Next Science Limited
Annual Report 2023

Plain-text annual report

TABLE OF CONTENTS 1. OUR MISSION 2. 3. 4. 5. 6. 7. 8. 9. PATIENT CASE STUDY PHYSICIAN TESTIMONIALS PRODUCT SHOWCASE COLLAGEN AND DME (DURABLE MEDICAL EQUIPMENT) DISTRIBUTION RESEARCH & DEVELOPMENT CHAIR MESSAGE CEO MESSAGE DIRECTORS’ REPORT 10. LEAD AUDITORS INDEPENDENCE DECLARATION 1 3 5 7 10 11 13 15 19 48 11. CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME 49 12. CONSOLIDATED STATEMENT OF FINANCIAL POSITION 13. CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 14. CONSOLIDATED STATEMENT OF CASH FLOWS 15. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 16. DIRECTORS’ DECLARATION 17. INDEPENDENT AUDITOR’S REPORT 18. INVESTOR INFORMATION 19. CORPORATE DIRECTORY 50 51 53 54 101 102 106 109 OUR MISSION 1 Annual Report 2023OUR MISSION Next Science strives to significantly improve patient outcomes, elevate physician efficacy, and create value within the overall healthcare system through relentless innovation and commitment to education and research on biofilm elimination, infection prevention, and treatments for inflammatory diseases. 2 Annual Report 2023PATIENT CASE STUDY Acute Septic Arthritic Knee The patient, an 81-year-old male presented to the emergency room 11 days post-operatively. He had undergone a revision Total Knee Arthroplasty (TKA) due to an unstable knee and on admission complained of knee pain, mental confusion, atrial fibrillation, elevated liver enzymes, inability to stand, and urinary retention. Aspiration of the knee was conducted and bacteria known as Klebsiella Pneumonia was found. Investigation into the source of the infection identified the cause as an infected pacemaker. Given the patients severely declining health, the decision was made to use arthroscopic lavage to treat the infection as a temporising measure. Results Arthroscopic lavage was performed using one litre of saline and two litres of XPERIENCETM. The patient was placed on an antibiotic regimen and the infected pacemaker was replaced during hospitalisation. Read the full report by Dr. Jon Minter At one year follow up, the patient is fully healed and did not suffer any recurence of knee symptoms. 3 Annual Report 2023PATIENT CASE STUDY #NEXTSCIENCEHEALS Intervention in Chronic Wound Part of a 3-patient pilot study, a 76-year-old female patient presented with thrombocytosis from a chronic, non-healing wound that was resistant to other therapies. The wound was appropriately debrided, soaked in hypochlorous acid, BLASTX applied, and covered with foam dressing with compression socks. Results The patient was monitored at 8 weeks and 16 weeks for signs of healing. By the 16-week mark, the wound was fully healed. View the full poster by Dr. Mark Melin TREATMENT TIMELINE BLASTX Initiated 11/30/22 4-Week Follow-up 12/28/22 Wound Closed 3/23/2023 4 Annual Report 2023 “ I have used this product in probably a million applications and we’re seeing really good results using BLASTX powered by the XBIOTM Technology. We have two randomised control trials to show that when you use that, with the Prepare the RepairTM Paradigm, you can have tremendous amount of healing rates. The death rate from any chronic wound is about 30%, diabetic wounds are about 50% because of all of the inflammation and the complexity of the wounds - my own father suffered from a diabetic foot wound and I had to cut off half of my own father’s foot. So, I’m passionate about the evidence, I’m passionate about the science, and I’m passionate about the results. ” Dr. Matthew Regulsky Podiatric Surgeon PHYSICIAN TESTIMONIALS 5 Annual Report 2023Dr. Ravi K. Bashyal Orthopedic Surgeon #NEXTSCIENCEHEALS “ As a hip and knee replacement surgeon, my most feared post-op complication is infection. Patients undergoing elective and routine hip or knee replacement are at risk for infection, but it is not their expectation that this will occur. Further, if an infection does occur in a hip or knee replacement, it is a serious complication that always requires surgery to address. In even the most benign circumstance, an infected prosthesis requires at least one repeat operation and many weeks of IV antibiotics - more serious cases may require multiple staged operations, each with likely worse functional final outcomes. Anything I can do to prevent this devastating complication from occurring is of great interest to me. Routine use of XPERIENCETM has been shown to dramatically lower this risk, and has been a game changer in my practice. For over the past two years and over 1000 cases, I have had ZERO infections. There is a multifactorial approach to this, but XPERIENCETM is a big part of this formula. I visualise this product as a paradigm shifting gamechanger. If we can educate and inform the surgical community effectively, it has an opportunity to change standard of care practices in surgery. ” 6 Annual Report 2023PRODUCT SHOWCASE In April 2021, XPERIENCETM Advanced Surgical Irrigation received FDA clearance to be sold as a medical device in the United States. This non- toxic technology does not need to be rinsed from the surgical site after closure, offering up to five hours of protection as the solution dilutes in the body, helping to prevent surgical site and post-operative infection. XPERIENCETM is designed for use in virtually every open orthopedic surgical case, with an initial focus on shoulder, hip, knee, trauma and podiatry. 7 Annual Report 2023XBIOTM TECHNOLOGY: HOW IT WORKS XBIOTM Technology combines a solvent, surfactant, and a high-osmolarity buffer system to create a unique solution that Deconstructs, Destroys, and Defends against biofilm. Deconstruct The buffer system (citric acid and sodium citrate) deconstructs the EPS structure while the citric acid removes the metal ions (chelation) holding together the polymers while the sodium citrate prevents the reformation of the bonds. Destroy After deconstructing the EPS, the high osmolarity of the buffer system increases osmotic pressure on the bacterial cells. The surfactant facilitates the destruction of the cell membrane by pulling out the proteins holding the structure together, allowing the high osmolarity solution to enter the cell and lysing the bacterial cell. Defend The solvent and buffer system defend against recolonisation by dissolving the polymers holding the structure together and preventing the metal ions from reattaching. #NEXTSCIENCEHEALS 8 Annual Report 2023In 2023, Dr. Matthew Regulski, DPM, developed the ‘Prepare to Repair™ paradigm.’ This initiative emphasises the critical importance of adequately preparing wounds to repair, or heal, before considering advanced therapies. The Prepare to Repair™ paradigm outlined essential steps for clinicians to follow, including adding an effective antimicrobial such as BLASTX® when addressing patients with wounds, ensuring comprehensive care and optimised outcomes. The first step being biofilm management. Dr. Matthew Regulsky Podiatric Surgeon The ‘Prepare to Repair’ paradigm showcased BLASTX’s pivotal role in wound management. Dr. Regulski’s feature on ‘The Balancing Act’ shared powerful patient stories, cementing BLASTX’s reputation as a game-changer in chronic wound care. Scan the QR code to witness BLASTX’s healing power firsthand. Watch the interview with Dr. Matthew Regulski #NEXTSCIENCEHEALS 9 Annual Report 2023COLLAGEN AND DME (DURABLE MEDICAL EQUIPMENT) DISTRIBUTION In the year following its launch in October 2022, Next Science’s Durable Medical Equipment (DME) program has continued to make significant strides in advancing wound care solutions. The DME program allows physicians to select Wound Care Packs that include a variety of wound care products tailored to their patients needs. These packs include collagen, wound cleanser, various dressings and gauze, and the option of BLASTX. The packs are then prescribed to patients by their physicians and billed through insurance. Why are Payors Important? The business model for Durable Medical Equipment (DME) differs significantly from the surgical model. In DME, our collaboration extends to patients, physicians, and insurance payors. When a patient receives a prescription from their physician, it’s simultaneously forwarded to Next Science. We then engage with their insurance provider to confirm coverage and facilitate payment. Our reimbursement is directly impacted by the number of payors we partner with, ensuring optimal financial support for prescribed treatments. 10 Annual Report 2023RESEARCH AND DEVELOPMENT Research and development (R&D) remains a cornerstone of Next Science’s commitment to innovation and advancement in healthcare solutions, aligned with our mission to significantly improve patient outcomes, elevate physician efficacy, and create value within the overall healthcare system. In FY23, the Company continued to allocate significant resources towards R&D endeavors, reflecting its dedication to driving future growth and enhancing patient care. In FY23, the Company expensed $6.5m in R&D, up 5.5% compared with FY22 directly related to continued spend on R&D projects and clinical studies including increased expenditure relating to the Canada study being conducted by the Ottawa Hospital Research Institute Furthermore, the scientific community’s interest in evaluating Next Science’s proprietary XBIOTM technology has continued to grow. Notably, recent studies have highlighted the unique advantage of XBIOTM Technology with anti-inflammatory properties, leading to a wider discussion of treatment in the wound and surgical spaces. Looking ahead, Next Science is poised to continue its pursuit of excellence in R&D, driving forward transformative advancements in healthcare solutions. 11 Annual Report 2023 RECENT STUDIES/PUBLICATIONS DATE: AREA AUTHORS HYPERLINK January 2023 Discovery: Spine Fresquez, Chung, Pereira, https://pubmed.ncbi.nlm.nih. Disease et al. (USC) gov/36358169/ March 2023 BLASTX® Regulski, Myntti, Garth et https://mdpi.com/2079-6382/12/3/536 Effectiveness al. (Wound Care Institute, Next Science, Montana State University) March 2023 Irrigation, Biofilms, Cheng, Owen , Swink, https://lnkd.in/eN3CnXv2 Infection Myntti (Allegheny Health Network poster presentation at Orthopaedic Research Society meeting. April 2023 Acne treatment Marshall-Hudson, Tuley, https://pub-press.mydigitalpublication.com/ Damstra, Dosik, Myntti, publication/?m=54680&i=787927&p=42&ver=html5 Porral, Palomo (TXL Research Inc., Next Science) July 2023 Biofilm, Wound Care Patricia Stevenson, Melissa Marguet and Matthew Regulski https://www.sciencedirect.com/science/article/abs/ pii/S0899588523000515?dgcid=author November XPERIENCETM Case Daniel Hawk, Dr. Jon https://worldjournalofcasereports.org/science-world/ 2023 Study on Acute Minter, MD articlepdf/wjcrci-22-221.pdf Septic Knee Arthritis December XPERIENCETM and Louis Battista, Andrew https://journaloei.scholasticahq.com/article/89994 2023 inflammation Wickline, MD January 2024 Biofilms Claudia A Cox, Elias K https://pubmed.ncbi.nlm.nih.gov/38214428/ Manavathu, Sushama Wakade, Matthew Myntti, Jose A Vazquez February 2024 BLASTX Case study Patricia Stevenson, Kristie https://worldjournalofcasereports.org/science-world/ on Sweets Syndrome Warwick, Kerry Wirz, articlepdf/wjcrci-24-31-224.pdf February 2024 Irrigation, PJI Sean B Sequeira, Matthew https://pubmed.ncbi.nlm.nih.gov/38372561/ Chelsea Birtwell F Myntti, Michael A Mont 12 Annual Report 2023CHAIR MESSAGE DEAR FELLOW SHAREHOLDERS, I am pleased to present the Annual Report of Next Science Limited for the year ended 31 December 2023, my first as your Chair. A YEAR OF RENEWAL 2023 has been a year of renewal for the Company with significant changes made to our Board and leadership team as well as across the business. The DME structure which was in its infancy at the start of FY23 has continued to show growth as we implemented key learnings and refined our strategy. We also made good progress in driving direct sales of BLASTX® and XPERIENCETM. We finished FY23 with a new-look Board following the departure of our Chair, Mark Compton for personal reasons and Bruce Hancox, who had served on the Board for over a decade following the investments by our major shareholder Lang Walker AO. We are extremely grateful to them both for their important contribution and longstanding support of the Company. We appointed two Australian-based Non-Executive Directors, Grant Hummel and Katherine Ostin, who bring fresh perspectives, valuable skills and deep experience in the healthcare sector. We also made significant changes to our leadership team. Our former CEO and Managing Director Judith Mitchell retired in July 2023, and we thank Judith for her pioneering work in establishing Next Science’s position as a listed medical device company and building its business especially in the United States. Judith led the Company through its ASX-listing and built a team focused on commercial success. I would also like to acknowledge the contribution of our former Chief Financial Officer (CFO) Jacqueline Butler who was pivotal in the ASX-listing, establishing robust financial systems and the successful formation of the DME. As part of the process of appointing a US-based CEO and Managing Director, we made the strategic decision to move the CFO role to our Florida office in the US. The relocation of the CFO role is designed to support and provide even greater focus on the ongoing growth of the commercial business. Marc Zimmerman was appointed CFO in May 2023. Marc has held different CEO and CFO roles as well as various finance positions during his 15-year tenure at Verizon. In July 2023, we were delighted to welcome I.V. Hall to Next Science as CEO and Managing Director. I.V. is a respected leader in the US healthcare industry with a rare combination of scientific, clinical and commercial skill and experience. He has a proven track record in building successful businesses and a positive organisational culture. I.V. was most recently a member of the Global Leadership Team and R&D Leadership Team for De Puy Synthes, a subsidiary of Johnson & Johnson (NYSE: JNJ). Since joining, I.V. has already made a huge difference to the Company creating a more inclusive and supportive culture based on accountability from the Board down. He has also conducted detailed reviews of our operating processes, sales strategy and the DME segment. CAPITAL RAISE AND USE OF FUNDS In August 2023, we successfully completed a Placement to new and existing institutional and sophisticated investors to raise gross proceeds of A$12m. This was followed by a Share Purchase Plan (SPP) and US Offer which were completed in September to raise a further A$9.5m. 13 Annual Report 2023CHAIR MESSAGE CAPITAL RAISE AND USE OF FUNDS (CONT.) In conjunction with the Placement, Next Science reached agreement with Walker Group Holdings Pty Ltd to retire the A$10m in convertible notes held by the Walker Group with the redemption amount of A$10m (plus accrued interest) offset against a share subscription commitment by Walker Group at the Placement Price. The settlement and issue of shares to Walker Group was approved by shareholders at a General Meeting in October 2023. The funds raised strengthened Next Science’s balance sheet ensuring we are well placed to fund the promotion of XPERIENCETM research, resourcing to service the Health Trust opportunity, expansion of the DME sales force and expansion of a second fulfilment site for the DME. LANG WALKER AO In January 2024, we were saddened to learn of the passing of Lang Walker AO, who has been a longstanding supporter of Next Science and its unique XBIOTM technology. Related