MedAdvisor
Annual Report 2020

Plain-text annual report

1 MedAdvisor Annual Report Year ending June 30, 2020 MedAdvisor Limited ABN 17 145 327 617 Contents 3 3 Highlights Chair + CEO letter Business update Management commentary Directors’ report Financials Governance and disclosures Brooke S T R O K E S U R V I V O R & M E DA DV I S O R U S E R COVER: Eric P H A R M AC Y O W N E R & M E DA DV I S O R C U S TO M E R Highlights 1.7m PAT I ENT S $9.6m O PERAT ING REVEN U E +42% Y OY +16. 5% Y OY 3,500+ PH ARM ACIES AU +260 Y OY $5.9m S AAS REVEN U E +19. 4% Y OY $6.3m ARR +15. 3% Y OY $ 8.4m GROSS MARGIN +16.0% YOY 450+ PAT I ENT S PER PH ARM ACY +25% Y OY $32,268 L I F E T I M E V A L U E T O T AL PH ARM ACY L T V P E R P H A R M A C Y +10% Y OY +10. 2% Y OY 70+ + # H EAL T H PRO G RAM S # H EAL T H PRO G RAM S +28. 6% Y OY 5 5 MedAdvisor’s remote customer service team CLOCKWISE: Josh, Tom, Alice, Nick, Laura, Sonja 7 Some exciting milestones helped underpin these results: • Entered into an agreement with NASDAQ-listed HMS to provide health programs to its pool of 100 million insured lives • Launched first US Health Program with Adheris in Q4 FY20 • Expanded Australian pharmacy network with deals including ma- jor groups like Amcal, PharmaSave, Guardian, Pharmacy Alliance and Chemist Warehouse to expand market share to more than 60%. In the coming year, we will continue to focus on improving and ex- panding our pharmacy, patient and pharmaceutical offerings. We also plan to invest in building our global footprint, as well as help existing customers better use our suite of products. MedAdvisor’s strong results in fiscal 2020 are a testament to the commitment and the talent of the people who work here. We are in- credibly proud of all the MedAdvisor employees who come together each day to build great products that our customers love. Thank you for joining us on this journey. Kind regards, Christopher Ridd Non-Executive Director and Chair Robert Read CEO and Managing Director 27 August, 2020 Chair + CEO letter To our shareholders, customers and partners, We have spent the last few years establishing the foundations for MedAdvisor’s diversified g lobal growth strategy w ith t he f ocus on driving results and operational discipline at scale. MedAdvisor is now helping millions of people better manage their medication and become more adherent. Medication adherence is estimated to be a US$630B global problem. To achieve this, we’ve focused on partnering with global pharmaceu- tical companies and leading pharmacies across Australia, the UK, the US and Asia. We’ve also invested in building internal capability, bolstering our marketing, sales, technical and development exper- tise across all levels of the business. We have continued to invest in our new global technology platform which is providing opportunities in new markets. It is built to the highest privacy standards including meeting stringent overseas standards such as HIPAA and GDPR. MedAdvisor is also ISO 27001 certified, which helps build trust with new customers and partners. We continue to invest with an eye towards the future. It’s this disci-pline and focus that provides us the opportunities we see ahead - namely, MedAdvisor’s global expansion - particularly as we continue to execute across the US and the UK. Given our strong domestic business which is continuing to evolve, executing in these new over-seas markets is our primary focus as we head into our fiscal 2021. The 2020 financial year was another productive year with total revenue of $11.1 million, up 20.4% year-on-year, annual recurring revenue up 15.3% to $6.3 million, and generating more than $32,000 in total lifetime value per pharmacy, up 10% year-on-year. We also grew the MedAdvisor family to 100 employees across Australia, UK, USA and South East Asia. Board of directors Christopher Ridd Non-Executive Director and Chair Bachelor of Business, Economics/Marketing (SUT) and Post Grad Diploma in Strategic Marketing (Distinction) (Charles Sturt Uni) Director since February 2020 Chris is non-executive director, advisor and investor in various fast- growth, Australian-based startups. He has 30 years’ experience in the IT industry including 5 years as Managing Director for Xero Aus- tralia and 15 years at Microsoft in various senior executive roles. He led Xero’s expansion in the Australian market from a small startup to become the largest online cloud accounting software company, growing from seven staff and 3,500 customers, to over 300 staff and 320,000 paying customers. In 2015, Chris was awarded The CEO Magazine’s Financial Services Executive of the Year & Runner Up in Managing Director of the Year. Jeffrey Sherman Non-Executive Director MBA (USC), B.S.Bus Fin & Acct (CU) Director since October 2019 Jeff has more than 30 years of experience in corporate and hos- pital-based finance. He previously served as executive vice presi- dent and CFO of Accentcare, executive vice-president and CFO of Lifepoint Hospitals Inc., and held senior finance positions at Tenet Healthcare Corporation. Based in the US, Jeff serves as Chief Financial Officer and Treasurer for HMS. Additionally, he is responsible for corporate development, including mergers and acquisitions. 9 Sandra Hook Non-Executive Director GAICD Director since 2016 Chair of Audit and Risk Committee Member of the People, Remuneration and Nominations Committee Sandra Hook has 25+ years’ experience developing and implement- ing commercially successful business and brands driving growth and leading change. Sandra has a track record in delivering custom- er-centred business transformation and transitioning traditional or- ganisations in rapidly evolving environments. Sandra brings extensive operational, financial management and strategic experience built over a career which includes CEO, COO, GM, Marketing Director and Snr Brand Manager with some of Aus- tralia’s largest media companies including News Limited, Foxtel, Federal Publishing Company, Murdoch Magazines and Fairfax. She brings a strong focus on customer-centric growth and digital inno- vation at Board level. Since 2000 she has served as a non-executive director on listed, public and private companies, and government bodies. Sandra is currently director of ASX listed digital, technology and marketing communications companies: RXP Services Ltd and IVE Group Ltd, as well as .au, Redhill Education Ltd and the Sydney Fish Market Ltd. She is a trustee of the Sydney Harbour Federation Trust. Peter Bennetto Non-Executive Director GAICD, SA Fin. Director since 2013 Member of Audit and Risk Committee Member of the People, Remuneration and Nominations Committee Peter Bennetto is an experienced company director, with skills in banking, corporate finance and governance. Peter has held a num- ber of company director positions in exploration, mining and man- ufacturing companies listed on the ASX since 1990. Mr Bennetto has been Non-Executive Chairman at MedAdvisor Limited (formerly Exalt Resources Limited) since November 28, 2013. Mr Bennetto is currently non-executive Chairman of Ironbark Zinc Ltd and Kingwest Resources Ltd. 11 Jim Xenos Non-Executive Director BSc, DipEd, AFAIM, GAICD Director since 2015 Member of Audit and Risk Committee Member of the People, Remuneration and Nominations Committee Jim Xenos brings to the board a wealth of pharmaceuticals industry experience and market insight, forged over 25+ years leading highly successful teams to drive strong commercial outcomes. He has a track record of delivering market share and profit growth across national and multinational corporations by creating impact- ful brand and portfolio strategies, and by introducing new product offerings that leverage innovative go-to market platforms in highly competitive industry categories. In addition to his extensive industry knowledge, Mr Xenos’ brings to the role a sharp strategic mindset, collaborative approach and a single-minded focus on value creation. Robert Read CEO and Managing Director BComm(Mgt), BA(Psych), GAICD Director since 2015 Member of Audit and Risk Committee Member of the People, Remuneration and Nominations Committee Robert Read has led MDR since July 2015 as a small private compa-ny, taking it through initial ASX listing and growing the business to now successfully operate in Australia, US, UK and SEA with strong partners and customer relationships. Robert has extensive commercial experience in a wide range of including Director of Commercial Strategy and businesses, Operations leading pharmaceutical in one of companies, GSK and roles in venture capital and private equity. the world’s Robert has had roles in business consulting and senior roles in pri- vate equity including Director at ANZ Private Equity and Managing Director at Harbert Private Equity, specialising in growing small and medium sized businesses. Robert brings a wide range of skills to the position of CEO - including leadership, sales and marketing, financial performance improvement and a deep understanding of the requirements to successfully grow businesses. Joshua Swinnerton Executive Director and Founder MEI, GradCert Eng., BE, BCS(Hons) Director since 2015 Joshua Swinnerton has extensive experience leading and managing large companies, as a sizeable consultant, and as the technical and operational lead of start-up companies. IT ventures, both within Prior to founding MedAdvisor, Josh led a technology start-up which he also founded and sold into the US as well as raising funds in the US for the company’s expansion and managed software develop-ment. During this time Mr Swinnerton gained valuable experience in bridging the gap between innovative technology and business objectives. Josh also has extensive skills in building and managing exceptional development teams. Company secretaries Executive team 13 Naomi Lawrie General Counsel and Company Secretary LLB (Hons), BCom (Hons) Naomi Lawrie holds over 20 years’ legal experience including as a partner in a national law firm. She has particular expertise in cor- porate and commercial law and has consulted to companies in a variety of sectors, including health and technology. Joining MedAdvisor in August 2020 as General Counsel and Compa- ny Secretary, Naomi is responsible for legal, compliance and compa- ny secretarial matters. Carlo Campiciano Company Secretary MEI, GradDip(Comp), Bbus(Acc), GIA(cert), MIPA Carlo Campiciano is a qualified accountant with extensive experi- ence working with business on a wide range of areas including taxa- tion, finance, operations, planning, operational and financial strategy. Mr Campiciano commenced his career with Coopers & Lybrand where he completed his Professional Year of Study which qualified him for admittance to the Institute of Chartered Accountants before moving onto roles in professional services firms as well as roles in industry which extended both his technical as well as practical busi- ness skills. Mr Campiciano was a Director of MedAdvisor International Pty Ltd prior to the relisting of MedAdvisor Limited and was the CFO from 2012 until June 30, 2019. Steve Watt Chief Revenue Officer B.Comp.Sc. (Hons), MBA A seasoned entrepreneur, Steve Watt has deep experience leading global tech organisations through business transformation and de- livering consistent revenue growth. Joining MedAdvisor in 2020, Steve is charged with leading the global go-to-market strategy with a particular emphasis on the US and UK markets. Prior to joining MedAdvisor, Steve was CEO Computer Automated Business Systems (CABS) in Europe where he grew the EU sales sig- nificantly from selling to the likes of PWC and KPMG. He is also the co-founder of Invisic where he expanded the Australian business to the US and the UK, growing to over 100 people based in Washington. Following which, as CEO for Raywood (a taxi dispatch software) he grew international sales from <20% to >50% of overall sales. Steve holds a Bachelor’s Degree in Computing from the University of Technology Sydney and a Master of Business Administration from Boston University. Executive team 15 Craig Schnuriger Interim Chief Technology Officer Bachelor of Business Systems (B. BSys) As MedAdvisor’s Interim CTO, Craig leads the technical team as it scales the company’s platform to help patients manage their medi- cation globally. Completing a Bachelor of Business Systems in 2003, Craig has worked in IT ever since. Prior to working at MedAdvisor, Craig had roles at Ernst & Young, Shell and Tenix Solutions. In 2011 Craig took his experience over to the US to work on the first generation of pharmacy/insurance connected mobile applications to support patients taking chronic medications. He brought this ex- pertise back to the Australian market and has been with MedAdvisor since its inception in 2013. Craig has worked extensively within the pharmacy industry within Australia and recognizes the role of tech- nology in supporting patients, pharmacists and doctors. Over the years, Craig has held several roles at MedAdvisor including Head of Engineering, Head of Architecture and now the CTO role. Simon Glover Chief Financial Officer MBA (Melb), B.Com (Melb), CA. Simon Glover holds over 25 years’ experience in senior financial and operational leadership across a range of industries including retail, aviation, gambling and entertainment, technology and communications and financial services across Australia and internationally. Joining MedAdvisor in July 2019 as Chief Financial Officer, Simon is responsible for corporate finance and investor relations, while also leading the broader finance team in supporting financial planning, forecasting, business analytics and operating budgets. Prior to joining MedAdvisor he held a number of senior finance roles listed companies such as Tabcorp Holding (ASX:TAH) and Coles Group (ASX:COL) and also brings prior industry experience from his time at Mayne Pharma. large in Prior to 2006 Simon was heavily involved in the international expansion of Jetstar where he was responsible for all finance matters relating to the launch of the international business. Ruba El Afifi EGM People and Culture Bachelor of Business (HR) A commercially astute strategic HR executive with experience in both large and small entrepreneurial organisations, with roles as EGM People at Aconex (ASX: ACX), as well as senior HR roles at QIC and AAMI. Ruba brings a wealth of industry experience gained in IT, finance, insurance and professional services. Ruba has significant experience in mergers & acquisitions and, in particular, integration and business transformation, aligning people strategy and business strategy, and creating a performance culture. Passionate about building outstanding businesses, Ruba has a depth of experience advising Boards, CEOs and developing effective teams. She is also a very strong team leader who has led small and large teams with success. Ruba also prides herself on her and succession skills as well as her ability to take a commercial and business perspective. change management talent management, Business update Business overview MedAdvisor continues to align its activities with its core strategic priorities which include uplifting technology to deliver innovative solutions, investing in a global sales organisation, establishing a performance culture where talented people do meaningful work, building a world-class marketing organisation and executing on its global expansion plans. COVID-19 changed the game As healthcare professionals on the frontline continue to face the challenges of COVID-19, the sector is changing to deal with these challenges. The provision of healthcare is increasingly taking a tech- first approach - largely driven by adoption of digital health initiatives, funding for innovation and the upcoming launch of ePrescribing. The pandemic has driven cultural change and we’re seeing what is a largely traditional and slow moving industry embrace new models of care to prioritise low or no touch options and offer consumers more convenience, protection and improved access. Behind these changes is an increased level of government support for digital health. The Australian Government alone has allocated $1.1 billion to the health sector during COVID-19, supporting a raft of initiatives including medication delivery and telehealth. As a result, MedAdvisor moved to support pharmacists on the front- line by providing technology to help them work smarter and safer. We prioritised the development of features that help patients and pharmacists social distance with the launch of in-app payment and on-demand delivery. We’ve already had 34,000+ deliveries complet- ed on the platform. 