INFECTION PREVENTION. FOR LIFE.
ANNUAL REPORT 2015
Contents
Financials at a glance
Chairman’s letter
CEO’s report
Regional highlights North America
Regional highlights Asia Pacific
Regional highlights Europe/rest of world
trophon® EPR: innovative technology delivering improved
standards of care
Clinical research program
Information on the directors, company secretaries and
senior management
Directors’ report
2
4
6
9
10
11
12
14
16
18
Contents of the financial statements
Auditor’s independence declaration
Financial statements
Notes to the financial statements
Directors’ declaration
Independent auditor’s report to the members
Shareholder information
Glossary
Corporate directory and information for investors
51
52
53
57
99
100
102
104
105
Company overview
Nanosonics (ASX: NAN) has developed a unique automated
disinfection technology, which is the first major innovation in high level
disinfection (HLD) for ultrasound probes in more than 20 years. This
proprietary technology is now being introduced around the world and
has the opportunity to become the new standard of care as it safely
and effectively addresses the issues with traditional ultrasound probe
disinfection practices.
Mission statement
We improve the safety of patients, clinics, their staff and the environment by transforming the way infection
prevention practices are understood and conducted, and introducing innovative technologies that deliver
improved standards of care.
Nanosonics 2015 Annual Report | Page 1
Financials 2015 At a glance
2012
2013
2014
2015
2012
2013
2014
2015
2012
2013
2014
2015
$12.3m
$14.9m
TOTAL SALES
3.4%
INCREASE
$21.5m
$22.2m
Total sales for the year were $22.2
million, an increase of 3.4% despite
the foreshadowed lower purchases
from GE Healthcare during the
transition to a non-exclusive
partnership and the establishment
of the Nanosonics direct sales
operations in North America.
$7.5m
$8.5m
$13.9m
$15.3m
$13.5m
$16.4m
$20.1m
$23.4m
GROSS PROFIT
9.9%
INCREASE
Gross profit increased 9.9%
reflecting higher margin direct
sales in both the UK and the US
plus higher sales associated with
accessories and service.
OPERATING EXPENSES
16.4%
INCREASE
Operating expenses were up
$3.3 million and net loss up $2.9
million, reflecting the investment
associated with establishing
direct sales operations in North
America and the one off costs
associated with the move to new
global corporate headquarters,
manufacturing and R&D facility.
NET LOSSES
109.5%
INCREASE
$4.7m
$5.8m
$2.6m
$5.5m
2012
2013
2014
2015
2012
2013
2014
2015
$29.3m
$24.0m
$21.2m
CASH AND
CASH EQUIVALENTS
115.3%
INCREASE
$45.7m
The FY15 year ended with a
strong balance sheet with cash
equivalents of $45.7 million post
the successful completion of a
placement and Share Purchase
Plan to raise a total of $28.0
million in March 2015.
Nanosonics 2015 Annual Report | Page 2
2009 – 2015 Results
Revenue
Operating revenue
Less cost of sales
Gross profit
Other income
2015
$’000
2014
$’000
2013
$’000
2012
$’000
2011
$’000
2010
$’000
2009
$’000
22,214
21,492
14,899
12,301
2,247
763
309
(6,901)
(7,571)
(6,428)
(4,799)
(981)
(284)
(121)
15,313
13,921
8,471
7,502
1,266
479
188
Government grants received
119
1,666
1,498
150
Other
Expenses
2,189
1,709
–
–
–
–
161
150
–
–
Operating expenses (excluding depreciation,
amortisation and impairment)
(22,353)
(19,141)
(15,335)
(12,634)
(13,229)
(8,827)
(9,867)
EBITDA
(4,732)
(1,845)
(5,366)
(4,982)
(11,963)
(8,187)
(9,529)
Depreciation, amortisation, and impairment
(1,063)
(975)
(1,044)
(914)
(1,010)
(771)
(419)
EBIT
Interest income
Interest expense
(5,795)
(2,820)
(6,410)
(5,896)
(12,973)
(8,958)
(9,948)
928
739
1,192
586
1,052
785
1,194
(598)
(555)
(517)
–
–
–
–
Operating loss before tax
(5,465)
(2,636)
(5,735)
(5,310)
(11,921)
(8,173)
(8,754)
Net income tax benefit (expense)
5
31
(33)
631
707
–
–
Operating loss after tax
(5,460)
(2,605)
(5,768)
(4,679)
(11,214)
(8,173)
(8,754)
Cash assets
Cash and cash equivalents
45,724
21,233
24,064
29,310
12,356
21,144
13,881
Nanosonics 2015 Annual Report | Page 3
Chairman’s letter
On behalf of the Board of Directors of Nanosonics
I am pleased to present our 2015 Annual Report.
During the past year Nanosonics has demonstrated an
outstanding commitment and real progress on behalf of all of
its stakeholders, that is its shareholders, its customers, its
staff, its strategic partners and most importantly, society that
it serves with its mission of “infection prevention for life”.
The Nanosonics team has delivered a remarkable series of achievements which,
in a very meaningful way, underpin not only our immediate growth objectives but
fundamentally provide the foundation for the Company’s strategic plans well into the
future. Key to these capabilities has been the establishment of new state-of-the-art
global headquarters, R&D laboratories and expanded manufacturing site in Lane
Cove. Equally, the successful launch of our direct sales and distribution organisation
in the United States, Nanosonics, Inc., provides us with a direct relationship with
the customer, focussing on infection control, disruptive technology and outstanding
clinical support.
Adoption of the trophon® EPR is growing strongly in the North American market and
there are now more than 5,000 systems in use across 1,900 facilities. The speed at
which the direct operations were put in place was remarkable. A first class team of
trophon sales specialists is now active in all territories and well supported by a fully
operational order procurement, warehousing, distribution and service centre. There
is now a strong pipeline in place for building direct sales in this region, which has an
estimated market opportunity in excess of 40,000 units.
Customers are responding positively to the direct Nanosonics presence and a
number of important contracts with Integrated Delivery Networks in the USA were
signed during the fourth quarter. The Company continues to actively work with
GE Healthcare on a non-exclusive basis and GE Ventures has provided important
marketing investment during the 2015 financial year.
The strategic partnership with Miele Professional in Germany is tracking well
and this year Nanosonics expanded European market distribution into five new
countries (Austria, Belgium, Italy, Luxembourg and the Netherlands), also through
Miele Professional.
In the UK, our direct sales operations, together with our ongoing work with Toshiba,
is driving an increasing rate of adoption across key practices and hospitals together
with a rapidly evolving awareness of the key benefits that trophon provides as an
environmentally friendly, rapid and automated ultrasound probe re-processor.
TROPHON EPR ADOPTION
IN NORTH AMERICA
THERE ARE NOW MORE
THAN 5,000 SYSTEMS IN USE
ACROSS 1,900 FACILITIES
Nanosonics 2015 Annual Report | Page 4
As a direct consequence of Nanosonics’ extensive clinical
research program, awareness of imaging-related healthcare
acquired infections (HAIs) is growing rapidly. A major step in
this area was taken in May this year with the announcement
that the trophon EPR is the first and only ultrasound probe
disinfection system to kill natural, infectious, high-risk human
papillomavirus (HPV). This high-risk virus causes 5% of all
cancers worldwide, is responsible for almost all cases of
cervical cancer and is a leading cause of oral, throat, anal and
genital cancers.
Other studies have shown that ultrasound probes can remain
contaminated with HPV after other routine disinfection, posing
a serious risk of cross infection. Nanosonics has first mover
advantage and is undertaking a number of activities to drive
education and awareness of this important information through
working with key opinion leaders, industry societies and the
medical profession.
The global trend towards stricter ultrasound reprocessing
guidelines also continued this year with new Welsh guidelines
from the UK’s National Health System (NHS). The guidelines
position an automated, validated system that can be used at
the point of care (trophon technology) as the optimal solution.
Further new guidelines from England and Scotland are
expected in the first half of the coming financial year and will
further boost the position of trophon technology as the new
standard of care.
During the year the Company successfully completed a
Placement and Share Purchase Plan to raise a total of $28
million. The funds raised have resulted in a very strong
balance sheet to support the Company’s continued bold
plans for growth. Throughout the year, Nanosonics invested
approximately $5 million in R&D, both in its core business
of trophon and in addressing a global market for advanced
infection control solutions that target many of the unmet needs
of healthcare providers across the globe.
Financial results are in line with expectations during the
successful transition phase of establishing direct sales
operations in North America and the Company has delivered
on all the objectives of our strategic plan. We are committed
to driving shareholder value now and well into the future.
Nanosonics is ideally positioned to benefit from both a lucrative
capital equipment market and annuity revenue deriving form
high margin consumable sales, which are already a meaningful
component of the Company’s sales.
The development of a direct sales presence, together with our
strategic partnerships across the globe, position Nanosonics
as the emerging leader in infection control solutions. Many
key opinion leaders and high profile customers worldwide
are now working with the Company as a consequence of
Nanosonics’ high profile and reputation as a trusted partner to
the healthcare community.
On behalf of our board I take this opportunity to recognise
the outstanding dedication and performance of the global
Nanosonics team. This has resulted in our inclusion in the
ASX 300, numerous awards and an exceptional platform
for future success. Most important is the feedback from our
customers outlining their positive recognition that trophon
has eliminated toxic chemicals, revolutionised patient and
staff safety, whilst markedly improving workflow. trophon has
become a case study of disruptive technology driving better
healthcare outcomes and creating remarkable brand equity
with Nanosonics now in partnership with many of the world’s
foremost ultrasound companies.
Mr Maurie Stang
Chairman
Sydney
20 August 2015
“TROPHON HAS BECOME A
CASE STUDY OF DISRUPTIVE
TECHNOLOGY DRIVING BETTER
HEALTHCARE OUTCOMES.”
Nanosonics 2015 Annual Report | Page 5
CEO’s report
Nanosonics 2015 Annual Report | Page 6
Nanosonics 2015 Annual Report | Page 6
The 2015 financial year has been a year of continued strong
delivery and significant achievement for Nanosonics. In
2014 we laid the foundations to support our next phase of
growth through the implementation of a structured strategic
growth agenda. I am pleased to report that, through
focussed efforts, we delivered consistently on our plan for
the five core corporate objectives of this growth agenda as
outlined below.
Customer Experience
The first of our five Corporate Objectives is to establish our offerings as new
standards of care globally and provide customers with a convenient and consistent
experience with our products and brand. FY15 saw many important achievements
associated with this objective, including:
Continued global expansion
In February this year we announced the establishment of our direct sales operation
in North America to drive sales more broadly alongside our distribution partner
GE Healthcare. We enter FY16 with our US operations fully established with the
addition of a new sales force and service operations, plus our warehousing and
order procurement functions fully operational. The North American market potential
for trophon is large with an estimated market opportunity in excess of 40,000
units. Adoption is growing strongly with a current installed base of over 5,000 units
across more than 1,900 facilities and the fundamentals for adoption continuing
to strengthen. Our direct presence in North America is helping to build brand
recognition for Nanosonics as a leader in infection prevention which is important as
we plan to introduce new infection prevention products to market in the future.
FY15 also saw expansion in Europe. In November we began distribution into five
new countries (Austria, Belgium, Italy, Luxembourg and the Netherlands) through
our partner Miele Professional.
Further establishment of trophon as the new standard of care
Our clinical research program is structured around demonstrating trophon EPR’s
superior efficacy over current conventional manual practice in order to establish
trophon technology as the new standard of care. A key highlight for Nanosonics
this year was the announcement in May of exciting clinical results that positioned
trophon EPR as the first and only system proven to kill high-risk, cancer-causing
strains of human papillomavirus (HPV). This follows an important paper published
last year showing that other disinfectants commonly used on ultrasound probes are
not effective against HPV.
The outcomes of this study seriously question the effectiveness of current practice
and we are working diligently with the relevant associations and medical profession
to ensure awareness of the outcomes are understood. Further information about
this study and the risks of HPV can be found at www.HPVdisinfection.com.
Other significant clinical results presented during the year included a study
conducted by the University Hospital Münster in Germany which demonstrated a
threefold higher risk of cross contamination with the manual wipe method when
compared directly to trophon EPR’s automated process.
Favourable changes to guidelines also play a crucial role in establishing trophon
EPR as a standard of care and driving adoption. In October 2014, the UK’s National
Health System (NHS) Welsh guidelines for probe reprocessing were finalised.
Similar to the changes in the American Institute of Ultrasound
in Medicine (AIUM) guidelines in May 2014, the Welsh
guidelines reinforce stricter controls for ultrasound probe
disinfection where an automated, validated system that can
be used at the point of care is positioned as the optimal
solution. New guidelines from Scotland and England are
expected this financial year also.
Product Innovation
The second of our Corporate Objectives aims to bring to
market a portfolio of innovative products that address unmet
customer needs and again we achieved a great deal in this
area, including:
Continued R&D investment
Throughout the 2015 financial year we invested approximately
$5 million in R&D activities across the disciplines of
mechanical, electrical and software engineering, as well as
research investment in microbiology and chemistry as part
of our ongoing product roadmap development. We also
formed a strategic partnership with the American Association
for Professionals in Infection Control and Epidemiology,
which provides a valuable source of input to ensure that
our R&D efforts are directed in areas of true need for
infection prevention.
Increased probe compatibility numbers – a unique
competitive advantage
As a result of our work throughout FY15, we expanded the
number of ultrasound probes tested and approved compatible
with trophon technology – from 600 to more than 900 models
across the world’s leading ultrasound manufacturers.
Continued to build on our IP strategy
Nanosonics patent portfolio made good progress in FY15
with more than 30 cases successfully passing examination
to proceed to allowance or grant.
Achieved recognition for our innovation
A great achievement this year was the recognition
Nanosonics received for its innovation program. In March,
Dr Ron Weinberger, our President of Technology Development
and Commercialisation, was awarded the Innovation Hero
Medal from the Warren Centre and the University of Sydney.
The award, which recognises outstanding innovations in
engineering technology, was presented to Dr Weinberger for
leading the team that developed our trophon technology.
Operational Excellence
Our third core Corporate Objective ensures our organisation is
agile and has scalable, compliant and performance focussed
processes. This was a priority over the last 12 months as we
transitioned from an emerging company to an internationally
recognised company in the field of infection prevention with
global operations in place. Significant operational milestones
were achieved this year, including:
Moved to new global headquarters
Moving our global headquarters and manufacturing facility to
premises more suitable to our growth objectives was a core
component of our strategic plan in FY15. In May this year
we relocated our global operations to Lane Cove in Sydney,
into the prior global headquarters of Cochlear Limited. The
new headquarters provide more than double the space with
extended flexibility in manufacturing capacity and capability.
Nanosonics 2015 Annual Report | Page 7
CEO’s report (continued)
We also built and commissioned new Microbiology, Virology
and Chemistry laboratories at this new site to support our
ongoing research program.
Our UK and German offices also moved to new premises
to support the continued growth and expansion of our
European operations.
Implemented a global IT and ERP system
To support global growth, our ERP (Enterprise Resource
Planning) system was further developed and expanded.
This system, along with an upgrade of our IT infrastructure,
provides a fully integrated solution to enable our global
business functions.
People Engagement
Our fourth objective centres around building an organisation
that attracts and retains the best people, and ensures
they are engaged and empowered to deliver on our
corporate objectives.
The team at Nanosonics is our greatest asset. We are
fortunate to have a highly skilled and dedicated workforce
who are focussed on delivering our corporate mission of
improving the safety of patients, clinics, their staff and the
environment by transforming the way infection prevention
practices are understood and conducted, and introducing
innovative technologies that deliver improved standards
of care.
Throughout the FY15 financial year our team grew by 21%,
increasing our capabilities across the majority of our functions
globally. In addition, formalised human capital planning was
implemented across the organisation to ensure we continually
assess, and have the necessary skills and experience, to
enable us to deliver on our objectives.
Value Creation
Our final Corporate Objective focuses on creating
sustainable shareholder value and delivering high growth
and strong returns.
True value creation comes from our ability to execute on
the other four corporate objectives I have outlined. Over the
past 12 months we have, through a determined focus, made
Nanosonics 2015 Annual Report | Page 8
Nanosonics 2015 Annual Report | Page 8
significant progress across Customer Experience, Product
Innovation, Operational Excellence and People engagement.
As a consequence of this we have been able to deliver
significant value creation for our shareholders. The market
capitalisation of the Company has increased 131% over the
last 12 months and, in March this year, Nanosonics was
included in the ASX 300. In addition, a successful capital
raising and Share Purchase Plan raised a further $28 million
for the organisation to provide balance sheet strength,
enabling us to move forward in a determined fashion and
continue executing on our strategic growth agenda.
Outlook
Looking forward, our aim for FY16 is to consolidate and
expand on the achievements of the past year. We will continue
to focus on our five core corporate objectives and execute
accordingly. Our installed base is growing well and the market
fundamentals continue to strengthen for continued adoption
of our technology as the new standard of care with new
guidelines, compelling clinical evidence of the risk of cross
contamination, and the superiority of our solution. Our direct
operations in North America are now fully operational and we
expect to expand our global operations further throughout
the year.
I would like to thank the Nanosonics team for the significant
achievements of FY15 and the support of our shareholders as
they share our vision to establish Nanosonics as a recognised
global leader in infection prevention.
Michael Kavanagh
CEO and President
Sydney
20 August 2015
MARKET
CAPITALISATION
OF THE COMPANY HAS
INCREASED 131% OVER
THE LAST 12 MONTHS
Regional highlights
North America
Sales in North America for the year of $17.7 million
reflect the strategic decision in February to establish a
Nanosonics direct sales presence and foreshadowed
lower purchases from GE Healthcare during the transition
to a non-exclusive partnership.
Key highlights included:
• The installed base continued to grow strongly throughout
the year and there are now more than 5,000 trophon EPR
systems in operation across 1,900 facilities.
• Established a direct sales operation in North America
consisting of 18 sales professionals to drive new business
more broadly in the market alongside our distribution
partner, GE Healthcare.
• Participated in nine major national conferences displaying
trophon technology and had most successful sales
conference to date at the national Association for
Professionals in Infection Control and Epidemiology (APIC)
2015 conference. Additional presentations were made at
21 regional infection control scientific meetings.
• Worked with Penn State College of Medicine on a study
that shows trophon EPR is the only high level disinfection
system for ultrasound probes proven to be effective
against high-risk, cancer causing strains of human
papillomavirus (HPV).
• Completed a number of successful research studies to
further validate the effectiveness of trophon technology.
Direct sales operations in USA now in place
In February 2015, we announced the expansion of our North
American presence with the introduction of a direct sales
operation covering territories across the USA and Canada.
Our operations in the USA are now fully established.
The new sales organisation includes a VP of Sales, two
directors of sales – one East and one West – and 15 highly
qualified sales professionals covering 15 territories. All these
people are now fully trained and active in their territories,
focussed on setting up accounts and building the pipeline for
our future direct sales.
Warehousing, direct service operations and all order
procurement systems are also in place and fully operational.
Initial feedback from customers has been very positive where
we are positioned as Infection Prevention experts and we are
seeing some early success where contracts have been signed
for the provision of trophon EPR systems with a number
of IDNs (integrated delivery networks), which are networks
of facilities and providers that work together to provide a
continuum of care.
INSTALLED BASE
CONTINUED TO GROW
STRONGLY THROUGHOUT THE
YEAR AND THERE ARE NOW
MORE THAN 5,000 TROPHON EPR
SYSTEMS IN OPERATION ACROSS
1,900 FACILITIES.
Nanosonics 2015 Annual Report | Page 9
Regional highlights (continued)
Asia Pacific
Sales in ANZ remained strong at $2.28 million for FY15.
Key highlights included:
• The trophon EPR is becoming the standard of care for
ultrasound probe decontamination in ANZ with the installed
base growing by 13% to 951 units.
• Total market penetration in ANZ is now in excess of
60% which is a good indication of the potential in other
developed markets around the world.
• During the year formal market research was conducted
to gain further insights into the market dynamics for
ultrasound probe decontamination. The commercialisation
strategy for Japan is expected to begin in the 2016
financial year.
TOTAL MARKET
PENETRATION IN ANZ IS
NOW IN EXCESS OF 60%
Nanosonics 2015 Annual Report | Page 10
Nanosonics 2015 Annual Report | Page 10
WHTM 01-06
Welsh Health Technical Memorandum
Decontamination of flexible endoscopes
Part C: Operational management
(Including guidance on non-channelled
endoscopes and ultrasound probes)
Europe/rest of world
Sales in Europe/rest of world grew strongly during the 2015
financial year with sales up 45% on the prior year.
Key highlights included:
• The market fundamentals for adoption in the UK continue
to grow strongly and trophon is now represented in more
than 40 facilities.
• Nanosonics’ direct operations placed 29 trophon EPR
units across five of Bart’s Healthcare NHS Trust hospitals
in London. Bart’s Healthcare is the largest NHS trust in
the UK.
• Our European market continued to expand with Miele
professional now representing Nanosonics in Germany,
Italy, Belgium, Netherlands, Austria and Luxembourg.
• New National Health System (NHS) Welsh guidelines
were published, positioning automated, validated
systems that can be used at the point of care as the
optimum solution for ultrasound probe decontamination.
trophon EPR meets all these criteria.
• trophon EPR passed all requirements of the test
committee of DGKH in Germany and was awarded
the hygiene certificate by the committee as a high level
virucidal system.
• European study carried out by the University Hospital
Münster in Germany demonstrated trophon EPR
is significantly more effective than the manual wipe
disinfection method currently standard in most
European countries.
• Moved to new, larger offices in the UK and Germany.
TROPHON IS NOW
REPRESENTED IN MORE
THAN 40 FACILITIES
Nanosonics 2015 Annual Report | Page 11
trophon® EPR: innovative technology delivering
improved standards of care
Why high level disinfection (HLD) of
ultrasound probes is important
Decontamination and reprocessing of reusable medical
instruments such as ultrasound probes is crucial to help
reduce cross contamination between patients and the spread
of healthcare acquired infections (HAIs). Awareness of imaging
procedure (ultrasound) HAIs, a subset of HAIs, is growing.
There are multiple disinfection guidelines globally that now
require HLD of ultrasound probes between patients to prevent
cross infection.
Issues with traditional HLD methods
Traditional ultrasound probe disinfection practices involve
manual methods such as soaking in toxic chemicals, spraying
or wiping. Studies have demonstrated these methods are
ineffective, inefficient and environmentally unsound.
trophon EPR: innovative technology
addressing market needs
Nanosonics’ trophon EPR addresses market needs for fast,
safe, environmentally friendly HLD of ultrasound probes.
The device uses a proprietary disinfectant based on hydrogen
peroxide chemistry. After use, the disinfectant breaks down
into harmless water and oxygen. The device is fully self-
contained so it can be safely used at the point of care to
improve clinical workflow.
Consumables
1 Sonex®/Nanonebulant®
Proprietary disinfectant liquid with hydrogen peroxide
chemistry that achieves effective HLD.
2 Chemical indicators
Chemical indicators validate each disinfection cycle by
providing a qualitative colour change.
Accessories
3 trophon® Connect
Software tool to help clinics meet documentation and
audit requirements.
4 trophon® Printer
Provides a fast, easy to use traceability solution by helping
to link the probe and disinfection procedure to the patient.
5 trophon Wall Mount and trophon® Cart
Enables the trophon EPR to be mounted on a wall where
there are space constraints or makes the device fully
mobile for convenient point of care use.
6 trophon Curved Probe Positioner (CPP)
An accessory to improve the positioning of approved
curved probes in the trophon EPR chamber.
1
3
5
2
4
6
Nanosonics 2015 Annual Report | Page 12
Nanosonics 2015 Annual Report | Page 12
The benefits that are positioning trophon EPR as the standard of care
Fast & Automated
Auto
Global guidelines are increasingly recommending automated ultrasound probe reprocessing over
manual methods. The trophon EPR delivers fast, automated HLD and is proven to save time over
aldehyde soak processes.1
Proven Effective
Independent laboratory testing shows the trophon technology is effective against a range of pathogens.
Additional published, peer-reviewed evidence shows that trophon meets a range of international standards
for HLD and is effective for disinfecting probe handles.2,3 Of major significance is recent research showing
that the trophon EPR is the only automated system proven to kill natural, infectious high-risk human
papillomavirus (HPV).
Helps Protect
The American Institute of Ultrasound in Medicine (AIUM) guidelines recommend a “hydrogen peroxide
nanodroplet emulsion” (trophon technology) for effective HLD without toxicity.
The trophon EPR is fully enclosed to minimise exposure to harmful chemicals. The disinfectant cartridge
remains sealed until it is inside the device and the wastes are harmless water and oxygen.
Probe friendly
The trophon EPR’s probe friendly process reduces probe exposure to potentially damaging chemicals.
Instead the hydrogen peroxide mist generated by the device is in contact with the probe for just a
few minutes. To date, trophon is approved for use with more than 900 probe models across
leading manufacturers.
Cost Efficient
The trophon EPR can be used at the point of care to improve workflow efficiencies and reduce the need
for separate cleaning facilities and probe transportation.
Environmentally Friendly
After use, the trophon EPR’s disinfectant is broken down into harmless, environmentally friendly
water and oxygen. The disinfectant cartridges are recyclable, as are more than 70 percent of
trophon EPR components.
Consistent Process
The CDC recommends automated reprocessing over manual methods4 and peer-reviewed, published
evidence shows operator compliance with automated methods is much greater than that of manual
methods (75.4% for automated versus 1.4% for manual).5 The trophon EPR assures process consistency
in every cycle.
Traceability Solution
Traceability is becoming a hot topic in infection control. Lack of monitoring or documentation of equipment
reprocessing makes it difficult to track the use of equipment on a specific patient. This can complicate the
patient notification process when an outbreak occurs.
The trophon EPR’s optional traceability solution provides automated documentation and reporting to allow
the probe and HLD cycle date and time to be linked with the patient and medical procedure.
1. Johnson et al., Evaluation of a Hydrogen Peroxide-Based System for High-Level Disinfection of Vaginal Ultrasound Probes, Journal of Ultrasound Medicine, 32:1799-804, 2013.
2. Vickery K, et al. Evaluation of an automated high-level disinfection technology for ultrasound transducers, Journal of Infection and Public Health, 2013.
3. Ngu A et al., Reducing infection risk through high-level disinfection of transvaginal ultrasound transducer handles. Infection Control and Hospital Epidemiology. In press.
4. Rutala W., et. al, Guideline for Disinfection and Sterilization in Healthcare Facilities, 2008, Centers of Disease Control, 1-158, 2008.
5. Ofstead, CL et al., Endoscope reprocessing methods: A prospective study on the impact of human factors and automation. Gastroenterology Nursing, 33:304–11, 2010.
