Statement of Compliance
The financial report is a general purpose financial report which has been prepared in accordance with the Corporations Act 2001, Accounting Standards and Urgent Issues Group Interpretations, and complies with other requirements of the law. Accounting Standards include Australian equivalents to International Financial Reporting Standards (‘A-IFRS’). Compliance with the A-IFRS ensures that the consolidated financial statements and notes of the consolidated entity comply with International Financial Reporting Standards (‘IFRS’). The parent entity financial statements and notes also comply with IFRS except for the disclosure requirements in IAS 32 ‘Financial Instruments: Disclosure and Presentation’ as the Australian equivalent Accounting Standard, AASB 132 ‘Financial Instruments: Disclosure and Presentation’ does not require such disclosures to be presented by the parent entity where its separate financial statements are presented together with the consolidated financial statements of the consolidated entity.
The financial statements were authorised for issue by the directors on 26 September 2006.
Basis of preparation
The financial report has been prepared on the basis of historical cost, except for the revaluation of certain non-current assets and financial instruments. Cost is based on the fair values of the consideration given in exchange for assets.
In the application of A-IFRS management is required to make judgments, estimates and assumptions about carrying values of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstance, the results of which form the basis of making the judgments. Actual results may differ from these estimates
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.
Judgments made by management in the application of A-IFRS that have signifi cant effects on the financial statements and estimates with a signifi cant risk of material adjustments in the next year are disclosed, where applicable, in the relevant notes to the financial statements.
Accounting policies are selected and applied in a manner which ensures that the resulting financial information satisfi es the concepts of relevance and reliability, thereby ensuring that the substance of the underlying transactions or other events is reported.
The consolidated entity changed its accounting policies on 1 July 2005 to comply with A-IFRS. The transition to A-IFRS is accounted for in accordance with Accounting Standard AASB 1 ‘First-time Adoption of Australian Equivalents to International Financial Reporting Standards’, with 1 July 2004 as the date of transition. An explanation of how the transition from superseded policies to A-IFRS has affected the company’s and consolidated entity’s financial position, financial performance and cash fl ows is discussed in note 28.
The directors have also elected under s.334(5) of the Corporations Act 2001 to apply Accounting Standard AASB 119 ‘Employee Benefi ts’ (December 2004), even though the Standard is not required to be applied until annual reporting periods beginning on or after 1 January 2006.
The accounting policies set out below have been applied in preparing the financial statements for the year ended 30 June 2006, the comparative information presented in these financial statements for the year ended 30 June 2005, and in the preparation of the opening A-IFRS balance sheet at 1 July 2004 (as disclosed in note 28), the consolidated entity’s date of transition.
a. Going concern
The financial report has been prepared on the going concern basis, which contemplates the continuity of normal business activity and the realisation of assets and the settlement of liabilities in the normal course of business.
The Company and consolidated entity have incurred a net loss after tax for the year ended 30 June 2006 of $7,662,118 and $7,399,069 respectively (2005: $4,305,676 and $4,393,715 respectively) and experienced net cash outfl ows from operating activities of $596,454 and $3,700,875 respectively (2005: $336,416 and $3,908,181 respectively). As at 30 June 2006 the Company and consolidated entity had net current asset defi ciencies of $243,252 and $574,333 (2005: $17,100 and $21,445 respectively).
The directors have taken steps subsequent to 30 June 2006 to ensure the Company and the consolidated entity continue as going concerns. These steps included:
- obtained a bank facility of $500,000 (secured by a personal guarantee of Dr. Sze Wee Tan);
- obtained the directors’ agreement to defer amounts payable to them which as at 30 June 2006 represented $100,770;
- raised a further $480,000 before costs through a private placement via the issue of 32,000,000 shares at an issue price of 1.5 cents per share;
- appointed Novus Capital to provide corporate advice and assist the company in securing additional funds; and
- announced on 12 September 2006 a share purchase plan for the issue of shares to existing shareholders at an issue price of1.5 cents per share to raise up to $1,710,000 before costs.
The ability of the Company and the consolidated entity to continue as going concerns and to pay their debts as and when they fall due is dependent on the following:
- the ability of the Company and the consolidated entity to secure further funds ($1,710,000) through the share purchase plan announced on 12 September 2006;
- the ability of the Company and the consolidated entity to secure additional funding through either the issue of further shares, convertible notes or a combination. The Company has appointed an advisor with respect to raising these funds;
- securing a pan-European licensing arrangement for CanDia5 with a global pharmaceutical or biotechnology company. The Company is currently engaged in detailed discussions with three parties in this regard;
- the Company’s H5N1 avian fl u tests for humans and poultry continuing to generate revenues through its distribution network across Europe and the Middle East in addition to the Asia Pacific region;
- the ability to successfully and profi tably market its products through existing and new markets.
