PainChek Limited
Annual Report 2022

Plain-text annual report

ANNUAL REPORT 2022 YEAR ENDING JUNE PAINCHEK LIMITED | ABN 21 146 035 127 CORPORATE DIRECTORY Board of Directors Mr John Murray Mr Philip Daffas Mr Adam Davey Mr Ross Harricks Non-Executive Chairman Managing Director Non-Executive Director Non-Executive Director Ms Cynthia Payne Non-Executive Director Company Secretary Ms Sally McDow Registered Office Principal Place of Business Suite 401, 35 Lime Street Suite 401, 35 Lime Street Sydney NSW 2000 Sydney NSW 2000 Website Website: www.painchek.com Auditor 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 CONTENTS Chairmans letter 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 report 4 6 27 28 29 30 31 32 56 57 CHAIRMAN’S LETTER Dear Fellow Shareholders, It gives me pleasure to present the 2022 Annual Report for PainChek Limited (ASX: PCK) as we reflect on our achievements over the past 12 months and the substantial opportunity that is ahead of us. We continue to execute our growth strategy with focuses on maintaining and growing our market position for adult PainChek® App in the Residential Aged Care (RAC) sector in Australia and New Zealand, gaining a stronger foothold in international RAC markets, as well as in new verticals such as infant care, home care and hospital settings. I am proud to report progress across all these areas in FY22. Our proprietary adult pain assessment App is a cost- effective and clinically validated solution, which we have now successfully implemented in RAC in Australia, New Zealand, Singapore, UK and Ireland. We have regulatory clearance for our adult App in these markets, as well as Europe and Canada, as a class 1 medical device. We have plans underway to achieve approval in other territories, including the lucrative United States market, to continue to grow our footprint across the globe. We have achieved 20 commercial integrations of PainChek® with care management systems partners across Australia, United Kingdom, Ireland, New Zealand and Canada, providing access to 470,000 RAC beds across these markets, of which we now have more than 126,000 contracted. This was a critical year for our company as we had to begin the transition of our RAC customers in Australia from government subsidised use of PainChek® to standard commercial terms. 4 | PAINCHEK LIMITED During this year the RAC industry remained under considerable stress, still recovering from the Covid pandemic and experiencing workforce challenges. Nevertheless, we successfully commenced this transition with approximately 28,000 licences under commercial terms at 30 June 2022, generating Annual Recurring Revenue (ARR) of $1.4 million; and a further 66,000 aged care beds implemented which offers an additional $3.2M of potential ARR if converted to commercial terms. About 1.3 million clinical pain assessments were conducted in Australian aged care as at 30 June 2022, undertaken by more than 8,000 PainChek-trained users. On this strong foundation, we focused on building our international RAC business in FY22 and expanded our resources and integration partners in the UK, where we have 4,000 out of 7,500 RAC contracted beds implemented. We also commenced development of the New Zealand market, contracting the third largest aged care provider across more than 1,000 RAC beds. We have developed an Infant PainChek® App to measure pain in children who are pre-verbal. Targeting uniform geographical regulatory approvals for our Infant app, we’ve built commercial integrations and partnerships critical to our go-to-market strategy. Market access for the Infant app in the US will position PainChek to align the roll out of this technology across the US, Europe and ANZ, where we have already achieved regulatory clearance. During FY22, we developed our strategy and relationships in the home care and hospital markets and expect to develop these important markets in FY23. I would like to thank our hardworking team for their all efforts during another challenging year, and who are currently progressing well with our FY23 initiatives. I would also like to thank our shareholders who participated in the recent $3.0 million Share Placement and accompanying Entitlement Offer, which raised $1.6 million. This funding will allow us to execute on our plans during FY23. We are ready to capitalise on the considerable opportunities ahead of us, and I hope you will continue to share the journey with us. John Murray Non-Executive ChairmanPainChek Limited (ASX: PCK) ABN 21 146 035 127 Suite 401, 35 Lime Street, Sydney, NSW, 2000 Registered Office: Suite 401, 35 Lime Street, Sydney, NSW, 2000 info@painchek.com PAINCHEK LIMITED | 5 DIRECTORS’ REPORT The directors of PainChek Limited (“PainChek” or “the Company”) submit herewith the financial report of the Company and its controlled entities (“Group” or “Consolidated Entity”) for the year ended 30 June 2022. 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 – Non-executive Chairman 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 is a past 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 is a director of UK AIM listed company Seeing Machines Ltd and was Chairman of ASX listed company Flamingo AI Limited until October 2019, but otherwise has not been a director of an ASX listed company in the past 3 years. 6 | PAINCHEK LIMITED Mr Philip Daffas (appointed 30 September 2016) BSc, Dip EENG, MBA, GAICD – Managing Director 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 – Non-executive Director Mr Adam Davey (appointed 30 September 2014) – Non-executive Director 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 General Manager. His remit included developing EMI’s medical business in this region. In 1983, Mr Harricks joined the Nucleus Group as Group Marketing Executive, and later became President the two Nucleus Group subsidiaries in United States marketing medical equipment and scientific and engineering computing products. In 1989 in the US, Mr Harricks was the CEO of a venture capital-backed start-up company developing specialist scientific and medical lasers. In Australia 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 2007. He was a director of VentraCor from 2005 to 2009. Other than PainChek, 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 international market endorsement and adoption, and on providing hands- on help with implementation in the American and European markets. 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 Canaccord Genuity Patersons Limited. 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 the Agency Group Australia Ltd and was a director of Ensurance Limited until 2nd July 2021. Otherwise, Mr Davey has not been a director of an ASX listed company in the past 3 years. Ms Cynthia Payne (appointed 30 March 2022) – Non Executive Director Ms Payne brings 30 years executive leadership experience as well as significant board and operational experience in residential and home aged care services in Australia. That experience includes over 16 years as CEO for a large private aged care Provider in NSW and before that head of operation manager for a large Not for Profit with home care, residential and retirement living portfolios. She is the founder and Managing Director of Anchor Excellence, a leading consultancy firm in the aged care services industry in Australia that advises boards and management on operational and compliance best practices. Cynthia is a board advisor to Total Constructions Pty Ltd, a former Director of the Heart Foundation and past Chair of Business Excellence Australia. PAINCHEK LIMITED | 7 Cynthia holds a Bachelor of Applied Science (Nursing) with specific interest in Dementia Care, an MBA from the University of New England, is a Member of the Australian Institute of Company Directors, Fellow of the Governance Institute Australia and Certified Chair with The Board Advisory centre. Company Secretary Ms Sally McDow was appointed to the position of Company on 2 June 2021. Ms McDow is an experienced company secretary, admitted as a solicitor (QLD) and holds an MBA and a corporate governance diploma. 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 2022, after accounting for income tax benefit, amounted to $5,720,534 (2021 $6,063,647). The year ended 30 June 2022 operating results are attributed to the following: • Research expense of $2,350,816 (30 June 2021: $2,652,106); • Share based payments in respect of options issued to Directors and employees of $549,191 (non-cash) (30 June 2021: $709,720 (non-cash)); and • Corporate and administration expenses of $2,775,117 (30 June 2021: $3,612,398, which included a provision for payroll tax assessment of $1,400,414 relating to the year ended 30 June 2020). Review of Operations The 2022 financial year has seen PainChek reinforce its position in residential aged care within its home market of Australia while making important strides as part of the Company’s market expansion strategy. PainChek is now demonstrating commercial operations and sales in multiple markets, a clear path and strategy to become the global market leader with both its Adult and Infant pain assessment offerings. 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. These results are combined with other observational assessments to provide an overall pain score and pain severity level of the person being assessed. The PainChek® technology has regulatory clearance in TGA (Australia), CE Mark (Europe) UK, New Zealand, Singapore and Canada as a class 1 medical device to assess pain in people who are unable to reliably verbalise, such as people with dementia. During FY21 PainChek developed and commercially launched PainChek® Universal, which has the same regulatory market clearances. PainChek® Universal is a complete point-of-care solution that combines the existing PainChek® App with the Numerical Rating Scale (NRS) and data from PainChek® Analytics. This enables best-practice pain management for people living with pain in any environment — from those who cannot verbalise pain to those who can, and those who fluctuate between the two. This means that PainChek is now a tool to assess and document pain for all people within aged care, hospital, and the home care environment. 8 | PAINCHEK LIMITED This time 12 months ago, PainChek outlined several focuses for FY22, which included: Maintaining and growing its position in the ANZ market including transition of customers onto commercial agreements International market expansion Enabling development of the infant market Accessing the home care and hospital markets PainChek has made significant inroads on each of these areas, creating the platform for substantial growth moving forward. Maintaining & growing the ANZ opportunity In May 2021 the Australian Federal Government funded grant (for the use of PainChek® Adult App for people living with dementia or cognitive impairment) came to an end. At this point PainChek had achieved 82,982 dementia specific beds reported to the government, with resulting Federal Government grant payments to PainChek totalling $4.3M in FY20 and FY21. At the close of FY22 a total of 28,000 Australian licences were under standard PainChek commercial terms, thus providing actual Annual Recurring Revenue (ARR) of $1.4M. There are currently a total 66,000 aged care beds implemented in Australia, offering a potential $3.2M ARR should these all convert to commercial terms. On the assumption that all existing contracted beds have a 67% conversion rate to commercial terms, this implies an ARR of approximately $4.3m by Q4 FY23, which excludes new sales in the period. Revenue from contracts is recognised in the statement of profit or loss and other comprehensive income in accordance with the Group’s accounting policy for Revenue set out on page 38. Some 1.3 million clinical pain assessments have been conducted in Australian aged care as at 30 June 2022, with an increasing number of case study reports confirming the clinical and cost benefit. Those assessments are undertaken by over 8,000 users that have been trained by PainChek. International market expansion PainChek saw numerous developments in the UK market during FY22 as its international expansion gained momentum. At 30 June 2022, PainChek has over 7,500 contracted beds in the UK, with close to 4,000 of these implemented. The pipeline is growing in the aged care sector and new opportunities are arising with hospital and home care sectors. PainChek UK has, at 30 June 2022, integration agreements with six care management partners and one medication management partner who can provide a pipeline opportunity of up to 200,000 residential aged care beds. These UK integration partnerships include Care Vision CMS and Nourish Care, who provide care management software to more than 60,000 residential aged care beds that could potentially use the