Nanosonics 2015 Annual Report | Page 13
Clinical research program
Clinical research program demonstrates
superior efficacy of trophon EPR
Our clinical research program is structured around
demonstrating trophon EPR’s superior efficacy over current
conventional manual practice in order to establish trophon
technology as the new standard of care. In recent years there
have been a number of clinical studies showing that, with
traditional methods of ultrasound probe disinfection, these
probes can remain contaminated with various bacteria and
viruses and pose a risk of cross infection.
A key highlight for Nanosonics this year was the
announcement in May of exciting clinical results that
positioned trophon EPR as the first and only system
proven to kill high-risk, cancer-causing strains of human
papillomavirus (HPV).
Our clinical team worked with Distinguished Professor Craig
Meyers of Penn State College of Medicine, PA to initiate the
study which was presented at the Society for Healthcare
Epidemiology of America (SHEA) spring conference.
Professor Meyers was one of the authors of an important
paper published last year showing that other disinfectants
commonly used on ultrasound probes are not effective
against HPV.
The results of both these studies are very significant as
high-risk HPV accounts for 5% of all cancers worldwide, is
responsible for almost all cases of cervical cancer and is a
leading cause of oral, throat, anal and genital cancers.
The outcomes of the study involving trophon EPR, which has
been submitted for publication in a leading, peer reviewed
journal, seriously question the effectiveness of current
practice. Further information about this study and the risks of
HPV can be found at www.HPVdisinfection.com.
Validation of trophon EPR efficacy was also announced
in September when research was presented at the World
Congress of the International Society of Ultrasound in
Gynaecology and Obstetrics (ISUOG) in Barcelona. The
study showed that trophon EPR is significantly more effective
than the manual wipe disinfection process that is currently
standard across most European countries.
The study, conducted by the University Hospital Münster
in Germany, demonstrated a threefold higher risk of cross
contamination with the manual method when compared
directly to trophon EPR’s automated process – which means
increased risk of infection for patients.
In addition to our own clinical work, awareness of the cross
contamination risks associated with traditional disinfection
methods is growing as a result of other clinical studies
and publications.
In May this year an article by Michelle Alfa, PhD, FCCM,
St Boniface Research Centre was published in Infection
Control & Hospital Epidemiology, highlighting the risks of
cross contamination with ultrasound probes that are not
Nanosonics 2015 Annual Report | Page 14
Nanosonics 2015 Annual Report | Page 14
properly disinfected and inadequacies of some disinfectants
against HPV. The article also reiterated the importance of
disinfecting probe handles to reduce the risk of infection
transmission. Nebulised hydrogen peroxide vapour [trophon
technology] was referred to as an effective method to achieve
high level disinfection of both probe handle and shaft.
Our clinical research program is gaining traction and is a
key component of our strategy to position trophon as the
standard of care for ultrasound probe disinfection. We are
now working with the relevant associations and the medical
profession to ensure awareness of the outcomes of our work
and the serious risks associated with HPV are understood.
HPV facts
HPV accounts for 5% of
all cancers worldwide.1
High risk types of HPV
cause 99.7% of cervical
cancer cases.2
In Australia about 303
women die each year as a
result of cervical cancer.3
Ultrasound probes are a potential
source of infection and up to
7% remain contaminated with
high-risk HPV after routine
disinfection.4-6
The American Cancer
Society estimates the
US figure will be 4,015
in 2015.
HPV is highly resistant
to disinfectants
commonly used on
ultrasound probes.7
1. Parkin DM (2006). “The global health burden of infection-associated cancers in the year 2002”. Int. J. Cancer 118 (12): 3030–44.
2. Walboomers JMM, Jacobs MV, Manos MM, et al. Human papillomavirus is a necessary cause of invasive cervical cancer worldwide. J Pathol. 1999; 189: 12–19.
3. Bruni L, et al. ICO Information Centre on HPV and Cancer (HPV Information Centre). Human Papillomavirus and Related Diseases in Australia. Summary Report 2015- 03-20.
4. Casalegno et. Al.: High Risk HPV Contamination of Endocavity Vaginal Ultrasound Probes: An Underestimated Route of Nosocomial Infection?, PLOS ONE, Oct 2012, Volume 7, Issue 10.
5. M’Zali et al. Persistence of microbial contamination on transvaginal ultrasound probes despite low-level disinfection procedure. PLoS One 2014;9:e93368.
6. Leroy, S et al. Impact of Vaginal-Rectal Ultrasound Examinations with Covered and Low-Level Disinfected Transducers on Infectious Transmissions in France. Infection Control and
Hospital Epidemiology, Vol 35, No 12 (December 2014), pp.1497-1504.
7. Meyers, J., et al., Susceptibility of high-risk human papillomavirus type 16 to clinical disinfectants. J Antimicrob Chemother, 2014.
Nanosonics 2015 Annual Report | Page 15
Information on the directors, company
secretaries and senior management
1. Maurie Stang
Non-executive Chairman
Mr Stang has been Non-executive Director and Chairman
since March 2007 and a member of the Board since
November 2000.
Mr Stang has more than two decades of experience
building and managing companies in the healthcare and
biotechnology industry in Australia and internationally. His
strong business development and marketing skills have
resulted in the successful commercialisation of intellectual
property across global markets. He is a Non-executive
Director of Vectus Biosystems and has been Non-executive
Chairman of Aeris Environmental Ltd (ASX:AEI) since 2002.
2. Michael Kavanagh BSc, MBA (Advanced)
CEO, President and Managing Director
Mr Kavanagh joined Nanosonics as CEO and President
effective 21 October 2013. He was a Non-executive Director
of the Board from 30 July 2012 to 20 October 2013.
Mr Kavanagh has more than 25 years of international
commercial experience in the healthcare market having
held local, regional and global roles in medical device and
pharmaceutical industries.
Before joining Nanosonics, he was Senior Vice President
of Global Marketing for the major medical device company
Cochlear Ltd, a position he held for more than 10 years.
Mr Kavanagh has no other current and former directorships
in the last three years.
3. Richard England FCA, MAICD
Non-executive Director
Mr England joined the Board in February 2010. He is
a chartered accountant and professional Non-executive
Director. Since 2002, Mr England has been a director and
Chairman of Ruralco Holdings Limited (ASX:RHL).
He has been a director of Macquarie Atlas Roads Limited
(ASX:MQA) since June 2010, a director of Japara Healthcare
Limited (ASX:JHC) since April 2014 and a director of HBF
Health Limited since February 2015. He was a director and
Chairman of Chandler Macleod Group Limited (ASX:CMG)
from February 2008 to April 2015.
4. David Fisher BRurSc (Hons), MAppFin, PhD, FFin, GAICD
Non-executive Director
Dr Fisher has been a member of the Board since July 2001.
Dr Fisher is founding partner of Brandon Capital Partners, a
leading Australian venture capital provider. He has more than
25 years’ extensive operating experience in the biotechnology
and healthcare industry in Australia and overseas. He held
senior positions with Pharmacia AB (now part of Pfizer, Inc)
and was CEO of Peptech Limited (now part of Cephalon Inc.
(Nasdaq:CEPH). He was a director of Aeris Environmental Ltd
(ASX:AEI) from May 2011 to July 2014.
Nanosonics 2015 Annual Report | Page 16
Nanosonics 2015 Annual Report | Page 16
5. Ron Weinberger BSc (Hons), PhD
President Technology Development/Commercialisation
Dr Weinberger joined the Company in August 2004 and
was appointed as Executive Director in July 2008 then
Managing Director and Chief Executive Officer in December
2011 with a period as acting CEO from May 2011. Since
October 2013, he has been President of Technology
Development/Commercialisation and is responsible for the
direction of the Company’s technology development and
commercialisation strategy.
Dr Weinberger has more than 20 years’ experience in medical
research and biotechnology. He is co-inventor of several of
Nanosonics’ key technology patents.
Dr Weinberger has not had any other directorships of listed
companies in the last three years.
6. McGregor Grant BEc, CA, GAICD
Chief Financial Officer and Company Secretary
Mr Grant joined Nanosonics in April 2011 and is responsible
for the overall financial management of the Company and,
together with Mr Kavanagh, has joint responsibility for
investor relations. Mr Grant has more than 19 years’ business
experience in a number of senior roles in the medical device
and healthcare industries located in Australia and the United
States. Previously Mr Grant worked for Coopers & Lybrand in
Australia and Europe.
7. Gerard Putt BSc
Chief Operations Officer
Mr Putt joined Nanosonics full time in 2011 after 18 months
on the Nanosonics advisory board. Mr Putt has more than
16 years’ experience in the medical device industry as
a leader of development, engineering, production and
operations teams. He has particular experience in the
implementation of new products into manufacturing and
rapid scaling of production to international market needs.
8. Michael Potas BE (E&C)
Head of Research, Design and Development
Mr Potas joined Nanosonics in August 2006 and has
more than 17 years’ experience in the development and
commercialisation of new products and technologies. Since
joining Nanosonics in 2006, Mr Potas has been instrumental
in the research, design and development of the trophon EPR
and associated core intellectual property.
9. Vincent Wang BSc, MSc, MBA
Head of Global Support and Services
Mr Wang has extensive experience in developing and
implementing global service and support strategy,
establishing and managing customer support, technical
service and service marketing functions in global medical
device businesses. Before joining Nanosonics in May 2011,
Mr Wang led and managed Technical Services and Service
Operations for Sonova Hearing Healthcare Group and
Cochlear Ltd, respectively.
1
2
3
4
5
6
7
8
9
J
K
L
M
N
O
P
Q
10. Ruth Cremin MSc
Head of Quality and Regulatory
14. Bryn Tudor-Owens BSc
Country Manager – UK
Ms Cremin joined Nanosonics in July 2011 and has extensive
regulatory affairs experience. Previously she worked at
Cochlear as a Senior Regulatory Affairs Specialist for the
Asia Pacific Region; at Pfizer Australia as a QA & Regulatory
Officer and at Bio-Medical Research Ltd in Galway, Ireland as
a Regulatory Affairs Associate.
Mr Tudor-Owen more than 24 years’ experience gained within
the medical device industry. Prior to Nanosonics he held
senior positions with both GE Medical Systems and Cardinal
Health for more than 15 years before more recently driving the
UK startup operations of a German Healthcare SME.
He joined Nanosonics in August 2012.
11. Kirste Courtney BA
Human Resources Manager
15. Ralf Schmähling BA (Hons)
Country Manager – Germany
Ms Courtney joined Nanosonics in 2008 and has more than
17 years’ human resources experience having worked in a
variety of industry sectors including chartered accounting,
media, logistics and banking.
12. Andrew Murray BE (Elec), MBA
Head of Global Marketing
Mr Murray joined Nanosonics in July 2015. He has more
than 15 years’ experience in medical device and technology
marketing across the full spectrum of strategic planning to
global launch.
His career includes senior marketing roles in Australia, USA
and Europe with blue chip companies including Cochlear and
ResMed and, more recently, consulting to a wide range of
technology driven businesses across Australia.
Mr Schmähling joined Nanosonics in September 2012. He has
more than 12 years’ experience in various business, sales and
marketing management and leadership functions within blue
chip medical device companies. He has a successful track
record on strategic and tactical sales execution in the German
health care market.
16. Julien Laronze BBA, BA
Country Manager – France
Mr Laronze joined Nanosonics in March 2014. He has more
than 15 years’ senior sales management and executive level
experience, with a proven track record in driving growth both
domestically and internationally, in the medical device industry
with large and small companies. Prior to joining Nanosonics,
he held Sales Director positions with Sophysa and Edap-Tms.
13. Ronald J Bacskai BSME, MBA (Hons)
President and CEO, Nanosonics, Inc.
Mr Bacskai joined Nanosonics in 2010 and is responsible for
leading Nanosonics’ business in North America. Mr Bacskai is
an experienced executive having worked in multiple industries
with a broad technical, marketing and sales, and technology
commercialisation background. Mr Bacskai has significant
experience as President, CEO and board member of several
public and private organisations as well as serving on the
advisory board of a speciality environmental firm.
17. Robert Waring BEc, CA, FCIS, FFin, FAICD
Company Secretary
Mr Waring was reappointed Company Secretary in
October 2010 and earlier held this position at the time of the
Company’s IPO in May 2007. He is a director of corporate
advisory firm, Oakhill Hamilton Pty Ltd, and has had more
than 25 years’ experience in Company Secretarial roles for
ASX listed companies.
Nanosonics 2015 Annual Report | Page 17
Directors’ report
Your directors submit their report together with the Consolidated Financial Report of the Group, being Nanosonics Limited and
its subsidiaries, for the year ended 30 June 2015.
Principal activities
During the year the principal activities of the Group consisted of:
• Manufacturing and distribution of the trophon® EPR ultrasound probe disinfector and its associated consumables
and accessories.
• Research, development and commercialisation of infection control and decontamination products and related technologies.
There have been no significant changes in the nature of these activities during the year.
Operating and financial review
Revenue from sales for the year amounted to $22,214,000 (2014: $21,492,000), an increase of $722,000 or $3.4%. Sales in
North America were consistent with last year and in line with plans as the Company continued through its transition phase to
establish its direct sales operations in North America. Sales in Europe and other countries increased by 45.4% compared with
the previous year. Sales in Australia and New Zealand were similar to the previous year.
Other income amounted to $3,236,000 (2014: $4,114,000), which included Export Market Development Grant of $119,000
(2014: 150,000); reimbursement of costs by a distributor of $1,200,000 (2014: $1,707,000); interest earned on cash investments
of $928,000 (2014: $739,000) and foreign exchange gains of $988,000 (2014: nil, foreign exchange loss included in other
operating costs). The Company did not receive an R&D tax offset in respect of the year ended 30 June 2014 (2014: $1,516,000
for the year ended 30 June 2013) because the turnover of the Company exceeded $20 million.
Operating expenditure for the year amounted to $23,416,000 (2014: $20,116,000), an increase of $3,300,000 or 16.4% driven by
higher employment and related operating costs to support the growth of the business including the direct sales operations in
North America.
Other expense for the year of $598,000 (2014: $555,000) relates mainly to borrowing costs on convertible notes.
The consolidated loss after tax amounted to $5,460,000 (2014: $2,605,000), an increase from last year.
The Group ended the year with $45,724,000 (2014: $21,233,000) of cash and equivalents which included net proceeds from
capital raising $27,038,000. The Group has adequate cash to fund the operations of the business.
Other information on the operations of the Group and its business strategies and prospects are discussed in the review of
operations included in the CEO’s report and the Regional highlights on pages 6 to 11 of this report.
Significant changes in the state of affairs
During the year, the Company increased its funding as follows:
a. The Company issued 15,151,515 shares through a share Placement to sophisticated and professional investors at a price
of $1.65 per share completed on 13 March 2015 to raise $25,000,000.
b. The Company issued 1,818,113 shares through a Share Purchase Plan to existing investors at a price of $1.65 per
share completed on 27 March 2015 to raise $3,000,000.
c. The Company incurred a total of $962,000 in share issue costs relating to the share Placement and the
Share Purchase Plan.
In the opinion of the directors, other than the matters described above and in the Review of operations, there were no other
significant changes in the state of affairs of the Group during the financial year under review and to the date of this report.
Nanosonics 2015 Annual Report | Page 18
Dividends – Nanosonics Limited
The directors do not recommend the payment of a dividend for the financial year ended 30 June 2015. No dividends were
proposed, declared or paid during the financial year (2014: Nil).
The Company’s dividend policy in the future, the extent of future dividends and any franking of dividends will depend upon the
profitability and the financial and taxation position of the Group at the relevant time.
Matters subsequent to the end of the financial year
No matter or circumstance has arisen since 30 June 2015 that has significantly affected, or may significantly affect:
a. The Group’s operations in future financial years.
b. The results of those operations in future financial years.
c. The Group’s state of affairs in future financial years.
Likely developments and expected results of operations
Comments on expected results of the operations of the Group are included in the review of operations on pages 6 to 11. Further
information on likely developments in the operations of the Group and the expected results of operations have not been included
in this annual report because the Directors believe it would be likely to result in unreasonable prejudice to the Group.
Environmental regulation
The Group is subject to meeting statutory environmental regulations. To demonstrate its commitment to meeting these
regulations, the Group maintains an Environmental Management system, which is currently certified to ISO14001.
Directors
During the year and to the date of this report, the Board of Nanosonics Limited comprised of Maurie Stang, David Fisher,
Richard England, Michael Kavanagh, and Ron Weinberger.
As at the date of this report, Nanosonics Limited has the following committees of the Board: Audit and Risk, Remuneration,
Nomination, and R&D and Innovation. Details of members of the committees of the Board during the year are included on
page 23.
Information on the directors, company secretaries and senior management is a part of the Directors’ report and can be found
on pages 16 to 17 of the Annual Report.
Meetings of directors
The number of directors’ meetings, including meetings of the committees, held during the year ended 30 June 2015, and
numbers of meetings attended by each of the directors were as follows:
Meetings of committees
Full meetings
of directors
Audit and Risk
Nomination
Remuneration
R&D and
Innovation
Held
Attended
Held
Attended
Held
Attended
Held
Attended
Held
Attended
Maurie Stang
Richard England
David Fisher
Ron Weinberger
Michael Kavanagh
11
11
11
11
11
11
10
11
11
11
3
3
3
3
3
3
1
1
1
1
1
1
1
1
1
1
1
1
3
3
3
3
3
3
3
3
Nanosonics 2015 Annual Report | Page 19
Directors’ report (continued)
Share-based payments
Shares issued under the DESP and options granted under ESOP and GSOP during the year are detailed below.
Shares issued
During the year ended 30 June 2015, the Company issued a total of 19,087,064 (2014: 1,835,108) new ordinary shares in
Nanosonics Limited as detailed below. To the date of this report, the Company issued a total of 2,251,811 new ordinary shares
as detailed below. No amount was unpaid on any of the shares so issued.
Shares issued
Share Placement and Share Purchase Plan
Share options exercised under Share Option Plans
Total new shares issued during the year
Share options exercised under Share Option Plans post balance date
Total new shares issued to the date of this report
Number of shares issued
16,969,628
2,117,436
19,087,064
134,375
19,221,439
As at 30 June 2015, there were 282,910,890 (2014: 263,823,826) ordinary shares in Nanosonics Limited on issue. At the date of
this report, there were 283,045,265 shares on issue. Further information on issued shares is provided in the Contributed equity
and the Share-based compensation note to the financial statements.
Share options granted
During the financial year and to the date of this report, the Company granted, for no consideration 1,413,303, (2014: 3,115,869)
unquoted options over unissued ordinary shares in Nanosonics Limited. Further information on the grants is provided below, in
section 5 of the Remuneration report on pages 40 to 45 and in the Share-based compensation note to the financial statements.
Share options granted
Employee Share Option Plan (ESOP)
General Share Option Plan (GSOP)
Total new options granted during the year and to the date of this report
Number of options granted
1,413,303
–
1,413,303
Nanosonics 2015 Annual Report | Page 20
Nanosonics 2015 Annual Report | Page 20
Shares under option
At the date of this report, there were 3,589,668 unissued ordinary shares of Nanosonics Limited under option as detailed below.
As at 30 June 2015, there were 5,694,023 (2014: 6,525,597) unissued ordinary shares of Nanosonics Limited under option.
Further information on the options is provided in the Share-based compensation note to the financial statements.
Share option plan
Employee Share Option Plan (ESOP)
General Share Option Plan (GSOP)
Total shares under option at 30 June 2015
Share options exercised under Share Option Plans post balance date
Share options forfeited under Share Option Plans post balance date
Share options issued under Employee Share Option Plan (ESOP) post balance date
Total shares under option to the date of this report
Number of shares under option
5,537,356
156,667
5,694,023
(134,375)
(1,969,980)
–
3,589,668
The options entitle the holder to participate in a share issue of the Company provided the options are exercised on or after their
vesting date and prior to their expiry date. No option holder has any right under the options to participate in any other share
issue of the Company or any other entity.
Nanosonics 2015 Annual Report | Page 21
Directors’ report (continued)
Remuneration report – audited
Table of contents
Section
Title
Description
1
2
3
4
5
6
7
Introduction
Remuneration
governance
Non-executive
Director
remuneration
Executive
remuneration
Equity plan
disclosures
Employment
agreements
Key Management
Personnel
transactions
Describes the scope of the Remuneration report and the individuals whose remuneration details
are disclosed.
Describes the role of the Board and the Remuneration Committee and the use of remuneration
consultants when making remuneration decisions.
Provides detail regarding the fees paid to Non-executive Directors including all
required disclosures.
Outlines the Company’s remuneration strategy and principles applied to executive remuneration
decisions and the framework used to deliver it including the performance and remuneration
linkages, and all required executive remuneration disclosures.
Provides detail regarding the Company’s employee equity plans including that information
required by the Corporation Act and applicable accounting standards.
Provides details regarding the contractual arrangements between the Company and the
executives whose remuneration details are disclosed.
Provides details of loans and other transactions with Key Management Personnel and their
related parties.
1.0 Introduction
Nanosonics is an emerging medical technology company with operations in a number of countries and locations. The Board
has a strong growth focus and the executive remuneration policies are designed to direct behaviours towards achieving
sustainable growth in shareholder value over the medium to long term. However, it must be understood that to attract, motivate
and retain high performing executives and in the face of strong competition for talent, some flexibility in our approach is required.
The Board’s executive remuneration strategy is to provide ‘fair and appropriate’ remuneration balanced on a risk and reward
framework that supports its business strategy in the short and long term. Board and executive remuneration are reviewed
independently on a regular basis. The last formal review was undertaken during the year ended 30 June 2014.
The Board believes that Nanosonics’ approach to executive KMP remuneration is appropriately balanced to fairly reward and
motivate an experienced executive team to deliver profitable business growth which meets the expectations of our shareholders.
1.1 Scope
This Remuneration report sets out, in accordance with the relevant Corporations Act 2001 (Cth) (Corporations Act) and
accounting standard requirements, the remuneration arrangements in place for KMP of Nanosonics Limited (Nanosonics) during
the financial year ended 30 June 2015 (2015 Financial Year).
Nanosonics 2015 Annual Report | Page 22
Nanosonics 2015 Annual Report | Page 22
1.2 Key Management Personnel
Key Management Personnel (KMP) have authority and responsibility for planning, directing and controlling the activities of
Nanosonics and comprise the Non-executive Directors, Executive Directors and Executive KMP. Details of the KMP as at
year end are set out in the table below.
Name
Title (at year end)
Change in 2015 Financial Year
Non-executive Directors
Maurie Stang
Chairman
Full year
Member, Audit and Risk Committee
Member, Remuneration Committee
Member, Nomination Committee
Member, R&D and Innovation Committee
Richard England
Director
Full year
Chairman, Audit and Risk Committee
Chairman, Remuneration Committee
Chairman, Nomination Committee
David Fisher
Director
Full year
Member, Audit and Risk Committee
Member, Remuneration Committee
Member, Nomination Committee
Chairman, R&D and Innovation Committee
Chief Executive Officer (CEO) and President,
Managing Director
Full year
Member, R&D and Innovation Committee
Director and President, Technology
Development/Commercialisation
Member, R&D and Innovation Committee
Chief Financial Officer (CFO) and
Company Secretary
Executive Directors
Michael Kavanagh
Ron Weinberger
Executive KMP
McGregor Grant
Gerard Putt
Chief Operations Officer
Full year
Full year
Full year
Nanosonics 2015 Annual Report | Page 23
Directors’ report (continued)
2.0 Remuneration governance
This section of the Remuneration Report describes the role of the Board, the Remuneration Committee, and the use of
Remuneration Consultants when making remuneration decisions.
2.1 Role of the Board and the Remuneration Committee
The Board is responsible for Nanosonics’ remuneration strategy and policy. Consistent with this responsibility, the Board has
established a Remuneration Committee which comprises a majority of independent Non-executive Directors. The members
of the Remuneration Committee over the 2015 Financial Year were Richard England, Maurie Stang and David Fisher.
The role and responsibilities of the Remuneration Committee are set out in its Charter, which was last revised and approved by
the Board in July 2014. In summary the Remuneration Committee’s role is to:
• Review and approve Nanosonics’ remuneration strategy and policy and ensure that appropriate processes and procedures
are in place to assess the remuneration levels of the Board and executive KMP and all other employees across the Group.
• Consider and propose to the Board the remuneration of the CEO and consider and approve the remuneration of all
designated senior executives.
• Review and approve Nanosonics’ incentive schemes, including amounts, terms and offer processes and procedures.
• Determine and approve equity awards in accordance with policy and shareholder approvals, including testing of vesting
and termination provisions.
The Remuneration Committee’s role and its interaction with the Board, internal and external advisors, are illustrated below:
Reviews, applies judgement and, as appropriate, approves the Remuneration Committee’s recommendations.
The Board
The Remuneration Committee
The Remuneration Committee operates under the delegated authority of the Board.
The Remuneration Committee is empowered to source any internal resources and obtain external independent
professional advice it considers necessary to enable it to make recommendations to the Board on the following:
Remuneration
policy, composition
and quantum
of remuneration
components for
Executive KMP,
including STI
performance targets
Remuneration policy
in respect of
Non-executive
Directors
Recruitment,
retention and
termination policies
and practices
Design features
of employee
and executive
LTI Plan awards,
including setting of
performance and
other vesting criteria
External Consultants
Internal Resources
Nanosonics 2015 Annual Report | Page 24
Nanosonics 2015 Annual Report | Page 24
Further information on the Remuneration Committee’s role, responsibilities and membership is contained in the Corporate
Governance Statement. The Remuneration Committee Charter and the Corporate Governance Statement can be viewed in
the Corporate Governance section of Nanosonics’ website at www.nanosonics.com.au.
2.2 Use of remuneration consultants
From 1 July 2011, all proposed remuneration consultancy contracts (within the meaning of section 206K of the
Corporations Act 2001) are subject to prior approval by the Board or the Remuneration Committee in accordance with
the Corporations Act 2001.
During the year ended 30 June 2015, several remuneration consultancy contracts were entered into by Nanosonics and
accordingly the disclosures required under section 300A (1) (h) of the Corporations Act 2001 are set out below
Advisor/Consultant FY2015
Service Provided
Remuneration Consultant for the
purposes of the Corporations Act 2001
Ian Crichton, Remuneration Consultant,
Crichton and Associates Pty Limited
Long Term Incentive (LTI) and Employee
Share Scheme (ESS) advisory services,
valuation of ESS instruments
Yes
Key questions regarding use of remuneration consultants
Did a remuneration consultant provide
remuneration recommendations in
relation to any of the Executive KMP for
the financial year?
No.
How much was the remuneration
consultant paid by the Company for
remuneration related and other services?
What arrangements did the Company
make to ensure that the making of the
remuneration recommendation would be
free from undue influence by
Executive KMP?
Is the Board satisfied that the
remuneration recommendation was free
from any such undue influence? What
are the reasons for the Board being
so satisfied?
Crichton and Associates Pty Limited – Remuneration Services $nil;
Other Services $15,126.
