Table of Contents

 

**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON, D.C. 20549**

 

**FORM 20-F**

 

 

| **o**      | **REGISTRATION STATEMENT PURSUANT   TO SECTION 12(b) OF THE SECURITIES EXCHANGE ACT OF 1934**                                             |
|------------|-----------------------------------------------------------------------------------------------------------------------------------------------------|
| ** ** | ** **                                                                                                                                          |
| **OR**     |
| ** ** | ** **                                                                                                                                          |
| **x**      | **ANNUAL REPORT PURSUANT TO   SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934   For the fiscal year ended June 30, 2016** |
| ** ** | ** **                                                                                                                                          |
| **OR**     |
| ** ** | ** **                                                                                                                                          |
| **o**      | **TRANSITION REPORT PURSUANT TO   SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**                                            |
| ** ** | ** **                                                                                                                                          |
| **OR**     |
| ** ** | ** **                                                                                                                                          |
| **o**      | **SHELL COMPANY REPORT PURSUANT   TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**                                         |

 

Date of event requiring this shell company report . . . . . . . . . . . . . . . . . . .

 

**For the transition period from                       to                        **

 

Commission file number 0-51504

 
| **GENETIC   TECHNOLOGIES LIMITED**                                                                                                                                                          |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (Exact name of Registrant as specified in its charter)                                                                                                                                      |
|                                                                                                                                                                                        |
| **N/A**                                                                                                                                                                                     |
| (Translation of Registrant’s name into English)                                                                                                                                        |
|                                                                                                                                                                                        |
| **AUSTRALIA**                                                                                                                                                                               |
| (Jurisdiction of incorporation or organization)                                                                                                                                             |
|                                                                                                                                                                                        |
| **60-66 Hanover Street, Fitzroy, Victoria, 3065,   Australia**

**Telephone: 011 61 3 8412 7000; Facsimile: 011 61   3 8412 7040**                                                          |
| (Address of principal executive offices)                                                                                                                                                    |
|                                                                                                                                                                                        |
| **Kevin Fischer**

**Telephone: 011 61 3 8412 7000; Facsimile: 011 61   3 8412 7040**

**Email: kevin.fischer@gtglabs.com**

**60-66 Hanover Street, Fitzroy, Victoria, 3065,   Australia** |
| (Name, Telephone, E-mail and/or Facsimile number and Address of   Company Contact Person)                                                                                                   |

 

Securities registered or to be registered pursuant to Section 12(b) of the Act. **None**

 

Securities registered or to be registered pursuant to Section 12(g) of the Act.

 
| **American Depositary Shares each representing 150   Ordinary Shares**

**and evidenced by American Depositary Receipts** |
|---------------------------------------------------------------------------------------------------------------------------|
| Title of each Class                                                                                                       |

 

----

Table of Contents

 

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.**None**

 

Number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.
|   | 1,715,282,724   Ordinary Shares |
|--------|---------------------------------|
|   |                            |

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

o Yes   x No

 

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

o Yes   x No

 

Note — Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

x Yes   o No

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

 

| Large accelerated filer o |   | Accelerated filer o |   | Non-accelerated filer x |
|---------------------------|--------|---------------------|--------|-------------------------|

 

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

 

| U.S. GAAP o |   | International Financial Reporting Standards as issued   by the International Accounting Standards Board x |   | Other o |
|-------------|--------|-----------------------------------------------------------------------------------------------------------|--------|---------|

 

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.

o Item 17   o Item 18

 

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

o Yes   x No

 

(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)

 

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.

 

o Yes   o No

 

----

Table of Contents

 

**TABLE OF CONTENTS**

 

| Item   1.  |   | Identity   of Directors, Senior Management and Advisers     |   | 1      |
|------------|--------|-------------------------------------------------------------|--------|--------|
|       |   |                                                        |   |   |
| Item   2.  |   | Offer   Statistics And Expected Timetable                   |   | 1      |
|       |   |                                                        |   |   |
| Item   3.  |   | Key   Information                                           |   | 1      |
|       |   |                                                        |   |   |
| Item   3.A |   | Selected   Financial Data                                   |   | 1      |
|       |   |                                                        |   |   |
| Item   3.B |   | Capitalization   and Indebtedness                           |   | 3      |
|       |   |                                                        |   |   |
| Item   3.C |   | Reasons   for the Offer and Use of Proceeds                 |   | 3      |
|       |   |                                                        |   |   |
| Item   3.D |   | Risk   Factors                                              |   | 4      |
|       |   |                                                        |   |   |
| Item   4.  |   | Information   on the Company                                |   | 17     |
|       |   |                                                        |   |   |
| Item   4.A |   | History   and Development of the Company                    |   | 17     |
|       |   |                                                        |   |   |
| Item   4.B |   | Business   Overview                                         |   | 17     |
|       |   |                                                        |   |   |
| Item   4.C |   | Corporate   Structure                                       |   | 25     |
|       |   |                                                        |   |   |
| Item   4.D |   | Property,   Plant and Equipment                             |   | 25     |
|       |   |                                                        |   |   |
| Item   5.  |   | Operating   and Financial Review and Prospects              |   | 26     |
|       |   |                                                        |   |   |
| Item   5.A |   | Operating   Results                                         |   | 26     |
|       |   |                                                        |   |   |
| Item   5.B |   | Liquidity   and Capital Resources                           |   | 30     |
|       |   |                                                        |   |   |
| Item   5.C |   | Research   and Development, Patents and Licenses, etc. |   | 31     |
|       |   |                                                        |   |   |
| Item   5.D |   | Trend   Information                                         |   | 32     |
|       |   |                                                        |   |   |
| Item   5E. |   | Off-balance   sheet arrangements                            |   | 32     |
|       |   |                                                        |   |   |
| Item   5F. |   | Information   about contractual obligations                 |   | 32     |
|       |   |                                                        |   |   |
| Item   6.  |   | Directors,   Senior Management and Employees                |   | 32     |
|       |   |                                                        |   |   |
| Item   6.A |   | Directors   and Senior Management                           |   | 32     |
|       |   |                                                        |   |   |
| Item   6.B |   | Compensation                                                |   | 34     |

 

