Pacific Edge Reports Continued Growth in FY19
Company Announcement
29 May 2019
PACIFIC EDGE REPORTS CONTINUED GROWTH IN FY19
Audited Financial results for the year ended 31 March 2019
• Adoption of Cxbladder continues and sales are increasing, with accelerating commercial progress being
noted, particularly in Q419.
• Operating revenue
from test sales was up 12% to $3.8m, with total revenue for the period of $5.1m.
• Total laboratory throughput (which includes commercial sales as well as tests from User Programmes) grew
to 15,697 tests in FY19, a 9% increase on FY18.
• Total billable tests grew to 12,744 tests in FY19, a 7% increase on FY18.
• Total operating expenses reduced to $(23.0)m for the year, a 7% improvement on FY18.
• Net operating cash outflow reduced to $(17.5)m for the year, a 3% improvement on FY18.
• Overall, the Company reported a net loss of $(17.9)m for the year, an improvement of 9% on FY18.
• Pacific Edge had cash, cash equivalents and short term deposits of $12.9m as at 31 March 2019.
Cancer diagnostics company, Pacific Edge (NZX: PEB) has today released its audited financial results for the year
ended 31 March 2019, reporting accelerating demand from new and existing customers in the second half of the
financial year, particularly from New Zealand customers in the final quarter of the year.
The majority of New Zealand’s national healthcare providers (District Health Boards, DHBs) have now added
Cxbladder into the standard of care and, in some cases, into clinical guidelines with Cxbladder replacing the gold
standard cystoscopy in both the evaluation of haematuria (blood in the urine) and in the monitoring for recurrence.
More than 3 million people (over 60% of New Zealand’s population) are now covered under contract with these
DHBs. Demand and commercial sales are exceeding the company’s expectations, with strong growth in Q419 in
particular. Based on current sales and projected demand, the New Zealand business is expected to reach a cashflow
positive position in FY20.
Given the success in New Zealand with the commercial contracting of public healthcare providers, Pacific Edge has
increased its focus on large institutional healthcare organisations in its USA, South East Asia and Australasian
markets. While these institutional customers can take longer to bring to completion, once commercial agreement
is reached, they provide significant volume, require lower sales maintenance and deliver more sustainable, longer
term growth opportunities with shorter cash conversion cycles.
The USA market remains the priority for Pacific Edge. Management is focused on completing agreements and
building sales from the large institutional accounts and payers it is targeting, including Kaiser Permanente, Johns
Hopkins Medicine, the Veterans Administration and Tricare, the Centers for Medicare and Medicaid Services (CMS)
and other blue chip institutions.
Two of the three milestones required for USA national public reimbursement were completed during FY19, being
(1) receipt of product specific CPT codes for Cxbladder Detect and Cxbladder Monitor in March 2018 and (2) the
notification of a national price for all Cxbladder tests (US$760 per test) in October 2018. These have allowed the
Company to initiate negotiations for contract terms with private payers. Successful completion of these contracts
will enable a shortening of the overall commercial transaction time and provide a positive reduction in the time to
Company Announcement
29 May 2019
receipt of cash. The introduction of the national product specific CPT codes from 1 January 2019 has started to have
a positive impact on cash collection rates in Q419 and this positive trend is expected to continue going forward.
Progress continues to be made with the third and final reimbursement milestone, which is to have Cxbladder
included in a Local Coverage Determination (LCD). This will allow for reimbursement of tests used by patients
covered by the Centers for Medicare and Medicaid Services (CMS). The CMS currently account for approximately
50% of the Company’s total laboratory throughput in the US.
South East Asia remains an exciting opportunity for Pacific Edge. User Programmes with the five largest hospitals
in Singapore are nearing completion and the focus is on transitioning these to commercial customers and growing
the adoption of Cxbladder by other large healthcare organisations in the region. In Australia, Pacific Edge has taken
over the sales and distribution of Cxbladder, building on the successful practices developed in the New Zealand
market.
Outlook for FY20
Pacific Edge’s Cxbladder tests continue to provide a compelling value proposition for healthcare providers, patients
and clinicians alike. Test adoption, coverage and reimbursement is expected to grow in FY20 as clinical evidence
continues to accumulate in favour of Cxbladder.
Demand from public healthcare providers in New Zealand is expected to continue to grow strongly and positively
impact commercial test throughput volumes. The New Zealand business is expected to reach a cashflow positive
position in FY20 and onwards.
Demand from the USA is expected to be positively impacted from having the national product specific CPT codes
for Cxbladder Detect and Cxbladder Monitor and a national CMS reimbursement price (effective 1 January 2019) in
place. The focus remains on gaining the LCD and accelerating the commercial adoption of all Cxbladder tests.
Pacific Edge has a prudent approach to its investment into the growth of the Company while operating with a net
negative cash position. Total operating expenses are expected to remain in line with FY19.
CEO of Pacific Edge, David Darling, said: “Many of the foundations for commercial success have now been
completed. We have a proven business model and a growing list of compelling clinical evidence published in top-
tier international journals. This published evidence is the key ingredient in driving widespread reimbursement and
adoption of Cxbladder with customers globally.
“Adoption of Cxbladder is growing and commercial sales are increasing. We remain focused on further accelerating
the adoption of Cxbladder by large healthcare organisations in New Zealand and internationally. Gaining inclusion
in the Local Coverage Determination remains a priority.”
Chairman Chris Gallaher said that the Board remained committed to the Company’s strategy and to achieving the
key milestone of cashflow breakeven for the Group. “We are now seeing steadily increasing traction from our
commercial strategies, particularly in New Zealand and the USA. The barriers to entry for medical devices are high
and Pacific Edge remains the only company in the world to have bought a new diagnostic for urothelial cancer to
market in the last 17 years. Clinical evidence published in top-tier journals is facilitating test adoption, coverage and
Company Announcement
29 May 2019
reimbursement and we expect to see a continued uplift in adoption and sales in FY20. We remain focused on the
USA market which offers enormous potential for our company.”
The Company’s key objectives for FY20 are as follows:
• GLOBAL REACH: Grow the number of large institutional healthcare customers globally and build on initial
sales to these organisations.
• USA: Successfully achieve the third and final USA reimbursement milestone to gain inclusion in the LCD,
upsell additional Cxbladder tests to contracted customers, and build on initial sales to the VA and other
organisations.
• NEW ZEALAND: Further accelerate the roll out of Cxbladder in New Zealand to obtain widespread contract
coverage with public health care providers (DHBs), upsell additional Cxbladder tests to each of the
contracted DHBs, and bringing Pacific Edge’s New Zealand business to a cashflow positive position.
• AUSTRALIA: Replicate the successful NZ sales and marketing model in Australia to drive sales.
• SE ASIA: transition User Programmes in Singapore into commercial customers, and progress discussions
with potential strategic partners in South East Asia.
• TEST ADOPTION: Increase the commercial adoption of Cxbladder in the USA, Australia and South East Asia
by leveraging the clinical validation and commercial success of Cxbladder in New Zealand.
• CLINICAL EVIDENCE: Continue to build out the evidence portfolio to drive further positive reimbursement
decisions.
ENDS
For more information contact:
David Darling
Chief Executive Officer
Pacific Edge Ltd
P: +64 (3) 479 5800
OVERVIEW www.pacificedge.co.nz www.pacificedgedx.com
Pacific Edge Limited (NZX: PEB) is a New Zealand publicly listed, cancer diagnostic company specialising in the discovery and
commercialisation of diagnostic and prognostic tests for better detection and management of cancer. Its non-invasive, simple
to use and accurate Cxbladder tests enable the detection of bladder and other urinary tract cancers from a small volume of a
patients’ urine. Cxbladder provides actionable results and better detection and management of urothelial cancer. The company
is developing and commercialising its range of Cxbladder tests globally and has two wholly owned accredited laboratories in
New Zealand and the USA. The company’s products have been tested and validated in multiple international clinical studies.
ABOUT Cxbladder Triage
Cxbladder Triage accurately identifies patients with haematuria who have a low probability of bladder cancer and may not
require a more extensive urological evaluation. Cxbladder Triage is a tool for use by clinicians and physicians in primary
evaluation of patients with haematuria and is intended to reduce the need for an expensive and invasive work-up in patients
who have a low probability of having urothelial cancer.
ABOUT Cxbladder Detect
Company Announcement
29 May 2019
Cxbladder Detect provides clinicians with a quick, cost effective and accurate measure of the presence of the cancer as an
effective adjunct to cystoscopy. Is often used in conjunction with Cxbladder Triage to provide greater rule-out and resolution
of patients who have UC.
ABOUT Cxbladder Monitor
Cxbladder Monitor allows urologists to monitor bladder cancer patients for recurrence of the disease. Bladder cancer has a
recurrence rate of 50-80% and requires life-long surveillance. Cxbladder Monitor accurately identifies patients with a prior
history of urothelial cancer whose Cxbladder Monitor score shows that they have a low probability of recurrent urothelial
cancer. Cxbladder Monitor is designed to be used as the preferred adjunct test to cystoscopy in the management of patients
for ongoing evaluation of recurrent bladder cancer.
ABOUT Cxbladder Resolve
Cxbladder Resolve identifies those patients who are likely to have aggressive or more advanced bladder cancer. Cxbladder
Resolve, when used as part of the primary evaluation of haematuria and/or in conjunction with other Cxbladder tests (Triage,
Detect), is designed to assist clinicians by accurately identifying patients with a high probability of having high grade or late
stage bladder cancer, for whom alternative or expedited treatment options may be warranted, or who can be prioritised for
further investigation in high throughput settings.
Refer to www.cxbladder.com for more information.
---
FY19 Results Presentation
For the year ended 31 March 2019
and Outlook for FY20
29 May 2019
PACIFIC EDGE IS IN A UNIQUE GLOBAL POSITION
(PEB.NZX)
•First to market for 17 years: Four proprietary, commercial diagnostic tests (Cxbladder)
addressing large, under-served urothelial cancer markets globally.
•Proven model: Answering clinical questions that matter; disrupting “gold standard” of
care; resolving diagnostic uncertainty with additional clinical utility; reducing healthcare
costs and patient fatigue.
•Strong clinical validation: Growing pool of clinical evidence supporting Cxbladder in top-
tier international journals; facilitating test adoption and reimbursement.
•Strong momentum: Growth rates accelerating; addressing a large global market
opportunity.
•Future Pipeline in Other Cancers: Identified biomarkers and IP supporting new product
development and long term growth.
2
CXBLADDER
World class diagnostic tests
validated by international physicians
The first new diagnostic tests for bladder cancer to be made
commercially available in the US market in 17 years, disrupting clinical
pathways and standards of care.
Four high performance Cxbladder products in use by clinicians and
now being integrated into standards of care and guidelines.
•Non-invasive
•Simple to use
•Extensive market access
•Fast laboratory turnaround
•Increases clinical resolution
•Reduces healthcare spend
Ongoing clinical validation continues to demonstrate the
outperformance of Cxbladder compared to other commonly used
diagnostics. Third party clinical outcomes now being published
support the transition into commercial reality.
3
FIRST MOVER ADVANTAGE IN A GLOBAL OPPORTUNITY IN
HAEMATURIA AND BLADDER CANCER
The US and NZ markets dominate our commercial focus
Pacific Edge’s
addressable market in
the USA alone has
been calculated to be
worth up to US$1.2
billion per annum.
Validated by EY-Parthenon review*
Approx. 7 million
people present with
haematuria annually
in the USA
79,000+ new bladder
cancer cases in USA
every year
9
th
most common
cancer in the world;
4
th
most common in
men
70% recurrence rate
leads to many clinical
procedures
Highest medical cost
of any cancer; up to
US$240k per patient
lifetime
Suite of four
Cxbladder tests
17 years of R&D and
validation
Primary focus is the
USA; the world’s
largest healthcare
market
Commercial
partnerships in USA,
NZ, Australia and
Singapore
*EY Parthenon, a leading international consulting firm, has endorsed Pacific Edge’s USA market strategy and confirmed the addressable market for Cxbladderin the USA to be
more than US$1.2 billion per annum
4
FY19 PROGRESS
FY19 HIGHLIGHTS AND MILESTONES
•Growth in commercial sales and billable test volumes:
-Strong growth in NZ and US commercial sales achieved in Q419.
•Several US reimbursement milestones successfully attained:
-National price for all Cxbladdertests (US$760 per test)
-National product specific CPT codes for Cxbladder Detect and Cxbladder Monitor.
•Increasing global pool of clinical evidence for Cxbladder facilitating test adoption and
reimbursement.
•Addition to public healthcare provider guidelines in New Zealand.
•Continued adoption and use in the USA; initial commercial sales in Southeast Asia.
•Improvement in Net Operating Cash Outflow and Net Loss.
•Successful $12m capital raise with several new investors welcomed to the register.
6
TOTAL LABORATORY THROUGHPUT
•Total laboratory throughput grew to 15,697 tests
in FY19, a 9% increase on FY18.
•Total billable tests grew to 12,744 tests in FY19, a
7% increase on FY18.
•CMS related tests accounted for approximately
50% of total laboratory throughput in FY19 and
cumulatively totalled in excess of 17,000 testsas
at 31 March 2019.
•Rest of World (ROW) total laboratory throughput
increased 83% y/y, primarily driven by strong
demand from NZ public healthcare providers.
7
-
2.0
4.0
6.0
8.0
10.0
12.0
14.0
FY15FY16FY17FY18FY19
(000s)
LABORATORY THROUGHPUT
(Commercial tests and User Programmes)
1H2H
81%of FY19 tests were billable
See slide 24 for further detail on FY17 to FY19 total laboratory throughput
TOTAL LABORATORY THROUGHPUT
BY REGION AND TEST TYPE
USA
80%
ROW
20%
8
Detect
57%
Monitor
23%
Triage
20%
Total Laboratory Throughput
(by region)
Total Laboratory Throughput
(by test type)
Detect
20%
Monitor
12%
Detect
66%
Test usage determined by length of time in
market for each product.
Regional
Throughput
by Test
USANZ
Cxbladder Detect66%20%
Cxbladder Monitor26%12%
Cxbladder Triage
8%68%
TOTAL LABORATORY THROUGHPUT
ACCELERATED GROWTH RATES IN Q419;
POSITIVE TRENDS HAVE CONTINUED INTO Q120
9
Q419 compared
to Q418
Q419 compared
with Q319
Total laboratory throughput
+26%+12%
ROW laboratory throughput
+126%+32%
USA laboratory throughput
+10%+7%
10
GROWING COMMERCIAL ADOPTION
IN HOME MARKET (NEW ZEALAND)
•New Zealand’s public healthcare providers are leading the global
adoption of Cxbladder.
