25 Nov

Financial Statements for the year ending 30 June 2021

Biome Australia Limited and Controlled Entities ABN 51 627 364 014 Financial Statements For the Year Ended 30 June 2021 Biome Australia Limited and Controlled Entities ABN 51 627 364 014 Contents For the Year Ended 30 June 2021 Page Financial Statements Directors' Report 1 Auditor's Independence Declaration under Section 307C of the Corporations Act 2001 6 Statement of Profit or Loss and Other Comprehensive Income 7 Statement of Financial Position 8 Statement of Changes in Equity 9 Statement of Cash Flows 11 Notes to the Financial Statements 12 Directors' Declaration 38 Independent Audit Report 39 Biome Australia Limited and Controlled Entities ABN 51 627 364 014 Directors' Report 30 June 2021 The directors present their report, together with the financial statements of the Group , being the Company and its controlled entities , for the financial year ended 30 June 2021 . Directors The names of the directors in office at any time during, or since the end of, the year are: Dr Jaroslav Haman Boublik Douglas Chee Yong Loh Blair William Brabin Vega Norfolk Ilario Thomas Faenza (appointed 18 August 2020) Dominque Fisher (appointed 12 August 2021) Rodney William Unsworth (resigned 14 December 2020) Michael Sven Ola Oredsson (resigned 17 December 2020) Directors have been in office since the start of the financial year to the date of this report unless otherwise stated. Principal activities The principal activities of the Group during the financial year were researching, developing, manufacturing and distributing innovative evidence-based products linking the gut and human health through the Group owned brands: ? Activated Nutrients ®, a range of completely organic, plant-based, all-in-one nutritional products; ? Activated Probiotics ®, a first-of-its-kind range of clinically-backed precision probiotics; and ? AXP TM , certified range of performance products for athletes. The Group distributes its products through two channels in Australia, community pharmacies and independent health practitioners. In international markets the Group distributes and markets its Activated Probiotics range in the United Kingdom and New Zealand through independent health practitioners. During the year, the Group finalised Clinical trial agreements on two of its products. The first trail, being conducted in collaboration with La Trobe University is on sub-threshold depression, using Biome Lift Probiotic TM . This clinical trial is currently in participant recruitment phase. The second clinical trial to be conducted in collaboration with Federation University will be on children’s immune health. This trial is expected to commence in early calendar 2022. A mass marketing campaign has been implemented in FY22 to support the growth of brand and sales revenue this financial year. This includes national TV advertising campaigns, magazines and outdoor advertising. Apart from the matters noted below under "significant changes in state of affairs", there was no significant change in the nature of these activities occurred during the year . Operating results The consolidated loss of the Group amounted to $ 5,381,116 (2020: $ 3,162,163 ). The results reflect the ongoing significant investment in developing and establishing the brand and product recognition of the business in that financial year. In a very difficult period with Covid being a significant factor in the business environment, the Group still achieved a healthy increase in Sales Revenue (more than 168%). Through the difficult period, the business continued its strategy of increasing brand recognition and capturing further market share which was only possible by 1 Biome Australia Limited and Controlled Entities ABN 51 627 364 014 Directors' Report 30 June 2021 Operating results (continued) collaborating with staff and management, which resulted in the establishment of the employee share plan. Ongoing support from existing shareholders enabled the Group to continue its operations to achieve the reported results. The Group also identified and consolidated its growth in the new channel of the practitioner markets. It has further grown its customer base and distribution networks through the engagement for several key customers. During the year, the Group made it first overseas sales to wholesale distributors in the UK and New Zealand. The Group continues to grow and work with its international partners to further expand the brand and product recognition internationally. For the year ended 30 June 2021, overseas sales accounted for 11% of total sales. The Group's continued investment into its development of products has also seen the launch of two new Activated Probiotics and two new Activated Nutrients products. Significant changes in state of affairs There were no significant changes in the state of affairs of entities in the Group during the year . The Group raised additional capital as required and adapted to unprecedented business environmental factors whilst continuing to grow the business through its core strategy. Matters or circumstances arising after the end of the year Subsequent to year end, the group issued 10,768,959 performance rights subject to shareholder's approval. Dominique Fisher was appointed non-executive director as at 12 August 2021. The group completed its pre-IPO funding, with the final applications for $1.7m of its pre-IPO raising completed this month. It signed an agreement with Canaccord Genuity Australia to be the Lead Manager for the ASX listing of the Group, expected by the end of November 2021. The launch of a strategic distribution partnership with one of the largest pharmacy banner Groups in Australia continues to translate into sales growth. The Company is confident of doubling sales for the quarter ended September 2021, compared to the same period in 2020. Apart from this, no other matters or circumstances have arisen since the end of the financial year which significantly affected or could significantly affect the operations of the Group , the results of those operations or the state of affairs of the Group in future financial years. Future developments and results Likely developments in the operations of the Group and the expected results of those operations in future financial years have not been included in this report as the inclusion of such information is likely to result in unreasonable prejudice to the Group . Environmental matters The Group 's operations are not regulated by any significant environmental regulations under a law of the Commonwealth or of a state or territory. Dividends paid or recommended No dividends were paid or declared since the start of the financial year . No recommendation for payment of dividends has been made. 2 Biome Australia Limited and Controlled Entities ABN 51 627 364 014 Directors' Report 30 June 2021 Information on directors Dr Jaroslav Haman Boublik Director, Chief Science Advisor Consultant to the nutritional R&D sector and researcher with over 30 years of experience in nutritional and complementary medicine. Dr. JB is Chief Scientist of LeafCann Group Pty Ltd and CEO of LeafCann Group Research & Advisory. He has published multiple peer-reviewed scientific articles. Douglas Chee Yong Loh Director, Finance Over 30 years of advisory, accounting and finance, company management and investment management experience. 19 years as founding member of Acorn Capital and held positions as Portfolio Manager, Head of Equities, CFO, COO and Director. Douglas was Chairman of DXN Limited, an ASX listed pre-fabricated modular data centre manufacturer, builder and operator. Special Responsibilities Corporate secretary until 27 January 2021 Blair William Brabin Vega Norfolk Director, Founder and MD Over 12 years of global pharmaceutical and FMCG experience as management and executive. Since founding the business in 2013, Blair has recruited the people, secured funding, products and IP and managed key relationships. Blair has strong relationships in media, pharmacy and manufacturing. Blair has a significant public profile as a health advocate and speaks at conferences and panels from Mental health to general wellbeing. Ilario Thomas Faenza Chairman M&A, PE & investment banking specialist with over 30 years experience in a range of high growth industries. Ilario has successfully started multiple companies and provided advisory, specialist M&A, due diligence, structuring and fund raising assistance to numerous businesses. Ilario has raised > $100M over the past 15 years for high growth companies and actively assists management with execution of strategy, commercial negotiations, IPO’s and exit strategies. Dominque Fisher Non Executive Director Ms Fisher couples her experience in tech driven businesses with a strong focus on risk mitigation and financial management which has led to her working in across a wide range of sectors in both executive and non executive roles. Ms Fisher has an extensive non-executive career, having served on ASX listed companies, IAG, Circadian Technologies/ Opthea , Pacific