MediaValet Annual Report 2019

FY2019 Annual Report · MediaValet

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FULL
YEAR
REPORT
2019

Financial Year
Ended 30 June
2019
(Previous corresponding
period: financial year ended
30 June 2018)

CHAIRMAN’S
& CEO’S REPORT

A record year
for MVP

Medical Developments International Limited (“MDI”) (ASX: MVP) reported a 327% increase in Net
Profit after Tax to $1.038m (FY18 $0.243m) for the twelve months ended 30 June 2019. Revenue
increased 19% to a record $21.4 million (FY18 $17.9 million) and Earnings Before Interest, Tax,
Depreciation and Amortisation increased 55% to $3.441m (FY18: $2.223m).

Sales of Penthrox® grew 47% overall and sales to Australian Ambulance grew 38%. Sales into
Europe grew 401% and after incurring significant delays, the roll out of Penthrox® in Europe is
underway. Sales of Penthrox® into the UK grew 68% and sales into Canada grew 294%.

Respiratory sales were down slightly, driven almost entirely by the issue we had in the UK.
Respiratory sales excluding the UK grew 11% globally and USA sales grew 62%. Sales in Australia
were lower and sales into New Zealand grew 172%.

GREEN in more ways than one

In December 2018 MVP completed the installation of a 245kW large scale solar PV system at our head office
and state of the art manufacturing facility in Scoresby.

The installation involved approximately 600 high wattage panels to maximise energy production and has
resulted in MVP being largely self-sufficient in terms of its energy needs during business hours on sunny
days between October and March.

The system significantly reduces MVP’s CO2 emissions (saving in excess of 401,218 kg of carbon emissions) and
also reduces the energy costs at our Scoresby based facility by in excess of $75k per annum.

Annual Financial Report 2019

Key Achievements for FY19
Penthrox®
ÆÆ Sales in Europe grew 401%
ÆÆ Sales into the UK grew 68%
ÆÆ Global sales grew 47%
ÆÆ Sales to Australian Ambulance grew 38%
ÆÆ Regulatory approval in a total of 27

(FY18: 385)

ÆÆ 540 customers in the UK and Ireland

ÆÆ Signed exclusive Penthrox® deal for China

and received A$20.8m upfront cash payment

ÆÆ IND submitted in China
ÆÆ Regulatory submissions and preparations
ongoing in USA, Iran, Iraq, South Korea
and Russia

ÆÆ Progressed the Paediatric Study in the UK
and Ireland (nearing 60% recruitment)

ÆÆ Completed recruitment for the Post
Authorisation Safety Study in the UK

ÆÆ Completed a Phase 1 Pharmacokinetic Study

in Europe

ÆÆ Australian Breath-A-Tech® sales up 9%
ÆÆ UK/EU sales down 53%

ÆÆ Received R&D Tax Incentive concession

of $488,000

ÆÆ Repayment of all bank debt

European countries

ÆÆ Regulatory approval and launches in Hong

Kong and Saudi Arabia

ÆÆ Regulatory approval in Jordan
ÆÆ Almost 400 new customers in Europe and

1,058 customers in total

ÆÆ 359 customers in France (FY18: 248)
ÆÆ 159 new customers in the rest of Europe

Respiratory Medical Devices
ÆÆ Sales into the USA grew 62%
ÆÆ Sales in Asia up 111%

Other
ÆÆ Raised $24.5m via Institutional Placement

and Share Purchase Plan

ÆÆ CSIRO development project for new

manufacturing technologies progressing

ÆÆ Continued investment in clinical
development programs and trials

Penthrox®
United States of America
MVP met with the Food and Drug Administration
(FDA) in June 2019 and:

• The FDA agreed that a previously mandated

animal study to predict idiosyncratic liver reaction
to Penthrox® would not be needed.

• MVP agreed to conduct a required animal study
that replicates the human dosing regimen for
Penthrox®. MVP expects the study to take 6
months to complete.

MVP expects to be in a position to address in full, all
the clinical hold issues during the first quarter of
2020 with a view to refiling our IND in mid-2020.

MVP remains confident we will be able to supply the
FDA with the additional information it requires. Our
confidence is based on 30+ years of experience, the
demonstrated safety profile of Penthrox® over that
time, the additional clinical data we have to support
our IND including our Post Authorisation Safety
Study, PK study, our ongoing clinical development
program and our recent achievements in getting
Penthrox® approved for sale in more than 40
countries around the world.

Medical Developments International LimitedPenthrox® USA update

Europe
European Penthrox® sales (excluding UK/Ireland)
grew 401%, despite the frustrating regulatory delays
we have incurred over the last 12 months. Whilst
initial orders have been placed for several countries,
most of Europe is still to launch Penthrox® including
Germany, Italy and Spain.

National Regulatory Applications are expected to be
filed with the relevant agencies in the Netherlands,
Greece, Macedonia, Serbia, Albania, Liechtenstein,
Montenegro, Kosovo, San Marino, Vatican City,
Bosnia and Herzegovina, Andorra and Monaco in
due course.

We have 1,058 customers buying Penthrox® in
Europe and believe that number will grow to
between 5,000 and 10,000 as Penthrox® becomes a
mainstream analgesic in every European market.

France
In market sales grew 55% in FY19 and feedback
from these markets continues to be positive. France
now has 359 customers which are buying and using
Penthrox®.

UK and Ireland
In the UK and Ireland, Galen continues to make good
progress. Sales to the UK and Ireland are up 68%
and in-market sales grew 86%. There are now 540
customers in total using the product. These include
seven of the eleven Major Trauma Centres in the UK.

Whilst Penthrox® is being used in all Ambulance
Services and major hospitals in Ireland the roll out
into UK ambulances continues. This process has
been frustratingly slow but the feedback from the

Ambulance Services and Galen is that Penthrox® will
be a success.

Customers in Europe

1058

882

640

459

338

1400

1200

1000

800

600

400

200

Dec 2016 June 2017 Dec 2017 June 2018 Dec 2018 June 2019

Total number of accounts that have ordered since launch

Australia
Australian sales of Penthrox® grew 32% in FY19 and
sales to Ambulance was up 38%.

During the year MVP signed an agreement with
Mundipharma Australia for the exclusive distribution
rights of Penthrox® in Australia. This led to a large
stocking order that was delivered in June 19. Even
excluding the impact of this, Australian Penthrox®
sales still grew 14%. Mundipharma’s presence in the
field is expected to lead to strong sales growth in the
short to medium term, particularly within General
Practitioner and Hospital channels.

Penthrox® is now sold into more than 200 hospitals
and medical clinics in Australia.

New Zealand
Penthrox® continues to perform strongly in New
Zealand since being listed as the first line analgesic
for New Zealand ambulance, and Nitrous Oxide
being removed as a competitor. Sales to New
Zealand grew 12% in FY19.

Annual Financial Report 2019Rest of World
The Chinese Regulatory approval is well underway. The IND has been submitted to the Chinese FDA and we
expect to have the IND open during 2019.

Penthrox® clinical program for China

Future for Penthrox®

MVP continues to negotiate with interested parties from around the world in terms of registering and
selling Penthrox®, whilst concurrently pursuing other important international regulatory submissions and
preparations in countries including USA, China, Russia, Iran, Iraq, Thailand and South Korea.

Medical Developments International LimitedRespiratory

Respiratory device sales were down 5% in FY19,
driven almost entirely by the issue we had in the UK.
Global sales (excluding the UK which declined 53%)
grew 11%. MVP has restructured the UK business
which delivered an improved performance in the
second half of FY19 and we anticipate good sales
growth in the coming year.

Sales into the USA market grew 62% and we
continue to build our business in that market. We
are well on the way to establishing ourselves as a
major supplier of respiratory devices in the USA and
we continue to negotiate new distribution deals with
some of the larger pharmacy chains in the USA. We
expect to deliver significant sales growth in the USA
in the years ahead.

Sales of Breath-A-Tech® grew 9% in Australia, but
that growth was largely offset by a drop in sales from
certain distributors. Overall Australian sales were
steady whilst sales into New Zealand grew 172%.

Sales into Asia grew 111%.

Clinical

MVP invested $6.8m in clinical and research
programs during FY19 (FY18: $7.1m).

Our longer-term ambition is to gather enough
clinical and safety data to extend the use of
Penthrox® into:

a. Paediatrics globally;

b. Minor surgical procedures;

c. Breakthrough post-operative and cancer pain;

d. Repeat use scenarios; and ultimately

e. Home use.

Our partners in Europe have completed one of the
required studies in Europe for the Minor Surgical
Procedures indication. We believe the global market
for Penthrox® in Surgical Procedures is more
valuable than the market for Trauma Pain.

MVP is conducting a Pivotal Paediatric Phase III
study in the UK and Ireland. Enrolment is steady but
slower than we would like due to the nature of young
children participating in pain trials. Enrolment has
reached 60% and we expect a successful outcome to
expand the sales of Penthrox® globally.

MVP has recently completed a Phase 1
Pharmacokinetic Study which characterises how the
drug moves through the human body. This 56-patient
escalating dose study has been successfully
completed and will be invaluable to other
registrations around the world including the USA.

Our Post Authorisation Safety Study in the UK has
recently completed recruiting with reporting to be
finalised in the coming months.

Commercial
New Technology Project
Our ambition is to develop the next generation of
manufacturing technologies to make pharmaceutical
products at a significantly reduced cost, improved
quality, and lower risk compared with traditional
processes. In February, MVP announced it has
successfully completed a small-scale production
run for Lidocaine using MVP’s new continuous flow
manufacturing technology. Since then we have
focussed our efforts and successfully run a series of
pilot scale continuous flow production runs proving
a successful scale up and commercial viability.
We have initiated preliminary discussions with
commercial parties to licence or sell the technology
and expect to have an outcome during FY20.

Veterinary

Our Vet business fell 18% in FY19, attributed to a
launch order in FY18 with one of the USA’s largest
veterinary medical device companies that was not
repeated in FY19. Despite the fall in revenue, the
segment continues to be profitable.

FY19 Full Year
Result
Gross revenue was a record
$21.4m.
Gross margins decreased slightly in FY19 from 68%
to 66%, reflecting a higher weighting of international
Penthrox® sales that are typically lower margin.

Annual Financial Report 2019Operating Expenses grew 8% for the period because
of increased:

• pharmacovigilance costs as a result of expanding

geographic sales base;

• cost of employee share based payments;

• marketing expenses as a result of expanding

geographic sales; and

• insurance related costs as a result of increasing

industry premiums.

Cash flow
During the year MVP invested:

• $6.8 million in clinical trials and registrations for

Penthrox®;

• $1.1 million in our manufacturing development

program with the CSIRO; and

• $1.5 million in various manufacturing equipment

and leasehold improvements.

Outlook

MVP’s ambition is to globalise Penthrox®, and in
doing so, make it the mainstream analgesic of
choice around the world.

Over the next 12 months we expect to:

• complete role out of Penthrox® into remaining

European countries, Mexico, Iran, Jordan, South
Korea and Thailand;

• consolidate and grow our Respiratory Device sales

in the USA, Europe and elsewhere;

• submit a response to the FDA clinical hold and
resubmit our IND for Penthrox® in the USA;

• conclude additional distribution partnerships

for Penthrox® and Respiratory Devices for new
countries;

• advance work on producing other analgesic and
pharmaceutical products using the intellectual
property that is our new manufacturing process;
and

• continue our clinical program to extend the
indication for use of Penthrox® globally.

Over the next few years our global market approvals
and “indication extensions” for Penthrox® are
expected to deliver strong growth, as will our
respiratory device business.

We look forward to reporting our progress and
successes.

Further Information:

MR JOHN SHARMAN
CHIEF EXECUTIVE OFFICER

MR DAVID WILLIAMS
CHAIRMAN

+61 3 9547 1888

+61 414 383 593

Medical Developments International LimitedBoard of Directors

Mr David Williams
Non-Executive Chairman

Managing Director of Kidder Williams Ltd, with over 30 years’ experience in the investment
banking sector. He is also Chairman of PolyNovo Ltd and RMA Global Limited. Mr Williams is
Chairman of the MVP Remuneration and Nominations Committee.

Mr Max Johnston
Non-Executive Director

Mr Johnston is a non-executive director of Polynovo Limited, Cannpal Animal Therapeutics
Limited and a former non-executive Director and Chairman of Probiotec Limited and a former
non-executive Director of Enero Group Limited. He is also a Director of Prolife Foods Ltd.
For 11 years he was President and Chief Executive Officer of Johnson & Johnson Pacific and
an Executive Director of Johnson & Johnson. Mr Johnston has also held several prominent
industry roles as a past President of ACCORD Australasia Limited, a former Vice Chairman
of the Australian Food and Grocery Council and a former member of the board of ASMI. Mr
Johnston has had extensive overseas experience during his career in leading businesses in
Western and Central-Eastern Europe, Africa as well as Asia-Pacific. Mr Johnston is also a
member of the MVP Audit & Risk Committee.

Mr Philip Powell
Non-Executive Director

Mr Powell, a Chartered Accountant, has an extensive finance background and commenced
working in investment banking in 1996 at Hambros Corporate Finance following ten years
industry experience in senior finance roles with ASX listed public company OAMPS Limited. Prior
to these roles, he worked for ten years within the Assurance Division at Arthur Andersen & Co.

From January 2006 to July 2013 he was a Director at Corporate Finance Advisory firm Kidder
Williams. Mr Powell is also a Non-executive Director of PolyNovo Limited and RMA Global
Limited. Philip is Chairman of MDI’s Audit and Risk Committee.

Mr Leon Hoare
Non-Executive Director

Mr Hoare is the Managing Director of Lohmann & Rauscher Australia/New Zealand (ANZ), a
private EU based medical device company. Previously he was Managing Director of Smith &
Nephew ANZ, one of the company’s largest global subsidiaries outside the USA. Until 2014 he
served as President of Smith & Nephew’s Asia Pacific Advanced Wound Management (AWM)
business for 5 years. He was also a member of the Global Executive Management for the AWM
Division. In his 24 years with Smith & Nephew, he also held roles in Marketing, Divisional and
General Management. Mr Hoare’s career also included a senior role at Bristol-Myers Squibb in
surgical products, and Vice-Chair of Australia’s peak medical device body, Medical Technology
Association of Australia.

He is also a Non-Executive Director of PolyNovo Limited (ASX: PNV).

The above-named directors held office during and since the end of the financial year.

Annual Financial Report 2019

7
7

Annual Financial Report 2019Product
portfolio
Pharmaceutical

Analgesia

• Penthrox®

Medical

Asthma
• Anti-Static Compact Space Chamber Plus®
• Anti-Static Space Chamber Plus®
• Breath-A-Tech® Spacer
• Breath-A-Tech® Hospital Spacer
• Breath-Alert® Peak Flow Meter
• Breath-A-Tech® Portable Nebuliser
• Compact Space Chamber Plus®
• MyMDI™ Pulse Oximeter
• Space Chamber Plus®
• Space Chamber Plus® Autoclavable spacer

• Space Chamber Slim®

Face masks

• EZ-fit silicone and disposable face masks

Oxygen
• OXI-Port® oxygen therapy device
• OXI-Sok oxygen therapy device
• OXI-Pro oxygen resuscitation device
• OXI-Life oxygen resuscitation device
• OXI-Saver™ closed circuit oxygen resuscitation device
• OXI-Dive closed circuit oxygen resuscitation device

• OXI-Vac™ suction system

Regulators

• KDK™ regulator/flow meter with oxygen flush

Absorbers

• KAB™ carbon dioxide absorber

Veterinary

Anaesthesia
• MK5 closed circuit anaesthetic machine
• LANA closed circuit anaesthetic machine
• Mini-KOM™ anaesthetic machine
• Breath-Alert® breathing monitor

• Veterinary Spacers

“

MVP’s ambition is to
globalise Penthrox® and
make it the mainstream
analgesic of choice
around the world.

