Annual Report 2022 Company Information Directors Alan Fisher BCom, FCA, MAICD Chair Hugh Burrill BSc, MScSt, MBA, FAICD Michael Kotsanis BSc, Grad Dip Business, MBus Jane Ryan BSc (Hons) PhD, MAICD Chief Executive Officer / Company Secretary Dr David Sparling BVSc (Hons), LLB (Hons), Grad Dip App Cor Gov Chief Financial Officer / Company Secretary Ancila Desai B Com (Hons), CA, MBS, Executive MBA, MAICD Bankers National Australia Bank Limited Level 28, 500 Bourke Street, MELBOURNE, VICTORIA, 3000 Auditors Grant Thornton Australia Limited Collins Square, Tower 5 727 Collins Street MELBOURNE, VICTORIA, 3008 Share Register Link Market Services Limited Tower 4, 727 Collins Street MELBOURNE, VICTORIA, 3008 Stock Exchange Australian Securities Exchange Limited 530 Collins Street MELBOURNE, VICTORIA, 3000 (ASX Code: IDT) Registered Office and Principal Place of Business 45 Wadhurst Drive BORONIA, VICTORIA, 3155 Telephone +61 3 9801 8888 Facsimile +61 3 9837 6445 Website Address www.idtaus.com.au 1 IDT Annual Report 2022 Contents Letter from the Chair and Chief Executive Officer Report of the Directors Auditors Independence Declaration Statement of Profit or Loss and Other Comprehensive Income Statement of Financial Position Statement of Changes in Equity Statement of Cash Flows Notes To and Forming Part of the Financial Statements Directors' Declaration Independent Audit Report to the Members Shareholder Information 3 5 16 17 18 19 20 21 41 42 47 IDT Annual Report 2022 2 Letter from the Chair and Chief Executive Officer We are pleased to present the Annual Report for IDT Australia Limited (“IDT”) for the year ended 30 June 2022. The global impact of the COVID-19 pandemic in 2020 and 2021 presented significant challenges to businesses. One such challenge was COVID-19’s unmasking of the critical deficiencies in Australia’s pharmaceutical supply chain, which actually created opportunities for IDT to showcase its facilities and capabilities. By the end of calendar 2021, IDT had completed its Sterile readiness project for the Federal Government, attaining the Company’s first ever Sterile cGMP license. Unfortunately the Government elected not to utilise IDT’s facility as a local site of manufacture of a COVID-19 vaccine. IDT immediately took the opportunity to deploy its Sterile ready facility to work with Monash University on the Monash / Doherty Institute developed receptor binding domain COVID-19 vaccine candidate slated for clinical trials in early calendar 2022. This was a significant achievement, to produce Australia’s first cGMP mRNA drug product. The project gained nationwide attention and is one which everybody at IDT is immensely proud to have been a part of. Coming off the back of the highs in late calendar 2021 and despite the fact that IDT is still the only Australian entity with demonstrated capability in cGMP mRNA product manufacture, the Company’s submission to the Federal Government’s Approach To Market (ATM): Proposals to establish an onshore mRNA manufacturing capability, was unsuccessful, as were all other bidders in the process. In contrast to the first half of the reporting period, IDT has not been able to gain further traction in the second half of the year with its sovereign manufacturing initiatives. IDT submitted a number of Federal Government applications, including the ATM and the Modern Manufacturing Initiative (MMI) Collaboration and Translation stream programs. With the election of a new Federal Government in May 2022, IDT briefed the incoming Government on the critical interdependencies and deficiencies in Australia’s pharmaceutical supply chain. Australia imports over 90% of its medicines, small molecule medicines comprise just under 80% of the medicines we take every day and the majority of the active pharmaceutical ingredients (API’s) in these medicines come from China and India. Notably IDT is Australia’s last remaining commercial small molecule API manufacturer providing pharmaceutical development and cGMP manufacturing services to the Australian research and life sciences community. On a positive note the Company’s cash position is strong, ending the reporting period with $9.2 million in cash; and the Company has progressed the re-commissioning its Sterile manufacturing facility, securing new contract development and manufacturing content, as well as developing our own medicinal cannabis product pipeline. Financial Summary The Company recorded a net loss after tax of $1.2 million compared to a $2.1m net profit after tax in 2021, representing a decrease of 155%. IDT’s revenue for the year was $12.1 million, down by 24% from $15.9m in the previous year. COVID-19 Treatment and Vaccine Initiatives During the year, IDT continued to progress its COVID-19 vaccine manufacturing initiative. Following on from the Sterile readiness project, IDT petitioned the Federal Government to use the Sterile facility to manufacture the Monash / Doherty Institute developed receptor binding domain COVID-19 vaccine candidate, slated for clinical trials in early calendar year 2022. IDT took frozen mRNA drug substance manufactured in Belgium and performed the complex lipid nanoparticle mRNA encapsulation, sizing, formulation and fill/finish activities to produce Australia’s first cGMP mRNA drug product. This was the first of its kind in the southern hemisphere and places IDT currently as the only entity in this region with demonstrated capability in cGMP mRNA product manufacture. IDT continues to advance discussions with the Federal Government, various State Governments and academic and institutional stakeholders in relation to the sovereign manufacture of mRNA COVID vaccines and other therapeutics. 3 IDT Annual Report 2022 Australian Sovereign Pharmaceutical Manufacturing Over the past two years, IDT has participated in numerous Government Initiatives, Inquiries and Commissions, and has been diligently petitioning both the Federal and State Government with the case for increased levels of sovereign pharmaceutical manufacturing. To-date IDT’s engagement with Government has failed to yield any actionable results. Finally, the Company has initiated an independent strategic review of its business and will update the market following this review. On behalf of the board and management we thank shareholders for their continued support. Alan Fisher Chair 30 August 2022 David Sparling Chief Executive Officer IDT Annual Report 2022 4 Report of the Directors – 30 June 2022 (Including Remuneration Report) The Directors present their report, together with the financial report of the Company for the year ended 30 June 2022. The following persons were Directors of IDT Australia Limited during or since the end of the financial year: Alan Fisher – Chair Hugh Burrill - Non-Executive Director Michael Kotsanis - Non-Executive Director Jane Ryan - Non-Executive Director (from 28 January 2022) Mary Sontrop - Non-Executive Director (retired 16 November 2021) Except as noted above, all other Directors held office during the whole of the financial year and since the end of the financial year. Principal Activities The principal activities of the Company through the course of the year were the supply of products and provision of research and development and other technical services within the pharmaceutical and allied industries. Review of Operations Total revenue for the year was $12.1 million, a decrease of $3.9 million from the previous year. The full year operating loss after tax was $1.2 million compared to an operating profit after tax in the previous year of $2.1 million. Earnings per share was a loss of 0.5 cents, a decrease of 1.4 cents from the previous year. During the year, IDT continued to assist the Federal Government with certain COVID-19 response activities. In August 2021, the Company finalised a Letter Agreement with the Australian Government, Department of Health to bring IDT’s Sterile manufacturing facility into a state of readiness to potentially provide COVID-19 vaccine manufacturing services. Whilst IDT’s sterile manufacturing facility did not end up being deployed as a site of manufacture of a commercial COVID-19 vaccine, IDT petitioned the Federal Government to use the facility to manufacture the Monash / Doherty Institute developed receptor binding domain COVID-19 vaccine candidate. In November 2021, IDT produced Australia’s first cGMP mRNA drug product which entered into clinical trials during the reporting period. IDT made numerous submissions to the Australian and Victorian Governments during the year. These include submissions to the Federal Government’s Approach To Market (ATM): Proposals to establish an onshore mRNA manufacturing capability, and several submissions to the Government’s Modern Manufacturing Initiative (MMI). These submissions have been unsuccessful. The Company continued to make progress executing on its Medicinal Cannabis Manufacturing Plan with a range of proprietary oil-in- bottle products now on market with stability supporting a commercially appropriate shelf life. Summary of Financial Performance Revenue from ordinary activities Net profit / (loss) before tax Net profit / (loss) after tax Basic earnings per share Diluted earnings per share 30 June 2022 $000 30 June 2021 $000 12,130 (1,876) (1,160) (0.5¢) (0.5¢) 15,989 966 2,103 0.9¢ 0.9¢ Movement (3,859) (2,843) (3,263) (1.4¢) (1.4¢) 5 IDT Annual Report 2022 Financial position At 30 June 2022, the Company had cash reserves of $9.2 million. This cash balance is further supported by an unutilised facility of $2.5 million with the National Australia Bank Ltd, which is next due for renewal on 31 July 2023. These cash reserves and debt facility are available to support the Company’s execution of strategies and projects and to extend production and manufacturing capabilities. Results The net result of operations after applicable income tax was a loss of $1.2 million (2021: $2.1 million profit). Dividends No dividends were paid during the financial year. There are no dividends or distributions recommended or declared for payment to members. Significant Changes in the State of Affairs In the opinion of the Directors, there have been no significant changes in the state of affairs of the Company during the financial year not otherwise disclosed in this report or the financial statements. Matters Subsequent to the End of the Financial Year Throughout the course of the financial year, the COVID-19 pandemic has continued to present challenges to day-to-day life as well as business and economic activity. The financial statements have been prepared based upon conditions existing at 30 June 2022, which included the impact of COVID on the business at that time. The Company considers the ongoing COVID-19 restrictions in other regions and supply chain disruptions to be non-adjusting post balance sheet events and accordingly the financial effects post year end of COVID-19 have not been reflected in the financial statements at 30 June 2022. The scale and duration of the COVID-19 pandemic and its associated business and economic disruptions remain uncertain as at the date of this report. However, they may have an impact on the Company’s 2023 financial year earnings, cash flow and financial position. In July 2022, Ms. Ancila Desai announced her intention to leave the Company later this year. IDT has commenced activities to secure a suitable CFO replacement. On 26 August 2022, IDT announced that it was advised that its final outstanding MMI submission (MMI – Translation Stream Round 2) was unsuccessful. Opportunities for IDT to provide further sovereign pharmaceutical manufacturing, mRNA and other sterile product manufacturing services are being pursued. There has not been any other matter or circumstance occurring subsequent to the end of the financial year that, to the Company’s knowledge, has significantly affected, or may significantly affect, the operations, results of the operations or the state of affairs of the Company. Likely Developments IDT is standing-by for any developments from the Australian and State Governments in relation to any potential initiatives to address the critical deficiencies in the Australia’s pharmaceutical supply chain and continues