BIOTRON LIMITED - Annual Report 2016

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Level 2, 66 Hunter Street Sydney NSW 2000 Tel: (61-2) 9300 3344 Fax: (61-2) 9221 6333 E-mail: [email protected] Website: www.biotron.com.au

17 October 2016

The Manager Companies ASX Limited 20 Bridge Street SYDNEY NSW 2000

(55 pages by email)

Dear Madam

ANNUAL REPORT AND NOTICE OF AGM

I attach the Company's Annual Report for the year ended 30 June 2016 and a copy of the Company's Notice of Annual General Meeting to be held on 22 November 2016.

Yours sincerely

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Peter J. Nightingale Company Secretary

pjn8643

BIOTRON LIMITED ABn 60 086 399 144

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ANNUAL REPORT 2016

operating and Financial Review ........................................ 1 Corporate Governance Statement .................................. 6 Directors’ Report ................................................................. 7 Lead Auditor’s Independence Declaration .................... 17 Statement of Profi t or Loss and other Comprehensive Income ....................................... 18 Statement of Financial Position ...................................... 19 Statement of Changes in equity .................................... 20 Statement of Cash Flows ................................................. 21 notes to the Financial Statements ................................ 22 Directors’ Declaration ..................................................... 39 Independent Auditor’s Report ....................................... 40 Additional Stock exchange Information ....................... 42 Corporate Directory ....................................................... IBC

REVIEW OF OPERATIONS

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Biotron Limited (‘Biotron’ or the ‘Company’) is currently focused on the ongoing clinical development of its unique antiviral platform, which has significant commercial value. Biotron’s strategy is to systematically grow the value of the Company and work towards a commercial outcome for shareholders. This is best achieved by the demonstration of positive data, from clinical trials and other supporting studies.

To date, focus has been on the planned, step‑wise clinical development of the Company’s lead antiviral drug, BIT225. Significant progress has been made with all the Company’s clinical programs, which include clinical trials in HIV‑ 1, Hepatitis C virus (‘HCV’) and in HIV‑1/HCV co‑infected patients.

Data from completed studies have demonstrated that BIT225 has clinical antiviral activity against both HIV‑1 and HCV.

During the financial year under review, further progress has been achieved. Preliminary data have been reported from the Phase 2 HCV 3‑month dosing trial (BIT225‑008). A paper with data from the Company’s HIV‑1 trial was published in an international, peer‑reviewed scientific journal, demonstrating that BIT225 has potential to eradicate important viral reservoirs in patients.

A summary of significant events achieved in the period in review includes:

z Confirmation of positive outcomes from the Phase 2, three‑month dosing study of BIT225 in subjects infected with HCV (BIT225‑008). The trial has generated important safety, tolerability and pharmacokinetic data that will support further development of BIT225 for both HIV‑1 and HCV indications.
z Demonstration that BIT225 may have a broader role in treatment of HIV‑1 infection, based on data from the key trial of BIT225 in HIV‑1‑infected subjects (BIT225‑004) and reported in a prestigious international scientific journal.
z Results indicating that selected Biotron compounds have activity against the Zika virus.
z Receipt of $1.5 million under the Federal R&D Tax Incentive Program.
z Successful completion of a share purchase plan to eligible shareholders, raising $2 million.
z Showcasing the Company to the international investment and pharmaceutical communities at various events in the USA, Asia and Australia.

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REVIEW OF OPERATIONS

Clinical Programs ‑ Hepatitis C Virus (HCV)

Significant progress has been made by the Company to date with clinical programs, which include clinical trials in HIV‑1, HCV and HIV‑1/HCV co‑infected populations. BIT225 is in mid‑stage clinical development with 8 clinical trials completed. encouraging efficacy results against both HCV and HIV‑1 have been achieved.

In April 2016, the Company reported positive outcomes from its Phase 2, 3‑month dosing trial of BIT225 in HCV patients. The trial confirmed that BIT225 was safe and well tolerated when dosed for the extended period of 12 weeks. An antiviral effect from BIT225 was evident over and above the standard of care drugs that the patients were taking, with 82% of HCV genotype 1 (‘GT1’) patients clearing the virus, compared to 60% who only received the standard HCV treatment. HCV GT1 patients treated with BIT225 cleared the virus faster than those treated with standard treatment alone.

The results of this trial were in line with the results of previous trials of BIT225. Unlike those previous trials, this study provided key data on the performance of the new capsule formulation of BIT225.

This was the first trial to use a new capsule form of BIT225. The trial provided key information on how well this new formulation delivered BIT225. Patients treated with the capsules had higher blood levels of the drug than were achieved with the previously used powder form of BIT225. This shows that the capsules were more efficient at delivering BIT225 to the blood than the powder form of the drug. This information is key for further development of BIT225.

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2016
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The data from BIT225‑008 means that lower dosages can be used in future studies, which will further improve the safety profile of the drug.

The results in the HCV genotype 3 (‘GT3’) cohort, which were reported previously, were less clear because of the higher than expected clearance of virus in the standard treatment arm. All GT3 patients treated with standard treatment cleared the virus, meaning that it was impossible to show an improvement with BIT225 for the GT3 subtype.

However, non‑clinical studies have shown that BIT225 is pan‑genotypic, which means it is active against all the main HCV genotypes, including GT3.

Clinical programs ‑ HIV‑1

BIT225 has a different mechanism of action than other HIV‑1 drugs. Unlike other treatments for HIV‑1 infection, BIT225 specifically targets viral reservoirs. These long‑lived pools of virus persist despite drug treatment, and are never completely eliminated. The reservoirs act as ‘burning embers’, producing low levels of virus that cause chronic disease in people infected with HIV‑1 through constant activation of the body’s immune system. These factors mandate life‑long treatment using currently available drugs.

Therefore, eradication of HIV‑1 is a current focus of scientists, clinicians, and the pharmaceutical industry and an area where BIT225 has potential.

Biotron has built up a detailed data package on its HIV‑1 program, including results from a clinical trial in HIV‑1‑infected patients. During the last year, Biotron reported these results in two papers published by international, peer‑reviewed scientific journals.

This clinical trial showed that BIT225 targets and reduces levels of HIV‑1 residing in long‑lived monocyte/macrophage reservoirs. These reservoirs exist even in patients undergoing treatment with current antiretroviral drugs, and are responsible for ongoing cycles of reseeding HIV‑1 infection.

The study also indicated that BIT225 may impact on immune activation. Immune activation is responsible for a number of ongoing health issues in these patients and treatment strategies are needed to prevent development of associated disorders that include accelerated aging and neurological dysfunction.

Biotron is currently progressing plans for a pivotal Phase 2 trial, designed in consultation with international medical and scientific HIV‑1 experts. The purpose of this study will be to demonstrate that adding BIT225 to current anti‑HIV‑1 drugs results in an additional, measurable clinical benefit to patients.

REVIEW OF OPERATIONS

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It should be noted that the results for safety and the capsule formulation from the BIT225‑008 HCV trial are also relevant for the Company program on HIV‑1. Completed studies done to predict drug‑drug interactions, and modelling of pharmacokinetic data from previous trials to determine optimal dosage of BIT225, benefit both the HCV and HIV‑1 programs.

Preparation of the trial protocol and other regulatory documentation is complete, and is ready for submission to the relevant institutional ethics review board.

This study is key to a commercial outcome for Biotron’s HIV‑1 program.

Other viral programs

There have been a number of high profile international outbreaks of viral diseases, including ebola, Middle east Respiratory virus (MeRS‑ CoV) and more recently, Zika virus. Covered extensively in the media, they are a reminder that there is an ongoing need for new drugs to treat life‑threatening diseases.

During the year in review, Biotron has been expanding testing of Biotron compounds for activity against other key commercially relevant virus targets.

Biotron’s core expertise lies in designing and developing drugs that target a class of virus protein known as viroporins. Viroporins are found in a very broad range of viruses, and have key roles in the virus life cycle.

Whilst BIT225 is an important asset in its own right and demonstrates the robustness of Biotron’s approach to antiviral drug development, it is only one of the Company’s compounds.

Biotron’s proprietary compound library is a rich source of potential hits against other viruses. Screening against other viruses, including Zika virus, is in progress. Hits from this screening will act as starting points for further chemistry to generate compounds with increased potency against Zika and other viruses.

As announced in May 2016, in the initial round of testing of a small number of representative compounds, two were shown to have antiviral activity against Zika virus.

These early results are encouraging. They demonstrate the additional depth beyond BIT225 of Biotron’s library of compounds and approach to developing drugs that target serious viral diseases. The identification of these active compounds is a starting point for designing compounds with increased potency against Zika.

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Outlook for the next 12 months

In line with previously stated strategies, Biotron aims to progress its antiviral programs through to a commercial outcome. In parallel with progressing clinical development of BIT225, and identification of lead candidates for additional viral diseases, the Company will progress discussions with potential partners in established and emerging markets such as China. It has been estimated that there are up to 30 million HCV‑infected people in China. This compares to 3 ‑ 5 million HCV‑infections in the USA.

Achieving a commercial outcome for the Company’s programs will be the main focus of activities over the next 12 months. In parallel, the Company anticipates achieving the following outcomes:

z Subject to receipt of relevant regulatory and ethics approvals, the commencement, and completion, of a pivotal Phase 2 trial of BIT225 in combination with current HIV‑1 drugs, with the aim of demonstrating a clinical benefit.
z Determination of the potential of BIT225 to impact on rebound of HIV‑1 from viral reservoirs.
z Progression of early stage programs for viruses other than HIV‑1 and HCV with the aim of generating lead drugs suitable for clinical programs.

REVIEW OF OPERATIONS

Patents

Biotron is focused on progressing patents related to its antiviral programs through the international patenting process. The Company recognises that the key to establishment of partnerships is the expansion and continued strengthening of Biotron’s intellectual property portfolio. Strong, defensible, international patents are essential to attract partners and to ensure a competitive advantage for the Company’s products in the marketplace.

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TITLE STATUS
WO0021538 Granted in Australia, Canada, China, Germany, France, United Kingdom,
The netherlands, Japan, new Zealand, and USA
Method of modulating ion channel
functional activity
Priority ‑ 12 october 1998
WO9813514 Granted in Austria, Australia, Belgium, Canada, Switzerland, Germany,
Denmark, Spain, Finland, France United Kingdom, Greece, Ireland, Italy, Japan,
Method of determining ion channel
Luxembourg, Monaco, The netherlands, Portugal, Sweden and USA
activity of a substance
Priority ‑ 27 September 1996
WO04112687 Granted in Australia, Canada, China, India, Japan, Korea, new Zealand,
Singapore and South Africa
Antiviral compounds and methods
Under examination elsewhere (Brazil, europe, Hong Kong, and USA)
Priority ‑ 26 June 2003
WO06135978 Granted in Austria, Australia, Belgium, Canada, Switzerland, China, Germany,
Denmark, Spain, Finland, France, United Kingdom, Hong Kong, Ireland, Italy,
Antiviral compounds and methods
Japan, Korea, Luxembourg, Monaco, The netherland, new Zealand, Poland,
Priority ‑ 24 June 2005 Portugal, Sweden, Singapore, Turkey, South Africa and USA
Under examination elsewhere (Brazil, India)
WO2009 /018609 Granted in Austria, Australia, Belgium, Switzerland, Germany, Denmark, Spain,
Finland, France, United Kingdom, Ireland, Italy, Japan, Korea, Luxembourg,
Hepatitis C antiviral compounds
Monaco, The netherlands, new Zealand, Poland, Portugal, Sweden, Singapore,
and methods
Turkey and South Africa
Priority ‑ 3 August 2007
Accepted in China
Under examination in elsewhere (Brazil, Canada, Hong Kong, India, and USA)
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REVIEW OF OPERATIONS

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Corporate

In April 2016, the Company received an R&D Tax Incentive rebate of $1.5 million for the 2015/16 financial year. The R&D Tax Incentive is an Australian Government program under which companies receive cash refunds for 45% of eligible expenditure on research and development.