•Majority have now adopted Cxbladder into their standard of care and, in
some cases, their clinical guidelines, replacing the gold standard
cystoscopy
•Demand from NZ public healthcare providers exceeded expectations
with strong growth from new and existing customers, particularly in
Q419.
•Counties Manukau, Ta i rā w h i t i, Capital & Coast and Hawkes Bay District
Health Boards all signed commercial agreements in FY19 bringing total
contract coverage of New Zealand’s population to more than 60%.
•Canterbury DHB’s comprehensive 12 month commercial look-back over
12 months of use is currently in peer review for publication.
•Demand from New Zealand’s public healthcare providers is expected to
continue to grow in FY20.
CONTINUED REIMBURSEMENT SUCCESS IN THE USA
Two of the three milestones required for
national public reimbursement in the US
were completed in FY19:
•Receipt of product specific CPT codes for
Cxbladder Detect and Cxbladder
Monitor (effective from 1 January 2019)
•Notification of a national price for all
Cxbladder tests of S$760 per test in
October 2018.
Allows Pacific Edge to move into contract
negotiations with private payers.
Progress being made with the third and
final milestone, to have Cxbladder included
in a Local Coverage Determination (LCD),
which will allow for reimbursement by
CMS.
11
SUCCESSFULLY
ACHIEVED
IN PROGRESS
GROWING
NUMBERS IN
CONTRACT
COMMERCIAL PROGRESS BY REGION IN FY19
12
FOCUS ON INSTITUTIONAL
HEALTHCARE ORGANISATIONS
IN ALL MARKETS
•Building on success achieved with large public
healthcare providers in New Zealand.
•Ongoing commercial negotiations and start up
processes with multiple targeted institutional
customers in the USA.
•Commencement of commercial evaluation with
John Hopkins Medicine, a US$8 billion integrated
global health enterprise and one of the leading
health care systems in the USA.
13
While these customers can take longer to bring to completion,
once commercial agreement is reached they can provide significant
volume, require lower sales maintenance and deliver more
sustainable, longer term growth opportunities.
FY19 FINANCIAL
PERFORMANCE
USA B2C REIMBURSEMENT PROCESS
•The US reimbursement system is complex.
•Currently, approx. 60% of Pacific Edge customers are directly
with the patient (B2C relationship).
•Payment can take anywhere from 1 to 24 months to be
received as the majority involves payment by either private
or public insurance, with the bulk of cash receipts coming
within 7 to 12 month period.
•Commercial agreements with large institutions and private
insurance companies will increase collectability of revenue.
•The Centersfor Medicare and Medicaid Services are seen as
reimbursement leaders. attaining a Local Coverage
Determination and price will provide payment for tests
provided to patients covered by the CMS and faster
collection times.
•LCD and price setting for the CMS tests facilitate Pacific
Edge’s commercial negotiations with other insurance payers.
•Pacific Edge sales teams increase focus on institutional
healthcare organisations.
15
FY19 FINANCIAL RESULT SNAPSHOT
16
üOperating revenue from test sales up 12% y/y
to $3.8m, with total revenue for the period of
$5.1m
üTotal operating expensesreduced to $23.0m
for the year, a 7% decrease on FY18
üNet loss of $17.9m for the year, an
improvement of 9% on FY18
üNet operating cash outflow reduced to $17.5m
for the year, a 3% decrease on FY18
ü$12.9m in cash, cash equivalents and short
term deposits as at 31 March 2019
1: Revenue excludes tests sold in the US for which cash payment has yet to be received, as well as tests completed for patients covered by the CMS. CMS tests account for
approximately 47% of annual US laboratory throughput and Pacific Edge will seek reimbursement for these when it is included in the CMS’s Local Coverage Determination (LCD). As
at 31 March 2019, Pacific Edge has completed and invoiced a total of 17,015 tests for CMS patients in the USA, for which we areyet to be reimbursed.
(NZ$’000)FY19FY18
%
Change
Operating Revenue
1
(test sales)3,817
3,400
12%
Other Revenue 1,312
1,602
(18%)
Total Revenue5,129
5,002
3%
Operating Expenses23,038
24,646
(7%)
Total Comprehensive Loss17,921
19,727
(9%)
Net Operating Cash Outflow17,507
18,100
(3%)
Cash on hand as at 31 March 2019
(cash, cash equivalents and short term deposits)
12,847
16,242
(21%)
OPERATING CASHFLOW
•Cash receipts from customers increased 9% y/y to $3.7m –
with a large portion of the cash received in FY19 being for
tests sold in FY18
•Net operating cash outflow reduced to ($17.5m), a 3%
decrease on FY18
•US payment terms currently average between 7 to 12
months from completion of test to payment by relevant US
payer (insurer).
•The introduction of national product specific CPT codes for
Cxbladder Detect and Cxbladder Monitor in the USA from 1
January 2019 had a positive impact on cash collection rates
in Q419. This positive trend is expected to continue in 1H20
•Cash, cash equivalents and short term deposits of $12.9m
as at 31 March 2019
17
NET OPERATING CASHFLOWS
(NZ$’000)
FY19FY18 % Change
Receiptsfrom:
-Customers
-Grant providers
3,734
755
3,420
944
9%
(20%)
Interest Received376115227%
Payments to Suppliers and
Employees
22,43122,575(0.6%)
NetCash Flows from
Operating Activities
(17,507)(18,100)(3%)
The New Zealand business is expected to reach a
cashflow positive position in FY20.
FY20 OUTLOOK
KEY OBJECTIVES FOR FY20
19
SUCCESS WITH THESE OBJECTIVES WILL ADD SIGNIFICANT GROWTH TO OUR BUSINESS
•GLOBAL REACH: Grow the number of large institutional healthcare customers globally and build on initial
sales to these organisations.
•USA: Successfully achieve the third and final USA reimbursement milestone to gain inclusion in the LCD,
upsell additional Cxbladder tests to contracted customers, and build on initial sales to the VA and other
organisations.
•NEW ZEALAND: Further accelerate the roll out of Cxbladder in New Zealand to obtain widespread contract
coverage with public health care providers (DHBs), upsell additional Cxbladder tests to each of the
contracted DHBs, and bringing Pacific Edge’s New Zealand business to a cashflow positive position.
•AUSTRALIA: Replicate the successful NZ sales and marketing model in Australia to drive sales.
•SE ASIA: transition User Programmes in Singapore into commercial customers, and progress discussions with
potential strategic partners in South East Asia.
•TEST ADOPTION: Increase the commercial adoption of Cxbladder in the USA, Australia and South East Asia
by leveraging the clinical validation and commercial success of Cxbladder in New Zealand.
•CLINICAL EVIDENCE: Continue to build out the evidence portfolio to drive further positive reimbursement
decisions.
5 January 2019
Global Business for Novel Cancer Diagnostics
Early detection and better management of cancer
OUR PRIMARY FOCUS REMAINS THE USA MARKET
A SCALE OPPORTUNITY IN BOTH THE EVALUATION OF HAEMATURIA AND MONITORING FOR RECURRENCE
20
*EY-Parthenon business review of the US market opportunity
UROTHELIAL AND BLADDER CANCER IN THE US
GROWING CLINICAL
EVIDENCE FOR CXBLADDER
•Publication of peer-reviewed papers is key to gaining
coverage and positive reimbursement decisions.
•Library of comprehensive clinical evidence for
physicians, healthcare payers (reimbursement) and
healthcare providers alike.
•Application to have Cxbladder included in a LCD has
been supported by the recent publication of further
compelling clinical evidence expanding the clinical
utility of Cxbladder.
•Cxbladder already in guidelines for some NZ public
healthcare providers.
21
PEER REVIEWED JOURNAL PUBLICATION DEMONSTRATES
SIGNIFICANT CLINICAL UTILITY OF CXBLADDER
•Diagnostic outperformance published in global number
one* ranked urology journal, European Urology, in May
2019.
•Cxbladder providing enhanced diagnostic outcomes not
currently available from existing technology.
•Enables physicians to remove the diagnostic dilemma
faced, when existing gold standard tests and procedures
are not able to determine a clear diagnostic outcome.
•Use of Cxbladder minimises the need for patients to have
further unnecessary tests and procedures.
•Use of Cxbladderresulted in 35% of patients avoiding
cystoscopies.
This real world outcome positions Cxbladder for
consideration for inclusion in other international guidelines
22
*European Urology -has an Impact Factor Rating of 17.58 andis
currently read by more than 20,000 urologists across the globe.
POSITIVE GROWTH OUTLOOK FOR FY20
•Continued growth in commercial sales expected from new and existing
customers.
•Demand from public healthcare providers in New Zealand is expected to grow
strongly and positively impact on laboratory throughput volumes.
•New Zealand business expected to be cashflow positive in FY20.
•To t a l o p e ra t i n g e x p e n s e s a r e e x p e c t e d t o r e m a i n i n l i n e w i t h F Y 1 9 .
•USA demand is expected to be positively impacted from having national product
specific CPT codes for Cxbladder and a national CMS reimbursement price in
place.
•Compelling clinical evidence published in top tier international journals is
expected to facilitate test adoption, coverage and reimbursement in FY20.
23
24
David Darling
Chief Executive Officer
Pacific Edge Limited
Tel: +64 3 479 5802 Mobile: +64 21 797981
Email: david.darling@pelnz.com
Enquiries to:
www.pacificedge.co.nz
www.cxbladder.com
www.pacificedgedx.com
LABORATORY TEST THROUGHPUT
HALF YEAR COMPARATIVES
(Number of Tests)1H172H17FY171H182H18FY181H192H19FY19
Total Laboratory
Throughput
5,6225,62411,2467,1197,32914,4487,3978,30015,697
Billable Tests
% of total
4,112
73%
4,185
75%
8,297
74%
5,439
76%
6,427
88%
11,866
82%
6,078
82%
6,666
80%
12,744
81%
Non-billable Tests
% of total
1,510
27%
1,439
25%
2,949
26%
1,680
24%
902
12%
2,582
18%
1,319
18%
1,634
20%
2,953
19%
25
DISCLAIMER
Information
The information in this presentation is an overview and does not contain all information necessary to make an investment decision. It is intended to constitute a
summary of certain information relating to the performance of Pacific Edge Limited . The information in this presentation is of a general nature and does not purport
to be complete. This presentation should be read in conjunction with Pacific Edge's other periodic and continuous disclosure announcements, which are available at
nzx.com.
Not financial product advice
This presentation is for information purposes only and is not financial or investment advice or a recommendation to acquire Pacific Edge securities, and has been
prepared without taking into account the objectives, financial situation or needs of individuals. Pacific Edge, its directorsand employees do not give or make any
recommendation or opinion in relation to acquiring or disposing of shares. In making an investment decision, investors must relyon their own examination of Pacific
Edge, including the merits and risks involved. Investors should consult with their own legal, tax, business and/or financial advisors in connection with any acquisition of
securities.
Future performance
This presentation contains certain 'forward-looking statements', for example statements concerning the development and commercialisation of new products,
regulatory approvals, customer adoption and results of future clinical studies. Forward-looking statements can generally be identified by the use of forward-looking
words such as, 'expect', 'anticipate', 'likely', 'intend', 'could', 'may', 'predict', 'plan', 'propose', 'will', 'believe', 'forecast', 'estimate', 'target', 'outlook', 'guidance' and
other similar expressions. The forward-looking statements contained in this presentation are not guarantees or predictions of future performance and involve known
and unknown risks and uncertainties and other factors, many of which are beyond the control of Pacific Edge and may involve significant elements of subjective
judgement and assumptions as to future events which may or may not be correct. There can be no assurance that actual outcomes will not materially differ from
these forward-looking statements. A number of important factors could cause actual results or performance to differ materially from the forward-looking statements.
The forward-looking statements are based on information available to Pacific Edge as at the date of this presentation. Except as required by law or regulation
(including the NZX Main Board Listing Rules), Pacific Edge undertakes no obligation to provide any additional or updated information whether as a result of new
information, future events or results or otherwise.
No representation
To the maximum extent permitted by law, Pacific Edge and its advisers, affiliates, related bodies corporate, directors, officers, partners, employees and agents make no
representation or warranty, express or implied, as to the currency, accuracy, reliability or completeness of information in thispresentation.
