2017 annual report - the iq group global ltd

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IQNOVATE™ LTD (“IQN” or ‘the Company”) ACN 149 731 644

™

2017 Annual Report

CONTENTS

CorporateDirectory 2

ChairandCEO’sReport 3

OperatingandFinancialReview 5

Directors’Report 6

RemunerationReport 9

CorporateGovernanceStatement 14

LeadAuditor’sIndependenceDeclaration 21

ConsolidatedFinancialStatements 22

NotestotheConsolidatedFinancialStatements 27

Directors’Declaration 51

IndependentAuditor’sReport 52

NSXAdditionalInformation 55

2017ANNUALREPORT 2

CORPORATE DIRECTORY ACN149731644

Directors

DrGeorgeSyrmalis,ChairandGroupChiefExecutiveOfficer

ConTsigounis

PeterBuchananSimpson

Companysecretary

GerardoIncollingo

ChiefExecutiveOfficerDrGeorgeSyrmalis

Registeredoffice

Level3,222ClarenceStreet

Sydney,NSW2000

Principalplaceofbusiness

Level3,222ClarenceStreet

Sydney,NSW2000

Shareregister

BoardroomPtyLimited

Level12,225GeorgeStreet

SydneyNSW2000

AuditorRSMAustraliaPartnersLevel13,60CastlereaghStreetSydneyNSW2000

StockexchangelistingsIQNovateLtdsharesarelistedontheNationalSecuritiesExchange(NSX:IQN).

Websiteaddresswww.iqnovate.com

IQNOVATELTDANDCONTROLLEDENTITIESCHAIRANDGROUPCEO’SREPORT

2017ANNUALREPORT 3

CHAIR AND GROUP CEO’S REPORT iQN,sinceitsinceptionin2011,hasbeenapureplaycompanyfocusedondevelopingearlystagelifescienceassetsforitsclientsorforitselfandtakingadvantageofriskbyestablishingasustainable“riskadvantage”whichisasimportantfortheentryintheinvestmenttodayascreatinganexitinthefuture.

OverthelastthreeyearsiQN’sfinancialshaveimprovedasthechartsinthefollowingcommentaryonresultssectionsignifies,howeverstillsustaininganoperationalcashburnof$6.5million.Despitethiscashburn,Ibelievetheintrinsicvalueofthecompanyremainsmultipletimeshigherthanthemarketcapitalisationof$37.3milliontoday.

ThisintrinsicvalueisascribedtothecompanybytheassetsitownsanddevelopsaswellasitssubsidiaryentitiesFarmaForce(FFC)andClinicalResearchCorporation(CRC).

Myfocusinthisyear’soperationalreviewwillbemoreaboutthedevelopmentprogramsthecompanyisrunningthanthesubsidiaryentitieswhichareconsolidatedintothisreport.

iQN’srevenueisgeneratedthroughthreeseparatestreams–commercialsales,capitalgains,andResearchandDevelopment.

• SalesofethicalpharmaceuticalsandmedicaldevicestophysiciansandotherhealthcarepractitionersonbehalfofourglobalBiopharmaclientsthroughFFC;

• ResearchandDevelopment,clinicalandmedicalservicestoclientglobalBiopharmacompanies;

• IncubationanddevelopmentofIntellectualpropertyonbehalfofclients;and

• CapitalgainsfromownershipofIP.

Overthepastfouryears,throughateamofscientists,economists,analystsandexternalcollaborators,wehavebeensourcing,identifyingandvalidatingdiscoverystagelifescienceIP.Inafieldrequiringthemosthighlyskilledlabourandscientificinnovationtobringproductstomarket,atanygiventime,thenumberof“good”opportunitiestodeploycapitalthatwillbesuccessfulandofferasuperiorinvestmentreturn

isfinitehencewehavesetveryrigidandspecificcriteriaofwhatwelookfor:

• Accesstheassetnotthelicense;wehavebeenlookingtoassignassignmentoftheIPasopposedtolicensetheIP.(AnassignmentofIPisatransferofownershipwhereasanIPlicenseallowsthecompanytousetheworkwithouttransferringownership).It’sfarmorecomplicatedtoexecuteanassignmentthanitistolicensee.g.in2014inAustralia,732licensingagreementswereachievedandonly10assignments.

• Createvehiclesthataccessthebiotechthemesforwhichbenefitsaccruetothecompanies,andbyextensiontheshareholders,asopposedtojustthecustomers.

• Correlatethescientificmilestonestothebusinessmilestones,addingvaluetotheprojectsthroughthecreationofearlyfinancialexits.

• MinimizeIPacquisitioncost,acquiringtheassetatrealisticpricegiventhedevelopmentriskandinvestmentnecessarytode-riskandcommenceexitprocess.

Inthepast,spikesofenthusiasmforthebiotechmarketshaveresultedinaveryrapidadvanceinassetspricesunjustifiedbythestageofdevelopmentandtherapeuticarea,denotingadistortionintheperceptionoftimebyinvestorsintheirchaseforoutsizedreturns.Todayalotoftheinvestorschasingreturnsinthebiotechnologysectoraredoingsobecauseoftheperformanceofthepast5yearsandnotbecausetheyhaveafirmgraspofthescience,theeconomicchallengesinvolvedortheearningspotentialgoingforward,andaretakingonalotmoreriskthantheyassumetheyare.iQNactivelyseekstotakesomeoftheriskawaybyitsinvestmentthesis.

AfterscreeninghundredsofearlystagedevelopmentsduringthepastfewyearsIQNhasavaluableandsustainabletherapeuticanddiagnosticportfolio.

IQNOVATELTDANDCONTROLLEDENTITIESCHAIRANDGROUPCEO’SREPORT

2017ANNUALREPORT 4

DiagnosticPortfolio

Thediagnosticplatformwehaveacquiredandaredeveloping,createsanentireportfolioofdiagnostic,screeningandprognostictests,forprofessionaluse,self-testingandpointofcareatclinic.

Ourcurrentdevelopmentstagepipelineincludes:

• hormones• immunology• biochemistry• tumormarkers• communicablediseases• nucleicacids

Asignificantfranchiseforourcompanyisdiabetes,andweareapproachingthecommercialisationstagewiththisasset.Thisnon-invasiveglucosetesthasthepotentialtobecomethesubstituteforeverypatientthatcurrentlyneedstodothefingerpricktestseveraltimesperday.

Thisinnovationenablesapatienttomonitorglucosewithoutprickingtheirfingerandithasthepotentialtoaddress415millionadultsthatcurrentlyhavediabetes.By2040thisnumberwillriseto642million.(IDFAtlas7thEdition).

Theentireglucoseself-monitoringmarket,accordingtoGlobalData,willreach$12.2billionbytheyear2017.

TherapeuticPortfolio

iQNisalsoundertakingatherapeuticresearchanddevelopmentprogramofafirstinclass,novelmodeofaction,biologiccompoundforbreastcancer.Itisanticipatedthatfollowingcompilationofthecompletedpreclinicaldatafile,thecompanywillsubmittotheFDAaninvestigativenewdrugapplicationtocommencehumanclinicaltrials.Followingthispilotsubmission,weareexpectingthatseparateINDA’swillbefiledforotheroncologyindications.

• BreastCancer• ProstateCancer• Melanoma• LungCancer

ItisforecastthattheglobalbreastcancertherapeuticsmarketissettoincreaseinvaluefromA$10.4billionin2014to$17.2billionby2021,ataCompoundAnnualGrowthRate(CAGR)of7.3%,accordingtobusinessintelligenceproviderGBIResearch.

DrGeorgeSyrmalisChairandGroupCEO

IQNOVATELTDANDCONTROLLEDENTITIESOPERATINGANDFINANCIALREVIEW

2017ANNUALREPORT 5

OPERATING AND FINANCIAL REVIEW

TheOperatingandFinancialReview(“OFR”)isprovidedtoassistshareholders’understandingoftheperformanceofiQnovateLtd(“iQN”orthe“Company”)anditssubsidiaries(collectivelyreferredtoasthe“Group”)andthefactorsunderlyingtheGroup’sresultsandfinancialpositionfortheperiod1July2016to30June2017.

SUMMARYOFFINANCIALRESULTS

• 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

OPERATINGHIGHLIGHTS

Refer to the Chair and Group CEO’s Report onpages3to4foroperatinghighlights.

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

IQNOVATELTDANDCONTROLLEDENTITIESDIRECTORS’REPORT

2017ANNUALREPORT 6

DIRECTORS’ REPORT TheDirectorspresenttheirreporttogetherwiththeconsolidatedfinancialstatementsofiQnovateLtd(“iQN”orthe“Company”)anditssubsidiaries(collectivelyreferredtoasthe“Group”)asatandfortheyearended30June2017.

DIRECTORS

ThenamesofDirectorswhoheldofficeoftheCompanyatanytimeduringthefinancialyearandatthedateofthisreport,togetherwithinformationontheirqualifications,experience,specialresponsibilities,otherlistedcompanydirectorshipsandotherdetails,areasfollows.

DrGeorgeSyrmalis

ChairandGroupChiefExecutiveOfficerAppointed:8March2011

TrainedinNuclearMedicine-Radiation

Immunology.

DrSyrmalisfoundedandledasCEOandChairofTheBionuclearGroupSA,(1995-2005)incorporatingAntisomaSA,BionuclearInstituteofDiagnosisandTherapySA,BionuclearResearchandDevelopmentSA,andVitalcheckSA.

DrSyrmalisiscurrentlyaNon-executiveDirectorofFarmaForceLimited,acompanylistedontheAustralianStockExchange;andExecutiveDirectorofiQXLimited,acompanylistedontheNationalStockExchangeofAustralia.

DrSyrmalisservesasamemberoftheRemunerationandNominationCommittee,andtheAuditandRiskManagementCommittee,foriQnovateLtd.

ConTsigounis

ExecutiveDirectorAppointed:8March2011

MemberoftheAustralianInstituteofCompany

Directors.

MrTsigounishasover20years’experienceinbusinessandinvestorrelations,specificallyinthewholesaleandretailsectors.AsamemberoftheBoardofiQnovateLtdsinceitsinception,Conhasbeenresponsibleforexecutingthatcompany’sinvestorrelationsandcapitalraisingstrategy.HisexperienceinShareholderrelationshipmanagementgiveshimthenecessaryskillsettoassisttheCompanyattainitscorporateobjectives.

MrTsigounisiscurrentlyaNon-ExecutiveDirectorofFarmaForceLimited,acompanylistedontheAustralianStockExchange.

PeterSimpson

Non-ExecutiveDirectorAppointed:28July2011

MastersofPharmacy

MrSimpsonhasextensiveexperienceinthepharmaceuticalindustryandhasbeeninvolvedinthedevelopmentofpharmaceuticalproductsforboththeAustralianandinternationalmarkets.ForeightyearshewastheResearchandDevelopmentManageratDavidBullLaboratoriesandoversawthedevelopmentandapprovalofover80productsintheAustralian,UKandUSmarkets.

MrSimpsoniscurrentlyaNon-ExecutiveDirectorofiQXLimited,acompanylistedontheNationalStockExchangeofAustralia.

MrSimpsonservesasamemberoftheRemunerationandNominationCommittee,andtheAuditandRiskManagementCommittee,foriQnovateLtd.

COMPANYSECRETARY

GerardoIncollingo

GerardowasappointedCompanySecretaryon22August2016.GerardoisManagingDirectorofLCIPartner’s,afirmofaccountants.

KelvinBoateng

KelvinBoatengwasiQnovateLtd’sCompanySecretaryandHead,Legal&CommercialAffairsuntilhisresignationon12August2016.

PRINCIPALACTIVITIES

DuringtheyeartheprincipalactivityfortheGroupconsistedoftheprovisionofassetmanagmentservicestolistedandunlistedcompaniesintheLifeScienceindustry.

IQNOVATELTDANDCONTROLLEDENTITIESDIRECTORS’REPORT(CONTINUED)

2017ANNUALREPORT 7

DIVIDENDS

Nodividendshavebeenpaidordeclaredsincetheendofthepreviousfinancialyear,nordothedirectorsrecommendthedeclarationofadividend.

REVIEWOFOPERATIONS

InformationontheoperationsandfinancialpositionoftheGroupanditsbusinessstrategiesandprospectsissetoutintheoperatingandfinancialreview(“OFR”)onpage5ofthisAnnualReport.

InformationintheOFRisprovidedtoenableshareholderstomakeaninformedassessmentabouttheGroup’sstrategiesandprospectsforfuturefinancialyears.DetailsthatcouldgiverisetolikelymaterialdetrimenttotheGroup(forexample,informationthatiscommerciallysensitive,isconfidentialorcouldgiveathirdpartycommercialadvantage)hasnotbeenincluded.

SIGNIFICANTCHANGESINTHESTATEOFAFFAIRS

TherehavebeennosignificantchangesinthestateofaffairsoftheCompanyduringtheyear.

SIGNIFICANTEVENTSAFTERTHEBALANCEDATE

TherehavebeennosignificanteventsoccurringafterthebalancedatewhichmayaffecttheGroup’soperationsorresultsofthoseoperationsortheGroup’sstateofaffairs.

LIKELYDEVELOPMENTSANDEXPECTEDRESULTSOFOPERATIONS

LikelydevelopmentsintheoperationsoftheGroupandtheexpectedresultsofthoseoperationsinfuturefinancialyearshavenotbeenincludedinthisreportastheinclusionofsuchinformationislikelytoresultinunreasonableprejudicetotheGroup.

ENVIRONMENTALREGULATION

TheDirectorsrecognisetheimportanceofenvironmentalandworkplacehealthandsafetyissues.TheDirectorsarecommittedtocompliancewithallrelevantlawsandregulationstoensuretheprotectionoftheenvironment,thecommunityandthehealthandsafetyofemployees.

TheoperationsoftheGrouparenotsubjecttoanyparticularandsignificantenvironmentalregulationunderthelawsoftheCommonwealthofAustraliaoranyofitsstatesorterritories.

Basedonresultsofenquiriesmade,theBoardisnotawareofanysignificantbreachesofenvironmentalregulationsduringtheperiodcoveredbythisreport.

REMUNERATIONREPORT

TheRemunerationReportissetoutonpages9to13andformspartoftheDirectors’Reportfortheyearended30June2017.

PROCEEDINGSONBEHALFOFTHECOMPANY

NopersonhasappliedtotheCourtundersection237oftheCorporationsAct2001forleavetobringproceedingsonbehalfoftheCompany,ortointerveneinanyproceedingstowhichtheCompanyisaparty,forthepurposeoftakingresponsibilityonbehalfoftheCompanyforallorpartofthoseproceedings.

NoproceedingshavebeenbroughtorintervenedinonbehalfoftheCompanywithleaveoftheCourtundersection237oftheCorporationsAct2001.

INDEMNIFICATIONOFAUDITORS

TheCompanyhasnot,duringorsincetheendofthefinancialyearended30June2017,indemnifiedoragreedtoindemnifytheauditoroftheCompanyoranyrelatedentityagainstaliabilityincurredbytheauditor.Duringthefinancialyear,theCompanyhasnotpaidapremiuminrespectofacontracttoinsuretheauditoroftheCompanyoranyrelatedentity.

NON-AUDITSERVICES

DuringtheyearRSMAustraliaPartners(“RSM”),theCompany’sauditor,hasperformedcertainotherservicesinadditiontotheauditandreviewofthefinancialstatementsandnotes.

TheBoardhasconsideredthenon-auditservicesprovidedduringtheyearbytheauditor,andissatisfiedthattheprovisionofthosenon-auditservicesduringtheyearbytheauditoriscompatiblewith,anddidnotcompromise,theauditorindependencerequirementoftheCorporationsAct2001(Cth).

DetailsoftheamountspaidtotheauditoroftheCompany,RSMAustraliaanditsnetworkfirmsforauditservicesprovidedduringtheyearended30June2017aredisclosedinnote27oftheconsolidatedfinancialstatements.

