Reliq Health Technologies
Annual Report 2021

Plain-text annual report

Resonance Health Limited ABN 96 006 762 492 Annual Report - 30 June 2021 Resonance Health Limited Contents 30 June 2021 Corporate Directory Review of Operations Directors' Report Auditor’s Independence Declaration Statement of Profit or Loss and Other 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 to the members of Resonance Health Limited Shareholder Information 2 3 5 17 18 19 20 21 22 54 55 59 1 Resonance Health Limited Corporate Directory 30 June 2021 Directors Dr Martin Blake - Non-executive Chairman Mr Mitchell Wells - Managing Director Mr Simon Panton - Non-executive Director Dr Travis Baroni - Non-executive Director Company secretary Mr Nicholas Allan Registered office Principal place of business Share register Auditor Solicitors Ground Floor Suite 2, 141 Burswood Road BURSWOOD WA 6100 T: +61 8 9286 5300 F: +61 8 9286 5399 Ground Floor Suite 2, 141 Burswood Road BURSWOOD WA 6100 T: +61 8 9286 5300 F: +61 8 9286 5399 Advanced Share Registry Ltd 110 Stirling Highway Nedlands WA 6009 Telephone: +61 8 9389 8033 Fax: +61 8 93897871 HLB Mann Judd (WA) Partnership Level 4 130 Stirling Street Perth WA 6000 Steinepreis Paganin Level 4, The Reed Building 16 Milligan Street Perth WA 6000 Bankers National Australia Bank Limited Stock exchange listing Resonance Health Limited shares are listed on the Australian Securities Exchange (ASX code: RHT) Website www.resonancehealth.com email: info@resonancehealth.com 2 Resonance Health Limited Review of Operations 30 June 2021 Resonance Health Limited (ASX: RHT) (“Resonance Health” or the “Company”) presents its Review of Operations for the year ended 30 June 2021. About Resonance Health Resonance Health is an Australian healthcare technology and services company, specialising in the development and delivery of noninvasive medical imaging software and services. The Company’s products are used globally by clinicians in the diagnosis and management of human diseases and by pharmaceutical and therapeutic companies in their clinical trials. Resonance Health has gained endorsement by leading physicians worldwide for consistently providing high quality quantitative measurements essential in the management of particular diseases. Resonance Health’s dedication to scientific rigour and quality management has enabled it to achieve regulatory clearances for a range of Software as a Medical Device (SaMD) products in the US, Europe, and Australia and to proudly carry ISO 13485 certification for the design and manufacture of medical devices. A number of these SaMD products incorporate the use of Artificial Intelligence (AI) in order to improve speed and efficiency of service delivery:    FerriScan® - provides an accurate measurement of liver iron concentration (LIC) through a non-invasive MRI-based technology, for use in the assessment of individuals with iron overload conditions. FerriScan is internationally recognised as the gold standard in LIC assessment FerriSmart® - an AI-driven system for the automated real-time measurement of LIC in patients using non-invasive MRI-based technology HepaFat-AI® - an AI-driven system for the automated real-time multi-metric measurement of liver fat in patients using non-invasive MRI-based technology, for use in the assessment of individuals with confirmed or suspected fatty liver disease The Company has an active development pipeline of additional medical imaging analysis products and services, including, Alert-PE®, an AI tool for the automated review of chest CT scans of patients with suspected pulmonary embolism. Sales Revenue Sales revenue for the year was $3.78 million, a 3% increase on the previous year of $3.67 million which was achieved despite the impact of COVID-19 due to global lockdowns and accessibility issues for patients to scanning centres during the global pandemic. Sales Revenue 31% of sales revenue for the year was derived from the United States and Canada with the UK contributing 21% and the balance spread across Europe, Australia and Asia. Commercial revenue accounted for 59% of total revenue with clinical trials and other studies making up the balance. Receipts from customers were $3.68 million, up 2% from the previous year’s result. $4.00M $3.50M $3.00M $2.50M $2.00M $1.50M $1.00M $0.50M - Net Profit After Tax FY 2018 FY 2019 FY 2020 FY 2021 The Company recorded a Net Profit after Tax for the year of $585,858, compared with a Net Loss after Tax for FY2020 of $715,076. Research and Development Activities Resonance Health recorded a number of significant achievements during the year in respect of its artificial intelligence (“AI”), imaging and molecular medicine R&D workstreams:  FerriSmart – The Company reached agreement for the incorporation of Resonance’s FerriSmart AI-based liver-iron concentration measurement tool into the Siemens Healthineers Digital Marketplace. This follows previous 3 Resonance Health Limited Review of Operations 30 June 2021    agreements allowing FerriSmart to be sold as part of 3DR’s post-processing services to their customers in the United States and via Blackford Analysis’s platform. HepaFat-AI – The Company achieved regulatory clearance from the US Food & Drug Administration (“FDA”), the Australian Therapeutic Goods Administration (“TGA”) and European CE Marking for HepaFat-AI, the Company’s fully automated AI-based liver fat quantification tool (see ASX announcements dated 9 December 2020, 18 February 2021 and 24 February 2021). In addition, the HepaFat-AI technology was integrated into channel partner Blackford Analysis’s platform during the year pursuant to an Alliance Partner Agreement (see ASX announcement 24 December 2020). Alert-PE – The Company continued to develop its Alert-PE tool, a radiological software tool that performs fully automated AI identification of pulmonary embolism (“PE”) using computer tomography pulmonary angiogram (“CTPA”) scans. The Company is progressing the Alert-PE product through validation of its performance and has recently (post period) lodged an application for a pre-submission meeting with the FDA. Antiviral Therapies Project - The Company has also progressed its molecular medicine R&D workstream aimed at treating liver-related diseases. Following testing the Company has selected a lead antisense oligonucleotide (“ASO”) compound which has been named AS3 and which is intended to target a human host protein essential to the lifecycle of numerous human viruses, including Hepatitis B (“HBV”). In a preclinical cell model of HBV infection, AS3 demonstrated statistically significant viral suppression compared to a control ASO. In view of the positive data and market opportunity, the Company has extended the testing program to include other important viral diseases and has commenced a liver dosing study in humanized liver mice. As part of these R&D workstreams, the Company received an R&D tax incentive of $242,334 for eligible R&D work expended by the Company for the financial year ended 30 June 2021. The Company continues to assess opportunities to expand its core business, with R&D expenditure targeted specifically towards the diversification of in-house R&D projects by establishing three key areas of focus, artificial intelligence, imaging, and molecular medicine. Cash at Bank Cash at Bank as at 30 June 2021 totaled $8.86 million, in comparison to the 30 June 2020 cash balance of $6.97 million which reflected strong Cash Flows from Operating Activities during the year of $1.17 million. The financial year included an R&D tax incentive refund of $242,334 and $1.25 million from the issue of fully paid ordinary shares on the exercise of options. The Company has no debt. Management Changes and Strategy for Growth $9.0M $8.0M $7.0M $6.0M $5.0M $4.0M $3.0M $2.0M $1.0M - Cash at Bank FY 2018 FY 2019 FY 2020 FY 2021 Mr. Mitchell Wells was appointed Managing Director on 28 June 2021 following the resignation of Ms. Alison Laws as CEO of Resonance Health. Mr. Wells commenced working with Resonance Health in April 2017. He initially provided strategy, contract, and corporate advisory services and in early 2018 he was invited to join the Board of Directors. He has served as a Director and a consultant of the Company since February 2018. Mr. Nicholas Allan was appointed Chief Financial Officer and Company Secretary during the year. Post year end, Mr. Ajay Nair was appointed as GM – Global Sales & Marketing. Going into FY2021 the Company is focused on pursuing organic revenue growth from its existing regulatory-approved product suite, building product and brand awareness in its current and new markets, pursuing strategic alliances to accelerate product distribution and progressing its R&D portfolio toward clinical validation and regulatory approval. 4 Resonance Health Limited Directors' Report 30 June 2021 The Directors present their report, together with the financial statements, on the consolidated entity (referred to hereafter as the 'Group') consisting of Resonance Health Limited (referred to hereafter as the 'Company' or 'parent entity') and the entities it controlled at the end of, or during, the year ended 30 June 2021. Directors The following persons were Directors of Resonance Health Limited during the whole of the financial year and up to the date of this report, unless otherwise stated: Dr Martin Blake Mr Mitchell Wells Mr Simon Panton Dr Travis Baroni 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. Dividends There were no dividends paid, recommended or declared during the current or previous financial year. Review of operations The profit for the Group after providing for income tax amounted to $585,858 (30 June 2020: loss of $715,076). Significant changes in the state of affairs Agha Shahzad resigned as the CFO and Company Secretary on 8 April 2021. Mitchell Wells was appointed as Company Secretary. Nick Allan was appointed as CFO and Company Secretary on 31 May 2021. The resignation of the CEO Alison Laws was announced on 4 June 2021 and her final day worked was 2 July 2021. Mitchell Wells transitioned to the role of Executive Director on 4 June 2021 and Managing Director effective 2 July 2021. 297,620 fully-paid ordinary shares were issued (subject to satisfaction of conditions) pursuant to the Licence Agreement with Telethon Kids Institute and Erasmus University Medical Centre on 11 June 2021. The Controlled Placement Agreement ("CPA") with Acuity Capital increased from $5m to $7.75m with the expiry extended to 31 July 2023. Following the increase and extension the available capacity under the CPA is $5m. There were no fees or costs associated with increase and extension of the CPA. On 30 June 2021 the following unlisted options were cancelled: ● ● 1,000,000 unlisted options exercisable at $0.10 on or before 1 January 2022 1,000,000 unlisted options exercisable at $0.125 on or before 1 January 2022 There were no other significant changes in the state of affairs of the Group during the financial year. 5 Resonance Health Limited Directors’ Report 30 June 2021 Matters subsequent to the end of the financial year Mr Mitchell Wells was appointed as Managing Director on 2 July 2021, following the resignation of CEO Ms Alison Laws. No other matter or circumstance has arisen since 30 June 2021 that has significantly affected, or may significantly affect the Group's operations, the results of those operations, or the Group's state of affairs in future financial years. Likely developments and expected results of operations Information on likely developments in the operations of the Group and the expected results of operations have not been included in this report because the Directors believe it would be likely to result in unreasonable prejudice to the Group. Environmental regulation The Group is not subject to any significant environmental regulation under Australian Commonwealth or State law. Information on Directors Name: Title: Qualifications: Experience and expertise: Other current directorships: Former directorships (last 3 years): Special responsibilities: Interests in shares: Interests in options: Dr Martin Blake Non-executive Chairman MBBS, FRANZCR, FAANMS, MBA, FAICD Dr Blake is a Radiologist and Nuclear Physician and brings significant technical and industry experience to Resonance Health. 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 Fellow of the Australian Institute of Company Directors, and holds directorships on a number of private Company boards. None None Chairman of the Remuneration Committee Member of the Audit and Risk Committee 6,464,677 ordinary shares 1,000,000 options exercisable at $0.150 on or before 28 November 2022 1,000,000 options exercisable at $0.175 on or before 28 November 2022 1,000,000 options exercisable at $0.200 on or before 28 November 2022 6 Resonance Health Limited Directors’ Report 30 June 2021 Name: Title: Qualifications: Experience and expertise: Other current directorships: Former directorships (last 3 years): Special responsibilities: Interests in shares: Interests in options: Name: Title: Experience and expertise: Other current directorships: Former directorships (last 3 years): Special responsibilities: Interests in shares: Interests in options: Name: Title: Experience and expertise: Other current directorships: Former directorships (last 3 years): Special responsibilities: Interests in shares: Interests in options: Mr Mitchell Wells Managing Director (appointed a Non-executive Director on 28 February 2018 and appointed Managing Director on 2 July 2021) L.LB, B.Comm, Dip. Aviation (CPL) Mr Wells is an experienced senior executive with commercial and legal experience in Australia, the United States of America and the United Kingdom. He has served as a Director and worked as a senior executive of public and private companies including ASX and US Nasdaq listed public companies. He has served as Chair of two non-profit organisations and he has previously served as the company secretary of two ASX listed public companies and as the corporate secretary of a US Nasdaq listed public company. Mr. Wells previously provided part-time consulting services to the Company before transitioning to Managing Director on 2 July 2021. None Lonestar Resources US Inc. – Nasdaq Listed US Public Company Member of the Audit and Risk Committee Member of the Remuneration Committee 600,000 ordinary shares 1,000,000 options exercisable at $0.150 on or before 28 November 2022 1,000,000 options exercisable at $0.175 on or before 28 November 2022 1,000,000 options exercisable at $0.200 on or before 28 November 2022 Mr Simon Panton Director — Non-Executive (appointed 5 October 2009) 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. None None Member of the Audit and Risk Committee Member of the Remuneration Committee 73,846,350 ordinary shares 1,000,000 options exercisable at $0.150 on or before 28 November 2022 1,000,000 options exercisable at $0.175 on or before 28 November 2022 1,000,000 options exercisable at $0.200 on or before 28 November 2022 Dr Travis Baroni Director — Independent and Non-Executive (appointed 25 November 2016) Mr Baroni has broad experience across industrial research, commercialisation of technology, asset valuations and investment banking services. He has managed innovation development and technology strategy in a large company setting as well as being an active investor in early stage investments. He has worked in investment banking, providing advisory services to equity capital market transactions, corporate research and valuations to clients. None None Chairman of the Audit and Risk Committee Member of the Remuneration Committee 350,000 ordinary shares 600,000 options exercisable at $0.150 on or before 28 November 2022 600,000 options exercisable at $0.175 on or before 28 November 2022 600,000 options exercisable at $0.200 on or before 28 November 2022 7 Resonance Health Limited Directors’ Report 30 June 2021 'Other current directorships' quoted above are current directorships for listed entities only and excludes directorships of all other types of entities, unless otherwise stated. 