2017 Annual Report - iQX InvestmentsiQX...

2017 Annual Report

IQX LIMITED ACN 155 518 380

CONTENTS

CorporateDirectory 2

Chair’sReport 3

CEO’sReport 4

OperatingandFinancialReview 6

Director’sReport 7

RemunerationReport 11

CorporateGovernanceStatement 17

LeadAuditor’sIndependenceDeclaration 24

ConsolidatedFinancialStatements 25

NotestotheConsolidatedFinancialStatements 30

Director’sDeclaration 53

IndependentAuditor’sReport 54

NSXAdditionalInformation 57

2

CORPORATE DIRECTORY

ACN155518380

Directors

KosmasDimitriou,Chair

DrGeorgeSyrmalis,ExecutiveDirectorandChiefExecutiveOfficer

PeterBuchananSimpson

JohnStratilas

Companysecretary

GerardoIncollingoChiefExecutiveOfficerDrGeorgeSyrmalis

Registeredoffice

Level3,222ClarenceStreet

Sydney,NSW2000

Principalplaceofbusiness

Level7,222ClarenceStreet

Sydney,NSW2000

Shareregister

BoardroomPtyLimited

Level12,225GeorgeStreet

AuditorRSMAustraliaPartnersLevel13,60CastlereaghStreetSydneyNSW2000

StockexchangelistingsiQXLimitedsharesarelistedontheNationalSecuritiesExchange(NSX:IQX).Websiteaddresswww.iqxinvestments.com

IQXLIMITEDANDCONTROLLEDENTITIESCHAIR’SREPORT

2017ANNUALREPORT 3

CHAIR’S REPORT

Onbehalfoftheboardofdirectors,itisanhonourandprivilegetoprovideareviewofiQXLimitedforthefinancialyearended30June2017.TheiQXteamhassuccessfullycontinuedtotranslatetheCompany'sstrategy,intotangibledeliverablesincluding:

• Therealisationofgoodvalueinvestmentattheearlystage;

• Theexpansionofourinfrastructure,inparticulartheunconditionalapprovaloftheSeries8LifeScienceFundtherebyenablingfurtherinvestmentintobiotechnologyopportunities;and

• Thecreationofsignificantvaluefrompriorinvestmentsaspertheoperationalandfinancialreview.

Thefinancialresultsfortheyearended30June2017areencouragingandreflecttheon-goinginvestmentanddevelopmentofiQXLimited’searlystagebiotechnologyassets.

iQXLimitedisalwaysseekingtodelivervaluetoallitsstakeholdersandtoensurethatwepartnerwiththeiQGroupofcompaniestoidentifyandinvestintosustainableearlystagebiotechnologyinvestments,onaglobalscaleinordertocontinuethejourneyoferadicatingdiseasethroughcapitalinvestment.Weareconfidentthatourentrepreneurial,curiousandinnovativeiQXteam,ledbyanaspirationalandcommittedgroupofexecutivemanagementandboardmembers,candeliverontheclearmandatetobuildtheiQXbusinessandmakearealdifferencewithintheAustralianLifeSciencesector.

KosmasDimitriouChair

IQXLIMITEDANDCONTROLLEDENTITIESCEO’SREPORT

2017ANNUALREPORT 4

CEO’S REPORT

Investinginbiotechnologyassetsisneithereasynorisitroutine,afterallittakesover10yearstoputaproductinfrontoftheregulator,theoddsofapprovalarestackedagainstyouandallthisatacostthatexceeds$1.7billion.Onlyatthisstageabiotechcompanymaygenerateitsfirstinvoicefromsalesandcreaterevenue.

AtiQXInvestmentsweunderstandthis,hencetakeathematicapproachtoourinvestments.Itisourviewthatoneneedstoembracethethemeandmanageinvestmentexpectationsaccordingly:thisapproachputsthewindatyourbackforyearsifnotdecades.Identifyingthosethemes,e.g.agingpopulation,thehumangenome,diabetes,cancer,isonething,butdrillingdowntothebestwaystoaccessthemrequirespatience,commercialacumen,scientificknowledgeanddiligence.

Tobeabletodrawadistinctionbetweeninvestablethemesandthosethatsoundgoodbutdeliverlittletoinvestorsisaresultofsignificantknowledgeandexperienceinthelifesciencearena.Itisabsolutelyimperativethatthereisaclearcompetitiveadvantageintheproposedinvestment.Thebenefitsneedtoaccruetothecompanies,andbyextensiontotheshareholders,asopposedtojustthecustomers.Atypicalexampleofthisbenefitaccrualispatentprotectionandmarketexclusivity.Whencompetingformarketshare,medicaldevices,bio-similarsornovel,sameclasspharmaceuticals,e.g.AntiTNF’s,enterthesametherapeuticarea,theybecomeprogressivelycheaperandprofitsgetcompetedaway.

Inourview,theadventofgenomicandmolecularmedicineisthebiggestinvestmentthemeofthislifetime.Theindustryisinnovativeandfastpaced,essentiallyacompetitiontocommercialiseintellectualproperty.Once,itcostbillionsandtookmorethanadecadetosequenceagenome,buttodayitcanbedoneinamatterofhoursforlessthanathousanddollars.

Thesumofhumanexperienceandresearchcontinuestobuilduponitselfintensifiedbyincreasingglobalisationandinformationsharing.Whenonecombinesthiswiththeadvancesinquantumcomputing,machinelearning,artificialintelligenceandothertechnologiesenablingsafer

andfasterdrugdesignandtesting,theresultisanexponentialaccelerationofinnovationsandefficienciesthatunderpinthecurrentbiotechboom.

Withsevenbillionhumansontheplanet,thelifesciencesindustryisassuredtosustaingrowthofdemand,henceitcreatesreasonstobeanoverweightsectorforthematicinvestors.

Theobviouswaytoenterthesethemesisthroughthecompaniesthataredevelopingthesepharmaceuticals,medicaldevices,diagnosticsorthecompaniesthataredevelopingtheplatformsandtoolse.g.DNAsequencing,usedbythedrugdiscoveryindustry.

Theseventuresrangefromestablishedprofit-makingcompaniestoearlier-stagemorespeculativeentities.Henceoneneedstohavetheabilitytounderstandtherelationshipbetweenpriceandvalue.Quiteofteninbiotechnologyexpectationsracesofaraheadofrealityandthestocks’valuationsgrowsoextreme,sothatanymisstepismetwithswiftandbrutalpunishmentfromthemarkets,resultinginsignificantlossofmarketcap.

Thepromiseofbreakthroughsinthecurrentstandardofcarearewhatinvestorshopetotranslateinoutsizedreturns.Potentiallyrevolutionarygeneandcancertherapiesareattractingvastamountsofcapital,butintheirenthusiasminvestorsmaybeignoringandmispricingtheamountoftimeandcapitalitwilltakeforthesenewpromisingtechnologiesandventurestodeliveraneconomicreturn.Indealingwithcancerandimmunityyoudealwithtwoincrediblycomplexandevolvingsystemsthatareuniquetoeachindividualcase.Whenyoucombinethetwoyoureachastaggeringlevelofcomplexity.

Inthisparticularcase,itislikelythatinvestors,whiledreamingabouttheinjectionthatwillkillcancer,currentlymispricetheamountoftimeandcapitalthatwillberequiredtosolvethisincrediblycomplexpuzzleandturnthetechnologyintoprofitableenterprises.

IQXLIMITEDANDCONTROLLEDENTITIES

CEO’SREPORT(CONTINUED)

2017ANNUALREPORT 5

RiskydevelopmentstagebiotechnologyventureswithnorevenueshavenowgonefromtheprivateVCmarket,wheretheyusedtobevaluedfortensofmillionsorfrompublicmarketvaluationsofafewhundredmillioninsomecases,tonowbeingpushedontothepublicmarketswithmultibilliondollarvaluationsonthebackofmainlyUSAanalyst’snarratives.AverylargenumberofventurestradinginthepublicmarketswouldhavequalifiedasVConlyinvestmentsjustacoupleofyearsago.TodayalotofinvestorsareengaginginVCtypebiotechnologyinvestmentsinthepublicmarkets.Ifyoucombinetheventurecapitalrisk(historicallyhighrateoffailure)withtheearlystagebiotechnologyrisk(historicallyhighrateoffailure),younotonlygetaninvestmentwithaveryhigh-riskprofilebutatapricethatnoventurecapitalistwouldeverpay.

AtiQXInvestmentswebelievethataccesstothebiotechboomisconsiderablymoreefficientthroughcompaniesthatmakeplatformsandtools:afterall,inanygoldrushyouwanttobeinvestinginthecompaniesthatmakethepicksandshovels.Webelievethatourinvestmentstrategywillyieldsustainablyhighreturnsifitinvestsinventuresthatreformthecurrenthealthcaresystem.

Currentlyhealthcarehasbeenfocusedonhelpingextendthequalityoflifeforalongtimebutthesystemwehaverightnowisneithersustainablenorgoodenough.Healthcareinnovationissolvingthehealthcareequationonlyforthefutureofaging,whichmeansifwe'resuccessful,wewillcreatemoreoldpeoplethatneedmorehealthcare.Thisrepresentsafeed-forwardmodelofhealthcareconsumptionthatisfatallyflawedandeventuallywilldestroyeveryeconomylinkedtohealthcareandultimatelyeverybodyagesoutanddies.Soasgoodasthissystemis,perhapsweneedaradicallynewsystemrightnow.

Pharmacologicinnovationsshouldextrapolatefromthemoleculetothepatient,e.g.ifanexponentialinnovationisevidentonlyinthemolecularsynthesisofthecompoundanddoesn’ttranslatetoanequallyexponentialpatientoutcome,thenwedon’tseeitasapotentialinvestment.

Asinvestors,wefocusonearlystagedevelopments,acquiringatareasonableprice,validatingthescientificmeritoftheinnovation,theviabilityoftheproposeddevelopmentplan,

theIPpositionandtheIPportfoliostructure.Weconstantlymonitortheexecutionoftheresearchanddevelopmentprogram,ensuringthatpre-definedmilestonesarebeingmet.Furthermore,ourdedicatedGlobalScientificAdvisoryBoard,togetherwithapartnerspecializedClinicalR&Dprovider,overseestheentireR&Dprocessoftheinvesteeentities.Therefore,asanactiveinvestorthroughouttheentireR&Dcycle,wehavetheuniquecapabilitytoidentifyandmapscientificmilestoneswhichwetranslateintovaluecreationevents,triggeringdivestmentopportunities.

Weacknowledgethatittakesgreatpeopletocreateandsustaingreatcompanies.Weseekproofthattheleadersoftheinvesteecompanieshavethewill,capabilityandcapacitytorealizetheproposedresearchanddevelopment.Weadditionallyascertaintheycanefficientlyapplycorporategovernanceandbestmanagementprinciplestotheeverydayoperationsoftheinvesteecompany.

Intermsoffinancials,weselectinvestmentsbasedonthefundamentalanalysisoffactorssuchaseachissuer’sfinancialandindustryposition,aswellasmarketandeconomicconditions.

DrGeorgeSyrmalisGroupCEO

IQXLIMITEDANDCONTROLLEDENTITIESOPERATINGANDFINANCIALREVIEW

2017ANNUALREPORT 6

OPERATING AND FINANCIAL REVIEW

TheOperatingandFinancialReview(“OFR”)isprovidedtoassistshareholders’understandingoftheperformanceofiQXLimited(“iQX”orthe“Company”)anditscontrolledentities(collectivelyreferredtoasthe”Group”)andthefactorsunderlyingtheGroup’sresultsandfinancialpositonfortheperiod1July2016to30June2017.

SUMMARYOFFINANCIALRESULT

• Revenueincreased642%to$3.4million• Profitaftertaxincreased706%to$14.2million

• Fairvalueoffinancialassetsincreasedby$19.0million

• Cashusedinoperationsdecreasedby$1.4m

$Amillions FY17 FY16 Change

Revenue 3.4 0.5 2.9

Profitbeforetax 17.5 (2.3) 19.8

FVoffinancialassets 19.0 0.0 19.0

Cashusedinoperations (0.9) (2.3) 1.4

Revenueincreasedby642%to$3.4millioninthepastyearasaresultofanincreaseincapitalmanagementadvisoryservicesprovided,andassetrelatedrevenue.

OPERATINGHIGHLIGHTS

• Series8LifeScienceFund(Global)ESVCLPLP(Series8),managedbysubsidiaryiQXInvestmentServicesPtyLtd,wasgrantedunconditionalregistrationfromtheDepartmentofIndustry,InnovationandScienceasanearlystageventurecapital

limitedpartnership.TheiQSeries8FundiscurrentlycappedatA$100million;

• CapitalLabs,aventureofiQXInvestmentServicesPtyLtdisinlatecompletionphaseandsubsequentlaunchiscontemplatedaroundOctober2017,pendingregulatoryframework.CapitalLabsisacrowdfundingplatform,linkingstart-upAustralianbiotechnologycompanieswithretailinvestorsinaccordancewiththeCorporationsAmendment(CrowdSourcedFunding)ActandASICConsultationPaper289;

• AcurrentSPVholdingofiQXLimitedisapproachingcommercialisationstageandpreparingforlaunchrolloutinChinaandHongKongRegionwhilstinpreparationforaproposedInitialPublicOfferingonNASDAQ.

ABOUTIQX

PartofTheiQGroupGlobal,iQXLimitedisanNSXlisted investment and funds managementcompanyspecialisinginthelifesciencesector.Ourteam of experts include investment managers,physicians and scientists who are committed toeradicatingdiseasethroughcapitalinvestment.iqxinvestments.com

ABOUTTHEIQGROUPGLOBAL

TheiQGroupGlobalprovidesaturnkeysolutionforlifesciencescompanies,spanningcorporateadvisoryandinvestmentbanking,throughtoresearch,development,commercialisationandsales.TheiQGroupGlobalfacilitiesanendtoendsolutionalongthedruglifecyclecreatingthemedicinesoftomorrow.theiqgroupglobal.com

IQXLIMITEDANDCONTROLLEDENTITIESDIRECTOR’SREPORT

2017ANNUALREPORT 7

DIRECTOR’S REPORT TheDirectorspresenttheirreporttogetherwiththeconsolidatedfinancialstatementsofiQXLimited(“iQX”orthe“Company”)anditssubsidiaries(collectivelyreferredtoasthe“Group”)asatandfortheyearended30June2017.

DIRECTORS

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

DrGeorgeSyrmalis

ExecutiveDirectorandGroupChiefExecutiveOfficerAppointed:24November2014

TrainedinNuclearMedicine-RadiationImmunology.

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

DrSyrmalisiscurrentlyaNon-executiveDirectorofFarmaForceLimited,acompanylistedontheAustralianStockExchange;andExecutiveDirectorofiQnovateLtd,acompanylistedontheNationalStockExchangeofAustralia.

KosmasDimitriou

Non-ExecutiveDirectorandChairAppointed:20November2012

BachelorCommerceLaws(UniversityofWesternSydney),DiplomaofLegalpractice(Tax)(UniversityofSydney)

KosmasisaSeniorTaxManagertovariousNABWealthbusinessunitswithintheNABgroup.Overthelast7yearsKosmashasprovidedcorporateandtaxadvisoryservicestoNABWealthonbothdomesticandinternationalacquisitions,divestments,restructures,andinvestmentproducttaxstructuringissues.KosmasisalsoamemberoftheFinancialServicesCouncilTaxExpertGroupwhichlobbiesthegovernmentfortaxlawreform.Duringthe6yearspriortojoiningNAB,KosmaswasataxlawyeratPricewaterhouseCoopers(PwC)inthePwCSydneylegalandtaxdivision.Kosmas

alsohasexperienceasaclienttaxmanagerspecialisinginthefinancialservicesindustryandadvisedclientssuchasColonial,BankofAmerica,DBRREEFandLumley.

MrDimitriouisexperiencedinstructuringcorporateacquisitionsandmanaginghighlyspecialisedandinnovativefundproducts.

MrDimitriouiscurrentlyaNon-ExecutiveDirectorofiQ3CorpLtd,acompanylistedontheAustralianStockExchange.

