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OVENTUS
INVITES
A N N U A L
R E P O R T
YOU
O V E N T U S . C O M . A U
CONTENTS
Chairman’s and Chief Executive Officer’s address
Business Strategy and Operations
Board and Management
Financial report
Corporate directory
01
04
10
12
49
OVENTUS MEDICAL ANNUAL REPORT 2018 1
Chairman’s and
Chief Executive Officer’s address
Dear Shareholders,
We are pleased to present Oventus Medical’s
(ASX: OVN) Annual Report for the 2018
financial year. In this document, we outline
our Go Forward Business Strategy, focused
on building sales from our ‘Sleep Treatment
Platform’, which has been clinically proven
and offers an important new treatment
option to patients suffering obstructive
sleep apnoea (OSA) and snoring.
Left: Dr Mel Bridges, Chairman
Right: Dr Chris Hart, Managing Director, CEO
The OSA space is currently dominated
by major brands. The question is often
asked as to why to enter this space. Our
response and firm belief is that the market
offers a significant opportunity, due to the
innovation of ‘Oventus Airway Technology’.
CPAP – or continuous positive airway
pressure therapy – the treatment that
many snorers or sleep apnoea sufferers
are prescribed, is intolerable for a
high percentage of patients due to the
discomfort in air pressure and aesthetics.
Some patients get relief from standard
mandibular advancement (or mouth guard)
therapy which stabilises the throat, where
the patient’s jaw (mandible) is moved
forward to allow more air into the back of
the throat when nose breathing. However,
for those patients who breathe with their
mouths open, this treatment rarely works.
A large treatment void exists in the sleep
medicine market for new, efficacious sleep
medicine. We are focused on filling that
gap with the Oventus ‘Sleep Treatment
Platform’ – bringing new treatments to the
sleep deprived patients who need them.
We entered FY2018 with one product on
the market, our titanium O2Vent™, which
incorporated ‘Oventus Airway Technology’
and was backed by clinical trial data from two
of our clinical studies: ‘Brisbane’ study and
‘NeuRA’ pilot study, across 34 patients. A year
on and we have significantly further validated
our technology - we now have published
data on over 150 patients across four clinical
studies. We’ve expanded upon, optimized,
and further innovated our patented ‘Oventus
Airway Technology’ off the back of deeper
clinical insights and findings. New products
under development include a substantial
improvement in efficacy of the O2Vent™,
via an add-on PEEP valve which manages
expiratory pressure, called the ExVent™, and
a device that connects to a patient’s existing
continuous positive airway pressure (CPAP)
treatment appliance, the O2Vent Connect™
appliance, avoiding the need for a mask.
We are introducing an option for a nylon
O2Vent™ design alongside the titanium
devices we have been selling to date, and
we’ve also introduced a digital workflow.
These two innovations are expected to
significantly reduce manufacturing costs
once fully implemented. As a result, we
expect to see higher gross margins and an
earlier breakeven than what would have
been achievable through purely selling the
titanium O2Vent™ devices.
of personalised approaches for patients.
With the product and strategic channel
development we’ve undertaken during
the period, Oventus is positioned to work
alongside sleep physicians to achieve this
goal for their patients, with our range of more
comfortable yet very efficacious treatments.
Looking back over the year, we’ve built a
‘Sleep Treatment Platform’ that offers a
personalised care approach to prescribing
our devices, and provides real solutions to
patients seeking alternatives or adjuncts to
existing treatment options, such as mouth
guard devices and CPAP appliances.
Oventus Chairman Dr Mel Bridges
commented “Clinical evidence across an
expanding group of patients shows that our
O2Vent™ devices can treat 78% of patients
without the need for CPAP. Further, 100% of
patients were able to successfully be treated
using the O2Vent Connect™ device, which is
at product development stage for launch in
calendar year 2019. The device can connect
our oral appliances to CPAP technology,
avoiding the need for the mask that many
patients find intrusive and uncomfortable.
We are very well positioned for the year ahead
This year we have seen signs that international
sleep medicine is recognising the criticality
with our Go Forward Business Strategy, which
is being driven by a highly credentialed team.”
OVENTUS.COM.AU 2 OVENTUS MEDICAL ANNUAL REPORT 2018
GO FORWARD BUSINESS STRATEGY
potential of our ‘Sleep Treatment Platform’ to
Our Go Forward Business Strategy is marked
by the phasing out of R&D activities in FY2018
and investment into sales and marketing,
deliver new technologies to obstructive sleep
apnoea sufferers. We are very pleased with
progress to date.”
particularly in the US and Australian markets.
The dental channel, supported by our
We are pleased to have built an exceptionally
well credentialed US sales and marketing team
which we started to assemble in early 2018,
headed by industry veteran Robin Randolph,
and following a capital raising in late 2017.
We see two broad sales and marketing
distribution channels: sleep centres and sleep
physicians, and the dental industry.
A great deal of product-to-channel work
has resulted in a marketing plan focused on
engaging key stakeholders within sleep centres,
which are a primary point of diagnosis for
best treatment options. Our marketing and
sales strategy is focused on an efficient rollout
across sleep centres, focused particularly on
the larger, well-established groups who service
several thousand patients.
Oventus CEO, Dr Chris Hart commented,
agreement with Modern Dental, will continue
to play an important role in the patient journey
through the provisioning of referrals to sleep
centres, and in the fitting of oral devices.
SLEEP TREATMENT PLATFORM
As mentioned earlier, a small number of key
new devices or accessories built around our
innovative ‘Oventus Airway Technology’ will
be launched soon and round-out our ‘Sleep
Treatment Platform’. This range will see us
provide an increased level of personalised care
to patients that is unique in our industry, and
enable improved patient outcomes across the
full spectrum of OSA and snoring sufferers.
A lighter and more aesthetically pleasing nylon
O2Vent™ device will be launched before calendar
year end, joining our family of titanium O2Vent™
devices. These have been used by patients in
“Sleep centres are a key gateway in the patient-
market and generating sales for some time.
practitioner ecosystem. We are focusing our efforts
on building relationships with sleep physicians and
this includes running education programs on the
merits of prescribing our technology.
A further innovation nearing launch, the
ExVent™ oral EPAP valve can be fitted to our
nylon and titanium O2Vent™ W devices. This
addition regulates the way a patient breathes
Our recently appointed US-focused Medical
out. This seemingly minor innovation which
Technology Advisory Board of sleep experts was
builds up air pressure in the throat has brought
set up to give us strong inroads into the sleep
industry and help us drive forward the clear
a remarkable level of additional efficacy to the
O2Vent™ devices.
Above: ExVent™ incorporating oral
expiratory positive airway pressure
(EPAP) or positive end-expiratory
pressure (PEEP) valve technology
Middle: O2Vent ONEPAP™ is a wire-
free, micro oro-nasal EPAP that
attaches to our our O2Vent™ devices
Bottom: the O2Vent Connect™ product
provides the bridge between the
O2Vent™ devices and wired CPAP if
needed, to treat higher levels of OSA
severity, removing the requirement
for a mask
OVENTUS SLEEP
TREATMENT PLATFORM
O2Vent™
O2Vent
Optima™
O2Vent™
+ ExVent™
Oral EPAP
O2Vent™
+ ONEPAP™
Oral/nasal
EPAP
O2Vent
Connect™
CPAP
connection
In market
Expected to be
released in Q4
CY 2018
Expected to be
released in Q4
CY 2018
At product
development
stage
At product
development
stage
OVENTUS.COM.AU OVENTUS MEDICAL ANNUAL REPORT 2018 3
A DATA-SUPPORTED STRATEGY
Clinical trial results show:
New clinical trial results clearly
demonstrate Oventus’ ability to further
improve treatment outcomes compared
to existing therapies and deliver a more
personalised treatment outcome to
patients, depending on the severity of their
disease. These benefits are seen most in
clinical trial settings where patients have
nasal obstruction.
> ‘Oventus Airway Technology’ increases
the efficacy of existing mandibular
advancement therapies (traditional
mouth guards which don’t include our
Airway Technology) by 30-50%
> With the inclusion of our ExVent™
and O2Vent ONEPAP™ (PEEP valve)
accessories, 78% of patients with OSA
can be treated without the need for
CPAP. For those patients who then
require further intervention, attaching
Oventus’ O2Vent Connect™ device
(in development), to our (in market)
O2Vent™ oral device means that patients
achieve reduction in their sleep events
without the need for a full face mask.
Importantly, we can also deliver this
treatment at lower pressures than
traditional CPAP, providing those
patients who require it an experience
they are able to tolerate better, thus
bringing them back into care.
CUMULATIVE SUCCESS RATES WITH OVENTUS AIRWAY TECHNOLOGY*
41%1
54%1
78%2
of patients treated
successfully
of patients treated
successfully
of patients treated
successfully
100%3
of patients treated
successfully
Mandibular
advancement
devices
Traditional
lower jaw
advancement
*AHI<10 & >50% Reduction
O2Vent™
/ Optima
O2Vent™
+ ExVent™
(PEEP valve
technology)
O2Vent™ +
Connect™
(PAP
interface)
1 Karen McCloy, Damian Lavery,
Julia Moldavtsev, Airway open-
airway closed: The effect of
mandibular advancement therapy
for obstructive sleep apnoea
with and without a novel in-built
airway. Abstract Submitted ASA
Brisbane 2018.
2 Victor Lai, Benjamin Tong, Carolin
Tran, Andrea Ricciardiello,
Michelle Donegan, Nicholas
Murray, Jayne Carberry and Danny
Eckert Combination therapy
with mandibular advancement
and expiratory positive airway
pressure valves reduces OSA
severity. Abstract Submitted ASA
Brisbane 2018.
3 Tong B, Tran C, Ricciardiello A,
Donegan M, Murray N, Chiang A,
Szollosi I, Amatoury A and Eckert
D. Combination therapy with CPAP
plus MAS reduces CPAP therapeutic
requirements in incomplete MAS
responders. Abstract submitted
ASA Brisbane 2018.
At product development stage for
severe OSA sufferers are the O2Vent
ONEPAP™ (oro-nasal EPAP) and O2Vent
Connect™. These devices bridge the
gap between standard mandibular
advancement oral devices and traditional
CPAP technologies, and are currently
undergoing clinical testing.
The introduction of a materials design shift
to predominantly offering nylon devices
will improve our gross margin and thereby
achieve breakeven earlier. Benefits include
reduced manufacturing input costs, a
customer preferred ‘white’ colour design
and a simplified manufacturing process
leading to faster delivery of devices to
customers. This will be complemented
by a digital workflow, enabling greater
accuracy for customised device fit and
faster turnaround times. A digital workflow
incorporates almost instant file transfer
of digital intra-oral mouth and bite scans
in place of traditional dental impressions,
that need to be physically sent to the lab.
MARKET
Our global target market is estimated
at A$3.8bn, growing at 15-20% CAGR,
however studies show that only 20% of
patients are actually in care. An estimated
80% of patients are undiagnosed or have
fallen out of care due to their inability to
tolerate the traditional treatment options.
This presents an attractive backdrop for
‘Oventus Airway Technology’ to deliver
enhanced outcomes to patients suffering
from OSA.
OUTLOOK FOR FY2019
A strong and seasoned Board and
management team are committed to bringing
to market our ‘Sleep Treatment Platform’ and
our Go Forward Business Strategy focused
on sales and marketing. We look forward to
regularly reporting on progress.
Yours sincerely,
Dr Mel Bridges
Chairman
Dr Chris Hart
Chief Executive Officer
and Managing Director
O V E N T U S . C O M . A U
4 OVENTUS MEDICAL ANNUAL REPORT 2018
Business Strategy
and Operations
1. Strategic shift from ‘Research and Development’ to a Go Forward Business Strategy
focusing on the clinical adoption of the Oventus ‘Sleep Treatment Platform’
2. Growing our body of clinical evidence to validate improved treatment outcomes
and drive market adoption
3. Building out our USA market support team and introduction of the Oventus
Medical Technology Advisory Board
4. Reduction of fixed and manufacturing costs
5. Capital Raising complete to maintain a strong balance sheet
1. Strategic shift from ‘Research and Development’ to a Go Forward Business Strategy
focusing on the clinical adoption of the Oventus ‘Sleep Treatment Platform’
This year we have seen ‘Oventus Airway
Technology’ evolve from its original
iteration as an alternative form of oral
appliance therapy for sleep apnoea, to
become an airway management and ‘Sleep
Treatment Platform’, that includes oral
appliance therapy; positive end expiratory
pressure (PEEP) airway management; and
a positive air pressure interface, reducing
pressure requirements and eliminating
the need for full face masks. This platform
will allow dental and sleep professionals
to personalise treatment to patients’
individual needs – via a range of O2Vent™
products and (future) accessories. It truly
bridges the gap between traditional oral
appliance therapy and CPAP therapy, with
its efficacy backed by a growing body of
clinical trial results.
OVENTUS SLEEP TREATMENT PLATFORM
DEVICES ‘IN MARKET’, ‘FOR LAUNCH’ AND
‘IN DEVELOPMENT’
The Oventus ‘Sleep Treatment Platform’ of oral therapeutic devices delivers
patient-centred care through a number of clinically proven oral devices. These are
prescribed depending on the severity of a patient’s level of OSA.
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O2VENT
The O2Vent™ oral therapeutic device for the treatment of
sleep apnoea and snoring incorporates ‘Oventus Airway
Technology’. The O2Vent™ devices are available in 3D printed
titanium (form: Mono, T, W) and will soon be joined by a
lighter nylon version, the O2Vent Optima™, in late 2018.
O V E N T U S . C O M . A U
EXVENT™ – ORAL
PEEP VALVE
O2VENT ONEPAP™ –
ORO-NASAL PEEP VALVE
The ExVent™ is a positive
end-expiratory (PEEP) valve
accessory for select O2Vent™
devices. Clinical trials have
shown the ExVent™ further
increases the efficacy of the
O2Vent™ in patients suffering
from OSA. It acts as a splint for
the airway during exhalation
to create resistance and
positive pressure, stabilising
the airway. ExVent™ will be
launched to market late 2018.
The O2Vent ONEPAP™ is a
titratable oro-nasal valve
accessory for O2Vent™ devices.
Clinical trials have shown the
O2Vent ONEPAP™ to further
increase the efficacy of the
O2Vent™ in patients suffering
from OSA in hard to treat
cases, by regulating both
nasal and mouth exhalation
simultaneously maintaining
constant pressure. This
accessory is at product
development stage.
O2VENT CONNECT™
The O2Vent Connect™ is an
add-on accessory for the
O2Vent™ and connects to
a CPAP machine. Clinical
trials have shown the O2Vent
Connect™ further increases
the efficacy of the O2Vent™
in patients suffering from
OSA in hard to treat cases.
It allows for mask and strap
free connection with ultra
low pressure PAP delivery.
This accessory is at product
development stage.
GO FORWARD BUSINESS STRATEGY
As we prepare to bring new O2Vent™
products and accessories to market, the
focus for Oventus Medical has now moved
from a Research and Development focus
to the implementation of our Go Forward
Business Strategy, with a particular focus
on the USA market.
We believe that the USA market for oral
appliance adoption and long-term use
is currently positioned for success and
will continue for the foreseeable future.
Contributing to this assessment are a
number of factors, including increased
provider and public awareness of OSA;
improved oral appliance technology; and
stagnant improvements in continuous
positive airway pressure (CPAP) therapy.
Despite the enhancements in CPAP mask
features (smaller/lighter) and comfort
features (e.g.-flex) designed into the CPAP
devices, there remains a high patient
abandonment rate (>50%) of CPAP
therapy. Compliance rates are essentially
at the same level since their introduction
of CPAP as a therapeutic modality
(flattened curve). It is currently estimated
that 5-6 million CPAP’s have been
dispensed in the USA, equating to 2-3
million people abandoning CPAP therapy.
Augmenting the above, is the proliferation
of information patients can access as
they seek alternatives to CPAP treatment.
Simultaneously, there has been a steady
influx of dental practitioners entering
the sleep dental space to enhance their
revenue stream in a relatively new market.
Once integrated into their practice,
medical billing for medical diagnosis (of
sleep apnoea) shows promise of better
reimbursement. Finally, sleep physicians
are increasingly seeking non-invasive
alternatives for CPAP patients who are
either unwilling or unable to use their
CPAP, as a means to improve patient
centred care and satisfaction.
The key elements to our success are:
1. Enhancing the patient experience
by providing exceptional and
personalised oral appliance therapy
as part of a ‘Sleep Treatment
Platform’. This will lead to improved
wear-ability, which in turn will lead
to improved adherence and health
outcomes.
