OncoSil Medical Limited Annual Report 2022

Plain-text annual report

2022 Annual Report OncoSil Medical Ltd • 30 June 2022 Contents Corporate directory Introduction Chairman’s letter CEO’s Report Looking to the future An interview with Dr. Natalie Phillips FY22 highlights Directors’ report Auditor’s independence declaration Statement of profit or loss and other comprehensive income Statement of financial position Statement of changes in equity Statement of cash flows Notes to the financial statements Directors’ declaration Independent auditor’s report to the members of OncoSil Medical Ltd Shareholder information 2 3 4 5 7 8 9 10 27 28 29 30 31 32 60 61 65 1 Corporate directory Directors Mr Otto Buttula – Chairman Mr Nigel Lange Dr Martin Cross Prof. Ricky Sharma Company secretary Mr Karl Pechmann Notice of annual general meeting The details of the annual general meeting of OncoSil Medical Ltd are: 12pm on Tuesday 25 October 2022 Registered office Suite 503, Level 5 and principal place of business 15 Blue Street North Sydney NSW 2060 Phone: +61 2 9223 3344 Share register Boardroom Pty Limited Auditor Solicitors Level 12 225 George Street Sydney NSW 2000 Phone: +61 2 9290 9600 Crowe Sydney Level 15 1 O’Connell Street Sydney NSW 2000 K&L Gates Level 25, South Tower 525 Collins Street Melbourne VIC 3000 Bankers Westpac Banking Corporation 341 George Street Sydney NSW 2000 Stock exchange listing OncoSil Medical Ltd shares are listed on the Australian Securities Exchange Website (ASX code: OSL) www.oncosil.com Corporate Governance Statement OncoSil Medical Ltd and the Board of Directors are committed to achieving and demonstrating the highest standards of corporate governance. OncoSil Medical Ltd has reviewed its corporate governance practices against the Corporate Governance Principles and Recommendations (4th Edition) published by the ASX Corporate Governance Council. Details of the corporate governance report is available on the Group website at: https://www.oncosil.com/investors 2 Introduction OncoSil Medical Ltd is a publicly traded medical device company (ASX: OSL) with a global footprint. OncoSil™ is our brachytherapy device, which delivers a targeted intratumoural placement of Phosphorous-32 (32P) in the treatment of locally advanced pancreatic cancer in combination with gemcitabine-based chemotherapy. Led by CEO and Managing Director Nigel Lange, OncoSil Medical operates in a number of markets across Europe and Asia Pacific and is headquartered in Sydney, Australia. We believe in our technology and its ability to have a truly positive impact in Oncology. 3 Chairman’s Letter Dear Fellow Shareholders, On behalf of the Board, I welcome all new and existing shareholders to OncoSil Medical’s 2021-2022 Annual Report. Despite being adversely impacted by COVID-19 headwinds during the year, the team has advanced local regulatory and ethics approvals for the OSPREY patient registry, as well as training numerous hospital sites in the use of the OncoSil™ device. The business has achieved numerous commercial milestones throughout the year. These include: Innovation Funding (NUB): whereby hospitals throughout Germany will be provided with additional funding for a new device which is not covered through existing federal hospital funding. Continuing in Germany, The Federal Joint Committee (G-BA) approved a fully-funded trial in Germany, in which OncoSil will receive sales revenue for the provision of the OncoSil™ device. The first commercial treatment of the OncoSil™ device implantation in Europe, with the procedure being performed at The Hospital Universitario de Fuenlabrada (THUF), located in Madrid, Spain. This was accompanied by the signing of a commercial agreement with the same hospital to treat further patients. We are most pleased to report that the second patient treated has been successfully resected. Thank-you to the practitioners and more importantly we wish patients well. After several changes to the management team in the prior year, Ricky Sharma and myself have joined the Board as a part of its renewal. I bring a number of years of business operating experience, and Ricky has extensive experience in radiotherapy. I’d also like to acknowledge Dr Roger Aston, Mr Mike Bassett and Dr Chris Roberts, who have all voluntarily stepped down from the Board and I thank them for their contribution to the Company. We are excited to be working to develop further clinical pathways to support universal public coverage and reimbursement initiatives, health insurance coverage and treatment adoption, all critical to OncoSil’s long-term growth plans. Many of these programs we are undertaking should expand our label coverage and deliver further relief to patients and greater revenues to OncoSil. Finally, on behalf of the Board, I would like to take this opportunity to thank our Chief Executive Officer, Nigel Lange, my fellow Board directors and the entire OncoSil management team for their commitment to assisting LAPC patients. Whilst we respect the patience of shareholders, we believe we are on the right path and look forward to the coming year of advancement in the successful application of this device against this insidious disease. We have a committed team and believe we will not only improve the quality of a patient’s experience with LAPC, but more importantly we expect to save further lives! Sincerely Mr Otto Buttula Chairman – OncoSil Medical Limited 4 CEO’s Report CEO’s Report In 2022, OncoSil Medical Limited continued with commercialisation plans for our lead product, the OncoSil™ device. Our progress was marked by several key milestones that has enabled your Company to continue to build upon the commercialisation of the OncoSil™ device. Commercialisation In February 2022, the German Institute for the Hospital Remuneration System (InEK) granted the OncoSil™ device a “Positive Status 1” recognition under the Innovation Funding (NUB) program. This provides hospitals with additional funding for a new device which is not covered through existing federal hospital funding. This was followed in March 2022 with the Federal Joint Committee (G-BA) approving a fully funded clinical trial in Germany. The Company will receive sales revenue for the provision of the OncoSil™ device over the course of the clinical trial, and a successful outcome of this trial will enable the company to receive public funding under the German DRG system for the treatment of patients within this market. In April 2022, OncoSil achieved the first commercial treatment with the OncoSil™ device in Europe. Following this successful treatment, a commercial agreement worth €374K (~A$553k) was signed with the same hospital to treat further patients afflicted with locally advanced pancreatic cancer (LAPC). The sales team is currently working with other trained hospitals in Spain to facilitate tenders that will enable greater patient access to the OncoSil™ device in the various regions throughout the country. Therefore, despite a slow start, negatively impacted by COVID-19, revenues have continued to build during the year. In late March, face-to-face meetings were largely approved and accordingly, our team were able to re-engage with targeted sites. Projects include local regulatory approvals and ethics approvals for the OSPREY patient registry. In July 2022, Bupa UK Insurance became the first health insurance company to provide reimbursement for the OncoSil™ device in the private payer market in the UK for treatments at The London Clinic. The OncoSil team will be working with other insurers to expand reimbursement for patient access to treatments at The London Clinic and other private institutions in the UK. Clinical and Regulatory Affairs During the year the team has continued to develop and execute on its strategic objectives related to the further clinical development of the technology. This will allow for advancement of the commercial objectives as it serves to develop a body of evidence in support of market access and public reimbursement in major targeted markets. Significant preparations have been made for the upcoming TRIPP-FFX clinical trial to expand the label for the treatment of OncoSil with FOLFIRINOX-based chemotherapy. Expanding the label will increase the opportunity for commercial success in approved markets. The Company has also continued to work on several initiatives in preparation for market access, health insurance coverage and reimbursement applications in various European countries. During the year, updated data was submitted to the US Food and Drug Administration (FDA) for the Humanitarian Device Exemption (HDE) for the use of the OncoSil™ device in the treatment of distal cholangiocarcinoma (bile duct cancer). OncoSil continues to have ongoing dialogue with the FDA regarding this application. 5 5 CEO’s Report Financial Position As at 30 June 2022, OncoSil had a cash balance of approximately $11.3 million. Over the year, the Company's net cash used in operations was $10.1 million, with $2.3 million invested in R&D activities. During the year we also completed a $10m capital raising, consisting of a $4m placement to existing and new sophisticated and professional investors, and a non-renounceable entitlement offer to existing shareholders. Approximately $3.2 million was raised from the non-renounceable entitlement offer and the shortfall of approximately $2.7 million was placed with various sophisticated and professional investors. I thank all new and existing investors for supporting the recent capital raising which will enable OncoSil to achieve further commercial success in 2023. Finally, I would like to thank all our shareholders for their continued support of our Company. I look forward to building upon our achievements of 2022 and entering an exciting new stage for growth in 2023 as we continue to work towards broader European commercialisation of our device and ultimately achieving our goal of improving patient outcomes in the area of pancreatic cancer. Looking to the future Pancreatic cancer incidence by region 25.2% 2.7% United States United Kingdom 8.4% Japan Sincerely, Nigel Lange Chief Executive Officer OncoSil Medical Limited 6 16.8% Rest of the world 30% Europe 16.9% Urban China Projected net increase in incidence rates (% 2021-2029) Where we have approvals Urban China USA Spain UK France Italy Japan 41.7% 17.8% 16.4% 13.39% 11.6% 10% 9% 8% EU UK NZ European Union United Kingdom New Zealand HK SG SW Hong Kong Singapore Switzerland TR IS MY Germany Turkey Israel Malaysia * Data taken from GlobalData 2020 Pancreatic Cancer: Opportunity Analysis and Forecasts to 2029 Looking to the future Pancreatic cancer incidence by region 25.2% 2.7% United States United Kingdom 8.4% Japan 16.8% Rest of the world 30% Europe 16.9% Urban China Projected net increase in incidence rates (% 2021-2029) Where we have approvals Urban China USA Spain UK France Italy Japan Germany 41.7% 17.8% 16.4% 13.39% 11.6% 10% 9% 8% EU UK NZ European Union United Kingdom New Zealand HK SG SW Hong Kong Singapore Switzerland TR IS MY Turkey Israel Malaysia * Data taken from GlobalData 2020 Pancreatic Cancer: Opportunity Analysis and Forecasts to 2029 7 7 An interview with Dr. Natalie Phillips Consultant Gastroenterologist and Hepatobiliary Specialist at Hammersmith Hospital Imperial Trust FY22 highlights A year of transition from clinical Development to commercialisation Clinical data Commercial expansion Regulatory approvals Q: Minimally invasive treatments in cancer care are Q: With the PanCo Study now published, what could this mean for patients in the future? A: The PanCo study was very exciting and interesting to read. Most importantly, it has shown that the administration of OncoSil is safe and that has to be the most important outcome from that study. The results of the PanCo study were very encouraging including the ability to convert people with locally advanced pancreatic cancer towards resection with 33 percent being potentially resectable and 24 percent going through with resections that may have been due to comorbidities or patient choice. I think overall the PanCo study is a very promising and encouraging study to read for patients with pancreatic cancer. Q: Since there are now two leading insurance providers that has agreed to reimburse OncoSil™ therapy for patients with appropriate cover, how do you think this will impact the utilisation of this treatment in the patient pathway? A: I think it’s fantastic that the insurers are behind the OncoSil treatment. We now have two insurers that are providing this treatment in the UK. This can only be a good thing for a cancer that has such a poor prognosis and very limited treatment options at present. dramatically changing the treatment pathways and outcomes for patients. Do you see these types of treatments having a greater role and impact for patients with pancreatic cancer? A: Sadly, in the UK approximately 10,000 patients are diagnosed with pancreatic cancer every year, and despite available treatment options to date, the prognosis has still remained one of the lowest of any other cancers with approximately five percent of patients reaching 5-year survival. Anything we can do to improve that survival must be a good thing. Patients who have non-resectable pancreatic cancer would be treated with chemotherapy or chemoradiotherapy traditionally. New developments have been based on other cancer care developments such as for prostate cancer, endometrial cancer including other therapies such as nanoknife and in the case of brachytherapy for pancreatic cancer, the OncoSil treatment and all of these developments are very promising and exciting opportunities for treatment for a cancer that up until now has such a poor prognosis. Q: Endoscopy involves diagnostic work, as well as providing symptom relief through stenting etc. Would you say that Endoscopists are increasingly taking on a more interventional role in cancer care? For example, when delivering OncoSil™ treatment. What does this look like in the future? A: ERCP (Endoscopic Retrograde Cholangiopancreatogram) is an interventional procedure performed by endoscopists and has been used for several years to help with relief of symptoms from pancreatic cancer and occasionally diagnosing pancreatic cancer as well. EUS (Endoscopic Ultrasound) therapy has really transformed the way that we can diagnose, stage and treat now pancreatic cancer, and is a very exciting area for development. EUS therapy is used for diagnoses, we can take tissue samples, we can look at staging the cancer and the advent of brachytherapy in terms of OncoSil, we can now deliver treatment directly to the tumour itself. We’re learning more and more about the tools that we can use endoscopic therapy for using EUS and it’s a very exciting area for development which I think will only increase in the coming years. 