MrDimitriouservesasamemberoftheRemunerationandNominationCommittee,andtheAuditandRiskManagementCommittee,foriQXLimited.

PeterSimpson

Non-ExecutiveDirectorAppointed:14August2013

MastersofPharmacy

MrSimpsonhasextensiveexperienceinthepharmaceuticalindustryandhasbeeninvolvedinthedevelopmentofpharmaceuticalproductsforboththeAustralianandinternationalmarkets.ForeightyearshewastheResearchandDevelopmentManageratDavidBullLaboratoriesandoversawthedevelopmentandapprovalofover80productsintheAustralian,UKandUSmarkets.

MrSimpsoniscurrentlyaNon-ExecutiveDirectorofiQnovateLtd,acompanylistedontheNationalStockExchangeofAustralia.

JohnStratilas

IndependentNon-ExecutiveDirectorAppointed:6February2012

MrStratilasbringstotheBoardover20yearsofexperienceinoperatinganumberofbusinessesinthefoodindustryandcommercialpropertydevelopmentandmanagementmarkets.

MrStratilasservesasamemberoftheRemunerationandNominationCommittee,andtheAuditandRiskManagementCommittee,foriQXLimited.

IQXLIMITEDANDCONTROLLEDENTITIESDIRECTORSREPORT(CONTINUED)

2017ANNUALREPORT 8

COMPANYSECRETARY

GerardoIncollingo

GerardowasappointedCompanySecretaryon22August2016.GerardoisManagingDirectorofLCIPartner’s,afirmofaccountants.

KelvinBoateng

KelvinBoatengwasiQXLimited’sCompanySecretaryandHead,Legal&CommercialAffairsuntilhisresignationon12August2016.

PRINCIPALACTIVITIES

DuringtheyeartheprincipalactivityfortheGroupconsistedofgeneralinvestingactivitiesandexploringinvestmentopportunitiesintheLifeScienceindustry.

DIVIDENDS

Nodividendshavebeenpaidordeclaredsincetheendofthepreviousfinancialyear,nordothedirectorsrecommendthedeclarationofadividend.

REVIEWOFOPERATIONS

InformationontheoperationsandfinancialpositionoftheGroupanditsbusinessstrategiesandprospectsissetoutintheoperatingandfinancialreview(“OFR”)onpage6ofthisAnnualReport.

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

SIGNIFICANTCHANGESINTHESTATEOFAFFAIRS

TherehavebeennosignificantchangesinthestateofaffairsoftheCompanyduringtheyear.

SIGNIFICANTEVENTSAFTERTHEBALANCEDATE

TherehavebeennosignificanteventsoccurringafterthebalancedatewhichmayaffecttheGroup’soperationsorresultsofthoseoperationsortheGroup’sstateofaffairs.

LIKELYDEVELOPMENTSANDEXPECTEDRESULTSOFOPERATIONS

LikelydevelopmentsintheoperationsoftheGroupandtheexpectedresultsofthoseoperationsinfuturefinancialyearshavenotbeenincludedinthisreportastheinclusionofsuchinformationislikelytoresultinunreasonableprejudicetotheGroup.

ENVIRONMENTALREGULATION

TheDirectorsrecognisetheimportanceofenvironmentalandworkplacehealthandsafetyissues.TheDirectorsarecommittedtocompliancewithallrelevantlawsandregulationstoensuretheprotectionoftheenvironment,thecommunityandthehealthandsafetyofemployees.

TheoperationsoftheGrouparenotsubjecttoanyparticularandsignificantenvironmentalregulationunderthelawsoftheCommonwealthofAustraliaoranyofitsstatesorterritories.

Basedonresultsofenquiriesmade,theBoardisnotawareofanysignificantbreachesofenvironmentalregulationsduringtheperiodcoveredbythisreport.

REMUNERATIONREPORT

TheRemunerationReportissetoutonpages11to16andformspartoftheDirectors’Reportfortheyearended30June2017.

PROCEEDINGSONBEHALFOFTHECOMPANY

NopersonhasappliedtotheCourtundersection237oftheCorporationsAct2001forleavetobringproceedingsonbehalfoftheCompany,ortointerveneinanyproceedingstowhichtheCompanyisaparty,forthepurposeoftakingresponsibilityonbehalfoftheCompanyforallorpartofthoseproceedings.

NoproceedingshavebeenbroughtorintervenedinonbehalfoftheCompanywithleaveoftheCourtundersection237oftheCorporationsAct2001.

INDEMNIFICATIONOFAUDITORS

TheCompanyhasnot,duringorsincetheendofthefinancialyearended30June2017,indemnifiedoragreedtoindemnifytheauditoroftheCompanyoranyrelatedentityagainstaliabilityincurredbytheauditor.Duringthefinancialyear,theCompanyhasnotpaidapremiuminrespectofacontracttoinsuretheauditoroftheCompanyoranyrelatedentity.

IQXLIMITEDANDCONTROLLEDENTITIESDIRECTOR’SREPORT(CONTINUED)

2017ANNUALREPORT 9

NON-AUDITSERVICES

DetailsoftheamountspaidtotheauditoroftheCompany,RSMAustraliaanditsnetworkfirmsforauditandnon-auditservicesprovidedduringtheyearended30June2017aredisclosedinnote26oftheconsolidatedfinancialstatements.

AUDITORINDEPENDENCE

Theauditor’sindependencedeclarationissetoutonpage24andformspartoftheDirectors’Reportfortheyearended30June2017.

MEETINGSOFDIRECTORS

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

Director Fullmeetings

ofdirectorsMeetingsofcommittees

Audit&RiskManagement

Remuneration&Nomination

A B A B A BDrGeorgeSyrmalis 11 11 - - - -

KosmasDimitriou 11 11 1 1 1 1PeterSimpson 11 9 - - - -

JohnStratilas 11 11 1 1 1 1

A–Eligibletoattend B-Attended

DIRECTORSINTERESTS

TherelevantinterestsofeachDirectorintheequityoftheCompanyatthedateofthisreportaresetoutinthefollowingtable.

Director NumberofOrdinaryShares

NumberofOptionsover

OrdinaryShares

NumberofadditionalOrdinarySharessubjecttoescrow

DrGeorgeSyrmalis 15,811,112 - -

KosmasDimitriou - - -

PeterSimpson - - -

JohnStratilas 1,600,000 - -

INDEMNIFICATIONANDINSURANCEOFDIRECTORSANDOFFICERS

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

Inaccordancewithcommercialpractice,theinsurancepolicyprohibitsdisclosureofthetermsofthepolicy,includingthenatureoftheliabilityinsuredagainstandtheamountofthepremium.

IQXLIMITEDANDCONTROLLEDENTITIESDIRECTORSREPORT(CONTINUED)

2017ANNUALREPORT 10

ROUNDINGOFAMOUNTS

TheamountsintheconsolidatedfinancialstatementshavebeenroundedofftothenearestdollarinaccordancewithASICCorporationInstrument2016/191.

TheDirectors’ReportissignedinaccordancewitharesolutionoftheDirectors.


Sydney

19 October2017

IQXLIMITEDANDCONTROLLEDENTITIESREMUNERATIONREPORT

2017ANNUALREPORT 11

REMUNERATION REPORT (AUDITED) ThisremunerationreportoutlinestheremunerationarrangementsforNon-ExecutiveDirectors,ExecutiveDirectorsandotherKeyManagementPersonnel(“KMP”)oftheCompanyforthefinancialyearended30June2017.Theinformationinthisreporthasbeenauditedasrequiredbysection308(3C)oftheCorporationsAct2001.

Thereportispresentedunderthefollowingsections:

1. Keymanagementpersonnel(KMP)coveredinthisreport2. Remunerationgovernance3. ExecutiveKMPremunerationarrangements

A. RemunerationprinciplesandstrategyB. Detailofincentiveplans

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

1.KEYMANAGEMENTPERSONNEL

ThetablebelowoutlinestheKMPatanytimeduringthefinancialyear,andunlessotherwiseindicated,theywereKMPfortheentireyear.

Name Position TermasKMP

Non-ExecutiveDirectors

KosmasDimitriou Chair Entireyear

JohnStratilas Non-ExecutiveDirector Entireyear

PeterSimpson Non-ExecutiveDirector Entireyear

ExecutiveDirectors

DrGeorgeSyrmalis ExecutiveDirectorandGroupCEO Entireyear

OtherExeucutiveKMP

SpiroSakiris GroupChiefFinancialandOperatingOfficer Entireyear

2.REMUNERATIONGOVERNANCE

TheBoardhasestablishedaremunerationandnominationcommittee(“RNC”)whichiscurrentlycomprisedofthefollowingmembers:

Committeemember PositionIndependent

KosmasDimitriou MemberNo

JohnStratilas MemberYes

ThekeyresponsibilityoftheRNCistoassisttheBoardinitsoversightof:

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

AfullcharteroutliningtheRNC’sresponsibilitiesisavailableat:www.iqxinvestments.com/

IQXLIMITEDANDCONTROLLEDENTITIESREMUNERATIONREPORT(CONTINUED)

2017ANNUALREPORT 12

3.EXECUTIVEKMPREMUNERATIONARRANGEMENTS

3ARemunerationprinciplesandstrategy

InFY17theexecutiveremunerationframeworkconsistedoffixedremunerationandshortandlong-termincentivesasoutlinedbelow.TheCompanyaimstorewardexecutiveswithalevelandmixofremunerationappropriatetotheirposition,responsibilitiesandperformancewithintheCompanyandalignedwithmarketpractice.RemunerationlevelsareconsideredannuallythrougharemunerationreviewwhichconsidersmarketdataandtheperformanceoftheCompanyandindividual.

3BDetailofincentiveplans

Short-termincentive(STI)

TheCompanyoperatesanannualSTIprogramavailabletoexecutivesandawardsacashincentivesubjecttotheattainmentofclearlydefinedkeyperformancemeasures.

AsummaryoftheExecutiveSTIplanineffectduringFY17isprovidedbelow:

Whoparticipates? DrGeorgeSyrmalisandSpiroSakiris

HowisSTIdelivered? Cash

WhatistheSTIopportunity? Upto25%ofbasesalary

WhataretheperformanceconditionsforFY17?

Individualperformancegoalsagainstannualplans.

Howisperformanceassessed? Onanannualbasis,afterconsiderationofperformanceagainstkeyperformanceindicators(KPI).

Employeebenefitplan(EBP)

ThefollowingtableexplainsthekeyfeaturesoftheEmployeeBenefitPlan.DrGeorgeSyrmalisandSpiroSakirisareeligibletoreceive153,000and90,000performancerightsrespectivelyperannumundertheEBP.

Whoparticipates? AllemployeesoftheGroup.

HowareLongTermIncentivesdelivered? Entitlementtosharesandperformancerights.

WhataretheperformanceconditionsfortheFY17grant?

Individualperformancegoalsagainstannualplans.

Howisperformanceassessed? Attheendoftherelevantperformanceperiod,theCompanywilldeterminewhetherandtowhatextenttheparticipanthassatisfiedtheapplicableperformancecriteria.

Whendoestheawardvest? Awardsvestafteratotalofthreeyears'continualservicefollowingachievementoftheapplicableperformancecriteria.

Howaregrantstreatedontermination? Theparticipantmustbeacurrentemployeeatvestingdateinordertobeentitledtoshares.

Howaregrantstreatedifachangeofcontroloccurs?

IfatakeoverbidorotherofferismadetoacquiresomeoralloftheissuedsharesoftheCompany,participantswillgenerallybeentitledtorequestthatallperformancerightsvestimmediately,regardlessofwhethertherelevantperformanceconditionshavebeensatisfied.


2017ANNUALREPORT 13

4.EXECUTIVEKMPREMUNERATIONOUTCOMESFOR2017

GroupperformanceanditslinktoSTI

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

ThetablebelowprovidesasummaryoftheCompany’sperformanceinFY17.TheinformationbelowistakenintoaccountbytheBoardwhensettinganddeterminingshort-termandlong-termremunerationforKMP.

NoSTIorLTIpaymentsweremadein,orprovidedforduring,theperiodto30June2017or30June2016.

Shareperformance EarningsperformanceA$million

Period Closingsharepriceat30June

Dividendpershare

EPS(cents) Revenue Profit/(loss)aftertax

FY2017 $0.40 NIL 12.22 $3.4 $14.2

FY2016 $0.43 NIL (2.26) $0.5 ($2.3)

FY2015 $0.65 NIL (1.27) $0.8 ($1.3)

FY2014 $0.65 NIL (1.38) - ($1.2)

FY2013 NA NIL (1.23) - ($1.0)

ExecutiveKMPremunerationdisclosurefortheyearended30June2017

ThefollowingtableofexecutiveKMPremunerationhasbeenpreparedinaccordancewithaccountingstandardsandtheCorporationsAct2001requirements,fortheperiod1July2016to30June2017.

KMP ShortTerm Postemploy-ment

Sharebasedpayments

Total

Name Year Basesalary Cashbonus

Non-cashbenefit

Other Super-annuation

Options Shares Total Perfor-mancerelated%

DrGeorgeSyrmalis

2017 300,180 - - - 26,719 - - 326,899 0%

2016 275,272 - - - 24,047 - - 299,319 0%

SpiroSakiris

2017 160,096 - 6,240 24,998 16,623 - - 207,957 0%

2016 161,462 - - - 14,926 - - 176,388 0%

TotalExecutiveKMP

2017 460,276 - 6,240 24,998 43,342 - - 534,856 0%

2016 436,734 - - - 38,973 - - 475,707 0%


2017ANNUALREPORT 14

5.EXECUTIVEKMPCONTRACTUALARRANGEMENTS

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

Executive Position Effectivedate

Fixedannualremuner-ation1

Term Noticeperiod2

Terminationpayment

DrGeorgeSyrmalis

GroupChiefExecutiveOfficer

1January2016

$307,970 Ongoing 6months SuperannuationwillbepaidirrespectiveoftheterminationbenefitscapundertheCorporationsAct.

SpiroSakiris

GroupChiefFinancialandOperatingOfficer

1January2016

$164,250 Ongoing 6months SuperannuationwillbepaidirrespectiveoftheterminationbenefitscapundertheCorporationsAct.

1FixedAnnualRemunerationincludesbasesalaryplussuperannuationcontributionsinaccordancewithSuperannuationGuaranteelegislation.

2TheCompanymayterminateemploymentimmediatelyandwithoutnoticeincertaincircumstances,includingwheretheexecutivehascommittedaseriousorpersistentbreachoftheiremploymentagreementorwheretheexecutivehasbeendishonestorfraudulentinthecourseofperformingtheirduties.

6.NON-EXECUTIVEDIRECTORARRANGEMENTS

DeterminationoffeesandmaximumaggregateNEDfeepool

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

Feepolicy

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

NEDsmaybereimbursedforexpensesreasonablyincurredinattendingtotheCompany’saffairs.NEDsdonotreceiveretirementbenefits,nordotheyparticipateinanyincentiveprograms.

StatutoryremunerationtableforFY17

ThetablebelowsetsouttheelementsofNEDfeesandotherbenefitsprovidedduring2017.

Feesapplicablefor2017 Chair Member

Board $35,000 $35,000

AuditandRiskManagementCommittee $5,000 Nil

RemunerationandNominationCommittee Nil Nil

Superannuation Includedinaboveamounts.

Other Reimbursementoftravelandotherexpensesnecessarilyincurredinexercisingtheirduties.


2017ANNUALREPORT 15

6.NON-EXECUTIVEDIRECTORARRANGEMENTS(CONTINUED)

Non-executiveremunerationdisclosurefortheyearended30June2017

Thefollowingtableofnon-executiveremunerationhasbeenpreparedinaccordancewithaccountingstandardsandtheCorporationsAct2001requirements,fortheperiod1July2016to30June2017.AllamountsareinAUD.

