Next Science Limited
ACN: 622 382 549
Appendix 4E
31 December 2022
Company details
Name of entity:
ABN:
Reporting period:
Previous period:
_________________________________________________________________________________
Next Science Limited
47 622 382 549
For the year ended 31 December 2022
For the year ended 31 December 2021
Results for announcement to the market
Revenues from ordinary activities
Loss from ordinary activities after tax
attributable to the owners of Next Science
Limited
Loss for the year attributable to the owners of
Next Science Limited
up
up
up
31%
36%
36%
to
to
to
USD $
11,712,722
(12,683,312)
(12,683,312)
Dividends
No dividend was paid or proposed during the year ended 31 December 2022 (2021: USD $nil).
Refer to the Operating and Financial Review within the Directors’ Report for further commentary on the
year’s results, financial position and likely developments in future years.
Net tangible assets
Reporting
period
USD Cents
Previous
period
USD Cents
Net tangible assets/(liabilities) per ordinary security
2.62
4.16
The net tangible asset/(liability) per ordinary security is calculated based on 214,790,134 ordinary
shares on issue at 31 December 2022 and 197,973,909 shares that were in existence at 31 December
2021.
Control gained over entities
Not applicable.
Loss of control over entities
Not applicable.
Next Science Limited
ACN: 622 382 549
Appendix 4E
31 December 2021
Other information requiring disclosure to comply with ASX Listing rule 4.3A is contained in, and should
be read in conjunction with the Financial Statements, the notes to the Financial Statements and the
Directors’ Report for the year ended 31 December 2022 attached to this report.
This report is based on the Consolidated Financial Statements and Notes of Next Science Limited which
have been audited by KPMG.
Signed
Mark Compton, AM
Chair
28 February 2023
Sydney
Next Science Limited
ACN 622 382 549
Annual Report - 31 December 2022
Next Science Limited
Contents
31 December 2022
Directors' report
Auditor's independence declaration
Consolidated statement of profit or loss and other comprehensive income
Consolidated statement of financial position
Consolidated statement of changes in equity
Consolidated statement of cash flows
Notes to the consolidated financial statements
Directors' declaration
Independent auditor's report to the members of Next Science Limited
Corporate Directory
2
23
24
25
26
28
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63
64
68
1
Next Science Limited
Directors' report
31 December 2022
The Directors present their report together with the consolidated financial statements of the Group comprising of Next Science
Limited (Next Science/Company), and the entities it controlled at the end of, or during, the year ended 31 December 2022
(Group). All amounts are presented in US dollars (USD) unless otherwise stated.
Directors
The Directors of the Company at any time during or since the end of the financial year are:
Mark Compton (Chair)
Judith Mitchell
Bruce Hancox
Daniel Spira
Aileen Stockburger
Dividends
No dividends were paid or declared since the commencement of the year and the Directors do not recommend the declaration
of a dividend.
Operating and financial review
Principal activities
The principal activities of the Group during the course of the year were the research, development and commercialisation of
technologies which solve issues in human health caused by biofilms. The Company is headquartered in Sydney, Australia
and has a research and development centre and sales and marketing functions located in Florida, USA.
Significant changes in the state of affairs and COVID-19 impact
Revenues grew by 31% in 2022 with sales contributions across all of Next Science’s products in market, including sales from
products sold through the newly established Durable Medical Equipment (‘DME’) business from mid October 2022 onwards.
Good progress was made in building market awareness for our XBIOTM brand as an answer to the biofilms and bacteria that
directly lead to the need for revision (repeat) joint replacement surgeries.
In January 2022, Next Science and Zimmer, Inc (Zimmer) revised the term of their existing distribution agreement for
Bactisure™. The term will now end on 31 December 2026 with Zimmer having the option to extend the distribution agreement
for an additional five-year period by providing 6 months’ prior written notice.
Next Science and Zimmer reached agreement in January 2022, in respect of the 2021 complaint filed in the United States
District Court, Northern District of Indiana, alleging that Zimmer had global commercial exclusivity rights over XPERIENCE™
and signed a new US distribution agreement in relation to the supply of a white labelled version of XPERIENCE™ under
Zimmer’s own labelling. The distribution agreement with Zimmer for XPERIENCE™ has a 5 year term plus a 5 year renewal
option and confirms Next Science’s intellectual property ownership and rights in respect of XPERIENCE™.
In conjunction with the signing of the new distribution agreement, Zimmer withdrew its District Court proceedings. The
complaint was dismissed “with prejudice” (meaning that Zimmer cannot reassert the claims) with each party paying its own
costs.
The first shipment to Zimmer of a white labelled version of XPERIENCE™ took place in June 2022 to support a controlled
rollout commencing in July 2022 across Zimmer’s national sales network. First US shipments of TridentX™ Wound Wash to
Convatec, also took place in June 2022.
During the year, Next Science also entered into multiple distribution partnerships in Australia and New Zealand for Next
Science’s XPERIENCE™, Surg X™ and Blast X™ products. Sales of XPERIENCETM to New Zealand commenced in Q2 2022
with sales of XPERIENCE™ and Blast X™ in Australia commencing in Q3 2022. Sales of Surg X™ to New Zealand
commenced in Q3 2022.
In Q4 2022 Next Science announced its accreditation as a licensed DME supplier giving the Company the ability to seek
reimbursement directly from US Centers for Medicare and Medicaid (CMS) for Surgical Dressings (including Collagen
products) supplied to patients, initially in 40 US States. Sales commenced during Q4 2022 through the new DME business
entity of a range of topical Collagen products to patients who have been prescribed Collagen treatment as a wound dressing.
2
Next Science Limited
Directors' report
31 December 2022
Operating and financial review (continued)
Significant changes in the state of affairs and COVID-19 impact (continued)
Next Science’s commercial team, in the United States, is continuing its own XPERIENCE™, Surg X™ and Blast X™
commercialisation efforts with increased customer usage across all products during the year.
During 1H of 2022 Next Science completed a two-tranche placement to institutional and sophisticated investors raising
A$6.0million (US$4.4million) in March 2022 and a further A$4.0million (US$2.9million) in May 2022 before capital raising
costs. A Share Purchase Plan was also launched during March 2022 raising A$4.8million (US$3.6million) before costs.
The financial position of the Group was affected by the amendment of the US Jacksonville Greystone Park Commercial Lease
on 17 June 2022. The amendment included:
a) Modification of the lease to expand the Premises; and
b) Extension of the term of the lease by 5 years
The amendment resulted in the recognition of an additional lease liability of $1,178,751, a right-of-use asset of $1,025,617
and leasehold improvements of $160,910 in the Statement of Financial Position.
In August 2021, Irrimax Corporation, a competitor of Next Science in the wound irrigation sector, filed a complaint and
subsequently served on its complaint in the United States District Court for the Northern District of Georgia alleging common
law unfair competition and false advertising regarding XPERIENCE™. The complaint settled in July 2022 and was dismissed
“with prejudice” (meaning that Irrimax cannot reassert the claims).
In the opinion of the Directors, other than the events previously stated, there were no further significant changes in the state
of affairs of the Group that occurred during the financial year.
Shareholder returns
Revenue
Loss attributable to owners of
the company
Basic earnings per share (EPS)
(cents)
Share price as at 31 Dec (A$)
Return on capital employed
2022
$11,712,722
2021
$8,947,591
($12,683,312)
($6.03)
($9,349,639)
($4.75)
AUD$0.685
(128.0%)
AUD$1.245
(77.8%)
Review of operations
The loss for the Group for the financial year to 31 December 2022 after providing for income tax amounted to $12,683,312
(2021: $9,349,639).
Revenue increased by 31% for the period increasing from $8,947,591 in the prior corresponding period to $11,712,722,
reflecting some of the recovery from the impacts of the COVID-19 pandemic during the 2022 financial year across surgical
procedures and in wound care clinics as well as revenue from new distribution agreements entered into for XPERIENCE™,
Blast X™ and Surg X™ both in the USA and in Australia and New Zealand, in addition to revenue earned from reimbursement
of Collagen products through the newly operational DME business from mid October 2022 onwards.
Gross profit for FY22 was $9,149,698 compared to $6,940,122 in the prior corresponding period. Gross margin as a percent
of sales remained steady at 78% (2021: 78%).
3
Next Science Limited
Directors' report
31 December 2022
Operating and financial review (continued)
Review of operations (continued)
Selling and distribution expenses were $10,310,205, an increase of $2,915,334 compared with $7,394,871 in the prior
corresponding period. The $2,915,334 in spend in 2022 mainly related to an increase in sales headcount ahead of the launch
of the DME business in October 2023 , other employee related expenditure including recruitment costs and an increase in
travel costs, associated with higher levels of direct sales activity in the US across all Next Science’s products as COVID-19
travel related restriction eased in 2022 compared to 2021.
Administration expenses were $5,385,006, an increase of $1,279,088 compared with $4,105,918 in the prior corresponding
period. The majority of the expenses in the current period relate to one off costs of defending and settling the 2021 legal suits
brought by Irrimax Corporation and Zimmer. The balance of the increase mainly relates to upfront recruitment retainer fees
for the US based CEO search, increased executive travel costs with the easing of COVID-19 travel related restrictions, as
well as additional strategic and territorial commercialisation consulting advice undertaken in the period.
Research and development expenses were $6,149,806 an increase of $1,102,931 compared with $5,046,875 in the prior
corresponding period with expenditure in the current period related to ongoing R&D projects and clinical studies as well as
regulatory compliance in existing and new jurisdictions (Canada) and increased medical advisory consulting expenses as well
as a modest increase in headcount.
Cash and cash equivalents at 31 December 2022 amounted to $5,073,625 compared to $7,000,869 at 31 December 2021.
Term deposits at 31 December 2022 amounted to $37,789 compared to $367,129 at 31 December 2021.
Inherent risks of Investments in Health Care Companies
There are many inherent risks associated with the development of medical devices to a marketable stage. The distribution of
some of Next Science's products is subject to obtaining and maintaining FDA and other clearances issued by appropriate
governmental authorities and regulatory bodies. Following regulatory approval of some products such as XPERIENCE™,
further clinical studies are being undertaken to demonstrate effectiveness and to expand the list of claims per product.
Although Next Science believes such clinical studies will be a success. there are no guarantees that the studies will effectively
meet their end points.
Other risks include patent protection and proprietary rights, whether patent applications and issued patents will offer adequate
protection to enable product development, the obtaining of necessary regulatory authority approvals and difficulties caused
by rapid advancements in technology.
As an accredited DME business, the Company will continue to expand its wound care footprint to patients. Being accredited
as a DME business, Next Science must comply with the U.S Health Insurance Portability and Accountability Act (HIPPA)
which requires companies that deal with protected health information to have physical, network, and process security
measures in in place and follow them. Next Science will need to ensure that it maintains its HIPPA compliance in order to
continue to be accredited as a DME entity.
Companies such as Next Science are dependent on the success and commercialisation of both their research projects and
existing products and their continued ability to attract funding to support those activities, as the Group scales. Access to capital
and funding for the Group and its projects going forward cannot be guaranteed. Whilst Next Science believes that
reimbursement through the DME will provide welcome cash inflows to assist with ongoing capital needs, the new DME
business is in its early stages and the timing and extent of reimbursements are still being assessed. To assist with bridging
the gap until the Group becomes cash flow positive, Next Science has issued a A$10,000,000 Secured Convertible Note to
major shareholder, Walker Group Holdings Pty Ltd, post shareholder approval on 2 February 2023. See Matters subsequent
to the end of the financial year for more details.
Likely developments and expected results of operations
Further information about likely developments in the operations of the Group and the expected results of those operations in
future financial years has not been included in this report because disclosure of the information would be likely to result in
unreasonable prejudice to the Group.
4
Next Science Limited
Directors' report
31 December 2022
Matters subsequent to the end of the financial year
On 2 February 2023 shareholders approved the issue of A$10,000,000 Secured Convertible Notes with major shareholder,
Walker Group Holdings Pty Ltd, with a maturity date 21 months after the issue date at a conversion price of A$0.72 per
security.
Each Note accrues interest at a rate of 10% per annum if the Notes are redeemed (and payable in one instalment only on
redemption) or at a rate of 5% per annum if the Notes are converted (and capitalised into additional shares on conversion).
Interest shall accrue on any overdue sum at a rate of 12% per annum from the due date. If converted, the shares rank pari
passu with existing ordinary shares.
Next Science Limited's obligations under the Secured Convertible Note Deed are to be secured over the Company and all of
the Company's property under a General Security Agreement.
In accordance with the Secured Convertible Note Deed, Walker Group Holdings Pty Ltd may at any time after the issue date
until 31 October 2023, give notice to Next Science Limited that it wishes to convert all of the Notes to conversion shares.
If the Notes are not converted by 31 October 2023, Next Science Limited must redeem the Notes on the maturity date, unless
Next Science Limited gives notice of early redemption to Walker Group Holdings Pty Ltd.
The Notes are non-transferrable.
There has not arisen in the interval between the end of the financial year and the date of this report any item, transaction or
event, other than those matters detailed above, of a material and unusual nature likely, in the opinion of the directors of the
Company, to affect significantly the operations of the Group, the results of those operations, or the state of affairs of the Group,
in future financial years.
Environmental regulation
The Group’s operations are not subject to significant environment regulations under either Commonwealth or State legislation.
The Board believes that the Group has adequate systems in place for the management of environmental requirements.
Government regulation
The Group is subject to varying degrees of governmental regulation in the countries in which operations are conducted, and
the general trend is toward increasingly stringent regulation. In the U.S., the drug, device, diagnostics and cosmetic industries
have long been subject to regulation by various federal and state agencies, primarily as to product safety, efficacy,
manufacturing, advertising, labelling and safety reporting. The exercise of broad regulatory powers available to the U.S. Food
and Drug Administration (the “FDA”) can result in increases in the amounts of testing and documentation required for FDA
clearance of new drugs and devices and a corresponding increase in the expense of product introduction. Similar trends are
also evident in major markets outside of the U.S.
In October 2022, the Jacksonville based subsidiary, Next Science LLC, established itself, and has been licensed and
accredited by US Medicare, as a Durable Medical Equipment (DME) provider based in the State of Florida, USA. Such
licensing and accreditation, brings with it additional regulatory and compliance obligations.
The Group relies on global supply chains, and production and distribution processes that are complex and are subject to
lengthy regulatory approval processes and ongoing regulatory requirements which can affect sourcing, supply and pricing of
materials used in the Group’s products.
5
Next Science Limited
Directors' report
31 December 2022
Information on Directors
Name:
Title:
Mark Compton AM
Chair and Independent Non-Executive Director
Special responsibilities:
Member, Audit and Risk Committee
Member, People, Culture and Remuneration Committee
Qualifications:
Bachelor of Science (Pharmacology, Physiology and Biochemistry) and an
MBA, University of New South Wales.
Fellow of the Australian Institute of Company Directors, the Australasian
College of Health Services Management,
Institute of
Management and the Royal Society (New South Wales).
the Australian
Experience and expertise
Mark is Lord Prior of the International Order of St John and Chair of the Board
of Trustees of St John International.
Mark is Chair of Sonic Healthcare Limited, a global medical diagnostics and
healthcare organisation which is a Top 50 ASX listed entity. He is also Chair
of St Luke’s Care Limited, a not-for-profit health and aged care organisation.
Mark has held various CEO and managing director roles, including at St Luke’s
Care Limited, Immune System Therapeutics Limited, Royal Flying Doctor
Service of Australia, SciGen Limited and Alpha Healthcare Limited. He is an
Adjunct Professor at Macquarie University in healthcare leadership and
management (since 2012).
Other current directorships:
Chair and Non-Executive Director of Sonic Healthcare Limited (ASX: SHL).
Chair of the Board of Trustees of St John International, Chair of St Luke’s Care
Limited.
Former listed directorships
(last 3 years):
None
Name:
Title:
Judith Mitchell
Managing Director and Chief Executive Officer
Special responsibilities:
None
Qualifications:
MBA, University of Hull
Experience and expertise:
Graduate of the Australian Institute of Company Directors
Judith has been the Managing Director of Next Science since 2017. Prior to
joining Next Science, Judith served as President of DePuy Synthes Asia
Pacific, the Orthopaedics Division of Johnson & Johnson, before which Judith
was President of Asia Pacific for Synthes GmbH, the world leaders in
orthopaedic trauma care.