17 Product overview MedAdvisor continues to develop its core offerings: MedAdvisor app, PlusOne pharmacy platform and pharmaceutical health programs. This year we have established a core technology team, led by interim CTO Craig Schnuriger and in key product development resources. We’ve also worked to replatform our systems onto Amazon Web Services. AWS employs some of the most stringent security and data privacy protocols globally. Data centres enable us to have limited down time (we currently run at 99.98% uptime). They also provide proactive security monitoring, firewall protection and inbuilt redundancy. invested Data security We have established a world-class security program, are regular- ly audited and comply with some of the most rigorous protocols globally including HIPAA, ISO27001 Certification and GDPR. We con- tinuously iterate and improve our security operations by assessing risks and potential vulnerabilities, confidentiality, integrity, and avail- ability of the service. We regularly review and update security policies, carry out internal security training, perform application and network security testing, monitor compliance with security policies, and conduct internal and external risk assessments. We also regularly conduct penetration testing of our infrastructure to confirm the resilience of our systems and identify any potential vulnerabilities. R&D In light of COVID-19 and its impact on our core market, we released several features to help pharmacists and patients cope with the changing environment. This included in-app payment and on-de- mand delivery functionality. A key project has been readying the platform for ePrescribing ca- pability in Australia. ePrescribing is one of the largest and most significant changes the pharmacy industry has experienced since the computerisation of pharmacies. There are many benefits of ePre- scriptions, including no more loss of paper scripts and an improved customer experience. MedAdvisor is well positioned to leverage this digital transformation of Australia’s pharmacy sector to attract more patients to its network. We have also been establishing our offering for key expansion mar- kets like the UK, the US and South East Asia. Business update 19 Regional overview Australia With a pharmacy network share of more than 60%, Australia continues to be MedAdvisor’s core market. Over the year we saw ARR increase 15.3% to $6.3m, compared to the same period prior. Over the year we signed several agreements with major pharmacy groups including Sigma, Chemist Warehouse and Pharmacy Alliance Group. More than 260 new pharmacies were added to the platform and we saw the volume of health programs increase by 28.6%, year-on-year. We also saw the number of digitally connected patients expand from 1.2 million to 1.7 million over the year. To help our pharmacists cope with heightened demand and re-strictions during COVID-19, we launched several new capabilities including on-demand delivery and in-app payment. UK Over the year, MedAdvisor signed an agreement with UK-based Day Lewis Pharmacy Group to develop a solution for use by its 270+ pharmacies. The UK’s National Pharmacy Association also endorsed MedAdvisor as the solution of choice for its members, representing 8 out of 10 independent community pharmacies. US The highlight for the year in our US operations was the strategic alliance deal with NASDAQ-listed HMS which will expand insurers, pharmaceutical companies, pharmacies, patients and GPs. MedAdvisor will integrate with HMS’ health engagement platform opening a new channel for up to 100 million insured lives. This partnership that MedAdvisor has already built, extending into a new marketplace. ad-dressable market the secure digital technology leverages include our to The HMS Eliza business has sent more than 865 million unique patient outreaches since 2016. MedAdvisor will receive a revenue share for each of the secure digital messages that are sent. The new integration is expected to go live towards the end of Q2 FY21. Additionally, MedAdvisor’s first set of US health programs com- top 10 global pharmaceutical menced with one of companies successfully going live in Q4FY20. the Asia Asia remains on track to deliver revenue in FY21 with pilot health programs developed as part of the Company’s joint venture with ZuelligPharma (ZP MedAdvisor Pte Ltd.) progressing on schedule. MedAdvisor has launched the MedExpress Pharmacy App in the Philippines and expects this to be promoted actively in Q1FY21. People and culture overview Enriching a performance culture by building the capability of our people has been a core focus this year. We can only achieve our stra- tegic objectives if our people are the most talented and engaged, and willing to embrace diverse, innovative thinking. The implemen- tation of a sophisticated and robust recruitment process to attract high calibre candidates has also enhanced our existing talent pool. MedAdvisor welcomed several new executives to its leadership team including CFO Simon Glover, CRO Steve Watt and, in August 2020, General Counsel and Company Secretary Naomi Lawrie. For- mer Xero Managing Director and technology investor, Chris Ridd was appointed as a Non-Executive Director and Chair of the Board. US-based Jeff Sherman was also appointed Non-Executive Director to add industry experience and a global perspective. This year has seen MedAdvisor significantly invest in our people through the development of key leadership training frameworks and programs. the launch of the Performance For all MedAdvisor staff, Management Framework has provided a platform for completing regular performance discussions, and setting unique action plans that link to the company purpose and goals. This consistent approach with the implementation of the Performance Management Online System engages, connects, and develops all sectors across the business. Management commentary Diversified revenue growth $9.6m +16. 5% Y OY $8.2m +24. 8% Y OY $6.6m F Y 18 F Y 1 9 F Y 20 SAAS HEALTH PROGRAMS TRANSACTION FEES Driving diversified revenue growth has underpinned MedAdvisor’s FY20 results. We’ve seen solid performance from Software as a Service (SaaS) revenue, largely driven by growth in our pharmacy network. Health programs also grew in volume, up 28.6%, year- on-year - despite the second half of the year impacted by COVID-19. Transaction the revenue mix introduction of in-app payments and changes in SMS revenue as more patients migrate to app-based solutions. is evolving with 21 Improved scale and operating efficiencies GROSS MARGIN COST OF ACQUISITION (PER PHARMACY) 87. 3% 87. 7% 87. 6% $8381.4m $7228.0m $5783.1m -24% F Y 18 F Y 19 F Y 20 F Y 19 F Y 20 OPEX – CORE & GROWTH $19. 5m +20. 0% $16. 3m +47. 6% F Y 18 F Y 19 F Y 20 Growth Opex Core Opex CORE EBITDA +50% +87. 5% $3.3m $2.2m $1.2m F Y 18 F Y 19 F Y 20 The Company is starting to realise the benefits of scale and oper- ating efficiency. Gross margin was stable at 87.3%, impacted by one-off costs for infrastructure technology uplift - including replat- forming to AWS. Growth operating expenditure reflects investment in overseas expansion and product offering while core operating expenditure was stable with core EBITDA product costs including operating expenditure reflecting operating leverage. Management commentary 23 Revenue continues to climb Driving revenue expansion Full year financial statement Cash flow Year ended 30 June 2020 ($000) FY20 FY19 Var % +ve/(-ve) Operating Revenue 9,602.6 8,242.0 Other Revenue Total Revenue Gross Margin 1,468.1 951.1 11,070.7 9,193.1 8,381.4 7,228.0 Gross Margin % 87.3% 87.7% Maintenance Opex3 5,675 5,304 16.5% 54.4% 20.4% 16.0% (0.4%) (7.0%) Growth Opex3 13,839 10,960 (26.3%) Operating Expenses 19,514 16,264 (20.0%) EBIT1 EBITDA (9,774) (8,220) (18.9%) (9,261) (7,960) (16.3%) Core EBITDA2 3,286 2,190 50.0% Profit/(Loss) Before Income Tax (9,780) (8,101) (20.7%) 1. EBIT includes depreciation associated with adopting AASB 17 Leases 2. Core EBITDA represents the “business as usual” EBITDA excluding all growth opex; 3. Maintenance opex represents costs associated with maintaining core operations; growth opex represents costs associated with expansion into new markets MedAdvisor posted revenue growth of 20.4% to $11.1 million for the year. Operating revenue was up 16.5% to $9.6 million. The company saw some short term delays and impact, primarily in overseas markets from COVID-19 during late Q3 and Q4. Other revenue reflects R&D tax concessions and Government grants. Operating expenses driven by overseas investment. Year ended 30 June 2020 ($000) FY20 FY19 $ Var Total operating cash receipts 11,419.5 8,946.6 2,473 Total operating cash payments (20,100) (15,892) (4,208) Net cash inflow / (outflow) from operating activities (8,681) (6,945) (1,735) Net cash inflow / (outflow) from investing activities (324) (104) (220) Net cash inflow / (outflow) from financing activities 16,949 975 15,974 Net increase / (decrease) in cash held 7,944 (6,074) 14,019 Cash & equivalents at 
beginning of the year 4,401 10,475 (6,074) Cash & equivalents at end of the year 12,345 4,401 7,944 Based on current projections and growth plans, we have sufficient capital available on hand to drive the business towards cash flow breakeven. With growth in annualised committed monthly revenue over the past year, and a large opportunity in the healthcare sector around the world, MedAdvisor can continue to execute its long-term growth strategy. We finished the year with $12.3 million cash at bank, up $7.9 mil- lion after completing a $17 million capital raise in October 2019. Our cash receipts were up 28% year-on-year to $11.4 million. Payments to suppliers and employees was up 26% year-on- year, in overseas expansion investment strategy. largely supporting Management commentary 25 25 Well positioned for growth Balance sheet Year ended 30 June 2020 ($000) FY20 FY19 $ Var Cash & cash equivalents 12,345 4,401 7,944 Trade receivables 1,839 1,130 710 Other 376 407 (32) Current Assets 14,560 5,938 8,623 Total Non Current Assets 6,711 5,837 874 Total Assets 21,271 11,775 9,497 Total Liabilities 4,251 3,130 1,121 Net Assets 17,021 8,645 8,376 MedAdvisor’s strong cash position has been driven by the $17 million capital raise completed in October 2019 as well as revenue growth. The company also saw net assets increase 96% year-on-year - large- ly due to the capital raise. The adoption of AASB16 Lease standard in FY20 impacted property, plant and equipment offset by lease liability. MedAdvisor’s remote branding workshop August, 2020 MEDADVISOR LIMITED DIRECTORS’ REPORT Directors’ report Directors’ report The Directors of MedAdvisor Limited (‘MedAdvisor’) present their report, together with the financial statements of the consolidated entity, being MedAdvisor Limited (‘the Company’) and its Controlled Entities (‘the Group’) for the year ended 30 June 2020. Directors The names of Directors in office at any time during or since the end of the year are: Christopher Ridd Non-Executive Director and Chair (appointed 17 February 2020) Robert Read CEO and Managing Director Joshua Swinnerton Executive Director and Founder Peter Bennetto Non-Executive Director Jim Xenos Sandra Hook Non-Executive Director Non-Executive Director Jeffrey Sherman Non-Executive Director (appointed 11 October 2019) MEDADVISOR LIMITED DIRECTORS’ REPORT – CONT. Board meetings 2020 Christopher Ridd Robert Read Josh Swinnerton Peter Bennetto Sandra Hook Jim Xenos Jeffrey Sherman Committee meetings 2020 Robert Read Peter Bennetto Sandra Hook Jim Xenos Principal activities 27 Meetings attended 4 10 9 10 10 10 6 Board Meetings Meetings held 4 10 10 10 10 10 7 People, Remuneration & Nominations Audit & Risk Meetings held Meetings attended Meetings held Meetings attended 2 2 2 2 2 2 2 2 3 3 3 3 3 3 3 3 The principal activities of the Company have continued to be the development and deployment of the MedAdvisor medication and adherence platform. The MedAdvisor platform is focused on improving health outcomes by connecting health professionals with their patients using mobile and web technologies. Details of the qualifications, experience and special responsibilities of the Directors and the qualifications and experience of the Company Secretaries as at the date of this report are set out on pages 8 to 12. Operating results Board and Board Committee meetings and attendance The number of meetings of the Board of Directors and of the Committees of the Board and the individual attendance by Directors at those meetings which they were eligible to attend, during the financial year, is summarised in the tables below: During the year, the Company reported a comprehensive loss of $9,727,382 (2019 $8,152,293). Operating revenue totaled $9,602,646, growing 16.5% on the prior financial year (2019 $8,241,993). Dividends No dividends have been paid or declared by the Company since the beginning of the financial year. Review of operations Please refer to the Business Update and Management Commentary sections of the 2020 Annual Report on pages 16 to 25 for the following information in respect of the Group: • • • • a review of operations during the financial year and the results of those operations likely developments in the operations in future financial years and the expected results of those operations comments on the financial position comments on business strategies and prospects for future financial years. MEDADVISOR LIMITED DIRECTORS’ REPORT – CONT. MEDADVISOR LIMITED DIRECTORS’ REPORT – CONT. 29 In respect of likely developments, business strategies and prospects for future financial years, material which if included would be likely to result in unreasonable prejudice to the Group has been omitted. Remuneration report Financial position The Group has $12,345,164 in cash plus $127,268 in cash on deposit as security, bringing a total cash balance of $12,472,432 as of 30 June 2020 following a net cash increase of $7,944,198 for the year. The net assets of the Group at 30 June 2020 were $17,020,609, an increase in net assets of $8,375,787 from 30 June 2019. State of affairs There were no other significant changes in the state of affairs of the Group that occurred during the financial year that are not otherwise disclosed in this report. Proceedings No person has applied for leave of Court to bring proceedings on behalf of the Group or intervene in any proceedings to which the Group is a party for the purpose of taking responsibility on behalf of the Group for all or any part of those proceedings. The Group was not a party to any such proceedings in the financial year. Matters subsequent to the end of the financial year The impact of the Coronavirus (COVID-19) pandemic is ongoing and it is not practicable to estimate the potential impact, positive or negative, after the date of this report. The situation is rapidly developing and is dependent on measures imposed by the Australian Government and other countries, such as maintaining social distancing requirements, quarantine, travel restrictions and any economic stimulus that may be provided. There have been no other matters or circumstances which have arisen since the end of the financial period that significantly affected, or may significantly affect the operations of the Company, the results of those operations or the state of affairs of the Company in future years. Unissued ordinary shares under option The Directors of MedAdvisor Limited (the Group) present the Remuneration Report for Non-Executive Directors, Executive Directors and other Key Management Personnel, prepared in accordance with the Corporations Act 2001 and the Corporations Regulations 2001 Remuneration Philosophy. The Remuneration Report is set out under the following main headings: a) Principles used to determine the nature and amount of remuneration b) Details of remuneration c) Service agreements d) Share-based remuneration; and e) Other information a. Principles used to determine the nature and amount of remuneration The principles of the Group’s executive strategy and supporting incentive programs and frameworks are: • • • to align rewards to business outcomes that deliver value to shareholders; to drive a high-performance culture by setting challenging objectives and rewarding high performing individuals; and to ensure remuneration is competitive in the relevant employment market place to support the attraction, motivation and retention of executive talent. MedAdvisor Limited has structured a remuneration framework that is market competitive and complementary to the reward strategy of the Group. The remuneration structure that has been adopted by the Group consists of the following components: • • • fixed remuneration being annual salary; short term incentives, being bonuses; and long term incentives, being employee share schemes. The payment of bonuses, share options and other incentive payments are reviewed by the Board prior to approval by the Board annually as part of the review of executive remuneration. All bonuses, options and incentives must be linked to pre-determined performance criteria. Short Term Incentive (STI) and Long-Term Incentive (LTI) MedAdvisor performance measures involve the use of annual performance objectives, metrics, performance appraisals and continuing emphasis on living the Company values. The performance measures are set annually after consultation with the Directors and executives and are specifically tailored to the areas where each executive has a level of control. The measures target areas the Board believes hold the greatest potential for expansion and profit and cover financial and non-financial measures. The Key Performance Indicators (KPI’s) for the Executive Team are summarised as follows: Performance areas • • financial – revenues and operating results; and non-financial – strategic goals set for each business unit based on job descriptions The STI and LTI Programs incorporate both cash and share-based components for the Executive Team and other employees. The Board may, at its discretion, award bonuses for exceptional performance in relation to each person’s pre-agreed KPIs. MEDADVISOR LIMITED DIRECTORS’ REPORT – CONT. Remuneration report – cont. b. Details of remuneration 2020 Cash Salary & Fees $ Cash Bonus $ Super- annuation $ Value of Share Based Awards in 2020 Financial Year1 $ Value of Share Based Awards from prior years1 $ Total $ Executive Directors R Read J Swinnerton Non-Executive Directors C Ridd P Bennetto J Xenos S Hook Other Key Management Personnel S Glover C Campiciano 292,113 281,157 40,639 69,000 45,000 45,000 198,103 166,719 1,137,731 - - - - - - - - - 21,002 1,546 3,861 6,555 4,275 4,275 18,836 15,472 75,822 129,642 - - - - 230,921 47,882 21,878 430,323 18,316 - * 461,073 282,703 - - - - 44,500 75,555 49,275 280,196 - - 18,316 264,821 204,069 1,662,192 ∗ Mr Read’s performance linked Share Based Entitlements are in accordance with his Employment Agreement dated 30 June 2015 which were disclosed in the Company’s Prospectus dated 8 September 2015. These Share Based Entitlements are brought to account based on a probability of all the performance milestones under his Employment Agreement being achieved. During the financial year 142,857 Read Rights vested based on the agreed milestones. The value brought to account of the Vested Read Rights in the current year; net of the value brought to account in previous years for lapsed options is $18,316, (2019 $7,938). 