26
---
19
CONSOLIDATED
FINANCIAL
STATEMENTS
FOR THE YEAR ENDED
31 MARCH 2019
PACIFIC EDGE LIMITED CONSOLIDATED FINANCIAL STATEMENTS 2019
2
Consolidated Financial Information
Statement of Comprehensive Income 3
Statement of Changes in Equity 4
Balance Sheet 5
Statement of Cash Flows 6
Notes to the Consolidated Financial Statements 7
Independent Auditors’ Report 35
Company Directory 39
Contents
PACIFIC EDGE LIMITED CONSOLIDATED FINANCIAL STATEMENTS 2019
3
Notes
2019
($000)
2018
($000)
REVENUE
Operating Revenue5 3,817 3,400
Total Operating Revenue 3,817 3,400
Other Income5 990 1,242
Interest Income9 323 231
Foreign Exchange Gain (Loss) (1) 129
Total Revenue and Other Income 5,129 5,002
OPERATING EXPENSES
Laboratory Operations 4,594 4,619
Research6 3,532 4,384
Sales and Marketing 8,236 9,436
General & Administration7 6,676 6,207
Total Operating Expenses 23,038 24,646
NET (LOSS) BEFORE TAX (17,709) (19,644)
Income Tax Expense169-
(LOSS) FOR THE YEAR AFTER TAX (17,918) (19,644)
Other Comprehensive Income that may be
reclassified to profit or loss
Translation of Foreign Operations (3) (83)
TOTAL COMPREHENSIVE (LOSS) attributable to
equity holders of the Company
(17,921) (19,727)
Earnings per share for profit attributable to the equity
holders of the Company during the year
Basic and Diluted Earnings Per Share3 (0.037)(0.045)
Statement of Comprehensive Income
For the year ended 31 March 2019
These Consolidated Financial Statements are to be read in conjunction with the Notes to the Consolidated Financial Statements
PACIFIC EDGE LIMITED CONSOLIDATED FINANCIAL STATEMENTS 2019
4
Statement of Changes in Equity
For the year ended 31 March 2019
Share
Capital
Accumulated
Losses
Share
Based
Payments
Reserve
Foreign
Currency
Translation
Reserve
Total Equity
Notes($000)($000)($000)($000)($000)
Balance as at 31 March 2017 111,596 (100,475) 2,889 963 14,973
(Loss) After Tax- (19,644)-- (19,644)
Other Comprehensive Income- -- (83) (83)
TOTAL COMPREHENSIVE (LOSS)
attributable to equity holders of the
Company
- (19,644)- (83) (19,727)
Transactions with owners in their capacity
as owners:
Issue of Share Capital (net of expenses)1820,020--- 20,020
Exercise of Employee Share Options112-(18)-94
Share Based Payments - Employee
Remuneration
896---96
Share Based Payment - Employee Share
Options
8- - 1,184- 1,184
Balance as at 31 March 2018 131,824 (120,119)4,055880 16,640
Balance as at 31 March 2018 131,824 (120,119) 4,055 880 16,640
(Loss) After Tax-(17,918)-- (17,918)
Other Comprehensive Income--- (3) (3)
TOTAL COMPREHENSIVE (LOSS)
attributable to equity holders of the
Company
-(17,918)- (3) (17,921)
Transactions with owners in their capacity
as owners:
Issue of Share Capital (net of expenses)18 14,391 --- 14,391
Share Based Payments - Employee
Remuneration
8188---188
Share Based Payment - Employee Share
Options
8-- 612 - 612
Share Based Payment - Employee Share
Options Expired
8-160(160)--
Balance as at 31 March 2019 146,403 (137,877) 4,507 877 13,910
These Consolidated Financial Statements are to be read in conjunction with the Notes to the Consolidated Financial Statements
PACIFIC EDGE LIMITED CONSOLIDATED FINANCIAL STATEMENTS 2019
5
Balance Sheet
As at 31 March 2019
Notes
2019
($000)
2018
($000)
CURRENT ASSETS
Cash and Cash Equivalents9 4,847 5,242
Short Term Deposits9 8,000 11,000
Receivables10 1,265 1,064
Inventory11 842 752
Other Assets12 610 472
Total Current Assets 15,564 18,530
NON-CURRENT ASSETS
Property, Plant and Equipment13 769 854
Intangible Assets14 233 281
Total Non-Current Assets 1,002 1,135
TOTAL ASSETS 16,566 19,665
CURRENT LIABILITIES
Payables and Accruals17 2,572 2,926
Finance Leases23 52 73
Total Current Liabilities 2,624 2,999
NON-CURRENT LIABILITIES
Finance Leases23 32 26
Total Non-Current Liabilities 32 26
TOTAL LIABILITIES 2,656 3,025
NET ASSETS 13,910 16,640
Represented by:
EQUITY
Share Capital18 146,403 131,824
Accumulated Losses (137,877) (120,119)
Share Based Payments Reserve 4,507 4,055
Foreign Currency Translation Reserve 877 880
TOTAL EQUITY 13,910 16,640
Net Tangible Assets Per Share ($)0.0270.035
For and on behalf of the Board of Directors
Chris Gallaher, Chairman Sarah Park, Director
Dated the 29th day of May 2019
These Consolidated Financial Statements are to be read in conjunction with the Notes to the Consolidated Financial Statements
PACIFIC EDGE LIMITED CONSOLIDATED FINANCIAL STATEMENTS 2019
6
Statement of Cash Flows
For the year ended 31 March 2019
Notes
2019
($000)
2018
($000)
CASH FLOWS TO OPERATING ACTIVITIES
Cash was provided from:
Receipts from Customers 3,734 3,420
Receipts from Grant Providers 755 944
Interest Received 376 115
4,865 4,479
Cash was disbursed to:
Payments to Suppliers and Employees 22,431 22,575
Net GST Cash (Inflow) Outflow (59) 4
22,372 22,579
Net Cash Flows To Operating Activities20 (17,507) (18,100)
CASH FLOWS FROM (TO) INVESTING ACTIVITIES:
Cash was provided from:
Proceeds from Short Term Deposits 11,000 8,000
11,000 8,000
Cash was disbursed to:
Purchase of Short Term Deposits 8,000 11,000
Capital Expenditure on Plant and Equipment 50 195
Capital Expenditure on Intangible Assets 106 140
8,156 11,335
Net Cash Flows From (To) Investing Activities 2,844 (3,335)
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash was received from:
Ordinary Shares Issued18 14,569 21,318
Exercising of Share Options-96
14,569 21,414
Cash was disbursed to:
Repayment of Finance Leases 97 59
Issue Expenses18 178 1,298
275 1,357
Net Cash Flows From Financing Activities 14,294 20,057
Net (decrease) in Cash Held (369) (1,378)
Add Opening Cash Brought Forward 5,242 6,564
Effect of exchange rate changes on net cash (26) 56
Ending Cash Carried Forward9 4,847 5,242
These Consolidated Financial Statements are to be read in conjunction with the Notes to the Consolidated Financial Statements
PACIFIC EDGE LIMITED CONSOLIDATED FINANCIAL STATEMENTS 2019
7
1. SUMMARY OF ACCOUNTING POLICIES
Reporting Entity
The consolidated financial statements (hereafter referred to as the ‘financial statements’) presented for the year
ended 31 March 2019 are for Pacific Edge Limited (the ‘Company’) and its subsidiaries (collectively referred to as
the ‘Group’). The Group’s purpose is to research, develop and commercialise new diagnostic and prognostic tools
for the early detection and management of cancers.
Pacific Edge Limited is registered in New Zealand under the Companies Act 1993 and is a Financial Markets
Conduct (FMC) reporting entity under Part 7 of the Financial Markets Conduct Act 2013. The financial statements
of the Group have been prepared in accordance with the requirements of the Financial Markets Conduct Act 2013
and the NZX Main Board Listing Rules. The financial statements presented are those of the Group, consisting of
the Parent entity, Pacific Edge Limited and its subsidiaries. The reporting entity is listed on the New Zealand Stock
Exchange (NZX).
These financial statements have been approved for issue by the Board of Directors on 29 May 2019.
Basis of Preparation
These financial statements of the Group have been prepared in accordance with Generally Accepted Accounting
Practice in New Zealand (NZ GAAP). The Group is a for-profit entity for the purposes of complying with NZ GAAP.
The financial statements comply with New Zealand equivalents to International Financial Reporting Standards (NZ
IFRS), other New Zealand accounting standards and authoritative notices that are applicable to entities that apply
NZ IFRS. The financial statements also comply with International Financial Reporting Standards.
The financial statements are presented in New Zealand Dollars, which is the Company’s functional currency and
Group’s presentation currency, and all values are rounded to the nearest thousand dollars ($000). The accounting
principles recognised as appropriate for the measurement and reporting of earnings, cash flows and financial
position on a historical cost basis have been used.
The Statement of Comprehensive Income and Statement of Cash Flows have been prepared so that all
components are stated net of GST. All items in the Balance Sheet are stated net of GST, with the exception of
receivables and payables.
Mangement of Capital
The capital structure of the Group consists of equity raised by the issue of ordinary shares in the Company. The
Company’s objectives when managing capital are to safeguard the Company’s ability to continue as a going
concern in order to provide returns for shareholders and benefit for other stakeholders and to maintain an optimal
capital structure to support the development of its business. The Company meets these objectives through
managing its liquidity position with available funds by reducing expenditure or issuing new shares. As part of
meeting these objectives, the Company completed a Share Placement in November 2018 and a Share Purchase
Plan in January 2019, issuing a further 43,988,000 shares at an average of $0.34 per share. Refer to Note 18 for
further details on the capital raising activity during FY19.
Going Concern
The 2019 financial statements have been prepared on the going concern basis which assumes that the Company
will have sufficient cash to pay its debts as they fall due for a minimum of 12 months from the date of signing the
Financial Statements.
As at 31 March 2019, the Company has $12.847m of cash, cash equivalents and short term deposits (2018: $16.242m)
and net assets of $13.910m (2018: $16.640m). Operating cash receipts totalling $4.865m were received in the 12
month period to 31 March 2019 (2018: $4.479m) along with additional capital of $14.569m (2018: $21.414m) prior to
issue expenses. Net cash out flows from operating activities for the 12 month period to 31 March 2019 were $17.507m
(2018: $18.100m).
While the Company continues to incur operating losses, the Company remains solvent and continues to meet its
debts as they fall due. The Company continues to progress commercial negotiations with targeted large scale
health organisations in the USA. These contracts are taking longer than expected to complete, but progress is
being made. The new contracts that will result from these commercial negotiations will have a significant positive
impact on the Company’s financial position when concluded.
Notes to the Consolidated Financial Statements
For the year ended 31 March 2019
PACIFIC EDGE LIMITED CONSOLIDATED FINANCIAL STATEMENTS 2019
8
The Company has prepared cash flow forecasts which indicate that if these commercial negotiations continue
to be delayed, the Company may not have sufficient cash to meet its minimum expenditure commitments and
support its current levels of activity. The Company may need to raise additional funds to continue as a going
concern. These matters indicate a material uncertainty that may cast significant doubt on the Company’s ability to
continue as a going concern and, therefore, that the Company may be unable to realise its assets and discharge its
liabilities in the normal course of business.
To address the future additional funding requirements of the Group, there are a number of options available to the
Directors, including:
• Seeking additional funding from current or new shareholders,
• Continuing to monitor the Company’s ongoing working capital requirements and minimum expenditure
commitments, and
• Continuing to focus on maintaining an appropriate level of expenditure in line with the Company’s
available cash resources.
Basis of Consolidation
The following entities and the basis of their inclusion for consolidation in these financial statements are as follows:
Name of Subsidiary
Place of
Incorporation
(or registration)
& Operation
Principal Activity
Ownership Interests
& Voting Rights
2019
%
2018
%
Pacific Edge Diagnostics New Zealand
Limited
New Zealand
Commercial Laboratory
Operation
100100
Pacific Edge Pty LtdAustralia
Biotechnology Research
& Development
100100
Pacific Edge Diagnostics USA LtdUSA
Commercial Laboratory
Operation
100100
Pacific Edge Diagnostics Singapore
Pte Ltd
Singapore
Biotechnology Research
& Development
100100
Pacific Edge Analytical Services
Limited
New Zealand
Diagnostic
Biocomputational Services
100100
The financial statements incorporate the assets, liabilities and results of all subsidiaries of Pacific Edge Limited as
at 31 March 2019 and for the year then ended. All subsidiaries have the same balance date as the Company of 31
March.
Pacific Edge Limited consolidates all entities over which Pacific Edge Limited has control. Control is achieved when
the Group:
• has power to direct the activities of the entity;
• is exposed, or has rights, to variable returns from involvement with the entity; and
• has the ability to use its power to affect its returns.
Subsidiaries which form part of the Group are consolidated from the date on which control is transferred to the
Group. They are de-consolidated from the date that control ceases.
The acquisition method of accounting is used to account for business combinations by the Group. The
consideration transferred for the acquisition of a subsidiary is the fair value of the assets transferred, the liabilities
incurred and the equity interest issued by the Group.
The consideration transferred includes the fair value of any asset or liability resulting from a contingent
consideration arrangement. Acquisition-related costs are expensed as incurred. Identifiable assets acquired and
liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at
the acquisition date. On an acquisition-by-acquisition basis, the Group recognises any non-controlling interest in
the acquiree either at fair value or at the non-controlling interest’s proportionate share of the acquiree’s net assets.
Notes to the Consolidated Financial Statements
For the year ended 31 March 2019
PACIFIC EDGE LIMITED CONSOLIDATED FINANCIAL STATEMENTS 2019
9
Inter-company transactions, balances and unrealised gains on transactions between Group companies are
eliminated. Unrealised losses are also eliminated. Accounting policies of subsidiaries have been changed where
necessary to ensure consistency with the policies adopted by the Group.
Critical Accounting Estimates and Assumptions
In preparing these financial statements, the Group made estimates and assumptions concerning the future.
These estimates and assumptions may differ from the subsequent actual results. Estimates and assumptions are
continually evaluated and are based on historical experience and other factors including expectations or future
events that are believed to be reasonable under the circumstances.
The main estimates and assumptions used are in relation to revenue from Cxbladder tests in the US detailed in
Note 5, and the going concern assumption which is further assessed in Note 1 above.
2. NEW AND AMENDED STANDARDS ADOPTED BY THE GROUP
New Standards
NZ IFRS 9: Financial Instruments (Effective date: periods beginning on or after 1 January 2018):
NZ IFRS 9 establishes the principles for hedge accounting and impairment of financial assets. Under NZ IFRS 9,
greater flexibility has been introduced to the types of transactions eligible for hedge accounting. In addition, the
effectiveness test has been overhauled and replaced with the principle of an ‘economic relationship’. Retrospective
assessment of hedge effectiveness is also no longer required. Enhanced disclosure requirements about an entity’s
risk management activities have also been introduced. In relation to the impairment of financial assets NZ IFRS
9 requires an expected credit loss model, as opposed to an incurred credit loss model under NZ IAS 39. The
expected credit loss model requires an entity to account for expected credit losses and changes in those expected
credit losses at each reporting date. The impact is immaterial to the Group.
The Group has adopted NZ IFRS 9 Financial Instruments in the 2019 financial year.
The Group does not have significant accounts receivable balances and the Group have minimal credit losses since
adopting NZ IFRS 15. After applying the expected credit loss model, the Group have determined the expected
credit loss model is immaterial.
In applying the standard, no changes to the classification of financial instruments have been identified.
Standards and Interpretations issued but not yet effective and relevant to the Group
NZ IFRS 16: Leases (Effective date: periods beginning on or after 1 January 2019):
NZ IFRS 16, ‘Leases’, replaces the current guidance in NZ IAS 17. Under NZ IFRS 16, a contract is, or contains, a
lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for
consideration. Under NZ IAS 17, a lessee was required to make a distinction between a finance lease (on balance
sheet) and an operating lease (off balance sheet). NZ IFRS 16 now requires a lessee to recognise a lease liability
reflecting future lease payments and a ‘right-of-use asset’ for virtually all lease contracts.
This new accounting standard eliminates the distinction between operating and finance leases and will result in
lessees bringing most leases on to their balance sheets. The expense previously recorded in relation to operating
leases will move from being included in rental and lease expenses to within depreciation and finance expenses.
