ANNUAL REPORT 2014
People do not decide to
become extraordinary.
They decide to accomplish
extraordinary things.
Sir Edmund Hillary
“”
PacificEdgeAnnualReport2014 1
Annual Report for the Year Ended 31 March 2014
Contents
Key Dates
OurBusiness 2
2014HighlightsandKeyEvents 6
Chairman’sReport 8
CEO’sReport 12
BoardofDirectors 21
SeniorExecutiveTeam 22
FinancialStatements 23
NotestotheFinancialStatements 30
AdditionalStockExchangeInformation 58
IndependentAuditors’Report 61
RiskAnalysis 63
ScientificAdvisoryBoard 64
ClinicalAdvisoryBoard 65
AnnualReportofDirectors 66
Directors’ResponsibilityStatement 70
Glossary 74
CompanyDirectory 77
EndofFinancialYear 31March
PreliminaryResultsAnnouncement By31May
IssueofAnnualReport By30June
2014AnnualMeeting 21August2014atDunedinArtGallery
EndofHalfYear 30September
InterimResultsAnnouncement By30November
InterimReport By31December
TheBoardofDirectorsofPacificEdgeLimitedispleasedtopresenttheAnnualReportfortheYearEnded
31March2014.ThisAnnualReportprovidesareviewofouractivitiesduringthe2014financialyearand
managementandBoardcommentaryonourfocusfor2015andbeyond.
Wearepleasedtohavethisopportunitytoshareourprogressandfutureplanswithyou.
TheAnnualReportcanalsobeviewedonourwebsitewww.pacificedgedx.com
2 PacificEdgeAnnualReport2014
Our Business
PacificEdgeisacancerdiagnosticscompany.Wedevelopandcommercialisetestsfortheearlydetection
andmanagementofcancer.
Ourproducts,builtfromourproprietarygeneticdatabases,areusedtoidentifydiagnosticbiomarkersfor
cancer.Wespecialiseindiscovering,buildingandcommercialisingnovelcancertests.
Ourfirstproduct,Cxbladder,isanovelbladdercancerdetectiontestwhichhasrecentlybeensuccessfully
launchedintargetmarkets.Ourfocusisfirmlyfixedongrowingourrevenuebase,particularlyintheworld’s
largestbiomedicalmarket,theUS.TheCompany’sshorttomediumtermfocuswillremainonbladdercan-
cerandwillseetheCompanylaunchafurtherproducttohelpcliniciansandpatientsalike,inthedetection
andmanagementofbladdercancer.
THE BUILDING BLOCKS OF OUR BUSINESS
Our innovative capability is underwritten by our scientific and clinical expertise, both of which help us
developandlaunchinnovativeproductstoimprovepatientcare.Ourcommercialcapabilitieshavedriven
ourCompany’sevolutionfromaresearchanddevelopmentbusinesstoanorganisationthatisnowmak-
ingcommercialinroadsinkeymarketsaroundtheworld.WenowhaveasolidfootprintintheUSmarket,
withacertifiedlaboratory,aUSsalesandmarketingteamandagrowingreputationandawarenessofour
Cxbladderproduct.
Globally,wehavecommercialoperationsinNewZealand,AustraliaandtheUnitedStates.
CXBLADDER
Cxbladderofferspatientsanon-invasive,accuratetestforthedetectionofbladdercancer.
Cxbladdermeasures the expression of five genes that create a uniquemolecular signature for bladder
cancer,alertingphysiciansandclinicianstopossibletumours.Moreaccuratethanmanyotherurine-based
cancerdetectiontests,Cxbladdercangivepatientsanddoctorsaddedconfidenceintheirdiagnoses.
Cxbladderisbeingutilisedbyclinicianstoprovideanumberofclinicalandpatientadvantages.Thetestcan
beusedonpatientspresentingwithbloodinurinetoruleinorruleoutthepresenceofbladdercancer;
savingmanypatientstheinconvenience,invasivenessandcostofafullurologicalworkup.
Thetestrequiresasmallsampleofthepatient’surinetobesenttooneofPacificEdge’sownorfranchised
partner laboratories.The laboratoryanalyses theurine,measures thepresenceoffivegenesanddeter-
mines,withahighdegreeofaccuracy,whetherthepatientdoesordoesnothavebladdercancer.
Innovative Thinking
Proprietary Genetic
Databases
Scientific And Clinical
Expertise
Commercial Capabilities
Global Market Focus
PacificEdgeAnnualReport2014 3
TheperformanceoftheCxbladdertestwasevaluatedinaformalclinicalstudy1thatwaspublishedinthe
JournalofUrologyin2012.ThestudyshowedthatCxbladderoutperformedalloftheotherclinicaltechnolo-
giesthatwereevaluatedalongsideit.Inthisstudy,Cxbladdercorrectlyidentified100%oflatestagetumours
and97%ofhigh-gradetumours.Thesefindingswerevalidatedbyafurthertwo-centrestudyin2013.
ThistestiscommerciallyavailablefromPacificEdgeanditscommercialpartnersinseveralcountriesaround
theworld,includingAustralia,NewZealandandtheUSA.
BLADDER CANCER
Bladdercancerhastheninthhighestincidenceintheworld.Ithasaveryhighrecurrencerateandoften
progressesquickly.Consequently,bladdercancerpatientsliveinaworldofongoingmonitoringandclinical
intervention,muchofwhichisinvasiveandexpensive.
However,bladdercancersarehighlytreatable,especiallyifdetectedintheearlystages.Thismakestimely
andregularsurveillanceofthiscancerakeyelementoftheclinicalprocessandoftheindividual’sannual
healthcareplan.
Oneof theearly symptomsofbladder cancer is thepresenceofblood in theurine, calledhaematuria.
PeoplewithhaematuriausuallypresenttotheGPbeforebeingreferredontoaurologist.
UNITED STATES SPAIN AUSTRALIA & NEW ZEALAND
1 MILLION
2 MILLION
200,000
300,000
50,00085,000
Number of people presenting with haematuria (blood in the urine) every year
Number of potential tests every year2
1O’Sullivanetal:Amultigeneurinetestforthedetectionandstratificationofbladdercancerinpatientspresentingwithhematuria, J Urol2012;188:741–747.2Undercurrentclinicalguidelines,patientsdiagnosedwithbladdercancerwillrequirerepeattestingoveraperiodofyears.
4 PacificEdgeAnnualReport2014
Our Business (continued)
OUR COMMERCIAL OPERATIONS FOR CXBLADDER
BUILDING THE GLOBAL CXBLADDER BUSINESS
IdentifyandprotectIntellectual
Property
IPdefiningtherelationshipbetweenthegenesandthedisease,thatis,the
genesignature.
Protectthegeneticsignature
containedinthepatient’surine
sample
Innovativeurinesamplingsystem(USS)thatenablesapatienttoeasily
provideaurinesampleandtoprotectthatsamplefromthepatient
collectiontothelaboratorythatmeetsstringentregulatoryrequirementsin
servedmarkets.
Meetregulatory
requirementsinglobalmarkets
Refinethetechnologytoproduceahighlyrepeatableandreproducible
clinicalproduct.
Provideaconsistentclinician
experienceeverytime
Developthefranchisemodelwhereeachlaboratoryusesthesame
processes,equipmentandconsumablestogivetheclinicianahighquality
productandservice.
Establishin-marketcapability
Understandtheregulatoryandreimbursementneeds.
Ensurelogisticsareinplaceforsamplesystemstotraveltoandfromthe
clinician.
Ensuretheprocessinglaboratoryisinplaceandhasregulatoryapproval.
Planandbuildthesalesandmarketingteam.
United States
• Population:327million
• Patientswithhaematuria:
approx.1millionperyear
• Approx.Urologists:10,500
• PotentialCxbladdertestmarket:
2milliontestsperyear
• Commerciallyavailable
sinceJuly2013
Spain
• Population:42million
• Patientswithhaematuria:
approx.200,000peryear
• Approx.Urologists:1,350
• PotentialCxbladdertestmarket:
300,000testsperyear
• Commercialprocessin
development
NZ and Australia
• Population:24million
• Patientswithhaematuria:
approx.50,000peryear
• Approx.Urologists:300
• PotentialCxbladdertestmarket:
85,000testsperyear
• Commerciallyavailable
since2012
PacificEdgeAnnualReport2014 5
Our VisionTo benefit global communities through delivery of innovative solutions for the early detection and better management of cancer.
OUR MISSION
To improve patient outcomes, provide superior
returns toour shareholdersandbenefits toother
stakeholders by developing and commercialising
innovative solutions for the early detection and
managementofcancer.
OUR FOCUS
Developmentandcommercialisationofstateofthe
artcancerdiagnosticsandprognosticsfortheearly
detectionandbettermanagementofcancer.
OUR PEOPLE
Ourstrengthisourpeople.Webelievepassionate,
focused,dedicatedandincentivisedpeoplemakea
significantdifference.
OUR MOTIVATION
To meet and exceed medical, clinical and
stakeholderexpectations.
OUR PRODUCTS
Todeliverproductsandservicewithperformance
that make a clinically meaningful difference for
cancermanagementandprovidebetteroutcomes
forpatients.
MILESTONES ON OUR JOURNEY TO SUCCESS
2001
Companyformedtobuildandcommercialisenovel
cancerdiagnostics
2002
CompanylistedonNZX
2005
Completedthegeneexpressiondatabaseinfive
cancers
2008
Publishedtheinitialbladdercancerdetectionresearch
2009
Producedapre-commercialprototypeofCxbladder
2011
CompletedtheclinicalevaluationofCxbladder
CompletedthecommerciallaboratoryinDunedinand
openedbytheNZMinisterofHealth
2012
PublishedCxbladderclinicalpaperinJournalof
Urology
CompletedthebuildandfitoutoftheUSlaboratory
inHershey,Pennsylvania
2013
ReceivedCLIAregulatoryapprovalforUSlaboratory
ReceivedCLIAregulatoryapprovalforDunedin
laboratory
FirstdedicatedsalesexecutivestartedintheUS
FirstsignificantsalesrevenuegeneratedintheUS
6 PacificEdgeAnnualReport2014
Commercial launch of Cxbladder in the United States
Recruitmentand trainingof salesandmarketing team fromJuly2013with thefirst commercialproduct
processedinOctober2013.
Continuation of successful User Programmes with selected urologists in New Zealand, Australia and the United States
TheUserProgrammesprovidetargetedcliniciansandurologyspecialistsinLargeUrologyGroups(LUGs)
andinIntegratedHealthCareorganisations(IHCs)withtheopportunitytoevaluateCxbladderintheirown
clinicalsettingandexperiencethesignificantbenefitsthatCxbladderofferstoclinicians,patientsandtheir
insurers.NewZealand successfully completed two largeUserProgrammes thatprovided clinicalperfor-
mancevalidationforCxbladder.IntheUS,anumberofnewUserProgrammeswereinitiatedwithprospec-
tivelargecustomers.
Signing of agreements with three National Provider Networks in the USA – FedMed, ACPN and Stratos. Since year-end, a fourth agreement has been signed with MultiPlan
TheseNationalProviderNetworks(NPNs)provideacontractedpricenetworkthatlinkspayerstothehealth-
careproviders.TheNPNsfacilitatethecommercialreimbursementinteractionsbetweenhealthcarepayers
andhealthcareproviders.
Significant gains made in the adoption of Cxbladder by publicly and privately funded health organisations and agencies in New Zealand
Agreement signedwith theGovernment’sHealth InnovationHub (HIH) tomakeCxbladderavailable to
patients in Waitemata, Auckland, Counties Manukau and Canterbury DHBs. Cxbladder in commercial
evaluation atMidCentralHealthDHBand commercially adoptedbyUrotec.Urotecprovides urological
servicestoBayofPlentyandLakesDHBs.
Pacific Edge’s Hershey and Dunedin laboratories receive CLIA certification
Pacific Edge has achieved essential US laboratory regulatory approval from CLIA (Clinical Laboratory
Improvement Amendments) in two laboratories, Hershey, Pennsylvania in the US and Dunedin, New
Zealand,oneofthefewCLIAregulatedlaboratoriesoutsidetheUnitedStates.
Hershey Laboratory gains CAP accreditation
ThePacificEdge(PED)laboratory intheUShasattainedthepinnacleof laboratorycertificationwiththe
recentapprovalgrantedbyCAP(CollegeofAmericanPathologists)—theleadingorganisationofboard-
certifiedpathologiststhatservespatients,pathologistsandthepublicbyfosteringandadvocatingexcellence
inthepracticeofpathologyandlaboratorymedicineworldwide.
Recipient of several Awards and Grants
NewZealandInnovationCouncilSupremeAwardwinner;NZBIOTopBiotechCompanyAward;Callaghan
InnovationGrowthGrant.
FY14 Highlights and Key Events
PacificEdgeAnnualReport2014 7
Completion and publication of international clinical study
AtwocentreuserstudyinNewZealandprovideda
formalvalidationoftheperformanceachievedby
Cxbladder in the 2011 international multi-centre
clinicalstudythatwaspublishedintheprestigious
international Journal of Urology in September
2012. These studies showed that Cxbladder has
excellent accuracy in detecting urothelial carci-
nomas,ofwhichbladdercancer isone,andper-
formed significantly better than any of the other
currentlyusedbladdercancerdetectiontechnolo-
gies that were benchmarked in these studies. At
anoverall82%sensitivityforaspecificityof85%,
Cxbladder saw100%ofTis,T1,T2andT3 stage
tumoursand97%ofallhighgradetumours.3
Validation studies reiterate Cxbladder technology performance
Two User Programmes at large District Health
Board (DHB) clinics in New Zealand completed
their evaluation and provided results that con-
firmed Cxbladder’s performance in an operating
clinical setting. These two sites provided blinded
samplestoPacificEdge’slaboratorywhichshowed
anoverallsensitivityof90%ataspecificityof75%
compared to the clinical study3of 82%and85%
respectively. At this performance Cxbladder saw
100% of T1, T2 and Tis stage tumours. These
recent results effectively replicate the accuracy
obtained in the clinical study published in the
Journal of Urology in September 20123. The
Companyislookingtopublishtheseresultsin2014
inanappropriateclinicalorscientificjournalafter
inclusionofotherUserProgrammes.
TRADING REVENUE
$523,000, up 187%
TOTAL REVENUE
$838,000, up 62.7%
TOTAL COMPREHENSIVE LOSS
$9.3 million, an increase of 35%
GLOBAL EMPLOYEES
33 employees, an increase of 50%
US SALES TEAM
Initial recruitment of four specialist sales people in four high volume sales regions
PIPELINE
Three new products in research and development
3O’Sullivanetal:Amultigeneurinetestforthedetectionandstratificationofbladdercancerinpatientspresentingwith hematuria,J Urol2012;188:741–747.
8 PacificEdgeAnnualReport2014
Chairman’s Report2014 was a milestone year for our Company
as we celebrated the commercial launch of our
first product, Cxbladder, and the start of revenue
generationintheworld’sbiggestbiomedicalmar-
ket,theUnitedStates.
For the past thirteen years, we have beenwork-
ingtowardsthismilestone.Wehaveinvestedtime,
moneyandresourcesintodevelopingourgenetic
databases, creating and testing prototypes, pro-
ducinga commercially viableproduct andestab-
lishingafootprintinourtargetedglobalmarkets.
Allthishardworkandeffortculminatedinadefin-
ingmomentinOctober2013whenweprocessed
our first commercial test sample through our US
laboratory.Whilenumbersofcommercialtestsare
stillsmall,theyaregrowingandweseethisasthe
startofaneweraforourCompany.
Atalltimesoverthelast13years,wehavefocused
ondeliveringonourpromises toour sharehold-
ers,andIampleasedthat2014wasnodifferent.
Further details on our operational achievements
forFY14canbefoundinthereportfromourCEO,
DavidDarling,onpages12to20.
Akeybuildingblockofourbusiness isourscien-
tificandclinicalknow-how.PacificEdgehasboth
aScientificAdvisoryBoardandaClinicalAdvisory
Board.MembersofbothBoardsareinternational
experts in their field and provide advice toman-
agement and the Pacific Edge Board.My thanks
gototheseindividualsforsharingtheirknowledge
andexpertisewithusagaininFY14aswecontinue
toinnovateanddevelopnewproducts.
The investment into the growth of the business,
particularly thecommercialrollout intheUS,was
theprimarydriverbehind theFY14reported loss
of$9.38million(FY13:$6.95million),whichwas
in linewithbudgetedexpectations.TheCompany
reported its first substantial trading revenue in
PacificEdgeAnnualReport2014 9
FY14andwhilststillonlyasmallnumber,thisisa
strongliftdespitetheshortperiodofsellinginthe
Americanmarket.
Themajorityofthenetlossisthesignificantinvest-
ment the Company has made in the growth of
the business; set up and rollout of our presence
in the US; investment in clinical trials and User
Programmes with new customers; further prod-
uctdevelopmentandmanagementof intellectual
property.
FUNDING FOR FUTURE GROWTH
InOctober2013,wesuccessfullycompleteda$20
millioncapitalraising.Mythanksgotothoseshare-
holderswhoparticipatedandwhocontinuetosup-
portus.
Thecapitalraised ishelpingtodriveanaccelera-
tion of the Pacific Edge salesforce rollout in the
US in 2014 and beyond, and will aid continued
research and development of new products for
urologistcustomers.
Over the years, we have received a number of
technologydevelopmentgrantstohelpusdevelop
our products. These have been a very important
funding line for us. In February 2014, we were
delightedtoreceiveaCallaghanInnovationGrowth
Grant thatwillprovideup to$4.5million, spread
overthreeyears,withanadditionaltwoyearsavail-
ableonreview.Thisfundingwillprovideadditional
resources to accelerate the development of our
non-invasive,cancerdetectiontests.
Asat31March2014,PacificEdgeheldcashand
equivalents of $20.4million, up from $10.7mil-
lion the year earlier. The Company is debt free.
The Board is comfortable that sufficient funds
are inplace to support thenext twoyearsof the
Company’splannedgrowthstrategy.
GOVERNANCE
PacificEdgeislistedontheNZXMainBoard.The
Board is responsible for the corporate govern-
anceoftheCompany.TheCompany’sgovernance
policies are consistent with the NZX Corporate
GovernanceBestPracticeCodeandmeetthenine
PrinciplesforCorporateGovernanceissuedbythe
Securities Commission.More detail on corporate
governancecanbereadonpages70to73.
Of our shareholders, 20 hold 52%of the shares
intheCompany,withthebalanceoftheCompany
heldby5,348shareholders.
Our capital raising in 2013 introduced a number
ofnewshareholderstoourshareregistryandwe
nowhaveover5,300shareholders.DuringFY14,
theCompanysawconsiderablegrowthintheshare
price, culminating in the Company entering the
NZX50.Thiswasagreatachievement.Wealsosaw
asignificantshiftasglobalmarketsrevaluedtech-
nologysharesorshareswithprojectedfutureearn-
ings,suchasPacificEdge.
We are aware of the need to inform sharehold-
ers about our business, and during the year, we
focusedonprovidingasmuchinformationaspos-
sibleontheregulatory,reimbursementandadop-
tiondriversfornovel,medicaldevicesinbothNew
ZealandandtheUS.Thiswillbeasignificantand
on-goingfocusfortheCompany.Weexpecttosee
a number of research papers produced by local
andinternationalanalyststofillsomeofthisknowl-
edgegapduringthecomingyear.
Weendeavourtokeepourshareholdersupdated
on our progress, key events and our business
activities throughannouncements to theNZXand
our annual and interim reports. All announce-
mentsandreportscanalsobefoundonourweb-
site. Shareholders are also welcome to attend
the Annual Meeting of Shareholders. The 2014
10 PacificEdgeAnnualReport2014
Chairman’s Report (continued)
AnnualMeetingwillbeheldon21August2014in
Dunedin.
LOOKING FORWARD
Ourfocusforthepastsixyearshasbeenondevel-
oping, testingand launchingourfirstcommercial
Cxbladderproducttothemarket.Wehaveestab-
lishedourbrandandhavegrowingawarenessof
ourproductamongstourtargeturologistcustom-
ers,withwhomwehavebeenworkingsodiligently
overthelastfewyears.
