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AnnuAl RepoRt 2020
A B O U T
M I C R O - X
Micro-X Limited (ASX: MX1) is a technology
and product manufacturing company
focused on global medical and security
markets. We have developed world-leading,
proprietary technology for miniaturising
X-ray sources. Our technology has the
potential to revolutionise the use and
applications of X-ray imaging across the
world and will be used as the platform for
all Micro-X’s future product developments.
Micro-X’s first suite of X-ray products,
currently in production and in use in
14 countries around the world provides
mobile medical diagnostic imaging in
acute hospitals, clinics and in deployed
military medical facilities.
Micro-X is proudly an Australian company
with a state-of-the-art manufacturing
facility in Adelaide supported by a highly
skilled team of scientists, engineers,
technicians and management.
Contents
02 A new era in x-ray
04 World-class products in
growing markets
06 An innovative pipeline of products
08 World class manufacturing
10 FY2020 key achievements
11 FY2021 milestones
12 Chairman’s letter
14 CEO’s report
23 Financial statements
24 Directors’ report
IBC Corporate directory
the world has changed markedly this
year with the CoVID-19 pandemic —
a catalyst for much disruption to the
global economy and everyone’s lives.
For Micro-X as a producer of equipment
for diagnostic lung imaging, this health
crisis has accelerated our transition to
become a commercially successful and
recognised supplier of high-technology
medical devices.
this Annual Report highlights:
> How we achieved success in 2020
> How we will build and strengthen
our commercial position
> Why we are confident that we will
continue to create long term value
Micro-X Ltd
A N N U A L R E p O R T 2 0 2 0
A N E W E R A
I N X - R A Y
A world first
X-ray tubes really haven’t changed since Willhelm Röntgen X-rayed
his wife’s hand in 1895 – they all use a heated filament like the
old-fashioned incandescent light bulb, to generate electrons inside
a vacuum tube to create X-rays. The hotter the filament, the more
electrons you get and the more X-rays you get. And, like light bulbs,
the hot filament often breaks.
Micro-X was the first company to bring a medical product to
market using an X-ray tube with a cold electron source material,
simply controlled by a small voltage. This tube technology gives
Micro-X’s product designers a number of huge advantages over
using conventional technology tubes: much lower weight (great for
portable equipment); much smaller size (great for making equipment
smaller) and more energy efficient (great if you’re running off batteries).
But most importantly the precise and instantaneous electronic
control of X-ray generation opens up a world of new applications that
X-ray tubes can now do with new products that can be created.
5x
Smaller than a
traditional mobile X-ray
02
$10.6b
The global market for mobile
X-ray was estimated at US$5.4b
at the end of 2019 and forecast
to grow to US$10.6b by 2024
thinking
small is big
Our technology allows us to drive
the size of X-ray imaging equipment
smaller and smaller, offering
customers new ways and new
uses for X-ray imaging.
But the most exciting new applications
involve arrays of miniature X-ray
sources which can be electronically
switched in sequence to produce a
moving X-ray beam from stationary
components. Conventional CT
scanners rotate a giant X-ray tube
quickly in a gantry to scan patients
and Micro-X’s technology can do
this with no moving parts.
Our CNT emitter and X-ray
tube technology developed and
manufactured in Adelaide ushers
in a new era in X-ray.
03
500kg
Lighter than many mobile X-ray units
Micro-X Ltd
A N N U A L R E p O R T 2 0 2 0
W O R L D - C L A S S
p R O D U C T S I N
G R O W I N G M A R K E T S
Driven by international demand
N A N O
now operating in 14 countries
The Carestream DRX-Revolution Nano, known as ‘Nano’
is an ultra-lightweight, fully integrated digital mobile
X-ray for bedside imaging in hospital wards and intensive
care units. Bedside imaging was first introduced because
of the risks of moving an ICU patient on life support to a
radiology room, but its use has been growing steadily in
other areas of the hospitals with increasing efficiencies
in staff workflow from performing imaging on the wards.
The recent coronavirus pandemic has accelerated the
trend towards in-bed imaging due to the cross-infection
risks posed by moving even ambulatory patients around
a hospital.
The Nano was designed for high-intensity workflow such
as the daily early morning rush to get fresh radiology
available for Doctors’ ward rounds. The small size, ease
of manoeuvrability and positioning with many features
to speed the imaging procedure have generated much
admiration amongst users, one commenting “this unit
was obviously designed by radiographers”.
> Small & portable –
95kgs compared to
350 to 600kgs
> Approvals – FDA,
CE Mark and TGA
> Sold into global markets
~ 14 countries already
> Proven reliability
+ strong customer
feedback
04
$500m
Addressable global market and
approved for sale in 40 countries
R O V E R
purpose-designed for military deployed
hospitals and humanitarian aid
Hospital-grade medical imaging hasn’t been
available to the military for deployable facilities
because the limitations of the floor surface in tented
hospitals prevents the use of 350 – 600kg X-ray units.
Equipment originally designed for small-animal
veterinary applications is currently found in
most such deployed facilities and unsatisfactory
diagnostic imaging is commonly reported.
Rover now offers full diagnostic imaging capability
in a package around 95kg. The unit is ruggedised and
optimised for the high-intensity use associated with
mass casualty situations in difficult environments.
Specific features desired by military users include:
high ground clearance; battery operation with 10hr
endurance and swappable battery pack; increased
X-ray power for challenging trauma exams; lifting
handles and a reinforced belly for moving around
warships; and flexible image communication options.
$170m
Addressable global market
in NATO countries
> Originally developed
under a contract
from the Australian
Department of Defence
> Used in remote and
difficult conflict areas
and humanitarian
disasters
> Limited competition
> FDA Approval received
Addresses the
unmet need for a full
performance digital
mobile X-ray imager
in deployed facilities.
05
Micro-X Ltd
A N N U A L R E p O R T 2 0 2 0
A N I N N O V A T I V E
p I p E L I N E O F
p R O D U C T S
new products in early stage development
for security and new medical markets
B A C K S C A T T E R
I M A G I N G
Counter-terrorism X-ray bomb imager
carried by robots
Micro-X’s concept for this new, remote-viewing X-ray
imaging ‘camera’ designed to save bomb disposal
technicians lives was proven under a contract from
the Australian Department of Defence.
Many terrorist bombs or Improvised Explosive Devices,
are designed to be victim-initiated so the normal X-ray
assessment process is hazardous. This X-ray ‘camera’
can be carried by a robot and a high-resolution X-ray
image viewed remotely to guide make-safe disruption
by the technician.
> low competition and currently unaddressed market
$1.8b
Addressable global market
06
F U T U R E
A I R p O R T
C H E C K p O I N T
p O R T A L
the self-service checkpoint of the future
Based on the work Micro-X is already undertaking for
the UK Government’s Department for Transport, a blend
of backscatter and transmission X-ray provides three-
dimensional imaging of carry-on luggage which can be
used for automated threat detection. Micro-X’s unique
technology makes an X-ray unit small enough to be
integrated with a body-scanner and passport reader in
an access control gate for a fully automated checkpoint
requiring security staff only for alarm resolution.
> Concept reimagines the future of airport checkpoints
based on self-service model
07
T O M O
Affordable stroke diagnosis
in ambulances
Early diagnosis and pre-hospital treatment
of strokes has been shown to hugely improve
patient outcomes and reduce healthcare costs.
Micro-X’s ‘Ring Scanner’ aims to provide
comparable diagnostic images to a conventional
helical CT scan in a unit small enough and priced
to be fitted in every ambulance. The goal is for
the majority of stroke patients to be treated
within the ‘Golden Hour’. The unit is also light
enough to be deployed in fixed or rotary wing
air ambulances.
> potential to be a game
changer in modern day
stroke treatment
$25b
Addressable global market
Micro-X Ltd
A N N U A L R E p O R T 2 0 2 0
W O R L D C L A S S
M A N U F A C T U R I N G
Quality and efficiency learned
from the automotive industry
Micro-X’s state-of-the-art
advanced manufacturing facility
which now spans over 2,000m2 is
located in the award-winning South
Australian Tonsley Innovation District.
Established in 2015, the facility
houses design, production and
testing of Micro-X’s suite of products
and operates a quality management
system accredited to ISO 13485.
Micro-X has taken the world
leading principles of the automotive
industry such as lean manufacturing,
continuous improvement and
built-in quality and applied them
to medical device manufacturing.
Micro-X’s highly skilled production
operators are cross-trained
throughout multiple areas.
This allows us to react flexibly to
high demand with short notice.
The application of global best
practices along with our highly skilled
workforce has resulted in a lower
cost, high yield production line.
Micro-X is proud to have established
and will maintain Australian
manufacturing operations as the
core of our business to reduce
supply chain risk, maintain quality
and ensure the continual development
of optimal manufacturing processes.
Our goal is to have 95% of our supply
chain Australian.
expansion Features
> $4 million invested to meet
demand as a result of COVID-19
> Multiple production lines with
capacity to upscale further
> Flexible production lines
integrating Nano and Rover
so that customer demand
is easily met
> Engineering, production
and warehousing under
a single roof
0
Warranty claims since
production began
2 nanos
Production capacity a day
08
“ Micro-X is a founding
tonsley tenant and a
leading example of the
globally focused advanced
manufacturing industries
that South Australia
is attracting and
growing here.”
— philipp Dautel, tonsley precinct
Director for Renewal SA
09
Micro-X Ltd
A N N U A L R E p O R T 2 0 2 0
F Y 2 0 2 0 K E Y
A C H I E V E M E N T S
$3.8m
nano sales
In-sourcing
new proprietary
X-ray technology
14
Countries where
nano is operating
Rover uS FDA
submission
and clearance
2 nanos
Daily capacity
$30m
Balance sheet
strengthened
expansion
of tonsley facility
for future proofing
10
Strengthened
leadership and
Board expertise
F Y 2 0 2 1
M I L E S T O N E S
Increasing
sales to deliver on
CoVID-19 demand
Rover Sales
to other buyers
First Rover
commercial sales
to uS Military
High power generator
— complete and installed
Airport Security
operational imaging
prototype
Mobile
backscatter
imager
initial imaging
demonstration
Rover Mk II
new product with
increased performance
capability
11
Micro-X Ltd
A N N U A L R E p O R T 2 0 2 0
C H A I R M A N ’ S
L E T T E R
patrick o’Brien
this year has been one of important achievements for
Micro-X across the board, as we delivered our nano
mobile X-ray to customers around the world and have
underpinned our future with production expansion and
approval for sale of our second mobile X-ray product.
It is my great pleasure to report
on the significant commercial
and technical progress that
Micro-X has made during the
year. These developments stand us
in good stead as we work towards
creating substantial value for our
shareholders.
Since our founding in 2012 we have
remained convinced of the huge
opportunity that our next generation
technology offers in global medical
and security markets. The product
differentiation which our carbon
nanotube technology brings is unique
and we see increasingly frequent
global recognition of our leadership
position in this area. We have a clear
product roadmap and the
performance of our products,
now in service around the world,
shows that our design and
manufacturing teams have the
capability to deliver enviable quality.
capabilities, holding more inventory
to meet increased demand and
positioning ourselves to react to
shortened delivery times. We are
now far better placed to react to
further Nano sales opportunities.
Our most important achievement
this year was being able to rapidly
expand to deliver the increased
volumes of the Carestream DRX-
Revolution Nano required to support
medical communities around the
world as they fought the evolving
COVID-19 pandemic. We were
proactive in adjusting our strategy to
the rapid changes which occurred in
the market demand for mobile X-rays;
increasing production capacity and
The importance of our policy to
vertically integrate and maximise
local procurement also brought
benefits this year with the disruption
in supply chains and air freight
brought about by the pandemic.
After our success in 2019 in-sourcing
X-ray tube manufacture, this year
we commenced the engineering
design for an in-house high voltage
generator. Once fitted to both Nano
and Rover products in early 2021,
12
We have been proactive in
our approach to the rapidly
changing market for mobile
X-rays, adjusting our strategy
as required to meet the
evolving challenges.
this will bring our total Australian
manufactured content to over 95%
and further improve our margins.
Last September we were very
pleased to have the Premier of South
Australia, The Hon Steven Marshall
MP, officially open the expansion of
our Tonsley facility in Adelaide and
simultaneously to welcome a large
number of shareholders to our
Investor Open Day. This extra
space has been vital as we moved
to ramp up manufacturing, new
product development and testing.
In the immediate term, however,
our focus remains on sales and
commercial progress, capitalising
on the recent rapid expansion in
the global installed base of
Nano units. Receiving our US FDA
clearance for the Rover allows our
recently enlarged marketing and
sales team to move up a gear in
their pursuit of early sales of this
highly differentiated product.
In order to deliver on these goals,
we have strengthened our balance
sheet and our leadership team so
that we can drive future growth.
We appreciate the support of
investors, both longstanding and
new, who have provided us with
over $30 million in deployable funds
this year and the Company is now
well capitalised for the journey to
break-even. The expansion of our
board and expertise is an ongoing
process and this year we were very
pleased to have David Knox join us
as a non-executive director, with his
wealth of commercial experience
domestically and internationally.
Finally, I would like to thank our
strong management team led by
the Managing Director, Peter
Rowland, who continue to work
tirelessly to deliver for you, the
shareholders of Micro-X.
Patrick O’Brien
Chairman
13
Micro-X Ltd
A N N U A L R E p O R T 2 0 2 0
C E O ’ S
R E p O R T
peter Rowland
this year Micro-X has transformed into a true
commercial-stage company. With a strong balance
sheet and two products now commercial, we have
set our sights to capture the opportunity before us
and drive shareholder returns in 2021 and beyond.
14
I believe the stage has
been set for us to enjoy
an exceptional future.
transforming Micro-X into
a commercial success
I am very pleased to report on a
successful year for Micro-X, in
which we achieved many significant
strategic and tactical milestones
across our business. These included
the commercialisation of Nano moving
up a gear with increased production
and sales; first regulatory approval of
Rover; expansion of our Tonsley facility;
tripling of production throughput capacity;
in-sourcing of our own proprietary CNT
emitter and X-ray tube manufacturing
and ending an unhappy history with our
former supplier; a second development
contract from the UK Government
on airport checkpoint security; a
design start on in-sourcing our own
high-voltage generator; a major
technological advancement on our
counter-terrorism backscatter
imaging technology and a major
leap in proving motionless CT
imaging for stroke diagnosis.
I believe the stage has been set for
us to enjoy an exceptional future as
the scale of commercial value which
our technology can deliver through
novel products becomes evident.
For both Micro-X and the global
environment in which we operate,
the beginning and end of this last
financial year look so very different.
The year began with Nano sales
growing modestly for the first two
quarters. This all changed drastically
as the coronavirus pandemic spread
across continents and we began to
receive a surge of Nano orders.
As demand outstripped supply the
whole market for mobile radiography
changed almost overnight.
We changed strategy to capture as
much of this new market demand
as we could by rapidly ramping up
production and drastically reducing
delivery times.
We then raised capital to better
position ourselves to take advantage
of the market disruption as we
transitioned Micro-X from a
technology developer into a fully-
fledged commercial enterprise.
The year also saw the emergence
of our second commercial product,
the Rover, as we transitioned through
design completion and safety testing
early in the year to achieving FDA
approval in July 2020. The credibility
attaching to Rover’s genesis with
the Australian Army underpins our
sales strategy for close engagement
with related military users in the
United States and the armed forces
in other NATO countries. There is a
growing realisation also among the
military medical fraternity that now,
for the first time, hospital-grade
radiology that they have always
wanted is available in a deployable
size and weight.
In parallel with expanding
commercial activities this year
we made a design breakthrough
on our Mobile Backscatter Imager
for robotic imaging of potential IED
threats and we are also very excited
to see the imaging performance
results of our brain CT scanner,
designed for stroke diagnosis
in ambulances.
I am pleased therefore to present
a report on the progress made
throughout the year and on the future
plans and outlook for the Company.