Judith commenced her medical technology career at GE Medical Systems,
where over 14 years, she held positions in sales, marketing and management.
She also held a variety of positions at Cochlear Limited in Product
Development, Global Marketing and Education.
Other current directorships:
None
Former listed directorships
(last 3 years):
None
6
Next Science Limited
Directors' report
31 December 2022
Information on Directors (continued)
Name:
Title:
Bruce Hancox
Non-Executive Director
Special responsibilities:
Chair, Audit and Risk Committee
Qualifications:
Bachelor of Commerce, Canterbury University New Zealand
Experience and expertise:
Bruce has many years of corporate experience across a broad spectrum of
commerce, including 16 years with Brierley Investments Limited in New
Zealand. He held a number of senior roles at Brierley Investments as general
manager and Chairman and served on the board of a number of their
subsidiaries in New Zealand, Australia and the US.
Bruce has been a financial advisor to interests of Mr Langley Walker since
2008. He serves as a director of investments and wealth management at
Walker Corporation and works with the Walker group of companies to pursue
investment opportunities outside the property market.
Other current directorships:
Director of Walker Group Holdings Pty Limited.
Former listed directorships
(last 3 years):
None
Name:
Title:
Daniel Spira
Independent Non-Executive Director
Special Responsibilities:
Chair, People, Culture and Remuneration Committee
Qualifications:
Bachelor of Commerce, University of New South Wales
Experience and expertise:
Daniel is the CEO of iNova Pharmaceuticals (since 2017), a leading
multinational consumer healthcare and pharmaceutical company with
operations across Asia Pacific and Africa. Previously he was at Bausch
Health (2011-2015) as Vice President and GM-North America (with
responsibility
for a portfolio of businesses spanning Vision Care,
Dermatology and Aesthetic Devices) and was also Managing Director,
Pacific region.
Prior to that, Daniel spent over 15 years at Johnson & Johnson Inc in various
roles including Vice President, Country Manager, Chief Marketing Officer
and other sales and marketing roles across the Asia Pacific, Europe/Middle
East and North American regions.
Other current directorships:
None
Former listed directorships
(last 3 years):
None
7
Next Science Limited
Directors' report
31 December 2022
Information on Directors (continued)
Name:
Title:
Aileen Stockburger
Independent Non-Executive Director
Special responsibilities:
Member, Audit and Risk Committee
Member, People, Culture and Remuneration Committee
Qualifications:
Experience and expertise:
Bachelor of Science and MBA, The Wharton School, University of
Pennsylvania, Graduate of the Australian Institute of Company Directors,
Certified Public Accountant (CPA – USA).
Prior to joining Next Science, Aileen was the Worldwide Vice President of
Business Development for the DePuy Synthes Group of Johnson & Johnson,
where she oversaw the group’s merger and acquisition activities, including
deal structuring, negotiations, contract design and review, and deal terms.
Aileen led Johnson & Johnson’s efforts to acquire Synthes for approximately
$21 billion, Johnson & Johnson’s largest medical device acquisition. She
also led the efforts to drive the DePuy Trauma business and acquire Micrus
Endovascular. Aileen was also involved in numerous other M&A transactions
including Pfizer Consumer Healthcare
(US$16.5 billion), Aveeno,
BabyCenter, OraPharma, DePuy, DePuy Miket, Kodak Clinical Diagnostics
and Neutrogena.
Other current directorships:
Non-Executive Director, Microbot Medical Inc. (NASDAQ: MBOT).
Non-Executive Director, Materna Medical Inc.
Non-Executive Director, Orchid Orthopedic Solutions
Non-Executive Director, ChemImage Corporation
Former listed directorships
(last 3 years):
None
8
Next Science Limited
Directors' report
31 December 2022
Company Secretary
Gillian Nairn, BA/LLB, LLM, FGIA, was appointed Company Secretary on 21 June 2018. Gillian is an experienced corporate
governance professional with more than 20 years legal and governance experience gained in private practice and in various
in-house and consulting company secretarial roles, predominantly with listed entities.
Meetings of directors
The number of meetings held and attended by each of the Directors of the Company during the year ended 31 December
2022 were as follows:
Name of director
Board meetings
Mark Compton
Judith Mitchell
Bruce Hancox
Daniel Spira
Aileen Stockburger
A
20
19
20
20
20
B
18
19
20
19
19
People, Culture &
Remuneration
Committee
B
A
3
3
-
-
-
-
3
3
3
3
Audit and Risk
Committee
A
8
-
8
-
8
B
8
-
8
-
8
A – Number of meetings held when Director was eligible to attend
B – Number of meetings attended during the time the Director held office
Directors’ interests
The relevant interest of each Director in shares, options and rights over such instruments issued by the Group, as notified by
the Directors to the ASX in accordance with section 205G(1) of the Corporations Act 2001 at the date of this report is as
follows:
Director
Mark Compton
Judith Mitchell
Bruce Hancox
Daniel Spira
Aileen Stockburger
Total
Fully paid ordinary shares
Number
171,920
6,420,000
564,482
752,172
44,837
7,953,411
Share options
Number
520,000
-
520,000
260,000
520,000
1,820,000
Shares under option
At the date of this report, there are 2,812,000 options over ordinary shares on issue (2021: 2,890,000 options), representing
1.31% (2021: 1.46%) of the Company’s undiluted total share capital, granted to employees and directors under an equity
incentive plan.
Indemnity and insurance of officers
The Group has indemnified the Directors and executives of the Group for costs incurred, in their capacity as a director or
executive, for which they may be held personally liable, except where there is a lack of good faith.
During the financial year, the Group has paid a premium in respect of a contract to insure the Directors and executives of the
Company against a liability to the extent permitted by the Corporations Act 2001. The contract of insurance prohibits disclosure
of the nature of the liability and the amount of the premium.
Indemnity and insurance of auditor
The Company and the Group have not, during or since the end of the financial year, indemnified or agreed to indemnify the
auditor of the Company or any related entity against a liability incurred by the auditor.
During the financial year, the Company has not paid a premium in respect of a contract to insure the auditor of the Company
or any related entity.
9
Next Science Limited
Directors' report
31 December 2022
Proceedings on behalf of the company
No person has applied to a court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of
the Company, or to intervene in any proceedings to which the Company is a party for the purpose of taking responsibility on
behalf of the Company for all or part of those proceedings.
Non-audit services
Details of the amounts paid or payable to the auditor for non-audit services provided during the financial year by the auditor
are outlined in note 34 to the financial statements.
The Directors are satisfied that the provision of non-audit services by the auditor during the financial year is compatible with
the general standard of independence for auditors imposed by the Corporations Act 2001.
The Directors are of the opinion that the services as disclosed in note 34 to the financial statements do not compromise the
external auditor’s independence requirements under the Corporations Act 2001 for the following reasons:
•
•
•
All non-audit services have been reviewed and approved to ensure that they do not impact the integrity and objectivity
of the auditor; and
The external auditor has declared to the Directors that to the best of the individual auditor's knowledge and belief,
there have been no contraventions of the auditor independence requirements of the Corporations Act and no
contraventions of any applicable code of professional conduct in relation to the half-year review.
The non-audit services provided do not undermine the general principles relating to auditor independence as set out
in APES 110 Code of Ethics for Professional Accountants (including Independence Standards), as they did not
involve reviewing or auditing the auditor’s own work, acting in a management or decision making capacity for the
Company, acting as an advocate for the Company or jointly sharing risks and rewards.
Officers of the Company who are former partners of KPMG
No officer of the Company was an audit partner of KPMG, being the auditors during the financial year, at a time when the
audit firm undertook an audit of the Company.
Auditor’s independence declaration
The auditor’s independence declaration is set out on page 23 and forms part of the Directors’ Report for the financial year
ended 31 December 2022.
Auditor
KPMG continues in office in accordance with section 327 of the Corporations Act 2001.
Remuneration Report (audited)
This Remuneration Report forms part of the Directors’ Report for the year ended 31 December 2022. This Report outlines the
details of the remuneration arrangements for the key management personnel of the Group, including remuneration strategy,
framework and practices, in accordance with the requirements of the Corporations Act 2001 and its Regulations.
For the purposes of this Report, key management personnel (KMP) are defined as those persons having authority and
responsibility for planning, directing and controlling the activities of the Group, directly or indirectly, including any Director of
the Company (non-executive or executive).
The information in this Remuneration Report is set out under the following headings:
• Key management personnel (KMP)
• Remuneration governance
• Service agreements and remuneration policy
• Non-Executive Directors’ remuneration
• Employee incentive arrangements and link between performance and reward
• Share option plans and performance rights over equity instruments
• KMP Remuneration
• KMP Equity Holdings
10
Next Science Limited
Directors' report
31 December 2022
Key management personnel (KMP)
The KMP of the Group during the financial year and the positions held are summarised below:
Non-Executive Directors
Mark Compton
Bruce Hancox
Daniel Spira
Aileen Stockburger
Managing Director
Judith Mitchell
Other KMP
Jacqueline Butler
Matthew Myntti
Jon Swanson
Dustin Haines
(Chief Financial Officer)
(Chief Technology Officer)
(Chief Operating Officer)
(Chief Commercial Officer) (Resigned and ceased to be a KMP on 20 April 2022)
Remuneration governance
The People, Culture and Remuneration Committee currently comprises of:
• Daniel Spira (Chair)
• Mark Compton
• Aileen Stockburger
The role and responsibilities, composition, structure and membership requirements of the People, Culture and Remuneration
Committee are documented
the People, Culture and Remuneration Committee Charter available at
www.nextscience.com/corp-governance.
in
The People, Culture and Remuneration Charter provides that the Committee should comprise at least three members, all of
whom are Non-Executive Directors and a majority of whom are independent Directors.
The Chair of the Committee should be an independent Director who is not Chair of the Board.
The Charter requires the Committee to meet at least twice each year.
All of the current members of the People, Culture and Remuneration Committee have been assessed by the Board as being
independent Non-Executive Directors and the Chair of the Committee is not Chair of the Board.
11
Next Science Limited
Directors' report
31 December 2022
Service agreements and remuneration policy
Executives are employed under executive employment agreements with the Group.
In determining remuneration, the Group considers:
industry based remuneration benchmaking (Australia and USA);
•
• market developments affecting remuneration practices;
•
•
•
•
the remuneration expectations of an executive whom the Company wants to employ;
future outlook for the Group and market generally;
the Company’s performance over a performance period; and
the link between remuneration and the successful implementation of the Company’s strategy and achievement of
strategic objectives.
Executive incentives comprise fixed and variable elements linked to Company and individual performance as detailed in this
Report.
Employment agreements
Name:
Judith Mitchell
Title:
Managing Director
Details:
Ongoing service agreement inclusive of superannuation and to be reviewed annually by the
Company.
The Company or employee may terminate the service agreement by giving 3-months’ notice
or pay in lieu of all or part of the notice period.
The Company may terminate without notice, in the event of serious misconduct or for any other
reason that enables summary dismissal at law.
Judith is entitled to participate in the Company’s short term and long-term incentive plans.
Name:
Title:
Details:
Jacqueline Butler
Chief Financial Officer (CFO)
Ongoing service agreement inclusive of superannuation and to be reviewed annually by the
Company.
The Company or employee may terminate the service agreement by giving 3-months’ notice
or pay in lieu of all or part of the notice period.
The Company may terminate without notice, in the event of serious misconduct or for any
other reason that enables summary dismissal at law.
Jacqueline is entitled to participate in the Company’s short term and long-term incentive
plans.
12
Next Science Limited
Directors' report
31 December 2022
Service agreements and remuneration policy (continued)
Employment agreements (continued)
Name:
Title:
Detail:
Dr Matthew Myntti
Chief Technology Officer (CTO)
Ongoing employment agreement to be reviewed annually by the Company.
The Company or employee may terminate the service agreement by giving 90 days written
notice.
The Company may terminate immediately for Cause as defined in the agreement.
Matthew is entitled to participate in the Company’s short term and long-term incentive plans.
Name:
Title:
Jon Swanson
Chief Operating Officer (COO)
Details:
Ongoing employment agreement to be reviewed annually by the Company.
The Company or employee may terminate the service agreement by giving 90 days written
notice.
The Company may terminate immediately for Cause as defined in the agreement.
Jon is entitled to participate in the Company’s short term and long-term incentive plans.
Name: Dustin Haines
Title:
Chief Commercial Officer (CCO)
Details:
Ongoing employment agreement to be reviewed annually by the Company.
The Company or employee may terminate the service agreement by giving 90 days written
notice.
The Company may terminate immediately for Cause as defined in the agreement.
Dustin is entitled to participate in the Company’s short term and long-term incentive plans.
Dustin’s employment agreement with Next Science ceased on 20 April 2022.
13
Next Science Limited
Directors' report
31 December 2022
Non-Executive Directors’ Remuneration
Each of the Non-Executive Directors have entered into appointment letters with Next Science confirming the terms of their
appointment and their roles and responsibilities.
Under the Constitution, the Board decides the amount paid to each Non-Executive Director as remuneration for their services
as a Director. However, the Constitution and the ASX Listing Rules stipulate that the total amount of fees paid to Non-Executive
Directors (excluding any special exertion fees) must not exceed the amount approved by the Company’s shareholders. This
amount has been fixed initially in the Company’s Constitution at A$750,000 per annum and may only be varied by ordinary
resolution in general meeting.
The annual fee for Non-Executive Directors is AUD$90,000 per annum (inclusive of superannuation) and for the Chair is
AUD$250,000 per annum (inclusive of superannuation). The Chair’s fees reflect the additional responsibilities of the role. An
additional fee of AUD$10,000 per annum is paid for performing the role of Chair of the Audit and Risk Committee or People,
Culture and Remuneration Committee. The Company paid special exertion fees to Aileen Stockburger during 2021 and 2022.
These exertions were to assist the Board in ensuring the Company’s activities in the US received appropriate oversight and
support.
Employee incentive arrangements and link between performance and reward
Short Term Incentive (STI) Plan for Executives
The Managing Director, CFO, CTO and COO were invited to participate in the Company’s short-term incentive plan (STI Plan),
effective from the Company’s admission to the ASX in April 2019. The CCO was invited to participate in the STI plan following
his appointment in June 2020.
Participants in the STI Plan, must be employed with the Company, or wholly owned subsidiary of the Company, for at least
six months during the Plan year and still be employed until after the announcement of the Group’s results to the ASX following
the relevant Plan year. Participation is by invitation from the Board and is not automatic. Participants who resign or are
terminated before the end of a Plan year are not eligible for any payments under the Plan unless the Board determines
otherwise, in its sole discretion.
The STI Plan objectives are to:
reward executives for their contribution in ensuring that the Group achieves its annual financial performance targets;
•
• enhance the Group’s opportunity to attract, motivate and retain high calibre and high performing executives; and
•
link part of executive remuneration directly to the achievement of Group and individual KPIs.
The making of any payment under the STI Plan is subject to the achievement of three gateway hurdles; at least 90% of a base
consolidated revenue target; 100% of a base consolidated EBITDA target; and an individual performance rating of at least 3
out of 5.
The maximum STI opportunity is 100% of Total Fixed Remuneration (TFR) for the Managing Director and 80% of TFR for the
CFO, CTO and COO. To receive the maximum STI opportunity, executives must achieve performance targets for consolidated
revenue, consolidated EBITDA and individual performance.
As a number of the members of the executive team already have significant security holdings in Next Science, any payments
under the STI Plan will be paid in cash to ensure that the STI opportunities operate as true incentives.
No STI payments were made in respect of the financial year ended 31 December 2022 (2021: Nil) as revenue and EBITDA
targets were not achieved.
Long-Term Incentive (LTI) Plan for Executives
At the time of the Company’s IPO in April 2019, the Board of the Company established a long-term incentive plan under which
incentives are issued in the form of Performance Rights to eligible participants (LTI Plan).
The terms of the LTI Plan with respect to future participation are currently under review. The details of the LTI Plan in this
Remuneration Report relate to the terms of the LTI Plan as they currently apply.
