Pacific Edge Announces FY20 Results
29 May 2020
1
PACIFIC EDGE ANNOUNCES FY20 RESULTS
Results for the 12 months ended 31 March 2020
Cancer diagnostics company, Pacific Edge Limited (NZX: PEB) has today released its audited financial results for
the 12 months ended 31 March 2020 (FY20).
$M FY20 FY19 % change
Operating Revenue 4.4 3.8 14%
Total Revenue 5.2 5.1 1%
Operating Expenses 24.1 23.0 5%
Net Loss After Tax (18.9) (17.9) 5%
Cash Receipts from Customers 4.4 3.7 19%
Net Operating Cashflow (15.4) (17.5) (12%)
Cash, cash equivalents and short term deposits 14.8 12.8 15%
Share Capital 165.4 146.4 13%
The company has reported continuing growth and achievement of commercial milestones, with growing adoption
and use of its Cxbladder bladder cancer diagnostics tests.
Highlights for the period include the publication of three additional peer reviewed papers in support of
Cxbladder; inclusion in the National Comprehensive Cancer Network (NCCN) guidelines in the US; increased
adoption and commercial use by New Zealand’s public healthcare providers (DHBs); and growing recognition and
adoption by urologists in the US and New Zealand.
Total Laboratory Throughput
1
increased 7% to 16,861 tests, with 81% of those tests being Commercial Tests
2
.
Since commencing commercial sales in 2015, Total Laboratory Throughput has grown at a compound annual
growth rate (5-year CAGR) of 34%.
Operating revenue from test sales was $4.4m, up 14% on the prior comparative period (pcp), with cash receipts
from customers up 19% year on year. US operating revenue increased 15% on pcp (+9% in USD terms) and
accounted for 86% of group operating revenue in FY20.
The US remains the company’s largest market, providing 79% of Total Laboratory Throughput in FY20. The
company’s commercial focus remains on achieving inclusion in the Local Coverage Determination (LCD) for the
Centers for Medicare and Medicaid (CMS); and integration and scale adoption of Cxbladder with targeted large
US institutional customers. A successful LCD decision will allow Pacific Edge to start recognising revenue for
approximately 43% of its current commercial sales in the US. A growing number of organisations and urologists in
the US are now using Cxbladder, which was reflected in a 6% increase in US Laboratory Throughput for the full
year and a 14% year on year increase in Q420.
1
Total Laboratory Throughput means total commercial and non-commercial tests processed through Pacific Edge’s
laboratories in the USA and New Zealand, including tests for User Programmes.
2
Commercial Tests means tests that have been analysed by Pacific Edge, for a specific customer, including the User
Programmes run by customers as part of their adoption process but excluding any tests run for clinical studies.
29 May 2020
2
Commercial test numbers include tests performed for CMS patients that have been invoiced but for which no
cash payments have been received or revenue recognised. CMS-related tests accounted for approximately 43% of
US Commercial Tests in FY20 and cumulatively totalled 21,789 tests as at 31 March 2020. Pacific Edge is
continuing to progress its application to achieve inclusion in the LCD with an updated dossier of clinical evidence
accepted by the CMS’s Medicare Administrative Contractor (Novitas), for formal review in August 2019. In
February 2020, Pacific Edge successfully added its latest peer-reviewed publication to that clinical evidence
dossier, which provided further real world evidence of significant gains in clinical utility from the commercial
adoption of Cxbladder Monitor (CxbM) by three different public healthcare providers in New Zealand.
Under NZ IFRS 15, a successful LCD decision would allow Pacific Edge to start recognising revenue for all the tests
that are performed on CMS patients in the US (FY20: 4,774 tests) at the already determined national CMS price
for Cxbladder of US$760 per test. A successful LCD decision would also have a significant positive impact on
operating cashflow and would allow the company to seek reimbursement from the CMS for the tests that have
previously been completed and invoiced, but for which no revenue has been recognised.
While the New Zealand market is small relative to the US, New Zealand’s public healthcare providers continue to
lead the global adoption of Cxbladder. New Zealand Laboratory Throughput increased 12% year on year, with
operating revenue increasing 11%. The majority of New Zealand’s public healthcare providers have adopted
Cxbladder into their standard of care and in some instances, replaced the gold standard cystoscopy. In Q420, two
New Zealand DHBs added an additional Cxbladder test to their mainstream commercial use, and three DHBs
started using Cxbladder for in-home testing as a solution for their patients. More than 65% of New Zealand’s
population is now covered by contracts with public healthcare providers.
Operating expenses were $24.1m, up 5% on the prior year, primarily due to the foreign exchange impact of a
weaker NZD compared to USD. US operating expenses account for 60% of total operating expenses and were
down 2% in local currency terms (up 3% in NZD). In Q420, the US business increased the number of sales
representatives selling Cxbladder to 16 (compared to 11 at the start of the financial year).
As at 31 March 2020, Pacific Edge had $14.8m in cash, cash equivalents and short term deposits, following a
successful $20.1m capital raising completed during the year. Cash receipts from customers increased 19% year on
year and net operating cash outflow reduced to $(15.4)m, a 12% improvement on pcp. The company reported a
Net Loss After Tax of $(18.9)m. The Board and management continue to carefully manage cash resources and
achieving a cashflow breakeven position remains a priority.
COVID-19 Impact and Response
Pacific Edge continued to operate as an essential business during the COVID-19 restrictions in both New Zealand
and the US. While Q420 Laboratory Throughput remained strong (US Total Laboratory Throughput +14% y/y), the
negative impact from the stay-at-home restrictions was felt in the first half of April 2020 with urologists balancing
the conflicting demands of COVID-19 restrictions and managing at-risk patients. This resulted in reduced
Laboratory Throughput in April 2020, with US and New Zealand Laboratory Throughput averaging 51% of April
2019 levels. Test demand recovered in New Zealand during the second half of April 2020 following the easing of
COVID-19 restrictions. Test demand is also expected to recover in the US as restrictions ease.
29 May 2020
3
Pacific Edge has been able to reduce costs to offset income reductions and has also received financial support in
the form of COVID-19 relief packages from Governments in New Zealand, Australia and the US.
Helping to offset the reduced Laboratory Throughput from patients visiting clinics has been the increased
adoption of Cxbladder’s unique in-home sampling system which allows patients to collect a sample at home for
delivery to a Pacific Edge laboratory. Three DHBs commenced in-home sample collection in New Zealand during
April 2020, and Pacific Edge has also seen increased sales activity with healthcare institutions as they seek
alternative methods to treat their patients remotely.
The COVID-19 pandemic has highlighted the need for novel ways to detect cancer early and guide treatment
Following the rapid increased use of telehealth in the US during this time, Pacific Edge expects tele-consultations
to become more common practise going forward. A leading US healthcare provider has recently stated that their
use of tele-consultations has increased from 15% of all appointments pre-COVID-19 to 80% currently. In line with
this growing trend, in-home diagnostic testing for cancer is also expected to become an accepted option for
patients and physicians, both during the COVID-19 pandemic and beyond.
CEO of Pacific Edge, David Darling, commented: “Our business continues to progress, with particularly strong
growth in our domestic market. We have achieved some significant milestones that drive reimbursement and,
combined with the strong clinical evidence portfolio underpinning the commercialisation of Cxbladder, we are
seeing increased adoption and commercial use of our tests.
“We remain focused on continuing to build scale in the US, through the signing of commercial agreements with
large scale healthcare organisations, as well as achieving inclusion in the CMS’s LCD. Upon completion, these will
provide a significant positive impact on the company’s financial position.
“The deployment of telehealth as a main stream component of patient health management has been accelerated
globally by the COVID-19 pandemic and we expect to see Cxbladder continue to benefit as in-home sampling
becomes a more integrated and valued alternative for many patients and physicians around the world.”
Outlook
Pacific Edge is in a unique global position, with a first mover advantage, a large addressable market and a proven
model and products with compelling and repeatable performance. Cxbladder provides the only commercially
available, non-invasive, accurate, clinically validated diagnostic solution across the bladder cancer pathway.
Cxbladder products deliver better care for patients, better utility for urologists and savings for the payers.
Scale adoption by large healthcare institutions remains the commercial objective for Pacific Edge in all markets,
particularly the US. The recent Inclusion in the NCCN bladder cancer guidelines (July 2019) and the publication of
additional compelling, peer reviewed clinical utility evidence (February 2020) is expected to facilitate greater test
adoption, reimbursement and additional guideline inclusion. Two of the three milestones required for
reimbursement from the CMS have been achieved and progress is being made to conclude the third milestone,
being inclusion in the LCD. A successful LCD decision would allow Pacific Edge to start recognising revenue for all
the tests that are performed on CMS patients in the US and would also have a significant positive impact on
operating cashflow. It remains a priority focus for the company.
29 May 2020
4
In New Zealand, demand from public healthcare providers continues to grow and the focus is now on upselling
additional tests to existing customers and gaining adoption from the remaining DHBs.
Continuing progress is being made in Southeast Asia with clinical trials in Singapore nearing completion. The
published results from these will form the basis for a proposed Singapore-wide commercial rollout. In Australia,
Pacific Edge is replicating its New Zealand-proven sales and marketing model to drive sales growth.
The company remains focused on achieving its key strategic objectives and commercial momentum is increasing.
Operating cashflow is expected to improve further, whilst operating expenses will be maintained at current levels
or lower.
