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DearShareholders
iQN,sinceitsinceptionin2011,hasbeenapureplaycompanyfocusedondevelopingearlystagelifescienceassets for its clients or for itself and taking advantageof risk by establishing a sustainable “risk advantage”whichisasimportantfortheentryintheinvestmenttodayascreatinganexitinthefuture.
OverthelastthreeyearsiQN’sfinancialshaveimprovedasthechartsinthefollowingcommentaryonresultssection signifies, however still sustaining an operational cash burn of $6.5million. Despite this cash burn, Ibelieve the intrinsic value of the company remainsmultiple times higher than themarket capitalisation of$37.3milliontoday.
This intrinsic value is ascribed to the company by the assets it owns and develops aswell as its subsidiaryentitiesFarmaForce(FFC)andClinicalResearchCorporation(CRC).
My focus in this year’s operational review will bemore about the development programs the company isrunningthanthesubsidiaryentitieswhichareconsolidatedintothisreport.
iQN’s revenue is generated through three separate streams– commercial sales, capital gains, andResearchandDevelopment.
• SalesofethicalpharmaceuticalsandmedicaldevicestophysiciansandotherhealthcarepractitionersonbehalfofourglobalBiopharmaclientsthroughFFC;
• ResearchandDevelopment,clinicalandmedicalservicestoclientglobalBiopharmacompanies;• IncubationanddevelopmentofIntellectualpropertyonbehalfofclients;and• CapitalgainsfromownershipofIP.
Over the past four years, through a teamof scientists, economists, analysts and external collaborators,wehave been sourcing, identifying and validating discovery stage life science IP. In a field requiring themosthighlyskilled labourandscientific innovationtobringproducts tomarket,atanygiventime, thenumberof“good”opportunitiestodeploycapitalthatwillbesuccessfulandofferasuperior investmentreturnisfinitehencewehavesetveryrigidandspecificcriteriaofwhatwelookfor:
• Accesstheassetnotthelicense;wehavebeenlookingtoassignassignmentoftheIPasopposedtolicensetheIP.(AnassignmentofIPisatransferofownershipwhereasanIPlicenseallowsthecompanytousetheworkwithouttransferringownership).It’sfarmorecomplicatedtoexecuteanassignmentthanitistolicensee.g.in2014inAustralia,732licensingagreementswereachievedandonly10assignments.
• Createvehiclesthataccessthebiotechthemesforwhichbenefitsaccruetothecompanies,andbyextensiontheshareholders,asopposedtojustthecustomers.
• Correlatethescientificmilestonestothebusinessmilestones,addingvaluetotheprojectsthroughthecreationofearlyfinancialexits.
• MinimizeIPacquisitioncost,acquiringtheassetatrealisticpricegiventhedevelopmentriskandinvestmentnecessarytode-riskandcommenceexitprocess.
Inthepast,spikesofenthusiasmforthebiotechmarketshaveresultedinaveryrapidadvanceinassetspricesunjustifiedbythestageofdevelopmentandtherapeuticarea,denotingadistortionintheperceptionoftimeby investors in their chase for outsized returns. Today a lot of the investors chasing returns in thebiotechnologysectoraredoingsobecauseoftheperformanceofthepast5yearsandnotbecausetheyhavea
firmgraspofthescience,theeconomicchallengesinvolvedortheearningspotentialgoingforward,andaretakingona lotmoreriskthantheyassumetheyare. iQNactivelyseekstotakesomeoftheriskawayby itsinvestmentthesis.
After screening hundreds of early stage developments during the past few years IQN has a valuable andsustainabletherapeuticanddiagnosticportfolio.
DiagnosticPortfolio
The diagnostic platform we have acquired and are developing, creates an entire portfolio of diagnostic,screeningandprognostictests,forprofessionaluse,self-testingandpointofcareatclinic.
Ourcurrentdevelopmentstagepipelineincludes:
• hormones• immunology• biochemistry• tumormarkers• communicablediseases• nucleicacids
Asignificantfranchiseforourcompanyisdiabetes,andweareapproachingthecommercialisationstagewiththis asset. This non-invasive glucose test has the potential to become the substitute for every patient thatcurrentlyneedstodothefingerpricktestseveraltimesperday.
This innovationenablesapatienttomonitorglucosewithoutprickingtheir fingerand ithasthepotentialtoaddress415millionadultsthatcurrentlyhavediabetes.By2040thisnumberwillriseto642million.(IDFAtlas7thEdition).
Theentireglucoseself-monitoringmarket,accordingtoGlobalData,willreach$12.2billionbytheyear2017.
TherapeuticPortfolio
IQN is also undertaking a therapeutic research anddevelopment programof a first in class, novelmodeofaction, biologic compound for breast cancer. It is anticipated that following compilation of the completedpreclinicaldatafile,thecompanywillsubmittotheFDAaninvestigativenewdrugapplicationtocommencehumanclinical trials. Following thispilot submission,weareexpecting that separate INDA’swill be filed forotheroncologyindications.
• BreastCancer• ProstateCancer• Melanoma• LungCancer
ItisforecastthattheglobalbreastcancertherapeuticsmarketissettoincreaseinvaluefromA$10.4billionin2014 to $17.2 billion by 2021, at a Compound Annual Growth Rate (CAGR) of 7.3%, according to businessintelligenceproviderGBIResearch.
DrGeorgeSyrmalisChairandGroupCEO
1
NSX-PreliminaryFinalReport
Nameofentity: IQNOVATELTDACN: 149731644ReportingPeriod: Twelvemonthsending30June2017PreviousCorrespondingPeriod: Twelvemonthsending30June2016
Resultsforannouncementtothemarket
Revenueandnetprofit
Movement Percentagechange
2017
Revenuefromordinaryactivities up 75% 4,670,912
Lossfromordinaryactivitiesaftertax up 34% (9,881,006)
Lossfromordinaryactivitiesaftertaxattributabletoowners up 39% (9,223,710)
Dividends
Dividend Amountper
security
Frankedamountpersecurity
Finaldividendinrespectofthetwelvemonthsending30June2017:
NIL NIL NIL
Nettangibleassetspersecurity 2017 2016
Nettangibleassetspersecurity(centspersecurity) (10.71) (1.27)
Commentaryonresults
Commentary for thepreliminary final report for thetwelvemonthsending30June2017 iscontained in theNationalSecuritiesExchange(NSX)releaseandonpage2ofthisannouncement.
Additionalinformation
Thisreportisbasedonunauditedfinancialstatementswhicharecurrentlyintheprocessofbeingaudited.Thefinancialstatementsincludedinthe2017AnnualReportarelikelytocontainanunqualifiedindependentauditreport.
AdditionalPreliminaryFinalReportrequirementscanbefoundonpages2to25ofthisannouncement.
2
Commentaryonresults
• Recordsalesrevenueof$4.7millionincreasing75%ontheprioryear;
• $0.8millionincreaseingrossprofit;• Increasedmarketshare,revenue,and
profitabilityofcontractsalesbusinessunit(FarmaForce).