PainChek® assessment solution. PAINCHEK LIMITED | 9 PainChek received an order for an initial rollout of 1,000 beds from one of these partners during the last quarter. Support was also received from Life Sciences Hub Wales with funding from the Gwent Regional Partnership Board via its Technology Enabled Care Programme. Funding will support a 12-month pilot for up to 1,000 residents in care environments such as residential, nursing, hospital and palliative care homes, across Gwent as the first step in rolling-out PainChek across Wales. Closer to home, Summerset Holdings Ltd, New Zealand’s 3rd largest aged care provider, commenced roll out of the PainChek® pain assessment solution across 24 of its care centres and 1,150 beds. Overall, the Company has more than 20 commercial integrations with care management and medication management system partners in Australia, UK, Ireland, New Zealand, Singapore and Canada. These partnerships provide access to 275,000 UK beds and 470,000 beds across these 4 markets, improve the pain assessment and pain management clinical care and reduce costs for our clients. This makes the PainChek a cost effective and clinically efficient healthcare solution. PainChek® Adult App FDA deNovo application has progressed positively and the clinical studies in the USA are projected to commence in 2022. Based on current time lines we are projecting Q4 C2023 for FDA regulatory clearance. Enabling development of the infant market The PainChek® Infant App received Australian TGA, CE Mark (Europe), UK, New Zealand, Singapore and Canada regulatory clearances during FY21. Furthermore, the PainChek Infant Face-Only pain assessment study was peer reviewed and accepted for publication in the Lancet Digital Scientific journal in July 2021 validating the PainChek Infant technology and clinical study outcomes. The Company in building commercial integrations and partnerships with larger diagnostic and therapeutic corporates. Collaborations with Children’s hospitals and validation studies in Melbourne, NSW and overseas markets continue to progress as part of the go to market strategy. is engaged During FY22 PainChek progressed significant new opportunities that have matured as a result of the COVID-19 pandemic. PainChek has been engaged in discussion with the Australian Department of Health following both the FDA and TGA confirming regulatory clearances for the COVID-19 vaccination for infants as young as 6 months of age. 10 | PAINCHEK LIMITED Market access for the Infant App in the US in 2022 would be a significant development for the Company and would align the Infant technology roll out across US, Europe and ANZ as this major infant vaccination program also rolls out. Additionally, led by Associate Prof Jenny Downs, Principal Research Fellow, Head Disability Research Program and Co-Head Child Disability Team, Telethon Kids Institute, a team of Western Australia researchers received a State Government of Western Australia Future Health Research and Innovation Fund grant to work in collaboration with PainChek to develop a new pain assessment tool specifically for children with disability aged 5 to 12 years. PainChek will hold all the commercialisation and IP rights. Accessing the home care & hospital markets PainChek remains focused on opportunities in the home care and hospital markets and this will remain the case through FY23 with growing interest and demand for the PainChek Adult technology as a post operative (e.g. orthopaedic) pain assessment solution to prevent the risk of a patient’s delirium. The Nurse-led Volunteer Support and PainChek Frailty Study funded through the Ramsay Hospital Research Foundation (RHRF) commenced at the Hollywood Hospital in WA during March, and a second study at Ramsay’s Joondalup Health Campus, also funded through the RHRF, is planned to evaluate the use of PainChek® Universal again combined with a nurse-led volunteer program. The market need for PainChek technology within Palliative care management continues to evolve as better pain management is seen as the critical element to ensure Palliative care be best delivered across hospitals, aged care, hospices and the home environment. Likely Developments and Overview of Group Strategy We aim to maintain and grow our core Residential Aged Care (RAC) market position in ANZ by maintaining the current contracted RAC beds above 120,000, through direct sales channel and in partnership with our 20 + existing CMS and medication management integration providers. These partnerships are projected to increase as we broaden our geographic reach. We will continue to implement and transition the remaining government contracted clients onto standard PainChek commercial terms during this year and gain new RAC clients in all key markets. The Home Care market will continue to be accessed, initially leveraging existing RAC clients that also have government funded home care packages in Australia and similar packages in overseas markets including the UK. The Hospital market will be entered by leveraging existing studies with hospitals, partnering with medical device suppliers and by bundling the Infant and Adult App for broad use across the hospital. The Company is investing in sales capability to service these markets in Australia and UK. International market expansion is planned in the existing UK and New Zealand markets by expanding the RAC beds market penetration and developing the home, hospital and infant markets. The Company is negotiating new market entry and in Europe, Canada and partnership opportunities the USA for both the Adult and Infant technologies with established local aged care and hospital supplier commercial entities. We have regulatory clearance in Canada for the Adult and Infant technologies and are entering the US market with the PainChek Infant technology as a Clinical Decision Support tool. In parallel we continue with the de-Novo application with FDA for US market clearance by Q4 C2023. PAINCHEK LIMITED | 11 In addition we are exploring market entry into key Asian markets including Japan with trade industry partners. REMUNERATION REPORT (AUDITED) Key Management Personnel the FY22 report discloses The remuneration arrangements and outcomes for the people listed below, who are the individuals within the Company who have been determined to be Key Management Personnel (KMP) in the financial year to 30 June 2022. Key Management Personnel (KMP) are those people who have the authority and responsibility for planning, directing and controlling the Group’s activities, either directly or indirectly. 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 Infant market indications for use will expand following the completion of clinical studies including The Royal Children’s Hospital in Melbourne “Painfaces Study”, evaluating the validity and reliability of the application for the assessment of procedural pain amongst infants in the Emergency Department. The Company has also commenced additional Children’s research studies in Europe to expand Children’s App clinical indications to include the 1-3 year age range thus further expanding the market size and overall opportunity. The Company continues to build and explore ‘go to market’ partnerships for the Infant App with large pharma, diagnostics and clinical research organisations to position PainChek as the total pain assessment and pain management solution that can be delivered in the home and hospital sectors. Subsequent events On 29 July 2022 the Group announced the completion of an Entitlement Offer, this followed the completion of a Placement of shares on 1 July 2022 to sophisticated and professional investors. The Group raised $4,587,000 before costs, of which $2,822,500 was received after the reporting date. 12 | PAINCHEK LIMITED 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 and Directors, executives and Directors 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 in the a performance-linked remuneration package for the executive and Directors, and for the future performance by the executives and Directors in managing the operations and strategic direction of the Company. incentive component 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. Short term incentive Generally paid in cash and structured, with a focus on delivery of specific short-term objectives aligned with the company’s strategies and goals and the Executives role in meeting these targets. Remuneration Consultant (“Eagan”) to undertake an In August 2019, the Company engaged Eagan Associates Pty Ltd independent remuneration review of the executive director and non- executive director’s salary and fees. The remuneration recommendations are set out below and continue to be applied. The Board is satisfied that Eagan’s remuneration recommendation was made free from undue influence by the KMP to whom the recommendations relate given only the non-executive chairman had made contact, Eagan does not provide any other consulting services to the Group and does not have any prior or continuing relationship or association with the company or any members of the KMP. 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 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. 2018 2019 2020 2021 2022 Share price at 30 June $0.056 $0.20 $0.115 $0.059 $0.028 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) ($4,810,532) ($3,262,418) ($12,392,659) ($6,063,647) ($5,720,534) ($4,810,532) ($3,262,418) ($12,392,659) ($6,063,647) ($5,720,534) (0.6) cents (0.4) cents (1.3) cents (0.5) cents (0.5) cents (0.6) cents (0.4) cents (1.3) cents (0.5) cents (0.5) cents PAINCHEK LIMITED | 13 Fixed remuneration is not linked to group performance. It is set with reference to the individual’s role, responsibilities and performance and remuneration levels for similar positions in the market. No dividends were paid by the Company nor was there any return of capital over the past 5 years. Performance Income as a Proportion of total compensation A short term incentive performance bonus of $52,500 was paid to Mr Daffas for the year ended 30 June 2021, based on Mr Daffas achieving certain internal KPI’s. Eagan’s report recommended that the Company’s non-executive director remuneration be supplemented with the following annual grant of Performance Rights for the financial years ended 30 June 2020, 2021 and 2022 as follows: Directors John Murray Adam Davey Ross Harricks Total Fee Performance Rights Total remuneration $ 80,000 $ 40,000 $ 40,000 $ 160,000 $ 40,000 $ 120,000 $ 20,000 $ 60,000 $ 20,000 $ 60,000 $ 80,000 $ 240,000 Non-executive director performance rights have no performance conditions as they are provided to supplement fixed director fees. The performance rights vest at end 30 June of each subsequent year provided the director remains a director of the Company at that date. The notional value of performance rights approved by shareholders will differ to the value required to be recognised for accounting purposes in accordance with AASB 2 Share Based Payments. Remuneration Consultant Benchmarks The median total statutory remuneration of $120,000 for the Chairman represents 120% of the median total statutory remuneration of $100,000 benchmark in the Health and IT sector for companies with a market capitalisation of between $50 million and $200 million. The median total statutory remuneration of $60,000 for a non-executive director represents 99% of the median total statutory remuneration of $60,857 benchmark in the Health and IT sector for companies with a market capitalisation of between $50 million and $200 million. At the 2019 Annual general meeting, shareholders approved the issue of Performance Rights to the non-executive directors on the following principles and terms: a) each non-executive director will in each end of financial year on 30 June 2020, 2021 and 2022 receive 1/3 of their total annual remuneration in Performance Rights; b) the number of Performance Rights issued for a year will be calculated based on the VWAP of the Company’s ordinary shares calculated 5 days either side of and including the date of announcement of the company’s annual statutory results for the financial year; c) Performance Rights will vest at 30 June each subsequent year - being the end of the financial year subject to the director remaining a director of the Company at that date; d) each Performance Right has the conditional right to acquire one Share; e) the Performance rights are issued for Nil consideration; f) the Performance Rights expire 3 months after the vesting date; g) the Performance Rights are subject to the terms and conditions of the LTI Plan; and 14 | PAINCHEK LIMITED 1 h) the below table summarises the position: Remuneration for year ended 30 June Share price calculation date Grant date Vesting date Date that Performance Rights convert to shares Expiry Date of