ANTEOTECH LTD — Interim / Quarterly Report 2016

Jul 28, 2016

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29 July, 2016

Company Announcements Office Australian Stock Exchange Level 6, 20 Bridge Street Sydney NSW 2000

Anteo Diagnostics Limited (ASX: ADO) attaches its Appendix 4C for the quarter ended 31 June 2016.

ACTIVITIES REPORT – QUARTER ENDED 30 June 2016

HIGHLIGHTS FROM THE JUNE QUARTER

• DIAsource record quarter revenue

• DIAsource signs new US$1.8m contract

• Anteo delivering strong POC value propositions

• Anteo Energy offering a novel approach with significant potential .

Anteo Group Cash Flows

Group receipts, excluding the R&D Tax Concession received in the first quarter were stable The growth in sales at DIAsource necessitated working capital allocation to increased stock levels and receivables. Cash applied to this purpose for the quarter was €1,302k, offset by the funding contributed by creditors of €921k. As sales receipts flow through the system, it is anticipated the cash flow from operations will return to normal levels.

At Anteo, operating expenditure for the quarter decreased by 55%. This represents both the non-recurring items related to the DIAsource acquisition in the prior quarter and expenditure at Anteo Technologies that were reduced 34%. The operating expense initiatives are expected to deliver a further reduction over the next quarter.

The cash position at the end of the quarter was $3,765,327.

DIAsource ImmunoAssays – Business Update

Commercial results

DIAsource revenue was a record €4.077 m ($6.178m) for the June quarter. This is the 4[th] consecutive quarter of revenue growth and the 2[nd] consecutive quarters of record revenue. Total revenue increased 11% over the same period last year.

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4,300,000
DIAsource Revenue by Quarter
4,100,000
3,900,000
3,700,000
E
u 3,500,000
r 3,300,000
o 3,100,000
2,900,000
2,700,000
2,500,000
Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16
----- End of picture text -----

The revenue was €7.868m ($11.975m) in the first 2 quarters of 2016, an increase of 10% over the same period in 2015 and is above target for the first half-year. Growth over 2015 was achieved across all product lines.

Third party manufacturing of Vitamin D ELISA assays is increasingly an important part of our Vitamin D revenue stream. These partnerships will become more important during the second half of 2016 when our partners receive registration of the product in different countries outside Europe.

The stronger sales growth of in-sourced products versus in-house manufactured DIAsource products resulted in a slightly lower gross margin of 48.1% compared with target.

DIAsource is focused on delivering improving revenue and gross margins through a successful internal continuous improvement plan underlined by specific actions in all levels of the organisation . The strategy and change program launched in early 2014 across the organisation continues to deliver improving overall outcomes reflected in results of the company.

A sales agreement was signed with the Egyptian Government for US$1.77m to deliver a variety of clinical tests for the first 12 month period starting in the second half of 2016.

Our sales activities during the second quarter have centred around increasing our market share for our core product lines: Vitamin D and RIA.

Our sales team manned DIAsource booths at the “5[th] International Conference on Vitamin D Deficiency and Human Health in Abu Dhabi, the 19[th] Workshop on Vitamin D in Boston (US) and the China International Medical Equipment Fair in Shanghai (China) to promote our Vitamin D and RIA/ELISA product lines.

DIAsource continues to get more recognition from the scientific community and from the market for its Vitamin D products.

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Anteo Energy – Update

Business development

According to plan, Anteo Energy business development group undertook a successful and productive trip through Asia meeting with some of the world’s largest manufacturers and component suppliers of Lithium-ion batteries in May. This followed patent filings; one provisional application progressing to PCT stage in April as well as 2 other provisional applications in March giving Anteo a strong proprietary position in our area of interest.

The market and business development meetings investigated the potential value and opportunities arising from our research activities. All the responses were highly encouraging and there is strong interest in working with Anteo. The companies and organisations see the Anteo technology as a novel approach that has the potential to deliver significant improvements to Lithium-ion battery performance.

The Anteo Energy offering is viewed as an approach that will not require re-engineering of current processes. Improved battery performance combined with the ‘drop in’ nature of the Anteo coating technology is considered significant and attractive.

Anteo’s unique nano-chemistry enables improvement in both anode and cathode performance in Lithium-ion batteries. These batteries will be able to store more energy and will last longer (without an increase in the amount of Lithium used). The projected increase in the use of Lithium-ion batteries over the next decades has created demand for lithium stocks and the associated investment vehicles. Anteo is well placed to benefit from the growth in the lithium market, through provision of a technology which will reduce the high demand for lithium raw materials in the future.

The positive feedback during the trip and subsequent interactions confirm that Anteo coating technology has a variety of commercially desirable attributes that are highly sought after by those striving to bring Lithium-ion battery performance to a level that enhances the utility of electric cars and provide cost effective storage for domestic renewable energy generation.