The Company made the following arrangements:
• The company has implemented protocols to govern the procedure for procuring
advice relating to KMP remuneration. The protocols contain a summary of
the process for the engagement of remuneration consultants, the provision
of information to the remuneration consultant, and the communication of
remuneration recommendations.
• The remuneration consultant must agree to adhere to the protocol procedures and
is required to advise the Remuneration Committee whether or not they had been
subjected to undue influence and must provide a Statement of Independence.
The Board is satisfied that the process are appropriate. No remuneration advice or
recommendation has been provided this year.
Nanosonics 2015 Annual Report | Page 25
Directors’ report (continued)
3.0 Non-executive Director remuneration
3.1 Non-executive Director remuneration philosophy
Principle
Comment
Fees are set by reference to
key considerations
Fees for Non-executive Directors are based on the nature of the Directors’ work and their
responsibilities, taking into account the nature and complexity of the Company and the skills and
experience of the Director. In determining the level of fees, survey data on comparable companies are
considered. Non-executive Directors’ fees are recommended by the Remuneration Committee and
determined by the Board. Shareholders approve the aggregate amount available for the remuneration
of Non-executive Directors. No increase in fees is proposed for the 2016 Financial Year.
Remuneration is structured to
preserve independence whilst
creating alignment
To preserve independence and impartiality, Non-executive Directors are not entitled to any form
of incentive payments and the level of their fees is not set with references to measures of
Company performance.
Aggregate Board Fees are
approved by shareholders.
The total amount of fees paid to Non-executive Directors in the year ended 30 June 2015 is within
the aggregate amount approved at a general meeting of the Company on 19 September 2006 of
$500,000 a year. No increase in the pool limit is proposed.
Flexibility in how fees
are received
Non-executive Directors can elect how they wish to receive their total fees – i.e. as a contribution
of cash, superannuation contributions or charitable donations.
3.2 Non-executive Director fees and other benefits
Elements
Details
Board fees per
annum – 20151
Board Chairman fee
Board NED fee
$145,000
$80,000
Post-employment benefits
Superannuation
Other benefits
Equity instruments
Other fees/benefits
Superannuation contributions are included in the Board fees and are made at a rate of 9.5% of
base fee (up to the Government’s prescribed maximum contributions limit) which satisfies the
Company’s statutory superannuation contributions.
Non-executive Directors do not receive any performance related remuneration, options or
performance shares. Options previously granted have either lapsed or been exercised.
Non-executive Directors are reimbursed for out-of-pocket expenses that are directly related to
Nanosonics’ business.
1. Committee fees are not paid to the members of each Committee.
Nanosonics 2015 Annual Report | Page 26
3.3 Non-executive Director total remuneration
Maurie Stang
Richard England
David Fisher
Michael Kavanagh1
Total
Year
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
Fees
Superannuation
132,420
111,362
73,059
66,613
73,059
66,613
–
18,043
278,538
262,631
12,580
10,301
6,941
6,162
6,941
6,162
–
1,669
26,462
24,294
Total
145,000
121,663
80,000
72,775
80,000
72,775
–
19,712
305,000
286,925
1. Includes remuneration paid to Mr Kavanagh until his appointment as an Executive Director on 21 October 2013.
4.0 Executive remuneration
4.1 Executive KMP remuneration
Nanosonics’ executive remuneration strategy is designed to attract, retain and motivate its executives. Fixed remuneration
components are determined having regard to the specific skills and competencies of the executive with reference to both
internal and external relativities, particularly local market conditions. The ‘at risk’ components of remuneration are strategically
directed to encourage management (and all participating executives) to strive for superior (risk balanced) performance by
rewarding the achievement of targets that are challenging, clearly defined, understood and communicated and within the
ambit of accountability of the relevant executive.
Nanosonics 2015 Annual Report | Page 27
Directors’ report (continued)
Executive KMP remuneration objectives are exemplified through three categories of remuneration, as illustrated below:
Executive KMP Remuneration Objectives
An appropriate balance of ‘fixed’
and ‘at-risk’ components.
Attract, motivate and retain
executive talent.
The creation of reward
differentiation to drive
performance and behaviours.
Shareholder value creation
through equity components.
Total Target Remuneration (TTR) is set by reference to the relevant market and internal relativities
Fixed
At risk
Total Fixed Remuneration (TFR)
Short-Term Incentives (STI)
Long-Term Incentives (LTI)
Fixed remuneration is set based on relevant
market relativities, reflecting responsibilities,
performance, qualifications, experience
and location.
STI performance criteria are set by reference
to Company and Individual performance
targets relevant to the specific position.
LTI targets are linked to both Nanosonics
Group internal (Revenue) and external
(relative Total Shareholder Return (TSR))
outperformance measures.
Remuneration for each component will be delivered as:
Base Salary plus any fixed elements related
to local markets, including superannuation
or equivalents.
Part cash and part equity. The equity
component is deferred for 1 year. The
deferred equity component remains ‘at risk’
until vesting.
Equity is held subject to performance and
service for 3 years from grant date. The
equity is ‘at risk’ until vesting.
Strategic intent and market positioning
TFR will generally be positioned at the
median (+/-) compared to relevant market
based data considering expertise and
performance in the role.
Performance incentive is directed to
achieving demanding growth targets. TFR
+ STI is intended to be positioned in 3rd
quartile of relevant benchmark.
LTI is intended to align executive KMP with
long term growth strategy aligned with
shareholders’ interests.
TTR is intended to be positioned in the 3rd quartile compared to relevant market based comparisons. 4th quartile TTR may
result if outperformance is achieved. This strategy is intended to ensure that top quartile remuneration is only awarded if the
Company exceeds the performance objectives set by the Board.
Total Target Remuneration (TTR)
Nanosonics 2015 Annual Report | Page 28
Nanosonics 2015 Annual Report | Page 28
4.2 Remuneration mix and timing of receipt
4.2.1 Remuneration mix
Position
CEO and President
Senior Executives (Executive KMP)
TFR (Cash)
STI (Cash and Equity)
LTI (Equity)
100%
100%
33.3% of Base Salary
33.3% of Base Salary1
25% of Base Salary
25% of Base Salary
1. In connection with the appointment of Mr Kavanagh as CEO and President, at the 2013 AGM shareholders approved the granting of 1,500,000 Performance Rights to Mr Kavanagh.
Details of the vesting conditions associated with these Performance Rights are provided in Section 4.4.2 Long Term Incentives.
4.2.2 Remuneration – timing of receipt of the benefit
The three complementary components of executive KMP remuneration are ‘earned’ over multiple time ranges.
This is illustrated in the following chart.
Year 1
Year 2
Year 3
Year 4
Year 5
TFR
Year 1
STI cash opportunity
STI equity deferral
LTI
TFR
Year 2
STI cash opportunity
STI equity deferral
LTI
TFR
Year 3
STI cash
opportunity
STI equity deferral
LTI
Each year, fixed remuneration and benefits are paid (monthly) and short term incentives are awarded based on achievement
of annual performance targets set. A portion of any STI earned is ‘invested’ in service rights and deferred for a minimum of
12 months. Each year, a long term equity incentive may be provided to eligible and invited executives. The LTI vests after three
years if the specified conditions are satisfied. In this way executives are rewarded for short, medium and long term performance
aligned to shareholder interests and expectations.
Nanosonics 2015 Annual Report | Page 29
Directors’ report (continued)
4.3 Total Fixed Remuneration (TFR) explained
Total Fixed Remuneration (TFR) includes all remuneration and benefits paid to an executive KMP calculated on a Total
Employment Cost (TEC) basis. Executive KMP TFR is tested regularly for market competitiveness by reference to appropriate
independent and externally sourced comparable benchmark information. Usually, TFR adjustments are only made in response
to individual performance (as measured), an increase in job role, changing market circumstances or promotion. Any adjustment
to executive KMP remuneration is approved by the Board, based on recommendations by the CEO and President and the
Remuneration Committee.
4.4 Variable ‘at risk’ remuneration explained
As set out in Section 4.2, variable remuneration forms a significant portion of the CEO and President and other Executive KMP
remuneration opportunity. Apart from being market competitive, the purpose of variable remuneration is to direct executives’
behaviours towards maximising Nanosonics’ short, medium and long term performance, as measured. The key aspects are
summarised below.
4.4.1 Short Term Incentives (STI)
Purpose
The STI arrangements at Nanosonics are designed to reward executives for the achievements against annual
performance targets set by the Board at the beginning of the performance period. The STI program is
reviewed annually by the Remuneration Committee and approved by the Board.
All STI awards to the CEO and President and other executive KMP are approved by the Remuneration
Committee and the Board.
Performance targets
The key performance objectives of Nanosonics are currently directed to achieving a Profit Before Tax (PBT)
target complemented by the achievement of individual performance goals.
The weighting between the PBT target and individual performance goals will depend on the responsibilities
and scope of influence of the relevant executive.
All targets are set having regard to prior year performance, market conditions and the Board approved
budgets. The specific targets are not provided in detail due to their commercial sensitivity.
Any anomalies or discretionary elements are approved and validated by the Board.
Rewarding performance
The actual STI awards for executive KMP in 2015 are as set out in the table in Section 4.6.1.
Payment of STI
To ensure there is an appropriate retention element of STI and to reinforce alignment with shareholders there
is a mandatory deferral of a portion of STI. The STI is delivered as follows:
• 50% of STI paid in cash
• 50% of STI delivered as Nanosonics Performance Rights deferred for one year
The equity component will be determined based on the 5 day Volume Weighted Average Market Price of
Nanosonics shares as at 31 August each year.
As the STI amount awarded as equity has already been earned, there are no further performance measures
attached to the Performance Rights. However, they are subject to service conditions until the vesting date.
Nanosonics 2015 Annual Report | Page 30
4.4.2 Long Term Incentives (LTI)
The LTI provides an annual opportunity for selected executives to receive an equity award deferred for three years that is
intended to align a significant portion of an executives overall remuneration to shareholder value over the longer term.
All LTI awards remain at risk until vesting and must meet or exceed the defined performance hurdles over the vesting period.
Purpose
To retain key executives and align their remuneration opportunity with shareholder value.
Type of equity awarded
Under the Nanosonics Long Term Incentive Scheme (LTIS) selected senior executives are offered Performance
Rights (being options to acquire ordinary shares of Nanosonics Limited for a nil exercise price) under the terms
of the Nanosonics Employee Share Option Plan (ESOP). See Section 5.1 for further details. Performance
Rights do not carry any dividend or voting rights prior to exercise.
Timing
LTI allocation
Grants are made each year after shareholder approval to issue securities to Directors has been obtained at the
relevant AGM.
The size of individual LTI grants for the CEO and President and other Executive KMP is determined in
accordance with the Board approved remuneration strategy mix. See Section 4.2. The target LTI $ value for
each executive once determined is then converted into a number of Performance Rights based on a valuation
methodology determined at the grant date, as follows:
Performance Rights allocated = LTI $ value divided by 5 day Volume Weighted Average Market Price of
Nanosonics shares as at the date of the AGM each year.
Performance hurdles
Equity grants to the CEO and President and other Executive KMP are subject to both internal (Revenue) and
external (relative Total Shareholder Return (TSR)) Performance Conditions.
CEO and President 2013
Long Term Incentive
Scheme (2013 LTIS)
At the 2013 AGM, shareholders approved the granting of 1,500,000 Performance Rights to Mr Kavanagh.
The number of Performance Rights granted to Mr Kavanagh was determined at the Board’s discretion in
connection with Mr Kavanagh’s appointment as CEO and President. The 1,500,000 Performance Rights
granted to Mr Kavanagh was made in respect of the 2013 and 2014 LTIS grant years. Accordingly, no
additional LTIS grant will be made to Mr Kavanagh in respect of the 2014 LTIS.
Full details of the vesting conditions associated with the Performance Rights granted to Mr Kavanagh
were included in the explanatory notes included with the Notice of the 2013 AGM (Resolution 10) and are
summarised below.
Nanosonics 2015 Annual Report | Page 31
Directors’ report (continued)
CEO and President 2013
Long Term Incentive
Scheme (2013 LTIS) –
continued
2016 Performance Conditions
Ranking of TSR vs. 2013 LTIS Comparator Group1
Revenue Hurdle
Tranche 1: 25% of total Performance Rights granted
(375,000)
Tranche 2: 25% of total Performance Rights granted
(375,000)
Performance
% of Performance
Rights to vest3
Revenue in Financial
Year 2016
% of Performance Rights
to vest3
< 50th percentile
0%
<$25.7 million
50th to 75th percentile
50% to 100% pro-rata
$25.7 million
At 75th percentile
100%
$29.1 million
$32.7 million
0%
25%
50%
75%
$36.7 million
100%
2017 Performance Conditions
Ranking of TSR vs. 2013 LTIS Comparator Group2
Revenue Hurdle
Tranche 3: 25% of total Performance Rights granted
Tranche 4: 25% of total Performance Rights granted
(375,000)
(375,000)
Performance
% of Performance
Rights to vest3
Revenue in Financial
Year 2017
% of Performance Rights
to vest3
< 50th percentile
0%
<$30.9 million
50th to 75th percentile
50% to 100% pro-rata
$30.9 million
At 75th percentile
100%
$36.4 million
$42.6 million
0%
25%
50%
75%
1. TSR measurement period is 8 November 2013 to the date of the release of Nanosonics’ FY16 financial statements.
2. TSR measurement period is 8 November 2013 to the date of the release of Nanosonics’ FY17 financial statements.
$49.5 million
100%
3. Straight line interpolation will apply to incremental results.
Service Conditions
In addition to the above performance conditions, the Performance Rights will only vest if Mr Kavanagh
remains in continuous employment with Nanosonics from the date of the grant to the respective vesting date
of each Tranche.
Special provisions, in accordance with company policies, may apply in the event of termination of employment
or a change of control.
Nanosonics 2015 Annual Report | Page 32
Nanosonics 2015 Annual Report | Page 32
Other Executive KMP
2014 Long Term Incentive
Scheme (2014 LTIS)
A summary of the vesting conditions associated with the Performance Rights granted to other Executive KMP
under the 2014 LTIS are summarised below.
Other Executive KMP
2013 Long Term Incentive
Scheme (2013 LTIS)
Ranking of TSR vs. 2013 LTIS Comparator Group1
Revenue Hurdle
Tranche 1: 50% of total Performance Rights granted
Tranche 2: 50% of total Performance Rights granted
Performance
% of Performance
Rights to vest2
Revenue in Financial
Year 2016
% of Performance Rights
to vest2
< 50th percentile
0%
<$30.9 million
50th to 75th percentile
50% to 100% pro-rata
$30.9 million
At 75th percentile
100%
$36.4 million
$42.6 million
0%
25%
50%
75%
1. TSR measurement period is 8 November 2013 to the date of the release of Nanosonics’ FY16 financial statements.
$49.5 million
100%
2. Straight line interpolation will apply to incremental results.
Service Conditions
In addition to the above performance conditions, the Performance Rights will only vest if the Executive KMP
remains in continuous employment with Nanosonics from the date of the grant to the respective vesting date
of each Tranche.
Special provisions, in accordance with company policies, may apply in the event of termination of employment
or a change of control.
A summary of the vesting conditions associated with the Performance Rights granted to other Executive KMP
under the 2013 LTIS are summarised below.
Ranking of TSR vs. 2013 LTIS Comparator Group1 Revenue Hurdle
Tranche 1: 50% of total Performance Rights granted
Tranche 2: 50% of total Performance Rights granted
Performance
% of Performance Rights
to vest2
Revenue in Financial Year
2017
% of Performance Rights
to vest2
<50th percentile
0%
<$25.7 million
50th to 75th percentile
50% to 100% pro-rata
$25.7 million
At 75th percentile
100%
$29.1 million
$32.7 million
0%
25%
50%
75%
1. TSR measurement period is 8 November 2013 to the date of the release of Nanosonics’ FY17 financial statements.
$36.7 million
100%
2. Straight line interpolation will apply to incremental results.
Service Conditions
In addition to the above performance conditions, the Performance Rights will only vest if the Executive KMP
remains in continuous employment with Nanosonics from the date of the grant to the respective vesting date
of each Tranche.
Special provisions, in accordance with company policies, may apply in the event of termination of employment
or a change of control.
Nanosonics 2015 Annual Report | Page 33
Directors’ report (continued)
4.5 Other remuneration elements and disclosures relevant to Executive KMP
4.5.1 Clawback
In accordance with the ASX Corporate Governance Guidelines, the Board has clear policies regarding the deferral of
performance-based remuneration as set out in Section 4.4.1. Policies concerning the reduction, cancellation or clawback
of performance-based remuneration in the event of serious misconduct or a material misstatement in the entity’s financial
statements have not been determined as yet. These policies will be developed as clear market trends emerge.
4.5.2 Securities trading restrictions
Under the Nanosonics Limited Securities Trading Policy and in accordance with the Corporations Act 2001, securities granted
under Nanosonics’ equity incentive schemes must remain at risk until vested, or until exercised if options or performance rights.
It is a specific condition of grant that no schemes are entered into by an individual or their associates that specifically protects
the unvested value of shares, options or performance rights allocated.
KMPs are not permitted to deal at any time in financial products such as options, warrants, futures or other financial products
issued over Nanosonics’ securities by third parties such as banks and other institutions without the prior approval of the Board.
An exception may apply where the securities form a component of a listed portfolio or index product.
KMPs are not permitted to enter into transactions in products associated with the securities without the prior approval of the
Board, which operates to limit the economic risk of their security holding in the Company (e.g. hedging arrangements).
Nanosonics, as required under the ASX Listing Rules, has a formal policy setting down how and when employees, including
KMPs of Nanosonics Limited, may deal in Nanosonics securities. A copy of the Company’s Securities Trading Policy is available
on the Nanosonics website, www.nanosonics.com under Investor Centre, Corporate Governance.
4.5.3 Cessation of employment provisions
The provisions that apply for STI and LTI awards in the case of cessation of employment are detailed in Section 6.
4.5.4 Change of control
The provisions that apply for STI and LTI awards in the case of a change of control are detailed in Section 6.
4.5.5 Conditions of LTI grants
The conditions under which LTI awards (Performance Rights) are granted are approved by the Board in accordance with
the relevant scheme rules as summarised in Section 5.
Nanosonics 2015 Annual Report | Page 34
Nanosonics 2015 Annual Report | Page 34
4.6 Relationship between Nanosonics’ performance and executive KMP remuneration
As explained in Section 4.2, Nanosonics’ remuneration framework aims to incentivise executive KMP towards achieving
sustainable growth of the business and the creation of shareholder value in the short, medium and long term.
4.6.1 Short Term Incentives
Executive KMP STI opportunity and actual 2015 STI awarded are set out in the table below:
Executive KMP
Position
Maximum
STI % of
2015 TFR1
STI
awarded
as a % of
potential1
STI cash
award in
2015 ($)2
Deferred
equity STI
award ($)3
%
Forfeited4
Michael Kavanagh
CEO and President,
Managing Director
Ron Weinberger
President, Technology
Development/Commercialisation
McGregor Grant
CFO and Company Secretary
Gerard Putt
Chief Operations Officer
31%
100%
68,467
68,468
22%
23%
22%
100%
38,750
38,750
100%
100%
38,318
38,318
31,255
31,255
–
–
_
_
1. Relates to STI % both cash and deferred equity opportunity. The deferred equity will be awarded the following year.
2. Amounts included in the remuneration for the financial year represent the maximum cash STI opportunity related to the financial year based on the achievement of individual goals and
satisfaction of specified performance criteria. The amount was finally determined on 12 August 2015 after performance reviews were completed and approved by the Board.
3. The equivalent number of Performance Rights to be awarded in the following year will be determined as set out in section 4.4.1 of the Remuneration Report.
4. The amounts forfeited are due to the performance criteria not being fully met in relation to the current financial year.
Short Term Incentives have been accrued in respect of the 2015 financial year because the performance conditions set by the
Board have been met.
Nanosonics 2015 Annual Report | Page 35
Directors’ report (continued)
4.6.2 Long Term Incentives
Executive KMP are only entitled to a benefit under the current Company’s LTI scheme if both Revenue and relative Total
Shareholder Return (TSR) targets are met.
Revenue growth is considered a priority for Nanosonics at this stage of its development, in the opinion of the Board.
Relative TSR is a generally accepted proxy for creation of shareholder value. The Board believes a balance between these
two performance criteria is a sound guide to medium and long term performance.
Revenue (50%)
Revenue targets under the 2013 and 2014 LTI grants were as follows:
Year/Vesting %
2016
2017
25%
$25.7M
$30.9M
50%
$29.1M
$36.4M
75%
$32.7M
$42.6M
100%
$36.7M
$49.5M
Nanosonics’ revenue for the financial years ended 30 June, 2012, 2013, 2014 and 2015 are set out below.
Financial year
Revenue $’000
2015
2014
2013
2012
22,214
21,492
14,899
12,301
Nanosonics would have to achieve an increase in revenue (2015 base year) of 16% for 25% of the 2013 LTI to vest and 65%
for 100% of the 2013 LTI to vest. Similarly, using the same base year, an increase of 39% for 25% of the 2014 LTI to vest and
123% for 100% of the 2014 LTI to vest. If these increases are achieved the Board believes an appropriate balance of results
and benefit will result.
Nanosonics 2015 Annual Report | Page 36
Nanosonics 2015 Annual Report | Page 36
Relative Total Shareholder Return (50%)
The relative TSR for 2013 LTI and 2014 LTI awards measures NAN TSR against a selected group of comparator companies,
set out as follows:
ACG
AtCor Medical
GID
Gi Dynamics, Inc
PXS
Pharmaxis Ltd
ACL
Alchemia Limited
GTG
Genetic Technologies Ltd
PYC
Phylogica Ltd
ACR
Acrux Limited
ADO
Anteo Diagnostics
AHZ
Allied Health Ltd
IDT
IPD
IVX
IDT Australia Limited
QRX
Qrxpharma Ltd
Impedimed Limited
RMD
ResMed Inc.
Invion Ltd
RVA
Reva Medical, Inc
ANP
Antisense Therapeutics Ltd
LCT
Living Cell Technologies Ltd
SOM
SomnoMed Limited
AVH
Avita Medical Ltd
MSB
Mesoblast Ltd
SPL
Starpharma Holdings Ltd
AVX
Avexa Limited
MVP
Medical Developments International Ltd
SRX
Sirtex Medical Ltd
BLT
Benitec Biopharma Ltd
MYX
Mayne Pharma Group Ltd
BNO
Bionomics Limited
NEU
Neuren Pharmaceuticals Ltd
TIS
UBI
Tissue Therapies Ltd
Universal Biosensors
CDY
Cellmid Limited
OIL
Optiscan Imaging
UCM
Uscom Limited
CIR
Circadian Technologies Ltd
OSP
Osprey Med Inc
VLA
Viralytics Ltd
CMP
Compumedics Limited
PAB
Patrys Limited
COH
Cochlear Limited
PBT
Prana Biotechnology Limited
CSL
CSL Limited
POH
Phosphagenics Limited
CUV
Clinuvel Pharmaceuticals Ltd
PRR
Prima Biomed Ltd
ELX
Ellex Medical Lasers Limited
PVA
Psivida Corp
Testing of performance against the relevant comparator group will only occur at the vesting date of each grant. To date, no
equity grant subject to a TSR hurdle has vested. The TSR hurdle set and the relative vesting schedule meet contemporary
market standards according to independent advice received by the Board. The cost of preparing an interim TSR performance
measure against the actual peer group outweighs the benefit of this disclosure in the Board’s opinion.
Nanosonics 2015 Annual Report | Page 37
Directors’ report (continued)
4.7 Executive remuneration tables
Fixed remuneration
Variable remuneration
Total
Proportion of total remuneration
Short-term
Long-term
Total
term
compensation
Total
Short-
Equity
Non-
Salary and
monetary
Other
long term
Year
fees
benefits Other Superannuation
benefits
Cash
bonus5
Options and
performance
rights6
Value of
Non-
options
Performance
related
performance
related2
and
rights
%
%
%
Executive
Directors
Michael
Kavanagh1
Ron Weinberger
McGregor Grant3
Gerard Putt4
Total
Total
2015
395,477
2014
267,446
–
–
2015
279,001
25,710
2014
290,923
39,459
2015
292,652
2014
273,037
2015
234,375
2014
214,575
–
–
–
–
2015
1,201,505
25,710
–
–
–
–
–
18,783
31,863
446,123
68,467
439,823
508,290
954,413
13,094
20,903
301,443
65,305
232,933
298,238
599,681
18,783
32,336
355,830
38,750
109,982
148,732
504,562
17,885
30,473
378,740
49,104
147,533
196,637
575,377
18,783
23,906
335,341
38,318
101,273
139,591
474,932
506
17,775
22,933
314,251
35,751
107,373
143,124
457,375
–
–
–
18,783
33,196
286,354
31,255
72,661
103,916
390,270
17,775
17,819
250,169
26,551
59,737
86,288
336,457
75,132
121,301 1,423,648
176,790
723,739
900,529
2,324,177
2014
1,045,981
39,459
506
66,529
92,128
1,244,603
176,711
547,576
724,287
1,968,890
53%
50%
29%
34%
26%
16%
25%
18%
38%
5%
0%
0%
0%
0%
4%
15%
2%
8%
1%
32%
46%
39%
22%
26%
21%
23%
19%
18%
31%
28%
1. Includes remuneration paid to Mr Kavanagh since his appointment as an Executive Director on 21 October 2013.
2. Non-performance related remuneration relates to options granted as part of employment contracts subject to service conditions.
3. Mr Grant joined the Company on 28 April 2011 and in connection with his appointment he was granted 1,000,000 options, which vested in 4 tranches with service conditions completed
in 2015. These options were exercised during the year.
4. Mr Putt joined the Company on 27 April 2011 and in connection with his appointment he was granted 400,000 options, which vested in 4 tranches with service conditions completed in
2015. These options were exercised during the year.
5. The cash bonus is for the performance during the respective financial year based the criteria set out in Section 4.4.1. 2015 amounts represent the maximum cash STI opportunity related
to the financial year based on the achievement of individual goals and satisfaction of specified performance criteria. Actual cash STI award is disclosed in Section 4.6.1.
6. The amount disclosed is the amount of the fair value of the options and performance rights recognised as an expense in each reporting period. It also covers both the performance rights
issued under the LTIS program as well as the deferred STI. The ability to exercise the options and rights are subject to vesting conditions. The fair values of the options and performance
rights that are subject to non-market performance conditions or service conditions are calculated at the date of the grant using Binomial Approximation model. The fair values of
performance rights that are subject to TSR performance conditions are calculated at the date of the grant using the Monte-Carlo simulation model.
Nanosonics 2015 Annual Report | Page 38
Nanosonics 2015 Annual Report | Page 38
4.8 Executive remuneration tables – unaudited
This table represents the value to the executive KMP of cash paid and vested equity awards (intrinsic value) received during
the year, and unvested equity awards (IFRS-2 value) granted during the financial year at risk. The LTI equity granted is a value
determined under IFRS-2 which may or may not vest depending on future outcomes that are uncertain. Accordingly, this table
incorporates data that could represent an accumulation of outcomes arising from multiple years.