We have identified a number of other potential
uses of the Cxbladder technology, at different
stages of the detection and treatment cycle for
bladdercancer.Theseprovideuswithnewproduct
opportunities.Webelieve that focusingondevel-
opingthesenewproductsforbladdercanceristhe
fastestandsurestwayforourCompanytogrowits
productbaseandtotalrevenue.
Therefore,whilewewillcontinuetomaintainour
portfolio of intellectual property in the areas of
gastric, colorectal and endometrial cancers and
melanoma, our focus will be on bladder cancer
productsfortheshorttomediumterm.Ourwider
portfoliowillprovideuswithfurtheroptionsinthe
future.
Whilst the New Zealand and Australian markets
are important tous fromaproductdevelopment
andcommercialisationprocessperspective,itisthe
scaleandaccessibilityoftheAmericanmarketthat
isparamounttothesuccessoftheCompany.
Evaluating haematuria (blood in the urine) in
American patients for bladder cancer is a sig-
nificantmarketofscaleandcouldbeworthupto
$100millioningrossrevenueforourCompanyin
fiveyears’time.
Our investment intoourbusinesswillcontinue to
grow over the 2015 financial year, focusing on
customercapture,adoptionofCxbladder,building
relationshipsandnegotiatingagreementswithkey
organisations that facilitate reimbursement, and
theset-upandroll-outof the franchisedbusiness
model in the targeted markets of New Zealand,
Australia,USandSpain. Inaddition,wewill con-
tinuetofurtherthedevelopmentoftheCompany’s
bladdercancerproductportfolio.
Ourgoalofattainingabusinesswithagrossrev-
enueof $100million after five full yearsof trad-
ingremainsourtargetandcontinuestobereadily
attainable.
Chris Swann
Chairman
PacificEdgeAnnualReport2014 11
12 PacificEdgeAnnualReport2014
CEO’s ReportThe2014financialyearwasanexcitingoneforour
Companyandmarkedanewstageofourjourney.
Itwas the yearwemade the change frombeing
simply a research and development organisation
and became a significant commercial enterprise.
The launchofCxbladder into theUSmarket and
the initialrevenuegeneratedhasbeenafantastic
achievementforallinvolved.
We are only at the beginning of this new com-
mercial phase and still have a lot ofwork ahead
ofus.Muchofthisisacontinuationoftheground-
workwe started inFY14, fromsalesandmarket-
ing efforts in theUS, New Zealand andAustralia
to building commercial scale at our laboratories
andcontinuedresearchanddevelopmentofnew
products.
Wearepleased tohaveonceagainachieved the
goals we set for ourselves last year. These were
important initiatives thathavebuiltastrongstart-
ingplatformforourcommercialjourney.Manyof
theseinitiativesareongoingandwillagainbeour
focusinFY15.
Thistimelastyear,wehadjustreceivedregulatory
approval for our newpurpose-built laboratory in
Hershey,Pennsylvania, a very significant achieve-
ment in its own right and one which required a
dedicatedeffortfromboththeNewZealand-based
teamandthenewteamintheUnitedStates.This
openedthewayforustostartplanningforacom-
mercial rollout in theUS.Ensuring thiswasdone
effectivelyandefficientlywastheprimaryfocusfor
managementinFY14.
WenowhaveanexcellentbaseintheUSmarket,
through our 100% owned US subsidiary PEDUSA.
Our US operations are based out of our pur-
pose built laboratory in Pennsylvania, where all
CxbladdertestsintheUSareprocessed.
Weareproceedingwellwith therecruitmentand
training of a specialist sales andmarketing team
PacificEdgeAnnualReport2014 13
in the US and we are receiving strong product
endorsementandseeingencouragingresultsfrom
our User Programmes, where targeted clinicians
areprovidedwiththeopportunitytotrialanduse
ourtestsintheirpractices.
We have also made excellent progress in nego-
tiating commercial relationships with National
ProviderNetworks (NPN) in theUS. TheseNPNs
provide patients with access to healthcare ser-
vices and technology by contracting with pro-
viders and payers on a national basis. The
agreements we have signed give millions of
Americans access to Cxbladder and its positive
benefits as a quick, cost effective, non-invasive
andhighlyaccuratecancerdetectiontest.Welook
forwardtoseeingthebenefitsofthisworkreflected
inoursalesinthiscomingyear.
Overthe2014financialyear,wehaveseenasteady
increaseinthegrowthoftheadoptionofCxbladder,
notjustintheUS,butalsoinourmarketsinNew
Zealand and Australia. The focus in all of these
markets is on providing a consistent and highly
repeatableclinicalexperienceforboththepatient
andtheclinicianswhenusingCxbladder,delivered
fromoneofPacificEdge’sspecialistlaboratoriesin
NewZealand,AustraliaandnowtheUnitedStates.
Wehaveidentifiedhighvolumesegmentsinthese
markets and have signed a number of valuable
contractsandagreementsoverthepastyear.These
provideuswithaccesstotheverylargenumberof
patientswithhaematuria in theUS,NewZealand
andAustralia.
ThefastestwayforourCompanytogrowrevenue
is to deliver another test to existing urology cus-
tomersdownthesamechanneltomarket.During
theyear,wehavemadegoodprogressonbringing
ournextnewproducttothemarket.Thecollection
oftheclinicalperformancedatahasbegun,anda
NewZealandlaunchisexpectedlateinthesecond
halfof2014.
TIMELINE OF ACTIVITY FOR DEVELOPMENT OF US SALESNationalProviderNetworksprovidemillionsofpatientswithaccesstoCxbladder.However,itcantakeanumberofmonthsfromthesigningofagreementsforcommercialteststoflowthroughandforreimbursementtobereceived.
AGREEMENTS SIGNED
TEST ANALYSIS
REVENUE
FedMed
Oct 13 Dec 13 Jan 14 Apr 14
ACPN
National Provider NetworksStratos Multiplan
Apr 14
May 14
First FedMed
network sale
Reimbursement from private insurance
from FedMed network sale
Elapsed Time: 7 Months
14 PacificEdgeAnnualReport2014
BUILDING OUR PRESENCE IN THE US MARKET
The US is the world’s largest biomedical market
andweoperateinthismarketthroughourwholly
owned subsidiary, Pacific Edge Diagnostics USA
(PEDUSA).
In March 2013, we received regulatory approval
and CLIA (Clinical Laboratory Improvement
Amendments) certification for our purpose built
laboratory in Pennsylvania. This is the regulatory
agencythatadministersthestandardswhichapply
to all clinical laboratory testing that provides or
usesaLaboratoryDevelopedTest(LDT)toprovide
aservicetocliniciansmanagingortreatinghumans
intheUnitedStates.
This regulatory achievement allowed us to pro-
gresswiththecommercialrolloutofCxbladder in
theUSmarketandenabledustostartourprocess
ofrecruitingthefirstofourdedicatedsalesexecu-
tives. We launched in July 2013, recruiting and
training sales and marketing personnel over the
followingsixmonths.
InOctober2013,weprocessedthefirstcommercial
test through the laboratory.This facilityhasbeen
builtbasedonourestimatesofthefuturescaleof
theUSmarketandhastheplannedcapacitytopro-
cessupto260,000testsperannum.
Ittakessignificanttimetobuildawarenessandthen
developcompetency in thisextensivemarketand
tobegintherelationshipswithourcustomersata
commercial level.We are confident themomen-
tumoftheextensivecommercialisationprogramto
familiarise theurology clinicians in theUShealth
system with the significant benefits of Cxbladder
willacceleratesalesinFY15.
As demand for our tests grows, we will look to
expand our testing capacity in the US to meet
demand.
WearestillintheveryembryonicstagesofourUS
rolloutandwelookforwardtoexpandingourpres-
enceanddrivingrevenue.
NationalProviderNetworks(NPNs)areakeycom-
ponentofthecommercialhealthcaremarketinthe
UnitedStates.Wehavesignedanumberofimpor-
tantcommercialagreementswith theseorganisa-
tionssinceOctober2013.
ThehealthsystemintheUnitedStatesissubstan-
tiallydifferent toNewZealand,withpaymentpri-
marilythroughinsurance,eitherprivateorpublic.
National(andregional)providernetworksarekey
components of theUShealth system. They com-
prisenetworksofclinicians,hospitals,laboratories
andotherspecialistswhocontractwiththeprovider
toofferservicestothepatientsoftheirclients,who
are private insurers, large employers and third
partyadministrators(TPAs).
Companies suchasPacificEdgenegotiateagree-
ments with these large organisations to provide
their products and services at agreed prices to
patientswhoareinsuredbyclientsoftheNPN.The
approvedcoverageofCxbladderprovidedbythe
agreementsencouragesitsusebycliniciansasan
accepteddiagnostictestfordeterminingthepres-
ence,ornot,ofbladdercancers.
Since October 2013, we have signed four
agreements–FedMed,America’sChoiceProvider
Network (ACPN), Stratos and MultiPlan. These
agreements givemillions of Americans access to
Cxbladder.
We are also advancing relationships with large
commercial payers and funding agencies includ-
ing the Government funded Centre forMedicare
and Medicaid Services (CMS) and Veterans
Administration(VA).
CEO’s Report(continued)
PacificEdgeAnnualReport2014 15
Awareness of Clinical Efficacy
• Publicationofpeerreviewed
sciencepapers
• Peertopeerinteraction
• KeyOpinionLeader(KOL)topeer
recommendation
• Businesstobusinessvalidation
• PresentationatUrologyconventions
Early Stage Trialling
• UserProgrammeforcustomfitintheir
clinicalsetting
• Evaluationondifferentpatient
populations
Initial Commercial Adoption
• Urologistdefinedpatientpopulation
Expansion of Adoption
• UrologistusesCxbladderbroadlyin
multiplepatientapplications
THE CLINICIAN’S ADOPTION PROCESS
OurUserProgrammesareprovinghighlyeffective
withcliniciansinencouragingevaluationandearly
useofourproduct.Ourgoal is toprogress these
participantsintocommercialcustomersoncetheir
UserProgrammesconclude.
AkeypartofouractivitypriortoandsincetheUS
launchhasbeentobuildawarenessofCxbladder
andencourageurologiststoevaluateanduseitfor
theirpatients,throughourUserProgrammes.
We have found that once urologists have the
opportunity to trial Cxbladderwith their patients,
they can see its positive benefits as a quick, cost
effective,non-invasiveandhighlyaccuratecancer
detectiontest.Giventheopportunityforthistestto
enhanceclinicalutilityandpossiblychangeclinical
practice,itcantakesometimeforclinicianstofind
thebestfitforthetestintheirclinicalpractice.
There are approximately 10,500 urologists in the
United States. We target our User Programmes
towards high volume clinicians or clinical groups
and tailor the Programme according to the size
and potential value proposition that each user
groupidentifiesasbeingimportanttothemintheir
practice.Insomecases,theseclinicalgroupscanbe
verylarge,withupto100urologistsseeingthou-
sandsofpatients every year. It is notuncommon
for our US customers to have clinical businesses
withinexcessof40practicingurologists.Whenput
inperspective,thiswouldbeasinglepracticewith
moreurologists that theentirenumberpracticing
inNewZealand.
WehavealsobeenrunningtheseUserProgrammes
inNewZealandandAustralia,wheretheyarecru-
cial for early feedback and generating the new
practices and data that underlie the validation of
theCompany’snewproducts.
OurfocusforFY15istocontinuetotranslatethese
formal evaluation programmes into paying com-
mercialrelationships.
16 PacificEdgeAnnualReport2014
Patients
Patientwithhaematuriaseeks
healthcaretreatmentand
services.
Patient Care Reimbursement process
National Provider Networks
Mostcliniciansandhealthcare
providersbelongtoone
ormoreNationalProvider
Networks(NPN).
TheNPNsnegotiateagreed
pricesforservicesandprod-
uctsforusebytheclients.
NPNsenablepaymentforan
approvedproductorservice
atanagreedpriceandina
timelymanner.
Payers
Largeprivateinsurance
companies.
IHC–Integratedhealthcare
providers.
IHS–IntegratedHealthcare
System.
CentreforMedicareand
MedicaidServices(CMS).
VeteransAdministration(VA).
Pacific Edge
Sendsinvoicetopatient’s
insurancecompany/payerfor
Cxbladderservices.
Payers
Checkspatient’spolicycover-
age,checksthatprovisionof
servicesiscoveredbyNPN.If
yes,thaninsurancecompany
expeditespaymentatagreed
NPNcontractprice.
Reimbursement and Billing
Agency
Processesclaimsand
facilitatespaymentbetween
payersandPEDUSA.
General Physicians
Primarycarephysiciansassess
patientandrecommendfor
fullevaluationby
urologistspecialtyservices.
Urologists
Urologistsinprivatepractice,
hospitalorspecialistcancer
clinicundertakefullevalua-
tionofpatientandrecom-
menddiagnosticstests.
Pacific Edge Laboratories
Cxbladdertestingand
analysis.Currentcapacityof
260,000testsperyearinthe
USand35,000peryearin
NewZealand.Testresultssent
tothephysicianforpatient
diagnosisandtreatment.
US HEALTHCARE SYSTEM
PacificEdgeAnnualReport2014 17
INTERNATIONAL ROLLOUT OF CXBLADDER
Develop the product and test the commercial model
Test and implement the franchise business model
Rollout to potential new markets
AUSTRALIA SPAIN
USA
JAPAN
SOUTH EAST ASIA
NEW ZEALAND
OUR CANCER DIAGNOSTIC BUSINESS
We operate through a franchise business model
whichincludesourwhollyownedsubsidiariesand
anyotherlicensedpartner.
Our laboratoriesarebuilt fromworld classoper-
ating platforms and equipment that can be pur-
chasedoff theshelfandsetuptoanalysepatient
urineusingourproprietaryRNAtranscripts.These
are brought together in line with our standard
operating systems to enable a high degree of
reproducibilityandrepeatabilityinourlabsensur-
ingthedeliveryofaconsistentuserexperienceto
cliniciansandpatientsglobally.
We currently have franchise partnerships in New
Zealand,Australia,SpainandtheUSA.
In New Zealand, all tests are analysed in Pacific
Edge’slaboratoryinDunedin.However,Labtestsin
Aucklandistheexclusivesalesandmarketingpart-
nerfortheAucklandandNorthlandregions.These
regionsaccountforapproximately40%ofalltests
inNewZealand.
InAustralia,wehavepartneredwithanAustralian
laboratoryprovider,Healthscope,abusinesspart-
nernecessarytohelpusaccesspublicfundingfor
our products. Our Cxbladder technology is fully
integrated into their Melbourne-based business
andisthecommercialhubforallAustraliantests.
Wearehopingtoseeanincreasingnumberoftests
beingdrivenoutofAustraliainthenextyear.
InSpain,wehaveanagreementwithOryzon.The
CxbladdervaluepropositionchosenbyOryzonto
launchCxbladderinSpainisfocusedonCxbladder
forsecondarydetectionofbladdercancer.Weare
workingwiththemtobuildthisspecificdatasetand
arehopingtoseeOryzonunderwaywithinthenext
12months.
CEO’s Report(continued)
18 PacificEdgeAnnualReport2014
THE GENERIC CLINICAL PATHWAY FOR THE DETECTION OF BLADDER CANCER
Pri
mary
Healt
hcare
(Gen
era
l P
racti
tio
ner)
Seco
nd
ary
Healt
hcare
(S
pecia
list
healt
hcare
pro
vid
er/
Uro
log
ist/
specia
list
can
cer
clin
ic)
Referraltoaspecialist
Nofurther
healthcare
intervention
required
FullEvaluation:Testing
Diagnosedwith
bladdercancer
Cancer Management
Duetohighrecurrenceof
bladdercancer,patients
undergoregulartesting.
Yearone–uptosixtimes
Yearstwotofive–upto
fourtimesperyear
New Opportunity: Cxbladder Triage
Preliminary evaluation:Newandaccurateopportunity totriageoutpatientswhodonotrequireareferral
forafullurologicalworkup.
Estimatedthatpatientsrequiringafullevaluationfor
bladdercancercoulddropfrom80%to20%
Benefits:• Fewerpeoplerequiringfullurologicalworkup
• Reducedpressureonhealthcaresystem
• Highlyaccurate,simple,non-invasivetest
CurrentlybeingdevelopedandtestedbyPacificEdge
inconjunctionwithselectedurologists
1 million patients with haematuria
presentingtoGPsannually.
Current Pathway approx. 80%
Cxbladder
Simple, singular urine test to identify the presence of bladder cancer.
Used for initial detection and ongoing disease management
Total market opportunity estimated at 2 million tests per year
Cxbladderworksasanadjuncttocystoscopy*andother
diagnostictools.Itprovidesquantitativegenomicinformation
tocomplementthevisualdiagnosisofferedbycystoscopy.
Cxbladderreplacescytology–athreesampleurinetest
whichisthecurrentalternativetoCxbladder.Cxbladderout-
performscytologyinthedetectionoftumoursinallcases.
Potentialopportunitytocreatemoretailoredproductsfor
useinthemanagementofbladdercancer
20% 80%
*Cystoscopy:Invasiveinternalexaminationwithascope,oftendoneundergeneralanaesthetic.Normallycarriedoutoncepatienthasbeendeterminedtohavebladdercancer.
PercentagesareestimatesmadebyPEBbasedonavailableclinicalandindustrydata.
PacificEdgeAnnualReport2014 19
CEO’s Report(continued)
THE OPPORTUNITY IS HUGE
InAmericaalone,thereisestimatedtobeapproxi-
mately1millionpeoplepresentingtotheirhealth-
careprovidereveryyearwithhaematuria(bloodin
theirurine).Mostofthesepeoplearereferredby
theirGPtoaspecialistclinicianforafullevaluation
and it isestimated thatoverUS$1billion is spent
investigatinghaematuriaeveryyear.
Duetoitshighrecurrencerateandneedforongo-
ing management, treatment of bladder cancer
incursthehighesttotalmedicalcostsofanycancer.
In theUS, this figure is approachingUS$200,000
perpatient,fromdetectionuntildeath.
PacificEdge’sCxbladderproductisspecificallytar-
getedtotestpeoplepresentingwithhaematuriato
determineiftheyhavebladdercancer.Itisseenas
amoreeffectivereplacementforothertestswhich
are currently in use and it is expectedCxbladder
willbeusedalongsideotherdiagnostictoolssuch
asultrasoundandcystoscopy.
In addition, during our engagement with clini-
ciansoverthepastthreeyears,wehaveidentified
anumberofotheropportunitiesfornewCxbladder
productswhichcanbeusedatdifferentstagesof
thedetectionandmanagementofhaematuriaand
bladdercancer.
We are currently developing our next product,
whichcanbeusedbyprimaryphysicianstotriage
outpatientswhodonot require a full referral for
a full urologicalwork-up. This coulddramatically
reducethenumberofpatientsrequiringafulluro-
logicalwork-up,reducingthecostandpressureon
thehealthcaresystemandofferingpeaceofmind
andbettercareforpatients.
FY15 OPERATING OBJECTIVES
Expand our sales presence in the United States and drive revenue
Continue to rollout our User Programmes to targeted clinical groups and urologists, particularly in the US
Continue to negotiate agreements with National and Regional Provider Networks in the US
Focus on developing new bladder cancer products where we have an identified opportunity
Ongoing focus on rollout and set up of franchise partnerships in other targeted markets
20 PacificEdgeAnnualReport2014
OUR FOCUS FOR THE 2015 FINANCIAL YEAR
OurachievementsinFY14havebroughtusanother
stepclosertoattainingourvisionofbeingaworld
leadingcancermoleculardiagnosticscompany.
OurprimaryfocusinFY15willbetostrengthenour
footprintintheUSmarket.
We have the opportunity to provide millions of
patients with access to our non-invasive, simple
andeffectiveCxbladdertechnologyandourfocus
will be on this particular cancer offering for the
shorttomediumterm.
This includes developing new products to meet
specificneedswithin thedetectionand treatment
pathwayforbladdercancer.
Significantinvestmentofhumanandfinancialcapi-
tal intoourCompanywill continue inFY15aswe
establishandexpandourfootprintintheUSmarket.
Ongoing investment is required to establish and
growthecommercialsideofourbusiness.InFY15,
wewillcontinuetoinvestinfourkeyareas:
1.People–expansionofourUSsalesandmarket-
ingteam.Their focuswillbeoncustomercap-
turethroughourUserProgrammes,particularly
of high volume user groups, and progressing
negotiations with National Provider Networks
andfundingagencies.