Performance Rights if not converted to shares 2020 2021 2022 5/09/2019 4/09/2020 7/09/2021 20/11/2019 30/06/2020 28/07/2020 20/11/2019 30/06/2021 15/07/2021 20/11/2019 30/06/2022 12/07/2022 30/09/2020 30/09/2021 30/09/2022 CEO remuneration review The Eagan report recommended that the Company’s CEO remuneration be supplemented with an annual grant of $200,000 worth of Performance Rights for the financial years ended 30 June 2020, 2021 and 2022. The Company entered into a new agreement on 8th October 2019 with Philip Daffas to increase his fixed and variable cash remuneration to a maximum of $400,000 per annum which together with the proposed $200,000 grant of Performance Rights, will result in total statutory remuneration of $600,000 for FY22. The notional value of performance rights as set out in the AGM Notice will differ to the value required to be recognised for accounting purposes in accordance with AASB 2 Share Based Payments. The total statutory remuneration of $600,000 for Philip Daffas represents 124% of the median total statutory remuneration of $483,812 benchmark in the Health and IT sector for companies with a market capitalisation of between $50 million and $200 million. The Company received Shareholder approval at the 2019 AGM for the issue of Performance Rights to Philip Daffas to the value of $600,000 over the 3 years ending 30 June 2022, with an annual limit of $200,000 for Philip Daffas or his nominee(s) to acquire one Share for each Performance Right held pursuant to the LTI Plan and as part of Philip Daffas' remuneration. The Performance Rights issued for a year will be issued at the VWAP of the Company’s ordinary shares calculated 5 days either side of and including the date of announcement of the company’s annual statutory results for the financial year preceding the financial year of the grant of the Performance Rights (Award Issue Price). Vesting of the Performance Rights is conditional on the following: a) 50% of the annual grant of $200,000 worth of Performance Rights will vest two years after the commencement of each vesting period on 1 October of the year of grant, subject to the Company's Share price achieving a compounded annual increase in Share price of 15% p.a. (Award Target Price) from the relevant Award Issue Price and provided that Philip Daffas remains employed by the Company at that date (unless he is a Good Leaver as defined in the LTI Plan in which case he retains the relevant pro rata portion of the grant subject to the increase in Share price vesting condition); and b) 50% of the annual grant of $200,000 worth of Performance Rights will vest three years after the commencement of each vesting period on 1 October of the year of grant, subject to the Company's Share price achieving a compounded annual increase in Share price of 15% p.a. from the relevant Award Issue Price and provided that Philip Daffas remains employed by the Company on that date (unless he is a Good Leaver as defined in the LTI Plan in which case he retains the relevant pro rata portion of the grant subject to the increase in Share price vesting condition). The Award Target Price will be calculated based on the 10 days VWAP leading up to and including the relevant vesting date 2 PAINCHEK LIMITED | 15 The following table summarises the above terms: The following table summarises the above terms: Remuneration Remuneration for year ended 30 June for year ended 30 June Share Price Share Price Calculation date Calculation date Grant date Grant date Vesting date Vesting date assuming share price hurdle is met assuming share price hurdle is met Likely date that Likely date that Performance Rights will convert to Performance Rights will convert to shares shares Expiry Date of Expiry Date of Performance Rights if not converted to Performance Rights if not converted to shares shares 2020 2020 2021 2021 2022 2022 5/09/2019 5/09/2019 20/11/2019 20/11/2019 50% on 1/10/2021; 50% on 1/10/2021; 50% on 1/10/2022 50% on 1/10/2022 50% on 30/10/2021; 50% on 30/10/2021; 50% on 30/10/2022 50% on 30/10/2022 50% on 1/1/2022; 50% on 1/1/2022; 50% on 1/1/2023 50% on 1/1/2023 4/09/2020 4/09/2020 20/11/2019 20/11/2019 50% on 1/10/2022; 50% on 1/10/2022; 50% on 1/10/2023 50% on 1/10/2023 50% on 30/10/2022; 50% on 30/10/2022; 50% on 30/10/2023 50% on 30/10/2023 50% on 1/1/2023; 50% on 1/1/2023; 50% on 1/1/2024 50% on 1/1/2024 7/09/2021 7/09/2021 20/11/2019 20/11/2019 50% on 1/10/2023; 50% on 1/10/2023; 50% on 1/10/2024 50% on 1/10/2024 50% on 30/10/2023; 50% on 30/10/2023; 50% on 30/10/2024 50% on 30/10/2024 50% on 1/1/2024; 50% on 1/1/2024; 50% on 1/1/2025 50% on 1/1/2025 Remuneration Policy of Key Management Personnel 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 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 experienced Directors and senior executives. The Board ensures that executive reward satisfies the following key criteria for good reward governance practices: criteria for good reward governance practices: • Competitiveness • Competitiveness • Acceptability to shareholders • Acceptability to shareholders • Performance linkage • Performance linkage • Capital management • Capital management Non-executive Directors Non-executive Directors The Board’s policy is to remunerate non-executive Directors at market rates for comparable companies for time, 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 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 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 that can be paid to non-executive Directors is subject to approval by shareholders at the Annual General Meeting and is currently set at $400,000 as approved by shareholders at the 2019 AGM. Fees for non-executive Directors are not is currently set at $400,000 as approved by shareholders at the 2019 AGM. Fees for non-executive Directors are not linked to the performance of the Company. linked to the performance of the Company. Directors’ Fees Directors’ Fees A Director may be paid fees or other amounts as the Directors determine where a Director performs special duties or 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 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. for reasonable out of pocket expenses incurred as a result of their Directorship or any special duties. 16 | PAINCHEK LIMITED 3 3 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 which was varied on 8 October 2019. The key terms of the Agreement are: • A salary of $250,000 per annum inclusive of superannuation; • A short term incentive of up to $150,000 per annum at the boards discretion; • An invitation to apply in respect of each of FY2020, FY2021 and FY2022 for an award of the number of performance rights equivalent to $200,000 divided by the volume weighted average price (VWAP) of PainChek Ltd shares, calculated 5 days either side of and including the date of announcement of the Company’s annual statutory results for the financial year preceding the financial year of the Award, with vesting conditional on terms described above. The Agreement may be terminated by either party at any time on the giving of not less than three (3) months’ notice in writing. Iain McAdam, Chief Financial Officer (appointed 22 March 2021) The Company entered into an Employment Agreement (“Agreement”) with Mr Iain McAdam pursuant to which Mr McAdam was appointed as Chief Financial Officer of the Company as at 22 March 2021. The key terms of the Agreement are: • A salary of $251,142 per annum inclusive of superannuation; • A short term incentive of up to 20% of base salary, excluding superannuation, on achievement of the Company’s and the Employee’s annual goals and payable at the discretion of the PainChek Board; • An offer of 5 million options in accordance with the Company’s Long Term Incentive Plan (“LTIP”), 25% vest after 12 months of the grant date and the balance in quarterly instalments over the next 3 years, subject to continued employment and with a restriction on disposal of underlying shares (assuming options have vested and exercised) for 2 years from the date of issue of the options. The Agreement may be terminated by either party at any time on the giving of not less than three (3) months’ notice in writing. 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. 4 PAINCHEK LIMITED | 17 DIRECTORS’ AND EXECUTIVE OFFICERS’ EMOLUMENTS (a) Details of Key Management Personnel Name Executives Philip Daffas Iain McAdam Position Term Managing Director Chief Financial Officer From 30 September 2016 From 22 March 2021 Non-Executive Directors John Murray Adam Davey Ross Harricks Cynthia Payne Chairman Non-Executive Director Non-Executive Director Non-Executive Director From 30 September 2016 From 30 September 2014 From 30 September 2016 From 30 March 2022 Except as detailed in Notes (b) – (e) 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. 18 | PAINCHEK LIMITED 5 (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 2022 is as follows: 2022 Short Term Employee Benefits Equity Compensation Post- employment Performance related % Base Salary and Fees Cash Bonus Value of Options Performance Rights Superannuation Contributions $ $ $ $ $ Directors John Murray Philip Daffas Ross Harricks Adam Davey Cynthia Payne Total Directors 80,000 - 227,273 52,500 - 40,000 40,000 20,000 - - 407,273 52,500 - - - - - - 14,995 108,083 7,498 7,498 - 138,074 Iain McAdam 228,311 4,281 Total 635,584 56,781 137,742 137,742 - 138,074 - 22,727 - - - 22,727 22,831 45,558 Total $ 94,995 410,583 47,498 47,498 20,000 620,574 393,165 1,013,739 16% 39% 16% 16% 0% 22% 35% 27% 2021 Short Term Employee Benefits Equity Compensation Post- employment Performance related % Base Salary and Fees Cash Bonus Value of Options Performance Rights Superannuation Contributions $ $ $ $ $ Directors John Murray Philip Daffas Ross Harricks Adam Davey Total Directors Iain McAdam Ian Hobson 73,059 231,507 36,530 40,000 381,096 64,103 119,400 - 75,000 - - 75,000 - - Total 564,599 75,000 - - - - - 41,147 - 41,147 39,492 145,162 19,746 19,746 224,146 - - 224,146 6,941 18,493 3,470 - 28,904 6,090 - 34,994 Total $ 119,492 470,162 59,746 59,746 709,146 111,340 119,400 939,886 33% 47% 33% 33% 32% 37% 0% 28% 6 PAINCHEK LIMITED | 19 c) Shares Held by Key Management Personnel 2022 Balance at 1 July 2021 Performance Rights Converted Bought & (Sold) Shares issued in lieu of cash Other Balance at 30 June 2022 Directors John Murray Philip Daffas Ross Harricks Adam Davey Cynthia Payne 12,486,402 20,499,581 6,243,201 9,783,965 - 49,013,149 Other key management personnel Iain McAdam 12,961 49,026,110 412,791 - 206,396 206,396 - 825,583 - 825,583 2021 Balance at 1 July 2020 Performance Rights Converted Bought & (Sold) Directors John Murray Philip Daffas Ross Harricks Adam Davey 12,299,748 20,499,581 6,149,874 9,690,638 48,639,841 Other key management personnel Iain McAdam Ian Hobson - - 186,654 93,327 93,327 373,308 - - 48,639,841 373,308 - - - - - - - - - - - - - - - - - - - - - - - 12,899,193 20,499,581 6,449,597 9,990,361 - - - 49,838,732 - - - - 12,961 49,851,693 Shares issued in lieu of cash Other Balance at 30 June 2021 - - - - - - - - 12,486,402 20,499,581 6,243,201 9,783,965 - - 49,013,149 12,961 - 12,961 - - - - 12,961 - - - 49,026,110 20 | PAINCHEK LIMITED 7 d) Options Held by Key Management Personnel 2022 Balance at 1 July 2021 Received as Remuneration Exercise of Options Other Balance at 30 June 2022 Vested and exercisable Unvested Directors John Murray Philip Daffas Ross Harricks Adam Davey Cynthia Payne - - - - - - Other key management personnel Iain McAdam 5,000,000 5,000,000 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 5,000,000 1,562,500 3,437,500 5,000,000 1,562,500 3,437,500 2021 Balance at 1 July 2020 Received as Remuneration Exercise of Options Other Balance at 30 June 2021 Vested and exercisable Unvested Directors John Murray Philip Daffas Ross Harricks Adam Davey - - - - - - - - - - Other key management personnel Iain McAdam Ian Hobson - - 5,000,000 - - 5,000,000 - - - - - - - - - - - - - - - - - - - - - 5,000,000 - 5,000,000 - - - - - - - - - - - - - 5,000,000 - 5,000,000 8 PAINCHEK LIMITED | 21 e) Performance Rights Held by Key Management Personnel 2022 Directors John Murray Philip Daffas Ross Harricks Adam Davey Cynthia Payne Balance at 1 July 2021 412,791 2,997,227 206,396 206,396 Received as Remuneration Conversion to shares Expired Balance at 30 June 2022 Vested and Exercisable Unvested 792,079 (412,791) - 792,079 792,079 - 3,960,396 396,040 - (206,396) (466,635) 6,490,988 396,040 - - 6,024,353 - 396,040 396,040 (206,396) - - - - - 396,040 - 396,040 - - - 3,822,810 5,544,555 (825,583) (466,635) 8,075,147 1,584,159 6,024,353 Other key management personnel Iain McAdam - - - - - - - 3,822,810 5,544,555 (825,583) (466,635) 8,075,147 1,584,159 6,024,353 2021 Directors John Murray Philip Daffas Ross Harricks Adam Davey Balance at 1 July 2020 186,654 933,270 93,327 93,327 Received as Remuneration Conversion to shares Other Balance at 30 June 2021 Vested and Exercisable Unvested 412,791 2,063,957 206,396 206,396 (186,654) - (93,327) (93,327) - 412,791 - 2,997,227 206,396 - 206,396 - 412,791 - - 2,997,227 - - 206,396 206,396 1,306,578 2,889,540 (373,308) - 3,822,810 825,583 2,997,227 Other key management personnel Iain McAdam - 1,306,578 - 2,889,540 - (373,308) - - - 3,822,810 - - 825,583 2,997,227 Share, Performance Rights 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. f) Compensation Options and Performance Rights Options During the financial year ended 30 June 2022, Nil options were granted by the Company to Directors or Other Key Management Personnel (2021: 5,000,000) and Nil options (2021: Nil) were exercised by Directors or Other Key Management Personnel. Performance rights During the financial year ended 30 June 2022, 5,544,555 performance rights were granted by the Company to Directors in lieu of cash remuneration following the shareholder approval on 20 November 2019 (2021: 2,889,540). 