'Former directorships (last 3 years)' quoted above are directorships held in the last 3 years for listed entities only and excludes directorships of all other types of entities, unless otherwise stated. Company secretary Mr Nicholas Allan - B.Com ACA Position: Company Secretary and Chief Financial Officer (appointed 31 May 2021) Experience: Mr Allan is a Chartered Accountant with over 25 years’ experience in commerce, corporate advisory and public practice. Mr Allan has previously held several senior finance positions including Chief Financial Officer and Company Secretary of a number of ASX-listed public companies. Mr Mitchell Wells - L.LB, B.Comm, Dip. Aviation (CPL) Position: Company Secretary (appointed 8 April 2021) Mr Agha Shahzad Pervez - B.Sc (IT) Hons, M.Com (Accounting) Position: Company Secretary and Chief Financial Officer (appointed 29 November 2017 – resigned 8 April 2021) Experience: Mr Pervez has over ten years’ experience in managing the financial obligations of an ASX listed corporation. He joined Resonance Health in 2009 and has in-depth knowledge of all financial and operational aspects of the Company. Agha has also been responsible for the handling of EMDG rebates and R&D Tax Incentive claims for the last several years. Meetings of Directors The number of meetings of the Company's Board of Directors ('the Board') held during the year ended 30 June 2021, and the number of meetings attended by each Director were: Full Board Attended Held Remuneration Committee Audit and Risk Committee Attended Attended Held Held Dr M Blake Mr M Wells Mr S Panton Dr T Baroni 9 9 9 9 9 9 9 9 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 Held: represents the number of meetings held during the time the Director held office. Remuneration Report (audited) The remuneration report details the key management personnel remuneration arrangements for the Group, in accordance with the requirements of the Corporations Act 2001 and its Regulations. Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly, including all Directors. The remuneration report is set out under the following main headings: ● ● ● ● ● ● Principles used to determine the nature and amount of remuneration Details of remuneration Service agreements Share-based compensation Additional information Additional disclosures relating to key management personnel 8 Resonance Health Limited Directors’ Report 30 June 2021 Principles used to determine the nature and amount of remuneration The objective of the Group's executive reward framework is to ensure reward for performance is competitive and appropriate for the results delivered. The framework aligns executive reward with the achievement of strategic objectives and the creation of value for shareholders, and it is considered to conform to the market best practice for the delivery of reward. The Board of Directors ('the Board') ensures that executive reward satisfies the following key criteria for good reward governance practices: ● set competitive remuneration packages to attract the highest calibre of employees in the context of prevailing market conditions, particular experience of the individual concerned and the overall performance of the Company; and reward employees for performance that results in long-term growth in shareholder wealth, with the objective of ensuring maximum stakeholder benefit from the retention of a high-quality board and executive team. ● The Remuneration Committee is responsible for determining and reviewing remuneration arrangements for its Directors and executives. The performance of the Group depends on the quality of its Directors and executives. The remuneration philosophy is to attract, motivate and retain high performance and high quality personnel. In consultation with external remuneration consultants, the Remuneration Committee has structured an executive remuneration framework that is market competitive and complementary to the reward strategy of the Group. The reward framework is designed to align executive reward to shareholders' interests. The Board have considered that it should seek to enhance shareholders' interests by: ● ● having economic profit as a core component of plan design focusing on sustained growth in shareholder wealth, consisting of dividends and growth in share price, and delivering constant or increasing return on assets as well as focusing the executive on key non-financial drivers of value attracting and retaining high calibre executives ● Additionally, the reward framework should seek to enhance executives' interests by: ● ● ● rewarding capability and experience reflecting competitive reward for contribution to growth in shareholder wealth providing a clear structure for earning rewards In accordance with best practice corporate governance, the structure of non-executive Director and executive Director remuneration is separate. Non-executive Directors remuneration The Board seeks to set aggregate remuneration at a level that provides the Company with the ability to attract and retain Directors of a high 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 service fees paid to any of the Directors and corporate performance. Executive remuneration The Group aims to reward executives based on their position and responsibility, with a level and mix of remuneration which has both fixed and variable components. 9 Resonance Health Limited Directors’ Report 30 June 2021 The executive remuneration and reward framework has four components: ● ● ● ● base pay and non-monetary benefits short-term performance incentives share-based payments other remuneration such as superannuation and long service leave The combination of these comprises the executive's total remuneration. Fixed remuneration, consisting of base salary, superannuation and non-monetary benefits, are reviewed annually by the Remuneration Committee based on individual and business unit performance, the overall performance of the Group and comparable market remunerations. The short-term incentives ('STI') program is designed to align the targets of the business units with the performance hurdles of executives. STI payments are granted to executives based on specific annual targets and key performance indicators ('KPI's') being achieved. KPI's include profit contribution, customer satisfaction, leadership contribution and product management. The long-term incentives ('LTI') include long service leave and share-based payments. All bonuses and incentives are linked to predetermined performance criteria. The Board may, however, exercise its discretion in relation to approving incentives and bonuses. The Remuneration Committee is of the opinion that the continued improved results can be attributed in part to the adoption of performance based compensation and is satisfied that this improvement will continue to increase shareholder wealth if maintained over the coming years. Adoption of Remuneration Report The remuneration report for the year ended 30 June 2020 was voted in favour at the 2020 AGM. Details of remuneration Amounts of remuneration Details of the remuneration of key management personnel of the Group are set out in the following tables. The key management personnel of the Group consisted of the following Directors of Resonance Health Limited: ● ● ● ● Dr Martin Blake Mr Mitchell Wells Mr Simon Panton Dr Travis Baroni And the following persons: ● ● ● Ms Alison Laws - Chief Executive Officer (resigned 2 July 2021) Mr Agha Shahzad – Company Secretary & Chief Financial Officer (resigned 8 April 2021) Mr Nicholas Allan – Company Secretary & Chief Financial Officer (appointed 31 May 2021) 10 Resonance Health Limited Directors’ Report 30 June 2021 2021 Non-Executive Directors: Dr M Blake Mr S Panton Dr T Baroni Executive Directors: Mr M Wells* Other Key Management Personnel: Ms A Laws Mr AS Pervez** Mr N Allan Short-term benefits Post- employ- ment benefits Long-term benefits Share- based payments Cash salary and fees $ Cash bonus $ Non- Super- monetary annuation $ $ Long service leave $ Equity- settled $ Total $ 54,795 36,530 36,530 150,500 266,147 168,913 17,308 730,723 - - - - - - - - - - - - - - - - 5,205 3,470 3,470 - - - - - - - - 60,000 40,000 40,000 - 150,500 23,038 11,290 1,644 48,117 - 28,626 - 28,626 1,000 1,000 - 2,000 290,185 209,829 18,952 809,466 * Mr M Wells remuneration represents $40,000 director fees and $110,500 consulting fees. Mr Wells was appointed as an executive director effective 4 June 2021, and from 2nd July 2021 Mr Wells was appointed Managing Director. ** Mr AS Pervez resigned on 8 April 2021, the cash salary and fees includes $50,067 of unused annual leave paid out on termination of employment. Short-term benefits Post- employ- ment benefits Long-term benefits Share- based payments Cash salary and fees $ Cash bonus $ Non- Super- monetary annuation $ $ Long service leave $ Equity- settled** $ Total $ 54,795 130,000 36,530 36,530 - - - - 250,000 150,000 657,855 27,000 15,000 42,000 - - - - - - - 5,205 - 3,470 3,470 - - - - 423,975 423,975 423,975 423,975 483,975 553,975 463,975 463,975 26,315 15,675 54,135 1,000 141,322 - 304,315 - 321,997 - 1,838,222 2,592,212 2020 Non-Executive Directors: Dr M Blake Mr M Wells* Mr S Panton Dr T Baroni Other Key Management Personnel: Ms A Laws Mr AS Pervez * Mr M Wells remuneration represents $40,000 director fees and $90,000 consulting fees. 11 Resonance Health Limited Directors’ Report 30 June 2021 ** The share-based remuneration is a non-cash expense of $140,322 for employee options and $1,695,900 for Director options as a result of all options being expensed out this financial year. The Directors options were approved by shareholders at the Company’s AGM held on 28 November 2019. The valuation is based on the grant date according to AASB 2, and no director has exercised any of their options. The proportion of remuneration linked to performance and the fixed proportion are as follows: Name Non-Executive Directors: Dr M Blake Mr S Panton Dr T Baroni Executive Directors: Mr M Wells Other Key Management Personnel: Ms A Laws Mr AS Pervez Mr N Allan Fixed remuneration 2020 2021 Share based payments 2021 2020 100% 100% 100% 12% 9% 9% 100% 23% 99% 99% 100% 90% 51% - - - - - 1% 1% - 88% 91% 91% 77% 10% 49% - Service agreements Remuneration and other terms of employment for key management personnel are formalised in service agreements. Details of these agreements are as follows: Name: Title: Agreement commenced: Details: Name: Title: Agreement commenced: Details: Name: Title: Details: Mr Pervez Company Secretary & Chief Financial Officer 29 November 2017 The employment agreement provides for a salary of $150,000 pa exclusive of superannuation and a termination notice of 4 weeks. This salary increased to $165,000 pa exclusive of superannuation during the year. The agreement terminated on 8 April 2021 due to Mr. Pervez’ resignation. Ms Laws Chief Executive Officer 23 February 2018 The employment agreement provides for a salary of $250,000 pa exclusive of superannuation and a termination notice of 3 months by the Company or Ms Laws. This salary increased to $300,000 pa exclusive of superannuation during the year. The agreement terminated on 2 July 2021 due to Ms. Laws’ resignation. Mr Wells Consultancy Services Agreement Mr Wells has a Consultancy Agreement with Resonance Health Analysis Services and provides commercial, investor relations, and management consulting services on a part-time basis. This Consultancy Agreement provides for consultancy fees of $90,000 per annum. The agreement may be terminated on 30 days notice by mutual agreement. The agreement terminated on 30 June 2021 due to Mr. Wells taking up the role of Managing Director. 