8 Jul Mr Otto Buttula joins the OncoSil Medical Board Updated data submitted to the FDA for the HDE in dCCA PanCO Clinical Study on OncoSil™ Published in ESMO Open First Commercial Pancreas Cancer Treatment With The OncoSil™ Device In Spain €374k Commercial Agreement signed with Hospital Universitario de Fuenlabrada in Spain Dr. Jon Bell joins OncoSil Medical as Oct Dec Apr Nov Mar Jun Prof. Ricky Sharma joins the OncoSil Medical Board OncoSil approved for Innovation Funding (NUB) and Central Ethics for all hospitals in Germany Federal Joint Committee (G-BA) approved a fully-funded trial in Germany OncoSil completes $10m Capital Raising OncoSil PanCO Clinical Trial Presented at ESMO World Congress on Gastrointestinal Cancer (WCGIC) FY22 highlights A year of transition from clinical Development to commercialisation Clinical data Commercial expansion Regulatory approvals Jul Mr Otto Buttula joins the OncoSil Medical Board Updated data submitted to the FDA for the HDE in dCCA PanCO Clinical Study on OncoSil™ Published in ESMO Open First Commercial Pancreas Cancer Treatment With The OncoSil™ Device In Spain €374k Commercial Agreement signed with Hospital Universitario de Fuenlabrada in Spain Dr. Jon Bell joins OncoSil Medical as Oct Dec Apr Nov Mar Jun Prof. Ricky Sharma joins the OncoSil Medical Board OncoSil approved for Innovation Funding (NUB) and Central Ethics for all hospitals in Germany Federal Joint Committee (G-BA) approved a fully-funded trial in Germany OncoSil completes $10m Capital Raising OncoSil PanCO Clinical Trial Presented at ESMO World Congress on Gastrointestinal Cancer (WCGIC) 9 9 The directors present their report, together with the financial statements, on the consolidated entity (referred to hereafter as the ‘Group’) consisting of OncoSil Medical Ltd (referred to hereafter as the ‘Company’ or ‘parent entity’) and the entities it controlled at the end of, or during, the year ended 30 June 2022. Directors The following persons were directors of OncoSil Medical Ltd during the whole of the financial year and up to the date of this report, unless otherwise stated: Mr Otto Buttula - Non-Executive Chairman (appointed on 20 July 2021) Mr Nigel Lange - Chief Executive Officer and Managing Director Dr Martin Cross - Non-Executive Director Prof. Ricky Sharma - Non-Executive Director (appointed on 1 November 2021) Dr Chris Roberts AO - Non-Executive Chairman (resigned on 19 October 2021) Dr Roger Aston - Non-Executive Director (resigned on 19 October 2021) Mr Michael Bassett - Non-Executive Director (resigned on 19 October 2021) Information on directors Name: Title: Mr Otto Buttula Chairman – OncoSil Medical Limited Qualifications: B. Ec. Grad Dip. SIA, FAICD Experience and expertise: Mr Buttula has had extensive experience and success in investment research, funds management, information and bio-technologies and has held directorships in a number of public companies. Mr Buttula’s executive experience includes co-founder and CEO and Managing Director of IWL Ltd, an online financial services company that listed on the ASX in 1999. The company grew from a market capitalisation of $48 million at listing before a takeover in 2007 by Commonwealth Bank of Australia for $373 million. Mr Buttula also founded and was Managing Director of Investors Mutual, prior to which he was a co-founder and director of Lonsdale Securities Limited. Following his completion of executive duties, Mr Buttula was Non-Executive Chairman of platform and stockbroking provider Investorfirst Ltd and led the acquisition of HUB24 Limited (ASX: HUB). More recently, he served on the Board as a Non-Executive Director and Head of Audit and Risk at Imugene Ltd (ASX: IMU) between 2014 and 2016 and currently is the Executive Chairman of Rhythm Biosciences Ltd (ASX: RHY) and Non-Executive Chairman of HITIQ Ltd (ASX:HIQ). Other current directorships: Executive Chairman of Rhythm Biosciences Ltd (ASX: RHY) and Non-Executive Chairman of HITIQ Ltd (ASX: HIQ) Former directorships (last 3 years): None Special responsibilities: Member of the Nomination and Remuneration Committee and member of Audit Interests in shares: 34,615,387 ordinary shares and Risk Committee 10 Directors’ reportOncoSil Medical Ltd • 30 June 2022Name: Title: Mr Nigel Lange Chief Executive Officer and Managing Director Qualifications: BA, B.Comm Experience and expertise: Nigel joined the Company in May 2020 as Europe, Middle East and Africa (‘EMEA’) President and brings with him over 30 years of experience in the medical devices industry. Since 2003, Nigel has held various leadership roles with Sirtex Medical, a global leader in brachytherapy treatment for liver cancer. From 2003, Nigel served as Chief Executive Officer of Sirtex’s European business, responsible for establishing their brachytherapy device in over 300 centres across Europe and the Middle East. Since 2017, Nigel served as Group Chief Commercial Officer where he was responsible for all commercial aspects of the global business. During this time, Nigel has also held interim roles including Interim Group CEO and Interim CEO of Asia Pacific. Other current directorships: None Former directorships (last 3 years): None Special responsibilities: Member of the Nomination and Remuneration Committee and member of Audit and Risk Committee Interests in shares: 6,218,303 ordinary shares Interests in rights: 2,841,633 performance rights Name: Title: Dr Martin Cross Non-Executive Director Qualifications: B.SC (Hons) and Ph.D. (Aberdeen) FAICD Experience and expertise: Dr Cross is a highly regarded pharmaceutical executive with nearly 40 years’ experience including corporate and industry leadership roles directly influencing healthcare policy and government legislation in Australia and global business management, marketing and sales roles. From 2013 to 2015, Dr Cross was Chairman of Medicines Australia, the country’s peak body representing the research based pharmaceutical industry in Australia. Prior to leading Medicines Australia, from 2010 to 2013 Dr Cross was Chairman of both the Generics Medicine Industry Association and Pharmaceutical Industry Council. During this time, Dr Cross was also Managing Director of Alphapharm (now Viatris) in Australia and New Zealand, with responsibility for 750 employees and sales of over US $500m per annum. From 2003 to 2008, Dr Cross was Country Head and Managing Director of Novartis Australia and New Zealand, and Head of Global Marketing and Sales Capabilities from 2001 to 2003, based in Switzerland. Other current directorships: Non-Executive Director Anagenics Limited (ASX: AN1) Former directorships (last 3 years): None Special responsibilities: Chairman of the Nomination and Remuneration Committee and member of the Interests in shares: 3,461,538 ordinary shares Audit and Risk Committee 11 Name: Title: Prof Ricky Sharma Non-Executive Director Qualifications: M.A. (Cantab), M.B. B.Chir. (Cantab), F.R.C.P, F.R.C.R., Ph.D, S.F.F.M.L.M. Experience and expertise: Professor Sharma is an international authority on the multi-modality treatment of cancer with precision therapies. He is currently Vice President Clinical Affairs at Varian, a Siemens Healthineers company. Professor Sharma is also an honorary consultant in clinical oncology at University College London Hospitals, where he has a clinical practice in radiotherapy and chemotherapy. Professor Sharma was previously an associate professor at the University of Oxford, and an honorary consultant in clinical oncology at Oxford University Hospitals. He has over 200 publications in peer-reviewed scientific journals, including Lancet and Nature journals. Professor Sharma has previously been the chair of radiation oncology at University College London and a scientific group leader at the UCL Cancer Institute and he was a former chair of working groups for NHS/NICE evaluations of novel radiotherapy treatments. He is a Fellow of the Royal College of Physicians and the Royal College of Radiologists, and a Senior Fellow of the Faculty of Medical Leadership and Management. Other current directorships: None Former directorships (last 3 years): None Special responsibilities: Member of the Nomination and Remuneration Committee and member of Audit Interests in shares: None and Risk Committee ‘Other current directorships’ quoted above are current directorships for listed entities only and excludes directorships of all other types of entities, unless otherwise stated. ‘Former directorships (last 3 years)’ quoted above are directorships held in the last 3 years for listed entities only and excludes directorships of all other types of entities, unless otherwise stated. Company secretary Mr Karl Pechmann is the current company secretary. Mr Pechmann was CFO and company secretary of a regulatory technology company, Kyckr Ltd (ASX: KYK). His previous roles include Finance Director with ASX listed biotech company, Immutep Ltd (ASX: IMM) and has held senior finance roles at both ASX-listed and multinational organisations. Principal activities The principal activities of the Group during the financial year focused on the development and commercialisation of its lead product candidate, the OncoSil™ localised radiation therapy for the treatment of pancreatic and distal cholangiocarcinoma. Dividends There were no dividends paid, recommended or declared during the current or previous financial year. 12 Directors’ reportOncoSil Medical Ltd • 30 June 2022Review of operations The loss for the Group after providing for income tax amounted to $10,726,703 (30 June 2021: $10,433,523). The COVID-19 pandemic has resulted in a delay of full commercial launch this financial year ended 30 June 2022. It is difficult to estimate the precise impact that the pandemic will have on the business moving forward, nevertheless positive progress has been evident over more recent months. OncoSil Medical is an ASX-listed medical device company which has developed a breakthrough implantable radiation (brachytherapy) device for patients with pancreatic and distal cholangiocarcinoma (dCCA). The OncoSilTM device has CE Marking approval for the treatment of locally advanced pancreatic cancer in combination with gemcitabine-based chemotherapy. Commercialisation Face-to-face meetings were enabled as COVID-19 restrictions were relaxed in the second half of the financial year ended 30 June 2022 and accordingly, our team were able to re-engage with targeted sites. The team continued to concentrate on assisting with local regulatory approvals and ethics approvals for the OSPREY patient registry. The OncoSil team continued to engage in site training, with 17 hospital sites across Europe and 22 sites globally now fully trained to administer the treatment of the OncoSilTM device. During the year OncoSil achieved the first commercial treatment with the OncoSilTM device in Europe. The procedure was performed at The Hospital Universitario de Fuenlabrada, in Madrid, Spain. A commercial agreement for €374,000 (~A$553,000) was signed with the same hospital to treat further patients afflicted with locally advanced pancreatic cancer (LAPC). The sales team continues to work with other trained hospitals in Spain to facilitate commercial uptake and further agreements to facilitate greater patient access to OncoSilTM treatments in the various regions throughout the country. In Germany, the German Institute for the Hospital Remuneration System (InEK) granted the OncoSil™ device with a “Positive Status 1” status under the Innovation Funding (NUB) program. This provides hospitals with additional funding for a new device which is not covered through the existing Federal hospital DRG system. Following the NUB status, the Federal Joint Committee (G-BA) approved a fully funded clinical trial in Germany. The Company will receive sales revenue for the provision of the OncoSilTM device over the course of the clinical trial. A successful outcome of this trial would enable the Company to receive public funding from statutory health insurers under the German DRG system for the treatment of patients within this market. Clinical and regulatory affairs During the year the team has continued to develop and execute on its strategic objectives related to the further clinical development of the technology. Additional data was submitted for OncoSil’s Humanitarian Device Exemption (HDE) application to the US Food and Drug Administration (FDA) with respect to the treatment of distal cholangiocarcinoma (bile duct cancer). The Company is currently in discussions with the FDA regarding the application and further progress will be made in the FY 2023 financial year. The HDE would mark an important milestone in the Company’s commercialisation strategy if approved. The PanCO Clinical Study was published in European Society for Medical Oncology (‘ESMO’) Open. This publication stated that the addition of OncoSilTM to standard-of-care chemotherapy is safe and effective and that 23.8% of patients proceeded to surgical resection with curative intent. The PanCO Clinical Trial data was presented at the ESMO World Congress on Gastrointestinal Cancer, comparing the resected vs non-resected patients who received the OncoSil device. This showed that resected patients had a substantial response to treatment compared to non-resected patients, particularly a decrease in tumour volume. 13 Corporate Mr Otto Buttula was appointed to the Board of Directors. Mr Buttula brings sectorial experience in finance, technology and biotechnology which is expected to assist in driving the Company’s commercial agenda moving forward. Professor Ricky Sharma was also appointed to the Board of Directors and brings a wealth of experience in the area of radiotherapies and oncology. OncoSil also welcomed Dr Jon Bell as Chief Medical Officer. Dr Bell is an internationally recognised expert in Interventional Oncology and has had many years of experience working with companies in the industry to provide medical oversight and strategy. The Company also completed a $10m capital raising consisting of a placement to sophisticated and professional investors and a non-renounceable entitlement offer. Financial position and performance OncoSil had a cash balance of $11,279,841 as at 30 June 2022. During the year, OncoSil earned modest revenue from the sale of the OncoSilTM device of $231,789 compared to $213,070 in 2021. Recognised revenue from the Research and Development tax incentive in 2022 was $831,598 compared to $1,077,202 in 2021, reflecting lower Research and Development expenses and a higher proportion of activities being directed towards commercial activities. Employee benefits expenses decreased to $5,266,026 in 2022 compared to $5,294,509 in 2021 as OncoSil invested in sales, reimbursement and clinical resources to assist in commercialisation. Significant changes in the state of affairs There were no significant changes in the state of affairs of the Group during the financial year. Matters subsequent to the end of the financial year No matter or circumstance has arisen since 30 June 2022 that has significantly affected, or may significantly affect the Group’s operations, the results of those operations, or the Group’s state of affairs in future financial years. Likely developments and expected results of operations The Company is currently progressing its manufacturing capabilities, supply chain and sales and marketing infrastructure to achieve commercial sales in the European Union and the United Kingdom, as well as seeking to obtain marketing approval in markets which recognise the CE Mark. The CE Marking approval requires the Company to conduct a post marketing surveillance program which requires approvals at hospital sites and at a country level. The Company has a Humanitarian Device Exemption (HDE) submission pending with the United States Food and Drug Administration (FDA) for the use of the OncoSil™ device for the treatment of distal cholangiocarcinoma (bile duct cancer). A Global Pivotal Clinical Study will be undertaken, aimed at supporting a pre-marketing application in the United States in future years for pancreatic cancer. There can be no guarantees that in the future we will achieve these regulatory approvals, or on the basis sought by the Company, and there are no guarantees of the rate of enrolment of the Pivotal Clinical Study or the outcome of clinical results. Business risks The following is a summary of material business risks that could adversely affect our financial performance and growth potential in future years and how we propose to mitigate such risks. 14 Directors’ reportOncoSil Medical Ltd • 30 June 2022Research and Development The Group’s future levels of success will be influenced by the performance of the Group’s product in future clinical trials. Expanded usage of the Company’s device requires additional research and development, including ongoing clinical evaluation of safety and efficacy in clinical trials and regulatory approval prior to marketing authorisation. Medical device development generally is often associated with a high failure rate and until the Company is able to provide further clinical evidence of the ability of the Group’s product to improve outcomes in patients, the future success of the product in development remains speculative. Research and development risks include uncertainty of the outcome of results, difficulties or delays in development and the uncertainty around that surrounds scientific development of novel medical devices generally. Future potential sales Despite obtaining CE Mark regulatory approval, the Group’s products/technologies may not gain market acceptance among physicians, patients and the medical community. The degree of market acceptance of the Group’s approved products will depend on a variety of factors including: • Timing of market introduction, number and clinical profile of competitive products; • The Group’s ability to provide acceptable evidence of the safety and efficacy and its ability to secure the support of key clinicians and physicians for its products; • Cost-effectiveness compared to existing and new treatments; • Inclusion in national treatment guidelines; • Ability for coverage, market access, reimbursement and adequate payment from government bodies, health maintenance organisations and other third-party payers; • Prevalence and severity of adverse side effects; and • Other advances over other treatment methods. Physicians, patients, payers or the medical community may be unwilling to accept, use or recommend the Group’s products which would adversely affect its potential reviews and future profitability. Regulatory risk The Group and the development / commercialisation of its proposed products/technologies are subject to extensive laws and regulations including but not limited to the regulation of human medical device products. Additionally, human clinical trials are very expensive and difficult to design and implement, in part because they are subject to rigorous regulatory requirements. A risk exists that the Group’s technology may not satisfy regulatory requirements in markets in which we are seeking approval and ultimately may not gain approval, or that the approval process may take much longer than expected. As a result, the Group may fail to commercialise or out-license any products. If the Group fails to remain compliant with these various regulatory requirements, there is a risk that the Group’s financial performance could be adversely affected. COVID-19 The Group continued to respond promptly and strategically to the ongoing and rapidly changing impact of COVID-19 related risks. The Group is equipped to quickly adapt to changing public health regulations and has developed better ways to continue operating in a COVID-safe manner including online sales. The winding back of Government stimulus across the economy may impact future results. Reliance on key personnel The Group currently employs a number of key management and scientific personnel, and the Group’s future depends on retaining and attracting suitably qualified personnel. The Group has included in its employment with key personnel provisions aimed at providing incentives and assisting in the recruitment and retention of such personnel. It has also, as far as legally possible, established contractual mechanisms through employment and consultancy contracts to limit the ability of key personnel to join a competitor or compete directly with the Group. Despite these measures, however, there is no guarantee that the Group will be able to attract and retain suitably qualified personnel, and a failure to do so could materially and adversely affect the value of the Group’s technology. 