Chair of Pacific Edge, Chris Gallaher, said: “The company has continued to make progress on the
commercialisation of Cxbladder and milestones continue to be achieved. We have added substantially to our
body of peer reviewed publications during the year and now have a compelling body of independent evidence
supporting the accuracy and clinical utility of our bladder cancer tests.
“While good progress has been made in our domestic market, the largest market opportunity, and the largest
investment of our capital and resources continues to be the USA. To the extent that we can control the pace of
progress in the USA, we are doing all that we can to achieve the remaining milestones achievement of which will
be transformative for the company.
“Covid-19 has given rise to both challenges and opportunities for the company. We may well see
permanent changes to the way the health professionals interact with patients and we are proving our logistics
capabilities through the delivery of in-home testing in both New Zealand and the USA.”
ENDS
For more information contact:
David Darling, Chief Executive Officer, Pacific Edge Limited, P: +64 (3) 479 5800
For media assistance, contact Jackie Ellis, P: +64 27 246 2505
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. The company's suite of non-invasive, simple to use and accurate Cxbladder diagnostic tests provide
actionable results, and better detection and management of urothelial cancer. The company is developing and
commercialising its range of Cxbladder tests globally through its wholly owned central laboratories in New
Zealand and the USA. The company’s products have been tested and validated in international multi-centre
clinical studies.
ABOUT Cxbladder Triage www.cxbladder.com
Cxbladder Triage combines the power of the genomic biomarkers with additional phenotypic and clinical risk
factors to accurately identify 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 carcinoma.
29 May 2020
5
ABOUT Cxbladder Detect www.cxbladder.com
Cxbladder Detect enables the non-invasive detection of bladder and other urinary tract cancers from a small
volume of a patients’ urine. Cxbladder Detect provides clinicians with a quick, cost effective and accurate
measure of the presence of the cancer as an effective adjunct to cystoscopy.
ABOUT Cxbladder Monitor www.cxbladder.com
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 (UC) whose Cxbladder Monitor score shows that they
have a low probability of recurrent urothelial carcinoma. 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 www.cxbladder.com
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.
---
PACIFIC EDGE
2020 FINANCIAL
RESULTS
PRESENTATION
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 ageneral 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 financial products of Pacific Edge, and has
been prepared without taking into account the objectives, financial situation or needs of individuals. Pacific Edge, its directors and 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
financial products.
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.
2
FY20 COMMERCIAL MILESTONES
•COMMERCIAL GROWTH:14% increase in Operating Revenue and 7% increase in Total Laboratory Throughput;
increasing number of customers and urologists adopting and using Cxbladder.
•PUBLICATION OF FURTHER PEER-REVIEWED PAPERS: highlighting Cxbladder’soutperformance and adding
significant additional clinical utility evidence in support of Cxbladder.
•INCLUSION IN USA’S NATIONAL COMPREHENSIVE CANCER NETWORK (NCCN) GUIDELINES as an approved
intervention for patients being monitored for recurrence of urothelial cancer (UC).
•USA: Growing recognition and adoption by large healthcare institutions in the USA.
•LCD PROGRESS: Updated dossier of clinical evidence accepted for formal review by the Centersfor Medicare and
Medicaid Services (CMS) in the USA, as part of process for inclusion in the Local Coverage Determination (LCD).
•NEW ZEALAND: Continuing adoption and increasing commercial use of Cxbladder by New Zealand public
healthcare providers (DHBs).
•SOUTH EAST ASIA: Continued progress in Southeast Asia. The 5 largest hospitals concluding their User
Programmes. Analysis to be completed in FY21.
•FUNDING:Successfully raised $20.1m from existing and new investors through a fully underwritten private
placement and rights issue.
3
FY20 FINANCIAL SUMMARY
4
$M
FY20FY19% change
Operating Revenue
1
4.43.814%
Total Revenue
5.25.11%
Operating Expenses
24.123.05%
Net Loss After Tax
(18.9)(17.9)5%
Cash Receipts from Customers
4.43.719%
Net Operating Cashflow
(15.4)(17.5)(12%)
Cash, cash equivalents and short term deposits
14.812.815%
Share Capital
165.4146.413%
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 accounted for
approximately 43% of FY20 US Commercial Tests and Pacific Edge will seek reimbursement for these when it is included in the CMS’s Local Coverage Determination (LCD). As
at 31 March 2020, Pacific Edge has completed and invoiced a total of 21,789 tests for CMS patients in the USA, for which it is yet to be reimbursed.
TOTAL LABORATORY THROUGHPUT
5
0
2
4
6
8
10
12
14
16
FY15FY16FY17FY18FY19FY20
(000s)
TOTAL LABORATORY THROUGHPUT
(Commercial Tests and User Programmes)
1H2H
81%of FY20 Throughput was for
Commercial Tests
+7%
•Total Laboratory Throughput increased 7% on pcpto
16,861 tests.
•US Total Laboratory Throughput up 6% on pcpto 13,240
tests. Strong 14% year on year increase in Q420.
•CMS-related tests accounted for approximately 43% of US
Commercial Tests in FY20 (45% in FY19).
•ROW Throughput increased 12% on pcpto 3,621 tests.
•5-year compound annual growth rate (CAGR) of 34%
•Total Commercial Tests* grew by 6% year on year and
comprise 81% of total Laboratory Throughput
*See Slide 21 for definition of Commercial Tests
TOTAL LABORATORY THROUGHPUT
BY REGION AND TEST TYPE
USA
78%
NZ
17%
ROW
5%
6
Detect
59%
Monitor
21%
Triage
20%
Total Laboratory Throughput
(by region)
Total Laboratory Throughput
(by test type)
Detect
20%
Monitor
12%
FY20 Regional
Laboratory
Throughput
by Test
USANZ
Cxbladder Detect69%21%
Cxbladder Monitor24%10%
Cxbladder Triage
7%69%
Test type usage is impacted by country and time in market for tests (egCxbladder Detect in the USA has been in-market longest)
Multi-Market and Multi-Product Opportunity for Cxbladder
GROWING ADOPTION AND COMMERCIAL USE IN
NEW ZEALAND
•Total Laboratory Throughput for NZ grew by 12% year on
year
•New Zealand Operating Revenue up 11% year on year.
•Increases driven by increased adoption and commercial
use by public healthcare providers in New Zealand
•New Zealand’s public healthcare providers (DHBs) are
leading the global adoption of Cxbladder, with
approximately 65% of New Zealand’s population under
cover.
•Majority of DHBs have adopted Cxbladder into their
standard of care and in some cases, their clinical
guidelines replacing the gold standard cystoscopy.
•In Q420, two of New Zealand’s public health care
providers each adopted an additional Cxbladderproduct
into their mainstream commercial use.
7
0
100
200
300
400
500
600
0
500
1000
1500
2000
2500
3000
3500
4000
Lab ThroughputRevenue
NZD ‘000s
Te s t N u m b e r s
NZ Growth
FY19FY20
+12%+11%
COMMERCIAL PACE GROWING IN USA
8
•Strategy focus is on gaining adoption with large
institutions.
•Increase in Total Laboratory Throughput and Operating
Revenue driven by increased evaluation, and adoption and
commercial use by urologists
•USA delivered 86% of Pacific Edge’s FY20 Operating
Revenue.
•9% increase in operating revenue in USD (15% increase in
NZD).
•USA Total Laboratory Throughput up 6% year on year.
•Q4 US Total Laboratory Throughput up 14% year on year.
•Planned quota of 16 account executives (sales people)
achieved at year end, up from 11 at the start of the year.
3000
3100
3200
3300
3400
3500
3600
3700
3800
Q419Q420
Te s t N u m b e r s
USA Q4 Laboratory Throughput
+14% growth
OPERATING REVENUE
•Total Operating Revenue from test sales increased 14%
on pcpto $4.4m.
•The U.S. market accounted for 86% of total Operating
Revenue in FY20.
•Operating revenue from test sales in the U.S. increased
15% on pcp(+9% in USD terms) to $3.8m*
•Operating Revenue from test sales in the Rest of World
(ROW) increased 14% on pcpto $0.6m.
•More than 65% of New Zealand’s population is currently
under contract through public healthcare providers.
9
0
1
2
3
4
5
FY18FY19FY20
$NZD Millions
OPERATING REVENUE
USAROW
+14%
*NZ-IFRS 15: US revenue is recognised on a cash-only basis. As at 31 March 2020, a total of 21,789 Cxbalddertests had been
performed for patients covered by the CMS, for which no payments have been received and no revenue recognised.
OPERATING CASHFLOW
10
NET OPERATING
CASHFLOWS
(NZ$M)
FY20FY19%
Change
Receiptsfrom:
-Customers
-Grant providers
4.4
1.2
3.7
0.8
19%
57%
Interest Received0.20.4-36%
Payments to Suppliers and
Employees
21.222.4-5%
NetCash Flows from
Operating Activities
(15.4)(17.5)-12%
•Cash receipts from customers increased 19% on pcp
•Payment terms average 5 months from test to receipt of
cash.
•Payments to suppliers and employees decreased 5% on
pcp.
•Net operating cash outflow improved 12% on pcpto
$(15.4)m.
•Net cash, cash equivalents and short term deposits
increased 15% on pcpto $14.8m.
OPERATING EXPENSES
•Operating Expenses increased 5% on pcpto $24.1m.
•In USD terms, U.S. Operating Expenses decreased 2% on
pcp.
•U.S. Operating Expenses account for approximately 60%
of total Operating Expenses.
•Sales and marketing expenses increased 5% on pcp.
•16 U.S. based sales executives were employed at year
end compared to 11 at the start of the year.