15
Micro-X Ltd
A N N U A L R E p O R T 2 0 2 0
Building nano sales in a
global pandemic
During the year we were very proud
that our Australian-born technology,
the DRX-Revolution Nano, helped
play a small part in the global
fight against COVID-19. The rapid
development of this health crisis
meant that existing radiology assets
were quickly overwhelmed and
hospitals and health authorities were
issuing tenders for mobile X ray units,
looking for almost immediate delivery
times. Suppliers offering anything
beyond 4 weeks were excluded from
consideration, contrasting with the
normal hospital procurement cycle
which is often 90 days from first
demonstration to installation.
In many patients with COVID-19
infection, an inflammatory response
to the virus in the lungs causes a
build-up of fluid there which, like
pneumonia symptoms, can be easily
and rapidly seen as ‘ground glass’
on a chest X-ray. Thus patients
presenting at hospitals with any
breathing difficulties will be given
a chest X-ray which, long before
blood or saliva tests can confirm the
presence of the virus, will ascertain
if pulmonary infiltration is present
and severe enough to warrant either
admission or an ICU bed. Thereafter
chest X-rays are used daily to monitor
the progression of the disease.
The World Health Organisation
has recommended mobile units for
chest X-ray imaging since use of
fixed-room projection or CT X-ray
is not only unnecessary but also ties
up these valuable assets for the long
periods associated with disinfection
of such large equipment after each
procedure. The global surge in
patients in hospitals, intensive care
units and temporary COVID isolation
wards has led to a rapidly growing
need for bedside radiology and
improved isolation of contagious
patients from the rest of the hospital.
16
The feedback from Nano users
dealing with COVID-19 patients has
been very positive – with the small
size, efficient workflow, long battery
life and ease of infection-control
cleaning making it an ideal choice.
This surge in global demand began
in January, and Micro-X received
$3.8 million of Nano purchase
orders during the financial year
with $2.1 million of Nano units
built and shipped in the June 2020
quarter alone.
Our Nano is now operating in
14 countries worldwide and we were
also very proud that in April this
year, the first units were ordered
in quantity for Australian hospitals,
particularly in NSW. Australian
uptake was helped by strong product
endorsement from the radiology staff
at The Alfred Hospital in Melbourne
which not only acted as a reference
site for other Australian state
government agencies but came back
for additional purchases of units.
expanding production
capabilities and technology
developments
In-sourcing proprietary X-ray tube
technology
In a year of many achievements,
the completion in July 2019 of the
insourcing of our own, proprietary
carbon nanotube (CNT) emitter
technology, plus the establishment
of our own vacuum X-ray tube
design and manufacturing capability
is one that will help underpin
Micro X’s fundamental value and
ability to deliver unique X-ray
products for many years to come.
A two year, $3 million, ‘skunk works’
type project was initiated in 2017,
involving all elements of design,
process engineering, production,
validation and testing. With our own
team of talented physicists, chemical
engineering and nanomaterials
science experts, assisted by
Flinders and Adelaide Universities,
we developed a new proprietary
Micro-X CNT emitter. This emitter,
offering superior performance,
quality and reliability has been
fully validated in both testing and
high-volume production in our
Tonsley facility and will power
every future Micro-X product.
next stage manufacturing
expansion at tonsley
Last September we were pleased to
host the South Australian Premier,
The Hon Steven Marshall MP to
officially open the second stage of our
facility expansion at Tonsley. This was
combined with an Investor Open Day
where we hosted over 65 visitors to
meet Micro-X staff and showcase
our facilities and achievements.
The expansion which includes an
additional 700m2 of production and
office space provided us with the
ability to upscale our production
(fortuitously with the arrival only six
months later of the COVID-19 related
surge) as well as dedicated space
for development and test activities
for our upcoming product range.
Ramp up in response to CoVID-19
As the global demand for mobile
X-rays surged in February our
order book grew much more rapidly
than we had the parts or capacity
to deliver. We undertook major
investment in two areas: relieving
processing equipment bottlenecks
in our tube production facility and
having the parts, inventory and
labour to re-rate our delivery
capability to two Nano units a day.
I must pay special tribute to our
supply chain partners who responded
magnificently when asked and our
supply chain management team
who worked the phones tirelessly
around the clock, to source all these
components in far greater quantities
and then to find ways to get them
to Adelaide. The flexibility of our
manufacturing team was also a
highlight as they worked additional
shifts while simultaneously training
new assembly staff and partially-
building Nano carts which were
completed when the parts in
shortage were finally received.
This increase to meet sales demand
was one of the foundations for our
$15 million capital raising in the
second quarter, with $4 million
invested to scaling up production
and inventory levels. The investment
was highly successful and we
reduced our order backlog,
which peaked at over nine weeks,
to almost nothing.
With additional inventory on our
shelves, three parallel production
lines operating and improved
multi-shift operations, we believe
we are better placed to manage
whatever demand profile emerges
as the second wave of the pandemic
expands globally.
2020 saw first
local sales
into Australian
hospitals.
17
Micro-X Ltd
A N N U A L R E p O R T 2 0 2 0
Higher power development
Another key project initiated on the
back of our recent capital raising
was the implementation of a new
high-powered X-ray tube together
with matching upgraded generator
(high-voltage power supply) which
will be used for second generations
of both our Rover and Nano products.
Some years ago the Australian
Department of Defence contracted
us to demonstrate the feasibility of
extending the power of our X-ray
tube output beyond what is required
in a typical hospital bedside setting,
to include the more demanding
X-ray exams associated with
trauma imaging as one would expect
in a deployed military hospital.
The imaging tests were highly
successful but to implement this
new X-ray tube in our product we
needed to increase the capacity
of the high-voltage generator to
deliver this extra power to the tube.
The high-powered generator
programme now underway is budgeted
to cost $3.5 million and be completed
by early 2021 when the first production
units will be available for integration.
As well as increasing utility of our
products, having our in-house generator
will also give us greater control of the
supply chain, reduce cycle times and
further increase product margins.
Commercial launch of Rover
for military use
While the Nano is our initial product
for the medical bedside imaging
market, we are now poised to
commercially launch our follow on,
military grade, medical X-ray, the
Rover. This product allows us to move
on to our next growth stage focused
on specialist markets with higher
returns deriving from customer
applications where conventional
X-ray technology cannot compete.
Earlier in the year, partly as a
marketing initiative, we sought
additional ‘voice-of-customer’ input
to our design of Rover from a number
of military medical practitioners,
particularly during demonstrations
of the Rover to the US Joint Defense
Health Agency in Fort Detrick, near
Washington DC. This provided ideas
for a number of new design features
which we were able to incorporate
and which will increase the product’s
appeal to both Army and Navy users.
We finalised the design and
detector integration in February
2020, completed safety testing
and lodged our 510(k) submission
to the US FDA in May, our first
ever application with Micro-X as the
manufacturer-of-record. We were
very pleased to receive regulatory
clearance after only five weeks.
We plan to conduct sales of
Rover through our own direct
sales resources. Our sales team
and advisors in Washington DC are
now setting up the patient imaging
demonstrations which FDA approval
now permits, with a number of
operational Army and Navy units
across the USA. We anticipate this
direct sales channel will allow us
to showcase the product to its full
capabilities and give us greater
control of the sales process and
increased margins as a result of
not using distributors.
Apart from the US, our sales team
has also been actively targeting
the British Army in the UK and
plans to expand into other NATO
countries whose armed forces
have deployable hospitals.
18
We were very pleased
to receive FDA approval
in only 5 weeks.
Broadening our product range
Micro-X is the only company in the
world with mature and proven CNT
X-ray technology. Our strategy is to
find unique customer applications
in which our product solutions
have no competitors – we can then
be price makers not price takers.
Without distracting from the current
commercial priorities, Micro-X’s
R&D team are working on positioning
a number of early-stage projects
which will yield both medium and
long term future products with
attractive margins.
Bomb detection – the Mobile
Backscatter Imager
It was the Counter-IED Task Force
of the Australian Department of
Defence who first articulated to
us the need for an X-ray ‘camera’
which could be carried by a robot
and remotely image a potential
Improvised Explosive Device without
the need to place a separate detector
behind it – clearly hazardous for
bomb disposal technicians.
When we postulated how our CNT
technology could form an image in
this way, we received a $2.5 million
contract from the Department of
Defence to design and construct a
bench-top prototype to prove the
concept. This imaging trial to Defence
officials generated much excitement
as it showed we could resolve better
than half-millimetre objects and also
how explosive material becomes
highlighted in the backscatter image.
Micro-X has been advancing the
development of this product trying
to make it as small and lightweight
as possible to meet the operational
user’s needs.
During the year our R&D team
came up with an exciting new way
of producing the backscatter image.
Initial tests with immediately
available components indicate we
can achieve better resolution this
way in a much smaller and lighter
package. We believe this innovation
also has the potential to greatly
simplify and shorten the product
development and reduce complexity
and cost of the final product.
We are waiting for delivery of a
new bespoke detector to run more
definitive proving tests on this
concept in coming months.
We are excited to be on the brink
of such cutting edge technology and
aim to launch the product in 2022.
Mobile stroke diagnosis –
saving lives in the Golden Hour
When a stroke occurs the elapsed
time, before diagnosis of the
nature of the stroke is confirmed
by a CT scan in a hospital and
when treatment can begin, is a
critical determinant of patient
survival and the extent of possible
permanent disability.
Micro-X has been working with
the Melbourne Brain Centre of the
Royal Melbourne Hospital (RMH)
to determine if our CNT technology
could be used in a new lightweight
scanner with no moving parts
which could be small enough and
inexpensive enough to be fitted
to every ambulance to provide
diagnosis at the point-of-care.
Working closely with the RMH during
the year we used a mock-up of a
multi-beam CNT X-ray product using
cone-beam tomography to perform
successful cadaver imaging trials.
We also partnered with Johns
Hopkins University Hospital in
Maryland, USA to undertake further
image reconstruction algorithm
development which has helped us to
improve the contrast and resolution
of brain scans to the point where our
simple device now gives comparable
diagnostic images to a conventional,
large, helical CT scan.
Micro-X is a member of the Australian
Stroke Alliance which has submitted
a funding proposal to government.
If successful , Micro X will receive
funding in 2021 to develop a scanner
over two years which can then
be used in patient imaging trials.
Fujifilm in Tokyo has committed to
partner with us to produce a bespoke
curved detector for the scanner
and Johns Hopkins is also keen to
remain involved with this product
development which they see as
revolutionising stroke care globally.
19
Micro-X Ltd
A N N U A L R E p O R T 2 0 2 0
Future Aviation Security Solutions
In 2018 Micro-X completed a contract
for the UK Government’s Department
for Transport (DfT) aimed at finding
explosives hidden in electronic items.
In that work we showed how a
combination of normal transmission
X-ray and the backscatter X-ray
techniques developed for MBI gave
a powerful and compact solution to
airport checkpoint threat detection.
In 2019 the DfT awarded Micro-X a
follow-on contract for “Enhanced
Threat Detection” by upgrading the
earlier work to operate with three-
dimensional imaging. The UK’s DfT
is working very closely with the US
Government’s Transportation Safety
Administration on next generation
checkpoint security technology and
Micro-X’s CNT X-ray solution fits
uniquely with their joint vision for
un-manned ‘self service’ gateways
as an alternative to the choke point
of current X-ray security lanes.
20
Strengthening the
Micro-X team
As Micro-X continues its
planned evolution from technology
development into a commercial
business, we have recognised
the need to add to our team to
support this transition.
We were very pleased to welcome
David Knox to our Board of Directors,
and his commercial expertise
and strategic experience in
public markets has already been
much appreciated as we continue
to build on our technology platform
and expand our commercial activities
internationally. We also welcomed
Kingsley Hall as our new CFO and
Company Secretary after an
extensive Australia-wide search.
He has been a great addition to
our leadership team with extensive
experience in finance and operations.
Much of our recent recruitment has
been to build our sales and marketing
capabilities as we move from an OEM
sales model for our first product,
the Nano, where Carestream is
responsible for marketing and sales
activities, to one where we will be
doing that ourselves for subsequent
products. Tennille Reed joined our
Leadership Team as Head of Strategic
Marketing from a background with
an electronics product company
where she successfully built
sales and distribution channels
internationally as well as launching
the company’s business in Defence.
Alongside her, we have introduced
two product specialist sales roles
for Nano and Rover.
With this energetic new team now
in place we hope to continue to build
sales revenue strongly and set us
up strategically for the best paths
to market for our products.
our Future outlook is strong
Our business model is simple:
to grow strong cashflows by
manufacturing products for global
medical and security markets
– profitable because they are
differentiated by our unique,
proprietary technology. We aim to
become a trusted brand for world-
class product function and quality.
Our corporate goal is to become
an ASX 300 company by 2022.
Already we have the technology,
a team of amazing and committed
people, the facilities, the design and
manufacturing capabilities and the
products in place to do this. Our focus
now, at this pivotal point in the
Company’s evolution, is on execution.
In this coming year our priorities are:
> Increasing sales of Nano with
immediate delivery readiness
to respond to any further
pandemic driven procurement
> Initiating first sales of Rover
> Delivering the new
high-powered generator
and X-ray tube for Rover
> Successful imaging tests of
the MBI
> Raising the Micro-X profile with
new branding and marketing
> Achieving compliance with the
EU Medical Device Regulation
Thank you for your ongoing interest
and support for the Company. We look
forward to engaging with you on our
quarterly investor calls to update you
with progress during this exciting
year ahead.
Peter Rowland
Managing Director
over the year we have made
immense strides and we plan
to maintain this momentum
as we grow towards
becoming an ASX 300
company by 2022.
21
Micro-X Ltd
A N N U A L R E p O R T 2 0 2 0
22
F I N A N C I A L
S T A T E M E N T S
Micro-X Ltd
ABN 21 153 273 735
for the year ended 30 June 2020
24 Directors’ report
39 Auditor’s independence
45 Notes to the consolidated
financial statements
declaration
78 Directors’ declaration
40 Statement of profit or loss and
79
other comprehensive income
Independent auditor’s report to
the members of Micro-X Ltd
41
Statement of financial position
83 Shareholder information
42 Consolidated statement
of changes in equity
44 Consolidated statement
of cash flows
IBC Corporate directory
23
Micro-X Ltd
A N N U A L R E p O R T 2 0 2 0
Micro-X Ltd
Directors' report
For the year ended 30 June 2020
The directors present their report, together with the financial statements, on the consolidated entity (referred to hereafter as
the 'Group') consisting of Micro-X Ltd (referred to hereafter as the 'Company' or 'parent entity') and the entities it controlled
at the end of, or during, the year ended 30 June 2020.
Directors
The names of the Directors in office at any time during or since the end of the year are:
Peter Rowland (Managing Director)
Patrick O'Brien (Non-Executive Chairman)
Alexander Gosling (Non-Executive Director)
Yasmin King (Non-Executive Director)
David Knox (Non-Executive Director) - Appointed 7 April 2020
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.
24
3
Micro-X Ltd
Directors' report
For the year ended 30 June 2020
Review of operations
Micro-X Limited and its wholly owned subsidiary (Micro-X or the Group) had three core areas of focus in the 2020 financial
year (the Financial Year):
Expanding product revenues and commercialisation activities, including:
o building sales of the CARESTREAM DRX-Revolution Nano; and
o obtaining regulatory approval to commence selling the Rover Mobile X-ray for military use;
Expanding manufacturing capacity, infrastructure and technology in-sourcing to support commercial activities; and
Advancing future product development of the Mobile Backscatter Imager and Brain Tomography products.
Commercialisation – CARESTREAM DRX-Revolution Nano
Micro-X greatly increased widespread distribution of the Nano into 14 countries over the Financial Year including the first
sales into Australian hospitals. Overall, Nano related Sales Revenues for the Financial Year grew to a total of $3.8 million
(2019: $1.9 million).
The COVID-19 pandemic saw international demand for mobile X-ray units surge in the second half of the Financial Year. This
in turn saw demand for the Nano increase as a result of its enhanced mobility and ease of use – both key factors in enabling
maximum throughput in the COVID-19 environment.
In order to meet demand, Micro-X materially increased it production capacity and strengthened its supply chain management
and remains well positioned to take advantage of additional demand for the Nano.
All Nanos sold during the Financial Year included Micro-X’s own manufactured CNT (carbon nano tube) emitter and X-ray
tube which was insourced in 1Q FY2020. With significant increase in Nano units sold and in use throughout the world, it is
pleasing to note that service calls and warranty claims remained very low throughout the Financial Year.