NED Year Boardfees

Otherfees

Non-cashbenefit

Super-annuation

Total PerformanceRelated%

KosmasDimitriou

2017 32,109 - - 3,050 35,159 0%

2016 32,109 - - 3,050 35,159 0%

PeterSimpson

2017 32,109 4,566 - 3,484 40,159 0%

2016 32,109 - - 3,050 35,159 0%

JohnStratilas 2017 32,109 - - 3,050 35,159 0%

2016 32,109 - - 3,050 35,159 0%

TotalNED 2017 96,327 4,566 - 9,584 110,477 0%

2016 96,327 - - 9,150 105,477 0%

7.ADDITIONALDISCLOSURESRELATINGTOOPTIONSANDSHARES

MovementsinEquityHoldingsofKMP

ThefollowingtablesetsoutthemovementduringthereportingperiodinthenumberofordinarysharesiniQXLimitedhelddirectly,indirectly,orbeneficiallybyKMPincludingtheirrelatedparties.

KMP Heldat1July2016

Grantedasremuneration

Optionsexcercised

Netchangeother

Forfeited Heldat30June2017

Non-executiveDirectors

KosmasDimitriou - - - - - -

PeterSimpson - - - - - -

JohnStratilas 1,600,000 - - - - 1,600,000

ExecutiveDirectors

DrGeorgeSyrmalis 15,811,112 - - - - 15,811,112

OtherExecutiveKMP

SpiroSakiris 266,730 - 1,556,900 539,000^ - 2,362,630

TotalKMP 17,677,842 - 1,556,900 539,000 - 19,773,742

^Off-marketpurchase,andfullypaidincash.


2017ANNUALREPORT 16

7.ADDITIONALDISCLOSURESRELATINGTOOPTIONSANDSHARES(CONTINUED)

MovementsinOtherEquityHoldingsofKMP

ThefollowingtablesetsoutthemovementduringthereportingperiodinthenumberofOptionsiniQXLimitedhelddirectly,indirectly,orbeneficiallybyKMPincludingtheirrelatedparties.

KMP Heldat1July2016

Grantedasremun-eration

Vested Other Forfeited Heldat30June2017

Non-executiveDirectors

PeterSimpson - - - - - -

ExecutiveDirectors

GeorgeSyrmalis - - - - - -

ConTsigounis - - - - - -

OtherExecutiveKMP

SpiroSakiris 565,950 - (1,556,900) 990,950^ - -

TotalKMP 565,950 - (1,556,900) 990,950 - -

^Off-marketpurchase,andfullyexcercised.

IQXLIMITEDANDCONTROLLEDENTITIESCORPORATEGOVERNANCESTATEMENT

2017ANNUALREPORT 17

CORPORATE GOVERNANCE STATEMENT

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

Principal1:Laysolidfoundationsformanagement

RoleoftheBoardandManagement

TheBoardofDirectorsisresponsibleforthecorporategovernanceoftheCompany.TheBoardprovidesstrategicguidancefortheCompany,andeffectiveoversightofmanagement.TheBoardguidesandmonitorsthebusinessandaffairsoftheGrouponbehalfoftheshareholdersbywhomtheyareelectedandtowhomtheyareaccountable.

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

ResponsibilitiesoftheBoard

TheBoardisresponsiblefor:

• Overseeingthecompany,includingitscontrolandaccountabilitysystems;

• Overseeingtheintegrityoftheaccountingandcorporatesystems,includingexternalaudit;

• AppointingandremovingtheCEO/ManagingDirector;

• Whereappropriate,ratifyingtheappointmentandremovalofseniorexecutives;

• Providinginputintoandfinalapprovalofmanagement’sdevelopmentofcorporatestrategyandperformanceobjectives;

• Reviewing,ratifyingandmonitoringsystemsofriskmanagementandinternalcontrols,codesofconductandlegalcompliance;

• Monitoringseniorexecutives’performanceandimplementationofstrategy;

• Ensuringtimelyandbalanceddisclosureofallmaterialinformationconcerningthecompanythatareasonablepersonwouldexpecttohaveamaterialeffectonthepriceorvalueofthecompany'ssecurities;

• Ensuringappropriateresourcesareavailabletoseniorexecutives;

• Approvingandmonitoringtheoperatingbudgetsandprogressofmajorcapitalexpenditure,capitalmanagementandacquisitionsanddivestures;and

• Monitoringtheeffectivenessoftheentity'sgovernancepractices.

Allocationofindividualresponsibilities

FormallettersofappointmentareprovidedtoallnewDirectorsandSeniorExecutivessettingoutkeytermsandconditionsoftheirappointment.

Responsibilitiesofmanagement

ManagementareresponsibleforimplementingthestrategicobjectivesoftheCompanyandoperatingwithintheriskappetitesetbytheBoardaswellasotheraspectsoftheday-to-dayrunningoftheCompany.

ManagementisalsoresponsibleforprovidingtheBoardwithaccurate,timelyclearinformationtoenabletheBoardtoperformitsresponsibilities.

Induction

AllnewDirectorsparticipateinaformalinductionprocessco-ordinatedbytheCompanySecretary.ThisinductionprocessincludesbriefingsontheCompany’sfinancial,strategic,operationalandriskmanagementposition,theCompany’sgovernanceframeworkandkeydevelopmentsintheCompanyandtheindustryandenvironmentinwhichitoperates.

RoleandaccountabilityoftheCompanySecretary

TheCompanySecretaryisappointedbytheBoardandisresponsiblefor:

• AdvisingtheBoardanditsCommitteesonGovernancematters;

• MonitoringcompliancewithBoardpoliciesandprocedures;

• Co-ordinatingBoardpapers;

IQXLIMITEDANDCONTROLLEDENTITIESCORPORATEGOVERNANCESTATEMENT(CONTINUED)

2017ANNUALREPORT 18

• AccuratelyrecordingdecisionsanddiscussionsfromBoardmeetings;and

• Co-ordinatingtheinductionandprofessionaldevelopmentofDirectors.

Ongoingtraining

Directorsidentifyadditionaltrainingneedsonanongoingbasisandattendtheseasnecessarytoensuretheyhavetheappropriateskillsandknowledgetoperformtheirrole.

AppointmentofBoardMembers

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

Principle2:StructuretheBoardtoaddvalue

TheBoard’spolicyisthattheBoardneedstohaveanappropriatemixofskills,experience,expertiseanddiversitytobewellequippedtohelptheCompanynavigatetherangeofchallengesfacedbythecompany.

TheCompanydoesnothaveamajorityindependentdirectors.TheBoardconsidersthistobesatisfactoryconsideringthesizeandcomplexityofthebusiness.

DetailsoftheBoardmember’snames,independencestatus,termsofservice,experience,expertiseandqualificationsaresetoutintheDirectors'report.

CompositionoftheBoard

TheBoard’scompositionisdeterminedbasedoncriteriasetoutintheCompany’sconstitutionandtheBoardCharter.

TheBoardseekstoensurethat:

• Atanypointintime,itsmembershiprepresentsanappropriatebalancebetweendirectorswithexperienceandknowledgeoftheCompanyanddirectorswithanexternalorfreshperspective;

• ThereisasufficientnumberofdirectorstoserveonBoardcommitteeswithoutoverburdeningthedirectorsormakingitdifficultforthemtofullydischargetheirresponsibilities;and

• ThesizeoftheBoardisappropriatetofacilitateeffectivediscussionandefficientdecisionmaking.

InaccordancewiththeNSXListingRules,theCompanymustholdanelectionofDirectorseachyear.

Boardcommittees

ToensurethattheresponsibilitiesoftheBoardareupheldandexecutedtothehighestlevel,theBoardhasestablishedthefollowingBoardcommittees:

• AuditandRiskCommittee• RemunerationandNominationCommittee

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

Boardskillsmatrix

ThekeyskillsrequiredbytheBoardarehighlightedinthematrixbelow,theBoardbelievesthattherearesufficientdirectorswiththeseskillsandtherearenodeficienciesintheseskillsinthecurrentboard.

• Riskandcompliance:Identifykeyriskstothecompanyrelatedtoeachkeyareasofoperations.

• Abilitytomonitorriskandcomplianceandknowledgeoflegalandregulatoryrequirements.

• FinancialandAudit:Experienceinaccountingandfinancetoanalysestatements,assessfinancialviability,contributetofinancialplanning,overseebudgetsandfundingarrangements.

• Strategy:Abilitytoidentifyandcriticallyassessstrategicopportunitiesandthreatstotheorganisation.Developstrategies


2017ANNUALREPORT 19

incontexttoourpoliciesandbusinessobjectives.

• Policydevelopment:Abilitytoidentifykeyissuesfortheorganisationanddevelopappropriatepolicyparameterswithinwhichthecompanyshouldoperate.

Independentdecisionmaking

TheBoardrecognisestheimportantcontributionindependentDirectorsmaketogoodcorporategovernance.AllDirectors,whetherindependentornot,arerequiredtoactinthebestinterestsoftheCompanyandtoexerciseunfetteredandindependentjudgment.

ADirectorisconsideredtobeindependentifheorsheisfreeofanyinterest,position,associationorrelationshipthatmightinfluenceorreasonablybeperceivedtoinfluence,inamaterialrespect,hisorhercapacitytobringanindependentjudgementtobearonissuesbeforetheBoardandtoactinthebestinterestsoftheCompanyanditssecurityholdersgenerally.

IfanyDirectorbelievesthereisachangeintheirindependencestatus,theyarerequiredtonotifytheBoardassoonaspossible.

TheBoardhasadoptedspecificprinciplesinrelationtodirectors’independenceandconsidersthefollowing,atleastannually,whendeterminingifaDirectorisindependent.WhethertheDirector:

• Isasubstantialshareholderofthecompanyoranofficerof,orotherwiseassociateddirectlywith,asubstantialshareholderofthecompany.

• Isemployed,orhaspreviouslybeenemployedinanexecutivecapacitybythecompanyoranothergroupmember,andtherehasnotbeenaperiodofatleastthreeyearsbetweenceasingsuchemploymentandservingontheBoard.

• Haswithinthelastthreeyearsbeenaprincipalofamaterialprofessionaladviseroramaterialconsultanttothecompanyoranothergroupmember,oranemployeemateriallyassociatedwiththeserviceprovided.

• Isamaterialsupplierorcustomerofthecompanyorothergroupmember,oranofficeroforotherwiseassociateddirectlyorindirectlywithamaterialsupplierorcustomer.

• Hasamaterialcontractualrelationshipwiththecompanyoranothergroupmemberotherthanasadirector.

RoleoftheChair

TheChairmanoftheBoardisresponsibleforleadershipoftheBoardandfortheefficientorganisationandconductoftheBoard’sfunctioning.

TheChairmanfacilitatestheeffectivecontributionofalldirectorsandpromotesconstructiveandrespectfulrelationsbetweendirectorsandbetweenBoardandmanagement.

NominationCommittee

TheNominationCommitteemeetsasrequiredduringtheyeartoassisttheBoardinfulfillingitscorporategovernanceresponsibilitiesinregardto:

• Boardappointments,re-electionsandperformanceandgeneralsuccessionplanningforBoard/SeniorManagement;

• Directors’inductionandcontinuingdevelopment;

• BoardCommitteemembership;and• EndorsementofExecutiveappointments.

TheNominationCommittee’sCharterwhichisavailableintheCorporateGovernancesectionoftheCompany’swebsite,setsouttheCommittee’sresponsibilitieswhichincludemakingrecommendationstotheBoardontheappropriateskillmix,personalqualities,expertiseanddiversityofeachpositionfollowingtheannualassessmentoftheBoard.Whenavacancyexistsorthereisaneedforparticularskills,theCommittee,inconsultationwiththeBoard,determinestheselectioncriteriabasedontheskillsdeemednecessary.BoardappointeesmuststandforelectionatthenextAnnualGeneralMeetingofshareholders.

TheCommitteealsomakesrecommendationstotheBoardandoverseesimplementationoftheprocedureforevaluatingtheBoard’sperformance.

Accesstoinformation

TheBoardisprovidedwiththeinformationitneedstodischargeitsresponsibilitieseffectivelyandallDirectorshavecompleteaccesstoseniormanagementthroughtheCEOorCompanySecretary.

Incertaincircumstances,eachDirectorhastherighttoseekindependentprofessionaladviceatthe


2017ANNUALREPORT 20

Company’sexpense,withinspecifiedlimits,orwiththepriorapprovaloftheBoard.

Principle3:Actethicallyandresponsibly

Codeofconduct

TheCompany’sCorporateEthicsPolicyandCorporateCodeofConductsetsoutthebehaviourrequiredofDirectors,employeesandcontractorsasappropriateandincludetheobservanceoflegalandothercomplianceobligationsthatrelatetothecompany'sactivitiesfromtimetotime.TheBoardacknowledgesandemphasisestheimportanceofalldirectorsandemployeesmaintainingthehigheststandardsofcorporategovernancepracticeandethicalconduct.

ACorporateCodeofConducthasbeenestablishedrequiringdirectorsandemployeesto:

• Actinthebestinterestoftheentity;• Acthonestlyandwithhighstandardsofpersonal

integrity;

• Exerciseduecareanddiligenceinfulfillingthefunctionsofoffice;

• Avoidconflictsandmakefulldisclosureofanypossibleconflictsofinterest;

• Complywiththelawsandregulationsthatapplytotheentityanditsoperations;

• Notknowinglyparticipateinanyillegalorunethicalactivity;and

• ComplywiththesharetradingpolicyoutlinedintheCodeofConduct.

ACorporateGovernanceCharterandBoardCharterhasbeenadoptedwhichregulatesthedutiesofDirectorsandtheirdealingswiththecompany(includingthetradingofsharesinthecompany)bothinternallyandexternally.

Principle4:Safeguardintegrityincorporatereporting

AuditCommittee

TheAuditandRiskCommitteeassiststheBoardinfulfillingitscorporategovernanceresponsibilitiesinregardsto:

• Theadequacyoftheentity'scorporatereportingprocesses;

• Whethertheentity'sfinancialstatementsreflecttheunderstandingofthecommitteemembersof,andotherwiseprovideatrueandfairview

of,thefinancialpositionandperformanceoftheentity;

• Theappropriatenessoftheaccountingjudgementsorchoicesexercisedbymanagementinpreparingtheentity'sfinancialstatements;

• Theappointmentorremoval,rotation,independenceandperformanceoftheexternalauditor;

• Thescopeandadequacyoftheexternalauditandanynon-auditservices;

• If,andwhen,theCompanyestablishesaninternalauditfunction:

o theappointmentorremovaloftheheadofinternalaudit;

o thescopeandadequacyoftheinternalauditworkplan;and

o theobjectivityandperformanceoftheinternalauditfunction.

ThemembersoftheAuditandRiskCommitteethroughouttheReportingPeriodwere:

Name Executive/Non-Executive

Indep-endent?

KosmasDimitriou Non-Executive NoJohnStratilas Non-Executive Yes

Accordingly,theCompanydoesnothaveamajorityofindependentcommitteemembers.TheBoardconsidersthistobeappropriateconsideringthesizeandcomplexityofthebusiness.

ThequalificationsandexperienceoftheAuditandRiskCommitteemembersandtheirattendanceatCommitteemeetingsisincludedinthedirectors'report.

TheAuditandRiskCommitteereportstothefullBoardaftereverymeetingonallmattersrelevanttothecommittee’srolesandresponsibilities.


2017ANNUALREPORT 21

Externalauditor

TheAuditandRiskCommitteeoverseestherelationshipwiththeexternalauditor.InaccordancewiththeCorporationsAct2001,theleadAuditPartnerontheauditisrequiredtorotateatthecompletionofa5-yearterm.

TheexternalauditorattendstheAGMandisavailabletoansweryourshareholderquestionsabouttheconductoftheauditandthepreparationandcontentoftheauditor’sreport.

TheBoardhavereceivedfromitsChiefExecutiveOfficerandChiefFinancialOfficeradeclarationthat,intheiropinion,thefinancialrecordsoftheentityhavebeenproperlymaintainedandthatthefinancialstatementscomplywiththeappropriateaccountingstandardsandgiveatrueandfairviewofthefinancialpositionandperformanceoftheentityandthattheopinionhasbeenformedonthebasisofasoundsystemofriskmanagementandinternalcontrolwhichisoperatingeffectively.

Internalcontrol

TheBoardisresponsibleforreviewingthecompany’spoliciesonriskoversightandmanagementandsatisfyingitselfthatmanagementhasdevelopedandimplementedasoundsystemofriskmanagementandinternalcontrol.

