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OTAQOPTISCAN
IMAGING
LIMITED
ANNUAL
REPORT
2015
Optiscan Imaging Limited
ABN 81 077 771 987
Annual Financial Report
for the year ended 30 June 2015
Optiscan Imaging Limited
Annual Report 2015
Contents
CORPORATE INFORMATION ..................................................................................................................... 3
DIRECTORS’ REPORT ............................................................................................................................... 4
AUDITOR INDEPENDENCE AND NON-AUDIT SERVICES ........................................................................19
CORPORATE GOVERNANCE STATEMENT .............................................................................................20
STATEMENT OF FINANCIAL POSITION ...................................................................................................21
STATEMENT OF COMPREHENSIVE INCOME ..........................................................................................22
STATEMENT OF CHANGES IN EQUITY ....................................................................................................23
STATEMENT OF CASH FLOWS ................................................................................................................24
NOTES TO THE FINANCIAL STATEMENTS ..............................................................................................25
1
2
3
4
5
6
7
8
9
CORPORATE INFORMATION ..........................................................................................................25
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ..................................................................25
FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES.....................................................44
SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS ..........................49
SEGMENT INFORMATION ...............................................................................................................50
REVENUES AND EXPENSES ..........................................................................................................53
INCOME TAX ....................................................................................................................................54
EARNINGS (LOSS) PER SHARE ......................................................................................................56
CASH AND CASH EQUIVALENTS ....................................................................................................57
10 TRADE AND OTHER RECEIVABLES ...............................................................................................58
11 INVENTORIES ..................................................................................................................................59
12 PREPAYMENTS ...............................................................................................................................59
13 PLANT AND EQUIPMENT ................................................................................................................59
14
TRADE AND OTHER PAYABLES .....................................................................................................60
15 INTEREST BEARING LOANS AND BORROWINGS .........................................................................61
16 FINANCING FACILITIES ...................................................................................................................62
17
PROVISIONS ....................................................................................................................................63
18 CONTRIBUTED EQUITY AND RESERVES ......................................................................................64
19
PARENT ENTITY INFORMATION .....................................................................................................66
20 RELATED PARTY DISCLOSURE .....................................................................................................66
21
SHARE-BASED PAYMENTS.............................................................................................................68
22 COMMITMENTS AND CONTINGENCIES .........................................................................................68
23 EVENTS AFTER THE BALANCE SHEET DATE ...............................................................................69
24 AUDITORS’ REMUNERATION ..........................................................................................................69
DIRECTORS’ DECLARATION ....................................................................................................................70
INDEPENDENT AUDIT REPORT TO MEMBERS OF OPTISCAN IMAGING LIMITED ................................71
PATENT INFORMATION ............................................................................................................................73
Summary of Key Optiscan Patents ..............................................................................................................73
ASX ADDITIONAL INFORMATION .............................................................................................................74
Page | 2
Optiscan Imaging Limited
Annual Report 2015
CORPORATE INFORMATION
ABN 81 077 771 987
This annual report covers both Optiscan Imaging Limited as an individual entity and the consolidated entity comprising
Optiscan Imaging Limited and its subsidiaries. The Group's functional and presentation currency is Australian Dollars
AUD ($).
A description of the Group's operations is included in the Operating and Financial Review in the directors' report on
pages 4 to 19. The directors' report is not part of the financial report.
Directors
P. O’Connor (Chairman, appointed 21 July 2015)
P. M. Delaney
B.R. Andrew
G.X. Cameron-Dow (appointed 21 July 2015, resigned 16 September 2015)
A. M. Holt (resigned 21 July 2015)
Company Secretary
B.R. Andrew
Registered office
15-17 Normanby Road
Notting Hill Vic 3168
Australia
Principal place of business
15-17 Normanby Road
Notting Hill Vic 3168
Australia
T 61 3 9538 3333
F 61 3 9562 7742
www.optiscan.com
Share Register
Computershare Registry Services
Yarra Falls
452 Johnston Street
Abbotsford Vic 3067
Australia
T 61 3 9415 5000
Solicitors
HWL Ebsworth Lawyers
530 Collins Street
Melbourne VIC 3000
Auditors
Ernst & Young
Melbourne
Bankers
National Australia Bank
Page | 3
Directors’ Report
Optiscan Imaging Limited
Annual Report 2015
The Board of Directors of Optiscan Imaging Limited has pleasure in submitting its report in respect of the
financial year ended 30 June 2015.
Directors
The names of the directors in office during or since the end of the financial year and up to the date of this
report are:
Mr Patrick O’Connor, Chairman (appointed 21 July 2015)
Mr Angus Holt, Director, Executive Chairman (Resigned 21 July 2015)
Mr Peter Delaney, Director of Technology
Mr Bruce Andrew, Director, Chief Financial Officer, Company Secretary
Mr George Cameron-Dow, Non-executive director (appointed 21 July 2015, resigned 16 September 2015))
Details of the qualifications and experience of the directors in office during the financial year and until the
date of this report are as follows:
Patrick O’Connor
B.Com, SEP Stanford
(USA), FAICD
Age 52
Mr O’Connor is an experienced professional Company Director and has a broad
background in corporate governance matters including audit, remuneration, health
safety & environment as Chairman or as a member of Board sub-committees. He
has had significant success in the strategic repositioning and the creation of
shareholder value for several listed companies.
Peter M. Delaney
BSc(Pharm) (Hons.)
Age 47
Bruce R. Andrew
B Bus, CPA
Age 61
Mr O’Connor is a non-executive director of Stanmore Coal Limited (ASX:SMR).
Mr O’Connor has previously held the roles of Chairman for TFS Corporation Limited
(ASX:TFC), Xceed Resources Limited, Perilya Limited, Water Corporation and has
been a non executive director of a number of ASX listed entities.
Mr O’Connor is Chairman and was appointed to the board on 21 July 2015.
Peter Delaney, Director of Technology, completed a science degree with honours in
Pharmacology at Monash University in 1989. He has played a major role in the
refinement of the fibre optic approach to produce a commercial instrument which
received an R&D 100 Award in 1991. In 1993, Mr Delaney received the Victorian
Young Achiever Award (Science and Technology) for his development of the
company strategy and infrastructure. Mr Delaney was appointed a director of
Optiscan Pty Ltd in March 1994, and was Managing Director until December 2002,
at which time he assumed the role of Director of Technology. In April 2007, Peter
Delaney was awarded a prestigious ATSE Clunies Ross award for excellence in the
innovation and commercialisation of scientific endeavours.
Mr Delaney held no other directorships of public companies during the past three
years.
Mr Andrew is an accountant with extensive corporate experience in both listed and
unlisted entities.
Mr Andrew was appointed Company Secretary when Optiscan listed in 1997. After
several years in a part time role, Mr Andrew was appointed Chief Financial Officer
in 2001, and has been a member of the executive management team since that
time. Mr Andrew was appointed to the board in January 2010.
Mr Andrew held no other directorships of public companies during the past three
years.
Page | 4
Optiscan Imaging Limited
Annual Report 2015
Directors’ Report (continued)
Directors (continued)
George X. Cameron-
Dow
(Master of
Management (cum
laude) Wits, SEP
Stanford (USA),
FAICD, FAIM)
Age 58
Mr Cameron-Dow brings extensive board experience spanning a range of industries
including pharmaceutical, health care, funds management, automotive, packaging
and building materials manufacturing. Much of this experience has been with
multinational organisations.
Mr Cameron-Dow is currently a non-executive director of Bioxyne Limited
(ASX:BXN) and Windward Resources Limited (ASX:WIN).
Mr Cameron-Dow was previously the Managing Director of Xceed Capital Limited,
and a past director of Calzada Limited (now PolyNovo) and Naracoota Resources
Limited.
Mr Cameron-Dow was appointed to the board on 21 July 2015, and resigned on 16
September 2015.
Angus M. Holt
B Com
Age 44
Mr Holt has a Commerce degree from the University of Melbourne and has over 16
years experience in funds management, private equity and early stage biotech
ventures.
Mr Holt was a director of Equity Life during the 90’s, at the time Australia’s leading
provider of regulated short term annuity investments. Mr Holt was Investment
Director at Equity Life overseeing in excess of $200m invested in a range of hybrid
securities, smaller companies and the leaders. Following the sale of Equity Life to
Challenger International in 1997 Mr Holt has focussed on private equity
opportunities funded by a few select individuals. Those opportunities have been
dominated by smaller companies (<$500m) across many fields ranging from toll
roads, mezzanine infrastructure debt, waste to energy, plumbing supplies and
biotechs, including in imaging, surgery navigation and immunology. Mr Holt has
lived in the US where he established the local operations for a surgical navigation
start up.
Mr Holt has 16 years experience as a public company director in Australia and was
appointed to the Board of Optiscan in February 2009 and later Chairman in May
2009. Mr Holt assumed the role of Executive Chairman in January 2010.
Mr Holt held no other directorships of public companies during the past three years.
Mr Holt resigned from the board on 21 July 2015.
Mr Delaney and Mr Andrew held their position as director throughout the entire financial year and up to the
date of this report.
Mr O’Connor and Mr Cameron-Dow were appointed to the board on 21 July 2015, and Mr Holt resigned from
the board on 21 July 2015.Mr Cameron-Dow resigned from the board on 16 September 2015.
Page | 5
Optiscan Imaging Limited
Annual Report 2015
Directors’ Report (continued)
Directors’ Interests
Relevant interests of the directors in the shares, options or other instruments of the company at the date of
this report are:
Director
Patrick O’Connor
Peter Delaney
Bruce Andrew
Other Interests of Directors
Shares
Options
-
4,531,259
1,200,000
-
-
Peter Delaney
Related parties to Peter Delaney hold a combined total of 280,163 ordinary shares (2014: 270,090 ordinary
shares).
Directors’ Meetings
The company held eight (8) Directors’ meetings during the year. The attendances of the directors at
meetings of the Board were:
Board of Directors
Director
Attended
Held
Angus Holt
Peter Delaney
Bruce Andrew
8
8
8
8
8
8
As at the date of this report, the board comprises three directors, one of whom is a recently appointed
independent, non-executive director, and two are executive directors. In recent years, the board was
comprised of only three executive directors, and as a consequence, the operation of committees of the board
had been temporarily suspended. Following the appointment of a new non-executive director, the role of
board committees including the Audit Committee, Remuneration Committee and Nomination committee will
be reviewed.
Principal Activities
The principal activity of the consolidated entity during the year was the development and commercialisation
of confocal microscopes. There was no change in the nature of this activity during the year.
Corporate Structure
Optiscan Imaging Limited is a company limited by shares that is incorporated and domiciled in Australia.
Trading Results
The consolidated loss of the consolidated entity for the financial year was $1,395,399 (2014: $1,417,712)
after income tax.
Page | 6
Optiscan Imaging Limited
Annual Report 2015
Directors’ Report (continued)
Operating and Financial Review
Background and Recent History
Optiscan’s core technology of live micro imaging was first released to market in 2006, under a collaboration
with Pentax. During the following two years more than 130 clinical systems were sold to Pentax. Over time
the technology has been embraced by key opinion leaders in gastroenterology, and it is now well established
and widely accepted as a valuable medical imaging modality.
In 2008 the global financial crisis led to very difficult trading conditions, particularly for companies in the
biotech sector. Optiscan moved quickly to scale down its activities in an effort to ride out the financial storm
that followed and endured for a number of years. Operations and staff numbers were significantly reduced. In
2009 the Pentax supply agreement came to an end, and the relationship now involves only a small royalty
income stream derived from the first generation technology. At this point, Optiscan focussed on the
development of its second generation platform and in particular on the collaboration established in 2007 with
Carl Zeiss Meditech (“Zeiss”) for applications in neurosurgery.
There have been two key operational activities in the Group since 2008. The first was the development of a
second generation imaging platform, comprising a miniaturised scanner and processor, which was largely
completed by 2011.
The second activity was that directed at tailoring that generic platform to the specific requirements of the
Zeiss collaboration. This has required both hardware and software applications and refinements to ensure
the new system is optimally designed and configured for the intended use in neurosurgery.
Operations
Over the past year, the Group’s activities have been wholly focused on the transition from development to
product. As was foreshadowed in the last annual report, the key activities in this process involve the
formulation of the regulatory strategy and concluding verification and validation testing required for regulatory
clearance. These requirements apply to the research system, the “CellLIVE”, as well as the clinical grade
neurosurgery instrument being developed under the collaboration with Carl Zeiss (CZM).
The collaboration with MR Solutions commenced in February 2014 with the signing of a global supply
agreement to introduce “CellLIVE” into the growing preclinical medical imaging market. The product concept
was introduced to the market in September last year and has now been exhibited at several international
conferences. This has provided valuable interaction with potential users and customers, and has enabled
refinement of features ahead of the design freeze that precedes market release. In particular, we have
introduced 3D imaging capability and spectral imaging to allow targeting of image content to specific markers
in samples This was not demanded in the medical device markets as there are few dyes available for human
use, however in the diverse applications in drug development, cancer research and regenerative medicine
(including stem cell research), there are many dyes available that can be imaged to show up individual
components of the biological tissue and cells. These enhancements to the product platform were
implemented during the year and resulted in a final feature set available for market release at the World
Molecular Imaging Conference in Hawaii in September 2015.
The highpoint of activity on the CZM collaboration in the past year was achievement of positive results for
outstanding tests being undertaken to allow clinical use of its sterility solution (disposable sheath). This
aspect of the development of the clinical neurosurgical endomicroscopy system had been challenging and
this was a significant breakthrough. Importantly, it also enabled realisation of a development milestone of
€$180,000, enabling some temporary acceleration of software activity (specifically, embedded firmware)
which has been on the critical path for some time, and progress had been resource constrained.
Page | 7
Optiscan Imaging Limited
Annual Report 2015
Directors’ Report (continued)
Operating and Financial Review (continued)
Operations (continued)
The CZM collaboration is now well advanced and focused on addressing such issues as regulatory
clearance and design improvements. These issues have been the subject of extensive discussions over
recent months and the company announced this month the outcome of a review of the CZM agreement.
While specific details of the agreement are confidential, CZM have agreed to new commercial terms that
include:
• CZM will make payments for additional engineering works as required;
• CZM will have joint ownership of the sheath (sterility barrier) in their fields of application, will assume
responsibility for regulatory approval and has agreed to a royalty model with Optiscan which will
provide Optiscan with revenues over the lifetime of the product (Optiscan retains all sheath rights
outside of the CZM fields of application);
• CZM will assume responsibilities that will relieve Optiscan of costs in the order of $0.75 million
relating to regulatory and legal issues;
• Optiscan will supply further systems to CZM.
These new arrangements are expected to generate cash flows to Optiscan for both the supply of services
and instruments in excess of $2.2 million1
savings will result in a net cash benefit of $3 million1 over that period. In addition, a final licence payment of
$160,0001 will be paid by CZM later in the project.
by the end of calendar 2016, which, when combined with the costs
A consequence of these changes is that control of the timing of some of the remaining processes will pass to
CZM. This is consistent with the current stage of the collaboration.
Financial Results
The net loss for 2015 of $1,395,399 was 1.5% lower than the loss of $1,417,712, indicating that most
aspects of the results and operations were largely unchanged over the past year.
Revenue decreased by $30,394 and other income increased by $136,933, resulting in a net increase of
$106,539 or 11.4%. This was due to higher receipts from both R&D income and the R&D Tax Incentive.
Expenses were 5% higher in 2015, up $109,081 to $2,424,403, largely due to costs associated with the
financing facilities implemented during the year.
The balance sheet did not alter significantly during the year, with the deficiency of net assets reducing by
$9,451. Cash at June 2015 was $268,893, and after balance date, this increased following an entitlements
issue which closed on 6 July 2015, with gross proceeds of $690,074.
Near Term Strategy - 2016
Our near term strategy now comprises 3 activities:
• Continue to advance toward completion of the Zeiss project under the new arrangements recently
agreed;
• Support the marketing activities of MR Solutions as they pursue initial sales of CellLIVE
•
Identify and prioritise the next applications to be pursued for our technology
1 Payments due from CZM are in Euro and USD and have been converted at rates ruling on the date of this
report.
Page | 8
Optiscan Imaging Limited
Annual Report 2015
Directors’ Report (continued)
Operating and Financial Review (continued)
Near Term Strategy – 2016 (continued)
CZM
The recently agreed arrangements with CZM have shifted the workflow in the collaboration. Although we no
longer have to manage the regulatory process, much of this was to be outsourced to specialist consultants,
and our own team will now have some additional tasks to complete, so there will be no spare capacity over
the outlook period. The new commercial arrangements will provide a degree of self funding, but will not
enable an expansion of our capacity, so our resource allocation will continue to be carefully balanced and
managed.
CellLIVE
Our distribution partner, MR Solutions will undertake the marketing of the CellLIVE product, following the
global launch earlier this month. Optiscan will not be required to incur marketing costs, and engineering
activity is now largely complete. We will engage in a modest resumption of production activity as initial sales
emerge from the product launch. This will of course be subject to the rate of early sales, but some inventory
build and exposure to minimum order quantities will occur over the next year, and should be funded by sales
proceeds.
Business Development
This important activity will set the path for the years beyond 2016, so it must be addressed now. In contrast
to the above activities, business development is the most exposed to resource constraints.
Our potential applications map sets out a range of medical conditions and imaging needs that could
potentially be candidates for confocal imaging. The process of assessing and prioritizing the most likely near
term opportunities is a large one, often requiring extensive research and dialogue with players outside
Australia. The micro size of our company at this time and the current funding base provides only limited
opportunity to pursue this activity. As we move forward, this will become an increasing priority for the board,
and we will seek to ensure that this is adequately resourced.
