
Company Secretary on 13 January
2016 following his appointment
as Chief Financial Officer on
2 November 2015. He has over ten
years’ experience in senior finance
roles with successful diagnostic
companies, such as QIAGEN and
Cellestis. Mr Fischer is a Fellow
CPA and Chartered Secretary who
has significant experience in the
financial management and reporting
for international operations.
Interests in the shares and
options of the Company and
related bodies corporate
As at the date of this Report, the
following Directors hold an indirect
beneficial interest in the shares and
options of the Company:
Dr Paul Kasian
Shares
256,410
Dr Lindsay Wakefield
7,754,763
Dr Jerzy Muchnicki
20,903,244
Mr Peter Rubinstein
47,282,700
Options
-
8,333,333
6,666,667
Mr Grahame Leonard AM BA (Hons),
LLB, CA, CPA, FAICD (Dip), AFAIM
(Non-Executive) Resigned 30 January 2018
Dr Paul Kasian
Dr Lindsay Wakefield
Dr Jerzy Muchnicki
Mr Peter Rubinstein
5,000,000
Dr Wakefield also has a direct
interest in 570,500 shares, and
Mr Lee has a direct interest in
59,594,850 ordinary shares
(represented by 397,299 American
Depositary Receipts).
Apart from the above, no Director
holds any interest in the shares and
options of the Company as at the
date of this Report.
Mr Leonard was appointed to the
Board on 29 November 2013 and
also served as Chairman of the
Company’s Audit Committee. He is
a qualified Lawyer and Chartered
Accountant. He brings over 35 years’
experience in the corporate world
including Lysaght (BHP), BTR Nylex
and The Thompson Corporation.
His numerous community positions
include former Commissioner,
Victorian Multicultural Commission,
former Chair, Victorian Government
Multifaith Advisory Group and
former Director of Transparency
International Australia, (the
Australian arm of the international
anti-corruption watchdog).
16
Mr Peter Rubinstein
(Non-Executive)
Mr Peter Rubinstein was appointed
to the Board on 31 January 2018.
He has over 20 years’ experience
in early stage technology
commercialisation through to public
listings on the ASX. He is a lawyer,
having worked at one of the large
national firms prior to moving in
house at Montech, the commercial
arm of Monash University.
Mr Rubinstein has had significant
exposure to the creation, launch
and management of a diverse range
of technology companies including
in biotech, digital payments and
renewable energy. Mr Rubinstein is
also Chairman of DigitalX Limited
(DCC) and a Director of Blockchain
Global Limited.
Mr Xue (Sam) Lee
(Non-Executive)
Mr Sam Lee was appointed to the
Board on 31 January 2018. He is
the founder and CEO of Blockchain
Global Limited, which offers one
of Australia’s largest cryptocurrency
exchanges, blockchain consulting
and blockchain incubation services,
assisting with over $200m in
blockchain related investments
with offices in Melbourne, New York,
Kobe, Shanghai and Dalian.
Mr Lee is a frequent speaker
at Blockchain Summits, DLT
Conferences and has been a panellist
at the World Economic Forum.
Mr Lee is also a Director of ASX listed
DigitalX Limited (DCC), a leading
blockchain advisory company.
Directors who held office
during the year
Names of directors who vacated
their roles during the year are as
follows:
Dr Malcolm R. Brandon BScAgr, PhD
(Non-Executive) Resigned 30 January 2018
Dr Brandon was appointed to the
Board on 5 October 2009 and as
its Chairman on 28 November 2012.
He has over 40 years’ experience
in commercially focused research
GENETIC TECHNOLOGIES
LIMITED
100%
100%
100%
100%
100%
GENETYPE
CORPORATION
GENE VENTURES
PTY LTD
GENETYPE
PTY LTD
GENETIC
TECHNOLOGIES
CORPORATION
PTY LTD
PHENOGEN
SCIENCES INC
OPERATING AND
FINANCIAL REVIEW
Corporate structure
Genetic Technologies Limited is a
public company limited by shares
that is incorporated and domiciled
in Australia. The Company has
prepared a consolidated financial
report incorporating the entities
that it controlled during the financial
year, which are outlined in the above
illustration of the Group’s corporate
structure as at the date of this
Report (refer note 26 of the financial
statements regarding changes to
structure during the year).
Group overview
Genetic Technologies is a diversified
molecular diagnostics company
embracing blockchain technologies
across genomic testing platforms.
GTG offers cancer predictive
testing and assessment tools to
help physicians proactively manage
patient health. The Company’s
lead product, BREVAGenplus®, is a
clinically validated risk assessment
test for non-hereditary breast
cancer and is first in its class.
BREVAGenplus improves upon
the predictive power of the first
generation BREVAGen test and
is designed to facilitate better
informed decisions about breast
cancer screening and preventive
treatment plans. BREVAGenplus
expands the application of
BREVAGen from Caucasian women
to include African-Americans and
Hispanics, and is directed towards
women aged 35 years or above,
who have not had breast cancer and
have one or more risk factors for
developing breast cancer.
Principal activities
The principal activity of the entities
within the Group during the financial
year was the provision of molecular
risk assessment for cancer. In
addition, during the year the
Company entered into a strategic
alliance to explore and pursue
opportunities to not only build on
the genomic assets and expertise
that it has developed to date in
the provision of molecular risk
assessment, but also take advantage
of the new and developing
opportunities that blockchain digital
platforms may create in the medical
and biotech industries.
Operating Result
The operating result for the year is
directly reflective of the Company’s
strategic transition as it seeks to
expand its genetic testing business,
embrace blockchain opportunities in
the medical and biotech space and
evaluate distribution opportunities
of the BREVAGenplus breast
cancer risk test and pipeline of risk
assessment products.
A NN UAL RE PORT 2018
17
During the 2018 financial year,
Genetic Technologies Limited
and its subsidiaries generated
consolidated gross revenues from
continuing operations, excluding
other revenue, of approximately
$0.2 million compared to $0.5
million in the preceding year. This
differential is directly attributable to
a decrease in the overall sales of the
BREVAGenplus tests.
Overheads have decreased by
approximately $1.6 million compared
with 2017. The combined areas of
selling/marketing, administration
(excluding net foreign currency
losses), licensing and operations
totalled $6.4 million for the year
compared with $8 million for 2017.
This overall reduction in overheads
is primarily attributable to a
decrease in selling and marketing
costs of $1.7 million, resulting
from a reduced headcount in the
US as the Company transitioned
the BREVAGenplus commercial
programme from a direct salesforce
to an ecommerce based solution.
The loss for the year of $5.46
million includes a $0.5 million
gain attributable to the voluntary
liquidation of GeneType AG, the
dormant Swiss subsidiary (2017: Nil).
1 8
DIRE CTORS’ REPORT
Dividends and distributions
No dividends have been paid since
the end of the previous financial
year, nor have the Directors
recommended that any dividend
be paid.
Review of financial condition
Capital structure
As at the date of this Report,
the Company had a total of
2,435,282,724 fully paid ordinary
shares on issue, all of which were
listed on the Australian Securities
Exchange, and on the Nasdaq
Capital Market in the US via the
Company’s ADRs (American
Depositary Receipts). Also at that
date, there were 55,102,778 unissued
ordinary shares in the Company
under option. As at the date of this
Report, no ordinary shares were
subject to escrow.
Treasury and related policies
The Company has in place a cash
management policy which follows
industry accepted leading practice
by investing the Company’s cash
assets in a range of short to medium
term interest-bearing deposits
with appropriately rated financial
institutions.
Cash provided by operations
During the financial year, the
consolidated net cash outflows used
in operations was approximately
$5.6 million. This is a $1.2 million
improvement compared to the prior
financial year. Overall, the Group’s
consolidated cash assets decreased
by approximately $5.5 million during
the 2018 financial year primarily to
support ongoing operations.
Liquidity and funding
As at 30 June 2018, the Company
also had corporate credit card
facilities with National Australia
Bank Limited and Bank of America,
which had total credit limits of
$150,000 and $13,770, respectively.
As at that date, a total liability
outstanding in respect of these
credit card facilities was $12,031.
Cash and cash equivalents, as at
30 June 2018 was $5,487,035.
Audit Report
The Company’s auditor has included
an “emphasis of matter” paragraph
in the Audit Report relating to the
Company’s ability to continue as
a going concern (refer Note 2(a)
Going concern).
Significant changes in the
state of affairs
During the year the Company’s
strategy was to focus on the
expansion of its cancer diagnostic
franchise. Significant changes in the
state of affairs of the group during
the financial year were as follows:
❚ A reduced physical headcount
in the US as the Company
transitioned the BREVAGenplus
commercial programme
from a direct salesforce to an
ecommerce based solution.
Under the new program, it is
planned that the consumer will
be able to initiate the testing
by accessing the Consumer
Initiated Testing (CIT) platform
via the Company’s US subsidiary,
Phenogen Sciences, Inc. website.
❚ On 2 February 2018, the
Company entered into a non-
binding terms sheet with
Blockchain Global Limited (BCG),
which outlined a proposed
strategic alliance between the
parties with respect to the
provision of a suite of blockchain
opportunities to the Company to
leverage off its existing genetics
testing platform, existing CLIA
approved laboratory and long
history in genomics, along with
BCG’s extensive blockchain
experience, with the proposed
issue of 486,000,000 shares
to BCG in 3 tranches subject
to the achievement of certain
milestones. Although subject
to final shareholder approval,
the strategic alliance has
subsequently been formalised
through a framework agreement,
executed between the parties on
2 August 2018.
There were no other significant
changes in the state of affairs that
are not described elsewhere in
this Report.
Significant events after
balance date
The following significant events
have occurred after balance date:
❚ The Company has renewed the
lease agreement for its Fitzroy
premises in Melbourne for a
further period of 3 years from
1 September 2018 to 31 August
2021. The Company has also
entered into a 2 year lease for
new premises in Charlotte, North
Carolina, commencing 23 July
2018 to 31 July 2020.
❚ A Framework Agreement with
Blockchain Global Limited
(“BCG”) was entered into on
2 August 2018. The Agreement
formalises the non-binding
terms sheet that was entered
into between the parties on
2 February 2018, which outlined
a proposed strategic alliance
with respect to the provision of a
suite of blockchain opportunities
to the Company, with the
proposed issue of 486,000,000
shares to BCG in 3 tranches
subject to the achievement of
certain milestones.
❚ On 8 August 2018, the Company
executed an Equity Placement
Facility with Kentgrove Capital
Pty Ltd. Under the Facility,
Kentgrove Capital may provide
the Company with up to A$20
million of equity capital in a
series of individual placements
of up to $1 million (or a higher
amount by mutual agreement)
over the next 20 months.
Following the execution of the
Facility and under a Prospectus
as lodged with ASIC, the
Company has issued:
19
❘
❘
❘
12,500,000 Options,
exercisable at $0.0153 each,
expiring 3 years after issue
(Establishment Options), to
Kentgrove Capital Pty Ltd
in its capacity as trustee
of the Kentgrove Capital
Growth Fund (Kentgrove)
(Option Offer)
8,833,100 Shares
(Establishment Shares) to
Kentgrove in lieu of payment
of an Establishment Fee
(Establishment Share Offer)
100,000,000 Shares
(Collateral Shares) to
Kentgrove as security for the
Company’s obligations under
the equity placement facility
with Kentgrove.
The issue of the establishment
and collateral shares to
Kentgrove has resulted in an
increase of the issued share
capital of the Company to
2,544,115,824.
❚ Under the lodged Prospectus,
the Company will also have the
ability to offer and issue up to
441,655,004 Placement Shares
either to Kentgrove under the
Kentgrove Facility, or to other
investors as determined by the
board, to raise up to $5,000,000.
The Company does not currently
have binding commitments
from any party to subscribe
for the Placement Shares. The
Prospectus currently has a
closing date of 9 November 2018.
❚ Following the recommendation
of the Remuneration Committee,
and subsequent Board approval
in July 2018, the Board has
agreed to award the Directors
of the Company Share Options
pursuant to the Company’s
Employee Share Option
Plan. Subject to Shareholder
approval, the quantum of the
award, ranging in value from
$75k to $150k will be aligned
to the individual Directors’
responsibilities and activities.
In addition, the Board has
agreed to grant to Dr Kasian,
in his role as interim CEO,
50 million Options subject to
certain market related vesting
conditions. The issue of such
Options will be subject to all
necessary Shareholder approvals
being obtained.
❚ The company has executed
an Agreement with Swisstec
Health Analytics on 30 July 2018
which sets out the principal
commercial terms on which the
Company intends to appoint
Swisstec as a non-exclusive
distributor for hospitals in Asia,
and imposes binding obligations
on the parties to negotiate in
good faith in order to enter a
formal distribution agreement.
In accordance with the terms of
this agreement, the Company
has acquired a 5% equity stake
in Swisstec, and has provided
Swisstec with $250k to facilitate
their expansion into hospitals in
the Asian region.
❚ The Company has signed a
Heads of Agreement with Beijing
Zishan Health Consultancy
Limited. The Agreement provides
a framework according to which
the two parties will explore
opportunities to achieve market
entry, through a Joint Venture,
for GTG’s genomic tests into
the health sector in the People’s
Republic of China.
Business strategy, future
developments and prospects
Following the endorsement by
shareholders of a refreshed Board
of Directors in January 2018, the
Company elected not to pursue
any of the potential strategic
opportunities that were identified
during the comprehensive review
undertaken by Roth Capital Partners
during the latter half of 2017. The
Company has instead during FY 18
renewed its focus on what it has
identified as key initiatives, including
R&D and global distribution and;
❚ Progressed development of an
enhanced breast cancer risk
assessment test, scheduled for
launch in H1 2019.
A NN UAL REP ORT 2 01 8
❚ Progressed development
of a Colorectal Cancer risk
assessment test, scheduled for
launch in H1 2019.
❚ Commenced R&D activities for
other cancer and disease targets
for its predictive technologies,
initially focusing on Prostate
Cancer, Melanoma, Type 2
Diabetes and Cardiovascular
Disease.
❚ Furthered discussions with US
telemedicine distributors for
implementation of a Consumer
Initiated Testing platform.
❚ Entered into a strategic alliance
with Blockchain Global Limited
(BCG) to pursue opportunities
that potentially allow it to not only
build on the genomic assets and
expertise that it has developed
to date but also take advantage
of the new and developing
opportunities that blockchain
digital platforms may create.
In addition, the Company’s ongoing
collaboration with The University of
Melbourne was further enhanced
through the execution of a
research and services agreement
for the further development and
enhancement of the BREVAGenplus
breast cancer risk assessment
test whilst the new collaboration
with Blockchain Global Limited
presents a unique opportunity
for the Company to contribute to
the advancement of cancer and
disease research and to improve
the health of individuals around
the world. The security and privacy
inherent in the blockchain provides
a means by which individuals can
share their genomic information
with research organisations
while retaining control of their
personal medical records. GTG is
also exploring the implications of
blockchain technology to enable
big data applications that will utilise
artificial intelligence to promote
personalised healthcare informed
by the genomics data. The creation
of a store of genetic data may more
accurately guide the treatment
of individuals according to their
genetic risk profile.
Key focus areas for the upcoming
year include:
❚
Launch of an enhanced
BREVAGenplus breast
cancer risk assessment test
and Colorectal cancer risk
assessment test.
❚ Progress ongoing development
and launch of predictive tests for
other cancer and disease targets.
❚ Pursuing strategic distribution
partnerships to accelerate the
adoption of the Company’s
genetic screening tests in the
US, Australia and Asia.
❚ Pursue blockchain opportunities
focussed on genetics, disease
prevention and general health.
2 0
Legal matters
There are no legal matters of a
material nature or amount affecting
the Company as at the date of this
Report.
Earnings / (loss) per share
Basic earnings /
(loss) per share
(cents per share)
Diluted earnings /
(loss) per share
(cents per share)
2018
2017
(0.22)
(0.40)
(0.22)
(0.40)
Material business risks
The Group operates in the
biotechnology sector. Any
investment in this sector is
considered to be high risk in
nature. The Group is subject to
normal business risks including,
but not limited to, exchange rate
fluctuations; the condition, liquidity
and volatility of global securities
markets; changes in government
policy and legislation (particularly
in Australia and the US); and
potential litigation, all of which are
largely outside the control of the
Company’s Board and Management.
Other risks that are more specific to
the Company, the sector in which it
operates and its underlying business
activities include:
DIR ECTORS’ REPORT
❚ Financial risk – With the
exception of the year ended
30 June 2011, the Company has
incurred operating losses in
every year of its existence. As
at 30 June 2018, the Company
had accumulated losses of
$123,311,946 and the extent of
any future losses and whether or
not the Company can generate
profits in future years remains
uncertain. The Company
currently does not generate
sufficient revenue to cover its
operating expenses. There is also
no certainty that the Company
will be able to raise additional
funds by issuing further shares
and/or the raising of debt and,
if such funds are available, on
what terms the Company would
be able to secure them. Refer
Note 2(a) for further information
on the material uncertainty
that may cast significant doubt
on the Company’s ability to
continue as a going concern.
❚ Competition – All aspects of
the medical, biotechnology
and blockchain industries face
significant competition. The
rapid pace of innovation and
development within the industry,
together with the high number
of competitors, mean that there
is no guarantee the Company’s
ventures in these industries
will be effective or economic.
There is a risk that competitors’
products, services or offerings
may render the Company’s
services, products or offerings
obsolete or uncompetitive. Many
of the organizations competing
with the Company are much
larger and have more ready
access to needed resources.
In particular, they would have
greater experience in the
areas of finance, research and
development, manufacturing,
marketing, sales, distribution,
technical and regulatory
matters than the Company
does. In addition, many of the
larger current and potential
competitors have already
established name/brand
recognition and more extensive
collaborative relationships.
For this reason, there can be
no guarantee that any of the
products, services or offerings
associated with the Company
will ever be commercialised, or
generate a profit.
One notable risk arising from the
intensity of market competition
in the blockchain industry is that
the Company may be unable to
compete successfully against
future competitors who pursue a
strategy of foregoing profitability
in the short or medium term
to grow their market share.
Accordingly, in the event that
the Company’s exploration of
blockchain products, services
or offerings is successfully
commercialised, there remains a
risk that this form of aggressive
competition could still result
in reduced profitability and
loss of market share which is
likely to adversely affect its
financial position. However, the
Company maintains an extensive
patent portfolio which does
provide some protection for the
BREVAGenplus test.
Intellectual property (“IP”)
risks – The Company relies on
its portfolio of patents, patent
applications and exclusive
licenses to patents relating to
Genetic Technologies. While the
Company patents and protects
its IP, it cannot be certain
that additional patents will be
issued to it or that its patents
will withstand challenges by
others. Patents issued to, or
licensed by, the Company may
be infringed or third parties may
develop similar technologies.