14
Next Science Limited
Directors' report
31 December 2022
Employee incentive arrangements and link between performance and reward (continued)
The Managing Director, CFO, COO and CCO, are entitled to participate in the LTI Plan. If Group performance hurdles are
achieved in the financial year ending 31 December 2022, and thereafter, the Managing Director has the opportunity to be
granted performance rights worth 200% of her Total Fixed Remuneration (TFR) and the other participants in the LTI Plan have
the opportunity to be granted performance rights worth 150% of their TFR.
The number of Performance Rights granted will be based on the volume weighted average price (VWAP) of shares in the
Company for the period 1 January until the day before the release on ASX of the Company’s relevant preliminary full year
results.
The vesting of Performance Rights issued under the LTI Plan is dependent on satisfaction of the following vesting conditions:
•
•
50% of Performance Rights will vest if the compound annual total shareholder return (TSR) is at least 15% per
annum; and
100% of Performance Rights will vest if the compound annual TSR is at least 30% per annum.
If compound TSR is less than 15% per annum, no Performance Right will vest.
Subject to vesting conditions being satisfied, Performance Rights automatically convert to shares, on a one-for one basis,
three years after the date on which they are granted. If vesting conditions have not been satisfied, the Performance Rights
will automatically lapse. Participants must be employed by the Company or a wholly owned subsidiary at the date of vesting.
No Performance Rights have been issued in relation to the financial year ending 31 December 2022 (2021: Nil) as vesting
conditions were not met.
The Company’s LTI Plan will operate in future years with grants based on the relevant revenue and/or other Group
performance measures. It is not intended to change the size of the grant to participants or the vesting conditions.
In recognition of the CCO’s extensive work in 2020 to prepare the Company for the launch of XPERIENCETM in 2021, and to
provide longer term upside opportunity to the CCO similar to that available to the other executive KMPs from the options
awarded to them prior to the Company’s admission to ASX, in February 2021, the Company granted the CCO USD$315,000
worth of performance rights. The vesting of the CCO’s performance rights was subject to continued tenure and was to be over
three years with 1/3 vesting in 1 year, 1/3 in 2 years and 1/3 in 3 years from the grant date. However, due to employment
ceasing on 20 April 2022 the performance rights in year 2 and 3 did not vest during the year.
Options and rights over equity instruments
Prior to the Company being admitted to the ASX, the Group established an Equity Incentive Plan (ECP) for US employees
and an Employee Share Option Plan (ESOP) for Australian employees and directors (see note 31). With the exception of the
Managing Director, Judith Mitchell, as described below, the only vesting condition applicable to the options granted under
these earlier plans was that the individual be employed by the Company, or any wholly owned subsidiary of the Company at
the vesting date.
There were no options over ordinary shares issued as compensation to KMP during the year ended 31 December 2022 (2021:
Nil). Details of the options over ordinary shares issued under the ECP or ESOP which were held by KMP as at 31 December
2022 are set out below:
KMP
Grant date
Expiry date
Vesting date
Fair value at grant date
Exercise price
(USD)
Pre-share
split (USD)
Post-share
split (USD)
Non-Executive
Directors
Mark Compton
Bruce Hancox
Daniel Spira
Aileen Stockburger
Other KMP
Jon Swanson
17 Dec 2018
17 Dec 2018
17 Dec 2018
17 Dec 2018
17 Dec 2023
17 Dec 2023
17 Dec 2023
17 Dec 2023
17 Dec 2021
17 Dec 2021
17 Dec 2021
17 Dec 2021
2,138
2,138
2,138
2,138
0.33
0.33
0.33
0.33
0.56
0.56
0.56
0.56
17 Dec 2018
17 Dec 2023
17 Dec 2020
2,138
0.33
0.56
15
Next Science Limited
Directors' report
31 December 2022
Options and rights over equity instruments (continued)
There were no rights over ordinary shares issued as compensation to KMP during the year ended 31 December 2022
(2021: 340,602).
The movement for the year ended 31 December 2022, in the number of rights and options over ordinary shares in Next
Science Limited held, directly, indirectly or beneficially, by each KMP, including their related parties was as follows:
KMP
Balance as
at 1 Jan
2022 No.
Granted
No.
Exercised
No.
Lapsed
No.
Balance
as at 31
Dec 2022
No.
Vested during
the year
Vested and
exercisable
No.
Un-vested
No.
Options
Executive Director
Judith Mitchell
-
Non-Executive
Directors
Bruce Hancox
Daniel Spira
Mark Compton
Aileen Stockburger
520,000
260,000
520,000
520,000
Other KMP
Matthew Myntti
Jon Swanson
Jacqueline Butler
Dustin Haines
-
650,000
-
-
Rights
Dustin Haines*
340,602
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
520,000
260,000
520,000
520,000
-
650,000
-
-
(113,534)
(227,068)
-
-
-
-
-
-
-
-
-
-
-
-
520,000
260,000
520,000
520,000
-
650,000
-
-
-
-
-
-
-
-
-
-
-
N/A
N/A
*Dustin Haines employment agreement with Next Science ceased on 20 April 2022
16
Next Science Limited
Directors' report
31 December 2022
Options and rights over equity instruments (continued)
The movement for the year ended 31 December 2021, in the number of rights and options over ordinary shares in Next
Science Limited held, directly, indirectly or beneficially, by each KMP, including their related parties was as follows:
KMP
Balance as
at 1 Jan
2021 No.
Granted
No.
Exercised
No.
Lapsed
No.
Balance
as at 31
Dec 2021
No.
Vested during
the year
Vested and
exercisable
No.
Un-vested
No.
Options
Executive Director
Judith Mitchell
2,340,000
Non-Executive
Directors
George Savvides
Bruce Hancox
Daniel Spira
Mark Compton
Aileen Stockburger
650,000
520,000
1,300,000
520,000
520,000
-
-
-
-
-
-
-
-
-
-
(1,560,000)
(780,000)
-
-
-
-
-
(1,040,000)
-
-
(650,000)
-
-
-
-
-
520,000
260,000
520,000
520,000
-
520,000
260,000
520,000
520,000
-
-
-
-
-
-
-
-
-
-
-
520,000
260,000
520,000
520,000
-
650,000
-
-
Other KMP
Matthew Myntti
Jon Swanson
Jacqueline Butler
Dustin Haines
Rights
Dustin Haines
-
650,000
650,000
-
-
-
(650,000)
-
-
-
-
-
-
-
650,000
-
-
340,602
-
-
-
-
-
-
340,602
-
N/A
340,602
Exercise of options granted as compensation
During the reporting period, there were no shares issued upon the exercise of options previously granted as compensation,
to KMP.
17
Next Science Limited
Directors' report
31 December 2022
Analysis of movements in rights
The value of rights over ordinary shares in the Company granted and exercised by each KMP during the reporting period is
detailed below.
KMP
Granted in year
$
Value of rights exercised in year
$
Dustin Haines
-
105,000
Details of equity incentives affecting current and future remuneration
KMP
Instrument Number
Grant date
Expiry date % vested
Financial
years in which
grant vests
Non-Executive
Directors
Mark Compton
Bruce Hancox
Aileen Stockburger
Daniel Spira
Other KMP
Jon Swanson
Options
Options
Options
Options
520,000
520,000
520,000
260,000
17 Dec 2018
17 Dec 2018
17 Dec 2018
17 Dec 2018
17 Dec 2023
17 Dec 2023
17 Dec 2023
17 Dec 2023
100%
100%
100%
100%
2021
2021
2021
2021
Options
650,000
17 Dec 2018
17 Dec 2023
100%
2020
18
Next Science Limited
Directors' report
31 December 2022
KMP Remuneration
The table below details the remuneration of the KMP based on the remuneration policies discussed in this report for the year
ended 31 December 2022.
Year ended 31 December 2022
KMP
(USD)
Cash salary
and fees
Other cash
service (i)
Long
service
Leave
Super-
annuati
on
$
$
$
$
Share-
based
payments
rights (ii)
$
Total
Performance
Related
(iii)
$
%
Executive Director
Judith Mitchell
Non-Executive
Directors
Mark Compton
Bruce Hancox
Daniel Spira
Aileen Stockburger
Other KMP
Matthew Myntti
Jon Swanson
Jacqueline Butler
Dustin Haines (iv)
264,444
173,466
62,941
67,768
79,868
-
-
-
-
-
6,717
16,922
-
-
-
-
-
6,446
1,619
-
-
-
-
-
-
288,083
173,466
69,387
69,387
79,868
359,962
264,571
207,427
103,474
1,583,921
6,650
609
38,925
46
46,230
-
-
4,630
-
11,347
-
-
16,926
-
41,913
-
-
-
8,750
8,750
366,612
265,180
267,908
112,270
1,692,161
-
-
-
-
-
-
-
-
-
-
(i)
Included in Jacqueline Butler’s Other cash services is an amount of $38,925 for cashed out annual leave.
Other cash services for Matthew Myntti, Jon Swanson and Dustin Haines includes motor vehicle allowance and/or
other minor benefits. For the year ended 31 December 2022 threshold Group performance targets were not met and
hence no amounts were awarded to KMP under the STI Plan.
(ii)
The fair value of the right is calculated at the date of grant using the 60 day volume weighted average price of Next
Science shares in the period immediately prior to the offer date. The rights disclosed is the portion of the fair value of
the rights recognised as an expense in the reporting period.
(iii)
Disclosed above are the relative proportions of each individual’s remuneration that are related to performance; the
remaining proportion being fixed remuneration.
(iv)
Dustin Haines employment agreement with Next Science ceased on 20 April 2022.
19
Next Science Limited
Directors' report
31 December 2022
KMP Remuneration (continued)
The table below details the remuneration of KMP for the year ended 31 December 2021.
Year ended 31 December 2021
KMP
(USD)
Cash salary
and fees (i)
Other cash
service (ii)
Long
service
Leave
Super-
annuati
on
Share-based payments
Total
Performance
Related
(v)
$
$
$
$
Options
(iii)
$
Rights (iv)
$
$
%
Executive Director
Judith Mitchell
Non-Executive
Directors
Mark Compton
Bruce Hancox
Daniel Spira
Aileen Stockburger
George Savvides
Other KMP
Matthew Myntti
Jon Swanson
Jacqueline Butler
Dustin Haines
283,239
144,570
68,388
73,385
83,860
66,493
-
-
-
-
-
-
3,696
17,051
(101,211)
-
-
-
-
-
-
6,663
1,667
-
-
71,729
71,729
35,865
71,729
(132,471)
-
-
-
-
-
-
202,775
216,299
146,780
110,917
155,589
(65,978)
350,000
254,155
198,231
320,235
1,842,556
6,516
651
-
106
7,273
-
-
3,126
-
6,822
-
-
16,990
-
42,371
-
-
-
-
17,370
-
-
-
96,250
96,250
356,516
254,806
218,347
416,591
2,012,642
-
-
-
-
-
-
-
-
-
-
(i) On 5 May 2021, George Savvides, AM retired as Chair and Mark Compton assumed the role of Chair.
(ii) Other cash service includes motor vehicle allowance and/or other minor benefits. For the year ended 31 December
2021 threshold Group performance targets were not met and hence no amounts were awarded to KMP under the STI
Plan.
(iii) The value of the share options granted to KMP is calculated at the grant date using the Black-Scholes formula. This
value is allocated to each reporting period evenly over the period from grant date to vesting date. The value disclosed
is the portion of the fair value of the options recognised as an expense in each reporting period. Certain tranches of
previous options awarded did not vest and lapsed during the year as vesting conditions were not met. In accordance
with Australian Accounting Standards previous expenses related to the lapsed portion of options were reversed in the
current year.
(iv) The fair value of the right is calculated at the date of grant using the 60 day volume weighted average price of Next
Science shares in the period immediately prior to the offer date. The rights disclosed is the portion of the fair value of
the rights recognised as an expense in the reporting period.
(v) Disclosed above are the relative proportions of each individual’s remuneration that are related to performance; the
remaining proportion being fixed remuneration.
20
Next Science Limited
Directors' report
31 December 2022
KMP equity holdings
The movement during the reporting period in the number of shares in Next Science Limited held directly, indirectly or
beneficially, by each KMP, including their related parties, is as follows:
Year ended 31 December 2022
KMP
Balance as at
1 Jan 2022
No.
Received on
exercise of
options/rights
No.
Other changes
during the year
No.*
Balance on
termination
Balance as at 31
Dec 2022 No.
Executive Director
Judith Mitchell
Non-Executive
Directors
Mark Compton
Bruce Hancox
Daniel Spira
Aileen Stockburger
Other KMP
Matthew Myntti
Jon Swanson
Jacqueline Butler
Dustin Haines
6,560,000
137,438
530,000
723,437
44,837
13,354,989
50,000
410,196
-
-
-
-
-
-
(140,000)
34,482
34,482
28,735
-
-
-
-
-
-
-
-
-
113,534**
(1,411,020)
-
-
(40,000)
-
-
-
73,534
6,420,000
171,920
564,482
752,172
44,837
11,943,969
50,000
410,196
N/A
* Other changes represent shares that were purchased, sold or transferred to another party during the year.
** Dustin Haines employment agreement with Next Science ceased on 20 April 2022.
21
Next Science Limited
Directors' report
31 December 2022
KMP equity holdings (continued)
Year ended 31 December 2021
KMP
Balance as at
1 Jan 2021
No.
Received on
exercise of
options
No.
Other changes
during the year
No.*
Balance as at 31
Dec 2021 No.
Executive Director
Judith Mitchell
Non-Executive
Directors
Mark Compton
Bruce Hancox
Daniel Spira
Aileen Stockburger
George Savvides
Other KMP
Matthew Myntti
Jon Swanson
Jacqueline Butler
Dustin Haines
5,000,000
1,560,000
-
6,560,000
137,438
530,000
49,266
44,837
649,876
20,657,000
70,000
-
-
-
-
1,040,000**
-
-
-
-
(365,829)
-
(180,000)
-
-
650,000**
-
(7,302,011)***
(20,000)
(239,804)
-
137,438
530,000
723,437
44,837
469,876
13,354,989
50,000
410,196
-
* Other changes represent shares that were purchased, sold or transferred to another party during the year.
** In respect of these options, in order to facilitate the exercise of these options the Company provided a short term loan to
the option holder which was repaid within 15 days.
*** As announced to ASX on 6 September 2021
This concludes the remuneration report (audited).
This report is made in accordance with a resolution of directors, pursuant to section 298(2)(a) of the Corporations Act 2001.
On behalf of the directors:
Mark Compton, AM
Chair
Dated at Sydney 28 February 2023
22
Lead Auditor’s Independence Declaration under
Section 307C of the Corporations Act 2001
To the Directors of Next Science Limited
I declare that, to the best of my knowledge and belief, in relation to the audit of Next Science Limited
for the financial year ended 31 December 2022 there have been:
i.
ii.
No contraventions of the auditor independence requirements as set out in the
Corporations Act 2001 in relation to the audit; and
No contraventions of any applicable code of professional conduct in relation to the audit.
KPMG
Kevin Leighton
Partner
Sydney
28 February 2023
KPMG, an Australian partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG
International Limited, a private English company limited by guarantee. All rights reserved. The KPMG name and logo are trademarks used
under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under
Professional Standards Legislation.
