Micro-X Ltd
Appendix 4E
Preliminary final report
1. Company details
Name of entity:
ABN:
Reporting period:
Previous period:
Micro-X Ltd
21 153 273 735
For the year ended 30 June 2017
For the year ended 30 June 2016
2. Results for announcement to the market
$'000
Revenues from ordinary activities
down
26% to
659
Loss from ordinary activities after tax attributable to the owners of Micro-
X Ltd
Loss for the year attributable to the owners of Micro-X Ltd
up
up
20%
to
20% to
(12,920)
(12,920)
Dividends
There were no dividends paid, recommended or declared during the current financial period.
Comments
The loss for the company after providing for income tax amounted to $12.9M (30 June 2016: $10.7M).
Refer to the Director's report in the 2017 Annual Report for additional information in the results during the financial year.
3. Net tangible assets
Net tangible assets per ordinary security
4. Control gained over entities
Not applicable.
5. Loss of control over entities
Not applicable.
6. Dividends
Reporting
Previous
period
Cents
period
Cents
9.14
13.58
Current period
There were no dividends paid, recommended or declared during the current financial period.
Previous period
There were no dividends paid, recommended or declared during the previous financial period.
7. Dividend reinvestment plans
Not applicable.
Micro-X Ltd
Appendix 4E
Preliminary final report
8. Details of associates and joint venture entities
Name of associate / joint venture
Reporting entity's
percentage holding
Contribution to profit/(loss)
(where material)
Reporting
Previous
Reporting
Previous
period
%
period
%
period
$'000
period
$'000
XinRay Systems Inc.
30%
30%
(491)
28
(491)
-
28
-
Group's aggregate share of associates and joint venture
entities' profit/(loss) (where material)
Profit/(loss) from ordinary activities before income tax
Income tax on operating activities
9. Foreign entities
Details of origin of accounting standards used in compiling the report:
Not applicable.
10. Audit qualification or review
Details of audit/review dispute or qualification (if any):
The financial statements have been audited and an unqualified opinion has been issued.
11. Attachments
Details of attachments (if any):
The Annual Financial Report of Micro-X Ltd for the year ended 30 June 2017 is attached.
12. Signed
Signed ___________________________
Date: 30 August 2017
Patrick O'Brien
Non-Executive Chairman
Micro-X Ltd
ABN 21 153 273 735
Annual Financial Report - 30 June 2017
Micro-X Ltd
Corporate directory
For the year ended 30 June 2017
Directors
Peter Robin Rowland (Managing Director)
Patrick Gerard O'Brien (Non-Executive Chairman)
Richard Nicholas Hannebery (Executive Director)
David Peter Neil Symons (Non-Executive Director)
Alexander Bennett Gosling (Non-Executive Director)
Yasmin Anna King (Non-Executive Director) - appointed 5 December 2016
Company secretary
Georgina Carpendale - appointed 5 December 2016
Registered office
Principal place of business
Share register
Auditor
A14, 6 MAB Eastern Promenade
1284 South Road, Tonsley
Clovelly Park, SA 5042
A14, 6 MAB Eastern Promenade
1284 South Road, Tonsley
Clovelly Park, SA 5042
Computershare Investors Services Pty Ltd
Yarra Falls
452 Johnston Street
Abbotsford, VIC 3067
Phone: 1300 555 159 (within Australia)
Phone: +61 3 8320 4062 (outside Australia)
Grant Thornton Audit Pty Ltd
The Rialto, Level 30, 525 Collins Street
Melbourne, VIC 3000
Phone: +61 3 8320 2222
Stock exchange listing
Micro-X Ltd shares are listed on the Australian Securities Exchange
(ASX code: MX1)
Website
www.micro-x.com
1
Micro-X Ltd
Contents
For the year ended 30 June 2017
Directors' report
Auditor's independence declaration
Statement of profit or loss and other comprehensive income
Statement of financial position
Statement of changes in equity
Statement of cash flows
Notes to the financial statements
Directors' declaration
Independent auditor's report to the members of Micro-X Ltd
Shareholder information
3
19
20
21
22
23
24
49
50
53
2
Micro-X Ltd
Directors' report
For the year ended 30 June 2017
The directors present their report, together with the financial statements, on the company for the year ended 30 June 2017.
Directors
The names of the Directors in office at any time during or since the end of the year are:
Peter Robin Rowland (Managing Director)
Patrick Gerard O'Brien (Non-Executive Chairman)
Richard Nicholas Hannebery (Executive Director)
David Peter Neil Symons (Non-Executive Director)
Alexander Bennett Gosling (Non-Executive Director)
Yasmin Anna King (Non-Executive Director) - appointed 5 December 2016
Directors have been in office since the start of the financial year to the date of this report unless otherwise stated.
Principal activities
Micro-X's principal activities are focused on the design, development and manufacturing of ultra-lightweight carbon nano
tube based X-ray products for the global healthcare and security (improvised explosive device imaging) markets.
No significant changes in the nature of these activities occurred during the year.
Dividends
There were no dividends paid, recommended or declared during the current or previous financial year.
Review of operations
The loss for the company after providing for income tax amounted to $12.9M (30 June 2016: $10.7M).
The majority of the loss for the year was due to $15.2M expenditure on research and development of the company's first
product, the DRX Revolution Nano ('Nano').
During the year the company undertook a successful placement offer and entitlement offer of $5.2M and $4.8M
respectively. The securities started trading on 18 April 2017 (placement shares) and on 9 May 2017 (rights issue shares).
Costs in relation to the placement and entitlement offerings have been split between the statement of profit and loss and
against equity on the statement of financial position.
During the year the company executed a loan facility agreement with the South Australian Treasurer for a loan commitment
of $3.0M with an agreed interest rate of 5.75% per annum paid monthly in arrears. The loan was fully drawn down as at the
year end.
The key milestone achievements for Micro-X through the course of 2016-2017 financial year were:
Carestream Health Inc. ('Carestream'):
In August 2016 the Company signed agreements with Carestream Health Inc. for exclusive development and OEM supply
for the DRX Revolution Nano.
Carestream officially launched the DRX Revolution Nano at the 102nd Scientific Meeting of Radiological Society of North
America (RSNA) in Chicago on 27th November 2016.
Service training for Nano was successfully conducted in Rochester of Carestream's technical product support staff from all
parts of the world during April.
3
Micro-X Ltd
Directors' report
For the year ended 30 June 2017
In June 2017, the company announced the receipt by Carestream of notification from the US Food and Drug Administration
(FDA) that the DRX-Revolution Nano’s 510(K) application had been approved.
Tonsley facility:
The Company moved into new premises at Tonsley, South Australia. The registered address for of the Company changed
in conjunction to the move to permanent facilities.
Research and development tax rebate:
The research and development tax incentive refund for $8.2M was received in November 2016 for the 2015/2016
financial year.
Reliability growth testing:
During the year, the company carried out an intensive Reliability Growth Testing program for the Nano at Tonsley. The
company set a high target for reliability to ensure that any systemic flaws in design or construction which might give rise to
post-installation service calls were identified and corrected prior to First Customer Shipments. By the end of April 2017, the
Nano had passed a number of cycles equivalent to a 10-year operation and the program further boosted confidence in the
durability of the unit as a competitive market discriminator.
Quality & regulatory:
During October 2016 Intertek, an independent test agency, undertook compliance testing on the Nano to the required
IEC60601 standard for mechanical, electrical and radiation safety and the Nano passed the testing.
In April 2017, the company received its ISO13485 accreditation certificate. The certification confirms that the company has
established and is operating at its Tonsley facility a comprehensive Quality Management System for the design and
manufacture of medical devices.
Defence products:
A critical design review of the development of the Mobile Backscatter Imager ('MBI') and the Mobile Medical Imager
('Rover') was held with Defence staff from the project office and counter-IED task force in September 2016, the relevant
milestone was passed.
The company completed the construction milestone for both the MBI and Rover demonstrations under the current contract
with the Department of Defence. The set-to-work and testing of the equipment is underway and the imaging
demonstrations will be performed in October.
In November 2016 the Company conducted usability trials for a variant product of the Nano for military use (‘Rover’). The
trials were held with the 2nd General Health Battalion at the ADF Role 2 (Enhanced) Deployed Medical Facility in
Enoggera Barracks, Queensland.
The company presented the Rover and the MBI programs to the Office of the Secretary of Defense in Washington DC.
The company also hosted a visit at Tonsley from a large overseas delegation of Counter-IED and Home Made Explosives
experts from the US Military, FBI, and Department of Homeland Security. There was strong interest shown in our new
explosives imaging technology currently in development.
Significant changes in the state of affairs
The Company used the cash and assets, in a form readily convertible to cash, that it had at the time of listing on the ASX
(21 December 2015) in a way consistent with its business objectives for the year ended 30 June 2016 and 30 June 2017.
The business objectives were to focus on the development of the DRX Revolution Nano (‘Nano’). The anticipated use of
proceeds for MBI have been used to improve the Nano core technology, reproducibility and effectiveness which will have a
benefit of ensuring reproducibility for a multi emitter tube to be used in MBI.
There were no other significant changes in the state of affairs of the company during the financial year.
4
Micro-X Ltd
Directors' report
For the year ended 30 June 2017
Matters subsequent to the end of the financial year
On 17 August 2017 the company announced that it had signed an agreement with XinRay Systems Inc. for new
management arrangements to support the production of x-ray tubes for its 'DRX Revolution Nano' product. The company
will directly mange tube production in North Carolina under its accredited quality system and implement improvements in
manufacturing processes and supply-chain management. There is an option for the company's investment in plant and
equipment under the agreement to be exchanged for additional equity in the future to increase its ownership of XinRay.
On 30 August 2017, the company announced that it has received an R&D Tax Incentive rebate of $7,032,170 for the
2016/2017 financial year. The R&D Tax Incentive is an Australian Government program under which companies with
turnover of less than $20M receive a cash refund for 43.5% of eligible expenditure on research and development.
No other matter or circumstance has arisen since 30 June 2017 that has significantly affected, or may significantly affect
the company's operations, the results of those operations, or the company's state of affairs in future financial years.
Likely developments and expected results of operations
The company’s main corporate focus in the coming periods is to continue to bring the DRX Revolution Nano to market and
to continue to develop and commercialise a range of highly innovative products applicable to global markets based on
proprietary carbon nanotube emitter technologies exclusively licensed and sourced from XinRay Systems Inc., a US based
technology developer.
The expected results will be dependent on the company’s ability to carry out its objectives stated above.
Environmental regulation
The company is not subject to any significant environmental regulation under Australian Commonwealth or State law.
Information on directors
Name:
Title:
Qualifications:
Experience and expertise:
Patrick O’Brien
Non-Executive Chairman
LLB, B.Com, Grad Dip Applied Finance, MBA
Patrick is managing director of Patrick O’Brien & Associates and a director of Red
Rock Leisure, The Water & Carbon Group and O’Brien Capital. Patrick has over 25
years’ business experience in Australia, the UK, Europe, Asia and the US including
as an executive director with Macquarie Group where he led teams in corporate
finance (Melbourne 1996-2005) and private equity (London 2005-2009). In this latter
role Patrick was responsible for Macquarie’s controlling stakes in, and chaired, large
unlisted groups European Directories and National Grid Wireless. Prior to Macquarie,
Patrick was a strategy consultant with McKinsey & Company and a lawyer with Minter
Ellison.
Nil
Other current directorships:
Former directorships (last 3 years): Nil
Special responsibilities:
Member of Nomination and Remuneration Committee and Member of Audit and Risk
Committee
4,625,380 fully paid ordinary shares
200,000 unlisted options exercisable at $0.575 (57.5 cents) on or before 31/12/19;
400,000 Unlisted Options exercisable at $0.625 (62.5 cents) on or before 31/12/19
Interests in shares:
Interests in options:
5
Micro-X Ltd
Directors' report
For the year ended 30 June 2017
Name:
Title:
Qualifications:
Experience and expertise:
Peter Rowland
Managing Director
BSc., MBA, MIET, CEng, FAICD
Peter worked in the engineering design, development and project management of
innovative, high-technology military & scientific equipment in his early career in
Scotland. In Australia, he ran an engineering design consultancy group, was director
of business development at BAE Systems and then was managing director of ASX-
listed Ellex Medical Lasers which designed and manufactured ophthalmic laser
equipment. More recently he was vice president of Asia-Pacific operations for Biolase
Technology Inc., a NASDAQ listed therapeutic medical device supplier.
Other current directorships:
Nil
Former directorships (last 3 years): Nil
Interests in shares:
Interests in options:
12,425,000 fully paid ordinary shares
696,556 unlisted options exercisable at $0.575 (57.5 cents) on or before 31/12/19;
1,393,114 unlisted options exercisable at $0.625 (62.5 cents) on or before 31/12/19
Name:
Title:
Qualifications:
Experience and expertise:
Other current directorships:
Former directorships (last 3 years): None
Special responsibilities:
Interests in shares:
Interests in options:
Richard Hannebery
Executive Director
BA (Econ), Grad Dip Econ
Richard has over 20 years’ experience in commercial and financial advisory services
with Merrill Lynch, Credit Suisse and JT Campbell & Co. He has 15 years’ experience
as a specialist in healthcare technology and intellectual property based companies at
a business development and director level. Richard has extensive experience in
strategy development and its implementation, as well as commercialisation, including
direct negotiation of key sales and distribution agreements in various markets with
large multinational medtech and technology companies. Richard is currently a board
member and the part-time chief executive of ASX-listed Genera Biosystems Limited
and a non-executive director of Australian Continence Solutions Pty Limited and its
operating company Nurturecare (Aust) Pty Limited.
Genera Biosystems Limited (ASX:GBI) appointed 14 May 2013
Nil
3,774,900 fully paid ordinary shares
696,556 Unlisted Options exercisable at $0.575 (57.5 cents) on or before 31/12/19;
1,393,114 Unlisted Options exercisable at $0.625 (62.5 cents) on or before 31/12/19
Name:
Title:
Qualifications:
Experience and expertise:
Dr. Alexander Gosling AM
Non-Executive Director
AM, MA, DEng, FTSE
Alexander has been working in the field of process and product development and
related research and development for 40 years. A founding director of Invetech and
was part of the management team that led Invetech to a public listing (as Vision
Systems) and then to its acquisition by Danaher Corp for $800M. He currently works
for Capstone Partners, a strategy consultancy specialising
technology
commercialisation and the development of start-up companies. Alexander is an
engineer, with an Honours degree from Cambridge University. He is a Fellow of the
Academy of Technological Sciences and Engineering, a Fellow of the Institute of
Engineers Australia and a Governor of the Warren Centre for Advanced Engineering.
