AnnuAl RepoRt 2014
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
Mr Adrian Bowers
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
110 Stirling Highway
NEDLANDS WA 6009
Tel: +61 8 9389 8033
Fax: +61 8 9389 7871
bankers
National Australia Bank Limited
solicitors
Steinepreis Paganin
Level 4, The Reed Building
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PERTH WA 6000
ResonAnce heAlth limited
Corporate InformatIon
Chairman and Managing Director’s Report
Snap Shot
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
Shareholders
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our business
Resonance Health specialises in the development
and delivery of medical imaging software and
services. The Company’s products 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.
Our most recent product HepaFat-Scan® has gained
regulatory clearance for the measurement of liver
fat in the US, Europe and Australia and a pipeline
product for the measurement of liver fibrosis is
in development.
AnnuAl RepoRt 2014
1
Contents Financial year 2014 saw strong growth
in FerriScan® sales and the regulatory
clearance of our new product
HepaFat-Scan®.
Our focus on the coming year is to
explore a range of commercialisation
initiatives for HepaFat-Scan® and
continue with our development of an
MRI liver fibrosis test.
Following the capital raise completed
mid-year, we have the funds to invest
in these two key initiatives.
We plan to invest funds into the
automation of HepaFat-Scan® with
the longer term objective of enabling
radiology facilities anywhere in the world
to use the HepaFat-Scan® technology in
a cloud based solution. This provides the
opportunity to deliver the HepaFat-Scan®
technology in a very cost effective way
whilst protecting the key aspects of the
underlying IP. Work has commenced to
investigate this solution.
In the meantime, we are providing
HepaFat-Scan® through the Company’s
traditional business model whereby
image data is uploaded to the
Company’s secure web facility and
Resonance Health provides the result
back to the radiology facility. This central
lab for image analysis is ideally suited
to the provision of services for clinical
trials where a centralised and quality
controlled analysis facility is required.
With a large number of therapies now
in development for fatty liver disease,
clinical trials provide a significant target
market for the Company.
Some of our existing customers are
now piloting HepaFat-Scan® and
providing us with feedback on the
service. We are also engaging with
medical practitioners across several
disciplines that have an interest in
the health consequences of fatty liver
disease. We engaged a consulting firm
to canvas a range of medical specialist
groups regarding the potential utility of
HepaFat-Scan® in their specific fields
of medicine. Apart from damage that
may be caused to the liver tissue there
are other serious consequences for
fatty liver disease. Fatty liver disease is
closely associated with diabetes and
recent studies have shown a direct
link to liver cancer without progressing
through liver fibrosis. Fatty liver
disease is also the number one risk
factor for cardiovascular disease.
The regulatory clearances gained
during the year for HepaFat-Scan®
are an important first step in the
commercialisation path. Our pilot site
customers are providing us invaluable
feedback and a validation study is
being planned to provide further peer
reviewed data to support the product.
Clinical studies and publications
regarding the value of HepaFat-Scan®
in specific clinical applications will be
important as we seek to have HepaFat-
Scan® included in clinical guidelines in
the future.
Resonance Health is delighted to be
invited to join the Forum on Facilitating
Drug Development for the Treatment
of Liver Disease. The US based
Forum provides the opportunity for
key opinion leaders and stakeholders
to work together in the development
of safe and effective therapies and
diagnostic tools to treat liver disease.
Stakeholders include the US National
Institutes of Health (NIH), the US
Food and Drug Administration (FDA),
specialist physicians, academics,
patient communities and major
pharmaceutical companies.
Investment will also continue into the
development of an MRI diagnostic test
for liver fibrosis. This continues to be a
key pillar of our liver diagnostic portfolio
and we have been buoyed by the results
we have achieved. Patients with liver
disease require a non-invasive test to
accurately grade the liver fibrosis so
appropriate treatment decisions can
be made. The earlier the diagnosis,
the better the outcome for the patient.
A liver biopsy is still the gold standard
test for diagnosing liver fibrosis. Due to
the risks involved in this procedure, it
is often delayed until liver damage has
become extensive.
The Company has conducted two
clinical studies in recent years that
have provided a complex and very
large amount of imaging data for the
liver fibrosis project. The work that
has been performed to date has
provided some promising results.
We are committing additional funds
to this project as we believe it has
the potential to deliver an exciting
new technology to address a large
unmet clinical need. We are also
actively seeking partnerships with
research groups, universities and
government agencies to partner with
the development of the technology.
Operationally, the 2014 financial year
delivered strong growth in the Services
Business Unit. Sales volumes were up
32% on the prior year and revenue was
$2.28 million, up 50%. A profit of $662k
was reported in the Services Business
Segment compared to a profit of $71k
in the prior year. The growth in the
number of radiology facilities providing
FerriScan® and increase in the number
of referring doctors provides a solid
base for growth.
A net loss after tax of $72k was reported
compared to a net loss in the prior year
of $204k. The company increased its
cash holdings from $1.1 to $2.1m at
the end of the reporting period. This
included funds received of $1.277m in
the 2014 financial year from the rights
issue and placement of shares. A further
$650k was received after 30 June 2014,
making the total cash contributed from
the capital raise of $1.927m.
The outlook for the company is good.
The FerriScan® business unit is cash
flow positive, profitable and growing.
HepaFat-Scan® for the diagnosis of
fatty liver disease has gained regulatory
clearance and is ideally suited for the
clinical trial sector for pharmaceutical
therapies in development for fatty
liver disease. The capital raised will
enable the company to continue its
progress towards the development of
an MRI test to accurately diagnosis the
presence and degree of liver fibrosis,
with the goal of replacing the need for
an invasive liver biopsy.
Liza Dunne
Managing Director
Dr Martin Blake
Chairman
2
ResonAnce heAlth limited
Chairman and managing direCtor’s report 23 consecutive months of year on year sales volume growth
50% increase in sales revenue from the previous year
50+ new radiology centres using FerriScan®
33% increase in referring clinicians from the previous year
FDA, TGA and CE Mark clearance for HepaFat-Scan®
Commercial roll out for HepaFat-Scan® commenced
10%
2011
14%
2012
2010
11%
2013
32%
2014
Annual Sales Volume Growth
32%
increase in
sales volumes
from 2012
AnnuAl RepoRt 2014
3
Snap Shot ferriscan®
Key Features of HepaFat-Scan®
HepaFat-Scan® provides an
accurate volume percentage of
fat in liver tissue.
HepaFat-Scan® has
been clinically validated
against independent biopsy
measurements of liver fat.
HepaFat-Scan® imaging can
be performed on standard 1.5
Tesla MRI scanners.
HepaFat-Scan® is a very quick
1 minute MRI scan.
HepaFat-Scan® is provided
as an image analysis service
with a fee charged for
each analysis performed.
There is no requirement for
radiology customers to purchase
new software or hardware.
HepaFat-Scan® results are
reliable and reproducible
between MRI centres and models
of scanners.
Large liver region is included in
the analysis, 300 times larger
than a liver biopsy sample
providing a more accurate result.