Medium Term Strategy – the GI market
The vision beyond the next twelve months rests entirely on our business development activities, and the
identification of the next product opportunities.
We remain of the view that whilst there are likely to be several candidates, one will certainly be flexible
endoscopy and the “GI” (gastrointestinal) market.
The GI market for endomicroscopy is large, and Optiscan’s technology has seen extensive application since
the launch of its pioneering clinical technology in 2006, through the Pentax ISC-1000.
The main flexible endoscopy applications are presently:
• Biopsy targeting and ‘see and treat’ workflows in Barrett’s Oesophagus ),
• Cancer detection in long term Ulcerative Colitis sufferers, and
• Margin assessment in colorectal and gastric cancer.
These applications alone represent annual addressable markets in excess of US$1billion. There are
numerous additional, although less mature GI applications, including inflammation, microscopic colitis,
epithelial healing, bacterial colonization and drug and other therapeutic responses.
Page | 9
Optiscan Imaging Limited
Annual Report 2015
Directors’ Report (continued)
Operating and Financial Review (continued)
Medium Term Strategy – the GI market (continued)
The ISC-1000 flexible endomicroscopy platform has now generated level one evidence in an international
multicentre study led by Johns Hopkins Hospital in Baltimore, the number one rated hospital in the USA. The
published results have created further demand from the established market for a more sophisticated second
generation endomicroscopy system which can be incorporated into contemporary medical practice
guidelines.
While these advances in market development in GI endomicroscopy have been evolving, Optiscan has
advanced its development of a probe based product resulting in a significantly smaller super hi-resolution
prototype probe. This is very important development in the context of the commercial emergence of the
endomicroscopy market.
The Pentax collaboration was founded on embedding Optiscan’s miniaturised scanner into a video
endoscope. This required a formal and exclusive commercial collaboration, and a very considerable
engineering effort on the part of both parties to build the new technology into existing endoscopes. It also
required the full process of regulatory clearance of the total integrated system, which was achieved in 2006.
Optiscan’s development of a probe based scanner would enable our second generation miniaturised high
magnification scanner to be used with any existing endoscope, by simply inserting an “accessory” scanner
into the existing working channels in conventional endoscopes. This will dispense with the need to
collaborate with an individual endoscope manufacturer, and open up a wide range of market distribution
channels, resulting in reduced commercial risk and the potential for much wider market penetration.
The broadening of our capabilities to include probe (pCLE, probe based Confocal Laser Endoscopy) as well
as the highly regarded supremacy of the endoscope based system (eCLE, embedded Confocal Laser
Endoscopy) creates a single platform which could service the entire GI market for endomicroscopy.
There are more opportunities in the medium term, including for example, our earlier interest in Women’s
Health imaging needs and arthroscopy of joints (cartilage, tendons and ligaments), where there is a
compelling need for microscopic imaging without biopsy. The pursuit of these, and a range of other
opportunities, is again a function of financial and management capacity to research and assess the medical
needs and economics.
Outlook
The next year will see the company progress toward completion of the Zeiss project, re-establish production
activity and turn to identifying the next round of application opportunities for our imaging platform.
Page | 10
Optiscan Imaging Limited
Annual Report 2015
Directors’ Report (continued)
Dividends
No dividends have been paid or declared since the beginning of the financial year by the Company (2014:
Nil).
Significant Changes in the State of Affairs
There have been no significant changes to the state of affairs of the consolidated entity during the year.
Significant Events After Balance Date
No matters or circumstances have arisen since the end of the financial year which significantly affected or
may significantly affect the operations of the consolidated entity, the expected results of those operations in
future years, or the state of affairs of the consolidated entity in future financial years, other than:
• On 15 June 2015, the company announced a fully underwritten rights issue that would close on 6
July 2015, resulting in the allotment of 13,801,493 new shares at a subscription price of $0.05 each.
In July the company received $690,074 from the rights issue. The underwriting agreement for the
rights issue included a 5% underwriting fee that was paid in July, together with the issue of
3,000,000 options over fully paid ordinary shares at an exercise price of ten cents per option, and an
expiry date of 12 June 2017.
• On 15 June 2015, the company also announced a short term loan of $500,000 repayable on 30
November 2015. In July 2015, the company effected allotment of 1,000,000 ordinary shares in
respect of the commitment fee payable on the loan facility.
• There were four changes in the board of directors:
o Mr Patrick O’Connor was appointed non executive Chairman on 21 July 2015
o Mr George Cameron-Dow was appointed a non executive director on 21 July 2015
o Mr Angus Holt resigned on 21 July 2015
o Mr George Cameron-Dow resigned on 16 September 2015
• On 3 September 2015 the company announced that its exclusive global distributor, UK based MR
Solutions, has today launched the CellLIVE system for the research market at the opening of the
World Molecular Imaging Congress (WMIC) in Hawaii, USA.
• On 25 September 2015 the company announced details of an enhanced collaboration agreement
with Carl Zeiss Meditec that is expected to generate cash flows to Optiscan for both the supply
services and instruments in excess of $2.2 million by the end of calendar 2016.
Likely Developments and Future Results
The directors have outlined in the Operating and Financial Review that they expect to derive additional
income from the Zeiss collaboration over the next year, as well as achieving initial sales of the CellLIVE
research instrument after its market launch in September 2015.The cost base of the company is not
expected to change significantly, so an improved financial performance should be achieved with the higher
revenue.
Page | 11
Optiscan Imaging Limited
Annual Report 2015
Directors’ Report (continued)
Environmental Regulations
The Group is not subject to significant environmental regulations.
Share Options
Details of movements in share options are set out in Note 21 in the financial statements
Since the end of the financial year, and up to the date of this report, no new shares have been issued as a
consequence of the exercise of options which were on issue at year end. Since the end of the financial year,
and up to the date of this report, no options have expired and the following issue of options was made:
•
In respect of the underwriting agreement in relation to the rights issue announced on 15 June 2015
included the issue of 3,000,000 options over fully paid ordinary shares at an exercise price of ten
cents per option, and an expiry date of 12 June 2017.
The total number of options outstanding at the date of this report is 3,000,000.
Indemnification and Insurance
During the financial year ended 30 June 2015, the company indemnified its directors, the company secretary
and executive officers in respect of any acts or omissions giving rise to a liability to another person (other
than the company or a related party) unless the liability arose out of conduct involving a lack of good faith. In
addition, the company indemnified the directors, the company secretary and executive officers against any
liability incurred by them in their capacity as directors, company secretary or executive officers in
successfully defending civil or criminal proceedings in relation to the company. No monetary restriction was
placed on this indemnity. The Company has insured its directors, the company secretary and executive
officers for the financial year ended 30 June 2015. Under the company’s Directors’ and Officers’ Liabilities
Insurance Policy, the Company shall not release to any third party or otherwise publish details of the nature
of the liabilities insured by the policy or the amount of the premium. Accordingly, the company relies on
section 300(9) of the Corporations Act 2001 to exempt it from the requirement to disclose the nature of the
liability insured against and the premium amount of the relevant policy.
Indemnification of auditors
To the extent permitted by law, the Company has agreed to indemnify its auditors, Ernst & Young, as part of
the terms of its audit engagement agreement against claims by third parties arising from the audit (for an
unspecified amount). No payment has been made to indemnify Ernst & Young during or since the financial
year.
Page | 12
Optiscan Imaging Limited
Annual Report 2015
Directors’ Report (continued)
Remuneration Report (Audited)
This remuneration report outlines the director and executive remuneration arrangements of the group in
accordance with the requirements of the Corporations Act 2001 and its regulations. For the purposes of this
report, Key Management Personnel (KMP) of the group are defined as those persons having authority and
responsibility for planning, directing and controlling the major activities of the group, directly or indirectly,
including any director (whether executive or otherwise) of the parent company.
For the purposes of this report, the Executive Management team encompasses the board of directors, as all
executives are members of the parent entity board.
Details of Key Management Personnel in office during the year
A. Holt
P. Delaney
B. Andrew
Executive Chairman, Director (resigned 21 July 2015)
Director of Technology, Director
Chief Financial Officer, Director
Remuneration Philosophy
The quality and performance of directors, executives and staff is critical to achieving business success.
Optiscan must foster a remuneration policy that attracts, motivates and retains personnel of the highest
calibre.
In formulating a framework for remuneration policies and practices, the board takes account of the following
factors:
• Capacity to pay.
• Employment market conditions.
• Company performance.
•
•
Identification of appropriate performance benchmarks.
Individual performance levels.
Objective of Remuneration Policy
The overall objective of the remuneration policy is to ensure maximum stakeholder benefit from the retention
of a high quality board, management and staff at a cost which is commercially realistic and acceptable to
shareholders. This objective seeks to:
• Reward employees for individual performance against appropriate benchmarks.
• Align the interests of management and staff with those of shareholders.
• Provide a link between rewards and the achievement of strategic targets, performance outcomes
and share price.
• Ensure remuneration is competitive by market standards.
Non-executive Director Remuneration
The Constitution of the company and the ASX Listing Rules establish an aggregate or maximum level of
remuneration available to non-executive directors, to be divided amongst the directors as agreed. The
aggregate amount approved by shareholders to be available for remuneration of non-executive directors is
$400,000 per annum.
Page | 13
Optiscan Imaging Limited
Annual Report 2015
Directors’ Report (continued)
Remuneration Report (Audited) (continued)
Non-executive Director Remuneration (continued)
The Board has determined that non-executive directors shall receive only fixed remuneration by way of
payment of fees. There is no variable, short term incentive remuneration for non-executive directors, nor is
there any entitlement to retiring allowances or payments other than the statutory superannuation required by
law.
Non-executive directors receive an annual fee for all services provided to the company, including being a
director of the company and any of its subsidiaries, and for serving on board sub committees in accordance
with the requirements of the Corporate Governance Policy.
Non-executive directors are encouraged to hold shares in the company which have been purchased on
market or through placements where participation by the directors has been approved by shareholders in
general meeting. It is considered good governance for the directors to have a personal financial stake in the
company.
As a consequence of a reduction in the size of the board in May 2009, there were no non-executive directors
in office during 2014/2015.
The remuneration of directors for the years ended 30 June 2015 and 30 June 2014 is detailed in Table 1 and
Table 2 on page 17 of this report.
Executive Remuneration
The Remuneration Committee (currently comprising the board) is responsible for establishing the structure
and amount of remuneration.
Remuneration may consist of fixed and variable components, incorporating both short term incentives (STI)
and long term incentives (LTI), as follows:
Remuneration Component
Fixed remuneration
Variable remuneration, (STI)
Variable remuneration, (LTI)
Form of Settlement
Base salary and superannuation
Performance bonus
Employee options
Fixed Remuneration
Objective
The level of fixed remuneration is set so as to provide a base level of remuneration, which is both
appropriate to the position and competitive in the market.
Structure
Fixed remuneration is reviewed annually by the Remuneration Committee, and the process consists of a
review of company and individual performance, and comparative remuneration in the market. All employees
are provided with the opportunity to receive their fixed remuneration in both cash or benefits, subject to there
being no change in overall cost to the company. Compulsory superannuation contributions are included in
the determination of fixed remuneration.
The fixed remuneration component of executives for the years ended 30 June 2015 and 30 June 2014 is
detailed in Table 1 and Table 2 on page 17 of this report.
Page | 14
Optiscan Imaging Limited
Annual Report 2015
Directors’ Report (continued)
Remuneration Report (Audited) (continued)
Executive Remuneration (continued)
Variable Remuneration
The objectives and structure of the Group’s policy on Variable Remuneration is set out below. This policy is
currently suspended, and will be re-activated when economic circumstances permit (refer Suspension of STI
and LTI Arrangements below).
Variable Remuneration - Short Term Incentive (STI)
Objective
The objective of the STI program is to link the achievement of the group’s operational targets with the
remuneration received by key management personnel with prime responsibility for meeting those targets.
The total potential STI available is set at a level so as to provide sufficient incentive to the key management
personnel to achieve the operational targets and such that the cost to the company is reasonable in the
circumstances.
Structure
Actual STI payments granted to key management personnel depend on the extent to which specific
operating targets set at the beginning of the financial year are met. The operational targets consist of a
number of Key Performance Indicators (KPI’s) covering both financial and non-financial measures of
performance. Typically included are such measures as achievement of budgeted financial outcomes and key
milestones, for example, demonstrating clinical efficacy, achieving quality accreditation, obtaining regulatory
clearance or measures such as control of expenditure or achievement of sales targets. The Board or
Remuneration Committee establishes clear performance benchmarks, which must be met in order to trigger
payments under the short term incentive scheme.
The aggregate amount of annual STI payments available for key management personnel and other
executives is subject to the approval of the Remuneration Committee. Payments made are usually delivered
as a cash bonus.
Variable Remuneration - Long Term Incentive (LTI)
Long term incentives are delivered to executives and employees by way of grant of options under the
Employee Share Option Plan.
Objective
The objective of the long term incentive plan is to reward executives and employees in a manner which
aligns this element of remuneration with the creation of shareholder wealth.
Structure
LTI grants to employees, including executives, are delivered in the form of options. The Remuneration
Committee is responsible for the allocation of options, and determines the quantum of grants by reference to
group and individual performance against targets.
Suspension of STI and LTI Arrangements
The board suspended STI and LTI arrangements for all staff during 2009/2010 due to the difficult economic
circumstances confronting the Group. At that time, key management personnel accepted reductions in
remuneration that removed the nexus with market rated remuneration, and similarly, with the role of variable
remuneration. The suspension has not been lifted and remains in place at balance date. A return to market
rated remuneration and variable remuneration may occur when the financial profile of the Group has
improved. As a result of this position, no STI and LTI entitlements were accrued and no payments were
made to key management personnel during 2014/2015.
Page | 15
Optiscan Imaging Limited
Annual Report 2015
Directors’ Report (continued)
Remuneration Report (Audited) (continued)
Incentives and Company Performance
The link between incentive structure and company performance is an important aspect of remuneration
philosophy. The purpose of the remuneration policies of the Group is to create an effective and transparent
link between the incentives provided and the performance of the Group.
The group is in the process of transition from a business predominantly engaged in research and
development (“R&D”) to one increasingly focussed on commercialisation of its technology. Whilst substantial
progress has been made, the transition from loss making R&D activities to profit making trading has not yet
been completed. As a consequence, performance to date cannot appropriately be determined with
conventional financial measurement tools. As the group has expensed all R&D expenditure incurred to date,
losses have been reported so conventional earnings measures such as profit growth, EPS or dividend yield
and payout are not applicable.
In view of the limited relevance of financial measurement tools, the Board of Directors has determined that
the performance of the group is best reviewed in the context of achievement of key milestones.
Incentive Payments and Performance Conditions 2014/2015
During the year ended 30 June 2015, no short or long term incentive payments were made to staff.
Employment Contracts
All staff including executives are engaged under rolling employment agreements. The contracts continue
indefinitely subject to satisfactory performance, and provide one months notice. Under the terms of the
agreements:
• The company may terminate the employment agreement by providing the requisite period of written
notice or by providing payment in lieu of notice, based on the fixed component of remuneration. Any
unvested options at the expiry of the notice period will be forfeited.
• On resignation, all unvested options are forfeited.
• The company may terminate the agreement at any time without notice if serious misconduct has
occurred, in which case the executive is only entitled to that portion of remuneration that is fixed, and
only up to the date of termination.
Page | 16
Optiscan Imaging Limited
Annual Report 2015
Directors’ Report (continued)
Remuneration Report (Audited) (continued)
Compensation of Key Management Personnel
Table 1: Compensation of Key Management Personnel for the year ended 30 June 2015
Short-Term
Long Term
Post
Employment
Total
Total Performance
Related
30 June 2015
Salary & fees
Directors fees
$
Long
Service
Leave
Superannuation
$
$
%
Directors
A. Holt
P. Delaney
B. Andrew
52,500
103,417
52,500
208,417
40,000
40,000
40,000
120,000
2,106
31
2,106
4,243
8,788
12,508
8,788
30,084
103,394
155,956
103,394
362,744
-
-
-
-
Table 2: Compensation of Key Management Personnel for the year ended 30 June 2014
Short-Term
Long Term
Post
Employment
Total
Total Performance
Related
30 June 2014
Salary & fees
Directors fees
$
Long
Service
Leave
Superannuation
$
$
%
Directors
A. Holt
P. Delaney
B. Andrew
52,500
104,625
52,500
209,625
40,000
40,000
40,000
120,000
1,494
-
1,494
2,988
8,556
3,700
8,556
102,550
148,325
102,550
20,812
353,425
-
-
-
-
Compensation Options Granted and Vested During the Year
During the current financial year, and the previous financial year, no options were granted as equity
compensation benefits under the long-term incentive plan. For further details relating to the options on issue,
refer to note 21 in the financial statements.
Shares Issued on Exercise of Compensation Options
No shares have been issued as a result of the exercise of options granted as compensation to key
management personnel during the years ended 30 June 2015 and 30 June 2014.
Page | 17
Directors’ Report (continued)
Remuneration Report (Audited) (continued)
Optiscan Imaging Limited
Annual Report 2015
Option holdings of Key Management Personnel
Options holdings of Key Management Personnel for the year ended 30 June 2015
There were no option holdings by key management personnel at 30 June 2015 or 30 June 2014.No
options were issued to, or exercised by key management personnel during the year ended 30 June
2015.