”

Pharmaceutical
MVP is a world leader in the
management of acute and
procedural pain.

Building our business

MVP manufactures its world leading inhaled analgesic
from its premises located Scoresby and Springvale,
Victoria, Australia. MVP is the sole manufacturer
of the active molecule worldwide and continues to
develop new markets and applications for the iconic
brand Penthrox®. Penthrox® continues to be a core
medication for the treatment of pain in trauma
by all Ambulance Services in Australia and New
Zealand. MVP continues the promotional focus into
the Australian Ambulance services ensuring that the
strong positioning of Penthrox® is maintained. Moving
forward, the strategy is to continue to broaden the
range customers (hospitals, general practice, dental
and cosmetic) domestically via our partnership with
Mundipharma Australia and continue to grow the
countries that can be served by Penthrox®. FY20 will
see Penthrox® launched into multiple new countries.

Product suite

MVP is continuing to develop additional formulations
of Penthrox® to provide improve convenience, utility
and value for its customers. This includes investing
in the product development of a next generation
Penthrox® inhalers.

“

MVP offers a range
of open and closed
circuit anaesthetic
machines to the
veterinary market

”

Veterinary
MVP re-invigorates its
Veterinary product range

Products

• Anaesthetic machines

• Vaporisers

• Breathing monitors

• Veterinary Spacers

The market

MVP offers a range of open and closed circuit
anaesthetic machines to the veterinary market,
which are popularly known as Komesaroff
anaesthetic machines. MVP has developed a unique
market position regarding the design, manufacture
and supply of closed circuit anaesthetic machines
to this particular niche market in Europe. Whilst the
majority of MDI’s veterinary products continue to
be sold in Europe through our distributor, Kruuse
(one of Europe’s largest veterinary distribution
companies), MVP expect to continue to expand in
Asia and North America via various distributors.

Medical devices

Building our product range

MVP’s focus in FY20 will be to add to our established
product range, to build on the solid foundation that
has been established with our current partnerships
in Australia and overseas. At the same time MVP
will develop new collaborations for future growth.
Core to the growth is the development of new and
improved models of:

• Asthma/COPD Space Chambers

• Penthrox® Inhaler

• Peak Flow Meters

• Portable Nebulisers

• Pulse Oximeter

• Face Masks

• Tourniquets

• Emergency medicine consumable equipment

Asthma devices

MVP’s Asthma devices business has been strong for
many years and continues to provide solid sales and
profit.

The success of this business over recent years has
been due to four factors:

• The strength of the Allersearch brand in

Australian Hospitals and Pharmacies through our
distribution partner

• The acquisition of the Breath-A-Tech® range

• Growing sales of our range of Asthma products
through established international partners and
new customers. Of particular note is the ongoing
growth in respiratory sales in the USA with MVP
products now in approximately 15,000 pharmacies
across the USA.

Product development

MVP’s Space Chamber is well known in the market
place as the ‘Rolls Royce’ brand and it offers the
greatest opportunity for future growth in the Asthma
devices market. To assist in future growth MVP has
developed new and improved Space Chambers to
assist with product differentiation and local and
international penetration.

“

MVP is introducing a
new range of antistatic
products to its
respiratory portfolio
in FY20

”

“

These products are all
custom assembled and
tested at MVP’s TGA
approved manufacturing
facilities in Melbourne,
Australia.

”

Oxygen and
other medical
equipment
Safe, precision engineering
and custom design kits and
accessories
MVP manufactures a range of oxygen therapy and
resuscitation equipment, providing healthcare
professionals and trained personnel with the ability
to administer oxygen to patients in an emergency
situation. These devices range from basic through
to advanced systems of delivering oxygen therapy
or resuscitation.

Product suite

• OXI-Port® oxygen therapy device

• OXI-Sok oxygen therapy device

• OXI-Pro oxygen resuscitation device

• OXI-Life oxygen resuscitation device

• OXI-Saver™ closed circuit oxygen

resuscitation device

• OXI-Dive closed circuit oxygen

resuscitation device

• OXI-Vac™ suction system

The market

MVP’s oxygen equipment is purchased and used by:

• Ambulance services

• Fire brigades

• Lifesaving clubs

• Military

• First aid organisations

• Dental markets

FULL
YEAR
REPORT
Financial Year
Ended 30 June
2019
(Previous corresponding
period: financial year ended
30 June 2018)

Contents

Directors’ Report

Independence Declaration

Independent Auditor’s Report

Directors’ Declaration

Consolidated Statement of Profit or Loss
and Other Comprehensive Income

Consolidated Statement of Financial Position

Consolidated Statement of Changes in Equity

Consolidated Statement of Cash Flows

Notes to the Financial Statements

Directors’
Report

The directors of Medical Developments International
Limited (“MVP”) herewith submit the annual
financial report of the company for the financial
year ended 30 June 2019. In order to comply with
the provisions of the Corporations Act 2001, the
directors report as follows:

Information about the
Directors
The names and particulars of the directors of the
company during or since the end of the financial year
are:

Mr D J Williams B.Ec (Hons), M.Ec, FAICD

Non-Executive Chairman
(since 16 September 2003)

Managing Director of Kidder Williams Ltd, with
over 30 years’ experience in the investment banking
sector. He is also Chairman of PolyNovo Ltd and
RMA Global Limited. Mr Williams is Chairman of the
MVP Remuneration and Nominations Committee.

Mr R M Johnston

Non-Executive Director
(since 5 November 2012)

Mr Johnston is a non-executive director of
Polynovo Limited, Cannpal Animal Therapeutics
Limited and a former non-executive Director and
Chairman of Probiotec Limited and a former non-
executive Director of Enero Group Limited. He is
also a Director of Prolife Foods Ltd and BARD1 Life
Sciences Limited. For 11 years he was President and
Chief Executive Officer of Johnson & Johnson Pacific
and an Executive Director of Johnson & Johnson. Mr
Johnston has also held several prominent industry
roles as a past President of ACCORD Australasia
Limited, a former Vice Chairman of the Australian
Food and Grocery Council and a former member of
the board of ASMI. Mr Johnston has had extensive
overseas experience during his career in leading
businesses in Western and Central-Eastern Europe,
Africa as well as Asia-Pacific. Mr Johnston is also a
member of the MVP Audit & Risk Committee.

Mr L Hoare AssocDipAppSc(Orth), GradDipBus, GAICD

Non-Executive Director
(since 27 September 2013)

Mr Hoare is the Managing Director of Lohmann &
Rauscher Australia/New Zealand (ANZ), a private
EU based medical device company. Previously he
was Managing Director of Smith & Nephew ANZ,
one of the company’s largest global subsidiaries
outside the USA. Until 2014 he served as President
of Smith & Nephew’s Asia Pacific Advanced Wound
Management (AWM) business for 5 years. He was
also a member of the Global Executive Management
for the AWM Division. In his 24 years with Smith &
Nephew, he also held roles in Marketing, Divisional
and General Management. Mr Hoare’s career also
included a senior role at Bristol-Myers Squibb in
surgical products, and Vice-Chair of Australia’s peak
medical device body, Medical Technology Association
of Australia. Mr Hoare joined the MVP Remuneration
and Nominations Committee post the departure of
Mr McCallum. Mr Hoare is also a Non-Executive
Director of PolyNovo Limited (ASX: PNV).

Mr P J Powell B.Com (Hons) ACA, F Fin, MAICD

Non-Executive Director
(since 17 December 2014)

Mr Powell, a Chartered Accountant, has an extensive
finance background and commenced working in
investment banking in 1996 at Hambros Corporate
Finance following ten years industry experience in
senior finance roles with ASX listed public company
OAMPS Limited. Prior to these roles, he worked for
ten years within the Assurance Division at Arthur
Andersen & Co.

From January 2006 to July 2013 he was a Director at
Corporate Finance Advisory firm Kidder Williams. Mr
Powell is also a Non-executive Director of PolyNovo
Limited, RMA Global Limited and BARD1 Life
Sciences Limited. Philip is Chairman of MDI’s Audit
and Risk Committee.

The above-named directors held office during and
since the end of the financial year.

Mr A D McCallum Dip.Ag Science, FAICD

Non-Executive Director
(appointed 27 October 2003,
resigned on 17 December 2018)

Mr McCallum has over 20 years’ public companies
experience including an ASX 50 company and has
served on numerous committees including: Audit,
Remuneration & Nomination, and as an Independent

Medical Developments International LimitedDirector on Related Parties (Governance)
Committees. Mr McCallum was a member of the
Remuneration and Nominations Committee. He is
also Chairman of Tassal Group Ltd and Cann Group
Limited.

Dr H F Oxer, AM, ASM, KStJ MA (Hons), MB.BChir (Cantab),
MRCS.LRCP, DA, FFARCS, FRCA, FFARACS, FANZCA, FACAP,

DipDHM

Non-Executive Director
(appointed 28 December 2006, resigned
on 19 December 2018)

Dr Oxer is a Medical Consultant to MDI and St John
Ambulance in Western Australia. Dr Oxer was a
long-time member of the State Executive for St John
Ambulance (WA) until his retirement in rotation
in 2012 and was the previous Medical Director
for twenty-six years. He has taught, lectured and
published extensively over the years, both nationally
and internationally. Dr Oxer is also a past Chairman
of the Australian Resuscitation Council and has a
major interest in resuscitation, oxygen therapy and
pain relief.

Directorships of other listed
companies
Directorships of other listed companies held by the
directors in the 3 years immediately before the end
of the financial year are as follows:

Name

Company

Period of
Directorship

David Williams

Polynovo Limited
(Chairman)

Since 13 March
2014

RMA Global Limited
(Chairman)

Since November
2014

Probiotec Ltd

Enero Group
Limited

Until 28 November
2016

Until 18 October
2016

Max Johnston

Polynovo Limited

Since 13 May 2014

CannPal Animal
Therapeutics
Limited

BARD1 Life
Sciences Limited

Since 21 April 2017

Since 17 June 2019

Polynovo Limited

Since 13 May 2014

RMA Global Limited Since 5 April 2018

Philip Powell

BARD1 Life
Sciences Limited

Leon Hoare

Polynovo Limited

Allan McCallum

Tassal Group Ltd
(Chairman)

Cann Group
Limited (Chairman)

Since 17 June 2019

Since 27 January
2016

Since October 2003

Since 5 May 2017

Company Secretary
Mr Mark Edwards, CA. Mr Edwards is also the Chief
Financial Officer of the company.

Principal Activities
The company’s principal activities during the course
of the financial year were the manufacture and
distribution of a pharmaceutical drug and medical
and veterinary equipment.

Review of
Operations
Penthrox® Developments

United States of America

MVP met with the Food and Drug Administration
(FDA) in June 2019 and:

• The FDA agreed that a previously mandated

animal study to predict idiosyncratic liver reaction
to Penthrox® would not be needed.

• MVP agreed to conduct a required animal study
that replicates the human dosing regimen for
Penthrox®. MVP expects the study to take 6
months to complete.

MVP expects to be in a position to address in full, all
the clinical hold issues during the first quarter of
2020 with a view to refiling our Investigational New
Drug (IND) application in mid-2020.

“

MVP expect to submit our
full response to the FDA IND
clinical hold by mid 2020

”

Annual Financial Report 2019
Europe

New Zealand

European Penthrox® sales (excluding UK/Ireland)
grew 401%, despite the frustrating regulatory delays
we have incurred over the last 12 months. Whilst
initial orders have been placed for several countries,
most of Europe is still to launch Penthrox® including
Germany, Italy and Spain.

We have 1,058 customers buying Penthrox® in
Europe and believe that number will grow to
between 5,000 and 10,000 as Penthrox® becomes a
mainstream analgesic in every European market.

France

In market sales grew 55% in FY19 and feedback
from the market continues to be positive. France
now has 359 customers which are buying and using
Penthrox®.

UK and Ireland

In the UK and Ireland, Galen continues to make good
progress. Sales to the UK and Ireland are up 68%
and in-market sales grew 86%. There are now 540
customers in total using the product. These include
seven of the eleven Major Trauma Centres in the UK.

Whilst Penthrox® is being used in all Ambulance
Services and major hospitals in Ireland the roll out
into UK ambulances continues. This process has
been frustratingly slow but the feedback from the
Ambulance Services and Galen is that Penthrox®
will be a success as protocols gradually incorporate
Penthrox®.

Australia

Australian sales of Penthrox® grew 32% in FY19 and
sales to Ambulance was up 38%.

During the year MVP signed an agreement with
Mundipharma Australia for the exclusive distribution
rights of Penthrox® in Australia. This led to a large
stocking order that was delivered in June 19. Even
excluding the impact of this, Australian Penthrox®
sales still grew by 14%. Mundipharma’s presence in
the field is expected to lead to strong sales growth
in the short to medium term, particularly within
General Practitioner and Hospital channels.

Penthrox® is now sold into more than 200 hospitals
and medical clinics in Australia.

Penthrox® continues to perform strongly in New
Zealand since being listed as the first line analgesic
for New Zealand ambulance, and Nitrous Oxide
being removed as a competitor. Sales to
New Zealand grew 12% in FY19.

Penthrox®: Rest of World

Since receipt of the $20.8m upfront payment, the
Chinese Regulatory approval is well underway. The
IND has been submitted to the Chinese FDA and we
expect to have the IND open during 2019.

MVP continues to negotiate with interested parties
from around the world in terms of registering
and selling Penthrox®, whilst concurrently
pursuing other important international regulatory
submissions and preparations in countries including
USA, China, Russia, Iran, Iraq, Thailand and South
Korea.

Respiratory
Respiratory device sales were down 5% in FY19,
driven almost entirely by the issue we had in the
UK (overstocking of our distributor in FY18). Global
sales (excluding the UK which declined 53%) grew
11%. MVP has restructured the UK business which
delivered an improved performance in the second
half of FY19 and we anticipate good sales growth in
the coming year.

Sales of Breath-A-Tech® grew 9% in Australia, but
that growth was largely offset by a drop in sales to
certain distributors. Overall Australian sales were
steady whilst sales into New Zealand grew 172%.

Sales into Asia grew 111%.

Clinical
MVP invested $6.8m in clinical and research
programs during FY19 (FY18: $7.1m). Our longer-
term ambition is to gather enough clinical and safety
data to extend the use of Penthrox® into:

a. Paediatrics globally

b. Minor surgical procedures;

Medical Developments International Limitedc. Breakthrough post-operative and cancer pain;

d. Repeat use scenarios; and ultimately

e. Home use.

Our Post Authorisation Safety Study in the UK has
recently completed recruiting with reporting to be
finalised in the coming months.

