Reliq Health Technologies
Annual Report 2013

Plain-text annual report

A n n u a l R e p o r t 2 0 1 3 Corporate Information ABN 96 006 762 492 Directors Dr Martin Blake Non-executive Chairman Ms Liza Dunne Managing Director Mr Simon Panton Non-executive Director Dr Timothy St Pierre Executive Director Dr Jason Loveridge Non-executive Director Company Secretary Mrs Naomi Haydari Securities exchange listing Resonance Health Limited shares are listed on the Australian Securities Exchange ASX Code: RHT Registered office and Principal place of business Ground Floor 278 Stirling Highway Claremont WA 6010 Telephone: +61 8 9286 5300 Facsimile: +61 8 9286 1179 Postal address PO Box 1135 Nedlands WA 6909 Website and e-mail address www.resonancehealth.com Email: info@ferriscan.com Auditors HLB Mann Judd Level 4 130 Stirling Street Perth WA 6000 Share registry Advanced Share Registry Ltd 150 Stirling Highway Nedlands WA 6009 Telephone: +61 8 9389 8033 Facsimile: +61 8 9389 7871 Bankers National Australia Bank Limited Solicitors Cole Legal Unit 9 569 Wellington Street Perth WA 6000 Our Business Resonance Health specialises in the development and delivery of medical imaging diagnostic tools and services. The Company’s MRI-based technologies are used by clinicians in the diagnosis and management of human disease and by pharmaceutical companies in their clinical trials. Resonance Health has demonstrated its expertise in liver imaging technologies with FerriScan®, now globally recognised as the gold standard in the measurement of liver iron overload. Further pipeline products for the measurement of fatty liver disease and liver fibrosis are in development. Table of Contents Chairman and Managing Director’s Report 2012/2013 Snapshot Year in Review Directors’ Report Corporate Governance Statement Auditor’s Independence Declaration Statement of Comprehensive Income Statement of Financial Position Statement of Changes in Equity Statement of Cash Flows Notes to the Financial Statements Directors’ Declaration Independent Auditor’s Report Additional information for listed public companies 2 3 4 7 14 19 20 21 22 23 24 48 49 51 1 Resonance Health Limited Annual Report 2013Chairman and Managing Director’s Report The financial year to 30 June 2013 has seen FerriScan® gained a second clearance provide an important tool to assist medical a considerable expansion in the global from the US FDA during the year as a practitioners in the diagnosis of fatty liver FerriScan® market and progress towards ‘companion diagnostic device’ for the safe and offers a non-invasive alternative to a bringing pipeline products to market. While and effective use of iron chelation therapy liver biopsy in clinical trials for therapies to the company has not reported a profit there in patients with non-transfusion-dependent address fatty liver disease. The FDA review have been significant achievements during thalassemia. FDA decisions are closely of HepaFat-Scan® is currently on hold as we the year which we believe will result in monitored by regulators and clinicians in compile some additional information they further growth in the use of our technology many countries and this approval provides have requested. and a profitable return to shareholders. further endorsement of the important role We have been pleased to see FerriScan® volumes increase consistently in our primary markets. The US and the UK markets FerriScan® plays in providing an accurate diagnostic for patients who have iron overload and require iron chelation therapy. An MRI test to assess liver fibrosis presents a large commercial opportunity for Resonance Health and its development continues to be a priority. During the year the Company have benefitted from our investment in We were pleased to sign several new multi- concluded a study in collaboration with local representation, returning growth rates year contracts for FerriScan® to be used in Pfizer and the Austin Hospital to further of over 30%. We believe there are still strong clinical trials. This included contracts with a develop its liver fibrosis test. While the opportunities yet to be exploited in these major European pharmaceutical company results were promising, the Company is now markets for FerriScan®. who has now entered the iron chelation conducting further analysis of the image In the US, patients with sickle cell disease represent the largest transfusional iron overload market with approximately 15,000 market and commenced clinical studies data collected with the aim of achieving a using FerriScan® as the primary measure of better degree of accuracy and sensitivity to their drug’s effectiveness. enable it to take the test to market. patients on chronic transfusion therapy. During the year we continued to invest Significantly, our loss and cash burn Currently, 3 out of the 10 National Institutes in projects focused on new product were less than the prior year as a result of Health (NIH) funded “Sickle Cell Centers of innovations and improvements to existing of sales growth, control of expenses and Excellence” offer FerriScan® to their patients products. A new version of the FerriScan® the prepayment of some contracts. The and only 5% of patients with Sickle Cell software was rolled out in January and has Board and Management remain strongly Disease are being evaluated annually with enabled the company to deliver substantially committed to the potential of the Company FerriScan®. In the UK, approximately 15% of more FerriScan® analyses at our central and its diagnostic tools to benefit patients the target population is currently having an facility without increasing staff numbers. and provide a strong financial return. annual FerriScan®. During the year we announced the peer reviewed publication of a large validation study of FerriScan involving 233 patients, providing strong differentiation to other products for assessing iron overload. It was also announced that three national US insurers have agreed to provide coverage for FerriScan® and several additional reviews are in progress with private insurers and state Medicaid offices. Reimbursement remains the main obstacle to growth for FerriScan® and these positive reimbursement decisions are a significant step towards more widespread insurance coverage. New product development is focused on MRI tests for accurately measuring liver fat and liver fibrosis. The aim is to ensure long- term growth primarily through projects aligned with our current expertise and addressing large target markets. Development has been completed for the Company’s HepaFat-Scan® product and a submission has been made to the FDA for marketing clearance of the test. HepaFat-Scan® is a software technology for the measurement of fat in the liver utilising MRI medical images and it has demonstrated excellent results compared Liza Dunne Managing Director with other published data. As the rate of Dr Martin Blake obesity and the associated health care costs Chairman continue to increase, HepaFat-Scan® will 2 2012/2013 Snapshot Annual Volume Growth 2012 14% 2011 14% 2010 29% 2009 2013 11% FerriScan® is now available at more than 160 centres in over 25 countries across six continents Total sales volumes increase of 11% compared to the prior year, with substantial growth in the two major markets of USA and UK, which achieved growth of 33% and 30% respectively. • Expansion in FerriScan® availability Over thirty new sites established in 2012/13 • New FDA marketing authorisation for FerriScan® FerriScan® now approved as an imaging companion diagnostic device in non- transfusion-dependent thalassaemia • Publication of a significant new FerriScan® paper Newly published data confirms FerriScan’s accuracy and reliability • US Insurance reimbursement for FerriScan® Insurance payers grant policy coverage for FerriScan® • Five new contracts for the use of FerriScan® in clinical trials The test-of-choice in clinical trials of drug therapies for iron overload • Increase in referrers 17% more doctors referred patients for a FerriScan® than in the previous year 3 Resonance Health Limited Annual Report 2013 Year in Review Canada 25% UK 30% USA 33% Chart illustrates sales volume increase in major markets in 2012/13 over previous year An important new publication in 2013 confirmed the accuracy of FerriScan® measurements across different MRI centres and scanners, unaffected by the age of the patient, the presence of liver fibrosis or inflammation. Multicenter Validation of Spin-Density Projection-Assisted R2-MRI for the Noninvasive Measurement of Liver Iron Concentration. St Pierre et al, Magnetic Resonance in Medicine, 2013. In January 2013, the U.S. Food and Drug Administration (FDA) authorised the marketing of FerriScan® as an imaging companion diagnostic in patients with FerriScan® - Forging ahead in iron overload imaging FerriScan® is the gold standard method- of-choice for the measurement of liver iron concentration in the management of patients with iron overload conditions and in clinical trials of pharmaceutical therapies. FerriScan® is provided as a centralised image analysis service and is Iron overload can arise from two main non-transfusion-dependent thalassemia causes. Primary iron overload occurs as a result (NTDT). This new FDA authorisation is of inherited genetic traits that cause in addition to the existing clearance of more iron to be absorbed from the diet FerriScan® for the measurement of liver than is required by the body. Secondary iron concentration across all clinical iron overload results from the regular conditions, gained in 2005. transfusion of red blood cells to treat diseases such as thalassaemia, sickle cell disease and myelodysplastic syndrome. The iron carried in the transfused red blood cells accumulates, causing overload. Non-transfusion-dependant thalassemia is estimated to affect at least three- quarters of a million people worldwide but the actual number of patients is likely to be much larger as the condition highly respected by clinicians around the Liver biopsy was previously the gold is often undiagnosed until serious world, providing accurate and reliable standard method of measuring liver iron symptoms develop. Blood tests such as information on which to base their concentration. However, it is an invasive, serum ferritin are poor indicators of iron treatment decisions. painful procedure that carries some loading in NTDT and FerriScan® can play a Iron Overload inherent risk and provides a result that critical role in the early diagnosis of these is not necessarily representative of iron patients. The accumulation of excess body iron is loading across the entire organ. For these a potentially life-threatening condition reasons, MRI has proved to be the ideal affecting a large number of people in non-invasive solution. different parts of the world. The liver is the primary site of excess iron storage. FerriScan® An assessment of liver iron concentration FerriScan® continues to be internationally provides the best indication of body iron recognised as the method against loading. which other MRI methods of liver iron therapy, and “…its [FerriScan®] use in Exjade clinical studies to select patients to manage for therapy, defined its role as an image companion diagnostic necessary for Exjade’s safe and effective use.” measurement are compared. Excerpt from FDA News Release, 23 January 2013 4 Resonance Health also offers a cardiac T2* During the year, five new multi-year image analysis service to measure cardiac contracts were signed. In addition to • American Society for Pediatric Hematology and Oncology (ASPHO) iron loading, provided in conjunction major pharmaceutical companies using annual meeting with a FerriScan® analysis. FerriScan® in clinical trials, the European Union has funded its use in a trial across a number of EU and non-EU countries. During the year, the company implemented a new image analysis workstation and update to the FerriScan® software which has delivered considerable improvements in efficiency. This has enabled the company to deliver growth without any additional staff. FerriScan® and cardiac T2* sales growth in 2012/13 • FerriScan® is now available at over 160 centres in more than 25 countries • Year on year total sales volume increase of 11% USA • 17% increase in numbers of referring clinicians over the previous year • Sales volumes increased 33% Over 30 new FerriScan® centres were • Revenue increased 35% established in 2012/13 expanding FerriScan® into new markets. For the first time, FerriScan® is now available to • 5 new US hospitals now using FerriScan® • American Gastroenterology Association annual meeting • American Society of Hematology annual meeting In addition, a number of prestigious U.S. institutions have issued Clinical Practice Guidelines supporting the use of FerriScan®, contributing to its growth in the market. While FerriScan’s market penetration in the management of thalassemia and sickle cell disease continues to expand, significant untapped potential still remains. Further opportunities also exist in other patient populations, such as myelodysplastic syndrome, bone marrow transplant and hereditary hemochromatosis. FerriScan® is currently used in 8 of the top 10 hospitals listed in patients outside clinical trials in countries Several U.S. insurers have agreed to the ‘Best Children’s Hospitals such as Vietnam, United Arab Emirates, Oman, Norway, Sweden and Cyprus. provide health insurance coverage for FerriScan®. A FerriScan® Medical Honor Roll’ in the U.S. This is a In addition, a number of prestigious U.S. institutions have issued Clinical Practice Guidelines supporting the use of FerriScan®, contributing to its growth in the market. This includes patients in developing countries who have not previously had access to FerriScan®. New contracts for the use of FerriScan® in clinical trials FerriScan® is the method-of-choice used by pharmaceutical companies in their clinical trials of iron chelation therapies. Policy was published in October 2012 significant achievement and by Medical Mutual of Ohio and several additional reviews are in progress with recognition of the important private insurers and State Medicaid role of FerriScan® in the offices. The company has also applied to the American Medical Association for a management of patients with unique Common Procedural Terminology iron overload. (CPT) reimbursement code for FerriScan®, an important step towards gaining more widespread reimbursement in the United States. The benefits of FerriScan® were presented at several meetings to further raise its profile in the U.S. clinical community. 5 Resonance Health Limited Annual Report 2013 Year in Review (CONT) UK and Ireland • Sales volumes increased 30% • Two new FerriScan® customers established during the year FerriScan® is currently used at 17 hospitals Pipeline HepaFat-Scan® HepaFat-Scan® is an MRI test developed by Resonance Health to provide an accurate assessment of a patient’s liver fat. Results of clinical studies demonstrate HepaFat-Scan’s superior sensitivity and overload, affecting millions of people throughout the world. Liver fibrosis can lead to liver cancer if left untreated - one of the top ten causes of death by disease in America. The current gold standard diagnostic for assessing liver fibrosis is a liver biopsy. in the UK and Ireland, representing about specificity to other published methods. 