party interests associated with Mr Walker hold around 37% of Next Science via Walker Group Holdings Pty Ltd and the Auckland Trust Company. OUR OUTSTANDING TEAM After a long career witnessing problematic infections, I joined the Next Science Board in 2018 because I was excited by the possibilities inherent in the XBIOTM technology platform. I have seen the debilitating impacts these infections have on people’s lives and the enormous burden they place on our healthcare systems. As we make the transition from a start up to a small company with successful commercialisation, I look forward to working closely with the Board, and I.V. and his team as we seek to eradicate these biofilms. On behalf of the Board, I would like to thank all our team for their continued dedication and commitment to our business. Our people are critical to Next Science’s success. I would also like to thank our board of directors who have provided counsel and guidance during an extraordinary year. Finally, I would like to acknowledge the ongoing support provided by our Shareholders and thank them for their belief in our mission to heal people and save lives. Aileen Stockburger Chair and Independent Non-Executive Director 14 Annual Report 2023CEO MESSAGE DEAR FELLOW SHAREHOLDERS, I am pleased to deliver the annual report for FY23, my first as your CEO. I would like to begin with what drew me to the CEO role. I have spent my 30-year career in medical devices, 28 years of which were in orthopaedics. For the first half of my career, I worked as an engineer in R&D, developing and launching hundreds of products. The second half has been focused on sales, commercialisation, and strategy. What I learned through my time in orthopaedic trauma was that the healthcare marketplace has developed excellent solutions for repairing biomechanics. We have optimised implant and instrument design for restoration of structure, developed robotics for perfection of surgical techniques and biologics for regeneration and remodelling of tissues. However, the one clinical challenge that remains and does not have a gold standard of care is the prevention or treatment of infection, whether it is orthopaedic or soft tissue-based surgery. Moreover, for wounds in general, we do not have effective and efficient gold standard of care treatment solutions for the prevention or treatment of infection. The XBIOTM technology is a very simple solution that does not change the way the procedures are done. It does not change the way a clinician has to work and forms part of the standard workflow of the surgery or patient treatment. The mode of action is so unique and the XBIOTM technology so straightforward in its approach and simplicity that it provides an elegant solution to a very difficult problem. When I first met with Next Science and gained a better understanding of the challenges facing the Company, I realised the needs primarily related to commercialisation rather than the technical side. This meant there was a real opportunity to get a solution into the healthcare space to solve entrenched problems and deliver better patient outcomes to an underserved population. IMMEDIATE PRIORITIES Since joining the Company in July 2023, I have focused on a several immediate priorities. This began with a refinement of our strategy and the establishment of key goals and objectives. We revised our mission statement to include innovation and education. As we focused on education, we looked closely at how we serve our customers. We decided it was time for the company to commit to building a sales force centred around product expertise and clinical acumen that is a true valued benefit. We consolidated our sales leadership team and launched a new sales training program, Next Science University, as first steps in this transformation. We have since taken on the process of training all of our direct field sales consultants in the clinical and technical realm of wound care. These changes and new focus on training are expected to deliver significant improvements in the future productivity and efficiency of the sales team. At the same time, it became clear that we needed to improve and expand our customer engagement and sales strategies specific to the DME business. We refocused our sales teams to target larger volume and more profitable segments of the wound care market. This involved targeting the larger Wound Care Centres and expanding our payor matrix beyond Medicare to include the private payor sector to enable access to more patients that are being treated in those Wound Care Centres. We have also refined the culture of the organisation building on the incredible passion displayed by our team with a renewed focus on consistency, quality, and rigour. 15 Annual Report 2023CEO MESSAGE FY23 FINANCIAL RESULT In FY23, Next Science delivered record revenue of US$22.2m which was 89.4% higher on the prior corresponding period (pcp). 2H FY23 revenue of US$12.1m was in line with the 2H FY23 guidance of US$12-14m provided in October 2023. As we moved through the year, we saw an improved performance across the business. Wound Care sales recorded solid growth as the DME structure benefited from an increased focus on wound care centres and shift in our payor mix. Higher direct sales of BLASTX® reflected a new distributor arrangement for Veterans Affairs clinics and orders from Long Term Care Centres. Within the Surgical segment, direct sales of XPERIENCETM recorded good growth due to an increase in the clinical evidence available and broader access to healthcare sites provided by our contract with a leading GPO.1 The key highlights of the FY23 result are as follows: • • • • Revenue: US$22.2 million (FY22: US$11.7 million) Gross Profit: US$16.2 million (FY22: US$9.2 million) Operating Loss: US$16.0 million (FY22: US$12.7 million) Closing Cash: US$9.2 million (FY22: US$5.1 million) CLINICAL STUDIES In 2023, we commenced a 7,600 participant Canadian randomised control study that will be one of the largest orthopaedic clinical studies conducted. The scale of the study has been designed to support our objective of XPERIENCETM being adopted as the standard of care in surgery. At the end of FY23, 261 patients had been enrolled in the first site. A second site has started recruiting with another five sites pending completion of contracts. Other important clinical studies released during FY23 added to the increasing body of clinical evidence available on the efficacy of XPERIENCETM. This included a study by Dr Andrew Wickline MD which showed a potential anti-inflammatory benefit for XPERIENCETM. Following a peer review process, it was published in the Journal of Orthopaedic Experience & Innovation in December 2023. In November 2023, a study by Dr Robert Harris MD, published on VuMedi, found XPERIENCETM to be efficacious with zero infection rate in the 423-patient cohort up to 90 days post-surgery. OUTLOOK Our priorities for FY24 are to deliver significant topline growth across three key areas of the business. Firstly, by increasing the penetration and productivity of the DME structure to achieve further improvement in revenue quality. Secondly, by driving higher direct sales of BLASTX® to Long Term Care Centres and Veterans Affairs clinics. ¹On 1 August 2023, Next Science entered into an agreement with leading Group Purchasing Organisation (GPO) HealthTrust to provide its members with access to XPERIENCETM. The US-based organisation serves 1,600 hospitals and 43,000 alternate sites of care including ambulatory surgery centres, physician practices and long-term care centres. 16 Annual Report 2023CEO MESSAGE OUTLOOK (CONT.) Finally, direct sales of XPERIENCETM are expected to benefit from the expansion of our GPO footprint and extension of the use case from high risk to prophylactic use. The publication of additional clinical research for both BLASTX® and XPERIENCE® in the next 12 months will also be important and lead to broader recognition in the medical community. Next Science expects to achieve a cash flow positive position on a monthly basis by the end of FY24. This is underpinned by continued revenue growth, working capital and cost management which includes an increase in the variability of our cost base. I would like to thank our Board, team, and shareholders for their invaluable contribution to the continued growth of our Company. Harry Thomas Hall, IV (I.V.) Managing Director and Chief Executive Officer 17 Annual Report 2023Next Science Limited ACN 622 382 549 Annual Report - 31 December 2023 18 Annual Report 2023 DIRECTORS’ REPORT The Directors present their report together with the consolidated financial statements of the Group comprising Next Science Limited (Next Science/Company), and the entities it controlled at the end of, or during, the year ended 31 December 2023 (Group). All amounts are presented in US dollars (USD) unless otherwise stated. DIRECTORS The Directors of the Company in office during or since the end of the financial year were as follows: CURRENT Aileen Stockburger Harry Thomas Hall, IV (I.V.) Appointed 10 July 2023 Grant Hummel Katherine Ostin Daniel Spira FORMER Bruce Hancox Mark Compton Judith Mitchell Appointed 23 August 2023 Appointed 24 October 2023 Retired 30 June 2023 Retired 23 August 2023 Retired 31 July 2023 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 com- mercialisation of technologies to resolve the issues caused by biofilms and their incumbent bacteria, fungus and viruses and the infections they cause with a focus on human health. The Company is headquartered in Sydney, Australia and has a research and development centre and sales and marketing functions located in Florida, USA. 19 Annual Report 2023DIRECTORS’ REPORT OPERATING AND FINANCIAL REVIEW (CONT.) Significant changes in the state of affairs On 2 February 2023, the Company, issued 10,000,000 Secured Convertible Notes with a Face Value of A$10,000,000 (Notes) to a major shareholder, Walker Group Holdings Pty Limited (Walker Group) to support the establishment and growth of the Company’s new Durable Medical Equipment (DME) business and to fund investment in a Canadian study at the Ottawa Hospital Research Institute (see further details on the study below). The terms of the Notes included a 21-month term maturing on 11 November 2024 at a conversion price of A$0.72 per security and accrual of interest at a rate of 10% per annum, (payable in one instalment on redemption, or if Walker Group issued a notice of conversion, at a rate of 5% per annum and capitalised into additional shares on conversion. In March 2023, recruitment commenced for a 7,600-patient study into periprosthetic joint infection (PJI) through the Ottawa Hospital Research Institute in Canada. The randomised controlled study is being conducted over at least five sites and will be one of the largest orthopaedic studies ever conducted. The study will assess the rate of PJI (less than 90 days post-surgery) in patients undergoing primary total knee arthroplasty, total hip arthroplasty or hip resurfacing with XPERIENCE™ Advanced Surgical Irrigation versus dilute Betadine. In May 2023, the Company announced that, as part of the process of appointing a new US based Managing Director and Chief Executive Officer (CEO), it had made a strategic decision to also move the Chief Financial Officer (CFO) role to the Company’s US office. The CFO role relocation was designed to support and provide even greater focus on the ongoing growth of the Company’s commercial business. Marc Zimmerman was appointed as CFO on 26 May 2023. Marc has over 29 years’ experience holding both CFO and CEO positions. On 10 July 2023, Harry Thomas Hall, IV (I.V.) commenced as the Company’s CEO, based in the Company’s Florida office. I.V. has over 28 years’ experience in the global medical device industry. Prior to joining Next Science, I.V. was a member of the Global Leadership Team and R&D Leadership Team for DePuy Synthes, a subsidiary of Johnson and Johnson (NYSE: JNJ). I.V. joined DePuy Synthes in 1997 where he held senior roles including: Global Vice President – MedTech R&D and Worldwide President – Trauma, Extremities, Craniomaxil- lofacial & Animal Health. As Worldwide President of Trauma, Extremities, Craniomaxillofacial and Animal Health at DePuy Synthes, I.V. was responsible for a global portfolio and execution strategy for a US$3.2bn platform including upstream marketing and commercial planning in the Global Orthopaedic Unit of DePuy Synthes. The terms of I.V.’s executive services agreement include a sign-on grant of performance rights equivalent in value to US$500,000 (based on the 20-trading day volume weighted average price of the Company’s shares prior to the date of announcement of I.V.’s appointment), vesting in equal tranches annually over a three-year period subject to continuous employment through to each vesting date. The Company will seek shareholder approval for the sign-on grant at the 2024 annual general meeting and the rights will be granted following the meeting. If shareholder approval is not obtained, vested rights will be satisfied with Company shares pur- chased on market. On 30 June 2023, Non-Executive Director, Bruce Hancox, retired as a Director, having served on the Board for more than 10 years and as Chair of the Board’s Audit and Risk Committee, since the Company’s admission to 20 Annual Report 2023DIRECTORS’ REPORT OPERATING AND FINANCIAL REVIEW (CONT.) Significant changes in the state of affairs (continued) the official list of ASX in 2019. Aileen Stockburger was appointed by the Board to assume the role of Chair of the Audit and Risk Committee upon Bruce’s retirement. On 27 July 2023, the Company announced that it had signed its first Group Purchasing Organisation (GPO) contract. The Company’s GPO contract with HealthTrust has provided access to XPERIENCE™ for Health- Trusts’ members since 1 August 2023. HealthTrust is a leading GPO in the US serving 1,600 hospitals and 43,000 alternate sites of care including ambulatory surgery centres, physician practices and long-term care centres. On 9 August 2023, Next Science announced the release of the findings of a 60-patient double-arm pilot study which demonstrates a potential anti-inflammatory benefit for XPERIENCE™, Next Science’s advanced sur- gical irrigation product, following a total knee arthroplasty (TKA). Next Science considers the study findings to be important as they suggest an expanded application for XPERIENCE™ beyond reducing biofilm-based infection rates. The study findings subsequently underwent a peer review process and were published in the Journal of Orthopaedic Experience & Innovation in December 2023. On 23 August 2023, the Company announced the appointment of Aileen Stockburger as Chair of the Board of Directors and the appointment of a longstanding advisor to the Company, Grant Hummel, as an independent Non-Executive Director. The timing of the Board changes was brought about by the retirement of Mark Comp- ton AM as a Non-Executive Director and Chair of the Company. Mark’s retirement from the Board followed recent family bereavements. On 31 August 2023, the Company announced the completion of a placement to institutional and sophisticated investors (Placement) raising A$12,000,000 at a price of A$0.42 per share as well as the launch of a Share Purchase Plan to raise up to A$5,000,000 and an offer to US accredited investors to raise up to A$1,500,000, each at the same price as the Placement. The Company also announced on 31 August 2023 that in conjunction with the Placement, the Company had entered into a Subscription and Redemption Deed agreement with