PainChek Limited
ABN 21 146 035 127
2018 Annual Report
PainChek Limited (formerly ePAT Technologies Limited)
Corporate directory
Board of Directors
Mr John Murray
Mr Philip Daffas
Mr Adam Davey
Mr Ross Harricks
Company Secretary
Mr Ian Hobson
Non-Executive Chairman
Managing Director
Non-Executive Director
Non-Executive Director
Principal Place of Business
Suite 401, 35 Lime Street
Sydney NSW 2000
Registered Office
Suite 5, 95 Hay Street
Subiaco, Western Australia 6008
+61 8 9388 8290
Tel:
+61 8 9388 8256
Fax:
Postal Address
PO Box 226
Subiaco, Western Australia 6904
Website
Website: www.PainChek.com
Auditors
BDO Audit Pty Ltd
Share Registry
Boardroom Pty Ltd
Grosvenor Place
Level 12, 225 George Street
Sydney, NSW 2000
Tel:
Fax:
+61 2 9290 9600
+61 2 9290 9655
Stock Exchange
Australian Securities Exchange
20 Bridge Street
Sydney, NSW 2000
ASX Code
PCK
10 October 2018
Dear Shareholders,
PainChek Limited (ASX: PCK)
ABN 21 146 035 127
Suite 401, 35 Lime Street, Sydney, NSW, 2000
Registered Office: Suite 5, 95 Hay Street Subiaco WA 6008
info@paincheck.com
During the 2018 Financial Year, PainChek® has focused on commercialisation of the PainChek®
Adult “Dementia” App for the enterprise health care market within Australia. We have done
this in a cost effective way, with a small but highly effective “go to market” team, while we
have validated our business model and the market opportunity. We have accelerated sales
growth in the Residential Aged Care (“RAC”) sector in Australia over the past few months, and
start the FY2018/19 with a strong sales pipeline in this sector. We have also agreed to integrate
and distribute our App with two leading Australian clinical care software providers, which will
expand our market reach. We have strong customer satisfaction levels, and this is reflected in
our first contract renewal with Dementia Support Australia.
PainChek® needs to be considered like a Thermometer or Blood Pressure meter in that it can
be used by multiple Health Care Professionals (“HCPs”) to assess and monitor pain levels. The
PainChek® “Shared Care” model is exciting as it will take PainChek® into the home consumer
environment through our established RAC network and with HCP support. We are now well
poised for expansion both domestically and internationally during 2019.
We continue to invest in research and development and have expanded our inhouse
technology capabilities. Development of our Infant App is progressing, and we remain excited
about the prospects for this important new product.
The Managing Directors report which follows provides more detail on the initiatives
undertaken during the year and the exciting plans we have going forward.
On behalf of the Board of Directors, I would like to thank all of our shareholders for continuing
to support the Company.
Yours sincerely,
John Murray
Chairman
Managing Directors Report
Review of operations
The PainChek® technology uses cameras in smartphones and tablets to capture a brief video
of the person, which is analysed in real time using facial recognition software to detect the
presence of facial micro- expressions that are indicative of the presence of pain. The initial
PainChek® App has been TGA and CE mark cleared for use as a class 1 medical device to assess
pain in people who are unable to verbalise.
Initial market Opportunity:
At a global level there are 50 Million people living with dementia with projections estimated
to grow to 75 Million by 2025. It is estimated there are on average three carers for each person
with dementia and it is the carers who are the primary users of the PainChek® App. Dementia
is currently the second major cause of death globally (after cardiovascular disease) and is
projected to become the leading cause of death during this period.
Pain often goes unrecognised and under-treated in people with advanced dementia who can
no longer communicate that they are in pain. Currently available pain assessment tools can
be subject to user bias and are generally paper-based, as a result they are under-utilized.
The Company has focused on commercialisation of the PainChek® Adult “Dementia” App
within Australia and has built a small but highly effective “go to market” team comprised of
experienced sales, marketing, clinical and technical personnel to drive the process. In
Australia, there are 950 RAC operators who manage a total of 2,700 RAC’s with 210,000
resident beds. There are 400,000 people living with dementia in Australia of which 115,000
are within Residential Aged Care(1).
Business Model:
Typically, we license a RAC facility based on the total number of approved beds (licensed beds)
for the facility, although on average we estimate approximately 50% of residents in a facility
may be suffering from dementia at any time. The monthly Average Revenue per Licensed Bed
(ARLB) across the RAC customers based on the agreements signed to date is $5 per month,
and the Average Revenue per Active Resident is in the range of $10 per month based on actual
resident usage.
We have conducted a significant number of customer trials, typically spanning a 4-6-week
period, across large, medium and small sized Residential Aged Care (RAC) clients with the vast
majority of them either resulting in a commercial agreement or moving forwards towards
negotiating an agreement.
Australian Commercial results to date:
Summary of RAC agreements over time
Number signed up to 30 June 2018
Number signed in the 3 months ended 30 Sept
Total
No. of
Customers
5
10
15
No. of
RAC's
No. of Licensed
Beds
5
15
20
338
1165
1503
As of 30th June 2018, we had one-year subscription license agreements in place with 6 clients
including 5 Residential Aged Care clients and Dementia Support Australia. In addition, more
than 2,000 PainChek® clinical pain assessments had been conducted on more than 500 people
living with dementia within Australia, thus establishing PainChek® as a new, valid pain
assessment tool for people unable to verbalise their pain within the Australian Aged Care
market.
As of 30th September 2018, we have a total of 16 clients covering 20 RAC’s and including
Dementia Support Australia, with one-year subscription agreements in place, with a Monthly
Recurring Revenue (MRR) (2) of $10,600 which equates to an Annualised Recurring Revenue
(ARR) of $127,000. We also have a large pipeline of opportunities which is summarised in
the segment analysis below. In addition, more than 6,000 PainChek® clinical pain
assessments have been conducted on more than 800 people living with dementia within
Australia since market launch in November 2017, thus establishing PainChek® as a new, valid
pain assessment tool for people unable to verbalise their pain within the Australian Aged
Care market.
(1) Australian Government Dept of Health data at 30 June 2015
(2) Monthly Recurring Revenue (MRR) includes subscription revenue on contracts of 12 months or longer and excludes one off fees for
professional support and training. MRR and ARR are calculated on the basis of the total number of contracts signed as of specific month
end date. As such, the MRR and ARR do not represent revenue recognised in the accounts for the period ending on that date.
Customer feedback:
PainChek® has been shown to accurately and rapidly assess pain, which facilitates better pain
management, leading to reduced pain related behavioural issues in those living with
dementia. It is the focus on improving the quality of resident care that is driving the rapid
adoption of PainChek® within Australian RAC’s.
The feedback from our initial client base has provided revealing insights. It is clear that
PainChek® provides carers across multiple clinical areas with three important new clinical
benefits;
•
the ability to identify the presence of pain, when pain isn’t obvious
•
to quantify the severity level of pain, when pain is obvious, and
• monitor the impact of pain treatment to optimise overall care.
We are building on these positive learnings as we expand our reach in Australia and prepare
to internationalise the business into larger markets commencing with Europe, where there
are 7,500,000 people living with dementia, and selected Asia Pacific markets in 2019.
New Market Opportunities and New Product Pipeline:
The Company will continue with the commercialisation of the PainChek® technology in Australia and
globally. We are receiving overseas interest including UK, Germany and US and Asia, which will support
our international market strategy. We are currently working to complete a PainChek® pre-market
submission for regulatory clearance with FDA in the United States.
The market segments being pursued by the Company include Residential Aged Care Operators, Health
Care Professionals, Home Care Operators and Direct to Home Carers. In parallel, development of the
next phase of Apps remains on track with the adult’s consumer version scheduled for Q3 2018. This
will be commercialised initially through a “shared care” model that allows healthcare professionals to
provide access to PainChek® for home carer use.
We are also making good progress on the development of the PainChek® App for Infants. The software
development is on schedule, and we anticipate having a version ready for beta testing and validation
studies by 30 September 2018. We are currently in discussions with groups in Melbourne and Sydney
for the validation study, with the objective of having a partner signed for the study by October 2018.
We have also completed the collection of our own video libraries to enable the machine learning for
both face and voice analysis.
All national patent filings around the technology remain on track and we have received a registered
trademark in Australia for the use of the PainChek® name and logo.
Australian Royal Commission into Aged Care:
September 2018 saw the Government announce a Royal Commission into Aged Care and call for input
on the Terms of Reference. Painaustralia provided a submission drawing upon successive reviews
which have recommended improved pain management in aged care. Painaustralia CEO Carol Bennett
quoted “Given that 80% of residents in aged care live with pain, it seems reasonable to expect best
practice pain management would be a requirement of government funding for aged care. This will
continue to be a high priority for Painaustralia as the Royal Commission gets underway”. PainChek®
is working closely with our RAC clients, Painaustralia and the Government to support this initiative.
Third Party Software Providers:
Health Metrics (HM) integration: PainChek® Ltd and Health Metrics Pty Ltd have now completed the
integration of the PainChek® App form into the eCase care management system. This work
eliminates duplicate resident data entry in the Aged Care environment by automatically creating new
eCase residents in PainChek®. The PainChek® assessments can be loaded into the eCase charting
system for review and analysis purposes within the Aged Care setting. This feature is now available
for production use by eCase clients.
Leecare Solutions (LS) Integration: We entered into an agreement with Leecare Solutions to integrate
PainChek® into the Leecare care management system in October 2018. The integration is projected to
be completed during Q4 2018.
PainChek® accurately assess pain severity at the point of care and now, combined with the backend
integration, these assessments can be documented automatically into our clients care management
system. The benefits to our clients include; eliminating the need for double handling of data or
duplication of effort creating greater efficiencies and addressing quality standard requirements.
These two software integration agreements allow PainChek® to fully automate pain assessment
testing for more than 100,000 approved places/beds (which is around 50% of the Australian Aged Care
market) and gain access to international markets where our integration partners have overseas
presence. This includes NZ, Singapore, UK and other European markets.
Key strategic objectives for the remainder of 2018 and into 2019
1. Continue to build sales and a sustainable and cost effective RAC business model
The local sales and business model continue to progress very positively within RAC setting. We will
continue to grow sales within the Australian RAC market and build strong customer satisfaction levels.
We have significantly increased the rate of sales take up within the RAC sector throughout 2018 and
have a strong sales pipeline to continue sales growth in 2019. The business model will continue to
evolve as we now have a good understanding of the sales cycle and the use of trials and on-line training
to shorten the sales cycle, optimise training, and reduce the overall cost of sale. This will provide a
base business model for overseas expansion.
2. Enter new market segments with the Adult App
We are now entering multiple market segments which have cross over and will expand our market
potential beyond dementia care and aged care segments. PainChek® has a broad range of
applications, similar to a thermometer or blood pressure meter, in that it will be used by multiple
Health Care Professionals to validate and revalidate pain levels - in many instances for the same
person. The PainChek® “Shared Care” model is exciting as it will take PainChek® into the person living
at home with dementia environment through our established RAC network and with Health Care
Professional support.
3. Market introduction of the Children’s App
We are finalising the clinical trials for the Children’s App in Australia and preparing the regulatory and
clinical documentation for market introduction in 2019 initially in Australia. The first version Children’s
App will be targeted to the 0-1 years age group and will be rapidly followed by a second version
covering the 1-3 years age group. The Children’s App has the potential to far exceed the adult
(dementia) App market. There are 400 Million children aged between 0-3 years of age at any one time,
a clear market needs and a strong consumer and family home carer market opportunity.
4.
Internationalise the Business
The learnings in 2018 hold us in good stead to accelerate the business in Australia and more
importantly to now enter into overseas markets where the large business opportunity exists for the
company. It is our strategic intent to globalise the business and we have the management capability
to do so.
We have established aged care and business contacts for the PainChek® dementia App in overseas
markets including New Zealand, Singapore, UK, Europe and USA during 2018. We plan to enter into
the UK and European markets in 2019 (with the CE Mark clearance) and other opportunistic markets
including New Zealand and Singapore where there is strong interest in PainChek®. This will be
achieved through a combination of setting up direct operations in key markets and through strategic
partnership including working with our existing clients and 3rd party software providers who have
overseas operations.
5. Regulatory Clearance in USA
As part of the international expansion, we are now in communication with the FDA to complete the
PainChek® adult App de-Novo pre-submission. This is projected to be completed by early 2019 in order
to achieve FDA clearance and market introduction during 2020 and in doing so use the adult FDA
clearance as a predicate device for the forthcoming Children’s App FDA submission.
6. Continue to Build Internal Capability
The PainChek® team has already been strengthened in sales, marketing, clinical and technical areas
during 2018. We will continue to build capability in all areas to reflect the business strategies and to
achieve the local and overseas market expansion goals.
Summary:
PainChek® has evolved from a conceptual healthcare product to a market reality with strong sales and
customer satisfaction in less than 2 years. This outstanding achievement has been accomplished with
minimal investment. We are addressing large untapped global markets with a business model that is
sustainable, low cost and scalable. In addition, we have the core technology, patents and trademarks
to protect our unique position, a pipeline of new products and a team that can execute the global
strategy.