12 Resonance Health Limited Directors’ Report 30 June 2021 Name: Title: Agreement commenced: Details: Name: Title: Agreement commenced: Details: Mr Wells Managing Director 1 July 2021 The employment agreement provides for a salary of $236,432 pa exclusive of superannuation and a termination notice of 3 months by the Company or Mr Wells. Mr Allan Company Secretary & Chief Financial Officer 31 May 2021 The employment agreement provides for a salary of $205,479.45 pa exclusive of superannuation and a termination notice of 3 months by the Company or Mr Allan. Key management personnel have no entitlement to termination payments in the event of removal for misconduct. Share-based compensation Issue of shares Details of shares issued to Directors and other key management personnel as part of compensation during the year ended 30 June 2021 are set out below: Name Mr AS Pervez Ms A Laws Date Shares Issue price $ 29 December 2020 29 December 2020 4,878 4,878 $0.205 $0.205 1,000 1,000 Options There were no options over ordinary shares issued during the year ended 30 June 2021 to Directors and other key management personnel as part of compensation that were outstanding as at 30 June 2021. There were no options over ordinary shares granted to or vested by Directors and other key management personnel as part of compensation during the year ended 30 June 2021. Additional information The earnings of the Group for the five years to 30 June 2021 are summarised below: 2021 $’000 2020 $’000 2019 $’000 2018 $’000 2017 $’000 Sales revenue EBITDA EBIT Profit/(loss) after income tax 3,779 722 357 637 3,668 653 (994) (715) 3,625 1,150 904 1,270 2,896 (62) (243) 225 2,485 (473) (667) (304) The factors that are considered to affect total shareholders return ('TSR') are summarised below: Share price at financial year end ($) Basic earnings per share (cents per share) 0.16 0.14 0.15 (0.17) 0.11 0.31 0.02 0.06 0.02 (0.08) 2021 2020 2019 2018 2017 13 Resonance Health Limited Directors’ Report 30 June 2021 Additional disclosures relating to key management personnel Shareholding The number of shares in the Company held during the financial year by each Director and other members of key management personnel of the Group, including their personally related parties, is set out below: Balance at Received the start of as part of the year remuneration Additions Disposals/ other Balance at the end of the year Ordinary shares Dr M Blake Mr M Wells Dr T Baroni * Mr S Panton Ms A Laws Mr AS Pervez ** Mr N Allan 6,464,677 600,000 500,000 73,546,350 9,091 9,091 - 81,129,209 - - - - - - 132,500 300,000 4,878 10,000,000 2,500,000 4,878 - - 9,756 12,932,500 - - (282,500) 6,464,677 600,000 350,000 - 73,846,350 - 10,013,969 - - (2,796,469) 91,274,996 (2,513,969) - T Baroni had an off-market transfer of 282,500 ordinary shares. * ** A Shahzad disposed of 500,000 ordinary shares and resigned 8 April 2021. Option holding The number of options over ordinary shares in the Company held during the financial year by each Director and other members of key management personnel of the Group, including their personally related parties, is set out below: Options over ordinary shares Dr M Blake Mr M Wells Dr T Baroni * Mr S Panton Ms A Laws Mr AS Pervez ** Mr N Allan Balance at the start of the year Granted Exercised Expired/ off market transfer/ other Balance at the end of the year 3,000,000 3,000,000 3,000,000 3,000,000 10,000,000 3,500,000 - 25,500,000 - - - - - - - - - (10,000,000) (2,500,000) - - - - (12,500,000) - - (1,200,000) - - (1,000,000) - 3,000,000 3,000,000 1,800,000 3,000,000 - - - (2,200,000) 10,800,000 T Baroni had an off-market transfer of 1,200,000 unlisted options. * ** A Shahzad resigned 8 April 2021. This concludes the remuneration report, which has been audited. 14 Resonance Health Limited Directors’ Report 30 June 2021 Shares under option Unissued ordinary shares of Resonance Health Limited under option at the date of this report are as follows: Type Unlisted options Unlisted options Unlisted options Unlisted options Unlisted options Expiry date 13 June 2022 1 December 2022 28 November 2022 28 November 2022 28 November 2022 Exercise price Number under option $0.100 $0.100 $0.150 $0.175 $0.200 1,000,000 200,000 4,000,000 4,000,000 4,000,000 13,200,000 No person entitled to exercise the options had or has any right by virtue of the option to participate in any share issue of the Company or of any other body corporate. Shares issued on the exercise of options The following ordinary shares of Resonance Health Limited were issued during the year ended 30 June 2021 and up to the date of this report on the exercise of options granted: Expiry date 9 March 2021 9 March 2021 9 March 2021 9 March 2021 13 June 2022 Exercise price Number of shares issued $0.030 $0.050 $0.075 $0.100 $0.100 2,500,000 3,250,000 4,500,000 4,750,000 2,000,000 17,000,000 Indemnity and insurance of officers The Company has indemnified the Directors and executives of the Company for costs incurred, in their capacity as a Director or executive, for which they may be held personally liable, except where there is a lack of good faith. During the financial year, the Company paid a premium in respect of a contract to insure the Directors and executives of the Company against a liability to the extent permitted by the Corporations Act 2001. The contract of insurance prohibits disclosure of the nature of the liability and the amount of the premium. Indemnity and insurance of auditor The Company has not, during or since the end of the financial year, indemnified or agreed to indemnify the auditor of the Company or any related entity against a liability incurred by the auditor. During the financial year, the Company has not paid a premium in respect of a contract to insure the auditor of the Company or any related entity. Proceedings on behalf of the Company No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the Company, or to 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 part of those proceedings. 15 Resonance Health Limited Directors’ Report 30 June 2021 Non-audit services Details of the amounts paid or payable to the auditor for non-audit services provided during the financial year by the auditor are outlined in note 24 to the financial statements. The Directors are satisfied that the provision of non-audit services during the financial year, by the auditor (or by another person or firm on the auditor's behalf), is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The Directors are of the opinion that the services as disclosed in note 24 to the financial statements do not compromise the external auditor's independence requirements of the Corporations Act 2001 for the following reasons: ● all non-audit services have been reviewed and approved 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 APES 110 Code of Ethics for Professional Accountants issued by the Accounting Professional and Ethical Standards Board, including reviewing or auditing the auditor's own work, acting in a management or decision-making capacity for the Company, acting as advocate for the Company or jointly sharing economic risks and rewards. ● Auditor’s Independence Declaration A copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001 is set out immediately after this Directors’ Report. Auditor HLB Mann Judd continues in office in accordance with section 327 of the Corporations Act 2001. This report is made in accordance with a resolution of Directors, pursuant to section 298(2)(a) of the Corporations Act 2001. On behalf of the Directors ___________________________ Dr Martin Blake Chairman 29 September 2021 Perth, Western Australia 16 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 2021, 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 29 September 2021 M R Ohm Partner 17 Resonance Health Limited Statement of Profit or Loss and Other Comprehensive Income For the year ended 30 June 2021 Revenue Other income Expenses Depreciation expense Amortisation expense Share-based payments Marketing & travel Consulting and professional services Employee benefits expense Research and development Statutory and compliance Foreign exchange loss Other expenses Profit/(loss) before income tax benefit Note Consolidated 2021 $ 2020 $ 5 6 3,778,914 3,668,184 243,577 231,239 (74,993) (289,166) (34,227) (241,051) (135,264) (1,970,270) (393,925) (211,628) (88,243) (240,200) (75,364) (265,208) (1,851,223) (236,457) (108,822) (1,719,589) (152,280) (215,917) (4,024) (223,239) 343,524 (952,700) Income tax benefit 7 242,334 237,624 Profit/(loss) after income tax benefit for the year attributable to the owners of Resonance Health Limited 20 585,858 (715,076) Other comprehensive income for the year, net of tax - - Total comprehensive income / (loss) for the year attributable to the owners of Resonance Health Limited 585,858 (715,076) Basic earnings/(loss) per share Diluted earnings/(loss) per share Cents Cents 33 33 0.13 0.13 (0.17) (0.17) The above statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes 18 Resonance Health Limited Statement of Financial Position As at 30 June 2021 Assets Current assets Cash and cash equivalents Trade and other receivables Other assets Total current assets Non-current assets Property, plant and equipment Right-of-use assets Intangibles Other assets Total non-current assets Total assets Liabilities Current liabilities Trade and other payables Lease liabilities Provisions Other liabilities Total current liabilities Non-current liabilities Lease liabilities Total non-current liabilities Total liabilities Net assets Equity Issued capital Reserves Accumulated losses Total equity Note Consolidated 2021 $ 2020 $ 8 9 10 11 12 13 10 14 15 16 17 15 8,856,820 790,375 43,008 9,690,203 6,974,237 765,606 39,871 7,779,714 52,481 55,925 2,594,630 45,900 2,748,936 27,431 111,849 2,532,122 45,900 2,717,302 12,439,139 10,497,016 492,508 60,105 26,924 32,201 611,738 385,272 55,998 75,821 13,843 530,934 - - 60,105 60,105 611,738 591,039 11,827,401 9,905,977 18 19 20 73,882,788 72,565,449 2,045,950 (64,119,564) (64,705,422) 2,064,177 11,827,401 9,905,977 The above statement of financial position should be read in conjunction with the accompanying notes 19 Resonance Health Limited Statement of Changes in Equity For the year ended 30 June 2021 Consolidated Foreign currency translation reserve $ Issued capital $ Options reserve $ Accumulated losses $ Total equity $ Balance at 1 July 2019 69,674,199 (270,580) 480,307 (63,990,346) 5,893,580 Loss after income tax benefit for the year Other comprehensive income for the year, net of tax Total comprehensive loss for the year Transactions with owners in their capacity as owners: Contributions of equity, net of transaction costs (note 18) Share-based payments (note 34) - - - - - - - - - (715,076) (715,076) - - (715,076) (715,076) 2,891,250 - - - - 1,836,223 - - 2,891,250 1,836,223 Balance at 30 June 2020 72,565,449 (270,580) 2,316,530 (64,705,422) 9,905,977 Consolidated Foreign currency translation reserve $ Issued capital $ Options reserve $ Accumulated losses $ Total equity $ Balance at 1 July 2020 72,565,449 (270,580) 2,316,530 (64,705,422) 9,905,977 Profit after income tax benefit for the year Other comprehensive income for the year, net of tax Total comprehensive income for the year - - - Transactions with owners in their capacity as owners: Contributions of equity, net of transaction costs (note 18) Share-based payments (note 34) 1,250,000 67,339 - - - - - - - - 585,858 585,858 - - 585,858 585,858 - 18,227 - - 1,250,000 85,566 Balance at 30 June 2021 73,882,788 (270,580) 2,334,757 (64,119,564) 11,827,401 The above statement of changes in equity should be read in conjunction with the accompanying notes 20 Resonance Health Limited Statement of Cash Flows For the year ended 30 June 2021 Cash flows from operating activities Receipts from customers Payments to suppliers and employee Interest received Interest and other finance costs paid Grants received Income taxes refunded Note Consolidated 2021 $ 2020 $ 3,679,488 (3,102,424) 3,601,142 (2,654,492) 577,064 45,624 (4,103) 307,595 242,334 946,650 47,639 (9,135) 88,000 237,624 7 Net cash from operating activities 32 1,168,514 1,310,778 Cash flows from investing activities Payments for property, plant and equipment Payments for intangibles 11 13 (44,119) (351,674) (2,106) (248,526) Net cash used in investing activities (395,793) (250,632) Cash flows from financing activities Proceeds from issue of shares Share issue transaction costs Repayment of lease liabilities Net cash from financing activities Net increase in cash and cash equivalents Cash and cash equivalents at the beginning of the financial year Effects of exchange rate changes on cash and cash equivalents 18 1,250,000 - (51,895) 2,891,250 (15,000) (51,671) 1,198,105 2,824,579 1,970,826 6,974,237 (88,243) 3,884,725 3,081,192 8,320 Cash and cash equivalents at the end of the financial year 8 8,856,820 6,974,237 The above statement of cash flows should be read in conjunction with the accompanying notes 21 Resonance Health Limited Notes to the Financial Statements 30 June 2021 Note 1. General information The financial statements cover Resonance Health Limited as a Group consisting of Resonance Health Limited and the entities it controlled at the end of, or during, the year. The financial statements are presented in Australian dollars, which is Resonance Health Limited's functional and presentation currency. Resonance Health Limited is a listed public company limited by shares, incorporated and domiciled in Australia. Its registered office and principal place of business is: Suite 3, 141 Burswood Road BURSWOOD WA 6100 T: +61 8 9286 5300 F: +61 8 9286 5399 A description of the nature of the Group's operations and its principal activities are included in the Directors’ Report, which is not part of the financial statements. The financial statements were authorised for issue, in accordance with a resolution of Directors, on 29 September 2021. The Directors have the power to amend and reissue the financial statements. Note 2. Significant accounting policies The principal accounting policies adopted in the preparation of the financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. New or amended Accounting Standards and Interpretations adopted The Group has adopted all of the new or amended Accounting Standards and Interpretations issued by the Australian Accounting Standards Board ('AASB') that are mandatory for the current reporting period. Any new or amended Accounting Standards or Interpretations that are not yet mandatory have not been early adopted. Going concern The financial report has been prepared on the going concern basis, which contemplates continuity of normal business activities and the realisation of assets and settlements of liability in the ordinary course of business. Basis of preparation These general purpose financial statements have been prepared in accordance with Australian Accounting Standards and Interpretations issued by the Australian Accounting Standards Board ('AASB') and the Corporations Act 2001, as appropriate for for-profit oriented entities. These financial statements also comply with International Financial Reporting Standards as issued by the International Accounting Standards Board ('IASB'). Historical cost convention The financial statements have been prepared under the historical cost convention, except for, where applicable, the revaluation of financial assets and liabilities at fair value. Critical accounting estimates The preparation of the financial statements requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group's accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements, are disclosed in note 3. Parent entity information In accordance with the Corporations Act 2001, these financial statements present the results of the Group only. Supplementary information about the parent entity is disclosed in note 29. 