adherium-annual-report-2023-v13.pdf

Adherium Limited ABN 24 605 352 510

Annual Report 2023 Adherium Ltd

Adherium Limited is a digital health company providing solutions for improving

patient treatment with remote monitoring and data solutions. Its Hailie

system is

transforming management of chronic respiratory conditions, especially asthma and

chronic obstructive pulmonary disease. Hailie improves patient health through

better adherence and self-management while enabling doctors to be paid

for remote work and saving costs across health systems by avoiding hospital

admissions. Adherium’s clinically proven sensors, app and powerful data

platform provide remote, real-time, personalised information to patients

and clinicians. Adherium is increasing sales in US and other markets by

pursuing partnerships with major hospital systems, medical groups

and insurers. For more information, visit www.adherium.com.

Company Overview

Annual Report 2023 Adherium Ltd

Chairman's and CEO's

Report

Directors’ Report

Remuneration Report

Auditor’s

Independence Declaration

Consolidated Statement of Prot or Loss

and Other Comprehensive Income

Consolidated Statement

of Financial Position

Consolidated Statement

of Changes in Equity

Consolidated Statement

of Cash Flows

Notes to the

Consolidated Financial Statements

Directors’

Declaration

Independent Auditor’s

Report

Australian Securities Exchange

Additional Information

Contents

1Annual Report 2023 Adherium Ltd

Annual Report 2023 Adherium Ltd

2 Annual Report 2023 Adherium Ltd

Chairman's and

CEO's Report

Annual Report 2023 Adherium Ltd

Dear Shareholders,

We are pleased to present the Chairman’s and

CEO's Report for the year ending 30 June 2023. It has

been a transformational year at Adherium marked

by major commercial, regulatory and operational

advancements. With 25 million patients diagnosed

with asthma in the US alone along with another 26

million diagnosed with COPD, the addressable market

for lifelong, chronic respiratory disease in our primary

market is 51 million patients. Remote patient monitoring

is especially important to caring for the 8.5 million

patients in the severe and difcult to treat category

as our targeted serviceable market. Our unwavering

commitment to improving outcomes and quality of

life for those patients remains at the heart of all our

endeavours.

The commercial strategy is focused on signing up

scalable partners and customers to reach cash ow

positive at less than 80,000 patients represents only

one percent of the US 8.5 million serviceable patient

market. With remote patient monitoring reimbursement

available in the US, Adherium gets paid for generating

and transmitting respiratory data. Our go-to-market

strategy includes medical groups and remote

monitoring companies with revenue from device sales

and recurring monthly data fees and hospital systems

and insurer channels with revenue from devices, data

and value-based risk-share agreements. In our prior

updates we highlighted Adherium’s intention to ramp

up commercialisaton of our technology portfolio; we

are pleased to report that we have made major strides

in this direction. The Hailie

platform is the culmination

of over 20 years of research and development and

clinical validation, and Adherium is uniquely positioned

in the right environment with the right technology to

deliver signicant value to patients, clinicians and

shareholders.

COVID-19 created a pivotal shift in the healthcare

landscape, accelerating the adoption of medical

technology and changing the ways patients engage

with their healthcare providers. Telemedicine and

remote monitoring are now rmly ingrained into

healthcare worldwide. The value placed on remote

patient care is reected in specic reimbursement

codes now available in the US to allow clinicians to

proactively access new remote patient care options.

Adherium’s mission has always been to be the leading

digital solution for remote respiratory monitoring

through the integration of devices and data to

optimise outcomes from user to payor. It is a result of

this foresight that Hailie

sensors continue to be the

only drug agnostic 510(k) approved sensors in the

market capable of tracking physiological data. Hailie

technology is clinically proven to improve adherence

and self-management that allow timely interventions

Annual Report 2023 Adherium Ltd

In the UK, Adherium was awarded $880,000 by the

NHS to deploy the Hailie

digital inhaler solution for

asthma management of high-risk children aged 5-16

years in a primary care setting. We are partnering

with our UK distribution partner Helicon Health to

deliver this project. In June Adherium was selected

by the Victorian Government to join a delegation to

attend London Trade Week to showcase our company

to an international audience, meet UK healthcare

key stakeholders and to connect with existing and

prospective customers. In Australia we are exploring

opportunities in new models of care such as virtual

hospitals where remote patient monitoring can be

expanded to include asthma and COPD management.

Several key publications revealed the long-term cost

effectiveness of digital inhaler adherence technologies

in difcult to treat asthma while others looked at

treating patients with digital inhalers to develop

predictive models for asthma exacerbations and

response to biologics using data collected from these

devices. These studies reinforce the strategic path

the company is now following and into the future as

AI gathers pace and software as a medical device

(SaMD) becomes the next stage of the Hailie

platform.

Our strategic partnerships run in parallel with

the expansion of our regulatory footprint to drive

Adherium’s market reach forward. In our pursuit of

regulatory excellence we are proud that we achieved

three additional US FDA 510(k) clearances during

the year for our new, next-generation Hailie

sensors

with physiological parameters that connect to

GlaxoSmithKline (GSK) Ellipta

dry powder inhalers,

GSK Ventolin

, Advair

and Flovent

pMDIs and

the Teva Pharmaceutical Industries pMDIs. This

strengthens our regulatory footprint and underscores

our commitment to being a drug agnostic, respiratory

digital health provider.

Now following a total of four US FDA 510(k) market

clearances of the next generation Hailie

sensors,

Adherium progressed to 79% coverage for sensors

capturing physiological data such as inhalation ow

rate, and 91% coverage for adherence tracking of US

top 20 branded inhaler medications by sales volume.

Hailie

is the only FDA 510(k) cleared drug agnostic

digital sensor available today to offer physiological

data insights on inhaler technique.

In January 2023, we also received UK Medicines and

Healthcare products Regulatory Agency (MHRA) and

Australian Therapeutic Goods Administration (TGA)

approval to commercially distribute the next-generation

Hailie

sensors.

Further in January 2023 we commenced commercial

production and market release of our GSK Ellipta

sensors. Our Hailie

platform continues to evolve,

and tailored treatment plans to greatly improve

health outcomes while reducing the frequency of

exacerbations and hospital admissions. Preventable

hospitalisations in the US alone cost its health system

US$34 billion annually and add unnecessary strain to

already stretched clinicians.

Our commercial strategy remains resolute, focused on

revolutionising healthcare by emphasising outcomes-

based models. Adherium's partnership initiatives have

gained substantial momentum, enabling us to make

meaningful strides in patient care.

We have a clear commercial path. We seek to

collaborate with large scale, value driven partners that

share our outcomes-based model of patient care, while

taking advantage of the favourable US reimbursement

environment. Our initial focus is on the signicant

US market while leveraging additional market

opportunities in the UK and Australia.

We have continued to make strong progress in our

commercial strategy and have secured several

strategic partnerships and established a pipeline of

prospective customer contracts with medical groups,

hospital systems and insurers. We believe this strategy

enables Adherium to rapidly grow while improving

healthcare outcomes for the most patients. A testament

to this strategy is Adherium’s latest partnership with

Allergy Partners, the largest allergy and asthma

practice in the US with more than 300,000 asthma

patients across 130 sites. Allergy Partners will integrate

Adherium’s Hailie

platform into its care approach.

This further solidies our presence in the remote patient

monitoring space.

Our partnership with CareCentra continues with the

integration of Hailie

to its AI-driven behaviour shaping

platform MyMoBeMap™, which analyses data to

identify health risks to alert patients and clinicians of

possible exacerbations that might result in emergency

admissions. This combined with behavioural inuencing

is a new dimension of insights targeted toward

changing patient care from reactive to preventative.

We believe this will become the new standard of

respiratory care and look forward to updating the

market with our progress.

A key component in the commercial strategy is

partnering with hospital systems and insurers where we

can align incentives to create value-based, risk-share

contracts. This approach not only drives meaningful

scale but also focuses on health outcomes rather than

just services delivered. This shift in healthcare models

reinforces our commitment to driving transformative

change.

Annual Report 2023 Adherium Ltd

demonstrating clinical effectiveness with impressive

adherence rates and reduced exacerbations. Updates

to the Hailie

portal this year included a new dynamic

patient triage dashboard based on a severity matrix

and prioritises those that need assistance and a new

patient dashboard that can provide individual billing

reports and overall improvements to the real-time

management of the Hailie

end user.

The Hailie

app and portal software platform provide

real-time feedback to patients and physicians,

leveraging data to inuence behaviour and drive

interventions. This approach has been shown to reduce

hospital admissions and improve quality of life for

patients.

With each patient onboarded onto the Hailie

platform

we generate revenue from the sensor sales and

recurring data fees for use of the Hailie

platform to

generate and transmit data. This continued expansion

snowballs our momentum towards becoming cash ow

positive.

This nancial year we successfully completed a capital

raise involving a Share Purchase Plan, during which

Adherium raised $13.81 million in funds from new

and existing institutional, sophisticated and retail

investors, and included cornerstone investments from

existing shareholders Trudell Medical and BioScience

Managers Translation Fund 1. The funds will be used

to pursue Adherium’s commercial opportunities and in

turn improve its value proposition to patients, customers

and shareholders.

Key appointments this year include Mr Daniel Kaplon as

Chief Financial Ofcer in October 2022. His wealth of

experience in healthcare and operations strengthens

our senior management team.

The past 12 months have seen Adherium achieve

important milestones in commercial partnerships,

regulatory advancements and operational execution.

The year ahead will continue our focus on driving

scale as we establish and build upon existing and new

customer relationships.

Our commitment to transforming healthcare remains

steadfast and our focus on outcomes-based models

is reshaping the industry. As we continue to pioneer

innovative solutions for respiratory care, we know we

are making a lasting impact on patient well-being.

We strongly believe the Hailie

platform has the

potential to transform patient care on a large scale.

Adherium seeks to be a leader in digital health and

our strategic path is clear. We thank the Adherium

team for their weighty efforts this year in realising the

company’s commercial, regulatory and operational

goals. To our partners and shareholders, thank you

“

Adherium progressed

to 79% coverage for

sensors capturing

physiological data such

as inhalation ﬂow rate,

and 91% coverage for

adherence tracking

of US top 20 branded

inhaler medications by

sales volume.

”

for your continued support and belief in our vision for

a new standard of healthcare. The coming year is full

of opportunities for Adherium and we look forward

to sharing our progress. Together, we are creating a

world where every breath counts

Lou Panaccio Rick Legleiter

Non-Executive Chairman Group CEO

Annual Report 2023 Adherium Ltd

Director's Report

Commercial

Commercial developments

with CareCentra, UK NHS

and Allergy Partners

Revenue

$3.195m

504%

Cash

$9.077m

71.8%

Number of new FDA 510(k) clearances

3 sensors

2022: 1 sensor

2023 at a Glance

Annual Report 2023 Adherium Ltd

Directors’ Report

The Directors present their report on the consolidated entity (the Group), consisting of Adherium Limited (the

Company or Adherium) and the entities it controlled at the end of, or during, the year ended 30 June 2023, together

with the independent auditor’s report thereon.

Directors

The Directors of the Company at any time during the year and until the date of this report are:

Mr Lou Panaccio, BEc, CA, MAICD. Age 66.

Independent Non-Executive Chair

Appointed as a Director 25 February 2022 and Chairman 29 April 2022.

Mr Panaccio is currently on the boards of ASX and NASDAQ listed Avita Therapeutics Inc. (Non-executive Chairman

from July 2014), ASX50 company Sonic Healthcare Limited, one of the world’s largest medical diagnostics companies

(Non-executive Director from June 2015), and ASX-listed Rhythm Biosciences Limited (Non-executive Director from

August 2017).

He is also a Non-executive Director of Unison Housing Limited, VGI Health Technology Limited, NeuralDX Limited

(Non-executive Chairman from March 2019) and Haemokinesis Limited (from July 2021).

Mr Panaccio was the Chief Executive Ofcer and Executive Director of Melbourne Pathology for ten years to 2001, the

Chief Executive Ofcer of Monash IVF until 2009 and the Executive Chairman of Health Networks Australia until 2017.

He was also a Non-executive Director of ASX-listed Genera Biosystems Limited from November 2010 until 28 June

2019 (Chairman from July 2011 until 28 June 2019).

Mr Panaccio holds a Bachelor of Economics from Monash University and is a Member of the Australian Institute of

Company Directors.

Mr George Baran, MBA. Age 63.

Non-Executive Director

Appointed as a Director on 13 May 2021.

Mr Baran has over 35 years of experience in the medical device industry and serves as Executive Chair of the Trudell

Medical Limited Board of Directors as well as being a signicant shareholder. In addition to his role at Trudell, Mr

Baran is an active investor in and Director of several medical device and e-health/connected care companies

including Sensory Technologies, Mozzaz Corporation, and Sky Medical Technology Inc. He was also a lead investor

and a former Director of Vanrx Phamasystems, which was recently acquired by Cytiva Life Sciences.

Mr Baran has been responsible for the marketing of new drug delivery technologies to medical opinion leaders and

major pharmaceutical companies. This has included collaboration with business and clinical partners in the design

and co-ordination of clinical studies. He has also been granted several US and international patents for medical

devices for drug delivery and minimally invasive surgery.

Mr Baran holds an MBA from the Richard Ivey School of Business, Western University, London (ON) where he

currently serves on the Advisory Board of the Lawrence National Centre for Policy and Management. Mr Baran has

not held any other Australian public company directorships in the last three years.

Mr Jeremy Curnock Cook, MA. Age 74.

Independent Non-Executive Director

Appointed as a Director on incorporation of Adherium Limited on 17 April 2015.

Mr Curnock Cook was formerly head of the life science private equity team at Rothschild Asset Management in the

UK and is an active investor in the Australian life science sector. At Rothschild, Mr Curnock Cook was responsible

for the launch of the rst dedicated biotechnology fund for the Australian market. Over his 40-year career, Mr

Curnock Cook has specialised in creating value in emerging biotech enterprises, through active participation with

management. He has served on over 40 boards in various roles, including chair of private and public biotechnology

companies listed on NASDAQ, AMEX, LSE, TSX and ASX. Mr Curnock Cook received his MA in Natural Sciences

from Trinity College in Dublin, Ireland. He is currently Managing Director of BioScience Managers (manager of a

major shareholder in Adherium), and sits on the board of Avita Medical, Rex Bionics Pty, Humanetix Ltd, Marine

Annual Report 2023 Adherium Ltd

Department Ltd, Cambridge Respiratory Innovations Ltd, and Sea Dragon Ltd. Mr Curnock Cook was previously a

director of Bioxyne Limited and Phylogica Limited. He has held no other Australian public company directorships in

the last three years.