2. Supporting Dental-Sleep industry
collaboration, with a focus on Oventus’
unique ‘airway management’ and
positive end expiratory pressure (PEEP)
valve technology.
Market potential
MARKET SIZE: ORAL APPLIANCE AND CPAP INTERFACE4,5
OVENTUS MEDICAL ANNUAL REPORT 2018 5
3. Continue our product development
and innovation to further expand the
Oventus ‘Sleep Treatment Platform’.
USA MARKET STRATEGY AND UPDATE
Our strategy for expanding business
operations in the USA and capitalising on
the growth of the oral appliance therapy
(OAT) market is to become known as the
Number One Market Leader in OAT. This
strategy is driven by not only a unique
product differentiator i.e. the airway
channel integrated into Oventus’ O2Vent™
appliances, but also our market entry.
Sleep physicians are embracing our
technology and comment that it is placing
the medical management of OAT for OSA
back within their medical domain, where
many feel it belongs. The realisation that
medical airway management and PEEP
therapy are now available, paves the way
for collaborative sleep relationships with
the Dentist and the Sleep Physician.
The key to our success is the combination
of unique and superior technology that
can satisfy the unmet needs of patients
suffering from OSA and snoring and the
execution of market strategy, delivered by
a strong, experienced US based sales and
marketing team.
$
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3000
2500
2000
1500
1000
500
0
2015
2020
USA
1,780
2,675
Europe
Asia Pacific
China
933
1,568
311
461
535
705
ROW
159
201
4 Sleep Apnoea Diagnostic & Therapeutic Devices Market, Markets and Markets, Table 98.
China data – Anti-snoring Devices and Snoring Surgery Market: 2016-2024 p101
5 Excludes cost of CPAP machine
O V E N T U S . C O M . A U
6 OVENTUS MEDICAL ANNUAL REPORT 2018
2. Growing our body of clinical evidence to validate improved
treatment outcomes and drive market adoption
During the financial year a number of
clinical trial results were announced and
presented at sleep industry conferences.
These results contribute to a growing
body of evidence confirming that,
compared to existing therapies, the
O2Vent™ oral appliances, incorporating
‘Oventus Airway Technology’ can further
improve OSA treatment outcomes – for
both oral appliance therapy and as a CPAP
interface. This technology also enables the
ability to personalise treatment depending
on the severity of the patient’s disease.
This ‘value add’ is receiving extremely
positive feedback and is being used in
At the end of the financial year, data was
communication with both the sleep and
collected and analysed across 95 patients
dental channels to drive market adoption.
suffering from OSA, from four clinical
The OVEN-003 ‘Brisbane’ trial was
concluded in late May and interim reports
from the OVEN-005 ‘Sydney NeuRA’ trial
was released demonstrating further
efficacy across an additional 45 patients.
The OVEN-005 trial remains ongoing
as part of the National Government
studies. Further results are due to be
released in Q4CY2018 from the OVEN-
004 ‘Perth’ study covering 23 patients
and the OVEN-005 ‘Sydney NeuRA’
covering a further 16 patients. At the time
of printing this annual report, we have
reached published data for 150 patients,
Cooperative Research Centre Program
as outlined in the following Clinical Trial
(CRC-P), as further detailed in the
summary table.
Directors’ Report.
CLINICAL TRIAL SUMMARY OF O2VENT™ DEVICE TRIALS TO VALIDATE OVENTUS AIRWAY TECHNOLOGY
Study/
Investigation
Patients
completed
(per Oct 2018)
Results – reduction
in AHI (sleep events
per hour)8
Commentary
Peer review / events
Pilot study
4
Name
Sydney study
(NeuRa)
OVEN-005
CRC-P funded
(A$2.95m)
3 stages over 3 years
180 Patients in Total
Nasal Resistance
Study
7
39
PEEP Valve Study
136
MAS Combo Study
16
Perth study
OVEN-004
Brisbane study
OVEN-003
Effect of Oventus
Airway on Upper
airway Physiology
Effect of Oventus
Airway on Efficacy
and Compliance
107
32
37 reduced to 8
= 78% reduction
Airway Technology increased
efficacy by 50% compared to
traditional oral appliance
In addition to AHI reduction,
66% reduction in CPAP pressure
required when using Oventus
CPAP connector
34.4 reduced to 7.0
= 80% reduction
29 reduced to 14.5
= 50% reduction
Increased nasal resistance did
not impact treatment outcomes
30.5 reduced to 16.4
In previous treatment
failures
CPAP pressure
requirements reduced by
35-40%
Success rates increased by 58%
enabling over 75% of patients to
be treated successfully without
CPAP
Patients able to breathe through
the device while using nasal CPAP
eliminating the need for full face
masks
69.6 reduced to 19.4
= 72% reduction
Airway Technology increased
Efficacy by 30%
24 reduced to 10
= 58% reduction
Airway Technology increased
response rate by 40% and
success rate by 20%
Increased efficacy in nasal
obstructers and previous
treatment failures
Presented at AADSM/AASM Sleep
June 2017, Boston
Interim results presented at World
Sleep Congress (abstract) 9-12
October 2017, Prague
Expanded results presented at
European Respiratory Society (ERS),
September 2018, Paris
Final results being presented at the
ASA Sleep DownUnder conference,
October 2018, Brisbane
Interim results presented at
European Respiratory Society (ERS),
September 2018, Paris
Expanded results being presented
at ASA Sleep DownUnder
Conference, October 2018,
Brisbane
Interim results: ASA Sleep
DownUnder, ASA Conference
(abstract) 25 October 2017,
Auckland
Final results being presented at the
ASA Sleep DownUnder, October
2018, Brisbane
Brisbane study
OVEN-001
Efficacy of Oventus
O2Vent
29
42 reduced to 16
= 62.5% reduction
Same response rate and efficacy
with and without self reported
nasal congestion
Journal of Dental Sleep Medicine,
Vol 4, No. 3
Total patients
150
O V E N T U S . C O M . A U
6 Results from a further 9 patients to be presented at the ASA Sleep DownUnder conference in October 2018,
Brisbane – results not publicly available yet
7 Results from a further 13 patients to be presented at the ASA Sleep DownUnder conference in October 2018,
Brisbane – results not publicly availabel yet
8 Apnoea-Hypopnoea Index (AHI), known as ‘sleep events’ per hour occurring when the breathing airway collapses
temporarily, leading to disruptions in breathing and sleep, in patients with Obstructive Sleep Apnoea (OSA)
OVENTUS MEDICAL ANNUAL REPORT 2018 7
3. Building out our USA market support team and introduction
of the Oventus Medical Technology Advisory Board
The implementation of our Go Forward Business Strategy in the USA necessitated the
formation of a strong, highly skilled and experienced team, covering the areas of sales,
marketing, education, training and clinical support across both dental and sleep industries.
OVENTUS USA TEAM
ROBIN RANDOLPH
GREG EATON
PEGGY POWERS
ROBYN WOIDTKE
BRIAN UEDA
Vice President Marketing
and Operations,
North America
Accomplished Marketing
and Sales executive
30+ years in the Sleep
Industry. In-depth North
America medical device
commercialisation
experience; product
management,
clinical education,
reimbursement, and
sales. Sleep Centre
operations management
experience.
Vice President Sales,
North America
Clinical
Educator
Senior Manager,
Dental Sleep Initiatives
Marketing
Operations Manager
Experienced medical
device sales executive
with 20+ years working
within Sleep and
Respiratory medical
device markets.
Possesses keen
innovative insights in
the areas of executing
sales tactics, sales
team development and
forecasting. Multi-time
recognised Presidents
Club Achievement
awardee for outstanding
sales performance.
Experienced clinical
educator and authority in
the sleep and respiratory
industry. Registered
Respiratory Therapist
20+ years. Highly skilled
in the design and delivery
of comprehensive
training programs for
health care providers.
Frequent presenter/
educator.
Credentialed in Clinical
Sleep Health, Science
and Nursing with a
sleep medicine career
spanning 30+ years
and experience in
the medical device
industry spanning
20+ years. Patient
focused in approach.
Experience spans
research, education
and regulation.
Skillful marketing
manager with an innate
ability to take complex
technical ideas and distill
them into user-friendly
visuals to drive marketing
campaigns. Experienced
in traditional advertising,
marketing, graphic
design and film.
O V E N T U S . C O M . A U
8 OVENTUS MEDICAL ANNUAL REPORT 2018
OVENTUS MEDICAL TECHNOLOGY
ADVISORY BOARD
To guide the launch and commercialisation
of the Oventus ‘Sleep Treatment Platform’
to US Sleep Professionals and to further
validate our product development
work, shortly after the financial year end
Oventus appointed a Medical Technology
Advisory Board (MTAB).
Reporting to CEO, Dr Chris Hart, the
MTAB comprises a US-based consultative
advisory body of highly experienced
leaders and international experts in
sleep medicine. This advisory body will
provide input and guidance into Oventus’
clinical, developmental and commercial
strategy, focused on introducing Oventus’
products to the sleep channel in the
USA. Members of the MTAB have been
appointed with a three year term,
renewable by mutual agreement.
The MTAB is composed of the following
leading sleep physicians and advisors:
LEE A. SURKIN,
MD, FAASM
RICHARD K. BOGAN,
MD, FCCP, FAASM
JERROLD A. KRAM,
MD, FCCP, FAASM
Chief Medical Officer
of N3Sleep
A private practitioner in
cardiology, sleep medicine
and obesity medicine, Dr
Surkin is one of a small
group of physicians to be
triple board certified in
cardiology, sleep medicine
and nuclear cardiology. His
professional career has
evolved from practicing
cardiology exclusively
to a unique practice
model that emphasises a
comprehensive wellness
approach by incorporating
sleep, cardiovascular and
bariatric medicine.
In 2009, Dr. Surkin created
Carolina Sleep – the only
dedicated sleep medicine
practice in eastern NC.
In 2012, he founded the
American Academy of
Cardiovascular Sleep
Medicine. In 2014, he
founded the Carolina Clinic
for Health and Wellness.
Associate Clinical
Professor, Chief Medical
Officer, Director,
SleepMed Inc.
Medical Director of the
California Center for
Sleep Disorders (with 8
locations)
Dr. Jerry Kram is board
certified in internal
medicine, pulmonary
medicine and sleep
medicine. He has
lectured extensively on
sleep and has conducted
many clinical trials of
treatments for various
sleep disorders and
published articles and
chapters on this topic.
He is on the faculty of
the School of Sleep
Medicine at Samuel
Merritt University and
a member of the Board
of the National Sleep
Foundation.
Associate Clinical Professor
at the University of South
Carolina School of Medicine
in Columbia, SC and
Medical University of SC in
Charleston, SC. He is the
Chief Medical Officer and a
Director of SleepMed Inc.
He is one of the founders
of SleepMed, the largest
sleep diagnostic company
in the U.S.
Dr. Bogan is board
certified in sleep medicine,
pulmonary medicine and
internal medicine with
previous certification
in critical care. He has
served as the medical
director for several
hospital departments
and serves on various
business, community,
and civic boards.
4. Reduction of fixed and manufacturing costs
As part of our shift from a Research and
Development (R&D) focus to a Go Forward
sales-oriented focus, during the financial
year we have been implementing a program
to reduce R&D spend and divert resources
into our sales and marketing channels.
Optima™ nylon 3D printed devices, along
with the introduction of a digital workflow
for the almost instant file transfer of
dental impressions and bite registration –
delivering faster turnarounds and greater
accuracy for device fit.
We are also working towards reducing
manufacturing costs. Two innovations
that will assist with this goal are the
upcoming introduction of the O2Vent
The Company will be further reducing
overheads by:
> Reducing activities at the Oventus
Melbourne manufacturing facility
> Fully outsourcing manufacture of
the O2Vent™ titanium appliance in a
strategic move to become a virtual
device manufacturer.
These cost reductions will enable
Oventus to focus on its core value
proposition of driving innovation in
airway management and clinical adoption
of ‘Oventus Airway Technology’.
O V E N T U S . C O M . A U
OVENTUS MEDICAL ANNUAL REPORT 2018 9
MARK HICKEY,
MD, FAASM
MARK A. RASMUS,
MD, FAASM
DANIEL B. BROWN,
ESQ.
MYRA G. BROWN
Founder, Colorado Sleep
Instiute
Medical Director,
Idaho Sleep Health
Dr. Rasmus is board
certified in paediatrics,
internal medicine,
pulmonary medicine,
critical care and sleep
medicine.
Dedicated to public
education about sleep
matters, Dr. Rasmus has
appeared on television
and frequently speaks
to community groups
and physicians. He has
conducted clinical research
and has published articles
in sleep disordered
breathing and CPAP
humidification.
Dr Hickey founded
the Colorado Sleep
Institute, which provides
comprehensive care for
the full spectrum of sleep
disorders. Dr. Hickey is a
Mayo-trained Neurologist
and is both fellowship-
trained and board certified
in Sleep Medicine.
At the American Academy
of Sleep Medicine, Dr.
Hickey serves in three
capacities: consultant to
the AASM Health Policy
Strategy Presidential
Committee, Welltrinsic
Board member, and AASM
legislative liaison. At the
Boulder Valley Individual
Practice Association, he is
both a Board member and
Credentials Committee
member. At the Boulder
Valley Care Network, he
serves as a Board member.
He is an active member
of the Colorado Medical
Society and Boulder County
Medical Society.
Partner, Healthcare
and Corporate Practice
Groups, Taylor English
Duma LLP Atlanta,
Georgia.
Dan is an accomplished
corporate and healthcare
attorney who regularly
advises clients on the
legal and regulatory
aspects associated with
the operation and sale of
health care businesses.
He represents a variety of
sleep medicine providers,
durable medical equipment
suppliers, medical device
manufacturers, physician
groups, health care
franchisors and health
systems on structuring
health care business
operations and maintaining
regulatory compliance
with the Stark laws, Anti-
Kickback Laws and HIPAA.
Dan served as Treasurer
and a member of the
Executive Committee of the
National Sleep Foundation.
He is on the Faculty of the
Atlanta School of Sleep
Medicine and Technology.
President,
MBrownGroup LLC
Myra has more than
30 years of experience
managing, consulting,
directing and developing
business opportunities
for health care
companies, device
manufacturers, health
insurers, entrepreneurs,
and individual health
care providers. She has
an MBA in Healthcare
Administration from the
Wharton School, University
of Pennsylvania, and began
her career with Hospital
Corporation of America
(HCA). She later served as
the Chief Operating Officer
of The Bill Wilkerson Center
of Vanderbilt University.
In Myra’s consulting
practice, she develops
strategic business, branding
and marketing plans for
companies ranging from
new business start-ups to
multinational entities. For
the past 12 years, she has
focused on the consumer
sleep market.
5. Capital Raising to maintain a strong balance sheet
In December 2017, Oventus raised A$7.6 million in further funds to
strengthen the balance sheet. These funds are allocated to completing
product development and our Go Forward Business Strategy, focused
on sales and marketing activities associated with the roll out of devices
which make up Oventus’ ‘Sleep Treatment Platform’ of therapeutic
devices for the treatment of sleep apnoea and snoring.
O V E N T U S . C O M . A U
10 OVENTUS MEDICAL ANNUAL REPORT 2018
Board and
Management
Oventus Medical Limited is
led by an experienced and
professional Board of Directors
and Management team, all
of whom bring a breadth
and depth of professional
experience and commercial
acumen to the business.
DR MEL BRIDGES
DR CHRIS HART
MR NEIL ANDERSON
Chairman and
Non-Executive Director
Mel has over 35 years’
experience founding and
building international
lifescience, diagnostic and
medical device companies
and commercialising a
wide range of Australian
technology. He is
responsible for numerous
commercial and M&A
transactions and liquidity
events, including listings on
the ASX.
Mel has received national
and state business
awards including the 2005
AusBiotech Chairman’s
Industry Medal and 2004
Queensland Entrepreneur
of the Year. Mel has
founded and developed
medical device and
diagnostic companies,
including Pacific
Diagnostics (acquired
by Baxter), PanBio Ltd
(acquired by Inverness
Medical), and ImpediMed
Ltd (ASX: IPD). Mel is
currently a director of ASX
100 Company ALS Ltd.
Founder, Managing
Director and Chief
Executive Officer
Chris is the founder
of the Company and
inventor of the O2Vent™
design concept. Chris is
overseeing the launch of
the O2Vent™ to patients
and through clinicians and
heads the management
team as they roll out the
Oventus ‘Sleep Treatment
Platform’ across Australia
and the United States.