Completion of development of Rover Mobile X-ray
Micro-X completed the final steps to commence commercialisation of its second product, the Rover Mobile X-ray. This
occurred with receipt of United States Food and Drug Administration or FDA, 510(k) regulatory approval for the Rover in July
2020. The development of the Rover has been driven by strong interest from both the US and Australian military and Micro-
X remains in commercial discussions with both governments’ military agencies.
The Rover addresses a niche market in the military hospital market and represents an opportunity for increased revenues at
higher margins. A development programme has also commenced for a high power generator which will be integrated as a
product enhancement in the next generation of the Rover from 3Q FY2021.
Operations and Manufacturing
During the Financial Year, Micro-X increased the size of its premises to accommodate increased production requirements
associated with the Nano and Rover, together with development needs for the MBI (Mobile Backscatter Imager) project.
The completion of the insourced CNT emitter tube project in 1Q FY2020 delivered greater product margins, together with an
increased ability to meet short term demand through improvements to both product quality and cycle time. In 4Q FY2020,
Micro-X commenced a significant ramp up in production capacity of Nano, enabling it to reduce delivery times considerably
as demand increased in response to COVID-19.
Throughout the pandemic, Micro-X has adapted its workforce and WHS arrangements to comply with government health
and travel restrictions. While there were some supply chain delays, arrangements have been put in place to manage
disruption. International and interstate travel to meet with potential partners and attend conferences has been impacted.
Future Products in Development
During the Financial Year, Micro-X continued to progress the MBI, targeted to worldwide security markets for assessment of
Improvised Explosive Devices (IEDs). This work has focussed on the development of a new imaging design which has the
potential to simplify product development for the MBI and reduce the cost and complexity of the product. Micro-X expects to
undertake bench testing of the MBI in 1H FY2021.
Additionally, Micro-X is building its future product portfolio for stroke detection. In June 2020, Micro-X progressed to Phase
Two of the Australian Stroke Alliance consortium’s “Golden Hour” programme run by the Australian Government’s Medical
Research Future Fund. Micro-X’s component of the submission is for $14.6 million of funding for the development and
testing of lightweight, mobile stroke diagnostic imaging technology, incorporating Micro-X’s proprietary CNT X-ray tube
technology.
4
25
Micro-X Ltd
A N N U A L R E p O R T 2 0 2 0
Micro-X Ltd
Directors' report
For the year ended 30 June 2020
Financial Overview
The net loss for the Group for the Financial Year after providing for income tax was $10.07 million, compared with a loss in
the previous year of $9.83 million. This net loss for the Financial Year included:
$3.8 million from the sales of the Nano;
$3.3 million of Other Income, including $1.2 million from the Advanced Manufacturing Growth Fund and $2.0 million in
R&D tax refund;
$3.6 million in Cost of Sales;
$2.5 million in expenditure on research and development activity, related to development work on emitter and tube
technology, commercialisation of the Rover product, and research and development related on the MBI; and
$6.4 million spent on employee, consulting and director costs. This represented a $1.3 million increase on the prior
period, driven by additional engineering and development personnel.
Financial Position
During the Financial Year, the Group raised funds including:
$31.50 million via two separate capital raising transactions, being a $16.5 million private placement in November and
December 2019, and then a $15.0 million raise in 2020, consisting of $8.75 million placement in April 2020 and a $6.25M
fully underwritten rights issue completed in May 2020;
$5 million via a convertible loan security from Thales AVS SAS.
Net assets of the Group increased by $17.9 million from $(3.0) million at 30 June 2019 to $14.9 million at 30 June 2020. Cash
on hand and at the bank increased to $18.3 million at 30 June 2020 ($1.6 million at 30 June 2019).
Significant changes in the state of affairs
There were no significant changes in the state of affairs of the Group during the financial year.
Matters subsequent to the end of the financial year
On 18 July 2020, Micro-X received 510(k) approval from the FDA for its Rover mobile X-ray product, a Class 2 medical
device.
No other matter or circumstance has arisen since 30 June 2020 that has significantly affected, or may significantly affect the
Group's operations, the results of those operations, or the Group's state of affairs in future financial years.
Likely developments and expected results of operations
The Group’s main focus moving forward is the commercialisation and growing sales revenues of its two current products,
the Nano and the Rover. Nano revenues will be derived through the appointed distributor and Rover sales will be driven by
a direct sales channel with military procurement agencies. There will be an emphasis on maximising gross margins on both
of these products through cost down and re-engineering initiatives.
Environmental regulation
The Group is not subject to any significant environmental regulation under Australian Commonwealth or State law.
26
5
Micro-X Ltd
Directors' report
For the year ended 30 June 2020
Information on directors
Name:
Title:
Qualifications:
Experience and expertise:
Patrick O’Brien
Non-Executive Chairman
LLB, B.Com, Grad Dip Applied Finance, MBA, GAICD
Patrick is managing director of Patrick O’Brien & Associates, chairman of Howjack
Holdings and a director of The Water & Carbon Group and O’Brien Capital. Patrick has
over 30 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 People and Remuneration Committee and Member of Audit and Risk
Committee
7,766,109 fully paid ordinary shares
Nil
Interests in shares:
Interests in options:
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.
Nil
Other current directorships:
Former directorships (last 3 years): Nil
Interests in shares:
Interests in options:
12,955,000 fully paid ordinary shares
Nil
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 50 years. He was 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 in
the area of technology commercialisation, advising universities, mentoring start-ups
and sitting on the Boards of early stage companies. Alexander is an engineer, with an
Honours degree from Cambridge University. He is a Fellow of the Academy of
Technology 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. He is a Member of the Australian
Institute of Company Directors.
Nil
Other current directorships:
Former directorships (last 3 years): Nil
Special responsibilities:
Chairperson of People and Remuneration Committee and Member of Audit and Risk
Committee
456,429 fully paid ordinary shares
Nil
Interests in shares:
Interests in options:
6
27
Micro-X Ltd
A N N U A L R E p O R T 2 0 2 0
Micro-X Ltd
Directors' report
For the year ended 30 June 2020
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 a director of Australian Health Care and Hospitals
Association and a member of the Adjunct Faculty 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.
Nil
Other current directorships:
Former directorships (last 3 years): Nil
Special responsibilities:
Member of People and Remuneration Committee and Chairperson of Audit and Risk
Committee
63,394 fully paid ordinary shares
320,000 Unlisted Options exercisable at $0.625 (62.5 cents) on or before 01/12/20
Interests in shares:
Interests in options:
Name:
Title:
Qualifications:
Experience and expertise:
David Knox
Non-Executive Director
BSc (Hons) Mechanical Engineering. MBA
David is a highly experienced and respected business leader with senior leadership,
engineering and public markets expertise gained in multi-national, domestic and
Commonwealth companies. David was MD and CEO of Australian Naval Infrastructure,
a Government Business Enterprise responsible for the delivery of naval infrastructure
required to support the Commonwealth’s continuous shipbuilding programme,
including the $535m Osborne South Shipyard. David was previously MD & CEO of
Santos from March 2008 through until his retirement in December 2015.
David is currently Chair of Snowy Hydro Limited and The Australian Centre for Social
Innovation (TACSI). He is also a board member of Commonwealth Scientific and
Industrial Research Organisation (CSIRO), Redflow Limited, Migration Council of
Australia, Adelaide Festival (AF) and the Royal Institution of Australia (RiAUS), is
originally from Edinburgh, Scotland and has a BSc (Hons) in Mechanical Engineering
(Edinburgh) and an MBA (Strathclyde). He is a Fellow of the Australian Institute of
Mechanical Engineering and the Australian Academy of Technological Sciences and
Engineering.
Redflow Ltd - 2 March 2017 to Present
Other current directorships:
Former directorships (last 3 years): Nil
Special responsibilities:
Interests in shares:
Interests in options:
Member of Audit and Risk Committee
250,000 fully paid ordinary shares
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.
28
7
Micro-X Ltd
Directors' report
For the year ended 30 June 2020
Company Secretary
Kingsley Hall is a member of the Institute of Chartered Accountants and a holds a Bachelor of Economics. Kingsley has over
25 years of experience in finance and operations with a diverse background across both private and public companies,
private equity, media, tourism and education. Kingsley is the Chief Financial Officer for Micro-X.
Kingsley Hall was appointed on 24 February 2020. Georgina Carpendale resigned on 29 May 2020.
Meetings of directors
The number of meetings of the Group's Board of Directors ('the Board') and of each Board committee held during the year
ended 30 June 2020, and the number of meetings attended by each director were:
Full Board
People and Remuneration
Committee
Audit and Risk Committee
Attended
Held
Attended
Held
Attended
Held
Patrick O'Brien
Peter Rowland
Alexander Gosling
Yasmin King
David Knox
15
15
15
15
5
15
15
15
15
5
3
-
3
3
-
3
-
3
3
-
7
-
7
7
2
7
-
7
7
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 Group, 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 Group'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 People 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
People and Remuneration Committee has structured an executive remuneration framework that is market competitive and
complementary to the reward strategy of the Group.
8
29
Micro-X Ltd
A N N U A L R E p O R T 2 0 2 0
Micro-X Ltd
Directors' report
For the year ended 30 June 2020
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
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 People and Remuneration Committee. The People 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 Group's Prospectus dated 25 November 2015, on
17 December 2015, following the completion of the Group's Initial Public Offer. Apart from the Award Options, Non-executive
directors present from the Initial Public Offer do not receive share options or other incentives. New non-executive directors
since this period may be offered share options upon their appointment.
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 Group's ASX listing,
where the shareholders approved the Group's Constitution which provides for an aggregate maximum remuneration of
$300,000 per annum.
Executive remuneration
The Group 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, is reviewed annually by the
People and Remuneration Committee based on individual and business unit performance, the overall performance of the
Group and comparable market remuneration.
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 Group and provides additional value to the executive.
30
9
Micro-X Ltd
Directors' report
For the year ended 30 June 2020
Company performance and link to remuneration
Remuneration of key management personnel is not currently directly linked to the performance of the Group other than via
Award Options the value of which is linked to its share price. The Group is investigating an appropriate mechanism for such
linkage.
Use of remuneration consultants
The Group did not engage any remuneration consultants in relation to remuneration paid or derived during the financial year
ended 30 June 2020.
Details of remuneration
Amounts of remuneration
Details of the remuneration of key management personnel of the Group are set out in the following tables.
The key management personnel of the Group consisted of the following directors and management of the Group:
●
●
●
●
●
●
●
●
●
●
Patrick O'Brien (Non-Executive Chairman)
Peter Rowland (Managing Director)
Alexander Gosling (Non-Executive Director)
Yasmin King (Non-Executive Director)
David Knox (Non-Executive Director)
Kingsley Hall (Company Secretary & Chief Financial Officer)
Georgina Carpendale (Company Secretary & Chief Financial Officer) - Resigned 29 May 2020
Brian Gonzales - Key Management Personnel responsibilities began 1 July 2019
Anthony Skeats - Key Management Personnel responsibilities began 1 July 2019
Alexander Blackburn - Key Management Personnel responsibilities began 1 July 2019
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
$
77,500
50,228
53,265
14,155
-
-
-
-
-
-
-
-
-
4,772
1,735
1,345
291,110
28,097
-
30,325
192,449
81,731
220,162
244,662
167,329
1,392,591
-
-
-
-
-
28,097
-
-
-
-
-
-
16,689
7,764
22,373
23,789
16,577
125,369
-
-
-
-
-
-
-
-
-
-
-
-
-
6,976
-
77,500
55,000
61,976
15,500
-
349,532
-
-
-
-
-
209,138
89,495
242,535
268,451
183,906
6,976 1,553,033
2020
Non-Executive Directors:
P O'Brien
A Gosling
Y King
D Knox*
Executive Directors:
P Rowland
Other Key Management
Personnel:
G Carpendale**
K Hall***
B Gonzales****
A Skeats*****
A Blackburn*****
10
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Micro-X Ltd
A N N U A L R E p O R T 2 0 2 0
Micro-X Ltd
Directors' report
For the year ended 30 June 2020
*
**
Mr Knox was appointed as Non-Executive Director on 7 April 2020.
Ms Carpendale resigned as Company Secretary on 29 May 2020. Short term salary & fees includes $24,779 paid
in lieu of unused Annual Leave.
*** Mr Hall was appointed as Chief Financial Officer on 24 February 2020.
****
Joined Key Management Personnel on 1 July 2019. Mr Gonzales is employed by MX Inc. His remuneration and
compulsory benefits have been translated to AUD for the purpose of this report.
***** Joined Key Management Personnel on 1 July 2019.
During the financial year a bonus was paid to Peter Rowland (Managing Director) upon meeting set key performance
indicators (‘KPI’). This bonus was approved by the Board of Directors following a recommendation from the People &
Remuneration Committee on 10 December 2019. Mr Rowland was granted a bonus for the 2018 and 2019 financial years
representing 20% of his bonus entitlement for each year.
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
36,529
15,000
36,529
6,088
277,500
253,333
168,000
852,979
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
3,470
-
3,470
578
26,363
-
15,200
49,081
-
-
-
-
-
-
-
-
-
4,353
2,902
(53,867)
10,808
(13,504)
64,353
42,901
(38,867)
50,807
(6,838)
-
-
303,863
253,333
-
(49,308)
183,200
852,752
2019
Non-Executive Directors:
P O'Brien
A Gosling
D Symons*
Y King
J McDowell**
Executive Directors:
P Rowland
R Hannebery***
Other Key Management
Personnel:
G Carpendale
*
**
Mr Symons resigned as Non-Executive Director on 21 November 2018. Share-based payment movement based on
expiry of options upon 6 month anniversary of resignation.
Mr McDowell resigned as Non-Executive Director on 31 August 2018. Share-based payment movement based on expiry
of options upon 6 month anniversary of resignation.
*** Mr Hannebery resigned as Executive Director on 15 April 2019. Included in the cash salary amount is $220k for work
performed in an Executive Director capacity.
32
11
Micro-X Ltd
Directors' report
For the year ended 30 June 2020
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
J McDowell*
Executive Directors:
P Rowland
R Hannebery*
Other Key Management
Personnel:
G Carpendale**
Kingsley Hall
B Gonzales***
A Skeats***
A Blackburn***
Fixed remuneration
2019
2020
At risk - STI
At risk - LTI
2020
2019
2020
2019
100%
100%
-
89%
-
92%
-
100%
100%
100%
100%
100%
93%
93%
100%
79%
100%
100%
100%
100%
-
-
-
-
-
-
-
-
-
8%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
11%
-
7%
7%
-
21%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
*
Mr Symons, Mr McDowell (Non-Executive Directors) and Mr Hannebery (Executive Director) resigned during the year
ended 30 June 2019. Share-based payment movement based on expiry of options upon 6 month anniversary of
resignation and is not shown above.
Ms Carpendale resigned as Company Secretary on 29 May 2020.
**
*** Joined Key Management Personnel on 1 July 2019.
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 6 months’ notice.
Annual salary
contributions (subject to annual review).
is $291,548 per annum plus 9.5% employer superannuation
Mr Rowland is entitled to an incentive payment of:
• either 50% of his salary where all KPIs set by the Group are achieved, or
• a relative percentage of his salary where one or more but not all KPIs are achieved.
12
33
Micro-X Ltd
A N N U A L R E p O R T 2 0 2 0
Micro-X Ltd
Directors' report
For the year ended 30 June 2020
Name:
Title:
Agreement commenced:
Term of agreement:
Details:
Kingsley Hall
Chief Financial Officer
24 February 2020
No fixed term. Micro-X or Mr Hall may terminate the employment contract at any time
provide that either party gives notice as follows:
• on or before 24 February 2022 – 1 months’ notice; and
• on or before 24 February 2024 – 2 months’ notice.
Annual salary
contributions (subject to annual review).
is $250,000 per annum plus 9.5% employer superannuation
Mr Hall is entitled to an incentive payment of:
• either 40% of his salary where all KPIs set by the Group are achieved, or
• a relative percentage of his salary where one or more but not all KPIs are achieved.
