Respiri Limited
Annual Report 2022

Plain-text annual report

ANNUAL REPORT 2022 ii | RESPIRI LIMITED Respiri Limited ABN 98 009 234 173 ANNUAL REPORT 2022 | iii iii Our Vision A world without the challenges of asthma. iv | RESPIRI LIMITED MISSION To improve asthma management by extending care beyond the clinic. ANNUAL REPORT 2022 | v OUR VALUES We act with Integrity We are Respectful We are Accountable We are One Team We are Innovative vi | RESPIRI LIMITED Chairman & CEO Update Dear Fellow Shareholders, On behalf of the Board of Directors of Respiri Limited we are proud to present the company’s Annual Report for the year ended 30 June 2022. This year has been one of continued progression against strategic objectives for Respiri (the Company), as we maintain our business push into the United States Remote Patient Monitoring (RPM) reimbursed physician led market. The accelerated strategic pivot undertaken in late 2021 was nine months ahead of the Company’s original plans and progress has been pleasing and in line with Company reported milestones and budgets. Needless to say, significant investment has been required to get the wheezo® RPM portal/ App/platform solution US-market ready to fully qualify for the Centers of Medicare and Medicaid Services (CMS) RPM Current Procedural Terminology (CPT) reimbursement codes. Despite the various nuances of the local market, this has been completed within budgets allowing Respiri and our RPM partners to be match ready which recent customer acquisition and interest confirms. The US RPM market has an expected annual growth rate of 30%+ until 2026 to US$85 billion. This is driven by an aging population and increases in the occurrence of chronic diseases, including Asthma and Chronic Obstructive Pulmonary Disease (COPD), demand for wireless and portable systems, the presence of sophisticated reimbursement structures, and a move to more cost-effective medical expenditure. Respiri has entered into strategic partnerships with two best in class RPM provider organisations in Access Telehealth and mTelehealth both of whom have a strong pedigree in healthcare provision in the US, established relationships and existing human and other resources providing the necessary resources required by Respiri to commercialise wheezo® RPM solutions. The Board decided to maintain a tight partnership network to maintain the premium nature of wheezo®, which is a source of differentiation for our partners, and to ensure we only deal with the highest quality partners in a market where there is a significant spectrum of partner value proposition quality. Access Telehealth, a provider of RPM and telehealth services utilising their unique Remotli platform, simplifies the provision of remote care with patient engagement and productivity driven dashboard tools to support effective patient care and compliance. In partnership with Access Telehealth, the Company has secured two contracted deals in the US, one with Michigan Children’s Hospital (part of a much larger NYSE listed healthcare provider) and a Health System based in North Carolina, focussing on patients living with COPD, with a number of other customer contracts close to being finalised. The Company is planning to launch these RPM programs with Access Telehealth in the very near future. mTelehealth LLC, a premier provider of RPM services based in Florida using its strong established partnerships to engage customers in the RPM space and also in the Federal Communication Commission (FCC) and US Department of Agriculture (USDA) regional/rural healthcare grants. Further, Medicare (CMS) RPM Total Services grew by 588% (CY20/19). CMS covers approx. 60% of insured patients in the USA) with private payors covering the remaining 40% of insured patients and reimburse services 20%-30% above Medicare scheduled fees. Furthermore, over a rolling 12-month period, the average RPM claimable months (patient monthly engagement) was only ~36%. The Access Telehealth premium services are delivering an ~80% engagement/RPM claim, a more than 2-fold improvement and best in class performance. Access Telehealth’s RPM model delivers proven results; longer RPM program patient persistence; monthly CPT code billables, resulting in greater life-time value (LTV) per patient compared to Medicare (CMS). We also welcomed Mr Brad Snow to the Board as a USA based, Non-Executive Director. He brings over 25 years of extensive commercial, operations and business development experience, gained within the med-tech, biotech and Health Information Technology (HIT) industries primarily focused on the United States. His experience with healthcare stakeholders including providers, payors and physicians, working knowledge in reimbursement system, including RPM, will accelerate our activities in the short to medium term. Brad has already used this background to help the Company continue to accelerate the commercialisation plan. The September 2022 quarter is critically important to the Company as the two contracted RPM programs remain on track to commence patient recruitment and onboarding. Respiri anticipates the first processed RPM CPT reimbursement codes claims resulting from wheezo® RPM programs in the December quarter which the Company believes will make it the first Australian based MedTech whose device has achieved this. The Company is also in latter-stage discussions to close more major deals, which represent tens of thousands of patient lives. With over 120 qualified customer leads in the RPM partner/Respiri sales funnel, the Company is well placed to show consistent patient and revenue growth during the next 12 months. ANNUAL REPORT 2022 | vii Operational achievements Key achievements during the year are outlined below. Product Development – During the year the Company has continued to iterate and improve its wheezo® USA supporting software technology. The mobile application was improved with the addition of the Asthma Control Test (ACT), a clinically validated tool to assess Asthma control over the last 4-week period. This important feature further provides objective metrics to the treating physician whilst reducing the subjectivity that currently exists when patients are in the community. Introducing gamification, through the use of task completion, to drive utilisation and engagement have been delivered, a highly desired capability and well received by existing and pending US customers. The major product advancement in the last year was the establishment of the Health Portal, the SaaS platform, allowing partners and healthcare providers alike to sign up, manage and review patient level health data. The delivery of the health Portal provides a true end-to-end vertical, enabling US based partners to sell the RPM solution as a total package. Respiri continues to develop features to further enhance the core product offerings with positive feedback already received from US customers. In July 2022 the Company announced the delivery of Application Programming Interface (API) functionality allowing the Respiri Health Portal to integrate seamlessly with Access Telehealth’s Remotli Platform. A one-off investment, the API facilitates the capture of key data required for RPM reimbursement codes to be processed by payors. Data included is wheeze rate which is determined from the recorded breathing (the physiological parameter required to qualify for the relevant RPM CPT code reimbursement). This integration also allows for Respiri data collected through customer interfaces to be sent across to Access Telehealth systems, which provides the correct reporting of RPM patient data points, to facilitate reimbursement processes in the US. National Institute for Health Research (NIHR) – The Company announced the £2 million National Institute of Health Research (NIHR) Funded UK paediatric asthma clinical trial awarded to King’s College, London that will assess the impact of the wheezo® when combined with a standard integrated care approach for Asthma (the control arm), for their effectiveness and cost-utility. The Technology Enhanced integrAted asthMa care (TEAM- care) trial is a three arm, randomised, 30-month, 1,464 patient clinical trial that aims to assess outcomes for children with Asthma using a technologically enhanced integrated care pathway to address an unmet clinical need by building the clinical and health economic evidence base for NHS adoption of new technologies for asthma self-management, treatment optimisation, and monitoring. The potential benefits of improving Asthma control are substantial, with the annual cost of Asthma in the UK of £2.3 billion. The costs of an Asthma attack in children with well controlled Asthma is 3.5 times lower than those with uncontrolled Asthma; and the cost of caring for a child with asthma is higher than cost of an adult2. The trial is expected to commence in Q4 2022, with results expected by mid-2024 and interim data available for analysis as the trial progresses. The selection of wheezo® as one of only two MedTech solutions chosen by Kings, and the NIHR’s decision to fund this study, are a further endorsement of the health outcomes and benefits wheezo® has the potential to deliver. A successful outcome will provide clinical and economic information with global utility, USA included further demonstrating the healthcare benefits wheezo® delivers and the costs burden this can relieve for payors. wheezo® was also chosen by the Queen Mary University of London for the ACACIA (Achieving Control of Asthma in Children In Africa) study “Use of an Electronic Wheeze Detection Tool (wheezo®) to detect wheeze in children. Previous ACACIA data indicate that the proportion of children with severe asthma symptoms without a doctor diagnosis of asthma is high. Only a low percentage of children in this cohort have objective markers of asthma. The aim of the study is to verify the wheeze in this group using wheezo®, increasing the likelihood of children having probable undiagnosed asthma. The Company is providing devices for the study and is pleased to be able to support healthcare provision in less affluent countries. Should results be positive this could see wheezo® become a possible mobile, easy, cost-effective diagnostic tool for asthma, which is particularly important in developing countries, and could open up a new global market for Respiri. The asthma Telehealth/Remote Asthma Monitoring Program (RAMP) – developed together with respiratory specialist Dr Kevin Chan (a leading Respiratory Physician working at Campbelltown Hospital & Sydney Adventist Hospital, Wahroonga) continued during the year with >60 patients onboarded onto the program. RAMP is an important activity for the Company as the protocol and overall program deliverables align with what is considered best practice in the US market. A Physician-led, in-community Nurse-supported program mirrors exactly what the RPM CPT codes are designed to foster, seeking to improve health outcomes based on a similar program design. Throughout the year Respiri continued to iterate and improve the program, with a particular focus on improved wheezo® device utilisation and mobile app engagement. These improvements delivered a 3x improvement in the number of wheeze recordings taken over a 2-month period, this higher level of device utilisation has been sustained. Interim analysis of the program results are currently underway and preliminary analyses are providing very promising results. viii | RESPIRI LIMITED Chairman & CEO Update continued Research and Development – The Company continued work on the wearable prototype during the year. The potential for a stable, scalable and clinically meaningful medical device, capable of providing multiple physiological parameters has significant potential for the Company. Utilisation during patient transitions of care; Monitoring at risk patients whilst in the community – post discharge; Reducing re-admission rates post-discharge, all of which create a significant burden on the US Health system. Expanding the Company’s Medical Device product range will continue drive the Company’s Respiratory leadership position and ensure Respiri is seen as an innovator in Medical Device development. Work has commenced on draft documentation required for medical device regulatory submission, FDA 510(k) in particular. There is no shortage of interest from Key Opinion Leaders and the Company anticipates starting preliminary validation clinical studies later in the December quarter. The device will not replace wheezo® but bolster the Respiri portfolio by providing a solution to monitor nocturnal asthma, hospital transition care (remotely monitoring patients discharged from hospital and sent home) and others. Manufacturing – Inventory built to meet US uptake in demand in the short to medium term. Australian inventory to be redirected. The Company has ~20K wheezo® on hand. The operations team successfully mitigated the semi-conductor/ chip issue impacting all sectors by securing an alternative superior chip and componentry which has been purchased and is in inventory ready for future manufacturing batch runs (12,500 chips in inventory). Shareholders We would like to thank all shareholders for their continued support of the company. The foundations have been set with a world-class team ready to execute across all fronts and a very clear strategic focus on US operations and success. Members of the Respiri team will continue to spend time in the US with a primary focus on accompanying US partners to important C-suite meetings to help accelerate and close deals whilst continuing to collect insights relating to US local market dynamics to further inform Products and R&D development. The Board would like to thank shareholders for the $1.6m raised as part of a share placement. The next 12 months are company defining. We have the right team, the right US partners, and most importantly, a well-received and innovative Medical Device in wheezo® and supporting software platform solution. We remain stead-fast and focussed on onboarding patients and “wowing” them and other healthcare stakeholders with the RPM service, whilst continuing to support our partners in growing the sales funnel and demonstrating sustainable growth over the coming 12 months. The NIHR studies will be underway, and the innovative wearable prototype will be well progressed with updates to be shared over the coming year. Thank you for the continued support and trust that you have placed in us as a Board and Executive team and the commitment you continue to show the Company. Nicholas Smedley Executive Chairman Marjan Mikel CEO and Managing Director ANNUAL REPORT 2022 | ix FINANCIAL STATEMENTS 2022 x | RESPIRI LIMITED Respiri LimitedABN 98 009 234 173ContentsFor the Year Ended 30 June 2022PageFinancial StatementsChairman and CEO UpdateDirectors' Report1Auditor's Independence Declaration under Section 307C of the Corporations Act 200119Statement of Profit or Loss and Other Comprehensive Income20Statement of Financial Position21Statement of Changes in Equity22Statement of Cash Flows24Notes to the Financial Statements25Directors' Declaration55Independent Audit Report56ANNUAL REPORT 2022 | 1 Respiri LimitedABN 98 009 234 173Directors' Report30 June 2022The Directors of Respiri Limited ("RSH", "Respiri", "Company" or "the Group") submit herewith the annual financial report ofthe Group for the financial year ended 30 June 2022. In order to comply with the Corporations Act 2001, the Directors'Report are as follows:DirectorsThe names of each person who has been a director during the year and to the date of this report are:Mr Nicholas SmedleyExecutive ChairmanAppointed to the Board30 October 2019Last elected by Shareholders16 December 2020ExperienceNicholas is an experienced Investment Banker and M&A Advisor, with14 years’ experience at UBS and KPMG. He has worked on M&Atransactions in the UK, Hong Kong, China, and