Chris is also heavily
involved with training and
presenting to the dental
and sleep sector.
Chris graduated from the
University of Queensland
in 1998 with a Bachelor
of Dental Science with
Honours and a Bachelor of
Science in Biochemistry. He
has studied at Cambridge
University where he
graduated with a Master of
Philosophy in Biomedical
Science in 1999.
Prior to establishing
Oventus, Chris owned
and managed a multi-site
national dental practice,
training institute and
management consultancy
which he sold to private
equity investors.
Chris also acts as an
adviser to various bodies
within the dental industry
as well as the health care
sector more broadly on
the commercial aspects of
health care delivery.
Chief Technical Officer
An experienced company
executive and biomaterial
scientist, Neil started
working with Dr Chris
Hart in 2013, to develop
and commercialise the
O2Vent™ and bring it to
market. Neil has been
responsible for managing
the collaboration process
with the CSIRO to develop
a remotely-managed
computer aided detection
(CAD) imaging and 3D
printing manufacturing
platform, as well as the
patent portfolio, quality
systems and regulatory
clearances for the
product to date.
Neil has 30 years’
experience in
commercialising medical
devices and managing
the process from
conception to market
release including applied
research, developing
prototypes and testing,
product development,
manufacturing,
regulatory submissions
and clinical trials.
Prior to taking on the role
with Oventus, Neil founded
and held the role of chief
executive officer of CathRx
for 10 years. In this role,
Neil managed the process
from the invention of the
company’s technology
through to commercialising
a range of products leading
to sales in Europe.
Neil has a Bachelor of
Applied Science (Hons) and
a Diploma of Management
and is a Graduate of the
Institute of Company
Directors (GAICD).
OVENTUS.COM.AU OVENTUS MEDICAL ANNUAL REPORT 2018 11
MS SUE MACLEMAN
MR STEPHEN DENARO
MR DAN PARRY
MS ROBIN RANDOLPH
Non-Executive Director
Company Secretary
Steve has extensive
experience in mergers
and acquisitions, business
valuations, accountancy
and income tax compliance
services, as well as board
corporate governance.
Steve provides company
secretary services for a
number of biotech and
software companies. Steve
is also a member of the
Institute of Chartered
Accountants in Australia,
and the Australian Institute
of Company Directors.
Sue MacLeman has more
than 30 years’ experience
as a pharmaceutical,
biotechnology and medical
technology executive with
senior roles in corporate,
medical, commercial and
business development.
Sue has also served as
CEO and Board member
of several ASX and
NASDAQ listed companies
in the sector and is
currently Chair of Anatara
Lifesciences Ltd, Chair of
Novita Healthcare Ltd,
Chair and Non-Executive
Director of MTPConnect
(MTPII-GC Ltd), Non-
Executive Director of
Oventus Medical Ltd
and veski.
Sue is also appointed to
a number of academic
and government advisory
committees. Her broad
commercial experience is
underpinned by graduate
qualifications in pharmacy
and post graduate
qualifications in commercial
law, corporate governance,
business administration
and marketing.
Chief Financial and
Operations Officer
Dan Parry joined Oventus
in December 2017 with
over 20 years of experience
as CFO and Company
Secretary in the life science,
technology and medical
service sectors.
Dan has held senior finance
roles with companies in
the US, UK and Australia,
ranging from venture-
backed start-ups to
NASDAQ listed companies
including Astellas, Synergen,
Cortech, Heska, Accera and
Implicit Bioscience Ltd. His
experience also includes
corporate finance and
internal audit roles with
a Fortune 100 company
and six years in public
accounting where Dan
qualified as a CPA in the US.
In these roles, Dan
has managed finance,
accounting, human
resources, information
technology, facilities,
legal and compliance
functions and mergers
and acquisitions. Dan is
professionally qualified as
a Chartered Accountant in
Australia and as a CPA in the
US, with an MBA from the
J.L. Kellogg Graduate School
of Management in Chicago.
Vice President Marketing
and Operations,
North America
Starting her career as
a nurse, then sleep
technologist and
clinical researcher,
Robin Randolph is an
accomplished marketing
and sales executive with
over 30 years’ experience
in the sleep industry,
including past ownership of
US sleep centres.
Robin joined Oventus
Medical in April 2018 as
Vice President of Marketing
and Operations, North
America. Robin’s vast
experience spans medical
device commercialisation,
product management,
clinical education,
reimbursement and
sleep centre operations
management.
Robin has held senior
management roles in these
areas for both ResMed and
Fisher & Paykel Healthcare.
She is passionate about
education for patient
management of sleep
disorders, including
obstructive sleep apnoea,
sharing her in-depth
industry knowledge and
promoting the advantages
of Oventus Airway
Technology.
OVENTUS.COM.AU 12 OVENTUS MEDICAL ANNUAL REPORT 2018
Financial Report
For the year ended 30 June 2018
CONTENTS
Directors’ Report
Auditor’s Independence Declaration
13
21
Consolidated Statement of Comprehensive Income 22
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Financial Statements
Directors’ Declaration
Independent Auditor’s Report
Shareholder Information
23
24
25
26
42
43
48
O V E N T U S . C O M . A U
Directors’ Report
For the year ended 30 June 2018
OVENTUS MEDICAL ANNUAL REPORT 2018 13
The directors present their report, together with the financial statements,
on the consolidated entity consisting of Oventus Medical Limited (‘the
Company’) and the entities it controlled (‘the Consolidated Entity’; “the
Group”) at the end of, or during, the year ended 30 June 2018.
DIRECTORS AND COMPANY SECRETARY
The names of the Directors of the Company during the year and up to
the date of this report are noted below. Directors were in office for the
entire period unless otherwise stated:
Dr Mel Bridges - Chairman
Dr Christopher Hart - Executive Director
Mr Neil Anderson - Executive Director
Ms Sue MacLeman - Non-Executive Director
Mr Stephen Denaro - Company Secretary
PRINCIPAL ACTIVITIES
Oventus (ASX: OVN) is a Brisbane, Australia-based medical device
company that has commercialised and brought to market a new
platform for the treatment of obstructive sleep apnoea (“OSA”) and
snoring. The Oventus Sleep Treatment Platform enhances treatment
outcomes delivered by conventional appliance therapy and Continuous
Positive Airway Pressure (CPAP) therapy, through increased efficacy
and greater adherence by patients when compared with these older
treatment methods.
During the year, the Company was principally focused on the
commercialisation and distribution of its unique and patented sleep
treatment platform, including its ‘Airway Technology’, which has been
shown in clinical trials to deliver significant clinical benefit to patients.
FINANCIAL POSITION
The Company’s cash position stood at $9.90 million as at 30 June 2018. In
early December 2017, the Company completed a heavily oversubscribed
capital raising, where $7.6 million was raised with support from new and
existing institutional and sophisticated investors. The funds raised ensure
Oventus is well capitalised to enable its fast-tracked entry into the global
sleep market with the support of partnerships like the one signed in mid-
2017 with Modern Dental Group (‘Modern’).
DIVIDENDS
There were no dividends to shareholders paid, recommended or
declared during the current or previous financial period.
REVIEW OF OPERATIONS
The loss for the Consolidated Entity after providing for income tax
amounted to $5,870,547 (2017: loss of $6,510,114). The Consolidated
Entity earned $271,322 in revenue for the year ended 30 June 2018
(2017: revenue of $447,994) and incurred operating expenses of
$6,424,042 for the year ended 30 June 2018 (2017: $7,097,982).
Development expenditures of $1,737,286 incurred during the year ended
30 June 2018 (2017: $1,925,893) were capitalised in the consolidated
statement of financial position. The Consolidated Entity received $966,233
from the Australian Federal Government in January 2018 as a credit
rebate for the Company’s 2017 financial year R&D spend.
Sales Activities
During the financial year, work continued to build Oventus’ two
main sales channels; with dentists through ‘the dental channel’
(predominantly through our agreement with Modern Dental) and with
sleep physicians through ‘the sleep channel’. To help drive referrals
through both channels, Oventus is focused on stakeholder education,
generating clinical data and product marketing.
Sales volumes are yet to accelerate since launching with Modern
Dental in early Calendar Year 2018 due to long lead times on treatment
uptake and the additional education typically required when launching
a new treatment modality. To this end, Modern has also been investing
heavily in education and marketing for the dental channel.
In the sleep channel, Oventus is focused on the generation of clinical
data and education of stakeholders to drive referrals for ‘Oventus
Airway Technology’. The investment in the sleep channel is being spear-
headed by a newly formed, but very experienced and well credentialed
US sales team headed by Robin Randolph.
Early feedback from the sleep community has been exceptional and the
Company remains very positive that sales will build in the second half
of Calendar year 2018. The Oventus treatment platform and the clinical
trial data to support its adoption has undergone a rapid evolution over
the last two years.
Historically, Oventus has been viewed by dentists, the sleep profession
and the market as another sleep apnoea mouthguard company selling
into a very competitive oral appliance market. However, with the
product development undertaken and supporting clinical trial data
being generated, in combination with access to existing reimbursement
codes and a clear regulatory pathway, Oventus is now emerging as
an airway management company. ‘Oventus Airway Technology’ now
extends into a sleep treatment platform with the addition of PEEP valve
technology eliminating the need for full face masks and CPAP for the
majority of patients.
With strong interest from dentists and sleep physicians in its ‘Sleep
Treatment Platform’ and continued adoption across dental and
sleep channels, the company expects to see increasing revenues in
future quarters.
Operational staff appointments
Oventus invested heavily in building out its operational, sales and
marketing capability in North America to support the implementation
of the Modern Dental distribution arrangement and the introduction of
products into the Sleep channel.
During the financial year, a number of key staff were recruited in the
US to drive marketing and sales and sales who bring long standing
relationships through prior roles in industry. The team is headed by
Robin Randolph, Vice President, Marketing and Operations supported
by Greg Eaton, Vice President Sales and Peggy Powers, Clinical
Educator, North America.
The Board has decided to clarify the executive roles of Dr Chris Hart
and Mr Neil Anderson to better reflect their true roles and the Board
agreed that Dr Hart assume the Chief Executive Officer role and Mr
Anderson the Chief Technical Officer role, effective 30 August 2018.
OVENTUS.COM.AU 14 OVENTUS MEDICAL ANNUAL REPORT 2018
Directors’ Report (continued)
For the year ended 30 June 2018
Distribution in Australia and North America
While there are many early adopters in clinical practice, many dentists
still do not view ‘Oventus Airway Technology’ as a new treatment
modality but as another oral appliance. Educating dentists as to the
benefits of ‘Oventus Airway Technology’ for their patients is critical to
drive adoption. Following the launch with Modern Dental Group in late
2017, there has been increased focus on training dentists in the clinical
application of ‘Oventus Airway technology’. This has been a mix of
online learning platforms, presentation of data at clinical meeting, face
to face training in clinics and at structured courses. This training has
been targeted at three groups of dentists:
1. Dentists that don’t currently incorporate Dental Sleep Medicine
into their practice – raising awareness on how screening for sleep
disorders can expand their practice offering and profitability;
2. Dentists already delivering mandibular advancement devices (MADs)
– explaining how ‘Oventus Airway Technology’ can be tailored to
patients to improve treatment outcomes; and
3. Advanced Sleep Dentists that have the ability to incorporate
combination therapy into clinical practice.
As with all new treatment modalities, there is a significant lead time
and investment in training required to modify clinical habits. To this
end, Oventus is not just working with dentists but also working with the
gatekeepers of sleep apnoea treatment: the sleep physicians’ groups.
Following the recent release of clinical evidence, sleep groups have
indicated a willingness to adopt and recommend ‘Oventus Airway
Technology’ as a treatment for obstructive sleep apnoea (OSA) when
continuous positive airway pressure (CPAP) treatment fails. The
development of the new PEEP technology “ExVent™” and “O2Vent
ONEPAP™” and the clinical trial data being generated at Neuroscience
Research Australia (NeuRA) by Prof Danny Eckert and his team, is
showing that this extension of ‘Oventus Airway Technology’ may be
able to treat over half of patients that have previously failed both
CPAP therapy and oral appliance therapy, increasing the reach of
‘Oventus Airway Technology’ to successfully treating more than three
quarters of patients without the need for CPAP.
In the USA, in recent months, Robin Randolph and Greg Eaton
from Oventus USA have met or forged relationships with a range of
prominent US Sleep networks. The recent American Academy of Dental
Sleep Medicine (AADSM) and SLEEP 2018 exhibitions in Baltimore
in June 2018 provided excellent opportunities to network with key
executives whilst raising awareness with the wider dental and sleep
community. Dr Chris Hart will be undertaking activities in the USA later
in the current quarter, presenting to sleep physicians the benefits of
Oventus’ personalised ‘Sleep Treatment Platform’ and onboarding them
with the technology.
Product development
As a result of the launch of a number of new appliances over the coming
six months that all incorporate ‘Oventus Airway Technology’, Oventus
will be able to treat an increasing number of patients suffering from
obstructive sleep apnoea with minimal intervention, offering a viable
CPAP alternative. The Oventus ‘Sleep Treatment Platform’ offering will
enable a personalised patient-centric approach to sleep medicine.
Product development has been guided by clinical trial results and
market feedback on the existing range of devices.
The titanium O2Vent™ appliance range currently on the market has
continued to evolve to make the devices lower profile and more
ergonomic as well as being compatible with the newly developed
ExVent™ and O2Vent ONEPAP™ devices.
The O2Vent Optima™ bespoke 3D printed nylon devices are ultralight
weight and much lower cost to produce than the titanium O2Vent™
appliances. These products remain on schedule for launch in the 4th
quarter of calendar 2018 and will be backed up by six clinical trial data
sets being presented at the European Respiratory Society Congress
in Paris this September and the Australasian Sleep Association’s Sleep
Down under in Brisbane in October all of which support the use of
‘Oventus Airway Technology’ in treating OSA.
Alongside the O2Vent™ nylon appliance range, Oventus will soon
launch the ExVent™ positive end expiratory pressure (PEEP) valve.
The ExVent™ integrates into the ‘duckbill’ in the airway of the O2Vent™
oral appliances, further enhancing efficacy in a number of patients – a
key step in the OVN personalised treatment program. This device
accessory controls exhalation for patients utilising the Oventus’
O2Vent™ airway, generating positive air pressure on exhalation,
creating a micro CPAP-type effect but without the air pump.
The O2Vent ONEPAP™ appliance (incorporating a titratable PEEP
valve and nasal pillows) is on track for launch in early 2019. This
appliance is designed for patients with more severe sleep apnoea and
is undergoing trials as part of the NeuRA study. O2Vent ONEPAP™ is
possibly the most exciting extension of ‘Oventus Airway Technology’
and in fact has the potential to elevate the efficacy of oral appliance
therapy to that of CPAP for many patients.
The previously announced O2Vent™ Connect™ CPAP connection
remains in late stage development for release in calendar 2019. This
appliance works together with existing CPAP technology delivering
pressurised airflow via Oventus’ unique connector with nasal pillows
in combination with Oventus’ O2Vent™ oral appliance.
Clinical trial results
A number of clinical trial results were announced during the financial
year and presented at sleep industry conferences confirming the
efficacy, and building on the growing body of evidence, of ‘Oventus
Airway Technology’.
The OVEN-003 ‘Brisbane’ trial was concluded in late May and interim
results were reported for the OVEN-005 ‘Sydney NeuRA’ trial which
both showed very positive clinical data covering an additional 45
patients in clinical trials being released.
To date, data has been collected and analysed across 95 patients
suffering from OSA over four clinical studies, all consistently showing
strong clinical efficacy of the O2Vent™ oral appliance, validating
‘Oventus Airway Technology’ for use in both oral appliances and as a
CPAP interface.
Further results are expected in calendar Q4 2018 from the OVEN-004
‘Perth’ study covering 23 patients and the OVEN-005 Sydney NeuRA
Study with a further 16 patients.
OVENTUS.COM.AU OVENTUS MEDICAL ANNUAL REPORT 2018 15
The OVEN-005 ‘Sydney NeuRA’ trial remains ongoing as part of a
Cooperative Research Centre Program (CRC-P) announced in February
2017, which is funded through $2.95 million grant over a three-year
period from the Australian Federal government’s Department of Industry,
Innovation and Science. The ongoing NeuRA study running a number of
cohorts will also focus on building clinical evidence during the coming
financial year 2019, in the newly developed PEEP technology, in the soon
to be launched ExVent™ and O2Vent ONEPAP™ extension appliances,
building out ‘Oventus Sleep Treatment Platform’. The study will also look
to build clinical evidence in the O2Vent™ Connect™ CPAP connection.