Philip Daffas
Managing Director
October 2018
PainChek Limited (formerly ePAT Technologies Limited)
Annual Financial Report for the year ended
30 June 2018
Contents
Directors’ report
Auditor’s independence declaration
Consolidated statement of profit or loss and other comprehensive income
Consolidated statement of financial position
Consolidated statement of changes in equity
Consolidated statement of cash flows
Notes to the financial statements
Directors’ declaration
Independent auditor’s review report
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PainChek Limited (formerly ePAT Technologies Limited)
Directors’ report
The directors of PainChek Limited formerly ePAT Technologies Limited (“PainChek” or “the Company”)
submit herewith the financial report of the Company and its subsidiary (“Group” or “Consolidated
Entity”) for the year ended 30 June 2018. In order to comply with the provisions of the Corporations Act
2001, the directors report as follows:
Names of Directors
The names of the directors of the Company during or since the end of the year are noted below.
Directors were in office for the entire period unless otherwise stated:
Mr John Murray (appointed 30 September 2016) LLB (Hons), CA, MAICD
Mr Murray has 25 years’ experience in private equity and venture capital and was a co-founder and
Managing Partner of Technology Venture Partners; one of the original and leading venture capital firms
in Australia. Mr Murray is a past chairman of the Australian Venture Capital Association. Mr Murray
has considerable experience as an investor and a non-executive director of high growth, technology-
based companies. He possesses a broad understanding of global trends in technology and its impact on a
variety of industries. He was until recently Chairman of a private, residential aged care business in
Australia. Mr Murray also brings 12 years’ experience in executive roles in corporate banking, accounting
and IT services industries.
Mr Murray has been on the Board of a number of successful technology rollouts and exits including
online travel play Viator, which was acquired by TripAdvisor for approximately US$200 million in
2014. He is a chartered accountant with an Honour degree in Law and is a member of the Australian
Institute of Company Directors. Mr Murray has not been a director of an ASX listed company in the past 3
years.
Mr Philip Daffas (appointed 30 September 2016) BSc, Dip EENG, MBA, GAICD
Philip is a highly accomplished global business leader and people manager with an international career
spanning more than 25 years with leading blue-chip healthcare corporates and novel technology start-up
companies.
Philip has held senior global business leader positions in Europe, US and Australia. He has been
instrumental in building businesses, growing market share and developing extensive high-level customer
and industry relationships in each sector on a global basis.
Philip’s earlier experience was gained in Europe with market leaders such as IVAC infusion systems and
Shiley cardiopulmonary products. He subsequently joined Boehringer Mannheim, initially in the UK
managing their diagnostics business and subsequently was promoted to a Global Marketing role in the
Diabetes Care business cased in Mannheim, Germany.
In 1997 Philip joined Cochlear in the UK as the European Sales and Marketing Manager and subsequently
was promoted in 2000 to the VP Global Marketing role based in Sydney, Australia
Other roles in Australia have included General Manager with Roche Diagnostics, Managing Director at
Bio-Rad Laboratories and CEO of Applied Physiology, an Australian software start up company in the
intensive care monitoring sector.
Graduated in the UK with a BSc and Diploma in Electronic Engineering, Philip also has an MBA and is a
Graduate of the Australian Institute of Company Directors (GAICD). Mr Daffas has not been a director of
an ASX listed company in the past 3 years.
Mr Ross Harricks (appointed 30 September 2016) BE, MBA
Mr Harricks’ experience in the commercialisation of medical products spans over forty years and over
three continents. His experience includes the marketing and commercialising of the computed
technology scanner (CT or CAT scanner) in Australia, where he headed up the EMI Electronics Group as
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PainChek Limited (formerly ePAT Technologies Limited)
General Manager. His remit included developing EMI’s medical business in this region.
In 1983, Mr Harricks joined the Nucleus Group and became President the Nucleus Group subsidiaries in
United States in marketing medical equipment and scientific and engineering computing products.
In 1989, Mr Harricks was the CEO of a venture capital-backed start-up company developing specialist
scientific and medical lasers.
Mr Harricks has been a director of ResMed Limited and cofounder of AtCor Medical where he completed
an Australian initial public offering in 2005 leading the company until 2009. Otherwise, Mr Harricks has
not been a director of an ASX listed company in the past 3 years.
Mr Harricks works with Australian medical and technology companies assisting in commercialisation of
their products into the US and EU markets. His unique expertise and experience includes strategic
advising on the best path to early market endorsement and on providing hands-on help with
implementation in the American and European markets.
Mr Adam Davey (appointed 30 September 2016)
Mr Davey’s expertise spans over 25 years and includes capital raising (both private and public), mergers
and acquisition, ASX listings, asset sales and purchases, transaction due diligence and director duties. Mr
Davey is a Director of Wealth Management at Patersons Securities. Mr Davey has been involved in
significantly growing businesses in both the industrial and mining sector. This has been achieved through
holding various roles within different organisations, including chairman, managing director, non-
executive director, major shareholder and corporate adviser to the board.
Mr Davey is a non-executive director of Ensurance Limited and Ausnet Financial Services Ltd. Otherwise,
Mr Davey has not been a director of an ASX listed company in the past 3 years.
Company Secretary (appointed 30 September 2016) B.BUS FCA ACIS MAICD
Mr Ian Hobson was appointed to the positions of Company Secretary and Chief Financial Officer on 30
September 2016.
A Fellow Chartered Accountant and Chartered Secretary, Mr Hobson has more than 30 years’ experience
in the areas of corporate finance, governance, corporate accounting, company secretarial and
restructuring advice. Mr Hobson was a director of PricewaterhouseCoopers and Ferrier Hodgson
Chartered Accountants before specializing in providing company secretarial and corporate accounting
services to listed entities. Mr Hobson is a Director of Castle Minerals Limited.
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PainChek Limited (formerly ePAT Technologies Limited)
OPERATIONS REPORT
Principal Activities
The principal activity of the Company is the development and commercialisation of mobile medical
device applications, that automate intelligent pain assessment of individuals who are unable to
communicate their pain with carers.
Financial and operational review
The loss of the Group for the year ended 30 June 2018, after accounting for income tax benefit,
amounted to $4,810,532 (2017: $8,473,802). The year ended 30 June 2018 operating results are
attributed to the following:
• Expensing license acquisition and fees of $1,709,510 (non-cash $1,312,500) (30 June 2017: $Nil);
• Research & Development expense of $1,699,292 (30 June 2017: $821,427);
• Share based payments in respect of options issued to Directors and employees of $345,172 (non-
cash) (30 June 2017: $ 2,220,842);
• Corporate and administration expenses of $1,198,311 (30 June 2017: $962,971); and
• Corporate restructure cost (non-cash) of $Nil following the acquisition (30 June 2017: $4,574,424).
In addition, the statement of financial position as at 30 June 2018 was impacted by:
• A share placement of 75,000,000 shares to raise $3,750,000; and
• Proceeds from the exercise of 18,500,000 options which raised $370,000.
Review of operations
The PainChek® technology uses cameras in smartphones and tablets to capture a brief video of the
person, which is analysed in real time using facial recognition software to detect the presence of facial
micro- expressions that are indicative of the presence of pain. The PainChek® technology has been TGA
and CE mark cleared for use as a class 1 medical device to assess pain in people who are unable to
verbalise.
The Company has focused on commercialisation of the PainChek® Adult “Dementia” App within Australia
and has built a small but highly effective “go to market” team comprised of experienced sales, marketing,
clinical and technical personnel to drive the process. We have conducted a significant number of
customer trials, typically spanning a 4-6-week period, across large, medium and small sized Residential
Aged Care (RAC) clients with the vast majority of them either resulting in a commercial agreement or
moving forwards towards negotiating an agreement.
As of 30th June 2018, we had one-year subscription license agreements in place with 6 Residential Aged
Care clients and Dementia Support Australia and a large pipeline of new commercial opportunities which
represents around 9% of the total beds in Australian Residential Aged Care. In addition, more than 2,000
PainChek® clinical pain assessments had been conducted on more than 500 people living with dementia
within Australia, thus establishing PainChek® as a new, valid pain assessment tool for people unable to
verbalise their pain within the Australian Aged Care market.
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PainChek Limited (formerly ePAT Technologies Limited)
Likely Developments and Overview of Group Strategy
The Company will continue with the commercialisation of the PainChek® technology in Australia and
globally. We are receiving overseas interest including UK, Germany and US and Asia, which will support
our international market strategy. We are currently working to complete a PainChek® pre-market
submission for regulatory clearance with FDA in the United States.
The market segments being pursued by the Company include Residential Aged Care Operators, Health
Care Professionals, Home Care Operators and Direct to Home Carers. In parallel, development of the
next phase of Apps remains on track with the adult’s consumer version scheduled for Q3 2018. This will
be commercialised initially through a “shared care” model that allows healthcare professionals to
provide access to PainChek® for home carer use.
We are also making good progress on the development of the PainChek® App for Infants. The software
development is on schedule, and we anticipate having a version ready for beta testing and validation
studies by 30 September 2018. We are currently in discussions with groups in Melbourne and Sydney for
the validation study, with the objective of having a partner signed for the study by October 2018. We
have also completed the collection of our own video libraries to enable the machine learning for both
face and voice analysis.
All national patent filings around the technology remain on track and we have received a registered
trademark in Australia for the use of the PainChek® name and logo.
Subsequent events
No matters or circumstances have arisen since the end of the year which significantly affected or could
significantly affect the operations of the Group, the results of those operations, or the state of affairs of
the Group in future financial years.
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PainChek Limited (formerly ePAT Technologies Limited)
REMUNERATION REPORT (AUDITED)
Remuneration Policy
The remuneration policy of the Group has been designed to align director objectives with shareholder and
business objectives by providing a fixed remuneration component which is assessed on an annual basis in
line with market rates. The Board of the Company believes the remuneration policy to be appropriate and
effective in its ability to attract and retain the best Directors to run and manage the Company, as well as
create goal congruence between Directors and shareholders.
The Board’s policy for determining the nature and amount of remuneration for board members is as follows:
- The remuneration policy, setting the terms and conditions for the executive Directors and other senior
staff members, was developed and approved by the Board.
-
In determining competitive remuneration rates, the Board considers local and international trends among
comparative companies and the industry generally so that executive remuneration is in line with market
practice and is reasonable in the context of Australian executive reward practices.
- All executives receive a base salary (which is based on factors such as length of service and experience),
superannuation and fringe benefits.
Performance Based Remuneration
The Company is a technology development entity and therefore speculative in terms of performance.
Consistent with attracting and retaining talented executives, Directors and senior executives are paid market
rates associated with individuals in similar positions within the same industry. Options, equity-based
performance incentives and cash bonus’ have been and may be further issued to provide a performance-
linked incentive component in the remuneration package for the Directors and for the future performance by
the Directors and key management personnel in managing the operations and strategic direction of the
Company. All remuneration paid to Directors is valued at the cost to the Company and expensed. Options are
valued using an appropriate valuation methodology. For details of Directors’ and executives’ interests in
options and performance rights at year end, refer to section (d) of this remuneration report.
Company Performance, Shareholder Wealth and Directors’ and Executives’ Remuneration
The remuneration policy has been tailored to align the strategic goals of the Company to create value for
shareholders, Directors and executives. The Company believes the policy has been effective in in aligning the
interests of the Company’s key management personnel with the interests of its shareholders. For details of
Directors’ and executives' interests in equity securities at year end, refer to section (c) of this remuneration
report.
2014
(formerly
MinQuest
Limited)
2015
(formerly
MinQuest
Limited)
2016
(formerly
MinQuest
Limited)
2018
2017
(formerly
ePAT
Technologies
Limited)
Share price at 30 June
$0.02
$0.02
$0.01
$0.025
$0.056
Loss for the year (continuing
and discontinued operations)
Loss for the year (continuing
operations)
EPS for the year (continuing
and discontinued operations)
EPS for the year (continuing
operations)
($792,267)
($1,703,733)
($5,047,449)
($8,473,802)
($4,810,532)
($792,267)
($911,349)
($1,680,796)
($8,473,802)
($4,810,532)
(2.9) cents
(2.4) cents
(2.1) cents
(1.63) cents
(0.6) cents
(2.9) cents
(1.3) cents
(0.7) cents
(1.63) cents
(0.6) cents
5
PainChek Limited (formerly ePAT Technologies Limited)
Performance Income as a Proportion of total compensation
In December 2017, a discretionary performance based bonus totaling $25,000 plus superannuation was paid
to Mr Philip Daffas, the Company’s managing director for services rendered for the year ended 30 September
2017. A further discretionary performance bonus of $40,000 including superannuation has been agreed to
be paid to Mr Daffas for the 9 months ended 30 June 2018. As this is discretionary and not predetermined,
there is no non-vesting proportion for cash bonuses.
Remuneration Policy of Key Management Personnel
The objective of the Company’s executive reward framework is set to attract and retain the most
qualified and experienced Directors and senior executives. The Board ensures that executive reward
satisfies the following key criteria for good reward governance practices:
• Competitiveness
• Acceptability to shareholders
• Performance linkage
• Capital management
Non-executive Directors
The Board’s policy is to remunerate non-executive Directors at market rates for comparable companies for
time, commitment and responsibilities. The Board determines payments to the non-executive Directors and
reviews their remuneration annually based on market practice, duties and accountability. The maximum
aggregate amount of fees that can be paid to non-executive Directors is subject to approval by shareholders at
the Annual General Meeting and is currently set at $250,000. Fees for non-executive Directors are not linked
to the performance of the Company.