to engage with the Government and industry to promote increased levels of sovereign vaccine and pharmaceutical manufacturing in Australia. The Company has initiated an independent strategic review of its business operations and will update the market following this review. Environmental Regulations IDT Australia Limited is subject to environmental regulations and other licenses in respect of its manufacturing facilities located in Boronia, Victoria. The Company monitors changes in its regulatory environment and ensures ongoing compliance with new requirements. It is subject to regular inspections and audits by responsible State and Federal authorities and by local and international clients. The Company considers it has complied with all necessary environmental regulations throughout the year ended 30 June 2022 and no related issues have arisen since the end of the financial year to the date of this report. IDT Annual Report 2022 6 Corporate Governance Statement The Company complies with the Australian Securities Exchange Corporate Governance Principles and Recommendations, 4th edition (ASX Recommendations). The Company’s Corporate Governance Statements and Policies, including disclosures required by the ASX Recommendations, may be viewed on the Company’s website: https://en.idtaus.com.au/investors/corporate-governance/. Indemnification of Officers During the financial year, the Company paid an insurance premium to insure Directors and Officers (D&O) of the Company. Under the terms of this policy the premium paid by the Company is not permitted to be disclosed. The liabilities insured are legal costs which may be incurred in defending civil or criminal proceedings which may be brought against D&O in their capacity as D&O of the Company, and any other payments arising from liabilities incurred by D&O in connection with such proceedings, except for where such liabilities arise out of conduct involving a wilful breach of duty by D&O or improper use by D&O of their position or of information to gain advantage for themselves or someone else or to cause detriment to the Company. The Company has not otherwise, during or since the end of the financial year, except to the extent permitted by law, indemnified or agreed to indemnify a D&O of the Company against a liability incurred. 7 IDT Annual Report 2022 Report of the Directors – 30 June 2022 (Including Remuneration Report) Information about the Directors ALAN D FISHER Qualifications: BCom, FCA, MAICD Experience: experienced corporate advisor and public company director. He has a proven track record of implementing strategies that enhance shareholder value. His main areas of expertise include mergers and acquisitions, public and private equity raisings, business restructurings and strategic advice. Other Current Directorships: Non-Executive Chair of Centrepoint Alliance Ltd, Non-Executive Director and Chair of Audit and Risk Committees of Bionomics Ltd and Thorney Technologies Ltd. Former Directorships in Last 3 Years: Simavita Ltd Responsibilities: Chair, Non-Executive Director, member Audit and Risk Committee Equity interests in Company: nil HUGH N BURRILL Qualifications: BSc, MScSt, MBA, FAICD Experience: formerly Corporate Vice President, Global Pharma Research & Development, Hospira Inc where he was responsible for overall pipeline portfolio management, and research and development of generic and specialty pharmaceuticals. Prior to this he held senior international roles within Hospira Inc and the original Mayne Pharma Ltd and currently provides consulting services in pharmaceutical strategic management, product development, regulatory affairs and intellectual property. Other Current Directorships: nil Former Directorships in Last 3 Years: Non-Executive Director and Deputy Chair Nova Aerospace Pty Ltd (2007 – 2020) Responsibilities: Non-Executive Director, Chair Audit and Risk Committee, Member Remuneration and Nomination Committee Equity interests in Company: nil MARY SONTROP (until 16 November 2021) Qualifications: BAppSci, Grad Dip Quality Management, Grad Dip Management (Health), MBA, GAICD Experience: extensive international experience in the biopharmaceutical sector across manufacturing operations, quality, and business integration. During 28 years with CSL Limited (ASX: CSL), Mary was an integral part of CSL’s globalisation through a series of major acquisitions. This included primary responsibility for the turnaround of unprofitable manufacturing operations. Subsequently as head of global plasma manufacturing, she delivered a globally integrated manufacturing network spanning four countries. As head of CSL’s Australia and New Zealand pharmaceutical business, Mary and her team delivered Australia’s most successful adolescent/adult immunisation program and achieved USFDA (US Food & Drug Administration) approval to manufacture and export CSL’s seasonal and pandemic influenza vaccines. Other Current Directorships: Non-Executive Director of Medical Developments International Former Directorships in Last 3 Years: nil Responsibilities: Non-Executive Director, Chair Remuneration and Nominations Committee Equity interests in Company: nil MICHAEL KOTSANIS Qualifications: BSc, Grad Dip Business, MBus Experience: seasoned executive with over 30 years of strategic and operational experience in the global pharmaceutical industry. Michael is the CEO of Acrux Ltd. He was formerly the Chief Commercial Officer and a Board Member of Synthon Holding BV, a Dutch based international pharmaceutical company with revenue over EUR250 million, a position he held for four years. Prior to Synthon, he served as President, Europe, Middle East and Africa, for Hospira and where he was responsible for delivering over US$500 million in annual revenue. Hospira was the global leader in generic injectable pharmaceuticals prior to its acquisition by Pfizer. Michael joined Hospira following its acquisition of Mayne Pharma in 2007, where he had served as President, Asia Pacific from 2002. He joined Mayne following their acquisition of FH Faulding in 2001, where he held responsibility for commercial activities of the pharmaceutical business in Australia and New Zealand. Michael was formerly a Board Member of the European Generics Association and a Director of the Generic Medicines Industry Association of Australia. Other Current Directorships: Acrux Ltd Former Directorships in Last 3 Years: nil Responsibilities: Non-Executive Director, Member of Audit and Risk Committee and Chair of Remuneration and Nomination Committee Equity interests in Company: 115,000 fully paid ordinary shares IDT Annual Report 2022 8 JANE RYAN (from 28 January 2022) Qualifications: BSc (Hons) PhD, MAICD Experience: Dr Jane Ryan has over 30 years of international experience in the pharmaceutical and biotechnology industries where she has held executive roles in management of research and development programs as well as business development and alliance management. Jane has worked in Australia, the United States and United Kingdom with companies including Peptech, Roche, Cambridge Antibody Technology and Biota Holdings. Throughout her career, she has led many successful fundraising campaigns and licensing initiatives including the winning of a $230 million US Government contract. Former Directorships in Last 3 Years: nil Responsibilities: Non-Executive Director, Member Remuneration and Nomination Committee Equity interests in Company: nil Information about the Secretaries DR DAVID SPARLING (Chief Executive Officer) Qualifications: BVSc (Hons), LLB (Hons), Grad Dip App Cor Gov Experience: Joined IDT in May 2013. Dr Sparling has over 20 years’ experience as a public company executive in CEO and Chairman level roles in ASX and Nasdaq listed companies. David has held multiple senior executive positions in pharmaceuticals, diagnostics, manufacturing, development and biotechnology companies. Dr Sparling is also an experienced and chartered Company Secretary. ANCILA DESAI (Chief Financial Officer) Qualifications: BCom (Hons), MBS, CA, Executive MBA, MAICD Experience: Chartered Accountant with over 15 years of experience in strategic finance, commercial finance including mergers and acquisitions, customer and supplier negotiations, financial modelling and capital management. Ancila possesses broad experience across sectors, including senior finance roles at Metcash, Toll and Boost Juice. Meetings of Directors The following table sets out the number of meetings the Company's Directors held during the year ended 30 June 2022, and the number of meetings attended by each Director. Board Audit and Risk Committee Remuneration and Nomination Committee A 12 12 12 4 7 B 12 12 12 4 7 A 2 2 2 - 1* B 2 2 2 - 1* A 1* 5 5 3 1 B 1* 5 5 3 1 Director Alan Fisher Hugh Burrill Michael Kotsanis Mary Sontrop Jane Ryan A Meetings attended while a director or committee member. B Meetings held while a director or committee member. - Not a member of relevant committee * Meeting attended as a guest 9 IDT Annual Report 2022 Report of the Directors – 30 June 2022 (Including Remuneration Report) Remuneration Report The Directors of the Company are pleased to present the following Remuneration Report which forms part of the Report of Directors prepared in accordance with s300A of the Corporations Act 2001. The Remuneration Report has been audited as required by s308 (3C) of the Corporations Act 2001 and sets out remuneration information for the Company’s key management personnel who have authority and are responsible for planning, directing and controlling the Company’s activities, directly or indirectly, including any Director (whether executive or otherwise) of the Company and the broader remuneration policies and philosophy adopted by the Board. There were no significant changes to remuneration policies during the year. The Remuneration and Nomination Committee advises the Board on remuneration policies and practices generally, making specific recommendations on the remuneration framework and other terms of employment for Executive Directors, Non-Executive Directors and Senior Executives, including incentives, share ownership plans and the relationship between remuneration policy and Company performance. At the last Annual General Meeting (AGM) held on 16 November 2021, the Company received 98.34% support on its 2021 Remuneration Report. Directors’ Remuneration IDT has a small and focussed Board which works closely with Executive management. Fees and payments to Directors reflect the demands made on, and the responsibilities of, the Directors. Directors’ fees are reviewed annually by the Remuneration and Nomination Committee, considering comparative remuneration data for the industry and size of the Company to attract Directors with relevant expertise in our industry as well as Australian capital markets. The Non-Executive Directors’ annual base fee is currently $70,000 and the Chair $120,000, inclusive of superannuation contributions, as required under the Australian superannuation guarantee legislation. Total Non-Executive Directors’ fees are determined within an aggregate Directors’ fee pool limit, periodically referred for approval by shareholders. The current maximum aggregate Directors’ fee pool for Non-Executive Directors is $400,000. Executive Remuneration Remuneration packages are set at levels intended to attract, retain and motivate high quality executives to manage the Company’s operations and are linked to the Company’s financial and operational performance. The Company is committed to adhering to Corporate Governance Standards for remuneration of executives. The framework of executive remuneration and terms of employment of the CEO are reviewed annually by the Remuneration and Nomination Committee. Other executive remuneration is reviewed by the CEO with oversight of the Remuneration and Nomination Committee having regard to performance against personal and Company objectives established at the beginning of the year and relevant comparative information. Independent expert advice is taken where necessary. Remuneration and other key terms of employment for Key Management Personnel (KMP) are formalised in service agreements. Major provisions of