TheBoardhasreceivedassurancefromtheChiefExecutiveOfficerandtheChiefOperatingOfficerthatthedeclarationprovidedinaccordancewithsection295AoftheCorporationsAct2001isfoundedonasystemofriskmanagementandinternalcontrolandthatthesystemisoperatingeffectivelyinallmaterialrespectsinrelationtofinancialreportingrisks.

Principle5:Maketimelyandbalanceddisclosure

iQXLimitedhasestablishedpoliciesandprocedurestoensuretimelyandbalanceddisclosuresofallmaterialmattersconcerningtheCompany,andtoensurethatallinvestorshaveequalandtimelyaccesstoinformationontheCompany’sfinancialperformance.

ThesepoliciesandproceduresincludeacomprehensivedisclosurepolicythatincludesidentificationofmattersthatmayhaveamaterialeffectonthepriceontheCompany’ssecurities,

qualitycontrolproceduresoverannouncements,notifyingthemtotheNSX,postingrelevantinformationontheCompany’swebsiteandissuingmediareleases.

TheAnnualReportincludesrelevantinformationabouttheoperationsoftheCompanyduringtheyear,keyfinancialinformation,changesinthestateofaffairsandindicationsoffuturedevelopments.TheCorporate

AnnualReportsforthecurrentyearandforpreviousyearsareavailableundertheInvestorRelationssectionofthecompanywebsite.

ThehalfyearandfullyearfinancialresultsareannouncedtotheNSXandareavailabletoshareholdersviatheCompanyandNSXwebsites.

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

Principle6:Respecttherightsofsecurityholders

TheCompanySecretaryhasbeennominatedasthepersonresponsibleforcommunicationswiththeNSX.

AllExecutiveManagementhaveanongoingobligationtoadvisetheCompanySecretaryofanymaterialnon-publicinformationwhichmayneedtobecommunicatedtothemarket.

TheCompanyhasanInvestorRelationsProgramwhichpromoteseffectivecommunicationwithshareholders,encouragesparticipationatgeneralmeetingsandencouragescommunicationsthroughouttheyear.

TheCompanyengageswithitssecurityholdersthrough:

• GivingthemreadyaccesstoinformationabouttheentityanditsgovernanceviatheCompanywebsite;

• Communicatingopenlyandhonestlywiththem;• Encouragingandfacilitatingtheirparticipationin

meetingsofsecurityholders;and


2017ANNUALREPORT 22

• ProvidinganemailaddressandtelephonenumberonallcommunicationforsecurityholderswhowishtocontacttheCompany.

TheCompanymakesallNSXannouncementsavailableviaitswebsite.Inaddition,shareholderswhoareregisteredreceiveemailnotificationofannouncements.

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

TheBoardencouragesfullparticipationbyshareholdersattheAnnualGeneralMeetingtoensureahighlevelofDirectoraccountabilitytoshareholdersandshareholderidentificationwiththeCompany’sstrategyandgoals.

AnAGMquestionformwillaccompanytheNoticeofMeeting,givingshareholderstheopportunitytoforwardquestionsandcommentstotheCompanypriortotheAGM.TheexternalauditorisavailabletoanswerquestionsattheAGM.

Principle7:Recogniseandmanagerisk

TheBoardconsidersidentificationandmanagementofkeyrisksassociatedwiththebusinessasvitaltomaximizeshareholderwealth.Ayearlyassessmentofthebusiness'sriskprofileisundertakenandreviewedbytheBoard,coveringallaspectsofthebusinessfromtheoperationallevelthroughtostrategiclevelrisks.

TheCEOhasbeendelegatedthetaskofimplementinginternalcontrolstoidentifyandmanagerisksforwhichtheAuditandRiskManagementCommitteeandtheBoardprovidesoversight.Theeffectivenessofthesecontrolsismonitoredandreviewedregularly.Therecenteconomicenvironmenthasemphasisedtheimportanceofmanagingandreassessingitskeybusinessrisks.

TheBoardisresponsibleforreviewingthecompany’spoliciesonriskoversightandmanagementandsatisfyingitselfthatmanagementhasdevelopedandimplementeda

soundsystemofriskmanagementandinternalcontrol.

TheBoardrequiresmanagementtodesignandimplementtheriskmanagementandinternalcontrolsystemtomanagethecompany'smaterialbusinessrisksandreporttoitonwhetherthoserisksarebeingmanagedeffectively.

TheCompanydoesnotpresentlyhaveaninternalauditfunction.TheevaluationoftheriskmanagementandinternalcontrolprocessistheresponsibilityoftheAuditandRiskManagementCommitteeandisperformedinconjunctionwithseniorexecutives.Externalconsultantsmaybeusedincertaincircumstances,howeverhavenotbeenusedduringthefinancialyear.

Principle8:Remuneratefairlyandresponsibly

TheCompany’sremunerationpolicyisdesignedinsuchasawaythatit:

• Motivatesseniorexecutivestopursuethelong-termgrowthandsuccessoftheCompany;and

• Demonstratesaclearrelationshipbetweenseniorexecutives’performanceandremuneration.

Theremunerationpolicy,whichsetsouttheremunerationframeworkforthekeymanagementpersonnel(KMP)wasdevelopedbytheRemunerationandNominationCommitteeafterseekingprofessionaladvicefromindependentconsultantsandwasapprovedbytheBoard.

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

TheBoardexpectsthattheremunerationstructureimplementedwillresultinthecompany


2017ANNUALREPORT 23

beingabletoattractandretainthebestexecutives.Itwillalsoprovideexecutiveswiththenecessaryincentivestoachievelong-termgrowthinshareholdervalue.

TheCompany’spoliciesandpracticessurroundingthepaymentofbonuses,optionsandotherincentivepaymentsarereviewedbytheRemunerationandNominationCommitteeannuallyaspartofthereviewofexecutiveremunerationpoliciesandpracticesandarecommendationisputtotheBoardforapproval.Allbonuses,optionsandincentivesmustbelinkedtopredeterminedperformancecriteria.

Furtherinformationaboutthecompany’sremunerationstrategyandpoliciesandtheirrelationshiptocompanyperformancecanbefoundintheRemunerationReportwhichformspartoftheDirectors'Report,togetherwithdetailsoftheremunerationpaidtokeymanagementpersonnel.

RemunerationCommittee

TheresponsibilitiesoftheRemunerationandNominationCommitteeincludeareviewofandrecommendationtotheBoardon:

• Thecompany’sremuneration,recruitment,retentionandterminationpoliciesandprocedures

• forseniorexecutives.• Seniorexecutives’remunerationandincentives.• Superannuationarrangements.• Theremunerationframeworkfordirectors.

EachmemberoftheRemunerationandNominationCommittee:

• Isfamiliarwiththelegalandregulatorydisclosurerequirementsinrelationtoremuneration.

• Hasadequateknowledgeofexecutiveremunerationissues,includingexecutiveretentionandterminationpoliciesandshorttermandlongtermincentivearrangements.

ThemembersoftheRemunerationandNominationCommitteethroughoutthereportingperiodaresetoutintheRemunerationReportwhichformspartoftheDirectors'Report.

TheCompanydoesnothaveamajorityofindependentcommitteemembers,astheBoard

considersthistobesatisfactoryconsideringthesizeandcomplexityofthebusiness.

24

THE POWER OF BEING UNDERSTOODAUDIT | TAX | CONSULTING

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

RSM Australia Partners ABN 36 965 185 036

Liability limited by a scheme approved under Professional Standards Legislation

RSM Australia Partners

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

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

www.rsm.com.au

AUDITOR’S INDEPENDENCE DECLARATION

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

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

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

RSM AUSTRALIA PARTNERS

David Talbot Partner

Sydney, NSW Dated: 19 October 2017

IQXLIMITEDANDCONTROLLEDENTITIESCONSOLIDATEDSTATEMENTOFPROFITORLOSSFORTHEYEARENDED30JUNE2017

2017ANNUALREPORT 25

Indollars Note 2017 2016^

Revenue 5 3,400,230 458,337

Otherincome 6(a) 19,003,522 7,295

Employeebenefitsexpense 6(c) (1,468,779) (1,294,475)

Depreciationandamortisationexpense (71,150) (27,165)

Consultancyfees (856,309) (135,598)

Occupancycosts (516,695) (157,882)

Otherexpenses 6(d) (1,492,717) (879,242)

Financecosts 6(b) (448,017) (318,716)

Shareoflossofassociatedcompanies 20 (57,959) -

Profit/(loss)beforeincometax 17,492,126 (2,347,446)

Incometaxexpense 8 (3,273,739) -

Netprofit/(loss)fortheperiod 14,218,387 (2,347,446)

Profit/(loss)persharefortheperiodattributabletotheordinaryequityholdersoftheCompany:

Note 2017 2016

Basicprofit/(loss)pershare(centspershare) 18 12.22 (2.26)

Dilutedprofit/(loss)pershare(centspershare) 18 12.22 (2.26)

^ Comparative information has been restated to reflect a change in classification of: (a) revenue rebates,furtherdetailsofwhichareincludedinnote5;and(b)employeebenefitexpenses,furtherdetailofwhichisdisclosedinnote6.

Theaboveconsolidatedstatementofprofitorlossshouldbereadinconjunctionwiththeaccompanyingnotestotheconsolidatedfinancialstatements.

IQXLIMITEDANDCONTROLLEDENTITIESCONSOLIDATEDSTATEMENTOFOTHERCOMPREHENSIVEINCOMEFORTHEYEARENDED30JUNE2017

2017ANNUALREPORT 26

Indollars Note 2017 2016

Netprofit/(loss)fortheperiod 14,218,387 (2,347,446)

Othercomprehensiveincome

Itemsthatareormaybereclassifiedsubsequentlytoprofitorlosswhenspecificconditionsaremet:

- -

Othercomprehensiveprofit/(loss)fortheperiod,netoftax - -

Totalcomprehensiveprofit/(loss)fortheperiod 14,218,387 (2,347,446)

Theaboveconsolidatedstatementofcomprehensiveincomeshouldbereadinconjunctionwiththeaccompanyingnotestotheconsolidatedfinancialstatements.

IQXLIMITEDANDCONTROLLEDENTITIESCONSOLIDATEDSTATEMENTOFFINANCIALPOSITIONFORTHEYEARENDED30JUNE2017

2017ANNUALREPORT 27

Indollars Note 2017 2016^

AssetsCurrentassets

Cash 7 177,604 471,077

Tradeandotherreceivables 9 1,556,835 818,100

Prepayments 107,824 173,207

Othercurrentassets 10 - 660,066

Totalcurrentassets 1,842,263 2,122,450

Non-currentassets

Property,plantandequipment 11 203,324 203,079

Intangibleassets 12 363,713 48,842

Investmentinassociate 20(b) 220,113 269,000

Investmentinjointventure - 7,700

Financialassets 20(c,d) 19,026,938 35,254

Deferredtaxassets 1,320 1,320

Totalnon-currentassets 19,815,408 565,195

TotalAssets 21,657,671 2,687,645

LiabilitiesCurrentliabilities

Tradeandotherpayables 13 807,715 805,027

Provisions 14 27,054 -

Employeebenefitliabilities 15 368,743 51,281

Borrowings 16 2,653,461 2,175,549

Provisionforincometax - 2,147

Totalcurrentliabilities 3,856,973 3,034,004

Non-currentliabilities

Employeebenefitliabilities 15 24,604 -

Deferredtaxliabilities 3,271,841 -

Totalnon-currentliabilities 3,296,445 -

Totalliabilities 7,153,418 3,034,004

Netassets/(liabilities) 14,504,253 (346,359)

Equity

Contributedequity 17 6,252,842 5,453,087

Reserves - 167,530

Retainedearnings/(accumulatedlosses) 8,251,411 (5,966,976)

Totalequity 14,504,253 (346,359)

^Comparativeinformationhasbeenrestatedtoreflectachangeinclassificationoftradeandotherreceivablestoprepayments.

Theaboveconsolidatedstatementoffinancialpositionshouldbereadinconjunctionwiththeaccompanyingnotestotheconsolidatedfinancialstatements.

IQXLIMITEDANDCONTROLLEDENTITIESCONSOLIDATEDSTATEMENTOFCHANGESINEQUITYFORTHEYEARENDED30JUNE2017

2017ANNUALREPORT 28

Indollars

Contributedequity

Optionreserve

Retainedearnings

Total

Balanceat1July2016 5,453,087 167,530 (5,966,976) (346,359)Totalcomprehensivelossfortheperiod Profitfortheperiod - - 14,218,387 14,218,387Othercomprehensiveprofitfortheperiod - - - -

Totalcomprehensiveprofitfortheperiod - - 14,218,387 14,218,387

Transactionswithownersrecordeddirectlyinequity

Capitalraisingcosts (23,141) - - (23,141)Issuedcapital 822,896 - - 822,896Optionsexpiredduringtheyear - (167,530) - (167,530)

Totaltransactionswithownersrecordeddirectlyinequity

799,755 (167,530) - 632,225

Balanceat30June2017 6,252,842 - 8,251,411 14,504,253

Balanceat1July2015 4,923,936 167,530 (3,619,530) 1,471,936

Totalcomprehensivelossfortheperiod Lossfortheperiod - - (2,347,446) (2,347,446)Othercomprehensiveincomefortheperiod - - - -

Totalcomprehensiveloss - - - (2,347,446)

Transactionwithownersrecordeddirectlyinequity

Capitalraisingcostswrittenoff 84,938 - - 84,938Issueofconvertiblenotes 444,213 - - 444,213

Balanceat30June2016 5,453,087 167,530 (5,966,976) (346,359)Theaboveconsolidatedstatementofchangesinequityshouldbereadinconjunctionwiththeaccompanyingnotestotheconsolidatedfinancialstatements.

IQXLIMITEDANDCONTROLLEDENTITIESCONSOLIDATEDSTATEMENTOFCASHFLOWSFORTHEYEARENDED30JUNE2017

2017ANNUALREPORT 29

Indollars Note 2017 2016

Cashflowsfromoperatingactivities

Receiptsfromcustomers 3,003,518 856,289

Paymentstosuppliersandemployees (3,934,428) (3,159,467)

Interestreceived 1,522 6,199

Interestpaid (10) (6,977)

Netcashusedinoperatingactivities 25 (929,398) (2,303,956)

Cashflowsfrominvestingactivities

Purchaseofproperty,plantandequipment (26,205) (112,784)

Investmentinassociates - (269,000)

Investmentinjointventure - (7,700)

Proceedsfromdisposaloffinancialassets - 81,458

Paymentforcapitalworkinprogress - (595,246)

Purchaseofintangibleassets - (23,576)

Netcashusedininvestingactivities (26,205) (926,848)

Cashflowsfromfinancingactivities

Proceedsfromissueofconvertiblenotes 662,129 2,308,023

Advancesfromrelatedparties - 330,840

Paymentfromloanfunds - 95,009

Netcashgeneratedfrom/(usedin)financingactivities 662,129 2,733,872

Netdecreaseincashandcashequivalents (293,473) (496,932)

Cashandcashequivalentsatthebeginningoftheperiod 471,077 968,009

Effectofmovementsinexchangeratesoncashheld - -

Cashandcashequivalentsattheendoftheperiod 7 177,604 471,077

Theaboveconsolidatedstatementofcashflowsshouldbereadinconjunctionwiththeaccompanyingnotestotheconsolidatedfinancialstatements.

IQXLIMITEDANDCONTROLLEDENTITIESNOTESTOTHECONSOLIDATEDFINANCIALSTATEMENTSFORTHEYEARENDED30JUNE2017

2017ANNUALREPORT 30

1. REPORTINGENTITY

IQXLimited(“iQX”orthe“Company”)isafor-profitcompanylimitedbyshareswhichisincorporatedanddomiciledinAustralia.Theseconsolidatedfinancialstatements(“financialstatements”)asatandfortheyearended30June2017compriseoftheCompanyanditssubsidiaries(collectivelyreferredtoasthe“Group”).

ThesefinancialstatementswereauthorisedforissuebytheBoardofDirectorson11September2017.