Further, patents may not provide
meaningful protection from
competitors. The Company
may also need to sue, or be
sued, by third parties regarding
its patents and other IP rights.
These suits may be costly and
would divert funds and resources
from the Company and cause a
distraction to Management.
❚
The transition from a traditional
reimbursement system through
insurance providers to a direct
patient self-pay program
introduced 1 April 2017 may not
produce the desired result of
providing economic and process
certainty to the transaction for
the healthcare provider and the
patient and overall improvement
of the pricing and billing
complexities. Additionally, the
transition of the BREVAGenplus
commercial programme
from a direct salesforce to an
ecommerce based solution
in August 2017, whereby it is
planned that the consumer will
be able to initiate the testing
by accessing the Consumer
Initiated Testing (CIT) platform
via the Company’s US subsidiary,
Phenogen Sciences, Inc. website,
may not result in an increase in
the uptake of BREVAGenplus.
❚ Development and
commercialisation of
blockchain applications –
Through the proposed strategic
alliance with BCG announced
on 15 February 2018, the
Company presently intends to
explore medical and biotech
blockchain applications. Failing
to successfully secure or develop
and commercialise these
offerings, products, solutions or
services is likely to negatively
impact the Company’s
performance, reduce its future
opportunities, and weaken its
financial position.
21
❚ Professional liability risks –
By the very nature of its
operations, the Company’s
business exposes it to potential
liability risks that are inherent
in the testing, manufacturing,
marketing and sale of genetic
tests. In the event of a mistake
occurring, including an incorrect
result of analysis of genetic
variations or other screening
tests performed, the commercial
sale of a genetic test by the
Company may expose it to
professional liability claims
and possible adverse publicity.
Litigation of such claims could
be costly. Further, if a court
were to require the Company to
pay damages to a plaintiff, the
amount of such damages could
harm its financial condition,
despite the Company having
significant levels of public and
product liability insurance
coverage to protect it from
such risks.
❚ Government regulation –
In addition to general regulation
and laws applicable to all
businesses, the Company
is subject to accreditation
regulation and legislation relating
to genetic research and testing.
From time to time, federal, state
and/or local governments adopt
or change regulations relating to
the conduct of genetic research
and genetic testing. In future,
such regulations could limit or
restrict the Company’s genetic
research activities as well as
genetic testing for research or
clinical purposes. Regulations
restricting genetic testing
could adversely affect the
Company’s ability to market and
sell its products and services.
Accordingly, any regulations of
this nature could increase the
costs of operations or restrict
its ability to conduct its testing
business and might adversely
affect its operations and
financial condition.
❚ Ethical issues – Public opinion
regarding ethical issues related
to the confidentiality and
appropriate use of genetic
testing results may influence
government authorities to call
for limits on, or regulation of
the use of genetic testing. In
addition, such authorities could
prohibit testing for genetic
predisposition to certain
conditions, particularly for
those that have no known cure.
Adverse publicity or public
opinion relating to genetic
research and testing could
reduce the potential markets
for the Company’s services,
which could adversely affect
its revenues.
❚ BREVAGen – Since the launch
of the Company’s BREVAGen
test in June 2011, a number of
potential commercial risks have
been identified. The test exists
in a new area of genetic testing,
being a predictive test, and
it may take time to establish
credibility and educate potential
customers which may delay
establishing reasonable rates
of sales.
Despite already having various
studies and review publications,
clinician adoption of the test
requires substantial resources
and effort. Even though the
Company’s laboratory is CLIA
certified, US government
health care programs could
potentially restrict its ability to
offer the test in the US, thereby
restricting the available market.
The launch of BREVAGenplus
(expanded SNP panel applicable
to African-American and
Hispanic ethnicities as well as
Caucasian) in October 2014,
brings additional risks with
the costs of development,
public relations and marketing
communications adding to
overhead costs. There is a risk
that the forecasted increase in
uptake for BREVAGenplus does
not occur to offset the cost of
this product introduction.
AN N UA L R EPO RT 2 01 8
DIR ECTORS’ REPORT
INDEMNIFICATION AND
INSURANCE OF DIRECTORS
AND OFFICERS
Details of Directors and
Key Management Personnel
as at balance date
Risk management
In respect of the above risks, the
Group takes a proactive approach
to risk management. The Board is
responsible for ensuring that risks
and opportunities are identified on
a timely basis and that the Group’s
objectives and activities are aligned
with those risks and opportunities.
The Board believes that it is
important for all Board members
to be a part of this process and the
Board takes overall responsibility for
the recognition and management of
risk. The overview of the compliance
and control mechanisms has been
delegated to the Audit Committee
through its Charter.
The Board believes that the Group
is not yet sufficiently large to
warrant the appointment of an
internal auditor.
22
During the financial year, the
Company paid a premium in respect
of a contract insuring the Directors
and Officers of the Company and
any related body corporate against
a liability incurred in his or her
capacity as a Director or Officer
to the extent permitted by the
Corporations Act 2001. The contract
of insurance prohibits disclosure of
the nature of the insurance provided
and the amount of the premium. The
Company has agreed to indemnify
the current and former Directors
and Executive Officers against all
liabilities to other persons that may
arise from their position as Directors
or Officers of the Company and its
subsidiaries, except where to do so
would be prohibited by law.
SHARE OPTIONS
REMUNERATION REPORT
Unissued shares under option
Introduction
As at the date of this Report,
there were 55,102,778 unissued
ordinary shares in the Company
under option. No additional options
to acquire ordinary shares in the
Company were granted during
the year ended 30 June 2018. All
options granted were granted at nil
cost. Refer Note 20 of the financial
statements for details regarding the
outstanding options.
Shares issued as a result of the
exercise of options
During the 2018 financial year no
shares were issued as a result of
the exercise of options. No options
have been exercised since the
end of the financial year. During
the 2018 financial year, a total of
20,000,000 options that had been
issued to employees lapsed due to
forfeiture. Option holders do not
have any right, by virtue of their
options, to participate in any share
issue of the Company or any related
body corporate.
This Remuneration Report outlines
the Director and Executive
remuneration arrangements of
Genetic Technologies Limited (the
“Company”) and its subsidiaries
(collectively, the “Group”) in
accordance with the requirements
of the Corporations Act 2001 and its
Regulations. For the purposes of this
Report, Key Management Personnel
(“KMP”) of the Group are defined as
those persons having authority and
responsibility for planning, directing
and controlling the major activities
of the Company and the Group,
directly or indirectly, including any
Director (whether executive or not)
of the parent company, and includes
executives in the Group who meet
the criteria, as set out below,
receiving the highest remuneration.
For the purposes of this Report,
the term “Executive” encompasses
the Group’s Chief Financial
Officer and Scientific Director. For
details regarding changes to Key
Management Personnel during
the period from 1 July 2017 to the
date of this Report, please refer
to the notes at the foot of the
Remuneration Table.
Directors
Dr Paul Kasian
(Chairman & Interim Chief Executive Officer)
Dr Jerzy Muchnicki
(Executive)
Dr Lindsay Wakefield
(Non-Executive)
Mr Peter Rubinstein
(Non-Executive)
Mr Xue Lee
(Non-Executive)
Executives
Mr Kevin Fischer
(Chief Financial Officer)
Dr Richard Allman
(Scientific Director)
Remuneration Committee
The Remuneration Committee
is made up of a majority of Non-
Executive Directors. The Committee
is, amongst other things, responsible
for determining and reviewing
remuneration arrangements for the
Directors, the Chief Executive Officer
and the Senior Leadership Team.
As at the date of this report, the
composition of the Remuneration
Committee is:
❚ Dr Lindsay Wakefield –
Chairman of the Committee
❚ Dr Paul Kasian
❚ Mr Peter Rubinstein
As an executive, Dr Kasian does not
take part in deliberations pertaining
to his own remuneration.
The Remuneration Committee
assesses the appropriateness of the
nature and amount of remuneration
paid to Directors and Executives on a
periodic basis by reference to relevant
employment market conditions, with
the overall objective of ensuring
maximum shareholder benefit from
the retention of a high quality Board
and Senior Leadership Team.
Remuneration strategy
The performance of the Company
depends upon the quality of
its Directors and Executives. To
prosper, the Company must attract,
motivate and retain appropriately
skilled Directors and Executives.
In particular, the Company
embodies the following principles
in its remuneration framework:
❚ provide competitive and
reasonable rewards to attract
and retain high calibre
Executives;
❚ wherever possible, align
Executive rewards to the
creation of shareholder value;
❚
❚
ensure that a portion of an
Executive’s remuneration is
“at risk”; and
establish appropriate,
demanding performance
hurdles for variable Executive
remuneration.
The remuneration strategy is
recommended by the Remuneration
Committee and approved by
the Board.
Remuneration structure
In accordance with best practice
corporate governance, the structure
of Non-Executive Director and
Executive remuneration is separate
and distinct.
The key performance indicators
applicable for all Executives are
quantifiable and the methods of
measurement are defined. Potential
levels of remuneration are linked
to each performance indicator
based on the pretext that if the
performance indicators as defined
are met then the business will have
more likely achieved certain key
financial or strategic objectives.
In addition to the various key
performance indicators that are
used to assess the performance of
each Executive, the overall financial
performance of the Company
is also taken into consideration
when determining both base
levels of remuneration and short
term incentive payments for those
individuals.
Non-Executive Director
remuneration
Objective
The Board seeks to set aggregate
remuneration at a level which
provides the Company with the
ability to attract and retain Directors
of the highest calibre, whilst
incurring a cost which is acceptable
to shareholders.
Structure
The Company’s Constitution and
the Listing Rules of the Australian
Securities Exchange specify that
the aggregate remuneration of
Non-Executive Directors shall be
determined from time to time by
a General Meeting of shareholders.
An amount not exceeding the
amount determined is then divided
between the Directors as agreed.
The most recent determination
was made at the 2007 Annual
General Meeting, when shareholders
approved an aggregate
remuneration not exceeding
$500,000 per year.
The amount of aggregate
remuneration sought to be approved
by shareholders and the manner in
which it is apportioned amongst
Directors are reviewed annually.
Each Non-Executive Director
receives a fee for serving as a
Director of the Company. No
additional fees are paid to any
Director for serving on a sub-
committee of the Board, hence all
fees disclosed on page 16 are base
fees by nature.
Executive remuneration
Objective
The Group aims to reward
Executives with a level and
mix of remuneration which is
commensurate with their positions
and responsibilities within the Group
and so as to:
❚
❚
❚
reward Executives for Group and
individual performance against
targets set by reference to
suitable benchmarks;
align the interests of Executives
with those of the shareholders;
and
ensure that the total
remuneration paid is competitive
by market standards.
Structure
The remuneration paid to Executives
is set with reference to prevailing
market levels and comprises a fixed
remuneration comprising base
salary and superannuation, various
short-term incentives (which are
linked to agreed Key Performance
Indicators (“KPIs”), as described
below under the heading of Variable
remuneration), and a long-term
option component.
Fixed remuneration
Objective
The Remuneration Committee
oversees the setting of fixed
remuneration on an annual basis.
The process consists of a review of
Company, divisional and individual
performance, relevant comparative
remuneration in the market and
internally and, where appropriate,
external advice on policies and
practices. The members of the
Committee have access to external
advice independent of Management.
23
A NN UAL REP ORT 2 01 8
2 4
DIRE CTORS’ REPORT
Structure
Variable remuneration
Fixed remuneration consists
of some or all of the following
components:
❚ base salary;
❚
❚
non-monetary benefits which
can include a motor vehicle
allowance, health insurance etc.;
and
superannuation benefits, which
includes employer contributions.
With the exception of the employer
contributions to superannuation,
Executives are given some flexibility
to decide the composition of their
total fixed remuneration and the
allocation between cash and other
benefits. It is intended that the
manner of payment chosen will be
optimal for the recipient without
creating any additional cost for
the Group.
Fixed remuneration is reviewed
annually with reference to individual
performance, market benchmarks
for individual roles and the overall
financial performance of the
Group. Any changes to the fixed
remuneration of Executives are first
approved by the Remuneration
Committee.
All employee remuneration is
evaluated on a regular basis using
a set of variables and taking into
account the addition of the statutory
superannuation contribution. An
assessment of existing base salaries
is made annually using comparisons
against independent market data
which provides information on
salaries and other benefits paid for
comparable roles within the biotech
and pharmaceutical industries,
using third party salary survey data.
Annual performance reviews with
each employee are based on a rating
system which is used to assess his
or her eligibility for salary increases.
Other qualitative factors, including
the specialised knowledge and
experience of the individual and the
difficulty of replacing that person,
are also taken into account when
considering salary adjustments.
Objective
The objective of variable
remuneration is to:
❚
❚
❚
align the interests of Executives
with those of shareholders;
link Executive rewards to
the achievement of strategic
goals and performance of the
Company; and
ensure that the total
remuneration paid by the
Company is competitive by
market standards.
Short Term Incentive (“STI”)
STI is an annual plan that applies
to Executives and other senior
employees that is based on
the performance of both the
Company and the individual
during a given financial year. STI
ranges vary depending on the role,
responsibilities and deliverables
achieved by each individual. Actual
STI payments granted to the
relevant employee will depend on
the extent to which the pre-agreed
specific targets are met within
a financial year. Specific targets
are quantifiable with the agreed
method of measurement defined
at the beginning of the financial
year. The ongoing performance of
the Executive or senior employee
is evaluated regularly during the
performance cycle.
Group objectives, and their relative
weighting, vary depending on the
position and responsibility of the
respective individual, but in respect
of the year ended 30 June 2018
include, amongst other things, the
achievement of:
❚
❚
achieving targets for cost
reduction or efficiency gains;
contributing to business growth
and expansion; and
❚ performance or the delivery of
results which exceed agreed
targets.
These measures are chosen as
they represent the key drivers
for the short term success of the
business and provide a framework
for delivering long term value.
Personal and operating objectives
vary according to the role and
responsibility of the Executive and
include objectives such as service
delivery to customers, project
delivery, compliance outcomes,
intellectual property management
and various staff management and
leadership objectives.
Achievement of an individual’s
targets or objectives is documented
and assessed by both the individual
and his or her direct manager.
The individual will participate in
an annual performance review
and must provide evidence of
the objectives that he or she has
delivered during the period under
review. Each objective is then rated
on an achievement scale. Depending
on the aggregate of the ratings, the
individual may be eligible to receive
an STI payment.
STI payments, if any, are generally
paid in August or September of
each year subject to the completion
of the performance review process
and the receipt of a satisfactory
rating. The Board conducts this
process in the case of the CEO.
Long Term Incentive (“LTI”)
The objective of the Group’s
LTI arrangements is to reward
Executives and senior employees
in a manner that aligns their
remuneration with the creation
of shareholder wealth. As such,
significant LTI grants are generally
only made to Executives who are
able to influence the generation
of shareholder wealth and have
an impact on the Group’s long
term profitability. There are no
specific performance hurdles, apart
from certain vesting provisions, in
respect of the LTI grants made to
Executives. Options with a vesting
period also serve as a retention
tool and may reduce the likelihood
of high performing Executives and
senior employees being targeted by
other companies.
LTI grants to Executives and
senior employees are delivered
in the form of options over
unissued ordinary shares in the
Company which are granted
under the terms and conditions
of the Company’s Employee
Option Plan. Selected Executives
who contribute significantly to
the long term profitability of the
Company are invited to participate
in the Employee Option Plan.
The remuneration value of these
grants varies and is determined
with reference to the nature of the
individual’s role, as well as his or
her individual potential and specific
performance.
During the year ended 30 June 2018,
a net share-based payments expense
of $129,635 (2017: $120,287) was
incurred by the Company in respect
of all options which had previously
been granted to Executives and
other senior employees.
In cases where an Executive ceases
employment prior to the vesting of
his or her options, the options are
forfeited after a prescribed period
if they have not been exercised.
The prescribed period ranges from
two to six months, depending on
the circumstances under which they
left the Company, e.g. resignation,
retirement, termination or death.
In the event of a change of control
of the Company, the performance
period end date will be brought
forward to the date of the change
of control and awards will vest over
this shortened period.
The following table shows the key
performance indicators for the
Group over the past five financial
years ended 30 June.
2018
$
2017
$
2016
$
2015
$
2014
$
25
Profit/(loss) for the year
attributable to owners of
Genetic Technologies Limited
(5,463,872)
(8,403,826)
(8,458,965)
(8,810,170)
(10,125,197)
Basic earnings per share (cents)
(0.22)
(0.40)
(0.49)
(0.82)
(1.76)
Increase/(decrease) in share price
Total Key Management Personnel
(KMP)incentives (being STI and LTI)
as a percentage of profit/(loss)
for the year
%
42.9
%
(63.2)
%
(32.1)
%
(22.2)
%
(62.1)
(4.24)
(2.35)
(2.36)
(1.30)
(0.90)
Relative proportion of fixed vs variable remuneration expense
Executive director
Dr Paul Kasian
Dr Jerzy Muchnicki
Eutillio Buccilli
Other KMP of the group
Diana Newport
Dr Richard Allman
Kevin Fischer
Chris Saunders
Dr Susan Gross
Fixed remuneration
At risk – STI
At risk – LTI*
2018
2017
2018
2017
2018
2017
100%
100%
89%
79%
71%
71%
90%
100%
-
-
83%
92%
88%
85%
88%
94%
-
-
-
-
20%
19%
-
-
-
-
7%
-
4%
5%
5%
4%
-
-
11%
21%
9%
10%
10%
**
-
-
10%
8%
8%
10%
7%
2%
*
Since the long-term incentives are provided exclusively by way of options, the percentages disclosed also reflect the value of
remuneration consisting of options, based on the value of options expensed during the year. Where applicable, the expenses
include negative amounts for expenses reversed during the year due to a failure to satisfy the vesting conditions.
**
Percentage not disclosed as the total amount of LTI remuneration expense was negative for the relative period.
A NN UAL REP ORT 2 01 8
DIRE CTORS’ REPORT
Employment contracts
The former Chief Executive Officer,
Mr Eutillio Buccilli was, until his
departure on 6 February 2018,
employed under an ongoing
contract dated 25 February 2015
which had the following key terms
and conditions:
❚ Base salary of $319,923 plus
statutory superannuation
contributions as prescribed
under the Superannuation
Guarantee legislation;
❚ STI payment equivalent to a
maximum of 30% of base salary
based on achievement of Key
Performance Indicators, as agreed
with the Board from time to time;
2 6
❚ Notice period of three months;
and
❚ The contract may be terminated
at any time without notice
if serious misconduct has
occurred. Where termination
with cause occurs, he is only
entitled to receive that portion
of remuneration which is fixed
and only up to the date of
termination. In this instance, all
entitlements to both STI and LTI
are forfeited and would lapse.