As noted, Mr Curnock Cook has an association with signicant shareholders through his capacity as Managing

Director of BioScience Managers Pty Ltd. The board of directors is of the opinion that this does not compromise the

independence of Mr Curnock Cook as, to the best of the Board’s knowledge and based on advice received, he is not

involved in decision making by the shareholders, and also does not control BioScience Managers Pty Ltd.

Dr William Hunter, MD. Age 60.

Independent Non-Executive Director

Appointed as a Director on 17 December 2015.

Dr Hunter has extensive experience in commercialising medical device technologies. He co-founded Angiotech

Pharmaceuticals in 1992 and assumed the position of CEO in 1997 when Angiotech was a venture-stage, private,

pre-clinical company with less than 50 employees. He led Angiotech through its IPO and listing on the Toronto Stock

Exchange and NASDAQ. Dr Hunter has over 200 patents and patent applications to his name and products in which

he was an inventor or co-inventor, including the TAXUS Drug-Eluting Coronary Stent, the Zilver PTX Peripheral Drug-

Eluting Stent, the Quill barbed wound closure device and the 5-FU Anti-Infective Catheter. Combined, these products

have generated revenues of over $12 billion and have helped the lives of over 15 million patients globally. He is

currently President and CEO of Canary Medical Inc. and formerly Correvio Pharma Corp (NASDAQ: CORV).

Dr Hunter is also a Director of Rex Bionics and an Industry Expert Advisor for BioScience Managers (manager of a

major shareholder in Adherium). He has previously served as a director of Epirus Biopharmaceuticals (NASDAQ:

EPRS) and Union Medtech.

Dr Hunter completed his BSc from McGill University and a MSC and MD from the University of British Columbia.

Dr Hunter served as a practising physician in British Columbia for ve years. Dr Hunter held no other Australian

public company directorships in the last three years.

Mr Bruce McHarrie, B.Com, FCA, GAICD. Age 65.

Independent Non-Executive Director

Appointed as a Director on 20 July 2015.

Mr McHarrie is a company director and adviser in the health and life sciences sectors with over 25 years’ experience.

He was formerly with Telethon Kids Institute in Perth, Western Australia, for 15 years, where his roles included Chief

Financial Ofcer, Director of Operations and Director of Strategic Projects. Prior to joining Telethon Kids, Mr McHarrie

was a Senior Manager at Deloitte in London before moving to Rothschild Asset Management as Assistant Director

of the Bioscience Unit, a life sciences private equity group investing in early-stage biotechnology and healthcare

companies. Outside his role at Adherium, he is currently an advisor to BioScience Managers (manager of a major

shareholder in Adherium). Mr McHarrie is a Fellow of the Institute of Chartered Accountants Australia and New

Zealand. He holds a Bachelor of Commerce from the University of Western Australia and is a graduate member of

the Australian Institute of Company Directors. Mr McHarrie was previously a director at AusCann Group Holdings Ltd

and Pharmamark Nutrition (nutritional foods). He has held no other Australian public company directorships in the

last three years.

As noted, as an advisor to BioScience Managers, Mr McHarrie has an association with a signicant shareholder of

the Company. The board of directors is of the opinion that this does not compromise Mr McHarrie’s independence as

to the best of the board’s knowledge he is not involved in decision making by BioScience Managers and the value of

the advisory services provided is not material.

Mr James Ward-Lilley, BA (Hons), MBA was an Independent Non-Executive Director until his resignation on

30 November 2022.

Company Secretary

Mr Brett Tucker, B.Com. CA Age 38.

Company Secretary

Appointed 4 May 2023.

Mr Tucker holds a Bachelor of Commerce from the University of Western Australia and has completed the Chartered

Accountant program. With over 10 years’ experience in governance and equity capital markets, he has been a

company secretary for numerous ASX listed and unlisted public & private companies across a range of industries,

including technology and healthcare.

Annual Report 2023 Adherium Ltd

Directors’ Meetings

The number of meetings of Directors (including meetings of committees of directors) held during the period and the

number of meetings attended by each Director was as follows:

Directors’ Meetings

Audit & Risk Committee

Meetings

Nomination & Remuneration

Committee Meetings

Meetings

eligible

to attend

Meetings

attended

Meetings

eligible

to attend

Meetings

attended

Meetings

eligible

to attend

Meetings

attended

Lou Panaccio

9 8 7 7 1 1

James Ward-Lilley

6 4 - - - -

George Baran

9 8 - - - -

Jeremy Curnock Cook

9 8 - - 1 1

William Hunter

9 4 - - - -

Bruce McHarrie

9 7 7 7 - -

Nomination & Remuneration Committee business was largely dealt with at Board meetings during this period.

Committees of the Board

The Company has established the following committees of the board, with membership in the year to 30 June 2023 as

noted:

Committee Membership

Audit & Risk Bruce McHarrie (Chair), Non-Executive Director

Lou Panaccio, Non-Executive Director

James Ward-Lilley, Non-Executive Director (until resignation 30 November 2022)

Nomination & Remuneration Jeremy Curnock Cook (Chair), Non-Executive Director

Lou Panaccio, Non-Executive Director (appointed 25 February 2022)

James Ward-Lilley, Non-Executive Director (until resignation 30 November 2022)

The committees’ Charters are contained in the Corporate Governance Policy which is available on the Company’s website.

Principal Activities

During the year, the principal continuing activity of the Group was the development, manufacture and supply of

its Hailie

(formerly Smartinhaler

) digital health technologies which address sub-optimal medication use, support

reimbursement for remote patient monitoring, and improve health outcomes in chronic disease.

Results and Dividends

The net loss after tax of the Group for the year ended 30 June 2023 was $9,858,000.

No dividends were paid, declared or recommended during the year ended 30 June 2023.

Review of Operations

During the 12 months to 30 June 2023, Adherium built on its strong development program of the Hailie

sensor and

software platform for both asthma and chronic obstructive pulmonary disease (COPD) medication inhalers by

achieving its fourth US FDA 510(k) cleared next generation Hailie

sensor. Adherium is now well placed with a clear

strategy and growing market recognition of the digital remote patient monitoring opportunity as it advances the

commercialisation of the Hailie

solution.

The progress in executing our strategy in the 2023 nancial year has seen signicant developments which are

building towards the future success of Adherium.

Annual Report 2023 Adherium Ltd

Capital Raising Activities

• In the course of the year a total of $13.8 million was raised by a placement and a share purchase plan which

was completed in January 2023. The raising was strongly supported by existing investors including BioScience

Managers Translational Fund 1, Trudell Medical and several investors new to Adherium. These funds will be

directed towards commercialisation and the Research and Development roadmap.

These funds are to support the commercialisation objectives namely in sales, marketing and business development,

together with continued product development and working capital.

US and UK Partnerships

• Collaboration agreement with US-based Allergy Partners to transform asthma management for its more than

300,000 patients across 130 sites in 20 states. Allergy Partners is the largest allergy and asthma practice in

the USA.

• The CareCentra partnership integrating the Hailie

platform for major hospital systems is entering its next

phase for digital sensors to be deployed to patients. The outcomes are expected to support value propositions

around improved patient outcomes, reduced costs to treat, and access to reimbursement.

• Being awarded by the UK NHS a pathnder service development project valued at $880,000 to deploy the

Hailie

digital inhaler solution for asthma management of high-risk children aged 5-16 years in a primary

care setting and partnering with our UK distribution partner, Helicon Health in delivering this project.

• Following the announcement in August 2022 of a partnership agreement with Dulcian Health to integrate and

deploy the Hailie

, platform integration gathers pace and is approaching a soft launch.

These agreements represent signicant progress in Adherium’s path to commercialisation, particularly in the US

market. Adherium is entering a new stage of business roll-out and committed to creating a world where every breath

counts.

Key Regulatory Achievements

• In July 2022, Adherium announced it had received U.S. Food and Drug Administration (FDA) 510(k) clearance

to market its second next generation Hailie

sensor with physiological parameters for monitoring asthma and

COPD medication use. That sensor, designed for use with the GlaxoSmithKline (GSK) Ellipta

dry powder

inhaler follows on from the rst FDA 510(k) clearance in September 2021 for Astra Zeneca’s Symbicort

pMDI

inhaler.

• Having submitted an application in August 2022, Adherium announced in November 2022 that it received

FDA 510(k) clearance for its third sensor to connect GSK Ventolin

, Advair

and Flovent

pMDI users with its

new, next-generation Hailie

sensor with physiological parameters.

• In January 2023, the Company received Australian Therapeutic Goods Administration (TGA) approval

to commercially distribute its next-generation Hailie

sensor for both the GSK and AstraZeneca inhaler

medications.

• Adherium announced in March 2023, it has received FDA 510(k) clearance for the next-generation Hailie

sensor for use with Teva Pharmaceutical Industries (Teva) pMDIs.

The regulatory strategy has progressed with now four US FDA 510 (k) clearances for its Hailie

sensor equipped with

physiological parameters. Hailie

is the only FDA 510(k) cleared drug agnostic digital sensor available today to offer

physiological insights on inhaler technique.

Senior Management and Board Appointments

• In October 2022, Daniel Kaplon was appointed as Chief Financial Ofcer based in Melbourne, Australia. With

over 25 years of experience in healthcare and manufacturing related companies as well as co-founding two

medical device start-ups, Mr Kaplon bring nance, operations and commercial expertise in both ASX-listed

and large private companies.

With this appointment, Adherium looks to capitalise on the commercial opportunities of the Hailie

sensor and

integrated digital platform, having in place the right team and regulatory foundation.

Annual Report 2023 Adherium Ltd

Financial commentary

• Revenue to 30 June 2023 was $3,195,000, compared with $529,000 in the prior year. The increase occurred

across both sensors sales and engineering services on increased customer orders and new project income.

• Research and development activities to 30 June 2023 amounted to $4,725,000 compared with $5,877,000

in the prior year, the decreased expenditure reecting the shift from external third parties to an internal

development team.

• Sales and Marketing costs were $4,006,000 to 30 June 2023, compared with $944,000 in the prior year. This

increase was a result of the investment in the CareCentra platform integration, expansion of activity in the

United Stated and the United Kingdom in bringing the product to market.

• Administrative expenses decreased from $5,363,000 in year ended 30 June 2022 to $4,854,000 in the

year ended 30 June 2023. Administrative payroll decreased from $1,654,000 in the prior year to $1,319,000

reecting the focus on resource management. Non-cash costs included asset depreciation and amortisation

expense of $191,000 compared to $186,000 in the prior year and net unrealised currency gains of $21,000

compared to an unrealised currency loss of $34,000 in the prior year relating to intercompany loan balances.

• In addition to the changes noted above, the loss for the year after tax was $9,858,000 compared to

$10,044,000 in 2022. Key components of the decreased loss were the increase in revenue, decreased R&D

spend, increase in interest income, and reduced payroll that offset the increase in Sales and Marketing costs.

• Adherium ended the year to 30 June 2023 with cash of $9,077,000.

Managing the risks associated with our strategy

In developing, rening and executing on our strategy the Company constantly assesses the key risks to our business

and puts in place controls and strategies to mitigate these risks in an appropriate manner. The Company is aware

of the macro-economic risks impacting the environment that we operate, as well as the risk factors that pertain to

medical device companies and other factors impacting Adherium. Where the risk relates to factors within the control

of management, we make further comments. These risk factors are not exhaustive and other risks may impact the

value of the investment that shareholders in the Company.

Business risks

Retention of Key Personnel

The Company's success depends on retaining its key management personnel, and attracting suitably qualied, new

personnel. There is no guarantee that Adherium will be able to attract and retain suitably qualied management

and technical personnel. A failure to do so could materially and adversely affect the Company, its operating results

and nancial prospects.

Limited Cash

The Company will have to raise more money to nance technology development, commercialisation and deployment

of its products and other longer-term objectives. Such fundraising may dilute Shareholders, may be on terms

unfavourable to the Company or may not be available at all.

Commercialisation

The Company's business operations are at pivotal stage of commercialisation which has yet been proven at scale.

The Company's success will depend on the Company's ability to implement its business plan and the ability to

commercialise the Company's products.

Competition

There can be no assurance that the Company will be able to match or compete with the efforts or funding of

competitors that release competing products to market. Adherium is focussed on maintaining and developing strong

relationships with health care providers and payors, being able to innovate and respond to changing market needs.

Annual Report 2023 Adherium Ltd

Cybersecurity

The Company's products, services and systems may be used in critical company, customer or third-party operations,

or involve the storage, processing and transmission of sensitive data, including valuable intellectual property,

other proprietary or condential data, regulated data, and personal information of employees, customers and

others. Successful breaches, employee malfeasance, or human or technological error could result in, for example,

unauthorised access to, disclosure, modication, misuse, loss, or destruction of company, customer, or other

third party data or systems; theft of sensitive, regulated, or condential data including personal information and

intellectual property; the loss of access to critical data or systems through ransomware, destructive attacks or other

means; and business delays, service or system disruptions or denials of service. Adherium has in place various

protections in order to take all reasonable steps to protect its data from unauthorised access, loss or modication.

Regulatory Approvals and Restrictions

The regulatory requirements for Adherium's Hailie

solution and any other developed products will depend on

the local policies of the ministry of health or similar government agency in the jurisdictions in which it intends to

operate (for example TGA in Australia and FDA in the US, etc.) and may be different from country to country. In

some countries, Adherium's products may be subject to continuing regulation including quality assurance, ongoing

monitoring and reporting, and restrictions on promoting or advertising its products. Some of these regulations

change over time and are enforced unpredictably. Meeting such regulatory compliance may prove expensive and

may reduce Adherium's protability. Failure by the Company to comply with applicable regulations may subject it to

enforcement actions such as warning letters, nes, or other penalties. Such failure may also attract negative publicity

to Adherium and could harm Adherium's reputation and adversely impact its ability to develop its business. There is

also the risk that company IP is challenged or not adequately protected.

Liability and Lawsuits

Medical device companies can be subject to claims alleging negligence, product liability, breach of warranty or

malpractice that may involve large claims and signicant defence costs whether or not such liability is imposed.

These claims may be brought by individuals seeking relief for themselves or, increasingly, by groups seeking to

represent a class. There are no such claims against the Company.