As at 30 June 2018, Non-Executive Directors fees were payable as follows:
• Non-Executive Chairman receives a fee of $80,000 per annum including superannuation.
• Non-Executive Directors receive a fee of $40,000 per annum including superannuation.
Directors’ Fees
A Director may be paid fees or other amounts as the Directors determine where a Director performs
special duties or otherwise performs services outside the scope of the ordinary duties of a Director. A
Director may also be reimbursed for reasonable out of pocket expenses incurred as a result of their
Directorship or any special duties.
Service Agreements
Philip Daffas, Managing Director (appointed 30 September 2016)
The Company entered into an Executive Services Agreement (“Agreement”) with Mr Philip Daffas
pursuant to which Mr Daffas was appointed as Managing Director of the Company as at 30 September
2016. The key terms of the Agreement are:
•
•
A salary of $225,000 per annum inclusive of superannuation plus any bonus at the boards
discretion;
Options equivalent to 5% of the Company’s fully diluted securities on issue at the time of
the acquisition of Electronic Pain Assessment Technologies (EPAT) Pty Ltd.
The Agreement may be terminated by either party at any time on the giving of not less than three (3)
months’ notice in writing.
Ian Hobson, Company Secretary and Chief Financial Officer (appointed 30 September 2016)
The Company entered into a Consultancy Agreement (“Agreement”) with Churchill Services Pty Ltd
pursuant to which Mr Hobson was engaged to provide Company Secretarial and Chief Financial Officer
services to the Company effective from 30 September 2016. Churchill Services Pty Ltd is to receive $200
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PainChek Limited (formerly ePAT Technologies Limited)
per hour, exclusive of GST, for services provided by Mr Hobson. The agreement may be terminated by
either party at any time with no notice period.
Retirement Benefits
Other retirement benefits may be provided directly by the Company if approved by shareholders.
However, no retirement benefits other than statutory superannuation are currently paid.
DIRECTORS’ AND EXECUTIVE OFFICERS’ EMOLUMENTS
(a) Details of Key Management Personnel
Directors
Mr John Murray Non-Executive Chairman
Mr Philip Daffas Managing Director
Mr Adam Davey Non-Executive Director
Mr Ross Harricks Non-Executive Director
Other Key Management Personnel
Ian Hobson
Chief Financial Officer and Company Secretary
Except as detailed in Notes (b) – (d) to the Remuneration Report, no key management personnel have
received or become entitled to receive, during or since the financial year, a benefit because of a contract
made by the Company or a related body corporate with key management personnel, a firm of which a
member of key management personnel is a member or an entity in which a member of key management
has a substantial financial interest.
(b) Compensation of Key Management Personnel
Remuneration Policy
The Board of Directors, comprising a majority of Non-Executive Directors, is responsible for determining
and reviewing compensation arrangements for the key management personnel. The Board will assess
the appropriateness of the nature and amount of emoluments of such officers on a periodic basis by
reference to relevant employment market conditions with the overall objective of ensuring maximum
stakeholder benefit from the retention of a high-quality Board and executive team. Remuneration of
Directors is set out below.
The value of remuneration received, or receivable, by key management personnel for the financial year
to 30 June 2018 is as follows:
2018
Primary
Equity Compensation
Post-
employment
Performance
related %
Base
Salary
and Fees
$
73,059
205,479
36,530
40,000
355,068
122,006
477,074
Directors
John Murray (1)
Philip Daffas(2)
Ross Harricks(4)
Adam Davey(3)
Total Directors
Ian Hobson (9)
Total
Bonus
$
-
61,530
-
-
61,530
-
61,530
Value of
Options (d)
$
65,695
109,492
32,848
32,848
240,883
-
240,883
Shares (d)
$
-
-
-
-
-
-
-
Superannuation
Contributions
$
6,941
25,366
3,470
-
35,777
-
35,777
Total
$
145,695
401,867
72,848
72,848
693,258
122,006
815,264
45%
43%
45%
45%
0%
7
PainChek Limited (formerly ePAT Technologies Limited)
Primary
Equity Compensation
Post-
employment
Performance
related %
2017
Directors
John Murray (1)
Philip Daffas(2)
Ross Harricks(4)
Paul Niardone(6)
Frank Terranova(7)
Jeremy Read (5)
Adam Davey(3)
Total Directors
Stephen Kelly(8)
Ian Hobson (9)
Total
Base
Salary
and Fees
$
54,795
126,712
27,397
7,500
15,000
154,006
37,500
422,910
105,000
80,119
608,029
Bonus
$
Value of
Options (d)
$
Shares (d)
$
-
-
-
-
-
-
-
-
-
-
-
600,539
1,000,898
300,269
-
-
-
300,269
2,201,975
-
-
2,201,975
-
-
-
-
-
-
-
-
49,500
-
49,500
Superannuation
Contributions
$
5,205
12,038
2,603
-
-
5,938
-
25,784
-
-
25,784
Total
$
660,539
1,139,648
330,269
7,500
15,000
159,944
337,769
2,650,669
154,500
80,119
2,885,288
67%
65%
67%
-
-
-
66%
-
-
-
56%
Notes:
(1) Appointed Non-Executive Chairman on 30 September 2016.
(2) Appointed Managing Director on 30 September 2016.
(3) Appointed Non-Executiv Director 30 September 2014.
(4) Appointed Non-Executive Director 30 September 2016.
(5) Appointed Managing Director on 30 September 2014, resigned 30 September 2016.
(6) Appointed Non-Executive Director 12 November 2014, appointed Non-Executive Chairman 2
September 2016, resigned 30 September 2016.
(7) Resigned as Non-executive Chairman 2 September 2016
(8) Appointed Company Secretary and Chief Financial Officer 1 June 2015, resigned 7 October 2016.
(9) Appointed Company Secretary and Chief Financial Officer 30 September 2016.
(c)
Shares Held by Key Management Personnel
2018
Directors
John Murray
Philip Daffas
Ross Harricks
Adam Davey
Other key
management
personnel
Ian Hobson
Balance at
1 July 2017
Bought &
(Sold)
Share
Consolidation
Shares issued
in lieu of cash*
Other+
Balance at
30 June 2018
-
-
-
3,540,764
3,540,764
-
3,540,764
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
3,540,764
3,540,764
-
3,540,764
8
PainChek Limited (formerly ePAT Technologies Limited)
2017
Directors
John Murray#
Philip Daffas#
Ross Harricks#
Jeremy Read#
Adam Davey
Paul Niardone#
Frank Terranova#
Other key
management
personnel
Stephen Kelly#
Ian Hobson#
Balance at
1 July 2016
Bought &
(Sold)
Share
Consolidation
Shares issued
in lieu of cash*
Other+
Balance at
30 June
2017
-
-
-
12,592,434
6,196,336
13,687,903
-
32,476,673
1,966,667
-
34,443,340
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(5,396,756)
(2,655,572)
(5,866,243)
-
(13,918,571)
-
-
-
-
-
-
-
-
-
-
-
(7,195,678)
-
(7,821,660)
-
(15,017,338)
-
-
-
-
3,540,764
-
-
3,540,764
(844,870)
-
(14,763,441)
2,475,000*
-
2,475,000
(3,596,827)
-
(18,614,165)
-
-
3,540,764
+ On Appointment/ Resignation
# Director / Key Management Personnel was appointed and / or resigned during the financial year ended 30 June
2017. Refer notes (1) to (9) to the Remuneration Table.
* Shares were issued to settle existing liabilities. These shares were issued on an arm’s length basis.
(d) Options Held by Key Management Personnel
2018
Balance at
1 July 2017
Received as
Remuneration
Exercise
of
Options
Other +
Balance at 30
June 2018
Total
Vested
Total
Exercisable
Directors
John Murray
Philip Daffas
Ross Harricks
Adam Davey
key
Other
management
personnel
Ian Hobson
24,599,497
40,999,162
12,299,748
12,299,748
90,198,155
-
90,198,155
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
24,599,497
40,999,162
12,299,748
12,299,748
90,198,155
16,399,665 16,399,665
27,332,775 27,332,775
8,199,832
8,199,832
60,132,104 60,132,104
8,199,832
8,199,832
-
90,198,155
-
60,132,104 60,132,104
-
9
PainChek Limited (formerly ePAT Technologies Limited)
(d)
Options Held by Key Management Personnel
2017
Balance at
1 July 2016
Received as
Remuneration
Exercise
of
Options
Other +
Balance at 30
June 2017
Total
Vested
Total
Exercisable
Directors
John Murray#
Philip Daffas#
Ross Harricks#
Jeremy Read#
Adam Davey#
Paul Niardone#
Frank Terranova#
key
Other
management
personnel
Stephen Kelly#
Ian Hobson
-
-
-
-
-
-
-
-
24,599,497
40,999,162
12,299,748
-
12,299,748
-
-
90,198,155
1,076,667
-
1,076,667
-
-
90,198,155
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
24,599,497
40,999,162
12,299,748
-
12,299,748
-
-
90,198,155
(1,076,667)
-
(1,076,667)
-
-
90,198,155
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
+ On Appointment/ Resignation/ Granted in conjunction with capital raising.
# Director / Key Management Personnel was appointed and / or resigned during the financial year ended 30 June
2017. Refer notes (1) to (9) to the Remuneration Table.
Share and Option Holdings
All equity dealings with Directors have been entered into with terms and conditions no more favourable
than those that the entity would have adopted if dealing at arm’s length.
(e) Compensation Options
During and since the financial year ended 30 June 2018, nil options were granted by the Company to
Directors or Key Management Personnel (2017: 90,198,155).
(f) Short term employee benefits
These amounts include director and consulting fees paid to non-executive directors as well as salary and
paid leave benefits awarded to executive directors.
(g) Post-employment benefits
These amounts are superannuation contributions made during the year.
10
On 30 September 2016, the following personnel were appointed directors of the Company (excluding Mr
Davey who remained a director) and entered into letters of appointment on the following key terms:
PainChek Limited (formerly ePAT Technologies Limited)
Name
Position
Cash
Remuneration
inclusive of
superannuation
Notice period /
termination
provisions
Options
equivalent to
% of fully
diluted shares
on issue
Mr John Murray
Mr Adam Davey
Mr Ross Harricks
Non- Executive
Chairman
Non-Executive
Director
Non-Executive
Director
$80,000
$40,000
$40,000
Nil
Nil
Nil
3%
1.5%
1.5%
Mr Philip Daffas
Managing Director
$225,000
3 months
5%
At the annual general meeting held on 23 November 2016, shareholders approved the issue of the
following options exercisable at 2 cents per share and expiring on 24 November 2019 and vesting on
certain conditions:
Name
Position
Unlisted options allotted 19
December 2016
Mr John Murray
Non- Executive Chairman
Mr Adam Davey
Non-Executive Director
Mr Ross Harricks
Non-Executive Director
Mr Philip Daffas
Managing Director
Total
24,599,497
12,299,748
12,299,748
40,999,162
90,198,155
The options issued to directors are to vest as follows:
i. One third after one year of service (as approved at the 2016 Annual General Meeting, no
performance condition is attached to this tranche of options).
ii. One third after the Company makes an announcement that Regulatory Approval to enable
commercial use of the PainChek App in Australia, the United States or Europe is received, or
the Company has announced the execution of a binding licence agreement to licence the
PainChek App to:
a. one or more residential aged care facilities facility owners managing in total in excess
of 150 beds; or
b. one or more medical clinics which service in total in excess of 2,000 patients per year;
or
c. a metropolitan hospital with in excess of 200 beds;
(each an “End User”);
d. or a global distribution partner with multiple End Users as existing customers.
iii. One third upon the Company generating cumulative revenue of $1,000,000.
11
PainChek Limited (formerly ePAT Technologies Limited)
The options issued to directors were expensed as follows:
Number of
options
Value per
option at
grant date
% Vested Vesting Date
Value
$
Expensed
30 June
2017
Expensed
30 June
2018
Tranche 1
30,066,052
$0.037
100%
30 Sept 2017
814,286
573,404
240,882
Trance 2
30,066,052
Tranche 3
30,066,052
$0.037
$0.037
100%
19 July 2017
814,286
814,286
0%
Performance
based
814,286
814,286
-
-
Total
90,198,155
2,442,857
2,201,975
240,882
End of Remuneration Report
12
PainChek Limited (formerly ePAT Technologies Limited)
ENVIRONMENTAL REGULATIONS AND PROCEEDINGS
The Group’s operations are not subject to any significant environmental regulations where it operates.
MEETINGS OF DIRECTORS
The number of Directors’ meetings held during the financial year each director held office and the
number of meetings attended by each director are:
Director
John Murray
Philip Daffas
Ross Harricks
Adam Davey
Directors Meetings
Meetings
Attended
12
12
12
12
Number Eligible
to Attend
12
12
12
12
The full Board currently fulfils the duties of the Remuneration Committee and the Audit Committee.
OPTIONS
At the date of this report, the following options over new ordinary shares in the Company were on issue.