2019 Cash Salary & Fees $ Cash Bonus $ Super- annuation $ Value of Share Based Awards in 2019 Financial Year1 $ Value of Share Based Awards from prior years1 $ Total $ Executive Directors R Read J Swinnerton Non-Executive Directors P Bennetto J Xenos S Hook Other Key Management Personnel C Campiciano 285,229 259,795 81,000 45,000 45,000 233,906 949,930 - - - - - - - 20,531 6,453 7,695 4,275 4,275 20,531 63,760 - - - - - 10,705 - 316,465 266,248 - - - 88,695 49,275 49,275 56,952 56,952 - 10,705 311,389 1,081,347 1 Share based entitlements have been measured at fair value on grant date determined in accordance with the Binomial or Black- Scholes option pricing model. The proportion of the cash bonus paid/payable or forfeited is as follows: Executive Directors R Read Cash bonus paid/payable Cash bonus forfeited 2020 2019 2020 2019 0% 0% 0% 0% MEDADVISOR LIMITED DIRECTORS’ REPORT – CONT. Remuneration report – cont. 31 The relative proportions of remuneration that are linked to performance and those that are fixed are as follows: ` Fixed Remuneration 2019 2020 At Risk - STI At Risk - LTI 2020 2019 2020 2019 Executive Directors R Read J Swinnerton Non-Executive Directors C Ridd P Bennetto J Xenos S Hook Other Key Management Personnel S Glover C Campiciano c. Service agreements 68% 100% 100% 100% 100% 18% 82% 89% 97% 100% n/a 100% 100% 100% n/a 82% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% n/a 0% 0% 0% n/a 0% 32% 0% 0% 0% 0% 82% 18% 11% 3% 0% n/a 0% 0% 0% n/a 18% Remuneration and other terms of employment for the Executive Directors and other Key Management Personnel are formalised in a Service Agreement. The major provisions of the agreements relating to remuneration are set out below: Name Directors R Read J Swinnerton Other Key Management Personnel S Glover C Campiciano Base salary agreement Notice period $293,906 $284,890 $228,307 $243,977 Undefined Undefined Undefined Undefined 9 months 9 months 6 months 6 months Note: Base salary noted above is the current base salary and is exclusive of superannuation which under the applicable service agreements is capped in accordance with the maximum superannuation contribution base for superannuation guarantee purposes. The remuneration of non-executive Directors is set by the Board at a level that provides the Board with the ability to attract and retain directors of the highest calibre whilst incurring a cost that is acceptable to shareholders. At the Annual General Meeting held on 18 December 2015 shareholders approved aggregate remuneration of non-executive directors of $350,000 per annum. The amount each non-executive director is remunerated is set by the Board based on the recommendation from the People and Remuneration Committee. Individual remuneration is set having regard to the director’s experience and their role on the Board and Committees. d. Share-based remuneration MedAdvisor employee incentive option plan All options refer to options over ordinary shares of the Company, which are exercisable at no cost on a one- for-one basis under the terms of the Employee Share Option Plan that was approved by shareholders at the 2015 annual general meeting. MEDADVISOR LIMITED DIRECTORS’ REPORT – CONT. Remuneration report – cont. MEDADVISOR LIMITED DIRECTORS’ REPORT – CONT. Remuneration report – cont. 33 Options granted to employees under the MedAdvisor Employee Incentive Option Plan will vest subject to the service period and performance milestone conditions in the grant of Options in accordance with the plan. Unvested options will expire on the termination of the individual’s employment; vested options will expire on the expiry date, which is 15 years. Read Rights Rights were issued to Mr Read under his employment agreement dated 1 July 2015 and were exercisable subject to meeting the following conditions: • • 714,286 (5 million pre share consolidation) for continuous employment (Employment Rights) over a 5-year period from the date of his employment with MedAdvisor International Pty Ltd 5.4 million (37.5 million pre share consolidation) on achievement of predetermined revenue, activated patients and active medical practitioner targets (Performance Rights) within 3 years from the date of relisting of the Company on the Australian Securities Exchange being 1 December 2015. Employment Rights All 714,286 of Mr Read’s Employment Rights have vested as at 30 June 2020. Performance Rights 1Read Rights Shares held by directors and key management personnel Of the 5.4 million Performance Rights, 2.2 million lapsed on 1 December 2018 and 3.2 million had vested on achievement of the predetermined milestones as of 1 December 2018 as follows: Ordinary Shares Financial year ended 30-Jun-17 30-Jun-18 30-Jun-19 714,286 1,071,429 1,428,571 3,214,286 Of the total of 3.9 million Read Rights that have vested (0.7 million Employment Rights and 3.2 million Performance Rights), Mr Read has exercised a total of 1.7 million Read Rights (1 million in September 2017 and 0.7 million in May 2019), 2.2 million Read Rights that have vested but not exercised as at 30 June 2020. All of the Read Rights refer to rights over ordinary shares of the Company, which are exercisable on a one- for-one basis at no cost under the terms of Mr Read’s employment agreement. Bonuses included in remuneration There were no bonuses paid and or payable in the 2020 financial year. e. Other information Options held by directors and key management personnel The number of options and rights to acquire shares in the Company held during the 2020 reporting period by each of the directors and key management personnel of the Group; including their related parties are set out below. The number of ordinary shares in the Company held during the 2020 reporting period by each of the directors and key management personnel of the Group; including their related parties are set out below. Balance at start of the Granted as 2020 reporting period remuneration Received or Exercised Other changes Held at end of the reporting period Executive Directors R Read J Swinnerton Non-Executive Directors P Bennetto S Hook J Xenos Other Key Management Personnel C Campiciano 2,631,983 25,008,943 1,618,965 178,571 20,583,723 3,362,842 - - - - - - - - - - - 57,147 - (10,000,000) 2,631,983 15,008,943 - - - - 1,618,965 178,571 20,583,723 3,419,989 Balance at start of the Granted as 2019 reporting period remuneration Received or Exercised Other changes Held at end of the reporting period Executive Directors R Read J Swinnerton Non-Executive Directors P Bennetto S Hook J Xenos Other Key Management Personnel C Campiciano 1,917,698 25,008,943 190,394 178,571 20,583,723 3,143,795 - - - - - - 714,285 - 1,428,571 - - 219,047 - - - - - - 2,631,983 25,008,943 1,618,965 178,571 20,583,723 3,362,842 Note: the above shares reflect the 1:7 share consolidated that was effected on 21 November 2019. MEDADVISOR LIMITED DIRECTORS’ REPORT – CONT. Remuneration report – cont. MEDADVISOR LIMITED DIRECTORS' REPORT -CONT. 35 Other transactions with directors and key management personnel : • During 2020 the Group used the services of NostraData Pty Ltd of which Mr Jim Xenos is a director and has significant influence. The amounts billed relate to the provision of Data Services by NostraData Pty Ltd and amounted to $143,157 (2019 $140,825). Additional information The earnings of the group since the incorporation of MedAdvisor International Pty Ltd are summarized below: Auditor’s independence declaration A copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 36 and forms part of this report. Auditor RSM Australia Partners continues in office in accordance with section 327 of the Corporations Act 2001. This directors’ report is made in accordance with a resolution of directors, pursuant to section 298(2)(a) of the Corporations Act 2001. On behalf of the directors, Christopher Ridd Non-Executive Director and Chair 27 August 2020 Camberwell, VIC End of audited Remuneration report Indemnities given to, and insurance premiums paid for officers The Company has indemnified the directors and executives of the Company for costs incurred, in their capacity as a director or executive, for which they may be held personally liable, except where there is a lack of good faith. During the financial year, the Company paid a premium in respect of a contract to insure the directors and executives of the Company against a liability to the extent permitted by the Corporations Act 2001. The contract of insurance prohibits disclosure of the nature of the liability and the amount of the premium. Indemnities and insurance premiums of auditor The Company has not, during or since the end of the financial year, indemnified or agreed to indemnify the auditor of the Company or any related entity against a liability incurred by the auditor. During the financial year, the Company has not paid a premium in respect of a contract to insure the auditor of the company or any related entity. Non-audit services During the year, RSM Australia Partners, the Company’s auditors provided services in relation to a R&D Tax Concession Claim, valued at $44,673. They did not perform any other services in addition to this and their statutory audit duties. Details of the amounts paid to the auditors of the Company, RSM Australia Partners, and its related practices for audit services provided during the year are set out in Note 8 to the financial statements. AUDITOR’S INDEPENDENCE DECLARATION 37 RSM Australia Partners Level 21, 55 Collins Street Melbourne VIC 3000 PO Box 248 Collins Street West VIC 8007 T +61 (0) 3 9286 8000 F +61 (0) 3 9286 8199 www.rsm.com.au AUDITOR’S INDEPENDENCE DECLARATION As lead auditor for the audit of the financial report MedAdvisor Limited for the year ended 30 June 2020, I declare that, to the best of my knowledge and belief, there have been no contraventions of: (i) (ii) the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and any applicable code of professional conduct in relation to the audit. RSM AUSTRALIA PARTNERS B Y CHAN Partner Date: 27 August 2020 Melbourne, Victoria THE POWER OF BEING UNDERSTOOD AUDIT | TAX | CONSULTING RSM Australia Partners is a member of the RSM network and trades as RSM. RSM is the trading name used by the members of the RSM network. Each member of the RSM network is an independent accounting and consulting firm which practices in its own right. The RSM network is not itself a separate legal entity in any jurisdiction. RSM Australia Partners ABN 36 965 185 036 Liability limited by a scheme approved under Professional Standards Legislation THE POWER OF BEING UNDERSTOODAUDIT | TAX | CONSULTINGRSM Australia Partnersis a member of the RSM network and trades as RSM. RSM is the trading name used by the members of the RSM network. Each member of the RSM network is an independent accounting and consulting firm which practices in its own right. The RSM network is not itself a separate legal entity in any jurisdiction. RSM Australia Partners ABN 36 965 185 036Liability limited by a scheme approved under Professional Standards LegislationRSMAustralia PartnersLevel21, 55 Collins Street Melbourne VIC3000POBox 248Collins Street West VIC8007T +61(0) 3 9286 8000F+61(0) 39286 8199www.rsm.com.auINDEPENDENTAUDITOR’SREPORTTo the Members of MedAdvisorLimitedOpinionWehaveaudited the financial reportofMedAdvisorLimited (the Company) and itssubsidiaries (theGroup), whichcomprises the consolidated statement of financialposition as at30June 2020, the consolidatedstatement ofprofitor lossand other comprehensive income, the consolidated statement of changes in equityand the consolidatedstatement of cash flows for theyear then ended,andnotes to the financialstatements, including asummaryofsignificant accounting policies, andthedirectors'declaration.Inouropinion theaccompanying financial reportoftheGroupisin accordance withthe CorporationsAct2001,including:I.giving a true and fair view of the Group's financial positionas at30 June 2020 and of its financialperformance for theyear thenended;andII.complyingwith Australian Accounting Standards andthe Corporations Regulations2001.BasisforOpinionWe conducted our auditin accordance with Australian Auditing Standards. Ourresponsibilities under thosestandardsare furtherdescribed in the Auditor'sResponsibilitiesforthe Audit ofthe FinancialReportsection ofourreport. We are independentofthe Group in accordancewith the auditorindependence requirementsoftheCorporationsAct 2001 and the ethical requirements of theAccounting ProfessionalandEthicalStandardsBoard'sAPES110Code ofEthicsforProfessionalAccountants(theCode)that are relevanttoourauditofthe financialreport in Australia.Wehave also fulfilled ourother ethical responsibilitiesin accordance with the Code.We confirm that theindependencedeclarationrequired bytheCorporationsAct 2001, which hasbeen given tothe directors of theCompany, would bein the same terms if given to the directors as at the time of this auditor'sreport.Webelieve thatthe auditevidence we have obtained is sufficient and appropriate to providea basisforouropinion.Financials Consolidated financial report for the year ended 30 June 2020 MEDADVISOR LIMITED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR YEAR ENDED 30 JUNE 2020 39 Revenues from continuing operations Other revenue Direct expenses Development costs Notes 5 a. 5 b. 6 a. Consolidated 2020 30-Jun-20 $ 2019 30-Jun-19 $ 9,602,646 8,241,993 1,468,098 951,121 (1,221,227) (1,014,022) (2,504,232) (2,591,683) Employee benefits expenses 6 b. (11,501,162) (9,268,366) Marketing expense Depreciation and amortisation expenses Directors fees Other expenses Finance costs Loss before income tax Income tax (expense) / income Loss after income tax expense for the year Other comprehensive income Total comprehensive loss for the year Loss for the year is attributable to: Non-controlling interest Owners of MedAdvisor Limited Total comprehensive loss for the year is attributable to: Non-controlling interest Owners of MedAdvisor Limited Loss per Share Basic loss per share Diluted loss per Share 6 c. 6 b. 6 d. 7 (2,425,110) (2,355,979) (512,224) (259,314) (217,892) (187,245) (2,353,387) (1,601,563) (115,100) (16,328) (9,779,590) (8,101,385) - - (9,779,590) (8,101,385) 52,208 (50,908) (9,727,382) (8,152,293) (194,595) (9,584,995) (9,779,590) (196,529) (9,530,853) (9,727,382) - (8,152,293) (8,152,293) - (8,152,293) (8,152,293) 3 3 $ $ (4.22) (4.22) $ $ (4.23) (4.23) The above statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes. Comparative figures are for the full year ended 30 June 2019 MEDADVISOR LIMITED CONSOLIDATED STATEMENT OF FINANCIAL POSITION FOR YEAR ENDED 30 JUNE 2020 MEDADVISOR LIMITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR YEAR ENDED 30 JUNE 2020 41 41 ASSETS Current Assets Cash and cash equivalents Trade and other receivables Other assets Total Current Assets Non-Current Assets Other assets Fixed assets Right-of-use assets Intangible assets Total Non-Current Assets Total Assets LIABILITIES Current Liabilities Trade and other payables Income in advance Employee benefits Leases Total Current Liabilities Non-Current Liabilities Employee benefits Leases Total Non-Current Liabilities Total Liabilities Net Assets EQUITY Contributed equity Reserves Retained earnings / (losses) Equity attributable to the owners of MedAdvisor Limited Non-controlling interest Total Equity Consolidated 2020 30-Jun-20 $ 2019 30-Jun-19 $ Notes 9 10 11 11 12 13 14 15 16 17 18 17 18 19 20 21 22 12,345,164 1,839,384 375,732 14,560,280 - 393,560 1,073,219 5,244,415 6,711,194 4,400,720 1,129,752 407,270 5,937,742 250,000 405,295 - 5,181,815 5,837,111 21,271,474 11,774,853 1,189,710 521,231 1,036,199 263,856 3,010,996 82,950 1,156,919 1,239,869 1,850,094 474,977 751,957 - 3,077,028 53,003 - 53,003 4,250,865 3,130,031 17,020,609 8,644,822 45,369,890 1,574,072 (30,281,714) 16,662,248 358,361 17,020,609 28,136,013 1,153,935 (20,645,126) 8,644,822 - 8,644,822 The above statement of financial position should be read in conjunction with the accompanying notes. Comparative figures are as at 30 June 2019 Contributed Equity $ Reserves $ Retained Earnings/(Losses) $ Non-Controlling Interest $ Total Equity $ Notes Consolidated Balance 1 July 2019 Transactions with owners in their capacity as owners: 28,136,013 1,153,935 (20,645,126) - 8,644,822 Ordinary shares issued Capital raising costs (net of GST) Share Options issued Share Options exercised 17,120,000 (467,903) - 581,780 - - 947,775 (581,780) - - - - 554,890 - - - Total comprehensive income for the full year: Other comprehensive income AASB 16 Retained Earnings Adjustment Loss after tax - - - 54,142 - - (51,593) (9,584,995) (1,934) (194,595) 17,674,890 (467,903) 947,775 - - 52,208 (51,593) (9,779,590) Balance 30 June 2020 45,369,890 1,574,072 (30,281,714) 358,361 17,020,609 25,979,898 1,732,305 (12,543,741) Consolidated Balance 1 July 2018 Transactions with owners in their capacity as owners: Ordinary shares issued Capital raising costs (net of GST) Share Options issued Share Options exercised 983,750 (16,347) - 1,188,712 - - 661,250 (1,188,712) - - - - - (8,101,385) Total comprehensive income for the full year: Other comprehensive income Loss after income tax - - (50,908) - Balance 30 June 2019 28,136,013 1,153,935 (20,645,126) The above statement of changes in equity should be read in conjunction with the accompanying notes. Comparative figures are for the full year ended 30 June 2019 - - - - - - - - 15,168,462 983,750 (16,347) 661,250 - (50,908) (8,101,385) 8,644,822 MEDADVISOR LIMITED CONSOLIDATED STATEMENT OF CASHFLOWS FOR YEAR ENDED 30 JUNE 2020 MEDADVISOR LIMITED NOTES TO THE FINANCIAL STATEMENTS FOR YEAR ENDED 30 JUNE 2020 43 Cash Flows From Operating Activities Receipts from customers (inclusive of GST) Payments to suppliers and employees (inclusive of GST) Receipt from R&D tax concession Interest received Interest paid Net cash outflow from operating activities Cash Flows From Investing Activities Payments for property, plant and equipment Payments for intangibles Net cash outflow from investing activities Cash Flows From Financing Activities Proceeds from new share issue Capital raising costs (net of GST) Receipts from non controlling entities Repayment of lease liabilities Consolidated 2020 30-Jun-20 $ 2019 30-Jun-19 $ Notes 10,129,859 (20,005,320) 1,188,204 101,394 (94,684) 8,063,295 (15,891,812) 749,545 133,804 - (8,680,547) (6,945,168) (100,667) (223,545) (103,890) - (324,212) (103,890) 17,100,000 (467,903) 554,890 (237,784) 975,000 - - - 24 12 14 19 19 22 Net cash (outflow) inflow from financing activities 16,949,203 975,000 Note 1: Statement of Significant Accounting Policies The financial statements cover the Company of MedAdvisor Limited. MedAdvisor Limited is a listed public company limited by shares, incorporated and domiciled in Australia. The financial statements were authorized for issue on the 27 August 2020 by the Directors of the Company. The principal accounting policies adopted in the preparation of the financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. Basis of Preparation The financial statements are general purpose financial statements that have been prepared in accordance Interpretations, other authoritative with Australian Accounting