Short-term benefits
Past at-risk
remuneration
received
Actual
remuneration
received during
year
Future at risk remuneration
received during year
Year
Fixed
remuneration2
Incentives3
Value of
performance
rights4
STI (deferred
as equity)
LTI (equity)
granted5
Michael Kavanagh1
2015
429,999
65,305
2014
287,369
–
Ron Weinberger
2015
354,494
49,104
–
–
–
495,304
121,231
–
287,369
403,598
–
1,158,938
91,155
154,371
2014
391,189
–
73,940
465,129
–
103,089
McGregor Grant
2015
325,329
35,751
136,666
Gerard Putt
Total
2014
2015
2014
2015
2014
311,626
–
266,735
26,551
247,408
–
52,433
54,666
42,670
497,746
364,059
347,952
290,078
66,368
110,664
–
181,902
49,289
91,314
150,093
1,376,557
176,711
191,332
1,744,600
328,043
356,349
1,237,592
–
169,043
1,406,635
–
1,594,022
1. Includes remuneration paid to Mr Kavanagh since his appointment as an Executive Director on 21 October 2013.
2. Base salary, superannuation, non-monetary, and other cash benefits received during the year (excludes annual leave and long service leave accrual).
3. STI received as cash in respect of the 2014 Financial Year. Excludes cash STI accrued in respect of the 2015 Financial Year.
4. Intrinsic value at vesting date of options and performance rights issued in previous periods that vested during the year.
5. Accounting value of performance rights awarded during the year that are unvested and subject to vesting conditions (i.e. achievement of performance conditions and/or service conditions).
Nanosonics 2015 Annual Report | Page 39
Directors’ report (continued)
5.0 Employee Share Scheme information
This section provides:
1. A description of the Employee Share Schemes (ESS) Nanosonics uses to provide equity rewards to Nanosonics employees.
2. Disclosures required in relation to ESS grants provided to KMP.
3. Disclosures required about ESS instruments that Nanosonics has issued.
4. Disclosures required in relation to Nanosonics’ shares and other ESS instruments held by KMP.
5.1 Employee Share Schemes operated by Nanosonics
Type of
Instruments
Ordinary Shares
Plan Name
Nanosonics Deferred Employee
Share Plan (DESP)
Established in 2007
Date last approved by
shareholders: 8 November 2013
Nanosonics Exempt Employee
Share Plan (EESP)
Established in 2007
Date last approved by
shareholders: 8 November 2013
Nanosonics Employee Share
Option Plan (ESOP)
Options
Established in 2007
Date last approved by
shareholders: 8 November 2013
Nanosonics General Share
Option Plan (GSOP)
Established in 2007
Date last approved by
shareholders: 8 November 2013
Purpose
Details
The purpose of the Share Plans
is to provide eligible employees
(including Executive Directors but
excluding Non-Executive Directors)
with performance incentives
through opportunities to acquire
beneficial ownership of shares in the
Company and to access the taxation
concessions available under the
Income Tax Assessment Act. The
DESP is also used for the settlement
of shares on exercise of options in
the Share Option Plans.
The purpose of the Share Option
Plans is to permit the Company,
as part of its overall remuneration
programs, to provide long-term
incentives for employees (including
Executive Directors), consultants
and contractors to Nanosonics who
deliver long-term shareholder returns.
The Plans provide participants
with an opportunity to acquire a
beneficial ownership of shares in the
Company and to access the taxation
concessions available under the
Income Tax Assessment Act.
Since the DESP was last approved,
814,841 shares (from the exercise of
ESOP options) have been issued to
the Plan. As at the date of this report
849,741 shares remain outstanding.
No grants to date have been made
under the EESP.
Since the ESOP was last approved,
3,681,827 options have been issued,
2,644,841 options exercised, and
2,056,270 options lapsed. As at the
date of this report 3,433,001 options
remain outstanding.
Since the GSOP was last approved,
no options have been issued,
608,333 options exercised and
50,000 options lapsed. There have
been no new issues. As at the date
of this report 156,667 options remain
outstanding.
Nanosonics 2015 Annual Report | Page 40
Nanosonics 2015 Annual Report | Page 40
5.2 ESS grants to KMP
5.2.1 Analysis of share-based payments granted as remuneration
Details of the vesting profiles for the year and as at 30 June 2015 of the Options and Performance Rights granted as remuneration
to each Executive KMP are set out below:
Options/Performance Rights
Vesting in future years
%
Number
vested
Number
lapsed/
vested
during
Number
forfeited
%
Expiry
Exercise
Number
during
the
vested to
during
lapsed/
Balance at
Intrinsic
value at
Date
granted
the year
year
date
the year
forfeited
year end
year end
Description
Grant
Date
Michael
Kavanagh
Ron
Weinberger
2014 Deferred STI
Mar-15
01-Oct-15
2013 LTIS Tranche 1
Nov-13
30-Sep-16
2013 LTIS Tranche 2
Nov-13
30-Sep-16
2013 LTIS Tranche 3
Nov-13
30-Sep-17
2013 LTIS Tranche 4
Nov-13
30-Sep-17
2014 Deferred STI
Mar-15
01-Oct-15
2014 LTIS Tranche 1
Mar-15
30-Sep-17
2014 LTIS Tranche 2
Mar-15
30-Sep-17
2013 LTIS Tranche 1
Nov-13
30-Sep-16
2013 LTIS Tranche 2
Nov-13
30-Sep-16
2014 Deferred STI
Mar-15
01-Oct-15
2014 LTIS Tranche 1
Mar-15
30-Sep-17
2014 LTIS Tranche 2
Mar-15
30-Sep-17
2013 LTIS Tranche 1
Mar-14
30-Sep-16
2013 LTIS Tranche 2
Mar-14
30-Sep-16
McGregor
Grant
2012 LTIS1
Options
Aug-13
30-Sep-15
Price
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
70,479
375,000
375,000
375,000
375,000
52,994
50,276
50,275
67,409
67,409
$0.56
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
200,000
38,584
36,041
36,041
47,888
47,889
145,307
2012 LTIS1
Options
Nov-12
30-Sep-15
$0.00
1,220,000
Jul-10
19-Jul-14
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
200,000
–
–
–
–
–
–
May-11
28-Apr-16
$0.85
1,000,000
166,666
17% 1,000,000
2014 Deferred STI
Mar-15
01-Oct-15
2014 LTIS Tranche 1
Mar-15
30-Sep-17
2014 LTIS Tranche 2
Mar-15
30-Sep-17
Gerard Putt
2013 LTIS Tranche 1
Mar-14
30-Sep-16
2013 LTIS Tranche 2
Mar-14
30-Sep-16
2012 LTIS1
Options
Aug-13
30-Sep-15
May-11
27-Apr-16
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.85
28,655
29,739
29,739
39,514
39,515
119,898
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
400,000
66,666
17%
400,000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
70,479
375,000
375,000
375,000
375,000
52,994
50,276
50,275
67,409
67,409
119,814
637,500
637,500
637,500
637,500
90,090
85,469
85,468
114,595
114,595
1,220,000
2,074,000
1,220,0001
38,584
–
38,584
36,041
36,041
47,888
47,889
–
65,593
61,270
61,270
81,410
81,411
145,307
247,022
145,3071
28,655
–
28,655
29,739
29,739
39,514
39,515
–
48,714
50,556
50,556
67,174
67,176
119,898
203,827
119,8981
–
–
2016
70,479
2017
2018
375,000
375,000
52,994
375,000
375,000
50,276
50,275
36,041
36,041
29,739
29,739
67,409
67,409
47,888
47,889
39,514
39,515
1. The performance conditions set out in the 2012 LTIS were not met. Accordingly, these performance rights did not vest and were subsequently forfeited in July 2015.
Nanosonics 2015 Annual Report | Page 41
Directors’ report (continued)
5.2.2 Exercise of options granted as remuneration
During the financial year, the following shares were issued on the exercise of options previously granted as part of remuneration
to KMP:
Number of shares
Amount paid per share ($)
Total amount paid ($)
Intrinsic value1 ($)
Ron Weinberger
McGregor Grant
Gerard Putt
Total
200,000
1,000,000
400,000
1,600,000
$0.556
$0.85
$0.85
$111,200
$850,000
$340,000
$1,301,200
$47,940
$1,035,000
$414,000
$1,496,940
1. The intrinsic value of the shares is calculated as the market price of the shares of the company on the ASX as at close of trading on the date the options were exercised and the shares
were issued after deducting the price paid to exercise the option.
There are no amounts unpaid on the shares issued as a result of the exercise of the options in prior years.
5.2.3 Analysis of movement in options
The movement in number and value during the financial year of Options and Performance Rights over ordinary shares of
Nanosonics Limited held by KMP is detailed below.
Balance at start
of the year
Granted in year
Exercised in year
Forfeited in year
Balance at end
of the year
Number
Value ($)1 Number Value ($)1
Number
Value($)2 Number Value ($)2
Number
Value ($)1
Michael
Kavanagh
Ron
Weinberger
McGregor
Grant
1,500,000 $1,158,938
70,479
$121,231
–
–
1,554,8183
$836,989
153,545
$245,526
200,000
$47,940
1,241,0843
$683,102
110,666
$177,032
1,000,000 $1,035,000
Gerard Putt
598,9273
$350,093
88,133
$140,603
400,000
$414,000
Total
4,894,829 $3,029,122
422,823 $684,392 1,600,000 $1,496,940
–
–
–
–
–
–
1,570,479 $1,280,169
– 1,508,3633 $1,019,614
–
–
–
351,7503
$358,934
287,0603
$290,696
3,717,652 $2,949,413
1. The ‘fair value’ of options granted in the year is the fair value of the options calculated at grant date and derived applying the valuation methodology prescribed under IFRS-2. The total
value of the options granted is included in the table above. This amount is allocated to remuneration over the vesting period (i.e. in years 30 June 2012 to 30 June 2015).
2. The value of options exercised and forfeited during the year is calculated as the market price of shares of the company on the ASX as at close of trading on the date the options were
exercised or forfeited after deducting the price paid or payable to exercise the option.
3. This includes performance rights under the 2012 LTIS. The performance conditions set out in the 2012 LTIS were not met. Accordingly, these performance rights did not vest and were
subsequently forfeited in July 2015.
Nanosonics 2015 Annual Report | Page 42
Nanosonics 2015 Annual Report | Page 42
5.3 Fair value of share-based compensation
The following factors and assumptions were used in determining the fair value on grant date of options and performance rights
granted to directors and KMP under ESOP which were unexpired on 30 June 2015, including those granted during the period:
Option/
Performance
Rights
Description
2012 LTIS1
2012 LTIS1
2013 LTIS
Tranche 1
– CEO
2013 LTIS
Tranche 2
– CEO
2013 LTIS
Tranche 3
– CEO
2013 LTIS
Tranche 4
– CEO
Vesting
Conditions
Grant
date
Expiry
date
Share price
at grant
date($)
Exercise
price ($)
Valuation
Model
Estimated
volatility
Risk free
interest rate
Fair Value
of option($)
FY15 Revenue,
net profit after
tax and service
FY15 Revenue,
net profit after
tax and service
Relative TSR
performance and
service
FY16 Revenue
and service
Relative TSR
performance and
service
FY17 Revenue
and service
Nov-12
30-Sep-15
0.55
–
Binomial
45.46%
2.58%
0.55
Aug-13
30-Sep-15
0.78
–
Binomial
45.49%
2.35%
0.78
Nov-13
30-Sep-16
0.85
–
Monte
Carlo
45.00%
3.00%
0.68
Nov-13
30-Sep-16
0.85
–
Binomial
45.00%
3.00%
0.85
Nov-13
30-Sep-17
0.85
–
Monte
Carlo
45.00%
3.20%
0.71
Nov-13
30-Sep-17
0.85
–
Binomial
45.00%
3.20%
0.85
2013 LTIS
Tranche 1
– Other KMP
Relative TSR
performance and
service
Mar-14
30-Sep-16
0.80
–
Monte
Carlo
45.00%
2.68%
0.63
2013 LTIS
Tranche 2
– Other KMP
2014 Deferred
STI
FY16 Revenue
and service
Mar-14
30-Sep-16
0.80
–
Binomial
45.00%
2.68%
0.80
Service Mar-15
01-Oct-15
1.72
–
Binomial
45.00%
2.10%
1.72
2014 LTIS
Tranche 1
– Other KMP
Relative TSR
performance and
service
2014 LTIS
Tranche 2
– Other KMP
FY17 Revenue
and service
Mar-15
30-Sep-17
1.72
–
Monte
Carlo
45.00%
1.88%
1.36
Mar-15
30-Sep-17
1.72
–
Binomial
45.00%
1.88%
1.71
1. The performance conditions set out in the 2012 LTIS were not met. Accordingly, these performance rights did not vest and were subsequently forfeited in July 2015.
Nanosonics 2015 Annual Report | Page 43
Directors’ report (continued)
5.4 KMP equity interests
In accordance with the Corporations Act (section 205G (1)), Nanosonics is required to notify the interests (shares and rights
to shares) of directors to the ASX. In the interests of transparency and completeness of disclosure we have provided this
information for each director (as required under the Corporations Act) and all other executive KMP.
Equity interests as at
30 June 2015
Non-Executive Directors
Maurie Stang
Richard England
David Fisher
Executive Directors
Michael Kavanagh
Ron Weinberger
Other Executive KMP
McGregor Grant
Gerard Putt
Nanosonics Limited
ordinary shares1
Options over Nanosonics
Limited ordinary shares
Total intrinsic value of NAN
securities as at year end ($)2/3
25,099,701
128,301
812,705
150,000
52,000
645,578
100,096
–
–
–
1,570,479
1,508,3634
351,7504
287,0604
$42,669,492
$218,112
$1,381,599
$2,924,814
$2,652,617
$1,695,458
$658,165
1. Includes the number of Nanosonics shares issued to executives under the DESP.
2. The intrinsic value of Nanosonics shares calculated as at the closing NAN price on 30 June 2015 times the number of shares.
3. The intrinsic value of options calculated as at the closing NAN price on 30 June 2015 less the applicable exercise price times the number of options.
4. Includes performance rights relating to the 2012 LTIS which did not vest and were subsequently forfeited in July 2015 as the performance conditions were not met.
Equity interests as at the
date of this report
Non-Executive Directors
Maurie Stang
Richard England
David Fisher
Executive Directors
Michael Kavanagh
Ron Weinberger
Other Executive KMP
McGregor Grant
Gerard Putt
Nanosonics Limited
ordinary shares1
Options over Nanosonics
Limited ordinary shares
25,099,701
128,301
812,705
150,000
52,000
645,578
100,096
–
–
–
1,570,479
288,363
206,443
167,162
1. Includes the number of Nanosonics shares issued to executives under the DESP.
Refer to Section 4.5.2 regarding Securities Trading Restrictions.
Nanosonics 2015 Annual Report | Page 44
Nanosonics 2015 Annual Report | Page 44
5.5 KMP Share movement
The numbers of shares in the Company held during the financial year by KMP, including their personally-related parties,
are set out below.
Balance at start of
the year
Received during the
year on the exercise
of options
Other net changes
during the year
Balance at end of
the year
Non-Executive Directors
Maurie Stang
Richard England
David Fisher
Executive Directors
Michael Kavanagh
Ron Weinberger
Other Executive KMP
McGregor Grant1
Gerard Putt1
28,402,424
128,301
812,705
150,000
68,607
77,056
69,046
1. This includes shareholding of a close family member of the KMP.
(3,302,723)
25,099,701
–
–
–
–
–
–
–
200,000
(216,607)
1,000,000
400,000
(431,478)
(368,950)
128,301
812,705
150,000
52,000
645,578
100,096
Nanosonics 2015 Annual Report | Page 45
Directors’ report (continued)
6.0 Employment agreements
6.1 CEO and President
The following sets out the key terms of the employment agreement for the CEO and President, Michael Kavanagh.
Length of contract
Ongoing employment contract until notice is given by either party.
Fixed Remuneration
$410,000 p.a., inclusive of superannuation and reviewed annually. Increased to $430,000 p.a., inclusive of
superannuation effective 1 July 2014.
Short-term Incentive
33.3% of Base Salary.
Long-term Incentive
33.3% of Base Salary. LTI arrangements in respect of 2013 and 2014 are described in section 4.4.2.
Notice periods
In order to terminate the employment arrangements, is required to provide Nanosonics with 9 months written
notice. Nanosonics must provide Mr Kavanagh with 9 months written notice.
Resignation
On resignation, unless the Board determines otherwise:
• All unvested STI or LTI benefits are forfeited.
• All vested but unexercised STI or LTI benefits are forfeited after 30 days following cessation
of employment.
Termination on notice
by Nanosonics
Nanosonics may terminate employment by providing 9 months’ written notice or payment in lieu of the
notice period based on fixed remuneration. Upon termination on notice by Nanosonics, unless the Board
determines otherwise:
Change of control
Termination for
serious misconduct
• All unvested STI or LTI benefits are forfeited.
• All vested but unexercised STI or LTI benefits are forfeited after 30 days following cessation
of employment.
In the event of a takeover or change in control of Nanosonics Limited, any unvested Performance Rights will
vest on a pro-rata basis based on the most current financial reports available at the time a change of control
occurs, unless otherwise determined by the Board. The pro-rata period will be calculated from the grant date
to the change of control date. Performance Rights that vest following a change of control will not generally
be subject to restrictions on dealings.
Nanosonics may immediately terminate employment at any time in the case of serious misconduct, and
Mr Kavanagh will be only be entitled to payment of fixed remuneration up to the date of termination. On
termination without notice by Nanosonics in the event of serious misconduct all unvested STI or LTI benefits
will be forfeited. The treatment of any vested but unexercised STI or LTI benefits will be at the discretion of
the Board.
Statutory Entitlements
Payment of statutory entitlements of long service leave and annual leave applies in all events
of separation.
Post-employment
Restraints
Mr Kavanagh will be restrained for a period of up to 24 months after termination of his employment by
either party from being engaged in any of the following activities:
• Engaging with clients of Nanosonics with a view to obtaining the custom of those clients in a business
that is the same as or similar to Nanosonics’ business.
• Interfering with the relationship between Nanosonics, its customers, employees, agents, contractors
or suppliers.
• Inducing or assisting in the inducement of any employee, agent or contractor of Nanosonics to leave
their employment or terminate their contract.
• Carrying-on or becoming in any way involved in any trade or business that is in competition
with Nanosonics.
Nanosonics 2015 Annual Report | Page 46
Nanosonics 2015 Annual Report | Page 46
6.2 Other Executive KMP
The following sets out details of the employment agreements relating to other Executive KMP. The terms for all other Executive
KMP are similar, but do on occasion, vary to suit different needs.
Length of contract
Ongoing employment contract until notice is given by either party.
Notice periods
In order to terminate the employment arrangements, either Nanosonics or the Executive KMP are required
to provide the other party with written notice as summarised below:
• Ron Weinberger: 6 months.
• McGregor Grant: 4 months.
• Gerard Putt: 3 months.
Resignation
On resignation, unless the Board determines otherwise:
• All unvested STI or LTI benefits are forfeited.
• All vested but unexercised STI or LTI benefits are forfeited after 30 days following cessation
of employment.
Termination on notice
by Nanosonics
Nanosonics may terminate employment by providing the relevant written notice or payment in lieu of the
notice period based on fixed remuneration. On termination on notice by Nanosonics, unless the Board
determines otherwise:
Change of control
• All unvested STI or LTI benefits are forfeited.
• All vested but unexercised STI or LTI benefits are forfeited after 30 days following cessation
of employment.
In the event of a takeover or change in control of Nanosonics Limited, any unvested Performance Rights
will vest on a pro-rata basis based on the most current financial reports available at the time a change of
control occurs, unless otherwise determined by the Board. The pro-rata period will be calculated from the
grant date to the change of control date. Performance Rights that vest following a change of control will
not generally be subject to restrictions on dealings.
Termination for
serious misconduct
Nanosonics may immediately terminate employment at any time in the case of serious misconduct, and
the Executive KMP will only be entitled to payment of fixed remuneration up to the date of termination.
On termination without notice by Nanosonics in the event of serious misconduct, all unvested STI or LTI
benefits will be forfeited. The treatment of any vested but unexercised STI or LTI benefits will be at the
discretion of the Board.
Statutory Entitlements
Payment of statutory entitlements of long service leave and annual leave applies in all events
of separation.
Post-employment
Restraints
All Executive KMP will be restrained for a period of up to 24 months after termination of their employment
by either party from being engaged in any of the following activities:
• Engaging with clients of Nanosonics with a view to obtaining the custom of those clients in a business
that is the same as or similar to Nanosonics’ business.
• Interfering with the relationship between Nanosonics, its customers, employees, agents, contractors
or suppliers.
• Inducing or assisting in the inducement of any employee, agent or contractor of Nanosonics to leave
their employment or terminate their contract.
• Carrying-on or becoming in any way involved in any trade or business that is in competition
with Nanosonics.
Nanosonics 2015 Annual Report | Page 47
Directors’ report (continued)
7.0 Key Management Personnel transactions
7.1 Loans to KMP and their related parties
During the financial year and to the date of this report, the Group made no loans to directors and other KMP and none were
outstanding as at 30 June 2015 (2014: Nil).
7.2 Other transactions with KMP
Certain directors and KMP, or their personally-related entities, hold positions in other entities that result in them having control
or significant influence over the financial or operating policies of those entities. A number of these entities transacted with the
Company in the 2014 and 2015 Financial Years. The terms and conditions of the transactions were no more favourable than
those available, or which might reasonably be expected to be available, on similar transactions with unrelated entities on an
arms-length basis.
Directors and KMP
Related entities
Maurie Stang
Gryphon Capital Pty Ltd
Transactions
Director fees
Maurie Stang
Novapharm Research (Australia) Pty Ltd
No transactions during the period
Maurie Stang
Ramlist Pty Ltd
Rent of premises
Maurie Stang
Regional Healthcare Group Pty Ltd
Products purchased, services received and
products sold
Richard England
Angleterre Pty Ltd and Domkirke Pty Ltd
Director fees
The aggregate amounts of each of the above types of transactions with directors and KMP of the Group were:
Amounts recognised as revenue
Products and services sold
Amounts recognised as expenses
Products purchased and services received
Rent of premises
2015
$’000
1,748
345
177
The aggregate amounts of assets and liabilities relating to the above types of transactions with directors and KMP of the
Group were:
Assets
Current receivables
Liabilities
Current liabilities
Nanosonics 2015 Annual Report | Page 48
Nanosonics 2015 Annual Report | Page 48
2015
$’000
501
4
2014
$’000
1,812
357
184
2014
$’000
450
18
Indemnifying officers or auditor
During the financial year, the Company paid insurance premiums to insure the directors and secretary and KMP of the Company
and its controlled entities.
The liabilities insured are legal costs that may be incurred in defending civil or criminal proceedings that may be brought
against the officers in their capacity as officers of entities in the Group, and any other payments arising from liabilities incurred
by the officers in connection with such proceedings. This does not include such liabilities that arise from conduct involving a
wilful breach of duty by the officers or the improper use by the officers of their positions or of information to gain advantage
for themselves or someone else or to cause detriment to the Company. It is not possible to apportion the premium between
amounts relating to the insurance against legal costs and those relating to other liabilities.
The directors have not included in this report the amount of the premium paid in respect of the insurance policy, as such
disclosure is prohibited under the terms of the contract.
No indemnities have been given or insurance premiums paid, during or since the financial year, for any person who is or has
been an auditor for the Group.
Proceedings on behalf of the Company
No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of
the Company or intervene in any proceedings to which the Company is a party, for the purpose of taking responsibility on behalf
of the Company for all or part of those proceedings.
No proceedings have been brought or intervened in on behalf of the Company with leave of the Court under section 237 of the
Corporations Act 2001.
Rounding
The amounts contained in this report and in the financial report have been rounded to the nearest $1,000 (where rounding is
applicable) and where noted ($’000) under the option available to the Company under ASIC CO 98/100. The Company is an
entity to which the class order applies.
Non-audit services
The Company may decide to employ the auditor on assignments additional to their statutory audit duties where the auditor’s
expertise and experience with the Company and/or the Group are important.
The Board of directors has considered the position and, in accordance with advice received from the Audit and Risk Committee,
is satisfied that the provision of the non-audit services by the auditor, if any, did not compromise the auditor independence
requirements of the Corporations Act 2001 for the following reasons:
a. All non-audit services have been reviewed by the Audit and Risk Committee to ensure they do not impact the impartiality
and objectivity of the auditor.
b. None of the services undermines the general principles relating to auditor independence as set out in APES 110 Code of
Ethics for Professional Accountants.
The auditor of the Group, UHY Haines Norton and its related practice firms did not provide any non-audit services during
the year.
Nanosonics 2015 Annual Report | Page 49
Directors’ report (continued)
Officers of the Company who are former audit partner of UHY Haines Norton
There are no officers of the company who are former audit partners of UHY Haines Norton.
Auditor’s independence declaration
A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is included on
page 52 of this report.
Auditor
UHY Haines Norton continues in office as auditor in accordance with section 327 of the Corporations Act 2001.
Corporate Governance
The Company’s Corporate Governance Statement and ASX Appendix 4G are released to ASX on the same day the Annual
Report is released, and the Corporate Governance Statement and Corporate Governance Manual can be found on the
Company’s website at http://www.nanosonics.com.au/Investor-Centre/Corporate-Governance.
This report, which includes the review of operations (on pages 6 to 11) and the Information on the directors, company
secretaries and senior management (on pages 16 to 17), is made and signed in accordance with a resolution of directors,
pursuant to section 298 (2)(a) of the Corporations Act 2001, on 20 August 2015.
