A leader in
personalised
predictive genetics
Annual Report
2021
1
Contents
Letter from the Chair
Vision and Values
Letter from the CEO
Form 20-F
Consolidated Financial Statements
Appendix 4E
Auditor’s Independence Declaration
Independent Auditor’s Report
Shareholder Information
Corporate Directory
3
5
6
8
95
234
237
238
242
244
Corporate Governance
Genetic Technologies Limited and its Board of Directors are committed to implementing and
achieving an effective corporate governance framework. Our Corporate Governance Statement
can be found on our website – www.gtglabs.com.
2
Letter from the Chair
Dear shareholders,
On behalf of the Board of Directors, I am pleased to present the
Annual Report for Genetic Technologies Limited (“GTG”) for the
2021 financial year.
I would like to extend our gratitude to our shareholders and our
industry and business partners who have supported us over the
year to establish GTG as a leading provider of Genomics based
risk assessment tests for serious disease.
FY21 Reflections
FY21 presented many challenges for both established and emerging businesses given the changing
dynamics caused by COVID-19. Genetic Technologies was no different, however, we were well
positioned at the start of this financial year having addressed a number of issues early in the
COVID journey. This ensured we were able to secure capital with the support of our US bankers and
institutional investors and pivot to work on our COVID-19 Risk Test and broaden our pipeline from a
single test to a multi-test covering the majority of serious diseases.
The Board and Management made the strategic decision in March 2020 to focus on the
development of the COVID-19 Risk Test, requiring not only monetary resources but more importantly
scientific resources and opportunity costs. This was decided in part due to the commercial
opportunities but also the ethical and social responsibility GTG held given the ability to assist
humanity with our skill sets and platform in developing genomic based risk assessment tests.
With over 10 years of development experience the ability to provide the stratification of risk of
hospitalisation from this debilitating virus was critical. We thank all those who contributed to the
success of this test and especially our chief scientist Dr Richard Allman and his team and the
support provided by Dr Muchnicki as Chief Medical Officer (CMO) and Interim CEO. In 12 months we
were able to take a concept from research to commercialisation via IBX and Vault in the highly
regulated United States, all based out of our bespoke lab in Hanover Street Fitzroy with a highly
dedicated scientific team.
Additionally, in February 2021 we strengthened our management team with the addition of Simon
Morriss as CEO and closed the financial year with the appointment of Mike Tonroe as our CFO.
Simon brings over 20 years’ experience within the Pharmaceutical, Healthcare and FMCG industries
having held senior executive positions at Sanofi and Blackmores. He brings a wealth of experience
in managing teams and successfully executing across sales, marketing and brand building.
Additionally, he has been critical in leading commercialisation across these industries and
understands the unique pressures and opportunities. Mike has over 25 years’ experience in
overseeing the finance function at both management and board-level positions for private and
listed companies in Australia, the United Kingdom, the United States and Canada. He also has
extensive experience in the biotech space across both the financial and company secretary roles
and has made significant inroads in improving our internal financial processes since his
appointment in June 2021.
We are incredibly pleased to have both individuals join the Company and note the significant
contributions they have already made in the strategic direction and processes for Genetic
Technologies Limited. We look forward to the year ahead where this vast experience and initial
foundational work is translated into realised revenues for the Company. We have now established a
strong Board and Management team with the requisite skills to drive forward with our mission and
vision for the Company, and I thank them too for their ongoing support.
3
Capital Management
The Board of Genetic Technologies Limited is committed to responsible management of
shareholder funds while ensuring the Company remains appropriately resourced to execute on its
strategic objectives. We have continued to appropriately manage our financial requirements in
Australia and the United States by ensuring we have appropriate levels of funding to abide by our
listing requirements. This continues to be a focus for the Company and over the course of the year
we raised US$11.66 million (before costs) from US Institutional Investors to underpin the execution of
our long-term strategy. This allowed us to execute on the strategic acquisition of EasyDNA which is
further outlined in the letter from the CEO in addition to delivering on the launch of the COVID-19
Risk Test and the ongoing development of the multi-test and laboratory expansion.
Board and Advisory Board
We have a strong Board of Directors at Genetic Technologies Limited with the experience and skills
necessary to assure sound governance, while also providing effective support and guidance for
management. I thank them personally for their ongoing support and especially Dr Muchnicki who
did an outstanding job to reposition the Company as Interim CEO.
We further strengthened our governance with the addition of a Scientific Advisory Board (‘SAB’). The GTG
Scientific Advisory Board is charged to advise the Board of Directors and executive leadership team on
scientific matters involving product development, interactions with academic and other external
research organisations, emerging concepts and industry trends, and the acquisition of technologies.
Given GTG is in the early stages of commercialisation, it is also important that the SAB has a
balance of experience relevant to building market adoption globally of GTG’s products including
primary care, consumer education and clinical guidelines. The SAB will provide strategic counsel to
the Board and Management on both launched products and products in development. The SAB
comprises Professor Jon Emery, Professor Finlay Macrae AO, and Dr Ora K Gordan, and members of
the GTG executive team and meets on a quarterly basis. While additional appointments may be
made in the future, the three members bring a wide range of clinical and research experience and
provide GTG with coverage of both the Australian and US target markets.
We are fortunate to attract such high calibre advisory board members, providing further validation
of GTG’s reputation in the genomics landscape. The SAB brings together some of the brightest
minds in genomics, preventative healthcare, serious disease, and data driven research. We look
forward to drawing on their advice and experience as we launch and develop leading technologies
for individualised risk assessment of serious disease.
Closing Comments
Finally, on behalf of the Board, I would like to thank our Genetic Technologies Limited employees for
their perseverance during this monumental year. We are also grateful to our shareholders for your
ongoing support throughout the year and your participation in our transformational capital raises
which will enable management to deliver on the promise that genomics is not just the way of the
future, but it is viable and available now through GeneType and EasyDNA.
We look forward to engaging with you throughout the year and at our 2021 Annual General Meeting.
Sincerely,
Mr Peter Rubinstein
Chairman, Genetic Technologies Limited
August 31, 2021
4
Vision and Values
Collaborative
Cooperative, Receptive,
Informative, Transparent
Dynamic
Proactive, Striving, Responsive,
Motivated.
Unity and diversity drives us to make a
positive impact on the community
Cutting edge Innovation that creates
an aspirational place to work
Professional
Trustworthy, Respectful,
Punctual, Accountable
Passionate
Enthusiastic, Inspiring,
Dedicated, Energetic
Leveraging our collective skills and
knowledge to create global partnerships
A place where you can apply your skills
and realise your career goals
5
Letter from the CEO
Dear shareholders,
The past 12 months have been a pivotal period for Genetic
Technologies. Transitioning the business from a predominantly
research-based platform to commercialising our products has
been the focus for the Company over the last few years. We have
made significant inroads on this strategy while navigating the
challenges brought on by the global pandemic. This has driven
us to innovate and assess our strategy and structure over the
year and brought with it opportunities to both rapidly progress
our COVID-19 Risk Test as well as challenges as we were required
to adapt our sales and marketing approach.
Having joined GTG in February 2021, I must firstly acknowledge the significant contribution of Dr
Jerzy Muchnicki guiding the business over the past two years. Jerzy has been instrumental in
driving the vision for the products and platform we have developed and continues to do so in his
role as Chief Medical Officer. Additionally, I thank our Shareholders for their patience as we
transition the business and experience the inherent growing pains of a company moving from a
research focus to revenue generation.
Reflecting on what was achieved in the last year, we have established our online sales platforms for
Breast Cancer and Colorectal Cancer, partnered with Taliaz on their Predictix product and released
our COVID-19 Risk Test in the US. We also continued to build on our portfolio of IP and confirmed
grant of US Patent No 11,031,098 - ‘Computer Systems and Methods for Genomic Analysis.
Additionally, in July 2021 we announced the acquisition of EasyDNA for US$4 million providing an
established platform delivering steady revenue growth of 11% over the past two years with US$4.63
million in revenue in Calendar Year 2020.
EasyDNA is a leader in paternity testing and animal genomics: their breadth of available products
also extends into the important health and wellness categories, providing multiple growth
opportunities for GTG moving forward. The acquisition included all brands, websites and reseller
agreements associated with EasyDNA. This includes over 70 websites in 40 countries and six brand
identities and agreements with 12 NATA and associated international certified laboratories.
EasyDNA revenue contributions are strongly weighted to five countries: Australia, UK, France,
Canada and the US, where it received 68% of its Calendar Year 2020 revenue, with the UK
contributing 20% of total revenue.
With several of our existing tests already ‘Conformite Europeenne’ (“CE”) marked, gaining
established sales channels into the Europe and the UK provides a solid foundation for rapid
growth. With notable recent advances on our Multitest having a strong distribution platform in
place with global reach will strengthen our roll out strategy as we move this test into
commercialisation.
The EasyDNA acquisition will provide GTG with the platform to build its direct-to-consumer
offerings and wellness division, one of three core pillars of our commercialisation strategy. The
platform will also allow us to build awareness of our medically supervised products which includes
GeneType for Breast Cancer and Colorectal Cancer further enhancing our Consumer Initiated
Testing (CIT) division.
6
The final pillar of our commercialisation strategy being our business-to-business medical focus will
incorporate our reimbursable germline products currently in development and will focus on payers
and insurers as well as physicians, specialists and surgeons.
We adapted our sales approach over the year and incorporated a licensing model with our
partnership with IBX allowing the Company to leverage the substantial and existing networks in the
US and Europe without the requirement to establish costly sales and marketing teams adapted for
each region. This will ensure that we can continue to operate cost effectively through existing on
the ground networks while leveraging our newly acquired digital presence through EasyDNA to
raise awareness of our broader product suite.
Our team are paramount to our success. We have a strong, long-serving team of industry leading
Scientific and Medical experts who are supported by a number of very influential key opinion
leaders as members of our Advisory Board that drive our innovation pipeline. As we closed out the
financial year, we welcomed Mike Tonroe as our Chief Financial Officer and Carl Stubbings as Chief
Commercial Officer. Mike has extensive experience in managing the financial requirements of
MedTech companies as they transition from pre revenue to post revenue and will bring an
additional level of rigour and structure to our team. Carl is an experienced senior leader in the
biotechnology and diagnostics industry with a focus on commercialisation, sales, marketing and
business development.
We are immensely proud of what the team achieved this year. In under 12 months they identified an
opportunity, developed a test, and released a product to market, in our COVID-19 Risk Test in
addition to progressing our existing product base. Our COVID product whilst addressing a current
need within the health sector also demonstrates the ability of the Company to respond and
develop products swiftly to address current and future market demand. This bodes well for the
future as we work to develop our platform of tests. Although the COVID test was not without its
challenges including delays from the original timeline, the end product has opened doors for us to
engage with significant partners in the US.
We have made notable progress over the year and we still have significant milestones and
objectives to achieve in the years ahead but are confident that we have the right team in place to
deliver on the near and longer-term objectives. We continue to adapt our structure while remaining
true to our purpose, to empower a healthier life, by developing new products and identifying future
trends and opportunities in genetics and Artificial Intelligence driven preventative health.
Once more we thank our shareholders for the continued support and our partners, staff and all
those that have supported Genetic Technologies over the year.
Mr Simon Morriss
Chief Executive Officer
Genetic Technologies Limited
August 31, 2021
7
FORM 20-F
8
form20-f.htm
20-F
1 of 146
08/30/2021 03:56 AM
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 20-F
☐ REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF
1934
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
For the fiscal year ended June 30, 2021
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
OR
☐ SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
Date of event requiring this shell company report . . . . . . . . . . . . . . . . . . .
Commission file number 000-51504
GENETIC TECHNOLOGIES LIMITED
(Exact name of Registrant as specified in its charter
and translation of Registrant’s name into English)
Australia
(Jurisdiction of incorporation or organisation)
60-66 Hanover Street, Fitzroy, Victoria, 3065, Australia
(Address of principal executive offices)
Simon Morriss,
Chief Executive Officer
60-66 Hanover Street, Fitzroy, Victoria, 3065, Australia
Telephone: 011 61 3 8412 7000; Facsimile: 011 61 3 8412 7040
(Name, telephone, e-mail and/or facsimile number and address of company contact person)
Securities registered or to be registered pursuant to Section 12(b) of the Act:
Title of each class
N/A
Trading Symbol
N/A
Name of each exchange on which registered
N/A
Securities registered or to be registered pursuant to Section 12(g) of the Act: American Depositary Shares, each representing 600
Ordinary Shares
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None
Number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the
annual report. There were 9,016,726,743 Ordinary Shares outstanding as of June 30, 2021.
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section
13 or 15(d) of the Securities Exchange Act of 1934.
☐ Yes ☒ No
Note — Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 from their obligations under those Sections.
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
☐ Yes ☒ No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant
to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files).
☒ Yes ☐ No
☒ Yes ☐ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or an emerging
growth company. See definition of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the
Exchange Act. (Check one):
Large accelerated filer ☐
Accelerated filer ☐
Non-accelerated filer ☒
Emerging growth company ☐
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the
registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards†
provided pursuant to Section 13(a) of the Exchange Act. ☐
† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to
its Accounting Standards Codification after April 5, 2012.
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of
its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public
accounting firm that prepared or issued its audit report.”
☐ Yes ☒ No
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
U.S. GAAP ☐
International Financial Reporting Standards as issued
by the International Accounting Standards Board ☒
Other ☐
If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant
has elected to follow.
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act).
☐ Yes ☒ No
(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the
Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. ☐ Yes ☐ No
☐ Item 17 ☐ Item 18
TABLE OF CONTENTS
Item 1.
Item 2.
Item 3.
Item 3.A
Item 3.B
Item 3.C
Item 3.D
Item 4.
Item 4.A
Item 4.B
Item 4.C
Item 4.D
Item 5.
Item 5.A
Item 5.B
Item 5.C
Item 5.D
Item 5E.
Item 5F.
Item 6.
Item 6.A
Item 6.B
Identity of Directors, Senior Management and Advisers
Offer Statistics And Expected Timetable
Key Information
Selected Financial Data
Capitalisation and Indebtedness
Reasons for the Offer and Use of Proceeds
Risk Factors
Information on the Company
History and Development of the Company
Business Overview
Corporate Structure
Property, Plant and Equipment
Operating and Financial Review and Prospects
Operating Results
Liquidity and Capital Resources
Research and Development, Patents and Licenses, etc.
Trend Information
Off-balance sheet arrangements
Information about contractual obligations
Directors, Senior Management and Employees
Directors and Senior Management
Compensation
i
1
1
1
1
4
4
4
19
19
21
30
30
31
31
34
35
35
36
36
37
37
39
Board Practices
Employees
Share Ownership
Major Shareholders and Related Party Transactions
Major Shareholders
Related Party Transactions
Interests of Experts and Counsel
Financial Information
Consolidated Statements and Other Financial Information
Significant Changes to Financial Information
The Offer and Listing
Offer and Listing Details
Plan of Distribution
Markets
Selling Shareholders
Dilution
Expenses of the Issue
Additional Information
Item 6.C
Item 6.D
Item 6.E
Item 7.
Item 7.A
Item 7.B
Item 7.C
Item 8.
Item 8.A
Item 8.B
Item 9.
Item 9.A
Item 9.B
Item 9.C
Item 9.D
Item 9.E
Item 9.F
Item 10.
Item 10.A Share Capital
Item 10.B Our Constitution
Item 10.C Material Contracts
Item 10.D Exchange Controls and Other Limitations Affecting Security Holders
Item 10.E
Item 10.F
Item 10.G Statement by Experts
Item 10.H Documents on Display
Subsidiary Information
Item 10.I
Quantitative And Qualitative Disclosures About Market Risk
Item 11.
Taxation
Dividends and Paying Agents
ii
52
54
55
55
55
55
60
60
60
61
61
61
61
61
61
61
61
62
62
62
63
64
65
72
72
72
72
72
Description Of Securities Other Than Equity Securities
Defaults, Dividend Arrearages and Delinquencies
Material Modifications to The Rights Of Security Holders and Use Of Proceeds
Controls and Procedures
Item 12.
Item 12.A Debt Securities
Item 12.B Warrants and Rights
Item 12.C Other Securities
Item 12.D American Depositary Shares
Item 13.
Item 14.
Item 15.
Item 15.A Disclosure controls and procedures
Item 15.B Management’s annual report on internal control over financial reporting
Item 15.C Attestation report of the registered public accounting firm
Item 15.D Changes in internal control over financial reporting
Item 16.A Audit Committee Financial Expert
Item 16.B
Item 16.C
Item 16.D Exemptions From The Listing Standards For Audit Committees
Item 16.E
Item 16.F
Item 16.G Corporate Governance
Item 16.H Mine Safety Disclosure
Item 16.I
Item 17.
Item 18.
Item 19.
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Financial Statements
Financial Statements
Exhibits
Purchases Of Equity Securities By The Issuer And Affiliated Purchasers
Change in Registrant’s Certifying Accountant
Code Of Ethics
Principal Accountant Fees and Services
iii
73
73
73
73
74
74
75
75
75
75
76
76
77
77
77
78
78
78
78
78
78
79
79
79
INTRODUCTION
In this Annual Report, the “Company,” “Genetic Technologies”, “we,” “us” and “our” refer to Genetic Technologies Limited
and its consolidated subsidiaries.
Our consolidated financial statements are set out beginning on page F1 of this Annual Report (refer to Item 18 “Financial
Statements”).
References to the “ADSs” are to our ADSs described in Item 12.D “American Depositary Shares” and references to the
“Ordinary Shares” are to our Ordinary Shares described in Item 10.A “Share Capital”.
Our fiscal year ends on June 30 and references in this Annual Report to any specific fiscal year are to the twelve month period
ended on June 30 of such year.
FORWARD-LOOKING STATEMENTS
This Annual Report contains forward-looking statements that involve risks and uncertainties. We use words such as
“anticipates”, “believes”, “plans”, “expects”, “future”, “intends” and similar expressions to identify such forward-looking statements.
This Annual Report also contains forward-looking statements attributed to certain third parties relating to their estimates regarding the
growth of Genetic Technologies and related service markets and spending. You should not place undue reliance on these forward-
looking statements, which apply only as of the date of this Annual Report. Our actual results could differ materially from those
anticipated in these forward-looking statements for many reasons, including the risks faced by us described below under the caption
“Risk Factors” and elsewhere in this Annual Report.
Although we believe that the expectations reflected in such forward-looking statements are reasonable at this time, we can give
no assurance that such expectations will prove to be correct. Given these uncertainties, readers are cautioned not to place undue reliance
on such forward-looking statements. Important factors that could cause actual results to differ materially from our expectations are
contained in cautionary statements in this Annual Report including, without limitation, in conjunction with the forward-looking
statements included in this Annual Report and specifically under Item 3.D “Risk Factors”.
All subsequent written and oral forward-looking statements attributable to us are expressly qualified in their entirety by
reference to these cautionary statements.
Australian Disclosure Requirements
Our ordinary shares are primarily quoted on the Australian Securities Exchange (“ASX”) in addition to our listing of our ADSs
on the NASDAQ Global Select Market. As part of our ASX listing, we are required to comply with various disclosure requirements as
set out under the Australian Corporations Act 2001 and the ASX Listing Rules. Information furnished under the sub-heading
“Australian Disclosure Requirements” is intended to comply with ASX listing and Corporations Act 2001 disclosure requirements and is
not intended to fulfill information required by this Annual report on Form 20F.
ENFORCEMENT OF LIABILITIES AND SERVICE OF PROCESS
We are incorporated under the laws of Western Australia in the Commonwealth of Australia. All of our directors and executive
officers, and any experts named in this Annual Report, reside outside the U.S. Substantially all of our assets, our directors’ and
executive officers’ assets and such experts’ assets are located outside the U.S. As a result, it may not be possible for investors to affect
service of process within the U.S. upon us or our directors, executive officers or such experts, or to enforce against them or us in U.S.
courts, judgments obtained in U.S. courts based upon the civil liability provisions of the federal securities laws of the U.S. In addition,
we have been advised by our Australian solicitors that there is doubt that the courts of Australia will enforce against us, our directors,
executive officers and experts named herein, judgments obtained in the U.S. based upon the civil liability provisions of the federal
securities laws of the U.S. or will enter judgments in original actions brought in Australian courts based upon the federal securities laws
of the U.S.
iv
PART I
Item 1. Identity of Directors, Senior Management and Advisers
Not applicable
Item 2. Offer Statistics and Expected Timetable
Not applicable.
Item 3. Key Information
Item 3.A Selected Financial Data
The following selected financial data for the five years ended June 30, 2021 is derived from the audited consolidated financial
statements of Genetic Technologies Limited, prepared in accordance with International Financial Reporting Standards (“IFRS”) as
issued by the International Accounting Standards Board, which became effective for our Company as of our fiscal year ended June 30,
2006.
The balance sheet data as of June 30, 2021 and 2020 and the statement of comprehensive income/(loss) data for the 2021, 2020
and 2019 fiscal years are derived from our audited consolidated financial statements which are included in this Annual Report. Balance
sheet data as of June 30, 2019, 2018 and 2017 and statements of comprehensive income/ (loss) data for the 2018 and 2017 financial
years are derived from our audited consolidated financial statements which are not included in this Annual Report. The data should be
read in conjunction with the consolidated financial statements, related notes and other financial information included herein.
All amounts are stated in Australian dollars as of June 30, 2021 as noted.
1
Item 3. Key Information (cont.)
Item 3.A Selected Financial Data (cont.)
CONSOLIDATED STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME/ (LOSS)
FOR 2021, 2020, 2019, 2018 AND 2017
Year ended
June 30, 2021
A$
Year ended
June 30, 2020
A$
Year ended
June 30, 2019
A$
Year ended
June 30, 2018
A$
Year ended
June 30, 2017
A$
Revenue from operations
Genetic testing services
Less: cost of sales
Gross profit/(loss) from
operations
Other income
Selling and marketing
expenses
General and administrative
expenses
Laboratory, research and
development costs
Finance costs
Foreign exchange gains
reclassified on liquidation
of subsidiary
Other gains/(losses)
Impairment of intangible
asset expense
Loss from continuing
operations before income
tax
Net profit from
discontinued operation
Loss before income tax
Income tax expense
Loss for the year
Other comprehensive
income/(loss)
Exchange (losses)/gains on
translation of controlled
foreign operations
Other comprehensive
(loss)/income for the
year, net of tax
Total comprehensive loss
for the year
Loss per share (cents per
share)
Basic and diluted net loss
per ordinary share
Weighted-average shares
outstanding
120,554
(361,027)
(240,473)
1,564,456
9,864
(251,511)
(241,647)
1,140,647
25,444
(276,267)
(250,823)
1,019,769
189,254
(300,088)
(110,834)
441,476
518,506
(492,417)
26,089
344,112
(1,119,851)
(637,295)
(576,077)
(1,066,404)
(2,721,474)
(4,158,319)
(4,058,557)
(3,830,198)
(3,015,818)
(3,109,530)
(3,109,383)
(14,049)
(2,477,578)
(14,823)
(2,360,762)
(20,031)
(2,210,498)
(28,843)
(2,366,334)
(31,995)
—
—
—
—
(5,522)
—
—
(407,482)
527,049
—
—
—
—
—
(544,694)
(7,077,619)
(6,294,775)
(6,425,604)
(5,463,872)
(8,403,826)
—
(7,077,619)
—
(7,077,619)
—
(6,294,775)
—
(6,294,775)
—
(6,425,604)
—
(6,425,604)
—
(5,463,872)
—
(5,463,872)
—
(8,403,826)
—
(8,403,826)
(37,468)
(33,175)
23,668
(522,966)
(130,655)
(37,468)
(33,175)
23,668
(522,966)
(130,655)
(7,115,087)
(6,327,950)
(6,401,936)
(5,986,481)
(8,534,481)
(0.08)
(0.15)
(0.24)
(0.22)
(0.40)
8,544,157,979
4,155,017,525
2,635,454,870
2,435,282,724
2,121,638,888
The company revised the previous audited financial statements to reflect the correction of an immaterial error. See Note 2(a)(v) of the
Consolidated Financial Statements for additional information.
2
Item 3. Key Information (cont.)
Item 3.A Selected Financial Data (cont.)
CONSOLIDATED BALANCE SHEET DATA
FOR 2021, 2020, 2019, 2018 AND 2017
As of
June 30,
2021
A$
22,236,114
735,574
22,971,688
(1,405,381)
(33,272)
(1,438,653)
21,533,035
As of
June 30,
2020
A$
15,192,749
440,230
15,632,979
(1,397,572)
(242,800)
(1,640,372)
13,992,607
As of
June 30,
2019
A$
3,195,672
69,333
3,265,005
(1,492,990)
(809)
(1,493,799)
1,771,206
As of
June 30,
2018
A$
5,990,697
175,284
6,165,981
(1,450,713)
(3,390)
(1,454,103)
4,711,878
As of
June 30,
2017
A$
11,631,649
476,648
12,108,297
(1,465,293)
(63,960)
(1,529,253)
10,579,044
153,574,974
11,033,279
(143,075,218)
21,533,035
140,111,073
9,928,571
(136,047,037)
13,992,607
125,498,824
6,009,932
(129,737,550)
1,771,206
122,372,662
5,651,162
(123,311,946)
4,711,878
122,382,625
6,044,493
(117,848,074)
10,579,044
Assets
Current assets
Non-current assets
Total assets
Liabilities
Current liabilities
Non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Reserves
Accumulated losses
Total equity
The company revised the previous audited financial statements to reflect the correction of an immaterial error. See Note 2(a)(v) of the
Consolidated Financial Statements for additional information.
Exchange rates
The following table sets forth, for the periods and dates indicated, certain information concerning the noon buying rate
in New York City for Australian dollars expressed in U.S. dollars per $1.00 as certified for customs purposes by the Federal
Reserve Bank of New York.
Period ended
At period end
USD
Average rate
USD
High
USD
Low
USD
Yearly data
June 2017
June 2018
June 2019
June 2020
June 2021
0.7676
0.7399
0.7009
0.6893
0.7518
3
0.7562
0.7753
0.7153
0.6711
0.7444
0.7680
0.8105
0.7466
0.7043
0.7829
0.7387
0.7355
0.6860
0.5755
0.6863
Item 3.B Capitalisation and Indebtedness
Not applicable.
Item 3.C Reasons for the Offer and Use of Proceeds
Not applicable.
Item 3.D Risk Factors
Before you purchase our ADSs, you should be aware that there are risks, including those described below. You should consider
carefully these risk factors together with all of the other information contained elsewhere in this Annual Report before you decide to
purchase our ADSs.
Risks Related to our Business
A variety of general risk factors associated with commercialising our products and product candidates internationally could
materially adversely affect our business.
We, or our licensing partners, may seek regulatory approval for our products or product candidates in multi-jurisdictions,
accordingly, we expect that we will be subject to additional risks for our products and product candidates related to operating in foreign
countries if we obtain the necessary approvals, including:
● differing regulatory requirements in foreign countries;
● the potential for so-called parallel importing, which is what happens when a local seller, faced with high or higher local prices,
opts to import goods from a foreign market (with low or lower prices) rather than buying them locally;
● unexpected changes in tariffs, trade barriers, price and exchange controls and other regulatory requirements;
● economic weakness, including inflation, or political instability in particular foreign economies and markets;
● compliance with tax, employment, immigration and labour laws for employees living or traveling abroad;
● foreign taxes, including withholding of payroll taxes;
● foreign currency fluctuations, which could result in increased operating expenses and reduced revenues, and other obligations
incident to doing business in another country;
● difficulties staffing and managing foreign operations;
● workforce uncertainty in countries where labour unrest is more common than in Germany or the U.S.;
● potential liability under the Foreign Corrupt Practices Act of 1977 or comparable foreign regulations;
● challenges enforcing our contractual and intellectual property rights, especially in those foreign countries that do not respect
and protect intellectual property rights to the same extent as in the EU or the U.S.;
● production shortages resulting from any events affecting raw material supply or manufacturing capabilities abroad; and
● business interruptions resulting from geo-political actions, including war and terrorism.
These and other risks associated with our or our licensing partners’ international operations may materially adversely affect our
ability to attain or maintain profitable operations.
Our Company has a history of incurring losses.
We have incurred operating losses in every year since the year ended June 30, 2011. As at June 30, 2021, the Company had
accumulated losses of A$143,075,218 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. We expect our
capital outlays and operating expenditures to remain constant for the foreseeable future as we continue to focus on R&D and new
product development, IP creation and the introduction of predictive genetic testing products. If we fail to generate sufficient revenue and
eventually become profitable, or if we are unable to fund our continuing losses by raising additional financing when required, our
shareholders could lose all or part of their investments.
We may not be successful in transitioning from our existing product portfolio to our next generation of risk assessment
tests, and our newly developed approach to marketing and distribution of such products may not generate revenues.
Although we developed and marketed our BREVAGen™ and BREVAGenplus products in the recent past, and had internally
developed product distribution teams in both Australia and the U.S., we believe that our future success is dependent upon our ability to
successfully introduce and sell our newly developed products, “GeneType for Breast Cancer”, “GeneType for Colorectal Cancer” and or
COVID severity risk test. Although we believe that we now have world class products that are poised to be an important part of making
predictive genetic testing a mainstream healthcare activity, we may not be successful in transitioning from our existing products to these
products, and there can be no assurance that the demand for these new products will develop. Furthermore, we plan to introduce our new
products to healthcare providers through a global network of distribution partners instead of through our own sales force. Although we
believe that we are building worthwhile sales and distribution relationships with experienced United States distribution firms, there can
be no assurance that we will be able to enter into distribution arrangements on terms satisfactory to us, and that our marketing strategy
will be successful and result in significant revenues.
4
Item 3. Key Information (cont.)
Item 3.D Risk Factors (cont.)
Our products may never achieve significant market acceptance.
We may expend substantial funds and management effort on the development and marketing of our predictive genetic testing
products with no assurance that we will be successful in selling our products or services. Our ability to enter into distribution
arrangements to successfully sell our molecular risk assessment and predictive genetic testing products and services will depend
significantly on the perception that our products and services can reduce patient risk and improve medical outcomes, and that our
products and services are superior to existing tests. Our business could also be adversely affected if we expend money without any
return.
Failure to demonstrate the clinical utility of our products could have a material adverse effect on our financial condition
and results of operations.
The Company believes that its GeneType for Breast Cancer, GeneType for Colorectal Cancer and COVID severity risk tests,
along with the pipeline of new tests under development have the capacity to transform health outcomes for entire populations. However,
it is critical for the Company to demonstrate the clinical utility of its new products. Clinical utility is the usefulness of a test for clinical
practice. If the Company is unable to demonstrate clinical utility, or if the data is deemed insufficient to validate utility, there may be
insufficient demand for the Company’s products.
If our competitors develop superior products, our operations and financial condition could be affected.
We are currently subject to increased competition from biotechnology and diagnostic companies, academic and research
institutions and government or other publicly-funded agencies that are pursuing products and services which are substantially similar to
our molecular risk assessment testing products, or which otherwise address the needs of our customers and potential customers.
Our competitors in the predictive genetic testing and assessment market include private and public sector enterprises located in
Australia, the U.S. and elsewhere. Many of the organisations competing with us 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 we do. In addition, many of the larger current and potential
competitors have already established name / brand recognition and more extensive collaborative relationships.
Our competitive position in the molecular risk assessment and predictive testing area is based upon, amongst other things, our
ability to:
● continue to strengthen and maintain scientific credibility through the process of obtaining scientific validation through
clinical trials supported by peer-reviewed publication in medical journals;
● create and maintain scientifically advanced technology and offer proprietary products and services;
● continue to strengthen and improve the messaging regarding the importance and value that our cancer risk assessment tests
provide to patients and physicians;
● diversify our product offerings in disease types other than breast cancer, colorectal cancer and COVID severity risk test;
● obtain and maintain patent or other protection for our products and services;
● obtain and maintain required government approvals and other accreditations on a timely basis; and
● successfully market our products and services.
If we are not successful in meeting these goals, our business could be adversely affected. Similarly, our competitors may
succeed in developing technologies, products or services that are more effective than any that we are developing or that would render
our technology, products and services obsolete, noncompetitive or uneconomical.
We have important relationships with external parties over whom we have limited control.
We have relationships with academic consultants, research collaborators at other institutions and other advisers who are not
employed by us. Accordingly, we have limited control over their activities and can expect only limited amounts of their time to be
dedicated to our activities. These persons may have consulting, employment or advisory arrangements with other entities that may
conflict with or compete with their obligations to us. Our consultants typically sign agreements that provide for confidentiality of our
proprietary information and results of studies. However, we may not be able to maintain the confidentiality of our technology, the
dissemination of which could hurt our competitive position and results from operations. To the extent that our scientific consultants,
collaborators or advisors develop inventions or processes that may be applicable to our proposed products, disputes may arise as to the
ownership of the proprietary rights to such information, and we may not be successful with any dispute outcomes.
5
Item 3. Key Information (cont.)
Item 3.D Risk Factors (cont.)
We may be subject to liability and our insurance may not be sufficient to cover damages.
Our business exposes us to potential liability risks that are inherent in the testing, manufacturing, marketing and sale of
molecular risk assessment and predictive tests. The use of our products and product candidates, whether for clinical trials or commercial
sale, may expose us to professional and product liability claims and possible adverse publicity. We may be subject to claims resulting
from incorrect results of analysis of genetic variations or other screening tests performed using our products. Litigation of such claims
could be costly. Further, if a court were to require us to pay damages to a plaintiff, the amount of such damages could be significant and
severely damage our financial condition. Although we have public and product liability insurance coverage under broad form liability
and professional indemnity policies, the level or breadth of our coverage may not be adequate to fully cover any potential liability
claims. In addition, we may not be able to obtain additional liability coverage in the future at an acceptable cost. A successful claim or
series of claims brought against us in excess of our insurance coverage and the effect of professional and/or product liability litigation
upon the reputation and marketability of our technology and products, together with the diversion of the attention of key personnel,
could negatively affect our business.
We use potentially hazardous materials, chemicals and patient samples in our business and any disputes relating to
improper handling, storage or disposal of these materials could be time consuming and costly.
Our research and development, production and service activities involve the controlled use of hazardous laboratory materials
and chemicals, including small quantities of acid and alcohol, and patient tissue samples. We do not knowingly deal with infectious
samples. We, our collaborators and service providers are subject to stringent Australian federal, state and local laws and regulations
governing occupational health and safety standards, including those governing the use, storage, handling and disposal of these materials
and certain waste products. However, we could be liable for accidental contamination or discharge or any resultant injury from
hazardous materials, and conveyance, processing, and storage of and data on patient samples. If we, our collaborators or service
providers fail to comply with applicable laws or regulations, we could be required to pay penalties or be held liable for any damages that
result and this liability could exceed our financial resources. Further, future changes to environmental health and safety laws could cause
us to incur additional expense or restrict our operations.
In addition, our collaborators and service providers may be working with these same types of hazardous materials, including
hazardous chemicals, in connection with our collaborations. In the event of a lawsuit or investigation, we could be held responsible for
any injury caused to persons or property by exposure to, or release of, these hazardous materials or patient samples that may contain
infectious materials. The cost of this liability could exceed our resources. While we maintain broad form liability insurance coverage for
these risks, the level or breadth of our coverage may not be adequate to fully cover potential liability claims.
We depend on the collaborative efforts of our academic and corporate partners for research, development and
commercialisation of our products. A breach by our partners of their obligations, or the termination of the relationship, could
deprive us of valuable resources and require additional investment of time and money.
Our strategy for research, development and commercialisation of our products has historically involved entering into various
arrangements with academic, corporate partners and others. As a result, the success of our strategy depends, in part, upon the strength of
those relationships and these outside parties undertaking their responsibilities and performing their tasks to the best of their ability and
responding in a timely manner. Our collaborators may also be our competitors. We cannot necessarily control the amount and timing of
resources that our collaborators devote to performing their contractual obligations and we have no certainty that these parties will
perform their obligations as expected or that any revenue will be derived from these arrangements.
If our collaborators breach or terminate their agreement with us or otherwise fail to conduct their collaborative activities in a
timely manner, the development or commercialisation of the product candidate or research program under such collaborative
arrangement may be delayed. If that is the case, we may be required to undertake unforeseen additional responsibilities or to devote
unforeseen additional funds or other resources to such development or commercialisation, or such development or commercialisation
could be terminated. The termination or cancellation of collaborative arrangements could adversely affect our financial condition,
intellectual property position and general operations. In addition, disagreements between collaborators and us could lead to delays in the
collaborative research, development, or commercialisation of certain products or could require or result in formal legal process or
arbitration for resolution. These consequences could be time-consuming and expensive and could have material adverse effects on the
Company.
6
Item 3. Key Information (cont.)
Item 3.D Risk Factors (cont.)
We rely upon scientific, technical and clinical data supplied by academic and corporate collaborators, licensors, licensees,
independent contractors and others in the evaluation and development of potential therapeutic methods. There may be errors or
omissions in this data that would materially adversely affect the development of these methods.
If our sole laboratory facility becomes inoperable, we will be unable to perform our tests and our business will be harmed.
We rely on our sole laboratory facilities in Melbourne, Australia, which has been certified under the U.S. Clinical Laboratory
Improvements Amendments (“CLIA”). Our current lease of laboratory premises expires February 28, 2022. The facility and the
equipment we use to perform our tests would be costly to replace and could require substantial lead time to repair or replace. If we were
to lose our CLIA certification or other required certifications or licenses, or if the facility is harmed or rendered inoperable by natural or
man-made disasters, including flooding and power outages, it will be difficult or impossible for us to perform our tests for some period
of time. The inability to perform our tests or the backlog of tests that could develop if our facility is inoperable for even a short period of
time may result in the loss of customers or harm our reputation, and we may be unable to regain those customers in the future.
If we no longer had our own facility and needed to rely on a third party to perform our tests, we could only use another facility
with established state licensure and CLIA accreditation. We cannot assure you that we would be able to find another CLIA certified
facility willing to comply with the required procedures, that this laboratory would be willing to perform the tests on commercially
reasonable terms, or that it would be able to meet our quality standards. In order to establish a redundant clinical reference laboratory
facility, we would have to spend considerable time and money securing adequate space, constructing the facility, recruiting and training
employees, and establishing the additional operational and administrative infrastructure necessary to support a second facility. We may
not be able, or it may take considerable time, to replicate our testing processes or results in a new facility. Additionally, any new clinical
reference laboratory facility would be subject to certification under CLIA and licensing by several states, including California and New
York, which could take a significant amount of time and result in delays in our ability to begin operations.
The loss of key members of our senior management team or our inability to attract and retain highly skilled scientists,
clinicians and salespeople could adversely affect our business.
Our success depends largely on the skills, experience and performance of key members of our executive management team and
others in key management positions. The efforts of each of these persons together will be critical as we continue to develop our
technologies and testing processes, continue our international expansion and transition to a company with multiple commercialised
products. If we were to lose one or more of these key employees, we may experience difficulties in competing effectively, developing
our technologies and implementing our business strategies.
During the year, we experienced significant changes in our executive officers, including the appointment of Simon Morriss as
our Chief Executive Officer on February 1, 2021 with Jerzy Muchnicki who had been acting CEO since September 21, 2019, stepping
into the role of Chief Medical Officer and Executive Director. Mike Tonroe has been appointed Chief Financial Officer in June 15, 2021
taking over from Philip Hains who had been in role since July 15, 2019, While we believe our current executive officers have the skills
and experience to enable us to execute our business plan, these changes may nevertheless result in a transition phase that could
adversely affect our operations in the short-term.
Our research and development programs and commercial laboratory operations depend on our ability to attract and retain
highly skilled scientists and technicians, including licensed laboratory technicians, chemists, biostatisticians and engineers. We may not
be able to attract or retain qualified scientists and technicians in the future due to the competition for qualified personnel among life
science businesses. In addition, if there were to be a shortage of clinical laboratory scientists in coming years, this would make it more
difficult to hire sufficient numbers of qualified personnel. We also face competition from universities and public and private research
institutions in recruiting and retaining highly qualified scientific personnel. In addition, our success depends on our ability to attract and
retain salespeople with extensive experience in oncology and close relationships with medical oncologists, pathologists and other
hospital personnel. We may have difficulties sourcing, recruiting or retaining qualified salespeople, which could cause delays or a
decline in the rate of adoption of our tests. If we are not able to attract and retain the necessary personnel to accomplish our business
objectives, we may experience constraints that could adversely affect our ability to support our research and development and sales
programs.
7
Item 3. Key Information (cont.)
Item 3.D Risk Factors (cont.)
Changes in the way that the FDA regulates our tests could result in the delay or additional expense in offering our tests and
tests that we may develop in the future.
Historically, the U.S. Food and Drug Administration (“FDA”) has exercised enforcement discretion with respect to most
laboratory-developed tests (“LDTs”) and has not required laboratories that furnish LDTs to comply with the agency’s requirements for
medical devices (e.g., establishment registration, device listing, quality systems regulations, premarket clearance or premarket approval,
and post-market controls). In recent years, however, the FDA publicly announced its intention to regulate certain LDTs and issued two
draft guidance documents that set forth a proposed phased-in risk-based regulatory framework that would apply varying levels of FDA
oversight to LDTs. However, these guidance documents were withdrawn at the end of the Obama administration and replaced by an
informal discussion paper reflecting some of the feedback that FDA had received on LDT regulation. The FDA acknowledged that the
discussion paper in January 2017 does not represent the formal position of the FDA and is not enforceable. Nevertheless, the FDA
wanted to share its synthesis of the feedback that it had received in the hope that it might advance public discussion on future LDT
oversight. Notwithstanding the discussion paper, the FDA continues to exercise enforcement discretion and may decide to regulate
certain LDTs on a case-by-case basis at any time, which could result in delay or additional expense in offering our tests and tests that we
may develop in the future.
Our business could be harmed from the loss or suspension of a license or imposition of a fine or penalties under, or future
changes in, or changing interpretations of, CLIA or state laboratory licensing laws to which we are subject.
The clinical laboratory testing industry is subject to extensive federal and state regulation, and many of these statutes and
regulations have not been interpreted by the courts. The regulations implementing CLIA set out federal regulatory standards that apply
to virtually all clinical laboratories (regardless of the location, size or type of laboratory), including those operated by physicians in their
offices, by requiring that they be certified by the federal government or by a federally approved accreditation agency. CLIA does not
preempt state law, which in some cases may be more stringent than federal law and require additional personnel qualifications, quality
control, record maintenance and proficiency testing. The sanction for failure to comply with CLIA and state requirements may be
suspension, revocation or limitation of a laboratory’s CLIA certificate, which is necessary to conduct business, as well as significant
fines and/or criminal penalties. Several states have similar laws and we may be subject to similar penalties. If the certification of one
laboratory owned by the Company is suspended or revoked that may preclude the Company from owning or operating any other
laboratory in the Country for two years.
We cannot assure you that applicable statutes and regulations and more specifically, the Food, Drug, and Cosmetic Act, will
not be interpreted or applied by a prosecutorial, regulatory or judicial authority in a manner that would adversely affect our business.
Potential sanctions for violation of these statutes and regulations include significant fines and the suspension or loss of various licenses,
certificates and authorisations, which could have a material adverse effect on our business. In addition, compliance with future
legislation could impose additional requirements on us, which may be costly.
Failure to establish and comply with appropriate quality standards to assure that the highest level of quality is observed in
the performance of our testing services and in the design, manufacture and marketing of our products could adversely affect the
results of our operations and adversely impact our reputation.
The provision of clinical testing services, and the design, manufacture and marketing of diagnostic products involve certain
inherent risks. The services that we provide and the products that we design, manufacture and market are intended to provide
information for healthcare providers in providing patient care. Therefore, users of our services and products may have a greater
sensitivity to errors than the users of services or products that are intended for other purposes. Similarly, negligence in performing our
services can lead to injury or other adverse events. We may be sued under common law, physician liability or other liability law for acts
or omissions by our laboratory personnel. We are subject to the attendant risk of substantial damages awards and risk to our reputation.
8
Item 3. Key Information (cont.)
Item 3.D Risk Factors (cont.)
If we fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately
report our financial results or prevent fraud.
Effective internal controls over financial reporting are necessary for us to provide reliable financial reports and, together with
adequate disclosure controls and procedures, are designed to prevent fraud. Any failure to design and implement an effective system of
internal control may reveal deficiencies in our internal controls over financial reporting that are deemed to be material weaknesses.
Ineffective internal controls could also cause investors to lose confidence in our reported financial information, which could have a
negative effect on the trading price of the ADSs and our Ordinary Shares.
As of June 30, 2021, our Chief Executive Officer and Chief Financial Officer assessed the effectiveness of our internal control
over financial reporting. In connection with this assessment, we are satisfied that remediation of the material weakness in relation to
segregation of duties identified as of June 30, 2020 had occurred. Refer to Item 15.B for the description of the material weakness and
Item 15.D for the efforts undertaken to remediate the material weakness identified as of June 30, 2020.
To remediate the previously identified material weakness and to enhance our overall control environment, we continued to
implement policies and procedures to ensure segregation of duties are appropriate as of June 30, 2021, and continuous training for the
finance team is in place. However, we cannot assure you that the measures we have taken to date, and actions we may take in the future,
will be sufficient to prevent potential future material weaknesses.
Failure to comply with HIPAA, including regarding the use of new “standard transactions,” may negatively impact our
business.
Pursuant to the Health Insurance Portability and Accountability Act of 1996, as amended, or HIPAA, we must comply with
comprehensive privacy and security standards with respect to the use and disclosure of protected health information, as well as standards
for electronic transactions, including specified transaction and code set rules. Under the 2009 HITECH amendments to HIPAA, the law
was expanded, including requirements to provide notification of certain identified data breaches, direct patient access to laboratory
records, the extension of certain HIPAA privacy and security standards directly to business associates, and heightened penalties for
noncompliance, and enforcement efforts.
9
Item 3. Key Information (cont.)
Item 3.D Risk Factors (cont.)
If we fail to comply with the complex federal, state, local and foreign laws and regulations that apply to our business, we
could suffer severe consequences that could materially and adversely affect our operating results and financial condition.
Our operations are subject to extensive federal, state, local and foreign laws and regulations, all of which are subject to change.
These laws and regulations currently include, among other things:
●
●
●
●
●
●
●
●
●
●
CLIA, which requires that laboratories obtain certification from the federal government, and state licensure laws;
FDA laws and regulations;
HIPAA, which imposes comprehensive federal standards with respect to the privacy and security of protected health
information and requirements for the use of certain standardised electronic transactions; amendments to HIPAA under
HITECH, which strengthen and expand HIPAA privacy and security compliance requirements, increase penalties for
violators, extend enforcement authority to state attorneys general and impose requirements for breach notification;
state laws regulating genetic testing and protecting the privacy of genetic test results, as well as state laws protecting
the privacy and security of health information and personal data and mandating reporting of breaches to affected
individuals and state regulators;
the federal anti-kickback law, or the Anti-Kickback Statute, which prohibits knowingly and willfully offering, paying,
soliciting, receiving, or providing remuneration, directly or indirectly, in exchange for or to induce either the referral
of an individual, or the furnishing, arranging for, or recommending of an item or service that is reimbursable, in whole
or in part, by a federal health care program;
other federal and state fraud and abuse laws, such as anti-kickback laws, prohibitions on self-referral, and false claims
acts, which may extend to services reimbursable by any third-party payor, including private insurers;
the federal Physician Payments Sunshine Act, which requires medical device manufactures to track and report to the
federal government certain payments and other transfers of value made to physicians and teaching hospitals and
ownership or investment interests held by physicians and their immediate family members;
Section 216 of the federal Protecting Access to Medicare Act of 2014 (“PAMA”), which requires applicable
laboratories to report private payor data in a timely and accurate manner beginning in 2017 and every three years
thereafter (and in some cases annually);
state laws that impose reporting and other compliance-related requirements; and
similar foreign laws and regulations that apply to us in the countries in which we operate.
These laws and regulations are complex and are subject to interpretation by the courts and by government agencies. Our failure
to comply could lead to civil or criminal penalties, exclusion from participation in state and federal health care programs, or prohibitions
or restrictions on our laboratory’s ability to provide or receive payment for our services. We believe that we are in material compliance
with all statutory and regulatory requirements, but there is a risk that one or more government agencies could take a contrary position, or
that a private, party could file suit under the qui tam provisions of the federal False Claims Act or a similar state law. Such occurrences,
regardless of their outcome, could damage our reputation and adversely affect important business relationships with third parties,
including managed care organisations, and other private third-party payors.
A failure to comply with any of federal or state laws applicable to our business, particularly laws related to the elimination
of healthcare fraud, may adversely impact our business.
Federal officials responsible for administering and enforcing the healthcare laws and regulations have made a priority of
eliminating healthcare fraud. For example, the Patient Protection and Affordable Care Act, as amended by the Health Care Education
and Reconciliation Act of 2010, jointly the “Affordable Care Act,” includes significant fraud and abuse measures, including required
disclosures of financial arrangements between drug and device manufacturers, on the one hand, and physicians and teaching hospitals,
on the other hand. Federal funding available for combating health care fraud and abuse generally has increased. While we seek to
conduct our business in compliance with all applicable laws and regulations, many of the laws and regulations applicable to our
business, particularly those relating to billing and reimbursement of tests and those relating to relationships with physicians, hospitals
and patients contain language that has not been interpreted by courts. We must rely on our interpretation of these laws and regulations
based on the advice of our counsel and regulatory or law enforcement authorities may not agree with our interpretation of these laws and
regulations and may seek to enforce legal remedies or penalties against us for violations. From time to time we may need to change our
operations, particularly pricing or billing practices, in response to changing interpretations of these laws and regulations or regulatory or
judicial determinations with respect to these laws and regulations. These occurrences, regardless of their outcome, could damage our
reputation and harm important business relationships that we have with healthcare providers, payers and others.
10
Item 3. Key Information (cont.)
Item 3.D Risk Factors (cont.)
We face risks associated with currency exchange rate fluctuations, which could adversely affect our operating results.
We receive a portion of our revenues and pay a portion of our expenses in currencies other than the United States dollar, such
as the Australian dollar, the Euro and the British pound. As a result, we are at risk for exchange rate fluctuations between such foreign
currencies and the United States dollar, which could affect the results of our operations. If the U.S. dollar strengthens against foreign
currencies, the translation of these foreign currency denominated transactions will result in decreased revenues and operating expenses.
We may not be able to offset adverse foreign currency impact with increased revenues. We do not currently utilise hedging strategies to
mitigate foreign currency risk and even if we were to implement hedging strategies to mitigate foreign currency risk, these strategies
might not eliminate our exposure to foreign exchange rate fluctuations and would involve costs and risks of their own, such as ongoing
management time and expertise, external costs to implement the strategies and potential accounting implications.
Government regulation of genetic research or testing may adversely affect the demand for our services and impair our
business and operations.
In addition to the regulatory framework governing healthcare, genetic research and testing has been the focus of public
attention and regulatory scrutiny. From time to time, federal, state and/or local governments adopt regulations relating to the conduct of
genetic research and genetic testing. In the future, these regulations could limit or restrict genetic research activities as well as genetic
testing for research or clinical purposes. In addition, if such regulations are adopted, these regulations may be inconsistent with, or in
conflict with, regulations adopted by other government bodies. Regulations relating to genetic research activities could adversely affect
our ability to conduct our research and development activities. Regulations restricting genetic testing could adversely affect our ability
to market and sell our products and services. Accordingly, any regulations of this nature could increase the costs of our operations or
restrict our ability to conduct our testing business.
Failure in our information technology systems could significantly increase testing turn-around times or impact on the
billing processes or otherwise disrupt our operations.
Our laboratory operations depend, in part, on the continued performance of our information technology systems. Our
information technology systems are potentially vulnerable to physical or electronic break-ins, computer viruses and similar disruptions.
Sustained system failures or interruption of our systems in our laboratory operations could disrupt our ability to process laboratory
requisitions, perform testing, and provide test results in a timely manner and/or billing process. Failure of our information technology
systems could adversely affect our business and financial condition.
Breaches of network or information technology, natural disasters or terrorist attacks could have an adverse impact on our
business.
Cyber-attacks or other breaches of information technology security, natural disasters, or acts of terrorism or war may result in
hardware failure or disrupt our product testing or research and development activities. There has been a substantial increase in frequency
of successful and unsuccessful cyber-attacks on companies in recent years. Such an event may result in our inability, or the inability of
our collaborative partners, to operate the facilities to conduct and complete the necessary activities, which even if the event is for a
limited period of time, may result in significant expenses and/ or significant damage or delay to our commercial or research activities.
While we maintain insurance cover for some of these events, the potential liabilities associated with these events could exceeded the
cover we maintain.
11
Item 3. Key Information (cont.)
Item 3.D Risk Factors (cont.)
Ethical and other concerns surrounding the use of genetic information may reduce the demand for our services.
Public opinion regarding ethical issues related to the confidentiality and appropriate use of genetic testing 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. Furthermore, adverse publicity or
public opinion relating to genetic research and testing, even in the absence of any governmental regulation, could reduce the potential
markets for our products and services.
Risks associated with our intellectual property.
The patenting of genes and issues surrounding access to genetic knowledge are the subjects of extensive and ongoing public
debate in many countries. By way of example, the Australian Law Reform Commission has previously conducted two inquiries into the
social uses of genetic information. The patents we hold overuses of “non-coding” DNA have broad scope and have also been the subject
of debate and some criticism in the media. Individuals or organisations, in any one of the countries in which these patents have issued,
could take legal action to seek their amendment, revocation or invalidation, something which has happened previously, on several
occasions in various jurisdictions, though we have prevailed in all such cases. Furthermore, any time that we initiate legal action against
parties that infringe our patents we face a risk that the infringer will defend itself through a counterclaim of patent invalidity or other
such claims. Subsequent legal action could potentially overturn, invalidate or limit the scope of our patents.
We rely heavily upon patents and proprietary technology that may fail to protect our business.
We rely upon our portfolio of patent rights, patent applications and exclusive licenses to patents and patent applications relating
to genetic technologies. We expect to aggressively patent and protect our proprietary technologies. However, we cannot be certain that
any additional patents will be issued to us because of our domestic or foreign patent applications or that any of our patents will
withstand challenges by others. Patents issued to, or licensed by us may be infringed or third parties may independently develop the
same or similar technologies. Similarly, our patents may not provide us with meaningful protection from competitors, including those
who may pursue patents which may prevent, limit or interfere with our products or which may require licensing and the payment of
significant fees or royalties by us to such third parties in order to enable us to conduct our business. We may sue or be sued by third
parties regarding our patents and other intellectual property rights. These suits are often costly and would divert valuable funds, time and
technical resources from our operations and cause a distraction to management.
We also rely upon unpatented proprietary technologies and databases. Although we require employees, consultants and
collaborators to sign confidentiality agreements, we may not be able to adequately protect our rights in such unpatented proprietary
technologies and databases, which could have a material adverse effect on our business. For example, others may independently develop
substantially equivalent proprietary information or techniques or otherwise gain access to our proprietary technologies or disclose our
technologies to our competitors.
We may face difficulties in certain jurisdictions in protecting our intellectual property rights, which may diminish the value
of our intellectual property rights in those jurisdictions.
The laws of some jurisdictions do not protect intellectual property rights to the same extent as the laws in the United States and
the European Union, and many companies have encountered significant difficulties in protecting and defending such rights in such other
jurisdictions. If we or our collaboration partners encounter difficulties in protecting, or are otherwise precluded from effectively
protecting, the intellectual property rights for our business in such jurisdictions, the value of those rights may be diminished and we may
face additional competition from others in those jurisdictions. In addition, many countries limit the enforceability of patents against
governments agencies or government contractors. In those countries, the patent owner may have limited remedies, which could
materially diminish the value of such patent.
12
Item 3. Key Information (cont.)
Item 3.D Risk Factors (cont.)
Our operations may be adversely affected by the effects of extreme weather conditions or other interruptions in the timely
transportation of specimens.
We may be required to transport specimens from the U.S. or other distant locations to our laboratory located in Melbourne,
Australia. Our operations may be adversely impacted by extreme weather conditions or other interruptions such as the COVID pandemic
in the timely transportation of such specimens or otherwise to provide our services, from time to time. The occurrence of any such event
and/or a disruption to our operations as a result may harm our reputation and adversely impact our results of operations.
Our CIT Platform will expose us to various risks.
Our Consumer Initiated Testing platform (CIT), allows consumers to directly request any of our tests online with a practitioner
involved in the process via telemedicine, will be subject to various risks, including but not limited to:
● The risk of failure to protect personal medical information;
● The risk of breach of cyber security for the platform; and
● The risk that the platform will fail to perform as expected.
Our ability to conduct telehealth services in a particular U.S. state or non-U.S. jurisdiction is dependent upon the applicable
laws governing remote healthcare, the practice of medicine and healthcare delivery in general in such location which are subject to
changing political, regulatory and other influences. Some state medical boards have established new rules or interpreted existing rules in
a manner that limits or restricts the practice of telemedicine. The extent to which a U.S. state or non-U.S. jurisdiction considers
particular actions or relationships to constitute practicing medicine is subject to change and to evolving interpretations by (in the case of
U.S. states) medical boards and state attorneys general, among others, and (in the case of non-U.S. jurisdictions) the relevant regulatory
and legal authorities, each with broad discretion. Accordingly, we must monitor our compliance with law in every jurisdiction in which
we operate, on an ongoing basis, and we cannot provide assurance that our activities and arrangements, if challenged, will be found to
be in compliance with the law. If a successful legal challenge or an adverse change in the relevant laws were to occur, and we were
unable to adapt our business model accordingly, our operations in the affected jurisdictions would be disrupted, which could have a
material adverse effect on our business, financial condition and results of operations.
Discontinuation or recalls of existing testing products or our customers using new technologies to perform their own tests
could adversely affect our business.
Discontinuation or recalls of existing testing products or our customers using new technologies to perform their own tests could
adversely affect the Company’s business. Manufacturers may discontinue or recall reagents, test kits or instruments used by us to
perform laboratory testing. Such discontinuations or recalls could adversely affect our costs, testing volume and revenue. In addition,
advances in technology may lead to the development of more cost-effective technologies such as point-of-care testing equipment that
can be operated by physicians or other healthcare providers in their offices or by patients themselves without requiring the services of
freestanding clinical laboratories. Development of such technology and its use by our customers could reduce the demand for our
laboratory testing services and the utilisation of certain tests offered by us and negatively impact our revenues.
Even if we are able to successfully transition our current lab facilities into a COVID-19 testing facility, there can be no
assurances that we will generate revenue from COVID-19 testing.
The Company has not had any material conversations or entered into any agreements with a third party regarding the
performance of COVID-19 testing and there is no guarantee that we will ever enter into any such agreements. As a result, despite our
potential ability to conduct COVID-19 testing, there can be no assurances that we will be able to commercialise such ability to generate
any revenue.
We may not be able to produce a PRS test that successfully allows for the assessment of risk in fully vaccinated populations
In response to the global COVID-19 pandemic, we have completed the development of our COVID-19 risk test, which we
believe may allow for the assessment of risk of an individual contracting a serious disease as a result of the contracting the COVID-19
virus (see “Recent Developments”). We may be unable to produce a test that successfully allows for the assessment of risk in a in fully
vaccinated populations. If the outbreak is effectively contained or the risk of infection is diminished or eliminated before we can
successfully develop and manufacture a PRS test, we may be unable to successfully generate revenue from the development of the PRS
test. Our business could be negatively impacted by our allocation of significant resources to a global health threat that is unpredictable
and could rapidly dissipate or against which our PRS test, if developed, may not be deemed useful or effective enough by the market.
13
Item 3. Key Information (cont.)
Item 3.D Risk Factors (cont.)
Because the PRS test may not be able to obtain necessary regulatory clearance, we may not generate any revenue.
All of our existing products are subject to regulation in Australia by CLIA, the U.S. by the FDA and/or other domestic and
international governmental, public health agencies, regulatory bodies or non-governmental organisations. The process of obtaining
required approvals or clearances for a potential new product varies according to the nature of and uses for a specific product. These
processes can involve lengthy and detailed laboratory testing, human clinical trials, sampling activities, and other costly, time-
consuming procedures. The submission of an application to a regulatory authority does not guarantee that the authority will grant an
approval or clearance for the product. Each authority may impose its own requirements and can delay or refuse to grant approval or
clearance, even though a product has been approved in another country. The time taken to obtain approval or clearance varies depending
on the nature of the application and may result in the passage of a significant period of time from the date of submission of the
application. Delays in the approval or clearance processes increase the risk that we will not succeed in introducing or selling the subject
products, and we may be required to abandon the PRS after devoting substantial time and resources to its development.
If our PRS test receives necessary CLIA and FDA approvals, it will be subject to continuing governmental regulations and
additional foreign regulations.
If the FDA determines that enforcement discretion is not appropriate or that LDTs are generally subject to FDA regulation and
that premarket review, including clearance or approval, is required for our PRS tests or any of our future tests, diagnostic test kits that
we may develop, or other products that would be classified as medical devices, the process of obtaining regulatory clearances or
approvals to market a medical device can be costly and time consuming, and we may not be able to obtain these clearances or approvals
on a timely basis, if at all. In particular, the FDA permits commercial distribution of a new medical device only after the device has
received clearance under Section 510(k) of the Federal Food, Drug and Cosmetic Act, or is the subject of an approved premarket
approval application, or PMA unless the device is specifically exempt from those requirements. The FDA will clear marketing of a
lower risk medical device through the 510(k) process if the manufacturer demonstrates that the new product is substantially equivalent
to other 510(k)-cleared products. High risk devices deemed to pose the greatest risk, such as life-sustaining, life-supporting, or
implantable devices, or devices not deemed substantially equivalent to a previously cleared device, require the approval of a PMA. The
PMA process is more costly, lengthy and uncertain than the 510(k)-clearance process. A PMA application must be supported by
extensive data, including, but not limited to, technical, preclinical, clinical trial, manufacturing and labeling data, to demonstrate to the
FDA’s satisfaction the safety and efficacy of the device for its intended use. Our currently commercialised products have not received
FDA clearance or approval, as they are marketed under the FDA’s enforcement discretion for LDTs. Even if regulatory clearance or
approval of a product is required and granted, such clearance or approval may be subject to limitations on the intended uses for which
the product may be marketed and reduce our potential to successfully commercialise the product and generate revenue from the product.
If the FDA determines that our promotional materials, labeling, training or other marketing or educational activities constitute promotion
of an unapproved use, it could request that we cease or modify our training or promotional materials or subject us to regulatory
enforcement actions.
We are also subject to other federal, state, and foreign regulation concerning the manufacture and sale of our products. Our
failure to comply with U.S. federal, state and foreign governmental regulations could lead to the issuance of warning letters or untitled
letters, the imposition of injunctions, suspensions or loss of regulatory clearance or approvals, product recalls, termination of
distribution, product seizures or civil penalties. In the most extreme cases, criminal sanctions or closure of our manufacturing facility are
possible, any of which could adversely affect our business, operating results and prospects.
The FDA and similar foreign governmental authorities have the authority to require the recall of regulated products in the event
of material deficiencies or defects in design or manufacture. In the case of the FDA, the authority to require a recall must be based on an
FDA finding that there is a reasonable probability that the device would cause serious injury or death. In addition, foreign governmental
bodies have the authority to require the recall of our products in the event of material deficiencies or defects in design or manufacture.
Manufacturers may, under their own initiative, recall a product if any material deficiency in a device is found. A government-mandated
or voluntary recall by us could occur as a result of component failures, manufacturing errors, design or labeling defects or other
deficiencies and issues. Recalls of any of our products would divert managerial and financial resources and have an adverse effect on
our financial condition and results of operations. The FDA requires that certain classifications of recalls be reported to FDA within 10
working days after the recall is initiated. Companies are required to maintain certain records of recalls, even if they are not reportable to
the FDA. We may initiate voluntary recalls involving our products in the future that we determine do not require notification of the
FDA. If the FDA disagrees with our determinations, they could require us to report those actions as recalls. A future recall
announcement could harm our reputation with customers and negatively affect our sales. In addition, the FDA could take enforcement
action for failing to report the recalls when they were conducted.