Standards, Australian Accounting pronouncements of the Australian Accounting Standards Board (AASB) and the Corporations Act 2001. The Company is a for-profit entity for financial reporting purposes under Australian Accounting Standards. Australian Accounting Standards set out accounting policies that the AASB has concluded would result in financial statements containing relevant and reliable information about transactions, events and conditions. Compliance with Australian Accounting Standards ensures that the financial statements and notes also comply with International Financial Reporting Standards as issued by the IASB. Material accounting policies adopted in the preparation of these financial statements are presented below and have been consistently applied unless otherwise stated. The financial statements have been prepared on an accruals basis and are based on historical costs, modified, where applicable, by the measurement at fair value of selected non-current assets, financial assets and financial liabilities. New or amended Accounting Standards and Interpretations adopted The Group has adopted all of the new or amended Accounting Standards and Interpretations issued by the Australian Accounting Standards Board ('AASB') that are mandatory for the current reporting period. Any new or amended Accounting Standards or Interpretations that are not yet mandatory have not been early adopted. The following Accounting Standards and Interpretations are most relevant to the consolidated entity: Net increase/(decrease) in cash held 7,944,444 (6,074,058) AASB 16 Leases Cash and cash equivalents at the beginning of the year 4,400,720 10,474,777 Cash and cash equivalents at the end of the year 9 12,345,164 4,400,720 The above statement of cash flows should be read in conjunction with the accompanying notes. Comparative figures are for the full year ended 30 June 2019 The Group has adopted AASB 16 from 1 July 2019. The standard replaces AASB 117 'Leases' and for lessees eliminates the classifications of operating leases and finance leases. Except for short-term leases and leases of low-value assets, right-of-use assets and corresponding lease liabilities are recognised in the statement of financial position. Straight-line operating lease expense recognition is replaced with a depreciation charge for the right-of-use assets (included in operating costs) and an interest expense on the recognised lease liabilities (included in finance costs). In the earlier periods of the lease, the expenses associated with the lease under AASB 16 will be higher when compared to lease expenses under AASB 117. However, EBITDA (Earnings Before Interest, Tax, Depreciation and Amortisation) results improve as the operating expense is now replaced by interest expense and depreciation in profit or loss. For classification within the statement of cash flows, the interest portion is disclosed in operating activities and the principal portion of the lease payments are separately disclosed in financing activities. For lessor accounting, the standard does not substantially change how a lessor accounts for leases. MEDADVISOR LIMITED NOTES TO THE FINANCIAL STATEMENTS FOR YEAR ENDED 30 JUNE 2020 MEDADVISOR LIMITED NOTES TO THE FINANCIAL STATEMENTS FOR YEAR ENDED 30 JUNE 2020 45 Note 1: Statement of Significant Accounting Policies – cont. Note 1: Statement of Significant Accounting Policies – cont. Impact of adoption AASB 16 was adopted using the modified retrospective approach and as such the comparatives have not been restated. The impact of adoption on opening retained profits as at 1 July 2019 was as follows: Operating lease commitments as at 1 July 2019 (AASB 117) Transition assessment adjustment Finance lease commitments as at 1 July 2019 (AASB 117) Operating lease commitments discount based on the weighted average incremental borrowing rate of 6% (AASB 16) Short-term leases not recognised as a right-of-use asset (AASB 16) Low-value assets leases not recognised as a right-of-use asset (AASB 16) Accumulated depreciation as at 1 July 2019 (AASB 16) Right-of-use assets (AASB 16) Adjustment for lease incentive Lease liabilities - current (AASB 16) Lease liabilities - non-current (AASB 16) Tax effect on the above adjustments Reduction in opening retained profits as at 1 July 2019 01-Jul-19 2,831,258 (506,934) (654,872) - - - (357,740) 1,311,712 295,253 (158,684) (1,499,876) - 51,595 When adopting AASB 16 from 1 July 2019, the consolidated entity has applied the following practical expedients: • • • • Applying a single discount rate to the portfolio of leases with reasonably similar characteristics Accounting for leases with a remaining lease term of 12 months as at 1 July 2019 as short term leases Excluding initial direct costs from the measurement of right of use assets Using hindsight in determining the lease term when the contract contains options to extend or terminate the lease; and • Not apply AASB 16 to contracts that were not previously identified as containing a lease. Accounting Policies (a) Parent entity information In accordance with the Corporations Act 2001, these financial statements present the results of the consolidated entity only. Supplementary information about the parent entity is disclosed in note 28. (b) Principles of Consolidation The consolidated financial statements incorporate all of the assets, liabilities and results of the parent MedAdvisor Limited and all of the subsidiaries. Subsidiaries are entities the parent controls. The parent controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. A list of controlled entities is contained in Note 2 9 of the Financial Statements. The assets, liabilities and results of all subsidiaries are fully consolidated into the financial statements of the Group from the date on which control is obtained by the Group. The consolidation of a subsidiary is discontinued from the date that control ceases. Intercompany transactions, balances and unrealised gains or losses on transactions between Group entities are fully eliminated on consolidation. Accounting policies of subsidiaries have been changed and adjustments made where necessary to ensure uniformity of the accounting policies adopted by the Group. The acquisition of subsidiaries is accounted for using the acquisition method of accounting. A change in ownership interest, without the loss of control, is accounted for as an equity transaction, where the difference between the consideration transferred and the book value of the share of the non-controlling interest acquired is recognised directly in equity attributable to the parent. Equity interests in a subsidiary not attributable, directly or indirectly, to the Group are presented as “non- controlling interests”. The Group initially recognises non-controlling interests that are present ownership interests in subsidiaries and are entitled to a proportionate share of the subsidiary’s net assets on liquidation at either fair value or at the non-controlling interests’ proportionate share of the subsidiary’s net assets. Subsequent to initial recognition, non-controlling interests are attributed their share of profit or loss and each component of other comprehensive income. Non-controlling interests are shown separately within the equity section of the statement of financial position and statement of comprehensive income. Where the consolidated entity loses control over a subsidiary, it derecognises the assets including goodwill, liabilities and non-controlling interest in the subsidiary together with any cumulative translation differences recognised in equity. The consolidated entity recognises the fair value of the consideration received and the fair value of any investment retained together with any gain or loss in profit or loss. (c) Operating segments Operating segments are presented using the 'management approach', where the information presented is on the same basis as the internal reports provided to the Chief Operating Decision Makers ('CODM'). The CODM is responsible for the allocation of resources to operating segments and assessing their performance. (d) Foreign currency translation The financial statements are presented in Australian dollars, which is MedAdvisor Limited’s functional and presentation currency. Foreign currency transactions Foreign currency transactions are translated into Australian dollars using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at financial year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss. Foreign operations The assets and liabilities of foreign operations are translated into Australian dollars using the exchange rates at the reporting date. The revenues and expenses of foreign operations are translated into Australian dollars using the average exchange rates, which approximate the rates at the dates of the transactions, for the period. All resulting foreign exchange differences are recognised in other comprehensive income through the foreign currency reserve in equity. The foreign currency reserve is recognised in profit or loss when the foreign operation or net investment is disposed of. MEDADVISOR LIMITED NOTES TO THE FINANCIAL STATEMENTS FOR YEAR ENDED 30 JUNE 2020 MEDADVISOR LIMITED NOTES TO THE FINANCIAL STATEMENTS FOR YEAR ENDED 30 JUNE 2020 47 Note 1: Statement of Significant Accounting Policies – cont. Note 1: Statement of Significant Accounting Policies – cont. (e) Revenue recognition The consolidated entity recognises revenue as follows: Revenue from contracts with customers Revenue is recognised at an amount that reflects the consideration to which the consolidated entity is expected to be entitled in exchange for transferring goods or services to a customer. For each contract with a customer, the consolidated entity: identifies the contract with a customer; identifies the performance obligations in the contract; determines the transaction price which takes into account estimates of variable consideration and the time value of money; allocates the transaction price to the separate performance obligations on the basis of the relative stand-alone selling price of each distinct good or service to be delivered; and recognises revenue when or as each performance obligation is satisfied in a manner that depicts the transfer to the customer of the goods or services promised. Variable consideration within the transaction price, if any, reflects concessions provided to the customer such as discounts, rebates and refunds, any potential bonuses receivable from the customer and any other contingent events. Such estimates are determined using either the 'expected value' or 'most likely amount' method. The measurement of variable consideration is subject to a constraining principle whereby revenue will only be recognised to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue recognised will not occur. The measurement constraint continues until the uncertainty associated with the variable consideration is subsequently resolved. Amounts received that are subject to the constraining principle are recognised as a refund liability. License fees License fees are charged for the use of the MedAdvisor platform and the revenue recognized at the point at which the customer has agreed to the terms and conditions of use of the platform and installs the interface on their computer equipment and is able to benefit from and be rewarded for the use of the platform. Rendering of services Rendering of services revenue from health programs is recognised by reference to the stage of completion of the contracts. Stage of completion is measured by reference to labour hours incurred to date as a percentage of total estimated labour hours for each contract. Where the contract outcome cannot be reliably estimated, revenue is only recognised to the extent of the recoverable costs incurred to date. Interest Interest revenue is recognised as interest accrues using the effective interest method. This is a method of calculating the amortised cost of a financial asset and allocating the interest income over the relevant period using the effective interest rate, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the net carrying amount of the financial asset. Other revenue Other revenue is recognised when it is received or when the right to receive payment is established. (f) Income tax The income tax expense (revenue) for the period comprises current income tax expense (income) and deferred tax expense (income). Current income tax expense charged to the profit or loss is the tax payable on taxable income calculated using applicable income tax rates enacted, or substantially enacted, as at the end of the reporting period. Current tax liabilities (assets) are therefore measured at the amounts expected to be paid to (recovered from) the relevant taxation authority. Deferred income tax expense reflects movements in deferred tax asset and deferred tax liability balances during the year as well as unused tax losses. Current and deferred income tax expense (income) is charged or credited directly to equity instead of the profit or loss when the tax relates to items that are credited or charged directly to equity. Deferred tax assets and liabilities are ascertained based on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred tax assets also result where amounts have been fully expensed but future tax deductions are available. No deferred income tax will be recognised from the initial recognition of an asset or liability, excluding a business combination, where there is no effect on accounting or taxable profit or loss. Deferred tax assets and liabilities are calculated at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates enacted or substantively enacted at the end of the reporting period. Their measurement also reflects the manner in which management expects to recover or settle the carrying amount of the related asset or liability. Deferred tax assets relating to temporary differences and unused tax losses are recognised only to the extent that it is probable that future taxable profit will be available against which the benefits of the deferred tax asset can be utilised. Where temporary differences exist in relation to investments in subsidiaries, branches, associates, and joint ventures, deferred tax assets and liabilities are not recognised where the timing of the reversal of the temporary difference can be controlled and it is not probable that the reversal will occur in the foreseeable future. Current tax assets and liabilities are offset where a legally enforceable right of set-off exists and it is intended that net settlement or simultaneous realisation and settlement of the respective asset and liability will occur. Deferred tax assets and liabilities are offset where a legally enforceable right of set-off exists, the deferred tax assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where it is intended that net settlement or simultaneous realisation and settlement of the respective asset and liability will occur in future periods in which significant amounts of deferred tax assets or liabilities are expected to be recovered or settled. (g) Current and non-current classification Assets and liabilities are presented in the statement of financial position based on current and non-current classification. An asset is classified as current when: it is either expected to be realised or intended to be sold or consumed in the consolidated entity's normal operating cycle; it is held primarily for the purpose of trading; it is expected to be realized within 12 months after the reporting period; or the asset is cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least 12 months after the reporting period. All other assets are classified as non-current. A liability is classified as current when: it is either expected to be settled in the consolidated entity's normal operating cycle; it is held primarily for the purpose of trading; it is due to be settled within 12 months after the reporting period; or there is no unconditional right to defer the settlement of the liability for at least 12 months after the reporting period. All other liabilities are classified as non-current. Deferred tax assets and liabilities are always classified as non-current. MEDADVISOR LIMITED NOTES TO THE FINANCIAL STATEMENTS FOR YEAR ENDED 30 JUNE 2020 MEDADVISOR LIMITED NOTES TO THE FINANCIAL STATEMENTS FOR YEAR ENDED 30 JUNE 2020 49 Note 1: Statement of Significant Accounting Policies – cont. Note 1: Statement of Significant Accounting Policies – cont. (h) Cash and cash equivalents expected credit loss recognised is measured on the basis of the probability weighted present value of anticipated cash shortfalls over the life of the instrument discounted at the original effective interest rate. Cash and cash equivalents includes cash on hand, deposits held at call with banks and other short-term highly liquid investments with original maturities of three months or less. (l) Plant and equipment (i) Trade and other receivables Trade receivables are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method, less any allowance for expected credit losses. Trade receivables are generally due for settlement within 30 days. The consolidated entity has applied the simplified approach to measuring expected credit losses, which uses a lifetime expected loss allowance to measure the expected credit losses, trade receivables have been grouped based on days overdue. Other receivables are recognised at amortised cost, less any allowance for expected credit losses. (j) Work in progress Work in progress on services contract’s in progress comprises the cost of labour directly related to the performance of the contract plus any other direct costs incurred in delivering the contract services. (k) Investments and other financial assets Investments and other financial assets are initially measured at fair value. Transaction costs are included as part of the initial measurement, except for financial assets at fair value through profit or loss. Such assets are subsequently measured at either amortised cost or fair value depending on their classification. Classification is determined based on both the business model within which such assets are held and the contractual cash flow characteristics of the financial asset unless an accounting mismatch is being avoided. Financial assets are derecognised when the rights to receive cash flows have expired or have been transferred and the consolidated entity has transferred substantially all the risks and rewards of ownership. When there is no reasonable expectation of recovering part or all of a financial asset, its carrying value is written off. Plant and equipment are measured on the cost basis and therefore carried at cost less accumulated depreciation and any accumulated impairment. In the event the carrying amount of plant and equipment is greater than the estimated recoverable amount, the carrying amount is written down immediately to the estimated recoverable amount and impairment losses are recognised either in profit or loss or as a revaluation decrease if the impairment losses relate to a revalued asset. A formal assessment of recoverable amount is made when impairment indicators are present (refer to Note 1 (o) for details of impairment). The carrying amount of plant and equipment is reviewed annually by directors to ensure it is not in excess of the recoverable amount from these assets. The recoverable amount is assessed on the basis of the expected net cash flows that will be received from the asset’s employment and subsequent disposal. The expected net cash flows have been discounted to their present values in determining recoverable amounts. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. All other repairs and maintenance are recognised as expenses in profit or loss during the financial period in which they are incurred. Depreciation The depreciable amount of all fixed assets including buildings and capitalised lease assets, but excluding freehold land, is depreciated over the asset’s useful life to the Company commencing from the time the asset is held ready for use. Leasehold improvements are depreciated over the shorter of either the unexpired period of the lease or the estimated useful lives of the improvements. The depreciation rates and method of deprecation is as follows: • Office equipment – diminishing value at 30% p.a. • Office furniture – straight line at 20% p.a. • Leasehold improvements – straight line over the unexpired period of the lease Financial assets at fair value through profit or loss (m) Right-of-use assets Financial assets not measured at amortised cost or at fair value through other comprehensive income are classified as financial assets at fair value through profit or loss. Typically, such financial assets will be either: (i) held for trading, where they are acquired for the purpose of selling in the short-term with an intention of making a profit, or a derivative; or (ii) designated as such upon initial recognition where permitted. Fair value movements are recognised in profit or loss. Impairment of financial assets The consolidated entity recognises a loss allowance for expected credit losses on financial assets which are either measured at amortised cost or fair value through other comprehensive income. The measurement of the loss allowance depends upon the consolidated entity's assessment at the end of each reporting period as to whether the financial instrument's credit risk has increased significantly since initial recognition, based on reasonable and supportable information that is available, without undue cost or effort to obtain. Where there has not been a significant increase in exposure to credit risk since initial recognition, a 12- month expected credit loss allowance is estimated. This represents a portion of the asset's lifetime expected credit losses that is attributable to a default event that is possible within the next 12 months. Where a financial asset has become credit impaired or where it is determined that credit risk has increased significantly, the loss allowance is based on the asset's lifetime expected credit losses. The amount of A right-of-use asset is recognised at the commencement date of a lease. The right-of-use asset is measured at cost, which comprises the initial amount of the lease liability, adjusted for, as applicable, any lease payments made at or before the commencement date net of any lease incentives received, any initial direct costs incurred, and, except where included in the cost of inventories, an estimate of costs expected to be incurred for dismantling and removing the underlying asset, and restoring the site or asset. Right-of-use assets are depreciated on a straight-line basis over the unexpired period of the lease or the estimated useful life of the asset, whichever is the shorter. Where the Group expects to obtain ownership of the leased asset at the end of the lease term, the depreciation is over its estimated useful life. Right-of use assets are subject to impairment or adjusted for any remeasurement of lease liabilities. The Group has elected not to recognise a right-of-use asset and corresponding lease liability for short-term leases with terms of 12 months or less and leases of low-value assets. Lease payments on these assets are expensed to profit or loss as incurred. MEDADVISOR LIMITED NOTES TO THE FINANCIAL STATEMENTS FOR YEAR ENDED 30 JUNE 2020 MEDADVISOR LIMITED NOTES TO THE FINANCIAL STATEMENTS FOR YEAR ENDED 30 JUNE 2020 51 Note 1: Statement of Significant Accounting Policies – cont. Note 1: Statement of Significant Accounting Policies – cont. (n) Intangible assets (q) Lease liabilities Intangible assets acquired as part of a business combination, other than goodwill, are initially measured at their fair value at the date of the acquisition. Intangible assets acquired separately are initially recognised at cost. Indefinite life intangible assets are not amortised and are subsequently measured at cost less any impairment. Finite life intangible assets are subsequently measured at cost less amortization and any impairment. The gains or losses recognised in profit or loss arising from the derecognition of intangible assets are measured as the difference between net disposal proceeds and the carrying amount of the intangible asset. The method and useful lives of finite life intangible assets are reviewed annually. Changes in the expected pattern of consumption or useful life are accounted for prospectively by changing the amortization method or period. Goodwill Goodwill arises on the acquisition of a business. Goodwill is not amortised. Instead, goodwill is tested annually for impairment, or more frequently if events or changes in circumstances indicate that it might be impaired and is carried at cost less accumulated impairment losses. Impairment losses on goodwill are taken to profit or loss and are not subsequently reversed. Patents and trademarks Significant costs associated with patents and trademarks are deferred and amortised on a straight-line basis over the period of their expected benefit, being their finite life of 10 years. Software Significant costs associated with software are deferred and amortised on a straight-line basis over the period of their expected benefit, being their finite life of 5-10 years. (o) Impairment of assets At the end of each reporting period, the Company assesses whether there is any indication that an asset may be impaired. The assessment will include the consideration of external and internal sources of information including dividends received from subsidiaries, associates or jointly controlled entities deemed to be out of pre-acquisition profits. If such an indication exists, an impairment test is carried out on the asset by comparing the recoverable amount of the asset, being the higher of the asset’s fair value less costs to sell and value in use, to the asset’s carrying amount. Any excess of the asset’s carrying amount over its recoverable amount is recognised immediately in profit or loss, unless the asset is carried at a revalued amount in accordance with another Standard (e.g. in accordance with the revaluation model in AASB 116: Property, Plant and Equipment). Any impairment loss of a revalued asset is treated as a revaluation decrease in accordance with that other Standard. Where it is not possible to estimate the recoverable amount of an individual asset, the Company estimates the recoverable amount of the cash-generating unit to which the asset belongs. Impairment testing is performed annually for goodwill, intangible assets with indefinite lives and intangible assets not yet available for use. (p) Trade and other payables These amounts represent liabilities for goods and services provided to the consolidated entity prior to the end of the financial year and which are unpaid. Due to their short-term nature they are measured at amortised cost and are not discounted. The amounts are unsecured and are usually paid within 30 days of recognition. A lease liability is recognised at the commencement date of a lease. The lease liability is initially recognised at the present value of the lease payments to be made over the term of the lease, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the consolidated entity's incremental borrowing rate. Lease payments comprise of fixed payments less any lease incentives receivable, variable lease payments that depend on an index or a rate, amounts expected to be paid under residual value guarantees, exercise price of a purchase option when the exercise of the option is reasonably certain to occur, and any anticipated termination penalties. The variable lease payments that do not depend on an index or a rate are expensed in the period in which they are incurred. Lease liabilities are measured at amortised cost using the effective interest method. The carrying amounts are remeasured if there is a change in the following: future lease payments arising from a change in an index or a rate used; residual guarantee; lease term; certainty of a purchase option and termination penalties. When a lease liability is remeasured, an adjustment is made to the corresponding right-of use asset, or to profit or loss if the carrying amount of the right-of-use asset is fully written down. (r) Finance costs Finance costs attributable to qualifying assets are capitalised as part of the asset. All other finance costs are expensed in the period in which they are incurred. (s) Provisions Provisions are recognised when the consolidated entity has a present (legal or constructive) obligation as a result of a past event, it is probable the consolidated entity will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the reporting date, taking into account the risks and uncertainties surrounding the obligation. If the time value of money is material, provisions are discounted using a current pre-tax rate specific to the liability. The increase in the provision resulting from the passage of time is recognised as a finance cost. (t) Employee benefits Short-term employee benefits Liabilities for wages and salaries, including non-monetary benefits, annual leave and long service leave expected to be settled wholly within 12 months of the reporting date are measured at the amounts expected to be paid when the liabilities are settled. Other long-term employee benefits The liability for annual leave and long service leave not expected to be settled within 12 months of the reporting date are measured as the present value of expected future payments to be made in respect of services provided by employees up to the reporting date. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. Expected future payments are discounted using market yields at the reporting date on corporate bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows. Share-based payments Equity-settled and cash-settled share-based compensation benefits are provided to employees. Equity-settled transactions are awards of shares, or options over shares, that are provided to employees in exchange for the rendering of services. Cash-settled transactions are awards of cash for the exchange of services, where the amount of cash is determined by reference to the share price. MEDADVISOR LIMITED NOTES TO THE FINANCIAL STATEMENTS FOR YEAR ENDED 30 JUNE 2020 MEDADVISOR LIMITED NOTES TO THE FINANCIAL STATEMENTS FOR YEAR ENDED 30 JUNE 2020 53 Note 1: Statement of Significant Accounting Policies – cont. Note 1: Statement of Significant Accounting Policies – cont. The cost of equity-settled transactions is measured at fair value on grant date. Fair value is independently determined using either the Binomial or Black-Scholes option pricing model that takes into account the exercise price, the term of the option, the impact of dilution, 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 option, together with non-vesting conditions that do not determine whether the consolidated entity receives the services that entitle the employees to receive payment. No account is taken of any other vesting conditions. The cost of equity-settled transactions is recognised as an expense with a corresponding increase in equity over the vesting period. The cumulative charge to profit or loss is calculated based on the grant date fair value of the award, the best estimate of the number of awards that are likely to vest and the expired portion of the vesting period. The amount recognised in profit or loss for the period is the cumulative amount calculated at each reporting date less amounts already recognised in previous periods. The cost of cash-settled transactions is initially, and at each reporting date until vested, determined by applying either the Binomial or Black-Scholes option pricing model, taking into consideration the terms and conditions on which the award was granted. The cumulative charge to profit or loss until settlement of the liability is calculated as follows: • • during the vesting period, the liability at each reporting date is the fair value of the award at that date multiplied by the expired portion of the vesting period. from the end of the vesting period until settlement of the award, the liability is the full fair value of the liability at the reporting date. All changes in the liability are recognised in profit or loss. The ultimate cost of cash-settled transactions is the cash paid to settle the liability. Market conditions are taken into consideration in determining fair value. Therefore any awards subject to market conditions are considered to vest irrespective of whether or not that market condition has been met, provided all other conditions are satisfied. If equity-settled awards are modified, as a minimum an expense is recognised as if the modification has not been made. An additional expense is recognised, over the remaining vesting period, for any modification that increases the total fair value of the share-based compensation benefit as at the date of modification. If the non-vesting condition is within the control of the consolidated entity or employee, the failure to satisfy the condition is treated as a cancellation. If the condition is not within the control of the consolidated entity or employee and is not satisfied during the vesting period, any remaining expense for the award is recognised over the remaining vesting period, unless the award is forfeited. If equity-settled awards are cancelled, it is treated as if it has vested on the date of cancellation, and any remaining expense is recognised immediately. If a new replacement award is substituted for the cancelled award, the cancelled and new award is treated as if they were a modification. (u) Fair value measurement When an asset or liability, financial or non-financial, is measured at fair value for recognition or disclosure purposes, the fair value is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date; and assumes that the transaction will take place either: in the principal market; or in the absence of a principal market, in the most advantageous market. Fair value is measured using the assumptions that market participants would use when pricing the asset or liability, assuming they act in their economic best interests. For non-financial assets, the fair value measurement is based on its highest and best use. Valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, are used, maximising the use of relevant observable inputs and minimising the use of unobservable inputs. There are no assets and liabilities held at fair value on a recurring or non-recurring basis. (v) Issued capital Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. (w) Business combinations The acquisition method of accounting is used to account for business combinations regardless of whether equity instruments or other assets are acquired. The consideration transferred is the sum of the acquisition-date fair values of the assets transferred, equity instruments issued or liabilities incurred by the acquirer to former owners of the acquiree and the amount of any non-controlling interest in the acquiree. For each business combination, the non-controlling interest in the acquiree is measured at either fair value or at the proportionate share of the acquiree's identifiable net assets. All acquisition costs are expensed as incurred to profit or loss. On the acquisition of a business, the consolidated entity assesses the financial assets acquired and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic conditions, the consolidated entity's operating or accounting policies and other pertinent conditions in existence at the acquisition-date. Where the business combination is achieved in stages, the consolidated entity remeasures its previously held equity interest in the acquiree at the acquisition-date fair value and the difference between the fair value and the previous carrying amount is recognised in profit or loss. Contingent consideration to be transferred by the acquirer is recognised at the acquisition-date fair value. Subsequent changes in the fair value of the contingent consideration classified as an asset or liability is recognised in profit or loss. Contingent consideration classified as equity is not remeasured and its subsequent settlement is accounted for within equity. The difference between the acquisition-date fair value of assets acquired, liabilities assumed and any non- controlling interest in the acquiree and the fair value of the consideration transferred and the fair value of any pre-existing investment in the acquiree is recognised as goodwill. If the consideration transferred and the pre-existing fair value is less than the fair value of the identifiable net assets acquired, being a bargain purchase to the acquirer, the difference is recognised as a gain directly in profit or loss by the acquirer on the acquisition-date, but only after a reassessment of the identification and measurement of the net assets acquired, the non-controlling interest in the acquiree, if any, the consideration transferred and the acquirer's previously held equity interest in the acquirer. Business combinations are initially accounted for on a provisional basis. The acquirer retrospectively adjusts the provisional amounts recognised and also recognises additional assets or liabilities during the measurement period, based on new information obtained about the facts and circumstances that existed at the acquisition-date. The measurement period ends on either the earlier of (i) 12 months from the date of the acquisition or (ii) when the acquirer receives all the information possible to determine fair value. MEDADVISOR LIMITED NOTES TO THE FINANCIAL STATEMENTS FOR YEAR ENDED 30 JUNE 2020 Note 1: Statement of Significant Accounting Policies – cont. (x) Earnings per share Basic earnings per share Basic earnings per share is calculated by dividing the profit attributable to the owners of MedAdvisor Limited, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the financial year. 