23
Next Science Limited
Consolidated statement of profit or loss and other comprehensive income
For the year ended 31 December 2022
Revenue
Cost of sales
Gross profit
Other income
Selling and distribution expenses
Research and development expenses
Administration expenses
Other expenses
Operating loss
Finance income
Finance costs
Net finance income
Consolidated
Note
2022
$
2021
$
5
11,712,722
(2,563,024)
8,947,591
(2,007,469)
6
8
9,149,698
6,940,122
37,870
147,112
(10,310,205)
(6,149,806)
(5,385,006)
(45,558)
(7,394,871)
(5,046,875)
(4,105,918)
(15,633)
(12,703,007)
(9,476,063)
10
11
48,298
(28,603)
19,695
142,900
(16,476)
126,424
Loss before income tax expense
(12,683,312)
(9,349,639)
Income tax expense
12
-
-
Loss after income tax expense for the year
(12,683,312)
(9,349,639)
Other comprehensive loss
Items that may be reclassified subsequently to profit or loss
Foreign currency translation differences
Other comprehensive loss for the year, net of tax
Total comprehensive loss for the year
(556,734)
(547,407)
(556,734)
(547,407)
(13,240,046)
(9,897,046)
Cents
Cents
Basic earnings per share
Diluted earnings per share
35
35
(6.03)
(6.03)
(4.75)
(4.75)
The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the
accompanying notes
24
Next Science Limited
Consolidated statement of financial position
As at 31 December 2022
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Other current assets - term deposits
Other current assets - other
Total current assets
Non-current assets
Trade and other receivables
Property, plant and equipment
Right-of-use assets
Intangible assets
Total non-current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Contract liabilities
Lease liabilities
Employee benefits
Total current liabilities
Non-current liabilities
Contract liabilities
Lease liabilities
Employee benefits
Total non-current liabilities
Total liabilities
Net assets
Equity
Share capital
Reserves
Accumulated losses
Total equity
Consolidated
Note
2022
$
2021
$
13
14
15
16
17
14
18
20
19
21
22
23
24
22
23
24
5,073,625
1,738,923
871,266
37,789
541,506
7,000,869
887,211
1,500,522
367,129
476,049
8,263,109 10,231,780
36,656
696,848
1,053,113
2,409,930
4,196,547
36,656
683,562
232,456
2,532,491
3,485,165
12,459,656 13,716,945
1,979,346
274,902
257,912
94,811
2,606,971
1,172,996
91,177
166,235
109,611
1,540,019
824,706
962,060
30,194
1,816,960
1,283,334
109,802
17,295
1,410,431
4,423,931
2,950,450
8,035,725 10,766,495
25
26
113,526,533 102,921,007
(41,709,310)
(50,445,202)
(42,362,294)
(63,128,514)
8,035,725 10,766,495
The above consolidated statement of financial position should be read in conjunction with the accompanying notes
25
Next Science Limited
Consolidated statement of changes in equity
31 December 2022
Balance at 1 January 2022
Loss for the year
Other comprehensive income
Foreign currency translation differences
Total other comprehensive loss
Total comprehensive loss for the year
Transactions with owners in their capacity as owners
Share-based payments
Performance rights converted to shares on vesting
Issue of ordinary shares
Capital raising costs
Total transactions with owners
Balance at 31 December 2022
Common
control
reserve
$
Foreign
currency
translation
reserve
$
Share capital
$
Share option
reserve
$
Performance
rights
reserve
$
Accumulated
losses
$
Total equity
$
102,921,007 (42,596,715)
-
-
(1,349,143)
-
2,140,298
-
96,250 (50,445,202) 10,766,495
(12,683,312)
(12,683,312)
-
-
-
-
-
105,000
10,886,160
(385,634)
10,605,526
-
-
-
-
-
-
-
-
(556,734)
(556,734)
(556,734)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(556,734)
(556,734)
(12,683,312)
(13,240,046)
8,750
(105,000)
-
-
(96,250)
-
-
-
-
-
8,750
-
10,886,160
(385,634)
10,509,276
113,526,533
(42,596,715)
(1,905,877)
2,140,298
-
(63,128,514)
8,035,725
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes
26
Next Science Limited
Consolidated statement of changes in equity
31 December 2022
Balance at 1 January 2021
Loss for the year
Other comprehensive income
Foreign currency translation differences
Total other comprehensive loss
Total comprehensive loss for the year
Transactions with owners in their capacity as owners
Share-based payments
Foreign exchange impact
Issue of ordinary shares
Capital raising costs
Total transactions with owners
Balance at 31 December 2021
Common
control
reserve
$
Foreign
currency
translation
reserve
$
Share capital
$
Share option
reserve
$
Performance
rights
reserve
$
Accumulated
losses
$
Total equity
$
101,281,467 (42,596,715)
-
-
(801,736)
-
2,125,541
-
- (41,095,563) 18,912,994
(9,349,639)
-
(9,349,639)
-
-
-
-
-
1,645,770
(6,230)
1,639,540
-
-
-
-
-
-
-
-
(547,407)
(547,407)
(547,407)
-
-
-
-
-
-
-
(547,407)
(547,407)
-
(9,349,639)
(9,897,046)
-
-
-
-
-
17,370
(2,613)
-
-
96,250
-
-
-
14,757
96,250
-
-
-
-
-
113,620
(2,613)
1,645,770
(6,230)
1,750,547
102,921,007 (42,596,715)
(1,349,143)
2,140,298
96,250 (50,445,202) 10,766,495
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes
27
Next Science Limited
Consolidated statement of cash flows
For the year ended 31 December 2022
Operating activities
Receipts from customers
Payments to suppliers and employees
Payments for research and development
Interest received
COVID-19 government assistance and other income
Consolidated
Note
2022
$
2021
$
10,657,495
(20,464,045)
(2,033,830)
12,720
37,890
9,512,635
(16,268,131)
(1,672,278)
16,515
146,905
10
Net cash used in operating activities
13
(11,789,770)
(8,264,354)
Investing activities
Payments for property, plant and equipment
Payments for intangible assets
18
19
(88,972)
(386,744)
(140,492)
(576,266)
Net cash used in investing activities
(475,716)
(716,758)
Financing activities
Proceeds from issue of ordinary shares
Proceeds from conversion of options to ordinary shares
Capital raising costs
Payment of lease liabilities
Net cash from financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year (including bank
term deposits)
Effects of exchange rate changes on cash and cash equivalents
25
25
25
10,853,400
32,760
(385,634)
(253,229)
-
1,645,770
(6,230)
(212,759)
10,247,297
1,426,781
(2,018,189)
(7,554,331)
7,367,998
(238,395)
15,339,402
(417,073)
Cash and cash equivalents at the end of the financial year (including bank
term deposits)
5,111,414
7,367,998
Less bank term deposits classified as other current assets
Cash and cash equivalents at end of the year
16
13
(37,789)
5,073,625
(367,129)
7,000,869
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes
28
Next Science Limited
Notes to the consolidated financial statements
31 December 2022
Note 1. Corporate information
Next Science Limited (the "Company") is a company domiciled in Australia.
The Group is a for‑profit entity and primarily involved in the research, development and commercialisation of technologies
which solve bacterial related issues.
These consolidated financial statements comprise the Company and its subsidiaries (collectively the "Group" and individually
"Group companies") for the year ended 31 December 2022 and comparative information for the year ended 31 December
2021.
Note 2. Basis of preparation
Statement of compliance
The consolidated financial statements are general purpose financial statements which have been prepared in accordance
with accounting standards adopted by the Australian Accounting Standards Board ("AASB") and the Corporations Act 2001.
The consolidated financial statements comply with International Financial Reporting Standards ("IFRS") adopted by the
International Accounting Standards Board ("IASB").
The financial statements were approved by the Board of Directors and authorised for issue on ____________ 2023.
Basis of measurement
The financial statements have been prepared on a historical cost basis unless otherwise stated.
Functional and presentation currency
The financial statements are presented in United States Dollars, which is the Group’s presentation currency. Entities within
the Group hold functional currencies of AUD or USD as appropriate to the individual entity.
Use of judgements and estimates
In preparing these financial statements, management has made judgements, estimates and assumptions that affect the
application of the Group’s accounting policies and the reported amounts of assets, liabilities, income, expenses and
disclosure of contingent liabilities. Actual results may differ from these estimates. Estimates and underlying assumptions are
reviewed on an ongoing basis. Revisions to accounting estimates are recognised prospectively.
The key judgements, estimates and assumptions are discussed below:
Impairment of non‑financial assets
The Group assesses impairment of non‑financial assets at each reporting date by evaluating conditions specific to the Group
and to the particular asset that may lead to impairment. This involves value‑in‑use calculations, which incorporate a number
of key estimates and assumptions.
Recoverable amount being the net amount of discounted future cash flows materially exceeds the carrying value of
non‑current assets. The recoverable amount of these cash generating units, at balance date, was estimated based on its
value in use.
Value in use for the cash‑generating units ('CGU') was determined by discounting the future cashflows to be generated from
the CGUs and is based on the following key assumptions:
●
●
●
●
Cashflows were projected based on forecast operating results over a 5 year period plus a terminal value.
Average annual revenue growth rates and approved budgets were used for revenue projections.
The pre-tax discount rates of 12% - 15% based on the weighted average cost of capital.
Changes in key assumptions would impact recoverable amount calculations.
29
Next Science Limited
Notes to the consolidated financial statements
31 December 2022
Note 2. Basis of preparation (continued)
Estimation of useful lives of assets
The consolidated entity determines the estimated useful lives and related depreciation and amortisation charges for its
property, plant and equipment and finite life intangible assets. The useful lives could change significantly as a result of
technical innovations or some other event. The depreciation and amortisation charge will increase where the useful lives are
less than previously estimated lives, or technically obsolete or non‑strategic assets that have been abandoned or sold will
be written off or written down and the incremental borrowing rate is estimated.
Recovery of deferred tax assets
Deferred tax assets for tax losses are only recognised if the Group considers it is probable that future taxable amounts will
be available to utilise those tax losses against.
Going concern
The financial report has been prepared on a going concern basis, which assumes continuity of normal business activities
and the realisation of assets and settlement of liabilities in the ordinary course of business for a period of at least twelve
months from the date this financial report is approved.
For the financial year ended 31 December 2022, the Group incurred a loss of $12,683,312 and had net cash outflows from
operations of $11,789,770. As at 31 December 2022, the Group had net current asset and net asset positions of $5,656,138
and $8,035,725 respectively.
The Group continues to reflect on the potential continued impacts of COVID‑19 which primarily are expected to affect revenue
due to the difficulty in accessing end customers and/or the ability for elective surgeries to be performed in selected markets.
The Group has also considered the impacts the launch of the DME business will have on cash inflows via reimbursements
from Medicare/Medicaid and other insurance providers and has modelled a range of scenarios for going concern purposes.
The Group considers that its cash and term deposits totalling $5,111,414 at 31 December 2022, together with the cash
received from the issue of A$10,000,000 Secured Convertible Notes to major shareholder, Walker Group Holdings Pty Ltd,
following approval at the shareholder meeting on 2 February 2023 as well as potential cost management initiatives are
sufficient to enable the Group to continue as a going concern for the foreseeable future, being at least twelve months from
the date of signing this financial report.
Note 3. Significant accounting policies
The Group has consistently applied the following accounting policies to all periods in these financial statements.
Parent entity information
In accordance with the Corporations Act 2001, these financial statements present the results of the Group only.
Supplementary information about the parent entity is disclosed in note 28.
Basis of consolidation
(i) Business combinations
The Group accounts for business combinations using the acquisition method when control is transferred to the Group, unless
it is a combination involving entities or businesses under common control. 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 on 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.
Common control transactions record assets and liabilities acquired at their book value at the date of acquisition, rather than
their fair value. The difference between the fair value of the consideration given and the carrying value of the assets and
liabilities acquired is recognised as a common control reserve.
The consideration transferred does not include amounts related to the settlement of pre‑existing relationships. Such amounts
are generally recognised in profit or loss.
30
Next Science Limited
Notes to the consolidated financial statements
31 December 2022
Note 3. Significant accounting policies (continued)
(ii) 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. The
financial statements of subsidiaries are included in the consolidated financial statements from the date on which control
commences until the date on which control ceases.
(iii) 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 interest 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.
(iv) Transactions eliminated on consolidation
Intra‑group balances and transactions, and any unrealised income and expenses arising from intra‑group transactions, are
eliminated. Unrealised gains arising from transactions with equity‑accounted investees are eliminated against the investment
to the extent of the Group’s interest in the investee. Unrealised losses are eliminated in the same way as unrealised gains,
but only to the extent that there is no evidence of impairment.
Foreign currency
(i) Foreign currency transactions
Transactions in foreign currencies are translated to the functional currency of the Group at exchange rates at the dates of
the transactions.
Monetary assets and liabilities denominated in foreign currencies are translated into the functional currency at the exchange
rate at the reporting date. Non‑monetary assets and liabilities that are measured at fair value in a foreign currency are
translated into the functional currency at the exchange rate when the fair value was determined. Non‑monetary items that
are measured based on historical cost in a foreign currency are translated at the exchange rate at the date of the transaction.
Foreign currency differences are generally recognised in profit or loss and presented within finance costs.
(ii) Foreign currency operations
The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are
translated into the presentation currency at the exchange rates at the reporting date. The income and expenses of foreign
operations are translated into the functional currency at the average exchange rates for the period, unless exchange rates
fluctuated significantly during that period, in which case the exchange rates at the dates of the transaction are used.
Foreign currency differences are recognised in equity and accumulated in the translation reserve.
Revenue from contracts with customers
Revenue from contracts with customers is recognised when a customer obtains control of the goods or services and when
performance obligations have been satisfied assessing the following criteria:
(i) Identification of distinct elements and separate performance obligations
In the case where the customer contract includes a sublicense and transfer of goods, the assessment must be made as to
whether a separate performance obligation exists for each element. For current contracts held, whilst a license to specific IP
has been given related to the Group’s product, this only includes rights to distribute, not to use the IP to manufacture the
product. Therefore, the licence transferred is not deemed to be a distinct element of the contract and only one performance
obligation exists to transfer product to the distributor.
(ii) Transfer of goods
Title and control pass to some of Next Science's customers at the point when the Group fulfils its obligation to deliver, and
goods are available at the customer’s premises. For these customers, the performance obligation (including the license)
transfers at the point in time when each good is delivered. Therefore, revenue is recognised at the point in time when the
product is delivered. For other customers (including DME patients), title and control pass when the product is delivered to
the courier, with revenue being recognised at this point in time.
31
Next Science Limited
Notes to the consolidated financial statements
31 December 2022
Note 3. Significant accounting policies (continued)
(iii) Measurement of transaction price
Consideration of the contract can comprise a fixed element (upfront payment plus minimum annual purchase amounts) and
variable elements (milestone payments).
Under AASB 15 the variable consideration is only included in the transaction price if it is ‘highly probable that a significant
reversal in the amount of cumulative revenue recognised will not occur’.
In the case where milestone payments are received upon signing the contract and are not subject to regulatory approval,
these amounts will be initially recognised as contract liabilities to be recognised over the life of the contract once product
sales have commenced. However, where the milestone payments are subject to regulatory approval, for the variable
consideration to be deemed ‘most likely’, this will only be included once regulatory approval has been received and
recognised over the remaining life of the contract.
For the new DME business which commenced mid October 2022, revenue is recognised when the cash reimbursement
amount is received and an estimate is made of amounts to be recognised in relation to debtor balances owing from Medicare.
(iv) Change in estimate
On 23rd November 2020, Next Science announced to the ASX that the distribution agreement with 3M for Blast‑X, would not
be renewed at the end of 2021 and that Blast X would be transitioned back to Next Science in the first half of 2021.
As a result of the non‑renewal of the 3M contract, a change has been made to the time frame for recognition of the
performance obligation in relation to the milestone payments received from 3M. The milestone payments would previously
have been recognised as revenue over the period until the end of the 3M contract on 31 December 2021. The milestone
payments have now been recognised as revenue over a shorter time period ending 1H 2021, as the transition of Blast‑X
back to Next Science was completed during 1H 2021.
In January 2022, Next Science and Zimmer, Inc revised the term of their existing distribution agreement for Bactisure™. The
term will now end on 31 December 2026 with Zimmer, Inc having the option to extend the distribution agreement for an
additional five‑year period by providing 6 months’ prior written notice. As a result of this amendment, there has been a change
in the time frame for recognition of the performance obligation in relation to milestone payments previously received from
Zimmer, Inc. The milestone payments which previously would have been recognised as revenue over the period until the
end of the contract period of 28 February 2037, will now be recognised as revenue over a shorter time period ending 31
December 2026.
Government grants
Government grants are recognised where there is reasonable assurance that the grant will be received and all attached
conditions will be complied with. When the grant relates to an expense item, it is recognised as income on a systematic basis
over the periods that the related costs, for which it is intended to compensate, are expensed. When the grant relates to an
asset, it is recognised as income in equal amounts over the expected useful life of the related asset.