Extensive disclosures are also required by NZ IFRS 16.
The Group, in the process of evaluating the impact of adopting this standard has determined that at this point
in time, NZ IFRS 16 is not expected to have a significant impact on the Group key performance indicators. The
standard will primarily affect the accounting for the Group’s rental and operating leases as a lessee.
As at 31 March 2019, the Group had non-cancellable rental and operating lease commitments of $1,923,000
which are currently treated as operating expenses. Under NZ IFRS 16 Leases, these rental and operating leases
will be recognised on the balance sheet as a right-of-use asset and a corresponding lease liability. Based on the
preliminary calculations the right to use asset and lease liability are expected to range between $1,600,000 and
$1,900,000 at 31 March 2019. The recognition exemption under NZ IFRS 16 – Leases, for short term or low value
assets of less than US$5,000 or leases terminating within one year, will be applied and these expenses will be
continued to be recognised on a straight-line basis in the Statement of Comprehensive Income. Of the amount in
the operating lease commitments $12,000 would fall under this exemption.
Notes to the Consolidated Financial Statements
For the year ended 31 March 2019
PACIFIC EDGE LIMITED CONSOLIDATED FINANCIAL STATEMENTS 2019
10
Rental and operating lease expenses previously recognised on a straight-line basis within other expenses will
be recognised as amortisation for right-of-use assets and finance costs for lease liabilities in the Statement of
Financial Performance. The impact on the Statement of Comprehensive Income for the year ended 31 March 2020
is expected to be approximately an increase of $30,000 in expenses. These estimates may differ materially to the
actual impact on adoption in the year ended 31 March 2020.
The Group will adopt this standard on its effective date and apply this standard to the 2020 financial statements,
using the modified retrospective approach. The modified retrospective approach under NZ IFRS 16 – Leases means
that on transition, the Group is not required to restate comparative information, instead opening equity is adjusted
Right-of-use assets will be measured using the retrospective calculation, using a discount rate based on the
Group’s incremental borrowing rate at the date of adoption.
There are no other NZ IFRS or NZ IFRIC interpretations that are not yet effective that would be expected to have a
material impact on the Group.
3. EARNINGS PER SHARE
(a) Basic
Basic earnings per share is calculated by dividing the profit attributable to equity holders of the Company by the
weighted average number of ordinary shares on issue during the year excluding ordinary shares purchased by the
Company (Note 18).
GROUP
2019
($000)
2018
($000)
Loss attributable to equity holders of the Company (17,918) (19,644)
Weighted average number of ordinary shares on issue 481,164 434,256
Earnings per share (0.037) (0.045)
(b) Diluted
Diluted earnings per share is calculated by adjusting the weighted average number of shares outstanding to
assume conversion of all dilutive potential ordinary shares. The Group’s dilutive potential ordinary shares are in the
form of share options. As the Group made a loss during the current year and losses cannot be diluted, basic and
diluted earnings per share are the same.
4. LABORATORY THROUGHPUT AND BILLABLE TESTS
Laboratory Throughput is a key metric for the Group: Laboratory Throughput provides evidence of the increasing
usage of Cxbladder products globally and the rates of adoption between different customer segments. Total
laboratory throughput includes billable tests, which are invoiced to customers (including tests for patients covered
by the US government’s medical program through the Centers for Medicare and Medicaid Services (CMS)), and
tests which are not considered to be billable as these tests relate to user programs (research tests) or other non-
chargeable activities.
Billable test numbers are also a key metric for the Group: Billable tests are those tests for which the Company is
actively seeking reimbursement and cash receipts. Given the time lag in the US between processing a Cxbladder
test and receiving the associated cash receipts, reported revenue based on the application of our accounting
policy and billable tests do not typically arise in the same reporting period as each other. Billable test numbers also
include CMS tests which are all invoiced to CMS but for which revenue is not being recognised. Further detail on
the accounting policy for revenue recognition is included in Note 5.
Notes to the Consolidated Financial Statements
For the year ended 31 March 2019
PACIFIC EDGE LIMITED CONSOLIDATED FINANCIAL STATEMENTS 2019
11
Laboratory throughput and billable tests per financial year are shown below.
FY16FY17FY18FY19
Total Laboratory Throughput (tests) 8,348 11,246 14,448 15,697
Increase in Total Laboratory Throughput (%)114%35%28%9%
Increase in Throughput from previous year (tests) (+) 4,438 (+) 2,898 (+) 3,202 (+) 1,249
Total Billable Tests (tests) 5,578 8,297 11,866 12,744
Billable Tests as a percentage of Total
Laboratory Throughput (%)
67%74%82%81%
Increase in Billable Tests from previous year (%)99%49%43%7%
5. REVENUE
Background information on US customers and the payment process
A physician will order a Cxbladder test if a patient presents to them with symptoms that may indicate the
possibility of bladder cancer. One of the main symptoms is haematuria or blood in their urine. A urine sample is
taken from the patient and sent to the Group’s laboratory in the United States in the Cxbladder Urine Sampling
System. The Group receives and processes the urine sample and returns the results of the test back to the
physician who originally ordered the test. The individual patient is the Group’s customer, however typically in the
US market, the patient’s insurer would pay the Group for the cost of the test.
When a physician orders a Cxbladder test, the Group has an obligation to perform the test and report the results to
the physician irrespective of the patient’s insurance circumstances. A patient may have private insurance cover, be
covered by the US government’s medical program through CMS or have no insurance cover.
Once the Cxbladder test has been completed, all information required for insurance purposes is sent to the Group’s
billing and reimbursement company to begin the process to collect reimbursement from the applicable insurance
company/ies for the Cxbladder test performed.
For patients with private insurance cover, the relevant test information will be sent to their insurance provider.
When the Group does not have an individual agreement with that insurance provider to pay for Cxbladder tests
(“out of network”), the insurance provider will assess that individual patient’s test for medical necessity and the
level of insurance cover (if any) available to cover the cost of the test. This process of assessment can take many
months to work through before the Group receives payments from the insurance company. The Group does have
agreements with some insurance providers but these currently cover a small population of the Group’s customers.
For patients covered by CMS, invoices are sent to CMS to demonstrate the validity of the Cxbladder test and support
the process for obtaining inclusion in the Local Coverage Determination (LCD). However, CMS will not normally pay
any amounts to the Group, nor permit the patient to be invoiced, until the LCD inclusion has been obtained.
For uninsured patients, the Group has no certainty of when or if the patient will pay.
Rest of World Customers
Revenue from Rest of World customers is primarily from the District Health Boards (DHBs) in New Zealand. In all
rest of world locations, there is a clearly defined contract with the customer meeting the requirements of NZ IFRS 15.
Pacific Edge Diagnostics New Zealand Limited has individual contracts with DHBs across New Zealand and revenue
is recognised as described on the following pages.
Critical Accounting Estimate
The application of NZ IFRS 15: Revenue from contracts with customers (NZ IFRS 15) requires the Directors to apply
significant judgement in determining whether revenue can be recognised in advance of the receipt of cash.
The significant judgements adopted by the Group in applying NZ IFRS 15 criteria include:
• Determining if a contract with the customer exists;
• Determining if the entity can identify the payment terms for the services; and
• Determining whether it is probable that the entity will collect the consideration to which it is entitled.
Notes to the Consolidated Financial Statements
For the year ended 31 March 2019
PACIFIC EDGE LIMITED CONSOLIDATED FINANCIAL STATEMENTS 2019
12
ACCOUNTING POLICIES
Revenue from Cxbladder tests
NZ IFRS 15 provides five criteria which must be met before an entity accounts for a contract with a customer under
the revenue standard:
• the contract has been approved
• the rights of each party are identified
• payment terms are identified
• the contract has commercial substance, and
• it is probable that consideration will be collected for the goods or services transferred.
The Group performs Cxbladder tests when requested by a patient’s physician. At the point the test results are
returned to the physician, the Group has satisfied its performance obligation and has the right to issue an invoice.
US customers – patients covered by CMS
The Group has judged it is not probable that any consideration will be received from CMS as inclusion in the Local
Coverage Determination (LCD) with the CMS has not yet been obtained. Therefore, no revenue is recognised for
any patients covered by CMS.
US customers – patients covered by private insurance/no insurance cover
The Group performs Cxbladder tests when requested by a patient’s physician. At the point the tests results are
returned to the physician, the Group has satisfied its performance obligation and has the right to issue an invoice.
The Group is out of network with almost all private insurers in the US market and so the Test Requisition Form
(TRF) signed by the patient is the key contract in this revenue stream. In assessing the information contained in the
TRF, the Group has concluded that the payment terms are unclear. This means that Cxbladder sales in the US do
not meet the required criteria under NZ IFRS 15 to enable revenue to be recognised when the test is undertaken
and the results are delivered to the ordering physician. The Group currently has a number of agreements signed
with private insurers, covering only a small percentage of the patient population which is currently deemed to be
immaterial for accounting purposes.
Revenue is recognised only when cash is received, and it is non-refundable. As new agreements are entered into
with private insurers, the Group will revisit this judgement, to determine if the criteria to account for a contract in
accordance with NZ IFRS 15 are met.
Rest of World customers
The Group performs Cxbladder tests when requested by a patient’s physician in New Zealand, Australia and
Singapore. At the point the test results are returned to the physician, the Group has satisfied its performance
obligation and an invoice is issued to the customer, therefore revenue is recognised when the invoice is issued.
OTHER INCOME
Grant Income
Government Grants are not recognised until there is reasonable assurance that the Group will comply with the
conditions attached to them and that the grants will be received. Government grants are recognised in Other
Income in the Statement of Comprehensive Income, on a systematic basis over the periods in which the Group
recognises as expenses the related costs for which the grants are intended to compensate.
Callaghan Innovation has awarded the Company a Growth Grant, which commenced on 1 January 2014 and
ended on 31 March 2019. Callaghan Innovation reimburses the Company for 20 percent of eligible expenditure
on the Company’s R&D programme. The eligible expenditure complies with NZ IAS 38: Intangible Assets and the
Ministerial Direction / New Zealand Gazette, No. 146.
For the year ended 31 March 2019, the total eligible expenditure under this Growth Grant was $2,862,000
(2018: $3,766,000). The Company also receives grants from Callaghan Innovation for postgraduate internships and
summer students.
New Zealand Trade and Enterprise has awarded the Company an International Growth Fund grant, to support the
startup of the Group’s operations in Singapore. The grant commenced on 14 May 2015 and runs until 30 April 2019.
New Zealand Trade and Enterprise reimburses the Company for 50 percent of eligible expenditure relating to the
Singapore operations.
Notes to the Consolidated Financial Statements
For the year ended 31 March 2019
PACIFIC EDGE LIMITED CONSOLIDATED FINANCIAL STATEMENTS 2019
13
All conditions of the grants have been complied with.
Cxbladder Research Rebate
A Cxbladder research programme is administered by Pacific Edge Pty Ltd and tax rebates are received as a result
of this programme.
The Cxbladder research rebate is recognised at its fair value where there is a reasonable assurance that the rebate
will be received and the Group will comply with all attached conditions.
All conditions of the research rebate have been complied with. Payment will be received after submission of each
annual research and development tax claim.
REVENUE AND OTHER INCOME
GROUP
2019
($000)
2018
($000)
Cxbladder Sales
- US 3,296 3,188
- Rest of World 521 212
Total Operating Revenue 3,817 3,400
Other Income
Grant Revenue 773 853
Research Rebate Received 217 389
Total Other Income 990 1,242
UNRECOGNISED REVENUE
Approximately 50% of all Cxbladder tests performed by the Group in the US relate to patients covered by CMS.
The Group presently invoices CMS tests performed for all US Medicare patients with CMS coverage, however no
revenue from these tests is recognised. Upon issuance of the LCD, the Group expects to be reimbursed at the
agreed rate for all US Medicare patients for tests performed after that date. The Group may also be reimbursed for
some tests completed prior to the issuance of the LCD. No contingent asset has been disclosed at 31 March 2019 as
it is not certain when the LCD process will be completed, nor whether any backpayment will be received.
To date, a total of 17,015 tests have been performed that relate to patients covered by CMS, for which no payments
have been received and no revenue recognised.
For patients with private insurance cover or no insurance cover, revenue has only been recognised when and
to the extent payment has been received, leaving a significant portion of invoiced amounts unrecognised. The
level of unrecognised revenue is expected to gradually decrease as the Group concludes firm agreements for
reimbursement with individual payers, principally the insurance companies. A contingent asset of $7,200,000
(2018: $5,108,000) has been estimated at 31 March 2019 for private insurance receivables as an inflow of economic
benefits is considered probable.
To date, a total of 5,330 tests which have not been written off have been performed that relate to patients covered
by private insurance, for which no payments have been received, but are actively being chased for payment.
6. RESEARCH AND DEVELOPMENT COSTS
ACCOUNTING POLICY
Research is the original and planned investigation undertaken with the prospect of gaining new scientific
knowledge and understanding. This includes: direct and overhead expenses for diagnostic and prognostic
biomarker discovery and research; pre-clinical trials; and costs associated with clinical trial activities. All research
costs are expensed when incurred.
Development is the application of research findings to a plan or design for the production of new or substantially
improved processes or products prior to the commencement of commercial production.
Notes to the Consolidated Financial Statements
For the year ended 31 March 2019
PACIFIC EDGE LIMITED CONSOLIDATED FINANCIAL STATEMENTS 2019
14
When a project reaches the stage where it is probable that future expenditure can be recovered through the
process or products produced, expenditure that is directly attributed or reasonably allocated to that project is
recognised as a development asset within intangible assets. If the expenditure also benefits processes or products
for which it cannot be recovered, it will be expensed. The asset will be amortised from the date of commencement
of commercial production of the product to which it relates on a straight-line basis over the period of expected
benefit. Development assets are reviewed annually for any impairment in their carrying value.
