ResApp Health Limited (formerly Narhex Life Sciences Limited) ABN CONSOLIDATED ANNUAL REPORT for the year ended 30 June 2016

Transcription

1 ResApp Health Limited (formerly Narhex Life Sciences Limited) CONSOLIDATED ANNUAL REPORT for the year ended 30 June 2016

2 CONTENTS TO THE CONSOLIDATED FINANCIAL REPORT Corporate information... 1 Directors report... 2 Corporate governance statement... 9 Auditor s independence declaration Consolidated statement of profit or loss and other comprehensive income for the financial year ended 30 June Consolidated statement of financial position as at 30 June Consolidated statement of changes in equity for the financial year ended 30 June Consolidated statement of cash flows for the financial year ended 30 June Notes to the consolidated financial statements Directors' declaration...45 Independent auditor's report ASX additional information... 48

3 ResApp Health Limited Annual Report Corporate information This annual report is for ResApp Health Limited (formerly Narhex Life Sciences Limited) and its controlled entity ( the Group ). Unless otherwise stated, all amounts are presented in Australian Dollars. A description of the Group s operations and of its principal activities is included in the review of operations and activities in the directors report on pages 5 to 8. The directors report is not part of the financial statements. Directors Dr Roger Aston (appointed 2 July ) Dr Tony Keating (appointed 2 July ) Mr Brian Leedman (appointed 19 February 2016) Mr Chris Ntoumenopoulos (appointed 21 January ) Mr Adam Sierakowski (resigned on 22 March 2016) Dr Robert Ramsay (resigned on 2 July ) Company Secretary Ms Nicki Farley Registered and Principal Office Auditors Level 24 Greenwich & Co Audit Pty Ltd 44 St Georges Tce, Level 2, 35 Outram St PERTH WA 6000 PERTH WA 6005 Share Registry & Register Solicitors Link Market Services Ltd Price Sierakowski Corporate Level 2, 178 St Georges Tce Level 24, 44 St Georges Tce PERTH WA 6000 PERTH WA 6000 Bankers Stock Exchange Listing National Australia Bank ResApp Health Limited Limited 100 St Georges Tce (formerly Narhex Life Sciences) is listed on PERTH WA 6000 the Australian Securities Exchange. ASX Code: RAP (formerly NLS) Contact Information Ph: Fax: Web Site 1

4 Directors report The directors of ResApp Health Limited (formerly Narhex Life Sciences Limited) ( the Company ) and its controlled entity ( the Group ) submit herewith the annual financial statements of the Group for the financial year ended 30 June These financial statements cover the period from 1 July to 30 June In order to comply with the provision of the Corporations Act 2001, the directors report is as follows: The names and particulars of the directors of the Company during or since the end of the financial year are: Dr Roger Aston Non-Executive Chairman (appointed 2 July ) Dr Roger Aston, BSc (Hons) PhD is currently the Chairman of OncoSil Medical. He has had extensive experience on boards of many pharmaceutical companies, and has been Chief Executive Officer of Pitney Pharmaceuticals Ltd, PSIMedica, psioncology Pte Ltd, Peptech and Cambridge Antibody Technology. In 2001, Dr Aston co-founded psivida Limited. He served as the Chief Executive Officer of Mayne Pharma Group Limited until 15 February During his career, Dr Aston has been closely involved in start-up companies and major pharmaceutical companies. Aspects of his experience include FDA and EU product registration, clinical trials, global licensing agreements, fundraising through private placements, and a network of contacts within the pharmaceutical, banking and stock broking sectors. Dr Aston is both a scientist and a seasoned biotechnology entrepreneur, with a successful track record in both fields. He currently has several executive and non-executive board positions with prominent biotechnology companies. Interest in Shares and Options Directorships held in other listed entities Dr Aston holds 8,437,500 ordinary shares and 8,437,500 performance shares indirectly in the Company. Dr Aston holds nil options in the Company. During the past three years Dr Aston has served as a Director for the following other listed companies: (a) Immuron Limited appointed 25 May 2012; (b) Regeneus Limited appointed 21 September 2012; (c) PharmAust Limited appointed 12 August 2013; (d) Oncosil Medical Limited appointed 28 March 2013; (e) IDT Australia Limited appointed 20 March 2012, resigned 20 November 2014; and (f) Polynovo Limited appointed 15 November 2013, resigned 10 September Dr Tony Keating Chief Executive Officer and Managing Director (appointed 2 July ) Dr Tony Keating has over 10 years experience in commercialising technology. Dr Keating created the initial business strategy for ResApp and has led the commercialization of ResApp s technology to date. Previously, Dr Keating was Director, Commercial Engagement at UniQuest Pty Ltd, one of the global leaders in commercialisation of university technology. While at UniQuest, Dr Keating held roles as interim Chief Executive Officer and Non-Executive Director for a number of privately-held, venture-capital funded start-up companies. Prior to joining UniQuest Dr Keating held business development and engineering management roles at Exa Corporation, a US-based software company that is now listed on the NASDAQ. 2