----

Table of Contents

 

| Item   6.C  |   | Board   Practices                                                    |   | 42     |
|-------------|--------|----------------------------------------------------------------------|--------|--------|
|        |   |                                                                 |   |   |
| Item   6.D  |   | Employees                                                            |   | 44     |
|        |   |                                                                 |   |   |
| Item   6.E  |   | Share   Ownership                                                    |   | 44     |
|        |   |                                                                 |   |   |
| Item   7.   |   | Major   Shareholders and Related Party Transactions                  |   | 44     |
|        |   |                                                                 |   |   |
| Item   7.A  |   | Major   Shareholders                                                 |   | 44     |
|        |   |                                                                 |   |   |
| Item   7.B  |   | Related   Party Transactions                                         |   | 44     |
|        |   |                                                                 |   |   |
| Item   7.C  |   | Interests   of Experts and Counsel                                   |   | 45     |
|        |   |                                                                 |   |   |
| Item   8.   |   | Financial   Information                                              |   | 45     |
|        |   |                                                                 |   |   |
| Item   8.A  |   | Consolidated   Statements and Other Financial Information            |   | 45     |
|        |   |                                                                 |   |   |
| Item   8.B  |   | Significant   Changes to Financial Information                       |   | 46     |
|        |   |                                                                 |   |   |
| Item   9.   |   | The   Offer and Listing                                              |   | 47     |
|        |   |                                                                 |   |   |
| Item   9.A  |   | Offer   and Listing Details                                          |   | 47     |
|        |   |                                                                 |   |   |
| Item   9.B  |   | Plan   of Distribution                                               |   | 48     |
|        |   |                                                                 |   |   |
| Item   9.C  |   | Markets                                                              |   | 48     |
|        |   |                                                                 |   |   |
| Item   9.D  |   | Selling   Shareholders                                               |   | 48     |
|        |   |                                                                 |   |   |
| Item   9.E  |   | Dilution                                                             |   | 48     |
|        |   |                                                                 |   |   |
| Item   9.F  |   | Expenses   of the Issue                                              |   | 48     |
|        |   |                                                                 |   |   |
| Item   10.  |   | Additional   Information                                             |   | 49     |
|        |   |                                                                 |   |   |
| Item   10.A |   | Share   Capital                                                      |   | 49     |
|        |   |                                                                 |   |   |
| Item   10.B |   | Our   Constitution                                                   |   | 52     |
|        |   |                                                                 |   |   |
| Item   10.C |   | Material   Contracts                                                 |   | 53     |
|        |   |                                                                 |   |   |
| Item   10.D |   | Exchange   Controls and Other Limitations Affecting Security Holders |   | 53     |
|        |   |                                                                 |   |   |
| Item   10.E |   | Taxation                                                             |   | 54     |
|        |   |                                                                 |   |   |
| Item   10.F |   | Dividends   and Paying Agents                                        |   | 60     |
|        |   |                                                                 |   |   |
| Item   10.G |   | Statement   by Experts                                               |   | 60     |
|        |   |                                                                 |   |   |
| Item   10.H |   | Documents   on Display                                               |   | 60     |
|        |   |                                                                 |   |   |
| Item   10.I |   | Subsidiary   Information                                             |   | 61     |
|        |   |                                                                 |   |   |
| Item   11.  |   | Quantitative   And Qualitative Disclosures About Market Risk         |   | 61     |

 

ii

----

Table of Contents

 

| Item   12.  |   | Description   Of Securities Other Than Equity Securities                       |   | 61     |
|-------------|--------|--------------------------------------------------------------------------------|--------|--------|
|        |   |                                                                           |   |   |
| Item   12.A |   | Debt   Securities                                                              |   | 61     |
|        |   |                                                                           |   |   |
| Item   12.B |   | Warrants   and Rights                                                          |   | 61     |
|        |   |                                                                           |   |   |
| Item   12.C |   | Other   Securities                                                             |   | 61     |
|        |   |                                                                           |   |   |
| Item   12.D |   | American   Depositary Shares                                                   |   | 61     |
|        |   |                                                                           |   |   |
| Item   13.  |   | Defaults,   Dividend Arrearages and Delinquencies                              |   | 62     |
|        |   |                                                                           |   |   |
| Item   14.  |   | Material   Modifications to The Rights Of Security Holders and Use Of Proceeds |   | 62     |
|        |   |                                                                           |   |   |
| Item   15.  |   | Controls   and Procedures                                                      |   | 62     |
|        |   |                                                                           |   |   |
| Item   15.A |   | Disclosure   controls and procedures                                           |   | 62     |
|        |   |                                                                           |   |   |
| Item   15.B |   | Management’s   annual report on internal control over financial reporting |   | 62     |
|        |   |                                                                           |   |   |
| Item   15.C |   | Attestation   report of the registered public accounting firm                  |   | 63     |
|        |   |                                                                           |   |   |
| Item   15.D |   | Changes   in internal control over financial reporting                         |   | 63     |
|        |   |                                                                           |   |   |
| Item   16.A |   | Audit   Committee Financial Expert                                             |   | 64     |
|        |   |                                                                           |   |   |
| Item   16.B |   | Code   Of Ethics                                                               |   | 64     |
|        |   |                                                                           |   |   |
| Item   16.C |   | Principal   Accountant Fees and Services                                       |   | 65     |
|        |   |                                                                           |   |   |
| Item   16.D |   | Exemptions   From The Listing Standards For Audit Committees                   |   | 65     |
|        |   |                                                                           |   |   |
| Item   16.E |   | Purchases   Of Equity Securities By The Issuer And Affiliated Purchasers       |   | 65     |
|        |   |                                                                           |   |   |
| Item   16.F |   | Change   in Registrant’s Certifying Accountant                            |   | 65     |
|        |   |                                                                           |   |   |
| Item   16.G |   | Corporate   Governance                                                         |   | 65     |
|        |   |                                                                           |   |   |
| Item   16.H |   | Mine   Safety Disclosure                                                       |   | 65     |
|        |   |                                                                           |   |   |
| Item   17.  |   | Financial   Statements                                                         |   | 65     |
|        |   |                                                                           |   |   |
| Item   18.  |   | Financial   Statements                                                         |   | 65     |
|        |   |                                                                           |   |   |
| Item   19.  |   | Exhibits                                                                       |   | 66     |

 

iii

----

Table of Contents

 

**INTRODUCTION**

 

In this Annual Report, the “Company,” “Genetic Technologies”, “we,” “us” and “our” refer to Genetic Technologies Limited and its consolidated subsidiaries.

 

Our consolidated financial statements are set out on pages F1 to F41 of this Annual Report (refer to Item 18 “Financial Statements”).