1,584,159 of these performance rights (2021: 825,583) were exercised by Directors in July 2022. 22 | PAINCHEK LIMITED 9 CEO performance rights The fair value at the date of grant of performance rights issued to the CEO is determined using a Monte-Carlo option pricing model that takes into account the exercise price, the underlying share price at the time of issue, the term of the performance right, the underlying share’s expected volatility, expected dividends and the risk free interest rate for the expected life of the instrument. The value of the performance rights were calculated using the inputs shown below: Tranche 1A Tranche 1B Tranche 2A Tranche 2B Tranche 3A Tranche 3B Grant date 20 November 2019 20 November 2019 20 November 2019 20 November 2019 20 November 2019 20 November 2019 Exercise price Nil Nil Nil Nil Nil Nil Vesting conditions & vesting dates Share price at date of grant Refer section “CEO remuneration review” above for vesting conditions and vesting dates $0.29 $0.29 $0.29 $0.29 $0.29 $0.29 Expiry date 1 January 2022 1 January 2023 1 January 2023 1 January 2024 1 January 2024 1 January 2025 Life of the instruments (years) Underlying share price volatility 2.12 100% Expected dividends Nil 3.12 100% Nil 3.12 100% Nil 4.12 100% Nil 4.12 100% Nil 5.12 100% Nil Risk free interest rate Pricing model Fair value per instrument 0.80% 0.80% 0.80% 0.80% 0.80% 0.80% Monte-Carlo Simulation Monte-Carlo Simulation Monte-Carlo Simulation Monte-Carlo Simulation Monte-Carlo Simulation Monte-Carlo Simulation $0.1979 $0.1980 $0.1711 $0.1773 $0.1763 $0.1536 Non-executive director performance rights The fair value at the date of grant of performance rights issued to the non-executive directors was calculated based on the share price at the date of issue ($0.29) (tranche 1), the value of the award specified in applicable years 2021 (tranche 2) and 2022 (tranche 3) over the vesting period. The value of the performance rights were calculated using the inputs shown below: Grant date Exercise price Vesting date Tranche 1 Tranche 2 Tranche 3 20 November 2019 20 November 2019 20 November 2019 Nil 30 June 2020 Nil Nil 30 June 2021 30 June 2022 Share price at date of grant $0.29 $0.29 $0.29 Expiry date 30 September 2020 30 September 2021 30 September 2022 g) 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. h) Post-employment benefits These amounts are superannuation contributions made during the year. 10 PAINCHEK LIMITED | 23 Transactions with Directors and Director related entities There were no other transactions with Directors or Director related entities during the year. Loans to Key Management Personnel There was no loans to KMP during the year. End of Remuneration Report 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 Cynthia Payne Directors Meetings Meetings Attended 13 13 13 13 3 Number Eligible to Attend 13 13 13 13 5 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 Unlisted Options Unlisted Options Unlisted Options Unlisted Options Unlisted Options Unlisted Options Unlisted Options Date of Expiry Exercise Price Number under Option 9 November 2023 26 September 2024 23 March 2025 28 April 2025 25 August 2025 24 September 2025 1 March 2026 $0.032 $0.11 $0.09 $0.095 $0.084 $0.075 $0.051 4,000,000 3,000,000 1,000,000 500,000 5,000,000 7,000,000 12,500,000 5,000,000 ordinary shares were issued (2021: Nil) as a result of the exercise of options during or since the financial year ended 30 June 2022. 24 | PAINCHEK LIMITED 11 PERFORMANCE RIGHTS At the date of this report, the following performance rights, convertible for Nil consideration at a ratio of 1:1 into new ordinary shares in the Company were on issue. Granted to CEO CEO CEO CEO CEO Date Right granted Expiry date 20/11/2019 20/11/2019 20/11/2019 20/11/2019 20/11/2019 1/01/2023 1/01/2023 1/01/2024 1/01/2024 1/01/2025 Share price at date of grant $0.29 $0.29 $0.29 $0.29 $0.29 Value of performance rights approved at the AGM No. of performance rights under plan $92,779 $58,904 $59,421 $60,300 $56,014 466,635 1,031,979 1,031,978 1,980,198 1,980,198 6,490,988 1,584,159 ordinary shares were issued to Non-executive directors as a result of the conversion of performance rights since the financial year ended 30 June 2022. 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 Cynthia Payne Total Insurance of officers Number of Shares Number of Options Number of Performance Rights 13,691,272 10,386,401 20,499,581 6,845,637 - 51,422,891 - - - - - - - - 6,490,988 - - 6,490,988 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. 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. 12 PAINCHEK LIMITED | 25 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 Other assurance services (assessment of payroll tax and R&D) Total remuneration for non-audit services 2022 $ 2021 $ - - 6,000 6,000 Auditor’s independence declaration The auditor’s independence declaration is included on the following page. Signed in accordance with a resolution of directors. John Murray Chairman 31 August 2022, Sydney, NSW 26 | PAINCHEK LIMITED 13 Auditor’s independence declaration Auditor’s independence declaration PainChek Limited Tel: +61 7 3237 5999 Fax: +61 7 3221 9227 www.bdo.com.au Level 10, 12 Creek Street Brisbane QLD 4000 GPO Box 457 Brisbane QLD 4001 Australia DECLARATION OF INDEPENDENCE BY T R MANN TO THE DIRECTORS OF PAINCHEK LIMITED As lead auditor of PainChek Limited for the year ended 30 June 2022, 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 period. T R Mann Director BDO Audit Pty Ltd Brisbane, 31 August 2022 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. 14 PAINCHEK LIMITED | 27 20 Consolidated statement of profit or loss and other comprehensive income for the year ended 30 June 2022 Revenue Other income – R&D Grant & other rebates Other income – Government Grant Cost of sales Research and development expenses Marketing and business development expenses Corporate administration expenses Share based payment expenses Loss before income tax Income tax benefit Consolidated Consolidated Note 30 June 2022 $ 30 June 2021 $ 3 4 5 6 14 7 994,148 1,102,500 750,796 (1,237,392) (2,350,816) (1,655,464) (2,775,117) (549,191) 233,887 1,136,601 1,750,000 (639,010) (2,652,106) (1,570,900) (3,612,398) (709,720) (5,720,534) (6,063,647) - - Loss for the period attributable to Owners of PainChek Limited (5,720,534) (6,063,647) Other comprehensive income, net of income tax Exchange differences relating to translation of foreign operations 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 5,177 - (7,370) - (5,715,357) (6,071,017) (5,715,357) (6,071,017) Loss per share: Basic and diluted (cents per share) 8 (0.50) (0.55) Notes to the financial statements are included on pages 32 to 55. 28 | PAINCHEK LIMITED 15 Consolidated statement of financial position as at 30 June 2022 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 2022 $ Consolidated 30 June 2021 $ Note 18 9 10 11 12 13 14 6,141,422 484,709 11,419,512 372,929 6,626,131 11,792,441 26,172 26,172 6,652,303 18,455 18,455 11,810,896 1,641,548 187,341 1,828,889 1,828,889 4,823,414 3,399,364 167,153 3,566,516 3,566,516 8,244,379 32,484,187 13,344,599 (41,005,372) 30,738,987 12,790,230 (35,284,838) 4,823,414 8,244,379 Notes to the financial statements are included on pages 32 to 55. 16 PAINCHEK LIMITED | 29 Consolidated statement of changes in equity for the year ended 30 June 2022 Company Consolidated Balance at 1 July 2020 Loss for the year Other comprehensive income Total comprehensive loss for the period Transactions with owners in their capacity as owners: Issue of ordinary shares (refer to note 13) Share issue costs (refer to note 13) Recognition of share based payments (refer to note 14) Issued capital $ Reserves $ Accumulated losses $ Total $ Note 21,261,768 - - 12,095,110 - (14,600) (29,228,421) (6,063,647) 7,230 4,128,457 (6,063,647) (7,370) - (14,600) (6,056,417) (6,071,017) 10,000,000 - (522,781) - 709,720 - - - 10,000,000 (522,781) 709,720 Balance at 30 June 2021 30,738,987 12,790,230 (35,284,838) 8,244,379 Consolidated Balance at 1 July 2021 Loss for the year Other comprehensive income Total comprehensive loss for the period Transactions with owners in their capacity as owners: Issue of ordinary shares (refer to note 13) Share issue costs (refer to note 13) Issue of shares on exercise of options (Refer to note 13) Recognition of share based payments (refer to note 14) Balance at 30 June 2022 30,738,987 12,790,230 (35,284,838) 8,244,380 - - - - (5,720,534) (5,720,534) 5,177 - 5,177 5,177 (5,720,534) (5,715,356) 1,763,200 (198,000) 180,000 - - - - 549,191 - - - - 1,763,200 (198,000) 180,000 549,191 32,484,187 13,344,599 (41,005,372) 4,823,414 Notes to the financial statements are included on pages 32 to 55. 30 | PAINCHEK LIMITED 17 Consolidated statement of cash flows for the year ended 30 June 2022 Cash flows from operating activities Receipts from customers Receipt from government grant Payments to suppliers and employees Payroll Tax liability paid Interest received R&D Grant and other rebates Net cash used in operating activities Cash flows from investing activities Payments for property, plant and equipment Net cash used in investing activities Cash flows from financing activities Proceeds from issue of shares Payment of share issue costs Net cash (used in)/provided by financing activities Consolidated Consolidated Year ended Note 30 June 2022 $ 30 June 2021 $ 11 18.1 1,292,223 - (7,996,631) (1,400,414) 5,195 1,102,127 (6,997,500) 168,293 1,353,316 (6,787,569) - 19,090 1,125,820 (4,121,050) (21,960) (21,960) (60,032) (60,032) 13 13 1,943,200 (198,000) 10,000,000 (522,781) 1,745,200 9,477,219 Net increase / (decrease) in cash and cash equivalents (5,274,260) 5,296,136 Cash and cash equivalents at the beginning of the period Effect of FX on cash balances Cash and cash equivalents at the end of the period 18 11,419,512 (3,830) 6,141,422 6,120,090 3,286 11,419,512 Notes to the financial statements are included on pages 32 to 55. 18 PAINCHEK LIMITED | 31 Notes to the financial statements for the year ended 30 June 2022 1. Significant accounting policies Basis of preparation The consolidated financial statements comprises PainChek Limited (referred to as the “Company” or “Parent Entity”) and its controlled entities (together referred to as the “Consolidated Entity” or the “Group”) and is a listed public company, incorporated and domiciled in Australia. The Group 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 and Australian Accounting Standards and Interpretations. 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 31 August 2022. 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”). Standards and Interpretations on issue not yet adopted Certain new accounting standards and interpretations have been published that are not yet mandatory for 30 June 2022 reporting periods. The Consolidated Entity has decided against early adoption of these standards. The Consolidated Entity has assessed the impact of these new standards and interpretations and does not expect that there would be a material impact on the Consolidated Entity in the current or future reporting periods and on foreseeable future transactions. New and amended standards adopted by the Group The accounting policies adopted are consistent with those of the previous financial year. Several other amendments and interpretations were applied for the first time during the year, but these changes did not have an impact on the Consolidated Entity’s financial statements, and hence, have not been disclosed. 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 $6,997,500 (2021: 4,121,050) and net current assets of $4,823,414 (30 June 2021: $8,244,379). The consolidated entity also generated a loss after tax of $5,720,534 (2021: $6,063,647). 