Name:
Title:
Agreement commenced:
Term of agreement:
Details:
Brian Gonzales
Chief Scientist
1 January 2018
No fixed term. Micro-X or Mr Gonzales may terminate the employment contract at any
time provided that either party gives 4 weeks' notice.
Annual salary is $147,290 USD per annum plus compulsory benefits.
Mr Gonzales is entitled to an incentive payment of:
• either 35% of his salary where all KPIs set by the Group are achieved, or
• a relative percentage of his salary where one or more but not all KPIs are achieved.
Name:
Title:
Agreement commenced:
Term of agreement:
Details:
Anthony Skeats
Engineering Manager
8 June 2017
No fixed term. Micro-X or Mr Skeats may terminate the employment contract at any
time provided that either party gives 2 months' notice.
Annual salary
contributions (subject to annual review).
is $248,745 per annum plus 9.5% employer superannuation
Mr Skeats is entitled to an incentive payment of:
• either 35% of his salary where all KPIs set by the Group are achieved, or
• a relative percentage of his salary where one or more but not all KPIs are achieved.
Name:
Title:
Agreement commenced:
Term of agreement:
Details:
Alexander Blackburn
Programs Manager
1 September 2015
No fixed term. Micro-X or Mr Blackburn may terminate the employment contract at any
time provided either party gives 2 months' notice.
Annual salary
contributions (subject to annual review).
is $169,950 per annum plus 9.5% employer superannuation
Mr Blackburn is entitled to an incentive payment of:
• either 30% of his salary where all KPIs set by the Group are achieved, or
• a relative percentage of his salary where one or more but not all KPIs are achieved.
Key management personnel have no entitlement to termination payments in the event of removal for misconduct.
34
13
Micro-X Ltd
Directors' report
For the year ended 30 June 2020
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 2020.
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 September 2014*
1 September 2014*
21 December 2015*
21 December 2015*
21 December 2015*
5 December 2016**
5 December 2016**
1 April 2017***
1 April 2017***
1 April 2017***
Vesting date and
exercisable date
21 December 2015
1 September 2016
1 September 2017
21 December 2016
21 December 2017
21 December 2018
1 December 2018
1 December 2019
1 April 2018
1 April 2019
1 April 2020
Expiry date
Exercise price at grant date
Fair value
per option
31 December 2019
31 December 2019
31 December 2019
31 December 2019
31 December 2019
31 December 2019
1 December 2020
1 December 2020
1 April 2021
1 April 2021
1 April 2021
$0.575
$0.625
$0.625
$0.575
$0.625
$0.625
$0.625
$0.625
$0.625
$0.625
$0.625
$0.151
$0.136
$0.136
$0.151
$0.136
$0.136
$0.142
$0.142
$0.149
$0.149
$0.149
*
**
Expired 31 December 2019.
These options were agreed to be issued on 5th December 2016 as part of the non-executive director agreement with
Yasmin King.
*** These options were agreed to be issued on 1st April 2017 as part of the employment agreement with Brian Gonzales
Options granted carry no dividend or voting rights.
The number of options over ordinary shares granted to and vested to directors and other key management personnel as part
of compensation during the year ended 30 June 2020 are set out below:
Name
P O'Brien
A Gosling
D Symons
Y King
B Gonzales*
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
2020
year
2019
year
2020
year
2019
-
-
-
-
-
-
-
-
-
-
-
-
-
160,000
416,667
200,000
133,334
133,334
160,000
-
*Joined Key Management Personnel on 1 July 2019. Amounts have only been disclosed in relation to the year ended 30
June 2020.
No amount was paid or payable by the recipients for these options.
All service criteria in relation to the vesting of options have been met.
The granting and vesting of the options is not dependent upon the satisfaction of a performance condition as the Group is of
the view that the service criteria, and the contribution by the recipient to the increase in the Group's share price, and therefore
the value of their options, is currently a sufficient basis for the granting and vesting of those options.
14
35
Micro-X Ltd
A N N U A L R E p O R T 2 0 2 0
Micro-X Ltd
Directors' report
For the year ended 30 June 2020
Additional disclosures relating to key management personnel
Shareholding
The number of shares in the Group held during the financial year by each director and other members of key management
personnel of the Group, 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
P O'Brien
A Gosling
Y King
G Carpendale*
D Knox
A Blackburn**
12,425,000
4,625,380
110,000
50,000
19,000
-
-
17,229,380
-
-
-
-
-
-
-
-
530,000
3,140,729
346,429
13,394
-
250,000
2,500
4,283,052
- 12,955,000
7,766,109
-
456,429
-
63,394
-
-
(19,000)
250,000
-
14,000
16,500
(5,000) 21,507,432
*
**
'Disposals/ Other' is to recognise resignation of Ms Carpendale on 29 May 2020 and hence removal of shareholding
from disclosure as at 30 June 2020.
A Blackburn joined Key Management Personnel 1 July 2019. 'Disposals/Other' denotes balance held prior to joining
Key Management Personnel.
Option holding
The number of options over ordinary shares in the Group held during the financial year by each director and other members
of key management personnel of the Group, including their personally related parties, is set out below:
Options over ordinary shares
P Rowland*
P O'Brien*
A Gosling*
Y King
B Gonzales**
Balance at
the start of Granted as
the year
remuneration Exercised
Expired/
forfeited/
other
Balance at
the end of
the year
2,089,670
600,000
400,000
320,000
-
3,409,670
-
-
-
-
-
-
-
-
-
-
-
-
(2,089,670)
(600,000)
(400,000)
-
1,250,000
(1,839,670)
-
-
-
320,000
1,250,000
1,570,000
*
**
Cancellation shown is to recognise expiry of unlisted options.
B Gonzales joined Key Management Personnel 1 July 2019. 'Expired/Forfeited/Other' denotes balance held prior to
joining Key Management Personnel.
In a prior period, the Group completed a successful private placement of 50,000 Unsecured Mandatorily Convertible Notes
for $5,000,000. Each of the directors of the Group participated in this capital raising; in aggregate subscribing for $450,000.
The number of Convertible Notes purchased and still held by each director as at balance date, is set out below:
P. Rowland - 200 Unlisted Convertible Notes for $20,000;
P. O'Brien* - Nil held as at the reporting date;
A. Gosling* - Nil held as at the reporting date;
Y. King - 500 Unlisted Convertible Notes for $50,000;
* Convertible notes redeemed as part of capital raise on 19 December 2019. Nil held as at the reporting date.
This concludes the remuneration report, which has been audited.
36
15
Micro-X Ltd
Directors' report
For the year ended 30 June 2020
Shares under option
Unissued ordinary shares of Micro-X Ltd under option at the date of this report are as follows:
Grant date
5 December 2016
1 April 2017
Expiry date
1 December 2020
1 April 2021
Exercise
price
Number
under option
$0.625
$0.625
320,000
2,500,000
2,820,000
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
Group or of any other body corporate.
Shares issued on the exercise of options
There were no ordinary shares of Micro-X Ltd issued on the exercise of options during the year ended 30 June 2020 and up
to the date of this report.
Indemnity and insurance of officers
The Group has indemnified the directors and executives of the Group 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 Group paid a premium in respect of a contract to insure the directors and executives of the
Group 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 Group has not, during or since the end of the financial year, indemnified or agreed to indemnify the auditor of the Group
or any related entity against a liability incurred by the auditor.
During the financial year, the Group has not paid a premium in respect of a contract to insure the auditor of the Group or any
related entity.
Proceedings on behalf of the Group
No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf
of the Group, or to intervene in any proceedings to which the Group is a party for the purpose of taking responsibility on
behalf of the Group for all or 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 27 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.
The directors are of the opinion that the services as disclosed in note 27 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 Group, acting
as advocate for the Group or jointly sharing economic risks and rewards.
●
16
37
Micro-X Ltd
A N N U A L R E p O R T 2 0 2 0
Micro-X Ltd
Directors' report
For the year ended 30 June 2020
Officers of the Group who are former partners of Grant Thornton Audit Pty Ltd
There are no officers of the Group who are former partners of Grant Thornton Audit Pty Ltd.
Rounding of amounts
The Group 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
28 August 2020
38
17
Micro-X Ltd
Auditor's independence declaration
Level 3, 170 Frome Street
Adelaide SA 5000
Correspondence to:
GPO Box 1270
Adelaide SA 5001
T +61 8 8372 6666
Auditor’s Independence Declaration
To the Directors of Micro-X Limited
In accordance with the requirements of section 307C of the Corporations Act 2001, as lead auditor for the audit of Micro-X
Limited for the year ended 30 June 2020, 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.
[This page has intentionally been left blank for the insertion of the auditor's independence declaration]
GRANT THORNTON AUDIT PTY LTD
Chartered Accountants
B K Wundersitz
Partner – Audit & Assurance
Adelaide, 28 August 2020
Grant Thornton Audit Pty Ltd ACN 130 913 594
a subsidiary or related entity of Grant Thornton Australia Ltd ABN 41 127 556 389
18
www.grantthornton.com.au
‘Grant Thornton’ refers to the brand under which the Grant Thornton member firms provide assurance, tax and advisory services to their clients
and/or refers to one or more member firms, as the context requires. Grant Thornton Australia Ltd is a member firm of Grant Thornton International
Ltd (GTIL). GTIL and the member firms are not a worldwide partnership. GTIL and each member firm is a separate legal entity. Services are
delivered by the member firms. GTIL does not provide services to clients. GTIL and its member firms are not agents of, and do not obligate one
another and are not liable for one another’s acts or omissions. In the Australian context only, the use of the term ‘Grant Thornton’ may refer to
Grant Thornton Australia Limited ABN 41 127 556 389 and its Australian subsidiaries and related entities. GTIL is not an Australian related entity to
Grant Thornton Australia Limited.
Liability limited by a scheme approved under Professional Standards Legislation.
39
Micro-X Ltd
A N N U A L R E p O R T 2 0 2 0
Micro-X Ltd
Statement of profit or loss and other comprehensive income
For the year ended 30 June 2020
Revenue
Total revenue
Expenses
Loss on disposal of assets
Cost of sales
Employee and director costs
Office and administrative expenses
Professional fees
Corporate expenses
Quality and regulatory
Project development 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
6
7
8
Loss after income tax expense for the year attributable to the owners of Micro-
X Ltd
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
Note
Consolidated
2020
$'000
2019
$'000
5
4,251
1,931
4,251
1,931
(3)
(3,551)
(6,426)
(398)
(588)
(487)
(61)
(2,463)
(1,966)
(823)
(856)
(17,622)
(3)
(1,762)
(5,132)
(703)
(841)
(121)
(52)
(4,755)
(744)
(1,067)
(495)
(15,675)
(13,371)
(13,744)
3,304
-
4,141
(231)
(10,067)
(9,834)
-
-
(10,067)
(9,834)
-
-
132
132
(10,067)
(9,702)
Cents
Cents
Basic earnings per share
Diluted earnings per share
35
35
(4.35)
(4.35)
(6.63)
(6.63)
The above statement of profit or loss and other comprehensive income should be read in conjunction with the
accompanying notes
19
40
Micro-X Ltd
Statement of financial position
As at 30 June 2020
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Other
Total current assets
Non-current assets
Property, plant and equipment
Right-of-use assets
Intangibles
Total non-current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Borrowings
Lease liabilities
Provisions
Total current liabilities
Non-current liabilities
Borrowings and other financial liabilities
Lease liabilities
Derivative financial instruments
Provisions
Total non-current liabilities
Total liabilities
Net assets/(liabilities)
Equity
Issued capital
Convertible notes
Share based payments reserve
Accumulated losses
Total equity/(deficiency)
Note
Consolidated
2020
$'000
2019
$'000
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
18,318
5,198
1,815
73
25,404
2,678
4,582
1,037
8,297
1,606
3,406
1,272
11
6,295
1,748
-
1,828
3,576
33,701
9,871
4,704
3,000
581
460
8,745
4,715
4,273
811
255
10,054
4,269
3,000
-
323
7,592
3,000
-
2,000
257
5,257
18,799
12,849
14,902
(2,978)
84,297
165
417
(69,977)
51,249
5,000
1,405
(60,632)
14,902
(2,978)
The above statement of financial position should be read in conjunction with the accompanying notes
20
41
Micro-X Ltd
A N N U A L R E p O R T 2 0 2 0
Micro-X Ltd
Statement of changes in equity
For the year ended 30 June 2020
Consolidated
Issued
capital
$'000
Share based
payment
reserve
$'000
Foreign
currency
translation
reserve
$'000
Convertible
notes
$'000
Accumulated
losses
$'000
Total
deficiency in
equity
$'000
Balance at 1 July 2018
48,024
1,621
426
-
(50,798)
(727)
Loss after income tax expense
for the year
Other comprehensive income
for the year, net of tax
Total comprehensive income for
the year
Reclassification of convertible
notes
Conversion of convertible notes
Disposal of investment*
Finance costs on conversion of
convertible notes
Issue of shares - placement
Transactions with owners in
their capacity as owners:
Share-based payments (note
36)
-
-
-
-
1,000
-
225
2,000
-
-
-
-
-
-
-
-
-
(216)
Balance at 30 June 2019
51,249
1,405
-
132
132
-
-
(558)
-
-
-
-
-
-
-
5,000
-
-
-
-
-
(9,834)
(9,834)
-
132
(9,834)
(9,702)
-
-
-
-
-
5,000
1,000
(558)
225
2,000
-
(216)
5,000
(60,632)
(2,978)
*During the prior year the Group disposed of its 30% shareholding in XinRay Systems Inc.
The above statement of changes in equity should be read in conjunction with the accompanying notes
21
42
Micro-X Ltd
Statement of changes in equity
For the year ended 30 June 2020
Consolidated
Issued
capital
$'000
Share based
payment
reserve
$'000
Foreign
currency
translation
reserve
$'000
Convertible
notes
$'000
Accumulated
losses
$'000
Total equity
$'000
Balance at 1 July 2019
51,249
1,405
-
5,000
(60,632)
(2,978)
Loss after income tax expense
for the year
Other comprehensive income
for the year, net of tax
Total comprehensive income for
the year
Redemption of convertible notes
(note 22)
Conversion of convertible notes
(notes 19 and 22)
Finance costs on conversion of
convertible notes (note 21)
Issue of shares - placement
Capital raising costs
Transactions with owners in
their capacity as owners:
Share-based payments (note
36)
-
-
-
-
3,523
241
31,501
(2,217)
-
Balance at 30 June 2020
84,297
-
-
-
-
-
-
-
-
(988)
417
-
-
-
-
-
-
-
-
-
-
-
-
-
(2,812)
(2,023)
-
-
-
-
(10,067)
(10,067)
-
-
(10,067)
(10,067)
-
-
-
-
-
(2,812)
1,500
241
31,501
(2,217)
722
(266)
165
(69,977)
14,902
The above statement of changes in equity should be read in conjunction with the accompanying notes
22
43
Micro-X Ltd
A N N U A L R E p O R T 2 0 2 0
Micro-X Ltd
Statement of cash flows
For the year ended 30 June 2020
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
Grant funding received
Note
Consolidated
2020
$'000
2019
$'000
2,569
(15,855)
7
3,153
(390)
594
466
1,818
(14,617)
10
3,840
(259)
649
1,405
Net cash used in operating activities
34
(9,456)
(7,154)
Cash flows from investing activities
Payments for property, plant and equipment
Payments for intangibles
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issue of shares
Capital raising costs
Proceeds from issue of convertible notes
Proceeds from borrowings
Proceeds from convertible loan
Repayment of borrowings
Repayment of lease liabilities
Repayments of convertible notes
Net cash from financing activities
Net increase/(decrease) 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
(2,133)
(66)
(1,636)
(72)
(2,199)
(1,708)
31,501
(2,218)
-
-
5,000
(3,000)
(104)
(2,812)
2,000
-
3,000
3,000
-
(1,600)
-
-
28,367
6,400
16,712
1,606
(2,462)
4,068
18,318
1,606
The above statement of cash flows should be read in conjunction with the accompanying notes
23
44
Micro-X Ltd
Notes to the financial statements
For the year ended 30 June 2020
Note 1. General information
The financial statements cover Micro-X Ltd as a Group consisting of Micro-X Ltd and the entities it controlled at the end of,
or during, the year. 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
SA 5042
A14, 6 MAB Eastern Promenade
1284 South Road, Tonsley
SA 5042
A description of the nature of the Group'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 28 August 2020.