The cash refund results from expenditure on Biotron’s HCV and HIV drug development programs. It is an important source of funds for the Company’s ongoing research and development activities.

At the start of the financial year in review, the Company completed a $2 million capital raising by way of a share purchase plan to eligible shareholders. The funds will be used to support the Company’s ongoing activities described above, in particular the HIV‑1 Phase 2 trial that is expected to run through the second half of 2016. Thank you to everyone who participated; your ongoing support is appreciated.

on behalf of the Board we would like to thank the Biotron staff for their commitment and dedication during the year. Biotron is poised to achieve the outcome that we have all been working towards ‑ demonstration that its systematic approach to antiviral drug development can result in significant clinical benefit to patients and generate value for our shareholders.

We look forward to the next year with confidence.

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Michael J. Hoy Chairman

Michelle Miller Managing Director

CORPORATE GOVERNANCE STATEMENT

The Board is committed to maintaining the highest standards of Corporate Governance. Corporate Governance is about having a set of core values and behaviours that underpin the Company’s activities and ensure transparency, fair dealing and protection of the interests of stakeholders. The Company has reviewed its corporate governance practices against the Corporate Governance Principles and Recommendations (3rd edition) published by the ASX Corporate Governance Council.

The 2016 corporate governance statement is dated as at 5 August 2016 and reflects the corporate governance practices throughout the 2016 financial year. The 2016 corporate governance was approved by the board on 4 August 2016. A description of the Company’s current corporate governance practices is set out in the Company’s corporate governance statement which can be viewed at http://www.biotron.com.au/corporate‑governance/

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DIRECTORS’ REPORT

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The directors present their report together with the financial statements of Biotron Limited (‘the Company’) for the year ended 30 June 2016 and the auditor’s report thereon.

Directors

The names and particulars of the directors of the Company at any time during or since the end of the financial year are:

Mr Michael J. Hoy Independent and Non‑Executive Chairman

Mr Hoy has more than 30 years’ corporate experience in Australia, the United Kingdom, USA and Asia. He is Chairman of Telesso Technologies Limited and Lipotek Pty Limited and a former director of John Fairfax Holdings Limited and FXF Trust.

Mr Hoy has been a director since 7 February 2000 and Chairman since 16 March 2000.

Dr Michelle Miller

BSc, MSc, PhD, GCertAppFin (Finsia) Managing Director

Dr Miller has worked for over 20 years in the bioscience industry, with extensive experience in commercial development of early to mid stage technologies. She completed her PhD in the Faculty of Medicine at Sydney University investigating molecular models of cancer development. Her experience includes several years at Johnson and Johnson developing anti‑HIV gene therapeutics through preclinical research to clinical trials. She has finance industry experience from time spent as an Investment Manager with a specialist bioscience venture capital fund.

Dr Miller was appointed as Managing Director on 21 June 2002.

Dr Susan M. Pond

AM, MD DSc, FTSE Independent and Non‑Executive Director

Dr Pond has a strong scientific and commercial background having held executive positions in the biotechnology and pharmaceutical industry for 12 years, most recently as chairman and managing director of Johnson & Johnson Research Pty Limited (2003 ‑ 2009). She has held many previous board positions including as executive director of Johnson & Johnson Pty Limited, non‑executive director and chairman of AusBiotech Limited, director of the Australian nuclear Science and Technology organisation and Australian Academy of Technological Sciences and engineering (ATSe) and board member of Commercialisation Australia and Innovation Australia.

Dr Pond is currently on the boards of the Wound Management Innovation Cooperative Research Centre and Vectus Biosystems Ltd. She is Adjunct Professor in the Faculty of engineering and Information Technologies at the University of Sydney, and Fellow of the Australian Institute of Company Directors, ATSe and the Australian Academy of Health and Medical Sciences.

Dr Pond holds a first class honours degree in Bachelor of Medicine and Surgery from the University of Sydney and a Doctor of Medicine degree from the University of new South Wales. She obtained specialist clinical credentials in internal medicine, clinical pharmacology and clinical toxicology and has held academic appointments at the University of California, San Francisco and the University of Queensland before joining the industry.

Dr Pond was appointed as a director on 7 March 2012.

DIRECTORS’ REPORT

Mr Robert B. Thomas

BEc, MSDIA, SF Fin, FICD Independent and Non‑Executive Director

Mr Thomas has over 35 years’ experience in the securities industry, with Potter Partners (now UBS), County natWest and Citigroup.

He is the chairman of Starpharma Holdings Limited and a director of Aus Bio Limited, Heartware Inc, ReVA Medical Limited and Virgin Australia Limited. He chairs Grahger Retail Securities Pty Ltd and is a director of o’Connell Street Associates Pty Limited.

Mr Thomas has a Bachelor of economics degree from Monash University (1963 ‑ 1966). He has been a member of the Securities Institute of Australia since 1976 and was appointed as a Fellow to the Institute in 1997. He is a Master Stockbroker and is a Fellow of the Institute of Company Directors.

Mr Thomas was appointed as a director on 7 March 2012.

Dr Denis N. Wade

Independent and Non‑Executive Director

Dr Wade has been involved for over 40 years with the development of research based pharmaceuticals and medical devices in both industry and academia. He has been a director of several private and public companies in the healthcare sector, including Heartware Limited and subsequently Heartware International Inc., since December 2004. He was a director and chairman of Gene Shears Pty Limited and, from 1987 until his retirement in 2002, was managing director and chairman of Johnson & Johnson Research Pty Ltd, a research and development company of Johnson & Johnson Inc. He was also a member of the J&J Corporate office of Science and Technology. Prior to that, Dr Wade was the Foundation Professor of Clinical Pharmacology at the University of new South Wales and served as a member of a number of state and federal bodies related to the drug industry, including the P3 Committee.

He is a former chairman of the Australian Academy national Committee for Pharmacology, the Australasian Society for Clinical and experimental Pharmacology and Toxicology and a former chairman of the Clinical Pharmacology Section of the International Union of Pharmacology.

Dr Wade holds a first class honours degree in Medicine and Science from the University of Sydney and a Doctorate of Philosophy from the University of oxford. He was awarded an Honorary Doctorate of Science by the University of new South Wales and is a Fellow of the Royal Australasian College of Physicians and of the Australian Academy of Technological Sciences and engineering. In 1999 he was made a Member of the order of Australia.

Dr Wade was appointed as a director on 30 April 2010.

Mr Peter J. Nightingale Company Secretary

Mr nightingale graduated with a Bachelor of economics degree from the University of Sydney and is a member of the Institute of Chartered Accountants in Australia. He has worked as a chartered accountant in both Australia and the USA.

As a director or company secretary Mr nightingale has, for more than 25 years, been responsible for the financial control, administration, secretarial and in‑house legal functions of a number of private and public listed companies in Australia, the USA and europe including Bolnisi Gold n.L., Callabonna Uranium Limited, Cockatoo Coal Limited, Mogul Mining n.L., Pangea Resources Limited, Perseverance Corporation Limited, Sumatra Copper & Gold plc, Timberline Minerals, Inc. and Valdora Minerals n.L. Mr nightingale is currently a director of ASX listed Argent Minerals Limited, Augur Resources Ltd, Planet Gas Limited and unlisted public companies nickel Mines Limited and Prospech Limited.

Mr nightingale has been Company Secretary since 23 February 1999.

DIRECTORS’ REPORT

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Directors’ Meetings

The number of directors’ meetings held and number of meetings attended by each of the directors of the Company, while they were a director, during the year are:

Director	Directors’ Meetings
	No. of Eligible Meetings to Attend No. of Meetings Attended
Michael J. Hoy	6 6
Michelle Miller	6 6
Susan M. Pond	6 6
Robert B. Thomas	6 6
Denis n. Wade	6 6

Directors’ Interests

At the date of this report, the beneficial interests of each director of the Company in the issued share capital of the Company and options, each exercisable to acquire one fully paid ordinary share of the Company are:

Fully Paid Option Terms
Directors Ordinary Shares Options (Exercise Price and Term)
Michael J. Hoy 4,985,491 700,961 $0.12 at any time up to 30 September 2016 Michelle Miller ‑ 2,000,000 $0.15 at any time up to 30 november 2018
‑ 3,000,000 $0.18 at any time up to 30 november 2018
Susan M. Pond 348,958 55,556 $0.12 at any time up to 30 September 2016 Robert B. Thomas 5,395,207 1,237,038 $0.12 at any time up to 30 September 2016 Denis n. Wade 1,637,079 273,977 $0.12 at any time up to 30 September 2016

In november 2015, 2,000,000 unlisted options with an exercise price of $0.15 and 3,000,000 unlisted options with an exercise price of $0.18 were granted to Michelle Miller.

There were no other options over unissued ordinary shares granted as compensation to directors or executives of the Company during or since the end of the financial year.

Unissued Shares Under Option

At the date of this report, unissued ordinary shares of the Company under option are:

Number of Shares	Exercise Price	Expiry Date
2,000,000 3,000,000 50,719,140	$0.15 $0.18 $0.12	30 november 2018 30 november 2018 30 September 2016

All options expire on the earlier of their expiry date or termination of the employee’s employment provided the exercise period has been reached. In the event that the employment of the option holder is terminated, any options which have not reached their exercise period will lapse and any options which have reached their exercise period may be exercised within three months of the date of termination of employment. Any options not exercised within this three month period will lapse. The persons entitled to exercise the options do not have, by virtue of the options, the right to participate in a share issue of the Company or any other body corporate.

DIRECTORS’ REPORT

Shares Issued on Exercise of Options

During or since the end of the financial year, the Company issued ordinary shares as a result of the exercise of options as follows (there are no amounts unpaid on the shares issued):

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|Number of Shares|Amount paid on each share|
|1,313|$0.12|

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Principal Activities

The principal activities of the Company during the financial year were the funding and management of intermediate and applied biotechnology research and development projects.

Financial Result and Review of Operations

The operating loss of the Company for the financial year after income tax was $3,004,303 (2015 ‑ $2,723,221 loss).

A review of the Company’s operations for the year is set out in the operating and Financial Review.

Impact of Legislation and Other External Requirements

There were no changes in environmental or other legislative requirements during the year that have significantly impacted the results or operations of the Company.

Dividends

The directors recommend that no dividend be paid by the Company. no dividend has been paid or declared since the end of the previous financial year.