these agreements include the following fixed and performance-based elements: • • • • • • base salary plus statutory employer contributions to the superannuation fund of the employee’s choice and statutory leave entitlements; short term performance incentives payable as a cash bonus, based on achievement of both Company-wide and individual performance objectives, established at the beginning of the year. Depending on assessed performance, the CEO may receive up to 50% of his base salary as a short term performance incentive whilst other KMP are eligible in the range of 15-20%. The objectives are measurable S.M.A.R.T. goals that are built into each KMP’s annual Workplan; long term incentives are via invitation to participate in the Company’s Loan Funded Employee Share Plan (ESP); a KMP may be terminated at the Company’s discretion by giving 3 months’ written notice; for employment to be terminated at the discretion of the KMP, 3 months’ written notice is required; and in the case of serious misconduct, KMP forgo termination entitlements other than payment of applicable base salary, statutory leave and superannuation entitlements to the date of termination. IDT Annual Report 2022 10 Remuneration Report continued Share-based Compensation From time to time, Directors, Executive Management and selected staff members may be invited to participate in the Employee Share Plan (ESP) whereby fully paid ordinary shares of the Company are issued at market value and funded by an interest free limited recourse loan from the Company, which is repayable at any time during employment or within 90 days of an employee ceasing employment with the company. Grants within the framework of the ESP are determined by the CEO together with the Remuneration and Nomination Committee and are subject to approval by the Board. Amounts disclosed for emoluments relating to these shares are the assessed fair values at issue date determined using a Black-Scholes pricing model considering the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk-free interest rate for the term of the arrangement. Other staff may be invited to participate in the allocation of up to $1,000 value of shares per year, granted for no consideration and escrowed for three years whilst participants remain employees of the Company. Remuneration Details 2022 Short-term benefits Post- employment benefits Long- term benefits Share-based payments Salary and fees $ Cash bonus $1 Non monetary $ Super- annuation $ Long Service Leave $ Shares granted as compensation $ Non-executive Directors A Fisher, Chair H Burrill M Kotsanis J Ryan2 M Sontrop3 109,091 63,636 63,636 27,020 24,215 Sub-total Non-executive Directors 287,598 Other key management personnel - - - - - - - - - - - - 10,909 6,364 6,364 2,702 2,421 28,760 - - - - - - - - - -- - - Total $ 120,000 70,000 70,000 29,722 26,636 316,358 D Sparling, Chief Executive Officer 354,750 163,325 27,500 10,526 104,200 660,301 A Desai, Chief Financial Officer 240,000 46,560 25,106 1,296 72,000 384,962 P McDonald, Head of Quality and Development 200,000 17,783 23,299 C Kagiaros, Head of People and Culture4 175,000 20,000 17,500 704 824 60,000 321,786 53,600 246,924 J Sosic, Vice President Operations, Supply and Infrastructure5 149,432 36,080 1,969 10,907 198,388 Sub-total executive management 1,119,182 263,748 25,268 101,013 13,350 289,800 1,812,361 Total key management personnel compensation 1,406,780 263,748 25,268 129,773 13,350 289,800 2,128,719 1 Short term incentive bonuses were paid on 17 August 2021 for performance in the FY21 financial year. 2 Ms Ryan was appointed Non-executive director on 28 January 2022. 3 Ms Sontrop was Non-executive director until 16 November 2021. 4 Mr Kagiaros was appointed Head of People and Culture on 1 September 2021. 5 Mr Sosic was Vice President Operations, Supply and Infrastructure until 29 November 2021. 11 IDT Annual Report 2022 Report of the Directors – 30 June 2022 (Including Remuneration Report) Summary of Short Term Incentive Bonuses paid in 2022 in relation to achievement of objectives established at the beginning of the previous financial year Potential of fixed remuneration Achievement of objectives as set at the start of the year D Sparling A Desai P McDonald C Kagiaros1 Remuneration Details 2021 50% 20% 20% 20% Short-term benefits Post- employment benefits Long- term benefits Share-based payments Salary and fees $ Cash bonus $2 Non monetary $ Super- annuation $ Long Service Leave $ Shares granted as compensation $ Non-executive Directors A Fisher, Chair H Burrill M Sontrop M Kotsanis 109,589 63,927 63,927 63,927 Sub-total Non-executive Directors 301,370 Other key management personnel - - - - - D Sparling, Chief Executive Officer 355,513 104,875 A Desai, Chief Financial Officer 240,000 1,000 - - - - - - - 10,411 6,073 6,073 6,073 28,630 - - - - - - - - - - 24,999 10,109 105,000 600,496 21,694 639 69,300 332,633 - 40% 39.5% 36.5% Total $ 120,000 70,000 70,000 70,000 330,000 202,328 37,190 4,726 19,221 3,889 69,300 336,654 J Sosic, Vice President Operations, Supply and Infrastructure P McDonald, Head of Quality and Development3 91,026 - 5,825 D Broadhurst, Head of Quality4 102,687 17,850 D Savaglio, Vice President People and Change5 11,411 12,426 - - 8,647 8,075 960 46 69,300 174,844 - - - 128,612 - 24,797 Sub-total executive management 1,002,965 173,341 10,551 83,596 14,683 312,900 1,598,036 Total key management personnel compensation 1,304,335 173,341 10,551 112,226 14,683 312,900 1,928,036 1 Mr Kagiaros’ bonus was prorated because he was appointed in the role for only part of the financial year ended 30 June 2022. 2 Short term incentive bonuses were paid on 01 September 2020 for performance in the FY20 financial year. 3 Mr McDonald was appointed Head of Quality and Development on 18 January 2021. 4 Mr Broadhurst was Head of Quality until 31 December 2020. 5 Ms Savaglio was Vice President People and Culture until 31 July 2020. IDT Annual Report 2022 12 Summary of Short Term Incentive Bonuses paid in 2021 in relation to achievement of objectives established at the beginning of the previous financial year D Sparling A Desai J Sosic P McDonald1 Potential of fixed remuneration Achievement of objectives as set at the start of the year 50% 20% 20% 20% 94% 97% 88% 94% Other Transactions with Key Management Personnel No other transactions or loans were provided to key management personnel other than interest free limited recourse loans provided in association with the Loan Shares granted within the framework of the Employee Share Plan. Key Management Personnel Holdings of Ordinary Shares The number of ordinary shares in the Company held during the financial year by Directors and each of the specified executives are set out below. All shares issued to KMP during the period were made within the provisions of the ESP, funded by an interest free limited recourse loan from the Company. No conditions are required to be met by KMP in order to be eligible to receive these shares and they are granted at the Board’s discretion. 2022 Non-executive Directors M Kotsanis M Sontrop2 Other key management personnel D Sparling A Desai P McDonald C Kagiaros J Sosic2 Total Holdings Balance at start of year Shares issued to employees Other changes during the year Balance at the end of the year 115,000 275,000 2,936,621 490,000 483,125 150,000 1,546,292 5,996,038 - - 521,000 360,000 300,000 268,000 - - - 115,000 - (1,426,621) 2,031,000 (160,000) 81,981 - 690,000 865,106 418,000 - 1,449,000 (1,504,640) 4,119,106 2022 Tranche Grant Date D Sparling 3-Mar-22 A Desai 3-Mar-22 P McDonald 3-Mar-22 C Kagiaros 3-Mar-22 Total Share price per agreement ($) 0.200 0.200 0.200 0.200 Issue price ($) 0.200 0.200 0.200 0.200 Share Price ($) 0.200 0.200 0.200 0.200 Number of loan backed shares Expected repayment date Fair value of one share based payment Fair Value 521,000 3-Mar-27 0.1305 67,990.50 360,000 3-Mar-27 0.1305 46,980.00 300,000 3-Mar-27 0.1305 39,150.00 268,000 3-Mar-27 0.1305 34,974.00 1,449,000 189,094.50 1 Mr McDonalds’s bonus was prorated because he was employed by IDT for only part of the financial year ended 30 June 2021. 2 Ms Sontrop and Mr Sosic were both not in office at the end of the financial year and accordingly their shareholdings as at 30 June 2022 is not disclosed. 13 IDT Annual Report 2022 Report of the Directors – 30 June 2022 (Including Remuneration Report) 2021 Non-executive Directors M Kotsanis M Sontrop Other key management personnel D Sparling1 A Desai J Sosic P McDonald D Broadhurst2 D Savaglio2 Total Holdings Company performance Balance at start of year Shares issued Other changes during the year Balance at the end of the year 50,000 275,000 2,660,687 - 1,216,292 - 475,000 940,431 - - 500,000 330,000 330,000 330,000 - - 65,000 - (224,066) 160,000 - 153,125 - - 115,000 275,000 2,936,621 490,000 1,546,292 483,125 - - 5,617,410 1,490,000 154,059 5,846,038 The table below sets out summary information about the Company’s earnings and movements in shareholder wealth for the five years ended 30 June 2022. Revenue Net profit / (loss) before tax3 Net profit / (loss) after tax Share price at start of year Share price at end of year Final dividend Basic earnings per share Diluted earnings per share 2022 $000 12,130 (1,876) (1,160) $0.33 $0.12 - (0.5¢) (0.5¢) 2021 $000 15,989 966 2,103 $0.17 $0.33 - 0.9¢ 0.9¢ 2020 $000 14,169 (1,981) (1,919) $0.17 $0.17 - (0.8¢) (0.8¢) 2019 $000 12,130 (6,118) (6,083) $0.10 $0.17 - (2.5¢) (2.5¢) 2018 $000 13,300 (18,575) (16,979) $0.11 $0.10 - (6.9¢) (6.9¢) # Shares on issue, 30 June 241,021,797 239,860,170 239,313,032 236,359,103 244,466,732 Market capitalisation, 30 June $27.72m $77.95m $39.49m $39.00m $23.47m 1 As the underlying loans on the ESP shares which had been issued to D Sparling were not repaid on 9 October 2020, the shares were cancelled following expiration of the Limited Recourse Loan Agreement. 2 Mr Broadhurst and Ms Savaglio were both not in office at the end of the financial year and accordingly their shareholding as at 30 June 2021 is not disclosed. 3 No asset impairment was recorded for the year ended 30 June 2019, but for the year ended 30 June 2018 the net profit / (loss) before tax includes asset impairment adjustments of $14.1 million. IDT Annual Report 2022 14 Non-Audit Services Details of amounts paid or payable to the auditor for services provided during the year are outlined in note 21 to the financial statements. The Company may decide to engage the external auditor on assignments additional to their statutory audit duties where the external auditor’s expertise and experience with the Company is important. Directors have considered the position and are satisfied that any provision of non-audit services is compatible with the general standard of independence for external auditors imposed by the Corporations Act 2001. Auditor’s independence declaration A copy of the auditor’s independence declaration as required under Section 307C of the Corporations Act 2001 is included after this report. Proceedings on Behalf of the Company The Corporations Act 2001 allows specified persons to bring, or intervene in, proceedings on behalf of the Company. No proceedings have been brought, or intervened in, on behalf of the Company with leave of the court under Section 237 of the Corporations Act 2001. Rounding of Amounts The Company is of a kind referred to in ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191, dated 24 March 2016, issued by the Australian Securities and Investments Commission relating to the “rounding off” of amounts in the Report of Directors. Amounts in the Report of Directors have been rounded off in accordance with the Class Order to the nearest thousand dollars, or in certain cases, to the nearest dollar. Directors Resolution This report is made in accordance with a resolution of the Directors made pursuant to s298(2) of the Corporations Act 2001. Mr Alan Fisher Chair 30 August 2022 15 IDT Annual Report 2022 Report of the Directors – 30 June 2022 (Including Remuneration Report) Auditors Independence Declaration Grant Thornton Audit Pty Ltd Level 22 Tower 5 Collins Square 727 Collins Street Melbourne VIC 3008 GPO Box 4736 Melbourne VIC 3001 T +61 3 8320 2222 Auditor’s Independence Declaration To the Directors of IDT Australia Limited In accordance with the requirements of section 307C of the Corporations Act 2001, as lead auditor for the audit IDT Australia Limited for the year ended 30 June 2022, 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, 30 August 2022 www.grantthornton.com.au ACN-130 913 594 Grant Thornton Audit Pty Ltd ACN 130 913 594 a subsidiary or related entity of Grant Thornton Australia Limited ABN 41 127 556 389 ACN 127 556 389. ‘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 Limited 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 ACN 127 556 389 and its Australian subsidiaries and related entities. Liability limited by a scheme approved under Professional Standards Legislation. IDT Annual Report 2022 16 Statement of Profit or Loss and Other Comprehensive Income Revenue from contracts with customers Other income Raw materials Employee benefits expense Depreciation and amortisation expenses Utilities and maintenance expenses Professional fess Other expenses Profit / (Loss) before income tax Income tax benefit Total Profit / (Loss) for the year Other comprehensive income, net of tax: Items that will not be reclassified subsequently to profit or loss Property revaluation Total comprehensive Income / (Loss) for the year Basic earnings per share Diluted earnings per share Note 3 5 27 27 2022 $000 12,105 25 1,440 6,309 1,536 3,578 372 771 (1,876) 716 (1,160) - (1,160) (0.5¢) (0.5¢) 2021 $000 15,989 937 2,635 6,697 1,780 2,933 500 1,415 966 1,137 2,103 1,733 3,837 0.9¢ 0.9¢ The above Statement of Profit or Loss and Other Comprehensive Income should be read in conjunction with the accompanying notes. 