Shareholdings of Key Management Personnel
Shares held in Optiscan Imaging Limited for the year ended 30 June 2015 (number)
30 June 2015
Balance at
beginning of
period 01-Jul-14
Purchased
Disposed
Holding at Date of
Appointment to Board of
Holder
Balance at end of
period
30-Jun-15
Directors
A. Holt
-direct
-indirect
P. Delaney
-direct
-indirect
B. Andrew
-indirect
Total
3,173,659
11,566,298
1,000,000
483,000
(443,659)
(8,440,397)
-
4,642,482
3,231,259
270,090
1,000,000
-
90,000
1,000,000
-
-
-
-
-
-
3,730,000
8,251,383
4,231,259
270,090
1,090,000
18,331,306
3,483,000
(8,884,056)
4,642,482
17,572,732
All equity transactions with Key Management Personnel have been entered into under terms and
conditions no more favourable than those the Group would have adopted if dealing at arm’s length.
Page | 18
Optiscan Imaging Limited
Annual Report 2015
Directors’ Report (continued)
AUDITOR INDEPENDENCE AND NON-AUDIT SERVICES
Non-Audit Services
The following non-audit services were provided by Ernst & Young. The directors are satisfied that the
provision of non-audit services is compatible with the general standard of independence for auditors imposed
by the Corporations Act 2001. The nature and scope of non-audit services provided means that auditor
independence was not compromised.
Ernst & Young received the following amount for the provision of non-audit services:
R&D tax services - $12,980
Auditor Independence
The directors received the following declaration from the auditor of Optiscan Imaging Limited.
This report has been made in accordance with a resolution of directors.
Peter Delaney
Director, 30 September 2015
Page | 19
Optiscan Imaging Limited
Annual Report 2015
Corporate Governance Statement
Optiscan is committed to ensuring that its policies and practices reflect good corporate governance.
This statement reports against the key governance principles as outlined in the Australian Stock Exchange
Corporate Governance Council’s “Principles of Good Corporate Governance and Best Practice
Recommendations”.
In accordance with the Council’s recommendations, and for full details on corporate governance policies
adopted by Optiscan Imaging Limited, please refer to our Corporate Governance Policy Statement, including,
the Board Charter and the Code of Conduct a copy of which can be found on our website at
www.optiscan.com.
The Board of Directors of Optiscan Imaging Limited is responsible for the corporate governance of the
consolidated entity. The Board guides and monitors the business and affairs of Optiscan Imaging Limited on
behalf of the shareholders by whom they are elected and to whom they are accountable.
Details of the directors, current at the time of this report, and their term in office are:
Director
Patrick O’Connor
Peter M Delaney
Bruce R Andrew
Status
Non Executive
Executive
Executive
Term in office
0.1 years
18 years
5.5 years
The skills, experience and expertise of each director is included in the Directors’ Report. Directors of
Optiscan Imaging Limited are considered to be independent when they are independent of management and
free from any business or other relationship that could materially interfere with, or could reasonably be
perceived to materially interfere with, the exercise of their independent judgement.
The Board does not have a majority of directors who are independent. In 2009, the board was reduced from
five members to the minimum level of three, two of whom are executives. The current scale of the company’s
activities does not warrant a larger board at this time. A consequence of this small board is that there is no
meaningful case for board committees, so there is no nomination, Audit, Risk or Remuneration Committee in
place at present, and these roles are performed by the full board. The directors will regularly monitor the
issues of the board composition, skills, diversity and independence.
The Corporate Governance Policy Statement covers issues such as the procedure for nomination, selection
and appointment of new directors, performance evaluation and the re-election of directors. An evaluation of
the Board did not take place during the period.
The functions reserved to the Board, and those delegated to senior executives are clearly distinguished and
set out in the Corporate Governance Policy Statement. As there is no Chief Executive Officer in office at
present, matters otherwise delegated to that role are assumed by the board. The process for evaluating the
performance of senior executives is also set out in the Corporate Governance Policy Statement. An
evaluation of senior executives did not take place during the year due to the restructuring within the Group.
Diversity
The company has not established a policy on diversity at this time and the company has not established
measurable objectives for achieving gender diversity. The board considers that adoption of a policy on
diversity at this time is impractical for a small organisation comprising less than ten full time equivalent (FTE)
staff. The company’s policy on equal opportunity provides relevant guidance on issues of diversity in the
current circumstances of the company. In relation to gender of employees, the company currently has two
women employees (1.4 FTE), representing 15% of total staff.
Remuneration
The Board is responsible for determining and reviewing compensation arrangements for the directors,
management and staff. There is no scheme to provide retirement benefits, other than statutory
superannuation, to non-executive directors. Full details of the remuneration of key management personnel,
and all directors are included in the Directors’ Report.
Page | 20
Statement of Financial Position
AS AT 30 JUNE 2015
Optiscan Imaging Limited
Annual Report 2015
ASSETS
Current Assets
Cash and cash equivalents
Trade and other receivables
Inventories
Prepayments
Total Current Assets
Non-current Assets
Plant and equipment
Total Non-current Assets
TOTAL ASSETS
LIABILITIES
Current Liabilities
Trade and other payables
Interest bearing loans and borrowings
Provisions
Total Current Liabilities
Non-current Liabilities
Provisions
Total Non-current Liabilities
TOTAL LIABILITIES
NET ASSETS / (LIABILITIES)
EQUITY
Contributed equity
Accumulated losses
Reserves
TOTAL EQUITY / (DEFICIENCY)
TOTAL EQUITY AND LIABILITIES
Notes
CONSOLIDATED
2015
$
2014
$
9
10
11
12
268,893
74,942
693,004
657,164
28,500
829
43,700
15,924
991,226
791,730
13
26,985
24,622
26,985
24,622
1,018,211
816,352
14
15
17
420,553
510,533
644,624
126,466
242,824
212,926
1,173,910
984,016
17
19,512
16,998
19,512
16,998
1,193,422
1,001,014
(175,211)
(184,662)
18
18
18
48,684,716
47,279,893
(50,350,332)
(48,954,933)
1,490,405
1,490,378
(175,211)
(184,662)
1,018,211
816,352
The above statement of financial position should be read in conjunction with the accompanying notes.
Page | 21
Statement of Comprehensive Income
FOR THE YEAR ENDED 30 JUNE 2015
Sale of goods
Other revenue
Revenue
Cost of sales
Gross Profit
Other income
Research & development expenses
Administrative expenses
Other expenses
Optiscan Imaging Limited
Annual Report 2015
Notes
CONSOLIDATED
2015
$
2014
$
6(a)
46,092
12,030
71,883
16,633
58,122
88,516
(12,835)
(37,690)
45,287
50,826
6(b)
983,717
846,784
(1,070,373)
(1,255,457)
(1,315,783)
(1,021,804)
(38,247)
(38,061)
Loss before income tax
(1,395,399)
(1,417,712)
Income tax expense
7
-
-
Net profit (loss) for the year
(1,395,399)
(1,417,712)
Other comprehensive income
Items that may be subsequently recycled through profit and loss:
Foreign currency translation of net investment in
foreign subsidiary
Items that will not be subsequently recycled through profit and loss:
Other comprehensive income for the period net of tax
27
27
(5,719)
-
(5,719)
TOTAL COMPREHENSIVE INCOME (LOSS) FOR PERIOD
(1,395,372)
(1,423,431)
Earnings (loss) per share (cents per share)
- basic earnings (loss) per share for the year
- diluted earnings (loss) per share for the year
8
(0.72)
(0.72)
(0.87)
(0.87)
The above statement of comprehensive income should be read in conjunction with the accompanying notes.
Page | 22
Statement of Changes in Equity
FOR THE YEAR ENDED 30 JUNE 2015
Optiscan Imaging Limited
Annual Report 2015
CONSOLIDATED
Ordinary
shares
$
Accumulated
Losses
$
Share
Based
Payments
$
Foreign
Currency
Translation
Reserve
$
Total
$
At 1 July 2014
47,279,893
(48,954,933)
1,485,661
4,717
(184,662)
Loss for the year
Other comprehensive income
Total comprehensive income (loss) for the year
-
-
-
(1,395,399)
-
(1,395,399)
Transactions with owners in their capacity as
owners:
Shares based payments
Shares issued for cash
Shares issued on conversion of notes
Transaction costs of share issues
15,000
574,500
849,199
(33,876)
-
-
-
-
-
-
-
-
-
-
-
-
(1,395,399)
27
27
27
(1,395,372)
-
-
-
-
15,000
574,500
849,199
(33,876)
At 30 June 2015
48,684,716
(50,350,332)
1,485,661
4,744
(175,211)
At 1 July 2013
46,993,580
(47,537,221)
1,485,661
10,436
952,456
Loss for the year
Other comprehensive income
Total comprehensive income (loss) for the year
-
-
-
(1,417,712)
-
(1,417,712)
Transactions with owners in their capacity as
owners:
Shares based payments
Shares issued on conversion of notes
24,075
262,238
-
-
-
-
-
-
-
-
(1.417,712)
(5,719)
(5,719)
(5,719)
(1,423,431)
-
-
24,075
262,238
At 30 June 2014
47,279,893
(48,954,933)
1,485,661
4,717
(184,662)
The above statement of changes in equity should be read in conjunction with the accompanying notes.
Page | 23
Statement of Cash Flows
FOR THE YEAR ENDED 30 JUNE 2015
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Royalties received
Interest received
Receipt of government grants
Other income
Optiscan Imaging Limited
Annual Report 2015
Notes
CONSOLIDATED
2015
$
2014
$
306,654
264,015
(2,490,057)
(1,832,030)
6,500
5,569
12,794
3,865
711,690
866,167
-
1,797
Net cash used in operating activities
9
(1,459,644)
(683,392)
Cash flows from investing activities
Purchase of plant and equipment
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issue of shares
Proceeds from issue of convertible notes, net of transaction costs
Proceeds from short term loan
Transaction costs relating to share issues
Repayment of convertible notes
Net cash flows from financing activities
Net decrease in cash and cash equivalents
Net foreign exchange differences
Cash and cash equivalents at beginning of period
13
18
15
15
18
15
(14,507)
(14,507)
574,500
-
-
-
754,196
328,541
500,000
(33,876)
(126,466)
-
-
-
1,668,354
328,541
194,203
(354,851)
(252)
(134)
74,942
429,927
Cash and cash equivalents at end of period
9
268,893
74,942
The above statement of cash flows should be read in conjunction with the accompanying notes.
Page | 24
Optiscan Imaging Limited
Annual Report 2015
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2015
1 CORPORATE INFORMATION
The consolidated financial statements of Optiscan Imaging Limited and its subsidiaries (collectively the
Group) for the year ended 30 June 2015 was authorised for issue in accordance with a resolution of the
directors on 30 September 2015.
Optiscan Imaging Limited is a company limited by shares incorporated in Australia whose shares are
publicly traded on the Australian Stock Exchange. The nature of the operations and principal activities of
the Group are described in the directors’ report. Information on the Group’s structure is provided in Note
20.
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Table of contents
Basis of preparation
a)
Changes in accounting policy, disclosures, standards and interpretations
b)
Basis of consolidation
c)
Revenue recognition
d)
Government grants
e)
Leases
f)
Cash and cash equivalents
g)
Trade and other receivables
h)
Inventories
i)
Derivative financial instruments and hedging
j)
Foreign currency translation
k)
l)
Income tax
m) Other taxes
n)
o)
p)
q)
r)
s)
t)
u)
v)
w)
Plant and equipment
Investments and other financial assets
Intangible assets
Trade and other payables
Interest bearing loans and borrowings
Provisions and employee leave benefits
Share-based payment transactions
Contributed equity
Earnings (Loss) per share
Segment reporting
a) Basis of preparation
The financial report is a general-purpose financial report, which has been prepared in accordance with
the requirements of the Corporations Act 2001, Australian Accounting Standards and other authoritative
pronouncements of the Australian Accounting Standards Board. The financial report is presented in
Australian dollars and has been prepared on a historical cost basis, except for derivative financial
instruments which have been measured at fair value. Optiscan Imaging Limited is, for the purposes of
preparing these financial statements, a for-profit entity.
Compliance with IFRS
The financial report complies with Australian Accounting Standards and International Financial
Reporting Standards (IFRS) as issued by the International Accounting Standards Board.
Page | 25
Optiscan Imaging Limited
Annual Report 2015
Notes to the Financial Statements (continued)
FOR THE YEAR ENDED 30 JUNE 2015
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
a) Basis of preparation (continued)
Going Concern (Significant Uncertainty as at 30 June 2015)
In common with many entities in the biotechnology sector, the company’s operations are subject to
considerable risk due to the nature of the development and commercialisation being undertaken. A part
of this risk relates to funding of the Company’s activities, and related issues including the conditions
prevailing in local and international financial markets. In the context of this operating environment, it is
likely that the company will need to raise additional capital in order to execute its near term and medium
term plans for expansion of its product portfolio.
As at 30 June 2015, the financial position of the consolidated entity as disclosed in the financial
statements reflects a net asset deficiency position of $175,211 (2014: net asset deficiency position of
$184,662). This balance has been determined after a consolidated net loss for the year of $1,395,399
(2014: $1,417,712), and a net cash outflow from operations of $1,459,644 (2014: $683,392).
The accounts have been prepared on a going concern basis, which includes the presumption that
sufficient funds will be available to finance the operations of the consolidated entity. In adopting this
position, the directors have had regard to:
• Cash on hand at 30 June 2015 is $268,893 (2013: $74,942);
• Additional fundraising in July 2015 as highlighted in Note 23;
• Additional cashflow is expected to be received in the 2016 financial year under the agreement
with Carl Zeiss;
• Revenue is expected to increase from the sale of systems to MR Solutions and Carl Zeiss;
• The directors believe the Company has the ability to raise additional capital from existing and
new investors;
• The Company has a successful track record in raising capital to fund its operations;
• The Company may have the ability to raise additional income, or accelerate forecast cash flows
if required.
The directors cannot be certain of the Company’s ability to achieve success in its activities, as these are
dependent on future events. Thus, should these activities result in a position where there are insufficient
funds to allow continuation of current activities, the directors will further reduce the company’s scale and
activities until either further funding is obtained, or a wholesale reassessment of the company’s future is
undertaken. The strategy for any potential future capital raising and its timing will be determined by the
directors based upon an assessment of the financial and operational circumstances of the consolidated
entity at the time.
The directors plan to continue the Company and the consolidated entity’s operations on the basis
outlined above, and believe there will be sufficient funds for the Group to conduct its affairs for at least
twelve months from the date of this report. To the extent that future arrangements may not be concluded
on a timely basis, and in the absence of new capital or additional income, there is significant uncertainty
whether the Group will continue as a going concern, and therefore, whether the Group will realise its
assets and extinguish its liabilities in the normal course of business and at the amounts stated in the
financial report. The financial statements take no account of the consequences, if any, of the effects of
unsuccessful product development, commercialisation or capital raising, nor the ability of the company
to continue as a going concern. Hence, the financial report does not include adjustments relating to the
recoverability and classification of recorded asset amounts or to the amounts and classification of
liabilities that might be necessary should the Company and consolidated entity not continue as going
concerns.
Page | 26
Optiscan Imaging Limited
Annual Report 2015
Notes to the Financial Statements (continued)
FOR THE YEAR ENDED 30 JUNE 2015
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
b) Changes in Accounting Policy, disclosures, standards and interpretations
The accounting policies adopted are consistent with those of the previous financial year.
New and amended standards and interpretations
The Group has adopted the following new and amended Australian Accounting Standards and AASB
Interpretations as of 1 July 2015.
AASB 2012-3 - Amendments to Australian Accounting Standards - Offsetting Financial Assets and
Financial Liabilities
AASB 2012-3 adds application guidance to AASB 132 Financial Instruments: Presentation to address
inconsistencies identified in applying some of the offsetting criteria of AASB 132, including clarifying the
meaning of "currently has a legally enforceable right of set-off" and that some gross settlement systems
may be considered equivalent to net settlement.
AASB 2013-3 – Amendments to AASB 136 – Recoverable Amount Disclosures for Non-Financial
Assets
AASB 2013-3 amends the disclosure requirements in AASB 136 Impairment of Assets. The
amendments include the requirement to disclose additional information about the fair value
measurement when the recoverable amount of impaired assets is based on fair value less costs of
disposal.
AASB 1031 - Materiality
The revised AASB 1031 is an interim standard that cross-references to other Standards and the
Framework (issued December 2013) that contain guidance on materiality. AASB 1031 will be withdrawn
when references to AASB 1031 in all Standards and Interpretations have been removed. AASB 2014-1
Part C issued in June 2014 makes amendments to eight Australian Accounting Standards to delete their
references to AASB 1031. The amendments are effective from 1 July 2014.
AASB 2014-1 Part A -Annual Improvements 2010–2012 Cycle
AASB 2014-1 Part A: This standard sets out amendments to Australian Accounting Standards arising
from the issuance by the International Accounting Standards Board (IASB) of International Financial
Reporting Standards (IFRSs) Annual Improvements to IFRSs 2010–2012 Cycle and Annual
Improvements to IFRSs 2011–2013 Cycle.
Annual Improvements to IFRSs 2010–2012 Cycle addresses the following items:
► AASB 2 - Clarifies the definition of 'vesting conditions' and 'market condition' and introduces the
definition of 'performance condition' and 'service condition'.
► AASB 3 - Clarifies the classification requirements for contingent consideration in a business
combination by removing all references to AASB 137.