Brands and Trimantium GrowthOps (2 as Chair) including two IPOs (IAG and TGO); numerous private companies including Integrity Life Group, various government and private advisory boards at both state and federal for both major political parties, Geoscape Australia and government agencies including the Sydney Opera House , Australia Post and the Australian Council for the Arts 3 Biome Australia Limited and Controlled Entities ABN 51 627 364 014 Directors' Report 30 June 2021 Company secretary George Lazarou George Lazarou held the position of Company secretary from 27 January 2021. He is a qualified Chartered Accountant with over 25 years’ experience, including five years as a partner of a mid-tier accounting firm, specialising in the areas of advisory and corporate services. Mr Lazarou has extensive skills in the areas of corporate services, due diligence, independent expert reports, mergers & acquisitions and valuations. Mr Lazarou has been Chairman, Non-Executive Director and Company Secretary of a number of ASX listed companies since 2006. Meetings of directors During the financial year , 20 meetings of directors (including committees of directors) were held. Attendances by each director during the year were as follows: Directors' Meetings Audit Committee Remuneration Committee Number eligible to attend Number attended Number eligible to attend Number attended Number eligible to attend Number attended Dr Jaroslav Haman Boublik 16 16 2 2 2 2 Douglas Chee Yong Loh 16 16 2 2 - - Blair William Brabin Vega Norfolk 16 16 - - - - Rodney William Unsworth 7 6 1 1 1 1 Michael Sven Ola Oredsson 7 6 - - - - Ilario Thomas Faenza 13 12 1 1 2 2 Options Unissued shares under option At the date of this report, the unissued ordinary shares of Biome Australia Limited and Controlled Entities under option are as follows: Grant Date Date of Expiry Exercise Price Number under Option 01 September 2020 31 October 2021 $0.10 21,045,450 08 February 2019 30 June 2022 $0.09 4,500,000 08 February 2019 30 June 2023 $0.12 4,500,000 30,045,450 No issue right for option holders Option holders do not have any rights to participate in any issues of shares or other interests in the Company or a controlled entity . 4 Biome Australia Limited and Controlled Entities ABN 51 627 364 014 Directors' Report 30 June 2021 Indemnification and insurance of officers and auditors The officers of Biome Australia Limited are indemnified by the Company. Every officer of the Company shall be indemnified out of the property of the Company against any liability incurred by him in his capacity as officer in defending any proceedings in which judgement is given in his favour or in which he is acquitted or in connection with any application in relation to any such proceedings in which relief is under the Act Law granted to him by the Court. During the year, the Company paid a total of $22,521 in premiums for officers liability insurance. Proceedings on behalf of company No person has applied for leave of Court to bring proceedings on behalf of the entity or intervene in any proceedings to which the entity is a partly for the purpose of taking responsibility on behalf of the entity for all or any part of those proceedings. Auditor's independence declaration The lead auditor's independence declaration in accordance with section 307C of the Corporations Act 2001 , for the year ended 30 June 2021 has been received and can be found on page 6 of the financial report. Signed in accordance with a resolution of the Board of Directors: Director: ............................................................... Ilario Thomas Faenza Dated this 31st day of August 2021 5 ABN: 13 488 640 554. Liability limited by a scheme approved under Professional Standards Legislation 6 AUDITOR’S INDEPENDENCE DECLARATION UNDER SECTION 307C OF THE CORPORATIONS ACT 2001 TO THE DIRECTORS OF BIOME AUSTRALIA LIMITED ABN: 51 627 364 014 I declare that, to the best of my knowledge and belief, during the year ended 30 June 20 2 1 there have been: (i) no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the audit; and (ii) No contraventions of any applicable code of professional conduct in relation to the audit. JTP ASSURANCE WAYNE TARRANT Chartered Accountan ts Partner Signed at Melbourne t his 31 st August 2021 Biome Australia Limited 2021 ABN 51 627 364 014 Statement of Profit or Loss and Other Comprehensive Income For the Period Ended 30 June 2021 Note 2021 $ 2020 $ Sales revenue 5 2,318,402 866,136 Cost of goods sold (1,139,264) (617,221) Gross profit 1,179,138 248,915 Other income 5 431,423 336,221 Sales and marketing expenses 7 (3,389,769) (1,935,179) Corporate and administrative expenses 7 (3,073,540) (813,448) Occupancy costs (132,617) (88,095) Finance expenses 6 (76,109) (64,845) Depreciation, amortisation and impairments 7 (107,294) (537,703) Other expenses (212,348) (308,029) Loss before income tax (5,381,116) (3,162,163) Income tax expense 8 - - Loss for the period (5,381,116) (3,162,163) Other comprehensive income for the year, net of tax - - Total comprehensive loss for the year attributable to the members (5,381,116) (3,162,163) The accompanying notes form part of these financial statements. 7 Biome Australia Limited 2021 ABN 51 627 364 014 Statement of Financial Position As At 30 June 2021 Note 2021 $ 2020 $ ASSETS CURRENT ASSETS Cash and cash equivalents 9 609,978 448,867 Trade and other receivables 10 738,214 276,993 Inventories 11 1,020,895 932,475 Current tax receivable 609 679 Other assets 14 24,634 125,437 TOTAL CURRENT ASSETS 2,394,330 1,784,451 NON-CURRENT ASSETS Property, plant and equipment 12 105,593 155,471 Intangible assets 13 - 6,719 TOTAL NON-CURRENT ASSETS 105,593 162,190 TOTAL ASSETS 2,499,923 1,946,641 LIABILITIES CURRENT LIABILITIES Trade and other payables 15 705,697 403,978 Borrowings 16 15,735 16,350 Short-term provisions - employee entitlements 133,598 88,594 Other financial liabilities 83 - TOTAL CURRENT LIABILITIES 855,113 508,922 NON-CURRENT LIABILITIES Borrowings 16 64,682 488,183 TOTAL NON-CURRENT LIABILITIES 64,682 488,183 TOTAL LIABILITIES 919,795 997,105 NET ASSETS 1,580,128 949,536 EQUITY Issued capital 17 9,830,488 5,877,185 Subscribed share capital - 72,500 Reserves 18 1,643,175 52,200 Accumulated losses (9,893,535) (5,052,349) TOTAL EQUITY 1,580,128 949,536 The accompanying notes form part of these financial statements. 8 Biome Australia Limited 2021 ABN 51 627 364 014 Statement of Changes in Equity For the Period Ended 30 June 2021 2021 Ordinary Shares $ Subscribed share capital $ Accumulated losses $ Option reserve $ Performance rights $ Total $ Balance at 1 July 2020 5,877,185 72,500 (5,052,349) 52,200 - 949,536 Loss attributable to the members - - (5,381,116) - - (5,381,116) Shares issued during the year 3,576,673 - - - - 3,576,673 Share capital raising fees (45,870) - - - - (45,870) Issue of share options - - - 48,405 - 48,405 Issue of performance rights - - - - 2,432,500 2,432,500 Options expired - - 17,400 (17,400) - - Performance rights expired - - 95,000 - (95,000) - Cancellation of performance rights - - 427,530 - (427,530) - Exercise of performance rights 350,000 - - - (350,000) - Transfer from subscribed share capital to ordinary shares 72,500 (72,500) - - - - Balance at 30 June 2021 9,830,488 - (9,893,535) 83,205 1,559,970 1,580,128 The accompanying notes form part of these financial statements. 9 Biome Australia Limited 2021 ABN 51 627 364 014 Statement of Changes in Equity For the Period Ended 30 June 2021 2020 Ordinary Shares $ Subscribed share capital $ Accumulated losses $ Option reserve $ Total $ Balance at 1 July 2019 2,972,622 70,000 (2,011,986) 174,000 1,204,636 Loss attributable to the members - - (3,162,163) - (3,162,163) Shares issued during the year 3,007,785 72,500 - - 3,080,285 Share capital raising fees (173,222) - - - (173,222) Cancellation of options - - 121,800 (121,800) - Transfer from subscribed share capital to ordinary shares 70,000 (70,000) - - - Balance at 30 June 2020 5,877,185 72,500 (5,052,349) 52,200 949,536 The accompanying notes form part of these financial statements. 10 Biome Australia Limited 2021 ABN 51 627 364 014 Statement of Cash Flows For the Period Ended 30 June 2021 Note 2021 $ 2020 $ CASH FLOWS FROM OPERATING ACTIVITIES: Receipts from customers 1,893,028 839,220 Payments to suppliers and employees (4,652,432) (4,363,295) R&D tax refund 179,257 136,619 ATO COVID 19 incentives 124,000 166,000 Export Market Development Grant 87,419 - Interest paid (24,812) - Interest received 406 602 Net cash provided by/(used in) operating activities 27 (2,393,134) (3,220,854) CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from sale of plant and equipment 39,000 - Purchase of intangibles - (7,028) Purchase of property, plant and equipment (67,765) (172,865) Net cash provided by/(used in) investing activities (28,765) (179,893) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from the issue of shares 2,636,292 3,080,285 Proceeds from borrowings 266,581 462,250 Repayment of borrowings (273,993) - Payment of capital raising fees (45,870) (173,222) Net cash provided by/(used in) financing activities 2,583,010 3,369,313 Net increase/(decrease) in cash and cash equivalents held 161,111 (31,434) Cash and cash equivalents at beginning of year 448,867 480,301 Cash and cash equivalents at end of financial year 9 609,978 448,867 The accompanying notes form part of these financial statements. 