We may be subject to liability for our current products or for our planned COVID-19 testing and our insurance may not be
sufficient to cover damages.
Our current business and potential COVID-19 testing exposes us to potential liability risks that are inherent in the testing,
manufacturing, marketing and sale of molecular risk assessment and predictive tests. The use of our products and product candidates,
whether for clinical trials or commercial sale, may expose us to professional and product liability claims and possible adverse publicity.
We may be subject to claims resulting from incorrect results of analysis of genetic variation or other screening tests performed using our
products or from any future COVID-19 testing. Litigation of such claims could be costly. Further, if a court were to require us to pay
damages to a plaintiff, the amount of such damages could be significant and severely damage our financial condition. Although we have
public and product liability insurance coverage under broad form liability and professional indemnity policies, the level or breadth of
our coverage may not be adequate to fully cover any potential liability claims. In addition, we may not be able to obtain additional
liability coverage in the future at an acceptable cost. A successful claim or series of claims brought against us in excess of our insurance
coverage and the effect of professional and/or product liability litigation upon the reputation and marketability of our technology and
products, together with the diversion of the attention of key personnel, could negatively affect our business.
14
Item 3. Key Information (cont.)
Item 3.D Risk Factors (cont.)
Declining general economic or business conditions, including as a result of the recent COVID-19 outbreak, may have a
negative impact on our business.
Continuing concerns over economic and business prospects in the United States and other countries have contributed to
increased volatility and diminished expectations for the global economy. These factors, coupled with the prospect of decreased business
and consumer confidence and increased unemployment resulting from the recent COVID-19 outbreak, may precipitate an economic
slowdown and recession. If the economic climate deteriorates, our business, including our access to patient samples and the addressable
market for diagnostic tests that we may successfully develop, as well as the financial condition of our suppliers and our third-party
payors, could be adversely affected, resulting in a negative impact on our business, financial condition, results of operations and cash
flows.
The COVID-19 pandemic is having a negative impact on global markets and business activity, which has had an effect on the
operations of the Company, including but not limited to, that sales of our products have been impacted not only by the inability for
consumers to visit their practitioners but also the difficulty our sales team is having in arranging face to face meetings with practitioners.
Our sales team has found it very difficult to reach practitioners to build on the sales momentum created prior to the pandemic,.
Additionally, in response to the COVID-19 pandemic, the Company has done the following:
● Moved forward with its Consumer Initiated Testing platform (CIT), as previously announced on April 1, which allows
for consumers to directly request any of the Company’s tests online with a practitioner involved in the process via
telemedicine. The platform is live, which we believe it will ensure that sales will be able to recommence in the event a
lockdown is maintained and it opens up another significant sales channel.
● We have also launched the Polygenic Risk Score (or PRS) test for COVID-19, which will allow for the assessment of
risk of an individual contracting a serious disease as a result of the contracting the COVID-19 virus. The proposed test
will be designed using the same strategies used to build our existing GeneType for breast and colorectal cancer tests.
Our objective will be to produce a test that can predict “disease severity” using either genetic information alone (PRS)
or a combination of genetic and clinical information. Biobank data will be interrogated to discover any informative
genetic and phenotypic associations.
These new COVID-19 related activities will provide some revenue opportunities for us in the short term and will assist in the
development of additional tests the Company is currently working on. We have not made significant progress to date that would lead to
orders or requests to increase capacity and there is no guarantee we will ever receive orders or requests.
15
Item 3. Key Information (cont.)
Item 3.D Risk Factors (cont.)
Risks Related to our Securities
Our ADSs may be delisted from the NASDAQ Capital Market.
In 2019, we were subject to NASDAQ delisting proceedings as a result of our failure to maintain the bid price of the ADS
above the minimum $1.00 per share requirement and because our reported stockholders’ equity was less than the minimum specified
amount of $2,500,000 as of December 31, 2018. We regained compliance with NASDAQ’s Listing Rules with respect to our bid price
as a result of the adjustment to the ratio of the ADSs that took effect on August 15, 2019, and we regained compliance with the
minimum stockholders’ equity requirement by raising gross proceeds of approximately $3,043,000 in a rights offering completed on
October 29, 2019. On November 6, 2019, we received a letter from NASDAQ notifying us that we had regained compliance with the
equity rule (the “Compliance Letter”).
On March 13, 2020, we received a determination letter (the “Letter”) from NASDAQ indicating that we did not comply with
the stockholders’ equity rule. The Letter indicates that Listing Rule 5815(d)(4)(B) does not permit an issuer that is deficient in
stockholders’ equity to present a plan of compliance to the NASDAQ Staff if such issuer has failed to comply with that provision within
one year of a Hearing Panel (the “Panel”) determination of compliance. The Letter states that since we are out of compliance with the
equity rule within one year of the Compliance Letter, the Staff cannot allow us to submit a plan of compliance. We requested an appeal
hearing with the Panel to review the delisting determination. Upon NASDAQ’s receipt of the hearing request by the Company,
NASDAQ stayed the suspension of our securities and the filing of the Form 25-NSE pending the Panel’s decision. An oral hearing took
place on April 30, 2020 and in a letter dated May 12, 2020, the Panel granted the Company the full 180 day extension until September 9,
2020, to publicly disclose full compliance with the minimum shareholder equity requirement under NASDAQ rules. Subsequent to this,
the Company has regained compliance with NASDAQ Listing Rule 5550(b)(1) as of August 25, 2020 (refer to sequence of events
below).
On April 2, 2020, we closed a registered direct offering of 1,028,574 ADSs, at a purchase price of $1.75 per ADS (the “First
April Offering”). H.C. Wainwright & Co., LLC acted as the placement agent for this offering. We intend to use the net proceeds from
this offering to support the introduction and distribution of our new products in the United States, for general product research and
development, including the development of polygenic risk tests with TGen in the United States, for implementation of our consumer
initiated testing platform, and for working capital. The Company issued 40,114,200 warrants to H.C. Wainwright & Co on April 3,
2020, exercisable at US$0.00365 each, expiring in 5 years from issue date. The warrants are exercisable for fully paid ordinary shares.
On April 17, 2020, we announced that we have developed a detailed implementation plan to enable a temporary transition of
our genetic testing laboratory to a high-throughput COVID-19 testing laboratory, should it be required by government agencies to assist
with demand (we have not received any such requests to date and there is no guarantee that we will ever receive such requests). Initial
work to identify laboratory workflows, instrument modification, laboratory compliance for biologics and contaminated materials
handling has commenced. Secure supply chain of test reagents has been confirmed. We believe we are prepared to commence testing
within 21 days of receiving a request to assist with demand, if any.
On April 22, 2020, we closed a registered direct offering of 722,502 ADSs at a purchase price of $2.00 per ADS (the “Second
April Offering,” and together with the First April Offering, the “April Offerings”). H.C. Wainwright & Co., LLC acted as the placement
agent for this offering. We intend to use the net proceeds of this offering to support the introduction and distribution of our new products
in the United States, for general product research and development, including the development of polygenic risk tests with TGen in the
United States, for implementation of our consumer initiated testing platform and preparation for potential COVID-19 testing as well as
for working capital. The Company issued 28,177,578 warrants to H.C. Wainwright & Co on April 22, 2020, exercisable at US$0.00417
each, expiring in 5 years from issue date. The warrants are exercisable for fully paid ordinary shares.
On May 26, 2020, we completed a capital raise by offering of (i) 3,500,000 American Depositary Shares (“ADSs”), for a
purchase price of United States Dollars (US$) US$2.00 per ADS (each representing six hundred (600) of the Company’s ordinary
shares) and (ii) 500,000 pre-funded warrants to purchase one ADS (the “Pre-Funded Warrants”) for a purchase price of US$1.9999 per
Pre-Funded Warrant. H.C. Wainwright & Co., LLC acted as the placement agent for this offering. In connection with such offering, the
Company agreed to issue 156,000,000 warrants exercisable at US$0.004166 each, expiring in 5 years from issue date, to H.C.
Wainwright & Co.
On July 21, 2020, we closed a registered direct offering of 1,025,000 American Depository Shares (ADSs), each representing
six hundred (600) of the Company’s ordinary shares, at a purchase price of United States Dollars (US$) US$5.00 per ADS - or in
Australian dollars $0.012 per ordinary share. The gross proceeds for this offering were approximately US$5.1 million. Against the
offering, the Company agreed to issue 39,975,000 warrants exercisable at US$0.0104 each, expiring in 5 years from issue date, to H.C.
Wainwright & Co which would form part of cost of raising capital.
As of August 25, 2020, the Company has regained compliance with the equity requirement of NASDAQ Listing Rule 5550(b)
(1), as required by the Hearings Panel decision dated May 12, 2020.
On January 25, 2021, we closed a registered direct offering of 1,250,000 American Depository Shares (ADSs), each
representing six hundred (600) of the Company’s ordinary shares, at a purchase price of United States Dollars (US$) US$5.25 per ADS -
or in Australian dollars $0.01125 per ordinary share. The gross proceeds for this offering was approximately US$6.56 million. Against
the offering, the Company agreed to issue 48,750,000 warrants exercisable at US$0.010938 each, expiring in 5 years from issue date, to
H.C. Wainwright & Co which would form part of cost of raising capital. The said warrants are subject to shareholder approval.
However, there can be no assurance that we will be successful in these in maintaining net assets compliance and our securities
will remain listed on the NASDAQ Capital Market. The delisting of our ADSs by NASDAQ would have material negative impacts on
the liquidity of our securities and our ability to raise future capital.
16
Item 3. Key Information (cont.)
Item 3.D Risk Factors (cont.)
Our stock price is volatile and can fluctuate significantly based on events not in our control and general industry conditions.
As a result, the value of your investment may decline significantly.
The biotechnology sector can be particularly vulnerable to abrupt changes in investor sentiment. Stock prices of companies in
the biotechnology industry, including ours, can swing dramatically, with little relationship to operating performance. Our stock price
may be affected by a number of factors including, but not limited to:
● product development events;
● the outcome of litigation;
● decisions relating to intellectual property rights;
● the entrance of competitive products or technologies into our markets;
● new medical discoveries;
● the establishment of strategic partnerships and alliances;
● changes in reimbursement policies or other practices related to the pharmaceutical industry; or
● other industry and market changes or trends.
Since our listing on the Australian Securities Exchange in August 2000, the price of our Ordinary Shares has ranged from a low
of A$0.006 to a high of A$0.88 per share. Further fluctuations are likely to occur due to events which are not within our control and
general market conditions affecting the biotechnology sector or the stock market generally.
In addition, low trading volume may increase the volatility of the price of our ADSs. A thin trading market could cause the
price of our ADSs to fluctuate significantly more than the stock market as a whole. For example, trades involving a relatively small
number of our ADSs may have a greater impact on the trading price for our ADSs than would be the case if the trading volume were
higher.
The fact that we do not expect to pay cash dividends may lead to decreased prices for our stock.
We have never declared or paid a cash dividend on our Ordinary Shares and we do not anticipate doing so in the foreseeable
future. We intend to retain future cash earnings, if any, for reinvestment in the development and expansion of our business. Whether we
pay cash dividends in the future will be at the discretion of our Board of Directors and may be dependent on our financial condition,
results of operations, capital requirements and any other factors our Board of Directors decides is relevant. As a result, an investor may
only recognise an economic gain on an investment in our stock from an appreciation in the price of our stock, which is uncertain and
unpredictable. There is no guarantee that our Ordinary Shares will appreciate in value or even maintain the price at which an investor
purchased the Ordinary Shares.
You may have difficulty in effecting service of legal process and enforcing judgments against us and our management.
We are a public company limited by shares, registered and operating under the Australian Corporations Act 2001. All of our
directors and officers named in this Annual Report reside outside the U.S. Substantially all, or a substantial portion of, the assets of
those persons are also located outside the U.S. As a result, it may not be possible to affect service on such persons in the U.S. or to
enforce, in foreign courts, judgments against such persons obtained in U.S. courts and predicated on the civil liability provisions of the
federal securities laws of the U.S. Furthermore, substantially all of our directly owned assets are located outside the U.S., and, as such,
any judgment obtained in the U.S. against us may not be collectible within the U.S. There is doubt as to the enforceability in the
Commonwealth of Australia, in original actions or in actions for enforcement of judgments of U.S. courts, of civil liabilities predicated
solely upon federal or state securities laws of the U.S., especially in the case of enforcement of judgments of U.S. courts where the
defendant has not been properly served in Australia.
17
Item 3. Key Information (cont.)
Item 3.D Risk Factors (cont.)
Because we are not required to provide you with the same information as an issuer of securities based in the United States,
you may not be afforded the same protection or information you would have if you had invested in a public corporation based in the
United States.
We are exempt from certain provisions of the Securities Exchange Act of 1934, as amended, commonly referred to as the
Exchange Act, that are applicable to U.S. public companies, including (i) the rules under the Exchange Act requiring the filing with the
SEC of quarterly reports on Form 10-Q and current reports on Form 8-K; (ii) the sections of the Exchange Act regulating the solicitation
of proxies, consents or authorisations in respect of a security registered under the Exchange Act; and (iii) the sections of the Exchange
Act requiring insiders to file public reports of their stock ownership and trading activities and liability for insiders who profit from trades
made in a short period of time. The exempt provisions would be available to you if you had invested in a U.S. corporation.
However, in line with the Australian Securities Exchange regulations, we disclose our reviewed financial results on a semi-
annual basis (under International Standard on Review Engagements) and our audited financial results on an annual basis (under
International Standards on Auditing). The information, which may have an effect on our stock price on the Australian Securities
Exchange, will be disclosed to the Australian Securities Exchange and also the Securities Exchange Commission. Other relevant
information pertaining to our Company will also be disclosed in line with the Australian Securities Exchange regulations and
information dissemination requirements for listed companies. We provide our semi-annual results and other material information that we
make public in Australia in the U.S. under the cover of an SEC Form 6-K. Nevertheless, you may not be afforded the same protection or
information, which would be made available to you, were you investing in a United States public corporation because the requirements
of a Form 10-Q and Form 8-K are not applicable to us.
A lack of significant liquidity for our ADSs may negatively affect your ability to resell our securities.
Our ADSs have traded on the NASDAQ Capital Market since June 30, 2010. An active trading market for the ADSs, however,
may not be maintained in the future. If an active trading market is not maintained, the liquidity and trading prices of the ADSs could be
negatively affected.
In certain circumstances, holders of ADSs may have limited rights relative to holders of Ordinary Shares.
The rights of holders of ADSs with respect to the voting of Ordinary Shares and the right to receive certain distributions may
be limited in certain respects by the deposit agreement entered into by us and The Bank of New York Mellon. For example, although
ADS holders are entitled under the deposit agreement, subject to any applicable provisions of Australian law and of our Constitution, to
instruct the depositary as to the exercise of the voting rights pertaining to the Ordinary Shares represented by the American Depositary
Shares, and the depositary has agreed that it will try, as far as practical, to vote the Ordinary Shares so represented in accordance with
such instructions, ADS holders may not receive notices sent by the depositary in time to ensure that the depositary will vote the
Ordinary Shares. This means that, from a practical point of view, the holders of ADSs may not be able to exercise their right to vote. In
addition, under the deposit agreement, the depositary has the right to restrict distributions to holders of the ADSs in the event that it is
unlawful or impractical to make such distributions. We have no obligation to take any action to permit distributions to holders of our
American Depositary Receipts, or ADSs. As a result, holders of ADSs may not receive distributions made by us.
There is a substantial risk that we are a passive foreign investment company, or PFIC, which subjects U.S. investors to
adverse tax rules.
Holders of our ADSs who are U.S. residents face income tax risks. There is a substantial risk that we are a passive foreign
investment company, commonly referred to as a PFIC. Our treatment as a PFIC could result in a reduction in the after-tax return to the
holders of our ADSs. For U.S. federal income tax purposes, we are classified as a PFIC for any taxable year in which either (i) 75% or
more of our gross income is passive income, or (ii) at least 50% of the average value of all of our assets for the taxable year produce or
are held for the production of passive income. For this purpose, cash is considered to be an asset that produces passive income. As a
result of our substantial cash position in relation to our other assets, we believe that we have been a PFIC in our most recent taxable
years and will continue to be a PFIC in the current tax year. Highly complex rules apply to U.S. holders owning ADSs. Accordingly,
you are urged to consult your tax advisors regarding the application of such rules. United States residents should carefully read “Item
10.E. Additional Information—Taxation, United States Federal Income Tax Consequences” in this Annual Report, for a more complete
discussion of the U.S. federal income tax risks related to owning and disposing of our ADSs.
18
Item 4. Information on the Company
Item 4.A History and Development of the Company
Originally incorporated under the laws of Western Australia on January 5, 1987, as Concord Mining N.L. the Company
operated as a mining company. On August 13, 1991, the Company changed its name to Consolidated Victorian Gold Mines N.L. On
December 2, 1991, the Company changed its name to Consolidated Victorian Mines N.L. On March 15, 1995, the Company changed its
name to Duketon Goldfields N.L.
On October 15, 1999, the Company’s corporate status was changed from a No Liability Company to a company limited by
shares. On August 29, 2000, following the acquisition of Swiss company GeneType AG, the Company changed its name to Genetic
Technologies Limited, which is its current name. At that time, the mining activities were phased out to focus on becoming a
biotechnology company, following which its stock exchange listing was duly transferred from the mining board of the ASX to the
industrial board and its shares were thereafter classified under the industry Company “Health and Biotechnology”, completing its
transformation from a mining company into a biotechnology company. The Company’s current activities in biotechnology primarily
concentrate on one clearly defined area of activity which is covered under Item 4.B “Business Overview”.
In October 2009, a new strategic direction was established to focus efforts in creating a portfolio of tests that would be aimed at
assisting medical clinicians with cancer management. This would comprise tests that were created by the Company and in-licensed from
third parties which would then be marketed by us in the Asia-Pacific region.
On April 14, 2010, the Company announced that it had acquired certain assets from Perlegen Sciences, Inc. in California, with
the main asset being the BREVAGen™ breast cancer risk assessment test (“BREVAGen™”). In addition to the BREVAGen™ test, the
Company also acquired a suite of patents valid to 2022 which augment and extend its current non-coding patent portfolio. On June 28,
2010, the Company incorporated a wholly owned subsidiary named Phenogen Sciences Inc. in the State of Delaware which commenced
selling the BREVAGen™ test in the U.S. marketplace in June 2011. In October 2014, the Company released its next generation breast
cancer risk assessment test BREVAGenplus.
On November 19, 2014, the Company completed the sale of its Heritage Australian Genetics business to Specialist Diagnostic
Services Ltd (SDS), the wholly owned pathology subsidiary of Primary Health Care Ltd.
In November 2016, the Company executed an exclusive worldwide license agreement with The University of Melbourne, for
the development and commercialisation of a novel colorectal cancer (CRC) risk assessment test, providing the Company with an
opportunity to enhance its pipeline of risk assessment products. Additionally, in June 2017, the Company executed an investigator-
initiated Research Agreement with The Ohio State University, reflecting the growing awareness of the Company’s expertise in SNP-
based risk assessment.
During 2018, the Company executed a further collaborative research and services agreement with The University of
Melbourne, with the research designed to broaden the applicability of BREVAGenplus, enabling its use by women with extended family
history of breast cancer as well as increase the range of factors analysed in assessing breast cancer.
In May 2019, the Company announced the development of two new cancer risk assessment tests branded as “GeneType for
Colorectal Cancer” and “GeneType for Breast Cancer.” The new breast cancer test provides substantial improvement over its legacy
breast cancer test BREVAGenplus, by incorporating multiple additional clinical risk factors. This test will provide healthcare providers
and their patients with a 5-year and lifetime risk assessment of the patient developing breast cancer. The colorectal cancer test will
provide healthcare providers and their patients a 5-year, 10-year, and lifetime risk assessment of the patient developing colorectal
cancer.
In June 2020, the Company received US Patent No: US10,683,549, Methods for assessing risk of developing breast cancer. The
Company is the first company in the world to successfully commercialise a polygenic risk test for breast cancer. The granted patent
covers the Company’s proprietary panels of single nucleotide polymorphisms (SNPs) and the combination of clinical and phenotypic
risk models to create the most comprehensive risk assessment tool on the market: GeneType for Breast Cancer.
The Company hired and trained a new internal sales employee to educate doctors on the Company’s polygenic risk score (PRS)
tests and introduce them to preventative health strategies. The Company had a very positive response from doctors. Initial test results
showed 10 per cent of subjects were high risk and 41 per cent were moderate risk. The Company believes that these results will help
create personalised strategies specifically designed for the patient risk profile. We think early indications show the tests lead to better
screening compliance and to the development of personalised screening solutions. This confirms the Company’s objective of focusing
on preventative health rather than ‘after the fact’ medicine. However, there is no guarantee that the PRS tests will generate any
substantial income for the Company in the near future or at all.
At the same time, the Company continued to develop other risk assessment tests across a range of diseases including:
● Cardiovascular disease
● Type 2 diabetes
● Prostate cancer
● Melanoma
19
Item 4. Information on the Company (cont.)
Item 4.A History and Development of the Company (cont.)
COVID-19 Related Testing
The Company developed a detailed implementation plan to allow a temporary transition of the Company’s genetic testing
laboratory to a high-throughput COVID-19 test center, should government agencies need it to assist with demand. The Company has
begun the initial work to identify laboratory workflows, instrument modification, and laboratory compliance for biologics and
contaminated materials handling. The Company has also confirmed a secure supply chain of test reagents.
The Company has developed a polygenic risk score (PRS) test for COVID-19, which may enable an assessment of the risk of
people developing a serious disease should they contract the virus. The test aims to predict disease severity using a combination of
genetic and clinical information.
● Working prototype developed based on about 3,000 patients
● Options for clinical risk model currently under evaluation
● Discussions continue with several international biobanks and clinical laboratories to source an independent cross-
validation dataset.
The Company has built strong relationships with international biobanks and health studies, including UK Biobank. They allow
us to secure additional, current COVID-19 patient data to continuously develop, refine, and validate the COVID-19 risk test.
The Company has ordered its first single nucleotide polymorphism (SNP) array panel from US-based Thermo Fisher Scientific
Inc., a world leader in genetic testing and the Company’s manufacturing partner for GeneType products.
The SNP array panel is a key reagent the Company needs to process the polygenic risk test portion of the COVID-19 risk test.
The test aims to categorise subjects as being at high, average, or low risk of developing life-threatening conditions due to COVID-19.
The Company has also confirmed capacity to scale up production for a global rollout of the COVID-19 risk test (reagent and
SNP array panel) with major manufacturers, including Thermo Fisher Scientific. The product uses technical components that healthcare
manufacturers already produce for other genetic-based tests. This will support the Company’s plans to accelerate production to meet
expected global demand.
We estimate that the Company’s Australian facilities can produce up to 250,000 tests a year. The scale-up of manufacturing
will require global distribution partnerships if the COVID-19 risk test is widely adopted. In anticipation of high demand, the Company
expects to make its data pack for the test available to global laboratories. Direct and indirect costs to date are approximately A$375,000.
Discussions have taken place with Centres for Medicare and Medicaid Services (CMS) and National Association of Testing
Authorities, Australia (NATA) for regulatory approval for the Company’s COVID-19 risk severity test in the U.S. and Australia.
● The Company plans to submit a complete technical package to the Centres for Medicare and Medicaid Services
(CMS) for review and approval. Clinical Laboratory Improvement Amendments (CLIA) turn-around time for
approval is expected to be approximately 45 days from submission;
● Submission of the technical file to include scientific literature, algorithm validation, laboratory network validation,
and laboratory procedural documentation; and
● NATA to provide an assessment after an internal review of the final independent data set for test validation.
The test should give risk stratification information which may help personal and population management in two ways, to:
● Guide quarantine measures on a personal, local, and national scale; and
● Prioritise vaccination
The Company has filed a provisional patent application for its COVID-19 risk test with IP Australia, an agency of Department
of Industry, Innovation and Science (Intellectual Property Australia) (2020901739 - Methods of assessing risk of developing a severe
response to Coronavirus infection). The provisional patent covers the specific single nucleotide polymorphism (SNP) algorithm the
Company designed to calculate a PRS and the testing model that combines PRS and the clinical risk factors that together constitute the
COVID-19 risk test.
The Company executed an acquisition agreement (“Acquisition Agreement”) on July 19th, 2021 to acquire the direct-to-
consumer eCommerce business and distribution rights associated with General Genetics Corporation and its associated brands trading as
EasyDNA, from BelHealth Investment Fund LP. The Acquisition Agreement provides for the acquisition of all brands, websites and
reseller agreements associated with EasyDNA. This includes over 70 websites in 40 countries and six brand identities. Under the terms
of the Acquisition Agreement, the Company will acquire 100% of EasyDNA’s brands and assets within the General Genetics
Corporation business for a purchase price of US$4 million, comprising cash consideration of US$2.5 million and US$1.5 million worth
of GTG securities in the nature of ADRs.
20
Item 4. Information on the Company (cont.)
Item 4.A History and Development of the Company (cont.)
Corporate Information
The Company’s registered office, headquarters and laboratory is located at 60-66 Hanover Street, Fitzroy, Victoria, 3065,
Australia and its telephone number is +61 3 8412 7000. The office of its U.S. subsidiary, Phenogen Sciences Inc., is located at 1300
Baxter Street, Suite 157, Charlotte, North Carolina, 28204 U.S.A. The telephone number for the Phenogen Sciences Inc. office is (704)
926 5700. The Company’s website address is www.gtglabs.com. The information in its website is not incorporated by reference into this
Annual Report and should not be considered as part of this Annual Report.
The Company’s Australian Company Number (ACN) is 009 212 328. The Company’s Australian Business Number (ABN) is
17 009 212 328. The Company operates pursuant to its constitution, the Australian Corporations Act 2001, the Listing Rules of the
Australian Securities Exchange, the Marketplace Rules of The NASDAQ Stock Market, and where applicable, local, state and federal
legislation in the countries in which the Company operates.
Item 4.B Business Overview Description of Business
Founded in 1989, Genetic Technologies listed its Ordinary Shares on the ASX (GTG) in 2000 and its ADSs on NASDAQ’s
Capital Market (GENE) in 2005. Genetic Technologies is a molecular diagnostics company that offers predictive testing and assessment
tools to help physicians proactively manage women’s health. The Company’s legacy product, BREVAGenplus, was a clinically
validated risk assessment test for non-hereditary breast cancer and was first in its class. BREVAGenplus improved upon the predictive
power of the first generation BREVAGen™ test and was designed to facilitate better informed decisions about breast cancer screening
and preventive treatment plans. BREVAGenplus expanded the application of BREVAGen™ from Caucasian women to include African
Americans and Hispanics and was 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.
The Company successfully launched the first generation BREVAGen™ test across the U.S. via its U.S. subsidiary Phenogen
Sciences Inc., and believes the addition of BREVAGenplus, launched in October 2014, significantly expanded the applicable market.
The Company marketed BREVAGenplus to healthcare professionals in comprehensive breast health care and imaging centers, as well
as to obstetricians/gynecologists (OBGYNs) and breast cancer risk assessment specialists (such as breast surgeons).
In May 2019, the Company announced that it had developed two new cancer risk assessment tests branded as ‘GeneType for
Colorectal Cancer’ and ‘GeneType for Breast Cancer’. The new breast cancer test provides substantial improvement over the
Company’s legacy breast cancer test BREVAGenplus, by incorporating multiple additional clinical risk factors. This test will provide
healthcare providers and their patients with a 5-year and lifetime risk assessment of the patient developing breast cancer. The colorectal
cancer test will provide healthcare providers and their patients a 5-year, 10-year, and lifetime risk assessment of the patient developing
colorectal cancer.
In June 2020, the Company received US Patent No: US 10,683,549, Methods for assessing risk of developing breast cancer.
The Company is the first company in the world to successfully commercialise a polygenic risk test for breast cancer. The granted patent
covers the Company’s proprietary panels of single nucleotide polymorphisms (SNPs) and the combination of clinical and phenotypic
risk models to create the most comprehensive risk assessment tool on the market: GeneType for Breast Cancer.
At the same time, the Company continued to develop other risk assessment tests across a range of diseases, including:
● Cardiovascular disease
● Type 2 diabetes
● Prostate cancer
● Melanoma
The Company’s Genetic Testing Business
Following the acquisition of Genetype AG in 1999 and the subsequent renaming to Genetic Technologies Limited, the
Company focused on establishing a genetic testing business, which over the following decade saw it become the largest provider of
paternity and related testing services in Australia. The Company’s service testing laboratory in Melbourne became the leading non-
Government genetic testing service provider in Australia. The genetic testing services of the Company expanded to include at certain
times:
● Medical testing
● Animal Testing
● Forensic Testing
● Plant Testing
21
Item 4. Information on the Company (cont.)
Item 4.B Business Overview (cont.)
The Company’s Genetic Testing Business (cont.)
The acquisition of GeneType AG also provided the Company with ownership rights to a potentially significant portfolio of issued
patents. During the intervening years, this portfolio has since been expanded by both organic growth and the acquisition of intellectual
property assets from third parties. The patent portfolio is constantly reviewed to ensure that the Company maintains potentially
important patents but at the same time keep costs to a minimum by no longer pursuing less commercially attractive and relevant
intellectual property.
A strategic alliance with Myriad Genetics Inc. delivered to the Company exclusive rights in Australia and New Zealand to
perform DNA testing for susceptibility to a range of cancers. In April 2003, the Company established its cancer susceptibility testing
facility within its Australian laboratory. In June 2003, this facility was granted provisional accreditation by the National Association of
Testing Authorities, Australia (“NATA”).
In November 2003, the Company joined the world-wide genetic testing network GENDIA as the sole reference laboratory for
the network in Australia and New Zealand. GENDIA consists of more than 50 laboratories from around the world, each contributing
expertise in their respective disciplines to create a network capable of providing more than 2,000 different genetic tests. This provided
the Company with the ability to offer comprehensive testing services to its customer base in the Asia-Pacific region as well as increasing
its exposure to other markets.
In April 2010 the Company purchased various assets from Perlegen Sciences, Inc. of Mountain View, California, which
included a breast cancer non-familial risk assessment test, BREVAGen™. The Company then began validating the test in our Australian
laboratory and initiated the process for obtaining CLIA certification which would enable the Company to undertake the testing of
samples received from the U.S. market. By July 2010, a new U.S. subsidiary named Phenogen Sciences Inc. had been incorporated by
the Company in Delaware to market and distribute the BREVAGen™ test across the United States.
In October 2014, the Company announced the U.S. release of BREVAGenplus, an easy-to-use predictive risk test for the
millions of women at risk of developing sporadic, or non-hereditary, breast cancer, representing a marked enhancement in accuracy and
broader patient applicability, over its first generation BREVAGen™ product. The Company also made a pivotal change of sales and
marketing emphasis toward large comprehensive breast treatment and imaging centers, which are more complex entities with a longer
sales cycle, but higher potential.
GeneType for Breast Cancer; a State-of-the-Art Breast Cancer Risk Assessment Test designed to enable a more personalised
breast cancer risk assessment in a greater number of women
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 U.S. in June 2011. In October 2014, the Company released its next generation breast cancer
risk assessment test, BREVAGenplus. This new version of the test incorporated 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 new test was clinically validated in a broader population of women including, African
American and Hispanic women. This increased the applicable market beyond the Caucasian only indication of the first-generation test,
and simplified the marketing process in medical clinics and breast health centers in the U.S.
The expanded panel of SNPs incorporated into our breast cancer tests 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.
BREVAGenplus was a first-in-class, clinically validated, predictive risk test for sporadic breast cancer which examined a
woman’s clinical risk factors, combined with seventy-seven scientifically validated genetic biomarkers (SNPs), to allow for more
personalised breast cancer risk assessment and risk management.
In May 2019, the Company announced the development of its next generation breast cancer risk assessment test, ‘GeneType
for Breast Cancer’. The new breast cancer test provides substantial improvement over its legacy breast cancer test BREVAGenplus by
incorporating multiple additional clinical risk factors. This test will provide healthcare providers and their patients with a 5-year and
lifetime risk assessment of the patient developing breast cancer.
Germline genetic testing for mutations in BRCA1 and BRCA2 allows for the identification of individuals at significantly
increased risk for breast and other cancers. However, such mutations are relatively rare in the general population and account for less
than 10% of all breast cancer cases. The remaining 90% of non-familial or sporadic breast cancer have to be defined by other
genetic/clinical markers common to the population at large and this is where the Company has focused its attention.
22
Item 4. Information on the Company (cont.)
Item 4.B Business Overview (cont.)
The newly developed ‘GeneType for Breast Cancer’ test is aimed at risk detection of non-BRCA related sporadic breast cancer
(that is, for those women who do not have an identified family history of breast cancer). Importantly, this means that the Company’s
new test covers 95% of women.
In June 2020, the Company received the approval for its U.S. patent, patent number US 10,683,549, “Methods for Assessing
Risk of Developing Breast Cancer.” The granted patent covers the Company’s proprietary panels of single nucleotide polymorphisms
(SNPs) and the combination of clinical and phenotypic risk models to create the most comprehensive risk assessment tool on the market:
GeneType for Breast Cancer.
GeneType for Colorectal; a State-of-the-Art Risk Assessment Test for Colorectal Cancer.
Next generation risk assessments combine multiple clinical and genetic risk factors to better stratify individuals at increased
risk of developing disease. ‘GeneType for Colorectal Cancer’ incorporates the most impactful risk factors in order to define an
individual’s risk of developing colorectal cancer, so the healthcare provider can make screening and preventative care recommendations
that are tailored to their patient’s personalised risk.
Colorectal cancer is the third most commonly diagnosed cancer in the U.S., yet 1 in 3 adults are not receiving the appropriate
colorectal cancer screening for their age. In addition, rates of colorectal cancer among 20-49-year olds is steadily increasing. Identifying
patients who are most at risk for colorectal cancer can lead to enhanced screening protocols and better outcomes. Most individuals
diagnosed with colorectal cancer do not have a significant family history of the disease. ‘GeneType for Colorectal Cancer’ evaluates the
genometric risk of developing colorectal cancer for men and women over age 30 who do not have a known pathogenic gene variant.
In sporadic colorectal cancer, no single gene mutation is causal of disease. Rather, common DNA variations or SNPs, each
contribute a small but measurable risk of developing disease. ‘GeneType for Colorectal Cancer’ analyses a patient’s DNA for more than
40 SNPs that have been clinically validated in their association with colorectal cancer. By combining the effects of all of these SNPs
into a single polygenic risk score (PRS), ‘GeneType for Colorectal Cancer’ will provide a superior risk stratification over standard risk
assessments that incorporate only clinical factors.
‘GeneType for Colorectal Cancer’ is clinically validated for men and women of 30 years of age or older and for individuals of
Caucasian descent. The Company intend to provide updates as it continuously improves its tests and add fully validated models for
additional ethnicities.
Government Regulations
CLIA AND FDA Regulations
In April 2011, the Company obtained certification of its Australian laboratory under the U.S. Clinical Laboratories
Improvements Amendments of 1988 (“CLIA”), as regulated by the Centers for Medicare and Medicaid in Baltimore, Maryland. This
certification enables the Company to accept and test samples from U.S. residents, and was the culmination of preparations required for
the U.S. launch of the Company’s BREVAGen™ test which occurred in June 2011.
In July 2013, the Company was inspected by a representative of the New York State Department of Health, Clinical Laboratory
Evaluation Program (“CLEP”). The Company’s laboratory received an inspection result with no deficiencies reported and, on August
30, 2013, the Company announced that it had received its Clinical Laboratory Permit (CLEP) from the New York State Department of
Health. This permit, which allows the Company to offer its risk assessment tests to residents of New York State, completed the final out-
of-state licensure allowing the Company to provide testing services to all 50 U.S. states.
From its headquarters in Melbourne, Victoria, the Company’s laboratory holds a number of accreditations including:
● The CLIA license required for all laboratories offering testing the U.S.;
● The CLEP license, an additional certification required to offer tests in New York State; and
● A Medical Device Establishment License (MDEL) required for Canada.
23
Item 4. Information on the Company (cont.)
Item 4.B Business Overview (cont.)
Physicians who order clinical tests for their patients have historically represented the primary source of its testing volume. Fees
invoiced to patients and third parties are based on its fee schedule, which may be subject to limitations imposed by third-party payers.
The clinical laboratory industry is highly regulated and subject to significant and changing Federal and state laws and regulations. These
laws and regulations affect key aspects of the Company’s business, including licensure and operations, billing and payment for
laboratory services, sales and marketing interactions with ordering physicians, security and confidentiality of health information, and
environmental and occupational safety. Oversight by government officials includes regular inspections and audits. The Company seek to
and believe that it conducts business in compliance with all applicable laws and regulations.
CLIA, extends Federal licensing requirements to all clinical laboratories (regardless of the location, size or type of laboratory),
including those operated by physicians in their offices, based on the complexity of the tests they perform. CLIA also establishes a
stringent proficiency testing program for laboratories and includes substantial sanctions, such as suspension, revocation or limitation of a
laboratory’s CLIA certificate (which is necessary to conduct business), and significant fines and/or criminal penalties.
The tests on samples provided through the Company’s products are processed at its laboratory in Melbourne, Australia. The
Company’s laboratory completed its first CLIA inspection under CLIA guidelines and received its certificate of compliance effective
November 17, 2011. A re-certification from CMS i.e. paper survey, was performed in November 2013 and another on-site re-
certification followed up in February 2016. Paper surveys were conducted in November 2017 and December 2019. Furthermore, the
Company’s laboratory completed its first CLEP inspection under the NYS DOH CLEP guidelines and received its certificate of
compliance effective August 30, 2013. Since the initial survey, the laboratory has been successful in submitting documents via the NYS
eCLEP Health Commerce System for each subsequent year to date. Although no firm date has been provided, the laboratory is
expecting an on-site visit in the near future.
The Company believes that it is in compliance with all applicable federal and state laboratory requirements. Under CLIA, the
Company remain subject to state and local laboratory regulations. CLIA provides that a state may adopt laboratory regulations that are
more stringent than those under federal law, and some states require additional personnel qualifications, quality control, record
maintenance and other requirements.
Following a successful Q3 CLIA audit, the Company renewed its status as a fully NATA and CLIA –accredited laboratory. It
places the Company in a unique position to service both the Australian and US markets subject to regulatory approvals.
Although the U.S. Food and Drug Administration (“FDA”) has consistently claimed that it has the authority to regulate
laboratory-developed tests (“LDTs”) that are developed, validated and performed only by a CLIA certified laboratory, it has historically
exercised enforcement discretion in not otherwise regulating most LDTs and has not required laboratories that furnish LDTs to comply
with the agency’s requirements for medical devices (e.g., establishment registration, device listing, quality systems regulations,
premarket clearance or premarket approval, and post-market controls). More recently, the FDA has indicated that it will apply a risk-
based approach to determine the regulatory pathway for all in-vitro diagnostics, which includes LDTs, as it does with all medical
devices. Accordingly, the regulatory pathway for the Company’s LDTs will depend on the level of risk to patients, based on the
intended use of the LDT and the controls necessary to provide a reasonable assurance of the LDTs safety and effectiveness. The two
primary types of marketing pathways for medical devices are clearance of a premarket notification under Section 510(k) of the Federal
Food, Drug, and Cosmetic Act, or 510(k), and approval of a premarket approval application, or PMA.
HIPAA and other privacy laws
The Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), established comprehensive federal standards for
the privacy and security of health information. The HIPAA standards apply to three types of organisations: health plans, healthcare
clearing houses, and healthcare providers that conduct certain healthcare transactions electronically (“Covered Entities”). Title II of
HIPAA, the Administrative Simplification Act, contains provisions that address the privacy of health data, the security of health data,
the standardisation of identifying numbers used in the healthcare system and the standardisation of certain healthcare transactions. The
privacy regulations protect medical records and other protected health information by limiting their use and release, giving patients the
right to access their medical records and limiting most disclosures of health information to the minimum amount necessary to
accomplish an intended purpose. The HIPAA security standards require the adoption of administrative, physical, and technical
safeguards and the adoption of written security policies and procedures.
On February 17, 2009, Congress enacted Subtitle D of the Health Information Technology for Economic and Clinical Health
Act, or HITECH, provisions of the American Recovery and Reinvestment Act of 2009. HITECH expanded and strengthened HIPAA,
created new targets for enforcement, imposed new penalties for noncompliance and established new breach notification requirements for
Covered Entities. Regulations implementing major provisions of HITECH were finalised on January 25, 2013, through publication of
the HIPAA Omnibus Rule (the “Omnibus Rule”).
24
Item 4. Information on the Company (cont.)
Item 4.B Business Overview (cont.)
Under HITECH’s breach notification requirements, Covered Entities must report breaches of protected health information that
has not been encrypted or otherwise secured in accordance with guidance from the Secretary of the U.S. Department of Health and
Human Services (the “Secretary”). Required breach notices must be made as soon as is reasonably practicable, but no later than 60 days
following discovery of the breach. Reports must be made to affected individuals and to the Secretary and, in some cases depending on
the size of the breach; they must be reported through local and national media. Breach reports can lead to investigation, enforcement and
civil litigation, including class action lawsuits.
In addition to the federal privacy and security regulations, there are a number of state laws regarding the privacy and security of
health information and personal data that are applicable to clinical laboratories. Many states have also implemented genetic testing and
privacy laws imposing specific patient consent requirements and protecting test results by strictly limiting the disclosure of those results.
State requirements are particularly stringent regarding predictive genetic tests, due to the risk of genetic discrimination against healthy
patients identified through testing as being at a high risk for disease. The Company believes that it has taken the steps required to
comply with health information privacy and security statutes and regulations, including genetic testing and genetic information privacy
laws in all jurisdictions, both state and federal. However, these laws constantly change, and the Company may not be able to maintain
compliance in all jurisdictions where it does business. Failure to maintain compliance, or changes in state or federal laws regarding
privacy or security could result in civil and/or criminal penalties, significant reputational damage and could have a material adverse
effect on the Company’s business.
Environmental and Safety Laws and Regulations
The Company is subject to laws and regulations related to the protection of the environment, the health and safety of employees
and the handling, transportation and disposal of medical specimens, infectious and hazardous waste and radioactive materials. For
example, the U.S. Occupational Safety and Health Administration (“OSHA”) has established extensive requirements relating
specifically to workplace safety for healthcare employers in the U.S. This includes requirements to develop and implement multi-faceted
programs to protect workers from exposure to blood-borne pathogens, including preventing or minimising any exposure through needle
stick injuries. For purposes of transportation, some biological materials and laboratory supplies are classified as hazardous materials and
are subject to regulation by one or more of the following agencies: the U.S. Department of Transportation, the U.S. Public Health
Service, the U.S. Postal Service and the International Air Transport Association. The Company generally use third- party vendors to
dispose of regulated medical waste, hazardous waste and radioactive materials and contractually require them to comply with applicable
laws and regulations.
The Company’s operations are also subject to environmental regulations under Australian State legislation. In particular, the
Company is subject to the requirements of the Environment Protection Act 1993. A license has been obtained under this Act to produce
listed waste.
Transparency Laws and Regulations
A federal law known as the Physician Payments Sunshine Act (the “Sunshine Act”) requires medical device manufacturers to
track and report to the federal government certain payments and other transfers of value made to physicians and teaching hospitals and
ownership or investment interests held by physicians and their immediate family members. There are also state “sunshine” laws that
require manufacturers to provide reports to state governments on pricing and marketing information. Several states have enacted
legislation requiring medical device manufacturers to, among other things, establish marketing compliance programs, file periodic
reports with the state, make periodic public disclosures on sales and marketing activities, and such laws may also prohibit or limit
certain other sales and marketing practices. These laws may adversely affect our sales, marketing, and other activities by imposing
administrative and compliance burdens on us. If the Company fail to track and report as required by these laws or to otherwise comply
with these laws, it could be subject to the penalty provisions of the pertinent state and federal authorities.
Product Distribution
Despite significant resource allocation and efforts by a dedicated sales team, sales of BREVAGenplus were insufficient to
defray the costs of the sales team. By late 2017, management decided that its sales strategy was not working and disbanded much of the
sales infrastructure in the U.S. and transitioned to an ecommerce-based solution that allowed consumers to initiate testing online.
Management then designed a “pivot plan” in an effort to reposition the Company, refine and improve products and reload with a newly
developed approach to market.
25
Item 4. Information on the Company (cont.)
Item 4.B Business Overview (cont.)
With COVID-19 social distancing impacting on the Company’s ability to fully engage with physicians, the Company
introduced a consumer-initiated testing (CIT) platform. This sales pipeline deviates from a traditional sales approach that targets
clinicians. Instead it allows patients to request a test directly, with clinician oversight of the testing process through an independent
provider network and telemedicine.
The Company presented its latest technology and world-leading tests at the 2020 JP Morgan Healthcare Conference in January.
The presentation coincided with the successful launch of the Company’s new tests and the introduction of the Company’s new
management to the U.S. market.
The Company is finalising verification of the diabetes test in its Australian laboratory. The Company has completed its
marketing collateral, and plan to launch once more normal conditions return post COVID-19.
Reimbursement and Clinical Studies
Prior to April 2017, the Company’s payment model relied on a traditional reimbursement system by Preferred Provider
Organisations (“PPOs”) and other third-party payers, which required credentialing its products with those payers. With effect from April
1, 2017, the Company transitioned to a direct patient self-pay program. Converting to a direct pay relationship with patients was aimed
at providing economic and process certainty to the transaction for the healthcare provider and the patient. The change eliminated
reimbursement issues from PPO and other third-party payors, including low levels of reimbursement, prolonged payment time, patient
confusion around eligibility and financial responsibility and poor coverage.
This shift also has reduced the Company’s reliance on clinical utility studies that had been designed as a means to achieve
reimbursement coverage through the private insurers. The Company recognised however that scientific papers are an essential marketing
tool, and that scientific and clinical data are key drivers to help strengthen our commercial position. The Company intends to explore
opportunities to engage in further research collaborations to support clinical utility. Physicians and the major breast health centers seek
multiple points of confirmation that the medical device works as intended and leads to a meaningful improvement in women’s health.
Therefore, the more papers that are published regarding the Company’s genetic tests, profiling product performance characteristics
including clinical validity and utility, the more likely physicians will be to use the tests.
The Company had previously conducted multiple scientific studies to develop and validate the first generation BREVAGen™
test and also created two health economic models to demonstrate potential cost savings and health benefits associated with the
BREVAGen™ test. Importantly, the research undertaken and published based on the original version of the Company’s test remains
applicable to its new GeneType for Breast Cancer and GeneType for Colorectal Cancer tests.
Research & Development Projects
During the year ended June 30, 2021, the Company supported the following research and development programs, details of
which are provided below:
● COVID Severity Risk Test (GeneType for COVID Severity)
● Breast Cancer Risk Assessment Test (GeneType for Breast Cancer)
● Colorectal Cancer Risk Assessment Test (GeneType for Colorectal Cancer)
● Research collaboration with Translational Genomics Research Institute (“TGen”)
● Research Agreement executed with Memorial Sloan Kettering New York Cambridge University
● Research collaboration with The Ohio State University
● Expanded range of other cancer and disease target predictive risk assessment tests
In previous years, other projects, which have since been terminated or otherwise commercialised, have also been supported by
the Company. The Company is constantly seeking new opportunities and plans to focus more on research and development activities in
the future. In addition, the Company plans on having its science and management team engage with the world’s leading scientific
experts working on predictive genetic testing and its role within world health systems. Historically, some projects have arisen from new
inventions made by the Company while some have been made by others who have approached the Company seeking collaboration and
support for their activities.
26
Item 4. Information on the Company (cont.)
Item 4.B Business Overview (cont.)
Collaboration with The University of Melbourne
On November 29, 2016, the Company announced the signing of an exclusive worldwide license agreement with The University
of Melbourne for the development and commercialisation of a novel colorectal cancer (CRC) risk assessment test. The core technology
behind this test was developed by a research team at the University’s Centre for Epidemiology and Biostatistics, with results from
preliminary modelling studies 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,” 2016 Feb: 12(4), 503-13. 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 CRC risk
categories. In practice, the technology could be used to identify people at high risk for CRC who should be subjected to intensive
screening, ultimately reducing the risk of occurrence and death from the disease. Those identified as low risk of CRC can be spared
expensive and invasive screening, thereby preventing adverse events and unjustified expenses.
A scientific validation study supporting this work has been completed, and a report of the research program progress has been
delivered to the Company. Whilst the terms of the Agreement are confidential, these events represent an important first milestone in the
development of a new test as the Company seeks to diversify its product pipeline and become a key player in the SNP-based cancer risk
assessment landscape.
TGen Collaboration
In September 2019, the Company signed a three-year collaboration agreement with Translational Genomics Research Institute
(TGen). The agreement includes cooperation in the design feasibility analysis of clinical research studies. The analysis is designed to
support the Company’s polygenic risk tests, by specifically identifying clinical applications or workflows, which would directly benefit
by the addition of a polygenic risk test. For example, some of the Company’s patients may be ineligible for routine screening based on
their age, but if identified as having an elevated risk by the Company’s polygenic tests, they may become eligible for such screening.
The studies are designed to identify areas of such need to enable successful implementation of the Company’s polygenic tests in the
clinical arena. TGen is an Arizona-based world leading non-profit biomedical research institute dedicated to conducting ground-
breaking genetic research. TGen is affiliated with Duarte, a world-renowned independent research and treatment center for cancer,
diabetes, and other life-threatening diseases.
The collaboration with TGen will focus on a clinical utility as the first stage, working with TGen’s extensive network of cancer
center clinicians. The wide-ranging collaboration will cover distribution channels, reimbursement strategy, further research, and
potential for the establishment of a new laboratory facility. The Company and TGen plan to develop a commercialisation strategy and
infrastructure for a suite of polygenic risk tests for the U.S. market, and set up the necessary fund-raising diseases.
Research Collaboration Memorial Sloan Kettering New York Cambridge University
In early 2019, the Company’s U.S. subsidiary entered into a Research Agreement with Memorial Sloan Kettering Cancer
Center of New York and the University of Cambridge. This collaborative research study is to be led by Mark Robson, MD, Chief of the
Breast Medicine Service at Sloan Kettering. The study is intended to assess whether the provision of individual risk information
informed by a polygenic risk score reduces decisional conflict among BRCA mutation carriers considering preventive surgery.
The Company believes this collaboration will benefit its engagement and collaboration with high profile cancer genetics
researchers who are at the forefront of risk assessment research, and by providing us with data that may potentially be beneficial in
developing additional risk assessment products.
Research Collaboration with The Ohio State University
On June 15, 2017 the Company executed a Clinical Study Agreement with The Ohio State University, Technology Commercialisation
Office and Division of Human Genetics. This is an “investigator-initiated” study in which the Company was approached to be the
collaborating partner, reflecting the growing awareness of the Company’s expertise in SNP-based risk assessment.
27
Item 4. Information on the Company (cont.)
Item 4.B Business Overview (cont.)
Under this Agreement, the Company will supply novel SNP-based genotyping for a clinical research study, through its CLIA
laboratory facility, on a fee for service basis. The Company will be responsible for the development and validation of the new assay,
although the fundamental technology is similar to the BREVAGenplus test and will fit synergistically into the Company’s existing
laboratory infrastructure and processes. Importantly, if the first phase of the study is successful, several other major genetics centers in
the U.S. have expressed an interest in joining the study.
This collaborative study provides two tangible benefits for the Company:
(i) engagement and collaboration with high profile cancer genetics researchers in the U.S. who are at the forefront of risk
assessment research; and
(ii) the resulting data can be used to inform the design of future pipeline products
Whilst sample collection by the University has been slower than expected during the current year, the Company remains
committed to delivering a high standard of service as envisaged under the terms of the agreement.
Collaboration with Shivom
The Company entered into an agreement with Shivom in March 2018. Shivom is a biotechnology data and analysis company
that optimises the way DNA is shared, secured and analysed. Under the agreement, Shivom would provide genetic population data for
the development of an Indian market polygenic predictive diabetes test to be developed by the Company, as well as future genetic tests it
develops, and its CLIA laboratory facilities would be used to develop a regulatory approval strategy for the distribution of completed
products. To date, the parties have not commenced development activities under this agreement.
Competition
The medical diagnostics and biotechnology industries are subject to intense competition. As more information regarding cancer
genomics and personalised medicine becomes available to the public, the Company anticipates that more products aimed at identifying
cancer risk will be developed and that these may compete with its products. However, the use of Single Nucleotide Polymorphisms
(SNPs), for disease risk prediction is still a relatively new field of medicine.
Until recently, there have been no active direct competitors marketing an assay similar to that of the Company’s breast cancer
risk assessment products in the sporadic breast cancer risk assessment space. However, in March 2019, Genomics PLC announced that it
was developing polygenic risk tests for several common diseases including breast cancer. In addition, Myriad Genetic Laboratories Inc.
announced in December 2017 that it will market a new breast cancer risk-prediction tool, which the Company believes will compete
with its GeneType for Breast Cancer test. Similarly, Ambry Genetics Corporation sells a precision risk tool that provides lifetime breast
cancer risk information. Other organisations such as 23andMe and Color Genomics in the U.S. have also over the past few years
developed SNP based risk tests that whilst not currently direct competitors to the Company’s products, are attracting significant
consumer interest.
In recent years, a number of other organisations, including deCODE (Iceland), 23andMe, Intergenetics, and Navigenics
(subsequently acquired by Life Technologies — now ThermoFisher) have attempted to commercialise SNP-based genetic tests, to both
physicians and consumers, to assess sporadic breast cancer risk in relevant patient populations. But either due to a lack of adequate and
compelling scientific validation, and/or sufficient commercial impetus and capability, these efforts have led to lackluster market
adoption, resulting in either the dissolution of these businesses or a marked change in their strategy. New entrants that the Company are
aware of that are in early stages of product development include Counsyl Inc. and Invitae Corporation in the U.S.
There are also a number of academic centers and affiliated research and development bodies, in the U.S. and in Europe, that are
reportedly exploring the validity and clinical viability of SNP-based commercial tests in the clinical setting, but it is unclear to what
extent these entities currently represent a direct or indirect potential competitive liability to the Company. A number of established,
mature laboratory services companies, such as Ambry Genetics, and Laboratory Corporation of America, among others, have the
demonstrable product development, marketing skill and resources to enter into this market for sporadic breast cancer risk assessment.
Many of these larger potential competitors have already established name and brand recognition and more extensive collaborative
relationships, but again, it is unclear to what extent these potential competitive threats could manifest in the near-to-long term.
28
Item 4. Information on the Company (cont.)
Item 4.B Business Overview (cont.)
Australian Disclosure Requirements
Business Strategies and Prospects for Future Years
The Company’s competitive position in the genetic testing area is based upon, amongst other things, its ability to:
● continue to strengthen and maintain scientific credibility through the process of obtaining scientific validation through
clinical trials supported by peer-reviewed publication in medical journals;
● create and maintain scientifically advanced technology and offer proprietary products and services;
● continue to strengthen and improve the messaging regarding the importance and value that the Company’s cancer risk
assessment tests provide to patients and physicians;
● diversify the Company’s product offerings in disease types other than breast and colorectal cancer;
● obtain and maintain patent or other protection for the Company’s products and services;
● obtain and maintain required government approvals and other accreditations on a timely basis; and
● successfully market the Company’s products and services.
If the Company is not successful in meeting these goals, its business could be adversely affected. Similarly, the Company’s
competitors may succeed in developing technologies, products or services that are more effective than any that it is developing or that
would render the Company’s technology and services obsolete, noncompetitive or uneconomical.
Dividends
No dividends were paid during the course of the fiscal year ended June 30, 2021. There are no dividends or distributions recommended
or declared for payment to members, but not yet paid, during the year.
29
Item 4. Information on the Company (cont.)
Item 4.C Corporate Structure
The diagram below shows the Company’s corporate structure as of the date of this Annual Report. All of the Company’s
subsidiaries in the chart below are wholly owned.
Item 4.D Property, Plant and Equipment
As at date of this Report, the Company has executed two leases in respect of premises occupied by the Company.
Fitzroy, Victoria
The Company rents offices and laboratory premises located at 60-66 Hanover Street, Fitzroy, Victoria, Australia (an inner
suburb of Melbourne) from Crude Pty. Ltd. In June 2020, the three-year lease was extended by 6 months and is now due to expire on
February 28, 2022. The total rental charge in respect of the year ended June 30, 2021 was approximately A$358,020.
30
Item 4. Information on the Company (cont.)
Item 4.D Property, Plant and Equipment (cont.)
Charlotte, North Carolina
Phenogen Sciences Inc., the Company’s U.S. subsidiary, rents office premises located at 1300 Baxter Street, Suite 157,
Charlotte, North Carolina, U.S. from Midtown Area Partners LLC. The original lease expired on October 31, 2017. It was then followed
by a month-to-month lease. A lease agreement was signed on July 10, 2020 for a three-year term, commencing on August 1, 2020 and
expiring July 31, 2023. The total rental expense towards the premise for the year ended June 30, 2021 was A$23,800.
Item 5. Operating and Financial Review and Prospects
The following discussion and analysis should be read in conjunction with Item 3.A “Selected Financial Data” and the
Company’s financial statements, the notes to the financial statements and other financial information appearing elsewhere in this Annual
Report. In addition to historical information, the following discussion and other parts of this Annual Report contain forward-looking
statements that reflect the Company’s plans, estimates, intentions, expectations and beliefs. The Company’s actual results could differ
materially from those discussed in the forward-looking statements. See the “Risk Factors” section of Item 3 and other forward-looking
statements in this Annual Report for a discussion of some, but not all, factors that could cause or contribute to such differences.
Item 5.A Operating Results
Overview
Founded in 1989, Genetic Technologies is an established Australian-based molecular diagnostics company that offers
predictive genetic testing and risk assessment tools. During the year ended June 30, 2015, the Company divested its interest in other
genetic testing services, which up until then, together with licensing of non-coding technology, had provided the main source of income
to fund operations, to concentrate on the principal activity of the provision of molecular risk assessment tests for cancer.
The Company’s revenues during its years ended June 30, 2021, 2020 and 2019 were generated principally by sales of its
BREVAGenplus breast cancer risk assessment test. However, during 2017, management determined that sales of this product were
insufficient to defray the costs of the sales team. By late 2017, management decided that its sales strategy was not working and
disbanded much of the sales infrastructure in the U.S. and transitioned to an ecommerce-based sales solution. Management then
designed a “pivot plan” in an effort to reposition the Company and refine and improve products and reload with a newly developed
approach to market. To that end, the Company has introduced its ‘GeneType for Colorectal Cancer’ and ‘GeneType for Breast Cancer’
genetic tests to healthcare providers through a global network of distribution partners.
With COVID-19 social distancing impacting on the Company’s ability to fully engage with physicians, the Company has
brought forward its plans to introduce a consumer-initiated testing (CIT) platform. This sales pipeline deviates from a traditional sales
approach that targets clinicians. Instead, it allows patients to request a test directly, with clinician oversight of the testing process
through an independent provider network and telemedicine. The Company has started negotiations with its preferred independent
provider network which will oversee patient ordering of the CIT pipeline. The Company has entered into binding agreements and has
launched its CIT platforms in the second half of 2021.
Since inception up to June 30, 2021, the Company has incurred A$143,075,218 in accumulated losses. The Company’s losses
have resulted principally from costs incurred in research and development, general and administrative and sales and marketing costs
associated with its operations. Further losses are anticipated as the Company continues to invest in new genetic testing product research
and development, and explore optimal distribution methodologies to commercialise its product offering. Refer to the Financial
Statements section in Item 18.
Fiscal year
As an Australian company, the Company’s fiscal, or financial, year ends on June 30 each year. The Company produces audited
consolidated accounts at the end of June each year and furnish half-yearly accounts for the periods ending on December 31 each year,
both of which are prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International
Accounting Standards Board.
31
Item 5. Operating and Financial Review and Prospects (cont.)
Item 5.A Operating Results (cont.)
Critical Accounting Policies
The accounting policies which are applicable to the Company are set out in Notes 2 of the attached financial statements.
Comparison of the year ended June 30, 2021 to the year ended June 30, 2020
Revenues from operations
During the 2021 financial year, the Company’s consolidated gross revenues from continuing operations, excluding other
revenue, increased by A$110,690 from A$9,864 to A$120,554 when compared to previous year. The increase in revenue resulted from
the three-year co-exclusive license agreement with Infinity Biologyx (IBX) announced on March 3, 2021 for the production,
distribution, sales and marketing of GTG’s COVID-19 Risk Test in the US with the product launched at the end of May 2021.
Cost of sales
The Company’s cost of sales from continuing operations increased by A$109,516 (44%) from A$251,511 in the previous financial year
to A$361,027 in the current financial year. Direct materials utilised for GeneType for Breast Cancer and GeneType for Colorectal
Cancer, increased by A$33,418 (40%) from A$82,516 to A$115,934 due to an increased number of revenue free sample tests conducted
during the year. Depreciation expense attributable to the laboratory testing equipment increased by $37,188 (88%) due to the purchase
of new equipment in anticipation of process improvements. There was an increase in inventories written-off by A$35,606 to A$54,523
in the current financial year when compared to A$18,917 in the previous financial year.
The Australian and US segments contributed A$351,971 and A$9,056 respectively of the total cost of sales in the current year. The
Australian segment incurred the majority of the costs since the Company operates its testing activities through its own laboratory in
Australia.
Selling and marketing expenses
Selling and marketing expenses increased by A$482,556 (76%) from A$637,295 to A$1,119,851 when compared to the
previous year. Major movements during the year related to personnel costs which increased by A$200,921 (53%) to A$576,753 in the
current financial year from A$375,832 in the previous financial year. The Company hired and trained a new internal sales force to
educate doctors on our Polygenic Risk Score (or “PRS”) tests and introduced them to preventative health strategies. Additionally, other
marketing costs increased to A$310,960 in the current financial year against A$27,750 in the prior year as the Company launched the
Australian-based CIT platform. This platform will enable the sale of tests to be initiated directly by consumers in Australia and the US
for both the GeneType for Breast Cancer and Colorectal Cancer tests.
General and administrative expenses
General and administrative expenses increased by A$99,762 (2%) to A$4,158,319 during the financial year when compared to
A$4,058,557 in the previous financial year. The increase is mainly related to employee expenses which increased by $525,784 that,
along with Performance Rights issued to the Directors, resulted in an increase in stock compensation expense of $729,018. The increase
is offset by the reduction in various administration costs such as bank revaluation ($539,223), legal fees ($368,707), accounting fees
($120,890), SEC filing costs ($110,179) and share registry expenses ($107,475).
Laboratory, research and development costs
Laboratory, research and development costs increased by A$631,805 (26%) from A$2,477,578 to A$3,109,383 when compared
to the previous year. Laboratory, research and development costs increased as the Company continued development, and accelerated
commercialisation of its pipeline of the new PRS tests for a range of human disease types. Also under development are a suite of gene-
panel tests for a range of hereditary cancers. The research and development activities cover the following diseases:
Breast cancer, Colorectal cancer, Prostate cancer, Ovarian cancer, Melanoma, Type-2-diabetes, Coronary artery disease, Atrial
fibrillation, COVID severity.
Finance costs
Finance costs decreased by A$774 (5%) from A$14,823 to A$14,049 when compared to previous year. Finance costs incurred
in 2021 and 2020 were primarily bank charges.
Non-operating income
Other income mainly consists of research and development tax incentive income received from the Australian Taxation Office.
Research and development tax incentive income (or “R&D tax credit”) has increased by 33% from A$750,000 to A$997,908 when
compared to the previous year. The R&D tax credit is recognised on an accruals basis when realisable. The higher R&D tax credit is due
to the increasing expenses on the R&D activities. The Company also received A$287,883 in Government grants income for COVID-19
relief which included A$157,500 in respect of the Jobkeeper allowance. Other income also includes A$100,000 received in respect of
the Export Market Development Grant
Other gains/losses
●
No impairment expense was recognised in the current year ended June 30, 2021 (2020: Nil).
32
Item 5. Operating and Financial Review and Prospects (cont.)
Item 5.A Operating Results (cont.)