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. (y) Goods and services tax (GST) Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable from the tax authority. In this case it is recognised as part of the cost of the acquisition of the asset or as part of the expense. Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable to, the tax authority is included in other receivables or other payables in the statement of financial position. Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities which are recoverable from, or payable to the tax authority, are presented as operating cash flows. Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the tax authority. (z) New or amended Accounting Standards and Interpretations adopted The consolidated entity has adopted all of the new or amended Accounting Standards and Interpretations issued by the Australian Accounting Standards Board ('AASB') that are mandatory for the current reporting period. Any new or amended Accounting Standards or Interpretations that are not yet mandatory have not been early adopted. The consolidated entity's assessment of the impact of these new or amended Accounting Standards and Interpretations, most relevant to the consolidated entity, are set out below. Conceptual Framework for Financial Reporting (Conceptual Framework) The revised Conceptual Framework is applicable to annual reporting periods beginning on or after 1 January 2020 and early adoption is permitted. The Conceptual Framework contains new definition and recognition criteria as well as new guidance on measurement that affects several Accounting Standards. Where the consolidated entity has relied on the existing framework in determining its accounting policies for transactions, events or conditions that are not otherwise dealt with under the Australian Accounting Standards, the consolidated entity may need to review such policies under the revised framework. At this time, the application of the Conceptual Framework is not expected to have a material impact on the consolidated entity's financial statements. (aa) Comparative figures Where required by Accounting standards, comparative figures have been adjusted to conform to changes in presentation for the current financial year. MEDADVISOR LIMITED NOTES TO THE FINANCIAL STATEMENTS FOR YEAR ENDED 30 JUNE 2020 55 Note 2: Critical accounting judgements, estimates and assumptions The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts in the financial statements. Management continually evaluates its judgements and estimates in relation to assets, liabilities, contingent liabilities, revenue and expenses. Management bases its judgements, estimates and assumptions on historical experience and on other various factors, including expectations of future events, management believes to be reasonable under the circumstances. The resulting accounting judgements and estimates will seldom equal the related actual results. The judgements, estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities (refer to the respective notes) within the next financial year are discussed below. Coronavirus (COVID-19) pandemic Judgement has been exercised in considering the impacts that the Coronavirus (COVID-19) pandemic has had, or may have, on the consolidated entity based on known information. This consideration extends to the nature of the products and services offered, customers, supply chain, staffing and geographic regions in which the consolidated entity operates. Other than as addressed in specific notes, there does not currently appear to be either any significant impact upon the financial statements or any significant uncertainties with respect to events or conditions which may impact the consolidated entity unfavourably as at the reporting date or subsequently as a result of the Coronavirus (COVID-19) pandemic. Goodwill and other indefinite life intangible assets The consolidated entity tests annually, or more frequently if events or changes in circumstances indicate impairment, whether goodwill and other indefinite life intangible assets have suffered any impairment, in accordance with the accounting policy stated in note 1. The recoverable amounts of cash-generating units have been determined based on value-in-use calculations. These calculations require the use of assumptions, including estimated discount rates based on the current cost of capital and growth rates of the estimated future cash flows. The recoverable amount of the consolidated entity's goodwill has been determined by a value-in-use calculation using a discounted cash flow model, based on a 3 year projection period approved by management and extrapolated for a further 2 years using a steady rate, together with a terminal value. Key assumptions are those to which the recoverable amount of an asset or cash-generating units is most sensitive. The following key assumptions were used in the discounted cash flow model for the business: a) 21.64% (2019: 21.16%) pre-tax discount rate; b) 5-10% (2019: 15-20%) per annum projected revenue growth rate; c) 3-5% (2019: 15-20%) per annum increase in operating costs and overheads. The discount rate of 21.64% pre-tax reflects management’s estimate of the time value of money and the consolidated entity’s weighted average cost of capital, the risk-free rate and the volatility of the share price relative to market movements. MEDADVISOR LIMITED NOTES TO THE FINANCIAL STATEMENTS FOR YEAR ENDED 30 JUNE 2020 Note 2: Critical accounting judgements, estimates and assumptions – cont. Management believes the projected revenue growth rate of 10% in years one and two, and 5% in years three through to five, is prudent and justified based on current and expected growth in the business. Similarly, management believes that the projected increase in operating costs and overheads of between 3-5% in years one through to five, is prudent and justified based on the cost structure and control environment in the business. Based on the above an impairment charge has not been applied as the carrying amount of goodwill does not exceed its recoverable amount for the business. Sensitivity The directors have made judgements and estimates in respect of impairment testing of goodwill. Should these judgements and estimates not occur the resulting goodwill carrying amount may decrease. The sensitivities are as follows: a) Revenue would need to decrease by more than 5% for the business before goodwill would need to be impaired, with all other assumptions remaining constant. b) The discount rate would be required to increase by more than 9% on a pre-tax basis before goodwill would need to be impaired, with all other assumptions remaining constant. Management believes that other reasonable changes in the key assumptions on which the recoverable amount of the goodwill is based would not cause the cash-generating unit’s carrying amount to exceed its recoverable amount. If there are any negative changes in the key assumptions on which the recoverable amount of goodwill is based, this would result in a further impairment charge for the goodwill. Share-based payment transactions The consolidated entity measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined by using either the Binomial or Black-Scholes model taking into account the terms and conditions upon which the instruments were granted. The accounting estimates and assumptions relating to equity-settled share- based payments would have no impact on the carrying amounts of assets and liabilities within the next annual reporting period but may impact profit or loss and equity. Impairment of non-financial assets other than goodwill and other indefinite life intangible assets The consolidated entity assesses impairment of non-financial assets other than goodwill and other indefinite life intangible assets at each reporting date by evaluating conditions specific to the consolidated entity and to the particular asset that may lead to impairment. If an impairment trigger exists, the recoverable amount of the asset is determined. This involves fair value less costs of disposal or value-in-use calculations, which incorporate a number of key estimates and assumptions. Recovery of deferred tax assets Deferred tax assets are recognised for deductible temporary differences only if the consolidated entity considers it is probable that future taxable amounts will be available to utilise those temporary differences and losses MEDADVISOR LIMITED NOTES TO THE FINANCIAL STATEMENTS FOR YEAR ENDED 30 JUNE 2020 57 Note 3: Earnings per Share Both the basic and diluted loss per share have been calculated using the loss attributable to shareholders of MedAdvisor Limited as the numerator, i.e. no adjustments to profits were necessary during the year ended 30 June 2020. Earning per share for loss from continuing operations of MedAdvisor Limited Loss for the year Basic loss per share Diluted loss per share Weighted average number of ordinary shares Weighted average number of ordinary shares used in calculating basic earnings per share Adjustment for calculation of diluted earnings per share Options over ordinary shares Performance rights vested but not exercised Performance rights not vested Consolidated Jun-20 $ Jun-19 $ (9,779,590) (8,101,385) Cents (4.22) (4.22) Cents (4.23) (4.23) 231,932,954 191,543,699 7,239,208 2,071,426 - 7,543,508 1,928,571 142,857 241,243,588 201,158,636 Note, in November 2019, MedAdvisor Limited conducted a consolidation of the Company’s issued capital on a basis of one new share for every 7 shares on issue. The adjusted weighted average number of shares have been disclosed for comparative purposes for the 12 months ended 30 June 2019. MEDADVISOR LIMITED NOTES TO THE FINANCIAL STATEMENTS FOR YEAR ENDED 30 JUNE 2020 MEDADVISOR LIMITED NOTES TO THE FINANCIAL STATEMENTS FOR YEAR ENDED 30 JUNE 2020 59 Note 4: Operating Segments Note 5: Revenues The Board has determined that the Company presently has five reporting segments. The first being the business activities of the MedAdvisor medication management and adherence platform, followed by the activities associated with operations in the USA, UK, and Asia, and finally, the corporate function associated with being an ASX listed company. The Board monitors the Company based on actual versus budgeted revenue and expenditure incurred. This internal reporting framework is the most relevant to assist the Board with making decisions regarding the Company and its ongoing activities. Disaggregation of revenue a. From continuing operations Major service lines SaaS Revenue Transaction & Development fees Health Programs Timing of revenue recognition Goods transferred at a point in time Services transferred over time b. Other Revenue Interest received Sundry income - Government Grants Sundry income - R&D Tax Concession Revenue by geographical region has been disclosed in note 4. Consolidated Jun-20 $ Jun-19 $ 5,913,620 2,462,002 1,227,024 9,602,646 5,913,620 3,689,026 9,602,646 109,213 170,681 1,188,204 1,468,098 4,951,730 2,291,730 998,533 8,241,993 4,618,510 3,623,483 8,241,993 134,518 67,058 749,545 951,121 MEDADVISOR LIMITED NOTES TO THE FINANCIAL STATEMENTS FOR YEAR ENDED 30 JUNE 2020 MEDADVISOR LIMITED NOTES TO THE FINANCIAL STATEMENTS FOR YEAR ENDED 30 JUNE 2020 61 Note 6: Expenses Note 7: Income tax expense Profit (loss) before income tax from continuing operation includes the following specific expenses: a. Direct costs Direct transaction costs Direct costs of sms services Managed services costs for the MedAdvisor Platform b. Employee Benefits Expenses: Development Marketing Business devlopment - international People and Culture Administration Share based employee remuneration Governance - Directors fees c. Depreciation & Amortization Depreciation Leasehold improvements Office furniture and equipment Right-of-use asset Motor vehicle Total depreciation Amortization Software Intellectual property Total amortization d. Finance costs Interest and finance charges paid/payable Other bank charges Consolidated Jun-20 $ Jun-19 $ 98,730 461,313 661,184 33,912 467,592 512,518 1,221,227 1,014,022 5,329,673 2,860,719 375,645 399,224 1,588,127 947,774 11,501,162 217,892 11,719,054 31,081 74,802 238,493 6,903 351,279 148,165 12,780 160,945 512,224 94,684 20,416 115,100 4,788,190 2,847,565 - - 971,360 661,251 9,268,366 187,245 9,455,611 30,902 45,506 21,433 - 97,841 148,693 12,780 - 161,473 259,314 17 16,311 16,328 e. Superannuation expense Defined contribution superannuation expense 805,146 690,962 Note 8: Auditors remuneration During the year the following fees were paid or payable for services provided Audit and review of financial report Other Services 76,618 44,673 121,291 72,148 - 72,148 MEDADVISOR LIMITED NOTES TO THE FINANCIAL STATEMENTS FOR YEAR ENDED 30 JUNE 2020 MEDADVISOR LIMITED NOTES TO THE FINANCIAL STATEMENTS FOR YEAR ENDED 30 JUNE 2020 63 Note 9: Cash and cash equivalents Cash on hand Cash at bank Note 10: Trade and other receivables Trade debtors Other debtors Consolidated Jun-20 $ Jun-19 $ - 12,345,164 12,345,164 303 4,400,417 4,400,719 1,525,428 313,956 1,839,384 1,129,752 - 1,129,752 The consolidated entity has recognised a loss of $50,611 in the profit or (loss) in respect of the expected credit losses for the year ended 30 June 2020 (30 June 2019: $35,000). The ageing of these receivables and allowances for expected credit losses provided for above are as follows: Not overdue 0 to 3 months overdue 3 to 6 months overdue Over 6 months overdue Expected credit loss rate Carrying amount Expected credit losses allowance 30-Jun-20 30-Jun-19 % 0% 4% 45% 67% % 0% 1% 18% 66% 30-Jun-20 $ 1,307,769 211,532 14,675 42,063 30-Jun-19 $ 914,246 183,401 23,831 43,275 1,576,039 1,164,752 30-Jun-20 $ 30-Jun-19 $ 6,494 9,411 6,578 28,128 50,611 237 2,150 4,234 28,379 35,000 Movements in the allowance for expected credit losses are as follows: Balance Additional provision recognised Receivables written off during the year as uncollectable Balance Consolidated Jun-20 $ Jun-19 $ 35,000 58,183 (42,572) 50,611 57,443 36,277 (58,720) 35,000 Note 11: Other assets Currrent Security bonds - cash on deposit with banks Prepayments Non Currrent Other receivables Note 12: Fixed assets Leasehold improvements at cost Less: Accumulated depreciation Office furniture & equipment at cost Less: Accumulated depreciation Motor vehicle Less: Accumulated depreciation Consolidated Jun-20 $ Jun-19 $ 127,268 248,464 375,732 - - 217,538 (68,996) 148,542 422,309 (201,692) 220,617 31,149 (6,748) 24,401 127,022 280,249 407,270 250,000 250,000 217,539 (37,915) 179,624 321,642 (126,890) 194,752 30,919 - 30,919 Total property, plant and equipment 393,560 405,295 MEDADVISOR LIMITED NOTES TO THE FINANCIAL STATEMENTS FOR YEAR ENDED 30 JUNE 2020 Note 12: Fixed assets - continued Reconciliation of written down values at the beginning and end of the current and previous financial year: Balance at 1 July 2018 Additions Depreciation Balance 30 June 2019 Additions Depreciation Foreign currency movements Balance 30 June 2020 Note 13: Right-of-use assets Building - right-of-use Less: Accumulated depreciation Leasehold Improvements $ 192,068 18,458 (30,902) 179,624 - (31,082) - 148,542 Office Furniture & Equipment $ Motor Vehicle $ 177,808 83,883 (66,939) 194,752 100,667 (74,802) - 220,617 - 30,919 - 30,919 - (6,903) 385 24,401 Total $ 369,876 133,260 (97,841) 405,295 100,667 (112,787) 385 393,560 Consolidated Jun-20 $ Jun-19 $ 1,669,452 (596,233) 1,073,219 - - - The consolidated entity leases a building for its offices under an agreement of seven years. The lease has a CPI linked escalation clause. On renewal, the terms of the lease will be renegotiated. MEDADVISOR LIMITED NOTES TO THE FINANCIAL STATEMENTS FOR YEAR ENDED 30 JUNE 2020 65 Note 14: Intangible assets Intellectual property at cost Less: Accumulated amortization Software at cost Less: Accumulated amortization Goodwill at cost Total intangible assets Consolidated Jun-20 $ Jun-19 $ 131,219 (70,560) 60,659 1,705,201 (535,313) 1,169,888 131,219 (57,781) 73,439 1,481,656 (387,148) 1,094,508 4,013,868 4,013,868 5,244,415 5,181,815 Reconciliation of written down values at the beginning and end of the current and previous financial year: Copyright Trademarks Software Goodwill Balance at 1 July 2018 Additions Depreciation Balance 30 June 2019 Additions Amortization Balance 30 June 2020 $ $ 45,000 - (12,780) 32,220 - (12,780) 19,440 Note 15: Trade and other payables Trade creditors Other creditors & accruals 38,190 3,030 - 41,220 - - $ 1,243,201 - (148,693) 1,094,508 223,544 (148,165) $ 4,013,868 - - 4,013,868 - - Total $ 5,340,258 3,030 (161,473) 5,181,815 223,544 (160,945) 41,220 1,169,888 4,013,868 5,244,415 Consolidated Jun-20 $ Jun-19 $ 715,026 474,684 1,189,710 746,615 1,103,478 1,850,094 MEDADVISOR LIMITED NOTES TO THE FINANCIAL STATEMENTS FOR YEAR ENDED 30 JUNE 2020 Note 16: Income in advance Gross pharmacy subscriptions in advance Patient engagement program (PEP) fees in advance Total income in advance Note 17: Employee benefits Current Provision for employee leave Non-Current Provision for employee leave Consolidated Jun-20 $ Jun-19 $ 412,521 108,710 521,231 369,815 105,163 474,977 1,036,199 751,957 82,950 53,003 Amounts not expected to be settled within the next 12 months The current provision