GROUP
Notes
2019
($000)
2018
($000)
Research Expenses 3,532 4,384
Includes:
Employee Benefits8 1,734 1,831
7. GENERAL AND ADMINISTRATION EXPENSES
GROUP
Notes
2019
($000)
2018
($000)
Amortisation14 77 138
Auditors Remuneration: PricewaterhouseCoopers New Zealand
- Group Year End Financial Statements
- Half Year Review of Financial Statements
- R&D Review for Callaghan Innovation
- Agreed Upon Procedures
155
21
3
-
94
19
2
6
Auditors Remuneration: PricewaterhouseCoopers Singapore
- Statutory Financial Statements916
Depreciation13 119 167
Directors Fees 22 279 275
Employee Benefits8 2,695 2,434
Employee Share Scheme Expenses8 188 96
Employee Share Options8 562 956
Rental and Lease Expense 262 262
Other General and Administration Expenses 2,306 1,742
Total General and Adminstration Expenses 6,676 6,207
Note Amortisation, Depreciation, Employee Benefits and Employee Share Options are included in other functional
analysis. Refer to relevant notes for full expense by nature.
Employee Share Options
Employee Share Options are a non-cash expense. Refer to Note 8 for details of the accounting policy for
Employee Share Schemes.
Other General and Administration Expenses
The major categories of expenditure which make up Other General and Administration Expenses, but are not
disclosed separately above, are NZX and Registry fees, Investor Relations costs, Consultants and Contractors.
Notes to the Consolidated Financial Statements
For the year ended 31 March 2019
PACIFIC EDGE LIMITED CONSOLIDATED FINANCIAL STATEMENTS 2019
15
8. EMPLOYEE BENEFITS
GROUP
Notes
2019
($000)
2018
($000)
Represented by:
Employee Benefits in Research61,7341,831
Employee Benefits in General & Administration72,6952,434
Short Term Salaries, Wages and Other Employee Benefits6,2716,720
10,70010,985
Non-Cash Employee Benefits:
Employee Share Scheme Expenses7 188 96
Share Option Expense76121,184
8001,280
Total Employee Benefits11,50012,265
Employee Share Scheme
The Company has an Employee Share Scheme where ordinary shares in the Company may be issued to selected
employees to recognise performance or a significant contribution to the Company. These shares may be issued
in lieu of a cash bonus or in addition to the employee’s remuneration. The ordinary shares are issued directly to
the employee and the Company accounts for the cost of the shares. The shares are allocated to the employee on
the date that the Board approves the issue of the share capital. All employees who hold ordinary shares in the
Company must comply with the Company’s Share Trading Policy.
The issuance of ordinary shares to employees is treated as equity settled share-based payments. Equity-settled
share-based payments to employees are measured at the fair value of the equity instruments at the grant date
based on the market price at the time of issuance. The fair value of shares granted is recognised as an employee
expense in the Statement of Comprehensive Income when the shares are issued. During the 2019 financial year,
561,000 (2018: 173,655) ordinary shares were issued to employees as part of the Employee Share Scheme. The
associated non-cash cost of these shares was $188,000 (2018: $96,000). Refer to Note 18 for further details on the
shares issued during the financial year.
Employee Share Option Scheme
The Board believes that the issue of share options provides an appropriate incentive for participating employees
to grow the total shareholder return of the Company. Share options are issued to selected employees to recognise
performance or contribution to the Company or as a long-term component of remuneration in accordance with the
Group’s remuneration policy.
The Company has two categories of Share Options which are outlined below:
Performance Options
Performance Options are issued to selected employees to recognise performance or a significant contribution
to the Company. Performance Options entitle the holder, on payment of the exercise price, to one ordinary share
in the capital of the Company. The exercise price of the granted options is determined using the fair value of the
Company’s share price at the time of the options being granted. Performance Options vest immediately and there
is no service requirement linked to the options or any other vesting conditions. The term in which options may be
exercised, and ultimately lapse if not exercised, is 10 years.
Incentive Options
Incentive Options are issued to selected employees as a long-term component of remuneration in accordance
with the Group’s remuneration policy. Incentive Options entitle the holder, on payment of the exercise price, to one
ordinary share in the capital of the Company.
Notes to the Consolidated Financial Statements
For the year ended 31 March 2019
PACIFIC EDGE LIMITED CONSOLIDATED FINANCIAL STATEMENTS 2019
16
The exercise price of the granted options is determined using the fair value of the Company’s share price at the
time of the options being granted. Incentive Options vest over three years and there is a requirement to remain
as an employee of the Company in order for the options to vest. Tranches of options are exercisable over four to
ten years from the relevant vesting date. No options can be exercised later than the tenth anniversary of the final
vesting date.
ACCOUNTING POLICY
All options are accounted for as equity settled share based payments as the Group has no legal or constructive
obligation to repurchase or settle either the Performance Options or the Incentive Options in cash.
The fair value of all options granted is recognised as an expense in the Statement of Comprehensive Income
over their vesting period, with a corresponding increase in the employee share option reserve. The fair value is
determined at the grant date of the options and expensed on a straight-line basis over the vesting period, based
on the Group’s estimate of equity instruments that will eventually vest, with a corresponding increase in equity.
At the end of each reporting period, the Group revisits its estimate of the number of equity instruments expected
to vest. The impact of the revision of the original estimates, if any, is recognised in the profit or loss such that the
cumulative expense reflects the revised estimate, with a corresponding adjustment to the share based payments
reserve.
During the year, no share options were exercised resulting in no increase in share capital (2018: 259,585). Refer to
Note 18 for further details on the share options that were exercised in the prior year.
Movements in the number of share options outstanding and their related weighted average exercise prices are as
follows:
GROUP
20192018
Weighted average
exercise price
$
Options
#
Weighted average
exercise price
$
Options
#
Outstanding at 1 April 0.59 11,221,944 0.64 6,839,857
Granted 0.28 152,500 0.51 4,800,000
Forfeited 0.37 (46,159) 0.65 (158,328)
Exercised - - 0.36 (259,585)
Expired 0.45 (615,918) - -
Outstanding at 31 March 0.60 10,712,367 0.59 11,221,944
Exercisable at 31 March 0.61 9,953,937 0.62 9,041,267
The significant inputs into the Black-Scholes valuation model were the weighted average market share price at
grant date of the options, the exercise price shown on the next page, the expected annualised volatility of 50%, a
dividend yield of 0%, an expected option life of between one and ten years and an annual risk-free interest rate of
between 2.81% and 2.93%.
The volatility measured is the standard deviation of continuously compounded share returns and is based on a
statistical analysis of daily share prices in the past one to ten years.
Notes to the Consolidated Financial Statements
For the year ended 31 March 2019
PACIFIC EDGE LIMITED CONSOLIDATED FINANCIAL STATEMENTS 2019
17
Share options outstanding at the end of the reporting periods have the following expiry dates, vesting dates and
exercise prices:
Expiry MonthVesting Date
Exercise
Price
$
31 March 19
Options
#
31 March 18
Options
#
April 2018April 20140.36- 259,585
August 2018August 20140.54- 83,333
September 2018September 20140.80- 73,000 *
November 2018November 20140.54- 200,000
April 2019April 20150.36 259,585 259,585
June 2019June 20150.69 13,333 13,333
July 2019July 20150.69 6,666 6,666
August 2019August 20150.54 83,333 83,333
September 2019September 20150.80 750,000 750,000
November 2019November 20150.54 200,000 200,000
June 2020June 20160.69 13,077 13,077
July 2020July 20160.69 2,740 2,740
August 2020August 20160.54 83,334 83,334
September 2020September 20160.80 750,000 750,000
November 2020November 20160.54 200,000 200,000
September 2021September 20170.80 750,000 750,000
September 2024September 20140.69 310,000 310,000 *
April 2025April 20150.69 6,666 6,666
July 2025July 20150.69 345,831 345,831
August 2025August 20150.72 4,166 4,166
September 2025September 20150.50 270,000 270,000 *
September 2025September 20150.69 15,000 15,000
September 2025September 20150.72 14,998 14,998
November 2025November 20150.72 83,333 83,333
January 2026January 20160.72 17,498 17,498
April 2026April 20160.69 6,667 6,667
July 2026July 20160.50 8,332 8,332
July 2026July 20160.69 345,834 345,834
August 2026August 20160.50 8,332 8,332
August 2026August 20160.72 2,866 2,866
September 2026September 20160.50 85,333 85,333
September 2026September 20160.69 15,000 15,000
September 2026September 20160.72 15,001 15,001
November 2026November 20160.50 50,000 50,000 *
November 2026November 20160.60 14,998 14,998
November 2026November 20160.72 83,333 83,333
December 2026December 20160.60 4,166 4,166
January 2027January 20170.72 10,834 10,834
February 2027February 20170.60 10,000 10,000
March 2027March 20170.60 4,166 4,166
April 2027April 20170.60 75,000 75,000
Notes to the Consolidated Financial Statements
For the year ended 31 March 2019
PACIFIC EDGE LIMITED CONSOLIDATED FINANCIAL STATEMENTS 2019
18
Expiry MonthVesting Date
Exercise
Price
$
31 March 19
Options
#
31 March 18
Options
#
April 2027April 20170.69 6,667 6,667
July 2027July 20170.50 4,190 4,190
July 2027July 20170.69343,346 343,346
August 2027August 20170.48 4,166 4,166
August 2027August 20170.50 8,334 8,334
September 2027September 20170.48 6,666 6,666
September 2027September 20170.50 79,169 79,169
September 2027September 20170.69 15,000 15,000
September 2027September 20170.72 10,594 10,594
October 2027October 20170.48 20,000 20,000
November 2027November 20170.60 10,252 10,252
November 2027November 20170.72 83,334 83,334
December 2027December 20170.60 1,872 1,872
December 2027December 20170.51 4,166 4,166
January 2028January 20180.72 7,473 7,473
January 2028January 20180.51 12,498 12,498
February 2028February 20180.60 10,000 10,000
March 2028March 20180.60 4,167 4,167
April 2028April 20180.60 75,000 75,000
May 2028May 20180.51 1,587,492 1,583,326
May 2028May 20180.28 6,666 -
July 2028July 20180.50 2,671 2,671
August 2028August 20180.48 3,916 4,167
August 2028August 20180.50 4,315 4,315
September 2028September 20180.48 4,128 6,667
September 2028September 20180.50 219 219
October 2028October 20180.48 30,000 30,000
October 2028October 20180.28 4,166 -
November 2028November 20180.60 6,816 8,334
December 2028December 20180.51 4,167 4,167
January 2029January 20190.51 6,416 12,501
January 2029January 20190.28 16,666 -
February 2029February 20190.6 10,000 10,000
February 2029February 20190.28 6,666 -
March 2029March 20190.60 69 4,167
April 2029April 20190.60 75,000 75,000
May 2029May 20190.51 1,587,502 1,583,335
May 2029May 20190.28 6,667 -
June 2029June 20190.28 4,166 -
July 2029July 20190.28 4,166 -
August 2029August 20190.48- 4,167
September 2029September 20190.48- 6,667
Notes to the Consolidated Financial Statements
For the year ended 31 March 2019
PACIFIC EDGE LIMITED CONSOLIDATED FINANCIAL STATEMENTS 2019
19
Expiry MonthVesting Date
Exercise
Price
$
31 March 19
Options
#
31 March 18
Options
#
October 2029October 20190.48 40,000 40,000
October 2029October 20190.28 4,167 -
December 2029December 20190.51 4,167 4,167
January 2030January 20200.51 4,167 12,501
January 2030January 20200.28 16,667 -
February 2030February 20200.28 6,667 -
May 2030May 20200.51 1,587,506 1,583,338
May 2030May 20200.28 6,667 -
June 2030June 20200.28 4,167 -
July 2030July 20200.28 4,167 -
October 2030October 20200.28 4,167 -
January 2031January 20210.28 16,667 -
February 2031February 20210.28 6,667 -
June 2031June 20210.28 4,167 -
July 2031July 20210.28 4,167 -
10,712,367 11,221,944
* Included within these tranches are 630,000 options (2018: 703,000) that vested immediately.
9. CASH, CASH EQUIVALENTS AND SHORT TERM DEPOSITS
ACCOUNTING POLICY
Cash and cash equivalents includes cash in hand, deposits held on call with banks, other short-term highly liquid
investments with original maturities of three months or less, and bank overdrafts.
Short Term Deposits are with ANZ, with periods ranging from 120 to 180 days.
GROUP
2019
($000)
2018
($000)
Cash and Cash Equivalents4,847 5,242
Short Term Deposits8,000 11,000
Total Cash, Cash Equivalents and Short Term Deposits12,847 16,242
NZD11,927 14,251
USD874 1,941
AUD44 12
EUR1 7
SGD1 31
Total Cash, Cash Equivalents and Short Term Deposits12,84716,242
Notes to the Consolidated Financial Statements
For the year ended 31 March 2019
PACIFIC EDGE LIMITED CONSOLIDATED FINANCIAL STATEMENTS 2019
20
INTEREST INCOME
ACCOUNTING POLICY
Interest income is recognised using the effective interest method.
Interest on the bank balances ranges from 0% to 3.45% (2018: 0% to 3.58%) per annum. Funds held on term
deposit with ANZ Bank can be accessed with one month’s notice at the request of the authorised bank signatories
of Pacific Edge Ltd.
10. RECEIVABLES
ACCOUNTING POLICY
Receivables are initially measured at fair value and subsequently measured at amortised cost using the effective
interest rate method, less any provision for impairment. An allowance for impairment is made up of expected
credit losses based on the assessment of the trade receivables debt at the individual level for impairment, plus an
additional allowance on the remaining balance for potential credit losses not yet identified.
GROUP
2019
($000)
2018
($000)
Trade Receivables51439
Sundry Debtors699862
Accrued Interest64117
GST Refund Due(12)46
Total Receivables1,2651,064
There is no provision for impairment relating to the revenue from Cxbladder sales. All outstanding sales are current
and there are no expected credit losses on the amounts outstanding at balance date.
Sundry debtors include accruals for grants and rebates that have not yet been paid. These are expected to be paid
once the relevant claims have been submitted. The Company has met all conditions of the claims and there is no
indication that there is impairment of these balances.
Included in trade receivables are the below amounts which were past due but not impaired. These relate to a
number of customers for whom there is no history of default.
2019
($000)
2018
($000)
3 to 6 Months
101
Over 6 Months--
Total Overdue Trade Receivables101
The foreign currency split of the amounts above is:
2019
($000)
2018
($000)
NZD 839 479
AUD 426 585
Total Receivables1,2651,064
Notes to the Consolidated Financial Statements
For the year ended 31 March 2019
PACIFIC EDGE LIMITED CONSOLIDATED FINANCIAL STATEMENTS 2019
21
11. INVENTORY
ACCOUNTING POLICY
Inventories are stated at the lower of cost and net realisable value. Cost is determined using the weighted average
formula.