Finance income and finance costs
Finance income comprises interest income, dividend income and foreign currency gains. Interest income is recognised in
profit or loss as it accrues using the effective interest method.
The ‘effective interest rate’ is the rate that exactly discounts estimated future cash payments or receipts through the expected
life of the financial instruments to the gross carrying amount of the financial asset or the amortised cost of the financial asset.
In calculating income and expense, the effective interest rate is applied to the gross carrying amount of the asset (when the
asset is not credit‑impaired) or to the amortised cost of the liability. However, for financial assets that have become
credit‑impaired subsequent to initial recognition interest income is calculated by applying the effective interest rate to the
amortised cost of the financial asset. If the asset is no longer credit impaired, then the calculation of interest income reverts
to the gross basis.
32
Next Science Limited
Notes to the consolidated financial statements
31 December 2022
Note 3. Significant accounting policies (continued)
Finance costs comprise interest expense on borrowings, lease liabilities and converting notes, foreign currency losses and
impairment losses recognised on financial assets. Foreign exchange gains and losses on intercompany assets and liabilities
that are not eliminated upon consolidation are recognised in OCI. Borrowing costs that are not directly attributable to the
acquisition, construction or production of a qualifying asset are recognised in profit or loss using the effective interest method.
Interest expenses includes interest in relation to lease liabilities and is calculated based on the bank borrowing rate as
appropriate for the lease contract, with a range of 3.5% to 4.6% on current leases held.
Foreign currency gains and losses are reported on a net basis as either finance income or finance cost depending on whether
foreign currency movements are in a net gain or net loss position.
Income tax
Income tax expense comprises current and deferred tax. It is recognised in profit or loss except to the extent that it relates
to a business combination, or items recognised directly in equity or in OCI.
The amount of current tax payable or receivable is the best estimate of the tax amount expected to be paid or received.
(i) Current tax
Current tax comprises the expected tax payable or receivable on the taxable income or loss for the year and any adjustment
to tax payable or receivable in respect of previous years. It is measured using tax rates enacted or substantively enacted at
the reporting date. Current tax also includes any tax liability arising from dividends.
Current tax assets and liabilities are offset only if certain criteria are met.
(ii) Deferred tax
Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for temporary
differences on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects
neither accounting nor taxable profit or loss, or on taxable temporary differences arising on the initial recognition of goodwill.
Deferred tax assets are recognised for unused tax losses, tax credits and deductible temporary differences, to the extent
that it is probable that future taxable profits will be available against which they can be utilised. Deferred tax assets are
reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be
realised; such reductions are reversed when the probability of future taxable profits improves.
Unrecognised deferred tax assets are reassessed at each reporting date and recognised to the extent that it has become
probable that future taxable profits will be available against which they can be used.
Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, using
tax rates enacted or substantively enacted at the reporting date.
The measurement of deferred tax reflects the tax consequences that could follow the manner in which the Group expects,
at the reporting date, to recover or settle the carrying amount of its assets and liabilities.
Deferred tax assets and liabilities are offset only if certain criteria are met.
Current and non-current classification
Assets and liabilities are presented in the statement of financial position based on current and non-current classification.
An asset is classified as current when: it is either expected to be realised or intended to be sold or consumed in the Group's
normal operating cycle; it is held primarily for the purpose of trading; it is expected to be realised within 12 months after the
reporting period; or the asset is cash or cash equivalent unless restricted from being exchanged or used to settle a liability
for at least 12 months after the reporting period. All other assets are classified as non-current.
33
Next Science Limited
Notes to the consolidated financial statements
31 December 2022
Note 3. Significant accounting policies (continued)
A liability is classified as current when: it is either expected to be settled in the Group's normal operating cycle; it is held
primarily for the purpose of trading; it is due to be settled within 12 months after the reporting period; or there is no
unconditional right to defer the settlement of the liability for at least 12 months after the reporting period. All other liabilities
are classified as non-current.
Deferred tax assets and liabilities are always classified as non-current.
Cash and cash equivalents
Cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short‑term, highly
liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and
which are subject to an insignificant risk of changes in value. For the statement of cash flows presentation purposes, cash
and cash equivalents also includes bank overdrafts, which are shown within borrowings in current liabilities on the statement
of financial position.
Trade and other receivables
Trade receivables are initially recognised at fair value and subsequently measured at amortised cost using the effective
interest method, less any allowance for expected credit losses. Trade receivables are generally due for settlement within 30
days.
The Group has applied the simplified approach to measuring expected credit losses, which uses a lifetime expected loss
allowance. To measure the expected credit losses, trade receivables have been grouped based on days overdue.
Other receivables are recognised at amortised cost, less any allowance for expected credit losses.
Inventories
Inventories are measured at the lower of cost and net realisable value. The cost of inventories is based on the first in, first
out principle.
Property, plant and equipment
(i) Recognition and measurement
Items of property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment
losses. Cost includes expenditure that is directly attributable to the acquisition of the asset. If significant parts of an item of
property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of
property, plant and equipment.
An item of property, plant and equipment is derecognised upon disposal or when there is no future economic benefit to the
consolidated entity. Gains and losses between the carrying amount and the disposal proceeds are taken to profit or loss.
Any revaluation surplus reserve relating to the item disposed of is transferred directly to retained profits.
(ii) Subsequent expenditure
Subsequent expenditure is capitalised only when it is probable that the future economic benefits associated with the
expenditure will flow to the Group.
(iii) Depreciation
Depreciation is calculated based on the cost of property, plant and equipment less their estimated residual values using the
straight‑line basis over their estimated useful lives, and is generally recognised in profit or loss. Right‑of‑use assets are
depreciated over the shorter of the lease term and their useful lives unless it is reasonably certain that the Group will obtain
ownership by the end of the lease term. Land is not depreciated.
34
Next Science Limited
Notes to the consolidated financial statements
31 December 2022
Note 3. Significant accounting policies (continued)
The estimated useful lives of property, plant and equipment are as follows:
Fixed asset class
Leasehold improvements
Plant and equipment
Furniture and fittings
Useful life
5-15 years
5 years
5 years
Depreciation methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate.
Right-of-use assets
A right-of-use asset is recognised at the commencement date of a lease. The right-of-use asset is measured at cost, which
comprises the initial amount of the lease liability, adjusted for, as applicable, any lease payments made at or before the
commencement date net of any lease incentives received, any initial direct costs incurred, and, except where included in the
cost of inventories, an estimate of costs expected to be incurred for dismantling and removing the underlying asset, and
restoring the site or asset.
Right-of-use assets are depreciated on a straight-line basis over the unexpired period of the lease or the estimated useful
life of the asset, whichever is the shorter. Where the Group expects to obtain ownership of the leased asset at the end of the
lease term, the depreciation is over its estimated useful life. Right-of use assets are subject to impairment or adjusted for
any remeasurement of lease liabilities.
The Group has elected not to recognise a right‑of‑use asset and corresponding lease liability for short‑term leases with terms
of 12 months or less and leases of low‑value assets. Lease payments on these assets are expensed to profit or loss as
incurred.
Intangible assets
(i) Recognition and measurement
Research and development expenditure
Expenditure on research activities is recognised in profit or loss as incurred. Development expenditure is capitalised only if
development costs can be measured reliably, the product or process is technically and commercially feasible, future
economic benefits are probable, and the Group intends to and has sufficient resources to complete development and to use
or sell the asset. Otherwise, it is recognised in profit or loss as incurred. Subsequent to initial recognition, development
expenditure is measured at cost less accumulated amortisation and any accumulated impairment losses.
Patents
Expenditure is capitalised in relation to patent application costs and amortised over the remaining life of the base patent as
relevant. Costs will be no longer capitalised in the event that a patent application is no longer being pursued with any existing
capitalised costs being impaired as an expense in the profit or loss.
Computer software
Computer software comprises computer application system software and licenses. Costs incurred in developing products or
systems and costs incurred in acquiring software and licenses that will contribute to future period financial benefits through
revenue generation and/or cost reduction are capitalised to computer software. Costs capitalised include external direct costs
of materials and services, direct payroll and payroll‑related costs.
(ii) Subsequent expenditure
Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the specific asset to
which it relates. All other expenditure, including expenditure on internally generated goodwill and brands, is recognised in
profit or loss as incurred.
(iii) Amortisation
Amortisation is calculated based on the cost of intangible assets less their estimated residual values using the straight‑line
method over their estimated useful lives and is generally recognised in profit or loss.
35
Next Science Limited
Notes to the consolidated financial statements
31 December 2022
Note 3. Significant accounting policies (continued)
The estimated useful lives of intangible assets are as follows:
●
●
●
Development expenditure: 5 years
Computer software: 2-3 years
Patents: 8-15 years
Amortisation methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate.
Intangible assets, other than trademarks and goodwill, have finite useful lives.
Trade and other payables
These amounts represent liabilities for goods and services provided to the Group prior to the end of the financial year and
which are unpaid. Due to their short-term nature, they are measured at amortised cost and are not discounted. The amounts
are unsecured and are usually paid within 30 days of recognition.
Contract liabilities
Contract liabilities represent the Group's obligation to transfer goods or services to a customer and are recognised when a
customer pays consideration, or when the Group recognises a receivable to reflect its unconditional right to consideration
(whichever is earlier) before the Group has transferred the goods or services to the customer.
Leases
(i) Definition of a new lease
The determination of whether a contract contains a lease is on the basis of whether the customer has the right to control the
use of an identified asset for a period of time in exchange for consideration. The Group has applied this definition to all lease
contracts currently held.
(ii) Lessee accounting
For all contracts determined to constitute a lease, right-of-use assets and lease liabilities are recognised in the consolidated
statement of financial position, initially measured at the present value of future lease payments. When measuring these lease
liabilities, the Group discounted lease payments using the interest rate implicit in the lease contract.
Right-of-use assets are tested for impairment in accordance with AASB 136 Impairment of assets. Lease incentives, if
relevant, are recognised as part of the measurement of the right-of-use assets and lease liabilities. Depreciation is expensed
on right-of-use assets and interest on lease liabilities, both recognised in the consolidated statement of profit or loss.
For presentation purposes, the total amount of cash paid in relation to leases is separated into a principal portion (presented
within financial activities) and interest on lease liabilities, both recognised in the consolidated statement of profit or loss.
For short‑term leases (lease term of 12 months or less) and leases of low‑value assets, the Group has opted to recognise a
lease expense on a straight‑line basis. This expense is presented within other expenses in the consolidated statement of
profit or loss.
Provisions
A provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation that can be
estimated reliably and if it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions
are determined by discounting the expected future cash flows at a pre‑tax rate that reflects current market assessments of
the time value of money and the risks specific to the liability. The unwinding of the discount is recognised as a finance cost.
Employee benefits
(i) Short-term employee benefits
Short‑term employee benefits are benefits (other than termination benefits) that are expected to be settled within 12 months
of the end of the financial year in which employees render the related service. Short‑term employee benefits include salaries
and wages plus related on‑costs such as payroll tax, superannuation and workers compensation insurance and are
measured at the undiscounted amounts expected to be paid when the obligation is settled.
36
Next Science Limited
Notes to the consolidated financial statements
31 December 2022
Note 3. Significant accounting policies (continued)
(ii) Long-term employee benefits
Long-term employee benefits include employees' long service leave and annual leave entitlements not expected to be settled
within 12 months of the end of the financial year in which employees render the related service. Other long-term employee
benefits are measured at the present value of the expected future payments to be made to employees. Expected future
payments incorporate anticipated future wage and salary levels, duration of service and employee departures and are
discounted at rates determined by reference to market yields at the end of the reporting period on corporate bonds that have
maturity dates that approximate the terms of the obligations. Any remeasurements for changes in assumptions of obligations
for long-term employee benefits are recognised in profit or loss in the periods in which the changes occur.
(iii) Defined contribution plans
A defined contribution plan is a post-employment benefit plan under which an entity pays fixed contributions into a separate
entity and will have no legal or constructive obligation to pay further amounts. Obligations for contributions to employees'
defined contribution plans are recognised as an expense as the related service is provided. Prepaid contributions are
recognised as an asset to the extent that a cash refund or a reduction in future payments is available.
(iv) Share-based payment arrangements
The fair value of performance rights and options granted is recognised as an employee expense with a corresponding
increase in equity, on a straight-line monthly basis over the vesting period in which the performance and/or service conditions
are fulfilled after which the employee becomes unconditionally entitled to them. 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 ended
and the Group’s best estimate of the number of equity instruments that will ultimately vest. The 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.
Financial instruments
(i) Recognition and initial measurement
The Group initially recognises trade receivables issued on the date that they are originated. All other financial assets and
financial liabilities are recognised initially on the trade date.
(ii)Classification and subsequent measurement
Financial assets
On initial recognition, a financial asset is classified as measured at amortised cost or fair value through profit or loss
(“FVTPL”).
Financial assets at amortised cost are subsequently measured at amortised cost using the effective interest method. The
amortised cost is reduced by impairment losses. Interest income, foreign exchange gains and losses and impairment are
recognised in profit or loss. Any gain or loss on derecognition is recognised in profit or loss.
Financial assets at FVTPL are subsequently measured at fair value. Net gains and losses, including any interest or dividend
income, are recognised in profit or loss.
Financial liabilities
Financial liabilities are classified as measured at amortised cost or FVTPL. A financial liability is classified as at FVTPL if it
is classified as held‑for‑trading, it is a derivative or it is designated as such on initial recognition. Financial liabilities at FVTPL
are measured at fair value and net gains and losses, including any interest expense, are recognised in profit or loss. Other
financial liabilities are subsequently measured at amortised cost using the effective interest method. Interest expense and
foreign exchange gains and losses are recognised in profit or loss. Any gain or loss on derecognition is also recognised in
profit or loss.
37
Next Science Limited
Notes to the consolidated financial statements
31 December 2022
Note 3. Significant accounting policies (continued)
(iii) Derecognition
Financial assets
The Group derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers
the rights to receive the contractual cash flows in a transaction in which substantially all the risks and rewards of ownership
of the financial asset are transferred or it neither transfers nor retains substantially all of the risks and rewards of ownership
and does not retain control over the transferred asset. Any interest in transferred financial assets that is created or retained
by the Group is recognised as a separate asset or liability.
Financial liabilities
The Group derecognises a financial liability when its contractual obligations are discharged, cancelled or expired.
(iv) Offsetting
Financial assets and financial liabilities are offset and the net amount presented in the statement of financial position when,
and only when, the Group currently has a legally enforceable right to set off the amounts and it intends either to settle them
on a net basis or to realise the asset and settle the liability simultaneously.
Impairment
The Group recognises loss allowances for expected credit losses (“ECL”) on financial assets and contract assets. Loss
allowances where relevant are measured at an amount equal to a 12 month ECL.
When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when
estimating ECL’s, the Group considers reasonable and supportable information that is relevant and available without undue
cost or effort. This includes both quantitative and qualitative information and analysis, based on the Group’s historical
experience and informed credit assessment and including forward‑looking information.
The Group assumes that the credit risk on a financial asset has increased significantly if it is more than 90 days past due.
The Group considers a financial asset to be in default when the borrower is unlikely to pay its obligations to the Group in full
or the financial asset is more than 130 days past due.
ECLs are a probability‑weighted estimate of credit losses and are measured as the present value of all cash shortfalls
discounted at the effective interest rate. Loss allowances for financial assets measured at amortised cost are deducted from
the gross carrying amount.
An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its
carrying amount and the present value of the estimated future cash flows discounted at the asset’s original effective interest
rate. Losses are recognised in profit or loss and reflected in an allowance account against loans and receivables. Interest on
the impaired asset continues to be recognised. When a subsequent event causes the amount of impairment loss to decrease,
the decrease in impairment loss is reversed through profit or loss.
Share capital
Ordinary shares
Incremental costs directly attributable to the issue of ordinary shares, net of any tax effects, are recognised as a deduction
from equity.
38
Next Science Limited
Notes to the consolidated financial statements
31 December 2022
Note 3. Significant accounting policies (continued)
Fair value measurement
‘Fair value’ is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between
market participants at the measurement date in the principal or, in its absence, the most advantageous market to which the
Group has access at that date. The fair value of a liability reflects its non‑performance risk.