The key provisions contained in the
employment contracts for other Key
Management Personnel in office at
the date of this Report are:
❚
❚
❚
❚
the Executive receives a
base salary and statutory
superannuation contributions,
as prescribed under the
Superannuation Guarantee
legislation, together with
certain STI payments based on
achievement of Key Performance
Indicators, as agreed with the
Chief Executive Officer from
time to time;
the Executive may resign from
his/her position and terminate
the contract by giving up to
three months written notice;
the Company may terminate
the contract by providing up to
three months written notice or
payment in lieu of notice; and
the Company may terminate the
contract without notice in the
event of serious misconduct.
In this instance, entitlements to
both STI and LTI payments are
forfeited and will lapse.
There are no employment contracts
in place with any Non-Executive
Director of the Company. Dr Kasian,
subsequent to being appointed as
Chairman on 31 January 2018, was
also appointed part time interim
CEO on 6 February 2018, following
the departure of Mr Buccilli. Whilst
no employment contract is in
place with Dr Kasian, his current
base salary of $150,000 (inclusive
of statutory superannuation
contributions) includes $48,262
attributable to his interim executive
role, with the balance attributable
to his role as Chairman. Similarly,
during this period of strategic
transition, Dr Muchnicki has
been appointed as part time
Business Development Director
with no employment contract
in place. Dr Muchnicki receives
an annual total remuneration of
$100,000 (inclusive of statutory
superannuation contributions), of
which $37,381 is attributable to
his interim executive role, and the
balance to his role as Director. Both
Dr Kasian and Dr Muchnicki’s total
earnings are disclosed as Executive
remuneration.
Remuneration of Key Management Personnel (“KMP”)
Name and title of
Year
$
$
$
$
$
$
Short-term
Post-
employment
Other
long-term
Share-
based
Salary/fees
Other
Superannuation*
Benefits
Options
Totals
Non-Executive Directors
Dr Lindsay Wakefield
Mr Peter Rubinstein 1
Mr Xue Lee 2
Dr Malcolm R. Brandon 3
Grahame Leonard AM 4
Totals
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
57,186
56,065
23,827
-
23,827
-
54,198
91,089
33,358
56,065
192,396
203,219
-
-
-
-
-
-
-
-
-
-
-
-
5,433
5,326
2,264
-
2,264
-
5,149
8,653
3,169
5,326
18,279
19,305
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
62,619
61,391
26,091
-
26,091
-
59,347
99,742
36,527
61,391
210,675
222,524
1. Mr Rubinstein was appointed as a Non-executive Director on 31 January 2018.
2. Mr Lee was appointed as a Non-executive Director on 31 January 2018.
3. Dr Brandon resigned as the Non-executive Chairman on 30 January 2018.
4. Mr Leonard resigned as a Director on 30 January 2018.
Name and title of
Year
$
$
$
$
Salary/fees
Other
Superannuation* Benefits** Options***
Termination
benefits
$
Totals
$
Short-term
Post-
employment
Other
long-term Share-based
Executives Directors
Dr Paul Kasian 1
Chairman & Interim CEO
Dr Jerzy Muchnicki 2
Business Development
Director
Eutillio Buccilli 3
Ex – Executive Director
& Chief Executive
Officer
Executives
Diana Newport 4
Quality & Ops. Director
Dr Richard Allman 5
Scientific Director
Kevin Fischer 6
Chief Financial Officer
Chris Saunders 7
US-VP Sales & Marketing
Dr Susan Gross 8
US-Senior Medical
Director
2018
2017
2018
2017
2018
89,099
56,065
38,051
-
186,621
-
-
-
-
-
8,464
5,326
3,615
44
-
1,200
-
-
-
-
-
-
-
-
-
-
97,607
61,391
42,866
-
25,000
802
45,639 164,760
422,822
2017
313,650
33,000
32,566
19,297
45,639
2018
2017
2018
2017
2018
2017
2018
2017
2018
73,469
105,493
165,294
162,053
171,666
168,300
156,403
283,402
41,545
-
-
49,588
8,100
51,500
12,600
-
14,832
-
2017
165,262
7,481
6,980 (10,137)
10,962
10,022
(1,370)
12,528
3,187
9,421
6,778
7,408
1,867
16,472
16,526
17,505
17,575
-
-
-
-
18,257
10,533
23,407
17,287
28,450
22,330
17,782
22,330
(3,150)
1,978
3,150
-
-
-
-
-
-
-
-
-
-
-
444,152
88,569
137,010
253,391
216,494
272,308
230,226
180,963
327,972
40,262
177,871
27
Sub-totals for
Executives
2018
2017
922,148
1,254,225
101,088
76,013
78,036
82,015
2,371
61,594
130,385
121,269
164,760 1,398,788
1,595,116
-
Total remuneration
of Key Management
Personnel
2018 1,114,544
101,088
96,315
2,371
130,385
164,760 1,609,463
2017 1,457,444
76,013
101,320
61,594
121,269
-
1,817,640
Notes pertaining to changes during the year:
1.
2.
3.
Dr Kasian was appointed as the Chairman on 31 January 2018 and interim CEO on 6 February 2018, having previously served
as a Non-Executive Director since his appointment in December 2013. Included in the 2018 total remuneration is an amount of
$18,689 attributable to his executive role as interim CEO (2017: Nil). The 2017 fees are all Non-Executive Director fees.
Dr Muchnicki was appointed as Business Development Director on 31 January 2018. Included in the 2018 total remuneration is
an amount of $16,774 attributable to his executive role as Business Development Director.
Mr Buccilli stepped down from his position of Executive Director and Chief Executive Officer on 6 February 2018. Included in
the termination benefits paid to Mr Buccilli are ; 3 months’ notice pay: pro-rata bonus entitlement calculated up to that date
being 3 months from the 6th February 2018.
4. Ms Newport held the role of Quality and Operations Director until her resignation on 1 May 2018.
5.
“Other” includes a bonus paid or payable to Dr Allman in the amount of $49,588 under a retention bonus scheme awarded
to KMP.
“Other” includes a bonus paid or payable to Mr Fischer in the amount of $51,500 under a retention bonus scheme awarded
to KMP.
Mr Saunders held the role of Vice President Sales and Marketing for Phenogen Sciences Inc. (USA) until his termination on
30 November 2017.
Dr Gross held the role of Senior Medical Director for Phenogen Sciences Inc. (USA) until her termination on 15 September 2017.
6.
7.
8.
Referencing the previous two tables:
* Post-employment benefits as per Corporations Regulation 2M.3.03(1) Item 7.
** Other long-term benefits as per Corporations Regulation 2M.3.03(1) Item 8.
*** Equity settled share-based payments as per Corporations Regulation 2M.3.03(1) Item 11.
The details of those Executives nominated as Key Management Personnel under section 300A of the Corporations
Act 2001 have been disclosed in this Report. No other employees of the Company meet the definition of “Key
Management Personnel” as defined in IAS 24/(AASB 124) Related Party Disclosures, or “senior manager” as defined
in the Corporations Act 2001.
AN N UA L R EPO RT 2 01 8
DIRE CTORS’ REPORT
Options exercised, granted, and forfeited as part of remuneration during the year ended 30 June 2018
Details of the options held by the Executives nominated as Key Management Personnel during the year ended
30 June 2018 are set out below. As at 30 June 2018, there were 3 executives and 1 employee who held options that
had been granted under the Company’s respective option plans.
During the 2018 financial year no options granted as equity compensation benefits to Executives were exercised,
and no new options were granted as equity compensation benefits to Executives. The following options previously
granted as equity compensation benefits to Executives were forfeited during the year:
Name of Executive
Diana Newport
Diana Newport
Chris Saunders
Chris Saunders
Dr Susan Gross
Totals
Options
forfeited
4,000,000
2,500,000
5,000,000
5,000,000
2,500,000
19,000,000
Exercise
price
Fair value
per option
Final
vesting date
$0.01
$0.02
$0.01
$0.02
$0.01
$0.0050
$0.0026
$0.0050
16 Feb 2022
31 Mar 2021
16 Feb 2022
$0.0024
24 Nov 2020
$0.0050
16 Feb 2022
28
Options exercised, granted and forfeited as part of remuneration during the year ended 30 June 2017
During the 2017 financial year 21,500,000 options were granted as equity compensation benefits to Executives.
No options were exercised or forfeited.
Fair values of options
Fair values at grant date are independently determined using a Black-Scholes option pricing model that takes into
account the exercise price, the term of the option, the share price at grant date and expected price volatility of the
underlying share, the expected divided yield and the risk-free interest rate for the term of the option.
Option holdings of Key Management Personnel 30 June 2018
Number of options
Vesting as at year end
Name of
option holder
Opening
balance
Granted Exercised
Lapsed
Closing
balance
Exercisable
Not
exercisable
Financial
year in
which
options vest
Fair value
yet to
vest
$
Executive
Paul
Kasian
Jerzy
Muchnicki*
Eutillio
Buccilli
Diana
Newport
Richard
Allman
Kevin
Fischer
Chris
Saunders
Susan
Gross
-
6,666,667
14,236,111
6,500,000
10,000,000
10,000,000
10,000,000
2,500,000
Totals
59,902,778
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
- 6,666,667 6,666,667
-
14,236,111
14,236,111
(6,500,000)
-
-
-
-
-
-
-
2015
2018
-
-
-
-
-
- 10,000,000 6,666,667 3,333,333
2019
16,667
- 10,000,000 6,666,667 3,333,333
2019
16,667
- (10,000,000)
-
(2,500,000)
-
-
-
-
-
-
-
-
-
-
- (19,000,000) 40,902,778
34,236,112 6,666,666
33,334
* Options held by Dr Muchnicki when appointed as a Director on 31 January 2018.
Option holdings of Key Management Personnel 30 June 2017
Number of options
Vesting as at year end
Name of
option holder
Opening
balance
Granted
Exercised Lapsed
Closing
balance
Exercisable
Not
exercisable
Financial
year in
which
options vest
Fair value
yet to
vest
$
Executive
Eutillio
Buccilli
Diana
Newport
Richard
Allman
Kevin
Fischer
Chris
Saunders
Susan
Gross
14,236,111
-
2,500,000 4,000,000
5,000,000 5,000,000
5,000,000 5,000,000
5,000,000 5,000,000
- 2,500,000
Totals
31,736,111 21,500,000
-
-
-
-
-
-
-
-
14,236,111
7,118,055
7,118,056
2018 90,777
- 6,500,000
1,250,000 5,250,000
2019
30,719
- 10,000,000 2,500,000 7,500,000
2019 46,438
- 10,000,000 2,500,000 7,500,000
2019 56,883
- 10,000,000 2,500,000 7,500,000
2019 56,883
- 2,500,000
- 2,500,000
2019 20,000
-
53,236,111
15,868,055 37,368,056
301,700
29
*
Options vest and are exercisable at any time after the date on which they meet the vesting conditions as described in the
notes to the financial report below.
Shareholdings of Key Management Personnel 30 June 2018
Shares held in Genetic
Technologies Limited
Director
Dr Malcolm Brandon 1
Mr Eutillio Buccilli 2
Mr Grahame Leonard AM 1
Dr Paul Kasian
Dr Lindsay Wakefield
Dr Jerzy Muchnicki 3
Mr Peter Rubinstein 3
Mr Xue Lee 3
Executive
Dr Richard Allman
Diana Newport 4
Kevin Fischer
Chris Saunders 5
Susan Gross 6
Totals
Opening balance
Bought
Sold
Closing balance
Number of shares
-
-
6,000,000
256,410
8,325,263
20,903,244
47,282,700
59,594,850
-
-
-
-
-
142,362,467
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
6,000,000
256,410
8,325,263
20,903,244
47,282,700
59,594,850
-
-
-
-
-
142,362,467
1. Dr Brandon and Mr Leonard were Directors from the start of the year to 30 January 2018.
2. Mr Buccilli was a Director from the start of the year to 6 February 2018.
3 . Opening Balance for Dr Muchnicki, Mr Rubinstein and Mr Lee refers to the number of shares held directly and indirectly on
appointment as a Director on 31 January 2018.
4. Ms Newport was a KMP from the start of the year to 1 May 2018.
5. Mr Saunders was a KMP from the start of the year to 30 November 2017.
6. Ms Gross was a KMP from the start of the year to 15 September 2017.
There were no loans to/from Key Management Personnel during the financial years ending 2018 and 2017.
End of Remuneration Report
A NN UAL REP ORT 2 01 8
DIRE CTORS’ REPORT
AUDITOR INDEPENDENCE AND NON-AUDIT SERVICES
Auditor independence
The Directors of Genetic Technologies Limited have received an independence declaration from
PricewaterhouseCoopers, the Company’s auditor, as reproduced immediately following the Directors’ Declaration
on page 72 of the Financial Report.
Non-audit services
During the financial year, the following fees were paid or payable to the auditors of Genetic Technologies Limited
and its subsidiaries in respect of both audit and non-audit services:
Audit and assurance services
PricewaterhouseCoopers in respect of:
Audit 1
Audit related
3 0
Other audit firms in respect of:
Audit of the Financial Reports of subsidiaries
Consolidated
2018
$
2017
$
288,200
-
-
325,972
107,451
4,070
Total remuneration in respect of audit services
288,200
437,493
1.
Audit fees consist of services that would normally be provided in connection with statutory and regulatory filings or
engagements, including services that generally only the independent accountant can reasonably provide.
ENVIRONMENTAL REGULATION
The Company is not aware of any breaches of any environmental regulation during the 2018 financial year.
ROUNDING OF AMOUNTS
The Company is of a kind referred to in ASIC Corporations (Rounding in Financial/Director’s reports) Instrument
2016/191, issued by the Australian and Securities and Investments Commission, relating to the “rounding off” of
amounts in the Directors’ Report. Amounts in the Directors’ Report have been rounded off in accordance with that
Class order to the nearest dollar.
PROCEEDINGS ON BEHALF OF THE COMPANY
No proceedings have been brought or intervened in or on behalf of the Company with leave to the Court under
section 237 of the Corporations Act 2001.
DIRECTORS’ MEETINGS
Meeting attendances
The number of meetings of Directors (including the meetings of Sub-Committees of the Board) held during the
financial year, and the number of such meetings attended by each Director, were as follows:
Directors’
meetings
Audit
Committee meetings
Remuneration
Committee meetings
Attended
Eligible
Attended
Eligible
Attended
Eligible
9
9
8
15
15
6
6
3
9
9
9
15
15
6
6
6
-
-
2
3
5
2
2
-
-
-
3
3
5
2
2
-
-
2
-
3
3
-
1
-
-
2
-
3
3
-
1
-
Dr Malcolm Brandon
Mr Eutillio Buccilli
Mr Grahame Leonard A.M.
Dr Paul Kasian
Dr Lindsay Wakefield
Dr Jerzy Muchnicki
Mr Peter Rubinstein
Mr Xue Lee
Sub-committee membership
As at the date of this Report, the composition of the Sub-Committees are:
Audit Committee
Remuneration Committee
Mr Peter Rubinstein Chairman of the Committee
Dr Lindsay Wakefield
Dr Lindsay Wakefield Chairman of the Committee
Dr Paul Kasian
Dr Jerzy Muchnicki
Mr Peter Rubinstein
Signed in accordance with a resolution of the Directors.
31
DR PAUL KASIAN
Chairman
Melbourne, 30 August 2018
A NN UAL REP ORT 2 01 8
Our patented tests
are designed to
predict an individual’s
risk of developing
chronic disease.
COR P ORATE GOVERNANCE STAT E ME N T
Genetic Technologies Limited (the “Company”)
and its Board are committed to achieving the
leading standards of corporate governance.
33
Reference is made to the revised
Corporate Governance Principles
and Recommendations issued
and revised from time to time by
the ASX Corporate Governance
Council. The Board believes
that all concepts of the revised
Principles and Recommendations
have been satisfied, however the
Board is realistic with respect to
the relative size and nature of the
Company and have implemented
the Recommendations accordingly.
The Company endeavours to ensure
exceptions to the guidelines do not
have negative impact on the best
interests of shareholders.
While in most respects the
Company complies with the
Recommendations, it is recognised
that the development and
implementation of policies and
practices is an ongoing process
that evolves with the needs of the
business and its stakeholders.
ASX Listing Rule 4.10.3 requires an
entity that is included in the official
list as an ASX Listing to include in
its annual report either a corporate
governance statement that meets
the requirements of that rule or
the URL of the page on its website
where such a statement is located.
The Company therefore advises that
the current corporate governance
statement and a summary of
its main corporate governance
practices as approved by the
Board on 30 August 2018 may be
found via the following link on the
Company’s website:
http://www.gtgcorporate.com/
investor-centre/corporate-
governance
A NN UAL RE PORT 2018
Take control.Breast Cancer Risk Assessment ReportRecommendations & next stepsConsult an expert oncologistSchedule regular checkupsOthercall to actiongoes hereDear Jessica, These are the findings from your GeneType Breast Cancer Risk Assessment Report. Lorem ipsum dolor sit amet, consectetur adipiscing elit. Aliquam in dolor aliquam, semper leo quis, convallis urna. Donec lorem elit, vehicula nec nulla id, ornare ornare erat. Aenean efficitur orci sit amet ultricies condimentum. Aliquam sit amet sem maximus, porta nulla rhoncus, luctus felis. Curabitur sed urna sollicitudin, venenatis nibh a, molestie dolor. Phasellus vehicula dolor vitae dui aliquam sodales. Vestibulum eget tempus orci. Suspendisse vel mi eros. Vestibulum rostiment wehicula.Lorem ipsum uspe ndisse vel mi eros. Vestib rehicula.Etiam elit ex, mollis in sapien et, tempus congue.Genetype Pty LtdABN 000 000 00060 Hanover StreetFitzroy Victoria 3065Australiainfo@genetype.com.augenetype.com.augeneTypeXX%Your test resultaverageabove average CONSOLIDATED STATEMENT OF
COMPREHENSIVE INCOME / (LOSS)
FOR THE YEA R E NDED 30 JUN E 2 018
Consolidated
Notes
2018
$
Revenue from operations – genetic testing services
Less: cost of sales
Gross profit from operations – genetic testing services
Other income
Foreign exchange gains reclassified on liquidation of subsidiary
Selling and marketing expenses
General and administrative expenses
Laboratory and research and development costs
Finance costs
3 4
Impairment of intangible assets expense
Net foreign exchange gains / (losses)
Loss from operations before income tax expense
Income tax expense
Loss for the year
4
5
6
8
Other comprehensive (loss) / profit
Items that may be reclassified to profit or loss
Exchange (loss) / gains on translation of controlled foreign operations
2017
$
518,506
(492,417)
26,089
344,112
-
(2,721,474)
(2,933,659)
(2,366,334)
(31,995)
(544,694)
(175,871)
189,254
(300,088)
(110,834)
441,476
527,049
(1,066,404)
(3,144,178)
(2,210,498)
(28,843)
-
128,360
(5,463,872)
(8,403,826)
-
-
(5,463,872)
(8,403,826)
(522,966)
(130,655)
Other comprehensive (loss) / profit for the year, net of tax
(522,966)
(130,655)
Total comprehensive loss for the year
(5,986,838)
(8,534,481)
Loss for the year is attributable to:
Owners of Genetic Technologies Limited
Total loss for the year
Total comprehensive loss for the year is attributable to:
Owners of Genetic Technologies Limited
Total comprehensive loss for the year
Loss per share attributable to owners
of the Company and from operations:
Basic loss per share (cents per share)
Diluted loss per share (cents per share)
(5,463,872)
(8,403,826)
(5,463,872)
(8,403,826)
(5,986,838)
(8,534,481)
(5,986,838)
(8,534,481)
9
9
(0.22)
(0.22)
(0.40)
(0.40)
The above consolidated statement of comprehensive income / (loss) should be read in conjunction with the
accompanying notes.