Patent progress

Following the advancement of Anteo’s initial battery patent application to PCT phase the patent examiner provided an International Search Report and opinion of the International Searching Authority in June. Our patent attorney advised that the Examiner considered all the claims of the application to be both novel and inventive. Further, the Examiner found that no objections needed to be addressed.

These are important steps in getting the strongest possible patent granted and securing the intellectual property for Anteo in this area. The other 2 provisional applications will also undergo a similar process next year.

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Next Steps

Anteo is mapping the work required to meet the customer requirements for our coatings. At the same time planning and positioning has started to define how and when to partner with the different organisations with whom Anteo is interacting to maximise shareholder value.

Anteo Technologies – Update

In order to compliment the significant investment in product development over the past 2 years, Anteo has sought to diversify the risk associated with the commercialisation of its nanochemistry technology and make the technology more accessible. Accordingly, Anteo is positioning its products to more directly target user groups and improve recognition and uptake in specific applications. Previously Anteo Life Science and Diagnostic products have provided an all-encompassing solution to multiple applications resulting in the release of the Universal Coupling Kit. The Anteo Technologies group has undertaken a significant body of work to develop a number of derivative kits oriented to specific applications for release at AACC (August 2016) in Philadelphia (US). The AACC launch will be accompanied by a digital marketing programme, the launch of a new search engine optimised website and a targeted distributor programme to support the pull through of products from existing distributors.

Anteo will use this opportunity to integrate DIAsource with Anteo Technologies utilising the skills and experience of the DIAsource management and sales team to help to develop existing and new relationships.

The teams at Anteo and DIAsource continued feasibility studies with the objective of incorporating Anteo’s technology in some of the DIAsource products to improve commercial outcomes.

The strategy to develop and market products targeting the life sciences research community to provide independent citations is taking hold. Increasingly, we find that assay developers seeking to expand the clinical applications of POC are looking to incorporate or develop novel technology as reported by Luppa et. al.[1] describing the future trends in POC testing. The existing platforms have reached a performance plateau with respect to sensitivity and specificity. Engineering based advancements (materials, format, design and scale selection) provide additional step-wise improvements, however there is an increased awareness of the fundamental limitations that result from the methods used to bind biological molecules onto solid supports typically used in POC. We expect that the IVD POC industry sector will continue to monitor the general advancements published in the literature and look to increasingly adopt Anteo’s technology as performance advantages are independently reported in scientific journals.

Examples of applications where the technology demonstrates clear advantages in enabling the next generation of detection technologies are appearing with increasing regularity. Recently we have noted articles in the fields of renal failure and detection of circulating tumour cells and we are seeing application to a greater diversity of platforms using our technology (see article on our website www.anteotech.com).

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This quarter has highlighted the strong value proposition Anteo Mix&Go products deliver in the POC sector. Today we have projects with companies developing POC products testing for heart attacks, tropical diseases, infectious diseases and bone metabolism across a variety of lateral flow platforms.

In all cases Anteo products are delivering greater sensitivity and reliability to users.

Conclusion

DIAsource double digit sales growth continued in this last quarter and underpins a stable platform for the Group.

Feasibility studies to incorporate the Anteo technology in DIAsource products are progressing positively.

Meetings with the larger Battery companies confirmed the interest of these companies and the significant tangible opportunities that our technology can offer to increase the efficiency in the Li-ion batteries.

Anteo will launch 3 new products at the coming AACC conference for life sciences companies in the US at the beginning of August.

Work continues in medical devices on the development of intellectual property assets, and further work with partners on a number of applications.

Anteo technology is getting more and more recognised in the scientific community as an alternative to other binding, priming and coating methods and importantly as the best technique in specific circumstances or surfaces.

1 Luppa, P.B., Bietenbeck, A., Beaudoin, C., Giannetti A., 2016. Biotechnology Advances, DOI: 10.1016/j.biotechadv.2016.01.003

1. The financial information is unaudited and may be subject to change.

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Rule 4.7B

Appendix 4C

Quarterly report for entities admitted on the basis of commitments

Name of entity Anteo Diagnostics Limited ACN or ARBN Quarter ended (“current quarter”)	Name of entity Anteo Diagnostics Limited ACN or ARBN Quarter ended (“current quarter”)
75-070-028-625	30-Jun-16

Consolidated statement of cash flows

Consolidated statement of cash flows
Cash flows related to operating activities	Current quarter $A’000	Year to date (12 months) $A’000
1.2 Payments for (a) staff costs (b) advertising and marketing (c) research and development (excluding staff costs relating to R&D) (d) leased assets (e) other working capital 1.3 Dividends received 1.4 Interest and other items of a similar nature received 1.5 Interest and other costs of finance paid 1.6 Income taxes paid 1.1 Receipts from customers and government grants	5,760 (2,665) (125) (364) (91) (3,929) - 55 (88) -	13,206 (6,639) (643) (1,279) (183) (11,733) - 84 (150) -
Net operating cash flows	(1,447)	(7,337)