50% of the specialist thalassaemia and sickle cell disease hospitals. Only about 15% of the target patient population is currently having an annual FerriScan®. Considerable opportunity exists to grow this market and also expand the use of FerriScan® to patients with myelodysplastic syndromes and other A submission has been made to the U.S. Food and Drug Administration (FDA) for approval to market HepaFat-Scan®. The FDA has requested some additional information which is currently being compiled and is due for submission by the 3rd of November 2013. iron loading conditions. The first FerriScan Up to 30% of the U.S. population has fatty centre has now been established in liver disease, yet it is often asymptomatic In 2012 a study was completed to further Ireland for the diagnosis and monitoring and difficult to diagnose with current progress the Company’s research into of hereditary haemochromatosis. diagnostic tools. The early diagnosis the ability of MRI technology to detect Resonance Health participated in a number of conferences to present the benefits of FerriScan® as an accurate and necessary diagnostic tool for the management of patients with iron overload. • 6th Annual Sickle Cell and Thalassaemia Advanced Conference • European Haematology Association Conference • Global Iron Summit • Thalassaemia International Federation Conference Data on the positive impact of FerriScan® on patient outcomes was presented at the European Haematology Association Conference in June by a leading clinician in the field. The risk profile of a group of patients monitored by FerriScan® was shown to improve over and treatment of fatty liver disease can and measure liver fibrosis. This study significantly improve the outcome for was completed in collaboration with patients. Non-alcoholic fatty liver disease Pfizer and the Victorian Liver Transplant is considered the most common liver Unit at the Austin Hospital. Each patient disease in the western world and affects underwent MRI examinations of their liver approximately 50% of diabetic patients. and these parameters were compared A provisional patent application for HepaFat-Scan® has been lodged in Australia. HepaFat-Scan® represents an exciting commercial opportunity for the Company to deliver an accurate, non-invasive test for use in clinical trials to assess the efficacy of new therapies under development and to assist clinicians in diagnosing patients with fatty liver disease. Liver Fibrosis Diagnostic Resonance Health is continuing to explore ways to measure liver fibrosis with independent measurements of fibrosis from liver biopsy. Some of the MRI measurements showed good results in distinguishing between low and high stage liver fibrosis. However, the results were equivocal at distinguishing the other stages of liver fibrosis. Further work is in progress to utilise more advanced methods of analysing the MRI data. The initial results of this work have shown promise representing a further step towards achieving our objective of bringing to market an MRI test to accurately assess liver fibrosis. subsequent scans as a result of greater compliance to therapy motivated by an with MRI. accurate knowledge of their liver iron Liver fibrosis is primarily caused by fatty concentration. liver, viral hepatitis, excess alcohol or iron 6 Directors’ Report The Directors present their report on the consolidated entity, consisting of Resonance Health Limited and the entities it controlled, together with the annual financial report for the financial year ended 30 June 2013. In order to comply with the provisions of the Corporations Act, the directors report as follows: Directors The names, qualifications and experience of directors in office during the financial year and until the date of this report are as follows. Directors were in office for this entire period unless otherwise stated. Dr Martin Blake MBBS,FRANZCR, FAANMS, MBA, GAICD Ms Liza Dunne B.Bus, GDipAppFin, GAICD Position: Position: Mr Simon Panton Position: Director – Non-Executive Chairman – Independent and Non-Executive Managing Director – Executive (appointed 5 October 2009) (appointed as Director 4 October 2007 and (appointed 23 October 2008) as Chairman 16 December 2010) Experience: Experience: Mr Panton has been a strong supporter Experience: Ms Dunne joined Resonance Health in of the Company and the FerriScan® Dr Blake is a Radiologist and Nuclear October 2003 and has been actively technology over a number of years and is Physician and brings significant technical involved in all aspects of the business a major shareholder of Resonance Health. and industry experience to Resonance including business development, Mr Panton brings skills in business and Health. Dr Blake received FAANMS as a commercialisation of FerriScan®, marketing having run his own successful post nominal this year in recognition of developing alliances with pharmaceutical business. his Nuclear Medicine Specialist training industry partners and obtaining regulatory undertaken in 1994 and 1995. approval in various countries. Other current directorships: None He has been a Partner of Perth Radiological Ms Dunne has in depth experience in Clinic since 1997 and is currently the senior positions across industry. She Chairman of that Company. worked for IBM for eleven years in financial, Former directorships in last 3 years: None Dr Blake has an MBA from Melbourne University, is a Graduate of the Australian Institute of Company Directors and holds directorships on a number of private Company boards. Other current directorships: None Former directorships in last 3 years: None Special responsibilities: Chairman of the Audit Committee Chairman of the Remuneration Committee (from 16 December 2010) marketing and management positions and spent five years with KPMG Consulting Special responsibilities: Member of the Audit Committee Member of the Remuneration Committee working across a broad spectrum of industry and project areas that focused on improved business processes and implementation of new technology. Ms Dunne holds a Business Degree, a Graduate Diploma in Applied Finance and is a Graduate of the Australian Institute of Company Directors. Other current directorships: None Former directorships in last 3 years: None 7 Resonance Health Limited Annual Report 2013 Directors’ Report (CONT) Dr Timothy St Pierre B.Sc(Hons), PhD Position: Director – Executive (appointed 21 August 2006) Dr Jason Loveridge B.SC(Hons), PhD, FRSM Position: Director – Non-Executive (appointed 7 February 2013) Mrs Naomi Haydari B.Bus, B SSc, CPA Position: Company Secretary (appointed 19 March 2012) Experience: Experience: Experience: Dr St Pierre is widely published in the field Dr Loveridge FRSM has a PhD in Mrs Haydari has experience in managing of iron in medicine and biology and has Biochemistry, a B.Sc in Biochemistry and the financial obligations of ASX listed a reputation as a key opinion leader in Microbiology (Class II/I Honours) and is a corporations across a diverse range of the understanding of the fundamental Fellow of the Royal Society of Medicine. industries. Mrs Haydari holds a Business Degree (Accounting), a Social Science Degree, is a qualified CPA and is currently completing her MBA at Deakin University. properties of the iron deposits that occur Dr Loveridge has been working with in iron overload diseases. Dr St Pierre, a young, growth orientated businesses in Professor at The University of Western the biotech and medtech industries for Australia, led the team which developed over 20 years. As an active venture investor the FerriScan® technology. Dr St Pierre has he established a lengthy track record of strong links with international key opinion successful participation in European, US leaders in the field of iron overload diseases and Israeli based healthcare companies. and regularly participates in international Based in Europe he also has considerable research collaborations. Dr St Pierre won international experience at board level a Clunies Ross Award from the Australian and a particular interest in business Academy of Technological Sciences and development, mergers and acquisitions. Engineering for his work on non-invasive measurement of tissue iron deposits. Other current directorships: CEO Parvulus Suisse SA Other current directorships: CEO Genable Technologies Ltd. None Former directorships in last 3 years: None Special responsibilities: None Gerant WARAMBI Sarl JDS Biopharma Pty. Ltd Anaconda Pharma SAS Parvulus Medical SAS Former directorships in last 3 years: None Special responsibilities: Member of the Audit Committee Member of the Remuneration Committee 88 Resonance Health Limited Annual Report 2013 Interests in the Shares of the Company within two days. Resonance Health also provides a range of core lab The following relevant interests in shares of the Company were held by the directors during the period. There has been no change in services to the pharmaceutical industry to support their use of the Company’s technology in clinical trials. directors’ and executives shareholdings to the date of this report. Resonance Health is also developing imaging tools for the Number of fully paid ordinary shares Directors Dr M Blake Ms L Dunne Mr S Panton 6,224,677 3,153,385 65,960,972 Dr J Loveridge - Dr T St Pierre Total Executives 9,078,750 84,417,784 Mrs N Haydari - quantification of liver fat and liver fibrosis using MRI technology. These activities are focused on developing pipeline products that address unmet needs in the significant markets of fatty liver disease and viral hepatitis where an invasive liver biopsy is currently considered the gold standard. During the year the Board and management continued to evaluate opportunities external to the operations of the Company to enhance shareholder value. Financial Summary: Total - During the year sales volumes increased 11% over the previous Incentive Shares and Options The Company does not have an option plan. Accordingly, no options were issued as part of remuneration to directors or specified executives during the current or previous financial year. Dividends Paid or Recommended No dividend was paid or declared for the financial year. Principal Activities financial year. Growth rates of over 30% were achieved in both the UK and USA markets where the company achieved further success in gaining reimbursement for FerriScan® and expanding the customer base. Sales volumes increased by 45% in the Germany market over the period, from a lower base. Collaborative programs with pharmaceutical companies have also expanded availability of the FerriScan® services to new regional markets. Sales revenue for the year ended 30 June 2013 was $1,527,188 representing a decrease of 2% from the previous year’s result of $1,562,242. Revenue continued to be negatively impacted by the The Company’s business involves the development and strong Australian dollar with approximately 80% of the Company’s commercialisation of technologies and services for the quantitative revenue received in US dollars. Revenue associated with the routine analysis of radiological images in a regulated and quality controlled clinical use of FerriScan® to manage patients with iron overload environment. The Company’s core product is FerriScan®, a non-invasive liver continues to increase. Revenue associated with clinical trials reduced year on year as some contracts for services came to a conclusion. diagnostic technology used for the measurement of iron in the liver. Receipts from customers were $1,860,846 up 34% from the previous Review of Operations year’s result. The Company’s main product is FerriScan® which provides an accurate measurement of liver iron concentration. FerriScan® has gained regulatory clearance and approvals in key markets A net loss was recorded for the year of $204,481 compared to a net loss of $268,601 in the previous financial year. Overall expenditure decreased 7% to $2,070,540 from $2,222,314 in the previous year. including the USA, Europe, Canada and Australia. FerriScan® Resonance Health has cash at bank of $1,092,943 at the end of the gained an additional FDA clearance in January 2013 as a Liver financial year, compared to $1,180,174 in the previous financial year Iron Concentration imaging companion diagnostic for Deferasirox and has no debt. Net cash provided by operating activities was intended to aid in the identification and monitoring of non- $137,028. transfusion dependant thalassemia patients receiving therapy with deferasirox. Research and development expenditure during the year totalled $343,047. This comprised capitalised development costs of $205,337 FerriScan® is provided to the medical community as an image that are recognised as an intangible asset on the Statement of analysis service through the Company’s central image analysis Financial Position and expenditure of $34,677 amortisation expense, facility in Perth. Patient image data is sent to Resonance Health via a $56,212 recognised in Research and Development in the Statement secure web portal from radiology facilities in more than 20 countries of Comprehensive Income and $46,821 recognised in Employee and a liver iron concentration report is returned to our customers Benefits. PB 9 Resonance Health Limited Annual Report 2013 Resonance Health Limited Annual Report 2013 Directors’ Report (CONT) Research and development expenditure was primarily associated (other than the Company or related body corporate) that may arise with the development of an MRI-based liver fibrosis test and an from their position as directors of the Company and its controlled MRI-based liver fat test (HepaFat-Scan®). The HepaFat-Scan® product entities, except where the liability arises out of conduct involving a was submitted to the FDA for marketing clearance in 2012 and the lack of good faith. Company is currently compiling its response to some additional information requirements of the FDA due by November 2013. During the financial year the Company paid a premium of $13,000 (2012: $13,000) to insure the directors and secretaries of the The development of an MRI test to assess liver fibrosis continues Company and its controlled entities against any liability incurred to be a priority for the Company due to the significant commercial in the course of their duties to the extent permitted by the opportunity it presents. During the year the Company concluded Corporations Act 2001. It is not possible to apportion the premium a study in collaboration with Pfizer and the Austin Hospital to between amounts relating to the insurance against legal costs and further develop its liver fibrosis test in a cohort of 28 subjects with those relating to other liabilities. liver disease due to chronic hepatitis C infection. The results were promising but require a better degree of accuracy and sensitivity to REMUNERATION REPORT (AUDITED) take to market. The Company is now conducting further analysis of This report outlines the remuneration arrangements in place for the the data collected in this study to improve the product’s ability to key management personnel of Resonance Health Limited for the detect liver fibrosis. This work is currently in progress. financial year ended 30 June 2013. The information provided in this Operating Results The net loss of the consolidated entity for the financial year after tax was $204,481 (2012: $268,601). Significant Changes in State of Affairs There were no significant changes in the state of affairs of the Company during the financial year. remuneration report has been audited as required by Section 308 (3C) of the Corporations Act 2001. The remuneration report details the remuneration arrangements for key management personnel who are defined as those persons having authority and responsibility for planning, directing and controlling the major activities of the Company and the Group, directly or indirectly, including any director (whether executive or otherwise) of the parent Company and the Company Secretary. Significant Events After Balance Date Key Management Personnel No other matters or circumstances have arisen since the end of the (i) Directors financial year which significantly affected or may significantly affect the operations of the Company and the consolidated entity, the results of those operations, or the state of affairs in future financial years. Dr Martin Blake - Chairman Ms Liza Dunne - Managing Director Mr Simon Panton Dr Timothy St Pierre Likely Developments and Expected Results of Operations Dr Jason Loveridge (appointed 7th February 2013) Comments on expected results of the operations of the consolidated entity are included in this report under the review of operations. Disclosure of information regarding likely developments in the operations of the consolidated entity in future financial years and the expected results of those operations is likely to result (ii) Executives Mrs Naomi Haydari - Company Secretary Remuneration Policy The Board’s policy for determining the nature and amount of remuneration for Board members and senior executives of the in unreasonable prejudice to the Company. Accordingly, this consolidated entity is as follows: information has not been disclosed in this report. Environmental Legislation The consolidated entity’s operations are not subject to any significant environmental legislation. Indemnification and Insurance of Directors and Officers • set competitive remuneration packages to attract the highest calibre of employees in the context of prevailing market conditions, particular experience of the individual concerned and the overall performance of the Company; and • reward employees for performance that results in long-term growth in shareholder wealth, with the objective of ensuring The Company has agreed to indemnify all the directors and maximum stakeholder benefit from the retention of a high quality secretaries of the Company for any liabilities to