CONSOLIDATED BALANCE SHEET
AS AT 30 JUNE 2 018
Consolidated
Notes
2018
$
2017
$
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Prepayments and other assets
Total current assets
Non-current assets
Property, plant and equipment
Total non-current assets
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Provisions
Total current liabilities
Non-current liabilities
Provisions
Total non-current liabilities
Total liabilities
Net assets
EQUITY
Contributed equity
Reserves
Accumulated losses
Total equity
10
11
12
13
15
16
16
17
18
19
5,487,035
10,988,255
301,383
202,279
426,272
217,122
5,990,697
11,631,649
175,284
175,284
476,648
476,648
6,165,981
12,108,297
35
945,130
505,583
898,103
567,190
1,450,713
1,465,293
3,390
3,390
63,960
63,960
1,454,103
1,529,253
4,711,878
10,579,044
122,372,662
122,382,625
5,651,162
6,044,493
(123,311,946)
(117,848,074)
4,711,878
10,579,044
The above consolidated balance sheet should be read in conjunction with the accompanying notes.
A NN UAL REP ORT 2 01 8
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEA R E NDED 30 JUN E 2 018
Cash flows (used in) / from operating activities
Receipts from customers
Payments to suppliers and employees
Interest received
Consolidated
Notes
2018
$
2017
$
758,452
964,520
(6,394,985)
(7,816,924)
15,218
38,765
Net cash flows used in operating activities
10
(5,621,315)
(6,813,639)
Cash flows (used in) / from investing activities
Proceeds from the sale of plant and equipment
Purchases of plant and equipment
Net cash flows (used in) / from investing activities
36
Cash flows from / (used in) financing activities
Proceeds from the issue of shares
Equity transaction costs
Facility fee rebate
-
(2,385)
(2,385)
-
(9,963)
-
52,650
(234,799)
(182,149)
8,049,369
(1,234,430)
295,110
Net cash flows from / (used in) financing activities
(9,963)
7,110,049
Net increase / (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Net foreign exchange difference
(5,633,663)
10,988,255
132,443
114,261
11,179,687
(305,693)
Cash and cash equivalents at end of year
10
5,487,035
10,988,255
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEA R E NDED 30 JUN E 2 018
Consolidated
Balance at 30 June 2016
Loss for the year
Other comprehensive loss
Total comprehensive income / loss
Transactions with owners
in their capacity as owners
Contributions of equity
(net of transaction costs)
Share-based payments
Share facility fee rebate
Balance at 30 June 2017
Loss for the year
Other comprehensive loss
Total comprehensive loss
Transactions with owners
in their capacity as owners
Contributions of equity
(net of transaction costs)
Share-based payments
Share facility fee rebate
Contributed
equity
$
Reserves
$
Accumulated
losses
$
Total
equity
$
115,272,576
6,054,861
(109,444,248)
11,883,189
-
-
-
-
(8,403,826)
(8,403,826)
(130,655)
-
(130,655)
(130,655)
(8,403,826)
(8,534,481)
6,814,939
-
-
120,287
295,110
7,110,049
-
120,287
-
-
-
-
6,814,939
120,287
295,110
7,230,336
122,382,625
6,044,493
(117,848,074)
10,579,044
-
-
-
-
(5,463,872)
(5,463,872)
(522,966)
-
(522,966)
(522,966)
(5,463,872)
(5,986,838)
37
(9,963)
-
-
-
129,635
-
(9,963)
129,635
-
-
-
-
(9,963)
129,635
-
119,672
Balance at 30 June 2018
122,372,662
5,651,162
(123,311,946)
4,711,878
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
A NN UAL REP ORT 2 01 8
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEA R E NDED 30 JUN E 2 018
38
1. CORPORATE INFORMATION
Historical cost convention
The Financial Report of Genetic
Technologies Limited (the
“Company”) for the year ended
30 June 2018 was authorised for
issue in accordance with a resolution
of the Directors dated 30 August
2018. Genetic Technologies Limited
is incorporated in Australia and is
a company limited by shares. The
Directors have the power to amend
and reissue the financial statements.
The Company’s ordinary shares are
publicly traded on the Australian
Securities Exchange under the
symbol GTG and, via Level II
American Depositary Receipts, on
the NASDAQ Capital Market under
the ticker GENE.
2. SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
(a) Basis of preparation
This general purpose Financial Report
has been prepared in accordance
with Australian Accounting
Standards, other authoritative
pronouncements of the Australian
Accounting Standards Board and the
Corporations Act 2001.
Compliance with IFRS
The Financial Report complies with
Australian Accounting Standards as
issued by the Australian Accounting
Standards Board and International
Financial Reporting Standards
(“IFRS”) as issued by the International
Accounting Standards Board.
These financial statements have
been prepared under the historical
cost convention except for financial
assets and liabilities (including
derivative instruments) which are
measured at fair value.
Critical accounting estimates
The preparation of financial
statements requires the use of
certain critical accounting estimates.
It also requires Management to
exercise its judgement in the
process of applying the Group’s
accounting policies. The areas
involving a higher degree of
judgement or complexity, or
areas where assumptions and
estimates are critical to the financial
statements, are disclosed in Note 3.
Going concern
For the year ending 30 June
2018, the Group incurred a total
comprehensive loss of $5,986,838
(2017: $8,534,481) and net cash
outflow from operations of
$5,621,315 (2017: $6,813,639).
As at 30 June 2018 the Group held
total cash and cash equivalents
of $5,487,035.
During the 2019 financial year,
the Directors expect increased
cash outflows from operations as
the Company continues to invest
resources in expanding the research
and development, sales and
marketing, and blockchain activities
in support of the distribution of
BREVAGenplus and its pipeline
of risk assessment products. As
a result of these expected cash
outflows, the Directors intend to
raise new equity funding within
the next twelve months in order to
ensure the Company continues to
hold adequate levels of available
cash resources to meet creditors
and other commitments. The
Company has subsequent to
30 June 2018 executed an equity
placement facility with Kentgrove
Capital Pty Ltd whereby it has an
opportunity to raise equity funding
of up to $20 million in a series of
individual placements of up to
$1 million (or a higher amount by
mutual agreement) over a period of
20 months, expiring 7 April 2020.
The Company has in place an open
Placement Prospectus, and although
it does not currently have binding
commitments from any party to
subscribe for Placement Shares,
the Placement Offer within the
Prospectus provides the Company
with greater flexibility should the
opportunity arise to offer and issue
any of the Placement Shares while
this Prospectus remains open. In
addition to this facility the Directors
will also consider other sources of
equity funding through traditional
offerings in either Australia or the
United States.
The continuing viability of the
Company and its ability to continue
as a going concern and meet its
debts and commitments as they fall
due is dependent on the satisfactory
completion of planned equity
raisings, which are not guaranteed.
GENETIC TECHNOLOGIES
LIMITED
GENETYPE
CORPORATION
GENE VENTURES
PTY LTD
GENETYPE
PTY LTD
GENETIC
TECHNOLOGIES
CORPORATION
PHENOGEN
SCIENCES INC
39
Due to the uncertainty surrounding
the timing, quantum or the ability
to raise additional equity, there is a
material uncertainty that may cast
significant doubt on the Group’s
ability to continue as a going
concern and therefore, that it may
be unable to realise its assets and
discharge its liabilities in the normal
course of business.
However, the Directors believe that
the Group will be successful in the
above matters and accordingly,
have prepared the financial report
on a going concern basis. As such
no adjustments have been made to
the financial statements relating to
the recoverability and classification
of the asset carrying amounts
or classification of liabilities that
might be necessary should the
Group not be able to continue as a
going concern.
As a US SEC registrant, the
Company is required to have its
financial statements audited in
accordance with Public Company
Oversight Board (“PCAOB”)
standards. References in these IFRS
financial statements to matters that
may cast significant doubt about
the Company’s ability to continue
as a going concern also raise
substantial doubt as contemplated
by the PCAOB standards.
(b) New accounting standards and
interpretations
(i) Standards and Interpretations
affecting amounts reported in
the current period (and/or prior
period)
The group has not applied any new
standards or amendments for the
first time for their annual reporting
period commencing 1 July 2017.
(ii) Standards and Interpretations
in issue but not yet adopted
In respect of the year ended
30 June 2018, the Group has
assessed all new Australian
accounting standards, and the IFRS
equivalent, mandatory for adoption
during the current year, noting no
new standards which would have
a material effect on the disclosure
in these financial statements. There
has been no effect on the profit
and loss or the financial position of
the Group. Certain new accounting
standards and interpretations
have been published that are
not mandatory for 30 June 2018
reporting periods.
The Group’s assessment of the
impact of these new standards and
interpretations is set out below.
A NN UAL REP ORT 2 01 8
NOTES TO THE FINANCIA L STATEM EN TS
Title of Standard
Summary and impact on Group’s financial statements
AASB 9
Financial
Instruments
(IFRS 9
Financial
Instruments)
AASB 9 Financial Instruments replaces AASB 139
and addresses and classification, measurement and
derecognition of financial assets and liabilities. It also
addresses the new hedge accounting requirements,
including changes to hedge effectiveness, treatment of
hedging costs and risk components that can be hedged.
Application date
of the standard
Application date
for Group for
financial year
ending
1 January 2018
30 June 2019
40
AASB 9 introduces a new expected loss impairment model
that will require entities to account for expected credit
losses at the time of recognising the asset. The Group does
not expect the adoption of the new standard to have a
material impact on its classification and measurement of
the financial assets and liabilities or its results on adoption
of the new impairment model.
The group has the following financial assets as at the
balance date:
Cash and cash equivalents
Cash and cash equivalents in the balance sheet comprise
cash at bank and in hand and short-term deposits with an
original maturity of 3 months or less. For the purposes of
the cash flow statement, cash and cash equivalents consist
of cash and cash equivalents as defined above. Cash at
bank earns interest at floating rates based on daily bank
deposit rates. Short-term deposits are made for varying
periods, depending on the immediate cash requirements
of the Group, and earn interest at the respective short-term
deposit rates. Given the nature of cash, the expected loss
model will not be material.
Trade and other receivables
Trade receivables, which are non-interest bearing and
generally have terms of between 30 to 90 days, are
recognised and carried at original invoice amount less an
allowance for any uncollectible amounts. An allowance for
doubtful debts is made when there is objective evidence
that a receivable is impaired. Such evidence includes an
assessment of the debtor’s ability and willingness to pay the
amount due. The amount of the allowance/impairment loss
is measured as the difference between the carrying amount
of the trade receivables and the estimated future cash flows
expected to be received from the relevant debtors. The
Group expects to continue to hold these assets in cash and
cash equivalents and thus does not expect to be impacted
by the classification and measurement provisions of AASB 9.
The only financial liabilities the group has at the balance
date relate to trade and other payables. Trade payables and
other payables are carried at amortised cost and represent
liabilities for goods and services provided to the Group
prior to the end of the financial year that are unpaid and
arise when the Group becomes obliged to make future
payments in respect of the purchase of these goods and
services. Trade payables and other payables generally have
terms of between 30 and 60 days. Given the nature of
these liabilities, the group does not expect to adopt the fair
value option under AASB9. The Group does not hold any
derivative instruments and thus the related impacts of AASB
9 will not be applicable. The Group has decided not to early
adopt AASB 9.
Application date
of the standard
Application date
for Group for
financial year
ending
1 January 2018
30 June 2019
41
1 January 2019
30 June 2020
Title of Standard
Summary and impact on Group’s financial statements
AASB 15
Revenue from
Contracts with
Customers
(IFRS 15
Revenue from
Contracts with
Customers)
AASB 16 Leases
(IFRS 16 Leases)
AASB 15 provides a single, principles based five-step model
to be applied to all contracts with customers. The five steps
in the model are as follows:
1. identify contracts with customers
2. identify the separate performance obligations
3. determine the transaction price of the contract
4. allocate the transaction price to each of the separate
performance obligations, and
5. recognise the revenue as each performance obligation
is satisfied.
Guidance is provided on topics such as the point in which
revenue is recognised, accounting for variable consideration,
costs of fulfilling and obtaining a contract and various
related matters. AASB 15 must be applied for financial
years commencing on or after January 1, 2018. The Group
has not adopted AASB 15 before the mandatory date. The
Group intends to adopt the standard using the modified
retrospective approach which means that the cumulative
impact of the adoption will be recognised in retained
earnings as of July 1, 2018, and comparative disclosures will
not be restated.
The adoption of this standard will apply to the recognition
of the sales related to the BREVAGenplus product as the
Group’s current sole revenue stream. Revenue generated
from this product is not currently material and thus we do
not expect there to be any material impact upon adoption.
AASB 16 will primarily affect the accounting by lessees and
will result in the recognition of almost all leases on the balance
sheet. The standard removes the current distinction between
operating and financing leases and requires recognition of an
asset (the right to use the leased item) and financial liability to
pay rentals for almost all of the lease contracts. The accounting
by lessors, however, will not significantly change.
The Group is in the process of assessing the potential future
impact on the balance sheet of the recently executed lease
agreements for premises in Fitzroy and Charlotte, which are
considered material.
The new standard will result in extended disclosures in the
financial statements. The Group has decided not to early adopt
AASB 16.
A NN UAL REP ORT 2 01 8
4 2
NOTES TO THE FINANCIA L STATEM EN TS
There are no other standards that
are not yet effective and that are
expected to have a material impact
on the entity in the current or
future reporting periods and on
foreseeable future transactions.
(c) Principles of consolidation
Subsidiaries
The consolidated financial
statements incorporate the assets
and liabilities of all subsidiaries of
Genetic Technologies Limited (the
“Company” or “Parent Entity”) as at
30 June 2018 and the results of all
subsidiaries for the year then ended.
Genetic Technologies Limited and
its subsidiaries together are referred
to in this Financial Report as the
“Group” or the “Consolidated Entity”.
Subsidiaries are all entities
(including structured entities) over
which the group has control. The
group controls an entity when the
group is exposed to, or has rights to,
variable returns from its involvement
within the entity and has the ability
to affect those returns through
its power to direct the activities
of the entity. Subsidiaries are fully
consolidated from the date on
which control is transferred to the
Group. They are de-consolidated
from the date that control ceases.
Intercompany transactions,
balances and unrealised gains/
losses on transactions between
Group companies are eliminated.
Unrealised losses are also eliminated
unless the transaction provides
evidence of the impairment of
the asset transferred. Accounting
policies of subsidiaries have
been changed where necessary
to ensure consistency with the
Group’s policies. Non-controlling
interests in the results and equity of
subsidiaries are shown separately
in the consolidated statement
of comprehensive income,
consolidated balance sheet and
consolidated statement of changes
in equity, respectively.
(d) Segment reporting
Operating segments are reported
in a manner consistent with the
internal reporting provided to the
chief operating decision maker.
The chief operating decision
maker, who is responsible for
allocating resources and assessing
the performance of the operating
segments, has been identified as the
Chief Executive Officer.
(e) Parent entity financial
information
The financial information for the
parent entity, Genetic Technologies
Limited has been prepared on the
same basis as the consolidated
financial statements, except that
investments in subsidiaries are
accounted for at cost in the financial
statements of Genetic Technologies
Limited. Loans to subsidiaries are
written down to their recoverable
value as at balance date.
(f) Foreign currency translation
The functional and presentation
currency of Genetic Technologies
Limited and its Australian
subsidiaries is the Australian dollar
(AUD). Transactions in foreign
currencies are initially recorded
in the functional currency at the
exchange rates ruling at the date of
the transaction. Monetary assets and
liabilities which are denominated in
foreign currencies are retranslated
at the rate of exchange ruling at the
balance sheet date. All differences
are taken to the statement of
comprehensive income.
Non-monetary items that are
measured in terms of historical cost
in a foreign currency are translated
using the exchange rate ruling at
the date of the initial transaction.
Non-monetary items measured at
fair value in a foreign currency are
translated using the exchange rates
ruling at the date when the fair value
was determined. The functional
currencies of the Company’s two
overseas subsidiaries are as follows:
❚ GeneType Corporation –
United States dollars (USD)
❚ Phenogen Sciences Inc. –
United States dollars (USD)
As at the reporting date, the assets
and liabilities of these subsidiaries
are translated into the presentation
currency of Genetic Technologies
Limited at the rate of exchange
ruling at the balance sheet date and
the statement of comprehensive
income is translated at the weighted
average exchange rates for the
period unless this is not a reasonable
approximation of the cumulative
effect of the rates prevailing on the
transaction dates, in which case
income and expenses are translated
at the dates of the transactions. The
exchange differences arising on the
retranslation are recognised in other
comprehensive income and taken
directly to a separate component
of equity. On disposal or liquidation
of a foreign entity, the deferred
cumulative amount recognised in
equity relating to that particular
foreign operation is recognised in the
statement of comprehensive income.
(g) Earnings per share (“EPS”)
Basic EPS is calculated by dividing
the profit attributable to owners
of the Company, excluding any
costs of servicing equity other than
ordinary shares, by the weighted
average number of ordinary shares
outstanding during the financial
year. Diluted EPS adjusts the figures
used in the determination of basic
EPS to take into account the after
income tax effect of interest and
other financing costs associated
with dilutive potential ordinary
shares and the weighted average
number of ordinary shares that
would have been outstanding
assuming the conversion of all
dilutive potential ordinary shares.