NOTES:

	Current quarter $A’000	Year to date (12 months) $A’000
1.8 Net operatingcash flows(carried forward)	(1,447)	(7,337)
Cash flows related to investing activities 1.9 Payment for acquisition of: (a) Businesses (b) equity investments (c) intellectual property (d) physical non-current assets (e) other non-current assets Proceeds from disposal of: (a) Businesses (b) equity investments (c) intellectual property (d) physical non-current assets (e) other non-current assets 1.11 Loans to other entities 1.12 Loans repaid by other entities 1.13 Adjustment for cash remaining in subsidiary entity at disposal Net investing cash flows 1.10	- - - (333) (84) - - - - - - - -	- (23,753) - (669) (84) - - - - - - - -
	(417)	(24,506)
1.14 Total operating and investing cash flows
	(1,864)	(31,843)
Cash flows related to financing activities 1.15 Proceeds from issues of shares, options, etc. 1.16 Proceeds from sale of forfeited shares 1.17 Proceeds from borrowings 1.18 Repayment of borrowings 1.19 Dividends paid 1.20 Other: Issue of converting notes Interest paid on converting notes Capital raising costs Net financing cash flows	- - 758 -435 - - - -	12,468 - 13,292 (490) - 2,037 - (574)
	323	26,733
Net increase (decrease) in cash held 1.21 Cash at beginning of quarter/year to date 1.22 Exchange rate adjustments to item 1.20 1.23 Cash at end ofquarter
	(1,541) 5,328 (22)	(5,110) 8,858 17
	**3,765 **	3,765

NOTES:

1.20

Payments to directors of the entity and associates of the directors Payments to related entities of the entity and associates of the related entities

Payments to related entities of the entity and associates of the	Payments to related entities of the entity and associates of the	related entities
1.24 Aggregate amount of payments to the parties included in item 1.2 1.25 Aggregate amount of loans to theparties included in item 1.11		Current quarter $A'000
		431
		NIL
1.26 Explanation necessary for an understanding of the transactions

Non-cash financing and investing activities

2.1 Details of financing and investing transactions which have had a material effect on consolidated assets and liabilities but did not involve cash flows The company acquired DIAsource Immunoassays SA on 11th January for €15,422,341. The acquisiton was financed by an initial payment of €7,722,341 ($11,907,468) with vendor finance of €7,700,000 payable over 4 years. The company allotted 9,789,733 Ordinary Shares at $0.075 each to vendors of DIAsource Immunoassays SA who elected to take shares in prepayment of interest $734,020 in accordance with the terms of the Share Purchase Agreement. The Company allotted 1,998,491 Ordinary Shares at $0.075 each to the convertible note lender 2.2 Details of outlays made by other entities to establish or increase their share in businesses in which the reporting entity has an interest

NIL

Financing facilities available

Add notes as necessary for an understanding of the position. (See AASB 1026 paragraph 12.2).

3.1 Loan facilities - Anteo have entered into an investment agreement with Bergen Global Opportunity Fund, LP. To date, Bergen has invested US$2.0 million by way of an interest-free unsecured convertible security with a 24 month maturity. Bergen may also invest up to a further US$4.5 million in Anteo’s equity over the next 24 months by mutual consent of Bergen and the Company 3.2 Credit standby arrangements	Amount available $A’000	Amount used $A’000
	NIL	NIL
	NIL	NIL

Reconciliation of cash

Reconciliation of cash
Reconciliation of cash at the end of the quarter (as shown in the consolidated statement of cash flows) to the related items in the accounts is as follows.	Current quarter $A’000	Previous quarter $A’000
4.1 Cash on hand and at bank 4.2 Deposits at call 4.3 Bank overdraft 4.4 Other - Funds held in trust re. Open Prospectus Offer	3,647	3,647
	118	118
		-
		-
Total: cash at end of quarter (item 1.23)	3,765	3,765

Acquisitions and disposals of business entities

5.1 Acquisition/disposal of subsidiary 5.2 Place of incorporation or registration 5.3 Consideration for acquisition or disposal 5.4 Total net assets at date of acquisition/disposal 5.5 Nature of business	Acquisitions (Item 1.9(a))	Disposals (Item 1.10(a))
	DIAsource Immunoassays SA Belgium
	€15,422,341
	€4,389,835
	Manufacturer of diagnostic products

Compliance statement

1

This statement has been prepared under accounting policies which comply with accounting standards as defined in the Corporations Act 2001 (except to the extent that information is not required because of note 2) or other standards acceptable to ASX.

2 This statement does give a true and fair view of the matters disclosed.

Sign here:

Date: 29 July 2016

(Director)

Print name: Richard Martin