another person board and executive team. 10 11 Resonance Health Limited Annual Report 2013 The Board of Resonance Health Limited believes the remuneration (i) Fixed Remuneration policy to be appropriate and effective in its ability to attract and retain the best executives and directors to run and manage the consolidated entity, as well as create goal congruence between directors, executives and shareholders. Fixed remuneration is reviewed annually. The process consists of a review of relevant comparative remuneration in the market and internally, and where appropriate, external advice on policies and practices. The Committee has access to external, independent Remuneration Committee advice where necessary. The Remuneration Committee of the Board of Directors of All executives (except Dr St Pierre) receive a base salary (which the Company is responsible for determining and reviewing is based on factors such as length of service and experience), compensation arrangements for directors and the executive team. superannuation and fringe benefits. The remuneration policy, setting the terms and conditions for the Executives receive a superannuation guarantee contribution executive directors and other senior executives, was developed by required by the government, which for the year was 9%, and do the remuneration committee and approved by the Board. not receive any other retirement benefits. The remuneration committee reviews executive packages annually (ii) Variable Remuneration by reference to the consolidated entity’s performance, executive performance and comparable information from industry sectors and other listed companies in similar industries. The assistance of an external consultant or remuneration surveys are used where necessary. Remuneration Structure All bonuses and incentives are linked to predetermined performance criteria. The Board may, however, exercise its discretion in relation to approving incentives and bonuses, and can recommend changes to the committee’s recommendations. Any changes must be justified by reference to measurable performance criteria. All remuneration paid to directors and executives is valued at the In accordance with best practice corporate governance, the cost to the Company and expensed or capitalised. Securities given structure of non-executive director and executive remuneration is to directors and executives are valued as the difference between the separate and distinct. market price of those shares and the amount paid by the director or Non-executive Director Remuneration The Board seeks to set aggregate remuneration at a level that executive. There are currently no securities on issue. Executive Officer’s Employment Agreements provides the Company with the ability to attract and retain directors Ms Dunne was appointed to the role of Managing Director of of the highest calibre, whilst incurring a cost that is acceptable to Resonance Health Ltd on 23 October 2008. Her employment shareholders. Non-executive directors’ fees not exceeding an aggregate of $250,000 per annum have been approved by the Company in a general meeting. The amount of aggregate remuneration sought to be approved by shareholders and the manner in which it is apportioned amongst directors is reviewed annually. The Board considers fees paid to non- executive directors of comparable companies when undertaking the annual review process. Each of the non-executive directors receives a fixed fee for their services as directors. There is no direct link between remuneration agreement provides for a salary of $272,500 pa inclusive of superannuation and the provision of three months notice for termination or resignation without cause. Mrs Haydari was appointed to the role of Company Secretary of Resonance Health Ltd on 19 March 2012. Her employment agreement provides for an equivalent full time salary of $136,250 pa inclusive of superannuation for 22.5 hours per week and the provision of three months notice for termination or resignation without cause. Consultancy Services Agreement for Executive Director Dr Tim St Pierre paid to any of the directors and corporate performance. The Company has an agreement with The University of Western Executive Remuneration Remuneration consists of fixed remuneration and variable remuneration. Australia (UWA) for consulting services provided by Dr St Pierre. Under this agreement consulting services provided for duties of Chief Scientific Officer totalling $94,544 (2012: $108,844) and no fixed fee for his services as a non-executive director (2012: $10,000) were incurred during the financial year. These amounts are included in Dr Tim St Pierre’s remuneration disclosed in the following table. 10 11 Resonance Health Limited Annual Report 2013Directors’ Report (CONT) Details of Remuneration for Year Ended 30 June 2013 The remuneration for each key management personnel of the consolidated entity during the year was as follows: Remuneration of directors and executives Resonance Health Limited Annual Report 2013 Short-term employee benefits Salary & Fees $ Post employment benefits Superannuation Contributions $ Non-Executive Directors’ remuneration Dr M Blake Mr S Panton 55,046 33,639 12,500 Dr J Loveridge Total 101,185 Executive Directors’ remuneration 250,000 Ms L Dunne Dr T St Pierre 1 94,544 Total Other Executives’ remuneration Mrs N Haydari 2 Total 75,000 75,000 344,544 4,954 3,028 - 7,982 22,500 - 22,500 6,750 6,750 Equity Total Shares $ - - - - - - - - - $ 60,000 36,667 12,500 109,167 272,500 94,544 367,044 81,750 81,750 Performance Related % - - - - - - - - - 1 Dr St Pierre’s remuneration represents directors’ fees earned during the financial year and consulting fees for duties as Chief Scientific Officer paid to The University of Western Australia in full. Details of Remuneration for Year Ended 30 June 2012 The remuneration for each key management personnel of the consolidated entity during the year was as follows: Remuneration of directors and executives Short-term employee benefits Salary & Fees $ Post employment benefits Superannuation Contributions $ Non-Executive Directors’ remuneration Dr M Blake Dr S Panton 55,046 21,407 Total 76,453 Executive Directors’ remuneration 215,385 Ms L Dunne Dr T St Pierre 1 Total Other Executives’ remuneration Mrs N Haydari 2 Mr C McDonald 3 Total 20,962 61,455 118,884 334,229 82,417 4,954 1,927 6,881 19,385 - 19,385 1,887 5,507 7,394 Equity Total Shares $ - - - - - - - - - $ 60,000 23,334 83,334 234,770 118,884 353,614 22,849 66,962 89,811 Performance Related % - - - - - - - - 1 Dr St Pierre’s remuneration represents directors’ fees earned during the financial year and consulting fees for duties as Chief Scientific Officer paid to The University of Western Australia in full. 2 Mrs Naomi Haydari was appointed Company Secretary on 19 March 2012. 3 Mr Colin McDonald resigned as Company Secretary on 19 march 2012. 12 13 Resonance Health Limited Annual Report 2013 Meetings of Directors The number of meetings of the Company’s Board of directors and each Board committee held during the year ended 30 June 2013, and the numbers of meetings attended by each director were: Director Meetings Audit Committee Meetings Remuneration Committee Meetings Number eligible Number Number eligible Number Number eligible Number To attend attended To attend attended To attend attended Dr M Blake Ms L Dunne Mr S Panton Dr T St Pierre Dr J Loveridge 6 6 6 6 3 Corporate Governance 6 6 5 6 3 3 3 3 3 1 3 3 3 2 1 3 3 3 3 1 3 3 3 2 1 In recognising the need for the highest standards of corporate behaviour and accountability, the directors of Resonance Health Limited support and adhere to the principles of corporate governance. The Company’s corporate governance statement is contained in the following section of this annual report. Proceedings on Behalf of Company No person has applied for leave of Court to bring proceedings on behalf of the Company or intervene in any proceedings to which the Company is a party for the purpose of taking responsibility on behalf of the Company for all or any part of those proceedings. The Company was not a party to any such proceedings during the year. Auditor Independence and Non-audit Services Section 307C of the Corporations Act 2001 requires our auditors, HLB Mann Judd, to provide the directors of the Company with an Independence Declaration in relation to the audit of the annual report. This Independence Declaration is set out on page 19 and forms part of this directors’ report for the year ended 30 June 2013. Non-audit Services Details of amounts paid or payable to the auditor for non-audit services provided during the year by the auditor are outlined in Note 22 to the financial statements. The directors are satisfied that the provision of non-audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The directors are of the opinion that the services do not compromise the auditor’s independence as all non-audit services have been reviewed to ensure that they do not impact the integrity and objectivity of the auditor and none of the services undermine the general principles relating to auditor independence as set out in Code of Conduct APES 110 Code of Ethics for Professional Accountants issued by the Accounting Professional & Ethical Standards Board. This report is made in accordance with a resolution of the Board of Directors. 12 13 Dr Martin Blake Chairman Perth, Western Australia Dated this 26 September 2013 Resonance Health Limited Annual Report 2013Resonance Health Limited Annual Report 2013 Corporate Governance Statement Resonance Health Limited is committed to protecting and enhancing shareholder value and adopting best practice governance policies and practices. This Corporate Governance Statement outlines the main Corporate Governance practices that were in place throughout the financial year, which comply with the Australian Securities Exchange (‘ASX’) Corporate Governance Council published guidelines as well as its corporate governance principles and recommendations unless otherwise stated. Where a recommendation has not been followed, this is clearly stated along with an explanation for the departure. Principle 1 Lay solid foundations for management and oversight The Board is the governing body of the Company. The Board and the Company act within a statutory framework – principally the Corporations Act and also the Constitution of the Company. Subject to this statutory framework, the Board has the authority and the responsibility to perform the functions, determine the policies and control the affairs of Resonance Health Limited. The Board must ensure that Resonance Health Limited acts in accordance with prudent commercial principles, and satisfies shareholders – consistent with maximising the Company’s long term value. The Company has established the functions reserved to the Board. The Board Charter summarises the role, responsibilities, policies and processes of the Board of Resonance Health Limited and comments on the Board’s approach to corporate governance. The primary responsibilities of the Board include: • Charting the direction, strategies and financial objectives of the Company and ensuring appropriate resources are available • Monitoring the implementation of those policies and strategies and the achievement of those financial objectives • Monitoring compliance with control and accountability systems, regulatory requirements and ethical standards • Ensuring the preparation of accurate financial reports and statements • Reporting to shareholders and the investment community on the performance and state of the Company • Appointing and monitoring the performance of senior executives • Establishing proper succession plans for management of the Company The Company has established the functions delegated to senior executives. The Board Charter summarises the role and responsibilities of the Managing Director and the Company Secretary. The Board delegates responsibility for day to day management of the Company to the Managing Director. However, the Managing Director must consult the Board on matters that are sensitive, extraordinary or of a strategic nature. The Company Secretary supports the effectiveness of the Board. Separate functions of the Board and management existed and were practised throughout the year. ASX Corporate Governance Council Principle 1 recommendation 1.2 requires companies to disclose the process for evaluating the performance of senior executives. The performance of executives is measured against criteria agreed annually with each executive and is based predominantly on the achievement of agreed milestones. Details of matters reserved to the Board and delegated to senior executives are outlined in the Board Charter. A copy of the Board Charter is publically available on the Company’s website. The Board complied with the ASX Corporate Governance Council Principle 1 at all times during the year except as noted above. Principle 2 Structure the Board to add value The composition of the Board has been determined on the basis of providing the Company with the benefit of a broad range of technical, commercial and financial skills, combined with an appropriate level of experience at a senior corporate level. Details of each Director’s skills and experience are set out in the Directors’ report. 14 15 Resonance Health Limited Annual Report 2013 The ASX guidelines recommend that a listed Company should have a majority of Directors who are independent. The Board did not comply with the ASX Corporate Governance Council Principle 2 Recommendation 2.1 throughout the year. The Board did not have a majority of independent Directors at all times during the financial year. A Director is considered independent when the Director does not have any relationship with the Company that would be considered to affect the independent status as outlined in the ASX Corporate Governance Council Principle 2 Recommendation 2.1. In the context of director independence, ‘materiality’ is considered from both the Company and individual director perspective. The determination of materiality requires consideration of both quantitative and qualitative elements. An item is presumed to be quantitatively immaterial if it is equal or less than 5% of the appropriate base amount. It is presumed to be material (unless there is evidence to the contrary) if it is equal or greater than 10% of the appropriate base amount. Qualitative factors considered include whether a relationship is strategically important, the competitive landscape, the nature of the relationship and the contractual or other arrangements governing it and other factors which point at the actual ability in question to shape the direction of the Company’s loyalty. Directors during the financial year were: • Dr Martin Blake – Independent – Chairman • Ms Liza Dunne – Executive – Not independent – Managing Director • Mr Simon Panton – Not independent – substantial shareholder • Dr Tim St Pierre – Executive – Not independent – Chief Scientific Officer • Dr Jason Loveridge - Independent- Non-executive Director A description of the skills and experience of each director and their period of office is disclosed in the Directors’ Report. The ASX Corporate Governance Council Principle 2 Recommendation 2.2 recommends that the Chairman should be an independent director. The role of Chairman was performed by an independent director at all times during the financial year. The ASX Corporate Governance Council Principle 2 Recommendation 2.3 recommends that the roles of Chairman and Managing Director be exercised by different individuals. The Company complied with this recommendation at all times during the financial year. The roles of Chairman and Managing Director are exercised by different individuals, providing for clear division of responsibility at the head of the Company. Their roles and responsibilities, and the division of responsibilities between them, are clearly understood and there is regular communication between them. Directors are subject to re-election by rotation at annual general meetings as stipulated in the Corporations Act and the Company’s Constitution. There is no maximum term for non-executive director appointments. Newly elected Directors must seek re-election at the first general meeting of shareholders following their appointment. The remuneration of the Directors is determined by the Nomination and Remuneration Committee. Further information and the components of remuneration for Directors are set out in the Directors’ Report. ASX Corporate Governance Council Principle 2.4 recommends that the Nomination Committee should consist of a majority of independent Directors, be chaired by an independent Director and have at least three members. The members of the Nomination and Remuneration Committee during the financial year were: • Dr Martin Blake – (Chairman) – Independent • Mr Simon Panton – Not Independent • Dr Jason Loveridge-Independent (appointed 20th June 2013) Due to having only two Non- executive Directors for the majority of the year, the two are members of the Nomination and Remuneration Committee. The number of meetings attended by each member of the Nomination and Remuneration Committee are detailed in the Directors’ Report. ASX Corporate Governance Council Principle 2.5 recommends that the performance of the Board should be reviewed regularly against appropriate measures. The Company does not have a formal process for evaluating the performance of the Board, its Committees or individual Directors. Accordingly, there was no formal evaluation of the Board, its Committees or individuals Directors during the reporting period. 