(h) Revenue recognition
Other
Revenues are recognised to the
extent that it is probable that the
economic benefits will flow to the
entity and the revenues can be
reliably measured. Revenues are
recognised at the fair value of the
consideration received or receivable
net of the amounts of Goods
and Services Tax. The following
recognition criteria must also be
met before revenue is recognised:
Genetic testing revenues
The Company operates facilities
which provide genetic testing
services. The Company recognises
revenue from the provision of these
services when the services have
been completed.
Interest received
Revenue is recognised as the
interest accrues using the effective
interest method.
Government Grants Research and
development tax incentive
The Australian government replaced
the research and development
tax concession with research
and development (R&D) tax
incentive from 1 July 2011. The
R&D tax incentive applies to
expenditure incurred and the use
of depreciating assets in an income
year commencing on or after 1 July
2011. A refundable tax offset is
available to eligible companies with
an annual aggregate turnover of
less than $20 million. Management
has assessed the Group’s activities
and expenditure to determine
which are likely to be eligible under
the incentive scheme. The Group
accounts for the R&D tax incentive
as a government grant. The grant is
recognised as other income over the
period in which the R&D expense
is recognised.
Other Grants from the government
are recognised at their fair value
where there is a reasonable
assurance that the grant will be
received and the company will
comply with all attached conditions.
of modification. Where appropriate,
the dilutive effect of outstanding
options is reflected as additional
share dilution in the computation
of diluted earnings per share. The
Company’s policy is to treat the
options of terminated employees
as forfeitures.
43
(i) Share-based payment
transactions
(j) Income tax
The income tax expense or revenue
for the period is the tax payable on
the current period’s taxable income
based on the national income tax
rate for each jurisdiction adjusted by
changes in deferred tax assets and
liabilities attributable to temporary
differences and unused tax losses.
The current income tax charge
is calculated on the basis of the
tax laws enacted or substantively
enacted at the end of the reporting
period in the countries where
the company’s subsidiaries and
associates operate and generate
taxable income.
Deferred income tax is provided
in full, using the liability method,
on temporary differences arising
between the tax bases of assets and
liabilities and their carrying amounts
in the consolidated financial
statements. However, the deferred
income tax is 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
income tax is determined using tax
rates (and laws) that have been
enacted or substantially enacted
by the balance sheet date and
are expected to apply when the
related deferred income tax asset
is realised or the deferred income
tax liability is settled. 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.
The fair value of options granted
under an Employee Option Plan is
recognised as an employee benefit
expense with a corresponding
increase in equity. The fair value
is measured at grant date and
recognized over the vesting period
over which all of the specified
vesting conditions are to be
satisfied. The fair value at grant date
is determined by management with
the assistance of an independent
valuer, using a Black-Scholes
option pricing model or a Monte
Carlo simulation analysis. The
total amount to be expensed is
determined by reference to the fair
value of the options granted:
❚
❚
including any market
performance conditions (e.g. the
entities share price)
excluding the impact of any
service and non-market
performance vesting conditions
(e.g. remaining an employee over
a specified time period).
The cumulative employee benefits
expense recognised at each
reporting date until vesting date
reflects (i) the extent to which the
vesting period has expired; and
(ii) the number of awards that,
in the opinion of the Directors of
the Group, will ultimately vest.
This opinion is formed based on
the best information available at
balance date.
Where the terms of an equity-
settled award are modified, as a
minimum an expense is recognised
as if the terms had not been
modified. In addition, an expense is
recognised for any increase in the
value of the transaction as a result
of the modification, as at the date
A NN UAL REP ORT 2 01 8
44
NOTES TO THE FINANCIA L STATEM EN TS
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. Deferred tax liabilities
and assets are not recognised for
temporary differences between the
carrying amount and tax bases of
investments in controlled entities
where the parent entity is able to
control the timing of the reversal of
the temporary differences and it is
probable that the differences will
not reverse in the foreseeable future.
Deferred tax assets and liabilities
are offset when there is a legally
enforceable right to offset current
tax assets and liabilities and when
the deferred tax balances relate
to the same taxation authority.
Current tax assets and tax liabilities
are offset where the entity has a
legally enforceable right to offset
and intends either to settle on a net
basis, or to realise the asset and
settle the liability simultaneously.
Current and deferred tax balances
attributable to amounts recognised
directly in equity are also recognised
directly in equity. Current and
deferred tax is recognised in profit
or loss, except to the extent that it
relates to items recognised in other
comprehensive income or directly
in equity. In this case, the tax is also
recognised in other comprehensive
income or directly in equity,
respectively.
Tax consolidation legislation
Genetic Technologies Limited
(“GTG”) and its wholly-owned
Australian-resident subsidiaries have
implemented the tax consolidation
legislation. The head entity, GTG,
and the subsidiaries in the tax
consolidated group account for
their own current and deferred tax
amounts. These tax amounts are
measured as if each entity in the
tax consolidated group continues
to be a stand-alone taxpayer in its
own right.
In addition to its own current and
deferred tax amounts, GTG also
recognises the current tax assets/
liabilities and the deferred tax
assets arising from unused tax
losses and tax credits assumed from
subsidiaries in the tax consolidated
group. Assets or liabilities arising
under tax funding agreements with
the tax consolidated entities are
recognised as amounts receivable
from or payable to other entities in
the Group. Any difference between
the amounts assumed and amounts
receivable or payable under
the tax funding agreements are
recognised as a contribution to (or
distribution from) wholly-owned tax
subsidiaries.
(k) Other taxes
Revenues, expenses and assets
are recognised net of the amount
of Goods and Services Tax (GST)
except where the GST incurred on
a purchase of goods and services is
not recoverable from the taxation
authority, in which case the GST is
recognised as part of the cost of
acquisition of the asset or as part
of the expense item as applicable;
and receivables and payables are
stated with the amount of GST
included. The net amount of GST
recoverable from, or payable to, the
taxation authority is included as
part of receivables or payables in
the balance sheet. Cash flows are
included in the cash flow statement
on a gross basis and the GST
component arising from investing
and financing activities, which is
recoverable from/payable to the
taxation authority, are classified as
operating cash flows.
(l) Withholding tax
The Group generates revenues from
the granting of licenses to parties
resident in overseas countries.
Such revenues may, in certain
circumstances, be subject to the
deduction of local withholding
tax. In such cases, revenues are
recorded net of any withholding
tax deducted.
(m) Finance costs
Finance costs are recognised using
the effective interest rate method.
(n) Cash and cash equivalents
Cash and cash equivalents in the
balance sheet comprise cash at
bank and in hand and short-term
deposits with an original maturity of
3 months or less. For the purposes
of the cash flow statement, cash
and cash equivalents consist of cash
and cash equivalents as defined
above. Cash at bank earns interest
at floating rates based on daily bank
deposit rates. Short-term deposits
are made for varying periods,
depending on the immediate cash
requirements of the Group, and earn
interest at the respective short-term
deposit rates.
(o) Trade and other receivables
Trade receivables, which are non-
interest bearing and generally have
terms of between 30 to 90 days, are
recognised and carried at original
invoice amount less an allowance
for any uncollectible amounts.
An allowance for doubtful debts
is made when there is objective
evidence that a receivable is
impaired. Such evidence includes an
assessment of the debtor’s ability
and willingness to pay the amount
due. The amount of the allowance/
impairment loss is measured as the
difference between the carrying
amount of the trade receivables
and the estimated future cash flows
expected to be received from the
relevant debtors.
(p) Inventories
Inventories principally comprise
laboratory and other supplies and
are valued at the lower of cost and
net realisable value. Inventory costs
are recognised as the purchase price
of items from suppliers plus freight
inwards and any applicable landing
charges. Costs are assigned on the
basis of weighted average cost.
45
(q) Property, plant and equipment
Plant and equipment is stated at
cost less accumulated depreciation
and any impairment in value.
Depreciation is calculated on
a straight-line basis over the
estimated useful life of the
respective asset as follows:
❚
Laboratory equipment –
3 to 5 years
economic benefits, the availability
of resources to complete the
development and the ability to
measure reliably the expenditure
attributable to the intangible asset
during its development. To date,
all development costs have been
expensed as incurred as their
recoverability cannot be regarded
as assured.
❚ Computer equipment – 3 years
(s) Impairment of assets
❚ Office equipment – 3 to 5 years
❚
Leasehold improvements –
lease term, being between
1 and 3 years
Costs relating to day-to-day
servicing of any item of property,
plant and equipment are recognised
in profit or loss as incurred. The
cost of replacing larger parts of
some items of property, plant and
equipment are capitalised when
incurred and depreciated over the
period until their next scheduled
replacement, with the replacement
parts being subsequently written off.
(r) Intangible assets
Patents
Patents held by the Group are used
in the licensing, testing and research
areas and are carried at cost and
amortised on a straight-line basis
over their useful lives, being 10
years. External costs incurred
in filing and protecting patent
applications, for which no future
benefit is reasonably assured, are
expensed as incurred.
Research and development costs
Costs relating to research activities
are expensed as incurred. An
intangible asset arising from
development expenditure on an
internal project is recognised only
when the Group can demonstrate
the technical feasibility of
completing the intangible asset so
that it will be available for use or
sale, its intention to complete and
its ability to use or sell the asset,
how the asset will generate future
The Group assesses at each
reporting date whether there is
an indication that an asset may
be impaired. If any such indication
exists, the Group makes an estimate
of the asset’s recoverable amount.
An asset’s recoverable amount
is the higher of its fair value less
costs of disposal or its value in use
and is determined for an individual
asset, unless the asset does not
generate cash inflows that are
largely independent of those from
other assets or groups of assets
and the asset’s value-in-use cannot
be estimated to be close to its fair
value. In such cases, the asset is
tested for impairment as part of
the cash-generating unit to which it
belongs. When the carrying amount
of an asset or cash-generating unit
exceeds its recoverable amount,
the asset or cash-generating unit is
considered impaired and is written
down to its recoverable amount.
In assessing value in use, the
estimated future cash flows are
discounted to their present value
using a pre-tax discount rate that
reflects current market assessments
of the time value of money and
the risks specific to the asset.
Impairment losses relating to
operations are recognised in those
expense categories consistent
with the function of the impaired
asset unless the asset is carried at
its revalued amount, in which case
the impairment loss is treated as a
revaluation decrease.
An assessment is made at each
reporting date as to whether there
is any indication that previously
recognised impairment losses
may no longer exist or may have
decreased. If such indication exists,
the recoverable amount is estimated.
A previously recognised impairment
loss is reversed only if there has been
a change in the estimates used to
determine the asset’s recoverable
amount since the last impairment
loss was recognised. If so, the
carrying amount of the asset is
increased to its recoverable amount.
The increased amount cannot
exceed the carrying amount that
would have been determined, net
of depreciation, had no impairment
loss been recognised for the asset
in prior years. Such reversal is
recognised in profit or loss unless
it reverses a decrement previously
charged to equity, in which case the
reversal is treated as a revaluation
increase. After such a reversal, the
depreciation charge is adjusted in
future periods to allocate the asset’s
revised carrying amount, less any
residual value, on a systematic basis
over its remaining useful life.
(t) Employee benefits
(i) Short-term obligations
Provision is made for employee
benefits accumulated as a result
of employees rendering services
up to the reporting date. These
benefits include wages and salaries,
annual leave and long service
leave. Liabilities arising in respect
of wages and salaries, expected to
be settled within twelve months of
the reporting date are measured
at their nominal amounts based
on remuneration rates which are
expected to be paid when the
liability is settled. Expenses for
non-accumulating sick leave are
recognised when the leave is taken
during the year and are measured
at rates paid or payable.
A NN UAL REP ORT 2 01 8
NOTES TO THE FINANCIA L STATEM EN TS
46
(ii) Other long-term employee
benefit obligations
The liabilities for long service
leave and annual leave are not
expected to be settled wholly
within 12 months after the end
of the reporting period in which
the employee renders the related
service. They are therefore
recognised in the provision for
employee benefits and measured
as the present value of expected
future payments to be made in
respect of services provided by
employees up to the end of the
reporting period using the projected
unit credit method. Consideration
is given to expected future wage
and salary levels, experience of
employee departures and periods of
service. Expected future payments
are discounted using market yields
at the end of the reporting period
of corporate bonds with terms and
currencies that match, as closely
as possible, the estimated future
cash outflows. The 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 period,
regardless of when the actual
settlement is expected to occur.
(iii) Retirement benefit obligations
The Group does not have any
defined benefit funds. Statutory
contributions to defined
contribution superannuation funds
are recognised as an expense as
they become payable. Prepaid
contributions are recognised as
an asset to the extent that a cash
refund or a reduction in the future
payments is available. Statutory
contributions are legally enforceable
in Australia.
(u) Provisions
(w) Contributed equity
Provisions for legal claims, service
claims and make good obligations
are recognised when the Group
has a present obligation (legal or
constructive) as a result of a past
event, it is probable that an outflow
of resources embodying economic
benefits will be required to settle the
obligation and a reliable estimate
can be made of the amount of
the obligation. Where the Group
expects some or all of a provision to
be reimbursed, the reimbursement
is recognised as a separate asset
but only when the reimbursement
is virtually certain. The expense
relating to any provision is
presented in the statement of
comprehensive income net of any
reimbursement.
If the effect of the time value of
money is material, provisions are
determined by discounting the
expected future cash flows at a
pre-tax rate that reflects market
assessments of the time value of
money and, where appropriate, the
risks specific to the liability. Where
discounting is used, the increase in
the provision due to the passage of
time is recognised as a finance cost.
(v) Trade and other payables
Trade payables and other payables
are carried at amortised cost and
represent liabilities for goods and
services provided to the Group prior
to the end of the financial year that
are unpaid and arise when the Group
becomes obliged to make future
payments in respect of the purchase
of these goods and services. Trade
payables and other payables
generally have terms of between
30 and 60 days.
Issued and paid up capital is
recognised at the fair value of
the consideration received by the
Company. Transaction costs arising
on the issue of ordinary shares
are recognised directly in equity
as a deduction, net of tax, of the
proceeds received. The Company
has a share-based payment
option plan under which options
to subscribe for the Company’s
shares have been granted to certain
executives and other employees.
3. CRITICAL ACCOUNTING
ESTIMATES AND JUDGEMENTS
Estimates and judgements are
evaluated and based on historical
experience and other factors,
including expectations of future
events that may have a financial
impact on the Company and that
are believed to be reasonable under
the circumstances.
Critical accounting estimates and
assumptions
The carrying amounts of certain
assets and liabilities are often
determined based on estimates and
assumptions of future events. The
key estimates and assumptions that
have a significant risk of causing a
material adjustment to the carrying
value of certain assets and liabilities
within the next annual reporting
period are set out below.
Share-based payments transactions
The Group measures the cost of
equity-settled transactions with
employees by reference to the value
of the equity instruments at the
date on which they are granted.
Management has determined
the fair value by engaging an
independent valuer using a Black-
Scholes and Monte Carlo simulation
options pricing model.
4. COST OF SALES
Inventories used
Direct labour costs
Depreciation expense
Inventories written off 1
Total cost of sales
1.
Inventories written off include $24,506 (2017: $53,856) of items that expired during the year.
5. OTHER INCOME
Net profit on disposal of plant and equipment
Research and development tax incentive
Export Marketing and Development Grant
Interest income
Total other income
Consolidated
2018
$
2017
$
93,869
88,690
65,853
51,676
300,088
-
299,351
126,907
15,218
441,476
172,070
152,767
71,139
96,441
492,417
52,188
253,159
-
38,765
344,112
47
6. FOREIGN EXCHANGE GAIN RECLASSIFIED ON LIQUIDATION OF SUBSIDIARY
Reclassification of net foreign exchange gains previously recognised in other
comprehensive income, reclassified to profit or loss
Total gain on liquidation of subsidiary
527,049
527,049
-
-
Total gain is attributable to the liquidation of GeneType AG, a dormant subsidiary, that was completed on 13 December 2017.
7. EXPENSES
Amortisation of intangible assets
Depreciation of fixed assets
Employee benefit expenses
Operating lease expenses
Research and development expenses
-
303,749
2,657,232
326,192
459,026
63,783
307,828
3,594,936
310,413
418,598
A NN UAL RE PORT 2018
NOTES TO THE FINANCIA L STATEM EN TS
8. INCOME TAX
Reconciliation of income tax expense to prima facie tax payable
Loss before income tax expense
Tax at the Australian tax rate of 27.50%
Tax effect amounts which are not deductible/(taxable) in calculating taxable
income
Share-based payments expense
Research and development tax incentive
Other assessable items
Withholding tax expense
Other non-deductible items
4 8
Difference in overseas tax rates
Under/(over) provision
Research and development tax credit
Tax losses not recognised
Income tax expense
Net deferred tax assets
Deferred tax assets not recognised
Property, plant and equipment
Capital raising costs
Intangible assets
Provisions
Other
Total deferred tax assets
Deferred tax liabilities not recognised
Prepayments
Total deferred tax liabilities
Consolidated
2018
$
2017
$
(5,463,872)
(8,403,826)
(1,502,565)
(2,311,052)
35,650
148,346
-
-
1,509
33,079
108,163
81,155
-
1,257
(1,317,060)
(2,087,398)
67,557
(268,092)
(82,322)
(96,775)
(75,054)
(69,619)
1,599,917
2,328,846
-
-
1,381
347,370
1,949,601
201,492
-
2,802
320,417
2,003,505
333,103
-
2,499,844
2,659,827
-
-
-
-
Net deferred tax assets on temporary differences not brought to account
(2,499,844)
(2,659,827)
Total net deferred tax assets
Tax losses
-
-
Unused tax losses for which no deferred tax asset has been recognised
87,970,140
80,706,629
Potential tax benefit
22,596,182
22,194,323
8. INCOME TAX CONTINUED
Subject to the Group continuing to
meet the relevant statutory tests,
the tax losses are available for offset
against future taxable income.
At 30 June 2018, the group had a
potential tax benefit related to tax
losses carried forward of $22,596,182.
Such amount includes net losses of
$5,155,038 related to subsidiaries in
the United States (US). The Tax Cuts
and Jobs Act (TCJA) enacted by
Congress in the US on 22 December
2017 cut the top corporate income
tax rate from 35% to 21%. For tax
years beginning after December
31, 2017, the graduated corporate
tax rate structure is eliminated
and corporate taxable income will
be taxed at 21-percent flat rate.
Additionally, the previous 20-year
limitation on carry forward net
operating losses (NOL’s) has been
removed, allowing the NOL’s to be
carried forward indefinitely. The
remaining tax losses carried forward
of $17,441,144 are indefinite and are
attributable to the Group’s operations
in Australia. As such the total unused
tax losses available to the Group,
equal $22,596,182.