22 Resonance Health Limited Notes to the Financial Statements 30 June 2021 Note 2. Significant accounting policies (continued) Principles of consolidation The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Resonance Health Limited ('Company' or 'parent entity') as at 30 June 2021 and the results of all subsidiaries for the year then ended. Resonance Health Limited and its subsidiaries together are referred to in these financial statements as the 'Group'. Subsidiaries are all those entities over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases. Intercompany transactions, balances and unrealised gains on transactions between entities in the Group are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group. The acquisition of subsidiaries is accounted for using the acquisition method of accounting. A change in ownership interest, without the loss of control, is accounted for as an equity transaction, where the difference between the consideration transferred and the book value of the share of the non-controlling interest acquired is recognised directly in equity attributable to the parent. Where the Group loses control over a subsidiary, it derecognises the assets including goodwill, liabilities and non- controlling interest in the subsidiary together with any cumulative translation differences recognised in equity. The Group recognises the fair value of the consideration received and the fair value of any investment retained together with any gain or loss in profit or loss. Operating segments Operating segments are presented using the 'management approach', where the information presented is on the same basis as the internal reports provided to the Chief Operating Decision Makers ('CODM'). The CODM is responsible for the allocation of resources to operating segments and assessing their performance. The Board of Directors have been identified as the CODM. Foreign currency translation The financial statements are presented in Australian dollars, which is Resonance Health Limited's functional and presentation currency. Foreign currency transactions Foreign currency transactions are translated into Australian dollars using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at financial year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss. Foreign operations The assets and liabilities of foreign operations are translated into Australian dollars using the exchange rates at the reporting date. The revenues and expenses of foreign operations are translated into Australian dollars using the average exchange rates, which approximate the rates at the dates of the transactions, for the period. All resulting foreign exchange differences are recognised in other comprehensive income through the foreign currency reserve in equity. The foreign currency reserve is recognised in profit or loss when the foreign operation or net investment is disposed of. Revenue recognition Refer to note 5 for accounting policy. 23 Resonance Health Limited Notes to the Financial Statements 30 June 2021 Note 2. Significant accounting policies (continued) Government grants Grants from the government are recognised at their fair value where there is a reasonable assurance that the grant will be received and the Group will comply with all attached conditions. Interest Interest revenue is recognised as interest accrues using the effective interest method. This is a method of calculating the amortised cost of a financial asset and allocating the interest income over the relevant period using the effective interest rate, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the net carrying amount of the financial asset. Other revenue Other revenue is recognised when it is received or when the right to receive payment is established. Income tax The income tax expense or benefit for the period is the tax payable on that period's taxable income based on the applicable income tax rate for each jurisdiction, adjusted by the changes in deferred tax assets and liabilities attributable to temporary differences, unused tax losses and the adjustment recognised for prior periods, where applicable. Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to be applied when the assets are recovered or liabilities are settled, based on those tax rates that are enacted or substantively enacted, except for: ● When the deferred income tax asset or liability arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and that, at the time of the transaction, affects neither the accounting nor taxable profits; or When the taxable temporary difference is associated with interests in subsidiaries, associates or joint ventures, and the timing of the reversal can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future. ● Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses. The carrying amount of recognised and unrecognised deferred tax assets are reviewed at each reporting date. Deferred tax assets recognised are reduced to the extent that it is no longer probable that future taxable profits will be available for the carrying amount to be recovered. Previously unrecognised deferred tax assets are recognised to the extent that it is probable that there are future taxable profits available to recover the asset. Deferred tax assets and liabilities are offset only where there is a legally enforceable right to offset current tax assets against current tax liabilities and deferred tax assets against deferred tax liabilities; and they relate to the same taxable authority on either the same taxable entity or different taxable entities which intend to settle simultaneously. Resonance Health Limited (the 'head entity') and its wholly-owned Australian subsidiaries have formed an income tax consolidated group under the tax consolidation regime. The head entity and each subsidiary in the tax consolidated group continue to account for their own current and deferred tax amounts. The tax consolidated group has applied the 'separate taxpayer within group' approach in determining the appropriate amount of taxes to allocate to members of the tax consolidated group. Current and non-current classification Assets and liabilities are presented in the statement of financial position based on current and non-current classification. An asset is classified as current when: it is either expected to be realised or intended to be sold or consumed in the Group's normal operating cycle; it is held primarily for the purpose of trading; it is expected to be realised within 12 months after the reporting period; or the asset is cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least 12 months after the reporting period. All other assets are classified as non-current. 24 Resonance Health Limited Notes to the Financial Statements 30 June 2021 Note 2. Significant accounting policies (continued) A liability is classified as current when: it is either expected to be settled in the Group's normal operating cycle; it is held primarily for the purpose of trading; it is due to be settled within 12 months after the reporting period; or there is no unconditional right to defer the settlement of the liability for at least 12 months after the reporting period. All other liabilities are classified as non-current. Deferred tax assets and liabilities are always classified as non-current. Cash and cash equivalents Cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. Trade and other receivables Trade receivables are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method, less any allowance for expected credit losses. Trade receivables are generally due for settlement within 14 - 90 days. The Group has applied the simplified approach to measuring expected credit losses, which uses a lifetime expected loss allowance. To measure the expected credit losses, trade receivables have been grouped based on days overdue. Other receivables are recognised at amortised cost, less any allowance for expected credit losses. Property, plant and equipment Plant and equipment is stated at historical cost less accumulated depreciation and impairment. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Depreciation is calculated on a straight-line basis to write off the net cost of each item of property, plant and equipment (excluding land) over their expected useful lives as follows: Plant and equipment 3-5 years The residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each reporting date. Leasehold improvements are depreciated over the unexpired period of the lease or the estimated useful life of the assets, whichever is shorter. An item of property, plant and equipment is derecognised upon disposal or when there is no future economic benefit to the Group. Gains and losses between the carrying amount and the disposal proceeds are taken to profit or loss. Right-of-use assets A right-of-use asset is recognised at the commencement date of a lease. The right-of-use asset is measured at cost, which comprises the initial amount of the lease liability, adjusted for, as applicable, any lease payments made at or before the commencement date net of any lease incentives received, any initial direct costs incurred, and, except where included in the cost of inventories, an estimate of costs expected to be incurred for dismantling and removing the underlying asset, and restoring the site or asset. Right-of-use assets are depreciated on a straight-line basis over the unexpired period of the lease or the estimated useful life of the asset, whichever is the shorter. Where the Group expects to obtain ownership of the leased asset at the end of the lease term, the depreciation is over its estimated useful life. Right-of use assets are subject to impairment or adjusted for any remeasurement of lease liabilities. The Group has elected not to recognise a right-of-use asset and corresponding lease liability for short-term leases with terms of 12 months or less and leases of low-value assets. Lease payments on these assets are expensed to profit or loss as incurred. 25 Resonance Health Limited Notes to the Financial Statements 30 June 2021 Note 2. Significant accounting policies (continued) Intangible assets Research and development 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; The ability to use or sell the intangible asset; How the intangible asset will generate probably 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. Subsequent to initial recognition, internally-generated intangible assets are reported at cost less accumulated amortisation and accumulated impairment losses, on the same basis as intangible assets acquired separately. The useful life used in the calculation of amortisation is 10 years. Trade and other payables These amounts represent liabilities for goods and services provided to the Group prior to the end of the financial year and which are unpaid. Due to their short-term nature they are measured at amortised cost and are not discounted. The amounts are unsecured and are usually paid within 30 days of recognition. Provisions Provisions are recognised when the Group has a present (legal or constructive) obligation as a result of a past event, it is probable the Group will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the reporting date, taking into account the risks and uncertainties surrounding the obligation. If the time value of money is material, provisions are discounted using a current pre-tax rate specific to the liability. The increase in the provision resulting from the passage of time is recognised as a finance cost. Lease liabilities A lease liability is recognised at the commencement date of a lease. The lease liability is initially recognised at the present value of the lease payments to be made over the term of the lease, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Group's incremental borrowing rate. Lease payments comprise of fixed payments less any lease incentives receivable, variable lease payments that depend on an index or a rate, amounts expected to be paid under residual value guarantees, exercise price of a purchase option when the exercise of the option is reasonably certain to occur, and any anticipated termination penalties. The variable lease payments that do not depend on an index or a rate are expensed in the period in which they are incurred. Lease liabilities are measured at amortised cost using the effective interest method. The carrying amounts are remeasured if there is a change in the following: future lease payments arising from a change in an index or a rate used; residual guarantee; lease term; certainty of a purchase option and termination penalties. When a lease liability is remeasured, an adjustment is made to the corresponding right-of use asset, or to profit or loss if the carrying amount of the right-of-use asset is fully written down. 26 Resonance Health Limited Notes to the Financial Statements 30 June 2021 Note 2. Significant accounting policies (continued) Employee benefits Short-term employee benefits Liabilities for wages and salaries, including non-monetary benefits, annual leave and long service leave expected to be settled wholly within 12 months of the reporting date are measured at the amounts expected to be paid when the liabilities are settled. Other long-term employee benefits The liability for annual leave and long service leave not expected to be settled within 12 months of the reporting date are measured at the present value of expected future payments to be made in respect of services provided by employees up to the reporting date using the projected unit credit method. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. Expected future payments are discounted using market yields at the reporting date on high quality corporate bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows. Share-based payments Equity-settled and cash-settled share-based compensation benefits are provided to employees. Equity-settled transactions are awards of shares, or options over shares, that are provided to employees in exchange for the rendering of services. Cash-settled transactions are awards of cash for the exchange of services, where the amount of cash is determined by reference to the share price. The cost of equity-settled transactions are measured at fair value on grant date. Fair value is independently determined using the Black-Scholes option pricing model that takes into account the exercise price, the term of the option, the impact of dilution, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk free interest rate for the term of the option, together with non-vesting conditions that do not determine whether the Group receives the services that entitle the employees to receive payment. No account is taken of any other vesting conditions. The cost of equity-settled transactions are recognised as an expense with a corresponding increase in equity over the vesting period. The cumulative charge to profit or loss is calculated based on the grant date fair value of the award, the best estimate of the number of awards that are likely to vest and the expired portion of the vesting period. The amount recognised in profit or loss for the period is the cumulative amount calculated at each reporting date less amounts already recognised in previous periods. The cost of cash-settled transactions is initially, and at each reporting date until vested, determined by applying the Black-Scholes option pricing model, taking into consideration the terms and conditions on which the award was granted. The cumulative charge to profit or loss until settlement of the liability is calculated as follows: ● during the vesting period, the liability at each reporting date is the fair value of the award at that date multiplied by the expired portion of the vesting period. from the end of the vesting period until settlement of the award, the liability is the full fair value of the liability at the reporting date. ● All changes in the liability are recognised in profit or loss. The ultimate cost of cash-settled transactions is the cash paid to settle the liability. Market conditions are taken into consideration in determining fair value. Therefore any awards subject to market conditions are considered to vest irrespective of whether or not that market condition has been met, provided all other conditions are satisfied. If equity-settled awards are modified, as a minimum an expense is recognised as if the modification has not been made. An additional expense is recognised, over the remaining vesting period, for any modification that increases the total fair value of the share-based compensation benefit as at the date of modification. 27 Resonance Health Limited Notes to the Financial Statements 30 June 2021 Note 2. Significant accounting policies (continued) If the non-vesting condition is within the control of the Group or employee, the failure to satisfy the condition is treated as a cancellation. If the condition is not within the control of the Group or employee and is not satisfied during the vesting period, any remaining expense for the award is recognised over the remaining vesting period, unless the award is forfeited. If equity-settled awards are cancelled, it is treated as if it has vested on the date of cancellation, and any remaining expense is recognised immediately. If a new replacement award is substituted for the cancelled award, the cancelled and new award is treated as if they were a modification. Fair value measurement When an asset or liability, financial or non-financial, is measured at fair value for recognition or disclosure purposes, the fair value is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date; and assumes that the transaction will take place either: in the principal market; or in the absence of a principal market, in the most advantageous market. Fair value is measured using the assumptions that market participants would use when pricing the asset or liability, assuming they act in their economic best interests. For non-financial assets, the fair value measurement is based on its highest and best use. Valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, are used, maximising the use of relevant observable inputs and minimising the use of unobservable inputs. 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. Earnings per share Basic earnings per share Basic earnings per share is calculated by dividing the profit attributable to the owners of Resonance Health Limited, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the financial year. Diluted earnings per share Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares. Goods and Services Tax ('GST') and other similar taxes Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable from the tax authority. In this case it is recognised as part of the cost of the acquisition of the asset or as part of the expense. Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable to, the tax authority is included in other receivables or other payables in the statement of financial position. Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities which are recoverable from, or payable to the tax authority, are presented as operating cash flows. Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the tax authority. 28 Resonance Health Limited Notes to the Financial Statements 30 June 2021 Note 2. Significant accounting policies (continued) New Accounting Standards and Interpretations not yet mandatory or early adopted Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet mandatory, have not been early adopted by the Group for the annual reporting period ended 30 June 2021. The Group has not yet assessed the impact of these new or amended Accounting Standards and Interpretations. Note 3. Critical accounting judgements, estimates and assumptions The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts in the financial statements. Management continually evaluates its judgements and estimates in relation to assets, liabilities, contingent liabilities, revenue and expenses. Management bases its judgements, estimates and assumptions on historical experience and on other various factors, including expectations of future events, management believes to be reasonable under the circumstances. The resulting accounting judgements and estimates will seldom equal the related actual results. The judgements, estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities (refer to the respective notes) within the next financial year are discussed below. 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 13. 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. The directors acknowledge that there is potential uncertainty surrounding budgeted commercial income as a result of the COVID-19 pandemic. As a result, the projected cash flows have been adjusted. For commercial income, a reduced growth rate of 10% has been adopted. 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 analyses 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 equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined by using the Black-Scholes model taking into account the terms and conditions upon which the instruments were granted. The accounting estimates and assumptions relating to equity-settled share-based payments would have no impact on the carrying amounts of assets and liabilities within the next annual reporting period but may impact profit or loss and equity. Allowance for expected credit losses The allowance for expected credit losses assessment requires a degree of estimation and judgement. It is based on the lifetime expected credit loss, grouped based on days overdue, and makes assumptions to allocate an overall expected credit loss rate for each group. These assumptions include recent sales experience and historical collection rates. 29 Resonance Health Limited Notes to the Financial Statements 30 June 2021 Note 3. Critical accounting judgements, estimates and assumptions (continued) Fair value measurement hierarchy The Group is required to classify all assets and liabilities, measured at fair value, using a three level hierarchy, based on the lowest level of input that is significant to the entire fair value measurement, being: Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date; Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly; and Level 3: Unobservable inputs for the asset or liability. Considerable judgement is required to determine what is significant to fair value and therefore which category the asset or liability is placed in can be subjective. The fair value of assets and liabilities classified as level 3 is determined by the use of valuation models. These include discounted cash flow analysis or the use of observable inputs that require significant adjustments based on unobservable inputs. Estimation of useful lives of assets The Group determines the estimated useful lives and related depreciation and amortisation charges for its property, plant and equipment and finite life intangible assets. The useful lives could change significantly as a result of technical innovations or some other event. The depreciation and amortisation charge will increase where the useful lives are less than previously estimated lives, or technically obsolete or non-strategic assets that have been abandoned or sold will be written off or written down. Impairment of non-financial assets other than goodwill and other indefinite life intangible assets The Group assesses impairment of non-financial assets other than goodwill and other indefinite life intangible assets at each reporting date by evaluating conditions specific to the Group and to the particular asset that may lead to impairment. If an impairment trigger exists, the recoverable amount of the asset is determined. This involves fair value less costs of disposal or value-in-use calculations, which incorporate a number of key estimates and assumptions. Income tax The Group is subject to income taxes in the jurisdictions in which it operates. Significant judgement is required in determining the provision for income tax. There are many transactions and calculations undertaken during the ordinary course of business for which the ultimate tax determination is uncertain. Where the final tax outcome of these matters is different from the carrying amounts, such differences will impact the current and deferred tax provisions in the period in which such determination is made. Lease term The lease term is a significant component in the measurement of both the right-of-use asset and lease liability. Judgement is exercised in determining whether there is reasonable certainty that an option to extend the lease or purchase the underlying asset will be exercised, or an option to terminate the lease will not be exercised, when ascertaining the periods to be included in the lease term. In determining the lease term, all facts and circumstances that create an economical incentive to exercise an extension option, or not to exercise a termination option, are considered at the lease commencement date. Factors considered may include the importance of the asset to the Group's operations; comparison of terms and conditions to prevailing market rates; incurrence of significant penalties; existence of significant leasehold improvements; and the costs and disruption to replace the asset. The Group reassesses whether it is reasonably certain to exercise an extension option, or not exercise a termination option, if there is a significant event or significant change in circumstances. Note 4. Operating segments Identification of reportable operating segments 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. 30 Resonance Health Limited Notes to the Financial Statements 30 June 2021 Note 4. Operating segments (continued) 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 2021. Consolidated - 2021 Revenue Sales to external customers Total revenue Total revenue Other income Other expenses Profit/(loss) before income tax benefit Income tax benefit Profit after income tax benefit Assets Segment assets Total assets Liabilities Segment liabilities Total liabilities Consolidated - 2020 Revenue Sales to external customers Total revenue Total revenue Other income Expenses Profit/(loss) before income tax benefit Income tax benefit Loss after income tax benefit Assets Segment assets Total assets Liabilities Segment liabilities Total liabilities Research and Services $ development Corporate $ $ Other segments $ Total $ 3,778,914 3,778,914 - - - - 3,778,914 - (1,598,636) 2,180,278 - - (1,104,485) (1,104,485) - 243,577 (975,846) (732,269) 703,807 2,645,969 9,089,363 - - - - - - 3,778,914 3,778,914 3,778,914 243,577 (3,678,967) 343,524 242,334 585,858 - 12,439,139 12,439,139 32,201 - 579,537 - 611,738 611,738 Research and Services $ development Corporate $ $ Other segments $ Total $ 3,668,184 3,668,184 - - - - 3,668,184 - (2,084,938) 1,583,246 - - (300,400) (300,400) - 231,329 (2,466,875) (2,235,546) 765,606 2,532,122 7,199,288 - - - - - - 3,668,184 3,668,184 3,668,184 231,329 (4,852,213) (952,700) 237,624 (715,076) - 10,497,016 10,497,016 399,115 - 191,924 - 591,039 591,039 The group derived 12% of its external customer sales revenue from one major customer. 31 Resonance Health Limited Notes to the Financial Statements 30 June 2021 Note 4. Operating segments (continued) Geographical Segments The company earns revenue in three significant geographical regions, countries are grouped in the regions of Asia/Pacific, North America and Europe-Middle-East-Africa (EMEA). All non-current assets are located in Australia being the Asia/Pacific region, applicable disclosure information is disclosed in Business Segment assets and no additional disclosure is made. Asia/Pacific North America EMEA Total sales to external customers Note 5. Revenue Accounting policy for revenue Consolidated 2021 $ 2020 $ 156,615 1,167,493 2,454,806 115,185 1,149,062 2,403,937 3,778,914 3,668,184 The Group generates revenue largely in the United States of America and the United Kingdom. The revenue and profits recognised in any period are based on the delivery of performance obligations and an assessment of when control is transferred to the customer. In determining the amount of revenue and profits to record, and related statement items (such as contract fulfilment assets, capitalisation of costs to obtain a contract, trade receivables, accrued income and deferred income) to recognise in the period, management is required to form a number of key judgements and assumptions. This includes an assessment of the costs the Group incurs to deliver the contractual commitments and whether such costs should be expensed as incurred or capitalised. Revenue is recognised either when the performance obligation in the contract has been performed (so 'point in time' recognition) or 'over time' as control of the performance obligation is transferred to the customer. For contracts with multiple components to be delivered such as establishment services, trial establishment project and data management, project and data management services and analysis services management applies judgement to consider whether those promised goods and services are (i) distinct - to be accounted for as separate performance obligations; (ii) not distinct - to be combined with other promised goods or services until a bundle is identified that is distinct or (iii) part of a series of distinct goods and services that are substantially the same and have the same pattern of transfer to the customer. At contract inception the total transaction price is estimated, being the amount to which the Group expects to be entitled and has rights to under the present contract. The transaction price does not include estimates of consideration resulting from changed orders for additional goods and services unless these are agreed. 