Commercial

New Technology Project (CSIRO)

Our ambition is to develop the next generation of
manufacturing technologies to make pharmaceutical
products at a significantly reduced cost, improved
quality, and lower risk compared with traditional
processes. In February, MVP announced it has
successfully completed a small-scale production
run for Lidocaine using MVP’s new continuous flow
manufacturing technology. Since then we have
focused our efforts and successfully run a series of
pilot scale continuous flow production runs proving
a successful scale up and commercial viability.
We have initiated preliminary discussions with
commercial parties to licence or sell the technology
and expect to have an outcome during FY20.

“

Vet
Our Vet revenue fell 18% in FY19, attributed to a
launch order in FY18 with one of the USA’s largest
veterinary medical device companies that was not
repeated in FY19. Despite the fall in revenue, the
segment continues to be profitable.

FY19 Full Year Financial
Result
Gross revenue was a record $21.4 million.

Gross margins decreased slightly in FY19 from 68%
to 66%, reflecting a higher weighting of international
Penthrox® sales that are typically lower margin.

Operating Expenses grew 8% for the period because
of increased:

• pharmacovigilance costs as a result of expanding

geographic sales base;

• cost of employee share based payments;

• marketing expenses as a result of expanding

geographic sales; and

• insurance related costs as a result of as a result

of increasing industry premiums.

Cash flow
During the year MVP invested:

• $6.8 million in clinical trials and registrations for

Penthrox®;

• $1.1 million in our manufacturing development

program with the CSIRO; and

• $1.5 million in various manufacturing equipment

and leasehold improvements.

Financial Position

A capital raising comprising of a $17m Institutional
Placement and a $7.5m Share Purchase Plan
was completed in August and September 2018
respectively. Bank debt was repaid during the year.

MVP completed a successful
$24.5 capital raise during the
year placing the company in a
strong financial position

Changes in State of Affairs

During the financial year there was no significant
change in the state of affairs of the company other
than that referred to in the financial statements or
notes thereto.

”

Annual Financial Report 2019Subsequent Events

On the 21st August 2019 the Board of Directors
declared a fully franked final dividend of 2 cents per
share to the holders of fully paid ordinary shares as
at the record date of 4 September 2019 to be paid
to the shareholders on the 4 October 2019. This
dividend has not been included as a liability in these
financial statements.

There has not been any other matter or
circumstance that has arisen that has 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.

Dividends

The Board of Directors is pleased to declare a Final
Dividend of 2 cents per share fully franked.

MVP intends to implement a Dividend Reinvestment
Plan which will allow shareholders to use the
proceeds from the Full Year Dividend to purchase
MVP shares at a 5% discount to the volume weighted
average price of all of the company’s fully paid
shares sold on the ASX during the 10 trading days
immediately before the record date.

The timetable for the Final Dividend for the year
ended 30 June 2019 is:

Indemnification of Officers and Auditors

During the financial year, the company paid a
premium in respect of a contract insuring the
directors of the company (as named above) and all
executive officers of the company against a liability
incurred as such a director, secretary or executive
officer 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.

The company has not otherwise, during or since
the end of the financial year, indemnified or agreed
to indemnify an officer or auditor of the company
against a liability incurred as such an officer or
auditor.

Directors’ Shareholdings

The following table sets out each director’s relevant
interest in shares as at the date of this report.

D.J. Williams

M. Johnston

L. Hoare

P.J. Powell

Fully paid shares

9,608,754

39,694

14,068

263,413

Directors hold no options over shares as at 30 June 2019.

Key dates

Event

Directors’ Meetings

21 August 2019

Declaration of Final Dividend

4 September 2019

Record Date for eligible shareholders to
receive dividend

23 September 2019

Date for shareholders to elect to
participate in Dividend Reinvestment Plan

4 October 2019

Payment Date

The table below sets out the number of directors’
meetings (including meetings of committees of
directors) held during the financial year and the
number of meetings attended by each director (while
they were a director or committee member). During
the financial year, 12 Board meetings, two Audit and
Risk Committee meetings and one Remuneration
and Nominations committee meeting were held.

Board of Directors

Audit & Risk Committee

Remuneration & Nominations

Held

Attended

Held

Attended

Nominations

Attended

D.J. Williams

A.D. McCallum

H.F. Oxer

M. Johnston

L. Hoare

P.J. Powell

Medical Developments International LimitedAudited Remuneration Report

Key Management Personnel Details

This remuneration report, which forms part of the
directors’ report, sets out information about the
remuneration of Medical Developments International
Limited’s key management personnel for the
financial year ended 30 June 2019. The term
‘key management personnel’ refers to those persons
having authority and responsibility for planning,
directing and controlling the activities of the
consolidated entity, directly or indirectly, including
any director (whether executive or otherwise) of the
consolidated entity. The prescribed details for each
person covered by this report are detailed below
under the following headings:

• Key management personnel

• Remuneration policy

• Relationship between the remuneration policy

and company performance

• Remuneration of key management personnel

• Key terms of employment contracts.

The company’s key management personnel consist
of the following directors and executives:

The directors of the company during or since the
end of the financial year were:

• D.J. Williams (Chairman, Non-executive)

• R.M. Johnston (Non-executive)

• L. Hoare (Non-executive)

• P. Powell (Non-executive)

• H.F. Oxer (Non-executive) (resigned on

19 December 2018)

• A.D. McCallum (Non-executive) (resigned on

17 December 2018)

The company executives during or since the end
of the financial year were:

• J. Sharman (Chief Executive Officer)

• M. Edwards (Chief Financial Officer/Company

Secretary)

Except as noted, the named persons held their
current position for the whole of the financial year
and since the end of the financial year.

Key management personnel equity holdings – fully paid ordinary shares

2019

D.J. Williams

M. Johnston

L. Hoare

P.J. Powell

J. Sharman

M. Edwards

Balance at 30
June 2018
No.

9,459,584

30,576

10,191

256,936

5,125

Issued during
the year via
DRP
No.

99,924

368

127

2,727

9,762,412

103,200

Disposals
No.

Acquired
No.

Net Other
Change
No.

Balance at 30
June 2019
No.

49,246

8,750

3,750

65,496

9,608,754

39,694

14,068

263,413

5,179

9,931,108

2018

Balance at 30
June 2017
No.

Issued during
the year via
DRP
No.

Disposals
No.

Acquired
No.

Net Other
Change
No.

Balance at 30
June 2018
No.

D.J. Williams *

17,970,388

113,025

(9,350,000)

750,000

(23,829)

9,459,584

A.D. McCallum

H.F. Oxer

M. Johnston

L. Hoare

P.J. Powell

J. Sharman

M. Edwards

384,671

193,118

30,365

10,121

255,157

510,312

2,344

1,347

211

1,779

225

(120,000)

(505,412)

267,015

194,465

30,576

10,191

256,936

5,125

19,354,132

119,001

(9,975,412)

750,000

(23,829)

10,223,892

*Mr. Williams ceased being trustee for 23,829 shares owned by Ward Williams

Annual Financial Report 2019
Remuneration Policy

The board continues to set remuneration at a level
that will attract directors and executives of high
calibre. The two key elements are:

• Base salary and fees, which are determined by

reference to the market rate based on payments
at similar sized companies in the industry; and

• Performance incentives, which have two

components – short term incentives based on
achieving key performance indicators during
the year and payable in cash, and long-term
incentives payable in equity, the value of which
depends on the share price of the company.

The remuneration and nominations committee,
comprised of D.J. Williams and L. Hoare, determines
the salary package of the CEO of the company and
reviews the compensation of the non-executive
directors on an annual basis. Changes are approved
by the board as a whole.

Relationship between the Remuneration
Policy and Company Performance

The board aims to ensure there is a strong link
between company performance and remuneration
and believes that the use of performance incentives
ensures that company performance is reflected
in the quantum of payments made to executives.
Performance metrics are selected to ensure that
the interests of management are aligned with those
of shareholders. For short term incentives, key
metrics are EBITDA (Earnings Before Interest, Tax,
Depreciation and Amortisation and NPAT (Net Profit
after Tax), used to directly link company earnings
and cash bonuses and other operational measures,
the achievement of which provides the basis for
future growth and profitability.

The table and graph below depict the company’s
earnings for the current financial year and the
previous seven financial years, which demonstrate
that the company has been consistently profitable.

Net Profit After Tax 2012-2019

3,000

2,500

2,000

0
0
0
$

’

1,500

1,000

500

2012

2013

2014

2015

2016

2017

2018

2019

The following table shows the company’s share prices for the current financial year and the previous seven
financial years.

Share price - start ($)

Share price - end ($)

Interim Dividend (cps)*

Final Dividend (cps)*

Basic Earnings per Share (cps)

Diluted Earnings per Share (cps)

2012

2013

2014

2015

2016

2017

2018

2019

0.40

0.79

3.00

5.10

0.79

1.27

3.00

2.00

4.10

1.27

1.32

1.50

1.32

2.68

2.65

2.68

6.10

2.00

0.41

6.10

4.95

2.00

3.10

4.95

5.80

2.00

0.41

5.80

5.30

2.00

1.61

1.60

*Franked to 100% at 27.5% corporate income tax rate.

Medical Developments International LimitedDividends

A 2c full franked dividend per fully paid ordinary share has been declared for the full year.

Elements of director and executive remuneration

Remuneration packages contain the following key elements:

1. Primary benefits – salary/fees and cash bonuses

2. Post-employment benefits – superannuation

3. Equity – rights to share options granted under the Long-Term Incentive Plan.

The following table discloses the remuneration of the directors of the company in 2019:

2019

Directors

D.J. Williams

A.D. McCallum

H.F. Oxer

M. Johnston

L. Hoare

P.J. Powell

Short-Term
Employee Benefits

Post
Employment

Salary
& Fees
$

76,104

20,548

46,804

257,612

Bonus
$

Superannuation
$

7,230

1,952

4,446

24,472

Long-
Term
Employee
Benefits

Long
Service
Leave
$

Share-
Based
Payments

Total

Options
& Rights
$

83,334

22,500

51,250

282,084

The following table discloses the remuneration of the key executives of the company in 2019:

2019

Executives

J. Sharman
(Chief Executive Officer)

M. Edwards
(CFO/Company Secretary)

Short-Term
Employee Benefits

Post
Employment

Salary
& Fees
$

Bonus
$

Superannuation
$

Long-
Term
Employee
Benefits

Long
Service
Leave
$

Share-
Based
Payments

Remuneration
Linked to
performance

Total

Options
& Rights
$

366,456

33,544

9,892

234,095

643,987

177,078

4,566

17,256

5,654

44,821

249,375

543,533

4,566

50,800

15,546

278,916

893,362

36%

20%

i. The value of the options granted to Mr Sharman and Mr Edwards as part of their remuneration was

calculated at grant date using a Black Scholes option pricing model. Additional details in relation to the
valuation are outlined below and also within note 32 of the Annual Report.

In FY19, Mr Edwards remuneration comprised a performance related component of $4,566. Director’s
remuneration did not contain a performance related component.

Annual Financial Report 2019The following table discloses the remuneration of the directors of the company in 2018:

2018

Directors

D.J. Williams

A.D. McCallum

H.F. Oxer

M. Johnston

L. Hoare

P.J. Powell

Short-Term
Employee Benefits

Post
Employment

Salary
& Fees
$

68,493

41,096

273,973

Bonus
$

Superannuation
$

6,507

3,904

26,027

Long-
Term
Employee
Benefits

Long
Service
Leave
$

Share-
Based
Payments

Total

Options
& Rights
$

75,000

45,000

300,000

The following table discloses the remuneration of the key executives of the company in 2018:

2018

Executives

J. Sharman
(Chief Executive Officer)

M. Edwards
(CFO/Company Secretary)

Short-Term
Employee Benefits

Post
Employment

Salary
& Fees
$

Bonus
$

Superannuation
$

Long-
Term
Employee
Benefits

Long
Service
Leave
$

Share-
Based
Payments

Remuneration
Linked to
performance

Total

Options
& Rights
$

343,794

50,000

36,798

16,759

447,351

167,657

4,566

16,530

2,950

511,451

54,566

53,328

19,709

191,703

639,054

11%

In FY18, both Mr Sharman and Mr Edwards
remuneration comprised a performance related
component of $50,000 and $4,566 respectively.
Director’s remuneration did not contain a
performance related component.

No key management personnel appointed during
the period received a payment as part of his or her
consideration for agreeing to hold the position.

Elements of remuneration related to
performance

Fees paid to non-executive directors are not directly
tied to performance. Salaries paid to the key
executives are also not directly tied to performance.
The short term and long-term incentive programmes
are directly related to performance, and the
conditions and assessment methods are explained
below.

Short-term incentives

The determination and approval of any potential
bonuses is at the discretion of the Board. During
the 2019 financial year, discretionary bonuses
totalling $4,566 (2018: $54,566) were determined
and approved by the Remuneration and Nominations
Committee in relation to key management personnel
in respect of their performance in the 2018 financial
year.

Long-term incentives

Executive Option Plans

Under the Executive Option plan awards were made
to executives who have an impact on the Group’s
performance. LTI awards are delivered in the form of
options over shares which vest on the achievement
of specific performance measures.

Medical Developments International LimitedThe fair value of share options granted is estimated
at the date of grant using a Black Scholes option
pricing model, taking into account the terms and
conditions upon which the share options were
granted including the option price, the life of the
option, the share price of the underlying shares on
grant date and the expected share price volatility.
It also takes into account historical and expected
dividends. There are no cash settlement alternatives
for the employees and The Group does not have a
past practice of cash settlement for these awards.

All outstanding options will be cancelled if the
employee leaves or is no longer employed by MVP
for any reason. When the Long-Term Incentive Plan
“LTIP” has met its vesting criteria and delivers an
entitlement to an equity interest, the employee will
have 3 months to exercise the relevant options, after
which the relevant options will lapse. In each case,
60% of the new shares issued by exercising options
will be escrowed for a period of 12 months from
issue date. In the case of an unconditional takeover,
the escrow conditions will not apply.

Each share option converts into one ordinarily share
of Medical Developments Limited on exercise. No
amounts are paid or payable by the recipient on the
receipt of the option nor are they tradeable at any
time. The options carry neither rights to dividends or
voting rights.

Executive share option plans

The following share-based payment arrangements
were in existence during the current reporting
period:

CEO Option Plan

On 18 July 2018 the company announced it has
agreed to a LTIP with Mr. John Sharman, the CEO
of Medical Developments International Limited
to encourage his long-term commitment to the
business.

Under the plan Mr. Sharman has been granted
300,000 options with a strike price of $0.01. The
options will only vest on the earlier of FDA approval
of Penthrox® for sale in the USA or the company
receives an unconditional takeover offer worth more
than $300m.

Senior Management Option Plan

In September 2018 the company announced it has
agreed to a LTIP with key Senior Management Team
members.

Under the plan the effected Senior Management
team members were granted options with a strike
price of $0.01. The options will only vest on the
earlier of FDA approval of Penthrox® for sale in
the USA or the company receives an unconditional
takeover offer worth more than $350m.

A summary of the options granted during the year and outstanding as at 30 June 2019 is outlined below:

2019

Granted as
remuneration
No.

Exercised
No.

Lapsed/
forfeited
No.

Balance
at 30 June
2019
No.

Balance
vested at
30 June
2019
but not
exercised
No.

Balance not
vested at 30
June 2019
No.

J. Sharman (CEO)

M. Edwards (CFO)

300,000

100,000

300,000

100,000

300,000

100,000

Options
vested
during
the year
No.