15 Environmental regulation The Group is not subject to any significant environmental regulation under Australian Commonwealth or State law. Meetings of directors The number of meetings of the Company’s Board of Directors (‘the Board’) and of each Board committee held during the year ended 30 June 2022, and the number of meetings attended by each director were: Full Board Nomination and Audit and Remuneration Committee Risk Committee Attended Held Attended Held Attended Held 6 7 7 4 3 3 3 6 7 7 4 3 3 3 1 - 1 1 - - - 1 - 1 1 - - - - 1 1 - 1 1 - - 1 1 - 1 1 - Mr Otto Buttula Mr Nigel Lange Dr Martin Cross Prof. Ricky Sharma Dr Chris Roberts AO Dr Roger Aston Mr Michael Bassett Held: represents the number of meetings held during the time the director held office or was a member of the relevant committee. Remuneration report (audited) The remuneration report, which has been audited, details the key management personnel (‘KMP’) remuneration arrangements for the Group, in accordance with the requirements of the Corporations Act 2001 and its Regulations. KMP are those persons having authority and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly, including all directors. The remuneration report is set out under the following main headings: • Principles used to determine the nature and amount of remuneration • Details of remuneration • Service agreements • Share-based compensation • Additional information • Additional disclosures relating to KMP Principles used to determine the nature and amount of remuneration The objective of the Group’s executive reward framework is to ensure the remuneration package properly reflects each person’s duties and responsibilities and that remuneration is competitive in attracting, retaining and motivating people of the highest quality. The framework aligns executive reward with the achievement of strategic objectives and the creation of value for shareholders, and it is considered to conform to the market best practice for the delivery of reward. The Board of Directors (‘the Board’) ensures that executive reward satisfies the following key criteria for good reward governance practices: • competitiveness and reasonableness; • acceptability to shareholders; 16 Directors’ reportOncoSil Medical Ltd • 30 June 2022• performance linkage / alignment of executive compensation; and • transparency. The Nomination and Remuneration Committee (‘NRC’) is responsible for determining and reviewing remuneration arrangements for its directors and executives. The performance of the Group depends on the quality of its directors and executives. The remuneration philosophy is to attract, motivate and retain high performance and high-quality personnel. The NRC has structured an executive remuneration framework that is market competitive and complementary to the reward strategy of the Group. The Board has considered that the reward framework is designed to align to shareholders’ interests by: • having economic profit as a core component of plan design; • focusing on sustained growth in shareholder wealth, consisting of dividends and growth in share price, and delivering constant or increasing return on assets as well as focusing the executive on key non-financial drivers of value; and • attracting and retaining high calibre executives. Additionally, the reward framework should seek to enhance executives’ interests by: • rewarding executives for Group and individual performance against targets set by reference to appropriate benchmarks; • aligning the interests of executives with those of shareholders; • linking reward with the strategic goals and performance of the Group; and • ensuring total remuneration is competitive by market standards. In accordance with best practice corporate governance, the structure of non-executive director and executive director remuneration is separate. Non-executive directors’ remuneration Fees and payments to non-executive directors reflect the demands and responsibilities of their role. Non-executive directors’ fees and payments are reviewed annually by the NRC. The NRC may, from time to time, receive advice from independent remuneration consultants to ensure non-executive directors’ fees and payments are appropriate and in line with the market. The chairman’s fees are determined independently to the fees of other non-executive directors based on comparative roles in the external market. The chairman is not present at any discussions relating to the determination of his own remuneration. Non-executive directors are also entitled to government statutory superannuation guarantee contribution. They may also be granted shares, aligning their interests with those of the shareholders. ASX listing rules require the aggregate non-executive directors’ remuneration be determined periodically by a general meeting. The most recent determination was at the Annual General Meeting held on 26 November 2015, where the shareholders approved a maximum annual aggregate director’s fees payable to non-executive directors of $500,000. Executive remuneration The Group aims to reward executives based on their position and responsibility, with a level and mix of remuneration which has both fixed and variable components. The executive remuneration and reward framework has four components: • base pay and non-monetary benefits; • short-term performance incentives; • share-based payments; and • other remuneration such as superannuation and long service leave. The combination of these comprises the executive’s total remuneration. 17 Structure Executive directors are contracted to the Group either on a consultancy basis with remuneration and terms stipulated in individual consultancy arrangements or pursuant to an employment contract with remuneration and terms stipulated in individual employment agreements. Fixed remuneration, consisting of base salary, superannuation and non-monetary benefits, are reviewed annually by the NRC based on individual and business unit performance, the overall performance of the Group and comparable market remuneration. Executives are given the opportunity to receive their base emolument in a variety of forms including cash and fringe benefits such as motor vehicles and expense payment plans. It is intended that the manner of payment chosen will be optimal for the recipient without creating undue cost for the Group. The short-term incentives (‘STI’) program is designed to align the targets of the business units with the performance hurdle of executives. STI payments are granted to executives based on specific annual targets and key performance indicators (‘KPI’s’) being achieved. In particular, all executive directors and other KMP may be entitled to annual bonuses payable upon the achievement of annual corporate or profitability measures. The Group seeks to emphasise payment for results through providing various cash bonus reward schemes, specifically the incorporation of incentive payments based on achievement of approved targets. The long-term incentives (‘LTI’) include long service leave and share-based payments. Currently limited recourse loans are awarded to executives in order for the executive to subscribe for ordinary shares in the Company under the OncoSil Employee Share Plan. These performance dependent loan shares will vest upon achieving of long-term KPI’s as agreed with the executive, measured over terms varying from three to five years. These KPI’s include, but are not limited to, an increase in shareholders’ value, revenue targets or meeting regulatory and clinical measures. The NRC reviewed the long-term equity-linked performance incentives specifically for executives during the year ended 30 June 2022. Group performance and link to remuneration Remuneration for certain individuals is directly linked to the performance of the Group. A portion of cash bonus and incentive payments are dependent on defined earnings per share targets being met. The remaining portion of the cash bonus and incentive payments are at the discretion of the NRC. Refer to the section ‘Additional information’ below for details of the earnings and total shareholders return for the last five years. Use of remuneration consultants The Group did not engage the use of a remuneration consultant during the financial year ended 30 June 2022. Voting and actions following the Company’s 2021 Annual General Meeting (‘AGM’) At the 2021 AGM, only 50% of the votes received supported the adoption of the remuneration report for the year ended 30 June 2021. As this is the second time more than 25% of the eligible votes were cast against the Remuneration Report the Company received a “second strike”. Following the AGM, the Board took the shareholder concerns seriously and proactively engaged and received feedback from many shareholders to understand their concerns. The Company’s Long Term Incentive scheme has been structured to align KMP interests with shareholders by having all vesting conditions subject to Total Shareholder Return hurdle rates. In the year ended 30 June 2022, the Company issued performance rights instead of performance dependent loan shares to increase the transparency of equity instruments held by KMP which are subject to vesting conditions. Whilst listening and acknowledging the feedback from shareholders, the Board must also consider how to balance the need for remuneration plans to engage and fairly reward Executive KMP for their contribution to the business’s long-term success and driving shareholder value. 18 Directors’ reportOncoSil Medical Ltd • 30 June 2022Details of remuneration Amounts of remuneration The KMP of the Group consisted of the directors of OncoSil Medical Ltd and the following persons: • Mr Karl Pechmann – Chief Financial Officer and Company Secretary Details of the remuneration of KMP of the Group are set out in the following tables. Short-term benefits employment Post- Long- term Share-based payments benefits benefits Cash salary Cash Non- Super- and fees bonus monetary annuation 2022 $ $ $ $ Long service leave $ Equity- settled options $ Equity- settled shares $ Non-Executive Directors: Mr Otto Buttula (chairman) Dr Martin Cross Prof. Ricky Sharma * Dr Chris Roberts AO (previous chairman) * ** 81,769 72,727 53,178 30,163 Dr Roger Aston ** 24,242 Mr Michael Bassett * ** 24,086 Executive Directors: Mr Nigel Lange 388,199 Other KMP: Mr Karl Pechmann 267,800 942,164 - - - - - - - - - - - - - - - - - - 8,177 7,273 - - 2,424 - - 26,780 44,654 - - - - - - - - - Total $ 89,946 80,000 53,178 30,163 26,666 24,086 - - - - - - - - - - - - 25,868 194,422 608,489 10,813 22,608 328,001 36,681 217,030 1,240,529 * The remuneration payments to Prof. Ricky Sharma, Dr Chris Roberts AO and Mr Michael Bassett were made to their director- related entities, Professor Sharma Consultancy Limited, Robertsplan Pty Ltd and Market Connect Australia Pty Ltd, respectively. ** Represents remuneration for the period from 1 July 2021 to date of resignation 19 October 2021. 19 Short-term benefits employment benefits Post- Long-term benefits Share-based payments Cash salary Cash Non- Super- and fees bonus monetary annuation 2021 $ $ $ $ Long service leave $ Equity- settled options $ Equity- settled shares $ Total $ Non-Executive Directors: Dr Chris Roberts AO 80,000 (chairman) * Dr Roger Aston Dr Martin Cross Mr Michael Bassett* Executive Directors: 73,059 73,059 80,000 Mr Daniel Kenny *** 542,558 - - - - - Mr Nigel Lange ** 359,038 32,109 Other KMP: Mr Karl Pechmann 255,000 16,000 1,462,714 48,109 - - - - - - - - - 6,941 6,941 - 13,344 - 25,745 52,971 - - - - - - - - - - - - - - - - - 80,000 (53,000) 27,000 - - 80,000 80,000 (460,922) 94,980 126,241 517,388 14,679 311,424 (373,002) 1,190,792 * The remuneration payments to Dr Chris Roberts AO and Mr Michael Bassett were made to their director-related entities, Robertsplan Pty Ltd and Market Connect Australia Pty Ltd, respectively. ** Represents remuneration for the whole financial year, including the period before his appointment as CEO on 21 January 2021. *** Represents remuneration for the period from 1 July 2020 to date of resignation 18 December 2020. The proportion of remuneration linked to performance and the fixed proportion are as follows: Name 2022 2021 2022 2021 2022 2021 Fixed remuneration At risk – STI At risk – LTI Non-Executive Directors: Mr Otto Buttula Dr Martin Cross Prof. Ricky Sharma Dr Chris Roberts AO Dr Roger Aston Mr Michael Bassett Executive Directors: Mr Nigel Lange Mr Daniel Kenny Other KMP: 100% 100% 100% 100% 100% 100% 64% - - 100% - 100% 100% 100% 70% 100% Mr Karl Pechmann 90% 90% 20 - - - - - - - - - - - - - - - 6% - 5% - - - - - - - - - - - - 36% - 24% - 10% 5% Directors’ reportOncoSil Medical Ltd • 30 June 2022The proportion of the cash bonus paid/payable or forfeited is as follows: Name 2022 2021 2022 2021 Cash bonus paid/payable Cash bonus forfeited Executive Directors: Mr Nigel Lange Other KMP: Mr Karl Pechmann Service agreements - - 25% 100% 75% 25% 100% 75% Remuneration and other terms of employment for KMP are formalised in service agreements. Details of these agreements are as follows: Name: Title: Mr Nigel Lange Chief Executive Officer and Managing Director Agreement commenced: 21 January 2021 Term of agreement: Ongoing until terminated by OncoSil or Mr Lange Details: Base salary of €250,000 per annum. Additional benefits of motor vehicle, medical insurance and statutory pension entitlements (value approximately €25,000 per annum). Cash bonus up to 35% of base salary subject to achievement of KPI’s as agreed with the Board. Mr Lange is eligible to participate in the long-term incentive plan up to 35% of base salary. Either party may terminate the contract by providing six months’ written notice. Name: Title: Karl Pechmann Chief Financial Officer and Company Secretary Agreement commenced: 31 March 2020 Term of agreement: No fixed term Details: Base salary for the year ended 30 June 2022 of $267,800 plus superannuation, to be reviewed annually by the NRC, three months termination notice by either party, cash bonus up to 25% of salary subject to achievement of KPIs as set by the Board. There is a restraint period of six months ending on the date of termination of employment. He is eligible to participate in the long-term incentive plan as approved by shareholders. KMP have no entitlement to termination payments in the event of removal for misconduct. Share-based compensation Issue of shares There were no shares issued to directors and other KMP as part of compensation during the year ended 30 June 2022 other than those issued under the Employee Share Plan below. 