IQNOVATELTDANDCONTROLLEDENTITIESDIRECTOR’SREPORT(CONTINUED)

8

AUDITORINDEPENDENCE

Theauditor’sindependencedeclarationissetoutonpage21andformspartoftheDirectors’Reportfortheyearended30June2017

MEETINGSOFDIRECTORS

The number of Directors’ meetings held (including meetings of committees of the Board) and number ofmeetingsattendedbyeachoftheDirectorsoftheCompanyduringthefinancialyearare:

Director Fullmeetingsofdirectors

Meetingsofcommittees

Audit&RiskManagement

Remuneration&Nomination

A B A B A BDrGeorgeSyrmalis 13 13 1 1 1 1ConTsigounis 13 12 - - - -

PeterSimpson 13 12 1 1 1 1

A–Eligibletoattend B-Attended

DIRECTORSINTERESTS

TherelevantinterestsofeachDirectorintheequityoftheCompanyatthedateofthisreportaresetoutinthefollowingtable.

Director NumberofOrdinaryShares

NumberofOptionsover

OrdinaryShares

NumberofadditionalOrdinarySharessubjecttoescrow

DrGeorgeSyrmalis 12,409,250 -ConTsigounis 12,306,250 -PeterSimpson - - -

INDEMNIFICATIONANDINSURANCEOFDIRECTORSANDOFFICERS

TheCompanyhas,duringthefinancialyear,paidaninsurancepremiuminrespectofaninsurancepolicyforthebenefitoftheCompanyandthosenamedandreferredtoaboveincludingthedirectors,companysecretaries,officersandcertainemployeesoftheCompanyandrelatedbodiescorporateasdefinedintheinsurancepolicy.Theinsuranceisappropriatepursuanttosection199BoftheCorporatesAct2001.

Inaccordancewithcommercialpractice,theinsurancepolicyprohibitsdisclosureofthetermsofthepolicy,includingthenatureoftheliabilityinsuredagainstandtheamountofthepremium.

ROUNDINGOFAMOUNTS

TheamountsintheconsolidatedfinancialstatementshavebeenroundedofftothenearestdollarinaccordancewithASICCorporationInstrument2016/191.

TheDirectors’ReportissignedinaccordancewitharesolutionoftheDirectors.

DrGeorgeSyrmalisChair

Sydney

19 October2017

2017ANNUALREPORT

IQNOVATELTDANDCONTROLLEDENTITIESREMUNERATIONREPORT

2017ANNUALREPORT 9

REMUNERATION REPORT (AUDITED) ThisremunerationreportoutlinestheremunerationarrangementsforNon-ExecutiveDirectors,ExecutiveDirectorsandotherKeyManagementPersonnel(“KMP”)oftheCompanyforthefinancialyearended30June2017.

Theinformationinthisreporthasbeenauditedasrequiredbysection308(3C)oftheCorporationsAct2001.

Thereportispresentedunderthefollowingsections:

1. Keymanagementpersonnel(KMP)coveredinthisreport2. Remunerationgovernance3. ExecutiveKMPremunerationarrangements

A. RemunerationprinciplesandstrategyB. Detailofincentiveplans

4. ExecutiveKMPremunerationoutcomes(includinglinktoperformance)5. ExecutiveKMPcontractualarrangements6. Non-executivedirectorarrangements7. Additionaldisclosuresrelatingtooptionsandshares

1.KEYMANAGEMENTPERSONNEL

ThetablebelowoutlinestheKMPatanytimeduringthefinancialyear,andunlessotherwiseindicated,theywereKMPfortheentireyear.

Name Position TermasKMPNon-ExecutiveDirectors

PeterSimpson Non-ExecutiveDirector Entireyear

ExecutiveDirectors

DrGeorgeSyrmalis ChairandGroupCEO Entireyear

ConTsigounis ExecutiveDirector Entireyear

OtherExeucutiveKMP

SpiroSakiris GroupChiefFinancialandOperatingOfficer Entireyear

2.REMUNERATIONGOVERNANCE

TheBoardhasestablishedaremunerationandnominationcommittee(“RNC”)whichiscurrentlycomprisedofthefollowingmembers:

Committeemember

DrGeorgeSyrmalis Member

PeterSimpson ChairofRNC

ThekeyresponsibilityoftheRNCistoassisttheBoardinitsoversightof:

• theremunerationframeworkandpolicyforExecutiveandemployeereward;• thedeterminationofappropriateExecutivereward,includingadviceonstructure,quantumandmix;• thedeterminationofachievementofperformancemeasuresincludedinanyvariableremunerationplan;• compliancewithapplicablelegalandregulatoryrequirements;and• boardsize,compositionandsuccessionplanning.

AfullcharteroutliningtheRNC’sresponsibilitiesisavailableat:www.iqnovate.com/corporate-governance/.

IQNOVATELTDANDCONTROLLEDENTITIESCORPORATEGOVERNANCESTATEMENT(CONTINUED)

2017ANNUALREPORT 10

3.EXECUTIVEKMPREMUNERATIONARRANGEMENTS

3ARemunerationprinciplesandstrategy

InFY17theexecutiveremunerationframeworkconsistedoffixedremunerationandshortandlong-termincentivesasoutlinedbelow.TheCompanyaimstorewardexecutiveswithalevelandmixofremunerationappropriatetotheirposition,responsibilitiesandperformancewithintheCompanyandalignedwithmarketpractice.RemunerationlevelsareconsideredannuallythrougharemunerationreviewwhichconsidersmarketdataandtheperformanceoftheCompanyandindividual.

3BDetailofincentiveplans

Short-termincentive(STI)

TheCompanyoperatesanannualSTIprogramavailabletoexecutivesandawardsacashincentivesubjecttotheattainmentofclearlydefinedkeyperformancemeasures.

AsummaryoftheExecutiveSTIplanineffectduringFY17isprovidedbelow:

Whoparticipates? DrGeorgeSyrmalis,ConTsigounis,andSpiroSakiris

HowisSTIdelivered? Cash

WhatistheSTIopportunity? Upto25%ofbasesalary

WhataretheperformanceconditionsforFY17?

Individualperformancegoalsagainstannualplans.

Howisperformanceassessed? Onanannualbasis,afterconsiderationofperformanceagainstkeyperformanceindicators(KPI).

Employeebenefitplan(EBP)

ThefollowingtableexplainsthekeyfeaturesoftheEmployeeBenefitPlan.DrGeorgeSyrmalisandSpiroSakirisareeligibletoreceive153,000and90,000performancerightsrespectivelyperannumundertheEBP.

Whoparticipates? AllemployeesoftheGroup.

HowisLongTermIncentivedelivered? Entitlementtosharesandperformancerights.

WhataretheperformanceconditionsfortheFY17grant?

Individualperformancegoalsagainstannualplans.

Howisperformanceassessed? Attheendoftherelevantperformanceperiod,theCompanywilldeterminewhetherandtowhatextenttheparticipanthassatisfiedtheapplicableperformancecriteria.

Whendoestheawardvest? Awardsvestafteratotalofthreeyears'continualservicefollowingachievementoftheapplicableperformancecriteria.

Howaregrantstreatedontermination? Theparticipantmustbeacurrentemployeeatvestingdateinordertobeentitledtoshares.

Howaregrantstreatedifachangeofcontroloccurs?

IfatakeoverbidorotherofferismadetoacquiresomeoralloftheissuedsharesoftheCompany,participantswillgenerallybeentitledtorequestthatallperformancerightsvestimmediately,regardlessofwhethertherelevantperformanceconditionshavebeensatisfied.


2017ANNUALREPORT 11

4.EXECUTIVEKMPREMUNERATIONOUTCOMESFOR2017

GroupperformanceanditslinktoSTI

KeyPerformanceIndicators(KPIs)aresetannually,withacertainlevelofconsultationwithKMP.Themeasuresarespecificallytailoredtotheareaeachindividualisinvolvedinandhasalevelofcontrolover.TheKPI’stargetareastheCompanybelievesholdgreaterpotentialforgroupexpansionandprofit,coveringfinancialandnon-financialaswellasshort-termandlong-termgoals.ThelevelsetforeachKPIisbasedonbudgetedfiguresfortheCompanyandrespectiveindustrystandards.

ThetablebelowprovidesasummaryoftheCompany’sperformanceinFY17.TheinformationbelowistakenintoaccountbytheBoardwhensettinganddeterminingshort-termandlong-termremunerationforKMP.

NoSTIorLTIpaymentsweremadein,orprovidedforduring,theperiodto30June2017or30June2016.

Shareperformance EarningsperformanceA$million

Period Closingsharepriceat30June

Dividendpershare

EPS Revenue Lossaftertax

FY2017 $0.45 NIL ($7.60) $4.7 ($9.9)

FY2016 $0.61 NIL ($6.49) $2.7 ($7.4)

FY2015 $0.55 NIL ($10.80) $0.8 ($4.4)

FY2014 $0.65 NIL ($3.65) $0.9 ($1.4)

FY2013 $1.20 NIL ($3.81) $0.8 ($1.5)

ExecutiveKMPremunerationdisclosurefortheyearended30June2017

ThefollowingtableofexecutiveKMPremunerationhasbeenpreparedinaccordancewithaccountingstandardsandtheCorporationsAct2001requirements,fortheperiod1July2016to30June2017.

KMP ShortTerm Postemploy-ment

Sharebasedpayments

Total

Name Year Basesalary Cashbonus

Non-cashbenefit

Other Super-annuation

Options Shares Total Perfor-mancerelated%

GeorgeSyrmalis

2017 310,596 - 9,463 44,277 29,094 - - 393,430 0%

2016 299,444 50,000 - 50,004 31,172 - - 430,620 0%

ConTsigounis

2017 210,539 - - 34,379 20,188 - - 265,106 0%

2016 214,040 50,000 - 41,670 24,938 - - 330,648 0%

SpiroSakiris

2017 160,096 - - - 14,250 - - 174,346 0%

2016 136,462 - - - 12,551 - - 149,013 0%

TotalExecutiveKMP

2017 681,231 - 9,463 78,656 63,532 - - 832,882 0%

2016 649,946 100,000 - 91,674 68,661 - - 910,281 0%


2017ANNUALREPORT 12

5.EXECUTIVEKMPCONTRACTUALARRANGEMENTS

RemunerationarrangementsforexecutiveKMPareformalisedinemploymentagreements.Thekeytermsandconditionsof executiveemploymentagreements for the yearended30 June2017areoutlined in the tablebelow.

Executive Position Effectivedate

Fixedannualremuner-ation1

Term Noticeperiod2

Terminationpayment

GeorgeSyrmalis

GroupChiefExecutiveOfficer

1January2016

$281,250 Ongoing 6months SuperannuationwillbepaidirrespectiveoftheterminationbenefitscapundertheCorporationsAct.

SpiroSakiris

GroupChiefFinancialandOperatingOfficer

1January2016

$150,000 Ongoing 6months SuperannuationwillbepaidirrespectiveoftheterminationbenefitscapundertheCorporationsAct.

ConTsigounis

Head,InvestorRelations

12November2015

$205,310 Ongoing 1month SubjecttotheterminationbenefitscapunderCorporationsAct.

1FixedAnnualRemunerationincludesbasesalaryonly.2TheCompanymayterminateemploymentimmediatelyandwithoutnoticeincertaincircumstances,includingwheretheexecutivehascommittedaseriousorpersistentbreachoftheiremploymentagreementorwheretheexecutivehasbeendishonestorfraudulentinthecourseofperformingtheirduties.

6.NON-EXECUTIVEDIRECTORARRANGEMENTS

DeterminationoffeesandmaximumaggregateNEDfeepool

TheConstitutionoftheCompanyprovidesthatnon-executivedirectors,otherthanaManagingDirectororanExecutiveDirector,areentitledtodirector’sfeesasdeterminedbytheDirectors,butnotexceedinginaggregateforanyfinancialyear,themaximumsumthatisfromtimetotimeapprovedbytheCompanyinGeneralMeeting.Atthedateofthisreportthismaximumsumis$300,000(inclusiveofsuperannuation).

Feepolicy

NEDfeesconsistofbasefeesandcommitteefees.ThepaymentofcommitteefeesrecognisestheadditionaltimecommitmentrequiredbyNEDswhoserveonboardcommittees.DirectorswhoalsochairtheAuditandRiskManagementCommitteeshallbeentitledtoanadditionalfeeof$5,000(includingsuperannuation)perannum.Thechairoftheboardattendsallcommitteemeetingsbutdoesnotreceiveanyadditionalcommitteefeesinadditiontobasefees.

NEDsmaybereimbursedforexpensesreasonablyincurredinattendingtotheCompany’saffairs.NEDsdonotreceiveretirementbenefits,nordotheyparticipateinanyincentiveprograms.

StatutoryremunerationtableforFY17

ThetablebelowsetsouttheelementsofNEDfeesandotherbenefitsprovidedduring2017.

Feesapplicablefor2017 Chair Member

Board $35,000 $35,000

AuditandRiskManagementCommittee $5,000 Nil

RemunerationandNominationCommittee Nil Nil

Superannuation Includedinaboveamounts.

Other Reimbursementoftravelandotherexpenses


2017ANNUALREPORT 13

6.NON-EXECUTIVEDIRECTORARRANGEMENTS(CONTINUED)

Non-executiveremunerationdisclosurefortheyearended30June2017

Thefollowingtableofnon-executiveremunerationhasbeenpreparedinaccordancewithaccountingstandardsandtheCorporationsAct2001requirements,fortheperiod1July2016to30June2017.AllamountsareinAUD.

NED Year Boardfees

Bonus Non-cashbenefit

Super-annuation

Total PerformanceRelated%

PeterSimpson

2017 36,697 - - 3,486 40,183 0%

2016 36,697 25,000 - 5,861 67,558 0%

TotalNED 2017 36,697 - - 3,486 40,183 0%2016 36,697 25,000 - 5,861 67,558 0%

7.ADDITIONALDISCLOSURESRELATINGTOOPTIONSANDSHARES

MovementsinEquityHoldingsofKMP

ThefollowingtablesetsoutthemovementduringthereportingperiodinthenumberofordinarysharesiniQnovateLtdhelddirectly,indirectly,orbeneficiallybyKMPincludingtheirrelatedparties.

KMP Heldat1July2016

Grantedasremuneration

Receivedonvestingofrights

Netchangeother

Forfeited Heldat30June2017

Non-executiveDirectors

PeterSimpson - - - - - -

ExecutiveDirectors GeorgeSyrmalis 12,409,250 - - - - 12,409,250

ConTsigounis 12,306,250 - - - - 12,306,250

OtherExecutiveKMP

SpiroSakiris 733,200 - - - - 733,200

TotalKMP 25,448,700 - - - - 25,488,700

MovementsinOtherEquityHoldingsofKMP

ThefollowingtablesetsoutthemovementduringthereportingperiodinthenumberofOptionsiniQnovateLtdhelddirectly,indirectly,orbeneficiallybyKMPincludingtheirrelatedparties.

KMP Heldat1July2016

No.grantedasremun-eration

No.vested

No.cancelled

No.forfeited

Heldat30June2017

Non-executiveDirectorsPeterSimpson - - - - - -ExecutiveDirectors GeorgeSyrmalis - - - - - -ConTsigounis - - - - - -OtherExecutiveKMP SpiroSakiris - - - - - -

TotalKMP - - - - - -

IQNOVATELTDANDCONTROLLEDENTITIESCORPORATEGOVERNANCESTATEMENT

2017ANNUALREPORT 14

CORPORATE GOVERNANCE STATEMENT

TheBoardiscommittedtoachievinganddemonstratingthehigheststandardsofcorporategovernance.TheBoardcontinuestorefineandimprovethegovernanceframeworkandpracticesinplacetoensuretheymeettheinterestsofshareholders.TheCompany’scorporategovernancepoliciesandprocedurescomplywithAnnexure1oftheNationalSecuritiesExchangeofAustralia(NSX)PracticeNote14.Inaddition,theCompany’scorporategovernancepoliciesandproceduresalsoincorporatethoserecommendationsreferredtointheASXCorporateGovernanceCouncil’sCorporateGovernancePrinciplesandRecommendations(thePrinciples).

