Building Strength. Delivering Growth. S c i D e v L i m i t e d / A n n u a l R e p o r t 2 0 2 2 ANNUAL REPORT 2022 FY2022 Highlights WATER TREATMENT TECHNOLOGY CHEMICAL SERVICES • Ongoing market acceptance • Record revenues. of our PFAS treatment technology with 12 PFAS treatment plants delivered in FY22. • Continued growth in all services across the domestic market. • Delivery of the leachate treatment plant for the $2.6b Sydney Gateway Project. • Commercialised our new CatChek™ technology. • High active suspension technology field trialled in Mining. GROSS REVENUE GROSS PROFIT MARGIN $55.6m 28% EBITDA FTE’S A$2.1m 58 SciDev Limited / Annual Report 2022 About SciDev WHO WE ARE A leader in environmental solutions focused on water-intensive industries. WHAT WE DO Our solutions allow clients to recycle and reuse water, improve operational efficiencies and reduce their environmental footprints. We deliver world-leading chemistry and water treatment technology with end-to-end support from our specialist scientists and engineers. OUR MISSION To improve the operational and environmental outcomes for our clients. CONTENTS Our Business at a Glance Chair’s Letter CEO’s Letter Project Profiles 02 04 06 10 Operations Review Environmental, Social and Governance Financial Report Corporate Directory 14 22 28 IBC 01 Our Business at a Glance CORE BUSINESS DIVISIONS WATER TREATMENT TECHNOLOGY SciDev specialises in the delivery of innovative water treatment technology across a wide range of applications. Our treatment technologies remove harmful contaminants from groundwater, surface water and industrial liquid waste allowing water to be reused or safely discharged to the environment. We operate through both Build, Own Operate (BOO) and Design & Construct (D&C) commercial models and deliver our solutions to a range of end markets. CHEMICAL SERVICES Our chemistry business focuses on the development, manufacturing and supply of a range of chemistries that help our clients improve their operational efficiency and minimise wastewater generation. We also provide a range of supporting services from “last mile delivery” to process optimisation ensuring maximum value for our clients. 02 INDUSTRIES WE OPERATE IN SciDev Limited / Annual Report 2022 Mining and Mineral Processing Oil and Gas Construction and Infrastructure Water and Wastewater Treatment SciDev has developed bespoke solutions to reduce the cost and operational downtime associated with water & slurry management within the construction and infrastructure sectors. SciDev is an industry leader in solid liquid separation in the mineral processing sector. Our chemistries and professional services maximise the operational performance of mineral processing systems and ensure minimal water is passed as waste into the tailings circuit. SciDev helps companies to comply with environmental regulations, limit the usage of freshwater, reduce costs and improve their operational performance. We provide equipment, chemistry, and professional services to deliver solutions that focus on increasing the reuse and recycling of water in onshore oil/gas production. SciDev provide chemicals into the wastewater treatment market to increase efficiencies in clarification and sludge dewatering processes. Through our Water Treatment Technology business we remove harmful contaminants from groundwater, surface water and industrial liquid waste allowing water to be reused or safely discharged to the environment. SCIDEV AREAS OF OPERATION Asia – Pacific North America South America UK and Europe Middle East 03 Chair’s Letter Dear Shareholders, On behalf of the Board, I am pleased to present the SciDev Ltd Annual Report for the financial year ending 30 June 2022 (FY22). It has been a busy 12 months for the company, challenged by supply chain constraints, lingering impacts from the COVID-19 pandemic, several severe flooding events in Eastern Australia and key changes to the Executive Leadership Team. Despite these challenges, SciDev has continued to deliver strong financial and operational performance with record revenues and positive EBITDA. I want to acknowledge the volatility in share price over the last year. We are focused on building resilience in the business. In any high-growth business such as SciDev, it’s important that our systems, processes and governance keep up with the growth to ensure we build a long-term sustainable business. As mentioned, in FY22, we delivered record top-line growth, a noteworthy achievement considering our pipeline was heavily impacted by border restrictions in 2021. As restrictions eased in 2022, we have had considerable success in building and expanding our pipeline of opportunities and contracts with particularly strong results in both the North American Energy Services business and the Australian Water Treatment business. 04 The Energy Services business has been the benefactor of higher exploration rates in North America, supported by the elevated oil price. Drilling a well using our Slik Friction Reducer products reduces the amount of contaminated water produced by about half, which is important given the water scarcity in the US due to ongoing droughts. While the US is experiencing droughts, in Australia, the water business had a very strong year amplified by the record rainfalls on the East Coast, which increased the need for water decontamination. In November 2021, SciDev completed an institutional placement raising $18M. The funds from the placement were directed towards funding an acquisition payment for the Water Services business, funding new sustainable chemistry initiatives in the North American Energy Services business and consolidating SciDev’s Australian production facilities. We also took the opportunity to increase inventory levels, given the supply chain constraints being experienced at the time. There were several changes to the Executive Team in FY22. In April 2022, the CEO, Lewis Utting, resigned and I would like to take this opportunity to recognise the tenure and achievements of Lewis, who led the early formation and growth of the company. The Board sincerely thank him for all his efforts. I also want to acknowledge and thank SciDev Limited / Annual Report 2022 GROSS REVENUE $55.6m EBITDA $2.1m We are seeing increasing demand for our innovative solutions with clients seeking new ways to recycle, reuse and manage water. Seán Halpin, our current Interim CEO, whose commitment, leadership and hard work, together with his deep understanding of the SciDev business from his previous role as Director of Water Services, have been invaluable. We look forward to completing the search for a new CEO in the coming months. In December 2021, Anna Hooper joined SciDev as our new Chief Financial Officer. Anna’s deep financial expertise and experience in a listed environment have already proven valuable. We have an extremely skilled leadership team in Australia and North America who will continue to drive SciDev’s growth and profitability. The substantial progress achieved over the last year would not have been possible without our employees’ strong support and commitment. We thank them for their enormous contribution. Being an innovative environmental solutions provider at a time when the world is accelerating towards a greener, more environmentally friendly economy provides SciDev with a great opportunity. We are seeing increasing demand for our innovative and bespoke solutions, with clients seeking new ways to recycle, reuse and treat water waste. This is especially so when it comes to treating per- and poly-fluoroalkyl substances (PFAS), with many companies, governments and environmental regulators just starting to realise the scale of the environmental issue. Once again, I would like to thank our employees, shareholders, investors and all stakeholders for their ongoing support throughout the year. Yours sincerely, Vaughan Busby Non-Executive Chairman 05 Alongside a strong pipeline of projects, a highly skilled and motivated team and a robust balance sheet, SciDev is well positioned to continue to drive both operational and financial growth into FY23 and beyond. EXPANDING OUR OPERATIONAL FOOTPRINT SciDev operates across a range of end verticals with a common thread of reducing the amount of wastewater generated by our clients. Whilst we engage across a wide and diversified range of industries, our business can essentially be separated into two distinct areas of operation: chemical services and water treatment technologies. Our chemical services business focuses on the development, manufacturing and supply of a range of chemistries that help our clients improve their operational efficiency and minimise wastewater generation. We also provide a range of supporting services from “last mile delivery” to process optimisation ensuring maximum value for our clients. CEO’s Letter Dear Shareholders, As interim CEO, it is with great pride that I share SciDev’s achievements for the 2022 financial year (FY22). Whilst the past financial year has not been without its challenges, the resilience and strength of the SciDev team has led to growth across our key verticals as we continued to emerge as a leading global provider of environmental solutions. Our growth over the year was reflected in a 30% increase in revenues to A$55.6m, and importantly, positive EBITDA. Our innovative chemistries, utilised across a range of industries, continue to improve production efficiencies, reduce waste, and minimise the environmental footprints of our clients. Our water treatment technologies, focusing on the Design and Construction (D&C) and Build, Own, Operate (BOO) commercial models continue to remove harmful contaminants from our natural environments through the treatment and remediation of contaminated groundwater, surface water and liquid waste. With growing environmental regulations across the globe, we are seeing increasing demand for our technologies and chemistries. 06 REVENUE +30% FTE’S 58 SciDev Limited / Annual Report 2022 Our business can essentially be separated into two distinct areas of operation: chemical services and water treatment technologies. Revenue is generated by direct sales to clients and as such fluctuates with activity in our key end markets of energy, mining and construction and our profitability and cashflow is a result of both headline revenue, cost of sales and our working capital cycle. Our Water Treatment business revolves around the delivery of innovative water treatment technology across a wide range of applications. Our treatment technologies remove harmful contaminants from groundwater, surface water and industrial liquid waste allowing water to be reused or safely discharged to the environment. We operate through both Build, Own Operate (BOO) and Design and Construct (D&C) commercial models and deliver our solutions to a range of end markets. Water treatment is more capital intensive than the chemicals but is a very scaleable business and provides higher returns. The ability to have two unique end markets, both circling water, provides both a diversified revenue stream and an ability to cross-sell and drive up the number of SciDev products utilised on our client’s sites. Additionally, as we continue to embed our recent acquisitions and drive a more strategic focus on our growth initiatives, the breadth of our product offering and end sectors we engage provides for a significant growth ability. The momentum and opportunity we see for growth were reflected in the record June quarter we delivered with revenue exceeding A$18 million and several new projects secured. CHEMICAL SERVICES Over the year, SciDev delivered significant growth in our chemistry business in terms of financial performance, new customer engagement and product development. In the mining sector, easing travel restrictions throughout the financial year allowed us to reconnect with our client base, successfully renew existing contracts, and deliver technical trials of our speciality chemistry for blue chip clients across the industry. Although international and interstate border closures caused us to miss out on some key contracts, we are now in a solid position to capitalise on these opportunities as these contracts come up for renewal. Commercialising our suspension technology is also an exciting, market-disrupting development for the mining industry. We look forward to taking it to full-scale production and distribution in the 2023 financial year. Similarly, international travel restrictions impacted our ability to effectively develop our pipeline within our Construction and Infrastructure vertical. In the second half of FY22 we were able to resume these efforts and reengage both locally and internationally, and we are excited to see growth in this vertical resume. 07 CEO’s Letter continued FY22 also saw a return to profitability for our Energy Services vertical. Our Energy Services business benefited from a steady increase in activity in the US Oil & Gas market driven by elevated oil prices and renewed investment in this space. The successful turnaround was achieved through the continued commercialisation of proprietary technology, such as our CatChek™ and SmartVIS™ chemistry, that increase well lifecycles, reduce waste water production and minimise reliance on our natural water resources. WATER TREATMENT The 2022 financial year marked the first full year of operations for our Water Treatment business following the Haldon acquisition in FY21. Our Water Services team increased market share within the Australian domestic market, delivering projects for new and existing clients and further developed SciDev’s presence within Western Australia and Queensland. We continued our establishment as the market leader in per- and poly-fluoroalkyl substances (PFAS) treatment, with our Water Services team delivering 12 PFAS treatment projects throughout the year. This year also saw further development of our D&C capabilities and project wins across a wide range of industries and applications. With growing PFAS regulation and an increasing array of clients, the Water Treatment business is set for another exciting year of growth in FY23. 08 FINANCIAL REVIEW SciDev reported revenue of $55.6m for the period, representing a 30% increase on the prior year’s results. SciDev’s record revenue generation was achieved through organic growth via contract wins across several verticals. SciDev reported a net loss of $1.4m, with net cash used in operating activities of $1.3m. With a strong balance sheet with $14m in net cash, we are well positioned to continue to drive growth and maximise profitability in FY23 and beyond. OUR PEOPLE I want to acknowledge the efforts of the entire SciDev team over the past year and thank our employees for their ongoing contribution and commitment to the business. Our talented team and positive culture continue to be the engine room that drives our company towards success. As interim CEO, it is exciting to see the breadth of talent across the SciDev team. It is also pleasing to witness the ongoing increase in gender diversity within our team, especially in executive and non-traditional STEM roles. I would like to extend a sincere thank you to our outgoing CEO, Lewis Utting, for his contribution to the SciDev business. His leadership and vision were key to SciDev’s early development, and he has left the company well positioned for continued growth. I am also extremely grateful for the leadership and guidance of our Chairman, Vaughan Busby, and the SciDev board throughout this transition period and I thank them for their ongoing support. SciDev Limited / Annual Report 2022 Our talented team and positive culture continue to be the engine room that drives our company towards success. ENVIRONMENTAL, SOCIAL AND GOVERNANCE Outside of our core business activities, we remain committed to giving back to the communities where we live and work. In the financial year 2022, SciDev pledged a further $60,000 in support of the Schools Plus ‘Two-Way Science’ project that helps to support eight remote Indigenous schools and communities to develop and implement an integrated learning program. In addition, I am pleased to report that our staff raised over $20,000 for the Black Dog Institute to help fund crucial mental health research, support and prevention initiatives. A fantastic effort towards a very important cause. We also remain committed to the ongoing development and management of our governance processes. As a high-growth business, it is essential to ensure effective management and risk protocols are in place to deliver sustainable growth. Therefore, we will continue to develop and expand our policies and procedures and ensure we provide the highest level of governance and oversight. OUTLOOK Looking to the future, I am incredibly optimistic about SciDev’s ability to continue to deliver value for our clients, shareholders, employees and the environment. A key component of our growth strategy is to broaden our client base across our key verticals whilst increasing our ratio of solutions per client. Focusing on our existing client base, we will continue capitalising on cross-selling opportunities to drive growth. We will also seek to enter new geographical regions as regulatory pressure creates new markets for our technologies while ensuring we provide our full service offering to regions where we are already established. The combination of cross-selling and new business growth, coupled with our existing pipeline and the strong momentum we delivered in the second half of FY22, positions the company to continue to deliver operational and financial growth in FY23 and beyond. There remains a significant amount of upside for SciDev to capture, and I look forward to driving our business to execute on the opportunities we see. Finally, I would like to thank our shareholders for your continued support. Yours Sincerely, Seán Halpin Interim Chief Executive Officer 09 Project Profiles A blue-chip Australian mining client had per- and poly-fluoroalkyl substances (PFAS) contaminated water on-site generated from stormwater run-off. Due to the site’s location being within a sensitive environment, a highly risk-adverse approach was used when determining the required environmental discharge criteria. SciDev designed, commissioned and is operating a water treatment plant capable of treating PFAS-impacted water under the most stringent controls used nationally in the treatment of PFAS, which requires the water treatment plant to treat to the 99th percentile level of ecological protection under the Australian and New Zealand Environment and Conservation Council (ANZECC) guidelines. This plant was the first PFAS treatment plant to treat to these levels at full scale under the governance of the Department of Water, Environment and Regulation. Our approach involved the bespoke design of a multi-stage water treatment plant that utilises various active adsorptive and ion exchange media. Effective design implementation has ensured the successful treatment of 560ML of PFAS-impacted water to date. This project was unique for a multitude of reasons: • The discharge criteria for the system required Total PFAS removal down to <0.0002 µg/L. • The system’s flow rate was designed to achieve 21L/s, and was subsequently upgraded to treat 38L/s. • The water treatment plant was required to treat from multiple sources with varying contamination levels for PFAS and other co-contaminants. • Construction and commissioning of the water treatment plant was completed in less than 40-days from the contract award due to on-site operational requirements. • After the first year of operation, the treatment plant was upgraded to treat elevated total suspended solids as the client required an additional feed source to be treated. PROTECTING THE CITY’S DRINKING WATER 10 SciDev Limited / Annual Report 2022 REDUCING THE ENVIRONMENTAL, COMMERCIAL AND OPERATIONAL RISK PROFILE OF THE SYDNEY GATEWAY PROJECT The $2.6 billion Sydney Gateway project will provide a high-capacity link from the airport precinct, Port Botany and the surrounding road network to the newly opened St Peters Interchange and is one of the missing pieces of Sydney’s motorway network. John Holland Seymour Whyte (JHSW) engaged SciDev to design and construct the permanent leachate treatment plant (LTP) designed to accept and treat leachate generated and extracted from the closed Tempe Landfill both during and post construction of the Sydney Gateway Project. The successful construction and commissioning of the permanent LTP ensured that the client was able to achieve their three-year bulk earthworks and civil construction objectives with the confidence of a reliable and consistent site-wide dewatering strategy. This significantly reduced the broader Sydney Gateway project’s environmental, commercial, and operational risk profile. The leachate treatment system was designed to manage variable influent quality, flows and site conditions both during the construction phase and post completion of the project. 11 The presence of iron from source water and oil well bore formation is an ongoing issue in oil well completion and production. The oxidised iron can form a scaleant reducing well lifecycle. Iron also causes agglomeration of partially hydrated polyacrylamide during the flow back process of oil well stimulation, which can lead to costly delays and downtime for exploration and production companies. Another common issue in oil well completion is the presence of fines, which can inhibit proppant delivery. In response to these industry challenges, SciDev’s research and development team have developed, CatChek™ 12. This cationic additive to traditional oil well production chemistry inhibits iron oxidation while minimising fines and fine migration. This allows for peak performance of polyacrylamide-based friction reducers to carry proppant to perforations during the completion phase of the oil well cycle. In addition, the management of fines also allows for more accurate proppant placement, improving the oil well’s decline curve and life cycle. CatChek™ 12 was developed in-house by SciDev and has since been extensively trialled in both the laboratory and in the field and is now fully commercialised. As a result, it is gaining increasing acceptance across the Oil & Gas industry, generating AUD $8.8m throughout FY22. Project Profiles continued CATCHEK™ 12, IMPROVING WELL PERFORMANCE THROUGH CATION CONTROL 12 SciDev Limited / Annual Report 2022 EXTENSIVE LABORATORY PROGRAM SECURES MAXIFLOX® PLANT TRIAL AT LARGE NICKEL OPERATION SciDev were engaged to undertake a full-scale plant trial of our MaxiFlox® technology at a large Nickel operation. A key component of MaxiFlox® is the ability to tailor our chemistry to maximise effectiveness in each individual application. The SciDev team have a detailed understanding of the complexities of thickening and tailings processes and the identification of opportunities for the optimisation of chemistry and process control. Before the trial, our team first conducted a detailed review of the multiple processes at the mine, identifying key areas for process improvement and optimisation. This stage was then followed by extensive laboratory evaluation of process samples and bench-scale trials to determine the most effective and efficient chemistry for each process. This method provided us with a range of chemistry to take to full-scale production trial, with targets set for operational effectiveness, usage rates and cost for each application. To compliment our chemistry, our OptiFlox® technology will be implemented as part of the trial to optimise the process further and minimise operator interface. SciDev’s MaxiFlox® chemistry combined with our OptiFlox® technology have resulted in a reduction in chemical usage rates across each process while increasing mineral recoveries and reducing OPEX costs for our client. 13 Operations Review SciDev’s innovative chemistries and water treatment technologies, utilised across a variety of industries, continue to improve production efficiencies, reduce waste, and minimise the environmental footprint of our clients. Our services can be utilised in a range of industries including Mining & Mineral processing, Oil & Gas, Construction & Infrastructure, and Wastewater. FY22 Financial Highlights FY22 REVENUE FY22 ADJUSTED EBITDA CASH AND CASH EQUIVALENTS +30% $2.1m $14.1m at 30 June 2022 14 SciDev Limited / Annual Report 2022 FY22 Operational Highlights The Water Treatment vertical continued to expand its operations in Australia, with growing revenue and client engagement amplified by the significant levels of rainfall throughout the Eastern Seaboard in the second half of the year. SciDev delivered 12 per- and poly-fluoroalkyl substances (PFAS) treatment projects across Australia, generating over $9.5m in revenue in FY22. The Company continues to engage with a range of clients to deliver commercial solutions for their PFAS treatment requirements. SciDev continued to execute supply and services to all major mining clients, with business development activities continuing across several operations with a FY23 focus on the commercialisation of SciDev’s suspension technology. Energy Services delivered an exceptionally strong performance in FY22, benefiting from a steady increase in activity in the US Oil & Gas market driven by elevated oil prices and renewed operational activity. Ongoing focus on the health and safety of all our employees, embedding a positive safety culture and continuous improvement of safety performance. 