2. STATEMENTOFCOMPLIANCE

ThefinancialstatementsaregeneralpurposefinancialstatementswhichhavebeenpreparedinaccordancewithAustralianAccountingStandards(“AASBs”)adoptedbytheAustralianAccountingStandardsBoard(“AASB”)andtheCorporationsAct2001.ThefinancialstatementscomplywithInternationalFinancialReportingStandards(“IFRS”)adoptedbytheInternationalAccountingStandardsBoard(“IASB”).

3. SIGNIFICANTACCOUNTINGPOLICIES

Thissectionsetsoutthesignificantaccountingpoliciesuponwhichthefinancialstatementsarepreparedasawhole.Specificaccountingpoliciesaredescribedintheirrespectivenotestothefinancialstatements.Thissectionalsoshowsinformationonnewaccountingstandards,amendmentsandinterpretations,andwhethertheyareeffectiveinthecurrentorlateryears.

Basisofpreparation

ThesefinancialstatementsarepresentedinAustraliandollars,whichistheCompany’sfunctionalcurrency.

TheCompanyisofakindreferredtoinASICCorporationsInstrument2016/191dated1April2016andinaccordancewiththatinstrument,allfinancialinformationpresentedinAustraliandollarshasbeenroundedtothenearestdollarunlessotherwisestated.

Thefinancialstatementshavebeenpreparedunderthehistoricalcostconvention,exceptfor,therevaluationofavailable-for-salefinancialassets,financialassetsandliabilitiesatfairvaluethroughprofitorloss,andderivativefinancialinstruments.

Theaccountingpolicieshavebeenconsistentlyappliedtoallperiodspresentedinthesefinancialstatements,unlessotherwisestated.

Basisofconsolidation

SubsidiariesareentitiescontrolledbytheGroup.TheGroupcontrolsanentitywhenitisexposedto,orhastherightsto,variablereturnsfromitsinvolvementwiththeentityandhastheabilitytoaffectthosereturnsthroughitspowerovertheentity.Thefinancialstatementsofsubsidiariesareincludedintheconsolidatedfinancialstatementsfromthedateonwhichcontrolcommencesuntilthedateonwhichcontrolceases.

Intercompanytransactions,balancesandunrealisedgainsontransactionsbetweenentitiesintheconsolidatedentityareeliminated.Accountingpoliciesofsubsidiarieshavebeenchangedwherenecessarytoensureconsistencywiththepoliciesadoptedbytheconsolidatedentity.

Non-controllinginterestintheresultsandequityofsubsidiariesareshownseparatelyinthestatementofprofitorlossandothercomprehensiveincome,statementoffinancialpositionandstatementofchangesinequityoftheconsolidatedentity.Lossesincurredbytheconsolidatedentityareattributedtothenon-controllinginterestinfull,evenifthatresultsinadeficitbalance.

Foreignoperations

TheassetsandliabilitiesofforeignoperationsaretranslatedintoAustraliandollars(AUD)attheexchangerateatthereportingdate.TheincomeandexpensesofforeignoperationsaretranslatedintoAUDattheaverageexchangerateofthemonthinwhichthetransactionoccurs.

IQXLIMITEDANDCONTROLLEDENTITIESNOTESTOTHEFINANCIALSTATEMENTS(CONTINUED)FORTHEYEARENDED30JUNE2017

2017ANNUALREPORT 31

‘3.SIGNIFICANTACCOUNTINGPOLICIES(CONTINUED)

Foreignoperations(continued)

Foreigncurrencydifferencesarerecognisedinothercomprehensiveincomeandaccumulatedintheforeigncurrencytranslationreserve.

Whenaforeignoperationisdisposedofinitsentiretyorpartiallysuchthatcontrol,significantinfluenceorjointcontrolislost,thecumulativeamountinthetranslationreserverelatedtothatforeignoperationisreclassifiedtoprofitorlossaspartofthegainorlossondisposal.

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

Revenues,expensesandassetsarerecognisednetoftheamountofrespectiveGSTorVAT,exceptwheretheamountofGSTorVATincurredisnotrecoverablefromtherelevanttaxationauthority.Inthesecircumstances,theGSTorVATisrecognisedaspartofthecostofacquisitionoftheassetoraspartoftheexpense.

ReceivablesandpayablesarestatedinclusiveoftheamountofGSTorVATreceivableorpayable.ThenetamountofGSTorVATrecoverablefrom,orpayableto,thetaxationauthorityisincludedwithotherpayablesintheconsolidatedstatementoffinancialposition.

Cashflowsarepresentedonagrossbasis.TheGSTorVATcomponentsofcashflowsarisingfrominvestingorfinancingactivitieswhicharerecoverablefrom,orpayabletotherelevanttaxationauthority,arepresentedasoperatingcashflowsintheconsolidatedstatementofcashflows.

Usesofjudgementsandestimates

Inpreparingthesefinancialstatements,managementhasmadejudgements,estimatesandassumptionsthataffecttheapplicationoftheGroup’saccountingpoliciesandthereportedamountsofassets,liabilities,incomeandexpenses.Actualresultsmaydifferfromtheseestimates.Estimatesandunderlyingassumptionsarereviewedonanongoingbasis.Revisionstoaccountingestimatesarerecognisedprospectively.

(i) Judgements

Significantjudgementhasbeenmadeinrespectto:(a)anabsenceofsignificantinfluenceoverrelatedpartyinvestees;and(b)designationofinvestmentsasfairvaluethroughprofitorloss.

(ii) Estimates

Informationaboutcriticaljudgementsinapplyingaccountingpoliciesthathavethemostsignificanteffectontheamountsrecognisedinthefinancialstatements,includingaboutassumptionsandestimationuncertaintiesthathaveasignificantriskofresultinginamaterialadjustmentwithintheyearending30June2017areincludedinthefollowingnotes:

• Note20–Investments;and• Note14–Provisions.

(iii) Measurementoffairvalues

AnumberoftheGroup’saccountingpoliciesanddisclosuresrequirethemeasurementoffairvalues,forbothfinancialandnon-financialassetsandliabilities.

TheGrouphasanestablishedcontrolframeworkwithrespecttothemeasurementoffairvalues.

Thefinancialreportingteamregularlyreviewssignificantunobservableinputsandvaluationadjustments.Ifthirdpartyinformationisusedtomeasurefairvalues,managementassesstheevidenceobtainedfromthethirdpartiestosupporttheconclusionthatsuchvaluationsmeettherequirementsofIFRS,includingthelevelinthefairvaluehierarchyinwhichsuchvaluationsshouldbeclassified.


2017ANNUALREPORT 32

3.SIGNIFICANTACCOUNTINGPOLICIES(CONTINUED)

Useofjudgementsandestimates(continued)

(iii)Measurementoffairvalues(continued)

Whenmeasuringthefairvalueofanassetoraliability,theGroupusesmarketobservabledataasfaraspossible.Fairvaluesarecategorisedintodifferentlevelsinafairvaluehierarchybasedontheinputsusedinthevaluationtechniquesasfollows:

• Level1:quotedprices(unadjusted)inactivemarketsforidenticalassetsorliabilities.

• Level2:inputsotherthanquotedpricesincludedinLevel1thatareobservablefortheassetorliability,eitherdirectly(i.e.asprices)orindirectly(i.e.derivedfromprices).

• Level3:inputsfortheassetorliabilitythatarenotbasedonobservablemarketdata(unobservableinputs).

Iftheinputsusedtomeasurethefairvalueofanassetoraliabilitymightbecategorisedindifferentlevelsofthefairvaluehierarchy,thenthefairvaluemeasurementiscategorisedinitsentiretyinthesamelevelofthefairvaluehierarchyasthelowestlevelinputthatissignificanttotheentiremeasurement.

TheGroupcategorisestransfersbetweenlevelsofthefairvaluehierarchyattheendofthereportingperiodduringwhichthechangehasoccurred.

Newstandardsandinterpretationsnotyetadopted

Anumberofnewstandards,amendmentstostandardsandinterpretationsareeffectiveforannualperiodsbeginningafter1July2017,andhavenotbeenappliedinpreparingthesefinancialstatements.ThosewhichmayberelevanttotheGrouparesetoutbelow.TheGroupdoesnotplantoadoptthesestandardsearly.

(i) AASB9FinancialInstruments

AASB9FinancialInstrumentsbecomesmandatoryfortheGroup’s2019financialstatementsandincludeschangestotheclassificationandmeasurementoffinancialassets,includinganewexpectedcreditlossmodelforcalculatingimpairment.Italsoincludesanewhedgeaccountingmodeltosimplifyhedgeaccountingrequirementsandmorecloselyalignhedgeaccountingwithriskmanagementactivities.

(ii) AASB15Revenuefromcontractswithcustomers

AASB15RevenuefromContractsbecomesmandatoryfortheGroup’s2019financialstatementsandoutlinesasinglecomprehensivemodelforentitiestouseinaccountingforrevenuearisingfromcontractswithcustomers;andreplacesAASB111ConstructionContract,AASB118Revenue,Interpretation13CustomerLoyaltyPrograms,Interpretation15AgreementsforConstructionofRealEstate,Interpretation18TransferofAssetsfromCustomersandInterpretation131Revenue-BarterTransactionsinvolvingAdvertisingServices.Thecoreprincipleisthatanentityrecognisesrevenuetodepictthetransferofpromisedgoodsorservicestocustomersinanamountthatreflectstheconsiderationtowhichtheentityexpectstobeentitledinexchangeforthosegoodsorservices.

(iii) AASB16Leases

AASB16LeasesbecomesmandatoryfortheGroup’s2020financialstatementsandremovestheclassificationofleasesbetweenfinanceandoperatingleases,effectivelytreatingallleasesasfinanceleasesforthelessee.Thepurposeistoprovidegreatertransparencyofalessee’sfinancialleverageandcapitalemployed.

TheGrouphasnotyetdeterminedthepotentialeffectofthesestandardsontheGroup’sfuturefinancialstatements.


2017ANNUALREPORT 33

4. OPERATINGSEGMENTS

TheGrouphasidentifiedoperatingsegmentsbasedoninternalreportingthatisreviewedandusedbythechiefoperatingdecisionmakers(theGroupCEOandtheGroupChiefFinancialandOperatingOfficer)inassessingtheperformanceoftherespectivesegments.Theoperatingsegmentsareidentifiedbymanagementbasedonthenatureofservicesprovided,witheachoperatingsegmentrepresentingastrategicbusinessthatservesadifferentsegmentofthemarket.

InFY17theGrouphasthreerevenuestreamsbeing:(1)financialservicesfeescharged;(2)officeandsharedservicesfeescharged;and(3)assetrelatedrevenue.Segmentanalysisofrevenueisprovidedbelow.

Informationonnetprofitandassetsbysegmetisnotprovidedtothechiefoperatingdecisionmakers.

Indollars 2017 2016

Fees–financialservices 240,760 294,955Assetrelatedrevenue 1,871,614 -Officeandsharedservicesrevenue 1,287,856 163,382

Totalrevenue 3,400,230 458,337

Informationongeographicalsegments

OnehundredpercentoftheGroup’srevenue,expensesandprofitarederivedinAustralia.

Relianceonmajorcustomers

OnehundredpercentoftheGroup’srevenueisderivedfromrelatedparties.

5. REVENUE

Indollars 2017 2016^

Fees–financialservices 240,760 294,955Assetrelatedrevenue 1,871,614 -Officeandsharedservicesrevenue 1,287,856 163,382

Totalrevenue 3,400,230 458,337

^ ThecomparativeinformationhasbeenrestatedtoreflectachangeinclassificationofrebatesfromDirectCoststoRevenue(nettedoff).

Significantaccountingpolicies

Revenueismeasuredatthefairvalueoftheconsiderationreceivedorreceivableaftertakingintoaccountanytradediscountsandvolumerebatesallowed.TheGrouprecognisesrevenuewhentheamountofrevenuecanbereliablymeasured,itisprobablethatfutureeconomicbenefitsassociatedwiththetransactionwillflowtotheGroupandspecificcriteriarelatingtothetypeofrevenueasnotedbelow,hasbeensatisfied.Anyconsiderationdeferredistreatedastheprovisionoffinanceandisdiscountedatarateofinterestthatisgenerallyacceptedinthemarketforsimilararrangements.Thedifferencebetweentheamountinitiallyrecognisedandtheamountultimatelyreceivedisinterestrevenue.

Renderingofservices

Revenueinrelationtorenderingofservicesisrecogniseddependingonwhethertheoutcomeoftheservicescanbeestimatedreliably.Iftheoutcomecanbeestimatedreliablythenthestageofcompletionoftheservicesisusedtodeterminetheappropriatelevelofrevenuetoberecognisedintheperiod.Iftheoutcomecannotbereliablyestimatedthenrevenueisrecognisedtotheextentofexpensesrecognisedthatarerecoverable.

Assetrelatedrevenue

Assetrelatedrevenueisrecognisedwhenitisreceivedorwhentherighttoreceivepaymentisestablished.


2017ANNUALREPORT 34

6. INCOMEANDEXPENSES

(a) Otherincome

Indollars 2017 2016

Rebates 2,000 -

Interestincome 1,522 6,199

Changeinfairvalueoffinancialasset 19,000,000 -

Gainondisposaloffinancialassetsmeasuredatfairvaluethroughprofitorloss - 1,096

Totalotherincome 19,003,522 7,295

(b) Financecosts

Indollars 2017 2016

Bankfees 2,940 5,034

Interestexpense 445,077 313,682

Totalfinancecosts 448,017 318,716

(c) Employeebenefitsexpenses


Wagesandsalaries 1,272,846 1,159,586

Compulsorysuperannuationcontributions 121,427 108,033

Increaseinliabilityforannualleave 49,902 26,856

Increaseinliabilityforlongserviceleave 24,604 -

Totalemployeebenefitexpense 1,468,779 1,294,475

(d) Otherexpenses


Accountingandlegalfees 85,031 50,042

Advertisingandmarketing 265,284 55,035

Insurance 109,474 56,938

Softwareandlicensing 238,908 140,206

Travelandaccommodation 21,537 60,485

Websitemaintenance 132,338 34,411

Other 640,145 482,125

Totalotherexpenses 1,492,717 879,242

^ Thecomparativeinformationhasbeenrestatedtoreflectachangeinclassificationofthefollowingexpensesfromotherexpensetoemployeebenefitexpense:workerscompensation,FBT,payrolltax.


2017ANNUALREPORT 35

7. CASH

Indollars 2017 2016

Bankbalances 177,604 471,077


Cashandcashequivalentsincludescashonhand,depositsheldatcallwithfinancialinstitutions,othershort-term,highlyliquidinvestmentswithoriginalmaturitiesofthreemonthsorlessthatarereadilyconvertibletoknownamountsofcashandwhicharesubjecttoaninsignificantriskofchangesinvalue.Forthestatementofcashflowspresentationpurposes,cashandcashequivalentsalsoincludesbankoverdrafts,whichareshownwithinborrowingsincurrentliabilitiesonthestatementoffinancialposition.


2017ANNUALREPORT 36

8. INCOMETAXESIndollars 2017 2016

Profit/(loss) 17,492,126 (2,347,446)Effectivetaxrate 27.5% 30.0%

Sub-total 4,810,335 (704,234)

Taxeffectof:

Expenditurenotallowedforincometaxpurposes 123,298 103,794

Temporarydifferencesnotbroughttoaccount 15,854 (4,228)

Deferredtaxassetsnotbroughttoaccount (1,675,748) 604,668

Incometaxexpense 3,273,739 0


Currenttax

Theincometaxexpenseorbenefitfortheyearisthetaxpayableonthecurrentyear’staxableincomebasedontheapplicationincometaxrateforeachjurisdictionadjustedbychangesindeferredtaxassetsandliabilitiesattributabletotemporarydifferencesandtounusedtaxlosses.

ThecurrentincometaxchargeiscalculatedonthebasisofthetaxlawsenactedorsubstantivelyenactedattheendofthereportingperiodinthecountrieswheretheCompany’ssubsidiariesandassociatesoperateandgeneratetaxableincome.Managementperiodicallyevaluatespositionstakenintaxreturnswithrespecttosituationsinwhichapplicabletaxregulationissubjecttointerpretation.Itestablishesprovisionswhereappropriateonthebasisofamountsexpectedtobepaidtothetaxauthorities.