State of Affairs

In the opinion of the directors, there were no significant changes in the state of affairs of the Company that occurred during the year ended 30 June 2016.

Environmental Regulations

The Company’s operations are not subject to significant environmental regulations under Commonwealth or State legislation in relation to its research projects.

Events Subsequent to Balance Date

There has not arisen in the interval between the end of the financial year and the date of this report any item, transaction or event of a material and unusual nature likely, in the opinion of the directors of the Company, to affect significantly the operations of the Company, the results of those operations, or the state of affairs of the Company in future financial years.

Likely Developments

During the year ended 30 June 2016, the Company continued to fund and manage its research and development projects. The success of these research projects, which cannot be assessed on the same fundamentals as trading and manufacturing enterprises, will determine future likely developments.

DIRECTORS’ REPORT

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Indemnification of Officers and Auditors

During or since the end of the financial year, the Company has not indemnified or made a relevant agreement to indemnify an officer or auditor of the Company against a liability incurred by such an officer or auditor. In addition, the Company has not paid or agreed to pay, a premium in respect of a contract insuring against a liability incurred by an officer or auditor.

Remuneration Report ‑ Audited

Principles of compensation ‑ Audited

Key management personnel have authority and responsibility for planning, directing and controlling the activities of the Company. Key management personnel comprise the directors of the Company and the Company Secretary. no other employees have been deemed to be key management personnel.

The policy of remuneration of directors and senior executives is to ensure the remuneration package properly reflects the person’s duties and responsibilities, and that remuneration is competitive in attracting, retaining and motivating people of the highest quality. The Board is responsible for reviewing its own performance. The non‑executive directors are responsible for evaluating the performance of the executive directors who, in turn, evaluate the performance of all other senior executives. The evaluation process is intended to assess the Company’s business performance, whether long term strategic objectives are being achieved and the achievement of individual performance objectives.

Remuneration generally comprises salary and superannuation. Longer term incentives are able to be provided through the Company’s Incentive option Plan which acts to align the directors and senior executives’ actions with the interests of the shareholders. The remuneration disclosed below represents the cost to the Company for the services provided under these arrangements.

no directors or senior executives receive performance related remuneration. options issued in prior periods as remuneration were subject to minimum service periods being met.

The number of options that had vested as at 30 June 2016 is 1,000,000. no options were granted subsequent to year end. 5,000,000 unlisted options granted to Michelle Miller expired during the year.

There were no remuneration consultants used by the Company during the year ended 30 June 2016, or in the prior year.

Consequences of performance on shareholder wealth ‑ Audited

In considering the Company’s performance and benefits for shareholders wealth, the Board have regard to the following indices in respect of the current financial year and the previous four financial years.

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2016 2015 2014 2013 2012
net loss attributable to equity holders
of the Company $3,004,303 $2,723,221 $3,085,814 $3,850,745 $2,378,052
‑ ‑ ‑ ‑ ‑
Dividends paid
Change in share price (7.0) cents 3.0 cents 2.0 cents (2.0) cents (1.0) cents
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The overall level of key management personnel’s compensation is assessed on the basis of market conditions, status of the Company’s projects, and financial performance of the Company.

DIRECTORS’ REPORT

Details of remuneration for the year ended 30 June 2016 ‑ Audited

Details of director and senior executive remuneration and the nature and amount of each major element of the remuneration of each director of the Company, and other key management personnel of the Company are set out below:

			Share Based			Value of
	Primary	Super-	Payments	Other		Options
Year	Fees	annuation	- Options	Long Term	Total	as a % of
	$	$	$	$	$	Remuneration
Directors Non‑executive Michael J. Hoy (Chairman) 2016 2015 Susan M. Pond 2016 2015 Robert B. Thomas 2016 2015 Denis n. Wade 2016 2015 Executive Michelle Miller (Managing Director) 2016 2015 Executives Peter J. nightingale (Company Secretary) 2016 2015	68,807 68,807 36,697 36,697 36,697 36,697 36,697 36,697 325,383 328,846 75,000 75,000	6,537 6,537 3,486 3,486 3,486 3,486 3,486 3,486 29,048 31,240 ‑ ‑	‑ ‑ ‑ ‑ ‑ ‑ ‑ ‑ 42,902 ‑ ‑ ‑	‑ ‑ ‑ ‑ ‑ ‑ ‑ ‑ 5,096 ‑ ‑ ‑	75,344 75,344 40,183 40,183 40,183 40,183 40,183 40,183 402,429 360,086 75,000 75,000	‑ ‑ ‑ ‑ ‑ ‑ ‑ ‑ 11% ‑ ‑ ‑

no bonuses were paid during the financial year and no performance based components of remuneration exist. The Company employed no other key management personnel.

Options granted as compensation ‑ Audited

Details of options granted as compensation to each key management person:

		Number of	Fair Value	Option Terms
Director	Grant Date	Options Granted	at Grant Date	(Exercise Price and Term)
Michelle Michelle Michelle	Miller 25 november 2015 Miller 25 november 2015 Miller 25 november 2015	1,000,000 1,000,000 3,000,000	$17,900 $17,900 $48,900	$0.15 at any time to 30 november 2018. $0.15 at any time from 30 november 2016 up to 30 november 2018. $0.18 at any time from 30 november 2017 up to 30 november 2018.

The fair value of the options at grant date was determined based on Black‑ Scholes formula. The model inputs of the options issued, were the Company’s share price of $0.046 at the grant date, a volatility factor of 100% based on historic share price performance, a risk free rate of 2.11% based on the 10 year government bond rate and no dividends paid.

The number of options that vested as at 30 June 2016 is 1,000,000 (2015 ‑ 5,000,000). no options were granted subsequent to year end and 5,000,000 options lapsed during the year.

DIRECTORS’ REPORT

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Modification of terms of equity‑settled share‑based payment transactions ‑ Audited

no terms of equity‑settled share‑based payment transactions (including options granted as compensation to a key management person) have been altered or modified by the issuing entity during 2016 financial year.

In november 2014 the 5,000,000 options on issue to Michelle Miller were repriced. The modification resulted in an immaterial change to the fair value of the options and no expense has been recognised as a result.

Exercise of options granted as compensation ‑ Audited

There were no shares issued on the exercise of options previously granted as compensation during the 2016 and 2015 financial years.

Analysis of options and rights over equity instruments granted as compensation ‑ Audited

All options refer to options over ordinary shares of Biotron Limited, which are exercisable on a one‑for‑one basis.

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|---|---|---|---|---|---|
|Options granted|
|% vested|% forfeited|Financial year in|
|Director|Number|Date|in year|in year|which grant vests|
|Michelle Miller|1,000,000|24 December 2010|‑|100%|1 July 2010|
|1,000,000|24 December 2010|‑|100%|1 July 2011|
|3,000,000|24 December 2010|‑|100%|1 July 2012|
|1,000,000|25 november 2015|100%|‑|1 July 2015|
|1,000,000|25 november 2015|‑|‑|1 July 2016|
|3,000,000|25 november 2015|‑|‑|1 July 2017|

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The number of options that had vested as at 30 June 2016 is 1,000,000 (2015 ‑ 5,000,000). no options were granted subsequent to year end.

Analysis of movements in options ‑ Audited

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|Valuation of options|
|Director|Granted in the year|exercised in the year|Lapsed in the year|
|Michelle Miller|5,000,000|‑|5,000,000|

----- End of picture text -----

DIRECTORS’ REPORT

Options and rights over equity instruments ‑ Audited

The movement during the reporting period in the number of options over ordinary shares in the Company held directly, indirectly or beneficially, by each key management person, including their personally related entities, is as follows:

Option holdings 2016 ‑ Audited

					Vested and
Held at	Granted/			Held at	exercisable at
1 July 2015	Purchased	Exercised	Expired	30 June 2016	30 June 2016
Directors Michael J. Hoy 700,961 Michelle Miller 5,000,000 Susan M. Pond 55,556 Robert B. Thomas 1,237,038 Denis n. Wade 273,977 Executives Peter J. nightingale 1,151,924	‑ 5,000,000 ‑ ‑ ‑ ‑	‑ ‑ ‑ ‑ ‑ ‑	‑ (5,000,000) ‑ ‑ ‑ ‑	700,961 5,000,000 55,556 1,237,038 273,977 1,151,924	700,961 1,000,000 55,556 1,237,038 273,977 1,151,924

Loans to key management personal and their related parties ‑ Audited

There were no loans made to key management personnel or their related parties during the 2016 and 2015 financial years and no amounts were outstanding at 30 June 2016 (2015 ‑ $nil).

Other transactions with key management personnel ‑ Audited

The following key management personnel holds a position in another entity that results in them having control or joint control over the financial or operating policies of that entity, and this entity transacted with the Company during the year as follows:

z During the year ended 30 June 2016, Peter J. nightingale had a controlling interest in an entity, MIS Corporate Pty Limited, which provided full administrative services, including rental accommodation, administrative staff, services and supplies, to the entity. Fees paid to MIS Corporate Pty Limited during the year amounted to $144,000 (2015 ‑ $144,000). There were no outstanding amounts at 30 June 2016 (2015 ‑ $nil).
z During the year ended 30 June 2015, Peter J. nightingale had a controlling interest in an entity, Rosignol Consultants Pty Limited, which provided consulting services specifically in relation to the capital raise conducted by the Company in october 2014. The fees paid to Rosignol Consultants Pty Limited during the prior period amounted to $5,000. There were no outstanding amounts at 30 June 2015.

DIRECTORS’ REPORT

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Movements in shares ‑ Audited

The movement during the reporting period in the number of ordinary shares in the Company held directly, indirectly or beneficially, by each key management person, including their personally‑related entities, is as follows:

Fully paid ordinary shareholdings and transactions 2016 ‑ Audited

	Received on
Held at	exercise of	Held at
1 July 2015	Purchased options	Sales 30 June 2016
Directors Michael J. Hoy 3,855,283 Michelle Miller ‑ Susan M. Pond 305,556 Robert B. Thomas 5,265,000 Denis n. Wade 1,506,871 Executives Peter J. nightingale 5,500,000	1,130,208 ‑ ‑ ‑ 43,402 ‑ 130,207 ‑ 130,208 ‑ 260,416 ‑	‑ 4,985,491 ‑ ‑ ‑ 348,958 ‑ 5,395,207 ‑ 1,637,079 ‑ 5,760,416

Service contracts ‑ Audited

There are no service contracts for the key management personnel.

Non‑executive directors ‑ Audited

Total compensation for all non‑executive directors is determined by the Board based on market conditions.

Non‑audit Services

During the year KPMG, the Company’s auditor, performed no other services in addition to their statutory duties.

A copy of the auditors’ independence declaration as required under Section 307C of the Corporations Act 2001 is included in the Directors’ Report.

Details of the amounts paid and accrued to the auditor of the Company, KPMG, and its related practices for audit and non‑audit services provided during the year are set out below.

	2016 $ 2015 $
Statutory audit
Audit and review of fnancial reports ‑ KPMG	43,400 38,500

DIRECTORS’ REPORT

Lead Auditor’s Independence Declaration

The Lead Auditor’s Independence Declaration is set out on page 17 and forms part of the Directors’ Report for the year ended 30 June 2016.