He was awarded an Honorary Doctorate in Engineering from Swinburne University
and made a Member of The Order of Australia for services to engineering.
Other current directorships:
Nil
Former directorships (last 3 years): Nil
Special responsibilities:
in
Chair of Nomination and Remuneration Committee and Member of Audit and Risk
Committee
110,000 fully paid ordinary shares
133,333 Unlisted Options exercisable at $0.575 (57.5 cents) on or before 31/12/19;
266,668 Unlisted Options exercisable at $0.625 (62.5 cents) on or before 31/12/19
Interests in shares:
Interests in options:
6
Micro-X Ltd
Directors' report
For the year ended 30 June 2017
Name:
Title:
Qualifications:
Experience and expertise:
Other current directorships:
Former directorships (last 3 years): None
Special responsibilities:
Interests in shares:
Interests in options:
David Symons
Non-Executive Director
LLB, B.Com
David has more than 15 years’ experience in corporate strategy communications,
private equity, investment banking, and corporate management. He has previously
held executive roles at ABN AMRO Capital, Macquarie Bank, Merrill Lynch and
Promina Group. He is currently a non-executive director of ASX-listed Genera
Biosystems Limited.
Genera Biosystems Limited (ASX:GBI)
Chair of Audit and Risk Committee and Member of Nomination and Remuneration
Committee
2,220,200 fully paid ordinary shares
133,333 Unlisted Options exercisable at $0.575 (57.5 cents) on or before 31/12/19;
266,668 Unlisted Options exercisable at $0.625 (62.5 cents) on or before 31/12/19
Name:
Title:
Qualifications:
Experience and expertise:
Yasmin King
Non-Executive Director
BA (Econ)(Honours). MBA
Yasmin is CEO of SkillsIQ Limited, the organisation that develops the National
Occupational Standards for vocational qualifications in the Services and Health and
Community services sectors. Yasmin was the inaugural NSW Small Business
Commissioner and an Associate Commissioner for the Australian Consumer and
Competition Commission, both positions leading to her detailed knowledge and
experience in the areas of compliance and regulation. Yasmin has extensive
experience in negotiation having run a successful consultancy in this area, including
acting as lead negotiator for numerous State and Federal Government procurement
contracts. She worked as a principal consultant for an international negotiation
organisation coaching major ASX companies and public sector agencies including
Department of Defence in contract negotiation. She has also served on both public
and private sector boards. She is an adjunct of the Australian Graduate School of
Management, delivering the conflict resolution and negotiation component of the
Women in Leadership program. Yasmin holds a Bachelor of Economics (Honours)
and a Master of Business Administration. She is a Fellow of the Australian Institute of
Company Directors and a Fellow Certified Practicing Accountant.
Other current directorships:
None
Former directorships (last 3 years): None
Special responsibilities:
Interests in shares:
Member of Audit and Risk Committee
Nil
'Other current directorships' quoted above are current directorships for listed entities only and excludes directorships of all
other types of entities, unless otherwise stated.
'Former directorships (last 3 years)' quoted above are directorships held in the last 3 years for listed entities only and
excludes directorships of all other types of entities, unless otherwise stated.
Company secretary
Georgina Carpendale was appointed as Company Secretary on 5 December 2016. Georgina is a Chartered Accountant
with a First Class Honours Degree in Business specialising in Accounting. Georgina has 10 years’ experience in the
accounting profession. Georgina has 4 years’ experience within the medical technology industry. Georgina is the Chief
Financial Officer for Micro-X.
Justin Mouchacca resigned as Company Secretary on 5 December 2016. Justin holds a Bachelor of Business majoring in
Accounting. He graduated from RMIT University in 2008, became a Chartered Accountant in 2011 and since July 2013 has
been the principal of chartered accounting firm, Leydin Freyer Corp Pty Ltd.
7
Micro-X Ltd
Directors' report
For the year ended 30 June 2017
Meetings of directors
The number of meetings of the company's Board of Directors ('the Board') and of each Board committee held during the
year ended 30 June 2017, and the number of meetings attended by each director were:
Full Board
Nomination and
Remuneration Committee
Audit and Risk Committee
Attended
Held
Attended
Held
Attended
Held
Patrick O'Brien
Peter Rowland
Richard Hannebery
David Symons
Alexander Gosling
Yasmin King
13
14
14
14
12
8
14
14
14
14
14
8
2
-
-
2
2
-
2
-
-
2
2
-
3
-
-
4
4
1
4
-
-
4
4
2
Held: represents the number of meetings held during the time the director held office or was a member of the relevant
committee.
Remuneration report (audited)
The remuneration report details the key management personnel remuneration arrangements for the company, in
accordance with the requirements of the Corporations Act 2001 and its Regulations.
Key management personnel are those persons having authority and responsibility for planning, directing and controlling the
activities of the entity, directly or indirectly, including all directors.
The remuneration report is set out under the following main headings:
●
●
●
●
●
Principles used to determine the nature and amount of remuneration
Details of remuneration
Service agreements
Share-based compensation
Additional disclosures relating to key management personnel
Principles used to determine the nature and amount of remuneration
The objective of the company's executive reward framework is to ensure reward for performance is competitive and
appropriate for the results delivered. The framework aligns executive reward with the achievement of strategic objectives
and the creation of value for shareholders, and it is considered to conform to the market best practice for the delivery of
reward. The Board of Directors ('the Board') ensures that executive reward satisfies the following key criteria for good
reward governance practices:
●
●
●
●
competitiveness and reasonableness
acceptability to shareholders
performance linkage / alignment of executive compensation
transparency
The Nomination and Remuneration Committee is responsible for determining and reviewing remuneration arrangements
for its directors and executives. The performance of the entity depends on the quality of its directors and executives. The
remuneration philosophy is to attract, motivate and retain high performance and high quality personnel and, accordingly,
the Nomination and Remuneration Committee has structured an executive remuneration framework that is market
competitive and complementary to the reward strategy of the Company.
The remuneration framework is designed to align executive reward to shareholders' interests. The Board is in the process
of refining the remuneration framework, and as part of this process will seek to further align shareholders' interests by:
●
●
having economic profit as a core component of plan design
focusing on sustained growth in shareholder wealth, consisting of dividends and growth in share price, and delivering
constant or increasing return on assets as well as focusing the executive on key non-financial drivers of value
attracting and retaining high calibre executives
●
Additionally, the remuneration framework should seek to align and incentivise executives' interests by:
●
●
●
rewarding capability and experience
reflecting competitive reward for contribution to growth in shareholder wealth
providing a clear structure for earning rewards
8
Micro-X Ltd
Directors' report
For the year ended 30 June 2017
In accordance with best practice corporate governance, the structure of non-executive director and executive director
remuneration is separate.
Non-executive directors remuneration
Fees and payments to non-executive directors reflect the demands and responsibilities of their role. Non-executive
directors' fees and payments are reviewed annually by the Nomination and Remuneration Committee. The Nomination and
Remuneration Committee may, from time to time, receive advice from independent remuneration consultants to ensure
non-executive directors' fees and payments are appropriate and in line with the market. The chairman's fees are
determined independently to the fees of other non-executive directors based on comparative roles in the external market.
The chairman is not present at any discussions relating to the determination of his own remuneration.
Non-executive directors were issued Award Options, as described in the Company's Prospectus dated 25 November 2015,
on 17 December 2015, following the completion of the Company's Initial Public Offer. Apart from the Award Options, Non-
executive directors do not receive share options or other incentives.
ASX listing rules require the aggregate maximum non-executive directors' remuneration be determined periodically by a
general meeting. The most recent determination was at the Annual General Meeting held prior to the Company's ASX
listing, where the shareholders approved the Company's Constitution which provides for an aggregate maximum
remuneration of $300,000 per annum.
Executive remuneration
The Company aims to reward executives based on their responsibility and performance, with a level and mix of
remuneration which has both fixed and variable components.
The executive remuneration and reward framework has four components:
●
●
●
●
base pay and non-monetary benefits
short-term performance incentives
share-based payments
other remuneration such as superannuation and long service leave
The combination of these comprises the executive's total remuneration.
Fixed remuneration, consisting of base salary, superannuation and non-monetary benefits, are reviewed annually by the
Nomination and Remuneration Committee based on individual and business unit performance, the overall performance of
the company and comparable market remunerations.
Executives may receive their fixed remuneration in the form of cash or other fringe benefits (for example motor vehicle
benefits) where it does not create any additional costs to the company and provides additional value to the executive.
The long-term incentives ('LTI') include long service leave and share-based payments. The Executive directors were
issued Award Options, as described in the Company's Prospectus dated 25 November 2015, on 17 December 2015,
following the completion of the Company's Initial Public Offer.
Company performance and link to remuneration
Remuneration of key management personnel is not currently directly linked to the performance of the Company other than
via Award Options the value of which is linked to its share price. The Company will investigate an appropriate mechanism
for such linkage.
Use of remuneration consultants
The Company did not engage any remuneration consultants during the financial year ended 30 June 2017.
Details of remuneration
Amounts of remuneration
Details of the remuneration of key management personnel of the company are set out in the following tables.
9
Micro-X Ltd
Directors' report
For the year ended 30 June 2017
The key management personnel of the company consisted of the following directors and management of the company:
●
●
●
●
●
●
●
Peter Rowland (Managing Director)
Patrick O'Brien (Non-Executive Chairman)
Richard Hannebery (Executive Director of Corporate Development)
David Symons (Non-Executive Director)
Alexander Bennett Gosling (Non-Executive Director)
Yasmin Anna King (Non-Executive Director) - appointed 5 December 2016
Georgina Sarah Carpendale (Chief Financial Officer)
Short-term benefits
Post-
employment
benefits
Long-term
benefits
Share-
based
payments -
Options
Cash salary
and fees
$
Cash
bonus
$
Non-
Super-
monetary annuation
$
$
Long
service
leave
$
Equity-
settled
$
Total
$
60,000
36,530
39,998
21,032
250,000
125,000
125,577
658,137
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
3,470
-
1,998
23,750
-
11,930
41,148
-
-
-
-
-
-
-
-
36,993
24,661
24,661
10,788
96,993
64,661
64,659
33,818
39,984
39,984
313,734
164,984
-
177,071
137,507
876,356
2017
Non-Executive Directors:
P O'Brien
A Gosling
D Symons
Y King*
Executive Directors:
P Rowland
R Hannebery
Other Key Management
Personnel:
G Carpendale - CFO
*
Ms King was appointed as Non-Executive Director on 5 December 2017
Short-term benefits
Post-
employment
benefits
Long-term
benefits
Share-
based
payments -
Options
Cash salary
and fees
$
Cash
bonus
$
Non-
Super-
monetary annuation
$
$
Long
service
leave
$
Equity-
settled
$
Total
$
45,000
30,000
29,997
-
-
-
199,154
95,262
25,000
-
4,154
403,567
-
25,000
-
-
-
-
-
-
-
-
2,850
-
11,510
-
395
14,755
-
-
-
-
-
-
-
28,220
18,813
18,813
73,220
51,663
48,810
118,568
118,568
354,232
213,830
-
302,982
4,549
746,304
2016
Non-Executive Directors:
P O'Brien*
A Gosling**
D Symons**
Executive Directors:
P Rowland
R Hannebery
Other Key Management
Personnel:
G Carpendale - CFO***
10
Micro-X Ltd
Directors' report
For the year ended 30 June 2017
Mr O'Brien was appointed as Non-Executive Chairman on 6 August 2015
Messrs Gosling and Symons were appointed as Non-Executive Directors on 27 August 2015
*
**
*** Ms Carpendale was appointed Chief Financial Officer on 14 June 2016
The proportion of remuneration linked to performance and the fixed proportion are as follows:
Name
Non-Executive Directors:
P O'Brien
A Gosling
D Symons
Y King
Executive Directors:
P Rowland
R Hannebery
Other Key Management
Personnel:
G Carpendale - CFO
Fixed remuneration
2016
2017
At risk - STI
At risk - LTI
2017
2016
2017
2016
62%
62%
62%
68%
87%
76%
61%
64%
61%
-
59%
45%
100%
100%
-
-
-
-
-
-
-
-
-
-
-
7%
-
38%
38%
38%
32%
13%
24%
39%
36%
39%
-
34%
55%
-
-
-
During the financial year no bonuses were approved to be paid as no key performance indicators (‘KPI’) had yet been set.
The Company is currently in the process of reviewing key performance indicators.
11
Micro-X Ltd
Directors' report
For the year ended 30 June 2017
Service agreements
Remuneration and other terms of employment for key management personnel are formalised in service agreements.
Details of these agreements are as follows:
Name:
Title:
Agreement commenced:
Term of agreement:
Details:
Peter Rowland
Managing Director
1 September 2014
No fixed term. Micro-X or Mr Rowland may terminate the employment contract at any
time provided that either party gives notice as follows:
• on or before 1 September 2016 – 3 months’ notice;
• on or before 1 September 2017 – 4 months’ notice;
• on or before 1 September 2018 – 5 months’ notice; and
• on or before 1 September 2019 – 6 months’ notice.
Annual salary is $250,000 per annum plus compulsory employer superannuation
contributions (subject to review in June 2017).
Mr Rowland is entitled to an incentive payment of:
• either 25% of his salary where all KPIs set by the Company are achieved, or
• a relative percentage of his salary where one or more but not all KPIs are achieved.
Mr Rowland has been issued LTI interests, being share options. Details of these
options are:
• number of options issued: 2,089,670, in 3 tranches;
• grant date: 1 September 2014;
• vesting terms:
- 696,556 options vesting upon IPO (Tranche 1);
- remaining options vest only upon satisfaction of service conditions as follows:
- 696,556 options vest 1 September 2016, provided he remains employed
with the Company on that date (Tranche 2);
- 696,558 options vest 1 September 2017, provided he remains employed
with the Company on that date (Tranche 3);
• exercise prices:
- Tranche 1 - $0.575 (57.5 cents) per option;
- Tranches 2 and 3 - $0.625 (62.5 cents) per option;
- expiry date: 31 December 2019.
12
Micro-X Ltd
Directors' report
For the year ended 30 June 2017
Name:
Title:
Agreement commenced:
Term of agreement:
Details:
Name:
Title:
Agreement commenced:
Term of agreement:
Details:
Richard Hannebery
Executive Director
1 September 2014
No fixed term. Micro-X or Mr Hannebery may terminate the employment contract at
any time provided that either party gives notices as follows:
• on or before 1 September 2016 – 3 months’ notice;
• on or before 1 September 2017 – 4 months’ notice;
• on or before 1 September 2018 – 5 months’ notice; and
• on or before 1 September 2019 – 6 months’ notice.