GROUP
2019
($000)
2018
($000)
Laboratory Supplies842752
Total Inventory842752
The major items of Inventory are laboratory reagents, chemicals and Cxbladder urine sampling systems.
Laboratory supplies used during the year of $3,536,000 (2018: $3,115,000) are included within the Statement of
Comprehensive Income in Laboratory Operations and Research.
12. OTHER ASSETS
GROUP
2019
($000)
2018
($000)
Prepayments
445315
Security Deposits
165157
Total Other Assets
610472
Prepayments are largely made up of insurance, subscriptions and travel not yet expired. Security deposits are paid
to secure properties for lease in United States and Singapore and to secure credit cards in the United States.
13. PROPERTY, PLANT & EQUIPMENT
ACCOUNTING POLICY
Property, Plant and Equipment are those assets held by the Group for the purpose of carrying on its business
activities on an ongoing basis. All Property, Plant and Equipment is stated at cost less subsequent accumulated
depreciation and any accumulated impairment losses. The cost of purchased assets includes the original purchase
consideration given to acquire the assets, and the value of other directly attributable costs that have been
incurred in bringing the assets to the location and condition necessary for their intended service. This includes the
laboratory equipment for the establishment of the laboratories.
Gains and losses on disposals are determined by comparing the net proceeds with the carrying amount and are
recognised within the Statement of Comprehensive Income when they occur.
Depreciation
Depreciation of plant and equipment is based on writing off the assets over their useful lives, using the straight line
(SL) and diminishing value (DV) basis.
Main rates used are:
Plant and Laboratory Equipment 5% to 40% DV
Computer Equipment 5% to 60% DV
Leasehold Improvements 10% SL
Furniture and Fittings 5% to 25% DV
The assets’ useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.
Notes to the Consolidated Financial Statements
For the year ended 31 March 2019
PACIFIC EDGE LIMITED CONSOLIDATED FINANCIAL STATEMENTS 2019
22
Plant &
Laboratory
Equipment
($000)
Computer
Equipment
($000)
Leasehold
Improvements
($000)
Furniture
& Fittings
($000)
Total
($000)
Cost
Balance at 1 April 2017 2,407 853 274 365 3,899
Additions 312 40 - 1 353
Disposals (534) (254)- (45) (833)
Foreign Translation Difference (20) (8) (4) (5) (37)
Balance at 31 March 2018 2,165 631 270 316 3,382
Balance at 1 April 2018 2,165 631 270 316 3,382
Additions 89 39 -- 128
Disposals-----
Foreign Translation Difference 53 18 71088
Balance at 31 March 2019 2,307 688 277 326 3,598
Accumulated Depreciation
Balance at 1 April 2017 2,089 677 75 221 3,062
Depreciation Expense 175 82 23 36 316
Disposals (529) (250)- (44) (823)
Foreign Translation Difference (18) (5) (1) (3) (27)
Balance at 31 March 2018 1,717 504 97 210 2,528
Balance at 1 April 2018 1,717 504 97 210 2,528
Depreciation Expense 125 66 21 25 237
Disposals-----
Foreign Translation Difference 41 13 3 7 64
Balance at 31 March 2019 1,883 583 121 242 2,829
Carrying Amounts
At 1 April 2017 318 176 199 144 837
At 31 March 2018 448 127 173 106 854
At 31 March 2019 424 105 156 84 769
Leased Fixed Assets
Plant and Laboratory Equipment includes the following amounts where the Group is a lessee under a finance lease
(refer to Note 23 for further details):
GROUP
2019
($000)
2018
($000)
Cost 319 229
Accumulated Depreciation (96) (35)
Carrying Value 223 194
14. INTANGIBLE ASSETS
ACCOUNTING POLICY
Intellectual Property
The costs of acquired Intellectual Property are recognised at cost. All Intellectual Property has a finite life.
The carrying value of Intellectual Property is reviewed for impairment, where indicators of impairment exist.
Amortisation is charged on a diminishing value basis over the estimated useful life of the intangible assets (1-20
years). The estimated useful life and amortisation method is reviewed at the end of each reporting period.
Notes to the Consolidated Financial Statements
For the year ended 31 March 2019
PACIFIC EDGE LIMITED CONSOLIDATED FINANCIAL STATEMENTS 2019
23
The following costs associated with Intellectual Property are expensed as incurred during the research phases of
a project and are only capitalised when incurred as part of the development phase of a process or product within
development assets: Internal Intellectual Property costs including the costs of patents and patent application.
Software Development Costs
Costs associated with the development of software are held at cost. Amortisation is charged on a diminishing value
basis over the estimated useful life of the intangible assets (2-10 years). The estimated useful life and amortisation
method is reviewed at the end of each reporting period.
Cxblader Development Costs
Costs associated with the development of Cxbladder products are held at cost. Amortisation is charged on a
diminishing value basis over the estimated useful life of the intangible assets (20 years). The estimated useful life
and amortisation method is reviewed at the end of each reporting period.
Software
Development
Costs
($000)
Patents
($000)
Cxbladder
Development
Costs
($000)
Total
($000)
Cost
Balance at 1 April 2017 700 213 33 946
Additions 99 40 - 139
Foreign Translation Difference (1)-- (1)
Balance at 31 March 2018 798 253 33 1,084
Balance at 1 April 2018 798 253 33 1,084
Additions 65 41 - 106
Foreign Translation Difference2--2
Balance at 31 March 2019 865 294 33 1,192
Accumulated Amortisation
Balance at 1 April 2017 465 142 10 617
Amortisation Expense 144 42 2 188
Foreign Translation Difference (2)-- (2)
Balance at 31 March 2018 607 184 12 803
Balance at 1 April 2018 607 184 12 803
Amortisation Expense 110 42 2 154
Foreign Translation Difference 2 -- 2
Balance at 31 March 2019 719 226 14 959
Carrying Amounts
At 1 April 2017 235 71 23 329
At 31 March 2018 191 69 21 281
At 31 March 2019 146 68 19 233
15. SEGMENT INFORMATION
ACCOUNTING POLICY
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating
decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing
performance of the operating segments, has been identified as the Chief Executive Officer who makes strategic
decisions.
Notes to the Consolidated Financial Statements
For the year ended 31 March 2019
PACIFIC EDGE LIMITED CONSOLIDATED FINANCIAL STATEMENTS 2019
24
There are two operating segments at balance date:
1. Commercial: The sales, marketing, laboratory and support operations to run the commercial
businesses worldwide
2. Research: The research and development of diagnostic and prognostic products for human cancer.
The reportable operating segment Commercial derives its revenue primarily from sales of Cxbladder tests and
the reportable operating segment Research derives its revenue primarily from grant income. The Chief Executive
Officer assesses the performance of the operating segments based on net (loss) for the period.
Segment income, expenses and profitability are presented on a gross basis excluding inter-segment eliminations
to best represent the performance of each segment operating as independent business units. The segment
information provided to the Chief Executive Officer for the reportable segment described above, for the year
ended 31 March 2019, is shown below.
2019
Commercial
($000)
Research
($000)
Less:
Eliminations
($000)
Total
($000)
Income
Operating Revenue - External 3,817 -- 3,817
- Internal 199 - (199)-
Other Income 213 1,669 (892) 990
Interest income 4 368 (49) 323
Foreign Exchange Gain (1) 1 (1) (1)
Total Income 4,232 2,038 (1,141) 5,129
Expenses
Expenses 15,625 8,163 (1,141) 22,647
Depreciation and Amortisation 135 256 - 391
Total Operating Expenses 15,760 8,419 (1,141) 23,038
Loss Before Tax (11,528) (6,381)- (17,909)
Income Tax Expense9--9
Loss After Tax(11,537)(6,381)-(17,918)
Net Cash Flows to Operating Activities (11,709) (5,798)- (17,507)
2018
Commercial
($000)
Research
($000)
Less:
Eliminations
($000)
Total
($000)
Income
Operating Revenue - External 3,400 -- 3,400
- Internal 154 - (154)-
Other Income 127 2,137 (1,022) 1,242
Interest Income 2 3,158 (2,929) 231
Foreign Exchange Gain- 129 - 129
Total Income 3,683 5,424 (4,105) 5,002
Expenses
Expenses 18,834 9,413 (4,105) 24,142
Depreciation and Amortisation 191 313 - 504
Total Operating Expenses 19,025 9,726 (4,105) 24,646
Loss Before Tax (15,342) (4,302)- (19,644)
Net Cash Flows to Operating Activities (14,072) (4,028)- (18,100)
Notes to the Consolidated Financial Statements
For the year ended 31 March 2019
PACIFIC EDGE LIMITED CONSOLIDATED FINANCIAL STATEMENTS 2019
25
Sales between segments are carried out at arm’s length. Post adoption of NZ IFRS 15, the revenue from external
parties reported to the Chief Executive Officer is measured in a manner consistent with that in the Statement of
Comprehensive Income.
Eliminations
These are the intercompany transactions between the subsidiaries and the Parent. These are eliminated on
consolidation of Group results.
Segment Assets and Liabilities Information
2019
Commercial
($000)
Research
($000)
Total
($000)
Total Assets 2,028 14,538 16,566
Total Liabilities 1,768 888 2,656
2018
Commercial
($000)
Research
($000)
Total
($000)
Total Assets 1,977 17,688 19,665
Total Liabilities 1,917 1,108 3,025
Total Laboratory Throughput
Billable
Commercial
Tests
Research
Tests
Total
Throughput
Tests
2019 12,744 2,953 15,697
2018 11,866 2,582 14,448
Laboratory Throughput is a key metric for the Group: Laboratory Throughput provides evidence of the increasing
usage of Cxbladder products globally and the rates of adoption between different customer segments. Total
laboratory throughput includes billable/ commercial tests, which are invoiced to customers (including CMS tests),
and tests which are not considered to be billable as these tests relate to user programs (research tests) or other
non-chargeable activities.
Billable/ commercial test numbers are also a key metric for the Group: the tests are those for which the Company
is actively seeking reimbursement and cash receipts. Given the time lag in the US between processing a Cxbladder
test and receiving the associated cash receipts, reported revenue based on the application of our accounting policy
and billable tests do not correlate in the same time period with one another. Billable test numbers also include tests
for CMS patients, which are all invoiced to CMS but for which revenue is not being recognised.
Additions to non current assets for the period include:
Commercial
($000)
Research
($000)
Total
($000)
Property, Plant & Equipment 83 45 128
Intangible Assets- 106 106
Total Additions to Non Current Assets 83 151 234
The amounts provided to the Chief Executive Officer with respect to total assets and total liabilities are measured
in a manner consistent with that of the financial statements. These assets and liabilities are allocated based on the
operation of the segment and the physical location of the asset.
There are no unallocated assets or liabilities.
Notes to the Consolidated Financial Statements
For the year ended 31 March 2019
PACIFIC EDGE LIMITED CONSOLIDATED FINANCIAL STATEMENTS 2019
26
16. INCOME TAX
ACCOUNTING POLICY
The tax expense for the period comprises current and deferred tax. Tax is recognised in the profit or loss, except to
the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the
tax is also recognised in other comprehensive income or directly in equity, respectively.
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 and its subsidiaries operate and generate taxable income.
Management periodically evaluates positions taken in tax returns with respect to situations in which applicable
tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts
expected to be paid to the tax authorities.
Deferred income tax is provided in full, using the liability method, on temporary differences arising between the
tax bases of assets and liabilities and their carrying amounts in the financial statements in accordance with NZ
IAS 12. Deferred income tax assets are recognised to the extent that it is probable that future taxable profit will be
available against which the temporary differences can be utilised.
Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially 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.
The Company and Group has incurred an operating loss for the 2019 financial year and no income tax is payable.
GROUP
2019
($000)
2018
($000)
Income tax recognised in the profit or loss:
Current tax expense9-
Adjustments to current tax in respect to prior years--
Benefit from previously unrecognised tax losses--
Deferred tax in respect of the current year(2,569) (2,918)
Adjustments to deferred tax in respect to prior years(521) (441)
Deferred tax assets not recognised3,090 3,359
Income tax expense9-
The prima facie income tax on pre-tax accounting
profit from operations reconciles to:
Accounting loss before income tax(17,909) (19,645)
At the statutory income tax rate of 28%(5,015) (5,501)
Permanent differences - Non-deductible expenditure1,642 1,730
Difference in US and Australian income tax rates804 853
Prior period adjustment(521) (441)
Tax losses utilised9-
Deferred tax assets not recognised3,0903,359
Income tax expense reported in Statement of
Comprehensive Income
9-
Notes to the Consolidated Financial Statements
For the year ended 31 March 2019
PACIFIC EDGE LIMITED CONSOLIDATED FINANCIAL STATEMENTS 2019
27
Tax Losses
The group has losses to carry forward of approximately $64,300,000 (2018: $54,700,000) with a potential tax
benefit of $14,200,000 (2018: $12,600,000). The tax losses are split between the following jurisdictions:
Tax Losses
NZ($000)
Tax Effect
NZ($000)Rate
New Zealand 9,500 2,70028%
Australia20010030%
Singapore1,00020017%
United States53,60011,20021%
Tax losses are available to be carried forward and offset against future taxable income subject to the various
conditions required by income tax legislation being complied with.
Deferred Research and Development Tax Expenditure
The Group also has deferred research and development tax expenditure of $38,200,000 (2018: $35,600,000) to
carry forward and claim for income tax purposes in New Zealand in the future. This has a tax effect of $10,800,000
(2018: $10,000,000). The deferred research and development tax expenditure can either be carried forward and
offset against future income arising from the research and development, or subject to meeting the shareholder
continuity requirements can be offset against future taxable income.
Deferred Tax Assets
The Group does not recognise a deferred tax asset in the Balance Sheet.
Imputation Credit Account
The Group has imputation credits of Nil (2018: Nil).
17. PAYABLES AND ACCRUALS
ACCOUNTING POLICY
Trade and Other Payables Due Within One Year
Trade payables are recognised at the value of the invoice received from a supplier. The carrying value of trade
payables is considered to approximate fair value as amounts are unsecured and are usually paid by the 30th of the
month following recognition.
GROUP
2019
($000)
2018
($000)
Trade Creditors634665
Accrued Expenses304610
Employee Entitlements (refer below)1,6341,651
Total Payables and Accruals2,5722,926
Payables and accruals are non-interest bearing and are normally settled on 30 day terms. Therefore their carrying
value approximates their fair value.