32 | PAINCHEK LIMITED 19 The ability of the consolidated entity to continue as a going concern is principally dependent upon one or more of the following conditions: • • the successful commercialisation of its intellectual property in a manner that generates sufficient operating cash inflows; and the ability of the consolidated entity to raise sufficient capital as and when necessary. 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, control over discretionary expenditure projects and conversion of customers onto commercial terms. 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 Consolidated Entity Set out below are the significant accounting policies that have been applied in the preparation of the consolidated financial statements: Fair Values The fair values of consolidated entity’s financial assets and financial liabilities approximate their carrying values due to short –term in nature. No financial assets or financial liabilities are readily traded on organised markets in standardised form. (a) Principles 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 entity, 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. 20 PAINCHEK LIMITED | 33 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. (b) 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 reporting date. Deferred income tax is provided on all temporary differences at the reporting 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: • 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 reporting 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 reporting 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. 34 | PAINCHEK LIMITED 21 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 reporting 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. (c) Impairment of non – financial Assets The Group assesses at each reporting 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 reporting 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 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. (d) 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. 22 PAINCHEK LIMITED | 35 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 profit or loss 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. (e) Cash and cash equivalents Cash comprises cash at bank and in hand. Cash equivalents are short term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. 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. (f) 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. The group applies the simplified approach permitted by AASB 9, which requires expected lifetime losses to be recognised from initial recognition of the receivables. Management has determined that assessment of expected credit loss associated with trade receivables is immaterial. 36 | PAINCHEK LIMITED 23 (g) 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 Group. Gains and losses between the carrying amount and the disposal proceeds are taken to profit or loss. (h) Trade and other payables Trade and other payables are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method. These amounts represent liabilities for goods and services provided to the Group prior to the end of the financial year and which are unpaid. Due to their short-term nature they are measured at amortised cost and are not discounted. The amounts are unsecured and are usually paid within 30 days of recognition. (i) 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. 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. 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 corporate bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows. Defined contribution superannuation expense Contributions to defined contribution superannuation plans are expensed in the period in which they are incurred. (j) 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. PAINCHEK LIMITED | 37 24 (k) 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: • • the weighted average number of additional ordinary shares that would have been outstanding assuming the conversion of all dilutive potential ordinary shares; costs of servicing equity; • 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. (l) Revenue from Contracts with Customers and Government Grants Software subscriptions i) Revenue from the sale of term (subscription) licences is recognised on a straight line basis over the subscription term. Training ii) Revenue from the provision of training services is recognised typically at a point in time when the Group has provided training and has met the performance obligation. Software support (maintenance) iii) Revenue for software support is recognised on a straight line basis over the service period as performance obligations require the Consolidated Entity to respond to requests made by customers to provide technical product support and unspecified updates, upgrades and enhancements on a when-available and if-available basis. Incremental Costs of obtaining Customer Contracts iv) Commissions on software subscriptions are capitalised and amortised over the term, where the term is greater than 12 months. Contract Liabilities v) A contract liability is recognised when a customer initially purchases services and goods, it is released as they are delivered to the customer. Contract Assets (Trade Receivables and Work in progress) vi) Trade receivables are amounts due from customers for goods sold or services performed in the ordinary course of business. They are generally due for settlement within 30 days and therefore are all classified as current. Trade receivables are recognised initially at the amount of consideration that is unconditional unless they contain significant financing components, when they are recognised at fair value. The Company holds the trade receivables with the objective to collect the contractual cash flows and therefore measures them subsequently at amortised cost using the effective interest method. Work in progress represents costs incurred and profit recognised for services that are in progress at reporting date and the Company has an enforceable right to payment for its performance completed to date. 38 | PAINCHEK LIMITED 25 Unsatisfied performance obligations vii) The Company continues to recognise its contract liabilities under AASB 15 in respect of any unsatisfied performance obligations in the Statement of Financial Position. Financing components viii) The Company does not recognise adjustments to transition prices or Contract balances where the period between the transfer of promised goods or services to the customer and payment by customer does not exceed one year. The Company reviewed its prior year contracts and did not identify material adjustments in timing and amounts recognised as revenue in prior years. Government grants ix) Government grants are recognised where there is reasonable assurance that the grant will be received and all attached conditions will be complied with. When the grant relates to an expense item, it is recognised as income on a systematic basis over the periods that the related costs, for which it is intended to compensate, are expensed. When the grant relates to an asset, it is recognised as income in equal amounts over the expected useful life of the related asset. (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. No adjustments was made to prior year numbers. (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. In preparing these statements, the key estimates made by management in applying the Consolidated Entity’s accounting policies in particular to: • Going concern – refer note 1 above. • The valuation of share-based payments - refer to note 14; • Recognition of Government Grant income when milestones are reasonably assured of being met as detailed in notes 4, 5 and 11; and • Recognition of a payroll tax liability related to options issued – refer to note 11. 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. 26 PAINCHEK LIMITED | 39 3. Revenue Revenue from Contracts with Customers Interest income Total Revenue 4. R&D and other rebates ATO cash boost COVID-19 government payments Research & Development Tax Incentive Total Other Income Consolidated 2022 $ 978,567 15,581 Consolidated 2021 $ 214,798 19,089 994,148 233,887 Consolidated 2022 $ Consolidated 2021 $ - 9,809 1,092,691 1,102,500 50,000 28,280 1,058,320 1,136,601 Research and development tax incentive The consolidated entity is eligible for the Commonwealth Government research and development tax incentive. To be eligible the company must meet stringent guidelines on what represents both core and supporting activities of research and development. Government grants are not recognised until there is reasonable assurance that the company will comply with the conditions attaching to them and the grants will be received which generally coincides with lodgement of the return with the regulatory body. 5. Other income – government grants Government grant Total government grants Consolidated 2022 $ 750,796 Consolidated 2021 $ 1,750,000 750,796 1,750,000 In December 2019, the Australian Government signed a grant funding contract with the Company for the national trial of the PainChek application for Australians with dementia living in residential aged care facilities. The Grant ended 31 May 2021. The intended outcome of the grant is to improve diagnosis and management of pain in people living with dementia in residential aged care. During this period, PainChek Limited also entered into agreements with end users acknowledging the Australian Government grant and allowing for the first period of those agreements to be funded in accordance with the Australian Government grant agreement. During the year, the Group received $Nil (FY21: $1,353,316) pursuant to the terms of the funding contract of which $750,796 (FY21: $1,750,000) has been recognised as income and at 30 June 2022 the balance of $102,520 (FY21: $853,316) has been recognised as deferred income – see note 11. 40 | PAINCHEK LIMITED 27 6. Loss for the year Loss for the year has been arrived at after charging the following items of expenses: Corporate administration expenses Salaries & oncosts Superannuation Payroll Tax assessment Board fees Company secretary fees Consultants fees Travel Legal and professional fees Regulatory Share registry fees ASX Audit & tax IT & telecommunications Other administration expenses 7. Income taxes 7.1 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 2022 $ 842,397 80,873 - 180,000 77,330 71,162 83,757 127,099 215,677 52,389 58,831 186,057 330,915 468,630 2,775,117 2021 $ 426,174 210,043 1,400,414 160,000 131,400 272,234 28,156 116,343 8,313 55,169 80,035 185,202 144,246 394,669 3,612,398 Consolidated Consolidated 2022 $ (1,399,246) 43,550 1,355,696 - 2021 $ (1,501,202) (49,186) 1,550,388 - 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 25% (2021: 26%) Effect of items that are not assessable/deductible in determining taxable loss: Non-deductible expenses Non-assessable income Change in Tax Rates Over/under provision Effect of unused tax losses not recognised as deferred tax assets Consolidated 2022 $ Consolidated 2021 $ (5,720,534) (6,063,646) (1,430,134) (1,576,548) 370,867 (290,008) (9,693) 3,272 1,355,696 - 329,387 (303,227) - - 1,550,388 - The tax rate used for the 2022 was 25% and 2021 was 26% 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. 28 PAINCHEK LIMITED | 41 The Company has no franking credits available for recovery in future years. 7.2 Income tax recognised directly in equity Current tax Share issue costs calculated at 25% (2021: 26%) 7.3 Unrecognised deferred tax assets Unused tax losses (revenue) for which no deferred tax assets have been recognised at 25% Temporary differences at 25% (2021: 26%) Consolidated 2022 $ Consolidated 2021 $ (49,500) (49,500) (135,923) (135,923) Consolidated 2022 $ 4,813,067 Consolidated 2021 $ 375,314 3,101,481 293,555 All unused tax losses were incurred by Australian entities. 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. 8. Loss per share Basic and diluted loss per share (cents per share) Consolidated 2022 $ Consolidated 2021 $ (0.50) (0.55) 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 (5,720,534) (6,063,647) Consolidated 2022 $ Consolidated 2021 $ Consolidated 2022 No. Consolidated 2021 No. Weighted average number of ordinary shares for the purposes of basic and diluted loss per share 1,128,290,139 1,111,992,128 Options and Performance Rights on issue are considered to be anti-dilutive while the entity is making losses. 