Operational focus and cost reduction
During the financial year, Oventus implemented a program of
reducing R&D spend and diverting resources into sales and
marketing channels while containing costs as part of a transition,
moving from being a predominantly R&D focused company to a
sales-oriented company.
The Company aims to further reduce operating overheads by
reducing activities at its Melbourne facility and by fully outsourcing
manufacturing of its titanium O2Vent™ appliance in a strategic move
to become a virtual device manufacturer. This move will enable
Oventus to focus on its core value proposition of driving innovation
in airway management and the incorporation of its technology into
existing workflows and channels.
Industry, Innovation and Science. Oventus is the lead participant
and is pleased to work with four other participants, CSIRO, Medical
Monitoring Solutions Pty Ltd, Neuroscience Research Australia
(NeuRA), and Western Sydney University (WSU).
The focus of the CRC-P is to develop on a personalised approach to
the treatment of obstructive sleep apnoea. The O2Vent Optima™ nylon
appliance, the ExVent™ and O2Vent ONEPAP™ PEEP valves are key R&D
outcomes over the last year. All these products are anticipated to be
on the market in the fiscal year ending 30 June 2019.
In addition, a number of product and process improvements were
implemented during the reporting period. These included introductions
of new 3D modelling software for increased device customisation and
improved patient comfort; redesign of the shape of the O2Vent™ T and
O2Vent™ W for increased strength and resilience; and upgrades to the
device adjuster assembly for improved patient usability.
The manufacturing and logistics partnership with Modern, entered into
in May 2017, has completed testing and is now operational. This saw
the production of polymer inserts used in the manufacturing process
transferred to Modern during the period. Discussions with contract
manufacturers are underway to outsource 3D printing, polishing
and other elements of the manufacturing process. Completion of
outsourced manufacturing is expected to be completed by the fourth
calendar quarter of 2018.
Research and Development (R&D) and product innovation
Patent application approvals
Research and development expenditures for the year ended 30 June
2018 totalled $2,515,574, including $1,737,286 of development costs
capitalised in the consolidated statement of financial position and a
provision for indirect costs.
As planned during the period, Oventus continued to conduct
research and development (R&D) activities to support product and
clinical development activities, in tandem with the market launch into
overseas jurisdictions which represent large market opportunities
for our innovative product range. R&D focus has switched to the
Cooperative Research Centre Program (CRC-P) announced in February
2017, which will receive $2.95 million in funding over a three-year
period from the Australian Federal Government’s Department of
Patent approval was received from the US Patent and Trade Mark
Office, number US-10,010,444, and European Patent Office, number
EP-2,709,572 in June 2018. The approvals provide Oventus with
protection for its ‘Airway Technology’ incorporated into its O2Vent™
oral appliances for the treatment of sleep apnoea and snoring.
This newly approved patent sits within an existing family of patents
previously approved and, importantly, provides Oventus with patent
protection in its key target market of the US and Europe. Oventus
already has issued patents in Australia.
SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
The Company’s capital raising activities for the prior two fiscal years
are shown in the table below.
Equity - Share capital
Opening Balance
Ordinary shares issued:
19 July 2016
29 June 2017
30 June 2017
9 August 2017
21 December 2017
Share issue costs
At reporting date
30 June 2018
Number of Shares
#
30 June 2018
Value of Shares
$
30 June 2017
Number of Shares
#
30 June 2017
Value of Shares
$
90,000,000
21,729,732
48,000,000
4,426,703
-
-
-
2,139,265
13,799,947
-
-
-
-
24,000,000
17,916,660
83,340
770,135
7,589,971
(449,444)
-
-
-
105,939,212
29,640,394
90,000,000
12,000,000
6,449,998
30,002
-
-
(1,176,971)
21,729,732
OVENTUS.COM.AU
16 OVENTUS MEDICAL ANNUAL REPORT 2018
Directors’ Report (continued)
For the year ended 30 June 2018
In early December 2017, the Company completed a heavily
oversubscribed capital raising, where $7.6 million was raised with
support from new and existing institutional and sophisticated investors.
The funds raised will ensure Oventus is well capitalised to enable its
fast-tracked entry into the global sleep market with the support of
partnerships like the one signed in mid 2017 with Modern Dental
Group (‘Modern’).
SIGNIFICANT MATTERS SUBSEQUENT TO THE PERIOD
On 3 July 2018, the Consolidated Entity granted 850,000 share options
to employees under the Oventus Employee Option Plan. The options
have an excise price $0.4804 and expiry date of 2 July 2023. The
estimated total fair value of share options granted was $121,740 or
$0.1432 per share option, calculated using The Black-Scholes pricing
model. The total value of the options will be brought to account over
the period of five years.
EXPECTED FUTURE DEVELOPMENTS
Looking ahead, Oventus expects to make significant progress in
generating sales of the O2Vent™ range. Key developments expected
across the coming two quarters include:
1. Uptake and acceptance of the O2Vent™ range of products by
patients and clinicians through Oventus’ distribution in the sleep
clinician channel and through the agreement with Modern in the
dental channel in various geographical locations, supported by
successful marketing and training activities to drive adoption;
2. Additional partnerships for clinical delivery and distribution in
various geographies;
3. Additional clinical evidence/clinical trial results which highlight the
benefit of the ‘Oventus Airway Technology’ for a range of patients;
4. Further enhancement and outsourcing of the manufacturing
process to scale manufacturing to meet demand and minimise
costs; and
5. Successful launch of new products including the O2Vent™ nylon
appliance range and extensions of ‘Oventus Airway Technology’
with the ExVent™ positive end expiratory pressure (PEEP) valve and
O2Vent ONEPAP™ appliance (incorporating a titratable PEEP value
and nasal pillows), treating a wider range of patients including those
that are intolerant of CPAP masks or in the future, as a first line of
treatment for specific severe sleep apnoea patients.
ENVIRONMENTAL REGULATIONS
The Company’s operations are not regulated by any significant
environmental regulations under a law the Commonwealth or of a
State or Territory.
INFORMATION ON DIRECTORS AND COMPANY SECRETARY
MEL BRIDGES
(Chairman) (Non-Executive Director)
Qualifications
Bachelor Degree of Science (Chemistry), Honorary Doctorate from
Queensland University of Technology and Fellow of the Australian
Institute of Company Directors.
Experience
Mel has over 35 years’ experience founding and building
international lifescience, diagnostic and medical device companies
and commercialising a wide range of Australian technology. He is
responsible for numerous commercial and M&A transactions and
liquidity events, including listings on the ASX.
Mel has received national and state business awards including the
2005 AusBiotech Chairman’s Industry Medal and 2004 Queensland
Entrepreneur of the Year. Mel has founded and developed medical
device and diagnostic companies, including Pacific Diagnostics
(acquired by Baxter), PanBio Ltd (acquired by Inverness Medical), and
ImpediMed Ltd (ASX: IPD).
Other current directorships
Mel is currently a director of ASX 100 Company ALS Ltd, and co-founder
and chairman of Anatara Lifesciences Ltd (until May 2018).
Former directorships (last 3 years)
Mel was director of Tissue Therapies Ltd (March 2009 to December
2015), Benitec BioPharma Limited (October 2007 to June 2014).
Special responsibilities
Mel is the chair of the Remuneration Committee and serves on the
Audit and Risk Management Committee.
Interest in shares
2,290,551 ordinary shares
Interest in options
200,732 options
CHRISTOPHER HART
(Executive Director) (Founder) (Managing Director and Chief Executive
Officer from 30 August 2018) (Clinical Director up to 29 August 2018)
Qualifications
Bachelor of Dental Science with Honours, Bachelor of Science in Bio-
chemistry, Master of Philosophy in Biomedical Science.
Experience
Prior to establishing Oventus, Chris owned and managed a multi-site
national dental practice, training institute and management consultancy
which he sold to private equity investors.
OVENTUS.COM.AU OVENTUS MEDICAL ANNUAL REPORT 2018 17
Chris also acts as an adviser to various bodies within the dental
industry as well as the health care sector more broadly on the
commercial aspects of health care delivery.
Other current directorships
None
Former directorships (last 3 years):
None
Interest in shares
26,542,513 ordinary shares
Interest in options
401,464 options
NEIL ANDERSON
(Executive Director) (Chief Technical Officer from 30 August 2018)
(Managing Director and Chief Executive Officer up to 29 August 2018)
Qualifications
Bachelor of Applied Science (Hons), Diploma of Management, Graduate
of the Institute of Company Directors (GAICD).
Experience
Neil has 30 years’ experience in commercialising medical devices and
managing the process from conception to market release including
applied research, developing prototypes and testing, product
development, manufacturing, regulatory submissions and clinical trials.
Prior to taking on the role with Oventus, Neil founded and held the role
of chief executive officer of CathRx for 10 years. In this role, Neil managed
the process from the invention of the company’s technology through to
commercialising a range of products leading to sales in Europe.
Experience
Sue MacLeman has more than 30 years’ experience as a
pharmaceutical, biotechnology and medical technology executive
with senior roles in corporate, medical, commercial and business
development. Sue has also served as CEO and Board member of several
ASX and NASDAQ listed companies in the sector. Sue is also appointed
to a number of academic and government advisory committees.
Other current directorships
Sue is currently Chair Elect and Non Executive Director of MTPConnect
(Medical Technology and Pharmaceuticals Industry Innovation Growth
Centre MTPCII-GC Ltd) and Non-Executive Director at both Oventus
Medical Ltd and veski.
Former directorships (last 3 years):
RHS Ltd
Special responsibilities
Sue is the chair of the Audit and Risk Management Committee and
serves on the Remuneration Committee.
Interest in shares
23,000 ordinary shares
Interest in options
200,732 options
STEPHEN DENARO
(Company Secretary)
Qualifications
Bachelor of Business, Chartered Accountant, a Member of AICD and a
Graduate Diploma in Applied Corporate Governance.
Other current directorships
Experience
None
Former directorships (last 3 years):
None
Interest in shares
5,837,365 ordinary shares
Interest in options
401,464 options
SUE MACLEMAN
(Non-Executive Director)
Qualifications
Bachelor of Pharmacy from the University of Queensland, Masters of
Marketing at Melbourne University (Melbourne Business School), a
Masters of Law degree (Deakin University), a Fellowship with the ACPP
and is a Fellow/Graduate of AICD.
Christopher Hart
Neil Anderson
Sue MacLeman
Mel Bridges (Chairman)
Steve has extensive experience in mergers and acquisitions, business
valuations, accountancy and income tax compliance services, as well
as board corporate governance. Steve provides company secretary
services for a number of biotech and software companies. Steve is also
a member of the Institute of Chartered Accountants in Australia, and
the Australian Institute of Company Directors.
MEETINGS OF DIRECTORS
During the financial year, 11 meetings of directors were held.
Attendances were:
Full Board
Number eligible
to attend
Number
attended
11
11
11
11
11
11
11
11
OVENTUS.COM.AU 18 OVENTUS MEDICAL ANNUAL REPORT 2018
Directors’ Report (continued)
For the year ended 30 June 2018
MEETINGS OF REMUNERATION COMMITTEE AND AUDIT AND
RISK MANAGEMENT COMMITTEE
g. Be transparent with respect to setting performance goals and the
measurement of performance against those goals; and
During the financial year, 2 meetings of the Remuneration and
Nomination Committee were held and 2 meetings of the Audit and Risk
Management Committee was held. Attendances were:
Remuneration and
Nomination
Audit and Risk
Management
Number
eligible to
attend
Number
attended
Number
eligible to
attend
Number
attended
Mel Bridges (Chairman)
Sue MacLeman
2
2
2
2
2
2
2
2
REMUNERATION REPORT (AUDITED)
Key management personnel (KMP) covered in this report
The following persons were directors of Oventus Medical Limited
during the financial year:
–
Mel Bridges (Chairman) (Non-Executive Director)
–
–
Christopher Hart (Executive Director) (Founder) (Managing Director
and Chief Executive Officer from 30 August 2018) (Clinical Director
up to 29 August 2018)
Neil Anderson (Executive Director) (Chief Technical Officer from 30
August 2018) (Managing Director and Chief Executive Officer up to
29 August 2018)
–
Sue MacLeman (Non-Executive Director)
Other key management personnel
The following persons also had the authority and responsibility for
planning, directing and controlling the major activities of the Group,
directly or indirectly, during the financial year:
–
–
Daniel Parry (Chief Financial and Operations Officer from 5
December 2017)
Robin Randolph (Vice President of U.S. Marketing and Operations
from 1 April 2018)
–
Stephen Denaro (Company Secretary)
h. Align with regional and industry standards and regulatory
requirements.
The remuneration policy links to the Group’s long-term performance
by providing incentives to key management personnel based upon
milestones which need to be met in the short to medium term
which but which are essential requirements for the Group’s long
term performance. The issue of options to key personnel aligns their
compensation to increases in share prices and, accordingly, increases in
shareholder wealth. The remuneration policy is not based on earnings
as this is not seen as the appropriate indicator of performance for key
management personnel at this stage of the Group’s life cycle.
Elements of remuneration
Remuneration packages may consist of fixed remuneration, short-term
incentives and long term equity-based benefits.
Remuneration packages can be tailored to an individual’s requirements
to maximize available salary packaging options.
Total fixed remuneration consist of base salary, non-cash benefits
provided inclusive of FBT (Fringe Benefit Tax) costs, as well as employer
contributions to superannuation.
Short-term incentives consist of cash bonuses payable under the
Company’s Employee Incentive Plan, and are paid on the basis of an
individual’s performance and contributions during the year.
The Employee Incentive Plan is managed by the Remuneration and
Nomination Committee, which sets and reviews relevant performance
targets against which an individual’s and the Company’s short-term
performance are measured.
Long-term benefits are provided by way of equity based incentives
under the Company’s Employee Option Plan, and are granted based on
an assessment made by the Remuneration and Nomination Committee
taking account of an individual’s position, service and market-based
assessment and an individual’s capacity to influence corporate value.
The Employee Option Plan is managed by the Remuneration and
Nomination Committee who recommends grants to individuals and the
terms and performance criteria applicable.
Remuneration policy and link to performance
Responsibilities of Remuneration and Nomination Committee
The Group’s remuneration policy adopted has been designed to:
a. Align with shareholder and business objectives and expectations;
b. Attract and retain suitably qualified and experienced people;
c. Provide a level and composition of remuneration that is reasonable,
fair and aligned to market;
d. Encourage directors and executives to pursue the long term growth
and success of the Company, balanced against the need to also
achieve critical short term business objectives;
e. Align corporate and individual performance;
f. Be internally consistent;
1. The Remuneration and Nomination Committee is responsible for
determining appropriate levels and structure of remuneration for
executives.
2. The Remuneration and Nomination Committee is responsible for
approving performance metrics for executives and measuring
performance against those metrics.
3. The Remuneration and Nomination Committee will review the
remuneration of executives annually, taking account of market
movements, comparative remuneration information and individual
performance.
OVENTUS.COM.AU OVENTUS MEDICAL ANNUAL REPORT 2018 19
Remuneration expenses for KMP
For the year ended 30 June 2018
Non-executive directors
Mel Bridges
Sue MacLeman
Executive directors
Christopher Hart
Neil Anderson
Other key management personnel
Stephen Denaro
Daniel Parry (from 5 December 2017)
Robin Randolph (from 1 April 2018)
For the year ended 30 June 2017
Non-executive directors
Mel Bridges
Sue MacLeman
Executive directors
Christopher Hart
Neil Anderson
Other key management personnel
Elise Hogan (up to 28 June 2017)
Stephen Denaro
Short- term benefits
Post-
employment
benefits
Share- based
payments
Cash salary
& fees
$
Bonus
$
Other
Benefits
$
Super
$
Termination
benefits
$
Equity
- settled
$
Total
$
73,059
50,228
-
-
301,370
301,370
80,000
80,000
25,000
105,577
55,921
74,583
55,228
300,070
300,070
301,370
25,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
5,766
-
-
-
-
-
-
6,941
4,772
36,230
25,000
-
10,030
-
7,085
4,771
28,507
28,507
-
-
-
-
-
-
-
-
-
-
-
7,215
7,215
14,430
14,430
3,608
6,793
-
6,933
6,933
13,867
13,867
35,788
108,381
28,303
-
-
-
87,215
62,215
432,030
420,800
28,608
122,400
61,687
88,601
66,932
342,444
342,444
473,842
25,000
Contractual arrangements for executive KMP
Remuneration and employment terms for executive directors and
other key management personnel are detailed in the employment
agreements. The employment agreements do not have a fixed term.