21 Employee Share Plan (‘ESP’) Certain employees have been issued limited recourse loans to acquire shares in the Company. In accordance with the Australian Accounting Standards, these performance dependent loan shares are accounted for in a similar manner as options. Terms and conditions of share-based payment arrangements affecting the remuneration of KMP in the current financial year are set out below: Number of Name performance dependent Grant date Expiry date loan shares granted Exercise price Fair value of performance dependent loan per share at grant date Mr Nigel Lange 5,718,303 05/11/2020 05/11/2025 $0.13 Mr Karl Pechmann 664,926 05/11/2020 05/11/2025 $0.13 $0.102 $0.102 The shares cannot be traded by the holder until their related loan has been settled and the shares released. For performance dependent loan shares issued on 5 November 2020, shares vest automatically if and when the OncoSil Total Shareholder Return (TSR) achieves a compound annual growth rate (CAGR) based on the following table: TSR CAGR Performance Loan Funded Shares that Vest (%) <15% 15% (threshold performance) > 15% and < 25% 25% or more (stretch) 0% 50% Straight-line vesting between 50% and 100% 100% Performance rights The terms and conditions of each grant of performance rights over ordinary shares affecting remuneration of directors and other KMP in this financial year or future reporting years are as follows: Name Number of rights granted Grant date Vesting date and exercisable date Share price Fair value Expiry date hurdle for per right at vesting grant date Mr Nigel Lange 2,841,633 20/10/2021 20/10/2024 20/10/2025 $0.00 Mr Karl Pechmann 1,187,823 20/10/2021 20/10/2024 20/10/2025 $0.00 $0.039 $0.039 Performance rights granted carry no dividend or voting rights. For the performance rights issued on 20 October 2021, performance rights vest automatically if and when the OncoSil Total Shareholder Return (TSR) achieves a compound annual growth rate (CAGR) based on the following table: TSR CAGR Performance 30-day VWAP share price hurdle on 30 June 2024 Performance rights that Vest (%) < 20% 20% (threshold performance) < $0.1105 $0.1105 0% 50% > 20% and < 40% Between $0.1105 and $0.1755 Straight-line vesting between 50% and 100% 40% or more (stretch) > $0.1755 100% 22 Directors’ reportOncoSil Medical Ltd • 30 June 2022Other than the above, there were no performance dependent loan shares or performance rights over ordinary shares granted to or vested in directors and other KMP as part of compensation during the year ended 30 June 2022. Additional information The earnings of the Group for the five years to 30 June 2022 are summarised below: 2022 $ 2021 $ 2020 $ 2019 $ 2018 $ Revenue/income 1,073,518 1,497,941 2,958,779 3,845,045 4,549,584 Loss after income tax (10,726,703) (10,433,523) (4,261,895) (8,566,731) (8,539,542) The factors that are considered to affect total shareholders return (‘TSR’) are summarised below: 2022 0.04 2021 0.05 2020 0.12 2019 0.05 2018 0.23 (1.32) (1.28) (0.65) (1.36) (1.66) Share price at financial year end ($) Basic earnings per share (cents per share) Additional disclosures relating to KMP Shareholding The number of shares in the Company held during the financial year by each director and other members of KMP of the Group including their personally related parties (including those held under an Employee Share Plan), is set out below: Balance at the start of Received as part of the year remuneration Additions Disposals/ other Balance at the end of the year Ordinary shares Mr Otto Buttula ** 30,000,001 Mr Nigel Lange Dr Martin Cross Dr Chris Roberts AO * 5,718,303 2,905,000 5,681,819 Dr Roger Aston * 12,654,416 Mr Michael Bassett * Mr Karl Pechmann 1,116,000 850,381 58,925,920 - - - - - - - - 4,615,386 500,000 556,538 - - - 34,615,387 6,218,303 3,461,538 - - - (5,681,819) (12,654,416) (1,116,000) - - - 1,034,184 - 1,884,565 6,706,108 (19,452,235) 46,179,793 * other represents ordinary shares held on date of resignation ** opening balance represents 30,000,001 shares privately held on the date of appointment as a director 23 Loan shares holding The number of performance dependent loan shares over ordinary shares in the Company held during the financial year by each director and other members of KMP of the Group, is set out below: Loan shares over ordinary shares * Mr Nigel Lange Mr Karl Pechmann Balance at the start of the year 5,718,303 664,926 6,383,229 Granted Exercised Forfeited Balance at the end of the year - - - - - - - - - 5,718,303 664,926 6,383,229 *None of the performance dependent loan shares over ordinary shares have vested at the end of the year since the related loans haven’t been repaid. Performance rights holding The number of performance rights over ordinary shares in the Company held during the financial year by each director and other members of key management personnel of the Group, including their personally related parties, is set out below: Balance at the start of the year Granted Vested Expired/ forfeited/ other Balance at the end of the year Performance rights over ordinary shares Mr Nigel Lange Mr Karl Pechmann - - - 2,841,633 1,187,823 4,029,456 - - - - - - 2,841,633 1,187,823 4,029,456 Other transactions with KMP and their related parties Payment of Director’s fees to Dr Chris Roberts AO, were made to his director-related entity, Robertsplan Pty Ltd during the financial year of $30,163 (2021: $80,000). Payment of Director’s fees to Mr Michael Bassett, were made to his director-related entity, Market Connect Australia Pty Ltd during the financial year of $24,086 (2021: $80,000). Payment of Director’s fees to Prof. Ricky Sharma, were made to his director-related entity, Professor Sharma Consultancy Limited during the financial year of $53,178 (2021: $Nil). This concludes the remuneration report, which has been audited. Shares under option There were no unissued ordinary shares of OncoSil Medical Ltd under option outstanding at the date of this report. 24 Directors’ reportOncoSil Medical Ltd • 30 June 2022Shares under performance dependent loan shares There were no unissued ordinary shares of OncoSil Medical Limited under performance dependent loan shares outstanding at the date of this report. Shares under performance rights Unissued ordinary shares of OncoSil Medical Ltd under performance rights outstanding at the date of this report are as follows: Grant date Expiry date Exercise price Number under rights 20/10/2021 20/10/2025 $0.00 10,987,347 Shares issued on the exercise of options There were no ordinary shares of OncoSil Medical Ltd issued on the exercise of options during the year ended 30 June 2022 and up to the date of this report. Shares issued on the exercise of performance dependent loan shares There were no ordinary shares of OncoSil Medical Ltd issued on the exercise of performance dependent loan shares during the year ended 30 June 2022 and up to the date of this report. Shares issued on the exercise of performance rights There were no ordinary shares of OncoSil Medical Ltd issued on the exercise of performance rights during the year ended 30 June 2022 and up to the date of this report. Indemnity and insurance of officers The Company has indemnified the directors and executives for costs incurred, in their capacity as a director or executive, for which they may be held personally liable, except where there is a lack of good faith. During the financial year, the Company paid a premium in respect of a contract to insure the directors and executives of the Company against a liability to the extent permitted by the Corporations Act 2001. The contract of insurance prohibits disclosure of the nature of the liability and the amount of the premium. Indemnity and insurance of auditor The Company has not, during or since the end of the financial year, indemnified or agreed to indemnify the auditor of the Company or any related entity against a liability incurred by the auditor. During the financial year, the Company has not paid a premium in respect of a contract to insure the auditor of the Company or any related entity. Proceedings on behalf of the Company No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the Company, or to intervene in any proceedings to which the Company is a party for the purpose of taking responsibility on behalf of the Company for all or part of those proceedings. 25 Non-audit services There were no non-audit services provided during the financial year by the auditor. Officers of the Company who are former partners of Crowe Sydney There are no officers of the Company who are former partners of Crowe Sydney. Auditor’s independence declaration A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is set out immediately after this directors’ report. This report is made in accordance with a resolution of directors, pursuant to section 298(2)(a) of the Corporations Act 2001. On behalf of the directors Signed __________________________________________________ Date: 31 August 2022 Mr Otto Buttula Chairman – OncoSil Medical Limited Sydney 26 Directors’ reportOncoSil Medical Ltd • 30 June 2022 Auditor’s independence declaration Crowe Sydney ABN 97 896 683 573 Level 24, 1 O’Connell Street Sydney NSW 2000 Australia Tel +61 (02) 9262 2155 Fax +61 (02) 9262 2190 www.crowe.com.au 31 August 2022 The Board of Directors OncoSil Medical Ltd Suite 503, Level 5 15 Blue Street North Sydney NSW 2060 Dear Board Members OncoSil Medical Ltd In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the following declaration of independence to the Directors of OncoSil Medical Ltd. As lead audit partner for the audit of the financial report of OncoSil Medical Ltd for the financial year ended 30 June 2022, I declare that to the best of my knowledge and belief, that there have been no contraventions of: (i) the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and (ii) any applicable code of professional conduct in relation to the audit. Yours sincerely, Crowe Sydney Barbara Richmond Partner The title ‘Partner’ conveys that the person is a senior member within their respective division, and is among the group of persons who hold an equity interest (shareholder) in its parent entity, Findex Group Limited. The only professional service offering which is conducted by a partnership is the Crowe Australasia external audit division. All other professional services offered by Findex Group Limited are conducted by a privately owned organisation and/or its subsidiaries. Findex (Aust) Pty Ltd, trading as Crowe Australasia is a member of Crowe Global, a Swiss verein. Each member firm of Crowe Global is a separate and independent legal entity. Findex (Aust) Pty Ltd and its affiliates are not responsible or liable for any acts or omissions of Crowe Global or any other member of Crowe Global. Crowe Global does not render any professional services and does not have an ownership or partnership interest in Findex (Aust) Pty Ltd. Services are provided by Crowe Sydney, an affiliate of Findex (Aust) Pty Ltd. Liability limited by a scheme approved under Professional Standards Legislation. © 2022 Findex (Aust) Pty Ltd. 27 Statement of profit or loss and other comprehensive income For the year ended 30 June 2022 Revenue Other income Interest revenue calculated using the effective interest method Expenses Raw materials and consumables used Employee benefits expense Research and development expenses Marketing expense Occupancy expenses Consulting, finance and legal expenses Net foreign exchange loss Consolidated Note 2022 $ 2021 $ 5 6 7 7 231,789 213,070 831,598 1,231,255 10,131 82,483 (972,474) (961,023) (5,266,026) (5,294,509) (2,376,474) (2,887,721) (370,212) (684,769) (57,853) (147,955) (1,122,080) (1,339,913) (139,488) (104,367) Share-based payments/(reversal) 17 (593,305) 140,801 Other administrative expenses Finance costs Loss before income tax expense Income tax expense Loss after income tax expense for the year attributable to the owners of OncoSil Medical Ltd Other comprehensive income Items that may be reclassified subsequently to profit or loss Foreign currency translation Other comprehensive income for the year, net of tax Total comprehensive income for the year attributable to the owners of OncoSil Medical Ltd Basic earnings per share Diluted earnings per share (882,685) (665,128) (19,624) (15,747) (10,726,703) (10,433,523) - - (10,726,703) (10,433,523) 87,372 87,372 109,454 109,454 (10,639,331) (10,324,069) Cents (1.32) (1.32) Cents (1.28) (1.28) 7 8 28 28 The above statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes 2828 OncoSil Medical Ltd • 30 June 2022Statement of financial position As at 30 June 2022 Assets Current assets Cash and cash equivalents Trade and other receivables Other assets Total current assets Non-current assets Plant and equipment Right-of-use assets Total non-current assets Total assets Liabilities Current liabilities Trade and other payables Lease liabilities Employee benefits Total current liabilities Non-current liabilities Lease liabilities Total non-current liabilities Total liabilities Net assets Equity Issued capital Reserves Accumulated losses Total equity Consolidated Note 2022 $ 2021 $ 9 10 11 11,279,841 12,239,836 907,742 1,181,448 556,976 198,407 12,744,559 13,619,691 54,133 77,443 12 270,799 453,342 324,932 530,785 13,069,491 14,150,476 13 14 1,460,800 1,731,275 165,375 163,240 141,652 238,398 1,767,827 2,132,913 15 138,839 321,125 138,839 321,125 1,906,666 2,454,038 11,162,825 11,696,438 16 17 79,909,727 70,397,314 4,277,709 3,597,032 (73,024,611) (62,297,908) 11,162,825 11,696,438 The above statement of financial position should be read in conjunction with the accompanying notes 29 Statement of changes in equity For the year ended 30 June 2022 Consolidated Issued capital $ Accumulated Reserves losses Total equity $ $ $ Balance at 1 July 2020 70,137,314 3,628,379 (51,864,385) 21,901,308 Loss after income tax expense for the year Other comprehensive income for the year, net of tax Total comprehensive income for the year - - - - (10,433,523) (10,433,523) 109,454 - 109,454 109,454 (10,433,523) (10,324,069) Transactions with owners in their capacity as owners: Contributions of equity, net of transaction costs (note 16) 260,000 - Share-based payments (note 15) - (140,801) - - 260,000 (140,801) Balance at 30 June 2021 70,397,314 3,597,032 (62,297,908) 11,696,438 Consolidated Issued capital $ Accumulated Reserves losses Total equity $ $ $ Balance at 1 July 2021 70,397,314 3,597,032 (62,297,908) 11,696,438 Loss after income tax expense for the year Other comprehensive income for the year, net of tax Total comprehensive income for the year - - - - (10,726,703) (10,726,703) 87,372 - 87,372 87,372 (10,726,703) (10,639,331) Transactions with owners in their capacity as owners: Contributions of equity, net of transaction costs (note 16) 9,512,413 - Share-based payments (note 17) - 593,305 - - 9,512,413 593,305 Balance at 30 June 2022 79,909,727 4,277,709 (73,024,611) 11,162,825 The above statement of changes in equity should be read in conjunction with the accompanying notes 3030 OncoSil Medical Ltd • 30 June 2022Statement of cash flows For the year ended 30 June 2022 Cash flows from operating activities Receipts from customers Payments to suppliers and employees Interest received Interest and other finance costs paid Research and development tax incentive Government grants received Note 2022 $ 2021 $ 267,159 210,941 (11,199,442) (12,002,553) 10,131 82,483 (19,624) (15,747) 831,598 2,763,475 - 146,000 Net cash used in operating activities 26 (10,110,178) (8,815,401) Cash flows from investing activities Payments for property, plant and equipment Net cash used in investing activities Cash flows from financing activities Proceeds from issue of shares Repayment of borrowings Repayment of lease liabilities Net cash from financing activities (5,832) (5,832) (54,000) (54,000) 16 9,316,244 260,000 - (26,564) (160,229) (122,184) 9,156,015 111,252 Net decrease in cash and cash equivalents (959,995) (8,758,149) Cash and cash equivalents at the beginning of the financial year 12,239,836 20,997,985 Cash and cash equivalents at the end of the financial year 9 11,279,841 12,239,836 The above statement of cash flows should be read in conjunction with the accompanying notes 31 Note 1. General information The financial statements cover OncoSil Medical Ltd as a Group consisting of OncoSil Medical Ltd (the ‘Company’ or ‘parent entity’) and the entities it controlled at the end of, or during, the year (the ‘Group’). The financial statements are presented in Australian dollars, which is OncoSil Medical Ltd’s functional and presentation currency. OncoSil Medical Ltd is a listed public company limited by shares, incorporated and domiciled in Australia. Its registered office and principal place of business is: Suite 503, Level 5 15 Blue Street North Sydney NSW 2060 A description of the nature of the Group’s operations and its principal activities are included in the directors’ report, which is not part of the financial statements. The financial statements were authorised for issue, in accordance with a resolution of directors, on 31 August 2022. The directors have the power to amend and reissue the financial statements. Note 2. Significant accounting policies The principal accounting policies adopted in the preparation of the financial statements are set out either in the respective notes or below. These policies have been consistently applied to all the years presented, unless otherwise stated. New or amended Accounting Standards and Interpretations adopted The Group has adopted all of the new or amended Accounting Standards and Interpretations issued by the Australian Accounting Standards Board (‘AASB’) that are mandatory for the current reporting period. Any new or amended Accounting Standards or Interpretations that are not yet mandatory have not been early adopted. Basis of preparation These general purpose financial statements have been prepared in accordance with Australian Accounting Standards and Interpretations issued by the Australian Accounting Standards Board (‘AASB’) and the Corporations Act 2001, as appropriate for for-profit oriented entities. These financial statements also comply with International Financial Reporting Standards as issued by the International Accounting Standards Board (‘IASB’). Historical cost convention The financial statements have been prepared under the historical cost convention. The financial statements have also been prepared on a going concern basis. Critical accounting estimates The preparation of the financial statements requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements, are disclosed in note 3. Going concern During the financial year ended 30 June 2022 the Group has reported a loss after tax of $10,726,703 (2021: $10,433,523) and a decline in cash flows from operating activities of $10,110,178. COVID-19 has impacted on the Group’s ability to grow its revenue base during the year. As at 30 June 2022, the Group holds cash and cash equivalents of $11,279,841. 