Principle1:Laysolidfoundationsformanagementandoversight

RoleoftheBoardandManagement

TheBoardofDirectorsisresponsibleforthecorporategovernanceoftheCompany.TheBoardprovidesstrategicguidancefortheCompany,andeffectiveoversightofmanagement.TheBoardguidesandmonitorsthebusinessandaffairsoftheGrouponbehalfoftheshareholdersbywhomtheyareelectedandtowhomtheyareaccountable.

TheBoardhasdelegatedresponsibilityforday-to-daymanagementoftheCompanytotheChiefExecutiveOfficer(CEO)andthereisaformaldelegationsstructureinplacewhichsetsoutthepowersdelegatedtotheCEOandthosespecificallyretainedbytheBoard,thesedelegationsarereviewedonaregularbasis.

ResponsibilitiesoftheBoard

TheBoardisresponsiblefor:

• Overseeingthecompany,includingitscontrolandaccountabilitysystems;

• Overseeingtheintegrityoftheaccountingandcorporatesystems,includingexternalaudit;

• AppointingandremovingtheCEO/ManagingDirector;

• Whereappropriate,ratifyingtheappointmentandremovalofseniorexecutives;

• Providinginputintoandfinalapprovalofmanagement’sdevelopmentofcorporatestrategyandperformanceobjectives;

• Reviewing,ratifyingandmonitoringsystemsofriskmanagementandinternalcontrols,codesofconductandlegalcompliance;

• Monitoringseniorexecutivesperformanceandimplementationofstrategy;

• Ensuringtimelyandbalanceddisclosureofallmaterialinformationconcerningthecompanythatareasonablepersonwouldexpecttohaveamaterialeffectonthepriceorvalueofthecompany'ssecurities;

• Ensuringappropriateresourcesareavailabletoseniorexecutives;

• Approvingandmonitoringtheoperatingbudgetsandprogressofmajorcapitalexpenditure,capitalmanagementandacquisitionsanddivestures;and

• Monitoringtheeffectivenessoftheentity'sgovernancepractices.

Allocationofindividualresponsibilities

FormallettersofappointmentareprovidedtoallnewDirectorsandSeniorExecutivessettingoutkeytermsandconditionsoftheirappointment.

Responsibilitiesofmanagement

ManagementisresponsibleforimplementingthestrategicobjectivesofthecompanyandoperatingwithintheriskappetitesetbytheBoardaswellasotheraspectsoftheday-to-dayrunningoftheCompany.

ManagementisalsoresponsibleforprovidingtheBoardwithaccurate,timelyandclearinformationtoenabletheBoardtoperformitsresponsibilities.

Induction

AllnewDirectorsparticipateinaformalinductionprocesscoordinatedbytheCompanySecretary.ThisinductionprocessincludesbriefingsontheCompany’sfinancial,strategic,operationalandriskmanagementposition,theCompany’sgovernanceframeworkandkeydevelopmentsintheCompanyandtheindustryandenvironmentinwhichitoperates.


2017ANNUALREPORT 15

RoleandaccountabilityoftheCompanySecretary

TheCompanySecretaryisappointedbytheBoardandisresponsiblefor:

• AdvisingtheBoardanditsCommitteesonGovernancematters;

• MonitoringcompliancewithBoardpoliciesandprocedures;

• Co-ordinatingBoardpapers;

• AccuratelyrecordingdecisionsanddiscussionsfromBoardmeetings;and

• Co-ordinatingtheinductionandprofessionaldevelopmentofDirectors.

Inadditiontotheaboveresponsibilities,theCompanySecretary,playedanintegralroleinassistingwiththeconductandprocessesoftheBoard,aswellasthedispatchofmaterialtotheBoardmembers.

Ongoingtraining

Directorsidentifyadditionaltrainingneedsonanongoingbasisandattendtheseasnecessarytoensuretheyhavetheappropriateskillsandknowledgetoperformtheirrole.

AppointmentofBoardMembers

PriortoappointingorputtingforwardacandidateforelectiontotheBoard,appropriatecheckssuchascharacter,experience,criminalrecordsandeducationareperformed.AllmaterialinformationintheCompany'spossessionisprovidedtosecurityholderstoallowthemtomakeaninformeddecisionaboutthesuitabilityofthecandidateattheCompany’snextAnnualGeneralMeetingofshareholders.

Principle2:StructuretheBoardtoaddValue

TheBoard’spolicyisthattheBoardneedstohaveanappropriatemixofskills,experience,expertiseanddiversitytobewellequippedtohelptheCompanynavigatetherangeofchallengesfacedbythecompany.

Thenames,independencestatus,termsofservice,experience,expertiseandqualifications,ofthemembersoftheBoardasatthedateofthisreportaresetoutintheDirector’sReport.

Thecompanydoesnothaveamajorityofindependentdirectors.TheBoardconsidersthistobesatisfactoryconsideringthesizeandcomplexityofthebusiness.

CompositionoftheBoard

TheBoard’scompositionisdeterminedbasedoncriteriasetoutintheCompany’sconstitutionandtheBoardCharter.

TheBoardseekstoensurethat:

• Atanypointintime,itsmembershiprepresentsanappropriatebalancebetweenDirectorswithexperienceandknowledgeoftheCompanyanddirectorswithanexternalorfreshperspective;

• ThereisasufficientnumberofdirectorstoserveonBoardcommitteeswithoutoverburdeningthedirectorsormakingitdifficultforthemtofullydischargetheirresponsibilities;and

• ThesizeoftheBoardisappropriatetofacilitateeffectivediscussionandefficientdecisionmaking.

InaccordancewiththeNSXListingRules,theCompanymustholdanelectionofDirectorseachyear.

Boardcommittees

ToensurethattheresponsibilitiesoftheBoardareupheldandexecutedtothehighestlevel,theBoardhasestablishedthefollowingBoardcommittees:

• AuditandRiskManagementCommittee

• RemunerationandNominationCommittee

Eachofthesecommitteeshasestablishedchartersandoperatingproceduresinplace,whicharereviewedonaregularbasis.TheBoardmayestablishothercommitteesfromtimetotimetodealwithmattersofspecialimportance.TheCommitteeshaveaccesstotheCompany’sexecutivesandseniormanagementaswellasindependentadvice.CopiesoftheminutesofeachCommitteemeetingaremadeavailabletothefullBoard,andtheChairmanofeachCommitteeprovidesanupdateontheoutcomesattheBoardmeetingthatimmediatelyfollowstheCommitteemeeting.

Boardskillsmatrix

ThekeyskillsrequiredbytheBoardarehighlightedinthematrixbelow,theBoardbelievesthattherearesufficientdirectorswiththeseskillsandtherearenodeficienciesintheseskillsinthecurrentboard.


2017ANNUALREPORT 16

• Riskandcompliance:Identifykeyriskstothecompanyrelatedtoeachkeyareasofoperations.Abilitytomonitorriskandcomplianceandknowledgeoflegalandregulatoryrequirements.

• FinancialandAudit:Experienceinaccountingandfinancetoanalysestatements,assessfinancialviability,andcontributetofinancialplanning,overseebudgetsandfundingarrangements.

• Strategy:Abilitytoidentifyandcriticallyassessstrategicopportunitiesandthreatstotheorganisation.Developstrategiesincontextofourpoliciesandbusinessobjectives.

• Policydevelopment:Abilitytoidentifykeyissuesfortheorganisationanddevelopappropriatepolicyparameterswithinwhichthecompanyshouldoperate.

Independentdecisionmaking

TheBoardrecognisestheimportantcontributionindependentDirectorsmaketogoodcorporategovernance.AllDirectors,whetherindependentornot,arerequiredtoactinthebestinterestsoftheCompanyandtoexerciseunfetteredandindependentjudgment.

ADirectorisconsideredtobeindependentifheorsheisfreeofanyinterest,position,associationorrelationshipthatmightinfluenceorreasonablybeperceivedtoinfluence,inamaterialrespect,hisorhercapacitytobringanindependentjudgementtobearonissuesbeforetheBoardandtoactinthebestinterestsoftheCompanyanditssecurityholdersgenerally.

IfanyDirectorbelievesthereisachangeintheirindependencestatus,theyarerequiredtonotifytheBoardassoonaspossible.

TheBoardhasadoptedspecificprinciplesinrelationtodirectors’independenceandconsidersthefollowing,atleastannually,whendeterminingifaDirectorisindependent:

WhethertheDirector:

• Isasubstantialshareholderofthecompanyoranofficerof,orotherwiseassociateddirectlywith,asubstantialshareholderofthecompany.

• Isemployed,orhaspreviouslybeenemployedinanexecutivecapacitybythecompanyoranothergroupmember,andtherehasnotbeenaperiodofatleastthree

yearsbetweenceasingsuchemploymentandservingontheBoard.

• Haswithinthelastthreeyearsbeenaprincipalofamaterialprofessionaladviseroramaterialconsultanttothecompanyoranothergroupmember,oranemployeemateriallyassociatedwiththeserviceprovided.

• Isamaterialsupplierorcustomerofthecompanyorothergroupmember,oranofficeroforotherwiseassociateddirectlyorindirectlywithamaterialsupplierorcustomer.

• HasamaterialcontractualrelationshipwiththecompanyoranothergroupmemberotherthanasaDirector.

RoleoftheChairman

TheChairmanoftheBoardisresponsibleforleadershipoftheBoardandfortheefficientorganisationandconductoftheBoard’sfunctioning.

TheChairmanfacilitatestheeffectivecontributionofalldirectorsandpromotesconstructiveandrespectfulrelationsbetweendirectorsandbetweenBoardandmanagement.

NominationCommittee

TheNominationCommitteemeetsasrequiredduringtheyeartoassisttheBoardinfulfillingitscorporategovernanceresponsibilitiesinregardto:

• Boardappointments,re-electionsandperformanceandgeneralsuccessionplanningforBoard/SeniorManagement;

• Directors’inductionandcontinuingdevelopment;

• BoardCommitteemembership;and

• EndorsementofExecutiveappointments.

TheNominationCommittee’sChartersetsouttheCommittee’sresponsibilities,whichincludemakingrecommendationstotheBoardontheappropriateskillmix,personalqualities,expertiseanddiversityofeachpositionfollowingtheannualassessmentoftheBoard.Whenavacancyexistsorthereisaneedforparticularskills,theCommittee,inconsultationwiththeBoard,determinestheselectioncriteriabasedontheskillsdeemednecessary.BoardappointeesmuststandforelectionatthenextAnnualGeneralMeetingofshareholders.


2017ANNUALREPORT 17

TheCommitteealsomakesrecommendationstotheBoardandoverseesimplementationoftheprocedureforevaluatingtheBoard’sperformance.

Accesstoinformation

TheBoardisprovidedwiththeinformationitneedstodischargeitsresponsibilitieseffectivelyandallDirectorshavecompleteaccesstoseniormanagementthroughtheCEOorCompanySecretary.

Incertaincircumstances,eachDirectorhastherighttoseekindependentprofessionaladviceattheCompany’sexpense,withinspecifiedlimits,orwiththepriorapprovaloftheBoard.

Principle3:Actethicallyandresponsibly

CodeofConduct

TheCompany’sCorporateEthicsPolicyandCorporateCodeofConductsetsoutthebehaviorrequiredofDirectors,employeesandcontractorsasappropriateandincludetheobservanceoflegalandothercomplianceobligationsthatrelatetothecompany'sactivitiesfromtimetotime.TheBoardacknowledgesandemphasizestheimportanceofalldirectorsandemployeesmaintainingthehigheststandardsofcorporategovernancepracticeandethicalconduct.

ACorporateCodeofConducthasbeenestablishedrequiringdirectorsandemployeesto:

• Actinthebestinterestoftheentity;

• Acthonestlyandwithhighstandardsofpersonalintegrity;

• Exerciseduecareanddiligenceinfulfillingthefunctionsofoffice;

• Avoidconflictsandmakefulldisclosureofanypossibleconflictsofinterest;

• Complywiththelawsandregulationsthatapplytotheentityanditsoperations;

• Notknowinglyparticipateinanyillegalorunethicalactivity;and

• ComplywiththesharetradingpolicyoutlinedintheCodeofConduct.

ACorporateGovernanceCharterandBoardCharterhasbeenadoptedwhichregulatesthedutiesofDirectorsandtheirdealingswiththecompany(includingthetradingofsharesinthecompany)bothinternallyandexternally.

Principle4:Safeguardintegrityincorporatereporting

AuditandRiskManagementCommittee

TheAuditandRiskManagementCommitteeassiststheBoardinfulfillingitscorporategovernanceresponsibilitiesinregardto:

• Theadequacyoftheentity'scorporatereportingprocesses;

• Whethertheentity'sfinancialstatementsreflecttheunderstandingofthecommitteemembersof,andotherwiseprovideatrueandfairviewof,thefinancialpositionandperformanceoftheentity;

• Theappropriatenessoftheaccountingjudgementsorchoicesexercisedbymanagementinpreparingtheentity'sfinancialstatements;

• Theappointmentorremoval,rotation,independenceandperformanceoftheexternalauditor;

• Thescopeandadequacyoftheexternalauditandanynon-auditservices;

• If,andwhen,theCompanyestablishesaninternalauditfunction:o theappointmentorremovalofthehead

ofinternalaudit;o thescopeandadequacyoftheinternal

auditworkplan;ando theobjectivityandperformanceofthe

internalauditfunction.

Themembersof theAudit andRiskManagementCommitteethroughouttheReportingPeriodwere:

Name Executive/Non-Executive

Independent?

DrGeorgeSyrmalis Executive No

PeterSimpson Non-Executive No

Accordingly,thecompanydoesnothaveamajorityofindependentcommitteemembers.TheBoardconsidersthistobeappropriateconsideringthesizeandcomplexityofthebusiness.

ThequalificationsandexperienceoftheAuditandRiskManagementCommitteemembersandtheirattendanceatCommitteemeetingsisincludedinthedirectors'report.

TheAuditandRiskManagementCommitteereportstothefullBoardaftereverymeetingonall


2017ANNUALREPORT 18

mattersrelevanttothecommittee’srolesandresponsibilities.

Externalauditor

TheAuditandRiskManagementCommitteeoverseestherelationshipwiththeexternalauditor.InaccordancewiththeCorporationsAct2001,theleadAuditPartnerontheauditisrequiredtorotateatthecompletionofa5-yearterm.

TheexternalauditorattendstheAGMandisavailabletoansweryourshareholderquestionsabouttheconductoftheauditandthepreparationandcontentoftheauditor’sreport.

TheBoardhavereceivedfromitsChiefExecutiveOfficerandChiefFinancialOfficeradeclarationthat,intheiropinion,thefinancialrecordsoftheentityhavebeenproperlymaintainedandthatthefinancialstatementscomplywiththeappropriateaccountingstandardsandgiveatrueandfairviewofthefinancialpositionandperformanceoftheentityandthattheopinionhasbeenformedonthebasisofasoundsystemofriskmanagementandinternalcontrolwhichisoperatingeffectively.

Internalcontrol

TheBoardisresponsibleforreviewingthecompany’spoliciesonriskoversightandmanagementandsatisfyingitselfthatmanagementhasdevelopedandimplementedasoundsystemofriskmanagementandinternalcontrol.

TheBoardhasreceivedassurancefromtheChiefExecutiveOfficerandtheChiefOperatingOfficerthatthedeclarationprovidedinaccordancewithsection295AoftheCorporationsAct2001isfoundedonasystemofriskmanagementandinternalcontrolandthatthesystemisoperatingeffectivelyinallmaterialrespectsinrelationtofinancialreportingrisks.

Principle5:Maketimelyandbalanceddisclosure

iQnovateLtdhasestablishedpoliciesandprocedurestoensuretimelyandbalanceddisclosuresofallmaterialmattersconcerningtheCompany,andtoensurethatallinvestorshaveequalandtimelyaccesstoinformationontheCompany’sfinancialperformance.

ThesepoliciesandproceduresincludeacomprehensivedisclosurepolicythatincludesidentificationofmattersthatmayhaveamaterialeffectonthepriceontheCompany’ssecurities,qualitycontrolproceduresoverannouncements,

notifyingthemtotheNSX,postingrelevantinformationontheCompany’swebsiteandissuingmediareleases.