The Group may terminate the contracts immediately if the executive
engages in serious misconduct, wilfully disobeys a lawful and reasonable
direction or becomes bankrupt. Otherwise, the Group or the executive
may terminate the contracts by giving three months’ notice.
Non-executive director arrangements
The Board’s policy is to remunerate non-executive Directors at market
rates for comparable companies for the time, commitment and
responsibilities undertaken by non-executive Directors.
Remuneration payable to non-executive Directors consists of fixed fees
payable within the aggregate director fees approved by shareholders.
In addition, statutory employer superannuation contributions are
payable where relevant, as are non-cash benefits in lieu of fees.
Base fixed fees payable to non-executive Directors take account of
work undertaken on Board committees. Additional fixed fees will be
paid to directors who chair a Board committee.
In addition, non-executive Directors may participate under the terms of
the Company’s Employee Option Plan, subject to the relevant approval
of shareholders.
Other than by way of payment of statutory employer superannuation
contributions, retirement benefits are not granted to non-executive
Directors.
The Remuneration and Nomination Committee reviews the
remuneration of non-executive Directors annually. If considered
necessary, the Remuneration and Nomination Committee will
recommend that shareholders be asked to consider, and if considered
appropriate, to approve any increase in the aggregate non-executive
Director fees. The total amount of fixed fees paid to non-executive
OVENTUS.COM.AU
20 OVENTUS MEDICAL ANNUAL REPORT 2018
Directors’ Report (continued)
For the year ended 30 June 2018
Directors must not exceed the maximum amount authorised by
shareholders from time to time. As at 30 June 2018, the Consolidated
Entity was a listed entity and the requirement to have non-executive
director remuneration authorised is subject to approval at the
Company’s annual general meeting.
Where relevant, the Remuneration and Nomination Committee will
seek advice from independent third parties to bench mark non-
executive Director remuneration against relevant market practice.
End of Remuneration Report
SHARES UNDER OPTION
Unissued ordinary shares
Unissued ordinary shares of Oventus Medical Limited under option at
the date of this report are as follows:
Date options
granted
Expiry date
Exercise
price
Number
under option
24 February 2016
23 February 2021
$0.578
2,274,954
1 December 2016
1 December 2021
$1.055
23 May 2017
12 December 2022
$0.961
23 May 2017
24 February 2022
$0.940
300,000
600,000
50,000
18 December 2017 18 November 2022
$1.016
200,000
No option holder has any right under the options to participate in any
other share issue of the company or any other entity.
PROCEEDINGS ON BEHALF OF THE COMPANY
No person has applied for leave of Court to bring proceedings on
behalf of the Company or intervene in any proceedings to which the
Company is a party for the purpose of taking responsibility on behalf of
the Company for all or any part of those proceedings.
The Company was not a party to any such proceedings during the period.
CORPORATE GOVERNANCE
In recognising the need for the highest standards of corporate
behaviour and accountability, the directors of Oventus Medical Limited
support and have adhered to key principles of corporate governance.
Please refer to the Corporate Governance Statement of Oventus
Medical Limited on website www.oventus.com.au via the tab headed
“Investor Centre” for more information.
NON-AUDIT SERVICES
Details of the amounts paid or payable to the auditor for non-audit
services provided during the financial year by the auditor are outlined
in note 17 to the financial statements.
The directors are satisfied that the provision of non-audit services
during the financial year, by the auditor (or by another person or firm
on the auditor’s behalf), is compatible with the general standard of
independence for auditors imposed by the Corporations Act 2001.
There were no non-audit services provided by the auditor (or by
another person or firm on the auditors behalf) during the financial year.
Shares issued on the exercise of options
AUDITOR’S INDEPENDENCE DECLARATION
No options were exercised during the year ended 30 June 2018.
INSURANCE OF OFFICERS AND INDEMNITIES
The Company maintains and pays premiums in respect of directors’
and officers’ insurance. Premiums paid in respect of insurance
amounted to $46,412.
The liabilities insured are legal costs that may be incurred in defending
civil or criminal proceedings that may be brought against the officers in
their capacity as officers of entities in the group, and any other payments
arising from liabilities incurred by the officers in connection with such
proceedings. This does not include such liabilities that arise from
conduct involving a wilful breach of duty by the officers or the improper
use by the officers of their position or of information to gain advantage
for themselves or someone else or to cause detriment to the company.
It is not possible to apportion the premium between amounts relating to
the insurance against legal costs and those relating to other liabilities.
The auditor’s independence declaration is set out on the following page
and forms part of the Directors’ Report for the year ended 30 June 2018.
This report is made in accordance with a resolution of directors.
Mel Bridges
Director
Brisbane
30th August 2018
OVENTUS.COM.AU Auditor’s independence declaration
For the year ended 30 June 2018
OVENTUS MEDICAL ANNUAL REPORT 2018 21
AUDITOR’S INDEPENDENCE DECLARATION
UNDER SECTION 307C OF THE CORPORATIONS ACT 2001
TO THE DIRECTORS OF
OVENTUS MEDICAL LIMITED
I declare that, to the best of my knowledge and belief, during the year ended 30 June 2018, there
have been:
(a)
no contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
AUDITOR’S INDEPENDENCE DECLARATION
UNDER SECTION 307C OF THE CORPORATIONS ACT 2001
TO THE DIRECTORS OF
OVENTUS MEDICAL LIMITED
(b)
no contraventions of any applicable code of professional conduct in relation to the audit.
I declare that, to the best of my knowledge and belief, during the year ended 30 June 2018, there
have been:
PKF HACKETTS AUDIT
(a)
no contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
no contraventions of any applicable code of professional conduct in relation to the audit.
(b)
Cameron Bradley
Partner
Brisbane, 30 August 2018
PKF HACKETTS AUDIT
Cameron Bradley
Partner
Brisbane, 30 August 2018
16
16
OVENTUS.COM.AU
22 OVENTUS MEDICAL ANNUAL REPORT 2018
Consolidated Statement of Comprehensive Income
For the year ended 30 June 2018
Revenue – sale of goods
Less: Expenses
Staff costs
Manufacturing costs - pilot phase
Depreciation and amortisation
Administration
Travel
Sales and marketing
Information technology costs
Audit legal and consulting
Clinical studies research and regulatory
Insurance
Office & lab
Total expenses
Other income (expenses)
Interest income
Other income
Loss before income tax expense
Income tax expense
Note
30 June 2018
$
30 June 2017
$
271,322
447,994
2,790,306
2,569,138
177,700
757,636
512,354
422,854
406,245
387,840
319,996
269,057
204,877
175,177
582,431
615,621
688,058
297,348
852,419
473,082
463,335
239,977
142,308
174,265
6,424,042
(6,152,720)
7,097,982
(6,649,988)
191,157
91,016
282,173
88,661
51,213
139,874
(5,870,547)
(6,510,114)
13
-
-
Loss for the year attributable to members of the company
(5,870,547)
(6,510,114)
Other comprehensive income:
Items that may be reclassified subsequently to profit and loss:
Exchange differences on translating foreign operations
3,895
-
Total comprehensive loss attributable to members of the company
(5,866,652)
(6,510,114)
Loss per share for profit/(loss) from continuing operations:
Basic loss per share
Diluted loss per share
22
22
Cents
(5.92)
(5.92)
Cents
(9.18)
(9.18)
The above Consolidated Statement of Comprehensive Income should be read in conjunction with the accompanying notes.
OVENTUS.COM.AU
Consolidated Statement of Financial Position
As at 30 June 2018
OVENTUS MEDICAL ANNUAL REPORT 2018 23
Current assets
Cash and cash equivalents
Trade and other receivables
Other current assets
Total current assets
Non- current assets
Property, plant and equipment
Intangible assets
Deposits
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Other current liabilities
Total current liabilities
Non- current liabilities
Other liabilities
Total non- current liabilities
Total liabilities
Net assets
Equity
Share capital
Share based payment reserve
Translation reserve
Accumulated losses
Total equity
Note
30 June 2018
$
30 June 2017
$
3
4
5
6
7
8
9
9
10
11
12
9,894,959
562,207
1,372,217
8,648,099
420,092
1,225,385
11,829,383
10,293,576
702,089
3,211,947
69,094
3,983,130
15,812,513
561,475
120,768
682,243
-
-
682,243
15,130,270
29,640,394
309,476
3,895
(14,823,495)
15,130,270
1,314,290
2,420,447
91,518
3,826,255
14,119,831
1,089,043
127,473
1,216,516
14,283
14,283
1,230,799
12,889,032
21,729,732
201,311
-
(9,042,011)
12,889,032
The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes.
OVENTUS.COM.AU
24 OVENTUS MEDICAL ANNUAL REPORT 2018
Consolidated Statement of Changes in Equity
For the year ended 30 June 2018
Contributed
Equity
$
Share Based
Payments Reserve
$
Translation
Reserve
$
Accumulated
Losses
$
Total
$
4,426,703
41,533
Contributions of equity, net of transaction
costs and tax
17,303,029
Share based payments
-
159,778
17,303,029
21,729,732
159,778
201,311
21,729,732
201,311
Balance at 1 July 2016
Loss for the year
Other comprehensive income
Total comprehensive income for the year
Transactions with owners in their
capacity as owners:
Total transactions with owners in their
capacity as owners:
Balance at 30 June 2017
Balance at 1 July 2017
Loss for the year
Other comprehensive income
Total comprehensive income for the year
-
-
-
-
-
-
Transactions with owners in their capacity
as owners:
Contributions of equity, net of transaction
costs and tax
7,910,662
Share based payments
Exchange differences on translating foreign
operations
Transfer of expired options
-
-
-
Total transactions with owners in their
capacity as owners:
7,910,662
-
-
-
-
-
-
-
-
197,228
-
(89,063)
108,165
-
-
-
-
-
-
-
-
-
-
-
-
-
-
3,895
-
3,895
(2,531,897)
1,936,339
(6,510,114)
(6,510,114)
-
-
(6,510,114)
(6,510,114)
-
-
-
17,303,029
159,778
17,462,807
(9,042,011)
12,889,032
(9,042,011)
12,889,032
(5,870,547)
(5,870,547)
-
-
(5,870,547)
(5,870,547)
-
-
-
89,063
89,063
7,910,662
197,228
3,895
-
8,111,785
Balance at 30 June 2018
29,640,394
309,476
3,895
(14,823,495)
15,130,270
The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes.
OVENTUS.COM.AU
Consolidated Statement of Cash Flows
For the year ended 30 June 2018
OVENTUS MEDICAL ANNUAL REPORT 2018 25
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Interest received
R&D grants and concessions received
Interest and other finance costs paid
Note
30 June 2018
$
30 June 2017
$
292,476
(6,124,361)
210,603
986,233
-
398,056
(6,630,595)
85,260
629,899
(12,696)
Net cash outflow from operating activities
21
(4,635,049)
(5,530,076)
Cash flows from investing activities
Payments for property, plant and equipment
Payments for intangible assets
Proceeds from (payments for) term-deposits
Net cash outflow from investing activities
Cash flows from financing activities
(66,836)
(1,954,802)
22,424
(1,999,214)
Proceeds from issue of shares, net of transaction costs
10
7,910,662
Proceeds from (Repayments of) borrowings from directors and related entities
Net cash inflow from financing activities
Net increase in cash held
Cash and cash equivalents at the beginning of the year
Effects of exchange rate changes on cash and cash equivalents
Cash and cash equivalents at the end of the year
-
7,910,662
1,276,399
8,648,099
(29,539)
9,894,959
The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes.
(249,959)
(2,251,874)
-
(2,501,833)
17,303,029
(767,999)
16,535,030
8,503,121
161,114
(16,136)
8,648,099
OVENTUS.COM.AU
26 OVENTUS MEDICAL ANNUAL REPORT 2018
Notes to the Financial Statements
For the year ended 30 June 2018
1. SIGNIFICANT ACCOUNTING POLICIES
The principal accounting policies adopted in the preparation of the
financial statements are set out below. These policies have been
consistently applied to all the years presented, unless otherwise stated.
New, revised or amending Accounting Standards and
Interpretations adopted
The Group has adopted all of the new, revised or amending Accounting
Standards and Interpretations issued by the Australian Accounting
Standards Board (‘AASB’) that are mandatory for the current reporting
period. Any new, revised or amending Accounting Standards or
Interpretations that are not yet mandatory have not been early adopted.
The adoption of these Accounting Standards and Interpretations
did not have any significant impact on the financial performance or
position of the Group.
Basis of preparation
These general purpose financial statements have been prepared in
accordance with Australian Accounting Standards and Interpretations
issued by the Australian Accounting Standards Board (‘AASB’) and the
Corporations Act 2001, as appropriate for for-profit oriented entities.
These financial statements also comply with International Financial
Reporting Standards as issued by the International Accounting
Standards Board (‘IASB’).
The acquisition of subsidiaries is accounted for using the acquisition
method of accounting. A change in ownership interest, without the
loss of control, is accounted for as an equity transaction, where the
difference between the consideration transferred and the book value
of the share of the non-controlling interest acquired is recognised
directly in equity attributable to the parent.
A list of controlled entities is at Note 19.
Comparative information
Where necessary, comparative figures have been adjusted to conform
to changes in presentation in the current year.
Segment Reporting
The Group is a medical device developer operating within a sole
industry, being the development of oral appliances for sleep disorders.
The Group operates predominantly in Australia and has established
sales and marketing operations in the United States of America in
January 2017. For management purposes, the Group has two operating
segments: Australia and United States of America.
Unless stated otherwise, all amounts reported to the Board of
Directors, being the chief operating decision makers with respect to
operating segments, are determined in accordance with accounting
policies that are consistent with those adopted in the annual financial
statements of the Group.
Historical cost convention
Revenue recognition
These financial statements have been prepared under the historical
cost convention on an accrual basis of accounting and a going concern
assumption.
Critical accounting estimates
The preparation of the financial statements requires the use of certain
critical accounting estimates. It also requires management to exercise
its judgement in the process of applying the Group’s accounting
policies. The areas involving a higher degree of judgement or
complexity, or areas where assumptions and estimates are significant
to the financial statements, are disclosed in note 2.
Parent entity information
In accordance with the Corporations Act 2001, these financial
statements present the results of the Group only. Supplementary
information about the parent entity is disclosed in note 18.
Principles of consolidation
The Statement of Comprehensive Income and Statement of Financial
Position as at 30 June 2018 incorporates the assets, liabilities and
results of the Company and its controlled entities. A subsidiary is any
entity over which the Company has the power to govern the financial
and operating policies, generally accompanying a shareholding of more
than one half of the voting rights.
Revenue from sale of goods 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.
Interest revenue is recognised when it becomes receivable on a
proportional basis taking in to account the interest rates applicable to
the financial assets.
All revenue is stated net of the amount of goods and services tax (GST).
Government grants
Grants from government, including Australian Research and
Development Tax Incentive (RDTI), are recognised at their fair value
where there is a reasonable assurance that the grant will be received
and the Company will comply with all attached conditions.
Where a grant is received relating to research and development costs
that have been expensed, the grant is recognised as other income
when the grant becomes receivable.
When the grant relates to an asset, the cost of the asset is shown net of
the grant or receivable.
Income tax
All intercompany balances and transactions between entities in the
Group, including any unrealised profits or losses, have been eliminated
on consolidation. Accounting policies of controlled entities are
consistent with the policies adopted by the parent unless otherwise
stated below.
The income tax expense or benefit for the period is the tax payable on
that period’s taxable income based on the applicable income tax rate
for each jurisdiction, adjusted by the changes in deferred tax assets
and liabilities attributable to temporary differences, unused tax losses
and the adjustment recognised for prior periods, where applicable.
OVENTUS.COM.AU OVENTUS MEDICAL ANNUAL REPORT 2018 27
Deferred tax assets and liabilities are recognised for temporary
differences at the tax rates expected to be applied when the assets are
recovered or liabilities are settled, based on those tax rates that are
enacted or substantively enacted, except for:
When the deferred income tax asset or liability arises from the initial
recognition of goodwill or an asset or liability in a transaction that is not
a business combination and that, at the time of the transaction, affects
neither the accounting nor taxable profits; or
When the taxable temporary difference is associated with interests in
subsidiaries, associates or joint ventures, and the timing of the reversal
can be controlled and it is probable that the temporary difference will
not reverse in the foreseeable future.