A number of the Group’s accounting policies and disclosures require the measurement of fair values, for both financial and
non‑financial assets and liabilities. When one is available, the Group measures the fair value using the quoted price in an
active market. A market is regarded as ‘active’ if transactions for the asset or liability take place with sufficient frequency and
volume to provide pricing information on an ongoing basis.
If there is no quoted price in an active market, then the Group uses valuation techniques that maximise the use of relevant
observable inputs and minimise the use of unobservable inputs.
The chosen valuation technique incorporates all of the factors that market participants would consider in pricing a transaction.
Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the Chief Operating Decision
Maker (“CODM”). The CODM is responsible for allocating resources and assessing performance of the operating segments.
Earnings per share
(i) Basic earnings per share
Basic earnings per share is calculated by dividing the profit or loss attributable to the owners of the Company excluding any
costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during
the financial year, adjusted for bonus elements in ordinary shares issued during the financial year.
(ii) Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the
after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted
average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares.
Goods and Services Tax ('GST') and other similar taxes
Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not
recoverable from the tax authority. In this case it is recognised as part of the cost of the acquisition of the asset or as part of
the expense.
Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST
recoverable from, or payable to, the tax authority is included in other receivables or other payables in the statement of
financial position.
Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities
which are recoverable from, or payable to the tax authority, are presented as operating cash flows.
Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the tax authority.
39
Next Science Limited
Notes to the consolidated financial statements
31 December 2022
Note 4. Standards issued but not yet effective
A number of new standards are effective for annual periods beginning after 1 January 2023 and earlier application is
permitted; however, the Group has not early adopted the new or amended standards in preparing these consolidated financial
statements.
The Group plans to apply the amendments when they become effective and they are not expected to have a significant
impact on the Group’s consolidated financial statements:
(1) AASB 17 Insurance Contracts
(2) Classification of Liabilities as Current or Non- current (AASB 2020-1 Amendments to Australian Accounting Standards)
(3) Annual Improvements 2018-2020 and Other Amendments (AASB 2020-3 Amendments to Australian Accounting
Standards)
(4) Classification of Liabilities as Current or Non-current – Deferral of Effective Date (AASB 2020-6 Amendments to
Australian Accounting Standards)
(5) Disclosure of Accounting Policies and Definition of Accounting Estimates (AASB 2021-2 Amendments to Australian
Accounting Standards)
(6) Deferred Tax related to Assets and Liabilities arising from a Single Transaction (AASB 2021-5 Amendments to
Australian Accounting Standards)
(7) Disclosure of Accounting Policies: Tier 2 and Other Australian Accounting Standards (AASB 2021-6 Amendments to
Australian Accounting Standards)
(8) Effective Date of Amendments to AASB 10 and AASB 128 and Editorial Corrections (AASB 2021-7a, b and c
Amendments to Australian Accounting Standards)
(9) Initial Application of AASB 17 and AASB 9 – Comparative Information (AASB 2021-1 Amendments to Australian
Accounting Standards)
40
Next Science Limited
Notes to the consolidated financial statements
31 December 2022
Note 5. Revenue
Consolidated
2022
$
2021
$
Revenue from contracts with customers
11,712,722
8,947,591
Identification of reporting operating segments
The Group operates in one operational segment, based on the internal reports that are reviewed and used by the Board of
Directors (who are identified as the Chief Operating Decision Makers (CODM)) in assessing performance and in determining
the allocation of resources. The one operational segment operates over two geographical segments, North America and
Australia and New Zealand.
Year ended 31 December 2022
Revenue from contracts with customers
Segment assets
Segment liabilities
Segment loss
Year ended 31 December 2021
Revenue from contracts with customers
Segment assets
Segment liabilities
Segment loss
Major customers
North
America
$
Australia and
New Zealand
$
Total
$
11,009,151
8,237,427
2,949,117
(6,765,412)
703,571 11,712,722
4,354,973 12,592,400
4,556,677
1,607,560
(12,683,313)
(5,917,901)
North
America
$
Australia and
New Zealand
$
Total
$
8,854,153
8,155,415
1,901,704
(5,831,533)
93,438
8,947,591
5,621,935 13,777,350
3,032,228
1,130,524
(9,349,638)
(3,518,105)
Revenues from two major customers of the Group represented 43% (2021: 78%) of the Group’s total revenue.
Note 6. Other income
Government assistance – Covid-19
Other income
Other income
Consolidated
2022
$
2021
$
-
37,870
130,656
16,456
37,870
147,112
Income received in relation to grants will only be recognised when there is reasonable assurance when all conditions
attaching to the grant have been complied with.
41
Next Science Limited
Notes to the consolidated financial statements
31 December 2022
Note 7. Depreciation and amortisation
The loss from ordinary activities before income tax includes the following expenses:
Included in selling and distribution expenses
Depreciation and amortisation
Included in research and development expenses
Depreciation and amortisation
Included in administrative expenses
Depreciation and amortisation
Note 8. Other expenses
Loss on sale of fixed asset
Impairment loss on intangibles
Note 9. Employee expenses
Salaries and wages
Contributions to defined contribution funds
Share-based payments
Consolidated
2022
$
2021
$
30,609
23,811
653,349
567,984
213,143
198,477
Consolidated
2022
$
2021
$
1,475
44,083
8,057
7,576
45,558
15,633
Consolidated
2022
$
2021
$
10,075,827
43,499
8,750
7,338,288
43,564
113,620
10,128,076
7,495,472
As part of employee compensation, the Group offers medical insurance to certain employees in certain geographies
(2022:$1,040,228, 2021:$759,048). These insurance amounts are not included in the above figures.
Note 10. Finance income
Interest income
Net foreign exchange gain
Note 11. Finance costs
Interest expense on lease liabilities
42
Consolidated
2022
$
2021
$
12,720
35,578
16,515
126,385
48,298
142,900
Consolidated
2022
$
2021
$
28,603
16,476
Next Science Limited
Notes to the consolidated financial statements
31 December 2022
Note 12. Income tax expense
Income tax expense comprises current and deferred tax expense and is recognised in profit or loss, except to the extent that
it relates to a business combination or items recognised directly in equity or other comprehensive income. The components
of tax expense comprise:
Income tax expense
Current tax
Deferred tax
Aggregate income tax expense
Numerical reconciliation of income tax expense and tax at the statutory rate
Reconciliation of income tax to accounting profit:
Loss before income tax expense
Tax at the statutory tax rate of 25% (2021: 26%)
Tax effect amounts which are not deductible/(taxable) in calculating taxable income:
Permanent differences
Effect of tax rate in foreign jurisdictions
Tax losses not brought to account
Prior period over/(under) provision
Income tax expense
The unused tax losses as at 31 December were as follows:
Australia gross unused tax losses (in AUD)
USD gross unused tax losses (in USD)
Consolidated
2022
$
2021
$
-
-
-
-
-
-
(12,683,312)
(9,349,639)
(3,170,828)
(2,430,906)
24,231
(264,232)
3,410,829
-
(23,777)
(319,306)
2,968,169
(194,180)
-
-
Consolidated
2022
$
2021
$
52,469,578 43,126,968
34,495,776 27,889,973
Tax losses are recognised only to the extent that it is probable that the future taxable profit will be available against which
the benefits can be utilised. Management has considered all the facts and circumstances and believe there is no material
uncertainty over the availability of the tax losses.
43
Next Science Limited
Notes to the consolidated financial statements
31 December 2022
Note 12. Income tax expense (continued)
Australian entities
Movement in deferred tax assets and liabilities using the Company’s domestic Australian tax rate of 26%
Opening
balance
$
Recognised
in profit or
loss
$
Closing
balance
$
(555,043)
30,295
45,011
357,373
7,161,233
(47,486)
(6,991,383)
-
40,596
(5,102)
(12,367)
(82,471)
1,347,152
(4,786)
(1,283,022)
-
(514,447)
25,193
32,644
274,902
8,508,385
(52,272)
(8,274,405)
-
(520,105)
23,803
9,255
903,118
6,149,970
(39,484)
(6,526,557)
-
(34,938)
6,492
35,756
(545,745)
1,011,263
(8,002)
(464,826)
-
(555,043)
30,295
45,011
357,373
7,161,233
(47,486)
(6,991,383)
-
Opening
balance
$
Recognised
in profit or
loss
$
Closing
balance
$
(83,520)
2,181
83,282
5,856,894
(39,415)
(5,819,422)
-
9,570
2,908
73,025
1,387,219
10,997
(1,483,719)
-
(73,950)
5,089
156,307
7,244,113
(28,418)
(7,303,141)
-
(117,566)
1,075
104,118
5,698,521
(40,289)
(5,645,859)
-
34,046
1,106
(20,836)
158,373
874
(173,563)
-
(83,520)
2,181
83,282
5,856,894
(39,415)
(5,819,422)
-
2022 cost
Intangibles
Employee benefits
Accrued expenses
Deferred revenue
Unused tax losses carried forward
Other items
Deferred tax assets not recognised
Deferred tax assets/(liabilities)
2021 cost
Intangibles
Employee benefits
Accrued expenses
Deferred revenue
Unused tax losses carried forward
Other items
Deferred tax assets not recognised
Deferred tax assets/(liabilities)
US entities
Movement in deferred tax assets and liabilities using the US tax rate of 21%
2022 cost
Intangibles
Employee benefits
Accrued expenses
Unused tax losses carried forward
Other items
Deferred tax asset not recognised
Deferred tax assets/(liabilities)
2021 cost
Intangibles
Employee benefits
Accrued expenses
Unused tax losses carried forward
Other items
Deferred tax asset not recognised
Deferred tax assets/(liabilities)
44
Next Science Limited
Notes to the consolidated financial statements
31 December 2022
Note 13. Cash and cash equivalents
Current assets
Cash at bank
Reconciliation of cash flows from operating activities
Loss for the year
Adjustments for:
Depreciation and amortisation
Share based payments (note 9)
Unrealised foreign currency translation gain/(loss)
Interest expense on right-of-use assets (note 20)
Loss on sale of fixed asset (note 8)
Impairment of intangible assets (note 19)
Operating loss before changes in working capital and provisions
Change in operating assets and liabilities
Change in trade and other receivables
Change in inventories
Change in other current assets
Change in trade and other payables
Change in provisions
Change in contract liabilities
Consolidated
2022
$
2021
$
5,073,625
7,000,869
Consolidated
2022
$
2021
$
(12,683,312)
(9,349,639)
897,101
8,750
25,806
20,827
1,475
44,083
(11,685,270)
790,272
113,620
(101,651)
16,476
8,057
7,576
(8,515,289)
(807,827)
556,918
(455,474)
806,350
70,436
(274,903)
(104,500)
2,498,905
(389,361)
(56,049)
109,884
(2,891)
(1,909,553)
250,935
Net cash from operating activities
(11,789,770)
(8,264,354)
Note 14. Trade and other receivables
Current assets
Trade receivables
Other receivables
Non-current assets
Security deposit
Consolidated
2022
$
2021
$
1,596,417
142,506
865,831
21,380
1,738,923
887,211
36,656
36,656
The carrying value of receivables is considered a reasonable approximation of fair value due to the short‑term nature of the
balances. The Group has assessed any potential credit risk associated with these counterparties and deemed expected
credit loss to be insignificant.
Information about the Group’s exposure to credit and market risks, and impairment losses for trade receivables is included
in Note note 36 (c).
45
Next Science Limited
Notes to the consolidated financial statements
31 December 2022
Note 15. Inventories
Current assets
Finished goods - at cost
Raw materials – at cost
Less: Provision for obsolete stock
Note 16. Other current assets - term deposits
Current assets
Term deposits
Note 17. Other current assets - other
Current assets
Prepayments and other assets
Note 18. Property, plant and equipment
Non-current assets
Leasehold improvements - at cost
Less: Accumulated depreciation
Plant and equipment - at cost
Less: Accumulated depreciation and impairment
Furniture, fixtures and fittings - at cost
Less: Accumulated depreciation and impairment
46
Consolidated
2022
$
2021
$
617,540
386,470
(132,744)
987,457
573,472
(60,407)
871,266
1,500,522
Consolidated
2022
$
2021
$
37,789
367,129
Consolidated
2022
$
2021
$
541,506
476,049
Consolidated
2022
$
2021
$
361,222
(85,011)
276,211
199,754
(74,611)
125,143
1,188,504
(848,804)
339,700
1,158,763
(680,804)
477,959
286,892
(205,955)
80,937
250,905
(170,445)
80,460
696,848
683,562
Next Science Limited
Notes to the consolidated financial statements
31 December 2022
Note 18. Property, plant and equipment (continued)
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out
below:
Consolidated
Balance at 1 January 2021
Additions
Disposals
Depreciation expense
Foreign exchange movements
Balance at 1 January 2022
Additions
Disposals
Depreciation expense
Leasehold
improvements
$
Plant and
equipment
$
Furniture
and fittings
$
Total
$
138,551
-
-
(13,411)
3
125,143
162,885
-
(11,817)
547,856
123,112
(7,847)
(185,164)
2
477,959
51,010
(1,475)
(187,794)
101,726
17,380
(210)
(38,436)
-
80,460
35,987
-
(35,510)
788,133
140,492
(8,057)
(237,011)
5
683,562
249,882
(1,475)
(235,121)
Balance at 31 December 2022
276,211
339,700
80,937
696,848
Note 19. Intangible assets
Non-current assets
Capitalised development - at cost
Less: Accumulated amortisation and impairment
Patents and trademarks - at cost
Less: Accumulated amortisation and impairment
Computer software - at cost
Less: Accumulated amortisation
Consolidated
2022
$
2021
$
2,139,440
(770,862)
1,368,578
1,972,054
(486,796)
1,485,258
1,675,632
(634,280)
1,041,352
1,507,814
(461,218)
1,046,596
117,613
(117,613)
-
121,701
(121,064)
637
2,409,930
2,532,491
47
Next Science Limited
Notes to the consolidated financial statements
31 December 2022
Note 19. Intangible assets (continued)
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out
below:
Consolidated
Balance at 1 January 2021
Additions
Impairment of assets
Amortisation expense
Balance at 1 January 2022
Additions
Impairment of assets
Amortisation expense
Capitalised
development
$
Patents and
trade marks
$
Computer
software
$
1,371,189
356,949
(7,576)
(235,304)
1,485,258
218,927
(44,083)
(291,524)
962,110
219,317
-
(134,831)
1,046,596
167,817
-
(173,061)
1,637
-
-
(1,000)
637
-
-
(637)
Total
$
2,334,936
576,266
(7,576)
(371,135)
2,532,491
386,744
(44,083)
(465,222)
Balance at 31 December 2022
1,368,578
1,041,352
-
2,409,930
Note 20. Right-of-use assets
The Group holds leases for properties with lease terms ranging from 3 to 5 years.
Non-current assets
Property - right-of-use
Less: Accumulated depreciation
Consolidated
2022
$
2021
$
1,682,210
(629,097)
668,314
(435,858)
1,053,113
232,456
There was a significant change in the current period with an amendment to the US Jacksonville Greystone Park Commercial
Lease on 17 June 2022. The amendment resulted in the recognition of an additional right‑of‑use asset of $1,025,617.
Amounts recognised in profit or loss
Depreciation expense
Interest expense
Expense relating to variable lease payments not included in the measurement of the lease
liability
The total cash outflow in relation to lease payments amounted to $253,229 (2021: $212,759).
Consolidated
2022
$
2021
$
196,757
28,603
182,127
16,476
89,511
89,146
314,871
287,749
48
Next Science Limited
Notes to the consolidated financial statements
31 December 2022
Note 20. Right-of-use assets (continued)
Movement
Balance at 1 January 2021
Additions
Depreciation expense
Foreign exchange movements
Closing value at 31 December 2021
Balance at 1 January 2022
Additions
Depreciation expense
Foreign exchange movements
Closing value at 31 December 2022
Note 21. Trade and other payables
Current liabilities
Trade payables
Other payables and accrued expenses
Property
$
227,265
186,161
(182,127)
1,157
232,456
232,456
1,025,617
(196,757)
(8,203)
1,053,113
Consolidated
2022
$
2021
$
973,665
1,005,681
515,579
657,417
1,979,346
1,172,996
All amounts are short term and the carrying values are considered to be a reasonable approximation of fair value.