Other Risks

This list of risk factors above is not an exhaustive list of the risks faced by Adherium or by investors in the Company.

The risk factors described in this Section as well as risk factors not specically referred to above may in the future

materially affect the nancial performance of the Company and the value of its Shares.

Signiﬁcant Changes in the State of Affairs

There have been no signicant changes in the state of affairs of the Group during the nancial year ended

30 June 2023.

Events since the end of the Financial Year

There are no other matters or circumstances that have arisen since the end of the nancial year that have

signicantly affected or may signicantly affect the operations of the Group, the results of those operations or the

state of affairs in future years.

Likely Developments and Expected Results

Commentary on the Group’s strategic direction and plan is set out in the Chairman's and CEO's Report on pages

2 to 5.

Environmental Regulation

The Group’s operations are not subject to any signicant environmental Commonwealth or State regulations or laws.

Annual Report 2023 Adherium Ltd

Directors’ Interests

The relevant interest of each Director in shares and options over shares in the Company as notied by the Directors to

the ASX in accordance with section 205G of the Corporations Act 2001 as at 30 June 2023 is:

Director Ordinary Shares Options over Ordinary Shares

Lou Panaccio 20,000,000 10,000,000

George Baran* 1,103,080,272 350,485,950

Jeremy Curnock Cook 2,992,539 -

William Hunter 3,412,539 -

Bruce McHarrie 3,077,392 -

* Shares and options disclosed are registered to Trudell Medical Limited, in which Mr Baran has a 33.33% benecial interest.

Indemniﬁcation and Insurance of Directors and Ofﬁcers

The Company has entered into deeds of access, insurance and indemnity with each director and ofcer which

contain rights of access to certain books and records of the Group for a period of seven years after the director or

ofcer ceases to hold ofce. This seven-year period can be extended where certain proceedings or investigations

commence before the seven-year period expires.

In respect of the indemnity of the directors and ofcers, the Company is required, pursuant to the constitution, to

indemnify all directors and ofcers, past and present, against all liabilities allowed under law. Under the deed of

access, insurance and indemnity, the Company indemnies parties against all liabilities to another person that may

arise from their position as a director or an ofcer of the Company or its subsidiaries to the extent permitted by law.

The deed stipulates that the Company will meet the full amount of any such liabilities, including reasonable legal

costs and expenses.

In respect of insurance being obtained on behalf of the directors and ofcers, the Company may arrange and

maintain directors’ and ofcers’ insurance for its directors and ofcers to the extent permitted by law. Under the deed

of access, insurance and indemnity, the Company must obtain such insurance during each director’s and ofcer’s

period of ofce and for a period of seven years after a director or an ofcer cease to hold ofce. This seven-year

period can be extended where certain proceedings or investigations commence before the seven-year period

expires.

Disclosure of the insurance premiums and the nature of liabilities covered by such insurance are prohibited by the

relevant contracts of insurance.

Shares Under Option

Unissued shares

As at the date of this report, unissued ordinary shares of the Company under options comprised:

Exercise price Total Number of Options Vested Options Expiry Date

$0.010000 1,350,000,000 1,350,000,000 31 March 2024

$0.010000 31,500,000 31,500,000 31 March 2024

$0.021900 27,519,467 27,519,467 29 January 2027

$0.040000 17,176,559 17,176,559 14 April 2027

Outstanding at

31 August 2023

1,426,196,026 1,426,196,026

The options over unissued ordinary shares do not entitle the holder to participate in any share issue of the Company

or any entity in the Group. Key management personnel were granted SARs as follows:

Name SARs Value Date

Rick Legleiter 148,977,337 $1,043,373 20 September 2021

Annual Report 2023 Adherium Ltd

During the year ended 30 June 2023 and to the date of this report no Directors of the Company or any other key

management personnel of the Group were granted options. The following Directors received options in relation to

share subscriptions during the year:

Name Total Number of Options Exercise Price Expiry Date

Lou Panaccio 10,000,000 $0.01 31 March 2024

George Baran

340,000,000 $0.01 31 March 2024

1. The registered holder of the options is Trudell Medical Limited, in which the director has a 33.33% benecial interest.

Details of fully paid ordinary shares issued on exercise of options in the year to 30 June 2023 are contained in the

accompanying consolidated nancial statements.

Proceedings on behalf of the Company

There are no legal or other proceedings being made on behalf of the Company or against the Company as at the

date of this report.

Non-audit Services

The Company may decide to employ the auditor on assignments additional to their statutory audit duties where the

auditor’s expertise and experience with the Company and/or the Group are important.

There were no fees paid to PricewaterhouseCoopers for other services in the years ended 30 June 2022 and 2023.

Fees were paid to RSM in the year ended 30 June 2023, prior to their appointment as auditor for the preparation of

an Independent Expert’s Report relating to the capital raise.

Auditor’s Independence Declaration

A copy of the Auditor’s Independence Declaration as required under section 307C of the Corporations Act 2001 in

relation to the audit for the nancial year is provided with this report.

Corporate Governance Statement

The board of Directors of Adherium Limited is responsible for corporate governance. The board has prepared the

Corporate Governance Statement (CGS) in accordance with the fourth edition of the ASX Corporate Governance

Council’s Principles and Recommendations under which the CGS may be made available on the Company’s website.

Accordingly, a copy of the Company’s CGS is available on the Adherium website at www.adherium.com under the

Investors/Corporate Governance section.

Annual Report 2023 Adherium Ltd

Remuneration Report

Details of key management personnel

Remuneration governance

Executive remuneration policy

and framework

Relationship between remuneration

and Group performance

Non-Executive director

remuneration policy

Details of remuneration of

key management personnel

Service agreements

Details of share-based compensation

Equity instruments held by

key management personnel

Other transactions with

key management personnel

Annual Report 2023 Adherium Ltd

Remuneration Report (Audited)

The Directors present the Group’s 2023 remuneration report which sets out the remuneration information for the

Company’s Non-Executive Directors, Executive Director and other key management personnel of the Group.

The report contains the following sections:

(a) Details of key management personnel disclosed in this report

(b) Remuneration governance

(d) Relationship between remuneration and Group performance

(e) Non-Executive director remuneration policy

(f) Details of remuneration of key management personnel

(g) Service agreements

(h) Details of share-based compensation

(i) Equity instruments held by key management personnel

(j) Other transactions with key management personnel

(a) Details of key management personnel disclosed in this report

The following persons acted as key management personnel of the Company and the Group during the year ended

30 June 2023.

(i) Non-Executive and Executive Directors

• Lou Panaccio Non-Executive Chairman (appointed 25 February 2022)

• George Baran Non-Executive Director (appointed 13 May 2021)

• Jeremy Curnock Cook Non-Executive Director (appointed on incorporation 17 April 2015)

• William Hunter Non-Executive Director (appointed 17 December 2015)

• Bruce McHarrie Non-Executive Director (appointed 20 July 2015)

• James Ward-Lilley Non-Executive Director (resigned 30 November 2022)

(ii) Other key management personnel

• Rick Legleiter Chief Executive Ofcer (appointed 13 May 2021)

• Daniel Kaplon Chief Financial Ofcer (appointed 10 October 2022)

• Geoff Feakes Chief Technology Ofcer (appointed 3 August 2020)

(iii) Changes since the end of the reporting period

There have been no other changes in key management personnel.

(b) Remuneration governance

The Nomination and Remuneration Committee is a committee of the board. Its responsibilities include assisting the

board in ensuring that the Company:

• has coherent remuneration policies and practices which are observed, and which enable it to attract and

retain executives and directors who will create value for shareholders;

• fairly and responsibly rewards executives having regard to the performance of the Company, the performance

of the executive and the general pay environment;

• provides disclosure in relation to the Company’s remuneration policies to enable investors to understand the

costs and benets of those policies and the link between remuneration paid to directors and key executives

and corporate performance; and

• complies with the provisions of the ASX Listing Rules and the Corporations Act.

The primary purpose of the Nomination and Remuneration Committee is to support and advise the board in fullling

its responsibilities to shareholders in ensuring that the board is appropriately remunerated, structured and comprised

of individuals who are best able to discharge the responsibilities of directors by:

Annual Report 2023 Adherium Ltd

• assessing the size, composition, diversity and skills required by the board to enable it to full its

responsibilities to shareholders, having regard to the Company’s current and proposed scope of activities;

• assessing the extent to which the required knowledge, experience and skills are represented on the board;

• establishing processes for the identication of suitable candidates for appointment to the board;

• overseeing succession planning for the board and the Chief Executive Ofcer;

• establishing processes for the review of the performance of individual directors and the board as a whole;

• assessing the terms of appointment and remuneration arrangements for non-executive directors; and

• assessment and reporting to the board in relation to:

- executive remuneration policy;

- the remuneration of executive directors;

- the remuneration of persons reporting directly to the Chief Executive Ofcer;

- diversity plans, measurable diversity objectives and ensuring equality in remuneration across gender

aligned, where relevant, with the ASX Corporate Governance Guidelines;

- the Company’s recruitment, retention and termination policies and procedures;

- superannuation arrangements; and

- all equity-based plans.

Remuneration policy

The policy for determining the nature and amount of remuneration of key management personnel is agreed by the

board of directors as a whole on advice from the Nomination and Remuneration Committee. The board obtains

professional advice where necessary to ensure that the Group attracts and retains talented and motivated directors

and employees who can enhance the performance of the Group through their contributions and leadership. The

Nomination and Remuneration Committee makes specic recommendations on the remuneration package and

other terms of employment for the CEO having regard to his or her performance, relevant comparative information,

and if appropriate, independent expert advice.

For key management personnel, the Group provides a remuneration package that incorporates both cash-based

remuneration and, if appropriate, share or option-based remuneration. The contracts for service between the Group

and key management personnel are on a continuing basis, the terms of which are to align executive performance-

based remuneration with Group objectives.

The Nomination and Remuneration Committee is also responsible for making recommendations to the board in

relation to the terms of any issue of equity-based remuneration to employees, as part of their individual package, or

a wider staff incentive and retention scheme, and for ensuring that any such issue is made in accordance with the

ASX Listing Rules.

Executive pay

The executive pay and reward framework has three components:

• base pay and benets, including legislative superannuation;

• short-term performance incentives; and

• long-term incentives through participation in the Adherium employee share and option plans, or other

incentive securities focussed on increasing shareholder value.

A combination of some or all of these components comprises an executive’s total remuneration.

Base pay

Executives are offered a competitive base pay that comprises the xed component of pay and rewards. Base pay for

executives is reviewed annually to ensure that executive remuneration is competitive with the market. There are no

guaranteed base pay increases included in any executive contracts.

Short-term incentives (STI)

Executives have a target STI opportunity depending on the accountabilities of the role and impact on the

organisation. The STI is a cash and equity-based incentive which forms part of the executive’s total compensation,

representing between 0% and 60% of base salary. Each year, the Nomination and Remuneration Committee in

conjunction with the CEO, will consider the appropriate targets and key performance indicators (KPIs) of each

executive to link the STI plan and the level of payout if targets are met. This will include setting any maximum payout

under the STI plan, and minimum levels of performance to trigger payment of STI. The targets and KPIs selected

are chosen to align executive performance with the Group’s annual business objectives set by the board and

encompassing business development, research & development, and cash management.

Annual Report 2023 Adherium Ltd

The STI achievement is calculated and paid annually. The Nomination and Remuneration Committee in conjunction

with the CEO assesses the extent to which targets and KPIs have been achieved at a Company and individual

performance level to determine the STI to be paid. Measurement of achievement of the business objectives does not

involve comparison with factors external to the Company.

Long-term incentives (LTI)

Long-term incentives are provided to certain employees via the Adherium Employee Share Plans and Executive Share

Option Plan (the Plans) and where appropriate via other incentive securities such as SARs.

Under the Plans, the board has the discretion to offer and issue to eligible employees including directors:

• ordinary shares in the Company issued at an issue price determined by the board, with limited recourse loans

where some or all of the issue price of the share awards are funded by way of a loan from the Company; or

• options over ordinary shares in the Company with an exercise price determined by the board.

The Plans are designed to focus directors, executives and staff on delivering long-term shareholder returns.

Share and option awards issued under the Plans generally vest in three equal tranches over three years of continuing

employment. If the vesting condition is not met, the related share or option award is forfeited and, where relevant,

the loan cancelled such that the participant receives no benet from unvested shares where the related loan is not

repaid.

Participation in the Plans is at the board’s discretion and staff do not have a contractual right to participate in the

Plans.

In the previous year ended 30 June 2022, the Company issued Stock Appreciation Rights (SARs) to its CEO as a long-

term incentive focused on delivering long-term shareholder returns. The Company did not establish a plan for the

SARs as further issues of this type of security were not intended. The issue of the SARs was ratied by shareholders at

the 2021 AGM. There were no SARs issued during the year to 30 June 2023.

Three tranches of SARs were issued, the rst vesting immediately in September 2021 and the remaining two tranches

vesting over the the next two years of continuing employment and subject to achievement of target annual volume

weighted average prices (VWAP) for the Company’s ordinary shares. On any exercise of a vested SAR, the Company

will issue that number of ordinary shares equivalent in value to the amount by which the fair market value of an

ordinary share exceeds a base price of $0.016.

(d) Relationship between remuneration and Group performance

The Group continues in a business growth phase as it pursues commercialisation having gained relevant regulatory

approvals for its technologies, and this is the focus of executives and the board. During this phase expenditures

continue to exceed revenues, and in the year ended 30 June 2023 the Group incurred a loss after tax of $9,858,000

(0.2 cent loss per share). In the year to 30 June 2023 the Company’s shares traded between 0.2 and 1.1 cents per

share. Given the stage of the Group’s commercial development, the board does not utilise earnings per share as

a performance measure and does not presently include the Company’s share price as a measure of executive

performance.

No dividends were paid, declared or recommended during the period ended 30 June 2023.

The table below sets out summary information about the Group’s earnings and movements in shareholder wealth for

the past ve (5) years to 30 June 2023:

30 June 2023 30 June 2022 30 June 2021

30 June 2020 30 June 2019

Total revenue $000s 3,195 524 401 2,218 2,779

Net loss before tax $000s (9,858) (10,044) (15,036) (11,397) (11,794)

Net loss after tax $000s (9,858) (10,044) (15,036) (11,397) (11,794)

Share price at start of year $0.007 $0.017 $0.024 $0.029 $0.120

Share price at end of year $0.003 $0.007 $0.017 $0.024 $0.029

Basic/diluted loss per share (0.2) cents (0.5) cents (1.7) cents (3.6) cents (6.8) cents

Annual Report 2023 Adherium Ltd

(e) Non-Executive Director remuneration policy

On appointment to the board, Non-Executive Directors enter into a service agreement with the Company in the form

of a letter of appointment. The letter summarises the board policies and terms, including remuneration, relevant to

the ofce of director.