 

References to the “ADSs” are to our ADSs described in Item 12.D “American Depositary Shares” and references to the “Ordinary Shares” are to our Ordinary Shares described in Item 10.A “Share Capital”.

 

Our fiscal year ends on June 30 and references in this Annual Report to any specific fiscal year are to the twelve month period ended on June 30 of such year.

 

**FORWARD-LOOKING STATEMENTS**

 

This Annual Report contains forward-looking statements that involve risks and uncertainties.  We use words such as “anticipates”, “believes”, “plans”, “expects”, “future”, “intends” and similar expressions to identify such forward-looking statements.  This Annual Report also contains forward-looking statements attributed to certain third parties relating to their estimates regarding the growth of Genetic Technologies and related service markets and spending.  You should not place undue reliance on these forward-looking statements, which apply only as of the date of this Annual Report.  Our actual results could differ materially from those anticipated in these forward-looking statements for many reasons, including the risks faced by us described below under the caption “Risk Factors” and elsewhere in this Annual Report.

 

Although we believe that the expectations reflected in such forward-looking statements are reasonable at this time, we can give no assurance that such expectations will prove to be correct.  Given these uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.  Important factors that could cause actual results to differ materially from our expectations are contained in cautionary statements in this Annual Report including, without limitation, in conjunction with the forward-looking statements included in this Annual Report and specifically under Item 3.D “Risk Factors”.

 

All subsequent written and oral forward-looking statements attributable to us are expressly qualified in their entirety by reference to these cautionary statements.

 

**ENFORCEMENT OF LIABILITIES AND SERVICE OF PROCESS**

 

We are incorporated under the laws of Western Australia in the Commonwealth of Australia.  The majority of our directors and executive officers, and any experts named in this Annual Report, reside outside the U.S.  Substantially all of our assets, our directors’ and executive officers’ assets and such experts’ assets are located outside the U.S.  As a result, it may not be possible for investors to affect service of process within the U.S. upon us or our directors, executive officers or such experts, or to enforce against them or us in U.S. courts, judgments obtained in U.S. courts based upon the civil liability provisions of the federal securities laws of the U.S.  In addition, we have been advised by our Australian solicitors that there is doubt that the courts of Australia will enforce against us, our directors, executive officers and experts named herein, judgments obtained in the U.S. based upon the civil liability provisions of the federal securities laws of the U.S. or will enter judgments in original actions brought in Australian courts based upon the federal securities laws of the U.S.

 

iv

----

Table of Contents

 

**PART I**

 

**Item 1.**                                 **Identity of Directors, Senior Management and Advisers**

 

Not applicable

 

**Item 2.**                                 **Offer Statistics and Expected Timetable**

 

Not applicable.

 

**Item 3.**                                 **Key Information**

 

**Item 3.A**                        **Selected Financial Data**

 

The following selected financial data for the five years ended June 30, 2016 is derived from the audited consolidated financial statements of Genetic Technologies Limited, prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board, which became effective for our Company as of our fiscal year ended June 30, 2006.

 

The balance sheet data as of June 30, 2016 and 2015 and the statement of comprehensive income/(loss) data for the 2016, 2015 and 2014 fiscal years are derived from our audited consolidated financial statements which are included in this Annual Report.  Balance sheet data as of June 30, 2014, 2013 and 2012 and statement of comprehensive income/ (loss) data for the 2013 and 2012 financial years are derived from our audited consolidated financial statements which are not included in this Annual Report.  The data should be read in conjunction with the consolidated financial statements, related notes and other financial information included herein.

 

All amounts are stated in Australian dollars as of June 30, as noted.

 

1

----

Table of Contents

 

**GENETIC TECHNOLOGIES LIMITED**

 

**CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME/ (LOSS)**

**FOR 2016, 2015, 2014, 2013 AND 2012**

 
| ** **                                                                              | ** ** | **Year ended   June 30, 2016** | ** ** | **Year ended   June 30, 2015** | ** ** | **Year ended   June 30, 2014** | ** ** | **Year ended   June 30, 2013** | ** ** | **Year ended   June 30, 2012** | ** ** |
|-----------------------------------------------------------------------------------------|------------|-----------------------------------------------|------------|-----------------------------------------------|------------|-----------------------------------------------|------------|-----------------------------------------------|------------|-----------------------------------------------|------------|
| ** **                                                                              | ** ** | **AUD**                                       | ** ** | **AUD**                                       | ** ** | **AUD**                                       | ** ** | **AUD**                                       | ** ** | **AUD**                                       | ** ** |
| **Revenue   from operations**                                                           |       |                                          |       |                                          |       |                                          |       |                                          |       |                                          |       |
| Genetic testing   services                                                              |       | 824,586                                       |       | 2,011,918                                     |       | 4,564,280                                     |       | 3,377,183                                     |       | 3,691,215                                     |       |
| Less: cost of   sales                                                                   |       | (743,060                                      | )          | (891,243                                      | )          | (1,837,729                                    | )          | (1,945,467                                    | )          | (1,948,625                                    | )          |
| Gross profit from   operations                                                          |       | 81,526                                        |       | 1,120,675                                     |       | 2,726,551                                     |       | 1,431,716                                     |       | 1,742,590                                     |       |
| Other revenue                                                                           |       | 300,548                                       |       | 1,027,151                                     |       | 863,832                                       |       | 4,784,913                                     |       | 2,526,599                                     |       |
| Gain on   deconsolidation of subsidiary                                                 |       | —                                        |       | —                                        |       | 761,361                                       |       | —                                        |       | 5,113,175                                     |       |
| Selling and   marketing expenses                                                        |       | (3,186,497                                    | )          | (4,504,299                                    | )          | (6,251,595                                    | )          | (5,266,818                                    | )          | (4,384,184                                    | )          |
| General and   administrative expenses                                                   |       | (3,429,357                                    | )          | (4,222,988                                    | )          | (3,173,109                                    | )          | (4,413,782                                    | )          | (5,608,038                                    | )          |
| Licensing,   patent and legal costs                                                     |       | (103,581                                      | )          | (435,418                                      | )          | (1,079,199                                    | )          | (2,399,824                                    | )          | (1,267,838                                    | )          |
| Laboratory,   research and development costs                                            |       | (2,584,752                                    | )          | (2,851,665                                    | )          | (3,298,127                                    | )          | (3,462,466                                    | )          | (4,029,369                                    | )          |
| Finance costs                                                                           |       | (28,889                                       | )          | (264,694                                      | )          | (744,199                                      | )          | (38,968                                       | )          | (45,217                                       | )          |
| Gain on disposal   of business                                                          |       | —                                        |       | 1,396,798                                     |       | —                                        |       | —                                        |       | —                                        |       |
| Fair value loss   on ImmunAid option fee                                                |       | —                                        |       | (795,533                                      | )          | —                                        |       | —                                        |       | —                                        |       |
| Share of net   loss of associates accounted for using the equity method                 |       | —                                        |       | —                                        |       | (362,682                                      | )          | (437,185                                      | )          | (132,037                                      | )          |
| Fair value gain/   (loss) on financial liabilities at fair value through profit or loss |       | —                                        |       | 349,246                                       |       | (648,374                                      | )          | —                                        |       | —                                        |       |
| Non-operating   income and expenses                                                     |       | 492,037                                       |       | 370,557                                       |       | 1,071,072                                     |       | 452,931                                       |       | 787,491                                       |       |
| **Profit/(loss)   from continuing operations before income tax**                        |       | (8,458,965                                    | )          | (8,810,170                                    | )          | (10,134,469                                   | )          | (9,349,483                                    | )          | (5,296,828                                    | )          |
| Net profit from   discontinued operation                                                |       | —                                        |       | —                                        |       | —                                        |       | —                                        |       | —                                        |       |
| **Profit/(loss)   before income tax**                                                   |       | (8,458,965                                    | )          | (8,810,170                                    | )          | (10,134,469                                   | )          | (9,349,483                                    | )          | (5,296,828                                    | )          |
| Income tax   expense                                                                    |       | —                                        |       | —                                        |       | —                                        |       | —                                        |       | —                                        |       |
| **Profit/(loss)   for the year**                                                        |       | (8,458,965                                    | )          | (8,810,170                                    | )          | (10,134,469                                   | )          | (9,349,483                                    | )          | (5,296,828                                    | )          |
| **Other   comprehensive income/(loss)**                                                 |       |                                          |       |                                          |       |                                          |       |                                          |       |                                          |       |
| Realized gain on   sale of available-for-sale investments transferred from reserve      |       | —                                        |       | —                                        |       | —                                        |       | —                                        |       | —                                        |       |
| Exchange   gains/(losses) on translation of controlled foreign operations               |       | 1,307,219                                     |       | 414,005                                       |       | (149,162                                      | )          | 9,347                                         |       | (6,818                                        | )          |
| Exchange   gains/(losses) on translation of non-controlled foreign operations           |       | —                                        |       | —                                        |       | 86                                            |       | 17,073                                        |       | (296                                          | )          |
| **Other   comprehensive income/(loss) for the year, net of tax**                        |       | 1,307,219                                     |       | 414,005                                       |       | (149,076                                      | )          | 26,420                                        |       | (7,114                                        | )          |
| **Total   comprehensive profit/(loss) for the year**                                    |       | (7,151,746                                    | )          | (8,396,165                                    | )          | (10,283,545                                   | )          | (9,323,063                                    | )          | (5,303,942                                    | )          |
| **Profit/(loss)   for the year is attributable to:**                                    |       |                                          |       |                                          |       |                                          |       |                                          |       |                                          |       |
| Owners of   Genetic Technologies Limited                                                |       | (8,458,965                                    | )          | (8,810,170                                    | )          | (10,125,197                                   | )          | (9,298,367                                    | )          | (5,287,523                                    | )          |
| Non-controlling   interests                                                             |       | —                                        |       | —                                        |       | (9,272                                        | )          | (51,116                                       | )          | (9,305                                        | )          |
| **Total   profit/(loss) for the year**                                                  |       | (8,458,965                                    | )          | (8,810,170                                    | )          | (10,134,469                                   | )          | (9,349,483                                    | )          | (5,296,828                                    | )          |
| **Total   comprehensive profit/(loss) for the year is attributable to:**                |       |                                          |       |                                          |       |                                          |       |                                          |       |                                          |       |
| Owners of   Genetic Technologies Limited                                                |       | (7,151,746                                    | )          | (8,396,165                                    | )          | (10,274,359                                   | )          | (9,289,020                                    | )          | (5,294,341                                    | )          |
| Non-controlling   interests                                                             |       | —                                        |       | —                                        |       | (9,186                                        | )          | (34,043                                       | )          | (9,601                                        | )          |
| **Total   profit/(loss) for the year**                                                  |       | (7,151,746                                    | )          | (8,396,165                                    | )          | (10,283,545                                   | )          | (9,323,063                                    | )          | (5,303,942                                    | )          |
|                                                                                    |       |                                          |       |                                          |       |                                          |       |                                          |       |                                          |       |
| **Earnings/(loss)   per share (cents per share)**                                       |       |                                          |       |                                          |       |                                          |       |                                          |       |                                          |       |
| Basic and   diluted net profit/(loss) per ordinary share                                |       | (0.49                                         | )          | (0.82                                         | )          | (1.76                                         | )          | (1.97                                         | )          | (1.15                                         | )          |
| Weighted-average   shares outstanding                                                   |       | 1,715,214,158                                 |       | 1,072,803,358                                 |       | 574,557,747                                   |       | 472,084,970                                   |       | 460,402,869                                   |       |

 

2

----

Table of Contents

 

**GENETIC TECHNOLOGIES LIMITED**

 