Deferred tax assets are recognised for deductible temporary differences
and unused tax losses only if it is probable that future taxable amounts
will be available to utilise those temporary differences and losses.
The carrying amount of recognised and unrecognised deferred tax
assets are reviewed at each reporting date. Deferred tax assets
recognised are reduced to the extent that it is no longer probable that
future taxable profits will be available for the carrying amount to be
recovered. Previously unrecognised deferred tax assets are recognised
to the extent that it is probable that there are future taxable profits
available to recover the asset.
Deferred tax assets and liabilities are offset only where there is a
legally enforceable right to offset current tax assets against current tax
liabilities and deferred tax assets against deferred tax liabilities; and
they relate to the same taxable authority on either the same taxable
entity or different taxable entities which intend to settle simultaneously.
Manufacturing costs - Pilot phase
Manufacturing costs incurred during the pilot phase of manufacturing
have been expensed as incurred. When the Group expands its
manufacturing and distribution, expected in the year ended 30 June
2019, it will commence recognising cost of sales. All costs directly
associated with generating revenue, including direct materials and
labour and indirect costs will be allocated to cost of goods for sale.
Inventories
Raw materials and stores, work in progress and finished goods are
stated at the lower of cost and net realisable value. Cost comprises
direct materials, direct labour and an appropriate proportion of
variable and fixed overhead expenditure. Costs are assigned to
individual items of inventory on the basis of weighted average costs.
Costs of purchased inventory are determined after deducting rebates
and discounts. Net realisable value is the estimated selling price in the
ordinary course of business less the estimated costs of completion and
the estimated costs necessary to make the sale.
Expenses
All expenses are recognised in the Statement of Comprehensive
Income on an accrual basis. Amounts disclosed as expenses are net of
taxes paid except where the amount of goods and services tax incurred
is not recoverable from the taxation authority. In these circumstances,
the tax is recognised as part of the expense.
Current and non-current classification
Assets and liabilities are presented in the statement of financial
position based on current and non-current classification.
An asset is classified as current when: it is either expected to be
realised or intended to be sold or consumed in the Group’s normal
operating cycle; it is held primarily for the purpose of trading; it
is expected to be realised within 12 months after the reporting
period; or the asset is cash or cash equivalent unless restricted
from being exchanged or used to settle a liability for at least 12
months after the reporting period. All other assets are classified as
non-current.
A liability is classified as current when: it is either expected to be
settled in the Group’s normal operating cycle; it is held primarily for
the purpose of trading; it is due to be settled within 12 months after
the reporting period; or there is no unconditional right to defer the
settlement of the liability for at least 12 months after the reporting
period. All other liabilities are classified as non-current.
Deferred tax assets and liabilities are always classified as non-current.
Cash and cash equivalents
Cash and cash equivalents include cash on hand and at banks, short-
term deposits with an original maturity of three months or less held
at call with financial institutions, and bank overdrafts. Bank overdrafts
are shown within borrowings in current liabilities in the Statement of
Financial Position.
Trade and other receivables
Trade receivables are recognised initially at fair value and subsequently
shown net of provision for bad debts. Trade receivables are generally
due for settlement within 30 days.
They are presented as current assets unless collection is not expected
for more than 12 months after the reporting date.
Collectability of trade receivables is reviewed on an ongoing basis.
Debts which are known to be uncollectible are written off by reducing
the carrying amount directly. An allowance account (provision for
impairment of trade receivables) is used when there is objective
evidence that the Company will not be able to collect all amounts
due according to the original terms of the receivables. Significant
financial difficulties of the debtor, probability that the debtor will enter
bankruptcy or financial reorganisation, and default or delinquency in
payments are considered indicators that the trade receivables are
impaired. The amount of the impairment allowance is the difference
between the asset’s carrying amount and the present value of
estimated future cash flows, discounted at the original effective interest
rate. Cash flows relating to short-term receivables are not discounted if
the effect of discounting is immaterial.
The amount of the impairment loss is recognised in the profit or
loss within other expenses. When a trade receivable for which an
impairment allowance had been recognised becomes uncollectible
in a subsequent year, it is written off against the allowance account.
Subsequent recoveries of amounts previously written off are credited
against other expenses in profit or loss.
OVENTUS.COM.AU 28 OVENTUS MEDICAL ANNUAL REPORT 2018
Notes to the Financial Statements (continued)
For the year ended 30 June 2018
Plant and equipment
Each class of plant and equipment is carried at cost or fair value less,
where applicable, any accumulated depreciation and any accumulated
impairment losses.
Plant and equipment is measured on a cost basis.
Depreciation
The depreciable amount of all property, plant and equipment is
depreciated over their estimated useful lives commencing from the
time the asset is held ready for use. Land and the land component of
any class of property, plant and equipment is not depreciated.
Class of fixed asset
Office equipment
Computer equipment
Sleep and production equipment
Assets under joint arrangement
Interests in Joint Arrangements
Depreciation rates
20%
33%
20-33%
12.5%
Joint operations represent arrangements whereby joint operators
maintain direct interests in each asset and exposure to each liability of
the arrangement. The Group’s interests in the assets, liabilities, revenue
and expenses of joint operations are included in the respective line
items of the consolidated financial statements.
Gains and losses resulting from sales to a joint operation are
recognised to the extent of the other parties’ interests. When the
Group makes purchases from a joint operation, it does not recognise
its share of the gains and losses from the joint arrangement until it
resells those goods/assets to a third party.
Intangible assets
Patents, trademarks and licences
Patents, trademarks and licences are recognised at cost less
accumulated amortisation and accumulated impairment losses.
Amortisation is recognised on a straight-line basis over their estimated
useful lives. The estimated useful life and amortisation method are
reviewed at the end of each reporting period, with the effect of any
changes in estimate being accounted for on a prospective basis. The
Group’s estimate of the useful lives of its patents, trademarks and
licenses is 20 years.
Research and development expenditure
Expenditure on research activities is recognised as an expense
when incurred.
An internally generated intangible asset arising from development (or
from the development phase of an internal project) is recognised if,
and only if, all of the following have been demonstrated:
–
the technical feasibility of completing the intangible asset so that it
will be available for use or sale;
–
the intention to complete the intangible asset and use or sell it;
–
the ability to use or sell the intangible asset;
–
–
–
how the intangible asset will generate probable future economic
benefits;
the availability of adequate technical, financial and other resources
to complete the development and to use
the ability to measure reliably the expenditure attributable to the
intangible asset during its development.
The amount initially recognised for internally generated intangible
assets is the sum of the expenditure incurred from the date when the
intangible asset first meets the recognition criteria listed above. Any
research and development tax offsets or grants received relating to
development costs are deducted from the total development cost.
Where no internally generated intangible asset can be recognised,
development expenditure is recognised in profit or loss in the period in
which it is incurred.
Subsequent to initial recognition, internally generated intangible assets
are reported at cost less accumulated amortisation and accumulated
impairment losses. Amortisation is recognised on a straight line basis
over the estimated useful life of 5 years. The estimated useful life and
amortisation method are reviewed at the end of each reporting period,
with the effect of any changes in estimate being accounted for on a
prospective basis.
Financial instruments
Classification
The Company classifies its financial assets into the following categories:
financial assets at fair value through profit and loss, loans and
receivables, held-to-maturity investments, and available-for-sale
financial assets. The classification depends on the purpose for
which the instruments were acquired. Management determines the
classification of its financial instruments at initial recognition.
Loans and receivables
Loans and receivables are measured at fair value at inception and
subsequently at amortised cost using the effective interest rate
method.
Financial liabilities
Financial liabilities include trade payables, other creditors and loans
from third parties including inter-company balances and loans from or
other amounts due to director-related entities.
Non-derivative financial liabilities are recognised at amortised cost,
comprising original debt less principal payments and amortisation.
Financial liabilities are classified as current liabilities unless the group
has an unconditional right to defer settlement of the liability for at least
twelve months after the reporting period.
Impairment of financial assets
The carrying amount of financial assets is reviewed annually by
directors to assess whether there is any objective evidence that a
financial asset is impaired.
Where such objective evidence exists, the company recognises
impairment losses.
OVENTUS.COM.AU OVENTUS MEDICAL ANNUAL REPORT 2018 29
Trade and other payables
Goods and Services Tax (GST)
Trade payables represent liabilities for goods and services provided to
the Company prior to the end of financial period, which are unsecured
and are usually paid within 30 days of recognition. Trade and other
payables are presented as current liabilities unless payment is not due
within 12 months from reporting date. They are recognised initially at
their fair value and subsequently measured at amortised cost using the
effective interest method.
Impairment of non-financial assets
Goodwill, intangible assets not yet ready for use and intangible assets
that have an indefinite useful life are not subject to amortisation and
are therefore tested annually for impairment, or more frequently
if events or changes in circumstances indicate that they might be
impaired.
An impairment loss is recognised where the carrying amount of the asset
exceeds its recoverable amount. The recoverable amount of an asset is
defined as the higher of its fair value less costs to sell and value in use.
For an asset measured at cost, an impairment loss is recognised in
profit or loss where the carrying amount of the asset exceeds its
recoverable amount.
Reversal of impairment loss for an asset measured at cost other than
goodwill is recognised immediately in profit or loss.
Provisions
A provision is recognised in the statement of financial position when
the Company has a present legal or constructive obligation as a result
of a past event, and it is probable that an outflow of economic benefits
will be required to settle the obligation, and the amount has been
reliably estimated.
Leases
Leases are classified at their inception as either operating or finance
leases based on the economic substance of the agreement so as to
reflect the risks and benefits incidental to ownership.
Operating Leases
Lease payments for operating leases, where substantially all the risks
and benefits remain with the lessor, are recognised as an expense on a
straight-line basis over the term of the lease.
Lease incentives received under operating leases are recognised as a
liability and amortised on a straight-line basis over the life of the lease
term.
Employee entitlements
Liabilities for salaries including annual leave expected to be settled
within 12 months of the reporting date are recognised in current
employee entitlements in respect of employee services up to the
reporting date, and are measured at the amounts expected to be paid
when the liabilities are settled.
The liability for long service leave is based on current salary levels, years
of completed service and the estimated probability that the employee
will remain with the Company.
Revenues, expenses and assets are recognised net of the amount of
associated GST, unless the GST incurred is not recoverable from the
taxation authority. In this case it is recognised as a part of the cost of
acquisition of the asset or as part of the expense.
Receivables and payables are stated inclusive of the amount of GST
receivable or payable. The net amount of GST recoverable from, or
payable to, the taxation authority is included with other receivables or
payables in the balance sheet.
Cash flows are presented on a gross basis. The GST components
of cash flows arising from investing or financing activities which are
recoverable from, or payable to the taxation authority, are presented
as operating cash flows.
Contributed equity
Ordinary shares are classified as equity; incremental costs directly
attributable to the issue of new shares or options are shown in equity
as a deduction, net of tax, from the proceeds.
New standards and interpretations not yet adopted
Certain new accounting standards and interpretations have been
published that are not mandatory for 30 June 2018 reporting periods and
have not been early adopted by the Group. The Group’s assessment of
the impact of these new standards and interpretations is set out below.
AASB 9 Financial Instruments
AASB 9 Financial Instruments and applicable amendments, effective
from 1 January 2018, addresses the classification, measurement and
derecognition of financial assets and financial liabilities. This standard
introduces new classification and measurement models for financial
assets, using a single approach to determine whether a financial asset
is measured at amortised cost or fair value. It has now also introduced
revised rules around hedge accounting and impairment. The Group
will adopt this standard and the amendments from 1 July 2018 and it
does not expect this to have a significant impact on the recognition and
measurement of the Group’s financial instruments. The derecognition
rules have not been changed from the previous requirements and the
Group does not apply hedge accounting.
AASB 15 Revenue from Contracts with Customers
This standard is applicable to annual reporting periods beginning on
or after 1 January 2018. The standard provides a single standard for
revenue recognition. The new standard is based on the principle that
revenue is recognised when control of a good or service transfers to a
customer. The standard permits either a full retrospective or a modified
retrospective approach for its adoption. The standard will require
contracts to be identified, together with the separate performance
obligations within the contract. The transaction price will be determined
adjusted for the time value of money. Revenue is recognised when
each performance obligation is satisfied. For goods, the performance
obligation would be satisfied when the customer obtains control of
the goods. Contracts with customers will be presented in an entity’s
statement of financial position as a contract liability, a contract asset,
or a receivable, depending on the relationship between the entity’s
OVENTUS.COM.AU 30 OVENTUS MEDICAL ANNUAL REPORT 2018
Notes to the Financial Statements (continued)
For the year ended 30 June 2018
performance and the customer’s payment. The Group will adopt this
standard from 1 July 2018 and the impact of its adoption is expected to
be minimal on the Group.
AASB 16 Leases
The new standard will be effective for annual periods beginning on or
after 1 January 2019. Early application is permitted, provided the new
revenue standard, AASB 15 Revenue from Contracts with Customers,
has been applied, or is applied at the same date as AASB 16. AASB
16 will primarily affect the accounting by lessees and will result in the
recognition of almost all leases on the balance sheet. The standard
removes the current distinction between operating and financing
leases and requires recognition of an asset (the right to use the leased
item) and a financial liability to pay rentals for almost all lease contracts.
The accounting by lessors, however, will not significantly change. The
Group will adopt this standard from 1 January 2019 but the impact of
its adoption is yet to be assessed by the Group.
2. CRITICAL ACCOUNTING JUDGEMENTS, ESTIMATES
AND ASSUMPTIONS
The preparation of the financial statements requires management to
make judgements, estimates and assumptions that affect the reported
amounts in the financial statements. Management continually evaluates
its judgements and estimates in relation to assets, liabilities, contingent
liabilities, revenue and expenses. Management bases its judgements,
estimates and assumptions on historical experience and on other
various factors, including expectations of future events, management
believes to be reasonable under the circumstances. The resulting
accounting judgements and estimates will seldom equal the related
actual results. The judgements, estimates and assumptions that have
a significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities (refer to the respective notes) within
the next financial year are discussed below.
Estimation of useful lives of assets
The Group determines the estimated useful lives and related
depreciation and amortisation charges for its property, plant and
equipment and finite life intangible assets. The useful lives could
change significantly as a result of technical innovations or some other
event. The depreciation and amortisation charge will increase where
the useful lives are less than previously estimated lives, or technically
obsolete or non-strategic assets that have been abandoned or sold will
be written off or written down.
Development costs
The Group capitalises development costs for a project in accordance
with the accounting policy as per note 1. Initial capitalisation of costs is
based on management’s judgement that technological and economic
feasibility is confirmed, usually when a product development project
has reached a defined milestone according to an established project
management model. In determining the amounts to be capitalised,
management makes assumptions regarding the expected future cash
generation of the project and the expected period of benefits. At 30
June 2018, the carrying amount of capitalised development costs was
$2,464,345 (2017: $1,847,478).
Going concern
The financial statements have been prepared on a going concern basis
that presumes the realisation of assets and the discharge of liabilities in
the normal course of operations for the foreseeable future.
The ability of the Group to continue on a going concern basis is
dependent upon the following:
–
The successful development of the Group’s product
–
Success in achieving budgeted sales and positive cash flow from
operations, and
Share-based payment transactions
–
The ability to raise further capital as required.
The Group measures the cost of equity-settled transactions with
employees by reference to the fair value of the equity instruments at
the date at which they are granted. The fair value is determined by using
the Black-Scholes model taking into account the terms and conditions
upon which the instruments were granted. The accounting estimates and
assumptions relating to equity-settled share-based payments would have
no impact on the carrying amounts of assets and liabilities within the next
annual reporting period but may impact profit or loss and equity.
During the year, the Group made a loss before tax of $5,870,547
(2017: loss of $6,510,114) and has accumulated losses of $14,823,495.
However, as at 30 June 2018, the current assets exceed its current
liabilities by $11,147,140. Thus, the directors have a reasonable
expectation that the Group has adequate resources to continue in
operational existence in the foreseeable future. However, additional
capital raising may be required in the future to meet expansionary and
long-term goals.
OVENTUS.COM.AU OVENTUS MEDICAL ANNUAL REPORT 2018 31
30 June 2018
$
30 June 2017
$
62
794,897
9,100,000
9,894,959
86,413
440,000
4,747
43,050
574,210
12,003
562,207
324
8,647,775
-
8,648,099
107,567
-
250,029
62,496
420,092
-
420,092
3. CASH AND CASH EQUIVALENTS
Cash on hand
Cash at bank
Short-term deposits
4. TRADE AND OTHER RECEIVABLES
Trade receivables
Receivable from CSIRO
GST receivable
Other receivables
Less allowance for doubtful debts
As at 30 June 2018, trade receivables of $12,003 (2017: nil) were past due and considered impaired.