► AASB 8 - Requires entities to disclose factors used to identify the entity's reportable segments when
operating segments have been aggregated. An entity is also required to provide a reconciliation of total
reportable segment assets to the entity's total assets.
► AASB 116 & AASB 138 - Clarifies that the determination of accumulated depreciation does not
depend on the selection of the valuation technique and that it is calculated as the difference between
the gross and net carrying amounts.
► AASB 124 - Defines a management entity providing KMP services as a related party of the reporting
entity. The amendments added an exemption from the detailed disclosure requirements in paragraph 17
of AASB 124 Related Party Disclosures for KMP services provided by a management entity. Payments
made to a management entity in respect of KMP services should be separately disclosed.
Page | 27
Optiscan Imaging Limited
Annual Report 2015
Notes to the Financial Statements (continued)
FOR THE YEAR ENDED 30 JUNE 2015
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
b) Changes in Accounting Policy, disclosures, standards and interpretations (continued)
New and amended standards and interpretations (continued)
Annual Improvements to IFRSs 2011–2013 Cycle addresses the following items:
► AASB 13 - Clarifies that the portfolio exception in paragraph 52 of AASB 13 applies to all contracts
within the scope of AASB 139 or AASB 9, regardless of whether they meet the definitions of financial
assets or financial liabilities as defined in AASB 132.
► AASB 140 - Clarifies that judgment is needed to determine whether an acquisition of investment
property is solely the acquisition of an investment property or whether it is the acquisition of a group of
assets or a business combination in the scope of AASB 3 that includes an investment property. That
judgment is based on guidance in AASB 3.
The above new and amended Australian Accounting Standards and AASB Interpretation did not have a
material impact on the accounting policies, financial position or performance of the Group.
Page | 28
Optiscan Imaging Limited
Annual Report 2015
Notes to the Financial Statements (continued)
FOR THE YEAR ENDED 30 JUNE 2015
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
b) Changes in Accounting Policy, disclosures, standards and interpretations
(i) Accounting standards and interpretations issued but not yet effective
Australian Accounting Standards and Interpretations that have recently been issued or amended but are
not yet effective have not been adopted by the Group for the annual reporting period ended 30 June
2015. These are outlined in the table below.
Application
date of
standard*
Impact on
Group financial
report
Application
date for
Group*
1 July 2018
1 January
2018
The Group has
considered the
impact of this
standard
anticipates
minimal impact
on financial
statements and
disclosures
Reference Title
Summary
AASB
9/IFRS 9
Financial
Instruments
AASB 9 (December 2014) is a new standard which
replaces AASB 139. This new version supersedes AASB
9 issued in December 2009 (as amended) and AASB 9
(issued in December 2010) and includes a model for
classification and measurement, a single, forward-looking
‘expected loss’ impairment model and a substantially-
reformed approach to hedge accounting.
AASB 9 is effective for annual periods beginning on or
after 1 January 2018. However, the Standard is available
for early adoption. The own credit changes can be early
adopted in isolation without otherwise changing the
accounting for financial instruments.
Classification and measurement
AASB 9 includes requirements for a simpler
approach for classification and measurement of
financial assets compared with the requirements of
AASB 139. There are also some changes made in
relation to financial liabilities.
The main changes are described below.
Financial assets
a. Financial assets that are debt instruments will be
classified based on (1) the objective of the entity's
business model for managing the financial assets; (2)
the characteristics of the contractual cash flows.
b. Allows an irrevocable election on initial recognition
to present gains and losses on investments in equity
instruments that are not held for trading in other
comprehensive income. Dividends in respect of
these investments that are a return on investment
can be recognised in profit or loss and there is no
impairment or recycling on disposal of the
instrument.
c. Financial assets can be designated and measured
at fair value through profit or loss at initial
recognition if doing so eliminates or significantly
reduces a measurement or recognition
inconsistency that would arise from measuring
assets or liabilities, or recognising the gains and
losses on them, on different bases.
Page | 29
Optiscan Imaging Limited
Annual Report 2015
Notes to the Financial Statements (continued)
FOR THE YEAR ENDED 30 JUNE 2015
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
b) Changes in Accounting Policy, disclosures, standards and interpretations
(i) Accounting standards and interpretations issued but not yet effective
Reference Title
Summary
Application
date of
standard*
Impact on Group
financial report
Application
date for
Group*
AASB
9/IFRS 9
(Cont)
Financial
Instruments
(Continued)
Financial liabilities
Changes introduced by AASB 9 in respect of
financial liabilities are limited to the
measurement of liabilities designated at fair
value through profit or loss (FVPL) using the
fair value option.
Where the fair value option is used for
financial liabilities, the change in fair value is
to be accounted for as follows:
The change attributable to changes
►
in credit risk are presented in other
comprehensive income (OCI)
►
in profit or loss
The remaining change is presented
AASB 9 also removes the volatility in profit
or loss that was caused by changes in the
credit risk of liabilities elected to be
measured at fair value. This change in
accounting means that gains or losses
attributable to changes in the entity’s own
credit risk would be recognised in OCI.
These amounts recognised in OCI are not
recycled to profit or loss if the liability is ever
repurchased at a discount.
Impairment
The final version of AASB 9 introduces a
new expected-loss impairment model that
will require more timely recognition of
expected credit losses. Specifically, the new
Standard requires entities to account for
expected credit losses from when financial
instruments are first recognised and to
recognise full lifetime expected losses on a
more timely basis.
Page | 30
Optiscan Imaging Limited
Annual Report 2015
Notes to the Financial Statements (continued)
FOR THE YEAR ENDED 30 JUNE 2015
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
b) Changes in Accounting Policy, disclosures, standards and interpretations
(i)
Accounting standards and interpretations issued but not yet effective
Reference Title
Summary
Application
date of
standard*
Impact on Group
financial report
Application
date for
Group*
AASB
9/IFRS 9
(Cont)
Financial
Instruments
(Continued)
AASB 2014-4 Clarification of
Acceptable Methods of
Depreciation and
Amortisation
(Amendments to
AASB 116 and AASB
138)
Hedge accounting
Amendments to AASB 9 (December 2009
& 2010 editions and AASB 2013-9) issued
in December 2013 included the new hedge
accounting requirements, including changes
to hedge effectiveness testing, treatment of
hedging costs, risk components that can be
hedged and disclosures.
Consequential amendments were also made
to other standards as a result of AASB 9,
introduced by AASB 2009-11 and
superseded by AASB 2010-7, AASB 2010-
10 and AASB 2014-1 – Part E.
AASB 2014-7 incorporates the
consequential amendments arising from the
issuance of AASB 9 in Dec 2014.
AASB 2014-8 limits the application of the
existing versions of AASB 9 (AASB 9
(December 2009) and AASB 9 (December
2010)) from 1 February 2015 and applies to
annual reporting periods beginning on after 1
January 2015.
AASB 116 Property Plant and Equipment and
AASB 138 Intangible Assets both establish the
principle for the basis of depreciation and
amortisation as being the expected pattern of
consumption of the future economic benefits of
an asset.
The IASB has clarified that the use of revenue-
based methods to calculate the depreciation of
an asset is not appropriate because revenue
generated by an activity that includes the use of
an asset generally reflects factors other than
the consumption of the economic benefits
embodied in the asset.
The amendment also clarified that revenue is
generally presumed to be an inappropriate
basis for measuring the consumption of the
economic benefits embodied in an intangible
asset. This presumption, however, can be
rebutted in certain limited circumstances.
1 January
2016
1 July 2016
The Group has
considered the
impact of this
standard
anticipates minimal
impact on financial
statements and
disclosures
Page | 31
Optiscan Imaging Limited
Annual Report 2015
Notes to the Financial Statements (continued)
FOR THE YEAR ENDED 30 JUNE 2015
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
b) Changes in Accounting Policy, disclosures, standards and interpretations
(i)
Accounting standards and interpretations issued but not yet effective
Application
date of
standard*
Impact on Group
financial report
Application
date for
Group*
1 January
2017
The Group has not
yet assessed in
detail the impact of
this standard.
1 July 2017
Reference Title
Summary
AASB 15
***
Revenue
from
Contracts
with
Customers
AASB 15 Revenue from Contracts with Customers
replaces the existing revenue recognition standards
AASB 111 Construction Contracts, AASB 118
Revenue and related Interpretations (Interpretation
13 Customer Loyalty Programmes, Interpretation 15
Agreements for the Construction of Real Estate,
Interpretation 18 Transfers of Assets from
Customers, Interpretation 131 Revenue—Barter
Transactions Involving Advertising Services and
Interpretation 1042 Subscriber Acquisition Costs in
the Telecommunications Industry). AASB 15
incorporates the requirements of IFRS 15 Revenue
from Contracts with Customers issued by the
International Accounting Standards Board (IASB) and
developed jointly with the US Financial Accounting
Standards Board (FASB).
AASB 15 specifies the accounting treatment for
revenue arising from contracts with customers
(except for contracts within the scope of other
accounting standards such as leases or financial
instruments).The core principle of AASB 15 is that an
entity recognises revenue to depict the transfer of
promised goods or services to customers in an amount
that reflects the consideration to which the entity
expects to be entitled in exchange for those goods or
services. An entity recognises revenue in accordance
with that core principle by applying the following
steps:
(a) Step 1: Identify the contract(s) with a customer
(b) Step 2: Identify the performance obligations in
the contract
(c)
Step 3: Determine the transaction price
(d) Step 4: Allocate the transaction price to
the performance obligations in the contract
(e) Step 5: Recognise revenue when (or as)
the entity satisfies a performance
obligation
Currently, AASB 15 is effective for annual reporting
periods commencing on or after 1 January 2017.
Early application is permitted.
► AASB 2014-5 incorporates the consequential
amendments to a number Australian Accounting
Standards (including Interpretations) arising from
the issuance of AASB 15.
*** The International Accounting Standards Board (IASB) in its July 2015 meeting decided to confirm its proposal to defer the effective
date of IFRS 15 (the international equivalent of AASB 15) from 1 January 2017 to 1 January 2018. The amendment to give effect to the
new effective date for IFRS 15 is expected to be issued in September 2015. At this time, it is expected that the AASB will make a
corresponding amendment to AASB 15, which will mean that the application date of this standard for the Group will move from 1 July
2017 to 1 July 2018.
Page | 32
Optiscan Imaging Limited
Annual Report 2015
Notes to the Financial Statements (continued)
FOR THE YEAR ENDED 30 JUNE 2015
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
b) Changes in Accounting Policy, disclosures, standards and interpretations
(i)
Accounting standards and interpretations issued but not yet effective
Reference
Title
Summary
Application
date of
standard*
Impact on Group
financial report
Application
date for
Group*
AASB 2015-1
Amendments
to Australian
Accounting
Standards –
Annual
Improvement
s to
Australian
Accounting
Standards
2012– 2014
Ccle
The subjects of the principal amendments to
the Standards are set out below:
1 January
2016
AASB 5 Non-current Assets Held for Sale and
Discontinued Operations:
• Changes in methods of disposal –
where an entity reclassifies an
asset (or disposal group) directly
from being held for distribution
to being held for sale (or visa
versa), an entity shall not follow
the guidance in paragraphs 27–29
to account for this change.
AASB 7 Financial Instruments: Disclosures:
•
Servicing contracts - clarifies how
an entity should apply the
guidance in paragraph 42C of AASB
7 to a servicing contract to decide
whether a servicing contract is
‘continuing involvement’ for the
purposes of applying the
disclosure requirements in
paragraphs 42E–42H of AASB 7.
AASB 119 Employee Benefits:
• Discount rate: regional market
issue - clarifies that the high
quality corporate bonds used to
estimate the discount rate for
post-employment benefit
obligations should be
denominated in the same
currency as the liability. Further
it clarifies that the depth of the
market for high quality corporate
bonds should be assessed at the
currency level.
AASB 134 Interim Financial Reporting:
•
Disclosure of information
‘elsewhere in the interim financial
report’ - amends AASB 134 to
clarify the meaning of disclosure of
information ‘elsewhere in the
interim financial report’ and to
require the inclusion of a cross-
reference from the interim
financial statements to the
location of this information.
1 July 2016
The Group has
considered the
impact of this
standard
anticipates
minimal impact on
financial
statements and
disclosures
Page | 33
Optiscan Imaging Limited
Annual Report 2015
Notes to the Financial Statements (continued)
FOR THE YEAR ENDED 30 JUNE 2015
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
b) Changes in Accounting Policy, disclosures, standards and interpretations
(i) Accounting standards and interpretations issued but not yet effective
Reference
Title
Summary
AASB
2015-2
Amendments
to Australian
Accounting
Standards –
Disclosure
Initiative:
Amendments
to AASB 101
The Standard makes amendments to AASB
101 Presentation of Financial Statements
arising from the IASB’s Disclosure Initiative
project. The amendments are designed to
further encourage companies to apply
professional judgment in determining what
information to disclose in the financial
statements. For example, the amendments
make clear that materiality applies to the
whole of financial statements and that the
inclusion of immaterial information can
inhibit the usefulness of financial
disclosures. The amendments also clarify
that companies should use professional
judgment in determining where and in
what order information is presented in the
financial disclosures.
Application
date of
standard*
Impact on Group
financial report
Application
date for
Group*
1 July 2016
1 January
2016
The Group has
considered the
impact of this
standard
anticipates
minimal impact on
financial
statements and
disclosures
AASB
2015-3
Amendments
to Australian
Accounting
Standards
arising
the
Withdrawal of
AASB
1031
Materiality
from
The Standard completes the AASB’s
project to remove Australian
guidance on materiality from
Australian Accounting Standards.
1 July 2015
1 July 2015
The Group has
considered the
impact of this
standard
anticipates
minimal impact on
financial
statements and
disclosures
Page | 34
Optiscan Imaging Limited
Annual Report 2015
Notes to the Financial Statements (continued)
FOR THE YEAR ENDED 30 JUNE 2015
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
c) Basis of consolidation
The consolidated financial statements comprise the financial statements of the Group and its
subsidiaries as at 30 June 2015. Control is achieved when the Group is exposed, or has rights, to
variable returns from its involvement with the investee and has the ability to affect those returns
through its power over the investee. Specifically, the Group controls an investee if and only if the Group
has:
• Power over the investee (i.e. existing rights that give it the current ability to direct the relevant
activities of the investee)
• Exposure, or rights, to variable returns from its involvement with the investee, and
• The ability to use its power over the investee to affect its returns
When the Group has less than a majority of the voting or similar rights of an investee, the Group
considers all relevant facts and circumstances in assessing whether it has power over an investee,
including:
• The contractual arrangement with the other vote holders of the investee
• Rights arising from other contractual arrangements
• The Group’s voting rights and potential voting rights
The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that
there are changes to one or more of the three elements of control. Consolidation of a subsidiary begins
when the Group obtains control over the subsidiary and ceases when the Group loses control of the
subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the
year are included in the statement of comprehensive income from the date the Group gains control until
the date the Group ceases to control the subsidiary.
Profit or loss and each component of other comprehensive income (OCI) are attributed to the equity
holders of the parent of the Group and to the non-controlling interests, even if this results in the
noncontrolling interests having a deficit balance. When necessary, adjustments are made to the financial
statements of subsidiaries to bring their accounting policies into line with the Group’s accounting
policies. All intra-group assets and liabilities, equity, income, expenses and cash flows relating to
transactions between members of the Group are eliminated in full on consolidation.
A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an
equity transaction. If the Group loses control over a subsidiary, it:
• De-recognises the assets (including goodwill) and liabilities of the subsidiary
• De-recognises the carrying amount of any non-controlling interests
• De-recognises the cumulative translation differences recorded in equity
• Recognises the fair value of the consideration received
• Recognises the fair value of any investment retained
• Recognises any surplus or deficit in profit or loss
• Reclassifies the parent’s share of components previously recognised in OCI to profit or loss or
retained earnings, as appropriate, as would be required if the Group had directly disposed of the
related assets or liabilities.
Page | 35
Optiscan Imaging Limited
Annual Report 2015
Notes to the Financial Statements (continued)
FOR THE YEAR ENDED 30 JUNE 2015
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
d) Revenue recognition
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group
and the revenue can be reliably measured. The following specific recognition criteria must also be met
before revenue is recognised:
(i) Sale of goods
Revenue is recognised when the significant risks and rewards of ownership of the goods have passed to
the buyer and the costs incurred or to be incurred in respect of the transaction can be measured reliably.
Risks and rewards of ownership are considered passed to the buyer at the time of delivery of the goods
to the customer.
(ii) Rendering of services
Revenue from service and product support activities is recognised by reference to the stage of
completion of a contract. Stage of completion is measured by reference to labour hours incurred to date
as a percentage of total estimated labour hours for each contract. When the contract outcome cannot be
estimated reliably, revenue is recognised only to the extent of the expenses recognised that are
recoverable.
(iii) Royalty revenue
Royalty revenue is recognised on an accrual basis in accordance with the substance of the relevant
licensing agreement.
(iv) Interest revenue
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.
e) Government grants
When the grant relates to an expense item, it is recognised as income over the periods necessary to
match the grant on a systematic basis to the costs that it is intended to compensate. Where expenditure
has been incurred that gives rise to an entitlement under a grant agreement, the grant income is
accrued. Revenue is recognised only to the extent that there is reasonable assurance that the grant will
be received and conditions attached will be complied with.
Page | 36
Optiscan Imaging Limited
Annual Report 2015
Notes to the Financial Statements (continued)
FOR THE YEAR ENDED 30 JUNE 2015
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
f) Leases
The determination of whether an arrangement is or contains a lease is based on the substance of
the arrangement and requires an assessment of whether the fulfillment of the arrangement is
dependent on the use of a specific asset or assets and the arrangement conveys a right to use the
asset.