11
OPERATING EXPENSES
(NZ$M)
FY20FY19%
Change
Laboratory Operations
5.24.613%
Research
3.93.511%
Sales and Marketing
8.68.24%
General and
Administration
6.46.7-4%
TOTAL
24.123.05%
GROWING CLINICAL
EVIDENCE FOR
CXBLADDER
•Publication of peer-reviewed papers is key to
gaining inclusion in the LCD and positive
reimbursement decisions.
•Library of comprehensive clinical evidence for
physicians, healthcare payers (reimbursement)
and healthcare providers alike.
•Application to have Cxbladder included in an
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.
•On 10 July 2019, Cxbladder Monitor was added
to the National Comprehensive Cancer
Network guidelines in the USA.
12
“This is first time urinary urothelial biomarkers have been included in the
guidelines...” Dr Sia DaneshmandNew York presentation 18 July 2019
PEER REVIEWED JOURNAL PUBLICATIONS DEMONSTRATE
SIGNIFICANT CLINICAL UTILITY OF CXBLADDER
13
COMPELLING RESULTS FROM CLINICAL LOOK-BACK STUDY
•The high NPV of this new clinical pathway enabled approximately one-third of patients with haematuria to be managed without cystoscopy and
other related procedures.
•Importantly, the patient with haematuria would also safely avoid the social disruption and discomfort of a secondary care visit for cystoscopy.
•The new pathway should be applicable in any health system with effective general practice or primary care and the ability to inform GPs of
locally recommended assessment and management of haematuria.
DIAGNOSTIC OUTPERFORMANCE PUBLISHED IN WORLD #1 CLINICAL JOURNAL
•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.
REAL WORLD EVIDENCE HIGHLIGHTS SIGNIFICANT FROM CXBLADDER MONITOR ADOPTION
•Further demonstrated that CxbMprovides tangible clinical utility when used as a rule-out test to identify patients at low risk of recurrence who
do not need a cystoscopy, and to identify those patients at higher risk who would benefit from cystoscopy.
•Based on these published data, several of New Zealand’s public healthcare providers have integrated CxbMinto their routine clinical surveillance
of patients for recurrence of bladder cancer.
OUTLOOK
COVID-19 RESPONSE
•Continued to operate as an essential business during COVID-19 restrictions in NZ and the USA.
•Cxbladder in-home sampling enabling physicians to maintain timely evaluation and diagnosis of
bladder cancer and manage at-risk patients.
•Reduction in Total Laboratory Throughput during April 2020 after a strong Q420 –April test numbers
averaging 51% of the prior year’s Total Laboratory Throughput.
•Recovery during May 2020 following the easing of restrictions and the growing demand for our in-
home sample collection service.
•Growing recognition of the benefits of Cxbladder in-home sampling solution with three DHBs in New
Zealand commencing use of in-home collection in April 2020.
•Expect in-home sample collection to continue as an additional option for urologists to better manage
patients beyond COVID-19.
•Took steps to preserve cash and provide flexibility to employees. All discretionary spend has been
reviewed and either cut or deferred over this period.
•Pacific Edge has successfully set-up and validated its ability to analyse COVID-19 tests and has offered
its services and been placed on standby by the Ministry of Health.
15
5 January 2019
Global Business for Novel Cancer Diagnostics
Early detection and better management of cancer
THE USA MARKET REMAINS OUR FOCUS
A SCALE OPPORTUNITY IN BOTH THE EVALUATION OF HAEMATURIA AND MONITORING FOR
RECURRENCE
16
1. EY-Parthenon business review of the annual addressable market opportunity for Cxbladder in the U.S. completed February 2018
INSTITUTIONS IN SOUTHEAST ASIA AND THE USA USING
OR EVALUATING CXBLADDER
USAUSASOUTH EAST ASIA
•Carolina Urologic Research
Center
•City of Hope
•Cleveland Clinic
•Cornell
•Fox Chase CC
•Johns Hopkins CC
•MD Anderson
•Moffitt CC
•Ohio State University CC
•Penn State Milton S. Hershey
Medical Center
•Rush University
•Thomas Jefferson University
•TriStar Medical Center
•UCLA
•University of California-San
Diego
•University of California-San
Francisco
•University of Chicago
•University of Colorado
•University of Michigan
•University of Minnesota
•University of Oklahoma
•University of Pennsylvania
•University of Southern
California
•UT Southwestern
•VA Accounts
•Wellstar
•Singapore General Hospital
•Tan Tock Seng
•Khoo Tech PuatHospital
•KK Womensand Childrens
Hospital
•National University Hospital
Our in-market strategy is to target large institutional healthcare providers
CATALYSTS TO DRIVE GROWTH THROUGH FY21
U.S Objectives.
•Inclusion in the LCD –expected to have a positive impact on Cxbladder test adoption, revenue growth and operating cash-
flow
•New commercial agreements completed with transformational institutional healthcare customers
•A positive shift in Guideline inclusion language in the American Urological Association (AUA) and NCCN Bladder Cancer
Guidelines –to be updated in 2020
•Increasing reimbursement coverage with private payers (insurance companies)
•Publication of additional clinical evidence supporting the clinical utility of Cxbladder to drive further reimbursement,
coverage and guideline inclusion
•Commercial launch of the fourth Cxbladder test (Cxbladder Resolve) planned for late FY21
Rest of World Objectives:
•Further adoption of Cxbladder by public healthcare providers in NZ and Australia
•Publication of additional clinical evidence supporting the clinical utility of Cxbladder to drive further reimbursement,
coverage and guideline inclusion
•Publication of a white paper summarisingthe results from the completed user programs from five public hospitals in
Singapore
Slide 18
19
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
GLOSSARY
•CMS: Centres for Medicare and Medicaid in the US
•Commercial Tests: Tests that have been analysed by Pacific Edge, for a specific customer, including the User Programmes
run by customers as part of their adoption process but excluding any tests run for clinical studies.
•Laboratory Throughput: Total commercial and non-commercial tests processed through Pacific Edge’s laboratories in the
USA and New Zealand, including tests for User Programmes.
•Local Coverage Determination (LCD): A decision by a Medicare Administrative Contractor (MAC) whether to cover a
particular service on a MAC-wide, basis.
•NZ IFRS15 accounting standard: NZ IFRS 15 requires that our revenue from U.S. customers is currently recognised only
when cash payments are received. As a result, no revenue is currently recognised on tests performed for patients covered
by the CMS or for patients in the U.S. with private insurance cover, for which payment has yet to be received.
20
---
20
CONSOLIDATED
FINANCIAL
STATEMENTS
FOR THE YEAR ENDED
31 MARCH 2020
PACIFIC EDGE LIMITED CONSOLIDATED FINANCIAL STATEMENTS 2020
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 37
Company Directory 41
Contents
PACIFIC EDGE LIMITED CONSOLIDATED FINANCIAL STATEMENTS 2020
3
Statement of Comprehensive Income
For the year ended 31 March 2020
Note: These Financial Statements are to be read in conjunction with the Notes to the Financial Statements
Notes
2020
($000)
2019
($000)
REVENUE
Operating Revenue 5 4,370 3,817
Total Operating Revenue 4,370 3,817
Other Income5 584 990
Interest Income9 249 323
Foreign Exchange Gain (Loss) (5) (1)
Total Revenue and Other Income 5,198 5,129
OPERATING EXPENSES
Laboratory Operations 5,181 4,594
Research6 3,916 3,532
Sales and Marketing 8,571 8,236
General and Administration7 6,416 6,676
Total Operating Expenses 24,084 23,038
NET (LOSS) BEFORE TAX (18,886) (17,909)
Income Tax Expense16 - 9
(LOSS) FOR THE YEAR AFTER TAX (18,886) (17,918)
Items that may be reclassified to profit or loss:
Translation of Foreign Operations (96) (3)
TOTAL COMPREHENSIVE (LOSS) attributable to
equity holders of the Company
(18,982) (17,921)
Earnings per share for profit attributable to the equity
holders of the Company during the year
Basic and Diluted Earnings per share3 (0.032) (0.036)
PACIFIC EDGE LIMITED CONSOLIDATED FINANCIAL STATEMENTS 2020
4
Share
Capital
Retained
Earnings
Share
Based
Payments
Reserve
Foreign
Currency
Translation
Reserve
Total
Equity
Notes($000)($000)($000)($000)($000)
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 Capital18 14,391 - - - 14,391
Share Based Payments - Employee
Remuneration
8 188 188
Share Based Payment - Employee
Share Options
8 - 160 452 - 612
Balance as at 31 March 2019 146,403 (137,877) 4,507 877 13,910
Balance as at 31 March 2019 146,403 (137,877) 4,507 877 13,910
(Loss) after tax - (18,886) - - (18,886)
Other Comprehensive Income - - - (96) (96)
TOTAL COMPREHENSIVE (LOSS)
attributable to equity holders of the
Company
- (18,886) - (96) (18,982)
Transactions with owners in their
capacity as owners:
Issue of Share Capital18 18,857 - - - 18,857
Share Based Payments - Employee
Remuneration
8 163 - - - 163
Share Based Payment - Employee
Share Options
8 - 521 35 - 556
Balance as at 31 March 2020 165,423 (156,242) 4,542 781 14,504
Statement of Changes in Equity
For the year ended 31 March 2020
Note: These Financial Statements are to be read in conjunction with the Notes to the Financial Statements
PACIFIC EDGE LIMITED CONSOLIDATED FINANCIAL STATEMENTS 2020
5
Balance Sheet
As at 31 March 2020
Notes
2020
($000)
2019
($000)
CURRENT ASSETS
Cash and Cash Equivalents9 1,755 4,847
Short Term Deposits9 13,029 8,000
Receivables10 642 1,265
Inventory11 796 842
Other Assets12 694 610
Total Current Assets 16,916 15,564
NON-CURRENT ASSETS
Property, Plant and Equipment13 652 769
Right-of-Use Assets23 1,581 -
Intangible Assets14 179 233
Total Non-Current Assets 2,412 1,002
TOTAL ASSETS 19,328 16,566
CURRENT LIABILITIES
Payables and Accruals17 3,270 2,572
Lease Liabilities23 983 52
Total Current Liabilities 4,253 2,624
NON-CURRENT LIABILITIES
Lease Liabilities23 571 32
Total Current Liabilities 571 32
TOTAL LIABILITIES 4,824 2,656
NET ASSETS 14,504 13,910