11 Biome Australia Limited 2021 ABN 51 627 364 014 Notes to the Financial Statements For the Year Ended 30 June 2021 The financial report covers Biome Australia Limited and its controlled entities (' the Group '). Biome Australia Limited and Controlled Entities is a for-profit Company limited by shares , incorporated and domiciled in Australia. Each of the entities within the Group prepare their financial statements based on the currency of the primary economic environment in which the entity operates (functional currency). The consolidated financial statements are presented in Australian dollars which is the parent entity’s functional and presentation currency. The financial report was authorised for issue by the Directors on 31 August 2021 . 1 Basis of Preparation The financial statements are general purpose financial statements that have been prepared in accordance with the Australian Accounting Standards and the Corporations Act 2001. These financial statements comply with International Financial Reporting Standards as issued by the International Accounting Standards Board. 2 Going concern During the financial period ended 30 June 2021 the Group incurred an operating loss of $5,381,116 (2020: $3,162,163) and a negative cash outflow from operating activities of $2,393,134 (2020: $3,220,854). The financial statements have been prepared on a going concern basis, which contemplates the continuity of normal business activity and the realisation of assets and the settlement of liabilities in the normal course of business. The ability of the Group to continue as a going concern is dependent on securing additional funding through new or existing investors to fund its operational and marketing activities. These conditions indicate a material uncertainty that may cast a significant doubt about the entity’s ability to continue as a going concern and, therefore, that it may be unable to realise its assets and discharge its liabilities in the normal course of business. The Directors believe that the Group will continue as a going concern. As a result, the financial statements has been prepared on a going concern basis. However, should the future fundraising be unsuccessful, the entity may not be able to continue as a going concern. No adjustments have been made relating to the recoverability and classification of assets and classification of liabilities that might be necessary should the Group not continue as a going concern. 3 Summary of Significant Accounting Policies (a) Principles of consolidation The consolidated financial statements include the financial position and performance of controlled entities from the date on which control is obtained until the date that control is lost. Intragroup assets, liabilities, equity, income, expenses and cashflows relating to transactions between entities in the consolidated entity have been eliminated in full for the purpose of these financial statements. Appropriate adjustments have been made to a controlled entity’s financial position, performance and cash flows where the accounting policies used by that entity were different from those adopted by the consolidated entity. All controlled entities have a June financial year end. A list of controlled entities is contained in Note 23 to the financial statements. 12 Biome Australia Limited 2021 ABN 51 627 364 014 Notes to the Financial Statements For the Year Ended 30 June 2021 3 Summary of Significant Accounting Policies (continued) (b) Revenue from contracts with customers The core principle of AASB 15 is that revenue is recognised on a basis that reflects the transfer of promised goods or services to customers at an amount that reflects the consideration the Group expects to receive in exchange for those goods or services. Revenue is recognised by applying a five-step model as follows: 1. Identify the contract with the customer 2. Identify the performance obligations 3. Determine the transaction price 4. Allocate the transaction price to the performance obligations 5. Recognise revenue as and when control of the performance obligations is transferred Generally the timing of the payment for sale of goods and rendering of services corresponds closely to the timing of satisfaction of the performance obligations, however where there is a difference, it will result in the recognition of a receivable, contract asset or contract liability. None of the revenue streams of the Group have any significant financing terms as there is less than 12 months between receipt of funds and satisfaction of performance obligations. Specific revenue streams The revenue recognition policies for the principal revenue streams of the Group are: Sale of goods Revenue from the sale of goods is recognised at the point in time when the customer obtains control of the goods, which is generally at the time of delivery. Revenue is recorded net of returns, rebates and discounts. Research and development tax incentive grants/Export Market Development Grants Research and Development tax incentive grants and Export Market Development Grants are recognised when they are probable of recovery and the amounts can be reliably measured, which presently is in the year when the claim is received. Interest Interest revenue is recognised as interest accrues using the effective interest method. This is a method of calculating the amortised cost of a financial asset and allocating the interest income over the relevant period using the effective interest rate, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the net carrying amount of the financial asset. Other revenue Other revenue is recognised when it is received or when the right to receive payment is established. 13 Biome Australia Limited 2021 ABN 51 627 364 014 Notes to the Financial Statements For the Year Ended 30 June 2021 3 Summary of Significant Accounting Policies (continued) (c) Income Tax The tax expense recognised in the statement of profit or loss and other comprehensive income comprises current income tax expense plus deferred tax expense. Current tax is the amount of income taxes payable (recoverable) in respect of the taxable profit (loss) for the year and is measured at the amount expected to be paid to (recovered from) the taxation authorities, using the tax rates and laws that have been enacted or substantively enacted by the end of the reporting period. Current tax liabilities (assets) are measured at the amounts expected to be paid to (recovered from) the relevant taxation authority. Deferred tax is provided on temporary differences which are determined by comparing the carrying amounts of tax bases of assets and liabilities to the carrying amounts in the consolidated financial statements. Deferred tax is not provided for the following: ? The initial recognition of an asset or liability in a transaction that is not a business combination and at the time of the transaction, affects neither accounting profit nor taxable profit (tax loss). ? Taxable temporary differences arising on the initial recognition of goodwill. ? Temporary differences related to investment in subsidiaries, associates and jointly controlled entities to the extent that the Group is able to control the timing of the reversal of the temporary differences and it is probable that they will not reverse in the foreseeable future. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. Deferred tax assets are recognised for all deductible temporary differences and unused tax losses to the extent that it is probable that taxable profit will be available against which the deductible temporary differences and losses can be utilised. Current and deferred tax is recognised as income or an expense and included in profit or loss for the period except where the tax arises from a transaction which is recognised in other comprehensive income or equity, in which case the tax is recognised in other comprehensive income or equity respectively. Tax consolidation legislation Biome Australia Limited and Controlled Entities and its wholly-owned Australian subsidiaries have formed an income tax consolidated group. Each entity in the tax consolidated group accounts for their own current and deferred tax amounts. These tax amounts are measured using the ‘stand-alone taxpayer’ approach to allocation. Current tax liabilities (assets) and deferred tax assets arising from unused tax losses and tax credits in the subsidiaries are immediately transferred to the parent entity. 