5 Directors report (continued) Dr Tony Keating Interest in Shares and Options Directorships held in other listed entities Mr Brian Leedman Chief Executive Officer and Managing Director (appointed 2 July ) Dr Keating holds a Bachelor of Engineering, a Master of Engineering Science and a Doctor of Philosophy (Mechanical Engineering) from The University of Queensland. Dr Keating also has an Executive Certificate of Management and Leadership from the MIT Sloan School of Management, and is a Graduate Member of the Australian Institute of Company Directors. Dr Keating holds nil shares in the Company. Dr Keating holds 20,000,000 options in the Company. During the past three years Dr Keating has not held directorship of any other ASX listed companies. Executive Director and Vice President, Corporate Affairs (appointed 19 February 2016) Mr Leedman is a marketing and investor relations professional with over 10 years experience in the biotechnology industry. Mr Leedman was cofounder of ResApp Diagnostics Pty Ltd which was acquired by Narhex Life Sciences Ltd to form ResApp Health. Prior to ResApp, Mr Leedman cofounded Oncosil Medical Limited and Biolife Science Limited (acquired by Imugene Limited). Mr Leedman previously served for 10 years as Vice President, Investor Relations for psivida Corp which is listed on the ASX and NASDAQ. He is currently the WA chairman of AusBiotech, the association of biotechnology companies in Australia. Mr Leedman holds a Bachelor of Economics and a Masters of Business Administration from the University of Western Australia. Interest in Shares Mr Leedman holds 30,060,000 ordinary shares and 23,250,000 and Options performance shares indirectly in the Company. Mr Leedman holds 1,875,000 options in the Company. Directorships held in other listed entities During the past three years Mr Leedman has served as a Director for the following other listed companies: (a) Alcidion Group Limited appointed 28 July 2016; Mr Chris Ntoumenopoulos Non-Executive Director (appointed 21 January ) Mr Ntoumenopoulos was a partner at CPS Capital, a WA based Stockbroking and Corporate Advisory firm. He has worked in financial markets for the past 12 years, focusing on Capital Raisings, Portfolio Management and Corporate Advisory. Mr Ntoumenopoulos has advised and funded numerous ASX companies from early stage venture capital, through to IPO. He is an executive director of various private companies which span across finance, technology and medical sectors. Mr Ntoumenopoulos has a Bachelor of Commerce degree from the University of WA, majoring in Money and Banking, Investment Finance and Electronic Commerce. Interest in Shares and Options Mr Ntoumenopoulos holds 2,109,375 shares indirectly in the Company. Mr Ntoumenopoulos holds nil options in the Company. 3

6 Directors report (continued) Mr Chris Ntoumenopoulos Directorships held in other listed entities Non-Executive Director (appointed 21 January ) During the past three years Mr Ntoumenopoulos has served as a Director for the following other listed companies: (a) Race Oncology Ltd appointed 27 April 2016; Mr Adam Sierakowski Non-Executive Director (resigned 22 March 2016) Mr Sierakowski is a lawyer and founding director of the legal firm Price Sierakowski. He has over 20 years experience in legal practice, much of which he has spent as a corporate lawyer consulting and advising on a range of transactions to a variety of large private and listed public entities. He is the co-founder and director of Perth based corporate advisory business, Trident Capital, where he has for years advised a variety of large private and public companies on structuring their transactions and coordinating fundraising both domestically and overseas. Mr Sierakowski has held a number of board positions with ASX listed companies and is currently a member of the Australian Institute of Company Directors and the Association of Mining and Exploration Companies. Interest in Shares and Options Directorships held in other listed entities Mr Sierakowski holds 15,823,477 ordinary shares indirectly in the Company. Mr Sierakowski holds nil options in the Company. During the past three years Mr Sierakowski has served as a Director for the following other listed companies: (b) Flexiroam Limited appointed 18 March ; (c) Coziron Resources Limited appointed 21 October 2010; (d) Kinetiko Energy Limited appointed 20 December 2012; and (e) iwebgate Limited appointed 23 July 2012, resigned 12 February Dr Robert Ramsay Interest in Shares and Options Directorships held in other listed entities Non-Executive Director (resigned 2 July ) Dr Ramsay is a geologist with over 30 years experience working with Rio Tinto, Striker Resources, BHP Billiton, and several junior explorers. During 20 years with Rio Tinto and Striker Resources, Dr Ramsay specialized in diamond exploration and the assessment of diamond-pipe prospectivity using indicator-mineral geochemistry. Most recently Dr Ramsay was the Senior Project Geologist with Speewah Metals Ltd where he was responsible for the planning and implementation of drilling programmes from discovery through to a JORC compliant resources of 4.7 Billion tonnes on the V-Ti magnetite along with mapping and drilling of an epithermal, vein style deposit of fluorite adjacent to the V-Ti-magnetite deposit leading to the expansion of a JORC compliant resource of 6.7Mt. Dr Ramsay holds nil shares in the Company. Dr Ramsay holds nil options in the Company. During the past three years Dr Ramsay has served as a Director for the following other listed companies: (a) Coziron Resources Limited appointed 20 December