for employee benefits includes all unconditional entitlements where employees have completed the required period of service and also those where employees are entitled to pro-rata payments in certain circumstances. The entire amount is presented as current, since the consolidated entity does not have an unconditional right to defer settlement. However, based on past experience, the consolidated entity does not expect all employees to take the full amount of accrued leave or require payment within the next 12 months. Note 18: Lease liability Current Lease liability Non-Current Lease liability MEDADVISOR LIMITED NOTES TO THE FINANCIAL STATEMENTS FOR YEAR ENDED 30 JUNE 2020 67 Note 19: Issued Capital a. Fully paid ordinary shares Ordinary shares fully paid Jun-20 Shares 246,718,025 Jun-19 Shares 195,987,489 Jun-20 $ 45,369,890 Jun-19 $ 28,136,013 Note, in November 2019, MedAdvisor Limited conducted a consolidation of the Company’s issued capital on a basis of one new share for every seven shares on issue. The comparatives have been restated for the year ended 30 June 2019. Movements in ordinary share capital Balance at 1 July 2018 EIP Options Exercised Exercise of Bennetto Options Exercise of Lead Manager Options Issue for services Read Rights Exercised Share issue transaction costs, net of tax for the year Balance at 30 June 2019 EIP Options Exercised New Share Issue Options on issue 21 November 2019 Share Consolidation Adjustment ( 1:7) Shares on issue post share consolidation (1:7) EIP Options Exercised New Share Issue (as Consideration) # of shares Issue price $ 1,317,927,982 25,979,898 16,289,995 $ 0.0375 10,000,000 $ 0.0418 22,500,000 $ 0.0438 194,445 $ 0.0450 5,000,000 $ 0.0300 610,627 418,085 985,000 8,750 150,000 (16,347) 1,371,912,422 28,136,013 4,156,666 $ 0.0365 151,870 342,500,000 $ 0.0499 17,099,999 1,718,569,088 (1,473,059,917) 245,509,171 1,168,854 $ 0.3678 40,000 $ 0.5000 45,387,882 45,387,882 429,911 20,000 (467,903) 45,369,890 Share issue transaction costs, net of tax for the year Balance at 30 June 2020 246,718,025 263,856 1,156,919 - - Ordinary shares Ordinary shares entitle the holder to participate in dividends and the proceeds on the winding up of the company in proportion to the number of and amounts paid on the shares held. The fully paid ordinary shares have no par value and the company does not have a limited amount of authorised capital. On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each share shall have one vote. Share buy-back There is no current on-market share buy-back. MEDADVISOR LIMITED NOTES TO THE FINANCIAL STATEMENTS FOR YEAR ENDED 30 JUNE 2020 Note 19: Issued Capital – continued b. Read rights Balance Employment rights Employment rights Performance rights Balance Balance Share Consolidation Adjustment ( 1:7) Balance post share consolidation Employment rights Balance Date 1-Jul-18 24-Aug-18 30-Nov-18 30-Jun-19 1-Jul-19 21-Nov-19 21-Nov-19 21-Nov-19 30-Jun-20 30-Jun-20 c. Options over unissued shares Balance at 1 July 2018 Bennetto Options Exercised Lead Manager Options Expired Lead Manager Options Exercised Employee incentive options exercised Employee incentive options Employee incentive options expired Read Rights exercised Read rights vested Balance at 30 June 2019 Employee incentive options exercised Employee incentive options Options expired Hook options expired Hook options issued Options on issue 21 November 2019 Share Consolidation Adjustment ( 1:7) Options on issue post share consolidation (1:7) Employee incentive options Employee incentive options exercised Employee incentive options expired Read rights vested Balance at 30 June 2020 Issued # Vested # 42,500,000 15,500,000 10,000,000 # - - Expired Balance # 27,000,000 17,000,000 2,000,000 1,000,000 1,000,000 1,000,000 (857,143) 142,857 - - - - - - 15,000,000 1,000,000 - 42,500,000 42,500,000 26,500,000 15,000,000 26,500,000 15,000,000 (36,428,572) (22,714,286) (12,857,143) 6,071,429 3,785,714 2,142,857 - 142,857 - 6,071,429 3,928,571 2,142,857 Issued # 94,733,332 (10,000,000) (1,500,000) (22,500,000) (16,289,993) 20,330,000 (4,876,669) (5,000,000) 11,000,000 65,896,670 (6,656,666) 420,000 (12,500,000) (5,000,000) 5,000,000 47,160,004 (40,422,861) 6,737,143 4,846,371 (1,168,854) (1,111,692) 142,857 9,445,825 1 Lead manager (Peloton) unlisted options are exercisable at $0.03 with an expiry date of 17 December 2018 2 Read unquoted employment rights are exercisable at no cost and have vested and are exercisable immediately 3 Bennetto unlisted options exercisable at $.0.03 with an expiry date of 12 November 2018 MEDADVISOR LIMITED NOTES TO THE FINANCIAL STATEMENTS FOR YEAR ENDED 30 JUNE 2020 Note 19: Issued Capital – continued Employee Incentive Options 69 Employee incentive plan options are unquoted and will vest in accordance with the rules of the plan. Unvested employee incentive options lapse on termination of employment, or failure to meet performance based vesting conditions in accordance with the conditions under which the options have been granted. Issue Date 14-Apr-16 15-Dec-16 27-Oct-17 19-Dec-17 12-Apr-18 24-Aug-18 24-Sep-18 10-Jan-19 15-Mar-19 25-Aug-19 23-Dec-19 28-Apr-20 15-May-20 Expiry Date 14-Apr-31 14-Dec-31 27-Oct-32 19-Nov-32 12-Apr-33 24-Apr-33 24-Sep-33 10-Jan-34 15-Mar-34 25-Aug-34 8-Dec-34 26-Apr-35 15-May-35 d. Capital management Issued # 1,292,827 2,215,685 1,792,795 44,283 161,422 250,000 1,211,378 407,140 1,035,713 59,997 5,117,132 324,477 119,047 Lapsed Exercised Balance Exercised Unvested Vested Not # 142,848 229,182 743,318 - 39,046 - 278,563 - 666,666 8,571 - - # 830,939 1,505,562 418,564 5,714 90,950 250,000 391,419 392,856 369,047 - 142,857 175,205 119,047 # 319,040 480,941 630,913 38,569 31,426 - 541,396 14,284 - 51,426 319,040 480,941 436,162 23,808 20,950 - 377,122 4,761 - 2,857 4,974,275 2,142,855 149,272 - - - - - 194,751 14,761 10,476 - 164,274 9,523 - 48,569 2,831,420 149,272 - 14,031,896 2,108,194 4,692,160 7,231,542 3,808,496 3,423,046 Management’s objective is to maintain optimal returns to shareholders and benefits for other stakeholders. Management also aims to maintain a capital structure that ensures the lowest cost of capital available to the entity. Management adjusts the capital structure to the extent possible to take advantage of favourable costs of capital or high returns on assets. As the market is constantly changing, management may change the amount of dividends to be paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt. The Company is not subject to any externally imposed capital requirements, nor does it focus on obtaining debt as a key capital management tool. MEDADVISOR LIMITED NOTES TO THE FINANCIAL STATEMENTS FOR YEAR ENDED 30 JUNE 2020 MEDADVISOR LIMITED NOTES TO THE FINANCIAL STATEMENTS FOR YEAR ENDED 30 JUNE 2020 71 Note 20: Reserves Note 22: Non-controlling interest Share options reserve Foreign currency translation reserve Movements in reserves Consolidated Jun-20 $ Jun-19 $ 1,570,838 3,234 1,574,072 1,204,843 (50,908) 1,153,935 Issued capital Reserves Accumulated losses Consolidated Jun-20 $ Jun-19 $ 554,890 (1,934) (194,595) 358,361 - - - - Movements in each class of reserve during the current and previous financial year are set out below Balance at 1 July 2018 Share Options issued Share Options exercised Foreign currency translation Balance 30 June 2019 Share Options issued Share Options exercised Foreign currency translation Share options $ 1,732,305 661,250 (1,188,712) - 1,204,843 947,775 (581,780) - Foreign currency $ - - - (50,908) (50,908) - - 54,142 Total $ 1,732,305 661,250 (1,188,712) (50,908) 1,153,935 947,775 (581,780) 54,142 Balance 30 June 2020 1,570,838 3,234 1,574,072 Note 21: Accumulated losses Accumulated losses at the beginning of the year AASB 16 Retained Earnings Adjustment Accumulated losses at the beginning of the year - restated Total comprehensive loss for the year Accumulated losses at the end of the year Consolidated Jun-20 $ Jun-19 $ (20,645,126) (12,543,741) (51,593) - (20,696,719) (12,543,741) (9,584,995) (8,101,385) (30,281,714) (20,645,126) The non-controlling interest has a 50% (2019: 0%) equity holding in ZP MedAdvisor Pte. Ltd. Note 23: Financial risk management The company’s financial instruments consist mainly of deposits with banks, trade receivable and payables. Totals for each category of financial instruments, measured in accordance with AASB 9 as detailed in the accounting policies to these financial statements, are as follows: Financial Assets Cash and equivalents Trade and other receivables Financial Liabilities Financial liabilities at amortised cost - Trade and other payables - Lease liabilities Financial Risk Management Policies Consolidated Jun-20 $ Jun-19 $ 12,345,164 1,839,384 14,184,548 4,400,720 1,129,752 5,530,472 1,189,710 1,420,776 2,610,485 1,850,094 - 1,850,094 The Directors’ overall risk management strategy seeks to assist the company in meeting its financial targets whilst minimising potential adverse side effects on financial performance. Risk management policies are approved and reviewed by the Directors’ on a regular basis. These include credit risk policies and future cash flow requirements. MEDADVISOR LIMITED NOTES TO THE FINANCIAL STATEMENTS FOR YEAR ENDED 30 JUNE 2020 NOTE 23: FINANCIAL RISK MANAGEMENT - CONTINUED Specific Financial Risk Exposures and Management MEDADVISOR LIMITED NOTES TO THE FINANCIAL STATEMENTS FOR YEAR ENDED 30 JUNE 2020 NOTE 23: FINANCIAL RISK MANAGEMENT - CONTINUED a. Credit Risk 41 73 The main risks the Entity is exposed to through its financial instruments are interest rate risk, liquidity risk, credit risk and foreign currency risk. Exposure to credit risk relating to financial assets arises from the potential non−performance by counter parties of contract obligations that could lead to a financial loss to the Entity. a) Interest Rate Risk Exposure to interest risk arises on financial assets financial assets and financial liabilities recognised at reporting date whereby a future change in interest rates will affect future cash flows or the fair value of fixed rate financial instruments. b) Liquidity Risk Liquidity risk arises from the possibility that the company might encounter difficulty in settling its debts or otherwise meeting its obligations related to financial liabilities. The Entity manages this risk through the preparation of forward-looking cash flow analysis in relation to its operational, investing and financing activities. Credit risk is managed through the maintenance of procedures (such procedures include the utilisation of systems for the approval, granting and removal of credit limits, regular monitoring of exposures against such limits and monitoring of the financial stability of significant customers and counter parties), ensuring to the extent possible, that customers and counter parties to transactions are of sound credit worthiness. Such monitoring is used in assessing receivables for impairment. Credit terms are generally 30 days from the invoice date. Customers who do not meet the Entity's strict credit policies may only purchase in cash or only use recognised credit cards. Within 1 year Between 1 and 2 years Between 2 and 5 years Total Credit Risk Exposures 1,189,710 - - 1,189,710 The maximum exposure to credit risk by class of recognised financial assets at balance date is equivalent to the carrying value and classification of those financial assets (net of any allowance for expected credit loss) as presented in the balance sheet 263,856 275,900 881,019 1,420,776 Trade and other receivables that are neither past due or impaired are considered to be of high credit quality. Aggregates of such amounts are as detailed in Note 10. 1,453,566 275,900 881,019 2,610,485 b. Foreign Currency Risk Consolidated - 2020 Financial liabilities due for payment Trade and other payables Interest bearing - fixed rate Lease liabilities Total financial liabilities Financial assets - cash flows realisable Cash and equivalents Trade and other receivables 12,345,164 1,839,384 14,184,548 - - - - - - 12,345,164 1,839,384 14,184,548 Net inflow/(outflow) on financial instruments 12,730,982 (275,900) (881,019) 11,574,063 Consolidated - 2019 Within 1 year Between 1 and 2 years Between 2 and 5 years Total Financial liabilities due for payment Trade and other payables 1,850,094 Interest bearing - fixed rate Lease liabilities Total financial liabilities Financial assets - cash flows realisable Cash and equivalents Trade and other receivables Net inflow/(outflow) on financial instruments - 1,850,094 4,400,720 1,129,752 5,530,472 3,680,379 - - - - - - - - - - - - - - 1,850,094 - 1,850,094 4,400,720 1,129,752 5,530,472 3,680,379 The consolidated entity undertakes certain transactions denominated in foreign currency and is exposed to foreign currency risk through foreign exchange rate fluctuations. Foreign exchange risk arises from future commercial transactions and recognised financial assets and financial liabilities denominated in a currency that is not the entity's functional currency. The risk is measured using sensitivity analysis and cash flow forecasting. The consolidated entity the foreign exchange risk to be low and has not entered into any forward foreign exchange contracts. The carrying amount of the consolidated entity's foreign currency denominated financial assets and financial liabilities at the reporting date were as follows: Consolidated US dollars British pounds Assets Liabilities 2020 $ 2019 $ 2020 $ 2019 $ 1,274,725 95,476 154,263 - 111,728 22,533 32,824 - 1,370,201 154,263 134,261 32,824 The consolidated entity had net assets denominated in foreign currencies of $1,235,940 (assets of $1,274,725 less liabilities of $134,261) as at 30 June 2020 (2019: 121,439)). Based on this exposure, had the Australian dollar weakened by 5% (2019: 5%) against these foreign currencies with all other variables held constant, the consolidated entity's loss before tax for the year would have been $61,797 lower (2019: $7,007). The percentage change is the expected overall volatility of the significant currencies, which is based on management’s assessment of reasonable possible fluctuations taking into consideration movements over the MEDADVISOR LIMITED NOTES TO THE FINANCIAL STATEMENTS FOR YEAR ENDED 30 JUNE 2020 NOTE 23: FINANCIAL RISK MANAGEMENT - CONTINUED last 6 months each year and the spot rate at each reporting date. The actual foreign exchange gain for the year ended 30 June 2020 was $52,208 (2019: $33,063). c. Price Risk The consolidated entity is not exposed to any significant price risk. Fair value estimation The fair values of financial assets and financial liabilities are presented in the following table and can be compared to their carrying values as presented in the balance sheet. Fair values are those amounts at which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm's length transaction. Fair values derived may be based on information that is estimated or subject to judgment, where changes in assumptions may have a material impact on the amounts estimated. Areas of judgment and the assumptions have been detailed below. Where possible, valuation information used to calculate fair value is extracted from the market, with more reliable information available from markets that are actively traded. In this regard, fair values. Differences between fair values and carrying amounts on financial instruments with fixed interest rates are due to the change in discount rates being applied by the market since their initial recognition by the company. Most of the instruments which are carried at amortised cost are to be held until maturity and therefore the net fair value figures calculated bear little relevance to the company. MEDADVISOR LIMITED NOTES TO THE FINANCIAL STATEMENTS FOR YEAR ENDED 30 JUNE 2020 NOTE 23: FINANCIAL RISK MANAGEMENT - CONTINUED Financial Assets Cash and equivalents Trade and other receivables Financial Liabilities Financial liabilities at amortised cost - Trade and other payables 75 Jun-19 Net Carrying Value $ Net Fair Value $ 4,400,720 1,129,752 5,530,472 4,400,720 1,129,752 5,530,472 1,850,094 1,850,094 1,850,094 1,850,094 Note 24: Reconciliation of profit/(loss) after tax to net cash flow from operations Consolidated Jun-20 $ Jun-19 $ Jun-20 Net Carrying Value $ Value $ Net Fair Cash assets - Note 9 12,345,164 4,400,720 (a) Reconciliation of cash to the statement of cash flows: (b) Reconciliation of profit from ordinary activities to net cash used in operating activities (9,779,590) (8,101,385) Financial Assets Cash and equivalents Trade and other receivables Financial Liabilities Financial liabilities at amortised cost - Trade and other payables - Lease liabilities 12,345,164 1,839,384 14,184,548 12,345,164 1,839,384 14,184,548 1,189,710 1,420,776 2,610,485 1,189,710 1,420,776 2,610,485 Profit after income tax Add: non cash items - Other non cash expenses - Depreciation and amortisation - Doubtful debts - Non cash share based payments - Foreign exchange differences Changes in assets and liabilities, net of the effects of purchase and disposal of subsidiaries - (Increase) decrease in receivables - (Increase) decrease in other assets - Increase (decrease) in payables / creditors - Increase (decrease) in income in advance - Increase (decrease) in provisions Net cash flows used in operating activities (752,204) 31,538 (365,128) 46,254 314,188 (725,352) (8,680,547) 270,000 512,224 42,572 947,775 51,825 1,824,396 (142,378) 259,314 36,065 661,251 - 814,252 (234,734) (342,094) 833,256 85,537 - 341,966 (6,945,168) MEDADVISOR LIMITED NOTES TO THE FINANCIAL STATEMENTS FOR YEAR ENDED 30 JUNE 2020 MEDADVISOR LIMITED NOTES TO THE FINANCIAL STATEMENTS FOR YEAR ENDED 30 JUNE 2020 77 Note 25: Contingencies Note 28: Parent entity information There were no contingent liabilities or contingent assets at the date of this report (2019: none) to affect the financial statements. Set out below is the supplementary information about the parent entity. Note 26: Events subsequent to the reporting date The impact of the Coronavirus (COVID-19) pandemic is ongoing and it is not practicable to estimate the potential impact, positive or negative, after the reporting date. The situation is rapidly developing and is dependent on measures imposed by the Australian Government and other countries, such as maintaining social distancing requirements, quarantine, travel restrictions and any economic stimulus that may be