Annual salary is $125,000 per annum (subject to review in June 2017).
Mr Hannebery is entitled to an incentive payment of:
• either 25% of his salary where all KPIs set by the Company are achieved, or
• a relative percentage of his salary where one or more but not all KPIs are achieved.
Mr Hannebery has been issued LTI interests, being share options. Details of these
options are:
• number of options issued: 2,089,670, in 3 tranches;
• grant date: 1 September 2014;
• vesting terms:
- 696,556 options vesting upon IPO (Tranche 1);
- remaining options vest only upon satisfaction of service conditions as follows:
- 696,556 options vest 1 September 2016, provided he remains employed
with the Company on that date (Tranche 2);
- 696,558 options vest 1 September 2017, provided he remains employed
with the Company on that date (Tranche 3);
• exercise prices:
- Tranche 1 - $0.575 (57.5 cents) per option;
- Tranches 2 and 3 - $0.625 (62.5 cents) per option;
- expiry date: 31 December 2019.
Georgina Carpendale
Chief Financial Officer
14 June 2016
No fixed term. Micro-X or Ms Carpendale may terminate the employment contract at
any time provided that either party gives notice as follows:
• on or before 14 June 2017 – 1 months’ notice;
• on or before 14 June 2018 – 1 months’ notice;
• on or before 14 June 2019 – 2 months’ notice; and
• on or before 14 June 2020 – 2 months’ notice.
Annual salary is $130,000 per annum plus compulsory employer superannuation
contributions (subject to review in June 2017).
Key management personnel have no entitlement to termination payments in the event of removal for misconduct.
Share-based compensation
Issue of shares
There were no shares issued to the directors and other key management personnel as part of compensation during the
year ended 30 June 2017.
13
Micro-X Ltd
Directors' report
For the year ended 30 June 2017
Options
The terms and conditions of each grant of options over ordinary shares affecting remuneration of directors and other key
management personnel in this financial year or future reporting years are as follows:
Grant date
1 September 2014*
(1,393,112 options)
1 September 2014*
(1,393,112 options)
1 September 2014*
(1,393,116 options)
21 December 2015
(466,666 options)
21 December 2015
(466,666 options)
21 December 2015
(466,668 options)
5 December 2016**
(160,000 options)
5 December 2016**
(160,000 options)
Vesting date and
exercisable date
Expiry date
Fair value
per option
Exercise price at grant date
21 December 2015
31 December 2019
$0.575
$0.151
1 September 2016
31 December 2019
$0.625
$0.136
1 September 2017
31 December 2019
$0.625
$0.136
21 December 2016
31 December 2019
$0.575
$0.151
21 December 2017
31 December 2019
$0.625
$0.136
21 December 2018
31 December 2019
$0.625
$0.136
1 December 2018
1 December 2020
$0.625
$0.142
1 December 2019
1 December 2020
$0.625
$0.142
*
**
Options deemed to be granted to key management personnel in FY15 in accordance with AASB 2 and have various
vesting dates commencing from the date of IPO.
These options were agreed to be issued on 5th December 2016 as part of the non-executive director agreement with
Yasmin King. Exercise price will be the higher of $0.625 or in the event of a capital raising before the ratification of this
grant of options by the shareholders, a 25% premium to the share price at which the first such capital raising
immediately following the appointment takes place. The grant of the unlisted options is subject to shareholder
approval at the Company’s 2017 Annual General Meeting, and has been estimated and expensed.
Options granted carry no dividend or voting rights.
The number of options over ordinary shares granted to and vested by directors and other key management personnel as
part of compensation during the year ended 30 June 2017 are set out below:
Name
P Rowland
R Hannebery
P O'Brien
A Gosling
D Symons
Y King
Number of
Number of
Number of
Number of
options
granted
options
granted
options
vested
options
vested
during the
during the
during the
during the
year
2017
year
2016
year
2017
year
2016
-
-
-
-
-
320,000
-
-
600,000
400,000
400,000
-
696,556
696,556
200,000
133,333
133,333
-
696,556
696,556
-
-
-
-
No amount was paid or payable by the recipients for these options.
14
Micro-X Ltd
Directors' report
For the year ended 30 June 2017
Service criteria that must be met before the options vest are as follows:
• issues to Executive Directors (P Rowland and R Hannebery):
- one third (Tranche 1) vested immediately upon IPO;
- one third (Tranche 2) vest on 1 September 2016, provided the holder remains employed by the company on that
date;
- one third (Tranche 3) vest on 1 September 2017, provided the holder remains employed by the company on that
date;
• issues to Non-Executive Directors:
- one third (Tranche 1) vest on 21 December 2016, provided the holder remains employed by the company on that
date;
- one third (Tranche 2) vest on 21 December 2017, provided the holder remains employed by the company on that
date;
- one third (Tranche 3) vest on 21 December 2018, provided the holder remains employed by the company on that
date.
• issues to Non-Executive Director (Yasmin King):
- one half (Tranche 1) vest on 1 December 2018, provided the holder remains employed by the company on that
date;
- one half (Tranche 2) vest on 1 December 2019, provided the holder remains employed by the company on that
date;
The granting and vesting of the options is not dependent upon the satisfaction of a performance condition as the company
is of the view that the service criteria, and the contribution by the recipient to the increase in the company's share price,
and therefore the value of their options, is currently a sufficient basis for the granting and vesting of those options.
Values of options over ordinary shares granted, exercised and lapsed for directors and other key management personnel
as part of compensation during the year ended 30 June 2017 are set out below:
Name
P Rowland
R Hannebery
P O'Brien
A Gosling
D Symons
Y King
Value of
options
granted
during the
year
$
Value of
options
available to
be exercised
during the
year
$
Value of
options
lapsed
Remuneration
consisting of
options
during the
year
$
for the
year
%
-
-
-
-
-
45,438
201,198
201,198
30,384
20,256
20,256
-
-
-
-
-
-
-
-
-
-
-
-
-
15
Micro-X Ltd
Directors' report
For the year ended 30 June 2017
Additional disclosures relating to key management personnel
Shareholding
The number of shares in the company held during the financial year by each director and other members of key
management personnel of the company, including their personally related parties, is set out below:
Balance at Received
as part of
the start of
the year
remuneration Additions
Disposals/
other
Balance at
the end of
the year
Ordinary shares
P Rowland
R Hannebery
P O'Brien
A Gosling
D Symons
12,425,000
3,712,400
3,887,869
100,000
2,145,600
22,270,869
-
-
-
-
-
-
-
62,500
737,511
10,000
74,600
884,611
- 12,425,000
3,774,900
-
4,625,380
-
110,000
-
-
2,220,200
- 23,155,480
Option holding
The number of options over ordinary shares in the company held during the financial year by each director and other
members of key management personnel of the company, including their personally related parties, is set out below:
Options over ordinary shares
P Rowland
R Hannebery
P O'Brien
A Gosling
D Symons
Y King
Balance at
the start of Granted as
the year
remuneration Exercised
Expired/
forfeited/
other
Balance at
the end of
the year
2,089,670
2,089,670
600,000
400,000
400,000
-
5,579,340
-
-
-
-
-
320,000
320,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2,089,670
2,089,670
600,000
400,000
400,000
320,000
5,899,340
*
Options deemed to be granted to key management personnel in FY15 in accordance with AASB 2 and have various
vesting dates commencing from the date of IPO
Options over ordinary shares
P Rowland
R Hannebery
P O'Brien
A Gosling
D Symons
This concludes the remuneration report, which has been audited.
Vested and Vested and
exercisable unexercisable
Balance at
the end of
the year
1,393,112
1,393,112
200,000
133,333
133,333
3,252,890
-
-
-
-
-
-
1,393,112
1,393,112
200,000
133,333
133,333
3,252,890
16
Micro-X Ltd
Directors' report
For the year ended 30 June 2017
Shares under option
Unissued ordinary shares of the company under option at the date of this report are as follows:
Grant date
Expiry date
1 September 2014*
1 September 2014*
21 December 2015
21 December 2015
5 December 2016**
1 April 2017
31 December 2019
31 December 2019
31 December 2019
31 December 2019
1 December 2020
1 April 2021
Exercise
price
Number
under option
$0.575
$0.625
$0.575
$0.625
$0.625
$0.625
1,393,112
2,786,228
2,049,998
4,100,002
320,000
2,500,000
13,149,340
*
**
Options deemed to be granted to key management personnel in FY15 in accordance with AASB 2 and have various
vesting dates commencing from the date of IPO.
These options were agreed to be issued on 5th December 2016 as part of the non-executive director agreement with
Yasmin King. Exercise price will be the higher of $0.625 or in the event of a capital raising before the ratification of this
grant of options by the shareholders, a 25% premium to the share price at which the first such capital raising
immediately following the appointment takes place. The grant of the unlisted options is subject to shareholder
approval at the Company’s 2017 Annual General Meeting.
No person entitled to exercise the options had or has any right by virtue of the option to participate in any share issue of
the company or of any other body corporate.
Shares issued on the exercise of options
There were no ordinary shares of the company issued on the exercise of options during the year ended 30 June 2017 and
up to the date of this report.
Indemnity and insurance of officers
The company has indemnified the directors and executives of the company for costs incurred, in their capacity as a director
or executive, for which they may be held personally liable, except where there is a lack of good faith.
During the financial year, the company paid a premium in respect of a contract to insure the directors and executives of the
company against a liability to the extent permitted by the Corporations Act 2001. The contract of insurance prohibits
disclosure of the nature of the liability and the amount of the premium.
Indemnity and insurance of auditor
The company has not, during or since the end of the financial year, indemnified or agreed to indemnify the auditor of the
company or any related entity against a liability incurred by the auditor.
During the financial year, the company has not paid a premium in respect of a contract to insure the auditor of the company
or any related entity.
Proceedings on behalf of the company
No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on
behalf of the company, or to intervene in any proceedings to which the company is a party for the purpose of taking
responsibility on behalf of the company for all or part of those proceedings.
Non-audit services
Details of the amounts paid or payable to the auditor for non-audit services provided during the financial year by the auditor
are outlined in note 23 to the financial statements.
The directors are satisfied that the provision of non-audit services during the financial 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.
17
Micro-X Ltd
Directors' report
For the year ended 30 June 2017
The directors are of the opinion that the services as disclosed in note 23 to the financial statements do not compromise the
external auditor's independence requirements of the Corporations Act 2001 for the following reasons:
●
all non-audit services have been reviewed and approved to ensure that they do not impact the integrity and objectivity
of the auditor; and
none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code
of Ethics for Professional Accountants issued by the Accounting Professional and Ethical Standards Board, including
reviewing or auditing the auditor's own work, acting in a management or decision-making capacity for the company,
acting as advocate for the company or jointly sharing economic risks and rewards.
●
Officers of the company who are former partners of Grant Thornton Audit Pty Ltd
There are no officers of the company who are former partners of Grant Thornton Audit Pty Ltd.
Rounding of amounts
The company is of a kind referred to in Corporations Instrument 2016/191, issued by the Australian Securities and
Investments Commission, relating to 'rounding-off'. Amounts in this report have been rounded off in accordance with that
Corporations Instrument to the nearest thousand dollars, or in certain cases, the nearest dollar.
Auditor's independence declaration
A copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001 is set out
immediately after this directors' report.
Auditor
Grant Thornton Audit Pty Ltd continues in office in accordance with section 327 of the Corporations Act 2001.
This report is made in accordance with a resolution of directors, pursuant to section 298(2)(a) of the Corporations Act
2001.
On behalf of the directors
___________________________
Patrick O'Brien
Non-Executive Chairman
30 August 2017
18
The Rialto, Level 30
525 Collins St
Melbourne Victoria 3000
Correspondence to:
GPO Box 4736
Melbourne Victoria 3001
T +61 3 8320 2222
F +61 3 8320 2200
E info.vic@au.gt.com
W www.grantthornton.com.au
AUDITOR’S INDEPENDENCE DECLARATION
TO THE DIRECTORS OF MICRO-X LTD
In accordance with the requirements of section 307C of the Corporations Act 2001, as lead auditor for
the audit of Micro-X Ltd for the year ended 30 June 2017, I declare that, to the best of my knowledge
and belief, there have been:
a
no contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
b
no contraventions of any applicable code of professional conduct in relation to the audit.
GRANT THORNTON AUDIT PTY LTD
Chartered Accountants
M A Cunningham
Partner - Audit & Assurance
Melbourne, 30 August 2017
Grant Thornton Audit Pty Ltd ACN 130 913 594
a subsidiary or related entity of Grant Thornton Australia Ltd ABN 41 127 556 389
‘Grant Thornton’ refers to the brand under which the Grant Thornton member firms provide assurance, tax and advisory services to their clients and/or refers to one or more member firms, as the context
requires. Grant Thornton Australia Ltd is a member firm of Grant Thornton International Ltd (GTIL). GTIL and the member firms are not a worldwide partnership. GTIL and each member firm is a separate legal
entity. Services are delivered by the member firms. GTIL does not provide services to clients. GTIL and its member firms are not agents of, and do not obligate one another and are not liable for one another’s
acts or omissions. In the Australian context only, the use of the term ‘Grant Thornton’ may refer to Grant Thornton Australia Limited ABN 41 127 556 389 and its Australian subsidiaries and related entities.
GTIL is not an Australian related entity to Grant Thornton Australia Limited.
Liability limited by a scheme approved under Professional Standards Legislation.