On 21 June 2018, the Company entered into an Equipment Ownership & Management Agreement with Commonwealth Scientific and Industrial
Research (CSIRO) wherein both parties agreed to share in the ownership and maintenance of the Arcam Equipment (the Equipment) in the period
from 1 July 2018 to 30 June 2026. As per the terms of the agreement, CSIRO is to contribute $440,000 (inclusive of GST) in exchange for its 50%
share of the Equipment. Both parties will also share in the maintenance costs of the Equipment. The amount is recorded as “Receivable to CSIRO”
as at 30 June 2018. The balance was collected from CSIRO on 25 July 2018.
5. OTHER CURRENT ASSETS
Prepayments
Accrued research & development tax credit
Inventory
Rental bond paid
Other assets
30 June 2018
$
30 June 2017
$
128,819
1,094,275
93,233
-
55,890
1,372,217
220,523
848,567
85,497
3,051
67,747
1,225,385
OVENTUS.COM.AU
32 OVENTUS MEDICAL ANNUAL REPORT 2018
Notes to the Financial Statements (continued)
For the year ended 30 June 2018
6. PROPERTY, PLANT AND EQUIPMENT
Computer and
office furniture
and equipment
$
Sleep and
production
equipment
$
At 30 June 2016
Cost
Accumulated depreciation
Net book amount
Year ended 30 June 2017
Opening net book amount
Additions
Disposals
Depreciation charge
Closing net book amount
At 30 June 2017
Cost
Accumulated depreciation
Net book amount
Year ended 30 June 2018
Opening net book amount
Additions
Reclassification
Disposals - cost
Disposals - accumulated depreciation
Depreciation charge
Closing net book amount
At 30 June 2018
Cost
Accumulated depreciation
Net book amount
34,182
(6,344)
27,838
27,838
18,046
(784)
(12,514)
32,586
51,444
(18,858)
32,586
32,586
29,462
-
-
-
(13,793)
48,255
80,906
(32,651)
48,255
Leasehold
improvement
$
271,523
(42,943)
228,580
228,580
-
-
(74,639)
153,941
271,523
(117,582)
153,941
1,261,804
(90,924)
1,170,880
1,170,880
231,913
(400)
(274,630)
1,127,763
1,493,317
(365,554)
1,127,763
1,127,763
153,941
37,374
(311,369)
(561,048)
249,679
(286,171)
256,228
658,274
(402,046)
256,228
-
-
(40,640)
23,025
(50,089)
86,237
230,883
(144,646)
86,237
Assets
Under Joint
Arrangement
$
-
-
-
-
-
-
-
-
-
-
-
-
-
311,369
-
-
-
311,369
311,369
-
311,369
Total
$
1,567,509
(140,211)
1,427,298
1,427,298
249,959
(1,184)
(361,783)
1,314,290
1,816,284
(501,994)
1,314,290
1,314,290
66,836
-
(601,688)
272,704
(350,053)
702,089
1,281,432
(579,343)
702,089
The Group capitalised depreciation expense amounting to $85,225 (2017: nil) as “Development costs” under Intangible assets.
As discussed in Note 4 to the financial statements, on 21 June 2018, the Group entered into an Equipment Ownership & Management Agreement
with CSIRO wherein both parties agreed to share in the ownership and maintenance of the Arcam Equipment (the Equipment) in the period from 1
July 2018 to 30 June 2026. The transaction was accounted for as a joint operation in accordance with AASB 11, Joint arrangements. Accordingly, the
Group’s share in the Equipment has been disclosed separately as “Assets Under Joint Arrangement”.
OVENTUS.COM.AU
OVENTUS MEDICAL ANNUAL REPORT 2018 33
7. INTANGIBLE ASSETS
At 30 June 2016
Cost
Accumulated amortisation
Net book amount
Year ended 30 June 2017
Opening net book amount
Additions
Tax concession received or receivable
Amortisation expense
Closing net book amount
At 30 June 2017
Cost
Accumulated amortisation
Net book amount
Year ended 30 June 2018
Opening net book amount
Additions
Tax concession received or receivable
Amortisation expense
Closing net book amount
At 30 June 2018
Cost
Accumulated amortisation
Net book amount
Patents, trademarks
and licenses
$
Software
$
Development
costs
$
208,595
(9,802)
198,793
198,793
192,656
-
(21,459)
369,990
401,251
(31,261)
369,990
369,990
302,741
-
(28,422)
644,309
703,992
(59,683)
644,309
168,033
(16,616)
151,417
151,417
133,325
-
(81,763)
202,979
301,358
(98,379)
202,979
202,979
-
-
(99,686)
103,293
301,358
(198,065)
103,293
991,131
(70,363)
920,768
920,768
1,925,893
(848,567)
(150,616)
1,847,478
2,068,457
(220,979)
1,847,478
1,847,478
1,737,286
(755,719)
(364,700)
2,464,345
3,050,024
(585,679)
2,464,345
Total
$
1,367,759
(96,781)
1,270,978
1,270,978
2,251,874
(848,567)
(253,838)
2,420,447
2,771,066
(350,619)
2,420,447
2,420,447
2,040,027
(755,719)
(492,808)
3,211,947
4,055,374
(843,427)
3,211,947
Development costs are shown net of amounts received or receivable subject to the research and development tax concession.
OVENTUS.COM.AU
34 OVENTUS MEDICAL ANNUAL REPORT 2018
Notes to the Financial Statements (continued)
For the year ended 30 June 2018
8. TRADE AND OTHER PAYABLES
Trade creditors
PAYG withholding
Employee benefits payable
GST payable
Other creditors
9. OTHER LIABILITIES
Current
Employee benefits - annual leave
Deferred lease incentive
Non- current
Deferred lease incentive
10.
EQUITY - SHARE CAPITAL
Opening Balance
19 July 2016
29 June 2017
30 June 2017
9 August 2017
21 December 2017
Consolidation of shares
Share issue costs
At reporting date
Rights of each type of share
30 June 2018
$
30 June 2017
$
232,630
64,419
18,091
-
246,335
561,475
106,486
14,282
120,768
-
-
367,800
237,048
29,875
1,122
453,198
1,089,043
84,489
42,984
127,473
14,283
14,283
30 June 2018
Number of shares
#
30 June 2018
Value of shares
$
30 June 2017
Number of shares
#
30 June 2017
Value of shares
$
90,000,000
21,729,732
-
-
-
2,139,265
13,799,947
-
-
105,939,212
-
-
-
770,135
7,589,971
-
(449,444)
29,640,394
48,000,000
24,000,000
17,916,660
83,340
-
-
-
-
90,000,000
4,426,703
12,000,000
6,449,998
30,002
-
-
-
(1,176,971)
21,729,732
Ordinary shares participate in dividends and the proceeds on winding up of the parent entity in proportion to the number of shares held.
At shareholders meetings each ordinary share is entitled to one vote when a poll is called, otherwise each shareholder has one vote on a show of hands.
OVENTUS.COM.AU OVENTUS MEDICAL ANNUAL REPORT 2018 35
11.
EQUITY - SHARE BASED PAYMENT RESERVE
Share based payment reserve at beginning of year
Share based payment expense
Transfer to accumulated losses
Share based payment reserve at end of year
The share based payment reserve is used to recognise the value of equity-settled share
based payments provided to employees, including key management personnel, as part of
their remuneration. Refer to Note 23 for further details.
12.
ACCUMULATED LOSSES
Accumulated losses at beginning of year
Transfer from share based payments reserve
Loss for the year
Accumulated losses at end of year
13.
INCOME TAX EXPENSE
Income tax expense
Current tax
Adjustment recognised for prior periods
Aggregate income tax expense
30 June 2018
$
30 June 2017
$
201,311
197,228
(89,063)
309,476
41,533
159,778
-
201,311
(9,042,011)
89,063
(5,870,547)
(14,823,495)
(2,531,897)
-
(6,510,114)
(9,042,011)
-
-
-
-
-
-
Numerical reconciliation of income tax expense and tax at the statutory rate
Loss before income tax expense from continuing operations
(5,870,547)
(6,510,114)
Profit before income tax expense from discontinued operations
Tax at the statutory tax rate of 27.5%
(1,614,400)
(1,790,281)
Tax effect amounts which are not deductible in calculating taxable income:
Research and development concession
Non-assessable or deductible items
Unused tax losses for which no deferred tax asset has been recognised
Income tax expense
14.
FINANCIAL INSTRUMENTS
(880,245)
56,674
(2,437,971)
2,437,971
(876,160)
57,558
(2,608,883)
2,608,883
-
-
The Group’s activities expose it to a variety of financial risks: market risk (which includes foreign currency risk), interest rate risk, credit risk and
liquidity risk. The Group uses different methods to measure different types of risk to which it is exposed. These methods include sensitivity analysis
in the case of interest rates and foreign exchange risk and aging analysis for credit risk. Risk management is carried out by the chief executive
officer under policies approved by the directors. These policies include identification and analysis of risks and appropriate procedures to address
these and report to the board of directors annually as to the effectiveness of the Group’s management of its key business risks.
Market risk
Market risk is the risk that changes in market prices, such as interest rates and foreign exchange rates will affect the Group’s income.
Foreign currency risk
The Group is exposed to foreign exchange fluctuations in relation to expenditures denominated in foreign currencies.
OVENTUS.COM.AU 36 OVENTUS MEDICAL ANNUAL REPORT 2018
Notes to the Financial Statements (continued)
For the year ended 30 June 2018
14.
FINANCIAL INSTRUMENTS (CONTINUED)
Interest rate risk
The Group’s main interest rate risk arises from cash and cash equivalents.
The Group has reviewed its sensitivity to foreign currency and interest rate risks and determined that this is not material.
As at the reporting date, the consolidated entity had the following cash and cash equivalents:
Consolidated
Cash on hand
Short term deposits
Cash at bank
Deposits
Net exposure to cash flow interest rate risk
*Weighted average interest rate
30 June 2018
30 June 2017
Rate*
%
nil
2.40%
nil
2.77%
Balance
$
62
9,100,000
794,897
69,094
9,964,053
Rate*
%
nil
nil
2.77%
Balance
$
324
-
8,647,775
91,518
8,739,617
On 3 July 2017, $6,000,000 was transferred to a term deposit, earning interest at 2.16% p.a
Credit risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. The management
assess the credit quality of its customers taking into account their financial position and past experience. The maximum exposure to credit risk at
the reporting date to recognised financial assets is the carrying amount, net of any provisions for impairment of those assets, as disclosed in the
statement of financial position and notes to the financial statements. The Group does not hold any collateral.
Financial assets
Set out below is an overview of financial assets, other than cash and short-term deposits, held by the Group as at 30 June 2018 and 2017:
Financial assets at amortised cost:
Trade and other receivables
Total
Remaining contractual maturities
30 June 2018
$
30 June 2017
$
574,210
574,210
420,092
420,092
The following tables detail the Group’s remaining contractual maturity for its financial liabilities. The tables have been drawn up based on the
undiscounted cash flows of financial liabilities based on the earliest date on which the financial liabilities are required to be paid. The tables include
both interest and principal cash flows disclosed as remaining contractual maturities and therefore these totals may differ from their carrying
amount in the statement of financial position.
30 June 2018
30 June 2017
Rate*
%
nil
1 year or less
$
561,475
561,475
Rate*
%
nil
1 year or less
$
1,089,043
1,089,043
Non-derivatives
Non-interest bearing
Trade and other payables
Total non-derivatives
*Weighted average interest rate
Fair value of financial instruments
Unless otherwise stated, the carrying amounts of financial instruments reflect their fair value.
OVENTUS.COM.AU
OVENTUS MEDICAL ANNUAL REPORT 2018 37
15. RELATED PARTY TRANSACTIONS
The Group entered into the following related party transactions during the year:
(a) Product sales
In 2018, the Group made sales of $17,419 (2017: $128,000) to Breathing Assist Solutions Pty Ltd (BAS), a company controlled by Christopher
Hart and owned by entities associated with Christopher Hart and Neil Anderson. At 30 June 2018, amounts owed by BAS was Nil (2017: $50,587;
included in trade and other receivables).
(b) Clinical trial costs recharge
The Group reimbursed BAS for clinical trial work conducted during the year amounting to $131,636. At 30 June 2018, amount owed to BAS was
$639 (2017: Nil).
16.
KEY MANAGEMENT PERSONNEL
Directors
The following persons were directors of Oventus Medical Limited during the financial year:
–
Mel Bridges (Chairman) (Non-Executive Director)
–
–
Christopher Hart (Executive Director) (Founder) (Managing Director and Chief Executive Officer from 30 August 2018) (Clinical Director up to
29 August 2018)
Neil Anderson (Executive Director) (Chief Technical Officer from 30 August 2018) (Managing Director and Chief Executive Officer up to
29 August 2018)
–
Sue MacLeman (Non-Executive Director)
Other key management personnel
The following persons also had the authority and responsibility for planning, directing and controlling the major activities of the Group, directly or
indirectly, during the financial year:
–
Daniel Parry (Chief Financial and Operations Officer from 5 December 2017)
–
Robin Randolph (Vice President of U.S. Marketing and Operations from 1 April 2018)
–
Stephen Denaro (Company Secretary)
Compensation
The aggregate compensation made to directors and other members of key management personnel of the Group is set out below:
Short-term employee benefits
Post-employment benefits
Share-based payments
Termination payments
30 June 2018
$
30 June 2017
$
1,025,967
1,056,321
82,973
53,691
-
104,658
69,903
108,381
1,162,630
1,339,263
OVENTUS.COM.AU 38 OVENTUS MEDICAL ANNUAL REPORT 2018
Notes to the Financial Statements (continued)
For the year ended 30 June 2018
17. REMUNERATION OF AUDITORS
During the financial year the following fees were paid or payable for services provided by PKF
Hacketts Audit the auditor of the Group:
Audit services - PKF Hacketts Audit
Audit or review of the financial statements
18.
PARENT ENTITY INFORMATION
Set out below is the supplementary information about the parent entity.
Statement of profit or loss and other comprehensive income
Loss after income tax
Total comprehensive income
Statement of financial position
Total current assets
Total assets
Total current liabilities
Total liabilities
Equity
Issued capital
Accumulated losses
Total equity
30 June 2018
$
30 June 2017
$
45,000
43,500
30 June 2018
$
30 June 2017
$
(786,462)
(786,462)
9,926,259
28,051,538
118,295
118,295
29,640,394
(1,707,151)
27,933,243
(760,992)
(760,992)
8,554,784
20,968,314
159,271
159,271
21,570,035
(760,992)
20,809,043
Guarantees entered into by the parent entity in relation to the debts of its subsidiaries
The parent entity had no guarantees in relation to the debts of its subsidiaries as at 30 June 2018 and 2017.
Contingent liabilities
The parent entity had no contingent liabilities as at 30 June 2018 and 2017.
Capital commitments - Property, plant and equipment
The parent entity had no capital commitments for property, plant and equipment at as 30 June 2018 and 2017.
Significant accounting policies
The accounting policies of the parent entity are consistent with those of the Group, as disclosed in note 1, except for the following:
–
Investments in subsidiaries are accounted for at cost, less any impairment, in the parent entity.
– Dividends received from subsidiaries are recognised as other income by the parent entity.
OVENTUS.COM.AU OVENTUS MEDICAL ANNUAL REPORT 2018 39
19.
INTEREST IN SUBSIDIARIES
The consolidated financial statements include the financial statements of Oventus Medical Limited and subsidiaries listed in the following table:
Name
Oventus Manufacturing Pty Ltd
Oventus CRM Pty Ltd
Oventus Medical USA, Inc.
Country of Incorporation
Australia
Australia
United States
Equity Interest
2018
100%
100%
100%
2017
100%
100%
100%
Oventus Medical USA, Inc. was incorporated as a wholly owned subsidiary of the Company on 13 January 2017 in the state of Delaware. O2Vent™
was officially launched at G’day USA event in San Francisco on 21 January 2017 and records for the first saleable product have been received. The
purpose of this entity is to market and distribute the Group’s devices in the USA.
The principal activities of the remaining subsidiaries are:
– Oventus Manufacturing Pty Ltd - operating entity responsible for the development and manufacture of the Group’s devices.
– Oventus CRM Pty Ltd - holds patient and clinical data
20.