2.Intellectual Property – registration of patents
andtrademarksintargetedcommercialmarkets.
SomecomponentsofourIParetradesecrets.
3.Franchisemodel–rolloutandsetupofthefran-
chisedbusinessmodelinNewZealand,Australia,
USandSpainandinvestigationofnewmarkets.
4.Research andDevelopment – further develop-
mentofnewproductstomeettheneedsofclini-
ciansandpatients.
PacificEdgeisauniqueNewZealandbusiness.Our
peoplearemotivatedbytheopportunitytomake
adifferenceinhealthcareglobally.At itssimplest,
ourproductscansavelivesthroughearlierdetec-
tionofcancer.
My thanks go to all our hardworking and dedi-
catedpeoplewhobelieveinourCompanyandare
anessentialbuildingblockinoursuccess.
IhavebeenproudtobeCEOofPacificEdgeforthe
last13yearsaswehavebuiltupourCompany.Iam
lookingforwardtothenextstageofourjourneyas
webuildourcommercialcapabilitiesandgrowour
revenue.
David Darling
Chief Executive Officer
CEO’s Report(continued)
PacificEdgeAnnualReport2014 21
Board Of Directors
PACIFIC EDGE LTD
David Band, Independent Director (Appointed 2007)
DavidBandisanexperiencedinternationalbusinessman.HiscareerencompassesaperiodasDirectorofthe
AdvancedBusinessProgrammeattheUniversityofOtagoandsignificantexperienceincorporateconsulting
andmanagement.
Colin Dawson, Independent Director (Appointed 2002)
ColinhasabroadbackgroundwithintheLifeSciencessectorincluding10yearsinveterinaryclinicalprac-
tice.Hehasheldanumberofseniorexecutivepositionsinthepublicandprivatehealthcaresectors.He
servesonanumberofadvisoryboardsandisadirectorofanumberofNZtechnologyandbiotechnology
companiesincludingImmuneSolutionsLtd,BLISTechnologiesandMenixisLtd.
Anatole Masfen, Non-independent Director (Appointed 2008)
AnatoleMasfen is theco-founderofArtemisCapitalaprivateequity investmentfirmbased inAuckland.
AnatolebringstotheBoardsignificantexperienceasaninvestmentmanager,aswellasexperienceinsys-
temsandprocessimplementation.
Chris Swann, Independent Chairman (Appointed 2005)
ChrisSwannwastheprincipalofTDScott&Co.Limited,aDunedin-basedaccountancyandconsultingfirm
for10years.Chrisisanexperiencedbusinessadvisorinanumberofindustriesincludingthemanufacturing,
publishing,health,andbiotechnologysectors.ChrisismanageroftheNewZealandSeedFundwithfour
investmentsinbiotechnologycompaniesincludingPacificEdge.Healsoholdsotherdirectorshipsandisa
MemberoftheNZInstituteofDirectors.
Bryan Williams, Independent Director (Appointed 2013)
BryanWilliams has significant business andUS governance experience. Bryan is also an internationally
recognisedcancerresearcherandresearchadministratorwithsignificantbusinessexperience.Bryanwas
chairmanofMEIPharma,aNASDAQlistedcompanyforsevenyears,ispresentlychairmanoftheBoardof
BiogradAustralia,andisadirectorofCancerTrialsAustraliaandtheMIMR-PHIInstituteofMedicalResearch.
PACIFIC EDGE DIAGNOSTICS USA (PEDUSA
)
PEDUSA isa100%ownedsubsidiaryofPacificEdge. It isgovernedbyaboardofdirectorswhich include
PacificEdgedirectors,ChrisSwannandDavidBand;PacificEdgeCEO,DavidDarling;PEDUSACEO,Jackie
Walker;andBruceNogales.
Bruce Nogales, Independent Director, Pacific Edge Diagnostics USA (Appointed 2013)
Brucehasover30years’businessexperiencepredominantlyinlifesciences.HejoinedtheboardofPEDUSA
inMarch2013.BruceiscurrentlytheChiefCorporateDevelopmentOfficeratGlaukosCorporation,aprivate
medicaldevicecompanyintheUS,focusedonophthalmology.Brucehasalsoheldseniorexecutiveposi-
tionswithTalecrisBiotherapeutics,AventisBehringandGenzyme.
22 PacificEdgeAnnualReport2014
Senior Executive Team
DAVE DARLING
Chief Executive Officer, Pacific Edge and Group
Davehasover30years’businessexperienceinlifesciencesandbiotechnology.HehasledPacificEdgefrom
itsearlyinceptionandhassignificantexecutiveandleadershipexperienceinthedevelopmentandinterna-
tionalcommercializationofbiomedicalandbiotechnologybusinessesandproducts.Duringhiscareer,Dave
hasheldanumberofpositionsingovernance,executiveandseniormanagement.DavejoinedPacificEdge
fromFletcherChallenge.
JIMMY SUTTIE
Chief Operating Officer, Pacific Edge
Jimmy has vast experience, as an executive, with the management of science and technology in New
Zealand’s primary industry sector, particularly thedevelopmentof science for commercialisation. Jimmy
joinedPacificEdgetoheadupoperationsforthefranchiseandnewproductdevelopment.
PARRY GUILFORD
Chief Scientific Officer, Pacific Edge
Parryhasledthescience,researchanddevelopmentatPacificEdgefromitsearlydays.Asoneofthefound-
ingscientistsandamemberoftheScientificAdvisoryBoardoftheCompany,Parryisthearchitectofmany
oftheCompany’sproductprototypes.Parry’sfocustodayandgoingforwardistobringhisworldclassskills
andexperienceonthestepchangeinbiotechnologyfortheCompany’snextgenerationofproducts.
BRENT POWNALL
Commercial Director, Pacific Edge Diagnostics New Zealand
PacificEdgeDiagnosticsNewZealandistheCompany’scommercialarminNewZealandandAustralia.Brent
bringssignificantcommercialexperiencefromthesaleandmarketingofbiologicsandbiomedicalproducts
inNewZealandandAustralia.
JACKIE WALKER
Chief Executive Officer, Pacific Edge Diagnostics USA
Jackiebringstothecompanyover25yearsofextensiveleadershipexperienceincommercializingmedi-
caltechnologies intheUSandastronggeneralmanagementbackground.Priorto joiningPacificEdge
Diagnostics USA, Jackie held senior executive positions at OSspray Ltd, Ondine Biomedica, Dentsply
International,aNASDAQ-100company,andOhmedaMedical.
PacificEdgeAnnualReport2014 23
Financial Statements For the Year Ended 31 March 2014
Statements of Comprehensive Income
24 PacificEdgeAnnualReport2014
Note: These Statements are to be read in conjunction with the Notes to the Financial Statements.
Notes Group2014($) Group2013($) Parent2014($) Parent2013($)
OPERATING REVENUE
CxbladderSales 145,195 15,022 – –
CxbladderResearchRebate 4 87,001 – – –
GrantReceived 5 291,187 158,377 291,186 158,377
LicenceFees – 4,530 – 115,992
InterestEarned 315,275 333,190 315,257 333,184
OtherIncome 8 – 4,419 549,767 210,728
Total Operating Revenue 838,658 515,538 1,156,210 818,281
LESS EXPENSES
Auditors’Remuneration AuditFees 30,600 20,700 30,600 20,700
30,600 20,700 30,600 20,700
Directors'Fees 163,226 88,417 110,337 71,417
Depreciation 6 268,057 195,213 72,272 66,133
Amortisation 7 116,274 – 110,050 –
CurrencyExchangeLoss 571,264 91,571 569,747 92,355
Conference&Travel 735,855 502,967 422,103 215,627
StockExchange&RegistryFees 77,014 147,187 77,014 147,187
Leases RentofPremises 8 653,579 365,037 132,087 134,502
Copier 11,842 11,553 11,842 11,553
665,421 376,590 143,929 146,055
PacificEdgeAnnualReport2014 25
Note: These Statements are to be read in conjunction with the Notes to the Financial Statements.
Notes Group2014($) Group2013($) Parent2014($) Parent2013($)
Research EmployeeBenefits 722,190 2,172,193 722,190 1,099,018
Consultants 102,336 420,609 102,336 71,946
ClinicalTrials 1,512,086 995,670 1,360,958 28,823
Consumables 82,110 141,913 81,982 85,491
ContractServices 540,483 143,647 445,447 70,512
Patents/Trademarks 406,591 414,052 406,591 412,782
CxbladderDevelopment – 733,193 – 100,201
3,365,796 5,021,277 3,119,504 1,868,773
Writedownofinvestmentandadvanceto
subsidiaries17 – – 4,624,375 4,805,160
OtherExpenses 2,286,211 984,980 741,895 330,273
EmployeeBenefits 2,509,985 – 567,435 –
InterestExpense 9 3,351 9 3,351
Total Expenses 10,789,712 7,432,253 10,589,270 7,767,031
NET (LOSS) BEFORE TAX (9,951,054) (6,916,715) (9,433,060) (6,948,750)
IncomeTaxExpense 9 – – – –
(LOSS) FOR THE YEAR AFTER TAX (9,951,054) (6,916,715) (9,433,060) (6,948,750)
TranslationofOtherForeignOperations 23 571,540 (33,163) – –
TOTAL COMPREHENSIVE INCOME/(LOSS) (9,379,514) (6,949,878) (9,433,060) (6,948,750)
EarningspershareforlossattributabletotheEquityHoldersoftheCompanyandGroupduringtheyear
BasicEarningspershare 3 (0.032) (0.025) (0.032) (0.025)
DilutedEarningspershare 3 (0.032) (0.025) (0.032) (0.025)
26 PacificEdgeAnnualReport2014
Note: These Statements are to be read in conjunction with the Notes to the Financial Statements.
Statements of Changes in Equity
Notes Group2014($) Group2013($) Parent2014($) Parent2013($)
EQUITY AT START OF YEAR 11,145,203 17,649,718 11,356,795 17,860,182
(LOSS) FOR YEAR (9,951,054) (6,916,715) (9,433,060) (6,948,750)
TranslationofOtherForeignOperations 571,540 (33,163) – –
Total Comprehensive Loss (9,379,514) (6,949,878) (9,433,060) (6,948,750)
TRANSACTION WITH OWNERS IN THEIR CAPACITY AS OWNERS
OwnersContribution 21 21,243,951 445,363 21,243,951 445,363
ShareIssueExpenses 21 (1,231,632) – (1,231,632) –
Total 20,012,319 445,363 20,012,319 445,363
EQUITY AT END OF YEAR 21,778,008 11,145,203 21,936,054 11,356,795
Equity Comprises:
Notes Group2014($) Group2013($) Parent2014($) Parent2013($)
Share Capital
OpeningBalance 46,599,293 46,153,930 46,599,293 46,153,930
SharesIssued 20,012,319 445,363 20,012,319 445,363
Closing Balance 21 66,611,612 46,599,293 66,611,612 46,599,293
Accumulated Losses
OpeningBalance (35,424,399) (28,507,684) (35,245,970) (28,297,220)
Net(Loss)fortheyear (9,951,054) (6,916,715) (9,433,060) (6,948,750)
Closing Balance 22 (45,375,453) (35,424,399) (44,679,030) (35,245,970)
Reserves
CurrencyTranslationReserve 23 541,849 (29,691) 3,472 3,472
EQUITY AT END OF YEAR 21,778,008 11,145,203 21,936,054 11,356,795
PacificEdgeAnnualReport2014 27
Note: These Statements are to be read in conjunction with the Notes to the Financial Statements.
Balance Sheets
Notes Group2014($) Group2013($) Parent2014($) Parent2013($)
CURRENT ASSETS
Cash,CashEquivalentsandShortTermDeposits 10 20,443,700 10,676,307 20,134,605 10,498,206
Receivables 11 574,241 132,206 543,720 198,373
Inventory 12 241,845 – 98,332 –
OtherAssets 13 166,538 204,282 11,250 27,094
Total Current Assets 21,426,324 11,012,795 20,787,907 10,723,673
NON–CURRENT ASSETS
Property,Plant&Equipment 15 1,111,969 1,081,381 370,962 178,478
IntangibleAssets 16 192,890 – 171,311 –
InvestmentinandAdvancetoSubsidiaries 17 – – 1,328,979 1,154,895
WorkinProgress 14 – 128,611 – 128,611
Total Non–Current Assets 1,304,859 1,209,992 1,871,252 1,461,984
TOTAL ASSETS 22,731,183 12,222,787 22,659,159 12,185,657
CURRENT LIABILITIES
PayablesandAccruals 18 953,175 922,084 723,105 673,362
RedeemableShares(PartPaid) 19 – 3,000 – 3,000
SeriesAConvertiblePreferenceShares 20 – 152,500 – 152,500
Total Current Liabilities 953,175 1,077,584 723,105 828,862
TOTAL LIABILITIES 953,175 1,077,584 723,105 828,862
NET ASSETS 21,778,008 11,145,203 21,936,054 11,356,795
RepresentedBy:
EQUITY
ShareCapital 21 66,611,612 46,599,293 66,611,612 46,599,293
AccumulatedLosses 22 (45,375,453) (35,424,399) (44,679,030) (35,245,970)
Reserves 23 541,849 (29,691) 3,472 3,472
TOTAL EQUITY 21,778,008 11,145,203 21,936,054 11,356,795
28 PacificEdgeAnnualReport2014
Note: These Statements are to be read in conjunction with the Notes to the Financial Statements.
Statements of Cash Flows
Notes Group2014($) Group2013($) Parent2014($) Parent2013($)
CASH FLOWS TO OPERATING ACTIVITIES
CashwasProvidedfrom:
ReceiptsfromCustomers&Grants 211,954 291,676 74,423 278,225
InterestReceived 220,879 316,119 220,861 526,844
432,833 607,795 295,284 805,069
CashwasDisbursedto:
PaymentstoSuppliers&Employees 9,923,423 7,313,100 5,144,382 2,975,939
InterestPaid 9 3,351 9 3,351
NetGSTPaid 33,013 1,780 48,476 13,607
9,956,445 7,318,231 5,192,867 2,992,897
Net Cash Flows to Operating Activities 25 (9,523,612) (6,710,436) (4,897,583) (2,187,828)
CASH FLOWS TO INVESTING ACTIVITIES
CashwasDisbursedto
CapitalExpenditureonPlantandEquipment 15 316,870 1,008,851 264,756 152,465
PurchaseofShortTermDeposits 10 11,304,780 4,195,220 11,304,780 4,195,220
CapitalExpenditureonIntangibleAssets 17 180,553 – 152,750 –
AdvancestoSubsidiaries 17 – – 4,248,691 5,533,247
11,802,203 5,204,071 15,970,976 9,880,932
Net Cash Flows to Investing Activities (11,802,203) (5,204,071) (15,970,976) (9,880,932)
PacificEdgeAnnualReport2014 29
Note: These Statements are to be read in conjunction with the Notes to the Financial Statements.
Notes Group2014($) Group2013($) Parent2014($) Parent2013($)
CASH FLOWS FROM FINANCING ACTIVITIES:
CashwasReceivedfrom:
OrdinarySharesIssued 21 21,001,560 445,363 21,001,560 445,363
21,001,560 445,363 21,001,560 445,363
CashwasDisbursedto:
ShareIssueExpenses 21 1,231,632 – 1,231,632 –
SharefundsinadvancefromShareholders – 9,238 – 9,238
1,231,632 9,238 1,231,632 9,238
Net Cash Flows From Financing Activities 19,769,928 436,125 19,769,928 436,125
Net (Decrease) / Increase in Cash Held (1,555,887) (11,478,382) (1,098,631) (11,632,635)
AddOpeningCashBroughtForward 6,481,087 17,959,469 6,302,986 17,935,620
EffectofExchangeRatechangesonNetCash 18,500 – (569,749) –
Ending Cash Carried Forward 4,943,700 6,481,087 4,634,606 6,302,986
Comprisedof:
BankofNewZealandChequeAccount 182,293 93,626 152,234 79,088
BankofNewZealandCallAccounts 1,151,535 2,212,092 1,151,536 2,212,092
BankofNewZealandUSD 3,298,257 3,963,723 3,298,257 3,963,723
BankofNewZealandAUD 4,668 20,946 4,668 20,946
BankofNewZealandEUR 27,910 27,137 27,910 27,137
CommonwealthBankAUDChequeAccount 7,131 16,216 – –
WellsFargoUSDAccount 271,906 147,347 – –
Ending Cash Carried Forward 4,943,700 6,481,087 4,634,606 6,302,986
BankofNewZealandTermDeposit 3,500,000 4,195,220 3,500,000 4,195,220
ANZTermDeposit 12,000,000 – 12,000,00 –
Total Short Term Deposits 15,500,000 4,195,220 15,500,000 4,195,220
Total Cash, Cash Equivalents and Short Term Deposits
20,443,700 10,676,307 20,134,606 10,498,206
Notes to the Financial Statements
30 PacificEdgeAnnualReport2014
1. GENERAL INFORMATION
The Financial Statements presented for the “Parent” are for the entity Pacific Edge Limited
(“theCompany”),acompanyregisteredunder theCompaniesAct1993.TheCompany isregistered
anddomiciledinNewZealandforthepurposeofdevelopingandcommercialisingnewdiagnosticand
prognostic tools for the early detection andmanagementof cancers. Pacific EdgeDiagnosticsNew
ZealandLtdandPacificEdgeDiagnosticsUSALimitedmanageandoperatethelaboratoriesusedfor
thedetectionofbladdercancer.
TheconsolidatedFinancialStatementsincorporatetheassetsandliabilitiesofallsubsidiariesofPacific
EdgeLimitedasat31March2014andtheresultsofallsubsidiariesfortheyearthenended.Pacific
EdgeLimitedanditssubsidiariestogetherarereferredtointheseFinancialStatementsastheGroup.
TheseconsolidatedFinancialStatementshavebeenapprovedforissuebytheBoardofDirectorson
30June2014.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
TheCompanyisareportingentityundertheFinancialReportingAct1993.TheCompanyisanissuerfor
thepurposesof theFinancialReportingAct1993.TheseFinancialStatementshavebeenprepared in
accordancewithGenerallyAcceptedAccountingPracticeinNewZealand(“NZGAAP”);andtheFinancial
ReportingAct 2013. They complywith International Financial Reporting Standards, theNew Zealand
Equivalents to International Financial Reporting Standards (“NZ IFRS”) andother applicable Financial
ReportingStandardsasappropriateforprofit-orientedentities.
TheCompanyandGrouparedesignatedasprofit-orientedentitiesforfinancialreportingpurposes.
Theaccountingpoliciessetoutbelowhavebeenappliedconsistentlytoallperiodspresentedinthese
FinancialStatements.
TheconsolidatedFinancialStatementsarepresented inNewZealanddollars,which is theCompany’s
functionalcurrencyandGroup’spresentationcurrency.Allfiguresareroundedtothenearestdollar.
Theaccountingprinciplesrecognisedasappropriateforthemeasurementandreportingofearnings,cash
flowsandfinancialpositiononanhistoricalcostbasishavebeenused.
(a) Basis of Consolidation
Thefollowingentitiesandthebasisof their inclusionforconsolidationintheseFinancialStatements
areasfollows:
OwnershipInterests&VotingRights
NameofSubsidiaryPlaceofIncorporation
(orregistration)&Operation PrincipalActivity 2014(%) 2013(%)
PacificEdgeDiagnostics
NewZealandLimitedNewZealand
CommercialLaboratory
Operation100 100
PacificEdgePtyLimited AustraliaBiotechnologyResearch&
Development100 100
PacificEdgeDiagnostics
USALimitedUSA
CommercialLaboratory
Operation100 100
PacificEdgeAnalytical
ServicesLimitedNewZealand DormantCompany 100 100
PacificEdgeAnnualReport2014 31
PacificEdgeLimitedisincorporatedinNewZealandandistheparententityoftheGroup.
Pacific Edge Diagnostics New Zealand Limited, Pacific Edge Diagnostics USA Limited, Pacific Edge
AnalyticalServicesLimitedandPacificEdgePtyLimitedallhaveabalancedateof31March.
TheconsolidatedFinancialStatementsincorporatetheassetsandliabilitiesofallsubsidiariesofPacific
EdgeLimitedasat31March2014andtheresultsofallsubsidiariesfortheyearthenended.Pacific
EdgeLimitedanditssubsidiariestogetherarereferredtointheseFinancialStatementsastheGroup.