**CONSOLIDATED BALANCE SHEET DATA FOR 2016, 2015, 2014, 2013 AND 2012**

 
| ** **                  | ** ** | **As of   June 30, 2016** | ** ** | **As of   June 30, 2015** | ** ** | **As of   June 30, 2014** | ** ** | **As of   June 30, 2013** | ** ** | **As of   June 30, 2012** | ** ** |
|-----------------------------|------------|------------------------------------------|------------|------------------------------------------|------------|------------------------------------------|------------|------------------------------------------|------------|------------------------------------------|------------|
| ** **                  | ** ** | **AUD**                                  | ** ** | **AUD**                                  | ** ** | **AUD**                                  | ** ** | **AUD**                                  | ** ** | **AUD**                                  | ** ** |
| **Assets**                  |       |                                     |       |                                     |       |                                     |       |                                     |       |                                     |       |
| Current assets              |       | 12,131,070                               |       | 19,566,096                               |       | 4,360,509                                |       | 2,657,416                                |       | 9,949,795                                |       |
| Non-current   assets        |       | 1,158,616                                |       | 1,153,636                                |       | 2,368,690                                |       | 5,662,111                                |       | 6,491,956                                |       |
| Total assets                |       | 13,289,686                               |       | 20,719,732                               |       | 6,729,199                                |       | 8,319,527                                |       | 16,441,751                               |       |
| **Liabilities**             |       |                                     |       |                                     |       |                                     |       |                                     |       |                                     |       |
| Current   liabilities       |       | (1,332,189                               | )          | (1,735,163                               | )          | (2,318,016                               | )          | (2,465,016                               | )          | (1,930,568                               | )          |
| Non-current   liabilities   |       | (74,308                                  | )          | (25,321                                  | )          | (2,583,664                               | )          | (96,224                                  | )          | (108,541                                 | )          |
| Total   liabilities         |       | (1,406,497                               | )          | (1,760,484                               | )          | (4,901,680                               | )          | (2,561,240                               | )          | (2,039,109                               | )          |
| Net assets                  |       | 11,883,189                               |       | 18,959,248                               |       | 1,827,519                                |       | 5,758,287                                |       | 14,402,642                               |       |
| **Equity**                  |       |                                     |       |                                     |       |                                     |       |                                     |       |                                     |       |
| Contributed   equity        |       | 115,272,576                              |       | 115,247,128                              |       | 90,080,492                               |       | 83,735,845                               |       | 83,280,142                               |       |
| Reserves                    |       | 6,054,861                                |       | 4,697,403                                |       | 3,922,140                                |       | 3,951,771                                |       | 3,719,419                                |       |
| Accumulated   losses        |       | (109,444,248                             | )          | (100,985,283                             | )          | (92,175,113                              | )          | (82,049,916                              | )          | (72,751,549                              | )          |
| Non-controlling   interests |       | —                                   |       | —                                   |       | —                                   |       | 120,587                                  |       | 154,630                                  |       |
| Total equity                |       | 11,883,189                               |       | 18,959,248                               |       | 1,827,519                                |       | 5,758,287                                |       | 14,402,642                               |       |

 

**Exchange rates**

 

The following table sets forth, for the periods and dates indicated, certain information concerning the noon buying rate in New York City for Australian dollars expressed in U.S. dollars per $1.00 as certified for customs purposes by the Federal Reserve Bank of New York.

 
| **Period ended** | ** ** | **At period end   USD** | ** ** | **Average rate   USD** | ** ** | **High   USD** | ** ** | **Low   USD** | ** ** |
|-----------------------|------------|-----------------------------------|------------|-----------------------------|------------|----------------|------------|---------------|------------|
|                  |       |                              |       |                        |       |           |       |          |       |
| **Yearly data**       |       |                              |       |                        |       |           |       |          |       |
| June 2012        |       | 1.0236                            |       | 1.0323                      |       | 1.1026         |       | 0.9453        |       |
| June 2013        |       | 0.9165                            |       | 1.0272                      |       | 1.0591         |       | 0.9165        |       |
| June 2014        |       | 0.9427                            |       | 0.9186                      |       | 0.9705         |       | 0.8715        |       |
| June 2015        |       | 0.7704                            |       | 0.8365                      |       | 0.9488         |       | 0.7566        |       |
| June 2016        |       | 0.7432                            |       | 0.7289                      |       | 0.7817         |       | 0.6855        |       |
|                  |       |                              |       |                        |       |           |       |          |       |
| **Monthly data**      |       |                              |       |                        |       |           |       |          |       |
| May 2016         |       | 0.7242                            |       | 0.7318                      |       | 0.7641         |       | 0.7184        |       |
| June 2016        |       | 0.7432                            |       | 0.7401                      |       | 0.7598         |       | 0.7225        |       |
| July 2016        |       | 0.7599                            |       | 0.7529                      |       | 0.7632         |       | 0.7453        |       |
| August 2016      |       | 0.7519                            |       | 0.7629                      |       | 0.7717         |       | 0.7516        |       |
| September 2016   |       | 0.7667                            |       | 0.7591                      |       | 0.7676         |       | 0.7470        |       |
| October 14 2016  |       | 0.7610                            |       | 0.7592                      |       | 0.7664         |       | 0.7545        |       |

 

**Item 3.B**                        **Capitalization and Indebtedness**

 

Not applicable.

 

**Item 3.C**                        **Reasons for the Offer and Use of Proceeds**

 

Not applicable.

 

3

----

Table of Contents

 

**Item 3.D**                        **Risk Factors**

 

Before you purchase our ADSs, you should be aware that there are risks, including those described below.  You should consider carefully these risk factors together with all of the other information contained elsewhere in this Annual Report before you decide to purchase our ADSs.

 

**Risks Related to our Business and Business Strategy**

 

**Our stock price is volatile and can fluctuate significantly based on events not in our control and general industry conditions.  As a result, the value of your investment may decline significantly.**

 

The biotechnology sector can be particularly vulnerable to abrupt changes in investor sentiment.  Stock prices of companies in the biotechnology industry, including ours, can swing dramatically, with little relationship to operating performance.  Our stock price may be affected by a number of factors including, but not limited to:

 

·                       product development events;

·                       the outcome of litigation;

·                       decisions relating to intellectual property rights;

·                       the entrance of competitive products or technologies into our markets;

·                       new medical discoveries;

·                       the establishment of strategic partnerships and alliances;

·                       changes in reimbursement policies or other practices related to the pharmaceutical industry; or

·                       other industry and market changes or trends.

 

Since our listing on the Australian Securities Exchange in August 2000, the price of our Ordinary Shares has ranged from a low of $0.012 to a high of $0.97 per share.  Further fluctuations are likely to occur due to events which are not within our control and general market conditions affecting the biotechnology sector or the stock market generally.

 

In addition, low trading volume may increase the volatility of the price of our ADSs.  A thin trading market could cause the price of our ADSs to fluctuate significantly more than the stock market as a whole.  For example, trades involving a relatively small number of our ADSs may have a greater impact on the trading price for our ADSs than would be the case if the trading volume were higher.

 

The following chart illustrates the fluctuation in the price of our shares (in Australian dollars) over the last five years:

 

 

(Refer Item 9.A for more information on key data points on this chart)

(Source: Yahoo Finance: https//au.finance.yahoo.com/)

 

4

----

Table of Contents

 

**The fact that we do not expect to pay cash dividends may lead to decreased prices for our stock.**

 

We have never paid a cash dividend on our Ordinary Shares and we do not anticipate paying a cash dividend in the foreseeable future.  We intend to retain future cash earnings, if any, for reinvestment in the development and expansion of our business.  Whether we pay cash dividends in the future will be at the discretion of our Board of directors and may be dependent on our financial condition, results of operations, capital requirements and any other factors our Board of directors decides is relevant.  As a result, an investor may only recognize an economic gain on an investment in our stock from an appreciation in the price of our stock.