24
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Micro-X Ltd
A N N U A L R E p O R T 2 0 2 0
Micro-X Ltd
Notes to the financial statements
For the year ended 30 June 2020
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 Group has adopted all of the new or amended Accounting Standards and Interpretations issued by the Australian
Accounting Standards Board ('AASB') that are mandatory for the current reporting period.
There are no accounting standards that have not been early adopted for the year ended 30 June 2020 but will be applicable
to the Group in future reporting periods.
The following Accounting Standards and Interpretations are most relevant to the Group:
AASB 16 Leases
Transition to AASB 16
The Group adopted AASB 16 using the modified retrospective method of adoption with the date of initial application of 1 July
2019. Under this method, the standard is applied retrospectively with the cumulative effect of initially applying the standard
recognised at the date of initial application. The Group elected to use the transition practical expedient allowing the standard
to be applied only to contracts that were previously identified as leases applying AASB 17 and AASB Interpretation 4 at the
date of initial application. The Group also elected to use the recognition exemptions for lease contracts that, at the
commencement date, have a lease term of 12 months or less and do not contain a purchase option (‘short-term leases’), and
lease contracts for which the underlying asset is of low value (‘low-value assets’).
The effect of adopting AASB 16 as at 1 July 2019 (increase/(decrease)) is, as follows:
Assets
Right-of-use assets
Liabilities
Lease liabilities
Deferred Rent
Total adjustment on
current year earnings
$’000
1,205
(1,335)
130
-
The Group recognised right-of-use assets and lease liabilities for those leases previously classified as operating leases, except
for short-term leases and leases of low-value assets. The right-of-use assets for most leases were recognised based on the
carrying amount as if the standard had always been applied, apart from the use of incremental borrowing rate at the date of
initial application. In some leases, the right-of-use assets were recognised based on the amount equal to the lease liabilities,
adjusted for any related prepaid and accrued lease payments previously recognised. Lease liabilities were recognised based
on the present value of the remaining lease payments, discounted using the incremental borrowing rate at the date of initial
application.
The Group also applied the available practical expedients wherein it:
Used a single discount rate to a portfolio of leases with reasonably similar characteristics
Relied on its assessment of whether leases are onerous immediately before the date of initial application
Applied the short-term leases exemptions to leases with a lease term that ends within 12 months at the date of initial
application
Excluded the initial direct costs from the measurement of the right-of-use asset at the date of initial application
Used hindsight in determining the lease term where the contract contains options to extend or terminate the lease
46
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Micro-X Ltd
Notes to the financial statements
For the year ended 30 June 2020
Note 2. Significant accounting policies (continued)
The lease liabilities as at 1 July 2019 can be reconciled to the operating lease commitments as of 30 June 2019 as follows:
Operating lease commitments as at 30 June 2019
Weighted average incremental borrowing rate as at 1 July
2019
Discounted operating lease commitments as at 1 July 2019
Commitments not ready for use at 30 June 2019
Lease liabilities as at 1 July 2019
$’000
3,117
5.0%
2,768
(1,433)
1,335
Summary of new accounting policies
Set out below are the new accounting policies of the Group upon adoption of AASB 16, which have been applied from the
date of initial application:
Right-of-use assets
The Group recognises right-of-use assets at the commencement date of the lease (i.e., the date the underlying asset is
available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and
adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities
recognised, initial direct costs incurred, and lease payments made at or before the commencement date less any lease
incentives received. Unless the Group is reasonably certain to obtain ownership of the leased asset at the end of the lease
term, the recognised right-of-use assets are depreciated on a straight-line basis over the shorter of its estimated useful life
and the lease term. Right-of-use assets are subject to impairment.
Lease liabilities
At the commencement date of the lease, the Group recognises lease liabilities measured at the present value of lease
payments to be made over the lease term. The lease payments include fixed payments (including in substance fixed
payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts
expected to be paid under residual value guarantees. The variable lease payments that do not depend on an index or a rate
are recognised as expense in the period on which the event or condition that triggers the payment occurs.
In calculating the present value of lease payments, the Group uses the incremental borrowing rate at the lease commencement
date if the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease
liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying
amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in the in-substance
fixed lease payments or a change in the assessment to purchase the underlying asset.
Short-term leases and leases of low-value assets
The Group applies the short-term lease recognition exemption to its short-term leases of machinery and equipment (i.e., those
leases that have a lease term of 12 months or less from the commencement date and do not contain a purchase option). It
also applies the lease of low-value assets recognition exemption to leases of office equipment that are considered of low value
(i.e., below $5,000). Lease payments on short-term leases and leases of low-value assets are recognised as an expense on
a straight-line basis over the lease term.
Set out below, are the carrying amounts of the Group’s right-of-use assets and lease liabilities and the movements for the
financial year ended 30 June 2020:
As at 1 July 2019
Additions
Depreciation expense
Interest expense
Payments
As at 30 June 2020
Right of use
assets
Leases
Lease
liabilities
$’000
1,335
3,917
-
188
(586)
4,854
$’000
1,205
3,866
(489)
-
-
4,582
26
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Micro-X Ltd
A N N U A L R E p O R T 2 0 2 0
Micro-X Ltd
Notes to the financial statements
For the year ended 30 June 2020
Note 2. Significant accounting policies (continued)
IFRIC Interpretation 23 Uncertainty over Income Tax Treatment
The Interpretation addresses the accounting for income taxes when tax treatments involve uncertainty that affects the
application of AASB 112 Income Taxes. It does not apply to taxes or levies outside the scope of AASB 112, nor does it
specifically include requirements relating to interest and penalties associated with uncertain tax treatments. The Interpretation
specifically addresses the following:
Whether an entity considers uncertain tax treatments separately;
The assumptions an entity makes about the examination of tax treatments by taxation authorities;
How an entity determines taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates; and
How an entity considers changes in facts and circumstances.
The Group determines whether to consider each uncertain tax treatment separately or together with one or more other
uncertain tax treatments and uses the approach that better predicts the resolution of the uncertainty. The Group applies
significant judgement in identifying uncertainties over income tax treatments.
Upon adoption of the Interpretation, the Group considered whether it has any uncertain tax positions, and has assessed
whether the Interpretation had an impact on its consolidated financial statements. The Group determined that it is probable
that its tax treatments (including those for the subsidiary) will be accepted by the taxation authorities. The Interpretation did
not have an impact on the consolidated financial statements of the Group.
Going concern
The Group incurred a net loss after tax for the financial year ended 30 June 2020 of $10.1M (year ended June 2019: $9.8M)
and had net cash outflows from operating activities of $9.5M (year ended June 2019: $7.2M). The Group had net assets for
the financial year ended 30 June 2020 of $14.9M (year ended June 2019: ($3.0M)). The increase in net assets was primarily
driven by capital raising of $16.5M in December 2019 and $15M in April 2020.
The directors believe that the Group 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 Group is a going concern for the following reasons:
the operating loss and operating cash flow outcomes for the year ended 30 June 2020 reflect the results of the
group's major activities during that period, including securing the in-house supply of Micro-X CNT tubes for the Nano
and commercialising the Rover;
the group recently completed two capital raises securing a total of $31.5 million in funds, which are being used to
commercialise the Rover, increase its manufacturing capability and develop the MBI;
securing the 510(k) for Rover enabling the Group to sell into the United States. The Group is currently working with
potential customers to generate sales during CY2020;
significant sales of Carestream DRX Nano units used in the Global response to the COVID-19 Pandemic;
as the Group is an ASX-listed entity, it has the ability to raise additional funds if required;
the Group is due to receive approximately $2M from the R&D tax incentive scheme in relation to FY2020 during Q2
FY2021;
the Group has become eligible for the Government's Jobkeeper program after year end. It is expected that the
Jobkeeper scheme should cover a portion of the Group's payroll expenditure through to the end of September 2020;
and
the Board is of the opinion that the Group has sufficient funds to meet the planned corporate activities, research and
development activities and working capital requirements.
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 2020.
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 Group not continue as a
going concern.
Notwithstanding the above, there is a material uncertainty related to events or conditions that may cast significant doubt on
the Group’s ability to continue as a going concern and, therefore, that it may be unable to realise its assets and discharge its
liabilities in the normal course of business.
48
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Micro-X Ltd
Notes to the financial statements
For the year ended 30 June 2020
Note 2. Significant accounting policies (continued)
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 financial assets and liabilities at fair value through profit or loss, financial assets at fair value through other
comprehensive income, 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 Group'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.
Principles of consolidation
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Micro-X Ltd ('Company' or
'parent entity') as at 30 June 2020 and the results of all subsidiaries for the year then ended. Micro-X Ltd and its subsidiaries
together are referred to in these financial statements as the 'Group'.
Subsidiaries are all those entities over which the Group has control. The Group controls an entity when the Group is exposed
to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its
power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to
the Group. They are de-consolidated from the date that control ceases.
Intercompany transactions, balances and unrealised gains on transactions between entities in the Group are eliminated.
Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred.
Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by
the Group.
The acquisition of subsidiaries is accounted for using the acquisition method of accounting. A change in ownership interest,
without the loss of control, is accounted for as an equity transaction, where the difference between the consideration
transferred and the book value of the share of the non-controlling interest acquired is recognised directly in equity attributable
to the parent.
Where the Group loses control over a subsidiary, it derecognises the assets including goodwill, liabilities and non-controlling
interest in the subsidiary together with any cumulative translation differences recognised in equity. The Group recognises the
fair value of the consideration received and the fair value of any investment retained together with any gain or loss in profit or
loss.
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
The Group recognises revenue as follows:
Sale of goods
Revenue from sale of goods is recognised at the point in time when control of the asset is transferred to the customer, generally
when delivery is organised. The normal credit term is 60 days upon delivery.
28
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Micro-X Ltd
A N N U A L R E p O R T 2 0 2 0
Micro-X Ltd
Notes to the financial statements
For the year ended 30 June 2020
Note 2. Significant accounting policies (continued)
Warranty obligations
The Group typically provides warranties for general service of defects that existed at the time of sale, as required by law.
These assurance-type warranties are accounted for as warranty provisions.
Engineering Consulting
The Group recognises revenue from Engineering Consulting over time. The Group uses an input method in measuring
progress of the consulting services because there is a direct relationship between the Group’s effort (i.e., based on the labour
hours incurred) and the transfer of service to the customer. The Group recognises revenue on the basis of the labour hours
expended relative to the total expected labour hours to complete the service.
Government subsidies
Subsidies from the government such as R&D tax incentive income and AMGF Grant income, are recognised as other income
at their fair value where there is reasonable assurance that the grant will be received, the Group will comply with attached
conditions and the incentive is readily measurable.
In relation to R&D, as the estimate is reliably measurable, the R&D tax incentive is measured on an accruals basis. AMGF
Grants funds paid during the year are also being treated on an accruals basis.
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.
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 Group'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 Group'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.
50
29
Micro-X Ltd
Notes to the financial statements
For the year ended 30 June 2020
Note 2. Significant accounting policies (continued)
Cash and cash equivalents
Cash and cash equivalents include 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.
Trade and other receivables
Trade receivables are initially recognised at fair value and subsequently measured at amortised cost using the effective
interest method, less any allowance for expected credit losses. Trade receivables are generally due for settlement within 60
days.
The Group has applied the simplified approach to measuring expected credit losses, which uses a lifetime expected loss
allowance. To measure the expected credit losses, trade receivables have been grouped based on days overdue.
Other receivables are recognised at amortised cost, less any allowance for expected credit losses.
Inventories
Raw materials, work in progress and finished goods are stated at the lower of cost and net realisable value on an average
cost basis. Cost comprises of direct materials and delivery costs, direct labour, import duties and other taxes, an appropriate
proportion of variable and fixed overhead expenditure based on normal operating capacity, and, where applicable, transfers
from cash flow hedging reserves in equity. Costs of purchased inventory are determined after deducting 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.
Derivative financial instruments
Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently
remeasured to their fair value at each reporting date. The accounting for subsequent changes in fair value depends on whether
the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged.
Derivatives are classified as current or non-current depending on the expected period of realisation.
Property, plant and equipment
Fixed assets (leasehold improvements, plant & equipment, furniture & fittings and computer equipment) are 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.
Leasehold improvements 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
Group. Gains and losses between the carrying amount and the disposal proceeds are taken to profit or loss.
30
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Micro-X Ltd
A N N U A L R E p O R T 2 0 2 0
Micro-X Ltd
Notes to the financial statements
For the year ended 30 June 2020
Note 2. Significant accounting policies (continued)
Right-of-use assets
A right-of-use asset is recognised at the commencement date of a lease. The right-of-use asset is measured at cost, which
comprises the initial amount of the lease liability, adjusted for, as applicable, any lease payments made at or before the
commencement date net of any lease incentives received, any initial direct costs incurred, and, except where included in the
cost of inventories, an estimate of costs expected to be incurred for dismantling and removing the underlying asset, and
restoring the site or asset.
Right-of-use assets are depreciated on a straight-line basis over the unexpired period of the lease or the estimated useful life
of the asset, whichever is the shorter. Where the Group expects to obtain ownership of the leased asset at the end of the
lease term, the depreciation is over its estimated useful life. Right-of use assets are subject to impairment or adjusted for any
remeasurement of lease liabilities.
Right-of-use assets that meet the definition of investment property are measured at fair value where the Group has adopted
a fair value measurement basis for investment property assets.
The Group has elected not to recognise a right-of-use asset and corresponding lease liability for short-term leases with terms
of 12 months or less and leases of low-value assets. Lease payments on these assets are expensed to profit or loss as
incurred.
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 useful life of the DRX Revolution Nano capitalised development costs has been linked
to the life of the distribution contract.
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.
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
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
These amounts represent liabilities for goods and services provided to the Group 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.
52
31
Micro-X Ltd
Notes to the financial statements
For the year ended 30 June 2020
Note 2. Significant accounting policies (continued)
Borrowings and other financial liabilities
Recognition and recognition
Financial liabilities are recognised at the fair value of the consideration received, when the Group becomes a party to the
contractual provisions of the financial instrument.
A financial liability is derecognised when it is extinguished, discharged, cancelled or expires.
Classification and measurement of financial liabilities
The Group’s financial liabilities include borrowings, trade and other payables and derivative financial instruments.
Financial liabilities are initially measured at fair value, and, where applicable, adjusted for transaction costs unless the Group
designated a financial liability at fair value through profit or loss.
Subsequently, financial liabilities are measured at amortised cost using the effective interest method except for derivatives
and financial liabilities designated at FVPL, which are carried subsequently at fair value with gains or losses recognised in
profit or loss.
The Group has designated its convertible note liabilities at FVPL in order to provide the most relevant information to users,
and furthermore to keep consistency with initial recognition on inception of these instruments. An assessment will be made at
each reporting period in regard to underlying valuation of this liability in regard to share price upon conversion of the convertible
notes.
Lease liabilities
A lease liability is recognised at the commencement date of a lease. The lease liability is initially recognised at the present
value of the lease payments to be made over the term of the lease, discounted using the interest rate implicit in the lease or,
if that rate cannot be readily determined, the Group's incremental borrowing rate. Lease payments comprise of fixed payments
less any lease incentives receivable, variable lease payments that depend on an index or a rate, amounts expected to be paid
under residual value guarantees, exercise price of a purchase option when the exercise of the option is reasonably certain to
occur, and any anticipated termination penalties. The variable lease payments that do not depend on an index or a rate are
expensed in the period in which they are incurred.
Lease liabilities are measured at amortised cost using the effective interest method. The carrying amounts are remeasured if
there is a change in the following: future lease payments arising from a change in an index or a rate used; residual guarantee;
lease term; certainty of a purchase option and termination penalties. When a lease liability is remeasured, an adjustment is
made to the corresponding right-of use asset, or to profit or loss if the carrying amount of the right-of-use asset is fully written
down.