Currenttaxisrecognisedinprofitorlossexcepttotheextentthatitrelatestoitemsrecognisedinothercomprehensiveincomeordirectlyinequity.Inthiscase,thetaxisalsorecognisedinothercomprehensiveincomeordirectlyinequityrespectively.

Deferredtax

Deferredincometaxisprovidedinfull,usingtheliabilitymethod,ontemporarydifferencesarisingbetweenthetaxbasesofassetsandliabilitiesandtheircarryingamountsintheconsolidatedfinancialstatements.Deferredincometaxisdeterminedusingtaxrates(andlaws)thathavebeenenactedorsubstantivelyenactedbytheendofthereportingperiodandareexpectedtoapplywhentherelateddeferredincometaxassetisrealisedorthedeferredincometaxliabilityissettled.Deferredtaxassetsarerecognisedfordeductibletemporarydifferencesandunusedtaxlossesonlyifitisprobablythatfuturetaxableamountswillbeavailabletoutilisethosetemporarydifferencesandlosses.

DeferredtaxliabilitiesandassetsarenotrecognisedfortemporarydifferencesbetweenthecarryingamountandtaxbasesofinvestmentsinforeignoperationswhentheCompanyisabletocontrolthetimingofthereversalofthetemporarydifferencesanditisprobablythatthedifferenceswillnotreverseintheforeseeablefuture.

Deferredtaxassetsandliabilitiesareoffsetwhenthereisalegallyenforceablerighttooffsetcurrenttaxassetsandliabilitiesandwhenthedeferredtaxbalancesrelatetothesametaxationauthority.Currenttaxassetsandtaxliabilitiesareoffsetwheretheentityhasalegallyenforceablerighttotheoffsetandintendseithertosettleonanetbasis,ortorealisetheassetandsettletheliabilitysimultaneously.Deferredtaxisrecognisedinprofitorloss,excepttotheextentthatitrelatestoitemsrecognisedinothercomprehensiveincomeordirectlyinequity.Inthiscase,thetaxisalsorecognisedinothercomprehensiveincomeordirectlyinequityrespectively.


2017ANNUALREPORT 37

9. TRADEANDOTHERRECEIVABLES

Indollars 2017 2016

Tradereceivables - -

Otherreceivables 559,525 57,683

Relatedpartyreceivables 997,310 760,417

Totaltradeandotherreceivables 1,556,835 818,100

Current 1,556,835 818,100

Non-current - -


10. OTHERCURRENTASSETS

Indollars 2017 2016

Capitalworkinprogress - 595,246

Deposits - 59,407

Otherfinancialassets - 5,413

Totalothercurrentassets - 660,066


Tradereceivablesarerecognisedinitiallyatfairvalueandsubsequentlymeasuredatamortisedcostusingtheeffectiveinterestmethod,lessprovisionforimpairment.Tradereceivablesaregenerallydueforsettlementwithin30-60days.Theyarepresentedascurrentassetsunlesscollectionisnotexpectedformorethan12monthsafterthereportingdate.

Collectabilityoftradereceivablesisreviewedonanongoingbasis.Debtswhichareknowntobeuncollectablearewrittenoffbyreducingthecarryingamountdirectly.Thelossisrecognisedinprofitorlosswithinotherexpenses.Subsequentrecoveriesofamountspreviouslywrittenoffarecreditedagainstotherexpensesintheprofitorloss.

Otherreceivablesarerecognisedatamortisedcost,lessanyprovisionforimpairment.


2017ANNUALREPORT 38

11. PROPERTY,PLANTANDEQUIPMENT

Cost

Indollars

Furniture,fixturesand

fittings

Leaseholdimprovements

Plantandequipment

Total

Balanceat1July2015 14,391 76,408 48,137 138,936

Additions 31,856 49,483 30,121 111,460

Balanceat30June2016 46,247 125,891 78,258 250,396

Additions 26,627 20,393 7,053 54,073

Balanceat30June2017 72,874 146,284 85,311 304,469

Accumulateddepreciation

Indollars


fittings


Plantandequipment

Total

Balanceat1July2015 2,961 10,263 8,252 21,476

Depreciationexpense 3,514 9,611 12,716 25,841

Balanceat30June2016 6,475 19,874 20,968 47,317

Depreciationexpense 6,581 32,006 15,241 53,828

Balanceat30June2017 13,056 51,880 36,209 101,145

Carryingamount

Indollars


fittings


Plantandequipment

Total

Carryingbalanceat30June2016 39,772 106,017 57,290 203,079

Carryingbalanceat30June2017 59,818 94,404 49,102 203,324


2017ANNUALREPORT 39

’11.PROPERTY,PLANTANDEQUIPMENT(CONTINUED)

12. INTANGIBLEASSETS

Indollars

Trademark Websiteand

software

Developmentcosts

Total

Cost

Costat1July2015 - 25,266 - 25,266

Additions - 23,576 - 23,576

Amortisationchargefortheyear - - -

Balanceat30June2016 - 48,842 48,842

Additions 4,000 123,504 205,503 333,007

Amortisationchargefortheyear - (18,136) - (18,136)

Balanceat30June2017 4,000 154,210 205,503 363,713


Carryingvalue

Allproperty,plantandequipmentisstatedathistoricalcostlessdepreciationandimpairment.Historicalcostincludesexpenditurethatisdirectlyattributabletotheacquisitionoftheitems.

Subsequentcostsareincludedintheasset’scarryingamountorrecognisedasaseparateasset,asappropriate,onlywhenitisprobablethatfutureeconomicbenefitsassociatedwiththeitemwillflowtothebusinessandthecostoftheitemcanbemeasuredreliably.Thecarryingamountofanycomponentaccountedforasaseparateassetisderecognisedwhenreplaced.Allotherrepairsandmaintenancearechargedtotheprofitorlossduringthereportingperiod.

Depreciation

Depreciationofassetsiscalculatedusingthestraight-linemethodtoallocatetheircost,netoftheirresidualvalues,overtheirestimatedusefullivesor,inthecaseofleaseholdimprovements,theshorterleasetermasfollows:

• Leaseholdimprovements–5to10years• Plantandequipment–5to10years• Furniture,fittingsandequipment–10to20years

Impairment

Anasset’scarryingamountiswrittendownimmediatelytoitsrecoverableamountiftheasset’scarryingamountisgreaterthanitsestimatedrecoverableamount.

Gainsandlossesondisposal

Gainsandlossesondisposalsaredeterminedbycomparingproceedswiththecarryingamount.Theseareincludedinprofitorloss.


2017ANNUALREPORT 40

‘12.INTANGIBLEASSETS(CONTINUED)


Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assetsacquiredinabusinesscombinationistheirfairvalueatthedateofacquisition.

Following initial recognition, intangible assets are carried at cost less any accumulated amortisation andaccumulatedimpairmentlosses.Internallygeneratedintangibles,excludingcapitaliseddevelopmentcosts,arenotcapitalised and the related expenditure is reflected in profit or loss in the period in which the expenditure isincurred.

Gainsorlossesarisingfromde-recognitionofanintangibleassetaremeasuredasthedifferencebetweenthenetdisposalproceedsandthecarryingamountoftheassetandarerecognisedinthestatementofprofitor lossandothercomprehensiveincomewhentheassetisderecognised.

Amortisation

Intangible assetswith finite lives are amortised over the useful economic life. The amortisation period and theamortisation method for an intangible asset with a finite useful life are reviewed at least at the end of eachreportingperiod.Changesintheexpecteduseful lifeortheexpectedpatternofconsumptionoffutureeconomicbenefitsembodiedintheassetareconsideredtomodifytheamortisationperiodormethod,asappropriate,andaretreatedaschangesinaccountingestimatesandadjustedonaprospectivebasis.Theamortisationexpenseonintangibleassetswithfinitelivesisrecognisedinthestatementofprofitorlossandothercomprehensiveincomeastheexpensecategorythatisconsistentwiththefunctionoftheintangibleassets.

Intangible assets with indefinite useful lives are not amortised, but are tested for impairment annually, eitherindividuallyoratthecash-generatingunitlevel.Theassessmentofindefinitelifeisreviewedannuallytodeterminewhethertheindefinitelifecontinuestobesupportable.Ifnot,thechangeinusefullifefromindefinitetofiniteismadeonaprospectivebasis.

Impairment

Intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually forimpairment,ormorefrequentlyifeventsorchangesincircumstancesindicatethattheymightbeimpaired.Otherassetsaretestedforimpairmentwhenevereventsorchangesincircumstancesindicatethatthecarryingamountmaynotberecoverable. Animpairmentloss isrecognisedfortheamountbywhichtheasset’scarryingamountexceedsitsrecoverableamount.Therecoverableamountisthehigherofanasset’sfairvaluelesscoststosellandvalueinuse.

Websiteandsoftware

Costsincurredinacquiringwebsitesoftwareandlicensesthatwillcontributetofuturefinancialbenefitsthroughrevenuegenerationand/orcostreductionarecapitalisedtosoftwareandsystems.Costscapitalisedincludeexternaldirectcostsof materials and service and direct payroll and payroll related costs of employees’ time spent on the project.Amortisationiscalculatedonastraight-linebasisoverperiodsgenerallyrangingfromthreetofiveyears

Websitedevelopmentcosts includeonly thosedirectlyattributable tothedevelopmentphaseandareonlyrecognisedfollowingcompletionoftechnicalfeasibilityandwherethebusinesshasanintentionandabilitytousetheasset.

Researchanddevelopmentcosts

Researchexpenditureisrecognisedasanexpenseasincurred.

Development costs include externally acquired and internally generated costs ofmaterials and services,which can bedirectlyattributabletothedevelopmentactivitiesofacquiringorgeneratinganintangibleasset.

Costs incurredon development projects (relating to the design and testingof newor improved intangible assets) arerecognisedonlywhen it isprobablethatthefutureeconomicbenefitsthatareattributabletotheassetwillflowtotheGroup, thecostof theassetcanbemeasuredreliably, technical andcommercial feasibilityof theasset forsaleorusehavebeenestablished,andtheGroupintendsandisabletocompletetheintangibleassetandeitheruseitorsellit.

Capitaliseddevelopment costs are recordedas an intangible asset andamortised from the point at which the asset isreadyforuseonastraight-linebasisoveritsusefullife.Developmentcostspreviouslyrecognisedasanexpensearenotrecognisedasanassetinasubsequentperiod.


2017ANNUALREPORT 41

13. TRADEANDOTHERPAYABLES

Indollars 2017 2016

Tradepayables 342,791 234,678

Sundrypayablesandaccruedexpenses 152,444 239,509

Relatedpartypayables 312,480 330,840

Totaltradeandotherpayables 807,715 805,027

Current 807,715 805,027

Non-current - -

Totaltradeandotherpayables 807,715 805,027

14. PROVISIONS

Indollars Makegood Total

Balanceat1July2016 - -

Provisionsmadeduringtheperiod 27,054 27,054

Totalprovisionsat30June2017 27,054 27,054


ProvisionsarerecognisedwhentheGrouphasapresentobligation(legalorconstructive)asaresultofapastevent,itisprobablethatanoutflowofresourcesembodyingeconomicbenefitswillberequiredtosettletheobligationandareliableestimatecanbemadeoftheamountoftheobligation.WhentheGroupexpectssomeorallofaprovisiontobereimbursed,forexample,underaninsurancecontract,thereimbursementisrecognisedasaseparateasset,butonlywhenthereimbursementisvirtuallycertain.Theexpenserelatingtoaprovisionispresentedinthestatementofprofitorlossandothercomprehensiveincomenetofanyreimbursement.

Make-goodprovisions

Amakegoodprovisionisrecognisedforthecostsofrestorationorremovalinrelationtoplantandequipmentandsiteleaseswherethereisalegalorconstructiveobligation.Theprovisionisinitiallyrecordedwhenareliableestimatecanbedeterminedanddiscountedtopresentvalue.Theunwindingoftheeffectofdiscountingontheprovisionisrecognisedasafinancecost.

Provisionsaremeasuredatthepresentvalueofmanagement’sbestestimateoftheexpenditurerequiredtosettlethepresentobligationattheendofthereportingperiod.Thediscountrateusedtodeterminethepresentvalueisapre-taxratethatreflectscurrentmarketassessmentsofthetimevalueofmoneyandtheriskspecifictotheliability.Theincreaseintheprovisionduetothepassageoftimeisrecognisedasinterestexpense.


Tradeandotherpayablesrepresentliabilitiesforgoodsandservicesprovidedtothebusinesspriortotheendofthefinancialyearwhichareunpaid.Theamountsareunsecuredandareusuallypaidwithin30daysofrecognition.Tradeandotherpayablesarepresentedascurrentliabilitiesunlesspaymentisnotduewithin12monthsfromthereportingdate.Theyarerecognisedinitiallyattheirfairvalueandsubsequentlymeasuredatamortisedcostusingtheeffectiveinterestmethod.


2017ANNUALREPORT 42

15. EMPLOYEEBENEFITLIABILITIES

Indollars 2017 2016

Liabilityforannualleave 101,182 51,281

Liabilityforsuperannuation 48,498 -

Liabilityforlongserviceleave 24,604 -

Liabilityforpayroll 219,063 -

Totalemployeebenefitliabilities 393,347 51,281

Current 368,743 51,281

Non-current 24,604 -

Totalemployeebenefitliabilities 393,347 51,281

16. BORROWINGS

Indollars 2017 2016

Convertiblenotes 2,653,461 2,175,549


Employeebenefitsrepresentsamountsaccruedforemployeepayroll,superannuation,annualleaveandlongserviceleave.

Thecurrentportionforthisprovisionincludesthetotalamountaccruedforannualleaveentitlementsandtheamountsaccruedforlongserviceleaveentitlementsthathavevestedduetoemployeeshavingcompletedtherequiredperiodofservice.BasedonpastexperiencetheGroupdoesnotexpectthefullamountofannualleaveorlongserviceleavebalancesclassifiedascurrentliabilitiestobesettledinthenext12months.However,theseamountsmustbeclassifiedascurrentliabilitiessincetheGroupdoesnothaveanunconditionalrighttodeferthesettlementoftheseamountsintheeventemployeeswishtousetheirleaveentitlement.

TheGrouprecognisesaliabilityforlongserviceleaveandannualleavemeasuredasthepresentvalueofexpectedfuturepaymentstobemadeinrespectofservicesprovidedbyemployeesuptothereportingdateusingtheprojectedunitcreditmethod.Considerationisgiventoexpectedfuturewageandsalarylevels,experienceofemployeedepartures,andperiodstoservice.Expectedfuturepaymentsarediscountedusingmarketyieldsatthereportingdateonnationalgovernmentbondswithtermstomaturityandcurrenciesthatmatch,ascloselyaspossible,theestimatedfuturecashoutflows.


Convertiblenotesareseparatedintoliabilityandequitycomponentsbasedonthetermsofthecontract.

Onissuanceoftheconvertiblenotes,thefairvalueoftheliabilitycomponentisestimatedusingamarketrateforanequivalent non-convertible instrument. This amount is classified as a financial liability at amortised cost (net oftransactioncosts)untilitisextinguishedonconversionorredemption.

The remainder of the proceeds is allocated to the conversion option that is recognised and included in equity.Transaction costsare deducted fromequity.The carryingamountof the conversionoption is not re-measured insubsequentyears.

Transactioncostsareapportionedbetweentheliabilityandequitycomponentsof theconvertiblenotesbasedontheallocationofproceedstotheliabilityandequitycomponentswhentheinstrumentsareinitiallyrecognised.


2017ANNUALREPORT 43

17. ISSUEDCAPITAL

Numberof

shares$

Inissueat1July2015 100,760,000 4,154,000AllotmentofsharesfromexerciseofLoyaltyoptions 9,450,000 -Convertiblenotes - 1,875,213Shareandnoteissuecosts - (576,126)

Inissueat30June2016 110,210,000 5,453,087

AllotmentofsharesfromexerciseofLoyaltyoptions&Economosoptions 7,625,900 850,180Shareandnoteissuecosts - (50,425)

Inissueat30June2017 117,835,900 6,252,842

AllordinarysharesrankequallywithregardtotheCompany’sresidualassets.Theholdersofthesesharesareentitledtoreceivedividendsasdeclaredfromtimetotime,andareentitledtoonevotepershareatgeneralmeetingsoftheCompany.