Walker Group to retire all of the Notes on the basis that the redemption amount of A$10,000,000 plus accrued interest would be offset against a share subscription commitment by Walker Group at the same price as the Placement, conditional upon shareholder approval. On 24 October 2023, the Board appointed Katherine Ostin (Kathy) as an independent Non-Executive Director and Chair of the Board’s Audit and Risk Committee. Kathy was an Audit, Assurance and Risk Consulting Part- ner at KPMG from 2005 to 2017 and has extensive experience in the aged care and healthcare sectors, having established and led KPMG’s New South Wales Health, Ageing and Human Services audit practice from 2006 to 2017. During her 24 years with KPMG, Kathy worked in Australia, the US, Asia, and the UK. On 25 October 2023, in accordance with the Subscription and Redemption Deed between Walker Group and Next Science and following receipt of shareholder approval to do so, Walker Group gave notice of the exercise of their right to elect to redeem the A$10,000,000 Notes in return for the issue to Walker Group of 24,673,842 shares in the Company at a price of $0.42 being the same price as the Placement price. The early conversion 21 Annual Report 2023DIRECTORS’ REPORT OPERATING AND FINANCIAL REVIEW (CONT.) Significant changes in the state of affairs (continued) and modification of the Notes resulted in an overall gain on fair value of US$402,324. Following the issue of the shares to Walker Group, the interests of Walker Group, and its associates, in the Company increased to 37.17%. In the opinion of the Directors, other than the events previously stated, there were no further significant chang- es in the state of affairs of the Group that occurred during the year. Shareholder returns Revenue Loss attributable to owners of the company Basic earnings per share (EPS) (cents) Share price as at 31 Dec (A$) Return on capital employed Review of operations 2023 $22,179,327 ($16,270,814) ($6.95) AUD$0.340 (113.4%) 2022 $11,712,722 ($12,683,312) ($6.03) AUD$0.685 (128.0%) The loss for the Group for the financial year to 31 December 2023 after providing for income tax amounted to $16,270,814 (2022: $12,683,312). Revenue increased by 89% for the period increasing from $11,712,722 in the prior corresponding period to $22,179,327. Major contributors to increases in product sales included significant growth in both the Wound Care and Surgical businesses. Growth in the Wound Care business is through the Durable Medical Equip- ment (DME) structure of offering reimbursed Collagen with BlastX. Contributing to the growth in the Surgical business is the Company’s GPO contract with HealthTrust giving Next Science the framework to sell XPERI- ENCE™ to a larger number of hospitals and alternate sites as well as further clinical studies conducted which provides support for the product, preventing surgical site infection. Gross profit for FY23 was $16,234,576 compared to $9,149,698 in the prior corresponding period. Gross mar- gin as a percent of sales was 73% compared with 78% in the prior corresponding period. Selling and distribution expenses were $20,165,335, an increase of $9,855,130 compared with $10,310,205 in the prior corresponding period. The increase in spend in 2023 mainly relates to an increase in the Wound Care sales team which more than doubled associated with growing the DME business in 2023 and the associated increases in US domestic travel. Administration expenses were $5,610,459, an increase of $225,453 compared with $5,385,006 in the prior corresponding period. The increase mainly relates to further costs to support the DME launch and the overall higher product sales. Research and development expenses were $6,485,524 an increase of $335,718 compared with $6,149,806 in the prior corresponding period with expenditure in the current period related to continued spend on R&D projects and clinical studies including increased expenditure relating to the Canada study being conducted by the Ottawa Hospital Research Institute. 22 Annual Report 2023DIRECTORS’ REPORT OPERATING AND FINANCIAL REVIEW (CONT.) Review of operations (Continued) Cash and cash equivalents at 31 December 2023 amounted to $9,238,697 compared to $5,073,625 at 31 December 2022. Term deposits at 31 December 2023 amounted to $37,823 compared to $37,789 at 31 De- cember 2022. The Directors have considered the effects of the Israeli-Palestinian Conflict, the rising interest and inflation outlook and climate-related risks and do not expect any significant impact on the Group arising from these matters. 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 clear- ances 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 effective- ness 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. 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. MATTERS SUBSEQUENT TO THE END OF THE FINANCIAL YEAR 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 its operations are conducted, and the general trend is towards increasingly stringent regulation. In the U.S., the drug, 23 Annual Report 2023DIRECTORS’ REPORT GOVERNMENT REGULATION (CONT.) 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. The Jacksonville based subsidiary, Next Science LLC, is licensed and accredited by US Medicare, as a Dura- ble Medical Equipment (DME) provider based in the State of Florida, USA. Such licensing and accreditation, brings with it additional regulatory and compliance obligations. 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 mea- sures 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. 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. 24 Annual Report 2023DIRECTORS’ REPORT INFORMATION ON DIRECTORS NAME: AILEEN STOCKBURGER Title: Chair and Independent Non-Executive Director Special responsibilities: Member, Audit and Risk Committee Member, People, Culture and Remuneration Committee Qualifications: Bachelor of Science and MBA, The Wharton School, University of Penn- sylvania, Graduate of the Australian Institute of Company Directors, Certi- fied Public Accountant (CPA – USA). Experience and expertise: Prior to joining Next Science, Aileen was the Worldwide Vice President of Business Development for the DePuy Synthes Group of Johnson & John- son, where she oversaw the group’s merger and acquisition activities, in- cluding 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 listed company director- Non-Executive Director, Microbot Medical Inc. (NASDAQ: MBOT). ships in last three years: 25 Annual Report 2023DIRECTORS’ REPORT NAME: HARRY THOMAS HALL, IV (I.V.) (APPOINTED 10 JULY 2023) Title: Managing Director and Chief Executive Officer Special responsibilities: None Qualifications: Bachelor of Science: Ceramic Engineering and Master of Science: Bio- engineering, Clemson University MBA, Pennsylvania State University Advanced Management Program, Harvard Business School Experience and expertise: I.V. has more than 28 years’ experience in the global medical device in- dustry and has held diverse general management roles including prod- uct development, global strategic marketing, commercial operations, and sales leadership. Prior to joining Next Science, I.V. was a member of the Global Leadership Team and R&D Leadership Team for DePuy Synthes, a subsidiary of Johnson and Johnson (NYSE: JNJ), and com- pleted the launch of the first surgical robot developed by JNJ / DePuy Synthes. I.V. joined DePuy Synthes in 1997 where he held senior roles including: Global Vice President – MedTech R&D and Worldwide Pres- ident – Trauma, Extremities, Craniomaxillofacial & Animal Health. As Worldwide President of Trauma, Extremities, Craniomaxillofacial and Animal Health, I.V. was responsible for a global portfolio and execution strategy for a US$3.2bn platform including upstream marketing and commercial planning in the Global Orthopaedic Unit of DePuy Synthes. In addition to managing over 1,100 staff across sales, marketing and R&D, I.V. created and sustained personal relationships with well over one hundred key opinion leaders worldwide. Other listed company director- None ships in last three years: 26 Annual Report 2023DIRECTORS’ REPORT INFORMATION ON DIRECTORS (CONTINUED) NAME: Title: GRANT HUMMEL (APPOINTED 23 AUGUST 2023) Independent Non-Executive Director Special responsibilities: None Qualifications: Bachelor of Science with an honours degree in molecular genetics and Bachelor of Laws (Honours), University of Tasmania Graduate Diploma of Applied Finance and Investment, FINSIA (now Ka- plan) Experience and expertise: Grant was part of Next Science’s ASX listing deal team in 2019. He has been a partner of a major Australian law firm, for over fifteen years. Grant has experience with corporate and commercial transactions, with partic- ular expertise in advising primary care, allied health, medical device and life science clients. Other listed company director- Non-Executive Director of GLG Corp Ltd (ASX:GLE) ships in last three years: NAME: Title: KATHERINE OSTIN (APPOINTED 24 OCTOBER 2023) Independent Non-Executive Director Special responsibilities: Chair, Audit and Risk Committee Qualifications: Bachelor of Commerce (Accounting and Finance), University of New South Wales Fellow of the Financial Services Institute of Australasia Graduate, Australian Institute of Company Directors Experience and expertise: Kathy is an experienced non-executive director and audit and risk com- mittee chair. Kathy was an Audit, Assurance and Risk Consulting Partner at KPMG from 2005 to 2017 and has extensive experience in aged care and healthcare sectors, having established and led KPMG’s New South Wales Health, Ageing and Human Services audit practice from 2006 to 2017. During her 24 years with KPMG, Kathy worked in Australia, the US, Asia, and the UK. Other listed company director- Non-Executive Director of 3P Learning Limited (ASX:3PL) since August ships in last three years: 2021 Non-Executive Director of Dusk Group Limited (ASX:DSK) since Septem- ber 2020 Non-Executive Director of Capral Limited (ASX:CAA) since June 2020 Non-Executive Director of Alex Corporation Limited since February 2021 Non-Executive Director of Elanor Investors Group Limited (ASX: ENN) and Elanor Commercial Property Fund (ASX: ECF) since January 2024 Non-Executive Director of Swift Media Ltd (ASX:SW1) (1 October 2019 - 18 November 2021) 27 Annual Report 2023DIRECTORS’ REPORT 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: Dan 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 Amer- ica (with responsibility for a portfolio of businesses spanning Vision Care, Dermatology and Aesthetic Devices) and was also Managing Director, Pacific region. Prior to that, Dan spent over 15 years at Johnson & Johnson Inc in various roles including Vice President, Country Manager, Chief Mar- keting Officer and other sales and marketing roles across the Asia Pacific, Europe/Middle East and North American regions. Other listed company director- None ships in last three years: NAME: Title: MARK COMPTON AM (RETIRED 23 AUGUST 2023) 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 Austral- asian College of Health Services Management, the Australian Insti- tute of Management and the Royal Society (New South Wales). 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 diagnos- tics 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, Sci- Gen Limited and Alpha Healthcare Limited. He is an Adjunct Profes- sor at Macquarie University in healthcare leadership and manage- ment (since 2012). Other listed company director- Chair and Non-Executive Director of Sonic Healthcare Limited (ASX: ships in last three years: SHL). 28 Annual Report 2023DIRECTORS’ REPORT INFORMATION ON DIRECTORS (CONTINUED) NAME: Title: BRUCE HANCOX (RETIRED 30 JUNE 2023) 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 gen- eral 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 Lang Walker AO since 2008. He serves as a director at Walker Corporation. Other listed company director- None ships in last three years: NAME: Title: JUDITH MITCHELL (RETIRED 31 JULY 2023) Managing Director and Chief Executive Officer Special responsibilities: None Qualifications: MBA, University of Hull Experience and expertise: Judith has been the Managing Director of Next Science since 2017. Prior Graduate of the Australian Institute of Company Directors 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 Sys- tems, 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 listed company directorships None in last three years: 29 Annual Report 2023DIRECTORS’ REPORT COMPANY SECRETARY Gillian Nairn, BA/LLB, LLM, FGIA, was appointed Company Secretary on 21 June 2018. Gillian is an experi- enced 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 2023 were as follows: NAME OF DIRECTOR BOARD MEETINGS PEOPLE, CULTURE & REMUNERATION COMMITTEE AUDIT AND RISK COMMITTEE AD HOC COMMITTEE1 Aileen Stockburger Harry Thomas Hall, IV4 Mark Compton5 Bruce Hancox6 Grant Hummel7 Judith Mitchell8 Katherine Ostin9 Daniel Spira A2 23 16 10 6 13 8 4 23 B3 23 15 8 6 13 8 4 22 A 3 - 2 - 1 - - 3 B 3 - 2 - 1 - - 3 A 6 - 3 2 3 - 1 - B 6 - 3 2 3 - 1 - A 5 5 - - - 5 - - B 5 4 - - - 5 - - 1This was a temporary subcommittee established by the Board to deal with ad-hoc matters during the year 2A - Number of meetings held 3B - Number of meetings attended by the Director during the time the Director was a member of the Board or Committee 4Appointed Managing Director and CEO on 10 July 2023 5Approved leave of absence from 17 August 2023 to 22 August 2023 inclusive. Retired on 23 August 2023. 6Retired on 30 June 2023 7Appointed a Director on 23 August 2023 8Retired on 31 July 2023 9Appointed a Director on 24 October 2023 30 Annual Report 2023 DIRECTORS’ REPORT 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 FULLY PAID ORDINARY SHARES SHARE OPTIONS OR RIGHTS Aileen Stockburger Harry Thomas Hall, IV (I.V.)* Grant Hummel Katherine Ostin Daniel Spira Total Number 569,638 200,000 387,694 - 752,172 1,909,504 Number - - - - - - *Note: I.V. Hall has a contractual right to a sign-on grant of rights. Refer to page 38 for further details. SHARES UNDER OPTION AND RIGHTS At the date of this report, there are 6,349,967 options over ordinary shares on issue (2022: 2,812,000 options) and 2,017,151 performance rights, representing 2.87% (2022: 1.31%) 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 ex- ecutives 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. 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 proceed- ings 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. 31 Annual Report 2023DIRECTORS’ REPORT 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 36 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 36 to the financial statements do not compromise the external auditor’s independence requirements under the Corporations Act 2001 for the fol- lowing 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 Corpo- rations Act 2001 and no contraventions of any applicable code of professional conduct in relation to the audit for the year ended 31 December 2023. 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 48 and forms part of the Directors’ Report for the financial year ended 31 December 2023. 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 2023. 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 Corpo- rations Act 2001 and its Regulations. 