32 Notes to the financial statementsOncoSil Medical Ltd • 30 June 2022Note 2. Significant accounting policies (continued) The directors have assessed the financial and operating implications of the above matters, including the expected net cash outflows over the next 12 months. Should forecasted revenue not be achieved, the Group can flexibly manage cash outflows by reducing discretionary expenditure. Based on this consideration, the directors are of the view that the Group will be able to pay its debts as and when they fall due for at least 12 months following the date of these financial statements and that it is appropriate for the financial statements to be prepared on the going concern basis. Parent entity information In accordance with the Corporations Act 2001, these financial statements present the results of the Group only. Supplementary information about the parent entity is disclosed in note 24. Principles of consolidation The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of OncoSil Medical Ltd as at 30 June 2022 and the results of all subsidiaries for the year then ended. OncoSil Medical Ltd and its subsidiaries together are referred to in these financial statements as the ‘Group’. Subsidiaries are all those entities over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases. Intercompany transactions, balances and unrealised gains on transactions between entities in the Group are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group. The acquisition of subsidiaries is accounted for using the acquisition method of accounting. A change in ownership interest, without the loss of control, is accounted for as an equity transaction, where the difference between the consideration transferred and the book value of the share of the non-controlling interest acquired is recognised directly in equity attributable to the parent. Where the Group loses control over a subsidiary, it derecognises the assets including goodwill, liabilities and non-controlling interest in the subsidiary together with any cumulative translation differences recognised in equity. The Group recognises the fair value of the consideration received and the fair value of any investment retained together with any gain or loss in profit or loss. Foreign currency translation The financial statements are presented in Australian dollars, which is OncoSil Medical Ltd’s functional and presentation currency. Foreign currency transactions Foreign currency transactions are translated into the Company’s functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at financial year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss. Foreign operations The assets and liabilities of foreign operations are translated into Australian dollars using the exchange rates at the reporting date. The revenues and expenses of foreign operations are translated into Australian dollars using the average exchange rates, which approximate the rates at the dates of the transactions, for the period. All resulting foreign exchange differences are recognised in other comprehensive income through the foreign currency reserve in equity. The foreign currency reserve is recognised in profit or loss when the foreign operation or net investment is disposed of. 33 Note 2. Significant accounting policies (continued) Current and non-current classification Assets and liabilities are presented in the statement of financial position based on current and non-current classification. An asset is classified as current when: it is either expected to be realised or intended to be sold or consumed in the Group’s normal operating cycle; it is held primarily for the purpose of trading; it is expected to be realised within 12 months after the reporting period; or the asset is cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least 12 months after the reporting period. All other assets are classified as non-current. A liability is classified as current when: it is either expected to be settled in the Group’s normal operating cycle; it is held primarily for the purpose of trading; it is due to be settled within 12 months after the reporting period; or there is no unconditional right to defer the settlement of the liability for at least 12 months after the reporting period. All other liabilities are classified as non-current. Deferred tax assets and liabilities are always classified as non-current. Plant and equipment Plant and equipment is stated at historical cost less accumulated depreciation and impairment. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Depreciation is calculated on a straight-line basis to write off the net cost of each item of property, plant and equipment over their expected useful lives as follows: Office equipment 3-15 years The residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each reporting date. An item of property, plant and equipment is derecognised upon disposal or when there is no future economic benefit to the Group. Gains and losses between the carrying amount and the disposal proceeds are taken to profit or loss. Research and development costs Research costs are expensed in the period in which they are incurred. Development costs will be capitalised if and when: it is probable that the project will be a success considering its commercial and technical feasibility; the Group is able to use or sell the asset; the Group has sufficient resources and intent to complete the development; and its costs can be measured reliably. Borrowings Loans and borrowings are initially recognised at the fair value of the consideration received, net of transaction costs. They are subsequently measured at amortised cost using the effective interest method. Employee benefits Short-term employee benefits Liabilities for wages and salaries and other employee benefits expected to be settled wholly within 12 months of the reporting date are measured at the amounts expected to be paid when the liabilities are settled. 34 Notes to the financial statementsOncoSil Medical Ltd • 30 June 2022Note 2. Significant accounting policies (continued) Long-term employee benefits Employee benefits not expected to be settled within 12 months of the reporting data are measured as the present value of expected future payments to be made in respect of services provided by employees up to the reporting date. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. Expected future payments are discounted using market yields at the reporting date on high quality corporate bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows. Defined contribution superannuation expense Contributions to defined contribution superannuation plans are expensed in the period in which they are incurred. Goods and Services Tax (‘GST’) and other similar taxes Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable from the tax authority. In this case it is recognised as part of the cost of the acquisition of the asset or as part of the expense. Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable to, the tax authority is included in other receivables or other payables in the statement of financial position. Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities which are recoverable from, or payable to the tax authority, are presented as operating cash flows. Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the tax authority. Comparatives Comparatives have been realigned where necessary, to be consistent with current year presentation. There was no effect on profit, net assets or equity. New Accounting Standards and Interpretations not yet mandatory or early adopted Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet mandatory, have not been early adopted by the Group for the annual reporting period ended 30 June 2022. The Group’s assessment of the impact of these new or amended Accounting Standards and Interpretations, most relevant to the Group, are set out below. Amending accounting standards issued are not considered to have a significant impact on the financial statements of the Group as their amendments provide either clarification of existing accounting treatment or editorial amendments. AASB 2020-1 Classification of liabilities as current or non-current AASB 2020-1 was issued in March 2020 and is applicable to annual periods beginning on or after 1 January 2023, as extended by AASB 2020-6. Early adoption is permitted. This standard amends AASB 101 ‘Presentation of Financial Statements’ to clarify requirements for the presentation of liabilities in the statement of financial position as current or non-current. The amendments clarify that a liability is classified as non-current if an entity has the right at the end of the reporting period to defer settlement of the liability for at least 12 months after the reporting period. If the deferral right is conditional, the right only exists if, at the end of the reporting period, those conditions have been complied with. Classification of a liability as non-current is unaffected by the likelihood that the entity will exercise its right to defer settlement of the liability for at least 12 months after the reporting date or even if the entity settles the liability prior to issue of the financial statements. The meaning of settlement of a liability is also clarified. 35 Note 3. Critical accounting judgements, estimates and assumptions The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts in the financial statements. Management continually evaluates its judgements and estimates in relation to assets, liabilities, contingent liabilities, revenue and expenses. Management bases its judgements, estimates and assumptions on historical experience and on other various factors, including expectations of future events, management believes to be reasonable under the circumstances. The resulting accounting judgements and estimates will seldom equal the related actual results. The judgements, estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities (refer to the respective notes) within the next financial year are discussed below. COVID-19 Judgement has been exercised in considering the impacts that COVID-19 has had, or may have, on the Group based on known information. This consideration extends to the nature of the products and services offered, customers, supply chain, staffing and geographic regions in which the Group operates. Whilst the impact of COVID-19 has not materially impacted the Group up to 30 June 2022, it is not practicable to estimate the potential impact, after the reporting date. Share-based payment transactions The Group measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined by using the Monte-Carlo model taking into account the terms and conditions upon which the instruments were granted during the last 2 years (Black-Scholes model has been used before). The accounting estimates and assumptions relating to equity-settled share-based payments would have no impact on the carrying amounts of assets and liabilities within the next annual reporting period but may impact profit or loss and equity. Research and development tax incentive The Group measures the research and development tax incentive (‘RDTI’) based on the preparation of the income tax return for the year therefore assumptions and judgement are involved to determine whether some costs are appropriated to RDTI. Recovery of deferred tax assets Deferred tax assets are recognised for deductible temporary differences only if the Group considers it is probable that future taxable amounts will be available to utilise those temporary differences and losses. Lease term The lease term is a significant component in the measurement of both the right-of-use asset and lease liability. Judgement is exercised in determining whether there is reasonable certainty that an option to extend the lease or purchase the underlying asset will be exercised, or an option to terminate the lease will not be exercised, when ascertaining the periods to be included in the lease term. In determining the lease term, all facts and circumstances that create an economical incentive to exercise an extension option, or not to exercise a termination option, are considered at the lease commencement date. Factors considered may include the importance of the asset to the Group’s operations; comparison of terms and conditions to prevailing market rates; incurrence of significant penalties; existence of significant leasehold improvements; and the costs and disruption to replace the asset. The Group reassesses whether it is reasonably certain to exercise an extension option, or not exercise a termination option, if there is a significant event or significant change in circumstances. Incremental borrowing rate Where the interest rate implicit in a lease cannot be readily determined, an incremental borrowing rate is estimated to discount future lease payments to measure the present value of the lease liability at the lease commencement date. Such a rate is based on what the Group estimates it would have to pay a third party to borrow the funds necessary to obtain an asset of a similar value to the right-of-use asset, with similar terms, security and economic environment. 36 Notes to the financial statementsOncoSil Medical Ltd • 30 June 2022Note 4. Operating segments Identification of reportable operating segments The Group operates in one segment being the device development for new medical treatments. This is based on the internal reports that are reviewed and used by the Board of Directors (who are identified as the Chief Operating Decision Makers (‘CODM’)) in assessing performance and in determining the allocation of resources. There is no aggregation of operating segments. The information reported to the CODM is on at least a monthly basis. The financial information presented in these financial statements are the same as that presented to the CODM. The Group currently derives revenue in the Australia and New Zealand region. Information of revenue from products is included in note 5. Major customers During the year ended 30 June 2022 there were no major customers. A customer is considered major if its revenues are 10% or more of the Group’s revenue. Note 5. Revenue Sales revenue Disaggregation of revenue The disaggregation of revenue from contracts with customers is as follows: Major product lines OncoSil device Geographical regions APAC (Australia and New Zealand) Timing of revenue recognition Goods transferred at a point in time Consolidated 2022 $ 2021 $ 231,789 213,070 Consolidated 2022 $ 2021 $ 231,789 213,070 231,789 213,070 231,789 213,070 37 Note 5. Revenue (continued) Accounting policy for revenue recognition The Group recognises revenue as follows: Sale of goods Revenue from the sale of goods is recognised when the performance obligation is satisfied, which is at the point in time the customer obtains control of the goods at the time of delivery. Note 6. Other income Government grants * Research and development tax incentive Other income Other income Consolidated 2022 $ 2021 $ - 146,000 831,598 1,077,202 - 8,053 831,598 1,231,255 *During the year the Company did not receive any payments from the Australian Government in response to COVID-19. During the previous financial year ending 30 June 2021 the Company received payments of $50,000 and $96,000 as part of the Australian Government’s ‘Boosting Cash Flow for Employers’ and ‘JobKeeper’ schemes, respectively. These non-tax amounts have been recognised as government grants and recognised as income once there is reasonable assurance that the Company will comply with any conditions attached. Accounting policy for: Government grants Grants from the government are recognised at their fair value when there is reasonable assurance that the grant will be received and the Group will comply with all attached conditions. Government grants relating to costs are deferred and recognised in profit or loss over the period necessary to match them with the costs that they are intended to compensate. Research and development tax incentive The research and development tax incentive (‘RDTI’) represents a refundable tax offset that is available on eligible research