TheCompanydoesnothaveauthorisedcapitalorparvalueinrespectofitsshares.Allissuedsharesarefullypaid.

(i) 10cLoyaltyoptions

There are no Loyalty options outstanding at 30 June 2017. At 30 June 2016, the Company had 13,950,000Loyalty options outstanding to be exercised at 10c each expiring on the three-year anniversary of theadmissiontotheOfficialListoftheNSX.Atotal6,750,000optionswereexcercisedduringthecurrentperiod,withtheremaining7,200,000optionsexpiringduringthecurrentperiod.

(ii) 20cEconomosoptions

TherearenoEconomosoptionsoutstandingat30 June2017.At30 June2016, theCompanyhad1,117,000Economos options outstanding to be exercised at 20c each expiring on the three-year anniversary of theadmissiontotheOfficialListoftheNSX.Atotalof875,900optionswereexcercisedduringthecurrentperiod,withtheremaining241,100optionsexpiringduringthecurrentperiod.

(iii) Movementsinoptions

Numberof

optionsTotal$ Weighted

averagepriceperoption

Optionsinissueat1July2016 15,067,000 1,618,400 $0.11Optionsexcercisedduringtheperiod (7,625,900) (850,180) $0.11Optionsexpiredduringtheperiod (7,441,100) (768,220) $0.10

Optionsinissueat30June2017 - - -

Dividends

NodividendsweredeclaredorpaidbytheCompanyfortheyear(2016:nil).


Ordinarysharesareclassifiedasequity.Incrementalcostsdirectlyattributabletotheissueofnewsharesoroptionsareshowninequityasadeduction,netoftax,fromtheproceeds.Transactioncostsarethecoststhatareincurreddirectlyinconnectionwiththeissueofthoseequityinstrumentsandwhichwouldnothavebeenincurredhadthoseinstrumentsnotbeenissued.


2017ANNUALREPORT 44

18. EARNINGSPERSHARE(EPS)

Thecalculationofbasicearningspersharehasbeenbasedonthefollowinglossattributabletoordinaryshareholdersandweighted-averagenumberofordinarysharesoutstanding.

Lossattributabletoordinaryshareholders

Indollars 2017 2016

Profit/(loss)fortheperiodattributabletoownersofiQXLimited 14,218,387 (2,347,446)

Weighted-averagenumberofordinaryshares

Innumberofshares 2017 2016

Weighted-averagenumberofordinarysharesatendoftheperiod 116,394,292 103,633,835

Weighted-averagenumberofsecuritiesifoutstandingoptionsexercised

116,394,292 125,277,000

Earningspershare

Incentspershare 2017 2016

Basicearnings/(loss)pershare 12.22 (2.26)

Dilutedlosspershare 12.22 (2.26)

Basic earnings per share is calculated as earnings for the period attributable to the Company over theweightedaveragenumberofshares.

Diluted earnings per share is calculated as earnings for the period attributable to the Company over theweightedaveragenumberofshareswhichhasbeenadjustedtoreflectthenumberofshareswhichwouldbeissuedifoutstandingoptionsweretobeexercised.

Therewerenooutstandingoptionsat30June2017.DuetothestatutorylossattributabletotheCompanyforthe comparative period ended 30 June 2016, the effect of these instruments has been excluded from thecalculationofdilutedearningspershareforthecomparativeperiodastheywouldreducethelosspershare.


2017ANNUALREPORT 45

19. FINANCIALINSTRUMENTS–FAIRVALUEANDRISKMANAGEMENT

Accountingclassificationsandfairvalues

TheGrouphasfinancialassetsofcashandcashequivalents,tradeandotherreceivables,andsharesinalistedcompany.Thesharesinalistedcompanyarevaluedatfairvalue.Theremainingfinancialassetsarenotmeasuredatfairvalue,andthecarryingamountisareasonableapproximationoffairvalueat30June2017.

TheGrouphasfinancialliabilitiesoftradeandotherpayables.Thesefinancialliabilitiesarenotmeasuredatfairvalue,andthecarryingamountisareasonableapproximationoffairvalueat30June2017.

Financialriskmanagement

TherehavebeennosubstantivechangesinthetypesofrisktheGroupisexposedto,howtheserisksarise,ortheBoard’sobjectives,policiesandprocessesformanagingormeasuringtheriskfromthepreviousperiod.TheGrouphasexposuretothefollowingriskarisingfromfinancialinstruments:

• creditrisk–refer(ii)• liquidityrisk–refer(iii)• marketrisk–refer(iv)

(i) Riskmanagementframework

TheCompany’sBoardofDirectorshasoverallresponsibilityfortheestablishmentandoversightoftheGroup’sriskmanagementframework.TheBoardofDirectorshasestablishedtheAuditandRiskManagementCommittee,whichisresponsiblefordevelopingandmonitoringtheGroup’sriskmanagementpolicies.ThecommitteereportsregularlytotheBoardofDirectorsonitsactivities.

TheGroup’sriskmanagementpoliciesareestablishedtoidentifyandanalysetheriskfacedbytheGroup,tosetappropriaterisklimitsandcontrolsandtomonitorrisksandadherencetolimits.RiskmanagementpoliciesandsystemsarereviewedregularlytoreflectchangesinmarketconditionsandtheGroup’sactivities.TheGroup,throughitstrainingandmanagementstandardsandprocedures,aimstomaintainadisciplinedandconstructivecontrolenvironmentinwhichallworkplaceparticipantsunderstandtheirrolesandobligations.

TheBoardofDirectorshasalsoestablishedaFinanceCommittee,consistingofseniorexecutivesoftheGroup,whichmeetsonaregularbasistoanalysefinancialriskexposureandtoevaluatetreasurymanagementstrategiesinthecontextofthemostrecenteconomicconditionsandforecasts.Thefinancecommittee’soverallriskmanagementstrategyseekstoassisttheGroupinmeetingitsfinancialtargets,whilstminimisingpotentialadverseeffectsonfinancialperformance.ThefinancecommitteeoperatesunderpoliciesapprovedbytheBoardofDirectors.

(ii) Creditrisk

Exposuretocreditriskrelatingtofinancialassetsarisesfromthepotentialnon-performancebycounterpartiesofcontractobligationsthatcouldleadtoafinanciallosstotheGroup.

TheGrouphasnosignificantconcentrationofcreditriskwithrespecttoanysinglecounterpartyorgroupofcounterpartiesotherthanthosereceivablesspecificallyprovidedforandmentionedwithinnote9.

Tradeandotherreceivables

ThemainsourceofcreditrisktotheGroupisconsideredtorelatetotheclassofassetsdescribedastradeandotherreceivables.Tradeandotherreceivablesthatareneitherpastdueorimpairedareconsideredtobeofhighcreditquality.Aggregatesofsuchamountsaredetailedinnote9.

Nocollateralisheldoverotherreceivables.


2017ANNUALREPORT 46

19.FINANCIALINSTRUMENTS–FAIRVALUEANDRISKMANAGEMENT(CONTINUED)

‘(ii)Creditrisk(continued)

Impairment

Theagingofthetradeandotherreceivablesthatwerenotimpairedasat30June2017aresetoutinthefollowingtable.

Indollars 2017 2016

Neitherpastduenorimpaired 889,327 57,683

30to90dayspastduebutnotimpaired - -

Over90dayspastduebutnotimpaired 667,508 760,417


Cashandcashequivalents

TheGroupheldcashandcashequivalentsof$177,604at30June2017.Thecashandcashequivalentsareheldwithbankandfinancialinstitutioncounterparties,whichareratedAA-toAA+,basedonratingagencyStandardandPoor’sratings.

(iii) Liquidityrisk

LiquidityriskistheriskthattheGroupwillencounterdifficultyinmeetingtheobligationsassociatedwithitsfinancialliabilitiesthataresettledbydeliveringcashoranotherfinancialasset.TheGroup’sapproachtomanagingliquidityistoensure,asfaraspossible,thatitwillhavesufficientliquiditytomeetitsliabilitieswhentheyaredue,underbothnormalandstressedconditions,withoutincurringunacceptablelossesorriskingdamagetotheGroup’sreputation.

TheGroupaimstomaintaincashatalevelappropriatetofundoperations.At30June2017,theexpectedcashflowsfromtradeandotherreceivablesmaturingwithintwomonthswere$889,327.

Non-derivativefinancialliabilities

Indollars

Within1year 1to5years Over5years Total

2017 2016 2017 2016 2017 2016 2017 2016

Tradeandotherpayables

807,715 805,027 - - - - 807,715 805,027

Totalnon-derivativefinancialliabilities

807,715 805,027 - - - - 807,715 805,027

(iv) Marketrisk

Marketriskistheriskthatchangesinmarketprices–suchasforeignexchangerates,interestratesandequityprices–willaffecttheGroup’sincomeorthevalueofitsholdingsoffinancialinstruments.Theobjectiveofmarketriskmanagementistomanageandcontrolmarketriskexposureswithinacceptableparameters,whileoptimisingthereturn.

(v) Currencyrisk

TheGroup’sexposuretoforeigncurrencyriskislimitedduetothenaturalhedgeaffordedtotheGroupbypurchasingandsellinginlocalcurrencyinallcountriesinwhichitoperates.TheGroupdoesnotholdanyforeigncurrencycontracts.


2017ANNUALREPORT 47

20. INVESTMENTS

Thepercentageownershipinterestisequivalenttothepercentagevotingrightsforallinvestments.

(a) Interestsinsubsidiariesandassociates

Entityname Countryofincorporation

Ownershipinterest2017

Ownershipinterest2016

Subsidiaries iQXInvestmentServicesPtyLtd Australia 100% 100%TheiQGroupGlobalPtyLtd Australia 100% 100%iQCapitalPartners(No.1)PtyLtd Australia 100% 100%iQSeries8LifeScienceFund(Global)PtyLtd Australia 100% 100%iQSeries8GP CaymanIslands 100% 100%

Associates NewFrontierHoldingsLLC(“NewFrontier”) USA 20% 20%NereidEnterprisesPtyLtd Australia 20% 20%NereidEnterprisesLLC USA 20% 20%

NereidEnterprisesPtyLtdprovidescorporateeventsandpromotionalservicestothehealthcareindustryandrelatedpartiesofiQXLimited.

Noneoftheassociatesarelistedonastockexchange.Theinvestmentsinassociatesisequityaccountedusingauditedfinancialinformation.

(b) Investmentinassociatesaccountedforusingequitymethod

Indollars 2017 2016

Reconciliationtocarryingamount

Netassetbalanceatstartofperiod 1,243,277 -Netassetatacquisition - 1,345,000Lossfortheperiod (142,712) (101,723)Othercomprehensiveincome - -Netassetbalanceatendofperiod 1,100,565 1,243,277Consolidatedentity’ssharein% 20% 20%Consolidatedentity’sshareatacquisition 220,113 248,655Adjustmentpostedinfollowingperiod - 20,345Consolidatedentity’sshareatreportingdate 220,113 269,000

(c) Financialassetscarriedatfairvaluethroughprofitorloss–designatedoninitialrecognition

Indollars 2017 2016

Sharesinunlistedcompanies 19,000,000 -

(d) Availableforsalefinancialassets

Indollars 2017 2016

Sharesinlistedcompanies 11,250 19,566Investmentsinunittrusts 15,688 15,688

Totalavailableforsalefinancialassets 26,938 35,254


2017ANNUALREPORT 48

20.INVESTMENTS(CONTINUED)


Subsidiaries

Subsidiaries are all entities (including structured entities) over which the parent has control. Control isestablishedwhentheparent isexposedto,orhasrightstovariableratesofreturnsfromits involvementwiththe entityand has theability toaffect those returns through its power todirect the relevantactivitiesof theentity.

Associates

Associates are all entities over which the Group has significant influence but not control, generallyaccompanying a shareholding between 20% and 50% of the voting rights. Investments in associates areaccounted for in theGroup’s financial statements using the equitymethodof accounting, after initially beingrecognisedatcost.

TheGroup’sshareoftheassociatespost-acquisitionprofitsorlossesarerecognisedinthestatementofprofitorloss, and its share of post-acquisition movements in reserves is recognised in reserves. The cumulative postacquisitionmovementsareadjustedagainstthecarryingamountoftheinvestment.Dividendsreceivablefromassociatesreducethecarryingamountoftheinvestment.

When theGroup’s shareof losses inanassociate equalsorexceeds its interest in theassociate, includinganyunsecuredreceivables,theGroupdoesnotrecognisefurtherlosses,unless ithasincurredobligationsormadepaymentsonbehalfoftheassociate.

Financialassetscarriedatfairvalue

Other financialassetsarecarriedat fairvalue,or the price theGroupwould receive tosellanassetorwouldhavetopaytotransferaliabilityinanorderly(i.e.unforced)transactionbetweenindependent,knowledgeableandwillingmarketparticipantsatthemeasurementdate.

TheGroupdisclosesthefairvaluemeasurementsbylevelusingthefollowingfairvaluemeasurementhierarchy:• quotedprices(unadjusted)inactivemarketsforidenticalassets(level1);• inputsotherthanquotedpricesincludedwithinlevel1thatareobservablethatareobservableforthe

asset,eitherdirectly(asprices)orindirectly(derivedfromprices)(level2);and• inputs for the asset or liability that are not basedon observablemarket data (unobservable inputs)

(level3).

Sharesinlistedcompaniesandunittrusts

Sharesinlistedcompaniesandunittrustsareinitiallyrecognisedatcostataccountingtradedate.Sharesinlistedcompaniesandunittruststhathaveaninterestinlistedcompaniesaresubsequentlycarriedatfairvalueusinglevel1fairvaluemeasurementinputs.Anysubsequentincreaseordecreaseinfairvalueisrecognisedinothercomprehensiveincome.

Gainsandlossesarisingfromsharesinlistedcompaniesareonlyrecognisedintheprofitorlosswhentheyaresoldorimpaired.

Sharesinunlistedcompanies

TheGroupdesignateshareinunlistedcompaniesasfairvaluethroughprofitorlosswhereperformanceisevaluatedonatotalreturnbasiscomprisingbothincomeandfairvalue;andwherefairvaluecanbereliablymeasured.Sharesinunlistedcompaniescarriedatfairvaluethroughprofitorlossareinitiallyrecognisedatcostataccountingtradedate.Theyaresubsequentlycarriedatfairvalueusinglevel2andlevel3fairvaluemeasurementinputs.Anysubsequentincreaseordecreaseinfairvalueisrecognisedinprofitorloss.Gainsandlossesarisingfromsharesinunlistedcompaniesareonlyrecognisedintheprofitorlosswhentheyaresoldorimpaired.


2017ANNUALREPORT 49

21. FAIRVALUEMEASUREMENT

Fairvaluehierarchy

ThefollowingtablesdetailtheGroup’sassetsandliabilies,measuredordisclosedatfairvalue,usingathreelevelhierarchy,basedonthelowestlevelofinputthatissignificanttotheentirefairvaluemeasurement,being:

Level1:Quotedprices(unadjusted)inactivemarketsforidenticalmarketsforidenticalassetsorliabilitiesthattheentitycanaccessatthemeasurementdate;

Level2:InputsotherthanquotedpricesincludedwithinLevel1thatareobservablefortheassetorliability,eitherdirectlyorindirectly;and

Level3:Unobservableinputsfortheassetorliability.

Consolidated-2017

Indollars Level1 Level2 Level3 Total

Assets Sharesinunlistedcompanies - 19,000,000 - 19,000,000Sharesinlistedcompanies 11,250 - - 11,250Investmentsinquotedunittrusts 15,688 - - 15,688

Totalassets 26,938 19,000,000 - 19,026,938

Liabilities

Convertiblenotes - 2,653,461 - 2,653,461

Totalliabilities - 2,653,461 - 2,653,461

Consolidated-2016

Indollars Level1 Level2 Level3 Total

Assets Sharesinunlistedcompanies - - - -Sharesinlistedcompanies 19,566 - - 19,566Investmentsinquotedunittrusts 15,688 - - 15,688

Totalassets 35,254 - - 35,254

Liabilities

Convertiblenotes - 2,171,549 - 2,171,549

Totalliabilities - 2,171,549 - 2,171,549

Therewerenotransfersbetweenlevelsduringthefinancialyear.