As at balance date, there are
unrecognised tax losses with a
benefit of approximately $22,596,182
(2017: $22,194,323) that have not
been recognised as a deferred
tax asset to the Group. These
unrecognised deferred tax assets
will only be obtained if:
(a) The Group companies derive
future assessable income of a
nature and amount sufficient
to enable the benefits to be
realised;
(b) The Group companies continue
to comply with the conditions
for deductibility imposed by the
law; and
(c) No changes in tax legislation
adversely affect the Group
companies from realising
the benefit.
Tax consolidation legislation
Genetic Technologies Limited
and its wholly owned Australian
subsidiaries implemented the tax
consolidation legislation as from
1 July 2003. The accounting policy
in relation to this legislation is set
out in Note 2(j).
The entities in the tax consolidated
group have entered into a Tax
Sharing Agreement which, in the
opinion of the Directors, limits the
joint and several liabilities of the
wholly-owned entities in the case of
a default by the head entity, Genetic
Technologies Limited.
The entities have also entered
into a Tax Funding Agreement
under which the wholly-owned
entities fully compensate Genetic
Technologies Limited for any
current tax payable assumed
and are compensated by Genetic
Technologies Limited for any
current tax receivable and deferred
tax assets relating to unused tax
losses or unused tax credits that are
transferred to Genetic Technologies
Limited under the tax consolidation
legislation. The funding amounts
are determined by reference to
the amounts recognised in the
respective subsidiaries’ financial
statements.
The amounts receivable or payable
under the Tax Funding Agreement
are due upon receipt of the funding
advice from the head entity, which
is issued as soon as practicable after
the end of each financial year.
As at 30 June 2018, there are no
unrecognised temporary differences
associated with the Group’s
investments in subsidiaries, as the
Group has no liability for additional
taxation should unremitted earnings
be remitted (2017: $nil).
49
Consolidated
2018
$
2017
$
9. LOSS PER SHARE
The following reflects the income and share data used in the calculations of basic and diluted loss per share:
Loss for the year attributable to the owners of Genetic Technologies Limited
(5,463,872)
(8,403,826)
Weighted average number of ordinary shares used in calculating loss per share
2,435,282,724
2,121,638,888
Note: None of the 55,102,778 (2017: 75,102,778) options over the Company’s ordinary shares that were outstanding as at the
reporting date are considered to be dilutive for the purposes of calculating diluted earnings per share.
A NN UAL RE PORT 2018
NOTES TO THE FINANCIA L STATEM EN TS
10. CASH AND CASH EQUIVALENTS
Reconciliation of cash and cash equivalents
Cash at bank and on hand
Total cash and cash equivalents
Reconciliation of loss for the year
Reconciliation of loss for the year after income tax to
net cash flows used in operating activities is as follows:
Loss for the year after income tax
Adjust for non-cash items
Amortisation and depreciation expenses
Impairment of Intangible assets
Share-based payments expense
50
Net (profit) / loss on disposal of plant and equipment
Net (gains) / losses on liquidation of subsidiary
Net foreign exchange (gains) / losses
Adjust for changes in assets and liabilities
(Increase) / decrease in trade and other receivables
(Increase) / decrease in prepayments and other assets
Increase / (decrease) in trade and other payables
Increase / (decrease) in provisions
Consolidated
2018
$
2017
$
5,487,035
10,988,255
5,487,035
10,988,255
(5,463,872)
(8,403,826)
303,749
-
129,635
-
(527,049)
(128,360)
124,889
14,843
47,027
(122,177)
371,611
544,694
120,287
(52,188)
-
175,038
204,501
103,488
60,120
62,636
Net cash flows from / (used in) operating activities
(5,621,315)
(6,813,639)
Financing facilities available
As at 30 June 2018, the following financing facilities had been negotiated and
were available:
Total facilities
Credit cards
Facilities used as at reporting date
Credit cards
Facilities unused as at reporting date
Credit cards
11. TRADE AND OTHER RECEIVABLES (CURRENT)
Trade receivables
Less: provision for doubtful debts
Net trade receivables
Other receivables
183,770
306,128
(12,031)
(12,428)
171,739
293,700
10,503
-
10,503
290,880
200,837
-
200,837
225,435
Total net current trade and other receivables
301,383
426,272
Note: Trade and other receivables for the Group include amounts due in US dollars of USD 7,114 (2017: USD 153,829).
Refer Note 28 for details of aging, interest rate and credit risks applicable to trade and other receivables for which, due to their
short-term nature, their carrying value approximates their fair value.
12. PREPAYMENTS AND OTHER ASSETS (CURRENT)
Prepayments
Inventories at the lower of cost and net realisable value
Performance bond and deposits
Total current prepayments and other assets
13. PROPERTY, PLANT AND EQUIPMENT
Laboratory equipment, at cost
Less: accumulated depreciation
Net laboratory equipment
Computer equipment, at cost
Less: accumulated depreciation
Net computer equipment
Office equipment, at cost
Less: accumulated depreciation
Net office equipment
Equipment under hire purchase, at cost
Less: accumulated depreciation
Net equipment under hire purchase
Leasehold improvements, at cost
Less: accumulated depreciation
Net leasehold improvements
Total net property, plant and equipment
Reconciliation of property, plant and equipment
Opening gross carrying amount
Add: additions purchased during the year
Less: disposals made during the year
Closing gross carrying amount
Opening accumulated depreciation and impairment losses
Add: disposals made during the year
Less: depreciation expense charged
Consolidated
2018
$
2017
$
139,767
59,007
3,505
202,279
136,923
76,822
3,377
217,122
1,451,389
1,451,389
(1,355,397)
(1,209,553)
95,992
241,836
609,550
(563,208)
607,165
(523,278)
51
46,342
83,887
167,564
(166,807)
167,564
(165,805)
757
1,759
594,626
(594,626)
594,626
(594,626)
-
-
462,797
(430,604)
462,797
(313,631)
32,193
149,166
175,284
476,648
3,283,541
3,049,462
2,385
-
234,799
(720)
3,285,926
3,283,541
(2,806,893)
(2,499,323)
-
258
(303,749)
(307,828)
Closing accumulated depreciation and impairment losses
(3,110,642)
(2,806,893)
Total net property, plant and equipment
175,284
476,648
A NN UAL REP ORT 2 01 8
NOTES TO THE FINANCIA L STATEM EN TS
13. PROPERTY, PLANT AND EQUIPMENT CONTINUED
Reconciliation of movements in property, plant and equipment by asset category
Asset category
Opening net
carrying amount
Additions
during year
Disposals
during year
Depreciation
expense
Closing net
carrying amount
$
$
$
Laboratory equipment
Computer equipment
Office equipment
Leasehold improvements
241,836
83,887
1,759
149,166
-
2,385
-
-
Totals
476,648
2,385
$
(145,844)
(39,930)
(1,002)
(116,973)
$
95,992
46,342
757
32,193
(303,749)
175,284
-
-
-
-
-
Consolidated
2018
$
2017
$
52
14. INTANGIBLE ASSETS
Patents
Patents, at cost
Less: accumulated amortisation
Less: impairment losses
Total net patents
Other intangible assets
Assets associated with BREVAGen™ breast cancer risk test, at cost
Less: accumulated amortisation
Less: impairment losses
Total net other intangible assets
Total net intangible assets
Reconciliation of patents
Opening net carrying amount
Less: amortisation expense charged (refer below)
Less: impairment expense
Total net patents
Reconciliation of other intangible assets
Opening net carrying amount
Less: amortisation expense charged (refer below)
Less: impairment expense
Total net other intangible assets
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
36,662,592
(32,950,533)
(3,712,059)
-
1,033,273
(568,300)
(464,973)
-
-
91,840
(12,119)
(79,721)
-
516,637
(51,664)
(464,973)
-
14. INTANGIBLE
ASSETS CONTINUED
Impairment
❚
Slow growth rates in the market
adoption of the BREVAGenplus
breast cancer risk assessment
test contributing to net losses
represented an impairment
triggering event in the prior year
(2017). The Group performed an
impairment assessment, which
resulted in a non-cash impairment
of the Patents and other Intangible
assets associated with the
BREVAGen test of $544,694 being
recorded at 31 December 2016.
There have been no indications of
a change in the estimates used to
determine the assets recoverable
amount since the last impairment
loss was recognized and as such
there is no reversal in the current
year ended 30 June 2018.
In order to support this conclusion,
the Company undertook an
impairment assessment as follows:
calculating the value in use of
each Intangible asset using a
discounted cash flow model.
These models used cash flows
(revenues, expenses and
capital expenditure) for each
asset based on their remaining
useful lives of approximately
4 years. The cash flows were
then discounted to net present
values at an average of the
most recent rates utilised by
other Companies in the industry
in which the Group operates
and have been assessed by
management to align with the
long term growth profile of the
Company. A pre-tax discount
rate of 14.5%, and a growth
rate estimate of 2.0% was used
throughout the value in use
model, and
❚
comparing the resulting value in
use of each Intangible asset to
their respective book values.
The Company also performed
sensitivity analysis over the value
15. TRADE AND OTHER PAYABLES (CURRENT)
Trade payables
Other payables
Accrued expenses
Total current trade and other payables
in use calculations by varying the
assumptions used to assess the
impact on the valuations.
On consideration of all of these
key assumptions the Company,
in line with its impairment testing
policy concluded that the intangible
asset should be fully impaired, and
that a non-cash impairment expense
of $544,694 be recognised at
30 June 2017.
Remaining useful lives
The assets associated with the
BREVAGen™ breast cancer risk test
had a remaining useful life of 4 years
as at 30 June 2017.
Disclosure of expenses
53
The total amortisation expense
charged during the year ended
30 June 2017 (2018: nil) in respect
of intangible assets of $63,783
is disclosed in the consolidated
statement of comprehensive income
under the heading of laboratory and
research and development costs.
Consolidated
2018
$
2017
$
535,923
222,503
186,704
398,291
195,584
304,228
945,130
898,103
Note: Trade payables for the Group include amounts due in US dollars of USD 116,063 (2017 USD 137,154) and Swiss francs of
CHF 0 (2017: CHF 380).
Refer Note 28 for details of management of interest rate, foreign exchange and liquidity risks applicable to trade and other
payables for which, due to their short-term nature, their carrying value approximates their fair value.
A NN UAL REP ORT 2 01 8
NOTES TO THE FINANCIA L STATEM EN TS
16. PROVISIONS (CURRENT AND NON-CURRENT)
Current provisions
Annual leave
Long service leave
Make good*
Total current provisions
Non-current provisions
Long service leave
Make good*
Total non-current provisions
54
Total provisions
* Make good provision.
Consolidated
2018
$
2017
$
145,449
268,544
91,590
505,583
3,390
-
3,390
508,973
239,821
243,411
83,958
567,190
56,328
7,632
63,960
631,150
Genetic Technologies Limited is required to restore the leased premises situated in Fitzroy, Melbourne to their original
condition at the end of the lease terms. A provision has been recognised for the present value of the estimated
expenditure required to remove any leasehold improvements. These costs have been capitalised as part of the cost
of leasehold improvements and are amortised over the shorter of the term of the lease or the useful life of the assets.
See Note 2 (u) for the Group’s other accounting policies relevant to provisions.
Reconciliation of annual leave provision
Balance at the beginning of the financial year
Add: obligation accrued during the year
Less: utilised during the year
Balance at the end of the financial year
Reconciliation of long service leave provision
Balance at the beginning of the financial year
(Less) / Add: obligation accrued during the year
Less: utilised during the year
Balance at the end of the financial year
239,821
155,967
(250,289)
223,100
183,613
(166,892)
145,499
239,821
299,739
(27,806)
-
271,933
253,824
58,699
(12,784)
299,739
Note: The total provisions for annual leave and long service leave include a total amount of $325,421 (2017: $428,891) in respect of
obligations which, based on historical evidence, the Company estimates will be settled more than 12 months from balance date.
17. CONTRIBUTED EQUITY
Issued and paid-up capital
Fully paid ordinary shares
Total contributed equity
Movements in shares on issue
Year ended 30 June 2017
Balance at the beginning of the financial year
Add: shares issued as part of private placements
Add: facility fee rebate on previously issued shares*
Less: transaction costs arising on share issue
Consolidated
2018
$
2017
$
122,372,662
122,382,625
122,372,662
122,382,625
Shares
$
1,715,282,724
720,000,000
-
-
115,272,576
8,049,369
295,110
(1,234,430)
Balance at the end of the financial year
2,435,282,724
122,382,625
55
Year ended 30 June 2018
Balance at the beginning of the financial year
Less: transaction costs arising on share issue
Balance at the end of the financial year
2,435,282,724
122,382,625
-
(9,963)
2,435,282,724
122,372,662
*
Rebate of a facility fee originally provided to Kentgrove Capital on commencement date of a Standby Equity Placement
Facility Agreement entered into in January 2015 that was paid on expiry of the facility agreement on 21 January 2017 in
accordance with the agreement, representing a reduction in total equity transaction costs associated with the commencement
of the facility.
Terms and conditions of contributed equity
Ordinary shares have the right to receive dividends as declared and, in the event of winding up the Company, to
participate in the proceeds from the sale of all surplus assets in proportion to the number of and amounts paid up
on shares held. Ordinary shares, which have no par value, entitle their holder to one vote, either in person or by
proxy, at a meeting of the Company.
Capital management
When managing capital, Management’s objective is to ensure that the Group continues as a going concern as well
as to provide returns for shareholders and benefits for other stakeholders. Management also aims to maintain a
capital structure to reduce the entity’s cost of capital.
A NN UAL RE PORT 2018
NOTES TO THE FINANCIA L STATEM EN TS
18. RESERVES
Foreign currency translation
Share-based payments
Total reserves
Reconciliation of foreign currency translation reserve
Balance at the beginning of the financial year
Add: net currency translation gain / (loss)
Balance at the end of the financial year
Reconciliation of share-based payments reserve
Balance at the beginning of the financial year
Add: share-based payments expense
56
Balance at the end of the financial year
Nature and purpose of reserves
Foreign currency translation reserve
Consolidated
2018
$
2017
$
765,930
4,885,232
1,288,896
4,755,597
5,651,162
6,044,493
1,288,896
(522,966)
1,419,551
(130,655)
765,930
1,288,896
4,755,597
129,635
4,635,310
120,287
4,885,232
4,755,597
This reserve is used to record exchange differences arising from the translation of the financial statements of
foreign subsidiaries.
Share-based payments reserve
This reserve is used to record the value of share-based payments provided to employees and others providing
similar services as part of their remuneration.
19. ACCUMULATED LOSSES
Balance at the beginning of the financial year
(117,848,074)
(109,444,248)
Add: net loss attributable to owners of Genetic Technologies Limited
(5,463,872)
(8,403,826)
Balance at the end of the financial year
(123,311,946)
(117,848,074)
20. OPTIONS
As at 30 June 2018, the following options over ordinary shares in the Company were outstanding.
2018
Weighted ave.
exercise price
2017
Weighted ave.
exercise price
Unlisted employee options (refer below)
34,736,111
$0.017
54,736,111
Unlisted options attached to convertible
notes
20,366,667
$0.015
20,366,667
55,102,778
$0.016
75,102,778
$0.016
$0.015
$0.016
On 30 November 2001, the Directors of the Company established a Staff Share Plan. On 19 November 2008, the
shareholders of the Company approved the introduction of a new Employee Option Plan. Under the terms of the
respective Plans, the Directors of the Company may grant options over ordinary shares in Genetic Technologies
Limited to executives, consultants and employees of the Group. The options, which are granted at nil cost, are not
transferable and are not quoted on the ASX. As at 30 June 2018, there was 3 executive and 1 employee who held
options that had been granted under the Plans. Options granted under the Plans carry no rights to dividends and
no voting rights.
The movements in the number of options granted under the Plans are as follows:
2018
Weighted ave.
exercise price
2017
Weighted ave.
exercise price
57
Unlisted employee options
Balance at the beginning of the financial
year
Add: options granted during the year
Less: options exercised during the year
54,736,111
$0.016
-
-
-
-
33,486,111
22,750,000
-
Less: options forfeited during the year
(20,000,000)
$0.014
(1,500,000)
Balance at the end of the financial year
34,736,111
$0.017
54,736,111
$0.022
$0.010
-
$0.049
$0.016
There were no options exercised under the Employee Option Plan during the year ended 30 June 2018 (2017: Nil).
The numbers of options outstanding as at 30 June 2018 by ASX code, including the respective dates of expiry and
exercise prices, are tabled below (refer Note 22 for further information). The options tabled below are not listed
on ASX.
Option description
Unlisted employee options
GTGAD (expiring 14 September 2020)
GTGAD (expiring 24 November 2020)
GTGAD (expiring 31 March 2021)
GTGAD (expiring 16 February 2022)
Unlisted options attached to convertible
notes
2018
Weighted ave.
exercise price
2017
Weighted ave.
exercise price
-
19,236,111
5,000,000
10,500,000
-
$0.020
$0.020
$0.010
250,000
24,236,111
7,500,000
22,750,000
34,736,111
$0.017
54,736,111
GTGAC (expiring 2 December 2018)
20,366,667
$0.015
20,366,667
Balance at the end of the financial year
55,102,778
$0.016
75,102,778
Exercisable at the end of the financial year
48,102,778
$0.017
36,234,722
The weighted average remaining contractual life of options outstanding as at 30 June 2018 was 1.94 years
(2017: 3.28 years).
A NN UAL RE PORT 2018
$0.058
$0.020
$0.020
$0.010
$0.016
$0.015
$0.016
$0.017
NOTES TO THE FINANCIA L STATEM EN TS
21. SEGMENT INFORMATION
Identification of reportable segments
The Group has identified a sole operating segment as reported that is consistent with the internal reporting
provided to the chief operating decision maker and is aligned to the one major revenue stream.
The Groups operating segment is summarised as follows:
Business segments
Segment
Operations
Segment
Operations
58
Geographic information
Revenues and income
Sales
$
Other
$
Totals
$
Profit/(Loss)
$
2018
2017
189,254
518,506
441,476
344,112
630,730
862,618
(5,463,872)
(8,403,826)
Assets
$
Liabilities
$
$
Amortisation/
depreciation
Purchases of
equipment
2018
2017
6,165,981
12,108,297
(1,454,103)
(1,529,253)
(303,749)
(371,611)
$
2,385
234,799
❚ Australia – is the home country of the parent entity and the location of the Company’s genetic testing and
licensing operations.
❚ USA – is the home of Phenogen Sciences Inc. and GeneType Corporation.
❚ Switzerland – is the home of GeneType AG (Liquidated December 2017).