14 Biome Australia Limited 2021 ABN 51 627 364 014 Notes to the Financial Statements For the Year Ended 30 June 2021 3 Summary of Significant Accounting Policies (continued) (c) Income Tax (continued) The tax consolidated group has entered into a tax funding agreement whereby each entity within the group contributes to the income tax payable by the Group in proportion to their contribution to the Group ’s taxable income. Differences between the amounts of net tax assets and liabilities derecognised and the net amounts recognised pursuant to the funding agreement are recognised as either a contribution by, or distribution to the head entity. (d) Borrowing costs Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalised as part of the cost of that asset. All other borrowing costs are recognised as an expense in the period in which they are incurred. (e) Goods and services tax (GST) Revenue, expenses and assets are recognised net of the amount of goods and services tax (GST), except where the amount of GST incurred is not recoverable from the Australian Taxation Office (ATO). Receivables and payable are stated inclusive of GST. Cash flows in the statement of cash flows are included on a gross basis and the GST component of cash flows arising from investing and financing activities which is recoverable from, or payable to, the taxation authority is classified as operating cash flows. (f) Inventories Inventories are measured at the lower of cost and net realisable value. Cost of inventory is determined using the first-in-first-out basis and is net of any rebates and discounts received. Net realisable value is estimated using the most reliable evidence available at the reporting date and inventory is written down through an obsolescence provision if necessary. (g) Property, plant and equipment Each class of property, plant and equipment is carried at cost or fair value less, where applicable, any accumulated depreciation and impairment. Depreciation Property, plant and equipment, excluding freehold land, is depreciated on a straight-line basis over the assets useful life to the Group , commencing when the asset is ready for use. Leased assets and leasehold improvements are amortised over the shorter of either the unexpired period of the lease or their estimated useful life. 15 Biome Australia Limited 2021 ABN 51 627 364 014 Notes to the Financial Statements For the Year Ended 30 June 2021 3 Summary of Significant Accounting Policies (continued) (g) Property, plant and equipment (continued) The depreciation rates used for each class of depreciable asset are shown below: Fixed asset class Depreciation rate Furniture, Fixtures and Fittings 50% Motor Vehicles 25% Leasehold improvements 30% Medical and diagnostic equipment 50% At the end of each annual reporting period, the depreciation method, useful life and residual value of each asset is reviewed. Any revisions are accounted for prospectively as a change in estimate. (h) Financial instruments Financial instruments are recognised initially on the date that the Group becomes party to the contractual provisions of the instrument. On initial recognition, all financial instruments are measured at fair value plus transaction costs (except for instruments measured at fair value through profit or loss where transaction costs are expensed as incurred). Financial assets All recognised financial assets are subsequently measured in their entirety at either amortised cost or fair value, depending on the classification of the financial assets. Amortised cost Assets measured at amortised cost are financial assets where: ? the business model is to hold assets to collect contractual cash flows; and ? the contractual terms give rise on specified dates to cash flows are solely payments of principal and interest on the principal amount outstanding. The Group 's financial assets measured at amortised cost comprise trade and other receivables and cash and cash equivalents in the statement of financial position . Subsequent to initial recognition, these assets are carried at amortised cost using the effective interest rate method less provision for impairment. Interest income, foreign exchange gains or losses and impairment are recognised in profit or loss. Gain or loss on derecognition is recognised in profit or loss. Trade receivables and contract assets Impairment of trade receivables and contract assets have been determined using the simplified approach in AASB 9 which uses an estimation of lifetime expected credit losses. The Group has determined the probability of non-payment of the receivable and multiplied this by the amount of the expected loss arising from default. 16 Biome Australia Limited 2021 ABN 51 627 364 014 Notes to the Financial Statements For the Year Ended 30 June 2021 3 Summary of Significant Accounting Policies (continued) (h) Financial instruments (continued) Financial assets (continued) The amount of the impairment is recorded in a separate allowance account with the loss being recognised in finance expense. Once the receivable is determined to be uncollectable then the gross carrying amount is written off against the associated allowance. Where the Group renegotiates the terms of trade receivables due from certain customers, the new expected cash flows are discounted at the original effective interest rate and any resulting difference to the carrying value is recognised in profit or loss. Financial liabilities The Group measures all financial liabilities initially at fair value less transaction costs, subsequently financial liabilities are measured at amortised cost using the effective interest rate method. The financial liabilities of the Group comprise trade payables, bank and other loans and lease liabilities. Hedge accounting The group does not enter into foreign exchange contracts. (i) Impairment of non-financial assets At the end of each reporting period the Group determines whether there is an evidence of an impairment indicator for non-financial assets. Where an indicator exists and regardless for goodwill, indefinite life intangible assets and intangible assets not yet available for use, the recoverable amount of the asset is estimated. Where assets do not operate independently of other assets, the recoverable amount of the relevant cash- generating unit (CGU) is estimated. The recoverable amount of an asset or CGU is the higher of the fair value less costs of disposal and the value in use. Value in use is the present value of the future cash flows expected to be derived from an asset or cash- generating unit. Where the recoverable amount is less than the carrying amount, an impairment loss is recognised in profit or loss. Reversal indicators are considered in subsequent periods for all assets which have suffered an impairment loss , except for goodwill. 17 Biome Australia Limited 2021 ABN 51 627 364 014 Notes to the Financial Statements For the Year Ended 30 June 2021 3 Summary of Significant Accounting Policies (continued) (j) Intangibles Trademarks/ Business and Domain Names Acquired trademarks/business and domain names are initially recognised at cost of acquisition. They are amortised over a useful life of 20 years and are tested annually for impairment and carried at cost less any impairment losses. Costs relating to registering and/or renewal of trademarks/business and domain names are expensed as incurred. (k) Cash and cash equivalents Cash and cash equivalents comprises cash on hand, demand deposits and short-term investments which are readily convertible to known amounts of cash and which are subject to an insignificant risk of change in value. (l) Leases At inception of a contract, the Group assesses whether a lease exists - i.e. does the contract convey the right to control the use of an identified asset for a period of time in exchange for consideration. This involves an assessment of whether: ? The contract involves the use of an identified asset - this may be explicitly or implicitly identified within the agreement. If the supplier has a substantive substitution right then there is no identified asset. ? The Group has the right to obtain substantially all of the economic benefits from the use of the asset throughout the period of use. ? The Group has the right to direct the use of the asset i.e. decision making rights in relation to changing how and for what purpose the asset is used. At the lease commencement, the Group recognises a right-of-use asset and associated lease liability for the lease term. The lease term includes extension periods where the Group believes it is reasonably certain that the option will be exercised. The right-of-use asset is measured using the cost model where cost on initial recognition comprises of the lease liability, initial direct costs, prepaid lease payments, estimated cost of removal and restoration less any lease incentives received. The right-of-use asset is depreciated over the lease term on a straight line basis and assessed for impairment in accordance with the impairment of assets accounting policy. The lease liability is initially measured at the present value of the remaining lease payments at the commencement of the lease. The discount rate is the rate implicit in the lease, however where this cannot be readily determined then the Group 's incremental borrowing rate is used. Subsequent