Micro-X Ltd
Statement of profit or loss and other comprehensive income
For the year ended 30 June 2017
Revenue
Total revenue
Expenses
Employee and director costs
Office and administrative expenses
Corporate expenses
Quality and regulatory
Project costs
Depreciation and amortisation expense
Other expenses
Finance costs
Total expenses
Operating loss
Other income
Share of profits of associates accounted for using the equity method
Loss before income tax expense
Income tax expense
Note
2017
$'000
2016
$'000
5
6
7
8
659
659
892
892
(3,031)
(595)
(134)
(121)
(15,280)
(79)
(795)
(139)
(20,174)
(1,418)
(182)
(427)
(32)
(17,682)
(30)
(403)
(2,860)
(23,034)
(19,515)
(22,142)
7,086
(491)
11,373
28
(12,920)
(10,741)
-
-
Loss after income tax expense for the year attributable to the owners of Micro-
X Ltd
(12,920)
(10,741)
Other comprehensive income
Items that may be reclassified subsequently to profit or loss
Exchange differences on translating foreign operations
Other comprehensive income for the year, net of tax
Total comprehensive income for the year attributable to the owners of Micro-X
Ltd
Basic earnings per share
Diluted earnings per share
186
186
-
-
(12,734)
(10,741)
Cents
Cents
31
31
(10.44)
(10.44)
(16.75)
(16.75)
The above statement of profit or loss and other comprehensive income should be read in conjunction with the
accompanying notes
20
Micro-X Ltd
Statement of financial position
As at 30 June 2017
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Other
Total current assets
Non-current assets
Investments accounted for using the equity method
Property, plant and equipment
Intangibles
Total non-current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Borrowings
Provisions
Total current liabilities
Non-current liabilities
Provisions
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Foreign currency translation reserve
Share based payments reserve
Accumulated losses
Total equity
Note
2017
$'000
2016
$'000
9
10
11
12
13
14
15
16
17
18
19
5,573
7,659
1,196
27
14,455
8,765
358
2,127
11,250
4,169
8,814
-
26
13,009
9,070
165
2,017
11,252
25,705
24,261
7,077
3,000
139
10,216
165
165
6,012
-
21
6,033
-
-
10,381
6,033
15,324
18,228
48,024
186
1,317
(34,203)
38,720
-
791
(21,283)
15,324
18,228
The above statement of financial position should be read in conjunction with the accompanying notes
21
Micro-X Ltd
Statement of changes in equity
For the year ended 30 June 2017
Issued
capital
$'000
Share based
payment
reserve
$'000
Foreign
currency
translation
reserve
$'000
Accumulated
losses
$'000
Total equity
$'000
Balance at 1 July 2015
Loss after income tax expense for the year
Other comprehensive income for the year, net
of tax
Total comprehensive income for the year
Transactions with owners in their capacity as
owners:
Share-based payments (note 32)
Issue of shares through IPO
Conversion of Converting Preferred Shares -
Series A, B and C
Purchase of XinRay Systems Inc. investment
Capital raising costs
1
-
-
-
-
20,000
18,273
1,917
(1,471)
265
-
-
-
526
-
-
-
-
Balance at 30 June 2016
38,720
791
-
-
-
-
-
-
-
-
-
-
(10,542)
(10,276)
(10,741)
(10,741)
-
-
(10,741)
(10,741)
-
-
-
-
-
526
20,000
18,273
1,917
(1,471)
(21,283)
18,228
Share based
payment
reserve
$'000
Foreign
currency
translation
reserve
$'000
Issued
capital
$'000
Accumulated
losses
$'000
Total equity
$'000
Balance at 1 July 2016
38,720
791
Loss after income tax expense for the year
Other comprehensive income for the year, net
of tax
Total comprehensive income for the year
Issue of shares through placement offer
Issue of shares through entitlement offer
Capital raising costs
Transactions with owners in their capacity as
owners:
Share-based payments (note 32)
-
-
-
5,200
4,776
(672)
-
-
-
-
-
-
-
526
-
-
(21,283)
18,228
(12,920)
(12,920)
186
-
186
186
(12,920)
(12,734)
-
-
-
-
-
-
-
-
5,200
4,776
(672)
526
Balance at 30 June 2017
48,024
1,317
186
(34,203)
15,324
The above statement of changes in equity should be read in conjunction with the accompanying notes
22
Micro-X Ltd
Statement of cash flows
For the year ended 30 June 2017
Cash flows from operating activities
Receipts from customers (inclusive of GST)
Payments to suppliers (inclusive of GST)
Interest received
R&D incentive tax refunds
Interest Paid
Net GST receipts
Rent Expense
Net cash used in operating activities
Cash flows from investing activities
Payments for property, plant and equipment
Payments for intangibles
Payments for investments in associates
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issue of shares
Capital raising costs
Proceeds from borrowings
Net cash from financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
Cash and cash equivalents at the end of the financial year
Note
2017
$'000
2016
$'000
29
11
12
17
17
627
(20,461)
19
8,219
(141)
1,307
(88)
882
(17,609)
68
3,106
-
1,111
(81)
(10,518)
(12,523)
(272)
(110)
-
(184)
(37)
(7,124)
(382)
(7,345)
9,976
(672)
3,000
20,000
(1,471)
2,916
12,304
21,445
1,404
4,169
1,577
2,592
5,573
4,169
The above statement of cash flows should be read in conjunction with the accompanying notes
23
Micro-X Ltd
Notes to the financial statements
For the year ended 30 June 2017
Note 1. General information
The financial statements cover Micro-X Ltd as an individual entity. The financial statements are presented in Australian
dollars, which is Micro-X Ltd's functional and presentation currency.
Registered office
Principal place of business
A14, 6 MAB Eastern Promenade
1284 South Road, Tonsley
Clovelly Park, SA 5042
A14, 6 MAB Eastern Promenade
1284 South Road, Tonsley
Clovelly Park, SA 5042
A description of the nature of the company's operations and its principal activities are included in the directors' report,
which is not part of the financial statements.
The financial statements were authorised for issue, in accordance with a resolution of directors, on 30 August 2017. The
directors have the power to amend and reissue the financial statements.
Note 2. Significant accounting policies
The principal accounting policies adopted in the preparation of the financial statements are set out below. These policies
have been consistently applied to all the years presented, unless otherwise stated.
New or amended Accounting Standards and Interpretations adopted
The company has adopted all of the new or amended Accounting Standards and Interpretations issued by the Australian
Accounting Standards Board ('AASB') that are mandatory for the current reporting period.
Any new or amended Accounting Standards or Interpretations that are not yet mandatory have not been early adopted.
The adoption of these Accounting Standards and Interpretations did not have any significant impact on the financial
performance or position of the company.
The following Accounting Standards and Interpretations are most relevant to the company:
Other Income - Government subsidies
Subsidies from the government including R&D tax incentive income, have been recognised as other income at their fair
value where there is reasonable assurance that the grant will be received, the Company will comply with attached
conditions and the R&D incentive is readily measurable.
Going concern
The Company incurred a net loss after tax for the financial year ended 30 June 2017 of $12.9M (year ended June 2016:
$10.7M) and had net cash outflows from operating activities of $10.9M (year ended June 2016: $12.5M).
Notwithstanding these results, the directors believe that the company will be able to continue as a going concern, which
contemplates continuity of normal business activities and the realisation of assets and settlement of liabilities in the
ordinary course of business and as a result the financial statements have been prepared on a going concern basis. The
accounts have been prepared on the assumption that the company is a going concern for the following reasons:
●
the operating loss and operating cash flow outcomes for the year ended 30 June 2017 reflect the results of the
company's major activities during that period, including the following, which were not directly revenue-generating nor
cash-flow positive:
The continuation and finalisation of research and development activities on the DRX Revolution Nano, which the
Company is undertaking with the objective that the outcomes of these activities be profitable and generate positive
operating cash flows;
the company planning to consolidate its operating activities at a profitable and cash flow-positive level going forward;
as the company is an ASX-listed entity, it has the ability to raise additional funds if required;
the company received $7.0M from the R&D tax incentive scheme in relation to FY2017 on 30 August 2017; and
the Board is of the opinion that the company has sufficient funds to meet the planned corporate activities, research
and development activities and working capital requirements; and
●
●
●
●
●
24
Micro-X Ltd
Notes to the financial statements
For the year ended 30 June 2017
Note 2. Significant accounting policies (continued)
The Directors are of the opinion that no asset is likely to be realised for an amount less than the amount at which it is
recognised in the financial report as at 30 June 2017.
Accordingly, this financial report does not include any adjustments relating to the recoverability and classification of
recorded asset amounts or to the amounts and classification of liabilities as might be necessary should the Company not
continue as a going concern.
Basis of preparation
These general purpose financial statements have been prepared in accordance with Australian Accounting Standards and
Interpretations issued by the Australian Accounting Standards Board ('AASB') and the Corporations Act 2001, as
appropriate for for-profit oriented entities. These financial statements also comply with International Financial Reporting
Standards as issued by the International Accounting Standards Board ('IASB').
Historical cost convention
The financial statements have been prepared under the historical cost convention, except for, where applicable, the
revaluation of available-for-sale financial assets, financial assets and liabilities at fair value through profit or loss,
investment properties, certain classes of property, plant and equipment and derivative financial instruments.
Critical accounting estimates
The preparation of the financial statements requires the use of certain critical accounting estimates. It also requires
management to exercise its judgement in the process of applying the company's accounting policies. The areas involving a
higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial
statements, are disclosed in note 3.
Operating segments
Operating segments are presented using the 'management approach', where the information presented is on the same
basis as the internal reports provided to the Chief Operating Decision Makers ('CODM'). The CODM is responsible for the
allocation of resources to operating segments and assessing their performance.
Revenue recognition
Revenue is recognised when it is probable that the economic benefit will flow to the company and the revenue can be
reliably measured. Revenue is measured at the fair value of the consideration received or receivable.
Sale of goods
Sale of goods revenue is recognised at the point of sale, which is at the end of production and the goods are ready to be
shipped, the risks and rewards are transferred to the customer and there is a valid sales contract. Amounts disclosed as
revenue are net of sales returns and trade discounts.
Contract revenue
Revenue from contracted services rendered is recognised in profit or loss in proportion to the stage of completion of the
transaction at the reporting date, and when success milestones have been achieved therefore probable that economic
benefits will flow to the Company. The stage of completion is assessed by reference to the completion of key milestones in
the contracts.
Stage of completion is measured by reference to total costs incurred to date as a percentage of total estimated total costs
for each contract. Where the contract outcome cannot be reliably estimated, revenue is only recognised to the extent of the
recoverable costs incurred to date.
Government subsidies
Subsidies from the government including R&D tax incentive income, are recognised as other income at their fair value
where there is reasonable assurance that the grant will be received, the Company will comply with attached conditions and
the R&D incentive is readily measureable. As such the Company recognised the R&D tax incentive on a cash basis in prior
periods. This period, as the estimate is reliably measurable, the R&D tax incentive is measured on an accruals basis.
25
Micro-X Ltd
Notes to the financial statements
For the year ended 30 June 2017
Note 2. Significant accounting policies (continued)
Interest
Interest revenue is recognised as interest accrues using the effective interest method. This is a method of calculating the
amortised cost of a financial asset and allocating the interest income over the relevant period using the effective interest
rate, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset
to the net carrying amount of the financial asset.
Other revenue
Other revenue is recognised when it is received or when the right to receive payment is established.
Income tax
The income tax expense or benefit for the period is the tax payable on that period's taxable income based on the
applicable income tax rate for each jurisdiction, adjusted by the changes in deferred tax assets and liabilities attributable to
temporary differences, unused tax losses and the adjustment recognised for prior periods, where applicable.
Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to be applied when
the assets are recovered or liabilities are settled, based on those tax rates that are enacted or substantively enacted,
except for:
●
When the deferred income tax asset or liability arises from the initial recognition of goodwill or an asset or liability in a
transaction that is not a business combination and that, at the time of the transaction, affects neither the accounting
nor taxable profits; or
When the taxable temporary difference is associated with interests in subsidiaries, associates or joint ventures, and
the timing of the reversal can be controlled and it is probable that the temporary difference will not reverse in the
foreseeable future.
●
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that
future taxable amounts will be available to utilise those temporary differences and losses.
The carrying amount of recognised and unrecognised deferred tax assets are reviewed at each reporting date. Deferred
tax assets recognised are reduced to the extent that it is no longer probable that future taxable profits will be available for
the carrying amount to be recovered. Previously unrecognised deferred tax assets are recognised to the extent that it is
probable that there are future taxable profits available to recover the asset.
Deferred tax assets and liabilities are offset only where there is a legally enforceable right to offset current tax assets
against current tax liabilities and deferred tax assets against deferred tax liabilities; and they relate to the same taxable
authority on either the same taxable entity or different taxable entities which intend to settle simultaneously.
Current and non-current classification
Assets and liabilities are presented in the statement of financial position based on current and non-current classification.
An asset is classified as current when: it is either expected to be realised or intended to be sold or consumed in the
company's normal operating cycle; it is held primarily for the purpose of trading; it is expected to be realised within 12
months after the reporting period; or the asset is cash or cash equivalent unless restricted from being exchanged or used
to settle a liability for at least 12 months after the reporting period. All other assets are classified as non-current.
A liability is classified as current when: it is either expected to be settled in the company's normal operating cycle; it is held
primarily for the purpose of trading; it is due to be settled within 12 months after the reporting period; or there is no
unconditional right to defer the settlement of the liability for at least 12 months after the reporting period. All other liabilities
are classified as non-current.
Deferred tax assets and liabilities are always classified as non-current.
Cash and cash equivalents
Cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term, highly
liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and
which are subject to an insignificant risk of changes in value.
26
Micro-X Ltd
Notes to the financial statements
For the year ended 30 June 2017
Note 2. Significant accounting policies (continued)
Trade and other receivables
Trade receivables are initially recognised at fair value and subsequently measured at amortised cost using the effective
interest method, less any provision for impairment. Trade receivables are generally due for settlement within 30 days.
Collectability of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectable are written
off by reducing the carrying amount directly. A provision for impairment of trade receivables is raised when there is
objective evidence that the company will not be able to collect all amounts due according to the original terms of the
receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial
reorganisation and default or delinquency in payments (more than 60 days overdue) are considered indicators that the
trade receivable may be impaired. The amount of the impairment allowance is the difference between the asset's carrying
amount and the present value of estimated future cash flows, discounted at the original effective interest rate. Cash flows
relating to short-term receivables are not discounted if the effect of discounting is immaterial.
Other receivables are recognised at amortised cost, less any provision for impairment.
Inventories
Inventories, which include all raw materials and components are stated at the lower of cost and net realisable value on a
'weighted average' basis. Cost comprises of purchase and delivery costs, net of rebates and discounts received or
receivable.
Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion
and the estimated costs necessary to make the sale.
Associates
Associates are entities over which the entity is able to exert significant influence but not control or joint control.
Investments in associates are accounted for using the equity method. Any goodwill or fair value adjustment attributable to
the Company’s share in the associate is not recognised separately and is included in the amount recognised as
investment. The carrying amount of the investment in associates is increased or decreased to recognise the Company’s
share of the profit or loss and other comprehensive income of the associate, adjusted where necessary to ensure
consistency with the accounting policies of the Company. Unrealised gains and losses on transactions between the
Company and its associates are eliminated to the extent of the Company’s interest in those entities. Where unrealised
losses are eliminated, the underlying asset is also tested for impairment.