FerriScan® continues to be the global gold standard
method-of-choice for the measurement of liver
iron concentration.
In addition to clinicians utilising FerriScan® for the management of patients
with iron overload conditions, major pharmaceutical companies choose
FerriScan® for the assessment of iron chelators in clinical trials.
The regulated and quality-assured service model provided by Resonance
Health provides clinicians, pharmaceutical companies and patients with
accurate and reliable results with which to make informed treatment decisions.
In addition to FerriScan®, an increasing number of our customers are also
utilising our Cardiac T2* measurement service to assess the cardiac iron of
their patients. In some medical conditions cardiac iron overload can occur
once a certain liver iron threshold is reached. A Cardiac T2* measurement
can provide important information for assessing the risk of cardiac failure and
arrhythmia in patients with iron overload.
FerriScan® and Cardiac T2*
Sales Growth
Partnerships with
Pharmaceutical Companies
Resonance Health has been working
with pharmaceutical companies
developing iron chelation drugs for over
ten years. FerriScan® provides a definitive
measurement of a patient’s liver iron
concentration and is used to assess the
efficacy of iron chelation drugs under
development in clinical trials.
Resonance Health has also been
working in partnership with major
pharmaceutical companies to
improve the health outcomes of
patients suffering from iron
overload conditions. The program
involve pharmaceutical companies
purchasing FerriScans® so patients
can be accurately assessed for
iron overload.
hepafat-scan®
Resonance Health is delighted
to have achieved 23 consecutive
months of sales volume growth.
The 2013-2014 financial year had
a sales volume growth of 32%
compared to the previous year
which delivered a 50% growth in
revenue year on year.
FerriScan® availability
continues to spread globally
FerriScan® is now available in more
than 200 radiology centres in over
30 countries. The 2013-2014
financial year saw a substantial
increase in the number of new
FerriScan® centres with over 60
new facilities set up for FerriScan®
during the year.
FerriScan® also became available in
6 new countries during the year:
Algeria, Bulgaria, Israel, Kuwait,
Morocco and South Africa. 14
additional FerriScan® facilities came
on line in the UK during the year, 11 in
Australia, 8 in Italy and 7 in the USA.
The referrer base for FerriScan® and
Cardiac T2* continues to grow with a
33% increase in the number of referring
clinicians from the previous year. This
demonstrates the growing level of trust
and acceptance of the technology in
the medical industry.
4
ResonAnce heAlth limited
HepaFat-Scan® gained international regulatory clearance in
the US (Food and Drug Administration), Europe (CE Mark) and
Australia (Therapeutic Goods Administration) during the year.
The 2013-2014 financial year welcomed some exciting milestones for Resonance Health
with the launch of our new HepaFat-Scan® technology. HepaFat-Scan® is a software
solution that enables the accurate measurement of liver fat using MRI scanners.
HepaFat-Scan® can be used for the screening, diagnosis, treatment planning and
monitoring of patients in a variety of clinical conditions that involve elevated liver fat.
Year in review 2014 Key Features of HepaFat-Scan®
Fatty Liver Disease
Fatty liver disease is a build-up of excess fat in the liver cells. In some cases, fatty
liver disease damages the organ and leads to serious complications such as liver
cirrhosis and cancer. Risk factors for fatty liver disease include overweight and
obesity, diabetes and elevated triglyceride levels. The damage caused by fatty
liver disease can often be halted or reversed if diagnosed before damage to the
liver has occurred. HepaFat-Scan® enables patients to be accurately diagnosed
for fatty liver disease utilising MRI scanners.
Fatty liver disease is a major healthcare burden in developed countries. The
prevalence of the disease is expected to increase with the global obesity epidemic
and the trend in developing countries towards the Western lifestyles.
Fatty liver disease is projected to be the
leading cause of liver transplants in the
US by 2020.
An estimated one in five people in the United Kingdom have
Non-Alcoholic Fatty Liver Disease (NAFLD). The cost to the
National Health Service is estimated to be £4.2 billion and will
be double that by 2050.
An estimated 20%-30%
of the US population
has fatty liver disease
The prevalence of NAFLD in urban India
is 20-30% and accounted for almost 50%
of the cases of liver cirrhosis
The prevalence
of fatty liver
disease in China
has doubled in
the last 10 years
5.5 million
Australians have
fatty liver disease
including 40% of all
adults over 50.
In the United States, liver
biopsies performed on potential
liver donors revealed that 20% of
donors were ineligible for organ
donation based on the degree of
the steatosis (>30%).
Diagnostic Advantage of
HepaFat-Scan®
A liver biopsy is the gold stand test
to diagnose fatty liver disease. Due
to the risks involved in the procedure,
imaging alternatives are preferred. An
ultrasound is often used to detect the
presence of fat in the liver. However,
ultrasound can only detect very high
levels of fat (>30%) yet liver fat levels
over 5% are considered abnormal.
HepaFat-Scan® provides the
medical community with a safe,
non-invasive accurate measurement
of the percentage of the liver that is
fat. Small changes can be detected
so improvements can be assessed
over time.
AnnuAl RepoRt 2014
5
Year in review 2014 Clinical Applications for HepaFat-Scan®
HepaFat-Scan® may be used in both adults and paediatrics in a variety of clinical setting where a definitive measurement of liver
fat is required. These may include the following:
A definitive fatty liver
disease diagnosis and
for patient education
and counselling.
Screening for the suitability
To monitor a patient
of living donors for liver
transplants. HepaFat-Scan®
may assist in determining the
viability of the liver without
using liver biopsy.
undergoing an intervention
program (e.g. weight loss
program).
Liver fat analysis on
patients already being
screened or monitored for
liver fibrosis or cirrhosis.
Monitoring intervention
programs such as pre
and post-operative
bariatric surgery.
Monitor patients at risk of
developing diabetes as
improvements in NAFLD have
been found to directly reduce
the development of diabetes.
Liver surgery planning
To screen patients
as high levels of liver fat
can have a detrimental
outcome on surgery.
prior to prescribing known
hepatotoxic medications.
Monitor patients at risk
of cardiovascular disease.
NAFLD is the leading risk
factor for CVD.
Pharmaceutical
Therapies for NAFLD
Whilst there are currently no FDA
approved drugs for NAFLD there are
several drug candidates being studied
to address this growing epidemic.
HepaFat-Scan® provides a safe,
accurate, readily available alternative to
diagnose patients with fatty liver disease
and to assess the outcome of patients
in clinical trials. Resonance Health has
extensive experience in providing image
services in multicentre clinical trials and
is ISO 13485 quality certified.
Once new therapies come to
market to treat fatty liver disease,
HepaFat-Scan® will provide a non-
invasive, safe alternative to diagnose
patients and monitor their outcomes.
in the pipeline – liver
fibrosis Diagnostic tool
The development of an MRI based
method to assess liver fibrosis continues
to be part of the company’s strategic
focus on developing diagnostic products
to address liver disease. The current
gold standard diagnostic tool for liver
fibrosis is a liver biopsy. Our goal is
to develop an accurate non-invasive
solution to diagnose and grade liver
fibrosis that would provide patients with a
significantly better option for their disease
management that is currently available.