Since the end of the last financial year the Company has raised $3,303,006 (net of costs) from a combination of private placements and two Entitlements issues. The directors believe that they will continue to be successful in securing additional funds through debt or equity issues.
The directors have reviewed the business outlook and are of the opinion that the use of the going concern basis of accounting is appropriate as they believe the Company and consolidated entity will achieve the matters set out above.
Notwithstanding this, there is signifi cant uncertainty whether the Company and the consolidated entity will be able to continue as going concerns.
Should the Company and the consolidated entity be unable to continue as going concerns, they may be required to realise their assets and extinguish their liabilities other than in the normal course of business and at amounts different from those stated in the financial report.
The financial report does not include any adjustments relating to the recoverability and classifi cation of recorded asset amounts or to the amounts and classifi cation of liabilities that may be necessary should the Company and the consolidated entity be unable to continue as going concerns.
b. Principles of Consolidation
A subsidiary is any entity Rockeby Biomed Limited has the power to control the financial and operating policies of so as to obtain benefi ts from its activities.
All subsidiaries have a June financial year-end.
All inter-company balances and transactions between entities in the group, including any unrealised profi ts or losses, have been eliminated on consolidation. Accounting policies of subsidiaries have been changed where necessary to ensure consistencies with those policies applied by the parent entity.
Where subsidiaries have entered or left the group during the year, their operating results have been included/excluded from the date control was obtained or until the date control ceased.
Minority equity interests in the equity and results of subsidiaries are shown as a separate item in the consolidated financial report.
c. Income Tax
The charge for current income tax expenses is based on the profi t for the year adjusted for any non-assessable or disallowed items. It is calculated using tax rates that have been enacted or are substantively enacted by the balance sheet date.
Deferred tax is accounted for using the balance sheet liability method in respect of temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the fi nancial statements. No deferred income tax will be recognised from the initial recognition of an asset or liability, excluding a business combination, where there is no effect on accounting or taxable profi t or loss.
Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is realised or liability is settled. Deferred tax is recognised in the income statement except where it relates to items that may be recognised directly to equity, in which case the deferred tax is recognised directly in equity.Deferred income tax assets are recognised to the extent that it is probable that future tax profi ts will be available against which deductible temporary differences can be utilised.
The amount of benefi ts brought to account or which may be realised in the future is based on the assumption that no adverse change will occur in income taxation legislation and the anticipation that the group will derive suffi cient future assessable income to enable the benefi t to be realised and comply with the conditions of deductibility imposed by the law.
Legislation to allow groups, comprising a parent entity and its Australian resident wholly owned entities, to elect to consolidate and be treated as a single entity for income tax purposes was substantively enacted on 21 October 2002. The company and its wholly owned Australian resident entities are eligible to consolidate for tax purposes under this legislation.
During the year, the Directors’ undertook a formal review of the implications of establishing a tax consolidation group and decided that it would not be benefi cial for the Rockeby group to proceed with tax consolidations at this stage.
As a result, only the fi nancial effects of the mandatory aspects of the enabling legislation has been recognised in the fi nancial statements and no adjustment has been made to recognise the fi nancial effects that may result from the implementation of the tax consolidation system.
d. Inventories
Inventories are measured at the lower of cost and net realisable value
e. Property, Plant and Equipment
Each class of property, plant and equipment is carried at cost less,
where applicable, any accumulated depreciation and impairment
losses.
Plant and equipment
Plant and equipment are measured on the cost basis less depreciation and impairment losses.
The carrying amount of plant and equipment is reviewed annually by directors who assess whether any of the impairment indicators as outlined in AASB 136 are present and to ensure it is not in excess of the recoverable amount from these assets.
The recoverable amount is assessed as the higher of the asset’s fair value (less costs to sell) or its value in use which is assessed as the expected net cash fl ows that will be received from the assets employment and subsequent disposal. The expected net cash flows are discounted to their present values in determining value in use.
Subsequent costs are included in the assets carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefi ts associated with the item will fl ow to the group and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the income statement during the fi nancial period in which they are incurred.
Depreciation
The depreciable amount of all fi xed assets is depreciated on a straight line basis over their useful lives to the group commencing from the time the asset is held ready for use.
The depreciation rates used for each class of depreciable assets are:
Class of Fixed - Asset Depreciation Rate
Plant and equipment - 3-5 years
The assets residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.
An asset’s carrying amount is written down immediately to its recoverable amount if the assets carrying amount is greater than its estimated recoverable amount. Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These gains and losses are included in the income statement.
f. Leases
Leases of fi xed assets where substantially all the risks and benefits incidental to the ownership of the asset are transferred to entities in the group are classifi ed as fi nance leases.