and development expenditure incurred by the Group. The RDTI is considered to be a form of government assistance and the accounting policy adopted is analogous to accounting for government grants. The RDTI is recognised at fair value where there is a reasonable assurance that the incentive will be received and the Group will comply with all attached conditions. The RDTI relating to expenses is recognised as incurred at the point of time in profit or loss. 38 Notes to the financial statementsOncoSil Medical Ltd • 30 June 2022Note 6. Other income (continued) Other income Other income is recognised when it is received or when the right to receive payment is established. Interest Interest revenue is recognised as interest accrues using the effective interest method. This is a method of calculating the amortised cost of a financial asset and allocating the interest income over the relevant period using the effective interest rate, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the net carrying amount of the financial asset. Note 7. Expenses Loss before income tax includes the following specific expenses Consolidated Cost of sales Cost of sales Depreciation Office equipment Buildings right-of-use assets Total depreciation Employee benefits (excluding share-based payments) Employee benefits Defined contribution superannuation expense Total employee benefits expense Finance costs Interest and finance charges paid/payable on borrowings Interest and finance charges paid/payable on lease liabilities Finance costs expensed Leases Short-term lease payments 2022 $ 2021 $ 972,474 961,023 29,142 97,766 33,159 114,379 126,908 147,538 5,115,259 5,097,404 150,767 197,105 5,266,026 5,294,509 - 19,624 19,624 1,081 14,666 15,747 57,854 136,850 39 Note 8. Income tax Consolidated 2022 $ 2021 $ Numerical reconciliation of income tax expense and tax at the statutory rate Loss before income tax expense Tax at the statutory tax rate of 25% (2021: 26%) (10,726,703) (10,433,523) (2,681,676) (2,712,716) Tax effect amounts which are not deductible/(taxable) in calculating taxable income Research and development – write back Share-based payments Others 250,701 348,348 148,326 (36,608) (21,228) (42,126) Future income tax benefit not brought to account 2,303,877 2,443,102 Income tax expense - - Tax losses not recognised Unused tax losses for which no deferred tax asset has been recognised 25,670,669 19,227,295 Potential tax benefit @ 25% 6,417,667 4,806,824 The above potential tax benefit for tax losses has not been recognised in the statement of financial position. These tax losses can only be utilised in the future if the continuity of ownership test is passed, or failing that, the same business test is passed. The corporate tax rate applicable to base rate entities reduces from 27.5% to 26% for the 2020-21 income year and further reduces to 25% prospectively from the 2021-22 income year. The Company qualifies as a base rate entity as it has a turnover of less than $50 million and less than 80% of its assessable income is derived from base rate entity passive income. The Company has remeasured its deferred tax balances, and any unrecognised potential tax benefits arising from carried forward tax losses, based on the effective tax rate that is expected to apply in the year the temporary differences are expected to reverse or benefits from tax losses realised. The impact of the change in tax rate on deferred tax balances has been recognised as tax expense in profit or loss or as an adjustment to equity to the extent to which the deferred tax relates to items previously recognised outside profit or loss. Accounting policy for income tax The income tax expense or benefit for the period is the tax payable on that period’s taxable income based on the applicable income tax rate for each jurisdiction, adjusted by the changes in deferred tax assets and liabilities attributable to temporary differences, unused tax losses and the adjustment recognised for prior periods, where applicable. Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to be applied when the assets are recovered or liabilities are settled, based on those tax rates that are enacted or substantively enacted, except for: • when the deferred income tax asset or liability arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and that, at the time of the transaction, affects neither the accounting nor taxable profits; or • when the taxable temporary difference is associated with interests in subsidiaries, associates or joint ventures, and the timing of the reversal can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future. 40 Notes to the financial statementsOncoSil Medical Ltd • 30 June 2022Note 8. Income tax (continued Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses. The carrying amount of recognised and unrecognised deferred tax assets are reviewed at each reporting date. Deferred tax assets recognised are reduced to the extent that it is no longer probable that future taxable profits will be available for the carrying amount to be recovered. Previously unrecognised deferred tax assets are recognised to the extent that it is probable that there are future taxable profits available to recover the asset. Deferred tax assets and liabilities are offset only where there is a legally enforceable right to offset current tax assets against current tax liabilities and deferred tax assets against deferred tax liabilities; and they relate to the same taxable authority on either the same taxable entity or different taxable entities which intend to settle simultaneously. Note 9. Current assets – cash and cash equivalents Cash at bank Cash on deposit Consolidated 2022 $ 2021 $ 11,162,548 12,122,736 117,293 117,100 11,279,841 12,239,836 Accounting policy for 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 between three and six months that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. Note 10. Current assets – trade and other receivables Trade receivables Other receivables Research and development tax incentive receivable Consolidated 2022 $ 2021 $ 16,500 28,691 59,643 75,555 831,599 1,077,202 891,242 1,152,757 907,742 1,181,448 41 Note 10. Current assets – trade and other receivables (continued) Accounting policy for 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. Collectability of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectable are written off by reducing the carrying amount directly. A provision for impairment of trade receivables is raised when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of the receivables. The amount of the impairment allowance is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. Cash flows relating to short-term receivables are not discounted if the effect of discounting is immaterial. Other receivables are recognised at amortised cost, less any allowance for expected credit losses. Note 11. Current assets – other assets Prepayments Other deposits Note 12. Non-current assets – right-of-use assets Buildings – right-of-use Less: Accumulated depreciation Motor vehicles - right-of-use Less: Accumulated depreciation Consolidated 2022 $ 2021 $ 467,705 107,873 89,271 90,534 556,976 198,407 Consolidated 2022 $ 2021 $ 317,748 317,742 (130,362) (32,590) 187,386 285,152 172,823 205,430 (89,410) (37,240) 83,413 168,190 270,799 453,342 The Group leases buildings for its offices under agreements of between 3 to 5 years with, in some cases, options to extend. The leases have various escalation clauses. On renewal, the terms of the leases are renegotiated. The Group also leases motor vehicles under agreements of between 3 to 5 years. 42 Notes to the financial statementsOncoSil Medical Ltd • 30 June 2022Note 12. Non-current assets – right-of-use assets (continued) Reconciliations Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out below: Consolidated Balance at 1 July 2020 Additions Depreciation expense Balance at 30 June 2021 Disposals Depreciation expense Balance at 30 June 2022 Buildings Motor vehicles $ 81,789 $ - 81,789 Total $ 317,742 205,430 523,172 (114,379) (37,240) (151,619) 285,152 168,190 453,342 - (19,922) (19,922) (97,766) (64,855) (162,621) 187,386 83,413 270,799 For other lease disclosures, refer to: • note 7 for depreciation, interest and other expenses on right-of-use assets; • note 14 and note 15 for lease liabilities; and • consolidated statement of cash flows for repayment of lease liabilities. Accounting policy for 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. 43 Note 13. Current liabilities – trade and other payables Trade payables Payroll liabilities Other payables Consolidated 2022 $ 2021 $ 931,041 1,226,950 201,266 272,087 328,493 232,238 1,460,800 1,731,275 Refer to note 19 for further information on financial instruments. Accounting policy for trade and other payables Trade and other payables 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, non-interest bearing and are usually paid within 60 days of recognition. Note 14. Current liabilities – lease liabilities Lease liability Refer to note 19 for information on the maturity analysis of lease liabilities. Note 15. Non-current liabilities – lease liabilities Lease liability Refer to note 19 for information on the maturity analysis of lease liabilities. Accounting policy for lease liabilities Consolidated 2022 $ 2021 $ 165,375 163,240 Consolidated 2022 $ 2021 $ 138,839 321,125 A lease liability is recognised at the commencement date of a lease. The lease liability is initially recognised at the present value of the lease payments to be made over the term of the lease, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Group’s incremental borrowing rate. Lease payments comprise of fixed payments less any lease incentives receivable, variable lease payments that depend on an index or a rate, amounts expected to be paid under residual value guarantees, exercise price of a purchase option when the exercise of the option is reasonably certain to occur, and any anticipated termination penalties. Lease liabilities are measured at amortised cost using the effective interest method. The carrying amounts are remeasured if there is a change in the following: future lease payments arising from a change in an index or a rate used; residual guarantee; lease term; certainty of a purchase option and termination penalties. When a lease liability is remeasured, an adjustment is made to the corresponding right-of use asset, or to profit or loss if the carrying amount of the right-of-use asset is fully written down. 44 Notes to the financial statementsOncoSil Medical Ltd • 30 June 2022 Note 16. Equity – issued capital Ordinary shares – fully paid 991,242,262 797,343,294 79,909,727 70,397,314 Consolidated 2022 Shares 2021 Shares 2022 $ 2021 $ Movements in ordinary share capital Details Balance Date Shares Issue price $ 1 July 2020 828,600,898 Employee loan shares issued 5 November 2020 10,862,730 Loan funded employee shares repaid 30 November 2020 - Cancellation of employee loan shares 18 December 2020 (23,581,872) Cancellation of employee loan shares 28 January 2021 (8,538,462) Cancellation of employee loan shares 10 May 2021 (10,000,000) Balance 30 June 2021 797,343,294 Cancellation of employee loan shares 11 August 2021 (5,000,000) Placement issue of shares 9 May 2022 80,000,000 Rights issue 10 June 2022 65,390,030 Placement issue of shares 14 June 2022 53,508,938 Transaction costs $0.13 $0.00 $0.00 $0.00 $0.00 $0.05 $0.05 $0.05 70,137,314 - 260,000 - - - 70,397,314 - 4,000,000 3,269,502 2,675,447 (432,536) Balance 30 June 2022 991,242,262 79,909,727 Ordinary shares Ordinary shares entitle the holder to participate in any dividends declared and any proceeds attributable to shareholders should the Company be wound up, in proportions that consider both the number of shares held and the extent to which those shares are paid up. The fully paid ordinary shares have no par value and the Company does not have a limited amount of authorised capital. On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each share shall have one vote. Share buy-back There is no current on-market share buy-back. 45 Note 16. Equity – issued capital (continued) Capital risk management The Group’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. Given the state of the Group’s development there are no formal targets set for return of capital. Capital is regarded as total equity, as recognised in the statement of financial position, plus net debt. Net debt is calculated as total borrowings less cash and cash equivalents. The Group is not subject to any financing arrangements covenants or externally imposed capital requirements. The capital risk management policy has not changed during the year. Accounting policy for issued capital Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. Note 17. Equity – reserves Foreign currency reserve Share-based payments reserve Foreign currency reserve Consolidated 2022 $ 2021 $ 34,432 (52,940) 4,243,277 3,649,972 4,277,709 3,597,032 The reserve is used to recognise exchange differences arising from the translation of the financial statements of foreign operations to Australian dollars. It is also used to recognise gains and losses on hedges of the net investments in foreign operations. Share-based payments reserve The reserve is used to recognise the value of equity benefits provided to: employees and directors as part of their remuneration under an Employee Share Plan; directors on terms determined by the Board and approved by shareholders; and other parties as part of their compensation for services. 46 Notes to the financial statementsOncoSil Medical Ltd • 30 June 2022 Movements in reserves Movements in each class of reserve during the current and previous financial year are set out below: Consolidated Balance at 1 July 2020 Foreign currency translation Share-based payments Balance at 30 June 2021 Foreign currency translation Share-based payments Foreign currency $ Share-based payments $ Total $ (162,394) 3,790,773 3,628,379 109,454 - 109,454 - (140,801) (140,801) (52,940) 3,649,972 3,597,032 87,372 - 87,372 - 593,305 593,305 Balance at 30 June 2022 34,432 4,243,277 4,277,709 Note 18. Equity – dividends There were no dividends paid, recommended or declared during the current or previous financial year. Note 19. Financial instruments Financial risk management objectives The Group’s activities expose it to a variety of financial risks: market risk (including foreign currency risk, price risk and interest rate risk), credit risk and liquidity risk. The Group’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the Group. The Group uses different methods to measure different types of risk to which it is exposed. These methods include sensitivity analysis in the case of interest rate risk and ageing analysis for credit risk. Risk management is carried out by senior finance executives (‘finance’) under policies approved by the Board of Directors (‘the Board’). These policies include identification and analysis of the risk exposure of the Group and appropriate procedures, controls and risk limits. Finance identifies and evaluates financial risks within the Group’s operating units. Finance reports to the Board on a monthly basis. Market risk Foreign currency risk The Group is not exposed to significant foreign currency risk. Price risk The Group is not exposed to any significant price risk. Interest rate risk The Group’s main interest rate risk arises from cash at bank and short-term deposits. The policy is to maintain a mix of fixed and floating rate deposits. 47 Note 19. Financial instruments (continued) The carrying value of the Group’s cash and cash equivalents at the reporting date, subject to interest rate risk. The effect a 100 (2021: 100) basis point interest rate change is detailed below. The method used to arrive at the possible change in basis points was based on the analysis of the average change of the Reserve Bank of Australia (‘RBA’) monthly issued cash rate over the past five years. Basis points increase Basis points decrease Basis points change Effect Effect on Basis points Effect Effect on on profit before tax equity change on profit before tax equity Consolidated – 2022 Cash and cash equivalents 100 112,798 84,599 (100) (112,798) (84,599) Basis points increase Basis points decrease Basis points change Effect Effect on Basis points Effect Effect on on profit before tax equity change on profit before tax equity Consolidated – 2021 Cash and cash equivalents 100 122,398 90,575 (100) (122,398) (90,575) Credit risk Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. The Group has a strict code of credit, including obtaining agency credit information, confirming references and setting appropriate credit limits. The Group obtains guarantees where appropriate to mitigate credit risk. 