Non-Executive Directors receive a fee which is inclusive of fees for chairing or participating on board committees.

They do not receive performance-based pay. Non-Executive Directors’ fees and payments are reviewed annually by

the board. The Non-Executive Chairman’s fees are determined independently of the fees of Non-Executive Directors

based on comparative roles in the external market. At the 2016 Annual General meeting shareholders approved

an aggregate annual non-executive director fee pool of $500,000. From this the Non-Executive Chairman is paid

$100,000 per annum and each Non-Executive Director is paid $50,000 per annum. Legislative superannuation

contributions are also paid where applicable.

A Non-Executive Director may be paid fees or other amounts as the board determines where a Director performs

services outside the scope of the ordinary duties of a Director. The Company may reimburse Non-Executive Directors

for their expenses properly incurred as a Director or in the course of ofce.

Annual Report 2023 Adherium Ltd

(f) Details of remuneration of key management personnel

Remuneration for the

year ended 30 June 2023

Short Term Beneﬁts

Post-Employment

Beneﬁts

Incentive

Share-based Payments

Salaries & Fees

Bonus

Insurance

& Other

Superannuation

Severance

Value of Options/SARs/

Loan Funded Shares

Total

Performance Related

Remuneration

Fixed

Remuneration

Directors’ remuneration

Lou Panaccio

100,000 - - 10,500 - - 110,500 - 100%

James Ward-Lilley

20,833 - - - - 14,252 35,085 41% 59%

George Baran

50,000 - - - - - 50,000 - 100%

Jeremy Curnock Cook

50,000 - - - - - 50,000 - 100%

William Hunter

50,000 - - - - - 50,000 - 100%

Bruce McHarrie

50,000 - - 5,250 - - 55,250

- 100%

Sub-total Directors 320,833 - - 15,750 - 14,252 350,835

Executives’ remuneration

Rick Legleiter 275,017 28,938 - 28,877

- 131,070 463,902 34% 66%

Daniel Kaplon

189,345 23,668 - 19,881 - - 232,894 10% 90%

Geoff Feakes 241,308 48,525 - 25,337 - 58,365 373,535 29% 71%

Mark Licciardo

6,504 - - - - - 6,504 - 100%

Rob Turnbull

167,959 37,930 - 6,867 106,404 12 319,172 12% 88%

Brett Tucker

10,400 - - - - - 10,400

- 100%

Sub-total executives

890,533 139,060 - 80,963

106,404 189,447 1,406,406

Total key management personnel

1,211,366 139,060 - 96,713

106,404 203,700 1,757,241

1. On 30 November 2022 James Ward-Lilley resigned as a director.

2. Daniel Kaplon was appointed CFO on 10 October 2022.

3. Mark Licciardo resigned as Joint Company Secretary on 4 July 2023.

4. Rob Turnbull resigned as General Manager on 22 December 2022 and as Joint Company Secretary on 4 May 2023.

5. Brett Tucker as appointed as Company Secretary on 4 May 2023.

Remuneration for the

year ended 30 June 2022

Short Term Beneﬁts

Post-Employment

Beneﬁts

Incentive

Share-based Payments

Salaries & Fees

Bonus

Insurance

& Other

Superannuation

Severance

Value of Options/

Loan Funded Shares

Total

Performance Related

Remuneration

Fixed

Remuneration

Directors’ remuneration

Lou Panaccio

25,000 - - 2,500 - - 27,500 - 100%

James Ward-Lilley

91,667 - - - - 39,441 131,108 30% 70%

George Baran

50,000 - - - - - 50,000 - 100%

Jeremy Curnock Cook

50,000 - - - - - 50,000 - 100%

William Hunter

50,000 - - - - 1,654 51,654 3% 97%

Bruce McHarrie

50,000 - - 5,000 - 551 55,551 1% 99%

Matthew McNamara

33,333 - - 3,333 - - 36,666

- 100%

Sub-total Directors 350,000 - - 10,833 - 41,646 402,479

Executives’ remuneration

Rick Legleiter 275,017 29,791 - 27,502

- 839,723 1,172,033 74% 26%

Robert Spurr

149,124 - - 14,326 - - 163,450 - 100%

Anne Bell

60,883 (63,494) - 6,088 139,620 62,625 205,722 - 100%

Geoff Feakes 232,014 97,348 - 23,201 - 32,580 385,143 33% 67%

Mark Licciardo

6,766 - - - - - 6,766 - 100%

Rob Turnbull

235,533 88,321 - 12,769

- 1,789 338,412

27% 73%

Sub-total executives

959,337 151,966 - 83,886

139,620 936,717 2,271,526

Total key management personnel

1,309,337 151,966 - 94,719

139,620 978,363 2,674,005

1. On 25 February 2022 Matthew McNamara resigned as a director and Lou Panaccio was appointed.

2. Anne Bell resigned from the role of CFO on 15 September 2021.

3. Robert Spurr was appointed interim CFO on 19 October 2021, and resigned 30 May 2022.

4. A company of which Mr Licciardo is a director received the fees from the Company for company secretarial and corporate governance

consulting services.

5. The fair values of options and Loan Funded Shares are calculated at the date of grant using a Black-Scholes pricing model, and for SARs using

the Monte Carlo Simulation valuation model. Fair values are allocated to each reporting period in accordance with vesting. The values noted

represent the portion of the fair value of the options, loan funded shares, or SARs allocated to the reporting period.

Annual Report 2023 Adherium Ltd

(f) Details of remuneration of key management personnel

Remuneration for the

year ended 30 June 2023

Short Term Beneﬁts

Post-Employment

Beneﬁts

Incentive

Share-based Payments

Salaries & Fees

Bonus

Insurance

& Other

Superannuation

Severance

Value of Options/SARs/

Loan Funded Shares

Total

Performance Related

Remuneration

Fixed

Remuneration

Directors’ remuneration

Lou Panaccio

100,000 - - 10,500 - - 110,500 - 100%

James Ward-Lilley

20,833 - - - - 14,252 35,085 41% 59%

George Baran

50,000 - - - - - 50,000 - 100%

Jeremy Curnock Cook

50,000 - - - - - 50,000 - 100%

William Hunter

50,000 - - - - - 50,000 - 100%

Bruce McHarrie

50,000 - - 5,250 - - 55,250

- 100%

Sub-total Directors 320,833 - - 15,750 - 14,252 350,835

Executives’ remuneration

Rick Legleiter 275,017 28,938 - 28,877

- 131,070 463,902 34% 66%

Daniel Kaplon

189,345 23,668 - 19,881 - - 232,894 10% 90%

Geoff Feakes 241,308 48,525 - 25,337 - 58,365 373,535 29% 71%

Mark Licciardo

6,504 - - - - - 6,504 - 100%

Rob Turnbull

167,959 37,930 - 6,867 106,404 12 319,172 12% 88%

Brett Tucker

10,400 - - - - - 10,400

- 100%

Sub-total executives

890,533 139,060 - 80,963

106,404 189,447 1,406,406

Total key management personnel

1,211,366 139,060 - 96,713

106,404 203,700 1,757,241

1. On 30 November 2022 James Ward-Lilley resigned as a director.

2. Daniel Kaplon was appointed CFO on 10 October 2022.

3. Mark Licciardo resigned as Joint Company Secretary on 4 July 2023.

4. Rob Turnbull resigned as General Manager on 22 December 2022 and as Joint Company Secretary on 4 May 2023.

5. Brett Tucker as appointed as Company Secretary on 4 May 2023.

Remuneration for the

year ended 30 June 2022

Short Term Beneﬁts

Post-Employment

Beneﬁts

Incentive

Share-based Payments

Salaries & Fees

Bonus

Insurance

& Other

Superannuation

Severance

Value of Options/

Loan Funded Shares

Total

Performance Related

Remuneration

Fixed

Remuneration

Directors’ remuneration

Lou Panaccio

25,000 - - 2,500 - - 27,500 - 100%

James Ward-Lilley

91,667 - - - - 39,441 131,108 30% 70%

George Baran

50,000 - - - - - 50,000 - 100%

Jeremy Curnock Cook

50,000 - - - - - 50,000 - 100%

William Hunter

50,000 - - - - 1,654 51,654 3% 97%

Bruce McHarrie

50,000 - - 5,000 - 551 55,551 1% 99%

Matthew McNamara

33,333 - - 3,333 - - 36,666

- 100%

Sub-total Directors 350,000 - - 10,833 - 41,646 402,479

Executives’ remuneration

Rick Legleiter 275,017 29,791 - 27,502

- 839,723 1,172,033 74% 26%

Robert Spurr

149,124 - - 14,326 - - 163,450 - 100%

Anne Bell

60,883 (63,494) - 6,088 139,620 62,625 205,722 - 100%

Geoff Feakes 232,014 97,348 - 23,201 - 32,580 385,143 33% 67%

Mark Licciardo

6,766 - - - - - 6,766 - 100%

Rob Turnbull

235,533 88,321 - 12,769

- 1,789 338,412

27% 73%

Sub-total executives

959,337 151,966 - 83,886

139,620 936,717 2,271,526

Total key management personnel

1,309,337 151,966 - 94,719

139,620 978,363 2,674,005

1. On 25 February 2022 Matthew McNamara resigned as a director and Lou Panaccio was appointed.

2. Anne Bell resigned from the role of CFO on 15 September 2021.

3. Robert Spurr was appointed interim CFO on 19 October 2021, and resigned 30 May 2022.

4. A company of which Mr Licciardo is a director received the fees from the Company for company secretarial and corporate governance

consulting services.

5. The fair values of options and Loan Funded Shares are calculated at the date of grant using a Black-Scholes pricing model, and for SARs using

the Monte Carlo Simulation valuation model. Fair values are allocated to each reporting period in accordance with vesting. The values noted

represent the portion of the fair value of the options, loan funded shares, or SARs allocated to the reporting period.

Annual Report 2023 Adherium Ltd

(g) Service agreements

Joint Company Secretary - Mr Mark Licciardo

Mr Licciardo provides company secretarial and corporate governance services under a service arrangement

between the Company and Acclime Corporate Services Australia Pty Ltd, a company associated with Mr Licciardo.

This arrangement concluded on 6 July 2023 on the resignation of Mr Licciardo.

Joint Company Secretary - Mr Rob Turnbull

Mr Turnbull provides company secretarial and corporate governance services under a service arrangement

between the Company and Mercurium Ltd, a company associated with Mr Turnbull. This arrangement concluded on

4 May 2023 on the resignation of Mr Turnbull.

Company Secretary - Mr Brett Tucker

Mr Tucker provides company secretarial and corporate governance services under a service arrangement between

the Company and Automic Company Secretarial Pty Ltd, a company associated with Mr Tucker. This arrangement

commenced on 4 May 2023 following the resignation of Mr Turnbull.

Other key management personnel of the Group

Remuneration and other terms of employment for other key management personnel of the Group are formalised in

employment agreements which specify the components of remuneration, benets and notice periods. Participation

in the STI and LTI plans is subject to the board’s discretion. Other major provisions of the agreements relating to

remuneration are set out below:

Name

Term of

Agreement Notice Period

Base Salary

Rick Legleiter No xed term 6 months A$275,000

Geoff Feakes No xed term 4 months A$241,280

Daniel Kaplon No xed term 4 months A$260,000

1. The notice period applies without cause equally to either party unless otherwise stated.

2. Base salaries quoted are annual as at 30 June 2023; they are reviewed annually by the Nomination and Remuneration Committee.

3. Amount or base salary payable if the Group terminates employees with notice, and without cause (e.g. for reasons other than unsatisfactory

performance).

(h) Details of share-based compensation

Executive Share Option Plan

The board has established the Adherium Executive Share Option Plan (ESOP).

Awards under the ESOP typically vest one third annually over three years of continued employment from the grant

date.

The fair value of the awards of options are calculated at the date of grant using a Black-Scholes pricing model,

which is allocated over the vesting periods as share-based compensation.

The board made no offers to key management personnel under the ESOP in the year ended 30 June 2023.

All options over ordinary shares issued by the Company are exercisable on a one-for-one basis, and any shares

issued on exercise are fully paid and rank pari passu with existing ordinary shares.

No options over ordinary shares were exercised during the period to 30 June 2023 and to the date of this report.

Loan funded Employee Share Plan

The board has established the loan funded Adherium Employee Share Plans (Plans).

Awards under the Plans typically vest one third annually over three years of continued employment from the grant

date. After vesting the participant may take title to the shares by repaying to the Company the proportion of the loan

related to those shares.

The fair value of the awards of loan funded shares are calculated at the date of grant using a Black-Scholes pricing

model, which is allocated over the vesting periods as share-based compensation.

In the year ended 30 June 2023 the board made no offers to key management personnel under the Plans.

Annual Report 2023 Adherium Ltd

Short-Term Incentive scheme (STI)

In the year to 30 June 2023, the Company issue shares to key management personnel under individual employment

agreements as follows:

Key Management Personnel Date Shares Price Value

Geoff Feakes 8 December 2022 2,991,989 $0.004054 $12,130

Rob Turnbull

8 December 2022 2,750,751 $0.004054 $11,152

5,742,740 $23,282

1. Resigned as General Manager on 22 December 2022.

Stock Appreciation Rights (SARs)

In the year ended 30 June 2023, the Company issued Stock Appreciation Rights (SARs) to its CEO as a long-term

incentive is as follows:

Key Management

Personnel SARs Base Price Term Vesting Total Value

2023 Expense

Allocation

Rick Legleiter 69,168,049 $0.016 10 years Immediate $670,930 -

Rick Legleiter 53,206,192 $0.016 10 years 2 years

$260,710 $131,070

1. Valuation at the date of award, using the Monte Carlo Simulation valuation model, to be allocated over the vesting periods as share-based

compensation.

2. Vesting is also subject to target VWAPs of $0.064 and $0.096 in the following two years respectively.

For the year ended 30 June 2023, SARs expense allocation was $131,070 (2022: $831,723) and on 20 September 2022,

26,603,096 SARs lapsed.