PacificEdgeLimitedconsolidatesassubsidiaries intheGroupFinancialStatementsallentitieswhere
PacificEdgeLimitedhastherightstovariablereturnsfromitsinvolvementwiththeentityandhasthe
abilitytoaffectthosereturnsthroughitspowerovertheentity.
SubsidiarieswhichformpartoftheGroupareconsolidatedfromthedateonwhichcontrolistransferred
totheCompany.Theyarede-consolidatedfromthedatethatcontrolceases.
TheacquisitionmethodofaccountingisusedtoaccountforbusinesscombinationsbytheGroup.The
considerationtransferredfortheacquisitionofasubsidiaryisthefairvalueoftheassetstransferred,the
liabilitiesincurredandtheequityinterestissuedbytheGroup.
Theconsiderationtransferred includes thefairvalueofanyassetor liabilityresultingfromacontin-
gentconsiderationarrangement.Acquisition-relatedcostsareexpensedasincurred.Identifiableassets
acquiredandliabilitiesandcontingentliabilitiesassumedinabusinesscombinationaremeasuredini-
tiallyattheirfairvaluesattheacquisitiondate.Onanacquisition-by-acquisitionbasis,theGrouprecog-
nisesanynon-controllinginterestintheacquireeeitheratfairvalueoratthenon-controllinginterest’s
proportionateshareoftheacquiree’snetassets.
Inter-companytransactions,balancesandunrealisedgainsontransactionsbetweenGroupcompanies
areeliminated.Unrealised lossesarealsoeliminated.Accountingpoliciesof subsidiarieshavebeen
changedwherenecessarytoensureconsistencywiththepoliciesadoptedbytheGroup.
InvestmentsinsubsidiariesareaccountedforatcostlessimpairmentintheParentFinancialStatements.
Costisadjustedtoreflectchangesinconsiderationarisingfromcontingentconsiderationamendments.
Costincludesdirectattributablecostsofinvestment.
(b) Property, Plant and Equipment
Property,PlantandEquipmentarethoseassetsheldbytheGroupforthepurposeofcarryingonits
businessactivitiesonanongoingbasis.AllProperty,PlantandEquipment isstatedatcost lesssub-
sequent accumulated depreciation and any accumulated impairment losses. The cost of purchased
assetsincludestheoriginalpurchaseconsiderationgiventoacquiretheassets,andthevalueofother
directlyattributablecoststhathavebeenincurredinbringingtheassetstothelocationandcondition
necessaryfortheirintendedservice.Thisincludesthelaboratoryequipmentfortheestablishmentof
thelaboratories.
32 PacificEdgeAnnualReport2014
Notes to the Financial Statements (continued)
(c) Depreciation
Depreciationofplantandequipmentisbasedonwritingofftheassetsovertheirusefullives,usingthe
diminishingvaluebasis.
Mainratesusedare:
• LaboratoryEquipment 5%to26.4%
• Office&ComputerEquipment 5%to60%
• LeaseholdImprovements 10%
• Plant&Equipment 5%to40%
• Furniture&Fittings 7%to25%
(d) Research and Development Costs
Research is theoriginalandplanned investigationundertakenwith theprospectofgainingnewsci-
entificknowledgeandunderstanding.Thisincludes:directandoverheadexpensesfordiagnosticand
prognosticbiomarkerdiscoveryandresearch;pre-clinicaltrials;andcostsassociatedwithclinicaltrial
activities.Allresearchcostsareexpensedwhenincurred.
Developmentistheapplicationofresearchfindingstoaplanordesignfortheproductionofnewor
substantiallyimprovedprocessesorproductspriortothecommencementofcommercialproduction.
Whenaprojectreachesthestagewhereitisreasonablycertainthatfutureexpenditurecanberecov-
eredthroughtheprocessorproductsproduced,expenditurethat isdirectlyattributedorreasonably
allocatedtothatprojectisrecognisedasadevelopmentasset.Theassetwillbeamortisedfromthedate
ofcommencementofcommercialproductionoftheproducttowhichitrelatesonastraight-linebasis
overtheperiodofexpectedbenefit.Developmentassetsarereviewedannuallyforanyimpairmentin
theircarryingvalue.
(e) Intangible Assets
Intellectual Property
ThecostsofacquiredIntellectualPropertyarerecognisedatcostandamortisedonastraight-linebasis
overitsanticipatedusefullife,whichiscurrentlyassessedattwotofiveyears.AllIntellectualProperty
hasafinitelife.ThecarryingvalueofIntellectualPropertyisreviewedforimpairment.
ThefollowingcostsassociatedwithIntellectualPropertyareexpensedasincurredduringtheresearch
phasesofaproject, andareonly capitalisedwhen incurredaspartof thedevelopmentphaseofa
processorproductwithindevelopmentassets—InternalIntellectualPropertycostsincludingthecosts
ofpatentsandpatentapplication.
Software Development Costs
Costsassociatedwithdevelopmentofsoftwareareheldatcostandamortisedovertheirusefullivesof
betweentwoandfiveyears.
PacificEdgeAnnualReport2014 33
(f) Goods & Services Tax
TheStatementsofComprehensiveIncomeandStatementsofCashFlowshavebeenpreparedsothatall
componentsarestatedexclusiveofGST.AllitemsintheBalanceSheetsarestatednetofGST,withthe
exceptionofreceivablesandpayables.
(g) Share Capital
Ordinary shares are described as equity. Redeemable Shares (part paid) and Series A Convertible
PreferenceSharesareclassifiedasliabilities.
Issueexpenses,includingcommissionpaid,relatingtotheissueofordinaryShareCapitalhavebeen
writtenoffagainsttheissuedsharepricereceivedandrecordedintheStatementsofChangesinEquity.
(h) Financial Instruments
FinancialinstrumentscarriedforwardintheBalanceSheetsincludecashandbankbalances,receiva-
bles,tradecreditors,RedeemableShares,convertiblepreferencesharesandadvancestosubsidiaries.
Theparticularrecognitionmethodsadoptedaredisclosedintheindividualpolicystatementsassociated
witheachitem.
(i) Receivables
Receivablesareinitiallymeasuredatfairvalueandsubsequentlymeasuredatamortisedcostusingthe
effectiveinterestmethod,lessanyprovisionforimpairment.Aprovisionforimpairmentofreceivables
isestablishedwhenthereisobjectiveevidencethattheGroupwillnotbeabletocollectallamountsdue
accordingtotheoriginaltermsofreceivables.Significantfinancialdifficultiesofthedebtor,probability
that thedebtorwillenterbankruptcyorfinancialreorganisation,anddefaultordelinquency inpay-
ments(morethan30daysoverdue)areconsideredindicatorsthatthetradereceivableisimpaired.The
amountoftheprovisionisthedifferencebetweentheasset’scarryingamountandthepresentvalueof
estimatedfuturecashflows,discountedusingtheoriginaleffectiveinterestrate.
(j) Foreign Currency Translation
Foreign Currency Transactions
TheindividualFinancialStatementsofeachgroupentityarepresentedinthecurrencyoftheprimary
economicenvironment inwhichtheentityoperates(its functionalcurrency).For thepurposeof the
GroupFinancialStatements,theresultsandfinancialpositionofeachgroupentityareexpressedinNew
Zealanddollars(‘NZD’),whichisthefunctionalcurrencyoftheCompanyandthepresentationcurrency
fortheGroupFinancialStatements.
InpreparingtheFinancialStatementsoftheindividualentities,transactionsincurrenciesotherthanthe
entity’s functionalcurrency(foreigncurrencies)arerecordedat theexchangeratesprevailingat the
datesofthetransactions.Attheendofeachreportingperiod,monetaryitemsdenominatedinforeign
currenciesareretranslatedattheratesprevailingattheendofthereportingperiod.
Non-monetaryitemscarriedatfairvaluethataredenominatedinforeigncurrenciesareretranslated
attheratesprevailingatthedatewhenthefairvaluewasdetermined.Non-monetaryitemsthatare
measuredintermsofhistoricalcostinaforeigncurrencyarenotretranslated.
34 PacificEdgeAnnualReport2014
Notes to the Financial Statements (continued)
ExchangedifferencesarerecognisedinthestatementofComprehensiveIncomeintheperiodinwhich
theyariseexceptfor:
• Exchangedifferencesonmonetary items receivable fromorpayable toa foreignoperation for
whichsettlementisneitherplannednorlikelytooccur,whichformpartofthenetinvestmentina
foreignoperation,andwhicharerecognisedinotherComprehensiveIncomeandaccumulatedas
aseparatecomponentofequityintheGroup’sforeigncurrencytranslationreserveandreclassified
fromequitytoprofitorloss(asareclassificationadjustment)ondisposalofthenetinvestment.
Foreign Operations
ForthepurposeofpresentingtheGroupFinancialStatements,theassetsandliabilitiesoftheGroup’s
foreignoperationsareexpressedinNewZealanddollarsusingexchangeratesprevailingattheendof
thereportingperiod.Incomeandexpenseitemsaretranslatedattheaverageexchangeratesforthe
period,unlessexchangeratesfluctuatedsignificantlyduringthatperiod, inwhichcasetheexchange
ratesatthedatesofthetransactionsareused.Exchangedifferencesarising,ifany,arerecognisedin
otherComprehensiveIncomeandaccumulatedasaseparatecomponentofequityintheGroup’sfor-
eigncurrencytranslationreserve.Suchexchangedifferencesarereclassifiedfromequitytoprofitorloss
(asareclassificationadjustment)intheperiodinwhichtheforeignoperationisdisposedof.
(k) Cash and Cash Equivalents
Cashandcashequivalents includescash inhand,depositsheldat callwithbanks,other short-term
highlyliquidinvestmentswithoriginalmaturitiesofthreemonthsorless,andbankoverdrafts.
Bankoverdraftsareshownwithinborrowingsincurrentliabilitiesinthebalancesheet.
(l) Revenue Recognition
Revenueismeasuredatthefairvalueoftheconsiderationreceivedorreceivable.Amountsdisclosedas
revenuearenetofreturns,tradeallowances,rebatesandamountscollectedonbehalfofthirdparties.
TheGrouprecognisesrevenuewhentheamountofrevenuecanbereliablymeasured,itisprobablethat
futureeconomicbenefitswillflowtotheentityandspecificcriteriahavebeenmetforeachoftheGroup’s
activitiesasdescribedbelow.
Operatingrevenuesrepresenttherevenuefromthesaleofgoodsthatisrecognisedwhenagroupentity
sellsaproducttothecustomer.
Consultancyfeesarerecognisedintheaccountingperiodinwhichtheservicesarerendered.Forfixed-
pricecontracts,revenueisrecognisedunderthepercentageofcompletionmethod,basedontheactual
serviceprovidedasaproportionofthetotalservicestobeprovided.
Grantsfromthegovernmentarerecognisedattheirfairvaluewherethereisareasonableassurancethat
thegrantwillbereceivedandtheGroupwillcomplywithallattachedconditions.Governmentgrants
relatingtocostsaredeferredandrecognisedintheprofitorlossovertheperiodnecessarytomatch
themwiththecoststhattheyareintendedtocompensate.Grantsareforreimbursementoflaboratory
costs.
PacificEdgeAnnualReport2014 35
Cxbladder research rebate is recognised at its fair valuewhere there is a reasonable assurance that
the rebatewill be received and theGroupwill complywith all attached conditions.Due to the time
takenbetweensubmissionoftherebateclaimandthereceiptoffunds,thisrevenueisrecognisedona
cashbasisinaccordancewithNZIAS18.TheCxbladderresearchrebateisfortheresearchprogramme
administeredbyPacificEdgePTYLimited.
Interest income is recognisedusing theeffective interestmethod.Whenareceivable is impaired, the
Groupreducesthecarryingamounttoitsrecoverableamount,beingtheestimatedfuturecashflowdis-
countedattheoriginaleffectiveinterestrateoftheinstrument,andcontinuesunwindingthediscountas
interestincome.Interestincomeonimpairedloansisrecognisedusingtheoriginaleffectiveinterestrate.
(m) Borrowing Costs
Borrowingcostsarerecognisedasanexpenseintheperiodinwhichtheyareincurred.
(n) Operating Leases
Operating leasesonequipmentarecharged tootherexpenses in thestatementsofComprehensive
Incomeonastraight-linebasisoverthetermofthelease.
(o) Employee Entitlements
Employeebenefitsaremeasuredatnominalvaluesbasedonaccruedentitlementsatcurrentratesof
pay.Theseincludesalariesandwagesaccrueduptobalancedate,annualleaveearnedto,butnotyet
takenatbalancedate.
(p) Critical Accounting Estimates and Assumptions
Inpreparing theseFinancialStatements theGroupmadeestimatesandassumptionsconcerning the
future.Theseestimatesandassumptionsmaydifferfromthesubsequentactualresults.Estimatesand
assumptionsarecontinuallyevaluatedandarebasedonhistoricalexperienceandotherfactorsinclud-
ing expectations or future events that are believed to be reasonable under the circumstances. The
mainestimatesandassumptionsusedaredepreciationofproperty,plantandequipment(note14)and
impairmentofsubsidiaries(note16).Itisnotexpectedthattheseestimatesandassumptionswillhave
asignificantriskofcausingamaterialadjustmenttothecarryingamountsofassetsandliabilitieswithin
thenextFinancialYear.
(q) Statements of Cash Flows
Cashmeanscashbalancesonhand,depositsheldat callwithbanks,other short-termhighly liquid
investmentswithoriginalmaturitiesofthreemonthsorless,andbankoverdrafts.
Operatingactivitiesincludethecashreceivedandcashpaidfortheprincipalrevenue-producingactivi-
tiesoftheCompanyandGroupandotheractivitiesthatarenotinvestingorfinancingactivities.
Investingactivitiesarethoseactivitiesrelatingtotheacquisitionanddisposalofnon-currentassets.
FinancingactivitiescomprisethechangeinequityanddebtcapitalstructureoftheCompanyandGroup.
36 PacificEdgeAnnualReport2014
Notes to the Financial Statements (continued)
(r) Income Tax
Thetaxexpensefortheperiodcomprisescurrentanddeferredtax.Taxisrecognisedinprofitorloss,
excepttotheextent that itrelatesto itemsrecognisedinotherComprehensiveIncomeordirectly in
equity. In this case, the tax is also recognised inotherComprehensive Incomeordirectly in equity,
respectively.
Thecurrentincometaxchargeiscalculatedonthebasisofthetaxlawsenactedorsubstantivelyenacted
attheBalanceSheetdateinthecountrieswherethecompanyanditssubsidiariesoperateandgener-
atetaxableincome.Managementperiodicallyevaluatespositionstakenintaxreturnswithrespectto
situationsinwhichapplicabletaxregulationissubjecttointerpretation.Itestablishesprovisionswhere
appropriateonthebasisofamountsexpectedtobepaidtothetaxauthorities.
Deferred income tax isprovided in full,using the liabilitymethod,on temporarydifferencesarising
betweenthetaxbasesofassetsandliabilitiesandtheircarryingamountsintheFinancialStatements
inaccordancewithNZIAS12.Deferredincometaxassetsarerecognisedtotheextentthatitisprob-
ablethatfuturetaxableprofitwillbeavailableagainstwhichthetemporarydifferencescanbeutilised.
Deferredincometaxisdeterminedusingtaxrates(andlaws)thathavebeenenactedorsubstantially
enactedbythebalancesheetdateandareexpectedtoapplywhentherelateddeferredincometaxasset
isrealisedorthedeferredincometaxliabilityissettled.
(s) Inventory
Inventoriesarestatedatthelowerofcostandnetrealisablevalue.Costisdeterminedusingweighted
average.
(t) Impairment of Non-Financial Assets
Non-financialassets thathavean indefiniteuseful lifearenotsubject toamortisationandaretested
annually for impairment.Assets thathaveafiniteuseful lifeare reviewed for impairmentwhenever
events or changes in circumstances indicate that the carrying amountmay not be recoverable. An
impairmentlossisrecognisedfortheamountbywhichtheasset’scarryingamountexceedsitsrecover-
ableamount.Therecoverableamountisthehigherofanasset’sfairvaluelesscoststosellandvalue
inuse.
Thevalueinuseforcash-generatingassetsisthepresentvalueofexpectedfuturecashflows.
ThetotalimpairmentlossisrecognisedintheStatementsofComprehensiveIncome.
(u) Segment Reporting
Operatingsegmentsarereportedinamannerconsistentwiththeinternalreportingprovidedtothe
chief operatingdecision-maker. The chief operatingdecision-maker,who is responsible for allocat-
ingresourcesandassessingperformanceoftheoperatingsegments,hasbeenidentifiedastheChief
ExecutiveOfficerwhomakesstrategicdecisions.
PacificEdgeAnnualReport2014 37
(v) Standards or Interpretations Not Yet Effective
Anumberofnewstandardsandamendments to standardsand interpretationsarenotyeteffective
andhavenotbeenappliedinpreparingtheseconsolidatedFinancialStatements.Noneof theseare
expectedtohaveasignificanteffectontheconsolidatedFinancialStatementsoftheGroup,exceptthe
followingsetoutbelow:
NZIFRS9,‘FinancialInstruments’,addressestheclassification,measurementandrecognitionoffinan-
cialAssetsandFinancialLiabilities
NZ IFRS9was issued inNovember2009andOctober2010. It replaces thepartsofNZ IAS39 that
relatetotheclassificationandmeasurementofFinancialInstrumentsandiseffectivefortheFinancial
Statementsissuedforthefiscalyearsbeginningonorafter1January2017.NZIFRS9requiresFinancial
Assets tobeclassified into twomeasurementcategories: thosemeasuredasat fair valueand those
measuredatamortisedcost.Thedeterminationismadeatinitialrecognition.Theclassificationdepends
ontheentity’sbusinessmodelformanagingitsFinancialInstrumentsandthecontractualcashflowchar-
acteristicsoftheinstrument.ForFinancialLiabilities,thestandardretainsmostoftheNZIAS39require-
ments.Themainchangeisthat,incaseswherethefairvalueoptionistakenforFinancialLiabilities,the
partofafairvaluechangeduetoanentity’sowncreditriskisrecordedinotherComprehensiveIncome
ratherthantheincomestatement,unlessthiscreatesanaccountingmismatch.Thegroupisyettoassess
NZIFRS9’sfullimpact.TheGroupwillalsoconsidertheimpactoftheremainingphasesofNZIFRS9
whencompletedbytheBoard.
(w) New and amended standards adopted by the Company and
Group
Thefollowingstandardshavebeenadoptedbythegroupforthefirsttimeforthefinancialyearbegin-
ningonorafter1April2013andarerelevanttothegroup:
• NZIFRS10,‘Consolidatedfinancialstatements’buildsonexistingprinciplesbyidentifyingthecon-
ceptofcontrolasthedeterminingfactorinwhetheranentityshouldbeincludedwithintheconsoli-
datedfinancialstatementsoftheparentcompany.
• NZIFRS12,‘Disclosuresofinterestsinotherentities’includesthedisclosurerequirementsforall
formsofinterestsinotherentities,includingjointarrangements,associates,structuredentitiesand
otheroffbalancesheetvehicles.
• NZ IFRS 13, ‘Fair valuemeasurement’, aims to improve consistency and reduce complexity by
providingaprecisedefinitionoffairvalueandasinglesourceoffairvaluemeasurementanddis-
closurerequirementsforuseacrossNZIFRSs.Therequirements,whicharelargelyalignedbetween
NZIFRSandUSGAAP,donotextendtheuseoffairvalueaccountingbutprovideguidanceonhow
itshouldbeappliedwhereitsuseisalreadyrequiredorpermittedbyotherstandardswithinNZ
IFRS.
38 PacificEdgeAnnualReport2014
Notes to the Financial Statements (continued)
3. EARNINGS PER SHARE
(a) Basic
BasicearningspershareiscalculatedbydividingtheprofitattributabletoequityholdersoftheCompany
bytheweightedaveragenumberofOrdinarySharesonissueduringtheyear.