Thecarryingamountsoftradeandotherreceivablesandtradeandotherpayablesareassumedtoapproximatetheirfairvaluesduetotheirshort-termnature.

Thegainrecognisedinprofitorlossfortheperiodfromlevel2valuationsis$19,000,000(2016:nil).


2017ANNUALREPORT 50

21.FAIRVALUEMEASUREMENT(CONTINUED)

Valuationtechniquesforfairvaluemeasurementscategorisedwithinlevel2

Thesharesinunlistedcompanywererevaluedon30June2017basedoninternalassessmentsperformedbymanagement,withreferencetoindependentprivateplacementinvestmentsmadeinthevehicle.

Theplannedlistingoftheunderlyinginvestmentwillentail12%ofthetotalequityofwhichiQXLimitedowns19%oftheissuedcapitalbeinglisted.Independentpre-ipoinvestorshavevaluedthesharesintheunderlyingentityat$100,000,000.

Managementchosetorevaluebasedonaninternalassessmentofprivateplacementinvestmentasitprovidedamoreconservativeoutcomewhencomparedtoavaluationwhichwasundertakenbyanexternalparty.

22. OPERATINGLEASES

TheGroupleasesanumberofofficefacilitiesunderoperatingleases.Theleasesarenon-cancellableandrunforaperiodof1to4years,withanoptiontorenewtheleaseafterthatdate.Contingentrentalprovisionswithintheleaseagreementrequirethattheminimumleasepaymentsshallbeincreasedby4%perannum.Theleaseallowsforsublettingofallleaseareas.

Futureminimumleasepayments

Asat30June2017,thefutureminimumleasepaymentsundernon-cancellableleaseswerepayableassetoutinthefollowingtable.

Indollars 2017 2016

Lessthanoneyear 112,165 159,662

Betweenoneandfiveyears - 107,851

Morethanfiveyears - -

Totalfutureminimumleasepayments 112,165 267,513

23. CONTINGENCIES

TheGrouphasnocontingentliabilitiesorassetsasatthereportingdate(2016:None).


Assetsandliabilitiesmeasuredatfairvalueareclassifiedintothreelevelsusingafairvaluehierarchythatreflectsthesignificanceoftheinputsusedinmakingthemeasurements.Classificationsarereviewedateachreportingdateandtransfersbetweenlevelsaredeterminedbasedonareassessmentofthelowestlevelofinputthatissignificanttothefairvaluemeasurement.


2017ANNUALREPORT 51

24. TRANSACTIONSWITHRELATEDPARTIES

(i) Parentandultimatecontrollingparty

iQXLimitedwastheparentandultimatecontrollingpartyoftheGroupthroughouttheyearended30June2017.

(ii) Keymanagementpersonnelcompensation

Thekeymanagementpersonnelcompensationissetoutinthetablebelow.

Indollars 2017 2016

Short-termemployeebenefits 592,408 533,061

Post-employmentbenefits 52,927 48,123

Totalkeymanagementpersonnelcompensation 645,335 581,184

Compensationof theGroup’skeymanagementpersonnel includessalariesandnon-cashbenefits.ExecutiveofficersalsoparticipateintheGroup’semployeeincentiveplan.

FurtherdetailsofkeymanagementpersonnelcompensationareincludedintheRemunerationReportwithintheDirectors’Report.

(iii) Transactionswithotherrelatedparties

TheGrouptransactedwiththefollowingrelatedcompanies.Transactionswithotherrelatedpartiesareonnormalcommercialtermsandconditionsnomorefavourablethanthoseavailabletootherpartiesunlessotherwisestated.

Entitiyname Relationship

iQnovateLtdandcontrolledentities Commondirectorshipand/keymanagementpersonel

iQ3CorpLtdandcontrolledentities Commondirectorshipand/keymanagementpersonnel

NereidEnterprisesPtyLtd AnAssociatewithcommondirectorshipand/keymanagementpersonnel

Theaggregatevalueoftransactionsandoutstandingbalancesrelatingtosubsidiariesandassociatesaresetoutinthefollowingtable.

Indollars 2017 2016

Financialservicesfeesreceivedfromrelatedparties 240,760 294,955Assetrelatedrevenuereceivedfromrelatedparties 1,871,614 -Sharedservicesfeesrececeivedfromrelatedparties 1,287,856 163,382Changeinfairvalueoffinancialassetheldinrelatedparties 19,000,000 -

Totalrevenueandotherincomereceivedfromrelatedparties 22,400,230 458,337Paymetofsharedservicesfeestorelatedparties 332,251 575,392Othertransactionandadministrativecostspaidtorelatedparties 933,784 193,708Totalcostspaidtorelatedparties 1,266,035 769,100Tradepayableaccountswithrelatedparties (312,480) (330,840)Tradereceivableaccountswithrelatedparties 997,310 760,417

Nettradereceivable/(payable)fromrelatedparties 684,830 429,577


2017ANNUALREPORT 52

25. RECONCILIATIONOFCASHFLOWSFROMOPERATINGACTIVITIES

Indollars 2017 2016

Cashflowsfromoperatingactivities

Profit/(loss)fortheperiod 14,218,387 (2,347,446)Adjustmentsfor: Depreciation 71,150 27,165Interestonconvertiblenotes 444,538 311,739Capitalraisingcostswrittenoff 337,472 84,938Revaluationoffinancialassetsthroughprofitorloss (19,000,000) -Shareoflossfromassociatedcompanies 57,959 - (3,870,494) (1,923,604)Changesin: Tradeandotherreceivables (738,735) (670,598)Prepayments 65,383 -

Otherassets -

Tradeandotherpayables 2,688 263,391

Employeebenefits 342,066 26,855

Deferredtax 3,271,841 -

Taxpayable (2,147) -

2,941,096 (380,352)

Netcashusedinoperatingactivities (929,398) (2,303,956)

26. AUDITORS’REMUNERATION

Indollars 2017 2016

Auditandreviewservices

AuditorsoftheGroupatJune2017–RSMAustraliaPartners 20,000 -

AuditorsoftheGroupatDecember2016–Fortunity 4,000 19,000

Otherauditors - -

Otherservices

AuditorsoftheGroupatJune2017–RSMAustraliaPartners 10,000 -

AuditorsoftheGroupatDecember2016–Fortunity - -

Otherauditors - -

27. SUBSEQUENTEVENTS

Therehasnotarisenintheintervalbetweentheendofthefinancialyearandthedateofthisreportanyitem,transactionoreventofamaterialandunusualnaturelikely,intheopinionoftheDirectorstoaffectsignificantlytheoperationsorstateofaffairsoftheGroupinfuturefinancialyears.

IQXLIMITEDANDCONTROLLEDENTITIESDIRECTORS’DECLARATIONFORTHEYEARENDED30JUNE2017

2017ANNUALREPORT 53

1. IntheopinionoftheBoardofDirectorsofiQXLimited(“theCompany”):

a. the consolidated financial statements and notes that are set out on pages 25 to 52 are inaccordancewiththeCorporationsAct2001,including:

I. giving a true and fair view of the financial position as at 30 June 2017 of theCompanyanditscontrolledentities(“theGroup”)andoftheGroup’sperformanceforthefinancialyearendedonthatdate;and

II. complyingwithAustralianAccountingStandardsandtheCorporationsRegulations2001;and

b. therearereasonablegroundstobelievethattheCompanywillbeabletopayitsdebtsasandwhentheybecomedueandpayable.

2. TheDirectorshavebeengiventhedeclarationsrequiredbySection295Aof theCorporationsAct2001fromthechiefexecutiveofficerandchieffinancialofficerforthefinancialyearended30June2017.

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

SignedinaccordancewitharesolutionofDirectors.


Sydney

19 October2017

THE POWER OF BEING UNDERSTOODAUDIT | TAX | CONSULTING

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

RSM Australia Partners ABN 36 965 185 036

Liability limited by a scheme approved under Professional Standards Legislation


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

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

www.rsm.com.au

INDEPENDENT AUDITOR’S REPORT To the Members of IQX Ltd

Opinion

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

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

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

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

Basis for Opinion

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

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

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

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

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

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

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

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

report.

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

opinion.

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

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Key Audit Matter How our audit addressed this matter

Investment carried at fair value through the profit and loss account

Refer note 21 in the financial statements

The company has designated its investment in Life

Science Biosensor Diagnostic Limited as fair value

through the profit or loss on the basis of election on

initial recognition.

The fair value of the investment has been

determined by management to be $19,000,000 and

is based on level 2 inputs from a valuation model that

is based on external independent capital raisings

The designation of the investment and the valuation

of the investment are matters which management

has exercised judgment.

Our audit procedures in relation to the classification

and valuation of the investment included:

• Reviewing managements documented judgments

of the application of AASB 139 Financial

Instruments: Recognition and Measurement in

relation to designating an equity investment as fair

value through profit or loss

• Assessing managements valuation methodology

and model with the firm’s internal valuation

specialists

• Substantiating inputs into the valuation model by

verifying independent capital raising transactions

Carrying value of internally developed intangible assets

Refer to note 13 in the financial statements

The closing net book value of all internally developed

assets was $155,995. The costs of building

applications and web-site platforms are capitalised

as intangible assets, where the expenditure

demonstrable value and the technical and

commercial feasibility is assured.

Management has to exercise judgment in

determining which costs can be capitalised and

when performing an impairment review if impairment

indicators are identified. The materiality of

judgments involved has caused us to identify these

as key audit risks.

Our audit procedures in relation to the carrying value

of internally developed intangible assets included:

• Reviewing management’s identification of the

development projects being undertaken, and their

assessment of whether they meet the criteria for

recognition as intangible assets in accordance with

AASB 138 Intangible Assets

• Testing amounts capitalised in the period to

assess whether expenses incurred were directly

attributable to the projects identified, and therefore

eligible for capitalisation.

Other Information

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

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

auditor's report thereon.

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

form of assurance conclusion thereon.

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

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

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

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

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

55

Responsibilities of the Directors for the Financial Report

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

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

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

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

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

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

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

alternative but to do so.

Auditor's Responsibilities for the Audit of the Financial Report

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

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

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

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

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

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

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

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

This description forms part of our auditor's report.

Report on the Remuneration Report

Opinion on the Remuneration Report

We have audited the Remuneration Report included in pages11 to 16 of the directors' report for the year ended

30 June 2017.

In our opinion, the Remuneration Report of IQX Ltd., for the year ended 30 June 2017, complies with section 300A

of the Corporations Act 2001.

Responsibilities

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

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

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

David Talbot

Partner


Sydney, 19 October 2017

56

IQXLIMITEDANDCONTROLLEDENTITIESNSXADDITIONALINFORMATION FORTHEYEARENDED30JUNE2017

2017ANNUALREPORT 57

NSX ADDITIONAL INFORMATION

AdditionalinformationrequiredbytheNSXandnotdisclosedelsewhereinthisreportissetoutbelow.Theinformationiscurrentasat11August2017.

SUBSTANTIALSHAREHOLDERS

Thenumberofsharesheldbysubstantialshareholdersandtheirassociatesaresetoutbelow:

Shareholdersgroupedbycommoncontrollers Numberofordinary

sharesheld

%oftotalordinaryshares

(i) RuminateGroup

RuminateInvestmentsPtyLtd 15,800,000 13.41%

TTSTwoInvestmentsPtyLtd 2,900,000 2.46%

AnthonyTsigounisPtyLtd 200,000 0.17%

TotalRuminateGroup 18,900,000 16.04%

(ii) LifeScienceGroup

LifeScienceInvestmentsPtyLtd 6,000,000 5.09%ZeroHedgeInvestmentsPtyLtd 5,550,000 4.71%

BiotechnologyHoldingsPtyLtd 4,261,112 3.62%TotalLifeScienceGroup 15,811,112 13.42%

(iii) AbiogenesisPtyLtd 15,600,000 13.24%

(iv) AgparaskeviGroup

AgparaskeviPtyLtd 8,000,000 6.79%BabiHoldingsPtyLtd 4,000,000 3.39%TotalAgparaskeviGroup 12,000,000 10.18%

(v) AdaptiveRadiationGroup

AdaptiveRadiationPtyLtd 8,888,888 7.54%

SequentialInvestmentsPtyLtd 1,600,000 1.36%

TotalAdaptiveRadiationGroup 10,488,888 8.90%

Totalofsubstantialshareholders 72,800,000 61.78%

IQXLIMITEDANDCONTROLLEDENTITIESNSXADDITIONALINFORMATION(CONTINUED)FORTHEYEARENDED30JUNE2017

2017ANNUALREPORT 58

TENLARGESTSHAREHOLDERS

Shareholder Numberofordinary

sharesheld

%oftotalordinaryshares

AbiogenisesPtyLtd 15,600,000 13.24%

RuminateInvestmentsPtyLtd 15,228,572 12.92%AdaptiveRadiationPtyLtd 8,888,888 7.54%

AgparaskeviPtyLtd 8,000,000 6.79%LifeScienceInvestmentsPtyLtd 6,000,000 5.09%ZeroHedgeInvestments 5,550,000 4.71%BiotechnologyHoldings 4,261,112 3.62%

BabiHoldingsPtyLtd 4,000,000 3.39%TTSTwoInvestmentsPtyLtd 2,900,000 2.46%AnestHoldingsPtyLtd 2,220,900 1.88%

Totalsecuritiesoftop10holdings 72,649,472 61.64%

Distributionofequitysecurityholders

Category Holders Ordinaryshares

%

1–1,000 - - 0.00%

1,001–5,000 2 6,000 0.01%

5,001–10,000 9 88,000 0.07%

10,001–100,000 102 5,364,000 4.55%

100,001andover 81 112,377,900 95.37%

Total 194 117,835,900 100.00%

Shareholderswithlessthanmarketableparcel

Therearenoshareholderswithanunmarketableparcelofshares.

Thisisbasedonaclosingpriceof$0.40pershareasat11August2017.

Sharessubjecttoescrow

Thereisnosecurityclasssubjecttoescrowasat11August2017.

Unquotedequitysecurities

Therearenounquotedredeemablepreferencesharesorredeemableconvertiblenotesonissue.

IQXLIMITEDANDCONTROLLEDENTITIESNSXADDITIONALINFORMATION(CONTINUED)FORTHEYEARENDED30JUNE2017

2017ANNUALREPORT 59

SECURITIESEXCHANGE

TheCompanyislistedontheNationalSecuritiesExchangeofAustralia.TheHomeexchangeisSydney.

ON-MARKETBUY-BACK

Thereisnocurrenton-marketbuy-back.

HISTORICALSUMMARYTABLE

Shareperformance FinancialperformanceA$million

Period Closingsharepriceat30June

Dividendpershare

EPS(cents) Revenue Profit/(loss)aftertax

Assets Liabilities

FY2017 $0.40 NIL 12.22 $3.4 $14.2 $21.6 $7.2

FY2016 $0.43 NIL (2.26) $0.5 ($2.3) $2.7 $3.0

FY2015 $0.65 NIL (1.27) $0.8 ($1.3) $1.7 $0.2

FY2014 $0.65 NIL (1.38) - ($1.2) $1.6 $0.2

FY2013 NA NIL (1.23) - ($1.0) $0.5 $1.6

WAIVERS

There are no arrangementswhere: (a) the Director’s have agreed towaive any emoluments; or (b)where ashareholderhaswaivedoragreedtowaiveanydividends.

SIGNIFICANTCONTRACTSWITHDIRECTORS,CHILDENTITIESORCONTROLLINGSHAREHOLDERS

Refertonote24oftheNotestotheConsolidatedFinancialStatements,fordetailsofmaterialrelatedpartytransactions.

DIRECTORANDOFFICERSINTERESTS

Refertonote7oftheRenumerationReport,whichformspartoftheAnnualReport,fordetailsofDirectorandOfficerinterests.

OTHER

Therearenoperiod’sunexpiredofanyservicecontractofanyDirectorproposedforelectionattheforthcomingannualgeneralmeeting.

[ IQX LTD ] Level 3, 222 Clarence Street Sydney 2000 NSW Australia

Ph: +61 2 8239 5400Fx: +61 2 8362 9547

[email protected]

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