Finance costs
Finance costs attributable to qualifying assets are capitalised as part of the asset. All other finance costs are expensed in the
period in which they are incurred.
Provisions
Provisions are recognised when the Group has a present (legal or constructive) obligation as a result of a past event, it is
probable the Group 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, considering 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.
32
53
Micro-X Ltd
A N N U A L R E p O R T 2 0 2 0
Micro-X Ltd
Notes to the financial statements
For the year ended 30 June 2020
Note 2. Significant accounting policies (continued)
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 Group 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 Group or employee, the failure to satisfy the condition is treated as a
cancellation. If the condition is not within the control of the Group 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.
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.
54
33
Micro-X Ltd
Notes to the financial statements
For the year ended 30 June 2020
Note 2. Significant accounting policies (continued)
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 consider 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.
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
There are no accounting standards that have not been early adopted for the year ended 30 June 2020 but will be applicable
to the Group in future reporting periods.
34
55
Micro-X Ltd
A N N U A L R E p O R T 2 0 2 0
Micro-X Ltd
Notes to the financial statements
For the year ended 30 June 2020
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.
Coronavirus (COVID-19) pandemic
Judgement has been exercised in considering the impacts that the Coronavirus (COVID-19) pandemic has had, or may have,
on the Group based on known information. This consideration extends to the nature of the products and services offered,
customers, supply chain, staffing and geographic regions in which the Group operates. Other than as addressed in specific
notes, there does not currently appear to be either any significant impact upon the financial statements or any significant
uncertainties with respect to events or conditions which may impact the Group unfavourably as at the reporting date or
subsequently as a result of the Coronavirus (COVID-19) pandemic.
Share-based payment transactions (Note 36)
The Group 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 considering
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.
Estimation of useful lives of assets
The Group determines the estimated useful lives and related depreciation and amortisation charges for its property, plant
and equipment and finite life intangible assets. The useful lives could change significantly as a result of technical innovations
or some other event. The depreciation and amortisation charge will increase where the useful lives are less than previously
estimated lives, or technically obsolete or non-strategic assets that have been abandoned or sold will be written off or written
down.
Impairment of non-financial assets other than goodwill and other indefinite life intangible assets
The Group 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 Group 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 Group 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 Group recognises liabilities for anticipated tax and audit issues
based on the Group'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.
Lease term
The lease term is a significant component in the measurement of both the right-of-use asset and lease liability. Judgement is
exercised in determining whether there is reasonable certainty that an option to extend the lease or purchase the underlying
asset will be exercised, or an option to terminate the lease will not be exercised, when ascertaining the periods to be included
in the lease term. In determining the lease term, all facts and circumstances that create an economical incentive to exercise
an extension option, or not to exercise a termination option, are considered at the lease commencement date. Factors
considered may include the importance of the asset to the Group's operations; comparison of terms and conditions to
prevailing market rates; incurrence of significant penalties; existence of significant leasehold improvements; and the costs and
disruption to replace the asset. The Group reassesses whether it is reasonably certain to exercise an extension option, or not
exercise a termination option, if there is a significant event or significant change in circumstances.
56
35
Micro-X Ltd
Notes to the financial statements
For the year ended 30 June 2020
Lease – Incremental Borrowing Rate
The Group cannot readily determine the interest rate implicit in the lease, therefore it uses its incremental borrowing rate
(IBR) to measure lease liabilities. The IBR is the rate of interest that the group would have to pay to borrow over a similar
term, and with a similar security, the funds necessary to obtain an asset of similar value to the right of use asset in a similar
economic environment. The IBR therefore reflects what the Group ‘would have to pay’, which requires estimation when no
observable rates are available or when they need to be adjusted to reflect the terms and conditions of the lease. The Group
estimates the IBR using observable inputs (such as market interest rates) when available and is required to make certain
entity specific estimates.
Research and development (R&D) tax incentive
The Group is entitled to claim R&D tax incentives in Australia. The R&D tax incentive is calculated using the estimated R&D
expenditure multiplied by a 43.5% non-refundable tax offset. The Group accounts for this incentive as other income within the
Statement of Profit or Loss and Other Comprehensive Income.
Note 4. Operating segments
The Group 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 security (improvised explosive device imaging) 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 2020 approximately $4.16M or 98% (2019: $1.93M or 100%) of the Group's external revenue
was derived from sales to Carestream.
Note 5. Revenue
Sale of Goods
Engineering Consulting
Revenue
Consolidated
2020
$'000
2019
$'000
3,789
462
1,931
-
4,251
1,931
36
57
Micro-X Ltd
A N N U A L R E p O R T 2 0 2 0
Micro-X Ltd
Notes to the financial statements
For the year ended 30 June 2020
Note 5. Revenue (continued)
Disaggregation of revenue
The disaggregation of revenue from contracts with customers is as follows:
Major product lines
DRX Revolution Nano
Engineering Consulting
Geographical regions
United States
Asia-Pacific
Europe
Timing of revenue recognition
Goods transferred at a point in time
Services transferred over time
Note 6. Other income
Interest received
R&D tax incentive refund*
Net foreign exchange gain/(loss)
Government grants income recognised per AASB 120**
Net gain/(loss) on disposal of investments (note 30)
Consolidated
2020
$'000
2019
$'000
3,789
462
1,931
-
4,251
1,931
1,036
2,605
610
1,153
186
592
4,251
1,931
3,789
462
1,931
-
4,251
1,931
Consolidated
2020
$'000
2019
$'000
7
2,042
-
1,255
-
10
3,076
(115)
296
874
3,304
4,141
*The R&D tax incentive refund is calculated based on combined eligible costs of $4.8M (2019: $8.0M) which consist of direct
development costs and direct employee compensation costs.
**The Government grants income recognised per AASB 120 relates to the Advanced Manufacturing Growth Funding
received.
Note 7. Share of profits of associates accounted for using the equity method
Share of profits/(losses) of associates accounted for using the equity method
-
(231)
The investment which was equity accounted was sold during the 2019 financial year.
Consolidated
2020
$'000
2019
$'000
58
37
Micro-X Ltd
Notes to the financial statements
For the year ended 30 June 2020
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:
Entertainment expenses
Share-based payments
Share of profits - associates
R&D tax incentive income
Feedstock adjustment
Other non-deductible expenses
R&D expenditure
Disposal of investment in associate
Finance costs
Non-assessable income
Current year tax losses not recognised
Current year temporary differences not recognised
Consolidated
2020
$'000
2019
$'000
(10,067)
(9,834)
(3,020)
(2,950)
1
(80)
-
(613)
-
9
1,420
-
72
-
(2,211)
1,683
528
2
(65)
69
(923)
5
-
2,427
(262)
68
(13)
(1,642)
1,565
77
Income tax expense
-
-
The Group has tax losses that arose of $17.5 million (2019: $11.9 million) that are available indefinitely for offsetting
against future taxable profits of the companies in which the tax losses arose.
Deferred tax assets have not been recognised in respect of these losses as the Group has been loss-making for some
time, and there is no evidence of recoverability in the near future.
Note 9. Current assets - trade and other receivables
Trade receivables
R&D tax incentive refund
Other receivables
GST receivable
Consolidated
2020
$'000
2019
$'000
2,350
1,965
417
4,732
466
268
3,076
-
3,344
62
5,198
3,406
38
59
Micro-X Ltd
A N N U A L R E p O R T 2 0 2 0
Micro-X Ltd
Notes to the financial statements
For the year ended 30 June 2020
Note 10. 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
Motor vehicles - at cost
Less: Accumulated depreciation
Computer equipment - at cost
Less: Accumulated depreciation
Work in progress - at cost
Consolidated
2020
$'000
2019
$'000
1,642
(199)
1,443
1,681
(608)
1,073
94
(77)
17
-
-
-
388
(243)
145
-
244
(70)
174
1,110
(187)
923
83
(61)
22
10
(3)
7
218
(166)
52
570
2,678
1,748
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out
below:
Consolidated
Balance at 1 July 2018
Additions
Disposals
Depreciation expense
Balance at 30 June 2019
Additions
Disposals
Transfers in/(out)
Depreciation expense
Leasehold
improveme
nts
$'000
Plant &
equipment
$'000
Fixtures &
fittings
$'000
Computer
Equipment
$'000
Motor
vehicles
$'000
Work in
progess
$'000
Total
$'000
199
-
-
(25)
174
828
-
570
(129)
83
980
(1)
(138)
924
571
-
-
(422)
28
19
(2)
(24)
21
12
-
-
(16)
17
56
67
(2)
(69)
52
170
-
-
(77)
145
27
-
(15)
(5)
7
-
(7)
-
-
-
-
570
-
-
570
-
-
(570)
-
393
1,636
(20)
(261)
1,748
1,581
(7)
-
(644)
-
2,678
Balance at 30 June 2020
1,443
1,073
Note 11. Non-current assets - right-of-use assets
The Group leases land and buildings for its offices and production facilities under agreements of between 5 to 10 years with,
in some cases, options to extend. The leases have various escalation clauses. On renewal, the terms of the leases are
renegotiated. The Group also leases machinery under agreements of between 1 to 5 years.
60
39
Micro-X Ltd
Notes to the financial statements
For the year ended 30 June 2020
Note 11. Non-current assets - right-of-use assets (continued)
Right-of-use
Less: Accumulated depreciation
Consolidated
2020
$'000
2019
$'000
5,071
(489)
4,582
-
-
-
Set out below are the carrying amounts of lease liabilities (disclosed as current and non-current lease liabilities) and the
movements during the period:
As at 1 July 2019
Additions
Accretion of interest
Payments
As at 30 June 2020
Current (Note 15)
Non-Current (Note 18)
Factors considered in determining the life of lease liabilities is discussed at Note 3.
The following are the amounts recognised in profit & loss:
Depreciation expense on Right of use assets
Interest expense on lease liability
Note 12. Non-current assets - intangibles
Development - at amortised value
Patents and trademarks - at amortised value
Consolidated
2020
$'000
2019
$'000
1,335
3,917
188
(586)
4,854
581
4,273
Consolidated
2020
$'000
2019
$'000
489
188
677
-
-
-
-
-
-
-
-
-
-
Consolidated
2020
$'000
2019
$'000
840
197
1,560
268
1,037
1,828
40
61
Micro-X Ltd
A N N U A L R E p O R T 2 0 2 0
Micro-X Ltd
Notes to the financial statements
For the year ended 30 June 2020
Note 12. Non-current assets - intangibles (continued)
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out
below:
Consolidated
Balance at 1 July 2018
Additions
Amortisation expense
Balance at 30 June 2019
Additions
Amortisation expense
Balance at 30 June 2020
Capitalised development costs
Capitalised
development
costs
$'000
Patents &
Trademarks
$'000
Total
$'000
1,980
-
(420)
1,560
-
(720)
259
72
(63)
268
43
(114)
2,239
72
(483)
1,828
43
(834)
840
197
1,037
For the purpose of ongoing annual impairment testing, the carrying value of capitalised development costs is allocated to the
DRX Revolution Nano, which is expected to benefit from the work, knowledge, intellectual property and other information
attributable to the relevant expenditure.
As a result of the impairment assessment at 30 June 2020, the directors and management of the Group determined that
since commercial launch of the DRX Revolution Nano, there were no triggers for impairment.
Note 13. Current liabilities - trade and other payables
Trade payables
Accrued payroll
PAYG
Unearned grant income
Payroll tax
Other payables
Note 14. Current liabilities - borrowings
South Australian Government Financing Authority (SAFA)*
R&D Capital Loan
62
41
Consolidated
2020
$'000
2019
$'000
1,543
105
709
623
44
1,680
2,060
103
126
1,108
16
856
4,704
4,269
Consolidated
2020
$'000
2019
$'000
3,000
-
-
3,000
3,000
3,000
Micro-X Ltd
Notes to the financial statements
For the year ended 30 June 2020
Note 14. Current liabilities - borrowings (continued)
*South Australian Government Financing Authority (SAFA) Loan is considered a current liability at 30 June 2020 as the
repayment date is 31 December 2020.
Financing arrangements
Unrestricted access was available at the reporting date to the following lines of credit:
Total facilities
South Australian Financing Authority (SAFA) Loan*
R&D Capital Loan
Used at the reporting date
South Australian Financing Authority (SAFA) Loan*
R&D Capital Loan
Unused at the reporting date
South Australian Financing Authority (SAFA) Loan*
R&D Capital Loan
Consolidated
2020
$'000
2019
$'000
3,000
-
3,000
3,000
-
3,000
-
-
-
3,000
3,000
6,000
3,000
3,000
6,000
-
-
-
*South Australian Government Financing Authority (SAFA) Loan was considered a non-current liability in 2019, as the
repayment date was 31 December 2020.
Note 15. Current liabilities - lease liabilities
Lease liability
Refer to note 11 for further information on lease liabilities.
Note 16. Current liabilities - provisions
Annual leave
Deferred lease incentives
Consolidated
2020
$'000
2019
$'000
581
-
Consolidated
2020
$'000
2019
$'000
460
-
460
322
1
323
42
63
Micro-X Ltd
A N N U A L R E p O R T 2 0 2 0
Micro-X Ltd
Notes to the financial statements
For the year ended 30 June 2020
Note 17. Non-current liabilities - borrowings and other financial liabilities
South Australian Government Financing Authority (SAFA) Loan*
Thales Convertible Loan – Host Debt**
Consolidated
2020
$'000
2019
$'000
-
4,715
3,000
-
4,715
3,000
*South Australian Government Financing Authority (SAFA) Loan was considered a non-current liability in 2019, as the
repayment date was 31 December 2020.
**The Group drew down a $5 million loan with Thales in July 2019. The loan attracts an annual interest rate of 185 bps above
the 6-month BBSW.
Under the terms of the convertible loan deed, there currently lies an obligation to deliver a variable, and not fixed, number of
shares to Thales on conversion and hence the balance is recognised as a liability as at 30 June 2020.
Due to the uncertain nature of the conversion at the expiration of the convertible loan, the instrument has been split into two
components, being the host debt disclosed above and the conversion factor which is disclosed in note 19.
Upon initial recognition, the value of the host debt was $4.35 million. $0.2 million implied interest was accrued on the host
debt instrument to 30 June 2020.
The closing balance of the host debt at 30 June 2020 also includes accrued interest payable of $0.13 million owing to Thales.
Note 18. Non-current liabilities - lease liabilities
Lease liability
Refer to note 11 for further information on lease liabilities.
Note 19. Non-current liabilities - derivative financial instruments
Convertible notes payable*
Thales Convertible Loan – Conversion feature**
Consolidated
2020
$'000
2019
$'000
4,273
-
Consolidated
2020
$'000
2019
$'000
500
311
811
2,000
-
2,000
64
43
Micro-X Ltd
Notes to the financial statements
For the year ended 30 June 2020
Note 19. Non-current liabilities - derivative financial instruments (continued)
*October 2018 Convertible Note:
In order to classify this note, the Group assessed AASB9 and made assessment that the notes were derivative in nature as
all characteristics under this section were met.
The 'fixed for fixed' test per AASB9 was then consequently assessed to determine whether the notes were of an equity or
liability nature. Per the terms of the note, the continued variable nature of the conversion price and hence number of shares
issued on conversion, indicates that the fixed-for-fixed test as noted above was failed and notes have been recognised as a
financial liability and within scope of AASB 9. Per the terms of the notes, there is a floor price on conversion of $0.23/share,
and a ceiling price on conversion of $0.40/share which has led to the above classification. The notes are perpetual in nature
with no expiry date.
In relation to the fair value of these notes, the Group has made the assessment to recognise the notes at the sum of
consideration paid as at time of completion of convertible note capital raising being $3.0M, less amounts converted into
shares to balance date. During the financial year ended 30 June 2020, $1.5M of notes were converted (equating to 6,639,150
new ordinary shares), as per note 20, leaving a closing fair value of $0.5M as at reporting date.
**The fair value of the conversion feature of the Thales convertible loan was split from the underlying host debt disclosed at
17 above. On recognition, the fair value of the conversion feature was $0.6 million. The fair value was calculated under the
Black-Scholes valuation principle using a Monte-Carlo simulation model.