SUBSEQUENT EVENTS
On 3 July 2018, the Consolidated Entity granted 850,000 share options to employees under the Oventus Employee Option Plan. The options have
an excise price $0.4804 and expiry date of 2 July 2023. The estimated total fair value of share options granted was $121,740 or $0.1432 per share
option, calculated using The Black-Scholes pricing model. The total value of the options will be brought to account over the period of five years.
21.
RECONCILIATION OF LOSS AFTER INCOME TAX TO NET CASH FROM OPERATING ACTIVITIES
Loss after income tax expense for the year
Adjustments for:
Depreciation and amortisation
Net loss (gain) on disposal of assets
Share-based payments
Research and development tax concession
Foreign exchange fluctuations
Change in operating assets and liabilities:
(Increase) / decrease in trade and other receivables
(Increase) in other assets
Increase / (decrease) in trade and other payables
Increase in employee benefits
Decrease in other liabilities
Net cash outflow from operating activities
30 June 2018
$
30 June 2017
$
(5,870,547)
(6,510,114)
757,636
(71,016)
197,228
755,719
33,434
257,885
(146,832)
(527,568)
-
(20,988)
(4,635,049)
615,621
11,096
159,778
396,301
16,136
(277,448)
(148,542)
201,429
46,124
(40,457)
(5,530,076)
OVENTUS.COM.AU 40 OVENTUS MEDICAL ANNUAL REPORT 2018
Notes to the Financial Statements (continued)
For the year ended 30 June 2018
22.
LOSS PER SHARE
Loss per share from continuing operations
Loss after income tax
30 June 2018
$
30 June 2017
$
(5,870,547)
(6,510,114)
Loss after income tax attributable to the owners of Oventus Medical Limited
(5,870,547)
(6,510,114)
Weighted average number of ordinary shares used in calculating basic loss per share
Adjustments for calculation of diluted loss per share:
Options over ordinary shares
Numbers
99,126,167
Numbers
70,914,840
-
-
Weighted average number of ordinary shares used in calculating diluted loss per share
99,126,167
70,914,840
Basic loss per share
Diluted loss per share
23.
SHARE- BASED PAYMENTS
Share options
Cents
(5.92)
(5.92)
Cents
(9.18)
(9.18)
Share options are issued to eligible participants under the Company’s Employee Share Option Plan. The Company has options outstanding of
3,424,952 as at 30 June 2018 (2017: 4,411,346).
Set out below are summaries of options granted under the plan:
Grant date
As at 30 June 2018
24/02/2016
14/04/2016
1/12/2016
23/05/2017
23/05/2017
18/12/2017
As at 30 June 2017
24/02/2016
14/04/2016
1/12/2016
23/05/2017
23/05/2017
Expiry
date
Exercise
price
Balance at the
start of the year
Granted
Expired/
forfeited/ other
Exercised
Balance at the
end of the year
23/02/2021
14/04/2021
1/12/2021
12/12/2022
24/02/2022
18/11/2022
23/02/2021
14/04/2021
1/12/2021
12/12/2022
24/02/2022
$0.58
$0.73
$1.06
$0.96
$0.94
$1.02
$0.58
$0.73
$1.06
$0.96
$0.94
2,709,882
401,464
450,000
700,000
150,000
-
-
-
-
-
(434,928)
(401,464)
(150,000)
(100,000)
(100,002)
-
200,000
-
4,411,346
200,000
(1,186,394)
2,960,794
401,464
-
-
-
50,183
(301,095)
-
550,000
700,000
150,000
(100,000)
-
-
3,362,258
1,450,183
(401,095)
-
-
-
-
-
-
-
-
-
-
-
-
-
2,274,954
-
300,000
600,000
49,998
200,000
3,424,952
2,709,882
401,464
450,000
700,000
150,000
4,411,346
OVENTUS.COM.AU
OVENTUS MEDICAL ANNUAL REPORT 2018 41
24. SIGNIFICANT AGREEMENTS AND COMMITMENTS FOR EXPENDITURE
Not later than 1 year
Later than 1 but not later than 5 years
Total
30 June 2018
$
30 June 2017
$
355,003
291,808
646,811
195,286
49,252
244,538
The Company is the lead participant with Medical Monitoring Solutions Pty Ltd, Neuroscience Research Australia (NeuRA), Western Sydney
University (WSU) and CSIRO as the other participants, to the Cooperative Research Centres (CRC) Programme grants from the Australian
Federal Government. The project will receive $2,950,000 over three years for a project titled, “Targeted therapy for sleep apnoea: A novel
personalised approach”. The Company has committed R&D expenditure of $918,232 over three years in relation to the CRC Programme
grant. As 30 June 2018, the Company spent $334,617 on CRC projects which have been capitalised as “Development Costs” under intangible
assets.
The Company has entered into two non-cancellable operating property leases and one licencing arrangement for the use of property.
Minimum lease payments contracted for but not recognised in the financial information are payable as follows:
–
–
The Taringa office property lease is a non-cancellable lease with a 3-year term. Minimum lease payments shall be increased by fixed rate
of 4% per annum.
The Sydney office property lease is a non-cancellable lease with a 2-year term. Minimum lease payments shall be increased by fixed rate
of 4% per annum. The Group pre-terminated the lease effective 1 June 2018.
The licence agreement with Commonwealth Scientific and Industrial Research Organisation (CSIRO) is for the use of property and is for a
licence period of 2 years, with licence and service fees payable monthly in advance.
Contingent provisions within the licence agreement require that the licence and services fees shall be increased by the consumer price
index (CPI) per annum.
25. SEGMENT REPORTING
Management currently identifies the Group’s two regions as its operating segments (see Note 1). These operating segments are monitored by the
Group’s chief operating decision maker and strategic decisions are made on the basis of adjusted segment operating results.
Segment information for the reporting period follows:
Australia
$
30 June 2018
United States
(12 months)
$
Total
Australia
$
$
30 June 2017
United States
(6 months)
$
Total
$
Segment revenue
Staff costs
210,128
61,194
271,322
447,994
-
447,994
(2,411,331)
(378,975)
(2,790,306)
(2,524,183)
(44,955)
(2,569,138)
Manufacturing costs - Pilot phase
(137,622)
Sales and marketing
Other expenses
Segment operating loss
Segment assets
Segment liabilities
Unallocated items:
(356,190)
(2,512,753)
(5,207,768)
15,764,805
645,979
(40,078)
(50,055)
(177,700)
(406,245)
(582,431)
(842,384)
(537,038)
(3,049,791)
(3,055,756)
(944,952)
(6,152,720)
(6,556,760)
-
(10,035)
(38,238)
(93,228)
(582,431)
(852,419)
(3,093,994)
(6,649,988)
47,708
36,264
15,812,513
14,119,831
-
14,119,831
682,243
1,222,654
8,145
1,230,799
Interest income and other income are not allocated to operating segments as they are not considered part of the core operations of any segments.
OVENTUS.COM.AU
42 OVENTUS MEDICAL ANNUAL REPORT 2018
Directors’ Declaration
For the year ended 30 June 2018
In the directors’ opinion
–
–
the attached financial statements and notes comply with the Corporations Act 2001, the Accounting Standards, the Corporations Regulations
2001 and other mandatory professional reporting requirements;
the attached financial statements and notes comply with International Financial Reporting Standards as issued by the International Accounting
Standards Board as described in note 1 to the financial statements;
– the attached financial statements and notes give a true and fair view of the Group’s financial position as at 30 June 2018 and of its performance
for the financial year ended on that date; and
–
there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.
The directors have been given the declarations required by section 295A of the Corporations Act 2001.
Signed in accordance with a resolution of directors made pursuant to section 295(5)(a) of the Corporations Act 2001.
On behalf of the directors
Mel Bridges
Director
Brisbane
30th August 2018
OVENTUS.COM.AU OVENTUS MEDICAL ANNUAL REPORT 2018 43
Independent auditor’s report to the
members of Oventus Medical Limited
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF OVENTUS MEDICAL LIMITED
Report on the Financial Report
Opinion
We have audited the accompanying financial report of Oventus Medical Limited (the company), which
comprises the consolidated statement of financial position as at 30 June 2018, the consolidated statement
of profit or loss and other comprehensive income, the consolidated statement of changes in equity and the
consolidated statement of cash flows for the year then ended, notes comprising a summary of significant
accounting policies and other explanatory information, and the directors’ declaration of the company and 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.
In our opinion, the financial report of Oventus Medical Limited is in accordance with the Corporations Act
2001, including:
i)
Giving a true and fair view of the consolidated entity’s financial position as at 30 June 2018
and of its performance for the year ended on that date; and
ii)
Complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for Opinion
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. Our
responsibilities under those standards are further described in the Auditor’s Responsibility section of our
report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.
Independence
We are independent of the consolidated entity in accordance with the Corporations Act 2001 and the ethical
requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for
Professional Accountants (the code) that are relevant to our audit of the financial report in Australia. We
have also fulfilled our other ethical responsibilities in accordance with the Code.
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our
audit of the financial report of the current period. This matter was addressed in the context of our audit of the
financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on
this matter. For each matter below, our description of how our audit addressed the matter is provided in that
context.
45
OVENTUS.COM.AU
44 OVENTUS MEDICAL ANNUAL REPORT 2018
Independent auditor’s report to the
members of Oventus Medical Limited (continued)
1. Capitalisation and Valuation of Internal Development Costs
Why significant
How our audit addressed the key audit matter
The Consolidated entity’s intangible assets as at 30
June 2018 include capitalised development costs with
a carrying value of $2,464,345 (2017: $1,847,478), as
disclosed in Note 7.
The Consolidated entity’s accounting policy in respect
of development costs are outlined in Note 1 and Note
2.
Capitalised development costs are significant to the
audit due
the amount of expenditure being
capitalised and the specific criteria that have to be met
for capitalisation.
to
We note significant judgement is required:
in determining the treatment of development
expenditure in accordance with AASB 138,
the Consolidated entity’s accounting
and
policy. In particular:
o whether project costs in the design
and development of a potential
recognition
the
product meet
conditions for an asset
o whether a product development
and
technically
project
economically feasible
is
o
in making assumptions regarding the
expected future cash generation of
the project, discount rates to be
applied and the expected period of
benefits.
in determining that capitalised development
costs have useful lives of 5 years which
determines the amortisation rate
indicate
whether
determining
and
facts
in
that development
circumstances
costs capitalised should be
for
impairment
in accordance with Australian
Accounting Standard AASB 136 Impairment of
Assets.
tested
Our work included, but was not limited to, the following
procedures:
testing, on a sample basis, development expenditure
incurred during the year for compliance with AASB
138 and the Consolidated entity’s accounting policy;
and
review the reasonableness of estimated useful life
and amortisation method and check on a sample
basis whether they are properly calculated and
disclosed in the financial statements
to assess whether there are indicators of impairment:
o
o
o
obtaining and assessing evidence of external
changes within the Consolidated entity’s market
or internal changes such as the sales
performance of existing products
holding discussions with the directors and
management as to the status of project
developments as well as assessing if there was
evidence that a product has been discontinued
obtaining and assessing evidence of the
Consolidated entity’s future intention for the
products, including reviewing future budgeted
expenditure and sales forecasts
assessing the appropriateness of the related
disclosures in Notes 1, 2 and 7.
46
OVENTUS.COM.AU
OVENTUS MEDICAL ANNUAL REPORT 2018 45
Other Information
Other information is financial and non-financial information in the annual report of the Consolidated entity
which is provided in addition to the Financial Report and the Auditor’s Report. The directors are responsible
for Other Information in the annual report.
The Other Information we obtained prior to the date of this Auditor’s Report was the Director’s report. The
remaining Other Information is expected to be made available to us after the date of the Auditor’s Report.
Our opinion on the Financial Report does not cover the Other Information and, accordingly, the auditor does
not and will not express an audit opinion or any form of assurance conclusion thereon, with the exception of
the Remuneration Report.
In connection with our audit of the Financial Report, our responsibility is to read the Other Information. In
doing so, we consider whether the Other Information is materially inconsistent with the Financial Report or
our knowledge obtained in the audit, or otherwise appears to be materially misstated.
We are required to report if we conclude that there is a material misstatement of this Other Information in
the Financial Report and based on the work we have performed on the Other Information that we obtained
prior the date of this Auditor’s Report we have nothing to report.
Directors’ Responsibilities for the Financial Report
The Directors of the company are responsible for the preparation of the financial report that gives a true and
fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such
internal control as the Directors determine is necessary to enable the preparation of the financial report that
gives a true and fair view and is free from material misstatement, whether due to fraud or error. In Note 1,
the Directors also state, in accordance with Australian Accounting Standard AASB 101 Presentation of
Financial Statements, that the financial report complies with International Financial Reporting Standards.
In preparing the financial report, the Directors are responsible for assessing the consolidated entity’s ability
to continue as a going concern, disclosing, as applicable, matters related to going concern and using a
going concern basis of accounting unless the Directors either intend to liquidate the consolidated entity or to
cease operations, or have no realistic alternative but to do so.
Auditor’s Responsibilities for the Audit of the Financial Report
Our responsibility is to express an opinion on the financial report based on our audit. Our objectives are to
obtain reasonable assurance about whether the financial report as a whole is free from material
misstatement, whether due to fraud or error, and to issue and auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in
accordance with Australian Auditing Standards will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individual or in aggregate, they
could reasonably be expected to influence the economic decisions of users taken on the basis of this
financial report.
As part of an audit in accordance with Australian Auditing Standards, we exercise professional judgement
and maintain professional scepticism throughout the audit.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
financial report.
47
OVENTUS.COM.AU
46 OVENTUS MEDICAL ANNUAL REPORT 2018
Independent auditor’s report to the
members of Oventus Medical Limited (continued)
The procedures selected depend on the auditor’s judgement, including assessment of the risks of material
misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the
auditor considers internal control relevant to the entity’s preparation of the financial report that gives a true
and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the
purpose of expressing an opinion on the effectiveness of the entity’s internal control.
The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from
error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of
internal control.
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 conclude on the appropriateness of the Directors’ use of the going concern basis of accounting and,
based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions
that may cast significant doubt on the consolidated entity’s ability to continue as a going concern. If we
conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the
related disclosures in the financial report or, if such disclosures are inadequate, to modify our opinion. Our
conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future
events or conditions may cause the consolidated entity to cease to continue as a going concern.
We evaluate the overall presentation, structure and content of the financial report, including the disclosures,
and whether the financial report represents the underlying transactions and events in a manner that
achieves fair presentation.
We obtain sufficient appropriate audit evidence regarding the financial information of the entities or business
activities within the consolidated entity to express an opinion on the financial report. We are responsible for
the direction, supervision and performance of the audit. We remain solely responsible for our audit opinion.
We communicate with the Directors regarding, among other matters, the planned scope and timing of the
audit and significant audit findings, including any significant deficiencies in internal control that we identify
during our audit.
The Auditing Standards require that we comply with relevant ethical requirements relating to audit
engagements. We also provide the Directors with a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with them all relationships and other matters
that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with the Directors, we determine those matters that were of most
significance in the audit of the financial report of the current period and are therefore key audit matters. We
describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the
matter or when, in extremely rare circumstances, we determine that a matter should not be communicated
in our report because the adverse consequences of doing so would reasonably be expected to outweigh the
public interest benefits of such communication.
Report on the Remuneration Report
We have audited the Remuneration Report included in the directors’ report for the year ended 30 June
2018.
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OVENTUS MEDICAL ANNUAL REPORT 2018 47
Opinion
In our opinion, the Remuneration Report of Oventus Medical Limited for the year ended 30 June 2018,
complies with section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the Remuneration
Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an
opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing
Standards.
PKF HACKETTS AUDIT
CAMERON BRADLEY
PARTNER
30 AUGUST 2018
BRISBANE
49
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48 OVENTUS MEDICAL ANNUAL REPORT 2018
Shareholder Information
30 June 2018
The shareholder information set out below was applicable as at 15 October 2018.
DISTRIBUTION OF EQUITABLE SECURITIES
EQUITY SECURITY HOLDERS
Analysis of number of equitable security holders by size of holding:
Twenty largest quoted equity security holders
Number of
holders of
ordinary shares
Units
% of total
shares issued
The names of the twenty largest security holders of quoted equity
securities are listed below:
1 to 1,000
1,001 to 5,000
5,001 to 10,000
10,001 to 100,000
100,001 and over
72
201
181
444
117
43,472
599,786
1,505,754
16,051,166
87,739,034
0.04
0.57
1.42
15.15
82.82
CHRISTOPHER PATRICK HART
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