Group2014($) Group2013($) Parent2014($) Parent2013($)
LossattributabletoequityholdersoftheCompany (9,379,514) (6,916,715) (9,433,060) (6,948,750)
WeightedaveragenumberofOrdinaryShareson
issue291,269,094 275,351,207 291,269,094 275,351,207
Earningspershare (0.032) (0.025) (0.032) (0.025)
(b) Diluted
DilutedearningspershareiscalculatedbyadjustingtheweightedaveragenumberofOrdinaryShares
outstandingtoassumeconversionofalldilutivepotentialOrdinaryShares.
DuringtheyeartheCompanyhadtwocategoriesofdilutivepotentialOrdinaryShares:Redeemable
sharesandSeriesAConvertiblePreferenceshares.BothcategorieswerefullyconvertedintoOrdinary
Sharesduringtheyear.
Group2014($) Group2013($) Parent2014($) Parent2013($)
LossattributabletoequityholdersoftheCompany (9,379,514) (6,916,715) (9,433,060) (6,948,750)
WeightedaveragenumberofOrdinarySharesin
issue291,269,094 275,351,207 291,269,094 275,351,207
Adjustmentsfor:
RedemptionofRedeemableShares – 201,000 – 201,000
ConversionofSeriesAConvertiblePreference
Shares– 1,067,500 – 1,067,500
WeightedaveragenumberofOrdinarySharesfor
dilutedearningspershare291,269,094 276,619,707 291,269,094 276,619,707
DilutedEarningspershare (0.032) (0.025) (0.032) (0.025)
PacificEdgeAnnualReport2014 39
4. CXBLADDER RESEARCH REBATE
During thefinancial year theGroupreceived revenue from theAustralianTaxOffice foraResearch
andDevelopmenttaxincentiverebateclaimfortheyearended31March2012.Duetothetimetaken
betweensubmissionoftherebateclaimandthereceiptoffunds,thisrevenueisrecognisedonacash
basisinaccordancewithNZIAS18.Afurtherclaimhasbeensubmittedforthe2013financialyear.
5. GRANTS RECEIVED
Duringthe2014financialyeartheCompanysubmittedaclaimforpartialreimbursementofcostswith
NewZealandTrade&Enterpriseinlinewiththeirfundingagreement(2013:GrantreceivedfromNew
ZealandTrade&Enterprise).AfurtherclaimhasbeensubmittedtoCallaghanInnovation(formerlythe
MinistryofBusiness,InnovationandEmployment)whichrelatestoapostgraduateinternandsummer
student.TheCompanywasalsoawardedaCallaghanInnovationGrowthGrantcommencing1January
2014.AclaimforJanuarytoMarch2014hasbeensubmittedtoCallaghanInnovationinlinewiththis
agreement.
Allconditionsofthegrantshavebeencompliedwith.
6. DEPRECIATION
Group2014($) Group2013($) Parent2014($) Parent2013($)
LaboratoryEquipment 151,400 94,720 44,581 42,810
Computer/OfficeEquipment 74,141 69,897 27,691 23,323
LeaseholdPropertyImprovements 8,854 6,330 – –
Furniture&Fittings 20,736 10,041 – –
Plant&Equipment 12,926 14,225 – –
Total Depreciation 268,057 195,213 72,272 66,133
7. AMORTISATION
Group2014($) Group2013($) Parent2014($) Parent2013($)
SoftwareDevelopmentCosts 89,844 – 83,620 –
Patents 16,901 – 16,901 –
CxbladderDevelopmentCosts 9,529 – 9,529 –
Total Amortisation 116,274 – 110,050 –
40 PacificEdgeAnnualReport2014
Notes to the Financial Statements (continued)
8. RELATED PARTIES
TheCompanypaidconsultancyfeesforaccountingservicestoCJSBusinessAdvisorsLimited.CJSwann
isaDirectorandShareholderof thisCompany.Thefeeschargedwereonnormal termsandcondi-
tionsandtotalled$28,658(2013:$40,467).Atbalancedatenofeeswereoutstandingrelativetothese
transactions(2013:$Nil).
Asignificantshareholder,theUniversityofOtago,providedrentalspaceandcarparkingtotheGroupto
thevalueof$228,321(2013:$186,118)andtheCompanytothevalueof$197,367(2013:$160,775).
Asat31March2014theGroupcommitment is$150,600(2013:$147,360)andtheCompanycom-
mitmentis$125,760(2013:$125,760).MrCEDawson,adirectoroftheCompanywasalsotheChief
ExecutiveOfficerofOtagoInnovationLimited,awhollyownedsubsidiaryoftheUniversityofOtago,
duringthe2014FinancialYear.
Refer note 32 for an Incentive Plan that will also impact keymanagement remuneration in future
periods.
Director’sfeesandpaymentsduringthe2014FinancialYearwere$163,226(2013:$88,417).
Keymanagementpersonnelcompensationshorttermemployeebenefitsforthe2014FinancialYear
were$878,300(2013:$700,000).
AllmembersoftheGroupareconsideredtoberelatedpartiesofPacificEdgeLimited(ultimateParent).
ThisincludesthesubsidiariesidentifiedinNote2(a).
During the2014Financial Year theCompanyadvanced$914,296 (2013: $913,808) toPacificEdge
DiagnosticsNewZealandLimitedtofundlaboratorywork.$3,282,763(2013:$3,946,867)wasadvanced
bytheCompanytoPacificEdgeDiagnosticsUSALimitedforplantandequipmentandthesetupofthe
LaboratoryinHershey.$51,633(2013:$691,013)wasadvancedbytheCompanytoPacificEdgePty
Limitedtofundcontinuedresearch.NofundswereadvancedtoPacificEdgeAnalyticalServicesLimited.
Thesebalancesarerecordedasanadvancetotheseparateentitiesandareimpairedpernote17asthey
arenotexpectedtobecalledforrepaymentwithinayear,untilthesubsidiarieshavesufficientfunds.
Interesttotalling$549,767(2013:$210,728)hasbeenchargedatmarketrateonthefundsadvancedto
subsidiariesfromPacificEdgeLimited.Noothertermsareheldontheloans.
9. INCOME TAX
TheCompanyandGrouphaveincurredanoperatinglossforthe2014FinancialYearandnoincome
taxispayable.TheCompanyhadacertificateofexemptionforResidentWithholdingTaxandassuchno
ResidentWithholdingTaxwasdeductedfrominterestearned.
Group2014($) Group2013($) Parent2014($) Parent2013($)
Net(Loss)beforetax (9,951,054) (6,916,715) (9,433,061) (6,948,750)
Add:Non-deductibleitems 13,998 700,468 4,637,663 4,811,429
Add:TimingDifferences 28,204 5,849 28,204 5,849
Net Profit (Loss) before tax (9,908,852) (6,210,399) (4,767,194) (2,131,742)
Taxat28% (2,774,479) (1,945,966) (1,334,814) (1,945,649)
Less:notrecognisedasadeferredtaxasset 2,774,479 1,945,966 1,334,814 1,945,649
Income Tax Expense – – – –
PacificEdgeAnnualReport2014 41
INCOME TAX (CONTINUED)
Tax Losses:
Tax losses are available to be carried forward and offset against future taxable income. Tax losses
canbeutilisedifvariousconditionsrequiredbyincometaxlegislationarecompliedwith.Theparent
has$5,404,883(2013:$3,466,008)lossestocarryforward.TheGrouphaslossestocarryforwardof
approximately$15,642,688whichisdependentonmeetingrequirementsofNewZealandandforeign
taxlegislation.
Deferred Research and Development Expenditure:
TheCompanyhasdeferredresearchanddevelopmentexpendituretotallingapproximately$20,291,449
(2013:$17,463,130)tocarryforwardandclaimforpurposesinNewZealandinthefuture.Thisequates
toapotentialbenefitof$5,681,606.
10. CASH, CASH EQUIVALENTS AND SHORT TERM DEPOSITS
Group2014($) Group2013($) Parent2014($) Parent2013($)
BankofNewZealandChequeAccount 182,293 93,626 152,235 79,088
BankofNewZealandCallAccounts 1,151,535 2,212,092 1,151,535 2,212,092
BankofNewZealandUSD 3,298,257 3,963,723 3,298,257 3,963,723
BankofNewZealandAUD 4,668 20,946 4,668 20,946
BankofNewZealandEUR 27,910 27,137 27,910 27,137
CommonwealthBankAUDChequeAccount 7,131 16,216 – –
WellsFargoUSDAccount 271,906 147,347 – –
Total Cash & Cash Equivalents 4,943,700 6,481,087 4,634,605 6,302,986
BankofNewZealandTermDeposit 3,500,000 4,195,220 3,500,000 4,195,220
ANZTermDeposit 12,000,000 – 12,000,000 –
Total Short Term Deposits 15,500,000 4,195,220 15,500,000 4,195,220
Total Cash, Cash Equivalents and Short Term Deposits
20,443,700 10,676,307 20,134,605 10,498,206
Interestonthebankbalancesrangefrom0%to4.79%(2013:0%to4.20%)perannum.Fundsheldon
shorttermdepositwithANZandBNZcanbeaccessedatanytimeattherequestoftheauthorisedbank
signatoriesofPacificEdgeLimited.
42 PacificEdgeAnnualReport2014
Notes to the Financial Statements (continued)
11. RECEIVABLES
Group2014($) Group2013($) Parent2014($) Parent2013($)
TradeReceivables 352,892 38,266 335,000 118,236
AccruedInterest 133,150 38,754 133,150 38,754
AustralianGSTRefundDue 4,908 893 – –
NewZealandGSTRefundDue 83,291 54,293 75,570 41,383
Total Receivables 574,241 132,206 543,720 198,373
Alltradereceivablesarewithinpaymentterms.Noitemsareheldthatarepastdue.
12. INVENTORY
Group2014($) Group2013($) Parent2014($) Parent2013($)
LaboratorySupplies 241,845 – 98,332 –
Total Inventory 241,845 – 98,332 –
13. OTHER ASSETS
Group2014($) Group2013($) Parent2014($) Parent2013($)
Prepayments 75,867 110,417 11,250 27,094
Other–LeaseSecurityDeposit 77,975 80,724 – –
CreditCardCollateral 12,696 13,141 – –
Total Other Assets 166,538 204,282 11,250 27,094
14. WORK IN PROGRESS
Duringthe2014yearworkonimplementingtheNAVfinancialadministrationsystemwascompleted.
The$128,611ofWork inProgress fromtheprioryear(2013)hasnowbeencapitalisedtosoftware
developmentcosts.
PacificEdgeAnnualReport2014 43
15. PROPERTY, PLANT & EQUIPMENT
GroupLaboratory
Equipment($)
Office&Computer
Equipment($)
LeaseholdImprovements
($)
Plant&Equipment($)
Furniture&Fittings($)
Total($)
COST
Balanceat1April2012 1,335,023 554,644 21,825 88,697 18,350 2,018,539
Additions 520,898 135,948 104,657 1,507 116,128 879,138
Disposals – (95,257) – – – (95,257)
Balance at 31 March 2013 1,855,921 595,335 126,482 90,204 134,478 2,802,420
Balanceat1April2013 1,855,921 595,335 126,482 90,204 134,478 2,802,420
Additions 163,434 151,085 – 10,246 7,095 331,860
Disposals – (14,990) – – – (14,990)
ForeignCurrencyTranslationDifference (17,735) (3,752) (3,563) (32) (3,954) (29,036)
Balance at 31 March 2014 2,001,620 727,678 122,919 100,418 137,619 3,090,254
ACCUMULATED DEPRECIATION
Balanceat1April2012 1,164,053 430,386 2,500 21,305 3,941 1,622,185
DepreciationExpense 94,720 69,897 6,330 14,225 10,041 195,213
Disposal – (94,360) – – – (94,360)
ForeignCurrencyTranslationDifference (1,420) (256) (120) (201) (2) (1,999)
Balance at 31 March 2013 1,257,353 405,667 8,710 35,329 13,980 1,721,039
Balanceat1April2013 1,257,353 405,667 8,710 35,329 13,980 1,721,039
DepreciationExpense 151,400 74,141 8,854 12,926 20,736 268,057
ForeignCurrencyTranslationDifference (7,353) (1,754) (521) (13) (1,170) (10,811)
Balance at 31 March 2014 1,401,400 478,054 17,043 48,242 33,546 1,978,285
NET BOOK VALUE
At1April2012 170,970 124,258 19,325 67,392 14,409 396,354
At31March2013 598,568 188,668 117,772 54,875 120,498 1,080,381
At31March2014 600,220 249,624 105,876 52,176 104,073 1,111,969
44 PacificEdgeAnnualReport2014
Notes to the Financial Statements (continued)
PROPERTY, PLANT & EQUIPMENT (CONTINUED)
Parent
LaboratoryEquipment($)
Office&Computer
Equipment($)
LeaseholdImprovements
($)
Plant&Equipment($)
Furniture&Fittings($)
Total($)
COST
Balanceat1April2012 1,335,023 396,786 – – – 1,731,809
Additions – 24,781 – – – 24,781
Disposals – (95,257) – – – (95,257)
Balance at 31 March 2013 1,335,023 326,310 – – – 1,661,333
Balanceat1April2013 1,335,023 326,310 – – – 1,661,333
Additions 159,037 105,719 264,756
Disposals – – – – – –
Balance at 31 March 2014 1,494,060 432,029 – – – 1,926,089
ACCUMULATED DEPRECIATION
Balanceat1April2012 1,164,053 347,029 – – – 1,511,082
DepreciationExpense 42,557 23,576 – – – 66,133
Disposals – (94,360) – – – (94,360)
Balance at 31 March 2013 1,206,610 276,245 – – – 1,482,855
Balanceat1April2013 1,206,610 276,245 – – – 1,482,855
DepreciationExpense 44,581 27,691 – – – 72,272
Disposals – – – – – –
Balance at 31 March 2014 1,251,191 303,936 – – – 1,555,127
NET BOOK VALUE
At1April2012 170,970 49,757 – – – 220,727
At31March2013 128,413 50,065 – – – 178,478
At31March2014 242,869 128,093 – – – 370,962
PacificEdgeAnnualReport2014 45
16. INTANGIBLE ASSETS
Group
SoftwareDevelopmentCosts($)
Patents($)Cxbladder
DevelopmentCosts($)Total($)
COST
Balanceat1April2012 – – – –
Additions – – – –
Disposals – – – –
Balance at 31 March 2013 – – – –
Balanceat1April2013 – – – –
Additions 242,188 33,802 32,846 308,836
Disposals – – – –
ForeignCurrencyTranslationDifference – – – –
Balance at 31 March 2014 242,188 33,802 32,846 308,836
ACCUMULATED AMORTISATION
Balanceat1April2012 – – – –
AmortisationExpense – – – –
Disposal – – – –
ForeignCurrencyTranslationDifference – – – –
Balance at 31 March 2013 – – – –
Balanceat1April2013 – – – –
AmortisationExpense 89,844 16,901 9,529 116,274
ForeignCurrencyTranslationDifference (328) -– – (328)
Balance at 31 March 2014 89,516 16,901 9,529 115,946
NET BOOK VALUE
At1April2012 – – – –
At31March2013 – – – –
At31March2014 152,671 16,901 23,317 192,890
46 PacificEdgeAnnualReport2014
Notes to the Financial Statements (continued)
INTANGIBLE ASSETS (CONTINUED)
Parent
Internally GeneratedSoftware
DevelopmentCosts($)Patents($)
CxbladderDevelopmentCosts($)
Total($)
COST
Balanceat1April2012 – – – –
Additions – – – –
Disposals – – – –
Balance at 31 March 2013 – – – –
Balanceat1April2013 – – – –
Additions 214,713 33,802 32,846 281,361
Disposals – – – –
Balance at 31 March 2014 214,713 33,802 32,846 281,361
ACCUMULATED AMORTISATION
Balanceat1April2012 – – – –
AmortisationExpense – – – –
Disposal – – – –
Balance at 31 March 2013 – – – –
Balanceat1April2013 – – – –
AmortisationExpense 83,620 16,901 9,529 110,050
Balance at 31 March 2014 83,620 16,901 9,529 110,050
NET BOOK VALUE
At1April2012 – – – –
At31March2013 – – – –
At31March2014 131,093 16,901 23,317 171,311
PacificEdgeAnnualReport2014 47
17. INVESTMENT IN AND ADVANCE TO SUBSIDIARIES
Parent2014($) Parent2013($)
Advancestosubsidiaries 5,952,354 5,959,055
Sharesinsubsidiary 1,000 1,000
5,593,354 5,960,055
LessImpairmentLossfortheYear (4,624,375) (4,805,160)
1,328,979 1,154,895
The cumulative advances to subsidiaries total $21,217,885 (2013: $15,265,531) and are impaired.
PacificEdgeAnalyticalServicesLimitedisdormantsonofundshavebeenadvancedtoit.Theimpair-
mentlossin2014isaresultoftheeffectoftheinvestmentandadvancesnotbeingrecoverableinfull
basedonthetotaldeficitinequityofthesubsidiariesat31March2014.Accordingly,theimpairment
lossreducesthevalueintheParent’sbookstoitsfairvaluebasedontherecoverableamountatbal-
ancedate.
18. PAYABLES AND ACCRUALS
Group2014($) Group2013($) Parent2014($) Parent2013($)
TradeCreditors 619,773 535,263 435,092 296,541
AccruedExpenses 88,688 84,549 43,301 74,549
EmployeeEntitlements(referbelow) 244,712 215,381 244,712 215,381
MoniesReceivedinAdvancefromShareholders – 86,891 – 86,891
Total Payables and Accruals 953,175 922,084 723,105 673,362
Payablesandaccrualsarenon-interestbearingandarenormallysettledon30dayterms, therefore
theircarryingvalueapproximatestheirfairvalue.
EmployeeEntitlements Group2014($) Group2013($) Parent2014($) Parent2013($)
PAYETax 44,834 39,906 44,834 39,906
HolidayPay 138,253 111,319 138,253 111,319
AccruedWages 61,625 64,156 61,625 64,156
Total Employee Entitlements 244,712 215,381 244,712 215,381
48 PacificEdgeAnnualReport2014
Notes to the Financial Statements (continued)
19. REDEEMABLE SHARES
PartPaid Group2014($) Group2013($) Parent2014($) Parent2013($)
RedeemableShares(PartPaid) – 3,000 – 3,000
Total Redeemable Shares – 3,000 – 3,000
ThesesharesrelatedtoanEmployeeShareOwnershipPlan(ESOP).Thishasnowterminatedandthe
twosubscribersoftheremaining300,000RedeemableShares($3,000at1centpershare)havecon-
vertedtheirRedeemableSharestoOrdinarySharesorbeenrepaidincash.
TheRedeemableshareswereoriginallyissuedintheESOPon26August2004.Followingasubsequent
reductioninthesharepriceforOrdinaryShares,theDirectorsdecidedtocanceltheschemeandoffer
allredeemableshareholdersrepaymentincashortheequivalentvalueinOrdinaryShares.TheScheme
wascancelledon31July2006.Consequently,theremainingvalueoftheoptionstoconverttoOrdinary
SharesintheESOP,thathadnotbeenpreviouslyexpensed,wasexpensedimmediately.
20. SERIES A CONVERTIBLE PREFERENCE SHARES
Group2014($) Group2013($) Parent2014($) Parent2013($)
OpeningBalance 152,500 190,625 152,500 190,625
Non-cashConversiontoOrdinaryShares (152,500) (38,125) (152,500) (38,125)
Closing Balance – 152,500 – 152,500
AllSeriesAConvertiblePreferenceShareshavenowbeenconvertedresultingintheissueof1,067,000
OrdinaryShares.ThereareNil(2013:$152,500)SeriesAConvertiblePreferenceSharesonissue.
TheoriginalagreementwasforeachSeriesAConvertiblePreferenceshareholderhavingtherightto
convert,uponelection,tofiveOrdinarySharesandthenentitledtofivevotes.Thiswassubsequently
variedtosevenOrdinarySharesandsevenvotesrespectively.
PacificEdgeAnnualReport2014 49
21. SHARE CAPITAL
Group2014($) Group2013($) Parent2014($) Parent2013($)
OrdinaryShares 66,611,612 46,599,293 66,611,612 46,599,293
Total Share Capital 66,611,612 46,599,293 66,611,612 46,599,293
Thereare318,615,921(2013:278,755,147)OrdinarySharesonissue.
AllfullypaidsharesintheCompanyhaveequalvotingrightsandequalrightstodividends.AllOrdinary
Sharesarefullypaidandhavenoparvalue.