Represented by:
EQUITY
Share Capital18 165,423 146,403
Accumulated Losses (156,242) (137,877)
Share Based Payments Reserve 4,542 4,507
Foreign Translation Reserve 781 877
TOTAL EQUITY 14,504 13,910
For and on behalf of the Board of Directors dated the 28th Day of May 2020:
Director Director
Note: These Financial Statements are to be read in conjunction with the Notes to the Financial Statements
PACIFIC EDGE LIMITED CONSOLIDATED FINANCIAL STATEMENTS 2020
6
Statement of Cash Flows
For the year ended 31 March 2020
Note: These Financial Statements are to be read in conjunction with the Notes to the Financial Statements
Notes
2020
($000)
2019
($000)
CASH FLOWS TO OPERATING ACTIVITIES
Cash was provided from:
Receipts from Customers 4,431 3,734
Receipts from Grant Providers 1,184 755
Interest Received 241 376
5,856 4,865
Cash was disbursed to:
Payments to Suppliers and Employees 21,190 22,431
Net GST cash outflow (inflow) 51 (59)
21,241 22,372
Net Cash Flows to Operating Activities20 (15,385) (17,507)
CASH FLOWS (TO)/FROM INVESTING ACTIVITIES:
Cash was provided from:
Proceeds from Short Term Deposits 8,000 11,000
8,000 11,000
Cash was disbursed to:
Purchase of Short Term Deposits 13,029 8,000
Capital Expenditure on Plant and Equipment 116 50
Capital Expenditure on Intangible Assets 67 106
13,212 8,156
Net Cash Flows (to)/from Investing Activities (5,212) 2,844
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash was received from:
Ordinary Shares Issued18 20,136 14,569
20,136 14,569
Cash was disbursed to:
Repayment of Leases23 1,211 97
Issue Expenses18 1,280 178
2,491 275
Net Cash Flows From Financing Activities 17,645 14,294
Net increase (decrease) in Cash Held (2,952) (369)
Add Opening Cash Brought Forward 4,847 5,242
Effect of exchange rate changes on net cash (140) (26)
Ending Cash Carried Forward9 1,755 4,847
PACIFIC EDGE LIMITED CONSOLIDATED FINANCIAL STATEMENTS 2020
7
Notes to the Consolidated Financial Statements
For the year ended 31 March 2020
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 2020 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 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 28th May 2020.
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.
Management 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, benefit for other stakeholders and to maintain an optimal
capital structure to support the development of its business. The Company meets these objectives through closely
managing revenue and expenditure, and where required issues new shares. As part of meeting these objectives, the
Company completed a Share Placement in November 2019 and a Rights Issue in December 2019, issuing a further
178,026,769 shares at an average of $0.11 per share. Refer to Note 18 for further details on the capital raising activity
during FY20.
Going Concern
The 2020 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 2020, the Company has $14.784m of cash, cash equivalents and short term deposits (2019:
$12.847m) and net assets of $14.504m (2019: $13.910m). Operating cash receipts totalling $5.856m were received in
the 12 month period to 31 March 2020 (2019: $4.865m) along with additional capital of $20.136m (2019: $14.569m)
prior to issue expenses. Net cash outflows from operating activities for the 12 month period to 31 March 2020 were
$15.385m (2019: $17.507m).
While the Company continues to incur operating losses, the Company 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. The new contracts that will result from these commercial negotiations will have a significant positive impact
on the Company’s financial position when concluded. Although these negotiations are progressing, the likely
outcome and the timing of completion is uncertain.
The Company has prepared cash flow forecasts for the 2021 financial year 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 manage costs or raise additional
PACIFIC EDGE LIMITED CONSOLIDATED FINANCIAL STATEMENTS 2020
8
Notes to the Consolidated Financial Statements
For the year ended 31 March 2020
funds to continue as a going concern. The Company has been able to successfully raise additional capital in the
past. The healthcare industry continues to see strong support in global markets and the value proposition for
non-invasive cancer diagnostic treatments is well suited to an environment supporting telehealth services. It is
acknowledged that the increase in capital raising activity due to the COVID-19 pandemic may create greater
uncertainty regarding the Company’s ability to raise capital.
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 further address the future additional funding requirements, the Company
continues to actively manage the ongoing working capital requirements, including focusing on ensuring an
appropriate level of expenditure in line with the Company’s available cash resources. However, as noted above,
unless new contracts are successfully negotiated, the Company may need to raise additional capital.
The financial statements do not include any adjustments that might be required if the Company is unable to
continue as a going concern.
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
31 March
2020
%
31 March
2019
%
Pacific Edge Diagnostics New Zealand
Limited
New Zealand
Commercial Laboratory
Operation
100100
Pacific Edge Pty LimitedAustralia
Biotechnology Research
& Development
100100
Pacific Edge Diagnostics USA LimitedUSA
Commercial Laboratory
Operation
100100
Pacific Edge Diagnostics Singapore
Pte Limited
Singapore
Commercial Sales and
Biotechnology Research
& Development
100100
Pacific Edge Analytical Services
Limited
New ZealandDormant Company100100
The financial statements incorporate the assets, liabilities and results of all subsidiaries of Pacific Edge Limited as at
31 March 2020 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. 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.
PACIFIC EDGE LIMITED CONSOLIDATED FINANCIAL STATEMENTS 2020
9
Notes to the Consolidated Financial Statements
For the year ended 31 March 2020
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 16: Leases (Effective date: periods beginning on or after 1 January 2019):
NZ IFRS 16 replaces NZ IAS 17. The effective date of this new standard is 1 April 2019 and the Group has applied this
standard for the first time in this current financial year.
The Group has applied NZ IFRS 16 using the modified retrospective method. There is no restatement of
comparative financial information or impact on opening equity, the comparative period continues to be reported
under NZ IAS 17 and NZ IFRIC 4 which are detailed in the accounting policies (note 23).
As a lessee, the Group previously classified leases as operating or finance leases based on its assessment of
whether the lease transferred significantly all the risks and rewards incidental to ownership of the underlying asset
to the Group. Under NZ IFRS 16, the Group recognises Right-of-Use assets and lease liabilities on balance sheet for
most leases.
At transition date (1 April 2019), lease liabilities were measured at the present value of the remaining lease
payments, discounted at the Group’s incremental borrowing rate. As at 1 April 2019, this ranged between 5.5% and
7.0%. Right-of-Use assets were measured at an amount equal to the lease liability. The Group applied this approach
to all leases.
The Right-of-Use asset is subsequently depreciated using the straight-line method over the shorter of the
estimated useful life of the Right-of-Use asset or the remaining estimated lease term. The estimated useful lives of
Right-of-Use assets are determined on the same basis as those of property, plant and equipment. The impact on
the statement of comprehensive income is that costs previously recorded as operating expenses will be recorded
as depreciation and finance costs.
The following practical expedients were used when applying NZ IFRS 16 to leases previously classified as operating
leases under NZ IAS 17:
• Applied a single discount rate to a portfolio of leases with similar characteristics; and
• Applied the exemption not to recognise Right-of-Use assets and liabilities for leases with less than 12 months of
lease term remaining.
On transition to NZ IFRS 16, the Group recognised Right-of-Use assets of $1,598,000 and a corresponding lease
liability of $1,598,000.
The impact of the profit and loss statement for the year ended 31 March 2020 was an increase in depreciation of
$1,074,000, an increase in interest of $57,000 and a decrease in operating costs of $1,115,000. The overall impact on
profit and loss was a $16,000 decrease in profit and has had no significant impact on Earnings per Share.
There is no significant impact on banking covenants or other reporting requirements.
Please refer to Note 23 for further details on lease accounting.
2020
($000)
Operating lease commitments as at 31 March 2019 1,923
Present value impact of incremental borrowing rate at 1 April 2019 (60)
Impact of changes to leases identified under NZ IFRS 16 criteria and remeasurements (265)
Discounted operating lease commitments as at 1 April 2019 1,598
PACIFIC EDGE LIMITED CONSOLIDATED FINANCIAL STATEMENTS 2020
10
Notes to the Consolidated Financial Statements
For the year ended 31 March 2020
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
2020
($000)
2019
($000)
Loss attributable to equity holders of the Company (18,886) (17,918)
Weighted average number of ordinary shares on issue 581,344 504,426
Earnings per share (0.032) (0.036)
(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 COMMERCIAL 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.
The inclusion of this non-GAAP reporting is considered helpful to readers of these accounts. Total Laboratory
Throughput includes Commercial 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 Commercial as these tests relate to user programs (research tests) or other
nonchargeable activities.