Australia withtransactions ranging from the A$9bn defence of WMC Resourcesthrough to the investment of $65m into Catch.com.au. Nicholascurrently oversees investments in the Property, Aged care,Technology and Medical Technology space. Key areas of expertiseinclude M&A, Debt structuring, Corporate governance and innovation. QualificationsB.ComInterest in shares and options14,209,668 Ordinary Shares and 77,500,000 Unlisted OptionsDirectorships held in otherlisted entitiesAD1 Holdings LimitedVortiv LimitedMr Marjan MikelCEO and Executive DirectorAppointed to the Board25 November 2019Last elected by Shareholders16 December 2020ExperienceMarjan is a highly experienced managing director and board memberwith a career spanning Australia, Europe and Japan, Marjan’s focushas been in the healthcare industry; from pharmaceuticals andinformation services and technology to medical devices and sleepdisorder solutions. He founded and subsequently sold Healthy SleepSolutions after developing it into a successful business, with ResmedLtd as a joint venture/shareholder partner.He is an industry research fellow at University of New South WalesFaculty of Engineering.QualificationsBSc(Hons), Grad Dip Ed, MCom; MAICDInterest in shares and options3,308,687 Ordinary Shares and 90,000,000 Unlisted OptionsDirectorships held in otherlisted entitiesN/A12 | RESPIRI LIMITED Respiri LimitedABN 98 009 234 173Directors' Report30 June 2022Directors (continued)Dr Thomas DuthyNon-Executive DirectorAppointed to the Board11 February 2020Resigned from the Board19th April 2022ExperienceDr Duthy has over 15 years of direct financial markets experiencehaving worked in sell-side equity research, and senior executive rolesacross investor relations and corporate development. Dr Duthy is theFounder and CEO of Nemean Group Pty Ltd, a boutique corporateadvisory and investor relations firm specialising in delivering value-added services across the life sciences, medical devices, healthcare,technology and emerging companies sectors. Prior to establishingNemean in October 2018, Tom was the Global Head of InvestorRelations & Corporate Development at Sirtex Medical Limited(ASX:SRX), which was sold to CDH Investments in September 2018for A$1.9 billion, which remains the largest medical device transactionin Australian corporate history. Prior to Sirtex, Tom spent ten years asa leading sell-side Healthcare & Biotechnology analyst at TaylorCollison Limited, focused mainly on small cap companies. During thistime, approximately $200 million in equity capital was raised forselected portfolio companies. He is a Member of the AustralianInstitute of Company Directors (MAICD) and the Australasian InvestorRelations Association (AIRA).QualificationsB.Sc. (Hons.), Ph.D, MBAInterest in shares and options745,454 Ordinary Shares and 30,000,000 Unlisted OptionsDirectorships held in otherlisted entities Invex Therapeutics LimitedMr Brad SnowNon-Executive DirectorAppointed to the Board20 June 2022ExperienceBrad Snow has 25 years of extensive commercial, operations andbusiness development experience gained within the med-tech,biotech and HIT industries primarily focused in the United States.Brad is currently Chief Executive Officer and Board of Director ofAngel-Medical Systems Inc (AngelMed). AngelMed’s novel device,The Guardian System, is the world’s first and only FDA approved real-time implantable cardiac device to detect acute coronary syndromeevents, including silent heart attacks.Previously, he was Chief Executive Officer and Board of Director ofSonaCare Medical LLC (now Sonablate Corp) a global company withcutting edge (HIFU) ultrasound imaging, assessment and ablationsystem.Brad provided Med Tech Consulting which provided advisory servicesto medical technology clients in relation to commercial strategy,operational improvements, business development and funding. He cofounded DisruptRxtech.com, an artificial intelligence healthcare ITcompany.Earlier in his career, he held executive leadership roles in sales,marketing, and commercial operations for numerous start-up andemerging growth companies in the med-tech space.Interest in shares and optionsNilDirectorships held in otherlisted entitiesAngel-Medical Systems Inc (Listed in the United States)2ANNUAL REPORT 2022 | 3 Respiri LimitedABN 98 009 234 173Directors' Report30 June 2022Company secretaryMr Alastair Beard was appointed as Company Secretary on 13th March 2019 and resigned on the 15th August 2022.Andrew Metcalfe was appointed as Company Secretary on 15th August 2022.Andrew Metcalfe (CPA, FGIA, GAICD) is an experienced Chartered Secretary and Governance Adviser with more than 25years' experience across a broad industry base, having worked with a variety of Board and senior management teams ofASX listed companies.Principal ActivitiesThe Company’s principal activities in the course of the financial year have been the research, development andcommercialisation of medical devices, and the development of mobile health applications.There were no significant changes in the nature of the Group's principal activities during the financial year.Operating and Financial reviewThe loss of the Company after income tax for the financial year was $6,624,313 (2021: $11,040,347). This result has beenachieved after fully expensing all research and development costs.During the year the Company expanded its Business into the United States with a focus on the Remote PatientMonitoring (RPM) reimbursed physician led market. Significant investment was required to get the wheezo® RPMportal/app/platform ready for the market and qualified for the Centres of Medicare and Medicaid Services (CMS) RPMCurrent Procedural Terminology (CPT) reimbursement codes. The Company entered strategic Partnerships with two major RPM providers – Access Telehealth and mTelehealth bothof whom have a solid track record for the provision of healthcare services in the US and maintain a strong network ofhealthcare providers. In Partnership with Access Telehealth, The Company was able to secure deals with two major UShealthcare providers including Michigan Children’s Hospital and a health system based in North Carolina with a focus onCOPD. The Company has announced a £2 million National Institute of Health Research (NIHR) Funded UK paediatric asthmaclinical trial awarded to King’s College, London that will assess the impact of the wheezo® when combined with astandard integrated care approach for Asthma for their effectiveness and cost-utility. The selection of wheezo® as one ofonly two MedTech solutions chosen by Kings, and the NIHR’s decision to fund this study, reflect endorsement of thewheezo® device and its potential to deliver healthcare benefits.The asthma Telehealth/Remote Asthma Monitoring Program (RAMP) – developed together with respiratory specialist DrKevin Chan (a leading Respiratory Physician working at Campbelltown Hospital & Sydney Adventist Hospital,Wahroonga) continued during the year with >60 patients onboarded onto the program. RAMP is an important activity forthe Company as the protocol and overall program deliverables align with what is considered best practice in the USmarket. A Physician-led, in-community Nurse-supported program mirrors exactly what the RPM CPT codes are designedto foster, seeking to improve health outcomes based on a similar program design.Corporate and Financial HighlightsThe Company recorded revenue of $253,668 representing sales of wheezo® devices to its US Partners in addition toonline orders, and license fees from mTelehealth.Product manufacturing cost of sales of $259,292 reflects further improvements in the COGS for manufacturing ofwheezo® model 4.0 and the progress made towards the Company set target price of US$35.Advertising and Marketing costs for the year of $1,463,343 include costs associated with the launch of wheezo® in theUS, including the costs of its distribution agreement with mTelehealth.34 | RESPIRI LIMITED Respiri LimitedABN 98 009 234 173Directors' Report30 June 2022Operating and Financial review (continued)Employee, consulting and corporate costs of $2,970,954 reflect the additional hire of key management personnel thatincluded the CTO and CCO and other key business roles required to support Respiri’s corporate objectives.The Company completed a $1,783,000 share placement to institutional, professional and sophisticated investors reflectingthe strong support from existing and new investors alike. The funding allowed Respiri to meet its corporate objectives whichincluded the commercial launch of wheezo® in the US market.At year end the company held $2,651,118 in inventories and $1,217,271 cash on hand.DividendsThe Company did not pay any dividends during the financial year. The Directors do not recommend the payment of adividend in respect of the 2022 financial year.Significant Changes in State of AffairsIn the opinion of the Directors, there were no significant changes in the state of affairs of entities in the Group during thefinancial year under review not otherwise disclosed in the Annual Report.Matters Subsequent to Reporting PeriodOn 15th August 2022, Alastair Beard resigned as company secretary. Andrew Metcalfe was appointed as the new companysecretary on the same date.Except for the above, no other matters or circumstances have arisen since the end of the financial year which significantlyaffected or could significantly affect the operations of the Group, the results of those operations, or the state of affairs of theGroup in future financial years.Likely Developments and Expected ResultsPlease refer to the ‘Operating and Financial Review’ section at the start of the Directors’ Report for information in relation toCompany’s future Developments and Events.Environmental RegulationsThe Group's operations are not regulated by any significant environmental regulations under either Commonwealth or Statelegislation.Risk ManagementThe Board is responsible for overseeing the establishment and implementation of the risk management system, and for thereviewing and assessing the effectiveness of the Company's implementation of that system on a regular basis.The Board and senior management continue to identify the general areas of risk and their impact on the activities of theCompany. The Board has established a formal process in relation to the maintenance of an internal risk register which isupdated and reviewed by the Board at its monthly meetings. The potential risk areas for the Company include:reliance on key personnelefficacy, safety and regulatory risk of medical devices4ANNUAL REPORT 2022 | 5 Respiri LimitedABN 98 009 234 173Directors' Report30 June 2022Risk Management (continued)financial position of the Company and the financial outlook;domestic and global economic outlook and share market activity;changing government policy (Australian and overseas);competitors' products and research and development programs;market demand and market prices for medical device technologies;environmental regulations;ethical issues relating to medical device research and development;the status of partnership and contractor relationships;other government regulations including those specifically relating to the biomedical and health industries; andoccupational health and safety and equal opportunity law.The above list of risk areas ought not to be taken as an exhaustive one of the risks faced by the Company or by investors inthe Company. The above areas, and others not specifically referred to above, may in the future materially affect thefinancial performance of the Company.The Board and Management will continue to perform a regular review of the following:the major risks that occur within the business;the degree of risk involved;the current approach to managing the risk; andwhere appropriate, determine:any inadequacies of the current approach; andpossible new approaches that more efficiently and effectively address the risk.Healthcare Technology Companies – Inherent RisksSome of the risks inherent in the development of medical device products to a marketable stage include the uncertainty ofpatent protection and proprietary rights, whether patent applications and issued patents will offer adequate protection toenable product development or may infringe intellectual property rights of other parties, the obtaining of the necessaryregulatory authority approvals and difficulties caused by the rapid advancements in technology. Also a particular medical device may fail the clinical development process through lack of efficacy or safety. Companiessuch as Respiri Limited are dependent on the success of their medical devices and on the ability to attract funding tosupport these activities.56 | RESPIRI LIMITED Respiri LimitedABN 98 009 234 173Directors' Report30 June 2022Healthcare Technology Companies – Inherent Risks (continued)Investment in healthcare technology including medical devices cannot be assessed on the same fundamentals as tradingand manufacturing enterprises and thus investment in these areas must be regarded as speculative taking into accountthese considerations. Meetings of DirectorsA number of formal meetings and circular resolutions were held during the year as tabled below:Directors'MeetingsAudit, Risk andComplianceCommitteeRemuneration &NominationCommitteeNumbereligible toattendNumberattendedNumbereligible toattendNumberattendedNumbereligible toattendNumberattendedMr Nicholas Smedley1212----Mr Marjan Mikel1212----Dr Thomas Duthy99----Mr Brad Snow11----For the date of appointment and resignation of each Director and Executive, please refer to the Remuneration Reportsection of the Directors’ Report.Indemnification of Officers and AuditorsDuring the financial year, the Company maintained an insurance policy to indemnify Directors and Officers against certainliabilities incurred as such a Director or Officer, including costs and expenses associated in successfully defending legalThe Company has not otherwise, during or since the financial year, indemnified or agreed to indemnify the Auditor of theCompany or any related body corporate against a liability incurred as such an Officer or Auditor.Proceedings on Behalf of the CompanyNo proceedings have been brought or intervened in on behalf of the Company with leave of the Court under section 237 ofthe Corporations Act 2001.Non-audit ServicesThe Company may decide to employ the auditor on assignments additional to their statutory audit duties where the auditor'sexpertise and experience with the Company and/or the Group are important.During the year ended 30 June 2022 the Company did not engage the external auditor to provide non-audit services.Auditor's Independence DeclarationThe auditor's independence declaration in accordance with section 307C of the Corporations Act 2001 for the year ended30 June 2022 has been received and can be found on page 19 of the financial report.6proceedings. The contract of insurance prohibits disclosure of the nature of the liability and the amount of the premium. ANNUAL REPORT 2022 | 7 Respiri LimitedABN 98 009 234 173Directors' Report30 June 2022Share Options on Issue as at the Date of this ReportThe unissued ordinary shares of Respiri Limited under option as at the date of this report were: Unlisted optionsClassASX CodeDate of ExpiryExercise Price$No. under Option01RSHAF31 December 20230.036,000,00002RSHAG31 December 20240.036,000,00007RSHAA28 May 20230.104,500,00008RSHAB12 June 20240.1065,000,000(a)09RSHACi30 Sep 20240.2030,000,000(a)10RSHACii31 Mar 20250.307,500,000(a)11RSHACiii30 Sep 20250.407,500,000(a)12RSHACiv31 Mar 20260.607,500,000(a)13RSHAD1 July 20220.107,000,00014RSHAE1 July 20240.1010,000,00015RSHAH30 Sep 20240.104,000,000(b)16RSHAC2 Nov 20230.205,800,000(b)171819RSHACRSHAARSHAA15 Jun 202617 Dec 202517 Dec 20250.300.300.308,000,00065,000,00010,000,000(b)20RSHAAB31 Jan 20270.203,200,00021RSH ESOP9 Jun 20270.102,000,00022RSH1 Mar 20250.105,000,00023RSH1 Mar 20250.2010,000,000a)Issued in 