9. Trade and other receivables Trade receivables Other receivables Prepayments At the reporting date, $100,329 trade receivables are past due. 42 | PAINCHEK LIMITED Consolidated 2022 $ 411,946 24,807 47,956 Consolidated 2021 $ 124,170 191,652 57,107 484,709 372,929 29 10. Property, plant and equipment Cost Balance at 1 July Additions Disposals Balance at 30 June Accumulated depreciation Balance at 1 July Depreciation expense Disposals Balance at 30 June Net book value 11. Trade and other payables Trade creditors Deferred income Contract liability Accruals and other payables Consolidated 2022 $ 126,249 21,960 - Consolidated 2021 $ 66,036 60,032 - 148,209 126,249 Consolidated 2022 $ (107,613) (14,424) Consolidated 2021 $ (48,084) (59,259) (122,037) (107,613) 26,172 18,455 Consolidated 2022 $ 275,481 102,520 703,703 559,844 Consolidated 2021 $ 325,135 853,316 191,893 2,196,172 1,641,548 3,399,364 Trade creditor payment terms are 30 days from end of month. Deferred income comprises the Federal Government Grant received and recognised as deferred income until the related costs, for which the grant is intended to compensate, are incurred. Contract liability is the customer initial payments for subscriptions and training recognised as a contract liability until the services are delivered. Customer terms vary between 1 month and 1 year payment in advance. Payroll Tax liability Accruals and Other Payables includes $Nil (2021: $1,400,414) Payroll Tax assessment received, relating to the 30 June 2020 year. The NSW Office of State Revenue issued an amended 2020 payroll tax assessment in relation to options issued in 2016 and exercised in 2020. This assessment indicated that PainChek had a liability of $1,400,414 (including penalties) related to the 2020 financial year. 30 PAINCHEK LIMITED | 43 12. Provisions Provision for employee annual leave entitlements 13. Issued capital 1,195,601,811 fully paid ordinary shares (June 2021: 1,126,804,799) Consolidated 2022 $ 187,341 Consolidated 2021 $ 167,153 Consolidated 2022 $ Consolidated 2021 $ 32,484,187 30,738,987 Movements during the period Balance at beginning of the period Placement – issued at $0.028 (FY21: $0.11) per share Exercise of options – exercise price $0.036 Exercise of performance rights – exercise price $0.00 Capital raising costs (net of tax) Balance at end of period 2022 Number 2021 Number 2022 $ 2021 $ 1,126,804,799 1,035,522,400 30,738,987 21,261,767 62,971,429 90,909,091 1,763,200 10,000,000 5,000,000 - 180,000 825,583 373,308 - - - 1,195,601,811 - 1,126,804,799 (198,000) 32,484,187 (522,781) 30,738,987 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 Balance at beginning of the reporting period Share based payments reserve Foreign currency translation reserve Total reserves at end of period Reconciliation of movement in reserves Opening balance Foreign exchange gain/loss recognised Share based payments reserve Total reserves at end of period Consolidated 2022 $ Consolidated 2021 $ 12,790,231 549,191 5,177 13,344,599 12,095,111 709,720 (14,600) 12,790,231 Share based payments reserve Foreign exchange reserve Total 12,818,453 - 549,191 13,367,644 (28,222) 5,177 - (23,045) 12,790,231 5,177 549,191 13,344,599 44 | PAINCHEK LIMITED 31 The foreign currency translation reserve records exchange rate differences arising from the translation of the financial statements of foreign subsidiaries. The share based payments reserve is used to record the value of share based payments provided to employees as part of their remuneration and to consultants for services provided. 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 2021. 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 2022 $ Consolidated 2021 $ 6,141,422 484,709 6,626,131 11,419,512 372,929 11,792,441 835,325 835,325 2,354,155 2,354,155 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. 32 PAINCHEK LIMITED | 45 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 16.5 below). 15.5 Interest rate risk management The sensitivity analyses below have been determined based on the exposure to interest rates for cash deposits 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 cash deposits 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 2022 would increase/decrease by $72,000 (2021: $120,000). 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 other receivables 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 $ $ $ $ $ $ 2022 Trade and other payables 2021 Trade and other payables 835,325 835,325 2,354,155 2,354,155 - - - - - - 835,325 2,354,155 46 | PAINCHEK LIMITED 33 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 17. Related party transactions 17.1 Entities under the control of the Group Consolidated 2022 $ 692,365 45,558 275,816 1,013,739 Consolidated 2021 $ 639,599 34,994 265,293 939,886 Parent Entity: PainChek Ltd Australia Country of Incorporation Percentage Owned (%)* 2022 2021 Electronic Pain Assessment Technology (EPAT) Pty Ltd PainChek UK Limited Australia England 100% 100% 100% 100% *Percentage of voting power is proportional to ownership 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 note 17. 17.3 Other related party transactions There were no transactions between the Group and the key management personnel and their related parties during the year (2021: Nil). 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 2022 $ 6,141,422 Consolidated 2021 $ 11,419,512 34 PAINCHEK LIMITED | 47 18.1 Reconciliation of loss for the year to net cash flows from operating activities Cash flow from operating activities Loss for the year Consolidated 2022 $ Consolidated 2021 $ (5,720,534) (6,063,647) Adjustments for: Depreciation Share based payments 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 Refer to Note 13 for non-cash issuance of shares during the year. 14,424 549,191 59,529 709,720 (120,931) 9,151 (1,748,989) 20,188 (6,997,500) (232,622) (48,562) 1,402,932 51,600 (4,121,050) 19. Remuneration of auditors Auditor of the parent entity Audit and review of the financial statements Other non-audit services – assessment of payroll tax and R&D. Consolidated 2022 $ 90,243 - Consolidated 2021 $ 63,359 6,000 90,243 69,359 The auditors of PainChek Ltd are BDO Audit Pty Ltd. 20. Events after the reporting period On 29 July 2022 the Group announced the completion of an Entitlement Offer, this followed the completion of a Placement of shares on 1 July 2022 to sophisticated and professional investors. The Group raised $4,587,000 before costs, of which $2,822,500 was received after the reporting date. There are no other events after the reporting period significant enough for disclosure. 21. Parent entity information The accounting policies of the parent entity, which have been applied in determining the 2022 and 2021 financial information shown below, are the same as those applied in the financial statements. Refer to note 1 for a summary of significant accounting policies relating to the Group. The legal Parent Entity of the Consolidated Entity is PainChek Limited. 48 | PAINCHEK LIMITED 35 Financial position of PainChek Limited Assets Current assets Non-current assets Total assets Liabilities Current liabilities Non-current liabilities Total liabilities Net assets Equity Issued capital Reserves Accumulated losses Total equity Financial performance Loss for the year Share based payments Reserves Balance at beginning of the reporting period Share based payments reserve Total reserves at end of period 2022 $ 2021 $ 6,272,195 23,267 6,295,462 11,444,688 15,050 11,459,738 1,472,048 3,215,358 - 1,472,048 4,823,414 - 3,215,358 8,244,380 41,238,892 13,406,656 (49,822,134) 4,823,414 39,493,692 12,857,465 (44,106,777) 8,244,380 (5,715,356) (6,071,016) Consolidated 2022 $ Consolidated 2021 $ 12,857,465 549,191 13,306,656 12,147,745 709,720 12,857,465 22. Approval of financial statements The financial statements were approved by the board of directors and authorised for issue on 31 August 2022. 23. SHARE BASED PAYMENTS Performance rights The Company has granted performance rights to the non-executive directors (NEDs) and the CEO at the 2019 AGM. The performance rights were granted for nil consideration and are not quoted on the ASX. Performance rights granted carry no dividend or voting rights. When vested, each performance right is convertible into one ordinary share. 36 PAINCHEK LIMITED | 49 Details of performance right issued, exercised and expired during the financial year are set out below: Expiry Date Tranche 30/09/2020 30/09/2021 30/09/2022 01/01/2022 01/01/2023 01/01/2023 01/01/2024 01/01/2024 01/01/2025 NEDs 1 NEDs 2 NEDs 3 CEO 1A CEO 1B CEO 2A CEO 2B CEO 3A CEO 3B Exercise Price $Nil $Nil $Nil $Nil $Nil $Nil $Nil $Nil $Nil VWAP Price $0.29 $0.10 $0.05 $0.21^ $0.21^ $0.10^ $0.10^ $0.05^ $0.05^ 1 July 2021 Issued Movements Exercised - 825,583 - - - (825,583) - 1,584,159 466,635 466,635 1,031,979 - - - 1,031,978 - - 1,980,198 - 1,980,198 - - - - - - - Expired / Forfeited - - - (466,635) - - - - - 30 June 2022 - - 1,584,159 - 466,635 1,031,979 1,031,978 1,980,198 1,980,198 3,822,810 5,544,555 (825,583) (466,635) 8,075,147 The performance rights outstanding at the end of the year had a weighted average exercise price of nil and a weighted average remaining contractual life of 1.3 years (2021: 0.8 years) ^ Refer details of vesting conditions below. The following table shows the calculation of the Performance Rights issued as part of Philip Daffas’ remuneration for holding office during FY20, FY21 and FY22 and vesting dates, if Philip Daffas remains in office and the relevant Award Target Price is achieved on the relevant vesting date: Annual Value of Performance Rights for FY20, FY21 and FY22 Share price calculated based on the VWAP 5 days (and including the day of) either side of FY19, FY20 and FY21 statutory results No. of Performance Rights Vesting Date Award Target Price $100,000 $100,000 $100,000 $100,000 $100,000 $100,000 $0.2143 $0.2143 $0.0969 $0.0969 $0.05 $0.05 466,636 466,635 1 October 2021 1 October 2022 1,031,979 1 October 2022 1,031,979 1 October 2023 1,980,198 1 October 2023 1,980,198 1 October 2023 $0.28 $0.33 $0.13 $0.15 $0.07 $0.08 The performance shares have the following key terms and conditions: Non- executive directors: a) each non-executive director receive in each end of financial year on 30 June 2020, 2021 and 2022, 1/3 of their total annual remuneration in Performance Rights; b) the number of Performance Rights issued for a year are calculated based on the VWAP of the Company’s ordinary shares calculated 5 days either side of and including the date of announcement of the company’s annual statutory results for the financial year; c) Performance Rights vest at 30 June each subsequent year – being the end of the financial year subject to the director remaining a director of the Company at that date; d) each Performance Right has the conditional right to acquire one Share; e) the Performance rights are issued for Nil consideration; f) the Performance Rights expire 3 months after the vesting date g) the Performance Rights are subject to the terms and conditions of the LTI Plan 50 | PAINCHEK LIMITED 37 CEO The issue of Performance Rights to Philip Daffas to the value of $600,000 over the years ended 30 June 2020, 2021 and 2022 with an annual limit of $200,000 for Philip Daffas or his nominee(s) to acquire one Share for each Performance Right held pursuant to the LTI Plan and as part of Philip Daffas’ remuneration. The Performance Rights issued for a year are issued at the VWAP of the Company’s ordinary shares calculated 5 days either side of and including the date of announcement of the company’s annual statutory results for the financial year preceding the financial year of the grant of the Performance Rights (Award Issue Price). a) 50% of the annual grant of $200,000 worth of Performance Rights will vest two years after the commencement of each vesting period on 1 October of the year of grant, subject to the Company’s Share price achieving a compounded annual increase in Share price of 15% p.a. (Award Target Price) from the relevant Award Issue Price and provided that Philip Daffas remains employed by the Company at that date (unless he is a Good Leaver as defined in the LTI Plan in which case he retains the relevant pro rata portion of the grant subject to the increase in Share price vesting condition); and b) 50% of the annual grant of $200,000 worth of Performance Rights will vest three years after the commencement of each vesting period on 1 October of the year of grant, subject to the Company’s Share price achieving a compounded annual increase in Share price of 15% p.a. from the relevant Award Issue Price and provided that Philip Daffas remains employed by the Company on that date (unless he is a Good Leaver as defined in the LTI Plan in which case he retains the relevant pro rata portion of the grant subject to the increase in Share price vesting condition). Fair value of performance rights granted The assessed fair value at the date of grant of performance shares issued is determined using a option pricing models that takes into account the exercise price, the underlying share