Group as lessor
(i)
Leases in which the Group retains substantially all the risks and benefits of ownership are classified as
operating leases. Rental income is recognised in profit or loss in accordance with the term of the lease.
Group as lessee
(ii)
Operating lease payments are recognised as an expense in profit or loss on a straight-line basis over
the lease term.
g) Cash and cash equivalents
Cash and short-term deposits in the Statement of Financial Position comprise cash at bank and in hand
and short term deposits with an original maturity of three months or less that are readily convertible to
known amounts of cash and which are subject to an insignificant risk of changes in value. Cash and
short term deposits are stated at nominal values.
For the purposes of the Statement of Cash Flows, cash and cash equivalents consist of cash and cash
equivalents as defined above.
h) Trade and other receivables
Trade receivables and other receivables, both of which generally have 30 to 60 day terms, are non
interest bearing and are recognised and carried at original invoice amount less an allowance for any
uncollectible amounts. Impairment of receivables is assessed by reference to ageing of receivables and
the Group’s knowledge of the profile and status of the debtors.
An allowance for doubtful debts is made when there is objective evidence that the Group will not be able
to collect the debts. Bad debts are written off when identified.
i)
Inventories
Inventories are valued at the lower of cost and net realisable value.
Costs incurred in bringing each product to its present location and condition are accounted for as
follows:
- Raw materials – purchase cost on a first-in, first-out basis; cost comprises the purchase price,
import duties and other taxes (other than those subsequently recoverable by the entity from the
taxing authorities), and transport, handling and other costs directly attributable to acquisition
- Finished goods and work-in-progress – cost of direct materials and labour and a proportion of
manufacturing overheads based on normal operating capacity.
Net realisable value is the estimated selling price in the ordinary course of business, less estimated
costs of completion and the estimated costs necessary to make the sale.
Page | 37
Optiscan Imaging Limited
Annual Report 2015
Notes to the Financial Statements (continued)
FOR THE YEAR ENDED 30 JUNE 2015
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
j) Derivative financial instruments and hedging
The Group sometimes uses derivative financial instruments in the form of forward currency contracts to
economically hedge its risks associated with foreign currency fluctuations. Such derivative financial
instruments are initially recognised at fair value on the date on which a derivative contract is entered into
and are subsequently remeasured to fair value. Derivatives are carried as assets when their fair value is
positive and as liabilities when their fair value is negative. The fair value of forward currency contracts is
calculated by reference to current forward exchange rates for contracts with similar maturity profiles.
As the Group economically hedges but does not meet the strict criteria for hedge accounting under
AASB 139 Financial Instruments: Recognition and Measurement, any gains or losses arising from
changes in the fair value of derivatives are taken directly to profit or loss for the year. For information on
the Group's financial risk management objectives and policies with respect to its economic hedging
program, refer to Note 3.
k) Foreign currency translation
Both the functional and presentation currency of Optiscan Imaging Limited and its Australian subsidiary
is Australian dollars ($). Each entity in the Group determines its own functional currency and items
included in the financial statements of each entity are measured using that functional currency.
Transactions in foreign currencies are initially recorded in the functional currency by applying the
exchange rates ruling at the date of the transaction. Monetary assets and liabilities denominated in
foreign currencies are retranslated at the rate of exchange ruling at balance date.
All transactional exchange differences are recognised in profit or loss. Exchange variations arising on
consolidation from the translation of the net investment in foreign subsidiaries, including loans forming
part of the net investment, are recognised in the foreign currency translation reserve in equity.
l)
Income tax
Current tax assets and liabilities for the current and prior periods are measured at the amount expected
to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the
amount are those that are enacted or substantively enacted by balance date.
Deferred income tax is provided on all temporary differences between the tax bases of assets and
liabilities and their carrying amounts for financial reporting purposes at balance date.
Deferred income tax liabilities are recognised for all taxable temporary differences except:
• when the deferred income tax liability arises from the initial recognition of goodwill or of 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 profit nor taxable profit or loss; or
• when the taxable temporary difference is associated with investments in subsidiaries, associates or
interests in joint ventures, and the timing of the reversal of the temporary difference can be
controlled and it is probable that the temporary difference will not reverse in the foreseeable future.
Page | 38
Optiscan Imaging Limited
Annual Report 2015
Notes to the Financial Statements (continued)
FOR THE YEAR ENDED 30 JUNE 2015
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
l)
Income tax (continued)
Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of
unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be
available against which the deductible temporary differences and the carry-forward of unused tax credits
and unused tax losses can be utilised. Exceptions to this position arise:
• when the deferred income tax asset relating to the deductible temporary difference arises from the
initial recognition of an asset or liability in a transaction that is not a business combination and, at the
time of the transaction, affects neither the accounting profit nor taxable profit or loss; or
• when the deductible temporary difference is associated with investments in subsidiaries, associates
or interests in joint ventures, in which case a deferred tax asset is only recognised to the extent that
it is probable that the temporary difference will reverse in the foreseeable future and taxable profit
will be available against which the temporary difference can be utilised.
The carrying amount of deferred income tax assets is reviewed at each balance date to determine
whether it is probable that sufficient taxable profit will be available to allow all or part of the deferred
income tax asset to be utilised. The carrying amount of deferred tax assets is reduced to the extent that
it is not probable that sufficient taxable profit will be available to allow all or part of the deferred income
tax asset to be utilised.
Unrecognised deferred income tax assets are reassessed at each balance date and are recognised to
the extent that it has become probable that future taxable profit will allow the deferred tax asset to be
recovered.
Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the
year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have
been enacted or substantively enacted at balance date.
Income taxes relating to items recognised directly in equity are recognised in equity and not in profit or
loss.
If deferred tax assets and deferred tax liabilities are recorded in the accounts, they are offset only if a
legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred
tax assets and liabilities relate to the same taxable entity and the same taxation authority.
Tax consolidation
Optiscan Imaging Limited and its 100% owned Australian resident subsidiary have elected not to form a
tax consolidated group.
m) Other taxes
Revenues, expenses and assets are recognised net of the amount of GST except:
• when the GST incurred on a purchase of goods and services is not recoverable from the taxation
authority, in which case the GST is recognised as part of the cost of acquisition of the asset or as
part of the expense item as applicable; and
•
receivables and payables, which are stated with the amount of GST included.
The net amount of GST recoverable from, or payable to, the taxation authority is included as part of
receivables or payables in the Statement of Financial Position.
Page | 39
Optiscan Imaging Limited
Annual Report 2015
Notes to the Financial Statements (continued)
FOR THE YEAR ENDED 30 JUNE 2015
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
m) Other taxes (continued)
Cash flows are included in the Statement of Cash Flows on a gross basis and the GST component of
cash flows arising from investing and financing activities, which is recoverable from, or payable to, the
taxation authority are classified as operating cash flows. Commitments and contingencies are disclosed
net of the amount of GST recoverable from, or payable to, the taxation authority.
n) Plant and equipment
Plant and equipment is stated at cost less accumulated depreciation and any accumulated impairment
losses.
Depreciation is calculated on a straight-line basis over the estimated useful life of the assets. The
depreciation rates applied to the main classes of plant and equipment are:
Class of plant and equipment
Depreciation rate
Office furniture & equipment
Production equipment
R&D equipment
20% - 40%
20%
30% - 40%
The assets' residual values, useful lives and amortisation methods are reviewed, and adjusted if
appropriate, at each financial year end.
Disposal
An item of plant and equipment is derecognised upon disposal or when no further future economic
benefits are expected from its use or disposal.
Any gain or loss arising on derecognition of the asset (calculated as the difference between the
net disposal proceeds and the carrying amount of the asset) is included in profit or loss in the year
the asset is derecognised.
o)
Investments and other financial assets
Other financial assets consist of investments in controlled entities, which are carried at cost less any
impairment in the parent company's financial statements.
The carrying values of investments in controlled entities are reviewed for impairment at each reporting
date.
p)
Intangible assets
The only intangible assets recognised by the group are software assets. The amounts capitalised
represent the acquisition cost of software used in the design, development and administrative activities
of the group. These amounts are amortised over a period of no more than three years, and are
assessed for impairment on an annual basis. At present intangible software assets are fully written
down, with zero carrying value.
Page | 40
Optiscan Imaging Limited
Annual Report 2015
Notes to the Financial Statements (continued)
FOR THE YEAR ENDED 30 JUNE 2015
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
p)
Intangible assets (continued)
Research and development costs
Research costs are expensed as incurred. An intangible asset arising from development expenditure on
an internal project is recognised only when the Group can demonstrate the technical feasibility of
completing the intangible asset so that it will be available for use or sale, its intention to complete and its
ability to use or sell the asset, how the asset will generate future economic benefits, the availability of
resources to complete the development and the ability to measure reliably the expenditure attributable to
the intangible asset during its development. Following the initial recognition of the development
expenditure, a review of activity will be conducted on a project by project basis, and the cost model will
be applied, requiring the development asset to be carried at cost less any accumulated amortisation and
accumulated impairment losses. Any expenditure so capitalised is to be amortised over the period of
expected benefits from the related project. No such expenditure has yet been capitalised by the Group.
q) Trade and other payables
Trade payables and other payables are non interest bearing and are carried at amortised cost. They
represent liabilities for goods and services provided to the Group prior to the end of the financial year
that are unpaid and arise when the Group becomes obliged to make future payments in respect of the
purchase of these goods and services. The amounts are unsecured and are generally paid on 30 day
terms.
r)
Interest bearing loans and borrowings
All loans and borrowings are initially recognised at the fair value of the consideration received less
directly attributable transaction costs.
After initial recognition, interest bearing loans and borrowings are subsequently measured at fair value.
Any fees paid on the establishment of loan facilities that are yield related are included as part of the
carrying amount of the loans and borrowings. Costs of borrowing facilities are treated as prepayments
and allocated over the term of the facility.
Borrowings are classified as current liabilities unless the Group has an unconditional right to defer
settlement of the liability for at least 12 months after balance date.
The consideration received from the issue of convertible notes is allocated between equity and liabilities.
The equity component is that part of the consideration that relates to the value of the option to convert to
equity. The balance of the consideration received is the fair value of the convertible note liability.
s) Provisions and employee leave benefits
Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of
a past event, it is probable that an outflow of resources embodying economic benefits will be required to
settle the obligation and a reliable estimate can be made of the amount of the obligation.
When the Group expects some or all of a provision to be reimbursed, for example under an insurance
contract, the reimbursement is recognised as a separate asset but only when the reimbursement is
virtually certain. The expense relating to any provision is presented in profit or loss net of any
reimbursement.
Page | 41
Optiscan Imaging Limited
Annual Report 2015
Notes to the Financial Statements (continued)
FOR THE YEAR ENDED 30 JUNE 2015
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
s) Provisions and employee benefits (continued)
Provisions (continued)
Provisions are measured at the present value of management’s best estimate of the expenditure
required to settle the present obligation at balance date using a discounted cashflow methodology. If the
effect of the time value of money is material, provisions are discounted using a current pre-tax rate that
reflects the time value of money and the risks specific to the liability.
Employee leave benefits
(i) Wages, salaries, superannuation, and annual leave
Liabilities for wages and salaries, including non-monetary benefits, superannuation and annual leave
expected to be settled within 12 months of the reporting dates are recognised in respect of employees'
services up to the reporting date. They are measured at the amounts expected to be paid when the
liabilities are settled. Expenses for non-accumulating sick leave are recognised when the leave is taken
and are measured at the rates paid or payable.
(ii) Long service leave
The liability for long service leave is recognised in the provision for employee benefits and measured as
the present value of expected future payments to be made in respect of services provided by employees
up to the reporting date. Consideration is given to expected future wage and salary levels, experience of
employee departures, and periods of service. Expected future payments are discounted using market
yields at the reporting date on corporate bonds with terms to maturity and currencies that match, as
closely as possible, the estimated future cash outflows.
(iii) Warranty
A provision for warranty at the rate of 3% of sales has been provided and the incidence of warranty claims is
monitored on an ongoing basis to assess adequacy of the provision.
t) Share-based payment transactions
(i)
Equity settled transactions with employees
The Group provides benefits to employees (including key management personnel) in the form of share-
based payments, whereby employees render services in exchange for shares or rights over shares
(equity-settled transactions).
There is an Employee Share Option Plan (ESOP) in place, which provides benefits to employees.
The cost of these equity-settled transactions with employees is measured by reference to the fair value
of the equity instruments at the date at which they are granted. The fair value is determined using a
Black Scholes valuation model.
In valuing equity-settled transactions, no account is taken of any performance conditions, other than
conditions linked to the price of the shares of Optiscan Imaging Limited (market conditions) if applicable.
The cost of equity-settled transactions is recognised, together with a corresponding increase in equity,
over the period in which the performance and/or service conditions are fulfilled (the vesting period),
ending on the date on which the relevant employees become fully entitled to the award (the vesting
date).At each reporting date until vesting the cumulative charge to profit or loss is the product of (i) the
grant date fair value of the award; (ii) the current best estimate of the number of equity instruments that
will ultimately vest, taking into account such factors as the likelihood of employee turnover during the
vesting period, and the likelihood of non market performance conditions being met, and (iii) the expired
portion of the vesting period. The charge to profit or loss for the period is the cumulative amount as
calculated above less the amounts already charged in previous periods. There is a corresponding entry
to equity.
Page | 42
Optiscan Imaging Limited
Annual Report 2015
Notes to the Financial Statements (continued)
FOR THE YEAR ENDED 30 JUNE 2015
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
t) Share-based payment transactions (continued)
Until an award has vested, any amounts recorded are contingent and will be adjusted if more or fewer
awards vest than were originally anticipated to do so. Any award subject to a market condition is
considered to vest irrespective of whether or not that market condition is fulfilled, provided all other
conditions are satisfied. If the terms of an equity-settled award are modified, as a minimum an expense
is recognised as if the terms had not been modified. An additional expense is recognised for any
modification that increases the total fair value of the share-based payment arrangement, or is otherwise
beneficial to the employee, as measured at the date of modification.
If an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and
any expense not yet recognised for the award is recognised immediately. However, if a new award is
substituted for the cancelled award and designated as a replacement award on the date that it is
granted, the cancelled and new award are treated as if they were a modification of the original award, as
described in the previous paragraph.
(ii)
Equity settled transactions with parties other than employees
The Group may from time to time enter into arrangements with parties other than employees which
involve consideration in the form of equity-settled transactions by way of allotment of shares and or
options.
The cost of equity-settled transactions is recognised, together with a corresponding increase in equity,
over the period in which the service is provided.
The dilutive effect, if any, of outstanding options is reflected as additional share dilution in the
computation of earnings / (loss) per share (see note 8).
u) Contributed equity
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new
shares or options are shown in equity as a deduction from the proceeds (net of tax).
The consideration received from the issue of convertible notes is allocated between equity and liabilities.
The equity component is that part of the consideration that relates to the value of the option to convert to
equity.
v) Earnings (Loss) per share
Basic earnings (loss) per share is calculated as net profit (loss) attributable to members of the parent,
adjusted to exclude any costs of servicing equity (other than dividends) divided by the weighted average
number of ordinary shares.
Diluted earnings (loss) per share is calculated as net profit (loss) attributable to members of the parent,
adjusted for:
•
costs of servicing equity (other than dividends) and interest associated with dilutive potential
ordinary shares that have been recognised as expenses; and
• other non-discretionary changes in revenues or expenses during the period that would result
from the dilution of potential ordinary shares;
divided by the weighted average number of ordinary shares and dilutive potential ordinary shares.
Page | 43
Optiscan Imaging Limited
Annual Report 2015
Notes to the Financial Statements (continued)
FOR THE YEAR ENDED 30 JUNE 2015
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
w) Segment reporting
An operating segment is a component of an entity that engages in business activities from which it may
earn revenues and incur expenses (including revenues and expenses relating to transactions with other
components of the same entity), whose operating results are regularly reviewed by the entity's chief
operating decision maker to make decisions about resources to be allocated to the segment and assess
its performance and for which discrete financial information is available.
Operating segments have been identified based on the information provided to the chief operating
decision makers, being the board of directors.
3 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
The Group's principal financial instruments comprise receivables, payables, cash and short-term
deposits, loans and, from time to time, convertible notes and derivatives.
In the context of the Group’s overall risk profile, financial instruments do not represent the most
significant exposure. Commercial risk associated with our business partnerships, technology risk around
future development and market risk relating to adoption of the technology will have considerably more
impact on our risk profile than the risks relating to financial instruments.
The Group monitors its exposure to key financial risks, principally currency and liquidity risk, with the
objective of achieving the Group's financial targets whilst protecting future financial security.
The Group enters into derivative transactions from time to time, mainly forward currency contracts. The
purpose is to manage the currency risks arising from the Group's operations. These derivatives provide
economic hedges, but do not qualify for hedge accounting and are based on limits set by the Board. It is,
and has been throughout the period under review, the Group’s policy that no trading in financial
instruments shall be undertaken.
The main risks arising from the Group's financial instruments are foreign currency risk, liquidity risk,
interest rate risk and credit risk. The Group uses different methods to measure and manage different
types of risks to which it is exposed. These include monitoring levels of exposure to interest rate and
foreign exchange risk and assessments of market forecasts for interest and foreign exchange rates.
Liquidity risk is monitored through the development of future rolling cash flow forecasts and regular
internal reporting. There is a lesser degree of risk management in relation to interest rate risk and credit
risk, as these are considered to have less capacity to materially impact the Group’s financial position at
the present time.