Type
Date of Expiry
Unlisted Options
Unlisted Options
Unlisted Options
Unlisted Options
Unlisted Options
7 October 2019
7 October 2019
24 November 2019
3 October 2021
22 July 2022
Exercise
Price
$0.025
$0.02
$0.02
$0.36
$0.726
Number under
Option
45,000,000
34,000,000
90,198,155
5,000,000
3,000,000
No ordinary shares were issued as a result of the exercise of options during or since the financial year
ended 30 June 2018.
EQUITY HOLDINGS
The relevant interests of each director in the Company’s share capital, options and performance rights at
the date of this report are as follows:
Directors
John Murray
Adam Davey
Philip Daffas
Ross Harricks
Total
Number of
Shares
-
3,540,764
-
-
3,540,764
Number of
Options
24,599,497
12,299,748
40,999,162
12,299,748
90,198,155
INSURANCE OF OFFICERS
To the extent permitted by law, the Company has indemnified (fully insured) each director and the
secretary of the Company. The liabilities insured include costs and expenses that may be incurred in
defending civil or criminal proceedings (that may be brought) against the officers in their capacity as
officers of the Company or a related body, and any other payments arising from liabilities incurred by the
officers in connection with such proceedings, other than where such liabilities arise out of conduct
involving a willful 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 company has not insured against or indemnified its auditor.
13
PainChek Limited (formerly ePAT Technologies Limited)
PROCEEDINGS ON BEHALF OF THE GROUP
The Group is not aware that any person has applied to the court under section 237 of the Corporations
Act 2001 for leave to bring proceedings on behalf of the Group, or to intervene in any proceedings in
which the Group is a party, for the purpose of taking responsibility on behalf of the Group for all or part
of those proceedings.
No proceedings have been brought or intervened in on behalf of the Group with leave of the court under
section 237 of the Corporations Act 2001.
NON-AUDIT SERVICES
The Group may decide to employ the auditor on assignments additional to their statutory audit duties
where the auditor’s expertise and experience with the Group and/or the Group are important.
The Board of Directors has considered the position and is satisfied that the provision of the non-audit
services is compatible with the general standard of independence for auditors imposed by the
Corporations Act 2001. The directors are satisfied that the provision of non-audit services by the
auditor, as set out below, did not compromise the auditor independence requirements of the
Corporations Act 2001 for the following reasons:
•
all non-audit services have been reviewed to ensure they do not impact the impartiality and
objectivity of the auditor;
none of the services undermine the general principles relating to auditor independence as set out
in APES 110 Code of Ethics for Professional Accountants.
•
Details of the amounts paid or payable to the auditor, BDO Audit Pty Ltd for audit services provided
during the year are set out in note 21 to the financial report.
Non-audit services
BDO Audit Pty Ltd
Tax advice services
Tax compliance services
Investigating Accountant Report for Prospectus
Total remuneration for non-audit services
2018
$
2017
$
-
-
-
-
-
8,450
5,500
13,950
Auditor’s independence declaration
The auditor’s independence declaration is included on page 18 of this report.
Signed in accordance with a resolution of directors.
John Murray
Chairman
27 August 2018, Sydney, NSW
14
Auditor’s independence declaration
PainChek Limited (formerly ePAT Technologies Limited)
Tel: +61 7 3237 5999
Fax: +61 7 3221 9227
www.bdo.com.au
Level 10, 12 Creek St
Brisbane QLD 4000
GPO Box 457 Brisbane QLD 4001
Australia
DECLARATION OF INDEPENDENCE BY C R JENKINS TO DIRECTORS OF PAINCHEK LIMITED
As lead auditor of PainChek Limited for the year ended 30 June 2018, I declare that, to the best of my
knowledge and belief, there have been:
1. No contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
2. No contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of PainChek Limited and the entities it controlled during the year.
C R Jenkins
Director
BDO Audit Pty Ltd
Brisbane, 27 August 2018
BDO Audit Pty Ltd ABN 33 134 022 870 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050
110 275, an Australian company limited by guarantee. BDO Audit Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited
by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional
Standards Legislation, other than for the acts or omissions of financial services licensees.
15
PainChek Limited (formerly ePAT Technologies Limited)
Consolidated statement of profit or
comprehensive income for the year ended 30 June 2018
loss and other
Continuing operations
Revenue
Other income
Research and development expenses
Marketing and business development expenses
Corporate administration expenses
License expenses
Corporate restructure expenses
Share based payment expenses
Loss before income tax
Income tax benefit
Loss for the period attributable to Owners of PainChek Limited
Other comprehensive income, net of income tax
Items that will not be reclassified subsequently to profit or loss
Items that may be reclassified subsequently to profit or loss
Other comprehensive income for the period, net of income tax
Total comprehensive loss for the period
Loss and total comprehensive loss attributable to:
Owners of PainChek Limited
Consolidated Consolidated
30 June 2018
$
30 June 2017
$
Note
3
4
5
5
19
14
6
50,647
410,014
(1,699,292)
(318,907)
(1,198,311)
(1,709,510)
-
(345,172)
(4,810,532)
31,116
74,446
(821,427)
-
(962,671)
-
(4,574,424)
(2,220,842)
(8,473,802)
-
(4,810,532)
-
(8,473,802)
-
-
-
(4,810,532)
-
-
-
(8,473,802)
(4,810,532)
(8,473,802)
Loss per share:
Basic and diluted (cents per share)
7
(0.6)
(1.63)
Notes to the financial statements are included on pages 20 to 43.
16
Consolidated statement of financial position as at 30 June 2018
PainChek Limited (formerly ePAT Technologies Limited)
Current assets
Cash and cash equivalents
Trade and other receivables
Total current assets
Non-current assets
Property, plant and equipment
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Provisions
Total current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Accumulated losses
Total equity
Consolidated
30 June 2018
$
Consolidated
30 June 2017
$
Note
18
8
9
10
11
13
14
3,606,115
62,098
3,668,213
2,630,019
57,233
2,687,252
4,384
4,384
3,672,597
2,544
2,544
2,689,796
415,914
31,980
447,894
447,894
3,224,703
191,503
15,729
207,233
207,233
2,482,563
13,710,033
3,088,014
(13,573,344)
3,224,703
8,502,533
2,742,842
(8,762,812)
2,482,563
Notes to the financial statements are included on pages 20 to 43.
17
PainChek Limited (formerly ePAT Technologies Limited)
Consolidated statement of changes in equity for the year ended
30 June 2018
Note
Company
Balance at 1 July 2016
Loss for the period
Other comprehensive income
Total comprehensive loss for the period
Issue of ordinary shares (refer to note 13)
Share issue costs (refer to note 13)
Recognition of share based payments
Balance at 30 June 2017
Consolidated
Balance at 1 July 2017
Loss for the period
Other comprehensive income
Total comprehensive loss for the period
Issue of ordinary shares (refer to note 13)
Issue of ordinary shares on conversion of
options (refer to note 13)
Share issue costs (refer to note 13)
Recognition of share based payments
(refer to note 13)
Balance at 30 June 2018
Issued
capital
$
357,143
-
-
Reserves
$
-
-
-
9,174,569
(1,078,679)
49,500
8,502,533
-
-
2,742,842
2,742,842
Accumulated
losses
$
(289,010)
(8,473,802)
-
(8,473,802)
-
-
-
(8,762,812)
8,502,533
-
-
2,742,842
-
-
3,750,000
370,000
(225,000)
-
-
-
(8,762,812)
(4,810,532)
-
(4,810,532)
-
-
-
1,312,500
13,710,033
345,172
3,088,014
-
(13,573,344)
Total
$
68,133
(8,473,802)
-
(8,473,802)
9,174,569
(1,078,679)
2,792,342
2,482,563
2,482,563
(4,810,532)
-
(4,810,532)
3,750,000
370,000
(225,000)
1,657,672
3,224,703
Notes to the financial statements are included on pages 20 to 43.
18
PainChek Limited (formerly ePAT Technologies Limited)
Consolidated statement of cash flows for the year ended 30
June 2018
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Interest received
Rebates and grants received
Net cash used in operating activities
Cash flows from investing activities
Cash from acquisition of subsidiary
Payments for property, plant and equipment
Net cash provided by investing activities
Cash flows from financing activities
Proceeds from issue of shares
(Payment) of share issue costs
Net cash (used in)/provided by financing activities
Consolidated Consolidated
Year ended
Note
30 June 2018
$
30 June 2017
$
32,842
(3,382,079)
26,191
410,014
(2,913,032)
-
(1,658,002)
26,707
53,416
(1,577,879)
-
(5,872)
(5,872)
18,277
-
18,277
4,120,000
(225,000)
3,895,000
4,732,493
(617,951)
4,114,543
Net increase / (decrease) in cash and cash equivalents
976,096
2,554,940
Cash and cash equivalents at the beginning of the period
2,630,019
75,079
Cash and cash equivalents at the end of the period
3,606,115
2,630,019
Notes to the financial statements are included on pages 20 to 43.
19
PainChek Limited (formerly ePAT Technologies Limited)
Notes to the financial statements for the year ended 30 June
2018
1.
Significant accounting policies
Basis of preparation
PainChek Ltd (formerly known as EPAT Technologies Ltd), (the “Group”) is a listed public company,
incorporated and domiciled in Australia. The entity’s principal activities are development and
commercialization of mobile medical device applications that provide pain assessment for
individuals that are unable to communicate with their carers.
The financial report is presented in Australian dollars.
The financial report is a general purpose financial report, which has been prepared in accordance
with the Corporations Act 2001, Australian Accounting Standards and Interpretations, and complies
with other requirements of the law.
The financial information has been prepared on the accruals basis and is based on historical costs
and does not take into account changing money values. Cost is based on the fair values of the
consideration given in exchange for assets.
Statement of Compliance
The financial report was authorised for issue on 27 August 2018.
The financial report complies with Australian Accounting Standards, which include Australian
equivalents to International Financial Reporting Standards (“AIFRS”). Compliance with AIFRS ensures
that the financial report, comprising the financial statements and notes thereto, complies with
International Financial Reporting Standards (“IFRS”).
Adoption of New and Revised Standards
In the year ended 30 June 2018, the Directors have reviewed all of the new and revised Standards
and Interpretations issued by the AASB that are relevant to the Group and effective for the current
annual reporting period.
As a result of this review, the Directors have determined that there is no material impact of the new
and revised Standards and Interpretations on the Group and, therefore, no material change is
necessary to Group accounting policies.
Standards and Interpretations on issue 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.
Title of standard
AASB 9 Financial Instruments
Nature of change
AASB 9 addresses the classification, measurement and derecognition of financial
assets and financial liabilities, introduces new rules for hedge accounting and a
new impairment model for financial assets.
Impact
The Group has reviewed its financial assets and liabilities and is expecting the
following impact from the adoption of the new standard on 1 July 2018:
The financial assets held by the Group primarily comprise cash and debt
instruments currently measured at amortised cost which meet the conditions for
20
PainChek Limited (formerly ePAT Technologies Limited)
classification at amortised cost under AASB 9.
Accordingly, the Group does not expect the new guidance to affect the
classification and measurement of these financial assets.
There will be no impact on the Group’s accounting for financial liabilities, as the
new requirements only affect the accounting for financial liabilities that are
designated at fair value through profit or loss and the Group does not have any
such liabilities. The derecognition rules have been transferred from AASB 139
Financial Instruments: Recognition and Measurement and have not been
changed.
The new impairment model requires the recognition of impairment provisions
based on expected credit losses (ECL) rather than only incurred credit losses as is
the case under AASB 139. It applies to financial assets classified at amortised
cost, debt instruments measured at FVOCI, contract assets under AASB 15
Revenue from Contracts with Customers, lease receivables, loan commitments
and certain financial guarantee contracts. Based on the assessments undertaken
to date, the Group expects no significant increase in the loss allowance for trade
debtors.
The new standard also introduces expanded disclosure requirements and
changes in presentation. These may change the nature and extent of the Group’s
disclosures about its financial instruments particularly in the year of the adoption
of the new standard.
Date of adoption
by Group
Must be applied for financial years commencing on or after 1 July 2018. The
Group will apply the new rules retrospectively from 1 July 2018, with the
practical expedients permitted under the standard.
Title of standard
AASB 15 Revenue from Contracts with Customers
Nature of change
The AASB has issued a new standard for the recognition of revenue. This will
replace AASB 118 which covers revenue arising from the sale of goods and the
rendering of services and AASB 111 which covers construction contracts.
Impact
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 the adoption.
Management has assessed the effects of applying the new standard on the
group’s financial statements and has not identified any areas that will be
affected.
The application of AASB 15 may result in the identification of separate
performance obligations in relation to certain contracts which could affect the
timing of the recognition of revenue going forward.
In the early stages of this business, revenue is not significant and the impact from
this change is not material.
Date of adoption
by Group
Mandatory for financial years commencing on or after 1 July 2018. The Group
intends to adopt the standard using the modified retrospective approach which
means that the cumulative impact of the adoption, if any, will be recognised in
retained earnings as of 1 July 2018 and that comparatives will not be restated.
21
PainChek Limited (formerly ePAT Technologies Limited)
Title of standard
AASB 16 Leases
Nature of change
Impact
AASB 16 was issued in February 2016. It will result in almost all leases being
recognised on the balance sheet, as the distinction between operating and
finance leases is removed. Under the new standard, an asset (the right to use the
leased item) and a financial liability to pay rentals are recognised. The only
exceptions are short-term and low-value leases.