Commercial Test numbers are also a key metric for the Group: Commercial Tests are those tests for which the
Company is actively seeking reimbursement and cash receipts, and tests performed at no charge in order to gain
new customers. The inclusion of this non-GAAP reporting is considered helpful to readers of these accounts. 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 Commercial Tests do not typically arise in the same
reporting period as each other. Commercial 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.
Laboratory Throughput and Commercial Tests per financial year are shown below.
FY20FY19
Total Laboratory Throughput (tests) 16,861 15,697
Increase in Total Laboratory Throughput (%)7%9%
Increase in Throughput from previous year (tests) (+) 1,164 (+) 1,249
Total Commercial Tests (tests) 13,627 12,830
Commercial Tests as a percentage of Total Laboratory
Throughput (%)
81%82%
Increase in Commercial Tests from previous year (%)6%7%
PACIFIC EDGE LIMITED CONSOLIDATED FINANCIAL STATEMENTS 2020
11
Notes to the Consolidated Financial Statements
For the year ended 31 March 2020
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 US 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.
ACCOUNTING POLICY
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.
PACIFIC EDGE LIMITED CONSOLIDATED FINANCIAL STATEMENTS 2020
12
Notes to the Consolidated Financial Statements
For the year ended 31 March 2020
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 test 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 reimbursed 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.
The Company also receives grants from Callaghan Innovation for postgraduate internships and summer
students.
New Zealand Trade and Enterprise 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 ran until 30 April 2019.
New Zealand Trade and Enterprise reimbursed the Company for 50 percent of eligible expenditure relating to the
Singapore operations.
All conditions of the grants have been complied with.
Cxbladder Research Rebate
A Cxbladder research programme is administered by Pacific Edge Pty Limited 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.
PACIFIC EDGE LIMITED CONSOLIDATED FINANCIAL STATEMENTS 2020
13
Notes to the Consolidated Financial Statements
For the year ended 31 March 2020
REVENUE AND OTHER INCOME
GROUP
2020
($000)
2019
($000)
Cxbladder Sales
- US 3,778 3,296
- Rest of World 592 521
Total Operating Revenue 4,370 3,817
Other Income
Grant Revenue 98 773
Research Rebate Received 486 217
Total Other Income 584 990
UNRECOGNISED REVENUE
Approximately 40% 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 2020
as it is not certain when the LCD process will be completed, nor whether any backpayment will be received.
As at 31 March 2020, a total of 21,789 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 $3,150,000 has
been estimated at 31 March 2020 for private insurance receivables as an inflow of economic benefits is considered
probable.
To date, a total of 5,355 tests have been performed and billed for which no payment has been received. These tests
are for patients covered by private insurance, and have not been written off and are being actively pursued 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.
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.
PACIFIC EDGE LIMITED CONSOLIDATED FINANCIAL STATEMENTS 2020
14
Notes to the Consolidated Financial Statements
For the year ended 31 March 2020
GROUP
Notes
2020
($000)
2019
($000)
Research Expenses 3,916 3,352
Includes:
Employee Benefits8 2,012 1,734
7. GENERAL AND ADMINISTRATION EXPENSES
GROUP
Notes
2020
($000)
2019
($000)
Amortisation1461 77
Auditors Remuneration: PricewaterhouseCoopers New Zealand
- Group year end financial statements
- Half year review of financial statements
- R&D review of Callaghan Innovation
- Singapore Statutory financial statements
129
21
-
11
1
67
21
3
-
Auditors Remuneration: PricewaterhouseCoopers Singapore
- Statutory financial statements 10 9
Depreciation13 86 119
Depreciation on Right-of-Use Assets23 261 -
Directors Fees 321 279
Employee Benefits8 2,857 2,695
Employee Share Scheme Expenses8 163 188
Employee Share Options8 148 562
Interest on Lease Liabilities23 27 -
Rental and Lease Expense* - 262
Other Operating Expenses 2,321 2,294
6,416 6,676
*Due to the adoption of NZ IFRS 16, this now only includes short term, low value and variable lease payments. The remaining
payments are now represented by depreciation on Right-of-Use assets and Interest on Lease Liabilities.
Note: Amounts displayed for Amortisation, Depreciation, Employee Benefits and Employee Share Options are only the General and
Administration Expense component of the total expense. Refer to relevant notes for full expense disclosure.
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 Operating Expenses
The major categories of expenditure which make up operating expenses, but are not disclosed separately above
are Information Technology costs, Compliance and Regulatory costs, NZX and Registry fees, Investor Relations
costs, Consultants and Contractors.
PACIFIC EDGE LIMITED CONSOLIDATED FINANCIAL STATEMENTS 2020
15
Notes to the Consolidated Financial Statements
For the year ended 31 March 2020
8. EMPLOYEE BENEFITS
GROUP
Notes
2020
($000)
2019
($000)
Represented by:
Employee Benefits in Research6 2,012 1,734
Employee Benefits in General & Administration7 2,857 2,695
Short Term Salaries, Wages and Other Employee Benefits 6,359 6,271
11,228 10,700
Non-Cash Employee Benefits:
Employee Share Scheme Expenses18 163 188
Share Option Expense 556 612
719 800
Total Employee Benefits 11,947 11,500
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 2020 financial year,
754,000 (2019: 561,000) ordinary shares were issued to employees as part of the Employee Share Scheme. The
associated non-cash cost of these shares was $163,000 (2019: $188,000). 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.
PACIFIC EDGE LIMITED CONSOLIDATED FINANCIAL STATEMENTS 2020
16
Notes to the Consolidated Financial Statements
For the year ended 31 March 2020
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 Statement of
Comprehensive Income 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 an increase in share capital (2019: Nil).
Movements in the number of options outstanding and their related weighted average exercise prices are as follows:
GROUP
20202019
Weighted average
exercise price
$
Options
#
Weighted average
exercise price
$
Options
#
Outstanding at 1 April 0.61 10,712,368 0.59 11,221,944
Granted 0.23 10,360,000 0.28 152,500
Forfeited 0.25 (1,621,853) 0.37 (46,159)
Exercised - - - -
Expired 0.65 (1,312,917) 0.45 (615,918)
Outstanding at 31 March 0.42 18,137,598 0.60 10,712,367
Exercisable at 31 March 0.52 11,350,318 0.61 9,953,937
The significant inputs into the Black-Scholes valuation model were the market share price at grant date, the
exercise price shown below, the expected annualised volatility of 50-60%, a dividend yield of 0%, an expected
option life of between one and ten years and an annual risk-free interest rate of between 1.1% and 4.71%.
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 10 years.
PACIFIC EDGE LIMITED CONSOLIDATED FINANCIAL STATEMENTS 2020
17
Notes to the Consolidated Financial Statements
For the year ended 31 March 2020
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 20
Options
#
31 March 19
Options
#
April 2019April 20150.36 - 259,585
June 2019June 20150.69 - 13,333
July 2019July 20150.69 - 6,666
August 2019August 20150.54 - 83,333
September 2019September 20150.80 - 750,000
November 2019November 20150.54 - 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
PACIFIC EDGE LIMITED CONSOLIDATED FINANCIAL STATEMENTS 2020
18
Notes to the Consolidated Financial Statements
For the year ended 31 March 2020
Expiry MonthVesting Date
Exercise
Price
$
31 March 20
Options
#
31 March 19
Options
#
April 2027April 20170.60 75,000 75,000
April 2027April 20170.69 6,667 6,667
July 2027July 20170.50 4,190 4,190
July 2027July 20170.69 343,346 343,346
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 1,587,492
May 2028May 20180.28 6,666 6,666
July 2028July 20180.50 2,671 2,671
August 2028August 20180.48 3,916 3,916
August 2028August 20180.50 4,315 4,315
September 2028September 20180.48 4,128 4,128
September 2028September 20180.50 219 219
October 2028October 20180.48 30,000 30,000
October 2028October 20180.28 4,166 4,166
November 2028November 20180.60 6,816 6,816
December 2028December 20180.51 4,167 4,167
January 2029January 20190.51 6,416 6,416
January 2029January 20190.28 16,666 16,666
February 2029February 20190.6 10,000 10,000
February 2029February 20190.28 6,666 6,666
March 2029March 20190.60 68 68
April 2029April 20190.60 75,000 75,000
May 2029May 20190.51 1,581,749 1,587,502
PACIFIC EDGE LIMITED CONSOLIDATED FINANCIAL STATEMENTS 2020
19
Notes to the Consolidated Financial Statements
For the year ended 31 March 2020
Expiry MonthVesting Date
Exercise
Price
$
31 March 20
Options
#
31 March 19
Options
#
May 2029May 20190.28 6,667 6,667
June 2029June 20190.28 4,166 4,166
July 2029July 20190.28 4,166 4,166
August 2029August 20190.23 4,166
October 2029October 20190.48 40,000 40,000
October 2029October 20190.28 4,167 4,167
October 2029October 20190.23 4,166 -
November 2029November 20190.23 8,332 -
December 2029December 20190.51 2,717 4,167
January 2030January 20200.51 3,767 4,167
January 2030January 20200.28 16,667 16,667
February 2030February 20200.28 6,667 6,667
May 2030May 20200.51 1,490,492 1,587,506
May 2030May 20200.28 5,334 6,667
June 2030June 20200.28 2,432 4,167
July 2030July 20200.28 4,167 4,167
August 2030August 20200.23 2,937,483 -
October 2030October 20200.28 4,167 4,167
October 2030October 20200.23 4,167 -
November 2030November 20200.23 8,334 -
January 2031January 20210.28 16,667 16,667
February 2031February 20210.28 6,667 6,667
June 2031June 20210.28 - 4,167
July 2031July 20210.28 4,167 4,167
August 2031August 20210.23 2,937,506 -
October 2031October 20210.23 4,167 -
November 2031November 20210.23 8,334 -
August 2032August 20220.23 2,933,345 -
18,137,598 10,712,367
* Included within these tranches are 580,000 options (2019: 630,000 options) that vested immediately.