The Board reviews and agrees policies for managing each of these risks as summarised below. Primary
responsibility for identification and control of financial risks rests with the Board. It reviews and agrees
policies for managing each of the risks, including the use of derivatives, hedging cover of foreign
currency, credit allowances, and future cash flow forecast projections.
Details of the significant accounting policies and methods adopted, including the criteria for recognition,
the basis of measurement and the basis on which income and expenses are recognised, in respect of
each class of financial asset, financial liability and equity instrument are disclosed in note 2 to the
financial statements.
Page | 44
Optiscan Imaging Limited
Annual Report 2015
Notes to the Financial Statements (continued)
FOR THE YEAR ENDED 30 JUNE 2015
3 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)
Risk Exposures and Responses
Interest rate risk
The Group's exposure to market interest rates relates primarily to the Group's borrowings and cash and
cash equivalents. The impact of movements in interest rates is not material in the context of the Group’s
operations or trading results.
At balance date, the Group had the following financial assets exposed to Australian variable interest rate
risk that are not designated in cash flow hedges:
Financial Assets
Cash and cash equivalents *
Consolidated
2015
$
255,435
2014
$
69,147
Financial Liabilities
-
-
Net exposure
255,435
69,147
*These amounts differ from the balance sheet due to non- interest bearing cash on hand and foreign
currency balances and loans with fixed interest rates.
The following sensitivity analysis is based on the interest rate risk exposures in existence at balance
date:
At 30 June 2015, if interest rates had moved throughout the year, as illustrated in the table below, with
all other variables held constant, post tax loss and equity would have been affected as follows:
Judgements of reasonably
possible movements in
interest rates:
Net Profit
Higher (Lower)
Other Comprehensive
Income
Higher (Lower)
Consolidated
+0.50% (50 basis points)
-0.25% (25 basis points)
2015
$
1,062
(531)
2014
$
503
(252)
2015
$
-
-
2014
$
-
-
Interest rates during 2014/2015 continued a downward trend, with official rates remaining at historical
lows at year end. At balance date, the economic outlook in Australia is similarly steady, with sentiment
on future interest rates remaining flat, suggesting the prospect of modest increases in the medium term.
On this basis, a possible movement in rates from -0.25% to +0.50% has been adopted as a reasonably
possible movement in rates. The movements in net loss are due to higher and lower amounts of interest
received from interest bearing cash balances. There is no movement in other comprehensive income as
there are no derivative instruments designated as cash flow hedges.
Page | 45
Optiscan Imaging Limited
Annual Report 2015
Notes to the Financial Statements (continued)
FOR THE YEAR ENDED 30 JUNE 2015
3 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)
Foreign currency risk
As nearly all of the Group’s sales revenue, as well as some expenses and inventory purchases, are
denominated in United States Dollars and Euro, the Group's statement of financial position can be
affected by significant movements in these exchange rates. At 30 June 2015, there were no economic
hedges in place in respect of net foreign currency exposures, as there were no bank facilities in place.
At 30 June 2015, the Group had the following exposure to foreign currency (US$ and Euro) that is not
designated in cash flow hedges:
Consolidated
Financial Assets
Cash and cash equivalents US$
Cash and cash equivalents Euro
Trade and other receivables US$
Trade and other receivables Euro
Financial Liabilities
Trade and other payables US$
Borrowings (Convertible Notes) US$^
Net exposure US$
Net exposure Euro
2015
$
1,452
3,941
3,390
-
(2,171)
-
2,671
3,941
2014
$
690
1,799
15,000
2,500
(40,167)
(125,000)
(149,477)
4,299
^ Not hedged at balance date as no bank facility available
The following sensitivity is based on the foreign currency risk exposures in existence at balance date:
At 30 June 2015, had the Australian Dollar moved by the same amount illustrated in the table below,
with all other variables held constant, post tax loss and equity would have been affected as follows:
Judgements of reasonably possible
movements in A$ exchange rates:
Consolidated
AUD/USD +10.0%, (2014, 1.5%)
AUD/USD -10.0%, (2014, 1.5%)
AUD/EURO + 0.6% (2014, 2.6%)
AUD/EURO – 0.6% (2014, 2.6%)
Parent Entity
AUD/USD +1.5%
AUD/USD - 1.5%
Net Loss
(Higher) Lower
2015
$
2014
$
(316)
316
33
(33)
2,437
(2,515)
(162)
170
-
-
2,038
(2,103)
Equity
Higher (Lower)
2015
$
2014
$
-
-
-
-
-
-
-
-
-
-
-
-
Management believe the balance date risk exposures are representative of the risk exposure inherent in
the financial instruments.
Page | 46
Optiscan Imaging Limited
Annual Report 2015
Notes to the Financial Statements (continued)
FOR THE YEAR ENDED 30 JUNE 2015
3 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)
Credit risk
Credit risk arises from the financial assets of the Group, which comprise cash and cash equivalents,
trade and other receivables and derivative instruments. The Group's exposure to credit risk arises from
potential default of the counter party, with a maximum exposure equal to the carrying amount of these
instruments. Exposure at balance date is addressed in each applicable note. The Group does not hold
any credit derivatives to offset its credit exposure. The Group trades only with recognised, creditworthy
third parties, and as such collateral is not requested nor is it the Group's policy to securitise its trade and
other receivables. It is the Group's policy that all customers who wish to trade on credit terms are
subject to credit verification procedures including an assessment of their independent credit rating,
financial position, past experience and industry reputation. Risk limits are set for each individual
customer, and are regularly monitored. In addition, receivable balances are monitored on an ongoing
basis with the result that the Group's exposure to bad debts is not significant. There is no significant
concentration of credit risk in the Group’s current trading position. With respect to credit risk arising from
the other financial assets of the Group, which comprise cash and cash equivalents, the Group’s
exposure to credit risk arises from the possibility of default of the counter party. This is considered
unlikely as the Group places cash and cash equivalents only with recognised Australian trading banks.
Liquidity risk and capital management
The Group's objective is to maintain adequate funding of its activities. Prior to May 2009, all capital
financing has been derived from issues of equity. Since May 2009, the Group has from time to time,
issued convertible notes, introducing debt finance to the funding mix. Capital management is a process
of monitoring cash reserves and forecast cash requirements, and there are no externally imposed
capital requirements. The table below reflects all contractually fixed pay-offs and receivables for
settlement from recognised financial assets and liabilities, as of 30 June 2015. Cash flows for financial
assets and liabilities without fixed amount or timing are based on the conditions existing at 30 June
2015.
<6 months
Consolidated
1-5 years
Total
Year ended 30 June 2015
Liquid financial assets
Cash and cash equivalents
Trade and other receivables
Financial liabilities
Trade and other payables
Short term loans
Callable bank guarantee
Net maturity
Year ended 30 June 2014
Liquid financial assets
Cash and cash equivalents
Trade and other receivables
Financial liabilities
Trade and other payables
Convertible notes
Callable bank guarantee
Net maturity
268,893
693,004
420,553
510,533
45,500
(14,689)
74,942
657,164
644,624
126,466
45,500
(84,484)
-
-
-
-
-
-
-
-
-
-
-
268,893
693,004
420,553
510,533
45,500
(14,689)
74,942
657,164
644,624
126,466
45,500
(84,484)
Page | 47
Optiscan Imaging Limited
Annual Report 2015
Notes to the Financial Statements (continued)
FOR THE YEAR ENDED 30 JUNE 2015
3 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)
Liquidity risk and capital management (continued)
The contractual maturities of the Group's and parent entity's financial assets and liabilities set out in the
table are equivalent to the maturity analysis of financial assets and liability based on management's
expectation.
The risk implied from the values in the table reflects a balanced view of cash inflows and outflows. Trade
payables and other financial liabilities mainly originate from investments in working capital, principally
inventories and trade receivables. These assets are considered in the Group's overall liquidity risk,
which is monitored through review of forecasts of liquidity reserves on the basis of expected cash flow.
The cash and cash equivalent balance classified as being capable of settlement within 90 days includes
term deposits which are secured by the bank (refer note 16). These amounts could be released within
six months upon cancellation of the underlying bank facilities, or upon a re-negotiation of the security
arrangements, for example, by providing a charge over assets other than cash.
The Group’s activities are funded from its cash reserves and convertible notes. There are no unused
credit facilities. Bank facilities are non credit lines, details of which are disclosed in note 16.
Fair value of financial assets and liabilities
The methods for estimating fair value are outlined in the relevant notes to the financial statements, and
unless specifically stated, carrying value approximates fair value for all financial instruments.
The fair value of financial assets and liabilities is included at the amount at which the instrument could
be exchanged in a current transaction between willing parties, other than in a forced or liquidation
transaction. Management has assessed that the fair value of cash and short term deposits, trade
receivables, and trade payables approximate their carrying amount due to the short term nature of the
instruments.
Fair value measurement of interest bearing borrowings
Interest bearing borrowings disclosed in note 15 are carried at fair value. This valuation at balance date
was based on an exit price that established by reference to significant observable inputs (level 2 under
AASB 13), being the amount paid shortly after balance date to extinguish the liability (refer note 15).
Fair value measurement hierarchy
The following table outlines the fair value measurement hierarchy for the liabilities carried at fair value:
Liability
Date of
Valuation
Total
Interest bearing
loans
30 June 2015
510,533
$
Convertible notes
30 June 2014
126,466
Quoted prices in
active markets
Fair value measurement using
Significant
observable
inputs
$
$
Significant
unobservable
inputs
$
-
-
510,533
126,466
-
-
Page | 48
Notes to the Financial Statements (continued)
FOR THE YEAR ENDED 30 JUNE 2015
4 SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS
Optiscan Imaging Limited
Annual Report 2015
In applying the Group’s accounting policies, management continually evaluates judgements, estimates
and assumptions based on historical experience and other factors, including expectations of future
events that may have an impact on the Group. All judgements, estimates and assumptions made are
believed to be reasonable based on the most current set of circumstances available to management.
Actual results may differ from the judgements, estimates and assumptions. The more significant
judgements, estimates and assumptions made by management in the preparation of these financial
statements are outlined below:
Net realisable value of inventory
Most of the inventory held by the Group is materials for second generation processors, scanners and
probes. Inventory relating to the first generation confocal imaging platform, including FIVE 1 products
and accessories, remains on hand but is carried at zero value. The rate of future sales, and the usage of
parts for service and support are uncertain, and as a consequence the Group’s ability to realise the
carrying value of inventory is similarly uncertain.
Long service leave provision
The liability for long service leave is recognised and measured at the present value of the estimated
future cash flows to be made in respect of services provided by all employees up to balance date. In
determining the present value of the liability, years of service, attrition rates, future pay increases and
inflation have been taken into account. Expected future payments are discounted using market yields at
the reporting date on government bonds with terms to maturity that match, as closely as practicable, the
estimated future cash outflows.
Recognition of grant receivable for R&D Tax Incentive
The Group has established a precedent for entitlement to grant income from the R&D Tax incentive in
prior periods. This experience supports the assumption that eligibility for the grant will continue on the
same basis, and accordingly, it is appropriate to recognise entitlement to the income in the current
period.
Capitalisation of research and development expenditure
The group expenses all research and development expenditure (refer note 2(p)). The group’s
development activities are at a stage where there is not yet adequate probability that the tests for
capitalisation can be met. The matter is kept under regular review.
Recognition of deferred tax assets
The carrying amount of deferred tax assets is dependent upon a judgement as to whether it is probable
that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. In
the light of the continuing expenditure on R&D there is not yet adequate probability of taxable profit in
the future that will enable the utilisation of these deductible temporary differences, which include tax
losses (refer note 2 (l)).
Useful lives of assets
The estimation of the useful lives of assets has been based on historical experience and management
judgement. In addition, the condition of assets is assessed annually and considered in the context of
remaining useful life, and adjustments to useful life are made where necessary. Depreciation charges
are disclosed in note 6(c). Details of useful lives by major asset category are included in note 2(n).
Fair value of financial liabilities
When the fair values of financial liabilities recorded in the statement of financial position cannot be
measured based on quoted prices in active markets, their fair value is measured using valuation
techniques including the DCF model. The inputs to these models are taken from observable markets
where possible, but where this is not feasible, a degree of judgement is required in establishing fair
values. Judgements include considerations of inputs such as liquidity risk, credit risk and volatility and
other external inputs. Changes in assumptions about these factors could affect the reported fair value of
financial instruments.
Page | 49
Optiscan Imaging Limited
Annual Report 2015
Notes to the Financial Statements (continued)
FOR THE YEAR ENDED 30 JUNE 2015
5 SEGMENT INFORMATION
The Group has identified its operating segments based on the internal reports that are reviewed and
used by management and the board (the chief decision makers) in assessing performance and in
determining the allocation of resources. The operating segments are identified by management based on
the activities undertaken. Financial information about each of these operating activities is reported to
management on a monthly basis. The group has two separate business segments, being product
realisation (trading), where activities comprise manufacturing and sales of confocal imaging products,
and research and development, where activities include design and development of new products and
technologies, including related income from customers. Unallocated amounts relate mainly to central
costs and overheads, and include unallocated revenues and other income. The accounting policies used
by the group in reporting segments internally are the same as those contained in note 2 to the accounts
and in the prior period.
Major customers
There is no significant concentration of customers in the Group’s trading activities, which are limited in
scope at present. The major customer in the Group’s primary activity, research and development, is Carl
Zeiss, where income is received under the terms of a collaboration agreement.
Page | 50
Notes to the Financial Statements (continued)
FOR THE YEAR ENDED 30 JUNE 2015
5 SEGMENT INFORMATION (continued)
Optiscan Imaging Limited
Annual Report 2015
Year ended 30 June 2015
Revenue
Sales to external customers
Inter segment revenue
Total segment revenue
Other revenues
Total consolidated revenue
Result
Net profit (loss) for year by segment
Unallocated items
Consolidated net profit (loss)
Assets and liabilities
Segment assets *
Segment liabilities
Segment net assets (deficiency)
Cash flow
Segment net cash flow from operating activities
Investing cash flows
Financing cash flows
Net cash flow for year
Other Segment information
Trading
$
R&D
$
Unallocated
$
Total
$
46,092
-
46,092
-
46,092
-
-
-
-
-
-
-
-
12,030
12,030
46,092
-
46,092
12,030
58,122
9,565
-
9,565
(86,655)
-
(86,655)
-
(1,318,309)
(1,318,309)
(77,090)
(1,318,309)
(1,395,399)
34,179
(41,716)
(7,537)
663,800
(149,889)
513,911
320,232
(1,001,817)
(681,585)
1,018,211
(1,193,422)
(175,211)
38,266
-
-
38,266
(98,128)
-
-
(98,128)
(1,399,782)
(14,507)
1,668,354
254,065
(1,459,644)
(14,507)
1,668,354
194,203
Non cash expenses
Depreciation and amortisation
Amortised cost adjustment of convertible notes & loans
Impairment of inventory
Share based payments
Foreign exchange differences
Revenue by geographic segment (location of customer)
Asia
Australia
Europe
USA & Canada
Total
-
-
23,692
-
-
-
23,659
5,561
16,872
46,092
-
-
-
-
-
-
-
-
-
-
12,144
59,732
-
15,000
279
6,500
5,530
-
-
12,030
12,144
59,732
23,692
15,000
279
6,500
29,189
5,561
16,872
58,122
* Unallocated segment assets include cash balances unrelated to the operating segments
Page | 51
Notes to the Financial Statements (continued)
FOR THE YEAR ENDED 30 JUNE 2015
5 SEGMENT INFORMATION (continued)
Optiscan Imaging Limited
Annual Report 2015
Year ended 30 June 2014
Revenue
Sales to external customers
Inter segment revenue
Total segment revenue
Other revenues
Total consolidated revenue
Result
Trading
$
R&D
$
Unallocated
$
Total
$
71,883
-
71,883
-
71,883
-
-
-
-
-
-
-
-
16,633
16,633
71,883
-
71,883
16,633
88,516
Net profit (loss) for year by segment
Unallocated items
Consolidated net profit (loss)
34,193
-
34,193
(410,469)
-
(410,469)
-
(1,041,436)
(1,041,436)
(376,276)
(1,041,436)
(1,417,712)
Assets and liabilities
Segment assets *
Segment liabilities
Segment net assets (deficiency)
47,320
(88,987)
(41,667)
652,416
(74,080)
578,336
116,616
(837,947)
(721,331)
816,352
(1,001,014)
(184,662)
Cash flow
Segment net cash flow from operating
activities
Investing cash flows
Financing cash flows
Net cash flow for year
Other Segment information
Non cash expenses
Depreciation and amortisation
Amortised cost adjustment of convertible notes
Impairment of inventory
Share based payments
Foreign exchange differences
Revenue by geographic segment (location of customer)
Asia
Australia
Europe
USA & Canada
Total
78,138
-
-
78,138
(217,730)
-
-
(217,730)
(543,800)
-
328,541
(215,259)
(683,392)
-
328,541
(354,851)
-
-
47,826
-
-
39,375
5,284
27,224
-
71,883
-
-
-
-
-
-
-
-
-
-
16,802
63,791
-
24,075
(9,213)
12,794
3,839
-
-
16,633
16,802
63,791
47,826
24,075
(9,213)
52,169
9,123
27,224
-
88,516
* Unallocated segment assets include cash balances unrelated to the operating segments
Page | 52
Notes to the Financial Statements (continued)
FOR THE YEAR ENDED 30 JUNE 2015
6 REVENUES AND EXPENSES
Optiscan Imaging Limited
Annual Report 2015
(a) Other revenue
Royalty revenue
Finance revenue – bank interest received
Total Other revenue
(b) Other income
Design and development income
Government grants – R&D Tax incentive
Insurance claim proceeds
Total Other income
(c) Depreciation and amortisation
-Depreciation included in cost of sales
- Depreciation included in R&D expenses
- Depreciation included in administration expenses
(d) Employee benefits expense
Wages and salaries
Workers’ compensation costs
Superannuation contribution expense
Annual leave expense
Long service leave expense
(e) Cost of inventories recognised as an expense
Consumed in production – cost of goods sold
Consumed in R&D
Write down inventory to net realisable value
(f)
Finance costs
Interest on convertible notes
Fair value adjustment of convertible notes
Amortised cost adjustment on short term loan
Other interest costs
(g) Share based payment expense
Share-based payments expense – non-employees
– funding facility costs
– interest on convertible notes
CONSOLIDATED
2015
$
2014
$
6,500
5,530
12,794
3,839
12,030
16,633
260,643
723,074
-
192,572
652,416
1,796
983,717
846,784
-
-
12,144
12,144
-
-
16,802
16,802
1,028,515
9,960
97,753
15,084
17,328
1,168,640
971,571
8,357
88,258
(9,095)
14,426
1,073,517
-
-
23,692
23,692
-
95,003
10,533
5,481
111,017
-
-
47,826
47,826
8,017
63,791
-
-
71,808
15,000
-
15,000
22,289
1,786
24,075
Page | 53
Notes to the Financial Statements (continued)
FOR THE YEAR ENDED 30 JUNE 2015
7
INCOME TAX
Optiscan Imaging Limited
Annual Report 2015
The components of income tax expense are:
Income Statement
Current income tax
Current income tax charge
Adjustments in respect of current income tax of previous
year:
Withholding tax deducted from royalty revenue
Deferred income tax
Relating to origination and reversal of temporary
differences
Income tax (expense) benefit reported in the income
statement
CONSOLIDATED
2015
$
2014
$
-
-
-
-
-
-
-
-
-
-
Tax Losses
The Group has unconfirmed, unrecouped tax losses in Australia of $40,693,930 (2014: $40,252,368)
which have not been brought to account. The ability to be able to recognise a deferred tax asset in
respect of these tax losses will be dependent upon the probability that future taxable profit will be
available against which the unused tax losses can be utilised and the conditions for deductibility
imposed by Australian tax authorities will be complied with.