5 tranches with different vesting conditions. See Note 21.b)Options granted at EGM held in May 2020. Issued in 3 tranches with different vesting conditions. Of the 3 tranches, 1has not yet been allotted to members. See Note 21.Please refer to Note 21 for further details regarding the above unlisted options on issue as at 30 June 2022.There were no listed options outstanding at the reporting date.Corporate GovernanceIn recognising the need for the highest standards of corporate behaviours and accountability, the Directors of Respirisupport and adhere to good corporate governance practices. The Company’s Corporate Governance Statement is availableon the Company’s website at www.Respiri.co.78 | RESPIRI LIMITED Respiri LimitedABN 98 009 234 173Directors' Report30 June 2022Remuneration Report (Audited)This Remuneration Report outlines the Director and Executive remuneration arrangements of the Company as required bythe Corporations Act 2001 and its Regulations. This report details the nature and amount of remuneration of each Director of Respiri Limited and all other KeyManagement Personnel. For the purposes of this report, Key Management Personnel (KMP) are defined as those persons having authority andresponsibility for planning, directing and controlling the major activities of the Company, directly or indirectly, including anyDirector (whether Executive or otherwise) of the Company. For the purposes of this report, the term 'executive' encompasses the Executive Chairman.NamesPositionAppointment/ResignationDirectorsMr Marjan MikelCEOAppointed on 2nd December 2019Executive DirectorAppointed on 25th November 2019Mr Nicholas SmedleyNon-Executive DirectorAppointed on 30th October 2019Executive ChairmanAppointed on 15th November 2019Mr Brad SnowNon-Executive DirectorAppointed on 20th June 2022Dr Thomas DuthyNon-Executive DirectorResigned on 19th April 2022Other KMPMr George VlachodimitropoulosChief Technology OfficerAppointed on 23rd August 2021Dr Samaneh Sarraf ShiraziChief Research OfficerAppointed on 4th February 2019Mr Peter HildebrandtMr Theo AntonopoulosChief Operating OfficerChief Commercial OfficerAppointed on 1st November 2020Appointed on 7th June 2021Remuneration PolicyRemuneration of all Non-Executive Directors and Officers of the Company is determined by the Board followingrecommendation by the Remuneration and Nomination Committee. The Company is committed to remunerating Executive Directors in a manner that is market-competitive and consistent with"Best Practice" including the interests of shareholders. Remuneration packages are based on fixed and variablecomponents, determined by the Executives' position, experience and performance, and may be satisfied via cash or equity. Non-Executive Directors are remunerated out of the aggregate amount limit approved by shareholders and at a level that isconsistent with industry standards. Non-Executive Directors do not receive performance based bonuses and priorShareholder approval is required to participate in any issue of equity. No retirement benefits are payable other thanstatutory superannuation, if applicable. Voting and comments made at the Company’s Annual General MeetingThe Company did not receive any specific feedback at the AGM or throughout 2022 on its remuneration practices. TheRemuneration Report was adopted at the 2021 AGM by more than 96% of eligible votes received.Remuneration Policy Versus Company Financial PerformanceDirectors have been compensated for work undertaken and the responsibilities assumed in being Directors of this publiclylisted company based on industry practice. Consistently with good corporate governance practices, compensation of Non-Executive Directors is not linked to specific performance hurdles or objectives.8ANNUAL REPORT 2022 | 9 Respiri LimitedABN 98 009 234 173Directors' Report30 June 2022Remuneration Report (Audited) (continued)Remuneration Policy Versus Company Financial Performance (continued)The Company envisages its performance in terms of earnings will remain negative whilst the Company continues in thedevelopment and commercialisation phase. Shareholder value reflects the speculative and volatile biotechnology marketsector. This pattern is indicative of the Company's performance over the past five years. Accordingly, no dividends have been paidduring the year, or in respect of the 2022 financial year.Net (Loss)/Profit$Share Priceat BalanceSheet Date$Loss perShare (cents)$Financial Year2022(6,624,313)0.06(0.91)2021(11,040,347)0.07(1.58)2020(7,260,935)0.09(1.27)2019(8,474,586)0.09(1.69)2018(3,207,220)0.10(0.73)Performance Based RemunerationThe purpose of a performance bonus is to reward individual performance in line with Company objectives. Consequently,performance based remuneration is paid to an individual where the individual's performance clearly contributes to asuccessful outcome for the Company. This is regularly measured in respect of performance against key performanceindicators (KPI's). The Company uses a variety of short-term and long-term KPI's to determine achievement, depending on the role of theexecutive or director being assessed and the particular KPI being targeted.These include: successful contract negotiations; company share price consistently reaching a targeted rate on the ASX or applicable market over a period of time; andcompletion of set milestones.The Non-Executive Directors do not receive performance-based remuneration.910 | RESPIRI LIMITED Respiri LimitedABN 98 009 234 173Directors' Report30 June 2022Remuneration Report (Audited) (continued)Details of Remuneration for the Year Ended 30 June 2022The remuneration for each Director and each of the other Key Management Personnel of the consolidated entity during theyear was as follows:Short-term Employee BenefitsPost-employmentBenefitsShare-basedpayments2022Cash salaryand fees$Cash bonus$Consultingfees$Superannuationcontribution$Shares/Options$$DirectorsMr Marjan Mikel428,306--23,568155,422607,296Mr Nicholas Smedley245,455---110,070355,525Mr Brad Snow(appointed 20 Jun 2022)------Dr Thomas Duthy(resigned 19 Apr 2022)50,000---(193,578)(143,578)Other KMPMr GeorgeVlachodimitropoulos214,382--20,3641,730236,476Mr Theo Antonopoulos275,000--23,56814,483313,051Mr Peter Hildebrandt235,000--23,50034,297292,797Dr Samaneh SarrafShirazi176,458--17,646-194,1041,624,601--108,646122,4241,855,671Note: For the date of appointment and resignation of each Director and Executive please refer to the Directors' Reportpages 1-2.a)15,000,000 options granted to Thomas Duthy were forfeited following his resignation on 19th April 2022.b)20,000,000 unlisted options were granted to senior management personnel at the May 2020 EGM. As at 30 June 2022,of the total granted, 8,000,000 options with a fair value of $159,573 have not yet been formally allotted.10ANNUAL REPORT 2022 | 11 Respiri LimitedABN 98 009 234 173Directors' Report30 June 2022Remuneration Report (Audited) (continued)Details of Remuneration for the Year (continued) Ended 30 June 2022Short-term Employee BenefitsPost-employmentBenefitsShare-basedpayments2021Cash salaryand fees$Cash bonus$Consultingfees$Superannuationcontribution$Shares/Options$$DirectorsMr Marjan Mikel428,306--21,6941,106,1111,556,111Dr Thomas Duthy60,000---345,734405,734Mr Nicholas Smedley203,636---929,5811,133,217Professor BruceThompson1,344--128-1,472Other KeyManagementPersonnelMr Philippe Ludekens214,659--18,59756,523289,779Mr Peter Hildebrandt156,667--14,88379,067250,617Mr Theo Antonopoulos18,333--1,7421,49321,568Dr Samaneh SarrafShirazi167,458--15,90956,523239,8901,250,403--72,9532,575,0323,898,388At Risk Income as a Proportion of Total RemunerationAll Executive Directors and other key management personnel are eligible to receive incentives whether throughemployment contracts or by the recommendation of the Board. Their performance payments are based on a set monetaryvalue, set number of shares or options or as a portion of base salary. Therefore, there is no fixed proportion betweenincentive and non-incentive remuneration. Entitlement to these payments does not depend on the future performance of theCompany. Non-Executive Directors are not entitled to receive bonuses and/or incentives.1112 | RESPIRI LIMITED Respiri LimitedABN 98 009 234 173Directors' Report30 June 2022Remuneration Report (Audited) (continued)At Risk Income as a Proportion of Total Remuneration (continued)The relative proportions of remuneration income that are at risk, and those that are fixed, are as follows:FixedRemunerationAt Risk - STIAt Risk - LTI2022%2021%2022%2021%2022%2021%DirectorsMr Marjan Mikel (appointed on 25 November 2019)7429--2671Mr Nicholas Smedley (appointed on 30 October 2019)6918--3182Mr Brad Snow (appointed on 20 June 2022)------Dr Thomas Duthy (appointed on 11 February 2020,resigned on 19 April 2022)10015---85Other Key Management PersonnelMr George Vlachodimitropoulos (appointed on 23August 2021)99---1-Mr Theo Antonopoulos (appointed 7 June 2021)9593--57Mr Peter Hildebrandt (appointed 1 November 2020)8868--1232Dr Samaneh Sarraf Shirazi (appointed 4 February2019)10076---24At risk long-term incentive (LTI) relates to remuneration in the form of share based payments, which are subject to vestingconditions based on length of service. At risk short-term incentive (STI) relates to discretionary bonuses approved by theboard in respect of performance during the relevant year.12ANNUAL REPORT 2022 | 13 Respiri LimitedABN 98 009 234 173Directors' Report30 June 2022Remuneration Report (Audited) (continued)Share-based CompensationAt the General Meeting held on 31 October 2013, Shareholders approved the establishment of the 2013 Employees',Directors' and Consultants' Share and Option Plan (ESOP). The ESOP is intended to reward Directors, employees and/orconsultants for their contributions to the Group. The Plan is to be used as a method of retaining key personnel for thegrowth and development of the Group. Due to the Group's presence in USA, the Plan has been established to benefitpersonnel in Australia and USA. As at 30 June 2022 equity had been issued to 2 directors & 6 employees in Australia.The terms and conditions of each grant of options affecting Director and other Key Management Personnel remuneration inthe current or future reporting periods are as follows:Grant DateDate Vested &ExercisableExpiry DateExercise Price$Share PriceHurdleFullyVestedValue per Optionat Grant Date$14 Dec 20171 Jul 202031 Dec 20230.030.10Yes0.04814 Dec 20171 Jul 202031 Dec 20240.030.15Yes0.09226 May 202030 Sep 202030 Sep 20240.10N/AYes0.03626 May 202030 Sep 202030 Sep 20240.30N/ANo0.02016 Jun 202012 Jun 202012 Jun 20240.10N/AYes0.04116 Jun 202030 Sep 202030 Sep 20240.20N/ANo0.03116 Jun 202031 Mar 202131 Mar 20250.30N/ANo0.02716 Jun 202030 Sep 202130 Sep 20250.40N/ANo0.02616 Jun 202022 Oct 202021 Dec 20207 Jun 202131 Mar 20221 Nov 202121 Dec 20207 Jun 202231 Mar 20261 Nov 202317 Dec 20257 Jun 20240.600.200.300.20N/AN/AN/AN/ANoNoYesNo0.0230.0740.0220.01527 Nov 202123 Aug 20232 Nov 20230.20N/ANo0.00322 Feb 202231 Jan 202331 Jan 20270.20N/ANo0.0029 Jun 20229 Jun 20239 Jun 20270.10N/ANo0.008Options granted under the plan carry no dividend or voting rights until exercised into ordinary fully paid shares.When exercisable, each option is convertible into one ordinary share as soon as practical after the receipt by the Companyof the completed exercise form and full payment of the exercise price. The exercise price of options granted under this plan shall be determined by the Committee in its sole discretion. The plan rules contain a restriction on removing the 'at risk' aspect of the instruments granted to executives. Planparticipants may not enter into any transaction designed to remove the 'at risk' aspect of an instrument before it vests.1314 | RESPIRI LIMITED Respiri LimitedABN 98 009 234 173Directors' Report30 June 2022Remuneration Report (Audited) (continued)Share-based Compensation (continued)Details of options over ordinary shares in the Company provided as remuneration to each Director of the Company andeach of the other Key Management Personnel are set out below:Number of OptionsGranted During the YearNumber of OptionsForfeited/ Lapsed/Exercised During theYearNumber of OptionsVested During the Year202220212022202120222021DirectorsMr Marjan Mikel-30,000,000---30,000,000Mr Nicholas Smedley-30,000,000---30,000,000Dr Thomas Duthy-5,000,00015,000,000--10,000,000Other Key ManagementPersonnelMr GeorgeVlachodimitropoulos2,500,000-----Mr Theo Antonopoulos1,000,0002,000,000----Mr Peter Hildebrandt-2,000,000----Mr Ross Blair-Holt------3,500,00069,000,00015,000,000--70,000,000Refer to Page 15 for closing balance of options held by each Director and other Key Management Personnel of RespiriLimited, including their personally related parties, as at 30 June 2022.14ANNUAL REPORT 2022 | 15 Respiri LimitedABN 98 009 234 173Directors' Report30 June 2022Remuneration Report (Audited) (continued)(a)ShareholdingsThe number of fully paid ordinary shares in the Company held during the financial year by each Director and other KeyManagement Personnel of Respiri Limited, including shares held indirectly by them personally, are set out below:Balance atStart of theYearGrantedasCompensationSharesfromOptionsExercisedNetChangeOtherBalance atEnd of theYear30 June 2022DirectorsMr Marjan Mikel3,308,687---(a)3,308,687Mr Nicholas Smedley14,209,668---(b)14,209,668Mr Brad Snow-----Dr Thomas Duthy745,454---(c)745,454Other Key Management PersonnelMr George Vlachodimitropoulos-----Mr Theo Antonopoulos-----Mr Peter Hildebrandt-----Dr Samaneh Sarraf Shirazi-----18,263,809---18,263,809a)At year end, 1,490,506 shares are held directly, 1,818,181 held indirectly.b)At year end, nil shares are held directly and 14,209,668 held indirectly.c)At year end, nil shares are held directly and 745,454 held indirectly.Balance atStart of theYearGranted asCompensationSharesfromOptionsExercisedNetChangeOtherBalance atEnd of theYear30 June 2021DirectorsMr Nicholas Smedley14,059,668--150,00014,209,668Mr Marjan Mikel2,643,119--665,5683,308,687Dr Thomas Duthy745,454---745,454Other Key Management PersonnelMr Philippe Ludekens-----Mr Peter Hildebrandt-----Mr Theo Antonopoulos-----Dr Samaneh Sarraf Shirazi-----17,448,241--815,56818,263,8091516 | RESPIRI LIMITED Respiri LimitedABN 98 009 234 173Directors' Report30 June 2022Remuneration Report (Audited) (continued)(b)Options and RightsThe number of options over ordinary shares in the Company held during the financial year by each Director and other Key Management Personnel of Respiri Limited, including theirpersonally related parties, are set out below:Balance atStart of theYearGranted asCompensationOptionsExercisedNet ChangeOtherBalance atEnd of theYearVested andExercisableUnvested30 June 2022DirectorsMr Nicholas Smedley77,500,000---77,500,00060,000,00017,500,000Mr Marjan Mikel90,000,000---90,000,00060,000,00030,000,000Dr Thomas Duthy30,000,000--(15,000,000)(a)15,000,00015,000,000-Other Key ManagementPersonnelMr GeorgeVlachodimitropoulos-2,500,000--(b)2,500,000-2,500,000Mr Theo Antonopoulos2,000,0001,000,000--(b)3,000,000-3,000,000Mr Peter Hildebrandt2,000,000---(b)2,000,000-2,000,000Dr Samaneh Sarraf Shirazi2,000,000---(b)2,000,0002,000,000-203,500,0003,500,000-(15,000,000)192,000,000137,000,00055,000,000a)15,000,000 options granted to Thomas Duthy were forfeited following his resignation on 19th April 2022.b)20,000,000 unlisted options were granted to senior management personnel at the May 2020 EGM. As at 30 June 2022, of the total granted, 8,000,000 options with a fair value of$159,573 have not yet been formally allotted.16ANNUAL REPORT 2022 | 17 Respiri LimitedABN 98 009 234 173Directors' Report30 June 2022Remuneration Report (Audited) (continued)(b)Options and Rights (continued)Balance atStart of theYearGranted asCompensationOptionsExercisedNet ChangeOtherBalance atEnd of theYearVested andExercisableUnvested30 June 2021DirectorsMr Nicholas