15 Operations Review continued FINANCIAL REVIEW The consolidated entity reported revenue of $55.6m for the period, representing a 30% increase on the prior year’s results. SciDev’s record revenue generation was achieved through organic growth via contract wins across several verticals. SciDev reported a net loss of $1.4m, with net cash used in operating activities of $1.3m. SciDev maintained a strong gross profit margin of 28% (FY21: 24%), in line with the prior year. The continued transition of the business towards speciality chemistry and a growing proportion of revenue from the Water Treatment business is expected to drive margin improvement in coming years. At the end of the period, the consolidated entity had a net cash position of $14.1m, with $7.3m in inventory on hand. On 15 September 2021, SciDev Limited issued 513,000 new ordinary shares at $0.60 to the vendors of ProSol Australia Pty Ltd to meet the contingent consideration settled via the issue of SciDev Limited shares. On 9 November 2021, SciDev Limited announced the placement and issued 27,692,308 new ordinary shares with institutional investors at an issue price of $0.65 per share. On 29 November 2021, SciDev Limited issued 527,671 new ordinary shares at $0.65 per share pursuant to a Share Purchase Plan (SPP). During the year, the consolidated entity paid contingent consideration of $2,922,000 to the vendors of Haldon Industries. The consolidated entity also paid contingent consideration of $313,000 to the vendor of ProSol Australia Pty Ltd. OPERATIONAL REVIEW Over FY22 SciDev continued to expand its client presence, securing numerous new contracts and increasing the number of services per client. Key developments in FY22 included: Awarded a contract for the design, construct, and operation of a permanent PFAS treatment plant for a major mining client in Western Australia with a total contract value of over $2.0m; A $1.1m purchase order by a Tier 1 mining company in Western Australia for the design, fabrication and installation of 27 custom water quality monitoring units; PFAS treatment plants were mobilised to customers across New South Wales and Queensland to treat PFAS contaminated surface water; Awarded supply of SciDev’s proprietary suspension polymer technology, Xslik 620, for a series of wells for a major exploration and production (E&P) company. Supply will continue through to December 2022; 16 SciDev Limited / Annual Report 2022 Over FY22 SciDev continued to expand its client presence, securing numerous new contracts and increasing the number of services per client. Sales of CatChek™ technology, which improves oil well efficiency, continued to attract new customers across the US shale industry; SciDev has secured a field trial with an existing CatChek™ customer to test our High-VIS friction reducer, which can reduce water usage required for well completion by up to 50%. The trial will commence in Q1FY23; SciDev developed a new cationic emulsion friction reducer for application in a recycled water completion fluid system. The product was successfully field trailed with a Tier 1 E&P company resulting in an initial purchase order for the product; Trial order to the value of US$1.4m received from major Nickel producer in Australia; and SciDev continues to receive significant customer interest in suspension chemistry in Australia with field trials beginning in Q1FY23. 17 Operations Review continued MINING & MINERAL PROCESSING SciDev is an industry leader in solid-liquid separation in the mineral processing sector. SciDev’s chemistries and professional services maximise the operational performance of mineral processing systems and ensure minimal water is passed as waste into the tailings circuit. During the year, the Company continued to execute supply and services into all major clients such as Iluka, Yancoal, Idemitsu, Société Le Nickel and Peabody. Business development activities continued across a range of operations and commodities, both domestically and overseas. During the year, the Company secured a trial order of US$1.4m from a major nickel producer in Australia, where SciDev’s MaxiFlox® chemistry and OptiFlox® technology will be used on site to improve operational efficiency and water use. SciDev also extended the contract with Iluka, extending the supply of SciDev’s chemistry until August 2023. The Company secured a contract to supply chemistry to a large mining services company in the US with supply to continue throughout FY23. This new contract is the first delivered following a cross-business unit initiative to diversify the revenue base in North America. With a large mining market in North America, SciDev sees significant opportunity to grow our regional presence. Cross-sell initiatives in the Australian mining market is another significant opportunity with a range of mining clients that independently use either SciDev’s water treatment solutions or chemistry. The ability to grow the number of products per client will drive revenue and secure SciDev as an integrated solutions provider on-site. The commercialisation of SciDev’s suspension technology delivers an exciting, market-disrupting development for the mining industry, and we look forward to taking it to full-scale production and distribution in FY23. ENERGY SERVICES SciDev provides drillers, producers, and service companies with chemistry, equipment, and professional services to help reuse and recycle oilfield water to reduce waste. Oil production worldwide generates about five barrels of wastewater for every barrel of oil produced. SciDev focuses on increasing the use of recycled water in onshore oil and gas production, helping companies meet their environmental regulations, limit freshwater usage, reduce costs and improve the customer’s operational performance. 18 SciDev Limited / Annual Report 2022 CONSTRUCTION & INFRASTRUCTURE SciDev has developed bespoke solutions to reduce the cost and operational downtime associated with water management within the construction and infrastructure sectors. International travel restrictions impacted SciDev’s ability to effectively develop the pipeline within the construction & infrastructure vertical. However, as these travel restrictions eased in the second half of FY22, SciDev was able to resume these efforts and re-engage both locally and internationally. SciDev is currently progressing opportunities in North America, Europe, the Middle East & Asia. The increase in the oil price and subsequent acceleration in onshore US oil and gas activity levels generated strong performance from SciDev’s energy services business in FY22, with elevated activity from existing clients and the conversion of a range of new clients to SciDev’s speciality chemistry solutions. SciDev’s chemistry continued to be utilised in commercial applications with increasing industry interest from multiple E&P clients driven by CatCheck’s™ ability to enhance oil recovery from wells. The Company’s ability to develop and commercialise new bespoke chemistries for the US shale industry was reflected in the supply of SciDev’s proprietary suspension polymer technology, Xslik 620, for a series of wells for a blue chip E&P company. SciDev can develop and supply multiple bespoke emulsions to large E&P companies with an average time to market for newly developed products of less than 30 days, far quicker than our peers. With a focus on value add through product optimisation and last-mile delivery efforts, SciDev is gaining market share in the US oil & gas sector, which strongly positions the Company for future growth. 19 Operations Review continued WATER TREATMENT SciDev’s water treatment business is centred around the removal of harmful contaminants from groundwater, surface water and industrial liquid waste allowing water to be reused or safely discharged to the environment. We operate through both Build, Own Operate (BOO) and Design & Construct (D&C) commercial models and deliver our solutions to a range of end markets. The water business continued to expand its operations in Australia, with growth in the underlying core services amplified by the significant levels of rainfall throughout the Eastern Seaboard in the second half of the financial year. SciDev has developed and commercialised technologies that are actively being utilised to treat PFAS. PFAS are a group of man-made chemicals used in various industries since the 1940s. PFAS chemicals are very persistent in the environment and cause environmental and health risks across a range of industrial sites. SciDev’s water treatment plants can remove all detectible PFAS compounds to below the lowest possible commercially available testing limits, and significantly ahead of competitors. In 2022 SciDev was active on 12 PFAS treatment and remediation projects across Australia, generating over $9.5M in revenue. The growing demand for SciDev’s PFAS solutions included the award of a contract for the design, construction and operation of a permanent PFAS treatment plant for a major mining client in Western Australia with a total contract value of over $2.0m. The global mining sector is a large addressable market for SciDev’s PFAS technology. It represents a substantial opportunity for cross-selling, increasing the number of solutions and revenue per site for our existing Maxiflox® mining clients. 20 SciDev Limited / Annual Report 2022 The Company has received interest from parties in Europe and North America for utilising SciDev’s PFAS treatment technology which the Company will continue to explore. During the year, SciDev delivered the successful construction and commissioning of the permanent leachate treatment plant (LTP) for the Sydney Gateway project. This piece of critical infrastructure ensured that the client could achieve their three-year bulk earthworks and civil construction objectives with the confidence of a reliable and consistent site-wide dewatering strategy. In addition, it significantly reduced the broader Sydney Gateway project’s environmental, commercial, and operational risk profile. SciDev continued to expand its water treatment into the mining sector with a $1.1m purchase order from a Tier 1 mining company in Western Australia for the design, fabrication and installation of 27 custom water quality monitoring units. The Company continues to focus on ongoing research and development, including continued development and refinement of PFAS treatment technology and the development of technology to lower total dissolved solids (TDS) in water without the use of conventional reverse osmosis and membrane technology which generate high volumes of waste (reject brine). With growing PFAS regulation and an increasing array of clients, the Water Treatment business is set for another year of growth in FY23. OUTLOOK SciDev’s focus for FY23 will include: Ongoing focus on the health and safety of all our employees; Leveraging the extensive business development pipeline in the water treatment sector and converting opportunities into contracts; Establish a presence across Europe and North America with an aim to deliver full-scale PFAS treatment technology within FY23; Continue to increase sales of speciality chemistry in the US oil and gas industry, growing not only the number of sites but also the number of solutions per site; Target key mining clients within the existing SciDev client base to further develop SciDev’s water treatment presence and deliver an end-to-end service within the industry; Optimise the inventory position to ensure the reliability of supply to clients whilst maintaining focus on effective working capital management; and Drive a positive culture across the organisation and increase the level of integration within the business to take advantage of the strong cross-sell opportunities across the client base. 21 Environmental, Social and Governance SciDev is committed to delivering value through sustainable development. Our actions ensure that we achieve economic, social and environmental sustainability in a balanced and value‑enhancing manner for all stakeholders. SciDev creates innovative, customised solutions to minimise water usage and deliver efficiency gains for our clients across a range of sectors. As a company, we are: Helping to solve the growing per‑ and poly‑fluoroalkyl substance (PFAS) issue. Reducing the consumption of water and the level of wastewater produced across a range of industries. Supporting the communities in which we live and work. Building a culture where we respect and embrace diversity in the workplace and wider community. 22 SciDev Limited / Annual Report 2022 Our water treatment plants can remove all detectible PFAS compounds to below the lowest possible commercially available laboratory limits of reporting, significantly ahead of our competitors. In FY22 SciDev was active on twelve PFAS water treatment projects. We actively work with global oilfield service leaders in the onshore US oil and gas sector to develop new drilling chemistries. The oil and gas sector produces over five barrels of wastewater for every barrel of oil produced. The increased awareness of the environmental impact of such high levels of water discharge drives our clients to embrace new chemistry and solutions that can reduce the impact of their operations on the environment. Among other projects, SciDev has developed a range of drilling technologies that perform efficiently in saline water, whilst reducing water waste by 50% and minimising the client’s freshwater footprint. SciDev will continue to innovate to ensure we can continue to meet our client’s objectives centred on reduction in water discharge. As an emerging company, we continue to build and formalise our commitment to sustainability and remain dedicated to improving our Environmental, Social and Governance reporting in the coming years. ENVIRONMENT SciDev’s sustainable chemistry and water treatment solutions focus on reducing freshwater consumption and the level of wastewater produced across a range of industries. Our technologies embrace a range of unique operating environments and challenges, including per- and poly-fluoroalkyl substances (PFAS) treatment, wastewater disposal from industrial sites and tailings slurry in the mining sector. By utilising our people, services, and solutions, our clients can reduce their environmental impact and achieve improved operational performance and efficiencies. One of the global environmental challenges is the emergence of PFAS, a group of man-made chemicals used in various industries since the 1940s. PFAS chemicals are very persistent in the environment and cause environmental and health risks across a range of industrial sites. Pivotal to SciDev’s ongoing success is our people. Our leadership team are passionate about creating inclusive and high‑performing teams that respect and embrace diversity and individuality. 23 Environmental, Social and Governance continued SOCIAL SciDev puts our workforce’s health, safety and wellbeing at the forefront of our operations and we strive to deliver a safe and inclusive culture. Safety SciDev places the highest priority on the health and safety of our people. We are committed to embedding a safety-first culture in everything that we do. A key strategic action is to embed a proactive safety culture to support a continuous improvement in safety performance. This approach is led from the top and cascades throughout the organisation to result in a risk management philosophy that enables each member of staff to take accountability for their actions. At a practical level, this includes daily activities for risk management in the field including risk assessments, Safe Work Method Statements, project planning, consultation mechanisms, competence and contractor management and maintenance excellence). Our strategic HSE activities are reviewed and driven by our management team in consultation with data harnessed from our frontline workers, operations and client interactions. SciDev is working to ensure that our systems are not only in compliance with regulation, but also fit for purpose so that our workforce has a clear, unhindered opportunity to manage risk and opportunities. The Water Services and Mining and Construction business units currently run two separate triple certificate management systems in tandem. A project has been initiated that will consolidate the two systems into one set of core mechanisms that will encompass all SciDev’s activities 24 SciDev Limited / Annual Report 2022 whilst maintaining the retention of any individual elements that specifically speak to each business unit. Diversity and inclusion Pivotal to SciDev’s ongoing success is our people. Our leadership team are passionate about creating inclusive and high-performing teams that respect and embrace diversity and individuality. The Company respects the diversity of all employees, consultants and contractors and cultivates an environment of fairness, respect and equal opportunity. The Company believes that the pursuit of diversity in the workplace increases the pool of talent available, enhances individual work-life balance, encourages personal achievement, improves cooperation and assists in optimising organisational performance. SciDev is committed to providing a fair and equitable workplace, free from discrimination related to age, gender, ethnicity, cultural or other personal factors, in which diversity enhances Company performance and Shareholder value. The Company encourages diversity at all levels of the organisation to facilitate an appropriate mix of skills and talent to conduct its business. Active management of diversity in the workplace involves recognising and valuing the unique contribution people can make because of their individual backgrounds, different skills, experiences and perspectives. Pleasingly, we have made positive progress in gender diversity, with 25% of our workforce now female. 25 Environmental, Social and Governance continued Communities Given the broad nature of the geographies in which SciDev operate we interact with a range of communities across the globe. Recognising this and wanting to establish and leave a lasting imprint on local communities via our actions, SciDev has partnered with Schools Plus in the delivery of funding to assist disadvantaged communities to improve learning outcomes for their students. SciDev has provided financial support to underpin the ‘Two-Way Science Programme’ at a cluster of Anangu schools (Oak Valley Anangu, Amata Anangu, Fregan Anangu, Indulkana Anangu, Kenmore Park Ananagu, Yalata Anangu, Pipalyatjara Anangu and Ernabella Anangu). The project had directly benefited over 200 students, 100 teachers and a further 100 community members to build cultural identity, teach science, reinforce literacy and numeracy skills and incorporate technology. This teaching and learning approach provides a way to construct meaningful engagement with the Anangu community. Our team also raised more than $20,000 for the Black Dog Institute to help fund crucial mental health research, support and prevention initiatives. GOVERNANCE SciDev are committed to a high level of governance and value, and reward ethical standards, personal and corporate integrity and respect for others. SciDev’s governing documents include a Corporate Governance Statement, Board Charter and Code of Conduct Policy which provide the overlying framework of governing principles. The SciDev Board of Directors is cognisant of the importance of the Company’s corporate governance framework in establishing accountabilities and managing risk. Our policies and procedures are detailed in our Corporate Governance Statement and Board Matrix which can be viewed on the SciDev website. Ethics and whistleblowing SciDev has a culture which foster open and honest dialogue amongst our staff. Our staff have access to senior management and the Board and are encouraged to report any unethical behaviour or breaches of policies and procedures. In FY22 all staff have completed training on Fraud and Corruption and Anti-Bullying, Discrimination and Harassment. These training modules form part of the on-barding training for all new employees. 26 Ethical Sourcing and Modern Slavery We are committed to an ethical and transparent approach to business, ensuring effective systems and controls are in place to safeguard against any form of modern slavery within our business operations or our supply chain. SciDev is aware of its responsibilities to respect and protect the rights of our people and individuals and communities affected by our activities and the Company is committed to following the UN Guiding Principles on Business and Human Rights. The Company is working through the framework to set an Ethical Sourcing and Modern Slavery Policy. SciDev Limited / Annual Report 2022 27 Financial Report Directors’ Report Auditor’s Independence Declaration Consolidated Statement of Profit or Loss and Other Comprehensive Income Consolidated Statement of Financial Position Consolidated Statement of Changes in Equity 29 49 50 51 52 28 Consolidated Statement of Cash Flows Notes to the Consolidated Financial Statements Directors’ Declaration Independent Auditor’s Report Additional ASX Information Corporate Directory 53 54 100 101 106 IBC DIRECTORS’ REPORT SciDev Limited / Annual Report 2022 The directors present their report, together with the financial statements, on the consolidated entity (referred to hereafter as the ‘consolidated entity’) consisting of SciDev Limited (referred to hereafter as the ‘company’ or ‘parent entity’) and the entities it controlled at the end of, or during, the year ended 30 June 2022. DIRECTORS The following persons were directors of SciDev Limited during the whole of the financial year, except where noted below, and up to the date of this report: • Vaughan Busby (appointed a Director and Non‑Executive Chairman on 9 August 2021) • Simone Watt • Jon Gourlay • Dan O’Toole (appointed a Director on 3 February 2021 and Acting Chairman from 30 June 2021 to 9 August 2021) • Lewis E Utting (resigned 29 April 2022) PRINCIPAL ACTIVITIES The principal activity of the consolidated entity is delivery of process control, professional services, equipment design and construction (including build, own operate services) and chemistry in the Mining and Mineral Processing, Infrastructure and Construction, Water Treatment and Oil and Gas markets. DIVIDENDS There were no dividends paid, recommended or declared during the current or previous financial year. REVIEW OF FINANCIAL PERFORMANCE Revenue from clients in 2022 is $55,597,000 (30 June 2021: $42,525,000) and the loss for the consolidated entity after providing for income tax amounted to $616,000 (30 June 2021: profit of $3,453,000). Reconciliation of profit before income tax to EBITDA and Adjusted EBITDA (unaudited): Profit/(loss) before income tax Depreciation and amortisation Finance costs EBITDA Professional fees in connection with business combinations Acquisition expense – Haldon contingent consideration Non‑recurring Haldon integration costs Adjusted EBITDA 2022 $’000 (1,441) 2,082 708 1,349 – 504 245 2021 $’000 806 930 148 1,884 206 – – 2,098 2,090 EBITDA and adjusted EBITDA are non‑IFRS earnings measures which do not have any standardised meaning prescribed by IFRS and therefore may not be comparable to EBITDA presented by other companies. These measures, which are unaudited, are important to management as an additional way to evaluate the consolidated entity’s performance. Adjusted EBITDA excludes the effects of significant items of income and expenditure which may have an impact on the quality of earnings because of isolated or non‑recurring events. 29 Directors’ report continued REVIEW OF OPERATIONS SciDev’s innovative chemistries and water treatment technologies, utilised across various end industries, continue to improve production efficiencies, reduce waste, and minimise the environmental footprints of our clients. Key developments in FY22 included: • Awarded a contract for the design, construct, and operation of a permanent per‑ and poly‑fluoroalkyl (PFAS) treatment plant for a major mining client in Western Australia with a total contract value of over A$2.0m. • An A$1.1m purchase order by a Tier 1 mining company in Western Australia for the design, fabrication and installation of 27 custom water quality monitoring units. • PFAS treatment plants were mobilised to clients across New South Wales and Queensland to treat PFAS contaminated surface water. • Awarded supply of SciDev’s proprietary suspension polymer technology, Xslik 620, for a series of wells for a major exploration and production (E&P) company. Supply will continue through to December 2022. • Sales of CatChek™ technology, which improves well efficiency, continued to attract new clients across the US shale industry. • SciDev has secured a field trial with an existing CatChek™ client to trial our High‑VIS friction reducer which can reduce water usage required for well completion by up to 50%. The trial will commence in Q1FY23. • SciDev developed a new cationic emulsion friction reducer for application in a recycled water completion fluid system. The product was successfully field trailed with a Tier 1 E&P company, and an initial purchase order for the product is expected to generate up to US$1.4m in Q1 FY23. • Trial order to the value of US$1.4m received from major Nickel producer in Australia. • SciDev continues to receive significant client interest in our suspension chemistry in Australia with field trials beginning in Q1FY23. Our services are utilised in a range of industries, including Mining and Mineral processing, Oil and Gas Construction and Infrastructure, and Water Treatment. Mining and Mineral Processing The easing of travel restrictions throughout FY22 allowed the Company to reconnect with our client base, successfully renew existing contracts and deliver technical trials of our speciality chemistry for blue chip clients across the industry. Although international and interstate border closures caused the Company to miss out on some key contracts, SciDev is now in a strong position to capitalise on these opportunities as these contracts come up for renewal. The commercialisation of our suspension technology is also an exciting, market‑disrupting development for the mining industry. We look forward to taking it to full‑scale production and distribution in FY23. Construction & Infrastructure International travel restrictions impacted SciDev’s ability to effectively develop our pipeline within the construction and infrastructure vertical. However, as these travel restrictions eased in the second half of FY22 we were able to resume these efforts and re‑engage both locally and internationally. We are excited to see growth in this vertical return. Oil and Gas FY22 saw a return to profitability for our Energy Services business as it benefited from a steady increase in activity in the US Oil & Gas market driven by elevated oil prices and renewed operational activity. The growth in revenue and profitability was achieved through the continued commercialisation of proprietary technology, such as our CatChek™ and SmartVIS chemistry, that increase well lifecycles, reduce waste water production and minimise reliance on our natural water resources. With continued elevated oil prices, we continue to see strong demand in the vertical. 