32 Resonance Health Limited Notes to the Financial Statements 30 June 2021 Note 5. Revenue (continued) Once the total transaction price is determined, the Group allocates this to the identified performance obligations in proportion to their relative stand-alone selling prices and recognises revenue when (or as) those performance obligations are satisfied. For each performance obligation, the Group determines if revenue will be recognised over time or at a point in time. Where the Group recognises revenue over time for long term contracts, this is in general due to the Group performing and the customer simultaneously receiving and consuming the benefits provided over the life of the contract. For each performance obligation to be recognised over time, the Group applies a revenue recognition method that faithfully depicts the Group’s performance in transferring control of the goods or services to the customer. This decision requires assessment of the real nature of the goods or services that the Group has promised to transfer to the customer. The Group applies the relevant output or input method consistently to similar performance obligations in other contracts. When using the output method the Group recognises revenue on the basis of direct measurements of the value to the customer of the goods and services transferred to date relative to the remaining goods and services under the contract. Where the output method is used, in particular for long term service contracts where the series guidance is applied, the Group often uses a method of time elapsed which requires minimal estimation. Certain long term contracts use output methods based upon estimation of number of users, level of service activity or fees collected. If performance obligations in a contract do not meet the over time criteria, the Group recognises revenue at a point in time. This may be at the point of physical delivery of goods and acceptance by a customer or when the customer obtains control of an asset or service in a contract with customer-specified acceptance criteria. The Group disaggregates revenue from contracts with customers by contract type, which includes (i) commercial revenue, (ii) voucher revenue, (iii) clinical trial revenue and (iv) other study income as management believe this best depicts how the nature, amount, timing and uncertainty of the Group’s revenue and cash flows. The nature of contracts or performance obligations categorised within this revenue type includes (i) establishment services, (ii) trial establishment project and data management, (iii) project and data management services, and (iv) analysis services. The service contracts in this category include contracts with either a single or multiple performance obligations. The Group considers that the services provided meet the definition of a series of distinct goods and services as they are (i) substantially the same and (ii) have the same pattern of transfer (as the series constitutes services provided in distinct time increments (e.g. monthly or annual services)) and therefore treats the series as one performance obligation. (i) Establishment services Encompasses different services from which the customer is able to benefit from on their own or with other readily available resources. Accordingly, revenues are recognised at a point in time when the service is delivered. (ii) Trial establishment project and data management Revenues are recognised when the contract is signed and the trial establishment activities have been performed. The customer can benefit from these activities on their own or with other readily available resources. (iii) Project and data management services Revenues are recognised over the contract period as the service is provided. 33 Resonance Health Limited Notes to the Financial Statements 30 June 2021 Note 5. Revenue (continued) (iv) Analysis services Revenues are recognised at a point in time following the completion of the analysis and report compilation. Contract fulfilment assets and liabilities As a result of the contracts which the Group enters into with its customers, a number of different assets and liabilities are recognised on the Group’s balance sheet. These include but are not limited to: • Trade receivables • Accrued income • Deferred income Deferred and accrued income The Group’s customer contracts include a diverse range of payment schedules dependent upon the nature and type of goods and services being provided. The Group often agrees payment schedules at the inception of long term contracts under which it receives payments throughout the term of the contracts. These payment schedules may include performance-based payments or progress payments as well as regular monthly payments for ongoing service delivery. Payments for transactional goods and services may be at delivery date, in arrears or part payment in advance. Where payments made are greater than the revenue recognised at the period end date, the Group recognises a deferred income contract liability for this difference. Where payments made are less than the revenue recognised at the period end date, the Group recognises an accrued income contract asset for this difference. Disaggregation of revenue The group derives its revenue from the services at a point in time and over time in the following major categories. This is consistent with the revenue information that is disclosed for each reportable segment: Revenue from contracts with customers Commercial revenue Voucher program Clinical trials Other studies Revenue Consolidated 2021 $ 2020 $ 2,189,364 33,358 1,513,097 43,095 2,007,927 25,342 1,587,337 47,578 3,778,914 3,668,184 Reconciliation of revenue from contracts with customers with the amounts disclosed in segment information Consolidated 2021 $ 2020 $ 3,778,914 - 3,668,184 - 3,778,914 3,668,184 Segment revenue Adjustments and eliminations Total revenue from contracts with customers 34 Resonance Health Limited Notes to the Financial Statements 30 June 2021 Note 6. Other income Subsidies and grants (1) Interest revenue Other income Consolidated 2021 $ 2020 $ 206,095 37,482 189,925 41,314 243,577 231,239 (1) Grants received included $136,500 in JobKeeper and $52,095 in Cash Flow Boosts from the Australian Federal Government and $17,500 payroll tax rebate from the Western Australian State Government. Note 7. Income tax Income tax benefit Research and Development tax offset Aggregate income tax benefit Numerical reconciliation of income tax benefit and tax at the statutory rate Profit/(loss) before income tax benefit Tax at the statutory tax rate of 26% (2020: 27.5%) Tax effect amounts which are not deductible/(taxable) in calculating taxable income: Expenses that are not deductible in determining taxable profit Non-assessable income Effect of unused tax losses not recognised as deferred tax assets Reduction in tax rate Tax losses recovered Effect of temporary differences not recognised in deferred tax assets and liabilities Research and Development tax offset Income tax benefit Unrecognised deferred tax balances Consolidated 2021 $ 2020 $ (242,334) (237,624) (242,334) (237,624) 343,524 (952,700) 89,316 (261,993) 103,876 (13,545) 548,516 (20,054) 179,647 - (6,910) (160,374) (12,363) (242,334) 266,469 - - (233,474) (32,995) (237,624) (242,334) (237,624) 35 Resonance Health Limited Notes to the Financial Statements 30 June 2021 Note 7. Income tax (continued) Deferred tax assets not recognised Deferred tax assets not recognised comprises temporary differences attributable to: Losses available for offset against future taxable income - revenue Amortisation and depreciation timing differences Business related costs Unrealised foreign exchange losses Accrued expenses and liabilities Others Total deferred tax assets not recognised Consolidated 2021 $ 2020 $ 2,040,098 127,247 1,753 22,061 61,824 1,045 2,530,838 139,972 1,925 1,107 101,688 1,170 2,254,028 2,776,700 The above potential tax benefit, which excludes tax losses, for deductible temporary differences has not been recognised in the statement of financial position as the recovery of this benefit is uncertain. Deferred tax liabilities not recognised Deferred tax liabilities not recognised comprises temporary difference attributable to: Capitalised research and development costs Accrued income Prepayments Consolidated 2021 $ 2020 $ 646,658 664 - 696,334 2,970 - 649,322 699,304 Deferred tax liabilities have not been recognised in respect of these taxable temporary differences as the entity is able to control the timing of the reversal of the temporary differences and it is probable that the temporary differences will not reverse in the foreseeable future. Tax Consolidation Resonance Health Limited and its 100% owned Australian resident subsidiaries implemented the tax consolidation legislation from 1st July 2012. 36 Resonance Health Limited Notes to the Financial Statements 30 June 2021 Note 8. Cash and cash equivalents Current assets Cash at bank Term deposits Consolidated 2021 $ 2020 $ 2,767,451 6,089,369 929,779 6,044,458 8,856,820 6,974,237 Cash at bank earns 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. Note 9. Trade and other receivables Current assets Trade receivables Other receivables Consolidated 2021 $ 2020 $ 755,146 35,229 739,517 26,089 790,375 765,606 Trade receivables are non-interest bearing and are generally on terms of 14 days to 90 days. All amounts are short term. The carrying value of trade receivables is considered a reasonable approximation of fair value. Allowance for expected credit losses The ageing of the receivables and allowance for expected credit losses provided for above are as follows: Consolidated Not overdue 30 - 60 days overdue 60 - 90 days overdue 90 - 120 days overdue Carrying amount 2020 2021 $ $ 361,426 173,516 97,677 157,756 362,237 88,813 35,512 279,044 790,375 765,606 The Group applies the AASB 9 simplified model of recognising lifetime expected credit losses for all trade receivables as these items do not have a significant financing component. In measuring the expected credit losses, the trade receivables have been assessed on a collective basis as they possess shared credit risk characteristics. Trade receivables are written off when there is no reasonable expectation of recovery. 37 Resonance Health Limited Notes to the Financial Statements 30 June 2021 Note 9. Trade and other receivables (continued) On the basis determined above, the expected credit loss for trade receivables as at 30 June 2021 was determined as $nil (30 June 2020: $nil). Note 10. Other assets Current assets Prepayments Non-current assets Security deposits Note 11. Property, plant and equipment Non-current assets Plant and equipment - at cost Less: Accumulated depreciation Consolidated 2021 $ 2020 $ 43,008 39,871 45,900 45,900 88,908 85,771 Consolidated 2021 $ 2020 $ 153,873 (101,392) 397,916 (370,485) 52,481 27,431 Reconciliations Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out below: Consolidated Balance at 1 July 2019 Additions Depreciation expense Balance at 30 June 2020 Additions Depreciation expense Balance at 30 June 2021 $ 40,511 6,359 (19,439) 27,431 44,119 (19,069) 52,481 38 Resonance Health Limited Notes to the Financial Statements 30 June 2021 Note 12. Right-of-use assets Non-current assets Land and buildings - right-of-use Less: Accumulated depreciation The Group has a single premises lease. Consolidated 2021 $ 2020 $ 167,774 (111,849) 167,774 (55,925) 55,925 111,849 Reconciliations Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out below: Consolidated Balance at 1 July 2019 Additions Depreciation expense Balance at 30 June 2020 Depreciation expense Balance at 30 June 2021 Note 13. Intangibles Non-current assets Research & development - at cost Less: Accumulated amortisation Land and buildings $ - 167,774 (55,925) 111,849 (55,924) 55,925 Consolidated 2021 $ 2020 $ 4,068,506 (1,473,876) 3,716,832 (1,184,710) 2,594,630 2,532,122 39 Resonance Health Limited Notes to the Financial Statements 30 June 2021 Note 13. Intangibles (continued) Reconciliations Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out below: Consolidated Balance at 1 July 2019 Additions Amortisation expense Balance at 30 June 2020 Additions Amortisation expense Balance at 30 June 2021 $ 2,550,818 246,512 (265,208) 2,532,122 351,674 (289,166) 2,594,630 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. Impairment tests are also required for intangible assets not yet ready for use regardless of the existence of indicator of impairment. 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. 