TheAnnualReportincludesrelevantinformationabouttheoperationsoftheCompanyduringtheyear,keyfinancialinformation,changesinthestateofaffairsandindicationsoffuturedevelopments.TheAnnualReportsforthecurrentyearandforpreviousyearsareavailableundertheInvestorRelationssectionofthecompanywebsite.

ThehalfyearandfullyearfinancialresultsareannouncedtotheNSXandareavailabletoshareholdersviatheCompanyandNSXwebsites.

Allannouncementsmadetothemarket,andrelatedinformation(includingpresentationstoinvestorsandinformationprovidedtoanalystsorthemediaduringbriefings)aremadeavailabletoallshareholdersundertheinvestorrelationssectionoftheCompanywebsiteaftertheyarereleasedtotheNSX.AllNSXannouncements,mediareleasesandfinancialinformationareavailableonCompanywebsitewithinonedayofpublicrelease.

Principle6:Respecttherightsofshareholders

TheCompanySecretaryhasbeennominatedasthepersonresponsibleforcommunicationswiththeNSX.

AllExecutiveManagementhaveanongoingobligationtoadvisetheCompanySecretaryofanymaterialnon-publicinformationwhichmayneedtobecommunicatedtothemarket.

TheCompanyhasanInvestorRelationsProgramwhichpromoteseffectivecommunicationwithshareholders,encouragesparticipationatgeneralmeetingsandencouragescommunicationsthroughouttheyear.

TheCompanyengageswithitssecurityholdersthrough:

• GivingthemreadyaccesstoinformationabouttheentityanditsgovernanceviatheCompanywebsite;

• Communicatingopenlyandhonestlywiththem;

• Encouragingandfacilitatingtheirparticipationinmeetingsofsecurityholders;and

• ProvidinganemailaddressandtelephonenumberonallcommunicationforsecurityholderswhowishtocontacttheCompany


2017ANNUALREPORT 19

TheCompanymakesallNSXannouncementsavailableviaitswebsite.Inaddition,shareholderswhoareregisteredreceiveemailnotificationofannouncements.

TheNoticeofAnnualGeneralMeeting(AGM)willbeprovidedtoallshareholdersandpostedonthecompany’swebsite.Noticesforgeneralmeetingsandothercommunicationswithshareholdersaredraftedtoensurethattheyarehonest,accurateandnotmisleadingandthatthenatureofthebusinessofthemeetingisclearlystatedandexplainedwherenecessary.

TheBoardencouragesfullparticipationbyshareholdersattheAnnualGeneralMeetingtoensureahighlevelofDirectoraccountabilitytoshareholdersandshareholderidentificationwiththeCompany’sstrategyandgoals.

AnAGMquestionformwillaccompanytheNoticeofMeeting,givingshareholderstheopportunitytoforwardquestionsandcommentstothecompanypriortotheAGM.TheexternalauditorisavailabletoanswerquestionsattheAGM.

Principle7:Recogniseandmanagerisk

TheBoardconsidersidentificationandmanagementofkeyrisksassociatedwiththebusinessasvitaltomaximizeshareholderwealth.Ayearlyassessmentofthebusiness'sriskprofileisundertakenandreviewedbytheBoard,coveringallaspectsofthebusinessfromtheoperationallevelthroughtostrategiclevelrisks.

TheCEOhasbeendelegatedthetaskofimplementinginternalcontrolstoidentifyandmanagerisksforwhichtheAuditandRiskManagementCommitteeandtheBoardprovidesoversight.Theeffectivenessofthesecontrolsismonitoredandreviewedregularly.Therecenteconomicenvironmenthasemphasizedtheimportanceofmanagingandreassessingitskeybusinessrisks.

TheBoardisresponsibleforreviewingthecompany’spoliciesonriskoversightandmanagementandsatisfyingitselfthatmanagementhasdevelopedandimplementedasoundsystemofriskmanagementandinternalcontrol.

TheBoardrequiresmanagementtodesignandimplementtheriskmanagementandinternalcontrolsystemtomanagethecompany'smaterialbusinessrisksandreporttoitonwhetherthoserisksarebeingmanagedeffectively.

TheCompanydoesnotpresentlyhaveaninternalauditfunction.TheevaluationoftheriskmanagementandinternalcontrolprocessistheresponsibilityoftheAuditandRiskManagementCommitteeandisperformedinconjunctionwithseniorexecutives.Externalconsultantsmaybeusedincertaincircumstances,howeverhavenotbeenusedduringthefinancialyear.

Principle8:Remuneratefairlyandresponsibly

TheCompany’sremunerationpolicyisdesignedinsuchaswaythatit:

• Motivatesseniorexecutivestopursuethelong-termgrowthandsuccessoftheCompany;and

• Demonstratesaclearrelationshipbetweenseniorexecutives’performanceandremuneration.

Theremunerationpolicy,whichsetsouttheremunerationframeworkforthekeymanagementpersonnel(KMP)wasdevelopedbytheRemunerationandNominationCommitteeafterseekingprofessionaladvicefromindependentconsultantsandwasapprovedbytheBoard.

Allexecutivesreceiveabasesalary,superannuation,fringebenefits,performanceincentivesandretirementbenefits.TheRemunerationandNominationCommitteereviewsexecutiveremunerationpoliciesandpracticestoensurethatexecutivepackagesarereferabletocompanyperformance,executiveperformance,comparableinformationfromindustrysectorsandotherlistedcorporationsandindependentadvice.Theperformanceofexecutivesismeasuredagainstcriteriaagreedhalfyearlywhicharebasedontheforecastgrowthofthecompanyandshareholdervalue.Thepolicyisdesignedtoattractthehighestcalibreexecutivesandrewardthemforperformancewhichresultsinlong-termgrowthinshareholdervalue.

TheBoardexpectsthattheremunerationstructureimplementedwillresultinthecompanybeingabletoattractandretainthebestexecutives.Itwillalsoprovideexecutiveswiththenecessaryincentivestoachievelong-termgrowthinshareholdervalue.

TheCompany’spoliciesandpracticessurroundingthepaymentofbonuses,optionsandotherincentivepaymentsarereviewedbytheRemunerationandNominationCommitteeannuallyaspartofthereviewofexecutiveremunerationpoliciesandpracticesanda


2017ANNUALREPORT 20

recommendationisputtotheBoardforapproval.Allbonuses,optionsandincentivesmustbelinkedtopredeterminedperformancecriteria.

Furtherinformationaboutthecompany’sremunerationstrategyandpoliciesandtheirrelationshiptocompanyperformancecanbefoundintheRemunerationReportwhichformspartofthedirectors'report,togetherwithdetailsoftheremunerationpaidtokeymanagementpersonnel.

RemunerationandNominationCommittee

TheresponsibilitiesoftheRemunerationandNominationCommitteeincludeareviewofandrecommendationtotheBoardon:

• thecompany’sremuneration,recruitment,retentionandterminationpoliciesandproceduresforseniorexecutives

• seniorexecutives’remunerationandincentives

• superannuationarrangements

• theremunerationframeworkfordirectors

EachmemberoftheRemunerationandNominationCommittee:

• isfamiliarwiththelegalandregulatorydisclosurerequirementsinrelationtoremuneration

• hasadequateknowledgeofexecutiveremunerationissues,includingexecutiveretentionandterminationpoliciesandshorttermandlongtermincentivearrangements.

ThemembersoftheRemunerationandNominationCommitteethroughouttheReportingPeriodwerearesetoutintheRemunerationReportwhichispartoftheDirector’sReport.:

Thecompanydoesnothaveamajorityofindependentcommitteemembers,astheBoardconsidersthistobesatisfactoryconsideringthesizeandcomplexityofthebusiness.

21

THE POWER OF BEING UNDERSTOODAUDIT | TAX | CONSULTING

RSM Australia Partners is a member of the RSM network and trades as RSM. RSM is the trading name used by the members of the RSM network. Each member of the RSM network is an independent accounting and consulting firm which practices in its own right. The RSM network is not itself a separate legal entity in any jurisdiction.

RSM Australia Partners ABN 36 965 185 036

Liability limited by a scheme approved under Professional Standards Legislation

RSM Australia Partners

Level 13, 60 Castlereagh Street Sydney NSW 2000GPO Box 5138 Sydney NSW 2001

T +61 (0) 2 8226 4500F +61 (0) 2 8226 4501

www.rsm.com.au

AUDITOR’S INDEPENDENCE DECLARATION

As lead auditor for the audit of the financial report of IQNovate Ltd for the year ended 30 June 2017, I declare that, to the best of my knowledge and belief, there have been no contraventions of:

(i) the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and

(ii) any applicable code of professional conduct in relation to the audit.

RSM AUSTRALIA PARTNERS

David Talbot Partner

Sydney, NSW Dated: 19 October 2017

IQNOVATELTDANDCONTROLLEDENTITIESCONSOLIDATEDSTATEMENTOFPROFITORLOSSFORTHEYEARENDED30JUNE2017

2017ANNUALREPORT 22

Indollars Note 2017 2016^

Revenue 6 4,670,912 2,670,362

Costofsales (3,837,759) (2,670,861)

Grossprofit 833,153 (499)

Otherincome 7(a) 118,807 91,711

Employeebenefitsexpense 7(c) (3,871,647) (2,965,529)

Depreciationandamortisationexpense (151,095) (92,668)

Overheadsharingcosts (880,242) (980,036)

Shareoptionexpense - (117,840)

Otherexpenses 7(d) (4,991,057) (2,779,059)

Financecosts 7(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) 20 (7.61) (6.49)

Dilutedlosspershare(centspershare) 20 (7.61) (6.49)

^Comparativeinformationhasbeenrestatedtoreflectachangeinclassificationof:(a)otherincome,further

detaildisclosedinnote7;and(b)Otherexpenses,furtherdetailsofwhichisdisclosedinnote7.

Theaboveconsolidatedstatementofprofitorlossshouldbereadinconjunctionwiththeaccompanyingnotes

totheconsolidatedfinancialstatements.

IQNOVATELTDANDCONTROLLEDENTITIESCONSOLIDATEDSTATEMENTOFOTHERCOMPREHENSIVEINCOMEFORTHEYEARENDED30JUNE2017

2017ANNUALREPORT 23

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)

Theaboveconsolidatedstatementofcomprehensiveincomeshouldbereadinconjunctionwiththe

accompanyingnotestotheconsolidatedfinancialstatements.

IQNOVATELTDANDCONTROLLEDENTITIESCONSOLIDATEDSTATEMENTOFFINANCIALPOSITIONFORTHEYEARENDED30JUNE2017

2017ANNUALREPORT 24

Indollars Note 2017 2016^

AssetsCurrentassets

Cash 8 298,937 2,159,311Tradeandotherreceivables 10 594,443 497,898Prepayments 116,637 164,997Othercurrentassets - 918,826Currenttaxreceivable - 916Totalcurrentassets 1,010,017 3,741,948Non-currentassets Tradeandotherreceivables - 63,278

Property,plantandequipment 11 625,149 662,065

Intangibleassets 12 4,257,740 1,891Investmentinassociate 22 440,226 538,000Deferredtaxassets 1,233,364 877,275Totalnon-currentassets 6,556,479 2,142,509TotalAssets 7,566,496 5,884,457LiabilitiesCurrentliabilities

Tradeandotherpayables 13 3,415,617 1,498,373Provisions 14 27,049 -Employeebenefitliabilities 15 850,545 205,700

Deferredrevenue 233,003 54,980

Borrowings 16 5,853,688 5,421,844

Derivativefinancialinstruments 17 884,788 -Deferredtaxliability 35,718 -Totalcurrentliabilities 11,300,408 7,180,897Non-currentliabilities Borrowings 16 4,954,814 -Employeebenefitliabilities 15 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 19 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)

^ComparativeinformationhasbeenrestatedtoreflectachangeinclassificationofOtherCurrentAssets,

DeferredRevenue,andEmployeeBenefitLiabilities.

Theaboveconsolidatedstatementoffinancialpositionshouldbereadinconjunctionwiththeaccompanying

notestotheconsolidatedfinancialstatements.

IQNOVATELTDANDCONTROLLEDENTITIESCONSOLIDATEDSTATEMENTOFCHANGESINEQUITYFORTHEYEARENDED30JUNE2017

2017ANNUALREPORT 25

Indollars

Contributedequity

Accumulatedlosses

Reserves Non-controlling

interest

Total

Balanceat1July2016 10,930,743 (12,910,781) 142,605 540,993 (1,296,440)

Totalcomprehensivelossfortheperiod Lossfortheperiod - (9,235,949) - (645,057) (9,881,006)Othercomprehensiveprofitfortheperiod - 12,239 - - 12,239Totalcomprehensivelossfortheperiod - (9,223,710) - (645,057) (9,868,767)Transactionswithownersrecordeddirectlyinequity Convertiblenotesissued/reconfiguredduringtheyear 681,669 - 2,243,700 526,300 3,451,669Foreigntranslationexchangedifferences - - (12,239) - (12,239)Capitalraisingcosts (120,575) - (595,656) (296,207) (1,012,438)Totaltransactionswithownersrecordeddirectlyinequity 561,094 - 1,635,805 230,093 2,426,992

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)Totalcomprehensiveloss - (6,613,719) - (780,632) (7,394,351)Transactionwithownersrecordeddirectlyinequity Sharesissuedduringtheperiod 5,459,544 - - - 5,459,544Issueofconvertiblenotesduringtheperiod 2,903,960 - - - 2,903,960Convertiblenotesreconfiguredduringtheperiod (797,788) - - - (797,788)Non-controllinginterest (2,372,244) 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.

IQNOVATELTDANDCONTROLLEDENTITIESNOTESTOTHECONSOLIDTEDFINANCIALSTATEMENTSFORTHEYEARENDED30JUNE2017

2017ANNUALREPORT 26

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 26 (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 8 298,937 2,159,311

Theaboveconsolidatedstatementofcashflowsshouldbereadinconjunctionwiththeaccompanyingnotesto

theconsolidatedfinancialstatements.

IQNOVATELTDANDCONTROLLEDENTITIESNOTESTOTHECONSOLIDATEDFINANCIALSTATEMENTSFORTHEYEARENDED30JUNE2017

2017ANNUALREPORT 27

1. REPORTINGENTITY

iQNovateLtd(“iQN”orthe“Company”)isafor-profitcompanylimitedbyshareswhichisincorporatedand

domiciledinAustralia.Theseconsolidatedfinancialstatements(“financialstatements”)asatandfortheyear

ended30June2017compriseoftheCompanyanditssubsidiaries(collectivelyreferredtoasthe“Group”).

ThesefinancialstatementswereauthorisedforissuebytheBoardofDirectorson11September2017.

2. STATEMENTOFCOMPLIANCE

Thefinancialstatementsaregeneralpurposefinancialstatementswhichhavebeenpreparedinaccordance

withAustralianAccountingStandards(“AASBs”)adoptedbytheAustralianAccountingStandardsBoard

(“AASB”)andtheCorporationsAct2001.ThefinancialstatementscomplywithInternationalFinancial

ReportingStandards(“IFRS”)adoptedbytheInternationalAccountingStandardsBoard(“IASB”).

3. SIGNIFICANTACCOUNTINGPOLICIES

Thissectionsetsoutthesignificantaccountingpoliciesuponwhichthefinancialstatementsarepreparedasa

whole.Specificaccountingpoliciesaredescribedintheirrespectivenotestothefinancialstatements.This

sectionalsoshowsinformationonnewaccountingstandards,amendmentsandinterpretations,andwhether

theyareeffectiveinthecurrentorlateryears.

Basisofpreparation

ThesefinancialstatementsarepresentedinAustraliandollars,whichistheCompany’sfunctionalcurrency.

TheCompanyisofakindreferredtoinASICCorporationsInstrument2016/191dated1April2016andin

accordancewiththatinstrument,allfinancialinformationpresentedinAustraliandollarshasbeenroundedto

thenearestdollarunlessotherwisestated.