The accounting for lessors will not significantly change.
The standard will affect primarily the accounting for the Group’s operating
leases. As at the reporting date, the Group has no non-cancellable operating
lease commitments. It is therefore not yet possible to estimate the amount of
right-of-use assets and lease liabilities that will have to be recognised on
adoption of the new standard and how this may affect the Group’s profit or loss
and classification of cash flows going forward.
Mandatory
application
date/Date
of
adoption by Group
Mandatory for financial years commencing on or after 1 July 2019. At this stage,
the Group does not intend to adopt the standard before its effective date. The
Group intends to apply the simplified transition approach and will likely not
restate comparative amounts for the year prior to first adoption.
Comparatives - Reverse acquisition
PainChek Ltd (formerly ePAT Technologies Limited) acquired Electronic Pain Assessment
Technologies (EPAT) Pty Ltd on 23 September 2016. From a legal and taxation perspective PainChek
is considered the acquiring entity. However, the acquisition has the features of a reverse acquisition
as described in the Australian Accounting Standard AASB3 “Business Combinations” (AASB 3)
notwithstanding PainChek Limited being the legal parent of the Group. At the time of the
acquisition PainChek Ltd divested all of its operations, and its activities were limited to managing its
cash balances, filing obligations (ie, a listed shell), and completion of the acquisition. It is therefore
considered that PainChek Ltd will not be a business for the purposes of AASB3 as it will have no
processes or outputs.
The transaction has therefore been accounted for as a reverse acquisition from a consolidated
perspective, where Electronic Pain Assessment Technologies (EPAT) Pty Ltd is the accounting
acquirer and PainChek Ltd is the legal acquirer. The comparatives in the financial report includes
the consolidated financial statements of the PainChek Limited group for the period 23 September
2016 to 30 June 2017 and represents a continuation of Electronic Pain Assessment Technologies
(EPAT) Pty Ltd financial statements with exception of the capital structure. The amount recognised
as equity instruments in these consolidated statements represents the issued equity of PainChek
Limited adjusted to reflect the equity issued by PainChek Ltd on acquisition. Refer to note 13 on
issued capital and note 19 on the accounting for the acquisition.
Under the reverse acquisition principles, the consideration provided by Electronic Pain Assessment
Technologies (EPAT) Pty Ltd was determined to be $4,422,069 which is the deemed fair value of the
222,103,433 shares owned by the former ePAT Technologies Limited / MinQuest Limited
shareholders at the completion of the acquisition, valued at the capital raising share price.
The excess of the deemed fair value of the shares owned by the PainChek Limited (formerly ePAT
Technologies Limited / MinQuest Limited) shareholders and the fair value of the identifiable net
liabilities of PainChek Limited immediately prior to the completion of the merger is accounted for
under “AASB 2 “Share–based Payment” and resulted in the recognition of $4,574,424 being
recorded as “Corporate Restructure Expense”. The net assets of PainChek Limited were recorded at
fair value at completion of the merger. No adjustments were required to the historical values.
22
PainChek Limited (formerly ePAT Technologies Limited)
Going concern basis
The financial statements have been prepared on the going concern basis, which contemplates
continuity of normal business activities and the realisation of assets and settlement of liabilities in
the normal course of business.
As disclosed in the financial statements, the consolidated entity has net operating cash outflows for
the year of $2,913,032 (30 June 2017: $1,577,879) and as at 30 June 2018 has cash and cash
equivalents of $3,606,115 (30 June 2017: $2,630,019). The consolidated entity also generated a loss
after tax of $4,810,532 (30 June 2017: $8,473,802).
The ability of the consolidated entity to continue as a going concern is principally dependent upon
one or more of the following conditions:
•
•
the ability of the consolidated entity to raise sufficient capital and when necessary; and
the successful commercialisation of its intellectual property in a manner that generates
sufficient operating cash inflows.
These conditions give rise to material uncertainty which may cast significant doubt over the
consolidated entity’s ability to continue as a going concern. The directors believe that the going
concern basis of preparation is appropriate due to its recent history of raising capital and the
significant progress made on exploiting its intellectual property.
Should the consolidated entity be unable to continue as a going concern, it may be required to
realise its assets and extinguish its liabilities other than in the ordinary course of business, and at
amounts that differ from those stated in the financial report. This financial report does not include
any adjustments relating to the recoverability and classification of recorded asset amounts or the
amounts or classification of liabilities and appropriate disclosures that may be necessary should the
consolidated entity be unable to continue as a going concern.
Significant accounting policies of the Company
Set out below are the significant accounting policies that have been applied in the preparation of
the consolidated financial statements:
(a)
Revenue and other income
Revenue is recognised when it is probable that the economic benefit will flow to the company
and the revenue can be reliably measured. Revenue is measured at the fair value of the
consideration received or receivable.
Sale of goods revenue is recognised at the point of sale, which is where the customer has taken
delivery of the goods, the risks and rewards are transferred to the customer and there is a valid
sales contract. Amounts disclosed as revenue are net of sales returns and trade discounts.
Interest revenue is recognised as interest accrues using the effective interest method. This is a
method of calculating the amortised cost of a financial asset and allocating the interest income
over the relevant period using the effective interest rate, which is the rate that exactly discounts
estimated future cash receipts through the expected life of the financial asset to the net carrying
amount of the financial asset.
Grants and other revenue is recognised when it is received or when the right to receive payment
is established.
23
PainChek Limited (formerly ePAT Technologies Limited)
(b)
Principals of Consolidation
The consolidated financial statements comprise the financial statements of all subsidiaries of the
Company and the results of all subsidiaries from the date that control was obtained. The
Company controls another entity when the Company is exposed to, or has the rights to, variable
returns from its involvement with the entity and has the ability to affect those returns through
its power to direct the activities of the entity.
Subsidiaries are fully consolidated from the date on which control is fully transferred. They are
deconsolidated from the date control ceases.
The financial statement of the subsidiary is prepared for the same reporting period as the parent
company, using consistent accounting policies.
In preparing the consolidated financial statements, all intercompany balances and transactions,
income and expenses and profit and losses resulting from intra-group transactions have been
eliminated in full.
The acquisition of subsidiaries is accounted for using the acquisition method of accounting. A
change in ownership interest without a loss of control is accounted for as an equity transaction.
Non-controlling interests in the results and equity of subsidiaries are shown separately in the
financial statements. Losses incurred by the consolidated entity are attributed to the non-
controlling interests in full, even if that results in a deficit balance.
Where the consolidated entity loses control over a subsidiary, it derecognises the assets
including goodwill, liabilities and non-controlling interest in the subsidiary, together with any
cumulative translation differences in equity. The consolidated entity recognises the fair value of
the consideration received and the fair value of any investment retained together with any gains
or losses in profit or loss.
(c)
Income Tax
Current tax assets and liabilities for the current and prior periods are measured at the amount
expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws
used to compute the amount are those that are enacted or substantively enacted by the balance
date.
Deferred income tax is provided on all temporary differences at the balance date between the
tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.
Deferred income tax liabilities are recognised for all taxable temporary differences except:
▪
▪
when the deferred income tax liability arises from the initial recognition of
goodwill or of an asset or liability in a transaction that is not a business
combination and that, at the time of the transaction, affects neither the
accounting profit nor taxable profit or loss; or
when the taxable temporary difference is associated with investments in
subsidiaries, associates or interests in joint ventures, and the timing of the
reversal of the temporary difference can be controlled and it is probable that the
temporary difference will not reverse in the foreseeable future.
Deferred income tax assets are recognised for all deductible temporary differences, carry-
forward of unused tax assets and unused tax losses, to the extent that it is probable that taxable
profit will be available against which the deductible temporary differences and the carry-forward
of unused tax credits and unused tax losses can be utilised, except:
24
PainChek Limited (formerly ePAT Technologies Limited)
▪
▪
when the deferred income tax asset relating to the deductible temporary
difference arises from the initial recognition of an asset or liability in a
transaction that is not a business combination and, at the time of the
transaction, affects neither the accounting profit nor taxable profit or loss; or
when the deductible temporary difference is associated with investments in
subsidiaries, associates or interests in joint ventures, in which case a deferred tax
asset is only recognised to the extent that it is probable that the temporary
difference will reverse in the foreseeable future and taxable profit will be
available against which the temporary difference can be utilised.
The carrying amount of deferred income tax assets is reviewed at each balance date and reduced
to the extent that it is no longer probable that sufficient taxable profit will be available to allow
all or part of the deferred income tax asset to be utilised. Unrecognised deferred income tax
assets are reassessed at each balance date and are recognised to the extent that it has become
probable that future taxable profit will allow the deferred tax asset to be recovered.
Deferred income tax assets and liabilities are measured at the tax rates that are expected to
apply to the year when the asset is realised or the liability is settled, based on tax rates (and tax
laws) that have been enacted or substantively enacted at the balance date.
Income taxes relating to items recognised directly in equity are recognised in equity and not in
profit or loss.
Deferred tax assets and deferred tax liabilities are offset only if a legally enforceable right exists
to set off current tax assets against current tax liabilities and the deferred tax assets and
liabilities relate to the same taxable entity and the same taxation authority.
(d)
Impairment of Assets
The Group assesses at each balance date whether there is an indication that an asset may be
impaired.
If any such indication exists, or when annual impairment testing for an asset is required, the
Company makes an estimate of the asset’s recoverable amount. An asset’s recoverable amount
is the higher of its fair value less costs to sell and its value in use and is determined for an
individual asset, unless the asset does not generate cash inflows that are largely independent of
those from other assets or groups of assets and the asset's value in use cannot be estimated to
be close to its fair value. In such cases the asset is tested for impairment as part of the cash
generating unit to which it belongs. When the carrying amount of an asset or cash-generating
unit exceeds its recoverable amount, the asset or cash-generating unit is considered impaired
and is written down to its recoverable amount.
In assessing value in use, the estimated future cash flows are discounted to their present value
using a pre-tax discount rate that reflects current market assessments of the time value of
money and the risks specific to the asset. Impairment losses relating to continuing operations are
recognised in those expense categories consistent with the function of the impaired asset unless
the asset is carried at revalued amount (in which case the impairment loss is treated as a
revaluation decrease).
An assessment is also made at each balance date as to whether there is any indication that
previously recognised impairment losses may no longer exist or may have decreased. If such
indication exists, the recoverable amount is estimated. A previously recognised impairment loss
is reversed only if there has been a change in the estimates used to determine the asset’s
recoverable amount since the last impairment loss was recognised. If that is the case the carrying
amount of the asset is increased to its recoverable amount. That increased amount cannot
25
PainChek Limited (formerly ePAT Technologies Limited)
exceed the carrying amount that would have been determined, net of depreciation, had no
impairment loss been recognised for the asset in prior years. Such reversal is recognised in profit
or loss unless the asset is carried at revalued amount, in which case the reversal is treated as a
revaluation increase.
After such a reversal the depreciation charge is adjusted in future periods to allocate the asset’s
revised carrying amount, less any residual value, on a systematic basis over its remaining useful
life.
(e)
Share-based Payment Transactions
The cost of equity-settled transactions with employees is measured by reference to the fair value
of the equity instruments at the date at which they are granted. The fair value is determined by
using a suitable option pricing model.
In valuing equity-settled transactions, no account is taken of any performance conditions, other
than conditions linked to the price of the shares of the Company.
The cost of equity-settled transactions is recognised, together with a corresponding increase in
equity, over the period in which the performance and/or service conditions are fulfilled, ending
on the date on which the relevant recipient of the equity becomes fully entitled to the award
(the vesting period).
The cumulative expense recognised for equity-settled transactions at each reporting date until
vesting date reflects (i) the extent to which the vesting period has expired and (ii) the Company’s
best estimate of the number of equity instruments that will ultimately vest. No adjustment is
made for the likelihood of market performance conditions being met as the effect of these
conditions is included in the determination of fair value at grant date. The income statement
charge or credit for a period represents the movement in cumulative expense recognised as at
the beginning and end of that period.
No expense is recognised for awards that do not ultimately vest, except for awards where
vesting is only conditional upon a market condition.
If the terms of an equity-settled award are modified, as a minimum an expense is recognised as if
the terms had not been modified. In addition, an expense is recognised for any modification that
increases the total fair value of the share-based payment arrangement, or is otherwise beneficial
to the employee, as measured at the date of modification.
If an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation,
and any expense not yet recognised for the award is recognised immediately. However, if a new
award is substituted for the cancelled award and designated as a replacement award on the date
that it is granted, the cancelled and new award are treated as if they were a modification of the
original award, as described in the previous paragraph.
(f)
Cash and cash equivalents
Cash comprises cash at bank and in hand. Cash equivalents are short term, highly liquid
investments that are readily convertible to known amounts of cash and which are subject to an
insignificant risk of changes in value. Bank overdrafts are shown within borrowings in current
liabilities in the statement of financial position.
For the purpose of the Statement of Cash Flows, cash includes on hand and other funds held at
call net of bank overdrafts.
26
PainChek Limited (formerly ePAT Technologies Limited)
(g)
Trade and other receivables
Trade receivables are initially recognised at fair value and subsequently measured at amortised
cost using the effective interest method, less any provision for impairment. Trade receivables are
generally due for settlement within 30 days.