to initial recognition, the lease liability is measured at amortised cost using the effective interest rate method. The lease liability is remeasured whether there is a lease modification, change in estimate of the lease term or index upon which the lease payments are based (e.g. CPI) or a change in the Group 's assessment of lease term. 18 Biome Australia Limited 2021 ABN 51 627 364 014 Notes to the Financial Statements For the Year Ended 30 June 2021 3 Summary of Significant Accounting Policies (continued) (l) Leases (continued) Where the lease liability is remeasured, the right-of-use asset is adjusted to reflect the remeasurement or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero. Exceptions to lease accounting The Group has elected to apply the exceptions to lease accounting for both short-term leases (i.e. leases with a term of less than or equal to 12 months) and leases of low-value assets. The Group recognises the payments associated with these leases as an expense on a straight-line basis over the lease term. (m) Share-based payments The Group operates equity-settled share-based payment share and option schemes. The fair value of the equity is measured at grant date and recognised as an expense over the vesting period, with a corresponding increase to an equity account. The fair value of shares is ascertained as the market bid price. The fair value of options is ascertained using a industry standard pricing model which incorporates all market vesting conditions. The amount to be expensed is determined by reference to the fair value of the options or shares granted, this expense takes in account any market performance conditions and the impact of any non-vesting conditions but ignores the effect of any service and non-market performance vesting conditions. Non-market vesting conditions are taken into account when considering the number of options expected to vest. At the end of each reporting period, the Group revises its estimate of the number of options which are expected to vest based on the non-market vesting conditions. Revisions to the prior period estimate are recognised in profit or loss and equity. (n) Foreign currency transactions and balances Transaction and balances Foreign currency transactions are recorded at the spot rate on the date of the transaction. At the end of the reporting period: ? Foreign currency monetary items are translated using the closing rate; ? Non-monetary items that are measured at historical cost are translated using the exchange rate at the date of the transaction; and ? Non-monetary items that are measured at fair value are translated using the rate at the date when fair value was determined. Exchange differences arising on the settlement of monetary items or on translating monetary items at rates different from those at which they were translated on initial recognition or in prior reporting periods are recognised through profit or loss, except where they relate to an item of other comprehensive income or whether they are deferred in equity as qualifying hedges. 19 Biome Australia Limited 2021 ABN 51 627 364 014 Notes to the Financial Statements For the Year Ended 30 June 2021 3 Summary of Significant Accounting Policies (continued) (o) New Accounting Standards and Interpretations The AASB has issued new and amended Accounting Standards and Interpretations that have mandatory application dates for future reporting periods. The Group has decided not to early adopt these Standards. (p) Reclassification of comparatives Comparative balances have been remapped or reclassified where relevant to aid understandability. The net prior year result or position of the Group has not changed as a result of these adjustments. 4 Critical Accounting Estimates and Judgments The directors make estimates and judgements during the preparation of these financial statements regarding assumptions about current and future events affecting transactions and balances. These estimates and judgements are based on the best information available at the time of preparing the financial statements, however as additional information is known then the actual results may differ from the estimates. The significant estimates and judgements made have been described below. Key estimates - receivables The receivables at reporting date have been reviewed to determine whether there is any objective evidence that any of the receivables are impaired. An impairment provision is included for any receivable where the entire balance is not considered collectible. The impairment provision is based on the best information at the reporting date. Key estimates - provision for impairment of inventories The provision for impairment of inventories assessment requires a degree of estimation and judgement. The level of the provision is assessed by taking into account the recent sales experience, the ageing of inventories and other factors that affect inventory obsolescence. Key estimates - impairment of non-financial assets Intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Other non- financial assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. Recoverable amount is the higher of an asset's fair value less costs of disposal and value-in-use. The value-in-use is the present value of the estimated future cash flows relating to the asset using a pre-tax discount rate specific to the asset or cash-generating unit to which the asset belongs. Assets that do not have independent cash flows are grouped together to form a cash-generating unit. 20 Biome Australia Limited 2021 ABN 51 627 364 014 Notes to the Financial Statements For the Year Ended 30 June 2021 4 Critical Accounting Estimates and Judgments (continued) Key estimates - income tax The Group is subject to income taxes in the jurisdictions in which it operates. Significant judgement is required in determining the provision for income tax. There are many transactions and calculations undertaken during the ordinary course of business for which the ultimate tax determination is uncertain. The Group recognises liabilities for anticipated tax audit issues based on the Group's current understanding of the tax law. Where the final tax outcome of these matters is different from the carrying amounts, such differences will impact the current and deferred tax provisions in the period in which such determination is made. Key estimates - recovery of deferred tax assets Deferred tax assets are recognised for deductible temporary differences only if the Group considers it is probable that future taxable amounts will be available to utilise those temporary differences and losses. 5 Revenue and Other Income Revenue from continuing operations 2021 $ 2020 $ Sales - Domestic 2,061,861 830,286 Sales - International 245,028 13,784 Other sales 11,513 22,066 2,318,402 866,136 Other Income Other Income - Interest income 254 602 - Partner contributions to clinical trials 36,000 - - R&D tax refund 179,257 136,619 - Government COVID-19 incentives 124,000 199,000 - Export Market Development Grant 87,419 - - Gain on sale of property, plant and equipment 4,493 - 431,423 336,221 21 Biome Australia Limited 2021 ABN 51 627 364 014 Notes to the Financial Statements For the Year Ended 30 June 2021 6 Finance Income and Expenses 2021 $ 2020 $ Interest expense 10,167 1,943 Interest expense on convertible notes 51,297 26,703 Settlement discount given 8,330 33,388 Bank charges 6,315 2,811 76,109 64,845 7 Result for the Year The result for the year includes the following specific expenses: 2021 $ 2020 $ Sales and marketing expenses Employee costs 1,311,328 1,058,566 Marketing expenses 761,174 667,494 Travel expenses 217,558 155,538 Selling and distribution expenses 119,112 53,581 Share based payments 980,597 - 3,389,769 1,935,179 Corporate and administrative expenses Employee costs 656,961 275,721 Consulting fees 234,563 208,884 Accounting fees 73,522 92,642 IT expenses 108,827 54,524 Insurance 32,668 35,560 Secretarial fees 29,286 40,254 Legal fees 6,323 24,747 Other administrative expenses 11,500 81,116 Share based payments 1,919,890 - 3,073,540 813,448 Depreciation, amortisation and impairments Depreciation expense 86,683 17,394 Amortisation expense 20,611 309 Impairment loss - 520,000 107,294 537,703 22 Biome Australia Limited 2021 ABN 51 627 364 014 Notes to the Financial Statements For the Year Ended 30 June 2021 8 Income Tax Expense 2021 $ 2020 $ Numerical reconciliation of income tax expense and tax at the statutory rate Loss for the year (5,381,116) (3,162,163) Tax at the statutory tax rate 26% (2020: 27.5%) (1,399,090) (869,595) Tax effect of: Non-deductible impairment - 143,000 R&D refund (46,657) (37,569) R&D expenses 130,000 94,875 Non-assessable COVID-19 incentive - (27,500) Share-based payments 754,127 - Current year tax losses (561,620) (696,789) Current year tax losses not recognised 561,620 696,789 Income tax expense - - Tax losses not recognised Unused tax losses for which no deferred tax asset has been recognised (6,402,958) (4,317,677) Potential tax benefit at 25% (2020: 26%) 1,600,739 1,122,596 The above potential tax benefit for tax losses has not been recognised in the statement of financial position. These tax losses can only be utilised in the future if the continuity of ownership test is passed, or failing that, the same business test is passed and the Group generates sufficient taxable earnings. 