Per the convertible loan deed, there is an implied cost of finance being a 20% discount on the share price on conversion of
the notes to ordinary shares. The closing balance of $0.3 million includes a $0.3 million finance gain which has been
recognised against the convertible loan.
Note 20. Non-current liabilities - provisions
Long service leave
Deferred lease incentives
Warranties
Note 21. Equity - Issued capital
Consolidated
2020
$'000
2019
$'000
111
-
144
255
45
164
48
257
Ordinary shares - fully paid
357,167,839 156,093,707
84,297
51,249
Consolidated
2020
Shares
2019
Shares
2020
$'000
2019
$'000
44
65
Micro-X Ltd
A N N U A L R E p O R T 2 0 2 0
Micro-X Ltd
Notes to the financial statements
For the year ended 30 June 2020
Note 21. Equity - Issued capital (continued)
Movements in ordinary share capital
Details
Date
Shares
Issue price
$'000
Balance
Issue of shares - placement
Issue of shares - conversion of convertible notes
($0.231 represents conversion at 20% discount to 20-
day VWAP prior to conversion date per terms of
security)
Finance cost on conversion of convertible notes
Issue of shares - conversion of convertible notes
($0.23 represents conversion at floor price per terms
of security)
Finance cost on conversion of convertible notes
Balance
Issue of shares - conversion of convertible notes
($0.23 represents conversion at floor price per terms
of security)
Finance cost on conversion of convertible notes
Issue of shares - conversion of convertible notes
($0.4 represents conversion per terms of security
Issue of shares - conversion of convertible notes
($0.23 represents conversion at floor price per terms
of security)
Finance cost on conversion of convertible notes
Issue of shares - conversion of convertible notes
($0.239 represents conversion at 20% discount to 20-
day VWAP prior to conversion date per terms of
security)
Finance cost on conversion of convertible notes
Issue of shares - conversion of convertible notes
($0.4 represents conversion per terms of security
Issue of shares - conversion of convertible notes
($0.258 represents conversion at 20% discount to 20-
day VWAP prior to conversion date per terms of
security)
Finance cost on conversion of convertible notes
Issue of shares - placement
Issue of shares - placement
Capital Raising Costs
Issue of shares - conversion of convertible notes
($0.4 represents conversion per terms of security
Issue of shares - placement
Issue of shares – rights issue
Capital Raising Costs
1 July 2018
2 January 2019
144,350,698
7,407,401
$0.270
48,024
2,000
4 June 2019
4 June 2019
2,161,695
-
$0.231
$0.000
14 June 2019
14 June 2019
2,173,913
-
$0.230
$0.000
500
97
500
128
30 June 2019
156,093,707
51,249
10 July 2019
10 July 2019
2,173,913
-
$0.230
$0.000
500
8
29 July 2019
2,500,000
$0.400
1,000
30 July 2019
30 July 2019
1,956,521
-
$0.230
$0.000
1 August 2019
1 August 2019
1,463,823
-
$0.239
$0.000
3 September 2019
57,500
$0.400
3 September 2019
25 November 2019
24 December 2019
24 December 2019
2 January 2020
23 April 2020
13 May 2020
13 May 2020
774,893
-
12,473,406
70,026,694
-
2,500,000
62,500,000
44,647,382
-
$0.258
$0.000
$0.200
$0.200
$0.000
$0.400
$0.140
$0.140
$0.000
450
95
350
88
23
200
50
2,495
14,005
(995)
1,000
8,750
6,251
(1,222)
84,297
Balance
30 June 2020
357,167,839
Ordinary shares
Ordinary shares entitle the holder to participate in dividends and the proceeds on the winding up of the Group in proportion
to the number of and amounts paid on the shares held. The fully paid ordinary shares have no par value and the Group 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.
66
45
Micro-X Ltd
Notes to the financial statements
For the year ended 30 June 2020
Note 21. Equity - Issued capital (continued)
Capital risk management
The Group'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 22. Equity - Convertible notes
Convertible notes*
*April 2018 Convertible Note:
Consolidated
2020
$'000
2019
$'000
165
5,000
In order to classify this note, the Group assessed AASB9 and made assessment that the notes were derivative in nature as
all characteristics under this section were met.
The 'fixed for fixed' test per AASB9 was then consequently assessed to determine whether the notes were of an equity or
liability nature. Per the terms of the note, as a qualifying capital raise did not occur before 30 September 2018, on maturity
conversion the notes will convert into ordinary shares at a fixed price, indicating that this test is now passed. The notes are
recognised as equity.
In relation to the fair value of these notes, the Group has made the assessment to recognise the notes at the sum of
consideration paid as at time of completion of convertible note capital raising. No fair value adjustments have been made to
this instrument during the current reporting period.
During the financial year ended 30 June 2020, $2,812,000 of convertible notes were redeemed, per Note 20. $2,023,000 of
convertible notes were also converted, equating to 5,057,500 new ordinary shares during the year.
Note 23. Equity - Share based payments reserve
Share-based payments reserve
Consolidated
2020
$'000
2019
$'000
417
1,405
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.
46
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Micro-X Ltd
Notes to the financial statements
For the year ended 30 June 2020
Note 23. Equity - Share based payments reserve (continued)
Movements in reserves
Movements in each class of reserve during the current and previous financial year are set out below:
Consolidated
Balance at 1 July 2018
Share option expense (note 36)
Balance at 30 June 2019
Share option expense*
Share option equity movement**
Balance at 30 June 2020
Share-based
payment
reserve
$'000
Total
$'000
1,621
(216)
1,405
(266)
(722)
1,621
(216)
1,405
(266)
(722)
417
417
*
**
Cancellation of unquoted options held by a previous Director, upon the 6 month anniversary of his cessation of
employment with the Group.
Expiry of unlisted options issued in connection with MX1's initial public offering of the ASX.
Note 24. Equity - dividends
There were no dividends paid, recommended or declared during the current or previous financial year.
Note 25. Financial instruments
Financial risk management objectives
The Group's activities expose it to a variety of financial risks: market risk (including interest rate risk), credit risk and liquidity
risk. The Group'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 Group. The Group 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 Group and appropriate procedures,
controls and risk limits. Finance identifies, evaluates and hedges financial risks within the Group's operating units. Finance
reports to the Board on a monthly basis.
Unless otherwise stated, there have been no changes from the previous reporting period in the Group'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 Group’s functional currency. The Group 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 Group is not exposed to any significant price risk.
68
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Micro-X Ltd
Notes to the financial statements
For the year ended 30 June 2020
Note 25. Financial instruments (continued)
Interest rate risk
The Group’s exposure to the risk of changes in market interest rates relates primarily to the Group’s cash deposits with
floating interest rates. These financial assets with variable rates expose the Group to interest rate risk.
All other financial assets and liabilities in the form of receivables and payables are non-interest bearing. The Group does not
engage in any hedging or derivative transactions to manage interest rate risk.
In regard to its interest rate risk, the Group 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 Group 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 $18.3M (2019: $1.6M). The sensitivity of the cash at bank balance to changes in interest rate (of +/-1%)
equates to +/-$183,176 (2019: +/-$16,063). 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
The Group has adopted a lifetime expected loss allowance in estimating expected credit losses to trade receivables through
the use of a provisions matrix using fixed rates of credit loss provisioning. These provisions are considered representative
across all customers of the Group based on recent sales experience, historical collection rates and forward-looking
information that is available.
Generally, trade receivables are written off when there is no reasonable expectation of recovery. Indicators of this include
the failure of a debtor to engage in a repayment plan, no active enforcement activity and a failure to make contractual
payments for a period greater than 1 year.
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 Group 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 Group 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 Group 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.
48
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Micro-X Ltd
Notes to the financial statements
For the year ended 30 June 2020
Note 25. Financial instruments (continued)
Remaining contractual maturities
The following tables detail the Group'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.
Consolidated - 2020
Non-derivatives
Interest-bearing - variable
Thales Convertible loan - Host
Debt*
Interest-bearing - fixed rate
SAFA Loan**
Total non-derivatives
Derivatives
Convertible notes payable***
Thales Convertible Loan –
Conversion Feature*
Total 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
2.03%
105
107
5,024
7.75%
3,117
3,222
-
107
-
5,024
-
2.03%
665
-
665
-
-
-
-
311
311
-
-
-
-
-
-
5,236
3,117
8,353
665
311
976
*
**
Debt to Equity ratio covenant exists in relation to this facility and has been met at all times.
Lender holds security over present and after-acquired property of the Group.
Refer Note 17 for further disclosure of facility.
Lender holds security over present and after-acquired property of the Group.
Refer Note 14 for further disclosure of facility.
*** There is no contractual cashflow for the mandatorily convertible notes, there is no cash redemption for the convertible
notes.
Consolidated - 2019
Non-derivatives
Interest-bearing - fixed rate
SAFA Loan*
R&D Capital Loan**
Total non-derivatives
Derivatives
Convertible notes payable***
Total 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
6.75%
9.00%
-
-
3,150
3,150
7,000
7,000
3,335
-
3,335
-
-
-
-
-
-
-
-
-
-
-
-
3,335
3,150
6,485
7,000
7,000
70
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Micro-X Ltd
Notes to the financial statements
For the year ended 30 June 2020
Note 25. Financial instruments (continued)
*
**
No debt covenants exist in relation to this facility.
Lender holds security over all present and after-acquired property of the Group, except the FY19 R&D refund from the
ATO which is held by R&D Capital Pty Ltd as below.
Refer Note 14 for further disclosure of facility.
Facility taken out with R&D Capital in relation to a prepayment loan on FY19 R&D Refund from ATO.
No principal repayment due until the Group receives its FY19 refund or 31 December 2019, whichever is first.
Interest @1.25%/month for amounts drawn, @0.25%/month for amounts undrawn.
No debt covenants exist in relation to this facility.
Lender holds security over the cash refund for the FY19 R&D refund from the ATO.
Refer Note 14 for further disclosure of facility.
*** No debt covenants exist in relation to this facility.
There is no contractual cashflow for the mandatorily convertible notes, there is no cash redemption for the convertible
notes.
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 26. Key management personnel disclosures
Compensation
The aggregate compensation made to directors and other members of key management personnel of the Group is set out
below:
Short-term employee benefits
Post-employment benefits
Share-based payments
Consolidated
2020
$
2019
$
1,420,689
125,368
6,976
852,979
49,081
(49,308)
1,553,033
852,752
The Group's Key Management Personnel increased by 3 members during the year ended 30 June 2020. Refer to the Details
of Remuneration in the Director's Report for further details.
Note 27. Remuneration of auditors
During the financial year the following fees were paid or payable for services provided by Grant Thornton, the auditor of the
Group:
Audit services - Grant Thornton
Audit or review of the financial statements
Other services - Grant Thornton
Other services
50
Consolidated
2020
$
2019
$
89,656
89,500
24,409
13,750
114,065
103,250
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Micro-X Ltd
Notes to the financial statements
For the year ended 30 June 2020
Note 28. Contingent liabilities
The Group has no contingent liabilities as at 30 June 2020.
Note 29. Commitments
Capital commitments
Committed at the reporting date but not recognised as liabilities, payable:
Property, plant and equipment
Note 30. Related party transactions
Subsidiaries
Interests in subsidiaries are set out in note 32.
Consolidated
2020
$'000
2019
$'000
-
1,798
Key management personnel
Disclosures relating to key management personnel are set out in note 26 and the remuneration report included in the
directors' report.
Transactions with related parties
There were no transactions with related parties during the current and previous financial year.
Receivable from and payable to related parties
Noted as at reporting date, a $77,500 payable to Patrick O'Brien is included within trade payables for director fees during the
year (2019: $60,000).
There were no other 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 31. Parent entity information
Set out below is the supplementary information about the parent entity.
Statement of profit or loss and other comprehensive income
Loss after income tax
Total comprehensive income
Parent
2020
$'000
2019
$'000
(10,067)
(9,835)
(10,067)
(9,835)
72
51
Micro-X Ltd
Notes to the financial statements
For the year ended 30 June 2020
Note 31. Parent entity information (continued)
Statement of financial position
Total current assets
Total assets
Total current liabilities
Total liabilities
Equity
Issued capital
Convertible notes
Share-based payments reserve
Accumulated losses
Total equity/(deficiency)
Parent
2020
$'000
2019
$'000
25,404
6,295
33,701
9,871
8,745
7,592
18,799
12,849
84,297
165
417
(69,977)
51,250
5,000
1,405
(60,633)
14,902
(2,978)
Guarantees entered into by the parent entity in relation to the debts of its subsidiaries
The parent entity had no guarantees in relation to the debts of its subsidiaries as at 2020.
Contingent liabilities
The parent entity had no contingent liabilities as at 2020 and 2019.
Capital commitments - Property, plant and equipment
The parent entity has no capital commitments for property, plant and equipment as at 2020.
The accounting policies of the parent entity are consistent with those of the Group, as disclosed in note 2.
Note 32. Interests in subsidiaries
The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiary in accordance
with the accounting policy described in note 2:
Name
Principal place of business /
Country of incorporation
Ownership interest
2019
2020
%
%
Micro-X Incorporated
USA
100%
100%
Note 33. Events after the reporting period
No matter or circumstance has arisen since 30 June 2020 that has significantly affected, or may significantly affect the
Group's operations, the results of those operations, or the Group's state of affairs in future financial years.
52
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Micro-X Ltd
Notes to the financial statements
For the year ended 30 June 2020
Note 34. 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
Net loss on disposal of property, plant and equipment
Share of loss - associates
Share-based payments
Non-cash finance costs
Lease Incentive
Gain on disposal of XinRay investment
Change in operating assets and liabilities:
Decrease/(increase) in trade and other receivables
Increase/(decrease) in trade and other payables
Increase in employee benefits
Increase in inventories
Increase in unearned income
Consolidated
2020
$'000
2019
$'000
(10,067)
(9,834)
1,966
-
-
(265)
593
-
-
(1,852)
896
301
(543)
(485)
744
19
231
(216)
225
5
(874)
1,076
(40)
124
278
1,108
Net cash used in operating activities
(9,456)
(7,154)
Note 35. Earnings per share
Loss after income tax attributable to the owners of Micro-X Ltd
(10,067)
(9,834)
Consolidated
2020
$'000
2019
$'000
Basic earnings per share
Diluted earnings per share
Cents
Cents
(4.35)
(4.35)
(6.63)
(6.63)
Number
Number
Weighted average number of ordinary shares used in calculating basic earnings per share
231,566,308 148,264,820
Weighted average number of ordinary shares used in calculating diluted earnings per share 231,566,308 148,264,820
74
53
Micro-X Ltd
Notes to the financial statements
For the year ended 30 June 2020
Note 35. Earnings per share (continued)
The weighted average number of shares does not include the potential number of ordinary shares upon take-up of options
and the conversion of the mandatorily convertible notes.
The total number of options granted and outstanding is 2,820,000 all of which were vested at 30 June 2020.
The potential number of shares on conversion of the April 2018 mandatorily convertible notes which are unconverted is
412,500 ordinary shares based on conversion prices of $0.40 (Ceiling Cap).
The potential number of shares on conversion of the October 2018 mandatorily convertible notes which are unconverted
ranges from 2,173,913 ordinary shares to 1,250,000 ordinary shares based on conversion prices ranging from $0.23 (Floor
Cap) to $0.40 (Ceiling Cap) respectively.
Basic EPS is calculated by dividing the loss for the year attributable to ordinary equity holders of the group by the weighted
average number of ordinary shares outstanding during the year.
Diluted EPS is calculated by dividing the loss attributable to ordinary equity holders of the group by the weighted average
number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would be
issued on conversion of all the dilutive potential ordinary shares into ordinary shares. It is noted that diluted EPS cannot be
calculated on the loss for the year and accordingly the diluted EPS equals the basic EPS.
Note 36. Share-based payments
Share based payments relate to Award Options as outlined in the Group’s Prospectus dated 25 November 2015. These
options were issued to directors and nominated employees and consultants of the Group.