Property, plant and equipment
Leasehold improvements are stated at historical cost less accumulated depreciation and impairment. Historical cost
includes expenditure that is directly attributable to the acquisition of the items.
Plant and equipment is stated at historical cost less accumulated depreciation and impairment. Historical cost includes
expenditure that is directly attributable to the acquisition of the items.
Furniture and fittings is stated at historical cost less accumulated depreciation and impairment. Historical cost includes
expenditure that is directly attributable to the acquisition of the items.
Computer equipment is stated at historical cost less accumulated depreciation and impairment. Historical cost includes
expenditure that is directly attributable to the acquisition of the items.
Depreciation is calculated on a straight-line basis to write off the net cost of each item of property, plant and equipment
(excluding land) over their expected useful lives as follows:
Leasehold improvements
Plant and equipment
Fixtures and fittings
Computer equipment
3-10 years
3-7 years
3-7 years
3-7 years
The residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each reporting
date.
27
Micro-X Ltd
Notes to the financial statements
For the year ended 30 June 2017
Note 2. Significant accounting policies (continued)
Leasehold improvements and plant and equipment under lease are depreciated over the unexpired period of the lease or
the estimated useful life of the assets, whichever is shorter.
An item of property, plant and equipment is derecognised upon disposal or when there is no future economic benefit to the
company. Gains and losses between the carrying amount and the disposal proceeds are taken to profit or loss.
Intangible assets
Intangible assets acquired separately are initially recognised at cost. Indefinite life intangible assets are not amortised and
are subsequently measured at cost less any impairment. Finite life intangible assets are subsequently measured at cost
less amortisation and any impairment. The gains or losses recognised in profit or loss arising from the derecognition of
intangible assets are measured as the difference between net disposal proceeds and the carrying amount of the intangible
asset. The method and useful lives of finite life intangible assets are reviewed annually. Changes in the expected pattern of
consumption or useful life are accounted for prospectively by changing the amortisation method or period.
Research and development
Costs incurred in research and development activities are expensed as incurred, with the exception of costs that Micro-X
can demonstrate the technical feasibility of completing the intangible asset so that it will be available for use or sale, its
intention to complete and its ability to use or sell the asset, how the asset will generate future economic benefits, the
availability of resources to complete the development and the ability to measure reliably the expenditure attributable to the
intangible asset during its development.
Given that work is not yet complete on the device and it is not yet available for use, capitalised development costs have not
yet commenced amortisation.
Patents and trademarks
Significant costs associated with patents and trademarks are deferred and amortised on a straight-line basis over the
period of their expected benefit, being their finite life of 10 years.
Impairment of non-financial assets
Goodwill and other intangible assets that have an indefinite useful life are not subject to amortisation and are tested
annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired.
Other non-financial assets are reviewed for impairment whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying
amount exceeds its recoverable amount.
Recoverable amount is the higher of an asset's fair value less costs of disposal and value-in-use. The value-in-use is the
present value of the estimated future cash flows relating to the asset using a pre-tax discount rate specific to the asset or
cash-generating unit to which the asset belongs. Assets that do not have independent cash flows are grouped together to
form a cash-generating unit.
Trade and other payables (Note 13)
These amounts represent liabilities for goods and services provided to the company prior to the end of the financial year
and which are unpaid. Due to their short-term nature they are measured at amortised cost and are not discounted. The
amounts are unsecured and are usually paid within 30 days of recognition.
Borrowings
Loans and borrowings are initially recognised at the fair value of the consideration received.
Provisions
Where there is an unconditional right to defer settlement of the liability for at least 12 months after the reporting date, the
loans or borrowings are classified as non-current.
Finance costs attributable to qualifying assets are capitalised as part of the asset. All other finance costs are expensed in
the period in which they are incurred.
28
Micro-X Ltd
Notes to the financial statements
For the year ended 30 June 2017
Note 2. Significant accounting policies (continued)
Provisions are recognised when the company has a present (legal or constructive) obligation as a result of a past event, it
is probable the company will be required to settle the obligation, and a reliable estimate can be made of the amount of the
obligation. The amount recognised as a provision is the best estimate of the consideration required to settle the present
obligation at the reporting date, taking into account the risks and uncertainties surrounding the obligation. If the time value
of money is material, provisions are discounted using a current pre-tax rate specific to the liability. The increase in the
provision resulting from the passage of time is recognised as a finance cost.
Employee benefits
Short-term employee benefits
Liabilities for wages and salaries, including non-monetary benefits, annual leave and long service leave expected to be
settled wholly within 12 months of the reporting date are measured at the amounts expected to be paid when the liabilities
are settled.
Other long-term employee benefits
The liability for annual leave and long service leave not expected to be settled within 12 months of the reporting date are
measured at the present value of expected future payments to be made in respect of services provided by employees up to
the reporting date using the projected unit credit method. Consideration is given to expected future wage and salary levels,
experience of employee departures and periods of service. Expected future payments are discounted using market yields
at the reporting date on high quality corporate bonds with terms to maturity and currency that match, as closely as
possible, the estimated future cash outflows.
Share-based payments
Equity-settled share-based compensation benefits are provided to employees.
Equity-settled transactions are awards of shares, or options over shares, that are provided to employees in exchange for
the rendering of services.
The cost of equity-settled transactions are measured at fair value on grant date. Fair value is independently determined
using a Black-Scholes option pricing model that takes into account the exercise price, the term of the option, the impact of
dilution, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and
the risk free interest rate for the term of the option, together with non-vesting conditions that do not determine whether the
company receives the services that entitle the employees to receive payment. No account is taken of any other vesting
conditions.
The cost of equity-settled transactions are recognised as an expense with a corresponding increase in equity over the
vesting period. The cumulative charge to profit or loss is calculated based on the grant date fair value of the award, the
best estimate of the number of awards that are likely to vest and the expired portion of the vesting period. The amount
recognised in profit or loss for the period is the cumulative amount calculated at each reporting date less amounts already
recognised in previous periods
Market conditions are taken into consideration in determining fair value. Therefore any awards subject to market conditions
are considered to vest irrespective of whether or not that market condition has been met, provided all other conditions are
satisfied.
If equity-settled awards are modified, as a minimum an expense is recognised as if the modification has not been made.
An additional expense is recognised, over the remaining vesting period, for any modification that increases the total fair
value of the share-based compensation benefit as at the date of modification.
If the non-vesting condition is within the control of the company or employee, the failure to satisfy the condition is treated
as a cancellation. If the condition is not within the control of the company or employee and is not satisfied during the
vesting period, any remaining expense for the award is recognised over the remaining vesting period, unless the award is
forfeited.
If equity-settled awards are cancelled, it is treated as if it has vested on the date of cancellation, and any remaining
expense is recognised immediately. If a new replacement award is substituted for the cancelled award, the cancelled and
new award is treated as if they were a modification.
29
Micro-X Ltd
Notes to the financial statements
For the year ended 30 June 2017
Note 2. Significant accounting policies (continued)
Fair value measurement
When an asset or liability, financial or non-financial, is measured at fair value for recognition or disclosure purposes, the
fair value is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date; and assumes that the transaction will take place either: in the
principal market; or in the absence of a principal market, in the most advantageous market.
Fair value is measured using the assumptions that market participants would use when pricing the asset or liability,
assuming they act in their economic best interests. For non-financial assets, the fair value measurement is based on its
highest and best use. Valuation techniques that are appropriate in the circumstances and for which sufficient data are
available to measure fair value, are used, maximising the use of relevant observable inputs and minimising the use of
unobservable inputs.
Issued capital
Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax,
from the proceeds.
Earnings per share
Basic earnings per share
Basic earnings per share is calculated by dividing the profit attributable to the owners of Micro-X Ltd, excluding any costs of
servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the
financial year, adjusted for bonus elements in ordinary shares issued during the financial year.
Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account
the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the
weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential
ordinary shares.
Goods and Services Tax ('GST') and other similar taxes
Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not
recoverable from the tax authority. In this case it is recognised as part of the cost of the acquisition of the asset or as part
of the expense.
Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST
recoverable from, or payable to, the tax authority is included in other receivables or other payables in the statement of
financial position.
Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing
activities which are recoverable from, or payable to the tax authority, are presented as operating cash flows.
Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the tax authority.
Foreign Currency Translation
Functional and presentation currency:
The financial statements are presented in Australian dollars, which is Micro-X Ltd's functional and presentation currency.
Foreign currency transactions and balances:
Foreign currency transactions are translated into the functional currency of Micro-X Ltd, using the exchange rates
prevailing at the dates of the transactions (spot exchange rate). Foreign exchange gains and losses resulting from the
settlement of such transactions and from the re-measurement of monetary items at year end exchange rates are
recognised in profit or loss. Non-monetary items are not retranslated at year-end and are measured at historical cost
(translated using the exchange rates at the date of the transaction), except for non-monetary items measured at fair value
which are translated using the exchange rates at the date when fair value was determined.
30
Micro-X Ltd
Notes to the financial statements
For the year ended 30 June 2017
Note 2. Significant accounting policies (continued)
Foreign operations:
Goodwill and fair value adjustments arising on the acquisition of a foreign entity have been treated as assets and liabilities
of the foreign entity and translated into $AUD at the closing rate. Income and expenses have been translated into $AUD at
the average rate over the reporting period. Exchange differences are charged or credited to other comprehensive income
and recognised in the currency translation reserve in equity. On disposal of a foreign operation the cumulative translation
differences recognised in equity are reclassified to profit or loss and recognised as part of the gain or loss on disposal.
Rounding of amounts
The company is of a kind referred to in Corporations Instrument 2016/191, issued by the Australian Securities and
Investments Commission, relating to 'rounding-off'. Amounts in this report have been rounded off in accordance with that
Corporations Instrument to the nearest thousand dollars, or in certain cases, the nearest dollar.
New Accounting Standards and Interpretations not yet mandatory or early adopted
Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet
mandatory, have not been early adopted by the company for the annual reporting period ended 30 June 2017. The
company's assessment of the impact of these new or amended Accounting Standards and Interpretations, most relevant to
the company, are set out below.
AASB 9 Financial Instruments
This standard is applicable to annual reporting periods beginning on or after 1 January 2018. The standard replaces all
previous versions of AASB 9 and completes the project to replace IAS 39 'Financial Instruments: Recognition and
Measurement'. AASB 9 introduces new classification and measurement models for financial assets.
A financial asset shall be measured at amortised cost, if it is held within a business model whose objective is to hold assets
in order to collect contractual cash flows, which arise on specified dates and solely principal and interest. All other financial
instrument assets are to be classified and measured at fair value through profit or loss unless the entity makes an
irrevocable election on initial recognition to present gains and losses on equity instruments (that are not held-for-trading) in
other comprehensive income ('OCI').
For financial liabilities, the standard requires the portion of the change in fair value that relates to the entity's own credit risk
to be presented in OCI (unless it would create an accounting mismatch). New simpler hedge accounting requirements are
intended to more closely align the accounting treatment with the risk management activities of the entity. New impairment
requirements will use an 'expected credit loss' ('ECL') model to recognise an allowance. Impairment will be measured
under a 12-month ECL method unless the credit risk on a financial instrument has increased significantly since initial
recognition in which case the lifetime ECL method is adopted.
The standard introduces additional new disclosures. The company will adopt this standard from 1 January 2018 but the
impact of its adoption is yet to be assessed by the company.
31
Micro-X Ltd
Notes to the financial statements
For the year ended 30 June 2017
Note 2. Significant accounting policies (continued)
AASB 15 Revenue from Contracts with Customers
This standard is applicable to annual reporting periods beginning on or after 1 January 2018. The standard provides a
single standard for revenue recognition. The core principle of the standard is that an entity will recognise revenue to depict
the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity
expects to be entitled in exchange for those goods or services.
The standard will require:
- contracts (either written, verbal or implied) to be identified, together with the separate performance obligations within
the contract;
- determine the transaction price, adjusted for the time value of money excluding credit risk;
- allocation of the transaction price to the separate performance obligations on a basis of relative stand-alone
selling price of each distinct good or service, or estimation approach if no distinct observable prices exist; and
- recognition of revenue when each performance obligation is satisfied.
Credit risk will be presented separately as an expense rather than adjusted to revenue.
For goods, the performance obligation would be satisfied when the customer obtains control of the goods.
For services, the performance obligation is satisfied when the service has been provided, typically for promises to transfer
services to customers.
For performance obligations satisfied over time, an entity would select an appropriate measure of progress to determine
how much revenue should be recognised as the performance obligation is satisfied.
Contracts with customers will be presented in an entity's statement of financial position as a contract liability, a contract
asset, or a receivable, depending on the relationship between the entity's performance and the customer's payment.
Sufficient quantitative and qualitative disclosure is required to enable users to understand the contracts with customers; the
significant judgements made in applying the guidance to those contracts; and any assets recognised from the costs to
obtain or fulfil a contract with a customer. The company will adopt this standard from 1 January 2018 but the impact of its
adoption is yet to be assessed by the company.
AASB 16 Leases
This standard is applicable to annual reporting periods beginning on or after 1 January 2019.
This standard:
- replaces AASB 117 Leases and some lease-related Interpretations;
- requires all leases to be accounted for ‘on-balance sheet’ by lessees, other than short-term and low value asset leases;
- provides new guidance on the application of the definition of lease and on sale and lease back accounting;
- largely retains the existing lessor accounting requirements in AASB 117;
- requires new and different disclosures about leases.
The Company will adopt this standard for the annual reporting period beginning 1 July 2019. The Company is yet to
undertake a detailed assessment of the impact of AASB 16. However, based on the Company's preliminary assessment,
the likely impacts from the first time adoption of the Standard for the year ending 30 June 2020 include:
- there will be a significant increase in lease assets and financial liabilities recognised on the balance sheet;
- the reported equity will reduce as the carrying amount of lease assets will reduce more quickly than the carrying
amount of lease liabilities;
- EBIT in the statement of profit or loss and other comprehensive income will be higher as the implicit interest in
lease payments for former off balance sheet leases will be presented as part of finance costs rather than being included
in operating expenses; and
- Operating cash outflows will be lower and financing cash flows will be higher in the statement of cash flows as principal
repayments on all lease liabilities will now be included in financing activities rather than operating activities.