The foreign currently split for Payables and Accruals is:
GROUP
2019
($000)
2018
($000)
NZD8831,167
AUD6917
USD1,5621,695
SGD5847
2,5722,926
Notes to the Consolidated Financial Statements
For the year ended 31 March 2019
PACIFIC EDGE LIMITED CONSOLIDATED FINANCIAL STATEMENTS 2019
28
Employee Entitlements
Employee entitlements are measured at values based on accrued entitlements at current rates of pay. These
include salaries and wages accrued up to balance date and annual leave earned to, but not yet taken at balance
date.
GROUP
2019
($000)
2018
($000)
Income Tax10850
Holiday Pay513440
Accrued Wages1,0131,161
Total Employee Entitlements1,6341,651
18. SHARE CAPITAL
ACCOUNTING POLICY
Ordinary shares are described as equity.
Issue expenses, including commission paid, relating to the issue of ordinary share capital, have been written off
against the issued share price received and recorded in the Statement of Changes in Equity.
Equity-settled share-based payments to employees and others providing services are measured at the fair value
of the equity instruments at the grant date. Details regarding the determination of the fair value of equity-settled
share based transactions are set out in Note 8.
GROUP
2019
($000)
2018
($000)
Ordinary Shares 146,403 131,824
Total Share Capital 146,403 131,824
All fully paid shares in the Company have equal voting rights and equal rights to dividends. All Ordinary Shares are
fully paid and have no par value.
Share Capital Group
Notes
2019 Shares
(000)
2019
($000)
2018 Shares
(000)
2018
($000)
Opening Balance 466,322 131,824 399,271 111,596
Issue of Ordinary Shares
- Rights Issue and Direct Offers
1
43,988 15,044 66,617 21,318
Issue of Ordinary Shares
- Exercise of share options
2
-- 260 112
Issue of Ordinary Shares
-Employee Remuneration
3
561 188 174 96
Less: Issue Expenses
4
- (653)- (1,298)
Movement 44,549 14,579 67,051 20,228
Closing Balance 510,871 146,403 466,322 131,824
1) During the period 43,988,000 shares were issued under private placements and shareholder purchases plans at an average
price of $0.34 per share. (2018: 66,617,000, $0.32)
2) No share options were exercised during the year (2018: 259,585, $0.36).
3) During the period 561,000 shares were issued as part of employees remuneration in lieu of cash payments at an average price
of $0.34 per share. (2018: 174,000, $0.46)
4) $475,000 of issue expenses are non cash, suppliers were instead issued 1,359,000 shares in the Company. This forms part of the
total detailed within (1)
Notes to the Consolidated Financial Statements
For the year ended 31 March 2019
PACIFIC EDGE LIMITED CONSOLIDATED FINANCIAL STATEMENTS 2019
29
19. FOREIGN CURRENCY
ACCOUNTING POLICIES
Foreign Currency Transactions
The individual financial statements of the Group are presented in the currency of the primary economic
environment in which the entity operates (its functional currency). For the purpose of the Group financial
statements, the results and financial position of the Group entity are expressed in New Zealand dollars (‘NZ$’),
which is the functional currency of the Parent and the presentation currency for the Group financial statements.
In preparing the financial statements of the individual entities, transactions in currencies other than the entity’s
functional currency (foreign currencies) are recorded at the rates of exchange prevailing at the dates of the
transactions. At the end of each reporting period, monetary items denominated in foreign currencies are
retranslated at the rates prevailing at the end of the reporting period. Non monetary items denominated in foreign
currencies are translated at the rates prevailing on the date the transaction occurs.
Exchange differences are recognised in the Statement of Comprehensive Income in the period in which they arise.
Foreign Operations
For the purpose of presenting the Group financial statements, the assets and liabilities of the Group’s foreign
operations are expressed in New Zealand dollars using exchange rates prevailing at the end of the reporting
period. Income and expense items are translated at the average exchange rates for the period, unless exchange
rates fluctuated significantly during that period, in which case the exchange rates at the dates of the transactions
are used. Exchange differences arising, if any, are recognised in other comprehensive income and accumulated as
a separate component of equity in the Group’s foreign currency translation reserve. Such exchange differences
are reclassified from equity to profit or loss (as a reclassification adjustment) in the period in which the foreign
operation is disposed of.
Foreign Currency Translation Reserve
Exchange differences relating to the translation from the functional currencies of the Group’s foreign subsidiaries
into New Zealand dollars are brought to account by entries made directly to the Foreign Currency Translation
Reserve.
Notes to the Consolidated Financial Statements
For the year ended 31 March 2019
PACIFIC EDGE LIMITED CONSOLIDATED FINANCIAL STATEMENTS 2019
30
20. RECONCILIATION OF CASH USED FROM OPERATING ACTIVITIES WITH OPERATING LOSS
GROUP
2019
($000)
2018
$000
Net Loss for the Period (17,918) (19,644)
Add Non Cash Items:
Depreciation 237 316
Loss on Disposal of Property, Plant and Equipment- 10
Amortisation 154 188
Employee Share Options 612 1,184
Employee Bonuses Paid in Shares in Lieu of Cash 188 96
Effect of Exchange Rates on Working Capital items4(131)
Total Non Cash Items 1,195 1,663
Add Movements in Other Working Capital items:
(Increase) in Receivables and Other Assets (341) (383)
(Increase)/Decrease in Inventory (90) 72
Increase/(Decrease) in Payables and Accruals (353) 192
Total Movement in Other Working Capital (784) (119)
Net Cash Flows to Operating Activities (17,507) (18,100)
21. FINANCIAL INSTRUMENTS
ACCOUNTING POLICIES
Financial instruments include cash and cash equivalents, short term deposits, receivables, security deposits, finance
lease liabilities and trade creditors. The particular recognition methods adopted are disclosed in the individual
policy statements associated with each item.
Managing Financial Risk
The Group’s activities expose it to the financial risks of changes in interest rate risk, credit risk, liquidity risk and
foreign currency risk.
Management is of the opinion that the Company and Group’s exposure to market risk during the period and at
balance date is defined as:
Risk FactorDescription
(i) Currency riskFinancial assets and financial liabilities are denominated in NZD, USD, AUD, SGD and
EUR currencies
(ii) Interest rate risk Exposure to changes in Bank interest rates resulting in cashflow interest rate risk
(iii) Other price riskNot applicable as no securities are bought, sold or traded
Notes to the Consolidated Financial Statements
For the year ended 31 March 2019
PACIFIC EDGE LIMITED CONSOLIDATED FINANCIAL STATEMENTS 2019
31
(i) Foreign Currency Risk
The Group faces the risk of movements in foreign currency exchange rates in relation to the New Zealand dollar.
The Group has significant operations in United States Dollars and less significant operations in Australian dollars,
Euros and Singapore dollars. As a result of this, the financial performance and financial position are impacted by
movements in exchange rates.
The Group manages foreign currency risk by purchasing overseas goods only when necessary and when foreign
exchanges are favourable. It will also purchase foreign currency to fund overseas operations based on cash flow
forecasts where it can maximise value. There are no formal foreign currency hedges entered into.
Balances in AUD, SGD and EUR currencies are not significant. A 10% increase or decrease in USD against the NZD
will reduce/increase the loss reported by approximately $35,000 (2018: $37,000) respectively and increase/reduce
equity by the same amount.
(ii) Interest Rate Risk
The Group’s interest rate risk arises from its cash and equivalents, and short term deposits. Cash and equivalents
comprise cash on hand and deposits at call with banks. Short term deposits comprise of term deposits placed with
New Zealand banks on fixed rates for different periods of time.
Management regularly review its banking arrangements to ensure it achieves the best returns on its funds while
maintaining access to necessary liquidity levels to service the Group’s day-to-day activities. The mixture of bank
deposits at floating interest rates and short term deposits at different rates over various periods of time mitigate
the risk of interest rates being received at less than market rates. The Group does not enter into interest rate hedges.
A 1% increase or decrease in Bank deposit interest rates will reduce/increase the loss reported by approximately
$130,000 and increase/reduce equity by the same amount (2018: $138,000).
Credit Risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to
meet its contractual obligations.
The Group incurs credit risk from
a) Cash and short term deposits;
b) Receivables in the normal course of its business;
c) Other assets.
The Group has no significant concentration of credit risk other than bank deposits with 54.35% of total assets at
the ANZ Bank, 1.80% at Bank of New Zealand, 2.85% at Wells Fargo and 18.55% at Heartland Bank. The Group’s
cash and short term deposits are placed with high credit quality financial institutions including major banks who
have at least a BBB credit rating.
Regular monitoring of receivables is undertaken to ensure that the credit exposure remains within the Group’s
normal terms of trade. These receivables balances mainly relate to New Zealand customers, Callaghan Innovation
and the Australian Government. Refer to note 10 for further details on expected credit losses for receivables.
While there are no trade receivables recognised for US customers, the Group continues to invoice for every billable
test completed in the US, and the billing and reimbursement process continues to maximise the cash that is
received by the Group.
Regular monitoring of other assets is undertaken to ensure that the credit exposure is limited. This is firstly done
by determining the credit risk before making security deposits on leased properties and ensuring suppliers are not
paid in advance where there is uncertainty in relation to their credit worthiness.
The carrying values of financial assets represent the maximum exposure to credit risk as represented below:
Notes
2019
($000)
2018
($000)
Cash and cash equivalents94,8475,242
Short term deposits98,00011,000
Trade and other receivables (excludes GST)101,2771,018
Other assets (excludes prepayments)12165157
14,28917,417
Notes to the Consolidated Financial Statements
For the year ended 31 March 2019
PACIFIC EDGE LIMITED CONSOLIDATED FINANCIAL STATEMENTS 2019
32
Liquidity Risk
Liquidity risk is the risk that the Group may encounter difficulty in raising funds at short notice to meet its
commitments as they fall due. Management maintains sufficient cash balances and uses cash flow forecasts to
determine future cash flow requirements. The Group does not have any external loans but does have four finance
leases.
Payables and Accruals totaling $2,143,000 are due within 3 months of balance date (2018: $2,292,000).
Fair Values
In the opinion of the directors, the carrying amount of financial assets and financial liabilities approximate their fair
values at balance date.
22. RELATED PARTIES
A shareholder, the University of Otago, provided services, including rental space and car parking, to the Group to
the value of $272,000 (2018: $264,000). The Group has commitments totaling $194,000 (2018: $194,000) with the
University of Otago in the next financial year.
Key Management Compensation
Key management personnel comprise of Directors and the Chief Executive Officers of Pacific Edge Limited and
Pacific Edge Diagnostics USA Limited.
Refer to Note 8 for details of the Incentive Plan that includes key management remuneration.
GROUP
2019
($000)
2018
($000)
Salaries and Other Short Term Employee Benefits1,3191,315
Share Options Benefits320635
Total Employee Entitlements1,6391,950
Directors Fees
The current total Directors’ fee pool for the non-executive Directors of Pacific Edge Limited, approved by the
shareholders at the Annual Shareholders’ Meeting on the 16th of August 2018 is $302,000 per annum. The total
amount of fees paid to Directors and expenses incurred for the year ended 31 March 2019 was $279,000.
The table below sets out the total fees payable to the non-executive Directors of Pacific Edge Limited for the year
ended 31 March 2019 based on the positions held:
PositionQuantityTotal Fees
Payable
Chair1 $80,000
Deputy Chair 1 $50,000
Non-executive Directors2 $88,000
US-based non-executive Director1 $79,000
Chair Audit & Risk Committee1 $5,000
Total Fee Pool$302,000
Notes to the Consolidated Financial Statements
For the year ended 31 March 2019
PACIFIC EDGE LIMITED CONSOLIDATED FINANCIAL STATEMENTS 2019
33
23. FINANCE AND OPERATING LEASE COMMITMENTS
ACCOUNTING POLICY
Leases of property, plant and equipment where the group, as lessee, has substantially all the risks and rewards of
ownership are classified as finance leases. Finance leases are capitalised at the lease’s inception at the fair value
of the leased property or, if lower, the present value of the minimum lease payments. The corresponding rental
obligations, net of finance charges, are included in other short-term and long-term payables. Each lease payment
is allocated between the liability and finance cost. The finance cost is charged to the profit or loss over the lease
period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period.
The property, plant and equipment acquired under finance leases is depreciated over the asset’s useful life, or over
the shorter of the asset’s useful life and the lease term if there is no reasonable certainty that the group will obtain
ownership at the end of the lease term.
Leases in which a significant portion of the risks and rewards of ownership are not transferred to the group as
lessee are classified as operating leases. Payments made under operating leases (net of any incentives received
from the lessor) are charged to profit or loss on a straight-line basis over the period of the lease.
a) Finance Lease Obligations
GROUP
2019
($000)
2018
($000)
Commitments in relation to finance leases are payable as
follows:
Within one year 55 78
Later than one year but not later than five years 33 26
Later than five years--
Minimum Lease Payments 88 104
Future finance charges (4)(5)
Recognised as a liability 84 99
The present value of finance lease liabilities is as follows:
Within one year 52 73
Later than one year but not later than five years 32 26
Later than five years--
Minimum Lease Payments 84 99
Included in the financial statements as:
Current borrowings 52 73
Non-current borrowings 32 26
Minimum Lease Payments 84 99
b) Leasing Arrangements
The group leases various plant and laboratory equipment with a carrying amount of $223,000 (2018: $194,000)
under finance leases expiring within one to two years. Under the terms of the leases, the group has the option to
acquire the leased assets for low or no cost on expiry of the leases.
The Interest rates underlying all obligations under finance leases are fixed at respective contract dates ranging from
4.6% to 9.4% (2018: 5.2% to 9.4%) per annum.
Notes to the Consolidated Financial Statements
For the year ended 31 March 2019
PACIFIC EDGE LIMITED CONSOLIDATED FINANCIAL STATEMENTS 2019
34
c) Operating Lease Obligations
The Group has the following lease commitment for buildings and equipment:
GROUP
2019
($000)
2018
($000)
Non cancellable operating lease commitments within one year1,075957
Later than one year, not later than five years8481,240
Over five years--
Total Lease Commitments1,9232,197
The major commitments included in the total lease commitments above are:
GROUP
2019
($000)
2018
($000)
Lease of premises from the University of Otago419194
Pacific Edge Diagnostics USA Ltd lease1,3031,904
Pacific Edge Diagnostics Singapore Pte. Ltd lease3848
Other16351
1,9232,197
The lease of premises (in the Centre for Innovation) with the University of Otago includes rights of renewal to lease
the premises to May 2023.