Comparison of the year ended June 30, 2020 to the year ended June 30, 2019
Revenues from operations
During the 2020 financial year, the Company’s consolidated gross revenues from continuing operations, excluding other
revenue, decreased by A$15,580 (61%) from A$25,444 to A$9,864 when compared to previous year. The decrease in revenues was due
to sales for the GeneType for Breast Cancer and GeneType for Colorectal cancer which commenced in January 2020 being impacted by
the COVID-19 pandemic. This has had an effect on the operations of the Company, including but not limited to impacting sales of the
Company’s products through consumers’ inability to visit their practitioners and also by the difficulty its sales team is having in
arranging face to face meetings with practitioners. The Company’s sales team has found it very difficult to reach practitioners to build
on the sales momentum created prior to the pandemic, with the launch into the Australian market being halted after less than 60 days of
operations thus, sales have effectively ceased for the short term.
Cost of sales
The Company’s cost of sales from continuing operations decreased by A$24,756 (9%) from A$276,267 in the previous financial year to
A$251,511 in the current financial year. BREVAGenplus direct materials utilised increased by A$26,521 (47%) from A$55,995 to
A$82,516 because of the increase in number of revenue free sample tests conducted along with the limited revenue generating tests
during the year. Depreciation expense attributable to the laboratory testing equipment decreased by $12,992 (23%) whilst direct labor
costs increased by A$3,989 because of a continued streamlining of the laboratory team to match the increase in number of tests (revenue
generating and non-revenue generating). There was a decrease in inventories written-off by A$42,274 to A$18,917 in the current
financial year when compared to A$61,191 in the previous financial year. The Australian segment of the cost of sales contributed
A$243,506 and whereas the US segment contributed A$8,005 of the total cost of sales in the current year. The Australian segment had
incurred majority of the costs since the Company operates its testing activities through its own laboratory in Australia.
Selling and marketing expenses
Selling and marketing expenses increased by A$61,218 (11%) from A$576,077 to A$637,295 when compared to previous year.
Major movements during the year related to personnel costs which increased by A$20,505 (6%) to A$375,832 in the current financial
year from A$355,327 in the previous financial year as we still maintained the minimum sales activities with our customers.
Additionally, other marketing costs increased to A$27,750 (100%) in the current financial year against nil in the prior year, in addition
to the general insurance costs allocated to selling and marketing category of expenses which increased by A$22,291 (164%) to
A$35,861 in the current financial year when compared to A$13,570 in the previous financial year. These costs increased due to the
commencement of new products or kits in the financial year. There were other small expenses within the category during the financial
period which had a net impact on the overall movement value when compared to prior year expense.
General and administrative expenses
General and administrative expenses (excluding net foreign currency losses) increased by A$228,359 (6%) to A$4,058,557
during the financial year when compared to A$3,830,198 in the previous financial year. There was an increase in accounting costs by
A$506,872 (565%) to A$596,510 in the current financial year when compared to A$89,638 in the previous financial year which is due
to support provided by outsourced accounting teams for ad-hoc services and out of scope activities hired by the Company, increase in
the legal fees by A$97,893 (27%) from A$356,750 to A$454,643 in the current year when compared to prior year and an increase in
consulting fees by A$442,450 (329%) to A$577,058 in the current financial year when compared to A$134,608 in the previous financial
year. The Company’s conscious effort to reduce administration costs resulted a decrease in employee expenses which reduced by
A$942,410 (76%) to A$300,339 in the current financial year when compared to A$1,242,749 in the previous financial year, decrease in
stock compensation expense by A$341,393 (104%) to A$(14,441) in the current financial year when compared to A$228,626 in the
previous financial year due to the net impact of reversal of performance rights held by prior directors and the usual expense of share
based payment.
Laboratory, research and development costs
Laboratory, research and development costs increased by A$116,816 (5%) from A$2,360,762 to A$2,477,578 when compared
to previous year. Laboratory, research and development costs increased as the Company started to develop a polygenic risk score (PRS)
test for COVID-19. The Company is also continuing research and development activities on the following genetic tests:
● Cardiovascular disease
● Type 2 diabetes
● Prostate cancer
● Melanoma
Finance costs
Finance costs decreased by A$5,208 (26%) from A$20,031 to A$14,823 when compared to previous year. Finance costs
incurred in 2020 and 2019 were primarily bank charges.
Non-operating income
Other income mainly consists of research and development tax incentive income received from Australian Taxation Office.
Research and development tax incentive income has decreased by 12% from A$856,707 to A$750,000 when compared to previous year.
The research tax credit is recognised on an accrual basis when realisable. The lower research and development tax credit is due to
completion of the development of GeneType for Breast Cancer and GeneType for Colorectal Cancer.
Other gains/losses
●
No impairment expense was recognised in the current year ended June 30, 2020 (2019: A$500,000).
33
Item 5. Operating and Financial Review and Prospects (cont.)
Item 5.A Operating Results (cont.)
Australian Disclosure Requirements
Significant Changes in the State of Affairs
There have been no significant changes within the state of affairs during the year ended June 2021 except as noted in the “Important
Corporate Developments” section included in Item 4.A.
Likely Developments and Expected Results of Operations
The Company executed an acquisition agreement (“Acquisition Agreement”) on July 19th, 2021 to acquire the direct-to-consumer
eCommerce business and distribution rights associated with General Genetics Corporation and its associated brands trading as
EasyDNA, from BelHealth Investment Fund LP. The Acquisition Agreement provides for the acquisition of all brands, websites and
reseller agreements associated with EasyDNA. This includes over 70 websites in 40 countries and six brand identities. Under the terms
of the Acquisition Agreement, the Company will acquire 100% of EasyDNA’s brands and assets within the General Genetics
Corporation business for a purchase price of US$4 million, comprising cash consideration of US$2.5 million and US$1.5 million worth
of GTG securities in the nature of ADRs.
Environmental Regulations
Our operations are not subject to any significant environmental regulations under either Commonwealth of Australia or
State/Territory legislation. We consider that adequate systems are in place to manage our obligations and are not aware of any breach of
environmental requirements pertaining to us.
Item 5.B Liquidity and Capital Resources
Summary
Since inception, the Company’s operations have been financed primarily from capital contributions by our stockholders,
proceeds from our licensing activities and revenues from operations, grants, and interest earned on the Company’s cash and cash
equivalents.
Currently the Company’s overall cash position depends on completion of its research and development activities, overall
market acceptance of and revenue generated by its new genetic testing products. The Company’s cash and cash equivalents were
A$20,902,282 as of June 30, 2021.
During the year ended June 30, 2021, 2020 and 2019 the Company incurred total comprehensive losses of A$7,115,087,
A$6,327,950 and A$6,401,936.
During the year ended June 30, 2021, 2020 and 2019 the Company’s net cash flows used in continuing operations were
A$6,295,929, A$5,712,098 and A$6,073,182.
The additional capital raised during the financial year puts the Company in its best financial position for more than 2 years. The
Company can expand and bring its comprehensive suite of risk assessment tests to market across both Australia and the US. The
Company can also expand and upgrade the laboratory to incorporate next generation sequencing and high-density SNP arrays. These
will allow-for the first time-risk assessments for 100 per cent of a person’s genomic risk, including monogenic, polygenic, clinical risk
factors, and family history.
Going Concern. The longer-term 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.
The Company expects to continue to incur losses and cash outflows for the foreseeable future as it continues to invest resources
in expanding the research and development activities in support of the distribution of existing and new products. Following successful
capital raises in the last six months of the financial year, the Company has A$20,902,282 cash and cash equivalents as at June 30, 2021.
In the Director’s opinion this will underpin the Company’s funding requirements for approximately two years. As a result, the financial
statements have been prepared on a going concern basis.
Operating Activities. The Company’s net cash used in operating activities was A$6,295,929, A$5,712,098 and A$6,073,182 for
the years ended June 30, 2021, 2020 and 2019, respectively. Cash used in operating activities for each period consisted primarily of
losses incurred in operations reduced by non-cash items such as impairment expenses, depreciation and amortisation expenses, share
based payments expenses, foreign exchange movements and unrealised profits and losses relating to investments. In approximate order
of magnitude, cash outflows typically consist of staff-related costs, marketing expenses, service testing expenses, general and
administrative expenses, legal/patent fees and research and development costs.
34
Item 5. Operating and Financial Review and Prospects (cont.)
Item 5.B Liquidity and Capital Resources (cont.)
Investing Activities. The Company’s net cash from/(used in) investing activities was A$(748,706), A$64,787 and A$(524,460)
for the years ended June 30, 2021, 2020 and 2019, respectively. During the year ended June 30, 2021 the Company spent A$748,706
towards purchase of computer equipment, furniture and fittings. Apart from the purchase of plant and equipment of A$748,706 in 2021,
A$38,100 in 2020 and A$50,309 in 2019, the Company had no other significant capital expenditures for the years ended June 30, 2021,
2020 and 2019.
Financing Activities. The Company’s net cash from/(used in) financing activities was A$13,689,996, A$18,360,346 and
A$3,126,162 for the years ended June 30, 2021, 2020 and 2019, respectively. During the year ended June 30, 2021, the Company
generated cash flows of A$15,897,629 from the issue of Ordinary Shares less costs associated with the transactions of A$1,956,691. For
the year ended June 30, 2020, the Company generated cash flows of A$21,793,678 from the issue of Ordinary Shares less costs
associated with the transactions of A$3,215,174. For the year ended June 30, 2019, the Company generated cash flows of A$3,557,509
from the issue of Ordinary Shares less costs associated with the transactions of A$431,347.
Leases
We are obligated under two leases that were in place at June 30, 2021. These leases relate to the premises occupied by the
Company in Fitzroy, Victoria, Australia and by its U.S. subsidiary, Phenogen Sciences Inc., in Charlotte, North Carolina, U.S.A. The
total rental charge in respect of the year ended June 30, 2021 was A$358,020 and A$23,800, respectively.
The future minimum lease payments in respect of the two leases that were in place and had remaining non-cancellable lease
terms as of June 30, 2021 were A$205,831.
Item 5.C Research and Development, Patents and Licenses, etc.
Our principal business is biotechnology, with a historical emphasis on genomics and genetics, the licensing of our non- coding
patents, reduction to practice of our fetal cell patents and expansion of the related service testing business. Research and development
expenditure as below is reflective of the intense focus by the scientific and laboratory team to develop and market a suite of world-
leading predictive genetic tests.
The following table details historic R&D expenditure by project.
BREVAGenplus
Colorectal Cancer Risk Assessment Test
Ohio State University
Other general R&D
Polygenic Risk Testing
Total R&D expense
Other expenditure
Total expenditure
R&D as a % of total expenditure
Item 5.D Trend Information
2021
A$
—
—
—
—
986,622
986,622
7,776,007
8,762,629
2020
A$
—
—
—
—
380,667
380,667
7,044,274
7,424,941
2019
A$
228,643
14,286
—
67,774
—
310,703
7,160,114
7,470,817
11.26%
5.13%
4.17%
See Item 5.A. “Operating Results” and Item 5.B. “Liquidity and Capital Resources” above.
35
Item 5. Operating and Financial Review and Prospects (cont.)
Item 5E. Off-balance sheet arrangements
We are not a party to any material off-balance sheet arrangements. In addition, we have no unconsolidated special purpose
financing or partnership entities that are likely to create any material contingent obligations.
Item 5F. Information about contractual obligations
The Company has no contractual obligations or commercial commitments as of June 30, 2021, other than those disclosed in the
financial statements.
As at June 30, 2020, the Company had a commitment to purchase laboratory equipment, which was used to expand the range of tests.
Property, plant and equipment
2021
A$
2020
A$
—
466,560
36
Item 6. Directors, Senior Management and Employees
(Start of the Remuneration Report for Australian Disclosure Requirements)
The Genetic Technologies Limited Board of Directors (“the Board”) presents the 2020/2021 Remuneration Report, which has been
prepared in accordance with the relevant Corporations Act 2001 (“Corporations Act”) and accounting standards requirements. The
remuneration report sets out remuneration information for our company’s key management personnel (“KMP”) as defined in the
International Accounting Standards 24 ‘Related Party Disclosures’ and the Australian Corporations Act 2001 for the financial year
ended June 30, 2021. The remuneration report has been audited as required by s308 (3C) of the Corporations Act.
Item 6.A Directors and Senior Management
The Directors of the Company as of the date of this Annual Report are:
Mr. Peter Rubinstein, BEc. LLB (Independent Non-Executive and Chairman)
Mr. Rubinstein was appointed to the Board on January 31, 2018 and appointed as Chairman in April 2020. 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 a Director of DigitalX Limited (ASX:
DCC). Mr. Rubinstein has not held any other public company directorships in the last three years.
Dr. Jerzy (George) Muchnicki, MBBS (Executive Director and Chief Medical Officer)
Dr. Muchnicki was appointed to the Board on January 31, 2018 and acted as Interim Chief Executive Officer from September
2019 till the appointment of Mr. Simon Morriss to the role. Dr. Muchnicki is a medical graduate from Monash University having held
positions in private practice for some 25 years, including a 12 month period as director for student health at The University of
Melbourne. 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 has been in his current role as Chief Medical Officer since February 2021, where he is focusing on the
integration of inherited with sporadic disease risk to create new predictive platforms which address 100% genetic risk screening for
common complex disease.
Dr. Muchnicki brings with him strong clinical medical skills, including interests in software development, blockchain and
sustainable building materials. He is a co-founder of Speed Panel Systems Pty Ltd 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, novel
instruments for the financial industry.
Dr. Lindsay Wakefield, MBBS (Independent Non-Executive)
Dr. Wakefield was appointed to the Board in 2014. He launched Safetech Pty Ltd in 1985 and over the next 35 years Safetech
has grown to become the largest supplier 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 Safetech. In 2019 Safetech was named
Victorian Manufacturer of the Year. It is Australia’s largest manufacturer and supplier of dock equipment, vehicle lifts, freight hoists
and custom lifting solutions. Safetech employs approximately 140 people. Dr. Wakefield has been a biotech investor for 30 years and
his role at GTG combines his medical and business experience.
Mr. Nicholas Burrows, B.Com. FAICD, FCA, FGIA, FTIA, F Fin (Independent Non-Executive)
Mr. Burrows was appointed to the Board on September 2, 2019. He is a contemporary independent Non-Executive Director
across the listed, government and private sectors with significant expertise in corporate governance, and strategic, commercial, financial
and risk management oversight. Mr. Burrows is currently a Non-Executive Director of TasWater, Australian Seafood Industries Pty Ltd,
PFG Group Pty Ltd and a number of large private companies and is a past Non-Executive Director of Clean Seas Seafood Limited,
Metro Tasmania Pty Ltd and TasTafe. Former public company directorship held by Mr. Burrows in the last three years: Clean Seas
Seafood Limited (ASX:CSS).
Mr. Burrows also provides board, governance, audit and risk advisory services to entities within the IT, tourism and hospitality,
debt recovery, agribusiness, forestry, and Local/State Government sectors. Mr. Burrows was Chief Financial Officer and Company
Secretary of Tassal Group Limited for 21 years from 1988 to 2009 and accordingly brings to the Board strong independent c-suite
commercial experience and the benefits of an extensive and contemporary senior executive ASX200 listed entity background. Mr.
Burrows is a respective Fellow of the Australian Institute of Company Directors, Institute of Chartered Accountants Australia,
Governance Institute of Australia Ltd, The Tax Institute and the Financial Services Institute of Australasia and is also a Chartered
Accountant. Mr. Burrows also served as National President of the Governance Institute of Australia in 2002 and served on their National
Board for 6 years.
37
Item 6. Directors, Senior Management and Employees (cont.)
Item 6.A Directors and Senior Management (cont.)
Senior Management
The Company has a professional team of qualified and experienced personnel, including a number of research and development
scientists and technicians. The Company currently has 18 full-time-equivalent employees in addition to the three Non-Executive
Directors listed above.
Mr. Simon Morriss, GAICD (Chief Executive Officer)
Mr. Morriss was appointed as Chief Executive Officer on February 1, 2021 and brings over 20 years’ experience within the
Pharmaceutical, Healthcare and FMCG industries having held senior executive positions at Sanofi and Blackmores. He brings a wealth
of experience in managing teams and successfully executing across sales, marketing and brand building.
Additionally, Mr. Morriss has been critical in leading commercialisation across these industries and understands the unique
pressures and opportunities. He has led companies through strategic adaptation to execution and will be driving Genetic Technologies
commercialisation strategy and continue to drive innovation across the business.
Mr. Mike Tonroe, BSc, FCA, MAICD (Company Secretary/Chief Financial Officer)
Mr. Tonroe was appointed as the Chief Financial Officer on June 15, 2021 and as Company Secretary on August 2, 2021. Mr.
Tonroe has over 25 years’ experience in overseeing the finance function at both management and board-level positions for private and
listed companies in Australia, UK, US and Canada. He also has extensive experience in the biotech space across both the financial and
company secretary roles. Prior to his most recent role as Chief Financial Officer and Company Secretary at dual-listed Opthea Limited
(ASX: OPT), Mr. Tonroe was Chief Financial Officer and Company Secretary at the Australian Synchrotron in Melbourne. Mr. Tonroe
also has extensive accounting expertise having worked for both Deloitte and KPMG in the UK and Hong Kong.
Mr. Tonroe is a fellow of the Institute of Chartered Accountants in England and Wales, a member of the Australian Institute of
Company Directors and holds a Bachelor of Science from Buckingham University, UK.
Mr. Justyn Stedwell B.Com, Grad Dip Acctg, Grad Dip Corp. Governance (Company Secretary)
Mr. Stedwell was appointed as the Company Secretary on July 15, 2019. Mr. Stedwell is a professional Company Secretary
consultant with over 12 years’ experience acting as a Company Secretary of ASX listed companies across a wide range of industries.
Mr. Stedwell resigned on August 2, 2021.
Mr. Stanley Sack (Chief Operating Officer)
On May 18, 2020, the Company appointed Mr. Stanley Sack who provides consulting in the capacity of Chief Operating Officer. Mr.
Sack has spent 15 years in large, listed entities in executive positions managing large business divisions. He has worked with a high net
worth family managing all their operating businesses and private equity activities. Mr. Sack built an Allied Health Business in the aged
care and community care space which became the biggest Mobile Allied Health Business in Australia, and was recently sold to a large
medical insurance company.
During the reporting period, the Company had transactions valued at A$157,609 (2020: A$38,500) with Mr. Stanley Sack’s entity
Cobben Investments Pty Ltd towards provision of consulting services in relation to provision of duties related to Chief Operating Officer
of the Company.
38
Item 6. Directors, Senior Management and Employees (cont.)
Item 6.A Directors and Senior Management (cont.)
Dr. Richard Allman, PhD (Chief Scientific Officer)
Dr. Allman joined the Company in 2004 and was appointed as Chief Scientific Officer 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.
Item 6.B Compensation
Elements of compensation
The board aims to ensure that remuneration practices are:
●
●
●
●
competitive and reasonable, enabling the Company to attract and retain key talent
aligned to the Company’s strategic and business objectives and the creation of shareholder value
transparent and easily understood, and
acceptable to shareholders.
Element
Purpose
Performance metrics
Fixed annual remuneration
(FR)
Short-Term Incentive (STI)
Long-Term Incentive (LTI)
Provide competitive market
salary including
superannuation and non-
monetary benefits
Reward for in-year
performance and retention
Alignment to long-term
shareholder value
Nil
Company and individual
performance goals
Share price, capital raised,
company and individual
performance goals
(i)
Fixed annual remuneration (FR)
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.
Structure
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 Company.
Fixed remuneration is reviewed annually with reference to individual performance, market benchmarks for individual roles and
the overall financial performance of the Company. Any changes to the fixed remuneration of Executives are first approved by the
Remuneration Committee.
39
Item 6. Directors, Senior Management and Employees (cont.)
Item 6.B Compensation (cont.)
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.
Remuneration Committee membership
As at the date of this Report, the composition of the committee is as follows:
● Dr. Lindsay Wakefield – Chairman of the Committee
● Mr. Nicholas Burrows (Member)
● Mr. Peter Rubinstein (Member)
(ii)
Short-Term Incentives (STI)
Short Term Incentive (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.
Company objectives, and their relative weighting, vary depending on the position and responsibility of the respective
individual, but in respect of the year ended June 30, 2021 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. During the financial year
ended June 30, 2021, no Short-Term Incentive payments were made to either Executives or other senior employees.
(iii)
Long-Term Incentives (LTI)
The objective of the Company’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 Company’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.
40
Item 6. Directors, Senior Management and Employees (cont.)
Item 6.B Compensation (cont.)
Long Term Incentive (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.
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.
Link between remuneration and performance
Statutory performance indicators
The Company aims to align executive remuneration to the Company’s strategic and business objectives and the creation of
shareholder wealth. The table below shows measures of the Company’s financial performance over the last five years as required by the
Corporations Act 2001. However, these are not necessarily consistent with the measures used in determining the variable amounts of
remuneration to be awarded to KMPs. As a consequence, there may not always be a direct correlation between the statutory key
performance measures and the variable remuneration awarded.
2021
2020
2019
2018
2017
Loss for the year attributable to owners ($)
Basic earnings per share (cents)
Share price at year end ($)
7,077,619
(0.1)
0.009
6,294,775
(0.1)
0.005
6,425,604
(0.2)
0.006
5,463,872
(0.2)
0.010
8,403,826
(0.4)
0.007
The Company’s earnings have remained negative since inception due to the nature of the business. Shareholder wealth reflects
this speculative and volatile market sector. No dividends have ever been declared by the Company. The Company continues to focus on
the research and development of its intellectual property portfolio with the objective of achieving key development and commercial
milestones in order to add further shareholder value.
Remuneration expenses
Details of the nature and amount of each major element of the compensation of each director of the Company and each of the
named officers of the Company and its subsidiaries, for services in all capacities during the financial year ended June 30, 2021 are listed
below. All figures are stated in Australian dollars (A$).
Name and title of Non-Executive Directors
Dr. Lindsay Wakefield
Mr. Peter Rubinstein
Mr. Nicholas Burrows
Short-term benefits
Other*
Salary/fees
A$
A$
67,462
154,769
67,462
—
—
—
Year
2021
2021
2021
Post-employment
Superannuation**
A$
6,409
9,003
6,409
Other
long-
term
benefits
***
A$
Share-
based
payments
Equity
****
A$
— 43,137
— 229,259
— 33,512
Totals
A$
117,008
393,031
107,383
Executives Directors
Dr. Jerzy Muchnicki
Management
Dr. Richard Allman
Mr. Mike Tonroe (6)
Mr. Simon Morriss (5)
Mr. Stanley Sack (4)
Totals
2021
240,020
11,359
22,802
1,359
232,467
508,007
2021
2021
2021
2021
216,434 (37,021)
—
12,692
43,750
133,181
—
143,281
20,561
1,206
12,652
—
28,187
3,231
—
—
— 79,727
4,622
—
231,392
13,898
269,311
147,903
2021
1,035,302
18,088
79,042
4,589
650,911 1,787,933
41
Item 6. Directors, Senior Management and Employees (cont.)
Item 6.B Compensation (cont.)
Notes pertaining to changes during the year:
On June 15, 2021, Mr. Phillip Hains resigned as CFO. During the year ended June 30, 2021, Mr. Phillip Hains did not earn any
remuneration apart from the provision of advice on the capacity as the CFO, accounting and other finance related activities through his
firm, The CFO Solution. During the reporting period, the total service fees of A$225,171 (2020: A$527,724) were paid.
During the financial year ended June 30, 2020, the Board approved to obtain consulting services in relation to capital raises, compliance,
NASDAQ hearings and investor relations from its Non-Executive director and current Chairman, Mr. Peter Rubinstein. The services
procured were through Mr. Peter Rubinstein’s associate entity, ValueAdmin.com Pty Ltd, and amounted to A$60,000 for the year ended
June 30, 2021.
Details of the nature and amount of each major element of the compensation of each director of the Company and each of the
named officers of the Company and its subsidiaries, for services in all capacities during the financial year ended June 30, 2020 are listed
below. All figures are stated in Australian dollars (A$).
Name and title of
Non-Executive Directors
Dr. Lindsay Wakefield
Mr. Peter Rubinstein
Mr. Xue Lee (1)
Mr. Nicholas Burrows (2)
Executives Directors
Dr. Paul Kasian (3)
Dr. Jerzy Muchnicki
Management
Dr. Richard Allman
Mr. Stanley Sack (4)
Year
2020
2020
2020
2020
2020
2020
2020
2020
Short-term benefits
Other
Salary/fees
A$
A$
—
66,295
—
106,946
—
1,570
—
53,775
62,789
139,824
168,600
38,500
—
—
360
—
360
Post-
employment
Superannuation*
A$
6,298
6,835
149
5,109
5,923
13,283
Other
long-
term
benefits
**
A$
—
—
—
—
—
—
Share-
based
payments
Equity
***
A$
9,625
12,833
(5,616)
—
Totals
A$
82,218
126,614
(3,897)
58,884
(76,368)
16,042
(7,656)
169,149
16,017
—
3,231
—
10,986
—
199,194
38,500
53,614
3,231
(32,498)
663,006
Totals
2020
638,299
Mr. Phillip Hains was appointed on July 15, 2019 as the Company’s Chief Financial Officer. During the year ended June 30, 2020, he
did not earn any remuneration apart from the provision of advice on the capacity as the CFO, accounting and other finance related
activities through his firm, The CFO Solution. During the reporting period, total service fees of A$527,724 (2019: A$45,459) were paid.
During the financial year ended June 30, 2020, the board approved to obtain consulting services in relation to capital raises, compliance,
NASDAQ hearings and investor relations from its Non-Executive director and current Chairman, Mr. Peter Rubinstein. The services
procured were through Mr. Peter Rubinstein’s associate entity, ValueAdmin.com Pty Ltd, and amounted to A$35,000 which remains
payable and is included as part of the cash salary and fees above as at June 30, 2020.
During the financial year ended June 30, 2020, the board members sacrificed 20% of their fees for a certain period in order to support
the staff costs during the COVID-19 cutback on working hours. Due to this there is a variance between the above disclosed and the
contractual arrangement disclosures.
(1) Mr. Lee resigned as a Non-Executive Director on July 9, 2019.
(2) Mr. Burrows was appointed as Non-Executive Director on September 2, 2019.
(3) Dr. Kasian resigned on September 24, 2019.
(4) Mr. Sack was appointed as Chief Operating Officer on May 18, 2020.
(5) Mr. Morriss was appointed as Chief Executive Officer on February 1, 2021.
(6) Mr. Tonroe was appointed as Chief Financial Officer on June 15, 2021.
42
Item 6. Directors, Senior Management and Employees (cont,)
Item 6.B Compensation (cont.)
Contractual agreements with the directors and other key management personnel
Name:
Position:
Fixed remuneration:
Name:
Position:
Fixed remuneration:
Consulting fee:
Name:
Position:
Fixed remuneration:
Name:
Position:
Fixed remuneration:
Name:
Position:
Fixed remuneration:
Name:
Position:
Fixed remuneration:
Name:
Position:
Fixed remuneration:
Name:
Position:
Fixed remuneration:
Dr. Jerzy Muchnicki
Executive Director and Chief Medical Officer
$219,000 (inclusive of superannuation)
Mr. Peter Rubinstein
Non-Executive Director and Chairman
$103,772 (inclusive of superannuation)
$60,000 (excluding GST)
Dr. Lindsay Wakefield
Non-Executive Director
$73,871 (inclusive of superannuation)
Mr. Nicholas Burrows
Non-Executive Director
$73,871 (inclusive of superannuation)
Mr. Simon Morriss
Chief Executive Officer
$350,000 (inclusive of superannuation)
Mr. Mike Tonroe
Chief Financial Officer
$300,000 (inclusive of superannuation)
Mr. Stanley Sack
Chief Operating Officer
$13,125 (plus GST) per month
Dr. Richard Allman
Chief Scientific Officer
$184,617 (inclusive of superannuation)
Key Terms and Conditions:
The key provisions contained in the agreements of the directors of the Company include the following:
● The Company does not have a set tenure for directors, and under the Corporations Act and the Constitution, the directorship
can cease under prescribed circumstances (example, bankruptcy, conviction of an offence). In addition, the director may resign
by providing notice in writing at any time.
● No form of remuneration linked to short term incentives has been issued to any of the directors.
● The following are the key provisions contained in the agreements of the other Key Management Personnel:
Mr. Simon Morriss (appointed February 1, 2021)
● Genetic Technologies or Mr. Morriss may terminate the employment agreement by providing two weeks written notice within
the first six months of employment. Thereafter the notice period is 4 months written notice. Genetic Technologies may, at its
own election, make payment in lieu of notice.
● Mr. Morriss shall be subject to restrictions on competing with Genetic Technologies Limited and its related bodies corporate
during the employment and for a period of up to 24 months after the employment ends. Mr. Morriss is also prevented from
soliciting Genetic Technologies employees’ customers or suppliers to cease employment or conducting business with the
Company.
● Mr. Morriss’ CEO employment agreement otherwise contains standard terms and conditions for agreements of its nature,
including confidentiality, retention of intellectual property and leave.
Mr. Mike Tonroe (appointed June 15, 2021)
● Genetic Technologies or Mr. Tonroe may terminate the employment agreement by providing two weeks written notice within
the first six months of employment. Thereafter the notice period is 4 months written notice. Genetic Technologies may, at its
own election, make payment in lieu of notice.
● Mr. Tonroe shall be subject to restrictions on competing with Genetic Technologies Limited and its related bodies corporate
during the employment and for a period of up to 24 months after the employment ends. Mr. Tonroe is also prevented from
soliciting Genetic Technologies employees’ customers or suppliers to cease employment or conducting business with the
Company.
● Mr. Tonroe’s CFO employment agreement otherwise contains standard terms and conditions for agreements of its nature,
including confidentiality, retention of intellectual property and leave.
Mr. Stanley Sack
● Stanley Sack, under his consulting agreement with the Company has an agreed fixed remuneration of $13,125 (plus GST) per
month work consisting of three days per week.
● Towards termination, the agreement states that the Company or Consultant may terminate the agreement at any time upon the
giving of 30 Days prior written notice to the other party. The Company and/or the Consultant can propose an adjusted level of
ongoing consulting services and the parties agree to consider such adjustment in good faith and replace this Agreement with a
Replacement Agreement on the newly agreed terns.
● Due to the agreement being consulting in nature the Company shall not be required to make contributions for employment
insurance, superannuation, workers’ compensation or similar premiums, employer health tax and other similar levies on behalf
of any of the Consultant’s personnel.
Dr. Richard Allman
● Towards termination, the agreement states that the Company or the employee may terminate at any time by providing a 30 day
notice to the other party or the agreement will be terminated on the expiration of that notice.
● On termination of this agreement the Company will pay the employee the salary package due up to and including the date of
termination.
43
Item 6. Directors, Senior Management and Employees (cont.)
Item 6.B Compensation (cont.)
Referencing the previous two tables:
* Other includes movement in Annual Leave component
** 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 Related Party Disclosures, or “senior manager” as defined in the Corporations Act
Executive officers are those officers who were involved during the year in the strategic direction, general management or
control of the business at a company or operating division level. The remuneration paid to Executives is set with reference to prevailing
market levels and comprises a fixed salary, various short-term incentives (which are linked to agreed key performance indicators), and
an option component. Options are granted to Executives in line with their respective levels of experience and responsibility.
Options exercised, granted, and forfeited as part of remuneration during the year ended 30 June 2021
Details of the options held by the Executives nominated as Key Management Personnel during the year ended June 30, 2021
are set out below. As at June 30, 2021, there was one executive and fourteen employees who held options that had been granted under
the Company’s respective option plans.
On December 21, 2020, the Company issued 5,000,000 options to Executives and 7,850,000 to other employees, under an
employee incentive scheme (2020: Nil). The options have an exercise price of A$0.008 (0.8 cents) per option and expire on December 1,
2023. The Company also issued various unlisted options to underwriters and sub-underwriters as a part of capital raising costs.
The following options previously granted as equity compensation benefits to KMP were forfeited during the year;
Name of KMP
Dr. Richard Allman (1)
Dr. Richard Allman (1)
Dr. Richard Allman (1)
Total
Options
Lapsed
2,925,000
1,100,000
975,000
5,000,000
Options
forfeited
Exercise
price
Fair value
per option
Final vesting
date
— $
— $
— $
—
0.010
0.010
0.010
$
$
$
0.0112
0.0094
0.0065
31 Mar 2021
31 Mar 2021
31 Mar 2021
(1) The options held by Dr. Richard Allman lapsed as they were not exercised by the final exercise date.
44
Item 6. Directors, Senior Management and Employees (cont.)
Item 6.B Compensation (cont.)
Option holdings of Key Management Personnel 30 June 2021
Options
Dr. Lindsay Wakefield
Mr. Peter Rubinstein(3)
Dr. Jerzy Muchnicki(2)
Dr. Richard Allman
Mr. Stanley Sack
Mr. Mike Tonroe (appointed on June 15,
2021)
Mr. Phillip Hains
Total
Notes
Balance at
start of the
year
—
125,000,000
125,000,000
15,000,000
—
—
—
265,000,000
Granted
as part
of cost
of
Balance at
end of the
year
Granted as
remuneration
—
—
—
5,000,000
—
capital Exercised
—
—
—
— (5,000,000)
—
—
Other
Vested and
Changes(1)
exercisable
—
—
—
— 125,000,000 125,000,000
— 125,000,000 125,000,000
15,000,000
—
15,000,000
—
—
—
—
—
—
—
—
5,000,000
—
—
—
—
—
—
—
— (5,000,000) 265,000,000 265,000,000
—
—
—
—
(1) Other changes incorporates changes resulting from the expiration/forfeiture of options.
(2) Dr. Jerzy Muchnicki currently holds 125,000,000 unlisted options issued as the sub-underwriter during the capital raise process in
October 2019. Hence, the unlisted options have been accounted for as part of transactions costs to equity and are not issued as a part of
his remuneration.
(3) Mr. Peter Rubinstein currently holds 125,000,000 unlisted options issued as the sub-underwriter during the capital raise process in
October 2019. Hence, the unlisted options have been accounted for as part of transactions costs to equity and are not issued as a part of
his remuneration.
Options
The Company introduced a Staff Share Plan on November 30, 2001. On November 19, 2008, the shareholders of the Company
approved the introduction of a new Employee Option Plan. Collectively, these Plans establish the eligibility of our employees and those
of any subsidiaries, and of consultants and independent contractors to a participating company who are declared by the Board to be
eligible, to participate. Broadly speaking, the respective Plans permits us, at the discretion of the Board, to issue traditional options (with
an exercise price). The Plans conform to the IFSA Executive Share and Option Scheme Guidelines and, where participation is to be
made available to staff who reside outside Australia, there may have to be modifications to the terms of grant to meet or better comply
with local laws or practice.
As of June 30, 2021, there was 1 executive and 14 employees who held options that had been granted under the Company’s
respective option plans. Options issued under the Plan carry no rights to dividends and no voting rights.
As of the date of this Annual Report, there was a total of 27,850,000 unlisted employee options outstanding.
Options granted under the Employee Option Plan carry no rights to dividends and no voting rights and generally have an expiry
date of nearly five years from the date of grant.
During the year ended June 30, 2021, the Company recorded a share-based payments expense in respect of the options granted
of A$91,853.
45
Item 6. Directors, Senior Management and Employees (cont.)
Item 6.B Compensation (cont.)
Unlisted Performance Rights
During the year ended June 30, 2021, the Company also issued 188,937,500 long term unlisted Performance Rights as
incentives to the Key Management Personnel which were approved by the shareholders on December 10, 2020.
The following are the details of the unlisted performance rights:
● 25,000,000 Class A Performance Rights with an exercise price of $ nil each. Vesting per resolution passed at 2020
Annual General Meeting (AGM) and per the terms and conditions as set out below. Class A performance rights
granted during the year ended June 30, 2021 expire on December 21, 2023.
● 50,000,000 Class B Performance Rights with an exercise price of $ nil each. Vesting per resolution passed at 2020
Annual General Meeting (AGM) and per the terms and conditions as set out below. Class B performance rights
granted during the year ended June 30, 2021 expire on December 21, 2023.
● 50,000,000 Class C Performance Rights with an exercise price of $ nil each. Vesting per resolution passed at 2020
Annual General Meeting (AGM) and per the terms and conditions as set out below. Class C performance rights
granted during the year ended June 30, 2021 expire on December 21, 2023.
● 60,000,000 Class D Performance Rights with an exercise price of $ nil each. Vesting per resolution passed by the
Board of Directors and per the terms and conditions as set out below. Class D performance rights granted during the
year ended June 30, 2021 expire on February 4, 2024.
● 3,937,500 Class E Performance Rights with an exercise price of $ nil each. Vesting per resolution passed by the Board
of Directors and per the terms and conditions as set out below. Class A performance rights granted during the year
ended June 30, 2021 expire on March 10, 2023.
Based on the independent valuation of the performance rights, the Company agrees that the total value of the performance
rights to be issued to each director (depending on the share price at issue) is as follows:
Valuation of Class A Performance Rights granted during the year ended June 30, 2021
Dr. Lindsay Wakefield
Mr. Nicholas Burrows
Dr. Jerzy Muchnicki
Mr. Peter Rubinstein
Total
Number of
Performance
Rights issued
Valuation
per Class A
(cents)
Total fair
value of
Class A
Performance
Rights
Expense
accounted for
during the
year
5,000,000
5,000,000
7,500,000
7,500,000
25,000,000
0.6702 A$
0.6702 A$
0.6702 A$
0.6702 A$
A$
33,512 A$
33,512 A$
50,268 A$
50,268 A$
167,560 A$
33,512
33,512
50,268
50,268
167,560
Valuation of Class B Performance Rights granted during the year ended June 30, 2021
Dr. Jerzy Muchnicki
Mr. Peter Rubinstein
Total
Valuation
per Class B
(cents)
Total fair
value of
Class B
Performance
Rights
0.6646
0.6646
A$
A$
A$
166,157.50
166,157.50
332,315
Expense
accounted for
during the
year
166,157.50
166,157.50
332,315
A$
A$
A$
Number of
Performance
Rights issued
25,000,000
25,000,000
50,000,000
46
Item 6. Directors, Senior Management and Employees (cont,)
Item 6.B Compensation (cont.)
Valuation of Class C Performance Rights granted during the year ended June 30, 2021
Dr. Jerzy Muchnicki
Mr. Peter Rubinstein
Total
Number of
Performance
Rights
issued
25,000,000
25,000,000
50,000,000
Valuation
per Class C
(cents)
Total fair
value of
Class C
Performance
Rights
Expense
accounted for
during the
year
0.6702 A$
0.6702 A$
A$
167,541 A$
167,541 A$
335,082 A$
—
—
—
Valuation of Class D Performance Rights granted during the year ended June 30, 2021
Mr. Simon Morriss
Number of
Performance
Rights
issued
60,000,000
Valuation
per Class
D
(cents)
Total fair
value of Class
D
Performance
Rights
Expense
accounted for
during the
year
0.9567 A$
574,037 A$
79,727
Valuation of Class E Performance Rights granted during the year ended June 30, 2021
Number of
Performance
Rights
issued
Valuation
per Class E
(cents)
Total fair
value of
Class E
Performance
Rights
Expense
accounted for
during the
year
3,937,500
0.9000 A$
35,438 A$
4,622
Mr. Stanley Sack
Performance hurdles
The Class A Performance Rights vest and are exercisable upon the Share price reaching $0.012 or greater for more than 10-day
consecutive ASX trading days.
The Class B Performance Rights vest and are exercisable upon the Share price reaching $0.014 or greater for more than 10-day
consecutive ASX trading days and sales commence on the Consumer Initiated Testing (CIT) platform in either Australia or the United
States of America.
The Class C Performance Rights vest and are exercisable upon a minimum of 4,000 tests being processed in any 12 month period or the
market cap of GTG reaching $100 million or above and being sustained for more than 10 consecutive ASX trading days, whichever
happens sooner.
The Class D Performance Rights vest and are exercisable upon the Share price reaching $0.016 or greater for more than 15-day
consecutive ASX trading days.
The Class E Performance Rights vest and are exercisable upon the first commercial sale of the Company’s COVID-19 risk test with IBX
(Infinity BioLogix).
The Key Management Personnel, being the recipients of the Performance Rights, must remain engaged by the Company at the time of
satisfaction of the performance hurdle in order for the relevant Performance Right to vest.
The Performance Rights are not currently quoted on the ASX and as such have no ready market value. The Performance Rights each
grant the holder a right of grant of one ordinary Share in the Company upon vesting of the Performance Rights for nil consideration.
Accordingly, the Performance Rights may have a present value at the date of their grant. Various factors impact upon the value of
Performance Rights including:
● the period outstanding before the expiry date of the Performance Rights;
● the underlying price or value of the securities into which they may be converted;
47
Item 6. Directors, Senior Management and Employees (cont,)
Item 6.B Compensation (cont.)
● the proportion of the issued capital as expanded consequent upon conversion of the Performance Rights into Shares (i.e. whether or
not the shares that might be acquired upon exercise of the options represent a controlling or other significant interest); and
● the value of the shares into which the Performance Rights may be converted.
There are various formulae which can be applied to determining the theoretical value of options (including the formula known as the
Black-Scholes Model valuation formula and the Monte Carlo simulation).
The Company has commissioned an independent valuation of the Performance Rights. The independent valuer has applied the Monte
Carlo simulation in providing the valuation of the Performance Rights.
Inherent in the application of the Monte Carlo simulation are a number of inputs, some of which must be assumed. The data relied upon
in applying the Monte Carlo simulation was:
a)
exercise price being 0.0 cents per Performance Right for all classes;
b) VWAP hurdle (10 days consecutive share price hurdle) equaling A$0.012 for Class A and A$0.014 for Class B, and (15 days
consecutive share price hurdle) equaling $0.016 for Class D Performance Rights;
c)
sales and market cap hurdles as listed above for Class C and Class E Performance Rights;
d)
the continuously compounded risk free rate being 0.111% for all classes of Performance Rights (based on a 3 year Australian
Government yield as at December 21, 2020);
e)
the expected option life of 2 years for Class E Performance Rights and 3 years for all other classes of Performance Rights; and
f)
a volatility measure of 158.23%.
During the year ended June 30, 2019, the Company also issued 76,250,000 long term unlisted performance rights as incentives
to the Directors which were approved by the shareholders on November 29, 2018.
The following are the details of the unlisted performance rights:
● 26,250,000 Class A Performance rights with an exercise price of $ nil each. Vesting per resolution passed at 2018
Annual General Meeting (AGM) and per the terms and conditions as set out below.
● 25,000,000 Class B Performance rights with an exercise price of $ nil each. Vesting per resolution passed at 2018
Annual General Meeting (AGM) and per the terms and conditions as set below.
● 25,000,000 Class C Performance rights with an exercise price of $ nil each. Vesting per resolution passed at 2018
Annual General Meeting (AGM) and per the terms and conditions as set out below.
During the year ended June 30, 2020, 3,750,000 Performance Rights previously issued to Mr. Xue Lee in the year ended June 30, 2019
were forfeited. Additionally, 57,500,000 Performance Rights previously issued to Dr. Paul Kasian in the year ended June 30, 2019 were
forfeited in the year ended June 30, 2020.
Based on the independent valuation of the performance rights, the Company agrees that the total value of the outstanding performance
rights issued to each director (depending on the share price at issue) is as follows:
Valuation of Class A Performance Rights granted prior to the year ended June 30, 2021
Performance rights vested during the year
Dr. Lindsay Wakefield
Dr. Jerzy Muchnicki
Mr. Peter Rubinstein
Total
Valuation per
Class A
(cents)
Total fair
value of
Class A
Performance
Rights
Expense
accounted for
during the
year
0.77 A$
0.77 A$
0.77 A$
A$
28,875 A$
48,125 A$
38,500 A$
115,500 A$
9,625
16,042
12,833
38,500
Number of
Performance
Rights
issued
3,750,000
6,250,000
5,000,000
15,000,000
48
Item 6. Directors, Senior Management and Employees (cont.)
Item 6.B Compensation (cont.)
The following is the reconciliation of Performance Rights for the year ended June 30, 2021 held by Key Management Personnel:
Performance Rights
Dr. Lindsay Wakefield
Mr. Peter Rubinstein
Mr. Nicholas Burrows
Dr. Jerzy Muchnicki
Dr. Richard Allman
Mr. Stanley Sack
Mr. Mike Tonroe
Mr. Simon Morriss
Mr. Phillip Hains
Total
Notes
Balance at
start of the
year
3,750,000
5,000,000
—
6,250,000
—
—
—
—
—
15,000,000
Granted as
remuneration
5,000,000
57,500,000
5,000,000
57,500,000
—
3,937,500
—
60,000,000
—
188,937,500
Exercised
Other
Changes1
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Balance at
the end of
year
8,750,000
62,500,000
5,000,000
63,750,000
—
3,937,500
—
60,000,000
—
203,937,500
1. Other changes incorporates changes resulting from the expiration/forfeiture of options.
49
Item 6. Directors, Senior Management and Employees (cont,)
Item 6.B Compensation (cont.)
Performance rights included in the balance at start of the year
Performance hurdles
The Class A Performance Rights vest and are exercisable upon the Share price reaching $0.02 or greater for more than 10-day
consecutive ASX trading days.
The Directors, being the recipients of the Performance Rights, must remain engaged by the Company at the time of satisfaction of the
performance hurdle in order for the relevant Performance Right to vest.
The unlisted Performance Rights granted and outstanding as of June 30, 2021 under the Plans are as follows:
Director
Mr. Peter Rubinstein (Class A)
Dr. Jerzy Muchnicki (Class A)
Mr. Lindsay Wakefield (Class A)
Balance at the end of the financial year
2019
Fair Value
Expiration Date
5,000,000
6,250,000
3,750,000
15,000,000
A$
A$
A$
A$
38,500
48,125
28,875
115,500
11-Dec-2021
11-Dec-2021
11-Dec-2021
The Company has accounted for these Performance Rights in accordance with its accounting policy for share-based payment
transactions and has not recorded any reversal of associated expense in the current year (2020: A$43,484).
50
Item 6. Directors, Senior Management and Employees (cont,)
Item 6.B Compensation (cont.)
The Performance Rights are not currently quoted on the ASX and as such have no ready market value. The Performance Rights each
grant the holder a right of grant of one ordinary Share in the Company upon vesting of the Performance Rights for nil consideration.
Accordingly, the Performance Rights may have a present value at the date of their grant. Various factors impact upon the value of
Performance Rights including:
● the period outstanding before the expiry date of the Performance Rights;
● the underlying price or value of the securities into which they may be converted;
● the proportion of the issued capital as expanded consequent upon conversion of the Performance Rights into Shares (i.e. whether or
not the shares that might be acquired upon exercise of the options represent a controlling or other significant interest); and
● the value of the shares into which the Performance Rights may be converted.
There are various formulae which can be applied to determining the theoretical value of options (including the formula known as the
Black-Scholes Model valuation formula and the Monte Carlo simulation).
The Company has commissioned an independent valuation of the Performance Rights. The independent valuer has applied the Monte
Carlo simulation in providing the valuation of the Performance Rights.
Inherent in the application of the Monte Carlo simulation are a number of inputs, some of which must be assumed. The data relied upon
in applying the Monte Carlo simulation was:
a)
exercise price being 0.0 cents per Performance Right for all classes;
b) VWAP hurdle (10 days consecutive share price hurdle) equaling A$0.02 for Class A Performance Rights;
c)
the continuously compounded risk-free rate being 2.02% for all classes of Performance Rights (calculated with reference to the
RBA quoted Commonwealth Government bonds as at October 8, 2018 of similar duration to that of the expected life of each class
of Performance Right);
d)
the expected option life of 2.8 years for all classes of Performance Rights; and
e)
a volatility measure of 80%.
This share-based payment expense is included within general and administrative costs in the statement of comprehensive
income/ (loss). The following is additional information relating to the options granted under the respective Plans and as of June 30,
2021:
Range of exercise prices
$0.008 - $0.01
Range of exercise prices
$0.00 - $0.00
Options outstanding
Options exercisable
Weighted
average
exercise
price
$
0.009
Remaining
weighted
average
contractual
life (years)
1.39
Number of
options
27,850,000
Performance rights outstanding
Number of
options
203,937,500
Weighted
average
exercise
price
0.000
$
51
Remaining
Weighted
average
contractual
life (years)
2.33
Weighted
average
exercise
price
$
0.009
Number of
options
27,850,000
Performance
rights exercisable
Weighted
average
exercise
price
$
0.00
Number of
Perf. rights
203,937,500
Item 6. Directors, Senior Management and Employees (cont,)
Item 6.B Compensation (cont.)
Australian Disclosure Requirements ordinary shares of Genetic Technologies Limited under option at the date of this Directors’
report are as follows:
Ordinary Shares
Dr. Lindsay Wakefield
Mr. Peter Rubinstein
Mr. Nicholas Burrows
Dr. Jerzy Muchnicki
Dr. Richard Allman
Mr. Stanley Sack
Mr. Mike Tonroe
Mr. Simon Morriss
Mr. Phillip Hains
Total
Balance at
start of the
year1
9,418,104
308,132,009
1,670,000
263,085,885
—
—
—
—
—
582,305,998
Granted as
remuneration
Received on
exercised
options
Other
Changes2
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Balance at
the end of
year3
—
9,418,104
— 308,132,009
—
1,670,000
— 263,085,885
—
—
—
—
—
—
—
—
—
—
— 582,305,998
1. Balance may include shares held prior to individuals becoming KMP. For individuals who became KMP during the period, the balance
is as at the date they became KMP.
2. Other changes incorporates changes resulting from the acquisition or disposal of shares or in relation to rights issues.
3. For former KMP, the balance is as at the date they cease being KMP.
Indemnification and Insurance with respect to Directors
We are obligated pursuant to an indemnity agreement, to indemnify the current Directors and executive officers and former
Directors against all liabilities to third parties that may arise from their position as Directors or officers of the Company and our
controlled entities, except where to do so would be prohibited by law. In addition, the Company does currently carry insurance in
respect of Directors’ and officers’ liabilities for current and former Directors, Company Secretary and executive officers or employees
under certain circumstances as specified in the insurance policy.
(End of the Remuneration Report for Australian Disclosure Requirements)
Other Australian Disclosure Requirements
Auditor’s Independence Declaration
There were no former partners or directors of Grant Thornton Audit Pty Ltd, the Company’s auditor, who were or were at any
time during the financial year an officer of the Company.
A copy of the auditor’s independence declaration under Section 307C of the Corporations Act in relation to the audit for the
year ended June 30, 2021 is included in Exhibit 15.4 of this annual report on Form 20-F.
Directors’ resolution
The components of our directors’ report are incorporated in various places within this annual report on the Form 20-F.
A table charting these components is included within ‘Exhibit 15.3 Appendix 4E’.
This report is made in accordance with a resolution of directors.
/s/ Peter Rubinstein
Director
Melbourne
August 31, 2021
Item 6.C Board Practices
The Board of Directors
Under the Company’s Constitution, its Board of Directors is required to comprise at least three Directors. As of the date of this
Annual Report, our Board comprised four Directors.
The role of the Board includes:
(a) Reviewing and making recommendations in remuneration packages and policies applicable to directors, senior executives
and consultants.
(b) Nomination of external auditors and reviewing the adequacy of external audit arrangements.
(c) Establishing the overall internal control framework over financial reporting, quality and integrity of personnel and
investment appraisal. In establishing an appropriate framework, the board recognised that no cost-effective internal control
systems will preclude all errors and irregularities.
(d) Establishing and maintaining appropriate ethical standards in dealings with business associates, suppliers, advisers and
regulators, competitors, the community and other employees.
(e)
Identifying areas of significant business risk and implementing corrective action as soon as practicable after a risk is
identified.
(f) Nominating audit and remuneration committee members.
The Board meets to discuss business regularly throughout the year, with additional meetings being held when circumstances
warrant. Included in the table below are details of the meetings of the Board and the sub-committees of the Board that were held during
the 2021 financial year.
Dr. Lindsay Wakefield
Dr. Jerzy Muchnicki
Mr. Peter Rubinstein
Mr. Nicholas Burrows
Directors’ meetings
Audit Committee
meetings
Remuneration
Committee meetings
Attended
Eligible
Attended
Eligible
Attended
Eligible
10
10
10
10
10
10
10
10
52
10
9
10
10
10
10
10
10
3
2
3
3
3
1
3
3
Item 6. Directors, Senior Management and Employees (cont.)
Item 6.C Board Practices (cont.)
Committees of the Board
The Board has established an Audit Committee which operates under a specific Charter approved by the Board. It is the
Board’s responsibility to ensure that an effective internal control framework exists within the Company. This includes internal controls
to deal with both the effectiveness and efficiency of significant business processes, the safeguarding of assets, the maintenance of proper
accounting records, and the reliability of financial information as well as non-financial considerations such as the benchmarking of
operational key performance indicators.
The Board has delegated the responsibility for the establishment and maintenance of a framework of internal control and
ethical standards for the management of the Company to the Audit Committee. The Audit Committee also provides the Board with
assurance regarding the reliability of financial information for inclusion in the financial reports. As at date of this report, all of the
members of the Audit Committee are independent Non-Executive Directors.
The Remuneration Committee is, amongst other things, responsible for determining and reviewing remuneration arrangements
for the Directors, the Chief Executive Officer and the Senior Leadership Team. The Chairman of the Committee is an independent non-
executive director.
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.
Committee membership
As at the date of this Report, the composition of these two Sub-Committees are:
Audit Committee:
Remuneration Committee:
Mr. Nicholas Burrows — Chairman of the Committee
Mr. Peter Rubinstein
Dr. Lindsay Wakefield
Dr. Lindsay Wakefield — Chairman of the Committee
Mr. Peter Rubinstein
Mr. Nicholas Burrows
53
Item 6. Directors, Senior Management and Employees (cont.)
Item 6.C Board Practices (cont.)
Compliance with NASDAQ Rules
NASDAQ listing rules require that the Company disclose the home country practices that we will follow in lieu of compliance
with NASDAQ corporate governance rules. The following describes the home country practices and the related NASDAQ rule:
Majority of Independent Directors: The Company follows home country practice rather than NASDAQ’s requirement in
Marketplace Rule 4350(c) (1) that the majority of the Board of each issuer be comprised of independent directors as defined in
Marketplace Rule 4200. As of the date of this Annual Report, with there were three independent Directors namely Mr. Nick Burrows,
Mr. Peter Rubinstein and Dr. Lindsay Wakefield which led to our Board of Directors being comprised of a majority of independent
directors.
Compensation of Officers: The Company follows home country practice rather than NASDAQ’s requirement in Marketplace
Rule 4350(c) (3) that chief executive compensation be determined or recommended to the Board by the majority of independent
directors or a compensation committee of independent directors. Similarly, compensation of other officers is not determined or
recommended to the Board by a majority of the independent directors or a compensation committee comprised solely of independent
directors. These decisions are made by the Company’s remuneration committee.
Nomination: The Company follow home country practice rather than NASDAQ’s requirement in Marketplace Rule 4350(c)(4)
that director nominees be selected or recommended by a majority of the independent directors or by a nominations committee comprised
of independent directors. These decisions are made by the Company’s full Board which is comprised of a majority of independent
directors which constitute Mr. Nick Burrows, Mr. Peter Rubinstein and Dr. Lindsay Wakefield.
The ASX does not have a requirement that each listed issuer have a nominations committee or otherwise follow the procedures
embodied in NASDAQ’s Marketplace Rule. Furthermore, no law, rule or regulation of the ASIC has such a requirement nor does the
applicable corporate law legislation. Accordingly, selections or recommendations of director nominees by a committee that is not
comprised of a majority of directors that are not independent is not prohibited by the laws of Australia.
Quorum: The Company follows home country practice rather than NASDAQ’s requirement in Marketplace Rule 4350(f) that
each issuer provides for a quorum of at least 33 1/3 percent of the outstanding shares of the issuer’s ordinary stock (voting stock).
Pursuant to the Company’s Constitution it is currently required to have a quorum for a general meeting of three persons. The practice
followed by the Company is not prohibited by Australian law.
Shareholder Approval for Capital Issuance: The Company has elected to follow certain home country practices in lieu of
NASDAQ Marketplace Rule 5635. For example, the Company is entitled to an annual 15% of capital placement capacity under ASX
Listing Rule 7.1 without shareholder approval. If this amount of annual entitlement is aggregated with an additional placement of
Ordinary Shares, including through the grant of options over Ordinary Shares, that exceeds 20% of the outstanding share capital, only
the excess over the 15% annual allowance requires shareholder approval under Australian law. Such home country practice is not
prohibited by the laws of Australia.
Item 6.D Employees
As of the date of this Annual Report, the Company comprising the Company and its subsidiaries, employed 18 full-time
equivalent employees. The number of full-time equivalent employees as of the end of each respective financial year ended June 30 are
as follows:
2021
2020
2019
54
18
13
13
Item 6. Directors, Senior Management and Employees (cont.)
Item 6.E Share Ownership
The relevant interest of the directors in the share capital of the Company as notified by them to the Australian Securities
Exchange in accordance with section 205G(1) of the Corporations Act 2001 as of the date of this Annual Report is as follows:
Director
Dr. Lindsay Wakefield
Dr. Jerzy Muchnicki
Mr. Peter Rubinstein
Mr. Nicholas Burrows
Item 7. Major Shareholders and Related Party Transactions
Item 7.A Major Shareholders
Ordinary
shares
Percentage of
Capital held
9,418,104
263,085,885
308,132,009
1,670,000
0.10%
2.85%
3.34%
0.02%
As at the date of this Annual Report, no shareholders hold a beneficial ownership of 5% or more of our voting securities.
The number of Ordinary Shares on issue in Genetic Technologies as of the date of this Annual Report was 9,226,090,143. The
number of holders of Ordinary Shares in Genetic Technologies as of the date of this Annual Report was approximately 4,724 (July 22,
2021).
The Company is not aware of any direct or indirect ownership or control of it by another corporation(s), by any foreign
government or by any other natural or legal person(s) severally or jointly. Principal shareholders do not enjoy any special or different
voting rights from those to which other holders of Ordinary Shares are entitled. The Company does not know of any arrangements, the
operation of which may at a subsequent date result in a change in control of the Company.
Record Holders
As of July 22, 2021, there were 4,724 holders of record of our ordinary shares, of which 40 record holders, holding
approximately 0.85% of our ordinary shares, had registered addresses in the United States. These numbers are not representative of the
number of beneficial holders of our shares nor are they representative of where such beneficial holders reside, since many of these
ordinary shares were held of record by brokers or other nominees. The majority of trading by our U.S. investors is done by means of
ADSs that are held of record by HSBC Custody Nominees (Australia) Ltd., which held 74.49% of our ordinary shares as of such date.
Item 7.B Related Party Transactions
During the year ended June 30, 2021, the only transactions between entities within the Company 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.
Transactions within the Company and with other related parties
During the year ended June 30, 2021, other than compensation paid to directors and other members of key management personnel, see
“Item 6.B Compensation”, the only transactions between entities within the Company and other related parties are as listed below.
Except where noted, all amounts were charged on similar to market terms and at commercial rates.
55
Item 7. Major Shareholders and Related Party Transactions (Cont.)
Item 7.B Related Party Transactions (Cont.)
Blockchain Global Limited
As announced by the Company on February 15, 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 August 2, 2018, a framework agreement with BCG
was entered formalising the non-binding terms sheet and providing a framework for a strategic alliance between the Company and BCG,
with the agreement became binding on November 29, 2018 upon receiving the requisite shareholder approval. The agreement proposed
the issue of 486 million shares to BCG in 3 tranches subject to the achievement of certain milestones. No shares have been issued under
the framework agreements and no milestones have been achieved. Any rights to the 486 million milestone shares lapsed between
December 27, 2019 and June 27, 2020.
The Company has accounted for these share issuances in accordance with its accounting policy for share-based payment transactions
and has not recorded any associated expense in the current year given performance conditions have not been met and are not currently
considering any Blockchain related projects.
A number of Directors of the Company presently or previously have had involvement with BCG. Mr. Xue Lee has a direct and indirect
equity interest and was a CEO and managing director of BCG. Mr. Peter Rubinstein held a minority shareholding in the Company and
was also a director in BCG. Dr. Jerzy Muchnicki has a direct and indirect interest in BCG. Dr. Paul Kasian was previously a director of
BCG until July 2018.
56
Item 7. Major Shareholders and Related Party Transactions (Cont.)
Item 7.B Related Party Transactions (Cont.)
Performance Rights Issuance
After receiving requisite shareholder approval on November 29, 2018, the Company has issued 76,250,000 performance rights to
Directors of the Company as follows:
● 7,500,000 Class A Performance Rights, 25,000,000 Class B Performance Rights and 25,000,000 Class C Performance Rights to Dr.
Paul Kasian
● 3,750,000 Class A Performance Rights to Dr. Lindsay Wakefield
● 6,250,000 Class A Performance Rights to Dr. Jerzy Muchnicki
● 5,000,000 Class A Performance Rights to Mr. Peter Rubinstein
● 3,750,000 Class A Performance Rights to Mr. Xue Lee
In the year ended June 30, 2020, all Performance Rights previously issued to Dr. Paul Kasian and Mr. Xue Lee were forfeited.
After receiving another requisite shareholder approval on December 10, 2020, the Company issued additional 125,000,000 Performance
Rights to Directors of the Company as follows:
● 5,000,000 Class A Performance Rights to Dr. Lindsay Wakefield
● 7,500,000 Class A Performance Rights, 25,000,000 Class B Performance Rights and 25,000,000 Class C Performance Rights to
Dr. Jerzy Muchnicki
● 7,500,00 Class A Performance Rights, 25,000,000 Class B Performance Rights and 25,000,000 Class C Performance Rights to
Mr. Peter Rubinstein
● 5,000,000 Class A Performance Rights to Mr. Nicholas Burrows
During the year, the Board has approved for the following Performance Rights to be issued to the Chief Executive Officer and Chief
Operating Officer:
● 60,000,000 Class D Performance Rights to Mr. Simon Morris
● 3,937,500 Class E Performance Rights to Mr. Stanley Sack
The Company has accounted for these Performance Rights in accordance with its accounting policy for share-based payment
transactions and has recorded A$622,725 of associated expense in the current reporting period.
57
Item 7. Major Shareholders and Related Party Transactions (Cont.)
Item 7.B Related Party Transactions (Cont.)
Blockshine Health Joint Venture
The Company, via its subsidiary Gene Ventures Pty Ltd, entered into a joint venture with Blockshine Technology Corporation (BTC).
The joint venture company, called Blockshine Health, was to pursue and develop blockchain opportunities in the biomedical sector.
Blockshine Health was to have full access to BTC’s technology (royalty free) as well as all of its opportunities in the biomedical sector.
The Company invested $250,000 into the joint venture in the year ended June 30, 2019 and held 49% equity stake. The Joint Venture
agreement was subsequently cancelled and the investment of $250,000 was impaired in the year ended June 30, 2019.
During the year ended June 30, 2020, the Company managed to transfer $43,380 back to its account from Blockshine Health and as a
result partially recovered its investment in Blockshine Health, its joint venture investment, which was previously fully impaired in the
year ended June 30, 2019.
Genetic Technologies HK Limited and Aocheng Genetic Technologies Co. Ltd - Joint Venture
In August 2018, the Company announced a Heads of Agreement had been reached with Representatives of the Hainan Government -
Hainan Ecological Smart City Company (“HESCG”), a Chinese industrial park development & operations company have formally
invited Genetic Technologies Limited (“GTG”) to visit the Hainan Medical Pilot Zone to conduct a formal review and discuss
opportunities for market entry into China via the Hainan Free Trade Zone initiative. The invitation was extended to GTG via Beijing
Zishan Health Consultancy Limited (“Zishan”), demonstrating the potential for growth presented by the proposed Joint Venture between
the parties (as announced to the market on August 14, 2018).
58
Item 7. Major Shareholders and Related Party Transactions (Cont.)
Item 7.B Related Party Transactions (Cont.)