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. The Group does not hold any collateral. The credit risk on liquid funds is limited because the counter party is a bank with high credit rating. Liquidity risk Vigilant liquidity risk management requires the Group to maintain sufficient liquid assets (mainly cash and cash equivalents) to be able to pay debts as and when they become due and payable. The Group manages liquidity risk by maintaining adequate cash reserves by continuously monitoring actual and forecast cash flows and matching the maturity profiles of financial assets and liabilities. The Group’s objective is to maintain a balance between continuity of funding and flexibility through the use of finance leases and equity funding. 48 Notes to the financial statementsOncoSil Medical Ltd • 30 June 2022Note 19. Financial instruments (continued) Remaining contractual maturities The following tables detail the Group’s remaining contractual maturity for its financial instrument liabilities. The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the financial liabilities are required to be paid. The tables include both interest and principal cash flows disclosed as remaining contractual maturities and therefore these totals may differ from their carrying amount in the statement of financial position. Weighted Remaining average 1 year or Between 1 Between 2 Over 5 contractual interest rate % less $ and 2 years and 5 years years maturities $ $ $ $ - - - 931,041 201,266 328,493 - - - - - - - - - - - - - 931,041 201,266 328,493 304,214 1,765,014 Interest-bearing – variable Lease liability 5.00% 165,375 138,839 Total non-derivatives 1,626,175 138,839 Weighted Remaining average 1 year or Between 1 Between 2 Over 5 contractual interest rate % less $ and 2 years and 5 years years maturities $ $ $ $ Consolidated – 2022 Non-derivatives Non-interest bearing Trade payables Payroll liabilities Other payables Consolidated – 2021 Non-derivatives Non-interest bearing Trade payables Payroll liabilities Other payables Interest-bearing – variable - - - 1,226,950 272,087 232,238 - - - - - - - - - - - 1,226,950 272,087 232,238 484,365 2,215,640 Lease liability 5.00% 163,240 176,508 144,617 Total non-derivatives 1,894,515 176,508 144,617 The cash flows in the maturity analysis above are not expected to occur significantly earlier than contractually disclosed above. Fair value of financial instruments Unless otherwise stated, the carrying amounts of financial instruments reflect their fair value. 49 Note 20. Key management personnel disclosures Compensation The aggregate compensation made to directors and other members of KMP of the Group is set out below: Short-term employee benefits Post-employment benefits Share-based payments Consolidated 2022 $ 942,164 44,654 253,711 1,240,529 2021 $ 1,510,823 52,971 (373,002) 1,190,792 Note 21. Remuneration of auditors During the financial year the following fees were paid or payable for services provided by Crowe Sydney, the auditor of the Company: Consolidated 2022 $ 2021 $ Audit services – Crowe Sydney Audit or review of the financial statements 60,450 57,500 Note 22. Contingent liabilities There has been no change in the status of contingent liabilities since 30 June 2021. On 16 April 2013, OncoSil Medical Ltd settled the acquisition of OncoSil Medical (UK) Limited (formerly Enigma Therapeutics Limited “OncoSil UK”). OncoSil UK holds a licence to commercialise OncoSil™ (formerly BrachySil™), a targeted brachytherapy product for the treatment of cancer (‘the Product’) under a licence agreement from pSiMedica. pSiMedica has granted to OncoSil UK an exclusive world-wide royalty-bearing license for the term of the pSiMedica Transaction (with limited rights to sub-license) under the Licensed Patents solely to make, use, sell, offer to sell and import the Product in the field of therapy in human neoplastic disease (cancer). Key terms of the license agreement have been summarised below: • OncoSil UK is required to make a payment of up to US$100,000 to pSiMedica annually to support existing patents; and • OncoSil UK is required to make the following payments for patents and subject to the Product completing positive clinical trials and becoming registered for sale. i. During the term of the licence, 8% of future net sales (future sales which cannot be guaranteed) of the Product or any other product protected by the rights arising from the Assigned Patents (if sold by OncoSil UK or its affiliates) and services performed using the Product or such other products, on a product-by-product and country-by-country basis. Only half of this payment must be made whenever approved generic competitor products derived from the Product maintain at least a 20% world-wide market share of sales, on a country-by-country and product-by-product basis. 50 Notes to the financial statementsOncoSil Medical Ltd • 30 June 2022Note 22. Contingent liabilities (continued) ii. 20% of any form of consideration, payments, royalties, third-party net sales income and other payments received from third party licensing deals and various other agreements with third parties in relation to the Product or any other product protected by the rights arising from the Assigned Patents, for the term of the pSiMedica licence, on a product-by-product and country-by-country basis. iii. Potential milestone payments based only upon the Product being a commercial success, which cannot be guaranteed now or in the future (ranging from US$1,000,000 to US$5,000,000) upon: • OncoSil UK, its affiliates and any of OncoSil UK’s third-party transferees together potentially achieving US$5,000,000 aggregate net sales of the Product and any other product protected by the rights arising from the Assigned Patents, for (i) an indication and (ii) a second indication; • aggregate net sales of the Product and any other product protected by the rights arising from the Assigned Patents, paid to OncoSil UK, its affiliates and third-party transferees in a calendar year of US$20,000,000 or more; and • aggregate net sales of the Product and any other product protected by the rights arising from the Assigned Patents, paid to OncoSil UK, its affiliates and third-party transferees in a calendar year of US$100,000,000 or more. Termination of licence agreement Unless terminated early for reasons such as a material breach, or by pSiMedica due to a patent challenge being brought against pSiMedica in certain circumstances (including by OncoSil UK), the term of the licence for the Licensed Patents and OncoSil UK’s rights to exploit the product and any other products arising from the Assigned Patents, remain in effect on a country-by-country and product-by-product basis, until the later to occur of: • the date on which the product or any other product protected by the rights arising from the Assigned Patents in such country is no longer covered or protected by a potential claim of the Licensed Patents or the Assigned Patents in such country; and • ten years from the date of first commercial sale of a product or any other product protected by the rights arising from the Assigned Patents in such country. In addition, if OncoSil UK reasonably forms the view that it is not capable of commercialising OncoSil™, OncoSil UK shall have the right to terminate the license agreement by giving 60 days prior written notice to pSiMedica. The directors are not aware of any other commitments or contingencies as at 30 June 2022. Note 23. Related party transactions Parent entity OncoSil Medical Ltd is the parent entity. Subsidiaries Interests in subsidiaries are set out in note 25. Key management personnel Disclosures relating to key management personnel are set out in note 20 and the remuneration report included in the directors’ report. Transactions with related parties Payment of Director’s fees to Dr Chris Roberts AO, were made to his director-related entity, Robertsplan Pty Ltd during the financial year of $30,163 (2021: $80,000). Payment of Director’s fees to Mr Michael Bassett, were made to his director-related entity, Market Connect Australia Pty Ltd during the financial year of $24,086 (2021: $80,000). Payment of Director’s fees to Prof. Ricky Sharma, were made to his director-related entity, Professor Sharma Consultancy Limited during the financial year of $53,178 (2021: $Nil). 51 Receivable from and payable to related parties There were no trade receivables from or trade payables to related parties at the current and previous reporting date. Loans to/from related parties There were no loans to or from related parties at the current and previous reporting date. Terms and conditions All transactions were made on normal commercial terms and conditions and at market rates. Note 24. Parent entity information Set out below is the supplementary information about the parent entity. Statement of profit or loss and other comprehensive income Loss after income tax Total comprehensive income Statement of financial position Total current assets Total assets Total current liabilities Total liabilities Equity Issued capital Share-based payments reserve Accumulated losses Total equity Parent 2022 $ 2021 $ (6,199,711) (7,842,014) (6,199,711) (7,842,014) Parent 2022 $ 2021 $ 21,863,313 18,152,267 21,898,506 18,406,467 1,412,660 1,825,607 1,412,660 1,825,607 79,908,706 70,397,314 4,243,277 3,649,972 (63,666,137) (57,466,426) 20,485,846 16,580,860 Guarantees entered into by the parent entity in relation to the debts of its subsidiaries The parent entity had no guarantees in relation to the debts of its subsidiaries as at 30 June 2022 and 30 June 2021. Contingent liabilities The parent entity had no contingent liabilities as at 30 June 2022 and 30 June 2021. 52 Notes to the financial statementsOncoSil Medical Ltd • 30 June 2022Capital commitments – Property, plant and equipment The parent entity had no capital commitments for property, plant and equipment as at 30 June 2022 and 30 June 2021. Significant accounting policies The accounting policies of the parent entity are consistent with those of the Group, as disclosed in note 2, except for the following: • Investments in subsidiaries are accounted for at cost, less any impairment, in the parent entity. • Dividends received from subsidiaries are recognised as other income by the parent entity and its receipt may be an indicator of an impairment of the investment. Note 25. Interests in subsidiaries The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance with the accounting policy described in note 2: Name Principal place of business / Country of incorporation OncoSil Medical UK Limited United Kingdom OncoSil Medical Europe GmbH OncoSil Medical US Inc. OncoSil Medical NZ Limited OncoSil Medical Singapore Pte. Ltd OncoSil Medical España SL* Germany United States New Zealand Singapore Spain * The company was registered on 8 October 2021. Ownership interest 2022 % 100% 100% 100% 100% 100% 100% 2021 % 100% 100% 100% 100% 100% - 53 Note 26. Reconciliation of loss after income tax to net cash used in operating activities Loss after income tax expense for the year (10,726,703) (10,433,523) Consolidated 2022 $ 2021 $ Adjustments for: Depreciation and amortisation Share-based payments Foreign exchange differences Change in operating assets and liabilities: Increase in trade receivables Decrease in other operating assets Increase/(decrease) in trade and other payables Increase/(decrease) in employee benefits 191,763 184,778 593,305 (140,801) 87,372 109,435 273,706 (28,691) (358,569) 1,572,345 (74,306) (49,317) (96,746) (29,627) Net cash used in operating activities (10,110,178) (8,815,401) Note 27. Changes in liabilities arising from financing activities Consolidated Balance at 1 July 2020 Borrowings Lease liability $ Total $ $ 26,564 83,377 109,941 Net cash used in financing activities (26,564) (122,184) (148,748) Acquisition of buildings - right-of-use by means of leases Balance at 30 June 2021 Net cash used in financing activities Release of lease assets Balance at 30 June 2022 - - - - - 523,172 523,172 484,365 484,365 (160,229) (160,229) (19,922) (19,922) 304,214 304,214 The borrowings the Group had during the year corresponded to loans for insurance premium funding arrangements. 54 Notes to the financial statementsOncoSil Medical Ltd • 30 June 2022Note 28. Earnings per share Consolidated 2022 $ 2021 $ Loss after income tax attributable to the owners of OncoSil Medical Ltd (10,726,703) (10,433,523) Weighted average number of ordinary shares used in calculating basic earnings per share 810,775,740 818,087,077 Weighted average number of ordinary shares used in calculating diluted earnings per share 810,775,740 818,087,077 Number Number Basic earnings per share Diluted earnings per share Cents (1.32) (1.32) Cents (1.28) (1.28) 17,170,382 performance dependent loan shares and 10,987,347 performance rights under the Group’s Employee Share Plan have not been included in the diluted earnings per share calculation as they are anti-dilutive. Accounting policy for earnings per share Basic earnings per share Basic earnings per share is calculated by dividing the profit attributable to the owners of OncoSil Medical Ltd, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the financial year. Diluted earnings per share Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average number of additional ordinary shares that would have been outstanding assuming conversion of all dilutive potential ordinary shares. Note 29. Share-based payments Grant of performance dependent loan shares The Group’s Employee Share Plan (‘ESP’) is designed as an incentive for senior managers and above. Under the plan, participants are granted performance dependent loan shares which only vest if certain performance standards are met. The issue price is fully financed by a limited recourse loan provided by the Group. Dividends are for the benefit of the employee. Employees are not permitted to deal in the shares until the limited recourse loan has been repaid. Performance dependent loan shares issued under the ESP are accounted for in a similar manner as options. There are no cash settlement alternatives. 55 Note 29. Share-based payments (continued) The following unvested performance dependent loan shares were on issue under the ESP at reporting date and held as security against limited recourse loan arrangements: 2022 Grant date Expiry date Exercise price Balance at Expired/ Balance at the start of Granted Vested forfeited/ the end of the year other * the year 12/08/2016 11/08/2021 $0.22 4,000,000 11/12/2017 11/12/2022 $0.22 769,231 02/03/2018 02/03/2023 $0.22 4,230,769 02/03/2018 11/08/2021 $0.22 1,000,000 31/10/2018 31/10/2023 $0.18 975,000 31/10/2018 31/10/2023 $0.18 975,000 25/03/2020 25/03/2025 $0.10 1,069,763 25/03/2020 25/03/2025 $0.10 1,069,761 05/11/2020 05/11/2025 $0.13 8,080,858 22,170,382 - - - - - - - - - - - - - - - - - - - - (4,000,000) - - - 769,231 4,230,769 (1,000,000) - - - - - - 975,000 975,000 1,069,763 1,069,761 8,080,858 (5,000,000) 17,170,382 Weighted average exercise price $0.17 $0.00 $0.00 $0.22 $0.15 *During the year 5,000,000 performance dependent loan shares were forfeited due to vesting conditions not being met. 56 Notes to the financial statementsOncoSil Medical Ltd • 30 June 2022Note 29. Share-based payments (continued) The following unvested performance dependent loan shares were on issue under the ESP as at 30 June 2021 and were being held as security against limited recourse loan arrangements: 2021 Grant date Expiry date Exercise price Balance at Expired/ Balance at the start of Granted Vested forfeited/ the end of the year other * the year 13/01/2016 13/01/2021 $0.13 2,500,000 10/05/2016 10/05/2021 $0.22 24,000,000 12/08/2016 11/08/2021 $0.22 4,000,000 11/12/2017 11/12/2022 $0.22 769,231 02/03/2018 02/03/2023 $0.22 4,230,769 02/03/2018 11/08/2021 $0.22 1,000,000 31/10/2018 31/10/2023 $0.18 2,625,000 31/10/2018 31/10/2023 $0.18 2,625,000 25/03/2020 25/03/2025 $0.10 1,069,763 25/03/2020 25/03/2025 $0.10 1,069,763 - - - - - - - - - - 05/11/2020 05/11/2025 $0.13 - 10,862,730 43,889,524 10,862,730 - - - - - - - - - - - - (2,500,000) (24,000,000) - - - - - - 4,000,000 769,231 4,230,769 1,000,000 (1,650,000) 975,000 (1,650,000) 975,000 - - 1,069,763 1,069,761 (2,781,872) 8,080,858 (32,581,872) 22,170,382 Weighted average exercise price $0.20 $0.13 $0.00 $0.19 $0.17 * During the year ended 30 June 2021 32,581,872 performance dependent loan shares were forfeited due to vesting conditions not being met. For performance dependent loan shares issued on 5 November 2020, shares vest automatically if and when the OncoSil Total Shareholder Return (TSR) achieves a compound annual growth rate (CAGR) based on the following table: TSR CAGR Performance Loan Funded Shares that Vest (%) <15% 15% (threshold performance) 0% 50% > 15% and < 25% Straight-line vesting between 50% and 100% 25% or more (stretch) 100% 57 Note 29. Share-based payments (continued) Terms of limited recourse loan arrangement The loans issued are limited recourse such that on the repayment date the repayment obligation under the loan will be limited to the lesser of: • (a) the outstanding balance of the loan; and • (b) the market value of the loan shares on that date. In addition, where the participant has elected for the performance dependent loan