7 Directors report (continued) Ms Nicki Farley Company Secretary (appointed 7 November 2012) Ms Farley has over 10 years experience working within the legal and corporate advisory sector providing advice in relation to capital raisings, corporate and securities laws, mergers and acquisitions and general commercial transactions. Ms Farley also holds a number of company secretarial roles for ASX listed companies. Ms Farley holds a Bachelor of Laws and Arts from the University of Western Australia. Directors meetings The following table sets out the number of directors meetings held during the financial year and the number of meetings attended by each director (while they were a director). Board of Directors Eligible to Attended Directors Attend Dr Roger Aston Dr Tony Keating Mr Brian Leedman Mr Chris Ntoumenopoulos 6 6 Mr Adam Sierakowski Dr Robert Ramsay Dr Aston and Dr Keating were appointed on 2 July 2 Mr Leedman was appointed on 19 February Mr Sierakowski resigned on 22 March Dr Ramsay resigned on 2 July The Board of Directors also approved fifteen (15) circular resolution during the year ended 30 June 2016 which were signed by all Directors of the Company. The audit, compliance and corporate governance committee is performed by the Board of Directors. Principal activities During the year, the Company acquired 100% of ResApp Diagnostics Pty Ltd ( ResApp Diagnostics ) and continued the development and commercialisation of ResApp Diagnostic s technology for the purpose of providing health care solutions for respiratory disease. Operating results and financial position The net loss for the year ended 30 June 2016 was 3,207,577 compared with a net loss of 489,321 for the previous year. The Company had a net asset position as at 30 June 2016 of 16,046,358 (: 484,941). The loss for the current year is attributable to operating activities and research and development costs incurred following the acquisition of ResApp Diagnostics. The prior year loss was attributable to increased legal services performed in relation to the acquisition of ResApp Diagnostics Pty Ltd. Review of operations Acquisition of ResApp Diagnostics Pty Ltd On 2 July, the Company announced that the Share Sale Agreement dated 20 February between the Company, ResApp Diagnostics Pty Ltd, the Shareholders of ResApp Diagnostics Pty Ltd and UniQuest had completed with the Company acquiring 100% of ResApp Diagnostics Pty Ltd ( ResApp ) following its successful raising of 4 million. 5

8 Directors report (continued) Review of operations (continued) Acquisition of ResApp Diagnostics Pty Ltd (continued) In accordance with the Company s Replacement Prospectus dated 26 May and as approved by Shareholders at the General Meeting held on 27 May, the following securities were issued (on a post consolidation basis): Public Offer 200,000,000 Shares at 0.02 per Share having raised 4 million; Vendor Offer 93,750,000 Shares and 93,750,000 Performance Shares issued in consideration for the acquisition of ResApp; Facilitation Offer 18,749,999 Shares to the Facilitators for services provided; and Incentive Options 20 million Incentive Options. In addition, the Company changed its name from Narhex Life Sciences Limited to ResApp Health Limited and was reinstated to official quotation on the ASX on 14 July under the new ASX Code RAP. Following completion of the acquisition, Dr Tony Keating was appointed to the Board of the Company in the position of Managing Director and Chief Executive Officer. Dr Roger Aston was appointed as a non-executive director, replacing Dr Rob Ramsay. Dr Aston was subsequently appointed as Chairman of the Company, replacing Mr Adam Sierakowski who remained on the Board as a non-executive director until 22 March Mr Brian Leedman was appointed as an executive director of the Company on 19 February Paediatric Clinical Studies Following reinstatement, the Company made significant progress with its paediatric clinical study at Joondalup Health Campus (JHC) in Perth, Western Australia. The study focuses on gathering data from patients with a variety of respiratory conditions with the aim of further optimizing the ResApp algorithms for pneumonia and asthma as well as broadening the validation to other common respiratory conditions. The Company subsequently announced Princess Margaret Hospital (PMH), an internationally recognised paediatric facility in Perth as the second site to participate in the existing study. On 30 September, the Company announced positive preliminary results from its clinical study for diagnosis of asthma and viral pneumonia. On 10 November further positive preliminary results were released from its paediatric clinical study underway at JHC and PMH. These November preliminary results, prepared by the team led by Associate Professor Udantha Abeyratne at The University of Queensland (UQ), were based on a 338 subject dataset. The results expanded the platform to diagnose bronchiolitis, croup and upper respiratory tract infection (URTI) at very high levels of accuracy (greater than 96%) and showed accurate (89-99%) differential diagnosis of patients with one respiratory disease from patients with other respiratory diseases. The new diseases (plus viral pneumonia and asthma/viral-induced wheeze reported in the September preliminary results) cover the majority of respiratory conditions that commonly occur in children. On 2 March 2016 a further update was provided on the paediatric clinical study being undertaken at JHC and PMH. Enrolments continued at a fast pace, with 598 subjects (481 confirmed respiratory disease cases and 117 control cases) enrolled in the study. ResApp s diagnostic tool achieved overall accuracy levels in excess of 90% when used to differentiate between lower respiratory tract diseases and URTIs with no lower respiratory tract involvement, and achieved 99% accuracy when distinguishing between patients with a lower respiratory tract disease and subjects with no discernible respiratory tract disease. In addition, ResApp s tool was able to correctly detect lower respiratory tract disease in 80% of patients who were initially diagnosed as clear by experienced clinicians using stethoscopes but were finally diagnosed as having a lower respiratory tract disease after clinical testing. On 31 March 2016, ResApp provided a further update on the paediatric clinical study on an expanded 524 subject dataset on which ResApp s algorithms continued to demonstrate high levels of accuracy for differential diagnosis of patients with respiratory disease. In these results 97% of patients with lower respiratory tract disease that were initially diagnosed as clear by experienced clinicians using stethoscopes were correctly detected by the ResApp algorithm. ResApp also provided preliminary results for the separation of bacterial and atypical pneumonia from viral pneumonia with accuracy of 89% and 92% respectively. 6