Issuing Entity

Personnel

Number of
shares under
option

Medical Developments International Ltd

J. Sharman

300,000

Medical Developments International Ltd

M. Edwards

100,000

400,000

Class of
shares

Ordinary

Exercise
price of
option

Expiry date
of options

$0.01

No expiry

Annual Financial Report 2019Details of amounts paid or payable to the auditor
for non-audit services provided during the year by
the auditor are outlined in note 7 to the financial
statements.

Corporate Governance Statement

A copy of the Company’s Corporate Governance
statement can be found at
www.medicaldev.com/investors-media

Auditor’s independence declaration

The auditor’s independence declaration is included
on page 31 of the annual report.

Rounding off of amounts

The Company is a Company of the kind referred to in
ASIC Corporations (rounding in Financial/Director’s
Reports) Instrument 2016/191 dated 24 March
2016, and in accordance with that Corporations
Instrument, amounts in the directors’ report and the
financial statements are rounded off to the nearest
thousand dollars, unless otherwise indicated.

Signed in accordance with a resolution of the
directors made pursuant to s.298(2) of the
Corporations Act 2001.

On behalf of the directors.

David Williams
Chairman

Melbourne, 21 August 2019

Fair value of share options granted during the
year

As the options contain non-market performance
hurdles, they have been valued using a ‘Black-
Scholes’ Option Pricing Model. Where relevant, the
expected useful life used in the model has been
adjusted based on management’s best estimate
for the effects of nontransferability and exercise
restrictions. Expected volatility is based on the
historical share price volatility over the past 2 years.

Inputs into the option pricing model were as follows:

Grant date share price

Exercise price

Option Fair Value

Expected volatility

Expected option life

Dividend (Bi-annually)

Risk-free interest rate

CEO

$5.69

$0.01

$5.47

40%

5 years

2.30%

CFO

$3.90

$0.01

$3.69

45%

5 years

2.17%

For valuation purposes a probability of 75% has been
applied to the likelihood of achieving FDA approval
for Penthrox® in the USA.

Contracts for services

Mr Sharman is employed under an open-ended
contract with a notice period of three months.
The contract does not provide for any termination
payments beyond payment for the notice period and
any accrued annual leave.

Mr Edwards is employed under an open-ended
contract with a notice period of four weeks. The
contract does not provide for any termination
payments beyond payment for the notice period and
any accrued annual leave.

Non-audit services

The directors are satisfied that the provision of
non-audit services, during the year, by the auditor
(or by another person or firm on the auditor’s
behalf) is compatible with the general standard
of independence for auditors imposed by the
Corporations Act 2001. The non-audit services
related to the provision of taxation services ($26,300)
and other audit related services ($10,675). The
directors do not believe that the provision of advice
of this nature compromises the general principles
relating to auditor’s independence, as set out by the
Institute of Chartered Accountants in Australia.

Medical Developments International Limited

Annual Financial Report 201932

Medical Developments International Limited33

Annual Financial Report 201934

Medical Developments International LimitedAnnual Financial Report 2019

Directors’ Declaration
The directors declare that:

a. 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;

b. in the directors’ opinion, the attached financial statements and notes thereto are in accordance with the

Corporations Act 2001, including compliance with accounting standards and giving a true and fair view of
the financial position and performance of the consolidated entity;

c. the attached financial statements are in compliance with International Financial Reporting Standards, as

stated in note 1 of the financial statements; and

d. the directors have been given the declarations required by s.295A of the Corporations Act 2001.

Signed in accordance with a resolution of the directors made pursuant to s.295(5) of the Corporations Act 2001.

On behalf of the directors.

David Williams
Chairman

Melbourne, 21 August 2019

Medical Developments International LimitedConsolidated Statement of Profit or Loss and Other
Comprehensive Income for the Financial Year Ended 30 June 2019

Gross revenue from sale of goods and contracts

Less discounts and claims

Net revenue from sale of goods and contracts

Cost of sales

Gross profit

Other income

Distribution expenses

Marketing expenses

Occupancy expenses

Administration expenses

Regulatory and registration expenses

Finance expenses

Other expenses

Profit before income tax expense

Income tax expense

Profit for the year

Other Comprehensive Income

Note

4(a)

5(a)

Items that may be reclassified subsequently to profit or loss, net of
income tax

Exchange differences on translating foreign operations

Total comprehensive income for the year

Profit for the year attributable to:

Owners of the parent

Total comprehensive income for the year attributable to:

Owners of the parent

Earnings per share:

Basic (cents per share)

Diluted (cents per share)

Notes to the financial statements are included on pages 43-71

2019
$’000

21,382

(506)

20,876

(6,692)

14,184

448

(1,197)

(3,072)

(1,269)

(4,135)

(1,999)

(71)

(1,338)

1,551

(513)

1,038

1,055

1,038

1,055

1.61

1.60

2018
$’000

17,929

(468)

17,461

(5,097)

12,364

(1,025)

(3,412)

(900)

(3,990)

(1,629)

(140)

(968)

301

(58)

243

290

243

290

0.41

Annual Financial Report 2019Consolidated Statement of Financial Position as at 30 June 2019

Current Assets

Cash and cash equivalents

Trade and other receivables

Inventories

Current tax receivable

Other

Total Current Assets

Non-Current Assets

Property, plant and equipment

Deferred tax assets

Goodwill

Other intangible assets

Total Non-Current Assets

Total Assets

Current Liabilities

Trade and other payables

Borrowings

Provisions

Current tax liabilities

Other

Total Current Liabilities

Non-Current Liabilities

Borrowings

Provisions

Other

Total Non-Current Liabilities

Total Liabilities

Net Assets

Equity

Issued capital

Reserves

Retained earnings

Total Equity

Note

29(a)

5(c)

5(d)

5(c)

2019
$’000

25,620

6,384

3,049

301

35,354

8,558

2,129

9,095

29,665

49,447

84,801

3,406

357

2,020

2,521

8,395

302

31,425

31,818

40,213

44,588

40,410

1,508

2,670

44,588

2018
$’000

794

4,287

3,197

373

8,747

8,075

1,082

9,095

22,549

40,801

49,548

3,227

102

356

2,418

6,103

9,150

206

13,048

22,404

28,507

21,041

16,121

711

4,209

21,041

Notes to the financial statements are included on pages 43-71

Medical Developments International LimitedConsolidated Statement of Changes in Equity for the Financial
Year Ended 30 June 2019

2019

Opening balance

Profit for the year

Other comprehensive income for the year,
net of income tax

Total comprehensive income for the year

Share based payments

Dividends paid

Shares issued - placement

Shares issued - share purchase plan

Options issues as part of CSIRO agreement

Dividends reinvested in the form of shares

Equity raising costs

Closing balance

2018

Opening balance

Profit for the year

Other comprehensive income for the year,
net of income tax

Total comprehensive income for the year

Share based payments

Dividends paid

Shares issue as part of ESS

Options issues as part of CSIRO

Dividends reinvested in the form of shares

Equity raising costs

Closing balance

Employee
equity
settled
benefits
reserve
$’000

CSIRO
option
reserve
$’000

Foreign
currency
$’000
translation
reserve

Total
$’000

331

400

(20)

21,041

Issued
capital
$’000

16,121

17,000

7,475

860

(1,046)

Retained
earnings
$’000

4,209

1,038

380

(2,576)

400

1,038

1,055

380

(2,576)

17,000

7,475

400

860

(1,046)

40,410

2,670

711

800

(3)

44,588

Employee
equity
settled
benefits
reserve
$’000

CSIRO
option
reserve
$’000

Foreign
currency
$’000
translation
reserve

Total
$’000

Issued
capital
$’000

Retained
earnings
$’000

15,008

6,328

331

1,123

(10)

243

(2,362)

400

(67)

21,600

243

290

(2,362)

400

1,123

(10)

16,121

4,209

331

400

(20)

21,041

Notes to the financial statements are included on pages 43-71

Annual Financial Report 2019Consolidated Statement of Cash Flows for the Financial Year
Ended 30 June 2019

Note

Cash flows from operating activities

Receipts from customers

Payments to suppliers and employees

Receipts from government grants

Upfront and milestone payments received

Interest paid

Income tax received/(paid)

Net cash generated by operating activities

29(b)

Cash flows from investing activities

Interest received

Payments for plant and equipment

Payments for other intangible assets

Net cash used in investing activities

Cash flows from financing activities

Dividends paid (net of DRP)

Proceeds from the issue of shares/options

Share issue transaction costs

Payments for hire purchase finance

Repayment of borrowings

Proceeds from borrowings

Net cash generated by financing activities

Net decrease in cash and cash equivalents

Cash and cash equivalents at the beginning of the financial year

Effects of exchange rate changes on the balance of cash held in
foreign currencies

2019
$’000

16,484

(16,595)

20,845

(71)

556

21,271

330

(1,487)

(8,378)

(9,535)

(1,717)

24,875

(1,045)

(11)

(9,059)

13,043

24,779

794

2018
$’000

16,233

(15,482)

118

1,020

(137)

1,790

(2,058)

(8,619)

(10,676)

(1,239)

400

(10)

(56)

8,878

7,973

(913)

1,691

Cash and cash equivalents at the end of the financial year

29(a)

25,620

794

Notes to the financial statements are included on pages 43-71

Medical Developments International Limited4141

Annual Financial Report 2019Notes to
the Financial
Statements
for the Financial Year Ended
30 June 2019

1. Significant accounting
policies

Statement of Compliance
The financial report is a general purpose financial
report which has been prepared in accordance with
the Corporations Act 2001, Australian Accounting
Standards and Interpretations, and complies with
other requirements of the law.

The financial statements comprise the consolidated
financial statements of the Group.

For the purposes of preparing the consolidated
financial statements, the Company is a for-profit
entity. Accounting Standards include Australian
Accounting Standards. Compliance with Australian
Accounting Standards ensures that the financial
statements and notes of the company comply with
International Financial Reporting Standards (‘IFRS’).

The financial statements were authorised for issue
by the directors on 21 August 2019.

Basis of Preparation
The consolidated financial statements have been
prepared on the basis of historical cost, except for
certain non-current assets and financial instruments
that are measured at revalued amounts or fair
values, as explained in the accounting policies below.
Historical cost is generally based on the fair values
of the consideration given in exchange for goods and
services. All amounts are presented in Australian
dollars, unless otherwise noted.

Fair value is 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, regardless of whether that price
is directly observable or estimated using another
valuation technique. In estimating the fair value of
an asset or a liability, the Group takes into account
the characteristics of the asset or liability if market
participants would take those characteristics into
account when pricing the asset or liability at the
measurement date. Fair value for measurement
and/or disclosure purposes in these consolidated
financial statements is determined on such a basis,
except for share-based payment transactions that
are within the scope of AASB 2, leasing transactions
that are within the scope of AASB 117, and
measurements that have some similarities to fair
value but are not fair value, such as net realisable
value in AASB 2 or value in use in AASB 136.

In addition, for financial reporting purposes, fair

value measurements are categorised into Level
1, 2 or 3 based on the degree to which the inputs
to the fair value measurements are observable
and the significance of the inputs to the fair value
measurement in its entirety, which are described as
follows:

• Level 1 inputs are quoted prices (unadjusted) in
active markets for identical assets or liabilities
that the entity can access at the measurement
date;

• Level 2 inputs are inputs, other than quoted prices
included within Level 1, that are observable for
the asset or liability, either directly or indirectly;
and

• Level 3 inputs are unobservable inputs for the

asset or liability.

The company is a company of the kind referred to
in ASIC Class Order 98/0100, dated 10 July 1998,
and in accordance with that Class Order amounts in
the financial report are rounded off to the nearest
thousand dollars, unless otherwise noted.

Basis of consolidation
The consolidated financial statements incorporate
the financial statements of the Company and entities
(including special purpose entities) controlled by
the Company (its subsidiaries). Control is achieved
where the Company has the power to govern the
financial and operating policies of an entity so as to
obtain benefits from its activities.

Income and expense of subsidiaries acquired or
disposed of during the year are included in the
consolidated statement of profit or loss and other
comprehensive income from the effective date of
acquisition and up to the effective date of disposal,
as appropriate. Total comprehensive income of
subsidiaries is attributed to the owners of the
Company and to the non-controlling interests even if
this results in the non-controlling interests having a
deficit balance.

Where necessary, adjustments are made to the
financial statements of subsidiaries to bring their
accounting policies into line with those used by other
members of the Group.

All intra-group transactions, balances, income and
expenses are eliminated in full on consolidation.

Changes in the Group’s ownership interests in
subsidiaries that do not result in the Group losing
control are accounted for as equity transactions.
The carrying amounts of the Group’s interests
and the non-controlling interests are adjusted to
reflect the changes in their relative interests in the
subsidiaries. Any difference between the amount by

Medical Developments International Limitedwhich the non-controlling interests are adjusted and
the fair value of the consideration paid or received
is recognised directly in equity and attributed to
owners of the Company.

Significant accounting policies

The following significant accounting policies have
been adopted in the preparation and presentation of
the financial report:

(a) Borrowings
Borrowings are recorded initially at fair value, net of
transaction costs.

Subsequent to initial recognition, borrowings are
measured at amortised cost with any difference
between the initial recognised amount and the
redemption value being recognised in profit and loss
over the period of the borrowing using the effective
interest rate method.

(b) Cash and cash equivalents
Cash and cash equivalents comprise cash on hand,
cash in banks and investments in money market
instruments, net of outstanding bank overdrafts.

(c) Employee benefits
A liability is recognised for benefits accruing to
employees in respect of wages and salaries, annual
leave, long service leave, and sick leave when it is
probable that settlement will be required and they
are capable of being measured reliably.

Liabilities recognised in respect of wages and
salaries, annual leave and sick leave expected
to be settled within 12 months, are measured at
their nominal values using the remuneration rate
expected to apply at the time of settlement.

Liabilities recognised in respect of annual leave
and long service leave which are not expected to
be settled within 12 months are measured using
an estimate of the present value of the future cash
outflows to be made by the company in respect of
services provided by employees up to reporting date.

(d) Financial assets

Loans and receivables

Trade receivables, loans, and other receivables
that have fixed or determinable payments that are
not quoted in an active market are classified as
‘loans and receivables’. Loans and receivables are
measured at amortised cost using the effective
interest rate method less impairment.

Interest income is recognised by applying the
effective interest rate.

Impairment of financial assets

Financial assets, other than those at fair value
through profit and loss, are assessed for indicators
of impairment at each balance sheet date. Financial
assets are impaired where there is objective
evidence that as a result of one or more events that
occurred after the initial recognition of the financial
asset, the estimated future cash flows of the
investment have been impacted.

(e) Financial instruments
issued by the company

Debt and equity instruments

Debt and equity instruments are classified as
either liabilities or as equity in accordance with the
substance of the contractual arrangement.

Transaction costs on the issue of equity
instruments

Transaction costs arising on the issue of equity
instruments are recognised directly in equity as a
reduction of the proceeds of the equity instruments
to which they relate. Transaction costs are the costs
that are incurred directly in connection with the
issue of those equity instruments and would not
have been incurred had those instruments not been
issued.

Interest and dividends

Interest and dividends are classified as expenses
or as distributions of profit consistent with the
balance sheet classification of the related debt or
equity instruments or component parts of compound
instruments.