32 Annual Report 2023DIRECTORS’ REPORT REMUNERATION REPORT (AUDITED) (CONT.) For the purposes of this Report, key management personnel (KMP) are defined as those persons having au- thority 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 KEY MANAGEMENT PERSONNEL (KMP) The KMP of the Group during the financial year and the positions held are summarised below: Non-Executive Directors Aileen Stockburger, Board Chair Mark Compton Bruce Hancox Grant Hummel Katherine Ostin Daniel Spira Managing Director and CEO Harry Thomas Hall, IV (I.V.) Judith Mitchell Other KMP Marc Zimmerman Jacqueline Butler Matthew Myntti Jon Swanson (retired 23 August 2023) (retired 30 June 2023) (appointed 23 August 2023) (appointed 24 October 2023) (appointed 10 July 2023) (resigned as Managing Director and CEO on 9 July 2023 and retired as a Director on 31 July 2023) (Chief Financial Officer) (appointed 26 May 2023) (Chief Financial Officer) (resigned 31 May 2023) (Chief Technology Officer) (Chief Operating Officer) 33 Annual Report 2023DIRECTORS’ REPORT REMUNERATION GOVERNANCE The People, Culture and Remuneration Committee comprises the following members: • Daniel Spira (Chair) • Aileen Stockburger • Grant Hummel The role and responsibilities, composition, structure and membership requirements of the People, Culture and Remuneration Committee are documented in the People, Culture and Remuneration Committee Charter available at www.nextscience.com/corp-governance. The People, Culture and Remuneration Committee 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 Di- rectors. 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. SERVICE AGREEMENTS AND REMUNERATION POLICY Executives are employed under executive employment agreements with the Group. In determining remuneration, the Group considers: • industry based remuneration benchmarking (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. 34 Annual Report 2023DIRECTORS’ REPORT SERVICE AGREEMENTS AND REMUNERATION POLICY (CONT.) Employment agreements Name: Title: HARRY THOMAS HALL, IV (I.V.) (APPOINTED 10 JULY 2023) Managing Director and Chief Executive Officer (CEO) Ongoing service agreement. If the Company terminates the CEO’s employment without Cause or the CEO resigns other than for Good Reason, 90 days’ notice must be provided. If the CEO resigns for Good Reason, the Company must continue to pay the CEO for 6 months from the termination date; up to 6 months of COBRA1 reimbursement; pro rata STI for current year payable in a single cash lump sum on the date the STI otherwise Details: would have been paid; earned and unpaid STI for the previous year; and accelerated vesting of outstanding service-based equity grants and continued eligibility for vesting of performance-based equity grants (in each case on a pro rata basis). The Company can terminate immediately for Cause. I.V. is entitled to participate in the Company’s short and long-term incentive plans. The CEO’s services agreement contains standard provisions regarding duties, leave en- titlements, confidentiality, intellectual property, non-competition and non-solicitation re- strictions. 1 COBRA is a US law that allows former employees to elect to remain as participants in their former employer’s group health insurance plan for a limited period of time after termination of employment Name: Title: MARC ZIMMERMAN (APPOINTED 26 MAY 2023) Chief Financial Officer (CFO) Details: Ongoing service agreement. The CFO’s employment may be terminated by either party at any time and for any reason on 60 days’ notice. If the CFO resigns, the Company may unilaterally accel- erate the date of termination. The CFO is entitled to participate in the Company’s short and long-term incentive plans. The CFO’s services agreement contains standard provisions regarding du-ties, leave entitlements, confidentiality, intellectual property, and non-competition and non-solicitation restrictions. 35 Annual Report 2023DIRECTORS’ REPORT SERVICE AGREEMENTS AND REMUNERATION POLICY (CONT.) Employment agreements Name: Title: Details: Name: Title: Details: 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 incen- tive plans. JON SWANSON Chief Operating Officer (COO) 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. 36 Annual Report 2023DIRECTORS’ REPORT 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 Con- stitution 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 respon- sibilities 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 the People, Culture and Remuneration Committee. The Company paid special exertion fees to Aileen Stockburger during 2022 and 2023. These exertions were in consideration for assisting the Board in ensuring the Company’s activities in the US received appropriate Board oversight and support. EMPLOYEE INCENTIVE ARRANGEMENTS AND LINK BETWEEN PERFORMANCE AND REWARD Short Term Incentive (STI) Plan for Executives The CEO, CFO, Chief Technical Officer (CTO), Chief Operating Officer (COO) and Chief Commercial Officer (CCO) are eligible to participate in the Company’s short-term incentive plan (STI Plan). The STI Plan year is defined as 1 January until 31 December in a given year. Participants in the STI Plan, must be employed with the Company, or a wholly owned subsidiary of the Com- pany, for at least six months during the Plan year. 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 objectives of the STI Plan are to: • reward executives for their contribution to ensuring that Next Science achieves its annual goals and ob- jectives; • enhance Next Science’s opportunity to attract, motivate and retain high calibre and high performing ex- ecutives; and • link part of executive remuneration directly to the achievement of Company and individual key perfor- mance objectives. The making of any payment under the STI Plan is subject to the achievement of three gateway hurdles: achievement of at least 90% of the Company’s revenue target; 100% of the Company’s EBITDA target; and an individual performance rating of at least ‘meets expectations’. 37 Annual Report 2023DIRECTORS’ REPORT EMPLOYEE INCENTIVE ARRANGEMENTS AND LINK BETWEEN PERFORMANCE AND REWARD (CONT.) The maximum STI opportunity is 100% of Total Fixed Remuneration (TFR) for the CEO and 80% of TFR for the other executive participants. To receive the maximum STI opportunity, the Company must achieve at least 110% of its revenue and EBITDA targets and individual performance must be assessed as being at the top level of ‘extraordinary’. As a number of the members of the executive team already have significant security holdings in Next Science, any payments under the STI Plan are paid in cash to ensure that the STI opportunities operate as true incen- tives. No STI payments were made in respect of the financial year ended 31 December 2023 (2022: Nil) as the gate- way revenue and EBITDA targets were not met. Long-Term Incentive (LTI) Plan for Executives At the time of the Company’s initial public offering (IPO) in April 2019, the Board of the Company established an equity incentive plan to facilitate the grant of equity to eligible persons to align their interests with share- holders through the sharing of a personal interest in the future growth and development of the Company (NXS Employee Equity Plan). In May 2023, Next Science issued 700,000 options with an exercise price of A$0.68 and expiry date of 1 May 2028 to employees under the NXS Employee Equity Plan. At the time of the Company’s IPO, the Company also established a long term incentive plan under which the Company can issue incentives in the form of performance rights (LTI Plan) to eligible executives of the Com- pany. The grant of performance rights under the LTI Plan is governed by the NXS Employee Equity Plan Rules. The CEO, CFO, CTO, COO and Senior Vice-President, Sales are eligible to participate in the LTI Plan. During the financial year ended 31 December 2023, the Board undertook a review of the Company’s approach to long term incentives, assisted by external remuneration consultants, with the key objectives of the review including ensuring that the LTI Plan was appropriate for the size of the Company and its stage of development, the LTI Plan was aligned to the Company’s strategy and commercialisation goals and the LTI Plan was simple to understand and valuable to all participants. This review led to the Board revising the Company’s LTI Plan with a key change being amending the form of equity offered under the plan from performance rights only to an equal split of performance rights and options i.e. 50% performance rights and 50% options. The CEO is entitled to an initial sign-on grant of performance rights equivalent in value to US$500,000, vesting in equal tranches annually over a three-year period subject to continuous employment. The Company intends to seek shareholder approval for the sign-on grant at the Company’s 2024 Annual General Meeting (AGM). The rights will be granted following the AGM. If shareholder approval of the grant of rights is not obtained, vested rights will be satisfied with Company shares purchased on-market. 38 Annual Report 2023DIRECTORS’ REPORT EMPLOYEE INCENTIVE ARRANGEMENTS AND LINK BETWEEN PERFORMANCE AND REWARD (CONT.) The number of Performance Rights granted under the LTI Plan, as amended, is based on the volume weighted average price (VWAP) of shares in the Company during the 30 days to 30 June in the relevant plan year. The vesting of Performance Rights issued under the LTI Plan is dependent on satisfaction of vesting condi- tions relating to relative total shareholder return (Relative TSR) and continued employment during a three-year performance period. If Relative TSR performance is less than the 50th percentile, no performance right will vest. At or above the 50th percentile, vesting occurs on a pro rata basis. 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. During the financial year ending 31 December 2023, 2,629,928 Performance Rights were issued under the Company’s LTI Plan (2022: Nil). Of these, 612,777 rights lapsed on 31 December 2023 due to an executive’s employment ending. The vesting of options issued under the LTI Plan is dependent on satisfaction of vesting conditions comprising share price hurdles and continued employment on the relevant vesting date. The Options are only exercisable during a two-year period commencing on the third anniversary of the grant date of the options and ending on the fifth anniversary of the grant date. Any Options that have not been ex- ercised by the end of this exercise period lapse. If a participant resigns or is terminated for cause (including due to a material breach of their obligations to Next Science), all vested but unexercised Options immediately lapse on cessation. If a participant ceases em- ployment for any other reason, any vested but unexercised Options that they hold may be exercised within a period of 60 calendar days (or such other period determined by the Board) from the start of the exercise period applicable to the options, after which time they will lapse. During the year ended 31 December 2023, 7,366,333 incentive stock options were issued under the Compa- ny’s LTI Plan). (2022: Nil). Of these, 1,716,366 options lapsed on 31 December 2023 due to an executive’s employment ending. 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 33). With the exception of the former Managing Director, Judith Mitchell, as described below, the only vesting con- dition applicable to the options granted under these earlier plans was that the individual be employed by the Company, or a wholly owned subsidiary of the Company at the vesting date. As at 31 December 2023, there were no outstanding options over ordinary shares issued under the ECP or ESOP. 39 Annual Report 2023DIRECTORS’ REPORT OPTIONS AND RIGHTS OVER EQUITY INSTRUMENTS Details of the options over ordinary shares issued under the LTI Plan which were held by KMP as at 31 Decem- ber 2023 are set out below: KMP GRANT DATE EXPIRY DATE VESTING DATE FAIR VALUE AT GRANT DATE (USD) EXERCISE PRICE (USD) Executive Director Harry Thomas Hall, IV (I.V.) Non-Executive Directors Aileen Stockburger Grant Hummel Katherine Ostin Daniel Spira Other KMP Jon Swanson Marc Zimmerman Matthew Myntti - - - - - - - - - - 24 Jul 2023 24 July 2028 - - 24 Jul 2023 24 July 2028 - - - - - (i) - (i) - - - - - 202,584 - 275,625 - - - - - 0.49 - 0.49 i. The Vesting date of the options can be any date between the grant date of 24 July 2023, and 3 years from the grant date. However, the options are only exercisable during the two year period starting on the third anniversary of the grant date being 24 July 2026 to 24 July 2028. Details of the 1,302,292 rights issued under the LTI Plan which were held by KMP as at 31 December 2023 are set out below: Other KMP Jon Swanson Matthew Myntti NUMBER OF RIGHTS GRANTED GRANT DATE EXPIRY DATE* VESTING CONDITION FAIR VALUE AT GRANT DATE 551,691 24 Jul 2023 750,601 24 Jul 2023 N/A N/A (i) (i) 157,178 213,848 * No expiry date applies to the Rights other than that any Rights for which the Vesting Conditions have not been met shall be forfeited. i. Vesting conditions include continued employment and Relative Total Shareholder Return over the Perfor- mance Period from grant date, 24 July 2023, to 24 July 2026. 40 Annual Report 2023DIRECTORS’ REPORT OPTIONS AND RIGHTS OVER EQUITY INSTRUMENTS (CONTINUED) The movement for the year ended 31 December 2023, 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 Options Executive Director INSTRUMENT BALANCE AS AT 1 JAN 2023 NO. GRANTED NO. EXERCISED NO. LAPSED NO. BALANCE AS AT 31 DEC 2023 NO. VESTED DURING THE YEAR VESTED AND EXERCISABLE NO. UN-VESTED NO. Harry Thomas Hall, - - IV (I.V.) Non-Executive Directors Aileen Stockburger Options 520,000 Grant Hummel Katherine Ostin Daniel Spira Other KMP - - - - Options 260,000 - - - - - - - - (520,000) - - - - - (260,000) - - - - - Jon Swanson Options 650,000 1,545,267 - (650,000) 1,545,267 Marc Zimmerman Matthew Myntti Rights - Options Rights - - 551,691 - - 2,102,408 - 750,601 - - - - - - - - 551,691 - 2,102,408 750,601 - - - - - - - - - - - - - - - - - - - - - 1,545,267(i) - - - - - 2,102,408(i) - - i. Vesting conditions include continued employment and Relative Total Shareholder Return over the Perfor- mance Period from grant date, 24 July 2023, to 24 July 2026. 41 Annual Report 2023DIRECTORS’ REPORT OPTIONS AND RIGHTS OVER EQUITY INSTRUMENTS (CONTINUED) 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 Options Executive Director 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. Judith Mitchell - Non-Executive Directors Bruce Hancox Daniel Spira Mark Compton 520,000 260,000 520,000 Aileen Stockburger 520,000 Other KMP Matthew Myntti - Jon Swanson 650,000 Jacqueline Butler Dustin Haines Rights - - Dustin Haines* 340,602 - - - - - - - - - - - - - - - - - - - - - - - - - - - - (113,534) (227,068) - 520,000 260,000 520,000 520,000 - 650,000 - - - *Dustin Haines employment agreement with Next Science ceased on 20 April 2022 - - - - - - - - - - - 520,000 260,000 520,000 520,000 - 650,000 - - - - - - - - - - - N/A N/A 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. 42 Annual Report 2023DIRECTORS’ REPORT DETAILS OF EQUITY INCENTIVES AFFECTING CURRENT AND FUTURE REMUNERATION KMP INSTRUMENT NUMBER GRANT DATE EXPIRY DATE % VESTED Executive Director Harry Thomas Hall, IV (I.V.) Non-Executive Directors Aileen Stockburger Grant Hummel Katherine Ostin Daniel Spira Other KMP Jon Swanson Marc Zimmerman Matthew Myntti - - - - - - - - - - - - - - - - - - - - Options 1,545,267 24 Jul 2023 24 Jul 2028 Rights 551,691 24 Jul 2023 - - - - - Options 2,102,408 24 Jul 2023 24 Jul 2028 Rights 750.601 24 Jul 2023 - - - - - - - - - - - FINANCIAL YEARS IN WHICH GRANT VESTS - - - - - (i) (ii) - (i) (ii) i. Vesting conditions include continued employment and Relative Total Shareholder Return over the Perfor- mance Period from grant date, 24 July 2023, to 24 July 2026. ii. Vesting conditions include continued employment and Relative Total Shareholder Return over the Perfor- mance Period from grant date, 24 July 2023, to 24 July 2026. 