Subsequently, the Company announced the official formation of Genetic Technologies HK Limited and Aocheng Genetic Technologies
Co. Ltd in Hong Kong to the market on March 27, 2019.
The Company’s previous Chairman, Dr. Paul Kasian was named in the formation Heads of Agreement document to be the Chairman of
the Joint Venture entity. At June 30, 2021, Genetic Technologies HK Limited has 100% ownership of Hainan Aocheng Genetic
Technologies Co. Limited. At this time, no Directors fees or emoluments have been paid to Dr. Kasian, nor have agreements regarding
fees been reached.
Issuance of options to directors towards sub-underwriting the capital raise
As announced on October 4, 2019, the Company undertook an underwritten non-renounceable pro-rata entitlement offer at an Issue
Price of 0.4 cents per new share.
On October 11, 2019, the Company updated the market to advise that the offer was from that time agreed to be underwritten by Lodge
Corporate Pty Ltd and that two of the Company’s directors (Mr. Peter Rubinstein and Dr. Jerzy Muchnicki), had agreed to sub-
underwrite the offer. Both directors, in conjunction with the underwriter Lodge Corporate Pty Ltd, subsequently agreed amongst
themselves to alter the respective sub-underwritten amounts, but the total to be sub-written between them (A$2 million) remained same,
as did the total underwritten amount (of A$4 million).
Accordingly, the underwritten offer subsequently was sub-underwritten by Peter Rubinstein and Dr. Jerzy Muchnicki (each as up to A$1
million) in conjunction with a consortium of non-associated wholesale investors (also as sub-underwriters) who in aggregate equate to
the underwritten amount of A$4 million, each in accordance with the terms of their separate sub-underwriting agreements with Lodge
Corporate Pty Ltd (each a Sub-Underwriting Agreement).
Dr. Muchnicki and Mr. Rubinstein reflecting the amount of their sub-writing commitment were to be granted on the same terms as all
options to be granted to the relevant sub-underwriters. The number of options issued to both directors was calculated as 1 Option for
every 2 Shares being sub-underwritten and were issued a total of 125,000,000 unlisted options to each of the directors.
As announced on October 11, 2019, within the rights issue offer document, upon exercise each such option converts into 1 fully paid
share on terms consistent with the ASX Listing Rules; with a 3-year expiry date from grant and with an exercise price per underwriter
and sub-underwriter option equal to the lower of:
●
●
A$0.008; and
The implicit price per share at which any raise done by Aegis capital within 3 months from the Company’s shareholder meeting.
but in any event with a floor exercise price equal to A$0.004.
59
Item 7. Major Shareholders and Related Party Transactions (Cont.)
Item 7.B Related Party Transactions (Cont.)
Lodge Corporate
Dr. Kasian was a director of corporate finance and corporate advisor from December 2017 to February 2019 with Lodge Corporate.
During the year ended, the Company engaged in corporate advisory services with Lodge Corporate and had transactions worth
A$154,224 which also included A$88,000 that related to 2% of the underwriting of the capital raise during the year ended June 30,
2020. Additionally, during the year, On March 6, 2020 the Company issued 5,000,000 options to Lodge Corporate Pty Ltd valued at
A$29,340 which were in relation to capital raising costs.
Mr. Phillip Hains (Former Chief Financial Officer)
On July 15, 2019, the Company announced that it had appointed Mr. Phillip Hains (MBA, CA) as the Chief Financial Officer who has
over 30 years of extensive experience in roles with a portfolio of ASX and NASDAQ listed companies and provides CFO services
through his firm The CFO Solution. Prior to this point the Company had a similar arrangement with The CFO Solution, where it would
engage and provide services of overall CFO, accounting and other finance related activities.
During the reporting period, the Company had transactions valued at A$224,971 (2020: A$527,724) with The CFO Solution towards
provision of overall CFO, accounting and other finance related activities.
Mr. Stanley Sack (Chief Operating Officer)
On May 18, 2020, the Company appointed Mr. Stanley Sack who provides consulting in the capacity of Chief Operating Officer. Mr.
Sack has spent 15 years in large listed entities in executive positions managing large business divisions. He has worked with a high net
worth family managing all their operating businesses and private equity activities. Mr. Sack built an Allied Health Business in the aged
care and community care space which became the biggest Mobile Allied Health Business in Australia, and was recently sold to a large
medical insurance company.
During the reporting period, the Company had transactions valued at A$157,609 (2020: A$38,500) with Mr. Stanley Sack’s entity
Cobben Investments Pty Ltd towards provision of consulting services in relation to provision of duties related to Chief Operating Officer
of the Company.
Mr. Peter Rubinstein (Non-Executive Director and Chairman)
During the financial year ended June 30, 2020, the Board approved to obtain consulting services in relation to capital raises, compliance,
NASDAQ hearings and investor relations from its Non-Executive Director and current Chairman, Mr. Peter Rubinstein. The services
procured were through Mr. Peter Rubinstein’s associate entity ValueAdmin.com Pty Ltd and amounted to A$60,000 (2020: A$35,000)
that is included as part of the cash salary and fees in the remuneration report as at June 30, 2021.
There were no transactions with parties related to Key Management Personnel during the year other than that disclosed above.
Item 7.C Interests of Experts and Counsel
Not applicable.
Item 8. Financial Information
Item 8.A Consolidated Statements and Other Financial Information
The information included in Item 18 of this Annual Report is referred to and referenced into this Item 8.A.
60
Item 8. Financial Information (Cont.)
Item 8.A Consolidated Statements and Other Financial Information (Cont.)
Legal Proceedings
We are not currently a party to any material legal proceedings. From time to time, we may be a party to litigation or subject to
claims incident to the ordinary course of business. Although the results of litigation and claims cannot be predicted with certainty, we
currently believe that the final outcome of these ordinary course matters will not have a significant effect on our financial position or
profitability. Regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion
of management resources and other factors.
Dividends
Until our businesses are profitable beyond our expected research and development needs, our Directors are unlikely to be able
to recommend that any dividend be paid to our shareholders. Our Directors will not resolve a formal dividend policy until we generate
profits. Our current intention is to reinvest our income in the continued development and expansion of our businesses.
Item 8.B Significant Changes to Financial Information
There have been no significant changes in the operation or financial condition of the Company since June 30, 2021.
Item 9. The Offer and Listing
Item 9.A Offer and Listing Details
The Company’s Ordinary Shares have been listed on the Australian Securities Exchange (the “ASX”) since July 1987 and trade
there under the symbol GTG. The Company’s securities are also listed on NASDAQ’s Capital Market (under the ticker GENE) in the
form of American Depositary Shares, each of which represents 600 Ordinary Shares.
Item 9.B Plan of Distribution
Not applicable.
Item 9.C Markets
See “Item 9.A Offer and Listing Details.”
Item 9.D Selling Shareholders
Not applicable.
Item 9.E Dilution
Not applicable.
Item 9.F Expenses of the Issue
Not applicable.
61
Item 10. Additional Information
Item 10.A Share Capital
Not applicable.
Item 10.B Our Constitution
Our registration number is 009 212 328. Our Constitution has been posted on the Company’s website and has been filed with
the SEC.
Purposes and Objects
Our Constitution does not specify any purposes or objects of the Company.
The Powers of the Directors
Under the provisions of our Constitution our Directors may exercise all of the powers of our company, other than those that are
required by our Constitution or the Corporations Act of Australia to be exercised at a general meeting of shareholders. A director may
participate in a meeting and vote on a proposal, arrangement or contract in which he or she is materially interested, so long as the
director’s interest is declared in accordance with the Corporations Act. The authority of our directors to enter into borrowing
arrangements on our behalf is not limited, except in the same manner as any other transaction by us.
Rights Attached to Our Ordinary Shares
The concept of authorised share capital no longer exists in Australia and as a result, our authorised share capital is unlimited.
All our outstanding Ordinary Shares are validly issued, fully paid and non-assessable. The rights attached to our Ordinary Shares are as
follows:
Dividend rights. If our board of directors recommends a dividend, registered holders of our Ordinary Shares may declare a
dividend by ordinary resolution in a general meeting. The dividend, however, cannot exceed the amount recommended by our board of
directors. Our board of directors may declare an interim dividend.
Voting rights. Holders of Ordinary Shares have one vote for each Ordinary Share held on all matters submitted to a vote of
shareholders. Such voting rights may be affected by the grant of any special voting rights to the holders of a class of shares with
preferential rights that may be authorised in the future.
The quorum required for an ordinary meeting of shareholders consists of at least two shareholders represented in person or by
proxy who hold or represent, in the aggregate, at least one third of the voting rights of the issued share capital. A meeting adjourned for
lack of a quorum generally is adjourned to the same day in the following week at the same time and place or any time and place as the
directors designate in a notice to the shareholders. At the reconvened meeting, the required quorum consists of any two members present
in person or by proxy.
An ordinary resolution, such as a resolution for the declaration of dividends, requires approval by the holders of a majority of
the voting rights represented at the meeting, in person, by proxy or by written ballot and voting thereon. Under our Constitution, a
special resolution, such as amending our Constitution, approving any change in capitalisation, winding-up, authorisation of a class of
shares with special rights, or other changes as specified in our Constitution, requires approval of a special majority, representing the
holders of no less than 75% of the voting rights represented at the meeting in person, by proxy or by written ballot, and voting thereon.
62
Item 10. Additional Information (Cont.)
Item 10.B Our Constitution (Cont.)
Pursuant to our Constitution, our directors are elected at our annual general meeting of shareholders by a vote of the holders of
a majority of the voting power represented and voting at such meeting.
Rights in our profits. Our shareholders have the right to share in our profits distributed as a dividend and any other permitted
distribution.
Rights in the event of liquidation. In the event of our liquidation, after satisfaction of liabilities to creditors, our assets will be
distributed to the holders of Ordinary Shares in proportion to the nominal value of their holdings. This right may be affected by the grant
of preferential dividend or distribution rights to the holders of a class of shares with preferential rights that may be authorised in the
future.
Changing Rights Attached to Shares
According to our Constitution, in order to change the rights attached to any class of shares, unless otherwise provided by the
terms of the class, such change must be adopted by a general meeting of the shareholders and by a separate general meeting of the
holders of the affected class with a majority of 75% of the voting power participating in such meeting.
Annual and Extraordinary Meetings
Our Board of Directors must convene an annual meeting of shareholders at least once every calendar year, within five months
of our last fiscal year-end balance sheet date. Notice of at least 28 days prior to the date of the meeting is required. An extraordinary
meeting may be convened by the board of directors, it decides or upon a demand of any directors, or of one or more shareholders
holding in the aggregate at least five percent of our issued capital. An extraordinary meeting must be called not more than 21 days after
the request is made. The meeting must be held not later than two months after the request is given.
Limitations on the Rights to Own Securities in Our Company
Neither our Constitution nor the laws of the Commonwealth of Australia restrict in any way the ownership or voting of our
shares. However, acquisitions and proposed acquisitions of securities in Australian companies may be subject to review and approval by
the Australian Federal Treasurer under the Takeovers Act as described under Item 10.D below.
Changes in Our Capital
Pursuant to the Listing Rules of the ASX, without shareholder approval, we may not issue more than 25% of our outstanding
Ordinary Shares in any twelve month period other than by a pro rata rights offering or a share purchase plan offer (of shares with a value
at the issue price of up to A$30,000 per shareholder to a maximum of 30% of our outstanding shares) in each case to the then existing
shareholders.
Item 10.C Material Contracts
During the prior period, the Company entered into agreement with Lodge Corporate, Aegis Capital Corporation and H.C.
Wainright & Co, to act as the placement agent to the offering made through which on multiple occasions the Company managed to raise
a total of A$ 15,709,559 before costs of the transactions (2020: A$21,793,678). Towards the cost of the transactions, the Company
issued the following securities:
● 250,000,000 unlisted options issued on October 30, 2019, exercisable at A$0.008 each and expiring on October 29, 2022,
amounting to A$817,666. Each option is exercisable for one fully paid ordinary share.
● 125,000,000 unlisted options issued on December 20, 2019, exercisable at A$0.008 each and expiring on December
20,2022, amounting to A$528,027. Each option is exercisable for one fully paid ordinary share.
● 125,000,000 unlisted options issued on December 20, 2019, exercisable at A$0.008 each and expiring on December
20,2022, amounting to A$528,027. Each option is exercisable for one fully paid ordinary share.
● 166,066,050 warrants issued at no cash consideration on July 16, 2019, exercisable at US$0.00533 each and expiring on
July 16, 2024, amounting to A$890,113. The warrants are exercisable for fully paid ordinary shares.
● 5,000,000 unlisted options issued to Lodge Corporate on March 6, 2020, exercisable at A$0.008 each and expiring on
March 6, 2023, amounting to A$29,340. Each option is exercisable for one fully paid ordinary share.
● 40,114,200 warrants issued to H.C. Wainwright & Co. LLC on April 3, 2020, exercisable at US$0.00365 each and
expiring on April 1, 2025, amounting to A$175,137. The warrants are exercisable for fully paid ordinary shares.
● 28,177,578 warrants issued to H.C. Wainwright & Co. LLC on April 22, 2020, exercisable at US$0.00417 each and
expiring on April 19, 2025, amounting to A$149,693. The warrants are exercisable for fully paid ordinary shares.
● 156,000,000 warrants issued to H.C. Wainwright & Co. LLC on December 21, 2020 exercisable at US$0.004166 expiring
on December 21, 2025, amounting to A$1,462,442. The warrants are exercisable for fully paid ordinary shares.
● 39,975,000 warrants issued to H.C. Wainwright & Co. LLC on December 21, 2020, exercisable at US$0.0104 expiring on
December 21, 2025, amounting to A$360,017. The warrants are exercisable for fully paid ordinary shares.
● 48,750,000 warrants to be issued to H.C. Wainwright & Co. LLC, subject to shareholder approval, exercisable at
US$0.00109375 expiring 5 years after date of issue, amounting to A$476,297. The warrants are exercisable for fully paid
ordinary shares.
On August 8, 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 A$1
million (or a higher amount by mutual agreement) until April 7, 2020. The Company raised A$1.6 million during 2018 and 2019 and
has approximately A$400,000 of remaining availability thereunder. This agreement expired on April 7, 2020.
There were no other material contracts entered into during the two years preceding the date of this Annual Report which were
outside the ordinary course of business.
63
Item 10. Additional Information (Cont.)
Item 10.D Exchange Controls
Under existing Australian legislation, the Reserve Bank of Australia does not inhibit the import and export of funds, and,
generally, no permission is required to be given to the Company for the movement of funds in and out of Australia. However, payments
to or from (or relating to) Iraq, its agencies or nationals, the government or a public authority of Libya, or certain Libyan undertakings,
the authorities in the Federal Republic of Yugoslavia (Serbia and Montenegro) or their agencies, the Taliban (also referred to as the
Islamic Emirate of Afghanistan), or the National Union for the Total Independence of Angola (also known as UNITA), its senior
officials or the adult members of their immediate families, may not be made without the specific approval of the Reserve Bank of
Australia.
Accordingly, at the present time, remittances of any dividends, interest or other payment by the Company to non-resident
holders of our securities in the U.S. are not, subject to the above, restricted by exchange controls or other limitations.
Takeovers Act
There are no limitations, either under the laws of Australia or under the Company’s Constitution, to the right of non-residents
to hold or vote our Technologies Ordinary Shares other than the Commonwealth Foreign Acquisitions and Takeovers Act 1975 (the
“Takeovers Act”). The Takeovers Act may affect the right of non-Australian residents, including U.S. residents, to hold Ordinary Shares
but does not affect the right to vote, or any other rights associated with, any Ordinary Shares held in compliance with its provisions.
Acquisitions of shares in Australian companies by foreign interests are subject to review and approval by the Treasurer of the
Commonwealth of Australia under the Takeovers Act. The Takeovers Act applies to any acquisition of outstanding shares of an
Australian company that exceeds, or results in a foreign person or persons controlling the voting power of more than a certain
percentage of those shares. The thresholds are 15% where the shares are acquired by a foreign person, or Company of associated foreign
persons, or 40% in aggregate in the case of foreign persons who are not associated. Any proposed acquisition that would result in an
individual foreign person (with associates) holding more than 15% must be notified to the Treasurer in advance of the acquisition. There
are statutory limitations in Australia on foreign ownership of certain businesses, such as banks and airlines, not relevant to the Company.
However, there are no other statutory or regulatory provisions of Australian law or Australian Securities Exchange requirements that
restrict foreign ownership or control of the Company.
Corporations Act 2001
As applied to the Company, the Corporations Act 2001 (the “Corporations Act 2001”) prohibits any legal person (including a
corporation) from acquiring a relevant interest in Ordinary Shares if after the acquisition that person or any other person’s voting power
in the Company increases from 20% or below to more than 20%, or from a starting point that is above 20% and below 90%.
This prohibition is subject to a number of specific exceptions set out in section 611 of the Corporations Act 2001 which must
be strictly complied with to be applicable.
In general terms, a person is considered to have a “relevant interest” in a share in the Company if that person is the holder of
that share, has the power to exercise, or control the exercise of, a right to vote attached to that share, or has the power to dispose of, or to
control the exercise of a power to dispose of that share.
It does not matter how remote the relevant interest is or how it arises. The concepts of “power” and “control” are given wide
and extended meanings in this context in order to deem certain persons to hold a relevant interest. For example, each person who has
voting power above 20% in a company or a managed investment scheme which in turn holds shares in the Company is deemed to have a
relevant interest in those shares. Certain situations (set out in section 609 of the Corporations Act 2001) which would otherwise
constitute the holding of a relevant interest are excluded from the definition.
A person’s voting power in the Company is that percentage of the total votes attached to Ordinary Shares in which that person
and its associates (as defined in the Corporations Act 2001) holds a relevant interest.
64
Item 10. Additional Information (Cont.)
Item 10.E Taxation
This summary of material tax consequences is based on the tax laws of the United States (including the Internal Revenue Code
of 1986, as amended, its legislative history, existing and proposed regulations thereunder, published rulings and court decisions) and on
the Australian tax law and practice as in effect on the date hereof. In addition, this summary is based on the income tax convention
between the United States and Australia (the “Treaty”). The foregoing laws and legal authorities as well as the Treaty are subject to
change (or changes in interpretation), possibly with retroactive effect. Finally, this summary is based in part upon the representations of
our ADR Depositary and the assumption that each obligation in the Deposit Agreement and any related agreement will be performed in
accordance with its terms.
The discussion does not address any aspects of U.S. taxation other than federal income taxation or any aspects of Australian
taxation other than federal income taxation, stamp duty and goods and services tax. This discussion does not necessarily address all
aspects of U.S. or Australian federal tax considerations that may be important to particular investors in light of their individual
investment circumstances or investors subject to special tax regimes, like broker-dealers, insurance companies, banks or other financial
institutions, tax-exempt organisations, regulated investment companies, real estate investment trusts or financial asset securitisation
investment trusts, persons who actually or constructively own 10% or more of our ADRs or Ordinary Shares, persons who hold ADRs
or Ordinary Shares as part of a straddle, hedge, conversion or constructive sale transaction or other integrated transaction, persons who
have elected mark-to-market accounting, U.S. holders whose functional currency is not the U.S. dollar, U.S. expatriates, investors liable
for the alternative minimum tax, partnerships and other pass-through entities, or persons who acquired their ADRs or Ordinary Shares
through the exercise of options or similar derivative securities or otherwise as compensation.
Prospective investors are urged to consult their tax advisers regarding the U.S. and Australian federal, state and local tax
consequences and any other tax consequences of owning and disposing of ADRs and shares.
Australian Tax Consequences
In this section, we discuss Australian tax considerations that apply to non-Australian tax residents who are residents of the
United States with respect to the ownership and disposal by the absolute beneficial owners of ADRs. This summary does not discuss any
foreign or state tax considerations, other than stamp duty.
Nature of ADRs for Australian Taxation Purposes
ADRs held by a U.S. holder will be treated for Australian taxation purposes as being held under a “bare trust” for that holder.
Consequently, the underlying Ordinary Shares will be regarded as owned by the ADR holder for Australian income tax and capital gains
tax purposes. Dividends paid on the underlying Ordinary Shares will also be treated as dividends paid to the ADR holder, as the person
beneficially entitled to those dividends. Therefore, in the following analysis, we discuss the tax consequences to non-Australian resident
holders of Ordinary Shares which, for Australian taxation purposes, will be the same as to U.S. holders of ADRs.
Taxation of Dividends
Australia operates a dividend imputation system under which dividends may be declared to be “franked” to the extent of tax
paid on company profits. Fully franked dividends are not subject to dividend withholding tax. Dividends payable by our company to
non-Australian resident stockholders will be subject to dividend withholding tax, to the extent the dividends are unfranked. Dividend
withholding tax will be imposed at 30%, unless a stockholder is a resident of a country with which Australia has a double taxation
agreement. Under the provisions of the Treaty, the Australian tax withheld on unfranked dividends paid by us to which a resident of the
United States is beneficially entitled is generally limited to 15% if the U.S. resident holds less than 10% of the voting rights of our
company, unless the shares are effectively connected to a permanent establishment or fixed base in Australia through which the
stockholder carries on business or provides independent personal services, respectively. Where a U.S. corporate resident holds 10% or
more of the voting rights of our company, the withholding tax rate is reduced to 5%.
65
Item 10. Additional Information (Cont.)
Item 10.E Taxation (Cont.)
Tax on Sales or other Dispositions of Shares - Capital Gains Tax
Non-Australian resident stockholders who hold their shares in us on capital account will not be subject to Australian capital
gains tax on any gain made on a sale or other disposal of our shares, unless they hold 10% or more of our issued capital and the
Company holds real property situated in Australia, the market value of which is 50% or more of the market value of the Company. The
Australian Taxation Office maintains the view that the Treaty does not limit Australian capital gains tax. Australian capital gains tax
applies to net capital gains charged at a taxpayer’s marginal tax rate but, for certain stockholders, a discount of the capital gain may
apply if the shares have been held for 12 months or more. For individuals, this discount is 50%. For superannuation funds, the discount
is 33%. There is no discount for a company that derives a net capital gain. Net capital gains are calculated after deducting capital losses,
which may only be offset against such gains.
Tax on Sales or other Dispositions of Shares - Stockholders Holding Shares on Revenue Account
Some non-Australian resident stockholders may hold shares on revenue rather than on capital account, for example, share
traders. These stockholders may have the gains made on the sale or other disposal of the shares included in their assessable income
under the ordinary income provisions of the income tax law, if the gains are sourced in Australia. Non-Australian resident stockholders
assessable under these ordinary income provisions in respect of gains made on shares held on revenue account would be assessed for
those gains at the Australian tax rates for non-Australian residents, which start at a marginal rate of 32.5%. Some relief from the
Australian income tax may be available to non-Australian resident stockholders under the Treaty, for example, because the stockholder
derives business profits not through a permanent establishment in Australia. To the extent an amount would be included in a non-
Australian resident stockholder’s assessable income under both the capital gains tax provisions and the ordinary income provisions, the
capital gain amount would generally be reduced, so that the stockholder would not be subject to double tax on any part of the income
gain or capital gain.
Dual Residency
If a stockholder were a resident of both Australia and the United States under the respective domestic taxation laws of those
countries, that stockholder may be subject to tax as an Australian resident. If, however, the stockholder is determined to be a U.S.
resident for the purposes of the Treaty, the Australian tax would be subject to limitation by the Treaty. Stockholders should obtain
specialist taxation advice in these circumstances.
Stamp Duty
Any transfer of shares through trading on the Australian Securities Exchange, whether by Australian residents or foreign
residents, is not subject to stamp duty within Australia.
Australian Death Duty
Australia does not have estate or death duties. Further, no capital gains tax liability is realised upon the inheritance of a
deceased person’s shares. However, the subsequent disposal of the shares by beneficiaries may give rise to a capital gains tax liability.
Goods and Services Tax
The issue or transfer of shares will not incur Australian goods and services tax and does not require a stockholder to register for
Australian goods and services tax purposes.
66
Item 10. Additional Information (Cont.)
Item 10.E Taxation (Cont.)
United States Federal Income Taxation
As used below, a “U.S. holder” is a beneficial owner of an ADR that is, for U.S. federal income tax purposes, (i) a citizen or
resident alien individual of the United States, (ii) a corporation (or an entity treated as a corporation) created or organised under the law
of the United States, any State thereof or the District of Columbia, (iii) an estate the income of which is subject to U.S. federal income
tax without regard to its source or (iv) a trust if (1) a court within the United States is able to exercise primary supervision over the
administration of the trust, and one or more United States persons have the authority to control all substantial decisions of the trust, or
(2) the trust has a valid election in effect under applicable U.S. Treasury Regulations to be treated as a United States person. For
purposes of this discussion, a “non-U.S. holder” is a beneficial owner of an ADR that is (i) a nonresident alien individual, (ii) a
corporation (or an entity treated as a corporation) created or organised in or under the law of a country other than the United States or a
political subdivision thereof or (iii) an estate or trust that is not a U.S. Holder. If a partnership (including for this purpose any entity
treated as a partnership for U.S. federal tax purposes) is a beneficial owner of an ADR, the U.S. federal tax treatment of a partner in the
partnership generally will depend on the status of the partner and the activities of the partnership. A holder of an ADR that is a
partnership and partners in that partnership should consult their own tax advisers regarding the U.S. federal income tax consequences of
holding and disposing of ADRs. We have not sought a ruling from the Internal Revenue Service (“IRS”) or an opinion of counsel as to
any U.S. federal income tax consequence described herein. The IRS may disagree with the description herein, and its determination may
be upheld by a court.
GIVEN THE COMPLEXITY OF THE TAX LAWS AND BECAUSE THE TAX CONSEQUENCES TO ANY
PARTICULAR INVESTOR MAY BE AFFECTED BY MATTERS NOT DISCUSSED HEREIN, PROSPECTIVE INVESTORS ARE
URGED TO CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THE SPECIFIC TAX CONSEQUENCES OF THE
ACQUISITION, OWNERSHIP AND DISPOSITION OF ADRs, INCLUDING THE APPLICABILITY AND EFFECT OF STATE,
LOCAL AND NON-U.S. TAX LAWS, AS WELL AS U.S. FEDERAL TAX LAWS.
Nature of ADRs for U.S. Federal Income Tax Purposes
In general, for U.S. federal income tax purposes, a holder of an ADR will be treated as the owner of the underlying shares.
Accordingly, except as specifically noted below, the tax consequences discussed below with respect to ADRs will be the same as for
shares in the Company, and exchanges of shares for ADRs, and ADRs for shares, generally will not be subject to U.S. federal income
tax.
Taxation of Dividends
U.S. Holders. In general, subject to the passive foreign investment company rules discussed below, a distribution on an ADR
will constitute a dividend for U.S. federal income tax purposes to the extent that it is made from our current or accumulated earnings and
profits as determined under U.S. federal income tax principles. If a distribution exceeds our current and accumulated earnings and
profits, it is generally treated as a non-taxable reduction of basis to the extent of the U.S. holder’s tax basis in the ADR on which it is
paid, and to the extent it exceeds that basis it will be treated as capital gain. For purposes of this discussion, the term “dividend” means a
distribution that constitutes a dividend for U.S. federal income tax purposes. The Company has not maintained and does not plan to
maintain calculations of earnings and profits under U.S. federal income tax principles. Accordingly, it is unlikely that U.S. Holders will
be able to establish that a distribution by the Company is in excess of its current and accumulated earnings and profits (as computed
under U.S. federal income tax principles). Therefore, a U.S. Holder should expect that a distribution by the Company will generally be
treated as taxable in its entirety as a dividend to U.S. Holders for U.S. federal income tax purposes even though the distribution may be
treated in whole or in part as a non-taxable distribution for Australian tax purposes.
The gross amount of any dividend on an ADR (which will include the amount of any Australian taxes withheld) generally will
be subject to U.S. federal income tax as foreign source dividend income, and will not be eligible for the corporate dividends received
deduction. The amount of a dividend paid in Australian dollars will be its value in U.S. dollars based on the prevailing spot market
exchange rate in effect on the day the U.S. holder receives the dividend or, in the case of a dividend received in respect of an ADR, on
the date the Depositary receives it, whether or not the dividend is converted into U.S. dollars. A U.S. holder will have a tax basis in any
distributed Australian dollars equal to its U.S. dollar amount on the date of receipt, and any gain or loss realised on a subsequent
conversion or other disposition of Australian dollars generally will be treated as U.S. source ordinary income or loss. If dividends paid
in Australian dollars are converted into U.S. dollars on the date they are received by a U.S. holder, the U.S. holder generally should not
be required to recognise foreign currency gain or loss in respect of the dividend income
67
Item 10. Additional Information (Cont.)
Item 10.E Taxation (Cont.)
Subject to certain exceptions for short-term and hedged positions, a dividend that a non-corporate holder receives on an ADR
will be subject to a maximum federal income tax rate of 20% if the dividend is a “qualified dividend”. A dividend on an ADR will be a
qualified dividend if (i) either (a) the ADRs are readily tradable on an established market in the United States or (b) we are eligible for
the benefits of a comprehensive income tax treaty with the United States that the Secretary of the Treasury determines is satisfactory for
purposes of these rules and that includes an exchange of information program, and (ii) we were not, in the year prior to the year the
dividend was paid, and are not, in the year the dividend is paid, a passive foreign investment company (“PFIC”). The ADRs are listed on
the NASDAQ Capital Market, which should qualify them as readily tradable on an established securities market in the United States. In
any event, the Treaty satisfies the requirements of clause (i) (b), and we are a resident of Australia entitled to the benefits of the Treaty.
However, based on our audited financial statements and relevant market and shareholder data, we believe we were a PFIC for U.S.
federal income tax purposes for our taxable years ended June 30, 2018 and June 30, 2020, and expect to be classified as a PFIC in the
current taxable year. Given that the determination of PFIC status involves the application of complex tax rules, and that it is based on the
nature of our income and assets from time to time, no assurances can be provided that we will or will not be considered a PFIC for any
past or future taxable years. In addition, as described in the section below entitled “Passive Foreign Investment Company Rules,” if we
were a PFIC in a year while a U.S. holder held an ADR, and if the U.S. holder has not made a qualified electing fund election effective
for the first year the U.S. holder held the ADR, the Ordinary Share underlying the ADR remains an interest in a PFIC for all future years
or until such an election is made. The IRS takes the position that such rule will apply for purposes of determining whether an ADR is an
interest in a PFIC in the year a dividend is paid or in the prior year, even if we do not satisfy the tests to be a PFIC in either of those
years. Even if dividends on the ADRs would otherwise be eligible for qualified dividend treatment, in order to qualify for the reduced
qualified dividend tax rates, a non-corporate holder must hold the Ordinary Share on which a dividend is paid for more than 60 days
during the 120-day period beginning 60 days before the ex-dividend date, disregarding for this purpose any period during which the
non-corporate holder has an option to sell, is under a contractual obligation to sell or has made (and not closed) a short sale of
substantially identical stock or securities, is the grantor of an option to buy substantially identical stock or securities or, pursuant to
Treasury regulations, has diminished such holder’s risk of loss by holding one or more other positions with respect to substantially
similar or related property. In addition, to qualify for the reduced qualified dividend tax rates, the non-corporate holder must not be
obligated to make related payments with respect to positions in substantially similar or related property. Payments in lieu of dividends
from short sales or other similar transactions will not qualify for the reduced qualified dividend tax rates.
A non-corporate holder that receives an extraordinary dividend eligible for the reduced qualified dividend rates must treat any
loss on the sale of the stock as a long-term capital loss to the extent of the dividend. For purposes of determining the amount of a non-
corporate holder’s deductible investment interest expense, a dividend is treated as investment income only if the non-corporate holder
elects to treat the dividend as not eligible for the reduced qualified dividend tax rates. Special limitations on foreign tax credits with
respect to dividends subject to the reduced qualified dividend tax rates apply to reflect the reduced rates of tax.
The U.S. Treasury has announced its intention to promulgate rules pursuant to which non-corporate holders of stock of non-
U.S. corporations, and intermediaries through whom the stock is held, will be permitted to rely on certifications from issuers to establish
that dividends are treated as qualified dividends. Because those procedures have not yet been issued, it is not clear whether we will be
able to comply with them.
Non-corporate holders of Ordinary Shares are urged to consult their own tax advisers regarding the availability of the reduced
qualified dividend tax rates with respect to dividends received on the ADRs in the light of their own particular circumstances.
68
Item 10. Additional Information (Cont.)
Item 10.E Taxation (Cont.)
Any Australian withholding tax imposed on dividends received with respect to the ADRs will be treated as a foreign income
tax eligible for credit against a U.S. holder’s U.S. federal income tax liability, subject to generally applicable limitations under U.S.
federal income tax law. For purposes of computing those limitations separately under current law for specific categories of income, a
dividend generally will constitute foreign source “passive category income” or, in the case of certain holders, “general category
income.” A U.S. holder will be denied a foreign tax credit with respect to Australian income tax withheld from dividends received with
respect to the ADRs to the extent the U.S. holder has not held the ADRs for at least 16 days of the 30-day period beginning on the date
which is 15 days before the ex-dividend date or to the extent the U.S. holder is under an obligation to make related payments with
respect to substantially similar or related property. Any days during which a U.S. holder has substantially diminished its risk of loss on
the ADRs are not counted toward meeting the 16-day holding period required by the statute. The rules relating to the determination of
the foreign tax credit are complex, and U.S. holders are urged to consult with their own tax advisers to determine whether and to what
extent they will be entitled to foreign tax credits as well as with respect to the determination of the foreign tax credit limitation.
Alternatively, any Australian withholding tax may be taken as a deduction against taxable income, provided the U.S. holder takes a
deduction and not a credit for all foreign income taxes paid or accrued in the same taxable year. In general, special rules will apply to the
calculation of foreign tax credits in respect of dividend income that is subject to preferential rates of U.S. federal income tax.
Non-U.S. holders. A dividend paid to a non-U.S. holder of an ADR will not be subject to U.S. federal income tax unless the
dividend is effectively connected with the conduct of trade or business by the non-U.S. holder within the United States (and is
attributable to a permanent establishment or fixed base the non-U.S. holder maintains in the United States if an applicable income tax
treaty so requires as a condition for the non-U.S. holder to be subject to U.S. taxation on a net income basis on income from the ADR).
A non-U.S. holder generally will be subject to tax on an effectively connected dividend in the same manner as a U.S. holder. A
corporate non-U.S. holder under certain circumstances may also be subject to an additional “branch profits tax,” the rate of which may
be reduced pursuant to an applicable income tax treaty.
Taxation of Capital Gains
U.S. Holders. Subject to the passive foreign investment company rules discussed below, on a sale or other taxable disposition
of an ADR, a U.S. holder will recognise capital gain or loss in an amount equal to the difference between the U.S. holder’s adjusted
basis in the ADR and the amount realised on the sale or other disposition, each determined in U.S. dollars. Such capital gain or loss will
be long-term capital gain or loss if at the time of the sale or other taxable disposition the ADR has been held for more than one year. In
general, any adjusted net capital gain of an individual is subject to a maximum federal income tax rate of 20%. Capital gains recognised
by corporate U.S. holders generally are subject to U.S. federal income tax at the same rate as ordinary income. The deductibility of
capital losses is subject to limitations. Any gain a U.S. holder recognises generally will be U.S. source income for U.S. foreign tax credit
purposes, and, subject to certain exceptions, any loss will generally be a U.S. source loss. If an Australian tax is paid on a sale or other
disposition of an ADR, the amount realised will include the gross amount of the proceeds of that sale or disposition before deduction of
the Australian tax.
The generally applicable limitations under U.S. federal income tax law on crediting foreign income taxes may preclude a U.S.
holder from obtaining a foreign tax credit for any Australian tax paid on a sale or other disposition of an ADR. The rules relating to the
determination of the foreign tax credit are complex, and U.S. holders are urged to consult with their own tax advisers regarding the
application of such rules. Alternatively, any Australian tax paid on the sale or other disposition of an ADR may be taken as a deduction
against taxable income, provided the U.S. holder takes a deduction and not a credit for all foreign income taxes paid or accrued in the
same taxable year.
Non-U.S. Holders. A non-U.S. holder will not be subject to U.S. federal income tax on gain recognised on a sale or other
disposition of an ADR unless (i) the gain is effectively connected with the conduct of trade or business by the non-U.S. holder within the
United States (and is attributable to a permanent establishment or fixed base the non-U.S. holder maintains in the United States if an
applicable income tax treaty so requires as a condition for the non-U.S. holder to be subject to U.S. taxation on a net income basis on
income from the ADR), or (ii) in the case of a non-U.S. holder who is an individual, the holder is present in the United States for 183 or
more days in the taxable year of the sale or other disposition and certain other conditions apply. Any effectively connected gain of a
corporate non-U.S. holder may also be subject under certain circumstances to an additional “branch profits tax,” the rate of which may
be reduced pursuant to an applicable income tax treaty.
69
Item 10. Additional Information (Cont.)
Item 10.E Taxation (Cont.)
Passive Foreign Investment Company Rules
A special set of U.S. federal income tax rules applies to a foreign corporation that is a PFIC for U.S. federal income tax
purposes. As noted above, based on our audited financial statements and relevant market and shareholder data, we believe that we were
a PFIC for U.S. federal income tax purposes for our taxable years ended June 30, 2018 and June 30, 2020, and expect to be classified as
a PFIC in our current taxable year. In addition, given that the determination of PFIC status involves the application of complex tax rules,
and that it is based on the nature of our income and assets from time to time, no assurances can be provided that we will or will not be
considered a PFIC for any past or future taxable years.
In general, a foreign corporation is a PFIC if at least 75% of its gross income for the taxable year is passive income or if at least
50% of its assets for the taxable year produce passive income or are held for the production of passive income. In general, passive
income for this purpose means, with certain designated exceptions, dividends, interest, rents, royalties (other than certain rents and
royalties derived in the active conduct of trade or business), annuities, net gains from dispositions of certain assets, net foreign currency
gains, income equivalent to interest, income from notional principal contracts and payments in lieu of dividends. Passive assets are those
assets that are held for production of passive income or do not produce income at all. Thus cash will be a passive asset. Interest,
including interest on working capital, is treated as passive income for purposes of the income test. The determination of whether a
foreign corporation is a PFIC is a factual determination made annually and is therefore subject to change. Subject to exceptions pursuant
to certain elections that generally require the payment of tax, once stock in a foreign corporation is stock in a PFIC in the hands of a
particular shareholder that is a United States person, it remains stock in a PFIC in the hands of that shareholder.
If we are treated as a PFIC, contrary to the tax consequences described in “U.S. Federal Income Tax Considerations— Taxation
of Dividends” and “U.S. Federal Income Tax Considerations—Taxation of Capital Gains” above, a U.S. holder that does not make an
election described in the succeeding two paragraphs would be subject to special rules with respect to (i) any gain realised on a sale or
other disposition of an ADR (for purposes of these rules, a disposition of an ADR includes many transactions on which gain or loss is
not realised under general U.S. federal income tax rules) and (ii) any “excess distribution” by the Company to the U.S. holder
(generally, any distribution during a taxable year in which distributions to the U.S. holder on the ADR exceed 125% of the average
annual taxable distributions (whether actual or constructive and whether or not out of earnings and profits) the U.S. holder received on
the ADR during the preceding three taxable years or, if shorter, the U.S. holder’s holding period for the ADR). Under those rules, (i) the
gain or excess distribution would be allocated ratably over the U.S. holder’s holding period for the ADR, (ii) the amount allocated to the
taxable year in which the gain or excess distribution is realised would be taxable as ordinary income in its entirety and not as capital
gain, would be ineligible for the reduced qualified dividend rates, and could not be offset by any deductions or losses, and (iii) the
amount allocated to each prior year, with certain exceptions, would be subject to tax at the highest tax rate in effect for that year, and the
interest charge generally applicable to underpayments of tax would be imposed in respect of the tax attributable to each of those years. A
U.S. holder who owns an ADR during any year we are a PFIC will generally have to file IRS Form 8621. A failure to file this return will
suspend the statute of limitations with respect to any tax return, event, or period to which such report relates (potentially including with
respect to items that do not relate to a U.S. Holder’s investment in the ADRs).
The special PFIC rules described above will not apply to a U.S. holder if the U.S. holder makes a timely election, which
remains in effect, to treat the Company as a “qualified electing fund” (“QEF”) in the first taxable year in which the U.S. holder owns an
ADR and the Company is a PFIC and if the Company complies with certain reporting requirements. Instead, a shareholder of a QEF
generally is currently taxable on a pro rata share of the Company’s ordinary earnings and net capital gain as ordinary income and long-
term capital gain, respectively. Neither that ordinary income nor any actual dividend from the Company would qualify for the 20%
maximum tax rate on dividends described above if the Company is a PFIC in the taxable year the ordinary income is realised or the
dividend is paid or in the preceding taxable year. We have not yet determined whether we would make the computations necessary to
supply U.S. holders with the information needed to report income and gain pursuant to a QEF election. It is, therefore, possible that U.S.
holders would not be able to make or retain a QEF election in any year we are a PFIC. Although a QEF election generally cannot be
revoked, if a U.S. holder made a timely QEF election for the first taxable year it owned an ADR and the Company is a PFIC (or is
treated as having done so pursuant to any of certain elections), the QEF election will not apply during any later taxable year in which the
Company does not satisfy the tests to be a PFIC. If a QEF election is not made in that first taxable year, an election in a later year
generally will require the payment of tax and interest.
70
Item 10. Additional Information (Cont.)
Item 10.E Taxation (Cont.)
In lieu of a QEF election, a U.S. holder of stock in a PFIC that is considered marketable stock could elect to mark the stock to
market annually, recognising as ordinary income or loss each year an amount equal to the difference as of the close of the taxable year
between the fair market value of the stock and the U.S. holder’s adjusted basis in the stock. Losses would be allowed only to the extent
of net mark-to-market gain previously included in income by the U.S. holder under the election for prior taxable years. A U.S. holder’s
adjusted basis in the ADRs will be adjusted to reflect the amounts included or deducted with respect to the mark-to-market election. If
the mark-to-market election were made, the rules set forth in the second preceding paragraph would not apply for periods covered by the
election. A mark-to-market election will not apply during any later taxable year in which the Company does not satisfy the tests to be a
PFIC. In general, the ADRs will be marketable stock if the ADRs are traded, other than in de minimis quantities, on at least 15 days
during each calendar quarter on a national securities exchange that is registered with the SEC or on a designated national market system
or on any exchange or market that the Treasury Department determines to have rules sufficient to ensure that the market price accurately
represents the fair market value of the stock. Under current law, the mark-to-market election may be available to U.S. holders of ADRs
because the ADRs are listed on the NASDAQ Capital Market, which constitutes a qualified exchange, although there can be no
assurance that the ADRs will be “regularly traded” for purposes of the mark-to-market election or that the ADRs will continue to be
listed on the NASDAQ Capital Market.
Given the complexities of the PFIC rules and their potentially adverse tax consequences, U.S. holders of ADRs are urged to
consult their tax advisers about the PFIC rules, including the availability of, and consequences to them of making a QEF election or a
mark-to-market election with respect to the Ordinary Shares in the event that the Company is classified as a PFIC for any taxable year.
Medicare Surtax on Net Investment Income
Non-corporate US Holders whose income exceeds certain thresholds generally will be subject to 3.8% surtax on their “Net
Investment Income” (which generally includes, among other things, dividends on, and capital gain from the sale or other taxable
disposition of, the ADRs). Absent an election to the contrary, if a QEF election is available and made, QEF inclusions will not be
included in net investment income at the time a US Holder includes such amounts in income, but rather will be included at the time
distributions are received or gains are recognised. Non-corporate US Holders should consult their own tax advisors regarding the
possible effect of such tax on their ownership and disposition of the Common Shares, in particular the applicability of this surtax with
respect to a non-corporate US Holder that makes a QEF or mark-to-market election in respect of their Common Shares.
Information Reporting and Backup Withholding
Dividends paid on, and proceeds from the sale or other disposition of, an ADR to a U.S. holder generally may be subject to
information reporting requirements and may be subject to backup withholding unless the U.S. holder provides an accurate taxpayer
identification number or otherwise establishes an exemption. The amount of any backup withholding collected from a payment to a U.S.
holder will be allowed as a credit against the U.S. holder’s U.S. federal income tax liability and may entitle the U.S. holder to a refund,
provided certain required information is furnished to the Internal Revenue Service. A non-U.S. holder generally will be exempt from
these information reporting requirements and backup withholding tax but may be required to comply with certain certification and
identification procedures in order to establish its eligibility for exemption.
Under U.S. federal income tax law and U.S. Treasury Regulations, certain categories of U.S. holders must file information
returns with respect to their investment in, or involvement in, a foreign corporation. For example, all U.S. holders of PFIC stock are
generally required to make annual return filings reporting their PFIC ownership and certain other information that the IRS may require.
U.S. holders are urged to consult with their own tax advisors concerning such reporting requirements.
Reporting Obligations of Individual Owners of Foreign Financial Assets
Section 6038D of the Code generally requires U.S. individuals (and possibly certain entities that have U.S. individual owners) to file
IRS Form 8938 if they hold certain “specified foreign financial assets,” the aggregate value of which exceeds $50,000. The definition of
specified foreign financial assets includes not only financial accounts maintained in foreign financial institutions, but also, unless held in
accounts maintained by a financial institution, any stock or security issued by a non-US. person, any financial instrument or contract
held for investment that has an issuer or counterparty other than a U.S. person and any interest in a foreign entity.
71
Item 10. Additional Information (Cont.)
Item 10.E Taxation (Cont.)
THE DISCUSSION ABOVE IS NOT INTENDED TO CONSTITUTE A COMPLETE ANALYSIS OF ALL TAX
CONSIDERATIONS APPLICABLE TO AN INVESTMENT IN ADRs. HOLDERS AND POTENTIAL HOLDERS ARE URGED TO
CONSULT THEIR OWN TAX ADVISERS CONCERNING THE TAX CONSEQUENCES RELEVANT TO THEM IN THEIR
PARTICULAR SITUATION.
Item 10.F Dividends and Paying Agents
No dividends have been paid by the Company or recommended by the directors since the end of the previous financial year.
Item 10.G Statement by Experts
Not applicable.
Item 10.H Documents on Display
The documents concerning the Company which are referred to in this Annual Report may be inspected at the offices of the
Company at 60-66 Hanover Street, Fitzroy, Victoria 3065 Australia. As a “foreign private issuer” we are subject to the information
requirements of the U.S. Securities Exchange Act of 1934, as amended, and, in accordance therewith, we are required to file reports,
including annual reports on Form 20-F, and other information with the U.S. Securities and Exchange Commission in electronic form.
Any filings we make electronically are available to the public over the Internet at the Commission’s website at http://www.sec.gov. We
also maintain a website at www.gtglabs.com. Information on our website and websites linked to it do not constitute a part of this Annual
Report.
Item 10.I Subsidiary Information
Not applicable.
Item 11. Quantitative and Qualitative Disclosures about Market Risk
Our market risk relates primarily to exposure to changes in foreign currency exchange rates and interest rates. Refer Note 28 of
the attached financial statements for further analysis surrounding market risk.
Interest Rate Risk. As of June 30, 2021, we had A$20,902,282 in cash and cash equivalents of which A$12,959,979 was
subject to interest rate risk. Interest income earned on the cash balances is affected by changes in the levels of market interest rates. We
invest excess cash in interest-bearing, investment-grade securities and time deposits in high-quality institutions. We do not utilise
derivative financial instruments, derivative commodity instruments, positions or transactions in any material matter.
Accordingly, we believe that, while the investment-grade securities and time-deposits we hold are subject to changes in financial
standing of the issuer of such securities, the principal is not subject to any material risks arising from changes in interest rates, foreign
currency exchange rates, commodity prices, equity prices or other market changes that affect market risk sensitive instruments. Since we
hold cash and cash equivalents in Banks which are located outside Australia, we are subject to certain cross-border risks, though due to
the size of the holdings these risks are not generally significant.
72
Item 11. Quantitative and Qualitative Disclosures about Market Risk (Cont.)
Foreign Currency Exchange Rate Risk. We operate in Australia with active operations in the U.S.A. and are accordingly
subject to certain foreign currency exposure. This includes foreign-currency denominated receivables, payables, debt, and other balance
sheet positions as well as future cash flows resulting from anticipated transactions including intra-company transactions. Historically,
currency translation gains and losses have been reflected as adjustments to stockholders’ equity, while transaction gains and losses have
been reflected as components of income and loss. Transaction gains and losses could be material depending upon changes in the
exchange rates between the Australian dollar and the U.S. dollar. A significant amount of our current revenue is denominated in U.S.
dollars which provides us with a limited natural hedge against exchange rate movements.
Item 12. Description of Securities Other Than Equity Securities
Item 12.A Debt Securities
Not applicable.
Item 12.B Warrants and Rights
Not applicable.
Item 12.C Other Securities
Not applicable
73
Item 12. Description of Securities Other Than Equity Securities (Cont.)
Item 12.D American Depositary Shares Fees and Charges Payable by ADS Holders
The table below summarises the fees and charges that a holder of our ADSs may have to pay, directly or indirectly, to our
depositary, The Bank of New York Mellon, or BNYM, pursuant to the Deposit Agreement, which was filed as Exhibit 2.1 to our
Registration Statement on Form F-6 filed with the SEC on January 14, 2002, and the types of services and the amount of the fees or
charges paid for such services. The disclosure under this heading “Fees and Charges Payable by ADS Holders” is subject to and
qualified in its entirety by reference to the full text of the Deposit Agreement. The holder of an ADS may have to pay the following fees
and charges to BNYM in connection with ownership of the ADS:
Persons Depositing or Withdrawing Shares Must
Pay:
For:
● US$5.00 (or less) per 100 ADSs (or portion of 100 ADSs)
● Issuance of ADSs, including issuances resulting from a
distribution of shares or rights or other property
● Cancellation of ADSs for the purpose of withdrawal, including
if the deposit agreement terminates
● US$0.02 (or less) per ADS
● Any cash distribution to you
● A fee equivalent to the fee that would be payable if securities
distributed to you had been shares and the shares had been
deposited for issuance of ADSs
● Distribution of securities distributed to holders of deposited
securities which are distributed by the depositary to ADS holders
● US$1.50 (or less) per ADR
● Expenses of the depositary
● Transfers, combination and split-up of ADRs
● Cable, telex and facsimile transmissions (when expressly
provided in the deposit agreement)
● Converting foreign currency to U.S. dollars
The depositary collects its fees for issuance and cancellation of ADSs directly from investors depositing shares or surrendering
ADSs for the purpose of withdrawal or from intermediaries acting for them. The depositary collects fees for making distributions to
investors by deducting those fees from the amounts distributed or by selling a portion of distributable property to pay the fees. The
depositary may collect its annual fee for depositary services by deduction from cash distributions or by directly billing investors or by
charging the book-entry system accounts of participants acting for them. The depositary may generally refuse to provide fee-attracting
services until its fees for those services are paid.
74
PART II
Item 13. Defaults, Dividend Arrearages and Delinquencies
Not applicable.
Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds
Not applicable.
Item 15. Controls and Procedures
Item 15.A Disclosure controls and procedures
We maintain disclosure controls and procedures as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities
Exchange Act of 1934 (the “Exchange Act”), as amended, that are designed to ensure that information required to be disclosed in the
reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarised and reported within the
time periods specified in the rules and forms of the Securities and Exchange Commission. Disclosure controls and procedures include,
without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted
under the Securities Exchange Act of 1934 is accumulated and communicated to management, including our Chief Executive Officer
and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
Our Management, including our Chief Executive Officer and Chief Financial Officer, believes that our disclosure controls and
procedures or our internal control over financial reporting are designed and operated to be effective at the reasonable assurance level.
However, our Management does not expect that our disclosure controls and procedures and our internal control over financial reporting
will prevent all error and fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not
absolute, assurance that the objectives of the control system are met. Additionally, the design of a control system must reflect the fact
that there are resource constraints, and the benefit of controls must be considered relative to their costs. Because of the inherent
limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud,
if any, have been detected or that our control system will operate effectively under all circumstances. Moreover, the design of any
system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any
design will succeed in achieving its stated goals under all potential future conditions.
Our Management has carried out an evaluation, under the supervision and with the participation of our Chief Executive Officer
and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures as of June 30, 2021. Based on that evaluation,
the Chief Executive Officer and the Chief Financial Officer concluded that the Company’s disclosure controls and procedures were
effective as of June 30, 2021 due to the remediation of material weaknesses in internal control over financial reporting identified as of
June 30, 2020 described in Item 15.B below.
Item 15.B Management’s annual report on internal control over financial reporting
Our Management is responsible for establishing and maintaining adequate internal control over financial reporting. The
Securities Exchange Act of 1934 defines internal control over financial reporting in Rules 13a-15(f) and 15d-15(f) as a process designed
by, or under the supervision of, the Company’s Chief Executive Officer and Chief Financial Officer effected by the Company’s Board
of Directors, Management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those
policies and procedures that:
● Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the
assets of the Company;
● Provide reasonable assurance that transactions are recorded as necessary to permit the preparation of financial statements in
accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only
in accordance with authorisations of Management and directors of the Company; and
● Provide reasonable assurance regarding prevention or timely detection of unauthorised acquisition, use or disposition of the
Company’s assets that could have a material effect on the consolidated financial statements.
75
Item 15. Controls and Procedures (Cont.)
Item 15.B Management’s annual report on internal control over financial reporting (Cont.)
Our Management, under the supervision and with participation of our Chief Executive Officer and Chief Financial Officer, has assessed
the effectiveness of the Company’s internal control over financial reporting as of June 30, 2021. In making this assessment,
Management used the criteria set forth by the Committee of Sponsoring Organisations of the Treadway Commission, or COSO, in
Internal Control-Integrated Framework (2013).
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there
is a reasonable possibility that a material misstatement of the annual financial statements will not be prevented or detected on a timely
basis.
As of June 30, 2020. we did not maintain an adequate segregation of duties with respect to internal control over financial reporting,
specifically including the following:
● We had limited accounting personnel to enable controls to be designed and implemented which sufficiently and consistently
evidence an independent review of complex financial reporting matters.
The control deficiencies were pervasive in nature and could impact all significant accounts and critical accounting estimates.
The control deficiencies resulted in audit adjustments to the Company’s consolidated financial statements for the year ended June 30,
2020. Additionally, these control deficiencies could result in misstatements of the Company’s consolidated financial statements or
disclosures that would result in a material misstatement of the annual consolidated financial statements that would not be prevented or
detected. Accordingly, our Management determined that these control deficiencies constituted a material weakness as of June 30, 2020.
We implemented improved systems of internal control through increased segregation of duties within its financial accounting
and reporting team by adding suitably professionally qualified resources and improving the management and oversight of its financial
reporting systems. The Company also engaged an external professional firm to conduct independent reviews of our internal controls
reporting to the Company’s Audit Committee. This remediation of the material weakness described above has led our Management to
conclude that, as of June 30, 2021, the Company did maintain effective internal control over financial reporting based on criteria in
Internal Control - Integrated Framework (2013) issued by the COSO.
This Annual Report does not include an attestation report of the Company’s registered public accounting firm regarding
internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public
accounting firm pursuant to rules of the Securities and Exchange Commission that permit the Company to provide only Management’s
report in this Annual Report.
Item 15.C Attestation report of the registered public accounting firm
Not applicable.
Item 15.D Changes in Internal Control over Financial Reporting
The remediation activities described below are changes in internal control over financial reporting during the year ended June
30, 2021, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial
reporting.
Remediation efforts
Segregation of duties. We are committed to continuously improving our internal control over financial reporting. We have remediated
the material weakness that was identified as of June 30, 2020, by implementing the following:
● Completed migration of our accounting systems to a cloud-based system (XERO), which provides the accounting team and the
CFO with a systematic process for preparing and reviewing the underlying journal entries, invoices, payments and
reconciliations. Appropriate access rights are maintained within XERO to formally enforce segregation of duties within the
accounting system.
● Continuous engagement with a professional service firm called The CFO Solution, who have standard internal review
procedures to ensure quality of accounting data and review over complex financial reporting matters.
● Engaged independent specialists for more complex financial reporting matters when needed, such as valuation of warrants that
have embedded derivatives.
76
Item 15. Controls and Procedures (Cont.)
Item 15.D Changes in Internal Control over Financial Reporting (Cont.)
● Established an internal control of a preparer of the accounting data and reviewer, through implementation of workpapers
wherein the accounting data is prepared and reviewed on a monthly basis by segregated staff and signed off by The CFO
Solution team.
● Engaged independent professional firm to assess and report on the effectiveness of internal controls to the Audit Committee
Although these measures have remediated the previously identified segregation of duties control deficiency, the Company will
continue to assess the effectiveness of the design of the controls and implement additional internal controls procedures over financial
reporting and test their operating effectiveness over a period of time.
Item 16.A Audit Committee Financial Expert
On September 2, 2019, the Company has appointed Mr. Nick Burrows to the Board as an independent Non-Executive Director.
Mr. Burrows is a financial expert and hence the Company subsequently appointed Mr. Burrows as the Chairman of the Audit Committee
replacing Mr. Peter Rubinstein, former Chairman of the Audit Committee.
Item 16.B Code of Ethics
We have adopted a Code of Ethics (styled “Code of Conduct”) that applies to all of our Directors and employees, including our
principal executive officer, principal financial officer and principal accounting officer or controller. The Code can be downloaded at our
website (www.gtglabs.com). Additionally, any person, upon request, can ask for a hard copy or electronic file of the Code. If we make
any substantive amendment to the Code or grant any waivers, including any implicit waiver, from a provision of the Code, we will
disclose the nature of such amendment or waiver on our website. During the year ended June 30, 2021, no such amendment was made,
or waiver granted.
Item 16.C Principal Accountant Fees and Services
The following table sets forth the fees billed to us by our Independent Registered Public Accounting Firms, Grant Thornton
Audit Pty Ltd and PricewaterhouseCoopers, during the financial years ended June 30, 2021 and 2020, respectively:
Services rendered
PricewaterhouseCoopers in respect of:
Audit fees (1)
Audit-related fees (2)
Tax fees (3)
All other fees (4)
Grant Thornton Audit Pty Ltd in respect of:
Audit fees (1)
Audit-related fees (2)
Tax fees (3)
All other fees (4)
Consolidated
2021
$
2020
$
72,500
—
—
—
168,333
—
—
65,000
274,000
200,000
—
—
—
—
—
—
(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 such as comfort
letters.
(2) Audit-related fees consist of fees billed for assurance and related services that generally only the statutory auditor could
reasonably provide to a client. Included in the balance are amounts related to additional regulatory filings during the 2021
and 2020 financial year. All services provided are considered audit services for the purpose of SEC classification.
(3) Tax fees include fees for all tax services other than those included in “Audit Fees” and “Audit-Related Fees”. This category
includes fees for tax compliance, tax advice and tax planning.
(4) All other fees consist of fees billed for financial and information technology due diligence services in respect of the
Company’s acquisition of the business and assets associated with the EasyDNA brand that completed on August 13th, 2021
Audit Committee Pre-Approval Policies and Procedures
Our Board of Directors has established pre-approval and procedures for the engagement of its Independent Registered Public
Accounting Firm for audit and non-audit services. The Board of Directors reviews the scope of the services to be provided, before their
commencement, in order to ensure that there are no independence issues and the services are not prohibited services, as defined by the
Sarbanes-Oxley Act of 2002. The Board of Directors has considered advice received from the audit committee and is satisfied that the
provision of the non-audit services is compatible with the general standard of independence for auditors imposed by the Corporations
Act 2001. The directors are satisfied that the provision of the non-audit services as set out above, did not compromise the auditor
independence requirements of the Corporations Act 2001 because the services are not deemed to undermine the general principles
relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants.
77
Item 16.D Exemptions from the Listing Standards for Audit Committees
Not applicable.
Item 16.E Purchases of Equity Securities by the Issuer and Affiliated Purchasers
Not applicable.
Item 16.F Change in Registrant’s Certifying Accountant
Not applicable.
Item 16.G Corporate Governance
Refer to Item 6C regarding the Company’s Corporate Governance practices and the key differences between the Listing Rules
of the Australian Securities Exchange and NASDAQ’s Marketplace Rules as they apply to us.
Item 16.H Mine Safety Disclosure
Not applicable.
Item 16.I Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable.
78
PART III
Item 17. Financial Statements
The Company has responded to Item 18 in lieu of responding to this Item.
Item 18. Financial Statements
The full text of the Company’s audited financial statements for the fiscal years ended June 30, 2021 and 2020 begins on page F-1 of this
Annual Report on Form 20-F.
Australian Disclosure Requirements
Directors’ Declaration
In the directors’ opinion:
(a) the financial statements and Notes set out on pages 86 to 150 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 June 30, 2021 and of its
performance for the fiscal 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.
Note 1 ‘Basis of preparation’ 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 required by section
295A of the Corporations Act 2001.
This declaration is made in accordance with a resolution of the directors.
/s/ Peter Rubinstein
Chairman
Melbourne, August 31, 2021
Item 19. Exhibits
The following documents are filed as exhibits to this Annual Report on Form 20-F:
Constitution of the Registrant (incorporate by reference to Exhibit 1.1 to the Company’s Registration Statement on Form
20-F filed with the Commission on December 21, 2010)
Deposit Agreement, dated as of January 14, 2002, by and among Genetic Technologies Limited, The Bank of New York
Mellon, as Depositary, and the Owners and Holders of American Depositary Receipts (such agreement is incorporated herein
by reference to the Registration Statement on Form F-6 relating to the ADSs (File No. 333-14270) filed with the Commission
on January 14, 2002).
Description of Securities (incorporate by reference to Exhibit 4.1 to the Company’s Annual Report on Form 20-F filed with
the Commission on October 22, 2020)
Form of American Depositary Receipt (incorporated by reference to Rule 424(b)(3) filing (File No. 333-183861), filed with
the Commission on August 15, 2019)
Form of Warrant issued on May 23, 2019 (incorporated by reference to Exhibit 10.3 of the Company’s Report on Form 6-K
filed with the Commission on May 23, 2019)
Form of Compensation Warrant issued on April 3, 2020 (incorporated by reference to Exhibit 10.3 of the Company’s Report
on Form 6-K filed with the Commission on April 2, 2020)
Form of Pre-funded Warrant (incorporate by reference to Exhibit 4.5 to the Company’s registration statement on Form F-1/A
filed on May 12, 2020)
Form of Placement Agent Warrant (incorporate by reference to Exhibit 4.6 to the Company’s registration statement on Form
F-1/A filed on May 12, 2020)
Staff Share Plan 2001 dated November 30, 2001 (incorporate by reference to Exhibit 4.2 to the Company’s Registration
Statement on Form 20-F filed with the Commission on August 19, 2005)
Master Collaboration Agreement, dated September 13, 2019, between Genetic Technologies Limited and The Translational
Genomics Research Institute (incorporate by reference to Exhibit 10.4 to the Company’s registration statement on Form
F-1/A filed on December 18, 2019)
Exhibit A-1 entered into under Master Collaboration Agreement, dated September 13, 2019, between Genetic Technologies
Limited and The Translational Genomics Research Institute (incorporate by reference to Exhibit 10.5 to the Company’s
registration statement on Form F-1/A filed on December 18, 2019)
1.1
2.1
2.2
2.3
2.4
2.5
2.6
2.7
2.8
4.1
4.2
4.3
Form of Securities Purchase Agreement dated as of May 22, 2019, between Genetic Technologies Limited and the investors
listed therein (incorporated by reference to Exhibit 10.2 of the Company’s Report on Form 6-K filed with the Commission on
May 23, 2019)
Form of Securities Purchase Agreement dated as of April 1, 2020, between Genetic Technologies Limited and the investors
listed therein (incorporated by reference to Exhibit 10.1 of the Company’s Report on Form 6-K filed with the Commission on
April 2, 2020)
Placement Agent Agreement effective March 30, 2020 (incorporated by reference to Exhibit 10.2 of the Company’s Report
on Form 6-K filed with the Commission on April 2, 2020)
Form of Securities Purchase Agreement (incorporate by reference to Exhibit 10.9 to the Company’s registration statement on
Form F-1/A filed on May 12, 2020)
4.4
4.5
4.6
79
Item 19. Exhibits (Cont.)