30 Directors’ report continued SciDev Limited / Annual Report 2022 Water Treatment The 2022 year marked the first full year of operations for our Water Treatment business following the Haldon acquisition in FY21. Our water services team increased market share within the Australian domestic market, delivering projects for new and existing clients and further developing SciDev’s presence within Western Australia and Queensland. We continued our establishment as the market leader in per‑ and poly‑fluoroalkyl (PFAS) treatment, with our water services team delivering 12 PFAS treatment projects throughout the year. The year also saw further development of our design and construct (D&C) capabilities and numerous new project wins across a wide range of industries and applications. With growing PFAS regulation and an increasing array of clients, the Water Treatment business is set for another year of growth in FY23. OUTLOOK SciDev’s focus for FY23 will include: • Ongoing focus on the health and safety of all our employees. • • Leveraging the extensive business development pipeline in the water treatment sector and converting opportunities into contracts. Establish a presence across Europe and North America with an aim to deliver full scale PFAS treatment technology within FY23. • Continue to increase sales of our speciality chemistry in the US oil and gas industry increasing not only the number of sites we are present on but also the number of solutions per site. • Target key mining clients within the existing SciDev client base to further develop our water treatment presence and deliver an end‑to‑end service within the industry. • Optimise the inventory position to ensure reliability of supply to clients whilst maintaining focus on effective working capital management. • Drive a positive culture across the organisation and increase the level of integration within our business to take advantage of the strong cross sell opportunities across our client base. SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS On 15 September 2021, SciDev Limited issued 513,000 new ordinary shares at $0.60 to the vendors of ProSol Australia Pty Ltd (refer note 22). This met the contingent consideration to be settled by the issue of SciDev Limited shares. On 9 November 2021, SciDev Limited announced the placement and issued 27,692,308 new ordinary shares with institutional investors at an issue price of $0.65 per share (refer note 22). On 29 November 2021, SciDev Limited issued 527,671 new ordinary shares at $0.65 per share pursuant to a Share Purchase Plan (SPP) (refer note 22). During the year, the consolidated entity paid contingent consideration of $2,922,000 (refer note 21) to the vendors of Haldon Industries. The consolidated entity also paid contingent consideration of $313,000 to the vendor of ProSol Australia Pty Ltd (refer note 21). There were no other significant changes in the state of affairs of the consolidated entity during the financial year. MATTERS SUBSEQUENT TO THE END OF THE FINANCIAL YEAR No matter or circumstance has arisen since 30 June 2022 that has significantly affected, or may significantly affect the consolidated entity’s operations, the results of those operations, or the consolidated entity’s state of affairs in future financial years. 31 Directors’ report continued ENVIRONMENTAL REGULATION The consolidated entity is subject to a range of environmental regulations and licences under Australian Commonwealth or State laws. The Company is responsible for monitoring its compliance with these laws and is not aware of any breaches during the year. A key area of regulation are specific process licences: Group companies are holders of NSW Environmental Protection Agency (EPA) mobile waste processing PFAS licences 20878 and 21114. INFORMATION ON DIRECTORS Name: Title: Vaughan Busby (appointed 9 August 2021) Non‑Executive Chairman Qualifications: B.Pharm, MBA (IMD Business School Switzerland) Experience and expertise: Mr Busby trained as a chemist and has extensive experience as a company director, having sat on a number of private and ASX listed boards over the last 15 years. He currently serves as a Non‑Executive Director for Energy Queensland Limited, a government‑owned corporation and the largest energy company in Australia. He is also a Non‑Executive Director for EnergyOne (ASX:EOL), a company providing specialist software to the energy industry and Netlogix Group Holdings Limited, a New Zealand based company specialising in supply chain logistics. Other current directorships: Non‑Executive Director of Energy One Limited (from listing on ASX on 12 January 2007 to present) Former directorships (last 3 years): None Special responsibilities: Interests in shares: Interests in options: Company Chairman and Chairman of the Nomination and Remuneration Committee Nil Nil Name: Title: Lewis Utting (resigned 29 April 2022) Managing Director and Chief Executive Officer Qualifications: BASc Experience and expertise: Mr Utting joined SciDev in March 2018 then the Board in October 2018 as Executive Director and was later appointed Managing Director and Chief Executive Officer in early 2019. In this time he has driven the transformation of SciDev, growing revenues and profits with a focus on common industry challenges across several sectors and leveraging adjacent supply chain synergies. Other current directorships: None Former directorships (last 3 years): None Special responsibilities: Managing Director and Chief Executive Officer Interests in shares: Interests in options: Interests in rights: 5,968,892* 800,000* nil* 32 Directors’ report continued SciDev Limited / Annual Report 2022 Name: Title: Simone Watt Non‑Executive Director Qualifications: BASc Experience and expertise: Ms Watt is the Managing Director of Sinoz Chemical and Commodities (Sinoz), which is a global company supplying reagents and technology‑based improvements to the mining and agribusiness industries. Ms Watt is also a Director of Kemtec Mineral Processing and Kanins International, both parts of the Sinoz Group of companies. She has extensive experience in strategic sourcing and supplier management, business development and sales and marketing. Other current directorships: None Former directorships (last 3 years): None Special responsibilities: Interests in shares: Interests in options: Member of the Audit and Risk Committee and the Nomination and Remuneration Committee 5,063,280 250,000 Name: Title: Jon Gourlay Non‑Executive Director Qualifications: BCom, C.A Experience and expertise: Mr Gourlay is a chartered accountant with extensive experience in finance and project management, risk management, business improvement and investor relationships, with a focus on the resources and technology sectors. Mr Gourlay has held senior management roles including most recently, Commercialisation Manager, Technology and Innovation for Newcrest Mining, with prior roles in investor relations, analysis and improvement of Newcrest’s operations at the Lihir Island Gold Mine in Papua New Guinea. Other current directorships: None Former directorships (last 3 years): None Special responsibilities: Interests in shares: Interests in options: Chairman of the Audit and Risk Committee and member of the Nomination and Remuneration Committee 1,046,934 Nil 33 Directors’ report continued Name: Title: Dan O’Toole Non‑Executive Director Qualifications: BEng(Hons), EngExec, FlEAust, MAusIMM, MAICD Experience and expertise: Mr O’Toole brings over 35 years of experience across the engineering and consulting sectors including over 18 years in executive leadership roles within Coffey International Limited and Pitt&Sherry. Mr O’Toole is currently the Chairman of Viotel Limited, a private company focused on empowering mining, transport and infrastructure businesses to better mitigate risks using world‑class monitoring technology. Prior to his current position, Mr O’Toole was the Chief Executive Officer of Pitt&Sherry, one of Australia’s most dynamic consulting engineering companies with a team of high‑calibre professional consultants servicing the Transport Infrastructure, Mining, Energy, Industrial, and Tourism & Recreation market sectors. Other current directorships: None Former directorships (last 3 years): None Special responsibilities: Interests in shares: Interests in options: Member of the Audit and Risk Committee and the Nomination and Remuneration Committee and Acting Chairman from 30 June 2021 to 9 August 2021 Nil Nil ‘Other current directorships’ quoted above are current directorships for listed entities only and excludes directorships of all other types of entities, unless otherwise stated. ‘Former directorships (last 3 years)’ quoted above are directorships held in the last three (3) years for listed entities only and exclude directorships of all other types of entities unless otherwise stated. * Interests in the shares and options of the company as at the date of resignation as a director. COMPANY SECRETARY Mr Heath L Roberts (Dip Law (S.A.B.) and Grad Dip Legal Practice (UTS)) is a commercial solicitor with over 20 years of listed company experience. He has acted for SciDev in various capacities over the years and brings strong transactional, compliance and capital raising experience to the role. MEETINGS OF DIRECTORS The number of meetings of the company’s Board of Directors (‘the Board’) and of each Board committee held during the year ended 30 June 2022, and the number of meetings attended by each director were: Full Board Nomination and Remuneration Committee Audit and Risk Committee Attended Held Attended Held Attended Held 9 9 10 11 11 9 10 11 11 11 2 – 2 2 2 2 – 2 2 2 1 – 2 2 2 1 – 2 2 2 Vaughan Busby* Lewis E Utting** Simone Watt Jon Gourlay Dan O’Toole Held: represents the number of meetings held during the time the director held office or was a member of the relevant committee. * Vaughan Busby was appointed as Chair on 9 August 2021. ** Lewis Utting resigned on 29 April 2022. 34 REMUNERATION REPORT (AUDITED) SciDev Limited / Annual Report 2022 The remuneration report details the key management personnel remuneration arrangements for the consolidated entity, in accordance with the requirements of the Corporations Act 2001 and its Regulations. Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly, including all directors. This includes key leaders of the Company’s operating subsidiaries in Australia and overseas. The remuneration report is set out under the following main headings: • Principles used to determine the nature and amount of remuneration; • Details of remuneration; • Service agreements; • Share‑based compensation; • Additional information; and • Additional disclosures relating to key management personnel. PRINCIPLES USED TO DETERMINE THE NATURE AND AMOUNT OF REMUNERATION The objective of the consolidated entity’s executive reward framework is to ensure reward for performance is competitive and appropriate for the results delivered. The framework aligns executive reward with the achievement of strategic objectives of the consolidated entity and the creation of value for shareholders. The Board of Directors (‘the Board’) ensures that executive reward satisfies the following key criteria for good reward governance practices: • competitiveness and reasonableness; • acceptability to shareholders; • alignment of executive compensation to business success; • transparency; and • alignment with proper capital management. The Group has structured an executive remuneration framework that is market competitive. The framework provides a mix of fixed base pay and variable pay that includes both short‑ and long‑term incentives, with an appropriate balance of at‑risk remuneration. The Company applies remuneration strata grades, with allocations for fixed remuneration, short‑term incentive (STI) and long‑term incentive (LTI) applicable to each strata grade. The percentage allocations between fixed remuneration, STI and LTI vary between the strata grades, with an emphasis on higher at‑risk STI and LTI elements for more senior executives. A relationship between Company performance and remuneration has been developed and implemented, with the STI or LTI component of remuneration delivered on a performance‑linked basis, as either: • Equity issues to executives, with performance conditions based on financial performance, share price performance and duration of employment milestones, and • In some cases cash bonuses, which are also financial performance linked. The Board has a Nomination and Remuneration Committee which provides advice on remuneration and incentive policies and practices and makes specific recommendations on remuneration packages and other terms of employment for the Managing Director and Chief Executive Officer, the Non‑Executive Directors and other senior executives. Several changes to the Board structure, including the appointment of Chairman Vaughan Busby in August 2021 followed by a review conducted in Financial Year 2021. An independent, external governance advisory group Guerdon and Associates, conducted a comprehensive review of the company’s Board and Committee structures and memberships and performance of the Chairman and Directors. The FY21 review resulted in the company undertaking a Board rejuvenation program, recognising the need to ensure that the Board’s skillset and governance structure remained fit for purpose and reflective of SciDev’s growth aspirations. 35 Directors’ report continued Non‑Executive directors remuneration Fees and payments to the Non‑Executive Directors reflect the demands which are made on, and the responsibilities of, the Non–Executive Directors. The Board undertakes a review of Non‑Executive Directors’ fees and payments annually. Separate from the Board rejuvenation process outlined above, during H1 FY21 the Board commissioned an independent, external review of Non‑Executive Directors remuneration levels by Guerdon Associates. The outcomes of the review process have validated that the fees paid to Non‑Executive Directors are below the median for peer companies. The company did not utilise remuneration consultants in the year ended 30 June 2022. Non‑Executive Directors’ fees are determined within an aggregate Non‑Executive Directors’ cash remuneration limit, which is periodically recommended for approval by shareholders. The current limit of $400,000 was approved by shareholders at the Company’s 2007 Annual General Meeting. The amount paid to Non‑Executive Directors of the parent entity (SciDev Limited) during the year to 30 June 2022 was $295,750 (2021: $231,032). In addition, Non‑Executive Directors are entitled to participate in issues of securities pursuant to the SciDev Employee Share Scheme (the SciDev ESS). The value of any securities granted to Non‑Executive Directors is not included in the aggregate cash remuneration limit as they are not cash‑based payments. In the case where Directors seek equity‑based remuneration over cash‑based remuneration, consideration will be given to such request and, in any case, shareholder approval would be required for any such equity‑based remuneration for Directors. During the 2022 financial year the Company granted no securities to Non‑Executive Directors, however an STI/LTI payment to the Managing Director & CEO Lewis Utting was settled through the issue of shares in December 2021, after requisite shareholder approval was obtained. Executive remuneration SciDev’s executive pay and reward framework has three primary components, which together comprise the executive’s total remuneration: • base pay, superannuation and ‘standard’ non‑monetary benefits such as sick leave, annual leave etc; • • short‑term incentives through individually negotiated, performance milestoned cash payments; and long‑term incentives through participation in the SciDev ESS. The combination of these comprises the executive’s total remuneration. The three elements described above are tailored to reflect fair reward for the individual executives’ contribution and whilst some executives receive a component of all three elements, other executives do not. (i) Base pay Base pay is generally structured as a total employment cost package, which may be delivered as a combination of cash and prescribed non‑financial benefits as negotiated between the Company and the executive. Executives are offered a competitive base pay that comprises a fixed component of cash salary, superannuation and standard non‑monetary benefits as described above. (ii) Short‑term incentives Former Managing Director & Chief Executive Officer The former Managing Director was eligible for a short‑term incentive (STI) cash bonus payment of up to $200,000 in relation to the Financial Year 2021, and was based on the achievement of key performance indicators (KPIs) determined by the Nomination and Remuneration Committee for the calendar year ended 31 December 2020. $116,250 of this STI was paid during Financial Year 2021 and the balance of this STI was settled through an issue of shares in December 2021, after requisite shareholder approval was obtained. No STI bonus or LTI bonus has been paid or is payable to the key management personnel (KMP) in relation to Financial Year 2022 performance. Senior Executives STIs paid to senior executives are made on a discretionary basis as determined by the Managing Director & Chief Executive Officer in consultation with the Nomination and Remuneration Committee. These incentives, while not guaranteed, are directly linked to the achievement of KPIs established around various performance targets including safety, finance, culture and client satisfaction. Cash bonuses were paid to a number of executives in respect of the 30 June 2022 financial year. 36 Directors’ report continued SciDev Limited / Annual Report 2022 On 2 July 2021, the company undertook an issue of performance rights, that had been granted during Financial Year 2021 to the executives and staff of the recently acquired Haldon Industries business. On 5 April 2022, a A$1,000 tax‑effective issue of shares was made to eligible staff. (iii) Long‑term incentives Long‑term performance incentives (LTI) are delivered through the grant of securities to executive directors and selected senior executives from time to time as part of their remuneration. Performance rights with performance hurdles applicable to any performance period (including how they will be measured) are set out in any such invitation to the eligible executives. During the 2021 financial year, the Company granted performance rights to senior executives and staff under the terms of the SciDev ESS. However, no performance rights were granted to any of the Board members or the Managing Director and Chief Executive Officer. Remuneration voting and comments at the company’s 25 November 2021 Annual General Meeting At the 2021 AGM, 98.95% of the votes received supported adopting the remuneration report for the year ended 30 June 2021. The company did not receive any specific feedback at the 2021 AGM regarding its remuneration practices. DETAILS OF REMUNERATION Amounts of remuneration Details of the remuneration of key management personnel of the consolidated entity are set out in the following tables. The key management personnel of the consolidated entity during the financial year ended 30 June 2022 consisted of the following directors of SciDev Limited: • Vaughan Busby – Non‑Executive Chairman (appointed on 9 August 2021) • Lewis E Utting – Managing Director & Chief Executive Officer (resigned 29 April 2022) • Simone Watt – Non‑Executive Director • Jon Gourlay – Non‑Executive Director • Dan O’Toole – Non‑Executive Director (acting Chairman from 1 July 2021 to 9 August 2021) And the following persons: • Seán Halpin – Interim Chief Executive Officer (appointed 29 April 2022) • Anna Hooper – Chief Financial Officer (appointed 6 December 2021) • Heath Roberts – Company Secretary and General Counsel • John Fehon – Chief Financial Officer (resigned 16 September 2021) 37 Directors’ report continued Short‑term benefits Post‑employment benefits Long‑term benefits Share‑based payments Cash salary and fees $ Annual leave $ Super‑ annu‑ ation $ Termi‑ nation Benefits $ Long service leave $ Options and perfor‑ mance rights(e) $ Share rights $ Total $ 2022 Non‑Executive Directors: Vaughan Busby (a) Simone Watt Jon Gourlay Dan O’Toole (a) Executive Directors: 85,284 60,000 60,000 63,580 – – – – 8,528 6,000 6,000 6,358 – – – – Lewis E Utting (b) 349,888 30,769 40,000 264,000 Other Key Manage ment Personnel: Seán Halpin (c) 258,333 19,872 24,000 – John Fehon (d) 54,167 4,167 5,000 86,500 Heath Roberts Anna Hooper (d) 166,000 175,216 1,272,468 – 15,379 70,187 – 11,784 – – 107,670 350,500 – – – – – – – – – – – – – – – – – – – 93,812 66,000 66,000 69,938 146,514 831,171 48,274 – – – – – – – 350,479 149,834 166,000 202,379 48,274 146,514 1,995,613 (a) Vaughan Busby was appointed as director and Non‑Executive Chairman on 9th August 2021. Dan O’Toole was acting Chair from 1 July 2021 until 9 August 2021. (b) Lewis Utting resigned on 29 April 2022. (c) Seán Halpin was appointed Interim Chief Executive Officer on 29 April 2022. Before his appointment, he was the Commercial Director of the Water Services Division. The amounts shown above include all of Seán Halpin’s remuneration during the reporting period, whether as Interim Chief Executive Officer or as Commercial Director of Water Services. Amounts received in his position as Interim Chief Executive Officer amounted to $62,333, made up of a cash salary of $58,333, superannuation of $4,000, annual and long service leave of $4,635 and performance rights of $8,332. (d) John Fehon resigned as Chief Financial Officer on 16 September 2021 and Anna Hooper was appointed Chief Financial Officer on 6 December 2021. (e) The amounts included in the options and performance rights represent the grant date fair value of options, amortised on a straight‑line basis over the expected vesting period. Expenses are reversed where rights are forfeited due to a failure to satisfy the non‑market hurdles only. No amounts will be received as remuneration as the market‑based hurdle has not been met upon expiry. 38 Directors’ report continued SciDev Limited / Annual Report 2022 Short‑term benefits Post‑employment benefits Long‑term benefits Share‑based payments Cash salary and fees $ Annual leave $ Super‑ annu‑ ation $ Termi‑ nation Benefits $ Long service leave $ Options and perfor‑ mance rights(e) $ Share rights $ Total $ 2021 Non‑Executive Directors: Trevor A Jones (Chairman) Simone Watt Jon Gourlay Dan O’Toole(a) Executive Directors: 82,236 52,500 52,500 25,000 – – – – – – – – 6,976 4,458 4,987 2,375 – – – – – – – – Lewis E Utting 446,250 200,000 13,072 54,189 369 70,113 Other Key Manage ment Personnel: John Fehon(c) Heath Roberts(c) 255,666 228,000 – – 8,676 24,699 – – 1,142,152 200,000 21,748 97,684 22 – 391 33,618 3,763 107,494 – – – – – – – – 89,212 56,958 57,487 27,375 783,993 322,681 231,763 1,569,469 (a) Dan O’Toole was appointed a Non‑Executive Director on 3 February 2021. The above reported remuneration relates to the period from 3 February 2021 to 30 June 2021. (b) The amounts included in the share‑based remuneration represent the grant date fair value of options, amortised on a straight‑line basis over the expected vesting period. Expenses are reversed where rights are forfeited due to a failure to satisfy the service conditions or there is a revision of share rights expected to vest. (c) Performance rights were granted to John Fehon and Heath Roberts on 15 December 2020. The rights had a fair value of $0.49774 per right. An expense has not been recorded as the non‑market conditions are not expected to be met. 39 Directors’ report continued The proportion of remuneration linked to performance and the fixed proportion are as follows: Fixed remuneration At risk – STI At risk – LTI Name 2022 2021 2022 2021 2022 2021 Non‑Executive Directors: Vaughan Busby Simone Watt Jon Gourlay Dan O’Toole Trevor A Jones Executive Directors: Lewis E Utting Other Key Management Personnel: Seán Halpin Anna Hooper Heath Roberts John Fehon 100% 100% 100% 100% – – 100% 100% 100% 100% 82% 66% 87% 100% 100% 100% – – 98% 90% – – – – – – – – – – – – – – – – – – – – – – – – – 25% 18% 9% – – – – 13% – – – – – 2% 10% 40 Directors’ report continued SciDev Limited / Annual Report 2022 SERVICE AGREEMENTS Remuneration and other terms of employment for key management personnel are formalised in service agreements. Details of these agreements at the date of this report are as follows: Name: Title: Lewis E Utting Managing Director and Chief Executive Officer Agreement commenced: 30 April 2019, revised various dates Term of agreement: Resigned 29 April 2022 Details: Name: Title: Base salary including car allowance of $480,000 plus superannuation. Mr Utting was also entitled to an STI bonus of $200,000 per 12‑month period subject to meeting certain performance‑based milestones and an LTI of $250,000 in performance‑based equity (options or shares) under the terms of the Company’s ESS. Mr Utting’s salary, allowances and performance bonus was reviewed annually by the Nomination and Remuneration Committee. The contract could be terminated by six (6) months’ notice from either party. Seán Halpin Interim Chief Executive Officer Agreement commenced: 29 April 2022 Term of agreement: On‑going Details: Name: Title: Base salary of $350,000 plus superannuation and performance‑based $60,000 bonus. Mr Halpin is entitled to participate in the Company’s ESS. The contract may be terminated by three (3) months’ notice from either party. Heath Roberts Company Secretary & General Counsel Agreement commenced: Term of agreement: 1 March 2017 On‑going Details: Name: Title: Consulting per diem rate equal to that of $240,000 for full‑time employment and services. The agreement may be terminated by one (1) month’s notice from either party. Anna Hooper Chief Financial Officer Agreement commenced: 6 December 2021 Term of agreement: On‑going Details: Base salary of $313,250 plus superannuation and STI performance‑based bonus of $70,000 and an LTI of $162,690 in performance‑based equity under the terms of the Company’s ESS. The contract may be terminated by three (3) months’ notice from either party. 