9 Directors report (continued) Review of operations (continued) Adult Clinical Studies On 14 December the Company announced that it has received approval to enrol its first adult patient at JHC. The Emergency Department (ED) at JHC provides emergency services to nearly 100,000 patients per year (80,000 adults and 20,000 children), making it one of Australia s busiest EDs. The study will gather data from adults presenting to the ED with respiratory conditions such as upper respiratory tract infections, bronchitis, pneumonia, asthma and chronic obstructive pulmonary disease. The aim of the study is to demonstrate that ResApp s technology, shown to be highly accurate for diagnosis of childhood respiratory conditions, can be extended to adults. On 26 February 2016 the Company announced that it had received approval to enrol adult patients at the Wesley Hospital in Brisbane, Australia. The Wesley Emergency Centre (WEC) is one of the largest private emergency departments in Australia. The WEC is the second site participating in ResApp s adult clinical study. On 7 June 2016 the Company announced that it had enrolled 322 adult patients (236 confirmed respiratory disease cases and 86 control cases) in its first adult study at Joondalup Health Campus. ResApp confirmed that enrolment at the WEC had also commenced. On 21 June 2016 the Company announced positive preliminary results from its first clinical study in adults underway at JHC confirming that the study had enrolled a total of 322 adult patients. The preliminary results on a 143 patient subset of the available data, prepared by the team led by Associate Professor Udantha Abeyratne at The University of Queensland, demonstrate similarly high levels of sensitivity, specificity and accuracy as previously reported in ResApp s paediatric study. These preliminary results show high levels of accuracy for distinguishing adult patients with COPD (96% accuracy), asthma (92% accuracy) or pneumonia (100% accuracy) from subjects with no discernible respiratory disease using ResApp s cough-based diagnostic technology. Distinguishing the group of asthma and COPD patients from the no respiratory disease group was also achieved at an accuracy of 94%. The differential diagnosis of asthma versus COPD, and pneumonia versus asthma was achieved at an accuracy in the range of 95% to 96%. FDA approval process On 31 December the Company confirmed that it has filed a Pre-Submission package with the United States Food and Drug Administration (FDA) for ResApp s diagnostic mobile software application (app). The FDA s Pre-Submission Program is designed to provide applicants the opportunity to obtain targeted feedback from the FDA in response to questions related to their marketing application, clinical study protocols or data requirements prior to a premarket submission. The Pre-Submission package was prepared with the assistance of Experien Group, LLC, a firm of highly experienced Silicon Valley-based FDA consultants who have an excellent track record of FDA regulatory submission approvals and clearances. On 14 March 2016 the Company announced a Pre-Submission Meeting had been held with the FDA regarding ResApp s diagnostic mobile software application, ResAppDx. During the meeting ResApp received targeted feedback from the FDA regarding the proposed US regulatory pathway, clinical study protocols, planned nonclinical evaluations and data requirements. ResApp confirmed that it will pursue a direct de novo premarket submission for ResAppDx, initially for paediatric use. A submission for adult use will be prepared in parallel and will be submitted shortly after the paediatric submission. The de novo pathway is designed for innovative medical devices (i.e. those which have no predicate device) where controls provide a reasonable assurance of safety and effectiveness. The de novo process leads to a Class I or Class II classification and has a 120-day review cycle, compared to a 90-day review period for a 510(k). The Company also confirmed that it will perform pivotal clinical studies at one or more US hospitals to provide a key portion of the clinical data required to support both paediatric and adult submissions. The balance of the required data will be gathered from pivotal studies at previously established Australian sites. 7