Note 22. Contract liabilities
Current liabilities
Contract liabilities
Non-current liabilities
Contract liabilities
Consolidated
2022
$
2021
$
274,902
91,177
824,706
1,283,334
Contract liabilities relate to consideration received in advance from customers for which revenue will be recognised as and
when products are delivered or other performance obligations met.
Note 23. Lease liabilities
Current liabilities
Lease liability
Non-current liabilities
Lease liability
Consolidated
2022
$
2021
$
257,912
166,235
962,060
109,802
49
Next Science Limited
Notes to the consolidated financial statements
31 December 2022
Note 23. Lease liabilities (continued)
The following table sets out a maturity analysis of lease payments, showing the undiscounted lease payments to be paid
after the reporting date:
Maturity analysis
Not later than 1 year
Later than 1 year but not later than 5 years
Later than 5 years
Note 24. Employee benefits
Current liabilities
Liability for annual leave
Non-current liabilities
Liability for long service leave
Note 25. Share capital
In number of shares
Balance as at 1 January 2021
Shares issued in March 2021 on conversion of employee share options (i)
Shares issued in April 2021 on conversion of employee share options (ii)
Shares issued in May 2021 on conversion of employee share options (iii)
Balance as at 31 December 2021
Balance as at 1 January 2022
Shares issued in February 2022 on conversion of employee performance shares (iv)
Shares issued in February 2022 on conversion of employee share options (v)
Placement in March 2022 (vi)
Shares purchase plan in March 2022 (vii)
Placement in May 2022 (viii)
Balance as at 31 December 2022
Consolidated
2022
$
2021
$
306,736
1,043,232
-
173,402
113,736
-
1,349,968
287,138
Consolidated
2022
$
2021
$
94,811
109,611
30,194
17,295
Fully paid
194,201,409
84,500
3,250,000
438,000
197,973,909
197,973,909
113,534
78,000
6,666,667
5,513,579
4,444,445
214,790,134
50
Next Science Limited
Notes to the consolidated financial statements
31 December 2022
Note 25. Share capital (continued)
Balance at 1 January 2021
Shares issued in March 2021 (on conversion of employee share options) (i)
Shares issued in April 2021 (on conversion of employee share options) (ii)
Shares issued in May 2021 (on conversion of employee share options) (iii)
Capital raising costs
Balance at 31 December 2021
Balance at 1 January 2022
Shares issued in February 2022 on conversion of employee performance shares (iv)
Shares issued in February 2022 on conversion of employee share options (v)
Placement in March 2022 (vi)
Shares purchase plan in March 2022 (vii)
Placement in May 2022 (viii)
Capital raising costs
Balance at 31 December 2022
Fully paid
$
101,281,467
35,490
1,365,000
245,280
(6,230)
102,921,007
102,921,007
105,000
32,760
4,382,730
3,597,370
2,873,300
(385,634)
113,526,533
(i) On 18 March 2021, 84,500 round 3 Equity Incentive Plan (ECP) employee share options converted to 84,500 ordinary
shares at a price of AUD$0.54.
(ii) Between 13 April 2021 and 15 April 2021, 3,250,000 round 3 Equity Incentive Plan (ECP) employee share options
converted to 3,250,000 ordinary shares at a price of AUD$0.55.
(iii) On 3 May 2021, 438,000 round 4 Equity Incentive Plan (ECP) employee share options converted to 438,000 ordinary
shares at a price of AUD$0.72.
(iv) In February 2022, 113,534 performance rights converted into 113,534 ordinary shares at a fair value of USD$0.92 per
share.
(v) In February 2022, 78,000 round 3 Equity Incentive Plan (ECP) employees share options converted to 78,000 ordinary
shares at a price of A$0.58.
(vi) In March 2022, Next Science raised A$6,000,000 via a Placement at A$0.90 per share.
(vii) In March 2022, Next Science raised A$4,796,814 via a Share Purchase Plan at A$0.87 per share.
(viii) In May 2022, Next Science raised A$4,000,000 via a Placement at A$0.90, approved by shareholders at the annual
general meeting held on 27 May 2022.
Ordinary shares
Fully paid ordinary shares
Ordinary shares participate in dividends and the proceeds on winding up of the Company in proportion to the number of
shares held. At shareholders' meetings, each ordinary share is entitled to one vote when a poll is called.
Capital management
The Group's objectives when managing capital is to safeguard its ability to continue as a going concern, so that it can provide
returns for shareholders and benefits for other stakeholders and to maintain an optimum capital structure to reduce the cost
of capital.
51
Next Science Limited
Notes to the consolidated financial statements
31 December 2022
Note 26. Reserves
Share option reserve
Foreign currency translation reserve
Common control reserve
Performance rights reserve
Consolidated
2022
$
2021
$
2,140,298
(1,905,877)
(42,596,715)
-
2,140,298
(1,349,143)
(42,596,715)
96,250
(42,362,294)
(41,709,310)
Foreign currency translation reserve
The translation reserve comprises all foreign currency differences arising from the translation of the financial statements of
foreign operations where their functional currency is different to the Group's presentation currency.
Common control reserve
The acquisition of the share capital of Microbial Defense Systems Holdings Inc ("MDS") by the Company on 22 December
2017 was accounted for as a common control transaction. As a consequence, the difference between the fair value of the
consideration paid ($43,862,500) and the existing book values of assets and liabilities of MDS ($1,265,785) was debited to
a common control reserve, directly within equity.
Share option reserve
The share option reserve comprises the value of the share‑based payment arrangements recognised in equity.
Note 27. Dividends
Dividends
No dividends were paid or declared by the Company during the financial year.
Dividend franking account
The Company has franking credits available to shareholders of Nil.
Note 28. Parent entity information
As at, and throughout, the financial year to 31 December 2022 the parent entity of the Group was Next Science Limited.
Statement of profit or loss and other comprehensive income
Loss after income tax
Other comprehensive income
Total comprehensive loss
Parent
2022
$
Parent
2021
$
(13,713,271)
(685,101)
(10,733,399)
(478,466)
(14,398,372)
(11,211,865)
52
Next Science Limited
Notes to the consolidated financial statements
31 December 2022
Note 28. Parent entity information (continued)
Statement of financial position
Assets
Total current assets
Total non-current assets
Total assets
Liabilities
Total current liabilities
Total non-current liabilities
Total liabilities
Total net assets
Equity
Share capital
Reserves
Accumulated losses
Total equity
Parent
2022
$
Parent
2021
$
3,877,713
4,033,709
9,938,727 13,308,038
13,816,440 17,341,747
(815,428)
-
(815,428)
(451,638)
-
(451,638)
13,001,012 16,890,109
113,526,531 102,921,005
(26,018,205)
(60,012,691)
(26,799,557)
(73,725,962)
13,001,012 16,890,109
Guarantees entered into by the parent entity in relation to the debts of its subsidiaries
The parent entity had no guarantees as at 31 December 2022 and 31 December 2021.
Contingent liabilities
The parent entity had no contingent liabilities as at 31 December 2022 and 31 December 2021.
Capital commitments - Property, plant and equipment
The parent entity had no capital commitments for property, plant and equipment as at 31 December 2022 and 31 December
2021.
Significant accounting policies
The accounting policies of the parent entity are consistent with those of the Group, as disclosed in note 3, except for the
following:
●
Investments in subsidiaries are accounted for at cost, less any impairment, in the parent entity.
53
Next Science Limited
Notes to the consolidated financial statements
31 December 2022
Note 29. Group entities
Set out below is the Group structure listing all subsidiaries as at 31 December 2022.
Note 30. Related party transactions
(a) Key management personnel compensation
Key management personnel ("KMP") are defined as those persons having authority and responsibility for planning, directing
and controlling the activities of the Group, directly and indirectly, and include the Directors, executive and non‑executive, as
well as certain other senior executives. The totals of remuneration of the KMP of the Company included within employee
expenses are as follows:
Short term employee benefits
Other long term employee benefits
Post employment benefits
Share based payment benefits
Total
Consolidated
2022
$
2021
$
1,630,151
11,347
41,913
8,750
1,849,829
6,822
42,371
113,620
1,692,161
2,012,642
Short term employee benefits
Short term employee benefits includes salary, fringe benefits and cash bonuses paid to the executive directors and other
KMP as well as fees and benefits awarded to the non‑executive directors.
Post‑employment benefits
Post‑employment benefits are the cost of superannuation contributions made during the year.
54
Next Science Limited
Notes to the consolidated financial statements
31 December 2022
Note 30. Related party transactions (continued)
(b) Key management personnel transactions
KMPs of the Company hold 9.48% (2021: 11.02%) of the issued capital of the Company as at 31 December 2022.
Note 31. Share based employee incentive arrangements
Equity Incentive Plan (equity‑settled)
Prior to listing on the ASX, the Group established an Equity Incentive Plan (ECP) and an Employee Share Option Plan
(ESOP). The purpose of the Plans is to attract and retain the types of employees, consultants and directors who will contribute
to the Company's long-term success; provide incentives that align the interests of Employees, Consultants and Directors
with those of the shareholders of the Company; and promote the success of the Company's business. As at 31 December
2022, there are 2,812,000 options over ordinary shares on issue (2021: 2,890,000 options), representing 1.31% (2021:
1.46%) of the Company's total share capital, granted to the employees and Directors of the Company.
The grant dates, vesting dates and exercise prices of options issued vary and are as follows:
No of
options as
at 31 Dec
2021
78,000
1,820,000
992,000
2,890,000
Granted
Exercised
(ii)
Lapsed
No of
options as
at 31 Dec
2022
Vested as
at 31 Dec
2022
-
-
-
-
(78,000)
-
-
-
-
-
- 1,820,000 1,820,000
992,000
-
992,000
(78,000)
- 2,812,000 2,812,000
Grant date and
vesting conditions
(i)
16-Apr-18 (1)
17-Dec-18 (2)
17-Dec-18 (1)
Totals
Expiry date
16-Apr-22
17-Dec-23
17-Dec-23
(i) Vesting conditions are as follows:
●
●
(1) 2 years' service from grant date
(2) 3 years' service from grant date
(ii) The weighted average share price for the options exercised during the year was USD $0.42 (2021: USD $0.44).
As at 31 December 2022, 2,812,000 options have vested (2021: 2,890,000)
The fair value has been measured using the Black‑Scholes formula. Service and non‑market performance conditions
attached to the arrangements were not taken into account in measuring fair value.
The inputs used in the measurement of the fair values at grant date and measurement date were as follows:
FV at grant date (USD)
Share price at grant date (USD)
Exercise price (USD)
Expected volatility
Expected life
Expected dividends
Risk free interest rate
16-Apr-18
0.20-0.22
0.42
0.42
Grant date
17-Dec-18
0.33
0.56
0.56
91%
3-4 years
0%
2.25%-5.0%
Expected volatility is measured based on peer companies and expected life is the number of days until expiry.
The fair value of the performance rights granted to Dustin Haines is deemed to represent the value of Dustin Haines's
services received over the vesting period. These values were calculated applying the following inputs to performance rights
issued:
55
Next Science Limited
Notes to the consolidated financial statements
31 December 2022
Note 31. Share based employee incentive arrangements (continued)
Grant date
Weighted average fair value per performance right
Number of performance rights issued
Remaining life of the performance rights
Performance rights
22 February 2021
USD $0.9248
340,602
3 years
The fair value of performance rights was measured as the 60 day volume weighted average share price of Next Science
Limited shares prior to the performance rights being issued.
Note 32. Contingent liabilities and capital commitments
The Group has no contingent liabilities as at 31 December 2022.
The Group has no capital commitments as at 31 December 2022 (2021: nil).
Note 33. Events occurring after the reporting date
On 2 February 2023 shareholders approved the issue of A$10,000,000 Secured Convertible Notes with major shareholder,
Walker Group Holdings Pty Ltd, with a maturity date 21 months after the issue date at a conversion price of A$0.72 per
security.
Each Note accrues interest at a rate of 10% per annum if the Notes are redeemed (and payable in one instalment only on
redemption) or at a rate of 5% per annum if the Notes are converted (and capitalised into additional shares on conversion).
If converted, the shares rank pari passu with existing ordinary shares.
Next Science Limited's obligations under the Secured Convertible Note Deed are to be secured over the Company and all
of the Company's property under a General Security Agreement.
In accordance with the Secured Convertible Note Deed, Walker Group Holdings Pty Ltd may at any time after the issue date
until 31 October 2023, give notice to Next Science Limited that it wishes to convert all of the Notes to conversion shares.
If the Notes are not converted by 31 October 2023, Next Science Limited must redeem the Notes on the maturity date, unless
Next Science Limited gives notice of early redemption to Walker Group Holdings Pty Ltd.
The Notes are non-transferrable.
There has not arisen in the interval between the end of the financial year and the date of this report any item, transaction or
event, other than those matters detailed above, of a material and unusual nature likely, in the opinion of the directors of the
Company, to affect significantly the operations of the Group, the results of those operations, or the state of affairs of the
Group, in future financial years.
56
Next Science Limited
Notes to the consolidated financial statements
31 December 2022
Note 34. Remuneration of auditors
Audit and assurance related services
KPMG Australia
Audit of financial statements
Other services
KPMG Australia
Taxation services
Other services
Total other services
Total auditor's remuneration
Note 35. Earnings per share
Loss after income tax
Weighted average number of shares
Basic earnings per share
Diluted earnings per share
Note 36. Financial risk management
(a) Overview
Consolidated
2022
$
2021
$
97,485
82,466
10,171
7,142
17,313
11,602
10,494
22,096
114,798
104,562
Consolidated
2022
$
2021
$
(12,683,312)
(9,349,639)
Number
Number
210,468,045 196,882,812
Cents
Cents
(6.03)
(6.03)
(4.75)
(4.75)
The Group’s activities expose it to various financial risks including: credit risk, liquidity risk and market risk.
This note presents information about the Group’s exposure to each of these risks, its objectives, policies and processes for
measuring and managing risk.
(b) Risk management framework
The Company's Board of Directors has overall responsibility for the establishment and oversight of the Group's risk
management framework with assistance from the Audit and Risk Committee (as detailed below). The Group’s risk
management framework has been established to identify and analyse the material risks faced by the Group, to set appropriate
risk limits and controls and to monitor risks and adherence to the risk appetite set by the Board. The Group’s risk management
framework is reviewed at least annually by the Audit and Risk Committee and the consideration of changes in the Group’s
risk profile and mitigating actions and controls is a standing item at Audit and Risk Committee meetings.
Audit and Risk Committee
The Audit and Risk Committee responsibilities in relation to risk management are to:
57
Next Science Limited
Notes to the consolidated financial statements
31 December 2022
Note 36. Financial risk management (continued)
(a) oversee the establishment, and maintenance by management, of processes to ensure that there is an adequate and
effective system to identify and manage material business risks;
(b) monitor the Group’s Risk Register to confirm that key risks have been identified and adequate controls are in place to
mitigate risks so far as reasonably practicable;
(c) receive reports from management on new and emerging sources of risk and the proposed risk controls to mitigate those
risks;
(d) receive reports from management and the external auditor on any material incident involving fraud or a breakdown of
the Group’s risk controls and the lessons learned;
(e) review, at least annually, the Group’s risk management framework to confirm that it continues to be sound and that the
Group is operating with due regard to the risk appetite set by the Board;
(f)
monitor the need for, and if considered necessary, require, an internal or external audit of critical areas of risk;
(g) oversee the establishment of procedures for the receipt, handling and investigation of whistleblower disclosures;
(h) oversee the establishment of, and monitor, assurance mechanisms for monitoring:
• the Group’s culture and compliance with the Group’s Values; and
• compliance with the Group’s corporate governance policies and procedures, contractual obligations and the laws
applicable to the Group and its operations;
(i)
(j)
oversee the Group’s annual insurance program, having regard to the Group’s business and the insurable risks within
its business;
assess the adequacy of controls, including disaster recovery and business continuity plans, for preserving and re-
establishing financial and operational information in the event of a disaster; and
(k) review and make recommendations to the Board in relation to public disclosures made by the Group regarding material
business risks.