4.7
4.8
4.9
4.10
4.11
4.12
4.13
Renewal of Lease over premises in Fitzroy, Victoria, Australia with an effective date of September 1, 2018 (incorporated by
reference to 20-F filed October 3, 2019)
Form of Securities Purchase Agreement dated July 16, 2020 (incorporated by reference to Exhibit 10.1 of the Company’s
Report on Form 6-K filed with the Commission on July 20, 2020)
Form of Securities Purchase Agreement dated January 21, 2021 (incorporated by reference to Exhibit 10.1 of the Company’s
Report on Form 6-K filed with the Commission on January 5, 2021)
Sale of Business Agreement dated July 18, 2021
Registration Rights Agreement dated August 12, 2021
Non-Solicitation Agreement dated July 18, 2021
Escrow Agreement dated August 12, 2021
12.01
Section 302 Certification of the Chief Executive Officer
12.02
Section 302 Certification of the Chief Financial Officer
13.01
Section 906 Certification of the Chief Executive Officer
13.02
Section 906 Certification of the Chief Financial Officer
15.1
15.2
15.3
15.4
15.5
Consent of Grant Thornton
Consent of PricewaterhouseCoopers
Appendix 4E
Auditor’s Independence Declaration
Independent Auditor's Report
101.INS
XBRL Instance Document
101.SCH
XBRL Schema Document
101.CAL
XBRL Calculation Linkbase Document
101.DEF
XBRL Definition Linkbase Document
101.LAB
XBRL Labels Linkbase Document
101.PRE
XBRL Presentation Linkbase Document
104
Cover Page Interactive Data File (embedded within the Inline XBRL document)
80
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and
authorised the undersigned to sign this Annual Report on its behalf.
SIGNATURES
Dated: August 31, 2021
GENETIC TECHNOLOGIES LIMITED
/s/ Simon Morriss
By:
Name: Simon Morriss
Title: Chief Executive Officer
81
GENETIC TECHNOLOGIES LIMITED
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
2021 Financial Report
Genetic Technologies Limited - Report of Independent Registered Public Accounting Firm.
Genetic Technologies Limited - Consolidated Statements of Profit or Loss and Other Comprehensive Income/(Loss) for the
years ended June 30, 2021, 2020 and 2019.
Genetic Technologies Limited - Consolidated Balance Sheets as of June 30, 2021 and 2020.
Genetic Technologies Limited - Consolidated Statements of Cash Flows for the years ended June 30, 2021, 2020 and 2019.
Genetic Technologies Limited - Consolidated Statements of Changes in Equity for the years ended June 30, 2021, 2020 and
2019.
Genetic Technologies Limited - Notes to Consolidated Financial Statements.
82
Page
F-1
F-4
F-5
F-6
F-7
F-8
This Page has purposefully been left blank
F-1
This Page has purposefully been left blank
F-2
This Page has purposefully been left blank
F-3
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE
INCOME/(LOSS)
For the year ended June 30, 2021
(in Australian dollars, except number of shares)
Revenue from operations
Genetic testing services
Less: cost of sales
Gross loss from operations
Other income
Selling and marketing expenses
General and administrative expenses
Laboratory, research and development costs
Finance costs
Other gains/(losses)
Loss from operations before income tax
Income tax expense
Loss for the year
Other comprehensive income/(loss)
Exchange gains/(losses) on translation of controlled foreign
operations
Other comprehensive income/(loss) for the year, net of
tax
Total comprehensive loss for the year
Loss per share (cents per share)
Basic and diluted net loss per ordinary share
Weighted-average shares outstanding
Year ended
June 30, 2021
$
Year ended
June 30, 2020
$
Year ended
June 30, 2019
$
Note
4
5
7
8
9
9
120,554
(361,027)
(240,473)
1,564,456
(1,119,851)
(4,158,319)
(3,109,383)
(14,049)
—
(7,077,619)
—
(7,077,619)
9,864
(251,511)
(241,647)
1,140,647
(637,295)
(4,058,557)
(2,477,578)
(14,823)
(5,522)
(6,294,775)
—
(6,294,775)
25,444
(276,267)
(250,823)
1,019,769
(576,077)
(3,830,198)
(2,360,762)
(20,031)
(407,482)
(6,425,604)
—
(6,425,604)
(37,468)
(33,175)
23,668
(37,468)
(7,115,087)
(33,175)
(6,327,950)
23,668
(6,401,936)
(0.08)
8,544,157,979
(0.15)
4,155,017,525
(0.24)
2,635,454,870
The company revised the previous audited financial statements to reflect the correction of an immaterial error. See Note 2(a)(v) for
additional information.
The above consolidated statement of profit or loss and other comprehensive income/(loss) should be read in conjunction with the
accompanying notes.
F-4
CONSOLIDATED BALANCE SHEETS
As at June 30, 2021
(in Australian dollars)
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Other current assets
Total current assets
Non-current assets
Right-of-use assets
Property, plant and equipment
Other non-current assets
Total non-current assets
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Deferred income
Provisions
Lease liabilities
Total current liabilities
Non-current liabilities
Provisions
Borrowing
Lease liabilities
Total non-current liabilities
Total liabilities
Net assets
EQUITY
Contributed equity
Reserves
Accumulated losses
Total equity
Note
2021
$
2020
$
10
11
12
17
13
14
15
17
15
16
17
18
19
20
20,902,282
1,074,325
76,927
182,580
22,236,114
180,528
457,178
97,868
735,574
22,971,688
760,350
635
464,770
179,626
1,405,381
8,860
—
24,412
33,272
1,438,653
21,533,035
14,214,160
789,354
91,390
97,845
15,192,749
397,945
42,285
—
440,230
15,632,979
723,724
—
432,933
240,915
1,397,572
1,927
52,252
188,621
242,800
1,640,372
13,992,607
153,574,974
11,033,279
(143,075,218)
21,533,035
140,111,073
9,928,571
(136,047,037)
13,992,607
The above consolidated balance sheets should be read in conjunction with the accompanying notes.
The company revised the previous audited financial statements to reflect the correction of an immaterial error. See Note 2(a)(v) for
additional information.
F-5
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended June 30, 2021
(in Australian dollars)
Cash flows from/(used in) operating activities
Receipts from customers
Payments to suppliers and employees
R&D tax incentive and other grants received
Net cash flows (used in) operating activities
Cash flows from/(used in) investing activities
Proceeds from the sale of plant and equipment
Proceeds from sale of financial assets at fair value through other
comprehensive income
Purchases of plant and equipment
Interest received
Payments for investments in related parties
Net cash flows from/(used in) investing activities
Cash flows from/(used in) financing activities
Proceeds from the issue of shares
Equity transaction costs
Proceeds from borrowings
Principal elements of lease payments
Interest paid
Net cash flows from financing activities
Net (decrease)/ increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Net foreign exchange difference
Cash and cash equivalents at end of year
10
Note
2021
$
Consolidated
2020
$
121,190
(7,747,186)
1,330,067
(6,295,929)
9,864
(6,758,484)
1,036,522
(5,712,098)
—
—
(748,706)
—
—
(748,706)
15,897,629
(1,956,691)
—
(236,893)
(14,049)
13,689,996
6,645,361
14,214,160
42,761
20,902,282
37,000
43,380
(38,100)
22,507
—
64,787
21,793,678
(3,215,174)
52,252
(183,907)
(86,503)
18,360,346
12,713,035
2,131,741
(630,616)
14,214,160
2019
$
204,768
(6,575,163)
297,213
(6,073,182)
—
—
(50,309)
25,849
(500,000)
(524,460)
3,557,509
(431,347)
—
—
—
3,126,162
(3,471,480)
5,487,035
116,186
2,131,741
The above consolidated statements of cash flows should be read in conjunction with the accompanying notes.
F-6
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
For the year ended June 30, 2021
(in Australian dollars)
Balance at June 30, 2018
Loss for the year
Other comprehensive income
Total comprehensive loss
Transactions with owners in their capacity as
owners
Contributions of equity, net of transaction costs and
tax
Share-based payments
Issue of options/warrants to underwriters
Balance at June 30, 2019
Initial adoption of IFRS 16
Restated total equity at July 1, 2019
Loss for the year
Other comprehensive income
Total comprehensive loss
Transactions with owners in their capacity as
owners
Contributions of equity, net of transaction costs and
tax
Share-based payments
Reversal of forfeited Performance Rights
Issue of options/warrants to underwriters
Balance at June 30, 2020
Loss for the year
Other comprehensive income
Total comprehensive loss
Transactions with owners in their capacity as
owners
Contributions of equity, net of transaction costs and
tax
Exercise of options/warrants
Share-based payments
Revaluation of warrants
Issue of performance rights
Options expired
Issue of options/warrants
Balance at June 30, 2021
Contributed equity
$
Reserves
$
Accumulated losses
$
Total equity
$
122,372,662
—
—
—
5,651,162
—
23,668
23,668
(123,311,946)
(6,425,604)
—
(6,425,604)
4,711,878
(6,425,604)
23,668
(6,401,936)
3,126,162
—
—
3,126,162
125,498,824
—
125,498,824
—
—
—
14,612,249
—
—
—
14,612,249
140,111,073
—
—
—
11,764,379
1,699,522
—
—
—
—
—
13,463,901
153,574,974
—
341,201
(6,099)
335,102
6,009,932
—
6,009,932
—
(33,175)
(33,175)
—
263,387
(81,984)
3,770,411
3,951,814
9,928,571
—
(37,468)
(37,468)
—
(973,467)
—
—
622,725
(49,438)
1,542,356
1,142,176
11,033,279
—
—
—
—
(129,737,550)
(14,712)
(129,752,262)
(6,294,775)
—
(6,294,775)
—
—
—
—
—
(136,047,037)
(7,077,619)
—
(7,077,619)
—
—
—
—
—
49,438
—
49,438
(143,075,218)
3,126,162
341,201
(6,099)
3,461,264
1,771,206
(14,712)
1,756,494
(6,294,775)
(33,175)
(6,327,950)
14,612,249
263,387
(81,984)
3,770,411
18,564,063
13,992,607
(7,077,619)
(37,468)
(7,115,087)
11,764,379
726,055
—
—
622,725
—
1,542,356
14,655,515
21,533,035
The above consolidated statements of changes in equity should be read in conjunction with the accompanying notes.
The company revised the previous audited financial statements to reflect the correction of an immaterial error. See Note 2(a)(v) for
additional information.
F-7
NOTES TO THE FINANCIAL STATEMENTS
For the year ended June 30, 2021
1. CORPORATE INFORMATION
Genetic Technologies Limited (the “Company”) is a molecular diagnostics company that offers predictive genetic testing and risk
assessment tools. The Financial Report of the Company for the year ended June 30, 2021 was authorised for issue in accordance with a
resolution of the Directors dated on August 31, 2021 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
(i) Compliance with International Financial Reporting Standards as issued by the International Accounting Standards Board
The general purpose financial statements of Genetic Technologies Limited and its subsidiaries have been prepared in accordance
with International Financial Reporting Standards, as issued by the International Accounting Standards Board and Australian
equivalent International Financial Reporting Standards, as issued by the Australian Accounting Standards Board. Genetic
Technologies Limited is a for-profit entity for the purpose of preparing the financial statements.
(ii) Historical cost convention
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.
(iii) 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 Company’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.
(iv) Going concern
For the year ended June 30, 2021, the Company incurred a total comprehensive loss of $7,115,087 (2020: $6,327,950) and net cash
outflow from operations of $6,295,929 (2020: $5,712,098). As at June 30, 2021, the Company held total cash and cash equivalents
of $20,902,282 and total net current assets of $20,830,733.
The Company expects to continue to incur losses and cash outflows for the foreseeable future as it continues to invest resources in
expanding the research and development activities in support of the distribution of existing and new products. Following two
successful capital raises during the financial year, the Company has $20,902,282 cash and cash equivalents as at June 30, 2021. In
the Directors’ opinion this will underpin the Company’s funding requirements for approximately two years. As a result, the
financial statements have been prepared on a going concern basis.
(v) Immaterial correction of error – previous year
During the year ended June 30, 2021, the Company identified an error and retrospectively revised the accounting for its
representative warrants as described below.
Representative warrants
Genetic Technologies Limited raised capital in April 2020 and May 2020, and representative warrants were included as part of
these public offerings. These representative warrants had been accounted for as a financial liability and was subsequently adjusted
to fair value at each subsequent reporting date.
The Company determined that these representative warrants originally classified as a financial liability should have been accounted
for as an equity-settled share-based payment in the consolidated financial statements as of and for the year ended June 30, 2020.
The Company assessed the effects of this correction based on both quantitative and qualitative factors and determined that the
correction was not material. Accordingly, the Company corrected the errors as of and for the year ended June 30, 2020 in the
accompanying consolidated financial statements and related footnotes.
The below tables summarise the adjustments that were made to correct the immaterial errors for the periods presented.
Extract from the Consolidated Statements of Profit or Loss and Other Comprehensive Income/(Loss)
Fair value gains on financial instruments
Loss from operations before income tax
Loss for the year
Total comprehensive loss for the year
Loss per share (cents per share)
Basic and diluted net loss per ordinary share
Weighted-average shares outstanding
Extract from the Consolidated Balance Sheet
Year ended June
30, 2020
$
Revision
$
Year ended June
30, 2020 Revised
$
195,845
(6,098,930)
(6,098,930)
(6,132,105)
(0.15)
4,155,017,525
(195,845)
(195,845)
(195,845)
(195,845)
—
(6,294,775)
(6,294,775)
(6,327,950)
(0.15)
4,155,017,525
2020
Revision
2020 Revised
Non-Current Liabilities
Other financial liabilities
Total Non-Current Liabilities
TOTAL LIABILITIES
NET ASSETS
EQUITY
Reserves
Accumulated losses
TOTAL EQUITY
$
$
$
977,237
1,220,037
2,617,609
13,015,370
8,755,489
(135,851,192)
13,015,370
F-8
(977,237)
(977,237)
(977,237)
977,237
1,173,082
(195,845)
977,237
—
242,800
1,640,372
13,992,607
9,928,571
(136,047,037)
13,992,607
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
(a) Basis of preparation (cont.)
Other Gains / (Losses)
Net foreign exchange gains/(losses)
Fair value gains on financial liabilities through profit or loss
Net impairment losses
Total other gains / (losses)
Loss per Share
Loss for the year attributable to the owners of Genetic
Technologies Limited
Weighted average number of Ordinary Shares used in
calculating loss per share (number of shares)
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
Add: Issue of options/warrants to underwriters
Less: Reversal of Performance Rights expenses in prior year
Balance at the end of the financial year
Accumulated Losses
2021
2020
$
Revision
$
2020 Revised
$
(5,522)
195,845
—
190,323
—
(195,845)
—
(195,845)
(5,522)
—
—
(5,522)
2020
$
Revision
$
2020 Revised
$
(6,098,930)
(195,845)
(6,294,775)
4,155,017,525
—
4,155,017,525
2020
$
Revision
$
2020 Revised
$
756,423
7,999,066
8,755,489
789,598
(33,175)
756,423
5,220,334
67,542
2,793,174
(81,984)
7,999,066
—
1,173,082
1,173,082
—
—
—
—
195,845
977,237
—
1,173,082
756,423
9,172,148
9,928,571
789,598
(33,175)
756,423
5,220,334
263,387
3,770,411
(81,984)
9,172,148
2020
$
Revision
$
2020 Revised
$
Balance at the beginning of the financial year
Add: Initial adoption of IFRS 16
Add: net loss attributable to owners of Genetic Technologies
Limited
Balance at the end of the financial year
(129,737,550)
(14,712)
(6,098,930)
(135,851,192)
—
—
(195,845)
(195,845)
(129,737,550)
(14,712)
(6,294,775)
(136,047,037)
F-9
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
(a) Basis of preparation (cont.)
(vi) New standards and interpretations
Software-as-a-Service arrangements
The IFRS Interpretations Committee (IFRIC) has issued two agenda decisions related to accounting for Software-as-a-Service
(SaaS) arrangements:
● In March 2019, the IFRIC considered the accounting for SaaS arrangements (the first agenda decision) and concluded that for
many such arrangements the substance is that the Company has contracted to receive services rather than the acquisition (or lease)
of software assets. This is because, in a cloud-based environment, the SaaS contract generally only gives the customer the right to
receive access to the cloud provider’s application software, rather than a license over the IP i.e. control over the software code itself.
● In April 2021, the IFRIC specifically considered how an entity should account for configuration and customisation costs incurred
in implementing these (SaaS) service arrangements. The IFRIC concluded (the second agenda decision) that these costs should be
expensed, unless the criteria for recognising a separate asset are met.
The Company has historically expensed costs related to SaaS arrangements. The impact of this decision has not had a material
impact on the Company’s financial statements.
(vii) New standards and interpretations not yet adopted
There are no standards that are not yet effective and that would be expected to have a material impact on the Company in the
current or future reporting years and on foreseeable future transactions.
F-10
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
(b) Principles of consolidation
(i) Subsidiaries
Subsidiaries are all entities (including structured entities) over which the Company has control. The Company controls an entity
when the Company is exposed to, or has rights to, variable returns from its involvement with the Company and has the ability to
affect those returns through its power to direct the activities of the Company. Subsidiaries are fully consolidated from the date on
which control is transferred to the Company. They are deconsolidated from the date that control ceases.
The acquisition method of accounting is used to account for business combinations by the Company.
Intercompany transactions, balances and unrealised gains on transactions between Company companies are eliminated. Unrealised
losses are also eliminated unless the transaction provides evidence of an impairment of the transferred asset. Accounting policies of
subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Company.
(c) Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker.
F-11
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
(d) Foreign currency translation
(i) Functional and presentation currency
Items included in the financial statements of each of the Company’s entities are measured using the currency of the primary
economic environment in which the Company operates (‘the functional currency’). The consolidated financial statements are
presented in Australian dollar ($), which is Genetic Technologies Limited’s functional and presentation currency.
(ii) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates at the dates of the transactions.
Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets
and liabilities denominated in foreign currencies at year end exchange rates are generally recognised in profit or loss.
Foreign exchange gains and losses that relate to borrowings are presented in the consolidated statement of profit or loss, within
finance costs. All other foreign exchange gains and losses are presented in the consolidated statement of profit or loss on a net basis
within other gains/(losses).
Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date when
the fair value was determined. Translation differences on assets and liabilities carried at fair value are reported as part of the fair
value gain or loss. For example, translation differences on non-monetary assets and liabilities such as equities held at fair value
through profit or loss are recognised in profit or loss as part of the fair value gain or loss and translation differences on non-
monetary assets such as equities classified as at fair value through other comprehensive income are recognised in other
comprehensive income.
(iii) Group companies
The results and financial position of foreign operations (none of which has the currency of a hyperinflationary economy) that have a
functional currency different from the presentation currency are translated into the presentation currency as follows:
● assets and liabilities for each consolidated balance sheet presented are translated at the closing rate at the date of that
consolidated balance sheet
● income and expenses for each consolidated statement of profit or loss and consolidated statement of profit or loss and other
comprehensive income are translated at average exchange rates (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), and
● all resulting exchange differences are recognised in other comprehensive income.
On consolidation, exchange differences arising from the translation of any net investment in foreign entities, and of borrowings and
other financial instruments designated as hedges of such investments, are recognised in other comprehensive income. When a
foreign operation is sold or any borrowings forming part of the net investment are repaid, the associated exchange differences are
reclassified to profit or loss, as part of the gain or loss on sale.
F-12
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
(e) Revenue recognition
Under IFRS 15, revenue is recognised based on contract with customers when performance obligations were satisfied. The
following recognition criteria must also be met before revenue is recognised:
Genetic testing revenues
The Company operates facilities which provide genetic testing services. Revenue from the provision molecular risk testing for
cancer (BREVAGenplus) is recognised at a point time when the Company has provided the customer with their test results, the
single performance obligation.
(f) Other income
(i) Interest income
Income is recognised as the interest accrues using the effective interest method.
(ii) Government Grants
The Australian government replaced the research and development tax concession with research and development (R&D) tax
incentive from July 1, 2011. The R&D tax incentive applies to expenditure incurred and the use of depreciating assets in an income
year commencing on or after July 1, 2011. A refundable tax offset is available to eligible companies with an annual aggregate
turnover of less than $20 million. Management has assessed the Company’s activities and expenditure to determine which are likely
to be eligible under the incentive scheme. The Company 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.
Income from government grants is recognised in the consolidated income statement on a systematic basis over the periods in which
the Company recognises as expense the related costs for which the grants are intended to compensate in accordance with IAS 20
Accounting for Government Grants and Disclosure of Government Assistance.
The receivable for reimbursable amounts that have not been collected is reflected in trade and other receivables on our consolidated
balance sheets.
F-13
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
(g) Income tax
The income tax expense or credit for the period is the tax payable on the current period’s taxable income based on the applicable
income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences
and to 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 and its subsidiaries and associates operate and generate taxable income. Management
periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to
interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.
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, deferred tax liabilities are not
recognised if they arise from the initial recognition of goodwill. Deferred income tax is also not accounted for if it arises from initial
recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects
neither accounting nor taxable profit or loss.
Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the end of the
reporting period 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 only if it is probable that future taxable amounts will be available to utilise those temporary
differences and losses.
Management has assessed the tax position of the Company and concluded that any potential uncertainty does not have a material
impact on the financial statements.
(h) Leases
Please refer to Note 17 for further information.
F-14
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
(i) Impairment of assets
The Company assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indication
exists, the Company 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 group 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.
F-15
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
(j) Cash and cash equivalents
For the purpose of presentation in the consolidated statement of cash flows, cash and cash equivalents includes cash on hand,
deposits held at call with financial institutions, other short-term, highly liquid investments with original maturities of three months
or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value, and
bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities in the consolidated balance sheet.
(k) Trade and other receivables
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest
method, less loss allowance.
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.
(l) Inventories
(i) Raw materials and stores, work in progress and finished goods
Raw materials and stores, work in progress and finished goods are stated at the lower of cost and net realisable value. Cost
comprises direct materials, direct labor and an appropriate proportion of variable and fixed overhead expenditure, the latter being
allocated on the basis of normal operating capacity. Costs are assigned to individual items of inventory on the basis of weighted
average costs. Costs of purchased inventory are determined after deducting rebates and discounts. Net realisable value is the
estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to
make the sale.
F-16
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
(m) Property, plant and equipment
Property, plant and equipment is stated at historical cost less accumulated depreciation. Historical cost includes expenditure that is
directly attributable to the acquisition of the items.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is
probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured
reliably. The carrying amount of any component accounted for as a separate asset is derecognised when replaced. All other repairs
and maintenance are charged to profit or loss during the reporting period in which they are incurred.
Depreciation is calculated using the straight-line method to allocate their cost or revalued amounts, net of their residual values, over
their estimated useful lives or, in the case of leasehold improvements and certain leased plant and equipment, the shorter lease term
as follows:
Plant and equipment
Furniture, fittings and equipment
Leasehold improvements
Leased plant and equipment
3 - 5 years
3 - 5 years
1 - 3 years (lease term)
3 years (lease term)
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.
An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its
estimated recoverable amount (note 2(i)).
Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in profit or loss.
When revalued assets are sold, it is Company policy to transfer any amounts included in other reserves in respect of those assets to
retained earnings.
(n) Trade and other payables
Trade payables and other payables are carried at amortised cost and represent liabilities for goods and services provided to the
Company prior to the end of the financial year that are unpaid and arise when the Company 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.
F-17
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
(o) Provisions
Provisions for legal claims, service warranties and make good obligations are recognised when the Company has a present legal or
constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation
and the amount can be reliably estimated. Provisions are not recognised for future operating losses.
Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by
considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any
one item included in the same class of obligations may be small.
Provisions are measured at the present value of management’s best estimate of the expenditure required to settle the present
obligation at the end of the reporting period. The discount rate used to determine the present value is a pre-tax rate that reflects
current market assessments of the time value of money and the risks specific to the liability. The increase in the provision due to the
passage of time is recognised as interest expense.
(p) Employee benefits
(i) Short-term obligations
Liabilities for wages and salaries, including non-monetary benefits, annual leave and accumulating sick leave that are expected to
be settled wholly within 12 months after the end of the period in which the employees render the related service are recognised in
respect of employees’ services up to the end of the reporting period and are measured at the amounts expected to be paid when the
liabilities are settled. The liabilities are presented as current employee benefit obligations in the balance sheet.
(ii) Other long-term employee benefit obligations
In some countries, the Company also has liabilities for long service leave and annual leave that are not expected to be settled wholly
within 12 months after the end of the period in which the employees render the related service. These obligations are therefore
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 high-quality corporate bonds with terms and currencies that match, as closely as possible, the estimated
future cash outflows. Remeasurements as a result of experience adjustments and changes in actuarial assumptions are recognised in
general and administrative expenses in profit or loss.
The obligations are presented as current liabilities in the balance sheet if the Company 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.
(q) Fair value measurement
When an asset or liability, financial or non-financial, is measured at fair value for recognition or disclosure purposes, the fair value
is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date; and assumes that the transaction will take place either: in the principal market; or in the
absence of a principal market, in the most advantageous market.
Fair value is measured using the assumptions that market participants would use when pricing the asset or liability, assuming they
act in their economic best interests. For non-financial assets, the fair value measurement is based on its highest and best use.
Valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, are
used, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.
F-18
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
Assets and liabilities measured at fair value are classified into three levels, using a fair value hierarchy that reflects the significance
of the inputs used in making the measurements. Classifications are reviewed at each reporting date and transfers between levels are
determined based on a reassessment of the lowest level of input that is significant to the fair value measurement.
Fair value hierarchy levels 1 to 3 are based on the degree to which the fair value is observable:
● Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or
liabilities;
● Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are
observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and
● Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that
are not based on observable market data (unobservable inputs).
For recurring and non-recurring fair value measurements, external valuers may be used when internal expertise is either not
available or when the valuation is deemed to be significant. External valuers are selected based on market knowledge and
reputation. Where there is a significant change in fair value of an asset or liability from one period to another, an analysis is
undertaken, which includes a verification of the major inputs applied in the latest valuation and a comparison, where applicable,
with external sources of data.
(r) Contributed equity
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.
F-19
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
(s) Loss per share
(i) Basic loss per share
Basic loss per share is calculated by dividing:
● the loss 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, adjusted for bonus elements in
ordinary shares issued during the year and excluding treasury shares
(ii) Diluted loss per share
Diluted loss per share adjusts the figures used in the determination of basic loss per share to take into account:
● after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares, and
● the weighted average number of additional ordinary shares that would have been outstanding assuming the conversion of all
dilutive potential ordinary shares.
On the basis of the Company’s losses, the outstanding options as at June 30, 2021 are considered to be anti-dilutive and therefore
were excluded from the diluted weighted average number of ordinary shares calculation.
(t) Goods and services tax (GST)
Revenues are recognised to the extent that it is probable that the economic benefits will flow to the Company 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:
Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable
from, or payable to, the taxation authority is included with other receivables or payables in the consolidated balance sheet.
Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities which
are recoverable from, or payable to the taxation authority, are presented as operating cash flows.
(u) Parent entity financial information
The financial information for the parent entity, Genetic Technologies Limited, disclosed in Note 32 has been prepared on the same
basis as the consolidated financial statements, except that 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-20
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.
Share-based payments transactions
The Company measures the cost of equity-settled transactions with employees and service providers 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 for more complex equity instruments, such as warrants and performance rights, by using Black-Scholes, Monte-Carlo
Simulation and Binomial model, and utilised internal resources to perform fair value by straight forward equity instruments by
using Black-Scholes model.
Coronavirus (COVID-19) pandemic
Judgement has been exercised in considering the impacts that the Coronavirus (COVID-19) pandemic has had, or may have, on the
Company based on known information. This consideration extends to the nature of the products and services offered, customers,
supply chain, staffing and geographic regions in which the Company operates. Other than as addressed in specific notes, there does
not currently appear to be either any significant impact upon the financial statements or any significant uncertainties with respect to
events or conditions which may impact the Company unfavourably as at the reporting date or subsequently as a result of the
Coronavirus (COVID-19) pandemic.
Lease liabilities
The application of IFRS 16 requires the Company to make judgments and estimates that affect the measurement of right-of-use
assets and lease liabilities. In determining the lease term, we must consider all facts and circumstances that create an economic
incentive to exercise renewal options (or not exercise renewal options). Assessing whether a contract includes a lease also requires
judgement. Estimates are required to determine the appropriate discount rate used to measure lease liabilities.
4. COST OF SALES
Inventories used
Direct labor costs
Depreciation expense
Inventories written-off
Total cost of sales
2021
$
115,934
110,894
79,676
54,523
361,027
Consolidated
2020
$
82,516
107,590
42,488
18,917
251,511
2019
$
55,995
103,601
55,480
61,191
276,267
F-21
5. OTHER INCOME
Net profit on disposal of plant and equipment
Research and development tax incentive income (1)
Export Marketing & Development Grant
Interest income
Rental income
Other income
Government grant income – COVID-19 relief (2)
Total other income
(1)
R&D tax incentive
2021
$
—
997,908
100,000
62,394
—
116,271
287,883
1,564,456
Consolidated
2020
$
37,000
750,000
—
22,507
—
78,001
253,139
1,140,647
2019
$
—
856,707
—
25,794
—
137,268
—
1,019,769
The Company’s research and development activities are eligible under an Australian government tax incentive for eligible
expenditure. Management has assessed these activities and expenditure to determine which are likely to be eligible under
the incentive scheme. Amounts are recognised when it has been established that the conditions of the tax incentive have
been met and that the expected amount can be reliably measured. For the year ended June 30, 2021, the Company has
included an item in other income of A$997,908 (2020: A$750,000, 2019: A$856,707) to recognise income over the period
necessary to match the grant on a systematic basis with the costs that they are intended to compensate.
On December 5, 2019, the Treasury Laws Amendment (R&D Tax Incentive Bill 2019) was introduced into Parliament.
The draft bill contains proposed amendments to the R&D tax incentive regulations. Under the proposed amendments, the
refundable tax offset rate for companies with an aggregated turnover of less than $20 million would become 41%. As at
June 30, 2021, the bill remains under review by the Senate Committee.
In accordance with IAS 20, government grants, including non-monetary grants at fair value, should not be recognised until
there is reasonable assurance that the Company will comply with the conditions attaching to them and the grants will be
received.
Management does not consider the rate reduction to be substantially enacted as at June 30, 2021 due to the continued
legislative debate in Parliament. The Company has therefore calculated the R&D tax incentive by applying the currently
legislated R&D rate to eligible expenditure.
(2)
Government Grant income – COVID-19 Relief
The COVID-19 relief relates to government assistance received during the year, from the Australian Government (at both
federal and state level) and the U.S. Small Business Administration, in response to the economic and financial challenges
in the current economy.
6. FOREIGN EXCHANGE MOVEMENT
The Company is more sensitive to movements in the AUD/USD exchange rates in 2021 than 2020 because of the increased amount
of USD denominated cash and cash equivalents. The US warrants financial liability will be equity-based settled upon exercise of the
US warrants. However, as the exercise will be done with an exercise price in US dollars, there is a foreign exchange risk due to the
subsequent translation to Australian dollars. The Company’s exposure to other foreign exchange movements is not material.
7. OTHER GAINS / (LOSSES)
During the year ended June 30, 2021 the Company identified an error in the accounting for its representative warrants and the table
below reflected the correction of an immaterial prior period error.
Net foreign exchange gains/(losses)
Fair value gains on financial liabilities through profit or loss
Net impairment losses (1)
Total other gains / (losses)
2021
$
Consolidated
2020
$
—
—
—
—
(5,522)
—
—
(5,522)
2019
$
92,518
—
(500,000)
(407,482)
The company revised the previous audited financial statements to reflect the correction of an immaterial error. See Note 2(a)(v) for
additional information.
(1) In August 2018, the Company invested A$250,000 into Swisstec towards the proposed joint venture to enable the Company and
Swisstec to collaborate to develop a medical and health service platform using blockchain technology. The Company has recorded
an impairment against the investment during the financial year ended June 30, 2019, due to cessation of activities in relation to the
joint venture.
In December 2018, Genetic Technologies Limited entered and invested A$250,000 into a Joint Venture agreement with Blockshine
Health Pty Ltd. with an ownership of 49%. The Company has recorded an impairment against the investment during the financial
year ended June 30, 2019, due to the cancellation of the project.
F-22
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 26% (2020: 27.50% and 2019:
27.50%)
Tax effect amounts which are not deductible/(taxable) in calculating
taxable income
Share-based payments expense
Research and development tax incentive
Other non-deductible items
Other assessable items
Difference in overseas tax rates
Under /(over) provision
Temporary differences not recognised
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
Total deferred tax assets
Deferred tax liabilities not recognised
Right-of-use assets
Total deferred tax liabilities
Net deferred tax assets on temporary differences not brought to
account
Total net deferred tax assets
F-23
2021
$
Consolidated
2020
$
2019
$
(7,077,619)
(6,098,930)
(6,425,604)
(1,840,181)
(1,677,206)
(1,767,040)
185,790
588,659
—
—
(1,065,732)
16,688
(235,653)
(419,965)
(275,631)
1,980,293
—
8,004
975,270
1,701,477
297,907
2,982,658
(34,735)
(34,735)
2,947,923
—
(3,971)
446,717
888
(26,764)
(1,260,336)
26,526
553,190
(353,628)
(206,250)
1,240,498
—
—
877,584
1,832,075
306,044
3,015,703
(119,384)
(119,384)
(2,896,320)
—
92,153
541,596
590
—
(1,132,701)
41,009
1,126,722
(121,965)
(238,084)
325,020
—
863
232,328
1,893,220
187,958
2,314,369
—
—
(2,314,369)
—
8. INCOME TAX (cont.)
Tax losses
Unused tax losses for which no deferred tax asset has been
recognised
Potential tax benefit @ 26% (Australia)
Potential tax benefit @ 21% (USA)
2021
$
Consolidated
2020
$
2019
$
100,694,696
19,165,603
5,665,976
97,259,045
18,727,578
6,123,340
90,254,547
17,563,730
5,541,152
Subject to the Company continuing to meet the relevant statutory tests, the tax losses are available for offset against future taxable
income.
At June 30, 2021, the Company had a potential tax benefit related to tax losses carried forward of A$24,691,039 (2020: A$24,850,918,
2019: A$23,104,882). Such amount includes net losses of A$5,665,976 (2020: A$6,123,340, 2019: A$5,541,152) related to subsidiaries
in the United States (U.S.). The Tax Cuts and Jobs Act (TCJA) enacted by Congress in the U.S. on December 22, 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% 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 A$19,025,063 (2020: A$18,727,578, 2019: A$17,563,730) are indefinite and are attributable to the Company’s operations in
Australia. As such the total unused tax losses available to the Company, equal A$24,691,039 (2020: A$24,850,918, 2019:
A$23,104,882).
As at balance date, there are unrecognised tax losses with a benefit of approximately A$24,691,039 (2020: A$24,850,918 and 2019:
A$23,104,882) that have not been recognised as a deferred tax asset to the Company. These unrecognised deferred tax assets will only
be obtained if:
(a) The Company derives future assessable income of a nature and amount sufficient to enable the benefits to be realised;
(b) The Company continues to comply with the conditions for deductibility imposed by the law; and
(c) No changes in tax legislation adversely affect the Company from realising the benefit.
Tax consolidation legislation
Genetic Technologies Limited and its wholly owned Australian subsidiaries implemented the tax consolidation legislation as from July
1, 2003. The accounting policy in relation to this legislation is set out in Note 2(g).
The entities in the tax consolidated Company 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 June 30, 2021, there are no unrecognised temporary differences associated with the Company’s investments in subsidiaries, as the
Company has no liability for additional taxation should unremitted earnings be remitted (2020: $Nil, 2019:$Nil).
F-24
9. LOSS PER SHARE
During the year ended June 30, 2021 the Company identified an error in the accounting for its representative warrants and the table
below reflected the correction of an immaterial prior period error.
The following reflects the income and share data used in the calculations of basic and diluted loss per share:
2021
$
Consolidated
2020
$
2019
$
Loss for the year attributable to the owners of Genetic Technologies
Limited
Weighted average number of Ordinary Shares used in calculating loss
per share (number of shares)
(7,077,619)
(6,294,775)
(6,425,604)
8,544,157,979
4,155,017,525
2,635,454,870
The company revised the previous audited financial statements to reflect the correction of an immaterial error. See Note 2(a)(v) for
additional information.
Note:
None of the 725,787,500 (2020:553,000,000 and 2019:114,250,000) options/performance rights 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.
F-25
10. CASH AND CASH EQUIVALENTS
During the year ended June 30, 2021 the Company identified an error in the accounting for its representative warrants and the table
below reflected the correction of an immaterial prior period error.
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
Other expenses
Impairment of investments
Share-based payments expense
Interest classified as investing cash flows
Net (profit) / loss on disposal of plant and equipment
Net (gains) / losses on liquidation of subsidiary
Depreciation of right-of-use of assets
Inventory written-off
Gain on investment previously written off
Finance costs
Interest received
2021
$
Consolidated
2020
$
2019
$
20,902,282
20,902,282
14,214,160
14,214,160
2,131,741
2,131,741
(7,077,619)
(6,294,775)
(6,425,604)
265,748
—
—
714,577
—
—
—
212,474
54,523
—
16,338
(62,394)
65,148
2,885
—
(14,442)
—
(37,000)
—
200,785
18,917
(43,380)
86,503
(22,507)
Net foreign exchange (gains) / losses
9,755
(597,441)
Adjust for changes in assets and liabilities
Decrease / (increase) in trade and other receivables
(Increase) / decrease in other operating assets
(Increase) / decrease in inventories
Increase / (decrease) in trade and other payables
Increase / (Decrease) in provisions
Increase / (decrease) in operating liabilities
Net cash flows from / (used in) operating activities
Financing facilities available
As at June 30, 2021, 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
(284,971)
(182,602)
14,463
(14,991)
38,770
—
(6,295,929)
29,412
115,455
(59,525)
891,498
(53,631)
—
(5,712,098)
190,020
193,605
(9,511)
(5,332)
180,509
188,272
156,260
—
500,000
335,102
(25,850)
—
—
—
—
—
—
—
(92,518)
(517,383)
(70,027)
27,142
60,178
—
(20,482)
(6,073,182)
95,714
(6,516)
89,198
The Company revised the previous audited financial statements to reflect the correction of an immaterial error. See Note 2(a)(v) for
additional information.
The Company’s main interest rate risk arises in relation to its short-term deposits with various financial institutions. If rates were to
decrease, the Company may generate less interest revenue from such deposits. However, given the relatively short duration of such
deposits, the associate risk is relatively minimal.
The Company has a Short-Term Investment Policy which was developed to manage the Company’s surplus cash and cash equivalents.
In this context, the Company 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 Company 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.
F-26
11. TRADE AND OTHER RECEIVABLES (CURRENT)
Trade receivables
Less: loss allowance
Net trade receivables
Other receivables (1)
Total net current trade and other receivables
(1) Other receivables majorly consists of R&D income grant receivable.
12. OTHER CURRENT ASSETS
Prepayments
Performance bond and deposits
Total current prepayments and other assets
F-27
Consolidated
2021
$
120,237
(30,784)
89,453
984,872
1,074,325
2020
$
38,871
—
38,871
750,483
789,354
Consolidated
2021
$
180,724
1,856
182,580
2020
$
95,820
2,025
97,845
13. PROPERTY, PLANT AND EQUIPMENT
Laboratory equipment, at cost
Less: cost written-off during the year
Add: additions during the year
Less: accumulated depreciation
Add: accumulated depreciation written-off during the year
Net laboratory equipment
Computer equipment, at cost
Less: cost written-off during the year
Add: additions during the year
Less: accumulated depreciation
Add: accumulated depreciation written-off during the year
Net computer equipment
Office equipment, at cost
Less: cost written-off during the year
Add: additions during the year
Less: accumulated depreciation
Add: accumulated depreciation written-off during the year
Net office equipment
Equipment under hire purchase, at cost
Less: accumulated depreciation
Net equipment under hire purchase
Leasehold improvements, at cost
Less: cost written-off during the year
Add: additions during the year
Less: accumulated depreciation
Add: accumulated depreciation written-off during the year
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: cost written-off during the year
Closing gross carrying amount
Opening accumulated depreciation and impairment losses
Add: accumulated depreciation written-off during the year
Less: depreciation expense charged
Closing accumulated depreciation and impairment losses
Total net property, plant and equipment
Consolidated
2021
$
426,701
(23,484)
557,655
(571,467)
23,484
412,889
672,538
(447,229)
26,543
(664,164)
447,229
34,917
—
—
10,495
(1,123)
—
9,372
—
—
—
—
—
—
—
—
—
457,178
1,096,489
594,693
(470,713)
1,220,469
(1,054,204)
470,713
(179,800)
(763,291)
457,178
Reconciliation of movements in property, plant and equipment by asset category for the year ended June 30, 2021
Asset category
Laboratory equipment
Computer equipment
Office equipment
Leasehold improvements
Totals
Opening
net
carrying
Amount
$
20,851
21,434
—
—
42,285
Additions
during
year
$
557,655
26,543
10,495
—
594,693
Disposals
during
year
$
Depreciation
expense
$
(165,617)
(13,060)
(1,123)
—
(179,800)
—
—
—
—
—
Reconciliation of movements in property, plant and equipment by asset category for the year ended June 30, 2020
Asset category
Laboratory equipment
Computer equipment
Leasehold improvements
Totals
Opening net
carrying
Amount
$
40,512
28,397
424
69,333
Additions
during
year
$
22,827
15,273
—
38,100
F-28
Disposals
during
year
$
Depreciation
expense
$
(42,488)
(22,236)
(424)
(65,148)
—
—
—
—
2020
$
1,451,389
(1,047,515)
22,827
(1,453,365)
1,047,515
20,851
657,265
—
15,273
(651,104)
—
21,434
167,564
(167,564)
—
(167,564)
167,564
—
594,626
(594,626)
—
465,380
(465,380)
—
(465,380)
465,380
—
42,285
3,336,224
38,100
(2,277,835)
1,096,489
(3,266,891)
2,277,835
(65,148)
(1,054,204)
42,285
Closing
net
carrying
amount
$
412,889
34,917
9,372
—
457,178
Closing
net
carrying
amount
$
20,851
21,434
—
42,285
14. TRADE AND OTHER PAYABLES (CURRENT)
Trade payables
Accrued expenses
Other payables
Total current trade and other payables
15. PROVISIONS (CURRENT AND NON-CURRENT)
Current provisions
Annual leave
Long service leave
Make good (1)
Total current provisions
Non-current provisions
Long service leave
Make good (1)
Total non-current provisions
Total provisions
(1) Make good provision
F-29
Consolidated
2021
$
269,665
485,422
5,263
760,350
2020
$
350,151
330,845
42,728
723,724
Consolidated
2021
$
2020
$
171,398
201,782
91,590
464,770
8,860
—
8,860
473,630
152,239
189,104
91,590
432,933
1,927
—
1,927
434,860
15. PROVISIONS (CURRENT AND NON-CURRENT) (cont.)
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
Add: obligation accrued during the year
Less: utilised during the year
Balance at the end of the financial year
16. BORROWING
Unsecured
Other loan
Consolidated
2021
$
2020
$
152,239
62,461
(43,302)
171,398
191,031
19,611
—
210,642
152,352
38,270
(38,383)
152,239
244,549
3,454
(56,972)
191,031
2021
Non-
Current
$
Current
$
Consolidated
Total
$
Current
$
2020
Non-
Current
$
Total
$
—
—
—
—
52,252
52,252
On May 4, 2020, the Company was granted a loan from the U.S. Small Business Administration as a part of the Paycheck Protection
Program (PPP) which ensures the Company could continue to pay its employees and cover certain costs for up to 8 weeks after the loan
was made available to the Company.
The following were the terms of the loan availed:
● PPP loan had fixed interest rate of 1%.
● Loan had a maturity of 2 years.
● No collateral or personal guarantees were required.
● Neither the government nor lenders charged small businesses any fees.
The loan availed had the following conditions for the Company to seek its forgiveness:
● Forgiveness was based on the Company maintaining or quickly rehiring employees and maintaining salary levels.
● Forgiveness would be reduced if full-time headcount declined, or if salaries and wages decreased.
On February 8, 2021, the U.S. Small Business Administration (SBA) determined that the amount the Company requested for
forgiveness on the Paycheck Protection Program loan was fully approved. The resulting credit has been recorded as a government grant
in other income.
17. LEASE LIABILITIES
(a) Amounts recognised in the statement of financial position
The statement of financial position shows the following amounts relating to leases:
Right-of-use assets
Right of use-of-assets
Lease Liabilities
Lease liabilities - Current
Lease liabilities – Non-Current
Total
F-30
Consolidated
2021
$
2020
$
180,528
397,945
179,626
24,412
204,038
240,915
188,621
429,536
17. LEASE LIABILITIES (Cont.)
(b) Amounts recognised in the statement of profit or loss
The statement of profit or loss under general and administrative expenses includes the following amounts relating to leases:
Depreciation charge of right-of-use assets
Depreciation Expense (for Leased Assets)
Interest expense (included in general and administrative expenses)
During the financial year ended June 30, 2021, the total cash outflow was $358,020.
(c) The Company’s leasing activities and how these leases are accounted for:
2021
$
2020
$
212,474
16,338
200,785
37,375
The Company has adopted IFRS 16 Leases during the year ended June 30, 2020 using the modified retrospective approach. The
modified approach does not require restatement of comparative periods. Instead, the cumulative impact of applying IFRS 16 is
accounted for as an adjustment to equity at the start of the current accounting period in which it is first applied, known as the ‘date of
initial application’.
For any new contracts entered into on or after July 1, 2019, the Company considers whether a contract is, or contains a lease. A lease is
defined as ‘a contract, or part of a contract, that conveys the right to use an asset (the underlying asset) for a period of time in exchange
for consideration’. To apply this definition the Company assesses whether the contract meets three key evaluations which are whether:
● the contract contains an identified asset, which is either explicitly identified in the contract or implicitly specified by being
identified at the time the asset is made available to the Company,
● the Company has the right to obtain substantially all of the economic benefits from use of the identified asset throughout the period
of use, considering its rights within the defined scope of the contract,
● the Company has the right to direct the use of the identified asset throughout the period of use. The Company assess whether it has
the right to direct ‘how and for what purpose’ the asset is used throughout the period of use.
Leases are recognised as a right-of-use asset and a corresponding liability at the date at which the leased asset is available for use by the
Company. Each lease payment is allocated between the liability and finance cost. The finance cost is charged to profit or loss over the
lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The right-of-
use asset is depreciated over the shorter of the asset’s useful life and the lease term on a straight-line basis.
Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of
the following lease payments:
● fixed payments (including in-substance fixed payments), less any lease incentives receivable,
● amounts expected to be payable by the lessee under residual value guarantees,
● the exercise price of a purchase option if the lessee is reasonably certain to exercise that option, and
● payments of penalties for terminating the lease, if the lease term reflects the lessee exercising that option.
The lease payments are discounted using the interest rate implicit in the lease, if that rate can be determined, or the Company’s
incremental borrowing rate.
Right-of-use assets are measured at cost comprising the following:
● the amount of the initial measurement of lease liability,
● any lease payments made at or before the commencement date, less any lease incentives received,
● any initial direct costs, and
● restoration costs.
Payments associated with short-term leases and leases of low-value assets are recognised on a straight-line basis as an expense in profit
or loss. Short-term leases are leases with a lease term of 12 months or less.
F-31
17. LEASE LIABILITIES (Cont.)
(d) COVID-19 Impact on Leases
On June 25, 2020, the Company obtained a rent concession for its leased premises. The terms of the concession are as follows:
● 15% waiver for the period April 1 through to September 30, 2020.
● 15% deferral for the period April 1 through to September 30, 2020.
● 70% due and payable on the first of each month in line with the lease.
● No interest on deferred payment.
● No increase of rent during the period April 1 through to September 30, 2020.
● The lease has been extended by 6 months from September 1, 2021 to February 28, 2022.
The above was treated as lease modification and adjustments were made to the right-of-use assets and corresponding current and non-
current liabilities for the year ended June 30, 2020 have been according to the amendments issued by the IASB towards IFRS 16. The
net impact of the variation resulted in an increase on the right -of-use assets balance amounted to A$88,103 and non-current liabilities
increased by A$94,626.
18. CONTRIBUTED EQUITY
Issued and paid-up capital
Fully paid Ordinary Shares
Total contributed equity
Movements in shares on issue
Year ended June 30, 2020
Balance at the beginning of the financial year
Shares issued during the year
Less: transaction costs arising on share issue (i)
Balance at the end of the financial year
Year ended June 30, 2021
Balance at the beginning of the financial year
Shares issued during the year
Less: transaction costs arising on share issue
Balance at the end of the financial year
Consolidated
2021
$
2020
$
153,574,974
153,574,974
140,111,073
140,111,073
Consolidated
Number of
Shares
2,938,134,143
4,575,645,600
—
7,513,779,743
Consolidated
Number of
Shares
7,513,779,743
1,502,947,000
—
9,016,726,743
$
125,498,824
21,793,678
(7,181,429)
140,111,073
$
140,111,073
17,409,150
(3,945,249)
153,574,974
(i)
The details of securities arising on shares issued for the year ended June 30, 2021 are as below:
● On July 17, 2020, the Company issued 114,447,000 new ordinary shares at the exercise of 166,066,050 warrants issued on
16 July, 2019, at no cash consideration and exercisable at United States Dollars (US$) 0.0053 that were issued to
underwriters along with capital raised in May 2019.
● On July 17, 2020, the Company issued 18,500,000 new ordinary shares at the exercise of 18,500,000 options issued on
October 30, 2019, at $0.008 (0.8 cents) per option, expiring October 29, 2022 to various underwriters.
● On July 21, 2020, the Company closed a registered direct offering of 1,025,000 American Depositary Shares (“ADSs”),
each representing six hundred (600) of the Company’s ordinary shares, at the purchase price of United States Dollars
(US$) US$5.00 per ADS – or in Australian Dollars $0.012 per ordinary share. H.C Wainwright & Co acted as the
placement agent for this offering. Against the offering, the Company issued 365,000,000 shares to several US institutional
investors pursuant to Listing Rule 7.1. The Company issued 250,000,000 shares to several US institutional investors
pursuant to Listing Rule 7.1A. The Company issued 156,000,000 warrants exercisable at US$0.004166 and 39,975,000
warrants exercisable at US$0.00104 each (unless exercised using the Cashless Exercise), both expiring December 21, 2025
to H.C. Wainwright & Co, which formed part of cost of raising capital which were approved at the AGM held on 10
December 2020.
● On December 21, 2020, the Company issued 12,850,000 options with an exercise price of $0.008 (0.8 cents) per option,
expiring December 1, 2023 issued under an employee incentive scheme that are not being immediately quoted on the ASX.
● On December 21, 2020 and following the approval by shareholders at the Company’s Annual General Meeting held on
December 10, 2020, the Company issued performance rights expiring on December 21, 2023 for nil consideration to the
following Directors:
○ Mr. Nick Burrows issued with 5,000,000 Class A performance rights.
○ Dr. Jerzy Muchnicki issued with 7,500,000 Class A performance rights, 25,000,000 Class B performance rights
and 25,000,000 Class C performance rights.
○ Mr. Peter Rubinstein issued with 7,500,000 Class A performance rights, 25,000,000 Class B performance rights
and 25,000,000 Class C performance rights.
○ Dr. Lindsay Wakefield issued with 5,000,000 Class A performance rights.
● On January 25, 2021 the Company issued 750,000,000 new ordinary shares pursuant to Listing Rule 7.1A.
● On February 4, 2021 the Company issued 2,500,000 new ordinary shares at the exercise of 2,500,000 options issued on
March 5, 2020, at $0.008 (0.8 cents) per option, expiring March 5, 2023 to various underwriters.
● On March 10, 2021, the Company issued 2,500,000 new ordinary shares at the exercise of 2,500,000 options issued on
October 30, 2019, at $0.008 (0.8 cents) per option, expiring October 29, 2022 to various underwriters.
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.
F-32
19. RESERVES
During the year ended June 30, 2021 the Company identified an error in the accounting for its representative warrants and the table
below reflected the correction of an immaterial prior period error.
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
Add: Issue of options/warrants to underwriters
Add: Issue of performance rights
Add: Issue of options/warrants
Less: Options expired
Less: Exercise of options/warrants
Less: Reversal of Performance Rights expenses in prior year (1)
Balance at the end of the financial year
Consolidated
2021
$
718,955
10,314,324
11,033,279
756,423
(37,468)
718,955
9,172,148
—
—
622,725
1,542,356
(49,438)
(973,467)
—
10,314,324
2020
$
756,423
9,172,148
9,928,571
789,598
(33,175)
756,423
5,220,334
263,387
3,770,411
—
—
—
—
(81,984)
9,172,148
The company revised the previous audited financial statements to reflect the correction of an immaterial error. See Note 2(a)(v) for
additional information.
(1)
During the year ended June 30, 2020, 3,750,000 performance rights previously issued to Mr. Xue Lee in the year ended June
30, 2019 were forfeited. Additionally, 57,500,000 performance rights previously issued to Dr. Paul Kasian in the year ended
June 30, 2019 were forfeited in the year ended June 30, 2020. Due to the forfeiture of performance rights, a reversal
amounting to A$81,984 relating to previously expensed amounts was accounted for during the current reporting period.
During the financial year ended 30 June 2020, the following warrants were issued to as a part of capital raising costs:
Warrants issued to
Aegis Corp
Grant date for warrants issued
Number of warrants issued
July 16, 2019
166,066,050
Grant Date
Warrants issued
Dividend yield
Historic volatility and expected volatility
Option exercise price
Fair value of warrants at grant date
Weighted average exercise price
Risk free interest rate
Model used
Expected life of an warrant
Valuation amount
F-33
2020
July 16, 2019
166,066,050
—
152%
0.008
0.006
0.008
1.05%
Black-Scholes
5 years
890,113
A$
A$
A$
A$
19. RESERVES (Cont.)
During the financial year ended June 30, 2021, the following warrants were reclassified from Other Financial Liabilities to Other
Reserves. See Note 2(a)(v) for additional information.
Valuation date
Grant Date
Warrants issued
Underlying asset price
Risk free rate
Volatility
Exercise price presented in United States Dollar
Exchange rate at valuation date
Exercise price presented in Australian Dollar
Time to maturity of underlying warrants (years)
Value per warrant in Australian Dollar
Model used
Valuation amount
Valuation date
Grant Date
Warrants issued
Underlying asset price
Risk free rate
Volatility
Exercise price presented in United States Dollar
Exchange rate at valuation date
Exercise price presented in Australian Dollar
Time to maturity of underlying warrants (years)
Value per warrant in Australian Dollar
Model used
Valuation amount
2020
April 3, 2020
April 3, 2020
40,114,200
0.0050
0.411%
140.54%
0.00365
1 to US$0.5995
0.0061
5
0.0044
Binomial
175,137
2020
April 23, 2020
April 23, 2020
28,177,578
0.0060
0.444%
142.70%
0.00417
1 to US$0.6369
0.0065
5
0.0053
Binomial
149,693
A$
US$
A$
A$
A$
A$
A$
US$
A$
A$
A$
A$
During the financial year ended June 30, 2021, the following warrants were reclassified from Other Financial Liabilities to Other
Reserves. See Note 2(a)(v) for additional information. The following warrants were revalued as at the date of shareholder approval.
Valuation date
Grant Date
Warrants issued
Underlying asset price
Risk free rate
Volatility
Exercise price presented in United States Dollar
Exchange rate at valuation date
Exercise price presented in Australian Dollar
Time to maturity of underlying warrants (years)
Value per warrant in Australian Dollar
Model used
Valuation amount
2021
July 21, 2020
June 1, 2020
156,000,000
0.0070 A$
0.34%
135.64%
0.00417 US$
1 to US$0.7127 A$
0.00541 A$
5
0.0062 A$
Binomial
1,462,442 A$
2020
June 1, 2020
June 1, 2020
156,000,000
0.0060
0.397%
142.94%
0.00417
1 to US$0.6797
0.0061
5
0.0054
Binomial
848,252
A$
US$
A$
A$
A$
A$
During the financial year ended June 30, 2021, the following warrants were issued to as a part of capital raising costs.
Valuation date
Grant Date
Warrants issued
Underlying asset price
Risk free rate
Volatility
Exercise price presented in United States Dollar
Exchange rate at valuation date
Exercise price presented in Australian Dollar
Time to maturity of underlying warrants (years)
Value per warrant in Australian Dollar
Model used
Valuation amount
Valuation date
Grant Date
Warrants issued
Underlying asset price
Risk free rate
Volatility
Exercise price presented in United States Dollar
Exchange rate at valuation date
Exercise price presented in Australian Dollar
Time to maturity of underlying warrants (years)
Value per warrant in Australian Dollar
Model used
2021
July 21, 2020
June 1, 2020
39,975,000
0.0070
0.42%
148.66%
0.00417
1 to US$0.7127
0.0146
5
0.009
Binomial
360,017
2021
January 25, 2021
January 25, 2021
48,750,000
0.0110
0.414%
147.29%
0.0109
1 to US$0.7708
0.0142
5
0.0098
Binomial
A$
US$
A$
A$
A$
A$
A$
US$
A$
A$
A$
Valuation amount
A$
476,297
F-34
19. RESERVES (Cont.)
The following information relates to options granted and issued against under the Employee Option Plan for the year ended June 30,
2021;
Options issued to
Grant date for options issued
Number of options issued
Employee Option Plan
19. RESERVES (Cont.)
Grant Date
Options issued
Dividend yield
Historic volatility and expected volatility
Option exercise price
Fair value of options at grant date
Weighted average exercise price
Risk-free interest rate
Expected life of an option
Model used
Valuation amount
Grant Date
Options issued
Dividend yield
Historic volatility and expected volatility
Option exercise price
Fair value of options at grant date
Weighted average exercise price
Risk-free interest rate
Expected life of an option
Model used
Valuation amount
Grant Date
Options issued
Dividend yield
Historic volatility and expected volatility
Option exercise price
Fair value of options at grant date
Weighted average exercise price
Risk-free interest rate
Expected life of an option
Model used
Valuation amount
Grant Date
Options issued
Dividend yield
Historic volatility and expected volatility
Option exercise price
Fair value of options at grant date
Weighted average exercise price
Risk-free interest rate
Expected life of an option
Model used
Valuation amount
Nature and purpose of reserves
Foreign currency translation reserve
December 21, 2020
12,850,000
2020
November 28, 2019
250,000,000
—
136%
0.008
0.003
0.008
0.85%
3 years
Black-Scholes
1,056,054
2020
October 30, 2019
250,000,000
—
136%
0.008
0.003
0.008
0.78%
3 years
Black-Scholes
817,666
2020
March 6, 2020
5,000,000
—
141%
0.008
0.007
0.008
0.36%
3 years
Black-Scholes
29,340
2021
December 21, 2020
12,850,000
—
155.34%
0.008
0.007
0.008
0.111%
3 years
Binomial
72,439
A$
A$
A$
A$
A$
A$
A$
A$
A$
A$
A$
A$
A$
A$
A$
A$
Exchange differences arising on translation of the foreign controlled entities are recognised in other comprehensive income as described
in Note 2(d) and accumulated in a separate reserve within equity. The cumulative amount is reclassified to profit or loss when the net
investment is disposed of.
Share-based payments reserve
The share-based payment reserve records items recognised as expenses on valuation of share options issued to key management
personnel, other employees and eligible contractors.
F-35
20. ACCUMULATED LOSSES
During the year ended June 30, 2021 the Company identified an error in the accounting for its representative warrants and the table
below reflected the correction of an immaterial prior period error.
Balance at the beginning of the financial year
Add: net loss attributable to owners of Genetic Technologies Limited
Less: Options expired
Balance at the end of the financial year
2021
$
(136,047,037)
(7,077,619)
49,438
(143,075,218)
The company revised the previous audited financial statements to reflect the correction of an immaterial error. See Note 2(a)(v) for
additional information.
21. OPTIONS
Employee Option Plan
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 recognised over the vesting period over which the service
vesting conditions are to be satisfied. Employee Option Plan options have no other vesting conditions. 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)
F-36
21. OPTIONS (Cont.)
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 Company, 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 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.
On November 30, 2001, the Directors of the Company established a Staff Share Plan. On November 19, 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 Company. The options, which are granted at nil cost, are not transferable and are not quoted on the
ASX. As at June 30, 2021, there was 1 executive and 12 employees who held options that had been granted under the Plans. Options
granted under the Plans carry no rights to dividends and no voting rights.
(i) Fair value of options granted
During the year ended June 30, 2021, there were 12,850,000 options issued under Employee Option Plan (2020: no options were
granted). The Company, however issued various unlisted options to underwriters and sub-underwriters as a part of capital raising costs.
For valuations on the unlisted options issued please refer to Note 20.
Set out below are summaries of all and unlisted options, including ESOP which were issued in prior periods:
Opening balance
Exercised by various underwriters
Exercised by Lodge Corporate Pty Ltd
Granted to employees during the year
Granted to directors in their capacity as sub-
underwriters
Options granted to various underwriters
Granted to Lodge Corporate Pty Ltd
Lapsed during the year
Forfeited during the year
Lapse of unlisted options attached to convertible
notes
Closing balance
$
$
$
$
$
$
$
2021
Average exercise
price per share
option
2020
Average exercise
price per share
option
$
Number of
options
538,000,000
(21,000,000)
(2,500,000)
12,850,000
— $
— $
— $
$
(5,000,000)
(500,000)
0.008
0.008
0.008
0.008
—
—
—
0.01
0.01
—
0.008
—
521,850,000
$
$
F-37
Number of
options
38,000,000
—
—
—
250,000,000
250,000,000
5,000,000
(5,000,000)
—
—
538,000,000
$
0.015
—
—
—
0.008
0.008
0.008
0.010
—
—
0.008
21. OPTIONS (Cont.)
(i) Fair value of options granted (Cont.)
The movements in the number of options granted under the Employee share plans are as follows:
2021
2020
Average exercise
price per
share option
Number of
options
Average
exercise price
per
share option
Number
of
options
Balance at the beginning of the financial year
Add: options granted during the year
Less: options lapsed during the year
Less: options forfeited during the year
Balance at the end of the financial year
$
$
$
$
$
0.015
0.008
0.010
0.010
0.011
$
20,500,000
12,850,000
(5,000,000)
(500,000)
27,850,000
$
$
$
0.015
—
0.010
—
0.015
$
25,500,000
—
(5,000,000)
—
20,500,000
The number of options outstanding as at June 30, 2021 by ASX code, including the respective dates of expiry and exercise prices, are
tabled below. The options tabled below are not listed on ASX.
Unlisted options
Options to Kentgrove Capital (expiring August
8, 2021)
GTGAD (expiring March 31, 2021)
GTGAD (expiring February 16, 2022)
Options to various underwriters (expiring
October 30, 2022)
Options to directors (expiring December 20,
2022)
Options issued Lodge Corporate Pty Ltd
(expiring March 6, 2023)
ESOP options (expiring December 11, 2021)
ESOP options (expiring December 1, 2023)
Total
Exercisable at the end of the financial year
$
$
$
$
$
$
$
$
2021
2020
Average
exercise price
per
share option
Number of
options
Average
exercise price
per
share option
0.015
—
0.010
0.008
0.008
—
0.010
0.008
0.008
0.008
$
12,500,000
$
— $
$
5,500,000
231,500,000
250,000,000
$
$
— $
$
9,500,000
12,850,000
521,850,000
521,850,000
$
$
0.015
0.020
0.010
0.008
0.008
0.008
0.010
—
0.008
0.008
$
Number
of
options
12,500,000
5,000,000
5,500,000
250,000,000
250,000,000
5,000,000
10,000,000
—
538,000,000
538,000,000
The weighted average remaining contractual life of options outstanding as at June 30, 2021 was 1.37 years (2020: 2.39 years).