41 Directors’ report continued Name: Title: John Fehon Chief Financial Officer Agreement commenced: 3 February 2020 Term of agreement: Resigned 16 September 2021 Details: Base salary of $260,000 plus superannuation and performance‑based $60,000 bonus. The contract could be terminated by three (3) months’ notice from either party. Key management personnel (KMP) have no entitlement to termination payments in the event of removal for misconduct. With the exception of LTI related to 2021 performance paid in shares to Lewis Utting, no STI bonus or LTI bonus has been paid or is payable to the KMP in relation to Financial Year 2022 performance. SHARE‑BASED COMPENSATION Issue of shares Lewis Utting elected to receive shares as compensation for his LTI bonus and the unpaid portion of the 2021 STI bonus. He received 328,457 shares approved at the AGM on 25 November 2021. The total expense was $180,652 split between STI accrued in Financial Year 2021 of $34,138 and LTI of $146,514. There were no other shares issued to directors or other key management personnel as part of compensation during the year ended 30 June 2022. Options The terms and conditions of the prior year grants of options over ordinary shares are as follows: Name Lewis Utting Lewis Utting Number of options granted Grant date Vesting date Expiry date 800,000 23/07/2019 23/07/2019 23/07/2022 800,000 23/07/2019 30/06/2021 23/07/2022 Simone Watt 250,000 23/07/2019 23/07/2019 23/07/2022 Jon Gourlay John Fehon John Fehon 650,000 23/07/2019 23/07/2019 23/07/2022 75,000 03/02/2020 03/02/2020 23/07/2022 75,000 03/02/2020 30/06/2021 23/07/2022 Heath Roberts 200,000 16/05/2019 16/05/2019 23/07/2022 Heath Roberts 200,000 16/05/2019 30/06/2021 23/07/2022 Fair value per option at grant date Exercise price $0.10 $0.10 $0.12 $0.12 $0.12 $0.12 $0.10 $0.10 $0.13 $0.17 $0.11 $0.11 $0.61 $0.63 $0.00 $0.04 Vested % 100% 100% 100% 100% 100% 100% 100% 100% With the exception of the options granted to Lewis Utting (Managing Director and Chief Executive Officer), which had performance conditions required to be met to earn the grant, all the other options granted had no performance conditions. The options issued to the Directors were premium‑priced options and reported as remuneration over the vesting period. These options were issued under the Company’s ESS. The options expire on the earlier of their expiry date or termination of the employee’s employment. The Board has discretion under the ESS to apply good leaver provisions in certain cases. Options issued to Directors of the company were first approved by the company’s shareholders, as required by ASX Listing Rules. The options do not entitle the holders to participate in any share issue, bonus or distribution by the Company unless first exercised in accordance with the option terms. 42 Directors’ report continued SciDev Limited / Annual Report 2022 Options granted carry no dividend or voting rights. There has been no alteration of the terms and conditions of the above share‑based payment arrangements since the grant date. Values of options over ordinary shares granted, exercised and lapsed for directors and other key management personnel as part of compensation during the year ended 30 June 2022 are set out below: Trevor Jones Lewis Utting Simone Watt Jon Gourlay John Fehon* Heath Roberts Value of options granted during the year 2022 $ Value of options exercised during the year 2022 $ Value of options granted during the year 2021 $ – – – – – – – – – – 63,750 – – – – – – – Value of options exercised during the year 2021 $ – 104,000 – – – – * The value exercised represents the intrinsic value at exercise date. There were no options for directors and other key management personnel that lapsed during the year ended 30 June 2022. Performance rights During the year ended 30 June 2021, the Company issued 2,133,399 performance rights, in two tranches of 1,408,399 and 725,000 respectively, under the terms of the Company’s ESS. In order for the performance rights to vest (convert to fully paid ordinary shares) the holder must meet: • A test related to SciDev share price performance ($2.00), and • A test related to relevant segment cashflow performance ≥ break‑even, and • A continued employment or ‘good leaver’ test. The terms and conditions of each grant of performance rights over ordinary shares affecting the remuneration of directors and other key management personnel in this financial year or future reporting years are as follows: Name John Fehon Heath Roberts Seán Halpin Number of rights granted Grant date Vesting date and exercisable date Expiry date Share price hurdle for vesting Fair value per right at grant date 130,000 15/12/2020 31/10/2022 31/10/2022 120,000 15/12/2020 31/10/2022 31/10/2022 312,500 26/05/2021 30/06/2022 30/06/2022 $2.000 $2.000 $2.000 $0.49740 $0.49740 $0.24190 The Performance Rights carry none of the rights of ordinary shares and, in particular, no right to vote, receive dividends or participate in bonus or rights issues. No Directors of the company participated in the grant of performance rights. The non‑market vesting conditions of these performance rights are forecast not to be met, and therefore no expense has been recognised in remuneration in respect of these rights in the period. The non‑market vesting conditions include the achievement of positive operating group cash flow over the year subsequent to the grant date. 43 Directors’ report continued ADDITIONAL INFORMATION The earnings of the consolidated entity for the five years to 30 June 2022 are summarised below: Sales revenue Profit/(loss) after income tax 2022 $’000 55,597 (616) 2021 $’000 42,525 3,453 2020 $’000 17,907 (875) 2019 $’000 2,656 (2,033) The factors that are considered to affect total shareholders return (‘TSR’) are summarised below: Share price at financial year end ($) Basic earnings per share (cents per share)* 2022 0.18 (0.35) 2021 0.85 2.26 2020 0.58 2019 0.09 (0.69) (2.69) 2018 $’000 2,029 1,002 2018 0.07 2.02 * The earnings per share for 2018 have been adjusted for the effect of the share consolidation completed in December 2018. Additional disclosures relating to key management personnel Shareholding The number of shares in the company held during the financial year by each director and other members of key management personnel of the consolidated entity, including their personally related parties, is set out below: Ordinary shares Vaughan Busby Lewis E Utting Simone Watt Jon Gourlay Dan O’Toole Seán Halpin(1) John Fehon Heath Roberts Anna Hooper Balance at the start of the year Received during the year on the exercise of options Additions/ other* Disposals/ other** Balance at the end of the year – 5,448,129 5,063,280 954,628 – – 309,659 106,093 – – – – – – – 75,000 – – – – 520,763 (5,968,892) – 92,306 – 5,100,000 – – – – – – – (384,659) – – – – 5,063,280 1,046,934 – 5,100,000 – 106,093 – 11,881,789 75,000 5,713,069 (6,353,551) 11,316,307 * Included in additions are the shareholdings held by Directors at the date of their appointment. ** Included in disposals/other is the removal from the table of the shareholdings for key management personnel who have resigned during the period or are no longer considered to be a key management person. (1) Mr Halpin is a director and part‑owner of Haldon Industries Pty Ltd, which is the holder of 5,100,000 shares. These shares are subject to a 24‑month escrow as described in the company’s ASX announcement of 29 March 2021. 44 Directors’ report continued SciDev Limited / Annual Report 2022 Option holding The number of options over ordinary shares in the company held during the financial year by each director and other members of key management personnel of the consolidated entity, including their personally related parties, is set out below: Options over ordinary shares Lewis E Utting Simone Watt John Fehon Heath Roberts Balance at the start of the year 800,000 250,000 75,000 400,000 1,525,000 Granted Exercised Expired/ forfeited/ other* Balance at the end of the year – – – – – – – (75,000) – (800,000) – – – (75,000) (800,000) – 250,000 – 400,000 650,000 * Included in expired/forfeited/other is the removal from the table of the option holdings for key management personnel who have resigned during the period or are no longer considered to be a key management person. Performance rights holding The number of performance rights over ordinary shares in the company held during the financial year by each director and other members of key management personnel of the consolidated entity, including their personally related parties, is set out below: Performance rights over ordinary shares John Fehon Heath Roberts Seán Halpin Balance at the start of the year 130,000 120,000 312,500 562,500 Granted Vested Expired/ forfeited/ other* Balance at the end of the year – – – – – – – – (130,000) – – 120,000 (312,500) – (442,500) 120,000 * Included in expired/forfeited/other is the removal from the table of the performance right holdings for key management personnel who have resigned during the period or are no longer considered to be a key management person. Loans to key management personnel and their related parties There were no loans owing by key management personnel of the group, including their close family members and entities related to them, during the financial year ended 30 June 2022. 45 Directors’ report continued Other transactions with key management personnel and their related parties A director, Simone Watt, is a director of Sinoz Chemicals and Commodities Pty Ltd (Sinoz) and has the capacity to significantly influence the decision‑making of the company. The consolidated entity has leased premises from Sinoz during July 2021 only. Amounts paid for rent in 2022: $502 (2021: $6,030). Seán Halpin, Interim CEO is also a director of Haldon Industries Pty Limited (HIPL). On 12 May 2021, SciDev Limited acquired the assets and business of Haldon Industries Limited. In relation to that transaction, during the financial year 2022, SciDev Limited paid a contingent consideration of $2,922,039, lease payments of $2,308,000 and cash on settlement of $879,685 to HIPL. In addition, a number of clients have continued to remit payments via HIPL. SciDev received cash from clients via HIPL of $3,882,745 and incurred costs in the year via HIPL of $540,838. Amounts reimbursed to HIPL for suppliers for the period from 15 May 2021 to 30 June 2021 was $281,911. Amounts exclude GST. As at 30 June 2022 SciDev recognised a contingent consideration of $7,240,000 to HIPL and a liability for the asset lease from HIPL of $2,307,000. There is a trading balance owing by SciDev to HIPL of $319,599 at 30 June 2022. There were no other transactions with key management personnel of the group, including their close family members and entities related to them, during the financial year ended 30 June 2022. This concludes the remuneration report, which has been audited. 46 Directors’ report continued SciDev Limited / Annual Report 2022 SHARES UNDER OPTION There were no unissued ordinary shares of SciDev Limited under option outstanding at the date of this report. No options were granted to the directors or any of the five highest remunerated officers of the company since the end of the financial year. SHARES UNDER PERFORMANCE RIGHTS Unissued ordinary shares of SciDev Limited under performance rights at the date of this report are as follows: Grant date Expiry date Exercise price Number under rights 15 December 2020 31 October 2022 $0.000 1,408,399 SHARES ISSUED ON THE EXERCISE OF OPTIONS There were 425,000 ordinary shares of SciDev Limited issued on the exercise of options during the year ended 30 June 2022 and a further 1,725,000 up to the date of this report. At the date of the report, there were no shares under option. SHARES ISSUED ON THE EXERCISE OF PERFORMANCE RIGHTS There were no ordinary shares of SciDev Limited issued on the exercise of performance rights during the year ended 30 June 2022 and up to the date of this report. INDEMNITY AND INSURANCE OF OFFICERS The company has indemnified the directors and executives of the company for costs incurred in their capacity as a director or executive, for which they may be held personally liable, except where there is a lack of good faith. During the financial year, the company paid a premium in respect of a contract to insure the directors and executives of the company against a liability to the extent permitted by the Corporations Act 2001. The contract of insurance prohibits disclosure of the nature of the liability and the amount of the premium. INDEMNITY AND INSURANCE OF AUDITOR The company has not, during or since the end of the financial year, indemnified or agreed to indemnify the auditor of the company or any related entity against a liability incurred by the auditor. During the financial year, the company has not paid a premium in respect of a contract to insure the auditor of the company or any related entity. PROCEEDINGS ON BEHALF OF THE COMPANY No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the company, or to intervene in any proceedings to which the company is a party for the purpose of taking responsibility on behalf of the company for all or part of those proceedings. 47 Directors’ report continued NON‑AUDIT SERVICES Details of the amounts paid or payable to the auditor for non‑audit services provided during the financial year by the auditor are outlined in note 29 to the financial statements. The directors are satisfied that the provision of non‑audit services during the financial year, by the auditor (or by another person or firm on the auditor’s behalf), is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The directors are of the opinion that the services as disclosed in note 29 to the financial statements do not compromise the external auditor’s independence requirements of the Corporations Act 2001 for the following reasons: • all non‑audit services have been reviewed and approved to ensure that they do not impact the integrity and objectivity of the auditor; and • none of the services undermines the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants issued by the Accounting Professional and Ethical Standards Board, including reviewing or auditing the auditor’s own work, acting in a management or decision‑making capacity for the company, acting as an advocate for the company or jointly sharing economic risks and rewards. OFFICERS OF THE COMPANY WHO ARE FORMER PARTNERS OF ERNST & YOUNG There are no officers of the company who are former partners of Ernst & Young. ROUNDING OF AMOUNTS The company is of a kind referred to in Corporations Instrument 2016/191, issued by the Australian Securities and Investments Commission, relating to ‘rounding‑off’. Amounts in this report have been rounded off in accordance with that Corporations Instrument to the nearest thousand dollars, or in certain cases, the nearest dollar. AUDITOR’S INDEPENDENCE DECLARATION A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is set out immediately after this Directors’ Report. AUDITOR Ernst & Young continues in office in accordance with section 327 of the Corporations Act 2001. This report is made in accordance with a resolution of directors, pursuant to section 298(2)(a) of the Corporations Act 2001. On behalf of the directors Vaughan Busby Chairman 31 August 2022 Sydney 48 AUDITOR’S INDEPENDENCE DECLARATION SciDev Limited / Annual Report 2022 Ernst & Young 200 George Street Sydney NSW 2000 Australia GPO Box 2646 Sydney NSW 2001 Tel: +61 2 9248 5555 Fax: +61 2 9248 5959 ey.com/au Auditor’s independence declaration to the directors of SciDev Limited As lead auditor for the audit of the financial report of SciDev Limited for the financial year ended 30 June 2022, I declare to the best of my knowledge and belief, there have been: a. No contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; b. No contraventions of any applicable code of professional conduct in relation to the audit; and c. No non-audit services provided that contravene any applicable code of professional conduct in relation to the audit. This declaration is in respect of SciDev Limited and the entities it controlled during the financial year. Ernst & Young Siobhan Hughes Partner 31 August 2022 A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation 49 CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME For the year ended 30 June 2022 Revenue Other income Expenses Note 5 6 2022 $’000 55,597 631 2021 $’000 42,525 1,712 Changes in inventories, and raw materials and consumables used (38,182) (32,366) Contractors and consultants Depreciation and amortisation expense Employee benefits expense Insurance Foreign exchange losses Acquisition expense – Haldon contingent consideration Professional fees Travel and accommodation Other expenses Finance costs Profit/(loss) before income tax benefit Income tax benefit Profit/(loss) after income tax benefit for the year attributable to the owners of SciDev Limited Other comprehensive income/(loss) Items that will not be reclassified subsequently to profit or loss (Loss)/Gain on the revaluation of equity instruments at fair value through other comprehensive income, net of tax Items that may be reclassified subsequently to profit or loss Foreign currency translation Other comprehensive income/(loss) for the year, net of tax Total comprehensive income/(loss) for the year attributable to the owners of SciDev Limited Basic earnings/(loss) per share Diluted earnings/(loss) per share (1,758) (2,082) (9,888) (340) (381) (504) (579) (582) (2,665) (708) (1,441) 825 (1,609) (930) (6,254) (275) – – (382) (313) (1,154) (148) 806 2,647 (616) 3,453 (808) 810 631 (177) (1,081) (271) (793) 3,182 Cents Cents (0.35) (0.35) 2.26 2.23 21 7 8 38 38 The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes 50 CONSOLIDATED STATEMENT OF FINANCIAL POSITION As at 30 June 2022 SciDev Limited / Annual Report 2022 Assets Current assets Cash and cash equivalents Trade and other receivables Contract assets Inventories Income tax refund due Other Total current assets Non–current assets Financial assets at fair value Property, plant and equipment Intangibles Deferred tax Other Total non–current assets Total assets Liabilities Current liabilities Trade and other payables Contract liabilities Lease liabilities Employee benefits Provisions Total current liabilities Non–current liabilities Borrowings Lease liabilities Provisions Total non–current liabilities Total liabilities Net assets Equity Issued capital Other equity Reserves Accumulated losses Total equity Note 2022 $’000 2021 $’000 *restated 9 10 11 12 13 14 15 8 16 17 19 20 21 18 19 21 22 23 24 14,064 10,268 – 7,346 3 439 32,120 1,730 7,772 25,874 3,505 156 39,037 71,157 11,787 242 2,551 432 3,620 18,632 – 344 3,344 3,688 22,320 48,837 119,237 – (69) (70,331) 48,837 7,010 7,683 442 3,793 3 337 19,268 2,721 6,384 25,686 2,047 45 36,883 56,151 9,529 263 2,465 400 3,539 16,196 280 2,385 5,675 8,340 24,536 31,615 100,997 308 25 (69,715) 31,615 * Consolidated Statement of Financial Position as at 30 June 2021 has been restated to reflect the finalisation of the acquisition accounting for Haldon Industries Pty Limited, Refer note 34 for details. The above consolidated statement of financial position should be read in conjunction with the accompanying notes 51 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY For the year ended 30 June 2022 Balance at 1 July 2020 Profit after income tax benefit for the year Other comprehensive income/(loss) for the year, net of tax Total comprehensive income/(loss) for the year Transactions with owners in their capacity as owners: Contributions of equity (note 22) Transaction costs net of tax (note 22) Share–based payments (note 39) Options exercised (note 22) Contingent consideration (note 23) Balance at 30 June 2021 Balance at 1 July 2021 Loss after income tax benefit for the year Other comprehensive income/(loss) for the year, net of tax Total comprehensive income/(loss) for the year Transactions with owners in their capacity as owners: Share‑based payments (note 39) Contributions of equity (note 22) Transaction costs net of tax (note 22) Options exercised (note 22) Contingent consideration (note 23) Balance at 30 June 2022 Issued capital $’000 89,875 – – – 10,927 (192) – 125 262 100,997 Issued capital $’000 100,997 – – – – 18,550 (669) 51 308 119,237 Other equity $’000 Reserves $’000 570 – – – – – – – (262) 308 133 – (271) (271) – – 163 – – 25 Other equity $’000 Reserves $’000 308 – – – – – – – (308) – 25 – (177) (177) 83 – – – – Accum‑ ulated losses $’000 (73,168) 3,453 Total equity $’000 17,410 3,453 – (271) 3,453 3,182 – – – – – 10,927 (192) 163 125 – (69,715) 31,615 Accum‑ ulated losses $’000 (69,715) (616) Total equity $’000 31,615 (616) – (177) (616) (793) – – – – – 83 18,550 (669) 51 – (69) (70,331) 48,837 The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes. 52 CONSOLIDATED STATEMENT OF CASH FLOWS For the year ended 30 June 2022 Cash flows from operating activities Receipts from clients (inclusive of GST) Payments to suppliers and employees (inclusive of GST) Government grants and subsidies Interest received R&D tax incentive received Interest and other finance costs paid Income taxes refunded Net cash used in operating activities Cash flows from investing activities Payment for purchase of business, net of cash acquired Payments for deferred consideration Payments for property, plant and equipment Payments for intangibles Payments for security deposits Payments for contingent considerations Proceeds from disposal of property, plant and equipment Proceeds from release of security deposits Net cash used in investing activities Cash flows from financing activities Proceeds from issue of shares Proceeds from borrowings Repayment of leases Proceeds from exercise of share options Share issue transaction costs Repayment of borrowings Net cash from financing activities Net increase in cash and cash equivalents Cash and cash equivalents at the beginning of the financial year Effects of exchange rate changes on cash and cash equivalents SciDev Limited / Annual Report 2022 Note 2022 $’000 2021 $’000 54,972 (57,214) (2,242) 119 – 1,044 (227) – (1,306) 41,853 (43,539) (1,686) 106 1 380 (148) 30 (1,317) – (1,700) (880) (2,382) (141) (110) (3,235) 98 – – (414) (187) – (267) 65 17 (6,650) (2,486) 37 15 18,369 – (2,476) 51 (955) – 14,989 7,033 7,010 21 7,000 1,093 (871) 125 (192) (817) 6,338 2,535 4,482 (7) 7,010 Cash and cash equivalents at the end of the financial year 9 14,064 The above consolidated statement of cash flows should be read in conjunction with the accompanying notes. 53 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 30 June 2022 NOTE 1. GENERAL INFORMATION The financial statements cover SciDev Limited as a consolidated entity consisting of SciDev Limited and the entities it controlled at the end of, or during, the year. The financial statements are presented in Australian dollars, which is SciDev Limited’s functional and presentation currency. SciDev Limited is a listed public company limited by shares, incorporated and domiciled in Australia. Its registered office and principal place of business are: Registered office C/‑ Boardroom Pty Limited Level 12 225 George Street Sydney NSW 2000 Principal place of business Unit 1 8 Turbo Road Kings Park NSW 2148 A description of the nature of the consolidated entity’s operations and its principal activities are included in the directors’ report, which is not part of the financial statements. The financial statements were authorised for issue, in accordance with a resolution of directors, on 31 August 2022. The directors have the power to amend and reissue the financial statements. NOTE 2. SIGNIFICANT ACCOUNTING POLICIES The principal accounting policies adopted in the preparation of the financial statements are set out either in the respective notes or below. These policies have been consistently applied to all the years presented, unless otherwise stated. New or amended Accounting Standards and Interpretations adopted The consolidated entity has adopted all of the new or amended Accounting Standards and Interpretations issued by the Australian Accounting Standards Board (‘AASB’) that are mandatory for the current reporting period. Any new or amended Accounting Standards or Interpretations that are not yet mandatory have not been early adopted. The adoption of these Accounting Standards and Interpretations did not have any significant impact on the financial performance or position of the consolidated entity. Basis of preparation These general purpose financial statements have been prepared in accordance with Australian Accounting Standards and Interpretations issued by the Australian Accounting Standards Board (‘AASB’) and the Corporations Act 2001, as appropriate for for‑profit oriented entities. These financial statements also comply with International Financial Reporting Standards as issued by the International Accounting Standards Board (‘IASB’). Historical cost convention The financial statements have been prepared under the historical cost convention, except for, where applicable, financial assets and liabilities at fair value through other comprehensive income. Critical accounting estimates The preparation of the financial statements requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the consolidated entity’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements, are disclosed in note 3. 