This report has been signed in accordance with a resolution of the directors and is dated 5 August 2016:

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Michael J. Hoy Chairman

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Michelle Miller Managing Director

DIRECTORS’ REPORT

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Lead Auditor’s Independence Declaration under Section 307C of the Corporations Act 2001

To: the Directors of Biotron Limited

I declare that, to the best of my knowledge and belief, in relation to the audit for the financial year ended 30 June 2016, there have been:

(i) no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the audit; and
(ii) no contraventions of any applicable code of professional conduct in relation to the audit.

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KPMG 5 August 2016 Brisbane

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Stephen J. Board Partner

Liability limited by a scheme approved under Professional Standards Legislation.

KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.

STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2016

Notes	2016 $ 2015 $
Continuing operations other income 5 Administration and consultants' expenses Depreciation 12 employee and director expenses Direct research and development expenses 6 Rent and outgoings expenses Travel expenses other expenses from ordinary activities Operating loss before fnancing income Interest income Net fnancing income Loss before tax Income tax expense 9 Loss for the year Other comprehensive income Total comprehensive loss for the year Basic and diluted loss per share (cents) 7	1,548,185 1,672,265 (225,250) (300,112) (15,457) (16,957) (850,813) (801,660) (3,132,197) (2,882,954) (62,686) (85,289) (36,404) (44,776) (306,046) (311,429)
	(3,080,668) (2,770,912)
	76,365 47,691
	76,365 47,691
	(3,004,303) (2,723,221) ‑ ‑
	(3,004,303) (2,723,221) ‑ ‑
	(3,004,303) (2,723,221)
	(0.96)cents (1.04)cents

The above Statement of Profit or Loss and other Comprehensive Income should be read in conjunction with the accompanying notes.

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STATEMENT OF FINANCIAL POSITION

AS AT 30 JUNE 2016

Notes	2016 $ 2015 $
Current assets Cash and cash equivalents 8 Trade and other receivables 10 other assets 11 Total current assets Non-current assets Plant and equipment 12 Total non-current assets Total assets Current liabilities Trade and other payables 13 employee entitlements 14 Total current liabilities Total liabilities Net assets Equity Issued capital 15 Reserves 15 Accumulated losses Total equity	3,418,453 4,523,224 ‑ 10,184 27,755 35,025
	3,446,208 4,568,433
	37,075 47,769
	37,075 47,769
	3,483,283 4,616,202
	115,959 283,319 230,357 189,857
	346,316 473,176
	346,316 473,176
	3,136,967 4,143,026
	39,163,122 37,207,759 860,729 1,339,848 (36,886,884) (34,404,581)
	3,136,967 4,143,026

The above Statement of Financial Position should be read in conjunction with the accompanying notes.

STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 30 JUNE 2016

Attributable to equity holders of the Company Notes	Issued Capital $ Option Reserves $ Accumulated Losses $ Total
Balance at 1 July 2014 Total comprehensive income for the year Loss for the year other comprehensive income Total comprehensive loss for the year Transactions with owners, recorded directly in equity Contribution by and distribution to owners ordinary shares/options issued Cost of shares issued exercise of options Balance at 30 June 2015 15 Balance at 1 July 2015 Total comprehensive income for the year Loss for the year other comprehensive income Total comprehensive loss for the year Transactions with owners, recorded directly in equity Contribution by and distribution to owners ordinary shares/options issued Cost of shares issued Share based payment Transfer of expired options exercise of options Balance at 30 June 2016 15	32,548,656 522,000 (31,681,360) 1,389,296 ‑ ‑ (2,723,221) (2,723,221) ‑ ‑ ‑ ‑
	‑ ‑ (2,723,221) (2,723,221)
	5,242,032 818,045 ‑ 6,060,077 (583,126) ‑ ‑ (583,126) 197 (197) ‑ ‑
	37,207,759 1,339,848 (34,404,581) 4,143,026
	37,207,759 1,339,848 (34,404,581) 4,143,026 ‑ ‑ (3,004,303) (3,004,303) ‑ ‑ ‑ ‑
	‑ ‑ (3,004,303) (3,004,303)
	2,000,158 ‑ ‑ 2,000,158 (44,816) ‑ ‑ (44,816) ‑ 42,902 ‑ 42,902 ‑ (522,000) 522,000 ‑ 21 (21) ‑ ‑
	39,163,122 860,729 (36,886,884) 3,136,967

The above Statement of Changes in equity should be read in conjunction with the accompanying notes.

STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 30 JUNE 2016

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Notes	2016 $ 2015 $
Cash fows from operating activities Cash receipts in the course of operations Payments for research and development Cash payments in the course of operations Interest received Net cash used in operating activities 16 Cash fows from investing activities Payments for plant and equipment Net cash used in investing activities Cash fows from fnancing activities Proceeds from issue of shares and options Cost of issue of shares and options Net cash from fnancing activities Net increase/(decrease) in cash held Cash and cash equivalents at 1 July Effect of exchange rate adjustments on cash held Cash and cash equivalents at 30 June 8	1,548,185 1,672,265 (3,260,756) (2,932,696) (1,444,702) (1,507,222) 76,366 47,953
	(3,080,907) (2,719,700)
	(4,763) ‑
	(4,763) ‑
	2,000,158 6,060,077 (44,816) (583,126)
	1,955,342 5,476,951
	(1,130,328) 2,757,251 4,523,224 1,764,181 25,557 1,792
	3,418,453 4,523,224

The above Statement of Cash Flows should be read in conjunction with the accompanying notes.

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2016

1. REPORTING ENTITY

3. SIGNIFICANT ACCOUNTING POLICIES

Biotron Limited (the ‘Company’) is a company domiciled in Australia. The address of the Company’s registered office is at Level 2, 66 Hunter Street, Sydney, nSW 2000. The Company is a for‑profit entity and is primarily engaged in the funding and management of intermediate and applied biotechnology research and development projects.

2. BASIS OF PREPARATION

The accounting policies set out below have been applied consistently to all periods presented in these financial statements, and have been applied consistently by the Company.

(a) Cash and cash equivalents

Cash and cash equivalents comprise cash balances and call deposits with an original maturity of three months or less.

(b) Trade and other receivables

(a) Statement of compliance

These financial statements are general purpose financial statements which have been prepared in accordance with Australian Accounting Standards (‘AASBs’) adopted by the Australian Accounting Standards Board (‘AASB’) and the Corporations Act 2001 . The financial statements of the Company also comply with International Financial Reporting Standards (‘IFRSs’) adopted by the International Accounting Standards Board (‘IASB’).

The financial report was authorised for issue by the directors on 5 August 2016.

(b) Basis of measurement

The financial statements have been prepared on the historical cost basis, unless otherwise stated.

(c) Functional and presentation currency

These financial statements are presented in Australian dollars, which is the Company’s functional currency.

(d) Use of estimates and judgements

The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected.

In particular, information about significant areas of estimation uncertainty and critical judgements in applying accounting policies that have the most significant effect on the amounts recognised in the financial statements are described in the following notes:

z note 9 ‑ Unrecognised deferred tax asset

Trade and other receivables are stated at their amortised cost less impairment losses.

(c) Property, plant and equipment

Property plant and equipment are stated at their historical cost less accumulated depreciation and accumulated impairment losses. Depreciation is recognised in profit or loss using the reducing balance method from the date of acquisition at rates between 13% and 40% per annum.

(d) Research and development

Grants

Where a grant is received relating to research and development costs that have been expensed, the grant is recognised as other income when the grant becomes receivable and the Company complies with all attached conditions.

Costs

expenditure on research activities, undertaken with the prospect of gaining new scientific or technical knowledge and understanding, is recognised in profit and loss when incurred.

Development activities involve a plan or design for the production of new or substantially improved products and processes. Development expenditure is capitalised only if development costs can be measured reliably, the product or process is technically and commercially feasible, future economic benefits are probable, and the Company intends to and has sufficient resources to complete development and to use or sell the asset. The expenditure capitalised includes the cost of materials, direct labour and overhead costs that are directly attributable to preparing the asset for its intended use. other development expenditure is recognised in profit or loss when incurred.

Capitalised development expenditure is measured at cost less accumulated amortisation and accumulated impairment losses.

FOR THE YEAR ENDED 30 JUNE 2016

NOTES TO THE FINANCIAL STATEMENTS

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3. SIGNIFICANT ACCOUNTING POLICIES (Cont.)

(e) Trade and other payables

Trade and other payables are stated at their amortised cost, are non‑interest bearing and are normally settled within 60 days.

(f) Employee entitlements

Short‑term employee benefits

Short‑term employee benefits are expensed as the related service is provided. A liability is recognised for the amount expected to be paid under short term cash bonus or profit sharing plans if the Company has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee, and the obligation can be estimated reliably.

Long term employee benefits

The Company’s net obligation in respect of long term employee benefits is the amount of future benefit that employees have earned in return for their service in the current and prior periods. That benefit is discounted to determine its present value. Remeasurements are recognised in profit or loss in the period in which they arise.

Share‑based payment transactions

The grant‑date fair value of share‑based payment awards granted to employees is recognised as an employee expense, with a corresponding increase in equity, over the period that the employees become unconditionally entitled to the awards. The amount recognised as an expense is adjusted to reflect the number of awards for which the related service and non‑market vesting conditions are expected to be met, such that the amount ultimately recognised as an expense is based on the number of awards that meet the related service and non‑market performance conditions at the vesting date. For share‑based payment awards with non‑vesting conditions, the grant date fair value of the share‑based payment is measured to reflect such conditions and there is no true‑up for differences between expected and actual outcomes.

(g) Financial Instruments

active market. Such assets are recognised at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, loans and receivables are measured at amortised cost using the effective interest method, less any impairment losses. They are included in current assets, except for those with maturities greater than 12 months after the reporting period, which are classified as non‑current assets. Loans and receivables comprise cash and cash equivalents and trade and other receivables.

The Company initially recognises loans and receivables on the date that they are originated.

The Company derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows on the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred. Any interest in such transferred financial assets that is created or retained by the Company is recognised as a separate asset or liability.

Financial assets and liabilities are offset and the net amount presented in the Statement of Financial Position when, and only when, the Company has a legal right to offset the amounts and intends either to settle them on a net basis or to realise the asset and settle the liability simultaneously.

Non‑derivative financial liabilities

The Company initially recognises debt securities issued and subordinated liabilities on the date that they are originated. All other financial liabilities are recognised initially on the trade date, which is the date that the Company becomes a party to the contractual provisions of the instrument.

The Company derecognises a financial liability when its contractual obligations are discharged, cancelled or expire.

other financial liabilities comprise trade and other payables.

(h) Share Capital

Ordinary Shares

ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares are recognised as a deduction from equity, net of any tax effects.

Non‑derivative financial assets

The Company holds loans and receivables. Loans and receivables are non‑derivative financial assets with fixed or determinable payments that are not quoted in an

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2016

3. SIGNIFICANT ACCOUNTING POLICIES (Cont.)

(i) Tax

Income tax comprises of current tax and deferred tax and is recognised in profit or loss except to the extent that it relates to a business combination, or items recognised directly in equity or in other comprehensive income.

Current tax

Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantially enacted at the reporting date, and any adjustment to tax payable in respect of previous years.