9 Cash and Cash Equivalents 2021 $ 2020 $ Cash at bank and in hand 609,978 448,867 609,978 448,867 10 Trade and Other Receivables 2021 $ 2020 $ CURRENT Trade receivables 738,200 152,292 GST receivable - 39,980 Government COVID-19 subsidies receivable - 83,000 Other receivables 14 1,721 738,214 276,993 The carrying value of trade receivables is considered a reasonable approximation of fair value due to the short-term 23 Biome Australia Limited 2021 ABN 51 627 364 014 Notes to the Financial Statements For the Year Ended 30 June 2021 10 Trade and Other Receivables (continued) nature of the balances. The maximum exposure to credit risk at the reporting date is the fair value of each class of receivable in the financial statements. (a) Impairment of receivables The Group applies the simplified approach to providing for expected credit losses prescribed by AASB 9, which permits the use of the lifetime expected loss provision for all trade receivables. To measure the expected credit losses, trade receivables have been grouped based on shared credit risk characteristics and the days past due. The loss allowance provision as at 30 June 2021 includes expected credit losses incorporating forward looking information. 11 Inventories 2021 $ 2020 $ At cost: Finished Goods 1,249,483 1,167,027 Provision for slow moving and obsolete stock (228,588) (234,552) 1,020,895 932,475 12 Property, plant and equipment 2021 $ 2020 $ Furniture, fixtures and fittings At cost - 7,526 Accumulated depreciation - (2,086) Total furniture, fixtures and fittings - 5,440 Motor vehicles At cost 135,067 132,345 Accumulated depreciation (29,474) (9,292) Total motor vehicles 105,593 123,053 Leasehold Improvements At cost - 19,752 Accumulated amortisation - (3,326) Total leasehold improvements - 16,426 24 Biome Australia Limited 2021 ABN 51 627 364 014 Notes to the Financial Statements For the Year Ended 30 June 2021 12 Property, plant and equipment (continued) 2021 $ 2020 $ Medical and diagnostic equipment At cost - 13,242 Accumulated depreciation - (2,690) Total medical and diagnostic equipment - 10,552 Total property, plant and equipment 105,593 155,471 (a) Movements in carrying amounts of property, plant and equipment Furniture, Fixtures and Fittings $ Motor Vehicles $ Leasehold Improvement s $ Medical and Diagnostic Equipment $ Total $ Year ended 30 June 2021 Balance at the beginning of year 5,440 123,053 16,426 10,552 155,471 Additions 5,628 42,063 4,250 15,824 67,765 Disposals - (30,960) - - (30,960) Depreciation expense (3,856) (28,563) (5,694) (15,237) (53,350) Impairment (7,212) - (14,982) (11,139) (33,333) Balance at the end of the year - 105,593 - - 105,593 Year ended 30 June 2020 Balance at the beginning of year - - - - - Additions 7,526 132,345 19,752 13,242 172,865 Depreciation expense (2,086) (9,292) (3,326) (2,690) (17,394) Balance at the end of the year 5,440 123,053 16,426 10,552 155,471 13 Intangible Assets 2021 $ 2020 $ Trademarks/ Business and Domain names Cost - 527,028 Accumulated amortisation and impairment - (520,309) Total Intangibles - 6,719 25 Biome Australia Limited 2021 ABN 51 627 364 014 Notes to the Financial Statements For the Year Ended 30 June 2021 13 Intangible Assets (continued) (a) Movements in carrying amounts of intangible assets Trademarks/ Business and Domain names $ Year ended 30 June 2021 Balance at the beginning of the year 6,719 Amortisation (6,719) Closing value at 30 June 2021 - Year ended 30 June 2020 Balance at the beginning of the year 520,000 Additions 7,028 Amortisation (309) Impairment expense (520,000) Closing value at 30 June 2020 6,719 14 Other non-financial assets 2021 $ 2020 $ CURRENT Shareholder subscription funds receivable - 72,500 Prepayments - 28,303 Bank guarantee 24,634 24,634 24,634 125,437 26 Biome Australia Limited 2021 ABN 51 627 364 014 Notes to the Financial Statements For the Year Ended 30 June 2021 15 Trade and Other Payables 2021 $ 2020 $ CURRENT Trade payables 619,289 264,820 GST payable 19,373 - Accrued expenses 16,404 22,400 Sundry creditors 50,631 116,758 705,697 403,978 Trade and other payables are unsecured, non-interest bearing and are normally settled within 30 days. The carrying value of trade and other payables is considered a reasonable approximation of fair value due to the short-term nature of the balances. 16 Borrowings 2021 $ 2020 $ CURRENT Chattel mortgage 15,735 16,350 Total current borrowings 15,735 16,350 2021 $ 2020 $ NON-CURRENT Related party payables - Director related entity 8,447 3,050 Chattel mortgage 56,235 68,430 Convertible notes (a) - 416,703 Total non-current borrowings 64,682 488,183 a) Convertible notes were issued with an issue price of $1.00 and are convertible into fully paid ordinary shares in accordance to the Convertible Note Agreement. Interest for the convertible notes is accrued at 10% until earlier of either the conversion date and the redemption date. During the year, under a Deed of Variation to the Convertible Note Agreement, the maturity date was amended to 30 June 2021. In line with this amendment, all convertible notes were converted to issued capital prior to year-end, including accrued interest up to the original maturity date of 30 September 2021. 27 Biome Australia Limited 2021 ABN 51 627 364 014 Notes to the Financial Statements For the Year Ended 30 June 2021 17 Issued Capital 2021 $ 2020 $ Ordinary shares 9,830,488 5,877,185 Date Shares Issue price $ Details Opening balance 1 July 2020 230,771,395 - 5,877,185 Transfer from subscribed share capital to ordinary shares 1,208,333 72,500 Issue of shares 28 July 2020 165,000 $0.06 9,900 Issue of shares 1 September 2020 2,903,333 $0.06 174,200 Issue of shares (a) 31 October 2020 5,027,759 $0.06 293,266 Issue of shares 11 November 2020 9,443,336 $0.06 566,600 Issue of shares 11 January 2021 5,333,334 $0.06 320,000 Issue of shares 1 March 2021 3,083,333 $0.06 185,000 Issue of shares 12 March 2021 3,756,667 $0.06 225,400 Issue of shares 19 March 2021 125,000 $0.06 7,500 Issue of shares 26 March 2021 833,334 $0.06 50,000 Issue of shares (a) 26 March 2021 32,135 $0.06 1,928 Issue of shares 29 March 2021 666,668 $0.06 40,000 Issue of shares 26 April 2021 1,866,666 $0.06 112,000 Issue of shares 13 May 2021 1,666,667 $0.06 100,000 Issue of shares 27 May 2021 833,333 $0.06 50,000 Issue of shares 1 June 2021 1,666,667 $0.06 100,000 Issue of shares 11 June 2021 833,334 $0.06 50,000 Issue of shares (a) 15 June 2021 5,833,334 $0.06 350,000 Issue of shares (a) 15 June 2021 64,646 $0.06 3,879 Issue of shares 16 June 2021 1,666,667 $0.06 100,000 Issue of shares 18 June 2021 1,400,000 $0.06 84,000 Issue of shares 21 June 2021 1,666,667 $0.06 100,000 Issue of shares 22 June 2021 3,666,667 $0.06 220,000 Issue of shares (a) 23 June 2021 2,499,999 $0.06 150,000 Issue of shares (b) 23 June 2021 11,700,000 $0.04 468,000 Issue of shares 23 June 2021 250,000 $0.06 15,000 Issue of shares 28 June 2021 1,666,666 $0.06 100,000 Issue of shares 30 June 2021 833,333 $0.06 50,000 Share capital raising fees - (45,870) 301,464,273 9,830,488 (a) Employee Share Plan (b) Conversion of convertible notes 28 Biome Australia Limited 2021 ABN 51 627 364 014 Notes to the Financial Statements For the Year Ended 30 June 2021 17 Issued Capital (continued) Ordinary shares The holders of ordinary shares are entitled to participate in dividends and the proceeds on winding up of the Company . On a show of hands at meetings of the Company , each holder of ordinary shares has one vote in person or by proxy, and upon a poll each share is entitled to one vote. The Company does not have authorised capital or par value in respect of its shares. Capital Management The key objectives of the Company when managing capital is to safeguard its ability to continue as a going concern and maintain optimal benefits to stakeholders. The Company defines capital as its equity and net debt. There has been no change to capital risk management policies during the year. The Company manages its capital structure and makes funding decisions based on the prevailing economic environment and has a number of tools available to manage capital risk. These include maintaining a diversified debt portfolio, the ability to adjust the size and timing of dividends paid to shareholders and the issue of new shares. The Board monitors a range of financial metrics including return on capital employed and gearing ratios. A key objective of the Company 's capital risk management is to maintain compliance with the covenants attached to the Company 's debts. Throughout the year, the Company has complied with these covenants. 