54 Notes to the consolidated financial statements continued SciDev Limited / Annual Report 2022 Comparative information The Group has finalised the accounting for the acquisition of Haldon Industries Pty Limited. Accordingly, the Consolidated Statement of Financial Position at 30 June 2021 has been restated. Parent entity information In accordance with the Corporations Act 2001, these financial statements present the results of the consolidated entity only. Supplementary information about the parent entity is disclosed in note 33. Principles of consolidation The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of SciDev Limited (‘company’ or ‘parent entity’) as at 30 June 2022 and the results of all subsidiaries for the year then ended. SciDev Limited and its subsidiaries together are referred to in these financial statements as the ‘consolidated entity’. Subsidiaries are all those entities over which the consolidated entity has control. The consolidated entity controls an entity when the consolidated entity is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the consolidated entity. They are de‑consolidated from the date that control ceases. Intercompany transactions, balances and unrealised gains on transactions between entities in the consolidated entity are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the consolidated entity. The acquisition of subsidiaries is accounted for using the acquisition method of accounting. A change in ownership interest, without the loss of control, is accounted for as an equity transaction, where the difference between the consideration transferred and the book value of the share of the non‑controlling interest acquired is recognised directly in equity attributable to the parent. Where the consolidated entity loses control over a subsidiary, it derecognises the assets, including goodwill, liabilities and non‑controlling interest in the subsidiary together with any cumulative translation differences recognised in equity. The consolidated entity recognises the fair value of the consideration received and the fair value of any investment retained together with any gain or loss in profit or loss. Foreign currency translation The financial statements are presented in Australian dollars, which is SciDev Limited’s functional and presentation currency. Foreign currency transactions Foreign currency transactions are translated into Australian dollars using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at financial year‑end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss. Foreign operations The assets and liabilities of foreign operations are translated into Australian dollars using the exchange rates at the reporting date. The revenues and expenses of foreign operations are translated into Australian dollars using the average exchange rates, which approximate the rates at the dates of the transactions, for the period. All resulting foreign exchange differences are recognised in other comprehensive income through the foreign currency reserve in equity. The foreign currency reserve is recognised in profit or loss when the foreign operation or net investment is disposed of. 55 Notes to the consolidated financial statements continued Current and non‑current classification Assets and liabilities are presented in the statement of financial position based on current and non‑current classification. An asset is classified as current when: it is either expected to be realised or intended to be sold or consumed in the consolidated entity’s normal operating cycle; it is held primarily for the purpose of trading; it is expected to be realised within 12 months after the reporting period; or the asset is cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least 12 months after the reporting period. All other assets are classified as non‑current. A liability is classified as current when: it is either expected to be settled in the consolidated entity’s normal operating cycle; it is held primarily for the purpose of trading; it is due to be settled within 12 months after the reporting period; or there is no unconditional right to defer the settlement of the liability for at least 12 months after the reporting period. All other liabilities are classified as non‑current. Deferred tax assets and liabilities are always classified as non‑current. Investments and other financial assets Investments and other financial assets are initially measured at fair value. Transaction costs are included as part of the initial measurement, except for financial assets at fair value through profit or loss. Such assets are subsequently measured at either amortised cost or fair value depending on their classification. Classification is determined based on both the business model within which such assets are held and the contractual cash flow characteristics of the financial asset unless an accounting mismatch is being avoided. Financial assets are derecognised when the rights to receive cash flows have expired or have been transferred and the consolidated entity has transferred substantially all the risks and rewards of ownership. When there is no reasonable expectation of recovering part or all of a financial asset, its carrying value is written off. Financial assets at fair value through other comprehensive income Upon initial recognition, the consolidated entity can elect to classify irrevocably its equity investments as equity instruments designated at fair value through Other Comprehensive Income (OCI) when they meet the definition of equity under AASB 132 Financial Instruments: Presentation and are not held for trading. The classification is determined on an instrument‑by‑instrument basis. Gains and losses on these financial assets are never recycled to profit or loss. Dividends are recognised as other income in the statement of profit or loss when the right of payment has been established, except when the Group benefits from such proceeds as a recovery of part of the cost of the financial asset, in which case, such gains are recorded in OCI. Equity instruments designated at fair value through OCI are not subject to impairment assessment. The consolidated entity elected to classify irrevocably its non‑listed equity investments under this category. Impairment of financial assets The consolidated entity recognises a loss allowance for expected credit losses on financial assets which are measured at amortised cost. The measurement of the loss allowance depends upon the consolidated entity’s assessment at the end of each reporting period as to whether the financial instrument’s credit risk has increased significantly since initial recognition, based on reasonable and supportable information that is available, without undue cost or effort to obtain. Where there has not been a significant increase in exposure to credit risk since initial recognition, a 12‑month expected credit loss allowance is estimated. This represents a portion of the asset’s lifetime expected credit losses that is attributable to a default event that is possible within the next 12 months. Where a financial asset has become credit impaired or where it is determined that credit risk has increased significantly, the loss allowance is based on the asset’s lifetime expected credit losses. The amount of expected credit loss recognised is measured on the basis of the probability weighted present value of anticipated cash shortfalls over the life of the instrument discounted at the original effective interest rate. 56 Notes to the consolidated financial statements continued SciDev Limited / Annual Report 2022 Impairment of non‑financial assets Goodwill and other intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Other non‑financial assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. Recoverable amount is the higher of an asset’s fair value less costs of disposal and value‑in‑use. The value‑in‑use is the present value of the estimated future cash flows relating to the asset using a pre‑tax discount rate specific to the asset or cash‑generating unit to which the asset belongs. Assets that do not have independent cash flows are grouped together to form a cash‑generating unit. Finance costs Finance costs attributable to qualifying assets are capitalised as part of the asset. All other finance costs are expensed in the period in which they are incurred. Goods and Services Tax (‘GST’) and other similar taxes Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable from the tax authority. In this case it is recognised as part of the cost of the acquisition of the asset or as part of the expense. Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable to, the tax authority is included in other receivables or other payables in the statement of financial position. Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities which are recoverable from, or payable to the tax authority, are presented as operating cash flows. Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the tax authority. Rounding of amounts The company is of a kind referred to in Corporations Instrument 2016/191, issued by the Australian Securities and Investments Commission, relating to ‘rounding‑off’. Amounts in this report have been rounded off in accordance with that Corporations Instrument to the nearest thousand dollars, or in certain cases, the nearest dollar. New Accounting Standards and Interpretations not yet mandatory or early adopted The following Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet mandatory, have not been early adopted by the consolidated entity for the annual reporting period ended 30 June 2022. The consolidated entity has not yet completed a detailed review of these, however does not expect any of them to have a material impact on the financial results upon adoption. Amendment to AASB 1, Subsidiary as a First‑time Adopter of AAS Amendments to AASB 3, Reference to the Conceptual Framework Amendment to AASB 9, Fees in the ‘10 per cent’ Test for Derecognition of Financial Liabilities Amendments to AASB 108 Definition of Accounting Estimates Amendments to AASB 112, Deferred Tax related to Assets and Liabilities from a Single Transaction Amendments to AASB 116, Property, Plant and Equipment: Proceeds before Intended Use Amendments to AASB 137, Onerous Contracts – Cost of Fulfilling a Contract Amendment to AASB 141, Taxation in Fair Value Measurements Amendment to AAS Classification of Liabilities as Current or Non‑Current 57 Notes to the consolidated financial statements continued NOTE 3. CRITICAL ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts in the financial statements. Management continually evaluates its judgements and estimates in relation to assets, liabilities, contingent liabilities, revenue and expenses. Management bases its judgements, estimates and assumptions on historical experience and on other various factors, including expectations of future events, management believes to be reasonable under the circumstances. The resulting accounting judgements and estimates will seldom equal the related actual results. The judgements, estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities (refer to the respective notes) within the next financial year are discussed below. Carrying value of goodwill and non‑financial assets Impairment exists when the carrying value of an asset or cash generating unit exceeds its recoverable amount, which is the higher of its fair value less costs of disposal and its value in use. The fair value less costs of disposal calculation is based on available data from binding sales transactions, conducted at arm’s length, for similar assets or observable market prices less incremental costs of disposing of the asset. The value in use calculation is based on a DCF model. The cash flows are derived from the budget for the next five years and do not include restructuring activities that the consolidated entity is not yet committed to or significant future investments that will enhance the performance of the assets of the CGU being tested. The recoverable amount is sensitive to the discount rate used for the DCF model as well as the expected future cash‑inflows and the growth rate used for extrapolation purposes. These estimates are most relevant to goodwill recognised by the consolidated entity. The key assumptions used to determine the recoverable amount for the different CGUs, including a sensitivity analysis, are disclosed and further explained in note 15. Fair value of contingent consideration The consolidated entity has estimated the fair value of contingent consideration payable in connection with business combinations by determining the present value of expected future payments, discounted using a risk‑adjusted discount rate. The estimate of future payments is based on forecast EBITDA of the acquired business until the end of FY23. Recovery of deferred tax assets Deferred tax assets are recognised for deductible temporary differences only if the consolidated entity considers it is probable that future taxable amounts will be available to utilise those temporary differences and losses. Judgement is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and the level of future profits and the availability of past losses for use. NOTE 4. OPERATING SEGMENTS Identification of reportable operating segments The consolidated entity operates in primarily two geographical segments: Australia and the United States. The primary business segment is the treatment of industrial waste. Operating and business segments are reported in a manner consistent with the internal reporting provided to the chief operating decision makers. The chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Board of Directors. Intersegment transactions Intersegment transactions were made at market rates. Intersegment transactions are eliminated on consolidation. 58 Notes to the consolidated financial statements continued SciDev Limited / Annual Report 2022 Intersegment receivables, payables and loans Intersegment loans are initially recognised at the consideration received. Intersegment loans receivable and loans payable that earn or incur non‑market interest are not adjusted to fair value based on market interest rates. Intersegment loans are eliminated on consolidation. Major clients During the year ended 30 June 2022, revenue from 1 client amounted to $4,378,215 arising from sales in the Australia segment, and revenue from 1 client amounted to $6,778,882 arising from sales in the United States segment. During the year ended 30 June 2021, revenue from 1 client amounted to $6,936,531 arising from sales in the Australia segment, and revenue from 1 client amounted to $4,760,454 arising from sales in the United States segment. No other client contributed 10% or more to the consolidated entity’s revenue for both 2022 and 2021. Operating segment information 2022 Revenue Sales to external clients Intersegment sales Total revenue EBITDA* Depreciation and amortisation Finance costs Loss before income tax benefit Income tax benefit Loss after income tax benefit Assets Segment assets Total assets Liabilities Segment liabilities Total liabilities * this is a non‑IFRS measure. United States $’000 Eliminations and adjustments $’000 Australia $’000 27,816 25 27,841 (823) 27,781 66 27,847 1,886 51,319 19,838 15,287 7,033 – (91) (91) 286 – – Total $’000 55,597 – 55,597 1,349 (2,082) (708) (1,441) 825 (616) 71,157 71,157 22,320 22,320 59 Notes to the consolidated financial statements continued 2021 Revenue Sales to external clients Intersegment sales Total revenue EBITDA* Depreciation and amortisation Finance costs Profit before income tax benefit Income tax benefit Profit after income tax benefit Assets Segment assets Total assets Liabilities Segment liabilities Total liabilities * this is a non‑IFRS measure. Australia $’000 25,593 – 25,593 2,758 United States $’000 Eliminations and adjustments $’000 16,932 100 17,032 (671) – (100) (100) (203) 43,926 12,225 21,449 3,087 – – Total $’000 42,525 – 42,525 1,884 (930) (148) 806 2,647 3,453 56,151 56,151 24,536 24,536 Accounting policy for operating segments Operating segments are presented using the ‘management approach’, where the information presented is on the same basis as the internal reports provided to the Chief Operating Decision Makers (‘CODM’). The CODM is responsible for the allocation of resources to operating segments and assessing their performance. 60 Notes to the consolidated financial statements continued SciDev Limited / Annual Report 2022 NOTE 5. REVENUE Treatment fees and product sales 2022 $’000 2021 $’000 55,597 42,525 Disaggregation of revenue The disaggregation of revenue from contracts with clients is based on the location of the clients as follows: Geographical regions Australia United States Europe Asia Timing of revenue recognition Goods transferred at a point in time Services transferred over time 2022 $’000 2021 $’000 26,202 25,286 59 4,050 55,597 41,828 13,769 55,597 21,068 18,034 – 3,423 42,525 40,569 1,956 42,525 Accounting policy for revenue recognition The consolidated entity recognises revenue as follows: Revenue from contracts with clients Revenue is recognised at an amount that reflects the consideration to which the consolidated entity is expected to be entitled in exchange for transferring goods or services to a client. For each contract with a client, the consolidated entity: identifies the contract with a client; identifies the performance obligations in the contract; determines the transaction price which takes into account estimates of variable consideration and the time value of money; allocates the transaction price to the separate performance obligations on the basis of the relative stand‑alone selling price of each distinct good or service to be delivered; and recognises revenue when or as each performance obligation is satisfied in a manner that depicts the transfer to the client of the goods or services promised. Generally, sale of goods is recognised at the point in time where the client takes control of the goods, usually at the time of delivery. Treatment fees are recognised when the service is rendered and are normally either fees per specified volume treated or per treatment time. Variable consideration within the transaction price, if any, reflects concessions provided to the client such as discounts, rebates and refunds, any potential bonuses receivable from the client and any other contingent events. Such estimates are determined using either the ‘expected value’ or ‘most likely amount’ method. The measurement of variable consideration is subject to a constraining principle whereby revenue will only be recognised to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue recognised will not occur. The measurement constraint continues until the uncertainty associated with the variable consideration is subsequently resolved. Amounts received that are subject to the constraining principle are recognised as a refund liability. Any warranties associated with contracts, that give rise to financial obligation, are recorded as provisions. Other revenue Other revenue is recognised when it is received or when the right to receive payment is established. 61 Notes to the consolidated financial statements continued NOTE 6. OTHER INCOME Net foreign exchange gain Net fair value gain on other financial assets Net gain on disposal of property, plant and equipment Subsidies and grants Sundry Other income 2022 $’000 – 164 40 405 22 631 2021 $’000 200 – 28 1,462 22 1,712 Other income includes research and development tax incentive and government grants. Research and development tax incentive is recognised in the period in which the grant submission is completed. Government grants are recognised when there is reasonable assurance that the consolidated entity will comply with the conditions attached to it and that the grant will be received. NOTE 7. EXPENSES Profit/(loss) before income tax includes the following specific expenses: Finance costs Interest and finance charges paid/payable on borrowings Interest and finance charges paid/payable on lease liabilities Unwinding of the discount on provisions Finance costs expensed Superannuation expense 2022 $’000 2021 $’000 4 223 481 708 100 48 – 148 Defined contribution superannuation expense 580 289 62 Notes to the consolidated financial statements continued SciDev Limited / Annual Report 2022 NOTE 8. INCOME TAX Income tax benefit Deferred tax – origination and reversal of temporary differences Aggregate income tax benefit Deferred tax included in income tax benefit comprises: Increase in deferred tax assets Numerical reconciliation of income tax benefit and tax at the statutory rate Profit/(loss) before income tax benefit Tax at the statutory tax rate of 30% Tax effect amounts which are not deductible/(taxable) in calculating taxable income: Non–deductible expenses Recognition of additional carry forward losses Tax losses relating to overseas subsidiaries not recognised Impact of change in tax rates on opening deferred tax balance Research and development tax credit Tax losses relating to overseas subsidiaries recognised Difference in overseas tax rates Income tax benefit Amounts (credited)/charged directly to equity Deferred tax (credit)/expense Tax losses not recognised Unused tax losses for which no deferred tax asset has been recognised Potential tax benefit @ 30% 2022 $’000 2021 $’000 (825) (825) (2,647) (2,647) (825) (2,647) (1,441) (432) 385 (47) – 54 – – (966) 134 (825) 2022 $’000 806 242 10 252 (2,580) 227 (124) (422) – – (2,647) 2021 $’000 (633) 408 53,200 15,960 56,240 16,872 Management has recognised prior year tax losses in the amounts included above and are in the process of assessing the availability of other historical tax losses. Tax losses will only be recognised and obtained if it is probable: (i) the consolidated entity will derive future assessable income of a nature and an amount sufficient to enable the benefit from the deductions for the losses and temporary difference to be realised; (ii) the consolidated entity complies with the conditions for deductibility imposed by the tax legislation such as continuity of ownership and same business test; and (iii) no changes in tax legislation adversely affect the consolidated entity in realising the benefit from deductions for the losses and temporary differences. 63 Notes to the consolidated financial statements continued Deferred tax asset The net deferred tax asset comprises temporary differences attributable to: Breakdown of closing deferred tax balances: Tax losses Employee benefits Accrued expenses Share issue costs Equity instruments at fair value through other comprehensive income Prepayments Client contracts Trademark and intellectual property Deferred tax asset Movements: Opening balance Credited to profit or loss Credited to equity Credited/(charged) to other comprehensive income Additions through business combinations (note 34) Closing balance 2022 $’000 2021 $’000 *restated 4,439 3,888 130 250 229 (61) (84) (666) (732) 3,505 2,047 825 286 347 – 3,505 120 53 – (408) (49) (780) (777) 2,047 1,365 2,647 – (408) (1,557) 2,047 * Upon finalisation of the acquisition accounting for Haldon Industries Pty Limited, the deferred tax asset at 2021 has been restated. For further details see note 34. Accounting policy for income tax The income tax expense or benefit for the period is the tax payable on that period’s taxable income based on the applicable income tax rate for each jurisdiction, adjusted by the changes in deferred tax assets and liabilities attributable to temporary differences, unused tax losses and the adjustment recognised for prior periods, where applicable. Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to be applied when the assets are recovered or liabilities are settled, based on those tax rates that are enacted or substantively enacted, except for: • When the deferred income tax asset or liability arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and that, at the time of the transaction, affects neither the accounting nor taxable profits; or • When the taxable temporary difference is associated with interests in subsidiaries, associates or joint ventures, and the timing of the reversal can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses. The carrying amount of recognised and unrecognised deferred tax assets are reviewed at each reporting date. Deferred tax assets recognised are reduced to the extent that it is no longer probable that future taxable profits will be available for the carrying amount to be recovered. Previously unrecognised deferred tax assets are recognised to the extent that it is probable that there are future taxable profits available to recover the asset. 64 Notes to the consolidated financial statements continued SciDev Limited / Annual Report 2022 Deferred tax assets and liabilities are offset only where there is a legally enforceable right to offset current tax assets against current tax liabilities and deferred tax assets against deferred tax liabilities; and they relate to the same taxable authority on either the same taxable entity or different taxable entities which intend to settle simultaneously. SciDev Limited (the ‘head entity’) and its wholly‑owned Australian subsidiaries have formed an income tax consolidated group under the tax consolidation regime. The head entity and each subsidiary in the tax consolidated group continue to account for their own current and deferred tax amounts. The tax consolidated group has applied the ‘separate taxpayer within group’ approach in determining the appropriate amount of taxes to allocate to members of the tax consolidated group. In addition to its own current and deferred tax amounts, the head entity also recognises the current tax liabilities (or assets) and the deferred tax assets arising from unused tax losses and unused tax credits assumed from each subsidiary in the tax consolidated group. Assets or liabilities arising under tax funding agreements with the tax consolidated entities are recognised as amounts receivable from or payable to other entities in the tax consolidated group. The tax funding arrangement ensures that the intercompany charge equals the current tax liability or benefit of each tax consolidated group member, resulting in neither a contribution by the head entity to the subsidiaries nor a distribution by the subsidiaries to the head entity. NOTE 9. CASH AND CASH EQUIVALENTS Current assets Cash at bank Cash on deposit 2022 $’000 2021 $’000 14,014 50 14,064 6,960 50 7,010 Accounting policy for cash and cash equivalents Cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short‑term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. 65 Notes to the consolidated financial statements continued NOTE 10. TRADE AND OTHER RECEIVABLES Current assets Trade receivables Other receivables 2022 $’000 2021 $’000 10,105 163 10,268 6,522 1,161 7,683 Allowance for expected credit losses The consolidated entity calculates its expected credit losses (ECL) based on the consolidated entity’s historical credit loss experience, adjusted for forward‑looking factors specific to its receivables and the economic environment. The consolidated entity does not have any history of impairment of its trade receivables. The consolidated entity transacts with a limited number of established clients and operates under strict credit policies approved by the Board of Directors. No impairment loss has been recognised for trade receivables. Accounting policy for trade and other receivables Trade receivables are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method, less any allowance for expected credit losses. Trade receivables are generally due for settlement within 30 days. The consolidated entity has applied the simplified approach to measuring expected credit losses, which uses a lifetime expected loss allowance. To measure the expected credit losses, trade receivables have been grouped based on days overdue. Other receivables are recognised at amortised cost, less any allowance for expected credit losses. NOTE 11. CONTRACT ASSETS Current assets Contract assets 2022 $’000 2021 $’000 – 442 Accounting policy for contract assets Contract assets are recognised when the consolidated entity has transferred goods or services to the client but where the consolidated entity is yet to establish an unconditional right to consideration. Contract assets are treated as financial assets for impairment purposes. 66 Notes to the consolidated financial statements continued SciDev Limited / Annual Report 2022 NOTE 12. INVENTORIES Current assets Stock in transit – at cost Stock on hand – at cost 2022 $’000 2021 $’000 – 7,346 7,346 227 3,566 3,793 Accounting policy for inventories Stock in transit is stated at the lower of cost and net realisable value. Cost comprises of purchase and delivery costs, net of rebates and discounts received or receivable. Stock on hand is stated at the lower of cost and net realisable value. Cost comprises of purchase and delivery costs, net of rebates and discounts received or receivable. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale. No inventory on hand at 30 June 2022 is being recorded at net realisable value. NOTE 13. FINANCIAL ASSETS AT FAIR VALUE Non–current assets Unlisted equity securities at fair value through profit or loss Unlisted equity securities at fair value through other comprehensive income Listed equity securities at fair value through other comprehensive income Reconciliation Reconciliation of the fair values at the beginning and end of the current and previous financial year are set out below: Opening fair value Revaluation increments recognised in profit or loss Revaluation increments recognised in other comprehensive income Revaluation decrements recognised in other comprehensive income Closing fair value 2022 $’000 2021 $’000 167 – 1,563 1,730 2,721 164 – (1,155) 1,730 – 2,721 – 2,721 1,503 – 1,218 – 2,721 Investment in listed equity securities Included in the total value of unlisted securities at 30 June 2021 is an investment of $2,718,000 in Tartana Resources Ltd (Tartana). On 4 February 2021, R3D Resources Limited (ASX:R3D) announced an off‑market all scrip takeover bid for 100% of the fully paid ordinary shares and 100% of the options in Tartana. The offer closed on 31 July 2021 and at that date R3D had a relevant interest in 99.89% of Tartana shares. SciDev received 13,589,935 R3D shares and 2,717,987 attaching options for the shares it held in Tartana. As a consequence of the takeover, the investment was reclassified from unlisted to listed. The options are valued at $164,000 and are disclosed as unlisted equity securities at fair value through profit or loss. The share in R3D are disclosed as listed equity securities at fair value through other comprehensive income. Refer to note 27 for further information on fair value measurement. 67 Notes to the consolidated financial statements continued NOTE 14. PROPERTY, PLANT AND EQUIPMENT Non‑current assets Office buildings and warehouses – at cost Less: Accumulated depreciation Plant and equipment – at cost Less: Accumulated depreciation Motor vehicles – at cost Less: Accumulated depreciation Office equipment – at cost Less: Accumulated depreciation 2022 $’000 410 (286) 124 9,714 (2,748) 6,966 849 (173) 676 33 (27) 6 2021 $’000 568 (297) 271 7,077 (1,534) 5,543 668 (117) 551 39 (20) 19 7,772 6,384 Reconciliations Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out below: Office buildings and warehouses $’000 Plant and equipment $’000 Motor vehicles $’000 Office equipment $’000 100 – – – – 2 381 (212) 271 – – – 13 11 – – (171) 124 957 402 4,883 (28) 2 (26) – (647) 5,543 2,131 – – 64 – – 402 (1,174) 6,966 120 10 356 (9) – (7) 112 (31) 551 184 (58) – 9 (11) (6) 168 (161) 676 20 2 7 – – – – (10) 19 1 – (7) – – – – (7) 6 Total $’000 1,197 414 5,246 (37) 2 (31) 493 (900) 6,384 2,316 (58) (7) 86 – (6) 570 (1,513) 7,772 Balance at 1 July 2020 Additions Additions through business combinations (note 34) Disposals Adjustments Exchange differences Recognition of right‑of‑use asset Depreciation expense Balance at 30 June 2021 Additions Disposals Adjustments Exchange differences Transfer Write off of assets Recognition of right‑of‑use assets Depreciation expense Balance at 30 June 2022 68 Notes to the consolidated financial statements continued SciDev Limited / Annual Report 2022 Included in the above line items are right‑of‑use assets over the following: Balance at 1 July 2020 Recognition of right‑of‑use asset Additions through business combinations Exchange differences Depreciation expense Balance at 30 June 2021 Exchange differences Recognition of right‑of‑use asset Disposals Transfers Depreciation expense Balance at 30 June 2022 Office buildings and warehouses $ Plant and equipment $ Motor vehicles $ 100 381 – 2 (212) 271 13 – – 11 (171) 124 – – 4,724 – (363) 4,361 (4) 402 – – (692) 4,067 79 112 – (6) (23) 162 8 168 (40) (11) (54) 233 Total $ 179 493 4,724 (4) (598) 4,794 17 570 (40) – (917) 4,424 Accounting policy for property, plant and equipment Plant and equipment is stated at historical cost less accumulated depreciation and impairment. Historical cost includes expenditure that is directly attributable to the acquisition of the items. A right‑of‑use asset is recognised at the commencement date of a lease. The right‑of‑use asset is measured at cost, which comprises the initial amount of the lease liability, adjusted for, as applicable, any lease payments made at or before the commencement date net of any lease incentives received, any initial direct costs incurred, and, except where included in the cost of inventories, an estimate of costs expected to be incurred for dismantling and removing the underlying asset, and restoring the site or asset. The consolidated entity has elected not to recognise a right‑of‑use asset and corresponding lease liability for short‑term leases with terms of 12 months or less and leases of low‑value assets. Lease payments of $484,000 on short‑term leases were expensed to profit or loss as incurred (2021: $168,000). Depreciation is calculated on a straight‑line basis to write off the net cost of each item of property, plant and equipment over their expected useful lives as follows: Plant and equipment Office buildings and warehouses (leasehold improvements) Motor vehicles Office equipment 4‑7.5 years Lease term of 3‑5 years 4‑5 years 2‑5 years The residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each reporting date. Right‑of‑use assets are depreciated on a straight‑line basis over the unexpired period of the lease or the estimated useful life of the asset, whichever is the shorter. Where the consolidated entity expects to obtain ownership of the leased asset at the end of the lease term, the depreciation is over its estimated useful life. Right‑of use assets are subject to impairment or adjusted for any remeasurement of lease liabilities. An item of property, plant and equipment is derecognised upon disposal or when there is no future economic benefit to the consolidated entity. Gains and losses between the carrying amount and the disposal proceeds are taken to profit or loss. 69 Notes to the consolidated financial statements continued NOTE 15. INTANGIBLES Non‑current assets Goodwill – at cost Trademarks and intellectual property – at cost Less: Accumulated amortisation Client contracts – at cost Less: Accumulated amortisation 2022 $’000 20,576 3,544 (467) 3,077 2,600 (379) 2,221 25,874 2021 $’000 *restated 19,972 3,389 (275) 3,114 2,600 – 2,600 25,686 * Upon finalisation of the acquisition accounting for Haldon Industries Pty Limited, intangible assets at 2021 have been restated. For further details see note 34. Reconciliations Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out below: Trademarks and intellectual property $’000 Goodwill $’000 Client contracts $’000 Balance at 1 July 2020 Additions Additions through business combinations (note 34) Exchange differences Write off of assets Amortisation expense Balance at 30 June 2021 Additions Exchange differences Amortisation expense Balance at 30 June 2022 10,987 – 10,054 (1,069) – – 19,972 – 604 – 20,576 415 187 2,591 (8) (41) (30) 3,114 141 12 (190) 3,077 Total $’000 11,402 187 15,245 (1,077) (41) (30) – – 2,600 – – – 2,600 25,686 – – (379) 2,221 141 616 (569) 25,874 Impairment testing for goodwill The recoverable amount of the consolidated entity’s goodwill has been determined by a value‑in‑use calculation using a discounted cash flow model, based on a 1‑year projection period approved by the Directors and extrapolated for a further 4 years (within the company’s 5‑year plan) using variable rates, together with a terminal value. 70 Notes to the consolidated financial statements continued SciDev Limited / Annual Report 2022 Goodwill is monitored by management at the following level: Australian Group of CGUs – Mining and Construction – Water Services United States CGU 2022 $’000 2021 $’000 3,002 10,054 7,520 20,576 3,002 10,054 6,916 19,972 Key assumptions are those to which the recoverable amount of an asset or cash‑generating units is most sensitive. Key assumptions in the discounted cashflow model for the Mining and Construction CGU (measured by value‑in‑use) include: (a) Post‑tax discount rate of 12% (2021: 6.5%) per annum; (b) Average revenue growth over the five‑year period of 17% (2021: 47.9%); (c) Average growth in gross margin over the five‑year period of 6% (2021: ‑1.3%); and (d) Average per annum increase in operating expenses of 1.4% (2021: 31.4%). Key assumptions in the discounted cashflow model for the Water Services CGU (measured by value‑in‑use) include: (a) Post‑tax discount rate of 12% (b) Average revenue growth over the five‑year period of 32% (c) Average growth in gross margin over the five‑year period of 20%; and (d) Average per annum increase in operating expenses of 24.6%. Key assumptions in the discounted cashflow model for the United States CGU include: (a) Post‑tax discount rate of 12% (2021: 14%) per annum; (b) Average revenue growth over the five‑year period of 7% (2021: 47.8%); (c) Average growth in gross margin over the five‑year period of 1.2% (2021: 14.8%); and (d) Average per annum increase in operating expenses of 9.4% (2021: 30.4%). The discount rate reflects management’s estimate of the time value of money and the weighted average cost of capital, the risk free rate and the volatility of the share price relative to market movements. Management believes the projected revenue growth rate is prudent and justified, based on management’s expectations of the business development pipeline for each CGU. The budgeted gross margin is based on past performance and management’s expectations for the future. Management has budgeted for operating costs based on the current structure of each CGU, adjusting for inflationary increases but not reflecting any future restructurings or cost saving measures. Sensitivity to change of assumptions: Increases in discount rates or changes in other key assumptions, may cause the recoverable amount to fall below carrying values. Based on current economic conditions and CGU performances, there are no reasonably possible changes to key assumptions used in the determination of CGU recoverable amounts that would result in a material impairment to the consolidated entity. 71 Notes to the consolidated financial statements continued Accounting policy for intangible assets Intangible assets acquired as part of a business combination, other than goodwill, are initially measured at their fair value at the date of the acquisition. Intangible assets acquired separately are initially recognised at cost. Indefinite life intangible assets are not amortised and are subsequently measured at cost less any impairment. Finite life intangible assets are subsequently measured at cost less amortisation and any impairment. The gains or losses recognised in profit or loss arising from the derecognition of intangible assets are measured as the difference between net disposal proceeds and the carrying amount of the intangible asset. The method and useful lives of finite life intangible assets are reviewed annually. Changes in the expected pattern of consumption or useful life are accounted for prospectively by changing the amortisation method or period. Goodwill Goodwill arises on the acquisition of a business. Goodwill is not amortised. Instead, goodwill is tested annually for impairment, or more frequently if events or changes in circumstances indicate that it might be impaired, and is carried at cost less accumulated impairment losses. Impairment losses on goodwill are taken to profit or loss and are not subsequently reversed. Trademarks and intellectual property Significant costs associated with trademarks and intellectual property are deferred and amortised on a straight‑line basis over the period of their expected benefit, being their finite life of between 10 and 20 years. Client contracts Client contracts acquired in a business combination are amortised on a straight‑line basis over the period of their expected benefit, being their finite life of 8 years. NOTE 16. TRADE AND OTHER PAYABLES Current liabilities Trade payables Payable to the vendors of Haldon Industries Other payables 2022 $’000 2021 $’000 10,787 – 1,000 11,787 7,618 880 1,031 9,529 Refer to note 26 for further information on financial instruments. Accounting policy for trade and other payables These amounts represent liabilities for goods and services provided to the consolidated entity prior to the end of the financial year and which are unpaid. Due to their short‑term nature they are measured at amortised cost and are not discounted. The amounts are unsecured and are usually paid within 30 days of recognition. 72 Notes to the consolidated financial statements continued SciDev Limited / Annual Report 2022 NOTE 17. CONTRACT LIABILITIES Current liabilities Contract liabilities Unearned revenue 2022 $’000 2021 $’000 – 242 242 263 – 263 Unsatisfied performance obligations The aggregate amount of the transaction price allocated to the performance obligations that are unsatisfied at the end of the reporting period was $242,000 as at 30 June 2022 ($263,000 as at 30 June 2021) and is expected to be recognised as revenue in future periods as follows: Within 6 months 2022 $’000 242 2021 $’000 263 Accounting policy for contract liabilities Contract liabilities represent the consolidated entity’s obligation to transfer goods or services to a client and are recognised when a client pays consideration, or when the consolidated entity recognises a receivable to reflect its unconditional right to consideration (whichever is earlier) before the consolidated entity has transferred the goods or services to the client. NOTE 18. BORROWINGS Non‑current liabilities Loan – Paycheck Protection Program (USA) 2022 $’000 2021 $’000 – 280 Paycheck Protection Program loan The Paycheck Protection Program is a loan designed to provide a direct incentive for small businesses (located in the USA) to keep their workers on the payroll. The loan was to be fully forgiven if the funds are used for payroll costs, interest on mortgages, rent, and utilities. On 26 August 2021, the company received confirmation that the loan owing by its subsidiary Highland Fluid Technology Inc, had been forgiven. There was no balance outstanding on the loan at 30 June 2022. The following were the key terms and conditions of the loan: • The loan had an interest rate of 1%. • Loans issued prior to 5 June 2020 had a maturity of 2 years. Loans issued after 5 June 2020 had a maturity of 5 years. • Loan payments had been deferred for six months. • The loan was unsecured. 73 Notes to the consolidated financial statements continued Movements in Paycheck Protection Program loan: Opening balance Debt converted into subsidy Receipts Exchange differences Closing balance Refer to note 26 for further information on financial instruments. Financing arrangements Unrestricted access was available at the reporting date to the following lines of credit: Total facilities Loan – Kanins International Pty Ltd Loan – Paycheck Protection Program (USA) Leases Invoice purchase facility Used at the reporting date Loan – Kanins International Pty Ltd Loan – Paycheck Protection Program (USA) Leases Invoice purchase facility Unused at the reporting date Loan – Kanins International Pty Ltd Loan – Paycheck Protection Program (USA) Leases Invoice purchase facility 2022 $’000 280 (280) – – – 2021 $’000 285 (266) 276 (15) 280 2022 $’000 2021 $’000 – – 2,895 6,000 8,895 – – 2,895 – 2,895 – – – 6,000 6,000 490 280 4,850 6,000 11,620 – 280 4,850 – 5,130 490 – – 6,000 6,490 The above facilities have the following maturity dates: • • Invoice purchase facility – $2,000,000 – 10 September 2022 Invoice purchase facility – $4,000,000 – 30 September 2022 Accounting policy for borrowings Loans and borrowings are initially recognised at the fair value of the consideration received, net of transaction costs. They are subsequently measured at amortised cost using the effective interest method. 74 Notes to the consolidated financial statements continued SciDev Limited / Annual Report 2022 NOTE 19. LEASE LIABILITIES Current liabilities Lease liability – land and buildings Lease liability – motor vehicles Lease liability – equipment Non‑current liabilities Lease liability – land and buildings Lease liability – motor vehicles Lease liability – equipment 2022 $’000 2021 $’000 246 60 2,245 2,551 1 171 172 344 2,895 277 73 2,115 2,465 17 123 2,245 2,385 4,850 Refer to note 26 for further information on financial instruments. Land and buildings: The consolidated entity has leases for warehouses and offices. Rental contracts are typically made for a fixed period of 3 – 5 years with options to extend. With the exception of short‑term leases and leases of low‑value underlying assets, each lease is reflected on the statement of financial position. The consolidated entity classifies its right‑of‑use assets in a consistent manner to its property, plant and equipment. Most extension options have been included in the lease liability. Motor vehicles: The consolidated entity leases motor vehicles under finance lease and hire purchase. The leases are secured over the individual motor vehicles that the lease relates to. Equipment: The consolidated entity leases water treatment equipment under a lease from Haldon Industries Pty Limited that expires on 30 June 2023. On that date, upon payment of $1 consideration, the legal and beneficial title of the asset will transfer to SciDev Limited. The lease is secured over the individual asset the lease relates to. See Related Party Transactions note 32 for further details. In addition, there are other leases for vehicles and equipment that extend beyond 30 June 2023. 75 Notes to the consolidated financial statements continued Accounting policy for lease liabilities A lease liability is recognised at the commencement date of a lease. The lease liability is initially recognised at the present value of the lease payments to be made over the term of the lease, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the consolidated entity’s incremental borrowing rate. Lease payments comprise of fixed payments less any lease incentives receivable, variable lease payments that depend on an index or a rate, amounts expected to be paid under residual value guarantees, exercise price of a purchase option when the exercise of the option is reasonably certain to occur, and any anticipated termination penalties. The variable lease payments that do not depend on an index or a rate are expensed in the period in which they are incurred. Lease liabilities are subsequently remeasured by increasing the carrying value to reflect interest on the lease liabilities, reducing the carrying value to reflect lease payments made and remeasuring the carrying amount to reflect any reassessment or lease modifications. The carrying amounts are remeasured if there is a change in the following: future lease payments arising from a change in an index or a rate used; residual guarantee; lease term; certainty of a purchase option and termination penalties. When a lease liability is remeasured, an adjustment is made to the corresponding right‑of use asset, or to profit or loss if the carrying amount of the right‑of‑use asset is fully written down. The consolidated entity has elected not to recognise a right‑of‑use asset and corresponding lease liability for short‑term leases with terms of 12 months or less and leases of low‑value assets. Lease payments on these assets are expensed to profit or loss as incurred. NOTE 20. EMPLOYEE BENEFITS Current liabilities Annual leave Long service leave 2022 $’000 2021 $’000 431 1 432 399 1 400 Accounting policy for employee benefits Short‑term employee benefits Liabilities for wages and salaries, including non‑monetary benefits, annual leave and long service leave expected to be settled wholly within 12 months of the reporting date are measured at the amounts expected to be paid when the liabilities are settled. Defined contribution superannuation expense Contributions to defined contribution superannuation plans are expensed in the period in which they are incurred. 76 Notes to the consolidated financial statements continued SciDev Limited / Annual Report 2022 NOTE 21. PROVISIONS Current liabilities Contingent consideration Non‑current liabilities Contingent consideration 2022 $’000 2021 $’000 3,620 3,539 3,344 6,964 5,675 9,214 Contingent consideration The contingent consideration relates to the acquisition of Haldon Industries and ProSol Pty Ltd and represents the cash component of the contingent consideration. It is measured at the present value of the estimated liability. 2022 Carrying amount at the start of the year Payments Additional provisions recognised Unwinding of discount Carrying amount at the end of the year 2021 Carrying amount at the start of the year Additions through business combinations Payments Unused amounts reversed Carrying amount at the end of the year Contin gent consid‑ eration – Haldon $’000 Contin gent consid‑ eration – ProSol $’000 8,901 (2,922) 504 481 6,964 313 (313) – – – Contin gent consid‑ eration – Haldon $’000 Contin gent consid‑ eration – ProSol $’000 Warranties $’000 – 8,901 – – 8,901 580 – (267) – 313 18 – – (18) – Total $’000 9,214 (3,235) 504 481 6,964 Total $’000 598 8,901 (267) (18) 9,214 Accounting policy for provisions Provisions are recognised when the consolidated entity has a present (legal or constructive) obligation as a result of a past event, it is probable the consolidated entity will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the reporting date, taking into account the risks and uncertainties surrounding the obligation. If the time value of money is material, provisions are discounted using a current pre‑tax rate specific to the liability. The increase in the provision resulting from the passage of time is recognised as a finance cost. 77 Notes to the consolidated financial statements continued NOTE 22. ISSUED CAPITAL Ordinary shares – fully paid 187,906,234 158,370,242 119,237 100,997 2022 Shares 2021 Shares 2022 $’000 2021 $’000 Movements in ordinary share capital Details Balance Share placement (a) Options exercised Shares issued to the vendor of ProSol Australia Pty Ltd (c) Share purchase plan (b) Options exercised Options exercised Options exercised Options exercised Date Shares Issue price 1 July 2020 24 July 2020 29 July 2020 29 July 2020 21 August 2020 17 November 2020 26 November 2020 15 January 2021 3 May 2021 140,889,052 7,692,308 125,000 436,959 3,076,923 800,000 125,000 75,000 50,000 – $0.650 $0.120 $0.600 $0.650 $0.100 $0.120 $0.120 $0.120 Shares issued to vendor of the Haldon Industries business (e) 12 May 2021 5,100,000 $0.770 Share issue expenses (net of tax) – Balance Options exercised Options exercised Options exercised Shares issued to the vendor of ProSol Australia Pty Ltd (c) Options exercised Share placement (a) Share purchase plan (b) 30 June 2021 158,370,242 5 July 2021 19 July 2021 18 August 2021 15 September 2021 25 October 2021 125,000 25,000 100,000 513,000 125,000 9 November 2021 27,692,308 29 November 2021 527,671 Shares issued to settle outstanding employee incentive entitlements (d) 23 December 2021 328,457 Shares issued to employees Options exercised Share issue expenses (net of tax) 3 February 2022 3 March 2022 49,556 50,000 – Balance 30 June 2022 187,906,234 – – $0.120 $0.120 $0.120 $0.600 $0.120 $0.650 $0.650 $0.550 $0.525 $0.120 – $’000 89,875 5,000 15 262 2,000 80 15 9 6 3,927 (192) 100,997 15 3 12 308 15 18,000 343 181 26 6 (669) 119,237 78 Notes to the consolidated financial statements continued SciDev Limited / Annual Report 2022 Ordinary shares Ordinary shares entitle the holder to participate in dividends and the proceeds on the winding up of the company in proportion to the number of and amounts paid on the shares held. The fully paid ordinary shares have no par value and the company does not have a limited amount of authorised capital. On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each share shall have one vote. (a) Share placement – 30 June 2021 On 24 July 2020 SciDev Limited announced the placement of 7,692,308 new ordinary shares with two leading Australian Fund Managers at an issue price of $0.65 per share. – 30 June 2022 On 9 November 2021, SciDev Limited announced the placement of 27,692,308 new ordinary shares with institutional investors at an issue price of $0.65 per share. (b) Share purchase plan ‑ 30 June 2021 On 21 August 2020 SciDev Limited issued 3,076,923 new ordinary shares at $0.65 per share pursuant to a Share Purchase Plan (SPP). ‑ 30 June 2022 On 29 November 2021, SciDev Limited issued 527,671 new ordinary shares at $0.65 per share pursuant to a Share Purchase Plan (SPP). (c) Shares issued to the vendor of ProSol Australia Pty Ltd ‑ 30 June 2021 On 29 July 2020 SciDev Limited issued 436,959 ordinary shares at $0.60 per share to the vendor of ProSol Australia Pty Ltd (ProSol) being part of the first tranche of milestoned consideration under the terms of acquisition of ProSol Australia Pty Ltd (see note 23). ‑ 30 June 2022 On 15 September 2021, SciDev Limited issued 513,000 new ordinary shares at $0.60 to the vendors of ProSol Australia Pty Ltd. The shares issued represented the fair value of the contingent consideration to be settled by the issue of SciDev Limited shares (refer note 23). (d) Shares issued to settle outstanding employee incentive entitlements ‑ 30 June 2022 On 23 December 2021, SciDev Limited issued 328,457 fully paid ordinary shares to the Managing Director (Lewis Utting). The shares were issued in settlement of the balance of his Short Term Incentive payment for the 30 June 2021 financial year and the payment of his Long Term Incentive for the 30 June 2021 financial year. The issue of the shares was approved by the company’s shareholders at the annual general meeting held on 25 November 2021. (e) Shares issued to the vendor of Haldon Industries ‑ 30 June 2021 On 12 May 2021 SciDev Limited issued 5,100,000 ordinary shares at $0.77 per share to acquire the Haldon Industries business (refer note 34). 