Pacific Edge Diagnostics USA Ltd has extended its lease by 3 years to 30 November 2020. The total financial
commitment shown above includes an Allowance Reimbursement which is payable to the landlord on a monthly
basis.
Pacific Edge Diagnostics Singapore Pte. Ltd has extended its lease until 30 April 2020.
24. OTHER COMMITMENTS AND CONTINGENT LIABILITIES
a) Capital Commitments
There are no capital commitments for the Group at 31 March 2019 (2018: Nil).
b) Contingent Liabilities
There were no known contingent liabilities at 31 March 2019 (2018: Nil). The Group has not granted any securities in
respect of liabilities payable by any other party whatsoever.
25. SUBSEQUENT EVENTS
John Duncan has been appointed to the Board, effective 30 April 2019.
Notes to the Consolidated Financial Statements
For the year ended 31 March 2019
PACIFIC EDGE LIMITED CONSOLIDATED FINANCIAL STATEMENTS 2019
35
PricewaterhouseCoopers
Westpac Building, 106 George Street, PO Box 5848, Dunedin 9058, New Zealand
T: +64 3 470 3600, F: +64 3 470 3601, pwc.co.nz
Independent auditor’s report
To the shareholders of Pacific Edge Limited
We have audited the consolidated financial statements which comprise:
the balance sheet as at 31 March 2019;
the statement of comprehensive income for the year then ended;
the statement of changes in equity for the year then ended;
the statement of cash flows for the year then ended; and
the notes to the consolidated financial statements, which include a summary of accounting
policies.
Our opinion
In our opinion, the accompanying consolidated financial statements of Pacific Edge Limited (the
Company), including its subsidiaries (the Group), present fairly, in all material respects, the financial
position of the Group as at 31 March 2019, its financial performance and its cash flows for the year
then ended in accordance with New Zealand Equivalents to International Financial Reporting
Standards (NZ IFRS) and International Financial Reporting Standards (IFRS).
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (New Zealand) (ISAs
(NZ) and International Standards on Auditing (ISAs). Our responsibilities under those standards are
further described in theAuditor’s responsibilities for the audit of the consolidated financial
statementssection of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
We are independent of the Group in accordance with Professional and Ethical Standard 1 (Revised)
Code of Ethics for Assurance Practitioners(PES 1) issued by the New Zealand Auditing and Assurance
Standards Board and the International Ethics Standards Board for Accountants’Code of Ethics for
Professional Accountants(IESBA Code), and we have fulfilled our other ethical responsibilities in
accordance with these requirements.
Our firm carries out other services for the Group in the areas of review of the Callaghan Innovation
Growth Grant claim and half year review procedures. The provision of these other services has not
impaired our independence as auditor of the Group.
Material uncertainty related to going concern
We draw attention to the disclosures in Note 1 to the financial statements, which indicates that the
Company continues to progress commercial negotiations with targeted large scale health organisations
in the USA. The disclosures note that contracts are taking longer than expected to complete, but
progress is being made. The Company has prepared cash flow forecasts which indicate that if these
commercial negotiations continue to be delayed, the Company may not have sufficient cash to meet its
minimum expenditure commitments and support its current levels of activity. The Company may need
to raise additional funds to continue as a going concern. These matters indicate a material uncertainty
that may cast significant doubt on the Company’s ability to continue as a going concern and, therefore,
that the Company may be unable to realise its assets and discharge its liabilities in the normal course
of business.Our opinion is not modified in respect of this matter.
PricewaterhouseCoopers
Westpac Building, 106 George Street, PO Box 5848, Dunedin 9058, New Zealand
T: +64 3 470 3600, F: +64 3 470 3601, pwc.co.nz
Independent auditor’s report
To the shareholders of Pacific Edge Limited
We have audited the consolidated financial statements which comprise:
the balance sheet as at 31 March 2019;
the statement of comprehensive income for the year then ended;
the statement of changes in equity for the year then ended;
the statement of cash flows for the year then ended; and
the notes to the consolidated financial statements, which include a summary of accounting
policies.
Our opinion
In our opinion, the accompanying consolidated financial statements of Pacific Edge Limited (the
Company), including its subsidiaries (the Group), present fairly, in all material respects, the financial
position of the Group as at 31 March 2019, its financial performance and its cash flows for the year
then ended in accordance with New Zealand Equivalents to International Financial Reporting
Standards (NZ IFRS) and International Financial Reporting Standards (IFRS).
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (New Zealand) (ISAs
(NZ) and International Standards on Auditing (ISAs). Our responsibilities under those standards are
further described in theAuditor’s responsibilities for the audit of the consolidated financial
statementssection of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
We are independent of the Group in accordance with Professional and Ethical Standard 1 (Revised)
Code of Ethics for Assurance Practitioners(PES 1) issued by the New Zealand Auditing and Assurance
Standards Board and the International Ethics Standards Board for Accountants’Code of Ethics for
Professional Accountants(IESBA Code), and we have fulfilled our other ethical responsibilities in
accordance with these requirements.
Our firm carries out other services for the Group in the areas of review of the Callaghan Innovation
Growth Grant claim and half year review procedures. The provision of these other services has not
impaired our independence as auditor of the Group.
Material uncertainty related to going concern
We draw attention to the disclosures in Note 1 to the financial statements, which indicates that the
Company continues to progress commercial negotiations with targeted large scale health organisations
in the USA. The disclosures note that contracts are taking longer than expected to complete, but
progress is being made. The Company has prepared cash flow forecasts which indicate that if these
commercial negotiations continue to be delayed, the Company may not have sufficient cash to meet its
minimum expenditure commitments and support its current levels of activity. The Company may need
to raise additional funds to continue as a going concern. These matters indicate a material uncertainty
that may cast significant doubt on the Company’s ability to continue as a going concern and, therefore,
that the Company may be unable to realise its assets and discharge its liabilities in the normal course
of business.Our opinion is not modified in respect of this matter.
PACIFIC EDGE LIMITED CONSOLIDATED FINANCIAL STATEMENTS 2019
36
PwC
Our audit approach
Overview
An audit is designed to obtain reasonable assurance
whether the financial statements are free from material
misstatement.
Overall Group materiality: $228,000 which represents
1% of total expenses.
The Company is in a loss making position. The
Company’s focus is on achieving revenue growth. In
our judgement, total expenses provides a more stable
basis for calculating materiality.
We have determined that there is one key audit matter:
US Revenue Recognition.
Materiality
The scope of our audit was influenced by our application of materiality.
Based on our professional judgement, we determined certain quantitative thresholds for materiality,
including the overall Group materiality for the consolidated financial statements as a whole as set out
above. These, together with qualitative considerations, helped us to determine the scope of our audit,
the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements, both
individually and in aggregate on the consolidated financial statements as a whole.
Audit scope
We designed our audit by assessing the risks of material misstatement in the consolidated financial
statements and our application of materiality. As in all of our audits, we also addressed the risk of
management override of internal controls including among other matters, consideration of whether
there was evidence of bias that represented a risk of material misstatement due to fraud.
We tailored the scope of our audit in order to perform sufficient work to enable us to provide an
opinion on the consolidated financial statements as a whole, taking into account the structure of the
Group, the accounting processes and controls, and the industry in which the Group operates.
PACIFIC EDGE LIMITED CONSOLIDATED FINANCIAL STATEMENTS 2019
37
PwC
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in
our audit of the consolidated financial statements of the current year. These matters were addressed in
the context of our audit of the consolidated financial statements as a whole, and in forming our
opinion thereon, and we do not provide a separate opinion on these matters.
Key audit matterHow our audit addressed the key audit matter
US Revenue Recognition
The application of NZ IFRS 15: Revenue
from contracts with customers (NZ IFRS
15) requires the Directors to apply
significant judgement in determining
whether revenue can be recognised in
advance of the receipt of cash.
The Company has two material United
States (US) revenue streams:
1.Coverage via Centers for Medicare and
Medicaid Services (CMS), and
2.Private Insurance.
The significant judgements adopted by the
Directors in applying NZ IFRS 15 criteria
include:
Determining if a contract with the
customer exists;
Determining if the entity can identify
the payment terms for the services; and
Determining whether it is probable that
the entity will collect the consideration
to which it is entitled.
Based on management’s assessment, US
derived revenue is accounted for on a cash
receipts basis as disclosed in Note 5.
Due to the significant audit effort required
to understand the revenue recognition
process and considering the significance of
the judgements applied by the Directors, we
determined this area to be a key audit
matter.
Our audit procedures included the following:
We obtained an understanding of management’s
analysis of the CMS and Private Insurance US
revenue streams to identify the significant
judgements.
We evaluated management’s determination of
whether a contract with customers existed by:
Inspecting documentation supporting the
contractual process and basis for engagement of
patients (customers) in the US; and
Discussing the process for engaging patients with
New Zealand and US based management to
reconfirm the facts that support a cash based
revenue recognition conclusion.
Assessing the supporting documentation provided by
management to illustrate the variation in payment
terms by customer.
Considering the payment terms and the probability of
recovery of outstanding balances based on the history
of past collections. This included assessing
management’s conclusions on whether it is probable
that the entity will collect the consideration. Further
we visited the Group’s external billing
reimbursement agent to confirm our understanding
of the process and monthly reporting.
We have no matters to report from the procedures
performed above.
Information other than the financial statements and auditor’s report
The Directors are responsible for the annual report. Our opinion on the consolidated financial
statements does not cover the other information included in the annual report and we do not and will
not express any form of assurance conclusion on the other information. At the time of our audit, there
was no other information available to us.
PACIFIC EDGE LIMITED CONSOLIDATED FINANCIAL STATEMENTS 2019
38
PwC
In connection with our audit of the consolidated financial statements, our responsibility is to read the
other information and, in doing so, consider whether the other information is materially inconsistent
with the consolidated financial statements or our knowledge obtained in the audit, or otherwise
appears to be materially misstated. If, based on the work we have performed on the other information
that we obtained prior to the date of this auditor’s report, we conclude that there is a material
misstatement of this other information, we are required to report that fact.
Responsibilities of the Directors for the consolidated financial statements
The Directors are responsible, on behalf of the Company, for the preparation and fair presentation of
the consolidated financial statements in accordance with NZ IFRS and IFRS, and for such internal
control as the Directors determine is necessary to enable the preparation of consolidated financial
statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, the Directors are responsible for assessing the
Group’s ability 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 consolidated financial statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial
statements, as a whole, are 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 ISAs (NZ) and ISAs 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 these consolidated financial statements.
A further description of our responsibilities for the audit of the financial statements is located at the
External Reporting Board’s website at:
https://www.xrb.govt.nz/standards-for-assurance-practitioners/auditors-responsibilities/audit-
report-1/
This description forms part of our auditor’s report.
Who we report to
This report is made solely to the Company’s shareholders, as a body. Our audit work has been
undertaken so that we might state those matters which we are required to state to them in an auditor’s
report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Company and the Company’s shareholders, as a body, for our
audit work, for this report or for the opinions we have formed.
The engagement partner on the audit resulting in this independent auditor’s report is Nathan Wylie.
For and on behalf of:
Chartered Accountants
29 May 2019
Dunedin
PACIFIC EDGE LIMITED CONSOLIDATED FINANCIAL STATEMENTS 2019
39
COMPANY DIRECTORY
As at 31 March 2019
PACIFIC EDGE COMMUNICATIONS
Websites
www.pacificedgedx.com
www.cxbladder.com
www.bladdercancer.me
Facebook
www.facebook.com/PacificEdgeLtd
www.facebook.com/Cxbladder
Twitter
@PacificEdgeLtd
@Cxbladder
LinkedIn
www.linkedin.com/company/pacific-edge-ltd
Issued Capital
510,871,464 Ordinary Shares
Registered Office
Anderson Lloyd
Level 10, Otago House
Cnr Moray Place and Princes Street
Dunedin
Directors
C. Gallaher – Chairman
D. Band (retired 16 August 2018)
D. Darling
D. Levison
A. Masfen
S. Park (appointed 6 December 2018)
B. Williams
Chief Executive Officer
David Darling
Nature of Business
Research, develop and commercialise new
diagnostic and prognostic tools for the early
detection and management of cancers.
Auditors
PricewaterhouseCoopers
Dunedin
Bankers
Bank of New Zealand
Dunedin
ANZ
Dunedin
Solicitors
Anderson Lloyd
Level 10, Otago House
Cnr Moray Place and Princes Street
Dunedin
Securities Registrar
Link Market Services Limited
138 Tancred St
Ashburton
Company Number
1119032
Date of Incorporation
27th February 2001
87 St David Street, PO Box 56, Dunedin, New Zealand
P +64 3 479 5800 F +64 3 479 5801
www.pacificedge.co.nz
---
Pacific Edge Limited
Appendix 1
Results for announcement to the market
Reporting Period 12 months to 31 March 2019
Previous Reporting Period 12 months to 31 March 2018
Currency NZD
Amount (000s) Percentage Change
Revenue from ordinary
activities
- Operating Revenue:
NZ$3,817
- Other Income:
NZ$990
Revenue from ordinary
activities: NZ$4,807
- Operating Revenue:
12% increase
- Other Income: 20%
decrease
Revenue from ordinary
activities: 4% increase
Profit (loss) from ordinary
activities after tax
attributable to security
holder.
NZ$(17,921) 9% decrease
Net profit (loss) attributable
to security holders.
NZ$(17,921) 9% decrease
Reporting Period Previous Reporting Period
Net tangible assets per
Quoted Equity Security
$0.027
$ 0.035
Interim/Final Dividend:
The Company does not propose to pay dividends to shareholders.
Financial Information:
The Appendix 1 Release should be read in conjunction with the audited consolidated
financial statements for the year ended 31 March 2019, the results presentation and
commentary, all of which have been released with this NZX Appendix 1 Release.
David Darling
Chief Executive Officer
+64 (3) 479 5800
dave.darling@pelnz.com
29 May 2019
Data sourced from publicly available filings. Our datasets may not be complete. Automated analysis can produce errors. If you believe any data on this page is incorrect, please contact us at hello@nzxplorer.co.nz. For informational purposes only. Not investment advice.
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