43 Annual Report 2023DIRECTORS’ REPORT 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 2023. Year ended 31 December 2023 CASH SALARY AND FEES OTHER CASH SERVICE (II) LONG SERVICE LEAVE SUPER- ANNUATION SHARE-BASED PAYMENTS (OPTIONS AND RIGHTS) (VI) $ $ $ PERFOR- MANCE RELATED (VII) % TOTAL $ KMP (USD) Executive Directors Harry Thomas Hall, 199,038 IV (I.V.) Judith Mitchell (i) 204,547 Non-Executive Directors Aileen Stockburger 111,846 Grant Hummel Katherine Ostin Daniel Spira Mark Compton (iii) Bruce Hancox (iv) Other KMP Marc Zimmerman Matthew Myntti Jon Swanson Jacqueline Butler (v) 19,323 11,401 66,439 107,989 30,063 193,846 360,433 264,917 233,430 - - - - - - - - 20,000 8,065 449 - - - - - - - - - - - - 19,535 1,803,272 28,514 19,535 $ - 11,205 - 2,126 1,254 - 2,743 3,157 - - - $ - - - - - - - - - 45,210 33,229 199,038 215,752 111,846 21,449 12,655 66,439 110,732 33,220 213,846 413,708 298,595 11,737 32,222 - 264,702 78,439 1,961,982 - - - - - - - - - 10.9 11.1 - - i. Judith Mitchell’s employment with Next Science ceased on 31 July 2023. ii. Other cash services for Marc Zimmerman, Matthew Myntti and Jon Swanson includes motor vehicle al- lowance and/or other minor benefits. iii. Mark Compton ceased as a Director with Next Science on 23 August 2023. iv. Bruce Hancox ceased as a Director with Next Science on 30 June 2023. v. Jacqueline Butler’s employment with Next Science ceased on 31 May 2023. vi. Share based payments were issued under the Company’s Long-Term Incentive Plan in the form of perfor- mance rights and share options. Refer to pages 38 and 39 above for further information on the Long-Term Incentive Plan. vii. Disclosed above are the relative proportions of each individual’s remuneration that are related to perfor- mance; the remaining proportion being fixed remuneration. 44 Annual Report 2023DIRECTORS’ REPORT KMP REMUNERATION (CONTINUED) The table below details the remuneration of KMP for the year ended 31 December 2022. Year ended 31 December 2022 KMP (USD) CASH SAL- ARY AND FEES OTHER CASH SER- VICE (I) LONG SERVICE LEAVE SUPER- ANNUATION SHARE-BASED PAYMENTS RIGHTS (II) Executive Director Judith Mitchell 264,444 $ Non-Executive Directors Mark Compton Bruce Hancox Daniel Spira Aileen Stockburger Other KMP Matthew Myntti Jon Swanson Jacqueline Butler Dustin Haines (iv) 173,466 62,941 67,768 79,868 359,962 264,571 207,427 103,474 $ - - - - - 6,650 609 $ $ 6,717 16,922 - - - - - - - 6,446 1,619 - - - 38,925 4,630 16,926 46 - - 1,583,921 46,230 11,347 41,913 $ - - - - - - - - 8,750 8,750 TOTAL PERFOR- MANCE RELATED (III) $ % 288,083 173,466 69,387 69,387 79,868 366,612 265,180 267,908 112,270 1,692,161 - - - - - - - - - - i. Included in Jacqueline Butler’s Other cash services is an amount of $38,925 for cashed out annual leave. ii. Other cash services for Matthew Myntti, Jon Swanson and Dustin Haines includes motor vehicle allow- ance and/or other minor benefits. For the year ended 31 December 2023, threshold Group performance targets were not met and hence no amounts were awarded to KMP under the STI Plan. iii. 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. iv. Disclosed above are the relative proportions of each individual’s remuneration that are related to perfor- mance; the remaining proportion being fixed remuneration. v. Dustin Haines employment agreement with Next Science ceased on 20 April 2022. 45 Annual Report 2023DIRECTORS’ REPORT KMP EQUITY HOLDINGS The movement during the reporting period in the number of shares in Next Science Limited held directly, indi- rectly or beneficially, by each KMP, including their related parties, is as follows: Year ended 31 December 2023 BALANCE AS AT 1 JAN 2023 NO. RECEIVED ON EXERCISE OF OPTIONS/ RIGHTS NO. OTHER CHANG- ES DURING THE YEAR NO.* BALANCE ON TERMINATION BALANCE AS AT 31 DEC 2023 NO. - 6,420,000 44,837 - 752,172 564,482 171,920 - 410,196 11,943,969 50,000 - - - - - - - - - - - - 200,000 - 200,000 - 6,420,000 - 524,801 387,694 - - - - - - - - 564,482 171,920 569,638 387,694 - 752,172 - - 150,000 - 150,000 - 410,196 (7,772,145) - - - - 4,171,824 50,000 KMP Executive Directors Harry Thomas Hall, IV (I.V.) Judith Mitchell (i) Non-Executive Directors Aileen Stockburger Grant Hummel (ii) Katherine Ostin Daniel Spira Bruce Hancox (iii) Mark Compton (iv) Other KMP Marc Zimmerman Jacqueline Butler (v) Matthew Myntti Jon Swanson * Other changes represent shares that were purchased, sold or transferred to another party during the year. i. Judith Mitchell’s employment with Next Science ceased on 31 July 2023. ii. Grant Hummel appointed a Director with Next Science 23 August 2023. 78,170 shares were held prior to being appointed a Director and 309,524 shares were acquired during the year. iii. Bruce Hancox ceased as a Director with Next Science on 30 June 2023. iv. Mark Compton ceased as a Director with Next Science on 23 August 2023. v. Jacqueline Butler’s employment with Next Science ceased on 31 May 2023. 46 Annual Report 2023DIRECTORS’ REPORT KMP EQUITY HOLDINGS (CONTINUED) Year ended 31 December 2022 KMP Executive Director Judith Mitchell Non-Executive Di- rectors Mark Compton Bruce Hancox Daniel Spira Aileen Stockburger Other KMP Matthew Myntti Jon Swanson Jacqueline Butler Dustin Haines BALANCE AS AT 1 JAN 2022 NO. RECEIVED ON EXERCISE OF OP- TIONS/RIGHTS NO. OTHER CHANGES DURING THE YEAR NO.* BALANCE ON TERMINATION BALANCE AS AT 31 DEC 2022 NO. 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 - (1,411,020) - - - - - - - - - - - 113,534** (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. 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 Corpora- tions Act 2001. On behalf of the directors: Aileen Stockburger Chair and Independent Non-Executive Director 47 Annual Report 2023LEAD AUDITOR'S INDEPENDENCE DECLARATION 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 2023 there have been: 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. i. ii. KPM_INI_01 PAR_SIG_01 PAR_NAM_01 PAR_POS_01 PAR_DAT_01 PAR_CIT_01 KPMG Kevin Leighton Partner Sydney 28 February 2024 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. 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. 48 25 Annual Report 2023 CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME For The Year Ended 31 December 2023 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 (costs) / income Loss before income tax expense Income tax expense Loss after income tax expense for the year Other comprehensive loss Items that may be reclassified subsequently to profit or loss Foreign currency translation differences Other comprehensive profit/(loss) for the year, net of tax Total comprehensive loss for the year Basic earnings per share Diluted earnings per share CONSOLITDATED Note 2023 $ 2022 $ 6 22,179,327 11,712,722 (5,944,751) (2,563,024) 16,234,576 9,149,698 7 99,484 37,870 (20,165,335) (10,310,205) (6,485,524) (5,610,459) 9 (26,827) (6,149,806) (5,385,006) (45,558) (15,954,085) (12,703,007) 11 12 467,722 (784,451) (316,729) 48,298 (28,603) 19,695 (16,270,814) (12,683,312) 13 - - (16,270,814) (12,683,312) 566,333 566,333 (556,734) (556,734) (15,704,481) (13,240,046) Cents (6.95) (6.95) 37 37 Cents (6.03) (6.03) The above consolidated statement of profit or loss and other comprehensive income should be read in con- junction with the accompanying notes. 49 Annual Report 2023CONSOLIDATED STATEMENT FINANCIAL POSITION As at 31 December 2023 CONSOLIDATED 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 Notes 2023 $ 2022 $ 14 15 16 17 18 15 19 21 20 22 23 25 26 23 25 26 27 28 9,238,697 5,073,625 3,588,649 1,738,923 721,310 871,266 37,823 37,789 373,954 541,506 13,960,433 8,263,109 36,656 36,656 713,511 696,848 802,701 1,053,113 2,387,050 2,409,930 3,939,918 4,196,547 17,900,351 12,459,656 3,207,184 1,979,346 274,902 274,801 79,660 274,902 257,912 94,811 3,836,547 2,606,971 549,804 687,164 5,780 824,706 962,060 30,194 1,242,748 1,816,960 5,079,295 4,423,931 12,821,056 8,035,725 133,823,509 113,526,533 (42,491,223) (42,362,294) (78,511,230) (63,128,514) 12,821,056 8,035,725 The above consolidated statement of financial position should be read in conjunction with the accompanying notes. 50 Annual Report 2023CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 31 December 2023 SHARE CAPITAL $ COMMON CONTROL RESERVE $ FOREIGN CURRENCY TRANSLATION RESERVE $ SHARE OPTION RESERVE $ PERFOR- MANCE RIGHTS RESERVE $ 113,526,533 (42,596,715) (1,905,877) 2,140,298 - - - - - - - - - Transactions with owners in their capacity as owners Balance at 1 January 2023 Loss for the year Other comprehensive income Foreign currency translation differences Total other comprehensive profit Total comprehensive profit/(loss) for the year Performance rights issued Share-based pay- ments Transfers to retained earnings Foreign currency translation differences Convertible note Issue of ordinary shares Capital raising costs Total transactions with owners Balance at 31 December 2023 20,933,533 (636,557) 20,296,976 ACCUMULATED LOSSES $ TOTAL EQUITY $ (63,128,514) 8,035,725 (16,270,814) (16,270,814) - - 566,333 566,333 (16,270,814) (15,704,481) - - - - - - - - - - 95,782 38,651 (888,098) 20,119 - - - - - - - - - - - 95,782 38,651 888,098 - - - - - 20,119 38,284 20,933,533 (636,557) - 566,333 566,333 566,333 - - - - 38,284 - - - - - - - - - - - - - - 38,284 (829,328) 95,782 888,098 20,489,812 133,823,509 (42,596,715) (1,301,260) 1,310,970 95,782 (78,511,230) 12,821,056 The above consolidated statement of changed in equity should be read in conjuction with the accompany notes. 51 Annual Report 2023CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 31 December 2023 COMMON CONTROL RESERVE $ FOREIGN CURRENCY TRANSLATION RESERVE $ SHARE OPTION RESERVE $ PERFOR- MANCE RIGHTS RESERVE $ SHARE CAPITAL $ ACCUMULAT- ED LOSSES $ TOTAL EQUITY $ (42,596,715) (1,349,143) 2,140,298 96,250 (50,445,202) 10,766,495 Balance at 1 January 2022 Loss for the year Other comprehen- sive income Foreign currency translation differ- ences Total other comprehensive loss Total comprehensive loss for the year Transactions with owners in their capacity as owners Sharebased payments Performance rights converted to shares on vesting Issue of ordinary 105,000 shares 10,886,160 Capital raising costs (385,634) Total transactions with owners Balance at 31 December 2022 10,605,526 - - - - - - - - - - - - - - - (556,734) (556,734) (556,734) - - - - - - - - - - - - - - - (12,683,312) (12,683,312) - - - - - (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 (42,596,715) (1,905,877) 2,140,298 - (63,128,514) 8,035,725 The above consolidated statement of changed in equity should be read in conjuction with the accompany notes. 52 Annual Report 2023CONSOLIDATED STATEMENT OF CASH FLOWS For The Year Ended 31 December 2023 CONSOLIDATED Notes 2023 $ 2022 $ Operating activities Receipts from customers Payments to suppliers and employees Payments for research and development Interest received Other income Net cash used in operating activities Investing activities Payments for property, plant and equipment Payments for intangible assets (Payments for)/proceeds from investments (term deposit) Net cash used in investing activities Financing activities Proceeds from issue of ordinary shares Proceeds from issue of converting notes Proceeds from conversion of options to ordinary shares Capital raising costs Payment of lease liabilities Net cash from financing activities Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at the beginning of the financial year Effects of exchange rate changes on cash and cash equivalents Cash and cash equivalents at the end of the financial year 11 14 19 20 27 24 27 27 21 20,109,562 10,657,495 (33,396,827) (20,464,045) (1,902,656) (2,033,830) 65,398 65,527 12,720 37,890 (15,058,996) (11,789,770) (295,417) (589,052) (88,972) (386,744) (34) 329,340 (884,503) (146,376) 14,035,576 10,853,400 6,983,199 - - 32,760 (637,862) (273,277) (385,634) (253,229) 20,107,636 10,247,297 4,164,137 (1,688,849) 5,073,625 7,000,869 935 (238,395) 9,238,697 5,073,625 The above consolidated statement of cash flows should be read in conjunction with the accompanying notes. 53 Annual Report 2023NOTES TO THE CONSILDATED FINANCIAL STATEMENTS 31 December 2023 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 2023 and comparative information for the year ended 31 December 2022.  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 28 February 2024. 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 with- in the Group hold functional currencies of AUD or USD as appropriate to the individual entity. NOTE 3. MATERIAL ACCOUNTING POLICY INFORMATION The accounting policies that are material to the Group are set out below. The accounting policies adopted are consistent with those of the previous financial year, unless otherwise stated. Parent entity information In accordance with the Corporations Act 2001, these financial statements present the results of the Group only. Supple- mentary information about the parent entity is disclosed in note 30. 54 Annual Report 2023 NOTES TO THE CONSILDATED FINANCIAL STATEMENTS 31 December 2023 NOTE 3. MATERIAL ACCOUNTING POLICY INFORMATION (CONT.) 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 test- ed 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. (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 relat- ed 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. Operating segments Operating segments are presented using the ‘management approach’, where the information presented is on the same basis as the internal reports provided to the Chief Operating Decision Makers (‘CODM’). The CODM is responsible for the allocation of resources to operating segments and assessing their performance. 55 Annual Report 2023 NOTES TO THE CONSILDATED FINANCIAL STATEMENTS 31 December 2023 NOTE 3. MATERIAL ACCOUNTING POLICY INFORMATION (CONT.) 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 ex- change 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. 56 Annual Report 2023 NOTES TO THE CONSILDATED FINANCIAL STATEMENTS 31 December 2023 NOTE 3. MATERIAL ACCOUNTING POLICY INFORMATION (CONT.) Revenue from contracts with customers (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 con- sideration 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 DME business, 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. 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. 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 attribut- able to the acquisition, construction or production of a qualifying asset are recognised in profit or loss using the effective interest method. 57 Annual Report 2023  NOTES TO THE CONSILDATED FINANCIAL STATEMENTS 31 December 2023 NOTE 3. MATERIAL ACCOUNTING POLICY INFORMATION (CONT.) Finance income and finance costs (continued) 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 adjust- ment 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 af- fects 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. 58 Annual Report 2023 NOTES TO THE CONSILDATED FINANCIAL STATEMENTS 31 December 2023 NOTE 3. MATERIAL ACCOUNTING POLICY INFORMATION (CONT.) Income tax (continued) (ii) Deferred tax (continued) 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. 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 uncon- ditional 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. 