14 15 Resonance Health Limited Annual Report 2013 Resonance Health Limited Annual Report 2013 Corporate Governance Statement (CONT) The Company has a procedure in place for Directors to take independent professional advice at the expense of the Company. Prior to the appointment of a new director, the Nomination and Remuneration Committee assesses the skills represented on the Board by the non-executive Directors and determines whether those skills meet the skills identified as required. The Committee will then implement a process to identify suitable candidates for appointment. The Committee makes recommendations to the Board on candidates it considers appropriate for appointment. Induction procedures are in place to ensure new Directors are able to participate fully and actively in Board decision-making at the earliest opportunity. Directors are encouraged to engage in continuing education and are encouraged to update and enhance their skills and knowledge. Directors meet regularly to discuss the performance of the Company and to attend to regulatory requirements. The Company Secretary distributes information before each Board meeting to enable Directors to discharge their duties effectively. The Company’s Constitution requires a director of the Company to not hold office without re-election past the third annual general meeting following the director’s appointment or three years, whichever is longer. The Company discloses its Nomination and Remuneration Committee Charter on the Company’s website. The Board complied with the ASX Corporate Governance Council Principle 2 at all times during the year except as noted above. Principle 3 Promote ethical and responsible decision-making The Board places great emphasis on ethics and integrity in all its business dealings. In regards to Principle 3.1 the Board considers the business practices and ethics exercised by individual Board members and key executives to be of the highest standards. The Company has a code of conduct as to the: • practices necessary to maintain confidence in the Company’s integrity; • practices necessary to take into account their legal obligations and the expectations of shareholders; and • responsibility and accountability of individuals for reporting and investigating reports of unethical practices. These practices are outlined in the Company’s Board Charter, Communication Policy, Continuous Disclosure Charter, Share Trading Policy, Audit and Risk Charter and Nomination and Remuneration Charter. These documents are disclosed on the Company’s website. Trading in the Company’s shares The Company’s policy restricts Directors and employees from acting on material information until it has been released to the market and adequate time has been given for this to be reflected in the securities’ prices. Statutory provisions of the Corporations Act dealing with insider trading have been strictly complied with. The Company’s Share Trading Policy is disclosed on the Company’s website. Diversity Policy The Board currently does not have a Diversity Policy. Gender Diversity is demonstrated within the Company as follows: Resonance Health currently has one female member of a five member board. The Managing Director, CFO/Company Secretary and three Managers of the Company are women. Currently, Resonance Health has women hold 20% of total Board membership. Additionally 50% of the all current employees are women and 28% of all Management/Executive roles are filled by women. The Board currently has no measurable objectives on achieving greater gender diversity within the Company. The Board complied with the ASX Corporate Governance Council Principle 3 Recommendations at all times during the year. 16 17 Resonance Health Limited Annual Report 2013 Principle 4 Safeguard integrity in financial reporting The Board has established an Audit and Risk Committee that operates in accordance with the Company’s Audit and Risk Charter. It is the Board’s responsibility to ensure that an effective internal control framework exists within the entity. This includes internal controls to deal with both the effectiveness and efficiency of significant business processes, including the safeguarding of assets, the maintenance of proper accounting records, and the reliability of financial information. The Board has delegated responsibility for the establishment and framework of internal controls and ethical standards for the management of the consolidated entity to the Audit Committee. The Committee also provides the Board with additional assurance regarding the reliability of financial information for inclusion in the financial reports. All members of the Audit Committee are non-executive Directors. ASX Corporate Governance Council Principle 4.2 recommends that the Audit Committee should consist only of non-executive with a majority of independent Directors, be chaired by an independent director who is not chair of the Board and have at least three members. The members of the Audit and Risk Committee during the financial year were: • Dr Martin Blake (Chairman) - Independent • Mr Simon Panton – Not independent • Dr Jason Loveridge - Independent (appointed 20th June 2013) The qualifications of each member of the Audit and Risk Committee and the number of meetings attended are detailed in the Directors’ Report. The Audit and Risk Committee generally invites the Managing Director, Company Secretary, and external auditors to attend meetings. The Company discloses its Audit and Risk Committee Charter on the Company’s website. The Company’s external auditors have a policy for the rotation of audit engagement partners. A new Audit Partner was assigned to the Company with effect for the 2009 financial year in line with this policy. The Board has not complied with the ASX Corporate Governance Council Principle 4 Recommendations at all times during the year. Due to there being only two non-executive directors on the Board from 16 December 2010, it was not possible to have three members on the committees at all times. The Chairman of the Board is also Chairman of the committee which is not in accordance with Principle 4.2, and this is also a result of having only two non-executive directors. Principle 5 Make timely and balanced disclosure The Company complies with all disclosure requirements to ensure that Resonance Health manages the disclosure of price sensitive information effectively and in accordance with the requirements as set out by regulatory bodies. The Managing Director and Company Secretary are authorised to communicate with shareholders and the market in relation to Board approved disclosures. The Company has a written policy designed to ensure compliance with ASX Listing Rule disclosures and accountability at a senior executive level for that compliance. The details of this policy are outlined in the Company’s Continuous Disclosure Charter which is displayed on the Company’s website. All announcements made to the ASX are placed on the Company’s web site immediately after public release. The Board complied with the ASX Corporate Governance Council Principle 5 Recommendations at all times during the year. Principle 6 Respect the rights of shareholders The Company has a Communications Policy that details the Company’s strategy to communicate with shareholders and actively promote shareholder involvement in the Company. It aims to continue to increase and improve the information available to shareholders on its website. All Company announcements, presentations to analysts and other significant briefings are posted on the Company’s website after release to the Australian Securities Exchange. The Board complied with the ASX Corporate Governance Council Principle 6 Recommendations at all times during the year. 16 17 Resonance Health Limited Annual Report 2013 Resonance Health Limited Annual Report 2013 Corporate Governance Statement (CONT) Principle 7 Recognise and manage risk The Board oversees the establishment, implementation and ongoing review of the Company’s risk management and internal control system. Recommendation 7.1 requires that the Company has a formal risk management policy and internal compliance and control system. Resonance Health Limited, through its operating subsidiary Resonance Health Analysis Services Pty Ltd, maintained a Quality Management System (QMS) to international standards ISO13485:2003 for the whole financial year which encompass formal risk analysis processes. Recommendation 7.2 requires implementation and review of the Company’s risk management and internal control system. The Company did not have a separately established risk committee. However, the duties and responsibilities typically delegated to such a committee are expressly included in the role of the Audit and Risk Committee and the main Board. The Board does not believe that any marked efficiencies or enhancements would be achieved by the creation of a separate risk committee. In addition, the QMS requires the appointment of a Management Representative that reports directly to the Board of Directors. The Company also has in place classes of insurance at levels which, in the reasonable opinion of the Directors, are appropriate for its size and operations. Management has reported the effectiveness of the Company’s management of its material business risks to the Board during the reporting period. In accordance with Recommendation 7.3 the Managing Director and the Chief Financial Officer provide written statements at each reporting period regarding the integrity of the financial statements and the Company’s risk management and internal compliance and control systems. The Company’s Audit and Risk Charter is displayed on the Company’s website. The Company’s external auditor is invited to attend the annual general meeting and questions from shareholders regarding the conduct of the audit and the preparation and content of the auditor’s report are welcomed. The Company’s Communication Policy is displayed on the Company’s website. The Board complied with the ASX Corporate Governance Council Principle 7 Recommendations at all times during the year. Principle 8 Remunerate fairly and responsibly The Board has a Nomination and Remuneration Committee. Members of the Committee are outlined under Principle 2 above. ASX Corporate Governance Council Principles recommend that the Remuneration Committee should consist of a majority of independent Directors, be chaired by an Independent Director and have at least three members. Ms Dunne, an Executive Director, resigned from the Nomination and Remuneration Committee on 24 March 2010. From this date the Company has not complied with this recommendation due to the small size of the Board. Dr Jason Loveridge was appointed to the Remuneration committee on 20 June 2013 as an independent Director. The Nomination and Remuneration Committee regularly review the level and composition of remuneration of non-executive Directors, executive Directors and senior management with regards to industry best practice, Company and individual performance. During Financial year ended 30 June 2013 the Nomination and Remuneration Committee met three times. The Company pays fees to The University of Western Australia for services provided by Dr St Pierre who is an executive Director of the Company. All executive employees receive a base salary and superannuation. The Company does not have a share or option incentive plan. Accordingly, executive employees do not receive any equity based remuneration unless specifically approved on a case by case basis at a general meeting. The members of the Nomination and Remuneration Committee are outlined in Principle 2. Their attendance at Nomination and Remuneration Committee meetings is detailed in the Directors’ Report. Director disclosure requirements are detailed in the notes to the financial statements. The Nomination and Remuneration Committee Charter is displayed on the Company’s website. The Board complied with the ASX Corporate Governance Council Principle 8 Recommendations at all times during the year except as detailed above. 18 19 Resonance Health Limited Annual Report 2013 AUDITOR’S INDEPENDENCE DECLARATION As lead auditor for the audit of the consolidated financial report of Resonance Health Limited for the year ended 30 June 2013, I declare that to the best of my knowledge and belief, there have been no contraventions of: a) the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and b) any applicable code of professional conduct in relation to the audit. This declaration is in respect of Resonance Health Limited and the entities it controlled during the year. This declaration is in respect of Resonance Health Limited. Perth, Western Australia 26 September 2013 N G NEILL Partner HLB Mann Judd (WA Partnership) ABN 22 193 232 714 Level 4, 130 Stirling Street Perth WA 6000. PO Box 8124 Perth BC 6849 Telephone +61 (08) 9227 7500. Fax +61 (08) 9227 7533. Email: hlb@hlbwa.com.au Website: http://www.hlb.com.au Liability limited by a scheme approved under Professional Standards Legislation HLB Mann Judd (WA Partnership) is a member of International, a worldwide organisation of accounting firms and business advisers. 18 19 Resonance Health Limited Annual Report 2013 Resonance Health Limited Annual Report 2013 Notes 2(a) 2(b) Consolidated 2013 $ 1,527,188 181,959 2012 $ 1,562,242 226,377 1,709,147 1,788,619 (1,376,376) (1,444,930) (61,068) (56,212) (18,475) (34,677) (218,641) (146,186) 156,584 (315,488) (54,098) (80,408) (20,298) - (198,952) (136,659) 57,042 (344,011) 3 (361,392) (433,695) 156,911 165,094 (204,481) (268,601) Statement of Comprehensive Income FOR THE yEAR ENDED 30 JUNE 2013 Sales revenue Other income Revenue Employee benefits expense Consulting and professional services Research and development Depreciation expense Amortisation expense Marketing and travel Statutory and compliance Foreign exchange gain Other expenses Loss before income tax benefit Income tax benefit Net loss for the year attributable to owners of the parent Other comprehensive income Items that may be reclassified to profit and loss Exchange differences arising on translation of foreign operations Exchange differences arising on translation of foreign loan Other comprehensive loss for the year, net of tax Total comprehensive loss for the year attributable to owners of the parent 5 (59,079) (61,495) (120,574) (325,055) (91,544) 30,599 (60,945) (329,546) Basic (loss) per share (cents per share) (0.1) (0.1) The accompanying notes form part of these financial statements. 20 21 Statement of Financial Position AS AT 30 JUNE 2013 Resonance Health Limited Annual Report 2013 Note Consolidated 2013 $ 2012 $ Current Assets Cash and cash equivalents Trade and other receivables Other assets Total Current Assets Non-Current Assets Plant and equipment Intangible assets Other financial assets Other assets Total Non-Current Assets Total Assets Current Liabilities Trade and other payables Current tax liability Other liabilities Total Current Liabilities Non-Current Liabilities Provisions Total Non-Current Liabilities Total Liabilities Net Assets Equity Issued capital Reserves Accumulated losses Total Equity 7 8 9 10 11 12 9 13 3 14 15 1,092,943 1,180,174 388,631 24,524 756,834 26,970 1,506,098 1,963,978 44,302 37,152 1,462,204 1,291,544 3,004 59,099 3,004 58,391 1,568,609 1,390,091 3,074,707 3,354,069 407,985 31,734 313,805 753,524 390,051 - 329,514 719,565 80,222 80,222 68,488 68,488 833,746 788,053 2,240,961 2,566,016 16(a) 67,534,039 67,534,039 (105,644) 14,930 (65,187,434) (64,982,953) 2,240,961 2,566,016 The accompanying notes form part of these financial statements. 