(i) Equity instruments held by key management personnel

Shareholdings

The numbers of ordinary shares in the Company held during the year to 30 June 2023 by each director and other key

management personnel of the Group, including their personally related parties, are set out below:

Name

Balance at the start

of the year Purchases

Other changes

during the period

Balance at the end

of the year

Lou Panaccio - 20,000,000 - 20,000,000

James Ward-Lilley 3,599,611 - - 3,599,611

George Baran 423,080,272 680,000,000 - 1,103,080,272

Jeremy Curnock Cook 2,992,539 - - 2,992,539

William Hunter 3,412,539 - - 3,412,539

Bruce McHarrie 3,077,392 - - 3,077,392

Geoff Feakes 22,238,116 25,000 2,991,989

25,255,105

Rob Turnbull 2,597,035 - 2,750,751

5,347,786

Adherium ESP Ltd

(trustee directors)

35,849,066 - 2,970,039

38,819,105

1. Ordinary shares held on behalf of employees in the capacity of trustee of the Company’s Employee Share Plan (Trustee directors: Bruce

McHarrie, Geoff Feakes, Daniel Kaplon).

2. Shares issued in lieu of salary/fees or as awards under the Company's Employee Share Plan.

3. Holding as at date directorship or employment ended.

4. The registered holder of the ordinary shares is Trudell Medical Limited, in which the director has a 33.33% beneﬁcial interest.

Annual Report 2023 Adherium Ltd

Options

The numbers of options over ordinary shares in the Company held during the year to 30 June 2023 by each director

and other key management personnel of the Group, including their personally related parties, are set out below:

Name

Balance

at the

start of

the year Purchases Exercised Lapsed

Balance

at the

end of

the year Vested

Vested and

exercisable

Vested and

unexercisable

James Ward-Lilley

10,000,000 - - - 10,000,000 10,000,000 10,000,000 -

George Baran

10,485,950 340,000,000 - - 350,485,950 350,485,950 350,485,950 -

Lou Panaccio - 10,000,000 - - 10,000,000 10,000,000 10,000,000 -

William Hunter 1,500,000 - - 1,500,000 - - - -

1. Resigned 30 November 2022.

2. Holding as of date directorship commenced. The registered holder of the options is Trudell Medical Limited, in which the director has

a 33.33% beneﬁcial interest.

(j) Other transactions with key management personnel

Transactions with directors or other key personnel are set out in note 18 of the accompanying Group nancial

statements for the year ended 30 June 2023.

End of audited Remuneration Report.

This report is made in accordance with a resolution of the directors.

Lou Panaccio

Non-Executive Chairman

Melbourne

30 August 2023

Annual Report 2023 Adherium Ltd

THE POWER OF BEING UNDERSTOOD

AUDIT | TAX | CONSULTING

RSM Australia Partners is a member of the RSM network and trades as RSM. RSM is the trading name used by the members of the RSM network. Each member of the

RSM network is an independent accounting and consulting firm which practices in its own right. The RSM network is not itself

a separate legal entity in any jurisdiction.

RSM Australia Partners ABN 36 965 185 036

Liability limited by a scheme approved under Professional Standards Legislation

RSM Australia Partners

Level 21, 55 Collins Street Melbourne VIC 3000

PO Box 248 Collins Street West VIC 8007

T +61 (0) 3 9286 8000

F +61 (0) 3 9286 8199

www.rsm.com.au

AUDITOR’S INDEPENDENCE DECLARATION

As lead auditor for the audit of the financial report of Adherium Limited and its controlled entities for the year

ended 30 June 2023, I declare that, to the best of my knowledge and belief, there have been no contraventions

of:

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

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

RSM AUSTRALIA PARTNERS

B Y CHAN

Partner

Dated: 30 August 2023

Melbourne, Victoria

THE POWER OF BEING UNDERSTOOD

AUDIT | TAX | CONSULTING

RSM Australia Partners is a member of the RSM network and trades as RSM. RSM is the trading name used by the members of the RSM network. Each member of the

RSM network is an independent accounting and consulting firm which practices in its own right. The RSM network is not itself

a separate legal entity in any jurisdiction.

RSM Australia Partners ABN 36 965 185 036

Liability limited by a scheme approved under Professional Standards Legislation

RSM Australia Partners

Level 21, 55 Collins Street Melbourne VIC 3000

PO Box 248 Collins Street West VIC 8007

T +61 (0) 3 9286 8000

F +61 (0) 3 9286 8199

www.rsm.com.au

AUDITOR’S INDEPENDENCE DECLARATION

As lead auditor for the audit of the financial report of Adherium Limited and its controlled entities for the year

ended 30 June 2023, I declare that, to the best of my knowledge and belief, there have been no contraventions

of:

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

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

RSM AUSTRALIA PARTNERS

B Y CHAN

Partner

Dated: 30 August 2023

Melbourne, Victoria

Annual Report 2023 Adherium Ltd

Consolidated Statement of Proﬁt or

Loss and Other Comprehensive Income

Consolidated Statement of

Financial Position

Consolidated Statement of

Changes in Equity

Consolidated Statement of

Cash Flows

Notes to the Consolidated

Financial Statements

Annual Report 2023 Adherium Ltd

Consolidated Statement of Proﬁt or Loss and

Other Comprehensive Income for the year

ended 30 June 2023

Notes

June 2023

$000

June 2022

$000

Continuing Operations

Sales 5 3,195 529

Cost of sales (670) (207)

Gross proﬁt 2,525 322

Other income - R&D tax credit 7 1,838 2,807

Manufacturing support (833) (1,012)

Research and development costs (4,725) (5,877)

Sales and marketing costs (4,006) (944)

Administrative expenses (4,854) (5,363)

Operating loss (10,055) (10,067)

Finance income 203 24

Finance expense (6) (1)

Finance income (cost) - net 197 23

Loss before income tax (9,858) (10,044)

Income tax credit (expense) 7 - -

Loss for the period attributable to equity holders (9,858) (10,044)

Other comprehensive income

Items that may be reclassied subsequently to prot or loss

when certain conditions are met: Foreign exchange differences

on translation of foreign operations 6 50

Other comprehensive income for the period, net of tax 6 50

Total comprehensive loss for the period (9,852) (9,994)

Total comprehensive loss attributable to:

Equity holders of Adherium Limited (9,852) (9,994)

Basic and diluted loss per share 8 (0.2) cents (0.5) cents

The accompanying notes form part of the nancial statements.

Annual Report 2023 Adherium Ltd

Consolidated Statement of Financial Position

as at 30 June 2023

Notes

June 2023

$000

June 2022

$000

ASSETS

Current assets

Cash and cash equivalents 9 9,077 5,283

Trade and other receivables 10 1,968 1,593

Inventories 11 1,239 1,071

Prepayments 228 272

Total current assets 12,512 8,219

Non-current assets

Property, plant and equipment 12 127 227

Intangible assets 13 - 1

Right-of-use assets 13 42 86

Total non-current assets 169 314

Total assets 12,681 8,533

LIABILITIES

Current liabilities

Trade and other payables 14 2,768 1,697

Income received in advance 15 655 1,214

Lease liabilities 19 44 42

Total current liabilities 3,467 2,953

Non-current liabilities

Lease liabilities 19 - 43

Total non-current liabilities - 43

Total liabilities 3,467 2,996

EQUITY

Share capital 16 123,617 110,523

Accumulated decit (93,287) (83,429)

Other reserves (21,116) (21,557)

Total equity 9,214 5,537

Total liabilities & equity 12,681 8,533

The accompanying notes form part of the nancial statements.

Annual Report 2023 Adherium Ltd

Consolidated Statement of Changes in Equity

for the year ended 30 June 2023

Capital

Accumulated

Deﬁcit

Share-based

Compensation

Reserve

Foreign

Currency

Translation

Reserve

Merger

Reserve

Total

Equity

$000 $000 $000 $000 $000 $000

Equity as at 1 July 2021 110,172 (73,385) 4,170 613 (27,535) 14,035

Loss for the period - (10,044) - - - (10,044)

Other comprehensive

income

- - - 50 - 50

Total comprehensive loss - (10,044) - 50 - (9,994)

Transactions with owners:

Share, option and SARs

grants for services

351 - 1,145 - - 1,496

Equity as at 30 June 2022 110,523 (83,429) 5,315 663 (27,535) 5,537

Loss for the period - (9,858) - - - (9,858)

Other comprehensive

income

- - - 6 - 6

Total comprehensive loss - (9,858) - 6 - (9,852)

Transactions with owners:

Shares and options issued

in placements and SPP

13,815 - - - - 13,815

Share and option grants for

services

23 - 434 - - 457

Share issue costs (744) - - - - (744)

Equity as at 30 June 2023 123,617 (93,287) 5,749 669 (27,535) 9,214

The accompanying notes form part of the nancial statements.

Annual Report 2023 Adherium Ltd

Consolidated Statement of Cash Flows

for the year ended 30 June 2023

Notes

June 2023

$000

June 2022

$000

Cash ﬂows from operating activities:

Receipts from customers 2,356 809

Research and development tax incentive receipts 1,638 1,997

Interest received 203 24

Interest paid (6) (1)

Payments to employees (6,921) (5,918)

Payments to suppliers (6,549) (6,521)

Net cash provided from (used in) operating activities (9,279) (9,610)

Cash ﬂows from investing activities:

Purchase of property, plant and equipment (41) (279)

Net cash used in investing activities (41) (279)

Cash ﬂows from ﬁnancing activities:

Proceeds from the issue of shares 13,815 -

Payment of capital raising costs (744) -

Net cash provided from ﬁnancing activities 13,071 -

Net increase (decrease) in cash 3,752 (9,889)

Cash at the beginning of the year 5,283 15,178

Effect of exchange rate changes on cash balances 42 (6)

Cash at the end of the year 9 9,077 5,283

Reconciliation with loss after income tax:

Loss after income tax (9,858) (10,044)

Non-cash and non-operating activities items requiring

adjustment:

Depreciation 12 145 181

Amortisation of intangible and right-of-use assets 13 46 5

Property, plant and equipment (gain) loss on disposal - (1)

Share-based compensation expense 492 1,145

Shares granted for services 23 351

Foreign exchange (gain) (19) 33

Changes in working capital:

Trade and other receivables (302) (1,185)

Inventories (147) (144)

Trade and other payables 906 (528)

Income received in advance (566) 577

Net cash provided from (used in) operating activities (9,279) (9,610)

The accompanying notes form part of the nancial statements.

Annual Report 2023 Adherium Ltd

Notes to the Consolidated Financial

Statements for the year ended 30 June 2023

1. General Information

Adherium Limited (the Company or Adherium) is a company domiciled in Australia. The address of the Company’s

registered ofce is Collins Square, Tower Four, Level 18, 727 Collins Street, Melbourne, VIC 3008. The consolidated

nancial statements of the Company as at and for the year ended 30 June 2023 comprise the Company and its

subsidiaries (together referred to as the Group and individually as Group entities). The Group is a for-prot entity and

primarily develops, manufactures and supplies digital health technologies which address sub-optimal medication

use and improve health outcomes in chronic disease.

The separate nancial statements of the parent entity, Adherium Limited, have not been presented within this

nancial report as permitted by the Corporations Act 2001.

The consolidated nancial statements were authorised for issue by the Board on 30 August 2023.

2. Basis of Preparation

This general purpose consolidated nancial report for the twelve months ended 30 June 2023 has been prepared in

accordance with Australian Accounting Standards and Interpretations issued by the Australian Accounting Standards

Board and the Corporations Act 2001.

The nancial statements have been prepared on the going concern basis, which contemplates continuity of normal

business activities and the realisation of assets and discharge of liabilities in the normal course of business.

As disclosed in the nancial statements, the Group incurred a loss of $9,858,000 and had net cash outows from

operating activities of $9,279,000 for the year ended 30 June 2023.

These factors indicate a material uncertainty which may cast signicant doubt as to whether the Group will continue

as a going concern and therefore whether it will realise its assets and extinguish its liabilities in the normal course of

business and at the amounts stated in the nancial report.

The Directors believe that there are reasonable grounds to believe that the Group will be able to continue as a

going concern, after consideration of the following factors:

• The Group is anticipating additional customer contracts and associated sales revenues over the next

12 months

• The Group is anticipating the receipt of a research and development claim of $1,377,000 in December 2023

(refer note 7)

• The Group intends to further reduce payroll and operational costs; and

• The Group has a proven track record of raising funds and is condent of being able to raise further funds,

if required.

Accordingly, the Directors believe that the Group will be able to continue as a going concern and that it is

appropriate to adopt the going concern basis in the preparation of the nancial report.

The ﬁnancial report does not include any adjustments relating to the amounts or classiﬁcation of recorded assets

or liabilities that might be necessary if the Group does not continue as a going concern.

(a) Compliance with International Financial Reporting Standards

These consolidated nancial statements comply with International Financial Reporting Standards (IFRS) as

issued by the International Accounting Standards Board (IASB).

(b) Historical cost convention

These nancial statements have been prepared under the historical cost convention as modied by certain

policies below.

Annual Report 2023 Adherium Ltd

These consolidated nancial statements are presented in Australian dollars, which is the Company’s

functional currency.

(d) Critical accounting estimates

The preparation of nancial 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 on-going basis. Revisions to accounting estimates are recognised in the

period in which the estimate is revised and in any future periods affected.

The signicant areas of estimate, uncertainty and critical judgements in applying accounting policies that

have the most signicant effect on amounts recognised in the nancial statements are:

(i) Research & Development (R&D) tax credit

The recogniton of the R&D tax credit set out in note 7 includes assumptions surrounding the probability

that particular R&D projects will meet the criteria for acceptance by tax authorities, and also that the

costs of each R&D project will qualify to be claimed.

(ii) Impairment of non-current assets

The Company reviews annually whether any property, plant and equipment have suffered any

impairment in accordance with the accounting policy stated in note 3.10. In making this assessment,

the extent of the likely future use of these assets is required to be estimated in determining if their value

is impaired at the balance sheet date. The Company evaluates indicators of impairment, including

expected future demand for devices, in relation to each type of asset at the balance sheet date.

(iii) Recognition of deferred tax assets

As at 30 June 2023, the Company has not recognised as an asset tax loss which could be offset

against future taxable prots. These tax losses would only be recognised to the extent that it is expected

that there will be future taxable prots and such losses will be available in the future (after shareholder

continuity tests) to offset those future taxable prots. The Company has considered its future expected

protability and shareholder continuity and has concluded that sufcient certainty does not yet exist to

recognise these tax losses as an asset.