Richard England
Director
Sydney
20 August 2015
Nanosonics 2015 Annual Report | Page 50
Nanosonics 2015 Annual Report | Page 50
Contents of the financial statements
For the year ended 30 June 2015
Auditor’s independence declaration
Financial statements
Notes to the financial statements
1. Corporate information
2. Summary of significant accounting policies
3. Financial risk management
4. Critical accounting estimates and judgments
5. Segment information
6. Other income
7. Loss before income tax expense
8. Taxation
9. Current assets – Cash and cash equivalents
10. Current assets – Trade and other receivables
11. Current assets – Inventories
12. Current assets – Other
13. Non-current assets – Property plant and equipment
14. Non-current assets – Intangible assets
15. Non-current assets – Other
16. Trade and other payables
17. Current liabilities – Deferred revenue
18. Provisions
19. Borrowings
20. Convertible notes
21. Contributed equity
22. Reserves
23. Dividends
24. Capital and leasing commitments
25. Auditor’s remuneration
26. Information relating to subsidiaries
27. Related party disclosures
28. Notes to the cash flow statements
29. Loss per share
30. Share-based compensation
31. Parent entity information
32. Events subsequent to reporting date
Directors’ declaration
Independent auditor’s report to the members
52
53
57
57
57
69
74
75
76
76
77
78
78
80
80
81
82
82
82
83
83
84
85
85
86
86
87
87
88
89
91
92
92
98
98
99
100
Nanosonics 2015 Annual Report | Page 51
Auditor’s independence declaration
Level 11 | 1 York Street | Sydney | NSW | 2000
GPO Box 4137 | Sydney | NSW | 2001
t: +61 2 9256 6600 | f: +61 2 9256 6611
sydney@uhyhn.com.au
www.uhyhnsydney.com.au
Auditor's Independence Declaration under section 307C of the Corporations Act 2001
To the Directors of Nanosonics Limited
I declare that, to the best of my knowledge and belief, during the year ended 30 June 2015, there
have been:
(i) no contraventions of the auditor independence requirements as set out in the Corporations Act
2001 in relation to the audit; and
(ii) no contraventions of any applicable code of professional conduct in relation to the audit.
Mark Nicholaeff
Partner
Sydney
Date: 20 August 2015
UHY Haines Norton
Chartered Accountants
An association of independent fi rms in Australia and New Zealand and a member
of UHY International, a network of independent accounting and consulting fi rms.
UHY Haines Norton—ABN 85 140 758 156 NSWBN 98 133 826
Liability limited by a scheme approved under Professional Standards Legislation.
Passion beyond numbers
Nanosonics 2015 Annual Report | Page 52
Consolidated statement of profit or loss
and other comprehensive income
For the year ended 30 June 2015
Continuing operations
Sale of goods and services
Cost of sales
Gross profit
Other income
Operating expenses
Staffing costs
Intellectual property
Quality & regulatory management
Business development
Premises, plant & equipment
External consultants & advisors
Other operating costs
Total operating expenses
Borrowing costs
Operating loss before income tax
Income tax benefit
Net loss after income tax expense attributable to owners of the
parent entity
Other comprehensive income
Items that may be reclassified subsequently to profit or loss
Exchange difference on foreign currency translation
Income tax on items of other comprehensive income
Total items that may be reclassified subsequently to profit or loss
Total other comprehensive income
Total comprehensive income for the period attributable to owners
of the parent entity
Notes
5
6
7
7
8
2015
$’000
22,214
(6,901)
15,313
3,236
13,906
342
272
1,479
2,885
1,421
3,111
23,416
598
(5,465)
5
(5,460)
14
–
14
14
2014
$’000
21,492
(7,571)
13,921
4,114
12,005
594
298
1,094
1,635
1,534
2,956
20,116
555
(2,636)
31
(2,605)
(7)
–
(7)
(7)
(5,446)
(2,612)
(Loss) per share for losses attributable to ordinary shareholders
of the company
Basic (loss) per share
Diluted (loss) per share
29
29
Cents
(2.0)
(1.9)
Cents
(1.0)
(1.0)
The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the
accompanying notes.
Nanosonics 2015 Annual Report | Page 53
Consolidated statement of financial position
As at 30 June 2015
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Other current assets
Total current assets
Non-current assets
Property, plant and equipment
Intangible assets
Other non-current assets
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Deferred revenue
Provisions
Borrowings
Convertible Notes
Total current liabilities
Non-current liabilities
Trade and other payables
Provisions
Borrowings
Convertible Notes
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Option premium on convertible notes
Reserves
Accumulated loss
Total equity
Notes
9
10
11
12
13
14
15
16
17
18
19
20
16
18
19
20
21
20
22
2015
$’000
45,724
3,871
6,209
636
56,440
3,568
207
150
3,925
60,365
2,725
443
3,321
7
8,693
15,189
238
251
11
–
500
15,689
44,676
103,059
376
4,743
(63,502)
44,676
2014
Restated
$’000
21,233
5,712
4,237
440
31,622
1,641
137
144
1,922
33,544
1,722
308
2,799
6
–
4,835
–
159
18
8,097
8,274
13,109
20,435
74,410
376
3,691
(58,042)
20,435
The above consolidated statement of financial position should be read in conjunction with the accompanying notes.
Nanosonics 2015 Annual Report | Page 54
Consolidated statement of changes in equity
For the year ended 30 June 2015
Contributed
equity
Note 21
$’000
Option
premium on
convertible
note
Note 20
$’000
Employee
equity
benefits
reserve
Note 22
$’000
Foreign
currency
translation
reserve
Note 22
$’000
At 30 June 2013
Loss for the period
Other comprehensive income
Total comprehensive income (loss)
Transactions with owners in their
capacity as owners
Shares issued
Transaction costs
Share-based payment
At 30 June 2014
Loss for the period
Other reserves
Total comprehensive income (loss)
Transactions with owners in their
capacity as owners
Shares issued
Transaction costs
Share-based payment
At 30 June 2015
74,068
376
2,673
–
–
–
–
–
342
74,410
–
–
–
28,000
(962)
1,611
–
–
–
–
–
–
376
–
–
–
–
–
–
103,059
376
–
–
–
–
–
998
3,671
–
–
–
–
–
1,038
4,709
Accumulated
losses
Total
equity
$’000
(55,437)
(2,605)
$’000
21,707
(2,605)
(7)
(2,605)
(2,612)
–
–
–
–
–
1,340
(58,042)
20,435
(5,460)
(5,460)
14
(5,460)
(5,446)
–
–
–
28,000
(962)
2,649
27
–
(7)
(7)
–
–
–
20
–
14
14
–
–
–
34
(63,502)
44,676
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
Nanosonics 2015 Annual Report | Page 55
Consolidated statement of cash flows
For the year ended 30 June 2015
Cash flows from operating activities
Receipts from customers (inclusive of GST)
Receipts from government grants (inclusive of refundable R&D tax offset)
6
Payments to suppliers and employees (inclusive of GST)
Notes
28
Interest received
Income taxes paid
Net cash used in operating activities
Cash flows from investing activities
Purchase of property, plant and equipment
Purchase of intangible assets
Net cash used in investing activities
Cash flow from financing activities
Proceeds from issue of shares
Share issue costs
Proceeds from exercise of options
Repayments of borrowings
Net cash provided by financing activities
Net increase (decrease) in cash and cash equivalents
Cash at the beginning of the financial year
Effects of exchange rate changes on cash and cash equivalents
Cash and cash equivalents at the end of year
9
2015
$’000
26,873
119
(30,265)
837
15
(2,421)
(2,135)
(176)
(2,311)
28,000
(962)
1,611
(8)
28,641
23,909
21,233
582
45,724
2014
$’000
23,027
1,666
(28,020)
727
6
(2,594)
(433)
(46)
(479)
342
–
–
(6)
336
(2,737)
24,064
(94)
21,233
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
Nanosonics 2015 Annual Report | Page 56
Notes to the financial statements
For the year ended 30 June 2015
1. Corporate information
The financial report on pages 53 to 98 covers Nanosonics Limited as a consolidated entity consisting of Nanosonics
Limited (the Company) and its subsidiaries (the Group).
Nanosonics Limited is a publicly listed company, limited by shares, incorporated and domiciled in Australia and listed on the
Australian Securities Exchange (ASX code NAN). During the year, the Company move it’s registered office and principal place of
business to:
14 Mars Road, Lane Cove, NSW 2066 Australia
The Company’s previous registered office and principal place of business was:
Unit 24, 566 Gardeners Road, Alexandria NSW 2015 Australia
A description of the nature of the Group’s operations and its principal activities is included in the review of operations on pages
6 to 11 and in the Directors’ report on page 18, both of which are not part of this financial report.
The financial report was authorised for issue in accordance with the resolution of the directors on 20 August 2015.
2. Summary of significant accounting policies
a. Basis of preparation
The financial report is a general purpose financial report, which has been prepared in accordance with the requirements of the
Corporations Act 2001, Australian Accounting Standards, and other authoritative pronouncements of the Australian Accounting
Standards Board (AASB). The financial report has also been prepared on a historical cost basis and does not take into account
changes in money values, except for derivative financial instruments, which have been measured at fair value.
The Company is of a kind referred to in ASIC Class Order 98/100 dated 10 July 1998 and in accordance with that Class Order,
all financial information presented in Australian dollars has been rounded to the nearest one thousand dollars ($’000), unless
otherwise stated.
b. Compliance with IFRS
The financial report of Nanosonics Limited also complies with International Financial Reporting Standards (IFRS) as issued by
the International Accounting Standards Board (IASB).
c. New accounting standards and interpretations
1) Changes in accounting policy and disclosures
The accounting policies adopted are consistent with those of the previous financial year except as follows:
The Group has adopted the following new and amended Australian Accounting Standards and AASB Interpretations as
of 1 July 2014:
• AASB 2014-1 Part A – Amendments to Australian Accounting Standards – Annual Improvements 2010-2012 and
2011-2013 Cycles.
• AASB 2014-1 Part B – Amendments to Australian Accounting Standards – Defined Benefit Plans: Employee Contributions.
• AASB 2014-1 Part C – Materiality.
• AASB 2012-3 Amendments to Australian Accounting Standards – Offsetting Financial Assets and Financial Liabilities.
• AASB 2013-3 Amendments to AASB 136 – Recoverable Amount Disclosure for Non-Financial Assets.
Nanosonics 2015 Annual Report | Page 57
The effect of the adoption of the above standards or interpretations or other amendments applied for the first time are
disclosed below:
• AASB 2014-1 Part A – Amendments to Australian Accounting Standards – Annual Improvements 2010-2012 and
2011-2013 Cycles – This standard sets out amendments to Australian Accounting Standards arising from the issuance
by the International Accounting Standards Board (IASB) of International Financial Reporting Standards (IFRSs). Annual
Improvements to IFRSs 2010-2012 Cycle.
Annual Improvements to IFRSs 2010–2012 Cycle is a collection of amendments to IFRSs in response to eight issues addressed
during the 2010–2012 cycle for annual improvements to IFRSs.
Among the items addressed by this standard, the following are relevant to the Group:
– IFRS 2 – Clarifies the definition of ‘vesting conditions’ and ‘market condition’ and introduces the definition of
‘performance condition’ and ‘service condition’.
– IFRS 8 – Requires entities to disclose factors used to identify the entity’s reportable segments when operating segments
have been aggregated. An entity is also required to provide reconciliation of total reportable segments’ assets to the
entity’s total assets.
– IAS 16 & IAS 38 – Clarifies the determination of accumulated depreciation does not depend on the selection of valuation
technique and that it is calculated as the difference between the gross and net carrying amounts.
– IAS 24 – Defines a management entity providing Key Management Personnel (KMP) services as a related party of the
reporting entity. The amendments added an exemption from the detailed disclosure requirements in paragraph 17 of
IAS 24 for KMP services provided by a management entity. Payments made to a management entity in respect of KMP
services should be separately disclosed.
• AASB 2013-3 Amendments to AASB 136 – Recoverable Amount Disclosure for Non-Financial Assets- The amendments
include the requirement to disclose additional information about the fair value measurement when the recoverable amount of
impaired assets is based on fair value less cost of disposal.
When these amendments were adopted, they did not have a significant impact to the Group given that they are largely of the
nature of clarification of existing requirements.
Adoption of the other standards affected the disclosures but did not have a material impact on the financial statements of
the Group.
2) Accounting Standards and Interpretations issued but not yet effective
Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet effective and
have not been adopted by the Group for the annual reporting period ended 30 June 2015, are outlined below:
Standards to be applied by the Group beyond 1 July 2015
• AASB 2014-4 Amendments to Australian Accounting Standards – Clarification on the Acceptable Methods of Depreciation
and Amortisation (Amendments to AASB 116 and AASB 138), effective 1 January 2016, applicable 1 July 2016. AASB 116
and AASB 138 both establish the principle for the basis of depreciation and amortisation as being the expected pattern of
consumption of the future economic benefits of an asset. The AASB has clarified that the use of revenue-based methods to
calculate the depreciation of an asset is not appropriate because revenue generated by an activity that includes the use of an
asset generally reflects factors other than the consumption of the economic benefits embodied in the asset. The AASB also
clarified that revenue is generally presumed to be an inappropriate basis for measuring the consumption of the economic
benefits embodied in an intangible asset. This presumption, however, can be rebutted in certain limited circumstances.
• AASB 2014-5 Amendments arising from AASB 15 Revenue from Contracts with Customers, effective 1 January 2017,
applicable 1 July 2017. AASB 15 establishes principles for reporting useful information to users of financial statements about
the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity’s contracts with customers.
The core principle of AASB 15 is that an entity recognises revenue to depict the transfer of promised goods or services to
customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods
or services. An entity recognises revenue in accordance with that core principle by applying the following steps:
– Step 1: Identify the contract(s) with a customer.
– Step 2: Identify the performance obligations in the contract.
– Step 3: Determine the transaction price.
– Step 4: Allocate the transaction price to the performance obligations in the contract.
– Step 5: Recognise revenue when (or as) the entity satisfies a performance obligation.
Nanosonics 2015 Annual Report | Page 58
Notes to the financial statements (continued)For the year ended 30 June 2015 • AASB 9 Financial Instruments, effective 1 January 2018, applicable 1 July 2018. AASB 9 includes requirements for
the classification and measurement of financial assets. It was amended by AASB 2010-7 and AASB 2012-6 to reflect
amendments to the accounting for financial liabilities. These requirements improve and simplify the approach for
classification and measurement of financial assets compared with the requirements of AASB 139. In December 2014 it was
further amended by AASB 2014-7 and AASB 2014-8 to the classification and measurement rules and also introduced a new
impairment model. With these amendments, AASB 9 is now complete.
The Group has not yet assessed the full impact of the above standards that will be applied by the Group beyond 1 July 2015.
d. Basis of consolidation
The consolidated financial statements comprise the financial statements of Nanosonics Limited (‘Company’ or ‘parent entity’)
and its subsidiaries as at 30 June each year. Nanosonics Limited and its subsidiaries together are referred to in this financial
report as the Group or the consolidated entity.
Business combinations
The Group accounts for business combinations using the acquisition method when control is transferred to the Group.
The consideration transferred in the acquisition is generally measured at fair value, as are the identifiable net assets acquired.
Any goodwill that arises is tested annually for impairment. Any gain or a bargain purchase is recognised in profit or loss
immediately. Transaction costs are expensed as incurred, except if related to the issue of debt or equity securities.
The consideration transferred does not include amounts related to the settlement of pre-existing relationships. Such amounts
are generally recognised in profit or loss.
Subsidiaries
Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed to, or has rights to, variable
returns from its involvement with the entity and has the ability to affect those returns through its power over the entity.
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. Information on subsidiaries is contained in note 26 to the financial statements.
The financial statements of the subsidiaries are prepared for the same reporting period as the parent company, using consistent
accounting policies.
Loss of control
When the Group loses control over a subsidiary, it derecognises the assets and liabilities of the subsidiary, and any related
non-controlling interests and other components of equity. Any resulting gain or loss is recognised in profit or loss. Any interest
retained in the former subsidiary is measured at fair value when control is lost.
Transactions eliminated on consolidation
In preparing the consolidated financial statements, all inter-company balances and transactions between entities in the Group,
including any unrealised profits or losses, have been eliminated in full.
e. Operating segments
Operating segments are reported in a manner consistent with the internal reporting provided to the Managing Director and
CEO, who is the Group’s chief operating decision maker. The chief operating decision maker is responsible for allocating
resources and assessing performance of the operating segments.
Nanosonics 2015 Annual Report | Page 59
f. Foreign currency
(i) Functional and presentation currency
Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary
economic environment in which the entity operates (‘the functional currency’). The consolidated financial statements are
presented in Australian dollars, which is Nanosonics Limited’s functional and presentation currency.
(ii) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the
transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at
year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the statement of
profit or loss, except when they are deferred in equity as qualifying cash flow hedges and qualifying net investment hedges or
are attributable to part of the net investment in a foreign operation.
Translation differences on assets and liabilities carried at fair value are reported as part of the fair value gain or loss. Translation
differences on non-monetary financial assets and liabilities are recognised in profit or loss as part of the fair value gain or loss.
(iii) Group companies
The functional currency of the overseas subsidiaries is as follows:
• Nanosonics Europe GmbH is EUR;
• Nanosonics, Inc. is USD;
• Nanosonics Europe Limited is GBP; and
• Nanosonics UK Limited is GBP.
The results and financial position of all the Group entities (none of which has the currency of a hyperinflationary economy) that
have a functional currency different from the presentation currency are translated into the presentation currency as follows:
• assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that statement of
financial position
• income and expenses for each income statement are translated at average exchange rates (unless this is not a reasonable
approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses
are translated at the dates of the transactions), and
• all resulting exchange differences are recognised in other comprehensive income – foreign currency translation reserve.
On consolidation, exchange differences arising from the translation of any net investment in foreign entities, and of borrowings
and other financial instruments designated as hedges of such investments, are recognised in other comprehensive income.
When a foreign operation is sold or any borrowings forming part of the net investment are repaid, a proportionate share of such
exchange differences is reclassified to profit or loss, as part of the gain or loss on sale where applicable.
g. Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable, taking into account defined terms of payment
and excluding taxes or duty. Amounts disclosed as revenue are net of returns, trade allowances, rebates and amounts collected
on behalf of third parties. The Group recognises revenue when the amount of revenue can be reliably measured, it is probable
that future economic benefits will flow to the entity and specific criteria have been met for each of the Group’s activities as
described below. The amount of revenue is not considered to be reliably measurable until all contingencies relating to the sale
have been resolved. The Group bases its estimates on historical results, taking into consideration the type of customer, the type
of transaction and the specifics of each arrangement.
Revenue is recognised for the major business activities as follows:
(i) Sale of goods
Revenue is recognised when the significant risks and rewards of ownership have been transferred to the distributor or end
customer. Sales are recorded based on the prices specified in the sales contracts net of any discounts and returns at the time
of sale. No element of financing is deemed to be present as the sales are made with credit terms which are consistent with
practices in each market.
Nanosonics 2015 Annual Report | Page 60
Notes to the financial statements (continued)For the year ended 30 June 2015 (ii) Sale of services
Revenue from trophon® EPR maintenance and repairs are recognised as services are rendered. Revenue from service contracts
are recognised as services are rendered over the service period, typically over one year. Unearned service revenue is deferred
and recognised as liability in the Statement of financial position.
(iii) Interest income
Interest income is recognised on a time proportion basis using the effective interest method.
h. Government grants
Grants from government are recognised at their fair value where there is a reasonable assurance that the grant will be received
and the Group will comply with the attached conditions.
i. Income tax and other taxes
The income tax expense or revenue for the period is the tax payable on the current period’s taxable income based on the
national income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary
differences and to unused tax losses.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the
reporting period in the countries where the Company’s subsidiaries and associates operate and generate taxable income.
Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation
is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the
tax authorities.
Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of
assets and liabilities and their carrying amounts in the consolidated financial statements. However, deferred income tax is not
accounted for if it arises from initial recognition of an asset or liability in a transaction, other than a business combination, that
at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using
tax rates (and laws) that have been enacted or substantially enacted by the balance date and are expected to apply when the
related deferred income tax asset is realised or the deferred income tax liability is settled.
Deferred income tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable
that future taxable amounts will be available to utilise those temporary differences and losses and on the assumption that
no adverse change will occur in income tax legislation enabling the benefit to be realised and comply with the conditions of
deductibility imposed by the law.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities
and when the deferred tax balances relate to the same taxation authority. Current tax assets and liabilities are offset where the
entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the
liability simultaneously.
Current and deferred tax is recognised in profit or loss, except to the extent that it relates to items recognised in other
comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in
equity, respectively.
Tax consolidation
Nanosonics Limited and its wholly-owned Australian controlled entity, Saban Ventures Pty Limited, are part of a tax
consolidated group.
The head entity, Nanosonics Limited, and the controlled entity in the tax consolidated group account for their own current
and deferred tax amounts. These tax amounts are measured as if each entity in the tax consolidated group continues to be a
standalone taxpayer in its own right.
In addition to its own current and deferred tax amounts, Nanosonics Limited also recognises the current tax liabilities (or assets)
and the deferred tax assets arising from unused tax losses and unused tax credits assumed from controlled entities in the tax
consolidated group.
Nanosonics 2015 Annual Report | Page 61
Goods and services tax (GST), Value added tax (VAT)
Revenues, expenses and assets are recognised net of the amount of associated GST or VAT as applicable, unless the GST/
VAT incurred is not recoverable from the taxation authority, in which case, the GST/VAT is recognised as part of the cost of
acquisition of the asset or as part of the expense.
Receivables and payables are stated inclusive of the amount of GST/VAT receivable or payable. The net amount of GST/ VAT
recoverable from, or payable to, the taxation authority is included with other current receivables or payables in the statement of
financial position.
Cash flows are presented on a gross basis. The GST/VAT components of cash flows arising from investing or financing activities
which are recoverable from, or payable to, the taxation authority are presented as operating cash flows.
j. Leases
The determination of whether an arrangement is, or contains, a lease is based on the substance of the arrangement at inception
date, whether fulfilment of the arrangement is dependent on the use of a specific asset or assets or the arrangement conveys a
right to use the asset, even if that right is not explicitly specified in an arrangement.
Group as a lessee
Finance leases that transfer to the Group substantially all the risks and benefits incidental to ownership of the leased item, are
capitalised at the commencement of the lease at the fair value of the leased property or, if lower, at the present value of the
minimum lease payments. Lease payments are apportioned between finance charges and reduction of the lease liability so as
to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognised in finance costs in
the profit or loss.
A leased asset is depreciated over the useful life of the asset. However, if there is no reasonable certainty that the Group will
obtain ownership by the end of the lease term, the asset is depreciated over the shorter of the estimated useful life of the asset
and the lease term.
Leases in which a significant portion of the risks and rewards of ownership are not transferred to the Group as lessee are
classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are
charged to the statement of profit or loss on a straight-line basis over the period of the lease.
Group as a lessor
Leases in which the Group does not transfer all the risks and benefits of ownership of an asset are classified as operating
leases. Initial direct costs incurred in negotiating an operating lease are added to the carrying amount of the leased asset and
recognized over the lease term on the same basis as rental income. Contingent rents are recognised as revenue in the period in
which they are earned.
k. Borrowing costs
Borrowing costs are expensed in the period they occur. Borrowing costs consist of interest and other costs that an entity incurs
in connection with the borrowing of funds.
l. Cash and cash equivalents
For cash flow statement presentation purposes, cash and cash equivalents includes cash on hand, deposits held at call with
financial institutions, other short-term, highly liquid investments presented at market value that are readily convertible to known
amounts of cash and which are subject to an insignificant risk of changes in value, and bank overdrafts. Bank overdrafts are
shown within borrowings in current liabilities in the statement of financial position.
m. Inventories
Raw materials, starting components, consumable stores, work in progress and finished goods are stated at the lower of cost
and net realisable value.
Costs of purchased inventory are determined to be actual costs on a batch basis, after including import duties, taxes (other than
those subsequently recoverable by the entity), transport, handling and other costs directly attributable to the acquisition of the
inventory, and after deducting rebates and discounts.
Costs of work in progress and finished goods comprise purchased materials at cost, direct labour and an appropriate
proportion of variable and fixed overhead expenditure, the latter being allocated on the basis of normal operating capacity.
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.
Nanosonics 2015 Annual Report | Page 62
Notes to the financial statements (continued)For the year ended 30 June 2015 n. Financial assets
Classification
Financial assets are classified at initial recognition as financial assets at fair value through profit or loss, loans and receivables,
held-to-maturity investments, available-for-sale financial assets, or as derivatives designated as hedging instruments in an
effective hedge, as appropriate.
The Group’s financial assets include cash and short-term deposits, trade and other receivables, and derivative
financial instruments.
Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturities that
the Group’s management has the positive intention and ability to hold to maturity. All of the Group’s cash term investments are
captured in this category. Cash term investments, which are highly liquid irrespective of their maturity dates, are classified as
current assets, as they may not necessarily be held for their full term.
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active
market. Trade receivables generally have 30 to 60 days credit terms. Loans and receivables are included in current assets,
except for those with maturities greater than 12 months after the reporting period which are classified as non-current assets.
Receivables are disclosed in trade and other receivables (note 10) in the statement of financial position.
Derivative financial instruments are classified as held for trading unless they are designated as effective hedging instruments.
Recognition and derecognition
All financial assets are recognised initially at fair value plus, in the case of financial assets not recorded at fair value through profit
or loss, transaction costs that are attributable to the acquisition of the financial assets.
Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention
in the market place (regular way trades) are recognised on the trade dates. i.e. the date that the Group commits to purchase or
sell the asset.
Financial assets carried at fair value through profit or loss are initially recognised at fair value and transaction costs are expensed
in profit or loss.
Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been
transferred and the Group has transferred substantially all the risks and rewards of ownership.
Subsequent measurement
Receivables and held-to-maturity investments are carried at amortised cost using the effective interest method, less impairment.
Amortised cost is calculated by taking into account any discount or premium on acquisition and fees and costs that are an
integral part of the effective interest rate. The losses arising from impairment are recognised in the statement of profit or loss.
Receivables and held-to-maturity investments are carried at amortised cost using the effective interest method. Investments in
controlled entities are carried in the Company’s financial statements at the lower of cost and recoverable amount.
Impairment of financial assets
For financial assets carried at amortised cost, at each reporting date, the Group assesses whether there is objective evidence
that a financial asset is impaired. For trade receivables, collectability is reviewed on an on-going basis.
An impairment exists if one or more events that has occurred since the initial recognition of the assets (an incurred “loss
event”) has an impact on the estimated future cash flows of the financial asset or the group of financial assets that can be
reliably estimated. Evidence of impairment may include indications that the debtors or group of debtors is experiencing
significant financial difficulty, default or delinquency in payments, the probability that they will enter bankruptcy or other financial
reorganisation and observable data indicating that there is a measurable decrease in the estimated future cash flows, such as
changes in arrears or economic conditions that correlate with defaults.
If any such evidence exists, the amount of any impairment loss is measured as the difference between the assets carrying
amount and the present value of estimated future cash flows (excluding future expected credit losses that have not yet been
incurred). The present value of the estimated future cash flows is discounted at the financial assets original effective interest rate.
The carrying amount of the asset is reduced through the use of an allowance account and the loss is recognised in the
statement of profit or loss. Receivables together with the associated allowance are written off when there is no realistic prospect
of future recovery. If in a subsequent year, the amount of the estimated impairment loss increases or decreases because of an
event occurring after the impairment were recognised, the previously recognised impairment loss is increased or reduced by
adjusting the allowance account. If a write-off is later recovered, the recovery is credited to other expense in the statement of
profit or loss.