Smedley47,500,00030,000,000--77,500,00060,000,00017,500,000Mr Marjan Mikel60,000,00030,000,000--90,000,00060,000,00030,000,000Dr Thomas Duthy25,000,0005,000,000--30,000,00010,000,00020,000,000-------Other Key ManagementPersonnelMr Philippe Ludekens2,000,000---(a)2,000,0002,000,000-Mr Peter Hildebrandt-2,000,000--(a)2,000,000-2,000,000Mr Theo Antonopoulos-2,000,000--(a)2,000,000-2,000,000Dr Samaneh Sarraf Shirazi2,000,000---(a)2,000,0002,000,000-136,500,00069,000,000--205,500,000134,000,00071,500,000a)20,000,000 unlisted options were granted to senior management personnel at the May 2020 EGM. As at 30 June 2021, of the total granted, 8,800,000 options with a fair value of$180,119 have not yet been formally allotted.1718 | RESPIRI LIMITED Respiri LimitedABN 98 009 234 173Directors' Report30 June 2022Remuneration Report (Audited) (continued)The Directors and other Key Management Personnel are subject to service agreements with normal commercial terms andconditions. The key terms of these agreements are set out below:DurationOn-going termPeriods of Notice Required to TerminateIn the case of:- Marjan Mikel, one months' notice of termination by theemployee and the Company;- George Vlachodimitropoulos, one months' notice oftermination by the employee and the Company;- Theo Antonopoulos, one months' notice of termination bythe employee and the company;- Peter Hildebrandt, one months' notice of termination by theemployee and the Company; and- Samaneh Shirazi, one months' notice of termination by theemployee and the Company.This is the end of the Audited Remuneration Report.This director's report, incorporating the remuneration report, is signed in accordance with a resolution of the Board ofDirectors.Mr Nicholas SmedleyExecutive-ChairmanDated this 30th day of August 2022Melbourne, Australia18ANNUAL REPORT 2022 | 19 THE POWER OF BEING UNDERSTOOD AUDIT | TAX | CONSULTING RSM Australia Partners is a member of the RSM network and trades as RSM. RSM is the trading name used by the members of the RSM network. Each member of the RSM network is an independent accounting and consulting firm which practices in its own right. The RSM network is not itself a separate legal entity in any jurisdiction. RSM Australia Partners ABN 36 965 185 036 Liability limited by a scheme approved under Professional Standards Legislation RSM Australia Partners Level 21, 55 Collins Street Melbourne VIC 3000 PO Box 248 Collins Street West VIC 8007 T +61 (0) 3 9286 8000 F +61 (0) 3 9286 8199 www.rsm.com.au AUDITOR’S INDEPENDENCE DECLARATION As lead auditor for the audit of the financial report of Respiri Limited for the year ended 30 June 2022, I declare that, to the best of my knowledge and belief, there have been no contraventions of: (i) the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and (ii) any applicable code of professional conduct in relation to the audit. RSM AUSTRALIA PARTNERS B Y CHAN Partner Dated: 30 August 2022 Melbourne, Victoria 20 | RESPIRI LIMITED Respiri LimitedABN 98 009 234 173Statement of Profit or Loss and Other Comprehensive IncomeFor the Year Ended 30 June 2022Note2022$2021$RevenueOperating revenue3253,688270,074Non-operating revenue6,8751,352Other income3518,5081,165,921Total revenue779,0711,437,347Cost of sales(259,292)(1,263,452)519,779173,895Expenses4Consulting, employee and director(2,970,954)(3,330,901)Equity-based payment21(311,035)(2,530,169)Corporate administration(1,193,459)(1,633,895)Depreciation(81,954)(79,601)Marketing and promotion(916,587)(2,185,086)Research and development(1,463,343)(1,387,084)Travel(206,760)(67,506)Loss before income tax expense from continuingoperations(6,624,313)(11,040,347)Income tax expense5--Loss after income tax for the year(6,624,313)(11,040,347)Other comprehensive income, net of income taxItems that will not be reclassified subsequently toprofit or lossExchange differences on translation of foreignoperations973(19,833)Total comprehensive loss for the year(6,623,340)(11,060,180)Loss attributable to:Members of the parent entity(6,624,313)(11,040,347)Total comprehensive loss attributable to:Members of the parent entity(6,623,340)(11,060,180)Basic loss per share (cents)(0.91)(1.58)Diluted loss per share (cents)(0.91)(1.58)The accompanying notes form part of these financial statements.20ANNUAL REPORT 2022 | 21 Respiri LimitedABN 98 009 234 173Statement of Financial PositionAs At 30 June 2022Note2022$2021$ASSETSCURRENT ASSETSCash and cash equivalents91,217,2717,973,188Trade and other receivables1050,305135,986Inventories142,651,118537,046Other assets13203,969298,978TOTAL CURRENT ASSETS4,122,6638,945,198NON-CURRENT ASSETSProperty, plant and equipment1282,686162,374TOTAL NON-CURRENT ASSETS82,686162,374TOTAL ASSETS4,205,3499,107,572LIABILITIESCURRENT LIABILITIESTrade and other payables15789,6291,294,633Other financial liabilities16404,771171,255Deferred revenue3,162857TOTAL CURRENT LIABILITIES1,197,5621,466,745NON-CURRENT LIABILITIESOther financial liabilities16-70,665TOTAL NON-CURRENT LIABILITIES-70,665TOTAL LIABILITIES1,197,5621,537,410NET ASSETS3,007,7877,570,162EQUITYIssued capital17128,840,331127,090,401Reserves187,480,0086,826,043Accumulated losses(133,312,552)(126,346,282)TOTAL EQUITY3,007,7877,570,162The accompanying notes form part of these financial statements.2122 | RESPIRI LIMITED Respiri LimitedABN 98 009 234 173Statement of Changes in EquityFor the Year Ended 30 June 20222022IssuedCapital$OptionReserve$ForeignTranslationCurrencyReserve$AccumulatedLosses$Total$Balance at1 July 2021127,090,4017,168,973(342,930)(126,346,282)7,570,162Loss after income tax expense for the year---(6,624,313)(6,624,313)Disposal of investments in foreign subsidiaries--341,957(341,957)-Other comprehensive income for the year, net of tax--973-973Total comprehensive income for the year--342,930(6,966,270)(6,623,340)Transactions with Equity holders in their capacity as Equity holdersShares issued1,783,000---1,783,000Capital raising costs(33,070)---(33,070)Options exercised-----Options issued-20,808--20,808Options cancelled-(149)--(149)Options forfeited/lapsed-(195,095)--(195,095)Share-based payment expense -485,471--485,471Balance at30 June 2022128,840,3317,480,008-(133,312,552)3,007,787The accompanying notes form part of these financial statements.22ANNUAL REPORT 2022 | 23 Respiri LimitedABN 98 009 234 173Statement of Changes in EquityFor the Year Ended 30 June 20222021IssuedCapital$OptionReserve$ForeignTranslationCurrencyReserve$AccumulatedLosses$Total$Balance at1 July 2020113,694,6144,429,194(323,097)(115,305,935)2,494,776Loss after income tax expense for the year---(11,040,347)(11,040,347)Other comprehensive income for the year, net of tax--(19,833)-(19,833)Total comprehensive income for the year--(19,833)(11,040,347)(11,060,180)Transactions with Equity holders in their capacity as Equity holdersShares issued13,000,200---13,000,200Capital raising costs(547,350)---(547,350)Options exercised942,937(292,937)--650,000Options issued-1,617,742--1,617,742Options cancelled-(72,509)--(72,509)Options forfeited/lapsed-(2,756)--(2,756)Share-based payment expense -1,490,239--1,490,239Balance at30 June 2021127,090,4017,168,973(342,930)(126,346,282)7,570,162The accompanying notes form part of these financial statements.2324 | RESPIRI LIMITED Respiri LimitedABN 98 009 234 173Statement of Cash FlowsFor the Year Ended 30 June 2022Note2022$2021$CASH FLOWS FROM OPERATING ACTIVITIES:Receipts from customers255,992270,931Payments to suppliers and employees (inclusive of GST)(9,258,957)(8,777,301)Interest received6,8751,352Grant income21,813129,211R&D tax refund496,695986,710ATO cashflow boost-50,000Net cash used in operating activities20(8,477,582)(7,339,097)CASH FLOWS FROM INVESTING ACTIVITIES:Payments for purchases of plant and equipment(2,265)(54,252)Net cash used in investing activities(2,265)(54,252)CASH FLOWS FROM FINANCING ACTIVITIES:Proceeds from issues of securities1,672,00012,430,200Proceeds from exercise of options-650,000Capital raising costs(33,070)(547,350)Repayment of from borrowings-(744,515)Net cash provided by financing activities1,638,93011,788,335Net increase in cash and cash equivalents held(6,840,917)4,394,986Cash and cash equivalents at beginning of year7,973,1883,552,334Effects of exchange rate changes on cash and cash equivalents85,00025,868Cash and cash equivalents at end of financial year91,217,2717,973,188The accompanying notes form part of these financial statements.24ANNUAL REPORT 2022 | 25 Respiri LimitedABN 98 009 234 173Notes to the Financial StatementsFor the Year Ended 30 June 20221Summary of Significant Accounting PoliciesCorporate InformationRespiri Limited is a listed public company limited by shares incorporated and domiciled in Australia whose shares arepublicly traded on the Australian Stock Exchange.The addresses of its registered office and principal place of business are disclosed in company details.The principal activities of the Company are the research, development and commercialisation of medical devices, andthe production of mobile health applications. The Company is a for-profit company.The financial report of Respiri Limited (the Company) for the year ended 30 June 2022 was authorised for issue inaccordance with a resolution of the Directors on (To update).Statement of ComplianceThe financial report is a general purpose financial report that has been prepared in accordance with the CorporationsAct 2001, Accounting Standards and Australian Accounting Interpretations, and complies with other authoritativepronouncements from the Australian Accounting Standards Board, as appropriate for for-profit orientated entities.The financial report covers Respiri Limited as a consolidated entity consisting of Respiri Limited and the entities itcontrolled during the year. The financial report complies with Australian Accounting Standards, as issued by the Australian Accounting Standardsand with International Financial Reporting Standards ('IFRS') as issued by the International Accounting StandardsBoard (IASB).Basis of PreparationThe financial report has been prepared on an accruals basis and is based on historical costs. Cost is based on fairvalues of the consideration given in exchange for assets. All amounts are presented in Australian dollars, unlessotherwise noted and amounts rounded to the nearest dollar.Parent entity informationIn accordance with the Corporations Act 2001, these financial statements present the results of the consolidated entityonly. Supplementary information about the parent entity is disclosed in note 2.Going Concern BasisThe financial statements have been prepared on the going concern basis, which contemplates continuity of normalbusiness activities and the realisation of assets and discharge of liabilities in the normal course of business.As disclosed in the financial statements, the Group incurred a loss of $6,624,313 and had net cash outflows fromoperating activities of $8,477,582 for the year ended 30 June 2022.In the event that capital raising be unsuccessful and insufficient funds are available to extinguish the debts, therewould be a material uncertainty which may cast significant doubt as to whether the Group will continue as a goingconcern and therefore whether it will realise its assets and extinguish its liabilities in the normal course of businessand at the amounts stated in the financial report.2526 | RESPIRI LIMITED Respiri LimitedABN 98 009 234 173Notes to the Financial StatementsFor the Year Ended 30 June 20221Summary of Significant Accounting Policies (continued)Going Concern Basis (continued)The Directors believe there the Group will continue as a going concern, and have adopted the going concern basis inthe preparation of the financial report. The Group has a strong track record of accessing capital when required, andthe directors believe it would be able to do so in future, if necessary.The financial report does not include any adjustments relating to the amounts or classification of recorded assets orliabilities that might be necessary if the Group does not continue as a going concern.Accounting Policies(a)Basis for consolidationThe consolidated financial statements incorporate the financial statements of the Company and entitiescontrolled by the Company (its subsidiaries) (referred to as "the Company" in these financial statements).Control is achieved where the consolidated entity is exposed to, or has rights to, variable returns from itsinvolvement with the entity and has the ability to affect those returns through its power to direct the activities ofthe entity. Subsidiaries are fully consolidated from the date on which control is transferred to the consolidatedentity. They are de-consolidated from the date that control ceases.A list of controlled entities is contained in Note 11 to the financial statements. All controlled entities have 30June 2022 financial year-end.All intra-group transactions, balances, income and expenses are eliminated in full on consolidation. In theseparate financial statements of the Company, intra-group transactions ('common control transactions') aregenerally accounted for by reference to the existing book value of the items. Where the transaction value ofcommon control transactions differ from their consolidated book value, the difference is recognised as acontribution by or distribution to equity participants by the transacting entities. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with thosepolicies applied by the parent entity. Subsidiaries are accounted for at cost in the parent entity.The results of subsidiaries acquired or disposed of during the year are included in profit or loss from theeffective date of acquisition or up to the effective date of disposal, as appropriate.(b)Income TaxThe income tax expense is based on the taxable income for the year. It is calculated using the tax rates thathave been enacted or are substantially enacted by the balance date. Current tax for current and prior periods isrecognised as a liability (or asset) to the extent that it is unpaid (or refundable). Deferred tax is accounted for using the balance sheet liability method. Temporary differences are differencesbetween the tax base of an asset or liability and its carrying amount in the statement of financial position. Thetax base of an asset or liability is the amount attributed to that asset or liability for tax purposes. In principle,deferred tax liabilities are recognised for all taxable temporary differences. Deferred tax assets are recognised to the extent that it is probable that sufficient taxable amounts will beavailable against which deductible temporary differences or unused tax losses and tax offsets can be utilised.However, deferred tax assets and liabilities are not recognised if the temporary differences giving rise to themarise from the initial recognition of assets and liabilities (excluding a business combination) that affects neithertaxable income nor accounting profit. Furthermore, a deferred tax liability is not recognised in relation to taxabletemporary differences arising from the initial recognition of goodwill. 26ANNUAL REPORT 2022 | 27 Respiri LimitedABN 98 009 234 173Notes to the Financial StatementsFor the Year Ended 30 June 20221Summary of Significant Accounting Policies (continued)(b)Income Tax (continued)Deferred tax liabilities are recognised for taxable temporary differences associated with investments insubsidiaries, branches and associates, and interests in joint ventures except where the Group is able to controlthe reversal of the temporary differences and it is probable that the temporary differences will not reverse in theforeseeable future. Deferred tax assets arising from deductible temporary differences associated with theseinvestments and interests are only recognised to the extent that it is probable that there will be sufficient taxableprofits against which to utilise the benefits of the temporary differences and they are expected to reverse in theforeseeable future. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period(s) whenthe asset and liability giving rise to them are realised or settled. Current and deferred tax is recognised as anexpense or income in Profit or Loss, except when it relates to items credited or debited directly to equity, inwhich case the deferred tax is also recognised directly in equity, or where it arises from the initial accounting fora business combination, in which case it is taken into account in the determination of goodwill or excess. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from themanner in which the Group expects, at the reporting date, to recover or settle the carrying amount of its assetsand liabilities. Deferred tax assets and liabilities are offset when they relate to income taxes levied by the sametaxation authority and the Company/Group intends to settle its current tax assets and liabilities on a net basis. Respiri Limited (head entity) and its wholly owned Australian subsidiaries have formed an income taxconsolidated group under the tax consolidation regime. Where the Company is entitled to a tax rebate under the R&D Tax Concession during a particular financial year,the rebate is recorded as revenue for the year when received, rather than when expenditure was incurred.(c)Current and non-current classificationAssets and liabilities are presented in the statement of financial position based on current and non-currentclassification. An asset is classified as current when: it is either expected to be realised or intended to be sold or consumed innormal operating cycle; it is held primarily for the purpose of trading; it is expected to be realised within 12months after the reporting period; or the asset is cash or cash equivalent unless restricted from beingexchanged or used to settle a liability for a least 12 months after the reporting period. All other assets areclassified as non-current. A liability is classified as current when: it is either expected to be settled in normal operating cycle; it is heldprimarily for the purpose of trading; it is due to be settled within 12 months after the reporting period; or there isno unconditional right to defer the settlement of the liability for at least 12 months after the reporting period. Allother liabilities are classified as non-current.(d)InventoriesRaw materials, work in progress and finished goods are stated at the lower of cost and net realisable value on a‘weighted average’ basis. The cost of inventories comprises cost of purchase and costs incurred in bringinginventories to their present location and condition. Cost of purchased inventories is determined after deductingrebates and discounts received or receivable. Net realisable value is the estimated selling price in the ordinary course of business less estimated costs ofcompletion and the estimated selling costs. 2728 | RESPIRI LIMITED Respiri LimitedABN 98 009 234 173Notes to the Financial StatementsFor the Year Ended 30 June 20221Summary of Significant Accounting Policies (continued)(d)Inventories (continued)The Company periodically evaluates the condition and age of inventories and makes provisions for slow movinginventories accordingly. If in a particular period production is not at normal capacity, the costs of inventories does not include additionalfixed overheads in excess of those allocated based on normal capacity. Such unallocated overheads arerecognised as an expense in Profit or Loss in the period in which they are incurred. Furthermore, cost ofinventories does not include abnormal amounts of materials, labour or other costs resulting from inefficiency.(e)Property, plant and equipmentPlant and equipment is stated at cost, less accumulated depreciation and impairment. Cost includes the cost of materials, direct labour, borrowing costs and an appropriate proportion of fixed andvariable overheads. Subsequent costs are included in the asset’s carrying amount or recognised as a separateasset, as appropriate, only when it is probable that future economic benefits associated with the item will flow tothe group and the cost of the item can be measured reliably. All other repairs and maintenance are charged toProfit or Loss during the financial period in which they are incurred.DepreciationThe depreciable amount of all plant and equipment is depreciated on a straight-line basis commencing from thetime the asset is held ready for use. The depreciation rates used for each class of depreciable asset are shown below:Fixed asset classDepreciation rateFurniture and Fittings6 - 15%Computer Equipment15 - 33%Medical Equipment15%28ANNUAL REPORT 2022 | 29 Respiri LimitedABN 98 009 234 173Notes to the Financial StatementsFor the Year Ended 30 June 20221Summary of Significant Accounting Policies (continued)(e)Property, plant and equipment (continued)The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance date. Anasset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount isgreater than its estimated recoverable amount. Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These gainsand losses are included in profit or loss.(f)LeasesLease assessment at contract inceptionAt inception of a contract, the Group assesses whether a lease exists - i.e. does the contract convey the right tocontrol the use of an identified asset for a period of time in exchange for consideration.This involves an assessment of whether:The contract involves the use of an identified asset - this may be explicitly or implicitly identified withinthe agreement. If the supplier has a substantive substitution right then there is no identified asset.The Group has the right to obtain substantially all of the economic benefits from the use of the assetthroughout the period of use.The Group has the right to direct the use of the asset i.e. decision making rights in relation to changinghow and for what purpose the asset is used.Right-of-use assetAt the lease commencement, the Group recognises a right-of-use asset and associated lease liability for thelease term. The lease term includes extension periods where the Group believes it is reasonably certain thatthe option will be exercised.The right-of-use asset is measured using the cost model where cost on initial recognition comprises of thelease liability, initial direct costs, prepaid lease payments, estimated cost of removal and restoration less anylease incentives received.The right-of-use asset is depreciated over the lease term on a straight-line basis and assessed for impairmentin accordance with the impairment of assets accounting policy.Lease liabilityThe lease liability is initially measured at the present value of the remaining lease payments at thecommencement of the lease. The discount rate is the rate implicit in the lease, however where this cannot bereadily determined then the Group's incremental borrowing rate is used.Subsequent to initial recognition, the lease liability is measured at amortised cost using the effective interestrate method. The lease liability is remeasured whether there is a lease modification, change in estimate of thelease term or index upon which the lease payments are based (e.g. CPI) or a change in the Group'sassessment of lease term.2930 | RESPIRI LIMITED Respiri LimitedABN 98 009 234 173Notes to the Financial StatementsFor the Year Ended 30 June 20221Summary of Significant Accounting Policies (continued)(f)Leases (continued)Lease liability (continued)Where the lease liability is remeasured, the right-of-use asset is adjusted to reflect the remeasurement or isrecorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.Adoption of short-term leases or low value asset exceptionExceptions to lease accountingThe Group has elected to apply the exceptions to lease accounting for both short-term leases (i.e. leases with aterm of less than or equal to 12 months) and leases of low-value assets. The Group recognises the paymentsassociated with these leases as an expense on a straight-line basis over the lease term.(g)Financial assets and liabilitiesRecognitionFinancial assets and financial liabilities are recognised when a group entity becomes a party to the contractualprovisions of the instrument. Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directlyattributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets andfinancial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financialassets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to theacquisition of financial assets or financial liabilities at fair value through profit or loss are recognisedimmediately in profit or loss.Financial liabilitiesOther financial liabilities, including borrowings and trade and other payables, are initially measured at fair value,net of transaction costs. Other financial liabilities are subsequently measured at amortised cost using theeffective interest method, with interest expense recognised on an effective yield basis. The effective interestmethod is a method of calculating the amortised cost of a financial liability and of allocating interest expenseover the relevant period. The effective interest rate is the rate that exactly discounts estimated future cashpayments through the expected life of the financial liability, or (where appropriate) a shorter period, to the netcarrying amount on initial recognition. A financial liability is removed from the balance sheet when the obligation specified in the contract is dischargedor cancelled or expires. Non-derivative financial liabilities are recognised at amortised cost using the effectiveinterest rate method, comprising original debt less principal payments, amortisation and impairment.30ANNUAL REPORT 2022 | 31 Respiri LimitedABN 98 009 234 173Notes to the Financial StatementsFor the Year Ended 30 June 20221Summary of Significant Accounting Policies (continued)(h)IntangiblesIntellectual propertyIntellectual property relates to technology assets, know-how and patents related to assets acquired onacquisition of Respiri (Israel) Limited (previously KarmelSonix (Israel) Limited) and is recorded at cost lessaccumulated amortisation and impairment. Amortisation is charged on a straight-line basis over the expectedlife, being 10 years. Amortisation commences when the asset is available for use, that is, when it is in thelocation and condition necessary for it to be capable of operating in the manner intended by management.The amortisation period and the amortisation method for an intangible asset is reviewed at least at the end ofeach reporting period. If the expected useful life of the asset is different from the previous estimates, theamortisation shall be changed accordingly. Such changes are accounted for as changes in accountingestimates. (i)Foreign currency transactions and balancesFunctional and presentation currencyThe functional currency of each of the Group’s entities is measured using the currency of the primary economicenvironment in which that entity operates. The consolidated financial statements are presented in Australiandollars which is the parent entity's functional and presentation currency.Transaction and balancesForeign currency transactions are translated into functional currency using the exchange rates prevailing at thedate of the transaction. Foreign currency monetary items are retranslated at the rates prevailing at the reportingdate. Non-monetary items that are measured in terms of historical cost are not retranslated. Non-monetaryitems carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing onthe date when the fair value was determined. Exchange differences arising on the translation of monetary items are recognised in Profit or Loss, exceptwhere deferred in equity as a qualifying cash flow or net investment hedge. Exchange differences arising on the translation of non-monetary items are recognised directly in equity to theextent that the gain or loss is directly recognised in equity, otherwise the exchange difference is recognised inProfit or Loss. For the purpose of presenting these consolidated financial statements, the assets and liabilities of the Group’sforeign operations are translated into Australian dollars using exchange rates prevailing at the end of thereporting period. Income and expense items are translated at the average exchange rates for the period, unlessexchange rates fluctuated significantly during that period, in which case the exchange rates at the dates of thetransactions are used. Exchange differences arising, if any, are recognised in other comprehensive income andaccumulated in equity (and attributed to non-controlling interests as appropriate).Group companiesThe financial results and position of foreign operations whose functional currency is different from the Group'spresentation currency are translated as follows:assets and liabilities are translated at year-end exchange rates prevailing at that reporting date;3132 | RESPIRI LIMITED Respiri LimitedABN 98 009 234 173Notes to the Financial StatementsFor the Year Ended 30 June 20221Summary of Significant Accounting Policies (continued)(i)Foreign currency transactions and balances (continued)Group companies (continued)income and expenses are translated at average exchange rates for the period; andretained earnings are translated at the exchange rates prevailing at the date of the transaction.Exchange differences arising on translation of foreign operations are transferred directly to the Group's foreigncurrency translation reserve in the Statement of Financial Position. These differences are recognised in theProfit or Loss in the period in which the operation is disposed.(j)Employee benefitsAnnual leave and long service leaveA liability is recognised for the Company’s liability for employee benefits arising from services rendered byemployees to balance date. Employee benefits that are expected to be settled within one year have beenmeasured at the amounts expected to be paid when the liability is settled, plus related on-costs. Employee benefits payable later than one year have been measured at the present value of the estimatedfuture cash outflows to be made for those benefits. Short-term benefits include salaries, paid annual leave, paid sick leave, recreation and social securitycontributions (Israel only) and are recognised as expenses as the services are rendered. Post employment benefits include superannuation and payments to insurance companies (Israel only) and aredefined contribution plans. Such payments are made in accordance with the relevant legislation for countryand/or state where an employee normally performs their duties as an employee. Payments are recognised asexpenses as the services are rendered.Shared-based paymentsShared-based compensation benefits are provided to employees via the Respiri Limited Employee Option Planand an employee share scheme. The fair value of options granted under Respiri Limited Option Share Plan is recognised as an employee benefitexpense with a corresponding increase in equity. The fair value is measured at the grant date and recognisedover the period during which the employees become unconditionally entitled to the options. The fair value at grant date was determined using an option pricing model that takes into account the exerciseprice, the term of the option, the vesting and performance criteria, the impact of dilution, the non-tradeablenature of the option, the share price at grant date and the expected price volatility of the underlying share, theexpected dividend yield and the risk free interest rate for the term of the option.(k)ProvisionsProvisions are recognised when the Group has a present legal or constructive obligation as a result of pastevents, it is probable that an outflow of resources will be required to settle the obligation and the amount hasbeen reliably measured. Provisions are not recognised for future operating losses. 