Geographic information
Australia
USA
Other
Totals
Australia
USA
Other
Totals
Revenues and income
Sales
$
-
18,215
189,254
500,291
-
-
Other
$
441,476
344,112
-
-
-
-
Totals
$
441,476
362,327
189,254
500,291
-
-
Profit/(Loss)
$
(3,504,098)
(7,000,994)
(1,959,774)
(1,371,001)
-
(31,831)
189,254
518,506
441,476
344,112
630,730
862,618
(5,463,872)
(8,403,826)
Assets
$
6,004,286
11,473,094
161,695
632,419
-
2,784
Liabilities
$
(1,353,718)
(1,291,529)
(100,385)
(233,301)
-
(4,423)
Amortisation/
depreciation
Purchases of
equipment
$
(295,150)
(362,677)
(8,599)
(8,934)
-
-
$
2,385
223,096
-
11,703
-
-
6,165,981
12,108,297
(1,454,103)
(1,529,253)
(303,749)
(371,611)
2,385
234,799
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
21. SEGMENT INFORMATION CONTINUED
Additional segment disclosures
❚ Other revenues and income includes interest received of $15,218 (2017: $38,765).
❚ Expenses includes employee benefits expenses of $2,657,232 (2017: $3,594,936).
❚ Assets - includes cash of $5,487,035 (2017: $10,988,255).
❚
Liabilities includes trade and other payables of $945,130 (2017: $898,103) and provisions of $508,973
(2017: $631,150).
Included in the above figures are the following intersegment balances and transactions:
Loan payable (USA) and loan receivable (Australia)
Foreign exchange gain (USA) and foreign exchange loss (Australia)
Cost of sales (USA) and sales (Australia)
Consolidated
2018
$
66,503
981,141
38,352
2017
$
348,835
776,295
74,762
Segment products and locations
59
The principal geographic segment is Australia, with the Company’s headquarters being located in Melbourne in the
State of Victoria however the key sales activities take place in the USA.
Major customers
During the years ended 30 June 2018 and 30 June 2017 there was no customer from whom the Group generated
revenues representing more than 10% of the total consolidated revenue from operations or outstanding receivables.
22. SHARE BASED PAYMENTS
(a) Employee option plan
On 30 November 2001, the Directors of the Company established a Staff Share Plan. On 19 November 2008, the
shareholders of the Company approved the introduction of a new Employee Option Plan. Under the terms of
the respective Plans, the Directors may, at their discretion, grant options over the ordinary shares in the Genetic
Technologies Limited to executives, consultants, employees, and former Non-Executive Directors, of the Group.
A NN UAL REP ORT 2 01 8
NOTES TO THE FINANCIA L STATEM EN TS
22. SHARE BASED PAYMENTS CONTINUED
(a) Employee option plan
During the year no options over ordinary shares were granted pursuant the Employee Option Plan. The following
information relates to ordinary shares granted pursuant to the Employee Option Plan at no cost for year ended
30 June 2017:
(i) 1,250,000 options to a number of employees of the Company’s US Subsidiary, Phenogen Sciences Inc. The
options vest based on non-market performance conditions (requirement to remain employed by the Company)
in three tranches commencing on the date of the 2017 Annual General Meeting (AGM) of the Company and
then at each of the 12 and 24 month anniversaries thereafter. The fair value of each option granted is estimated
by an external valuer using a Black-Scholes option-pricing model, with assumptions as follows:
Grant Date
Options issued
Dividend yield
Historic volatility and expected volatility
Option exercise price
Weighted average exercise price
60
Risk-free interest rate
Expected life of an option
Model used
2017
17 Feb 2017
1,250,000
-
60%
$0.010
$0.010
2.19%
4.5 years
Black-Scholes
As at 30 June 2018, there was 1 employee (2017: 4) who held options that had been granted under the Plan.
The expected price volatility is based on the historic volatility (based on the remaining life of the options), adjusted
for any expected changes to future volatility due to publicly available information.
(ii) 21,500,000 options to a number of KMP. The options vest based on non-market performance conditions
(requirement to remain employed by the Company) in three tranches commencing on the date of the 2017
Annual General Meeting (AGM) of the Company and then at each of the 12 and 24 month anniversaries
thereafter. The fair value of each option granted is estimated by an external valuer using a Black-Scholes
option-pricing model, with assumptions as follows:
Grant Date
Options issued
Dividend yield
Historic volatility and expected volatility
Option exercise price
Weighted average exercise price
Risk-free interest rate
Expected life of an option
Model used
2017
17 Feb 2017
21,500,000
-
60%
$0.010
$0.010
2.19%
4.5 years
Black-Scholes
(b) Expenses arising from share-based payment transactions
Total expenses arising from share-based payment transactions recognised during the period as part of employee
benefit expense were as follows:
Options issued under employee option plan
Total
Consolidated
2018
$
129,635
129,635
2017
$
120,287
120,287
23. COMMITMENTS AND CONTINGENCIES
Operating lease expenditure commitments
Minimum operating lease payments
- not later than one year
- later than one year but not later than five years
- later than five years
Total minimum operating lease payments
Consolidated
2018
$
2017
$
41,625
-
-
227,992
35,676
-
41,625
263,668
As at 30 June 2018, the above operating leases related to the following premises that are currently occupied by
the Group:
Location
Landlord
Use
Date of expiry
of lease
60-66 Hanover Street
Fitzroy, Victoria 3065 Australia
9115 Harris Corners Parkway, Suite 320
Charlotte, North Carolina 28269 USA
Crude Pty. Ltd. Office /
31 August 2018
New Boston
Harris Corners
LLC
laboratory
Office
Month to
month
Minimum
payments
($)
35,676
5,949
61
Total
41,625
Apart from the above, there were no other commitments or contingencies as at 30 June 2018.
On 3 July 2018 the lease agreement for the Fitzroy premises in Melbourne was extended for 3 years from
1 September 2018 to 31 August 2021. In addition, Phenogen Sciences Inc. has vacated the Harris Corners Parkway
office in Charlotte and entered into a 2 year lease agreement effective 23 July 2018 for premises situated at 1300
Baxter Street, Suite 157, Charlotte, North Carolina.
24. AUDITORS’ REMUNERATION
Audit and assurance services
PricewaterhouseCoopers in respect of:
Audit 1
Audit related
Other audit firms in respect of:
Audit of the Financial Reports of subsidiaries
Consolidated
2018
$
2017
$
288,200
-
-
325,972
107,451
4,070
Total remuneration in respect of audit services
288,200
437,493
1.
Audit fees consist of services that would normally be provided in connection with statutory and regulatory filings or
engagements, including services that generally only the independent accountant can reasonably provide.
A NN UAL REP ORT 2 01 8
NOTES TO THE FINANCIA L STATEM EN TS
A number of Directors of the
Company presently or previously
have had involvement with BCG.
Mr Sam Lee has a direct and
indirect share interest in BCG of
21% and is a director of BCG. Mr
Peter Rubinstein has a direct and
indirect share interest in BCG of
8% and is a consultant to BCG. Dr
George Muchnicki has a direct and
indirect share interest in BCG of
3.4%. Dr Paul Kasian was previously
a director of BCG until July 2018. No
transactions between the Company
and BCG took place during the year
ended 30 June 2018.
There were no transactions with
parties related to Key Management
Personnel during the year other
than that disclosed above.
62
25. RELATED PARTY
DISCLOSURES
Ultimate parent
Genetic Technologies Limited is the
ultimate Australian parent company.
As at the date of this Report,
no shareholder controls more
than 50% of the issued capital of
the Company.
Transactions within the Group and
with other related parties
During the year ended 30 June
2018, the only transactions between
entities within the Group and
other related parties occurred,
are as listed below. Except where
noted, all amounts were charged
on similar to market terms and at
commercial rates.
Debt convertible notes
During the year ended 30 June 2015
the Company finalised the raising of
$2,150,000 via the issue of unlisted
secured (debt) notes to existing
and new Australian institutional and
wholesale investors. The debt notes
carried a 10.0% coupon rate, and
as approved at the Annual General
Meeting, held on 25 November 2014,
became convertible notes which
could convert into ordinary shares
(at a 10.0% discount to the 5 day
VWAP). These convertible notes
also carry free attached options
to purchase further shares in
the Company.
$125,000 of these convertible notes
were issued to a holder associated
with Dr Lindsay Wakefield, a
Company director at the time
of issue, on the same terms and
conditions as other note holders,
all of which were converted during
the year ended 30 June 2015. The
8,333,333 share options attached
to these convertible notes remain
unexercised at 30 June 2018. Dr
Muchnicki and Mr Rubinstein, both
of whom were elected as Directors
of the Company on 31 January
2018, also participated in the debt
convertible notes raising, and at 30
June 2018 indirectly held 6,666,667
and 5,000,000 options respectively.
Blockchain Global Limited
As announced by the Company on
15 February 2018, a non-binding
terms sheet with Blockchain Global
Limited (BCG) was entered to
provide a framework for continuing
discussions between the two
companies, with the proposed
transaction being subject to
shareholder approval (by non-
associated Shareholders); and
as announced by the Company
on 2 August 2018, a framework
agreement with BCG was entered
formalizing the non-binding terms
sheet and providing a framework
for a strategic alliance between
the Company and BCG, with
this Framework Agreement only
becoming binding on the Company
obtaining the approval of non-
associated Shareholders. This
framework includes a proposed
issuance of 486,000,000 shares to
BCG in 3 tranches subject to the
achievement of certain milestones.
25. RELATED PARTY DISCLOSURES CONTINUED
Details of Directors and Key Management Personnel as at balance date
Directors
Executives
Dr Paul Kasian (Chairman and Interim CEO)
Mr Kevin Fischer (Chief Financial Officer)
Dr Lindsay Wakefield (Non-Executive)
Dr Jerzy Muchnicki (Executive Director)
Mr Peter Rubinstein (Non-Executive)
Mr Xue Lee (Non-Executive)
Dr Richard Allman (Scientific Director)
Remuneration of Key Management Personnel
Short-term employee benefits
Post-employment benefits
Share-based payments
Other long-term benefits
Termination benefits
Consolidated
2018
$
2017
$
1,215,632
1,533,457
96,315
130,385
2,371
164,760
101,320
121,269
61,594
-
63
Total remuneration of Key Management Personnel
1,609,463
1,817,640
26. SUBSIDIARIES
The following diagram is a depiction of the Group structure as at 30 June 2018.
Name of Group company
Entities held directly
by parent
GeneType Pty. Ltd.
(Dormant)
Genetic Technologies
Corporation Pty. Ltd.
(Genetic testing)
Incorporation
details
5 September
1990 Victoria,
Australia
11 October 1996
N.S.W., Australia
Gene Ventures Pty. Ltd.*
(Dormant)
7 March 2001
N.S.W., Australia
GeneType AG**
(Dormant)
GeneType Corporation
(Dormant)
Phenogen Sciences Inc.
(BREVAGen™)
Total carrying value
13 February
1989 Zug,
Switzerland
18 December
1989 California,
U.S.A.
28 June 2010
Delaware,
U.S.A.
Group interest (%)
Net carrying value ($)
2018
2017
2018
2017
100%
100%
100%
100%
100%
100%
-
100%
100%
100%
100%
100%
-
2
10
-
-
-
2
10
-
-
11,006
11,018
11,006
11,018
* On 26 April 2018, the name of RareCellect Pty Ltd (ACN 096 135 9847) was changed to Gene Ventures Pty Ltd (ACN 096 135 947).
** Liquidation of GeneType AG was completed on 13 December 2017.
A NN UAL REP ORT 2 01 8
NOTES TO THE FINANCIA L STATEM EN TS
27. PARENT ENTITY FINANCIAL INFORMATION
Summary financial information
The individual financial statements for the parent entity, Genetic Technologies Limited, disclose the aggregate
amounts set out in the following table.
Balance sheet
Current assets
Total assets
Current liabilities
Total liabilities
Equity
Contributed equity
Reserves
Accumulated losses
64
Total equity
Total comprehensive loss
Related party information
As at 30 June 2018, an amount of
$59,598,266 (2017: $58,148,587)
was receivable by the Company
from its various subsidiaries. As
at the same date, an amount of
$9,991,385 (2017: $11,403,841)
was payable by the Company to
its wholly-owned subsidiaries. All
such loans are unsecured, generally
interest free and there are no fixed
terms of repayment.
Financial risk management
In assessing the recoverability
of intercompany receivables,
Genetic Technologies Limited, the
parent entity, raises a provision
for diminution to ensure that
the carrying amount of these
receivables does not exceed the net
tangible assets of the subsidiaries.
The balance of the provision as
at 30 June 2018 was $59,414,284
(2017:$57,492,658).
Contingent liabilities and
commitments of the parent entity
As at the date of this Report, the
parent entity had no contingent
liabilities or other commitments.
28. FINANCIAL RISK
MANAGEMENT
The Group’s activities expose
it to a variety of financial risks
such as credit risk, market risk
(including foreign currency risk
and interest rate risk) and liquidity
risk. The Group’s overall risk
management program focuses on
the unpredictability of financial
markets and seeks to minimise
potential adverse effects on the
financial performance of the Group.
The Group uses different methods
to measure the different types of
risk to which it is exposed. These
methods include sensitivity analysis
in the case of foreign exchange,
interest rate and aging analysis for
credit risk.
Risk management is managed
by the Executive under guidance
provided by the Board of Directors
via its Audit Committee, which
provides guidance for overall risk
Consolidated
2018
$
2017
$
5,708,300
5,972,634
1,149,581
11,235,945
10,891,441
11,774,645
12,573,111
12,637,070
122,372,662
122,382,625
2,953,424
2,823,790
(130,589,397)
(126,068,840)
(5,263,311)
(862,425)
(4,520,557)
(7,745,109)
management, as well as policies
covering specific areas, such as
credit risk, foreign exchange risk and
interest rate risk. The Committee
identifies and evaluates financial
risks in close cooperation with the
Group’s executive management.
The Group’s principal financial
instruments comprise cash and cash
equivalents. The Group also has
other financial assets and liabilities,
such as trade receivables and
payables, which arise directly from
its operations.
The Group does not typically enter
into derivative transactions, such
as interest rate swaps or forward
currency contracts. It is, and has
been throughout the period under
review, the Group’s policy that no
trading in financial instruments
shall be undertaken. The main
risks arising from the Group’s
financial instruments are credit risk
exposures, foreign currency risk,
interest rate risk and liquidity risk.
The policies for managing each of
these risks are summarised below.
28. FINANCIAL RISK MANAGEMENT CONTINUED
Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis
of measurement and the basis on which income and expenses are recognised, in respect of each class of financial
asset, financial liability and equity instrument are disclosed in Note 2.
The Group holds the following financial instruments:
Financial assets
Cash at bank / on hand
Trade and other receivables
Performance bond and deposits
Total financial assets
Financial liabilities
Trade and other payables
Total financial liabilities
Consolidated
2018
$
2017
$
5,487,035
10,988,255
301,383
3,505
426,272
3,376
5,791,923
11,417,903
945,130
945,130
898,103
898,103
65
Credit risk
The Group’s credit risk is managed
on a Group basis. Credit risk arises
from cash and cash equivalents
and deposits with banks and
financial institutions, as well as
credit exposures to customers,
including outstanding receivables
and committed transactions. Other
receivables represent amounts
accrued for which reimbursement
will be applied for from the
Australian Taxation Authority under
the Governments Research and
Development grant. The maximum
exposures to credit risk at 30 June
2018 in relation to each class of
recognised financial asset is the
carrying amount of those assets,
as indicated in the balance sheet.
Financial assets included on the
balance sheet that potentially
subject the Group to concentration
of credit risk consist principally
of cash and cash equivalents and
trade receivables. In accordance
with the guidelines of the Group’s
Short Term Investment Policy, the
Group minimises this concentration
of risk by placing its cash and cash
equivalents with financial institutions
that maintain superior credit ratings
in order to limit the degree of credit
exposure. For banks and financial
institutions, only independently-
rated parties with a minimum rating
of “A-1” are accepted. The Group has
also established guidelines relative
to credit ratings, diversification and
maturities that seek to maintain
safety and liquidity. The Group does
not require collateral to provide
credit to its customers. On 1 April
2017, a change to the billing policy
for the BREVAGenplus® test was
introduced whereby the test is
now only provided on a patient
self-pay basis. This is in contrast
to prior periods, whereby once a
BREVAGen™ or BREVAGenplus® test
had been performed, historically a
patient elected to self-pay or where
applicable seek healthcare provider
payment on receipt of the outcome
of the test. The nature of this
revenue recognition cycle increased
the risk of credit exposure. The
Group has not entered into any
transactions that qualify as a
financial derivative instrument.
The trade receivables balance is
reflective of historical collection
rates which are monitored on
an ongoing basis and adjusted
accordingly based on changing
collection and test data. As at
30 June 2018, the balance of the
Group’s total accrued net trade
receivables was $10,503 (2017:
$200,837 (refer Note 11).
Credit risk further arises in relation
to financial guarantees given by the
Group to certain parties in respect
of obligations of its subsidiaries.
Such guarantees are only provided
in exceptional circumstances.
A NN UAL REP ORT 2 01 8
NOTES TO THE FINANCIA L STATEM EN TS
28. FINANCIAL RISK MANAGEMENT CONTINUED
An analysis of the aging of trade and other receivables is provided below:
Net trade and other receivables
Current (less than 30 days)
31 days to 60 days
61 days to 90 days
Greater than 90 days
Consolidated
2018
$
2017
$
294,454
426,272
3142
783
3004
-
-
-
Total net trade and other receivables (Note 11)
301,383
426,272
66
Market risk
Foreign currency risk
The Group operates internationally
and is exposed to foreign currency
exchange risk, primarily with
respect to the US dollar, through
financial assets and liabilities. It is
the Group’s policy not to hedge
these transactions as the exposure
is considered to be minimal
from a consolidated operations
perspective. Further, as the Group
incurs expenses which are payable
in US dollars, the financial assets
that are held in US dollars provide
a natural hedge for the Group.
Foreign exchange risk arises
from planned future commercial
transactions and recognised assets
and liabilities denominated in a
currency that is not the entity’s
functional currency and net
investments in foreign operations.
The risk is measured using
sensitivity analysis and cash flow
forecasting.
The Group has a Foreign Exchange
Management Policy which was
developed to establish a formal
framework and procedures for
the efficient management of the
financial risks that impact on
Genetic Technologies Limited
through its activities outside of
Australia, predominantly in the
United States. The policy governs
the way in which the financial assets
and liabilities of the Group that are
denominated in foreign currencies
are managed and any risks
associated with that management
are identified and addressed. Under
the policy, which is updated on
a regular basis as circumstances
dictate, the Group generally retains
in foreign currency only sufficient
funds to meet the expected
expenditures in that currency.
Surplus funds are converted into
Australian dollars as and when
deemed appropriate by the Board
in consultation with the CFO.