32
Micro-X Ltd
Notes to the financial statements
For the year ended 30 June 2017
Note 3. Critical accounting judgements, estimates and assumptions
The preparation of the financial statements requires management to make judgements, estimates and assumptions that
affect the reported amounts in the financial statements. Management continually evaluates its judgements and estimates in
relation to assets, liabilities, contingent liabilities, revenue and expenses. Management bases its judgements, estimates
and assumptions on historical experience and on other various factors, including expectations of future events,
management believes to be reasonable under the circumstances. The resulting accounting judgements and estimates will
seldom equal the related actual results. The judgements, estimates and assumptions that have a significant risk of causing
a material adjustment to the carrying amounts of assets and liabilities (refer to the respective notes) within the next
financial year are discussed below.
Share-based payment transactions (Note 32)
The company measures the cost of equity-settled transactions with employees by reference to the fair value of the equity
instruments at the date at which they are granted. The fair value is determined by using the Black-Scholes model taking
into account the terms and conditions upon which the instruments were granted. The accounting estimates and
assumptions relating to equity-settled share-based payments would have no impact on the carrying amounts of assets and
liabilities within the next annual reporting period but may impact profit or loss and equity.
Impairment of non-financial assets other than goodwill and other indefinite life intangible assets
The company assesses impairment of non-financial assets other than goodwill and other indefinite life intangible assets at
each reporting date by evaluating conditions specific to the company and to the particular asset that may lead to
impairment. If an impairment trigger exists, the recoverable amount of the asset is determined. This involves fair value less
costs of disposal or value-in-use calculations, which incorporate a number of key estimates and assumptions.
Income tax
The company is subject to income taxes in the jurisdictions in which it operates. Significant judgement is required in
determining the provision for income tax. There are many transactions and calculations undertaken during the ordinary
course of business for which the ultimate tax determination is uncertain. The company recognises liabilities for anticipated
tax audit issues based on the company's current understanding of the tax law. Where the final tax outcome of these
matters is different from the carrying amounts, such differences will impact the current and deferred tax provisions in the
period in which such determination is made.
Recovery of deferred tax assets
Deferred tax assets are recognised for deductible temporary differences only if the company considers it is probable that
future taxable amounts will be available to utilise those temporary differences and losses.
Note 4. Operating segments
The company is organised into one operating segment being the design, development and manufacturing of ultra-
lightweight carbon nano tube based X-ray products for the global healthcare and counter improvised explosive device
imaging security markets. This operating segment is based on the internal reports that are reviewed and used by the Board
of Directors (who are identified as the Chief Operating Decision Makers ('CODM')) in assessing performance and in
determining the allocation of resources.
Major customers
During the year ended 30 June 2017 approximately $420K or 64% (2016: $800K or 90%) of the company's external
revenue was derived from sales to Defence Science and Technology Group of the Department of Defence. During the year
ended 30 June 2017 approximately $233K or 35% (2016: $92K or 10%) of the company's external revenue was derived
from sales to Carestream.
33
Micro-X Ltd
Notes to the financial statements
For the year ended 30 June 2017
Note 5. Revenue
Sales revenue
Sale of Goods
Other revenue
Contract revenue
Revenue
Note 6. Other income
Interest received
R&D tax incentive refund
Net foreign exchange gain
Note 7. Share of profits of associates accounted for using the equity method
2017
$'000
2016
$'000
239
92
420
659
800
892
2017
$'000
2016
$'000
19
7,052
15
68
11,305
-
7,086
11,373
2017
$'000
2016
$'000
Share of profits of associates accounted for using the equity method
(491)
28
Note 8. Income tax
Numerical reconciliation of income tax expense and tax at the statutory rate
Loss before income tax expense
Tax at the statutory tax rate of 30%
Tax effect amounts which are not deductible/(taxable) in calculating taxable income:
Share-based payments
Share of profits - associates
R&D tax incentive income
Feedstock adjustment
Other non-deductible expenses
Net prior year 'true-up' adjustments
R&D expenditure
Current year tax losses not recognised
Current year temporary differences not recognised
Income tax expense
2017
$'000
2016
$'000
(12,920)
(10,741)
(3,876)
(3,222)
158
147
(2,110)
23
(9)
-
4,851
(816)
807
9
-
158
8
(3,392)
(8)
858
74
5,467
(57)
20
37
-
34
Micro-X Ltd
Notes to the financial statements
For the year ended 30 June 2017
Note 9. Current assets - trade and other receivables
Trade receivables
R&D tax incentive refund
Deposits
GST receivable
Note 10. Non-current assets - investments accounted for using the equity method
Investment in associate - XinRay Systems Inc.
Refer to note 27 for further information on interests in associates.
Note 11. Non-current assets - property, plant and equipment
Leasehold improvements - at cost
Less: Accumulated depreciation
Plant and equipment - at cost
Less: Accumulated depreciation
Fixtures and fittings - at cost
Less: Accumulated depreciation
Computer equipment - at cost
Less: Accumulated depreciation
2017
$'000
2016
$'000
199
7,034
7,233
4
422
10
8,201
8,211
-
603
7,659
8,814
2017
$'000
2016
$'000
8,765
9,070
2017
$'000
2016
$'000
244
(21)
223
75
(26)
49
60
(22)
38
91
(43)
48
358
34
-
34
62
(12)
50
40
(8)
32
62
(13)
49
165
35
Micro-X Ltd
Notes to the financial statements
For the year ended 30 June 2017
Note 11. Non-current assets - property, plant and equipment (continued)
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out
below:
Balance at 1 July 2015
Additions
Depreciation expense
Balance at 30 June 2016
Additions
Depreciation expense
Balance at 30 June 2017
Note 12. Non-current assets - intangibles
Development - at cost
Patents and trademarks - at cost
Leasehold
improvements
$'000
Plant &
equipment
$'000
Fixtures &
fittings
$'000
Computer
equipment
$'000
Total
$'000
-
34
-
34
210
(21)
223
12
48
(10)
50
13
(14)
49
-
40
(8)
32
20
(14)
38
-
62
(13)
49
29
(30)
48
12
184
(31)
165
272
(79)
358
2017
$'000
2016
$'000
1,980
1,980
147
37
2,127
2,017
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out
below:
Balance at 1 July 2015
Additions
Balance at 30 June 2016
Additions
Balance at 30 June 2017
Capitalised development costs
Capitalised
development
costs
$'000
Patents &
trademarks
$'000
Total
$'000
1,980
-
1,980
-
1,980
-
37
37
110
147
1,980
37
2,017
110
2,127
For the purpose of ongoing annual impairment testing, the carrying value of capitalised development costs is allocated to
the following cash-generating product(s) (CGU), which is/ are the product(s) expected to benefit from the work, knowledge,
intellectual property and other information attributable to the relevant expenditure:
DRX Revolution Nano
36
2017
$'000
2016
$'000
1,980
1,980
Micro-X Ltd
Notes to the financial statements
For the year ended 30 June 2017
Note 12. Non-current assets - intangibles (continued)
Recoverability of development costs
The carrying amount of the Company's Development Cost intangible assets, relating to shares issued to Carestream in lieu
of development payments for Carestream’s development input for the Nano mobile X-ray cart that are yet to be
commercialised is reviewed at each reporting date for potential impairment. The review consists of a comparison of the
carrying value with the expected recoverable amount of the Development intangible assets as determined under a fair
value-in-use method.
Management has utilised a discounted cash flow model. These assumptions, and a description of management's approach
to determining the value(s) assigned to them, are as follows:
- the projected revenues and EBITDA margins of comparable ASX listed medical device companies
and discussions with customers and suppliers;
- the status of the Nano project with regard to its stage of development;
- the minimal extent of any incremental costs expected to be incurred to commercialise the Nano development asset
after development has completed;
- five year forecast revenues from commercialisation of the Nano development asset, including assumptions with respect
to sales growth and addressable market penetration rates;
- the risks attached to commercialising the Nano asset, including any industry specific or regulatory risk;
- the number of markets and timeframe in which the Nano is anticipated to be offered for sale via the support of
Carestream’s direct and VAR dealer network sales support;
- anticipated levels of competition; and
- other general economic factors.
The Company uses discounted cash flow projections to measure estimated fair value-in-use and used the following inputs:
- period over which cash flows were projected: 5 years;
- growth rate used to extrapolate cash flow projections: 5%; and
- discount rate applied to cash flow projections: 12% post-tax WACC.
As a result of the impairment assessment at 30 June 2017, the directors and management of the Company determined
that the recoverable amount of the Development Cost intangible assets, recorded in the Nano CGU, as estimated from the
discounted cash flows and other measurement techniques, was not impaired.
Management and the Board have determined that there was no reasonably possible change in a key assumption on which
management has based its determination of the Nano CGU recoverable amount which would cause its carrying amount to
exceed its recoverable amount.
Note 13. Current liabilities - trade and other payables
Trade payables
Accrued payroll
PAYG
Other payables
Refer to note 21 for further information on financial instruments.
Note 14. Current liabilities - borrowings
South Australian Financing Authority (SAFA) Loan
Refer to note 21 for further information on financial instruments.
37
2017
$'000
2016
$'000
4,225
46
149
2,657
4,913
-
46
1,053
7,077
6,012
2017
$'000
2016
$'000
3,000
-
Micro-X Ltd
Notes to the financial statements
For the year ended 30 June 2017
Note 15. Current liabilities - provisions
Annual leave
Deferred lease incentives
Payroll tax
Note 16. Non-current liabilities - provisions
Long service leave
Deferred lease incentives
Note 17. Equity - Issued capital
2017
$'000
2016
$'000
136
(12)
15
139
2017
$'000
2016
$'000
5
160
165
21
-
-
21
-
-
-
2017
Shares
2016
Shares
2017
$'000
2016
$'000
Ordinary shares - fully paid
144,350,698 119,409,725
48,024
38,720
Movements in ordinary share capital
Details
Date
Shares
Issue price
$'000
Balance
Conversion of Series A, B and C to ordinary shares
Share Split 1:950
Issue of shares at initial public offering
Purchase of XinRay Inc. investment
Capital raising cost
1 July 2015
17 December 2015
17 December 2015
17 December 2015
17 December 2015
17 December 2015
Balance
Issue of shares - placement
Issue of shares - entitlement offer
Capital raising cost - placement
Capital raising cost - entitlement offer
30 June 2016
18 April 2017
9 May 2017
18 April 2017
9 May 2017
23,000
56,553
75,495,797
40,000,000
3,834,375
-
119,409,725
13,000,000
11,940,973
-
-
$0.000
$0.000
$0.500
$0.500
$0.000
$0.400
$0.400
$0.000
$0.000
Balance
30 June 2017
144,350,698
1
18,273
-
20,000
1,917
(1,471)
38,720
5,200
4,776
(324)
(348)
48,024
Ordinary shares
Ordinary shares entitle the holder to participate in dividends and the proceeds on the winding up of the company in
proportion to the number of and amounts paid on the shares held. The fully paid ordinary shares have no par value and the
company does not have a limited amount of authorised capital.
On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each
share shall have one vote.
There is no current on-market share buy-back.
38
Micro-X Ltd
Notes to the financial statements
For the year ended 30 June 2017
Note 17. Equity - Issued capital (continued)
Capital risk management
The company's objectives when managing capital is to safeguard its ability to continue as a going concern, so that it can
provide returns for shareholders and benefits for other stakeholders and to maintain an optimum capital structure to reduce
the cost of capital.
Note 18. Equity - Foreign currency translation reserve
2017
$'000
2016
$'000
Exchange differences on translating foreign operations
186
-
Note 19. Equity - Share based payments reserve
Share-based payments reserve
2017
$'000
2016
$'000
1,317
791
Share-based payments reserve
The reserve is used to recognise the value of equity benefits provided to employees and the directors as part of their
remuneration, and other parties as part of their compensation for services.
Movements in reserves
Movements in each class of reserve during the current and previous financial year are set out below:
Balance at 1 July 2015
Share option expense
Balance at 30 June 2016
Share option expense
Balance at 30 June 2017
Note 20. Equity - dividends
Share-based
payments
reserve
$'000
Total
$'000
265
526
791
526
265
526
791
526
1,317
1,317
There were no dividends paid, recommended or declared during the current or previous financial year.
Note 21. Financial instruments
Financial risk management objectives
The company's activities expose it to a variety of financial risks: market risk (including interest rate risk), credit risk and
liquidity risk. The company's overall risk management program focuses on the unpredictability of financial markets and
seeks to minimise potential adverse effects on the financial performance of the company. The company uses different
methods to measure different types of risk to which it is exposed. These methods include sensitivity analysis in the case of
interest rate and other price risks and ageing analysis for credit risk.
Risk management is carried out by senior finance executives ('finance') under policies approved by the Board of Directors
('the Board'). These policies include identification and analysis of the risk exposure of the company and appropriate
procedures, controls and risk limits. Finance identifies, evaluates and hedges financial risks within the company's operating
units. Finance reports to the Board on a monthly basis.
39
Micro-X Ltd
Notes to the financial statements
For the year ended 30 June 2017
Note 21. Financial instruments (continued)
Unless otherwise stated, there have been no changes from the previous reporting period in the Company's exposures to
risks related to financial instruments, or how those risks arise.
Market risk
Foreign currency risk
Foreign exchange risk arises when future commercial transactions and recognised assets and liabilities are denominated
in a currency that is not the Company’s functional currency. The Company operates internationally and is exposed to
foreign exchange risk arising from various currency exposures, primarily with respect to the United States Dollar (USD).
Price risk
The company is not exposed to any significant price risk.
Interest rate risk
The Company’s exposure to the risk of changes in market interest rates relates primarily to the company’s cash deposits
with floating interest rates. These financial assets with variable rates expose the Company to interest rate risk.
All other financial assets and liabilities in the form of receivables and payables are non-interest bearing. The Company
does not engage in any hedging or derivative transactions to manage interest rate risk.
In regard to its interest rate risk, the Company continuously analyses its exposure. Within this analysis consideration is
given to potential renewals of existing positions, alternative investments and the mix of fixed and variable interest rates.
At the balance date the company had the following financial assets and liabilities exposed to Australian variable interest
rate risk that are not designated in cash flow hedges:
Cash at bank of $5.6M (2016: $4.2M). The sensitivity of the cash at bank balance to changes in interest rate (of +/-1%)
equates to +/-$55,726 (2016: +/-$41,690). The sensitivity of 1% is based on reasonable, possible changes, over a financial
year, using the observed range of actual historical short term deposit rate movements and management's expectation of
future movements.
Credit risk
Credit risk arises from cash and cash equivalents and outstanding trade and other receivables.
The cash balances are held in financial institutions with high ratings and the trade and other receivables relate to:
(i) amounts receivable from a substantial trade debtor with a strong credit standing;
(ii) goods and services tax receivable from the Australian Tax Office (ATO);
(iii) estimated R&D tax incentive receivable from the ATO.