59 Annual Report 2023 NOTES TO THE CONSILDATED FINANCIAL STATEMENTS 31 December 2023 NOTE 3. MATERIAL ACCOUNTING POLICY INFORMATION (CONT.) Trade and other receivables (continued) 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. Inventory provision is measured by taking into consideration inventory quantities held, timing of expiration of products and confirmed sale contracts. The amount of any inventory write-down to net realisable value or inventory losses is recognised as an expense in the period the write-down or loss occurred. Property, plant and equipment (i) Recognition and measurement   Items of property, plant and equipment are measured at cost less accumulated depreciation and accumulated impair- ment 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 com- ponents) 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. 60 Annual Report 2023 NOTES TO THE CONSILDATED FINANCIAL STATEMENTS 31 December 2023 NOTE 3. MATERIAL ACCOUNTING POLICY INFORMATION (CONT.) Property, plant and equipment (continued) (iii) Depreciation (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. 61 Annual Report 2023 NOTES TO THE CONSILDATED FINANCIAL STATEMENTS 31 December 2023 NOTE 3. MATERIAL ACCOUNTING POLICY INFORMATION (CONT.) Intangible assets (continued) (i) Recognition and measurement (continued) 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. 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. 62 Annual Report 2023 NOTES TO THE CONSILDATED FINANCIAL STATEMENTS 31 December 2023 NOTE 3. MATERIAL ACCOUNTING POLICY INFORMATION (CONT.) 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. Convertible notes Convertible notes that can be converted into ordinary shares at the option of the holder, where the number of shares to be issued is fixed by a rate determined by the management upon particular events specified occurs.  Convertible notes are separated into a liability and equity based on the terms of the agreement. On issuance of the con- vertible notes, the liability component is initially recognised at the fair value of a similar liability that does not have an equity conversion option. The residual amount is treated as equity or liability depending on whether it meets the “fixed for fixed” test. Where the “fixed for fixed” test is met, the conversion option is classified as an equity instrument. And where the “fixed for fixed” test is not met the conversion option is classified as a financial liability. The debt is carried at amortised cost using the effective interest method until it is extinguished on conversion or redemp- tion. The Group de-recognises financial liabilities when, and only when, the Company’s obligations are discharged, cancelled or they expire. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable is recognised in profit or loss. 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 consoli- dated 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. 63 Annual Report 2023 NOTES TO THE CONSILDATED FINANCIAL STATEMENTS 31 December 2023 NOTE 3. MATERIAL ACCOUNTING POLICY INFORMATION (CONT.) Leases (continued) (ii) Lessee accounting (continued) Right-of-use assets are tested for impairment in accordance with AASB 136 Impairment of assets. Lease incentives, if rel- evant, 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 (present- ed 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. Finance costs Finance costs attributable to qualifying assets are capitalised as part of the asset. All other finance costs are expensed in the period in which they are incurred. Provisions 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 in- clude 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. 64 Annual Report 2023 NOTES TO THE CONSILDATED FINANCIAL STATEMENTS 31 December 2023 NOTE 3. MATERIAL ACCOUNTING POLICY INFORMATION (CONT.) Employee benefits (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 sepa- rate entity and will have no legal or constructive obligation to pay further amounts. Obligations for contributions to employ- ees’ 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 condi- tions 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”). 65 Annual Report 2023 NOTES TO THE CONSILDATED FINANCIAL STATEMENTS 31 December 2023 NOTE 3. MATERIAL ACCOUNTING POLICY INFORMATION (CONT.) Financial instruments (continued) 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. (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. 66 Annual Report 2023 NOTES TO THE CONSILDATED FINANCIAL STATEMENTS 31 December 2023 NOTE 3. MATERIAL ACCOUNTING POLICY INFORMATION (CONT.) Impairment (continued) 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 un- due 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 dis- counted 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 deduc- tion from equity.  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. 67 Annual Report 2023 NOTES TO THE CONSILDATED FINANCIAL STATEMENTS 31 December 2023 NOTE 3. MATERIAL ACCOUNTING POLICY INFORMATION (CONT.) Fair value measurement (continued) 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 trans- action. 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 re- coverable 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 recov- erable 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. NOTE 4. CRITICAL ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS 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 68 Annual Report 2023 NOTES TO THE CONSILDATED FINANCIAL STATEMENTS 31 December 2023 NOTE 4. CRITICAL ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS (CONT.) 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% - 175% based on the weighted average cost of capital. • Changes in key assumptions would impact recoverable amount calculations. 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. 69 Annual Report 2023   NOTES TO THE CONSILDATED FINANCIAL STATEMENTS 31 December 2023 NOTE 4. CRITICAL ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS (CONT.) Going concern (continued) For the financial year ended 31 December 2023 the Group incurred a loss of $16,270,814 and had net cash outflows from operations of $15,058,996 As at 31 December 2023, the Group had net current asset and net asset positions of $10,123,886 and $12,821,056 respectively. The Group has modelled a range of scenarios for going concern purposes including the continued revenue growth in the DME business, providing cash inflows via reimbursements from insurance providers and improvement in the Group’s direct sales and distribution model with the recent agreement with a leading Group Purchasing Organisation which provides direct access to a larger number of hospitals. The Group considers that its cash and term deposits totalling $9,238,697 at 31 December 2023, together with 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. Convertible notes The Group de-recognised the convertible note financial liability at 1 November 2023 as the Company had entered into an agreement with Walker Group to redeem all of the Notes and for Walker Group to apply all of the redemption proceeds to subscribing for new shares in the Company. The fair value of the liability component of the convertible notes were remea- sured at redemption date and the difference between the carrying amount of the financial liability derecognised and the consideration paid and payable recognised in profit or loss. The early conversion and modification of the convertible note resulted in an overall gain on fair value of USD$402,324. NOTE 5. STANDARDS ISSUED BUT NOT YET EFFECTIVE A number of new standards are effective for annual periods beginning after 1 January 2024 and earlier application is per- mitted; 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) Non-current Liabilities with Covenants (AASB 2022-6 Amendments to Australian Accounting Standards) (2) Disclosure of Non-current Liabilities with Covenants: Tier 2 (AASB 2023-3 Amendments to Australian Accounting Standards) (3) Lease Liability in a Sale and Leaseback (AASB 2022-5 Amendments to Australian Accounting Standards) 70 Annual Report 2023 NOTES TO THE CONSILDATED FINANCIAL STATEMENTS 31 December 2023 NOTE 6. REVENUE Revenue from contracts with customers 22,179,327 11,712,722 CONSOLIDATED 2023 $ 2022 $ 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 determin- ing the allocation of resources. The one operational segment operates over two geographical segments, North America and Australia and New Zealand. Year ended 31 December 2023 Revenue from contracts with customers Segment assets Segment liabilities Segment loss Year ended 31 December 2022 Revenue from contracts with customers Segment assets Segment liabilities Segment loss Major customers NORTH AMERICA AUSTRALIA AND NEW ZEALAND $ $ 21,836,183 5,893,600 3,764,477 9,969,090 343,144 12,016,395 1,324,462 6,301,724 NORTH AMERICA AUSTRALIA AND NEW ZEALAND $ $ TOTAL $ 22,179,327 17,909,995 5,088,939 16,270,814 TOTAL $ 11,712,722 12,592,400 4,556,677 11,009,151 8,237,427 2,949,117 (6,765,412) 703,571 4,354,973 1,607,560 (5,917,901) (12,683,313) Revenues from two major customers of the Group represented 23% (2022: 43%) of the Group’s total revenue. 71 Annual Report 2023 NOTES TO THE CONSILDATED FINANCIAL STATEMENTS 31 December 2023 NOTE 7. OTHER INCOME Other income CONSOLIDATED 2023 $ 2022 $ 99,484 37,870 Income received in relation to grants will only be recognised when there is reasonable assurance when all conditions at- taching to the grant have been complied with. NOTE 8. DEPRECIATION AND AMORTISATION The loss from ordinary activities before income tax includes the following expenses: CONSOLIDATED 2023 $ 2022 $ 64,853 30,609 796,252 653,349 251,918 213,143 CONSOLIDATED 2023 $ 81 26,746 26,827 2022 $ 1,475 44,083 45,558 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 9. OTHER EXPENSES Loss on sale of fixed asset Impairment loss on intangibles 72 Annual Report 2023 NOTES TO THE CONSILDATED FINANCIAL STATEMENTS 31 December 2023 NOTE 10. EMPLOYEE EXPENSES Salaries and wages Contributions to defined contribution funds Share-based payments CONSOLIDATED 2023 $ 2022 $ 17,569,111 10,075,827 49,357 134,433 43,499 8,750 17,752,901 10,128,076 As part of employee compensation, the Group offers medical insurance to certain employees in certain geographies (2023:$1,870,405, 2022:$1,040,228). These insurance amounts are not included in the above figures. NOTE 11. FINANCE INCOME Interest income Net foreign exchange gain Gain on modification and early conversion of convertible note NOTE 12. FINANCE COSTS Interest expense on lease liabilities Interest expense on convertible note Other interest expense Net foreign exchange loss CONSOLIDATED 2023 $ 65,398 - 402,324 467,722 2022 $ 12,720 35,578 - 48,298 CONSOLIDATED 2023 $ 48,536 712,694 876 22,345 784,451 2022 $ 28,603 - - - 28,603 73 Annual Report 2023 NOTES TO THE CONSILDATED FINANCIAL STATEMENTS 31 December 2023 NOTE 13. 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 com- ponents 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% 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 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 2023 $ 2022 $ - - - - - - (16,270,814) (12,683,312) (4,067,704) (3,170,828) 33,608 24,231 (412,563) (264,232) 4,446,658 3,410,829 - - CONSOLIDATED 2023 $ 2022 $ 63,277,349 52,469,578 44,809,849 34,495,776 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. 74 Annual Report 2023 NOTES TO THE CONSILDATED FINANCIAL STATEMENTS 31 December 2023 Australian entities Movement in deferred tax assets and liabilities using the Company’s domestic Australian tax rate of 25% 2023 cost Intangibles Employee benefits Accrued expenses Deferred revenue Unused tax losses carried forward Other items Deferred tax assets not recognised Deferred tax assets/(liabilities) 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) OPENING BALANCE RECOGNISED IN PROFIT OR LOSS CLOSING BALANCE $ $ $ (514,447) 25,193 32,644 274,902 8,508,385 (52,272) (8,274,405) - (555,043) 30,295 45,011 357,373 7,161,233 (47,486) (6,991,383) - (5,513) (17,166) 21,971 (68,726) 1,795,181 5,529 (1,731,276) - 40,596 (5,102) (12,367) (82,471) 1,347,152 (4,786) (1,283,022) - (519,960) 8,027 54,615 206,176 10,303,566 (46,743) (10,005,681) - (514,447) 25,193 32,644 274,902 8,508,385 (52,272) (8,274,405) - 75 Annual Report 2023 NOTES TO THE CONSILDATED FINANCIAL STATEMENTS 31 December 2023 U.S. entities Movement in deferred tax assets and liabilities using the US tax rate of 21% 2023 cost Intangibles Employee benefits Accrued expenses Unused tax losses carried forward Other items Deferred tax asset not recognised Deferred tax assets/(liabilities) 2022 cost Intangibles Employee benefits Accrued expenses Unused tax losses carried forward Other items Deferred tax asset not recognised Deferred tax assets/(liabilities) OPENING BALANCE RECOGNISED IN PROFIT OR LOSS CLOSING BALANCE $ (73,950) 5,089 156,307 7,244,113 (28,418) (7,303,141) - (83,520) 2,181 83,282 5,856,894 (39,415) (5,819,422) - $ 9,436 6,111 146,082 2,165,955 (59,368) (2,268,216) - 9,570 2,908 73,025 1,387,219 10,997 (1,483,719) - $ (64,514) 11,200 302,389 9,410,068 (87,786) (9,571,357) - (73,950) 5,089 156,307 7,244,113 (28,418) (7,303,141) - 76 Annual Report 2023 NOTES TO THE CONSILDATED FINANCIAL STATEMENTS 31 December 2023 NOTE 14. 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 10) Unrealised foreign currency translation gain Interest expense on right-of-use assets (note 21) Interest expense on convertible notes (note 24) Gain on remeasurement on the early conversion of convertible note (note 24) Sub-lease income Loss on sale of fixed asset (note 9) Impairment of intangible assets (note 20) CONSOLIDATED 2023 $ 2022 $ 9,238,697 5,073,625 CONSOLIDATED 2023 $ 2022 $ (16,270,814) (12,683,312) 1,113,023 897,101 134,433 24,251 48,536 712,694 (402,324) (33,510) 81 26,746 8,750 25,806 20,827 - - - 1,475 44,083 Operating loss before changes in working capital and provisions (14,646,884) (11,685,270) 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 (1,909,282) (807,827) 273,056 312,778 1,348,902 (162,664) (274,902) (412,112) 556,918 (455,474) 806,350 70,436 (274,903) (104,500) Net cash used in operating activities (15,058,996) (11,789,770) 77 Annual Report 2023 NOTES TO THE CONSILDATED FINANCIAL STATEMENTS 31 December 2023 NOTE 15. TRADE AND OTHER RECEIVABLES Current assets Trade receivables Other receivables Non-current assets Security deposit CONSOLIDATED 2023 $ 2022 $ 3,460,703 1,596,417 127,946 142,506 3,588,649 1,738,923 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 38 (c). NOTE 16. INVENTORIES Current assets Finished goods - at cost Raw materials – at cost Less: Provision for obsolete stock NOTE 17. OTHER CURRENT ASSETS - TERM DEPOSITS Current assets Term deposits 78 CONSOLIDATED 2023 $ 2022 $ 385,565 345,391 (9,646) 721,310 617,540 386,470 (132,744) 871,266 CONSOLIDATED 2023 $ 2022 $ 37,823 37,789 Annual Report 2023  NOTES TO THE CONSILDATED FINANCIAL STATEMENTS 31 December 2023 NOTE 18. OTHER CURRENT ASSETS - OTHER Current assets Prepayments and other assets NOTE 19. 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 CONSOLIDATED 2023 $ 2022 $ 373,954 541,506 CONSOLIDATED 2023 $ 2022 $ 406,284 361,222 (134,766) (85,011) 271,518 276,211 1,329,939 1,188,504 (1,020,670) (848,804) 309,269 339,700 388,971 286,892 (256,247) (205,955) 132,724 713,511 80,937 696,848 Reconciliations Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out below: LEASEHOLD IMPROVEMENTS PLANT AND EQUIPMENT FURNITURE AND FITTINGS Consolidated Balance at 1 January 2022 Additions Disposals $ 125,143 162,885 - $ 477,959 51,010 (1,475) $ 80,460 35,987 TOTAL $ 683,562 249,882 - (1,475) Depreciation expense (11,817) (187,794) (35,510) (235,121) Balance at 1 January 2023 Additions Depreciation expense Balance at 31 December 2023 276,211 45,042 (49,735) 271,518 339,700 148,215 (178,646) 309,269 80,937 102,079 696,848 295,336 (50,292) (278,673) 132,724 713,511 79 Annual Report 2023 NOTES TO THE CONSILDATED FINANCIAL STATEMENTS 31 December 2023 NOTE 20. 