Collectability of trade receivables is reviewed on an ongoing basis. Debts which are known to be
uncollectable are written off by reducing the carrying amount directly. A provision for
impairment of trade receivables is raised when there is objective evidence that the 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 (more than 60 days overdue) are
considered indicators that the trade receivable may be 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.
(h)
Plant and equipment
Plant and equipment is stated at historical cost less accumulated depreciation and impairment.
Historical cost includes expenditure that is directly attributable to the acquisition of the items.
Depreciation is calculated on a straight-line basis to write off the net cost of each item of plant
and equipment over their expected useful lives as follows:
Plant and equipment
Less than 5 years
The residual values, useful lives and depreciation methods are reviewed, and adjusted if
appropriate, at each reporting date.
An item of plant and equipment is derecognised upon disposal or when there is no future
economic benefit to the company. Gains and losses between the carrying amount and the
disposal proceeds are taken to profit or loss.
(i)
Trade and other payables
These amounts represent liabilities for goods and services provided to the company prior to the
end of the financial year and which are unpaid. Due to their short-term nature they are
measured at amortised cost and are not discounted. The amounts are unsecured and are usually
paid within 30 days of recognition.
(j)
Employee benefits
Short-term employee benefits
Liabilities for wages and salaries, including non-monetary benefits, annual leave and long service
leave expected to be settled within 12 months of the reporting date are recognised in current
liabilities in respect of employees' services up to the reporting date and are measured at the
amounts expected to be paid when the liabilities are settled.
27
PainChek Limited (formerly ePAT Technologies Limited)
Other long-term employee benefits
The liability for annual leave and long service leave not expected to be settled within 12 months
of the reporting date are recognised in non-current liabilities, provided there is an unconditional
right to defer settlement of the liability. The liability is measured as the present value of
expected future payments to be made in respect of services provided by employees up to the
reporting date using the projected unit credit method. Consideration is given to expect future
wage and salary levels, experience of employee departures and periods of service. Expected
future payments are discounted using market yields at the reporting date on national
government bonds with terms to maturity and currency that match, as closely as possible, the
estimated future cash outflows.
Defined contribution superannuation expense
Contributions to defined contribution superannuation plans are expensed in the period in which
they are incurred.
(k)
Issued capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of
new shares or options are shown in equity as a deduction, net of tax, from the proceeds.
(l)
Earnings per share
Basic earnings per share is calculated as net profit attributable to members of the Group,
adjusted to exclude any costs of servicing equity, divided by the weighted average number of
ordinary shares, adjusted for any bonus element.
Diluted earnings per share is calculated as net profit attributable to members of the Group,
adjusted for:
•
•
costs of servicing equity;
the weighted average number of additional ordinary shares that would have been
outstanding assuming the conversion of all dilutive potential ordinary shares;
the after tax effect of dividends and interest associated with dilutive potential ordinary
shares that have been recognised as expenses; and
•
• other non-discretionary changes in revenues or expenses during the period that would result
from the dilution of potential ordinary shares divided by the weighted average number of
ordinary shares and dilutive potential ordinary shares, adjusted for any bonus element.
(m)
Comparative Figures
When required by Accounting Standards, comparative figures have been adjusted to conform to
changes in presentation for the current financial year.
Where the Group retrospectively applies an accounting policy, makes a retrospective
restatement or reclassifies items in its financial statements, an additional (third) statement of
financial position as at the beginning of the preceding period in addition to the minimum
comparative financial statements is presented.
(n)
Significant accounting judgements and key estimates
The preparation of financial statements requires management to make judgements, estimates
and assumptions that affect the application of accounting policies and the reported amounts of
assets, liabilities, income and expense. Actual results may differ from these estimates.
28
PainChek Limited (formerly ePAT Technologies Limited)
In preparing these statements, the key estimates made by management in applying the
Company’s accounting policies have been applied to the valuation of share-based payments,
refer to note 14.
In preparing these financial statements, the significant judgements made by management in
applying the Company’s accounting policies and the key sources of estimation uncertainty have
been applied to the reverse acquisition, refer to note 19.
(o)
Amendments to AASBs and the new Interpretation that are mandatorily effective for
the current reporting period
The Group has adopted all of the new and revised Standards and Interpretations issued by the
Australian Accounting Standards Board (the AASB) that are relevant to their operations and
effective for the current year.
New and revised Standards and amendments thereof and Interpretations effective for the current
year that are relevant to the Consolidated Entity do not have any material impact on the disclosures
or the amounts recognised in the Company’s financial statements.
2.
Segment information
Operating segments are presented using the ‘management approach’, where information presented
is on the same basis as the internal reports provided to the Chief Operating Decision Makers
(CODM). The CODM is responsible for the allocation of resources to operating segments and
assessing their performance. The Group operates predominantly in one segment, being the sale of
its pain assessment solutions. The primary financial statements reflects this segment.
3. Revenue
Revenue from ordinary activities
Interest income
Total Revenue
4. Other income
Research & Development Rebates
Grants Received
Miscellaneous
Total Other Income
Consolidated
2018
$
24,420
26,227
50,647
Consolidated
2017
$
-
31,116
31,116
Consolidated
2018
$
410,014
-
-
410,014
Consolidated
2017
$
53,416
20,000
1,030
74,446
29
PainChek Limited (formerly ePAT Technologies Limited)
5.
Loss for the year
Loss for the year has been arrived at after charging the
following items of expenses:
Corporate administration expenses
Company secretary fees
Directors remuneration
Legal and professional fees
Share registry fees
Insurance expenses
Occupancy costs
Computer expenses
Other administration expenses
Consolidated
Consolidated
2018
$
122,006
411,757
81,247
27,897
30,555
14,017
59,430
451,402
1,198,311
2017
$
-
140,119
306,755
33,102
14,147
9,811
68,715
33,792
356,230
962,671
The Group acquired the nViso Licence for a total cost of $1,709,510. As at the date of acquisition, the
recognition criteria for recognising an intangible asset could not be met and the amount was expensed.
The cost of this licence includes:
Issuance of 31,250,000 shares for a cost of $1,312,500 (refer Note 13);
•
• $300,000 on signing of the licence agreement;
• $92,500 deferred cash consideration; and
• Transaction costs of $4,510.
6.
Income taxes relating to continuing operations
6.1
Income tax recognised in profit or loss
Current tax expense/(income)
Deferred tax expense/(income)
Tax losses not recognised
Total Tax expense/(income)
Consolidated
Consolidated
2018
$
(1,336,159)
478,110
858,049
-
2017
$
(517,449)
36,103
481,346
-
The income tax expense for the year can be reconciled to the accounting loss as follows:
Loss before tax from continuing operations
Income tax expense/(revenue) calculated at 27.5% (2017: 30%)
Effect of items that are not assessable/deductible in
determining taxable loss:
Non-deductible expenses
Non-assessable income
Effect of unused tax losses not recognised as deferred tax assets
Consolidated
2018
$
(4,810,532)
Consolidated
2017
$
(8,473,802)
(1,322,896)
(2,542,141)
577,601
(112,754)
858,049
-
2,076,820
(16,025)
481,346
-
The tax rate used for the 2018 was 27.5% and 2017 was 30% to calculate the reconciliations above being
the corporate tax rate payable by Australian corporate entities on taxable profits under Australian tax
law in those years.
The Company has no franking credits available for recovery in future years.
30
PainChek Limited (formerly ePAT Technologies Limited)
6.2
Income tax recognised directly in equity
Current tax
Share issue costs
Deferred tax
Share issue costs deductible over 5 years
6.3
Unrecognised deferred tax assets
Unused tax losses (revenue) for which no deferred tax assets
have been recognised
Temporary differences
All unused tax losses were incurred by Australian entities.
Consolidated
2018
$
Consolidated
2017
$
(225,000)
(1,639,753)
-
(225,000)
-
(1,639,753)
Consolidated
2018
$
Consolidated
2017
$
2,410,949
104,569
6,634,926
37,854
This benefit for tax losses will only be obtained if the specific entity carrying forward the tax losses
derives future assessable income of a nature and of an amount sufficient to enable the benefit from the
deductions for the losses to be realised, and the Group complies with continuity of business / same
business test and the conditions for deductibility imposed by tax legislation.
7.
Loss per share
Basic and diluted loss per share (cents per share)
Consolidated
2018
$
Consolidated
2017
$
(0.6)
(1.63)
The loss and weighted average number of ordinary shares used in the calculation of basic loss per
share are as follows:
Loss for the year attributable to the owners of the Company
(4,810,532)
(8,473,802)
Consolidated
2018
$
Consolidated
2017
$
Weighted average number of ordinary shares for the
purposes of basic and diluted loss per share
Consolidated
2018
No.
Consolidated
2017
No.
800,935,009
519,348,367
Options on issue are considered to be anti-dilutive while the entity is making losses.
8.
Trade and other receivables
Other receivables
Prepayments
At the reporting date, none of the receivables are past due.
Consolidated
2018
$
56,086
6,012
62,098
Consolidated
2017
$
44,961
12,272
57,233
31
PainChek Limited (formerly ePAT Technologies Limited)
9.
Property, plant and equipment
Carrying amounts of
Computer Equipment – at cost
Cost
Balance at 1 July 2017
Additions
Disposals
Balance at 30 June 2018
Accumulated depreciation
Balance at 1 July 2017
Depreciation expense
Disposals
Balance at 30 June 2018
Net book value
10.
Trade and other payables
Trade creditors
Revenue received in advance
Accruals and other payables
Trade creditor payment terms are 30 days from end of month.
11.
Provisions
Provision for employee entitlements
12.
Subsidiaries
Consolidated
2018
$
Consolidated
2017
$
4,384
2,544
Consolidated
2018
$
Consolidated
2017
$
2,694
3,280
-
5,974
-
2,694
-
2,694
Consolidated
2018
$
Consolidated
2017
$
150
1,440
-
1,590
4,384
-
(150)
-
(150)
2,544
Consolidated
2018
$
286,969
7,410
121,535
415,914
Consolidated
2017
$
148,004
-
43,500
191,504
Consolidated
2018
$
31,980
Company
2017
$
15,729
The consolidated financial statements include the financial statements of PainChek Limited and its
subsidiary company Electronic Pain Assessment Technologies (EPAT) Pty Ltd.
32
13.
Issued capital
Fully paid Ordinary shares
Balance at beginning of the
reporting period
Merger of PainChek Limited and
Electronic Pain Assessment
Technologies (EPAT) Pty Ltd
Elimination of existing Electronic
Pain Assessment Technologies
(EPAT) Pty Ltd shares
Existing PainChek Ltd shares on
acquisition
Issue of PainChek Ltd milestone
shares from the acquisition
Issued pursuant to capital raising
Issued for part consideration of
nViso licence
Issued on conversion of options
Issued in lieu of remuneration
Capital raising costs
Balance at end of period
PainChek Limited (formerly ePAT Technologies Limited)
Consolidated
2018
$
13,710,033
Consolidated
2017
$
8,502,533
Consolidated
2018
No.
674,423,049
$
8,502,533
Consolidated
2017
No.
$
1,000,001
357,143
(1,000,001)
-
222,103,433
4,442,069
38,461,538
75,000,000
-
3,750,000
213,219,616
236,625,000
-
4,732,500
31,250,000
18,500,000
-
-
837,634,587
1,312,500
370,000
-
(225,000)
13,710,033
2,475,000
-
674,423,049
49,500
(1,078,679)
8,502,533
Fully paid ordinary shares carry one vote per share and carry the right to dividends. Ordinary shares
participate in the proceeds on winding up of the Company in proportion to the number of shares
held.
14. Reserves
Option reserve:
Balance at beginning of the reporting period
Issue of 45,000,000 Underwriter options
Issue of 90,198,155 Director options
Issue of 5,000,000 Employee options
Issue of 3,000,000 Employee options
Total reserves at end of period
Consolidated
2018
$
Consolidated
2017
$
2,742,842
-
240,882
71,658
32,632
3,088,014
-
522,000
2,201,975
18,867
-
2,742,842
The purpose of this reserve is to recognise share-based payments.
33
PainChek Limited (formerly ePAT Technologies Limited)
Options issued during the period:
Options
Balance at beginning of the
reporting period
Existing PainChek Limited shares on
acquisition
Expiry of existing options during
period
Issue of options on conversion of
convertible notes
Consolidated
2018
Consolidated
2017
No.
$
No.
$
197,096,302
2,742,842
-
-
-
-
-
50,535,179
-
(46,137,032)
-
52,500,000
-
-
-
-
Issue of options to underwriters
Issue of director options
Issue of options to employees
Exercise of options
-
-
3,000,000
(18,500,000)
-
240,882
104,290
-
45,000,000
522,000
90,198,155 2,201,975
18,867
-
5,000,000
-
Balance at end of period
178,167,730
3,088,014 197,096,302
2,742,842
14.1 Share-based payments
Options on Issue
At the date of this report, the following options over new ordinary shares in the Company were
on issue.