79 Notes to the consolidated financial statements continued Capital risk management The consolidated entity’s objectives when managing capital is to safeguard its ability to continue as a going concern, so that it can provide returns for shareholders and benefits for other stakeholders and to maintain an optimum capital structure to reduce the cost of capital. Capital is regarded as total equity, as recognised in the statement of financial position, plus net debt. Net debt is calculated as total borrowings and lease liabilities (current and non‑current) less cash and cash equivalents. In order to maintain or adjust the capital structure, the consolidated entity may adjust the amount of dividends paid to shareholders, 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 seen as value adding relative to the current company’s share price at the time of the investment. The consolidated entity is not actively pursuing additional investments in the short term as it continues to integrate and grow its existing businesses in order to maximise synergies. There are no externally imposed capital requirements. The capital risk management policy remains unchanged from the 2021 Annual Report. The consolidated entity monitors capital on the basis of its working capital position (i.e. liquidity risk). The net working capital (current assets less current liabilities) of the consolidated entity at 30 June 2022 was $13,488,000 (2021: $3,072,000). Accounting policy for issued capital Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. NOTE 23. OTHER EQUITY Contingent consideration 2022 $’000 – 2021 $’000 308 The contingent consideration at 30 June 2021, is related to the acquisition of ProSol Pty Ltd and represented the fair value of the consideration to be settled by the issue of SciDev Ltd shares. The shares were issued during the 2022 financial year. 2022 $’000 308 (308) ‑ 2021 $’000 570 (262) 308 Opening balance Issue of shares Closing balance 80 Notes to the consolidated financial statements continued SciDev Limited / Annual Report 2022 NOTE 24. RESERVES Financial assets at fair value through other comprehensive income reserve Foreign currency reserve Share‑based payments reserve 2022 $’000 2 (486) 415 (69) 2021 $’000 810 (1,117) 332 25 Financial assets at fair value through other comprehensive income (FVOCI) reserve The reserve is used to recognise increments and decrements in the fair value of financial assets at fair value through other comprehensive income. Foreign currency reserve The reserve is used to recognise exchange differences arising from the translation of the financial statements of foreign operations to Australian dollars. It is also used to recognise gains and losses on hedges of the net investments in foreign operations. Share‑based payments reserve The reserve is used to recognise the value of equity benefits provided to employees and directors as part of their remuneration, and other parties as part of their compensation for services. Movements in reserves Movements in each class of reserve during the current and previous financial year are set out below: Financial assets at FVOCI reserve $’000 Foreign currency reserve $’000 Share‑ based payments reserve $’000 – 1,218 (408) – – 810 (1,155) 347 – – 2 (36) – – (1,081) – (1,117) – – 631 – (486) 169 – – – 163 332 – – – 83 415 Balance at 1 July 2020 Revaluation – gross Deferred tax Foreign currency translation Share‑based payments Balance at 30 June 2021 Revaluation – gross Deferred tax Foreign currency translation Share‑based payments Balance at 30 June 2022 NOTE 25. DIVIDENDS There were no dividends paid, recommended or declared during the current or previous financial year. Total $’000 133 1,218 (408) (1,081) 163 25 (1,155) 347 631 83 (69) 81 Notes to the consolidated financial statements continued NOTE 26. FINANCIAL INSTRUMENTS Financial risk management objectives The consolidated entity’s activities expose it to a variety of financial risks: market risk (including foreign currency risk, price risk and interest rate risk), credit risk and liquidity risk. The consolidated entity’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the consolidated entity. The consolidated entity does not enter into or trade financial instruments, including derivative financial instruments for speculative purposes. Risk management is carried out by company management and the Board of Directors. Financial risks are identified and evaluated and where considered necessary strategies are put in place to investigate and/or minimise such risks. Market risk Foreign currency risk Foreign exchange risk arises when future commercial transactions and recognised assets and liabilities are denominated in a currency that is not the entity’s functional currency. The consolidated entity has a trade finance facility utilised for the purchase of US$ denominated invoices. Purchases through the facility are transacted at the prevailing spot A$/US$ exchange rate and the outstanding amount under the facility is always denominated in A$. The consolidated entity has not entered into any foreign currency hedging contracts during the year. The carrying amount in AUD of the consolidated entity’s foreign currency denominated financial assets and financial liabilities at the reporting date were as follows: Assets – cash – US dollars Assets – receivables – US dollars Liabilities – US dollars Net liabilities denominated in foreign currencies 2022 $’000 233 211 (2,666) (2,222) 2021 $’000 1,732 1,220 (3,092) (140) The following table shows how profit or loss and equity would have been affected by changes in USD that were reasonably possible at the reporting date. The percentage change is the expected overall volatility of the USD, which is based on management’s assessment of reasonable possible fluctuations taking into consideration movements over the last 12 months each year and the spot rate at each reporting date. AUD strength ened Effect on profit before tax $’000 % change Effect on equity $’000 % change AUD weakened Effect on profit before tax $’000 Effect on equity $’000 10% 222 222 10% (222) (222) AUD strength ened Effect on profit before tax $’000 % change Effect on equity $’000 % change AUD weakened Effect on profit before tax $’000 Effect on equity $’000 10% 14 14 10% (14) (14) 2022 US Dollar 2021 US Dollar The actual foreign exchange loss for the year ended 30 June 2022 was $381,000 (2021 gain: $200,000). 82 Notes to the consolidated financial statements continued SciDev Limited / Annual Report 2022 Price risk SciDev Limited is exposed to equity price risk arising from its investment in R3D Resources Limited (R3D) (refer note 13). A 1c change in the share price results in a $135,890 change in the value of the investment in R3D. Interest rate risk The consolidated entity was exposed to variable interest rate risks on cash deposits. A reasonably possible increase of 175 basis points (2021: 100 basis points) in interest rates at the reporting date would have increased the profit before tax by $246,120 (2021: $70,100). The percentage change is based on the expected volatility of interest rates using market data and analysts forecasts. As at the reporting date, the consolidated entity had the following deposits: Cash at bank and on deposit Net exposure to cash flow interest rate risk 2022 2021 Weighted average interest rate % – Weighted average interest rate % – Balance $’000 14,064 14,064 Balance $’000 7,010 7,010 An analysis by remaining contractual maturities in shown in ‘liquidity and interest rate risk management’ below. Credit risk The consolidated entity has adopted a lifetime expected loss allowance in estimating expected credit losses to trade receivables through the use of a provisions matrix using fixed rates of credit loss provisioning. These provisions are considered representative across all clients of the consolidated entity based on recent sales experience, historical collection rates and forward‑looking information that is available. There was no expected credit loss provision at 30 June 2022 and 30 June 2021 and there were no movements in the provision during the 2022 financial year as there were no changes in the credit risk of clients. There were no debts written off during the 2022 financial year (2021: nil). Generally, trade receivables are written off when there is no reasonable expectation of recovery. Indicators of this include the failure of a debtor to engage in a repayment plan, no active enforcement activity and a failure to make contractual payments for a period greater than 1 year. Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the consolidated entity. There is no significant concentration of credit risk to any single entity. The maximum exposure to credit risk at the reporting date to recognised financial assets is the carrying amount, net of any provisions for impairment of those assets, as disclosed in the statement of financial position and notes to the financial statements. There is no trade debtor or other receivable amount where collateral has been received as security or pledged. Liquidity risk Vigilant liquidity risk management requires the consolidated entity to maintain sufficient liquid assets (mainly cash and cash equivalents) and available borrowing facilities to be able to pay debts as and when they become due and payable. The consolidated entity manages liquidity risk by maintaining adequate cash reserves and available borrowing facilities by continuously monitoring actual and forecast cash flows and matching the maturity profiles of financial assets and liabilities. 83 Notes to the consolidated financial statements continued Remaining contractual maturities The following tables detail the consolidated entity’s remaining contractual maturity for its financial instrument liabilities. The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the financial liabilities are required to be paid. The tables include both interest and principal cash flows disclosed as remaining contractual maturities and therefore these totals may differ from their carrying amount in the statement of financial position. 2022 Non‑interest bearing Trade payables and other payables Contingent consideration Interest‑bearing – fixed rate Lease liability Total non‑derivatives 2021 Non‑interest bearing Trade payables and other payables Contingent consideration Interest‑bearing – fixed rate Other loans Lease liability Total non‑derivatives 1 year or less $’000 Between 1 and 2 years $’000 Between 2 and 5 years $’000 Over 5 years $’000 Remaining contractual maturities $’000 11,787 3,620 2,630 18,037 – 3,620 216 3,836 – – 129 129 – – 20 20 11,787 7,240 2,995 22,022 1 year or less $’000 Between 1 and 2 years $’000 Between 2 and 5 years $’000 Over 5 years $’000 Remaining contractual maturities $’000 9,529 3,569 – 2,552 15,650 – 2,814 280 2,501 5,595 – 3,620 – 83 3,703 – – – – – 9,529 10,003 280 5,136 24,948 The cash flows in the maturity analysis above are not expected to occur significantly earlier than contractually disclosed above. 84 Notes to the consolidated financial statements continued SciDev Limited / Annual Report 2022 NOTE 27. FAIR VALUE MEASUREMENT Fair value hierarchy The following tables detail the consolidated entity’s assets and liabilities, measured or disclosed at fair value, using a three level hierarchy, based on the lowest level of input that is significant to the entire fair value measurement, being: Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly Level 3: Unobservable inputs for the asset or liability. Other than the assets and liabilities included in the table below, other financial assets and liabilities are short term in nature and as such the carrying value approximates fair value. 2022 Assets Equity securities Equity securities – other Total assets Liabilities Contingent consideration Total liabilities 2021 Assets Equity securities Equity securities – other Total assets Liabilities Contingent consideration Total liabilities Level 1 $’000 Level 2 $’000 Level 3 $’000 Total $’000 1,563 – 1,563 – – – 167 167 – – – – – 6,964 6,964 Level 1 $’000 Level 2 $’000 Level 3 $’000 – – – – – 2,718 3 2,721 – – – – – 9,214 9,214 1,563 167 1,730 6,964 6,964 Total $’000 2,718 3 2,721 9,214 9,214 Transfers between levels 1 and 2 During the year, the company’s investment in Tartana Resources Limited (Tartana) was acquired by an ASX listed entity, R3D Resources Limited, in a scrip for scrip takeover. SciDev Limited received 13,589,935 R3D shares and 2,717,987 attaching options for the shares it held in Tartana. Consequently, the investment in shares in R3D was transferred from level 2 to level 1 following the takeover. Valuation techniques for fair value measurements categorised within level 2 and level 3 Level 2: Equity securities The fair value of financial instruments that are not traded in an active market is determined using valuation techniques which maximise the use of observable market data and rely as little as possible on entity‑specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2. 85 Notes to the consolidated financial statements continued Level 3: Contingent consideration If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3. The valuation model for the contingent consideration upon acquisition considered the present value of expected future payments. The contingent consideration liability is discounted using a risk‑adjusted discount rate. The significant input to the consideration calculation is the entity’s forecast EBITDA. The probability of achieving the maximum payout under the contract was initially estimated at 88% however the target maximum EBITDA was achieved in Financial Year 2022 and hence an additional provision has been recognised. Level 3 assets and liabilities Movements in level 3 assets and liabilities during the current and previous financial year are set out below: Balance at 1 July 2020 Additions Payments Balance at 30 June 2021 Additional provisions recognised Payments Unwinding of discount recognised through net finance costs Balance at 30 June 2022 Total losses for the current year included in profit or loss that relate to level 3 assets held at the end of the current year There were no gains or losses relating to level 3 liabilities held at 30 June 2021. Contingent consider‑ ation $’000 580 8,901 (267) 9,214 504 (3,235) 481 6,964 (985) Accounting policy for fair value measurement When an asset or liability, financial or non‑financial, is measured at fair value for recognition or disclosure purposes, the fair value is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date; and assumes that the transaction will take place either: in the principal market; or in the absence of a principal market, in the most advantageous market. Fair value is measured using the assumptions that market participants would use when pricing the asset or liability, assuming they act in their economic best interests. For non‑financial assets, the fair value measurement is based on its highest and best use. Valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, are used, maximising the use of relevant observable inputs and minimising the use of unobservable inputs. Assets and liabilities measured at fair value are classified into three levels, using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. Classifications are reviewed at each reporting date and transfers between levels are determined based on a reassessment of the lowest level of input that is significant to the fair value measurement. For recurring and non‑recurring fair value measurements, external valuers may be used when internal expertise is either not available or when the valuation is deemed to be significant. External valuers are selected based on market knowledge and reputation. Where there is a significant change in fair value of an asset or liability from one period to another, an analysis is undertaken, which includes a verification of the major inputs applied in the latest valuation and a comparison, where applicable, with external sources of data. 86 Notes to the consolidated financial statements continued SciDev Limited / Annual Report 2022 NOTE 28. KEY MANAGEMENT PERSONNEL DISCLOSURES Compensation The aggregate compensation made to directors and other members of key management personnel of the consolidated entity is set out below: Short‑term employment benefits Post‑employment benefits Long‑term benefits Termination benefits Share‑based payments 2022 $ 2021 $ 1,342,655 1,363,900 107,670 97,684 – 350,500 194,788 391 – 107,494 1,995,613 1,569,469 NOTE 29. REMUNERATION OF AUDITORS During the financial year the following fees were paid or payable for services provided by Ernst & Young, the auditor of the company, and its network firms: Audit services – Ernst & Young Audit or review of the financial statements Other services – Ernst & Young* Tax compliance services Transaction services Immigration services Share scheme advice Audit services – Rothsay Chartered Accountants Audit or review of the financial statements Other services – Rothsay Chartered Accountants Tax compliance services 2022 $ 2021 $ 227,550 90,000 – – 6,643 13,350 19,993 247,543 – – – 6,300 119,620 – – 125,920 215,920 12,000 5,000 17,000 * All non‑audit services provided by Ernst & Young in the year ended 30 June 2021 were performed and paid prior to Ernst & Young’s appointment as auditor. NOTE 30. CONTINGENT LIABILITIES The consolidated entity did not have any contingent liabilities other than those disclosed in note 21 and note 33 as at 30 June 2022 (2021: none other than those disclosed in note 21 and note 33). 87 Notes to the consolidated financial statements continued NOTE 31. COMMITMENTS There were no capital commitments as at 30 June 2022 for the consolidated entity (2021: nil). NOTE 32. RELATED PARTY TRANSACTIONS Parent entity SciDev Limited is the parent entity. Subsidiaries Interests in subsidiaries are set out in note 35. Key management personnel Disclosures relating to key management personnel are set out in note 28 and the remuneration report included in the directors’ report. Transactions with related parties Details of transactions between the consolidated entity and related parties are disclosed below: Payment for other expenses: Rent paid to other related party Other transactions: 2022 $ 2021 $ 502 6,030 Contingent consideration paid to entity associated with key management personnel 2,922,039 Lease payment to entity associated with key management personnel 2,308,000 – – A director, Simone Watt, is a director of Sinoz Chemicals and Commodities Pty Ltd (Sinoz) and has the capacity to significantly influence the decision‑making of the company. The consolidated entity has leased premises from Sinoz during July 2021 only. Seán Halpin, Interim CEO is also a director of Haldon Industries Pty Limited (HIPL). On 12 May 2021, SciDev Limited acquired the assets and business of Haldon Industries Limited. In relation to that transaction, during the financial year 2022, SciDev Limited paid a contingent consideration of $2,922,039, lease payments of $2,308,000 and cash on settlement of $879,685 to HIPL. In addition, a number of clients have continued to remit payments via HIPL. SciDev received cash from clients via HIPL of $3,882,745 and incurred costs in the year via HIPL of $540,838. Amounts reimbursed to HIPL for suppliers for the period from 15 May 2021 to 30 June 2021 was $281,911. Amounts exclude GST. Receivable from and payable to related parties As at 30 June 2022 SciDev recognised a contingent consideration of $7,240,000 to HIPL and a liability for the asset lease from HIPL of $2,307,000. There is a trading balance owing by SciDev to HIPL of $319,599 at 30 June 2022. Loans to/from related parties A director, Simone Watt, is a director of Kanins International Pty Ltd and has the capacity to significantly influence decision making of that company. Kanins International Pty Ltd provided SciDev Limited with a US$350,000 working capital facility that matured on 1 October 2021. The facility was secured against the consolidated entity’s inventory and incurred interest at 15% per annum. $nil (2021: $nil) was drawn down on this facility and $nil (2021: $nil) repaid during the 2022 financial year. The loan balance at 30 June 2021 was $nil. Balances and transactions between the company and its subsidiaries, which are related parties of the company, have been eliminated on consolidation and are not disclosed in this note. 88 Notes to the consolidated financial statements continued SciDev Limited / Annual Report 2022 NOTE 33. PARENT ENTITY INFORMATION Set out below is the supplementary information about the parent entity. Statement of profit or loss and other comprehensive income Profit/(loss) after income tax Other comprehensive income/(loss) for the year, net of tax Total comprehensive income/(loss) Statement of financial position Total current assets Total non‑current assets Total assets Total current liabilities Total non‑current liabilities Total liabilities Net assets Equity Issued capital Other equity Financial assets at fair value through other comprehensive income reserve Share‑based payments reserve Accumulated losses Total equity Parent 2022 $’000 (3,516) – (3,516) Parent 2022 $’000 6,562 39,716 46,278 370 – 370 2021 $’000 1,127 810 1,937 2021 $’000 1,400 31,553 32,953 830 – 830 45,908 32,123 119,544 101,303 – 2 415 308 810 240 (74,053) 45,908 (70,538) 32,123 Guarantees entered into by the parent entity in relation to the debts of its subsidiaries The parent entity had no guarantees in relation to the debts of its subsidiaries as at 30 June 2022 and 30 June 2021, other than under the terms of the acquisition of the Haldon business by SciDev Water Services Pty Limited (SWSPL). The parent entity irrevocably and unconditionally guarantees the due and punctual performance of SWSPL’s present and future obligations and the payment of all present and future liabilities of SWSPL under that acquisition agreement. Contingent liabilities The parent entity had no contingent liabilities as at 30 June 2022 and 30 June 2021. Capital commitments – Property, plant and equipment The parent entity had no capital commitments for property, plant and equipment as at 30 June 2022 and 30 June 2021. 89 Notes to the consolidated financial statements continued Significant accounting policies The accounting policies of the parent entity are consistent with those of the consolidated entity, as disclosed in note 2, except for the following: • Investments in subsidiaries are accounted for at cost, less any impairment, in the parent entity. • Dividends received from subsidiaries are recognised as other income by the parent entity and its receipt may be an indicator of an impairment of the investment. NOTE 34. BUSINESS COMBINATIONS Prior year business combinations On 12 May 2021, SciDev Water Services Pty Ltd Limited acquired the business operations and assets of Haldon Industries Pty Ltd (Haldon). Haldon is an Australian‑based environmental solutions company focused on the water treatment sectors. The acquisition of Haldon provides the consolidated entity with presence and scale in the infrastructure and water verticals via Haldon’s key services of water treatment, remediation, groundwater dewatering and onsite liquid waste treatment. The total consideration for the acquisition was $15,407,191 consisting of a cash payment of $2,579,685, 5,100,000 SciDev Limited shares valued at $3,927,000, and contingent consideration of $8,900,506. The contingent consideration is based on the achievement of EBITDA targets for the 2021, 2022, and 2023 financial years with EBITDA subject to a minimum of 20% of revenue. The fair value of the contingent consideration arrangement was estimated using a discounted cash flow (DCF) method. The key assumption was the assumed probability‑adjusted EBITDA. The goodwill of $10,053,801 is attributable to the expected future benefits of the acquired business increasing SciDev’s presence and scale in the infrastructure, water, and wastewater verticals via Haldon’s key services of water treatment, remediation, groundwater dewatering and onsite liquid waste treatment. Trade receivables Plant and equipment Office equipment Motor vehicles Equipment – right‑of‑use assets Client contacts Trademark and intellectual property Trade and other payables Employee benefits Lease liability – equipment Lease liability – other Deferred tax liability Net assets acquired Goodwill Net assets acquired Provisional fair value $ 1,987,329 159,432 6,709 356,048 4,723,664 Movement $ – – – – – Final fair value $ 1,987,329 159,432 6,709 356,048 4,723,664 – – 2,600,000 2,600,000 2,591,000 2,591,000 (385,626) (147,018) (4,723,664) (257,184) – – – – (385,626) (147,018) (4,723,664) (257,184) – (1,557,300) (1,557,300) 1,719,690 3,633,700 5,353,390 13,687,501 (3,633,700) 10,053,801 15,407,191 – 15,407,191 The acquisition accounting was performed on a provisional basis at 30 June 2021 with final determination of the fair value of intangible assets acquired determined during the 2022 financial year and noted above. In accordance with AASB 3 Business Combinations, the provisional fair values of assets and liabilities acquired are retrospectively adjusted to reflect information obtained during the measurement period that existed at acquisition date. Therefore, the Consolidated Statement of Financial Position at 30 June 2021 has been restated. There are no changes to the Consolidated Statement of Profit and Loss and Other Comprehensive Income or the Consolidated Statement of Cash Flows from the amounts noted for the 2021 Financial year as the impact is not material. 90 Notes to the consolidated financial statements continued SciDev Limited / Annual Report 2022 Accounting policy for business combinations The acquisition method of accounting is used to account for business combinations regardless of whether equity instruments or other assets are acquired. The consideration transferred is the sum of the acquisition‑date fair values of the assets transferred, equity instruments issued or liabilities incurred by the acquirer to former owners of the acquiree and the amount of any non‑controlling interest in the acquiree. For each business combination, the non‑controlling interest in the acquiree is measured at either fair value or at the proportionate share of the acquiree’s identifiable net assets. All acquisition costs are expensed as incurred to profit or loss. On the acquisition of a business, the consolidated entity assesses the financial assets acquired and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic conditions, the consolidated entity’s operating or accounting policies and other pertinent conditions in existence at the acquisition‑date. Where the business combination is achieved in stages, the consolidated entity remeasures its previously held equity interest in the acquiree at the acquisition‑date fair value and the difference between the fair value and the previous carrying amount is recognised in profit or loss. Contingent consideration to be transferred by the acquirer is recognised at the acquisition‑date fair value. Subsequent changes in the fair value of the contingent consideration classified as an asset or liability is recognised in profit or loss. Contingent consideration classified as equity is not remeasured and its subsequent settlement is accounted for within equity. The difference between the acquisition‑date fair value of assets acquired, liabilities assumed and any non‑controlling interest in the acquiree and the fair value of the consideration transferred and the fair value of any pre‑existing investment in the acquiree is recognised as goodwill. If the consideration transferred and the pre‑existing fair value is less than the fair value of the identifiable net assets acquired, being a bargain purchase to the acquirer, the difference is recognised as a gain directly in profit or loss by the acquirer on the acquisition‑date, but only after a reassessment of the identification and measurement of the net assets acquired, the non‑controlling interest in the acquiree, if any, the consideration transferred and the acquirer’s previously held equity interest in the acquirer. Business combinations are initially accounted for on a provisional basis. The acquirer retrospectively adjusts the provisional amounts recognised and also recognises additional assets or liabilities during the measurement period, based on new information obtained about the facts and circumstances that existed at the acquisition‑date. The measurement period ends on either the earlier of (i) 12 months from the date of the acquisition or (ii) when the acquirer receives all the information possible to determine fair value. 