Thefinancialstatementshavebeenpreparedunderthehistoricalcostconvention,exceptfor,therevaluation

ofavailable-for-salefinancialassets,financialassetsandliabilitiesatfairvaluethroughprofitorloss,and

derivativefinancialinstruments.

Theaccountingpolicieshavebeenconsistentlyappliedtoallperiodspresentedinthesefinancialstatements,

unlessotherwisestated.

Basisofconsolidation

SubsidiariesareentitiescontrolledbytheGroup.TheGroupcontrolsanentitywhenitisexposedto,orhas

therightsto,variablereturnsfromitsinvolvementwiththeentityandhastheabilitytoaffectthosereturns

throughitspowerovertheentity.Thefinancialstatementsofsubsidiariesareincludedintheconsolidated

financialstatementsfromthedateonwhichcontrolcommencesuntilthedateonwhichcontrolceases.

Intercompanytransactions,balancesandunrealisedgainsontransactionsbetweenentitiesintheconsolidated

entityareeliminated.Accountingpoliciesofsubsidiarieshavebeenchangedwherenecessarytoensure

consistencywiththepoliciesadoptedbytheconsolidatedentity.

Non-controllinginterestintheresultsandequityofsubsidiariesareshownseparatelyinthestatementof

profitorlossandothercomprehensiveincome,statementoffinancialpositionandstatementofchangesin

equityoftheconsolidatedentity.Lossesincurredbytheconsolidatedentityareattributedtothenon-

controllinginterestinfull,evenifthatresultsinadeficitbalance.

Foreignoperations

TheassetsandliabilitiesofforeignoperationsaretranslatedintoAustraliandollars(AUD)attheexchangerate

atthereportingdate.TheincomeandexpensesofforeignoperationsaretranslatedintoAUDattheaverage

exchangerateofthemonthinwhichthetransactionoccurs.

IQNOVATELTDANDCONTROLLEDENTITIESNOTESTOTHEFINANCIALSTATEMENTS(CONTINUED)FORTHEYEARENDED30JUNE2017

2017ANNUALREPORT 28

‘3.SIGNIFICANTACCOUNTINGPOLICIES(CONTINUED)

Foreignoperations(continued)

Foreigncurrencydifferencesarerecognisedinothercomprehensiveincomeandaccumulatedintheforeign

currencytranslationreserve.

Whenaforeignoperationisdisposedofinitsentiretyorpartiallysuchthatcontrol,significantinfluenceor

jointcontrolislost,thecumulativeamountinthetranslationreserverelatedtothatforeignoperationis

reclassifiedtoprofitorlossaspartofthegainorlossondisposal.

GoodsandServicesTax(“GST”)andValueAddedTax(“VAT”)

Revenues,expensesandassetsarerecognisednetoftheamountofrespectiveGSTorVAT,exceptwherethe

amountofGSTorVATincurredisnotrecoverablefromtherelevanttaxationauthority.Inthesecircumstances,

theGSTorVATisrecognisedaspartofthecostofacquisitionoftheassetoraspartoftheexpense.

ReceivablesandpayablesarestatedinclusiveoftheamountofGSTorVATreceivableorpayable.Thenet

amountofGSTorVATrecoverablefrom,orpayableto,thetaxationauthorityisincludedwithotherpayables

intheconsolidatedstatementoffinancialposition.

Cashflowsarepresentedonagrossbasis.TheGSTorVATcomponentsofcashflowsarisingfrominvestingor

financingactivitieswhicharerecoverablefrom,orpayabletotherelevanttaxationauthority,arepresentedas

operatingcashflowsintheconsolidatedstatementofcashflows.

Usesofjudgementsandestimates

Inpreparingthesefinancialstatements,managementhasmadejudgements,estimatesandassumptionsthat

affecttheapplicationoftheGroup’saccountingpoliciesandthereportedamountsofassets,liabilities,income

andexpenses.Actualresultsmaydifferfromtheseestimates.Estimatesandunderlyingassumptionsare

reviewedonanongoingbasis.Revisionstoaccountingestimatesarerecognisedprospectively.

(i) Judgements

Significantjudgementhasbeenmadeinrespecttothecapitalisationofdevelopmentcostsforinternally

developedintangibleassets,andthecapitalisationcostsofacquiredIPintangibleassets.SeeNote12.

(ii) Estimates

Informationaboutcriticaljudgementsinapplyingaccountingpoliciesthathavethemostsignificanteffecton

theamountsrecognisedinthefinancialstatements,includingaboutassumptionsandestimationuncertainties

thathaveasignificantriskofresultinginamaterialadjustmentwithintheyearending30June2017are

includedinthefollowingnotes:

• Note22–Investments;and

• Note14–Provisions.

(iii) Measurementoffairvalues

AnumberoftheGroup’saccountingpoliciesanddisclosuresrequirethemeasurementoffairvalues,forboth

financialandnon-financialassetsandliabilities.

TheGrouphasanestablishedcontrolframeworkwithrespecttothemeasurementoffairvalues.

Thefinancialreportingteamregularlyreviewssignificantunobservableinputsandvaluationadjustments.If

thirdpartyinformationisusedtomeasurefairvalues,managementassesstheevidenceobtainedfromthe

thirdpartiestosupporttheconclusionthatsuchvaluationsmeettherequirementsofIFRS,includingthelevel

inthefairvaluehierarchyinwhichsuchvaluationsshouldbeclassified.


2017ANNUALREPORT 29

‘

3.SIGNIFICANTACCOUNTINGPOLICIES(CONTINUED)

Useofjudgementsandestimates(continued)

(iii)Measurementoffairvalues(continued)

Whenmeasuringthefairvalueofanassetoraliability,theGroupusesmarketobservabledataasfaras

possible.Fairvaluesarecategorisedintodifferentlevelsinafairvaluehierarchybasedontheinputsusedin

thevaluationtechniquesasfollows:

• Level1:quotedprices(unadjusted)inactivemarketsforidenticalassetsorliabilities.

• Level2:inputsotherthanquotedpricesincludedinLevel1thatareobservablefortheassetor

liability,eitherdirectly(i.e.asprices)orindirectly(i.e.derivedfromprices).

• Level3:inputsfortheassetorliabilitythatarenotbasedonobservablemarketdata(unobservable

inputs).

Iftheinputsusedtomeasurethefairvalueofanassetoraliabilitymightbecategorisedindifferentlevelsof

thefairvaluehierarchy,thenthefairvaluemeasurementiscategorisedinitsentiretyinthesamelevelofthe

fairvaluehierarchyasthelowestlevelinputthatissignificanttotheentiremeasurement.

TheGroupcategorisestransfersbetweenlevelsofthefairvaluehierarchyattheendofthereportingperiod

duringwhichthechangehasoccurred.

Newstandardsandinterpretationsnotyetadopted

Anumberofnewstandards,amendmentstostandardsandinterpretationsareeffectiveforannualperiods

beginningafter1July2017,andhavenotbeenappliedinpreparingthesefinancialstatements.Thosewhich

mayberelevanttotheGrouparesetoutbelow.TheGroupdoesnotplantoadoptthesestandardsearly.

(i) AASB9FinancialInstruments

AASB9FinancialInstrumentsbecomesmandatoryfortheGroup’s2019financialstatementsandincludes

changestotheclassificationandmeasurementoffinancialassets,includinganewexpectedcreditlossmodel

forcalculatingimpairment.Italsoincludesanewhedgeaccountingmodeltosimplifyhedgeaccounting

requirementsandmorecloselyalignhedgeaccountingwithriskmanagementactivities.

(ii) AASB15Revenuefromcontractswithcustomers

AASB15RevenuefromContractsbecomesmandatoryfortheGroup’s2019financialstatementsandoutlinesa

singlecomprehensivemodelforentitiestouseinaccountingforrevenuearisingfromcontractswith

customers;andreplacesAASB111ConstructionContract,AASB118Revenue,Interpretation13Customer

LoyaltyPrograms,Interpretation15AgreementsforConstructionofRealEstate,Interpretation18Transferof

AssetsfromCustomersandInterpretation131Revenue-BarterTransactionsinvolvingAdvertisingServices.The

coreprincipleisthatanentityrecognisesrevenuetodepictthetransferofpromisedgoodsorservicesto

customersinanamountthatreflectstheconsiderationtowhichtheentityexpectstobeentitledinexchange

forthosegoodsorservices.

(iii) AASB16Leases

AASB16LeasesbecomesmandatoryfortheGroup’s2020financialstatementsandremovestheclassification

ofleasesbetweenfinanceandoperatingleases,effectivelytreatingallleasesasfinanceleasesforthelessee.

Thepurposeistoprovidegreatertransparencyofalessee’sfinancialleverageandcapitalemployed.

TheGrouphasnotyetdeterminedthepotentialeffectofthesestandardsontheGroup’sfuturefinancial

statements.


2017ANNUALREPORT 30

4. GOINGCONCERN

Thefinancialstatementshavebeenpreparedonthegoingconcernbasis,whichcontemplatescontinuityof

normalbusinessactivitiesandtherealisationofassetsanddischargeofliabilitiesinthenormalcourseof

business.

Asdisclosedinthefinancialstatements,theGroupincurredalossof$9,881,006andhadnetcashoutflows

fromoperatingactivitiesof$6,465,616fortheyearended30June2017.AsatthatdatetheCompanyhadnet

currentliabilitiesof$11,300,408andnetliabilitiesof$8,738,215.

Thesefactorsmayprimafacieindicatethepotentialofamaterialuncertaintywhichmayresultinsignificant

doubtastowhethertheGroupwillcontinueasagoingconcernandthereforewhetheritwillrealiseitsassets

andextinguishitsliabilitiesinthenormalcourseofbusinessandattheamountsstatedinthefinancialreport.

However,theDirectorshavedeterminedthattreatmentasagoingconcernisappropriate,duetothe

followingfactors:

• TheGroupwillcontinueitsexpansionanddevelopmentofitsportfoliooflifescienceassets

intellectualpropertyassetsbyexternalprojectbasedcapitalraisingasithasdemonstratedithas

donepreviously;

• Thefundswillbeutilisedwiththeultimateobjectivetoincreasethevalueoftheassetsasdiscussedin

theOperatingandFinancialReview;

• ForthetradingdivisionsoftheGroup,thecontinuedtrendofincreasingmarketshareasindicatedin

thefinancialstatementsisresultinginadditionalcustomercontractsonhandimprovingnetoperating

cashflow;

• Liabilitiesincludetotalconvertiblenoteswithafacevalueof$11,475,624(currentliabilities:

$6,520,810,plusnon-currentliabilities$4,954,814)convertibletoequitybythecompany,hencenot

requiringfundingfromcashflowtoextinguishtheseliabilities;

Accordingly,theDirectorsbelievethattheGroupwillbeabletocontinueasagoingconcernandthatitis

appropriatetoadoptthegoingconcernbasisinthepreparationofthefinancialreport.

Thefinancialreportdoesnotincludeanyadjustmentsrelatingtotheamountsorclassificationofrecorded

assetsorliabilitiesthatmightbenecessaryiftheGroupwerenottooperateasagoingconcern.

5. OPERATINGSEGMENTS

TheGrouphasidentifiedoperatingsegmentsbasedoninternalreportingthatisreviewedandusedbythe

chiefoperatingdecisionmakers(theGroupCEOandtheGroupChiefFinancialandOperatingOfficer)in

assessingtheperformanceoftherespectivesegments.Theoperatingsegmentsareidentifiedbymanagement

basedonthenatureofservicesprovided,witheachoperatingsegmentrepresentingastrategicbusinessthat

servesadifferentsegmentofthemarket.

InFY17theGroupprovidedtwotypesofservicesbeing:(1)contractsalesandmarketingservicestoexternal

customers;and(2)sharedservicestorelatedparties.Segmentanalysisofrevenueandgrossprofitisprovided

below.Informationonnetassetsbysegmentisnotprovidedtothechiefoperatingdecisionmakers.

Indollars 2017 2016

Revenue

Contractsalesandmarketingservices 4,255,622 2,320,215

Relatedpartyservices 415,290 350,147

Totalrevenue 4,670,912 2,670,362Grossprofit

Contractsalesandmarketingservices 417,863 (350,646)

Relatedpartyservices 415,290 350,147

Totalgrossprofit 833,153 (499)


2017ANNUALREPORT 31

5.OPERATINGSEGMENTS(CONTINUED)

Informationongeographicalsegments

OnehundredpercentoftheGroup’srevenue,expensesandprofitarederivedinAustralia.

Relianceonmajorcustomers

Threecustomersrepresentmorethan10%oftheconsolidatedrevenue.Totalrevenuefromthesemajor

customersamountsto$2,928,836(62.7%)oftotalrevenue(2016:$1,757,238;65.8%).

6. REVENUE

Indollars 2017 2016^

Contractandservicefeerevenue 4,255,622 2,320,215

Officeandsharedservicesrevenue 415,290 350,147

Totalrevenue 4,670,912 2,670,362

^ Thecomparativeinformationhasbeenrestatedtoreflectachangeinclassificationofthefollowingitems

fromrevenuetootherincome:(a)financeincome$42,711;and(b)Rebatesandoffsets$49,000.

7. INCOMEANDEXPENSES

(a) Otherincome


Rebatesandoffsets 110,717 49,000

Financeincome 7,200 42,711

Foreigncurrencygains 890 -

Totalotherincome 118,807 91,711

Significantaccountingpolicies

Revenueismeasuredatthefairvalueoftheconsiderationreceivedorreceivableaftertakingintoaccountanytrade

discountsandvolumerebatesallowed.

TheGrouprecognisesrevenuewhentheamountofrevenuecanbereliablymeasured,itisprobablethatfuture

economicbenefitsassociatedwiththetransactionwillflowtotheGroupandspecificcriteriarelatingtothetypeof

revenueasnotedbelow,hasbeensatisfied.

Anyconsiderationdeferredistreatedastheprovisionoffinanceandisdiscountedatarateofinterestthatis

generallyacceptedinthemarketforsimilararrangements.Thedifferencebetweentheamountinitiallyrecognised

andtheamountultimatelyreceivedisinterestrevenue.

Renderingofservices

Revenueinrelationtorenderingofservicesisrecogniseddependingonwhethertheoutcomeoftheservicescanbe

estimatedreliably.Iftheoutcomecanbeestimatedreliablythenthestageofcompletionoftheservicesisusedto

determinetheappropriatelevelofrevenuetoberecognisedintheperiod.

Iftheoutcomecannotbereliablyestimatedthenrevenueisrecognisedtotheextentofexpensesrecognisedthat

arerecoverable.


2017ANNUALREPORT 32

7.INCOMEANDEXPENSES(CONTINUED)

(b) Financecosts

Indollars 2017 2016

Bankfees 7,960 5,000

Interestonconvertiblenotes 985,317 536,374

Otherinterestexpense 147,911 9,057

Totalfinancecosts 1,141,188 550,431

(c) Employeebenefitsexpenses


Wagesandsalaries 3,389,205 2,653,647

Compulsorysuperannuationcontributions 361,933 249,294

Increaseinliabilityforannualleave 71,020 62,588

Increaseinliabilityforlongserviceleave 49,489 -

Totalemployeebenefitsexpense 3,871,647 2,965,529

(d) Otherexpenses


Accountingfees 91,708 135,828

Advertisingandmarketing 276,118 333,018

Exchangeandlistingfees 99,069 178,665

Insurance 78,055 69,914

Legalandconsultingfees 890,006 360,366

Occupancycosts 371,276 191,222

Projectsourcingandevaluationcosts 1,559,239 -

Recruitmentfees 255,439 329,088

Softwarelicensingandsubscriptions 202,452 286,617

Travelandaccommodation 140,698 154,528

Other 1,026,997 739,813

Totalotherexpenses 4,991,057 2,779,059

^ Thecomparativeinformationhasbeenrestatedtoreflectachangeinclassificationofthefollowingexpenses

fromotherexpensetoemployeebenefitexpense:workerscompensation,FBT,payrolltax.