 

**You may have difficulty in effecting service of legal process and enforcing judgments against us and our Management.**

 

We are a public company limited by shares, registered and operating under the Australian *Corporations Act 2001*.  The majority of our directors and officers named in this Annual Report reside outside the U.S.  Substantially all, or a substantial portion of, the assets of those persons are also located outside the U.S.  As a result, it may not be possible to affect service on such persons in the U.S. or to enforce, in foreign courts, judgments against such persons obtained in U.S. courts and predicated on the civil liability provisions of the federal securities laws of the U.S.  Furthermore, substantially all of our directly-owned assets are located outside the U.S., and, as such, any judgment obtained in the U.S. against us may not be collectible within the U.S.  There is doubt as to the enforceability in the Commonwealth of Australia, in original actions or in actions for enforcement of judgments of U.S. courts, of civil liabilities predicated solely upon federal or state securities laws of the U.S., especially in the case of enforcement of judgments of U.S. courts where the defendant has not been properly served in Australia.

 

**Because we are not necessarily required to provide you with the same information as an issuer of securities based in the United States, you may not be afforded the same protection or information you would have if you had invested in a public corporation based in the United States.**

 

We are exempt from certain provisions of the Securities Exchange Act of 1934, as amended, commonly referred to as the Exchange Act, that are applicable to U.S. public companies, including (i) the rules under the Exchange Act requiring the filing with the SEC of quarterly reports on Form 10-Q or current reports on Form 8-K; (ii) the sections of the Exchange Act regulating the solicitation of proxies, consents or authorizations in respect of a security registered under the Exchange Act; and (iii) the sections of the Exchange Act requiring insiders to file public reports of their stock ownership and trading activities and liability for insiders who profit from trades made in a short period of time.  The exempt provisions would be available to you if you had invested in a U.S. corporation.

 

However, in line with the Australian Securities Exchange regulations, we disclose our financial results on a semi-annual basis (which is performed under International Standard on Review Engagements) and to be fully audited annually (which is performed under International Standards on Auditing) which are required to have a limited review semi-annually and to be fully audited annually.   The information, which may have an effect on our stock price on the Australian Securities Exchange, will be disclosed to the Australian Securities Exchange and also the Securities Exchange Commission.  Other relevant information pertaining to our Company will also be disclosed in line with the Australian Securities Exchange regulations and information dissemination requirements for listed companies.  We will provide our semi-annual results and other material information that we make public in Australia in the U.S. under the cover of an SEC Form 6-K.  Nevertheless, you may not be afforded the same protection or information, which would be made available to you, were you investing in a United States public corporation because the requirements of a Form 10-Q and Form 8-K are not applicable to us.

 

**If significant liquidity does not eventuate for our ADSs on NASDAQ, your ability to resell your ADSs could be negatively affected because there would be limited buyers for your interests.**

 

Historically, there was virtually no trading in our ADSs through the pink sheets after the establishment of our Level I ADR Program.  However, subsequent to the Level II listing of our ADSs on the NASDAQ Global Market on September 2, 2005, the trading volumes of our ADSs have increased.  The Company subsequently transferred the listing of its ADSs to the NASDAQ Capital Market effective as from June 30, 2010.  An active trading market for the ADSs, however, may not be maintained in the future.  If an active trading market is not maintained, the liquidity and trading prices of the ADSs could be negatively affected.

 

**In certain circumstances, holders of ADSs may have limited rights relative to holders of Ordinary Shares.**

 

The rights of holders of ADSs with respect to the voting of Ordinary Shares and the right to receive certain distributions may be limited in certain respects by the deposit agreement entered into by us and The Bank of New York Mellon.  For example, although ADS holders are entitled under the deposit agreement, subject to any applicable provisions of Australian law and of our Constitution, to instruct the depositary as to the exercise of the voting rights pertaining to the Ordinary Shares represented by the American Depositary Shares, and the depositary has agreed that it will try, as far as practical, to vote the Ordinary Shares so represented in accordance with such instructions, ADS holders may not receive notices sent by the depositary in time to ensure that the depositary will vote the Ordinary Shares.  This means that, from a practical point of view, the holders of ADSs may not be able to exercise their right to vote.  In addition, under the deposit agreement, the depositary has the right to restrict distributions to holders of the ADSs in the event that it is unlawful or

 

5

----

Table of Contents

 

impractical to make such distributions.  We have no obligation to take any action to permit distributions to holders of our American Depositary Receipts, or ADSs.  As a result, holders of ADSs may not receive distributions made by us.

 

**Our Company has a history of incurring losses.**

 

The business now called Genetic Technologies Limited was founded in 1989.  With the exception of the year ended June 30, 2011, the Company has incurred operating losses in every year of its existence.  As at June 30, 2016, the Company had accumulated losses of $109,444,248 and the extent of any future losses and whether or not the Company can generate profits in future years remains uncertain.  The Company currently does not generate sufficient revenue to cover its operating expenses.  We expect our capital outlays and operating expenditures to continue to increase for the foreseeable future as we seek to establish the BREVAGen*plus* test as a leading non-hereditary breast cancer risk assessment test.  In order to fund the commercialization of BREVAGen*plus*, further expand our clinical laboratory operations, technologies and research & development activities, we may need to raise additional capital. There is no certainty that the Company will be able to raise additional funds by issuing further shares and/or the raising of debt and, if such funds are available, on what terms the Company would be able to secure them.

 

**Going concern.**

 

During the 2016 financial year, the Company incurred a total comprehensive loss after income tax of $7,151,746 (2015: $8,396,165) and net cash outflows from operations of $7,726,838 (2015: $9,691,528).

 

As of June 30, 2016, the Company held cash reserves of $11,179,687 and had net current assets of $10,798,881.

 

During the 2017 financial year, the Directors expect increased cash outflows from operations as the Company continues to invest resources in expanding the research & development and sales & marketing activities in support of BREVAGen*plus®* in the U.S. As a result of these expected cash outflows, the Directors intend to raise new equity funding within the next twelve months in order to ensure the Company continues to hold adequate levels of available cash resources to meet creditors and other commitments.