91 Notes to the consolidated financial statements continued NOTE 35. INTERESTS IN SUBSIDIARIES The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance with the accounting policy described in note 2: Name Principal place of business/ Country of incorporation Highland Fluid Technology Inc United States Intec Copper Pty Ltd Intec Envirometals Pty Ltd ProSol Australia Pty Ltd Science Developments Pty Ltd SciDev International Holdings Pty Ltd SciDev (US) LCC* SciDev Water Services Pty Ltd Australia Australia Australia Australia Australia United States Australia Ownership interest 2022 % 100% 100% 100% 100% 100% 100% 100% 100% 2021 % 100% 100% 100% 100% 100% 100% 100% 100% * SciDev (US) LCC is a wholly‑owned subsidiary of SciDev International Holdings Pty Ltd. NOTE 36. EVENTS AFTER THE REPORTING PERIOD No matter or circumstance has arisen since 30 June 2022 that has significantly affected, or may significantly affect the consolidated entity’s operations, the results of those operations, or the consolidated entity’s state of affairs in future financial years. 92 Notes to the consolidated financial statements continued SciDev Limited / Annual Report 2022 NOTE 37. CASH FLOW INFORMATION Reconciliation of profit/(loss) after income tax to net cash used in operating activities Profit/(loss) after income tax benefit for the year Adjustments for: Depreciation and amortisation Share‑based payments Write off of assets Net gain on disposal of non‑current assets Net fair value gain on other financial assets Paycheck Protection Program (USA) subsidy R&D tax incentive Finance costs – non‑cash Foreign currency differences Change in operating assets and liabilities: Increase in trade and other receivables Decrease/(increase) in contract assets Decrease/(increase) in inventories Decrease in income tax refund due Increase in deferred tax assets Increase in prepayments Increase in trade and other payables Increase/(decrease) in contract liabilities Increase in employee benefits Increase/(decrease) in other provisions Net cash used in operating activities 2022 $’000 (616) 2,082 255 13 (40) (164) (280) – 481 (76) (2,585) 442 (3,553) – (825) (102) 3,460 (21) 32 191 (1,306) 2021 $’000 3,453 930 163 40 (28) – (266) (423) – 13 (3,102) (442) 1,012 29 (2,647) (183) 910 262 127 (1,165) (1,317) 93 2021 $’000 262 3,927 493 266 Total $’000 538 (595) (266) 493 4,981 (21) 5,130 (2,476) (280) 505 16 253 (871) – 493 4,981 (6) 4,850 (2,476) – 505 16 2,895 2,895 Notes to the consolidated financial statements continued Non‑cash investing and financing activities Shares issued to acquire ProSol Australia Pty Ltd Shares issued to the Haldon Industries business Additions to right‑of‑use assets Paycheck Protection Program (USA) loan converted into a subsidy Changes in liabilities arising from financing activities 2022 $’000 308 – 570 280 Borrowings $’000 Lease liabilities $’000 Balance at 1 July 2020 Net cash from/(used in) financing activities Paycheck Protection Program (USA) loan converted into a subsidy Acquisition of leases Changes through business combinations (note 34) Exchange differences Balance at 30 June 2021 Net cash used in financing activities Debt converted into subsidy Acquisition of leases Exchange differences Balance at 30 June 2022 285 276 (266) – – (15) 280 – (280) – – – 94 Notes to the consolidated financial statements continued SciDev Limited / Annual Report 2022 NOTE 38. EARNINGS PER SHARE Profit/(loss) after income tax attributable to the owners of SciDev Limited 2022 $’000 (616) 2021 $’000 3,453 Number Number Weighted average number of ordinary shares used in calculating basic earnings per share 177,366,254 152,573,170 Adjustments for calculation of diluted earnings per share: Options over ordinary shares – 2,178,466 Weighted average number of ordinary shares used in calculating diluted earnings per share 177,366,254 154,751,636 Basic earnings/(loss) per share Diluted earnings/(loss) per share Cents Cents (0.35) (0.35) 2.26 2.23 Options are considered to be potential ordinary shares but were anti‑dilutive in nature and therefore the diluted loss per share is the same as the basic loss per share. These options could potentially dilute basic earnings per share in the future. Accounting policy for earnings per share Basic earnings per share Basic earnings per share is calculated by dividing the profit attributable to the owners of SciDev Limited, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the financial year. Diluted earnings per share Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares. 95 Notes to the consolidated financial statements continued NOTE 39. SHARE‑BASED PAYMENTS (a) Options Employee Share Scheme Share‑based compensation benefits are provided to employees via the SciDev Employee Share Scheme. At the 2014 Annual General Meeting, shareholders approved the SciDev Employee Share Scheme (the Scheme). All Directors, employees and consultants are eligible to participate in the Scheme. Options granted under the Scheme to eligible participants are for no additional consideration. Options granted under the Scheme carry no dividend or voting rights. The granting of options is at the Board’s discretion and no individual has a contractual right to receive options. On 16 May 2019 and approved by shareholders on 23 July 2019, the Nomination & Remuneration Committee recommended, and the Board approved that the Company granted 5,200,000 unquoted options, 2,000,000 options have an exercise price of $0.10 and 3,200,000 options have an exercise price of $0.12. All options have an expiry date of 23 July 2022. As noted below, the Managing Director & Chief Executive Officer was ultimately issued 1,600,000 options at an exercise price of $0.10, being less than his contracted entitlement (2,500,000), and less than approved by Shareholders approval (2,000,000), as a result of his voluntary allocation to other executives and new staff. On 16 May 2019, the company granted 2,150,000 unquoted options to executives and staff (not Directors). 1,750,000 have an exercise price of $0.12 and 400,000 have an exercise price of $0.10. All options have an expiry date of 23 July 2022. The first tranche of 1,075,000 options were not subject to any vesting conditions and vested on grant date and the second tranche of 1,075,000 options are subject to a service vesting condition. The value of the options granted was $46,500. On 23 July 2019, following the 16 May 2019 Board approval, the company held a General Meeting which approved the grant of 2,750,000 unquoted options to Directors. All options have an expiry date of 23 July 2022. The Managing Director was granted 1,600,000 options. The options granted to the Managing Director have an exercise price of $0.10. The Non‑Executive Directors were granted 1,150,000 options which have an exercise price of $0.12 and which vested on grant date. The value of the options granted to the Directors was $366,500. On 3 February 2020, the company granted 150,000 unquoted options to the Chief Financial Officer. The options have an exercise price of $0.12 and an expiry date of 23 July 2022. The first tranche of 75,000 options were not subject to any vesting conditions and vested on grant date and the second tranche of 75,000 options are subject to a service vesting condition. The value of the options granted was $93,000. On 11 November 2019, the company granted 150,000 unquoted options to an employee. The options have an exercise price of $0.12 and an expiry date of 23 July 2022. The first tranche of 75,000 options were not subject to any vesting conditions and vested on grant date and the second tranche of 75,000 options are subject to a service vesting condition. The value of the options granted was $84,000. 96 Notes to the consolidated financial statements continued SciDev Limited / Annual Report 2022 Set out below are summaries of options granted: 2022 Grant date Expiry date Exercise price Balance at the start of the year Granted Exercised Expired/ forfeited/ other Balance at the end of the year 16/05/2019 23/07/2022 $0.100 400,000 16/05/2019 23/07/2022 $0.120 950,000 23/07/2019 23/07/2022 $0.100 800,000 23/07/2019 23/07/2022 $0.120 250,000 11/11/2019 23/07/2022 03/02/2020 23/07/2022 $0.120 $0.120 75,000 75,000 2,550,000 – – – – – – – – (350,000) – – – (75,000) (425,000) – – – – – – – 400,000 600,000 800,000 250,000 75,000 – 2,125,000 Weighted average exercise price $0.111 $0.000 $0.120 $0.000 $0.000 The weighted average share price at the date of exercise of options exercised during the year ended 30 June 2022 was $0.80. 2021 Grant date Expiry date Exercise price Balance at the start of the year Granted Exercised Expired/ forfeited/ other Balance at the end of the year 16/05/2019 23/07/2022 $0.100 400,000 16/05/2019 23/07/2022 $0.120 1,325,000 23/07/2019 23/07/2022 $0.100 1,600,000 23/07/2019 23/07/2022 $0.120 250,000 11/11/2019 23/07/2022 03/02/2020 23/07/2022 $0.120 $0.120 75,000 75,000 3,725,000 – – – – – – – – (375,000) (800,000) – – – (1,175,000) – – – – – – – 400,000 950,000 800,000 250,000 75,000 75,000 2,550,000 Weighted average exercise price $0.109 $0.000 $0.106 $0.000 $0.111 The weighted average share price at the date of exercise of options exercised during the year ended 30 June 2021 was $0.88. Set out below are the options exercisable at the end of the financial year: Grant date 16/05/2019 23/07/2019 11/11/2019 03/02/2020 Expiry date 23/07/2022 23/07/2022 23/07/2022 23/07/2022 2,125,000 2022 Number 2021 Number 1,000,000 1,350,000 1,050,000 1,050,000 75,000 – 2,550,000 75,000 75,000 The weighted average remaining contractual life of options outstanding at the end of the financial year was 0.06 years (2021: 1.06 years). 97 Notes to the consolidated financial statements continued (b) Performance rights The company granted performance rights to nominated employees on 15 December 2020 and 26 May 2021. The vesting of any performance rights have non‑market conditions assigned to each individual based on their business unit, an employment condition and a single market condition of the company share price of $2.00 per share for 10 consecutive days. The performance rights granted on 15 December 2020 and 26 May 2021 vest on 30 June 2022 and 31 October 2022 respectively. Set out below are summaries of performance rights granted under the plan: 2022 Grant date Expiry date Exercise price Balance at the start of the year Granted Exercised Expired/ forfeited/ other Balance at the end of the year 15/12/2020 31/10/2022 $0.000 1,408,399 26/05/2021 30/06/2022 $0.000 725,000 2021 Grant date Expiry date 15/12/2020 31/10/2022 26/05/2021 30/06/2022 Exercise price $0.000 $0.000 – – – – – – – 1,408,399 (725,000) – (725,000) 1,408,399 Granted Exercised Expired/ forfeited/ other Balance at the end of the year 2,133,399 Balance at the start of the year – – – 1,408,399 725,000 2,133,399 – – – – – – 1,408,399 725,000 2,133,399 Set out below are the performance rights exercisable at the end of the financial year: Grant date 15/12/2020 26/05/2021 Expiry date 31/10/2022 30/06/2022 1,408,399 2022 Number 2021 Number 1,408,399 1,408,399 – 725,000 2,133,399 The weighted average remaining contractual life of performance rights outstanding at the end of the financial year was 0.22 years (2021 1.22 years). 98 Notes to the consolidated financial statements continued SciDev Limited / Annual Report 2022 (c) Expenses arising from share‑based payment transactions The total expense arising from share‑based payment transactions recognised during the period as part of employee benefits expense was $255,231 (2021: $163,000). Accounting policy for share‑based payments Equity‑settled share‑based compensation benefits are provided to employees. Equity‑settled transactions are awards of shares, or options over shares, that are provided to employees in exchange for the rendering of services. The cost of equity‑settled transactions are measured at fair value on grant date. Fair value is independently determined using either the Black‑Scholes or the Monte Carlo models that takes into account the exercise price, the term of the option, the impact of dilution, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk free interest rate for the term of the option, together with non‑vesting conditions that do not determine whether the consolidated entity receives the services that entitle the employees to receive payment. No account is taken of any other vesting conditions. The cost of equity‑settled transactions are recognised as an expense with a corresponding increase in equity over the vesting period. The cumulative charge to profit or loss is calculated based on the grant date fair value of the award, the best estimate of the number of awards that are likely to vest and the expired portion of the vesting period. The amount recognised in profit or loss for the period is the cumulative amount calculated at each reporting date less amounts already recognised in previous periods. Market conditions are taken into consideration in determining fair value. Therefore any awards subject to market conditions are considered to vest irrespective of whether or not that market condition has been met, provided all other non‑market conditions are satisfied. If equity‑settled awards are modified, as a minimum an expense is recognised as if the modification has not been made. An additional expense is recognised, over the remaining vesting period, for any modification that increases the total fair value of the share‑based compensation benefit as at the date of modification. If the non‑vesting condition is within the control of the consolidated entity or employee, the failure to satisfy the condition is treated as a cancellation. If the condition is not within the control of the consolidated entity or employee and is not satisfied during the vesting period, any remaining expense for the award is recognised over the remaining vesting period, unless the award is forfeited. If equity‑settled awards are cancelled, it is treated as if it has vested on the date of cancellation, and any remaining expense is recognised immediately. If a new replacement award is substituted for the cancelled award, the cancelled and new award is treated as if they were a modification. 99 DIRECTORS’ DECLARATION 30 June 2022 In the directors’ opinion: • • • • the attached financial statements and notes comply with the Corporations Act 2001, the Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements; the attached financial statements and notes comply with International Financial Reporting Standards as issued by the International Accounting Standards Board as described in note 2 to the financial statements; the attached financial statements and notes give a true and fair view of the consolidated entity’s financial position as at 30 June 2022 and of its performance for the financial year ended on that date; and there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable. The directors have been given the declarations required by section 295A of the Corporations Act 2001. Signed in accordance with a resolution of directors made pursuant to section 295(5)(a) of the Corporations Act 2001. On behalf of the directors Vaughan Busby Chairman 31 August 2022 Sydney 100 INDEPENDENT AUDITOR’S REPORT SciDev Limited / Annual Report 2022 Ernst & Young 200 George Street Sydney NSW 2000 Australia GPO Box 2646 Sydney NSW 2001 Tel: +61 2 9248 5555 Fax: +61 2 9248 5959 ey.com/au Independent auditor’s report to the members of SciDev Limited Report on the audit of the financial report Opinion We have audited the financial report of SciDev Limited (the Company) and its subsidiaries (collectively 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, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, notes to the financial statements, including a summary of significant accounting policies, and the directors’ declaration. In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001, including: a. Giving a true and fair view of the consolidated financial position of the Group as at 30 June 2022 and of its consolidated financial performance for the year ended on that date; and b. Complying with Australian Accounting Standards and the Corporations Regulations 2001. Basis for opinion We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial report section of our report. We are independent of the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Key audit matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial report of the current year. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, but we do not provide a separate opinion on these matters. For each matter below, our description of how our audit addressed the matter is provided in that context. We have fulfilled the responsibilities described in the Auditor’s responsibilities for the audit of the financial report section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the financial report. The results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying financial report. A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation 101 Independent Auditor’s Report continued Carrying Value of Goodwill Why significant How our audit addressed the key audit matter In accordance with the requirements of the Australian Accounting Standards, the Group is required to test all cash generating units (CGUs) annually for impairment where goodwill is present. The Group assesses the recoverable amount of each CGU using a discounted cash flow forecast to determine value in use (VIU). As disclosed in Note 15 to the financial statements, no impairment was identified as at 30 June 2022. Assumptions used in the forecast of cash flows are highly judgmental and inherently subjective. Specifically, judgement is required to assess the reasonability of forecast growth rates, margins, operating costs, discount rates and terminal growth rates. As a result of the above, and the extent of audit effort and judgement required, we considered the goodwill carrying value assessment to be a key audit matter. With the assistance of our valuation specialists, our audit procedures included the following: • • • • • • • • • • We considered the Group’s identification of CGUs for completeness and consistency with Australian Accounting Standards. We assessed whether the impairment testing methodology used met the requirements of Australian Accounting Standards. We tested the mathematical accuracy of the discounted cash flow models. We assessed the basis of preparing the cash flow forecasts and considered the Group’s current performance and accuracy of the previous forecasts and budgets. We assessed the appropriateness of the cash flow forecasts, including forecast revenue growth and margins, with reference to current trading performance, historical growth rates achieved, contracts and purchase orders in place, and industry data and forecasts (where available). We assessed the appropriateness of the discount rates and growth rates with reference to publicly available information for comparable companies in the industry and markets in which the Group operates. We performed sensitivity analyses to evaluate whether reasonably possible changes in assumptions could cause the carrying amount of each CGU to exceed its recoverable amount. We cross-checked the EBITDA multiples represented by the recoverable amount derived from the discounted cashflow models against a range of comparable companies and transactions. We considered the carrying value of the Group’s net assets against its market capitalisation. We evaluated the adequacy of the disclosures relating to the goodwill carrying values in the financial report, including those made with respect to judgements and estimates. Information other than the financial report and auditor’s report thereon The directors are responsible for the other information. The other information comprises the information included in the Company’s 2022 annual report other than the financial report and our auditor’s report thereon. We obtained the directors’ report that is to be included in the annual report, prior to the date of this auditor’s report, and we expect to obtain the remaining sections of the annual report after the date of this auditor’s report. Our opinion on the financial report does not cover the other information and we do not and will not express any form of assurance conclusion thereon, with the exception of the Remuneration Report and our related assurance opinion. A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation 102 Independent Auditor’s Report continued SciDev Limited / Annual Report 2022 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 on the other information obtained prior to the date of this auditor’s report, 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 Group’s ability to continue as a going concern, disclosing, as applicable, matters relating to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so. Auditor’s responsibilities for the audit of the financial report Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with 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. As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgment and maintain professional scepticism throughout the audit. We also: ► Identify and assess the risks of material misstatement of the financial report, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. ► Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control. ► Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors. ► Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial report or, if such disclosures are A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation 103 Independent Auditor’s Report continued inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern. ► Evaluate the overall presentation, structure and content of the financial report, including the disclosures, and whether the financial report represents the underlying transactions and events in a manner that achieves fair presentation. ► Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the financial report. We are responsible for the direction, supervision and performance of the Group audit. We remain solely responsible for our audit opinion. We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied. From the matters communicated to the directors, we determine those matters that were of most significance in the audit of the financial report of the current year and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. Report on the audit of 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 SciDev Limited for the year ended 30 June 2022, complies with section 300A of the Corporations Act 2001. A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation 104 Independent Auditor’s Report continued SciDev Limited / Annual Report 2022 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. Ernst & Young Siobhan Hughes Partner Sydney 31 August 2022 A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation 105 ADDITIONAL ASX INFORMATION SHAREHOLDER INFORMATION The shareholder information set out below was applicable as at 4 October 2022. A. Distribution of equity securities Analysis of numbers of equity security holders by size of holding: Name 1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 and over B. Substantial holders Substantial shareholders as at 4 October 2022 are listed below: Perennial Value Management Limited (PVM) Australian Super Pty Ltd Class of equity security Ordinary shares Number of Shareholders Number of Shares 543 653 327 623 204,966 1,738, 878 2,614,224 212,118,845 161 163,904,765 2,314 189,581,678 15.17% 8.69% 106 Additional ASX information continued SciDev Limited / Annual Report 2022 Equity security holders The names of the twenty largest holders of quoted equity securities as at 04 October 2022 are listed below: Name NATIONAL NOMINEES LIMITED J P MORGAN NOMINEES AUSTRALIA HSBC CUSTODY NOMINEES BNP PARIBAS NOMINEES PTY LTD JIANFENG ZHANG & HALDON INDUSTRIES PTY LTD KANINS AUSTRALIA PTY LTD HSBC CUSTODY NOMINEES MR LEWIS EDWARD UTTING & BNP PARIBAS NOMS (NZ) LTD FIRST TRUSTEE COMPANY (NZ) MR KIERAN GREGORY RODGERS LYNTER PTY LTD HSBC CUSTODY NOMINEES CITICORP NOMINEES PTY LIMITED PUNTERO PTY LTD NUOER CHEMICAL AUSTRALIA MR KIERAN GREGORY RODGERS & MR ANDREW MACBRIDE PRICE MR BEN GILL Total Securities of Top 20 Holdings Total of Securities Ordinary shares Number held Percentage of issued shares 28,452,359 15.008% 17,267,250 6,962,077 6,325,216 6,028,572 5,100,000 5,000,000 4,208,638 4,019,313 3,952,224 3,750,000 3,007,696 2,750,000 2,634,098 2,253,601 2,212,352 2,161,137 2,006,467 2,000,000 9.108% 3.672% 3.336% 3.180% 2.690% 2.637% 2.220% 2.120% 2.085% 1.978% 1.586% 1.451% 1.389% 1.189% 1.167% 1.140% 1.058% 1.055% 1,830,112 0.965% 111,921,112 59.036% 189,581,678 C. Voting rights The voting rights attaching to each class of equity securities are set out below: (a) Ordinary shares On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each share shall have one vote. (b) Options No voting rights. 107 This page intentionally left blank for your notes. 108 SciDev Limited / Annual Report 2022 This page intentionally left blank for your notes. 109 This page intentionally left blank for your notes. 110 CORPORATE DIRECTORY DIRECTORS Vaughan Busby – Non‑Executive Chairman Simone Watt – Non‑Executive Director Jon Gourlay – Non‑Executive Director Dan O’Toole – Non‑Executive Director COMPANY SECRETARY Heath L Roberts REGISTERED OFFICE C/‑Boardroom Pty Limited Level 12, Grosvenor Place 225 George Street, Sydney NSW 2000 Phone: 1300 737 760 PRINCIPAL PLACE OF BUSINESS Unit 1 8 Turbo Road Kings Park NSW 2148 Phone: (02) 9622 5185 SciDev Limited / Annual Report 2022 SHARE REGISTER Boardroom Pty Limited Level 12, Grosvenor Place 225 George Street, Sydney NSW 2000 Phone: 1300 737 760 AUDITOR Ernst & Young 200 George Street Sydney NSW 2000 STOCK EXCHANGE LISTING SciDev Limited shares are listed on the Australian Securities Exchange (ASX code: SDV) WEBSITE scidevltd.com CORPORATE GOVERNANCE STATEMENT www.scidev.com.au/about‑us/governance/ www.colliercreative.com.au #SDV0001 i S c D e v L i m i t e d / A n n u a l R e p o r t 2 0 2 2 scidevltd.com