$Amillions FY17 FY16 Change
Revenue 4.7 2.7 2.0
Grossprofit 0.8 (0.0) 0.8
Lossaftertax (9.9) (7.4) (2.5)
Cashusedinoperations (6.5) (6.8) 0.3
AboutiQnovate
IQnovateisascientificallydrivenlifescienceassetmanagementorganisation.Ithasexceptionalorganicresearchanddevelopmentcapability.ThisenablesiQnovatetoconceptualise,source,validateandcommercialisebiotechnologyassetsthathaveextraordinaryandpotentiallydisruptiveoutcomes,thusadvancinghumanhealth.iqnovate.com
AboutFarmaForce
FarmaForceisacontractsalesorganisationofferinginnovativesalessolutionstotheAustralianpharmaceuticalindustry.farmaforce.com.au
AboutClinicalResearchCorporation(CRC)
CRCprovidescontractmedicalaffairsservicestothepharmaceuticalindustrythroughoutthedruglifecycle.crcaustralia.com
AboutTheiQGroupGlobal
TheiQGroupGlobalprovidesaturnkeysolutionforlifesciencescompanies,spanningcorporateadvisoryandinvestmentbanking,throughtoresearch,development,commercialisationandsales.TheGroupfacilitatesanendtoendsolutionalongthedruglifecyclecreatingthemedicinesoftomorrow.theiqgroupglobal.com
IQNOVATELTDANDCONTROLLEDENTITIESCONSOLIDATEDSTATEMENTOFPROFITORLOSSFORTHEYEARENDED30JUNE2017
PRELIMINARYFINALREPORT
3
Indollars Note 2017 2016^
Revenue 4 4,670,912 2,670,362
Costofsales (3,837,759) (2,670,861)
Grossprofit 833,153 (499)
Otherincome 5(a) 118,807 91,711
Employeebenefitsexpense 5(c) (3,871,647) (2,965,529)
Depreciationandamortisationexpense (151,095) (92,668)
Overheadsharingcosts (880,242) (980,036)
Shareoptionexpense - (117,840)
Otherexpenses 5(d) (4,991,057) (2,779,059)
Financecosts 5(b) (1,141,188) (550,431)
Shareoflossofassociatedcompaniesnetoftax (115,919) -
Lossbeforeincometax (10,199,188) (7,394,351)
Incometaxbenefit 318,182 -
Lossfortheperiod (9,881,006) (7,394,351)
Lossattributabletomembersoftheparent (9,235,949) (6,613,719)
Lossattributabletonon-controllinginterest (645,057) (780,632)
Totallossattributed (9,881,006) (7,394,351)
LosspersharefortheperiodattributabletotheordinaryequityholdersoftheCompany:
Note 2017 2016
Basiclosspershare(centspershare) 17 (7.60) (6.49)
Dilutedlosspershare(centspershare) 17 (7.60) (6.49)
^Comparativeinformationhasbeenrestatedtoreflectachangeinclassificationof:(a)otherincome,furtherdetaildisclosedinnote4;and(b)Otherexpenses,furtherdetailsofwhichisdisclosedinnote5.
Theaboveconsolidatedstatementofprofitorlossshouldbereadinconjunctionwiththeaccompanyingnotestotheconsolidatedfinancialstatements.
IQNOVATELTDANDCONTROLLEDENTITIESCONSOLIDATEDSTATEMENTOFOTHERCOMPREHENSIVEINCOMEFORTHEYEARENDED30JUNE2017
PRELIMINARYFINALREPORT 4
Indollars Note 2017 2016
Netlossfortheperiod (9,881,006) (7,394,351)
Othercomprehensiveincome
Exchangedifferencesontranslationofforeignoperations,netoftax 12,239 -
Othercomprehensivelossfortheperiod,netoftax 12,239 -
Totalcomprehensivelossfortheperiod (9,868,767) (7,394,351)
Comprehensivelossattributabletomembersoftheparent (9,223,710) (6,613,719)
Comprehensivelossattributabletonon-controllinginterest (645,057) (780,632)
Totalcomprehensivelossattributed (9,868,767) (7,394,351)
The above consolidated statement of comprehensive income should be read in conjunction with theaccompanyingnotestotheconsolidatedfinancialstatements.
IQNOVATELTDANDCONTROLLEDENTITIESCONSOLIDATEDSTATEMENTOFFINANCIALPOSITIONASAT30JUNE2017
PRELIMINARYFINALREPORT
5
Indollars Note 2017 2016^
AssetsCurrentassets
Cash 6 298,937 2,159,311Tradeandotherreceivables 7 594,443 497,898Prepayments 116,637 164,997Othercurrentassets - 918,826Currenttaxreceivable - 916Totalcurrentassets 1,010,017 3,741,948Non-currentassets Tradeandotherreceivables - 63,278
Property,plantandequipment 8 625,149 662,065
Intangibleassets 9 4,257,740 1,891Investmentinassociate 18 440,226 538,000Deferredtaxassets 1,233,364 877,275Totalnon-currentassets 6,556,479 2,142,509TotalAssets 7,566,496 5,884,457LiabilitiesCurrentliabilities
Tradeandotherpayables 10 3,415,617 1,498,373Provisions 11 27,049 -Employeebenefitliabilities 12 850,545 205,700
Deferredrevenue 233,003 54,980
Borrowings 13 5,853,688 5,421,844
Derivativefinancialinstruments 14 884,788 -Deferredtaxliability 35,718 -Totalcurrentliabilities 11,300,408 7,180,897Non-currentliabilities Borrowings 13 4,954,814 -Employeebenefitliabilities 12 49,489 -Totalnon-currentliabilities 5,004,303 -Totalliabilities 16,304,711 7,180,897Netassets (8,738,215) (1,296,440)Equity Contributedequity 11,491,837 10,930,743Reserves 16 1,778,410 142,605Accumulatedlosses (22,134,491) (12,910,781)
Totalequityattributabletoholdersofthecompany (8,864,244) (1,837,433)Totalequityattributabletonon-controllinginterests (126,029) 540,993Totalequity (8,738,215) (1,296,440)
^ Comparative information has been restated to reflect a change in classification of Other Current Assets,DeferredRevenue,andEmployeeBenefitLiabilities.
Theaboveconsolidatedstatementoffinancialpositionshouldberead inconjunctionwiththeaccompanyingnotestotheconsolidatedfinancialstatements.