 

The continuing viability of the Company and its ability to continue as a going concern and meet its debts and commitments as they fall due is dependent on the satisfactory completion of the planned equity raising.

 

Due to the uncertainty surrounding the timing, quantum or the ability to raise additional funds via the issuance of new equity, there is a material uncertainty that may raise substantial doubt on the Company’s ability to continue as a going concern and therefore, that it may be unable to realise its assets and discharge its liabilities in the normal course of business.  However, the Directors believe that the Company will be successful in the above matters and accordingly, have prepared the financial report on a going concern basis. As such no adjustments have been made to the financial statements relating to the recoverability and classification of the asset carrying amounts or classification of liabilities that might be necessary should the Company not be able to continue as a going concern.

 

**There is a substantial risk that we are, or will become, a passive foreign investment company, or PFIC, which will subject our U.S. investors to adverse tax rules.**

 

Holders of our ADSs who are U.S. residents face income tax risks. There is a substantial risk that we are, or will become, a passive foreign investment company, commonly referred to as a PFIC. Our treatment as a PFIC could result in a reduction in the after-tax return to the holders of our ADSs and would likely cause a reduction in the value of such ADSs. For U.S. federal income tax purposes, we will be classified as a PFIC for any taxable year in which either (i) 75% or more of our gross income is passive income, or (ii) at least 50% of the average value of all of our assets for the taxable year produce or are held for the production of passive income. For this purpose, cash is considered to be an asset that produces passive income. We believe that there is a risk we will be classified as a PFIC for the taxable year ended June 30, 2016. If we are classified as a PFIC for U.S. federal income tax purposes, highly complex rules will apply to U.S. holders owning ADSs. Accordingly, you are urged to consult your tax advisors regarding the application of such rules. United States residents should carefully read “Item 10.E. Additional Information—Taxation, United States Federal Income Tax Consequences” in this Annual Report on Form 20-F for the fiscal year ended June 30, 2016, for a more complete discussion of the U.S. federal income tax risks related to owning and disposing of our ADSs.

 

6

----

Table of Contents

 

**Risks Related to our Industry**

 

**Our sales cycle is typically lengthy.**

 

The sales cycle for our testing products is typically lengthy.  As a result, we may expend substantial funds and management effort with no assurance of successfully selling our products or services.  Our ability to obtain customers for our molecular risk assessment and predictive genetic testing services depends significantly on the perception that our services can help accelerate efforts in genomics.  Our sales effort requires the effective demonstration of the benefits of our services to, and significant training of, many different departments within a potential customer.  In addition, we sometimes are required to negotiate agreements containing terms unique to each customer.  Our business could also be adversely affected if we expend money without any return.

 

**If our competitors develop superior products, our operations and financial condition could be affected.**

 

Though we currently have no direct competition in this space, we are currently subject to competition from biotechnology and diagnostic companies, academic and research institutions and government or other publicly-funded agencies that are pursuing products and services which are substantially similar to our molecular risk assessment testing services, or which otherwise address the needs of our customers and potential customers.  Our competitors in the predictive genetic testing and assessment market include private and public sector enterprises located in Australia, the U.S. and elsewhere. Many of the organizations competing with us are much larger and have more ready access to needed resources. In particular, they would have greater experience in the areas of finance, research and development, manufacturing, marketing, sales, distribution, technical and regulatory matters than we do.  In addition, many of the larger current and potential competitors have already established name / brand recognition and more extensive collaborative relationships.

 

Our competitive position in the molecular risk assessment and predictive testing area is based upon, amongst other things, our ability to:

 

·             maintain first to market advantage;

 

·             continue to strengthen and maintain scientific credibility through the process of obtaining scientific validation and undertaken further clinical trials supported by Peer-reviewed publication in medical journals;

 

·             create and maintain scientifically-advanced technology and offer proprietary products and services;

 

·             attract and retain qualified personnel;

 

·             obtain patent or other protection for our products and services;

 

·             obtain required government approvals and other accreditations on a timely basis; and

 

·             successfully market our products and services.

 

If we are not successful in meeting these goals, our business could be adversely affected.  Similarly, our competitors may succeed in developing technologies, products or services that are more effective than any that we are developing or that would render our technology and services obsolete, noncompetitive or uneconomical.

 

**We rely heavily upon patents and proprietary technology that may fail to protect our business.**

 

We rely upon our portfolio of patent rights, patent applications and exclusive licenses to patents and patent applications relating to genetic technologies.  We expect to aggressively patent and protect our proprietary technologies.  However, we cannot be certain that any additional patents will be issued to us as a result of our domestic or foreign patent applications or that any of our patents will withstand challenges by others.  Patents issued to, or licensed by us may be infringed or third parties may independently develop the same or similar technologies.  Similarly, our patents may not provide us with meaningful protection from competitors, including those who may pursue patents which may prevent, limit or interfere with our products or which may require licensing and the payment of significant fees or royalties by us to such third parties in order to enable us to conduct our business.  We may sue or be sued by third parties regarding our patents and other intellectual property rights.  These suits are often costly and would divert valuable funds, time and technical resources from our operations and cause a distraction to management.

 

**We have important relationships with external parties over whom we have limited control.**

 

We have relationships with academic consultants and other advisers who are not employed by us.  Accordingly, we have limited control over their activities and can expect only limited amounts of their time to be dedicated to our activities.  These persons may have consulting, employment or advisory arrangements with other entities that may conflict with or compete with their obligations to us.  Our consultants typically sign agreements that provide for confidentiality of our proprietary information and results of studies.  However, in connection with every relationship, we may not be able to maintain the confidentiality of our technology, the dissemination of which could

 

7

----

Table of Contents

 

hurt our competitive position and results from operations.  To the extent that our scientific consultants develop inventions or processes independently that may be applicable to our proposed products, disputes may arise as to the ownership of the proprietary rights to such information, and we may not be successful with any dispute outcomes.