The company has assessed that there is minimal risk that the cash and trade and other receivables balances are impaired.
Liquidity risk
Vigilant liquidity risk management requires the company to maintain sufficient liquid assets (mainly cash and cash
equivalents) and available borrowing facilities to be able to pay debts as and when they become due and payable.
The company manages liquidity risk by maintaining adequate cash reserves and available borrowing facilities by
continuously monitoring actual and forecast cash flows and matching the maturity profiles of financial assets and liabilities.
Trade payables are generally payable on 30 day terms.
40
Micro-X Ltd
Notes to the financial statements
For the year ended 30 June 2017
Note 21. Financial instruments (continued)
Remaining contractual maturities
The following tables detail the company's remaining contractual maturity for its financial instrument liabilities. The tables
have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the
financial liabilities are required to be paid. The tables include both interest and principal cash flows disclosed as remaining
contractual maturities and therefore these totals may differ from their carrying amount in the statement of financial position.
2017
Non-derivatives
Interest-bearing - fixed rate
SAFA loan
Total non-derivatives
Weighted
average
interest rate
%
1 year or less
$'000
Between 1
and 2 years
$'000
Between 2
and 5 years
$'000
Over 5 years
$'000
Remaining
contractual
maturities
$'000
5.75%
3,157
3,157
-
-
-
-
-
-
3,157
3,157
The cash flows in the maturity analysis above are not expected to occur significantly earlier than contractually disclosed
above.
Fair value of financial instruments
Unless otherwise stated, the carrying amounts of financial instruments reflect their fair value.
Note 22. Key management personnel disclosures
Compensation
The aggregate compensation made to directors and other members of key management personnel of the company is set
out below:
Short-term employee benefits
Post-employment benefits
Share-based payments
Note 23. Remuneration of auditors
2017
$
2016
$
658,137
41,148
177,071
428,567
14,755
302,982
876,356
746,304
During the financial year the following fees were paid or payable for services provided by Grant Thornton Audit Pty Ltd, the
auditor of the company:
Audit services - Grant Thornton Audit Pty Ltd
Audit or review of the financial statements
Other services - Grant Thornton Audit Pty Ltd
Investigating Accountant's Report and due diligence review
Tax consulting
41
2017
$
2016
$
50,000
50,000
-
12,500
58,000
10,000
12,500
68,000
62,500
118,000
Micro-X Ltd
Notes to the financial statements
For the year ended 30 June 2017
Note 24. Contingent liabilities
The company has no contingent liabilities as at 30 June 2017.
Note 25. Commitments and contingencies
Lease commitments - operating
Committed at the reporting date but not recognised as liabilities, payable:
Within one year
One to five years
More than five years
2017
$'000
2016
$'000
182
1,010
715
168
672
784
1,907
1,624
Operating lease commitments includes contracted amounts for a non-cancellable operating commercial property lease of a
purpose-designed facility at Tonsley, South Australia. The lease will have a term of 10 years, with a 10 year option to
renew. Annual lease payments are approximately $182,000 and there is a 3.5% annual rent increase
Note 26. Related party transactions
Associates
Interests in associates are set out in note 27.
Key management personnel
Disclosures relating to key management personnel are set out in note 22 and the remuneration report included in the
directors' report.
Transactions with related parties
During the year XinRay Systems Inc. (a director-related entity) was engaged by the company to develop the Carbon-Nano
Tube for the DRX Revolution Nano. During the year the company was invoiced under the Design and Development
Agreement $5.7M (2016: $3.0M). The outstanding balance of $2.7M (2016: $1.4M) due to XinRay Systems Inc. is included
in trade and other payables.
There were no other transactions with related parties during the current and previous financial year.
Receivable from and payable to related parties
There were no trade receivables from or trade payables to related parties at the current and previous reporting date.
Loans to/from related parties
There were no loans to or from related parties at the current and previous reporting date.
Note 27. Interests in associates
Interests in associates are accounted for using the equity method of accounting. Information relating to associates that are
material to the company are set out below:
Name
Principal place of business /
Country of incorporation
Ownership interest
2016
2017
%
%
XinRay Systems Inc.
United States of America
30%
30%
42
Micro-X Ltd
Notes to the financial statements
For the year ended 30 June 2017
Note 27. Interests in associates (continued)
The Company has made the following significant judgements and assumptions in determining that it has significant
influence over XinRay Systems Inc ("XinRay"):
- it has a 30% shareholding in XinRay, and is one of 2 shareholders the other bring Xintek Inc.
- its Managing Director, Mr Peter Rowland, is a member of the Board of XinRay and will continue to represent
the Company's interests on that Board; and
- Whilst XinRay has contractual work with multiple customers during the previous 12 month period Micro-X contract
payments accounted for more than half of XinRay’s contractual revenues.
The nature of the risks associated with the Company's investment in XinRay are:
- XinRay is still at an early stage of development and relies upon the funding support of its shareholders or access to
funding from other corporate partners and government agencies such as the US TSA;
- Should XinRay be successful in securing a current Broad Agency Announcement (BAA) grant funding from the US
Transport Security Administration (TSA) for its 3D - CT baggage screening imaging system for airport security check
points it does not guarantee successful TSA certification of XinRay system and as such there is no guarantee of
commercial success for the system;
- The Company believes that the investment reduces risk for access to XinRay manufactured products it exclusively
accesses under its Strategic Supplier Agreement for the development and commercialisation of the Company’s new
product pipeline;
- The investment may provide significant financial return to the Company should XinRay’s other business activities be
commercially successful.
There has been no change in these risks during the current reporting period.
43
Micro-X Ltd
Notes to the financial statements
For the year ended 30 June 2017
Note 27. Interests in associates (continued)
Summarised financial information
Summarised statement of financial position (AUD)
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Net assets
Summarised statement of profit or loss and other comprehensive income (AUD)
Revenue
Expenses
Profit/(loss) before income tax
Other comprehensive income
Total comprehensive income
Reconciliation of the company's carrying amount (AUD)
Closing net assets
Group’s share in %
Group's share in $
Goodwill
2017
$'000
2016
$'000
4,368
6,785
5,531
5,338
11,153
10,869
3,324
1,425
3,369
79
4,749
3,448
6,404
7,421
5,966
(6,847)
2,145
(2,051)
(881)
-
(881)
6,404
30%
1,921
6,844
94
-
94
7,421
30%
2,226
6,844
Closing carrying amount
8,765
9,070
Note 28. Events after the reporting period
On 17 August 2017 the company announced that it had signed an agreement with XinRay Systems Inc. for new
management arrangements to support the production of x-ray tubes for its 'DRX Revolution Nano' product. The company
will directly mange tube production in North Carolina under its accredited quality system and implement improvements in
manufacturing processes and supply-chain management. There is an option for the company's investment in plant and
equipment under the agreement to be exchanged for additional equity in the future to increase its ownership of XinRay.
On 30 August 2017, the company announced that it has received an R&D Tax Incentive rebate of $7,032,170 for the
2016/2017 financial year. The R&D Tax Incentive is an Australian Government program under which companies with
turnover of less than $20M receive a cash refund for 43.5% of eligible expenditure on research and development.
No other matter or circumstance has arisen since 30 June 2017 that has significantly affected, or may significantly affect
the company's operations, the results of those operations, or the company's state of affairs in future financial years.
44
Micro-X Ltd
Notes to the financial statements
For the year ended 30 June 2017
Note 29. Reconciliation of loss after income tax to net cash used in operating activities
Loss after income tax expense for the year
Adjustments for:
Depreciation and amortisation
Share of loss/(profit) - associates
Share-based payments
Non-cash finance costs
Lease Incentive
Change in operating assets and liabilities:
Decrease/(increase) in trade and other receivables
Increase in trade and other payables
Increase in employee benefits
Increase in Inventories
2017
$'000
2016
$'000
(12,920)
(10,741)
79
491
526
-
148
1,277
958
119
(1,196)
30
(28)
526
2,859
-
(8,502)
3,312
21
-
Net cash used in operating activities
(10,518)
(12,523)
Note 30. Non-cash investing and financing activities
Shares issued as consideration for acquisition of interest in associate
Conversion of converting preferred shares and accrued interest to fully paid ordinary shares
2017
$'000
2016
$'000
-
-
-
1,917
18,273
20,190
In the prior year the company issued 3,834,375 fully paid ordinary shares at a deemed issue price of $0.50 (50 cents) per
share pursuant to a Share Subscription Agreement to purchase 7.3% of XinRay shares.
Note 31. Earnings per share
Loss after income tax attributable to the owners of Micro-X Ltd
(12,920)
(10,741)
2017
$'000
2016
$'000
Basic earnings per share
Diluted earnings per share
Cents
Cents
(10.44)
(10.44)
(16.75)
(16.75)
Number
Number
Weighted average number of ordinary shares used in calculating basic earnings per share
123,779,236 64,132,036
Weighted average number of ordinary shares used in calculating diluted earnings per share 123,779,236 64,132,036
Note 32. Share-based payments
Share based payments relate to Award Options as outlined in the company’s Prospectus dated 25 November 2015. These
options were issued to directors and nominated employees and consultants of the company.
45
Micro-X Ltd
Notes to the financial statements
For the year ended 30 June 2017
Note 32. Share-based payments (continued)
The general terms and conditions of the Award Options are:
- basis for issues of options:
- issues to Executive Directors (Peter Rowland and Richard Hannebery) - in accordance with respective
executive contracts with the Company;
- issues to Non-Executive Directors and other employees - to incentivise performance and further align
interests with shareholders;
- issues to consultants - award for contribution to product development of the DRX Revolution Nano;
- no amount was payable by the holders on the issues of the options;
- vesting arrangements:
- issues to Executive Directors:
- one third (Tranche 1) vested immediately upon IPO;
- one third (Tranche 2) vest on 1 September 2016, provided the holder remains employed by the
company on that date;
- one third (Tranche 3) vest on 1 September 2017, provided the holder remains employed by the
company on that date;
- issues to Non-Executive Directors and other employees:
- one third (Tranche 1) vest on 21 December 2016, provided the holder remains employed
by the company on that date;
- one third (Tranche 2) vest on 21 December 2017, provided the holder remains employed
by the company on that date;
- one third (Tranche 3) vest on 21 December 2018, provided the holder remains employed
by the company on that date;
- issues to consultants:
- one third (Tranche 1) vest on 21 December 2016;
- one third (Tranche 2) vest on 21 December 2017;
- one third (Tranche 3) vest on 21 December 2018;
- exercise prices:
- Tranche 1: $0.575 (57.5 cents) per option;
- Tranches 2 and 3: $0.625 (62.5 cents) per option;
- all of the above options expire on 31 December 2019;
46
Micro-X Ltd
Notes to the financial statements
For the year ended 30 June 2017
Note 32. Share-based payments (continued)
- issues to Non-Executive Directors (during the year):
- one half (Tranche 1) vest on 1 December 2018, provided the holder remains employed
by the company on that date;
- one half (Tranche 2) vest on 1 December 2019, provided the holder remains employed
by the company on that date;
- these options were agreed to be issued as part of the non-executive director agreement. Exercise
price will be the higher of $0.625 or in the event of a capital raising before the ratification of this grant
of options by the shareholders, a 25% premium to the share price at which the first such capital raising
immediately following the appointment takes place. The grant of the unlisted options is subject to shareholder
approval at the company’s 2017 Annual General Meeting.
- these options expire on 1 December 2020;
- issues to other employees (during the year):
- one third (Tranche 1) vest on 1 April 2018, provided the holder remains employed
by the company on that date;
- one third (Tranche 2) vest on 1 April 2019, provided the holder remains employed
by the company on that date;
- one third (Tranche 3) vest on 1 April 2020, provided the holder remains employed
by the company on that date;
- issues to consultants (during the year):
- one third (Tranche 1) vest on 1 April 2018;
- one third (Tranche 2) vest on 1 April 2019;
- one third (Tranche 3) vest on 1 April 2020;
- exercise prices to other employee and consultants issued during the year for Tranche 1, 2
and 3 is $0.625 (62.5 cents) per option
- these options expire on 1 April 2021;
- all options will be settled by issues of fully paid ordinary shares in the company.
During the year the share based payments expense recognise was $526K.
Set out below are the options outstanding at the end of the financial year (the options shown on the first and second lines
are those issued to the Executive Directors, and the options on the third and fourth lines are those issued to Non-Executive
Directors, other employees and consultants):
2017
Grant date
Expiry date
price
Exercise
Balance at
the start of
the year
Granted
Exercised
Expired/
forfeited/
other
Balance at
the end of
the year
01/09/2014
01/09/2014
21/12/2015
21/12/2015
05/12/2016
01/04/2017
31/12/2019
31/12/2019
31/12/2019
31/12/2019
01/12/2020
01/04/2021
$0.575
$0.625
$0.575
$0.625
$0.625
$0.625
1,393,112
2,786,228
2,050,000
4,100,000
-
-
10,329,340
-
-
-
-
320,000
2,500,000
2,820,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,393,112
2,786,228
2,050,000
4,100,000
320,000
2,500,000
13,149,340
Weighted average exercise price
$0.608
$0.612
$0.000
$0.000
$0.612
47
Micro-X Ltd
Notes to the financial statements
For the year ended 30 June 2017
Note 32. Share-based payments (continued)
2016
Grant date
Expiry date
price
Exercise
Balance at
the start of
the year
Granted
Exercised
Expired/
forfeited/
other
Balance at
the end of
the year
01/09/2014
01/09/2014
21/12/2015
21/12/2015
31/12/2019
31/12/1919
31/12/2019
31/12/2019
$0.575
$0.625
$0.575
$0.625
1,393,112
2,786,228
-
-
4,179,340
-
-
2,050,000
4,100,000
6,150,000
-
-
-
-
-
-
-
-
-
-
1,393,112
2,786,228
2,050,000
4,100,000
10,329,340
Set out below are the options exercisable at the end of the financial year:
Grant date
Expiry date
01/09/2014
01/09/2014
21/12/2015
31/12/2019
31/12/2019
31/12/2019
2017
Number
2016
Number
-
1,393,112
2,049,998
1,393,112
-
-
3,443,110
1,393,112
The weighted average remaining contractual life of options outstanding at the end of the financial year was 2.76 years
(2016: 3.27 years).