The general terms and conditions of the Award Options are:
Basis for issues of options:
- 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:
54
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Micro-X Ltd
Notes to the financial statements
For the year ended 30 June 2020
Note 36. Share-based payments (continued)
Issues to Non-Executive Directors (during 2017 financial year):
- one half (Tranche 1) vest on 1 December 2018, provided the holder remains employed by the Group on that date;
- one half (Tranche 2) vest on 1 December 2019, provided the holder remains employed by the Group on that date;
- exercise price for Tranche 1 and 2 is $0.625 (62.5 cents) per option.
- these options expire on 1 December 2020;
Issues to other employees (during 2017 financial year):
- one third (Tranche 1) vested on 1 April 2018, provided the holder remains employed by the Group on that date;
- one third (Tranche 2) vest on 1 April 2019, provided the holder remains employed by the Group on that date;
- one third (Tranche 3) vest on 1 April 2020, provided the holder remains employed by the Group on that date;
Issues to consultants (during 2017 financial year):
- one third (Tranche 1) vested 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 Group.
During the year the share-based payments expense recognised was a credit of $0.3M. This was driven by the forfeiture of
options held by a previous director, upon the 6 month anniversary from resignation.
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 lines below are those issued to Non-Executive Directors,
other employees and consultants):
2020
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
$0.000
$0.000
$0.000
$0.000
$0.000
$0.000
1,393,112
2,786,228
1,000,001
1,999,999
320,000
2,500,000
9,999,340
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(1,393,112)
(2,786,228)
(1,000,001)
(1,999,999)
-
-
(7,179,340)
-
-
-
-
320,000
2,500,000
2,820,000
Weighted average exercise price
$0.613
$0.000
$0.000
$0.254
$0.625
76
55
Micro-X Ltd
Notes to the financial statements
For the year ended 30 June 2020
Note 36. Share-based payments (continued)
2019
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
11/09/2017
31/12/2019
31/12/2019
31/12/2019
31/12/2019
01/12/2020
01/04/2021
01/09/2021
$0.575
$0.625
$0.575
$0.625
$0.625
$0.625
$0.625
1,393,112
2,786,228
1,800,000
3,600,000
320,000
2,500,000
320,000
12,719,340
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(799,999)
(1,600,001)
-
-
(320,000)
(2,720,000)
1,393,112
2,786,228
1,000,001
1,999,999
320,000
2,500,000
-
9,999,340
Weighted average exercise price
$0.612
$0.000
$0.000
$0.537
$0.613
Set out below are the options exercisable at the end of the financial year:
Grant date
Expiry date
01/09/2014
21/12/2015
05/12/2016
01/04/2017
31/12/2019
31/12/2019
01/12/2020
01/04/2021
2020
2019
Number
Number
-
-
320,000
2,500,000
4,179,340
3,000,000
160,000
1,666,666
2,820,000
9,006,006
The weighted average remaining contractual life of options outstanding at the end of the financial year was 0.71 years (2019:
0.84 years).
The fair values of the Award Options will be recognised as an expense by the Group over the following periods:
- options issued to the Executive Directors: from 1 September 2014, being the commencement date of their
executive contracts with the Group, to the respective vesting dates; and
- all other options: from grant dates in December 2015, December 2016, April 2017 and September 2017 to the respective
vesting dates.
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Micro-X Ltd
Directors' declaration
For the year ended 30 June 2020
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 Group's financial position as at 30 June
2020 and of its performance for the financial year ended on that date; and
there are reasonable grounds to believe that the Group 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
28 August 2020
78
57
Micro-X Ltd
Independent auditor's report to the members of Micro-X Ltd
Level 3, 170 Frome Street
Adelaide SA 5000
Correspondence to:
GPO Box 1270
Adelaide SA 5001
T +61 8 8372 6666
Independent Auditor’s Report
To the Members of Micro-X Limited
Report on the audit of the financial report
Opinion
We have audited the financial report of Micro-X Limited (the Company) and its subsidiaries (the Group), which comprises
the consolidated statement of financial position as at 30 June 2020, the consolidated statement of profit or loss and other
comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the
year then ended, and notes to the consolidated financial statements, including a summary of significant accounting
policies, and the Directors’ declaration.
In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001, including:
a giving a true and fair view of the Group’s financial position as at 30 June 2020 and of its performance for the year
[This page has intentionally been left blank for the insertion of page one of the independent auditor's report]
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 Group in accordance with the auditor independence requirements of the Corporations Act 2001 and
the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for
Professional Accountants (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled
our other ethical responsibilities in accordance with the Code.
We 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 Group incurred a net loss of $10.1 million
during the year ended 30 June 2020, and as of that date, the Group’s net cash outflows from operating activities totalled $9.5
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 Group’s ability to continue as a going concern. Our opinion is not modified in
respect of this matter.
58
Grant Thornton Audit Pty Ltd ACN 130 913 594
a subsidiary or related entity of Grant Thornton Australia Ltd ABN 41 127 556 389
www.grantthornton.com.au
‘Grant Thornton’ refers to the brand under which the Grant Thornton member firms provide assurance, tax and advisory services to their clients
and/or refers to one or more member firms, as the context requires. Grant Thornton Australia Ltd is a member firm of Grant Thornton International
Ltd (GTIL). GTIL and the member firms are not a worldwide partnership. GTIL and each member firm is a separate legal entity. Services are
delivered by the member firms. GTIL does not provide services to clients. GTIL and its member firms are not agents of, and do not obligate one
another and are not liable for one another’s acts or omissions. In the Australian context only, the use of the term ‘Grant Thornton’ may refer to
Grant Thornton Australia Limited ABN 41 127 556 389 and its Australian subsidiaries and related entities. GTIL is not an Australian related entity to
Grant Thornton Australia Limited.
Liability limited by a scheme approved under Professional Standards Legislation.
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Independent auditor's report to the members of Micro-X Ltd
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
Recognition of research and development tax incentive – Notes 2, 3, 6 and 9
Under the research and development (R&D) tax incentive
scheme, the Group receives a 43.5% refundable tax offset
for 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.
Our procedures included, amongst others:
enquiry with management to obtain and document an
understanding of the process to estimate the claim;
engaged our 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;
Management have performed a detailed review of the
Group’s total R&D expenditure to determine the potential
claim under the R&D tax incentive legislation.
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compared the nature of the R&D expenditure included in the
current year estimate to the prior year claim;
The receivable at year-end for the incentive was $2.0
million. This represents an estimated claim for the period 1
July 2019 to 30 June 2020.
We have placed audit focus on the R&D tax incentive given
the significant 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 the inherent
complexities and judgement required of management to
determine their receivable reimbursement.
compared the eligible expenditure used in the receivable
calculation to the expenditure recorded in the general ledger;
considered the Group’s history of successful claims;
agreed a sample of individual expenditure items included in
the estimate to underlying supporting documentation to
ensure that they have been appropriately recognised in the
accounting records and that they are eligible expenditures;
inspected copies of relevant correspondence with
AusIndustry and the Australian Tax Office related to the
claims; and
assessed the adequacy of disclosures in the financial
statements.
59
80
Micro-X Ltd
Independent auditor's report to the members of Micro-X Ltd
Financial instruments – Notes 2, 17, 19 and 22
The Company has three tranches of Convertible instruments
on issue:
Our procedures included, amongst others:
For the July 2019 Thales convertible loan:
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evaluated the reasonableness of management’s
obtained the convertible loan agreement to understand
the terms and conditions of the contract;
performed enquiries with management to understand
the substance of the transaction in order to identify any
surrounding circumstances that would influence the fair
value of the convertible loan at 30 June 2020;
assessed the appropriateness of management’s
classification of the financial instrument in accordance
with AASB 132;
assessed management’s conclusions on identification of
the separate components implied within the instrument;
engaged our Corporate Finance team to assess if the
assumptions and judgements within the valuation
appear reasonable; and
assigned fair value of each component upon initial
recognition of the instrument.
For all convertible instruments:
assessed measurement of fair value at the reporting
date;
reviewed movements in existing notes during the year,
including the conversion or redemption of convertible
notes; and
assessed the adequacy of disclosures in the financial
statements.
April 2018, the Company issued 50,000 convertible notes
with a collective face value of $5.0 million. The majority of
these notes have been converted, and met the fixed-for-
fixed criteria to be classified as equity.
October 2018, the Company issued 30,000 convertible
notes with a face value of $3.0 million, with similar
conversion options to those issued in April 2018, but a
modified window of time for a successful Qualifying Capital
Raise. Those notes still on hand continue to be carried as
derivative financial liabilities.
July 2019 saw the initial draw down of the convertible loan
facility with Thales totalling $5.0 million. These are carried
as derivative financial liabilities.
Accordingly, management must consider the ongoing
classification of the existing notes, as well as the new notes
and assess their classification and fair value in accordance
with AASB 132 Financial Instruments: Presentation and
AASB 9 Financial Instruments, respectively.
There were some conversion of tranches into issued capital,
as well as redemptions that occurred during the financial
year.
The assessments associated with the classification and
measurement of the instruments, can be complex and
involve management judgement. These judgements include:
whether the instrument includes an embedded or
standalone derivative to be separately accounted for;
determining the appropriate classification of the instrument
within the financial statements as defined in accounting
standard AASB 132 Financial Instruments: Presentation;
determining the fair value of the upon initial recognition of
the instrument, considering the following:
instrument as a whole;
liability component;
conversion features; and, if applicable
derivative component; and
determining the fair value of each component at 30 June
2020.
This area is a key audit matter due to the management
judgements involved and valuation complexities of the
instruments.
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Micro-X Ltd
A N N U A L R E p O R T 2 0 2 0
Micro-X Ltd
Independent auditor's report to the members of Micro-X Ltd
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
Group’s Annual report for the year ended 30 June 2020, but does not include the financial report and our auditor’s report
thereon.
Our opinion on the financial report does not cover the other information and we do not express any form of assurance
conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider
whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or
otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are
required to report that fact. We have nothing to report in this regard.
Responsibilities of the Directors for the financial report
The Directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in
accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the Directors
determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material
misstatement, whether due to fraud or error.
In preparing the financial report, the Directors are responsible for assessing the Group’s ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the
Directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so.
[This page has intentionally been left blank for the insertion of page two of the independent auditor's report]
Auditor’s responsibilities for the audit of the financial report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance
is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing
Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions
of users taken on the basis of this financial report.
A further description of our responsibilities for the audit of the financial report is located at the Auditing and Assurance
Standards Board website at: https://www.auasb.gov.au/auditors_responsibilites/ar1_2020.pdf. This description forms part of
our auditor’s report.
Report on the remuneration report
Opinion on the remuneration report
We have audited the Remuneration Report included in the Directors’ report for the year ended 30 June 2020.
In our opinion, the Remuneration Report of Micro-X Limited, for the year ended 30 June 2020 complies with section 300A
of the Corporations Act 2001.
Responsibilities
The Directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance
with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report,
based on our audit conducted in accordance with Australian Auditing Standards.
GRANT THORNTON AUDIT PTY LTD
Chartered Accountants
59
B K Wundersitz
Partner – Audit & Assurance
Adelaide, 28 August 2020
82
Micro-X Ltd
Shareholder information
For the year ended 30 June 2020
The shareholder information set out below was applicable as at 18 August 2020.
The total number of shareholders is 2,291 and there are 357,167,839 ordinary fully paid shares on issue. There are a further
6,523,698 unlisted options over fully paid ordinary shares issued as follows:
Options Expiry Date
Exercise Price
Number of
Holders
Number on
Issue
Number of
Restricted
Securities
Release Date
(If Applicable)
1 December 2020
31 December 2021
1 April 2021
$0.625
$0.400
$0.625
1
19
2
320,000
3,703,698
2,500,000
-
-
-
-
-
-
There are 6,650 unlisted convertible notes of face value $100 per Note as follows:
Convertible Notes Maturity
Date
Note Conversion
Price
Number of
Holders
Number on
Issue
Number of
Restricted
Securities
Release Date
(If Applicable)
No maturity date
No maturity date
$0.400
Lesser of VWAP
and $0.230
5
2
1,650
5,000
-
-
-
-
In addition to the above, there are $5,000,000 of convertible loan securities on issue to Thales AVS France SAS with a
maturity date of 2 July 2025. After 2 July 2024, these convertible loan securities may be converted into fully paid ordinary
shares following a request by Thales to do so at which time the Group has the choice to either (i) to repay the Thales
convertible loan securities in cash within 7 days; or (ii) issue fully paid ordinary shares which would be issued at a 20%
discount to the 30 day VWAP at the time of conversion with a floor price of 25 cents per fully paid ordinary share.
Distribution of 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
There are 222 holders (with a total of 449,719 shares) holding less than a marketable parcel.
61
shares
shares
36
404
355
1,119
377
2,291
-
-
-
-
22
22
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A N N U A L R E p O R T 2 0 2 0
Micro-X Ltd
Shareholder information
For the year ended 30 June 2020
Equity security holders
Twenty largest equity security holders
The names of the twenty largest security holders of equity securities are listed below:
NATIONAL NOMINEES LIMITED
UBS NOMINEES PTY LTD
BNP PARIBAS NOMINEES PTY LTD (IB AU NOMS RETAILCLIENT DRP)
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
MERRILL LYNCH (AUSTRALIA) NOMINEES PTY LIMITED
MR PETER ROBIN ROWLAND
CARESTREAM HEALTH INC
BNP PARIBAS NOMS PTY LTD (DRP)
CS THIRD NOMINEES PTY LIMITED (HSBC CUST NOM AU LTD 13 A/C)
LONSDALE NOMINEES PTY LTD (THE LONSDALE FUND A/C)
HARMAN NOMINEES PTY LTD (HARMANIS INVESTMENT)
HAMMOND ROYCE CORPORATION PTY LTD (LEN DAVID SUPER FUND A/C)
BRONTE INVESTMENTS PTY LTD (MCMAHON SUPERANNUATION A/C)
BT PORTFOLIO SERVICES LIMITED (THE VABEN S/F A/C)
MEDDISCOPE PTY LTD (PODESTA FAMILY A/C)
FIFTY SECOND CELEBRATION PTY LTD (MCBAIN FAMILY A/C)
GOWING BROS LIMITED
RUBI HOLDINGS PTY LTD (JOHN RUBINO S/F A/C)
ANGLESEA INVESTMENTS PTY LIMITED (DAMIEN OBRIEN FAMILY A/C)
PICTON COVE PTY LTD
Ordinary shares
Number held
% of total
shares
issued
28,846,454
22,977,106
21,786,689
15,937,676
13,538,414
12,955,000
9,405,000
8,148,810
6,758,583
5,864,322
5,071,585
4,926,588
4,560,000
3,329,487
3,244,565
2,817,645
2,752,858
2,500,000
2,485,288
2,351,598
8.08
6.43
6.10
4.46
3.79
3.63
2.63
2.28
1.89
1.64
1.42
1.38
1.28
0.93
0.91
0.79
0.77
0.70
0.70
0.66
180,257,668
50.47
Substantial holders in the Company, as disclosed in substantial holding notices given to the Company, are set out below:
Perennial Value Management Limited
TIGA Trading Pty Ltd and Thorney Technologies Limited
Regal Funds Management Pty limited
Voting rights
The voting rights attached to ordinary shares are set out below:
Ordinary shares
Number held
27,234,757
26,282,972
18,773,972
% of total
shares
issued
7.63
7.36
6.01
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 and Convertible Notes
Options and Convertible Notes do not have voting rights attached.
There are no other classes of equity securities.
62
84
Corporate directory
Directors
Peter Rowland (Managing Director)
Patrick O’Brien (Non-Executive Chairman)
Alexander Gosling (Non-Executive Director)
Yasmin King (Non-Executive Director)
David Knox (Non-Executive Director)
Company secretary
Kingsley Hall
Registered office
A14, 6 MAB Eastern Promenade
1284 South Road, Tonsley
SA 5042
principal place of business
A14, 6 MAB Eastern Promenade
1284 South Road, Tonsley
SA 5042
Share register
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)
Auditor
Grant thornton Audit pty ltd
Grant Thornton House, Level 3
170 Frome Street
Adelaide, SA 5000
Phone: +61 8 8372 6666
Stock exchange listing
Micro-X Ltd shares are listed on the Australian Securities Exchange
(ASX code: MX1)
Website
www.micro-x.com
www.colliercreative.com.au #MIX0001
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