17 IDT Annual Report 2022 Statement of Financial Position ASSETS CURRENT ASSETS Cash and cash equivalents Trade and other receivables Contract asset Current tax asset Inventories TOTAL CURRENT ASSETS NON-CURRENT ASSETS Property, plant and equipment Intangible assets Deferred tax assets TOTAL NON-CURRENT ASSETS TOTAL ASSETS LIABILITIES CURRENT LIABILITIES Trade and other payables Borrowings Contract liabilities Provisions TOTAL CURRENT LIABILITIES NON CURRENT LIABILITIES Provisions TOTAL NON-CURRENT LIABILITIES TOTAL LIABILITIES NET ASSETS EQUITY Contributed equity Reserves Accumulated losses TOTAL EQUITY The above Statement of Financial Position should be read in conjunction with the accompanying notes. Note 2022 $000 2021 $000 6 7 8 9 10 11 12 13 14 15 16 16 17 18 19 9,214 2,784 49 716 1,102 13,865 6,928 9,357 - 528 453 17,266 16,215 16,743 - - 16,215 30,080 120 - 16,863 34,129 1,253 4,413 881 154 490 766 254 636 2,778 6,069 314 314 3,092 26,988 51,189 8,499 (32,700) 26,988 445 445 6,514 27,615 51,189 7,966 (31,540) 27,615 IDT Annual Report 2022 18 Statement of Changes in Equity Contributed Capital $000 Asset Revaluation Reserve $000 Share-based Payment Reserve $000 Accumulated Losses $000 Total Equity $000 51,189 2,164 3,588 (33,643) 23,298 Balance at 1 July 2020 Profit/(Loss) for the year Share based payments expense Limited recourse loans repaid Other comprehensive income for the year, net of tax Balance at 30 June 2021 51,189 - - - - - - - 1,733 3,897 - 279 202 - 2,103 2,103 - - - 279 202 1,733 4,069 (31,540) 27,615 Balance at 1 July 2021 Profit/(Loss) for the year Share based payments expense Limited recourse loans repaid Other comprehensive income for the year, net of tax 51,189 3,897 4,069 (31,540) 27,615 - - - - - - - - - 218 315 - (1,160) (1,160) - - - 218 315 - Balance at 30 June 2022 51,189 3,897 4,602 (32,700) 26,988 The above Statement of Changes in Equity should be read in conjunction with the accompanying notes. 19 IDT Annual Report 2022 Statement of Cash Flows Note 2022 $000 2021 $000 CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers (inclusive of goods and services tax) Payments to suppliers and employees (inclusive of goods and services tax) Interest and other costs of finance paid Income tax refund received Interest received 16,544 (14,189) 2,355 (22) 528 - NET CASH INFLOW / (OUTFLOW) FROM OPERATING ACTIVITIES 26 2,861 14,756 (14,433) 323 (22) 40 29 370 CASH FLOWS FROM INVESTING ACTIVITIES Payments for property, plant and equipment Proceeds from sale of property, plant and equipment Payments for development costs (912) (526) - - - - NET CASH INFLOW / (OUTFLOW) FROM INVESTING ACTIVITIES (912) (526) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issue of equity Payments associated with share buy backs Proceeds from borrowings Repayment of borrowings Repayment of finance lease NET CASH INFLOW / (OUTFLOW) FROM FINANCING ACTIVITIES NET INCREASE / (DECREASE) IN CASH AND CASH EQUIVALENTS HELD Cash and cash equivalents at the beginning of the financial year CASH AND CASH EQUIVALENTS AT THE END OF THE FINANCIAL YEAR 6 315 - 1,354 (1,332) - 337 2,286 6,928 9,214 202 - 1,089 (1,067) - 224 68 6,860 6,928 The above Statement of Cash Flows should be read in conjunction with the accompanying notes. IDT Annual Report 2022 20 Notes To and Forming Part of the Financial Statements 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The principal accounting policies adopted in the preparation of the financial report are outlined in this section and have been consistently applied to all the periods presented, unless otherwise stated. 1.1 Statement of Compliance These financial statements are general purpose financial statements prepared in accordance with the Corporations Act 2001, Australian Accounting Standards and Interpretations, and comply with International Financial Reporting Standards and other requirements of the law. For the purposes of preparing the financial statements, the Company is a for-profit entity. 1.2 Basis of Preparation These financial statements have been prepared under the basis of historical cost, except for certain financial instruments, intangible assets and land and buildings that are measured at fair value. Historical cost is generally based on fair values of the consideration given in exchange for goods and services, being the price that would be received in an orderly transaction at the measurement date, regardless of whether that price is directly observable or estimated using another technique. A fair value measurement of a non-financial asset considers the Company’s ability to generate economic benefits through use of the asset in its highest or best use or by selling it through an orderly transaction. In estimating the fair value of an asset or liability, the Company considers the characteristics market participants would take into account when pricing the asset or liability at measurement date. Fair value has been used in these financial statements except for transactions within the scope of AASB 2 Share Based Payments, AASB 16 Leases and measurements that have some similarities to fair value but are not fair value, such as net realisable value in AASB 102 Inventories or fair value less cost to dispose in AASB 136 Impairment of Assets. For financial reporting purposes fair value measurements are categorised into Level 1, 2 or 3 based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, described as follows: • • Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date; Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly; and • Level 3 inputs are unobservable inputs for the asset or liability. All amounts are presented in Australian dollars unless otherwise noted. 1.3 Going concern basis For the year ended 30 June 2022, the Company incurred a loss after tax of $1.2 million and held cash reserves of $9.2 million, which is sufficient to fund planned strategic initiatives, capital and other development projects for at least the 12 month period from the date of this report. The Company is not reliant on renewal of bank facilities in July 2023 from a going concern perspective. Having carefully assessed the Company’s budget and forward forecasts, including cash flow forecasts which reflect forward sales orders received from customers as well as available funding facilities, the Directors believe the Company will continue to operate as a going concern and therefore it is appropriate to prepare the financial statements on a going concern basis contemplating continuity of normal business activities and the realisation of assets and settlement of liabilities in the ordinary course of business. 21 IDT Annual Report 2022 1.4 Impairment of Non-Current Assets For all except goodwill and indefinite life intangibles, non-financial assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying value exceeds its recoverable amount. Recoverable amount is the higher of an asset’s fair value less costs of disposal and value-in-use. The value-in-use is the based on the market capitalisation of the company. 1.5 New or amended Accounting Standards and Interpretations adopted The Company has adopted all of the new or amended Accounting Standards and Interpretations issued by the Australian Accounting Standards Boards (‘AASB’) that are mandatory for the current reporting period. Any new or amended Accounting Standards or Interpretations that are not mandatory have not yet been adopted. 1.6 Foreign Currency Translation Transactions in currencies other than the Company’s functional currency are recognised at the rates of exchange prevailing at the date of the transaction. At the end of each reporting period, monetary items denominated in foreign currencies are translated at the rates prevailing at that date. Foreign exchange gains and losses resulting from settlement of such transactions and translation at period end exchange rates of foreign currency monetary assets and liabilities are recognised in the Statement of Profit or Loss and Other Comprehensive Income. 1.7 Critical Accounting Estimates and Judgements Preparation of these financial statements requires the Company to make estimates and judgements that may affect the reported values of assets, liabilities, revenues and expenses. Management continually evaluates estimates and judgements based on historical experience and other factors it believes to be reasonable under the circumstances, including expectations of future events that may have a financial impact on the entity. In preparing the financial statements, management has considered the impact of COVID-19 on the various balances, including the carrying values of trade receivables and accounting estimates for which cash flow forecasts are required to be prepared such as the recoverable amount of non-current assets. The following critical judgements have been made in application of the Company’s accounting policies and have the most significant effect on amounts recognised in the Company’s financial statements. Valuation of non-current assets (being property, plant and equipment and finite life intangibles assets) The Company applies AASB 136 Impairment of Assets to test the carrying value of non-current assets and impairment. Judgement is applied to make estimates of future cash flows to support assessment of the appropriateness of the carrying value. Criteria considered include anticipated future sales prices, market size and expected share, future exchange rates and the discount rate. In making these judgements, the Company makes reasonable and supportable assumptions to represent management’s estimate of the conditions that will exist over the useful life of the asset. Amongst other factors the Company evaluates technical feasibility, the cost to complete the project, existence of an attractive commercial market, potential launch dates and sales expectations to conclude on the value of expected future economic benefits which would be expected to flow to the entity in order to calculate discounted cash flows. Balanced estimates of these criteria have been made but key sensitivities could include more competitive market conditions which could result in higher than expected discounting required to achieve targeted market share. At any time should the estimated value of future economic benefits relative to the asset’s carrying value be considered insufficient relative to net book value, the Company would recognise impairment in accordance with AASB 136 Impairment of Assets. IDT Annual Report 2022 22 Notes To and Forming Part of the Financial Statements continued Income taxes Deferred tax assets are recognised for deductible temporary differences and tax losses as management considers that it is probable that future taxable profits will be available to utilise those temporary differences. The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the asset to be recovered. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Company expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities. Provision for impairment of inventories The provision for impairment of inventories assessment requires a degree of estimation and judgement. The level of the provision is assessed by taking into account the usage of each item, product expiry date and other factors that affect inventory obsolescence. Share-based payments The issuance of shares to employees are at market rates and funded by interest-free limited recourse loans to the Company. The fair values of such arrangements utilises the Binomial method and therefore includes elements of judgment and estimate in determining certain input factors such as an estimate of share price volatility. 1.8 Rounding of Amounts The Company is of a kind referred to in ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191, dated 24 March 2016, issued by the Australian Securities and Investments Commission, relating to the "rounding off" of amounts in the financial statements. Amounts in the financial statements have been rounded off in accordance with that Class Order to the nearest thousand dollars, or in certain cases, to the nearest dollar. 1.9 Reclassification of Contract Assets The Company classifies billable work-in-progress not yet invoiced as Contract Assets. The amount at 30 June 2022 is $49,383 (2021: nil) and has been restated from Inventory to Contract Assets in the Statement of Financial Position. This does not impact on the Profit or Cash flows. 2 SEGMENT INFORMATION Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Chief Executive Officer of IDT Australia Limited. The Company has identified one reportable segment, that is: Development and Manufacture of Active Pharmaceutical Ingredients (API) and Finished Dose Forms (FDF). The segment details are therefore fully reflected in the body of the financial statements. 3 REVENUE Sale of goods transferred at a point in time Service revenue recognised over time Total revenue from contracts with customers 2022 $000 - 12,105 12,105 2021 $000 - 16,027 16,027 23 IDT Annual Report 2022 Key Accounting Policies Accounting policy for revenue from contracts with customers Revenue arises mainly from development and manufacturing of Active Pharmaceutical Ingredients (API) and Finished Dose Forms (FDF). To determine whether to recognise revenue, the Company follows a 5-step process: 1 2 Identifying the contract with a customer Identifying the performance obligations 3 Determining the transaction price 4 Allocating the transaction price to the performance obligations 5 Recognising revenue when/as performance obligations are satisfied. Revenue is recognised either at a point in time or over time, when the Company satisfies performance obligations by transferring the promised goods or services to its customers. The Company recognises contract liabilities for consideration received in respect to unsatisfied performance obligations and reports these amounts as other liabilities in the statement of financial position. Similarly, if the Company satisfies a performance obligation before it receives the consideration, the Company recognises either a contract asset or a receivable in its statement of financial position, depending on whether something other than the passage of time is required before the consideration is due. The Company has two key types of arrangements with Clients; 1) Fee for Service Revenue generated in accordance with a Scope of Works agreed with clients before project commencement and recognised over the term of the project as specific performance obligations are completed (i.e. over time), 2) Manufacturing activities, particularly manufacture of Active Pharmaceutical Ingredients, conducted based on supply agreements and purchase orders received from clients. Revenue from these activities is recognised after product has been released by Quality Assurance and shipped in accordance with client instructions (i.e. point in time). It must also be probable that the economic benefits of the transaction will flow to the Company and the amount of revenue can be measured reliably. 4 EXPENSES Profit / (Loss) from ordinary activities before income tax expense includes the following expenses: Cost of goods sold Depreciation of property, plant and equipment Amortisation - Right of use asset - Development costs Repairs and maintenance Impairment of intangible assets Net foreign currency loss 2022 $000 760 1,416 - 120 1,385 - 34 2021 $000 3,853 1,650 - 131 1,084 - 35 IDT Annual Report 2022 24 Notes To and Forming Part of the Financial Statements continued 5 INCOME TAX (a) Income Tax Benefit Current tax Deferred tax (Under) / over recognised current tax asset in prior period (b) Numerical reconciliation of income tax expense to prima facie tax payable Profit / (Loss) from ordinary activities before income tax expense Prima facie tax (expense) / benefit at 26% (2021: 26%) Tax effect of amounts which are not deductible (taxable) in calculating taxable income: Non-deductible expenses Research and development tax concessions Employee share issue Impairment losses Cash flow boost (Under) / Over recognised Current tax asset in prior period Deferred tax losses not brought to account Deferred tax asset not previously brought to account Prior year losses not brought to account Income tax benefit / (expense) attributable to operating loss Key Accounting Policies 2022 $000 716 - - 716 (1876) 488 (51) 305 - - - 742 - (26) - - 716 2021 $000 528 609 - 1,137 966 (251) - 212 (72) - 10 (101) - - 592 646 1,137 The income tax expense or benefit for the period is the tax payable / receivable on the current period’s taxable income / (loss) based on the notional income tax rate adjusted by changes in deferred tax assets and liabilities attributable to temporary differences between the tax bases of assets and liabilities and their carrying amounts in the financial statements, and unused tax losses. Current and deferred tax balances attributable to amounts recognised directly in equity are also recognised directly in equity. The Company incurs eligible expenditure which supports a R&D Tax Incentive Claim, refundable by the Australian Government at 43.5% for entities with a tax loss and revenues less than $20 million. There are no unfulfilled conditions or other contingencies in relation to this incentive. This receivable balance is accounted for as a current tax asset and income tax expense / (benefit). 25 IDT Annual Report 2022 6 CASH AND CASH EQUIVALENTS Cash at bank and on hand Key Accounting Policies 2022 $000 9,214 2021 $000 6,928 For purposes of the statement of cash flows, cash and cash equivalents include bank deposits which are readily convertible to cash on hand and which are used in the cash management function on a day-to-day basis. 7 TRADE AND OTHER RECEIVABLES Trade receivables Less: Provision for expected credit losses Other receivables Prepayments Total trade and other receivables 2022 $000 1,459 - 1,459 82 1,243 2,784 2021 $000 8,151 (190) 7,961 164 1,232 9,357 The average collection period for invoices is 30-60 days from invoice date and interest is not charged on overdue balances. Age of receivables which are past due: 0-30 days 30-60 days 60-90 days 90+ days 1,404 55 - - 1,459 6,929 22 1,011 190 8,151 Estimated credit loss for aging less than 90 days is deemed immaterial. Key Accounting Policies Trade receivables represent amounts receivable relating to the provision of goods and services pursuant to a valid purchase order or contract for product or services. Receivables are recognised at the full value receivable and do not require re- measurement because they are due for settlement within 60 days of invoice date. IDT Annual Report 2022 26 Notes To and Forming Part of the Financial Statements continued 8 CURRENT TAX ASSET Income tax receivable Key Accounting Policies 2022 $000 716 2021 $000 528 The Company incurs eligible expenditure to support a R&D Tax Incentive Claim. The estimated amount of claim is recognised as a current tax asset and income tax expense / (benefit) in the year that the R&D was incurred. 9 INVENTORIES Raw materials - at cost Finished goods Less: Provision for stock obsolescence Total inventories Key Accounting Policies 2022 $000 1,293 197 (388) 1,102 2021 $000 907 - (454) 453 Inventories are valued at the lower of cost and net realisable value with the cost determined on a first-in-first-out basis. Net realisable value reflects the estimated selling price in the ordinary course of business less the estimated costs of completion and costs necessary to make the sale. Subsequent to initial measurement, balances held in inventory are reviewed at least annually and a provision raised where future use is no longer considered probable, principally due to reasons of obsolescence or product dating. 10 PROPERTY, PLANT AND EQUIPMENT 2022 $000 4,380 7,180 (195) 2021 $000 4,380 7,180 (15) 11,365 11,545 43,072 (38,520) 298 4,850 4,850 16,215 42,274 (37,284) 208 5,198 5,198 16,743 Land and Buildings Freehold land (at fair value) Buildings (at fair value) Less: Accumulated depreciation Total Land and Buildings Plant and Equipment Plant and equipment – at cost Less: Accumulated depreciation Capital Work in Progress Total Plant & Equipment Total Property, Plant and Equipment 27 IDT Annual Report 2022 Reconciliation of the carrying amounts of each class of property, plant and equipment at the beginning and end of the current financial year are set out below. 2022 Freehold Land $000 Buildings $000 Plant & Equipment $000 Total $000 Carrying amount at start of year 4,380 7,165 5,198 16,743 Revaluation Additions Disposals Depreciation expense - - - - Carrying amount at end of year 4,380 - - - (180) 6,985 2021 Carrying amount at start of year Revaluation Additions Disposals Depreciation expense Freehold Land $000 Buildings $000 4,380 - - - - 4,959 2,342 - - (136) 7,165 - 888 - (1,236) 4,850 Plant & Equipment $000 6,187 - 526 - (1,515) 5,198 - 888 - (1,416) 16,215 Total $000 15,526 2,342 526 - (1,651) 16,743 Carrying amount at end of year 4,380 Key Accounting Policies Freehold land and buildings are shown at revalued amounts being the fair value (level 3) at date of revaluation less subsequent depreciation for buildings. The most recent fair value measurement by independent valuers was 1 June 2021. The valuation conforms to Australian Valuation Standards and was calculated based on the fair value of the land and depreciated replacement cost of the buildings. As revaluations are performed regularly, carrying amounts do not differ materially from those that would be determined using fair values at the end of each reporting period. The revaluation increase arising on the revaluation of land and buildings is accumulated in the revaluation reserve within equity. Decreases that offset previous increases of the same asset are recognised against revaluation reserve directly in equity; all other decreases are to be recognised in profit or loss. Plant and equipment, including Right of Use Assets, are measured at cost less accumulated depreciation and any impairment adjustments which may have been identified. The cost of non-current assets constructed or developed by the Company includes the costs of all materials used in construction, direct labour on the project and an appropriate proportion of directly attributable variable and fixed overheads. AASB 16 Leases provides the lessee with the choice of whether to recognise short-term or low value leases on the balance sheet. Under the Company’s policy, photocopiers and printers are treated as short term or low value leases, which qualify for the low value lease exemption. IDT Annual Report 2022 28 Notes To and Forming Part of the Financial Statements continued Depreciation is recognised so as to write off the cost or valuation of assets, other than land, over their estimated useful lives, net of their residual values, using the straight-line method, as follows: • Buildings 40 years • Plant & Equipment 3-15 years Estimated useful lives, residual values and depreciation methods are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis. Plant is regularly overhauled through an ongoing cyclical maintenance program. Routine operating maintenance, repair costs and minor renewals are charged as expenses as incurred. An item of property, plant and equipment is derecognised upon disposal or where no future economic benefits are expected to arise from continued use. Any gain or loss arising on disposal or retirement is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in the profit or loss. Impairment of property plant and equipment For all except goodwill and indefinite life intangible assets, non-financial assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying value exceeds its recoverable amount. Recoverable amount is the higher of an asset’s fair value less costs of disposal and value-in-use. The value-in-use is the based on the market capitalisation of the company. The Company is considered as one cash-generating unit (CGU) for impairment testing purposes (there are nil indefinite life intangible assets). The Company has determined that its market capitalisation is greater than the value of its assets at 30 June 2022 and accordingly no impairment charge for assets has been recognised. 