shares to be provided to the Company in full satisfaction of the loan, the Company must accept the loan shares as full settlement of the repayment obligation under the loan. The total value of loans outstanding under the Employee Share Plan at reporting date was $2,733,834 (2021: $3,833,834). The weighted average remaining contractual life of loan shares outstanding at the end of the financial year was 27 months (2021: 31 months). Grant of performance rights At the 2021 Annual General Meeting held on 19 October 2021, shareholders approved the Group’s Omnibus Incentive Plan and is designed as an incentive for senior managers and above. Under the plan, various equity instruments can be granted and will only vest if certain performance standards are met. Set out below are summaries of performance rights granted under the plan: 2022 Grant date Expiry date Exercise price Balance at Expired/ Balance at the start of Granted Exercised forfeited/ the end of the year other the year 20/10/2021 20/10/2025 $0.00 - - 10,987,347 10,987,347 - - - - 10,987,347 10,987,347 For the performance rights granted during the current financial year, the valuation model inputs used to determine the fair value at the grant date, are as follows: Grant date Expiry date price at grant date Share Exercise Expected Dividend Risk free Fair value at price volatilty yield inetrest rate grant date 20/10/2021 20/10/2025 $0.05 $0.00 104.00% - 0.66% $0.039 58 Notes to the financial statementsOncoSil Medical Ltd • 30 June 2022For the performance rights issued on 20 October 2021, performance rights vest automatically if and when the OncoSil Total Shareholder Return (TSR) achieves a compound annual growth rate (CAGR) based on the following table: TSR CAGR Performance 30-day VWAP share price hurdle on 30 June 2024 Performance rights that Vest (%) < 20% 20% (threshold performance) < $0.1105 $0.1105 0% 50% > 20% and < 40% Between $0.1105 and $0.1755 Straight-line vesting between 50% and 100% 40% or more (stretch) > $0.1755 100% There are no exercisable performance dependant loan shares and performance rights as at 30 June 2022 and 2021, as they have not vested. Accounting policy for share-based payments Equity-settled share-based compensation benefits are provided to employees. Equity-settled transactions are awards of shares, or options over shares, that are provided to employees in exchange for the rendering of services. The cost of equity-settled transactions are measured at fair value on grant date. Fair value is independently determined using the Monte-Carlo option pricing model that takes into account the exercise price, the term of the option, the share price at grant date and expected price volatility of the underlying share and the risk-free interest rate for the term of the option during the last 2 years (Black-Scholes model has been used before). The cost of equity-settled transactions are recognised as an expense with a corresponding increase in equity over the vesting period. The cumulative charge to profit or loss is calculated based on the grant date fair value of the award, the best estimate of the number of awards that are likely to vest and the expired portion of the vesting period. The amount recognised in profit or loss for the period is the cumulative amount calculated at each reporting date less amounts already recognised in previous periods. Market conditions are taken into consideration in determining fair value. Therefore any awards subject to market conditions are considered to vest irrespective of whether or not that market condition has been met, provided all other conditions are satisfied. If equity-settled awards are modified, as a minimum an expense is recognised as if the modification has not been made. An additional expense is recognised, over the remaining vesting period, for any modification that increases the total fair value of the share-based compensation benefit as at the date of modification. If the non-vesting condition is within the control of the Group or employee, the failure to satisfy the condition is treated as a cancellation. If the condition is not within the control of the Group or employee and is not satisfied during the vesting period, any remaining expense for the award is recognised over the remaining vesting period, unless the award is forfeited. If equity-settled awards are cancelled, they are treated as if they had vested on the date of cancellation, and any remaining expense is recognised immediately. If a new replacement award is substituted for the cancelled award, the cancelled and new award is treated as if they were a modification. Note 30. Events after the reporting period No matter or circumstance has arisen since 30 June 2022 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. 59 Directors’ declaration In the directors’ opinion: • the attached financial statements and notes comply with the Corporations Act 2001, the Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements; • the attached financial statements and notes comply with International Financial Reporting Standards as issued by the International Accounting Standards Board as described in note 2 to the financial statements; • the attached financial statements and notes give a true and fair view of the Group’s financial position as at 30 June 2022 and of its performance for the financial year ended on that date; and • there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable. The directors have been given the declarations required by section 295A of the Corporations Act 2001. Signed in accordance with a resolution of directors made pursuant to section 295(5)(a) of the Corporations Act 2001. On behalf of the directors Signed __________________________________________________ Date: 31 August 2022 Mr Otto Buttula Chairman – OncoSil Medical Limited Sydney 60 OncoSil Medical Ltd • 30 June 2022 Independent auditor’s report to the members of OncoSil Medical Ltd Crowe Sydney ABN 97 895 683 573 Level 24 1 O’Connell Street Sydney NSW 2000 Australia Tel +61 2 9262 2155 Fax +61 2 9262 2190 www.crowe.com.au Independent Auditor’s Report to the Members of OncoSil Medical Ltd Report on the Audit of the Financial Report Opinion We have audited the financial report of OncoSil Medical Ltd (the Company) and its subsidiaries (the Group), which comprises the consolidated statement of financial position as at 30 June 2022, the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies, and the directors’ declaration. In our opinion, the accompanying financial report of Group is in accordance with the Corporations Act 2001, including: (a) giving a true and fair view of the Group’s financial position as at 30 June 2022 and of its financial performance for the year then ended; (b) and complying with Australian Accounting Standards and the Corporations Regulations 2001. Basis for Opinion We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report. We are independent of the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Key Audit Matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report of the current period. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. The title ‘Partner’ conveys that the person is a senior member within their respective division, and is among the group of persons who hold an equity interest (shareholder) in its parent entity, Findex Group Limited. The only professional service offering which is conducted by a partnership is the Crowe Australasia external audit division. All other professional services offered by Findex Group Limited are conducted by a privately owned organisation and/or its subsidiaries. Findex (Aust) Pty Ltd, trading as Crowe Australasia is a member of Crowe Global, a Swiss verein. Each member firm of Crowe Global is a separate and independent legal entity. Findex (Aust) Pty Ltd and its affiliates are not responsible or liable for any acts or omissions of Crowe Global or any other member of Crowe Global. Crowe Global does not render any professional services and does not have an ownership or partnership interest in Findex (Aust) Pty Ltd. Services are provided by Crowe Sydney, an affiliate of Findex (Aust) Pty Ltd. Liability limited by a scheme approved under Professional Standards Legislation. © 2022 Findex (Aust) Pty Ltd. 61 Independent auditor’s report to the members of OncoSil Medical Ltd Independent Auditor’s Report OncoSil Medical Ltd Key Audit Matter How we addressed the Key Audit Matter Research and Development Tax Incentive Refer to Note 2, Note 3, Note 6 and Note 10 Under the research and development (R&D) tax incentive scheme, the Group is entitled to receive a 43.5% refundable tax offset of eligible expenditure if its turnover is less than $20 million per annum, provided it is not controlled by an income tax exempt entity. The R&D plan is filed with AusIndustry in the following financial year, and based on this filing, the Group receives the incentive in cash. The Group prepared an estimate of its total R&D expenditure to determine the potential claim under the R&D tax incentive legislation. As at 30 June 2022, the Group had an estimated claim of $831,599 relating to the year ended 30 June 2022. The R&D tax incentive is a key audit matter due to the size of the balance and because interpretation of the R&D tax legislation is required by the Group to assess the eligibility of the R&D expenditure under the scheme. Going Concern Assessment Refer to Note 2 The Group incurred a loss of $10,639,331 (2021: $10,324,069) and net cash used in operating activities was$10,110,178 (2021: $8,815,401). Notwithstanding the continued losses and operating cash outflows, the financial statements have been prepared on a going concern basis based on the actions undertaken by management as outlined in Note 2 Going Concern in the financial report. We performed the following key procedures: • Agreed the estimate made in previous year to the amount of cash received after lodgement of the R&D tax claim. • Compared the nature of R&D expenditure included in the current year estimate to the prior year estimate. Tested a sample of R&D expenses for eligibility under the R&D Tax Incentive scheme. • • Compared the amount of eligible expenditures used to calculate the estimate to the expenditure recorded in the general ledger. Inspected copies of relevant documents lodged with AusIndustry and the ATO related to historic claims. • • Reviewed the related financial statement disclosures. We critically analysed the Group’s cashflow forecast that was used to support the going concern assessment, including performing the following procedures: • Compared costs in the forecast prepared by management with the actual cashflows for FY2022 and obtained justification from management on variances in order to evaluate the validity of management’s forecasting processes. Interrogated the cashflow and performed a sensitivity analysis over the forecasted revenue and costs. • • Discussed with management the significant assumptions and reviewed supporting documentation for inputs used in the cashflow forecast. • Reviewed post balance date performance of the entity up to the date of signing the audit report to determine if the business performance was consistent with management’s expectations. Other Information The directors are responsible for the other information. The other information comprises the information included in the Group’s annual report for the year ended 30 June 2022, but does not include the financial report and our auditor’s report thereon. Our opinion on the financial report does not cover the other information and accordingly we do not express any form of assurance conclusion thereon. © 2022 Findex (Aust) Pty Ltd www.crowe.com.au 62 OncoSil Medical Ltd • 30 June 2022 Independent Auditor’s Report OncoSil Medical Ltd In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of the Directors for the Financial Report The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In preparing the financial report, the directors are responsible for assessing the ability of the Group to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so. Auditor’s Responsibilities for the Audit of the Financial Report Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report. As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgement and maintain professional scepticism throughout the audit. We also: • Identify and assess the risks of material misstatement of the financial report, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control. • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors. • Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial report or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern. • Evaluate the overall presentation, structure and content of the financial report, including the disclosures, and whether the financial report represents the underlying transactions and events in a manner that achieves fair presentation. © 2022 Findex (Aust) Pty Ltd www.crowe.com.au 63 Independent auditor’s report to the members of OncoSil Medical Ltd Independent Auditor’s Report OncoSil Medical Ltd • Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the group financial report. The auditor is responsible for the direction, supervision and performance of the group audit. The auditor remains solely responsible for the audit opinion. We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during the audit. We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied. From the matters communicated with the directors, we determine those matters that were of most significance in the audit of the financial report of the current period and are therefore the key audit matters. We describe these matters in the auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in the auditor’s report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. Report on the Remuneration Report Opinion on the Remuneration Report We have audited the remuneration report included in the directors’ report from pages 16 to 24 of the annual report for the year ended 30 June 2022. In our opinion, the remuneration report of OncoSil Medical Ltd., for the year ended 30 June 2022, complies with section 300A of the Corporations Act 2001. Responsibilities The directors of the Company are responsible for the preparation and presentation of the remuneration report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the remuneration report, based on our audit conducted in accordance with Australian Auditing Standards. Crowe Sydney Barbara Richmond Partner 31 August 2022 Sydney © 2022 Findex (Aust) Pty Ltd www.crowe.com.au 64 OncoSil Medical Ltd • 30 June 2022 Shareholder information The shareholder information set out below was applicable as at 16 August 2022. Distribution of equitable securities Analysis of number of equitable security holders by size of holding: Ordinary shares % of total Number shares of holders issued 1 to 1,000 1,001 to 5,000 5,001 to 10,000 10,001 to 100,000 100,001 and over Holding less than a marketable parcel Ordinary shares Number % of total of holders shares issued 157 406 677 2,472 1,157 4,869 138 - 0.17 0.55 10.04 89.24 100.00 - 65 Shareholder information The shareholder information set out below was applicable as at 16 August 2022. Equity security holders Twenty largest quoted equity security holders Ordinary shares The names of the twenty largest security holders of quoted equity securities Number held % of total are listed below: issued shares 41,830,232 32,307,694 26,529,655 23,120,251 21,560,127 20,500,000 16,000,000 15,930,697 15,433,187 13,617,018 12,653,847 11,276,924 11,016,547 11,000,000 10,000,000 10,000,000 9,929,104 8,000,000 7,413,926 7,000,000 4.22 3.26 2.68 2.33 2.18 2.07 1.61 1.61 1.56 1.37 1.28 1.14 1.11 1.11 1.01 1.01 1.00 0.81 0.75 0.71 325,119,209 32.82 Number on issue Number of holders 10,987,347 8 NATIONAL NOMINEES LIMITED WEBINVEST PTY LTD (OLSB UNIT A/C) NETWEALTH INVESTMENTS LIMITED (WRAP SERVICES A/C) TISIA NOMINEES PTY LTD (HENDERSON FAMILY A/C) ROJO NERO CAPITAL PTY LTD PETER KYROS PTY LTD (KYROS SF A/C) MRS SARAH CAMERON MR GREGORY JOSEPH HARRIS CITICORP NOMINEES PTY LIMITED BRISPOT NOMINEES PTY LTD (HOUSE HEAD NOMINEE A/C) ALUA CAPITAL PTY LTD CABLETIME PTY LTD (INGODWE A/C) DR ROGER ASTON BANNABY INVESTMENTS PTY LIMITED (BANNABY SUPER FUND A/C) JK NOMINEES PTY LTD (THE JK A/C) OAKTONE NOMINEES PTY LTD (GRIST INVESTMENT A/C) STRUCTURE INVESTMENTS PTY LTD (ROGERS FAMILY A/C) SUNSET CAPITAL MANAGEMENT PTY LTD (SUNSET SUPERFUND A/C) BNP PARIBAS NOMS PTY LTD (DRP) ASIA UNION INVESTMENTS PTY LTD Unquoted equity securities Performance rights over ordinary shares issued 66 OncoSil Medical Ltd • 30 June 2022Shareholder information Substantial holders There are no substantial holders in the Company. Voting rights The voting rights attached to ordinary shares are set out below: Ordinary shares On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each share shall have one vote. There are no other classes of equity securities. 67 2022 Annual Report oncosil.com

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