Positive progress was made towards
the development of a liver fibrosis
diagnostic tool and collaborations with
research partners are providing further
advances towards this goal.
How the HepaFat-Scan® Service Works
Following a 2-3 minute scan, patient image data are transmitted electronically to Resonance Health’s
central image analysis facility over a secure network. The HepaFat-Scan® analysis process is applied
to provide the volume % of fat in tissue.
MRI images
transmitted
securely to
Resonance Health
Analysis Centre
HepaFat-Scan® liver fat
concentration report available for
secure download within target
time of 48 hours
Patient scanned at MRI Centre
HepaFat-Scan® analysis process
applied to images received
6
ResonAnce heAlth limited
HepaFat-ScanTM Report
Report #:
1400001
Patient ID:
C123456
Patient name: C123456 (de-identified)
Birth date:
20 Jan 1998
Scan date:
07 August 2014
Analysis date: 20 August 2014
Referrer:
MRI Centre:
Dr Doctor
MRI Central
Volume fraction of fat in liver: 9.6%
The outline represents the liver region used for the HepaFat-Scan analysis.
Authorised by: Service Centre Manager
Resonance Health Analysis Services Pty Ltd www.resonancehealth.com
0805 ARTG : 223853 510(k): K122035
Year in review 2014
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 2014. In order
to comply with the provisions of the Corporations Act 2001, 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
Mr Simon Panton
Position:
Chairman — Independent and Non-
Executive (appointed as Director 4
October 2007 and as Chairman 16
December 2010)
Experience:
Dr Blake is a Radiologist and Nuclear
Physician and brings significant
technical and industry experience
to Resonance Health. Dr Blake
received FAANMS as a post nominal
in recognition of his Nuclear Medicine
Specialist training undertaken in 1994
& 1995.
He has been a Partner of Perth
Radiological Clinic since 1997
and is currently the Chairman
of that Company.
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
Position:
Managing Director — Executive
(appointed 23 October 2008)
Position:
Director — Non-Executive
(appointed 5 October 2009)
Experience: Mr Panton has been
a strong supporter of the Company
and the FerriScan® technology over
a number of years and is a major
shareholder of Resonance Health.
Mr Panton brings skills in business
and marketing having run his own
successful business.
Other current directorships:
None
Former directorships in last 3 years:
None
Special responsibilities:
Member of the Audit Committee
Member of the Remuneration Committee
Experience:
Ms Dunne joined Resonance Health
in October 2003 and has been
actively involved in all aspects of
the business including business
development, commercialisation of
FerriScan®, developing alliances with
pharmaceutical industry partners and
obtaining regulatory approval in various
countries.
Ms Dunne has in depth experience
in senior positions across industry.
She worked for IBM for eleven
years in financial, marketing and
management positions and spent five
years with KPMG Consulting 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
AnnuAl RepoRt 2014
7
DIRECTORS’ REPORT
Dr Timothy St Pierre
B.Sc(Hons), PhD
Dr Jason Loveridge
B.Sc, PhD, FRSM
Mrs Naomi Haydari
B.Bus, B SSc, CPA
Position:
Director — Executive
(appointed 21 August 2006)
Position:
Director — Non-Executive
(appointed 7 February 2013)
Experience:
Dr St Pierre is widely published in the
field of iron in medicine and biology
and has a reputation as a key opinion
leader in the understanding of the
fundamental properties of the iron
deposits that occur in iron overload
diseases. Dr St Pierre, a Professor at
The University of Western Australia,
led the team which developed the
FerriScan® technology. Dr St Pierre
has strong links with international
key opinion leaders in the field of
iron overload diseases and regularly
participates in international research
collaborations. Dr St Pierre won
a Clunies Ross Award from the
Australian Academy of Technological
Sciences and Engineering for his work
on non-invasive measurement of tissue
iron deposits.
Experience:
Dr. Loveridge FRSM has a Ph.D. in
Biochemistry, a B.Sc. in Biochemistry
and Microbiology (Class II/I Honours)
and is a Fellow Royal Society of Medicine.
Dr. Loveridge has been working with
young, growth orientated businesses
in the biotech and medtech industries
for over 20 years. As an active venture
investor he established a lengthy track
record of successful participation
in European, US and Israeli based
healthcare companies. Based in
Europe he also has considerable
international experience at board level
and a particular interest in business
development, mergers & acquisitions.
Other current directorships:
None
Other current directorships:
None
Former directorships in last 3 years:
None
Former directorships in last 3 years:
None
Special responsibilities:
None
Special responsibilities:
Member of the Audit Committee
Member of the Remuneration
Committee
Position:
Company Secretary (on maternity leave)
Experience:
Mrs Haydari has experience in
managing the financial obligations
of ASX listed corporations across a
diverse range of industries.
Mrs Haydari holds a Business Degree
(Accounting), a Social Science Degree
and is a qualified CPA.
Mrs Haydari commenced maternity
leave effective 28th November 2013.
Mr Adrian Bowers
B.Bus, CPA,
Chartered Secretary
Position:
Company Secretary acting while Mrs
Haydari is on maternity leave.
Experience:
Mr Bowers has experience in
managing the financial affairs of public
corporations across a diverse range of
industries.
Mr Bowers holds a Bachelor of
Business, is a CPA and qualified
Chartered Secretary.
8
ResonAnce heAlth limited
DIRECTORS’ REPORT interests in the shares
of the company
The following relevant interests in
shares of the Company were held by
the directors during the period. There
has been no change in directors’ and
executives’ shareholdings to the date of
this report.
Number of fully paid ordinary shares
6,464,677
3,253,385
65,960,972
-
9,078,750
84,757,784
Directors
Dr M Blake
Ms L Dunne
Mr S Panton
Dr J Loveridge
Dr T St Pierre
Total
Executives
Mrs N Haydari
Total
incentive shares
and options
review of
operations
FerriScan®:
FerriScan® is a patent protected
software medical device used to
assess the amount of iron in the
liver through the analysis of MRI
images. The FerriScan® software is
used at the Company’s ISO 13485
certified central facility to provide an
image analysis and reporting service
to hospitals and pharmaceutical
companies around the world. We
are currently providing FerriScan®
analysis and reporting services to
clients in over 20 countries and in
the last 12 months we have seen
considerable growth in the number of
FerriScan® clients.
-
-
During the year sales volumes
increased 32% over the previous
financial year and over 50 new
radiology facilities were set up for
FerriScan® imaging. Collaborative
programs with pharmaceutical
companies have expanded the
availability of the FerriScan® services to
new markets.
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
The Company’s business involves the
development and commercialisation
of technologies and services for the
quantitative analysis of radiological
images in a regulated and quality
controlled environment.
The Company’s core product is
FerriScan®, a non-invasive liver diagnostic
technology used for the measurement of
iron in the liver.
Sales revenue for the year ended
30 June 2014 was $2,284,565
representing an increase of 50% from
the previous year’s sales revenue of
$1,527,188. The Company completed
a record number of 5,596 FerriScan®
images up 32% from prior year’s 4,247
images. Pre-paid revenue received
in the prior year of $313,805 was
earned for accounting purposes and
recognised as revenue during the
current year.