PACIFIC EDGE LIMITED CONSOLIDATED FINANCIAL STATEMENTS 2020
20
Notes to the Consolidated Financial Statements
For the year ended 31 March 2020
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, BNZ and Heartland Bank, with periods ranging from 120 to 240 days.
GROUP
2020
($000)
2019
($000)
Cash and Cash Equivalents1,7554,847
Short Term Deposits13,0298,000
Total Cash, Cash Equivalents and Short Term Deposits14,78412,847
NZD14,52511,927
USD154874
AUD9444
EUR51
SGD61
Total Cash, Cash Equivalents and Short Term Deposits14,78412,847
INTEREST INCOME
ACCOUNTING POLICY
Interest income is recognised using the effective interest method.
Interest on the bank balances ranges from 0% to 2.90% (2019: 0% to 3.45%) per annum. Funds held on term
deposit with ANZ, BNZ and Heartland Banks can be accessed with one month’s notice at the request of the
authorised bank signatories of Pacific Edge Limited.
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
2020
($000)
2019
($000)
Trade Receivables 61 514
Sundry Debtors 470 699
Accrued Interest 72 64
GST Refund Due/(Payable) 39 (12)
Total Receivables 642 1,265
PACIFIC EDGE LIMITED CONSOLIDATED FINANCIAL STATEMENTS 2020
21
Notes to the Consolidated Financial Statements
For the year ended 31 March 2020
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.
2020
($000)
2019
($000)
3 to 6 Months
- 10
Over 6 Months - -
Total Overdue Trade Receivables - 10
The foreign currency split of Receivables is:
2020
($000)
2019
($000)
NZD 168 839
AUD 473 426
SGD
1 -
Total Receivables 642 1,265
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
2020
($000)
2019
($000)
Laboratory Supplies796 842
Total Inventory796 842
The major items of Inventory are laboratory reagents, chemicals and Cxbladder urine sampling systems.
Laboratory supplies used during the year of $1,112,000 (2019: $1,012,000) are included within the Statement of
Comprehensive Income in Laboratory Operations and Research.
12. OTHER ASSETS
GROUP
2020
($000)
2019
($000)
Prepayments
509 445
Security Deposits
185 165
Total Other Assets
694 610
Prepayments are largely made up of insurance, subscriptions and travel not yet used. Security deposits are paid to
secure properties for lease in US and Singapore and to secure credit cards in the US.
PACIFIC EDGE LIMITED CONSOLIDATED FINANCIAL STATEMENTS 2020
22
Notes to the Consolidated Financial Statements
For the year ended 31 March 2020
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.
Plant &
Laboratory
Equipment
($000)
Computer
Equipment
($000)
Leasehold
Improvements
($000)
Furniture
& Fittings
($000)
Total
($000)
Cost
Balance at 1 April 2018 2,165 631 270 316 3,382
Additions 89 39 - - 128
Disposals - - - - -
Foreign Translation Difference 53 18 7 10 88
Balance at 31 March 2019 2,307 688 277 326 3,598
Balance at 1 April 2019 2,307 688 277 326 3,598
Additions 44 35 37 - 116
Translation Difference 127 41 17 22 207
Transfer to/from Right-of-Use
Assets
- - - - -
Disposals (93) - - - (93)
Balance at 31 March 2020 2,385 764 331 348 3,828
Accumulated Depreciation
Balance at 1 April 2018 1,717 504 97 210 2,528
Depreciation Expense 125 66 21 25 237
Disposal - - - - -
Translation Difference 41 13 3 7 64
Balance at 31 March 2019 1,883 583 121 242 2,829
PACIFIC EDGE LIMITED CONSOLIDATED FINANCIAL STATEMENTS 2020
23
Notes to the Consolidated Financial Statements
For the year ended 31 March 2020
Plant &
Laboratory
Equipment
($000)
Computer
Equipment
($000)
Leasehold
Improvements
($000)
Furniture
& Fittings
($000)
Total
($000)
Balance at 1 April 2019 1,883 583 121 242 2,829
Depreciation Expense 79 59 20 15 173
Disposals (4) - - - (4)
Transfer to/from Right-of-Use
Assets
12 - - - 12
Translation Difference 103 35 8 20 166
Balance at 31 March 2020 2,073 677 149 277 3,176
Carrying Amounts
At 1 April 2018 448 127 173 106 854
At 31 March 2019 424 105 156 84 769
At 31 March 2020 312 87 182 71 652
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.
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.
PACIFIC EDGE LIMITED CONSOLIDATED FINANCIAL STATEMENTS 2020
24
Notes to the Consolidated Financial Statements
For the year ended 31 March 2020
Software
Development
Costs
($000)
Patents
($000)
Cxbladder
Development
Costs
($000)
Total
($000)
Cost
Balance at 1 April 2018 798 253 33 1,084
Additions 65 41 - 106
Foreign Translation Difference 2 - - 2
Balance at 31 March 2019 865 294 33 1,192
Balance at 1 April 2019 865 294 33 1,192
Additions 15 53 - 68
Foreign Translation Difference 7 - - 7
Balance at 31 March 2020 887 347 33 1,267
Accumulated Amortisation
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
Balance at 1 April 2019 719 226 14 959
Amortisation Expense 74 47 2 123
Foreign Translation Difference 6 - - 6
Balance at 31 March 2020 799 273 16 1,088
Carrying Amounts
At 1 April 2018 191 69 21 281
At 31 March 2019 146 68 19 233
At 31 March 2020 88 74 17 179
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.
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 2020 is shown on the next page.
PACIFIC EDGE LIMITED CONSOLIDATED FINANCIAL STATEMENTS 2020
25
2020
Commercial
($000)
Research
($000)
Less:
Eliminations
($000)
Total
($000)
Income
Operating Revenue - External 4,370 - - 4,370
- Internal - - - -
Other Income 376 1,381 (1,173) 584
Interest Income 6 245 (2) 249
Foreign Exchange Gain - (5) - (5)
Total Income 4,752 1,621 (1,175) 5,198
Expenses
Expenses 15,093 8,740 (1,175) 22,658
Depreciation and Amortisation 1,015 411 - 1,426
Total Operating Expenses 16,108 9,151 (1,175) 24,084
Loss Before Tax (11,356) (7,530) - (18,886)
Income Tax Expense - - - -
Loss After Tax (11,356) (7,530) - (18,886)
Net Cash Flows to Operating Activities (9,910) (5,475) - (15,385)
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 Expense 9 - - 9
Loss After Tax (11,537) (6,381) - (17,918)
Net Cash Flows to Operating Activities (11,709) (5,798) - (17,507)
Eliminations
These are the intercompany transactions between the subsidiaries and the Parent. These are eliminated on
consolidation of Group results.
Notes to the Consolidated Financial Statements
For the year ended 31 March 2020
PACIFIC EDGE LIMITED CONSOLIDATED FINANCIAL STATEMENTS 2020
26
Segment Assets and Liabilities Information
2020
Commercial
($000)
Research
($000)
Total
($000)
Total Assets 2,374 16,954 19,328
Total Liabilities 2,842 1,982 4,824
2019
Commercial
($000)
Research
($000)
Total
($000)
Total Assets 2,028 14,538 16,566
Total Liabilities 1,768 888 2,656
Additions to Non Current Assets for the period include:
Commercial
($000)
Research
($000)
Total
($000)
Property, Plant & Equipment 75 41 116
Right-of-Use Assets 1,588 1,088 2,676
Intangible Assets - 67 67
Total Additions to Non Current Assets 1,663 1,196 2,859
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.
Geographic Split of Revenue and Non-Current Assets
The Group generates most of the operating revenue from commercial tests from the US and New Zealand, and
also receives Grant revenue from Australia and New Zealand. Rest of World consists of Revenue from Australia and
Singapore.
2020
($000)
2019
($000)
Operating and Grant Revenue
US 3,778 3,296
New Zealand 675 1,292
Rest of World 501 219
Total Operating and Grant Revenue 4,954 4,807
The US accounted for 37% of non-current assets (2019: 37%). Non-current assets located in New Zealand account
for 61% of the Group’s total (2019: 63%), with Rest of World, consisting of non-current assets in Australia and
Singapore holding 2% (2019: 0%).
2020
($000)
2019
($000)
Non-Current Assets
US 885 375
New Zealand 1,478 626
Rest of World 49 1
Total Non-Current Assets 2,412 1,002
Notes to the Consolidated Financial Statements
For the year ended 31 March 2020
PACIFIC EDGE LIMITED CONSOLIDATED FINANCIAL STATEMENTS 2020
27
16. INCOME TAX
ACCOUNTING POLICY
The tax expense for the period comprises current and deferred tax. Tax is recognised in the Statement of
Comprehensive Income, 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 2020 financial year and no income tax is payable.