Tax Consolidation
Optiscan Imaging Limited and its 100% owned Australian resident subsidiary have elected not to form a
tax consolidated group.
Page | 54
Notes to the Financial Statements (continued)
FOR THE YEAR ENDED 30 JUNE 2015
7
INCOME TAX (continued)
A reconciliation between tax expense and the product
of accounting loss before income tax multiplied by the
Group’s applicable income tax rate is as follows:
Optiscan Imaging Limited
Annual Report 2015
CONSOLIDATED
2015
$
2014
$
Accounting loss before income tax
(1,395,399)
(1,417,712)
Prima facie income tax (benefit) at the Parent entity’s
statutory income tax rate of 30% (2014: 30%)
Adjustments in respect of current income tax of
previous years
Non assessable gains
Share based payments not deductible
R&D Tax Incentive deductions foregone for tax offset
Expenditure not allowable for income tax purposes
Other deductible expenditure
Deferred tax assets recognised /( not recognised)
Income tax expense
Deferred income tax - not brought to account
Deferred income tax at 30 June relates to the
following items and has not been brought to account
(Refer note 2(l):
CONSOLIDATED
Deferred tax assets
Undeducted patent costs
Employee benefit & warranty provisions
Expenses not yet deductible
Inventory impairment provision
Deferred deductible equity issue costs
Tax Losses available
Foreign tax credits
Gross deferred income tax assets
Less amounts not recognised in accounts
Gross deferred income tax assets
Deferred tax income/ (expense) incurred
Less deferred income tax (expense) not recognised in
accounts
Deferred tax income/ (expense)
(418,620)
(425,314)
39,516
(216,922)
5,625
451,449
16,794
(21,240)
(143,398)
-
(203,951)
-
434,944
26,360
-
(167,961)
-
-
Statement of financial
position
Statement of comprehensive
income
2015
$
2014
$
2015
$
2014
$
214,658
78,701
9,900
468,296
-
12,208,179
12,979,734
(12,979,734)
-
214,193
68,978
9,360
468,095
-
12,075,710
-
12,836,336
(12,836,336)
-
465
9,723
540
201
-
132,469
-
13,393
(3,152)
360
(5,688)
(3,419)
166,467
-
143,398
167,961
(143,398)
-
(167,961)
-
Page | 55
Optiscan Imaging Limited
Annual Report 2015
Notes to the Financial Statements (continued)
FOR THE YEAR ENDED 30 JUNE 2015
8 EARNINGS (LOSS) PER SHARE
The following reflects the income and share data used in the basic and
diluted earnings (loss) per share computations:
Net loss
Weighted average number of ordinary shares for basic earnings per share
Effects of dilution:
Share options
CONSOLIDATED
2015
$
2014
$
(1,395,399)
(1,417,712)
2015
Number
2014
Number
193,843,018 163,733,749
-
-
Weighted average number of ordinary shares adjusted for the effect of dilution
193,843,018 163,733,749
Weighted average number of converted, lapsed or cancelled potential ordinary
shares included in diluted earnings per share
-
-
Options on issue have been determined to be not dilutive, as the exercise prices
exceed current market price, making the prospect of exercise highly unlikely.
There have been no other transactions involving ordinary shares or potential
ordinary shares between the reporting date and the date of completion of these
financial statements, other than a rights issue in July 2015 to raise funds for working
capital (refer notes 15 and 24).
Page | 56
Optiscan Imaging Limited
Annual Report 2015
Notes to the Financial Statements (continued)
FOR THE YEAR ENDED 30 JUNE 2015
9 CASH AND CASH EQUIVALENTS
Cash at bank earns interest at floating rates based on daily bank deposit rates. Short-term deposits are made for
varying periods of between one day and three months, depending on the immediate cash requirements of the
Group, and earn interest at the respective short-term deposit rates. At balance date the bank balance interest rate is
2.45% (2014: 2.35%), and the balances are at call. The fair value of cash at bank approximates the carrying amount.
At balance date the term deposit interest rate is 3.25%, and the weighted average term to maturity is 47 days. The
fair value of cash deposit approximates the carrying amount, in view of the short term to maturity. Term deposits
amounting to $65,500 are subject to a charge which secures banking facilities made available to the group (refer
note 16).
Reconciliation to Statement of Cash Flows
For the purposes of the Statement of Cash Flows, cash and cash equivalents comprise the following at 30 June:
Cash at bank and in hand
Short-term deposits
CONSOLIDATED
2015
$
2014
$
203,393
65,500
6,970
67,972
268,893
74,942
Reconciliation of net profit (loss) after tax to net cash
flows from operations
Net profit (loss)
(1,395,399)
(1,417,712)
Adjustments for:
Depreciation and amortisation
Fair value adjustment of loans and convertible notes
Impairment of assets
Net exchange differences
Shares based payments expensed
Changes in assets and liabilities
12,144
105,536
23,692
279
15,000
16,804
63,791
47,826
(9,213)
24,075
(Increase)/decrease in trade and other receivables
(Increase)/decrease in inventories
(Increase)/decrease in prepayments
(Decrease)/increase in trade and other payables
(Decrease)/increase in provisions
(35,840)
(8,492)
15,095
(224,071)
32,412
282,405
(1,694)
(6,245)
327,080
(10,509)
Net cash used in operating activities
(1,459,644)
(683,392)
Disclosure of financing facilities - Refer to note 16.
Page | 57
Optiscan Imaging Limited
Annual Report 2015
Notes to the Financial Statements (continued)
FOR THE YEAR ENDED 30 JUNE 2015
10 TRADE AND OTHER RECEIVABLES
CURRENT
Trade receivables
GST refund receivable
Interest receivable
R&D Tax incentive grant receivable
Net carrying amount
CONSOLIDATED
2015
$
2014
$
5,679
23,310
215
663,800
3,620
874
254
652,416
693,004
657,164
Ageing Analysis of Receivables
Total
0-30 Days
31-60
Days
61-90
Days
PDNI*
90+
Days
PDNI*
Consolidated – 2015
693,004
688,590
Consolidated – 2014
657,164
657,164
-
-
-
-
4,414
-
* Past due not impaired (“PDNI”)
(i) All receivables shown as past due are the subject of follow up action by the company.
(ii) Trade receivables are non-interest bearing and are generally on 30-60 day terms. An allowance for doubtful
debts will be made if there is objective evidence that a trade receivable is impaired. No such allowance has yet
been made. Receivables other than cash on term deposit are also non-interest bearing.
(iii) The fair value of receivables approximates the carrying amount, in view of the short term nature of the trading
terms.
(iv) The maximum exposure to credit risk is the fair value of receivables. Collateral is not held as security, nor is it
the Group’s policy to transfer or on sell receivables to special purpose vehicles.
(v) Details regarding foreign exchange risk exposure of current receivables are disclosed in note 3.
Page | 58
Optiscan Imaging Limited
Annual Report 2015
Notes to the Financial Statements (continued)
FOR THE YEAR ENDED 30 JUNE 2015
11 INVENTORIES
Raw materials (at net realisable value)
Work in progress (at net realisable value)
Finished goods (at cost)
CONSOLIDATED
2015
$
28,500
-
-
2014
$
43,700
-
-
Total inventories at net realisable value
28,500
43,700
Write down to net realisable value
23,692
47,826
12 PREPAYMENTS
Current
Prepaid expenses
13 PLANT AND EQUIPMENT
829
15,924
YEAR ENDED 30 JUNE 2015
Opening balance, net of accumulated depreciation
Additions
Disposals
Depreciation charge for the year
At 30 June 2015, net of accumulated depreciation
At 30 June 2015
Cost
Accumulated depreciation
Office
Furniture &
Equipment
2015
$
24,622
14,507
-
(12,144)
26,985
Production
Equipment
2015
$
R&D
Equipment
2015
$
-
-
-
-
-
Total Plant &
Equipment
2015
$
24,622
14,507
-
(12,144)
26,985
-
-
-
-
-
698,835
(671,850)
258,483
(258,483)
364,905
(364,905)
1,322,223
(1,295,238)
Net carrying amount
26,985
-
-
26,985
At 1 July 2014
Cost
Accumulated depreciation
684,327
(659,705)
258,483
(258,483)
364,905
(364,905)
1,307,715
(1,283,093)
Net carrying amount
24,622
-
-
24,622
Page | 59
Optiscan Imaging Limited
Annual Report 2015
Notes to the Financial Statements (continued)
FOR THE YEAR ENDED 30 JUNE 2015
13 PLANT AND EQUIPMENT (continued)
YEAR ENDED 30 JUNE 2014
Opening balance, net of accumulated depreciation
Additions
Disposals
Depreciation charge for the year
Office
Furniture &
Equipment
2014
$
41,424
-
-
(16,802)
At 30 June 2014, net of accumulated depreciation
24,622
Production
Equipment
2014
$
R&D
Equipment
2014
$
-
-
-
-
-
Total Plant &
Equipment
2014
$
41,424
-
-
(16,802)
24,622
-
-
-
-
-
At 30 June 2014
Cost
Accumulated depreciation
684,327
(659,705)
258,483
(258,483)
364,905
(364,905)
1,307,715
(1,283,093)
Net carrying amount
24,622
-
-
24,622
At 1 July 2013
Cost
Accumulated depreciation
684,327
(642,903)
258,483
(258,483)
364,905
(364,905)
1,307,715
(1,266,291)
Net carrying amount
41,424
-
-
41,424
14 TRADE AND OTHER PAYABLES
Current
Trade payables (i)
Accrued expenses
Other creditors
CONSOLIDATED
2015
$
2014
$
213,165
201,617
5,771
281,814
360,900
1,910
420,553
644,624
(i) Trade payables are non-interest bearing and are normally settled on 30-day terms. The fair value of trade
payables approximates the carrying amount due to the short term nature of the trading terms.
Page | 60
Notes to the Financial Statements (continued)
FOR THE YEAR ENDED 30 JUNE 2015
15 INTEREST BEARING LOANS AND BORROWINGS
Optiscan Imaging Limited
Annual Report 2015
Current
Convertible notes
Short term loan
Movement in interest bearing loans and borrowings
Convertible notes
Opening balance (Refer (e) below)
Convertible notes issued (Refer (f) below)
Fair value adjustment of convertible notes
Convertible notes converted to equity by noteholders
Convertible notes repaid
Foreign currency revaluation at balance date
Closing balance
Short term loan
Opening balance
Proceeds from short term loan
Amortised cost adjustment
Closing balance
CONSOLIDATED
2015
$
2014
$
-
510,533
510,533
126,466
-
126,466
126,466
754,196
95,003
(849,199)
(126,466)
-
-
-
328,541
63,791
(262,238)
-
(3,628)
126,466
-
500,000
10,533
510,533
-
-
-
-
(a) Fair value
Convertible notes and short term loans on issue are accounted for at fair value.
(b)
Interest rate
Details regarding interest rate and liquidity risk are detailed in Note 3.
(c) Assets pledged as security
The short term loan is secured by a charge over the assets of Optiscan Imaging Ltd and by a first charge over
the R&D Tax Incentive government rebate.
(d) Terms and conditions of short term loan
The short term loan was drawn on 9 June 2015, and is repayable on 30 November 2015. The interest rate on
the loan is 15%pa, and the loan is secured by a registered charge over Optiscan Imaging Limited and by a first
charge over the R&D Tax Incentive government rebate. A facility fee by way of the allotment of 1,000,000
shares was settled in July 2015 (refer note 23). In the event of late repayment of the loan after 30 November
2015, Optiscan would incur a further monthly facility fee of 1,000,000 shares per month until repayment is
made.
(e) The convertible note facility commenced on 30 August 2013. The agreement provided for the issue of
convertible notes of US$100,000 each with a one year term, which can be converted to equity at the option of
the holder. The amount payable upon conversion is 122% of face value, with the number of shares determined
by reference to the daily volume-weighted average share price of the Group’s shares. The notes carry interest
at 8% per annum. The notes were repaid in July 2104.
Page | 61
Optiscan Imaging Limited
Annual Report 2015
Notes to the Financial Statements (continued)
FOR THE YEAR ENDED 30 JUNE 2015
15 INTEREST BEARING LOANS AND BORROWINGS (continued)
(f)
In July 2014, the company entered into a finance facility with a conversion option. The face value of the debt
was $531,250 and the expiry date of the facility was 11 February 2015, if not converted earlier. The conversion
rate was $0.05 per share. In November, December and January, all notes were converted into ordinary shares.
In September 2014, the company entered into a loan agreement with a conversion option. The face value of the
debt was $300,000 and the expiry date of the facility was 19 September 2015, if not converted earlier. The
conversion rate was $0.04 per share. In November and January all notes were converted into ordinary shares.
Interest was payable on each convertible note facility at a rate of 15% per annum. The facilities were secured by
a charge over the assets of the Group.
(g) Potential Dilution
In the event that convertible notes are converted to ordinary shares, and in a circumstance where the Group
generates a net profit, there will be potential dilution of earnings per share from the increased number of shares
on issue as a consequence of the conversion of notes.
16 FINANCING FACILITIES
Bank Facilities
- credit cards
- bank guarantees and indemnities
Facilities used at reporting date:
- credit cards
- bank guarantees and indemnities
Facilities unused at reporting date:
- credit cards
- bank guarantees and indemnities
Total bank facilities
Facilities used at reporting date
Facilities unused at reporting date
CONSOLIDATED
2015
$
2014
$
20,000
45,500
65,500
2,766
45,500
48,266
17,234
-
17,234
65,500
48,266
17,234
20,000
45,500
65,500
3,527
45,500
49,027
16,473
-
16,473
65,500
49,027
16,473
Assets pledged as security
The bank facilities are secured by charges over specific term
deposits
65,500
65,500
Convertible Note Funding Facility
Total facility
Facilities used at reporting date
Facilities unused at reporting date*
The convertible note funding facility was secured by a floating
charge over the unsecured assets of the Group.
US$
1,000,000
115,000
885,000
-
-
-
Page | 62
Notes to the Financial Statements (continued)
FOR THE YEAR ENDED 30 JUNE 2015
17 PROVISIONS
Optiscan Imaging Limited
Annual Report 2015
Annual
Leave
$
Long
Service
Leave
$
Warranty
$
Total
$
77,006
95,192
(80,108)
92,090
92,090
-
92,090
77,006
-
124,834
17,328
-
142,162
122,650
19,512
142,162
107,836
16,998
28,084
-
-
28,084
28,084
-
28,084
28,084
-
229,924
112,520
(80,108)
262,336
242,824
19,512
262,336
212,926
16,998
77,006
124,834
28,084
229,924
At 30 June 2014
Arising during the year
Utilised
At 30 June 2015
Current 2015
Non-current 2015
Current 2014
Non-current 2014
Annual Leave Provision
The annual leave provision is for the unused entitlements to annual leave for employees. Staff are encouraged to take
leave when due or entitled, but workflow considerations sometimes prevent all entitlements being utilised.
Long Service Leave
Long service leave provision provides for the future entitlements of employees to long service leave or, where
sanctioned by legislation, entitlement to pro rata payment upon termination. Some employees have reached
entitlement to pro rata payment upon termination.