Receipts from customers were
$2,179,241 up 17% from the previous
year’s receipts.
Variations in volume growth and revenue
growth are the result of changes in the
mix of services provided. Contracts
with pharmaceutical companies
include project management and data
management services in addition to
the FerriScan® analysis and reporting
services. Growth in the routine use of
FerriScan® by hospitals does not include
these additional project related services.
HepaFat-Scan®:
HepaFat-Scan® is a software medical
device for the measurement of fat in
the liver addressing the rapidly growing
fatty liver market. HepaFat-Scan®
was cleared for marketing by the US
Food and Drug Administration (FDA)
in December 2013 and was listed on
the Australian Register of Therapeutic
Goods (ARTG) and gained the CE
Mark(European Community approval)
in May 2014 for marketing approval in
Europe. Commercialisation activities
have focused on the following activities:
Completion of a US market access
report which has expanded the
potential markets for HepaFat-Scan®
and is directing our initial target
marketing activities.
Engaging with the Company’s existing
customer base to use HepaFat-Scan®
for patients with fatty liver related
disorders. Several customers are now
piloting HepaFat-Scan® in the US and
Australia.
Engaging with pharmaceutical
companies developing therapies
to address fatty liver disease. The
Company’s ISO 13485 certified core
lab is ideally suited to provide services
for pharmaceutical companies
conducting clinical trials where a
determination of the amount of fat in
the liver is required. Resonance Health
has been providing services to clinical
trials for over 10 years.
An agreement has been reached in
principal with a leading US hospital
regarding an independent validation
study of HepaFat-Scan®.
Work has commenced to further
automate the use of the HepaFat-
Scan® software, enabling scale up
for large volume use. Many countries
in Asia are now experiencing a
rapidly growing prevalence of fatty
liver disease and the Company is
developing a solution to provide a
low cost option to these markets.
Liver Fibrosis:
Resonance Health is also developing
imaging tools for the quantification of
AnnuAl RepoRt 2014
9
DIRECTORS’ REPORT liver fibrosis using MRI technology.
A noninvasive alternative to a liver
biopsy to assess the degree of liver
fibrosis is a large unmet need.
The Company has conducted a
number of studies which have
shown some promising results.
The most recent work has focused
on the assessment of contrast-
enhanced images to detect subtle
features within the images which
distinguish fibrosis. Whilst this work
has not been finalised, to date it has
not provided results which are better
than those previously obtained. Using
non-contrast enhanced images, the
Company’s technology accurately
scored the level of liver fibrosis in
90% of the 29 cases. However,
when tested with a separate set
of images, the same results could
not be achieved. The Company is
undertaking further investigation
into understanding the less than
satisfactory results on the
second measurements.
While the Company’s liver fibrosis
product is not currently at a position
to be commercialised, the results
are encouraging and the Company is
still pursuing its objectives in regard
to the development of a unique and
novel MRI test to accurately assess
the degree of liver fibrosis.
financial summary
A net loss was recorded for the year
of $72,415 compared to a net loss of
$204,481 in the previous financial year.
Sales revenue was $2,284,565, an
increase of 50% over the prior year due
to an increase in the volume of work.
Total income was 35% higher than
the prior year. The Company received
no Export Market Development Grant
(EMDG) in the FY 2013/14 compared to
$146,051 received in the previous year.
The FerriScan® and Services Business
Segment reported a profit of $661,665
compared to a profit of $70,641 in
the previous financial year, an increase
of 836%.
Normal operating expenses (excluding
depreciation, amortisation, foreign
exchange expense and due diligence
onetime costs) were 3% lower than the
prior year. Total expenditure for the year
was $2,384,818 compared to the prior
year total expenditure of $2,070,539 for
the following reasons:
Year on Year difference
the Statement of Financial Position and
expenditure of $89,326 (2013: $34,677)
and amortisation expense, $70,874
(2013: $56,212) recognised in Research
and Development in the Statement
of Comprehensive Income and
$25,804 (2013: $46,821) recognised in
Employee Benefits.
($54,649)
Operating Results
Amortisation charges
are higher $89,326
(2013: $34,677)
Foreign exchange
expense of $53,879
compared to prior year
foreign exchange gain
of $156,584
Onetime charge for
due diligence cost of
$119,573
Other Items
Total
($210,463)
($119,573)
$70,406
($314,279)
The loss for the year also reflects a
reduced income tax benefit of $3,367
compared to $156,911 in the previous
financial year as the Group moves into
a tax paying position.
Resonance Health has cash at bank of
$2,097,607 at the end of the financial
year compared to $1,092,943 in the
previous financial year and has no debt.
Cash flows from operating activities
generated positive cash of $64,239. This
excludes cash expenditure of $94,629
associated with the due diligence of a
potential acquisition target.
No Research and Development Tax
Rebate was received in the FY 2013/14
year compared to $188,645 received in
the FY 2012/13. A rebate of $115,949
has been recorded as part of other
receivables at balance date.
The Company raised $1,277,521 (less
costs) via the issue of 25,550,419
million shares at 5 cents per share.
Research and development
expenditure focused on the Company’s
HepaFat-Scan® and fibrosis products
totalled $376,409 during the year
(2013: $343,047). This comprised
capitalised development costs of
$190,404 (2013: $205,337) that are
recognised as an intangible asset in
The net loss of the consolidated entity
for the financial year after tax was
$72,415 (2013: $204,481).
Significant Changes in State of Affairs
There were no significant changes in
the state of affairs of the Company
during the financial year, other than as
set out in this report.
Significant Events After
Balance Date
On 12 September 2014 as part of the
Shortfall Entitlement, the Company
placed 13 million shares at $0.05
per share. This raised a further cash
amount of $650,000.
Likely Developments and Expected
Results of Operations
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 in unreasonable prejudice to the
Company. Accordingly, this 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
The Company has agreed to indemnify
all the directors and secretaries of the
Company for any liabilities to another
10
ResonAnce heAlth limited
DIRECTORS’ REPORT person (other than the Company or
related body corporate) that may arise
from their position as directors of the
Company and its controlled entities,
except where the liability arises out of
conduct involving a lack of good faith.
During the financial year the Company
paid a premium of $13,000 (2013:
$13,000) to insure the directors and
secretaries of the Company and
its controlled entities against any
liability incurred in the course of their
duties to the extent permitted by
the Corporations Act 2001. It is not
possible to apportion the premium
between amounts relating to the
insurance against legal costs and those
relating to other liabilities.
remuneration report
(auDiteD)
This report outlines the remuneration
arrangements in place for the key
management personnel of Resonance
Health Limited for the financial year
ended 30 June 2014. The information
provided in this remuneration report has
been audited as required by Section
308 (3C) of the Corporations Act 2001.
Key management personnel 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.