20 21 Resonance Health Limited Annual Report 2013 Resonance Health Limited Annual Report 2013 Statement of Changes in Equity FOR THE yEAR ENDED 30 JuNE 2013 Consolidated Foreign Currency Issued Capital $ Translation Option Accumulated Reserve Reserve Losses Total Equity $ $ $ $ Balance at 1 July 2011 67,534,039 9,591 66,284 (64,714,352) 2,895,562 Loss for the year Other comprehensive income Shares issued during the year - - - - (60,945) - - - - (268,601) (268,601) - - (60,945) - Balance at 30 June 2012 67,534,039 (51,354) 66,284 (64,982,953) 2,566,016 Loss for the year Other comprehensive income Total comprehensive income for the year Shares issued during the year - - - - - (120,574) (120,574) - - - - - (204,481) - (204,481) (120,574) (204,481) (325,055) - - Balance at 30 June 2013 67,534,039 (171,928) 66,284 (65,187,434) 2,240,961 The accompanying notes form part of these financial statements. 22 23 Statement of Cash Flows FOR THE yEAR ENDED 30 JUNE 2013 Resonance Health Limited Annual Report 2013 Note Consolidated 2013 $ 2012 $ Inflows/(Outflows) Cash flows from operating activities Receipts from customers Payments to suppliers and employees Grants received Interest received Income tax received Net cash provided by operating activities 7(i) Cash flows from investing activities Payments for plant and equipment Payments for intangible assets Net cash used in investing activities Net decrease in cash and cash equivalents Foreign exchange differences on cash balances Cash and cash equivalents at the beginning of period Cash and cash equivalents at the end of the period 7 The accompanying notes form part of these financial statements. 1,860,846 (2,096,671) 146,051 38,157 188,645 137,028 (25,625) (205,337) (230,962) (93,934) 6,703 1,180,174 1,092,943 1,393,151 (1,727,373) 128,106 124,233 165,094 83,211 (11,427) (414,073) (425,500) (342,289) 18,984 1,503,479 1,180,174 22 23 Resonance Health Limited Annual Report 2013Resonance Health Limited Annual Report 2013 Notes to the Financial Statements FOR THE yEAR ENDED 30 JuNE 2013 NOTE 1: Statement of significant accounting policies (a) Basis of preparation The financial report is a general purpose financial report which has been prepared in accordance with the requirements of the Corporations Act 2001, Accounting Standards and Interpretations and complies with other requirements of the law. The financial report has been prepared on a historical cost basis, except for available-for-sale investments, which have been measured at fair value. Cost is based on the fair values of the consideration given in exchange for assets. The financial report is presented in Australian dollars. The Company is a listed public Company, incorporated and operating in Australia and the United States of America. The entity’s principal activities are the development of magnetic resonance imaging related technology, specifically the provision of image analysis services for use by health care professions. (b) Adoption of new and revised standards In the year ended 30 June 2013, the Directors have reviewed all of the new and revised Standards and Interpretations issued by the AASB that are relevant to the Group’s operations and effective for the current annual reporting period. It has been determined by the Directors that there is no impact, material or otherwise, of the new and revised Standards and Interpretations on the Group’s business and, therefore, no change is necessary to Group accounting policies. The Directors have also reviewed all new Standards and Interpretations that have been issued but are not yet effective for the year ended 30 June 2013. As a result of this review the Directors have determined that there is no impact, material or otherwise, of the new and revised Standards and Interpretations on the Group’s business and, therefore, no change necessary to Group accounting policies. (c) Statement of compliance The financial report was authorised for issue on 26 September 2013. 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). (d) Basis of consolidation The consolidated financial statements comprise the separate financial statements of Resonance Health Limited (“Company” or “parent entity”) and its subsidiaries as at 30 June each year (“the Group”). Control is achieved where the Company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. The financial statements of the subsidiaries are prepared for the same reporting period as the parent Company, using consistent accounting policies. In preparing the consolidated financial statements, all intercompany balances and transactions, income and expenses and profit and losses resulting from intra-group transactions have been eliminated in full. Subsidiaries are fully consolidated from the date on which control is transferred to the Group and cease to be consolidated from the date on which control is transferred out of the Group. Control exists where the Company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. Business combinations have been accounted for using the acquisition method of accounting (refer Note 1(ab)). Non-controlling interests represent the portion of profit or loss and net assets in subsidiaries not held by the Group and are presented separately in the statement of comprehensive income and within equity in the consolidated statement of financial position. Losses are attributed to the non-controlling interest even if that results in a deficit balance. (e) Critical accounting judgements and key sources of estimation uncertainty The application of accounting policies requires the use of judgements, estimates and assumptions about carrying values of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates. 24 25 Resonance Health Limited Annual Report 2013 NOTE 1: Statement of significant accounting policies (cont.) (e) Critical accounting judgements and key sources of estimation uncertainty (cont.) The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions are recognised in the period in which the estimate is revised if it affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. Impairment of intangibles The Group determines whether intangibles with indefinite useful lives are impaired at least on an annual basis. This requires an estimation of the recoverable amount of the cash generating units to which the intangibles with indefinite useful lives are allocated. The assumptions used in this estimation of recoverable amount and the carrying amount of intangibles with indefinite useful lives are discussed in Note 11. Additionally, the Group assesses impairment at the end of each reporting period by evaluating conditions and events specific to the Group that may indicate impairment triggers. Recoverable amounts of relevant assets are reassessed using value-in-use calculations which incorporate various key assumptions. With respect to cash flow projections growth rates have been factored into valuation models for the next five years on the basis of management’s expectations regarding the Group’s continued ability to increase market share based on contractual obligations already in place and historical sales growth rates. Historic Group averages have been used to reflect projected cash flow growth rates in year 1 and year 2. In subsequent periods a consistent growth rate has been attached as a conservative estimate for use in the impairment calculation. Pre-tax discount rate of 3.5%, adjusted for risk has been used throughout the value in use model. Development expenditure is considered to be sensitive to these assumptions as they are not ready for use. Therefore sensitivity analysis of 5% and 10% reduction in revenue and the use of a pre-tax discount rate of 5%, 10% and 15% have been calculated and did not indicate an impairment. Share-based payment transactions The Group measures the cost of cash-settled share-based payments at fair value at the grant date. (f) Segment reporting Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Board of Directors of Resonance Health Limited. (g) Foreign currency translation Both the functional and presentation currency of Resonance Health Limited and its Australian subsidiaries is Australian dollars. Each entity in the Group determines its own functional currency and items included in the financial statements of each entity are measured using that functional currency. Transactions in foreign currencies are initially recorded in the functional currency by applying the exchange rates ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of exchange ruling at the statement of financial position date. All exchange differences in the consolidated financial report are taken to profit or loss. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate as at the date of the initial transaction. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date the fair value was determined. The functional currency of the foreign operation Resonance USA Inc. is United States dollars (US$). As at the reporting date the 24 25 Resonance Health Limited Annual Report 2013 Resonance Health Limited Annual Report 2013 Notes to the Financial Statements FOR THE yEAR ENDED 30 JuNE 2013 NOTE 1: Statement of significant accounting policies (cont.) (g) Foreign currency translation (cont.) assets and liabilities of this subsidiary are translated into the presentation currency of Resonance Health Limited at the rate of exchange ruling at the statement of financial position date and the statement of comprehensive income is translated at the average exchange rate for the year. The exchange differences arising on the translation are taken directly to a separate component recognised in the foreign currency translation reserve in equity. On disposal of a foreign entity, the deferred cumulative amount recognised in equity relating to that particular foreign operation is recognised in profit or loss. (h) Revenue recognition Revenue is recognised to the extent that it is probable that economic benefits will flow to the Group and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognised: (i) Sale of Goods Revenue is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer and the costs incurred or to be incurred in respect of the transaction can be measured reliably. Risks and rewards of ownership are considered passed to the buyer at the time of delivery of the goods to the customer. (ii) Rendering of services Revenue from the rendering of a service is recognised upon the delivery of the service to the customers. (iii) Interest income Interest revenue is recognised on a time proportionate basis that takes into account the effective yield on the financial asset. (i) Borrowing costs Borrowing costs are recognised as an expense when incurred. (j) Lease Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards if ownership to the lessee. All other leases are classified as operating leases. Assets held under finance lease are initially recognised at their fair value or, if lower, the present value of the minimum lease payments, each determined at the inception of the lease. The corresponding liability to the lessor is included in the statement of financial position as a finance lease obligation. Lease payments are apportioned between finance charges and the reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged directly against income unless they are directly attributable to qualifying assets, in which case they are capitalised in accordance with the general policy on borrowing costs. Finance lease assets are depreciated on a straight line basis over the estimated useful life of the asset. Operating lease payments, where the lessor effectively retains substantially all of the risks and benefits of ownership of the leased items, are recognised as an expense on a straight line basis over the lease term, except where another systematic basis is more representative of the time pattern in which economic benefits from the lease asset are consumed. (k) Income tax The income tax expense or benefit for the period is the tax payable on the current period’s taxable income based on the applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary difference and to unused tax losses. The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting period in the countries where the Company’s subsidiaries and associates operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities. 26 27 Resonance Health Limited Annual Report 2013 NOTE 1: Statement of significant accounting policies (cont.) (k) Income tax (cont.) 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 substantially enacted by the balance date. Deferred income tax is provided on all temporary differences at the balance date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred income tax liabilities are recognised for all taxable temporary differences except: • when the deferred income tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and that, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; or • when the taxable temporary difference is associated with investments in subsidiaries, associates or interests in joint ventures, and the timing of the reversal of the temporary difference can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused tax assets and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences and the carry-forward of unused tax credits and unused tax losses can be utilised, except: • 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 with the temporary difference can be utilised. The carrying amount of deferred income tax assets is reviewed at each balance date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised. Unrecognised deferred income tax assets are reassessed at each balance date and are recognised to the extent that it is has become probable that future taxable profit will allow the deferred tax asset to be recovered. Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance date. Income taxes relating to items recognised directly in equity are recognised in equity and not in profit or loss. Deferred tax assets and deferred tax liabilities are offset only if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred tax assets and liabilities relate to the same taxable entity and the same taxation authority. (l) Other taxes Revenues, expenses and assets are recognised net of the amount of Goods and Services Tax (GST) except: • when the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the GST is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and • receivables and payables, which are stated with the amount of GST included. The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the statement of financial position. Cash flows are included in the Statement of Cash Flows on a gross basis and the GST component of cash flows arising from investing and financing activities, which is recoverable from, or payable to, the taxation authority are classified as operating cash flows. Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation authority. 