price at the time of issue, the term of the performance share, the underlying share’s expected volatility, expected dividends and the risk free interest rate for the expected life of the instrument. The value of the performance shares was calculated using the inputs shown below: Non- executive directors The fair value at the date of grant of performance rights issued to the non-executive directors was calculated based on the share price at the date of issue ($0.29) (tranche 1), the value of the award specified in applicable period. years (tranche (tranche vesting 2022 2021 over and the 3) 2) Grant date Exercise price Vesting condition Vesting date Tranche 1 20 November 2019 Tranche 2 20 November 2019 Tranche 3 20 November 2019 Nil Refer above 30 June 2020 Nil Refer above 30 June 2021 $0.29 Nil Refer above 30 June 2022 $0.29 Share price at date of grant $0.29 Expected dividends Expiry day Life of instrument Fair value of instrument nil 30 September 2020 nil 30 September 2021 nil 30 September 2022 0.9 $108,259 1.9 $78,927 2.9 $78,301 The performance rights outstanding at the end of the year had a weighted average exercise price of nil and a weighted average remaining contractual life of 0.3 years (2021: 0.8 years) PAINCHEK LIMITED | 51 38 CEO Tranche 1A Tranche 1B Tranche 2A Tranche 2B Tranche 3A Tranche 3B Grant date Exercise price 20/11/19 Nil 20/11/19 Nil Refer above - 50% will vest after 3 years from grant date 20/11/19 Nil Refer above - 50% will vest after 3 years from grant date 20/11/19 Nil Refer above - 50% will vest after 4 years from grant date 20/11/19 Nil Refer above - 50% will vest after 4 years from grant date 20/11/19 Nil Refer above - 50% will vest after 5 years from grant date Refer above - 50% will vest after 2 years from grant date 5 September 2019 5 September 2019 5 September 2020 5 September 2020 5 September 2021 5 September 2021 Vesting conditions Share price calculation date Vest date 1 Oct 2021 1 Oct 2022 1 Oct 2022 1 Oct 2023 1 Oct 2023 1 Oct 2024 Share price at date of grant Expected dividends Expiry date $0.29 $0.29 $0.29 $0.29 $0.29 $0.29 Nil Nil Nil Nil Nil Nil 1 January 2022 1 January 2023 1 January 2023 1 January 2024 1 January 2024 1 January 2025 Life (years) 2.12 3.12 3.12 4.12 4.12 5.12 Fair value $0.1979 $0.1980 $0.1711 $0.1773 $0.1763 $0.1536 Volatility 100% 100% 100% 100% 100% 100% Risk free rate 0.80% 0.80% 0.80% 0.80% 0.80% 0.80% Pricing model Monte-Carlo Simulation Monte-Carlo Simulation Monte-Carlo Simulation Monte-Carlo Simulation Monte-Carlo Simulation Monte-Carlo Simulation The performance rights outstanding at the end of the year had a weighted average exercise price of nil and a weighted average remaining contractual life of 1.6 years (2021: 2 years) Summary of vesting dates Non-executive directors Remuneration for year ended 30 June Share price calculation date (estimated) Grant date Vesting date Likely date that Performance Rights will convert to shares 2020 2021 2022 5/09/2019 20/11/2019 30/06/2020 30/07/2020 5/09/2020 20/11/2019 30/06/2021 30/07/2021 5/09/2021 20/11/2019 30/06/2022 30/07/2022 Expiry Date of Performance Rights if not converted to shares 30/09/2020 30/09/2021 30/09/2022 52 | PAINCHEK LIMITED 39 CEO The Award Target Price will be calculated based on the 10 days VWAP leading up to and including the relevant vesting date. The following table summarises the above terms: Remuneration for year ended 30 June Share Price Calculation date (estimated) Grant date 2020 5/09/2019 20/11/2019 2021 5/09/2020 20/11/2019 2022 5/09/2021 20/11/2019 Vesting date assuming share price hurdle is met Likely date that Performance Rights will convert to shares Expiry Date of Performance Rights if not converted to shares 50% on 1/10/2021; 50% on 1/10/2022 50% on 30/10/2021; 50% on 30/10/2022 50% on 1/1/2022; 50% on 1/1/2023 50% on 1/10/2022; 50% on 1/10/2023 50% on 30/10/2022; 50% on 30/10/2023 50% on 1/1/2023; 50% on 1/1/2024 50% on 1/10/2023; 50% on 1/10/2024 50% on 30/10/2023; 50% on 30/10/2024 50% on 1/1/2024; 50% on 1/1/2025 Options Details of options issued, exercised and expired during the financial year are set out below: Expiry Date 3 October 2021 22 July 2022 9 November 2023 30 June 2022 31 March 2024 26 September 2024 23 March 2025 28 April 2025 25 August 2025 24 September 2025 1 March 2026 Tranches 3 4 5 6 7 8 9 10 11 12 13 Exercise Price $0.036 $0.073 $0.032 $0.250 $0.210 $0.110 $0..090 $0.095 $0.084 $0.075 $0.051 1 July 2021 Issued 5,000,000 3,000,000 4,000,000 14,241,379 3,000,000 3,000,000 1,000,000 500,000 5,000,000 7,000,000 - - - - - - - - - - - 12,500,000- 12,500,000 45,741,379 Movements Exercised (5,000,000) - - - - - - - - - - (5,000,000) Expired - - - (14,241,379) (3,000,000) - - - - - - (17,241,379) 30 June 2022 - 3,000,000 4,000,000 - - 3,000,000 1,000,000 500,000 5,000,000 7,000,000 12,500,000 36,000,000 The share options outstanding at the end of the year had a weighted average exercise price of $0.0666 (2021: $0.1647) and a weighted average remaining contractual life of 2.8 years (2021: 1.1 years) Fair value of options granted The assessed fair value at the date of grant of options issued is determined using a option pricing models that takes into account the exercise price, the underlying share price at the time of issue, the term of the option, the underlying share’s expected volatility, expected dividends and the risk free interest rate for the expected life of the instrument. PAINCHEK LIMITED | 53 40 3 1 3 1 3 1 1 2 0 2 p e S 1 1 2 0 2 p e S 1 1 2 0 2 p e S 1 5 0 . 0 $ 5 0 5 0 . . 0 $ 0 $ 2 1 1 1 0 1 9 2 1 2 1 r a M 4 2 1 1 1 1 b e F 6 2 0 1 0 1 t c O 8 2 9 9 t p e S 3 2 r r a a M M 1 2 0 4 4 2 2 2 1 2 0 2 1 2 0 2 8 0 . 0 $ b e 1 F 2 6 0 2 2 b e F 6 2 1 2 0 2 1 2 0 2 8 0 . 0 $ t c 0 O 2 8 0 2 2 t c O 8 2 0 2 0 2 0 2 0 2 0 1 . 0 $ t p e 0 S 2 0 3 2 2 t p e S 3 2 0 2 0 2 0 2 0 2 9 0 . 0 $ 1 e t o N 1 e t o N 1 e t o N 5 0 . 0 $ 2 e t o N 2 e t o N 2 e t o N 8 0 . 0 $ 1 e t o N 1 e t o N 1 e t o N 8 0 . 0 $ 1 e t o N 1 e t o N 1 e t o N 9 0 . 0 $ 1 e t o N 1 e t o N 1 e t o N 9 0 . 0 $ 1 e t o N 1 e t o N 1 e t o N 8 0 . 0 $ 1 e t o N 1 e t o N 1 e t o N 0 3 . 0 $ 5 0 5 0 . . 0 $ 0 $ r a M 1 r r a a 6 M M 2 0 1 1 2 6 2 0 2 6 2 0 2 5 . 4 t p e 5 S 2 0 4 2 2 t p e S 4 2 5 2 0 2 5 2 0 2 5 . 4 8 0 8 0 . . 0 $ 0 $ t p e S 4 2 g u 5 A 2 0 5 2 2 g u A 5 2 5 2 0 2 5 2 0 2 5 . 4 8 0 8 0 . . 0 $ 0 $ g u A 5 2 y y a a 5 M M 2 0 8 8 2 2 2 5 2 0 2 5 2 0 2 6 . 4 9 0 9 0 . . 0 $ 0 $ y a M 8 2 r r a a M M 5 2 0 3 3 2 2 2 5 2 0 2 5 2 0 2 5 . 4 9 0 9 0 . . 0 $ 0 $ r a M 3 2 8 0 8 0 . . 0 $ 0 $ p e S 6 2 p e 4 S 2 6 0 2 2 p e S 6 2 4 2 0 2 4 2 0 2 5 . 4 r r a a M M 4 2 0 1 1 2 3 3 4 2 0 2 4 2 0 2 5 . 4 0 3 0 3 . . 0 $ 0 $ r a M 1 3 5 5 . . 4 4 5 5 . . 4 4 5 5 . . 4 4 6 6 . . 4 4 5 5 . . 4 4 5 5 . . 4 4 5 5 . . 4 4 % % 0 0 0 0 1 1 % 0 0 1 l i n % % 0 0 0 0 1 1 % 0 0 1 l i n % % 0 0 0 0 1 1 % 0 0 1 l i n % % 0 0 0 0 1 1 % 0 0 1 l i n % % 0 0 0 0 1 1 % 0 0 1 l i n % % 0 0 0 0 1 1 % 0 0 1 l i n % % 0 0 0 0 1 1 % 0 0 1 l i n l i l i n n l i l i n n l i l i n n l i l i n n l i l i n n l i l i n n l i l i n n % 8 5 . 0 % 7 4 . 0 % 7 4 . 0 % 7 4 . 0 % 7 4 . 0 % 7 4 . 0 % 8 4 . 1 % % 8 8 5 5 . . 0 0 k c a B l l l s e o h c S s e o h c S k c a B s k e c l a o h B c S l l % % 7 7 4 4 . . 0 0 k c a B l l l s e o h c S s e o h c S k c a B s k e c l a o h B c S l l % % 7 7 4 4 . . 0 0 k c a B l l l s e o h c S s e o h c S k c a B s k e c l a o h B c S l l % % 7 7 4 4 . . 0 0 k c a B l l l s e o h c S s e o h c S k c a B s k e c l a o h B c S l l % % 7 7 4 4 . . 0 0 k c a B l l l s e o h c S s e o h c S k c a B s k e c l a o h B c S l l % % 7 7 4 4 . . 0 0 k c a B l l l s e o h c S s e o h c S k c a B s k e c l a o h B c S l l % % 8 8 4 4 . . 1 1 k c a B l l l s e o h c S s e o h c S k c a B s k e c l a o h B c S l l 3 0 3 0 . . 0 $ 0 $ 5 0 5 0 . . 0 $ 0 $ 5 0 5 0 . . 0 $ 0 $ 7 0 7 0 . . 0 $ 0 $ 7 0 7 0 . . 0 $ 0 $ 5 0 5 0 . . 0 $ 0 $ 3 2 3 2 . . 0 $ 0 $ 3 0 . 0 $ 5 0 . 0 $ 5 0 . 0 $ 7 0 . 0 $ 7 0 . 0 $ 5 0 . 0 $ 3 2 . 0 $ 8 0 8 0 . . 0 $ 0 $ 8 0 8 0 . . 0 $ 0 $ 0 1 0 1 . . 0 $ 0 $ 9 0 9 0 . . 0 $ 0 $ 1 1 1 1 . . 0 $ 0 $ 1 2 1 2 . . 0 $ 0 $ 8 8 8 7 7 7 6 6 6 : : l l w w o o e e b b n n w w o o h h s s 5 5 5 s t u p n s t u p n i i 4 4 4 3 3 3 0 0 2 2 0 0 2 2 r r a a M M 6 6 2 2 9 1 0 2 t p e S 0 3 9 1 0 2 t p e S 0 3 9 1 0 2 n u J 1 2 9 1 0 2 n u J 1 2 9 9 1 1 0 0 2 2 y y a a M M 9 9 8 1 0 2 n a J 2 2 8 1 0 2 n a J 2 2 0 2 0 2 r a M 6 2 9 1 0 2 t p e S 0 3 9 1 0 2 n u J 1 2 9 1 0 2 y a M 9 8 1 0 2 n a J 2 2 7 1 0 2 r p A 5 7 1 0 2 r p A 5 7 1 0 2 r p A 5 1 1 . 0 $ 1 2 . 0 $ 5 2 . 0 $ 3 0 . 0 $ 7 0 . 0 $ 4 0 . 0 $ : l w o e b n w o h s s t u p n i e h t g n i s u d e t a u c l a c l s a w s n o i t p o e h t l f o e u a v e h T e h t g n i s u d e t a u c l a c e h t g n i s u d e t a u c l a c l l s s a a w w s s n n o o i i t t p p o o e e h h t t 54 | PAINCHEK LIMITED 5 2 5 2 . . 0 $ 0 $ e e r F i i g n s i n h o c a i t t p t o a g n h c a t t a e e r F g n e e h r c F a t t a s n o i t p o s n o i t p o 9 1 . 0 $ 3 0 3 0 . . 0 $ 0 $ 7 0 7 0 . . 0 $ 0 $ 4 0 4 0 . . 0 $ 0 $ 1 e t o N 1 e t o N 1 e t o N 7 0 . 0 $ 1 e t o N 1 e t o N 1 e t o N 6 0 . 0 $ 1 e t o N 1 e t o N 1 e t o N 4 0 . 0 $ 9 1 9 1 . . 0 $ 0 $ n u J - 0 3 n u 2 J 2 - 0 0 3 2 n u J - 0 3 2 2 0 2 2 2 0 2 0 . 3 7 0 7 0 . . 0 $ 0 $ v o N 9 v o N 9 v o 3 N 2 0 9 2 3 2 0 2 3 2 0 2 5 . 4 6 0 6 0 . . 0 $ 0 $ - l u J 2 2 - l u 2 J 2 2 0 2 2 - l u J 2 2 2 2 0 2 2 2 0 2 5 . 4 4 0 4 0 . . 0 $ 0 $ t c O 3 t c O 3 t c 1 O 2 0 3 2 1 2 0 2 1 2 0 2 5 . 4 0 0 . . 3 3 A N A N A N A N A N A N A N A N A N A N A N A N 5 5 . . 4 4 5 5 . . 4 4 5 5 . . 4 4 % % 0 0 0 0 1 1 % 0 0 1 l i n % % 0 0 0 0 1 1 % 0 0 1 l i n % % 0 0 0 0 1 1 % 0 0 1 l i n l i l i n n l i l i n n l i l i n n % 8 4 . 1 % 5 9 . 1 % 5 9 . 1 % % 8 8 4 4 . . 1 1 k c a B l l l s e o h c S s e o h c S k c a B s k e c l a o h B c S l l % % 5 5 9 9 . . 1 1 k c a B l l l s e o h c S s e o h c S k c a B s k e c l a o h B c S l l % % 5 5 9 9 . . 1 1 k c a B l l l s e o h c S s e o h c S k c a B s k e c l a o h B c S l l e c i r p e s i c r e x E e c i r p e s i c r e x E e c i r p e s i c r e x E e t a d t n a r G e t a d t n a r G e t a d t n a r G s n o i t i d n o c g n i t s e V s n o i t i d n o c g n i t s e V s n o i t i d n o c g n i t s e V t n a r g t a e c i r p e r a h S t n a r g t a e c i r p e r a e h t a S d t n a r g t a e c i r p e r a h S e r a h s e r a h s e r a h y s t i g l i n t a i y l o l r v e d e n c i U r p g n i y l r e d n U y t i l i t a o v e c i r p y t i l i t a o v e c i r p l l s d n e d i v i d d e t c e p x E s d n e d i v i d d e t c e p x E s d n e d i v i d d e t c e p x E t s e r e t n i e e r f k s i R t s e r e t n t s e r e t n i i e e r f e e r f e t a r e t a r k s i R k e s i t R a r l l e e d d o o m m g g n n i i c c i i r r P P l r e p e u a v r i a F l e d o m g n i c i r P e t a d y r i p x E e t a d y r i p x E e h t f o e f i L s s t t n n g e e n m m i y u u l r r r e t t d s s n n n U e h t s t e n h e t m f o u e r t f s i L n i f o e f i L i i e t a d y r i p x E e t a d e t a d l l 2 2 f f 2 o o d d d n n e e n u u a a a 1 1 a a 1 v v e e e t t e e o o t h h o N N T T N o t j t c e b u s , s t n e m a t s n l i y l r e t r a u q n i l e c n a a b d n a t n e m y o p m e l s h t n o m 2 1 r e t f a t s e v e e y o p m e l e h t o t d e u s s i s n o i t p o e h t f o % 5 2 - s e h c n a r t l l a o o 2 t t j j l t t i c c t e e n u b b u u f o s s i i , , d s s e t t n n s o e e m m p s l l i a a d t t s s e n n b y y t o l l r r n e e n t t r r a a a c u u s q q e n n r a i i h e e s c c n n g a a n l l i a a y b b l r e d d d n n n a a u t t n n e e e h m m t t y y a o o h l l p p t m m n o e e i t s s c h h i t t r n n t s o o e m m r r 2 2 e 1 1 h t r r r e e u t t f f f a a a t t e s s e e v a v v h e e e e s n y y o o o l l i p p t p m m o e e e e e h h h t t t e o o r e t t h d d w e e u u 3 s s 1 s s i i d s s n n n a o o i i t t 0 p p 1 o o s e e e h h h t t c n f f o o a r % % t t 5 5 p 2 2 e c - - x s s e e e t h h n c c e n n m a a r r y t t o p a a m r r o o e f f e n n m o o i i i t t t i i d d n n u o o f c c d g g e n n u i i n t t s s i t e e n V V o - - c l l l l l l l 3 1 2 1 2 2 l i t n u l i t n u f o f o d e s o p s i d d e s o p s i d e b e b t o n n a c t o n n a c s e r a h s s e r a h s g n i y l r e d n u g n i y l r e d n u e h t e h t 1 1 0 1 9 t a h t t a h t 8 n o i t c i r t s e r n o i t c i r t s e r r e h t r u f r e h t r u f a a 7 e v a h e v a h s n o i t p o s n o i t p o e h t e h t 6 e e r r e e h h w w 3 3 1 1 d n a d n a 5 0 1 0 1 s e h c n a r t s e h c n a r t t p e c x e t p e c x e 4 l l t t n n e e m m y y 3 o o p p m m e e . e t e e a m m d i i t t t n a u u r f f g d d r e e e t u u f n n a i i s t t n n r a o o e c c y l l l l 1 2 0 2 p e S 1 r a M 4 2 1 2 0 2 b e F 6 2 1 2 0 2 t c O 8 2 0 2 0 2 t p e S 3 2 0 2 0 2 0 2 0 2 r a M 6 2 9 1 0 2 t p e S 0 3 9 1 0 2 n u J 1 2 9 1 0 2 y a M 9 8 1 0 2 n a J 2 2 7 1 0 2 r p A 5 . e t a d t n a r g r e t f a s r a e y . e t a d t n a r g r e t f a s r a e y e t a d t n a r G 0 0 0 0 . . 