IQNOVATELTDANDCONTROLLEDENTITIESCONSOLIDATEDSTATEMENTOFCHANGESINEQUITYFORTHEYEARENDED30JUNE2017
PRELIMINARYFINALREPORT
6
Indollars
Contributedequity
Accumulatedlosses
Reserves Non-controlling
interest
Total
Balanceat1July2016 10,930,743 (12,910,781) 142,605 540,993 (1,296,440)Totalcomprehensivelossfortheperiod Lossfortheperiod - (9,223,710) - (645,057) (9,881,006)Othercomprehensiveprofitfortheperiod
- - (12,239) - -
Totalcomprehensiveprofitfortheperiod
- (9,223,710) (12,239) (645,057) (9,881,006)
Transactionswithownersrecordeddirectlyinequity Convertiblenotesissued/reconfiguredduringtheyear
681,669 - 2,243,700 526,300 3,451,669
Capitalraisingcosts (120,575) - (595,656) (296,207) (1,012,438)Totaltransactionswithownersrecordeddirectlyinequity
561,094 - 1,648,044 230,093 2,439,231
Balanceat30June2017 11,491,837 (22,134,491) 1,778,410 126,029 (8,738,215) Balanceat1July2015 6,730,660 (7,347,681) 24,765 - (592,256)Totalcomprehensivelossfortheperiod Lossfortheperiod - (6,613,719) - (780,632) (7,394,351)Othercomprehensiveincomefortheperiod
- - - - -
Totalcomprehensiveloss - (6,613,719) - (780,632) (7,394,351)Transactionwithownersrecordeddirectlyinequity
Sharesissuedduringtheperiod 5,459,544 - - - 5,459,544Issueofconvertiblenotesduringtheperiod
2,903,960 - - - 2,903,960
Convertiblenotesreconfiguredduringtheperiod
(797,788) - - - (797,788)
Non-controllinginterest (2,372,246.5) 1,050,619 - 1,321,625 -Capitalraisingcosts (993,389) - - - (993,389)Sharebasedtransactions - - 117,840 - 117,840Balanceat30June2016 10,930,743 (12,910,781) 142,605 540,993 (1,296,440)Theaboveconsolidatedstatementofchangesinequityshouldbereadinconjunctionwiththeaccompanyingnotestotheconsolidatedfinancialstatements.
IQNOVATELTDANDCONTROLLEDENTITIESCONSOLIDATEDSTATEMENTOFCASHFLOWSFORTHEYEARENDED30JUNE2017
PRELIMINARYFINALREPORT
7
Indollars Note 2017 2016
Cashflowsfromoperatingactivities
Receiptsfromcustomers 5,220,563 1,863,306
Paymentstosuppliersandemployees (11,590,104) (8,702,381)
Interestreceived 2,980 42,711
Interestpaid (99,055) (14,057)
Incometaxpaid - (916)
Netcashusedinoperatingactivities 21 (6,465,616) (6,811,337)
Cashflowsfrominvestingactivities
Purchaseofproperty,plantandequipment (97,115) (384,340)
Investmentinassociates (18,145) (538,000)
Purchaseofintangibleassets (2,841,338) -
Netcashusedininvestingactivities (2,956,598) (922,340)
Cashflowsfromfinancingactivities
Proceedsfromcontributedequity 902,887 4,466,155
Proceedsfromtheissueofconvertiblenotes 6,658,953 2,934,715
Netcashgeneratedfrom/(usedin)financingactivities 7,561,840 7,400,870
Netdecreaseincashandcashequivalents (1,860,374) (332,807)
Cashandcashequivalentsatthebeginningoftheperiod 2,159,311 2,492,118
Effectofmovementsinexchangeratesoncashheld - -
Cashandcashequivalentsattheendoftheperiod 6 298,937 2,159,311
Theaboveconsolidatedstatementofcashflowsshouldbereadinconjunctionwiththeaccompanyingnotestotheconsolidatedfinancialstatements.
IQNOVATELTDANDCONTROLLEDENTITIESNOTESTOTHECONSOLIDATEDFINANCIALSTATEMENTSFORTHEYEARENDED30JUNE2017
PRELIMINARYFINALREPORT
8
1. REPORTINGENTITY
iQNovateLtd (“iQN”or the“Company”) isa for-profit company limitedbyshareswhich is incorporatedanddomiciledinAustralia.Theseconsolidatedfinancialstatements(“financialstatements”)asatandfortheyearended30June2017compriseoftheCompanyanditssubsidiaries(collectivelyreferredtoasthe“Group”).
ThesefinancialstatementswereauthorisedforissuebytheBoardofDirectorson11September2017.
2. SIGNIFICANTACCOUNTINGPOLICIES
Thissectionsetsoutthesignificantaccountingpoliciesuponwhichthefinancialstatementsarepreparedasawhole. Specific accounting policies are described in their respective notes to the financial statements. Thissectionalsoshowsinformationonnewaccountingstandards,amendmentsandinterpretations,andwhethertheyareeffectiveinthecurrentorlateryears.
Basisofpreparation
ThesefinancialstatementsarepresentedinAustraliandollars,whichistheCompany’sfunctionalcurrency.
The Company is of a kind referred to in ASIC Corporations Instrument 2016/191 dated 1 April 2016 and inaccordancewiththatinstrument,allfinancialinformationpresentedinAustraliandollarshasbeenroundedtothenearestdollarunlessotherwisestated.
Thefinancialstatementshavebeenpreparedunderthehistoricalcostconvention,exceptfor,therevaluationof available-for-sale financial assets, financial assets and liabilities at fair value through profit or loss, andderivativefinancialinstruments.
Theaccountingpolicieshavebeenconsistentlyappliedtoallperiodspresentedinthesefinancialstatements,unlessotherwisestated.
Basisofconsolidation
SubsidiariesareentitiescontrolledbytheGroup.TheGroupcontrolsanentitywhen it isexposedto,orhastherightsto,variablereturnsfromits involvementwiththeentityandhastheabilitytoaffectthosereturnsthrough its powerover theentity. The financial statements of subsidiaries are included in the consolidatedfinancialstatementsfromthedateonwhichcontrolcommencesuntilthedateonwhichcontrolceases.
Intercompanytransactions,balancesandunrealisedgainsontransactionsbetweenentitiesintheconsolidatedentity are eliminated. Accounting policies of subsidiaries have been changed where necessary to ensureconsistencywiththepoliciesadoptedbytheconsolidatedentity.
Non-controlling interest in the results and equity of subsidiaries are shown separately in the statement ofprofitor lossandothercomprehensive income,statementof financialpositionandstatementofchanges inequity of the consolidated entity. Losses incurred by the consolidated entity are attributed to the non-controllinginterestinfull,evenifthatresultsinadeficitbalance.
Foreignoperations
TheassetsandliabilitiesofforeignoperationsaretranslatedintoAustraliandollars(AUD)attheexchangerateatthereportingdate.TheincomeandexpensesofforeignoperationsaretranslatedintoAUDattheaverageexchangerateofthemonthinwhichthetransactionoccurs.
Foreigncurrencydifferencesare recognised inothercomprehensive incomeandaccumulated in the foreigncurrencytranslationreserve.
Whena foreignoperation isdisposedof in itsentiretyorpartially such that control, significant influenceorjoint control is lost, the cumulative amount in the translation reserve related to that foreign operation isreclassifiedtoprofitorlossaspartofthegainorlossondisposal.
IQNOVATELTDANDCONTROLLEDENTITIESNOTESTOTHECONSOLIDATEDFINANCIALSTATEMENTS(CONTINUED)FORTHEYEARENDED30JUNE2017
PRELIMINARYFINALREPORT
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‘2.SIGNIFICANTACCOUNTINGPOLICIES(CONTINUED)
GoodsandServicesTax(“GST”)andValueAddedTax(“VAT”)
Revenues,expensesandassetsarerecognisednetoftheamountofrespectiveGSTorVAT,exceptwheretheamountofGSTorVATincurredisnotrecoverablefromtherelevanttaxationauthority.Inthesecircumstances,theGSTorVATisrecognisedaspartofthecostofacquisitionoftheassetoraspartoftheexpense.