26 27 Resonance Health Limited Annual Report 2013Resonance Health Limited Annual Report 2013 Notes to the Financial Statements FOR THE yEAR ENDED 30 JuNE 2013 NOTE 1: Statement of significant accounting policies (cont.) (m) Impairment of assets The Group assesses at each balance date whether there is an indication that an asset may be impaired. If any such indication exists, or when annual impairment testing for an asset is required, the Group makes an estimate of the asset’s recoverable amount. An asset’s recoverable amount is the higher of its fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets and the asset’s value in use cannot be estimated to be close to its fair value. In such cases the asset is tested for impairment as part of the cash-generating unit to which it belongs. When the carrying amount of an asset or cash-generating unit exceeds its recoverable amount, the asset or cash- generating unit is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Impairment losses relating to continuing operations are recognised in those expense categories consistent with the function of the impaired asset unless the asset is carried at revalued amount (in which case the impairment loss is treated as a revaluation decrease). An assessment is also made at each balance date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the recoverable amount is estimated. A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognised. If that is the case the carrying amount of the asset is increased to its recoverable amount. That increased amount cannot 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. (n) Cash and cash equivalents Cash comprises cash at bank and in hand. Cash equivalents are short term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. Bank overdrafts are shown within borrowings in current liabilities in the statement of financial position. For the purposes of the Statement of Cash Flows, cash and cash equivalents consist of cash and cash equivalents as defined above. (o) Trade and other receivables Trade receivables are measured on initial recognition at fair value and are subsequently measured at amortised cost using the effective interest rate method, less any allowance for impairment. Trade receivables are generally due for settlement within periods ranging from 14 days to 90 days. Impairment of trade receivables is continually reviewed and those that are considered to be uncollectible are written off by reducing the carrying amount directly. An allowance account is used when there is objective evidence that the Group will not be able to collect all amounts due according to the original contractual terms. Factors considered by the Group in making this determination include known significant financial difficulties of the debtor, review of financial information and significant delinquency in making contractual payments to the Group. The impairment allowance is set equal to the difference between the carrying amount of the receivable and the present value of estimated future cash flows, discounted at the original effective interest rate. Where receivables are short-term discounting is not applied in determining the allowance. The amount of the impairment loss is recognised in the statement of comprehensive income within other expenses. When a trade receivable for which an impairment allowance had been recognised becomes uncollectible in a subsequent period, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against other expenses in the statement of comprehensive income. 28 29 Resonance Health Limited Annual Report 2013 NOTE 1: Statement of significant accounting policies (cont.) (p) Financial assets Financial assets in the scope of AASB 139 Financial Instruments: Recognition and Measurement are classified as either financial assets at fair value through profit or loss, loans and receivables, held-to-maturity investments, or available-for-sale investments, as appropriate. Where financial assets are recognised initially, they are measured at fair value, plus, in the case of investments not at fair value through profit or loss, directly attributable transaction costs. The Group determines the classification of its financial assets after initial recognition and, when allowed and appropriate, re-evaluates this designation at each financial year-end. All regular way purchases and sales of financial assets are recognised on the trade date, i.e. the date that the Group commits to purchase the asset. Regular way purchases or sales of financial assets under contracts that require delivery of the assets within the period established generally by regulation or convention in the marketplace. (i) Financial assets at fair value through profit or loss Financial assets classified as held for trading are included in the category ‘financial assets at fair value through profit or loss’. Financial assets are classified as held for trading if they are acquired for the purpose of selling in the near term. Gains or losses on investments held for trading are recognised in profit or loss. (ii) Held-to-maturity investments Non-derivative financial assets with fixed or determinable payments and fixed maturity are classified as held-to-maturity when the Group has the positive intention and ability to hold to maturity. Investments intended to be held for an undefined period are not included in this classification. (iii) Loans and receivables Loans and receivables are non-derivative financial assets that are not quoted in an active market. Gains and losses are recognised in the profit or loss when the loans and receivables are derecognised or impaired. (iv) Available-for-sale investments Available-for-sale investments are those non-derivative financial assets that are designated as available-for-sale or are not classified as any of the three preceding categories. After initial recognition available-for-sale investments are measured at fair value with gains or losses being recognised as a separate component of equity until the investment is derecognised or until the investment is determined to be impaired, at which time the cumulative gain or loss previously reported in equity is recognised in profit or loss. The fair value of investments that are actively traded in organised financial markets is determined by reference to quoted market bid prices at the close of business on the balance date. For investments with no active market, fair value is determined using valuation techniques. Such techniques include using recent arm’s length market transactions; reference to the current market value of another instrument that is substantially the same; discounted cash flow analysis and option pricing models. (q) Derecognition of financial assets and liabilities (i) Financial assets A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is derecognised when: • the rights to receive cash flows from the asset have expired; • the Group retains the right to receive cash flows from the asset, but has assumed an obligation to pay them in full without material delay to a third party under a ‘pass-through’ arrangement; or • the Group has transferred its rights to receive cash flows from the asset and either: (a) has transferred substantially all the risks and rewards of the asset, or (b) has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset. 28 29 Resonance Health Limited Annual Report 2013 Resonance Health Limited Annual Report 2013 Notes to the Financial Statements FOR THE yEAR ENDED 30 JuNE 2013 NOTE 1: Statement of significant accounting policies (cont.) (q) Derecognition of financial assets and liabilities (cont.) When the Group has transferred its rights to receive cash flows from an asset and has neither transferred nor retained substantially all the risks and rewards of the asset nor transferred control of the asset, the asset is recognised to the extent of the Group’s continuing involvement in the asset. (ii) Financial liabilities A financial liability is recognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognised in profit or loss. (r) Impairment of financial assets The Group assess at each balance date whether a financial asset or group of financial assets is impaired. (i) Financial assets carried at amortised cost If there is objective evidence that an impairment loss on loans and receivables carried at amortised cost has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate (i.e. the effective interest rate computed at initial recognition). The carrying amount of the asset is reduced either directly or through use of an allowance account. The amount of the loss is recognised in profit or loss. The group first assesses whether objective evidence of impairment exists individually for financial assets that are individually significant, and individually or collectively for financial assets that are not individually significant. If it is determined that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, the asset is included in a group of financial assets with similar credit risk characteristics and that group of financial asset is collectively assessed for impairment. Assets that are individually assessed for impairment and for which an impairment loss is or continues to be recognised are not included in a collective assessment of impairment. If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed. Any subsequent reversal of an impairment loss is recognised in profit or loss, to the extent that the carrying value of the asset does not exceed its amortised cost at the reversal date. (ii) Financial assets carried at cost If there is objective evidence that an impairment loss has been incurred on an unquoted equity instrument that is not carried at fair value (because its fair value cannot be reliably measured), the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the current market rate of return for a similar financial asset. (iii) Available-for-sale investments If there is objective evidence that an available-for-sale investment is impaired, an amount comprising the difference between its cost (net of any principal repayment and amortisation) and its current fair value, less any impairment loss previously recognised in profit or loss, is transferred from equity to the income statement. Reversals of impairment losses for equity instruments classified as available-for- sale are not recognised in profit. Reversals of impairment losses for debt instruments are reversed through profit or loss if the increase in an instrument’s fair value can be objectively related to an event occurring after the impairment loss was recognised in profit or loss. (s) Plant and equipment Plant and equipment is stated at cost less accumulated depreciation and any accumulated impairment losses. Depreciation is calculated on a straight-line basis over the estimated useful life of the assets as follows: Plant and equipment 3 – 5 years The assets’ residual values, useful lives and amortisation methods are reviewed, and adjusted if appropriate, at each financial year end. 30 31 Resonance Health Limited Annual Report 2013 NOTE 1: Statement of significant accounting policies (cont.) (s) Plant and equipment (cont.) (i) Impairment The carrying values of plant and equipment are reviewed for impairment at each balance date, with recoverable amount being estimated when events or changes in circumstances indicate that the carrying value may be impaired. The recoverable amount of plant and equipment is the higher of fair value less costs to sell and value in use. 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. For an asset that does not generate largely independent cash inflows, recoverable amount is determined for the cash-generating unit to which the asset belongs, unless the asset’s value in use can be estimated to be close to its fair value. An impairment exists when the carrying value of an asset or cash-generating units exceeds its estimated recoverable amount. The asset or cash-generating unit is then written down to its recoverable amount. Impairment losses for plant and equipment are recognised in the statement of comprehensive income. (ii) Derecognition and disposal An item of plant and equipment is derecognised upon disposal or when no further future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in profit or loss in the year the asset is derecognised. (t) Intangible assets Internally generated intangible assets – research and development expenditure Expenditure on research activities is recognised as an expense in the period in which it is incurred. Where no internally-generated intangible asset can be recognised, development expenditure is recognised as an expense in the period as incurred. An intangible asset arising from development expenditure on an internal project is recognised if, and only if, all of the following has been demonstrated: • The technical feasibility of completing the intangible asset so that it will be available for use or sale; • The intention to complete the intangible asset and use or sell it; • How the intangible asset will generate probable future economic benefits; • The availability of adequate technical, financial and other resources to complete development and to use or sell the intangible asset; and • The ability to measure reliably the expenditure attributable to the intangible asset during its development. The amount initially recognised for internally generated intangible assets is the sum of the expenditure incurred from the date when the intangible asset first meets the recognition criteria listed above. (u) Trade and other payables Trade payables and other payables are carried at amortised costs and represent liabilities for goods and services provided to the Group prior to the end of the financial year that are unpaid and arise when the Group becomes obliged to make future payments in respect of the purchase of these goods and services. The amounts are unsecured and are usually paid within 30 days of recognition. (v) Interest-bearing loans and borrowings Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in profit or loss over the period of the borrowings using the effective interest method. 30 31 Resonance Health Limited Annual Report 2013Resonance Health Limited Annual Report 2013 Notes to the Financial Statements FOR THE yEAR ENDED 30 JuNE 2013 NOTE 1: Statement of significant accounting policies (cont.) (v) Interest-bearing loans and borrowings (cont.) Borrowings are removed from the statement of financial position when the obligation specified in the contract is discharged, cancelled or expired. The difference between the carrying amount of a financial liability that has been extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in profit or loss as other income or finance costs. Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the reporting period. (w) Provisions Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Provisions are not recognised for future operating losses. Provisions are measured at the present value or management’s best estimate of the expenditure required to settle the present obligation at the end of the reporting period. (x) Employee benefits Wages, salaries, annual leave, sick leave and long service leave Liabilities for wages and salaries, including non-monetary benefits, annual leave, long service leave and accumulating sick leave expected to be settled within 12 months of the balance date are recognised in sundry creditors in respect of employees’ services up to the balance date. They are measured at the amounts expected to be paid when the liabilities are settled. Liabilities for non-accumulating sick leave are recognised when the leave is taken and are measured at the rates paid or payable. (y) Share-based payment transactions Equity-settled transactions The Group uses agreements where payment for services rendered are settled by the issuance of fully paid shares or options in the Company. The cost of these equity-settled transactions is measured by reference to the fair value of the equity instruments at the date they are granted and is recognised, together with a corresponding increase in equity, over the period in which the service is provided. (z) 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. (aa) Earnings per share (“EPS”) Basic EPS is calculated as net profit/loss attributable to members of the parent, adjusted to exclude any costs of servicing equity (other than dividends) and preference share dividends, divided by the weighted average number of ordinary shares, adjusted for any bonus element. Diluted EPS is calculated as net profit/loss attributable to members of the parent, adjusted for: • costs of servicing equity (other than dividends) and preference share dividends; • 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. 32 33 Resonance Health Limited Annual Report 2013 NOTE 1: Statement of significant accounting policies (cont.) (ab)Business combinations The acquisition method of accounting is used to account for all business combinations, including business combinations involving entities or business under common control, regardless of whether equity instruments or other assets are acquired. The consideration transferred for the acquisition of a subsidiary comprises the fair value of the assets transferred, the liabilities incurred and the equity interests issued by the group. The consideration transferred also includes the fair value of any contingent consideration arrangements and the fair value of any pre-existing equity interest in the subsidiary. Acquisition-related costs are expenses as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are, with limited exceptions, measured initially at their fair values at the acquisition date. On an acquisition-by-acquisition basis, the group recognises any non-controlling interest in the acquiree either at fair value or at the non-controlling interest’s proportionate share of the acquiree’s net identifiable assets. The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition-date fair value of any previous equity interest in the acquiree over the fair value of the group’s share of the net identifiable assets acquired is recorded as goodwill. If those amounts are less than the fair value of the net identifiable assets of the subsidiary acquired and the measurement of all amounts has been reviewed, the difference is recognised directly in profit or loss as a bargain purchase. Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to their present value as at the date of exchange. The discount rate used is the entity’s incremental borrowing rate, being the rate at which a similar borrowing could be obtained from an independent financier under comparable terms and conditions. Contingent consideration is classified as either equity or a financial liability. Amounts classified as a financial liability are subsequently remeasured to fair value with changes in fair value recognised in profit or loss. (ac)Parent entity financial information The financial information for the parent entity, Resonance Health Limited, disclosed in Note 20 has been prepared on the same basis as the consolidated financial statements, except as set out below. (i) Investments in subsidiaries, associates and joint venture entities Investments in subsidiaries, associates and joint venture entities are accounted for at cost in the parent entity’s financial statements. NOTE 2: Revenues and expenses (a) Sales revenue Sales to external customers (b) Other income Grants received Interest received (c) Expenses Consolidated 2013 $ 2012 $ 1,527,188 1,562,242 146,051 35,908 181,959 128,106 98,271 226,377 Rental expense on operating leases 98,074 94,571 32 33 Resonance Health Limited Annual Report 2013Resonance Health Limited Annual Report 2013 Notes to the Financial Statements FOR THE yEAR ENDED 30 JuNE 2013 NOTE 3: Income tax benefit Income tax recognised in profit or loss The major components of tax benefit are: Current taxation Adjustments recognised in the current year in relation to the current tax of prior years – R&D tax offset The prima facie income tax benefit on pre-tax accounting loss from operations reconciles to the income tax benefit in the financial statements as follows: Accounting loss before income tax Consolidated 2013 $ 2012 $ (31,734) 188,645 156,911 - 165,094 165,094 (361,392) (433,695) Income tax calculated at 30% Effect of income that is not deductible in determining taxable profit Effect of unused tax losses not recognised as deferred tax assets Effect of prior year adjustments Effect of temporary differences not recognised as deferred tax assets and liabilities Effect of concessions (research and development) Tax refund receivable (research and development tax offset) Income tax benefit reported in the income statement 108,418 (170,727) (30,229) (16,340) 77,144 - 188,645 156,911 130,108 (164,386) (271,112) 161,915 170,059 (26,584) 165,094 165,094 Unrecognised deferred tax balances The following deferred tax assets and liabilities have not been brought to account: Deferred tax assets: Losses available for offset against future taxable income - revenue 2,200,889 2,170,661 Depreciation timing differences Business related costs Unrealised foreign exchange losses Accrued expenses and liabilities Deferred tax liabilities: Capitalised research and development costs Accrued income Prepayments Income tax benefits not recognised directly in equity Share issue costs Current tax liability Income tax payable 45,423 3,160 88,292 80,565 56,060 11,115 112,931 64,687 2,418,329 2,415,454 438,661 380 7,357 446,398 387,463 1,055 8,091 396,609 152,765 152,765 31,734 - 34 35 Resonance Health Limited Annual Report 2013 NOTE 4: Segment reporting Segment Information The chief operating decision maker is considered to be the Company’s Board of Directors. The Group’s operating segments are determined by differences in the type of activities performed. The financial results of the Group’s operating segments are reviewed by the Board of Directors on a quarterly basis. Business Segments The following table presents revenue and profit/loss information and certain asset and liability information regarding business segments for the year ended 30 June 2013. Segment revenue Sales to external customers Grant revenue Interest revenue Total segment revenue Services Research and Development Corporate $ $ $ 1,527,188 146,051 - 1,673,279 - - - - - - 35,908 35,908 Total $ 1,527,188 146,051 35,908 1,709,147 Segment profit/(loss) 70,641 24,868 (299,990) (204,481) Other segment information included in (loss) Income tax benefit - 156,911 - 156,911 Segment assets Segment liabilities 388,631 590,816 1,462,204 1,223,872 3,074,707 48,599 194,331 833,746 The consolidated entity derived 38% of its external customer sales revenue from one major customer. 34 35 Resonance Health Limited Annual Report 2013Resonance Health Limited Annual Report 2013 Notes to the Financial Statements FOR THE yEAR ENDED 30 JuNE 2013 NOTE 4: Segment reporting (cont.) The following table presents revenue and profit/loss information and certain asset and liability information regarding business segments for the year ended 30 June 2012. Segment revenue Sales to external customers Grant revenue Interest revenue Total Segment revenue FerriScan Research and Development Corporate $ $ $ Total $ 1,562,242 - - 1,562,242 - - - - - 1,562,242 128,106 98,271 226,377 128,106 98,271 1,788,619 Segment profit/(loss) (226,517) 85,074 (127,158) (268,601) Other segment information included in (loss) Income tax benefit - 165,094 - 165,094 Segment assets Segment liabilities 756,834 616,759 1,291,544 - 1,305,691 171,294 3,354,069 788,053 The consolidated entity derived 51% of its external customer sales revenue from one major customer. NOTE 5: Earnings per share Basic profit / (loss) per share (cents) Consolidated 2013 $ 2012 $ (0.1) (0.1) (a) Loss used in the calculation of basic earnings per share (204,481) (268,601) 2013 Number 2012 Number (b) Weighted average number of ordinary shares for the purposes of basic loss per share 360,991,365 360,991,365 The calculation does not include shares under option that could potentially dilute basic earnings per share in the future as the options on issue are out of the money and the Company has incurred a loss. NOTE 6: Dividends No dividend was paid or declared for the current or previous financial year. 36 37 Resonance Health Limited Annual Report 2013 NOTE 7: Cash and cash equivalents Consolidated Deposits at call Term deposits 2013 $ 492,943 600,000 1,092,943 2012 $ 380,174 800,000 1,180,174 Deposits at call earn interest at floating rates based on daily bank deposit rates. Term deposits are made for varying periods depending on the immediate cash requirements of the Group and earn interest at the respective term deposit rates (i) Reconciliation of profit / (loss) for the year to net cash flows from operating activities Profit/(loss) for the year Non-cash flows in profit / (loss): Depreciation Amortisation of intangible assets Changes in net assets and liabilities: Decrease in receivables Decrease in other assets (current) (Increase) in assets (non-current) Decrease in trade creditors and other payables Increase in current tax liabilities Decrease/(increase) in other liabilities Net cash provided by/(used in) operating activities (ii) Financing facilities Unsecured credit card: Amount used Amount unused Secured credit card: Amount used Amount unused (iii) Cash balances not available for use Security deposits: Credit card Lease premises (204,481) (268,601) 18,475 34,677 240,927 2,446 (708) 29,669 31,734 (15,711) 137,028 12,834 7,166 20,000 493 19,507 20,000 20,000 39,099 59,099 20,298 - 120,785 2,528 (271) 30,844 - 177,628 83,211 4,362 15,638 20,000 290 19,710 20,000 20,000 38,391 58,391 36 37 Resonance Health Limited Annual Report 2013Resonance Health Limited Annual Report 2013 Notes to the Financial Statements FOR THE yEAR ENDED 30 JuNE 2013 NOTE 8: Trade and other receivables Consolidated Current Trade receivables Other receivables The average credit period on sales of goods and rendering of services is 14 to 90 days. Aging of past due but not impaired Up to 30 days 60-90 days 90-120 days 120+ days Movement in the allowance for impairment Balance at the beginning of the year Impairment losses recognised on receivables Balance at the end of the year 2013 $ 342,203 46,428 388,631 159,789 31,751 15,281 - 206,821 - - - 2012 $ 537,179 219,655 756,834 75,915 24,511 9,830 - 110,256 26,632 (26,632) - In determining the recoverability of a trade receivable, the Group considers any changes in the credit quality of the trade receivable from the date credit was granted up to the reporting date. No allowance has been made for estimated irrecoverable trade receivable amounts arising from the past rendering of services in relation to a specific debtor amount. The concentration of credit risk is significant with 29% (2012: 51%) of trade receivables relating to one major customer. The remaining trade receivables relate to a large and unrelated customer base. The directors believe no further increase is required in excess of the allowance for impairment. NOTE 9: Other assets Current Prepayments Non-Current Deposits Consolidated 2013 $ 2012 $ 24,524 26,970 59,099 58,391 38 39 Resonance Health Limited Annual Report 2013 NOTE 10: Plant and equipment Consolidated Fixtures and equipment At cost Less: Accumulated depreciation Total property, plant and equipment Reconciliation 2013 $ 269,432 (225,130) 44,302 Reconciliation of the carrying amount of each class of property, plant and equipment is set out below: Fixtures and equipment Carrying Amount at the beginning of the year Additions Depreciation expense Carrying amount at the end of the year NOTE 11: Intangible assets Development expenditure At cost Less: Accumulated amortisation Total development expenditure Reconciliation Reconciliation of the carrying amount of intangible assets is set out below: Development expenditure Carrying Amount at the beginning of the year Additions Amortisation expense Carrying amount at the end of the year 2012 $ 243,807 (206,655) 37,152 46,023 11,427 (20,298) 37,152 37,152 25,625 (18,475) 44,302 1,496,881 (34,677) 1,462,204 1,291,544 - 1,291,544 1,291,544 205,337 (34,677) 1,462,204 957,400 334,144 - 1,291,544 Development expenditure relates to costs incurred in developing MRI image analysis tools for the diagnosis and clinical management of human disease. During the current financial year this development has related to a new version of FerriScan, a cardiac iron assessment MRI tool and the next stage of development of a MRI based liver fibrosis tool and liver fat assessment tool. The recoupment of development expenditure is dependent on the successful development and commercialisation or sale of the technology developed. The directors are required to assess at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists an estimate is made of the asset’s recoverable amount. Where the asset’s carrying value exceeds the estimated recoverable amount a provision for impairment is recognised. In making this assessment the directors had regard to the size of the liver fibrosis and liver fat markets, competing products, experience gained with the FerriScan technology, the likely period over which these revenues are expected to be generated and the likelihood of any technological obsolescence. 38 39 Resonance Health Limited Annual Report 2013Resonance Health Limited Annual Report 2013 Notes to the Financial Statements FOR THE yEAR ENDED 30 JuNE 2013 NOTE 11: Intangible assets (cont.) The recoverable amount of development expenditure detailed above is determined based on value - in - use calculations. Value-in-use is calculated based on the present value of cash flow projections over a five year period. The cash flows are discounted using the yield of a 10 year government bond at the beginning of the budget period. The following assumptions were used in the value-in -use calculations: • Growth rate was based on contractual obligations already in place and historical sales growth rates. • Costs are calculated taking into account historical growth margins as well as estimated weighted average inflation rates over the period, which are consistent with inflation rates appropriate to historic company rates. • Discount rate was based on the market risk free rate of 10 year government bond rate. NOTE 12: Available for sale investments Available for sale - carried at fair value Shares in listed corporations Less: impairment NOTE 13: Trade and other payables Current Trade payables (i) Sundry creditors and accruals 2013 $ 14,337 (11,333) 3,004 256,494 151,491 407,985 2012 $ 14,337 (11,333) 3,004 102,040 288,011 390,051 Consolidated (i) Trade payables are non-interest bearing and are normally settled on 30 day terms. Information regarding the effective interest rate and credit risk of current payables is set out in Note 17. NOTE 14: Other liabilities Current Unearned income NOTE 15: Provisions Non-current Long service leave provision Reconciliation Balance at the beginning of the year Arising during the year Carrying amount at the end of the year 313,805 329,514 80,222 68,488 68,488 11,734 80,222 - 68,488 68,488 40 41 Resonance Health Limited Annual Report 2013 NOTE 16: Issued Capital 2013 2012 Number $ Number $ (a) Issued and paid up capital 360,991,365 67,534,039 360,991,365 67,534,039 Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the company in proportion to the number of and amounts paid on the shares held. On a show of hands every holder of ordinary shares present at a meeting in person or by proxy, is entitled to one vote, and upon a poll each share is entitled to one vote. Ordinary shares have no par value and the company does not have a limited amount of authorised capital. Movements during the period Ordinary shares Number of shares Issue Price $ Balance at the beginning of the financial year Balance at the end of the financial year 360,991,365 360,991,365 67,534,039 67,534,039 NOTE 17: Financial instruments (a) Capital risk management The Group controls the capital of the Company in order to maintain an appropriate debt to equity ratio and to ensure that the Company can fund its operations and continue as a going concern. The Group’s overall strategy remains unchanged from the previous financial year. The capital structure of the Group consists of cash and cash equivalents and equity attributable to equity holders of the parent, comprising issued capital, reserves and retained earnings. None of the Group’s entities are subject to externally imposed capital requirements. Operating cash flows are used to maintain and expand operations, as well as to make routine expenditures. (b) Categories of financial instruments Financial assets Consolidated Cash and cash equivalents Loans and receivables Available for sale financial assets Other financial assets Payables 2013 $ 1,092,943 388,631 3,004 59,099 407,985 2012 $ 1,180,174 756,834 3,004 58,391 390,051 The net fair values of all financial assets and liabilities approximate their carrying value. (c) Financial risk management objectives The Group is exposed to market risk (including currency risk, fair value interest rate risk and price risk), credit risk, liquidity risk and cash flow interest rate risk. The Group seeks to minimise the effects of these risks. The Group does not enter into or trade financial instruments, including derivative financial instruments, for speculative purposes. (d) Market risk The Group’s activities expose it primarily to the financial risk of changes in foreign currency exchange rates. There has been no change in the Group’s exposure to market risks or the manner in which it manages and measures the risk from the previous period. 