provided. There have been no matters or circumstances which have arisen since the end of the financial period that significantly affected, or may significantly affect the operations of the Entity, the results of those operations or the state of affairs of the Entity, in future years. Note 27: Other related party transactions Other related parties include close family members of key management personnel and entities that are controlled or jointly controlled by those key management personnel individually or collectively with their close family members. Transactions between related parties are on normal commercial terms and conditions no more favourable than those available to other persons unless otherwise stated. NostraData Pty Ltd is an associated entity of the Company which has entered into the following related party transaction with the Company during the financial year. Consolidated Jun-20 $ Jun-19 $ Statement of profit or loss and other comprehensive income Loss after income tax Total comprehensive income Statement of financial position Total current assets Total assets Total current liabilities Total Liabilities Net assets Equity Issued capital Share options reserve Accumulated losses Total equity Contingent liabilities Parent Jun-20 $ Jun-19 $ (1,654,168) (1,654,168) (892,333) (892,333) 37,907 36,090 41,244,993 24,750,511 558,503 558,503 9,722 9,722 40,686,490 24,740,788 43,939,865 1,570,838 (4,824,213) 40,686,490 26,705,989 1,204,843 (3,170,044) 24,740,788 Total value of consulting , data and marketing services 143,157 140,825 Capital commitments – property plant & equipment The parent entity had no contingent liabilities as at 30 June 2020 and 30 June 2019. Amounts due and payable to NostraData Pty Ltd at the end of the financial year included in trade and other payables 26,504 26,061 The parent entity had no capital commitments for property plant & equipment as at 30 June 2020 and 30 June 2019. Zuellig Pharma Pte Ltd has entered into a joint venture with MedAdvisor Limited with 50% ownership interest in ZP MedAdvisor Pte Ltd. The following contributions for equity were advanced to the Company during the financial year. Significant accounting policies The accounting policies of the parent entity are consistent with those of the consolidated entity as disclosed in Note 1. Related party transactions with Zuellig Pharma Pte Ltd Capital contributions received for investment in ZP MedAdvisor Pte Ltd 554,890 - MEDADVISOR LIMITED NOTES TO THE FINANCIAL STATEMENTS FOR YEAR ENDED 30 JUNE 2020 MEDADVISOR LIMITED 79 Note 29: Interests in subsidiaries The consolidated financial statements incorporate the assets, liabilities and results of the following wholly- owned subsidiaries in accordance with the accounting policy described in note 1: Directors’ declaration The Directors of the Company declare that: Name MedAdvisor International Pty Ltd Health Enterprises 2 Pty Ltd MedAdvisor Welam UK Ltd. MedAdvisor Welam USA Inc. Principal place of business / Country of incorporation Australia Australia UK USA Ownership interest 2020 % 100% 100% 100% 100% 2019 % 100% 100% 100% 100% The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiary with non-controlling interests in accordance with the accounting policy described in Note 1: Name Principal place of business / Country of incorporation ZP MedAdvisor Pte.Ltd Singapore Parent Ownership interest 2020 % 2019 % Non-controlling interest 2020 % 2019 % 50% 50% 50% 50% Note 30: Key management personnel disclosures Compensation The aggregate compensation made to directors and other members of key management personnel of the consolidated entity is set out below: 1. The consolidated financial statements and notes, as set out on pages 38 to 78, are in accordance with the Corporations Act 2001 and: (a) (b) comply with Accounting Standards which as stated in accounting policy Note 1 to the financial statements, constitutes explicit and unreserved compliance with International Financial Reporting Standards (IFRS); and give a true and fair view of the financial position as at 30 June 2020 and of the performance for the year ended on that date of the Company; 2. the Director’s have declared that: (a) (b) (c) the financial records of the Company for the financial year have been properly maintained in accordance with section 286 of the Corporations Act 2001; the financial statements and notes for the financial year comply with the Accounting Standards; and the financial statements and notes for the financial year give a true and fair view; and 3. in the Directors’ opinion, there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable. This declaration is made in accordance with a resolution of the Board of Directors. Short-term employee benefits Share based entitlements Total compensation Consolidated Jun-20 $ Jun-19 $ 1,267,322 448,639 1,715,961 1,013,690 67,657 1,081,347 Christopher Ridd Non-Executive Director and Chair 27 August 2020 Camberwell, VIC AUDIT REPORT Audit report 81 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 How our audit addressed this matter Impairment of Goodwill Refer to Note 14 in the financial statements The Group has goodwill of $4,013,868 as at 30 June 2020. We identified this area as a key audit matter due to the size of the goodwill balance, and because the directors’ assessment of the ‘value in use’ of the cash generating unit (“CGU”) involves judgements about the future underlying cash flows of the business and the discount rate applied to them. For the year ended 30 June 2020 management have performed an impairment assessment over the goodwill balance by:  Calculating the value in use the CGU using a discounted cash flow model. These models used cash flows (revenues, expenses and capital expenditure) for the CGU for 5 years, with a terminal growth rate applied to the 5th year. These cash flows were then discounted to net present value using the Group’s weighted average cost of capital (WACC) adjusted for the CGU; and  Comparing the resulting value in use of the CGU to their respective book values. Management also performed a sensitivity analysis over the value in use calculations by varying the assumptions used (growth rates, terminal growth rate and WACC) to assess the impact on the valuations. Our audit procedures in relation to management’s impairment assessment included:  Assessing management’s determination that the goodwill should be allocated to a single CGU based on the nature of the Group’s business and the in which results are monitored and manner reported;  Assessing the valuation methodology used;  Challenging the reasonableness key assumptions, including the cash flow projections, revenue growth rates, and sensitivities used; rates, discount of  Checking the mathematical accuracy of the cash flow model, and reconciling input data to supporting evidence such as approved budgets, and considering the reasonableness of these budgets; and  Reviewing the accuracy of disclosures of critical financial valuation estimates and assumptions in statements methodologies. relation the the to in THE POWER OFBEING UNDERSTOODAUDIT |TAX | CONSULTINGRSM AustraliaPartnersis amemberof theRSM network and trades asRSM.RSMis thetradingname used bythemembers of theRSM network. Each memberoftheRSM networkisan independentaccountingand consultingfirm which practicesin its ownright.The RSMnetwork isnot itselfaseparate legal entityin any jurisdiction.RSMAustralia Partners ABN36965185 036Liability limited by a scheme approved under Professional Standards LegislationRSM Australia PartnersLevel 21, 55 Collins Street Melbourne VIC 3000 PO Box 248 Collins Street West VIC 8007 T +61 (0) 3 9286 8000 F +61 (0) 3 9286 8199 www.rsm.com.au INDEPENDENT AUDITOR’S REPORT To the Members of MedAdvisor Limited Opinion We have audited the financial report of MedAdvisor Limited (the Company) and its subsidiaries (the Group), which comprises the consolidated statement of financial position as at 30 June 2020, the consolidated statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies, and the directors' declaration. In our opinion the accompanying financial report of the Group is in accordance with the Corporations Act 2001, including: I. giving a true and fair view of the Group's financial position as at 30 June 2020 and of its financial performance for the year then ended; and II. complying with Australian Accounting Standards and the Corporations Regulations 2001. Basis for OpinionWe conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Report section of our report. We are independent of the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board's APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. We confirm that the independence declaration required by the Corporations Act 2001, which has been given to the directors of the Company, would be in the same terms if given to the directors as at the time of this auditor's report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. THE POWER OF BEING UNDERSTOODAUDIT | TAX | CONSULTINGRSM Australia Partnersis a member of the RSM network and trades as RSM. RSM is the trading name used by the members of the RSM network. Each member of the RSM network is an independent accounting and consulting firm which practices in its own right. The RSM network is not itself a separate legal entity in any jurisdiction. RSM Australia Partners ABN 36 965 185 036Liability limited by a scheme approved under Professional Standards LegislationRSMAustralia PartnersLevel21, 55 Collins Street Melbourne VIC3000POBox 248Collins Street West VIC8007T +61(0) 3 9286 8000F+61(0) 39286 8199www.rsm.com.auINDEPENDENTAUDITOR’SREPORTTo the Members of MedAdvisorLimitedOpinionWehaveaudited the financial reportofMedAdvisorLimited (the Company) and itssubsidiaries (theGroup), whichcomprises the consolidated statement of financialposition as at30June 2020, the consolidatedstatement ofprofitor lossand other comprehensive income, the consolidated statement of changes in equityand the consolidatedstatement of cash flows for theyear then ended,andnotes to the financialstatements, including asummaryofsignificant accounting policies, andthedirectors'declaration.Inouropinion theaccompanying financial reportoftheGroupisin accordance withthe CorporationsAct2001,including:I.giving a true and fair view of the Group's financial positionas at30 June 2020 and of its financialperformance for theyear thenended;andII.complyingwith Australian Accounting Standards andthe Corporations Regulations2001.BasisforOpinionWe conducted our auditin accordance with Australian Auditing Standards. Ourresponsibilities under thosestandardsare furtherdescribed in the Auditor'sResponsibilitiesforthe Audit ofthe FinancialReportsection ofourreport. We are independentofthe Group in accordancewith the auditorindependence requirementsoftheCorporationsAct 2001 and the ethical requirements of theAccounting ProfessionalandEthicalStandardsBoard'sAPES110Code ofEthicsforProfessionalAccountants(theCode)that are relevanttoourauditofthe financialreport in Australia.Wehave also fulfilled ourother ethical responsibilitiesin accordance with the Code.We confirm that theindependencedeclarationrequired bytheCorporationsAct 2001, which hasbeen given tothe directors of theCompany, would bein the same terms if given to the directors as at the time of this auditor'sreport.Webelieve thatthe auditevidence we have obtained is sufficient and appropriate to providea basisforouropinion.AUDIT REPORT Audit report 83 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: http://www.auasb.gov.au/auditors_responsibilities/ar2.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 the directors' report for the year ended 30 June 2020. In our opinion, the Remuneration Report of MedAdvisor Limited, for the year ended 30 June 2020, complies with section 300A of the Corporations Act 2001. Responsibilities The directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. RSM AUSTRALIA PARTNERS B Y CHAN Partner Date: 27 August 2020 Melbourne, Victoria Key Audit Matters (continued.) Key Audit Matter How our audit addressed this matter Recognition of Revenue Refer to Note 5 in the financial statements Revenue recognition was considered a key audit matter. MedAdvisor receives revenue from three core income streams, and the accounting for each of these differs. While SaaS revenues from subscriptions are not complex and do not involve significant management judgements, the recognition of revenue generated from Transaction and Development Fees and Health Programs involves management estimates around the timing of delivery of services. Our audit procedures in relation to the recognition of revenue included: Assessing whether the Group’s revenuerecognition policies were in compliance with AASB15 Revenue from Contracts with Customers;Evaluating the operating effectiveness ofmanagement’s controls related to revenuerecognition;Performing substantive analytical reviewprocedures on SaaS revenues;Performing detailed testing on a sample ofTransaction and Development Fees and HealthPrograms revenue recognised and assessing theallocation of revenue to various elements in thecontracts with customers; andReviewing revenue transactions before and afteryear-end to ensure that revenue is recognised inthe correct period.Other Information The directors are responsible for the other information. The other information comprises the information included in the Group's annual report for the year ended 30 June 2020 but does not include the financial report and the auditor's report thereon. Our opinion on the financial report does not cover the other information and accordingly we do not express any form of assurance conclusion thereon. In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of the Directors for the Financial ReportThe directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In preparing the financial report, the directors are responsible for assessing the ability of the Group to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so. 85 Order Order Order Order Order Order Order Add Add MENU Jane's prescription medications (6) NO SUPPLY LEFT ABCSTATIN TABLET 40MG ABCheart (Sample) 4 Repeats Left 2 DAYS LEFT 18 DAYS LEFT 30 DAYS LEFT ABCHEAD TABLET 200MG ABCCofen (Sample) 2 Repeats Left ABCAMOL ABChaler (Sample) 2 Repeats Left ABCHEAD TABLET 100MG ABCCofen (Sample) 4 Repeats Left FINISHED ABCSTATIN TABLET 40MG ABCheart (Sample) 5 Repeats Left FINISHED ABCAMOL ABChaler (Sample) 4 Repeats Left 5 DAYS LEFT ABCHEAD TABLET 200MG ABCCofen (Sample) 3 Repeats LeftLoad More Jane's NDSS products Add NDSS or diabetes product Track and order Jane's blood glucose strips, syringes, pen needles and more My non-prescription meds and vitamins - ABC Vitamin A 5000 2 DAYS LEFT Home ABC Vitamin A 5000 Frank & Miriam M E DA DV I S O R P E R S O N A L IT I E S PharmacyMessagesHomeSettingsMEDADVISOR LIMITED 87 87 Governance and disclosures MEDADVISOR LIMITED Additional disclosures Shareholder information The shareholder information set out below was applicable as at 18 August 2020. Distribution of equitable securities Analysis of number of equitable security holders by size of holding: Corporate Governance Statement The Board is committed to achieving and demonstrating the highest standards of corporate governance. As such, MedAdvisor Limited and its Controlled Entities (‘the Group’) have adopted the third edition of the Corporate Governance Principles and Recommendations which was released by the ASX Corporate Governance Council on 27 March 2014 and became effective for financial years beginning on or after 1 July 2014. The Group’s Corporate Governance Statement for the financial year ending 30 June 2020 is dated as at 30 June 2020 and date of last review and Board approval was on 25 August 2020. The Corporate Governance Statement is available on MedAdvisor’s website at: www.mymedadvisor.com/investors-corporate-governance > Governance Documents > Other 1 to 1,000 1,001 to 5,000 5,001 to 10,000 10,001 to 100,000 100,001 and over Holding less than a marketable parcel Number of holders of ordinary shares # % 174 1103 499 833 135 2744 123 0.05% 1.20% 1.56% 9.81% 87.38% 100.00% 0.02% MEDADVISOR LIMITED SHAREHOLDER INFORMATION – CONT. MEDADVISOR LIMITED SHAREHOLDER INFORMATION – CONT. 89 Equity security holders Twenty largest quoted security holders The names of the twenty largest security holders of quoted equity securities are listed below: Escrowed securities Restricted securities Voting rights The voting rights attaching to each class of equity securities are set out below: Ordinary shares All issued ordinary shares carry one vote per share (including restricted securities). Options Options do not carry a right to vote. Substantial shareholders The substantial shareholders in the Company are set out below: Ordinary Shares Number held % of total shares issued Health Management Systems Inc 31,428,571 12.74% Ebos Ph Pty Ltd 26,459,627 10.72% Kojent Pty Ltd 20,540,866 8.33% Hsbc Custody Nominees (Australia) Limited 16,441,606 6.66% Wavey Industries Pty Ltd 15,008,943 6.08% Regal Funds Management Pty Ltd 14,981,247 6.07% Unquoted equity securities Options over ordinary shares issued Corporate directory Registered office MedAdvisor Limited, Level 2, 971 Burke Road, Camberwell, VIC 3124 Tel: +613 9095 3036 ABN 17 145 327 617 Web address www.mymedadvisor.com Directors Mr Christopher Ridd Non-Executive Director and Chair Mr Peter Bennetto Non-Executive Director Mr Jim Xenos Non-Executive Director Ms Sandra Hook Non-Executive Director Mr Jeffrey Sherman Non-Executive Director Mr Robert Read CEO and Managing Director Mr Joshua Swinnerton Executive Director and Founder Company secretaries Naomi Lawrie and Carlo Campiciano Stock exchange listing MedAdvisor Limited shares are listed on the Australian Securities Exchange (ASX:MDR) Share registrar Computershare Investor Services Pty Ltd Yarra Falls 1152 Johnston Street Abbotsford Vic 3067 Tel: 1300 850 505 (within Australia) +613 9415 4000 (outside Australia) Auditor RSM Australia Partners Level 21, 55 Collins Street Melbourne Vic 3000 Lawyers HWL Ebsworth – Lawyers Level 26, 530 Collins Street Melbourne Vic 3000 Notice of annual general meeting The Annual General Meeting of MedAdvisor Limited will be held as a Virtual Meeting which has been scheduled for 9:00 a.m. on Thursday 5 November 2020 (further details will be provided in the Notice of Meeting). 

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