32ANNUAL REPORT 2022 | 33 Respiri LimitedABN 98 009 234 173Notes to the Financial StatementsFor the Year Ended 30 June 20221Summary of Significant Accounting Policies (continued)(k)Provisions (continued)The amount recognised as a provision is the best estimate of the consideration required to settle the presentobligation at reporting date, taking into account the risks and uncertainties surrounding the obligation. Where aprovision is measured using the cash flows estimated to settle the present obligation, its carrying amount is thepresent value of those cash flows.(l)Cash and cash equivalentsCash and cash equivalents include cash on hand, deposits held at call with banks, other short-term highly liquidinvestments with original maturities of three months or less. (m)Revenue and other incomeThe revenue recognition policies for the principal revenue streams of the Group are:InterestInterest revenue is recognised on a proportional basis taking into account the interest rates applicable to thefinancial assets. All revenue is stated net of the amount of goods and services tax (GST).Sale of goodsRevenue from the sale of goods is recognised at the point in time when the customer obtains control of thegoods, which is generally at the time of delivery.Government Grants Government grants are recognised at fair value where there is reasonable assurance that the grant will bereceived and all grant conditions will be met. Grants relating to expense items are recognised as income overthe periods necessary to match the grant to the costs they are compensating. Grants relating to the purchase ofproperty, plant and equipment are included in non-current liabilities as deferred income and are credited toProfit or Loss over the expected useful life of the related asset on a straight-line basis. Government grants received in Israel as support for research and development projects, include an obligationto pay royalties (ranging from 3.5% to 5%) conditional on future sales arising from the project. These grants arerecognised upon receipt as a liability if future economic benefits are expected from the project (i.e. sales). If noeconomic benefits are expected, the grants are recognised as a reduction of the related research anddevelopment expenses and the royalty obligation treated as a contingent liability. At the end of each reporting date, the Company evaluates if there is reasonable assurance that the liabilityrecognised, in whole or part, will not be repaid. If there are indications the liability will not be repaid, theappropriate amount of the liability is derecognised and recorded in Profit or Loss as a reduction of research anddevelopment expenses. Otherwise, the appropriate amount of the liability that reflects expected future royaltypayments is recognised with a corresponding adjustment to research and development expenses.Royalty payments are treated as a reduction of the liability.Other revenue Other revenue is recognised when it is received or when the right to receive payment is established.3334 | RESPIRI LIMITED Respiri LimitedABN 98 009 234 173Notes to the Financial StatementsFor the Year Ended 30 June 20221Summary of Significant Accounting Policies (continued)(m)Revenue and other income (continued)R&D Tax Concession RefundsR&D Tax concession refunds are recorded as revenue for the year when received, rather than whenexpenditure was incurred.(n)Goods and services tax (GST)Revenue, expenses and assets are recognised net of the amount of goods and services tax (GST), exceptwhere the amount of GST incurred is not recoverable from the Australian Taxation Office (ATO). In thesecircumstances the GST is recognised as part of the cost of acquisition of the asset or as part of an item of theexpense. Receivables and payables in the Statement of Financial Position sheet are shown inclusive of GST. Cash flows are presented in the Statement of Cash Flows on a gross basis, except for the GST component ofinvesting and financing activities, which are disclosed as operating cash flows.(o)Share capitalOrdinary share capital is recognised as the fair value of the consideration received by the Company. Anytransaction costs arising on the issue of ordinary shares are recognised directly in equity as a reduction of theshare proceeds received.(p)Earnings per shareBasic earnings per shareBasics earnings per share is calculated by dividing the profit attributed to the owners of Respiri Limited,excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinaryshares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during thefinancial year.Diluted earnings per shareDiluted earnings per share adjusts the figures used in the determination of basic earnings per share to take intoaccount the after income tax effect of interest and other financing costs associated with dilutive potentialordinary shares and the weighted average number of shares assumed to have been issued for no considerationin relation to dilutive potential ordinary shares.(q)New Accounting Standards and InterpretationsAustralian Accounting Standards and Interpretations that have recently been issued or amended but are not yetmandatory, have not been early adopted by the Company for the year ended 30 June 2022.34ANNUAL REPORT 2022 | 35 Respiri LimitedABN 98 009 234 173Notes to the Financial StatementsFor the Year Ended 30 June 20221Summary of Significant Accounting Policies (continued)(r)Critical Accounting Estimates and JudgmentsThe preparation of the financial statements requires the Directors and Management to make judgements,estimates and assumptions that affect the reported amounts in the financial statements. Managementcontinually evaluates its judgements and estimates in relation to assets, liabilities, contingent liabilities, revenueand expenses. Management bases its judgements, estimates and assumptions on historical experience and onother various factors, including expectations of future events, management believes to be reasonable under thecircumstances. The resulting accounting judgements and estimates will seldom equal the related actual results.The estimates and underlying assumptions are continually evaluated. Revisions to accounting estimates arerecognised in the period in which the estimate is revised if the revision affects only that period, or in the periodof the revision and future periods if the revision affects both current and future periods.The judgements, estimates and assumptions that have a significant risk of causing a material adjustment to thecarrying amounts of assets and liabilities (refer to the respective notes) within the next financial year arediscussed below:Share-based payment transactionsThe consolidated entity measures the cost of equity-settled transactions with employees and consultants byreference to the fair value of the equity instruments at the date at which they are granted. The fair value isdetermined by using the Black Scholes model taking into account the terms and conditions upon which theinstruments were granted. The accounting estimates and assumptions relating to equity-settled share-basedpayments would have no impact on the carrying amounts of assets and liabilities within the next annualreporting period but may impact profit or loss and equity. Segment ReportingOperating segments are identified on the basis of internal reports about components of the Group that areregularly reviewed by the chief operating decision maker in order to allocate resources to the segment and toassess its performance. The operating segments of the Group are determined to be Australia. For moreinformation, refer to Note 19.3536 | RESPIRI LIMITED Respiri LimitedABN 98 009 234 173Notes to the Financial StatementsFor the Year Ended 30 June 20222Parent entityThe following information has been extracted from the books and records of the parent entity and has been preparedin accordance with the accounting standards.2022$2021$Statement of Financial PositionAssetsCurrent assets4,118,8358,927,189Non-current assets82,686165,130Total Assets4,201,5219,092,319LiabilitiesCurrent liabilities1,197,5621,417,618Non-current liabilities-70,665Total Liabilities1,197,5621,488,283EquityIssued capital128,840,331127,090,401Accumulated losses(133,316,380)(126,655,338)Reserves7,480,0087,168,973Total Equity3,003,9597,604,036Statement of Profit or Loss and OtherComprehensive IncomeLoss after income tax(6,661,042)(11,031,250)Total comprehensive loss(6,661,042)(11,031,250)Parent Entity Contingencies and CommitmentsThe parent entity does not have any contingent liabilities and commitments.Parent Entity Guarantees in Respect of the Debts of its SubsidiariesThe parent entity has no guarantees in respect of its subsidiaries.3Revenue and Other Income2022$2021$Operating revenue- Wheezo Device Sales113,396269,342- Subscriptions Sales2,642732- License Fees137,650-Total Revenue253,688270,074The group derives its sales revenue from the sale of Wheezo devices, from the sale of subscriptions for its Wheezoapp, and from license fees for use of the Wheezo platform and App.36ANNUAL REPORT 2022 | 37 Respiri LimitedABN 98 009 234 173Notes to the Financial StatementsFor the Year Ended 30 June 20223Revenue and Other Income (continued)Revenue from the sale of Wheezo devices is based on the contracted sales price. Revenue is recognised at the pointin time when control passes to the customer with the exact timing dependent on the agreed sales terms for eachcontract.2022$2021$Other Income- R&D concession (a)496,695986,710- Grant Income21,813129,211- ATO cashflow boost-50,000518,5081,165,921a)The value of any claimable R&D tax concession refund with respect to eligible R&D expenditures incurred duringthe financial year 2022 has not yet been determined and have therefore not been included within the financialstatements for financial year 2022.4Expenses2022$2021$Consulting, employee and directorConsulting expenses487,1341,430,493Employee expenses1,741,4921,186,772Director expenses742,328713,6362,970,9543,330,901Equity-based payment311,0352,530,169Corporate administrationAudit and accounting fees145,132180,016Foreign exchange loss/(gain)76,83945,700Corporate administration expenses926,1921,357,596Office rentals45,29650,5831,193,4591,633,895Depreciation81,95479,602Marketing and promotion916,5872,185,087Research and development1,463,3431,387,084Travel206,76067,506Total expenses7,144,09211,214,2443738 | RESPIRI LIMITED Respiri LimitedABN 98 009 234 173Notes to the Financial StatementsFor the Year Ended 30 June 20225Income Tax Expense(a) The prima facie tax on loss from ordinary activities before the loss is reconciled to the income tax as follows:2022$2021$Loss before income tax(6,624,313)(11,040,347)Tax%25.00%27.50Income tax benefit calculated(1,656,078)(3,036,095)Add:Tax effect of amounts which are not deductible in calculating incometax:- share-based payments expenses34,909695,796- other expenses not deductible224,32342,547Other non-assessable income(124,174)(285,095)Other deductible items(98,860)(93,306)Deferred tax assets relating to tax losses and temporary differencesnot recognised1,619,8802,676,153Income tax expense--(b)Unrecognised deferred tax assets and liabilities2022$2021$Deferred tax assets and liabilities are attributable to the following: - tax losses27,110,84125,511,746 - prepayments(43,270)(56,663) - provision47,93435,894 - accrual18,35122,99927,133,85625,513,976(c)Components of tax expenseThe components of tax expense comprise:2022$2021$Current tax--Deferred tax--Income tax expense--38ANNUAL REPORT 2022 | 39 Respiri LimitedABN 98 009 234 173Notes to the Financial StatementsFor the Year Ended 30 June 20225Income Tax Expense (continued)Included in the total of deferred tax assets attributable to tax losses not recognised are tax losses in relation tooperations in United States of America, and Australia. Tax losses in Australian entities alone of $36,310,926 (2021:$29,870,098) relate to losses generated from 22 November 2006 to 30 June 2022. The ongoing availability of thesetax losses are subject to further review by the Company to ensure compliance with the relevant provisions of AustraliaIncome Tax laws.6Key Management Personnel RemunerationThe aggregate compensation made to Directors and other Key Management Personnel of the Consolidated entity isset out below:2022$2021$Short-term employee benefits1,624,6011,250,403Post-employment benefits108,64672,953Share-based payments (Note 21)122,4242,575,0321,855,6713,898,3887Auditors' Remuneration2022$2021$Remuneration of Company's auditor, RSM, for:- auditing or reviewing the financial report of the Group57,00045,00057,00045,000Remuneration of Subsidiary Company's auditor, Ernst & Young Israel, for:- auditing or reviewing the financial report of the subsidiary (a)-9,334Total57,00054,334a)Audit fees paid to Ernst & Young Israel for the auditing and/or review of the financial report of Respiri (Israel) Ltd.8Loss per Share2022$2021$Basic loss per share (cents)(0.91)(1.58)Diluted loss per share (cents)(0.91)(1.58)(a) Net loss used in the calculation of basic and dilutedloss per share(6,624,313)(11,040,347)(b) Weighted average number of ordinary sharesoutstanding during the period used in the calculation ofbasic and diluted loss per share728,627,533699,081,480Potential ordinary shares, including options, are excluded from the weighted average number of shares used in thecalculations of basic loss per share as they are considered non-dilutive.3940 | RESPIRI LIMITED Respiri LimitedABN 98 009 234 173Notes to the Financial StatementsFor the Year Ended 30 June 20229Cash and Cash Equivalents2022$2021$Cash at bank1,217,2717,973,1881,217,2717,973,188The interest rates on cash at bank on 30 June 2022 was 0.01% (2021: 0.01%). The Group’s exposure to interest raterisk is discussed in Note 24(b). The maximum exposure to credit risk at the end of the financial year is the carryingamount of each class of cash and cash equivalents mentioned above.10Trade and Other Receivables2022$2021$CURRENTTrade receivables-96,000Other receivables (a)50,30539,98650,305135,986a)Other receivables include GST/V.A.T receivable.Refer to Note 24(c) for more information on the Group's credit risk management policy.11Controlled EntitiesPrincipal place ofbusiness / Country ofIncorporationPercentageOwned (%)*2022PercentageOwned (%)*2021Parent EntityRespiri LimitedAustralia--Subsidiaries of Respiri LimitedKarmelSonix Australia Pty Ltd Australia100100iSonea (Israel) LimitedIsrael-100iSonea USA Inc.United States of America-100Respiri USA IncUnited States of America100-*The percentage of ownership interest held is equivalent to the percentage voting rights for all subsidiaries.40ANNUAL REPORT 2022 | 41 Respiri LimitedABN 98 009 234 173Notes to the Financial StatementsFor the Year Ended 30 June 202212Property, plant and equipment2022$2021$Office equipmentAt cost8,6108,610Accumulated depreciation(1,025)(354)Total office equipment7,5858,256Computer equipment and softwareAt cost45,00342,738Accumulated depreciation(30,987)(16,344)14,01626,394Right-of-Use assetAt cost199,916199,916Accumulated depreciation(138,831)(72,192)Total Right-of-Use asset61,085127,724Total property, plant and equipment82,686162,374(a)Movements in carrying amounts of property, plant and equipmentMovement in the carrying amounts for each class of property, plant and equipment between the beginning and the endof the current financial year:OfficeEquipment$ComputerEquipment$Right-of-Use Asset$Total$Year ended 30 June 2022Balance at the beginning of year8,25626,394127,724162,374Additions-2,265-2,265Disposals----Depreciation expense(670)(14,645)(66,638)(81,953)Balance at the end of the year7,58614,01461,08682,686OfficeEquipment$ComputerEquipment$Right-of-Use Asset$Total$Year ended 30 June 2021Balance at the beginning of year4,13912,728170,858187,725Additions4,46525,66524,17654,306Disposals-(55)-(55)Depreciation expense(348)(11,944)(67,310)(79,602)Balance at the end of the year8,25626,394127,724162,3744142 | RESPIRI LIMITED Respiri