For the options granted during the current financial year, the Black-Scholes valuation model inputs used to determine the
fair value at the grant date, are as follows:
Grant date
Expiry date
Share price Exercise
at grant date
price
Expected
volatility
Dividend
Risk-free
Fair value
yield
interest rate at grant date
05/12/2017
01/04/2017
01/12/2020
01/04/2021
$0.500
$0.460
$0.625
$0.625
50.00%
50.18%
-
-
2.63%
2.63%
$0.142
$0.149
The fair values of the Award Options will be recognised as an expense by the company over the following periods:
- options issued to the Executive Directors: from 1 September 2014, being the commencement date of their
executive contracts with the company, to the respective vesting dates; and
- all other options: from grant dates in December 2015 and April 2017 to the respective vesting dates.
* these options were agreed to be issued as part of the non-executive director agreement. Exercise price will be the higher
of $0.625 or in the event of a capital raising before the ratification of this grant of options by the shareholders, a 25%
premium to the share price at which the first such capital raising immediately following the appointment takes place. The
grant of the unlisted options is subject to shareholder approval at the company’s 2017 Annual General Meeting.
48
Micro-X Ltd
Directors' declaration
For the year ended 30 June 2017
In the directors' opinion:
●
●
●
●
the attached financial statements and notes comply with the Corporations Act 2001, the Accounting Standards, the
Corporations Regulations 2001 and other mandatory professional reporting requirements;
the attached financial statements and notes comply with International Financial Reporting Standards as issued by the
International Accounting Standards Board as described in note 2 to the financial statements;
the attached financial statements and notes give a true and fair view of the company's financial position as at 30 June
2017 and of its performance for the financial year ended on that date; and
there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due
and payable.
The directors have been given the declarations required by section 295A of the Corporations Act 2001.
Signed in accordance with a resolution of directors made pursuant to section 295(5)(a) of the Corporations Act 2001.
On behalf of the directors
___________________________
Patrick O'Brien
Non-Executive Chairman
30 August 2017
49
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF MICRO-X LTD
Report on the audit of the financial report
The Rialto, Level 30
525 Collins St
Melbourne Victoria 3000
Correspondence to:
GPO Box 4376
Melbourne Victoria 3001
T +61 3 8320 2222
F +61 3 8320 2200
E info.vic@au.gt.com
W www.grantthornton.com.au
Opinion
We have audited the financial report of Micro-X Ltd (the Company), which comprises the statement
of financial position as at 30 June 2017, the statement of profit or loss and other comprehensive
income, statement of changes in equity and statement of cash flows for the year then ended, and
notes to the financial statements, including a summary of significant accounting policies, and the
directors’ declaration.
In our opinion, the accompanying financial report of Micro-X Ltd, is in accordance with the
Corporations Act 2001, including:
a Giving a true and fair view of the Company’s financial position as at 30 June 2017 and of its
performance for the year ended on that date; and
b Complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for Opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities
under those standards are further described in the Auditor’s Responsibilities for the Audit of the
Financial Report section of our report. We are independent of the Company in accordance with
the independence requirements of the Corporations Act 2001 and the ethical requirements of the
Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional
Accountants (the Code) that are relevant to our audit of the financial report in Australia. We have
also fulfilled our other ethical responsibilities in accordance with the Code.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a
basis for our opinion.
Material Uncertainty Related to Going Concern
We draw attention to Note 2 in the financial statements, which indicates that the Company incurred
a net loss of $12.92 million during the year ended 30 June 2017, with the net cash outflow from
operating and investing activities totalling $10.90 million. As stated in Note 2, these events or
conditions, along with other matters as set forth in Note 2, indicate that a material uncertainty
exists that may cast doubt on the Company’s ability to continue as a going concern. Our opinion is
not modified in respect of this matter.
Grant Thornton Audit Pty Ltd ACN 130 913 594
a subsidiary or related entity of Grant Thornton Australia Ltd ABN 41 127 556 389
‘Grant Thornton’ refers to the brand under which the Grant Thornton member firms provide assurance, tax and advisory services to their clients and/or refers to one or more member firms, as the
context requires. Grant Thornton Australia Ltd is a member firm of Grant Thornton International Ltd (GTIL). GTIL and the member firms are not a worldwide partnership. GTIL and each member firm
is a separate legal entity. Services are delivered by the member firms. GTIL does not provide services to clients. GTIL and its member firms are not agents of, and do not obligate one another and
are not liable for one another’s acts or omissions. In the Australian context only, the use of the term ‘Grant Thornton’ may refer to Grant Thornton Australia Limited ABN 41 127 556 389 and its
Australian subsidiaries and related entities. GTIL is not an Australian related entity to Grant Thornton Australia Limited.
Liability limited by a scheme approved under Professional Standards Legislation.
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance
in our audit of the financial report of the current period. These matters were addressed in the
context of our audit of the financial report as a whole, and in forming our opinion thereon, and we
do not provide a separate opinion on these matters.
In addition to the matter described in the Material Uncertainty Related to Going Concern section,
we have determined the matters described below to be the key audit matters to be communicated
in our report.
Key audit matter
How our audit addressed the key audit matter
Investment in associate – Note 2, 10 and 27
The Company owns an investment making up 30% of
its associate’s shares, totalling $8.765 million as at
30 June 2017. The investment in XinRay is required
to be measured in accordance with AASB 128
Investments in Associates and Joint Ventures.
The fair value of the Company’s investment is reliant
upon the fair value of the associate’s investment in a
joint venture. The process to measure this investment
is complex, and requires significant judgment from
management.
This area is a key audit matter due to the valuation
complexities of the investment being a significant
risk.
Intangible assets –Note 2, 3 and 12
The Company has capitalised an intangible asset
associated with the development of what will be its
flagship product, totalling $1.98 million as at 30 June
2017. The product is not yet at a position for
commercialisation to the market, and accordingly has
not yet begun its useful life.
There is significant judgment that is required of
management to develop assumptions for future profit
and loss information for the purpose of satisfying the
impairment considerations under AASB 136
Impairment of Assets by performing a discounted
cash flow analysis.
This area is a key audit matter due to the judgements
and estimates associated with the discounted cash
flow.
Our procedures included, amongst others, performing
the following:
•
reviewing the measurement of profits and losses
captured in the investment against the
requirements of AASB 128 including the
elimination of profit on related party sales;
• making enquiring of the XinRay statutory auditor
on procedures performed over significant balances
for the 31 December 2016 audit, as well as the
audit opinion issued;
• performing additional procedures beyond the 31
December 2016 statutory financial statements over
significant balances up to the reporting date;
• critically analysing the discounted cash flow
forecast prepared by management that addresses
AASB 136, which included:
-
-
-
-
-
testing the mathematical accuracy of the
model;
understanding the inputs and judgements in
the forecast, including obtaining available
evidence to support the key assumptions;
assessing the reasonableness of the
revenue and costs forecast against current
year actuals;
performing sensitivity analysis on the key
assumptions;
engaging our internal valuation expert to
evaluate the model; and
•
reviewing the adequacy of the disclosures in the
financial statements.
Our procedures included, amongst others, performing
the following:
•
obtaining management’s latest discounted cash
flow model and critically analysing against the
requirements of AASB 136, which included:
-
testing the mathematical accuracy of the
model;
understanding the inputs and judgements in
the forecast, including obtaining available
evidence to support the key assumptions;
assessing the reasonableness of the
revenue and costs forecast against current
year actuals;
performing sensitivity analysis on the key
assumptions;
engaging our internal valuation expert to
evaluate the model; and
-
-
-
-
•
reviewing the adequacy of the disclosures in the
financial statements.
Key audit matter
How our audit addressed the key audit matter
Research and Development incentive – Note 2
and 9
Under the research and development (R&D) tax
incentive scheme, the Company receives a 43.5%
refundable tax offset of eligible expenditure if its
turnover is less than $20 million per annum, provided
it is not controlled by income tax exempt entities. An
R&D plan is filed with AusIndustry in the following
financial year and, based on this filing; the Group
receives the incentive in cash.
Management have performed a detailed review of the
Company’s total R&D expenditure to determine the
potential claim under the R&D tax incentive
legislation. The receivable at year-end for the
incentive was $7.032 million. This represents an
estimated claim for the period 1 July 2016 to 30 June
2017.
We focused on the R&D tax incentive due to the size
of the receivable and because there is a degree of
judgement and interpretation of the R&D tax
legislation required by management to assess the
eligibility of the R&D expenditure under the scheme.
This area is a key audit matter due to recognition of
the R&D tax incentive being a risk.
Our procedures included, amongst others, performing
the following:
• enquiring with management to obtain and
document an understanding of the process to
estimate the claim;
• evaluating the competence, capabilities and
objectivity of management’s expert;
• utilising our internal R&D tax expert to consider the
nature of the expenses against the eligibility
criteria of the R&D tax incentive scheme to form a
view about whether the expenses included in the
estimate were likely to meet the eligibility criteria;
• comparing the nature of the R&D expenditure
included in the current year estimate to the prior
year claim;
• comparing the eligible expenditure used in the
receivable calculation to the expenditure recorded
in the general ledger;
• considering the Company’s history of successful
•
•
claims;
inspecting copies of relevant correspondence with
AusIndustry and the Australian Tax Office related
to the claims; and
reviewing relevant disclosures in the financial
statements.
Information Other than the Financial Report and Auditor’s Report Thereon
The Directors are responsible for the other information. The other information comprises the
information included in the Company’s annual report for the year ended 30 June 2017, but does
not include the financial report and our auditor’s report thereon. The annual report is expected to
be made available to us after the date of this auditor’s report.
Our opinion on the financial report does not cover the other information and we do not express any
form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial
report or our knowledge obtained in the audit or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this
other information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of the Directors’ for the Financial Report
The Directors of the Company are responsible for the preparation of the financial report that gives
a true and fair view in accordance with Australian Accounting Standards and the Corporations Act
2001 and for such internal control as the Directors determine is necessary to enable the
preparation of the financial report that gives a true and fair view and is free from material
misstatement, whether due to fraud or error.
In preparing the financial report, the Directors are responsible for assessing the Company’s ability
to continue as a going concern, disclosing, as applicable, matters related to going concern and
using the going concern basis of accounting unless the Directors either intend to liquidate the
Company or to cease operations, or have no realistic alternative but to do so.
Auditor’s Responsibilities for the Audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is
free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee
that an audit conducted in accordance with the Australian Auditing Standards will always detect a
material misstatement when it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they could reasonably be expected to
influence the economic decisions of users taken on the basis of this financial report.
A further description of our responsibilities for the audit of the financial report is located at the
Auditing and Assurance Standards Board website at:
http://www.auasb.gov.au/auditors_responsibilities/ar2.pdf. This description forms part of our
auditor’s report.
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 8 to 16 of the directors’ report for the
year ended 30 June 2017.
In our opinion, the Remuneration Report of Micro-X Ltd, for the year ended 30 June 2017,
complies with section 300A of the Corporations Act 2001.
Responsibilities
The Directors of the Company are responsible for the preparation and presentation of the
Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our
responsibility is to express an opinion on the Remuneration Report, based on our audit conducted
in accordance with Australian Auditing Standards.
GRANT THORNTON AUDIT PTY LTD
Chartered Accountants
M A Cunningham
Partner - Audit & Assurance
Melbourne, 30 August 2017
Micro-X Ltd
Shareholder information
For the year ended 30 June 2017
The shareholder information set out below was applicable as at 18 August 2017.
Distribution of equitable securities
Analysis of number of equitable security holders by size of holding:
Number
of holders
of options
Number
of holders
of ordinary ordinary
over
1 to 1,000
1,001 to 5,000
5,001 to 10,000
10,001 to 100,000
100,001 and over
Holding less than a marketable parcel
Equity security holders
Twenty largest equity security holders
The names of the twenty largest security holders of equity securities are listed below:
MR PETER ROBIN ROWLAND
CARESTREAM HEALTH INC
UBS NOMINEES PTY LTD
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED - A/C 2
HARMAN NOMINEES PTY LTD (HARMANIS INVESTMENT)
LONSDALE NOMINEES PTY LTD (THE LONSDALE FUND A/C)
NATIONAL NOMINEES LIMITED
HAMMOND ROYCE CORPORATION PTY LTD (LEN DAVID SUPER FUND A/C)
OBFT PTY LTD (O'BRIEN FAMILIES A/C)
XINTEK INC
WALES RIDING PTY LTD
MS ROBYN GOULD
MEDDISCOPE PTY LTD
BT PORTFOLIO SERVICES LIMITED (THE VABEN S/F A/C)
MR DAVID SYMONS
TITANIUM HOLDINGS (VIC) PTY LTD
BRONTE INVESTMENTS PTY LTD (MCMAHON SUPERANNUATION A/C)
BNP PARIBAS NOMS PTY LTD (DRP)
ANGLESEA INVESTMENTS PTY LIMITED (DAMIEN OBRIEN FAMILY A/C)
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
shares
shares
19
206
144
461
156
986
33
-
-
-
-
12
12
-
Ordinary shares
% of total
Number held
11,950,000
9,405,000
8,049,100
6,710,375
5,071,585
4,625,380
4,568,317
3,038,287
2,928,623
2,621,293
2,481,400
2,394,250
2,375,000
2,329,487
1,955,600
1,873,450
1,850,000
1,825,000
1,818,622
1,473,945
shares
issued
8.28
6.52
5.58
4.65
3.51
3.20
3.16
2.10
2.03
1.82
1.72
1.66
1.65
1.61
1.35
1.30
1.28
1.26
1.26
1.02
79,344,714
54.97
53
Micro-X Ltd
Shareholder information
For the year ended 30 June 2017
Unquoted equity securities
Shares - ASX Escrowed 24 months to 24 December 2017
Unquoted options - Award options issued to directors and employees
Number
on issue
Number
of holders
28,154,570
12,829,340
13
12
Substantial holders
Substantial holders in the company, as disclosed in substantial holding notices given to the company, are set out below:
Peter Robin Rowland and associates
Thorney Technologies and associates
Voting rights
The voting rights attached to ordinary shares are set out below:
Ordinary shares
% of total
Number held
shares
issued
12,425,000
8,856,760
8.61
6.14
Ordinary shares
On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each
share shall have one vote.
Shares subject to escrow (Restricted Securities)
Voting rights relating to shares subject to escrow are the same as for ordinary shares except that, during a breach of the
ASX Listing Rules relating to Shares which are Restricted Securities, or a breach of a restriction agreement, the holder of
the relevant Restricted Securities is not entitled to any voting rights in respect of those Restricted Securities.
Options
Options do not have voting rights attached.
There are no other classes of equity securities.
Restricted securities
Class
Expiry date
Fully paid ordinary shares: ASX escrowed
24 December 2017
Number
of shares
28,154,570
54