Option
series
1
2
3
4
5
Type
Date of Expiry
Unlisted Options
Unlisted Options
Unlisted Options
Unlisted Options
Unlisted Options
7 October 2019
7 October 2019
24 November 2019
3 October 2021
22 July 2022
Exercise
Price
$0.025
$0.02
$0.02
$0.36
$0.726
Number under
Option
45,000,000
34,000,000
90,198,155
5,000,000
3,000,000
The following share-based payment arrangements were in existence during and prior reporting
periods:
34
PainChek Limited (formerly ePAT Technologies Limited)
Option
series
Number
Grant date
Total Value
at Grant
Date
Recognised
as expense
to 30 June
2018
Exercise
Price
Expiry
date
Vesting
date
1
2
3
4
45,000,000
90,198,155
7 October
2016
23
November
2016
5,000,000
5 April 2017
3,000,000
22 January
2018
$
$
$
522,000
-
0.025
2,442,857
240,882
0.02
138,925
130,361
71,658
0.036
32,632
0.0726
7 October
2019
24
November
2019
3 October
2021
22 July
2022
7
October
2016
Various
Various
Various
There has been no alteration of the terms and conditions of the above share-based payment
arrangements since the grant date.
1) Underwriter options
45,000,000 options were granted to the Underwriter pursuant to the Prospectus dated 25 August
2016. The fair value of the options at grant date are determined using a Black Scholes pricing
method that takes into account the exercise price, the term of the option, the share price at grant
date and expected volatility of the underlying share, the expected dividend yield and the risk-free
interest rate for the term of the option. The following table lists the inputs to the model used for
valuation of the unlisted options:
Item
Volatility (%)
Risk free interest rate (%)
Expected life of option (years)
Expected dividend yield
Exercise price per terms and conditions
Underlying security price at grant date
Expiry date
Value per option
Inputs
100%
1.54%
3.03
nil
$0.025
$0.020
7 October 2019
$0.0116
2) Director options
90,198,155 options were granted to the Directors as approved by shareholders at the annual
general meeting on 23 November 2016. The fair value of the options at grant date are determined
using a Black Scholes pricing method that takes into account the exercise price, the term of the
option, the share price at grant date and expected volatility of the underlying share, the expected
dividend yield and the risk-free interest rate for the term of the option. The following table lists the
inputs to the model used for valuation of the unlisted options:
35
Item
Volatility (%)
Risk free interest rate (%)
Expected life of option (years)
Expected dividend yield
Exercise price per terms and conditions
Underlying security price at grant date
Expiry date
Value per option
PainChek Limited (formerly ePAT Technologies Limited)
Inputs
100%
1.54%
3.003
Nil
$0.020
$0.037
24 November 2019
$0.0271
The options issued to directors are to vest as follows:
1. One third after one year of service.
2. One third after the Company makes an announcement that Regulatory Approval to enable
commercial use of the PainChek App in Australia, the United States or Europe is received, or
the Company has announced the execution of a binding licence agreement to licence the
PainChek App to:
a. one or more residential aged care facilities facility owners managing in total in excess of
150 beds; or
b. one or more medical clinics which service in total in excess of 2,000 patients per year; or
c. a metropolitan hospital with in excess of 200 beds;
(each an “End User”);
d. or a global distribution partner with multiple End Users as existing customers.
3. One third upon the Company generating cumulative revenue of $1,000,000.
3) Employee options
5,000,000 options were granted to an employee on 5 April 2017. The fair value of the options at
grant date are determined using a Black Scholes pricing method that takes into account the exercise
price, the term of the option, the share price at grant date and expected volatility of the underlying
share, the expected dividend yield and the risk-free interest rate for the term of the option. The
following table lists the inputs to the model used for valuation of the unlisted options:
Item
Volatility (%)
Risk free interest rate (%)
Expected life of option (years)
Expected dividend yield
Exercise price per terms and conditions
Underlying security price at grant date
Expiry date
Value per option
Inputs
100%
1.95%
4.5
Nil
$0.036
$0.038
3 October 2021
$0.0278
4) Employee options
3,000,000 options were granted to an employee on 22 January 2018. The fair value of the options
at grant date are determined using a Black Scholes pricing method that takes into account the
exercise price, the term of the option, the share price at grant date and expected volatility of the
underlying share, the expected dividend yield and the risk-free interest rate for the term of the
option. The following table lists the inputs to the model used for valuation of the unlisted options:
36
Item
Volatility (%)
Risk free interest rate (%)
Expected life of option (years)
Expected dividend yield
Exercise price per terms and conditions
Underlying security price at grant date
Expiry date
Value per option
PainChek Limited (formerly ePAT Technologies Limited)
Inputs
100%
1.95%
4.5
Nil
$0.0726
$0.062
22 July 2022
$0.0434
25 % of the options issued to the employees vest after 12 months employment and balance in quarterly
instalments over the next 3 years, subject to continued full time employment (i.e. Fully vested after 4.5
years employment).
14.2 Movements in share options during the year
The following reconciles the share options outstanding at the beginning and end of the year:
2018
2017
Number of
options
Weighted
average
exercise price
Number of
options
Weighted
average
exercise price
No.
$
No.
$
197,096,302
0.022
-
-
50,535,179
Balance at beginning of the year
Existing PainChek Limited shares
on acquisition
Granted during the year
3,000,000
0.0726
192,698,155
0.0206
Forfeited during the year
-
Exercised during the year
(18,500,000)
-
0.020
-
-
-
-
Expired during the year
(3,428,572)
0.07875
46,137,032
0.07875
Balance at end of year
178,167,730
0.0225
197,096,302
Exercisable at end of year
141,351,678
0.0217
101,898,147
0.022
0.024
Share options exercised during the year
18,5000,000 share options were exercised during the year (2017: nil).
Share options outstanding at the end of the year
The share options outstanding at the end of the year had a weighted average exercise price of
$0.0226 and a weighted average remaining contractual life of 523 days (2017: 853).
15.
Financial instruments
15.1 Capital management
The Group manages its capital to ensure entities in the Group will be able to continue as going
concern while maximising the return to stakeholders through the optimisation of the debt and
equity balance. The Group’s overall strategy remains unchanged from 2017.
37
PainChek Limited (formerly ePAT Technologies Limited)
The Group is not subject to any externally imposed capital requirements.
Given the nature of the business, the Group monitors capital on the basis of current business
operations and cash flow requirements.
15.2
Categories of financial instruments
Financial assets
Cash and cash equivalents
Trade and other receivables
Financial liabilities
Trade and other payables
Consolidated
2018
$
Consolidated
2017
$
3,606,115
62,098
3,668,213
2,630,019
57,233
2,687,252
415,914
415,914
191,503
191,503
The fair value of the above financial instruments approximates their carrying values.
15.3 Financial risk management objectives
In common with all other businesses, the Group is exposed to risks that arise from its use of
financial instruments. This note describes the Group’s objectives, policies and processes for
managing those risks and the methods used to measure them. Further quantitative information in
respect of those risks is presented throughout these financial statements.
There have been no substantive changes in the Group’s exposure to financial instrument risks, its
objectives, policies and processes for managing those risks or the methods used to measure them
from previous periods unless otherwise stated in this note.
The board has overall responsibility for the determination of the Group’s risk management
objectives and policies and, whilst retaining ultimate responsibility for them, it has delegated the
authority for designing and operating processes that ensure the effective implementation of the
objectives and policies to the Group’s finance function.
The Group’s risk management policies and objectives are therefore designed to minimise the
potential impacts of these risks on the Group where such impacts may be material. The board
receives monthly financial reports through which it reviews the effectiveness of the processes put
in place and the appropriateness of the objectives and policies it sets. The overall objective of the
board is to set policies that seek to reduce risk as far as possible without unduly affecting the
Group’s competitiveness and flexibility.
15.4 Market risk
Market risk for the Group arises from the use of interest bearing financial instruments. It is the
risk that the fair value or future cash flows of a financial instrument will fluctuate because of
changes in interest rate (see 15.5 below).
15.5
Interest rate risk management
The sensitivity analyses below have been determined based on the exposure to interest rates for
both derivatives and non-derivative instruments at the end on the reporting period.
Interest rate sensitivity analysis
The sensitivity analyses below have been determined based on the exposure to interest rates for
both derivatives and non-derivative instruments at the end on the reporting period.
If interest rates had been 100 basis points higher/lower and all other variables were held constant,
the Group’s loss for the year ended 30 June 2018 would increase/decrease by $36,000 (2017:
$26,300).
38
PainChek Limited (formerly ePAT Technologies Limited)
15.6 Credit risk management
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting
in financial loss to the Group. The Group has adopted a policy of dealing with creditworthy
counterparties and obtaining sufficient collateral, where appropriate, as a means of mitigating the
risk of financial loss from defaults. The Group only transacts with entities that are rated the
equivalent of investment grade and above. This information is supplied by independent rating
agencies where available and, if not available, the Group uses other publicly available financial
information and its own trading records to rate its major customers. The Group’s exposure and
the credit ratings of its counterparties are continuously monitored and the aggregate value of
transactions concluded is spread amongst approved counterparties.
The credit risk on liquid funds is limited because the counterparties are banks with high credit-
ratings assigned by international credit-rating agencies.
15.7 Liquidity risk management
Ultimate responsibility for liquidity risk management rests with the board of directors, which has
established an appropriate liquidity risk management framework for the management of the
Group’s short-, medium- and long-term funding and liquidity management requirements. The
Group manages liquidity by maintaining adequate banking facilities, by continuously monitoring
forecast and actual cash flows, and by matching the maturity profiles of financial assets and
liabilities.
Contractual cash flows
Carrying
Amount
Less than 1
month
1-3
months
3-12
months
1 year to
5 years
$
$
$
$
$
Total
contractual
cash flows
$
2018
Trade and other payables
2017
Trade and other payables
415,914
415,914
191,503
191,503
-
-
-
-
-
-
415,914
191,503
16.
Key management personnel
The aggregate compensation made to directors and other members of key management personnel
of the Company is set out below:
Short-term employee benefits
Post-employment benefits
Share-based payments
Consolidated
2018
$
Consolidated
2017
$
538,604
35,777
240,883
815,264
491,362
21,825
2,251,475
2,764,662
39
PainChek Limited (formerly ePAT Technologies Limited)
17. Related party transactions
17.1 Entities under the control of the Group
On 23 September 2016 the Company completed the 100% acquisition of Electronic Pain
Assessment Technology (EPAT) Pty Ltd. Refer to note 19 for further information.
17.2 Key management personnel
Any person(s) having authority and responsibility for planning, directing and controlling the
activities of the entity, directly or indirectly, including any director (whether executive or
otherwise) of that entity, are considered key management personnel.
For details of disclosures relating to key management personnel, refer to the remuneration report
contained in the directors’ report and note 14.
17.3 Other related party transactions
All transactions between the Group and related parties are on an arms-length basis.
18. Cash and cash equivalents
For the purposes of the statement of cash flows, cash and cash equivalents include cash on hand
and in banks, net of outstanding bank overdrafts. Cash and cash equivalents at the end of the
reporting period as shown in the statement of cash flows can be reconciled to the related items in
the statement of financial position as follows:
Cash and bank balances
Consolidated
2018
$
Consolidated
2017
$
3,606,115
2,630,019
18.1 Reconciliation of loss for the year to net cash flows from operating activities
Cash flow from operating activities
Loss for the year
Adjustments for:
License – issue of securities
Depreciation
Share based payments
Corporate restructure expense
Movements in working capital
(Increase)/decrease in other receivables
(Increase)/decrease in prepayments
Increase/(decrease) in trade and other payables
Increase in provisions
Net cash outflows from operating activities
Consolidated
2018
$
Consolidated
2017
$
(4,810,532)
(8,473,802)
1,312,500
4,032
409,094
-
(33,126)
6,260
246,411
16,251
(2,913,033)
150
2,220,842
4,574,424
17,844
(12,272)
82,413
12,522
(1,577,879)
Non-Cash Financing and Investing Activities
Options were issued to underwriters as part of capital raising costs. See note 14.1.
40
PainChek Limited (formerly ePAT Technologies Limited)
19. Business Combination – Reverse acquisition (comparatives)
Subsidiary acquired
On 25 July 2016 the Company executed a share purchase agreement for the acquisition of one
hundred percent of the issued capital of Electronic Pain Assessment Technologies (EPAT) Pty Ltd.
The consideration for this acquisition was made up as follows:
(i) 213,219,616 shares to be issued at completion; and
(ii) $1,000,000 worth of shares to be issued if the Company announces that either of
the following milestones have been met within 12 months from the date of
completion of the acquisition:
(A) Regulatory approval having been received to enable commercial use of
the PainChek App in Australia, the United States of America or Europe. (In
this context, “Regulatory Approval” means approval by the Therapeutic
Goods Administration of Australia, Food and Drug Administration of the
United States, or a CE mark from the relevant authority in Europe); or
(B) the execution of a binding licence agreement to licence the PainChek App
to:
▪
▪
▪
one or more residential aged care facility owners managing in
total in excess of 150 beds;
one or more medical clinics which service in total in excess of
2,000 patients per year;
a metropolitan hospital with in excess of 200 beds;
(each an "End User”) or
▪
a global distribution partner with multiple End Users as existing
customers.