10 Directors report (continued) Review of operations (continued) Collaboration with Leading Humanitarian Organisation On 7 March 2016 the Company announced it had signed a non-binding memorandum of understanding with a leading humanitarian organisation and UniQuest (the main commercialisation company of The University of Queensland), to enter into a partnership to field test ResApp s smartphone-based pneumonia diagnostic tool in the developing world. ResApp, UniQuest and the humanitarian organisation will work together to secure one or more field sites in the developing world. Capital Raisings On 20 April 2016 the Company announced it had raised 12.5 million pursuant to a placement which was significantly oversubscribed. 62,500,000 Shares were issued at 0.20 per share to new and existing institutional and sophisticated investors. The Company also issued 1,016,250 Advisory Shares together with 4,500,000 Advisory Options (exercisable at 0.28, expiring 29 April 2019, escrowed 12 months from issue) and 1,866,667 Advisory Options (exercisable at 0.30, expiring 29 April 2019, escrowed 12 months from issue). Funds raised under the Placement will be used to expedite US FDA approval for the adult diagnostic test, expand US market opportunity into in-clinic use, expand global opportunity into Europe and Asia, and accelerate development of respiratory disease management tools. During the financial year, 23,531,250 unlisted options (expiring 31 December 2016) were exercised at raising a total of 611,812 (refer to note 20). Subsequent Events On 20 July 2016 the Company announced that it is planning to conduct a clinical study with the Massachusetts General Hospital (MGH) for the ResAppDx US paediatric study. The Company also announced that the MGH is a 1,000-bed academic medical centre located in Boston, Massachusetts. Each year, the MGH admits more than 50,000 patients, delivers nearly 4,000 babies and records 1.5 million outpatient visits, including more than 100,000 Emergency Department visits. In, the MGH topped the Nature Index list of health care organizations for most publications in leading scientific journals. The MGH also has always been among the top few hospitals each year on the U.S. News & World Report list of America's Best Hospitals. In July 2016, the Company issued a total of 1,125,000 Shares on the conversion of 1,125,000 unlisted options at per share. On 4 August 2016, the Company confirmed it had received notification from ASIC that it had consented to the resignation of the Company s auditor Somes Cooke. The incoming auditor is Greenwich & Co Audit Pty Ltd. The reason for the change is due to legal restructuring associated with Somes Cooke merging with other accounting firms. On 15 August 2016, the Company announced positive initial results that demonstrated the potential for measuring the severity of asthma or viral wheeze in children using cough sounds. The Company also announced that it had begun working with two lung function test laboratories, one at Joondalup Health Campus (JHC) in Perth and one at the Wesley Hospital in Brisbane to record adult asthma and chronic obstructive pulmonary disease (COPD) patients breathing and cough sounds alongside comprehensive lung function tests. On 15 September 2016, the Company, in partnership with UniQuest (the main commercialisation company of The University of Queensland), shipped smartphones to a leading global humanitarian organisation under the terms of a non-binding memorandum of understanding to field-test ResApp s smartphone-based respiratory disease diagnostic tool in the developing world. On 16 September 2016 the Company issued 2 million Employee Incentive Options pursuant to the terms of the Company s Employee Incentive Plan. The Options are exercisable at 0.45 and expire on 16 September One third of the Employee Incentive Options vest immediately with the remaining two thirds vesting in equal quarterly instalments over 2 years from the date of issue if the employee remains employed by the Company. The Options have been issued to provide an incentive and reward for employees for their contributions to the Company. 8

11 Directors report (continued) Review of operations (continued) Subsequent Events (continued) On 16 September 2016 the Company also issued 2 million Consultancy Incentive Options exercisable at 0.45 and 2 million Consultancy Incentive Options exercisable at The Consultancy Incentive Options expire on 16 September 2019 and have been issued as part consideration for consultancy services provided. In addition, on 16 September 2016 the Company issued 187,500 Shares on the conversion of 187,500 Unlisted Options (exercisable at on or before 31 December 2016). Except for the events noted above, no material events have occurred subsequent to the reporting date. Future developments The Group will continue the development and commercialisation of the ResApp technology for the purpose of providing health care solutions to assist doctors and consumers diagnose respiratory disease. Environmental issues The Group s operations are not subject to significant environmental regulations under the law of the Commonwealth or of a State, or Territory. Dividends No amounts have been paid or declared by way of dividend by the Group since the end of the previous financial year and the Directors do not recommend the payment of any dividend. Indemnification of officers and auditors The Group has not otherwise, during or since the financial year, except to the extent permitted by law, indemnified or agreed to indemnify an officer or auditor of the Company or of any related body corporate against a liability incurred as such an officer or auditor. Corporate governance statement The Board is responsible for establishing the Company s corporate governance framework, the key features of which are set out below. In establishing its corporate governance framework, the Board has referred to the 3rd edition of the ASX Corporate Governance Councils Corporate Governance Principles and Recommendations. In accordance with ASX Listing Rule 1.1 Condition 13, the corporate governance statement discloses the extent to which the Company follows the recommendations. The Company will follow each recommendation where the Board has considered the recommendation to be an appropriate benchmark for its corporate governance practices. Where the Company s corporate governance practices will follow a recommendation, the Board has made appropriate statements reporting on the adoption of the recommendation. In compliance with the if not, why not reporting regime, where, after due consideration, the Company s corporate governance practices will not follow a recommendation, the Board has explained its reasons for not following the recommendation and disclosed what, if any, alternative practices the Company will adopt instead of those in the recommendation. The following governance-related documents can be found on the Company s website at under the section marked Corporate Governance : (a) Board Charter; (b) Board Performance Evaluation Policy; (c) Code of Conduct; (d) Audit Committee Charter; (e) Remuneration and Nomination Committee Charter; (f) Security Trading Policy; (g) Continuous Disclosure Policy; (h) Shareholder Communication and Investor Relations Policy; (i) Risk Committee Charter; (j) Risk Management Policy; and (k) Diversity Policy. 9