Warranty
A provision for warranty at the rate of 3% of sales has been provided and the incidence of warranty claims is monitored
on an ongoing basis to assess adequacy of the provision.
Page | 63
Notes to the Financial Statements (continued)
FOR THE YEAR ENDED 30 JUNE 2015
18 CONTRIBUTED EQUITY AND RESERVES
Optiscan Imaging Limited
Annual Report 2015
Ordinary shares - Issued and fully paid
$48,741,091
$47,279,893
CONSOLIDATED
Movement in ordinary shares on issue
At 1 July 2013
Issued for cash in placement
Shares issued upon conversion of notes
Shares issued for facility costs and interest
At 30 June 2014
Issued for cash in placement
Shares issued upon conversion of notes
Shares issued for facility costs and interest
Transaction costs of share issues
At 30 June 2015
No of Shares
$
162,088,113
4,741,960
395,428
167,225,501
19,991,938
18,554,950
1,250,000
-
207,022,389
46,993,580
-
261,719
24,594
-
47,279,893
574,500
849,199
37,500
(56,376)
48,684,716
Ordinary shares
Effective 1 July 1998, the Corporations legislation abolished the concepts of authorised capital and par value of
shares. Accordingly, the Parent does not have authorised capital nor par value in respect of its issued shares. Fully
paid ordinary shares carry one vote per share and carry the right to dividends.
Share options
The company has a share based payment option plan under which options to subscribe for the company’s shares
have been granted to employees (refer note 21).
CONSOLIDATED
2015
$
2014
$
Accumulated losses
Movements in accumulated losses were as follows:
Balance 1 July
Net profit (loss) for the year
Balance 30 June
(48,954,933)
(47,537,221)
(1,395,399)
(1,417,712)
(50,350,332)
(48,954,933)
Page | 64
Optiscan Imaging Limited
Annual Report 2015
Notes to the Financial Statements (continued)
FOR THE YEAR ENDED 30 JUNE 2015
18
CONTRIBUTED EQUITY AND RESERVES (continued)
CONSOLIDATED
2015
$
2014
$
Reserves
Movements in reserves were as follows:
Share Based Payments Reserve
Balance 30 June
1,485,661
1,485,661
Foreign Currency Translation Reserve
Balance 1 July
4,717
10,436
Foreign currency translation difference
27
(5,719)
Balance 30 June
Total reserves
Nature and purpose of reserves
4,744
4,717
1,490,405
1,490,378
Share based payments reserve
This reserve is used to record the value of equity benefits provided to employees and other parties in consideration
for services rendered. Refer to note 21 for further details of the employee share option plan and other share based
payments.
Foreign currency translation reserve
This reserve is used for foreign currency translation differences arising on the consolidation of the USA subsidiary,
Optiscan Inc.
Page | 65
Notes to the Financial Statements (continued)
FOR THE YEAR ENDED 30 JUNE 2015
19 PARENT ENTITY INFORMATION
Optiscan Imaging Limited
Annual Report 2015
Information relating to Optiscan Imaging Ltd:
Current assets
Total assets
Current liabilities
Total liabilities
Issued capital
Accumulated losses
Share based payments reserve
2015
$
2014
$
3,889
383,822
559,033
559,033
1,174
2,048
186,710
186,710
48,684,716
47,279,893
(50,345,588)
(48,950,216)
1,485,661
1,485,661
Total equity / (deficiency)
(175,211)
(184,662)
Profit (Loss) of the parent entity
Other comprehensive income of the parent entity
(1,395,372)
(1,423,431)
Total comprehensive income of the parent entity
(1,395,372)
(1,423,431)
Parent entity guarantees for debts of subsidiaries
Contingent liabilities of parent entity
Contractual commitments of parent entity
-
-
-
-
-
-
20 RELATED PARTY DISCLOSURE
The consolidated financial statements include the financial statements of Optiscan Imaging Limited and the
subsidiaries listed in the following table:
Name
At cost:
Optiscan Pty Ltd
Optiscan Inc
Accumulated impairment
Country of incorporation
% Equity interest
2014
2015
Investment $
2015
2014
Australia
United States
100
100
100
100
6,605,396
6,605,396
2,002
2,002
(6,607,398)
(6,607,398)
-
-
Optiscan Imaging Limited is the ultimate Australian parent entity.
Transactions with Subsidiaries
Inter-company transactions between the parent entity, Optiscan Imaging Limited and subsidiary, Optiscan Pty Ltd
amounted to $1,554,388 (2014: $573,428). Outstanding balances at year-end are unsecured, interest free and
settlement occurs in cash. The balances are classified current by the parent entity. An impairment assessment is
undertaken each financial year by examining the financial position of the subsidiaries to determine whether there is
objective evidence that a related party receivable is impaired. When such objective evidence exists, an impairment
loss is recognised.
Page | 66
Optiscan Imaging Limited
Annual Report 2015
Notes to the Financial Statements (continued)
FOR THE YEAR ENDED 30 JUNE 2015
20 RELATED PARTY DISCLOSURE (continued)
Details of Key Management Personnel
(i)
Board of Directors
Executive Directors
A. Holt
P. Delaney
B. Andrew
Chairman (Appointed to board 12 February 2009, Executive Chairman 14 May 2009)
Director of Technology (Appointed to board 21 March 1994)
Chief Financial Officer (Appointed to board 20 January 2010)
On 21 July 2015, Mr Angus Holt resigned from the board, and Mr Patrick O’Connor and Mr George Cameron-Dow
were appointed as Non-executive Chairman and Non-executive Director respectively. Mr Cameron-Dow resigned on
16 September 2015.
Compensation of Key Management Personnel
Table 1: Compensation of Key Management Personnel for the year ended 30 June 2015
Short term employee benefits
Post Employment benefits
Other long term benefits
CONSOLIDATED
2015
$
2014
$
328,417
329,625
30,083
4,243
20,812
2,988
362,743
353,425
There were no other transactions and balances with Key Management Personnel
Page | 67
Optiscan Imaging Limited
Annual Report 2015
Notes to the Financial Statements (continued)
FOR THE YEAR ENDED 30 JUNE 2015
21 SHARE-BASED PAYMENTS
Types of share based payments
Issue of shares in relation to Finance Facilities
The following costs associated with finance facilities were settled by way of share based payments:
Finance facility fees
Interest
CONSOLIDATED
2014
2015
$
$
37,500
17,948
55,448
22,289
2,305
24,594
Details of option issues to parties other than employees
The following table illustrates the movement in the number and weighted average exercise prices (WAEP) of share
options issued to parties other than employees during the year:
Options issued to parties other than employees
No. Options
2015
WAEP
2015
No. Options
2014
WAEP
2014
Outstanding at the beginning of the year
1,900,000
0.166
6,900,000
0.118
Granted during the year
Expired during the year
Outstanding at the end of the year
Exercisable at the end of the year
-
(1,900,000)
-
-
-
-
-
-
-
(5,000,000)
-
-
1,900,000
0.166
1,900,000
0.166
On 13 July 2015, the company issued 3,000,000 options over fully paid ordinary shares at an exercise price of
ten cents per option, and an expiry date of 12 June 2017 in part consideration of the underwriting of a rights issue
(refer note 23).
22 COMMITMENTS AND CONTINGENCIES
Operating lease commitments – Group as lessee
The previous property lease over the premises occupied by the Group expired in September 2007. The Group
currently occupies the premises on a monthly tenancy. There are no future minimum rentals payable under non-
cancellable operating leases as at 30 June 2015.
Capital commitments
At 30 June 2015 there were no material capital commitments outstanding (2014: Nil).
Contingent Liabilities
The group has contingent liabilities in relation to bank guarantees on issue at balance date amounting to $45,500
(2014: $45,500).
Page | 68
Optiscan Imaging Limited
Annual Report 2015
Notes to the Financial Statements (continued)
FOR THE YEAR ENDED 30 JUNE 2015
23 EVENTS AFTER THE BALANCE SHEET DATE
The directors are not aware of any events after balance date that would have a material impact on the financial
statements at 30 June 2015, other than:
• On 15 June 2015, the company announced a fully underwritten rights issue that would close on 6 July 2015,
resulting in the allotment of 13,801,493 new shares at a subscription price of $0.05 each. In July the company
received $690,074 from the rights issue. The underwriting agreement for the rights issue included a 5%
underwriting fee that was paid in July, together with the issue of 3,000,000 options over fully paid ordinary
shares at an exercise price of ten cents per option, and an expiry date of 12 June 2017.
• On 15 June 2015, the company also announced a short term loan of $500,000 repayable on 30 November
2015. In July 2015, the company effected allotment of 1,000,000 ordinary shares in respect of the commitment
fee payable on the loan facility.
•
There were four changes in the board of directors:
o Mr Patrick O’Connor was appointed non executive Chairman on 21 July 2015
o Mr George Cameron-Dow was appointed a non executive director on 21 July 2015
o Mr Angus Holt resigned on 21 July 2015
o Mr George Cameron-Dow resigned on 16 September 2015
• On 3 September 2015 the company announced that its exclusive global distributor, UK based MR Solutions,
has today launched the CellLIVE system for the research market at the opening of the World Molecular Imaging
Congress (WMIC) in Hawaii, USA.
• On 25 September 2015 the company announced details of an enhanced collaboration agreement with Carl
Zeiss Meditec that is expected to generate cash flows to Optiscan for both the supply services and instruments
in excess of $2.2 million by the end of calendar 2016.
24 AUDITORS’ REMUNERATION
The auditor of Optiscan Imaging Limited is Ernst & Young (Australia).
Amounts received or due and receivable by Ernst &
Young (Australia) for:
• An audit or review of the financial report of the
entity and any other entity in the consolidated
group
• Other services in relation to the entity and any
other entity in the consolidated group
- R&D tax services
CONSOLIDATED
2014
2015
$
$
53,385
54,425
12,875
-
66,260
54,425
Page | 69
Optiscan Imaging Limited
Annual Report 2015
Directors’ Declaration
In accordance with a resolution of the directors of Optiscan Imaging Limited, I state that:
1
In the opinion of the directors:
(a) the financial report, and remuneration report included in the directors’ report of the company and of the group
are in accordance with the Corporations Act 2001, including:
i
ii
giving a true and fair view of the company's and group's financial position as at 30 June 2015 and of their
performance for the year ended on that date; and
complying with Australian Accounting Standards and Corporations Regulations 2001 and International
Financial Reporting Standards (IFRS) as disclosed in note 2(a) of the financial statements; and
(b) there are reasonable grounds to believe that the company will be able to pay its debts as and when they
become due and payable.
2 This declaration has been made after receiving the declarations required to be made to the directors in
accordance with sections 295A of the Corporations Act 2001 for the financial year ended 30 June 2015.
On behalf of the Board
Peter Delaney
Director
30 September 2015
Page | 70
Ernst & Young
8 Exhibition Street
Melbourne VIC 3000 Australia
GPO Box 67 Melbourne VIC 3001
Tel: +61 3 9288 8000
Fax: +61 3 8650 7777
ey.com/au
Independent auditor's report to the members of Optiscan Imaging
Limited
Report on the financial report
We have audited the accompanying financial report of Optiscan Imaging Limited, which comprises the
consolidated statement of financial position as at 30 June 2015, 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, notes comprising a summary of significant accounting policies and
other explanatory information, and the directors' declaration of the consolidated entity comprising the
company and the entities it controlled at the year's end or from time to time during the financial year.
Directors' responsibility for the financial report
The directors of the company are responsible for the preparation of the financial report that gives a true
and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for
such internal controls as the directors determine are necessary to enable the preparation of the financial
report that is free from material misstatement, whether due to fraud or error. In Note 2, the directors
also state, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements, that
the financial statements comply with International Financial Reporting Standards.
Auditor's responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted our
audit in accordance with Australian Auditing Standards. Those standards require that we comply with
relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain
reasonable assurance about whether the financial report is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in
the financial report. The procedures selected depend on the auditor's judgment, including the assessment
of the risks of material misstatement of the financial report, whether due to fraud or error. In making
those risk assessments, the auditor considers internal controls relevant to the entity's preparation and
fair presentation of the financial report in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's
internal controls. An audit also includes evaluating the appropriateness of accounting policies used and
the reasonableness of accounting estimates made by the directors, as well as evaluating the overall
presentation of the financial report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our audit opinion.
Independence
In conducting our audit we have complied with the independence requirements of the Corporations Act
2001. We have given to the directors of the company a written Auditor’s Independence Declaration, a
copy of which is included in the directors’ report.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
2
Opinion
In our opinion:
a.
the financial report of Optiscan Imaging Limited is in accordance with the Corporations Act
2001, including:
i
ii
giving a true and fair view of the consolidated entity's financial position as at 30 June 2015
and of its performance for the year ended on that date; and
complying with Australian Accounting Standards and the Corporations Regulations 2001;
and
b.
the financial report also complies with International Financial Reporting Standards as disclosed in
Note 2.
Material uncertainty regarding continuation as a going concern
Without qualification to the opinion expressed above, attention is drawn to the following matter. As a
result of matters described in Note 2 ‘Going Concern’ to the financial report, there is material uncertainty
whether the consolidated entity will be able to continue as a going concern and therefore whether it will
realise its assets and extinguish its liabilities in the normal course of business and at the amounts stated in
the financial report. The financial report does not include adjustments relating to the recoverability and
classification of recorded asset amounts or to the amounts and classification of liabilities that might be
necessary should the consolidated entity not continue as a going concern.
Report on the remuneration report
We have audited the Remuneration Report included in pages 13 to 18 of the directors' report for the year
ended 30 June 2015. The directors of the company are responsible for the preparation and presentation
of the Remuneration Report in accordance with 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.
Opinion
In our opinion, the Remuneration Report of Optiscan Imaging Limited for the year ended 30 June 2015,
complies with section 300A of the Corporations Act 2001.
Ernst & Young
Joanne Lonergan
Partner
Melbourne
30 September 2015
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
Patent Information
Summary of Key Optiscan Patents
Patent Title
Scanning Microscope with
Miniature Head
Compact Confocal Endoscope
and Endomicroscope
Electrically Operated
Tuning Fork
Z Sharpening for Fibre
Confocal Microscopes
Objective Lens Unit For
Endoscope *
Scanning Method & Apparatus
Light Scanning Device *
Condensing Optical System,
Confocal Optical System and
Scanning Type Confocal System *
Laser Scanning Confocal
Microscope with Fibre Bundle
Return
Method & Apparatus for Providing
Depth Control
for Z Actuation *
Tuning Fork-Type Scanning
Apparatus with a Counterweight
Optical Fibre Scanning Apparatus
Fibre Bundle Confocal
Endomicroscope
Optical Connector *
Optiscan Imaging Limited
Annual Report 2015
Countries Pending
Applications
Germany 19882512.9
Germany 19940421.6
Germany 10393608.4
USA 2005/0052753
Countries Granted
Patents
2340332
UK
6967772
USA
2341943
UK
8047985
USA
759742
Australia
USA
7010978
France 1192497
UK 1192497
Italy 1192497
Germany 60040223.1
Japan 4171597
2363025
UK
6567585
USA
USA 7695431
UK
2411071
USA 7123790
Japan 4718184
Japan
5044027
USA 7248390
Japan 4475912
Expiry Date
15 Jul 2018
16 Jul 2018
25 Aug 2019
3 Aug 2024
8 Jun 2020
3 Apr 2021
1 Apr 2025
29 Oct 2023
10 Jun 2023
17 Oct 2023
USA 7330305
15 Jan 2024
Germany 102004018110.1
USA 7294102
4842518
Japan
13 Apr 2024
14 Apr 2024
Germany 11200500322.2
USA 7532375
23 Sep 2025
Japan 2012-262961
Hong Kong 11108509.4
Europe 07116499.0
Europe 10185839.7
Europe 06704775.3
Germany 102004024396.4
USA 7920312
Japan 5371222
17 Nov 2028
13 Sep 2027
USA 8057083
29 March 2027
USA 7401984
Japan 4603816
Japan 5232826
USA 7695431
23 Mar 2026
14 May 2024
14 May 2024
13 April 2024
USA 7338439
11 Feb 2030
Objective Lens Unit *
Japan
4320184
Confocal Optical Systems *
Confocal Endoscope *
Optical Element
A scanner for an Endoscope
P2003-314204
P2003-357896
Japan
Japan
Germany 102004043049.7
Japan
2005-182150
USA 10/585565
Australia 2011316479
Europe 11831848.4
Japan 2013-533054
USA 13/878729
*
Indicates patents that have been filed in the joint names of Optiscan Pty Ltd and Pentax Corporation.
Patent applications that are in earlier stages of filing or where the specifications have not been
published have not been included in the above list.
Page | 73
Optiscan Imaging Limited
Annual Report 2015
ASX Additional Information
Additional information required by the Australian Securities Exchange Ltd and not shown elsewhere in this report is as
follows. The information is current as at 25 September 2015.
(a) Distribution of equity securities
221,823,882 fully paid ordinary shares are held by 3,550 individual shareholders. All issued ordinary shares carry one
vote per share and carry the rights to dividends.
The number of shareholders, by size of holding, in each class are:
F
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 – and over
Holding less than a marketable parcel
Option
(b) Substantial shareholders aid
O
Name
Total Holders
No of Fully paid ordinary shares
780
1,077
404
982
307
3,550
2,100
447,084
3,059,647
3,339,506
36,447,842
178,529,803
221,823,882
5,236,237
Number
Percentage
Ibsen Pty Ltd
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