Current tax assets and liabilities are offset only if certain criteria are met.

Deferred tax

Deferred tax is recognised in respect of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for temporary differences on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss.

The measurement of deferred tax reflects the tax consequences that would follow the manner in which the Company expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.

Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, using tax rates enacted or substantively enacted at the reporting date. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously.

A deferred tax asset is recognised for unused tax losses, tax credits and deductible temporary differences, to the extent that it is probable that future taxable profits will be available against which they can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.

Goods and services tax

Revenue, expenses and assets are recognised net of the amount of goods and services tax (‘GST’), except where the amount of GST incurred is not recoverable from the taxation authority. In these circumstances, the GST is recognised as part of the cost of acquisition of the asset or as part of the expense.

Receivables and payables are stated with the amount of GST included. The net amount of GST recoverable from, or payable to, the ATo is included as a current asset or liability in the balance sheet.

Cash flows are included in the statement of cash flows on a gross basis. The GST components of cash flows arising from investing and financing activities which are recoverable from, or payable to, the ATo are classified as operating cash flows.

(j) Finance income

Finance income comprises interest income on funds invested. Interest income is recognised as it accrues in profit or loss, using the effective interest method.

(k) Earnings per share

The Company presents basic and diluted earnings per share (‘ePS’) data for its ordinary shares. Basic ePS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the period. Diluted ePS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding for the effects of all dilutive potential ordinary shares, which comprise share options granted to employees.

(l) Impairment

Non‑derivative financial assets

A financial asset not classified as at fair value through profit or loss is assessed at each reporting date to determine whether there is any objective evidence that it is impaired. A financial asset is considered to be impaired if objective evidence indicates that one or more events have had a negative effect on the estimated future cash flows of that asset.

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2016

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3. SIGNIFICANT ACCOUNTING POLICIES (Cont.)

(n) Segment reporting

Financial assets measured at amortised cost

Individually significant financial assets are tested for impairment on an individual basis. The remaining financial assets are assessed collectively in groups that share similar credit risk characteristics.

An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying amount, and the present value of the estimated future cash flows discounted at the original effective interest rate. Losses are recognised within profit or loss. When an event occurring after the impairment was recognised causes the amount of impairment loss to decrease, the decrease in impairment loss is reversed through profit or loss.

Non‑financial assets

The carrying amounts of the Company’s non‑financial assets are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists then the asset’s recoverable amount is estimated.

An impairment loss is recognised whenever the carrying amount of an asset or its cash‑generating unit (‘CGU’) exceeds its recoverable amount. The recoverable amount of an asset or CGU is the greater of their fair value less costs of disposal and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre‑tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU. For impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or CGUs. Impairment losses are recognised in profit or loss.

An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.

(m) Provisions

A provision is recognised if, as a result of a past event, the Company has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre‑tax rate that reflects the current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognised as a finance cost.

Determination and presentation of operating segments

The Company determines and presents operating segments based on the information that is provided internally to the Managing Director, who is the Company’s chief operating decision maker.

An operating segment is a component of the Company that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Company’s other components. All operating segments’ operating results are regularly reviewed by the Company’s Managing Director to make decisions about resources to be allocated to the segment and assess its performance.

Segment results that are reported to the Managing Director include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly corporate assets (primarily the Company’s headquarters), head office expenses, and income tax assets and liabilities.

(o) New standards and interpretations not yet adopted

A number of new standards, amendments to standards and interpretations are effective for annual periods beginning after 1 July 2014, and have not been applied in preparing these financial statements. Those which may be relevant to the Company are set out below. The Company does not plan to adopt these standards early.

AASB 9 Financial Instruments

AASB 9 replaces the existing guidance in AASB 139 Financial Instruments: Recognition and Measurement . AASB 9 includes revised guidance on the classification and measurement of financial instruments, including a new expected credit loss model for calculating impairment on financial assets and the new general hedge accounting requirements. It also carries forward the guidance on recognition and derecognition of financials instruments from AASB 139.

AASB 9 is effective for the Company’s annual reporting period beginning 1 July 2018 and can be early adopted. The Company does not plan to adopt this standard early and the standard is not expected to have a significant effect on the financial statements.

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2016

4. DETERMINATION OF FAIR VALUES

A number of the Company’s accounting policies and disclosures require the determination of fair value, for both financial and non‑financial assets and liabilities. Fair values have been determined for measurement and/or disclosure purposes based on the following methods. Where applicable, further information about the assumptions made in determining fair values is disclosed in the notes specific to that asset or liability.

Trade and other receivables

The fair value of trade and other receivables is estimated as the present value of future cash flows, discounted at the market rate of interest at the measurement date. Fair value is determined at initial recognition and, for disclosure purposes, at each annual reporting date.

Share‑based payment transactions

The fair value of employee share options is measured using the Black‑Scholes formula. Measurement inputs include share price on measurement date, exercise price of the instrument, expected volatility (based on weighted average historic volatility adjusted for changes expected due to publicly available information), weighted average expected life of the instruments (based on historical experience and general option holder behaviour), expected dividends, and the risk‑free interest rate (based on government bonds). Service and non‑market performance conditions attached to the transactions are not taken into account in determining fair value. Share‑based payment arrangements in which the Company receives goods or services as consideration for its own equity instruments are accounted for as equity‑settled share‑based payment transactions.

Non‑derivative financial liabilities

non‑derivative financial liabilities are measured at fair value, at initial recognition, and for disclosure purposes, at each annual reporting date. Fair value is calculated based on the present value of future principal and interest cash flows, discounted at the market rate of interest at the measurement date.

	2016 $ 2015 $
5. OTHER INCOME Research and development rebate 6. LOSS FROM OPERATING ACTIVITIES Loss from ordinary activities has been arrived at after charging the following items: Auditors' remuneration paid to KPMG ‑ Audit and review of fnancial reports Depreciation ‑ offce equipment ‑ Plant and equipment Direct research and development expenditure expensed as incurred Provision for employee entitlements Superannuation expense	1,548,185 1,672,265
	43,400 38,500 14,550 15,817 907 1,140 3,132,197 2,882,954 40,500 10,540 66,177 109,051

2016
$
2015
$

5. OTHER INCOME
Research and development rebate
6. LOSS FROM OPERATING ACTIVITIES
Loss from ordinary activities has been arrived at after charging the following items:
Auditors' remuneration paid to KPMG
‑ Audit and review of fnancial reports
Depreciation
‑ offce equipment
‑ Plant and equipment
Direct research and development expenditure expensed as incurred
Provision for employee entitlements
Superannuation expense

1,548,185
1,672,265

43,400
38,500
14,550
15,817
907
1,140
3,132,197
2,882,954
40,500
10,540
66,177
109,051

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2016

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7. LOSS PER SHARE

The calculation of basic and diluted loss per share at 30 June 2016 was based on the loss attributable to ordinary shareholders of $3,004,303 (2015 ‑ $2,723,221 loss) and a weighted average number of ordinary shares outstanding during the financial year ended 30 June 2016 of 313,099,418 (2015 ‑ 260,882,383), calculated as follows:

	2016 $ 2015 $
net loss for the year	3,004,303 2,723,221


	2016 Number 2015 Number
Weighted average number of ordinary shares (basic and diluted) Issued ordinary shares at 1 July 296,402,910 228,296,944 Weighted average number of ordinary shares at 30 June 313,099,418 260,882,383 As the Company is loss making, none of the potentially dilutive securities are currently dilutive. 2016 $ 2015 $	296,402,910 228,296,944
8. CASH AND CASH EQUIVALENTS Cash at bank Cash and cash equivalents in the statement of cash fows	3,418,453 4,523,224
	3,418,453 4,523,224

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2016

	2016 $ 2015 $
9. INCOME TAX EXPENSE Current tax expense Current year Tax losses not recognised Deferred tax expense Current year De‑recognition of temporary differences Numerical reconciliation between tax expense and pre-tax net proft Loss before tax ‑ continuing operations Prima facie income tax beneft at the Australian tax rate of 30% (2015 ‑ 30%) Increase in income tax expense due to: ‑ Adjustments not resulting in temporary differences ‑ effect of tax losses not recognised ‑ Unrecognised temporary differences Income tax expense current and deferred Deferred tax assets have not been recognised in respect of the following items Deductible temporary differences (net) Tax losses net	(1,367,846) (1,351,580) 1,367,846 1,351,580
	‑ ‑
	15,679 33,987 (15,679) (33,987)
	‑ ‑
	(3,004,303) (2,723,221)
	(901,291) (816,966) 590,106 (500,626) 326,864 1,351,580 (15,679) (33,988)
	‑ ‑
	227,691 226,406 9,876,428 9,549,564
	10,104,119 9,775,970

The deductible temporary differences and tax losses do not expire under the current tax legislation. Deferred tax assets have not been recognised in respect of these items because it is not probable that future taxable profit will be available against which the Company can utilise the benefits of the deferred tax asset.

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2016

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	2016 $ 2015 $
10. TRADE AND OTHER RECEIVABLES Current other debtors 11. OTHER ASSETS Current prepayments Security deposits 12. PLANT AND EQUIPMENT offce equipment ‑ at cost Accumulated depreciation Plant and equipment ‑ at cost Accumulated depreciation Total plant and equipment ‑ net book value Reconciliations	‑ 10,184
	12,755 19,894 15,000 15,131
	27,755 35,025
	205,851 201,088 (173,634) (159,084)
	32,217 42,004
	506,463 506,463 (501,605) (500,698)
	4,858 5,765
	37,075 47,769

Reconciliations of the carrying amounts for each class of plant and equipment are set out below:

Offce equipment Balance at 1 July Additions Depreciation Carrying amount at the end of the fnancial year Plant and equipment Balance at 1 July Depreciation Carrying amount at the end of the fnancial year Total carrying amount at the end of the fnancial year	42,004 57,821 4,763 ‑ (14,550) (15,817)
	32,217 42,004
	5,765 6,905 (907) (1,140)
	4,858 5,765
	37,075 47,769

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2016

	2016 $ 2015 $
13. TRADE AND OTHER PAYABLES Current Creditors Accruals 14. EMPLOYEE ENTITLEMENTS Current employee annual leave provision Long service leave provision number of employees at the end of the fnancial year 15. CAPITAL AND RESERVES Issued and paid up capital 313,765,329 (2015 ‑ 296,402,910) fully paid ordinary shares Fully paid ordinary shares Balance at the beginning of the fnancial year Issue of shares exercise of options Costs of issue Balance at the end of fnancial year	92,459 249,213 23,500 34,106
	115,959 283,319
	106,233 78,694 124,124 111,163
	230,357 189,857
	4 4
	39,163,122 37,207,759
	37,207,759 32,548,656 2,000,158 5,242,032 21 197 (44,816) (583,126)
	39,163,122 37,207,759

The Company does not have authorised capital or par value in respect of its issued shares. All issued shares are fully paid.

z During the year ended 30 June 2016, 1,313 ordinary shares (2015‑12,201) were issued through the exercise of the listed options for cash totalling $158 (2015:$1,464). The fair value of the options issued was $21 (2015 ‑ $197).
z In July 2015, the Company issued 17,361,111 new fully paid ordinary shares through a share purchase plan for a cash totalling $2,000,000. Total issue cost of $44,816 was recognised as a reduction in the proceeds of these shares.
z In June 2015 the Company issued 17,361,111 ordinary shares through a share placement offer for cash totalling $2,000,000. Total issue costs of $179,417 were recognised as a reduction in the proceeds of the issue of these shares.
z In october 2014 the Company offered eligible shareholders to purchase one new share and one new listed option through a pro‑ rata renounceable rights issue. Under this offer, the Company issued 50,732,654 ordinary shares and 50,732,654 listed options for cash totalling $4,058,613. Fair value for the listed options amounting to $818,045 was recognised in the option premium reserve. Total issue cost of $403,709 was recognised as a reduction in proceeds of issue of these shares. The listed options are each exercisable at 12 cents to acquire one fully paid ordinary share exercisable at any time up to 30 September 2016.