Key Management Personnel
(i) Directors
Dr Martin Blake – Chairman
Ms Liza Dunne – Managing Director
Mr Simon Panton
Dr Timothy St Pierre
Dr Jason Loveridge
(ii) executives
Mrs Naomi Haydari - Company
Secretary (on Maternity Leave)
Remuneration Policy
The Board’s policy for determining the
nature and amount of remuneration for
Board members and senior executives
of the consolidated entity is as follows:
•
set competitive remuneration
packages to attract the highest
calibre of employees in the
context of prevai ling 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 maximum
stakeholder benefit from the
retention of a high quality board
and executive team.
The Board of Resonance Health
Limited believes the 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.
Remuneration Committee
Non-executive Director
Remuneration
The Board seeks to set aggregate
remuneration at a level that provides
the Company with the ability to attract
and retain directors of the highest
calibre, whilst incurring a cost that is
acceptable to 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 paid to any of the
directors and corporate performance.
The Remuneration Committee of the
Board of Directors of the Company
is responsible for determining and
reviewing compensation arrangements
for directors and the executive team.
Executive Remuneration
Remuneration consists of fixed
remuneration and variable
remuneration.
The remuneration policy, setting the
terms and conditions for the executive
directors and other senior executives,
was developed by the remuneration
committee and approved by the Board.
The remuneration committee
reviews executive packages
annually 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
In accordance with best practice
Corporate Governance, the structure
of non-executive director and
executive remuneration is separate
and distinct.
(i) fixed remuneration
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
advice where necessary.
All executives (except Dr St Pierre)
receive a base salary (which
is based on factors such as
length of service and
experience), superannuation
and fringe benefits.
Executives receive a
superannuation guarantee
contribution required by the
government, which for the year
is 9.25%, and do not receive any
other retirement benefits.
AnnuAl RepoRt 2014
11
DIRECTORS’ REPORT
(ii) variable remuneration
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 cost
to the Company and expensed
or capitalised. Securities given to
directors and executives are valued
as the difference between the
market price of those shares and
the amount paid by the director or
executive. There are currently no
securities on issue.
Executive Officer’s Employment
Agreements
Ms Dunne was appointed to the role
of Managing Director of Resonance
Health Ltd on 23 October 2008. Her
employment 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. Mrs
Haydari resigned as Company
Secretary on 28 November 2013 to
take 12 months maternity leave. 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
one months notice for termination or
resignation without cause.
Consultancy Services Agreement for
Executive Director Dr Tim St Pierre
The Company has an agreement with
The University of Western Australia (UWA)
for consulting services provided by Dr St
Pierre. Under this agreement consulting
services provided for duties of Chief
Scientific Officer totalling $67,119 (2013:
$94,544) and no fixed fee for his services
as a non-executive director (2013: $nil)
were incurred during the financial year.
These amounts are included in Dr Tim
St Pierre’s remuneration disclosed in the
following table.
Details of remuneration for year enDeD 30 June 2014
The remuneration for key management personnel of the consolidated entity during the year was as follows:
Short-term
Employee
Benefits
Post
Employment
Benefits
Equity
Total
Salary &
Fees
$
Superannuation
Contributions
$
Shares/
Options
$
$
Performance
Related
%
Non-Executive Directors’ remuneration
Dr M Blake
Mr S Panton
Dr J Loveridge
Total
Executive Directors’ remuneration
Ms L Dunne
Dr T St Pierre1
Total
Executive Directors’ remuneration
Mrs N Haydari2
Total
54,920
27,460
45,000
127,380
250,000
67,119
317,119
59,411
59,411
5,080
2,540
-
7,620
23,125
-
23,125
4,460
4,460
-
-
-
-
-
-
-
-
-
60,000
30,000
45,000
135,000
273,125
67,119
340,244
63,871
63,871
-
-
-
-
-
-
-
-
-
1 Dr St Pierre’s remuneration represents director’s 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 commenced maternity leave effective 28th November 2013.
12
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DIRECTORS’ REPORT
Details of remuneration for year enDeD 30 June 2013
The remuneration for key management personnel of the consolidated entity during the year was as follows:
Short-term
Employee
Benefits
Post
Employment
Benefits
Equity
Total
Salary &
Fees
$
Superannuation
Contributions
$
Shares/
Options
$
$
Performance
Related
%
Non-Executive Directors’ remuneration
Dr M Blake
Mr S Panton
Total
Executive Directors’ remuneration
Ms L Dunne
Dr T St Pierre1
Total
Executive Directors’ remuneration
Mrs N Haydari
Total
55,046
33,639
12,500
101,185
250,000
94,544
344,544
75,000
75,000
4,954
3,028
-
7,982
22,500
-
22,500
6,750
6,750
-
-
-
-
-
-
-
-
-
60,000
36,667
12,500
109,167
272,500
94,544
367,044
81,750
81,750
-
-
-
-
-
-
-
-
-
1 Dr St Pierre’s remuneration represents director’s fees earned during the financial year and consulting fees for duties as Chief
Scientific Officer paid to The University of Western Australia in full.
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.
Balance
1/7/2013
Received as
Remuneration
Net Change
Other*
Received during
the year on
exercise of options
Balance
30/6/2014
Directors
Dr M Blake
Ms L Dunne
Dr T St Pierre
Dr J Loveridge
6,224,677
3,153,385
9,078,750
-
Mr S Panton
65,960,972
Total
84,417,784
-
-
-
240,000
100,000
-
-
-
340,000
-
-
-
-
-
-
6,464,677
3,253,385
9,078,750
-
65,960,972
84,757,784
AnnuAl RepoRt 2014
13
DIRECTORS’ REPORT 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.
Balance
1/7/2013
Received as
Remuneration
Net Change
Other*
Received during
the year on
exercise of
options
Balance
30/6/2014
Executives
Mrs N Haydari
Total
-
-
-
-
-
-
-
-
-
-
Key management personnel options and rights holdings
No options or rights are held by any member of KMP.
There were no other transactions with KMP’s during the year.
End of Remuneration Report
14
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DIRECTORS’ REPORT 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
2014, and the numbers of meetings attended by each director were:
Directors Meetings
Audit Committee Meetings
Remuneration Committee
Meetings
Number
eligible
to attend
Number
attended
Number
eligible
to attend
Number
attended
Number
eligible
to attend
Number
attended
Dr M Blake
Ms L Dunne
Mr S Panton
Dr T St Pierre
Dr J Loveridge
10
10
10
10
10
Corporate Governance
10
10
10
8
10
2
-
2
-
2
2
-
2
-
2
2
-
2
-
2
2
-
2
-
2
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.
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.
Auditor Independence and Non-
audit Services
This report is made in accordance with
a resolution of the Board of Directors.
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 20 and
forms part of this Directors’ Report for
the year ended 30 June 2014.
Non-audit Services
Details of amounts paid or payable
to the auditor for non-audit services
Dr Martin Blake
Chairman
Perth, Western Australia
Dated this 26 September 2014
AnnuAl RepoRt 2014
15
DIRECTORS’ REPORT 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.
16
ResonAnce heAlth limited
CORPORATE GOVERNANCE STATEMENT 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.
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
Nomination and Remuneration Committee consists of three Non-executive Directors.