F-38
22. SEGMENT INFORMATION
(a) Identification of reportable segments
The Company has identified two reportable segments as reported that is consistent with the internal reporting provided to the chief
operating decision maker.
Management considers the business from a geographic perspective and has identified two reportable segments:
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
(b) Geographical segments
The segment information for the reportable segments is as follows:
2021
Consolidated entity
Segment revenue & other income
Revenue from contracts with customers
Other income
Cost of goods sold
Total segment revenue & other income
Segment expenses
Depreciation and amortisation
Finance costs
Share-based payments
Laboratory and research and development
General and administrative expenses
Other operating expenses
Depreciation for right-of-use assets
Total segment expenses
Income tax expenses
Loss for the period
Total Segment Assets
Total Segment Liabilities
22. SEGMENT INFORMATION (Cont.)
(b) Geographical segments (Cont.)
2020
Consolidated entity
Segment revenue & other income
Revenue from contracts with customers
Other income
Net other gains
Cost of goods sold
Total segment revenue & other income
Segment expenses
Depreciation and amortisation
Finance costs
Share-based payments
Laboratory and research and development
General and administrative expenses
Other operating expenses
Depreciation for right-of-use assets
Total segment expenses
Income tax expenses
Loss for the period
Total Segment Assets
Total Segment Liabilities
Australia
$
USA
$
Total
$
102,416
1,308,043
(351,971)
1,058,488
(99,719)
(4,360)
(714,577)
(2,702,313)
(3,381,808)
(723,890)
(191,671)
(7,818,338)
—
(6,759,850)
22,628,506
(1,347,007)
18,138
256,413
(9,056)
265,495
(405)
(9,689)
—
(149,155)
(7,656)
(395,556)
(20,803)
(583,264)
—
(317,769)
343,182
(91,646)
120,554
1,564,456
(361,027)
1,323,983
(100,124)
(14,049)
(714,577)
(2,851,468)
(3,389,464)
(1,119,446)
(212,474)
(8,401,602)
—
(7,077,619)
22,971,688
(1,438,653)
Australia
$
USA
$
Total
$
3,160
1,130,881
(5,522)
(243,506)
885,013
(65,148)
(1,221)
14,442
(2,310,815)
(4,046,264)
(159,009)
(200,785)
(6,768,800)
—
(5,687,942)
15,329,955
(1,427,051)
6,704
9,766
—
(8,005)
8,465
—
(13,602)
—
(166,763)
(12,295)
(226,793)
—
(419,453)
—
(410,988)
303,024
(213,321)
9,864
1,140,647
(5,522)
(251,511)
893,478
(65,148)
(14,823)
14,442
(2,477,578)
(4,058,559)
(385,802)
(200,785)
(7,188,253)
—
(6,098,930)
15,632,979
(1,640,372)
The company revised the previous audited financial statements to reflect the correction of an immaterial error. See Note 2(a)(v) for
additional information.
F-39
23. SHARE BASED PAYMENTS
(a) Employee option plan
On December 21, 2020, the Company issued 12,850,000 options with an exercise price of A$0.008 (0.8cents) per option, expiring
December 1, 2023 issued under an employee incentive scheme (2020: Nil).The Company, also issued various unlisted options to
underwriters and sub-underwriters as a part of capital raising costs. Please refer to further details on options on Note 22.
(b) Performance Rights Issuance
After receiving requisite shareholder approval on November 29, 2018, the Company has issued 76,250,000 performance rights to
Directors of the Company as follows:
● 7,500,000 Class A Performance Rights, 25,000,000 Class B Performance Rights and 25,000,000 Class C performance Rights to Dr.
Paul Kasian
● 3,750,000 Class A Performance Rights to Dr. Lindsay Wakefield
● 6,250,000 Class A Performance Rights to Dr. Jerzy Muchnicki
● 5,000,000 Class A Performance Rights to Mr. Peter Rubinstein
● 3,750,000 Class A Performance Rights to Mr. Xue Lee
In the year ended June 30, 2020, all Performance Rights previously issued to Dr. Paul Kasian and Mr. Xue Lee were forfeited.
After receiving another requisite shareholder approval on December 10, 2020, the Company issued additional 125,000,000 Performance
Rights to Directors of the Company as follows:
● 5,000,000 Class A Performance Rights to Dr. Lindsay Wakefield
● 7,500,000 Class A Performance Rights, 25,000,000 Class B Performance Rights and 25,000,000 Class C Performance Rights to
Dr. Jerzy Muchnicki
● 7,500,00 Class A Performance Rights, 25,000,000 Class B Performance Rights and 25,000,000 Class C Performance Rights to
Mr. Peter Rubinstein
● 5,000,000 Class A Performance Rights to Mr. Nicholas Burrows
During the year, the Board has approved for the following Performance Rights to be issued to the Chief Executive Officer and Chief
Operating Officer:
● 60,000,000 Class D Performance Rights to Mr. Simon Morris
● 3,937,500 Class E Performance Rights to Mr. Stanley Sack
The Company has accounted for these Performance Rights in accordance with its accounting policy for share-based payment
transactions and has recorded A$622,725 of associated expense in the current reporting period.
F-40
23. SHARE BASED PAYMENTS (Cont.)
(b) Performance Rights Issuance (Cont.)
Valuation of Performance Rights
The Performance Rights are not currently quoted on the ASX and as such have no ready market value. The Performance Rights each
grant the holder a right of grant of one ordinary Share in the Company upon vesting of the Performance Rights for nil consideration.
Accordingly, the Performance Rights may have a present value at the date of their grant. Various factors impact upon the value of
Performance Rights including:
● the period outstanding before the expiry date of the Performance Rights;
● the underlying price or value of the securities into which they may be converted;
● the proportion of the issued capital as expanded consequent upon conversion of the Performance Rights into Shares (i.e. whether or
not the shares that might be acquired upon exercise of the options represent a controlling or other significant interest); and
● the value of the shares into which the Performance Rights may be converted.
There are various formulae which can be applied to determining the theoretical value of options (including the formula known as the
Black-Scholes Model valuation formula and the Monte Carlo simulation).
The Company has commissioned an independent valuation of the Performance Rights. The independent valuer has applied the Monte
Carlo simulation in providing the valuation of the Performance Rights.
Inherent in the application of the Monte Carlo simulation are a number of inputs, some of which must be assumed. For the Performance
Rights issued in the year ended June 2019, the data relied upon in applying the Monte Carlo simulation was:
a)
exercise price being 0.0 cents per Performance Right for all classes;
b) VWAP hurdle (10 days consecutive share price hurdle) equaling 2.0 cents for Class A Performance Rights;
c)
the continuously compounded risk-free rate being 2.02% for all classes of Performance Rights (calculated with reference to the
RBA quoted Commonwealth Government bonds as at 8 October 2018 of similar duration to that of the expected life of each
class of Performance Right);
d)
the expected option life of 2.8 years for all classes of Performance Rights; and
e)
a volatility measure of 80%.
For the Performance Rights issued during the current year, the data relied upon in applying the Monte Carlo simulation was:
a)
exercise price being 0.0 cents per Performance Right for all classes;
b) VWAP hurdle (10 days consecutive share price hurdle) equaling A$0.012 for Class A and A$0.014 for Class B, and (15 days
consecutive share price hurdle) equaling $0.016 for Class D Performance Rights;
c)
sales and market cap hurdles as listed above for Class C and Class E Performance Rights;
d)
the continuously compounded risk free rate being 0.111% for all classes of Performance Rights (calculated with reference to
Refinitiv – closing share price as at December 21, 2020, and 3 year Australian Government yield as at December 21, 2020);
e)
the expected option life of 2 years for Class E Performance Rights and 3 years for all other classes of Performance Rights; and
f)
a volatility measure of 158.23%.
F-41
23. SHARE BASED PAYMENTS (Cont.)
(b) Performance Rights Issuance (Cont.)
Performance hurdles
The Directors, being the recipients of the Performance Rights, must remain engaged by the Company at the time of satisfaction of the
performance hurdle in order for the relevant Performance Right to vest.
Performance Rights issued during the year ended June 30, 2021
The Class A Performance Rights vest and are exercisable upon the Share price reaching $0.012 or greater for more than 10-day
consecutive ASX trading days.
The Class B Performance Rights vest and are exercisable upon the Share price reaching $0.014 or greater for more than 10-day
consecutive ASX trading days and sales commence on the Consumer Initiated Testing (CIT) platform in either Australia or the United
States of America.
The Class C Performance Rights vest and are exercisable upon a minimum of 4,000 tests being processed in any 12 month period or the
market cap of the Company reaching $100 million or above and being sustained for more than 10 consecutive ASX trading days,
whichever happens sooner.
The Class D Performance Rights vest and are exercisable upon the Share price reaching $0.016 or greater for more than 15-day
consecutive ASX trading days.
The Class E Performance Rights vest and are exercisable upon the first commercial sale of the Company’s COVID-19 risk test with IBX
(Infinity BioLogix).
Performance Rights issued prior to the year ended June 30, 2021
The Class A Performance Rights vest and are exercisable upon the Share price reaching $0.02 or greater for more than 10 day
consecutive ASX trading days.
Performance rights issued during prior years, vested during the year
Dr. Lindsay Wakefield
Dr. Jerzy Muchnicki
Mr. Peter Rubinstein
Total
Number of
Performance
Rights issued
3,750,000
6,250,000
5,000,000
15,000,000
Valuation
per Class
A (cents)
0.77
0.77
0.77
Total fair
value of
Class A
Performance
Rights
Expense
accounted
for during
the year
$
$
$
$
28,875
48,125
38,500
115,500
$
$
$
$
9,625
16,042
12,833
38,500
Performance rights cancelled/forfeited during the year ended June 30, 2020
Mr. Xue Lee(2)
Dr. Paul Kasian(1)
Total
Dr. Paul Kasian(1)
Dr. Paul Kasian(1)
Notes:
Number of
Performance
Rights issued
3,750,000
7,500,000
11,250,000
Valuation
per Class
A (cents)
0.77
0.77
Number of
Performance
Rights issued
25,000,000
Valuation
per Class
B (cents)
0.77
Number of
Performance
Rights issued
25,000,000
Valuation
per Class
C (cents)
0.57
Total fair
value of
Class A
Performance
Rights
$
$
$
28,875
57,750
86,625
Total fair
value of
Class B
Performance
Rights
Expense
accounted
for during
the year
$
$
$
(5,616)
(11,229)
(16,845)
Expense
accounted
for during
the year
$
192,500
$
(37,431)
Total fair
value of
Class C
Performance
Rights
Expense
accounted
for during
the year
$
142,500
$
(27,708)
(1) Dr. Paul Kasian resigned on September 24, 2019.
(2) Mr. Xue Lee resigned on July 9, 2019
No Performance Rights were cancelled/forfeited during the year ended June 30, 2021.
F-42
23. SHARE BASED PAYMENTS (cont.)
(c) 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:
Kentgrove options issued
Performance rights issued
Reversal of forfeited Performance Rights
Options issued under employee option plan
Total expenses arising from share-based payments
(d) Securities issued during capital raise
2021
$
16,667
622,725
—
75,186
714,578
Consolidated
2020
$
16,667
38,500
(81,984)
12,375
(14,442)
2019
$
15,278
104,441
—
215,383
335,102
The following information relates to options granted and issued against the capital raising costs year ended June 30, 2020;
Director
Mr. Peter Rubinstein
Dr. Jerzy Muchnicki
Total
November 28, 2019
November 28, 2019
Grant date of issued options
Number of options issued
125,000,000
125,000,000
250,000,000
Grant Date
Options issued
Dividend yield
Historic volatility and expected volatility
Option exercise price
Fair value of options at grant date
Weighted average exercise price
Risk-free interest rate
Expected life of an option
Model used
Valuation amount
2020
November 28, 2019
250,000,000
—
136%
0.008
0.003
0.008
0.85%
3 years
Black-Scholes
1,056,054
A$
A$
A$
A$
Holder
Various underwriters
Grant date of issued options
Number of options issued
October 30, 2019
250,000,000
Grant Date
Options issued
Dividend yield
Historic volatility and expected volatility
Option exercise price
Fair value of options at grant date
Weighted average exercise price
Risk-free interest rate
Expected life of an option
Model used
Valuation amount
Holder
Lodge Corporate Pty Ltd
Grant Date
Options issued
Dividend yield
Historic volatility and expected volatility
Option exercise price
Fair value of options at grant date
Weighted average exercise price
Risk-free interest rate
Expected life of an option
Model used
Valuation amount
2020
October 30, 2019
250,000,000
—
136%
0.008
0.003
0.008
0.78%
3 years
Black-Scholes
817,666
A$
A$
A$
A$
Grant date of issued options
Number of options issued
March 6, 2020
F-43
5,000,000
2020
March 6, 2020
5,000,000
—
141%
0.008
0.007
0.008
0.36%
3 years
Black-Scholes
29,340
A$
A$
A$
A$
24. COMMITMENTS
(a) Expense commitments
Expenditure commitments
Minimum expense payments
- not later than one year
- later than one year but not later than five years
- later than five years
Total minimum expense payments
2021
$
Consolidated
2020
$
—
—
—
—
—
—
—
—
2019
$
250,068
266,560
—
516,628
Due to the adoption of IFRS 16 effective July 1, 2019, the Company no longer has any non-cancellable lease to be recognised under
commitments for the year ended June 30, 2021.
(b) Capital commitments
Significant capital expenditure contracted for at the end of the reporting period but not recognised as liabilities is as follows:
Property, plant and equipment
2021
$
2020
$
—
466,560
The above commitment relates to the purchase of laboratory equipment which will assist the Company to conduct more tests in the
future.
F-44
25. AUDITORS’ REMUNERATION
Audit and assurance services
PricewaterhouseCoopers in respect of:
Audit (1)
Audit related fees (2)
Tax fees (3)
All other fees (4)
Grant Thornton Audit Pty Ltd in respect of:
Audit (1)
Audit related fees (2)
Tax fees (3)
All other fees (4)
Other audit firms in respect of:
Audit of the Financial Reports of subsidiaries
Total remuneration in respect of audit services
2021
$
Consolidated
2020
$
2019
$
72,500
—
—
—
168,333
—
—
65,000
—
305,833
274,000
200,000
—
—
—
—
—
—
288,000
—
—
—
—
—
—
—
—
474,000
—
288,000
(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.
(2) Audit related fees consist of fees billed for assurance and related services that generally only the statutory auditor could reasonably
provide to a client. Included in the balance are amounts related to additional regulatory filings during the 2020 financial year. All
services provided are considered audit services for the purpose of SEC classification.
(3) Tax fees include fees for all tax services other than those included in “Audit Fees” and “Audit-Related Fees”. This category
includes fees for tax compliance, tax advice and tax planning.
(4) All other fees consist of fees billed for financial and information technology due diligence services in respect of the Company’s
acquisition of the business and assets associated with the EasyDNA brand that completed on August 13th, 2021.
26. 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 Company and with other related parties
During the year ended June 30, 2021, other than compensation paid to directors and other members of key management personnel, see
“Item 6.B Compensation”, the only transactions between entities within the Company and other related parties are as listed below.
Except where noted, all amounts were charged on similar to market terms and at commercial rates.
F-45
26. RELATED PARTY DISCLOSURES (Cont.)
Blockchain Global Limited
As announced by the Company on February 15, 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 August 2, 2018, a framework agreement with BCG
was entered formalising the non-binding terms sheet and providing a framework for a strategic alliance between the Company and BCG,
with the agreement became binding on November 29, 2018 upon receiving the requisite shareholder approval. The agreement proposed
the issue of 486 million shares to BCG in 3 tranches subject to the achievement of certain milestones. No shares have been issued under
the framework agreements and no milestones have been achieved. Any rights to the 486 million milestone shares lapsed between
December 27, 2019 and June 27, 2020.
The company has accounted for these share issuances in accordance with its accounting policy for share-based payment transactions and
has not recorded any associated expense in the current year given performance conditions have not been met and are not currently
considering any Blockchain related projects.
A number of Directors of the Company presently or previously have had involvement with BCG. Mr. Xue Lee has a direct and indirect
share interest and was a CEO and managing director of BCG. Mr. Peter Rubinstein held a minority shareholding in the Company and
was also a director in BCG. Dr. Jerzy Muchnicki has a direct and indirect interest in BCG. Dr. Paul Kasian was previously a director of
BCG until July 2018.
Performance Rights Issuance
After receiving requisite shareholder approval on November 29, 2018, the Company has issued 76,250,000 Performance Rights to
Directors of the Company as follows:
● 7,500,000 Class A Performance Rights, 25,000,000 Class B Performance Rights and 25,000,000 Class C Performance Rights to Dr.
Paul Kasian
● 3,750,000 Class A Performance Rights to Dr. Lindsay Wakefield
● 6,250,000 Class A Performance Rights to Dr. Jerzy Muchnicki
● 5,000,000 Class A Performance Rights to Mr. Peter Rubinstein
● 3,750,000 Class A Performance Rights to Mr. Xue Lee
F-46
26. RELATED PARTY DISCLOSURES (Cont.)
In the year ended June 30, 2020, all Performance Rights previously issued to Dr. Paul Kasian and Mr. Xue Lee were forfeited.
After receiving another requisite shareholder approval on December 10, 2020, the Company issued additional 125,000,000 Performance
Rights to Directors of the Company as follows:
● 5,000,000 Class A Performance Rights to Dr. Lindsay Wakefield
● 7,500,000 Class A Performance Rights, 25,000,000 Class B Performance Rights and 25,000,000 Class C Performance Rights to
Dr. Jerzy Muchnicki
● 7,500,00 Class A Performance Rights, 25,000,000 Class B Performance Rights and 25,000,000 Class C Performance Rights to
Mr. Peter Rubinstein
● 5,000,000 Class A Performance Rights to Mr. Nicholas Burrows
During the year, the Board has approved for the following Performance Rights to be issued to the Chief Executive Officer and Chief
Operating Officer:
● 60,000,000 Class D Performance Rights to Mr. Simon Morris
● 3,937,500 Class E Performance Rights to Mr. Stanley Sack
The Company has accounted for these Performance Rights in accordance with its accounting policy for share-based payment
transactions and has recorded A$622,725 of associated expense in the current reporting period.
Blockshine Health Joint Venture
The Company, via its subsidiary Gene Ventures Pty Ltd, entered into a joint venture with Blockshine Technology Corporation (BTC).
The joint venture company, called Blockshine Health, was to pursue and develop blockchain opportunities in the biomedical sector.
Blockshine Health was to have full access to BTC’s technology (royalty free) as well as all of its opportunities in the biomedical sector.
The Company invested A$250,000 into the joint venture in the year ended June 30, 2019 and held 49% equity stake. The Joint Venture
agreement was subsequently cancelled and the investment of A$250,000 was impaired in the year ended June 30, 2019.
During the year ended June 30, 2020, the Company managed to recover A$43,380 from this investment previously written-off.
Genetic Technologies HK Limited and Aocheng Genetic Technologies Co. Ltd - Joint Venture
In August 2018, the Company announced a Heads of Agreement had been reached with Representatives of the Hainan Government -
Hainan Ecological Smart City Company (“HESCG”), a Chinese industrial park development & operations company have formally
invited Genetic Technologies Limited (“GTG”) to visit the Hainan Medical Pilot Zone to conduct a formal review and discuss
opportunities for market entry into China via the Hainan Free Trade Zone initiative. The invitation was extended to GTG via Beijing
Zishan Health Consultancy Limited (“Zishan”), demonstrating the potential for growth presented by the proposed Joint Venture between
the parties (as announced to the market on August 14, 2018).
Subsequently, the Company announced the official formation of Genetic Technologies HK Limited and Aocheng Genetic Technologies
Co. Ltd in Hong Kong to the market on March 27, 2019,
The Company’s previous Chairman, Dr. Paul Kasian was named in the formation Heads of Agreement document to be the Chairman of
the Joint Venture entity. At June 30, 2021, Genetic Technologies HK Limited has 100% ownership of Hainan Aocheng Genetic
Technologies Co. Limited. At this time, no Directors fees or emoluments have been paid to Dr. Kasian, nor have agreements regarding
fees been reached.
Issuance of options to directors towards sub-underwriting the capital raise
As announced on October 4, 2019, the Company undertook an underwritten non-renounceable pro-rata entitlement offer at an Issue
Price of 0.4 cents per new share.
On October 11, 2019, the Company updated the market to advise that the offer was from that time agreed to be underwritten by Lodge
Corporate Pty Ltd and that two of the Company’s directors (Peter Rubinstein and Dr. Jerzy Muchnicki), had agreed to sub-underwrite
the offer. Both directors, in conjunction with the underwriter Lodge Corporate Pty Ltd, subsequently agreed amongst themselves to alter
the respective sub-underwritten amounts, but the total to be sub-written between them (A$2 million) remained same, as did the total
underwritten amount (of A$4 million).
Accordingly, the underwritten offer subsequently was sub-underwritten by Mr. Peter Rubinstein and Dr. Jerzy Muchnicki (each as up to
A$1 million) in conjunction with a consortium of non-associated wholesale investors (also as sub-underwriters) who in aggregate equate
to the underwritten amount of A$4 million, each in accordance with the terms of their separate sub-underwriting agreements with Lodge
Corporate Pty Ltd (each a Sub-Underwriting Agreement).
Dr. Muchnicki and Mr. Rubinstein reflecting the amount of their sub-writing commitment were to be granted on the same terms as all
options to be granted to the relevant sub-underwriters. The number of options issued to both directors was calculated as 1 Option for
every 2 Shares being sub-underwritten and were issued a total of 125,000,000 unlisted options to each of the directors.
As announced on October 11, 2019, within the rights issue offer document, upon exercise each such option converts into 1 fully paid
share on terms consistent with the ASX Listing Rules; with a 3-year expiry date from grant and with an exercise price per underwriter
and sub-underwriter option equal to the lower of:
● A$0.008; and
● The implicit price per share at which any raise done by Aegis capital within 3 months from the Company’s shareholder meeting.
but in any event with a floor exercise price equal to A$0.004.
Lodge Corporate
Dr. Kasian was a director of corporate finance and corporate advisor from December 2017 to February 2019 with Lodge Corporate.
During the year ended, the Company engaged in corporate advisory services with Lodge Corporate and had transactions worth
A$154,224 which also included A$88,000 that related to 2% of the underwriting of the capital raise during the year ended June 30,
2020. Additionally, during the year, On March 6, 2020 the Company issued 5,000,000 options to Lodge Corporate Pty Ltd valued at
A$29,340 which were in relation to capital raising costs.
F-47
26. RELATED PARTY DISCLOSURES (Cont.)
Mr. Phillip Hains (Former Chief Financial Officer)
On July 15, 2019, the Company announced that it had appointed Mr. Phillip Hains (MBA, CA) as the Chief Financial Officer who has
over 30 years of extensive experience in roles with a portfolio of ASX and NASDAQ listed companies and provides CFO services
through his firm The CFO Solution. Prior to this point the Company had a similar arrangement with The CFO Solution, where it would
engage and provided services of overall CFO, accounting and other finance related activities.
During the reporting period, the Company had transactions valued at A$224,971 (2020: A$527,724) with The CFO Solution towards
provision of overall CFO, accounting and other finance related activities.
Mr. Stanley Sack (Chief Operating Officer)
On May 18, 2020, the Company appointed Mr. Stanley Sack who provides consulting in the capacity of Chief Operating Officer. Mr.
Sack has spent 15 years in large listed entities in executive positions managing large business divisions. He has worked with a high net
worth family managing all their operating businesses and private equity activities. Mr. Sack built an Allied Health Business in the aged
care and community care space which became the biggest Mobile Allied Health Business in Australia, and was recently sold to a large
medical insurance company.
During the reporting period, the Company had transactions valued at A$143,172 (2020: A$38,500) with Mr. Stanley Sack’s entity
Cobben Investments towards provision of consulting services in relation to provision of duties related to Chief Operating Officer of the
Company.
Mr. Peter Rubinstein (Non-Executive Director and Chairman)
During the financial year ended June 30, 2020, the Board approved to obtain consulting services in relation to capital raises, compliance,
NASDAQ hearings and investor relations from its Non-Executive Director and current Chairman, Mr. Peter Rubinstein. The services
procured were through Mr. Peter Rubinstein’s associate entity ValueAdmin.com Pty Ltd and amounted to A$60,000 (2020: A$35,000)
that is included as part of the cash salary and fees in the remuneration report as at June 30, 2021.
There were no transactions with parties related to Key Management Personnel during the year other than that disclosed above.
F-48
26. RELATED PARTY DISCLOSURES (Cont.)
Details of Directors and Key Management Personnel as at balance date
Directors
● Mr. Peter Rubinstein (Independent Non-Executive & Chairman)
● Dr. Jerzy Muchnicki (Executive Director & Chief Medical Officer )
● Dr. Lindsay Wakefield (Independent Non-Executive)
● Mr. Nicholas Burrows (Independent Non-Executive) (appointed September 2, 2019)
Key Management Personnel (KMPs)
● Mr. Simon Morriss (Chief Executive Officer) (appointed 1 February 2021)
● Dr. Richard Allman (Chief Scientific Officer)
● Mr. Phillip Hains (Chief Financial Officer) (July 15, 2019 to 15 June 2021)
● Mr. Mike Tonroe (Chief Financial Officer) (appointed 15 June 2021)
● Mr. Stanley Sack (Chief Operating Officer) (appointed May 18, 2020)
Remuneration of Key Management Personnel
Short-term employee benefits
Post-employment benefits
Share-based payments
Other long-term benefits
Termination benefits
Total remuneration of Key Management Personnel
F-49
2021
$
1,035,302
79,042
650,911
4,589
—
1,787,933
Consolidated
2020
$
638,659
53,614
(32,498)
3,231
—
663,006
2019
$
964,162
86,130
157,886
734
—
1,208,912
27. SUBSIDIARIES
The following diagram is a depiction of the Company structure as at June 30, 2021.
F-50
27. SUBSIDIARIES (Cont.)
Name of Company
Entities held directly by parent
GeneType Pty. Ltd. (Dormant)
Genetic Technologies
Corporation Pty. Ltd. (Genetic
testing)
Gene Ventures Pty. Ltd. (1)
(Dormant)
GeneType Corporation (Dormant)
Phenogen Sciences Inc.
(BREVAGenTM)
Hainan Aocheng Genetic
Technologies Co Ltd
Genetic Technologies HK Ltd
Total carrying value
Incorporation details
September 5, 1990 Victoria,
Australia
October 11, 1996
N.S.W., Australia
March 7, 2001
N.S.W., Australia
December 18, 1989
California, U.S.A.
June 28, 2010
Delaware, U.S.A.
Hong Kong, China
March 18, 2019
Hong Kong, China
Company interest (%)
2020
2021
Net carrying value ($)
2020
2021
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
—
2
10
—
—
2
10
—
11,006
11,006
—
—
11,018
—
—
11,018
(1)
On 26 April 2018, the name of RareCellect Pty Ltd (ACN 096 135 9847) was changed to Gene Ventures Pty Ltd (ACN 096 135
947)
F-51
28. FINANCIAL RISK MANAGEMENT
This note explains the Company’s exposure to financial risks and how these risks could affect the Company’s future financial
performance.
The Company’s risk management is predominantly controlled by the board. The board monitors the Company’s financial risk
management policies and exposures and approves substantial financial transactions. It also reviews the effectiveness of internal controls
relating to market risk, credit risk and liquidity risk.
(a) Market risk
(i) Foreign exchange risk
The Company undertakes certain transactions denominated in foreign currency and is exposed to foreign currency risk through foreign
exchange rate fluctuations.
Foreign exchange rate risk arises from financial assets and financial liabilities denominated in a currency that is not the Company’s
functional currency. Exposure to foreign currency risk may result in the fair value of future cash flows of a financial instrument
fluctuating due to the movement in foreign exchange rates of currencies in which the Company holds financial instruments which are
other than the Australian dollar (AUD) functional currency of the Company. This risk is measured using sensitivity analysis and cash
flow forecasting. The cost of hedging at this time outweighs any benefits that may be obtained.
The consolidated financial statements are presented in Australian Dollar ($), which is Genetic Technologies Limited’s functional and
presentational currency.
Exposure
The Company’s exposure to foreign currency risk at the end of the reporting period, expressed in Australian dollar, was as follows:
Cash at Bank / on hand
Trade and other receivables
Trade and other payables
Sensitivity
USD
$
7,868,978
31,908
27,001
June 30, 2021
CAD
$
—
—
(1,236)
June 30, 2020
EUR
$
36,787
—
—
USD
$
2,512,767
—
99,637
EUR
$
38,020
—
—
As shown in the table above, the Company is primarily exposed to changes in USD/AUD exchange rates. The sensitivity of profit or
loss to changes in the exchange rates arises mainly from USD denominated financial instruments.
The Company has conducted a sensitivity analysis of its exposure to foreign currency risk. Based on the financial instruments held as at
June 30, 2021, had the Australian dollar weakened/strengthened by 4.9% (2020: 6.03%) against the USD with all other variables held
constant, the Company’s post-tax loss for the year would have been A$388,466 lower/higher (2020: A$145,520 lower/higher).
● USD: 4.9% (2020: 6.03%)
The Company is more sensitive to movements in the AUD/USD exchange rates in 2021 than 2020 because of the increased amount of
USD denominated cash and cash equivalents. The US warrants financial liability will be equity-based settled upon exercise of the US
warrants. However, as the exercise will be done with an exercise price in US dollars, there is a foreign exchange risk due to the
subsequent translation to Australian dollars. The Company’s exposure to other foreign exchange movements is not material.
(b) Credit risk
Exposure to credit risk relating to financial assets arises from the potential non-performance by counterparties of contract obligations
that could lead to a financial loss to the Company.
(i) Risk management
Credit risk is managed through the maintenance of procedures (such as the utilisation of systems for the approval, granting and renewal
of credit limits, regular monitoring of exposures against such limits and monitoring the financial stability of significant customers and
counterparties), ensuring to the extent possible that customers and counterparties to transactions are of sound credit worthiness. Such
monitoring is used in assessing receivables for impairment. Credit terms are normally 30 days from the invoice date.
Risk is also minimised through investing surplus funds in financial institutions that maintain a high credit rating.
(ii) Security
For some trade receivables the Company may obtain security in the form of guarantees, deeds of undertaking or letters of credit which
can be called upon if the counterparty is in default under the terms of the agreement.
(iii) Impairment of financial assets
The Company has one type of financial asset subject to the expected credit loss model:
● trade receivables for sales of inventory
While cash and cash equivalents are also subject to the impairment requirements of IFRS 9, the identified impairment loss was
immaterial.
F-52
28. FINANCIAL RISK MANAGEMENT (Cont.)
(b) Credit risk (Cont.)
(iii) Impairment of financial assets (Cont.)
Trade receivables
The Company applies the IFRS 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss allowance
for all trade receivables.
To measure the expected credit losses, trade receivables assets have been grouped based on shared credit risk characteristics and the
days past due.
(c) Liquidity risk
Liquidity risk arises from the possibility that the Company might encounter difficulty in settling its debts or otherwise meeting its
obligations related to financial liabilities. The Company manages this risk through the following mechanisms:
● preparing forward looking cash flow analyses in relation to its operating, investing and financing activities;
● obtaining funding from a variety of sources;
● maintaining a reputable credit profile;
● managing credit risk related to financial assets;
● investing cash and cash equivalents and deposits at call with major financial institutions; and
● comparing the maturity profile of financial liabilities with the realisation profile of financial assets.
(i) Maturities of financial liabilities
The tables below analyse the Company’s financial liabilities into relevant maturity groupings based on their contractual maturities. The
amounts disclosed in the table are the contractual undiscounted cash flows.
Contractual maturities of
financial liabilities
At June 30, 2021
Trade and other payables
Lease liabilities
Total
Contractual maturities of
financial liabilities
At June 30, 2020
Trade and other payables
Lease liabilities
Borrowings
Total
Less
than 6
months
$
6 – 12
months
$
Between
1 and 2
years
$
Between
2 and 5
years
$
Over 5
years
$
Total
contractual
cash flows
$
Carrying
amount
(assets)/liabilities
$
760,350
129,057
889,407
—
50,569
50,569
—
24,412
24,412
—
—
—
—
—
—
760,350
204,038
964,388
760,350
204,038
964,388
Less
than 6
months
$
723,724
108,924
—
832,648
6 – 12
months
$
—
131,991
—
131,991
Between
1 and 2
years
$
Between
2 and 5
years
$
Over 5
years
$
Total
contractual
cash flows
$
Carrying
amount
(assets)/liabilities
$
—
188,621
52,252
240,873
F-53
—
—
—
—
—
—
—
—
723,724
429,536
52,252
1,205,512
723,724
429,536
52,252
1,205,512
28. FINANCIAL RISK MANAGEMENT (Cont.)
(d) Interest rate risk
The Company’s main interest rate risk arises in relation to its short-term deposits with various financial institutions. If rates were to
decrease, the Company may generate less interest revenue from such deposits. However, given the relatively short duration of such
deposits, the associate risk is relatively minimal.
The Company has a Short-Term Investment Policy which was developed to manage the Company’s surplus cash and cash equivalents.
In this context, the Company 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 Company 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 June 30, 2021, if interest rates had changed by +/- 50 basis points from the year-end rates, with all other variables held constant, the
Company’s loss for the year would have been A$14,775 lower / higher (2020: loss A$55,828 lower / higher), as a result of higher /
lower interest income from cash and cash equivalents and deposits in place.
F-54
28. FINANCIAL RISK MANAGEMENT (Cont.)
The exposure to interest rate risks and the effective interest rates of financial assets and liabilities, both recognised and unrealised, for
the Company is as follows:
Consolidated
Financial assets
Cash at bank / on hand
Performance bond / deposits
Totals
Financial liabilities
Borrowings
Leases
Totals
Floating
rate
A$
2,955,047
11,645,389
—
—
2,955,047
11,645,389
—
—
—
—
—
—
Fixed rate
A$
17,947,235
—
1,856
2,025
17,949,091
2,025
—
52,252
204,038
429,536
204,038
481,788
Carrying
amount
A$
20,902,282
11,645,389
1,856
2,025
20,904,138
11,647,414
—
52,252
204,038
429,536
204,038
481,788
Year
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
Weighted
ave.
effective
rate
%
0.2%
0.5%
—
—
—
1%
5.37%
5.37%
Ave.
maturity
Period
Days
At call
At call
At call
At call
—
—
—
—
Note The Company holds the balance of its cash in non-interest-bearing bank accounts.
F-55
29. SUBSEQUENT EVENTS
The Company executed an acquisition agreement (“Acquisition Agreement”) on July 19th, 2021 to acquire the direct-to-consumer
eCommerce business and distribution rights associated with General Genetics Corporation and its associated brands trading as
EasyDNA, from BelHealth Investment Fund LP. The Acquisition Agreement provides for the acquisition of all brands, websites and
reseller agreements associated with EasyDNA. This includes over 70 websites in 40 countries and six brand identities. Under the terms
of the Acquisition Agreement, the Company will acquire 100% of EasyDNA’s brands and assets within the General Genetics
Corporation business for a purchase price of US$4 million, comprising cash consideration of US$2.5 million and US$1.5 million worth
of GTG securities in the nature of ADRs.
30. CAPITAL MANAGEMENT
(a) Risk management
The Company’s objectives when managing capital are to
● safeguard their ability to continue as a going concern, so that they can continue to provide returns for shareholders and benefits for
other stakeholders, and
● maintain an optimal capital structure to reduce the cost of capital.
In order to maintain or adjust the capital structure, the Company may issue new shares or reduce its capital, subject to the provisions of
the Company’s constitution. The capital structure of the Company consists of equity attributed to equity holders of the Company,
comprising contributed equity, reserves and accumulated losses. By monitoring undiscounted cash flow forecasts and actual cash flows
provided to the board by the Company’s management, the board monitors the need to raise additional equity from the equity markets.
(b) Dividends
No dividends were declared or paid to members for the year ended June 30, 2021 (2020: nil). The Company’s franking account balance
was nil at June 30, 2021 (2020: nil).
F-56
31. PARENT ENTITY FINANCIAL INFORMATION
The individual financial statements for the parent entity show the following aggregate amounts:
Balance sheet
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Shareholders’ equity
Share Capital Reserves
Other reserves
Share-based payments
Retained earnings
Total Equity
Profit/(Loss) for the year
2021
$
2020
$
21,809,918
2,011,338
23,821,256
1,317,378
7,694,668
9,012,046
11,646,391
345,236
11,991,627
10,095,549
1,117,947
11,213,496
153,574,974
(117,131)
8,499,649
(147,148,282)
140,111,073
(117,131)
6,184,391
(145,400,202)
14,809,210
778,131
(1,601,672)
(8,816,667)
For the year ended June 30, 2021, A$4,482,965 impairment loss previously recognised on intercompany loan balances between the
parent and its subsidiaries was reversed. (2020: A$3,782,537 recognised as impairment loss).
32. CONTINGENT LIABILITIES AND CONTINGENT ASSETS
The Company had no contingent liabilities at June 30, 2021 (2020: nil).
33. IMPACT OF COVID-19
On January 30, 2020, the International Health Regulations Emergency Committee of the World Health Organisation (WHO) declared
the novel coronavirus disease 2019 (“COVID-19”) outbreak a public health emergency of international concern and on March 12, 2020
the WHO announced the outbreak was a pandemic.
Continuing concerns over economic and business prospects in the United States and other countries have contributed to increased
volatility and diminished expectations for the global economy. These factors, coupled with the prospect of decreased business and
consumer confidence and increased unemployment resulting from the recent COVID-19 outbreak, may precipitate an economic
slowdown and recession. If the economic climate deteriorates, the Company’s business, including its access to patient samples and the
addressable market for diagnostic tests that it may successfully develop, as well as the financial condition of its suppliers and its
third-party payors, could be adversely affected, resulting in a negative impact on the Company’s business, financial condition, results of
operations and cash flows.
On a micro level, the COVID-19 pandemic is having a negative impact on global markets and business activity, which has had an effect
on the operations of the Company, including but not limited to that sales of the Company’s products have been impacted not only by the
inability for consumers to visit their practitioners but also the difficulty its sales team is having in arranging face to face meetings with
practitioners. The Company’s sales team has found it very difficult to reach practitioners to build on the sales momentum created prior
to the pandemic, with the launch into the Australian market being halted after less than 60 days of operations thus, sales have effectively
ceased for the short term.
During the period of the pandemic commencing March 2020, the Company undertook a number of capital raises both public and private
placements managed by H.C. Wainwright & Co. in the United States of America.
Australian Disclosure Requirements
All press releases, financial reports and other information are available using the stock code GTG on the Australian Stock Exchange
website: www2.asx.com.au
F-57
USA Independence Declaration – To Be Added
F-58
Auditors USA Opinion – To Be Added
F-59
ex4-10.htm
EX-4.10
1 of 31
08/30/2021 03:56 AM
Exhibit 4.10
This Sale of Business Agreement is made on 18 day of July 2021 (“Effective Date”) by and between:
SALE OF BUSINESS AGREEMENT
Genetic Technologies Limited ACN 009 212 328, a company formed under the laws of the Commonwealth of Australia, with its
principal office at 60-66 Hanover Street, Fitzroy, Victoria 3065 Australia
hereinafter, GTG
AND
General Genetics Corporation, a Delaware company, registration No. OC 754, trading as “General Genetics Europe” and with an
address at 36, Triq ir-Russett, Kappara, SGN4433, Malta
AND
General Genetics Europe Limited
AND
General Genetics Limited UK
AND
hereinafter, GGC
hereinafter, GGE
hereinafter, GGUK
The Genetic Test Laboratories Australia Pty Limited ACN 145 305 187 having its registered office at Suite 3, 5 Sesame Court,
Slacks Creek QLD 4127 and t/as Easy DNA Australia
hereinafter, GGA
and hereinafter, GGC, GGE, GGUK and GGA are jointly and severally, the Vendor
AND
Kevin Camilleri of 34, Casa Bene, Triq ir-Russett, Kappara SGN4433, Malta only with respect to Section 6.5
hereinafter, Key Person
INTRODUCTION:
A. The Vendor carries on the Business.
B.
C.
The Vendor has agreed to sell and GTG has agreed to buy the Business carried on by the Vendor together with the Assets and
Stock on the terms set out in this Agreement.
The Vendor has made representations to GTG in terms of the representations and warranties set out in Section 11.1 and Schedule 7
with the intention that GTG should rely on such representations in entering into this Agreement.
IT IS AGREED:
1. DEFINITIONS AND CONSTRUCTION
1.1 Definitions
In this Agreement unless the context otherwise requires:
“ADRs” means American Depositary Shares listed on NASDAQ (GENE: NASDAQ), representing Ordinary Shares of GTG.
“Affiliates” means, with respect to a person, any other person that, directly or indirectly, through one or more intermediaries, controls, is
controlled by or is under common control with such first Person for so long as such other Person controls, is controlled by or is under
common control with such first person, regardless of whether such Affiliate is or becomes an Affiliate on or after the Effective Date. For
purposes of this definition, “control” and, with correlative meanings, the terms “controlled by” and “under common control with” means
(a) the possession, directly or indirectly, of the power to direct the management or policies of a Person, whether through the ownership
of voting securities, by contract relating to voting rights or corporate governance, or otherwise; or (b) the ownership, directly or
indirectly, of more than fifty percent (50%) of the voting securities or other ownership interest of a Person (or, with respect to a limited
partnership or other similar entity, its general partner or controlling entity). The parties acknowledge that in the case of certain entities
organized under the laws of certain countries outside of the United States, the maximum percentage ownership permitted by law for a
foreign investor may be less than fifty percent (50%), and that in such case such lower percentage shall be substituted in the preceding
sentence; provided that such foreign investor has the power to direct the management or policies of such entity.
“Assets” means:
(a)
stock on hand, leases, Plant and Equipment;
(b) CPR, accounting and other software licenses and/or cloud-based software as a service subscriptions;
(c)
all the Managed Sites, domain websites, Domain Names and social media accounts;
(d)
fixtures & fittings currently used in the business and forming part of this sale will be provided by the Vendor; and
(e)
the Trade Marks;
(f)
the Goodwill;
(g)
client and customer databases;
(h)
the Intellectual Property used in the Business;
(i)
the Licences held by the Vendor;
(j)
the Records;
(k)
the Vendor’s interest in the Contracts,; and
(l)
the Vendor’s interest in the Leases;
and all Intellectual Property rights subsisting in the foregoing, but excluding the Excluded Assets;
“Business” means the business carried on by the Vendor which is the marketing, advertising, offering for sale and sale of genetic testing
services through the Managed Websites and a network of resellers under the Brands;
-2-
“Cap” has the meaning set forth in Section 11.2
“Claim” means a legal proceeding (whether civil or criminal), administrative proceeding, arbitral proceeding, mediation or other form
of alternative dispute resolution (whether or not held in conjunction with the proceeding), an investigation or inquiry by a Government
Agency, liquidator, controller or administrator;
“Completion” means settlement of the sale and purchase and other matters in accordance with the terms of this Agreement;
“Completion Date” means the date on which Completion occurs, which shall be as promptly as practicable (but in no event later than
the third (3rd) business day) after all of the conditions set forth in Section 5 (other than conditions which by their terms are required to
be satisfied at Completion, but subject to the satisfaction or waiver of such conditions) shall have been satisfied or, if permissible,
waived by the party entitled to the benefit of the same and, subject to the foregoing, shall take place at such time and on such date as
specified by the parties, or such other date and time as is agreed between the parties in writing when Completion will occur;
“Confidential Information” means all information, including trade secrets, disclosed to GTG or known by GTG as a consequence of or
through its or his relationship to the Business or Vendor, that (A) concerns the Business, Assets, Stock and/or the Premises or the
products, processes or services offered by the Business or any of its respective customers or vendors; and (B) either (1) has not been
made generally available to the public, or (2) has been identified to GTG as confidential, either orally or in writing; and includes
computer programs, unpatented inventions, discoveries or improvements, marketing, manufacturing, or organizational research and
development, or business plans, sales forecasts, personnel information (including the identity of other employees of the Business, their
responsibilities, competence, abilities and compensation), manufacturing techniques, product formulations, and product constructions,
pricing and financial information, current and prospective customer/patient lists and information on customers/patients, information
concerning planned or pending acquisitions or divestitures, and information concerning purchases of major equipment or property.;
“Contracts” means all the contracts and agreements to which the Vendor is a party relating to the Business including those listed in
Schedule 1.
“Consideration Shares” means three hundred and forty eight thousand and nine hundred and thirty nine (348,939) ADRs (which
number has been calculated based on US$1,500,000 divided by thirty (30) day VWAP of the ADRs on the trading day immediately
preceding the Effective Date).
“Completion Deferred Revenue Cost” means the cost incurred by GTG of dispatching test kits and/or preparing and issuing customer
reports after Completion in respect of tests that are sold by Vendor to a customer before Completion.
“Domain Names” means all those domain names identified in Schedule 6;
“Employee Entitlements” means all entitlements owing to each Employee employed by the Vendor at the Completion Date including
without limitation, accumulated wages, salaries, holiday pay, holiday leave loading (if any), annual sick leave, accrued long service
leave and superannuation payments, charges and levies;
“Employees” means those persons engaged in the Business and who are employed either by GGC or GGA, including the Key Person,
all of whose particulars are set out in Schedule 2;
-3-
“Encumbrance” means any mortgage, charge (whether fixed or floating), pledge, lien, title retention or conditional sales agreement,
hire or hire purchase agreement, option, subordination or other Security Interest;
“Escrow Agent” means Citibank, N.A.
“Escrow Agreement” means an escrow agreement to be entered into by and among GTG, GGC (as representative of the Vendor) and
the Escrow Agent, effective as of the Completion Date, such escrow agreement to be substantially in the form attached hereto as
Exhibit A.
“Excluded Assets” means the shares, options, warrants, convertible note and other any form of share capital in or of each of GGC,
GGE, GGUK and GGA and all cash, cash equivalents and marketable securities of the Vendor;
“Goodwill” means the goodwill of the Vendor in relation to the Business;
“Government Agency” means any government, government department, or governmental, semi-governmental or judicial body or
person charged with the administration of any applicable law including a town council;
“GTG Cap” has the meaning set forth in Section 11.6.
“Intellectual Property” means all intellectual property rights of any nature whatsoever including patents, trademarks, whether
registered or otherwise, trade mark applications, trade names, copyright and all intellectual property rights subsisting in inventions,
know-how, data, specifications, systems and processes, whether or not capable of protection by registration and all rights to use any of
the foregoing owned by the Vendor and used in connection with the Business.
“Key Person” means Kevin Camilleri of 34 Casa Bene Trig ir-Russett, Kamparra, SGN 4433 Malta
“Landlord” means the owner of each of the Premises as specified on the Leases;
“Law” includes any law, regulation, authorisation, ruling, judgment, order or decree of any Government Agency and any statute,
regulation, proclamation, ordinance or by-law in, as relevant, Australia, Malta and the United States.
“Lease” means the documents, details of which are set out in Schedule 1;
“Liabilities” means all liabilities and obligations, whether actual, contingent or prospective, as at the Completion Date, including trade
Liabilities and liabilities to taxation authorities anywhere in the world;
“Licences” means the statutory licences, registrations, approvals and permits which are held by the Vendor or its nominee on
Completion in relation to the Business listed in Schedule 3.
“Losses” means, without duplication, any and all claims, actions, causes of action, judgments, awards, losses, costs or damages
(including reasonable fees and expenses of attorneys, but excluding any allocation of overhead, including any cost of employing their
own employees) actually suffered or incurred, excluding any Losses to the extent they are incidental damages, provided that “Losses”
shall not include any consequential damages, special damages, or punitive damages or any Losses to the extent caused by the action or
inaction of the indemnified party or its Affiliates.
“Managed Sites” means those websites identified by the Domain Names and/or the Trade Marks.
-4-
“Material Adverse Effect” means any event, occurrence, fact, condition or change that is materially adverse to (a) the business, results
of operations, financial condition or assets of the Business, or (b) the ability of Vendor to consummate the transactions contemplated
hereby; provided, however, that “Material Adverse Effect” excludes the MAE Exclusions. “MAE Exclusions” means any event,
occurrence, fact, condition or change, directly or indirectly, arising out of or attributable to: (i) general economic or political conditions;
(ii) conditions generally affecting the industries in which the Company and the Subsidiaries operates; (iii) any changes in financial,
banking or securities markets in general, including any disruption thereof and any decline in the price of any security or any market
index or any change in prevailing interest rates; (iv) acts of war (whether or not declared), armed hostilities or terrorism, or the
escalation or worsening thereof; (v) any action required or permitted by this Agreement or any action taken (or omitted to be taken) with
the written consent of or at the written request of GTG; (vi) any matter of which GTG is aware; (vii) any changes in applicable Laws or
accounting rules or the enforcement, implementation or interpretation thereof; (viii) the public announcement or existence of the
transactions contemplated by this Agreement, including losses or threatened losses of employees, customers, suppliers, distributors or
others having relationships with the Business; (ix) any natural or man-made disaster or acts of God; (ix) government orders or mandates;
(xi) epidemic or pandemic (including SARS-CoV-2 or COVID-19, and any evolutions thereof or related or associated epidemics,
pandemics or disease outbreaks); or (xii) any failure by the Business to meet any internal or published projections, forecasts or revenue
or earnings predictions (provided that the underlying causes of such failures (subject to the other provisions of this definition) shall not
be excluded).
“Outgoings” means the outgoings of the Business and Premises, including without limitation, rent, rates, levies, charges, land tax,
hiring, leasing and maintenance charges, and all other recurrent outgoings for which the Vendor is responsible;
“PPSA” means the Personal Properties Securities Act 2009 (Cth) and its associated regulations as amended;
“Permitted Encumbrance” means (i) any Encumbrance previously notified to GTG over each item of Plant and Equipment listed in or
annexed to Schedule 4, (ii) landlords’, lessors’, mechanics’, materialmen’s, warehousemen’s, carriers’, workers’, or repairmen’s
Encumbrances or other similar Encumbrances arising or incurred in the ordinary course of business which are not delinquent, (iii)
easements, quasieasements rights-of-way, rights of re-entry or other similar restrictions, including any other agreements, conditions or
restrictions that would be shown by a current title report or other similar report or listing, which do not materially impair the occupancy
or use of any Premises for the purposes for which it is currently used in connection with the Business, (iv) any conditions that may be
shown by a current survey and that do not materially impair the occupancy or use of any Premises for the purposes for which it is
currently used in connection with the Business, and (iv) zoning, building, subdivision or other similar requirements or restrictions which
are not violated by the current use and operation of the applicable Premises (except for any violations that would not adversely affect in
any material respect the use and occupancy of any such Premises as currently used and occupied).;
“Plant and Equipment” means the items of plant and equipment set out or annexed to Schedule 5;
“Premises” means those premises that are the subject of each of the Leases respectively, being:
(a)
the Dolphin Centre Complex, Main Street, Valley Road, Balzan, Malta, having an area of 225sqm; and
(b) Uni 3, 5 Sesame Court, Slacks Creek, QLD 4127
-5-
“Records” means originals and copies, in machine readable or printed form, of all books, files, reports, records, correspondence,
documents and other material of or relating to or used in connection with the Business including:
(a)
all records stored on or accessed through the Vendor’s CPR, accounting and other software licenses and/or cloud-based software as
a service subscriptions
(b) minute books, statutory books and registers, books of account and copies of applicable taxation returns;
(c)
brochures and other promotional material;
(d)
all sales and purchasing records, including all customer names;
(e)
all trading and financial records;
(f)
bank account records for all the bank accounts relating to the business for the period commencing on 1 January 2018 and ending
on the Completion Date;
(g)
lists of all regular suppliers and customers;
(h)
all user names and passwords needed to access all accounting, software licenses, social media accounts and all other services or
assets requiring a user name and password; and
(i)
employee records.
“Registration Agreement” means a registration rights agreement to be entered into by and between GTG and the Vendor, effective as
of the Completion Date, such registration rights agreement to be substantially in the form attached hereto as Exhibit B.
“Security Interest” means a security interest as defined in the PPSA;
“Stock” means all the marketable stock including raw materials, materials used in manufacture, packaging materials, components,
work-in-progress, finished goods, goods under manufacture, inventories and other stock in trade owned by the Vendor, including goods
in transit and stock ordered and paid for by the Vendor but not received by Completion;
“Termination Date” has the meaning set forth in Section 5.4(b).
“Transferring Employees” means those Employees who accept an offer of employment with GTG as at the Completion Date.
“Trade Marks” means:
(a) EasyDNA
(b) GTLDNA
(c) General Genetic Corporation
(d) Homedna Direct
(e)
International Bioscience
(f) Whoz the Daddy?
as further may be identified in Schedule 6.
“Vendor’s Warranties” means the Vendor’s warranties as set out in Schedule 7.
-6-
1.2 Construction
In this Agreement unless the context otherwise requires:
(a) words importing the singular include the plural and vice versa;
(b) words importing any gender include all other genders;
(c) words importing persons include corporations, all bodies and associations corporate or unincorporate and vice versa and includes
their heirs, successors, permitted assigns and transferees;
(d)
(e)
any agreement, warranty, representation, obligation or liability which binds or benefits two or more persons under this Agreement
binds or benefits those persons jointly and severally;
any reference to a statute or statutory provision includes any statutory provision which amends, extends, consolidates or replaces or
has been amended, extended, consolidated or replaced by, that statute or statutory provision and any other orders, regulations,
instruments or other subordinate legislation made under that statute or statutory provision;
(f)
headings are included for convenience only and will not affect the interpretation and construction of this Agreement or any
Schedule;
(g)
all references to “$” and “dollars” are references to the lawful currency of the United States; and
(h)
if an event (including the making of a payment) must occur under or in connection with this Agreement on a stipulated day which
is not a Business Day then the stipulated day will be taken to be the next Business Day.
2.
SALE AND PURCHASE OF BUSINESS AND ASSETS
2.1 Sale and Purchase of Business and Assets
Subject to the terms of this Agreement, the Vendor agrees to sell and GTG agrees to buy the Business and Assets, free from all
Encumbrances except any Permitted Encumbrance with effect from the Completion Date.
2.2 Sale and Purchase of Stock
Subject to the terms of this Agreement, the Vendor agrees to transfer and set over to GTG and GTG agrees to receive and acquire from
the Vendor all the Stock on the Completion Date.
3. CONSIDERATION
3.1 The Purchase Price
In consideration of the Vendor selling and transferring the Business and Assets and subject to the terms and conditions hereunder, GTG
must:
(a)
pay to the Vendor the amount of two million and five hundred thousand United States dollars (US $2,500,000); and
(b)
issue to the Vendor or its nominee the Consideration Shares.
-7-
3.2 Cash Payment - Schedule
Payment of the amount specified in paragraph (a) of Section 3.1 shall be by way of two direct wire transfers to bank accounts to be
nominated by the Vendor:
(a)
(b)
the first of which shall be in the amount of two million United States dollars (US $2,000,000), payable on the Completion Date;
and
the second of which shall be to the Escrow Agent in the amount of five hundred thousand United States dollars (US $500,000)
payable on the Completion Date (the “Escrow Amount”).
For avoidance of doubt, GTG acknowledges that its sole source of payment for any adjustment to the amount payable under Section 3.2
(a) (including adjustments contemplated by Sections 6.4, 6.6, 6.8, 8.2, 8.3 and 8.4) shall be the Escrow Funds in accordance with the
Escrow Agreement. The parties agree to address such adjustments and agree to them not later than thirty (30) days before the first
anniversary of the Completion Date.
3.3 Issuing the Consideration Shares
The time for issuing the Consideration Shares specified in paragraph (b) of Section 3.1 shall be on the Completion Date..
3.4 Intentionally Omitted.
3.5 Conditions attaching to the Consideration Shares
The Consideration Shares will be subject to a lock-up agreement for the first six (6) months following the Completion Date. All costs
related to the conversion of the GTG Ordinary Shares into ADRs, and the registration of the ADRs referenced herein, shall be borne by
GTG.
Vendor hereby represents and warrants as of the date hereof and as of the Completion Date to GTG as follows (unless as of a specific
date therein, in which case they shall be accurate as of such date):
(a) Understandings or Arrangements. Vendor is acquiring the Consideration Shares as principal for its own account and has no
direct or indirect arrangement or understandings with any other persons to distribute or regarding the distribution of such
Consideration Shares (this representation and warranty not limiting Vendor’s right to sell the Consideration Shares pursuant
to a resale registration statement or otherwise in compliance with applicable federal and state securities laws).
(b) Vendor Status. At the time Vendor was offered the Consideration Shares, it was, and as of the date hereof it is either: (i) an
“accredited investor” as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8) under the Securities Act of 1933, as amended
(the “Securities Act”) or (ii) a “qualified institutional buyer” as defined in Rule 144A(a) under the Securities Act.
(c) Experience of Vendor. Vendor, either alone or together with its representatives, has such knowledge, sophistication and
experience in business and financial matters so as to be capable of evaluating the merits and risks of the prospective
investment in the Consideration Shares, and has so evaluated the merits and risks of such investment. Vendor is able to bear
the economic risk of an investment in the Consideration Shares and, at the present time, is able to afford a complete loss of
such investment.
(d) Access to Information. Vendor acknowledges that it has had the opportunity to review this Agreement (including all exhibits
and schedules thereto) and GTG’s SEC Reports and has been afforded, (i) the opportunity to ask such questions as it has
deemed necessary of, and to receive answers from, representatives of GTG concerning the terms and conditions of the
offering of the Consideration Shares and the merits and risks of investing in the Consideration Shares; (ii) access to
information about GTG and its financial condition, results of operations, business, properties, management and prospects
sufficient to enable it to evaluate its investment; and (iii) the opportunity to obtain such additional information that GTG
possesses or can acquire without unreasonable effort or expense that is necessary to make an informed investment decision
with respect to the investment.
-8-
The Vendor agrees to the imprinting, so long as is required by applicable securities laws, of a legend on any of the Consideration Shares
in the form required by the depositary for the ADRs.
GTG acknowledges and agrees that Vendor may from time to time pledge pursuant to a bona fide margin agreement with a registered
broker-dealer or grant a security interest in some or all of the Consideration Shares to a financial institution that is an “accredited
investor” as defined in Rule 501(a) under the Securities Act and, if required under the terms of such arrangement, Vendor may transfer
pledged or secured Consideration Shares to the pledgees or secured parties. Such a pledge or transfer would not be subject to approval of
GTG and no legal opinion of legal counsel of the pledgee, secured party or pledgor shall be required in connection therewith. Further, no
notice shall be required of such pledge. At the Vendor’s expense, GTG will execute and deliver such reasonable documentation as a
pledgee or secured party of Consideration Shares may reasonably request in connection with a pledge or transfer of the Consideration
Shares.
GTG shall cause its counsel to issue a legal opinion to the Transfer Agent or Vendor promptly after the effective date of such
registration statement if required by the Transfer Agent to effect the removal of the legend hereunder, or if requested by Vendor.
Vendor agrees with GTG that Vendor will sell any Consideration Shares pursuant to either the registration requirements of the Securities
Act, including any applicable prospectus delivery requirements, or an exemption therefrom, and acknowledges that the removal of the
restrictive legend the applicable Consideration Shares as set forth in this Section 3.5 is predicated upon GTG’s reliance upon this
understanding.
3.6 No Further Payments
The parties acknowledge and agree that, other than the amounts specified in this Section 3 (subject to adjustments contemplated under
this Agreement), GTG does not have any liability or obligation to pay the Vendor any amounts.
3.7 Escrow Agreement
(a) At the Closing, GTG shall deposit the Escrow Amount with the Escrow Agent pursuant to Section 3.2(b) and the Escrow
Agreement. The Escrow Amount and any interest or earnings thereon (the “Escrow Funds”) shall be governed by the terms of the
Escrow Agreement. The Escrow Funds shall be held in escrow until the first (1st) anniversary of the Completion Date to fund any
adjustment pursuant to Sections 6.4, 6.6, 6.8, 8.2, 8.3 and 8.4 and any required indemnification payments of Vendor in accordance
with Sections 11.2 and 12.1.
(b) All parties hereto agree for all tax purposes: (i) the right of Vendor to the Escrow Funds shall be treated as deferred contingent
purchase price; and (ii) GTG shall be treated as the owner of the Escrow Funds solely for tax purposes, and all interest and
earnings earned from the investment and reinvestment of the Escrow Funds, or any portion thereof, shall be allocable to GTG. All
parties hereto shall file all Tax Returns consistently with the foregoing.
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4. CONTRACTS
4.1 Assignment, novation of the Contracts or New Contracts
(a) The Vendor assigns to GTG with effect on and from Completion the benefit of those Contracts in respect of which assignment by
the Vendor is permitted without the consent of the other party to the Contract.
(b) The Vendor and GTG must use reasonable endeavours to assign to GTG with effect on and from Completion the benefit of those
Contracts in respect of which assignment by the Vendor is permitted only with the consent of the other party to the Contract.
(c) To the extent that a Contract is not assigned to GTG on Completion, for a period after Completion ending on the earlier of the date
that GTG enters into a replacement Contract with the other party to such Contract that was not assigned, and the first (1st)
anniversary of the Completion Date, the Vendor shall hold its rights under such Contract for the benefit of GTG and must do
whatever GTG reasonably requires at GTG’s expense to enable GTG to enjoy that benefit. GTG indemnifies and will keep
indemnified the Vendor in respect of any claim the Vendor may be or become liable for in connection with or arising out of the
Vendor complying with its obligations under this clause.
(d) From Completion:
(i) GTG must comply with and perform all of the Vendor’s obligations; and
(ii)
the Vendor is released from all responsibilities and liabilities (other than in respect of any liability for breaches before
Completion),
in respect of all of the Contracts, whether or not they are assigned or novated to GTG on or before Completion.
4.2 Breach after Completion
GTG indemnifies the Vendor from and against all losses arising directly or indirectly from, or incurred in connection with, any breach of
any Contract by GTG after Completion, except to the extent caused or contributed to by the Vendor. In accordance with and subject to
the limitations set forth in Sections 11.2 and 12, the Vendor indemnifies GTG from and against all Losses arising from, or incurred in
connection with, any breach of any Contract of the Vendor before Completion.
5. CONDITION FOR COMPLETION
5.1 Conditions Precedent to GTG’s Obligations
Completion is conditional on and subject to each of the following conditions being fulfilled or being waived by GTG on or before the
Completion Date:
(a) Officers Certificate
GTG shall have received from the Vendor a signed certificate of an officer of each of GGC, GGE, GGUK and GGA, certifying that the
each of those Companies’ board of directors and shareholders have resolved to enter into the transaction described in this Agreement.
(b) No Material Change in the Business
Since the Effective Date, there shall have been no Material Adverse Effect and GTG shall have received from the Vendor a signed
certificate of an officer of each of GGC, GGE, GGUK and GGA, certifying to that effect.
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(c) No Breach of Warranty
There will have been no breach of the Vendor’s Warranties except to the extent such breach would not have a Material Adverse Effect.
(d) Key Person
The employment agreement entered into by and between GTG and the Key Person on the Effective Date concurrently with the
execution and delivery of this Agreement (the “Key Person Employment Agreement”) shall not have been terminated and shall be in
full force and effect on the Completion Date.
(e) Employees
At least fifty percent (50%) of the Employees identified in Schedule 2 shall have accepted the offer of employment made by GTG in
accordance with Section 6.1 and signed their respective employment agreement with GTG.
(f) Contracts
GTG will have become a party to five (5) of the nine (9) Contracts with agents, five (5) of the nine (9) Contracts with labs and each of
the leases identified on Schedule 1 as being required as a condition of Completion, whether by way of the Contracts respective counter-
parties agreeing to GTG becoming a party or by way of a fresh agreement being entered into between GTG and each of the Contracts’
respective counter-parties.
(g) No Legal Proceedings
There being no legal proceedings threatened or pending in relation to the Products or the Business which could reasonably be expected
to restrict or prohibit the transaction contemplated by this Agreement.