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2016

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15. CAPITAL AND RESERVES (Cont.)

The following options were issued during the year ended 30 June 2016 and were on issue at 30 June 2016:

z 1,000,000 options with a fair value at grant date of 1.8 cents, each exercisable at 15 cents to acquire one fully paid ordinary share at any time up to 30 november 2018.
z 1,000,000 options with a fair value at grant date of 1.8 cents, each exercisable at 15 cents to acquire one fully paid ordinary share at any time after 30 november 2016 up to 30 november 2018.
z 3,000,000 options with a fair value at grant date of 1.6 cents, each exercisable at 18 cents to acquire one fully paid ordinary share at any time after 30 november 2017 up to 30 november 2018.

The fair value of the options at each grant date was determined based on the Black‑Scholes formula. The model inputs for those options issued during the year ended 30 June 2016 were the Company’s share price of $.046 at the grant date, a volatility factor of 100% based on historic share price performance, risk free interest rate of 2.11% based on the 10 year government bond rate and no dividends paid.

During the year ended 30 June 2016, the following options lapsed (2015‑ nil).

z 2,000,000 options, each exercisable at 21 cents to acquire one fully paid ordinary share at any time up to 30 october 2015.
z 3,000,000 options, each exercisable at 24 cents to acquire one fully paid ordinary share at any time up to 30 october 2015.

Terms and conditions ‑ Shares

Holders of ordinary shares are entitled to receive dividends as declared and, are entitled to one vote per share at shareholders’ meetings. In the event of winding up of the Company, ordinary shareholders rank after creditors and are fully entitled to any proceeds of liquidation.

	2016 $ 2015 $
Option Reserves equity based compensation reserve (a) option premium reserve (b) Movements during the period (a) Equity based compensation reserve Balance at the beginning of period Share Based Payment expiry of options Balance at end of period	42,902 522,000 817,827 817,848
	860,729 1,339,848
	522,000 522,000 42,902 ‑ (522,000) ‑
	42,902 522,000

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2016

15. CAPITAL AND RESERVES (Cont.)

	2016 $ 2015 $
(b) Option premium reserve Balance at the beginning of period Issue of options exercise of options Balance at end of period	817,848 ‑ ‑ 818,045 (21) (197)
	817,827 817,848

Nature and purpose of reserves

Equity based compensation reserve:

The equity based compensation reserve is used to recognise the grant date fair value of options issued but not exercised.

Option premium reserve:

The option premium reserve is used to accumulate proceeds received from the issuing of options.

	2016 $ 2015 $
16. STATEMENT OF CASH FLOWS Reconciliation of cash fows from operating activities Loss for the period Adjustments for: Depreciation of plant and equipment Provisions Share based payments effect of exchange rate adjustments Changes in assets and liabilities Decrease/(Increase) in receivables Decrease in prepayments Decrease/(Increase) in payables Net cash used in operating activities	(3,004,303) (2,723,221)
	15,457 16,957 40,500 10,540 42,902 ‑ (25,557) (1,792) 10,184 (10,184) 7,139 8 (167,229) (12,008)
	(3,080,907) (2,719,700)

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2016

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17. RELATED PARTIES

Key management personnel and director transactions

z During the year ended 30 June 2016, Peter J. nightingale had a controlling interest in an entity, MIS Corporate Pty Limited, which provided full administrative services, including rental accommodation, administrative staff, services and supplies, to the entity. Fees paid to MIS Corporate Pty Limited during the year, amounted to $144,000 (2015 ‑ $144,000). There were no outstanding amounts at 30 June 2016 (2015 ‑ $nil).
z During the year ended 30 June 2015, Peter J. nightingale had a controlling interest in an entity, Rosignol Consultants Pty Limited, which provided consulting services specifically in relation to the capital raise conducted by the Company in october 2014. There was no additional fees paid to Rosignol Consultants Pty Limited during the period (2015‑$5,000). There were no outstanding amounts at 30 June 2016 and 30 June 2015.

Key management personnel compensation

During the year ended 30 June 2016 compensation of key management personnel totalled $673,322 (2015 ‑ $630,979), which comprised primary salary and fees of $579,281 (2015 ‑ $582,744), superannuation of $46,043 (2015 ‑ $48,235), share based payments of $42,902 (2015 ‑ nil) and long service leave of $5,096. During the 2016 and 2015 financial years, no long term benefits or termination payments were paid.

18. SHARE BASED PAYMENTS

The Company has an Incentive option Plan to provide eligible persons, being employees or directors, or individuals whom the Plan Committee determine to be employees for the purposes of the Plan, with the opportunity to acquire options over unissued ordinary shares in the Company. The number of options granted or offered under the Plan will not exceed 10% of the Company’s issued share capital and the exercise price of options will be the greater of the market value of the Company’s shares as at the date of grant of the option or such amount as the Plan Committee determines. options have no voting or dividend rights. The vesting conditions of options issued under the plan are based on minimum service periods being achieved. There are no other vesting conditions attached to options issued under the plan.

In the event that the employment or office of the option holder is terminated, any options which have not reached their exercise period will lapse and any options which have reached their exercise period may be exercised within three months of the date of termination of employment. Any options not exercised within this three month period will lapse.

During the year ended 30 June 2016, 5,000,000 options were issued to the managing director as detailed in note 15 (2015‑ nil).

Options outstanding at 30 June 2016

	Number of		Fair value
Grant date	options	Exercise price	at grant date	Vesting date*	Expiry date
25 november 2015 25 november 2015 25 november 2015	1,000,000 1,000,000 3,000,000	$0.15 $0.15 $0.18	$0.018 $0.018 $0.016	25 november 2015 30 november 2016 30 november 2017	30 november 2018 30 november 2018 30 november 2018

Vesting conditions are based on minimum service periods being achieved.

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2016

18. SHARE BASED PAYMENTS (Cont.)

Options outstanding at 30 June 2015

	Number of		Fair value at
Grant date	options	Exercise price	grant date	Vesting date*	Expiry date
24 December 2010 24 December 2010 24 December 2010	1,000,000 1,000,000 3,000,000	$0.21 $0.21 $0.24	$0.105 $0.105 $0.104	24 December 2010 30 october 2011 30 october 2012	30 october 2015 30 october 2015 30 october 2015

Vesting conditions are based on minimum service periods being achieved.

The options on issue at 30 June 2015 were modified in november 2014. The strike price of the options was reduced by 1c for each option. The modification had an immaterial impact on the fair value of each option on issue, and accordingly no expense has been recognised in relation to the modification.

Movement of options in the equity based compensation reserve during the year

				Weighted average		Weighted average
			Number of options	exercise price	Number of options	exercise price
			2016	2016	2015	2015
outstanding at	1	July	5,000,000	$0.17	5,000,000	$0.23

The equity based compensation reserve is used to record the options issued to directors and executives of the Company as compensation. options are valued using the Black‑Scholes option pricing model.

The weighted average remaining contractual life of share options outstanding at the end of the year in the equity based compensation reserve was 2.42 years (2015 ‑ 0.33 years).

no ordinary shares have been issued as a result of the exercise of any option granted pursuant to the Incentive option Plan during the current and prior financial year.

Fair value of options

The fair value of options granted is measured at grant date and recognised as an expense over the period during which the employee becomes unconditionally entitled to the options. The fair value of the options granted is measured using an option valuation methodology, taking into account the terms and conditions upon which the options were granted. The amount recognised as an expense is adjusted to reflect the actual number of options that vest.

When options on issue are modified and the modification is beneficial to the other party the incremental fair value at the date of the modification is recognised over the remaining modified vesting period and the original grant‑date fair value is recognised over the remaining original vesting period. When the modification is to options on issue that have fully vested the incremental fair value is recognised as an expense in the period the modification occurs. The incremental fair value is the difference between the fair value of the share based payment at the date of modification between the old and new terms.

expenses arising from share‑based payment transactions

Total expenses arising from share based payment transactions recognised during the year ended 30 June 2016 was $42,902 (2015 ‑ $nil).

FOR THE YEAR ENDED 30 JUNE 2016

NOTES TO THE FINANCIAL STATEMENTS

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19. FINANCIAL INSTRUMENTS

Financial risk management objectives and policies

The Company’s financial instruments comprise deposits with banks, receivables, trade and other payables and from time to time short term loans from related parties. The Company does not trade in derivatives or in foreign currency.

The Company manages its risk exposure of its financial instruments in accordance with the guidance of the Board of Directors. The main risks arising from the Company’s financial instruments are market risk, credit risk and liquidity risks. This note presents information about the Company’s exposure to each of these risks, its objectives, policies and processes for measuring and managing risk, and the Company’s management of capital.

Risk management framework

The Board has overall responsibility for the establishment and oversight of the risk management framework. Informal risk management policies are established to identify and analyse the risks faced by the Company. The primary responsibility to monitor the financial risks lies with the Managing Director and the Company Secretary under the authority of the Board.

Credit risk

Credit risk arises mainly from the risk of counterparties defaulting on the terms of their agreements.

The carrying amounts of the following assets represent the Company’s maximum exposure to credit risk in relation to financial assets:

Note	Carrying amount
	2016 $ 2015 $
Cash and cash equivalents 8 Trade and other receivables 10 Security deposits 11	3,418,453 4,523,224 ‑ 10,184 15,000 15,131
	3,433,453 4,548,539

Cash and cash equivalents

The Company mitigates credit risk on cash and cash equivalents by dealing with regulated banks in Australia.

Trade and other receivables

Credit risk of trade and other receivables is very low as it usually consists predominantly of amounts recoverable from taxation and other government authorities in Australia.

All financial assets are current and are not past due or impaired and the Company does not have any material credit risk exposure to any single debtor or group of debtors under financial instruments entered into by the Company.

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2016

19. FINANCIAL INSTRUMENTS (Cont.)

Liquidity risk

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company’s reputation.

Ultimate responsibility for liquidity management rests with the Board. The Company monitors rolling forecasts of liquidity on the basis of expected fund raisings, trade payables and other obligations for the ongoing operation of the Company. At balance date, the Company has available funds of $3,418,453 for its immediate use.

The following are the contractual maturities of financial liabilities, including estimated interest payments:

	Carrying amount $ Contractual cash fows $ Less than one year $ Between one and fve years $ Interest $
30 June 2016
Trade and other payables	115,959 (115,959) (115,959) ‑ ‑
30 June 2015 Trade and other payables	283,319 (283,319) (283,319) ‑ ‑

It is not expected that the cash flows included in the maturity analysis could occur significantly earlier, or at significantly different amounts.