The number of meetings attended by each member of the Nomination and Remuneration Committee are detailed in the
Directors’ Report.
AnnuAl RepoRt 2014
17
CORPORATE GOVERNANCE STATEMENT 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.
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
(on Maternity Leave) and two Managers of the Company are women.
Currently, Resonance Health has women who hold 20% of total Board membership. Additionally 32% of all current employees
are women and 26% 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.
18
ResonAnce heAlth limited
CORPORATE GOVERNANCE STATEMENT 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
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 2014 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. The Chairman of the Board is also Chairman of the committee which is not in accordance with Principle 4.2, however
given the size of the company and the Chair’s Independent status it is reasonable and acceptable.
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.
AnnuAl RepoRt 2014
19
CORPORATE GOVERNANCE STATEMENT 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.
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.
20
ResonAnce heAlth limited
CORPORATE GOVERNANCE STATEMENT 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.
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 2014 the Nomination and Remuneration Committee met two 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.
AnnuAl RepoRt 2014
21
CORPORATE GOVERNANCE STATEMENT -20-
RESONANCE HEALTH LIMITED
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
2014, 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.
Perth, Western Australia
26 September 2014
L Di Giallonardo
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.
22
ResonAnce heAlth limited
Note
2(a)
2(b)
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
Due diligence expense
Other expenses
Loss before income tax benefit
Income tax benefit
3
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 income/(loss) for the year, net of tax
Total comprehensive loss for the year attributable to owners
of the parent
Consolidated
2014
$
2013
$
2,284,565
24,471
2,309,036
(1,323,033)
(63,877)
(70,874)
(19,242)
(89,326)
(173,232)
(139,345)
(53,879)
(119,573)
(332,437)
(75,782)
3,367
(72,415)
1,527,188
181,959
1,709,147
(1,376,376)
(61,068)
(56,212)
(18,475)
(34,677)
(218,641)
(146,186)
156,584
-
(315,488)
(361,392)
156,911
(204,481)
(9,249)
9,827
578
(59,079)
(61,495)
(120,574)
(71,837)
(325,055)
Basic (loss) per share (cents per share)
5
(0.02)
(0.1)
The accompanying notes form part of these financial statements.
AnnuAl RepoRt 2014
23
STATEMENT OF COMPREHENSIVE INCOMEFOR THE YEAR ENDED 30 JUNE 2014 Consolidated
Note
2014
$
2013
$
7
8
9
10
11
12
9
13
3
15
14
15
2,097,607
499,399
24,602
2,621,608
29,448
1,563,284
3,004
59,099
1,092,943
388,631
24,524
1,506,098
44,302
1,462,204
3,004
59,099
1,654,835
1,568,609
4,276,443
3,074,707
460,429
144,316
48,610
244,480
897,835
40,013
40,013
407,985
31,734
-
313,805
753,524
80,222
80,222
937,848
833,746
937,848
833,746
16(a)
68,703,510
(105,066)
(65,259,849)
3,338,595
67,534,039
(105,644)
(65,187,434)
2,240,961
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
Provisions
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
24
ResonAnce heAlth limited
STATEMENT OF FINANCIAL POSITIONFOR THE YEAR ENDED 30 JUNE 2014
Consolidated
Issued
Capital
$
Foreign
Currency
Translation
Reserve
$
Option
Reserve
$
Accumulated
Losses
$
Total
Equity
$
Balance at 1 July 2012
67,534,039
(51,354)
66,284
(64,982,953)
2,566,016
Loss for the year
Other comprehensive loss
Total comprehensive loss 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
Loss for the year
Other comprehensive income
Total comprehensive income/(loss)
for the year
-
-
-
-
578
578
Shares issued during the yearof foreign loan
1,169,471
-
-
-
-
-
(72,415)
(72,415)
-
578
(72,415)
(71,837)
-
1,169,471
Balance at 30 June 2014
68,703,510
(171,350)
66,284
(65,259,849)
3,338,595
The accompanying notes form part of these financial statements.
AnnuAl RepoRt 2014
25
STATEMENT OF CHANGES IN EQUITYFOR THE YEAR ENDED 30 JUNE 2014 Consolidated
Note
2014
$
2013
$
Inflows/(Outflows)
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Due diligence expense
Grants received
Interest received
Income tax received
Net cash (used in)/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
Cash flows from financing activities
Share issues
Share issue costs
Net cash provided by financing activities
Net increase/(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
2,179,241
(2,134,816)
(94,629)
-
19,814
-
(30,390)
(4,389)
(190,406)
(194,795)
1,277,521
(48,672)
1,228,849
1,003,664
1,000
1,092,943
2,097,607
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
26
ResonAnce heAlth limited
STATEMENT OF CASH FLOWSFOR THE YEAR ENDED 30 JUNE 2014
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 Company’s business involves the development and commercialisation of
technologies and services for the quantitative analysis of radiological images in a regulated and quality controlled environment.
(b) Adoption of new and revised standards
In the year ended 30 June 2014, 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 2014. 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 2014.
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.
AnnuAl RepoRt 2014
27
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2014 note 1: statement of significant accounting policies
(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.
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 10% which includes a risk component, 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 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.
28
ResonAnce heAlth limited
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2014 note 1: statement of significant accounting policies
(g) Foreign currency translation (Continued)
The functional currency of the foreign operation Resonance USA Inc. is United States dollars (US$). As at the reporting date
the assets and liabilities of this subsidiary are translated into the presentation currency of Resonance Health Limited at the rate
of exchange ruling at the balance 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 the Statement of Comprehensive Income.
(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.
AnnuAl RepoRt 2014
29
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2014
note 1: statement of significant accounting policies
(k) Income tax (Continued)
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.
30
ResonAnce heAlth limited
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2014 note 1: statement of significant accounting policies
(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 cashgenerating 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 adjusted risk 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 statement of
comprehensive income 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.
(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.
AnnuAl RepoRt 2014
31
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2014 note 1: statement of significant accounting policies
(p) Financial assets (Continued)
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-tomaturity
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.
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 expired.
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.
32
ResonAnce heAlth limited
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2014
note 1: statement of significant accounting policies
(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. Such impairment loss should not be reversed in subsequent periods.
(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.
(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.
AnnuAl RepoRt 2014
33
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2014
note 1: statement of significant accounting policies
(s) Plant and equipment (Continued)
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 areexpected
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 the statement of comprehensive income 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
have been demonstrated:
The technical feasibility of completing the intangible asset so that it will be available for use or sale;
The intention to complete the intangible asset and use or sell it;
•
•
• 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. Trade and other payables are presented as current liabilities unless payment is not due within 12 months.
(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.
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
34
ResonAnce heAlth limited
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2014
note 1: statement of significant accounting policies
(w) Provisions (Continued)
estimate can be made of the amount of the obligation. Provisions are not recognised forfuture 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 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.
(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.