LimitedABN 98 009 234 173Notes to the Financial StatementsFor the Year Ended 30 June 202213Other assets2022$2021$CURRENTPrepayments173,080192,775Deposits28,48636,203Provision for unpaid share capital-70,000Unexpired interest2,403-203,969298,97814Inventories2022$2021$CURRENTInventories2,651,118537,0462,651,118537,04615Trade and Other Payables2022$2021$CURRENTTrade payables524,4901,080,478Accrued expenses265,139214,155789,6291,294,633Terms and conditions of the above financial liabilities: Trade payables are non-interest bearing and are normally settled on between 30 - 45 day terms Accrued expenses are non-interest bearing Refer to Note 24(a) for more information on the Group’s foreign currency risk management policy.42ANNUAL REPORT 2022 | 43 Respiri LimitedABN 98 009 234 173Notes to the Financial StatementsFor the Year Ended 30 June 202216Other Financial Liabilities2022$2021$CURRENTLease liabilities70,66471,805Other financial liability-12,912Other financial liability unsecured334,10786,538404,771171,2552022$2021$NON-CURRENTLease liabilities-70,665Total-70,66517Issued CapitalThe Company has an unlimited authorised share capital of no par value ordinary shares.2022No.2022$2021No.2021$Fully paid ordinary sharesBalance at beginning of the year722,840,790127,090,401651,714,790113,694,614Shares issued during the year39,005,5561,783,00071,126,00013,650,200Options exercised during the year---292,937Transaction costs relating to share issues-(33,070)-(547,350)Total issued capital761,846,346128,840,331722,840,790127,090,401During the year-ended 30 June 2022, the Company issued the following securities:DateDetailsNo. ofSharesIssuePrice$TotalValue$6 May 2022Issue of shares to certain professionaland sophisticated investors asannounced to the market on 9 May 202237,155,5560.04501,672,00014 Jun 2022Issue of shares in lieu of cash paymentfor services rendered as announced tothe market on 20 June 20221,850,0000.0600111,00039,005,5561,783,0004344 | RESPIRI LIMITED Respiri LimitedABN 98 009 234 173Notes to the Financial StatementsFor the Year Ended 30 June 202217Issued Capital (continued)Terms and Conditions of Issued CapitalOrdinary Shares:Ordinary shareholders have the right to receive dividends as declared and in the event of winding up the Company, toparticipate in the proceeds from the sale of all surplus assets in proportion to the number of and amounts paid up onshares held. Ordinary shares entitle their holder to one vote, either in person or by proxy at a meeting of theCompany.Options: Option holders do not have the right to receive dividends and are not entitled to vote at the meeting of the Companyuntil options are exercised into ordinary shares by payment of the exercise price. Options may be exercised at anytime from the date they vest to their expiry date. Share options convert into ordinary shares on a one for one basis onthe date they are exercised. Capital Risk Management: The consolidated entity’s objective when managing capital is to safeguard its ability to continue as a going concern, sothat it can provide returns for shareholders and benefits for other stakeholders and to maintain an optimum capitalstructure to reduce the cost of capital.In order to maintain or adjust the capital structure, the consolidated entity may adjust the amount of dividends paid toshareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.The consolidated entity would look to raise capital when an opportunity to invest in a business or company was seenas a value adding relative to the current company’s share price at the time of the investment. The consolidated entity isnot actively pursuing additional investment in the short-term as it continues to develop its technologies.44ANNUAL REPORT 2022 | 45 Respiri LimitedABN 98 009 234 173Notes to the Financial StatementsFor the Year Ended 30 June 202218Reserves2022No.2022$2021No.2021$OptionsBalance at beginning of the year259,000,0007,168,973191,500,0004,429,195Unlisted options issued during the year (a)20,200,00020,80875,000,0001,494,743Adjustment for options issued in prior year----Expense recorded over vesting period---1,613,237Options exercised--(5,500,000)(292,937)Options expired/forfeited (b)(15,000,000)(195,095)-(2,756)Cancellation of options (c)(200,000)(149)(2,000,000)(72,509)Share-based payment expense-485,471--Balance at end of the year264,000,0007,480,008259,000,0007,168,973FX ReserveBalance at beginning of the year-(342,930)-(323,097)Other comprehensive income for the year,net of tax-973-(19,833)Disposal of investments in foreignsubsidiaries-341,957--Balance at end of the year---(342,930)Total Reserves264,000,0007,480,008259,000,0006,826,043a)3,200,000 unlisted options were granted to employees and 17,000,000 were granted to consultants.b)15,000,000 unlisted options granted to former Director on 16 June 2020 were forfeited following resignation on 19April 2022.c)200,000 Unlisted Options issued to former employee on 7 June 2021 at an exercise price of $0.20 were cancelledfollowing resignation.During the year-ended 30 June 2022, the Company issued the following options:DateDetailsNo. ofoptionsOption fairvalue$Total value$22 Feb 2022Issue to Senior Management Personnel -Class 201,200,0000.00212,56822 Feb 2022Issue to Consultant for Advisory Servicesrendered - Class 202,000,0000.00214,2809 Jun 2022Issue to Senior Management Personnel -Class 212,000,0000.008216,43114 Jun 2022Issue to Consultants for CorporateAdvisory Services rendered - Class 225,000,0000.002613,12114 Jun 2022Issued to Consultants for CorporateAdvisory Services rendered - Class 2310,000,0000.00055,30320,200,00041,7034546 | RESPIRI LIMITED Respiri LimitedABN 98 009 234 173Notes to the Financial StatementsFor the Year Ended 30 June 202218Reserves (continued)Option Reserve:The option reserve recognises the proceeds from the issue of options over ordinary shares and the expenserecognised in respect of share based payments.19Segment ReportingAASB 8 requires operating segments to be identified on the basis of internal reports about components of the Groupthat are regularly reviewed by the chief operating decision maker in order to allocate resources to the segment and toassess its performance.Information reported to the Group’s Chief Operating Decision Makers for the purposes of resource allocation andassessment of performance is more specifically focused on the geographical locations of the Group’s operations.The Group’s reportable segments under AASB 8 are therefore as follows:AustraliaThe Australia reportable segment activities include research, development and commercialisation of medical devices,and the production of mobile health applications in Australia.In prior years, the Group has had operations in Israel; however, these operations have ceased and therefore are nolonger reported as a reportable segment.Information regarding these segments is presented below. The accounting policies of the reportable segments are thesame as the Group’s accounting policies.46ANNUAL REPORT 2022 | 47 Respiri LimitedABN 98 009 234 173Notes to the Financial StatementsFor the Year Ended 30 June 202219Segment Reporting (continued)MedicalDevicesSegmentAustralia$MedicalDevicesSegmentIsrael$SegmentTotal$Corporate$Total$30 June 2022Segment RevenueExternal Sales253,688-253,688-253,688Other income518,508-518,508-518,508Total Segment Revenue772,196-772,196-772,196Interest revenue---6,8756,875Total Revenue772,196-772,1966,875779,071Segment Expenses(1,722,997)-(1,722,997)(5,591,656)(7,314,653)EBITDA(950,801)-(950,801)(5,591,656)(6,542,457)Segment depreciation expenses---(81,954)(81,954)Interest revenue---6,8756,875Finance costs---(6,777)(6,777)Profit/(loss) before income tax(950,801)-(950,801)(5,673,512)(6,624,313)Income tax expense-----Profit/(loss) after income tax(950,801)-(950,801)(5,673,512)(6,624,313)AssetsSegment assets2,654,947-2,654,9471,550,4034,205,350Total Assets2,654,947-2,654,9471,550,4034,205,350LiabilitiesSegment liabilities---1,197,5621,197,562Total Liabilities---1,197,5621,197,5624748 | RESPIRI LIMITED Respiri LimitedABN 98 009 234 173Notes to the Financial StatementsFor the Year Ended 30 June 202219Segment Reporting (continued)MedicalDevicesSegmentAustralia$MedicalDevicesSegmentIsrael$SegmentTotal$Corporate$Total$30 June 2021Segment RevenueExternal sales270,074-270,074-270,074Other income1,165,921-1,165,921-1,165,921Total Segment Revenue1,435,995-1,435,995-1,435,995Interest Revenue---1,3521,352Total Revenue1,435,995-1,435,9951,3521,437,347Segment Expenses(2,650,993)(109,166)(2,760,158)(9,610,047)(12,370,205)EBITDA(1,214,998)(109,166)(1,324,163)(9,610,047)(10,934,210)Segment depreciation expenses---(79,601)(79,601)Interest revenue---1,3521,352Finance costs---(27,888)(27,888)Profit/(loss) before income tax(1,214,998)(109,166)(1,324,163)(9,716,184)(11,040,347)Income tax expense-----Profit/(loss) after income tax(1,214,998)(109,166)(1,324,163)(9,716,184)(11,040,347)AssetsSegment assets540,96314,814555,7778,551,7959,107,572Total Assets540,96314,814555,7778,551,7959,107,572LiabilitiesSegment liabilities-49,12749,1271,488,2821,537,410Total Liabilities-49,12749,1271,488,2821,537,41048ANNUAL REPORT 2022 | 49 Respiri LimitedABN 98 009 234 173Notes to the Financial StatementsFor the Year Ended 30 June 202220Cash Flow Information(a)Reconciliation of cash flow from operations with loss after income tax2022$2021$Net loss for the year(6,624,313)(11,040,347)Non-cash flows in profit: - depreciation81,95479,602 - share-based payments422,0353,432,716 - capitalised interest on loan-27,370 - foreign exchange adjustments(84,027)(45,700) - lawsuit settlement - shares issued-100,000Changes in assets and liabilities: - (increase)/decrease in trade and otherreceivables85,680(57,787) - (increase)/decrease in other assets95,009262,449 - (increase)/decrease in inventories(2,114,073)(227,826) - increase/(decrease) in trade and otherpayables(505,003)163,350 - (decrease)/increase in deferred revenue2,304857 - (decrease)/increase in other financial liabilities162,852(33,781)Cashflows from operations(8,477,582)(7,339,097)(b)Non-cash financing and investing activitiesPlease refer to Note 17 and 18 for further details regarding equity issued for nil cash consideration.21Share-based Payments(a)Employee share and option planThe following options were issued during the current year under ESOP:No. ofOptionsGrant dateExpiry dateShare priceat grantdate$Exerciseprice$ExpectedvolatilityDividendyieldRisk-freeinterestrateFair valueat grantdate$3,200,000(a)22 Feb 202231 Jan 20270.0460.20040.98%-1.56%6,8482,000,000(b)9 Jun 20229 Jun 20270.0380.10050.70%-3.12%16,431a)Options will vest after 31 March 2023.b)Options will vest after 9 June 2023.The weighted average fair value of the share options granted during the financial year is $0.002 (2021: $0.022). 4950 | RESPIRI LIMITED Respiri LimitedABN 98 009 234 173Notes to the Financial StatementsFor the Year Ended 30 June 202221Share-based Payments (continued)(b)Fair value of share options granted in the year outside of the ESOPFor the options granted during the financial year, the Black Scholes Option valuation model inputs used todetermine the fair value at the grant date are as follows:No. ofOptionsGrant DateExpiry DateShareprice atgrant dateExercisepriceExpectedvolatilityDividendyield Risk freeinterestrateFV atgrantdate5,000,000(a)14 Jun 20221 Mar 20250.0340.10051.02 %-3.48 %13,12110,000,000(a)14 Jun 20221 Mar 20250.0340.20051.02 %-3.48 %5,303a)Options have vested.(c)Movement in share options during the yearThe following reconciles the share options outstanding at the beginning and end of the year:2022No. ofOptions2022WeightedAverageExercisePrice$2021No. ofOptions2021WeightedAverageExercisePrice$Outstanding at the beginning of the year259,000,0000.22191,500,0000.21Granted20,200,0000.1775,000,0000.30Exercised--(5,500,000)-Expired/lapsed(15,000,000)---Cancelled(200,000)-(2,000,000)-Outstanding at year-end264,000,0000.21259,000,0000.22Exercisable at year-end197,500,0000.18172,500,0000.17(d)Share options exercised during the yearThere were no options exercised during the year. (e)Share options outstanding at the end of the yearThe options outstanding at 30 June 2022 had a weighted average exercise price of $0.21 (2021:$0.22) and aweighted average remaining contractual life between 0.5 to 5.5 years.Exercise price range from $0.03 (2021: $0.03) to $0.6 (2021: $0.6) in respect of options outstanding at 30 June2022.50ANNUAL REPORT 2022 | 51 Respiri LimitedABN 98 009 234 173Notes to the Financial StatementsFor the Year Ended 30 June 202221Share-based Payments (continued)(f)Share-based payments expense2022$2021$Share-based payments - options issued to directors267,0092,381,425 - options issued to suppliers (a)171,399502,548 - options issued to other key managementpersonnel50,510193,605- options issued to employees17,36130,403 - options to former employees cancelled (b)(149)(72,509) - options to former director forfeited (c)(195,095)(2,756) - shares issued to suppliers-400,000311,0353,432,716a)The Company issued 17,000,000 options to consultants for corporate advisory services.b)The Company cancelled 200,000 options issued to former employee following resignation in February 2022.c)The Company forfeited 15,000,000 options issued to former director following resignation in April 2022.22Related Party TransactionsThe Group's related parties comprise of subsidiaries and key management personnel.Disclosures relating to key management personnel are set out in the remuneration report. Transactions between theparent company and its subsidiaries are eliminated on consolidation and are not disclosed in this note.23Events Occurring After the Reporting DateThe Victorian Government extended a Declaration of a State of Emergency from the 29 July 2021 and “Stage 4”restrictions continued to apply to Metro Melbourne. This event does not affect amounts recognised in the 2021/22financial statements.Except for the above, no other matters or circumstances have arisen since the end of the financial year whichsignificantly affected or could significantly affect the operations of the Group, the results of those operations, or thestate of affairs of the Group in future financial years. 