(h)
Incorporating a GTG Subsidiary
Either (i) GTG will have incorporated a Maltese company and opened a bank account for that Company, or (ii) Vendor shall have
provided GTG with reasonable access to and use of Vendor appropriate bank accounts for purposes of satisfying payroll obligations in
respect of Transferring Employees from and after Completion until such time as GTG will have incorporated a Maltese company and
opened a bank account for that Company.
5.2 Conditions Precedent to Vendor’s Obligations
(a) GTG Warranties
The Warranties of GTG set forth in Section 11.5 shall be true and correct in all material respects as of the Completion Date (except that
warranties that are made as of a specific date need be true and correct only as of such date and).
(b) GTG Covenants
GTG shall have performed or caused to be performed in all material respects all obligations that are required to be performed by it on or
prior to the Completion Date.
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(c) No Material Change in GTG
Since the Effective Date, there shall have been no event, occurrence, fact, condition or change that is materially adverse to (a) the
business, results of operations, financial condition or assets of GTG, or (b) the ability of GTG to consummate the transactions
contemplated hereby, and and Vendor shall have received from GTG a signed certificate of an officer of GTG , certifying to that effect.
(d) Officer’s Certificates
Vendor shall have received from GTG a signed certificate of an officer of GTG, certifying that GTG’s board of directors have resolved
to enter into the transaction described in this Agreement.
(e) Escrow Agreement and Registration Agreement
GTG and the Escrow Agent shall have executed and delivered the Escrow Agreement and the Escrow Agreement shall be in full force
and effect. GTG shall have executed and delivered the Registration Agreement and the Registration Agreement shall be in full force and
effect.
5.3 Reasonable endeavours
The parties must use their respective reasonable endeavours to ensure that the conditions set out in clauses 5.1 and 5.2 are met as soon as
reasonably practicable and each party must keep the other informed of any circumstance which may result in any condition set out in
clause 5.1 not being satisfied.
(a) Waiver of conditions
The Condition Precedents set out in Section 5.1 are for the benefit of GTG and may only be waived in writing by GTG. The Condition
Precedents set out in Section 5.2 are for the benefit of Vendor and may only be waived in writing by Vendor.
(b) Notification of satisfaction of Condition Precedents
GTG must give the Vendor notice in writing within a reasonable time of GTG becoming aware of Condition Precedents being satisfied
or the Condition Precedents not being satisfied.
5.4 Termination of Agreement
This Agreement may be terminated, and the consummation of the transactions contemplated hereby may be abandoned, at any time prior
to Completion only as provided below:
(a)
by the mutual written consent of Vendor and GTG;
(b) by either Vendor or GTG by written notice to the other if the Closing shall not have occurred on or before the date that is one
hundred twenty (120) days after the date of this Agreement (the “Termination Date”); provided, however, that the right to
terminate this Agreement under this Section 5.4(b) shall not be available to any party whose failure to comply with any provision
of this Agreement has been the primary cause of, or primarily resulted in, the failure of Completion to occur on or before the
Termination Date
In the event of the valid termination of this Agreement pursuant to this Section 5.4, this Agreement shall forthwith become null and void
and have no effect, without any liability on the part of GTG or Vendor, and their respective directors, officers, employees, partners,
managers, Affiliates, direct or indirect equity holders, members or stockholders, and all rights and obligations of any party hereto shall
cease, except that (a) the agreements contained in this Article 5.4, Section 16, and Section 18 shall survive the termination of this
Agreement and (b) no such termination shall relieve any party hereto of any liability for damages resulting from any fraud by such party
of this Agreement prior to such termination.
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6.
EMPLOYEES
6.1 Basis for Employment of the Employees
As soon as reasonably practicable after the date of this Agreement but in any event not less than two (2) weeks before the Completion
Date, GTG must, or must cause its nominee to, offer to employ the Employees:
(a) with effect from and conditional on Completion;
(b) unless otherwise agreed, on terms and conditions that no less favourable to the Employees than the terms on which they are
employed at the time the offer is made;
The Offers of Employment must remain open for acceptance for at least seven days after receipt.
6.2 The Parties’ Cooperation in relation to Employment
(a) The parties must use all reasonable efforts to encourage the Employees to accept GTG’s offers of Employment.
(b) As soon as the offers of Employment have all been accepted or refused, GTG must notify the Vendor accordingly, giving the
names of the Transferring Employees.
(c) Despite any other provision of this Agreement, Vendor, or its representative, will terminate the employment of all the Employees
effective as at Completion.
6.3 Vendor’s obligations to Transferring Employees
Subject to Section 6.4, after Completion, the Vendor will be responsible for and must pay when due all remuneration and other
Employee Entitlements, that accrued before Completion.
6.4 Adjustment Employee Entitlements
GTG shall be entitled to deduct from the amount payable under Section 3.2 the amounts payable with respect to Employee Entitlements
that arose before the Completion Date and, in the case of personal leave other than annual leave, that arose before the Completion Date
and that a Transferring Employee used after the Completion Date.
6.5 Employment of the Key Person
The Key Person agrees, subject to the terms and conditions of the Key Person Employment Agreement, to be employed by GTG on a
full time basis from and after the Completion Date, as evidenced by the Key Person executing the Key Person Employment.
6.6 Worker’s Compensation
In relation to each Transferring Employee:
(a)
the Vendor is responsible for and will indemnify, keep indemnified and hold harmless GTG in relation to any workers’
compensation claim lodged before or subsequent to the Completion Date where and to the extent that the claim is founded upon an
event or circumstance alleged to have occurred during the claimant’s employment by the Vendor; and
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(b) GTG is responsible for and will indemnify, keep indemnified and hold harmless the Vendor in relation to any workers’
compensation claim lodged by any Transferring Employee provided the claim is founded upon an event or circumstance alleged to
have occurred during the claimant’s employment with GTG.
6.7 GTG’s Covenant
After the Completion Date, GTG will be solely responsible for all Transferring Employees and will keep the Vendor indemnified
against all costs and expenses relating to claims by Transferring Employees in relation to Employee Entitlements payable to such
Employees, where the Employee Entitlements arose after the Completion Date.
6.8 Superannuation
(a) Obligation of Vendor
On or before the close of business on the Completion Date, the Vendor will pay to the trustee or trustees of the superannuation fund or
funds maintained for the benefit of the Transferring Employees in accordance with applicable Law (“Vendor’s Superannuation
Fund”) all superannuation contributions which the Vendor is required to make as employer on behalf of the Transferring Employees
under any industrial award, agreement or legislation governing superannuation contributions for the period up to the Completion Date.
(b) Obligation of Purchaser
GTG will, for the period on and from the Completion Date, make contributions for superannuation in respect of the Transferring
Employees as GTG is required to make under the provisions of any industrial award, agreement or legislation governing superannuation
contributions.
7. ADJUSTMENTS
7.1 Outgoings
The Outgoings will be apportioned between the Vendor and GTG on the Completion Date and the amount due to either party will be
paid on that day. The Vendor will be liable for all Outgoings up to 11.59 p.m. on the day prior to the Completion Date and GTG will be
liable for all Outgoings on and after the Completion Date.
7.2 Services
All services connected to the Premises, including without limitation, electricity, gas and telephone services will be the Vendor’s
responsibility and must be paid by the Vendor up to 11.59 p.m. on the day prior to the Completion Date.
8. DEBTORS AND CREDITORS
8.1 No Transfer
The parties agree that the sale and purchase of the Business, Assets and Stock will not affect any transfer or assignment of any of the
debtors or creditors of the Business as at the Completion Date.
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8.2 Deferred Revenue
GTG shall be entitled to reimbursement for Completion Deferred Revenue Costs.
8.3 Debts
Subject to Section 8.2:
(a)
the Vendor remains entitled to collect all debts owing to it and liable for all the debts of the Business, as at the close of trading on
the day before the Completion Date; and
(b) GTG shall be entitled to collect all debts owing to it and liable for all the debts of the Business, after Completion Date.
8.4 Monies received by GTG on Vendor’s behalf
(a)
(b)
(c)
If after the Completion Date, GTG receives cash or other forms of payment made by debtors of the Business and due to the
Vendor, it must hold such payment on trust for the Vendor.
If after the Completion Date, the Vendor receives cash or other forms of payment made by debtors of the Business and due to
GTG, it must hold such payment on trust for GTG.
In the event that any amounts or payments are credited incorrectly into one of the parties’ bank accounts, then the relevant party
who is holding such funds must immediately notify the other party and arrange a reconciliation and/or reimbursement of the
relevant monies within five (5) Business Days.
9. COMPLETION
9.1 Date, Place and Time of Completion
Completion will take place at the office of GTG on the Completion Date at a time agreed between the parties in writing or in such other
manner as may be mutually agreed between the parties.
9.2 Matters to be Attended to on the Completion Date
The Vendor must, on or before the Completion Date:
(a)
change the names of GGC, GGA, GGE and GGUK;
(b) provide a list of all amounts outstanding and payable from clients of the Business to the Vendor;
(c)
provide a list of all amounts outstanding and payable from the Vendor to its suppliers;
(d) give GTG possession of the Business, Assets and Stock, free of Encumbrances except for any Permitted Encumbrance;
(e)
give GTG possession of the Premises;
(f)
sign all documents and do all things necessary to apply for and transfer to GTG all Licences, permits, hiring, leasing and
maintenance agreements and other registrations necessary to enable GTG to lawfully carry on the Business;
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(g)
arrange for all service meters (including telephones) to be read and assist GTG to transfer those services including (subject to the
approval of any relevant authority) any telephone and/or facsimile lines used in the Business;
(h) provide to GTG details of:
(i)
the Vendor’s insurances related to the Business; and
(ii)
software licenses, including for access to accounting packages and systems;
(i)
deliver to GTG all operational records relating to the Business, Premises (including the Lease), Assets, Stock, and all Employees
re-employed by GTG which are necessary for the conduct of the Business (excluding those records which are confidential or which
the Vendor must retain by law), including without limitation all customer lists, product promotional and descriptive literature,
computer data relating to the Business, Assets and Stock and purchasing records;
(j)
deliver a duly executed assignment of the Vendor’s trademarks to GTG, in customary form and substance reasonable acceptable to
the Vendor and GTG; and
(k) do all other things reasonably necessary and required by GTG to put GTG into full possession of the Business, Assets, Stock and
Premises and otherwise for the purpose of carrying out its obligations under this Agreement.
9.3 Assignment of Intellectual Property
As and from the Completion Date, the Vendor hereby assigns or transfers to GTG its entire right and title in and to all the Intellectual
Property.
10. POST COMPLETION OBLIGATIONS
10.1 Non-Disparagement
Subject to Completion occurring, the each party agrees that, from Completion, it will not disparage the other party, or the other party’s
related entities or any of their respective businesses or associated personnel (including officers, employees, agents and contractors) or
speak or write in terms which are likely to be injurious to the commercial, professional or personal standing of any of them or any of
their businesses or associated personnel; provided that each party may confer in confidence with their respective legal representatives
and make truthful statements as required by Law.
10.2 Non-solicitation
During the Term of this Agreement and for a period of twelve (12) months after its termination or expiry, each party agrees that it will
not, directly or indirectly: (i) solicit or recruit any personnel of the other party, for its own benefit or the benefit of any other person, and
(ii) encourage, suggest or facilitate any employees of the other party to leave his or her employment with the other party;. For
clarification, the restrictions set out in this Section 10.2 apply with respect of the Transferred Employees.
10.3 Restrictive Covenant
(a) The Vendor covenant and agree that they will not after the Completion Date, without GTG’s prior written consent, for the periods
of time specified in paragraph (d) of this Section 10.3 and within the regions specified in paragraph (e) of this Section 10.3, carry
on or be involved in any capacity with any business that offers for sale or sells or markets genetic tests or otherwise identical or
similar to the Business. The Vendor agree that this Section 10.3 will enure for the benefit of GTG and its legal personal
representatives, assigns or transferees.
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(b) This Section 10 is to be construed and to take effect as if it consisted of the number of separate provisions which are the result of
combining each type of conduct referred to above with each of the regions specified in regions specified in paragraph (e) of this
Section 10.3, and then relating each of those combinations to each of the periods of time specified in paragraph (d) of this Section
10.3. If any of those separate provisions is unenforceable, illegal or void for any reason that provision shall be severed. Severance
will not affect the validity or unenforceability of any of the other separate provisions.
(c) The Vendor acknowledges that each of the separate provisions referred to above constitute a fair and reasonable restraint of trade.
(d) Thirty six months
Twenty four months
twelve months; and
six months.
(e) The entire world;
The Americas, Europe and Asia;
The Americas and Europe; and
The US and all European countries west of the Urals.
11. WARRANTIES
11.1 Vendor’s warranties
The Vendor:
(a)
represents and warrants to GTG that each and every one of the Vendor Warranties are true, complete and accurate as at the
Effective Date and immediately prior to Completion;
(b)
acknowledges that GTG is entering into this Agreement in reliance on each of the Vendor’s Warranties;
(c) warrants that each warranty is given as at the date of this Agreement and will remain in full force and effect for twelve (12) months
after the Completion Date; and
(d)
represents and warrants to GTG that, subject to Section 11.2, it shall be liable to make any payment (whether by way of an
adjustment to the amount payable under Section 3.2(b) or otherwise) for any breach of any warranty.
11.2 Indemnity for breach of Vendor Warranty
(a) The Vendor shall indemnify GTG for all of GTG’s Losses arising out of or incurred in connection with any Vendor Warranty
being untrue at the time it was given.
(b) Notwithstanding anything to the contrary contained in this Agreement:
(i) The representations and warranties of Vendor contained in this Agreement or in any schedule, exhibit or certificate attached
hereto or delivered pursuant to this Agreement shall survive the Completion until the first (1st) anniversary of the Completion
Date (“Survival Period”). Vendor shall not be liable for any claim for indemnification under this Section 11.2 unless GTG
delivers to the Vendor a claim notice in accordance with Section 11.3 prior to the expiration of the Survival Period. Upon
GTG delivering such a claim notice, the representation and/or warranty which is the subject of such claim notice shall survive
until such claim is resolved, and irrespective of whether or not the amount of the Losses resulting from such breach has been
finally determined at the time the notice is given.
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(ii) Vendor shall not be liable for any claim for indemnification pursuant to this Section 11.2 unless and until the aggregate
amount of Losses which may be recovered from Vendor equals or exceeds forty thousand dollars (US$40,000) (the
“Deductible”), in which case Vendor shall be liable for the aggregate amount of Losses, up to the Cap;
(iii) The maximum aggregate amount of Losses which may be recovered from Vendor pursuant to or relating to the transactions
contemplated under this Agreement (including under Sections 6.4, 6.6, 6.8, 8.2, 8.3, 8.4, 11.2 and 12) shall be limited to the
aggregate amount of the Escrow Funds (collectively, the “Cap”). The amount of any Losses for which indemnification is
provided under this Agreement (including under Sections 6.4, 6.6, 6.8, 8.2, 8.3, 8.4, 11.2 and 12) shall be net of any insurance
proceeds that GTG receives as an offset against such Losses.
(iv) GTG shall take commercially reasonable steps to mitigate any Losses as soon as reasonably practicable after GTG becomes
aware of any event which does, or could reasonably be expected to, give rise to any such Losses.
(v) Notwithstanding anything in this Agreement, GTG shall not be entitled to indemnification in respect of any breach of any
representation or warranty of Vendor if and to the extent GTG had actual knowledge of such breach prior to Completion.
(vi) GTG acknowledges and agrees that the remedies provided for in this Section 11.2 and Section 12 shall be GTG’s sole and
exclusive remedies for any breach of the representations and warranties or covenants contained in this Agreement or any
claims relating to this Agreement, other documents, certificates or agreements delivered in connection with this Agreement,
the Company or any Law or otherwise. Notwithstanding anything to the contrary set forth herein, GTG acknowledges that its
sole source of payment for any Losses indemnifiable under this Agreement (including under Sections 6.4, 6.6, 6.8, 8.2, 8.3,
8.4, 11.2 and 12) shall be the Escrow Funds in accordance with the Escrow Agreement.
11.3 Notice in advance of Payment for Warranty Claims
To be entitled to receive payment under Section 11.2, GTG must deliver to the Vendor written notice setting out specific details of a
warranty claim and give the Vendor at least 14 days to respond. If a demand is made on GTG by a third party which may result in a
claim by GTG on the Vendor for breach of a warranty under this Agreement, GTG must delivery written notice to the Vendor to such
effect immediately on receipt and permit the Vendor to participate in responding to and resolving the demand.
11.4 Intentionally Omitted
11.5 Warranties of GTG
GTG represents and warrants to the Seller that as at the Effective Date and immediately prior to Completion, it:
(a)
is properly incorporated and validly existing under the laws of its place of incorporation;
(b) has full power and authority to enter into and perform its obligations under this Agreement;
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(c)
has obtained all necessary approvals, consents and Authorisations to enter into and perform its obligations under this Agreement;
(d)
is not entering into this Agreement as trustee of any trust; and
(e)
there are no actions, suits, claims, investigations or other legal proceedings pending or, to GTG’s knowledge, threatened against or
by GTG or any affiliate of GTG that challenge or seek to prevent, enjoin or otherwise delay the transactions contemplated by this
Agreement.
The execution, delivery and performance by GTG of this Agreement, and the consummation of the transactions contemplated hereby, do
not and will not (a) result in a violation or breach of its formation and organizational documents, (b) result in a violation or breach of
any Law applicable to GTG, or (c) require the consent, notice or other action by any Person under, conflict with, result in a violation or
breach of, constitute a default under or result in the acceleration of any agreement to which GTG is a party, except in the cases of
clauses (b) and (c), where the violation, breach, conflict, default, acceleration or failure to give notice would not have a material adverse
effect on GTG’s ability to consummate the transactions contemplated hereby. No consent, approval, permit, governmental order,
declaration or filing with, or notice to, any Government Agency is required by or with respect to GTG in connection with the execution
and delivery of this Agreement and the consummation of the transactions contemplated hereby, except for filings or notices which
would not have a material adverse effect on GTG’s ability to consummate the transactions contemplated hereby.
On the Completion Date GTG will have sufficient funds available to consummate the transactions contemplated hereby, including, to
purchase the Assets and to pay the cash purchase price contemplated by Section 3.1. GTG acknowledges and agrees that its performance
of its obligations under this Agreement is not in any way contingent upon the availability of financing to GTG. Immediately after giving
effect to the transaction contemplated hereby and the incurrence of any indebtedness in connection therewith, the assets of the GTG will
exceed its liabilities. In connection with the consummation of the transaction contemplated hereby and the incurrence of any
indebtedness in connection therewith, GTG does not intend that the it would incur, and does not believe that it will incur, debts beyond
its ability to pay as such debts mature.
GTG has timely filed with or furnished to, as applicable, the ASX and United States Securities and Exchange Commission (the “SEC”)
all registration statements, prospectuses, reports, schedules, forms, statements, and other documents (including exhibits and all other
information incorporated by reference) required to be filed or furnished by it with the ASX and SEC since January 1, 2020 (the “GTG
Filed Documents”). True, correct, and complete copies of all the GTG Filed Documents are publicly available on EDGAR. As of their
respective filing dates or, if amended or superseded by a subsequent filing prior to the date hereof, as of the date of the last such
amendment or superseding filing (and, in the case of registration statements, on the dates of effectiveness), each of the GTG Filed
Documents complied as to form in all material respects with the applicable requirements of the Securities Act of 1933, as amended, the
Securities Exchange Act of 1934, as amended, and the Sarbanes-Oxley Act, and the rules and regulations of the SEC thereunder
applicable to such GTG Filed Documents. None of the GTG Filed Documents, including any financial statements, schedules, or exhibits
included or incorporated by reference therein at the time they were filed (or, if amended or superseded by a subsequent filing prior to the
date hereof, as of the date of the last such amendment or superseding filing), contained any untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading. To the Knowledge of GTG, none of the GTG Filed Documents is the subject of ongoing
ASX or SEC review or outstanding ASX or SEC investigation and there are no outstanding or unresolved comments received from the
ASX or the SEC with respect to any of the GTG Filed Documents.
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A true and correct description of the authorized capital stock of GTG consists is set forth in the GTG Filed Documents. The capital stock
described in the GTG Filed Documents constitutes all the issued and outstanding equity interests of the GTG. Except as described in the
GTG Filed Documents, no shares of capital stock or other equity interests of the GTG are issued, reserved for issuance or outstanding.
Except as described in the GTG Filed Documents, GTG is not a party to any outstanding or authorized option, warrant, right (including
any preemptive right), subscription, claim of any character, agreement, obligation, convertible or exchangeable securities, or other
commitments contingent or otherwise, relating to the capital stock or other equity or voting interests in GTG or any of its Subsidiaries,
pursuant to which GTG is or may become obligated to issue, deliver or sell or cause to be issued, delivered or sold, shares of capital
stock of or other equity or voting interests in, GTG or any securities convertible into, exchangeable for, or evidencing the right to
subscribe for or acquire, any shares of the capital stock of or other equity or voting interests in the Company. Except as described in the
GTG Filed Documents, there are no outstanding or authorized stock appreciation, phantom stock, profit participation or similar rights
with respect to the capital stock of, or other equity or voting interests in, GTG.
11.6 Indemnity for breach of GTG Warranty
(c) GTG shall indemnify the Vendor for all of the Vendor’s Losses arising out of or incurred in connection with any GTG Warranty
being untrue at the time it was given.
(d) Notwithstanding anything to the contrary contained in this Agreement:
(vii) The representations and warranties of GTG contained in this Agreement or in any schedule, exhibit or certificate attached
hereto or delivered pursuant to this Agreement shall survive the Completion only until the expiration of the Survival Period.
GTG shall not be liable for any claim for indemnification under this Section 11.6 unless the Vendor delivers to GTG a claim
notice prior to the expiration of the Survival Period. Upon the Vendor delivering such a claim notice, the representation
and/or warranty which is the subject of such claim notice shall survive until such claim is resolved, and irrespective of
whether or not the amount of the Losses resulting from such breach has been finally determined at the time the notice is
given.
(viii) GTG shall not be liable for any claim for indemnification pursuant to this Section 11.2 unless and until the aggregate amount
of Losses which may be recovered from GTG equals or exceeds the Deductible, in which case GTG shall be liable for the
aggregate amount of Losses, up to the GTG Cap;
(ix) The maximum aggregate amount of Losses which may be recovered from GTG pursuant to or relating to the transactions
contemplated under this Agreement (including under this Section 11.6 and Section 12) shall be limited to the aggregate
amount of $500,000 (collectively, the “GTG Cap”). The amount of any Losses for which indemnification is provided by
GTG under this Agreement by GTG (including under this Section 11.5 and Section 12) shall be net of any insurance proceeds
that the Vendor receives as an offset against such Losses.
(x) The Vendor shall take commercially reasonable steps to mitigate any Losses as soon as reasonably practicable after the
Vendor becomes aware of any event which does, or could reasonably be expected to, give rise to any such Losses.
(xi) Notwithstanding anything in this Agreement, the Vendor shall not be entitled to indemnification in respect of any breach of
any representation or warranty of GTG if and to the extent the Vendor had actual knowledge of such breach prior to
Completion.
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12. INDEMNITIES
12.1 Indemnity by Vendor
(a)
In addition to the indemnification obligations set forth in Section 11.2, the Vendor indemnifies GTG against all Losses arising
from claims by third parties against GTG arising out of:
(i)
the ownership or operation of the Business, Assets or Stock or occupation of the Premises before the Completion Date;
(ii)
the employment or termination of employment of any employees, directors, secretaries or other officers of the Vendor before
the Completion Date; or
(iii) any Encumbrances (other than Permitted Encumbrances) created or incurred or in relation to any of the Assets or Stock
before the Completion Date;
(iv) any misrepresentation, breach of the Vendor’s Warranties or breach of or non-compliance with any of the provisions of this
Agreement by the Vendor; and
(v)
any and all Claims made by third parties against GTG with respect to matters arising before the Completion Date; and
(b)
the Vendor’s liability to indemnify GTG under this Section 12.1 shall be reduced proportionally to the extent that GTG directly
contributed to the loss.
12.2 Indemnity by GTG
GTG indemnifies the Vendor against all claims by third parties against, suffered or incurred by the Vendor arising out of:
(a)
the ownership or operation of the Business, Assets or Stock or occupation of the Premises after the Completion Date;
(b)
the employment or termination of employment of any of the Transferring Employees on or after the Completion Date;
(c)
the failure by GTG to pay or otherwise perform or discharge any of the responsibilities, liabilities and obligations under this
Agreement;
(d)
any Encumbrances created or incurred on or in relation to any of the Assets or Stock after the Completion Date;
(e)
any losses, Claims, actions, liabilities, damages and other expenses against, suffered or incurred by Vendor arising out of any
misrepresentation, breach of GTG’s warranties or breach of or non-compliance with any of the provisions of this Agreement by the
GTG.
GTG’s liability to indemnify the Vendor under this Section 12.2 shall be: (i) capped at GTG Cap which shall be in addition to the
amounts payable by GTG under Section 3 and notwithstanding anything to the contrary hereunder, GTG shall not be liable to pay the
Vendor any amount in excess of the GTG Cap, and (ii) reduced proportionally to the extent that the Vendor directly contributed to the
loss.
13. DEFAULT
13.1 Payment of Purchase Price
If GTG defaults in payment of all or part of the amounts payable under Section 3 and the default continues for more than 30 days after
notice in writing specifying the default has been served on GTG, then notwithstanding anything contained in this Agreement and
without prejudice to any other rights of the Vendor, the whole of the amount payable under Section 3 and any other money due under
this Agreement will at the option of the Vendor become immediately due and payable.
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13.2 Notice of Default
Time will be of the essence of this Agreement. However, without prejudice to the provisions of Clause 13.3 if either party defaults under
this Agreement, the other party will not be entitled to exercise any of their rights arising out of the default (including the right to sue for
money owing) until the party in default has been served with a written notice specifying:
(a)
the default; and
(b)
the intention to exercise their rights unless the default is remedied and the reasonable legal costs occasioned by the default and any
money payable under Clause 13.3 are paid within 7 days of service of the notice (except where other time frames are expressly
specified in this Agreement),
and the party in default fails to comply with the notice.
13.3 Interest
If the Vendor or GTG breaches this Agreement, the party in default must, without prejudice to any of the rights of the other party, pay
on demand:
(a)
(b)
all reasonable expenses, including legal costs on a solicitor own client basis, incurred by the other party as a result of the breach;
and
interest on any money overdue during the period of default at the rate of five percent (5%) p.a. calculated on the outstanding
amount applicable to the period commencing from the date on which payment becomes due and expiring on the date when
payment is made.
For the avoidance of doubt, interest will be calculated on any outstanding monies from the due date such sum was due rather than the
default date following a written Notice of Default.
14. DISPUTE
14.1 Parties to Negotiate
(a) A party to this Agreement may not commence legal proceedings, except proceedings seeking urgent interlocutory relief, in respect
of any disputes in relation to this Agreement, without first complying with the dispute resolution procedures in this clause 14.
(b)
If a dispute arises between the parties, then the parties undertake in good faith to use all reasonable endeavours to settle the dispute
by negotiation.
(c) Any Party shall, not later than twenty eight (28) days after the dispute has arisen, submit the matter at issue in writing to the other
Party specifying with detailed particulars of the matters in issue (the “notice”).
(d) Upon receipt of the notice the parties shall each nominate a person who has express authority to settle the dispute. The persons
nominated shall meet (the meeting) within ten (10) days of receipt of the notice and attempt to resolve the dispute.
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(e)
(f)
If the parties are unable to resolve the dispute or agree on the method to be used to resolve the dispute by following the process
described in paragraph (d) above, they must refer the dispute to mediation.
If the parties cannot agree on a mediator within seven (7) days of the receipt of the date of the meeting described in paragraph (d)
above, either party may request the Australian Disputes Centre to appoint a mediator and must copy the other party on such
request. Within fourteen (14) days of such request, the parties must submit to a mediation.
(g) Mediation shall take place at a time and place in Melbourne Australia agreed between the parties. If the parties are unable to agree,
the mediator shall nominate the time and place of the mediation. Any mediation must be conducted in Melbourne, Australia.
(h) The Parties acknowledge that all aspects of the meeting except the fact of the occurrence shall be confidential, and without
prejudice to any subsequent proceedings.
(i) Where the Parties are unable to resolve the dispute, then, within fourteen (14) days, either Party may refer the dispute to arbitration
as set out in this Clause 14, and, thereafter, if resolution by that means is not achieved then by the commencement of court
proceedings.
15. PENDING COMPLETION
15.1 Restrictions
Pending Completion the Vendor must not:
(a)
dispose of any Assets, other than the sale of Stock in the ordinary course of business;
(b)
acquire any Assets, other than the purchase of Stock in the ordinary course of business; or
(c)
do, or omit to do, or allow to happen, anything which would make any warranty false, misleading or incorrect in any material
respect when made or considered to be made under this Agreement.
15.2 Conduct of Business Prior to Completion
Pending Completion the Vendor must:
(a)
conduct the Business in the ordinary course of business consistent with past practice;
(b) maintain all existing insurance policies over the Business, Assets and Stock and ensure that those insurances are adequate and if
there is no insurance effect adequate insurance over the Business, Assets and Stock of an insurable nature;
(c)
consult with and keep GTG informed in relation to material decisions about the Business and its management;
(d) maintain and protect the Business, Assets and Stock, including without limitation, fully and punctually comply with all orders,
notices and requirements of any authority having jurisdiction over the Business, Assets, Stock and the Premises;
(e)
not allow any new Encumbrance to be placed on the Business, Assets or Stock without GTG’s prior written consent;
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(f)
use its best endeavours to preserve the Goodwill of the Business; and
(g)
comply with all the Vendor’s obligations under the Lease.
16. CONFIDENTIALITY
16.1 Obligation of Confidentiality
Subject to Clause 16.2, GTG must:
(a)
keep the Confidential Information confidential;
(b) not disclose the Confidential Information to persons other than its agents, employees, solicitors, accountants or advisers.
Vendor must keep the Confidential Information confidential and not disclose it to any third party for any purpose. Vendor’s obligation
of confidentiality, shall expire upon the Confidential Information entering the public domain through no fault of the Vendor or any of its
directors, officers, employees or contractors.
16.2 Termination of Obligations
GTG’s obligations under Clause 16.1 terminate on:
(a)
the Confidential Information becoming publicly available other than directly or indirectly through GTG or any of GTG’s agents,
employees, solicitors, accountants or advisers; or
(b) on Completion.
16.3 Return of Confidential Information
If Completion fails to take place GTG must immediately return to the Vendor any Confidential Information in the possession of GTG or
any of GTG’s agents, employees, solicitors, accountants or advisers.
17. RELEASE OF SECURITY INTEREST1
17.1 Assets Subject to a Security Interest
This clause 17 applies if any part of the Assets is subject to a security interest to which the Personal Property Securities Act 2009 (Cth)
(PPSA) applies.
17.2 Vendor to provide Release
Subject to clause 17.4, the Vendor must ensure that at or before Completion, GTG receives:
(a)
a release from the secured party releasing the security interest in respect of the Assets; or
(b)
a statement in writing in accordance with section 275(1)(b) of the PPSA setting out that the amount or obligation that is secured is
nil at the due date for settlement; or
1 Note to Draft: Required lien releases to be discussed.
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(c)
a written approval or correction in accordance with section 275(1)(c) of the PPSA indicating that, on the due date for Completion,
the personal property included in this agreement is not or will not be property in which the security interest is granted,
if the security interest is registered in the Personal Properties Securities Register.
17.3 Property Sold in the Ordinary Course of Business
The Vendor is not obliged to ensure that GTG receives a release, statement, approval or correction in respect of any personal property
that is sold in the ordinary course of the Vendor’s business of selling personal property of that kind unless, in the case of goods that may
or must be described by a serial number in the Personal Properties Securities Register, GTG advises the Vendor at least 21 days before
the due date for Completion that the goods are to be held as inventory.
17.4 No Release in Certain Circumstances
The Vendor is not obliged to ensure that GTG receives a release, statement, approval or correction in respect of any personal property
that:
(a)
is not described by serial number in the Personal Property Securities Register;
(b)
is predominantly used for personal, domestic or household purposes; and
(c)
has a market value of not more than $5,000 or, if a greater amount has been prescribed for the purposes of section 47(1) of the
PPSA, not more than that prescribed amount.
17.5 Release to be in Writing
For the purposes of a release under special condition 17.2(a), a release must be in writing. The release must be effective in releasing the
goods from the security interest and be in a form which allows GTG to take title to the goods free of that security interest.
17.6 GTG to Provide Vendor Release in Certain Circumstances
If GTG receives a release under special condition 17.2(a), GTG must provide the Vendor with a copy of the release at or as soon as
practicable after settlement.
17.7 Undertaking to Register a Finance Statement
In addition to ensuring a release is received under this clause 17, the Vendor must ensure that at or before Completion, GTG receives a
written undertaking from a secured party to register a financing change statement to reflect that release if the property being released
includes goods of a kind that are described by serial number in the Personal Property Securities Register.
17.8 Interpretation
Words and phrases used in this clause which are defined the PPSA have the same meaning in this clause 17.
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18. MISCELLANEOUS
18.1 Entire Agreement
This Agreement constitutes the entire agreement between the Vendor and Purchaser and no representations, warranties, guarantees or
other terms or conditions, whether express or implied and whether oral or in writing in relation to the subject matter of this Agreement
will be of any force or effect unless contained in this Agreement.
18.2 Announcements
The parties intend to issue a mutually agreed joint press release or other similar public communications regarding this Agreement on the
Effective Date. Otherwise, neither party shall make any public statement, concerning the terms of, or events related to, this Agreement,
except where such statement (a) is required by Law or legal proceedings, including as required by securities regulators, (b) is required to
be contained in such party’s financial statements, or (c) has been announced previously in a manner mutually agreed to in writing by the
parties. In the case of any public statement that is required by Law or legal proceedings, each party shall (i) use commercially reasonable
efforts to obtain confidential treatment of financial and trade secret information, and (ii) if reasonably practicable under the
circumstances, give the other party sufficient advance notice of the text so that such other party will have the opportunity to comment
upon the statement, and give due consideration to any such comments in the final statement.
18.3 Amendment and Waiver
This Agreement may not be modified or amended except by instrument in writing signed by all the parties to this Agreement. No waiver
of any breach of any term of this Agreement (including this sub-clause) will be effective unless in writing signed by the party or parties
having the right to enforce such breach and no such waiver shall be construed as a waiver of any continuing or subsequent breach.
18.4 Notices
Any demand, notice or document to be made or given under this Agreement:
(a) must be in writing;
(b) may be made or given by the solicitor for a party; and
(c) will be sufficiently served if delivered personally or sent by prepaid post or email transmission addressed to the party to be served
at their address shown in this Agreement or to their solicitor or if served in any other manner authorised by the Victorian Supreme
Court Rules for service of documents on parties or their solicitors.
18.5 Assignment
Neither party may assign or transfer this Agreement or any rights or obligations hereunder without the prior written consent of the other
party, except that a party may make such an assignment or transfer without the other party’s written consent to (a) any of its Affiliates,
or (b) any third party in connection with (i) the acquisition of a party by or merger or consolidation of such party with another entity or
(ii) a merger, consolidation, sale of stock, sale of all or substantially all of such party’s assets or other similar transaction in which such
Third Party becomes the owner of all or substantially all of the business and assets of such party. Any permitted successor or assignee of
rights or obligations hereunder shall expressly assume the performance of such rights or obligations. In the event of an assignment or
transfer as permitted above in this Section 18.5 to an Affiliate of the assigning party, the assigning party shall remain responsible (jointly
and severally) with such Affiliate for such assigned or transferred obligations. Any assignment or transfer, or attempted assignment or
transfer, by either party in violation of the terms of this Section 18.5 shall be null and void and of no legal effect. This Agreement shall
be binding on, and inure to the benefit of, each party, its successors and permitted assigns.
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18.6 Costs
Each party must pay its own costs (including legal fees and accountant or other consultant fees) in relation to the negotiation,
preparation and execution of this Agreement.
18.7 Counterparts
This Agreement may be executed in two or more counterparts, each of which will be considered to be an original, but all of which
together will constitute one and the same instrument.
18.8 Non-Merger
Any provision of this Agreement remaining to be performed or capable of having effect after the Completion Date remains in full force
and effect.
18.9 Governing Law
This Agreement is governed by and is to be construed in accordance with the Laws of the Commonwealth of Australia and the State of
Victoria and the Parties submit to the exclusive jurisdiction of the courts of Commonwealth of Australia and the State of Victoria.
18.10 Severance
The provisions of this Agreement will be separate and severable from each other to the extent that if any provision or provisions are
considered to be inoperative then the remaining provision or provisions will be binding on and enforceable by the parties.
18.11 Sample Adjustment calculation
Exhibit C sets for a sample calculation of the adjustments contemplated by Sections 6, 7 and 8, assuming for purposes of such
calculations that the Completion took place on June 30, 2021 (the “Sample Adjustment Calculation”). The adjustments contemplated
by Sections 6, 7 and 8 shall be calculated in accordance with the accounting methods, policies, principles, practices, procedures,
classifications or estimation methodologies set forth in the Sample Adjustment Calculation.
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1.
Power and Authority
Schedule 7
VENDOR’S WARRANTIES
(a)
(b)
The Vendor has the power to enter into and perform this Agreement and has obtained all necessary consents to enable
it to do so.
The entry into and performance of this Agreement by the Vendor does not constitute a breach of any obligation
(including but not limited to any statutory, contractual or fiduciary obligation), or default under any agreement or
undertaking, by which the Vendor is bound.
2.
Solvency
The Vendor is not:
(a)
(b)
(c)
(d)
(e)
(f)
(g)
wound up, no resolution for its winding up has been passed and no meeting of members or creditors has been
convened for that purpose;
the subject of a winding up application which has been made to a court, and no event has occurred which would entitle
any person to apply to a court to wind it up;
a party to a composition or arrangement with any of its creditors;
the recipient of a demand under section 459E of Corporations Act 2001;
in receivership and none of its assets is in the possession of or under the control of a mortgagee or chargee;
the subject of a liquidation; or
insolvent.
3.
Accounts
The audited accounts disclosed by the Vendor to GTG before the Effective Date, exhibit a true and fair view in all material
respects of the financial position and affairs of the Business including the income, expenses and operational results for each of
the three (3) financial years preceding the date of this Agreement, are true and accurate to a material extent.
Between 1 January 2020 and the date of this Agreement:
(a)
(b)
the Business has been carried on, in all material respects, in the normal course, in a proper and efficient manner and
without interruption and there have not been any significant change to the nature or scale of any activity comprised in
the Business; and
there has been no material change to the remuneration and other benefits (including any bonus scheme) payable to or
conferred on an employee of the Vendor nor any proposal or agreement to do so.
-28-
4.
Business and Assets
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
(i)
There is no pending, or to Vendor’s Knowledge threatened, product recall by any authorised regulator in respect of the
Products, nor is the Vendor aware of any circumstances that could reasonably give rise to a Product recall.
There are no manufacturing or supply issues in respect to any of the Products which could reasonably be expected to
result in Material Adverse Effect
The Vendor is the legal and beneficial owner of the Assets. There are no Encumbrances by a bank or other financial
institution or any other third party over or affecting any of the Assets.
The Vendor does not have any outstanding loans.
The Vendor does not have any secured creditors.
The Vendor has paid all its debts that arose before the Effective Date and will pay all its debts that arise before the
Completion Date.
The Vendor is not in default of any tax liability to any tax authority anywhere in the world.
The Business is conducted in accordance with all applicable laws and the conduct of the Business by the Vendor does
not contravene any laws.
All licences and registrations which are necessary for the conduct of the Business have been obtained and are valid
and subsisting. All conditions which apply to any such licence have been complied with in all material respects. None
of such licences has been breached by the Vendor or, so far as the Vendor is aware, is likely to be suspended,
cancelled, refused, materially altered, not renewed, or revoked.
5.
Plant and Equipment
(a)
Each item of Plant and Equipment and Leased Plant and Equipment is in satisfactory
working condition and capable of doing the work for which it is designed.
(b)
Each item of Plant and Equipment is in the physical possession of the Vendor.
6.
Stock
All the Stock is in the physical possession of the Vendor or under the control of the Vendor or is in transit to the
Vendor.
7.
Intellectual Property Rights
(a)
(b)
(c)
The Vendor owns all right, title and interest, in and to the Trade Marks and all other Intellectual Property Rights used
in the Business.
The Vendor has not licensed any of the Intellectual Property Rights and has not assigned or in any way disposed of
any right, title or interest in the Intellectual Property Rights.
The Vendor has not received any information and is not aware of any fact or circumstance that would indicate that a
third party has any right in or to the Trade Marks or any of them.
-29-
8.
Leased Premises
(a)
(b)
The Vendor has exclusive occupation of the Premises.
The Vendor has properly performed and observed all material covenants affecting the Premises. The Vendor’s use of
the Premises does not constitute a breach of the Lease or any applicable Law.
9.
Contracts
Each of the Contracts of a material nature is valid, binding and enforceable against the Vendor, and to the Vendor’s knowledge,
the other parties thereto and the Vendor is not in breach of, or in default under, any such Contract.
10.
Litigation
(a)
(b)
(c)
The Vendor is not involved in any litigation or arbitration proceedings relating to the Business, except for the
litigation described in Section 5.1(a)(ii)
To the Vendor’s knowledge, there are no threatened disputes against the Vendor from, and the Vendor does not know
of any circumstances that may give rise to a claim or dispute or grievance that, an employee, customer of the Business
or supplier to the Business has or may have against the Business or the Vendor or any director of the Vendor.
Neither the Vendor nor any of the Employees is involved, in any pending litigation, arbitration, administrative or
governmental investigation or criminal prosecution and there are no facts likely to give rise to a proceeding of this
type.
1.1
Insurance
(a)
(b)
All risks, whether in relation to damage to property (including the Assets), personal injury, product liability or
otherwise are adequately insured for amounts which would be maintained in accordance with prudent business
practice, and with a reputable and properly authorised or licensed insurer.
The Vendor does not know of any circumstances that would give rise to a claim for insurance under any of the
insurance policies owned by the Vendor.
1.2
Superannuation
The Vendor has duly complied in all material respects with all of its obligations under the applicable legislation relating to
superannuation and all amounts due to be paid pursuant to such have been paid when due.
1.3
Employees
(a)
(b)
The vendor is not in arrears with respect to any amount payable by it or owing to an employee.
The Vendor is not aware of any Employee wanting to leave employment with the Vendor.
1.4
Security Interests
There are no Encumbrances (other than Permitted Encumbrances) affecting the Assets.
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EXECUTED BY THE PARTIES:
GENETIC TECHNOLOGIES LIMITED
/s/ Simon Morriss
By:
Name:
Simon Morriss
Position: Chief Executive Officer
GENERAL GENETICS CORPORATION
By:
Name:
Position: President
/s/ Inder Tallur
Inder Tallur
GENERAL GENETICS EUROPE LIMITED
By:
Name:
Position: President
/s/ Inder Tallur
Inder Tallur
GENERAL GENETICS LIMITED UK
By:
Name:
Position: President
/s/ Inder Tallur
Inder Tallur
THE GENETIC TEST LABORATORIES AUSTRALIA PTY LIMITED
By:
Name:
Position: President
/s/ Inder Tallur
Inder Tallur
Kevin Camilleri
Signature: /s/ Kevin Camilleri
ex4-11.htm
EX-4.11
1 of 14
08/30/2021 03:56 AM
Exhibit 4.11
REGISTRATION RIGHTS AGREEMENT
1. Definitions
2. Registration Rights
2.1 Resale Registration
2.2 Obligations of the Company
2.3 Furnish Information
2.4 Expenses of Registration
2.5 Delay of Registration
2.6 Indemnification
2.7 Securities Laws Disclosure; Publicity
2.8 Termination of Registration Rights
2.9 Obligations of the Investors
2.10 Liquidated Damages
3. Miscellaneous
3.1 Successors and Assigns
3.2 Governing Law
3.3 Counterparts
3.4 Titles and Subtitles
3.5 Notices
3.6 Amendments and Waivers
3.7 Severability
3.8 Aggregation of Shares
3.9 Entire Agreement
3.10 Dispute Resolution
3.11 Delays or Omissions
1
2
2
3
3
3
3
3
7
7
7
8
8
8
8
8
8
9
9
9
9
9
10
10
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT is made as of the 12th day of August, 2021, by and among Genetic
Technologies Limited, a company formed under the laws of the Commonwealth of Australia (the “Company”), and each of General
Genetics Corporation, General Genetics Europe Limited, General Genetics Limited UK and Genetic Test Laboratories Australia Pty
Limited (each, an “Investor” and together, the “Investors”).
RECITALS
WHEREAS, the Company and the Investors are party to that certain Sale of Business Agreement, dated as of the date hereof (the
“Purchase Agreement”), regarding the sale by the Investors and the purchase by the Company of substantially all of the assets of the
Investors in consideration for a specified cash payment and the issuance by the Company to the Investors of [209,363,400] ordinary
shares of the Company (the “Ordinary Shares”) that can be converted into 348,939 American Depository Shares (ADRs); and
WHEREAS, the Company and the Investors are entering into this Agreement in order to govern the rights of the Investors to cause
the Company to register American Depositary Shares representing Ordinary Shares to be issued to the Investors under the Purchase
Agreement and shall govern certain other matters as set forth herein;
NOW, THEREFORE, the parties hereby agree as follows:
1. Definitions. For purposes of this Agreement:
“Affiliate” means, with respect to any specified Person, any other Person who, directly or indirectly, controls, is controlled by, or is
under common control with such Person, including without limitation any general partner, managing member, officer or director of such
Person or any investment fund now or hereafter existing that is controlled by one or more general partners or managing members of, or
shares the same management company with, such Person.
“American Depositary Shares” means American Depositary Shares representing Ordinary Shares.
A “Change of Control” shall mean any transaction or series of transactions in which the direct or indirect ownership of voting
shares of the Company carrying in excess of 50% of the voting rights (on an as-converted basis) is, after such transactions, effectively
transferred to any third party.
“Chosen Courts” has the meaning set forth in Section 3.10(a).
“Company Breach” has the meaning set forth in Section 2.10.
“Completion Date” has the meaning set forth in the Purchase Agreement.
“Damages” means any loss, damage, claim or liability (joint or several) to which a party hereto may become subject under the
Securities Act, the Exchange Act, or other applicable securities law, rule or regulation, insofar as such loss, damage, claim or liability
(or any action in respect thereof) arises out of or is based upon (i) any untrue statement or alleged untrue statement of a material fact
contained in any registration statement of the Company, including any preliminary prospectus or final prospectus contained therein or
any amendments or supplements thereto; (ii) an omission or alleged omission to state therein a material fact required to be stated therein,
or necessary to make the statements therein not misleading; or (iii) any violation or alleged violation by the indemnifying party (or any
of its agents or Affiliates) of the Securities Act, the Exchange Act, any other applicable securities law, or any rule or regulation
promulgated under the Securities Act, the Exchange Act, or any applicable securities law.
1
“Eligibility Date” means the first day after the expiration of the lockup period contemplated by Section 3.5 of the Purchase
Agreement, currently anticipated to be February 14, 2022.
“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
“Form F-1” means such form under the Securities Act as in effect on the date hereof; provided, however that if the Company
ceases to be a “Foreign Private Issuer” (as defined in the Securities Act and the Exchange Act), then all references to Form F-1 herein
shall be deemed to be references to Form S-1.
“Form F-3” means such form under the Securities Act as in effect on the date hereof or any registration form under the Securities
Act subsequently adopted by the SEC that permits incorporation of substantial information by reference to other documents filed by the
Company with the SEC; provided, however that if the Company ceases to be a “Foreign Private Issuer” (as defined in the Securities Act
and the Exchange Act) and becomes eligible to use Form S-3 under the Securities Act, then all references to Form F-3 herein shall be
deemed to be references to Form S-3.
“Holder” means any holder of Registrable Securities who is a party to this Agreement.
“Liquidated Damages” has the meaning set forth in Section 2.10.
“Ordinary Shares” has the meaning set forth in the Recitals.
“Person” means any individual, corporation, partnership, trust, limited liability company, association or other entity.
“Registrable Securities” means (i) the Ordinary Shares, (ii) the American Depositary Shares; and (iii) any securities issued as a
dividend or other distribution with respect to, or in exchange for or in replacement of, the Ordinary Shares or the American Depositary
Shares; excluding in all cases, however, any Registrable Securities sold by a Person in a transaction in which the applicable rights under
this Agreement are not assigned pursuant to Section 3.1 of this Agreement.
“SEC” means the Securities and Exchange Commission.
“SEC Rule 144” means Rule 144 promulgated by the SEC under the Securities Act.
“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
“Selling Expenses” means all underwriting discounts, selling commissions, stock transfer taxes and/or depositary fees applicable to
the sale of Registrable Securities, and fees and disbursements of counsel for any Holder.
2. Registration Rights. The Company covenants and agrees as follows:
2.1 Resale Registration.
(a) The Company shall use its commercially reasonable efforts to prepare and file with the SEC a Form F-3
registration statement (or in the event the Company is not eligible to use form F-3, a Form F-1 registration
statement) covering the resale of the Registrable Securities for an offering to be made on a continuous basis
pursuant to Rule 415 as soon as practicable on or before the Eligibility Date; provided that such filing shall be
made no later than sixty (60) days after the Completion Date. The Company shall use its commercially reasonable
efforts to cause such Registration Statement to be declared effective under the Securities Act as soon as possible,
and shall use its commercially reasonable efforts to keep the Registration Statement continuously effective under
the Securities Act until the earlier of (i) such time as all Registrable Securities covered by such Registration
Statement have been publicly sold by the Holders or (ii) the date that all securities covered by such Registration
Statement cease to be Registrable Securities hereunder (the “Effectiveness Period”).
2
(b) Notwithstanding the foregoing obligations, if the Company furnishes to the Holders a certificate signed by the
Company’s chief executive officer stating that in the good faith judgment of the Company’s Board of Directors it
would be materially detrimental to the Company and its shareholders for such registration statement to either
become effective or remain effective for as long as such registration statement otherwise would be required to
remain effective, because such action would (i) materially interfere with a significant acquisition, corporate
reorganization, or other similar transaction involving the Company; (ii) require premature disclosure of material
information that the Company has a bona fide business purpose for preserving as confidential; or (iii) render the
Company unable to comply with requirements under the Securities Act or Exchange Act, then the Company shall
have the right to defer taking action with respect to such filing, and any time periods with respect to filing or
effectiveness thereof shall be tolled correspondingly, for a period of not more than thirty (30) days after such
certificate is delivered; provided, however, that the Company may not invoke this right more than twice.
2.2 Obligations of the Company. Whenever required under this Section 2 to effect the registration of any Registrable Securities,
the Company shall, as expeditiously as reasonably possible:
(a) prepare and file with the SEC a registration statement with respect to such Registrable Securities and use its
commercially reasonable efforts to cause such registration statement to become effective for the duration of the
Effectiveness Period, as set forth in Section 2.1(a);
(b) prepare and file with the SEC such amendments and supplements to such registration statement, and the
prospectus used in connection with such registration statement, as may be necessary to comply with the Securities
Act in order to enable the disposition of all securities covered by such registration statement;
(c) furnish to the selling Holders such numbers of copies of a prospectus, including a preliminary prospectus, as
required by the Securities Act, and such other documents as the Holders may reasonably request in order to
facilitate their disposition of their Registrable Securities;
3
(d) use its commercially reasonable efforts to register and qualify the securities covered by such registration
statement under such other securities or blue-sky laws of such jurisdictions as shall be reasonably requested by the
selling Holders; provided that the Company shall not be required to qualify to do business or to file a general
consent to service of process in any such states or jurisdictions, unless the Company is already subject to service
in such jurisdiction and except as may be required by the Securities Act; and
(e) provide a transfer agent and registrar and, as needed, a depositary, for all Registrable Securities registered
pursuant to this Agreement and provide a CUSIP number for all such Registrable Securities, in each case not later
than the effective date of such registration.
2.3 Furnish Information. It shall be a condition precedent to the obligations of the Company to take any action pursuant to this
Section 2 with respect to the Registrable Securities of the Holders that each such Holder shall furnish to the Company such information
regarding itself, the Registrable Securities held by it, and the intended method of disposition of such securities as is reasonably required
to effect the registration of such Holder’s Registrable Securities.
2.4 Expenses of Registration. All expenses (other than Selling Expenses) incurred in connection with the conversion of the
Ordinary Shares into American Depositary Shares and registrations, filings, or qualifications pursuant to this Section 2, shall be borne
and paid by the Company. All Selling Expenses relating to Registrable Securities registered pursuant to this Section 2 shall be borne and
paid by the Holders.
2.5 Delay of Registration. No Holder shall have any right to obtain or seek an injunction restraining or otherwise delaying any
registration pursuant to this Agreement as the result of any controversy that might arise with respect to the interpretation or
implementation of this Section 2.
2.6 Indemnification. If any Registrable Securities are included in a registration statement under this Section 2:
(a) To the extent permitted by law, the Company will indemnify and hold harmless each selling Holder, and the
partners, members, officers, directors, and shareholders of each such Holder, legal counsel and accountants for
each such Holder, any underwriter (as defined in the Securities Act) for the Holders, and each Person, if any, who
controls such Holder or underwriter within the meaning of the Securities Act or the Exchange Act, against any
Damages, and the Company will pay to each such Holder, underwriter, controlling Person, or other
aforementioned Person any legal or other expenses reasonably incurred thereby in connection with investigating
or defending any claim or proceeding from which Damages may result, as such expenses are incurred; provided,
however, that the indemnity agreement contained in this Section 2.6(a) shall not apply to amounts paid in
settlement of any such claim or proceeding if such settlement is effected without the consent of the Company,
which consent shall not be unreasonably withheld, conditioned or delayed, nor shall the Company be liable for
any Damages to the extent that they arise out of or are based upon actions or omissions made in reliance upon and
in conformity with written information furnished by or on behalf of any such Holder, underwriter, controlling
Person, or other aforementioned Person expressly for use in connection with such registration.
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(b) To the extent permitted by law, each Holder, jointly and severally with respect to its direct or indirect successors,
assignors and assignees (collectively, the “Group Indemnitors”), but severally and not jointly with respect to
each other Holder and its respective direct or indirect successors, assignors and assignees to the extent each is not
a Group Indemnitor, will indemnify and hold harmless the Company, and each of its directors, each of its officers
who has signed the registration statement, each Person (if any), who controls the Company within the meaning of
the Securities Act, legal counsel and accountants for the Company, any underwriter (as defined in the Securities
Act), any other Holder selling securities in such registration statement, and any controlling Person of any such
underwriter or other Holder, against any Damages, in each case only to the extent that such Damages arise out of
or are based upon actions or omissions made in reliance upon and in conformity with written information
furnished by or on behalf of such selling Holder for use in connection with such registration; and each such
selling Holder will pay to the Company and each other aforementioned Person any legal or other expenses
reasonably incurred thereby in connection with investigating or defending any claim or proceeding from which
Damages may result, as such expenses are incurred; provided, however, that the indemnity agreement contained
in this Section 2.6(b) shall not apply to amounts paid in settlement of any such claim or proceeding if such
settlement is effected without the consent of the Holder, which consent shall not be unreasonably withheld,
conditioned or delayed; and provided further that in no event shall the aggregate amounts payable by any Holder
by way of indemnity or contribution under Sections 2.6(b) and 2.6(d) exceed the proceeds from the offering
received by such Holder (net of any expenses paid by such Holder), except in the case of fraud or willful
misconduct by such Holder.
(c) Promptly after receipt by an indemnified party under this Section 2.6 of notice of the commencement of any
action (including any governmental action) for which a party may be entitled to indemnification hereunder, such
indemnified party will, if a claim in respect thereof is to be made against any indemnifying party under this
Section 2.6, give the indemnifying party notice of the commencement thereof. The indemnifying party shall have
the right to participate in such action and, to the extent the indemnifying party so desires, participate jointly with
any other indemnifying party to which notice has been given, and to assume the defense thereof with counsel
mutually satisfactory to the parties; provided, however, that an indemnified party (together with all other
indemnified parties that may be represented without conflict by one counsel) shall have the right to retain one
separate counsel, with the fees and expenses to be paid by the indemnifying party, if representation of such
indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or
potential differing interests between such indemnified party and any other party represented by such counsel in
such action.
5
(d) To provide for just and equitable contribution to joint liability under the Securities Act in any case in which either
(i) any party otherwise entitled to indemnification hereunder makes a claim for indemnification pursuant to this
Section 2.6 but it is judicially determined (by the entry of a final judgment or decree by a court of competent
jurisdiction and the expiration of time to appeal or the denial of the last right of appeal) that such indemnification
may not be enforced in such case, notwithstanding the fact that this Section 2.6 provides for indemnification in
such case, or (ii) contribution under the Securities Act may be required on the part of any party hereto for which
indemnification is provided under this Section 2.6, then, and in each such case, such parties will contribute to the
aggregate losses, claims, damages, liabilities, or expenses to which they may be subject (after contribution from
others) in such proportion as is appropriate to reflect the relative fault of each of the indemnifying party and the
indemnified party in connection with the statements, omissions, or other actions that resulted in such loss, claim,
damage, liability, or expense, as well as to reflect any other relevant equitable considerations. The relative fault of
the indemnifying party and of the indemnified party shall be determined by reference to, among other things,
whether the untrue or allegedly untrue statement of a material fact, or the omission or alleged omission of a
material fact, relates to information supplied by the indemnifying party or by the indemnified party and the
parties’ relative intent, knowledge, access to information, and opportunity to correct or prevent such statement or
omission; provided, however, that, in any such case, (x) no Holder will be required to contribute any amount in
excess of the public offering price of all such Registrable Securities offered and sold by such Holder pursuant to
such registration statement, and (y) no Person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) will be entitled to contribution from any Person who was not guilty of such
fraudulent misrepresentation; and provided further that in no event shall a Holder’s liability pursuant to this
Section 2.6(d), when combined with the amounts paid or payable by such Holder pursuant to Section 2.6(b),
exceed the proceeds from the offering received by such Holder (net of any Selling Expenses paid by such Holder),
except in the case of willful misconduct or fraud by such Holder.
6
(e) Notwithstanding the foregoing, to the extent that the provisions on indemnification and contribution contained in
an underwriting agreement entered into in connection with an underwritten public offering registered on the Form
F-3 registration statement (or if applicable the Form F-1 registration statement) filed pursuant to Section 2 are in
conflict with the foregoing provisions, the provisions in the underwriting agreement shall control.
(f) Unless otherwise superseded by an underwriting agreement entered into in connection with an underwritten
public offering registered on the Form F-3 registration statement (or if applicable the Form F-1 registration
statement) filed pursuant to Section 2, the obligations of the Company and the Holders under this Section 2.6 shall
survive the completion of any offering of Registrable Securities in a registration under this Section 2, and
otherwise shall survive the termination of this Agreement.
2.7 Securities Laws Disclosure; Publicity. The Company shall use commercially reasonable efforts to file, on or before 8:30
a.m., New York local time, no later than the business day immediately following the date hereof, a current report on Form 6-K with the
SEC describing the terms contemplated by this Agreement, in the form required by the Exchange Act. The Company shall not, in
connection with the transaction contemplated by this Agreement and the Purchase Agreement, otherwise publicly disclose the name of
any Holder or any Affiliate or investment adviser of any Holder, or include the name of any Holder or any Affiliate or investment
adviser of any Holder in any press release or filing with the SEC (other than in a registration statement and any exhibits to filings made
in respect of this transaction, or in accordance with periodic report or current report filing requirements under the Exchange Act) or any
regulatory agency, without the prior written consent of such Holder, except to the extent such disclosure is required by law or
regulations, in which case the Company shall provide the Holder with prior notice of such disclosure.
2.8 Termination of Registration Rights. The right of any Holder to request registration or inclusion of Registrable Securities in
any registration pursuant to Section 2 shall terminate upon the earliest to occur of the following, at which time such Holder’s securities
shall no longer be deemed Registrable Securities:
(a) the failure to consummate the sale and purchase of securities contemplated by the Purchase Agreement within
thirty (30) trading days of the date hereof;
(b) the consummation of a Change of Control; and
(c)
the disposition of all of such Holder’s Registrable Securities.
2.9 Obligations of the Investors. It shall be a condition precedent to the effectiveness of this Agreement that each Investor and
the Seller shall have executed the Purchase Agreement, concurrent with the entry into this Agreement.
7
2.10 Liquidated Damages. If the a Form F-3 registration statement (or in the event the Company is not eligible to use form F-3,
a Form F-1 registration statement) covering the resale of the Registrable Securities is not declared effective on or before the Eligibility
Date or such Form F-3 registration statement (or form F-1 registration statement, if applicable) does not remain continuously effective
during the Effectiveness Period (a “Company Breach”) in accordance with this Section 2, the Company shall pay shall pay to the
Investors an amount equal to $10,000 per day for each day that such Company Breach continues (the “Liquidated Damages”), up to a
maximum of $$1,500,000. The Company and the Investors intend that the Liquidated Damages constitute compensation, and not a
penalty. The Company and the Investors acknowledge and agree that the Investors’ harm caused by a Company Breach would be
impossible or very difficult to accurately estimate as of the date hereof, and that the Liquidated Damages are a reasonable estimate of the
anticipated or actual harm that might arise from a Company Breach.
3. Miscellaneous.
3.1 Successors and Assigns. The rights under this Agreement may be assigned (but only with all related obligations) by a
Holder to a transferee of Registrable Securities that (i) is an Affiliate of a Holder; and (ii) after such transfer, holds 50% of the
Registrable Securities originally acquired by the applicable Investor pursuant to the Purchase Agreement (subject to appropriate
adjustment for stock splits, stock dividends, combinations, and other recapitalizations); provided, however, that (x) the Company is,
within a reasonable time after such transfer, furnished with written notice of the name and address of such transferee and the Registrable
Securities with respect to which such rights are being transferred; and (y) such transferee agrees in a written instrument delivered to the
Company to be bound by and subject to the terms and conditions of this Agreement. The terms and conditions of this Agreement inure
to the benefit of and are binding upon the respective successors and permitted assignees of the parties. Nothing in this Agreement,
express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and permitted
assignees any rights, remedies, obligations or liabilities under or by reason of this Agreement, except as expressly provided herein.
3.2 Governing Law. This Agreement shall be governed by the internal law of the State of New York without giving effect to its
conflict of laws principles, and shall be treated as if executed in the County, City, and State of New York, United States of America.
3.3 Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same instrument. Counterparts may be delivered via electronic mail (including PDF) or
other transmission method and any counterpart so delivered shall be deemed to have been duly and validly delivered and be valid and
effective for all purposes.
3.4 Titles and Subtitles. The titles and subtitles used in this Agreement are for convenience only and are not to be considered in
construing or interpreting this Agreement.
8
3.5 Notices. All notices and other communications given or made pursuant to this Agreement shall be in writing and shall be
deemed effectively given upon the earlier of actual receipt or: (i) personal delivery to the party to be notified; (ii) when sent, if sent by
electronic mail or facsimile during the recipient’s normal business hours, and if not sent during normal business hours, then on the
recipient’s next business day; (iii) five (5) days after having been sent by registered or certified mail, return receipt requested, postage
prepaid; or (iv) one (1) business day after the business day of deposit with a nationally recognized overnight courier, freight prepaid,
specifying next-day delivery, with written verification of receipt. All communications shall be sent to the respective parties at their
addresses as set forth on the signature pages hereto, or to such email address or address as subsequently modified by written notice given
in accordance with this Section 3. If notice is given to the Company, a copy shall also be sent to the Chief Executive Officer, with a
copy to the Company Secretary.