ShareCapitalGroup&Parent 2014Shares 2014($) 2013($)
OpeningBalance 278,755,147 46,599,293 46,153,930
Newissues:ConversionofRedeemablePartPaidShares 207,299 51,000 –
Newissues:DirectOffers 38,919,311 21,040,451 –
Newissues:ConversionofSeriesAPreferenceShares 1,067,500 152,500 38,125
NewIssues:ConversionofOptions – – 407,238
318,949,257 67,843,244 46,599,293
LessIssueExpenses – (1,231,632) –
SubscriberWithdrawal (333,336) – –
Closing Balance 318,615,921 66,611,612 46,599,293
On 5 July, 2013, 200,000 Redeemable Preference Shares were converted to 200,000
OrdinarySharesat25centspershareand100,000RedeemablePreferenceShareswere
converted to 7,299 Ordinary Shares at 13.7 cents per ordinary share. On 4 December,
2013,37,358,637OrdinaryShareswereissuedunderarenounceablerightsofferof2new
sharesforevery15existingsharesheld,atapriceof$0.55.1,560,674OrdinaryShareswere
issuedduringtheyearunderseparateagreementsforservicesprovided.152,500SeriesA
Convertiblepreferenceshareswereconvertedto1,067,500OrdinarySharesduringtheyear
at14.3centsperOrdinaryShare.
50 PacificEdgeAnnualReport2014
Notes to the Financial Statements (continued)
22. ACCUMULATED LOSSES
Group2014($) Group2013($) Parent2014($) Parent2013($)
OpeningBalance (35,424,399) (28,507,684) (35,245,970) (28,297,220)
Net(Loss)AfterTax (9,951,054) (6,916,715) (9,433,060) (6,948,750)
Closing Balance (45,375,453) (35,424,399) (44,679,030) (35,245,970)
23. FOREIGN CURRENCY TRANSLATION RESERVE
ExchangedifferencesrelatingtothetranslationfromthefunctionalcurrenciesoftheGroup’sforeign
subsidiaries intoNewZealanddollarsarebroughttoaccountbyentriesmadedirectlytotheforeign
currencytranslationreserve.
24. SEGMENT INFORMATION
TheChiefExecutiveOfficerhasdeterminedtheoperatingsegmentsbasedonreportsreviewedbyhim
thatareusedtomonitorperformanceandallocateresources.
TheChiefExecutiveOfficer considers thebusiness tobe threeoperating segments atbalancedate.
Thesesegmentsaretheresearchanddevelopmentofdiagnosticandprognosticproductsforhuman
cancerinNewZealandandAustraliaandtheoperatorsofthelaboratoriesusedforthedetectionof
bladdercancer;currentlyoperatingintheUnitedStatesofAmericaandNewZealand.
TotalresearchsegmentrevenueiscomprisedofGrantsReceivedandCxbladderResearchRebate. It
doesnotincludeinterest.
ThesegmentinformationprovidedtotheChiefExecutiveOfficerforthereportablesegmentdescribed
above,isshownbelow.
2014 NZLaboratory($) USLaboratory($) Research($) Total($)
TotalSegmentRevenue 50,372 94,823 378,188 523,383
Revenue from within the segment – – – –
Revenue from External Customers 50,372 94,823 378,188 523,383
AdjustedEBITDA (758,207) (3,915,378) (5,208,404) (9,881,989)
InterestRevenue 18 – 315,257 315,275
InterestExpense – – (9) (9)
Depreciation&Amortisation (36,641) (165,368) (182,322) (384,331)
Total Loss Before Tax (794,830) (4,080,746) (5,075,478) (9,951,054)
Total Assets 237,532 1,243,079 21,250,572 22,731,183
Total Liabilities 63,575 138,559 751,041 953,175
PacificEdgeAnnualReport2014 51
SEGMENT INFORMATION (CONTINUED)
2013 NZLaboratory($) USLaboratory($) Research($) Total($)
TotalSegmentRevenue 82,465 – 485,096 567,561
Revenue from within the segment 63,019 – 322,189 385,209
Revenue from External Customers 19,440 – 162,907 182,347
AdjustedEBITDA (912,535) (2,938,413) (3,200,393) (7,051,342)
InterestRevenue 5 – 333,185 333,190
InterestExpense – – (3,351) (3,351)
Depreciation&Amortisation (56,084) (72,996) (66,133) (195,213)
IncomeTaxExpense – – – –
Total Loss Before Tax (968,614) (3,011,409) (2,936,692) (6,916,715)
Total Assets 160,212 1,104,192 10,958,383 12,222,787
Total Liabilities 40,086 208,636 828,862 1,077,584
Salesbetweensegmentsarecarriedoutatarm’slength.Therevenuefromexternalpartiesreported
to the Chief Executive Officer is measured in a manner consistent with that in the statement of
ComprehensiveIncome.
TheamountsprovidedtotheChiefExecutiveOfficerwithrespecttototalassetsandtotalliabilitiesare
measuredinamannerconsistentwiththatoftheFinancialStatements.Theseassetsareallocatedbased
ontheoperationofthesegmentandthephysicallocationoftheasset.“Reportablesegments”assets
arereconciledtototalassetsasfollows:
2014($) 2013($)
Segmentassetsforreportablesegments 22,731,183 12,222,787
Unallocated – –
Total Assets per the Balance Sheet 22,731,183 12,222,787
TheamountsprovidedtotheChiefExecutiveOfficerwithrespecttototalliabilitiesaremeasuredina
mannerconsistentwith thatof theFinancialStatements.These liabilitiesareallocatedbasedon the
operationsofthesegment.“Reportablesegments”liabilitiesarereconciledtototalliabilitiesasfollows:
52 PacificEdgeAnnualReport2014
Notes to the Financial Statements (continued)
SEGMENT INFORMATION (CONTINUED)
2014($) 2013($)
Segmentliabilitiesforreportablesegment 953,175 1,077,584
Unallocated – –
Total Liabilities per the Balance Sheet 953,175 1,077,584
Theresearchoperatingsegmentderivesrevenueprimarilyfromgrantincomeandthereportableoper-
atingsegmentlaboratoriesderiveitsrevenueprimarilyofsalesofCxbladderdetectiontests.TheChief
ExecutiveOfficerassessestheperformanceoftheoperatingsegmentbasedonnetprofit/(loss)forthe
period.
25. RECONCILIATION OF CASH USED IN OPERATING ACTIVITIES WITH LOSS AFTER TAX
Group2014($) Group2013($) Parent2014($) Parent2013($)
Lossaftertax (9,951,055) (6,916,715) (9,433,060) (6,948,750)
Add Non Cash Items:
Depreciation 268,057 195,213 72,272 66,133
Amortisation 116,274 – 110,050 –
TranslationofForeignOperations 571,540 (33,163) – –
Interestchargedonadvancetosubsidiary – – (549,767) (210,728)
EffectofexchangeratesonNetCash (276) – 569,747 92,355
Writedownofinvestmentinandadvanceto
Subsidiary– – 4,624,375 4,805,160
Total Non Cash Items 955,595 162,050 4,826,677 4,752,920
Add Movements in Other Working Capital items:
IncreaseinGSTReceivable (33,013) – (48,477) –
(Increase)inReceivablesandOtherAssets (371,274) (73,766) (281,027) 150,575
(Increase)inInventory (241,845) – (98,332) –
Increase/(Decrease)inPayablesandAccruals 117,978 117,995 136,636 (142,573)
Total Movement in Other Working Capital (528,154) 44,229 (291,199) 8,002
Net Cash Flows to Operating Activities (9,523,613) (6,710,436) (4,897,583) (2,187,828)
Interestchargedonadvancestosubsidiarieshasbeenwrittendownaspartoftheimpairmentoninvest-
mentandadvancestosubsidiaries,thisisclassifiednon-cash.
PacificEdgeAnnualReport2014 53
26. FINANCIAL INSTRUMENTS
Managing Financial Risk
TheCompanyandGroup’sactivitiesexposeittothefinancialrisksofchangesininterestraterisk,credit
risk,liquidityriskandforeigncurrencyrisk.
Interest Rate Risk
TheCompanyandGroup’sbankdepositsareatfloatinginterestrates,whichmitigatestheriskofinterest
ratesbeinglessthanmarketrates.
Credit Risk
TheCompanyandGroupincurcreditriskfrombankbalances,receivablesinthenormalcourseofits
businessandotherassets.Regularmonitoringofreceivablesandotherassetsisundertakentoensure
thatthecreditexposureremainswithintheCompanyandGroup’snormaltermsoftrade.TheGroup’s
cashandshorttermdepositsareplacedwithhighcreditqualityfinancialinstitutions.Accordingly,the
Company andGroup have no significant concentration of credit risk other than bank depositswith
35.7%oftotalassetsattheBankofNewZealandand52.8%atANZBank.Thecarryingvaluesoffinan-
cialassetsrepresentmaximumexposuretocreditrisk.
Liquidity Risk
LiquidityriskistheriskthattheCompanyandGroupmayencounterdifficultyinraisingfundsatshort
noticetomeetitscommitmentsastheyfalldue.Managementmaintainssufficientcashandtheavail-
abilityoffundingthroughanadequateamountofcommittedcreditfacilitiesifrequired.
Fair Values
Intheopinionofthedirectors,thecarryingamountoffinancialassetsandfinancialliabilitiesapproxi-
matetheirfairvaluesatbalancedate.
Unrecognised Financial Instruments
Therearenounrecognisedfinancialinstruments,hedgesorforwardexchangecontractsat31March
2014(2013Nil).
Market Risk
The Company and Group purchase goods from overseas suppliers. It also operates Pacific Edge
DiagnosticsUSALimitedintheUSA.ThisexposestheCompanyandGrouptoforeigncurrencyrisk.The
Companymanagesforeigncurrencyriskbyonlypurchasingoverseasgoodswhennecessaryandwhen
foreignexchangesarefavourable.
ManagementisoftheopinionthattheCompanyandGroup’sexposuretomarketriskatbalancedate
isdefinedas:
54 PacificEdgeAnnualReport2014
Notes to the Financial Statements (continued)
RiskFactor Description Sensitivity
Currencyrisk AssetsandLiabilitiesaredenominatedinNZD,USD,AUD,andEURcurrencies Asbelow
Interestraterisk ExposuretochangesinBankinterestrates Asbelow
Otherpricerisk Nosecuritiesarebought,soldortraded Nil
BalancesinAUDandEURcurrenciesarenotsignificant.A1%increaseordecreaseinUSDwillreduce/
increasethelossreportedbyapproximately$31,000(2013:$46,000)respectivelyandincrease/reduce
equitybythesameamount.
A 1% increase or decrease in Bank deposit interest rateswill reduce/increase the loss reported by
approximately$155,600(basedonnormallevelsofbankdeposits)andincrease/reduceequitybythe
sameamount(2013:$2,500).
PacificEdgeAnnualReport2014 55
Liquidity/maturity profile of liabilities at 31 March 2014
GroupLiabilities 0–3Months($) 3–6Months($) 6–12Months($) 1–2Years($) 2+Years($) Total($)
Payables&Accruals 953,175 – – – – 953,175
RedeemableShares(PartPaid) – – – – – –
SeriesAConvertiblePreferenceShares – – – – – –
953,175 – – – – 953,175
ParentLiabilities 0–3Months($) 3–6Months($) 6–12Months($) 1–2Years($) 2+Years($) Total($)
Payables&Accruals 723,105 – – – – 723,105
RedeemableShares(PartPaid) – – – – – –
SeriesAConvertiblePreferenceShares – – – – – –
723,105 – – – – 723,105
Thisprofilerecognisestheearliesttimebandofshareconversionsorredemptions(asthereisnofixed
conversionorredemptiondate).
Liquidity/maturity profile of liabilities at 31 March 2013
GroupandParentLiabilities 0–3Months($) 3–6Months($) 6–12Months($) 1–2Years($) 2+Years($) Total($)
Payables&Accruals 922,084 – – – – 922,084
RedeemableShares(PartPaid) 3,000 – – – – 3,000
SeriesAConvertiblePreferenceShares 152,500 – – – – 152,500
1,077,584 – – – – 1,077,584
ParentLiabilities 0–3Months($) 3–6Months($) 6–12Months($) 1–2Years($) 2+Years($) Total($)
Payables&Accruals 673,362 – – – – 673,362
RedeemableShares(PartPaid) 3,000 – – – – 3,000
SeriesAConvertiblePreferenceShares 152,500 – – – – 152,500
828,862 – – – – 828,862
56 PacificEdgeAnnualReport2014
Notes to the Financial Statements (continued)
27. CONTINGENT LIABILITIES
Therewerenoknowncontingentliabilitiesat31March2014(2013Nil).TheCompanyandGrouphave
notgrantedanysecuritiesinrespectofliabilitiespayablebyanyotherpartywhatsoever.
28. BANK SECURITIES
TheCompanyhasprovidedadebenturetotheBankofNewZealandtosecureborrowings.Therewere
nobankborrowingsatbalancedate.
29. CAPITAL COMMITMENTS
TherearenocapitalcommitmentsfortheCompanyorGroupat31March2014(2013Nil).
30. LEASE COMMITMENTS
TheCompanyandGrouphavethefollowingleasecommitmentforbuildings.
Group2014($) Group2013($) Parent2014($) Parent2013($)
Noncancellableoperatingleasecommitments
withinoneyear469,764 346,131 125,760 125,760
Laterthanoneyear,notlaterthantwoyears 353,041 330,414 20,960 125,760
Laterthantwoyears,notlaterthanfiveyears 565,679 925,119 – 125,760
Total Lease Commitments 1,388,484 1,601,664 146,720 377,280
The leaseof premises (in theCentre for Innovation)with theUniversity ofOtagowas renewedon
26May 2013 for a further two years at $125,760per annum, the rental in the 2014 year remains
unchangedfrom2013.PacificEdgeDiagnosticsNewZealandLimited’sleaseofpremisesis$24,840a
year.PacificEdgeDiagnosticsUSALimitedhasa5yearleasewhichexpireson30November2017.The
totalfinancialcommitment remaining for this lease is$1,212,784(2013:$1,577,104).Anadditional
AllowanceReimbursementispayabletothelandlordonamonthlybasis.Thetotalfinancialcommit-
mentforthisAllowanceReimbursementis$485,894(2013:$673,982).
31. SUBSEQUENT EVENTS
Therewerenoeventssubsequenttobalancedate.
32. MANAGEMENT OF CAPITAL
TheGroup’sobjectiveswhenmanagingcapitalare tosafeguardtheGroup’sability tocontinueasa
goingconcerninordertoprovidereturnsforshareholdersandbenefitforotherstakeholdersandto
maintainanoptimalcapitalstructuretosupportthedevelopmentofitsbusiness.TheCompanymeets
theseobjectivesthroughmanagingtheirliquiditypositionwithavailablefundsbyreducingcosts,issue
newsharesorsellassets.
PacificEdgeAnnualReport2014 57
33. PACIFIC EDGE INCENTIVE PLAN (PEIP)
InMarch2011 theCompanydevelopedan “IncentivePlan”asameansofprovidingDirectors and
Officersandcertainemployeeswiththeopportunitytoparticipateinthepotentialincreasingprofitabil-
ityoftheGroup.ThePlanisanEquityEquivalent(EE)SchemethatprovidesEEUnitsonthefollowing
terms:
• EEUnitsarevestedtotheparticipantoveraperiodof4yearsbutcannotberedeemedduringthe
firsttwoyearsfromthedateoftheirissue.
• EachEEUnithastheequivalentvalueofanordinaryshareintheCompany.
• RedemptionisincashforthedifferencebetweenthevalueoftheEEUnitsatthetimeofallocation
andtheirvalueatthetimeofredemption.
• TheCompanymustbetradinginacashflowpositiveconditionandtheCompany’ssharepriceon
theNZXmustbeataminimumpriceof$1.00perordinaryshare.
• Amaximumof25%ofaparticipant’svestedEEUnitscanberedeemedinanyoneyear.
• TheCompanycommencedissuingtheEEUnitsinlateMarch2011.Atbalancedate6,449,000EE
unitshadbeenvested.ThefairvalueoftheseEEUnitshasbeendeterminedasNilat31March
2014(2013:Nil)becausetheconditionsaboveareassessedasunlikelytobemetand,accordingly,
noexpenseorliabilityhavebeenrecordedintheseFinancialStatements.
Holding of EE units by current Directors and Officers as at 31 March 2014
Name 2014($)
ChrisSwann 412,500
ColinDawson 330,000
DavidDarling 1,800,000
58 PacificEdgeAnnualReport2014
Additional Stock Exchange Information
Thetotalnumberofissuedvotingsecuritiesis318,615,921OrdinaryShares.
TheCompany’sOrdinarySharesarelistedontheNZXMainBoard.
TheCompanycurrentlydoesnothaveacreditrating.
1. SUBSTANTIAL SECURITY HOLDERS
TheCompany’sregisterofSubstantialSecurityHolders,preparedinaccordancewithsection26ofthe
SecuritiesMarketsAct1988,recordedthefollowinginformationasat31March2014.Thesesharehold-
ershavearelevantinterestof5%ormoreinallclassesofsecurities.
NameNumberofOrdinary VotingSecurities
NumberofSeriesAConvertiblePreference ShareVotingSecurities
Partpaid RedeemableShares
KOneWOneLimited 20,286,297(6.37%) – –
HarbourAssetManagement 20,183,646(6.34%) – –
ACC(BlairTallot) 13,997,229(5.00%) – –
2. SPREAD OF SECURITY HOLDERS AT 30 APRIL 2014
No.of OrdinarySecurity Holders
PercentageofIssuedOrdinary
Equity
No.of SeriesA Security Holders
Percentage ofIssued SeriesA Equity
No.ofPartPaid
RedeemableShareHolders
PercentageofIssuedPartPaidRedeemable
Shares
1–1,000 537 0% – – – –
1,001–5,000 1,869 2% – – – –
5,001–10,000 952 2% – – – –
10,001–100,000 1,702 16% – – – –
100,001–500,000 247 16% – – – –
500,001–1,000,000 27 6% – – – –
1,000,001–2,500,000 16 8% – – – –
2,500,001–13,000,000 15 21% – – – –
13,000,001andOver 3 29% – – – –
Total Security Holders 5,368 100% – –% – –%
PacificEdgeAnnualReport2014 59
3. TWENTY LARGEST EQUITY SECURITY SHAREHOLDERS AS AT 30 APRIL 2014
OrdinaryShares
NewZealandCentralSecuritiesDepositoryLimited 55,320,404
KOneWOneLimited 20,286,297
SuperlifeTrusteeNomineesLimited 14,623,498
FNZCustodiansLimited 9,644,131
MasfenSecuritiesLimited 7,965,326
HypertechMedicalLimited 7,929,169
Christopher&BanksPrivateEquityLimited 6,249,000
SinclairLongTermHoldingsLimited 5,000,000
CustodialServicesLimited 4,054,481
CarolAnneEdwards&GraemeBrentRamsey 3,623,172
ForsythBarrCustodiansLimited 3,431,989
DavidDarling,YvonneMccallumandIndependentTrustees(Tauranga)Limited 2,978,900
EwanJohnBennie 2,920,077
ForsythBarrCustodiansLimited 2,851,711
UniversityofOtago 2,755,000
LeveragedEquitiesFinanceLimited 2,714,043
SuperlifeTrusteeNomineesLimited 2,647,913
StevenCyrilHancock&BronwynHildaHancock 2,550,000
LewisHoldingsLimited 2,161,920
DavidJohnMcCaulay&SallyAnneMcCaulay 2,020,644
60 PacificEdgeAnnualReport2014
4. DIRECTORS’ SHAREHOLDINGS
Listedbelow,equitysecuritiesinwhicheachdirector,andassociatedpersonofeachDirector,holdsa
relevantinterestatbalancedate:
2014($) 2013($)
NUMBER OF ORDINARY SHARES
C.E.Dawson 1,175,857 1,034,580
C.J.Swann 797,065 1,055,566
B.R.G.Williams 4,316 N/A
A.G.H.Masfen(MasfenSecurityLimited) 7,965,326 15,057,641
5. WAIVERS GRANTED BY NZX
NZXMarket Regulation granted the Company awaiver of Listing Rule 7.10.5 on 22October 2013
in relation to the oversubscription facility under its rights issue pursuant to a Simplified Disclosure
Prospectus.Thisoversubscriptionfacilityenabledeligibleshareholderstomakeapplicationsinexcess
oftheirpro-rataentitlementwhichwouldotherwisehavebeenprohibited.