(f) Foreign currency
The individual financial statements of each group
entity are presented in the currency of the primary
economic environment in which the entity operates
(its functional currency). For the purpose of the
consolidated financial statements, the results and
financial position of each group entity are expressed
in Australian dollars (‘$’), which is the functional
currency of the Company and the presentation
currency for the consolidated financial statements.

In preparing the financial statements of each
individual group entity, transactions in currencies
other than the entity’s functional currency (foreign
currencies) are recognised at the rates of exchange

Annual Financial Report 2019prevailing at the dates of the transactions. At the
end of each reporting period, monetary items
denominated in foreign currencies are retranslated
at the rates prevailing at that date. Non-monetary
items carried at fair value that are denominated
in foreign currencies are retranslated at the rates
prevailing at the date when the fair value was
determined. Non-monetary items that are measured
in terms of historical cost in a foreign currency are
not retranslated.

Exchange differences on monetary items are
recognised in profit or loss in the period in which
they arise, except for:

• exchange differences on foreign currency

borrowings relating to assets under construction
for future productive use, which are included in
the cost of those assets when they are regarded
as an adjustment to interest costs on those
foreign currency borrowings;

• exchange differences on transactions entered into
in order to hedge certain foreign currency risks
below for hedging accounting policies; and

• exchange differences on monetary items

receivable from or payable to a foreign operation
for which settlement is neither planned nor
likely to occur (therefore forming part of the
net investment in the foreign operation), which
are recognised initially in other comprehensive
income and reclassified from equity to profit or
loss on repayment of the monetary items.

For the purpose of presenting consolidated financial
statements, the assets and liabilities of the

Group’s foreign operations are translated into
Australian dollars using exchange rates prevailing at
the end of the reporting period. Income and expense
items are translated at the average exchange rates
for the period, unless exchange rates fluctuated
significantly during that period, in which case the
exchange rates at the dates of the transactions
are used. Exchange differences arising, if any, are
recognised in other comprehensive income and
accumulated in equity (attributed to non-controlling
interests as appropriate).

(g) Goods and services tax
Revenues, expenses and assets are recognised
net of the amount of goods and services tax (GST),
except:

• where the amount of GST incurred is not

recoverable from the taxation authority, it is
recognised as part of the cost of acquisition of an
asset or as part of an item of expense; or

• for receivables and payables which are recognised

inclusive of GST.

The net amount of GST recoverable from, or payable
to, the taxation authority is included as part of
receivables or payables.

Cash flows are included in the Consolidated
Statement of Cash Flows on a gross basis. The GST
component of cash flows arising from investing
and financing activities which is recoverable from,
or payable to, the taxation authority is classified as
operating cash flows.

(h) Goodwill
Goodwill, representing the excess of the cost of
acquisition over the fair value of the identifiable net
assets acquired, is recognised as an asset and not
amortised but tested for impairment annually and
whenever there is an indication that the goodwill
may be impaired. Any impairment is recognised
immediately in the Consolidated Statement of Profit
or Loss and Other Comprehensive Income and is not
subsequently reversed. Refer also to note 1(j).

(i) Government grants
Government grants are assistance by the
government in the form of transfers of resources to
the company in return for past or future compliance
with certain conditions relating to the operating
activities of the company. Government grants
include government assistance where there are
no conditions specifically relating to the operating
activities of the company other than the requirement
to operate in certain regions or industry sectors.

Government grants relating to income are
recognised as income over the periods necessary
to match them with the related costs. Government
grants that are receivable as compensation for
expenses or losses already incurred or for the
purpose of giving immediate financial support to the
company with no future related costs are recognised
as income of the period in which it becomes
receivable.

Government grants relating to assets are treated
as deferred income and recognised in the profit and
loss over the expected useful lives of the assets
concerned.

(j) Impairment of assets
At each reporting date, the company reviews the
carrying amounts of its tangible and intangible
assets to determine whether there is any indication
that those assets have suffered an impairment

Medical Developments International Limitedloss. If any such indication exists, the recoverable
amount of the asset is estimated in order to
determine the extent of the impairment loss (if any).
Where the asset does not generate cash flows that
are independent from other assets, the company
estimates the recoverable amount of the cash
generating unit to which the asset belongs.

Goodwill, intangible assets with indefinite useful
lives and intangible assets not yet available for use
are tested for impairment annually and whenever
there is an indication that the asset may be impaired.
An impairment of goodwill is not subsequently
reversed. Recoverable amount is the higher of
fair value less costs to sell and value in use. In
assessing value in use, the estimated future cash
flows are discounted to their present value using a
pre-tax discount rate that reflects current market
assessments of the time value of money and the
risks specific to the asset for which the estimates of
future cash flows have not been adjusted.

If the recoverable amount of an asset (or cash-
generating unit) is estimated to be less than its
carrying amount, the carrying amount of the
asset (or cash-generating unit) is reduced to
its recoverable amount. An impairment loss is
recognised in the Consolidated Statement of
Profit or Loss and Other Comprehensive Income
immediately, unless the relevant asset is carried
at fair value, in which case the impairment loss is
treated as a revaluation decrease.

Where an impairment loss (other than Goodwill)
subsequently reverses, the carrying amount of the
asset (or cash generating unit) is increased to the
revised estimate of its recoverable amount, but only
to the extent that the increased carrying amount
does not exceed the carrying amount that would
have been determined had no impairment loss been
recognised for the asset (or cash-generating unit)
in prior years. A reversal of an impairment loss is
recognised in profit or loss immediately, unless the
relevant asset is carried at fair value, in which case
the reversal of the impairment loss is treated as a
revaluation increase.

(k) Income tax

Current tax

Current tax is calculated by reference to the amount
of income taxes payable or recoverable in respect
of the taxable profit or loss for the period. It is
calculated using tax rates and tax laws that have
been enacted or substantively enacted by reporting
date. Current tax for current and prior periods is
recognised as a liability (or asset) to the extent that it
is unpaid (or refundable).

Where the Group qualifies for the research and
development tax incentive refund (at 45%), this
reduces the current tax expense recognised in profit
and loss for the period.

Deferred tax

Deferred tax is accounted for using the
comprehensive balance sheet liability method
in respect of temporary differences arising from
differences between the carrying amount of assets
and liabilities in the financial statements and the
corresponding tax base of those items.

In principle, deferred tax liabilities are recognised
for all taxable temporary differences. Deferred tax
assets are recognised to the extent that it is probable
that sufficient taxable amounts will be available
against which deductible temporary differences or
unused tax losses and tax offsets can be utilised.
However, deferred tax assets and liabilities are not
recognised if the temporary differences giving rise
to them arise from the initial recognition of assets
and liabilities (other than as a result of a business
combination) which affects neither taxable income
nor accounting profit. Furthermore, a deferred
tax liability is not recognised in relation to taxable
temporary differences arising from goodwill.

Deferred tax assets and liabilities are measured
at the tax rates that are expected to apply to the
period(s) when the asset and liability giving rise to
them are realised or settled, based on tax rates (and
tax laws) that have been enacted or substantively
enacted by reporting date. The measurement of
deferred tax liabilities and assets reflects the tax
consequences that would follow from the manner in
which the company expects, at the reporting date, to
recover or settle the carrying amount of its assets
and liabilities.

Deferred tax assets and liabilities are offset when
they relate to income taxes levied by the same
taxation authority and the company intends to settle
its current tax assets and liabilities on a net basis.

Current and deferred tax for the period

Current and deferred tax is recognised as an
expense or income in the Consolidated Statement
of Profit or Loss and Other Comprehensive Income,
except when it relates to items credited or debited
directly to equity, in which case the deferred tax
is also recognised directly in equity, or where it
arises from the initial accounting for a business
combination, in which case it is taken into account in
the determination of goodwill or excess.

Annual Financial Report 2019(l) Intangible assets

Patents, trademarks and licenses

Patents, trademarks and licenses are recorded at
cost less accumulated amortisation and impairment.
Amortisation is charged on a straight-line basis
over their estimated useful lives of 10 years. The
estimated useful life and amortisation method is
reviewed at the end of each annual reporting period.

Research and development costs

Expenditure on research activities is recognised
as an expense in the period in which it is incurred.
Where no internally-generated intangible asset
can be recognised, development expenditure is
recognised as an expense in the period as incurred.

An intangible asset arising from development (or
from the development phase of an internal project)
is recognised if, and only if, all of the following are
demonstrated:

• the technical feasibility of completing the

intangible asset so that it will be available for use
or sale;

• the intention to complete the intangible asset and

use or sell it;

• the ability to use or sell the intangible asset;

• how the intangible asset will generate probable

future economic benefits;

• the availability of adequate technical, financial and
other resources to complete the development and
to use or sell the intangible asset; and

• the ability to measure reliably the expenditure
attributable to the intangible asset during its
development.

Internally-generated intangible assets in respect
of development costs are stated at cost less
accumulated amortisation and impairment and
are amortised on a straight-line basis over their
estimated useful life of 5-10 years commencing from
the date that revenue results.

Registration costs

Items of expenditure on registrations are capitalised
to the extent that such costs can be measured
reliably, future economic benefits are attributable to
the expenditure, and it is probable that such future
economic benefits will eventuate.

Any capitalised registration costs are amortised over
a period of 5 - 10 years in which the corresponding
benefits are expected to arise, commencing from
commercial sales to any of the countries for which

the registration costs contributed to a successful
registration.

The unamortised balance of registration costs
capitalised in previous periods is reviewed regularly
at each reporting date, to ensure the criteria for
deferral continue to be met. Where such costs are
no longer recoverable, they are written off as an
expense in the Consolidated Statement of Profit or
Loss and Other Comprehensive Income.

Brandnames

Brandnames arising on acquisition of a business
are carried at cost as established at the date of
acquisition of the business less any applicable
impairment charge (if any). They are not amortised
but subject to annual tests for impairment. For the
purposes of impairment testing, brandnames are
allocated to the relevant Group cash generating unit
to which they relate.

(m) Inventories
Inventories are valued at the lower of cost and net
realisable value. Costs, including an appropriate
portion of fixed and variable overhead expenses, are
assigned to inventory on hand by the method most
appropriate to each particular class of inventory,
with the majority being valued on a first in first out
basis. Net realisable value represents the estimated
selling price less all estimated costs of completion
and costs to be incurred in marketing, selling and
distribution.

(n) Leases
Leases are classified as finance leases whenever
the terms of the lease transfer substantially all the
risks and rewards of ownership to the lessee. The
company currently does not have any finance leases.
All other leases are classified as operating leases.

Operating lease payments are recognised as an
expense on a straight-line basis over the lease term,
except where another systematic basis is more
representative of the time pattern in which economic
benefits from the leased asset are consumed.

(o) Financial Liabilities
Trade payables and other accounts payable are
classified as financial liabilities and are recognised
when the company becomes obliged to make future
payments resulting from the purchase of goods and
services. Financial liabilities are initially measured
at fair value, net of transaction costs.

Medical Developments International LimitedFinancial liabilities are subsequently measured
at amortised cost using the effective interest rate
method, with interest expense recognised on an
effective yield basis.

obligation. Where a provision is measured using the
cashflows estimated to settle the present obligation,
its carrying amount is the present value of those
cashflows.

The effective interest rate method is a method of
calculating the amortised cost of a financial liability
and of allocating interest expense over the relevant
period. The effective interest rate is the rate that
exactly discounts estimated future cash payments
through the expected life of the financial liability, or
where appropriate, a shorter period.

(p) Plant and equipment
Plant and equipment and leasehold improvements
are stated at cost less accumulated depreciation
and impairment. Cost includes expenditure that
is directly attributable to the acquisition of the
item. In the event that settlement of all or part
of the purchase consideration is deferred, cost is
determined by discounting the amounts payable in
the future to their present value as at the date of the
acquisition. Other than the charge over the groups
assets held in relation to the bank bill loan, all other
assets are not encumbered by any additional charge
or mortgage.

Depreciation

Depreciation is provided on plant and equipment
and is calculated on a straight-line basis so as to
write off the cost of each asset over its expected
useful life to its estimated residual value. Leasehold
improvements are depreciated over the period
of the lease or estimated useful life, whichever
is the shorter, using the straight-line method.
The estimated useful lives, residual values and
depreciation method are reviewed at the end of each
annual reporting period.

The following estimated useful lives are used in the
calculation of depreciation:

Leasehold improvements

Plant and equipment

5 - 10 years

4 - 10 years

(q) Provisions
Provisions are recognised when the Group has a
present obligation, the future sacrifice of economic
benefits is probable, and the amount of the provision
can be measured reliably.

The amount recognised as a provision is the best
estimate of the consideration required to settle the
present obligation at reporting date, taking into
account the risks and uncertainties surrounding the

When some or all of the economic benefits required
to settle a provision are expected to be recovered
from a third party, the receivable is recognised as an
asset if it is probable that recovery will be received
and the amount of the receivable can be measured
reliably.

Dividends

A liability is recognised for dividends when they have
been declared, determined or publicly recommended
by the directors on or before the reporting date.

(r) Revenue recognition

Sale of goods

Revenue from the sale of goods is recognised when
the company has transferred control of the product
to the buyer. Settlement and volume discounts
granted to customers are accounted as offsets
against sales.

Interest income

Interest income is recognised on a time
proportionate basis that takes into account the
effective yield on the financial asset.

(s) Share based payments
Equity-settled share-based payments granted are
measured at fair value at the date of grant. Fair
value is measured by use of a Monte Carlo valuation
model.

The fair value determined at the grant date of the
equity settled share based payments is expensed on
a straight line based over the vesting period, based
on the Group’s estimated of equity instruments that
will eventually vest, with a corresponding increase
in equity. At the end of the reporting period, the
Group revises its estimate of the number of equity
instruments expected to vest and the impact of any
revision on the original estimates is also recognised
in the profit and loss.

(t) Research and development
recoveries
R&D tax credits receivable as compensation for
expenses or losses already incurred by the Company
with no future related costs are recognised in profit

Annual Financial Report 2019

or loss in the period in which they are quantified
and become receivable. The company applies
the income tax approach for the accounting and
presentation of the R&D tax credit. Accordingly, the
tax benefit is presented as a reduction of income tax
expense in the Statement of Profit or loss and other
Comprehensive Income.

(u) Application of new and
revised Accounting Standards
The Group has adopted all of the new and revised
Standards and Interpretations issued by the Australian
Accounts Standards and amendments to Accounting
Standards that are mandatorily effective for the current
period that begins on or after 1 July 2018.

Standards and Interpretations in issue not yet
adopted

At the date of authorisation of the financial
statements, the Group has not applied the following
new and revised Australian Accounts Standards,
Interpretations and amendments that have been
issued but are not yet effective:

New and revised Standards and amendments
thereof and Interpretations effective for the current
year that are relevant to the Group include:

• AASB 9 Financial Instruments and related

amending Standards

• AASB 15 Revenue from Contracts with Customers

• AASB 2016-5 Amendments to Australian

Accounting Standards – Classification and
Measurement of Share-based Payment
Transactions

• Interpretation 22 Foreign currency Transactions

and Advance Consideration

The main impacts in the current year were in
relation to AASB 9 and AASB 15.

Standard/Amendment/Interpretation

AASB 16 Leases

AASB 2018-1 Amendments to Australian Accounting Standards
– Annual Improvements 2015-2017 Cycle

AASB 2018-3 Amendments to Australian Accounting Standards
– Reduced Disclosure Requirements

AASB 2018-7 Amendments to Australian Accounting Standards
– Definition of Material

AASB 9 Financial Instruments

In the current year, the Group has applied an
amendment to AASB 9 Financial Instruments
(as amended) and the related consequential
amendments to other Accounting Standards that
are effective for an annual period that begins on or
after 1 July 2018. The transition provisions of AASB 9
allow an entity not to restate comparatives.