Receivables and payables are stated inclusive of the amount of GST or VAT receivable or payable. The netamountofGSTorVATrecoverablefrom,orpayableto,thetaxationauthorityisincludedwithotherpayablesintheconsolidatedstatementoffinancialposition.
Cashflowsarepresentedonagrossbasis.TheGSTorVATcomponentsofcashflowsarisingfrominvestingorfinancingactivitieswhicharerecoverablefrom,orpayabletotherelevanttaxationauthority,arepresentedasoperatingcashflowsintheconsolidatedstatementofcashflows.
Usesofjudgementsandestimates
Inpreparingthesefinancialstatements,managementhasmadejudgements,estimatesandassumptionsthataffecttheapplicationoftheGroup’saccountingpoliciesandthereportedamountsofassets,liabilities,incomeand expenses. Actual results may differ from these estimates. Estimates and underlying assumptions arereviewedonanongoingbasis.Revisionstoaccountingestimatesarerecognisedprospectively.
(i) Judgements
Significantjudgementhasbeenmadeinrespecttotheelectionofcommoncontrolaccountingasopposedtoaccountingforbusinesscombinationsatfairvalueatacquisitiondate.
(ii) Estimates
Informationaboutcriticaljudgementsinapplyingaccountingpoliciesthathavethemostsignificanteffectontheamountsrecognisedinthefinancialstatements,includingaboutassumptionsandestimationuncertaintiesthat have a significant risk of resulting in a material adjustment within the year ending 30 June 2017 areincludedinthefollowingnotes:
• Note18–Investments;• Note11–Provisions;• Note20–Contingencies.
(iii) Measurementoffairvalues
AnumberoftheGroup’saccountingpoliciesanddisclosuresrequirethemeasurementoffairvalues,forbothfinancialandnon-financialassetsandliabilities.
TheGrouphasanestablishedcontrolframeworkwithrespecttothemeasurementoffairvalues.
The financial reporting team regularly reviews significant unobservable inputs and valuation adjustments. Ifthirdparty information isused tomeasure fair values,managementassess theevidenceobtained from thethirdpartiestosupporttheconclusionthatsuchvaluationsmeettherequirementsofIFRS,includingthelevelinthefairvaluehierarchyinwhichsuchvaluationsshouldbeclassified.
Whenmeasuring the fair value of an asset or a liability, the Group usesmarket observable data as far aspossible.Fairvaluesarecategorisedintodifferentlevelsinafairvaluehierarchybasedontheinputsusedinthevaluationtechniquesasfollows:
• Level1:quotedprices(unadjusted)inactivemarketsforidenticalassetsorliabilities.
• Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset orliability,eitherdirectly(i.e.asprices)orindirectly(i.e.derivedfromprices).
• Level3: inputsfortheassetor liabilitythatarenotbasedonobservablemarketdata(unobservableinputs).
IQNOVATELTDANDCONTROLLEDENTITIESNOTESTOTHECONSOLIDATEDFINANCIALSTATEMENTS(CONTINUED)FORTHEYEARENDED30JUNE2017
PRELIMINARYFINALREPORT
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‘2.SIGNIFICANTACCOUNTINGPOLICIES(CONTINUED)
Useofjudgementsandestimates(continued)
‘(iii)Measurementoffairvalues(continued)
Iftheinputsusedtomeasurethefairvalueofanassetoraliabilitymightbecategorisedindifferentlevelsofthefairvaluehierarchy,thenthefairvaluemeasurementiscategorisedinitsentiretyinthesamelevelofthefairvaluehierarchyasthelowestlevelinputthatissignificanttotheentiremeasurement.
TheGroupcategorisestransfersbetweenlevelsofthefairvaluehierarchyattheendofthereportingperiodduringwhichthechangehasoccurred.
Newstandardsandinterpretationsnotyetadopted
Anumberofnewstandards, amendments to standardsand interpretationsareeffective for annualperiodsbeginningafter1July2017,andhavenotbeenappliedinpreparingthesefinancialstatements.ThosewhichmayberelevanttotheGrouparesetoutbelow.TheGroupdoesnotplantoadoptthesestandardsearly.
(i) AASB9FinancialInstruments
AASB 9 Financial Instruments becomes mandatory for the Group’s 2019 financial statements and includeschangestotheclassificationandmeasurementoffinancialassets,includinganewexpectedcreditlossmodelfor calculating impairment. It also includes a new hedge accounting model to simplify hedge accountingrequirementsandmorecloselyalignhedgeaccountingwithriskmanagementactivities.
(ii) AASB15Revenuefromcontractswithcustomers
AASB15RevenuefromContractsbecomesmandatoryfortheGroup’s2019financialstatementsandoutlinesasingle comprehensive model for entities to use in accounting for revenue arising from contracts withcustomers; and replaces AASB 111 Construction Contract, AASB 118 Revenue, Interpretation 13 CustomerLoyaltyPrograms,Interpretation15AgreementsforConstructionofRealEstate, Interpretation18TransferofAssetsfromCustomersandInterpretation131Revenue-BarterTransactionsinvolvingAdvertisingServices.Thecore principle is that an entity recognises revenue to depict the transfer of promised goods or services tocustomersinanamountthatreflectstheconsiderationtowhichtheentityexpectstobeentitledinexchangeforthosegoodsorservices.
(iii) AASB16Leases
AASB16LeasesbecomesmandatoryfortheGroup’s2020financialstatementsandremovestheclassificationofleasesbetweenfinanceandoperatingleases,effectivelytreatingallleasesasfinanceleasesforthelessee.Thepurposeistoprovidegreatertransparencyofalessee’sfinancialleverageandcapitalemployed.
The Group has not yet determined the potential effect of these standards on the Group’s future financialstatements.
3. GOINGCONCERN
The financial statementshavebeenpreparedon thegoing concernbasis,which contemplates continuityofnormal business activities and the realisation of assets and discharge of liabilities in the normal course ofbusiness.
Asdisclosed in the financial statements, theGroup incurreda lossof$9,868,767andhadnetcashoutflowsfromoperatingactivitiesof$6,465,616fortheyearended30June2017.Asatthatdatethecompanyhadnetcurrentliabilitiesof$10,290,391andnetliabilitiesof$8,738,215.