As at 30 June 2018, the Group held
the following financial assets and
liabilities that were denominated
in foreign currencies:
Consolidated
Financial assets
Cash at bank / on hand
Total financial assets
Financial liabilities
Trade and other payables
Total financial liabilities
Year
USD
EUR
CHF
2018
2017
2018
2017
2018
2017
2018
2017
2,154,291
6,203,335
2,154,291
6,203,335
116,063
99,540
116,063
99,540
28,952
30,852
28,952
30,852
-
-
-
-
-
-
-
-
-
-
-
-
Notes: USD – United States dollars EUR – European euros
CHF – Swiss francs
28. FINANCIAL RISK
MANAGEMENT CONTINUED
During the year ended 30 June
2018, the Australian dollar/US dollar
exchange rate weakened by 3.7%,
from 0.7686 at the beginning of
the year to 0.7403 at the end of
the year.
Based on the financial instruments
held at 30 June 2018, had the
Australian dollar weakened/
strengthened by 10% against the
US dollar with all other variables
held constant, the Group’s loss
for the year would have been
$306,000 lower / $250,000 higher
(2017: loss $882,000 lower / loss
$722,000 higher), mainly as a
result of changes in the values of
cash and cash equivalents which
are denominated in US dollars, as
detailed in the above tables.
Interest rate risk
The Group’s main interest rate risk
arises in relation to its short-term
deposits with various financial
institutions. If rates were to
decrease, the Group may generate
less interest revenue from such
deposits. However, given the
relatively short duration of such
deposits, the associate risk is
relatively minimal.
The Group has a Short Term
Investment Policy which was
developed to manage the Group’s
surplus cash and cash equivalents.
In this context, the Group adopts a
prudent approach that is tailored
to cash forecasts rather than
seeking high returns that may
compromise access to funds as
and when they are required. Under
the policy, the Group deposits its
surplus cash in a range of deposits/
securities over different time frames
and with different institutions in
order to diversify its portfolio and
minimise risk.
On a monthly basis, Management
provides the Board with a detailed
list of all cash and cash equivalents,
showing the periods over which the
cash has been deposited, the name
and credit rating of the institution
holding the deposit and the interest
rate at which the funds have
been deposited.
At 30 June 2018, if interest rates had
changed by +/- 50 basis points from
the year-end rates, with all other
variables held constant, the Group’s
loss for the year would have been
$12,000 lower / higher (2017: loss
$12,000 lower / higher), as a result
of higher / lower interest income
from cash and cash equivalents.
Consolidated equity for the Group
would have been $12,000 higher /
lower (2017: $12,000 higher / lower)
mainly as a result of an increase /
decrease in the fair value of cash
and cash equivalents.
The exposure to interest rate risks
and the effective interest rates of
financial assets and liabilities, both
recognised and unrealised, for the
Group is as follows:
67
Consolidated
Year
$
$
$
%
Days
Floating rate
Fixed rate
Carrying amount
Weighted ave.
effective rate
Ave. maturity
period
Financial assets
Cash at bank / on hand
Performance bond /
deposits
Totals
Financial liabilities
2018
2017
2018
2017
2018
2017
2,394,754
2,468,730
-
-
2,394,754
2,468,730
1.74%
1.75%
-
-
2,394,754
2,468,730
3,505
3,376
3,505
3,376
3,505
3,376
2, 398,259
2,472,106
At call
At call
At call
At call
-
-
-
-
-
-
Financial liabilities at fair
value through profit or loss
2018
2017
-
-
-
-
-
-
Note: The Company holds the balance of its cash in non-interest bearing bank accounts.
A NN UAL RE PORT 2018
NOTES TO THE FINANCIA L STATEM EN TS
28. FINANCIAL RISK MANAGEMENT CONTINUED
Liquidity risk
Prudent liquidity risk management implies maintaining sufficient cash and cash equivalents and the availability
of funding through an adequate amount of committed credit facilities, such as its hire purchase and credit
card facilities. The Group manages liquidity risk by continuously monitoring forecast and actual cash flows and,
wherever possible, matching the maturity profiles of financial assets and liabilities. Due to the dynamic nature of
the underlying businesses, Management aims to maintain flexibility in funding by keeping committed credit lines
available. Surplus funds are generally only invested in instruments that are tradeable in highly liquid markets. Refer
note 2(a) for further information on the material uncertainty that may cast significant doubt on the Company’s
ability to continue as a going concern.
A balanced view of cash inflows and outflows affecting the Group is summarised in the table below:
Consolidated
Year
$
$
$
$
< 6 months
6 to 12 months
1 to 5 years
> 5 years
Financial assets
Cash at bank / on hand
68
Trade and other
receivables
Performance bond and
deposits
Total financial assets
Financial liabilities
Trade and other payables
Total financial liabilities
Net maturity
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
5,487,035
10,988,255
301,383
426,272
3,505
3,376
5,791,923
11,417,903
945,130
898,103
945,130
898,103
4,846,793
10,519,800
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Totals
$
5,487,035
10,988,255
301,383
426,272
3,505
3,376
5,791,923
11,417,903
945,130
898,103
945,130
898,103
4,846,793
10,519,800
-
-
-
-
-
-
-
-
-
-
-
-
-
-
The Group had access to the following undrawn borrowing facility as at 30 June 2018:
Nature of facility
Credit card facility
Facility limit
Amount used
Amount available
$
$
$
183,770
(12,031)
171,739
❚ The company has executed
an Agreement with Swisstec
Health Analytics on 30 July 2018
which sets out the principal
commercial terms on which the
Company intends to appoint
Swisstec as a non-exclusive
distributor for hospitals in Asia
and imposes binding obligations
on the parties to negotiate in
good faith in order to enter a
formal distribution agreement.
In accordance with the terms of
this agreement, the Company
has acquired a 5% equity stake
in Swisstec, and has provided
Swisstec with $250k to facilitate
their expansion into hospitals in
the Asian region.
❚ The Company has signed a
69
Heads of Agreement with Beijing
Zishan Health Consultancy
Limited. The Agreement provides
a framework according to which
the two parties will explore
opportunities to achieve market
entry, through a Joint Venture,
for GTG’s genomic tests into
the health sector in the People’s
Republic of China.
29. SUBSEQUENT EVENTS
Significant events after
balance date
The following significant events
have occurred after balance date.
❚ The Company has renewed the
lease agreement for it Fitzroy
premises in Melbourne for a
further period of 3 years from
1 September 2018 to 31 August
2021. The Company has also
entered into a 2 year lease for
new premises in Charlotte, North
Carolina, commencing 23 July
2018 to 31 July 2020.
❚ A Framework Agreement with
Blockchain Global Limited
(“BCG”) was entered into on
2 August 2018. The Agreement
formalises the non-binding
terms sheet that was entered
into between the parties on
2 February 2018, which outlined
a proposed strategic alliance
with respect to the provision of a
suite of blockchain opportunities
to the Company, with the
proposed issue of 486,000,000
shares to BCG in 3 tranches
subject to the achievement of
certain milestones.
❚ On 8 August 2018, the Company
executed an Equity Placement
Facility with Kentgrove Capital
Pty Ltd. Under the Facility,
Kentgrove Capital may provide
the Company with up to A$20
million of equity capital in a
series of individual placements
of up to $1 million (or a higher
amount by mutual agreement)
over the next 20 months.
Following the execution of the
Facility and under a Prospectus
as lodged with ASIC, the
Company has issued:
❘
12,500,000 Options,
exercisable at $0.0153 each,
expiring 3 years after issue
(Establishment Options), to
Kentgrove Capital Pty Ltd
in its capacity as trustee
of the Kentgrove Capital
Growth Fund (Kentgrove)
(Option Offer).
❘
❘
8,833,100 Shares
(Establishment Shares) to
Kentgrove in lieu of payment
of an Establishment Fee
(Establishment Share Offer).
100,000,000 Shares
(Collateral Shares) to
Kentgrove as security for the
Company’s obligations under
the equity placement facility
with Kentgrove.
The issue of the establishment
and collateral shares to
Kentgrove has resulted in an
increase of the issued share
capital of the Company to
2,544,115,824.
Under the lodged Prospectus,
the Company will also have the
ability to offer and issue up to
441,655,004 Placement Shares
either to Kentgrove under the
Kentgrove Facility, or to other
investors as determined by the
board, to raise up to $5,000,000.
The Company does not currently
have binding commitments
from any party to subscribe
for the Placement Shares. The
Prospectus currently has a
closing date of 9 November 2018.
❚ Following the recommendation
of the Remuneration Committee,
and subsequent Board approval
in July 2018, the Board has
agreed to award the Directors’
of the Company Share Options
pursuant to the Company’s
Employee Share Option
Plan. Subject to Shareholder
approval, the quantum of the
award, ranging in value from
$75k to $150k will be aligned
to the individual Directors
responsibilities and activities.
In addition, the Board has
agreed to grant to Dr Kasian,
in his role as interim CEO, 50
million Options subject to
certain market related vesting
conditions. The issue of such
Options will be subject to all
necessary Shareholder approvals
being obtained.
A NN UAL REP ORT 2 01 8
The Directors have
been given the
declarations by the
Chief Executive
Officer and Chief
Financial Officer.
DI RECTORS’ DE CLA RATION
In the opinion of the Directors:
(a) the Financial Statements and accompanying notes set out on pages 34 to 69 are in accordance with the
Corporations Act 2001, including:
(i) complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional
reporting requirements; and
(ii) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2018 and of its
performance for the financial year ended on that date; and
(b) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they
become due and payable; and
71
71
Note 2 confirms that the financial statements also comply with International Financial Reporting Standards as
issued by the International Accounting Standards Board.
The Directors have been given the declarations by the Chief Executive Officer and Chief Financial Officer, as
required by section 295A of the Corporations Act 2001.
This Declaration is made in accordance with a resolution of the Directors.
DR PAUL KASIAN
Chairman
Melbourne, 30 August 2018
AN N UA L R EPO RT 2 01 8
A NN UAL REP ORT 2 01 8
AUDITOR’S INDEPENDENCE DECLARATION
7272
Auditor’s Independence Declaration
As lead auditor for the audit of Genetic Technologies Limited for the year ended 30 June 2018, I
declare that to the best of my knowledge and belief, there have been:
(a)
no contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
(b)
no contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Genetic Technologies Limited and the entities it controlled during the
period.
Sam Lobley
Partner
PricewaterhouseCoopers
Melbourne
30 August 2018
PricewaterhouseCoopers, ABN 52 780 433 757
2 Riverside Quay, SOUTHBANK VIC 3006, GPO Box 1331, MELBOURNE VIC 3001
T: 61 3 8603 1000, F: 61 3 8603 1999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
AUDITOR’S REPORT
73
73
AN N UA L R EPO RT 2 01 8
A NN UAL REP ORT 2 01 8
Independent auditor’s report To the members of Genetic Technologies Limited Report on the audit of the financial report Our opinion In our opinion: The accompanying financial report of Genetic Technologies Limited (the Company) and its controlled entities (together the Group) 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 2018 and of its financial performance for the year then ended (b) complying with Australian Accounting Standards and the Corporations Regulations 2001. What we have audited The Group financial report comprises: the consolidated balance sheet as at 30 June 2018 the consolidated statement of comprehensive income / (loss) for the year ended 30 June 2018 the consolidated statement of changes in equity for the year ended 30 June 2018 the consolidated statement of cash flows for the year ended 30 June 2018 the notes to the financial statements for the year ended 30 June 2018 the directors’ declaration. Basis for opinion We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial report section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Independence We are independent of the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. 2 Riverside Quay, SOUTHBANK VIC 3006, GPO Box 1331, MELBOURNE VIC 3001 T: 61 3 8603 1000, F: 61 3 8603 1999, www.pwc.com.au Liability limited by a scheme approved under Professional Standards Legislation. PricewaterhouseCoopers, ABN 52 780 433 757 AUDITOR’S RE PORT
Material uncertainty related to going concern
We draw attention to Note 2(a) in the financial report, which indicates that the Group incurred a total
comprehensive loss of $5,986,838 and had net cash outflows from operations of $5,621,315 during the
year ended 30 June 2018. The Group’s ability to continue as a going concern is dependent on the
successful execution of the planned equity raisings. These conditions, along with other matters set
forth in Note 2(a), indicate that 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.
7474
Our audit approach
An audit is designed to provide reasonable assurance about whether the financial report is free from
material misstatement. Misstatements may arise due to fraud or error. They are considered material if
individually or in aggregate, they could reasonably be expected to influence the economic decisions of
users taken on the basis of the financial report.
We tailored the scope of our audit to ensure that we performed enough work to be able to give an
opinion on the financial report as a whole, taking into account the geographic and management
structure of the Group, its accounting processes and controls and the industry in which it operates.
Materiality
Audit scope
For the purpose of our audit we used overall
materiality of $270,000, which represents
approximately 5% of the Group’s total loss from
operations before income tax expense.
Our audit focused on where the Group made
subjective judgements; for example, significant
accounting estimates involving assumptions and
inherently uncertain future events.
We applied this threshold, together with
qualitative considerations, to determine the scope
of our audit and the nature, timing and extent of
our audit procedures and to evaluate the effect of
misstatements on the financial report as a whole.
We chose loss from operations before income tax
expense, which is a commonly accepted
benchmark and utilised a 5% threshold based on
our professional judgement, noting it is within the
range of commonly accepted thresholds.
The accounting processes are structured around a
Group-wide finance function at the head office
Melbourne, where our procedures were
predominately performed.
Our approach had regard for the quality of the
control environment and deficiencies identified,
which include lack of segregation of duties.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in
our audit of the financial report for the current period. The key audit 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. Further, any commentary on the outcomes of a
particular audit procedure is made in that context. We communicated the key audit matters to the
Audit Committee.
In addition to the matter described in the Material uncertainty related to going concern section, we
have determined the matter described below to be the key audit matters to be communicated in our
report.
Key audit matter
How our audit addressed the key audit matter
75
75
Related Party Disclosures
(Refer to note 25)
A number of Directors of the Group presently or
previously have had involvement with Blockchain
Global Limited (BCG), which meets the definition of a
related party under Australian Accounting Standards
Board 124 Related Party Disclosures.
As announced by the Group on 15 February 2018, a
non-binding terms sheet with BCG was entered into to
provide a framework for continuing discussions
between the two companies.
As announced by the Group on 2 August 2018, a
framework agreement with BCG was entered into
formalizing the non-binding terms sheet and providing
a framework for the alliance between the Company and
BCG, with this agreement only becoming binding on
the Company obtaining the approval of non-associated
shareholders. This framework includes a proposed
issuance of 486,000,000 shares to BCG in 3 tranches
subject to the achievement of certain milestones.
Given the significance of this strategic alliance with a
related party, we have determined this is a key audit
matter.
Our procedures over transactions between the Group
and BCG as disclosed within Note 25 to the financial
report included, amongst others:
Reading the formal agreement between the
parties to obtain an understanding of the
proposed framework
Holding discussions with management and
directors to obtain an understanding of the
proposed initiatives with BCG
Reading minutes of meetings held amongst
the board of directors where matters related to
BCG were discussed
Assessing if the associated disclosures made in
the financial report complied with Australia
Accounting Standards Board 124 Related
Party Disclosures.
Other information
The directors are responsible for the other information. The other information comprises the
information included in the annual report for the year ended 30 June 2018, but does not include the
financial report and our auditor’s report thereon. Prior to the date of this auditor's report, the other
information we obtained included the Directors' Report, Corporate Information, Corporate
AN N UA L R EPO RT 2 01 8
A NN UAL RE PORT 2018
AUDITOR’S RE PORT
7676
Governance Statement and ASX Additional Information. We expect the remaining other information
to be made available to us after the date of this auditor's report.
Our opinion on the financial report does not cover the other information and we do not and will not
express an opinion or any form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information
identified above 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 on the other information that we obtained prior to the date of
this auditor’s report, 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.
When we read the other information not yet received as identified above, if we conclude that there is a
material misstatement therein, we are required to communicate the matter to the directors and use
our professional judgement to determine the appropriate action to take.
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 Corporations Act 2001 and
for such internal control as the directors determine is necessary to enable the preparation of the
financial report that gives a true and fair view and is free from material misstatement, whether due to
fraud or error.
In preparing the financial report, the directors are responsible for assessing the ability of the Group 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 the financial report.
A further description of our responsibilities for the audit of the financial report is located at the
Auditing and Assurance Standards Board website at:
http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf. This description forms part of our
auditor's report.
Report on the remuneration report
Our opinion on the remuneration report
We have audited the remuneration report included in pages 22 to 29 of the directors’ report for the
year ended 30 June 2018.
In our opinion, the remuneration report of Genetic Technologies Limited for the year ended 30 June
2018 complies with section 300A of the Corporations Act 2001.
77
77
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.
PricewaterhouseCoopers
Sam Lobley
Partner
Melbourne
30 August 2018
AN N UA L R EPO RT 2 01 8
A NN UAL RE PORT 2018
ASX ADDITIONAL INFORMATI O N
Additional information required by the
Listing Rules of the Australian Securities Exchange
(ASX) and not disclosed elsewhere in this
Annual Report. The information provided
is current as at 18 October 2018.
78
HOME EXCHANGE
The Company’s ordinary shares are quoted on the Australian Securities Exchange. The home exchange is
Melbourne, Victoria. The ASX code for the Company’s ordinary shares is GTG. The Company also has a listing
of Level II American Depositary Receipts (ADRs) on the National Association of Securities Dealers Automated
Quotation (NASDAQ) Capital Market in the U.S.A. Each ADR comprises 150 fully paid ordinary shares and trade
under the ticker symbol GENE.
DISTRIBUTION OF EQUITY SECURITIES
The number of shareholders as at 18 October 2018, ranked by size of holding, in each class of shares are as follows:
Range of shares
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 - 9,999,999,999
Total
Number of holders
Number of shares
% of shares
303
683
386
1,944
1,144
168,953
2,020,953
3,182,340
102,357,253
2,436,386,325
0.01
0.08
0.13
4.02
95.77
4,460
2,544,115,824
100.00
The number of shareholders holding less than a “marketable parcel” of shares (being 45,455 shares) is 2,239.
The total number of shares held by these shareholders on 18 October was 28,902,051.
TWENTY LARGEST SHAREHOLDERS
The names of the twenty largest registered shareholders of the Company’s ordinary shares as at 18 October 2018 are:
Rank Name
Number of shares Percentage held
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
1,546,734,954
KENTGROVE CAPITAL PTY LTD
MR WARREN DWAYNE JONES
S H RAYBURN NOMINEES PTY LTD
10. CITICORP NOMINEES PTY LIMITED
11.
12.
JGM INVESTMENT GROUP PTY LTD
Continue reading text version or see original annual report in PDF format above