AASB 9 introduced new requirements for:

• The classification and measurement of financial

assets and financial liabilities (minimal impact on
the Group);

• Impairment of financial assets (minimal impact on

the Group); and

• General hedge accounting (no impact on the

Group).

Details of these new requirements as well as
their impact on the Groups consolidated financial
statements are described below:

Classification and measurement of financial
assets and financial liabilities

The Group’s financial assets classified as held to
maturity and loans and receivables under AASB 139
that were measured at amortised cost, continue to
be measured at amortised cost under AASB 9 as
these are held within a business model to collect
contractual cash flows and these cash flows consist
solely of payment of principal and interest on the
principal amount outstanding.

Impairment of financial assets

In relation to the impair of financial assets, AASB 9
requires an expected credit loss model as opposed
to an incurred credit loss model under AASB 139.
Th expected credit loss model requires the Group
to account for expected credit losses and changes
in those expected credit losses at each reporting
date to reflect changes in credit risk since initial
recognition of the financial assets. In other words,

Effective for annual
reporting periods
beginning on or after

Expected to be initially
applied in the financial
year ending

1 January 2019

30 June 2020

1 January 2019

30 June 2020

1 January 2019

30 June 2020

Interpretation 23 – Uncertainty over Income Tax Treatments

1 January 2019

30 June 2020

Medical Developments International Limitedit is no longer necessary for a credit even to have
occurred before credit losses are recognised.

application of the standard for the group will be 1
July 2019.

Despite the changed recognition criteria, the group
continues to assess the risk of non-recoverability
or expected credit loss on its receivables to be very
low. Trade receivables are typically collected within a
30-90-day period and despite the occasional debtor
being slow paying, empirical evidence suggest there
has been a very low absence of credit losses in
recent years (losses over the last 4 financial years
total less than $25k).

AASB 15 Revenue from Contracts with
Customers

In the current year, the Group has applied AASB15
Revenue from Contracts with Customers (as
amended) which is effective for annual reporting
periods that begin on or after 1 July 2018.

Following a detailed assessment of the requirements
of this standard, the Group has determined that the
five-step approach framework under AASB 15 does
not impact the two main sources of revenue streams
earned by the Group, those being revenue from sale
of goods and upfront and milestone payments.

Revenue from sale of goods – the key and sole
performance milestone relates to the delivery of
the product related to the order with no after sales
service embedded or attached to the underlying sale.
Hence the previously adopted revenue recognition
practices remain unchanged as a result of the
application of AASB 15.

Revenue from upfront and milestone payments
is amortised to the income statement over the
underlying contract term. As the performance
obligation continues to be the right of the Groups
partners to exclusively sell product in a specific
market for a period of time, the consumption of the
right and benefit occurs evenly over the contract
period and the accounting remains unchanged.

As such there are no changes to the historical
revenue recognition and measurement practices as a
result of the introduction and application of AASB 15.

Standards not yet adopted

AASB 16 Leases

General impact of application

AASB 16 provides a comprehensive model for the
identification of lease arrangements and their
treatment in the financial statements for lessees.
AASB 16 will supersede the current lease guidance
included in AASB 117 Leases and the related
interpretations, effective for accounting periods
on or after 1 January 2019. The date of initial

The group has opted for the modified application
of AASB 16. Consequently, no restatement of
comparative information will be required.

The Group will apply the definition of a lease and
related guidance set out in AASB 16. In preparation
for the first-time application of the new standard,
the Group has carried out an assessment that has
determined the new definition in AASB 16 will not
change significantly the scope of contracts that meet
the definition of a lease for the Group.

Accordingly, AASB 16 will change how the Group
accounts for leases previously classified as
operating leases under AASB117 which were off
balance sheet. The main impact being in relation
to the Group’s key lease in relation to its Scoresby
based head office and manufacturing facility. On
initial application of AASB16, for all leases (except as
noted below), the Group will:

• Recognised right of use assets and lease liabilities
in the consolidated statement of financial position,
initially measure at the present value of the future
lease payments;

• Recognise depreciation of right of use assets and
interest on lease liabilities in the consolidated
statement of profit and loss; and

• Separate the total amount of cash paid into
principal portion (presented with finance
activities) and interest (presented within operating
activities) in the consolidated cash flow statement.

The lease incentive (i.e. rent free period received on
the Scoresby lease), will be recognised as part of the
measurement of the right of use assets and leases
liabilities, whereas under AASB 117 the results
in the recognition of a lease liability incentive,
amortised as a reduction of rental expense on a
straight-line basis.

For short term leases (i.e. those of 12 months or
less) and leases of low value assets, the Group will
opt to recognise a lease expense on a straight-line
basis as permitted by AASB 16.

As at 30 June 2019, the Group has non-cancellable
operating lease commitments of $2.343m of which
the Scoresby lease represents $2.183m.

A preliminary assessment indicates that the Group
will recognise a right of use asset of $3.074m and
a lease liability of $3.462m. This assumes the
Group will exercise the first of its 5-year lease
renewal options. The impact on the profit or loss
is to decrease occupancy expenses by $0.283m, to
increase depreciation by $0.271m and to increase
interest expense by $0.119m. The lease liability

Annual Financial Report 2019discount rate in order to calculate the present value.

The carrying amount of goodwill at the balance
sheet date was $9,095,000 (2018: $9,095,000).
Details of the impairment calculation are provided in
note 13.

Impairment of intangible
assets not yet available
for use
The Group has material capitalised registration costs
in relation to obtaining registration of Penthrox® in
a number of jurisdictions (primarily the USA and
China). Management tests the intangible assets not
yet available for use using a fair value less costs to
sell basis each year.

Useful life of capitalised
registration costs
Capitalisation of other intangible assets requires
judgement by management to determine whether:

• Expenditure relates to development activity and

not research activity,

• Expected future economic benefits attributable to

the intangible assets will flow to the Group,

• The timing of the commencement of the

amortisation of the asset which should commence
when revenue has been generated, and

• The useful lives assigned to each individual

category are appropriate.

Details of the other intangible assets are provided in
Note 14

Useful life of plant and
equipment
Refer note 1(p) for further discussion on useful life
assessments relating to plant and equipment.

Deferred tax assets
The carrying amount of deferred tax assets are
reviewed at the end of each reporting period and
reduced to the extent that it is no longer probable
that sufficient taxable profits will eventuate to enable
recovery of the asset.

incentive of $0.388m previously recognised in
respect of the Scoresby operating lease will be
derecognised and the amount factored into the
measurement of the ‘right to use’ asset.

Under AASB117, all lease payments on operating
leases are presented as part of cash flows from
operating activities. The impact of the changes under
AASB 16 would be to increase the cash generated
from operating activities by $0.283m and to increase
the net cash used in financing activities.

Interpretations 22 Foreign Currency
Transactions and Advance Consideration

Interpretation 22 addresses how to determine the
date of transaction for the purpose of determining
the exchange rate to use on initial recognition of an
assets, expense or income, when consideration for
that item has been paid or received in advance in
foreign current which results in the recognition of a
non-monetary assets or non-monetary liability.

The interpretation specifies that the date of
transaction is the date on which the entity initially
recognises the non-monetary asset or non-monetary
liability arising from the payment or receipt of
advance consideration. If there are multiple
payments or receipts in advance, the interpretation
requires an entity to determine the date of
transaction for each payment of receipts of advance
consideration.

2. Critical accounting
judgements and key
sources of estimation
uncertainty

The following are the key assumptions concerning
the future, and other key sources of estimation
uncertainty at the balance sheet date, that have
significant risk of causing a material adjustment to
the carrying amounts of assets and liabilities within
the next financial year:

Impairment of goodwill
Determining whether goodwill is impaired requires
an estimation of the value in use of the cash-
generating units to which goodwill has been
allocated. The value in use calculation requires the
entity to estimate the future cash flows expected to
arise from the cash generating unit and a suitable

Medical Developments International LimitedGoing Concern
The FY19 Financial statements have been
prepared on a going concern basis. The going
concern assumption continues to apply to Medical
Developments International Ltd as at 30 June
2019 as the Group is profitable, generates positive
operating cash flows, has completed a capital raising
during the year and continues to be in a positive net
asset position, which enables the Group to meet its
debts and obligations as and when they fall due.

3. Segment information

Products and services within
each business segment
For management purposes, the company
is organised into three business units –
Pharmaceuticals, Medical Devices and Veterinary

products. These units are the basis on which the
company reports its primary segment information.
The principal products and services of each of these
divisions are as follows:

• Pharmaceuticals – the sale of Penthrox® primarily
within Australia, New Zealand, Europe the UK and
some sales in Canada, the Middle East, Asia and
South Africa.

• Medical Devices – the sale of medical devices,

particularly the Space Chamber and Breath-Alert
Peak-Flow meters, primarily within Australia, UK/
Europe and North America, with some sales in
Asia and New Zealand.

• Veterinary Products – the sale of veterinary
products within Australia, Europe, and Asia.

No operating segments have been aggregated in
arriving at the reportable segments of the group.

There have also been no sales between reportable
segments.

Segment revenues and results

Pharmaceuticals

Medical
Equipment

Veterinary
Equipment

Unallocated

Total

2019
$’000

2018
$’000

2019
$’000

2018
$’000

2019
$’000

2018
$’000

2019
$’000

2018
$’000

2019
$’000

2018
$’000

Revenues:

External revenue (gross)

14,322

10,246

6,442

6,928

618

755

Sales discounts and claims

(506)

(468)

Total external revenue (net)

14,322

10,246

5,936

6,460

618

755

Results:

Segment results

5,334

4,353

573

507

184

244

21,382

17,929

(506)

(468)

20,876

17,461

6,091

5,104

(2,650)

(2,881)

(2,650)

(2,881)

Unallocated

Profit before interest,
income tax depreciation
& amortisation

5,334

4,353

573

507

184

244

(2,650)

(2,881)

3,441

2,223

Depreciation & Amortisation

(1,805)

(1,417)

(249)

(192)

Profit before interest and tax

3,529

2,936

324

315

(25)

159

(37)

(188)

(137)

(2,267)

(1,783)

207

(2,838)

(3,018)

1,174

440

Net Interest

Profit before income tax
expense

Income tax expense

Net profit for the period
from continuing operations

Assets and Liabilities

Assets

Liabilities

Other Segment Information

Acquisition of segment
assets

377

(139)

377

(139)

(2,461)

(3,157)

1,551

301

(513)

(58)

(513)

(58)

(2,974)

(3,215)

1,038

243

44,236

35,046

9,973

9,981

1,108

1,120

29,484

3,401

84,801

49,548

40,213

28,507

40,213

28,507

8,994

10,062

291

328

567

224

9,865

10,677

Annual Financial Report 2019The accounting policies of the reportable segments
are the same as the Group’s accounting policies
described in Note 1. This is the measure reported to
the chief operating decision maker for the purposes
of resource allocation and assessment of segment
performance. MVP has made minor adjustments to
prior year comparatives to ensure consistent year on
year expense allocations.

Liabilities are not disclosed per segment as it is not
possible to track these on a segment basis.

Geographical information
The Group operates in two principal geographical
areas: Australia (country of domicile); and
“International” comprising predominately Europe,
North America, Middle East, Asia and South Africa.

The Group’s revenue from continuing operations
from external customers and information about its
non-current assets by location of assets are detailed
below:

Revenue from major products
and services
Revenue from major products and services has not
been presented as it is not considered practicable to
do so.

Geographical Information

Australia

International

Revenue
from
external
customers 2019

$000’s

11,208

10,174

21,382

Revenue
from
external
customers 2018

$000’s

9,705

8,224

17,929

52.4

47.6

100.0

The Group’s non-current assets by location are detailed below:

Non-Current Segment Assets

Leasehold improvements at cost

Plant and equipment at cost

Goodwill at gross carrying amount

Other intangible assets at cost

Deferred tax asset

Australia
$000’s

Overseas
$000’s

298

7,763

9,095

29,665

2,062

48,883

497

564

54.1

45.9

100.0

Total
$000’s

298

8,260

9,095

29,665

2,129

49,447

Information about major customers
The Group had no individual customers who contributed 10% or more to the Group’s total 2019 sales revenue.

Medical Developments International Limited4. Items included in profit and loss

(a) Revenue and other income

Gross revenue from sale of goods

Sales discounts and claims

Upfront and milestone income

Total Revenue (net)

Interest revenue - bank deposits

(b) Expense items included in profit and loss

Profit before income tax has been arrived at after charging the following expenses:

Depreciation of non-current assets

Amortisation of non-current assets

Research & development costs

Operating lease rental expenses - minimum lease payments

Share based payments (equity settled)

Gain/(loss) on foreign currency transactions

Finance Expenses

Interest on bank loans

Interest on other loans/hire purchase arrangements

Employee benefit expense:

Short-term employee benefits

Superannuation contributions

2019
$’000

18,964

(506)

2,418

20,876

448

21,324

(1,003)

(1,263)

(253)

(328)

(380)

382

(46)

(25)

(71)

(4,559)

(594)

2018
$’000

15,763

(468)

2,166

17,461

17,462

(620)

(1,162)

(156)

(322)

(103)

(134)

(6)

(140)

(3,945)

(560)

Annual Financial Report 20195. Income taxes

(a) Income tax recognised in profit or loss

Tax expense comprises:

Current tax expense/(benefit)

Deferred tax expense/(benefit) relating to origination and reversal of temporary
differences

Adjustments recognised in the current year in relation to the current tax of prior year

Deferred tax expense relating to change in company tax rate

Total tax expense

2019
$’000

(2,905)

3,371

513

2018
$’000

2,247

(2,319)

107

The prima facie income tax expense on pre-tax accounting profit reconciles to the income tax expense in the financial statements
as follows:

Profit from operations

Income tax calculated at 27.5% (2018: 27.5%)

Research & development benefit

Non deductible expenses

Adjustments recognised in relation to the current tax of prior year

Deferred tax expense relating to change in company tax rate

Effect of different tax rates of subsidiaries operating in other jurisdictions

Income tax expense recognised in the Statement of Profit or Loss and Other
Comprehensive Income

1,551

426

(127)

130

513

301

(167)

107

The tax rate used in the above reconciliation is the corporate tax rate of 27.5% payable by Australian corporate entities on taxable
profits under Australian tax law.

(b) Income tax recognised directly in equity

No current and deferred tax amounts have been charged directly to equity during the period (2018: $nil)

Income tax (payable)/receivable

(2,020)

MVP has received upfront payments during the current and prior years and for tax purposes these are
deemed as assessable on a cash received basis or when unconditional entitlement arises. This has resulted
in the recognition of a net deferred tax asset.