Nanosonics 2015 Annual Report | Page 63
o. Derivative financial instruments and hedge accounting
The Group uses derivative financial instruments, i.e. forward currency contracts, to hedge its foreign currency risks. Such
derivative financial instruments are initially recognised at fair value on the date on which a derivative contract is entered into
and are subsequently remeasured at fair value. Derivatives are carried as financial assets when the fair value is positive and as
financial liabilities when the fair value is negative.
The fair values of forward currency contracts are calculated by reference to current forward exchange rates for contracts with
similar maturity profiles.
Any gains or losses arising from changes in the fair value of derivatives are taken directly to the income statement, except for the
effective portion of cash flow hedges, which is recognised in other comprehensive income.
For the purposes of hedge accounting, hedges are classified as:
• fair value hedges, when they hedge the exposure to changes in the fair value of a recognised asset or liability; or
• cash flow hedges, when they hedge the exposure to variability in cash flows that is attributable either to a particular risk
associated with a recognised asset or liability or to a forecast transaction.
Hedges that meet the strict criteria for hedge accounting are accounted as follows:
• For cash flow hedges, the effective portion of the gain or loss on the hedging instrument is recognised directly in equity, while
the ineffective portion is recognised in profit or loss.
• For fair value hedges, the carrying amount of the hedged item is adjusted for gains and losses attributable to the risk being
hedged and the derivative is remeasured to fair value. Gains and losses from both are taken to profit or loss.
p. Convertible notes
Convertible notes are compound financial instruments which are separated into liability and equity components based on the
terms of the contract.
On issuance of the convertible note, the fair value of the liability component is determined using a market rate for an equivalent
non-convertible note. The equity component is initially recognised at the difference between the fair value of the compound
financial instrument as a whole and the fair value of the liability component. Any directly attributable transaction costs are
allocated to the liability and equity components in proportion to their initial carrying amounts.
Subsequent to initial recognition, the liability component of the convertible notes is measured at amortised cost using the
effective interest method. The equity component is not remeasured.
Interest related to the financial liability is recognised in profit or loss. On conversion, the financial liability is reclassified to equity
and no gain or loss is recognised.
q. Property, plant and equipment
All property, plant and equipment is stated at historical cost less depreciation and/or accumulated impairment losses, if any.
Historical cost includes expenditure that is directly attributable to the acquisition of the items. Subsequent costs are included in
the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic
benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount
of any component accounted for as a separate assets is derecognised when it is replaced. All other repairs and maintenance
are charged to the income statement during the reporting period in which they are incurred. Production tooling used to
manufacture component parts qualifies as property, plant and equipment when the Company expects to use it during more
than one period.
Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in the
income statement.
Nanosonics 2015 Annual Report | Page 64
Notes to the financial statements (continued)For the year ended 30 June 2015 All assets have limited useful lives and are depreciated using the straight line method over their estimated useful lives, or in
the case of leasehold improvements, over the estimated useful life or lease term, whichever is shorter, taking into account
residual values. The assets’ residual values, useful lives and depreciation methods are reviewed prospectively and adjusted if
appropriate at least annually. Depreciation is expensed. The depreciation rates or useful lives used for each class of assets are
as follows:
Depreciation of property, plant and equipment
Leasehold improvements
Plant and equipment
2015
Lease
2-7 years
2014
Lease
2-7 years
Plant and equipment comprises laboratory fit-out and equipment, manufacturing equipment, office furniture and equipment,
computer equipment, service, test and demonstration equipment and vehicle which were previously disclosed separately.
r. Intangible assets
(i) Research and development
Research and development expenditure is expensed as incurred except that costs incurred on development projects, relating
to the design and testing of new or improved products, are recognised as intangible assets when it is probable that the project
will, after considering its commercial and technical feasibility, be completed and generate future economic benefits and its
costs can be measured reliably. The expenditure capitalised comprises directly attributable costs, including costs of materials
and services. Other development expenditures that do not meet these criteria are recognised as an expense as incurred.
Development costs previously recognised as an expense are not recognised as an asset in a subsequent period.
Capitalised development expenditure which has a finite life is recorded as an intangible asset from the point at which the
asset is ready for use and amortised on a straight-line basis over the period during which the related benefits are expected to
be realised.
(ii) Patents and Trademarks
The costs of registering and protecting patents and trademarks are expensed as incurred.
(iii) ERP system and computer software
The expenditure incurred on the Enterprise Resource Planning (ERP) system and computer software and the costs necessary
for the implementation of the system are recognised as an intangible asset, to the extent Nanosonics controls future economic
benefits as a result of the costs incurred, and are stated at cost less accumulated amortisation. Costs include expenditure that
is directly attributable to the development and implementation of the system.
s. Impairment of non-financial assets
The Group assesses at each reporting date whether there is an indication that an asset may be impaired. Intangible assets are
tested annually for impairment or more frequently if events or changes in circumstances indicate that they might be impaired.
Other 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 assets carrying amount exceeds its
recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the
purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash
inflows which are largely independent of the cash inflows from other assets or groups of assets (cash-generating units).
Non-financial assets other than goodwill that suffered impairment are reviewed for possible reversal of the impairment at each
reporting date.
Impairment losses of continuing operations, including impairment on inventories, are recognised in the income statement in
expense categories consistent with the function of the impaired asset.
Nanosonics 2015 Annual Report | Page 65
t. Trade and other payables
Trade and other payables are carried at amortised cost. These amounts represent liabilities for goods and services provided
to the Group prior to the end of financial year which are unpaid and arise when the Group becomes obliged to make future
payment in respect of the purchase of these goods and services. The amounts are unsecured and are usually paid within
60 days of recognition.
u. Provisions
General
Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, it is probable
that an outflow of resources will be required to settle the obligation and the amount has been reasonably estimated. Provisions
are not recognised for future operating losses.
Provisions are measured at the present value of management’s best estimate of the expenditure required to settle the present
obligation at the reporting date. The discount rate used is to determine the present value reflects current market assessments
of the time value of money and the risks specific to the liability. An increase in the provision due to the passage of time is
recognised as interest expense.
Provision for warranties
Provision for warranty related costs are made in respect of the Group’s estimated liability on all products sold or services
provided under warranty at balance date. The provision is measured at current values estimated to be required to settle the
warranty obligation. The initial estimate of warranty-related costs is revised annually.
Provision for make good lease costs
The Group have operating leases over its offices that require the premises to be returned to the lessor in their original condition.
The operating lease payments do not include an element for the repairs/overhauls. A provision for make good lease costs
is recognised at the time it is determined that it is probable that such costs will be incurred in a future year, measured at
the expected cost of returning the asset to the lessor in its original condition. An offsetting asset of the same value is also
recognised and is classified in property, plant and equipment. This asset is amortised to the statement of profit profit or loss
over the life of the lease.
Provision for onerous contracts
A provision for onerous contracts is recognised when expected benefits to be derived by the Group from a contract are lower
than the unavoidable cost of meeting contractual obligations. The provision is measured at the lower of the expected cost of
terminating the contract and the expected net cost of continuing with the contract. Before a provision is established, The Group
recognises any impairment loss on the assets associated with the contract.
v. Employee benefits
Wages, salaries and annual leave and sick leave
Liabilities for employee benefits, including wages, salaries and non-monetary benefits, and accumulating annual and other
leave, represent present obligations resulting from employees’ services provided to reporting date. Employee benefits have
been measured at the amounts expected to be paid when the liability is settled and are recognised in the provision for employee
benefits. Sick leaves are recognised when the leave is taken and are measured at the rates paid or payable.
Long service leave
The liability for long-service leave is recognised in the provision for employee benefits and measured as the present value of
expected future payments to be made in respect of services provided by employees up to the reporting date. Consideration is
given to expected future wage and salary levels, experience of employee departures and periods of service. Expected future
payments are discounted using market yields at the reporting date on corporate bonds (previously on national government
bonds) with terms to maturity that match as closely as possible, the estimated future cash outflows.
Nanosonics 2015 Annual Report | Page 66
Notes to the financial statements (continued)For the year ended 30 June 2015 Bonuses
The Group recognises a liability and an expense for bonuses. The Group recognises a provision where contractually obliged
and where there is a past practice that has created a constructive obligation.
Termination benefits
Termination benefits are payable when employment is terminated before the normal retirement or end of employment
contract date, or when an employee accepts voluntary redundancy in exchange for these benefits. The Group recognises
termination benefits when it is demonstrably committed to either terminating the employment of current employees according
to a formal plan without possibility of withdrawal or providing termination benefits as a result of an offer made to encourage
voluntary redundancy.
Share-based compensation
Share-based compensation benefits are equity-settled transactions provided to employees via the Nanosonics share-based
compensation plans. Information relating to the plans is set out in note 30 to the financial statements.
Share option plans
The assessed fair value on the date options are granted is independently determined using the appropriate valuation 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.
General Share Option Plan (GSOP)
The assessed fair values of options granted under the GSOP are expensed in full in the month in which they are granted with
a corresponding increase in a share based payments reserve as part of shareholders’ equity, except where the options are
granted as part of a capital raising programme, in which case no cost is recognised.
Employee Share Option Plan (ESOP)
The fair value of options and performance rights granted under the ESOP is recognised as an employee benefit expense
with a corresponding increase in equity, over the period in which the performance and/or service conditions are fulfilled. The
cumulative expense recognised for share-based payments at each reporting date until the vesting date reflects the extent to
which the vesting period has expired and the Group’s best estimate of the number of equity instruments that will ultimately vest.
The statement of profit or loss expense or credit for a period represents the movement in cumulative expense recognised as at
the beginning and end of the period.
No expense is recognised for awards that do not ultimately vest, except for equity-settled transactions for which vesting are
conditional upon a market or non-vesting condition. These are treated as vesting irrespective of whether or not the market or
non-vesting condition is satisfied, provided that all other performance and/or service conditions are satisfied.
When the terms of an equity-settled award are modified, the minimum expense recognised is the expense had the terms had
not been modified. If the original terms of the award are met. An additional expense is recognised for any modification that
increases the total fair value of the share-based payment transaction, or is otherwise beneficial to the employee as measured at
the date of modification.
Deferred Employee Share Plan (DESP)
The issue price of DESP shares granted during the year is calculated as the 5-day weighted average market price of shares of
the Company on the Australian Securities Exchange as at close of trading on the date the shares are granted. The fair value of
DESP shares granted is taken to be the issue price.
The assessed fair values of DESP shares are expensed in full in the month in which they are granted with a corresponding
increase in equity, except if they are granted with a vesting condition, in which case the fair value of DESP shares granted is
apportioned on a straight line monthly basis over the period between grant date and the date on which the shares all vest.
At the end of a period the Company assesses the probability of achievement of a benefit, being the percentage probability
that employees will achieve at least the fair value of the unvested shares. The value of DESP shares with vesting conditions
expensed in any period is calculated as that portion of the fair value applicable to the period factored by the probability of
achievement and a share based payments reserve is created as part of shareholders’ equity.
Nanosonics 2015 Annual Report | Page 67
w. Contributed equity
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.
x. Earnings per share
(i) Basic earnings per share
Basic earnings per share (“EPS”) is calculated by dividing the net profit or loss attributable to equity holders of the Company for
the reporting period, by the weighted average number of ordinary shares of the Company outstanding during the financial year.
(ii) Diluted earnings per share
Diluted EPS adjusts the figures used in the determination of basic EPS to take into account the after income tax effect of interest
and other financing costs associated with dilutive potential ordinary shares and the weighted average number of additional
ordinary shares that would have been outstanding assuming the conversion of all dilutive potential ordinary shares.
y. Current versus non-current classification
The Group presents assets and liabilities in statement of financial position based on current/non-current classification. An asset
is current when it is:
• Expected to be realised or intended to be sold or consumed in normal operating cycle.
• Held primarily for the purpose of trading.
• Expected to be realised within twelve months after the reporting period.
• Cash or cash equivalents unless restricted from being exchanged or used to settle a liability for at least twelve months after
the reporting period.
All other assets are classified as non-current. A liability is current when it is:
• Expected to be settled in normal operating cycle.
• Held primarily for the purpose of trading.
• Due to be settled within twelve months after the reporting period.
• There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period.
The Group classifies all other liabilities as non-current.
Deferred tax asset and liabilities, if recognised, are classified as non-current assets and liabilities.
Nanosonics 2015 Annual Report | Page 68
Notes to the financial statements (continued)For the year ended 30 June 2015 3. Financial risk management
The Group is exposed to financial risks, predominantly interest rate risk, foreign currency risk and credit risk and it has a
financial risk management program which seeks to minimise potential adverse effects on financial performance. The Board
provides written principles for investment of the Group’s cash reserves, so as to ensure operational liquidity whilst optimising
interest earnings from a mix of instruments with one or more of Australia’s four main banks.
The Group held the following financial instruments and their classification:
Financial assets
Loans and receivables
Trade and other receivables
Other financial assets
Cash and cash equivalents
Total Financial assets
Financial liabilities
Fair value through profit or loss
Derivative financial instruments
Other financial liabilities
Trade and other payables
Convertible notes
Borrowings
Total Financial liabilities
Notes
10
9
16
20
19
2015
$’000
3,871
45,724
49,595
2014
$’000
5,712
21,233
26,945
–
–
2,963
8,693
18
11,674
1,722
8,097
24
9,843
Nanosonics 2015 Annual Report | Page 69
a. Interest rate risk exposures
Interest rate risk is the risk that the fair value of the future cash flows of a financial instrument will fluctuate because of changes in
market interest rates. The Group’s exposure to interest rate risk is noted below:
Net financial assets (liabilities)
15,524
21,500
(11)
2015
Financial assets
Cash and cash equivalents
Trade and other receivables
Total financial assets
Weighted average interest rate
Financial liabilities
Trade and other payables
Convertible notes
Borrowings
Total financial liabilities
Weighted average interest rate
2014
Financial assets
Cash and cash equivalents
Trade and other receivables
Total financial assets
Weighted average interest rate
Financial liabilities
Trade and other payables
Convertible notes
Borrowings
Total financial liabilities
Weighted average interest rate
Fixed interest rate maturing in:
Floating
interest rate
$’000
1 year or
less
$’000
Over 1 to
5 years
$’000
More than
5 years
$’000
Notes
Non-
interest
bearing
$’000
Total
$’000
15,524
30,200
–
–
15,524
30,200
2.71%
3.09%
–
–
–
–
–
–
11
11
–
8,693
7
8,700
6.01%
8.09%
–
–
–
–
–
–
–
–
–
–
–
45,724
3,871
3,871
3,871
49,595
–
–
2,963
–
–
2,963
8,693
18
2,963
11,674
–
–
908
37,921
Fixed interest rate maturing in:
Floating
interest rate
$’000
1 year or
less
$’000
Over 1 to
5 years
$’000
More than
5 years
$’000
Notes
Non-
interest
bearing
$’000
Total
$’000
6,013
15,220
–
–
6,013
15,220
0.21%
3.73%
–
–
–
–
–
8,097
18
8,115
6.01%
(8,115)
–
–
–
–
–
–
–
–
–
–
–
21,233
5,712
5,712
5,712
26,945
–
–
1,722
–
–
1,722
8,097
24
1,722
9,843
–
–
3,990
17,102
–
–
6
6
8.09%
15,214
9
10
16
20
19
9
10
16
20
19
–
–
–
–
–
–
–
–
–
–
Net financial assets (liabilities)
6,013
Nanosonics 2015 Annual Report | Page 70
Notes to the financial statements (continued)For the year ended 30 June 2015
Interest rate sensitivity
The following table demonstrates the sensitivity to a reasonable possible change in interest rates, with all other variables
held constant:
Increase /decrease in basis points
Effect on profit before tax and other
comprehensive income $’000
2015
2014
+ 25
- 25
+ 25
- 25
84
(84)
57
(57)
b. Foreign currency risk exposures
Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes
in foreign exchange rates. The Group’s exposure to the risk of changes in foreign exchange rates relates primarily to the Group’s
operating activities (when revenue or expense is denominated in different currency from the Group’s functional currency) and
the Group’s net investments in foreign subsidiaries. The Group enters into foreign currency forward contracts to mitigate its
foreign currency risk on its trade receivables.
The Groups’ exposure to foreign currency risk at the reporting date comprised:
2015
2014
Euro
€ '000
25
147
(64)
108
USD
$’000
659
1,720
(621)
1,758
GBP
£'000
233
205
(40)
398
Euro
€ '000
104
178
(88)
194
USD
$’000
4,580
4,125
(525)
8,180
GBP
£'000
152
223
(83)
292
Cash and cash equivalents
Trade and other receivables
Trade and other payables
Foreign currency sensitivity
The following table demonstrates the sensitivity to a reasonable possible change in the USD, EUR and GBP against the
Australian dollar, with all other variables held constant:
Effect on profit
before tax and other
comprehensive income
$’000
Change in
USD rate
Effect on profit
before tax and other
comprehensive income
€’000
Effect on profit
before tax and other
comprehensive income
£’000
Change in
GBP rate
Change in
EUR rate
2015
2014
3%
-10%
3%
-8%
53
(176)
245
(654)
3%
-8%
3%
-10%
3
(9)
6
(19)
3%
-6%
3%
-6%
12
(24)
9
(18)
Nanosonics 2015 Annual Report | Page 71
c. Operational risk
Operational risk is the risk of direct and indirect loss arising from a wide variety of causes associated with company processes,
personnel, technology and infrastructure, and from external factors other than credit, market and liquidity risks such as those
arising from legal and regulatory requirements and generally accepted standards of corporate behaviour. Operational risks arise
from all of the Company’s operations.
An objective of the Company is to manage operational risk so as to balance the avoidance of financial losses and damage to
the Company’s reputation with overall cost effectiveness and to avoid control procedures that restrict initiative and creativity.
The primary responsibility for the development and implementation of control to address operational risk is assigned to the
Audit and Risk Committee. This responsibility is supported by the development of standards for the management of operational
risk in the following areas:
• requirements for appropriate segregation of duties, including the independent authorisation of transactions;
• requirements for the reconciliation and monitoring of transactions;
• compliance with regulatory and other legal requirements;
• documentation of controls and procedures;
• requirements for the periodic assessment of operational risks faced and the adequacy of controls and procedures to address
the risks identified;
• development of contingency plans;
• training and professional development;
• ethical and business standards; and
• risk mitigation, including insurance where this is effective.
d. Credit risk
Credit risk is the risk of financial loss to Nanosonics if a customer or counterparty to a financial instrument fails to meet its
contractual obligations.
Credit risk arises from holdings in cash and cash equivalents, trade receivables, and derivative financial instruments. The Group
invests only in deposits and floating rate notes offered by Australia’s four main banks.
The Company exposure to credit risk is influenced mainly by the geographical location, the type and characteristics of individual
customer. Customer credit risk is managed subject to the Group’s established policy, procedures and control relating to credit
risk management. The Company, by policy, performs customer credit assessment prior to entering into a distribution agreement
or sales and routinely assesses the financial strength of its customers and reviews distribution agreements. The Company
utilises an external credit rating agency to assess the credit worthiness of its end-user customers. In North America outstanding
customer receivables are regularly monitored and are generally covered by credit insurance. As a result, the Company believes
that its accounts receivable credit risk exposure is mitigated and has not experienced significant write-downs in its accounts
receivable balances. As of 30 June 2015, GE Healthcare and Regional Healthcare, combined, accounts for over 41% of the
trade receivables (2014: GE Healthcare and Regional Healthcare, combined, accounts for over 91% of the trade receivables).
The credit risk arising from derivative financial instruments is not significant.
The maximum exposure to credit risk as at the reporting date is the carrying amount of the financial assets as set out above.
The carrying amount is determined according to the Group’s accounting policies.
e. Liquidity risk
The Group manages liquidity risk by continuously monitoring forecast and actual cash flows and matching the maturity profiles
of financial assets and liabilities. Surplus funds are invested in short and medium term instruments which are tradeable in highly
liquid markets.
Nanosonics 2015 Annual Report | Page 72
Notes to the financial statements (continued)For the year ended 30 June 2015 Maturity profile
Following is the contractual maturity profiles of undiscounted cash flows from financial liabilities:
2015
Trade and other payables
Borrowings
Convertible notes
Total financial liabilities
2014
Trade and other payables
Borrowings
Convertible notes
Total financial liabilities
Fair values
On demand
Less than
3 months
3 to 12
months
1 to 5 years
Over 5 years
–
–
–
–
2,725
2
–
2,727
–
6
9,300
9,306
238
11
–
249
–
–
–
–
On demand
Less than 3
months
3 to 12
months
1 to 5 years
Over 5 years
–
–
–
–
1,722
2
–
1,724
–
6
450
456
–
19
8,850
8,869
–
–
–
–
Total
2,963
19
9,300
12,282
Total
1,722
27
9,300
11,049
Set out below is a comparison by class of the carrying amounts and fair value of the Group’s financial instruments that are
carried in the financial statements.
Carrying
amount
Fair value
Carrying
amount
Fair value
Notes
2015
2015
2014
2014
Financial assets
Loans and receivables
Cash and cash equivalents
Trade and other receivables
Financial liabilities
Other financial liabilities
Trade and other payables
Convertible notes
Borrowings
9
10
16
20
19
45,724
3,871
49,595
45,724
3,871
49,595
21,233
5,712
26,945
21,233
5,712
26,945
(2,963)
(8,693)
(18)
(11,674)
(2,963)
(8,693)
(18)
(11,674)
(1,722)
(8,097)
(24)
(9,843)
(1,722)
(8,097)
(24)
(9,843)
Nanosonics 2015 Annual Report | Page 73
The fair value of the financial assets and liabilities is included at the amount at which the instrument could be exchanged in a
current transaction between willing parties, other than in a forced or liquidation sale. The following methods and assumptions
were used to estimate fair values:
• Cash and cash equivalents, trade and other receivables, trade and other payables approximate their carrying amounts largely
due to the short term maturities of these instruments.
• The Group enters into derivative financial instruments with various counterparties principally with Australia’s major banks.
Derivatives valued using valuation techniques with market observable inputs are mainly foreign exchange forward contracts.
The valuation technique is described below.
Fair value hierarchy
The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by
valuation technique:
• Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities.
• Level 2: other techniques for which all inputs that have a significant effect on the recorded fair value are observable, either
directly or indirectly.
• Level 3: techniques that use inputs that have a significant effect on the recorded fair value that are not based on observable
market data.
As at 30 June 2015, the Group did not hold any derivative financial instruments. (2014: Nil derivative financial instruments)
4. Critical accounting estimates and judgments
The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates
and requires management to exercise judgment in the process of applying the Group’s accounting policies. Estimates and
associated assumptions and judgments affect the recognised amounts of assets, liabilities, revenues and expenses and
the disclosure of contingent liabilities and are based on historical experience and various other factors that are believed to
be reasonable under the circumstances, the results of which form the basis of making judgments about the carrying values
of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. The
estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised
in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future
periods if the revision affects both current and future periods.
The key estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amount of
certain assets and liabilities are:
Provision for warranty
The Group has recognised a provision in accordance with the accounting policy describe in note 2(u). The Group has made
assumptions in relation to the values estimated to be required to settle the warranty obligation on all products under warranty
at balance date.
Other provisions
The Group has recognised make good and onerous lease provisions in accordance with the accounting policy describe in
note 2(u). The Group has made assumptions in relation to the values estimated to be required to settle these obligations at
balance date.
Share-based payment transactions
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. Estimating the fair value for share based payment transactions requires
determining the most appropriate valuation model, which is depended on the terms and conditions of the grant. This estimate
also requires determining the most appropriate inputs to the valuation model including the expected life of the share option,
volatility and dividend yield and making assumptions about them. The assumptions and models used for estimating fair value for
share based-payment transactions are disclosed in note 30 to the financial statements.
Recognition of deferred tax assets
Deferred tax assets are only recognised for unused tax losses to the extent that it is probable that taxable profit will be available
against which the losses can be utilised. Significant management judgement is required to determine the amount of deferred
tax asset that can be recognised, based upon the likely timing and level of future taxable profits together with future tax planning
strategies. Details of the unrecognised deferred tax assets on unused tax losses and non-refundable R&D tax offset are
disclosed in note 8 to the financial statements.
Nanosonics 2015 Annual Report | Page 74
Notes to the financial statements (continued)For the year ended 30 June 2015 5. Segment information
Operating segment
The Group has identified its operating segments based on the internal reports that are reviewed and used by the Managing
Director and CEO (the chief operating decision maker) in assessing performance and in determining the allocation of resources.
The Group operates in a single operating segment, being the healthcare equipment segment. Accordingly, the Group’s
consolidated total assets is the total reportable assets of the operating segment.
Types of products and services
The principal products and services of the healthcare equipment segment are the manufacture and commercialisation of
infection control and decontamination products and related technologies.
Major customers
The Group has a number of customers to which it provides products and services. The most significant customer accounts for
80% (2014: 82%) of external revenue. The next most significant customer accounts for 7.9% of external revenue (2014: 8.4%).
Geographical information
Geographically, the Group operates in the global markets. Australia is the home country of the parent entity.
Revenue from external customers by geographical location is detailed below.
North America
Australia and New Zealand
Europe and other countries
Total revenue
Revenues above are allocated based on the country in which the customer is located.
The analysis of the location of non-current assets is as follows:
North America
Australia and New Zealand
Europe and other countries
Total non-current assets
2015
$’000
17,663
2,282
2,269
22,214
2015
$’000
127
3,768
30
3,925
2014
$’000
17,665
2,267
1,560
21,492
2014
$’000
10
1,903
9
1,922
Non-current assets for this purpose consist of property, plant and equipment, intangible assets and other non-current assets.
Assets and capital expenditure are allocated based on where the assets are located.
Nanosonics 2015 Annual Report | Page 75
6. Other income
Interest income
Government grants
Foreign exchange gain (Note 7)
Other income
Total
2015
$’000
928
119
988
1,201
3,236
2014
$’000
739
1,666
–
1,709
4,114
Government grants comprise receipt of payments under the Export Market Development Grant scheme.
There were no unfulfilled conditions or other contingencies attaching to these grants. The Group did not benefit directly from any
other form of governmental assistance.
Other income includes reimbursement of cost by a distributor of $1,200,000 (2014: $1,707,000). The related costs are included
in the operating expenses.