The Board considers the Group’s risk management framework to be appropriate for the size and level of operations of the
Group.
(c) Credit risk
Cash and cash equivalents
The Group held cash and cash equivalents of USD $5,073,625 and USD $37,789 in term deposits at 31 December 2022
(2021: USD $7,000,869 in cash and USD $367,129 in term deposits). The cash and cash equivalents are held with credit
worthy bank and financial counterparties. The expected credit loss of each of these banks and counterparties are considered
to be extremely low; accordingly any expected credit losses are deemed to be insignificant.
Trade receivables and contract assets
Credit risk on trade receivables is the risk of financial loss if a customer fails to meet its contractual obligations.
The carrying amounts of financial assets represents the maximum credit exposure.
Maximum exposure to credit risk for trade receivables by type of counterparty was as follows:
58
Next Science Limited
Notes to the consolidated financial statements
31 December 2022
Note 36. Financial risk management (continued)
Distribution & Licensing Partners
Hospitals & Surgery Centres
Prescribing Physicians
Consolidated
2022
$
2021
$
867,065
526,897
202,455
593,644
272,187
-
1,596,417
865,831
As at 31 December 2022, Zimmer Surgical Inc (worldwide) accounted for over 47% of the trade receivables (2021: Zimmer
Surgical Inc accounted for over 67% of the trade receivables).
(i) Risk management
The Group’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. However,
management also considers the factors that may influence the credit risk of its customer base, including the default risk
associated with the industry and country in which customers operate. Details of concentration of revenue are included in
note 5.
The Audit and Risk Committee has established a credit policy under which each new customer is analysed individually for
creditworthiness before the Group’s standard payment and delivery terms and conditions are offered. The Group’s review of
new customers includes customer due diligence and credit agency information (Dun & Bradstreet Corporation), if available.
Sale limits are established for each customer and reviewed periodically. Any sales exceeding those limits require approval
according to an approval matrix.
The maximum exposure to credit risk at the reporting date to recognised financial assets is the carrying amount, net of any
provisions for impairment of those assets, as disclosed in the statement of financial position and notes to the financial
statements.
In monitoring customer credit risk, customers are grouped according to their credit characteristics, including whether they
are an individual hospital or surgery centre or whether they are a distribution partner with which Next Science has a licensing
or distribution agreement. Further consideration is given to their geographic location and trading history with the Group and
existence of any previous financial difficulties.
59
Next Science Limited
Notes to the consolidated financial statements
31 December 2022
Note 36. Financial risk management (continued)
(ii) Impaired trade receivables
Generally, trade receivables are written off when there is no reasonable expectation of recovery. Indications of this include
significant financial difficulties of the debtor, the failure of a debtor to engage in a repayment plan, no active enforcement
activity and a failure to make contractual payments for an extensive period of time.
Impairment losses are recognised in the profit or loss statement within selling and distribution expenses. Subsequent
recoveries of amounts previously written off are credited against selling and general expenses.
As at 31 December 2022, trade receivables with a nominal value of $Nil (2021: Nil) were considered impaired and fully
provided for.
(iii) Past due not impaired
As at 31 December 2022, trade receivables of $56,315 (2021: $67,247) were past due but not impaired. These relate to
customers for whom there is no recent history of default.
The aging analysis of trade receivables is as follows:
0 - 30 days
31 - 60 days
61 - 90 days
91 - 120 days
More than 120 days
Total
(d) Liquidity risk
Consolidated
2022
$
2021
$
1,269,546
281,858
35,791
9,222
-
781,855
62,302
21,006
668
-
1,596,417
865,831
Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with its financial liabilities
that are settled by delivering cash or another financial asset. The Group's approach to managing liquidity is to ensure, as far
as possible, that it will have sufficient liquidity to meet its liabilities when they are due, under both normal and stressed
conditions, without incurring unacceptable losses or risking damage to the Group's reputation. The Group manages liquidity
risk by monitoring net cash balances, actual and forecast operating cash flows.
60
Next Science Limited
Notes to the consolidated financial statements
31 December 2022
Note 36. Financial risk management (continued)
Exposure to liquidity risk
The following are the remaining contractual maturities of financial liabilities at the reporting date. The amounts are gross and
undiscounted and include estimated interest payments and exclude the impact of netting agreements.
As 31 December 2022
Trade and other payables
Lease liabilities
Total
As 31 December 2021
Trade and other payables
Lease liabilities
Total
Less than 6
months
$
6-12 months
$
Between 1
and 5 years
$
Total
contracted
amounts
$
1,979,346
151,550
2,130,896
-
155,185
155,185
-
1,043,232
1,043,232
1,979,346
1,349,967
3,329,313
1,172,996
115,361
1,288,357
-
58,042
58,042
-
113,736
113,736
1,172,996
287,139
1,460,135
The cash flows in the maturity analysis are not expected to occur significantly earlier or be for a significantly different amount
than contractually disclosed above.
(e) Market risk
Market risk is the risk that changes in market prices, such as foreign exchange rates and interest rates, will affect the Group's
income or the value of its holdings of financial instruments. The objective of market risk management is to manage and
control market risk exposures within acceptable parameters, while optimising the return.
61
Next Science Limited
Notes to the consolidated financial statements
31 December 2022
Note 36. Financial risk management (continued)
Interest rate risk
The Group is not exposed to any significant interest rate risk. There is minimal exposure to the impact of adverse changes
in benchmark interest rates. The Group is exposed to variable interest rate risks at the reporting date on cash and short‑term
deposits. A reasonably possible change of 100 basis points in interest rates at the reporting date would have increased or
decreased profit after tax by $13,032 (2021: $42,906). This analysis assumes that all other variables, in particular foreign
currency rates, remain constant.
Currency risk
Currency risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in
foreign exchange rates. The source and nature of this risk arise from operations and translation risks. The Group’s reporting
currency is United States Dollars (“USD”). However, the international operations give rise to an exposure to changes in
foreign exchange rates as amounts of expenditure are from Australia and denominated in currencies other than USD.
The carrying amounts of the Group's foreign currency denominated financial assets (trade and other receivables including
accrued income) and financial liabilities (trade and other payables) at the reporting date were as follows:
AUD financial assets converted to USD
AUD financial liabilities converted to USD
Net exposure in statement of financial position
Consolidated
2022
$
2021
$
1,402,132
(346,097)
4,006,776
(300,868)
1,056,035
3,705,908
A reasonably possible strengthening (weakening) of the Unites States Dollar against all other currencies at 31 December
2022 would have affected the measurement of financial instruments denominated in a foreign currency and affected profit or
loss and equity by the amounts shown below. This analysis assumes that all other variables, in particular interest rates,
remain constant and ignores any impact of forecast sales and purchases.
2022
Australian Dollars
2021
Australian Dollars
%
Change
$
Profit before
tax
strengthen
$
Profit before
tax weaken
$
Equity
strengthen
$
Equity
weaken
$
10%
105,604
(105,604)
105,604
(105,604)
10%
370,591
(370,591)
370,591
(370,591)
The percentage change is the expected overall volatility of the significant currencies, which is based on management’s
assessment of reasonable possible fluctuations taking into consideration movements over the last 12 months and the spot
rate at each reporting date.
62
Next Science Limited
Directors' declaration
31 December 2022
1.
In the opinion of the Directors of Next Science Limited (the “Company”):
a.
The consolidated financial statements and notes that are set out on pages 24 to 62 and the Remuneration Report on pages 10 to
22 in the Directors’ Report, are in accordance with the Corporations Act 2001, including:
(i) giving a true and fair view of the financial position of the Group as at 31 December 2022 and of its performance for the financial
year ended on that date; and
(ii) complying with Australian Accounting Standards and the Corporations Regulations 2001; and
b.
there are reasonable grounds to believe that the Group will be able to pay its debts as and when they become due and payable.
2.
3.
The Directors have been given the declarations required by Section 295A of the Corporations Act 2001 from the chief executive officer
and chief financial officer for the financial year ended 31 December 2022.
The Directors draw attention to Note 2 to the consolidated financial statements, which includes a statement of compliance with
International Financial Reporting Standards.
Signed in accordance with a resolution of Directors:
________________________
Mark Compton, AM
Chair
28 February 2023
63
Independent Auditor’s Report
To the shareholders of Next Science Limited
Report on the audit of the Financial Report
Opinion
We have audited the Financial Report of
Next Science Limited (the Company).
In our opinion, the accompanying Financial
Report of the Company is in accordance
with the Corporations Act 2001, including:
• Giving a true and fair view of the
Group’s financial position as at 31
December 2022 and of its financial
performance for the year ended on
that date; and
•
Complying with Australian Accounting
Standards and the Corporations
Regulations 2001.
Basis for opinion
The Financial Report comprises:
• Consolidated statement of financial position as at 31
December 2022;
• Consolidated statement of profit or loss and other
comprehensive income, Consolidated statement of
changes in equity, and Consolidated statement of
cash flows for the year then ended;
• Notes including a summary of significant accounting
policies; and
• Directors’ Declaration.
The Group consists of the Company and the entities it
controlled at the year-end or from time to time during
the financial year.
We conducted our audit in accordance with Australian Auditing Standards. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Our responsibilities under those standards are further described in the Auditor’s responsibilities for
the audit of the Financial Report section of our report.
We are independent of the Group in accordance with the Corporations Act 2001 and the ethical
requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics
for Professional Accountants (including Independence Standards) (the Code) that are relevant to our
audit of the Financial Report in Australia. We have fulfilled our other ethical responsibilities in
accordance with these requirements.
64
KPMG, an Australian partnership and a member firm of the KPMG global organisation of independent member firms affiliated
with KPMG International Limited, a private English company limited by guarantee. All rights reserved. The KPMG name and
logo are trademarks used under license by the independent member firms of the KPMG global organisation. Liability limited by
a scheme approved under Professional Standards Legislation.
Key Audit Matters
Key Audit Matters are those matters that, in our professional judgement, were of most significance in
our audit of the Financial Report of the current period.
This matter was addressed in the context of our audit of the Financial Report as a whole, and in
forming our opinion thereon, and we do not provide a separate opinion on this matter.
Revenue recognition – USD 11,712,722
Refer to Note 5 to the Financial Report
The key audit matter
How the matter was addressed in our audit
We focused on revenue recognition as a key
audit matter due to the significant audit effort
required by us to test the Group’s revenue
given the:
•
•
•
Significance of revenue to the financial
statements;
Varying terms and conditions within each
customer contract such as product sales,
advance deposits, true up payments and
milestone payments. This increases the
effort required by the audit team to
evaluate the timing and measurement of
revenue recognised by the Group, and
associated contract liabilities;
The Group has manual processes and
controls which may increase the risk of
error in recognition of revenue at the end of
the reporting period due to differing terms
of trade and extended delivery periods of
customer contracts.
Our procedures included:
•
•
Reviewed new and modified contracts and
considered management’s assessment of
revenue recognition in accordance with AASB
15 – Revenue from contracts with customers
Evaluated the appropriateness of the Group’s
revenue recognition policies against the
requirements of AASB 15 Revenue from
Contracts with Customers.
• Obtained an understanding of and assessed
management’s recognition and estimation of
revenue from the new collagen products
(DME) through examination of the underlying
arrangements and substantive sampling
For a sample of transactions, across customer
contracts including product sales, advance
deposits, true up payments and milestone
payments, we:
o
checked the terms and conditions of the
customer contract for consistency to the
Group’s policy for timing and
measurement of revenue recognition;
o checked the amount, nature and date of
revenue recognition through evaluation of
the terms and conditions in the underlying
customer contract, date of completion of
freight forwarding services from
underlying freight documents, underlying
sales invoices and bank statement cash
receipts.
For the calculation of deferred revenue, we
reviewed the calculation based on the
remaining life of the contract with reference to
•
•
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the underlying customer contract including the
contract modification during the year relating
to the Bactisure contract with Zimmer.
•
•
Selected a sample of revenue transactions
across differing terms of trade and extended
delivery periods for the last two weeks of the
reporting period and the first two weeks of
the next reporting period. For each sample
selected, we checked the amount and timing
of revenue recorded by the Group to the
underlying customer contracts, sales invoice
and to freight documents.
Assessed the disclosures in the financial
report using our understanding obtained from
our testing and against the requirements of
the accounting standards.
Other Information
Other Information is financial and non-financial information in Next Science Limited’s annual reporting
which is provided in addition to the Financial Report and the Auditor’s Report. The Directors are
responsible for the Other Information.
The Other Information we obtained prior to the date of this Auditor’s Report was the Directors’
Report, Remuneration Report and Corporate Directory. The Our Purpose Page, Chairman’s Letter,
Managing Director’s Report, Investor Information are expected to be made available to us after the
date of the Auditor’s Report.
Our opinion on the Financial Report does not cover the Other Information and, accordingly, we do not
express an audit opinion or any form of assurance conclusion thereon, with the exception of the
Remuneration Report and our related assurance opinion.
In connection with our audit of the Financial Report, our responsibility is to read the Other
Information. In doing so, we consider whether the Other Information is materially inconsistent with
the Financial Report or our knowledge obtained in the audit, or otherwise appears to be materially
misstated.
We are required to report if we conclude that there is a material misstatement of this Other
Information, and based on the work we have performed on the Other Information that we obtained
prior to the date of this Auditor’s Report we have nothing to report.
Responsibilities of the Directors for the Financial Report
The Directors are responsible for:
• Preparing the Financial Report that gives a true and fair view in accordance with Australian
Accounting Standards and the Corporations Act 2001;
•
Implementing necessary internal control to enable the preparation of a Financial Report that
gives a true and fair view and is free from material misstatement, whether due to fraud or
error; and
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• Assessing the Group’s ability to continue as a going concern and whether the use of the going
concern basis of accounting is appropriate. This includes disclosing, as applicable, matters
related to going concern and using the going concern basis of accounting unless they either
intend to liquidate the Group or to cease operations, or have no realistic alternative but to do
so.
Auditor’s responsibilities for the audit of the Financial Report
Our objective is:
• To obtain reasonable assurance about whether the Financial Report as a whole is free from
material misstatement, whether due to fraud or error; and
• To issue an Auditor’s Report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in
accordance with Australian Auditing Standards will always detect a material misstatement when it
exists.
Misstatements can arise from fraud or error. They are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on
the basis of the Financial Report.
A further description of our responsibilities for the audit of the Financial Report is located at the
Auditing and Assurance Standards Board website at:
https://www.auasb.gov.au/admin/file/content102/c3/ar1_2020.pdf This description forms part of our
Auditor’s Report.
Report on the Remuneration Report
Opinion
Directors’ responsibilities
In our opinion, the Remuneration Report
of Next Science Limited for the year
ended 31 December 2022, complies with
Section 300A of the Corporations Act
2001.
The Directors of the Company are responsible for the
preparation and presentation of the Remuneration
Report in accordance with Section 300A of the
Corporations Act 2001.
Our responsibilities
We have audited the Remuneration Report included in
pages 10 to 22 of the Directors’ report for the year
ended 31 December 2022.
Our responsibility is to express an opinion on the
Remuneration Report, based on our audit conducted in
accordance with Australian Auditing Standards.
KPMG
Kevin Leighton
Partner
Sydney
28 February 2023
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Next Science Limited
Corporate Directory
31 December 2022
Directors
Independent Non-Executive Chairman:
Managing Director:
Non-Executive Directors:
Mark Compton
Judith Mitchell
Bruce Hancox
Daniel Spira
Aileen Stockburger
Company Secretary
Gillian Nairn
Registered office
Share register
Auditor
Solicitors
Suite 1902
Level 19
Tower A
The Zenith Building
821 Pacific Highway
Chatswood
NSW 2067
Link Market Services Limited
Level 12
680 George Street
Sydney
NSW 2000
KPMG Australia
300 Barangaroo Avenue
Sydney
NSW 2000
HWL Ebsworth Lawyers
Level 14
Australia Square
264-278 George Street
Sydney
NSW 2000
Stock exchange listing
Next Science Limited shares are listed on the Australian
Securities Exchange (ASX code: NXS)
Website
www.nextscience.com
Corporate governance statement
https://www.nextscience.com/corp-governance/
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