(d) Deferred tax asset (current)

Temporary differences

Tax losses

(e) Deferred tax liabilities

Temporary differences

Net Deferred Tax Asset

9,849

9,916

(7,787)

2,129

4,644

2,391

7,035

(5,953)

1,082

Medical Developments International LimitedTaxable/Deductible temporary differences arise from the following:

2019

Deferred tax assets/(liabilities):

Accrued expenses

Deferred revenue

Other Intangibles

Property, Plant & Equipment

Provisions

Goodwill

2018

Deferred tax assets/(liabilities):

Accrued expenses

Deferred revenue

Other Intangibles

Property, Plant & Equipment

Provisions

Goodwill

Unrealised foreign exchange losses

Opening
balance
$’000

Charged to
income
$’000

Closing
balance
$’000

117

4,253

(5,728)

(4)

274

(221)

(1,309)

5,082

(1,828)

(6)

3,371

186

9,335

(7,556)

(10)

328

(221)

2,062

Opening
balance
$’000

Charged to
income
$’000

Closing
balance
$’000

131

4,948

(4,103)

276

(221)

(23)

1,010

(14)

(695)

(1,625)

(6)

(2)

117

4,253

(5,728)

(4)

274

(221)

(2,319)

(1,309)

6. Key management personnel compensation

The aggregate compensation of the key management personnel of the company and the Group is set out below:

Short-term employee benefits

Post employment benefits

Long term employee benefits

Share based payments

7. Remuneration of auditors

Audit or review of the financial report

Taxation services

Other audit services

The auditor of the entity is Deloitte Touche Tohmatsu.

2019
$’000

806

279

1,176

2018
$’000

840

939

2019

90,000

26,300

10,675

2018

79,785

29,790

126,975

109,575

Annual Financial Report 20198. Current receivables

due to the fact that the customer base is large and
unrelated.

Trade receivables

GST recoverable

2019
$’000

6,273

111

6,384

2018
$’000

4,233

4,287

The directors believe that there is no further credit
provision required in excess of the allowance for
doubtful debts.

9. Current inventories

The average credit period on sales of goods to
domestic customers is 30 days, international
customers 60 days. No interest is charged on trade
receivables.

Included in the trade receivable balance are debtors
with a carrying amount of $647,906 (2018: $368,225)
which are past due at the reporting date for which
the Group has not provided as there has not been a
significant change in credit quality and the amounts
are still considered recoverable. The Group does not
hold any collateral over these balances.

Ageing of past due but not impaired

Raw materials:

At cost

Work in progress:

At cost

Finished goods:

At cost

Provision for obsolesence

2019
$’000

2018
$’000

1,200

1,111

825

647

1,169

(145)

3,049

1,479

(40)

3,197

2019
$’000

2018
$’000

The provision for obsolescence at 30 June 2019
represented predominantly obsolete materials.

60 - 90 days

> 90 days

386

262

648

284

368

10. Other current assets

In determining the recoverability of trade
receivables, the Group considers any change in the
credit quality of the trade receivable from the date
the credit was initially granted up to the reporting
date. The concentration of credit risk is limited

Prepayments

Other receivables

2019
$’000

301

2018
$’000

372

373

11. Subsidiaries

Details of the Group’s subsidiaries at the end of the reporting period are as follows.

Name of Subsidiary

Principle activity

Place of
incorporation
and operation

Proportion of ownership interest
and voting power held by the Group

Medical Developments
UK Limited

Distribution of pharmaceutical drug and
medical and veterinary equipment

United Kingdom

Medical Developments
MD&P Limited

Holder of European Penthrox® Marketing
Authorisation

Ireland

Medical Developments
USA Inc.

Distribution of medical devices

United States
of America

2019

100%

2018

100%

N/A

100%

Medical Developments International Limited12. Property, plant & equipment

Gross carrying amount

Balance at 30 June 2017

Additions

Balance at 30 June 2018

Additions

Balance at 30 June 2019

Accumulated depreciation

Balance at 30 June 2017

Depreciation expense

Balance at 30 June 2018

Depreciation expense

Balance at 30 June 2019

Net book value

As at 30 June 2018

As at 30 June 2019

Leasehold
improvements at
cost
$’000

Manufacturing
Facility
$’000

Plant and
equipment
at cost
$’000

495

563

532

1,095

(295)

(63)

(358)

(439)

(797)

205

298

3,818

269

4,087

(136)

(341)

(477)

3,952

3,610

5,264

1,720

6,984

955

7,939

(2,645)

(421)

(3,066)

(223)

(3,289)

3,918

4,650

Total
$’000

9,577

2,057

11,634

1,487

13,121

(2,940)

(620)

(3,560)

(1,003)

(4,563)

8,075

8,558

13. Goodwill

and veterinary equipment business. The carrying
amount of goodwill allocated to cash-generating
units is as follows:

Gross carrying amount

Balance at beginning
of financial year

Additions

2019
$’000

2018
$’000

9,095

Pharmaceuticals

Medical devices

Veterinary equipment

2019
$’000

3,808

4,706

581

9,095

2018
$’000

3,808

4,706

581

9,095

Balance at end of financial year

9,095

Net book value

Balance at beginning
of financial year

Balance at end of financial year

9,095

During the year, the company assessed the
recoverable amount of goodwill and determined that
there was no impairment (2018: $nil).

Allocation of goodwill to
cash-generating units
Goodwill has been allocated for impairment testing
purposes to three individual cash-generating units:
pharmaceutical business, medical devices business

The recoverable amount of all three cash-generating
units is based on a value in use calculation for each
unit which uses cash flow projections based on a
five-year projection period and terminal value. The
Board of Directors approved financial budget for the
following year is used to determine the cash flows
for year 1.

Recoverable amount testing has been based on
EBITDA growth rates for years 2-5 of:

Pharmaceuticals:
25% based on expansion of existing markets

Medical Devices:
15% based on expansion of existing markets

Veterinary equipment:
5% based on expansion of existing markets

Annual Financial Report 2019

A terminal value after 5 years based on a long-term
growth rate of 2.5%, and a post-tax discount rate of
10.06% per annum (2018: 11.14% per annum) have
been used to calculate the carrying value of the
intangible assets.

The key assumptions used in the value in use
calculations for all units are:

• EBITDA growth – described above; and

• Gross margin – it is assumed that gross margin

of the Pharmaceutical & Medical Devices
segments will be maintained following investment
and activities aimed at improvement in the
manufacturing process and procedures.

14. Other intangible assets

Management believes that any reasonably possible
change in the key assumptions on which the
recoverable amount for the Pharmaceutical and
Vet Equipment CGU’s is based would not cause
the carrying amounts to exceed their recoverable
amounts.

The Medical devices segment is the segment most
at risk of impairment when a sensitivity analysis is
applied to the key variables. A moderate increase in
discount rate or shortfall in budgeted EBITDA will
result in impairment.

Development
$’000

Patents &
trademarks
$’000

Capitalised
registration
costs
$’000

Brandnames
$’000

Other
$’000

2,021

1,062

3,083

1,455

4,538

(294)

(203)

(497)

(257)

(754)

2,586

3,784

755

288

1,043

1,137

(291)

(90)

(381)

(100)

(481)

662

657

13,151

7,270

20,421

6,829

27,229

(1,713)

(783)

(2,496)

(820)

(3,316)

17,924

23,934

738

867

(142)

(86)

(228)

(86)

(314)

639

553

Gross carrying amount

Balance at 30 June 2017

Additions

Balance at 30 June 2018

Additions

Balance at 30 June 2019

Accumulated amortisation

Balance at 30 June 2017

Amortisation expense

Balance at 30 June 2018

Amortisation expense

Balance at 30 June 2019

Net book value

As at 30 June 2018

As at 30 June 2019

Total
$’000

17,532

8,620

26,152

8,358

34,510

(2,440)

(1,162)

(3,602)

(1,263)

(4,865)

22,549

29,665

The amortisation charge for the year of $1,263,000 (2018: $1,162,000) has been included in administration
expenses. For an explanation of amortisation periods refer Note 1(l).

15. Current trade and other payables

2019
$’000

2,030

1,319

2018
$’000

2,063

1,116

3,406

3,227

Trade payables (i)

Accrued expenses

Employee benefits payable

PAYG witholding tax payable

Medical Developments International Limitedi. The average credit period on purchase of goods is
30 days. No interest is charged on trade payables.
The company has financial risk management
policies in place to ensure that all payables are
paid within the credit timeframe.

of stages 1a and 2 and is then calculated at the
Westpac Bank Lending Rate at the date the
relevant note was issued, plus 2%.

v. The Group has an overdraft facility of $200,000. As

at 30 June 2019, this remains unused.

16. Borrowings

17. Current provisions

Secured - at amortised cost

Employee benefits

2019
$’000

2018
$’000

2019
$’000

357

2018
$’000

356

Hire Purchase (i)

Hire Purchase (ii)

Bank Bill (iii)

Other (iv)

Current

Non-current

181

8,969

272

9,252

102

9,150

9,252

Summary of borrowing
arrangements
i. On 1 March 2013 the Group entered into a

commercial loan agreement to fund the purchase
of a new bottling station. This was fully repaid
during the year.

ii. On 4 September 2013 the Group entered into a

Hire Purchase Agreement in relation to plant and
equipment. The term was 5 years and was fully
repaid during the current year.

iii. The Bank Bill Facility with a variable interest rate
and 90-day roll over period was closed during the
current year after the outstanding balance was
repaid after the completion of the capital raising
in August 2019.

iv. On 29 June 2012, the group entered into an

agreement with the Commonwealth Scientific
and Industrial Research Organisation (“CSIRO”)
to fund the development of a new production
process for the pain-relieving ingredient used
in Penthrox®. Funding is receivable at the
commencement of each of three stages of
development and is payable over a three year term
upon the completion of the relevant stage. As at
30 June 2019, the stage 1a, 1b and Stage 2 are
complete. Should MDI default on the loan, CSIRO
has the option to convert the debt into shares in
MDI at fair market value. This funding is interest-
free until the first anniversary of the completion

18. Non-current
provisions

Employee benefits

2019
$’000

302

2018
$’000

206

The company has 58 full time equivalent employees
at 30 June 2019 (2018: 55)

19. Other liabilities

Revenue received in advance

Unearned government grant
income

Current

Non-current

2019
$’000

33,281

2018
$’000

14,785

665

681

33,946

2,521

31,425

33,946

15,466

2,418

13,048

15,466

MVP has received additional upfront and milestone
payments during the current year, most notably from
Daiichi Sankyo for $20.8m in relation to a licensing
and distribution agreement for Penthrox® in China,
Thailand and Vietnam. For accounting purposes
these non-refundable payments are deferred and
amortised into the income statement over the term
of the agreement to which the payments relate. As
at 30 June 2019 $33.281m (2018: $14.785m) remains
unamortised.

Unearned government grant income represents
funds received through the Commercial Ready
Programme from the Federal Government and
Futures Industries Manufacturing Program of the
Victorian State Government.

Annual Financial Report 201920. Issued Capital

20(a) Fully paid ordinary shares

Fully paid ordinary shares

Balance at beginning of financial year

59,172,092

16,121

58,975,176

2019

No.

$’000

2018

No.

Shares Issued - Dividends Reinvestment Plan

Share issue - Placement

Share issue - Share Purchase Plan

Capital raising costs

Balance at end of financial year

225,951

4,250,000

1,868,703

65,516,746

860

17,000

7,475

(1,046)

40,410

196,916

59,172,092

16,121

Fully paid ordinary shares carry one vote per share and carry the right to dividends.

21. Reserves

2019
$’000

2018
$’000

2019
$’000

2018
$’000

(b) Employee equity-settled benefits reserve

Balance at beginning of year

$’000

15,008

1,123

(10)

Share-based payments recognised

Balance at end of year

331

380

711

331

The above equity settled employee benefits reserve
related to share options granted by the company to
its CEO under its employee share option plan.

Balance at beginning of year

Option issues for services provided

Balance at end of year

2019
$’000

2018
$’000

400

800

400

The above CSIRO option reserve at 30 June 2019,
relates to 178,756 options (2018: 72,056) over
ordinary shares of the Company. These options
are in relation to the MVP/CSIRO Manufacturing
Technologies Project announced on 5 June 2017.
Options are exercisable for no consideration when
a developed technology has been proven to be
commercially viable. The share options granted to
the CSIRO carry no rights to dividends and no voting
rights.

(a) Foreign currency translation reserve

Balance at beginning of year

(20)

(67)

Exchange differences arising on
translating the foreign operations

Balance at end of year

(3)

(20)

Exchange differences relating to the translation of
the results and net assets of the Group’s foreign
operations from their functional currencies
to the Group’s presentation currency (i.e.
Australian dollars) are recognised directly in
other comprehensive income and accumulated
in the foreign currency translation reserve. Gains
and losses on hedging instruments that are
designated as hedging instruments for hedges of
net investments in foreign operations are included
in the foreign currency translation reserve.
Exchange differences previously accumulated in the
foreign currency translation reserve (in respect of
translating both the net assets of foreign operations
and hedges of foreign operations) are reclassified to
profit or loss on the disposal of the foreign operation.

Medical Developments International Limited22. Retained earnings

2019
$’000

2018
$’000

Balance at beginning of financial year

4,209

6,328

Dividends paid

(2,576)

(2,362)

Net profit attributable to members

1,038

243

Balance at end of financial year

2,670

4,209

23. Earnings per share

Diluted earnings per share
Earnings used in the basic earnings per share
calculation are identical to those used for the diluted
earnings per share calculation. Dilutive options
outstanding as at 30 June 2019 related to options to
employees and also to the CSIRO.

Weighted average number of
ordinary shares used in the
calculation of basic EPS

2019
No.

2018
No.

64,615,720

59,080,452

2019
cents per
share

2018
cents per
share

Shares deemed to be issued for no consideration in respect of:

- Dilutive Options

344,166

Weighted average number of
ordinary shares for diluted EPS

64,959,886

59,080,452

Basic earnings per share

Diluted earnings per share

1.61

1.60

0.41

Basic earnings per share
The earnings and weighted average number of
ordinary shares used in the calculation of basic
earnings per share are as follows:

Earnings

2019
$’000

1,038

2019
No.

2018
$’000

243

2018
No.

Weighted average number
of ordinary shares

64,615,720

59,080,452

24. Dividends

An interim dividend of 2 cents per share was
declared and paid in the current year and a final
dividend of 2 cents per share was declared in respect
of the year ended 30 June 2019.

The interim dividend paid during the 30 June 2019
year resulted in the company paying dividends of
$864,000 and the balance of $444,000 issued as
shares under the Dividend Reinvestment Plan.

The 2018 full year dividend paid during the 30 June
2019 year resulted in the company paying dividends
of $852,000 and the balance of $416,000 issued as
shares under the Dividend Reinvestment Plan.

2019

2018

cents per share

$’000

cents per share

$’000

Recognised amounts

Fully paid ordinary shares

Interim dividend - fully franked

Full year dividend paid during the year - fully
franked

Unrecognised amounts

Fully paid ordinary shares

Final dividend - fully franked

2.0

4.0

2.0

1,308

1,268

2,576

1,310

2.0

4.0

2.0

1,182

1,180

2,362

1,183

Annual Financial Report 20192019
$’000

2018
$’000

Adjusted franking account balance

490

2,286

25. Operating leases
Operating leases primarily relate to factory leases
with remaining lease terms ranging from 0.5 to 6.5
years. The company does not have the option to
purchase the leased asset at the expiry of the lease
period.

2019
$’000

2018
$’000

Non cancellable operating lease payments:

Not longer than 1 year

392

385

Longer than 1 year and not longer than
5 years

Greater than 5 years

1,455

1,845

496

2,343

2,726

26. Commitments for
expenditure

(a) Capital expenditure
commitments
There were no capital expenditure commitments
at 30 June 2019.