18 Reserves (a) Options reserve 2021 $ 2020 $ Option reserve 83,205 52,200 Movements: Opening balance 52,200 174,000 Value of options issued 48,405 - Options expired (17,400) - Cancellation of options - (121,800) Closing balance 83,205 52,200 29 Biome Australia Limited 2021 ABN 51 627 364 014 Notes to the Financial Statements For the Year Ended 30 June 2021 18 Reserves (continued) (b) Performance rights 2021 $ 2020 $ Performance rights 1,559,970 - Movements: Opening balance - - Issue of performance rights 1,987,500 - Performance rights cancelled (427,530) - Closing balance 1,559,970 - 19 Capital and Leasing Commitments (a) Operating Leases The Group currently has an operating lease for premises for $9,064 per month, on a month by month agreement, however either party can terminate the lease with 3 months notice. (b) Contracted Commitments The Group does not have any contracted commitments as at 30 June 2021. 20 Financial Risk Management The Group is exposed to a variety of financial risks through its use of financial instruments. The Group ‘s overall risk management plan seeks to minimise potential adverse effects due to the unpredictability of financial markets. The most significant financial risks to which the Group is exposed to are described below: Specific risks ? Liquidity risk ? Credit risk ? Market risk - currency risk, interest rate risk and price risk Financial instruments used The principal categories of financial instrument used by the Group are: ? Trade receivables 30 Biome Australia Limited 2021 ABN 51 627 364 014 Notes to the Financial Statements For the Year Ended 30 June 2021 20 Financial Risk Management (continued) ? Cash at bank ? Bank overdraft ? Trade and other payables ? Lease liabilities Objectives, policies and processes The Board of Directors have overall responsibility for the establishment of the Group ’s financial risk management framework. This includes the development of policies covering specific areas such as foreign exchange risk, interest rate risk, liquidity risk, credit risk and the use of derivatives. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Group ’s activities. The day-to-day risk management is carried out by the Group ’s finance function under policies and objectives which have been approved by the Board of Directors. The Chief Financial Officer has been delegated the authority for designing and implementing processes which follow the objectives and policies. This includes monitoring the levels of exposure to interest rate and foreign exchange rate risk and assessment of market forecasts for interest rate and foreign exchange movements. The Board of Directors receives monthly reports which provide details of the effectiveness of the processes and policies in place. Mitigation strategies for specific risks faced are described below: Liquidity risk Liquidity risk arises from the Group ’s management of working capital and where applicable, the finance charges and principal repayments on its debt instruments. It is the risk that the Group will encounter difficulty in meeting its financial obligations as they fall due. The Group ’s policy is to ensure that it will always have sufficient cash to allow it to meet its liabilities as and when they fall due. The Group manages its liquidity needs by carefully monitoring, where applicable, scheduled debt servicing payments for long-term financial liabilities as well as cash-outflows due in day-to-day business. 31 Biome Australia Limited 2021 ABN 51 627 364 014 Notes to the Financial Statements For the Year Ended 30 June 2021 20 Financial Risk Management (continued) Credit risk Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in a financial loss to the Group . Credit risk arises from cash and cash equivalents, deposits with banks and financial institutions, as well as credit exposure to wholesale and retail customers, including outstanding receivables and committed transactions. The credit risk for liquid funds and other short-term financial assets is considered negligible, since the counterparties are reputable banks with high quality external credit ratings. Trade receivables and contract assets Ongoing credit evaluation is performed on the financial condition of accounts receivable. The Group has adopted a policy of only dealing with creditworthy counterparties as a means of mitigating the risk of financial loss from defaults. Management considers that all the financial assets that are not impaired for each of the reporting dates under review are of good credit quality, including those that are past due. Market risk Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. (i) Foreign exchange risk Exposure to foreign exchange risk may result in the fair value or future cash flows of a financial instrument fluctuating due to movement in foreign exchange rates of currencies in which the Group holds financial instruments which are other than the AUD functional currency of the Group . Exposures to currency exchange rates arise from the Group 's overseas purchases, which are primarily denominated in Euro and US dollars. To mitigate the Group 's exposure to foreign currency risk, non-Australian Dollar cash flows are monitored in accordance with the Group ‘s risk management policies. The Group does not enter into forward exchange contracts. The implications of this decision are that realised and unrealised foreign exchange gains and losses are recognised in profit and loss in the period in which they occur. Foreign currency denominated financial assets and liabilities, translated into Australian Dollars at the closing rate, are as follows: Trade payables in Euro is equivalent of AUD $415,386. (ii) Interest rate risk The Group is exposed to interest rate risk as funds are borrowed at floating and fixed rates. Borrowings issued at fixed rates expose the Group to fair value interest rate risk. 32 Biome Australia Limited 2021 ABN 51 627 364 014 Notes to the Financial Statements For the Year Ended 30 June 2021 20 Financial Risk Management (continued) (iii) Price risk The Group is not exposed to any significant price risk. 21 Key Management Personnel Remuneration Directors Dr Jaroslav Haman Boublik Douglas Chee Yong Loh Blair William Brabin Vega Norfolk Ilario Thomas Faenza Key management personnel remuneration included within employee expenses for the year is shown below: 2021 $ 2020 $ Short-term employee benefits 697,412 582,831 Share-based payments 2,432,500 - 3,129,912 582,831 22 Auditors' Remuneration During the financial year the following fees were paid or payable for services provided by JTP Assurance, the auditor of the Group: 2021 $ 2020 $ Audit services - JTP Assurance - auditing or reviewing the financial statements 16,000 12,500 - other services 2,500 - 18,500 12,500 33 Biome Australia Limited 2021 ABN 51 627 364 014 Notes to the Financial Statements For the Year Ended 30 June 2021 23 Interests in Subsidiaries Composition of the Group Principal place of business / Country of Incorporation Percentage Owned (%)* 2021 Percentage Owned (%)* 2020 Subsidiaries: Biome Australia Trading Pty Ltd Melbourne, Victoria, Australia 100 100 Biome Australia IP Pty Ltd Melbourne, Victoria, Australia 100 100 *The percentage of ownership interest held is equivalent to the percentage voting rights for all subsidiaries. 24 Parent entity 2021 $ 2020 $ Statement of Financial Position Assets Current assets 592,464 515,068 Non-current assets (net of impairment provision) 8,305,012 5,715,477 Total Assets 8,897,476 6,230,545 Liabilities Current liabilities - 1,322 Non-current liabilities - 390,000 Total Liabilities - 391,322 Equity Issued capital 11,485,488 5,949,685 Accumulated losses (2,640,212) (162,662) Option reserve 83,205 52,200 Total Equity 8,928,481 5,839,223 Statement of Profit or Loss and Other Comprehensive Income Total loss for the year (2,477,550) (48,026) Total comprehensive income (2,477,550) (48,026) 25 Contingencies In the opinion of the Directors , the Group did not have any contingencies at 30 June 2021 . 