7. Loss before income tax expense
The loss from ordinary activities before income tax includes:
2015
$’000
2014
$’000
Expenses
Staffing costs broken into:
Salaries and wages
Superannuation and social security contribution
Workers compensation costs
Other employee benefits and staffing costs
Share based payments
Less: Staffing costs included in cost of sales
Total staffing costs
Depreciation, amortisation and impairment
Research and development costs
Rental expenses relating to operating leases
Bad debts provision
Inventories provision/write off
Borrowing costs
Loss on disposal of fixed assets
Realised loss on foreign exchange forward contracts
Net foreign exchange (gains)/losses
Nanosonics 2015 Annual Report | Page 76
11,944
1,182
96
2,520
1,038
(2,874)
13,906
1,063
4,902
1,116
1
412
598
120
496
(988)
10,592
1,001
98
2,203
997
(2,886)
12,005
975
4,103
576
5
536
555
–
32
414
Notes to the financial statements (continued)For the year ended 30 June 2015
8. Taxation
(a) Income tax expense
Operating loss from ordinary activities
The prima facie income tax benefit applicable to the operating loss is calculated at
27.0% (2014:28.3%)
Non-assessable income
Research and development tax offset received during the year
Other deductible items
Non-deductible items:
Research and development expense
Equity based benefits
Entertainment
Other temporary differences
Deferred tax benefit not recognised
Non-refundable research and development tax offset
Adjustment in respect of current income tax of previous years
Income tax benefit reported on the Consolidated statement of profit or loss
and other comprehensive income
(b) Deferred tax assets
2015
$’000
5,465
1,474
–
4
(1,569)
(316)
–
53
(354)
(1,616)
1,961
14
5
The potential deferred tax assets in a controlled entity, which is a company, arising from tax losses, non-refundable tax offsets and
timing differences are only recognised when it is probable that future taxable amounts will be available to utilise those tax losses and
temporary differences.
Unrecognised deferred tax assets include:
Estimated tax losses carried forward
Non-refundable R&D tax offset
Estimated tax losses carried forward:
Beginning of the year unrecognised tax losses carried forward
Adjustment in respect of unrecognised tax losses carried forward from previous year
Tax losses for the year
Estimated non-refundable R&D tax offset carried forward:
Beginning of the year non-refundable R&D tax offset carried forward
Arose during the year
Utilised during the year
Adjustment in respect of non-refundable R&D tax offset carried forward from previous year
Estimated non-refundable R&D tax offset at the end of the year
2015
$’000
17,061
1,536
18,597
54,137
(859)
3,145
56,423
3,438
4,902
(3,727)
(772)
3,841
2014
$’000
2,636
745
455
307
(1,231)
(282)
(1)
(270)
(277)
(1,459)
1,641
126
31
2014
$’000
16,241
1,375
17,616
53,856
281
–
54,137
–
4,103
(665)
–
3,438
Nanosonics 2015 Annual Report | Page 77
The potential future income tax benefit of tax losses carried forward and non-refundable R&D tax offset will only be obtained if:
(i)
(ii)
the Company and the Group derive future assessable income of a nature and an amount sufficient to enable the benefit
to be realised
the Company and the Group continue to comply with the conditions for deductibility imposed by the law; and
(iii) no changes in tax legislation adversely affect the Company and the Group is realising the benefit.
9. Current assets – Cash and cash equivalents
Cash at bank and on hand
Deposits on call
Short term deposits
2015
$’000
1,886
2,138
41,700
45,724
2014
$’000
5,705
308
15,220
21,233
Cash term investments which are highly liquid irrespective of their maturity dates are classified as current assets at market value
as they may not necessarily be held by the Company for their full term.
The Group’s exposure to interest rate risk is discussed in note 3. The maximum exposure to credit risk at the reporting date is
the carrying amount of each class of cash and cash equivalents mentioned above.
10. Current assets – Trade and other receivables
Trade receivables net of allowance for impairment loss
GST receivable
VAT receivable
Interest and other receivables
2015
$’000
3,417
127
102
225
3,871
Trade receivables by geographic region were as follows:
Carrying amount
2015
$’000
2,247
629
541
3,417
Carrying amount
2015
$’000
1,908
1,509
3,417
North America
Australia and New Zealand
Europe and other countries
Maximum exposure to credit risk for trade receivable by
type of counterparty was as follows.
Distributors
End-user customers
Nanosonics 2015 Annual Report | Page 78
2014
$’000
5,338
59
204
111
5,712
2014
$’000
4,382
472
484
5,338
2014
$’000
5,310
28
5,338
Notes to the financial statements (continued)For the year ended 30 June 2015 1
14
2014
$’000
4,826
–
453
16
5,295
As at 30 June 2015, the aging analysis of trade receivables is as follows:
2015
2014
Total
$’000
3,417
5,338
Past due but not impaired
Neither past due
nor impaired
$’000
<30 days
$’000
30-60 days
$’000
>60 days
$’000
2,652
5,295
692
28
72
1
An analysis of the credit policy of trade receivables that are neither past due nor impaired is as follows:
External financial ratings at least 1A from Dun & Bradstreet
Covered by credit insurance
Other customers:
Four or more years trading history with the Group
Less than four years of trading history with the Group
2015
$’000
1,139
905
523
85
2,652
Information about the Group’s exposure to foreign currency risk in relation to trade and other receivables is provided in note 3.
Due to the short-term nature of the receivables, their carrying amount is assumed to approximate their fair value.
The maximum exposure to credit risk at the reporting date is the carrying amount of each class of receivables mentioned
above. Collateral is not held as security, nor is it the Group’s policy to transfer (on-sell) receivables to special purpose entities.
As at 30 June 2015, trade receivables with a nominal value of $5,000 (2014: $5,000) were considered impaired.
The movement in allowance for impairment in respect of trade and other receivables during the year was as follows :
At 1 July 2013
Increase for the year
Utilised
Unused amount reversed
At 30 June 2014
Increase for the year
Utilised
Unused amount reversed
At 30 June 2015
$000
–
5
–
–
5
1
–
(1)
5
Nanosonics 2015 Annual Report | Page 79
11. Current assets – Inventories
Raw materials and stores – at net realisable
Work in progress – at cost
Finished goods – at net realisable value
2015
$’000
2,822
831
2,556
6,209
2014
$’000
2,211
737
1,289
4,237
Write-downs of inventories to net realisable values during the year ended 30 June 2015 amounted to $412,000 (2014:$536,000).
The expense has been included in other operating costs in the income statement.
Roll forward of provision for inventories:
Beginning balance
Provided during this year
Utilised during this year
Ending balance
12. Current assets – Other
Prepaid expenses
Prepaid foreign income tax
Service work in progress
2015
$’000
357
412
(367)
402
2015
$’000
602
22
12
636
2014
$’000
147
536
(326)
357
2014
$’000
388
31
21
440
Nanosonics 2015 Annual Report | Page 80
Notes to the financial statements (continued)For the year ended 30 June 2015 13. Non-current assets – Property, plant and equipment
Leasehold
improvements
Plant and
equipment
Capital work
in progress
Year ended 30 June 2014
Opening net book value
Additions
Retirement and others
Depreciation charge
Foreign currency translation effect (net)
Closing net book value at 30 June 2014
At 30 June 2014
Cost
Accumulated depreciation
Net book value at 30 June 2014
Year ended 30 June 2015
Opening net book value
Additions
Retirement and others
Impairment
Depreciation charge
Foreign currency translation effect (net)
Closing net book value at 30 June 2015
At 30 June 2015
Cost
Accumulated depreciation and impairment
Net book value at 30 June 2015
17
58
–
(37)
–
38
940
(902)
38
38
2,062
(4)
–
(64)
–
2,032
2,059
(27)
2,032
1,446
960
(177)
(740)
–
1,489
5,443
(3,954)
1,489
1,489
906
(149)
(92)
(801)
7
1,360
4,250
(2,890)
1,360
Total
1,560
1,035
(177)
(777)
–
97
17
–
–
–
114
1,641
114
–
114
114
62
–
–
–
–
6,497
(4,856)
1,641
1,641
3,030
(153)
(92)
(865)
7
176
3,568
176
–
176
6,485
(2,917)
3,568
Plant and equipment comprises laboratory fit-out and equipment, manufacturing equipment, office furniture and equipment,
computer equipment, service, test and demonstration equipment and vehicle which were previously disclosed separately.
The net book value of ERP system and computer software of $207,000 has been reclassified and disclosed under Intangible
assets in the Statement of financial position as it better reflects the nature of the asset. In prior periods, this was included under
Property, plant and equipment. Accordingly, the comparative net book value of the ERP system and computer software of
$137,000 has been reclassified.
Nanosonics 2015 Annual Report | Page 81
14. Non-current assets – Intangible assets
Development costs
At cost
Accumulated amortisation
Net book value
ERP system and computer software
At cost
Accumulated amortisation
Net book value
Opening net book value
Additions
Amortisation
Closing net book value
Total intangible assets, net book value at 30 June
2015
$’000
201
(201)
-
1,055
(848)
207
137
176
(106)
207
207
2014
$’000
201
(201)
-
879
(742)
137
252
46
(161)
137
137
Development costs relate to the trophon® EPR project and are carried at cost less accumulated amortisation. The intangible
asset has been assessed as having a finite life and is amortised using the straight line method over a period of 5 years.
Amortisation of $Nil (2014:$37,000) is included in depreciation and amortisation expense in the statement of profit or loss.
Intangible assets include the net book value of the ERP system and computer software of $207,000 which was reclassified from
Property, plant and equipment to better reflect the nature of the account. Accordingly, the comparative net book value of the
ERP system and computer software of $137,000 has been reclassified.
15. Non-current assets – Other
Refundable deposits and bonds
Total
16. Trade and other payables
Trade payables
Accrued rent expense
Other payables
Total trade and other payables
Trade and other payables – current
Trade payables
Other payables
Total trade and other payables – current
Trade and other payables - non-current
Accrued rent expense
Total trade and other payables – non-current
Nanosonics 2015 Annual Report | Page 82
2015
$’000
150
150
2015
$’000
1,034
238
1,691
2,963
1,034
1,691
2,725
238
238
2014
$’000
144
144
2014
$’000
575
–
1,147
1,722
575
1,147
1,722
–
–
Notes to the financial statements (continued)For the year ended 30 June 2015
17. Current liabilities – Deferred revenue
Beginning balance
Deferred during the year
Released to profit or loss
Ending balance
18. Provisions
Provision for warranty
Other provisions
Employees provisions:
Provision for bonus
Provision for annual leave
Provision for long service leave
Total employee provisions
Total provisions
Provisions – current
Provision for warranty
Other provisions
Employees provisions:
Provision for bonus
Provision for annual leave
Provision for long service leave
Total employee provisions
Total provisions – current
Provisions – non-current
Provision for long service leave
Other provisions
Total provisions – non-current
Roll forward of:
Provision for warranty
At 1 July
Provided during this year
Utilised during this year
At 30 June
2015
$’000
308
843
(708)
443
2015
$’000
1,004
564
772
856
376
2,004
3,572
1,004
494
772
856
195
1,823
3,321
181
70
251
2015
$’000
896
658
(550)
1,004
2014
$’000
209
616
(517)
308
2014
$’000
896
382
723
690
267
1,680
2,958
896
382
723
690
108
1,521
2,799
159
–
159
2014
$’000
449
701
(254)
896
Nanosonics 2015 Annual Report | Page 83
Other provisions
At 1 July
Provided during this year
Utilised during this year
At 30 June
Other provisions consist of:
Make good provision
Onerous lease
2015
$’000
382
182
–
564
2015
$’000
452
112
564
2014
$’000
382
–
–
382
2014
$’000
382
–
382
The Group has recognised a provision for warranty in accordance with the accounting policy describe in note 2(u). The Group
has made assumptions in relation to the values estimated to be required to settle the warranty obligation on all products under
warranty at balance date.
Provision for warranty of $1,004,000 and Other provisions of $564,000 has been disclosed under Provisions in the Statement of
financial position as it better reflects the nature of the liability. In prior period, this was included under Trade and other payables.
Accordingly, the comparative Provision for warranty of $896,000 and Other provisions of $382,000 have been reclassified.
The Group recognised make good provision at the time it is determined that it is probable that such costs will be incurred in a
future year, measured at the expected cost of returning the asset to the lessor in its original condition in accordance with the
accounting policy describe in note 2(u). An offsetting asset of the same value is also recognised and is classified in property,
plant and equipment. This asset is amortised to the statement of profit or loss over the life of the lease.
The Group recognised a provision for onerous lease contracts when expected benefits to be derived by Nanosonics from
a contract are lower than the unavoidable cost of meeting contractual obligations in accordance with the accounting policy
describe in note 2(u). The provision is measured at the lower of the expected cost of terminating the contract and the expected
net cost of continuing with the contract. Before a provision is established, the Group recognises any impairment loss on the
assets associated with the contract.
The provision for long service leave includes all unconditional entitlements where employees have completed the required
period of service and also where employees are entitled to pro-rata payments in certain circumstances.
19. Borrowings
Finance lease obligations
Current portion
Non-current portion
Total
2015
$’000
18
7
11
18
2014
$’000
24
6
18
24
Nanosonics 2015 Annual Report | Page 84
Notes to the financial statements (continued)For the year ended 30 June 2015 20. Convertible notes
Current liabilities
Convertible notes at amortised value
Non-current liabilities
Convertible notes at amortised value
Equity
Option premium on convertible notes
2015
$’000
8,693
–
376
2014
$’000
–
8,097
376
On 28 June 2012, the Company issued unsecured Tranche A convertible note of $4,000,000 and Tranche B convertible note of
$3,500,000 which matures 4 years after the issue date. The convertible notes bear 6% interest per annum on a simple interest
basis calculated on each anniversary of the issue date. No interest repayment will be made to the noteholder in the first two
years but the interest will accrue and form part of the face value of the note but will not bear any further interest.
After that period, the noteholder may elect whether to receive interest in cash or to have such interest accrue and form part of
the Face Value (but this will not bear further interest). The convertible notes may be converted at any time up until the Maturity
Date at $0.75 per share, subject to certain adjustments. The effective interest on convertible notes is 7.364%.
The noteholder elected to have interest in respect of the third year not to be paid and instead accrue and form part of the face
value (though that portion will not bear further Interest) of the convertible notes.
As at 30 June 2015, the amortised value of convertible notes recognised in current liabilities including accrued interest
amounted to $8,693,000 (2014: recognised in Non-current liabilities of $8,097,000) and borrowing costs related to the
convertible notes amounted to $596,000 (2014: 555,000).
21. Contributed equity
Share capital
282,910,890 ordinary fully paid shares (2014: 263,823,826)
Movements in ordinary shares on issue
At 30 June 2013
Share options exercised
Share issued
At 30 June 2014
Share options exercised
Shares issued under share Placement and Share Purchase Plan (net of issue cost)
Number of shares
$’000
261,988,718
1,835,108
–
263,823,826
2,117,436
16,969,628
74,068
342
–
74,410
1,611
27,038
At 30 June 2015
282,910,890
103,059
All ordinary shares are fully paid. Ordinary shares carry one vote per share and entitle the holder to participate in dividends and
the proceeds on winding up of the Company in proportion to the number of shares held. On a show of hands, every ordinary
shareholder present at a meeting in person or by proxy is entitled to one vote and upon a poll each share is entitled to one vote.
Ordinary shares have no par value and the Company does not have a limited amount of authorised capital.
At 30 June 2015 there were 5,694,023 (2014: 6,525,597) options to acquire one ordinary share each outstanding, of which
25,000 (2014: 1,705,668) had vested and were exercisable.
Information relating to the Company’s employee share-based payment schemes, including details of shares and options issued,
options exercised and options lapsed during the financial year, as well as options outstanding at the end of the financial year, is
set out in note 30.
Nanosonics 2015 Annual Report | Page 85
Capital Management
Management controls the capital of the Group to ensure that the Group can fund its operations and continue as a
going concern.
The Group’s capital includes ordinary share capital and financial liabilities supported by financial assets. There are no externally
imposed capital requirements. Management effectively manages the Group’s capital by assessing the Group’s financial risks
and adjusting its capital structure in response to changes in these risks and in the market. These responses include the
management of share issues.
There have been no changes in the strategy adopted by management to control the capital of the Group since the prior year.
22. Reserves
Employee equity benefits reserve
Foreign currency translation reserve
Balance 30 June
Employee equity benefits reserve
Balance 1 July
Share-based payment (ESOP)
Share-based payment (GSOP)
Balance 30 June
2015
$’000
4,709
34
4,743
2015
$’000
3,671
1,025
13
4,709
2014
$’000
3,671
20
3,691
2014
$’000
2,673
940
58
3,671
The employee equity benefits reserve is used to record the value of share based payments provided to employees, including
KMP, as part of their remuneration. Refer to note 30 for further details of these plans.
Foreign currency translation reserve
Balance 1 July
Exchange difference on foreign currency translation during the year
Balance 30 June
2015
$’000
20
14
34
2014
$’000
(27)
7
20
The foreign currency translation reserve is used to record exchange differences arising from the translation of the financial
statements of foreign subsidiaries.
23. Dividends
No dividends were proposed, declared or paid during the financial year and to the date of this report (2014: Nil).
Nanosonics 2015 Annual Report | Page 86
Notes to the financial statements (continued)For the year ended 30 June 2015 24. Capital and leasing commitments
Future operating lease commitments not provided for in the financial
statements and payable:
Within one year
One year or later and no later than five years
Greater than 5 years
2015
$’000
922
3,241
977
5,140
Finance lease and
hire purchase commitments
2015
$’000
$’000
2014
$’000
2014
$’000
473
105
–
578
$’000
Within one year
After one year but not more than 5 years
Total minimum lease payments
Less finance charges
Present value of minimum lease payments
25. Auditor’s remuneration
Audit services
Audit and review of financial reports
Total remuneration for audit services
Non-audit services
Assurance related services
Audit of regulatory returns
Total remuneration for assurance related services
Total remuneration for non-audit services
Minimum
payments
Present value
of payments
Minimum
payments
Present value
of payments
8
11
19
1
18
7
11
18
–
18
8
19
27
3
24
6
18
24
–
24
2015
2014
59,200
59,200
56,000
56,000
–
–
–
–
–
–
Nanosonics 2015 Annual Report | Page 87
26. Information relating to subsidiaries
The consolidated financial statements of the Group include:
Name of controlled entity
Principal activities
Nanosonics Europe GmbH
Saban Ventures Pty Limited
Nanosonics, Inc.
Provision of sales and customer support
services to Nanosonics Limited in Germany
Owner of the registered intellectual property
of the Group
Sales and distribution of Nanosonics’
products and provision of sales and
customer support services to Nanosonics
Limited in the USA1
Country of
incorporation
Class of
shares
Germany
Ordinary
Equity Holdings
2015
100%
2014
100%
Australia
Ordinary
100%
100%
USA
Ordinary
100%
100%
Nanosonics Europe Limited2
Nanosonics UK Limited2
Sales and distribution of Nanosonics’
products in Europe
Provision of sales and customer support
services in Europe
UK
UK
Ordinary
100%
Ordinary
100%
–
–
1 The principal activities of Nanosonics, Inc. changed during the year from provision of sales and customer support services to include sales and distribution with
the transition to direct sales operations in the USA.
2 Nanosonics Europe Limited and Nanosonics UK Limited were incorporated in United Kingdom on 15 December 2014.
Parent entity
The parent entity within the Group is Nanosonics Limited which is based and listed in Australia.
Nanosonics 2015 Annual Report | Page 88
Notes to the financial statements (continued)For the year ended 30 June 2015 27. Related party disclosures
Note 26 provides the information about the Group’s structure including the details of the subsidiaries and the parent entity.
(a) Transactions with related parties
Certain directors and Key Management Personnel (KMP), or their personally-related entities, hold positions in other entities that
result in them having control or significant influence over the financial or operating policies of those entities. Details of the type of
transactions that were entered into with directors and KMP are as follows:
Directors and Key
Management Personnel
Maurie Stang
Maurie Stang
Maurie Stang
Maurie Stang
Related entities
Gryphon Capital Pty Ltd
Transactions
Director fees
Novapharm Research (Australia) Pty Ltd
No transactions during the period
Ramlist Pty Ltd
Rent of premises
Regional Healthcare Group Pty Ltd
Products purchased, services received and products sold
Richard England
Angleterre Pty Ltd and Domkirke Pty Ltd
Director fees
2015
$’000
2014
$’000
1,748
1,812
345
177
357
184
2014
$’000
450
18
Key Management Personnel – Other directors’ interests
Sales of goods and services
Sale of products to related parties
Purchases of goods
Purchases of goods and services from related parties
Other transactions
Rent of premises and equipment from related parties
(b) Outstanding balances arising from sales/purchases of goods and services
The following balances are outstanding at the reporting date in relation to transactions with related parties:
Key Management Personnel – Other directors’ interests
Current receivables (supply of goods and services)
Current payables (purchases of goods and services)
2015
$’000
501
4
There were no provisions for doubtful debts relating to the outstanding balances from related parties (2014: Nil) and there were
no expenses recognized during the period in respect of doubtful debts from related parties.
Nanosonics 2015 Annual Report | Page 89
(c) Guarantees
No guarantees were provided during the year under review and none were in effect at the year-end between the Company and
its subsidiaries (2014: Nil).
(d) Terms and conditions
The terms and conditions of the transactions were no more favourable than those available, or which might reasonably be
expected to be available, on similar transactions with unrelated entities on an arms-length basis.
All other transactions were made on normal commercial terms and conditions and at market rates, except that there are no fixed
terms for the repayment of loans between the parties.
Outstanding balances are unsecured and are repayable in cash.
(e) Directors and key management personnel compensation
Director fees
Short-term employee benefits
Long-term benefits
Termination benefits
Share based payments
Total compensation
Group and Company
2015
278,538
1,404,005
222,895
–
723,739
2,629,177
2014
262,631
1,262,657
182,951
–
547,576
2,255,815
Total compensation includes total remuneration for executive and non-executive
directors of the parent entity
1,763,975
1,461,983
Options and performance rights were granted to KMP as part of their compensation. Details of options and performance rights
provided as remuneration and shares issued on exercise of such options, together with the terms and conditions of the options,
can be found in Sections 4 to 5 of the Remuneration Report on pages 27 to 45.
(f) Loans to directors and key management personnel
During the financial year and to the date of this report, the Group made no loans to directors and key management personnel
and none were outstanding at the year ended 30 June 2015 (2014: Nil).
Nanosonics 2015 Annual Report | Page 90
Notes to the financial statements (continued)For the year ended 30 June 2015 28. Notes to the cash flow statements
(a) Reconciliation of cash
Cash and cash equivalents
2015
$’000
45,724
2014
$’000
21,233
For the purpose of the Statement of cash flows, cash includes cash on hand and at bank, deposits on call and short term
deposits, net of outstanding bank overdrafts. Cash at the end of the financial year as shown in the Statement of cash flow is
reconciled to the related items in the statement of financial position as follows:
(b) Reconciliation of operating loss after income tax to net cash provided by operating activities
Operating loss after income tax
Adjustment for:
Depreciation, amortisation, and impairment
Share based payments expense
Borrowing costs
Unrealised foreign exchange loss
Loss on disposal of fixed assets
Changes in assets and liabilities
(Increase)/decrease in trade and other receivables
(Increase)/decrease in inventories
(Increase)/decrease in other current assets
(Increase)/decrease in other non-current assets
Increase/(decrease) in trade and other payables
Increase/(decrease) in derivative financial instruments
Increase/(decrease) in provisions
Increase/(decrease) in other current liabilities
(Increase)/ decrease in net current tax assets
Net cash used in operating activities
(c) Credit standby arrangements unused
2015
$’000
(5,460)
1,063
1,038
598
121
120
1,873
(2,832)
(205)
(6)
477
–
783
–
9
2014
$’000
(2,605)
975
998
555
119
–
(1,574)
(1,752)
51
–
(728)
(198)
717
854
(6)
(2,421)
(2,594)
Borrowing facilities
Guarantee facility
Borrowing facilities
Guarantee facility
Facility Limit
$’000
Facility used by
$’000
Facility available at
$’000
30 June 2015
30 June 2014
115
475
256
–
21
297
50
–
94
178
206
–
Nanosonics 2015 Annual Report | Page 91
29. Loss per share
Basic loss per share
Loss attributable to ordinary shareholders of the Company
Diluted loss per share
Loss attributable to ordinary shareholders of the Company
Losses used in calculating loss per share
2015
Cents
(2.0)
(1.9)
2014
Cents
(1.0)
(1.0)
Net loss after income tax expense attributable to shareholders
(5,460)
(2,605)
Weighted average number of shares used
For basic earnings per share
For diluted earnings per share
Information concerning options granted
269,533,917
286,677,733
263,072,467
263,072,467
Options granted under the Nanosonics Employee Share Option Plan and the Nanosonics General Share Option Plan and
the Convertible notes are considered to be potential ordinary shares and have been excluded from the calculation of diluted
loss per share as the effect would have been anti-dilutive. Details relating to the options are set out in note 30 to these
financial statements.
30. Share-based compensation
The Company’s share based compensation schemes comprise option plans and share plans. Options have been granted under
the option plans. Shares have been granted under the Deferred Employee Share Plan. To the date of this report no shares have
been granted under the Exempt Employee Share Plan.
(a) Option plans
The Nanosonics Employee Share Option Plan (ESOP) and the Nanosonics General Share Option Plan (GSOP) were established
in 2007 and last approved by the shareholders in the 2013 Annual General Meeting (AGM) on 7 November 2013. Under the
plans, participants are granted options for no consideration. Options may only be exercised on or after any vesting dates
specified by the Board at the time of offer. The exercise price of options is determined by the Board at the time of issue.
Participation in the plans is at the Board’s discretion and no individual has a contractual right to participate in a plan or to receive
any guaranteed benefits.
General Share Option Plan (GSOP)
The General Share Option Plan is designed to provide incentive, recognition and reward for non-employees, usually consultants
and contractors, who create long-term value for the Company.
No share options were issued under the GSOP during the financial year (2014: Nil issued).
Nanosonics 2015 Annual Report | Page 92
Notes to the financial statements (continued)For the year ended 30 June 2015
Employee Share Option Plan (ESOP)
The Employee Share Option Plan is designed to provide the deferred equity component of the short-term incentive and long-
term incentives for employees (including executive directors) to deliver long-term shareholder returns. All employees and
directors are eligible to participate in the ESOP at the invitation of the Board. The maximum number of options able to be on
issue under the ESOP during any five-year period is 5% of the total number of shares on issue. 1,413,303 share options were
issued under the ESOP during the financial year (2014: 2,981,494 issued).
(b) Exercise of options
Options are granted under the plans for no consideration and options carry no dividend or voting rights. When exercisable,
each option is convertible into one ordinary share that ranks equally with any other share on issue in respect of dividends and
voting rights. The exercise prices of all options issued to the date of this report were fixed on the dates the options were granted.
Details are provided in section (c) of this note.