27. Related party
disclosures
There were no related party transactions during the
2019 financial year.

Balances and transactions between the Company
and its subsidiaries which are related parties of the
company have been eliminated on consolidation and
are not disclosed in this note.

Please also refer to note 6 for details of Key
Management Personnel compensation.

28. Subsequent events
On the 21st August 2019 the Board of Directors
declared a fully franked final dividend of 2 cents per
share to the holders of fully paid ordinary shares as
at the record date of 4 September 2019 to be paid
to the shareholders on the 4 October 2019. This
dividend has not been included as a liability in these
financial statements.

Medical Developments International Limited29. Notes to the Consolidated Statement
of Cash Flows

(a) Reconciliation of cash and cash equivalents

For the purposes of the Consolidated Statement of Cash Flows, cash includes cash on hand and in banks. Cash at the end of the
financial year as shown in the Consolidated Statement of Cash Flows is reconciled to the related item in the Statement of Financial
Position as follows:

2019
$’000

2018
$’000

Cash and cash equivalents

(b) Reconciliation of profit for the period to net cash flows from operating activities

Profit for the period

Interest received

Depreciation and amortisation of non-current assets

Net unrealised foreign exchange (gain)/loss

Share based payments

Increase/(decrease) in tax payable

Decrease/(increase) in deferred tax asset

Movements in working capital

Decrease/(increase) in assets:

Receivables

Inventories

Other assets

Increase/(decrease) in liabilities:

Payables

Provisions

Other liabilities

Non-current provisions

Net cash from operating activities

Unsecured bank overdraft facility, reviewed annually and payable at call:

Amount unused

Bank bill facility with a 90 day roll over period:

Amount used

Amount unused

25,620

1,038

(330)

2,266

(53)

380

2,116

(1,047)

(2,097)

148

202

18,480

21,271

200

794

243

(1)

1,782

113

(21)

945

(773)

(50)

490

(1,006)

1,790

200

8,969

2,031

11,000

Annual Financial Report 201930. Financial
Instruments

(a) Capital risk management
The Group manages its capital to ensure that it
will be able to continue as a going concern while
maximising the return to stakeholders. The Group
does not enter into or trade financial instruments,
including derivatives, for speculative purposes.

The capital structure of the Group consists of net
debt (borrowings as detailed in note 16) and equity
of the Group (comprising issued capital, reserves,
retained earnings, and cash and cash equivalents as
detailed in notes 20, 21, 22, and 29(a), respectively).

The Group’s Audit and Risk Committee reviews
the capital structure of the Group on a semi-
annual basis. As part of this review, the committee
considers the cost of capital and the risks associated
with each class of capital. The gearing ratio at
30 June 2019 is outlined below:

Debt (i)

Cash and bank balances

Net debt / (cash)

Equity (ii)

Net debt to equity ratio

2019
$’000

2018
$’000

182

9,252

(182)

(794)

8,458

44,588

21,041

40%

i. Debt is defined as long-term and short-term

borrowings as described in note 16.

ii. Equity includes all capital and reserves of the

group that are managed as capital. Cash has been
included to the extent it reduced the outstanding
debt to nil.

(b) Significant accounting
policies
Details of significant accounting policies and
methods adopted, including the criteria for
recognition, the basis of measurement and the basis
on which revenues and expenses are recognised,
in respect of each class of financial asset, financial
liability and equity instrument are disclosed in note 1
to the financial statements.

These policies were consistent throughout the
current year and the prior year.

(c) Financial risk management
objectives
The Group’s finance function provides services
to the business, co-ordinates access to domestic
and international financial markets, monitors and
manages financial risks relating to the operations
of the Group. These risks include market risk
(including currency risk, fair value interest rate risk
and price risk), credit risk, liquidity risk and cash
flow interest rate risk.

(d) Credit risk management
Credit risk refers to the risk that a counter
party will default on its contractual obligations
resulting in financial loss to the Group. The
Group has adopted a policy of only dealing with
creditworthy counterparties. The Group’s exposure
is continually monitored and the aggregate value of
transactions concluded is spread amongst approved
counterparties.

Trade receivables consist of a large number of
customers. Ongoing credit evaluation is performed
on the financial condition of these accounts
receivable and advance payments are requested
where deemed appropriate.

The carrying amount of financial assets recorded in
the financial statements, net of any allowance for
losses, represents the Group’s maximum exposure
to credit risk without taking account of the value of
any collateral or other security obtained.

Apart from the three largest customers of the
Group (refer to Notes 3 and 8), the Group does
not have significant credit risk exposure to any
single counterparty or any group of counterparties
having similar characteristics. The Group defines
counterparties as having similar characteristics if
they are related entities. Concentration of credit risk
to any other counterparty did not exceed 5% of gross
monetary assets at any time during the year.

(e) Foreign currency risk
management
The Group undertakes certain transactions
denominated in foreign currencies, hence exposures
to exchange rate fluctuations arise.

The carrying amount of the Group’s foreign currency
denominated monetary assets and monetary
liabilities at the reporting date is as follows:

Medical Developments International LimitedLiabilities

Assets

2019
$’000

903

2018
$’000

1,512

126

2019
$’000

5,841

733

343

2018
$’000

1,212

1,125

287

148

987

1,663

6,923

2,784

USD

GBP

NZD

EUR

CND

Amounts of exposure are not currently significant
and as such forward contracts and currency swap
agreements are not used.

Foreign currency sensitivity analysis

The Group predominantly trades in Australian
dollars (AUD), but has exposure to the US dollar
(USD) and Great Britain Pound (GBP) based on a
portion of its overseas sales and purchases.

The following table details the Group’s sensitivity to a
10% increase and decrease in the Australian Dollar
against the USD and GBP. 10% is the sensitivity rate
used when assessing foreign currency risk internally
by key management and represents management’s
assessment of the possible change in foreign
currency rates. The sensitivity analysis includes only
outstanding foreign currency denominated monetary
items and adjusts their translation at the period end
for a 10% change in foreign currency rates.

A positive number indicates an increase in profit or
loss where the Australian Dollar strengthens against
the respective currency. For a weakening of the
Australian Dollar against the respective currency
there would be an equal and opposite impact on the
profit.

Profit or loss

2019
$’000

(494)

(67)

2018
$’000

(100)

USD Impact

GBP Impact

This is attributable to the exposure outstanding on
USD and GBP receivables and payables at year end
in the Group. The exposure to movement in NZD,
EUR, and CAD is not deemed to be significant.

f) Fair value of financial
instruments
The Directors consider that the carrying amount of
financial assets and liabilities recorded at amortised
cost in the financial statements approximates their
respective net fair values, determined in accordance
with the accounting policies disclosed in note 1 to
the financial statements.

The Group does not recognise any financial
instruments that are measured subsequent to initial
recognition at fair value.

(g) Interest rate risk management
The Group is exposed to interest rate risk as it holds cash at floating interest rates. The following table
details the Group’s exposure to interest rate risk as at 30 June 2019 and 30 June 2018.

Variable interest rate maturity

2019

Financial assets

Cash

Receivables

Financial liabilities

Payables

Borrowings

Average
interest rate
%

Less than
1 year
$’000

1 to 5
years
$’000

More than
5 years
$’000

Non-interest
bearing
$’000

1.99%

25,620

4.72%

25,620

6,384

3,406

Total
$’000

25,620

6,384

32,004

3,406

182

3,588

Annual Financial Report 20192018

Financial assets

Cash

Receivables

Financial liabilities

Payables

Borrowings

Average
interest rate
%

Less than
1 year
$’000

1 to 5
years
$’000

More than
5 years
$’000

Non-interest
bearing
$’000

0.01%

3.46%

794

102

9,150

4,287

3,227

12,479

Total
$’000

794

4,287

5,081

3,227

9,252

The following table details the Group’s sensitivity to a 50-basis point increase or decrease in interest rates.

Interest rate risk table

Profit or Loss

2019
$’000

2018
$’000

127

(42)

(h) Liquidity risk management
The Group manages liquidity risk by maintaining adequate cash reserves, banking facilities and reserve
borrowing facilities by continuously monitoring forecast and actual cash flows and matching the maturity
profiles of financial assets and liabilities.

Liquidity risk table

The following table details the Group’s remaining contractual maturity for its non-derivative financial
liabilities. The table has been drawn up based on the undiscounted cash flows of financial liabilities based on
the earliest date on which the Group can be required to pay. The table includes the principal cash flows.

Weighted
average
effective
interest rate
%

4.72%

3.46%

Less than
1 year
$’000

1 to 5
years
$’000

More than
5 years
$’000

3,406

3,497

3,227

102

3,329

9,150

Total
$’000

3,406

182

3,588

3,227

9,252

12,479

2019

Payables

Borrowings

2018

Payables

Borrowings

Medical Developments International Limited31. Parent Entity
Information

32. Employee Share
Option Plans

The accounting policies of the parent entity, which
have been applied in determining the financial
information shown below, are the same as those
applied in the consolidated financial statements.

Refer to note 1 for a summary of the significant
accounting policies relating to the Group.

Financial Position

Assets

Current Assets

Non-Current Assets

Total Assets

Liabilities

Current Liabilities

Non-Current Liabilities

Total Liabilities

Equity

Issued capital

Reserves

Retained earnings

Total Equity

2019
$’000

2018
$’000

35,848

8,884

49,375

40,758

85,223

49,642

5,965

3,623

34,338

24,822

40,303

28,445

40,410

16,121

1,511

731

2,999

4,345

44,920

21,197

Financial Performance

Profit for the year

Dividends paid

2019
$’000

2018
$’000

1,231

240

(2,576)

(2,362)

Other comprehensive income

Total comprehesive income

(1,345)

(2,122)

The commitments of the parent are the same as
those of the overall consolidated group.

Executive Option Plans
Under the Executive Option plan awards were made
to executives who have an impact on the Group’s
performance. Long Term Incentive awards are
delivered in the form of options over shares which
vest on the achievement of specific performance
measures.

The fair value of share options granted is estimated
at the date of grant using a Black Scholes option
pricing model, taking into account the terms and
conditions upon which the share options were
granted including the option price, the life of the
option, the share price of the underlying shares on
grant date and the expected share price volatility.
It also takes into account historical and expected
dividends. There are no cash settlement alternatives
for the employees and The Group does not have a
past practice of cash settlement for these awards.

Annual Financial Report 201932.1 Executive share option
plans
The following share-based payment arrangements
were in existence during the current reporting
period:

CEO Option Plan

On 18 July 2018 the company announced it has
agreed to a LTIP with Mr. John Sharman, the CEO
of Medical Developments International Limited
to encourage his long-term commitment to the
business.

Senior Management Option Plan

In September 2018 the company announced it has
agreed to a LTIP with key Senior Management Team
members.

Under the plan the effected Senior Management
team members were granted 375,000 options with
a strike price of $0.01. The options will only vest on
the earlier of FDA approval of Penthrox® for sale in
the USA or the company receives an unconditional
takeover offer worth more than $350m. 100,000 of
options within this issue contain a further vesting
trigger being, the delivery of a new API from the
CSIRO manufacturing technologies project that
creates revenue of at least $10m p.a. (or upfront
payment of greater than $15m).

2019

Granted as
remuneration
No.

Exercised
No.

Lapsed/
forfeited
No.

Balance at
30 June 2019
No.

Balance
vested at
30 June 2019
but not
exercised
No.

Balance not
vested at
30 June 2019
No.

Options
vested
during
the year

J. Sharman (CEO)

M. Edwards (CFO)

Senior Management

300,000

100,000

275,000

(50,000)

300,000

100,000

225,000

300,000

100,000

225,000

Issuing Entity

Number of
shares under
option

Class of
shares

Exercise
price of
option

Expiry date
of options

Personnel

Medical Developments International Ltd

J. Sharman

300,000

Ordinary

Medical Developments International Ltd

M. Edwards

100,000

Ordinary

Medical Developments International Ltd

Senior Management

225,000

625,000

Ordinary

$0.01

No expiry

32.2 Fair value of share options granted during the year

As the options contain non-market performance
hurdles, they have been valued using a ‘Black-
Scholes’ Option Pricing Model. Where relevant, the
expected useful life used in the model has been

adjusted based on management’s best estimate
for the effects of non-transferability and exercise
restrictions. Expected volatility is based on the
historical share price volatility over the past 2 years.

Medical Developments International LimitedInputs into the option pricing model were as follows:

Grant date share price

Exercise price

Option Fair Value

Expected volatility

Expected option life

Dividend (Bi-annually)

CEO

$5.69

$0.01

$5.47

40%

CFO

$3.90

$0.01

$3.69

45%

Senior
Management

$3.90

$0.01

$3.69

45%

5 years

Risk-free interest rate
Æ
For valuation purposes a probability of 75% has been applied to the likelihood of achieving FDA approval for
Penthrox® in the USA.

2.17%

2.30%

2.17%

32.3 Share Based Payments Expense

Share-based payments

2019
$’000

380

2018
$’000

33. Additional company information
Medical Developments International Limited is a listed public company, incorporated and domiciled
in Australia.

Company Secretary

Mr. Mark Edwards

Registered office and principal place of business

4 Caribbean Drive
Scoresby VIC 3179

Tel: (03) 9547 1888

Share registry

Computershare Investor Services Pty Ltd
452 Johnston Street
Abbotsford VIC 3067

Tel: 1300 850 505

Annual Financial Report 2019Additional Stock Exchange Information as at
31 August 2019

Number of holders of equity securities

Ordinary share capital

65,516,746 fully paid ordinary shares held by 5,790 individual shareholders. All issued ordinary shares carry
one vote per share.

Distribution of holders of equity securities

2,554

2,043

618

522

5,790

303

Fully paid ordinary shares

1 – 1,000

1,001 – 5,000

5,001 – 10,000

10,001 – 100,000

100,001 and over

Holding less than a marketable parcel

Substantial Shareholders

MR DAVID JOHN WILLIAMS

Twenty largest holders of equity securities

MR DAVID JOHN WILLIAMS

HSBC CUSTODY NOMINEES

J P MORGAN NOMINEES AUSTRALIA

UBS NOMINEES

DR RUSSELL KAY HANCOCK

WARBONT NOMINEES PTY LTD

SANDHURST TRUSTEES

NETWEALTH INVESTMENTS LIMITED

CS FOURTH NOMINEES

NATIONAL NOMINEES LIMITED

MERRILL LYNCH (AUSTRALIA) NOMINEES

MR ALISTAIR DAVID STRONG

CS THIRD NOMINEES PTY LIMITED

MORGAN STANLEY AUSTRALIA SECURITIES

MRS VIRGINA CATHERINE HANCOCK

ECAPITAL NOMINEES PTY LTD

SANDHURST TRUSTEES

IMAJ PTY LTD

CITICORP NOMINEES PTY LIMITED

HOLLYWIND PTY LTD

Number

9,608,754

Number

9,608,754

9,121,026

3,365,649

1,710,470

1,614,214

1,589,858

1,584,589

1,126,932

1,017,449

853,799

761,187

630,000

604,833

603,963

515,031

475,000

361,222

293,750

270,755

270,000

14.67

13.92

5.14

2.61

2.46

2.43

2.42

1.72

1.55

1.30

1.16

0.96

0.92

0.79

0.73

0.55

0.45

0.41

Medical Developments International Limited