AnnuAl RepoRt 2014
35
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2014 note 1: statement of significant accounting policies
(ab) Business combinations (Continued)
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 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
2014
$
2013
$
2,284,565
1,527,188
-
24,471
24,471
146,051
35,908
181,959
Rental expense on operating leases
101,997
98,074
36
ResonAnce heAlth limited
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2014
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
Consolidated
2014
$
2013
$
(112,582)
(31,734)
115,949
3,367
188,645
156,911
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
(75,782)
(361,392)
Income tax benefit calculated at 30%
Effect of expenses that are 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 capital raising costs recognised directly in equity
Tax refund receivable (research and development tax offset)
Income tax benefit reported in the statement of comprehensive income
22,735
(131,726)
886
-
(36,892)
32,415
115,949
3,367
108,418
(170,727)
(30,229)
(16,340)
77,144
-
188,645
156,911
AnnuAl RepoRt 2014
37
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2014 note 3: income tax benefit
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
2,200,004
2,200,889
Consolidated
2014
$
2013
$
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
Recognised balances
Current tax liability
Income tax payable
34,913
71,993
97,838
81,331
45,423
3,160
88,292
80,565
2,486,079
2,418,329
468,985
1,777
7,380
478,142
438,661
380
7,357
446,398
32,415
152,765
144,316
31,734
38
ResonAnce heAlth limited
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2014 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 2014.
Segment revenue
Sales to external customers
Interest revenue
Total segment revenue
Services
$
Research and
Development
$
Corporate
$
Total
$
2,284,565
-
2,284,565
-
-
-
-
2,284,565
24,471
24,471
24,471
2,309,036
Segment profit/(loss) before tax
661,665
(96,678)
(640,769)
(75,782)
Other segment information included in loss
Income tax benefit
Segment assets
Segment liabilities
-
3,367
-
3,367
499,399
849,225
1,563,282
2,213,762
4,276,443
-
88,623
937,848
The consolidated entity derived 38% of its external customer sales revenue from one major customer.
AnnuAl RepoRt 2014
39
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2014 note 4: segment reporting
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
$
Total
$
1,527,188
146,051
-
1,673,239
-
-
-
-
-
-
35,908
35,908
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
Segment assets
Segment liabilities
-
156,911
-
156,911
388,631
590,816
1,462,204
1,223,872
3,074,707
48,599
194,331
833,746
40
ResonAnce heAlth limited
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2014 note 5: earnings per share
Basic loss per share (cents per share)
(0.02)
0.1)
(a) Loss used in the calculation of basic earnings per share
(72,415)
(204,481)
Consolidated
2014
$
2013
$
2014
Number
2013
Number
(b) Weighted average number of ordinary shares for the purposes
of basic loss per share
363,572,613
360,991,365
The calculation does not include shares under option that could potentially dilute basic earnings per share in the future as no
options are on issue.
note 6: DiviDenDs
No dividend was paid or declared for the current or previous financial year.
note 7: cash anD cash equivalents
Deposits at call
Term deposits
Consolidated
2014
$
497,607
1,600,000
$2,097,607
2013
$
492,943
600,000
1,092,943
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.
AnnuAl RepoRt 2014
41
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2014 note 7: cash anD cash equivalents (continueD)
(i) Reconciliation of loss for the year to net cash flows from operating activities
Loss for the year
Non-cash flows in loss:
Depreciation
Amortisation of intangible assets
Changes in net assets and liabilities:
(Increase)/Decrease in receivables
(Increase)/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 (used in)/provided by operating activities
(ii) Financing facilities
Unsecured credit card:
Amount used
Amount unused
Net cash (used in)/provided by operating activities
Secured credit card:
Amount used
Amount unused
(iii) Cash balances not available for use
Security deposits:
Credit card
Lease premises
42
ResonAnce heAlth limited
Consolidated
2014
$
2013
$
(72,415)
(204,481)
19,242
89,326
(111,191)
(78)
-
1,469
112,582
(69,325)
(30,647)
18,475
34,677
240,927
2,446
(708)
29,669
31,734
(15,711)
137,028
Consolidated
2014
$
2013
$
11,073
8,927
20,000
1,202
18,798
20,000
12,834
7,166
20,000
493
19,507
20,000
Consolidated
2014
$
2013
$
20,000
39,099
59,099
20,000
39,099
59,099
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2014
note 8: traDe anD other receivables
Current
Trade receivables
Other receivables
Consolidated
2014
$
2013
$
365,592
133,807
499,399
342,203
46,428
388,631
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
Net cash (used in)/provided by operating activities
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
Consolidated
2014
$
2013
$
84,668
23,984
33,748
-
142,400
-
-
-
159,789
31,751
15,281
-
206,821
-
-
-
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 33% (2013: 29%) 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
2014
$
2013
$
24,602
24,524
59,099
59,099
AnnuAl RepoRt 2014
43
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2014 note 10: plant anD equipment
Fixtures and equipment
At cost
Less: Accumulated depreciation
Total property, plant and equipment
Reconciliation
Consolidated
2014
$
2013
$
273,820
(244,372)
29,448
269,432
(342,203)
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
44,302
4,388
(19,242)
29,448
37,152
25,625
(18,475)
44,302
1,687,285
(124,003)
1,563,282
1,496,881
(34,677)
1,462,204
1,462,204
190,404
(89,326)
1,563,282
1,291,544
205,337
(34,677)
1,462,204
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 liver fat assessment tool, further refinement of
FerriScan® and the next stage of development of a MRI based liver fibrosis 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.
44
ResonAnce heAlth limited
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2014 note 11: intangible assets (continueD)
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 margins and trends 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 a 10 year government bond.
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
Consolidated
2014
$
2013
$
14,337
(11,333)
3,004
136,618
323,811
460,429
14,337
(11,333)
3,004
256,494
151,491
407,985
(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
Current: Long service leave
Non-current: Long service leave
244,480
313,805
48,610
40,013
88,623
-
80,222
80,222
AnnuAl RepoRt 2014
45
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2014
note 15: provisions (continueD)
Reconciliation
Balance at the beginning of the year
Balance at the beginning of the year
Arising during the year
Carrying amount at the end of the year
note 16: issueD capital
Consolidated
2014
$
2013
$
80,222
8,401
88,623
68,488
11,734
80,222
Consolidated
2014
2013
Number
$
Number
$
Issued Paid Up Capital
386,541,784
68,703,510
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
360,991,365
67,534,039
Placement 17 April 2014 at $0.05 each
Rights issue 17 June 2014 at $0.05 each
Share capital issue costs
Balance at the end of the financial year
10,000,000
15,550,419
-
500,000
777,521
108,050)
386,541,784
68,703,510
46
ResonAnce heAlth limited
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2014 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/(liabilities)
Cash and cash equivalents
Loans and receivables
Available for sale financial assets
Other financial assets
Payables
Consolidated
2014
$
2013
$
2,097,607
499,399
3,004
59,099
(460,429)
1,092,943
388,631
3,004
59,099
407,985
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.