Thesefactorsmayprimafacieindicatethepotentialofamaterialuncertaintywhichmayresult insignificantdoubtastowhethertheGroupwillcontinueasagoingconcernandthereforewhetheritwillrealiseitsassetsandextinguishitsliabilitiesinthenormalcourseofbusinessandattheamountsstatedinthefinancialreport.However, the Directors have determined that treatment as a going concern is appropriate, due to thefollowingfactors:
IQNOVATELTDANDCONTROLLEDENTITIESNOTESTOTHECONSOLIDATEDFINANCIALSTATEMENTS(CONTINUED)FORTHEYEARENDED30JUNE2017
PRELIMINARYFINALREPORT
11
‘3.GOINGCONCERN(CONTINUED)
• The Group will continue its expansion and development of its portfolio of life science assetsintellectual property assets by external project based capital raising as it has demonstrated it hasdonepreviously;
• ThefundswillbeutilisedwiththeultimateobjectivetoincreasethevalueoftheassetsasdiscussedintheReviewofOperations
• ForthetradingdivisionsoftheGroup,thecontinuedtrendofincreasingmarketshareasindicatedinthefinancialstatementsisresultinginadditionalcustomercontractsonhandimprovingnetoperatingcashflow;
• Liabilities include total convertible notes with a face value of $11,475,624 (current liabilities:$6,520,810,plusnon-currentliabilities$4,954,814)convertibletoequitybythecompany,hencenotrequiringfundingfromcashflowtoextinguishtheseliabilities;
Accordingly, theDirectors believe that theGroupwill be able to continue as a going concern and that it isappropriatetoadoptthegoingconcernbasisinthepreparationofthefinancialreport.
The financial report does not include any adjustments relating to the amounts or classification of recordedassetsorliabilitiesthatmightbenecessaryiftheGroupwerenottooperateasagoingconcern.
4. REVENUE
Indollars 2017 2016^
Contractandservicefeerevenue 4,255,622 2,320,215
Officeandsharedservicesrevenue 415,290 350,147
Totalrevenue 4,670,912 2,670,362
^ The comparative informationhasbeen restated to reflect a change in classificationof the following itemsfromrevenuetootherincome:(a)financeincome$42,711;and(b)Rebatesandoffsets$49,000.
Significantaccountingpolicies
Revenueismeasuredatthefairvalueoftheconsiderationreceivedorreceivableaftertakingintoaccountanytradediscountsandvolumerebatesallowed.
TheGroup recognises revenuewhen the amount of revenue can be reliablymeasured, it is probable that futureeconomicbenefitsassociatedwiththetransactionwillflowtotheGroupandspecificcriteriarelatingtothetypeofrevenueasnotedbelow,hasbeensatisfied.
Any consideration deferred is treated as the provision of finance and is discounted at a rate of interest that isgenerallyacceptedinthemarketforsimilararrangements.Thedifferencebetweentheamountinitiallyrecognisedandtheamountultimatelyreceivedisinterestrevenue.
Renderingofservices
Revenueinrelationtorenderingofservicesisrecogniseddependingonwhethertheoutcomeoftheservicescanbeestimatedreliably.Iftheoutcomecanbeestimatedreliablythenthestageofcompletionoftheservicesisusedtodeterminetheappropriatelevelofrevenuetoberecognisedintheperiod.
Iftheoutcomecannotbereliablyestimatedthenrevenueisrecognisedtotheextentofexpensesrecognisedthatarerecoverable.
IQNOVATELTDANDCONTROLLEDENTITIESNOTESTOTHECONSOLIDATEDFINANCIALSTATEMENTS(CONTINUED)FORTHEYEARENDED30JUNE2017
PRELIMINARYFINALREPORT
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5. INCOMEANDEXPENSES
(a) Otherincome
Indollars 2017 2016^
Rebatesandoffsets 110,717 49,000Financeincome 7,200 42,711Foreigncurrencygains 890 -Totalotherincome 118,807 91,711
(b) Financecosts
Indollars 2017 2016
Bankfees 7,960 5,000Interestonconvertiblenotes 985,317 536,374Otherinterestexpense 147,911 9,057Totalfinancecosts 1,141,188 550,431
(c) Employeebenefitsexpenses
Indollars 2017 2016^
Wagesandsalaries 3,389,205 2,653,647
Compulsorysuperannuationcontributions 361,933 249,294Increaseinliabilityforannualleave 71,020 62,588Increaseinliabilityforlongserviceleave 49,489 -Totalemployeebenefitsexpense 3,871,647 2,965,529
(d) Otherexpenses
Indollars 2017 2016^
Accountingfees 91,708 135,828Advertisingandmarketing 276,118 333,018Exchangeandlistingfees 99,069 178,665Insurance 78,055 69,914Legalandconsultingfees 890,006 360,366Occupancycosts 371,276 191,222Projectsourcingandevaluationcosts 1,559,239 -Recruitmentfees 255,439 329,088Softwarelicensingandsubscriptions 202,452 286,617Travelandaccommodation 140,698 154,528Other 1,026,997 739,813Totalotherexpenses 4,991,057 2,779,059
^ Thecomparativeinformationhasbeenrestatedtoreflectachangeinclassificationofthefollowingexpensesfromotherexpensetoemployeebenefitexpense:workerscompensation,FBT,payrolltax.
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6. CASH
Indollars 2017 2016
Bankbalances 298,937 2,159,311
7. TRADEANDOTHERRECEIVABLES
Indollars 2017 2016
Tradereceivables 327,229 216,415
Otherreceivables 241,182 108,527
Relatedpartyreceivables 26,032 236,234
Totaltradeandotherreceivables 594,443 561,176
Current 594,443 497,898
Non-current - 63,278
Totaltradeandotherreceivables 594,443 561,176
Significantaccountingpolicies
Trade receivables are recognised initially at fair value and subsequentlymeasured at amortised cost using theeffective interest method, less provision for impairment. Trade receivables are generally due for settlementwithin 30-60 days. They are presented as current assets unless collection is not expected for more than 12monthsafterthereportingdate.
Collectabilityoftradereceivablesisreviewedonanongoingbasis.Debtswhichareknowntobeuncollectablearewrittenoffbyreducingthecarryingamountdirectly.Thelossisrecognisedinprofitorlosswithinotherexpenses.Subsequentrecoveriesofamountspreviouslywrittenoffarecreditedagainstotherexpensesintheprofitorloss.
Otherreceivablesarerecognisedatamortisedcost,lessanyprovisionforimpairment.
Significantaccountingpolicies
Cashand cash equivalents includes cashonhand, deposits heldat callwith financial institutions,other short-term, highly liquid investmentswithoriginalmaturitiesof threemonthsor less thatare readilyconvertible toknownamountsofcashandwhicharesubjecttoaninsignificantriskofchangesinvalue.Forthestatementofcash flows presentation purposes, cash and cash equivalents also includes bank overdrafts,which are shownwithinborrowingsincurrentliabilitiesonthestatementoffinancialposition.