40 41 Resonance Health Limited Annual Report 2013 Resonance Health Limited Annual Report 2013 Notes to the Financial Statements FOR THE yEAR ENDED 30 JuNE 2013 NOTE 17: Financial instruments (cont.) (e) Foreign currency risk management The Group undertakes certain transactions denominated in foreign currencies, hence exposures to exchange rate fluctuations arise. Exchange rate exposures are managed within approved policy parameters. The Group does not engage in forward exchange contracts. The carrying amount of the Group’s foreign currency denominated monetary assets and monetary liabilities at the reporting date is as follows: United States Dollars Great British Pounds European Euros Liabilities Assets 2013 $ 14,012 - 3,177 2012 $ 18,777 - - 2013 $ 426,416 97,058 20,999 2012 $ 495,005 52,641 8,186 Foreign currency sensitivity analysis The Group is exposed to United States Dollar (USD), Great British Pound (GBP) and European Euro (EUR) currency fluctuations. The following table illustrates the Group’s sensitivity to a 10% increase and decrease in the Australian dollar against the relevant foreign currency. The sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjusts their translation at the period end for a 10% change in foreign currency rates. A negative number indicates a decrease in profit and other equity where the Australian dollar strengthens against the respective currency. For a weakening of the Australian dollar against the respective currency there would be an equal and opposite impact on the profit and other equity and the balances below would be positive. Profit or loss impact: - USD - GBP - EUR (f) Interest rate risk management 2013 $ (37,491) (8,823) (1,620) 2012 $ (43,293) (4,786) (744) All financial assets and financial liabilities are non-interest bearing except for cash and cash equivalent balances. The following table details the Group’s expected maturities for cash and cash equivalent financial assets. Cash and cash equivalent financial assets Less than one month One to three months Total 2013 Weighted average effective interest rate 2012 Weighted average effective interest rate $1,092,943 2.16% $1,180,174 3.81% $59,099 4.57% $58,391 5.76% $1,152,042 $1,238,565 The Group is exposed to fluctuations in interest rates as it has deposited monies at floating and fixed interest rates. The impact of a 10% change in interest rates will not have a material impact on the result for the year 42 43 Resonance Health Limited Annual Report 2013 NOTE 17: Financial instruments (cont.) (g) Credit risk management Credit risk is the risk that a counter party will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Group is exposed to credit risk from its operating activities (primarily from customer receivables) and from its financing activities, including deposits with banks, foreign exchange transactions and other financial instruments. Outstanding customer receivables are regularly monitored and any credit concerns highlighted to senior management. At 30 June 2013, the Group had one customer that accounted for 29% of all trade receivables (2012: 68%). The maximum exposure to credit risk, excluding the value of any collateral or other security at balance date in relation to each class of recognised financial assets is the carrying amount, net of any allowance for impairment recorded in the financial statements. The Group does not hold any collateral as security for any trade receivable. (h) Equity price risk The Group is exposed to equity price risks arising from available-for-sale financial assets. The Group’s investments are publicly traded. The impact of a 10% increase or decrease in the equity price will not have a material impact on the result for the year. (i) Liquidity risk management Ultimate responsibility for liquidity risk management rests with the Board of directors, who have built 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 risk by maintaining adequate reserves by continually monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities. Included in Note 7 is a listing of additional undrawn facilities that the Group has at its disposal to further reduce liquidity risk. The following table details the Group’s expected maturity for its financial liabilities. Less than one month One month to Three months to three months one year $ $ $ Total $ 2013 Non-interest bearing 236,412 42,960 128,613 407,985 2012 Non-interest bearing (j) Fair value of financial instruments 222,645 48,246 119,160 390,051 The net fair value of all financial assets and liabilities approximate their carrying values. No financial assets or financial liabilities, except for listed shares are readily traded on organized markets in standardized form. The aggregate net fair values and carrying amounts of all financial assets and liabilities are disclosed in the financial statements. 42 43 Resonance Health Limited Annual Report 2013Resonance Health Limited Annual Report 2013 Notes to the Financial Statements FOR THE yEAR ENDED 30 JuNE 2013 NOTE 18: Commitments for expenditure Consolidated Operating lease commitments Commitments for minimum lease payments in relation to non-cancellable operating leases for office premises are payable as follows: Within one year Later than 1 year but no later than 5 years Total commitments not recognised in the financial statements A lease over new premises was entered into effective 1 August 2011. NOTE 19: Related party disclosure 2013 $ 113,922 9,501 123,492 2012 $ 113,152 127,511 240,663 The consolidated financial statements include the financial statements of Resonance Health Limited and the subsidiaries listed in the following table. Name of entity Country of incorporation Class of shares Resonance Health Analysis Services Pty Ltd Australia Ordinary WA Private Health Care Services Pty Ltd Australia Ordinary IVB Holdings Pty Ltd Resonance USA Inc Australia Ordinary USA Ordinary Resonance Health Limited is the ultimate Australian entity and ultimate parent of the Group. Transactions with related parties Equity holding 100% 100% 100% 100% Transactions with related parties are on normal commercial terms and conditions no more favourable than those available to other parties unless otherwise stated. Transactions with key management personnel Refer to Note 23 for details of transactions with key management personnel. During the year Resonance Health Analysis Services Pty Ltd provided interest free loans to the Company totalling $118,391. During the previous year the Company repaid interest free loans to Resonance Health Analysis Services Pty Ltd totalling $229,942. During the year Resonance USA Inc repaid interest free loans to the Company totalling $200,000 (2012: $205,000). A cumulative impairment of these loans of $4,545,135 was recorded up to balance date (2012: $4,545,135). During the year expenses were paid by Resonance Health Analysis Services Pty Ltd totalling $145,848 (2012: $118,318) on behalf of the Company. During the year expenses were paid by the Company on behalf of Resonance USA Inc totalling $193,789 (2012: $197,252). 44 45 NOTE 20: Parent entity disclosures Financial Position Assets Current assets Non-current assets Total assets Liabilities Current liabilities Total liabilities Equity Issued capital Option reserve Accumulated losses Total equity Financial Performance Profit / (loss) for the year Other comprehensive income / (loss) Total comprehensive income / (loss) Resonance Health Limited Annual Report 2013 2013 $ 645,467 1,015,346 1,660,813 94,122 94,122 2013 $ 1,034,009 856,682 1,890,691 49,768 49,768 67,534,039 66,284 (66,033,632) 1,566,691 67,534,039 66,284 (65,449,616) 2,150,707 year ended 30 June 2013 year ended 30 June 2012 $ (584,016) - (584,016) $ (153,111) - (153,111) NOTE 21: Events subsequent to reporting date No other matters or circumstances have arisen since the end of the financial year which significantly affected or may significantly affect the operations of the Company and the consolidated entity, the results of those operations, or the state of affairs in future financial years. NOTE 22: Auditors’ remuneration Consolidated During the year the following fees were paid or payable to the auditor: Remuneration of the auditor of the company for: Auditing/reviewing financial report Taxation compliance services 2013 $ 48,895 45,400 94,295 2012 $ 45,500 45,250 90,750 44 45 Resonance Health Limited Annual Report 2013Resonance Health Limited Annual Report 2013 Notes to the Financial Statements FOR THE yEAR ENDED 30 JuNE 2013 NOTE 23: Key management personnel disclosures (a) Details of key management personnel (i) Directors Dr Martin Blake Chairman (non-executive) Ms Liza Dunne Managing Director (executive) Mr Simon Panton Director (non-executive) Dr Jason Loveridge Director (non-executive) (appointed 7th February 2013) Dr Tim St Pierre Director (executive) ii) Executives Mrs Naomi Haydari Chief Financial Officer and Company Secretary Key management personnel remuneration has been included in the Remuneration Report section of the Directors’ Report. (b) Shareholdings of key management personnel The numbers of ordinary shares in the Company held during the financial year by key management personnel of the consolidated Group including their personally related entities are set out below. Directors Dr M Blake Ms L Dunne Dr T St Pierre Dr J Loveridge Mr S Panton Total Executives Mrs N Haydari Total Balance 1.7.12 Received as Remuneration Net Change Other* Received during the year on exercise of options Balance 30.6.13 6,224,677 3,153,385 9,078,750 - 65,960,972 84,417,784 - - - - - - - - - - - - - - - - - - - - - 6,224,677 3,153,385 9,078,750 - 65,960,972 84,417,784 - (c) Transactions and balances with directors and other key management personnel Executive Director – Dr Tim St Pierre Dr St Pierre is an employee of The University of Western Australia. The Group has an agreement with The University of Western Australia for the provision of consulting services by Dr St Pierre and others. Amounts relating to services provided by Dr St Pierre during the year can be found in the Remuneration Report forming part of the Directors’ Report. Amounts relating to consulting services provided by others under the agreement with The University of Western Australia during the financial year totalled $nil (2012: $11,583). The amount payable at 30 June 2013 totalled $nil (2012: $13,226). During the year the Group provided FerriScan services totalling $2,618 (2012: $2,630) to The University of Western Australia. Amounts receivable at 30 June 2013 totalled nil (2012: $2,630). 46 47 Resonance Health Limited Annual Report 2013 NOTE 23: Key management personnel disclosures (cont.) (d) Key Management Personnel Compensation Refer to remuneration report contained in the directors report for details of the remuneration paid or payable to each member of the Group’s key management personnel (KMP) for the year ended 30 June 2013. The totals paid to KMP of the Company and the Group during the year are as follows: Short term employee benefits Post employment benefits Share based payments Total KMP compensation (e) KMP Options and Rights Holdings No Options or rights are held by any member of KMP. 2013 $ 520,729 37,232 - 557,961 2012 $ 493,099 33,660 - 526,759 46 47 Resonance Health Limited Annual Report 2013Resonance Health Limited Annual Report 2013 Directors’ Declaration 1. In the opinion of the directors: a. the accompanying financial statements, notes and the additional disclosures are in accordance with the Corporations Act 2001 including: i. giving a true and fair view of the consolidated entity’s financial position as at 30 June 2013 and of it’s performance for the year then ended; and ii. complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001; and b. there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable; 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 2013. This declaration is signed in accordance with a resolution of the Board of Directors. Dr Martin Blake Chairman Place: Perth, Western Australia Dated: 26 September 2012 48 49 Resonance Health Limited Annual Report 2013 INDEPENDENT AUDITOR’S REPORT To the members of Resonance Health Limited Report on the Financial Report We have audited the accompanying financial report of Resonance Health Limited (“the company”), which comprises the consolidated statement of financial position as at 30 June 2013, the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, notes comprising a summary of significant accounting policies and other explanatory information, and the directors’ declaration for the consolidated entity. The consolidated entity comprises the company and the entities it controlled at the year’s end or from time to time during the financial year. Directors’ responsibility for the financial report The directors of the company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that is free from material misstatement, whether due to fraud or error. In Note 1(c), the directors also state, in accordance with Accounting Standard AASB 101: Presentation of Financial Statements, that the financial report complies with International Financial Reporting Standards. Auditor’s responsibility Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. Those standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial report is free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the company’s preparation and fair presentation of the financial report in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report. Our audit did not involve an analysis of the prudence of business decisions made by directors or management. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Independence In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001. HLB Mann Judd (WA Partnership) ABN 22 193 232 714 Level 4, 130 Stirling Street Perth WA 6000. PO Box 8124 Perth BC 6849 Telephone +61 (08) 9227 7500. Fax +61 (08) 9227 7533. Email: hlb@hlbwa.com.au Website: http://www.hlb.com.au Liability limited by a scheme approved under Professional Standards Legislation HLB Mann Judd (WA Partnership) is a member of International, a worldwide organisation of accounting firms and business advisers. 48 49 Resonance Health Limited Annual Report 2013 Resonance Health Limited Annual Report 2013 Auditor’s Opinion In our opinion: (a) the financial report of Resonance Health Limited is in accordance with the Corporations Act 2001, including: (i) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2013 and of its performance for the year ended on that date; and (ii) complying with Australian Accounting Standards and the Corporations Regulations 2001; and (b) the financial report also complies with International Financial Reporting Standards as disclosed in Note 1(c). Report on the Remuneration Report We have audited the remuneration report included in the directors’ report for the year ended 30 June 2013. The directors of the company are responsible for the preparation and presentation of the remuneration report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the remuneration report, based on our audit conducted in accordance with Australian Auditing Standards. Auditor’s Opinion In our opinion the remuneration report of Resonance Health Limited for the year ended 30 June 2013 complies with section 300A of the Corporations Act 2001. HLB MANN JUDD Chartered Accountants N G NEILL Partner Perth, Western Australia 26 September 2013 50 51 Resonance Health Limited Annual Report 2013 Additional information for listed public companies The following additional information is disclosed in accordance with Section 4.10 of the Australian Stock Exchange Ltd Listing rules in respect of listed public companies only. The following information is supplied as at 28 September 2013. 1. Analysis of Shareholdings Distribution of Shareholders (ASX Code: RHT) Ordinary Shares Number of Ordinary Shares Held Number of holders Number of shares 1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 – and over 530 182 222 697 327 1,958 120,258 576,122 1,636,019 27,481,618 331,177,348 360,991,365 The number of shareholdings holding less than a marketable parcel of shares are 1,347. 2. Voting Rights Ordinary shares Each ordinary share is entitled to one vote when a poll is called, otherwise each member present at a meeting or by proxy has one vote on a show of hands. 3. Twenty Largest Shareholders of quoted Ordinary Shares Name Number of Ordinary Shares Percentage of Total Southam Investments 2003 Pty Ltd 65,414,622 1. 2. 3. The University Of Western Australia Timothy Guy St Pierre 4. Wanida Chau-Anusorn 5. 6. 7. 8. 9. 10. 11. Dr Simon Bell Mr Robert Panton Dr Franklyn Ives Mr Sean Watkins-Saxon Mr Helmut Rocker Mr William Grove Mr Kevin Deeves and Mrs Pauline Deeves 12. Walker Trusco Pty Ltd 13. 14. 15. 16. 17. 18. 19. Dr Martin Peter Blake Mr Harry Basle Mrs Michelle Watkins-Saxon and Mr Sean Saxon Mr Bruce Stevenson Mr Russell Mackenzie Mr Jeremy Hussein Rishani Blake Nominees Pty Ltd 20. Anahein Pty Ltd 4. Substantial shareholders 9,078,750 9,078,750 8,070,000 7,932,252 7,840,824 6,272,934 6,250,000 6,000,000 4,838,401 4,550,000 4,494,844 3,798,590 3,671,359 3,238,636 2,932,755 2,870,000 2,638,699 2,426,087 2,408,478 163,805,981 18.12 2.52 2.52 2.24 2.20 2.17 1.74 1.73 1.66 1.34 1.26 1.24 1.05 1.02 0.90 0.81 0.80 0.73 0.67 0.67 45.39 50 51 The names of substantial shareholders who have notified the Company in accordance with sections 709 and 710 of the Corporations Act 2001 are: Southam Investments 2003 Pty Ltd 65,414,622 ordinary shares Resonance Health Limited Annual Report 2013 Resonance Health Limited Annual Report 2013 This page has been left blank intentionally 52 PB Resonance Health Limited Annual Report 2013 Principal place of business Ground Floor | 278 Stirling Highway | Claremont | WA 6010 Telephone: +61 8 9286 5300 | Facsimile: +61 8 9286 1179 Postal address PO Box 1135 | Nedlands | WA 6909 Website and e-mail address www.resonancehealth.com | Email: info@ferriscan.com 

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