11 INTANGIBLE ASSETS Development expenditure capitalised Less: Accumulated amortisation development costs Total intangible assets Reconciliation of Intangible Assets Carrying amount at start of year Development expenditure capitalised during the year Amortisation of development costs during the year Carrying amount at end of year 2022 $000 - - - 120 - (120) - 2021 $000 271 (151) 120 248 - (128) 120 29 IDT Annual Report 2022 Key Accounting Policies a) Internally generated Intangible Assets Research expenditure is recognised as an expense as incurred. An internally generated intangible asset arising from development is recognised as a non-current asset where all of the following conditions can be demonstrated: • • • • • technical feasibility of completing the project that it will be available for use or sale; intention to complete the intangible asset and use it or sell it; the intangible asset will generate probable future economic benefits for the Company; availability of adequate technical, financial and other resources to complete the development; and the ability to measure reliably the expenditure attributable to the development of the asset. The amount initially recognised for internally generated intangible assets is the sum of the expenditure incurred from the date the asset first met the recognition criteria listed above. Development expenditures that do not meet all of these criteria are recognised in profit or loss in the period in which incurred. Development costs previously recognised as an expense may not be recognised as an asset in a subsequent period. Subsequent to initial recognition, internally generated intangible assets are reported at cost less accumulated amortisation from the date the intangible asset first meets the recognition criteria. The estimated useful life and amortisation method are reviewed at the end of each reporting period, with the effect of any change accounted for on a prospective basis. b) Impairment of Intangible Assets Assets with finite lives are subject to amortisation and are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment or more frequently if events or changes in circumstances indicate that they may be impaired. An impairment loss is recognised in the statement of comprehensive income for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purpose of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash generating units), other than goodwill that is monitored at the segment level. Impairment losses recognised in respect of cash generating units are allocated first to reduce the carrying amount of any goodwill allocated to cash generating units, and then to reduce the carrying amount of the other assets in the unit on a pro-rata basis. IDT Annual Report 2022 30 Notes To and Forming Part of the Financial Statements continued 12 DEFERRED TAX ASSET / (LIABILITY) Deferred Liability The balance comprises temporary differences attributable to: Depreciation Asset revaluation Prepayments Development costs Movements Opening balance at 1 July Increase/(Reduction) current tax expense Restating opening balance of DTL due to reduced tax rate Current year increase/(decrease) not recognised 2022 $000 1,680 1,680 - - - 2021 $000 1,778 1,138 609 - 31 1,680 1,778 1,778 (98) - - 1,246 600 (68) - Closing balance at 30 June 1,680 1,778 Deferred Tax Assets 1,680 1,778 The balance comprises temporary differences attributable to: Employee entitlements, accruals and other Tax losses Movements Opening balance at 1 July Increase/(Reduction) current tax expense Unused tax losses recognised / (de-recognised) Restating opening balance of DTA due to reduced tax rate Charged/(Credited) to equity Closing balance at 30 June Net Deferred Assets / (Liability) Deferred tax liability expected to settle within 12 months Deferred tax liability expected to settle more than 12 months Deferred tax asset expected to be recovered within 12 months Deferred tax asset expected to be recovered after more than 12 months 405 1,275 1,680 1,778 (98) - - - 597 1,181 1,778 1,246 7 592 (67) - 1,680 1,778 - 1,680 1,680 - 1,680 1,680 - 1,778 1,778 - 1,778 1,778 31 IDT Annual Report 2022 Key Accounting Policies Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to apply when the assets are recovered or liabilities settled. The relevant tax rate is applied to the cumulative amounts of deductible and taxable temporary differences to measure the deferred tax asset or liability. An exception is made for certain temporary differences arising from the initial recognition of an asset or a liability. No deferred tax asset or liability is recognised in relation to temporary differences if they arose in a transaction, other than a business combination, that at the time of the transaction did not affect either accounting profit or taxable profit or loss. Deferred tax assets will only be recognised for deductible temporary differences and unused tax losses if it is probable that future taxable amounts will be available to utilise those temporary differences and losses. In addition to the above deferred tax assets recognised, the Company has further unrecognised tax losses relating to prior period tax losses. As at 30 June 2022 the Company has gross carried forward tax losses amounting to $18m (2021: $17.3m) and a further $12.3m (2021: $12.3m) capital losses which have not been recognised as assets in these financial statements. 13 TRADE AND OTHER PAYABLES Trade payables Other payables Total trade and other payables 14 BORROWINGS Current Premium funding Total current borrowings Non Current Lease liabilities Total non current borrowings 2022 $000 550 703 1,253 881 881 - - 2021 $000 2,582 1,831 4,413 766 766 - - The company utilises a Premium Funding facility to pay its annual Insurance Premium. This facility has a 10 month term with an interest rate applicable of 1.8%. IDT Annual Report 2022 32 Notes To and Forming Part of the Financial Statements continued 15 CONTRACT LIABILITIES Current Client prepayments Contractual milestones received Total contract liabilities Non Current Contractual milestones received Reconciliation Reconciliation of the written down value at the beginning and end of the current and previous financial year are set out below: Opening balance Payments received in advance Transfer to revenue - included in the opening balance Transfer to revenue - performance obligations satisfied in previous periods Ending balance 2022 $000 2021 $000 154 - 154 254 - 254 - - 254 332 (643) 211 154 39 816 (601) - 254 Unsatisfied performance obligations The aggregate amount of the transaction price allocated to the performance obligations that are unsatisfied at the end of the reporting period was $153,823 as at 30 June 2022 ($253,756 as at 30 June 2021) and is expected to be recognised as revenue in future periods as follows: Within 6 months 6 to 12 months 12 to 18 months Key Accounting Policies 2022 $000 154 - - 154 2021 $000 254 - - 254 Fee for Service Revenue generated in accordance with a Scope of Works agreed with clients before project commencement and recognised over the term of the project as specific performance obligations are completed (i.e. over time). In some cases the client may pay for services before the work is conducted and this revenue is deferred until earned. Contractual milestones have been received in accordance with the Company’s long-term distribution agreements. As such milestones relate to the performance of the contract, revenue is recognised over the term of the distribution contract. 33 IDT Annual Report 2022 16 PROVISIONS Current Employee entitlements Non Current Employee entitlements Key Accounting Policies 2022 $000 2021 $000 490 636 314 445 The provision for employee entitlements represents annual leave, vested long service leave and an estimate of the future value of long service leave which has not yet vested but is expected to be payable to employees. A liability is recognised for benefits accruing to employees in respect of wages and salaries, annual leave and long service leave when it is probable that settlement will be required and they can be reliably measured. Liabilities recognised in respect of short term employee benefits are classified as current liabilities and measured at their nominal values using the remuneration rate expected to apply at the time of settlement. Liabilities recognised in respect of long-term employee benefits are classified as non-current liabilities and measured at the present value of the estimated future outflows to be made by the Company in respect of services provided by employees up to reporting date. 17 CONTRIBUTED EQUITY 2022 Shares 2021 Shares 2022 $000 2021 $000 Paid up capital - Ordinary shares, fully paid 241,021,797 239,860,170 51,189 51,189 Movements in ordinary share capital of the Company during the past two years were as follows: Date Details 1 July 2020 Employee share plan issues Forfeited employee shares Shares $000 2,010,506 (1,463,368) - - 30 June 2021 Closing balance 239,860,170 51,189 1 July 2021 Employee share plan issues Forfeited employee shares 1,601,630 (440,003) - - 30 June 2022 Closing balance 241,021,797 51,189 During the year 1,601,630 ordinary shares (2021: 2,010,506) were issued within the rules of the IDT Australia Limited Employee Share Plan. 440,003 (2021: 1,463,368) shares were forfeited and cancelled because the Limited Recourse Loans were not repaid, due to former employees electing not to repay the Limited Recourse Loan within 90 days of cessation of employment. IDT Annual Report 2022 34 Notes To and Forming Part of the Financial Statements continued 18 RESERVES Share-based payments reserve Asset revaluation reserve Total reserves 2022 $000 4,602 3,897 8,499 2021 $000 4,069 3,897 7,966 The asset revaluation reserve is used to recognise fair value movements in respect of land and buildings owned by the Company valued by an independent third party valuer. The most recent fair value measurement by independent valuers was 1 June 2021. 19 ACCUMULATED LOSSES Accumulated losses at the beginning of the financial year Net profit / loss attributable to members of IDT Australia Limited Accumulated losses at the end of the financial year (31,540) (1,160) (32,700) (33,643) 2,103 (31,540) 20 FINANCING ARRANGEMENTS Bank overdraft Commercial loan Premium Funding Total secured liabilities (current and non-current) - - 881 881 Unrestricted access was available at balance date to the following credit facilities with the National Australia Bank Ltd: Total facilities - Bank Overdraft - Flexible Rate Commercial Loan - Credit Card Facility Used at balance date - Bank Overdraft - Flexible Rate Commercial Loan - Credit Card Facility Available at balance date - Bank Overdraft - Flexible Rate Commercial Loan - Credit Card Facility 1,000 1,500 100 - - 22 1,000 1,500 78 - - 766 766 1,000 1,500 100 - - 15 1,000 1,500 85 At 30 June 2022, the Company has cash reserves of $9.2 million. This cash balance is further supported by an unutilised facility of $2.5 million with the National Australia Bank Ltd, which is next due for renewal on 31 July 2023. These cash reserves and debt facility are available to support the Company to execute strategies and projects to extend production and manufacturing capabilities. 