Genera Biosystems : 2017 Annual Report

Directors' report 3

Auditor's independence declaration 23

Statement of profit or loss and other comprehensive income 24

Statement of financial position 25

Statement of changes in equity 26

Statement of cash flows 27

Notes to the financial statements 28

Directors' declaration 51

Independent auditor's report to the members of Genera Biosystems Limited 52

Shareholder information 57

The Directors present their report, together with the financial statements, on the consolidated entity for the year ended 30 June 2017.

Directors

The following persons were Directors of the consolidated entity during the whole of the financial year and up to the date of this report, unless otherwise stated:

Principal activities

The consolidated entity's strategic focus is to utilise its platform DNA analysis technologies to exploit the lucrative molecular diagnostics market. Genera is developing a suite of competitive and differentiated molecular diagnostic testing products focussed on high-growth and strategically important areas.

Dividends

There were no dividends paid, recommended or declared during the current or previous financial year.

Review of operations

Your Directors are pleased to provide this report on a highly productive year. We again first acknowledge the efforts of our staff. For a number of years your company has tailored its activities to minimise the level of cash burn prior to the generation of meaningful revenues. As a consequence we have been disciplined in our management of headcount and related costs. This extends to your Directors, who hold meaningful equity positions and have strongly aligned interests with all our shareholders, who have undertaken extra tasks and duties while deferring their fees in support of minimising cash burn.

The loss for the consolidated entity after providing for income tax amounted to $3,087,778 (30 June 2016: $3,084,077). Increased sales of respiratory panel tests resulted in product revenue for the financial year of $800,800 (2016:

$611,033). Total expenses in 2017 ($4,389,652) tracked similar to the previous year (2016: $4,433,997). Expenses, excluding depreciation and amortization and non-cash finance costs, in 2017 of $2,471,414 were 15.3% lower than the previous year (2016: $2,850,159). The consolidated entity has continued to carefully manage its costs during the period.

Net cash used in operating activities in 2017 ($765,591) was 44.0% lower than the previous year (2016: $1,368,218) largely due to higher product revenues, lower payments to suppliers for PapType clinical trial study activities, higher R&D tax incentive rebate receipts received and significantly lower laboratory expenses.

The consolidated entity's current asset balance at 30 June 2017 was $909,137 (2016: $1,006,480), and the current liabilities balance was $6,848,629 (2016: $4,925,928). The main reason for the decline in current assets was the net decrease in R&D tax incentive rebate receivable as the company cycled a historically high level of clinical studies for its PapType HPV test in the prior corresponding period. Current liabilities have increased from the previous financial year end balance mainly due to the $4,458,370 borrowings amount in relation to the Series B Convertible Note Debt and also additional funds raised under a mezzanine loan facility provided by existing shareholders.

The outstanding Series B Convertible Notes and the mezzanine loan facility are redeemable by the holders on 31 December 2017 or in the event of a monetization event.1 Accrued finance expenses from the Series B Convertible Notes outstanding are non-cash and will be written into equity should they be converted into shares. No interest is due

or payable by the company on the outstanding Series B Convertible Notes should they be converted into ordinary shares with finance expenses being accrued only in event of their redemption.