GROUP
2020
($000)
2019
($000)
Income Tax recognised in the Statement of Comprehensive
Income
Current Tax Expense - 9
Deferred Tax in respect of the Current Year (2,931) (2,569)
Adjustments to Deferred Tax in respect to Prior Years (451) (521)
Deferred Tax Assets not recognised 3,382 3,090
Income Tax Expense - 9
The prima facie Income Tax on Pre-Tax Accounting Profit
from operations reconciles to:
Accounting Loss before Income Tax (18,887) (17,909)
At the statutory Income Tax rate of 28% (5,288) (5,015)
Non-Deductible Expenditure 2,530 1,642
Difference in US, Singapore and Australian Income Tax Rates 928 804
Prior Period Adjustment (451) (521)
Foreign Tax Forfeited - 9
Tax Losses Utilised (1,101) -
Deferred Tax Assets not recognised 3,382 3,090
Income Tax Expense reported in Statement of
Comprehensive Income
- 9
Notes to the Consolidated Financial Statements
For the year ended 31 March 2020
PACIFIC EDGE LIMITED CONSOLIDATED FINANCIAL STATEMENTS 2020
28
Tax Losses
The Group has losses to carry forward of approximately $84,000,000 (2019: $64,300,000) with a potential tax
benefit of $18,000,000 (2019: $14,200,000). The tax losses are split between the following jurisdictions:
Tax Losses
($000)
Tax Effect
($000)Rate
New Zealand 5,800 1,600 28%
Australia 500 100 30%
Singapore 1,000 200 17%
United States 76,700 16,100 21%
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 $39,600,000 (2019: $38,200,000) to
carry forward and claim for income tax purposes in New Zealand in the future. This has a tax effect of $11,100,000
(2019: $10,800,000). 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 other 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 (2019: 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 30
th
of the
month following recognition.
GROUP
2020
($000)
2019
($000)
Trade Creditors 692 634
Accrued Expenses 380 304
Revenue Received in Advance 168
-
Employee Entitlements (refer below) 2,030 1,634
Total Payables and Accruals 3,270 2,572
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 currency split for Payables and Accruals is:
GROUP
2020
($000)
2019
($000)
NZD 1,138 883
AUD 97 69
USD 1,981 1,562
SGD 54 58
3,270 2,572
Notes to the Consolidated Financial Statements
For the year ended 31 March 2020
PACIFIC EDGE LIMITED CONSOLIDATED FINANCIAL STATEMENTS 2020
29
Notes to the Consolidated Financial Statements
For the year ended 31 March 2020
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
2020
($000)
2019
($000)
Income Tax 237 108
Holiday Pay 563 513
Accrued Wages 1,230 1,013
Total Employee Entitlements 2,030 1,634
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
2020
($000)
2019
($000)
Ordinary Shares 165,423 146,403
Total Share Capital 165,423 146,403
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
2020 Shares
(000)
2020
($000)
2019 Shares
(000)
2019
($000)
Opening Balance 510,871 146,403 466,322 131,824
Issue of Ordinary Shares
- Rights Issue and Direct Offers
1
178,027 20,136 43,988 15,044
Issue of Ordinary Shares
- Employee Remuneration
2
754 163 561 188
Less: Issue Expenses
3
- (1,279) - (653)
Movement 178,781 19,020 44,549 14,579
Closing Balance 689,652 165,423 510,871 146,403
1) During the period 178,026,769 shares were issued under private placements and a rights issue at an average price of $0.11 per
share. (2019: 43,988,000, $0.34)
2) During the period 753,994 shares were issued as part of employees remuneration in lieu of cash payments at an average price
of $0.22 per share. (2019: 561,000, $0.34)
3) No shares were issued to suppliers during the year. In 2019 $475,000 of issue expenses are non cash, suppliers were instead
issued 1,359,000 shares in the Company. This forms part of the total detailed within (1).
PACIFIC EDGE LIMITED CONSOLIDATED FINANCIAL STATEMENTS 2020
30
Notes to the Consolidated Financial Statements
For the year ended 31 March 2020
19. FOREIGN CURRENCY
ACCOUNTING POLICIES
Foreign Currency Transactions
The individual financial statements of the Group are presented in the currency of the primary economic
environment in which the entity operates (its functional currency). For the purpose of the Group financial
statements, the results and financial position of the Group entity are expressed in New Zealand dollars (‘NZ$’),
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.
20. RECONCILIATION OF CASH USED FROM OPERATING ACTIVITIES WITH OPERATING NET LOSS
GROUP
2020
($000)
2019
$000
Net Loss for the Period (18,886) (17,918)
Add Non Cash Items:
Depreciation 173 237
Amortisation 123 154
Employee Share Options 556 612
Employee Bonuses paid in shares in lieu of cash 163 188
Depreciation on Right-of-Use Assets 1,131 -
Interest on finance leases shown in lease repayments 65 -
Total Non Cash Items 2,211 1,191
Add Movements in Other Working Capital items:
Decrease (Increase) in Receivables and Other Assets 539 (341)
Decrease (Increase) in Inventory 46 (90)
Increase (Decrease) in Payables and Accruals 698 (353)
Effect of exchange rates on net cash 7 4
Total Movement in Other Working Capital 1,290 (780)
Net Cash Flows to Operating Activities (15,385) (17,507)
PACIFIC EDGE LIMITED CONSOLIDATED FINANCIAL STATEMENTS 2020
31
Notes to the Consolidated Financial Statements
For the year ended 31 March 2020
21. FINANCIAL INSTRUMENTS
ACCOUNTING POLICY
Foreign Currency Transactions
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
(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 US 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.
A 10% increase or decrease in the foreign currency against the NZD will reduce/increase the loss reported by
approximately $40,000 (2019: $35,000) 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
$131,000 and increase/reduce equity by the same amount (2019: $130,000).
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; and
c) Other assets.
PACIFIC EDGE LIMITED CONSOLIDATED FINANCIAL STATEMENTS 2020
32
Notes to the Consolidated Financial Statements
For the year ended 31 March 2020
The Group has no significant concentration of credit risk other than bank deposits with 31.3% of total assets at the
Bank of New Zealand, 26.0% at Heartland Bank, 18.5% at ANZ, and 0.7% at Wells Fargo. 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, 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:
GROUP
Notes
2020
($000)
2019
($000)
Cash and Cash Equivalents91,7554,847
Short Term Deposits913,0298,000
Trade and Other Receivables (excludes GST)106031,277
Other Assets (excludes prepayments)12185165
15,57214,289
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 $3,276,000 are due within 3 months of balance date (2019: $2,143,000).
Fair Values
In the opinion of the Directors, the carrying amount of financial assets and financial liabilities approximate their fair
values at balance date.
PACIFIC EDGE LIMITED CONSOLIDATED FINANCIAL STATEMENTS 2020
33
Notes to the Consolidated Financial Statements
For the year ended 31 March 2020
22. RELATED PARTIES
A shareholder, the University of Otago, provided services, including rental space and car parking, to the Group to
the value of $276,000 (2019: $272,000). The Group has commitments totaling $208,000 (2019: $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
2020
($000)
2019
($000)
Salaries and Other Short Term Employee Benefits1,3321,319
Share Options Benefits193320
Total Employee Entitlements1,5251,639
Directors’ Fees
The current total Directors’ fee pool for non-executive Directors of Pacific Edge Limited, approved by the
shareholders at the Annual Shareholders Meeting on the 16th August 2018 is $302,000 per annum. During the
year ended 31 March 2020, the number of non-executive Directors of Pacific Edge increased by one to six with
the addition of J. Duncan to the Board in April 2019. J. Duncan ceased to be a Director during the year ended
31 March 2020. The group relied on NZX Listing Rule 2.11.3 for the period J. Duncan was added to the Board.
The total amount of fees paid to Directors for the year ended 31 March 2020 was $321,000.
The table below sets out the total fees payable to the non-executive Directors of Pacific Edge Limited for the year
ended 31 March 2020 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
23. FINANCE AND OPERATING LEASE COMMITMENTS
ACCOUNTING POLICY
The Group has changed its accounting policy for leases and has adopted NZ IFRS 16 Leases.
The Group leases various properties and equipment. Rental contracts vary depending on the type of asset
being leases. Lease terms are negotiated on an individual basis and contain a wide range of different terms and
conditions. The lease agreements do not impose any covenants, but leased assets may not be used as security for
borrowing purposes.
Contracts may contain both lease and non-lease components. The Group allocates the consideration in the
contract to the lease and non-lease components based on their relative stand-alone prices.
Leases are recognised as a Right-of-Use asset and a corresponding liability at the date at which the leased asset is
available for use by the Group. Each lease payment is allocated between the liability and finance cost. The finance
PACIFIC EDGE LIMITED CONSOLIDATED FINANCIAL STATEMENTS 2020
34
Notes to the Consolidated Financial Statements
For the year ended 31 March 2020
cost is charged to the Statement of Comprehensive Income over the lease period to produce a constant periodic
rate of interest on the remaining balance of the liability for each period. The Right-of-Use asset is depreciated over
the shorter of the asset’s useful life and the lease term on a straight-line basis.
(i) Measurement basis
Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the
net present value of the following lease payments:
• Fixed payments (including in-substance fixed payments), less any lease incentives receivable;
• Variable lease payments that are based on an index or a rate;
• Amounts expected to be payable by the lessee under residual value guarantees;
• The exercise price of a purchase option if the lessee is reasonably certain to exercise that option; and
• Payments of penalties for terminating the lease, if the lease term reflects the lessee exercising that option.
Lease payments to be made under reasonably certain extension options are also included in the measurement of
the liability.
The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily
determined, which is generally the case for leases in the Group, the lessee’s incremental borrowing rate is used.