35 IDT Annual Report 2022 Security for Borrowings The bank overdraft, lease and business loan facilities are secured by the following: • • • • • A Registered Mortgage over property situated at 39 Wadhurst Drive, Boronia A Registered Mortgage over property situated at 41 Wadhurst Drive, Boronia A Registered Mortgage over property situated at 43-49 Wadhurst Drive, Boronia A Registered Mortgage over property situated at 51-57 Wadhurst Drive, Boronia A Registered Mortgage over property situated at 68 Wadhurst Drive, Boronia Carrying value of assets pledged as Security - Freehold land and buildings Total assets pledged as security 21 AUDITOR’S REMUNERATION Total amounts payable to auditors for: Audit and review of the Company’s financial statements Other services Total auditor remuneration For the year ended 30 June 2021 Audit services were provided by Deloitte Touche Tohmatsu. 22 FINANCIAL RISK MANAGEMENT Financial risks impacting the Company’s activities fall into three categories: a) market risk – foreign exchange and interest rate b) credit risk c) liquidity risk a) Market risk 2022 $000 2021 $000 11,365 11,365 11,545 11,545 2022 $000 2021 $000 98,000 228 98,228 98,300 11,000 109,300 In order to minimise the impact of currency fluctuation it is Company policy to transact in Australian dollars wherever possible. From time to time the Company also transacts in foreign currencies, particularly Euro and US dollars, which can give rise to foreign exchange risk as exchange rates fluctuate. At reporting date the Company has $9.2 million Cash Reserves held in its operating bank account and short term bank deposits. Forward cash flow forecasts do not project use of the bank debt facilities. Therefore the Company does not foresee any increased borrowings or consequentially a material sensitivity to interest rates. b) Credit risk Credit risk refers to the risk that a counterparty will default on its contractual obligations, resulting in a financial loss to the Company. Credit risk is closely managed and the Company has procedures to deal with credit worthy counterparties. Customer credit worthiness is reviewed on an ongoing basis and exposure to any one customer is monitored. Potential credit loss is regularly reviewed and assessed and a provision for expected credit losses would be raised if there was any evidence the debt was no longer collectible. The Company does not carry a material level of overdue debtor balances. IDT Annual Report 2022 36 Notes To and Forming Part of the Financial Statements continued c) Liquidity risk Liquidity risk arises from the financial liabilities of the Company and is the risk that the Company is not able to pay its financial liabilities as when they fall due. The ultimate responsibility for liquidity risk management rests with the Board of Directors which has established a framework for management of the Company’s requirements over time through continuous monitoring of historical and anticipated cash flows and scenario analysis. The Company manages liquidity risk by maintaining cash reserves and reserve borrowing facilities. Rolling 18 month cash flow forecasts are prepared each month. Strategic planning also includes liquidity considerations and based on current strategies, no funding shortfalls have been identified. In addition to funds on deposit, the Company has $2.5 million undrawn banking facilities. The Company holds the following financial instruments: Liquid Financial Assets Cash and cash equivalents Trade receivables and other Total financial assets Financial Liabilities Trade and other payables Borrowings, current and non-current Total financial liabilities Net financial position 2022 $000 2021 $000 9,214 2,257 11,471 1,253 881 2,134 9,337 6,928 6,729 13,657 4,413 766 5,179 8,478 23 SHARE BASED PAYMENTS The ESP was approved at the Annual General Meeting held on 18 November 2019. During the year ended 30 June 2022, the Company issued 1,601,630 ordinary shares under the rules of the IDT ESP (2021: 2,010,506). Total expenses arising from share-based payment transactions recognised during the period as part of employee benefit expenses were as follows: Value of shares issued under employee share plan Movement in number of shares under Employee Share Plan: Opening balance Employee Share Plan granted during the year Shares on which limited recourse loans have been repaid Shares on which escrow lifted Forfeited during the year 2022 $000 319 2021 $000 279 9,301,796 8,754,658 1,601,630 2,010,506 - - - - (440,003) (1,463,368) Closing balance of shares on issue under Employee Share Plan 10,463,423 9,301,796 37 IDT Annual Report 2022 Key Accounting Policies Directors, Executive Management and selected staff may be offered shares in the Company at the current market value at the date of issue, funded by an interest free limited recourse loan from the Company. These limited recourse loan funded shares are measured and accounted for as options in accordance with the substance, and no asset is recognise for the loan. Grants within the framework of the ESP are determined by the CEO together with the Remuneration and Nomination Committee and are subject to approval by the Board. Amounts disclosed for emoluments relating to these shares are the assessed fair values at issue date determined using the Binomial method taking into account the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk-free interest rate for the term of the arrangement. The ESP provides an annual value of up to $1,000 of shares may be issued to eligible employees for no consideration. The value of shares issued is recognised in the income statement as employee benefit costs at the time the shares are granted. Such shares may not be sold until the earlier of three years after issue or cessation of employment with the Company. In all other respects ESP shares rank equally with other fully-paid ordinary shares on issue. 24 KEY MANAGEMENT PERSONNEL DISCLOSURES The following persons were Directors of IDT Australia Limited during the financial year: Non Executive Directors Alan Fisher, Chair Hugh Burrill Mary Sontrop (retired 16 November 2021) Michael Kotsanis Jane Ryan (from 28 January 2022) Mr Fisher, Mr Burrill, Ms Ryan and Mr Kotsanis are Independent Directors. Key Management Personnel The following persons have authority and responsibility for planning, directing and controlling the activities of the Company, directly or indirectly, during the financial year: David Sparling Ancila Desai Paul McDonald Chris Kagiaros Jim Sosic Chief Executive Officer, Joint Company Secretary Chief Financial Officer, Joint Company Secretary Head of Quality and Development Head of People and Culture, from 1 September 2021 Vice President Operations, Supply and Infrastructure, until 29 November 2021 Directors and Key Management Personnel Compensation Short term employee benefits Post-employment benefits Long term benefits Share based payments 2022 $ 2021 $ 1,695,796 1,488,227 129,773 13,350 289,800 112,226 14,683 312,900 2,128,719 1,928,036 IDT Annual Report 2022 38 Notes To and Forming Part of the Financial Statements continued 25 RELATED PARTY TRANSACTIONS Transactions of Directors and Key Management Personnel Concerning Shares Aggregate numbers of shares acquired and disposed of by Directors or Key Management Personnel were as follows: Ordinary shares issued to KMP Ordinary shares forfeited by KMPs Ordinary shares acquired Ordinary shares sold Ordinary shares sold after limited recourse loans repaid 2022 Shares 2021 Shares 1,449,000 1,490,000 - 81,981 160,000 1,426,621 224,066 378,125 - - Other than shares issued as described in note 23, the terms and conditions of other transactions relating to shares were on the same basis as similar transactions with other shareholders. Aggregate numbers of shares of IDT Australia Limited held directly, indirectly or beneficially by Directors or KMP holding office at balance date were as follows: Ordinary shares 2022 2021 4,119,106 5,846,038 There were no other transactions or contracts between the Company and Directors and Key Management Personnel in 2022 (2021: nil). 26 RECONCILIATION OF NET CASH INFLOW / OUTFLOW FROM OPERATING ACTIVITIES TO OPERATING LOSS AFTER INCOME TAX Net cash inflow /(outflow) from operating activities Depreciation and amortisation Profit / (Loss) on Divestment – Property Plant and Equipment Non-cash share-based payment Impairment of intangible assets Change in operating assets and liabilities: Increase/(decrease) in receivables Increase/(decrease) in inventories Increase/(decrease) in current tax asset (Increase)/Decrease in payables Increase in other provisions Increase/(decrease) in unearned revenue Operating profit / (loss) after income tax 39 IDT Annual Report 2022 2022 $000 2,861 1,536 - (319) - (7,101) 698 188 1,354 (277) (100) (1,160) 2021 $000 370 (1,780) - (279) - 3,920 9 488 (850) 10 215 2,103 27 EARNINGS PER SHARE Basic earnings per share Diluted earnings per share 2022 (0.5¢) (0.5¢) 2021 0.9¢ 0.9¢ Weighted average number of ordinary shares on issue during the year used to calculate basic earnings per share 240,179,956 239,321,399 Weighted average number of ordinary shares on issue during the year used to calculate diluted earnings per share 240,179,956 239,321,399 $000 $000 Basic Earnings per share Profit / (Loss) attributable to ordinary equity holders used in calculating basic earnings per share (1,160) 2,103 Diluted earnings per share Profit / (Loss) attributable to ordinary equity holders used in calculating diluted earnings per share (1,160) 2,103 Key Accounting Policies (i) Basic Earnings per Share - Basic earnings per share is determined by dividing the profit or loss attributable to equity holders 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. (ii) Diluted Earnings per Share - Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares. 28 EVENTS AFTER THE REPORTING PERIOD Throughout the course of the financial year, the COVID-19 pandemic has continued to present challenges to day-to-day life as well as business and economic activity. The financial statements have been prepared based upon conditions existing at 30 June 2022, which included the impact of COVID on the business at that time. The Company considers the ongoing COVID-19 restrictions in other regions and supply chain disruptions to be non-adjusting post balance sheet events and accordingly the financial effects post year end of COVID-19 have not been reflected in the financial statements at 30 June 2022. The scale and duration of the COVID-19 pandemic and its associated business and economic disruptions remain uncertain as at the date of this report. However, they may have an impact on the Company’s 2023 financial year earnings, cash flow and financial position. In July 2022, Ms. Ancila Desai announced her intention to leave the Company later this year. IDT has commenced activities to secure a suitable CFO replacement. On 26 August 2022, IDT announced that it was advised that its final outstanding MMI submission (MMI – Translation Stream Round 2) was unsuccessful. Opportunities for IDT to provide further sovereign pharmaceutical manufacturing, mRNA and other sterile product manufacturing services are being pursued. Further information has been provided in Likely Developments as set out in the Director’s report. There has not been any other matter or circumstance occurring subsequent to the end of the financial year that, to the Company’s knowledge, has significantly affected, or may significantly affect, the operations, results of the operations or the state of affairs of the Company. 