AnnuAl RepoRt 2014
47
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2014 note 17: financial instruments (continueD)
(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
Foreign currency sensitivity analysis
Liabilities
Assets
2014
$
1,904
12,905
-
2013
$
14,012
-
3,177
2014
$
2013
$
372,647
426,416
98,802
41,953
97,058
20,999
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
2014
$
2013
$
(33,704)
(7,809)
(3,814)
(37,491)
(8,823)
(1,620)
48
ResonAnce heAlth limited
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2014 note 17: financial instruments (continueD)
(f) Interest rate risk management
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
2014
Less than
one month
One to three
months
Total
$2,097,607
$59,099
$2,156,706
Weighted average effective interest rate
2.65%
3.42%
2013
$1,092,943
$59,099
$1,152,042
Weighted average effective interest rate
2.16%
4.57%
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.
(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 2014, the Group had one customer that accounted for 33% of all trade receivables (2013: 29%).
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
TT he 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.
AnnuAl RepoRt 2014
49
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2014 note 17: financial instruments (continueD)
(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.
2014
Non-interest bearing
2013
Non-interest bearing
(i) Liquidity risk management
Less than
one month
One to three
months
Three months
to one year
Total
227,613
127,509
105,306
460,429
236,412
42,960
128,613
407,985
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 standardised form.
The aggregate net fair values and carrying amounts of all financial assets and liabilities are disclosed in the financial statements.
note 18: commitments for expenDiture
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
2014
$
2013
$
106,173
255,386
361,559
113,922
9,501
123,423
A lease over premises was entered into effective 1 August 2011 and has been extended from 1 August 2014 for a further 3
years to July 2017.
50
ResonAnce heAlth limited
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2014 note 19: relateD party Disclosure
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
Equity holding
Resonance Health Analysis Services Pty Ltd
WA Private Health Care Services Pty Ltd
IVB Holdings Pty Ltd
Resonance USA Inc
Australia
Australia
Australia
Australia
Ordinary
Ordinary
Ordinary
Ordinary
100%
100%
100%
100%
Resonance Health Limited is the ultimate Australian entity and ultimate parent of the Group.
Transactions with related parties
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 repaid interest free loans to the Company totalling $356,000.
During the year the Company provided additional interest free loans to Resonance Health Analysis Services Pty Ltd
totalling $200,000.
During the year the Company provided additional interest free loans to Resonance USA Inc. totalling US$90,500 (2013: $200,000).
A cumulative impairment of these loans of $4,176,719 was recorded up to balance date (2013: $4,545,135).
During the year expenses were paid by Resonance Health Analysis Services Pty Ltd totalling $243,495 (2013: $145,848) on
behalf of the Company.
During the year expenses were paid by the Company on behalf of Resonance Health Analysis Services Pty Ltd totalling $43,146
(2013: $193,789).
AnnuAl RepoRt 2014
51
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2014 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
Loss for the year
Other comprehensive income
Total comprehensive loss
2014
$
2013
$
1,718,326
1,048,591
2,766,917
238,486
238,486
645,467
1,015,346
1,660,813
94,122
94,122
68,703,510
66,284
67,534,039
66,284
(66,241,363)
(66,033,632)
2,528,431
1,566,691
Year ended
30 June 2014
$
Year ended
30 June 2013
$
(207,731)
-
(207,731)
(584,016)
-
(584,016)
note 21: events subsequent to reporting Date
On 12 September 2014 as part of the Shortfall Entitlement, the Company placed 13 million shares at $0.05 per share which raised
a further cash amount of $650,000.
note 22: auDitors’ remuneration
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
Consolidated
2014
$
2013
$
49,950
37,750
87,700
48,895
45,400
94,295
52
ResonAnce heAlth limited
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2014 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)
Dr Tim St Pierre
Director (executive)
(ii) Executives
Mrs Naomi Haydari
Chief Financial Officer and Company Secretary
on maternity leave effective 28th November 2013.
Key management personnel remuneration has been included in the Remuneration Report section of the Directors’ Report.
(b) Key Management Personnel Compensation
Refer to the 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 2014.
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
2014
$
2013
$
503,910
35,205
-
539,115
520,729
37,232
-
557,961
AnnuAl RepoRt 2014
53
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2014
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 Group’s financial position as at 30 June 2014 and of its 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 2014.
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 2014
54
ResonAnce heAlth limited
DIRECTORS’ DECLARATION
-53-
RESONANCE HEALTH LIMITED
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 2014, 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 Group. The Group 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.
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.
AnnuAl RepoRt 2014
55
-54-
RESONANCE HEALTH LIMITED
Auditor’s opinion
In our opinion:
(a)
(b)
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 Group’s financial position as at 30 June 2014 and of its performance for
the year ended on that date; and
complying with Australian Accounting Standards and the Corporations Regulations 2001; and
(ii)
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 2014. 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 2014 complies with
section 300A of the Corporations Act 2001.
HLB Mann Judd
Chartered Accountants
L Di Giallonardo
Partner
Perth, Western Australia
26 September 2014
56
ResonAnce heAlth limited
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 additional information is supplied as at October 2014.
1. Analysis of Shareholdings
Distribution of Shareholders (ASX Code: RHT)
Number of Ordinary Shares Held
Ordinary Shares
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
536
180
241
847
397
2,201
115,926
554,231
1,796,766
34,034,376
364,701,268
401,202,567
The number of shareholdings holding less than a marketable parcel of shares are 893.
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.
AnnuAl RepoRt 2014
57
ShareholderS
3. Twenty Largest Shareholders of quoted Ordinary Shares
Name
Southam Investments 2003 Pty Ltd
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
Number of
Ordinary
Shares
65,414,622
16,557,577
Mr Kevin Deeves and Mrs Pauline Deeves
10,650,000
1
2
3
4
5
6
7
Mr Sean Watkins-Saxon
Timothy Guy St Pierre
The University Of Western Australia
Mr Gregory Peter Wilson
8 Wanida Chau-Anusorn
9
Mr Helmut Rocker
10 Mr Harry Basle
11 Mr Robert Panton
12 Walker Trusco Pty Ltd
13 MC Manangement Group Pty Ltd
14 Mr William Grove
15 Dr Martin Peter Blake
16 Mr Maximino Amoedo
17 ABN Amro Clearing Sydney Nominees Pty Ltd
18 Marcolongo Nominees Pty Ltd
19 Anahein Pty Ltd
20 Mr Bruce Stevenson
4. Substantial shareholders
Percentage
of Total
16.30
4.12
2.66
2.36
2.28
2.26
2.00
1.68
1.54
1.25
1.16
1.12
1.04
1.01
0.95
0.82
0.81
0.78
0.75
0.74
9,488,636
9,146,250
9,078,750
8,055,000
6,730,000
6,200,000
5,022,422
4,640,824
4,494,844
4,159,203
4,068,401
3,798,590
3,300,000
3,242,803
3,126,000
3,010,598
2,960,404
183,144,924
45.63
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
58
ResonAnce heAlth limited
ShareholderS
AnnuAl RepoRt 2014
59
Principal Place of Business
Ground Floor
278 Stirling Highway, Claremont WA 6010
Telephone: +61 8 9286 5300 | Facsimile: +61 9286 1179
Postal Address
PO Box 1135, Nedlands WA 6909
www.resonancehealth.com
info@ferriscan.com