(e) Rounding of amounts

The Company has applied the relief available to it under ASIC Corporations (Rounding in Financial/

Directors’ Reports) Instrument 2016/191. Accordingly, amounts in the consolidated nancial statements and

Directors’ Report have been rounded to the nearest $1,000.

3. Summary of signiﬁcant accounting policies

The principal accounting policies adopted in the preparation of these nancial statements are set out below. These

policies have been consistently applied to all periods presented, unless otherwise stated.

3.1 Principles of consolidation:

The consolidated nancial statements incorporate all of the assets, liabilities and results of Adherium

Limited and all subsidiaries. Subsidiaries are all entities over which the Group has control. The Group

controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity

and has the ability to affect those returns through its power to direct the activities of the entity. A list of the

subsidiaries is provided in note 21. All intercompany transactions are eliminated. The assets and liabilities

of Group companies whose functional currency is not Australian dollars are translated into Australian

dollars at the period-end exchange rate. The revenue and expenses of these companies are translated

into Australian dollars at rates approximating those at the dates of the transactions. Exchange differences

arising on this translation are recognised in the foreign currency translation reserve. On disposal or partial

disposal of an entity, the related exchange differences that were recorded in equity are recognised in the

income statement as part of the gain or loss on sale.

3.2 Segment Reporting

The Group has considered the requirements for segmental reporting as set out in AASB 8: Operating

Segments. The standard requires that operating segments are reported in a manner consistent with the

internal reporting provided to the chief operating decision-maker. The chief operating decision-maker has

been identied as the Chief Executive Ofcer. The Group has determined that one segment exists for the

Group’s Hailie

(formerly known as Smartinhaler

) business.

Annual Report 2023 Adherium Ltd

3.3 Foreign currency translation

(a) Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates

prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the

settlement of such transactions and from the translation at year end exchange rates of monetary

assets and liabilities denominated in foreign currencies and not related to net investments in

subsidiaries are recognised in the Statement of Prot & Loss and Other Comprehensive Income.

Foreign exchange gains and losses resulting from translation of net investments in subsidiaries are

recognised in the foreign currency translation reserve.

(b) Group Companies

The nancial results and position of foreign operations whose functional currency is different from the

Group’s presentation currency is translated as follows:

• Assets and liabilities are translated at period end exchange rates prevailing at that reporting date.

• Income and expenses are translated at average exchange rates for the period.

• Retained earnings are translated at the exchange rates prevailing at the date of the transaction.

3.4 Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable, and represents amounts

receivable for goods supplied, stated net of discounts, returns and taxes. The Company recognises revenue

when specic criteria have been met for each of the Company’s activities, as described below. Amounts

received from customers in accordance with contractual sales terms before these revenue recognition

criteria are met are deferred and recorded as Income Received in Advance until such time as the criteria

for recognition as revenue are met.

(a) Sales of devices and monitoring services

The Company manufactures and sells a range of inhaled medication monitoring devices and related

equipment. Sales of products are recognised when they have been delivered to the customer and

there is no unfullled obligation that could affect the customer’s acceptance of the products. Delivery

does not occur until the products have been shipped to the specied location, and either the customer

has accepted the products in accordance with the sales contract, the acceptance provisions have

lapsed, or the Company has objective evidence that all criteria for acceptance have been satised.

No element of nancing is deemed present as the sales are made with a credit term of 30-60 days.

Monitoring services are billed monthly in arrears based on contracted terms and conditions.

(b) Grants

Grants received for research and development are recognised in the Statement of Prot & Loss and

Other Comprehensive Income when the requirements under the grant agreement have been met.

Any grants for which the requirements under the grant agreement have not been completed are

carried as liabilities until all the conditions have been fullled.

Interest income is recognised on a time-proportion basis using the effective interest method.

3.5 Research and development

Research costs include direct and directly attributable overhead expenses for product invention and

design Research costs are expensed as incurred.

When a project reaches the stage where it is reasonably certain that future expenditure can be recovered

through the process or products produced, development expenditure is recognised as a development

asset within Intangible Assets when:

• a product or process is clearly dened and the costs attributable to the product or process can be

identied separately and measured reliably;

• the technical feasibility of the product or process can be demonstrated;

• the existence of a market for the product or process can be demonstrated and the Company

intends to produce and market the product or process;

• adequate resources exist, or their availability can be reasonably demonstrated to complete the

project and market the product or process.

In such cases the asset is amortised from the commencement of commercial production of the product

to which it relates on a straight-line basis over the years of expected benet. Research and development

costs are otherwise expensed as incurred.

Annual Report 2023 Adherium Ltd

3.6 Employee beneﬁts

(a) Wages, salaries and annual leave

Liabilities for wages and salaries, bonuses and annual leave expected to be settled within 12 months

of the reporting date are recognised in accrued liabilities in respect of employees’ services up to the

reporting date and are measured at the amounts expected to be paid when the liabilities are settled.

Liabilities for non-accumulating sick leave are recognised when the leave is taken and measured at

the rates paid or payable.

(b) Share-based payments

The Company operates equity-settled share and option plans and awards certain employees,

directors and consultants shares, options and other incentive securities, from time to time, on a

discretionary basis. The fair value of the services received in exchange for the grant of the securities

is recognised as an expense with a corresponding increase in the share-based compensation

reserve over the vesting period. The total amount to be expensed over the vesting period is determined

by reference to the fair value of the securities at grant date. At each balance sheet date, the Company

revises its estimates of the number of securities that are expected to vest and become exercisable.

It recognises the impact of the revision of original estimates, if any, in the Statement of Prot & Loss

and Other Comprehensive Income, and a corresponding adjustment to equity over the remaining

vesting period.

3.7 Leases

At lease commencement, as Lessee an asset (the right to use the leased item) and a nancial liability to

pay rentals across all leases are recognised unless the lease term is 12 months or less, or the underlying

asset has a low value. The right-of-use assets recognised comprise the initial measurement of the

corresponding lease liability, lease payments made at or before the commencement day, less any lease

incentives received and any initial direct costs. They are subsequently measured at cost less accumulated

depreciation and impairment losses.

3.8 Income Tax

The tax expense for the period comprises current and deferred tax. Tax is recognised in the Statement of

Prot & Loss and Other Comprehensive Income, except to the extent that it relates to items recognised in

directly in equity. In this case, the tax is also recognised directly in equity.

The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted

at the balance sheet date in the countries where the Company generated taxable income.

Deferred income tax is recognised on temporary differences arising between the tax bases of assets and

liabilities and their carrying amounts in the nancial statements. Deferred income tax is determined using

tax rates (and laws) that have been enacted or substantively enacted by the balance sheet date and

are expected to apply when the related deferred income tax asset is realised, or the deferred income tax

liability is settled.

Deferred income tax assets are recognised only to the extent that it is probable that future taxable prot

will be available against which the temporary differences can be utilised.

3.9 Goods and Services Tax (GST)

The Statement of Prot & Loss and Other Comprehensive Income has been prepared so that all

components are stated exclusive of GST. All items in the balance sheet are stated net of GST, with the

exception of receivables and payables, which include GST invoiced.

3.10 Impairment of non-ﬁnancial assets

Assets that are subject to amortisation and depreciation are reviewed whenever events or changes in

circumstances indicate that the carrying amount of the assets may not be recoverable. The carrying

amount of an asset is considered impaired when its recoverable amount is less than its carrying value.

In that event, a loss is recognised in the Statement of Prot & Loss and Other Comprehensive Income based

on the amount by which the carrying amount exceeds the recoverable amount.

3.11 Cash and cash equivalents

Cash and cash equivalents include cash on hand, deposits held at call with nancial institutions, other

short term, highly liquid investments with original maturities of three months or less that are readily

convertible to known amounts of cash and which are subject to an insignicant risk of changes in value.

Annual Report 2023 Adherium Ltd

3.12 Trade receivables

The Group makes use of a simplied approach in accounting for trade and other receivables and records

any loss allowance as lifetime expected credit losses. These are the expected shortfalls in contractual cash

ows, considering the potential for default at any point during the life of a nancial instrument.

In calculating expected credit losses, the Group uses its historical experience, external indicators and

forward-looking information using a provision matrix. The Group assesses impairment of trade receivables

on a collective basis and as they possess shared credit risk characteristics, grouped them based on the

days past due.

3.13 Inventories

Inventories are stated at the lower of cost or net realisable value. Cost is determined using the rst-in, rst-

out (FIFO) method. The cost of nished goods and work in progress comprises raw materials, direct labour,

other direct costs and related production overheads (based on normal operating capacity). It excludes

borrowing costs. Net realisable value is the estimated selling price in the ordinary course of business, less

applicable variable selling expenses.

3.14 Property, plant and equipment

Property, plant and equipment are stated at historical cost less depreciation and any impairments

recognised. Historical cost includes expenditure that is directly attributable to the acquisition of the items.

Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as

appropriate, only when it is probable that future economic benets associated with the item will ow to

the Company and the cost of the item can be measured reliably. All other repairs and maintenance are

charged to the Statement of Prot & Loss and Other Comprehensive Income during the nancial period in

which they are incurred

Depreciation is determined principally using the diminishing value method to allocate their cost, net of

their residual values, over their estimated useful lives, as follows:

Manufacturing tooling equipment 4 years

Computer equipment 2 years

Ofce furniture, xtures & ttings 4 years

3.15 Intangible assets

(a) Intellectual property

Costs in relation to protection and maintenance of intellectual property are expensed as incurred.

Acquired patents, trademarks and licences have nite useful lives and are carried at cost less

accumulated amortisation and impairment losses. Amortisation is calculated using the straight-line

method to allocate the cost over the anticipated useful lives, which are aligned with the unexpired

patent term or agreement over trademarks and licences.

(b) Acquired software

Acquired software licences are capitalised on the basis of the costs incurred to acquire and bring

to use the specic software. These costs are amortised over their estimated useful lives (two to

three years).

3.16 Trade payables

Trade payables are obligations to pay for goods or services that have been acquired in the ordinary

course of business from suppliers.

Trade payables are recognised initially at fair value and subsequently measured at amortised cost using

the effective interest method.

3.17 Share capital

Ordinary shares are classied as equity. Incremental costs directly attributable to the issue of new ordinary

shares or options are deferred until the issue of the shares or options, and then shown in equity as a

deduction, net of tax, from the proceeds.

Annual Report 2023 Adherium Ltd

3.18 Financial assets

(a) Financial assets recognised in the Statement of Financial Position include cash and cash equivalents,

and trade and other receivables. The Company believes that the amounts reported for nancial

assets approximate fair value.

(b) Financial assets: Loans and receivables

Loans and receivables are non-derivative nancial assets with xed or determinable payments that

are not quoted in an active market. They are included in current assets, except for maturities greater

than 12 months after the balance sheet date. These are classied as non-current assets. The

Company’s loans and receivables comprise “trade and other receivables” and “cash and cash

equivalents” in the Statement of Financial Position. Loans and receivables are measured at amortised

cost using the effective interest method less impairment.

3.19 Dividend distribution

Dividend distribution to the Company’s shareholders is recognised as a liability in the nancial statements

in the period in which the dividends are approved by the Company’s shareholders.

3.20 Comparative Information

Where necessary, certain comparative information has been reclassied in order to provide a more

appropriate basis for comparison.

3.21 New Accounting Standards for application in future periods

There are no other standards, amendments, or interpretations to existing standards that have been

issued and yet to be adopted by the Company that are likely to have a material impact on the nancial

statements.

4. Segment Information

The chief operating decision maker is the Chief Executive Ofcer, who reviews nancial information for the Group as

a whole. The information reviewed is prepared in the same format as included in the nancial statements. The Group

has therefore determined that one reportable segment exists for the Group’s Hailie

business.

(a) Geographic segment information

The Group operates predominantly from New Zealand, with some manufacturing also undertaken by

suppliers in Asia at which the Group locates equipment and tools:

Domicile of non-current assets

June 2023

$000

June 2022

$000

New Zealand and Australia 85 200

South-East Asian Countries 42 110

Other Countries

- 4

127 314

The Group sells its products and services domestically and internationally. Revenues by customer region of

domicile are:

Location of customer sales

June 2023

$000

June 2022

$000

New Zealand and Australia 27 7

Europe 2,632 355

North America

536 167

3,195 529

Annual Report 2023 Adherium Ltd

b) Major customers

Revenues are derived from major external customers as follows:

Major customers

June 2023

$000

June 2022

$000

Customer A group entities 1,507 396

5. Revenue

Income from continuing operations:

June 2023

$000

June 2022

$000

Sensor sales and monitoring services 1,881 294

New product design and engineering services

1,314 235

3,195 529

Revenue by geographic location is disclosed in note 4.

6. Expenses

Loss before income tax includes the following speciﬁc expenses:

June 2023

$000

June 2022

$000

Fees paid to PricewaterhouseCoopers for:

- audit of the nancial statements - 99

- interim report review 48 40

Fees paid to RSM for:

- audit of the nancial statements 50 -

- interim report review - -

Fees paid to PricewaterhouseCoopers for non-audit services:

- fees in respect of other advice and services - -

Fees paid to RSM for non-audit services:

- fees in respect of other advice and services

20 -

Total fees to PricewaterhouseCoopers and RSM 118 139

Depreciation and amortisation 191 186

Directors’ remuneration

- director fees 337 361

- share-based compensation 14 42

Total Directors’ remuneration 351 403

Employee benets expense

- wages and salaries 6,469 5,641

- superannuation expense 426 302

- share-based compensation 393 1,102

Total employee benets expense 7,288 7,045

Foreign exchange loss (gain) (19) 33

Operating lease costs 98 139

Annual Report 2023 Adherium Ltd

7. Income tax

June 2023

$000

June 2022

$000

Current tax - -

Deferred tax - -

Income tax expense - -

Numerical reconciliation of income tax expense to prima facie tax

payable (receivable):

Loss before income tax (9,858) (10,044)

Tax calculated at domestic tax rates (2,624) (2,877)

Tax effects of:

Expenses not deductible for tax purposes (276) (388)

Under (over) provision in prior year 688 895

Deferred tax assets not recognised (note 17) 2,212 2,370

Income tax expense - -

The weighted average applicable tax rate was 27% (2022: 29%).