From a legal and taxation perspective PainChek Ltd is considered the acquiring entity. However,
the acquisition has the features of a reverse acquisition as described in the Australian Accounting
Standard AASB 3 “Business Combinations” notwithstanding PainChek Ltd being the legal parent of
the Group. The transaction has been accounted for as a reverse acquisition from a consolidated
perspective, where Electronic Pain Assessment Technologies (EPAT) Pty Ltd is the accounting
acquirer and PainChek Limited is the legal acquirer.
The excess of the fair value of the shares owned by the PainChek Ltd shareholders and the fair
value of the identifiable net assets of PainChek Ltd immediately prior to the completion of the
merger is accounted for under “AASB 2 “Share –based Payment” and resulted in the recognition
of $4,574,424 being recorded as “Corporate Restructure Expense”. The net assets of PainChek Ltd
were recorded at fair value at completion of the merger. No adjustments were required to the
historical values.
41
PainChek Limited (formerly ePAT Technologies Limited)
Assets acquired and liabilities of PainChek Limited assumed at the date of
acquisition
Current assets
Cash and cash equivalents
Trade receivables
Total assets
Current liabilities
Trade and other payables
Provisions
Total liabilities
Net liabilities acquired
PainChek
Limited
$
18,277
12,025
30,302
134,406
28,251
162,657
(132,355)
The fair values of the assets acquired and the liabilities assumed approximate their carrying value.
The initial accounting for the acquisition of PainChek Ltd (the legal acquirer) has been determined at
the end of the reporting period.
Corporate restructure expense on acquisition
Fair value of notional shares issued to affect the transaction
Less fair value of identifiable net liabilities acquired - PainChek Ltd
Corporate restructure expense
4,442,069
(132,355)
4,574,424
From the date of acquisition (ie 23 September 2016) to 30 June 2017, PainChek Ltd generated
$31,620 in revenue and $3,019,147 in losses.
20. Commitments and contingencies
As per the Research Services Agreement with Curtin University of Technology, dated 29th July
2016, the Company has agreed to Fees, payable in equal monthly instalments in accordance with a
payment schedule. The remaining commitment is $128,467 is due in less than 12 months.
21. Remuneration of auditors
Auditor of the parent entity
Audit or review of the financial statements
Other non-audit services
The auditors of PainChek Ltd are BDO Audit Pty Ltd.
Consolidated
2018
$
34,275
-
34,275
Consolidated
2017
$
60,041
13,950
73,991
22. Events after the reporting period
No matters or circumstances have arisen since the end of the year which significantly affected or
could significantly affect the operations of the Group, the results of those operations, or the state
of affairs of the Group in future financial years.
42
PainChek Limited (formerly ePAT Technologies Limited)
23. Parent entity information
The accounting policies of the parent entity, which have been applied in determining the 2018
financial information shown below, are the same as those applied in the financial statements.
Refer to note 3 for a summary of significant accounting policies relating to the Group.
Financial position of PainChek Limited (Legal Parent)
Assets
Current assets
Non-current assets
Total assets
Liabilities
Current liabilities
Provisions
Non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Accumulated losses
Total equity
Financial performance
Loss for the year
2018
$
2017
$
3,615,662
4,384
3,620,046
206,307
31,980
-
238,287
3,381,759
2,635,744
2,543
2,638,287
94,654
15,729
-
110,383
2,527,904
22,464,739
3,127,026
(22,210,006)
3,381,759
17,257,239
2,781,854
(17,511,189)
2,527,904
(4,698,817)
(8,226,147)
24. Approval of financial statements
The financial statements were approved by the board of directors and authorised for issue on 27
August 2018.
43
PainChek Limited (formerly ePAT Technologies Limited)
DIRECTORS DECLARATION
1.
The Directors of the Company declare that:
a. the accompanying financial statements and notes are in accordance with the
Corporations Act 2001 including:
i.
giving a true and fair view of the Group’s financial position as at 30 June 2018 and of
its performance for the year then ended; and
ii.
complying with Australian Accounting Standards, the Corporations Regulations
2001, professional reporting requirements and other mandatory requirements.
b. there are reasonable grounds to believe that the company will be able to pay its
debts as and when they become due and payable; and
c.
the financial statements and notes thereto are in accordance with International
Financial Reporting Standards issued by the International Accounting Standards
Board.
2.
This declaration has been made after receiving the declarations required to be made to the
Directors in accordance with Section 295A of the Corporations Act 2001 for the financial
year ended 30 June 2018.
This declaration is signed in accordance with a resolution of the Board of Directors.
John Murray
Chairman
27 August 2018
44
Tel: +61 7 3237 5999
Fax: +61 7 3221 9227
www.bdo.com.au
Level 10, 12 Creek St
Brisbane QLD 4000
GPO Box 457 Brisbane QLD 4001
Australia
INDEPENDENT AUDITOR'S REPORT
To the members of PainChek Limited
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of PainChek Limited (the Company) and its subsidiaries (the
Group), 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, and notes
to the financial report, including a summary of significant accounting policies and the directors’
declaration.
In our opinion the accompanying financial report of the Group, is in accordance with the Corporations
Act 2001, including:
(i)
Giving a true and fair view of the Group’s financial position as at 30 June 2018 and of its
financial 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. Our responsibilities under
those standards are further described in the Auditor’s responsibilities for the audit of the Financial
Report section of our report. We are independent of the Group in accordance with the Corporations
Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s
APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the
financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance
with the Code.
We confirm that the independence declaration required by the Corporations Act 2001, which has been
given to the directors of the Company, would be in the same terms if given to the directors as at the
time of this auditor’s report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our opinion.
Material uncertainty related to going concern
We draw attention to Note 1 in the financial report which describes the events and/or conditions which
give rise to the existence of a material uncertainty that may cast significant doubt about the group’s
ability to continue as a going concern and therefore the group may be unable to realise its assets and
discharge its liabilities in the normal course of business. Our opinion is not modified in respect of this
matter.
BDO Audit Pty Ltd ABN 33 134 022 870 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050
110 275, an Australian company limited by guarantee. BDO Audit Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited
by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional
Standards Legislation, other than for the acts or omissions of financial services licensees.
45
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in
our audit of the financial report of the current period. These matters were addressed in the context of
our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide
a separate opinion on these matters. In addition to the matter described in the Material uncertainty
related to going concern section, we have determined the matters described below to be the key audit
matters to be communicated in our report.
Purchase of nViso license
Key audit matter
How the matter was addressed in our audit
Our procedures included, but were not limited
to:
•
•
•
•
Reviewing the licence agreement to
understand the key terms and conditions,
and confirming our understanding of the
transaction with management;
Reviewing the basis for the accounting
treatment adopted by management which
included confirming that the recognition
criteria for intangible assets were not met;
Reviewing the measurement of the share
based payment and deferred cash elements
of the consideration; and
Assessing the adequacy of the Group's
disclosures of the acquisition.
As disclosed in Note 5 (Loss for the year) and Note
13 (Issued capital) of the financial report, the
Group entered into a licence agreement for the
use of certain artificial intelligence technology.
The consideration amount comprised the following:
•
•
•
31,250,000 fully paid ordinary shares;
$300,000 in cash on signing the agreement;
and
$92,500 in deferred cash consideration.
The audit of the accounting for this licence is a key
audit matter due to the:
•
•
•
•
Significant judgement involved in assessing
whether the recognition criteria for intangible
assets were not met and why the licence was
expensed;
Measurement of the share based payment and
deferred cash elements of the consideration;
The transaction is material in the context of
the audit and significant to the financial
statements; and
The presentation, measurement and
disclosures around this transaction are
important in the users’ understanding of the
financial statements.
Other information
The directors are responsible for the other information. The other information comprises the
information contained in Group’s annual report for the year ended 30 June 2018, but does not include
the financial report and our auditor’s report thereon, which we obtained prior to the date of this
auditor’s report, and the Group’s annual report, which is expected to be made available to us after
that date.
BDO Audit Pty Ltd ABN 33 134 022 870 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050
110 275, an Australian company limited by guarantee. BDO Audit Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited
by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional
Standards Legislation, other than for the acts or omissions of financial services licensees.
46
Our opinion on the financial report does not cover the other information and we do not express any
form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information
identified above and, in doing so, consider whether the other information is materially inconsistent
with the financial report or our knowledge obtained in the audit or otherwise appears to be materially
misstated.
If, based on the work we have performed on the other information that we obtained prior to the date
of this auditor’s report, we conclude that there is a material misstatement of this other information,
we are required to report that fact. We have nothing to report in this regard.
Responsibilities of the directors for the Financial Report
The directors of the Company are responsible for the preparation of the financial report that gives a
true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
and for such internal control as the directors determine is necessary to enable the preparation of the
financial report that gives a true and fair view and is free from material misstatement, whether due to
fraud or error.
In preparing the financial report, the directors are responsible for assessing the ability of the group to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to liquidate the Group or to cease
operations, or has no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of this financial report.
A further description of our responsibilities for the audit of the financial report is located at the
Auditing and Assurance Standards Board website (http://www.auasb.gov.au/Home.aspx) at:
http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf
This description forms part of our auditor’s report.
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 5 to 12 of the directors’ report for the
year ended 30 June 2018.
In our opinion, the Remuneration Report of PainChek Limited, for the year ended 30 June 2018,
complies with section 300A of the Corporations Act 2001.
BDO Audit Pty Ltd ABN 33 134 022 870 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050
110 275, an Australian company limited by guarantee. BDO Audit Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited
by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional
Standards Legislation, other than for the acts or omissions of financial services licensees.
47
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.
BDO Audit Pty Ltd
C R Jenkins
Director
Brisbane, 27 August 2018
BDO Audit Pty Ltd ABN 33 134 022 870 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050
110 275, an Australian company limited by guarantee. BDO Audit Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited
by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional
Standards Legislation, other than for the acts or omissions of financial services licensees.
48
Additional Shareholder Information
The following additional information is current as at 4 October 2018.
CORPORATE GOVERNANCE:
The Company’s Corporate Governance Statement is available on the company’s website at
www.painchek.com/corporate-governance
SUBSTANTIAL SHAREHOLDER:
Holder Name
Mr Russell David Stewart & Mr Lennard Anthony Lefroy
Peters Investments Pty Ltd
Holding
% IC
101,894,666
60,000,000
12.16%
7.16%
Ordinary Shares:
Holdings Ranges
1-1,000
1,001-5,000
5,001-10,000
10,001-100,000
100,001-
9,999,999,999
Totals
Holders
35
6
219
614
522
1,396
Total Units
6,740
16,963
1,583,309
28,339,087
807,938,490
%
0.001
0.002
0.189
3.382
96.426
837,884,589
100.000
There are 225 shareholders with less than a marketable parcel.
VOTING RIGHTS
Each fully paid ordinary share carries voting rights of one vote per share.
THE TOP 20 HOLDERS OF ORDINARY SHARES ARE:
Name/Address 1Balance as at 03-10-2018%MR RUSSELL DAVID STEWART & MR LENNARD ANTHONY LEFROY 101,894,66612.161%PETERS INVESTMENTS PTY LTD60,000,0007.161%J & E CONSULTING PTY LTD37,003,1254.416%KRESHNIK HOTI37,003,1254.416%MUSTAFA ABDUL WAHED ATEE37,003,1254.416%NVISO SA31,250,0003.730%J P MORGAN NOMINEES AUSTRALIA LIMITED17,878,3612.134%THORNBURY NOMINEES PTY LTD 14,643,9031.748%J & TW DEKKER PTY LTD 13,973,3481.668%MR ROBERT ANTHONY HEALY12,857,1431.534%G & G CHILCOTT PTY LTD 12,122,8111.447%MR ROBERT ANTHONY HEALY11,599,6521.384%MR RODNEY JAMES WELLSTEAD 10,511,6971.255%CS FOURTH NOMINEES PTY LIMITED 10,111,0591.207%PETERS INVESTMENTS PTY LTD9,348,1411.116%MR JOHN BETAR9,300,0001.110%GRAZIAN PTY LTD 8,623,3281.029%DEV NOMINEES PTY LTD 8,000,0000.955%HUSIF NOMINEES PTY LTD7,615,1310.909%REDEDGE ENTERPRISES PTY LTD 7,411,0110.884%Total Securities of Top 20 Holdings458,149,62654.679%Total of Securities837,884,589
UNQUOTED EQUITY SECURITIES
Number
254,156,156
Number
of
Holders
11
Ordinary shares
19 October 2018
Class
Escrow Period
Holders of more than 20%
Mr Russell David Stewart &
Mr Lennard Anthony Lefroy
(86,323,266 shares)
Nil
7 October 2018
Mr Peter Russell (9,000,000)
Philip Daffas (40,999,162)
Nanjop Pty Ltd (24,599,497)
Issued pursuant to ESOP
Issued pursuant to ESOP
33,750,000
35
45,000,000
19
90,198,155
5,000,000
3,000,000
4
1
1
Options exercisable
at $0.02 expiring 7
October 2019
Options exercisable
at $0.025 expiring 7
October 2019
Options exercisable
at $0.02 expiring 24
November 2019
Options exercisable
at $0.036 expiring of
3 October 2021
Options exercisable
at $0.0726 expiring
of 22 July 2022
Use of Funds
The entity has used the cash and assets in a form readily convertible into cash at the time of listing in
a way that is consistent with its business objectives.
There is no current share buy-back.