The incremental borrowing rate is the rate that the individual lessee would have to pay to borrow the funds
necessary to obtain an asset of similar value to the Right-of-Use asset in a similar economic environment with
similar terms, security and conditions.
To determine the incremental borrowing rate, the Group:
• Where possible, uses recent third-party financing received by the individual lessee as a starting point, adjusted to
reflect changes in financing conditions since third-party financing was received;
• Uses a build-up approach that starts with a risk-free interest rate adjusted for credit risk for leases held by Pacific
Edge Limited, which does not have recent third-party financing; and
• Makes adjustments specific to the lease, e.g. term, country, currency and security.
The Group is exposed to potential future increases in variable lease payments based on an index or rate, which are
not included in the lease liability until they take effect. When adjustments to lease payments based on an index or
rate take effect, the lease liability is reassessed and adjusted against the Right-of-Use asset.
Lease payments are allocated between principal and finance cost. The finance cost is charged to the Statement
of Comprehensive Income over the lease period to produce a constant periodic rate of interest on the remaining
balance of the liability for each period.
Right-of-use assets are measured at cost comprising the following:
• The amount of the initial measurement of lease liability;
• Any lease payments made at or before the commencement date;
• Any initial direct costs; and
• Restoration costs.
Right-of-use assets are generally depreciated over the shorter of the asset’s useful life and the lease term on
a straight-line basis. If the Group is reasonably certain to exercise a purchase option, the Right-of-Use asset
is depreciated over the underlying asset’s useful life. While the Group revalues its land and buildings that are
presented within property, plant and equipment, it has chosen not to do so for the Right-of-Use buildings held by
the Group.
Payments associated with short-term leases and leases of low-value assets are recognised on a straight-line basis
as an expense in profit or loss. Short-term leases are leases with a lease term of 12 months or less. Low-value assets
include IT equipment and small items of office furniture.
(ii) Accounting policies applied until 31 March 2019
Until 31 March 2019, leases in which a significant portion of the risks and rewards of ownership are retained by the
lessor were classified as operating leases. Payments made under operating leases (net of any incentives received
from the lessor) were charged to the Operating Expenses component of the Statement of Comprehensive Income
on a straight line basis over the period of the lease.
PACIFIC EDGE LIMITED CONSOLIDATED FINANCIAL STATEMENTS 2020
35
Notes to the Consolidated Financial Statements
For the year ended 31 March 2020
Right-of-Use Assets
GROUP
2020
($000)
2019
($000)
Cost
Assets recognised on Initial Transition
- previously Operating Assets
1,598 -
Assets recognised on Initial Transition
- previously under a Finance Lease
223 -
Additions 1,078 -
Transfers to Plant, Property and Equipment (155)-
Foreign Currency Translation (226)-
2,518 -
Accumulated Depreciation
Depreciation 1,131 -
Transfers to Plant, Property and Equipment (24)-
Foreign Currency Translation (170)-
937 -
Net Right-of-Use Assets Balance 1,581 -
Right-of-Use Assets Net Book Value
Buildings 1,148 -
Computer Equipment 16 -
Plant and Equipment 417 -
1,581 -
Depreciation
Buildings 1,009 -
Computer Equipment 28 -
Plant and Equipment 94 -
1,131 -
Expenses relating to Short Term and Low Value Leases22-
Total Cash Outflow relating to Leases1,21197
PACIFIC EDGE LIMITED CONSOLIDATED FINANCIAL STATEMENTS 2020
36
Notes to the Consolidated Financial Statements
For the year ended 31 March 2020
GROUP
Lease Liability
2020
($000)
2019
($000)
Liabilities Recognised on Initial Transition 1,598 -
Lease Liabilities previously recognised as Finance Leases 84 -
Additions 1,078 -
Lease Repayments (1,210)-
Interest Charged 65 -
Foreign Currency Translation (61)-
1,554 -
Split by:
Current Liability 983 52
Non-Current Liability 571 32
1,554 84
The maturity of the Lease Liabilities is as follows:
Less than one year 983 -
One to two years 340 -
Two to three years 200 -
More than four years 31 -
1,554 -
24. OTHER COMMITMENTS AND CONTINGENT LIABILITIES
a) Contingent Liabilities
There were no known contingent liabilities at 31 March 2020 (March 2019: Nil). The Group has not granted any
securities in respect of liabilities payable by any other party whatsoever.
b) Capital Commitments
There are no capital commitments at 31 March 2020 (March 2019: Nil).
25. SUBSEQUENT EVENT – COVID-19
At the date of signing, there has been an impact on the throughput, revenue and expenses of the Group as a result
of Covid-19.
In the markets the Group operates in, measures have been employed by Governments in an attempt to limit the
spread of the virus. This restricted the ability for people to visit clinics and have tests performed for the occurrence
of bladder cancer. This has resulted in reduced throughput numbers seen by the group in April and May 2020.
Tests performed in the US and New Zealand laboratories for the month of April 2020 were approximately 51% of
April 2019 levels. This is expected to be seen in reduced income from the US in particular in coming months.
Offsetting the reduced throughput from patients visiting clinics has been increased adoption of the unique in-
home sampling system which allows patients to perform tests at home, with the results provided to their urologist.
The Group has also seen increased sales activity with institutions as they seek alternative methods to treat their
patients remotely.
The Group has been able to reduce costs to offset income reductions, and has also received support in the form of
Covid-19 relief packages from the Governments in New Zealand, Australia, Singapore and the US.
26. OTHER SUBSEQUENT EVENTS
There are no other subsequent events.
PACIFIC EDGE LIMITED CONSOLIDATED FINANCIAL STATEMENTS 2020
37
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 2020;
•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 2020, 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 the Auditor’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 ourother ethical responsibilities in
accordance with these requirements.
Our firm carries out other services for the Group in the area of 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 continued to have net cash outflows from operationsin the 2020 financialyear and is
forecast to do so during the 2021 financial year. The Company continues to progress commercial
negotiations with targeted large-scale health organisations in the USA,howeverthe likely outcome and
timing of completion is uncertain. 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.As a result, the
Company may need to raise additional funds to continue as a going concern.As stated in Note 1, these
matters, together with the other matters set out in Note 1, indicate that a material uncertainty
exists that may cast significant doubt on the Company’s ability to continue as a going concern.Our
opinion is not modified in respect of this matter.
PACIFIC EDGE LIMITED CONSOLIDATED FINANCIAL STATEMENTS 2020
38
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.In addition to the matter
described in the Material uncertainty related to going concern section, we have determined the
matter described below to be the key audit matter to be communicated in our report.
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. We
normally visit the Group's external billing
reimbursement agent to confirm our understanding of
the process and monthly report. Due to COVID-19 we
were unable to perform this visit physically. However,
we held video conference meetings to obtain this
understanding.
We have no matters to report from the procedures
performed above.
PACIFIC EDGE LIMITED CONSOLIDATED FINANCIAL STATEMENTS 2020
39
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: $240,000, which represents 1% of total expenses.
We chose total expenses as the benchmark because, 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.
Information other than the consolidated 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.
In connection with our audit of the consolidated financial statements, if other information is included
in the annual report, 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.
PACIFIC EDGE LIMITED CONSOLIDATED FINANCIAL STATEMENTS 2020
40
PwC
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 includesour 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 andare
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 consolidated 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.
Chartered Accountants
28 May 2020
Dunedin
PACIFIC EDGE LIMITED CONSOLIDATED FINANCIAL STATEMENTS 2020
41
COMPANY DIRECTORY
As at 31 March 2020
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
689,652,227 Ordinary Shares
Registered Office
Anderson Lloyd
Level 10, Otago House
Cnr Moray Place and Princes Street
Dunedin
Directors
C. Gallaher – Chairman
D. Darling
D. Levison
A. Masfen
S. Park
B. Williams
J. Duncan (appointed 30 April 2019 /
ceased 2 October 2019)
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
Heartland Bank
Dunedin
Solicitors
Anderson Lloyd
Level 10, Otago House
Cnr Moray Place and Princes Street
Dunedin
Securities Registrar
Link Market Services Limited
138 Tancred Street
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
---
Template
Results announcement
(for Equity Security issuer/Equity and Debt Security issuer)
Updated as at 17 October 2019
Results for announcement to the market
Name of issuer
Reporting Period 12 months to 31 March 2020
Previous Reporting Period 12 months to 31 March 2019
Currency
Amount (000s) Percentage change
Revenue from continuing
operations
$4,370
14% Increase
Total Revenue $5,198 1% Increase
Net profit/(loss) from
continuing operations
($18,982) 6% Increase
Total net profit/(loss) ($18,982) 6% Increase
Interim/Final Dividend
Amount per Quoted Equity
Security
The Company does not propose to pay dividends to shareholders.
Imputed amount per Quoted
Equity Security
Not Applicable
Record Date Not Applicable
Dividend Payment Date Not Applicable
Current period Prior comparable period
Net tangible assets per
Quoted Equity Security
$0.021 $0.027
A brief explanation of any of
the figures above necessary
to enable the figures to be
understood
The Results Announcement should be read in conjunction with the
audited consolidated financial statements for the year ended 31 March
2020, the results presentation and commentary, all of which have been
released with this Results Announcement.
Authority for this announcement
Name of person authorised
to make this announcement
David Darling
Contact person for this
announcement
David Darling
Contact phone number
+64 (3) 479 5800
Contact email address
dave.darling@pelnz.com
Date of release through MAP 29/05/2020
Audited financial statements accompany this announcement.
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.