Finance leases are capitalised by recording an asset and a liability at the lower of the amounts equal to the fair value of the leased property or the present value of the minimum lease payments, including any guaranteed residual values. Lease payments are allocated between the reduction of the lease liability and the lease interest expense for the period.
Leased assets are depreciated on a straight-line basis over their estimated useful lives or otherwise over the term of the lease if shorter.
Lease payments for operating leases are recognised as an expense on a straight line basis over the lease term, except where another systematic basis is more representative of the time pattern in which economic benefi ts for the leased asset are consumed.
g. Impairment of Assets
At each reporting date, the group reviews the carrying values of its tangible and intangible assets to determine whether there is any indication that those assets have been impaired. If such an indication exists, the recoverable amount of the asset, being the higher of the assets fair value less costs to sell and value in use, is compared to the assets carrying value. Any excess of the assets carrying value over its recoverable amount is expensed to profi t and loss immediately.
Where it is not possible to estimate the recoverable amount of an individual asset, the group estimates the recoverable amount of the cash-generating unit to which the asset belongs
h. Intangibles
Intellectual Property
Intellectual Property is recognised at its cost of acquisition. The directors have determined that the Intellectual Property has a useful life of 15 years and is carried at cost less any accumulated amortisation and any impairment losses.
Research and development
Expenditure during the research phase of a project is recognised as an expense when incurred.
Intangible assets acquired in a business combination
All potential intangible assets acquired in a business combinations are identifi ed and recognised separately from goodwill where they satisfy the defi nition of an intangible asset and their fair value can be measured reliablyi. Foreign Currency Transactions and Balances
Functional and presentation currency
The functional currency of each of the group entities is determined as the currency of the primary economic environment in which that entity operates. The consolidated fi nancial statements are presented in Australian dollars which is the parent entity’s functional and presentation currency.
Transactions and balances
Foreign currency transactions are translated into functional currency using the exchange rates prevailing at the date of the transaction. Foreign currency monetary items are translated at the year-end exchange rate. Non-monetary items measured at historical cost continue to be carried at the exchange rate at the date of the transaction.
Exchange differences arising on the translation of monetary items are recognised in the income statement.
Group companies
The fi nancial results and position of foreign operations whose functional currency is different from the group’s presentation currency are translated as follows:
- Assets and liabilities are translated at exchange rates prevailing at the reporting date.
- Income and expenses are translated at the exchange rates prevailing at the date of the transaction.
Exchange differences arising on translation of foreign operations are transferred directly to the group’s foreign currency translation reserve in the balance sheet. These differences are recognised in the income statement in the period in which the foreign operation is disposed of.
j. Employee Benefits
Provision is made for the Group’s liability for employee benefi ts arising from services rendered by employees to balance date. Employee benefi ts that are expected to be settled within one year have been measured at the amounts expected to be paid when the liability is settled, plus related on-costs. Employee benefi ts payable later than one year have been measured at the present value of the estimated future cash outfl ows to be made for those benefits.k. Provisions
Provisions are recognised when the consolidated entity has a legal or constructive obligation, as a result of past events, for which it is probable that an outfl ow of economic benefi ts will results and that outfl ow can be reliably measured.
l. Cash and Cash Equivalents
Cash and cash equivalents includes cash on hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within short-term borrowings in current liabilities on the balance sheet
m. Revenue and Income
Revenue from the sale of goods is recognised when the group has transferred the signifi cant risks and rewards of ownership of the goods to customers
Interest income is recognised on a proportional basis taking into account the interest rates applicable to the fi nancial assets.
All revenue is stated net of the amount of goods and services tax (GST).
n. Borrowing Costs
All borrowing costs are recognised as an expense in the period in which they are incurred
o. Goods and Services Tax (GST)
Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable from the Australian Tax Offi ce. In these circumstances the GST is recognised as part of the cost of acquisition of the asset or as part of an item of the expense. Receivables and payables in the balance sheet are shown inclusive of GST.
Cash flows are presented in the cash fl ow statement on a gross basis. The GST component of cashfl ows arising from investing and financing activities which is recoverable from, or payable to, the taxation authority is classified as operating cash flows.
p. Share Based Payments
Equity-settled share-based payments granted after 7 November 2002 that were unvested as of 1 January 2005, are measured at fair value at the date of grant. Fair value is measured by use of a Black and Scholes model. The expected life used in the model has been adjusted, based on management’s best estimate, for the effects of non-transferability, exercise restrictions, and behavioural considerations.
The fair value determined at the grant date of the equity-settled sharebased payments is expensed on a straight-line basis over the vesting period, based on the consolidated entity’s estimate of shares that will eventually vest.
For cash-settled share-based payments, a liability equal to the portion of the goods or services received is recognised at the current fair value determined at each reporting date.
q. Comparative Figures
When required by Accounting Standards, comparative fi gures have been adjusted to conform to changes in presentation for the current financial year.