6. EXERCISE OF NZX POWERS (LISTING RULE 5.4.2)
NZXdidnotexerciseitspowersundertheMainBoardListingRule5.4.2.
7. DIVERSITY
Asat31March2014allfiveDirectorsoftheCompanyweremale.TheChiefExecutiveOfficerwasalso
male.TheCompanydoesnothaveagenderdiversitypolicyasat31March2014.
8. INDEPENDENCE
• ThefollowingdirectorsareconsideredbytheBoardtobeIndependent(asdefinedundertheMain
Board/DebtMarketListingRules):C.J.Swann,C.E.Dawson,B.R.G.WilliamsandD.C.Band.
• ThefollowingdirectorsareconsideredbytheBoardtonotbeindependent:A.G.H.Masfen.
Additional Stock Exchange Information (continued)
PacificEdgeAnnualReport2014 61
Independent Auditors’ Reportto the shareholders of Pacific Edge Limited
Report on the Financial StatementsWe have audited the financial statements of Pacific Edge Limited on pages 23 to 57, whichcomprise the balance sheets as at 31 March 2014, the statements of comprehensive income,statements of changes in equity, statements of cash flows for the year then ended and the notesto the financial statements that include a summary of significant accounting policies and otherexplanatory information for both the Company and the Group. The Group comprises theCompany and the subsidiaries it controlled at 31 March 2014 or from time to time during thefinancial year.
Directors’ Responsibility for the Financial StatementsThe Directors are responsible for the preparation of these financial statements in accordancewith generally accepted accounting practice in New Zealand and that give a true and fair view ofthe matters to which they relate and for such internal controls as the Directors determine arenecessary to enable the preparation of financial statements that are free from materialmisstatement, whether due to fraud or error.
Auditors’ ResponsibilityOur responsibility is to express an opinion on these financial statements based on our audit. Weconducted our audit in accordance with International Standards on Auditing (New Zealand) andInternational Standards on Auditing. These standards require that we comply with relevantethical requirements and plan and perform the audit to obtain reasonable assurance aboutwhether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts anddisclosures in the financial statements. The procedures selected depend on the auditors’judgement, including the assessment of the risks of material misstatement of the financialstatements, whether due to fraud or error. In making those risk assessments, the auditorsconsider the internal controls relevant to the Company and Group’s preparation of financialstatements that give a true and fair view of the matters to which they relate, in order to designaudit procedures that are appropriate in the circumstances, but not for the purpose ofexpressing an opinion on the effectiveness of the Company and Group’s internal control. Anaudit also includes evaluating the appropriateness of accounting policies used and thereasonableness of accounting estimates, as well as evaluating the overall presentation of thefinancial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide abasis for our audit opinion.
We have no relationship with, or interests in, Pacific Edge Limited or its subsidiaries other thanin our capacities as auditors and providing tax services. These services have not impaired ourindependence as auditors of the Company and Group.
PricewaterhouseCoopers, Level 1, Westpac Building, 106 George Street, PO Box 5848, Dunedin 9058,New Zealand T: +64 (3) 470 3600, F: +64 (3) 470 3601, www.pwc.com/nz
62 PacificEdgeAnnualReport2014
Independent Auditors’ ReportPacific Edge Limited
OpinionIn our opinion, the financial statements on pages 23 to 57:
(i) comply with generally accepted accounting practice in New Zealand;
(ii) comply with International Financial Reporting Standards; and
(iii) give a true and fair view of the financial position of the Company and the Group as at 31 March 2014, and their financial performance and cash flows for the year then ended.
Report on Other Legal and Regulatory RequirementsWe also report in accordance with Sections 16(1)(d) and 16(1)(e) of the Financial Reporting Act1993. In relation to our audit of the financial statements for the year ended 31 March 2014:
(i) we have obtained all the information and explanations that we have required; and
(ii) in our opinion, proper accounting records have been kept by the Company as far as appears from an examination of those records.
Restriction on Distribution or UseThis report is made solely to the Company’s shareholders, as a body, in accordance with Section205(1) of the Companies Act 1993. Our audit work has been undertaken so that we might stateto the Company’s shareholders those matters which we are required to state to them in anauditors’ report and for no other purpose. To the fullest extent permitted by law, we do notaccept or assume responsibility to anyone other than the Company and the Company’sshareholders, as a body, for our audit work, for this report or for the opinions we have formed.
Chartered Accountants30 June 2014
Dunedin
PacificEdgeAnnualReport2014 63
Risk AnalysisAsahighgrowthCompany,thereareanumberofrisksassociatedwithourbusiness.Webelieveitisimportantfor
ourshareholderstohaveanunderstandingoftheserisksandtheprocessestheBoardandmanagementhaveput
inplacetomitigatetheserisks.
MarketDisruptionWeoperateinanumberofdifferentinternationalmarketsandasweintroduceadditionalproductsinnewareas,wewilllimitourexposuretoanypotentialmarketdisruption
Acceptanceofourproductsbythemedicalcommunityandfunders/thirdpartypayers
Clinicalstudieshavevalidatedourtestresults
OurUserProgrammesareakeyingredientindrivingadoptionbyclinicians
WehaveCLIAcertifiedlaboratoriesinUSAandNewZealand
Acceptanceofourproductsfundersandthirdpartypayers
Wearebuildingstrongrelationshipsandhavenegotiatedanumberofagreementswiththirdpartypayersandfunders
Dependenceonfranchisepartnerstomarketandsellourproducts
GreatercontrolinthekeyUSmarketthroughourwhollyownedsubsidiary,PEDUSA
Closeworkingrelationshipswithfranchisepartners
CompetitorActivity
Wehaveyettoseeanyintensecompetitioninthebladdercancerdiagnosticfield
Weholdtheleadinclinicalvalidation
Wearefocusedonbuildingastrongandloyalcustomerbase
IPrelatedOpportunitiesandRisks
WehavemadegreatprogressinexpandingourIPportfolioandgettingseveralkeypatentsgranted
Insomecases,wehavetakenforwardlookinglicensestohedgetheeventofother’sIPimpactingonus
RegulatoryRisks
Wehavesoughtadvicefromexpertsintheregulatorylandscape
Weareawareoftherisksandcontinuouslymonitortheregulatoryenvironmentforchangesthatmayaffectourbusiness
ReimbursementRisks
WehavededicatedspecialistsworkingintheareaofAccountsandPayerRelationships
Wehavenegotiatedagreementsinplacewithmajorpaymentfacilitators
FinancialRisks
TheBoardbelieveswehavesufficientfundinginplacetocontinuewithourstrategicgrowthplanforthenexttwoyears
Afterthistime,weexpectthattradingrevenuewillbeamajorcontributortofuturegrowthfunding
Wehaveatrackrecordofachievingourobjectivesontimeandwithinbudget
Shouldnewopportunitiesarise,theCompanymayseektoraiseadditionalcapitaltoexpeditetheopportunity
RevenueGenerationWewouldreasonablyexpectrevenuetogrowaswerolloutourcommercialpresenceintheUSAandgainmomentuminNewZealand,AustraliaandSpain
ForeignExchangeRisksonExpectedRoyalties
TheBoardandmanagementmonitortheserisksregularlyandevaluatewhetherexposurecanbereducedbyhedgingtransactions
Otherenvironmental,HealthandSafety,OperationalandStatutoryRisks
Thesearemonitoredcontinuously
Functionsandprocesseshavebeenimplementedateachfacilitytoreducerisks
Weconsultwithexternalexpertsinourdecisionmaking,policiesandprocesses
ShareRegistryRisksWeareawareoftherisksassociatedwithoursharessuchaslowlevelsofliquidity,anumberoflargeinvestors,highvolatilityinsharepriceandexternalinfluencesfrominvestorconfidence
Dunedin
64 PacificEdgeAnnualReport2014
Pacific Edge Scientific Advisory BoardPacificEdgehasaworldclassScientificAdvisoryBoard(seetablebelow).Theskills,experienceandcapabil-
itycoverarangeofdisciplinesfromclinicalmedicineandpathologythroughtocommercialbiotechnology
researchanddevelopment.
MembersoftheScientificAdvisoryBoardadviseonscience,scientificprogressandclinicalopportunities.
VisitstoNewZealandbytheinternationalmembersalsoprovideastronglinkagetointernationalissuesand
opportunitieswhileenablingustokeepabreastoftherapidlychangingtechnology.
Name Position Organisation Country
P.GuilfordChiefScientificOfficer
AssociateProfessor
PacificEdge
UniversityofOtagoNewZealand
N.Kasabov
HeadofKnowledge
EngineeringDiscovery
ResearchInstitute
(KEDRI)
KnowledgeEngineering
SchoolofComputer&InformationSciences,
AucklandUniversityofTechnology
NewZealand
M.SullivanConsultant
PaediatricOncologistRoyalChildren’sHospital Melbourne
M.Brennan
Physician
VicePresidentfor
InternationalPrograms
MemorialSloanKetteringCancerCentre USA
B.Williams DirectorMonashInstituteofMedicalResearch,
MonashUniversityAustralia
O.OgawaProfessor
Chairman
DepartmentofUrology,
KyotoSchoolofMedicineJapan
P.Spence ManagingDirector PaulSpenceConsultants London
PacificEdgeAnnualReport2014 65
Clinical Advisory BoardPacificEdgehasaClinicalAdvisoryBoardtoprovideexpertadviceonglobalclinicalneedsandapplications
fortheCxbladdertechnology.
Name Position Organisation Country
R.GetzenbergDirectorofResearch
ProfessorofUrology
JamesBuchananBradyUrologicalInstitute
JohnsHopkinsUniversitySchoolofMedicineUSA
S.ShariatSurgeonandSpecialistin
UrologicOncology
DepartmentofUrology,
NewYorkPresbyterianHospital
WeillMedicalCollege
CornellUniversity
USA
J.Raman UrologistPennStateHersheySurgerySpecialists
Hershey,Pennsylvania,USAUSA
P.Cozzi Urologist
VMOatHurstvilleCommunityHospital
StGeorgePublicHospital
MaterPrivateHospital
Australia
P.Gilling
ConsultantUrologist
HeadofUrology
Department
TaurangaHospital
UROBopLtdNewZealand
M.Fraundorfer ConsultantUrologistTaurangaHospital
UROBopLtdNewZealand
P.DavidsonConsultantUrologist
TrusteeofCURT
UrologyAssociates
CanterburyUrologicalResearchTrust
(CURT)
NewZealand
J.Masters Urologist
AucklandCityHospital
ManukauSuperclinic
GilgitRoadSpecialists
NewZealand
66 PacificEdgeAnnualReport2014
Annual Report of DirectorsThe Directors present their Annual Report including Financial Statements of Pacific Edge Limited (“the
Company”)andGroupfortheyearended31March2014.TheGroupconsistsoftheCompanyanditssub-
sidiariesPacificEdgeDiagnosticsNewZealandLimited,PacificEdgeDiagnosticsUSALimited,PacificEdgePty
LimitedandPacificEdgeAnalyticalServicesLimited.
ThebusinessoftheCompanyisdevelopingandcommercialisingnewdiagnosticandprognostictoolsforthe
earlydetectionandmanagementofcancers.TheCompanyhaswhollyownedsubsidiariesinNewZealand,
AustraliaandtheUnitedStates.ThesubsidiariesinNewZealandandtheUnitedStateshavebeensetupto
manageandoperatethecommercial laboratoriesusedfor thedetectionofbladdercancer.TheAustralian
subsidiaryisaresearchanddevelopmentCompany.
ThenatureoftheCompany’sbusinesshasnotchangedduringtheyear.
AUDITORS
TheGroup’sAuditorsarePricewaterhouseCoopers.Auditfeespayablefortheyearwere$30,600.Pricewa-
terhouseCoopersarewillingtocontinueastheGroup’sAuditors.
DIRECTORS’ DISCLOSURES
Thefollowingdisclosureswererecordedintheinterestsregisterfortheyearended31March2014:
Share Dealings
Person/orAssociatedPersons No.Sold ClassSold No.Purchased ClassPurchased
A.G.H.Masfen(MasfenSecuritiesLimited) 8,500,000 OrdinaryShares 1,407,685 OrdinaryShares
C.J.Swann 350,000 OrdinaryShares 91,509 OrdinaryShares
C.E.Dawson 80,000 OrdinaryShares 41,277 OrdinaryShares
PacificEdgeAnnualReport2014 67
Directors’ Remuneration
Directors’remunerationpaidwasasfollows:
Directors’Fees 2014($) 2013($)
C.J.Swann(Chairman) 42,658 27,500
D.C.Band 28,520 17,000
A.G.H.Masfen 23,504 17,000
C.E.Dawson 23,504 17,000
B.R.G.Williams 20,671 –
B.Nogales 24,369 –
J.P.Foster(Resigned30/11/2012) 9,917
Total 163,226 88,417
Note:D.C.Band’sDirectorsFeeswerepaidbythesubsidiaryPacificEdgePty.LimitedfortheYearEnded31March2014.B.Nogales’DirectorsFeeswerepaidbythesubsidiaryPacificEdgeDiagnosticsUSALimitedfortheYearEnded31March2014.AllotherfeeswerepaidbyPacificEdgeLimited.
Transactions with Directors
TheCompanypaidconsultancyfeesforaccountingservicestoCJSAdvisoryServicesLimited.C.J.Swannis
aDirectorandShareholderofthisCompany.Thefeeschargedwereonnormaltermsandconditionsand
totalled$28,658(2013:$40,467).Atbalancedatenofeeswereoutstandingrelativetothesetransactions
(2013:$Nil).
Asignificantshareholder,theUniversityofOtago,providedrentalspaceandcarparkingtotheGroupcost-
ing$228,321(2013:$186,118)andtheCompanycosting$197,367(2013:$160,775).Asat31March2014
theGroupcommitmentis$150,600(2013:$147,360)andtheCompanycommitmentis$125,760(2013:
$125,760).Mr C. E. Dawson, aDirector of the Companywas also the Chief ExecutiveOfficer ofOtago
InnovationLimited,awhollyownedsubsidiaryoftheUniversityofOtago,duringthe2014financialyear.
The following Directors held office at 31 March 2014:
C.J.Swann(Chairman),D.C.Band,C.E.Dawson,B.R.G.WilliamsandA.G.H.Masfen.
B.NogalesandD.DarlingareDirectorsofPacificEdgeDiagnosticsUSALimited.OnlyD.Darlingdoesnot
receiveremunerationforthisposition.
NootherpersonwasaDirectoratanytimeduringtheyear.
TheBoardofDirectorsreceivednonoticesfromDirectorswishingtouseCompanyinformationreceivedin
theircapacityasDirectors,whichwouldnothaveordinarilybeenavailable.
68 PacificEdgeAnnualReport2014
Annual Report of Directors (continued)
Donations
TheGrouphasmadenodonationsduringtheyear.
Employee Remuneration
EmployeesoftheCompanyreceivingremunerationorbenefitsinexcessof$100,000wereasfollows:
Remuneration 2014($) 2013($)
$100,000–$109,999 1 –
$110,000–$119,999 1 2
$170,000–$179,999 1 –
$180,000–$190,000 1 1
$270,000–$279,999 – 1
$320,000–$329,999 1 -
Pacific Edge Diagnostics New Zealand Limited
TheCompanyhasawhollyownedsubsidiarycalledPacificEdgeDiagnosticsNewZealandLimitedwhich
wasincorporatedon15April2010inNewZealand.Thissubsidiarymanagesandoperatesalaboratoryused
forthedetectionofbladdercancerinDunedin.TheDirectorsofthesubsidiaryareDavidDarling(whois
theCEOoftheCompany)andChrisSwann(theCompany’sChairman).Noremunerationwaspaidbythe
subsidiarytothesedirectors.
There is one employee of Pacific Edge Diagnostics New Zealand Limited who received remuneration
between$170,000and$179,999intheyearended31March2014.Nodonationshavebeenmadebythe
subsidiary.NoamountshavebeenpaidtotheauditorbythesubsidiaryfortheYearEnded31March2014.
Pacific Edge Analytical Services Limited
The Company has awholly owned subsidiary called Pacific EdgeAnalytical Services Limitedwhichwas
incorporatedon8October2010inNewZealand.Thissubsidiaryiscurrentlynottrading.Thesoledirector
ofthesubsidiaryisDavidDarling.NoremunerationwaspaidbythesubsidiarytoDavidDarlingforhisrole
asdirector.
TherearenoemployeesofPacificEdgeAnalyticalServicesNewZealandLimitedwhoreceivedremuneration
exceeding$100,000intheyearended31March2014.Nodonationshavebeenmadebythesubsidiary.No
amountshavebeenpaidtotheauditorbythesubsidiaryfortheYearEnded31March2014.
PacificEdgeAnnualReport2014 69
Pacific Edge Diagnostics USA Limited
TheCompanyhasawhollyownedsubsidiarycalledPacificEdgeDiagnosticsUSALimitedwhichwasincor-
poratedintheUSAon15December2011.Thissubsidiarymanagesandoperatesalaboratoryusedforthe
detectionofbladdercancerinHershey,Pennsylvania.TheDirectorsofthesubsidiaryareChrisSwann,Jackie
Walker,BruceNogalesandDavidDarling.No remunerationwaspaiddirectlyby the subsidiary toChris
Swann,JackieWalkerorDavidDarling.However,DavidDarling’ssalaryasCEOhasbeenapportionedtothis
subsidiaryfromtheCompanyforworkdoneintheUnitedStatesof$140,000fortheyear.BruceNogales
wasappointedasadirectoron11March2013andwaspaiddirectorsfeesofNZ$24,369bythesubsidiary
fortheYearEnded31March2014.
TheUSsubsidiaryhasoneemployeewithremunerationbetweenUS$270,000andUS$279,999fortheYear
Ended31March2014.Nodonationshavebeenmadebythesubsidiary.Noamountshavebeenpaidtothe
auditorbythesubsidiaryfortheYearEnded31March2014.
Pacific Edge Pty Limited
TheCompanyhasawhollyownedsubsidiarycalledPacificEdgePtyLimitedwhichwas incorporated in
Australiaon4August2008.Thissubsidiary’spurpose is toresearchanddevelop theCxbladderproduct
alongwithotherdiagnostics andprognostic tools for early detection andmanagementof cancers. The
directorsofthesubsidiaryareDavidDarling,DavidBandandBryanWilliams.DavidBandwaspaidDirector’s
feesofNZ$28,520bythesubsidiary.
TherearenoemployeesofPacificEdgePtyLimitedwhoreceivedremunerationexceeding$100,000inthe
yearended31March2014.Nodonationshavebeenmadebythesubsidiary.Noauditfeewaspaidtothe
auditorbythesubsidiaryfortheYearEnded31March2014.
ForandonbehalfoftheBoardofDirectors,
Director Director
Datedthe30thdayofJune2014.
70 PacificEdgeAnnualReport2014
Directors’ Responsibility StatementTheDirectorsareresponsible forensuring that theFinancialStatementsgivea trueand fairviewof the
financialpositionoftheCompanyandGroupasat31March2014anditsfinancialperformanceandcash
flowsfortheyearendedonthatdate.
TheDirectorsconsiderthattheFinancialStatementsoftheCompanyandGrouphavebeenpreparedusing
appropriateaccountingpolicies, consistentlyappliedandsupportedby reasonable judgementsandesti-
matesandthatallrelevantfinancialreportingandaccountingstandardshavebeenfollowed.
TheDirectorsbelievethatproperaccountingrecordshavebeenkeptwhichenable,withreasonableaccu-
racy,thedeterminationofthefinancialpositionoftheCompanyandGroupandfacilitatecomplianceofthe
FinancialStatementswiththeFinancialReportingAct2013.
CORPORATE GOVERNANCE
Role of the Board of Directors
TheBoardofDirectorsofPacificEdgeLimitediselectedbytheshareholderstosupervisethemanagement
oftheCompany.TheBoardestablishestheCompany’sobjectives,strategiesforachievingtheseobjectives,
theoverallpolicyframeworkwithinwhichthebusinessoftheCompanyisconducted,monitorsmanage-
ment’sperformanceandensuresthatproceduresareinplacetoprovideeffectiveinternalfinancialcontrol.