Research & development (R&D) tax credit

The Group is eligible to participate in the Research and Development (R&D) Tax Incentive Offset scheme to

potentially obtain a tax rebate or credits equivalent to the entitlements under the scheme operating at the time.

These are only recognised when it is probable that a claim under the schemes is likely to be successful or would be

available to be offset against income tax payable. During the current year, the Group has recognised an amount

of $1,838,000 in relation to the R&D Tax Incentive Offset scheme for income tax year 2023. As at 30 June 2023,

$1,377,000 was accrued for the 2023 income tax year (2022: $1,173,000).

8. Earnings per share

Basic loss per share is based upon the weighted average number of outstanding ordinary shares. For all periods

presented, the Company’s potentially dilutive ordinary share equivalents (being the Options set out in note 16) have

an anti-dilutive effect on loss per share and, therefore, have not been included in determining the total weighted

average number of ordinary shares outstanding for the purpose of calculating diluted loss per share.

June 2023

$000

June 2022

$000

Prot (loss) after income tax attributable to equity holders (9,858) (10,044)

Weighted average shares outstanding (basic) 4,083,068,279 2,173,918,843

Weighted average shares outstanding (diluted) 4,083,068,279 2,173,918,843

Basic and diluted loss per share (0.2) cents (0.5) cents

9. Cash and cash equivalents

June 2023

$000

June 2022

$000

Cash at bank and on hand 1,042 315

Deposits at call 8,035 4,968

9,077 5,283

Annual Report 2023 Adherium Ltd

10. Trade and other receivables

June 2023

$000

June 2022

$000

Trade receivables and accruals 602 302

Allowance for expected credit losses (63) -

R&D tax credit receivable 1,377 1,173

GST and other taxes receivable 15 62

Security deposits 37 56

1,968 1,593

Allowance for expected credit loss

The consolidated entity has recognised a loss of $63,000 in prot or loss in respect of the expected credit losses for

the year ended 30 June 2023.

The ageing of receivables and allowance for expected credit losses provided for above are as follows:

Expected credit loss rate Carrying amount

Allowance for expected

credit losses

June 2023

June 2022

June 2023

$000

June 2022

$000

June 2023

$000

June 2022

$000

Not overdue - - 109 - - -

0 to 3 months overdue - - 430 283 - -

3 to 6 months overdue 100% - 8 12 8 -

Over 6 months overdue 100% -

55 7 55 -

602 302 63 -

June 2023

$000

June 2022

$000

Opening balance - -

Additional provisions recognised (63) -

Receivables written off during the year as uncollectable - -

Unused amount reserved - -

Closing balance (63) -

11. Inventories

June 2023

$000

June 2022

$000

Raw materials and components 835 981

Provision for obsolescence (69) (21)

Finished goods 473 111

1,239 1,071

Annual Report 2023 Adherium Ltd

12. Property, plant and equipment

Manufacturing

Equipment

$000

Computer

Equipment

$000

Fixtures

& Fittings

$000

Ofﬁce

Equipment

$000

Total

$000

As at 1 July 2021

Cost 770 154 20 60 1,004

Accumulated depreciation (695) (126) (11) (45) (877)

Net book value 75 28 9 15 127

Movements in the year

ended 30 June 2022

Opening net book value 75 28 9 15 127

Additions 190 91 8 - 289

Disposals - - (2) - (2)

Depreciation (135) (38) (2) (6) (181)

Foreign currency translation (5) (1) - - (6)

Closing net book value 125 80 13 9 227

As at 30 June 2022

Cost 929 242 23 58 1,252

Accumulated depreciation (804) (162) (10) (49) (1,025)

Net book value 125 80 13 9 227

Movements in the year

ended 30 June 2023

Opening net book value 125 80 13 9 227

Additions 20 22 1 - 43

Disposals - - - - -

Depreciation (89) (50) (2) (4) (145)

Foreign currency translation 2 - - - 2

Closing net book value 58 52 12 5 127

As at 30 June 2023

Cost 1,050 250 24 59 1,384

Accumulated depreciation (993) (198) (12) (54) (1,257)

Net book value 58 52 12 5 127

Annual Report 2023 Adherium Ltd

13. Intangible and right-of-use assets

Software

$000

Right-of-Use Asset

$000

Total

$000

As at 30 June 2021

Cost 299 - 299

Accumulated amortisation (296) - (296)

As at 30 June 2021 - Net book value 3 - 3

Movements in the year ended 30 June 2022

Opening net book value 3 - 3

Additions - 89 89

Disposals - - -

Amortisation (2) (3) (5)

Foreign currency translation - - -

Closing net book value 1 86 87

As at 30 June 2022

Cost 290 89 379

Accumulated amortisation (289) (3) (292)

Net book value 1 86 86

Movements in the year ended 30 June 2023

Opening net book value 1 86 87

Additions - - -

Disposals - - -

Amortisation (1) (45) (46)

Foreign currency translation - 1 1

Closing net book value - 42 42

As at 30 June 2023

Cost 295 91 386

Accumulated amortisation (295) (49) (344)

Net book value - 42 42

14. Trade and other payables

June 2023

$000

June 2022

$000

Trade payables 958 304

Accruals 806 506

Other payables 35 31

Employee benets 969 856

2,768 1,697

Annual Report 2023 Adherium Ltd

15. Income received in advance

June 2023

$000

June 2022

$000

Income received in advance 655 1,214

Customer prepaid revenue held as stock 655 1,214

16. Share capital

Ordinary Shares $000

Share capital as at 1 July 2021 601,906,334 87,682

Shares issued in employee share plans 68,490,750 -

Cancellation of shares issued in employee share plans (7,399,372) -

Shares issued for services 21,426,603 351

Share issue costs - (809)

Share capital as at 30 June 2022 2,208,251,092 110,523

Shares issued in employee share plans 22,414,483 -

Shares issued in placements 2,700,000,000 13,500

Shares issued in share purchase plan 63,000,000 315

Shares issued for services 5,742,740 23

Share issue costs - (744)

Share capital as at 30 June 2023 4,999,408,315 123,617

(a) Ordinary Shares

The ordinary shares have no par value and all ordinary shares are fully paid-up and rank equally as to

dividends and liquidation, with one vote attached to each fully paid ordinary share.

(b) Employee incentive plans

Adherium Executive Share Option Plan (Adherium ESOP)

The Company operates an employee share option plan for employees, directors and consultants within the

Group. Participants are invited by the Board of Directors and awards typically vest one third annually over a three-

year period.

The tables below set out the movements in options within relevant exercise price ranges:

Exercise

price range

$0.04 Options

Weighted

Average

Exercise

Price

Weighted

Average

Remaining

Contract

Life (years) Exercisable

Weighted

Average

Exercise

Price

Weighted

Average

Share Price

at Exercise

Outstanding at

1 July 2021

23,000,000 $ 0.0400 5.1 9,666,667 $ 0.0400 -

Granted - $ -

Exercised - $ -

Lapsed (5,823,441) $ 0.0400

Annual Report 2023 Adherium Ltd

Outstanding at

30 June 2022

17,176,589 $ 0.0400 4.8 13,843,225 $ 0.0400 -

Granted - $ -

Exercised - $ -

Lapsed - $ 0.0400 3,333,334

Outstanding at

30 June 2023

17,176,559 $ 0.0400 3.8 17,176,559 $ 0.0400 -

The Company has no legal or constructive obligation to repurchase or settle the options in cash.

Adherium Employee Share Plans (Adherium ESP)

The Company operates employee share plans for employees, directors and consultants within the Group.

Participants are invited by the Board of Directors and those who accept an offer of ESP shares are provided with

an interest free loan from the Company to nance the whole of the purchase of the ESP shares they were invited

to apply for (ESP Loan). The ESP Loans are provided to participants on a non-recourse basis and upon vesting

must be repaid in order to remove trading restrictions on vested ESP shares. The term of the ESP Loan is ve

years, however participants may forfeit their ESP shares if they do not repay the ESP Loan or leave employment

with the Company. Awards typically vest one third annually over a three-year period and are subject to restriction

until vesting conditions are met.

The assessed weighted average fair value at grant date of the awards made during the 2020 nancial period is

1.3 cents per ESP share awarded. The awards were priced using a Black-Scholes option pricing model that takes

into account the exercise price, the term of the award, the share price at grant date and expected price volatility

of the underlying share, the expected dividend yield and the risk-free interest rate for the term of the award.

There were no new awards under the Adherium ESP during scal 2019.

The following incentive awards have been made and are on issue under the Adherium ESP:

Grant date Shares granted Issue price

Vested as at

30 June 2023

Restricted as at

30 June 2023

Share price

at grant date

8 November 2016 900,000 $0.500 - 900,000 $0.350

10 July 2019 3,377,435 $0.027 2,984,757 3,377,435 $0.028

10 July 2019 1,099,872 $0.075 978,842 1,099,872 $0.028

10 July 2019 1,099,872 $0.150 978,842 1,099,872 $0.028

10 July 2019 1,099,887 $0.250 978,856 1,099,887 $0.028

21 October 2020 5,876,711 $0.040 5,876,711 5,876,711 $0.026

21 October 2020 4,500,000 $0.050 3,000,000 4,500,000 $0.026

26 November 2021 68,490,750 $0.016 - 68,490,750 $0.013

29 August 2022 19,444,444 $0.009 - 19,444,444 $0.009

22 June 2023 990,913 $0.026 990,013 990,013 $0.003

22 June 2023 990,913 $0.052 - 990,013 $0.003

22 June 2023 990,913 $0.078 - 990,013 $0.003

On 20 September 2021, the Company issued 148,977,337 Stock Appreciation Rights (SARs) with a 10-year life to

key management personnel as a long-term incentive. At the time, 69,168,049 SARs vested at grant date. On

20 September 2022, 26,603,096 SARs lapsed, and 53,206,192 SARs will vest in two equal tranches over two years

subject to the achievement of target VWAPs of $0.064 and $0.096 over the next two years respectively for the

Company’s ASX listed shares.

In 2022, the fair value of the award of SARs of $1,043,000 was calculated at the date of grant using a Monte

Carlo Simulation valuation model. The signicant inputs to the valuation model were a grant date share price of

$0.016, a dividend yield of 0%, an early exercise factor of 2.5, an annual risk-free rate of 1.27%, and a volatility of

110%. In the year to 30 June 2023, $131,070 (2022: $839,723) was recognised as compensation expense.

Annual Report 2023 Adherium Ltd

On any exercise of a vested SAR, the Company will issue that number of ordinary shares equivalent in value to

the amount by which the fair market value of the ordinary shares exceeds the base price of $0.016.

(d) Other option issues

On 26 September, 28 October 2022 and 12 December 2022, the Company issued 167,077,165 options,

1,106,672,835 options and 76,250,000 options respectively to placement investors, with an exercise price of $0.01

and expiry date of 31 March 2024.

On 12 December 2022 and 25 January 2023, the Company issued 23,000,000 options and 8,500,000 options

respectively pursuant to an entitlement shortfall offer, with an exercise price of $0.01 and expiry date of 31 March

2024.

17. Deferred Income Tax

June 2023

$000

June 2022

$000

Movements:

Deferred tax asset (liability) at the beginning of the year - -

Credited (charged) to the income statement (note 7) 2,212 2,370

Change in unrecognised deferred tax assets (2,212) (2,370)

Deferred tax asset (liability) at the end of the year - -

The movement in deferred income tax assets and liabilities during the period is as follows:

Deferred tax assets (liabilities)

Provisions

and accruals

$000

Intangible

assets

$000

Tax

losses

$000

Total

$000

As at 30 June 2021 - - - -

Credited (charged) to the income statement (8) (37) 2,415 2,370

Effect of exchange rate changes (4) (8) 97 85

Change in unrecognised deferred tax assets

12 45 (2,512) (2,455)

As at 30 June 2022 - - - -

Credited (charged) to the income statement 23 (83) 2,565 2,505

Effect of exchange rate changes 2 5 355 362

Change in unrecognised deferred tax assets (25) 78 (2,920) (2,867)

As at 30 June 2023

- - - -

Deferred income tax assets are recognised for tax losses carried forward to the extent that the realisation of

the related tax benet through future taxable prots is probable, or to the extent that they can set off against

deferred income tax liabilities. The Company did not recognised deferred income tax assets of $21,815,000 (2022:

$18,896,000) in respect of losses amounting to $71,009,000 (2022: $61,280,000) that can be carried forward against

future taxable income. The Company also did not recognise further deferred income tax assets of $753,000 (2022:

$805,000) in respect of other timing differences amounting to $2,586,000 (2022: $2,774,000).

Annual Report 2023 Adherium Ltd

18. Related party transactions

(a) Key management personnel

The key management personnel include the directors of the Company, the CEO, and senior executives

responsible for the planning, directing and controlling of the Group’s activities. Compensation for this

group was as follows:

June 2023

$000

June 2022

$000

Directors

- director fees and other legislated superannuation 337 361

- share-based compensation 14 42

CEO and management

- short-term benets 1,136 1,111

- post-employment benet contributions 81 224

- share-based compensation 189 937

1,757 2,675

Key management personnel and their associates did not subscribe for share capital in the Company in the years

ended 30 June 2022 and 2023.

(b) Related parties

There were no other transactions with related parties in the periods presented.

19. Financial instruments and risk management

(a)

Categories of ﬁnancial instruments

June 2023

$000

June 2022

$000

Financial assets

Loans and receivables classiﬁcation:

Cash and cash equivalents 9,077 5,283

Trade receivables (net) 539 302

Other receivables 1,658 1,563

Total ﬁnancial assets 11,274 7,148

Financial liabilities

Measured at amortised cost:

Trade and other payables 2,768 1,697

Lease liabilities 44 85

Total ﬁnancial liabilities 2,812 1,782

(b) Risk management

The Group is subject to a number of nancial risks which arise as a result of its activities.

Annual Report 2023 Adherium Ltd

Foreign exchange risk

During the normal course of business, the Group enters into contracts with overseas customers or suppliers or

consultants that are denominated in foreign currency. As a result of these transactions there is exposure to

uctuations in foreign exchange rates.

The Group does not utilise derivative nancial instruments. It operates a policy of holding cash and cash equivalents

in the currency of near-term estimated future supplier payments, however it does not designate formal hedges and

as such remains unhedged against foreign currency uctuations. A foreign exchange loss of $19,000 is included in

results for the period ended 30 June 2023 (2022: $33,000 loss).