29 CONTINGENT ASSETS AND CONTINGENT LIABILITIES The Company has no contingent assets or liabilities to disclose at the date of this report. IDT Annual Report 2022 40 Directors' Declaration In the Directors’ opinion: (a) the financial statements and notes set out on pages 14 to 30 are in accordance with the Corporations Act 2001, including: (i) (ii) complying with Accounting Standards, the Corporations Act 2001 and other mandatory professional reporting requirements; and giving a true and fair view of the Company’s financial position as at 30 June 2022 and of its performance, as represented by the result of its operations, changes in equity and cash flows, for the financial year ended on that date; and (b) there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable; and (c) the financial statements and notes thereto also comply with International Financial Reporting Standards as disclosed in Note 1. The Directors have been given the declarations required by Section 295A of the Corporations Act 2001. This declaration is made in accordance with a resolution of the Directors made pursuant to s295(5) of the Corporations Act 2001. On behalf of the Directors Mr Alan Fisher Chair 30 August 2022 41 IDT Annual Report 2022 Independent Audit Report to the Members Grant Thornton Audit Pty Ltd Level 22 Tower 5 Collins Square 727 Collins Street Melbourne VIC 3008 GPO Box 4736 Melbourne VIC 3001 T +61 3 8320 2222 Independent Auditor’s Report To the Members of IDT Australia Limited Report on the audit of the financial report Opinion We have audited the financial report of IDT Australia Limited (the Company), which comprises the statement of financial position as at 30 June 2022, the statement of profit or loss and other comprehensive income, statement of changes in equity and statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies, and the Directors’ declaration. In our opinion, the accompanying financial report of the Company is in accordance with the Corporations Act 2001, including: a Giving a true and fair view of the Company’s financial position as at 30 June 2022 and of its performance for the year ended on that date; and b Complying with Australian Accounting Standards and the Corporations Regulations 2001. Basis for opinion We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial report section of our report. We are independent of the Company in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (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. www.grantthornton.com.au ACN-130 913 594 Grant Thornton Audit Pty Ltd ACN 130 913 594 a subsidiary or related entity of Grant Thornton Australia Limited ABN 41 127 556 389 ACN 127 556 389. ‘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 Limited 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 ACN 127 556 389 and its Australian subsidiaries and related entities. Liability limited by a scheme approved under Professional Standards Legislation. IDT Annual Report 2022 42 Independent Audit Report to the Members continued 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. Key audit matter Revenue – Note 3 In the financial year ended 30 June 2022, the Company recorded revenue of $12.1 million. The Company offers several products and services to its customers that require different patterns of revenue recognition due to varying contractual terms, which impact the identification of performance obligations and the determination of how the Company satisfies those obligations. There is a risk of potential overstatement of revenue given there is a pressure placed on the performance of the Company against market expectations. This is a key audit matter due to the financial significance to the statement of profit or loss and other comprehensive income and the judgement involved in determining appropriate revenue recognition for these various services. Recognition of research and development tax incentive – Note 5 The Company receives a refundable tax offset of eligible expenditure under the research and development (R&D) tax incentive scheme. An R&D plan is filed with AusIndustry in the following financial year, and, based on this filing, the Company receives the incentive in cash. Management reviews the Company’s total research and development expenditure to determine the potential claim under the R&D tax incentive legislation. The Company recognises an R&D tax incentive rebate benefit on an accrual basis, meaning that a receivable is recorded at the balance date based on the estimated amount that is yet to be received from the Australian Taxation Office for the period 1 July 2021 to 30 June 2022. This area is a key audit matter due to the judgement and interpretation of the R&D tax legislation required by management to assess the eligibility of the R&D expenditure under the scheme. How our audit addressed the key audit matter Our procedures included, amongst others: • Obtaining an understanding of the processes and controls used by the Company in evaluating contracts under the five-step model of AASB 15 Revenue from Contracts with Customers; • Reviewing revenue recognition policies of the Company’s recurring and non-recurring revenue streams to ensure compliance with AASB 15; • Selecting a sample of revenue transactions to verify that revenue was being recognised in accordance with revenue recognition policies; • Analytically reviewing all revenue streams and investigating movements outside our expectations with management; • Testing the accuracy of deferred income recorded by the Company during the year; and • Evaluating the disclosures in the financial statements for appropriateness and consistency with accounting standards. Our procedures included, amongst others: • Obtaining the R&D incentive calculations, as prepared by management and reviewed by management’s expert, and engaging an internal R&D tax expert to assist in assessing the reasonableness of the estimate; • Performing a review to ensure that any relevant legislation changes have been appropriately applied; • Comparing the nature of the R&D expenditure included in the current year estimate to the prior year approved claim; • Comparing the estimates made in previous years to the amount of cash received after lodgement of the R&D tax claim; Grant Thornton Australia Limited 43 IDT Annual Report 2022 Key audit matter How our audit addressed the key audit matter • 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 are likely to meet the eligibility criteria; • Assessing the eligible expenditure used to calculate the estimate to ensure it is in accordance with expenditure recorded in the general ledger; • Testing a sample of expenditure items included in the estimate to supporting documentation to ensure they are appropriately recognised in the accounting records and that they are eligible expenditures; • Inspecting copies of relevant correspondence with AusIndustry and the ATO related to the claims; and • Reviewing the appropriateness of the relevant disclosures in the financial statements. Our procedures included, amongst others: Land and buildings • Obtaining the most recent valuation reports and assessing completeness, accuracy and reasonableness of key inputs and assumptions applied in the calculations in accordance with AASB 116 Property, Plant and Equipment; • Reviewing management‘s assessment of the fair value of the land and buildings as at 30 June 2022. Property, plant and equipment • Reviewing management’s assessment of the existence of potential impairment indicators at year end; • Considering other qualitative considerations (e.g. market valuation of the Company compared to its net assets, new secured contracts, other public information available or press releases) in order to challenge management’s assessment of impairment indicators; • Obtaining supporting documentation to demonstrate ongoing use of the asset; and • Assessing the adequacy of disclosures for compliance in accordance with the Australian Accounting Standards (AASBs). Carrying value of non-current assets – Note 10 As at 30 June 2022, the Company’s carrying value of property, plant and equipment totalled $16.2 million. Land and buildings Land and buildings are carried under the revaluation model under AASB 116 Property, Plant and Equipment, whereby valuations are obtained cyclically, and revaluations are taken through the asset valuation reserve. Plant and equipment The assessment of the recoverable amount of plant and equipment requires management to exercise significant judgement in identifying indicators of impairment under AASB 136 Impairment of Assets. This area is a key audit matter due to the judgement involved in determining whether the fair value of the land and buildings is materially appropriate. Grant Thornton Australia Limited IDT Annual Report 2022 44 Independent Audit Report to the Members continued 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 2022 but does not include the financial report and our auditor’s report thereon. Our opinion on the financial report does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report, or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of the Directors for the financial report The Directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the Directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In preparing the financial report, the Directors are responsible for assessing the 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 Company 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/ar2_2020.pdf. This description forms part of our auditor’s report. Report on the remuneration report Opinion on the remuneration report We have audited the Remuneration Report included in pages 8 to 12 of the Directors’ report for the year ended 30 June 2022. In our opinion, the Remuneration Report of IDT Australia Limited, for the year ended 30 June 2022 complies with section 300A of the Corporations Act 2001. Grant Thornton Australia Limited 45 IDT Annual Report 2022 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, 30 August 2022 Grant Thornton Australia Limited IDT Annual Report 2022 46 Shareholder Information The shareholder information set out below was applicable as at 30 June 2022. A DISTRIBUTION OF EQUITY SECURITIES Analysis of numbers of equity security holders by size of holding: 1 - 1,000 1,001 - 5,000 5,001 - 10,000 10,001 - 100,000 100,001+ B TWENTY LARGEST INDIVIDUAL SHAREHOLDERS The names of the twenty largest individual holders of ordinary shares are listed below: CITICORP NOMINEES PTY LIMITED UBS NOMINEES PTY LTD ONE MANAGED INVT FUNDS LTD HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED MR ANTHONY JOHN HUNTLEY ONE FUND SERVICES LTD MR GRAEME LESLIE BLACKMAN JAMPLAT PTY LTD PICHERIT'S FARM PTY LTD MRS PAULENE BLACKMAN DAVID SPARLING SHAREHOLDERS MUTUAL ALLIANCE PTY LTD MR ALISTAIR DAVID STRONG GOEN INVESTMENTS PTY LTD MR GAVIN GEORGE ROGERS & MS KATHRYN ANN ROGERS MS MELISSA MARY STEPHENS CS FOURTH NOMINEES PTY LIMITED MR AHMED FAHOUR MR ALEXANDRE PETER SWANSON GW BURKE INVESTMENTS PTY LTD ON ON FOR DON PTY LTD WONGTEH PTY LTD 47 IDT Annual Report 2022 Holders 2022 Holders 2021 483 1,422 671 1,144 216 3,936 152 704 386 832 201 2,275 Number Held Percentage of Issued Shares 22,786,298 22,615,834 19,949,434 19,023,526 9,399,924 9,360,934 6,029,710 4,230,000 3,850,000 3,457,737 2,031,000 2,000,000 2,000,000 2,000,000 1,600,000 1,502,000 1,187,539 1,157,000 1,103,944 1,050,000 1,005,000 1,000,002 9.45% 9.38% 8.28% 7.89% 3.90% 3.88% 2.50% 1.76% 1.60% 1.43% 0.84% 0.83% 0.83% 0.83% 0.66% 0.62% 0.49% 0.48% 0.46% 0.44% 0.42% 0.41% 138,339,882 57.40% C SUBSTANTIAL HOLDERS The following parties have declared a relevant interest in the number of ordinary shares at the date of giving the notice under Part 6C.1 of the Corporations Act. Sandon Capital Pty Ltd Regal Funds Management Pty Limited and its associates Bank of America and its related bodies corporate Credit Suisse Holdings (Australia) Limited D VOTING RIGHTS Number Held 29,219,292 26,360,286 21,934,288 12,936,807 A registered holder of shares in the company may attend general meetings of the company in person or by proxy and on a poll may exercise one vote for each share held. IDT Australia Limited 45 Wadhurst Drive, Boronia Victoria 3155 Australia www.idtaus.com.au