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 a rate of 10% which includes a risk component 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 pre-tax discount rate of 10% which includes a risk component. ● 40 Resonance Health Limited Notes to the Financial Statements 30 June 2021 Note 14. Trade and other payables Current liabilities Trade payables (i) Other payables Consolidated 2021 $ 2020 $ 118,495 374,013 53,617 331,655 492,508 385,272 (i) Trade payables are non-interest bearing and are normally settled on 30-day terms. The carrying value of the trade payables is considered a reasonable approximation of fair value. Information regarding the effective interest rate and credit risk of current payables is set out in note 22. Note 15. Lease liabilities The Group leases only premises. The remaining term of the lease as of 30 June 2021 is 12 months. The incremental borrowing rate applied to this lease is 4.79%. Current liabilities Lease liability Non-current liabilities Lease liability Consolidated 2021 $ 2020 $ 60,105 55,998 - 60,105 60,105 116,103 Refer to note 22 for further information on financial instruments. Underlying assets serve as security for the related lease liabilities. A maturity analysis of future minimum lease payments is presented below: Lease payments Interest Net present values Lease payments due < 1 year 1 - 2 years Total 61,903 (1,798) 60,105 - - - 61,903 (1,798) 60,105 41 Resonance Health Limited Notes to the Financial Statements 30 June 2021 Note 16. Provisions Current liabilities Long service leave Note 17. Other liabilities Current liabilities Unearned income Note 18. Issued capital Consolidated 2021 $ 2020 $ 26,924 75,821 Consolidated 2021 $ 2020 $ 32,201 13,843 Consolidated 2021 Shares 2020 Shares 2021 $ 2020 $ Ordinary shares - fully paid 461,149,601 443,773,933 73,882,788 72,565,449 Movements in ordinary share capital Details Date Shares $ Balance Share issue on conversion of options Shares issue under ESP Controlled placement cost Share issue to Acuity Capital1 Balance Shares issued on conversion of options Shares issued under ESP Shares issued for research and development projects2 1 July 2019 30 June 2020 422,497,568 69,674,199 141,250 15,000 (15,000) 2,750,000 8,500,000 136,365 - 12,640,000 443,773,933 72,565,449 17,000,000 1,250,000 78,048 16,000 297,620 51,339 Balance 30 June 2021 461,149,601 73,882,788 (1) As collateral for a Controlled Placement Agreement ("CPA") that was entered into on 18 April 2019, the Company agreed to place additional 12,640,000 shares from its Listing Rule 7.1 capacity, at issue price of $0.218 per share to Acuity Capital (collateral shares) but may, at any time, cancel the CPA and buy back the collateral shares for no consideration. The CPA was initially established with a limit of $5m and the Company has utilised the CPA to raise a total of $2.75m. On 30 June 2021 it was announced that the CPA limit was increased to $7.75m and expiry date was extended to 31 July 2023. The Company now has available capacity of $5m under the CPA. There is no requirement to utilise the CPA and there were no fees or costs associated with the increase in and extension of the CPA. 42 Resonance Health Limited Notes to the Financial Statements 30 June 2021 Note 18. Issued capital (continued) (2) 297,620 shares were issued to the Telethon Kids Institute on 11 June 2021 at an issue price of $0.1725. Refer note 34. Ordinary shares Ordinary shares entitle the holder to participate in dividends and the proceeds on the winding up of the Company in proportion to the number of and amounts paid on the shares held. The fully paid ordinary shares have no par value and the Company does not have a limited amount of authorised capital. On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each share shall have one vote. Share buy-back There is no current on-market share buy-back. Capital risk management The Group's objectives when managing capital is to safeguard its ability to continue as a going concern, so that it can provide returns for shareholders and benefits for other stakeholders and to maintain an optimum capital structure to reduce the cost of capital. Capital is regarded as total equity, as recognised in the statement of financial position, plus net debt. Net debt is calculated as total borrowings less cash and cash equivalents. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt. The Group would look to raise capital when an opportunity to invest in a business or company was seen as value adding relative to the current Company's share price at the time of the investment. The Group is not actively pursuing additional investments in the short term as it continues to integrate and grow its existing businesses in order to maximise synergies. The Group is subject to certain financing arrangements covenants and meeting these is given priority in all capital risk management decisions. There have been no events of default on the financing arrangements during the financial year. The capital risk management policy remains unchanged from the 30 June 2020 Annual Report. Note 19. Reserves Foreign currency reserve Options reserve Consolidated 2021 $ 2020 $ (270,580) 2,334,757 (270,580) 2,316,530 2,064,177 2,045,950 Foreign currency reserve The reserve is used to recognise exchange differences arising from the translation of the financial statements of foreign operations to Australian dollars. It is also used to recognise gains and losses on hedges of the net investments in foreign operations. Share-based payments reserve The reserve is used to recognise the value of equity benefits provided to employees and Directors as part of their remuneration, and other parties as part of their compensation for services. 43 Resonance Health Limited Notes to the Financial Statements 30 June 2021 Note 19. Reserves (continued) Movements in reserves Movements in each class of reserve during the current and previous financial year are set out below: Consolidated Balance at 1 July 2019 Options issued Balance at 30 June 2020 Options amortised Balance at 30 June 2021 Note 20. Accumulated losses Foreign currency translation reserve $ Option reserve $ Total $ (270,580) - 480,307 1,836,223 209,727 1,836,223 (270,580) - 2,316,530 18,227 2,045,950 18,227 (270,580) 2,334,757 2,064,177 Consolidated 2021 $ 2020 $ Accumulated losses at the beginning of the financial year Profit/(loss) after income tax benefit for the year (64,705,422) (63,990,346) (715,076) 585,858 Accumulated losses at the end of the financial year (64,119,564) (64,705,422) Note 21. Dividends There were no dividends paid, recommended or declared during the current or previous financial year. Note 22. Financial instruments Financial risk management objectives The Group's activities expose it to a variety of financial risks: market risk (including foreign currency risk, price risk and interest rate risk), credit risk and liquidity risk. The Group's overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the Group. The Group does not enter into or trade financial instruments, including derivative financial instruments such as forward foreign exchange contracts to hedge certain risk exposures. Risk management is carried out by senior finance executives ('finance') under policies approved by the Board of Directors ('the Board'). These policies include identification and analysis of the risk exposure of the Group and appropriate procedures, controls and risk limits. Finance identifies, evaluates and hedges financial risks within the Group's operating units. Finance reports to the Board on a monthly basis. Market risk Foreign currency risk The Group undertakes certain transactions denominated in foreign currency and is exposed to foreign currency risk through foreign exchange rate fluctuations. 44 Resonance Health Limited Notes to the Financial Statements 30 June 2021 Note 22. Financial instruments (continued) 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 financial assets and financial liabilities at the reporting date were as follows: Consolidated US dollars Euros Pound Sterling Assets 2021 $ 2020 $ Liabilities 2021 $ 2020 $ 2,148,146 244,390 1,035,920 1,052,673 174,061 291,320 - 554 4,126 5,441 2,249 4,378 3,428,456 1,518,054 4,680 12,068 Foreign currency sensitivity analysis The Group is exposed to United States Dollar (USD), Great British Pound (GBP) and European Euro (EUR) currency fluctuations. The following table illustrates the Group’s sensitivity to an 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 EUR GBP Price risk The Group is not exposed to any significant price risk. Consolidated 2021 $ 2020 $ (195,286) (22,167) (93,799) (95,203) (15,619) (26,086) Interest rate risk All financial assets and financial liabilities are non-interest bearing except for cash and cash equivalent balances, and lease liabilities. The following table details the Group’s expected maturities for cash and cash equivalent financial assets. 45 Resonance Health Limited Notes to the Financial Statements 30 June 2021 Note 22. Financial instruments (continued) Cash and cash equivalent financial assets: Consolidated Less than one month One to three months 2021 2020 Weighted average interest rate % Weighted average interest rate % Balance $ Balance $ 0.13% 0.49% 8,856,820 45,900 0.86% 1.34% 6,974,237 45,900 8,902,720 7,020,137 The Group is exposed to fluctuations in interest rates as it has deposited monies at floating interest rates. The impact of a 10% change in interest rates will not have a material impact on the result for the year. Credit risk 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 2021, the Group had one customer that accounted for 9% of all trade receivables (2020: 12%). Refer note 9 for further details. 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. Liquidity risk 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. 46 Resonance Health Limited Notes to the Financial Statements 30 June 2021 Note 22. Financial instruments (continued) Remaining contractual maturities The following tables detail the Group's remaining contractual maturity for its financial instrument liabilities. The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the financial liabilities are required to be paid. The tables include both interest and principal cash flows disclosed as remaining contractual maturities and therefore these totals may differ from their carrying amount in the statement of financial position. Consolidated - 2021 Non-derivatives Non-interest bearing Trade payables Other payables Interest-bearing - variable Lease liability Total non-derivatives Consolidated - 2020 Non-derivatives Non-interest bearing Trade payables Other payables Interest-bearing - variable Lease liability Total non-derivatives Weighted average interest rate % 1 year or less $ Between 1 and 2 years $ Between 2 and 5 years $ Remaining contractual maturities $ Over 5 years $ - - - 492,508 32,201 60,105 584,814 - - - - - - - - - - - - 492,508 32,201 60,105 584,814 Weighted average interest rate % 1 year or less $ Between 1 and 2 years $ Between 2 and 5 years $ Remaining contractual maturities $ Over 5 years $ - - - 385,272 13,843 - - 55,998 455,113 60,105 60,105 - - - - - - - - 385,272 13,843 116,103 515,218 The cash flows in the maturity analysis above are not expected to occur significantly earlier than contractually disclosed above. Fair value of financial instruments Unless otherwise stated, the carrying amounts of financial instruments reflect their fair value. Note 23. Key management personnel disclosures Directors The following persons were Directors of Resonance Health Limited during the financial year: Dr Martin Blake Mr Mitchell Wells Mr Simon Panton Dr Travis Baroni 47 Resonance Health Limited Notes to the Financial Statements 30 June 2021 Note 23. Key management personnel disclosures (continued) Other key management personnel The following persons also had the authority and responsibility for planning, directing and controlling the major activities of the Group, directly or indirectly, during the financial year: Ms Alison Laws Mr Agha Shahzad Mr Nicholas Allan Chief Executive Officer (resigned 2 July 2021) Company Secretary & Chief Financial Officer (resigned 8 April 2021) Company Secretary & Chief Financial Officer (appointed 31 May 2021) Compensation The aggregate compensation made to Directors and other members of key management personnel of the Group is set out below: Short-term employee benefits Post-employment benefits Long-term benefits Share-based payments Note 24. Remuneration of auditors Consolidated 2021 $ 2020 $ 730,723 48,117 28,626 2,000 699,855 54,135 - 1,838,222 809,466 2,592,212 During the financial year the following fees were paid or payable for services provided by HLB Mann Judd, the auditor of the Company: Consolidated 2021 $ 2020 $ 61,931 57,528 7,500 12,500 69,431 70,028 Audit services - HLB Mann Judd Audit or review of the financial statements Other services - HLB Mann Judd Preparation of the tax return Note 25. Contingent assets The Group has no contingent assets as at 30 June 2021 (2020: $nil). 48 Resonance Health Limited Notes to the Financial Statements 30 June 2021 Note 26. Contingent liabilities On 10 September 2020 the Company announced that they had entered into a licence agreement with the Telethon Kids Institute ("Telethon Kids") and the Erasmus University Medical Centre for the use of computer tomography ("PRAGMA-CF Data") datasets that will be used by the Company in the potential development of a new artificial intelligence ("AI") algorithm for the automated assessment of lung disease progression in patients with cystic fibrosis. See Note 34 for further details. Under the licence agreement a further 297,620 fully paid ordinary shares in the Company will be issuable to Telethon Kids upon first submission of its medical device dossiers to a regulatory authority and a 10% net royalty on all sales of the analysis performed by the AI algorithm device will be payable by the Group. Note 27. Commitments The Group has no operating or capital commitments. Note 28. Related party transactions Parent entity Resonance Health Limited is the parent entity. Subsidiaries Interests in subsidiaries are set out in note 30. Key management personnel Disclosures relating to key management personnel are set out in note 23 and the remuneration report included in the Directors’ Report. Transactions with related parties The following transactions occurred with related parties: Sale of goods and services: Services provided to Perth Radiological Clinic * Payment for goods and services: Services provided by Perth Radiological Clinic * Consolidated 2021 $ 2020 $ 2,156 270 300 540 * Dr Martin Blake is a shareholder, Chairman and consulting Radiologist of Perth Radiological Clinics. Receivable from and payable to related parties There were no trade receivables from or trade payables to related parties at the current and previous reporting date. Loans to/from related parties There were no loans to or from related parties at the current and previous reporting date. Terms and conditions All transactions were made on normal commercial terms and conditions and at market rates. 