12 Directors report (continued) Corporate governance statement (continued) ResApp Health Limited Consolidated Annual Report Principle 1: Lay solid foundations for management and oversight Recommendation 1.1 The Company has established the respective roles and responsibilities of its Board and management, and those matters expressly reserved to the Board and those delegated to management, and has documented this in its Board Charter. The responsibilities of the Board include but are not limited to: (a) setting and reviewing strategic direction and planning; (b) reviewing financial and operational performance; (c) identifying principal risks and reviewing risk management strategies; and (d) considering and reviewing significant capital investments and material transactions. In exercising its responsibilities, the Board recognises that there are many stakeholders in the operations of the Company, including employees, shareholders, co-ventures, the government and the community. The Board has delegated responsibility for the business operations of the Company to the Chief Executive Officer and the management team. The management team, led by the Chief Executive Officer is accountable to the Board. Recommendation 1.2 The Company undertakes appropriate checks before appointing a person, or putting forward to shareholders a candidate for election as a director and provides shareholders with all material information in its possession relevant to a decision on whether or not to elect a director. The checks which are undertaken, and the information provided to shareholders, are set out in the Company s Remuneration and Nomination Committee Charter. Recommendation 1.3 The Company has a written agreement with each of the Directors and the Incoming Directors and senior executives setting out the terms of their appointment. The material terms of any employment, service or consultancy agreement the Company, or any of its child entities, has entered into with its Chief Executive Officer, any of its directors, and any other person or entity who is a related party of the Chief Executive Officer or any of its directors will be disclosed in accordance with ASX Listing Rule (taking into consideration the exclusions from disclosure outlined in that rule). Recommendation 1.4 The Company Secretary is accountable directly to the Board, through the Chair, on all matters to do with the proper functioning of the Board. The Company Secretary is responsible for the application of best practice in corporate governance and also supports the effectiveness of the Board by: (a) ensuring a good flow of information between the Board, its committees, and Directors; (b) monitoring policies and procedures of the Board; (c) (d) advising the Board through the Chairman of corporate governance policies; and conducting and reporting matters of the Board, including the despatch of Board agendas, briefing papers and minutes. Recommendation 1.5 The Company has a Diversity Policy, the purpose of which is: (a) to outline the Company s commitment to creating a corporate culture that embraces diversity and, in particular, focuses on the composition of its Board and senior management; and (b) to provide a process for the Board to determine measurable objectives and procedures which the Company will implement and report against to achieve its diversity goals. The Board intends to set measurable objectives for achieving diversity, specifically including gender diversity and will review and report on the effectiveness and relevance of these measurable objectives. However, due to the current size of the Board and management, these measurable objectives have not yet been set. 10

13 Directors report (continued) Corporate governance statement (continued) ResApp Health Limited Consolidated Annual Report Recommendation 1.6 The Chief Executive Officer will be responsible for evaluating the performance of the Company s senior executives in accordance with the process disclosed in the Company s Process for Performance Evaluations, which is currently being developed by the Board. The Chair will be responsible for evaluating the performance of the Company s Chief Executive Officer in accordance with the process disclosed in the Company s Process for Performance Evaluations, which is currently being developed by the Board. Recommendation 1.7 The Chair will be responsible for evaluating the performance of the Board, Board committees and individual directors in accordance with the process disclosed in the Company s Board performance evaluation policy. This policy is to ensure: (a) individual Directors and the Board as a whole work efficiently and effectively in achieving their functions; (b) the executive Directors and key executives execute the Company s strategy through the efficient and effective implementation of the business objectives; and (c) committees to which the Board has delegated responsibilities are performing efficiently and effectively in accordance with the duties and responsibilities set out in the board charter. This policy will be reviewed annually. During the reporting period, an evaluation of the Board, its committees and individual directors has taken place in accordance with the Company s policy. Principle 2: Structure the board to add value Recommendation 2.1 Due to the size of the Board, the Company does not have a separate nomination committee. The roles and responsibilities of a nomination committee are currently undertaken by the Board. The duties of the full Board in its capacity as a nomination committee are set out in the Company s Remuneration and Nomination Committee Charter which is available on the Company s website. When the Board meets as a remuneration and nomination committee it carries out those functions which are delegated to it in the Company s Remuneration and Nomination Committee Charter. Items that are usually required to be discussed by a Remuneration and Nomination Committee are marked as separate agenda items at Board meetings when required. The Board has adopted a Remuneration and Nomination Committee Charter which describes the role, composition, functions and responsibilities of a Nomination Committee and is disclosed on the Company s website. Recommendation 2.2 The mix of skills and diversity which the Board is looking to achieve in its composition is: (a) a broad range of business experience; and (b) technical expertise and skills required to discharge duties. Recommendation 2.3 The Board considers the independence of directors having regard to the relationships listed in Box 2.3 of the Principles and Recommendations. Currently the Board is structured as follows: (a) Dr Roger Aston (Chairman); (b) Dr Anthony Keating (Managing Director and CEO); (c) Mr Brian Leedman (Executive Director); and (d) Mr Chris Ntoumenopoulos (Non-executive Director). 11