Theday-to-daymanagementresponsibilitiesoftheCompanyhavebeendelegatedtotheChiefExecutive
Officer.
Corporate Governance Practices in the Constitution
TheCompany’sconstitutionsetsoutguidelinesforDirectorsandmanagementincarryingouttheirduties
andresponsibilities.TheconstitutionrequiresthattheBoardcomplywiththeNZX’sMainBoardListingRules
andtheCompaniesAct1993.TheprovisionsintheSecondScheduletotheCompany’sconstitutiongovern
theproceedingsoftheBoard.TheCompany’sconstitutioncoversmatterssuchas:
• GeneralCorporateGovernanceMatters
• RoleoftheBoard
• CompositionoftheBoard
• Directors’Responsibilities
• AppointmentandremovalofDirectors(includingexecutiveandalternateDirectors)
• PowersandrightsofDirectors
• RemunerationofDirectors
• ConfidentialityandprotectionofCompanyinformation
• Compliancewithlawsandregulations
• Shareholderparticipation,rights,andobligations
• CompanyTransactions
• ConflictsofInterest
• ProtectionofCompanyAssets
PacificEdgeAnnualReport2014 71
Theprimary responsibilities of theBoard include ensuring compliancewith theCompany’s constitution,
settingcleargoalsfortheCompanyandensuringthatthereareappropriatestrategiesinplaceforachiev-
ingthem,monitoringtheperformanceofmanagement,managingtheCompany’sfinancialpositionand
FinancialStatements,ensuringthattheCompanyfollowshighstandardsofethicalandcorporatebehaviour,
andensuringthattheCompanyhasappropriateriskmanagementpoliciesinplace.NewlyelectedDirectors
areexpectedtobefamiliarwiththeirobligationsundertheconstitution.Trainingisalsoprovidedtonewand
existingdirectorswherethisisrequiredtoenableDirectorstofulfiltheirobligationsundertheconstitution.
Board Membership
TheBoardhasbeenselectedontheirindividualskillsandcontributiontotheCompany.TheBoardiscom-
prisedof5non-executivedirectorsincludingtheChairmanC.J.Swann,D.C.Band,C.E.Dawson,A.G.H.
MasfenandB.R.G.Williams.TheChairmanisanon-executivedirectorwhoiselectedbytheDirectors.
InaccordancewiththeCompany’sconstitution,onethird,orthenumbernearesttoonethird,oftheBoard
retire by rotation at each annualmeeting. The directors to retire are those who have been longest in
officesincethelastelection.Directorsretiringbyrotationmay,ifeligible,standforre-election.Adirector
appointedsincethepreviousAnnualMeetingholdsofficeonlyuntilthenextAnnualMeetingbutiseligible
forre-electionatthatmeeting.
Committees
TheBoard formsCommittees fordesignated tasks tobeaddressed. SuchCommittees include theAudit
Committee,theNominationCommitteeandtheRemunerationCommittee.
Internal Financial Control
TheBoardhasoverallresponsibilityfortheCompany’ssystemof internalfinancialcontrol.TheDirectors
haveestablishedproceduresandpoliciesthataredesignedtoprovideeffectiveinternalfinancialcontrol.
Annualbudgetsandbusinessplansareprepared,andagreedbytheBoard.FinancialStatementsarepre-
paredmonthlyandreviewedby theBoard throughout theyear tomonitorperformanceagainstbudget
targetsandobjectives.
TheDirectorsareresponsibleforpresentingtheFinancialStatementsforeachFinancialYear.
Audit Committee
TheCompany’s constitution requires it tohaveanAuditCommitteecomprised solelyofdirectorsof the
Company,withthemajorityofmembersbeingIndependentDirectors.Theremustbeatleastthreemembers
ontheAuditCommitteeandatleastonemembermusthaveanaccountingorfinancialbackground.Under
theconstitutiontheresponsibilitiesoftheAuditCommitteeincludeasaminimum:
• EnsuringthattheprocessesareinplaceinmonitoringthoseprocessessothattheBoardisproperly
andregularlyinformedandupdatedoncorporatefinancialmatters.
• Recommendingtheappointmentandremovaloftheindependentauditor.
72 PacificEdgeAnnualReport2014
Directors’ Responsibility Statement (continued)
• Monitoringandreviewingtheindependentandinternalauditingpractices.
• Havingdirectcommunicationwithandunrestrictedaccesstotheindependentauditorsandanyinter-
nalauditorsoraccountants.
• Reviewingthefinancialreportsandadvisingalldirectorswhethertheycomplywiththeappropriate
lawsandregulations.
• Ensuringthattheexternalauditororleadauditpartnerischangedatleasteveryfiveyears.
TheAuditCommitteecomprises3IndependentDirectorsbeingChrisSwann,DavidBandandColinDawson.
Nominations Committee
TheBoardhasestablishedaNominationcommittee torecommenddirectorappointments to theBoard.
ThecommitteemembersareColinDawson,BryanWilliams,AnatoleMasfenandChrisSwann,whoareall
IndependentDirectors.
Remuneration Committee
TheBoardhasaRemunerationcommitteetorecommendtheremunerationforDirectorstothesharehold-
ers.ThemembersofthiscommitteeareBryanWilliams,DavidBandandChrisSwann.
Conflicts of Interest
TheconstitutionsetsoutaproceduretobefollowedwhereDirectorsarefacedwithapotentialconflictofinter-
est.AtalltimesaDirectormustbeabletoactintheinterestsoftheCompanyasawholeandinaccordancewith
allrelevantlawsincludingtheNZXMainBoardListingRulesandtheCompaniesAct1993.
ThepersonalinterestsofaDirectormustnotbeallowedtoprevailoverthoseoftheCompanyanditssharehold-
ersgenerally.TheconstitutionrequiresaDirectortodiscloseanypersonalintereststotheCompanywhichmay
conflictwiththeCompany’sinterest.
TheCompany’sconstitutionprovidesthataDirectormay:
• contractwiththeCompanyandbeapartytoanytransactionwiththeCompany.
• haveanypersonalinvolvementorinterestinanytransactionorarrangementtowhichtheCompanyis
apartyorisotherwiseinterestedorinvolved.
• becomeaDirectororotherofficerof,orotherwisebeinterestedin,anycorporationpromotedby
theCompanyorinwhichtheCompanymaybedirectlyorindirectlyinterestedasashareholderor
otherwise.
• retainanyremunerationprofitsorbenefitsinrelationtoanyofthesearrangements.
HoweveraDirectorwhois interested inatransactionwiththeCompanymayattendaBoardmeetingat
whichanymatterrelatingtothetransactionarisesbutwillnotbecountedforquorumpurposesandmay
notvoteonaBoardresolutioninrespectofanymatterrelatingtothetransactionunlessthatmatterisone
inwhichthedirectorsareeitherrequiredtosignacertificateorwherethematterrelatestoanindemnity.
PacificEdgeAnnualReport2014 73
Compliance with NZX and Financial Markets Authority Guidelines
TheCompany’sgovernancepoliciesareconsistentwiththeNZXCorporateGovernanceBestPracticeCode
andmeetthe9PrinciplesforCorporateGovernanceissuedbytheSecuritiesCommission(nowtheFinancial
MarketsAuthority)assetoutontheFinancialMarketsAuthoritywebsite.
Insummary,the9principlesare:
1.EthicalStandards–Directorsshouldobserveandfosterhighethicalstandards.
2.BoardComposition–Thereshouldbeabalanceof independence,skills,knowledge,experience,and
perspectivesamongdirectorssothattheboardworkseffectively.
3.BoardCommittees–TheBoardshouldusecommitteeswherethiswouldenhanceitseffectivenessinkey
areaswhileretainingboardresponsibility.
4.ReportingandDisclosure–TheBoardshoulddemandintegritybothinfinancialreportingandinthetimeli-
nessandbalanceofdisclosuresonentityaffairs.
5.Remuneration– TheremunerationofDirectorsandExecutivesshouldbetransparent,fair,andreasonable.
6.RiskManagement – TheBoardshouldregularlyverifythattheentityhasappropriateprocessesthatiden-
tifyandmanagepotentialandrelevantrisks.
7.Audits–TheBoardshouldensurethequalityandindependenceoftheexternalauditprocess.
8.ShareholderRelations – TheBoardshouldfosterconstructiverelationshipswithshareholdersthatencour-
agethemtoengagewiththeCompany.
9.Stakeholder Interests – theBoard should respect the interests of stakeholderswithin the context of a
Companystructureanditsfundamentalpurpose.
Reporting and Disclosure
TheBoardfocusesonprovidingaccurate,adequateandtimelyinformationbothtoexistingshareholders
andtothemarketgenerally.ThisenablesallinvestorstomakeinformeddecisionsabouttheCompany.All
significantannouncementsmadetoNZX,andreportsissued,arepostedontheCompany’swebsite.
TheDirectorshavepleasureinpresentingtheFinancialStatements,setoutonpages23to62forPacific
EdgeLimitedandtheconsolidatedGroupfortheyearended31March2014.
TheBoardofPacificEdgeLimitedauthorisedtheseFinancialStatementsforissueon30June2014.
ForandonbehalfoftheBoardofDirectors,
ChairmanDirectorChiefExecutiveOfficer
Datedthe30thdayofJune2014.
74 PacificEdgeAnnualReport2014
Glossary
Assay. Chemical reactions that allow detection
or quantification of substances or biomarkers in
samples.
Biomarker.Acharacteristicthatisobjectivelymeas-
uredandevaluatedasanindicatorofnormalbio-
logicorpathogenicprocessesorpharmacological
responsestoatherapeuticintervention.
Biopsy. Sample of tissue from a living body
extractedfordiagnosticpurposes.
Classification.Thedivisionofadiseaseintomedi-
cally relevant subtypes, such as aggressive and
nonaggressivesubclassesoftumoursinoncology.
CAP(CollegeofAmericanPathologists).Thelead-
ing organization of board-certified pathologists
thatservespatients,pathologists,andthepublicby
fosteringandadvocatingexcellenceinthepractice
ofpathologyandlaboratorymedicineworldwide.
(www.cap.org).
Clinical Laboratory Improvement Amendments
(CLIA). Regulate laboratory testing and require
clinicallaboratoriestobecertificatedbytheirstate
aswell as theCenter forMedicare andMedicaid
Services(CMS)beforetheycanaccepthumansam-
plesfordiagnostictesting.(www.fda.gov)
ClinicalTrial.Asinglestatisticallysignificanttrialfor
patientswithdisease.Theresultsofthetrialprovide
performance statistics for the testandarewritten
upandpublishedinapeerreviewedjournal.
CMS(CentersforMedicareandMedicaidServices).
The branch of the Department of Health and
HumanServicesthatadministersMedicare.(medi-
care.kaiserpermanente.org)
Colonoscopy. Invasive endoscopic examinationof
the large colon and the end sectionof the small
bowel with a CCD camera or a fibre optic cam-
era on a flexible tube passed through the anus.
Frequentlyusedtodiagnosecolorectalcancerand
othercolondiseases.
Commercial payers. private insurers. (Medical
DeviceandDiagnosticIndustry2006)
Company.PacificEdgeLimited.
DNA.Deoxyribonucleicacid.Thecarrierofgenetic
information for all complex organisms. DNA
consists of four different bases bound to a sugar
phosphate backbone: adenine (A), cytosine (C),
guanine(G),thymine(T).Thegeneticinformation
isencodedinthesequenceoffourbases.
Endoscope. Optical device for the inspection of
body cavitiesandminimally invasive surgery. See
alsocolonoscopy.
Endoscopy. Visual inspection of body cavities by
useofanendoscope.
False-positiverate.Percentageofhealthyindividu-
als,falselyidentifiedassickduetotheimprecision
ofadiagnosticprocedure.
FDA.FoodandDrugAdministration.U.S.govern-
mentagencyresponsiblefortheapprovalofdrugs
andmedicaldevices.(e.g.IVDtests)
FSS. Federal Supply Schedule – General Services
Administration’s (GSA) Federal Supply Schedules
arelargecontractsthroughwhichfederalcustom-
erscanacquiremorethan4millionproductsand
servicesdirectlyfrommorethan8,000commercial
suppliers. They offer a vast array of brandname
products-from office supplies and copier paper
to systems furniture, computers and laboratory-
and services ranging from accounting to graphic
designtolandscaping.(www.va.gov/osdbu/library/
dbwvaFss.asp)
Health care provider. an individual or an institu-
tionwho isauthorizedby theStateandperform-
ingwithinthescopeoftheirpracticeasdevinedby
state law that provides preventive, curative, pro-
motionalorrehabilitativehealthcareservicesina
systematicwaytoindividuals,families,orcommu-
nities.(Wikipediaandhrweb.berkeley.edu)
PacificEdgeAnnualReport2014 75
Incidence.Numberofnewcasesperyearinaspe-
cificdiseaseindication.
Indication. A valid reason to use a certain test,
medication,procedureorsurgery.
Integrated Health Care Delivery System. a man-
agedcaresystemintheUnitedStatesthatincludes
ahospitalorganizationthatprovidesacutepatient
care,amultispecialtymedicalcaredeliverysystem,
thecapabilityofcontractingforanyotherneeded
services, and a payer. Services are provided to
enrollees of the health plan. (http://medical-dic-
tionary.thefreedictionary.com/Integrated+Health+C
are+Delivery+System)
Invitro.Inatesttube.
IVD.Invitrodiagnostic.
LocalCoverageDetermination(LCD).Localcover-
agedeterminations(LCDS)aredefined inSection
1869(f)(2)(B)of theSocial SecurityAct (theAct).
This section states: “For purposes of this section,
the term ‘local coveragedetermination’means a
determination by a fiscal intermediary or a car-
rierunderpartAorpartB,asapplicable,respect-
ing whether or not a particular item or service
is covered on an intermediary- or carrier-wide
basisundersuchparts,inaccordancewithsection
1862(a)(1)(A).”(cms.gov)
Laboratory Developed Test (LDT). Laboratory
developed tests are in vitro diagnostic tests that
are developed, validated, and used for in-house
pathology and diagnostic purposes. (www.ascp.
org)
Medicaid. a program administered at the state
level, which provides medical assistance to the
needy.Familieswithdependentchildren,theaged,
blind,anddisabledwhoare infinancialneedare
eligibleforMedicaid.Itmaybeknownbydifferent
names in different states. (www.census.gov/hhes/
www/hlthins/methodology/definitions/cps.html)
Medicare. the Federal program which helps pay
healthcarecostsforpeople65andolderandfor
certainpeopleunder65withlong-termdisabilities.
(www.census.gov/hhes/www/hlthins/methodol-
ogy/definitions/cps.html)
Medicare Advantage (Medicare Part C). A plan
offeredbyaprivateorganizationasanalternative
to Parts A&B only. Part C plans and cost plans
may offer more benefits than original Medicare
andmay includePartDcoverage. (medicare.kai-
serpermanente.org)
NationalProviderNetwork.providerofhealthcare
costmanagementsolutions.(multiplan.com)
VA. Veterans Administration – An agency of the
federal government which provides a variety of
services forUnitedStates veterans. (businessdic-
tionary.com)
Milestone payment. One-time payment between
contractualpartiesuponreachingimportantgoals
withcollaboration.
Molecular classification test. Diagnostic test that,
basedon the analysis ofDNAorRNAallows the
morepreciseclassificationofadiseaseinclinically
orpathologicallyrelevantsubgroups.
Molecular Diagnostics. Diagnostics based on
geneticandepigeneticinformation.
Monitoring.Thetracingofpotentialrecurrenceor
assessmentofprogressionofadisease.
NMP22.NuclearMatrixProtein22,asingleprotein
biomarkertestusedtodetectbladdercancer.
Non exclusive licensing model. Strategy for the
commercialisation of patents by which several
licenseesinageographicregionobtaintherightsto
useoneormorepatentsforthesameapplication.
Nonexclusive partnerships. Business partnerships
of a company with several other companies in
whicheachofthecollaborationspursuesthesame
orsimilargoals.
76 PacificEdgeAnnualReport2014
Oncology. The branch of medicine that studies
tumours (cancer) and seeks to understand their
development,diagnosis,treatmentandprevention.
PCR.Polymerasechainreaction.Methodtomulti-
plyasectionoftheDNAinatesttube.
Privatehealth insurance.Privatehealth insurance
iscoveragebyahealthplanprovidedthroughan
employerorunionorpurchasedbyan individual
from a private health insurance company. (www.
census.gov/hhes/www/hlthins/methodology/defi-
nitions/cps.html)
Prognosis.Predictionofhowapatient’sdiseasewill
progress,andthechanceofrecovery.
Prototypeassay.Prototypeofa testprocedureas
astartingpointforthedevelopmentofdiagnostic
products.
Reagents.Chemicalsubstancesneededfortheper-
formanceofanassay.
Reimbursement.tomakerepaymenttoforexpense
or loss incurred (http://dictionary.reference.com/
browse/reimbursement)
Regulatory approval. approval required by State
and/orNationalregulatorybodiestosellaproduct
orserviceintheUSA
Relapse.Diseasereturnfollowingtreatmenttothe
primaryordistantorgan.
Recurrence. Disease return following medical
intervention.(seerelapse)
Researchmarket.Marketforlaboratoryequipment
andsuppliesnotintendedfortherapeuticordiag-
nosticuseinhumansoranimals.
RNA. Ribonucleic acid. Molecule build of similar
componentsasDNAthatmainlyasaninformation
carrierisinvolvedintheuseofgeneticinformation
to direct the synthesis of proteins. Compared to
DNA,RNAischemicallyandbiologicallyconsider-
ablylessstable.
RTPCR.Real-timePCR.PCRinwhichtheamplifi-
cationofaDNAsegmentiscontinuouslymeasured.
RUO.Research-Use-Only.Labelforproductsonly
intendedforresearchapplications.
Screening. The systematic and preventativemass
screeningofanasymptomaticpopulationforearly
detectionofdisease.
Sensitivity.Themeasureofatest’sabilitytoaccu-
ratelydetectthepresenceofadisease.Forexam-
ple, a sensitivity of 90% means that out of 100
patientswhichactuallyhavethedisease,onaver-
age90arecorrectlydiagnosed.
Specificity. The measure for a test’s ability to
exclude a disease if it is truly not present. For
example,aspecificityof90%meansthatoutof100
healthypeopletenarefalselyidentifiedashaving
thedisease.
Surveillance. Tight surveillance of individuals at
highriskofdevelopingadiseasebyusingdiagnos-
ticprocedure.
Test kit. Test reagent kit. A set of reagents, con-
sumablesandprocessinginstructionsnecessaryto
performadiagnosticlaboratorytest.
Testpanel.Combinationofdifferentbiomarkersin
adiagnostictest.
Tumour.Amassofexcess tissue that results from
abnormalcelldivision.
Urologist. Specialist clinicians for urological dis-
easesanddisorders.
User Program. formal evaluation program that
allows a physician, group practice, institution, or
healthcaresystemtoevaluatetheperformanceof
anewproductortechnology
Validation.Establishingdocumentedevidencethat
aprocessorsystem,whenoperatedwithinestab-
lished parameters, can perform effectively and
reproduciblyandmeetitspredeterminedspecifica-
tionsandqualityattributes.
Glossary (continued)
PacificEdgeAnnualReport2014 77
Company Directory
Issued Capital
318,615,921OrdinaryShares
Registered Office
Level10,OtagoHouse
CnrMorayPlace&PrincesStreet
Dunedin
Directors
C.J.Swann—Chairman
D.C.Band
C.E.Dawson
A.G.H.Masfen
B.R.G.Williams
Chief Executive Officer
D.Darling
Auditors
PricewaterhouseCoopers
Dunedin
Bankers
BankofNewZealand
Dunedin
Solicitors
AndersonLloydLawyers
OtagoHouse
481MorayPlace
Dunedin
Securities Registrar
LinkMarketServicesLimited
138TancredSt
Ashburton
Accountants
Deloitte
OtagoHouse
481MorayPlace
Dunedin
Company Number
119032
Date of Incorporation
27February2001
Nature of Business
Developandcommercialisenewdiagnosticand
prognostictoolsfortheearlydetectionand
managementofcancers.
87 St David Street, PO Box 56, Dunedin, New Zealand
P +64 3 479 5800 F +64 3 479 5801
W www.pacificedge.co.nz