49 Resonance Health Limited Notes to the Financial Statements 30 June 2021 Note 29. Parent entity information Set out below is the supplementary information about the parent entity. Statement of Profit or Loss and Other Comprehensive Income Loss after income tax Total comprehensive income Statement of Financial Position Total current assets Total assets Total current liabilities Total liabilities Equity Issued capital Options reserve Accumulated losses Total equity Parent 2021 $ 2020 $ (570,871) (2,409,395) (570,871) (2,409,395) Parent 2021 $ 2020 $ 6,119,528 6,091,272 6,976,210 6,947,954 102,207 59,343 2,663,411 3,399,850 73,882,788 72,565,449 2,316,530 (71,904,746) (71,333,875) 2,334,757 4,312,799 3,548,104 Note 30. Interests in subsidiaries The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance with the accounting policy described in note 2: Name Principal place of business / Country of incorporation Resonance Health Analysis Services Pty Ltd WA Private Health Care Services Pty Ltd IVB Holdings Pty Ltd Resonance USA Inc Australia Australia Australia USA Ownership interest 2020 2021 % % 100% 100% 100% 100% 100% 100% 100% 100% 50 Resonance Health Limited Notes to the Financial Statements 30 June 2021 Note 31. Events after the reporting period Mr Mitchell Wells was appointed as Managing Director on 2 July 2021, following the resignation of CEO Ms Alison Laws. No other matter or circumstance has arisen since 30 June 2021 that has significantly affected, or may significantly affect the Group's operations, the results of those operations, or the Group's state of affairs in future financial years. Note 32. Cash flow information Reconciliation of profit/(loss) after income tax to net cash from operating activities Profit/(loss) after income tax benefit for the year 585,858 (715,076) Consolidated 2021 $ 2020 $ Adjustments for: Depreciation and amortisation Share-based payments Foreign exchange differences Interest expense Change in operating assets and liabilities: Increase in trade and other receivables Increase in prepayments Increase/(decrease) in trade and other payables Decrease in employee benefits Increase/(decrease) in other operating liabilities Net cash from operating activities Note 33. Earnings per share 364,159 85,566 88,243 (4,103) 340,572 1,836,223 - - (24,769) (3,137) 107,236 (48,897) 18,358 (103,278) (3,551) (44,078) - (34) 1,168,514 1,310,778 Consolidated 2021 $ 2020 $ Profit/(loss) after income tax attributable to the owners of Resonance Health Limited 585,858 (715,076) Number Number Weighted average number of ordinary shares used in calculating basic earnings per share Adjustments for calculation of diluted earnings per share: Options over ordinary shares 450,260,200 432,385,267 1,976,827 - Weighted average number of ordinary shares used in calculating diluted earnings per share 452,237,027 432,385,267 51 Resonance Health Limited Notes to the Financial Statements 30 June 2021 Note 34. Share-based payments (continued) Basic earnings/(loss) per share Diluted earnings/(loss) per share The dilutionary impact of options did not change the earnings per share. Note 34. Share-based payments Cents Cents 0.13 0.13 (0.17) (0.17) The Company has an Employee Incentive Option Plan for key staff members and consultants of the Company. Set out below are summaries of options granted under the plan: Weighted average exercise price 2021 Number of options 2021 Weighted average exercise price 2020 Number of options 2020 Outstanding at the beginning of the financial year Granted Forfeited Exercised Expired Cancelled 32,200,000 - (2,000,000) (17,000,000) - - $0.122 33,500,000 $0.000 12,200,000 (5,000,000) $0.115 (8,500,000) $0.075 - $0.000 - $0.000 $0.074 $0.170 $0.000 $0.000 $0.000 $0.000 Outstanding at the end of the financial year 13,200,000 $0.170 32,200,000 $0.122 Exercisable at the end of the financial year 13,200,000 $0.170 32,200,000 $0.122 2021 Grant date Expiry date 08/11/2018 08/11/2018 08/11/2018 08/11/2018 14/02/2019 14/02/2019 13/06/2019 28/11/2019 28/11/2019 28/11/2019 02/12/2019 09/03/2021 09/03/2021 09/03/2021 09/03/2021 01/01/2022 01/01/2022 13/06/2022 28/11/2022 28/11/2022 28/11/2022 01/12/2022 Exercise price Balance at the start of the year Granted Expired/ Balance at cancelled/ the end of Exercised other the year $0.030 $0.050 $0.075 $0.100 $0.100 $0.125 $0.100 $0.150 $0.175 $0.200 $0.100 2,500,000 3,250,000 4,500,000 4,750,000 1,000,000 1,000,000 3,000,000 4,000,000 4,000,000 4,000,000 200,000 32,200,000 (2,500,000) - (3,250,000) - (4,500,000) - (4,750,000) - - - - - (2,000,000) - - - - - - - - - - (17,000,000) - - - - (1,000,000) (1,000,000) - - - - - - - - - - - 1,000,000 4,000,000 4,000,000 4,000,000 200,000 (2,000,000) 13,200,000 The weighted average share price during the financial year was $0.199 (2020: $0.087). The weighted average remaining contractual life of options outstanding at the end of the financial year was 1.4 years (2020: 1.5 years). 52 Resonance Health Limited Notes to the Financial Statements 30 June 2021 Note 34. Share-based payments (continued) 78,048 fully paid ordinary shares were issued to employees under the Employee Share Plan on 29 December 2020 at an issue price of $0.205. $16,000 was expensed to share based payments. On 10 September 2020 the Company announced that they had entered into a licence agreement with the Telethon Kids Institute ("Telethon Kids") and the Erasmus University Medical Centre for the use of computer tomography ("PRAGMA-CF Data") datasets that will be used by the Company in the potential development of a new artificial intelligence ("AI") algorithm for the automated assessment of lunch disease progression in patients with cystic fibrosis. Consideration for the licence of the PRAGMA-CF Data will be as follows: (i) 297,620 fully paid ordinary shares to Telethon Kids payable upon receipt and acceptance of both the first and second primary tranches of PRAGMA-CF Data (ii) subject to (i) being satisfied, 297,620 fully paid ordinary shares to Telethon Kids upon first submission of its medical device dossiers to a regulatory authority. (iii) 10% net royalty on all sales of the analysis performed by the Device. During the year ended 30 June 2021 the PRAGMA-CF Data was received and the first tranche of 297,620 fully-paid ordinary shares were issued to Telethon Kids on 11 June 2021 at an issue price of $0.1725, $51,339 was expensed to research and development expenditure during the period. Reconciliation of share based payments expense: Options to staff and consultants Employee share plan Shares issued for research & development Consolidated 2021 $ 2020 $ 18,227 16,000 51,339 1,836,223 15,000 - 85,566 1,851,223 53 Resonance Health Limited Directors’ Declaration 30 June 2021 In the Directors' opinion: ● ● ● ● the attached financial statements and notes comply with the Corporations Act 2001, the Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements; the attached financial statements and notes comply with International Financial Reporting Standards as issued by the International Accounting Standards Board as described in note 2 to the financial statements; the attached financial statements and notes give a true and fair view of the Group's financial position as at 30 June 2021 and of its performance for the financial year ended on that date; and there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable. The Directors have been given the declarations required by section 295A of the Corporations Act 2001. Signed in accordance with a resolution of Directors made pursuant to section 295(5)(a) of the Corporations Act 2001. On behalf of the Directors ___________________________ Dr Martin Blake Chairman 29 September 2021 Perth, Western Australia 54 INDEPENDENT AUDITOR’S REPORT To the members of Resonance Health Limited Report on the Audit of the Financial Report Opinion We have audited the financial report of Resonance Health Limited (“the Company”) and its controlled entities (“the Group”), which comprises the consolidated statement of financial position as at 30 June 2021, the consolidated statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies, and the directors’ declaration. In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001, including: a) giving a true and fair view of the Group’s financial position as at 30 June 2021 and of its financial performance for the year then ended; and b) complying with Australian Accounting Standards and the Corporations Regulations 2001. Basis for opinion We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report. We are independent of the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (“the Code”) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report of the current period. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. We have determined the matters described below to be the key audit matters to be communicated in our report. 55 Key Audit Matter Intangible assets Refer to Note 13 As at 30 June 2021, the Group has an intangible asset balance of $2,594,630 which comprises intangible assets not yet available for use and other intangible assets. Under AASB 136 Impairment of Assets, intangible assets not yet available for use are subject to an annual impairment test and other intangible assets are subject to an impairment test should indicators of impairment arise. We considered this to be a key audit matter as it involves complex matters involving subjectivity and judgement, it is material to the users’ understanding of the financial statements as a whole and it required significant auditor attention and communication with those charged with governance. How our audit addressed the key audit matter Our audit procedures included but were not limited to the following: - Obtained an understanding of the key controls associated with the preparation of the value-in-use calculation used to assess the recoverable amount of the intangible assets; - Critically evaluated management’s methodology used in the value-in-use calculation and for key assumptions including the discount rate used; the basis - Assessed the value-in-use calculation accounting for consistency with standards requirements; - Compared key assumptions in forecast cash flows to historical results and, where these were materially different, we critically reviewed the basis for differing future expectations; the assets comprising the cash-generating unit had been correctly allocated; - Considered whether - Compared the value-in-use the carrying amount of assets comprising the cash-generating unit; to - Performed sensitivity analyses around the key inputs used in the cash flow forecasts and the headroom impact on the value-in-use calculation; - Reviewed the mathematical accuracy of the net present value calculation; and - Assessed the appropriateness of the disclosures included in the relevant notes to the financial report. Information other than the financial report and auditor’s report thereon The directors are responsible for the other information. The other information comprises the information included in the Group’s annual report for the year ended 30 June 2021, but does not include the financial report and our auditor’s report thereon. Our opinion on the financial report does not cover the other information and accordingly we do not express any form of assurance conclusion thereon. In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. 56 Responsibilities of the directors for the financial report The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In preparing the financial report, the directors are responsible for assessing the ability of the Group to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so. Auditor’s responsibilities for the audit of the financial report Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report. As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgement and maintain professional scepticism throughout the audit. We also: - Identify and assess the risks of material misstatement of the financial report, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. - - - Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors. Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial report or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern. Evaluate the overall presentation, structure and content of the financial report, including the disclosures, and whether the financial report represents the underlying transactions and events in a manner that achieves fair presentation. - We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. 57 From the matters communicated with the directors, we determine those matters that were of most significance in the audit of the financial report of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. Report on the Remuneration Report Opinion on the Remuneration Report We have audited the Remuneration Report included within the directors’ report for the year ended 30 June 2021. In our opinion, the Remuneration Report of Resonance Health Limited for the year ended 30 June 2021 complies with section 300A of the Corporations Act 2001. Responsibilities The directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards HLB Mann Judd Chartered Accountants Perth, Western Australia 29 September 2021 M R Ohm Partner 58 Resonance Health Limited Shareholder Information 30 June 2021 The following additional information is disclosed in accordance with section 4.10 of the Australia Securities Exchange Listing Rules in respect of a listed public company. Corporate Governance 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 on the Company’s web site located here: http://www.resonancehealth.com/investors/business-overview.html Analysis of Shareholdings (as of 10 September 2021) Distribution of shareholders (ASX Code: RHT) Spread of Holdings Number of Units Number of Holders % of Total Issued Capital 1 - 1000 1001 - 5000 5001 - 10000 10001 - 100000 100001 - 999999999999 TOTAL Voting Rights 20,994 966,680 2,059,234 44,575,179 413,527,514 461,149,601 117 255 256 1,097 471 2,196 0.00% 0.21% 0.45% 9.67% 89.67% 100% Ordinary Securities: Each ordinary share is entitled to one vote when a poll is called, otherwise each member present at a meeting or by proxy has a one vote on a show of hands. 59 Resonance Health Limited Shareholder Information 30 June 2021 Twenty largest shareholders of quoted ordinary shares (as of 10 September 2021) Rank Name Units % of Units 1 2 3 SOUTHAM INVESTMENTS 2003 PTY LTD HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED ACUITY CAPITAL INVESTMENT MANAGEMENT PTY LTD 4 MS ALISON VIRGINIA WESLEY 5 MR PAUL JOHN VAN DYK 6 MR WILLIAM MURRAY THOMPSON 7 MS JADE LOUISE THOMPSON 8 MR BRUCE ALAN STEVENSON 9 MR HELMUT ROCKER 10 MARCOLONGO NOMINEES PTY LTD 11 THE MAJOBRI HOLDINGS PTY LTD 12 MR THOMAS PSARAKIS 13 MR HARISH GARG 14 BNP PARIBAS NOMINEES PTY LTD DR MARTIN PETER BLAKE 15 16 MR VINCENT OLADELE 17 18 19 20 MORGAN STANLEY AUSTRALIA SECURITIES (NOMINEE) PTY LIMITED FULLERTON PRIVATE CAPITAL PTY LIMITED THE UNIVERSITY OF WESTERN AUSTRALIA NEWECONOMY COM AU NOMINEES PTY LIMITED <900 ACCOUNT> 73,300,000 43,293,525 20,000,000 10,000,000 9,349,700 6,658,660 6,512,759 6,300,000 6,250,000 5,186,200 4,500,000 4,434,777 4,001,245 3,890,663 3,798,590 3,708,052 3,588,012 3,500,000 3,478,750 3,389,575 15.9 9.39 4.34 2.17 2.03 1.44 1.41 1.37 1.36 1.12 0.98 0.96 0.87 0.84 0.82 0.8 0.78 0.76 0.75 0.74 The names of substantial shareholders who have notified the Company in accordance with the Corporations Act 2001 are: SOUTHAM INVESTMENTS 2003 PTY LTD 73,300,000 Ordinary shares HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED 43,293,525 Ordinary shares 225,140,508 48.82 60 

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