14 Directors report (continued) Corporate governance statement (continued) ResApp Health Limited Consolidated Annual Report Recommendation 2.3 (continued) Dr Keating and Dr Aston were appointed to the Board on 2 July. Dr Keating is an executive director of the Company and is therefore a non-independent director. Dr Aston is an independent, non-executive Chairman of the Board. Mr Ntoumenopoulos is an independent director who was appointed to the Board on 21 January. Mr Brian Leedman was appointed as an executive director of the Company on 19 February Mr Leedman is a non-independent director due to his executive role and his substantial shareholding in the Company. Recommendation 2.4 Currently, the Board considers that membership weighted towards technical expertise is appropriate at this stage of the Company s operations. Accordingly, the Board does not have a majority of independent directors. Recommendation 2.5 Dr Aston is an independent Chairman of the Board. Recommendation 2.6 It is a policy of the Company, that new Directors undergo an induction process in which they are given a full briefing on the Company. Where possible this includes meetings with key executives, tours of the premises, an induction package and presentations. In order to achieve continuing improvement in Board performance, all Directors are encouraged to undergo continual professional development. Specifically, Directors are provided with the resources and training to address skills gaps where they are identified. Principle 3: Act ethically and responsibly Recommendation 3.1 The Company is committed to promoting good corporate conduct grounded by strong ethics and responsibility. The Company has established a Code of Conduct (Code), which addresses matters relevant to the Company s legal and ethical obligations to its stakeholders. It may be amended from time to time by the Board, and is disclosed on the Company s website. The Code applies to all Directors, employees, contractors and officers of the Company. The Code will be formally reviewed by the Board each year. Principle 4: Safeguard integrity in corporate reporting Recommendation 4.1 Due to the size of the Board, the Company does not have a separate Audit Committee. The roles and responsibilities of an audit committee are undertaken by the Board. The full Board in its capacity as the audit committee is responsible for reviewing the integrity of the Company s financial reporting and overseeing the independence of the external auditors. The duties of the full Board in its capacity as the audit committee are set out in the Company s Audit Committee Charter which is available on the Company s website. When the Board meets as an audit committee is carries out those functions which are delegated to it in the Company s Audit Committee Charter. Items that are usually required to be discussed by an Audit Committee are marked as separate agenda items at Board meetings when required. The Board is responsible for the initial appointment of the external auditor and the appointment of a new external auditor when any vacancy arises. Candidates for the position of external auditor must demonstrate complete independence from the Company through the engagement period. The Board may otherwise select an external auditor based on criteria relevant to the Company's business and circumstances. The performance of the external auditor is reviewed on an annual basis by the Board. The Board has adopted an Audit Committee Charter which describes the role, composition, functions and responsibilities of the Audit Committee and is disclosed on the Company s website. 12

15 Directors report (continued) Corporate governance statement (continued) ResApp Health Limited Consolidated Annual Report Recommendation 4.2 Before the Board approves the Company financial statements for each financial period it will receive from the Chief Executive Officer and the Chief Financial Officer (or equivalent) a declaration that, in their opinion, the financial records of the Company for the relevant financial period have been properly maintained and that the financial statements for the relevant financial period comply with the appropriate accounting standards and give a true and fair view of the financial position and performance of the Company and the consolidated entity and that the opinion has been formed on the basis of a sound system of risk management and internal control which is operating effectively. Recommendation 4.3 Under section 250RA of the Corporations Act, the Company s auditor is required to attend the Company s annual general meeting at which the audit report is considered, and does not arrange to be represented by a person who is a suitably qualified member of the audit team that conducted the audit and is in a position to answer questions about the audit. Each year, the Company will write to the Company s auditor to inform them of the date of the Company s annual general meeting. In accordance with section 250S of the Corporations Act, at the Company s annual general meeting where the Company s auditor or their representative is at the meeting, the Chair will allow a reasonable opportunity for the members as a whole at the meeting to ask the auditor (or its representative) questions relevant to the conduct of the audit; the preparation and content of the auditor s report; the accounting policies adopted by the Company in relation to the preparation of the financial statements; and the independence of the auditor in relation to the conduct of the audit. The Chair will also allow a reasonable opportunity for the auditor (or their representative) to answer written questions submitted to the auditor under section 250PA of the Corporations Act. Principle 5: Make timely and balanced disclosure Recommendation 5.1 The Company is committed to: (a) ensuring that shareholders and the market are provided with full and timely information about its activities; (b) complying with the continuous disclosure obligations contained in the Listing Rules and the applicable sections of the Corporations Act; and (c) providing equal opportunity for all stakeholders to receive externally available information issued by the Company in a timely manner. The Company has adopted a Disclosure Policy, which is disclosed on the Company s website. The Disclosure Policy sets out policies and procedures for the Company s compliance with its continuous disclosure obligations under the ASX Listing Rules, and addresses financial markets communication, media contact and continuous disclosure issues. It forms part of the Company s corporate policies and procedures and is available to all staff. The Company Secretary manages the policy. The policy will develop over time as best practice and regulations change and the Company Secretary will be responsible for communicating any amendments. This policy will be reviewed by the Board annually. Principle 6: Respect the rights of security holders Recommendation 6.1 The Company provides information about itself and its governance to investors via its website at The Company is committed to maintaining a Company website with general information about the Company and its operations and information specifically targeted at keeping the Company s shareholders informed about the Company. In particular, where appropriate, after confirmation of receipt by ASX, the following will be posted to the Company website: (a) relevant announcements made to the market via ASX; (b) media releases; (c) investment updates; (d) Company presentations and media briefings; (e) copies of press releases and announcements for the preceding three years; and (f) copies of annual and half yearly reports including financial statements for the preceding three years. 13