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8. PROPERTY,PLANTANDEQUIPMENT
Cost
Indollars
Plantandequipment
Furniture,fixturesand
fittings
Leaseholdimprovements
Total
Balanceat1July2015 164,607 43,809 224,389 432,805
Additions 49,339 66,555 268,446 384,340
Balanceat30June2016 213,946 110,364 492,835 817,145
Additions 58,251 19,630 27,049 104,929
Balanceat30June2017 272,197 129,994 519,884 992,074
Accumulateddepreciation
Indollars
Plantandequipment
Furniture,fixturesand
fittings
Leaseholdimprovements
Total
Balanceat1July2015 31,264 7,096 24,615 62,975
Depreciationexpense 44,640 9,292 38,173 92,105
Balanceat30June2016 75,904 16,388 62,788 155,080
Depreciationexpense 54,948 13,277 73,620 141,845
Balanceat30June2017 130,852 29,665 136,408 296,925
Carryingamount
Indollars
Plantandequipment
Furniture,fixturesand
fittings
Leaseholdimprovements
Total
Carryingbalanceat30June2016 138,042 93,976 430,047 662,065
Carryingbalanceat30June2017 141,345 100,328 383,476 625,149
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’8.PROPERTY,PLANTANDEQUIPMENT(CONTINUED)
Significantaccountingpolicies
Carryingvalue
All property, plant and equipment is stated at historical cost less depreciation and impairment. Historical costincludesexpenditurethatisdirectlyattributabletotheacquisitionoftheitems.
Subsequentcostsareincludedintheasset’s carryingamountorrecognisedasaseparateasset,asappropriate,onlywhenitisprobablethatfutureeconomicbenefitsassociatedwiththeitemwillflowtothebusinessandthecostoftheitemcanbemeasuredreliably.Thecarryingamountofanycomponentaccountedforasa separateasset isderecognisedwhenreplaced.Allotherrepairsandmaintenancearecharged totheprofitor lossduringthereportingperiod.
Depreciation
Depreciation of assets is calculated using the straight-linemethod to allocate their cost, net of their residualvalues, over their estimated useful lives or, in the case of leasehold improvements, the shorter lease term asfollows:
• Leaseholdimprovements–5to10years• Plantandequipment–5to10years• Furniture,fittingsandequipment–10to20years
Impairment
Anasset’scarryingamountiswrittendownimmediatelytoitsrecoverableamountiftheasset’scarryingamountisgreaterthanitsestimatedrecoverableamount.
Gainsandlossesondisposal
Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These areincludedinprofitorloss.
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9. INTANGIBLEASSETS
Cost
Indollars
AcquiredIP
Developmentexpenditure
Websiteand
software
Total
Balanceat1July2015 - - 2,536 2,536
Additions - - - -
Balanceat30June2016 - - 2,536 2,536Additions 1,871,614 2,169,946 231,354 4,272,914Balanceat30June2017 1,871,614 2,169,946 233,890 4,275,450
Amortisation
Indollars
AcquiredIP
Developmentexpenditure
Websiteand
software
Total
Balanceat1July2015 - - 82 82
Amortisationexpense - - 563 563
Balanceat30June2016 - - 645 645Amortisationexpense - - 17,064 17,064Balanceat30June2017 - - 17,709 17,709
Carryingamount
Indollars
AcquiredIP
Developmentexpenditure
Websiteand
software
Total
Carryingbalanceat30June2016 - - 1,891 1,891
Carryingbalanceat30June2017 1,871,614 2,169,946 216,181 4,257,740
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‘9.INTANGIBLEASSETS(CONTINUED)
Significantaccountingpolicies
Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assetsacquiredinabusinesscombinationistheirfairvalueatthedateofacquisition.
Following initial recognition, intangible assets are carried at cost less any accumulated amortisation andaccumulatedimpairmentlosses.Internallygeneratedintangibles,excludingcapitaliseddevelopmentcosts,arenotcapitalised and the related expenditure is reflected in profit or loss in the period in which the expenditure isincurred.
Gainsorlossesarisingfromde-recognitionofanintangibleassetaremeasuredasthedifferencebetweenthenetdisposalproceedsandthecarryingamountoftheassetandarerecognisedinthestatementofprofitor lossandothercomprehensiveincomewhentheassetisderecognised.
Amortisation
Intangible assetswith finite lives are amortised over the useful economic life. The amortisation period and theamortisation method for an intangible asset with a finite useful life are reviewed at least at the end of eachreportingperiod.Changesintheexpecteduseful lifeortheexpectedpatternofconsumptionoffutureeconomicbenefitsembodiedintheassetareconsideredtomodifytheamortisationperiodormethod,asappropriate,andaretreatedaschangesinaccountingestimatesandadjustedonaprospectivebasis.Theamortisationexpenseonintangibleassetswithfinitelivesisrecognisedinthestatementofprofitorlossandothercomprehensiveincomeastheexpensecategorythatisconsistentwiththefunctionoftheintangibleassets.
Intangible assets with indefinite useful lives are not amortised, but are tested for impairment annually, eitherindividuallyoratthecash-generatingunitlevel.Theassessmentofindefinitelifeisreviewedannuallytodeterminewhethertheindefinitelifecontinuestobesupportable.Ifnot,thechangeinusefullifefromindefinitetofiniteismadeonaprospectivebasis.
Impairment
Intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually forimpairment,ormorefrequentlyifeventsorchangesincircumstancesindicatethattheymightbeimpaired.Otherassetsaretestedforimpairmentwhenevereventsorchangesincircumstancesindicatethatthecarryingamountmaynotberecoverable. Animpairmentloss isrecognisedfortheamountbywhichtheasset’scarryingamountexceedsitsrecoverableamount.Therecoverableamountisthehigherofanasset’sfairvaluelesscoststosellandvalueinuse.
Websiteandsoftware
Costsincurredinacquiringwebsitesoftwareandlicensesthatwillcontributetofuturefinancialbenefitsthroughrevenuegenerationand/orcostreductionarecapitalisedtosoftwareandsystems.Costscapitalisedincludeexternaldirectcostsof materials and service and direct payroll and payroll related costs of employees’ time spent on the project.Amortisationiscalculatedonastraight-linebasisoverperiodsgenerallyrangingfromthreetofiveyears
Websitedevelopmentcosts includeonly thosedirectlyattributable tothedevelopmentphaseandareonlyrecognisedfollowingcompletionoftechnicalfeasibilityandwherethebusinesshasanintentionandabilitytousetheasset.
Researchanddevelopmentcosts
Researchexpenditureisrecognisedasanexpenseasincurred.
Development costs include externally acquired and internally generated costs ofmaterials and services,which can bedirectlyattributabletothedevelopmentactivitiesofacquiringorgeneratinganintangibleasset.
Costs incurredon development projects (relating to the design and testingof newor improved intangible assets) arerecognisedonlywhen it isprobablethatthefutureeconomicbenefitsthatareattributabletotheassetwillflowtotheGroup, thecostof theassetcanbemeasuredreliably, technical andcommercial feasibilityof theasset forsaleorusehavebeenestablished,andtheGroupintendsandisabletocompletetheintangibleassetandeitheruseitorsellit.
Capitaliseddevelopment costs are recordedas an intangible asset andamortised from the point at which the asset isreadyforuseonastraight-linebasisoveritsusefullife.Developmentcostspreviouslyrecognisedasanexpensearenotrecognisedasanassetinasubsequentperiod.