8. CASH

Indollars 2017 2016

Bankbalances 298,937 2,159,311


Cashandcashequivalentsincludescashonhand,depositsheldatcallwithfinancialinstitutions,othershort-

term,highlyliquidinvestmentswithoriginalmaturitiesofthreemonthsorlessthatarereadilyconvertibleto

knownamountsofcashandwhicharesubjecttoaninsignificantriskofchangesinvalue.Forthestatementof

cashflowspresentationpurposes,cashandcashequivalentsalsoincludesbankoverdrafts,whichareshown

withinborrowingsincurrentliabilitiesonthestatementoffinancialposition.


2017ANNUALREPORT 33

9. INCOMETAXESIndollars 2017 2016

Taxlosses 1,197,646 877,275

Netdeferredtaxassetsrecogniseddirectlythroughprofitorloss 1,197,646 877,275


Currenttax

Theincometaxexpenseorbenefitfortheyearisthetaxpayableonthecurrentyear’staxableincomebasedon

theapplicableincometaxrateforeachjurisdictionadjustedbychangesindeferredtaxassetsandliabilities

attributabletotemporarydifferencesandtounusedtaxlosses.

Thecurrentincometaxchargeiscalculatedonthebasisofthetaxlawsenactedorsubstantivelyenactedatthe

endofthereportingperiodinthecountrieswheretheCompany’ssubsidiariesandassociatesoperateand

generatetaxableincome.Managementperiodicallyevaluatespositionstakenintaxreturnswithrespectto

situationsinwhichapplicabletaxregulationissubjecttointerpretation.Itestablishesprovisionswhere

appropriateonthebasisofamountsexpectedtobepaidtothetaxauthorities.

Currenttaxisrecognisedinprofitorlossexcepttotheextentthatitrelatestoitemsrecognisedinother

comprehensiveincomeordirectlyinequity.Inthiscase,thetaxisalsorecognisedinothercomprehensive

incomeordirectlyinequityrespectively.

Deferredtax

Deferredincometaxisprovidedinfull,usingtheliabilitymethod,ontemporarydifferencesarisingbetweenthe

taxbasesofassetsandliabilitiesandtheircarryingamountsintheconsolidatedfinancialstatements.Deferred

incometaxisdeterminedusingtaxrates(andlaws)thathavebeenenactedorsubstantivelyenactedbytheend

ofthereportingperiodandareexpectedtoapplywhentherelateddeferredincometaxassetisrealisedorthe

deferredincometaxliabilityissettled.Deferredtaxassetsarerecognisedfordeductibletemporarydifferences

andunusedtaxlossesonlyifitisprobablethatfuturetaxableamountswillbeavailabletoutilisethosetemporary

differencesandlosses.

Deferredtaxliabilitiesandassetsarenotrecognisedfortemporarydifferencesbetweenthecarryingamountand

taxbasesofinvestmentsinforeignoperationswhentheCompanyisabletocontrolthetimingofthereversalof

thetemporarydifferencesanditisprobablethatthedifferenceswillnotreverseintheforeseeablefuture.

Deferredtaxassetsandliabilitiesareoffsetwhenthereisalegallyenforceablerighttooffsetcurrenttaxassets

andliabilitiesandwhenthedeferredtaxbalancesrelatetothesametaxationauthority.Currenttaxassetsand

taxliabilitiesareoffsetwheretheentityhasalegallyenforceablerighttotheoffsetandintendseithertosettleon

anetbasis,ortorealisetheassetandsettletheliabilitysimultaneously.Deferredtaxisrecognisedinprofitor

loss,excepttotheextentthatitrelatestoitemsrecognisedinothercomprehensiveincomeordirectlyinequity.

Inthiscase,thetaxisalsorecognisedinothercomprehensiveincomeordirectlyinequityrespectively.


2017ANNUALREPORT 34

10. TRADEANDOTHERRECEIVABLES


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


^ Thecomparativeinformationhasbeenrestatedtoreflectachangeinclassificationofcustomerdoubtfuldebt

provisionfromtradeandotherpayablestotradereceivables(FY16$113,138).


Tradereceivablesarerecognisedinitiallyatfairvalueandsubsequentlymeasuredatamortisedcostusingthe

effectiveinterestmethod,lessprovisionforimpairment.Tradereceivablesaregenerallydueforsettlement

within30-60days.Theyarepresentedascurrentassetsunlesscollectionisnotexpectedformorethan12

monthsafterthereportingdate.

Collectabilityoftradereceivablesisreviewedonanongoingbasis.Debtswhichareknowntobeuncollectableare

writtenoffbyreducingthecarryingamountdirectly.Thelossisrecognisedinprofitorlosswithinotherexpenses.

Subsequentrecoveriesofamountspreviouslywrittenoffarecreditedagainstotherexpensesintheprofitorloss.

Otherreceivablesarerecognisedatamortisedcost,lessanyprovisionforimpairment.


2017ANNUALREPORT 35

11. PROPERTY,PLANTANDEQUIPMENT

Cost

Indollars

Plantandequipment

Furniture,fixturesand

fittings

Leaseholdimprovements

Total

Balanceat1July2015 164,607 43,809 224,389 432,805Additions 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 272,197 129,994 519,884 922,074

Accumulateddepreciation

Indollars

Plantandequipment


fittings


Total

Balanceat1July2015 31,264 7,096 24,615 62,975Depreciationexpense 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


fittings


Total

Carryingbalanceat30June2016 138,042 93,976 430,047 662,065

Carryingbalanceat30June2017 141,345 100,329 383,476 625,149


2017ANNUALREPORT 36

’11.PROPERTY,PLANTANDEQUIPMENT(CONTINUED)


Carryingvalue

Allproperty,plantandequipmentisstatedathistoricalcostlessdepreciationandimpairment.Historicalcost

includesexpenditurethatisdirectlyattributabletotheacquisitionoftheitems.

Subsequentcostsareincludedintheasset’scarryingamountorrecognisedasaseparateasset,asappropriate,

onlywhenitisprobablethatfutureeconomicbenefitsassociatedwiththeitemwillflowtothebusinessandthe

costoftheitemcanbemeasuredreliably.Thecarryingamountofanycomponentaccountedforasaseparate

assetisderecognisedwhenreplaced.Allotherrepairsandmaintenancearechargedtotheprofitorlossduring

thereportingperiod.

Depreciation

Depreciationofassetsiscalculatedusingthestraight-linemethodtoallocatetheircost,netoftheirresidual

values,overtheirestimatedusefullivesor,inthecaseofleaseholdimprovements,theshorterleasetermas

follows:

• Leaseholdimprovements–5to10years

• Plantandequipment–5to10years

• Furniture,fittingsandequipment–10to20years

Impairment

Anasset’scarryingamountiswrittendownimmediatelytoitsrecoverableamountiftheasset’scarryingamount

isgreaterthanitsestimatedrecoverableamount.

Gainsandlossesondisposal

Gainsandlossesondisposalsaredeterminedbycomparingproceedswiththecarryingamount.Theseare

includedinprofitorloss.


2017ANNUALREPORT 37

12. INTANGIBLEASSETS

Cost

Indollars

AcquiredIP

Developmentexpenditure

Websiteand

software

Total

Balanceat1July2015 - - 2,536 2,536

Additions - - - -

Balanceat30June2016 - - 2,536 2,536Additions 1,871,613 2,169,946 231,354 4,272,913

Balanceat30June2017 1,871,613 2,169,946 233,890 4,275,449

Amortisation

Indollars

AcquiredIP


Websiteand

software

Total

Balanceat1July2015 - - 82 82

Amortisationexpense - - 563 563

Balanceat30June2016 - - 645 645Amortisationexpense - - 17,064 17,064

Balanceat30June2017 - - 17,709 17,709

Carryingamount

Indollars

AcquiredIP


Websiteand

software

Total

Carryingbalanceat30June2016 - - 1,891 1,891

Carryingbalanceat30June2017 1,871,613 2,169,946 216,181 4,257,740

Therecoverableamountoftheconsolidatedentitiy’sdevelopmentexenditurehasbeendeterminedusingfair

valuelesscoststosell,basedthefollowingkeyjudgementsapprovedbymanagement:(a)itistechnically

feasiblethattheassetwilbecompletedforuse/sale;(b)theGroupintendstocompleteanduse/selltheasset;

(c)theGroupareabletouse/selltheasset;(d)theGrouphasadequateresourcesavailabletocompletethe

assetforuse/sale;and(e)theGroupisabletoreliablymeasureexpenditureduringthedevelopmentphase.


2017ANNUALREPORT 38

‘12.INTANGIBLEASSETS(CONTINUED)


Intangibleassetsacquiredseparatelyaremeasuredoninitialrecognitionatcost.Thecostofintangibleassets

acquiredinabusinesscombinationistheirfairvalueatthedateofacquisition.

Followinginitialrecognition,intangibleassetsarecarriedatcostlessanyaccumulatedamortisationand

accumulatedimpairmentlosses.Internallygeneratedintangibles,excludingcapitaliseddevelopmentcosts,arenot

capitalisedandtherelatedexpenditureisreflectedinprofitorlossintheperiodinwhichtheexpenditureis

incurred.

Gainsorlossesarisingfromde-recognitionofanintangibleassetaremeasuredasthedifferencebetweenthenet

disposalproceedsandthecarryingamountoftheassetandarerecognisedinthestatementofprofitorlossand

othercomprehensiveincomewhentheassetisderecognised.

Amortisation

Intangibleassetswithfinitelivesareamortisedovertheusefuleconomiclife.Theamortisationperiodandthe

amortisationmethodforanintangibleassetwithafiniteusefullifearereviewedatleastattheendofeach

reportingperiod.Changesintheexpectedusefullifeortheexpectedpatternofconsumptionoffutureeconomic

benefitsembodiedintheassetareconsideredtomodifytheamortisationperiodormethod,asappropriate,and

aretreatedaschangesinaccountingestimatesandadjustedonaprospectivebasis.Theamortisationexpenseon

intangibleassetswithfinitelivesisrecognisedinthestatementofprofitorlossandothercomprehensiveincome

astheexpensecategorythatisconsistentwiththefunctionoftheintangibleassets.

Intangibleassetswithindefiniteusefullivesarenotamortised,butaretestedforimpairmentannually,either

individuallyoratthecash-generatingunitlevel.Theassessmentofindefinitelifeisreviewedannuallytodetermine

whethertheindefinitelifecontinuestobesupportable.Ifnot,thechangeinusefullifefromindefinitetofiniteis

madeonaprospectivebasis.

AcquiredIPwithafiniteusefullife,isnotamortiseduntilitisreadyforuse.

Impairment

Intangibleassetsthathaveanindefiniteusefullifearenotsubjecttoamortisationandaretestedannuallyfor

impairment,ormorefrequentlyifeventsorchangesincircumstancesindicatethattheymightbeimpaired.Other

assetsaretestedforimpairmentwhenevereventsorchangesincircumstancesindicatethatthecarryingamount

maynotberecoverable.Animpairmentlossisrecognisedfortheamountbywhichtheasset’scarryingamount

exceedsitsrecoverableamount.Therecoverableamountisthehigherofanasset’sfairvaluelesscoststoselland

valueinuse.

Websiteandsoftware

Costsincurredinacquiringwebsitesoftwareandlicensesthatwillcontributetofuturefinancialbenefitsthroughrevenue

generationand/orcostreductionarecapitalisedtosoftwareandsystems.Costscapitalisedincludeexternaldirectcosts

ofmaterialsandserviceanddirectpayrollandpayrollrelatedcostsofemployees’timespentontheproject.

Amortisationiscalculatedonastraight-linebasisoverperiodsgenerallyrangingfromthreetofiveyears

Websitedevelopmentcostsincludeonlythosedirectlyattributabletothedevelopmentphaseandareonlyrecognised

followingcompletionoftechnicalfeasibilityandwherethebusinesshasanintentionandabilitytousetheasset.

Researchanddevelopmentcosts

Researchexpenditureisrecognisedasanexpenseasincurred.Developmentcostsincludeexternallyacquiredand

internallygeneratedcostsofmaterialsandservices,whichcanbedirectlyattributabletothedevelopmentactivitiesof

acquiringorgeneratinganintangibleasset.

Costsincurredondevelopmentprojects(relatingtothedesignandtestingofneworimprovedintangibleassets)are

recognisedonlywhenitisprobablethatthefutureeconomicbenefitsthatareattributabletotheassetwillflowtothe

Group,thecostoftheassetcanbemeasuredreliably,technicalandcommercialfeasibilityoftheassetforsaleoruse

havebeenestablished,andtheGroupintendsandisabletocompletetheintangibleassetandeitheruseitorsellit.

Capitaliseddevelopmentcostsarerecordedasanintangibleassetandamortisedfromthepointatwhichtheassetis

readyforuseonastraight-linebasisoveritsusefullife.Developmentcostspreviouslyrecognisedasanexpensearenot

recognisedasanassetinasubsequentperiod.


2017ANNUALREPORT 39

13. 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

14. PROVISIONS

Indollars Makegood Total

Balanceat1July2016 - -

Provisionsmadeduringtheperiod 27,049 27,049

Totalprovisionsat30June2017 27,049 27,049


ProvisionsarerecognisedwhentheGrouphasapresentobligation(legalorconstructive)asaresultofapastevent,it

isprobablethatanoutflowofresourcesembodyingeconomicbenefitswillberequiredtosettletheobligationanda

reliableestimatecanbemadeoftheamountoftheobligation.WhentheGroupexpectssomeorallofaprovisionto

bereimbursed,forexample,underaninsurancecontract,thereimbursementisrecognisedasaseparateasset,but

onlywhenthereimbursementisvirtuallycertain.Theexpenserelatingtoaprovisionispresentedinthestatementof

profitorlossandothercomprehensiveincomenetofanyreimbursement.

Make-goodprovisions

Amakegoodprovisionisrecognisedforthecostsofrestorationorremovalinrelationtoplantandequipmentand

siteleaseswherethereisalegalorconstructiveobligation.Theprovisionisinitiallyrecordedwhenareliableestimate

canbedeterminedanddiscountedtopresentvalue.Theunwindingoftheeffectofdiscountingontheprovisionis

recognisedasafinancecost.

Provisionsaremeasuredatthepresentvalueofmanagement’sbestestimateoftheexpenditurerequiredtosettle

thepresentobligationattheendofthereportingperiod.Thediscountrateusedtodeterminethepresentvalueisa

pre-taxratethatreflectscurrentmarketassessmentsofthetimevalueofmoneyandtheriskspecifictotheliability.

Theincreaseintheprovisionduetothepassageoftimeisrecognisedasinterestexpense.


Tradeandotherpayablesrepresentliabilitiesforgoodsandservicesprovidedtothebusinesspriortotheendofthe

financialyearwhichareunpaid.Theamountsareunsecuredandareusuallypaidwithin30daysofrecognition.Trade

andotherpayablesarepresentedascurrentliabilitiesunlesspaymentisnotduewithin12monthsfromthereporting

date.Theyarerecognisedinitiallyattheirfairvalueandsubsequentlymeasuredatamortisedcostusingtheeffective

interestmethod.


2017ANNUALREPORT 40

15. EMPLOYEEBENEFITLIABILITIES

Indollars 2017 2016Liabilityforannualleave 334,022 205,700

Liabilityforsuperannuation 237,876 -

Liabilityforlongserviceleave 49,489 -

Liabilityforpayroll 278,647 -

Totalemployeebenefitliabilities 900,034 205,700Current 850,545 205,700

Non-current 49,489 -

Totalemployeebenefitliabilities 900,034 205,700

16. BORROWINGS

Indollars 2017 2016Current:Convertiblenotes 5,853,688 5,421,844

Non-Current:Convertiblenotes 4,954,814 -


Employeebenefitsrepresentsamountsaccruedforemployeepayroll,superannuation,annualleaveandlongservice

leave.

Thecurrentportionforthisprovisionincludesthetotalamountaccruedforannualleaveentitlementsandthe

amountsaccruedforlongserviceleaveentitlementsthathavevestedduetoemployeeshavingcompletedthe

requiredperiodofservice.BasedonpastexperiencetheGroupdoesnotexpectthefullamountofannualleaveor

longserviceleavebalancesclassifiedascurrentliabilitiestobesettledinthenext12months.However,these

amountsmustbeclassifiedascurrentliabilitiessincetheGroupdoesnothaveanunconditionalrighttodeferthe

settlementoftheseamountsintheeventemployeeswishtousetheirleaveentitlement.