16 Directors report (continued) Corporate governance statement (continued) ResApp Health Limited Consolidated Annual Report Recommendation 6.2 The Company has a Shareholder Communication and Investor Relations Policy which aims to ensure that Shareholders are informed of all major developments of the Company. The policy is disclosed on the Company s website. Information is communicated to Shareholders via: (a) reports to Shareholders; (b) ASX announcements; (c) annual general meetings; and (d) the Company website. This Shareholder Communication and Investor Relations policy will be formally reviewed by the Board each year. While the Company aims to provide sufficient information to Shareholders about the Company and its activities, it understands that Shareholders may have specific questions and require additional information. To ensure that Shareholders can obtain all relevant information to assist them in exercising their rights as Shareholders, the Company has made available a telephone number and relevant contact details (via the website) for Shareholders to make their enquiries. Recommendation 6.3 The Board encourages full participation of Shareholders at meetings to ensure a high level of accountability and identification with the Company s strategies and goals. However, due to the size and nature of the Company, the Board does not consider a policy outlining the policies and processes that it has in place to facilitate and encourage participating at meetings of shareholders to be appropriate at this stage. Recommendation 6.4 Shareholders are given the option to receive communications from, and send communication to, the Company and its share registry electronically. To ensure that shareholders can obtain all relevant information to assist them in exercising their rights as shareholders, the Company has made available a telephone number and relevant contact details (via the website) for shareholders to make their enquiries. Principle 7: Recognise and manage risk Recommendation 7.1 Due to the size of the Board, the Company does not have a separate Risk Committee. The Board is responsible for the oversight of the Company s risk management and control framework. When the Board meets as a risk committee is carries out those functions which are delegated to it in the Company s Risk Committee Charter. Items that are usually required to be discussed by a Risk Committee are marked as separate agenda items at Board meetings when required. The Board has adopted a Risk Committee Charter which describes the role, composition, functions and responsibilities of the Risk Committee and is disclosed on the Company s website. The Board has adopted a Risk Management Policy, which is disclosed on the Company s website. Under the policy, responsibility and control of risk management is delegated to the appropriate level of management within the Company with the Chief Executive Officer having ultimate responsibility to the Board for the risk management and control framework. The risk management system covers: (a) operational risk; (b) financial reporting; (c) compliance / regulations; and (d) system / IT process risk. A risk management model is to be developed and will provide a framework for systematically understanding and identifying the types of business risks threatening the Company as a whole, or specific business activities within the Company. 14

17 Directors report (continued) Corporate governance statement (continued) ResApp Health Limited Consolidated Annual Report Recommendation 7.2 The Board will review the Company s risk management framework annually to satisfy itself that it continues to be sound, to determine whether there have been any changes in the material business risks the Company faces and to ensure that the Company is operating within the risk appetite set by the Board. Arrangements put in place by the Board to monitor risk management include, but are not limited to: (a) monthly reporting to the Board in respect of operations and the financial position of the Company; and (b) quarterly rolling forecasts prepared; Recommendation 7.3 The Company does not have, and does not intend to establish, an internal audit function. To evaluate and continually improve the effectiveness of the Company s risk management and internal control processes, the Board relies on ongoing reporting and discussion of the management of material business risks as outlined in the Company s Risk Management Policy. Recommendation 7.4 Given the speculative nature of the Company s business, it is subject to general risks and certain specific risks. The Company has identified those economic, environmental and/or social sustainability risks to which it has a material exposure, and disclosed how it intends to manage those risks. Principle 8: Remunerate fairly and responsibly Recommendation 8.1 Due to the size of the Board, the Company does not have a separate remuneration committee. The roles and responsibilities of a remuneration committee are currently undertaken by the Board. The duties of the full board in its capacity as a remuneration committee are set out in the Company s Remuneration and Nomination Committee Charter which is available on the Company s website. When the Board meets as a remuneration committee is carries out those functions which are delegated to it in the Company s Remuneration and Nomination Committee Charter. Items that are usually required to be discussed by a Remuneration Committee are marked as separate agenda items at Board meetings when required. The Board has adopted a Remuneration and Nomination Committee Charter which describes the role, composition, functions and responsibilities of the Remuneration Committee and is disclosed on the Company s website. Recommendation 8.2 Details of the Company s policies on remuneration will be set out in the Company s Remuneration Report in each Annual Report published by the Company. This disclosure will include a summary of the Company s policies regarding the deferral of performance-based remuneration and the reduction, cancellation or claw-back of the performance-based remuneration in the event of serious misconduct or a material misstatement in the Company s financial statements. Recommendation 8.3 The Company s Security Trading Policy includes a statement on the Company s policy on prohibiting participants in the Company s Employee Incentive Plan entering into transactions (whether through the use of derivatives or otherwise) which limit the economic risk of participating in the Employee Incentive Plan. Security Trading Policy In accordance with ASX Listing Rule 12.9, the Company has adopted a trading policy which sets out the following information: (a) closed periods in which directors, employees and contractors of the Company must not deal in the Company s securities; (b) trading in the Company s securities which is not subject to the Company s trading policy; and (c) the procedures for obtaining written clearance for trading in exceptional circumstances. 15