(c) Reconciliation of outstanding share options and performance rights
The number and weighted average exercise price (WAEP) of share options and performance rights under the share option plans
were as follows:
Number of
Options
Unexpired
options as at
1 July
Granted during
the year
Exercised
during the year
Forfeited
during the year
Expired during
the year
Unexpired
options as at
30 June
Number of
holders as at
30 June
ESOP
GSOP
All Option Plans
2015
2014
2015
2014
2015
2014
Number of
options and
rights
WAEP
($)
Number of
options and
rights
WAEP
($)
Number
of options
and rights
WAEP
($)
Number
of options
and rights
WAEP
($)
Number of
options and
rights
Number of
options and
rights
5,972,263
0.24
4,603,625
0.35
553,334
0.57
815,000
0.55
6,525,597
5,418,625
1,413,303
–
2,981,494
–
–
–
–
–
1,413,303
2,981,494
(1,770,769)
0.79
(1,573,442)
0.13
(346,667)
0.60
(261,666)
0.53
(2,117,436)
(1,835,108)
(77,441)
–
5,537,356
–
–
–
(39,414)
–
–
–
(50,000)
0.52
–
–
–
–
–
–
(127,441)
(39,414)
–
–
5,972,263
0.24
156,667
0.51
553,334
0.57
5,694,023
6,525,597
88
20
3
5
91
25
Nanosonics 2015 Annual Report | Page 93
Number
granted
during the
year
Number at
start of the
year
334,000
100,000
30,000
Number
exercised
during the
year
(334,000)
(100,000)
(30,000)
(1,400,000)
(115,000)
(6,769)
Set out below are details of unexpired options granted under the plans as at 30 June 2015:
Option
Plan
Exercise
price
Assessed fair
value at grant
date
Grant
date
Expiry date
Number
forfeited
during the
year
Number at
end of the
year
Number
vested and
exercisable at
end of year
ESOP
GSOP
ESOP
ESOP
GSOP
ESOP
ESOP
GSOP
GSOP
ESOP
ESOP
ESOP
ESOP
ESOP
ESOP
ESOP
ESOP
ESOP
ESOP
ESOP
Total
$0.56
Aug-10
$0.78
Oct-10
$0.31
$0.49
19-Jul-14
01-Oct-14
$0.92
Mar-11
$0.58
23-Feb-15
$0.85
May-11
$0.50
28-Apr-16
1,400,000
$0.53
Nov-11
$0.38
21-Nov-15
115,000
$0.00
Jun-12
$0.49
01-Apr-15
6,769
$0.00
Nov-12
$0.55
30-Sep-15
1,220,000
155,000
183,334
712,970
442,409
442,409
375,000
375,000
316,847
316,859
$0.51
Nov-12
$0.27
24-Nov-16
$0.52
Dec-12
$0.20
21-Nov-16
$0.00
Aug-13
$0.78
30-Sep-15
$0.00
Nov-13
$0.68
30-Sep-16
$0.00
Nov-13
$0.85
30-Sep-16
$0.00
Nov-13
$0.71
30-Sep-17
$0.00
Nov-13
$0.85
30-Sep-17
$0.00
Mar-14
$0.63
30-Sep-16
$0.00
Mar-14
$0.80
30-Sep-16
$0.00
Jul-14
$0.80
30-Jul-15
$0.00
Mar-15
$1.36
30-Sep-17
$0.00
Mar-15
$1.71
30-Sep-17
$0.00
Mar-15
$1.72
01-Oct-15
25,000
–
–
–
–
–
–
1,220,0001
90,000
66,667
712,9701
442,409
442,409
375,000
375,000
287,803
287,814
134,375
394,622
394,606
470,348
(65,000)
(66,667)
(50,000)
134,375
399,181
399,164
480,583
(29,044)
(29,045)
(4,559)
(4,558)
(10,235)
6,525,597
1,413,303
(2,117,436)
(127,441)
5,694,023
25,000
1 The performance conditions set in the the 2012 LTIS were not met. Accordingly, these performance rights did not vest and were subsequently
forfeited in July 2015.
(d) Fair value of options and performance rights granted
The assessed fair value on the date options were granted was independently determined using an appropriate option valuation
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.
Nanosonics 2015 Annual Report | Page 94
Notes to the financial statements (continued)For the year ended 30 June 2015
Terms and condition of the options and performance rights granted and the inputs to the valuations of options and performance
rights granted and not expired to 30 June 2015 included:
Exercise
price
Grant
date
Expiry
date
Estimated share
price at grant
date
Valuation
model
Expected
price
volatility
of the
company’s
shares
Expected
dividend
yield
Risk-free
interest
rate
Assessed
fair value at
grant date
$0.00
Jul-14
30-Jul-15
$0.80
Binomial
44.78%
0%
2.54%
$0.80
$0.00
Mar-15
1-Oct-15
$1.72
Binomial
45.00%
0%
2.10%
$1.72
$0.00
Mar-15 30-Sep-17
$1.72
Binomial
45.00%
0%
1.88%
$1.36
Option type Vesting Conditions
Granted during the year:
ESOP
ESOP (h)
ESOP (i)
Service Condition until
exercise date
Service Condition until
exercise date
Relative TSR performance
and service
ESOP (j)
FY17 Revenue and service
$0.00
Mar-15 30-Sep-17
$1.72 Monte Carlo
45.00%
0%
1.88%
$1.71
Granted in prior periods and unexpired at report date:
ESOP (a)
GSOP
GSOP
ESOP (a)
ESOP (b)
ESOP (c)
ESOP (d)
ESOP (e)
ESOP (f)
ESOP (g)
FY15 Revenue, net profit
after tax and service
condition
Service Condition until
first exercise date of each
tranche
Service Condition until
first exercise date of each
tranche
FY15 Revenue, net profit
after tax and service
condition
Relative TSR performance
and service condition
FY16 Revenue, net profit
after tax and service
condition
Relative TSR performance
and service condition
FY17 Revenue, net profit
after tax and service
condition
Relative TSR performance
and service condition
FY16 Revenue, net profit
after tax and service
condition
$0.00
Nov-12 30-Sep-15
$0.55
Binomial
45.46%
0%
2.58%
$0.55
$0.51
Nov-12 24-Nov-16
$0.56
Binomial
54.96%
0%
2.71%
$0.27
$0.52
Dec-12 21-Nov-16
$0.49
Binomial
53.13%
0%
2.87%
$0.20
$0.00
Aug-13 30-Sep-15
$0.78
Binomial
45.49%
0%
2.35%
$0.78
$0.00
Nov-13 30-Sep-16
$0.85 Monte Carlo
45.00%
0%
3.00%
$0.68
$0.00
Nov-13 30-Sep-16
$0.85
Binomial
45.00%
0%
3.00%
$0.85
$0.00
Nov-13 30-Sep-17
$0.85 Monte Carlo
45.00%
0%
3.20%
$0.71
$0.00
Nov-13 30-Sep-17
$0.85
Binomial
45.00%
0%
3.20%
$0.85
$0.00
Mar-14 30-Sep-16
$0.80 Monte Carlo
45.00%
0%
2.68%
$0.63
$0.00
Mar-14 30-Sep-16
$0.80
Binomial
45.00%
0%
2.68%
$0.80
Options marked as per below were granted to key management personnel. Further information is included in section 5 of the Remuneration report.
(a) 2012 LTIS granted to key management personnel. The performance conditions set out in the 2012 LTIS were not met. Accordingly, these performance rights did not vest and were
subsequently forfeited in July 2015.
(b) 2013 LTIS – Tranche 1 granted to the CEO and the Executive Director.
(c) 2013 LTIS – Tranche 2 granted to the CEO and the Executive Director.
(d) 2013 LTIS – Tranche 3 granted to the CEO.
(e) 2013 LTIS – Tranche 4 granted to the CEO.
(f) 2013 LTIS – Tranche 1 granted to other key management personnel and senior employees.
(g) 2013 LTIS – Tranche 2 granted to other key management personnel and senior employees.
(h) 2014 Deferred STI granted to other key management personnel and eligible employees.
(i) 2014 LTIS – Tranche 1 granted to other key management personnel and senior employees.
(j) 2014 LTIS – Tranche 2 granted to other key management personnel and senior employees.
Nanosonics 2015 Annual Report | Page 95
(e) Recognition of expense of options granted
General Share Option Plan (GSOP)
The assessed fair values of options granted under the GSOP are expensed in full in the month in which they are granted and
a share based payments reserve is created as part of shareholders’ equity, except where the options are granted as part of a
capital raising program, in which case no cost is recognised.
Employee Share Option Plan (ESOP)
Options granted under the ESOP require the holder to be an employee of the Company at the time the options are exercised,
except that they may be exercised, if vested, up to 30 days after voluntary termination of employment. The assessed fair value
of ESOP options granted is apportioned on a straight line monthly basis over the period between grant date and the date on
which the options all vest. At the end of a period the Company assesses the probability of achievement of a benefit, being the
percentage probability that employees will achieve a benefit if the options are exercised. The value of ESOP options expensed
in any period is calculated as that portion of the assessed fair value applicable to the period factored by the probability of
achievement and a share based payments reserve is created as part of shareholders’ equity.
(f) Employee share plans
The Company has two Employee Share Plans, being the Exempt Employee Share Plan (“EESP”) and the Deferred Employee
Share Plan (“DESP”).
The EESP and DESP was established in 2007 and last approved at a general meeting of shareholders on 8 November 2013.
Shareholder approval was also granted to enable the Company to grant financial assistance under both the EESP and the DESP
in accordance with the Corporations Act 2001.
Exempt Employee Share Plan (“EESP”)
The EESP enables eligible employees, including directors, to acquire up to $1,000 worth of Nanosonics shares each year
on a tax-exempt basis in accordance with enabling tax legislation. As a contemporary company the Board believes allowing
employees to acquire equity in the Company on tax-preferred terms should be encouraged. No shares have been issued under
the EESP to the date of this report.
Nanosonics Deferred Employee Share Plan (“DESP”)
The DESP allows invited eligible employees, including directors, to receive Nanosonics shares as a bonus or incentive or
as remuneration sacrifice and, subject to certain conditions, not to pay tax for up to 10 years on the benefit in accordance
with enabling tax legislation. The DESP is designed to allow the Company to meet contemporary executive equity incentive
practices. No shares were issued under the DESP during the financial year.
(g) Shares granted
During the financial year there were no shares directly granted under the DESP. Details of shares granted under the DESP to the
date of this report are set out below.
Share Plan
Share issue price
Grant date
Assessed fair
value at grant date
Closing share
price on grant
date
Number granted
DESP
DESP
DESP
DESP
0.2880
0.4251
0.4251
0.9080
23 March 2009
26 June 2009
26 June 2009
3 May 2011
0.2880
0.4251
0.4251
0.9080
0.2950
0.4100
0.4100
0.9080
Total Employee Shares granted to date
336,424
176,400
75,000
102,403
690,227
Share issued on the exercise of zero-priced options granted to employees as part of their performance bonus or short term
incentive has been issued to the DESP.
No shares have been granted to the date of this report under the EESP.
(h) Fair value of shares granted
The issue price for shares granted is calculated as the 5-day weighted average market price of shares of the Company on the
Australian Securities Exchange as at close of trading on the date the shares were granted. The fair value of shares granted is
taken to be the issue price.
Nanosonics 2015 Annual Report | Page 96
Notes to the financial statements (continued)For the year ended 30 June 2015 (i) Recognition of expense of shares granted
Deferred Employee Share Plan (DESP)
The assessed fair values of shares granted under the DESP are expensed in full in the month in which they are granted, except
if they are granted with a vesting condition, in which case the fair value of DESP shares granted is apportioned on a straight
line monthly basis over the period between grant date and the date on which the shares all vest. At the end of a period, the
Company assesses the probability of achievement of a benefit, being the percentage probability that employees will achieve at
least the fair value of the unvested shares. The value of DESP shares expensed in any period is calculated as that portion of the
fair value applicable to the period factored by the probability of achievement. A share based payments reserve is created as part
of shareholders’ equity.
(j) Shares on issue under employee share plans
Number of Shares
2015
2014
2015
2014
2015
2014
DESP
EESP
All Share Plans
Employee Shares on issue as at 1 July
1,125,469
779,053
Granted during the year
Issued on exercise of zero-priced options during
the year
Issued on share purchase plan allotment during
the year
Withdrawn during the year
Forfeited during the year
–
–
6,769
1,207,442
–
–
(416,872)
(861,026)
–
–
Employee Shares on issue as at 30 June
715,366
1,125,469
Number of holders as at 30 June
91
40
–
–
–
–
–
–
–
–
(k) Expenses arising from share-based compensation transactions
Options issued under ESOP
Options issued under GSOP
Shares issued under DESP
Total share-based compensation
–
–
–
–
–
–
–
–
1,125,469
779,053
–
–
6,769
1,207,442
–
–
(416,872)
(861,026)
–
–
715,366
1,125,469
91
40
2015
$’000
1,025
13
–
1,038
2014
$’000
940
58
–
998
Nanosonics 2015 Annual Report | Page 97
31. Parent entity information
As at and throughout the financial year ended 30 June 2015, the parent entity of the Group was Nanosonics Limited.
Set out below is the supplementary information about the parent entity.
Financial position of parent entity at year end
Current assets
Total assets
Total current liabilities
Total liabilities
Total equity of the parent entity comprising of:
Contributed Equity
Convertible Notes
Share option reserve
Accumulated losses
Total equity
Result of parent entity
Profit or loss for the year
Total comprehensive income (loss)
Hire purchase commitment
For acquisition of Manufacturing equipment
2015
$’000
53,862
57,813
5,959
9,139
103,059
376
4,554
(59,315)
48,674
(1,319)
(1,319)
2014
$’000
31,157
33,147
4,567
12,855
74,410
376
3,502
(57,996)
20,292
(2,448)
(5,819)
18
24
The consolidated financial statements include the financial statements of Nanosonics Limited and the subsidiaries listed in
note 26.
Contingent liabilities
The parent entity had no contingent liabilities.
32. Events subsequent to reporting date
No other matter or circumstance has arisen since 30 June 2015 that has significantly affected, or may significantly affect:
a. The Group’s operations in future financial years.
b. The results of those operations in future financial years.
c. The Group’s state of affairs in future financial years.
Nanosonics 2015 Annual Report | Page 98
Notes to the financial statements (continued)For the year ended 30 June 2015 Directors’ declaration
In the directors’ opinion:
1. the financial statements and notes set out on pages 53 to 98 are in accordance with
the Corporations Act 2001, including:
a. complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory
professional reporting requirements, and
b. giving a true and fair view of the Company’s and Group’s financial position as at 30 June 2015
and of their performance for the financial year ended on that date; and
2. there are reasonable grounds to believe that the Company and its subsidiaries will be able to pay
their debts as and when they become due and payable.
The directors have been given the declarations by the Managing Director and CEO and Chief Financial Officer
required by section 295A of the Corporations Act 2001.
This declaration is made in accordance with a resolution of directors.
Richard England
Director
Sydney
20 August 2015
Nanosonics 2015 Annual Report | Page 99
Independent auditor’s report to the members
Level 11 | 1 York Street | Sydney | NSW | 2000
GPO Box 4137 | Sydney | NSW | 2001
t: +61 2 9256 6600 | f: +61 2 9256 6611
sydney@uhyhn.com.au
www.uhyhnsydney.com.au
INDEPENDENT AUDITOR’S REPORT
To the Members of Nanosonics Limited
Report on the Financial Report
We have audited the accompanying financial report of Nanosonics Limited (the Company), which
comprises the consolidated statement of financial position as at 30 June 2015, the consolidated
statement of profit or loss and other comprehensive income, the consolidated statement of changes in
equity and the consolidated statement of cash flows for the year then ended, notes comprising a
summary of significant accounting policies and other explanatory information, and the directors’
declaration of the consolidated entity comprising the Company and the entities it controlled at the
year’s end or from time to time during the financial year.
Directors’ Responsibility 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 controls as the directors determine are necessary to enable the preparation of
the financial report that is free from material misstatement, whether due to fraud or error.
In Note 2b, the directors also state, in accordance with Accounting Standard AASB 101: Presentation of
Financial Statements, that the financial statements comply with International Financial Reporting
Standards.
Auditor’s Responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted
our audit in accordance with Australian Auditing Standards. Those standards require that we comply
with relevant ethical requirements relating to audit engagements and plan and perform the audit to
obtain reasonable assurance about whether the financial report is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures
in the financial report. The procedures selected depend on the auditor’s judgement, including the
assessment of the risks of material misstatement of the financial report, whether due to fraud or error.
In making those risk assessments, the auditor considers internal control relevant to the entity’s
preparation of the financial report that gives a true and fair view in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of
accounting policies used and the reasonableness of accounting estimates made by the directors, as
well as evaluating the overall presentation of the financial report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our audit opinion.
An association of independent fi rms in Australia and New Zealand and a member
of UHY International, a network of independent accounting and consulting fi rms.
UHY Haines Norton—ABN 85 140 758 156 NSWBN 98 133 826
Liability limited by a scheme approved under Professional Standards Legislation.
Passion beyond numbers
Nanosonics 2015 Annual Report | Page 100
Independence
In conducting our audit, we have complied with the independence requirements of the Corporations
Act 2001.
Opinion
In our opinion:
(a) The financial report of Nanosonics Limited is in accordance with the Corporations Act 2001,
including:
i.
ii.
giving a true and fair view of the consolidated entity’s financial position as at 30
June 2015 and of its performance for the financial year ended on that date; and
complying with Australian Accounting Standards and the Corporations Regulations
2001; and
(b) The financial report also complies with International Financial Reporting Standards as
disclosed in Note 2b;
Report on the Remuneration Report
We have audited the Remuneration Report included on pages 22 to 48 of the directors’ report for the
year ended 30 June 2015. The directors of the Company are responsible for the preparation and
presentation of the Remuneration Report in accordance with s 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.
Opinion
In our opinion, the Remuneration Report of Nanosonics Limited for the financial year ended 30 June
2015, complies with s 300A of the Corporations Act 2001.
Mark Nicholaeff
Partner
Sydney
Date: 20 August 2015
UHY Haines Norton
Chartered Accountants
An association of independent fi rms in Australia and New Zealand and a member
of UHY International, a network of independent accounting and consulting fi rms.
UHY Haines Norton—ABN 85 140 758 156 NSWBN 98 133 826
Liability limited by a scheme approved under Professional Standards Legislation.
Passion beyond numbers
Nanosonics 2015 Annual Report | Page 101
Shareholder information
The shareholder information set out below was applicable as at 10 August 2015.
A. Equity security holders
Twenty largest holders of quoted equity securities
Ordinary shares
J P Morgan Nominees Australia Limited
Citicorp Nominees Pty Limited
Mr Maurie Stang1
Mr Bernard Stang
National Nominees Limited
HSBC Custody Nominees (Australia) Limited
Mr Steve Kritzler
BNP Paribas Noms Pty Ltd
National Nominees Limited
Link Traders (Aust) Pty Ltd
Asia Union Investments Pty Ltd
Armada Trading Pty Ltd
Dr Harry Hirschowitz
Citicorp Nominees Pty Limited
UBS Wealth Management Australia Nominees Pty Ltd
Australian Shareholder Nominees Pty Ltd
Avanteos Investments Limited <2349414 Hofbauer A/C>
Bennelong Resources Pty Limited
Warbont Nominees Pty Ltd
Mr John Charles Plummer
Total top 20 holders
Total all other holders
Total shares on issue
1 Includes indirect holdings of 116,368 shares.
Unquoted equity securities
Options on issue
Number of quoted
shares held
28,841,019
25,745,893
25,099,701
23,684,056
20,016,243
18,094,268
9,489,737
7,398,143
5,114,740
3,256,247
3,069,091
2,033,336
2,010,000
1,638,277
1,364,192
1,225,000
1,200,000
1,200,000
1,093,421
950,000
182,523,364
100,521,901
283,045,265
Percentage
10.19%
9.10%
8.87%
8.37%
7.07%
6.39%
3.35%
2.61%
1.81%
1.15%
1.08%
0.72%
0.71%
0.58%
0.48%
0.43%
0.42%
0.42%
0.39%
0.34%
64.49%
35.51%
100%
Number of options
over ordinary shares
Number of holders
General Share Options to take up unissued ordinary shares
Employee Share Options to take up unissued ordinary shares
Total options on issue
156,667
3,433,001
3,589,668
3
79
82
Nanosonics 2015 Annual Report | Page 102
B. Distribution of equity securities
Analysis of numbers of ordinary shares and options by size of holding:
1–1,000
1,001–5,000
5,001–10,000
10,001–100,000
100,001 and over
Total Holders
There were 165 holders of less than a marketable parcel of 286 ordinary shares
C. Substantial holders
Substantial holders in the Company are shown below:
Mr Maurie Stang1
Allan Gray Investment Mgt
Mr Bernard Stang
Kinetic Investment Partners
Quoted ordinary shares
Unquoted
options
717
1,860
1,017
1,580
176
5,350
26
29
2
14
9
80
Number of ordinary shares
Percentage
25,099,701
23,967,225
23,684,056
19,486,214
8.87%
8.47%
8.37%
6.88%
1 Includes indirect holdings of 116,368 shares.
D. Voting rights
The voting rights attaching to each class of equity securities are set out below:
a) Ordinary shares
On a show of hands every member present at a meeting in person or by proxy shall have one vote and on a poll each share
shall have one vote.
(b) Options
Options have no voting rights.
Nanosonics 2015 Annual Report | Page 103
Glossary
Australian Accounting Standards Board
KMP
Key management personnel
Annual General Meeting
LEAN Program Program designed to maximize customer value while
AASB
AGM
AIUM
ANZ
APIC
ASIC
ASUM
ASX
CEO
CFO
American Institute of Ultrasound in Medicine
Australia and New Zealand
Association for Professionals in Infection Control
and Epidemiology
Australian Securities and Investments Commission
Australasian Society for Ultrasound in Medicine
Australian Securities Exchange Limited
Chief Executive Officer
Chief Financial Officer
Company
Nanosonics Limited
Date of this
report
20 August 2015
DESP
EESP
EMS
EPS
ERP
ESOP
Deferred Employee Share Plan
Exempt Employee Share Plan
Environmental Management System
Earnings Per Share
Enterprise Resource Planning
Employee Share Option Plan
LTI
LTIS
MHRA
MRSA
minimizing waste
Long Term Incentives
Long Term Incentive Scheme
Medicines and Healthcare Products Regulatory
Agency (MHRA)
Methicillin resistant staphylococcus aureus, a bacterium
resistant to broad-spectrum antibiotics
NanoNebulant®
The biocide used in Nanosonics’ technological process
NED
NHS
NRTL
OHS
PBT
Non-executive Director
National Health System
Nationally Recognised Testing Laboratory Ortho-
phthalaldehyde Chemical compound commonly used
to disinfect semi-critical medical devices such as
ultrasound probes
Occupational Health & Safety
Profit before tax
Q1, 2, 3, or 4
3-monthly periods beginning 1 July, 1 October, 1 January
and 1 April respectively
R&D
Research and Development
Reporting period Year to 30 June 2015
Fiscal Year
Year to 30 June
SHEA
Society of Healthcare Epidemiology of America
STI
TEC
TFR
TJC
TSR
TTR
Short Term Incentives
Total Employment Cost
Total Fixed Remuneration
The Joint Commission, an independent, non-for- profit
organisation, that accredits and certifies more than
20,500 health care organisations and programs in the
United States of America
Total Shareholder Return
Total Target Remuneration
trophon®
The brand representing Nanosonics’ range of
infection control solutions designed specifically
for healthcare settings
trophon® EPR
The brand of Nanosonics’ device specifically designed
to disinfect intracavity and surface ultrasound probes.
See also www.trophon.com
TÜV
UK
USA
VAT
TÜVs are German organisations that validate product
safety and provide certification for international standards
such as ISO9001
United Kingdom
United States of America
Value Added Tax
WAEP
Weighted Average Exercise Price
FY
Group
Financial year, eg. FY2015 is the financial year ended
30 June 2015
Nanosonics Limited and its wholly owned
subsidiary companies
GSOP
General Share Option Plan
GST
HAI
HLD
HPV
IAS
IASB
IDN
IFRS
ISO 13485
ISO 14001
Goods and Services Tax
Healthcare Acquired Infection
High Level Disinfection – involves the complete elimination
of all microorganisms in or on an instrument, except for
small numbers of bacterial spores
Human papillomavirus
International Accounting Standards
International Accounting Standards Board
Integrated Delivery Network
International Financial Reporting Standards
Quality Management System for Medical Devices –
Requirements for Regulatory Purposes
Environmental Management System –
An international standard developed by the International
Organisation for Standardisation through dedicated
technical committees representing approximately 150
countries around the world. Its purpose is to enable
organisation of any type or size to develop and implement
a policy committing it to prevention of pollution,
compliance with legal and other requirements and
continual improvement
ISUOG
International Society for Ultrasound in Obstetrics
and Gynaecology
Nanosonics 2015 Annual Report | Page 104
Corporate directory and information for investors
Nanosonics Limited ABN 11 095 076 896 incorporated 14 November 2000
Legal Advisors
Shelston IP
Level 21, 60 Margaret Street
Sydney NSW 2000 Australia
Baker & McKenzie
AMP Centre
Level 27, 50 Bridge Street
Sydney NSW 2000 Australia
Dibbs Barker
Level 8, Angel Place
123 Pitt Street
Sydney NSW 2000 Australia
Bankers
Australia: Australia and New Zealand Banking Group
Limited, HSBC Bank Australia Limited and National
Australia Bank Limited
United Kingdom: HSBC Bank plc
Germany: Deutsche Bank AG
United States: PNC Financial Services Group, Inc.
Stock Exchange Listings
Nanosonics Limited shares are listed on the Australian
Securities Exchange
ASX code: NAN
Industry Group: Healthcare Equipment & Services
2015 Annual General Meeting
The 2015 AGM of Nanosonics Limited will be held:
At 11.00am on 6th November 2015
Brisbane Room, Sofitel Sydney Wentworth
61-101 Phillip Street, Sydney NSW 2000
Website Address
www.nanosonics.com.au
Directors
Maurie Stang
Richard England
David Fisher
Michael Kavanagh
Ron Weinberger
Company Secretaries
McGregor Grant
Robert Waring
Registered Office
14 Mars Road, Lane Cove
NSW 2066 Australia
Ph: +61 2 8063 1600
European Offices
Nanosonics Europe Limited
Unit 7, Linfit Court, Colliers Way
Clayton West, Huddersfield HD8 9WL United Kingdom
Ph: +44 1484 860581
Nanosonics Europe GmBH
(European overseas representative)
Poppenbütteler Bogen 66 22399 Hamburg Germany
Ph: +49 (0)40 468 568 85
Share Register
Computershare Investor Services Pty Ltd
GPO Box 2975
Melbourne, VIC 3001 Australia
Ph: +61 3 9415 4088
Ph: 1300 555 159 (within Australia)
www.au.computershare.com/au/contact
Investor/Media Relations
Buchan Consulting
Ph: +61 3 9866 4722
Ph: 1300 557 010 (within Australia)
McGregor Grant – Company Secretary
Ph: +61 2 8063 1600
Email: info@nanosonics.com.au
Auditor
UHY Haines Norton
Level 11, 1 York Street
Sydney NSW 2000 Australia
Nanosonics 2015 Annual Report | Page 105
Nanosonics Limited
14 Mars Road, Lane Cove
NSW 2066 Australia
T +61 2 8063 1600
E info@nanosonics.com.au
www.nanosonics.com.au
ABN 11 095 076 896