TheGrouprecognisesaliabilityforlongserviceleaveandannualleavemeasuredasthepresentvalueofexpected

futurepaymentstobemadeinrespectofservicesprovidedbyemployeesuptothereportingdateusingthe

projectedunitcreditmethod.Considerationisgiventoexpectedfuturewageandsalarylevels,experienceof

employeedepartures,andperiodstoservice.Expectedfuturepaymentsarediscountedusingmarketyieldsatthe

reportingdateonnationalgovernmentbondswithtermstomaturityandcurrenciesthatmatch,ascloselyas

possible,theestimatedfuturecashoutflows.


Convertiblenotesthatarecompoundfinancialinstrumentsareseparatedintoliabilityandequitycomponentsbased

on the terms of the contract. On issuance of the convertible notes, the fair value of the liability component is

estimatedusingamarketrateforanequivalentnon-convertibleinstrument.Thisamountisclassifiedasafinancial

liabilityatamortisedcost(netoftransactioncosts)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 in

subsequent years. Transaction costs are apportioned between the liability and equity components of the

convertiblenotesbasedontheallocationofproceedstotheliabilityandequitycomponentswhentheinstruments

areinitiallyrecognised.

Convertible notes that are hybrid contracts containing an embeddedderiviative are separated between the host

contractandtheembeddedderiviativeoninitialrecognition.Theembeddedderiviativeismeasuredatfairvalueon

initialandsubsequentrecognition.Thehostcontractisinitiallyrecordedattheresidualamountandsubsequentlyat

amortisedcost.


2017ANNUALREPORT 41

17. DERIVATIVEFINANCIALINSTRUMENTS

Indollars 2017 2016

Convertiblenoteoptions 884,788 -

DuringtheperiodtheCompany’ssubsidiaryGlucoseBiosensorSystems(GreaterChina)PtyLtd(“GBSGC”)

issuedConvertibleNoteOptionsvaluedat$5,013,800.Ofthisamount,$884,788hasbeenclassifiedasa

derivativefinancialinstrumentasthenotesbenefitfroma15%discountontheInitialPublicOfferingPrice

fromthedateofGBSGCs(oritsnomineeentitiy’s)admissiononanapprovedstockexchange.

18. SHARECAPITAL

Numberofshares

$

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.Theholdersofthesesharesare

entitledtoreceivedividendsasdeclaredfromtimetotime,andareentitledtoonevotepershareatgeneral

meetingsoftheCompany.TheCompanydoesnothaveauthorisedcapitalorparvalueinrespectofitsshares.

Allissuedsharesarefullypaid.

Dividends

NodividendsweredeclaredorpaidbytheCompanyfortheyear(2016:nil).


Ordinarysharesareclassifiedasequity.Incrementalcostsdirectlyattributabletotheissueofnewsharesoroptions

areshowninequityasadeduction,netoftax,fromtheproceeds.Transactioncostsarethecoststhatareincurred

directlyinconnectionwiththeissueofthoseequityinstrumentsandwhichwouldnothavebeenincurredhadthose

instrumentsnotbeenissued.


Derivativesareinitiallyrecognisedatfairvalueonthedateaderivativecontactisenteredintoandsubsequently

remeasuredtotheirfairvalueateachreportingdate.Theaccountingforsubsequentchangesinfairvaluedepends

onwhetherthederivativeisdesignatedasahedginginstrument,andifso,thenatureoftheitembeinghedged.


2017ANNUALREPORT 42

19. 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

20. EARNINGSPERSHARE(EPS)

Thecalculationofbasicearningspersharehasbeenbasedonthefollowinglossattributabletoordinary

shareholdersandweighted-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-averagenumberofsecuritiesifoutstandingoptions

exercised

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 the

weightedaveragenumberofshares.

DilutedearningspershareiscalculatedasearningsfortheperiodattributabletotheCompanyoverthe

weightedaveragenumberofshareswhichhasbeenadjustedtoreflectthenumberofshareswhichwouldbe

issuedifoutstandingoptionsandperformancerightsweretobeexercised.However,duetothestatutoryloss

attributabletotheCompanyforboththefinancialyearended30June2017andthecomparativeperiodended

30June2016,theeffectoftheseinstrumentshasbeenexcludedfromthecalculationsofdilutedearningsper

shareforbothperiodsastheywouldreducethelosspershare.


2017ANNUALREPORT 43

21. FINANCIALINSTRUMENTS–FAIRVALUEANDRISKMANAGEMENT

Accountingclassificationsandfairvalues

TheGrouphasfinancialassetsofcashandcashequivalents,andtradeandotherreceivables.Thesharesina

listedcompanyarevaluedatfairvalue.Thefinancialassetsaremeasuredatamortisedcost,andthecarrying

amountisareasonableapproximationoffairvalueat30June2017.

TheGrouphasfinancialliabilitiesofderiviativesandtradeandotherpayables.Deriviativesaremeasuredat

fairvalue.Otherfinancialliabilitiesaremeasuredatamortisedcost,andthecarryingamountisareasonable

approximationoffairvalueat30June2017.

Financialriskmanagement

TherehavebeennosubstantivechangesinthetypesofrisktheGroupisexposedto,howtheserisksarise,or

theBoard’sobjectives,policiesandprocessesformanagingormeasuringtheriskfromthepreviousperiod.

TheGrouphasexposuretothefollowingriskarisingfromfinancialinstruments:

• creditrisk–refer(ii)

• liquidityrisk–refer(iii)

• marketrisk–refer(iv)

(i) Riskmanagementframework

TheCompany’sBoardofDirectorshasoverallresponsibilityfortheestablishmentandoversightoftheGroup’s

riskmanagementframework.TheBoardofDirectorshasestablishedtheAuditandRiskManagement

Committee,whichisresponsiblefordevelopingandmonitoringtheGroup’sriskmanagementpolicies.The

committeereportsregularlytotheBoardofDirectorsonitsactivities.

TheGroup’sriskmanagementpoliciesareestablishedtoidentifyandanalysetheriskfacedbytheGroup,to

setappropriaterisklimitsandcontrolsandtomonitorrisksandadherencetolimits.Riskmanagementpolicies

andsystemsarereviewedregularlytoreflectchangesinmarketconditionsandtheGroup’sactivities.The

Group,throughitstrainingandmanagementstandardsandprocedures,aimstomaintainadisciplinedand

constructivecontrolenvironmentinwhichallworkplaceparticipantsunderstandtheirrolesandobligations.

TheBoardofDirectorshasalsoestablishedaFinanceCommittee,consistingofseniorexecutivesoftheGroup,

whichmeetsonaregularbasistoanalysefinancialriskexposureandtoevaluatetreasurymanagement

strategiesinthecontextofthemostrecenteconomicconditionsandforecasts.Thefinancecommittee’s

overallriskmanagementstrategyseekstoassisttheGroupinmeetingitsfinancialtargets,whilstminimising

potentialadverseeffectsonfinancialperformance.Thefinancecommitteeoperatesunderpoliciesapproved

bytheBoardofDirectors.

(ii) Creditrisk

Exposuretocreditriskrelatingtofinancialassetsarisesfromthepotentialnon-performancebycounterparties

ofcontractobligationsthatcouldleadtoafinanciallosstotheGroup.

TheGrouphasnosignificantconcentrationofcreditriskwithrespecttoanysinglecounterpartyorgroupof

counterpartiesotherthanthosereceivablesspecificallyprovidedforandmentionedwithinnote10.

Tradeandotherreceivables

ThemainsourceofcreditrisktotheGroupisconsideredtorelatetotheclassofassetsdescribedastradeand

otherreceivables.Tradeandotherreceivablesthatareneitherpastdueorimpairedareconsideredtobeof

highcreditquality.Aggregatesofsuchamountsaredetailedinnote10.

Nocollateralisheldoverotherreceivables.


2017ANNUALREPORT 44

21.FINANCIALINSTRUMENTS–FAIRVALUEANDRISKMANAGEMENT(CONTINUED)

‘(ii)Creditrisk(continued)

Impairment

Thebalanceoftradeandotherreceivablesthatwereagedover90daysandimpairedat30June2017is

$124,452(2016:$124,452).

Theagingofthetradeandotherreceivablesthatwerenotimpairedasat30June2017aresetoutinthe

followingtable.

Indollars 2017 2016

Neitherpastduenorimpaired 391,953 155,918

30to60dayspastduebutnotimpaired - -

60to90dayspastduebutnotimpaired - -

Over90dayspastduebutnotimpaired 5,000 -


Cashandcashequivalents

TheGroupheldcashandcashequivalentsof$298,937at30June2017.Thecashandcashequivalentsareheld

withbankandfinancialinstitutioncounterparties,whichareratedAA-toAA+,basedonratingagency

StandardandPoor’sratings.

(iii) Liquidityrisk

LiquidityriskistheriskthattheGroupwillencounterdifficultyinmeetingtheobligationsassociatedwithits

financialliabilitiesthataresettledbydeliveringcashoranotherfinancialasset.TheGroup’sapproachto

managingliquidityistoensure,asfaraspossible,thatitwillhavesufficientliquiditytomeetitsliabilitieswhen

theyaredue,underbothnormalandstressedconditions,withoutincurringunacceptablelossesorrisking

damagetotheGroup’sreputation.

TheGroupaimstomaintaincashatalevelappropriatetofundoperations.At30June2017,theexpectedcash

flowsfromtradeandotherreceivablesmaturingwithintwomonthswere$396,953.

Non-derivativefinancialliabilities

IndollarsWithin1year 1to5years Over5years Total

2017 2016 2017 2016 2017 2016 2017 2016

Tradeandother

payables

1,274,445 556,160 - - - - 1,274,445 556,160

Convertiblenotes 5,853,688 5,421,844 4,954,814 - - - 10,808,502 5,421,844

Totalnon-derivativefinancialliabilities

7,128,133 5,978,004 4,954,814 - - - 12,082,947 5,978,004


2017ANNUALREPORT 45


(iii)Liquidityrisk(continued)

Derivativefinancialliabilities

IndollarsWithin1year 1to5years Over5years Total

2017 2016 2017 2016 2017 2016 2017 2016

Derivatives 884,788 - - - - - 884,788 -

Totalderivativefinancialliabilities

884,788 - - - - - 884,788 -

(iv) Marketrisk

Marketriskistheriskthatchangesinmarketprices–suchasforeignexchangerates,interestratesandequity

prices–willaffecttheGroup’sincomeorthevalueofitsholdingsoffinancialinstruments.Theobjectiveof

marketriskmanagementistomanageandcontrolmarketriskexposureswithinacceptableparameters,while

optimisingthereturn.

Currencyrisk

TheGroup’sexposuretoforeigncurrencyriskislimitedduetothenaturalhedgeaffordedtotheGroupby

purchasingandsellinginlocalcurrencyinallcountriesinwhichitoperates.TheGroupdoesnotholdany

foreigncurrencycontracts.

Exposuretocurrencyrisk

ThesummaryquantitativedataabouttheGroup’sexposuretocurrencyriskasreportedtothemanagement

oftheGroupissetoutinthefollowingtable.

Indollars

USD

2017 2016

Netstatementoffinancialpositionexposure - -

Thefollowingsignificantexchangerateshavebeenappliedinpreparingtheconsolidatedstatementof

financialpositionandconsolidatedstatementofprofitorloss.

InAUD

USD

2017 2016Averagerate 0.79 0.73

Year-endspotrate 0.80 0.74

Fairvaluemeasurement

(i) Fairvaluehierarchy

ThefollowingtabledetailtheGroup’sassetsandliabiliesforthecurrentreportingperiod(2016:nil)measured

ordisclosedatfairvalue,usingathreelevelhierarchy,basedonthelowestlevelofinputthatissignificantto

theentirefairvaluemeasurement,being:

Level1:Quotedprices(unadjusted)inactivemarketsforidenticalmarketsforidenticalassetsorliabilitiesthat

theentitycanaccessatthemeasurementdate;


2017ANNUALREPORT 46


Fairvaluemeasurement(continued)

‘(i)Fairvaluehierarchy(continued)

Level2:InputsotherthanquotedpricesincludedwithinLevel1thatareobservablefortheassetorliability,

eitherdirectlyorindirectly;and

Level3:Unobservableinputsfortheassetorliability.

Indollars Level1 Level2 Level3 Total

Liabilities

Derivativeconvertiblenoteoptions - 884,788 - 884,788

Totalliabilities - 884,788 - 884,788

Therewerenotransfersbetweenlevelsduringthefinancialyear.

Thecarryingamountsoftradeandotherreceivablesandtradeandotherpayablesareassumedto

approximatetheirfairvaluesduetotheirshort-termnature.

Thegain/lossrecognisedinprofitorlossfortheperiodfromlevel2and3valuationsisnil(2016:nil).

Valuationtechniquesforfairvaluemeasurementscategorisedwithinlevel2

Thederivativeconvertiblenoteoptionswererevaluedon30June2017basedoninternalassessments

performedbymanagement,withreferencetothetermsoftheunderlyingconvertiblenotesasdisclosedin

note17.

Significantaccountingpolicis

Assetsandliabilitiesmeasuredatfairvalueareclassifiedintothreelevelsusingafairvaluehierarchythatreflects

thesignificanceoftheinputsusedinmakingthemeasurements.Classificationsarereviewedateachreporting

dateandtransfersbetweenlevelsaredeterminedbasedonareassessmentofthelowestlevelofinputthatis

significanttothefairvaluemeasurement.


2017ANNUALREPORT 47

22. 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)HoldingsInc 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.

NereidEnterprisesPtyLtdprovidescorporateeventsandpromotionalservicestothehealthcareindustry

andrelatedpartiesofiQnovateLtd.

Summaryfinancialinformation

Noneoftheassociatesarelistedonastockexchange.Theinvestmentsinassociatesisequityaccountedusing

auditedfinancialinformation.

(b) Investmentinassociatesaccountedforusingequitymethod

Indollars 2017 2016

Reconciliationtocarryingamount

Netassetbalanceatstartofperiod 1,243,277 -

Netassetatacquisition - 1,345,000

Lossfortheperiod (142,712) (101,723)

Othercomprehensiveincome - -

Netassetbalanceatendofperiod 1,100,565 1,243,277Consolidatedentity’ssharein% 40% 40%

Consolidatedentity’sshareatacquisition 440,226 497,311

Adjustmentpostedinfollowingperiod - 40,689

Consolidatedentity’sshareatreportingdate 440,226 538,000


2017ANNUALREPORT 48

22.INVESTMENTS(CONTINUED)

23. OPERATINGLEASES

TheGroupleasesanumberofofficefacilitiesunderoperatingleases.Theleasesarenon-cancellableandrun

foraperiodof1to4years,withanoptiontorenewtheleaseafterthatdate.Contingentrentalprovisions

withintheleaseagreementrequirethattheminimumleasepaymentsshallbeincreasedby4%perannum.

Theleaseallowsforsublettingofallleaseareas.

Futureminimumleasepayments

Asat30June2017,thefutureminimumleasepaymentsundernon-cancellableleaseswerepayableassetout

inthefollowingtable.

Indollars 2017 2016

Lessthanoneyear 112,165 159,137

Betweenoneandfiveyears - 107,496

Morethanfiveyears - -

Totalfutureminimumleasepayments 112,165 266,633

24. CONTINGENCIES

TheGrouphasnocontingentliabilitiesorassetsasatthereportingdate(2016:None).


Subsidiaries

Subsidiariesareallentities(includingstructuredentities)overwhichtheparenthascontrol.Controlis

establishedwhentheparentisexposedto,orhasrightstovariableratesofreturnsfromitsinvolvementwith

theentityandhastheabilitytoaffectthosereturnsthroughitspowertodirecttherelevantactivitiesofthe

entity.