Market Risks

Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the Company’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return.

Interest rate risk

The Company’s income statement is affected by changes in interest rates due to the impact of such changes on interest income from cash and cash equivalents and interest bearing security deposits. The average interest rate on funds held during the year was 1.99% (2015 ‑ 1.64%).

At balance date, the Company had the following mix of financial assets exposed to variable interest rate risk that are not designated as cash flow hedges:

Note	2016 $ 2015 $
Financial assets Cash and cash equivalents 8 Security deposits 11 net exposure	3,418,453 4,523,224 15,000 15,131
	3,433,453 4,538,355

The Company did not have any interest bearing financial liabilities in the current or prior year.

The Company does not have interest rate swap contracts. The Company always analyses its interest rate exposure when considering renewals of existing positions including alternative financing.

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2016

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19. FINANCIAL INSTRUMENTS (Cont.)

Sensitivity analysis

The following sensitivity analysis is based on the interest rate risk exposures at balance date.

An increase of 100 basis points in interest rates throughout the reporting period would have decreased the loss for the period by the amounts shown below, whilst a decrease would have increased the loss by the same amount. The Company’s equity consists of fully paid ordinary shares. There is no effect on fully paid ordinary shares by an increase or decrease in interest rates during the period.

2016	2015
$	$
38,378	29,270

Currency risk

The Company is exposed to currency risk on cash and cash equivalents that are denominated in United States currency. The company’s gross financial exposure to foreign currency risk at balance date was US$5,269 (2015‑ US$433,934).

Sensitivity analysis

The following sensitivity analysis is based on the currency risk exposures at balance date.

A 5% strengthening of the United States dollar to Australian dollar at 30 June 2016 would have decreased post tax profit and net assets for the period by the amounts shown below, while weakening would have increased the post‑tax profit and net assets for the period.

2016	2015
$	$
355	28,334

The Company is not exposed to price risks.

Capital management

The Board’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business.

The Board ensures costs are not incurred in excess of available funds and will seek to raise additional funding through issues of shares for the continuation of the Company’s operations. There were no changes in the Company’s approach to capital management during the year.

The Company is not subject to externally imposed capital requirements.

Estimation of fair values

The carrying amounts of financial assets and liabilities approximate their net fair values, given the short time frames to maturity and or variable interest rates.

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2016

20. FINANCIAL REPORTING BY SEGMENTS

The Company operates in one reportable operating and geographical segment, being the biotechnology industry in Australia.

21. OPERATING LEASES

The Company leases an office in north Ryde, Sydney. The lease is for a period of 3 years starting from november 2013 with monthly renewal after the 3 years.

During the year ended 30 June 2016, $62,686 was recognised as an expense in profit or loss in respect of the operating lease (2015 ‑ $85,289).

The future minimum leases payments under non‑cancellable operating leases are payable as follows:

	2016	2015
	$	$
Less than one year	24,250	66,640
Between one and fve years	‑	24,250

22. COMMITMENTS AND CONTINGENCIES

The Company may be party to commercial disputes and litigation in the normal course of business. no material liabilities are expected to arise in respect of the commercial disputes and litigation existing at balance date.

There are no capital commitments at the date of these financial statements.

23. SUBSEQUENT EVENTS

There has been no matters arisen in the interval between the end of the financial year and the date of this report any item, transaction or event of a material and unusual nature likely, in the opinion of the directors of the Company, to affect significantly the operations of the Company, the results of those operations, or the state of affairs of the Company in future financial years.

DIRECTORS’ DECLARATION

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In the opinion of the directors of Biotron Limited:
a) the financial statements and notes set out on pages 18 to 38, and the Remuneration Report in the Directors’ Report, set out on pages 11 to 15, are in accordance with the Corporations Act 2001 , including:
- (i) giving a true and fair view of the Company’s financial position as at 30 June 2016 and of its performance for the financial year ended on that date; and
- (ii) complying with Australian Accounting Standards (including Australian Accounting Interpretations) and the Corporations Regulations 2001 ;
b) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.
The directors have been given the declarations required by Section 295A of the Corporations Act 2001 from the chief executive officer and chief financial officer for the financial year ended 30 June 2016.
The directors draw attention to note 2(a) of the financial statements, which includes a statement of compliance with International Financial Reporting Standards.

This report has been signed in accordance with a resolution of the directors and is dated 5 August 2016:

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Michael J. Hoy Chairman

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Michelle Miller Managing Director

INDEPENDENT AUDITOR’S REPORT

TO THE MEMBERS OF BIOTRON LIMITED

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Report on the financial report

We have audited the accompanying financial report of Biotron Limited (the Company), which comprises the Statement of Financial Position as at 30 June 2016, and the Statement of Profit or Loss and other Comprehensive Income, Statement of Changes in equity and Statement of Cash Flows for the year ended on that date, notes 1 to 23 comprising a summary of significant accounting policies and other explanatory information and the directors’ declaration.

Directors’ responsibility 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 is free from material misstatement, whether due to fraud or error. In note 2(a), the directors also state, in accordance with Australian Accounting Standard AASB 101 Presentation of Financial Statements , that the financial statements comply with International Financial Reporting Standards.

Auditor’s responsibility

our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. These Auditing Standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial report is free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation of the financial report that gives a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report.

We performed the procedures to assess whether in all material respects the financial report presents fairly, in accordance with the Corporations Act 2001 and Australian Accounting Standards, a true and fair view which is consistent with our understanding of the Company’s financial position and of its performance.

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

Independence

In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001 .

KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.

Liability limited by a scheme approved under Professional Standards Legislation.

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INDEPENDENT AUDITOR’S REPORT

TO THE MEMBERS OF BIOTRON LIMITED

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Auditor’s opinion

In our opinion:

a) the financial report of Biotron Limited is in accordance with the Corporations Act 2001 , including:
(i) giving a true and fair view of the Company’s financial position as at 30 June 2016 and of its performance for the year ended on that date; and
(ii) complying with Australian Accounting Standards and the Corporations Regulations 2001.
b) the financial report also complies with International Financial Reporting Standards as disclosed in note 2(a).

Report on the remuneration report

We have audited the Remuneration Report included in pages 11 to 15 of the directors’ report for the year ended 30 June 2016. 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 auditing standards.

Auditor’s opinion

In our opinion, the Remuneration Report of Biotron Limited for the year ended 30 June 2016 complies with Section 300A of the Corporations Act 2001 .

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KPMG 5 August 2016 Brisbane

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Stephen J. Board Partner

ADDITIONAL STOCK EXCHANGE INFORMATION

Home Exchange

The Company is listed on the ASX Limited. The home exchange is Sydney.

Use of Cash and Assets

Since the Company’s listing on the ASX, the Company has used its cash and assets in a way consistent with its stated business objectives.

Class of Shares and Voting Rights

There is only one class of shares in the Company, fully paid ordinary shares.

The rights attaching to shares in the Company are set out in the Company’s Constitution. The following is a summary of the principal rights of the holders of shares in the Company.

every holder of shares present in person or by proxy, attorney or representative at a meeting of shareholders has one vote on a vote taken by a show of hands, and, on a poll every holder of shares who is present in person or by proxy, attorney or representative has one vote for every fully paid share registered in the shareholder’s name on the Company’s share register.

A poll may be demanded by the chairperson of the meeting, by at least 5 shareholders entitled to vote on the resolution or shareholders with at least 5% of the votes that may be cast on the resolution on a poll.

Distribution of Equity Securityholders

As at 31 July 2016, the distribution of each class of equity was as follows:

					30 November	30 November
	Fully Paid		30 September	Total Number	2018 $0.15	2018 $0.18
	Ordinary	Total Number	2016 $0.12	of Listed	Unlisted	Unlisted
Range	Shares	of Shares	Listed Options	Options	Options	Options
1 ‑ 1,000 1,001 ‑ 5,000 5,001 ‑ 10,000 10,001 ‑ 100,000 100,001 and over	105 403 430 1,271 468 2,677	30,952 1,459,600 3,494,475 50,019,137 258,763,937 313,768,101	65 200 74 255 89 683	40,185 538,577 561,798 9,200,393 40,375,420 50,716,373	‑ ‑ ‑ ‑ 1 1	‑ ‑ ‑ ‑ 1 1

At 31 July 2016, 683 shareholders held less than a marketable parcel of shares and 546 listed option holders held less than a marketable parcel of options.

ADDITIONAL STOCK EXCHANGE INFORMATION

Twenty Largest Quoted Shareholders

At 31 July 2016 the twenty largest fully paid ordinary shareholders held 30.35% of fully paid ordinary as follows:

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Fully Paid
Name Ordinary Shares %
1 Armco Barriers Pty Ltd 12,261,000 3.91
2 Bond Street Custodians Limited 10,000,000 3.19
3 HSBC Custody nominees (Australia) Limited 9,271,743 2.95
4 Scott’s A V Pty Ltd 9,014,000 2.87
5 Warman Investments Pty Ltd 5,280,556 1.68
6 Mr Robert Thomas +Mrs Kyrenia Thomas 5,086,805 1.62
7 Pathold no 222 Pty Ltd 5,050,000 1.61
8 Umbiram Pty Ltd 4,985,491 1.59
9 Rigi Investments Pty Limited 4,338,696 1.38
10 Twynam Agricultural Group Pty Ltd 3,830,208 1.22
11 Mr. Peter James nightingale 3,594,903 1.15
12 Mrs narelle Fay 3,385,525 1.08
13 Fordholm Investments Pty Ltd 3,200,000 1.02
14 CBDF Pty Limited 2,719,487 0.87
15 Jey Investments Pty Ltd 2,560,445 0.82
16 Ramsab Pty Ltd 2,444,445 0.78
17 Rosignol Pty Ltd 2,165,513 0.69
18 Mr Ian Gavin Platt‑Hepworth + Mrs S Marion Platt ‑ Hepworth 2,070,151 0.66
19 De Peter Mun Sun Chan 2,000,000 0.64
20 Mr Russell Dean Thomson 1,976,736 0.63
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There are no current on‑market buy‑backs.