3.6 Amendments and Waivers. Any term of this Agreement may be amended and the observance of any term of this Agreement
may be waived (either generally or in a particular instance, and either retroactively or prospectively) only with the written consent of the
Company and the holders of 50% of the Registrable Securities then outstanding; provided that any provision hereof may be waived by
any waiving party on such party’s own behalf, without the consent of any other party. Notwithstanding the foregoing, this Agreement
may not be amended or terminated and the observance of any term hereof may not be waived with respect to any Holder without the
written consent of such Holder, unless such amendment, termination, or waiver applies to all Holders in the same fashion. Any
amendment, termination, or waiver effected in accordance with this Section 3.6 shall be binding on all parties hereto, regardless of
whether any such party has consented thereto. No waivers of or exceptions to any term, condition, or provision of this Agreement, in
any one or more instances, shall be deemed to be or construed as a further or continuing waiver of any such term, condition, or
provision.
3.7 Severability. In case any one or more of the provisions contained in this Agreement is for any reason held to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality, or unenforceability shall not affect any other provision of this
Agreement, and such invalid, illegal, or unenforceable provision shall be reformed and construed so that it will be valid, legal, and
enforceable to the maximum extent permitted by law.
3.8 Aggregation of Shares. All shares of Registrable Securities held or acquired by Affiliates shall be aggregated together for
the purpose of determining the availability of any rights under this Agreement and such Affiliated persons may apportion such rights as
among themselves in any manner they deem appropriate.
3.9 Entire Agreement. This Agreement (including any Schedules and Exhibits hereto) constitutes the full and entire
understanding and agreement among the parties with respect to the subject matter hereof, and any other written or oral agreement
relating to the subject matter hereof existing between the parties is expressly canceled.
9
3.10 Dispute Resolution.
(a)
(b)
The parties (i) hereby irrevocably and unconditionally submit to the jurisdiction of the state courts of the
State of New York, County of New York and to the jurisdiction of the United States District Court for the
Southern District of New York (the “Chosen Courts”) for the purpose of any suit, action or other proceeding
arising out of or based upon this Agreement, (ii) agree not to commence any suit, action or other proceeding
arising out of or based upon this Agreement except in the Chosen Courts, and (c) hereby waive, and agree not
to assert, by way of motion, as a defense, or otherwise, in any such suit, action or proceeding, any claim that
it is not subject personally to the jurisdiction of the Chosen Courts, that its property is exempt or immune
from attachment or execution, that the suit, action or proceeding is brought in an inconvenient forum, that the
venue of the suit, action or proceeding is improper or that this Agreement or the subject matter hereof may
not be enforced in or by the Chosen Courts.
EACH PARTY HEREBY WAIVES ITS RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF
ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT, THE OTHER TRANSACTION
DOCUMENTS, THE SECURITIES OR THE SUBJECT MATTER HEREOF OR THEREOF. THE SCOPE
OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES
THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS
TRANSACTION, INCLUDING, WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS
(INCLUDING NEGLIGENCE), BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW
AND STATUTORY CLAIMS. THIS SECTION HAS BEEN FULLY DISCUSSED BY EACH OF THE
PARTIES HERETO AND THESE PROVISIONS WILL NOT BE SUBJECT TO ANY EXCEPTIONS.
EACH PARTY HERETO HEREBY FURTHER WARRANTS AND REPRESENTS THAT SUCH PARTY
HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT SUCH PARTY
KNOWINGLY AND VOLUNTARILY WAIVES
ITS JURY TRIAL RIGHTS FOLLOWING
CONSULTATION WITH LEGAL COUNSEL.
(c)
The prevailing party shall be entitled to reasonable attorney’s fees, costs, and necessary disbursements in
addition to any other relief to which such party may be entitled.
3.11 Delays or Omissions. No delay or omission to exercise any right, power, or remedy accruing to any party under this
Agreement, upon any breach or default of any other party under this Agreement, shall impair any such right, power, or remedy of such
non-breaching or non-defaulting party, nor shall it be construed to be a waiver of or acquiescence to any such breach or default, or to
any similar breach or default thereafter occurring, nor shall any waiver of any single breach or default be deemed a waiver of any other
breach or default theretofore or thereafter occurring. All remedies, whether under this Agreement or by law or otherwise afforded to any
party, shall be cumulative and not alternative.
[Remainder of Page Intentionally Left Blank]
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.
COMPANY:
GENETIC TECHNOLOGIES LIMITED
/s/ Simon Morriss
By:
Name: Simon Morris
Title: Chief Executive Officer
Genetic Technologies Limited
60-66 Hanover Street
Fitzroy, Victoria 3065
Australia
Attention:Michael Tonroe
Email: mike.tonroe@gtglabs.com
INVESTORS:
GENERAL GENETICS CORPORATION
GENERAL GENETICS EUROPE LIMITED
GENERAL GENETICS LIMITED UK
GENETIC TEST LABORATORIES AUSTRALIA PTY
LIMITED
/s/ Inder Tallur
By:
Name: Inder Tallur
Title: President
c/o BelHealth Investment Partners
401 E. Las Olas Boulevard, Suite 1400
Fort Lauderdale, FL 33301
Attention: Harold Blue
Email: hblue@belhealth.com
ex4-12.htm
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Exhibit 4.12
NON-SOLICITATION AGREEMENT
This NON-SOLICITATION AGREEMENT (this “Agreement”) is entered into as of 18 July 2021, by and between Genetic
Technologies Limited, a company formed under the laws of the Commonwealth of Australia (“Buyer”), and BelHealth Investment Fund
II, L.P., a Delaware limited partnership (the “Restricted Party”). Each of Buyer and the Restricted Party is sometimes referred to herein
individually as a “Party” and collectively as the “Parties”. Capitalized terms used herein without being otherwise defined shall have the
meanings assigned thereto in the Purchase Agreement (defined below).
RECITALS
WHEREAS, concurrently herewith, Buyer on the one part, and General Genetics Corporation, General Genetics Europe Limited,
General Genetics Limited UK and The Genetic Test Laboratories Australia Pty Limited together on the other part are entering into that
certain Sale of Business Agreement, dated as of the date hereof (as amended, supplemented or otherwise modified from time to time in
accordance with its terms, the “Purchase Agreement”); and
WHEREAS, pursuant to the Purchase Agreement, it is contemplated that, upon the terms and subject to the conditions set forth
therein, Buyer will acquire substantially all of the assets of the Vendor (as defined in the Purchase Agreement).
WHEREAS, as the owner of shares in the Vendor, the Restricted Party will benefit from the amounts payable by the Buyer to the
Vendor under the Purchase Agreement.
NOW, THEREFORE, in consideration of the mutual agreements set forth herein and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the Parties hereto agree as follows:
AGREEMENT
1. Covenant Not to Solicit or Hire. In consideration for the good and valuable consideration to be received by the Affiliates of the
Restricted Party in connection with the transactions contemplated by the Purchase Agreement, the Restricted Party covenants and agrees
that, from and after the Completion Date and for a period of three (3) years following the Completion Date (the “Non-Solicitation
Period”), except pursuant to an express written agreement with Buyer, none of the Restricted Party, or any of its Affiliates or its or its
Affiliates’ respective Representatives (in their respective capacities as such) shall, directly or indirectly, hire, solicit for employment,
employ, retain or engage as an employee or otherwise engage in any capacity any Transferring Employees (“Restricted Persons”), or
encourage, request, induce or advise any Restricted Persons to leave or modify his or her employment with the Buyer, or violate the
terms of his or her employment agreement, engagement letter or other employment or engagement arrangement with Buyer; provided
that the foregoing shall not prohibit any person or entity from soliciting, hiring or otherwise engaging any Restricted Person whose
employment is terminated by Buyer following such termination or soliciting, hiring or otherwise engaging any Restricted Person who
terminates his or her employment with Buyer at least six (6) months following such termination. For purposes of this Agreement,
“Representative” means, with respect to any person or entity, any and all directors, managers, officers, employees, consultants, financial
advisors, counsel, accountants and other agents of such person or entity, and “Affiliate” of a person means a person that, directly or
indirectly (through one or more intermediaries) controls, is controlled by, or is under common control with such first mentioned person,
where for purposes of this definition of “Affiliate”, “control” means (i) the direct or indirect ownership of 50 percent or more of the
voting shares or other voting interests or interests in profits, or (ii) the ability to otherwise control or direct the decisions of board of
directors or equivalent governing body thereof.
2. Termination. This Agreement shall automatically terminate, without any notice or other action by any Party, and be void ab initio
upon the termination of the Purchase Agreement prior to Completion in accordance with its terms and, upon such termination shall be of
no further force or effect, without the creation or imposition of any penalty, liability or obligation upon any Party.
3. Notices. All notices and other communications hereunder shall be in writing and shall be deemed duly given (a) on the date of
delivery if delivered personally, or if by facsimile or email, upon written confirmation of receipt by facsimile, e-mail or otherwise, (b)
on the first Business Day following the date of dispatch if delivered utilizing a next-day service by a recognized next-day courier or (c)
on the earlier of confirmed receipt or the fifth Business Day following the date of mailing if delivered by registered or certified mail,
return receipt requested, postage prepaid. All notices hereunder shall be delivered to the addresses set forth below, or pursuant to such
other instructions as may be designated in writing by the Party to receive such notice:
if to Buyer:
Genetic Technologies Limited
60-66 Hanover Street
Fitzroy, Victoria 3065 Australia
Attention: Simon Morriss
Email: simon.morriss@gtglabs.com
with a copy (which shall not constitute notice) to:
Amos Meltzer
BioMeltzer Pty Limited
13 Wilgah Street
St Kilda East VIC 3183
Melbourne
Email: amos@BioMeltzer.com
if to the Restricted Party:
BelHealth Investment Partners
401 E. Las Olas Boulevard, Suite 1400
Fort Lauderdale, Florida 33301
Attention: Harold Blue
Email: hblue@belhealth.com
with a copy (which shall not constitute notice) to:
Norton Rose Fulbright US LLP
1301 Avenue of the Americas
New York, New York 10019-6022
Attention: Steven I. Suzzan
Email: steven.suzzan@nortonrosefulbright.com
4. Entire Agreement. This Agreement constitutes the entire agreement of the Parties with respect to the subject matter of this Agreement,
and supersedes all prior agreements and undertakings, both written and oral, among the Parties with respect to the subject matter of this
Agreement, except as otherwise expressly provided in this Agreement.
5. Amendments and Waivers; Assignment. Any provision of this Agreement may be amended or waived if, and only if, such
amendment or waiver is in writing and signed by the Restricted Party and Buyer. Notwithstanding the foregoing, no failure or delay by
any party in exercising any right hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any
other or further exercise of any other right hereunder. This Agreement and any of the rights, interests or obligations hereunder shall only
be assignable by Buyer and may not otherwise be assignable without Buyer’s prior written consent.
6. No Third Party Beneficiaries. This Agreement shall be for the sole benefit of the Parties and their respective successors and permitted
assigns and is not intended, nor shall be construed, to give any Person, other than the Parties and their respective successors and assigns,
any legal or equitable right, benefit or remedy of any nature whatsoever by reason this Agreement. Nothing in this Agreement,
expressed or implied, is intended to or shall constitute the Parties, partners or participants in a joint venture.
7. Miscellaneous. Sections 1.2 (Construction), 14 (Dispute), 18.6 (Costs), 18.7 (Counterparts) and 18.9 (Governing Law) of the
Purchase Agreement are incorporated herein by reference, mutatis mutandis.
[Signature pages follow]
IN WITNESS WHEREOF, the Parties have executed and delivered this Non-Solicitation Agreement as of the date first above
written.
BUYER:
GENETIC TECHNOLOGIES LIMITED
/s/ Simon Morriss
By:
Name: Simon Morriss
Title: Chief Executive Officer
RESTRICTED PARTY:
BELHEALTH INVESTMENT FUND II, L.P.
By: BelHealth Investment Partners GP II, LLC, its General
Partner
/s/ Inder Tallur
By:
Name:Inder Tallur
Title: President
ex4-13.htm
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Exhibit 4.13
ESCROW AGREEMENT
THIS ESCROW AGREEMENT (this “Agreement”) is made and entered into as of August 12, 2021, by and among Genetic
Technologies Limited, a company formed under the laws of the Commonwealth of Australia ( “Buyer”), General Genetics Corporation,
a Delaware corporation (“Seller Party Representative” and, together with Buyer, sometimes referred to individually as a “Party” and
collectively as the “Parties”), and Citibank, N.A., as escrow agent (the “Escrow Agent”).
RECITALS
WHEREAS, Buyer and Seller Party Representative have entered into that certain Sale of Business Agreement, dated as of July
18, 2021 (the “Purchase Agreement”) with General Genetics Europe Limited, General Genetics Limited UK, The Genetic Test
Laboratories Australia Pty Limited (collectively with Seller Party Representative, “Vendor”) and Kevin Camilleri, pursuant to which
Buyer will purchase from Vendor, and Vendor will to sell to Buyer, substantially all of Vendor’s assets.
WHEREAS, unless context otherwise requires, capitalized terms used but not otherwise defined in this Agreement shall have
the meanings assigned to such terms in the Purchase Agreement; provided, however, the Escrow Agent will not be responsible to
determine or make any inquiry into any term, capitalized or otherwise, not defined herein;
WHEREAS, pursuant to the Purchase Agreement, Buyer is required to deliver to the Escrow Agent at the Completion the
Escrow Amount (as defined below), in order to provide a source of funding for the purposes set forth in the Purchase Agreement and the
Parties wish such deposit to be subject to the terms and conditions set forth herein and in the Purchase Agreement.
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NOW THEREFORE, in consideration of the foregoing and of the mutual covenants hereinafter set forth, the parties hereto
agree as follows:
1.
2.
Appointment. The Parties hereby appoint the Escrow Agent as their escrow agent for the purposes set forth herein, and the
Escrow Agent hereby accepts such appointment and agrees to act as escrow agent in accordance with the terms and conditions
set forth herein.
Escrow Funds.
(a)
(b)
At the Completion and simultaneous with the execution and delivery of this Agreement, Buyer is depositing or
causing to be deposited with the Escrow Agent by wire transfer of immediately available funds, Five Hundred
Thousand Dollars ($500,000) (referred to herein as the “Escrow Amount”) into a separate escrow account (referred to
herein as the “Escrow Account”). The Escrow Agent hereby acknowledges receipt of the Escrow Amount, together
with all products and proceeds thereof, including all interest, dividends, gains and other income (the “Escrow
Earnings”) earned with respect thereto (the “Escrow Funds”), subject to the terms and conditions of this Agreement
and the Purchase Agreement.
For greater certainty, all Escrow Earnings shall be retained by the Escrow Agent and reinvested in the Escrow Funds
and shall become part of the Escrow Funds and shall be disbursed as part of the Escrow Funds in accordance with the
terms and conditions of this Agreement and the Purchase Agreement.
3.
Investment of Escrow Funds.
(a)
(b)
(c)
Unless otherwise instructed in accordance with a joint written instruction signed by an Authorized Signer of each of
Buyer and Seller Party Representative, the Escrow Agent shall hold the Escrow Funds in a separate “non-interest-
bearing deposit account” insured by the Federal Deposit Insurance Corporation (“FDIC”) to the applicable limits and
applicable laws. The Escrow Funds shall at all times remain available for distribution in accordance with the terms and
conditions of this Agreement and the Purchase Agreement.
The Escrow Agent shall send an account statement to each of the Parties at the addresses set forth in Section 11 hereof
on a monthly basis reflecting activity in the Escrow Account for the preceding month and also reflecting any change in
interest rate when applicable.
The Escrow Agent shall have no responsibility for any investment losses resulting from the investment, reinvestment
or liquidation of the escrowed property, as applicable, provided that the Escrow Agent has made such investment,
reinvestment or liquidation of the escrowed property in accordance with the terms, and subject to the conditions, of
this Agreement. The Escrow Agent does not have a duty nor will it undertake any duty to provide investment advice.
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4.
Disposition and Termination of the Escrow Funds.
(a)
(b)
(c)
(d)
(e)
If Buyer elects to assert a claim for adjustment of the purchase price or for indemnification under the Purchase
Agreement, it must give written notice of such claim (an “Indemnity Escrow Claim”) to the Escrow Agent and Seller
Party Representative prior to the date that is 12 months after the Closing Date. An Indemnity Escrow Claim shall (i)
describe in good faith the matter in reasonable detail and (ii) indicate the amount (estimated in good faith, if necessary
and to the extent feasible) of the Losses that have been or may be suffered by the applicable Buyer Indemnitee or the
amount of the adjustment (including the Completion Deferred Revenue Cost) (the “Claim Amount”). Such Indemnity
Escrow Claim is to be executed by an Authorized Signer of Buyer set forth in Exhibit A-2 hereto.
If Seller Party Representative wishes to object to the Indemnity Escrow Claim (including the Claim Amount), Seller
Party Representative shall deliver to Buyer and Escrow Agent a notice within 20 Business Days of Escrow Agent’s
receipt of the Indemnity Escrow Claim stating that Seller Party Representative objects to such Indemnity Escrow
Claim, including a reasonably detailed description of the nature and basis for Seller Party Representative’s objection
(a “Dispute Notice”). Such Dispute Notice is to be executed by an Authorized Signer of Seller Party Representative.
If no Dispute Notice is delivered with respect to an Indemnity Escrow Claim within such 20 Business Day period,
then Seller Party Representative (on behalf of Vendor) shall be deemed to have accepted such Indemnity Escrow
Claim, and Buyer and Seller Party Representative shall deliver a Joint Release Instruction to the Escrow Agent with
respect to such Indemnity Escrow Claim setting forth the terms of release from the Escrow Account and instructing
the Escrow Agent to release the Claim Amount from the Escrow Account.
If a Dispute Notice is delivered within such 20 Business Day period, then the Escrow Agent shall not deliver any
portion of the Claim Amount to Buyer until the Escrow Agent receives a Joint Release Instruction or a Final
Determination. Following receipt by Buyer of a Dispute Notice, Buyer and Seller Party Representative shall comply
with the dispute resolution provisions set forth in Sections 14 and 18.9 of the Purchase Agreement. If Buyer and Seller
Party Representative are able to reach agreement, Buyer and Seller Party Representative shall deliver a Joint Release
Instruction to the Escrow Agent setting forth such agreement and, as applicable, instructing the Escrow Agent to
release funds from the Escrow Funds. The Escrow Agent shall be entitled to conclusively presume that the delivery of
any Indemnity Escrow Claim or Dispute Notice and the information set forth therein complies with the terms of the
Purchase Agreement and that Seller Party Representative or Buyer, as applicable, contemporaneously received each
Indemnity Escrow Claim and Dispute Notice received by the Escrow Agent.
If at any time either of the Parties receives a Final Determination, then upon receipt by the Escrow Agent of a copy of
such Final Determination from any Party (which Final Determination shall also be contemporaneously delivered by
such Party to the other Party), the Escrow Agent shall on the fifth Business Day following receipt by the Escrow
Agent of the Final Determination (unless prior thereto the other Party objects to such, in a written notice delivered to
both Escrow Agent and the non-objecting Party pursuant to the terms of Section 11 below, alleging that such release is
not in accordance with a final non-appealable order of a court of competent jurisdiction) disburse as directed, part or
all, as the case may be, of the Escrow Funds (but only to the extent funds are available in the Escrow Funds) of the
Escrow Funds in accordance with such Final Determination. Subject to the terms of this Section 4(e), the Escrow
Agent will act on such Final Determination without further inquiry.
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(f)
(g)
(h)
Within two Business Days after the date that is 12 months after the Completion Date (the “Distribution Date”), Buyer
and Seller Party Representative will deliver a Joint Release Instruction to the Escrow Agent instructing the Escrow
Agent to release all of the remaining balance of the Escrow Funds to Seller Party Representative, minus the Claim
Amounts of any Indemnity Escrow Account Claims which are Pending on the Distribution Date. Once all Indemnity
Escrow Account Claims are no longer Pending, any amount previously withheld on the Distribution Date that has not
been disbursed to Buyer in accordance with this Section 4 shall be disbursed to Seller Party Representative, in
accordance to payment instructions executed by an Authorized Signer of Seller Party Representative. An Indemnity
Escrow Account Claim will be considered “Pending” if either (i) the time period for delivery of Dispute Notice
pursuant to Section 4(a) above has not yet expired, or (ii) Seller Party Representative has delivered a timely Dispute
Notice and the Escrow Agent has not yet received a Joint Release Instruction or Final Determination with respect to
such disputed Indemnity Escrow Claim.
All payments of any part of the Escrow Funds to Buyer or Seller Party Representative, or their designees, as the case
may be, shall be made by wire transfer of immediately available funds as set forth in the Joint Release Instruction or
Final Determination, as applicable.
Any instructions setting forth, claiming, containing, objecting to, or in any way related to the transfer or distribution of
any funds on deposit in the Escrow Account under the terms of this Agreement must be in writing, executed by an
authorized signer of the applicable Party or Parties as set forth on Exhibit A-1 with respect to Seller Party
Representative, and/or Exhibit A-2 with respect to Buyer (an “Authorized Signer”), annexed hereto and delivered to
the Escrow Agent either (A) by confirmed facsimile sent to the fax number of the Escrow Agent set forth in Section
11 below or (B) attached to an e-mail sent to the e-mail address of the Escrow Agent set forth in Section 11 below. For
the avoidance of doubt, any instruction or correspondence to be delivered to the Escrow Agent under this Agreement
shall require the written consent of an Authorized Signer of Seller Party Representative or any successor Seller Party
Representative as appointed by a majority-in-interest of Vendor. In the event that a successor Seller Party
Representative is appointed, such successor Seller Party Representative shall provide such necessary due diligence
documentation as requested by the Escrow Agent. In the event a Joint Release Instruction or Final Determination is
delivered to the Escrow Agent, whether by facsimile or by e-mail, the Escrow Agent is authorized to seek
confirmation of such instruction by telephone call back to the person or persons designated in Exhibits A-1 and/or A-2
annexed hereto (the “Authorized Individuals”), and the Escrow Agent may rely upon the confirmations of anyone
purporting to be an Authorized Individual. To ensure accuracy of the instructions it receives, the Escrow Agent may
record such callbacks. If the Escrow Agent is unable to verify the instructions, or is not satisfied with the verification
it receives, it will not execute the instruction until all such issues have been resolved. The Escrow Agent and the
Parties shall cooperate in good faith to resolve any such issues as soon as reasonably practicable. The persons and
telephone numbers for callbacks may be changed only in writing, executed by an Authorized Signer of the applicable
Party actually received and acknowledged by the Escrow Agent.
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(i)
Certain Definitions and Interpretation.
(i)
(ii)
(iii)
(iv)
(v)
“Business Day” means any day that is not a Saturday, a Sunday or other day on which banks are required or
authorized by law to be closed in New York, New York.
“Final Determination” means a final non-appealable order of any court of competent jurisdiction which may
be issued, together with (A) a certificate executed by an Authorized Signer of the prevailing Party to the
effect that such order is final and non-appealable and from a court of competent jurisdiction having proper
authority and (B) the written payment instructions executed by an Authorized Signer of the prevailing Party
to effectuate such order.
“Joint Release Instruction” means the joint written instruction executed by an Authorized Signer of each of
the Parties, to the Escrow Agent directing the Escrow Agent to disburse all or a portion of the Escrow Funds.
“Person” means an individual, a partnership, a corporation, a limited liability company, an association, a joint
stock company, a trust, a joint venture, an unincorporated organization or a Governmental Authority or any
department, agency or political subdivision thereof.
For the removal of any doubt, Buyer is entitled to give multiple Indemnity Escrow Claims in accordance with
paragraph 4(a) and the provisions of this Section 4 shall apply to each such Indemnity Escrow Claim.
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5.
Escrow Agent. The Escrow Agent undertakes to perform only such duties as are expressly set forth herein, which shall be
deemed purely ministerial in nature, and no other duties, including but not limited to any fiduciary duties, shall be implied. The
Escrow Agent has no knowledge of, nor any requirements to comply with, the terms and conditions of any other agreement,
instrument or document between the Parties, in connection herewith, if any, including, without limitation, the Purchase
Agreement, nor shall the Escrow Agent be required to determine if any Person has complied with any such agreements, nor
shall any additional obligations of the Escrow Agent be inferred from the terms of such agreements, even though reference
thereto may be made in this Agreement. Notwithstanding the terms of any other agreement between the Parties, the terms and
conditions of this Agreement will control the actions of Escrow Agent. The Escrow Agent may rely upon and shall not be liable
for acting or refraining from acting upon any Joint Release Instruction or Final Determination furnished to it hereunder and
believed by it to be genuine and to have been signed by an Authorized Signer for each Party or the Parties. Concurrent with the
execution of this Agreement, the Parties shall deliver to the Escrow Agent authorized signers’ forms in the form of Exhibit A-1
and Exhibit A-2 attached hereto. The Escrow Agent shall be under no duty to inquire into or investigate the validity, accuracy
or content of any such document, notice, instruction or request; provided, however, that the Escrow Agent may not act upon
instruction by either Buyer or Seller Party Representative alone where joint written instruction is required as provided herein.
The Escrow Agent shall have no duty to solicit any payments which may be due it or the Escrow Funds. In the event that the
Escrow Agent shall be uncertain as to its duties or rights hereunder or shall receive instructions, claims or demands from any
Party hereto which, in its reasonable opinion, conflict with any of the provisions of this Agreement, it shall be entitled to refrain
from taking any action and its sole obligation shall be to keep safely all property held in escrow until (i) it shall be given a Joint
Release Instruction which eliminates such conflict or (ii) it shall be directed in a Final Determination. The Escrow Agent may
interplead all of the assets held hereunder into a court of competent jurisdiction or may seek a declaratory judgment with
respect to certain circumstances, and thereafter be fully relieved from any and all liability or obligation with respect to such
interpleaded assets or any action or non-action based on such declaratory judgment. The Escrow Agent may consult with legal
counsel of its selection in the event of any dispute or question as to the meaning or construction of any of the provisions hereof
or its duties hereunder. The Escrow Agent will not be liable for any action taken, suffered or omitted to be taken by it in good
faith with respect to the Escrow Funds except to the extent that the Escrow Agent’s fraud, willful misconduct or gross
negligence was the cause of any direct loss to either Party. To the extent practicable, the Parties agree to pursue any redress or
recourse in connection with any dispute (other than with respect to a dispute involving the Escrow Agent) without making the
Escrow Agent a party to the same. ANYTHING IN THIS AGREEMENT TO THE CONTRARY NOTWITHSTANDING, IN
NO EVENT SHALL THE ESCROW AGENT BE LIABLE FOR ANY SPECIAL, INDIRECT, PUNITIVE, INCIDENTAL
OR CONSEQUENTIAL LOSSES OR DAMAGES OF ANY KIND WHATSOEVER (INCLUDING BUT NOT LIMITED TO
LOST PROFITS), EVEN IF THE ESCROW AGENT HAS BEEN ADVISED OF THE LIKELIHOOD OF SUCH LOSSES
OR DAMAGES AND REGARDLESS OF THE FORM OF ACTION.
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6.
7.
8.
Resignation and Removal of Escrow Agent. The Escrow Agent (a) may resign and be discharged from its duties or obligations
hereunder by giving 30 calendar days’ advance notice in writing of such resignation to the Parties specifying a date when such
resignation shall take effect or (b) may be removed, with or without cause, by Buyer and Seller Party Representative acting
jointly at any time by providing to the Escrow Agent a joint written instruction signed by an Authorized Signer of each of
Buyer and Seller Party Representative. Any corporation or association into which the Escrow Agent may be merged or
converted or with which it may be consolidated, or any corporation or association to which all or substantially all of the escrow
business of the Escrow Agent’s line of business may be transferred, shall be the Escrow Agent under this Agreement without
further act. The Escrow Agent’s sole responsibility after such 30 day notice period expires or after receipt of written notice of
removal shall be to hold and safeguard the Escrow Funds (without any obligation to reinvest the same) and to deliver the same
(i) to a substitute or successor escrow agent pursuant to a joint written designation from the Parties, (ii) as set forth in a Joint
Release Instruction or (iii) in accordance with the directions of a Final Determination, at which time of delivery, the Escrow
Agent’s obligations hereunder shall cease and terminate. In the event the Escrow Agent resigns, if the Parties have failed to
appoint a successor escrow agent prior to the expiration of 30 calendar days following receipt of the notice of resignation, the
Escrow Agent may petition any court of competent jurisdiction for the appointment of such a successor escrow agent or for
other appropriate relief, and any such resulting appointment shall be binding upon all of the Parties hereto.
Fees and Expenses. All customary and reasonable fees and expenses of the Escrow Agent are described in Schedule 1 attached
hereto and one-half of such fees and expenses shall be paid by Buyer and one-half of such fees and expenses shall be paid by
Seller Party Representative. The fees agreed upon for the services to be rendered hereunder are intended as full compensation
for the Escrow Agent services as contemplated by this Agreement.
Indemnity. Each of the Parties shall jointly and severally indemnify, defend and hold harmless the Escrow Agent and its
affiliates and their respective successors, assigns, directors, officers, agents and employees (the “Indemnitees”) from and
against any and all losses, damages, claims, liabilities, penalties, judgments, settlements, actions, suits, proceedings, litigation,
investigations, costs or expenses (including the reasonable fees and expenses of one outside counsel and experts and their staffs
and all expense of document location, duplication and shipment) (collectively “Escrow Agent Losses”) arising out of or in
connection with (a) the Escrow Agent’s execution and performance of this Agreement, tax reporting or withholding, the
enforcement of any rights or remedies under or in connection with this Agreement, or as may arise by reason of any act,
omission or error of the Indemnitee, except to the extent that such Escrow Agent Losses, as adjudicated by a court of competent
jurisdiction, have been caused by the fraud, gross negligence or willful misconduct of the Escrow Agent or any such
Indemnitee, or (b) the Escrow Agent following any instructions or other directions from Seller Party Representative or Buyer,
except to the extent that the Escrow Agent following any such instruction or direction is expressly forbidden by the terms
hereof. It is understood and agreed that the Escrow Agent does not have a contractual right of set-off or a contractual security
interest under this Agreement; provided, however, that nothing herein shall be construed as a waiver of any statutory or
common law rights to which the Escrow Agent may otherwise be entitled with respect thereto. The Parties hereto acknowledge
that the foregoing indemnities shall survive the resignation or removal of the Escrow Agent or the termination of this
Agreement. Notwithstanding anything to the contrary herein, Buyer and Seller Party Representative agree, solely as between
themselves, that any obligation for indemnification under this Section 8 (or for reasonable fees and expenses of the Escrow
Agent described in Section 7) shall be borne by the Party or Parties determined by a court of competent jurisdiction to be
responsible for causing the loss, damage, liability, cost or expense against which the Escrow Agent is entitled to
indemnification or, if no such determination is made, then one-half by Buyer and one-half by Seller Party Representative. The
provisions of this Section 8 shall survive the resignation or removal of the Escrow Agent and the termination of this
Agreement.
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9.
Tax Matters.
(a)
(b)
(c)
Seller Party Representative (on behalf of Vendor) shall be responsible for and the taxpayer on all taxes due on the
interest or income earned, if any, on the Escrow Funds for the calendar year in which such interest or income is
earned. The Escrow Agent shall report any interest or income earned on the Escrow Funds to the IRS or other taxing
authority on IRS Form 1099. Prior to the date hereof, the Parties shall provide the Escrow Agent with certified tax
identification numbers by furnishing appropriate forms W-9 or W-8 as applicable and such other forms and documents
that the Escrow Agent may reasonably request.
The Escrow Agent shall be responsible only for income reporting to the Internal Revenue Service with respect to
income earned on the Escrow Funds. The Escrow Agent shall withhold any taxes required to be withheld by
applicable law, including but not limited to required withholding in the absence of proper tax documentation, and shall
remit such taxes to the appropriate authorities.
The Escrow Agent, its affiliates, and its employees are not in the business of providing tax or legal advice to any
taxpayer outside of Citigroup, Inc. and its affiliates. This Agreement and any amendments or attachments hereto are
not intended or written to be used, and may not be used or relied upon, by any such taxpayer or for the purpose of
avoiding tax penalties. Any such taxpayer should seek advice based on the taxpayer’s particular circumstances from
an independent tax advisor.
Covenant of Escrow Agent. The Escrow Agent hereby agrees and covenants with Buyer and Seller Party Representative that it
shall perform all of its obligations under this Agreement and shall not deliver custody or possession of any of the Escrow Funds
to anyone except pursuant to the express terms of this Agreement or as otherwise required by law.
Notices. All notices, requests, demands, claims and other communications required under this Agreement shall be in writing, in
English, and shall be deemed to have been duly given if delivered (i) personally, (ii) by facsimile transmission with written
confirmation of receipt, (iii) on the day of transmission if sent by electronic mail (“e-mail”) with a PDF attachment executed by
an authorized signed of the Party/Parties to the e-mail address given below, and written confirmation of receipt is obtained
promptly after completion of the transmission, (iv) by overnight delivery with a reputable national overnight delivery service,
or (v) by mail or by certified mail, return receipt requested, and postage prepaid. If any notice is mailed, it shall be deemed
given five Business Days after the date such notice is deposited with the United States Postal Service. If notice is given to a
Party, it shall be given at the address for such Party set forth below. It shall be the responsibility of the Parties to notify the
Escrow Agent and the other Party in writing of any name or address changes.
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10.
11.
if to Buyer, then to:
Genetic Technologies Limited
60-66 Hanover Street
Fitzroy, Victoria 3065 , Australia
Attention: Michael Tonroe
E-mail: mike.tonroe@gtglabs.com
Statement Recipient: Yes
with a copy (which shall not constitute notice or service of process) to:
BioMeltzer Pty Limited
13 Wilgah Street
St Kilda East VIC 3183, Australia
Attention: Amos Meltzer
E-mail: amos@biomeltzer.com
Statement Recipient: No
or, if to Seller Party Representative, then to:
General Genetics Corporation
c/o BelHealth Investment Partners
401 E. Las Olas Boulevard, Suite 1400
Fort Lauderdale, FL 33301
Attention: Harold Blue
Email: hblue@belhealth.com
Statement Recipient: Yes
with a copy (which shall not constitute notice or service of process) to:
Norton Rose Fulbright US LLP
1301 Avenue of the Americas
New York, NY 10019-6022
Attention: Steven I. Suzzan
E-mail: steven.suzzan@nortonrosefulbright.com
Statement Recipient: No
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or, if to the Escrow Agent, then to:
Citibank, N.A.
c/o Citi Private Bank
Preferred Custody Services
388 Greenwich Street, 29th FL
New York, NY 10013
Attention: Rola Tseng-Pappalardo
E-mail: rola.tsengpappalardo@citi.com
Telephone No.: (212)783-7030
Facsimile No.: (212) 783-7131
Notwithstanding the above, in the case of communications delivered to the Escrow Agent pursuant to the foregoing clause (i) through
(v) of this Section 11, such communications shall be deemed to have been given on the date received by the Escrow Agent. In the event
that the Escrow Agent, in its discretion, shall determine that an emergency exists, the Escrow Agent may use such other means of
communication as the Escrow Agent deems appropriate.
12.
13.
Termination. This Agreement shall terminate on the first to occur of (a) the distribution of all of the amounts in the Escrow
Funds in accordance with this Agreement or (b) delivery to the Escrow Agent of a written notice of termination executed
jointly by Buyer and Seller Party Representative after which this Agreement shall be of no further force and effect except that
the provisions of Section 8 hereof shall survive termination.
Miscellaneous. The provisions of this Agreement may be waived, altered, amended or supplemented, in whole or in part, only
by a writing signed by all of the parties hereto. Neither this Agreement nor any right or interest hereunder may be assigned in
whole or in part by any party hereto, except as provided in Sections 6 and 16, without the prior consent of the other parties
hereto. This Agreement shall be governed by and construed under the laws of the State of New York, without giving effect to
any choice or conflict of law provisions or rules that would cause the application of the laws of any other jurisdiction. Each
party hereto irrevocably waives any objection on the grounds of venue, forum non conveniens or any similar grounds and
irrevocably consents to service of process by mail or in any other manner permitted by applicable law and consents to the
exclusive jurisdiction of any state or federal court located in the State of New York. The parties hereto hereby waive any right
to a trial by jury with respect to any lawsuit or judicial proceeding arising or relating to this Agreement. This Agreement may
be executed in multiple counterparts, each of which shall be deemed an original, but all of which together shall constitute one
and the same instrument. All signatures of the parties to this Agreement may be transmitted by facsimile or electronic
transmission in portable document format (.pdf), and such facsimile or .pdf will, for all purposes, be deemed to be the original
signature of such party hereto whose signature it reproduces, and will be binding upon such party hereto. If any provision of
this Agreement is determined to be prohibited or unenforceable by reason of any applicable law of a jurisdiction, then such
provision shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating
the remaining provisions thereof, and any such prohibition or unenforceability in such jurisdiction shall not invalidate or render
unenforceable such provisions in any other jurisdiction. The Parties represent, warrant and covenant that each document,
notice, instruction or request provided by such Party to the Escrow Agent shall comply with applicable laws and regulations.
Where, however, the conflicting provisions of any such applicable law may be waived, they are hereby irrevocably waived by
the parties hereto to the fullest extent permitted by law, to the end that this Agreement shall be enforced as written. Except as
expressly provided in Section 7 and Section 8, nothing in this Agreement, whether express or implied, shall be construed to
give to any person or entity other than the Escrow Agent and the Parties any legal or equitable right, remedy, interest or claim
under or in respect of this Agreement or any funds escrowed hereunder.
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14.
15.
16.
17.
Compliance with Court Orders. In the event that any escrow property shall be attached, garnished or levied upon by any court
order, governmental orders or the delivery thereof shall be stayed or enjoined by an order of a court, government order or any
order, judgment or decree shall be made or entered by any court order affecting the property deposited under this Agreement,
the Escrow Agent is hereby expressly authorized, in its sole discretion, to obey and comply with all writs, orders or decrees so
entered or issued, which it is advised by legal counsel of its own choosing is binding upon it, whether with or without
jurisdiction, and in the event that the Escrow Agent obeys or complies with any such writ, order or decree it shall not be liable
to any of the Parties hereto or to any other Person, by reason of such compliance notwithstanding such writ, order or decree be
subsequently reversed, modified, annulled, set aside or vacated. The Escrow Agent shall promptly notify Buyer and Seller
Party Representative in writing (which shall include a copy of the writ, order or decree), upon receipt of such writ, order or
decree, to the extent legally permissible.
Further Assurances. Following the date hereof, each party hereto shall deliver to the other parties such further information and
documents and shall execute and deliver to the other parties such further instruments and agreements as any other parties shall
reasonably request to consummate or confirm the transactions provided for herein, to accomplish the purpose hereof or to
assure to any other party the benefits hereof.
Assignment. No assignment of the interest of any of the Parties hereto shall be binding upon the Escrow Agent unless and until
written notice of such assignment shall be filed with and acknowledged by the Escrow Agent.
Force Majeure. The Escrow Agent shall not incur any liability for not performing any act or fulfilling any obligation hereunder
by reason of any occurrence beyond its control including, but not limited to, any provision of any present or future law or
regulation or any act of any governmental authority, any act of God; earthquakes; fire; flood; wars; acts of terrorism; civil or
military disturbances; sabotage; epidemic; riots; interruptions; loss or malfunctions of utilities, computer (hardware or
software) or communications services; acts of civil or military authority or governmental action, or the unavailability of the
Federal Reserve Bank wire services or any electronic communication facility), it being understood that the Escrow Agent shall
use commercially reasonable efforts which are consistent with accepted practices in the banking industry to resume
performance as soon as reasonably practicable under the circumstances.
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18. Compliance with Federal Law. To help the U.S. Government fight the funding of terrorism and money laundering activities
and to comply with Federal law requiring financial institutions to obtain, verify and record information on the source of funds
deposited to an account, the Parties agree to provide the Escrow Agent with the name, address, taxpayer identification number,
and remitting bank for all Parties depositing funds at Citibank pursuant to the terms and conditions of this Agreement. For a
non-individual person such as a business entity, a charity, a trust or other legal entity, the Escrow Agent will ask for
documentation to verify its formation and existence as a legal entity. The Escrow Agent may also ask to see financial statements,
licenses, and identification and authorization documents from individuals claiming authority to represent the entity or other
relevant documentation.
19. Use of Citibank Name. No publicly distributed printed or other material in any language, including prospectuses, notices,
reports, and promotional material which mentions “Citibank” by name or the rights, powers, or duties of the Escrow Agent under this
Agreement shall be issued by any other parties hereto, or on such party’s behalf, without the prior written consent of the Escrow Agent.
20. Publication; Disclosure. By executing this Agreement, the Parties and the Escrow Agent acknowledge that this Agreement
(including all related attachments) contains certain information that is sensitive and confidential in nature and agree that such
information needs to be protected from improper disclosure, including the publication or dissemination of this Agreement and related
information to individuals or entities not a party to this Agreement. The Parties further agree to take reasonable measures to mitigate any
risks associated with the publication or disclosure of this Agreement and information contained therein. If any Party becomes aware of
any threatened or actual unauthorized disclosure, publication or use of this Agreement, that Party shall promptly notify in writing the
other Parties and the Escrow Agent and shall be liable for any unauthorized release or disclosure on its part. The parties hereto agree and
acknowledge that the Escrow Agent’s or a Party’s disclosure of information as may be required by law or by regulatory auditor shall not
be considered an unauthorized release or disclosure.
****************
- 12 -
IN WITNESS WHEREOF, the parties hereto have executed this Escrow Agreement as of the date set forth above.
BUYER:
GENETIC TECHNOLOGIES LIMITED
/s/ Simon Morriss
By:
Name: Simon Morriss
Its:
Chief Executive Officer
SELLER PARTY REPRESENTATIVE
GENERAL GENETICS CORPORATION
/s/ Inder Tallur
By:
Name: Inder Tallur
Its:
President
ESCROW AGENT:
CITIBANK, N.A.
By:
Name:
Its:
Schedule 1
ESCROW AGENT FEE PROPOSAL
Citibank, N.A., Escrow Agent
Acceptance Fee
To cover the acceptance of the Escrow Agency appointment, the study of the Agreement, and supporting documents submitted in
connection with the execution and delivery thereof, and communication with other members of the working group:
Fee: WAIVED
Administration Fee
The annual administration fee covers maintenance of the Escrow Account including safekeeping of assets in the escrow accounts,
normal administrative functions of the Escrow Agent, including maintenance of the Escrow Agent’s records, follow-up of the Escrow
Agreement’s provisions, and any other safekeeping duties required by the Escrow Agent under the terms of the Escrow Agreement. Fee
is based on Escrow Amounts being deposited in a non-interest bearing deposit account with a duration of at least a year, FDIC insured to
the applicable limits.
Fee: WAIVED
Tax Preparation Fee
To cover preparation and mailing of Form 1099-INT, (or any other applicable tax reporting) for the applicable escrow party and in
respect of the Escrow Funds for each calendar year:
Fee: WAIVED
Transaction Fees
To cover all required disbursements from an escrow account, including disbursements made via check and/or wire transfers, payments
to all parties as designated by client, fees associated with postage and overnight delivery charges incurred by the Escrow Agent as
required under the terms and conditions of the Escrow Agreement:
Fee: WAIVED
Other Fees
Material amendments to the Agreement: additional fee(s), if any, to be discussed at time of amendment
TERMS AND CONDITIONS: The above schedule of fees does not include charges for reasonab l e out-of-pocket expenses or for
any services of an extraordinary nature that we or our legal counsel may be called upon from time to time to perform in either
an agency or fiduciary capacity. Our participation in the transactions contemplated by the Agreement is subject to internal
approval of the third party depositing monies into the escrow account. Error! Unknown document property name.
EXHIBIT A-1
Certificate as to Seller Party Representative’s Authorized Signatures
The specimen signatures shown below are the specimen signatures of the individuals who have been designated as authorized
representatives of Seller Party Representative and are authorized to initiate and approve transactions of all types for the escrow account
or accounts established under this Agreement, on behalf of Seller Party Representative. The below listed persons (must list at least two
individuals) have also been designated Authorized Individuals and may be notified by Citibank N.A. prior to the release of Escrow
Funds from the escrow account(s) unless an original “Standing or Predefined Instruction” letter is on file with the Escrow Agent.
Name / Title /Telephone #
Specimen Signature
Inder Tallur
Name
Authorized Person
Title
(347) 308-7018
Telephone #
Joseph P. Wynne
Name
Authorized Person
Title
347-308-7015
Telephone #
Signature
Signature
EXHIBIT A-2
Certificate as to Buyer’s Authorized Signatures
The specimen signatures shown below are the specimen signatures of the individuals who have been designated as authorized
representatives of Buyer and are authorized to initiate and approve transactions of all types for the escrow account or accounts
established under this Agreement, on behalf of Buyer. The below listed persons (must list at least two individuals) have also been
designated Authorized Individuals and may be notified by Citibank N.A. prior to the release of Escrow Funds from the escrow account
(s) unless an original “Standing or Predefined Instruction” letter is on file with the Escrow Agent.
Name / Title /Telephone #
Specimen Signature
Simon Morriss
Name
Chief Executive Officer
Title
+61 408 579 593
Telephone #
Michael Tonroe
Name
Chief Financial Officer
Title
+61 415 750 996
Telephone #
Signature
Signature
ex12-01.htm
EX-12.01
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Exhibit 12.01
SARBANES-OXLEY SECTION 302(a) CERTIFICATION
I, Simon Morriss, certify that:
1. I have reviewed this annual report on Form 20-F of Genetic Technologies Limited;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with
respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this
report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in
Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the Company, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in
which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to
be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with generally accepted
accounting principles;
(c) Evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and
(d) Disclosed in this report any change in the Company’s internal control over financial reporting that occurred
during the period covered by the annual report that has materially affected, or is reasonably likely to materially
affect the Company’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the Company’s auditors and the audit committee of the Company’s board of directors (or persons performing the
equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarise and
report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in
the Company’s internal control over financial reporting.
Date: August 31, 2021
/s/ Simon Morriss
Simon Morriss
Chief Executive Officer
ex12-02.htm
EX-12.02
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Exhibit 12.02
SARBANES-OXLEY SECTION 302(a) CERTIFICATION
I, Mike Tonroe, certify that:
1. I have reviewed this annual report on Form 20-F of Genetic Technologies Limited;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with
respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this
report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in
Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the Company, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in
which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to
be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with generally accepted
accounting principles;
(c) Evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and
(d) Disclosed in this report any change in the Company’s internal control over financial reporting that occurred
during the period covered by the annual report that has materially affected, or is reasonably likely to materially
affect the Company’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the Company’s auditors and the audit committee of the Company’s board of directors (or persons performing the
equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarise and
report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in
the Company’s internal control over financial reporting.
Date: August 31, 2021
/s/ Mike Tonroe
Mike Tonroe
Chief Financial Officer
ex13-01.htm
EX-13.01
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Exhibit 13.01
CERTIFICATION PURSUANT TO 18 U.S.C
SECTION 1350 AS ADOPTED
PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Genetic Technologies Limited (the “Company”) on Form 20-F for the period ended June 30,
2021, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Simon Morriss, Chief Executive
Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
(1)
(2)
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations
of the Company.
August 31, 2021
* The originally executed copy of this Certification will be maintained at the Company’s offices and will be made available for
inspection upon request.
By:/s/ Simon Morriss
Simon Morriss
Chief Executive Officer
ex13-02.htm
EX-13.02
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Exhibit 13.02
CERTIFICATION PURSUANT TO 18 U.S.C
SECTION 1350 AS ADOPTED
PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Genetic Technologies Limited (the “Company”) on Form 20-F for the period ended June 30,
2021, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Mike Tonroe, Chief Financial Officer
of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
(1)
(2)
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations
of the Company.
August 31, 2021
* The originally executed copy of this Certification will be maintained at the Company’s offices and will be made available for
inspection upon request.
By:/s/ Mike Tonroe
Mike Tonroe
Chief Financial Officer
ex15-1.htm
EX-15.1
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Exhibit 15.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the incorporation by reference in the Registration Statement on Form F-3 (No. 333-237152) of Genetic
Technologies Limited of our report dated August 31, 2021 relating to the financial statements, which appears in this Form 20-F.
/s/ Grant Thornton
Melbourne, Australia
August 31, 2021
ex15-2.htm
EX-15.2
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This Page has purposefully been left blank
Exhibit 15.2
ex15-3.htm
EX-15.3
Appendix 4E
Preliminary final report for the twelve months to June 30, 2021
Genetic Technologies Limited
ABN 17 009 212 328
1.
Reporting period
Report for the financial year ended
Previous corresponding period is the financial year ended
2.
Results for announcement to the market
Revenues from ordinary activities (item 2.1)
Loss from ordinary activities after tax attributable
to members (item 2.2)
Net loss for the period attributable to members
(item 2.3)
*increase in loss
Up/down
%
Up
Up*
Up*
1,122%
12.4%
12.4%
to
to
to
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08/30/2021 03:56 AM
Exhibit 15.3
June 30, 2021
June 30, 2020
Amount reported
for the year ended
June 30, 2021
$
120,554
(7,077,619)
(7,077,619)
There are no dividends being proposed or declared for the period (item 2.4 and 2.5)
Commentary related to the above results
Please refer to ‘Item 5.A Operating results’ within the Form 20-F for the year ended June 30, 2021.
3.
Net tangible assets per security
Net tangible asset backing per ordinary security (1)
June 30, 2021
June 30, 2020
0.24 cents
0.17 cents
(1) Net tangible assets exclude the right-of-use assets under AASB 16 Leases.
4.
Other documents accompanying this Appendix 4E
This Appendix 4E should be read in conjunction with the Genetic Technologies Limited annual report on the form 20-F, which
includes:
-
-
Item 18 Financial Statements; and
Other sections as tabled below.
This preliminary final report and the associated Directors’ Report are found throughout the various sections of the
accompanying Genetic Technologies Limited annual report on the form 20-F.
The following table has been provided to assist readers to locate each section of the Directors’ Report within the accompanying
annual report on the form 20-F.
Sections of Directors’ Report
Principal activities
Review of operations and activities
Business strategies and prospects for future years
Business risks
Significant changes in the state of affairs
Matters subsequent to the end of the financial year
Likely developments and expected results of operations
Environmental regulations
Dividends
Information on directors
Remuneration report
Indemnification of officers
Proceedings on behalf of the group
Non-Audit Services
Auditor’s independence declaration
Directors’ Resolution
Form 20-F Reference
Item 5.A Operating Results
See subheading – “Overview”
Item 4.B Business Overview Item 5.A Operating Results
Item 4.B Business Overview
Item 3.D Risk Factors
Item 5.A Operating Results
See subheading – “Significant changes in the state of
affairs”
Item 8.B Significant Changes
Item 5.A Operating Results
See subheading – “Likely developments and expected
results of operations”
Item 5.A Operating Results
See subheading – “Likely developments and expected
results of operations”
Item 5.A Operating Results
See subheading – “Environmental regulations”
Item 4.B Business Overview See subheading –
“Dividends”
Item 6.A Directors and Senior Management
The Remuneration report starts at Item 6 and ends after
Item 6.B as indicated
Item 6.B Compensation
See subheading – “Indemnification and Insurance with
respect to Directors”
Item 8.A Consolidated Statements and Other Financial
Information
See subheading – “Legal Proceedings”
Item 16.C Principal Accountant Fees and Services
Exhibit 15.4 Auditor’s Independence Declaration
Item 6.B Compensation
See subheading – “Directors’ Resolution”
5.
Audited Financial Report 2021
This preliminary final report has been based on accounts which have been audited.
A copy of the audited Financial Statements for the year ended June 30, 2021 is included in Item 18 Financial Statements within
the Form 20-F.
-
End of Appendix 4E -
Exhibit 15.4
Collins Square, Tower 5
727 Collins Street
Melbourne VIC 3008
Correspondence to:
GPO Box 4736
Melbourne VIC 3001
T +61 3 8320 2222
F +61 3 8320 2200
E info.vic@au.gt.com
W www.grantthornton.com.au
Auditor’s Independence Declaration
To the Directors of Genetic Technologies Limited
In accordance with the requirements of section 307C of the Corporations Act 2001, as lead auditor for the audit of
Genetic Technologies Limited for the year ended 30 June 2021, I declare that, to the best of my knowledge and belief, there
have been:
a
b
no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
no contraventions of any applicable code of professional conduct in relation to the audit.
Grant Thornton Audit Pty Ltd
Chartered Accountants
M A Cunningham
Partner – Audit & Assurance
Melbourne, 31 August 2021
Grant Thornton Audit Pty Ltd ACN 130 913 594
a subsidiary or related entity of Grant Thornton Australia Ltd ABN 41 127 556 389
www.grantthornton.com.au
‘Grant Thornton’ refers to the brand under which the Grant Thornton member firms provide assurance, tax and advisory services to their clients
and/or refers to one or more member firms, as the context requires. Grant Thornton Australia Ltd is a member firm of Grant Thornton International
Ltd (GTIL). GTIL and the member firms are not a worldwide partnership. GTIL and each member firm is a separate legal entity. Services are
delivered by the member firms. GTIL does not provide services to clients. GTIL and its member firms are not agents of, and do not obligate one
another and are not liable for one another’s acts or omissions. In the Australian context only, the use of the term ‘Grant Thornton’ may refer to
Grant Thornton Australia Limited ABN 41 127 556 389 and its Australian subsidiaries and related entities. GTIL is not an Australian related entity to
Grant Thornton Australia Limited.
Liability limited by a scheme approved under Professional Standards Legislation.
237
Exhibit 15.5
Collins Square, Tower 5
727 Collins Street
Melbourne VIC 3008
Correspondence to:
GPO Box 4736
Melbourne VIC 3001
T +61 3 8320 2222
F +61 3 8320 2200
E info.vic@au.gt.com
W www.grantthornton.com.au
Independent Auditor’s Report
To the Members of Genetic Technologies Limited
Report on the audit of the financial report
Opinion
We have audited the financial report of Genetic Technologies Limited (the Company) and its subsidiaries (the Group),
which comprises the consolidated statement of financial position as at 30 June 2021 the consolidated statement of profit
or loss and other comprehensive income, consolidated statement of changes in equity and consolidated statement of cash
flows for the year then ended, and notes to the consolidated financial statements, including a summary of significant
accounting policies, and the Directors’ declaration.
In our opinion, the accompanying financial report of 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 2021 and of its performance for the year
ended on that date; and
b complying with International Financial Reporting Standards (IFRS) as issued by the International Accounting
Standards Board (IASB) and the Corporations Regulations 2001.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are
further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report. We are
independent of the 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 (including Independence Standards) (the Code) that are relevant to our audit of the financial
report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial
report of the current period. These matters were addressed in the context of our audit of the financial report as a whole, and in
forming our opinion thereon, and we do not provide a separate opinion on these matters.
Grant Thornton Audit Pty Ltd ACN 130 913 594
a subsidiary or related entity of Grant Thornton Australia Ltd ABN 41 127 556 389
www.grantthornton.com.au
‘Grant Thornton’ refers to the brand under which the Grant Thornton member firms provide assurance, tax and advisory services to their clients
and/or refers to one or more member firms, as the context requires. Grant Thornton Australia Ltd is a member firm of Grant Thornton International
Ltd (GTIL). GTIL and the member firms are not a worldwide partnership. GTIL and each member firm is a separate legal entity. Services are
delivered by the member firms. GTIL does not provide services to clients. GTIL and its member firms are not agents of, and do not obligate one
another and are not liable for one another’s acts or omissions. In the Australian context only, the use of the term ‘Grant Thornton’ may refer to
Grant Thornton Australia Limited ABN 41 127 556 389 and its Australian subsidiaries and related entities. GTIL is not an Australian related entity to
Grant Thornton Australia Limited.
Liability limited by a scheme approved under Professional Standards Legislation.
238
Key audit matter
How our audit addressed the key audit matter
2
Share-Based Payments – Note 23
During the year ended June 30, 2021, the Company issued
a significant number of warrants, employee options and
performance rights. Under IFRS 2 Share-based Payments,
these issuances are to be recognised over the vesting
period, and recorded as a liability or equity depending on the
employees’ nomination of cash or shares.
Share-based payment arrangements are a complex
accounting area which rely on assumptions applied in the
determination of fair value and estimation regarding the
number of options that are expected to become exercisable.
Additionally, a number of share-based awards were granted
to related parties. As a result, share-based payment
arrangements were considered a key audit matter.
Research and Development Tax Incentive – Note 11
Under the research and development (R&D) tax incentive
scheme, the Company receives a 43.5% refundable tax offset
of eligible expenditure if its turnover is less than $20 million
per annum, provided it is not controlled by income tax exempt
entities. A registration of R&D Activities Application is filed
with AusIndustry in the following financial year and, based on
this filing, the Company receives the incentive in cash.
Management engaged an R&D expert to perform a detailed
review of the Company’s total R&D expenditure to determine
the potential claim under the R&D tax incentive legislation.
The R&D receivable for the period ended June 30, 2021 was
$984,872. This represents an estimated claim for the period
from July 1, 2020 to June 30, 2021.
This is a key audit matter due to the size of the receivable
and because there is a degree of judgment and interpretation
of the R&D tax legislation required to assess eligibility of the
R&D expenditure under the scheme.
Our procedures included, amongst others:
• Obtaining an understanding of the process applied to
determine the appropriate accounting treatment and
calculate the share-based payments;
• Evaluating the accounting treatment of the awards for
compliance with IFRS 2;
• Agreeing a sample of awards to the relevant contractual
grant agreements;
• Critically assessing the appropriateness of the valuation
methods applied by:
o Evaluating the competence, capabilities and objectivity
of the valuation specialist engaged by the Company to
perform the valuations;
o Assessing inputs and assumptions utilised in the
valuation models for accuracy and reasonableness; and
o Utilising internal valuation specialists to assess the
appropriateness of valuation methodologies applied,
reasonableness of key assumptions, and accuracy of
mathematical calculations;
• Recalculating the deferral of the fair value of share-based
payment expense over the vesting period; and
• Assessing the adequacy of the Company’s disclosures in
relation to share-based payments.
Our procedures included, amongst others:
• Obtaining an understanding of the process undertaken to
calculate the R&D tax incentive;
• Evaluating the competence, capabilities and objectivity of
the specialist engaged by the Company to review the R&D
expenditure;
• Utilising an internal R&D tax specialist in:
o Reviewing the methodology used by the Company for
consistency with the R&D tax offset rules; and
o Considering the nature of the expenses against the
eligibility criteria of the R&D tax incentive scheme to
assess whether the expenses included in the estimate
were likely to meet the eligibility criteria;
• Inspecting supporting documentation for a sample of
expenses claimed to assess validity of the claimed amount
and eligibility against the R&D tax incentive scheme
criteria;
• Comparing the nature of R&D expenditure included in the
current year estimate to the prior year claim;
• Considering the Company’s history of successful claims;
• Inspecting copies of relevant correspondence with
AusIndustry and the Australian Taxation Office related to
the claims; and
• Assessing the adequacy of the Company’s disclosures in
relation to the R&D tax incentive.
239
3
Information other than the financial report and auditor’s report thereon
The Directors are responsible for the other information. The other information comprises the information included in the
Company’s annual report for the year ended 30 June 2021, but does not include the financial report and our auditor’s report
thereon. The other information obtained included Part I, Part II and Part III of the Form 20F included in the annual report.
Our opinion on the financial report does not cover the other information and we do not express any form of assurance
conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider
whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or
otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are
required to report that fact. We have nothing to report in this regard.
Responsibilities of the Directors for the financial report
The Directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in
accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the Directors
determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material
misstatement, whether due to fraud or error.
In preparing the financial report, the Directors are responsible for assessing the Company’s ability to continue as a going
concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless
the Directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance
is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing
Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions
of users taken on the basis of this financial report.
A further description of our responsibilities for the audit of the financial report is located at the Auditing and Assurance
Standards Board website at: https://www.auasb.gov.au/auditors_responsibilites/ar1_2020.pdf. This description forms part of
our auditor’s report.
240
4
Report on the remuneration report
Opinion on the remuneration report
We have audited the Remuneration Report included in pages 37 to 52 of the Directors’ report for the year ended 30 June
2021.
In our opinion, the Remuneration Report of Genetic Technologies Limited, for the year ended 30 June 2021 complies
with section 300A of the Corporations Act 2001.
Responsibilities
The Directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance
with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report,
based on our audit conducted in accordance with Australian Auditing Standards.
Grant Thornton Audit Pty Ltd
Chartered Accountants
M A Cunningham
Partner – Audit & Assurance
Melbourne, 31 August 2021
241
Shareholder Information
A
Distribution of equity securities
The number of shareholders, by size of holding, of quoted fully paid ordinary shares as at August
19, 2021 was as follows:
Range
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 Over
Total
Number of holders
Number of shares
Fully paid ordinary shares
293
651
340
1,789
1,661
4,734
155,107
1,905,493
2,759,387
99,674,471
9,121,595,685
9,226,090,143
There were 2,456 holders of less than a marketable parcel of ordinary shares.
B
Twenty Largest Shareholders
The names of the 20 largest holders of quoted fully paid ordinary shares and their respective
holdings at August 19, 2021 are:
Security holder
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
MJGD NOMINEES PTY LTD
DOMA 193 PTY LTD
RIP OPPORTUNITIES PTY LTD
IRWIN BIOTECH NOMINEES PTY LTD
MONUMENT HILL PTY LTD
MISS SUSAN SPITERI
HILCOR TRADING PTY LTD
MR WARWICK WRIGHT
MR JOHN CHRISTOPOLOUS
MR BILL GIANOULAS
AQUASAFE INVESTMENTS PTY LTD
SAYCA PTY LTD
S H RAYBURN NOMINEES PTY LTD
BNP PARIBAS NOMINEES PTY LTD SIX SIS LTD
MR CAN ODABAS
AP 300 PTY LTD
BLR CRANES PTY LTD
BNP PARIBAS NOMINEES PTY LTD ACF CLEARSTREAM
BNP PARIBAS NOMINEES PTY LTD
Subtotal
Total remaining holders balance
Number
held
Percentage of
issued shares
6,854,987,321
200,849,309
144,551,379
124,999,999
75,849,310
42,000,001
41,142,778
40,000,000
33,000,000
26,000,000
25,000,000
24,248,154
22,500,000
21,800,000
20,206,182
20,000,000
18,750,000
18,397,239
15,897,780
15,620,011
7,785,799,463
1,440,290,680
74.30
2.18
1.57
1.35
0.82
0.46
0.45
0.43
0.36
0.28
0.27
0.26
0.24
0.24
0.22
0.22
0.20
0.20
0.17
0.17
84.39
15.61
242
C
Substantial Shareholders
The following information is current at August 19, 2021 based on information extracted from the
substantial shareholding notices given to the Company by shareholders who hold relevant
interests in more than 5 per cent of the Company’s voting shares:
The Bank of New York Mellon Corporation and Associates
Number held
6,857,924,911
D
Voting Rights
The voting rights attracting to each class of equity securities are set out below:
a)
b)
Ordinary shares: On a show of hands every member present at a meeting in person or
by proxy shall have one vote and upon a poll each share shall have one vote.
Options and Warrants: no voting rights.
243
Corporate Directory
Directors
Share register
Mr Peter Rubinstein
Independent Non-Executive Director
and Chairman
Dr Jerzy Muchnicki
Executive Director and Chief Medical Officer
Dr Lindsay Wakefield
Independent Non-Executive Director
Mr Nicholas Burrows
Independent Non-Executive Director
Company Secretary
Mr Michael Tonroe
Registered office and
principal place of business
60-66 Hanover Street
(PO Box 115)
Fitzroy VIC 3065
Australia
Telephone: +61 (0)3 8412 7000
Facsimile: +61 (0)3 8412 7040
Website
www.gtglabs.com
Computershare Investor Services Pty Limited
452 Johnston Street
Abbotsford VIC 3067
Australia
Telephone: +61 0(3) 9415 5000
Facsimile: +61 0(3) 9473 2500
Auditor
Grant Thornton
Collins Square
727 Collins Street, Melbourne VIC 3008
Australia
Telephone: +61 (0)3 8603 1000
Facsimile: +61 (0)3 8603 1999
Bankers
National Australia Bank
Level 2, 151 Rathdowne Street
Carlton VIC 3053
Stock exchange listings
Genetic Technologies Limited securities are
listed on the Australian Securities Exchange
(ASX: GTG) and NASDAQ (GENE)
244