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 2023 $ 2022 $ 2,569,723 2,139,440 (1,145,925) (770,862) 1,423,798 1,368,578 1,807,655 1,675,632 (844,403) (634,280) 963,252 1,041,352 56,772 (56,772) - 117,613 (117,613) - 2,387,050 2,409,930 Reconciliations Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out below: Consolidated CAPITALISED DEVELOPMENT PATENTS AND TRADE MARKS COMPUTER SOFTWARE $ $ $ TOTAL $ Balance at 1 January 2022 1,485,258 1,046,596 637 2,532,491 Additions Impairment of assets Amortisation expense 218,927 (44,083) (291,524) 167,817 - - - (173,061) (637) Balance at 1 January 2023 1,368,578 1,041,352 Additions Impairment of assets Amortisation expense 457,029 (26,746) (375,063) 132,023 - (210,123) Balance at 31 December 2023 1,423,798 963,252 - - - - - 386,744 (44,083) (465,222) 2,409,930 589,052 (26,746) (585,186) 2,387,050 80 Annual Report 2023 NOTES TO THE CONSILDATED FINANCIAL STATEMENTS 31 December 2023 NOTE 21. 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 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 $273,277 (2022: $253,229). Balance at 1 January 2023 Depreciation expense Foreign exchange movements Closing value at 31 December 2023 Balance at 1 January 2022 Additions Depreciation expense Foreign exchange movements Closing value at 31 December 2022 81 CONSOLIDATED 2023 $ 2022 $ 1,682,369 1,682,210 (879,668) (629,097) 802,701 1,053,113 CONSOLIDATED 2023 $ 2022 $ 249,164 48,536 109,763 407,463 196,757 28,603 89,511 314,871 PROPERTY $ 1,053,113 (249,164) (1,248) 802,701 232,456 1,025,617 (196,757) (8,203) 1,053,113 Annual Report 2023NOTES TO THE CONSILDATED FINANCIAL STATEMENTS 31 December 2023 NOTE 22. TRADE AND OTHER PAYABLES Current liabilities Trade payables Other payables and accrued expenses CONSOLIDATED 2023 $ 2022 $ 1,411,037 973,665 1,796,147 1,005,681 3,207,184 1,979,346 All amounts are short term and the carrying values are considered to be a reasonable approximation of fair value. NOTE 23. CONTRACT LIABILITIES Current liabilities Contract liabilities Non-current liabilities Contract liabilities CONSOLIDATED 2023 $ 2022 $ 274,902 274,902 549,804 824,706 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. 82 Annual Report 2023 NOTES TO THE CONSILDATED FINANCIAL STATEMENTS 31 December 2023 NOTE 24. LOANS AND BORROWINGS Non-current liabilities Convertible notes - debt host liability Movements: Balance at 1 January 2023 Convertible note issued during the year (i) Less: transaction costs Net proceeds Less: foreign exchange movements Add: accrued effective interest Gain on modification at 31 August 2023 (ii) Early conversion and modification of convertible note at 1 November 2023 (ii) Balance at 31 December 2023 CONSOLIDATED 2023 $ 2022 $ - - 6,983,200 (62,637) 6,920,563 (514,713) 712,694 (402,324) (6,716,220) (6,920,563) - - - - - - - - - - - - (i) On 2 February 2023, the Company, issued 10,000,000 Secured Convertible Notes with a face value of A$10,000,000 to major shareholder, Walker Group Holdings Pty Limited (Notes). The Notes have a 21 month term maturing on 11 November 2024 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 accrues 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. (ii) On 31 August 2023, the Company announced that it had completed a placement to institutional and sophisticat- ed investors (Placement) raising A$12,000,000 at a price of A$0.42 per share and that the Company had entered into an agreement with Walker Group to redeem all of the Notes and for Walker Group to apply all of the redemption proceeds to subscribing for new shares at the same price as the Placement, subject to shareholder approval. On 1 November 2023, in accordance with the Subscription and Redemption Deed between Walker Group Holdings Pty Limited and Next Science, Walker Group agreed to retire the A$10m convertible notes in return for equity at the same price as the Placement Price, being $0.42. The early conversion and modification of the convertible note resulted in an overall gain on modification of USD$402,324 (refer note 11). 83 Annual Report 2023 NOTES TO THE CONSILDATED FINANCIAL STATEMENTS 31 December 2023 NOTE 25. LEASE LIABILITIES Current liabilities Lease liability Non-current liabilities Lease liability CONSOLIDATED 2023 $ 2022 $ 274,801 257,912 687,164 962,060 The following table sets out a maturity analysis of lease payments, showing the undiscounted lease payments to be paid after the reporting date: CONSOLIDATED 2023 $ 2022 $ 259,979 755,311 306,736 1,043,232 1,015,290 1,349,968 CONSOLIDATED III 2023 $ 2022 $ 79,660 94,811 5,780 30,194 Maturity analysis Not later than 1 year Later than 1 year but not later than 5 years NOTE 26. EMPLOYEE BENEFITS Current liabilities Liability for annual leave Non-current liabilities Liability for long service leave 84 Annual Report 2023 NOTES TO THE CONSILDATED FINANCIAL STATEMENTS 31 December 2023 NOTE 27. SHARE CAPITAL In number of shares Balance as at 1 January 2022 Shares issued in February 2022 on conversion of employee performance shares (i) Shares issued in February 2022 on conversion of employee share options (ii) Placement in March 2022 (iii) Shares purchase plan in March 2022 (iv) Placement in May 2022 (v) Balance as at 31 December 2022 Balance as at 1 January 2023 Institutional placement in September 2023 (viii), (ix) Share Purchase Plan in September 2023 (ix) US Placement in September 2023 (ix) Shares issued for corporate advisory services in November 2023 (x) Director Placement in November 2023 (xi) FULLY PAID 197,973,909 113,534 78,000 6,666,667 5,513,579 4,444,445 214,790,134 214,790,134 28,571,429 20,238,012 2,244,504 142,857 1,034,325 Shares issued to Walker Group in November 2023 on redemption of A$10 million convertible notes (xi) 24,673,842 Balance as at 31 December 2023 Balance at 1 January 2022 Shares issued in February 2022 on conversion of employee performance shares (i) Shares issued in February 2022 on conversion of employee share options (ii) Placement in March 2022 (iii) Shares purchase plan in March 2022 (iv) Placement in May 2022 (v) Capital raising costs Balance at 31 December 2022 Balance at 1 January 2023 Institutional placement in September 2023 (viii), (ix) Share Purchase Plan in September 2023 (ix) US Placement in September 2023 (ix) Shares issued for corporate advisory services in November 2023 (x) Directors Placement in November 2023 (xi) Shares issued to Walker Group in November 2023 on redemption of A$10 million convertible notes (xi) Capital raising costs Balance at 31 December 2023 291,695,103 $ 102,921,007 105,000 32,760 4,382,730 3,597,370 2,873,300 (385,634) 113,526,533 113,526,533 7,777,143 5,508,787 610,954 38,886 281,543 6,716,220 (636,557) 133,823,509 85 Annual Report 2023NOTES TO THE CONSILDATED FINANCIAL STATEMENTS 31 December 2023 NOTE 27. SHARE CAPITAL (CONT.) (i) In February 2022, 113,534 performance rights converted into 113,534 ordinary shares at a fair value of USD$0.92 per share. (ii) In February 2022, 78,000 round 3 Equity Incentive Plan (ECP) employee share options converted to 78,000 ordi- nary shares at a price of A$0.58. (iii) In March 2022, Next Science raised A$6,000,000 via a Placement at A$0.90 per share. (iv) In March 2022, Next Science raised A$4,796,814 via a Share Purchase Plan at A$0.87 per share. (v) In May 2022, Next Science raised A$4,000,000 via a Placement to Walker Group Holdings Pty Limited at A$0.90, approved by shareholders at the annual general meeting held on 27 May 2022. (vi) In May 2023, Next Science issued 700,000 options with an exercise price of A$0.68 and expiry date of 1 May 2028 to employees under the Company’s Employee Equity Plan. (vii) In July 2023, Next Science issued 7,366,333 options and 2,629,928 rights to executives under the Company’s Long Term Incentive Plan. Of these, 1,716,366 options and 612,777 rights lapsed on 31 December 2023 following the cessation of employment of one of the executives. (viii) In August 2023, Next Science completed a placement to institutional and sophisticated investors (Placement) at a price of A$0.42 (Placement Price). (ix) In September 2023, Next Science issued: a. 28,571,429 ordinary fully paid shares to the participants in the Placement, raising A$12 million (before costs); b. 20,238,012 ordinary fully paid shares raising A$8,499,965 via a Share Purchase Plan (SPP) at the Placement Price; c. 2,244,504 ordinary fully paid shares raising A$610,954 via an offer to eligible US investors at the Placement Price (US Offer). (x) In November 2023, Next Science issued 142,857 ordinary fully paid shares at the Placement Price to a consul- tant, who provided corporate advisory services to the Company, in lieu of fees. (xi) In November 2023, following receipt of shareholder approval at a General Meeting held on 25 October 2023: a. Next Science issued 1,034,325 ordinary fully paid shares to three Directors (Chair Aileen Stockburger, Man- aging Director and CEO I.V. Hall, and Non-Executive Director, Grant Hummel) who participated in the Placement and US Offer; an b. Next Science issued 24,673,842 ordinary fully paid shares to Walker Group Holdings Pty Limited at the Place- ment Price in accordance with the Subscription and Redemption Deed between Walker Group Holdings Pty Limited and Next Science on the basis that the redemption amount of A$10m plus accrued interest was offset against the share subscription commitment and the A$10m convertible notes held by Walker Group were to be retired; and c. the A$10m convertible notes held by Walker Group were retired in accordance with the Subscription and Re- demption Deed. 86 Annual Report 2023 NOTES TO THE CONSILDATED FINANCIAL STATEMENTS 31 December 2023 NOTE 27. SHARE CAPITAL (CONT.) 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. NOTE 28. RESERVES Share option reserve Foreign currency translation reserve Common control reserve Performance rights reserve CONSOLIDATEDI 2023 $ 2022 $ 1,310,970 2,140,298 (1,301,260) (1,905,877) (42,596,715) (42,596,715) 95,782 - (42,491,223) (42,362,294) 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. 87 Annual Report 2023 NOTES TO THE CONSILDATED FINANCIAL STATEMENTS 31 December 2023 NOTE 28. RESERVES (CONT.) Movements in reserves Movements in each class of reserve during the current and previous financial year are set out below: Consolidated Balance at 1 January 2022 Foreign currency translation Share-based payments Foreign exchange impact SHARE OPTION RESERVE $ FOREIGN CURRENCY TRANSLATION RESERVE COMMON CONTROL RESERVE PERFORMANCE RIGHTS RESERVE $ $ $ TOTAL $ 2,140,298 (1,349,143) (42,596,715) 96,250 (41,709,310) - - - (556,734) - - - - - - (556,734) 8,750 8,750 (105,000) (105,000) Balance at 31 December 2022 2,140,298 (1,905,877) (42,596,715) Foreign currency translation Performance rights issued Share-based payments Transfers to retained earnings Foreign currency translation differences - - 38,651 (888,098) 20,119 566,333 - - - - Convertible note - 38,284 - - - - - - - - 95,782 - - - - (42,362,294) 566,333 95,782 38,651 (888,098) 20,119 38,284 Balance at 31 December 2023 1,310,970 (1,301,260) (42,596,715) 95,782 (42,491,223) NOTE 29. DIVIDENDS Dividends No dividends were paid or declared by the Company during the financial year. NOTE 30. PARENT ENTITY INFORMATION As at, and throughout, the financial year to 31 December 2023 the parent entity of the Group was Next Science Limited. Statement of profit or loss and other comprehensive income Profit/(loss) after income tax Other comprehensive income Total comprehensive income / (loss) PARENT 2023 PARENT 2022 $ 1,474,963 901,312 2,376,275 $ (13,713,271) (685,101) (14,398,372) 88 Annual Report 2023 NOTES TO THE CONSILDATED FINANCIAL STATEMENTS 31 December 2023 NOTE 30. PARENT ENTITY INFORMATION (CONT.) 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 2023 PARENT 2022 $ $ 3,299,432 33,204,079 36,503,511 3,877,713 9,938,727 13,816,440 (1,517,647) (815,428) - (1,517,647) 34,985,864 - (815,428) 13,001,012 133,823,509 (26,586,646) (72,250,999) 34,985,864 113,526,533 (26,799,559) (73,725,962) 13,001,012 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 2023 and 31 December 2022. Contingent liabilities The parent entity had no contingent liabilities as at 31 December 2023 and 31 December 2022. Capital commitments - Property, plant and equipment The parent entity had no capital commitments for property, plant and equipment as at 31 December 2023 and 31 Decem- ber 2022. Material accounting policy information 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. 89 Annual Report 2023 NOTES TO THE CONSILDATED FINANCIAL STATEMENTS 31 December 2023 NOTE 31. GROUP ENTITIES Set out below is the Group structure listing all subsidiaries as at 31 December 2023. 90 Annual Report 2023 NOTES TO THE CONSILDATED FINANCIAL STATEMENTS 31 December 2023 NOTE 32. RELATED PARTY TRANSACTIONS (a) Key management personnel compensation Key management personnel (“KMP”) are defined as those persons having authority and responsibility for planning, direct- ing and controlling the activities of the Group, directly and indirectly, and include the Directors, executive and non-exec- utive, 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 2023 $ 2022 $ 1,831,786 1,630,151 19,535 32,222 78,439 11,347 41,913 8,750 1,961,982 1,692,161 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. (b) Key management personnel transactions   KMPs of the Company hold 0.59% (2022: 9.48%) of the issued capital of the Company as at 31 December 2023. NOTE 33. 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 con- tribute 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 2023, there are 8,066,333 options and rights over ordinary shares on issue (2022: 2,812,000 options), represent- ing 2.77% (2022: 1.31%) of the Company’s total share capital, granted to the employees and Directors of the Company. 91 Annual Report 2023 NOTES TO THE CONSILDATED FINANCIAL STATEMENTS 31 December 2023 NOTE 33. SHARE BASED EMPLOYEE INCENTIVE ARRANGEMENTS (CONT.) Equity Incentive Plan (equity-settled) (continued) The grant dates, vesting dates and exercise prices of options issued vary and are as follows: GRANT DATE AND VESTING CONDITIONS EXPIRY DATE INSTRUMENT NO AS AT 31 DEC 2022 GRANTED EXERCISED (II) LAPSED NO AS AT 31 DEC 2023 VESTED AS AT 31 DEC 2023 24-Jul-23 (i) N/A Rights 1-May-23 (ii) 30-Apr-28 Options 24-Jul-23 (iii) 24-Jul-28 Options - - - 2,629,928 700,000 7,366,333 17-Dec-18 17-Dec-23 Options 17-Dec-18 17-Dec-23 Options 1,820,000 992,000 - - Totals 2,812,000 10,696,261 - - - - - - (612,777) 2,017,151 - 700,000 (1,716,366) 5,649,967 (1,820,000) (992,000) - - (5,141,143) 8,367,118 - - - - - - (i) No expiry date applies to the Rights other than that any Rights for which the Vesting Conditions have not been met shall be forfeited. (ii) The Vesting date of the options vary between 1 May 2024 and 1 May 2026.  (iii) The Vesting date of the options can be any date between the grant date of 24 July 2023, and 3 years from the grant date. However, the options are only exercisable during the two year period starting on the third anniversary of the grant date being 24 July 2026 to 24 July 2028. As at 31 December 2023, nil options have vested (2022: 2,812,000). The fair value of options has been measured using the Black-Scholes formula for options granted 1 May 2023 and the Monte Carlo simulation for options granted 24 July 2023.  