Associates

AssociatesareallentitiesoverwhichtheGrouphassignificantinfluencebutnotcontrol,generally

accompanyingashareholdingbetween20%and50%ofthevotingrights.Investmentsinassociatesandjoint

venturesareaccountedforintheGroup’sfinancialstatementsusingtheequitymethodofaccounting,after

initiallybeingrecognisedatcost.

TheGroup’sshareoftheassociatespost-acquisitionprofitsorlossesarerecognisedinthestatementofprofitor

loss,anditsshareofpost-acquisitionmovementsinreservesisrecognisedinreserves.Thecumulativepost

acquisitionmovementsareadjustedagainstthecarryingamountoftheinvestment.Dividendsreceivablefrom

associatesreducethecarryingamountoftheinvestment.

WhentheGroup’sshareoflossesinanassociateequalsorexceedsitsinterestintheassociate,includingany

unsecuredreceivables,theGroupdoesnotrecognisefurtherlosses,unlessithasincurredobligationsormade

paymentsonbehalfoftheassociate.

.


2017ANNUALREPORT 49

25. TRANSACTIONSWITHRELATEDPARTIES

(i) Parentandultimatecontrollingparty

iQnovateLtdwastheparentandultimatecontrollingpartyoftheGroupthroughouttheyearended30June

2017.

(ii) Keymanagementpersonnelcompensation

Thekeymanagementpersonnelcompensationissetoutinthetablebelow.

Indollars 2017 2016

Short-termemployeebenefits 806,047 903,317

Post-employmentbenefits 67,018 74,522

Totalkeymanagementpersonnelcompensation 873,065 977,839

Compensationof theGroup’skeymanagementpersonnel includessalariesandnon-cashbenefits.Executive

officersalsoparticipateintheGroup’semployeeincentiveplan.

FurtherdetailsofkeymanagementpersonnelcompensationareincludedintheRemunerationReportwithin

theDirectors’Report.

(iii) Transactionswithrelatedparties

TheGrouptransactedwiththefollowingrelatedcompanies.Transactionswithotherrelatedpartiesareon

normalcommercialtermsandconditionsnomorefavorablethanthoseavailabletootherpartiesunless

otherwisestated.

Entitiyname Relationship

iQXLimitedandcontrolledentities Commondirectorshipand/keymanagementpersonnel

iQ3CorpLtdandcontrolledentities Commondirectorshipand/keymanagementpersonnel

NereidEnterprisesPtyLtd AnAssociatewithcommondirectorshipand/keymanagement

personnel

Transactionswithrelatedpartiesareonnormalcommercialtermsandconditionsnomorefavourablethan

thoseavailabletootherpartiesunlessotherwisestated.

Theaggregatevalueoftransactionsandoutstandingbalancesrelatingtosubsidiariesandassociatesareset

outinthefollowingtable.

Indollars 2017 2016

Sharedservicesfeesreceivedfromrelatedparties 415,290 350,147

Totalfeesreceivedfromrelatedparties 415,290 350,147Consultingfeespaidtorelatedparties 1,931,546 2,240,244

Paymetofsharedservicesfeestorelatedparties 880,242 1,106,216

Assetspurchasedfromrelatedparties 2,841,338 -

Othertransactionandadministrativecostspaidtorelatedparties 40,342 1,002,760

Totalcostspaidtorelatedparties 5,693,468 4,349,220Tradepayableaccountswithrelatedparties (1,310,776) (701,290)

Tradereceivableaccountswithrelatedparties 26,032 24,363

Nettradereceivable/(payable)fromrelatedparties (1,284,744) (676,927)


2017ANNUALREPORT 50

26. 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)

27. AUDITORS’REMUNERATION

Indollars 2017 2016

Auditandreviewservices

AuditorsoftheGroupatJune2017–RSMAustraliaPartners 20,000 -

AuditorsoftheGroupatDecember2016–Fortunity 4,000 19,000

Otherauditors - -

Otherservices AuditorsoftheGroupatJune2017–RSMAustraliaPartners 14,500 -

AuditorsoftheGroupatDecember2016–Fortunity - -

Otherauditors - -

28. SUBSEQUENTEVENTS

Therehasnotarisenintheintervalbetweentheendofthefinancialyearandthedateofthisreportanyitem,

transactionoreventofamaterialandunusualnaturelikely,intheopinionoftheDirectorstoaffect

significantlytheoperationsorstateofaffairsoftheGroupinfuturefinancialyears.

IQNOVATELTDANDCONTROLLEDENTITIESDIRECTORS’DECLARATIONFORTHEYEARENDED30JUNE2017

2017ANNUALREPORT 51

1. IntheopinionoftheBoardofDirectorsofiQnovateLtd(“theCompany”):

a. the consolidated financial statements and notes that are set out on pages 22 to 50 are in

accordancewiththeCorporationsAct2001,including:

I. giving a true and fair view of the financial position as at 30 June 2017 of the

Companyanditscontrolledentities(“theGroup”)andoftheGroup’sperformance

forthefinancialyearendedonthatdate;and

II. complyingwithAustralianAccountingStandardsandtheCorporationsRegulations

2001;and

b. therearereasonablegroundstobelievethattheCompanywillbeabletopayitsdebtsasand

whentheybecomedueandpayable.

2. TheDirectorshavebeengiventhedeclarationsrequiredbySection295Aof theCorporationsAct2001

fromthechiefexecutiveofficerandchieffinancialofficerforthefinancialyearended30June2017.

3. The Directors draw attention to note 2 to the consolidated financial statements, which includes a

statementofcompliancewithInternationalFinancialReportingStandards.

SignedinaccordancewitharesolutionofDirectors.

DrGeorgeSyrmalisChair

Sydney

19 October2017

THE POWER OF BEING UNDERSTOODAUDIT | TAX | CONSULTING

RSM Australia Partners is a member of the RSM network and trades as RSM. RSM is the trading name used by the members of the RSM network. Each member of the RSM network is an independent accounting and consulting firm which practices in its own right. The RSM network is not itself a separate legal entity in any jurisdiction.

RSM Australia Partners ABN 36 965 185 036

Liability limited by a scheme approved under Professional Standards Legislation


Level 13, 60 Castlereagh Street Sydney NSW 2000GPO Box 5138 Sydney NSW 2001

T +61 (0) 2 8226 4500F +61 (0) 2 8226 4501

www.rsm.com.au

INDEPENDENT AUDITOR’S REPORT To the Members of IQNovate Ltd

Opinion

We have audited the financial report of IQNovate Ltd (the Company) and its subsidiaries (the Group), which comprises the consolidated statement of financial position as at 30 June 2017, the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies, and the directors' declaration.

In our opinion the accompanying financial report of the Group is in accordance with the Corporations Act 2001, including:

(i) giving a true and fair view of the Group's financial position as at 30 June 2017 and of its financialperformance for the year then ended; and

(ii) complying with Australian Accounting Standards and the Corporations Regulations 2001.

Basis for Opinion

We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those

standards are further described in the Auditor's Responsibilities for the Audit of the Financial Report section of

our report. We are independent of the Group in accordance with the auditor independence requirements of the

Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board's

APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the financial

report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code.

We confirm that the independence declaration required by the Corporations Act 2001, which has been given to

the directors of the Company, would be in the same terms if given to the directors as at the time of this auditor's

report.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our

opinion.

Key Audit MattersKey audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report of the current period. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

52

Key Audit Matter How our audit addressed this matter

Recognition of Revenue

Refer to Note 6 in the financial statements

Revenue recognition was considered a key audit

matter, as it material and important to the company’s

profitability.

In addition we focused on revenue recognition as the

company’s business involves entering into fixed

price contracts for the provision of contract sales and

marketing. Revenue on these contracts are

recognised over time as the service is provided and

this may differ from payments received from the

customer, resulting in deferred revenue. There may

also be significant management judgment in

determining the extent to which services have been

delivered, and in identifying potentially onerous

contracts.

Our audit procedures in relation to the recognition of

revenue included:

• Assessing whether the Company’s revenuerecognition policies were in compliance withAustralian Accounting Standards

• Evaluating, and testing the operatingeffectiveness, of management’s controls relatedto revenue recognition

• Inspection of sales contracts and agreeing termsof the contract, the stage of completion, andrecalculating revenue recognised.

Carrying value of internally developed intangible assets

Refer to note 12 in the financial statements

The closing net book value of all internally developed

and purchased intangible assets was $4,257,740.

Development expenditure, acquired intellectual

property and the costs of building applications and

web-site platforms are capitalised as intangible

assets, where the expenditure demonstrable value

and the technical and commercial feasibility is

assured.

Management has to exercise judgment in

determining which costs can be capitalised and

when performing an impairment review. The

materiality of judgments involved has caused us to

identify these as key audit risks.

Our audit procedures in relation to the carrying value

of internally developed intangible assets included:

• Reviewing management’s identification of the

development projects being undertaken, and their

assessment of whether they meet the criteria for

recognition as intangible assets in accordance with

AASB 138 Intangible Assets

• Testing amounts capitalised in the period to

assess whether expenses incurred were directly

attributable to the projects identified, and therefore

eligible for capitalisation.

• Critically reviewing management’s impairment

reviews for those assets not yet available for use.

Other Information

The directors are responsible for the other information. The other information comprises the information included

in the Group's annual report for the year ended 30 June 2017, but does not include the financial report and the

auditor's report thereon.

Our opinion on the financial report does not cover the other information and accordingly we do not express any

form of assurance conclusion thereon.

In connection with our audit of the financial report, our responsibility is to read the other information and, in doing

so, consider whether the other information is materially inconsistent with the financial report or our knowledge

obtained in the audit or otherwise appears to be materially misstated.

If, based on the work we have performed, we conclude that there is a material misstatement of this other

information, we are required to report that fact. We have nothing to report in this regard.

53

Responsibilities of the Directors for the Financial Report

The directors of the Company are responsible for the preparation of the financial report that gives a true and fair

view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal

control as the directors determine is necessary to enable the preparation of the financial report that gives a true

and fair view and is free from material misstatement, whether due to fraud or error.

In preparing the financial report, the directors are responsible for assessing the ability of the Group to continue as

a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of

accounting unless the directors either intend to liquidate the Group or to cease operations, or have no realistic

alternative but to do so.

Auditor's Responsibilities for the Audit of the Financial Report

Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from

material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion.

Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance

with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements

can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably

be expected to influence the economic decisions of users taken on the basis of this financial report.

A further description of our responsibilities for the audit of the financial report is located at the Auditing and

Assurance Standards Board website at: http://www.auasb.gov.au/auditors_responsibilities/ar2.pdf.

This description forms part of our auditor's report.

Report on the Remuneration Report

Opinion on the Remuneration Report

We have audited the Remuneration Report included in pages 9 to 13 of the directors' report for the year ended

30 June 2017.

In our opinion, the Remuneration Report of IQNovate Ltd., for the year ended 30 June 2017, complies with

section 300A of the Corporations Act 2001.

Responsibilities

The directors of the Company are responsible for the preparation and presentation of the Remuneration Report

in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the

Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards.

David Talbot

Partner


Sydney, 19 October 2017

54

IQNOVATELTDANDCONTROLLEDENTITIESNSXADDITIONALINFORMATIONFORTHEYEARENDED30JUNE2017

2017ANNUALREPORT 55

NSX ADDITIONAL INFORMATION

AdditionalinformationrequiredbytheNSXandnotdisclosedelsewhereinthisreportissetoutbelow.The

informationiscurrentasat11August2017.

SHAREHOLDINGS

Substantialshareholders

Thenumberofsharesheldbysubstantialshareholdersandtheirassociatesaresetoutbelow:

Shareholder Numberofordinary

sharesheld

%oftotalordinaryshares

BiotechnologyHoldings 37,227,750 29.94%

ConTsigounisPtyLtd 36,918,780 26.69%

Totalofsubstantialshareholders 74,146,530 56.63%

Distributionofequitysecurityholders

Category Holders Ordinaryshares

%

1–1,000 4 2,400 0.00%

1,001–5,000 4 16,638 0.01%

5,001–10,000 199 1,381,321 1.11%

10,001–100,000 102 4,647,131 3.74%

100,001andover 98 118,291,680 95.14%

Total 407 124,339,170 100.00%

Shareholderswithlessthanmarketableparcel

Thereare4shareholderseachwithanunmarketableparcelofsharesbeingaholdingof1,664or less, fora

combinedtotalof2,400shares.Thisisbasedonaclosingpriceof$0.30pershareasat11August2017and

represents0.0019%ofthefullypaidordinarysharesonissue.

Sharessubjecttoescrow

Thereisnosecurityclasssubjecttoescrowasat11August2017.

Unquotedequitysecurities

Therearenounquotedredeemablepreferencesharesorredeemableconvertiblenotesonissue.

SECURITIESEXCHANGE

TheCompanyislistedontheNationalSecuritiesExchange.TheHomeexchangeisSydney.

ON-MARKETBUY-BACK

Thereisnocurrenton-marketbuy-back.

IQNOVATELTDANDCONTROLLEDENTITIESNSXADDITIONALINFORMATION(CONTINUED)FORTHEYEARENDED30JUNE2017

2017ANNUALREPORT 55

TENLARGESTSHAREHOLDERS

Shareholder Numberofordinary

sharesheld

%oftotalordinaryshares

BiotechnologyHoldingsPtyLtd 32,227,750 29.94%

ConTsigounisPtyLtd 36,918,750 26.69%

AnthonyTsigounisPtyLtd 4,312,500 3.47%

MrTRegoandMrsCRego 1,500,000 1.21%

MrAKousoulisandMrsAKousoulis 1,320,000 1.06%

MoberyPtyLtd 1,125,000 0.90%

MrJStratilas 1,038,000 0.83%

MrWEconomosandMrsMEconomos 1,020,000 0.82%

MrPMercouris 1,020,000 0.82%

JKConsultancyServicesPtyLtd 1,020,000 0.82%

Totalsecuritiesoftop10holdings 81,502,000 66.56%

HISTORICALSUMMARYTABLE

Shareperformance FinancialperformanceA$million

Period Closingshare

priceat30June

Dividend

pershare

EPS(cents) Revenue Lossaftertax Assets Liabilities

FY2017 $0.45 NIL (7.6) $4.7 ($9.9) $7.6 $16.3

FY2016 $0.61 NIL (6.5) $2.7 ($7.4) $5.8 $7.2

FY2015 $0.55 NIL (10.8) $0.8 ($4.4) $4.4 $5.0

FY2014 $0.65 NIL (3.65) $0.9 ($1.4) $2.2 $0.8

FY2013 $1.20 NIL (3.81) $0.8 ($1.5) $2.5 $0.1

WAIVERS

Therearenoarrangementswhere: (a) theDirector’shaveagreedtowaiveanyemoluments;or (b)wherea

shareholderhaswaivedoragreedtowaiveanydividends.

SIGNIFICANTCONTRACTSWITHDIRECTORS,CHILDENTITIESORCONTROLLINGSHAREHOLDERS

Refertonote25oftheNotestotheConsolidatedFinancialStatementsfordetailsofmaterialrelatedparty

transactions.

DIRECTORANDOFFICERSINTERESTS

Refertonote7oftheRenumerationReport,whichformspartoftheAnnualReportfordetailsofDirectorand

Officerinterests.Inaddition,thefollowingDirectorsandCompanyOfficersholdsecurityinterestsinchild

entitiesassetoutbelow:

• GerardoIncollingohasaninterestin1,245,000ordinarysharesiniQN,a$50,000debtinstrument

withCRC,and470,000ordinarysharesinFarmaForce.

• SpiroSakirishasaninterestin110,833ordinarysharesinFarmaForce,41,667optionsinFarmaForce,

anda$25,000debtinstrumentwithCRC.

• DrGeorgeSyrmalishasaninterestin10,000ordinarysharesinFarmaForce.

OTHER

Therearenoperiod’sunexpiredofanyservicecontractofanyDirectorproposedforelectionatthe

forthcomingannualgeneralmeeting.

94

Level 7, 222 Clarence St, Sydney NSW Australia 2000

Tel: +61 2 8239 5400 | Fax: +61 2 8362 9547 | [email protected]

iqnovate.com

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