The carrying amounts of foreign currency denominated nancial assets and nancial liabilities are as follows:

June 2023

$000

June 2022

$000

Assets

New Zealand Dollars 592 395

US dollars 478 335

UK pound 445 23

Liabilities

New Zealand Dollars 791 729

US dollars 302 126

UK pound 317 75

Japanese Yen - 153

The following table details the sensitivity of nancial assets and nancial liabilities to a 10% increase and decrease in

each of the currencies noted against the Australian dollar as at the reporting date.

Decrease (increase) in loss after income tax

June 2023

$000

June 2022

$000

10% strengthening of Australian dollar against:

New Zealand dollars (42) 27

US dollars (25) (28)

UK pound (22) 8

10% weakening of Australian dollar against:

New Zealand dollars (79) (34)

US dollars 29 34

UK pound 27 (10)

Cash ﬂow and fair value interest rate risk

The Group is exposed to interest rate risk as it holds cash and cash equivalents (refer note 9).

Trade and other receivables and payables do not bear interest and are not interest rate sensitive.

The Group’s interest-bearing nancial assets bear interest at deposit rates for up to 180 days and accordingly any

change in interest rates would have an immaterial effect on reported loss after tax.

Annual Report 2023 Adherium Ltd

Credit risk

The Group incurs credit risk from transactions with trade receivables and nancial institutions in the normal course of

its business. The credit risk on nancial assets of the Group, which have been recognised in the statement of nancial

position, is the carrying amount, net of any allowance for doubtful debts.

The Group does not require any collateral or security to support transactions with nancial institutions or customers.

The counterparties used for banking activities are nancial institutions with an A1/A2 credit rating (2022: A1/A2) and

the Group assesses the credit quality of customers by taking into account their nancial position, past experience

and other factors. The credit quality of trade receivables can be assessed by reference to external credit ratings (if

available) or to historical information about counterparty default rates:

June 2023

$000

June 2022

$000

Counterparties with external credit rating:

• A-2 429 123

Counterparties without external credit rating:

• existing customers (more than 6 months) with no defaults in the past

173 179

Total trade receivables

602 302

The Group applies the simplied model of recognising lifetime expected credit losses for all trade receivables

as these items do not have a signicant nancing component. In measuring the expected credit losses, the trade

receivables have been assessed on a collective basis as they possess shared credit risk characteristics and have

been grouped based on the days past due. In calculating the expected credit losses, the Group uses its historical

experience, external indicators and forward-looking information.

On this basis, the loss allowance as at 30 June 2023 for trade and other receivables was determined to be $63,000

(2022: nil).

Trade receivables are written off (i.e., derecognised) when there is no reasonable expectation of recovery. Failure to

make payments within 180 days from the invoice date and failure to engage with the Group on alternative payment

arrangements, amongst others, are considered indicators of no reasonable expectation of recovery.

The Group is exposed to a concentration of credit risk as 71% of accounts receivable are with one counterparty

(2022: 41%). The customer has an external credit rating of A-1.

Liquidity risk

The table below shows the Group’s non-derivative nancial liabilities by relevant maturity grouping based on the

remaining period at the balance sheet date to the contractual maturity date. The amounts disclosed in the table are

the contractual undiscounted cash ows.

Less than

3 months

$000

Between 3 months

and 1 year

$000

Between 1 year

and 2 years

$000

As at 30 June 2023

Trade and other payables 2,768 - -

Lease liabilities 11 33 -

As at 30 June 2022

Trade and other payables 1,697 - -

Lease liabilities 10 32 43

Annual Report 2023 Adherium Ltd

Capital risk

The Group manages its capital to ensure that it is able to continue as a going concern. The capital structure of the

Group consists of cash and cash equivalents, and equity comprising issued capital, reserves and accumulated decit.

Fair value estimation.

Financial liabilities measured at fair value in the statement of nancial position are grouped into three Levels of a fair

value hierarchy. The three levels are dened based on the observability of signicant inputs to the measurement, as

follows:

- Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities

- Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability,

either directly or indirectly.

- Level 3: unobservable inputs for the asset or liability.

Lease liabilities

The Group entered into a lease for ofce space during the year ending 30 June 2023. This lease is a two-year lease

with a two-year right of renewal. The lease liabilities recognised in the balance sheet are:

June 2023

$000

June 2022

$000

Lease Liabilities

Lease liabilities (current) 44 42

Lease liabilities (non-current) - 43

Total lease liabilities 44 85

The total cash outow for leases in 2023 was $143,000 (2022: $145,000).

The lease liabilities are secured by the underlying right-of-use-assets.

20. Parent entity information

The following details information related to the legal parent, Adherium Limited as at 30 June 2023. During the year

ended 30 June 2023 Adherium Limited recognised an impairment on the carrying value of its investments in and

loans to subsidiaries to record those at the Group carrying value. This resulted in an impairment charge of $6,179,000

(2022: $5,367,000 impairment) The information presented here has been prepared using consistent accounting

policies as presented in Note 1.

Parent

June 2023

$000

Parent

June 2022

$000

Statement of Financial Position

Current assets 9,154 6,257

Non-current assets

28 45

Total assets 9,182 6,302

Current liabilities 1,164 783

Non-current liabilities

- -

Total liabilities 1,164 783

Net assets

8,018 5,519

Contributed equity

123,617 110,523

Accumulated decit (122,443) (110,413)

Reserves

6,843 5,409

Total equity

8,018 5,519

Statement of Proﬁt and Loss and Comprehensive Income

Loss after tax

(12,030) (10,497)

Total comprehensive loss

(12,030) (10,497)

Annual Report 2023 Adherium Ltd

21. Interests in controlled entities

The consolidated nancial statements incorporate the assets, liabilities and results of the following subsidiaries in

accordance with the accounting policy described in Note 3:

Name of Entity Status Country of incorporation Percentage owned

June 2023 June 2022

Adherium (NZ) Limited Operating New Zealand 100% 100%

Adherium North America, Inc. Operating United States 100% 100%

Adherium Europe Ltd Operating United Kingdom 100% 100%

Nexus6 Limited Dormant shell New Zealand 100% 100%

22. Contingencies and commitments

The Group had no contingencies or commitments to purchase any property, plant or equipment at 30 June 2022 (2021: nil).

The following aggregate future non-cancellable minimum short-term lease payments for premises have been committed

to by the Group, but not recognised in the nancial statements.

June 2023

$000

June 2022

$000

Not later than one year 7 54

Later than one year and not later than ve years - -

Later than ve years

- -

7 54

23. Events occurring after balance date

Subsequent to the balance sheet date, there was a buy-back of 7,535,769 shares on 9 August 2023 for nil

consideration. The buyback was due to extinguishment of Employee Share Plan loans totalling $612,171 originally

advanced by the Company for purchase of ESP Shares due to award expiry.

On 6 July 2023, Mr Mark Licciardo resigned as Joint Company Secretary of the Company.

There are no other events occurring after the balance sheet date which require disclosure or adjustment in the

nancial statements.

Annual Report 2023 Adherium Ltd

Directors’ Declaration

The Directors declare that the nancial statements and notes set out on pages 26 to 49 in accordance with the

Corporations Act 2001:

(a) comply with Accounting Standards and the Corporations Regulations 2001, and other mandatory professional

reporting requirements;

(b) as stated in note 2, the consolidated nancial statements also comply with International Financial Reporting

Standards; and

performance for the nancial year ended on that date.

In the Directors’ opinion there are reasonable grounds to believe that Adherium Limited will be able to pay its

debts as and when they become due and payable.

This declaration has been made after receiving the declarations required to be made by the Chief Executive

Ofcer and Chief Financial Ofcer to the Directors in accordance with section 295A of the Corporations Act 2001

for the year ended 30 June 2023.

This declaration is made in accordance with a resolution of the Directors.

On behalf of the board.

Lou Panaccio

Non-Executive Chairman

Melbourne

30 August 2023

Annual Report 2023 Adherium Ltd

THE POWER OF BEING UNDERSTOOD

AUDIT | TAX | CONSULTING

RSM Australia Partners is a member of the RSM network and trades as RSM. RSM is the trading name used by the members of the RSM network. Each member of the

RSM network is an independent accounting and consulting firm which practices in its own right. The RSM network is not itself

a separate legal entity in any jurisdiction.

RSM Australia P

artners ABN 36 965 185 036

Liability limited by a scheme approved under Professional Standards Legislation

RSM Australia Partners

Level 21, 55 Collins Street Melbourne VIC 3000

PO Box 248 Collins Street West VIC 8007

T +61 (0) 3 9286 8000

F +61 (0) 3 9286 8199

www.rsm.com.au

INDEPENDENT AUDITOR’S REPORT

To the Members of Adherium Limited

Opinion

We have audited the financial report of Adherium Limited (the Company) and its controlled entities (the Group),

which comprises the consolidated statement of financial position as at 30 June 2023, the consolidated statement

of profit or loss and other comprehensive income, the consolidated statement of changes in equity and the

consolidated statement of cash flows for the year then ended, and notes to the financial statements, including a

summary of significant accounting policies, and the directors' declaration.

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

including:

i. giving a true and fair view of the Group's financial position as at 30 June 2023 and of its financial

performance for the year then ended; and

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

Basis for Opinion

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

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

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

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

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

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

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

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

report.

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

opinion.

Material Uncertainty Related to Going Concern

We draw attention to Note 2 in the financial report, which indicates that the Group incurred a net loss of $9,858,000

during the year ended 30 June 2023 and net cash outflows from operating activities of $9,279,000. As stated in

Note 2, these events or conditions, along with other matters as set forth in Note 2, indicate that a material

uncertainty exists that may cast significant doubt on the Group's ability to continue as a going concern. Our opinion

is not modified in respect of this matter.

THE POWER OF BEING UNDERSTOOD

AUDIT | TAX | CONSULTING

RSM Australia Partners is a member of the RSM network and trades as RSM. RSM is the trading name used by the members of the RSM network. Each member of the

RSM network is an independent accounting and consulting firm which practices in its own right. The RSM network is not itself

a separate legal entity in any jurisdiction.

RSM Australia Partners ABN 36 965 185 036

Liability limited by a scheme approved under Professional Standards Legislation

RSM Australia Partners

Level 21, 55 Collins Street Melbourne VIC 3000

PO Box 248 Collins Street West VIC 8007

T +61 (0) 3 9286 8000

F +61 (0) 3 9286 8199

www.rsm.com.au

AUDITOR’S INDEPENDENCE DECLARATION

As lead auditor for the audit of the financial report of Adherium Limited and its controlled entities for the year

ended 30 June 2023, I declare that, to the best of my knowledge and belief, there have been no contraventions

of:

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

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

RSM AUSTRALIA PARTNERS

B Y CHAN

Partner

Dated: 30 August 2023

Melbourne, Victoria

Annual Report 2023 Adherium Ltd

Page 2 of 4

Key Audit Matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of

the financial report of the current period. These matters were addressed in the context of our audit of the financial

report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

In addition to the matter described in the Material Uncertainty Related to Going Concern section, we have

determined the matters described below to be the key audit matters to be communicated in our report.

Key Audit Matter

How our audit addressed this matter

Inventory valuation

Refer to Note 11 in the financial statements

The Group has inventory with a carrying value of

$1,239,000 as at 30 June 2023.

• The existence and valuation of inventory is

considered a key audit matter, due to the

materiality of the balance, and the significant

judgements involved in:

• Assessing the net

realisable value of

inventories; and

•

The determination of a provision for

obsolescence.

Our audit procedures included:

•

Testing inventory costing by verifying costs

against supporting documentation;

•

Verifying that inventory is being held at the

lower of cost and net realisable value;

• Assessing the reasonableness of the Group’s

inventory methodology for determining the

provision for obsolescence; and

•

Evaluating management assumptions and

estimates app

lied to the provision for

obsolescence through analysis of historical

sales levels.

Accounting for research and development tax credit

Refer to Note 10 in the financial statements

The Group has recognised a research and

development tax credit receivable of $1,377,000.

This is a key audit matter as judgement is applied by

management in assessing the likelihood that the

taxation authorities will accept the claims the group

has made.

Our audit procedures included:

• Testing the research and development costs

that form part of the claim for reasonableness;

•

Evaluating the basis on which management

made their judgements over the likelihood that

the claim would be successful;

• Assessing the appropriateness of the Group’s

disclosures relating to the rese

arch and

development tax claim.

Page 2 of 4

Key Audit Matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of

the financial report of the current period. These matters were addressed in the context of our audit of the financial

report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

In addition to the matter described in the Material Uncertainty Related to Going Concern section, we have

determined the matters described below to be the key audit matters to be communicated in our report.

Key Audit Matter

How our audit addressed this matter

Inventory valuation

Refer to Note 11 in the financial statements

The Group has inventory with a carrying value of

$1,239,000 as at 30 June 2023.

• The existence and valuation of inventory is

considered a key audit matter, due to the

materiality of the balance, and the significant

judgements involved in:

• Assessing the net

realisable value of

inventories; and

•

The determination of a provision for

obsolescence.

Our audit procedures included:

•

Testing inventory costing by verifying costs

against supporting documentation;

•

Verifying that inventory is being held at the

lower of cost and net realisable value;

• Assessing the reasonableness of the Group’s

inventory methodology for determining the

provision for obsolescence; and

•

Evaluating management assumptions and

estimates app

lied to the provision for

obsolescence through analysis of historical

sales levels.

Accounting for research and development tax credit

Refer to Note 10 in the financial statements

The Group has recognised a research and

development tax credit receivable of $1,377,000.

This is a key audit matter as judgement is applied by

management in assessing the likelihood that the

taxation authorities will accept the claims the group

has made.

Our audit procedures included:

• Testing the research and development costs

that form part of the claim for reasonableness;

•

Evaluating the basis on which management

made their judgements over the likelihood that

the claim would be successful;

• Assessing the appropriateness of the Group’s

disclosures relating to the rese

arch and

development tax claim.

Annual Report 2023 Adherium Ltd

Page 3 of 4

Other Information

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

in the Group's annual report for the year ended 30 June 2023, but does not include the financial report and the

auditor's report thereon.

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

form of assurance conclusion thereon.

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

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

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

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

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

Responsibilities of the Directors for the Financial Report

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

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

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

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

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

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

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

alternative but to do so.

Auditor's Responsibilities for the Audit of the Financial Report

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

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

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

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

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

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

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

Assurance Standards Board website at: https://www.auasb.gov.au/admin/file/content102/c3/ar2_2020.pdf.

This

description forms part of our auditor's report.