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10. TRADEANDOTHERPAYABLES
Indollars 2017 2016
Tradepayables 1,835,060 455,465
Sundrypayablesandaccruedexpenses 269,781 324,661
Relatedpartypayables 1,310,776 718,247
Totaltradeandotherpayables 3,415,617 1,498,373
Current 3,415,617 1,498,373
Non-current - -
Totaltradeandotherpayables 3,415,617 1,498,373
11. PROVISIONS
Indollars Makegood Total
Balanceat1July2016 - -
Provisionsmadeduringtheperiod 27,049 27,049
Totalprovisionsat30June2017 27,049 27,049
Significantaccountingpolicies
ProvisionsarerecognisedwhentheGrouphasapresentobligation(legalorconstructive)asaresultofapastevent,itisprobablethatanoutflowofresourcesembodyingeconomicbenefitswillberequiredtosettletheobligationandareliableestimatecanbemadeoftheamountoftheobligation.WhentheGroupexpectssomeorallofaprovisiontobereimbursed,forexample,underaninsurancecontract,thereimbursementisrecognisedasaseparateasset,butonlywhenthereimbursementisvirtuallycertain.Theexpenserelatingtoaprovisionispresentedinthestatementofprofitorlossandothercomprehensiveincomenetofanyreimbursement.
Make-goodprovisions
Amakegoodprovisionisrecognisedforthecostsofrestorationorremoval inrelationtoplantandequipmentandsiteleaseswherethereisalegalorconstructiveobligation.Theprovisionisinitiallyrecordedwhenareliableestimatecanbedeterminedanddiscountedtopresentvalue.Theunwindingoftheeffectofdiscountingontheprovisionisrecognisedasafinancecost.
Provisionsaremeasuredatthepresentvalueofmanagement’sbestestimateoftheexpenditurerequiredtosettlethepresentobligationattheendofthereportingperiod.Thediscountrateusedtodeterminethepresentvalueisapre-taxratethatreflectscurrentmarketassessmentsofthetimevalueofmoneyandtheriskspecifictotheliability.Theincreaseintheprovisionduetothepassageoftimeisrecognisedasinterestexpense.
Significantaccountingpolicies
Tradeandotherpayablesrepresentliabilitiesforgoodsandservicesprovidedtothebusinesspriortotheendofthefinancialyearwhichareunpaid.Theamountsareunsecuredandareusuallypaidwithin30daysofrecognition.Tradeandotherpayablesarepresentedascurrentliabilitiesunlesspaymentisnotduewithin12monthsfromthereportingdate.Theyarerecognisedinitiallyattheirfairvalueandsubsequentlymeasuredatamortisedcostusingtheeffectiveinterestmethod.
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12. EMPLOYEEBENEFITLIABILITIES
Indollars 2017 2016
Liabilityforannualleave 334,022 205,700
Liabilityforsuperannuation 237,876 -
Liabilityforlongserviceleave 49,489 -
Liabilityforpayroll 278,647 -
Totalemployeebenefitliabilities 900,034 205,700
Current 850,545 205,700
Non-current 49,489 -
Totalemployeebenefitliabilities 900,034 205,700
13. BORROWINGS
Indollars 2017 2016
Current:Convertiblenotes 5,853,688 5,421,844
Non-Current:Convertiblenotes 4,954,814 -
Significantaccountingpolicies
Employeebenefitsrepresentsamountsaccruedforemployeepayroll,superannuation,annualleaveandlongserviceleave.
The current portion for this provision includes the total amount accrued for annual leave entitlements and theamounts accrued for long service leave entitlements that have vested due to employees having completed therequiredperiodofservice.BasedonpastexperiencetheGroupdoesnotexpectthe fullamountofannual leaveorlong service leave balances classified as current liabilities to be settled in the next 12 months. However, theseamountsmust beclassifiedascurrent liabilities since theGroupdoesnothavean unconditional right todefer thesettlementoftheseamountsintheeventemployeeswishtousetheirleaveentitlement.
TheGrouprecognisesa liabilityfor longserviceleaveandannual leavemeasuredasthepresentvalueofexpectedfuture payments to be made in respect of services provided by employees up to the reporting date using theprojected unit credit method. Consideration is given to expected future wage and salary levels, experience ofemployeedepartures,andperiods toservice.Expected future paymentsare discounted usingmarketyieldsat thereporting date on national government bonds with terms to maturity and currencies that match, as closely aspossible,theestimatedfuturecashoutflows.
Significantaccountingpolicies
Convertiblenotesareseparatedintoliabilityandequitycomponentsbasedonthetermsofthecontract.
Onissuanceoftheconvertiblenotes,thefairvalueoftheliabilitycomponentisestimatedusingamarketrateforanequivalent non-convertible instrument. This amount is classified as a financial liability at amortised cost (net oftransactioncosts)untilitisextinguishedonconversionorredemption.
The remainder of the proceeds is allocated to the conversion option that is recognised and included in equity.Transaction costsare deducted fromequity.The carryingamountof the conversionoption is not re-measured insubsequentyears.
Transactioncostsareapportionedbetweentheliabilityandequitycomponentsof theconvertiblenotesbasedontheallocationofproceedstotheliabilityandequitycomponentswhentheinstrumentsareinitiallyrecognised.
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14. DERIVATIVEFINANCIALINSTRUMENTS
Indollars 2017 2016
DiscountonPre-IPOconvertiblenotes 884,788 -
15. SHARECAPITAL
Numberof
shares$
Inissueat1July2015 41,243,390 4,697,661
Sharesplitduringthereportingperiod 203,000 -
Inissueat30June2016 41,446,390 4,697,661
Sharedissuedfromsharesplit 82,892,780 -
Inissueat30June2017 124,339,170 4,697,661
AllordinarysharesrankequallywithregardtotheCompany’sresidualassets.Theholdersofthesesharesareentitledtoreceivedividendsasdeclaredfromtimetotime,andareentitledtoonevotepershareatgeneralmeetingsoftheCompany.TheCompanydoesnothaveauthorisedcapitalorparvalueinrespectofitsshares.Allissuedsharesarefullypaid.
Dividends
NodividendsweredeclaredorpaidbytheCompanyfortheyear(2016:nil).
Significantaccountingpolicies
Ordinarysharesareclassifiedasequity.Incrementalcostsdirectlyattributabletotheissueofnewsharesoroptionsareshowninequityasadeduction,netoftax,fromtheproceeds.Transactioncostsarethecoststhatareincurreddirectlyinconnectionwiththeissueofthoseequityinstrumentsandwhichwouldnothavebeenincurredhadthoseinstrumentsnotbeenissued.
Significantaccountingpolicies
Derivatives are initially recognised at fair value on the date a derivative contact is entered into and subsequentlyremeasuredtotheirfairvalueateachreportingdate.Theaccountingforsubsequentchangesinfairvaluedependsonwhetherthederivativeisdesignatedasahedginginstrument,andifso,thenatureoftheitembeinghedged.