34 Biome Australia Limited 2021 ABN 51 627 364 014 Notes to the Financial Statements For the Year Ended 30 June 2021 26 Related Parties (a) The Group's main related parties are as follows: Key management personnel - refer to Note 21 . Other related parties include close family members of key management personnel and entities that are controlled or significantly influenced by those key management personnel or their close family members. (b) Transactions with related parties Transactions between related parties are on normal commercial terms and conditions no more favourable than those available to other parties unless otherwise stated. (c) Loans to/from related parties Unsecured loans are made to related parties on an arm's length basis. Loans are unsecured and repayable in cash. 27 Cash Flow Information Reconciliation of net income to net cash provided by operating activities: 2021 $ 2020 $ Loss for the year (5,381,116) (3,162,163) - depreciation, amortisation and impairment expenses 107,294 537,703 - net gain on disposal of property, plant and equipment (4,494) - - write-down of inventory 133,550 234,552 - share based payments expense 2,900,487 - - interest on convertible notes 51,297 - Changes in assets and liabilities: - (increase)/decrease in trade and other receivables (461,221) (26,529) - (increase)/decrease in other assets 100,873 (13,381) - (increase)/decrease in inventories (221,970) (715,055) - increase/(decrease) in income in advance 83 - - increase/(decrease) in trade and other payables 337,079 (111,653) - increase/(decrease) in provisions 45,004 35,672 Cashflows from operations (2,393,134) (3,220,854) 35 Biome Australia Limited 2021 ABN 51 627 364 014 Notes to the Financial Statements For the Year Ended 30 June 2021 28 Share Based Payments A summary of the Company options issued is as follows: Grant date Expiry Date Exercise Price $ Start of the year Issued during the year Expired/ Exercised during the year Cancelled during the year Balance at the end of the year Vested and exercisable at the end of the year Options Tranche 1 8 Feb 2019 30 Jun 2022 0.060000 4,500,000 - (4,500,000) - - - Tranche 2 8 Feb 2019 30 Jun 2022 0.090000 4,500,000 - - - 4,500,000 4,500,000 Tranche 3 8 Feb 2019 30 Jun 2023 0.120000 4,500,000 - - - 4,500,000 4,500,000 Tranche 4 1 Sept 2020 31 Oct 2021 0.100000 - 21,045,450 - - 21,045,450 21,045,450 Performance Rights Tranche 2 8 Feb 2019 30 Jun 2021 - 16,666,666 - - (16,666,666) - - Tranche 3 8 Feb 2019 31 March 2021 - 16,666,667 - - (16,666,667) - - Issue 1 - Tranche 1 26 Oct 2020 31 Dec 2021 0.001805 - 11,666,667 (5,833,334) (2,916,667) 2,916,666 - Issue 1 - Tranche 2 26 Oct 2020 31 Dec 2021 0.001805 - 8,416,667 - (2,104,167) 6,312,500 - Issue 1 - Tranche 3 26 Oct 2020 31 Dec 2021 0.001805 - 8,416,666 - (2,104,166) 6,312,500 - Issue 2 - Tranche (a) 27 Jan 2021 30 Sep 2021 0.002439 - 5,541,667 - - 5,461,667 - Issue 2 - Tranche (b) 27 Jan 2021 31 Mar 2022 0.002439 - 6,500,000 - - 6,500,000 - Share options granted carry no rights to dividends and no voting rights. The options fully vested on issue. Valuation of the options has been undertaken using an industry standard pricing model. Refer below for further information. 36 Biome Australia Limited 2021 ABN 51 627 364 014 Notes to the Financial Statements For the Year Ended 30 June 2021 28 Share Based Payments (continued) The weighted average fair value of the options granted during the year is shown below. These values were calculated by using a Black-Scholes option pricing model applying the following inputs: Issue 1 $ Issue 2(a) $ Issue 2(b) $ Option Issue $ Grant Date 26 Oct 2020 27 Jan 2021 27 Jan 2021 1 Sep 2020 Expiry Date 31 Dec 2021 30 Sep 2021 31 Mar 2022 31 Oct 2021 Spot rate $0.06 $0.06 $0.06 $0.06 Exercise price $0.001805 $0.002439 $0.002439 $0.100000 Weighted average life of option 1.18 0.67 1.17 1.37 Expected share price volatility 88.16% 88.16% 88.16% 88.16% Dividend yield - - - - Risk free rate 0.215% 0.215% 0.215% 0.215% Fair value at grant date $0.0582 $0.05756 $0.05757 $0.00230 29 Events Occurring After the Reporting Date Subsequent to year end, the group issued 10,768,959 performance rights subject to shareholder's approval. Dominique Fisher was appointed non-executive director as at 12 August 2021. The group completed its pre-IPO funding, with the final applications for $1.7m of its pre-IPO raising completed this month. It signed an agreement with Canaccord Genuity Australia to be the Lead Manager for the ASX listing of the Group, expected by the end of November 2021. The launch of a strategic distribution partnership with one of the largest pharmacy banner Groups in Australia continues to translate into sales growth. The Company is confident of doubling sales for the quarter ended September 2021, compared to the same period in 2020. Apart from this, no other matters or circumstances have arisen since the end of the financial year which significantly affected or could significantly affect the operations of the Group , the results of those operations, or the state of affairs of the Group in future financial years. 30 Statutory Information The registered office of the company is: 16 Dover Street Cremorne VIC 3132 The principal place of business is: 16 Dover Street Cremorne VIC 3121 37 Biome Australia Limited and Controlled Entities ABN 51 627 364 014 Directors' Declaration The directors of the Company declare that: 1. the financial statements and notes for the year ended 30 June 2021 are in accordance with the Corporations Act 2001 and Corporations Regulations 2001 and: a. comply with Accounting Standards, which, as stated in basis of preparation Note 1 to the financial statements, constitutes compliance with International Financial Reporting Standards (IFRS); and b. give a true and fair view of the financial position and performance of the consolidated group ; 2. In the directors' opinion, there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable. This declaration is made in accordance with a resolution of the Board of Directors. Director .................................................................. Ilario Thomas Faenza Dated 31st August 2021 38 39 ABN: 13 488 640 554. Liability limited by a scheme approved under Professional Standards Legislation BIOME AUSTRALIA LIMITED AB N : 51 627 364 014 INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF BIOME AUSTRALIA LIMITED Report on the audit of the financial report Opinion We have audited the accompanying financial report, being a general purpose financial report of Biome Australia Limited (the Company) and Controlled entities (the Group ) , which comprises the consolidated statement of financial position as at 30 June 20 2 1 , the consolidated statement of profit or loss and comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the period then ended, notes comprising a summary of significant accounting policies and other explanatory information, and the directors’ declaration. In our opinion , the financial report of the Company and Controlled entities is in accordance with the Corporations Act 2001 , including: (a) giving a true and fair view of the Group ’s financial position as at 30 June 20 2 1 and of its performance for the period ended on that date; and (b) complying with Australian Accounting Standards and the Corporations Regulations 2001 . Basis for Opinion We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor's Responsibilit ies for the Audit of the Financial Report section of our report. We are independent of t he 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 ar e relevant to our audit of the financial report in Australia. We have also fulfilled our other e thical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for o ur audit opinion . Material Uncertainty Related to Going Concern We draw your attention to Note 2 (Going Concern) in the financial report, which indicates the Group incurred an operating loss of $ 5,381,116 and a negative cash outflow from operating activities of $ 2,393,134 . As stated in Note 2, this event or condition, along with other matters as set forth in Note 2, indicate that a material uncertainty exists that may cast doubt on the Group’s ability to continue as a going concern. Our opinion is not modified in respect of this matter. 40 ABN: 13 488 640 554. Liability limited by a scheme approved under Professional Standards Legislation 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 20 2 1 but does not include the financial report and our auditor’s report thereon. Our opinion on the financial report does not cover the other information and accordingly we do not express any form of assurance conclusion thereon. In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of the Directors for the Financial Report The directors of the C ompany 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 t he directors determine is necessary to enable the preparation of the financia l report that gives a true an d fair view and is free from material misstatement, whether due to fraud or error. In preparing the financial report, directors are responsible for assessing the Group 's ab ility 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 has no realistic alternative but to do so. Auditor’s Responsibilit ies for the Audit of the Financial Report Our objectives are to obtain reasonable assurance about whether the financial rep ort as a whole is free fr om material misstatement, whether due to fraud or error, and to issue an auditor's r eport t h at includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Australian Auditing Standards will always detect a material misstatement when it exists. M is st atements can arise from fr aud or error and are considered mater ial if, individually or in ag gr e ga te, they could re as o na bly be expected to influence the economic decisions of users taken on the ba sis of th e fi na ncial report . 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/Home.aspx . This description forms part of our auditor’s report. We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant d eficiencies in internal control that we identify during our audit. JTP ASSURANCE WAYNE TARRANT Chartered Accountants Partner Signed at Melbourne this 31 ST day of August 20 2 1

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