5152 | RESPIRI LIMITED Respiri LimitedABN 98 009 234 173Notes to the Financial StatementsFor the Year Ended 30 June 202224Financial Risk ManagementThe Group holds the following financial instruments:2022$2021$Financial assetsCash and cash equivalents1,217,2717,973,188Trade and other receivables50,305135,986Total financial assets1,267,5768,109,174Financial liabilitiesTrade and other payables789,6301,294,633Other financial liabilities404,771171,255Other financial liabilities - Non-current-70,665Total financial liabilities1,194,4011,536,553(a)Foreign exchange riskThe Group engages in international purchase transactions and is exposed to foreign currency risk arising fromvarious currency exposures, primarily with respect to the US dollar (USD). The parent has minimal exposure toforeign exchange risk as it does not hold any foreign currency cash reserves and only makes minor foreigncurrency payments. The Group does not make use of derivative financial instruments to hedge foreign exchangerisk.The carrying amount of the foreign currency denominated monetary assets and liabilities at the reporting date is asfollows, all amounts in the table below are displayed in $AUD at year-end spot rates:2022$2021$Cash and trade and other receivables - ILS-6,167 - USD86,021-86,0216,167Trade and other payables - CAD(8,382)- - GBP(2,990)- - ILS-(36,215) - USD(50,898)-(62,270)(36,215)52ANNUAL REPORT 2022 | 53 Respiri LimitedABN 98 009 234 173Notes to the Financial StatementsFor the Year Ended 30 June 202224Financial Risk Management (continued)Sensitivity AnalysisThe following tables demonstrate the sensitivity to a reasonably possible change in USD, CAD, GBP and ILSexchange rates, with all other variables held constant. The impact on the Group’s profit before tax is due to changesin the fair value of monetary assets and liabilities including non-designated foreign currency derivatives andembedded derivatives. The Group’s exposure to foreign currency changes for all other currencies is not material.20222021+5%-5%+5%-5%CADEffect on profit before tax419(419)--GBPEffect on profit before tax149(149)--ILSEffect on profit before tax--1,502(1,502)USDEffect on profit before tax(1,756)1,756--(b)Interest rate riskThe Group's exposure to interest rate risk is the risk that a financial instrument’s value will fluctuate as a result ofchanges in market interest rates and the effective weighted average interest rates on classes of financial assetsand financial liabilities. The following table summarises the sensitivity of the Group’s financial assets and financial liabilities to interest raterisk (against the implied 30 day bank bill rate). The table also represents the quantitative impact on the financialstatements should the variation occur.Carryingamount$Weightedaverageinterestrate%(1%) effecton profitbefore tax$1% effecton profitbefore tax$30 June 2022Financial assetsCash and cash equivalents1,217,2710.01(12,173)12,173Total (decrease)/increase1,217,271-(12,173)12,17330 June 2021Financial assetsCash and cash equivalents7,973,1880.01(79,732)79,732Total (decrease)/increase7,973,188-(79,732)79,7325354 | RESPIRI LIMITED Respiri LimitedABN 98 009 234 173Notes to the Financial StatementsFor the Year Ended 30 June 202224Financial Risk Management (continued)(c)Credit risk Credit risk refers to the risk that a counter party will default on its contractual obligations resulting in financial loss tothe Group. The Group has no significant concentration of credit risk in the current or prior year.The Group ensures that surplus cash is invested with financial institutions of appropriate credit worthiness andlimits the amount of credit exposure to any one counter party.(d)Liquidity riskLiquidity risk is the risk that the Group will not pay its debtors when they fall due. Prudent liquidity risk managementimplies maintaining sufficient cash and the availability of funding through an adequate amount of committed creditfacilities. The Group manages liquidity risk by maintaining sufficient bank balances to fund its operations and theavailability of funding through committed credit facilities.Management manages this risk by monitoring rolling forecasts of the Group's liquidity reserve on the basis ofexpected cash flows. The table below analyses the Group's financial liabilities.0-12months$Maturing 1to 3 years$Total$30 June 2022Trade and other payables789,629-789,629Other borrowings---Lease liabilities70,664-70,664860,293-860,29330 June 2021Trade and other payables1,294,633-1,294,633Lease liabilities71,80570,664142,4691,366,43870,6641,437,102(e)Capital Risk ManagementThe Group's objectives when managing capital are to safeguard the Group's ability to continue as a going concernand to maintain a capital structure that maximises shareholder value. In order to maintain or achieve an optimalcapital structure, the Group may issue new shares or reduce its capital, subject to the provisions of the Group'sconstitution. The capital structure of the Group consists of equity attributed to equity holders of the Group, comprisingcontributed equity and reserves disclosed in Notes 17 and 18. By monitoring undiscounted cash flow forecasts andactual cash flows provided to the Board by the Group's Management the Board monitors the need to raiseadditional equity from the equity markets.54ANNUAL REPORT 2022 | 55 Respiri LimitedABN 98 009 234 173Directors' DeclarationThe directors of the Company declare that:1. the financial statements and notes, as set out on pages 20 to 54, and the remuneration disclosures that are containedwithin the Remuneration Report within the Directors' report, set out on pages 8 to 18, are in with the Corporations Act2001 and:a.In the directors' opinion there are reasonable grounds to believe the company will be able to pay its debts as andwhen they become due and payable;b.In the directors' opinion the financial statements and notes also comply with the International Financial ReportingStandards as disclosed in Note 1;c.In the directors' opinion the attached financial statements and notes thereto are in accordance with theCorporations Act 2001, including compliance with accounting standards and giving a true and fair view of thefinancial position and performance of the consolidated entity; andd.The directors have been given the declaration required by s295A of the Corporations Act 2001.Signed in accordance with a resolution of the directors made pursuant to s.295(5) Corporations Act 2001.On behalf of the DirectorsMr Nicholas SmedleyExecutive-ChairmanDated this 30th day of August 2022Melbourne, Australia5556 | RESPIRI LIMITED THE POWER OF BEING UNDERSTOOD AUDIT | TAX | CONSULTING RSM Australia Partners is a member of the RSM network and trades as RSM. RSM is the trading name used by the members of the RSM network. Each member of the RSM network is an independent accounting and consulting firm which practices in its own right. The RSM network is not itself a separate legal entity in any jurisdiction. RSM Australia Partners ABN 36 965 185 036 Liability limited by a scheme approved under Professional Standards Legislation RSM Australia Partners Level 21, 55 Collins Street Melbourne VIC 3000 PO Box 248 Collins Street West VIC 8007 T +61 (0) 3 9286 8000 F +61 (0) 3 9286 8199 www.rsm.com.au INDEPENDENT AUDITOR’S REPORT To the Members of Respiri Limited Opinion We have audited the financial report of Respiri Limited (the Company) and its subsidiaries (the Group), which comprises the consolidated statement of financial position as at 30 June 2022, the consolidated statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and notes to the financial 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: i. giving a true and fair view of the Group's financial position as at 30 June 2022 and of its financial performance for the year then ended; and ii. complying with Australian Accounting Standards and the Corporations Regulations 2001. Basis for Opinion We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Report section of our report. We are independent of the Group in accordance with the 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 confirm that the independence declaration required by the Corporations Act 2001, which has been given to the directors of the Company, would be in the same terms if given to the directors as at the time of this auditor's report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. ANNUAL REPORT 2022 | 57 Material Uncertainty Related to Going Concern We draw attention to Note 1 in the financial report, which indicates that the Group incurred a net loss of $6,624,313 and had net operating cash outflows from operating activities of $8,477,582 during the year ended 30 June 2022. As stated in Note 1, these events or conditions, along with other matters as set forth in Note 1, indicate that a material uncertainty exists that may cast significant doubt on the Group's ability to continue as a going concern. Our opinion is not modified in respect of this matter. Key Audit Matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report of the current period. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. In addition to the matter described in the Material Uncertainty Related to Going Concern section, we have determined the matters described below to be the key audit matters to be communicated in our report. Key Audit Matter How our audit addressed this matter Share based payments Refer to Note 21 in the financial statements Respiri Limited have an Employee’s, Directors’ and Consultants’ Share and Option Plan (ESOP). The ESOP is intended to reward directors, employees and/or consultants for their contributions to the Group. We identified share-based payments as a key risk due the complexity in the valuation of the options issued, and the estimates made by management in relation to the achievement of vesting conditions. Our audit procedures in relation to share based payments included: • Assessing the reasonableness of option valuation inputs into the Black Scholes Option Valuation Model including assessment of the share volatility rates applied in comparison to entities in the similar industry; • Performing a recalculation the Black Scholes Option Valuation Model for a sample of options issued; • Testing a sample of options issued to signed ESOP agreements; • Reviewing the accounting for the share-based payments in accordance with AASB 2 Share-based Payments; and • Reviewing the reasonableness of management’s estimates of the likelihood of the achievement of vesting conditions for the options issued. 58 | RESPIRI LIMITED Key Audit Matters (continued) Key Audit Matter How our audit addressed this matter Revenue recognition Refer to Note 3 in the financial statements Revenue recognition was considered a key audit matter as it is complex and involves significant management judgements. The Group’s revenue is primarily derived from the provision of device and licenses to customers. Our audit procedures in relation to the recognition of revenue included: • Assessing whether the Group’s revenue recognition policies were in compliance with AASB 15 Revenue from Contracts with Customers; • Evaluating the operating effectiveness of management’s controls related to revenue recognition; • Performing detailed testing on a sample of revenue transactions by agreeing to supporting documents, including contracts with customers; and • Reviewing sales transactions before and after year end to ensure that revenue was recognised in the correct period. Other Information 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 2022, but does not include the financial report and the 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. 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. ANNUAL REPORT 2022 | 59 Auditor's Responsibilities for the Audit of the Financial Report Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report. A further description of our responsibilities for the audit of the financial report is located at the Auditing and Assurance Standards Board website at: www.auasb.gov.au/auditors_responsibilities/ar2.pdf. This description forms part of our auditor's report. Report on the Remuneration Report Opinion on the Remuneration Report We have audited the Remuneration Report included in the directors' report for the year ended 30 June 2022. In our opinion, the Remuneration Report of Respiri Limited, for the year ended 30 June 2022, 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. RSM AUSTRALIA PARTNERS B Y CHAN Partner Dated: 31 August 2022 Melbourne, Victoria 60 | RESPIRI LIMITED Respiri LimitedAdditional Information for Listed Public Companies30 June 2022SHAREHOLDERS INFORMATION as at 25 August 2022Equity security holdersTwenty largest quoted equity holdersThe names of the twenty largest security holders of quoted equity securities are listed below:HolderOrdinaryshares held% of totalsharesissuedCITICORP NOMINEES PTY LIMITED28,477,8233.74%NETWEALTH INVESTMENTS LIMITED 20,178,5502.65%NETWEALTH INVESTMENTS LIMITED 16,820,9562.21%MR PETER KARL BRAUN16,702,6112.19%MALLAMANDA PTY LTD 15,724,9812.06%MRS TARA MARJORIE HILL15,191,6891.99%MR SIMON DUMARESQ + DR BELINDA JACKSON 12,265,1931.61%ROSHERVILLE PTY LTD 9,250,0001.21%P & A MIHAILOU PTY LTD 8,000,0001.05%MR PAUL ARGENTINO 7,761,1411.02%HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED7,643,7071.00%TORRES INVESTMENTS PTY LTD7,424,0700.97%CLEMWELL PTY LTD 7,235,6780.95%DIXSON TRUST PTY LIMITED6,850,0000.90%COONAN FAMILY SUPERANNUATION FUND PTY LTD 6,750,0000.89%BENVER INTERNATIONAL PTY LTD 6,642,4990.87%ENDEAVOUR RIVER PTY LTD6,500,0000.85%CRAFT LAW PTY LTD 6,322,7120.83%ATLANTIS INVESTIGATIONS PTY LIMITED 6,225,0780.82%MR GARY RONALD HEATH + MRS MELISSA LOUISE HEATH 6,213,2600.82%Unquoted equity securitiesNo unquoted sharesUnquoted equity securitiesNumber on issueNumber of holdersOptions over ordinary shares issued264,000,00024ANNUAL REPORT 2022 | 61 Respiri LimitedAdditional Information for Listed Public Companies30 June 2022Substantial HoldersHolderDesignationOrdinary shares held% of total sharesissuedCITICORP NOMINEES PTY LIMITED28,477,8233.74%Voting RightsThe voting rights attached to ordinary shares are set out below: Ordinary SharesOn a show of hands, every member present at a meeting in person or by proxy shall have one vote and upon a poll eachshare shall have one vote.There are no other classes of equity securities.On-market Buy-backsThere is no current on-market buy-back in relation to the Company's securities.Securities subject to voluntary escrowThere are no securities subject to voluntary escrow.Distribution of equitable securitiesAnalysis of number of equitable security holders by size of holding:Number of Holders of ordinary shares1 to 1,0001391,001 to 5,0002875,001 to 10,00052810,001 to 100,0001,551100,001 and above777Unmarketable ParcelsAs at 25th August 2022 there were 529 unmarketable parcels on register.62 | RESPIRI LIMITED Respiri LimitedAdditional Information for Listed Public Companies30 June 2022SHAREHOLDER ENQUIRIESShareholders with enquiries about their shareholdings should contact the Share Register:Computershare Investor Services Pty LtdYarra Falls452 Johnson StreetAbbostsford, Victoria, 3067Telephone:+61 (0)3 9415 4000Facsimile:+61 (0)3 9473 2500Email:www.investorcentre.com/contactCHANGE OF ADDRESS, CHANGE OF NAME, CONSOLIDATION OF SHAREHOLDINGSShareholders should contact the Share Registry via your Investor Centre portal.REMOVAL FROM THE ANNUAL REPORT MAILING LISTShareholders who no longer wish to receive the Annual Report should notify the Share Registry via the shareholder'srespective Investor Centre portal. These shareholders will continue to receive all other shareholder information.TAX FILE NUMBERSIt is important that Australian resident shareholders, including children, have their tax file number or exemption details notedby the Share Registry.CHESS (Clearing House Electronic Sub-register System)Shareholders wishing to move to uncertified holdings under the Australian Stock Exchange (CHESS) system should contacttheir stockbroker.UNCERTIFIED SHARE REGISTERShareholding statements are issued at the end of each month in which there is a transaction that alters the balance of yourholding.ANNUAL REPORT 2022 | 63 Respiri Limited ABN 98 009 234 173 Corporate Directory AUSTRALIAN COMPANY NUMBER (ACN) 009 234 173 DIRECTORS Mr Marjan Mikel Mr Nicholas Smedley Dr Thomas Duthy Mr Brad Snow COMPANY SECRETARY Mr Andrew Metcalfe PRINCIPAL PLACE OF BUSINESS Level 9, 432 St Kilda Road Melbourne, Victoria AUSTRALIA 3004 Telephone: +61 (0)3 9653 9160 SHARE REGISTRY Computershare Investor Services Pty Ltd Yarra Falls 452 Johnston Street Abbotsford, Victoria, 3067 Australia Telephone: +61 (0)3 9415 4000 Facsimile: +61 (0)3 9473 2500 AUDITORS RSM Australia Partners Ltd Level 21, 55 Collins Street Melbourne, Victoria, 3000 Australia Telephone: +61 (0) 3 9286 8000 WEBSITE www.respiri.co SECURITIES QUOTED Australian Securities Exchange - Ordinary Fully Paid Shares (Code: RSH) Respiri Limited is a Public Company Limited by shares and is domiciled in Australia. Appointed on 25th November 2019 Appointed on 30th October 2019 Appointed on 11th February 2020; Resigned 19th April 2022 Appointed on 11th June 2022 REGISTERED OFFICE Level 10, 446 Collins Street Melbourne, Victoria AUSTRALIA 3000 Telephone: +61 (0)3 9602 3366 Fax: +61 (0)3 9602 3606 SOLICITORS Gadens Lawyers Level 13, Collins Arch 447 Collins Street Melbourne, Victoria, 3000 AUSTRALIA Telephone: +61 (0)3 9252 2555 Fax: +61 (0)3 9252 2500 BANKERS National Australia Bank (NAB) 330 Collins Street, Melbourne, Victoria, 3000 Australia 

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