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16. RESERVES
Indollars
Subscriptionsforequity
Optionsreserve
Foreigntranslation
Total
Balanceat1July2015 - 24,765 - 24,765
Sharebasedtransactions - 117,840 - 117,840
Balanceat30June2016 - 142,605 - 142,605
Subscriptionsforequityissued 1,648,044 - - 1,648,044
Reportingtranslationdifferences (12,239) (12,239)
Balanceat30June2017 1,648,044 142,605 (12,239) 1,778,410
17. EARNINGSPERSHARE(EPS)
The calculation of basic earnings per share has been based on the following loss attributable to ordinaryshareholdersandweighted-averagenumberofordinarysharesoutstanding.
Lossattributabletoordinaryshareholders
Indollars 2017 2016
LossfortheperiodattributabletoownersofiQNovateLtd (9,235,949) (6,613,719)
Weighted-averagenumberofordinaryshares
Innumberofshares 2017 2016
Weighted-averagenumberofordinarysharesatendoftheperiod 121,386,824 101,981,095
Weighted-averagenumberofsecuritiesifoutstandingoptionsexercised
121,386,824 101,981,095
Earningspershare
Incentspershare 2017 2016
Basiclosspershare (7.61) (6.49)
Dilutedlosspershare (7.61) (6.49)
Basic earnings per share is calculated as earnings for the period attributable to the Company over theweightedaveragenumberofshares.
DilutedearningspershareiscalculatedasearningsfortheperiodattributabletotheCompanyovertheweightedaveragenumberofshareswhichhasbeenadjustedtoreflectthenumberofshareswhichwouldbeissuedifoutstandingoptionsandperformancerightsweretobeexercised.However,duetothestatutorylossattributabletotheCompanyforboththefinancialyearended30June2017andthecomparativeperiodended30June2016,theeffectoftheseinstrumentshasbeenexcludedfromthecalculationsofdilutedearningspershareforbothperiodsastheywouldreducethelosspershare.
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18. INVESTMENTS
Thepercentageownershipinterestisequivalenttothepercentagevotingrightsforallinvestments.
(a) Interestsinsubsidiaries,associates,andjointventure
Entityname Countryofincorporation
Ownershipinterest2017
Ownershipinterest2016
Subsidiaries
FarmaForceLimited Australia 70.6% 70.6%
ClinicalResearchCorporationPtyLtd Australia 100% 100%
LifeScienceBiosensorDiagnosticsPtyLtd Australia 81% 81%
GlucoseBiosensorSystems(GC)Inc USA 81% 81%
GlucoseBiosensorSystems(GC)PtyLtd Australia 81% 81%
AntisomaTherapeuticsPtyLtd Australia 100% 200%
Associates1
NewFrontierHoldingsLLC(“NewFrontier”) USA 34.1% 34.1%
NereidEnterprisesPtyLtd Australia 34.1% 34.1%
NereidEnterprisesLLC USA 34.1% 34.1%
1Percentageshownisnetofnon-controllinginterest.
(b) Investmentinassociatesaccountedforusingequitymethod
Indollars 2017 2016
Reconciliationtocarryingamount
Netassetbalanceatstartofperiod 1,243,277 -
Netassetatacquisition - 1,345,000
Lossfortheperiod (142,712) (101,723)
Othercomprehensiveincome - -
Netassetbalanceatendofperiod 1,100,565 1,243,277
Consolidatedentity’ssharein% 40% 40%
Consolidatedentity’sshareatacquisition 440,226 497,311
Adjustmentpostedinfollowingperiod - 40,689
Consolidatedentity’sshareatreportingdate 440,226 538,000
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’18.INVESTMENTS(CONTINUED)
19. OPERATINGLEASES
TheGroupleasesanumberofofficefacilitiesunderoperatingleases.Theleasesarenon-cancellableandrunforaperiodof1 to4years,withanoption to renewthe leaseafter thatdate.Contingent rentalprovisionswithin the leaseagreement require that theminimum leasepaymentsshallbe increasedby4%perannum.Theleaseallowsforsublettingofallleaseareas.
Futureminimumleasepayments
Asat30June2017,thefutureminimumleasepaymentsundernon-cancellableleaseswerepayableassetoutinthefollowingtable.
Indollars 2017 2016
Lessthanoneyear 112,165 159,137
Betweenoneandfiveyears - 107,496
Morethanfiveyears - -
Totalfutureminimumleasepayments 112,165 266,633
20. CONTINGENCIES
TheGrouphasnocontingentliabilitiesorassetsasatthereportingdate(2016:None).
Significantaccountingpolicies
Subsidiaries
Subsidiaries are all entities (including structured entities) over which the parent has control. Control isestablishedwhentheparent isexposedto,orhasrightstovariableratesofreturnsfromits involvementwiththe entityand has theability toaffect those returns through its power todirect the relevantactivitiesof theentity.
Associates
Associates are all entities over which the Group has significant influence but not control, generallyaccompanying a shareholding between 20%and 50%of the voting rights. Investments in associates and jointventures are accounted for in theGroup’s financial statements using the equitymethodof accounting, afterinitiallybeingrecognisedatcost.
TheGroup’sshareoftheassociatespost-acquisitionprofitsorlossesarerecognisedinthestatementofprofitorloss, and its share of post-acquisition movements in reserves is recognised in reserves. The cumulative postacquisitionmovementsareadjustedagainstthecarryingamountoftheinvestment.Dividendsreceivablefromassociatesreducethecarryingamountoftheinvestment.
When theGroup’s shareof losses inanassociate equalsorexceeds its interest in theassociate, includinganyunsecuredreceivables,theGroupdoesnotrecognisefurtherlosses,unless ithasincurredobligationsormadepaymentsonbehalfoftheassociate.
.
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21. RECONCILIATIONOFCASHFLOWSFROMOPERATINGACTIVITIES
Indollars 2017 2016
Cashflowsfromoperatingactivities
Lossfortheperiod (10,199,188) (7,394,351)
Adjustmentsfor:
Depreciation 151,095 92,668
Sharebasedpayments - 117,840
Interestonconvertiblenotes 985,317 536,374
Shareoflossfromassociatedcompanies 115,919 -
(8,946,857) (6,647,469)
Changesin:
Tradeandotherreceivables (33,267) (979,329)
Prepayments 48,360 -
Tradeandotherpayables 1,913,246 965,040
Incomeinadvance 178,023 (149,579)
Employeebenefits 694,334 -
Deferredtaxliability 35,718 -
Deferredtaxasset (355,173) -
2,481,241 (163,868)
Netcashusedinoperatingactivities (6,465,616) (6,811,337)
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CORPORATE DIRETORY
ACN149731644
Directors
DrGeorgeSyrmalis,ChairandGroupChiefExecutiveOfficer
ConTsigounis
PeterBuchananSimpson
Companysecretary
GerardoIncollingoChiefExecutiveOfficerDrGeorgeSyrmalis
Registeredoffice
Level3,222ClarenceStreet
Sydney,NSW2000
Principalplaceofbusiness
Level3,222ClarenceStreet
Sydney,NSW2000
Shareregister
BoardroomPtyLimited
Level12,225GeorgeStreet
SydneyNSW2000
StockexchangelistingsIQNovateLtdsharesarelistedontheNationalSecuritiesExchange(NSX:IQN).Websiteaddresswww.iqnovate.com
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