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 92 GRANT DATE GRANT DATE 1 MAY 23 0.06-0.24 0.44 0.45 60% 5 years 0% 3.08% 24 JUL 23 0.11-0.16 0.39 0.49 60% 5 years (i) 0% 3.86% Annual Report 2023 NOTES TO THE CONSILDATED FINANCIAL STATEMENTS 31 December 2023 NOTE 33. SHARE BASED EMPLOYEE INCENTIVE ARRANGEMENTS (CONT.) Equity Incentive Plan (equity-settled) (continued) Expected volatility is measured based on peer companies and expected life is the number of days until expiry. (i) The expected life of the options granted on 24 July 2023 is 5 years. However, the vested options are only exercisable during the exercise period form the last vesting date to the expiry date. The fair value of the performance rights granted during the year is calculated at the date of grant using the Monte-Carlo simulation model taking into account the simulated share price and total shareholder returns of Next Science Limited and peer companies during the vesting period. These values were calculated applying the following inputs to performance rights issued: Grant date Fair value per performance right Number of performance rights issued Remaining life of the performance rights PERFORMANCE RIGHTS 24 Jul 2023 USD $0.2849 2,017,151 N/A (i) During the financial year ending 31 December 2023, 2,629,928 Performance Rights were issued under the Company’s LTI Plan (2022: Nil). Of these, 612,777 rights lapsed on 31 December 2023 due to an executive’s employment ending. NOTE 34. CONTINGENT LIABILITIES AND CAPITAL COMMITMENTS The Group has no contingent liabilities as at 31 December 2023. The Group has no capital commitments as at 31 December 2023 (2022: nil). NOTE 35. EVENTS OCCURRING AFTER THE REPORTING DATE No matter or circumstance has arisen since 31 December 2023 that has significantly affected, or may significantly affect the Group’s operations, the results of those operations, or the Group’s state of affairs in future financial years. 93 Annual Report 2023 NOTES TO THE CONSILDATED FINANCIAL STATEMENTS 31 December 2023 NOTE 36. 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 37. EARNINGS PER SHARE Loss after income tax Weighted average number of shares (Number) Basic earnings per share (Cents) Diluted earnings per share (Cents) CONSOLIDATED 2023 $ 2022 $ 121,704 97,485 25,086 24,875 49,961 10,171 7,142 17,313 171,665 114,798 CONSOLIDATED 2023 $ 2022 $ (16,270,814) (12,683,312) 234,094,658 210,468,045 (6.95) (6.95) (6.03) (6.03) NOTE 38. FINANCIAL RISK MANAGEMENT (a) Overview 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. 94 Annual Report 2023 NOTES TO THE CONSILDATED FINANCIAL STATEMENTS 31 December 2023 NOTE 38. FINANCIAL RISK MANAGEMENT (CONT.) (b) Risk management framework   The Company’s Board of Directors has overall responsibility for the establishment and oversight of the Group’s risk man- agement 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 lim- its 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: (a) (b) (c) 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; 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; Receive reports from management on new and emerging sources of risk and the proposed risk controls to miti- gate those risks; (d) Receive reports from management and the external auditor on any material incident involving fraud or a break- (e) (f) (g) (h) (i) (j) down of the Group’s risk controls and the lessons learned; 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; Monitor the need for, and if considered necessary, require, an internal or external audit of critical areas of risk; Oversee the establishment of procedures for the receipt, handling and investigation of whistleblower disclosures; 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; 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. 95 Annual Report 2023 NOTES TO THE CONSILDATED FINANCIAL STATEMENTS 31 December 2023 NOTE 38. FINANCIAL RISK MANAGEMENT (CONT.) (c) Credit risk Cash and cash equivalents The Group held cash and cash equivalents of USD $9,238,697 and USD $37,823 in term deposits at 31 December 2023 (2022: USD $5,073,625 in cash and USD $37,789 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: Distribution & Licensing Partners Hospitals & Surgery Centres Prescribing Physicians CONSOLIDATED 2023 $ 918,484 787,772 1,754,447 2022 $ 867,065 526,897 202,455 3,460,703 1,596,417 As at 31 December 2023, Zimmer Surgical Inc (worldwide) accounted for over 23% of the trade receivables (2022: Zimmer Surgical Inc accounted for over 47% 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, man- agement also considers the factors that may influence the credit risk of its customer base, including the default risk asso- ciated with the industry and country in which customers operate. Details of concentration of revenue are included in note 6.  96 Annual Report 2023 NOTES TO THE CONSILDATED FINANCIAL STATEMENTS 31 December 2023 NOTE 38. FINANCIAL RISK MANAGEMENT (CONT.) (c) Credit risk (continued) (i) Risk management (continued) 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 re- view 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 licens- ing or distribution agreement. Further consideration is given to their geographic location and trading history with the Group and existence of any previous financial difficulties.  (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 re- coveries of amounts previously written off are credited against selling and general expenses. As at 31 December 2023, trade receivables with a nominal value of $Nil (2022: Nil) were considered impaired and fully provided for. (iii) Past due not impaired As at 31 December 2023, trade receivables of $51,577 (2022: $56,315) were past due but not impaired. These relate to customers for whom there is no recent history of default. 97 Annual Report 2023 NOTES TO THE CONSILDATED FINANCIAL STATEMENTS 31 December 2023 NOTE 38. FINANCIAL RISK MANAGEMENT (CONT.) (c) Credit risk (continued) (iii) Past due not impaired (continued) 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 CONSOLIDATED 2023 $ 2022 $ 2,175,204 1,269,546 327,215 962,119 3,835 - 281,858 35,791 9,222 - 3,468,373 1,596,417 (d) Liquidity risk 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. 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 2023 Trade and other payables Lease liabilities Total As 31 December 2022 Trade and other payables Lease liabilities Total 6-12 MONTHS BETWEEN 1 AND 5 YEARS $ - $ - 131,270 131,270 755,311 755,311 TOTAL CONTRACTED AMOUNTS $ 3,207,182 1,015,290 4,222,472 - 155,185 155,185 - 1,043,232 1,043,232 1,979,346 1,349,967 3,329,313 LESS THAN 6 MONTHS $ 3,207,182 128,709 3,335,891 1,979,346 151,550 2,130,896 98 Annual Report 2023 NOTES TO THE CONSILDATED FINANCIAL STATEMENTS 31 December 2023 NOTE 38. FINANCIAL RISK MANAGEMENT (CONT.) (d) Liquidity risk (continued) Exposure to liquidity risk (continued) 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. Interest rate risk The Group is not exposed to any significant interest rate risk. There is minimal exposure to the impact of adverse chang- es 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 $87,854 (2022: $13,032). This analysis assumes that all other variables, in par- ticular 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 report- ing 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 includ- ing 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 III 2023 $ 9,140,418 (389,619) 8,750,799 2022 $ 1,402,132 (346,097) 1,056,035 A reasonably possible strengthening (weakening) of the Unites States Dollar against all other currencies at 31 Decem- ber 2023 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. 99 Annual Report 2023NOTES TO THE CONSILDATED FINANCIAL STATEMENTS 31 December 2023 NOTE 38. FINANCIAL RISK MANAGEMENT (CONT.) (e) Market risk (continued) Currency risk (continued) 2023 Australian Dollars 2022 Australian Dollars % CHANGE PROFIT BEFORE TAX STRENGTHEN PROFIT BEFORE TAX WEAKEN EQUITY STRENGTHEN EQUITY WEAKEN $ $ $ $ $ 10% 875,080 (875,080) 875,080 (875,080) 10% 105,604 (105,604) 105,604 (105,604) 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. 100 Annual Report 2023 DIRECTORS DECLARATION 31 December 2023 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 49 to 100 and the Remuneration Report on pages 32 to 47 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 Company as at 31 December 2023 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 Company will be able to pay its debts as and when they be come due and payable. 2. 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 2023. 3. The Directors draw attention to Note 2 to the consolidated financial statements, which includes a statement of compli- ance with International Financial Reporting Standards. Signed in accordance with a resolution of Directors: _________________________________________ Aileen Stockburger Chair and Independent Non-Executive Director 28 February 2024 101 Annual Report 2023 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 2023 and of its financial performance for the year ended on that date; and • complying with Australian Accounting Standards and the Corporations Regulations 2001. The Financial Report comprises: • Consolidated statement of financial position as at 31 December 2023 • 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 material accounting policies • 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. Basis for opinion 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. 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 Liability limited by a scheme approved under Professional Standards Legislation. 66 name and logo are trademarks used under license by the independent member firms of the KPMG global organisation. 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. 102 Annual Report 2023 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 22,179,327 Refer to Note 6 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; • High degree of estimation required to calculate the period end revenue recognition adjustment for Durable Medical Equipment (DME) product sales; • 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 differing 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 o checked the terms and conditions of the customer contract for consistency to the Group’s policy for timing and measurement of revenue recognition; 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 the underlying customer contract. • Selected a sample of revenue transactions across 67 103 Annual Report 2023 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 report 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 and 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 • assessing the Group and Company’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 and Company or to cease operations, or have no realistic alternative but to do so. 104 68 Annual Report 2023 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 2023, 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 12 to 24 of the Directors’ report for the year ended 31 December 2023. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. KPM_INI_01 KPMG Kevin Leighton Partner Sydney 28 February 2024 105 69 Annual Report 2023 INVESTOR INFORMATION AS AT 4 MARCH 2024 NUMBER OF SECURITYHOLDERS At the specified date, there were 4,421 holders of ordinary shares (quoted), 11 holders of options over ordinary shares (unquoted) and three holders of performance rights (unquoted). These were the only classes of equity securities on issue. SHAREHOLDING DISTRIBUTION SIZE OF SHAREHOLDING NUMBER OF HOLDERS NUMBER OF SHARES % OF ISSUED CAPITAL 1-1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 and above Total 1,070 1,323 590 1,191 247 4,421 559,159 3,716,402 4,621,735 39,793,031 243,004,776 291,695,103 0.19 1.27 1.58 13.64 83.31 100 TWENTY LARGEST HOLDERS OF ORDINARY SHARES NAME SHARES HELD % OF ISSUED CAPITAL 1 2 3 4 5 6 7 8 9 10 11 12 HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED AUCKLAND TRUST COMPANY LTD UBS NOMINEES PTY LTD HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED – A/C 2 MR CHARLES ROBERT DIRCK WITTENOOM JUDITH LEE MITCHELL DR MATTHEW FRANCO MYNTTI CITICORP NOMINEES PTY LIMITED MR JAMES FONG SEETO BNPP NOMS PTY LTD HUB24 CUSTODIAL SERV LTD J P MORGAN NOMINEES AUSTRALIA PTY LIMITED S G ANDREW PTY LTD 13 MR DEAN ANTHONY MACKENZIE 14 15 16 17 18 19 BOND STREET CUSTODIANS LIMITED MR EVAN PHILIP CLUCAS & MS LEANNE JANE WESTON BELGRAVIA STRATEGIC EQUITIES PTY LTD TWENTY FIFTH ELPORTO PTY LTD BROOK ST SMSF PTY LTD RETZOS EXECUTIVE PTY LTD 20 MR TIMOTHY IAN DOUGLAS Total 106 59,990,423 56,019,938 16,528,388 11,839,023 5,118,880 4,706,975 4,171,824 3,815,931 3,000,000 2,925,007 2,921,688 2,745,000 2,514,258 2,460,427 2,251,187 1,965,000 1,800,000 1,255,702 1,057,146 1,032,075 20.57 19.20 5.67 4.06 1.75 1.61 1.43 1.31 1.03 1.00 1.00 0.94 0.86 0.84 0.77 0.67 0.62 0.43 0.36 0.35 188,118,872 64.49 Annual Report 2023INVESTOR INFORMATION AS AT 4 MARCH 2024 SUBSTANTIAL HOLDERS Substantial holders as disclosed in substantial holding notices given to the Company were as follows: NAME OF SUBSTANTIAL HOLDER DATE OF NOTICE NUMBER OF SHARES % OF ISSUED OVER WHICH RELEVANT CAPITAL INTEREST IS HELD Walker Group Holdings Pty Limited, Auckland Trust 2.11.2023 108,296,030 37.17 Company Limited as trustee of the Second Pacific Master Superannuation Fund and Lang Alexander Walker Thorney Technologies Ltd, TIGA Trading Pty Ltd, Thor- 20.9.2023 13,964,280 5.74 ney Investment Group entities and Jasforce Pty Ltd SECURITIES SUBJECT TO ESCROW There were no securities subject to a restriction period or voluntary escrow period. UNQUOTED OPTIONS OVER ORDINARY SHARES There were 6,149,967 unquoted options over ordinary shares held as follows: SIZE OF OPTION HOLDING NUMBER OF HOLDERS NUMBER OF OPTIONS % OF ISSUED OPTIONS 1-1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,000 and above Total 0 0 0 4 7 11 0 0 0 100,000 6,049,967 6,149,967 0 0 0 1.63 98.37 100 Three executives of the Company - Dr Matthew Myntti, Jon Swanson and Robert Bell - hold 20% or more of the unquoted options on issue. The options were issued under the Company’s executive long-term incentive plan. UNQUOTED PERFORMANCE RIGHTS There were 2,017,151 unquoted performance rights held as follows: SIZE OF RIGHTS HOLDING NUMBER OF HOLDERS NUMBER OF RIGHTS % OF ISSUED RIGHTS 1-1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,000 and above Total 0 0 0 0 3 3 0 0 0 0 2,017,151 2,017,151 0 0 0 0 100 100 Three executives of the Company - Dr Matthew Myntti, Jon Swanson and Robert Bell - hold 20% or more of the unquoted rights on issue. The rights were issued under the Company’s executive long-term incentive plan. 107 Annual Report 2023INVESTOR INFORMATION AS AT 4 MARCH 2024 VOTING RIGHTS Ordinary shares (including partly paid shares) carry voting rights on a one for one basis and unlisted options and rights do not carry voting rights. UNMARKETABLE PARCELS There are 1,228 holders of an unmarketable parcel of shares based on the closing market price of $0.36 at 4 March 2024. 108 Annual Report 2023CORPORATE DIRECTORY DIRECTORS Independent Non-Executive Chair Aileen Stockburger Managing Director Harry Thomas Hall, IV Non-Executive Directors Company Secretary Registered office Share register Auditor Solicitors Grant Hummel Katherine Ostin Daniel Spira Gillian Nairn HWL Ebsworth Level 14, Australia Square 264-278 George Street Sydney NSW 2000 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/ 109 Annual Report 2023