ADDITIONAL STOCK EXCHANGE INFORMATION

Twenty Largest Quoted Option Holders

At 31 July 2016 the twenty largest option holders held 48.90% of listed options as follows:

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Fully Paid
Name Ordinary Shares %
1 Armco Barriers Pty Ltd 5,300,000 10.45
2 Mr Russell Dean Thomson 2,407,475 4.75
3 ABn AMRo Clearing Sydney nominees Pty Ltd 1,994,334 3.93
4 BMMDH Pty Ltd 1,444,000 2.85
5 Mr Robert Thomas +Mrs Kyrenia Thomas 1,181,482 2.33
6 IQ Global Asset Partners Pty Ltd 1,099,487 2.17
7 CBDF Pty Limited 1,077,891 2.13
8 Bond Street Custodians Limited 1,000,000 1.97
9 Fordholm Investments Pty Ltd 1,000,000 1.97
10 Mr Russel Wayne Halder 1,000,000 1.97
11 Rigi Investments Pty Limited 1,000,000 1.97
12 HSBC Custody nominees (Australia) Limited 913,633 1.80
13 Viking Management Services Pty Ltd 822,223 1.62
14 Mr edward Patrick o’Brien 778,798 1.54
15 Pudd & Co Pty Ltd 752,278 1.48
16 Umbiram Pty Ltd 700,961 1.38
17 Mr. Peter James nightingale 629,945 1.24
18 Altinova nominees Pty Ltd 625,000 1.23
19 Mr William Stinson + Mrs Maree Stinson + Mr John Stinson 550,000 1.08
20 Rosignol Pty Ltd 521,979 1.03
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Unquoted Options

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|||||||
|---|---|---|---|---|---|
|Number of|Number of|
|Holders|Options|Grant Date|Vesting Date|Exercise Price|Expiry Date|
|1|1,000,000|25/11/2015|25/11/2015|$0.15|30 november 2018|
|1|1,000,000|25/11/2015|30/11/2016|$0.15|30 november 2018|
|1|3,000,000|25/11/2015|30/11/2017|$0.18|30 november 2018|

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Substantial Optionholders in the entity

The Company provides the names of the holders of 20% or more options in these unquoted securities below:

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||||
|---|---|---|
|Name|Number of Options Held|% of Options Held|
|Michelle Miller|5,000,000|100%|

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CORPORATE DIRECTORY

Directors

Mr Michael J. Hoy (Chairman) Dr Michelle Miller (Managing Director) Dr Susan M. Pond Mr Robert B. Thomas Dr Denis n. Wade

Share Registrar

Computershare Investor Services Pty Limited Level 4, 60 Carrington Street SYDneY nSW 2000 Phone: 1300 787 272 Fax: +61 3 9473 2500

Company Secretary

Mr Peter J. nightingale

Registered Offi ce

Level 2, 66 Hunter Street SYDneY nSW 2000 Phone: + 61 2 9300 3344 Fax: + 61 2 9221 6333 e‑mail: [email protected] Homepage: www.biotron.com.au

Principal Administration Offi ce

Suite 1.9, 56 Delhi Road noRTH RYDe nSW 2113 Phone: + 61 2 9805 0488 Fax: + 61 2 9805 0688

Auditors

KPMG Level 16, Riparian Plaza 71 eagle Street BRISBAne QLD 4000

Home Exchange

ASX Limited 20 Bridge Street SYDneY nSW 2000

Solicitors

Minter ellison 88 Phillip Street SYDneY nSW 2000

Biotron Limited, incorporated and domiciled in Australia, is a publicly listed company limited by shares.

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WWW. .COM.AU

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Level 2, 66 Hunter Street Sydney NSW 2000 Tel: (61-2) 9300 3344 Fax: (61-2) 9221 6333 E-mail: [email protected] Website: www.biotron.com.au

NOTICE OF ANNUAL GENERAL MEETING

Notice is hereby given that the Annual General Meeting of members is to be convened at Level 4, 60 Carrington Street, Sydney, NSW, 2000 on 22 November 2016 at 11.30 am.

AGENDA

BUSINESS

To receive and consider the Company's annual financial report, the directors' report and the auditors' report for the year ended 30 June 2016.

To consider and, if thought fit, pass the following resolutions, with or without amendment:

Ordinary Resolutions

Resolution 1. 'That the Remuneration Report for the year ended 30 June 2016 be and is hereby adopted.'

Resolution 2. 'That Dr. Denis N. Wade be and is hereby re-elected as a Director.'

To transact any other business that may be brought forward in accordance with the Company's Constitution.

By order of the Board

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Peter J. Nightingale Company Secretary

17 October 2016

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Notes:

The Company has determined, in accordance with regulation 7.11.37 of the Corporations Regulations 2001 (Cth) , that the Company's shares quoted on the Australian Stock Exchange Limited at 7.00 pm Sydney time on 20 November 2016 are taken, for the purposes of the Annual General Meeting to be held by the persons who held them at that time. Accordingly, those persons are entitled to attend and vote (if not excluded) at the meeting.

Voting Exclusion Statements

A. The Company will disregard any votes cast on Resolution 1 by or on behalf of a member of the key management personnel of the Company (at the date of the meeting or whose remuneration is disclosed in the remuneration report) ('KMP') and their closely related parties (such as close family members and controlled companies), unless the vote is cast:
as a proxy for a person entitled to vote in accordance with a direction on the proxy appointment; or
by the Chairman of the Meeting as a proxy for a person entitled to vote and the proxy appointment expressly authorises the Chairman of the Meeting to exercise the proxy even if the resolution is connected directly or indirectly with the remuneration of a member of KMP.

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Level 2, 66 Hunter Street Sydney NSW 2000 Tel: (61-2) 9300 3344 Fax: (61-2) 9221 6333 E-mail: [email protected] Website: www.biotron.com.au

EXPLANATORY MEMORANDUM

This is an Explanatory Memorandum to in the Notice of Annual General Meeting of Biotron Limited to be convened at Level 4, 60 Carrington Street, Sydney, NSW, 2000 on 22 November 2016 at 11.30 am.

Resolution 1 Adoption of the Remuneration Report

The Remuneration Report, which can be found as part of the Directors’ Report in the Company's 2016 Annual Report, contains certain prescribed details, sets out the policy adopted by the Board of Directors and discloses the payments to key management personnel, Directors and senior executives.

In accordance with section 250R of the Corporations Act, a resolution that the Remuneration Report be adopted must be put to the vote. This resolution is advisory only and does not bind Directors.

The Chairman will allow a reasonable opportunity for shareholders as a whole to ask about, or make comments on the Remuneration Report.

The Chairman intends to exercise all undirected proxies in favour of Resolution 1. If the Chairman of the Meeting is appointed as your proxy and you have not specified the way the Chairman is to vote on Resolution 1, by signing and returning the Proxy Form, you are considered to have provided the Chairman with an express authorisation for the Chairman to vote the proxy in accordance with the Chairman's intention.

The Directors recommend that you vote IN FAVOUR of advisory Resolution 1.

The Chairman of the Meeting intends to vote undirected proxies IN FAVOUR of Resolution 1.

Resolution 2 Re-election of Dr. Denis N. Wade as a Director

In accordance with Article 58 of the Company's Constitution and the Corporations Law, Denis Wade retires as a Director by rotation and, being eligible, offers himself for re-election.

Dr. Wade has been involved for over 40 years with the development of research based pharmaceuticals and medical devices in both industry and academia. He has been a director of several private and public companies in the healthcare sector, including Heartware Limited and subsequently Heartware International Inc., since December 2004. He was a director and chairman of Gene Shears Pty Limited and, from 1987 until his retirement in 2002, was managing director and chairman of Johnson & Johnson Research Pty Ltd, a research and development company of Johnson & Johnson Inc. He was also a member of the J&J Corporate Office of Science and Technology. Prior to that, Dr. Wade was the Foundation Professor of Clinical Pharmacology at the University of New South Wales and served as a member of a number of state and federal bodies related to the drug industry, including the P3 Committee.

He is a former chairman of the Australian Academy National Committee for Pharmacology, the Australasian Society for Clinical and Experimental Pharmacology and Toxicology and a former chairman of the Clinical Pharmacology Section of the International Union of Pharmacology.

Dr. Wade holds a first class honours degree in Medicine and Science from the University of Sydney and a Doctorate of Philosophy from the University of Oxford. He was awarded an Honorary Doctorate of Science by the University of New South Wales and is a Fellow of the Royal Australasian College of Physicians and of the Australian Academy of Technological Sciences and Engineering. In 1999 he was made a Member of the Order of Australia.

The Directors recommend that you vote IN FAVOUR of Resolution 2.

The Chairman of the Meeting intends to vote undirected proxies IN FAVOUR of Resolution 2.

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All correspondence to: Computershare Investor Services Pty Limited GPO Box 2975 MELBOURNE VICTORIA 3001 AUSTRALIA

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BIOTRON LIMITED — Annual Report 2016

64528_rns_2016-10-16_512e35e9-930b-4b7a-a450-044b7d5bfd6a.pdf

ANNUAL REPORT AND NOTICE OF AGM

CONTENTS

REVIEW OF OPERATIONS

REVIEW OF OPERATIONS

Clinical Programs ‑ Hepatitis C Virus (HCV)

Clinical programs ‑ HIV‑1

REVIEW OF OPERATIONS

Other viral programs

Outlook for the next 12 months

REVIEW OF OPERATIONS

Patents

REVIEW OF OPERATIONS

Corporate

CORPORATE GOVERNANCE STATEMENT

DIRECTORS’ REPORT

Directors

Mr Michael J. Hoy Independent and Non‑Executive Chairman

Dr Michelle Miller

BSc, MSc, PhD, GCertAppFin (Finsia) Managing Director

Dr Susan M. Pond

AM, MD DSc, FTSE Independent and Non‑Executive Director

DIRECTORS’ REPORT

Mr Robert B. Thomas

BEc, MSDIA, SF Fin, FICD Independent and Non‑Executive Director

Dr Denis N. Wade

Independent and Non‑Executive Director

Mr Peter J. Nightingale Company Secretary

DIRECTORS’ REPORT

Directors’ Meetings

Directors’ Interests

Unissued Shares Under Option

DIRECTORS’ REPORT

Shares Issued on Exercise of Options

Principal Activities

Financial Result and Review of Operations

Impact of Legislation and Other External Requirements

Dividends

State of Affairs

Environmental Regulations

Events Subsequent to Balance Date

Likely Developments

DIRECTORS’ REPORT

Indemnification of Officers and Auditors

Remuneration Report ‑ Audited

Principles of compensation ‑ Audited

Consequences of performance on shareholder wealth ‑ Audited

Details of remuneration for the year ended 30 June 2016 ‑ Audited

Options granted as compensation ‑ Audited

DIRECTORS’ REPORT

Modification of terms of equity‑settled share‑based payment transactions ‑ Audited

Exercise of options granted as compensation ‑ Audited

Analysis of options and rights over equity instruments granted as compensation ‑ Audited

Analysis of movements in options ‑ Audited

DIRECTORS’ REPORT

Options and rights over equity instruments ‑ Audited

Option holdings 2016 ‑ Audited

Loans to key management personal and their related parties ‑ Audited

Other transactions with key management personnel ‑ Audited

DIRECTORS’ REPORT

Movements in shares ‑ Audited

Fully paid ordinary shareholdings and transactions 2016 ‑ Audited

Service contracts ‑ Audited

Non‑executive directors ‑ Audited

Non‑audit Services

DIRECTORS’ REPORT

Lead Auditor’s Independence Declaration

DIRECTORS’ REPORT

Lead Auditor’s Independence Declaration under Section 307C of the Corporations Act 2001

To: the Directors of Biotron Limited

STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2016

STATEMENT OF FINANCIAL POSITION

STATEMENT OF CHANGES IN EQUITY

STATEMENT OF CASH FLOWS

NOTES TO THE FINANCIAL STATEMENTS

1. REPORTING ENTITY

3. SIGNIFICANT ACCOUNTING POLICIES

2. BASIS OF PREPARATION

BIOTRON LIMITED Annual Report 2016