0 $ 0 $ . l 0 : w 0 o 0 $ e b n w o h s 6 s 0 t . u 0 p $ n 6 0 6 0 . . 0 $ 0 $ i 4 0 4 0 . . 0 $ 0 $ . e h t g n i 4 s 0 u 0 d $ e t a u c l a c l 3 0 3 0 . . 0 $ 0 $ . s 3 a 0 w 0 s $ n o i t p o e h r t e f p o t e n e u e u m a l a v u v r r i t e a s h F n T r e p e u a v r i a F l l i r o f n o i t i d 2 n t t d n n o n e e c a m m g 1 u u n r r e i t t t s s t s n n o e N V - i i 1 4 1 4 1 4 5 0 1 e t o N 2 e t o N 1 e t o N 1 e t o N 1 e t o N 1 e t o N 1 e t o N e e r F i g n h c a t t a s n o i t p o 1 e t o N 1 e t o N 1 e t o N s n o i t i d n o c g n i t s e V 5 . 4 5 . 4 5 . 4 6 . 4 5 . 4 5 . 4 5 . 4 r a M 1 6 2 0 2 t p e S 4 2 5 2 0 2 g u A 5 2 5 2 0 2 y a M 8 2 5 2 0 2 r a M 3 2 5 2 0 2 p e S 6 2 4 2 0 2 r a M 1 3 4 2 0 2 n u J - 0 3 2 2 0 2 v o N 9 3 2 0 2 5 . 4 - l u J 2 2 2 2 0 2 5 . 4 t c O 3 1 2 0 2 5 . 4 5 0 . 0 $ 8 0 . 0 $ 8 0 . 0 $ 9 0 . 0 $ 9 0 . 0 $ 8 0 . 0 $ 0 3 . 0 $ 9 1 . 0 $ 7 0 . 0 $ 6 0 . 0 $ 4 0 . 0 $ % 0 0 1 % 0 0 1 % 0 0 1 % 0 0 1 % 0 0 1 % 0 0 1 % 0 0 1 % 0 0 1 % 0 0 1 % 0 0 1 t n a r g t a e c i r p e r a h S e t a d e r a h s g n i y l r e d n U y t i l i t a l o v e c i r p e t a d y r i p x E s t n e m u r t s n i e h t f o e f i L t s e r e t n i e e r f k s i R e t a r l e d o m g n i c i r P r e p e u l a v r i a F t n e m u r t s n i . e t a d t n a r g r e t f a s r a e y 1 4 % 8 5 . 0 % 7 4 . 0 % 7 4 . 0 % 7 4 . 0 % 7 4 . 0 % 7 4 . 0 % 8 4 . 1 % 8 4 . 1 % 5 9 . 1 % 5 9 . 1 k c a l B s e l o h c S k c a l B s e l o h c S k c a l B s e l o h c S k c a l B s e l o h c S k c a l B s e l o h c S k c a l B s e l o h c S k c a l B s e l o h c S k c a l B s e l o h c S k c a l B s e l o h c S k c a l B s e l o h c S 3 0 . 0 $ 5 0 . 0 $ 5 0 . 0 $ 7 0 . 0 $ 7 0 . 0 $ 5 0 . 0 $ 3 2 . 0 $ 0 0 . 0 $ 6 0 . 0 $ 4 0 . 0 $ 3 0 . 0 $ l i n l i n l i n l i n l i n l i n l i n l i n l i n l i n s d n e d i v i d d e t c e p x E o t t c e j b u s , s t n e m l a t s n i y l r e t r a u q n i e c n a l a b d n a t n e m y o l p m e s h t n o m 2 1 r e t f a t s e v e e y o l p m e e h t o t d e u s s i s n o i t p o e h t f o % 5 2 - s e h c n a r t l l a r o f n o i t i d n o c g n i t s e V - 2 l i t n u f o d e s o p s i d e b t o n n a c s e r a h s g n i y l r e d n u e h t t a h t n o i t c i r t s e r r e h t r u f a e v a h s n o i t p o e h t e r e h w 3 1 d n a 0 1 s e h c n a r t t p e c x e t n e m y o l p m e e m i t l l u f d e u n i t n o c 0 . 3 A N A N A N A N . 0 $ 8 0 . 0 $ 8 0 . 0 $ 0 1 . 0 $ 9 0 . 0 $ 1 1 . 0 $ 1 2 . 0 $ 5 2 . 0 $ 3 0 . 0 $ 7 0 . 0 $ 4 0 . 0 $ e c i r p e s i c r e x E Expenses arising from share-based payment transactions Performance shares and options issued 549,191 709,720 2022 $ 2021 $ 42 PAINCHEK LIMITED | 55 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 2022 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 2022. This declaration is signed in accordance with a resolution of the Board of Directors. John Murray Chairman 31 August 2022 56 | PAINCHEK LIMITED 43 Independent auditor’s report Tel: +61 7 3237 5999 Fax: +61 7 3221 9227 Level 10, 12 Creek Street 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 2022, 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 2022 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 (including Independence Standards) (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. We 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. 44 PAINCHEK LIMITED | 57 51 Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in Key audit matters our audit of the financial report of the current period. These matters were addressed in the context of Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide our audit of the financial report of the current period. These matters were addressed in the context of a separate opinion on these matters. In addition to the matter described in the Material uncertainty our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide related to going concern section, we have determined the matters described below to be the key audit a separate opinion on these matters. In addition to the matter described in the Material uncertainty matters to be communicated in our report. related to going concern section, we have determined the matters described below to be the key audit Revenue Recognition and other income matters to be communicated in our report. Revenue Recognition and other income Key audit matter How the matter was addressed in our audit Key audit matter Recognition of Revenue and Other Income was identified as a key audit matter due to the Recognition of Revenue and Other Income was significance to the financial report and the identified as a key audit matter due to the complex nature of the agreements entered into significance to the financial report and the by the Group. complex nature of the agreements entered into The assessment of revenue recognition and by the Group. income required significant auditor effort and The assessment of revenue recognition and judgement. income required significant auditor effort and judgement. • • • How the matter was addressed in our audit We have performed the following procedures to address this risk in the financial report: We have performed the following procedures to • Reviewing the terms and conditions of the address this risk in the financial report: agreements entered into in the current and Reviewing the terms and conditions of the prior year to determine the relevant agreements entered into in the current and accounting standard to be applied to the prior year to determine the relevant various revenue and income streams. accounting standard to be applied to the Assessing the accounting policy adopted for various revenue and income streams. recognition of revenue and other income Assessing the accounting policy adopted for and assessing compliance with AASB 15 recognition of revenue and other income Revenue from Contracts with Customers and assessing compliance with AASB 15 (‘AASB 15’) or AASB 120 Accounting for Revenue from Contracts with Customers Government Grants and Disclosure of (‘AASB 15’) or AASB 120 Accounting for Government Assistance (‘AASB 120’). Government Grants and Disclosure of Verified government grant income to bank Government Assistance (‘AASB 120’). statements and ensured income is Verified government grant income to bank recognised in the correct period and in statements and ensured income is compliance with AASB 120. recognised in the correct period and in For a sample of transactions, vouching to compliance with AASB 120. supporting documentation such as invoices For a sample of transactions, vouching to and receipts and assessing compliance supporting documentation such as invoices against the accounting policy adopted and receipts and assessing compliance including the recognition of any contract against the accounting policy adopted liability or deferred income. including the recognition of any contract Assessed the adequacy of the disclosures in liability or deferred income. the financial statements. Assessed the adequacy of the disclosures in the financial statements. • • • • • • 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 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 firms. Liability limited by a scheme approved under Professional Standards Legislation. 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. 58 | PAINCHEK LIMITED 52 52 Other information The directors are responsible for the other information. The other information comprises the information contained in the Directors report for the year ended 30 June 2022, 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 Annual report, which is expected to be made available to us after that date. 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 and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. When we read the Annual Report, if we conclude that there is a material misstatement therein, we are required to communicate the matter to the directors and will request that it is corrected. If it is not corrected, we will seek to have the matter appropriately brought to the attention of users for whom our report is prepared. 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 at: https://www.auasb.gov.au/admin/file/content102/c3/ar1_2020.pdf This description forms part of our auditor’s report. 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. PAINCHEK LIMITED | 59 53 Report on the Remuneration Report Opinion on the Remuneration Report Report on the Remuneration Report We have audited the Remuneration Report included in pages 12 to 24 of the directors’ report for the Opinion on the Remuneration Report year ended 30 June 2022. We have audited the Remuneration Report included in pages 12 to 24 of the directors’ report for the In our opinion, the Remuneration Report of PainChek Limited, for the year ended 30 June 2022, year ended 30 June 2022. complies with section 300A of the Corporations Act 2001. In our opinion, the Remuneration Report of PainChek Limited, for the year ended 30 June 2022, Responsibilities complies with section 300A of the Corporations Act 2001. The directors of the Company are responsible for the preparation and presentation of the Responsibilities 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 The directors of the Company are responsible for the preparation and presentation of the Australian Auditing Standards. 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 BDO Audit Pty Ltd T R Mann Director T R Mann Director Brisbane, 31 August 2022 Brisbane, 31 August 2022 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. 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. 60 | PAINCHEK LIMITED 54 54 Additional Shareholder Information The following additional information is current as at 24 October 2022. CORPORATE GOVERNANCE: The Company’s Corporate Governance Statement www.painchek.com/corporate-governance. is available on the company’s website at SUBSTANTIAL SHAREHOLDER: Holder Name PETERS INVESTMENTS PTY LTD 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 Holding 118,650,000 % IC 9.141% Holders 88 443 739 2,177 1,060 4,507 Total Units 13,615 1,500,360 5,669,419 83,955,474 1,206,850,674 1,297,989,542 There are 77 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 PETERS INVESTMENTS PTY LTD HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED J&E CONSULTING PTY LTD DR KRESHNIK HOTI MR MUSTAFA ABDUL WAHED ATEE BNP PARIBAS NOMS PTY LTD MR PHILIP DAFFAS MR CRAIG ROBERT WILLIAMSON THORNBURY NOMINEES PTY LTD MR ALLAN GRAHAM JENZEN & MRS ELIZABETH JENZEN Balance as at 26-09-2021 118,650,000 67,710,244 38,003,125 37,717,411 37,003,125 29,143,853 21,524,560 19,255,683 15,802,500 % 0.000 0.120 0.440 6.470 92.980 100.000 % 9.141% 5.217% 2.928% 2.906% 2.851% 2.245% 1.658% 1.484% 1.217% 14,141,873 1.090% PAINCHEK LIMITED | 61 G & G CHILCOTT PTY LTD NANJOP PTY LTD MR ROBERT ANTHONY HEALY MS ELOISE KATHLEEN JENNINGS & MR ANDREW JOHN HOPKINS CITICORP NOMINEES PTY LIMITED CAPPER SUPERANNUATION PTY LTD MR ROBERT ANTHONY HEALY FLUE HOLDINGS PTY LTD MR SHANNON JOHN GORMAN MR ADAM STUART DAVEY Total Securities of Top 20 Holdings Total of Securities UNQUOTED EQUITY SECURITIES Number Number of Holders Class 13,927,169 12,914,735 12,857,143 12,129,791 11,675,234 11,674,331 11,000,000 10,758,457 10,463,516 10,175,170 1.073% 0.995% 0.991% 0.935% 0.899% 0.899% 0.847% 0.829% 0.806% 0.784% 516,527,920 39.794% 1,297,989,542 Holders of more than 20% 1 1 9 2 1 1 3 1 PCKAT Performance Rights Phillip Daffas Share options with an exercise price of $0.09 and an expiry date of 23 March 2025 Issued pursuant to ESOP Options exercisable at various prices expiring various dates Issued pursuant to ESOP Share options with an exercise price of $0.075 and an expiry date of 24 September 2025 Issued pursuant to ESOP Share options with an exercise price of $0.21 and an expiry date of 31 March 2024 Share options with an exercise price of $0.11 and an expiry date of 26 September 2024 Issued pursuant to ESOP Issued pursuant to ESOP Share options with an exercise price of $0.084 and an expiry date of 25 August 2025 Issued pursuant to ESOP Share options with an exercise price of $0.095 and an expiry date of 28 April 2025 Issued pursuant to ESOP 6,490,988 1,000,000 13,500,000 7,000,000 2,542,377 3,000,000 5,000,000 500,000 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. 62 | PAINCHEK LIMITED PainChek Limited (ASX: PCK) ABN 21 146 035 127 Suite 401, 35 Lime Street, Sydney, NSW, 2000 Registered Office: Suite 401, 35 Lime Street, Sydney, NSW, 2000 info@painchek.com WWW.PAINCHEK.COM 

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