 

**We may be subject to professional liability suits and our insurance may not be sufficient to cover damages.  If this occurs, our business and financial condition may be adversely affected.**

 

Our business exposes us to potential liability risks that are inherent in the testing, manufacturing, marketing and sale of molecular risk assessment and predictive tests.  The use of our products and product candidates, whether for clinical trials or commercial sale, may expose us to professional liability claims and possible adverse publicity.  We may be subject to claims resulting from incorrect results of analysis of genetic variations or other screening tests performed using our services.  Litigation of such claims could be costly.  We could expend significant funds during any litigation proceeding brought against us.  Further, if a court were to require us to pay damages to a plaintiff, the amount of such damages could be significant and severely damage our financial condition.  Although we have public and product liability insurance coverage under broadform liability and professional indemnity policies, for an aggregate amount of A$60,000,000, the level or breadth of our coverage may not be adequate to fully cover any potential liability claims.  To date we have not been subject to any claims, or ultimately liability, in excess of the amount of our coverage.  In addition, we may not be able to obtain additional professional liability coverage in the future at an acceptable cost.  A successful claim or series of claims brought against us in excess of our insurance coverage and the effect of professional liability litigation upon the reputation and marketability of our technology and products, together with the diversion of the attention of key personnel, could negatively affect our business.

 

**We use potentially hazardous materials, chemicals and patient samples in our business and any disputes relating to improper handling, storage or disposal of these materials could be time consuming and costly.**

 

Our research and development, production and service activities involve the controlled use of hazardous laboratory materials and chemicals, including small quantities of acid and alcohol, and patient tissue samples.  We do not knowingly deal with infectious samples.  We, our collaborators and service providers are subject to stringent Australian federal, state and local laws and regulations governing occupational health and safety standards, including those governing the use, storage, handling and disposal of these materials and certain waste products.  However, we could be liable for accidental contamination or discharge or any resultant injury from hazardous materials, and conveyance, processing, and storage of and data on patient samples.  If we, our collaborators or service providers fail to comply with applicable laws or regulations, we could be required to pay penalties or be held liable for any damages that result and this liability could exceed our financial resources.  Further, future changes to environmental health and safety laws could cause us to incur additional expense or restrict our operations.  To date, we have not had a reportable event or serious injury.

 

In addition, our collaborators and service providers may be working with these same types of hazardous materials, including hazardous chemicals, in connection with our collaborations.  In the event of a lawsuit or investigation, we could be held responsible for any injury caused to persons or property by exposure to, or release of, these hazardous materials or patient samples that may contain infectious materials.  The cost of this liability could exceed our resources.  While we maintain broadform liability insurance coverage for these risks, in the amount of up to A$40,000,000, the level or breadth of our coverage may not be adequate to fully cover potential liability claims.  To date, we have not been subject to claims, or ultimately liability, in excess of the amount of our coverage.  Our broadform insurance coverage also covers us against losses arising from an interruption of our business activities as a result of the mishandling of such materials.  We also maintain workers’ compensation insurance, which is mandatory in Australia, covering all of our workers in the event of injury.

 

**We depend on the collaborative efforts of our academic and corporate partners for research, development and commercialization of some of our products.  A breach by our partners of their obligations, or the termination of the relationship, could deprive us of valuable resources and require additional investment of time and money.**

 

Our strategy for research, development and commercialization of some of our products has historically involved entering into various arrangements with academic, corporate partners and others.  As a result, the success of our strategy depends, in part, upon the strength of those relationships and these outside parties undertaking their responsibilities and performing their tasks to the best of their ability and responding in a timely manner.  Our collaborators may also be our competitors.  We cannot necessarily control the amount and timing of resources that our collaborators devote to performing their contractual obligations and we have no certainty that these parties will perform their obligations as expected or that any revenue will be derived from these arrangements.

 

If our collaborators breach or terminate their agreement with us or otherwise fail to conduct their collaborative activities in a timely manner, the development or commercialization of the product candidate or research program under such collaborative arrangement may be delayed.  If that is the case, we may be required to undertake unforeseen additional responsibilities or to devote unforeseen additional funds or other resources to such development or commercialization, or such development or commercialization could be terminated.  The termination or cancellation of collaborative arrangements could adversely affect our financial condition, intellectual property position and general operations.  In addition, disagreements between collaborators and us could lead to delays in the collaborative research, development, or commercialization of certain products or could require or result in formal legal process or arbitration for resolution.  These consequences could be time-consuming and expensive and could have material adverse effects on the Company.

 

8

----

Table of Contents

 

Other than our contractual rights under our license agreements, we may be limited in our ability to convince our licensees to fulfill their obligations.  If our licensees fail to act promptly and effectively, or if a dispute arises, it could have a material adverse effect on our results of operations and the price of our ordinary shares and ADSs.

 

We rely upon scientific, technical and clinical data supplied by academic and corporate collaborators, licensors, licensees, independent contractors and others in the evaluation and development of potential therapeutic methods.  There may be errors or omissions in this data that would materially adversely affect the development of these methods.

 

We may seek additional collaborative arrangements to develop and commercialize our products in the future.  We may not be able to negotiate acceptable arrangements in the future and, if negotiated, we have no certainty that they will be on favorable terms or if they will be successful.  In addition, our partners may pursue alternative technologies independently or in collaboration with others as a means of developing treatments for the diseases targeted by their collaborative programs with us.  If any of these events occur, the progress of the Company could be adversely affected and our results of operations and financial condition could suffer.

 

**Currently our financial results depend largely on the sales of our breast cancer risk assessment test, BREVAGen*plus.***

 

For the near future, we expect to continue to derive a substantial majority of our revenues from sales of one product, our breast cancer risk test BREVAGen*plus*. We do not expect to recognize significant revenues from BREVAGen*plus*, a second generation BREVAGen product, until increased levels of adoption and reimbursement for this test have been established. If we are unable to increase sales of   BREVAGen*plus* or successfully develop and commercialize other tests or enhancements, our ability to achieve sustained revenues and profitability would be impacted.

 

**If our sole laboratory facility becomes inoperable, we will be unable to perform our tests and our business will be harmed.**

 

We do not have redundant clinical reference laboratory facilities outside of Melbourne, Australia. Our current lease of laboratory premises expires August 31, 2018. The facility and the equipment we use to perform our tests would be costly to replace and could require substantial lead time to repair or replace. The facility may be harmed or rendered inoperable by natural or man-made disasters, including flooding and power outages, which may render it difficult or impossible for us to perform our tests for some period of time. The inability to perform our tests or the backlog of tests that could develop if our facility is inoperable for even a short period of time may result in the loss of customers or harm our reputation, and we may be unable to regain those customers in the future.

 

If we no longer had our own facility and needed to rely on a third party to perform our tests, we could only use another facility with established state licensure and Clinical Laboratory Improvements Amendments (CLIA) accreditation under the scope of which BREVAgen*plus* tests could be performed following validation and other required procedures. We cannot assure you that we would be able to find another CLIA-certified facility willing to comply with the required procedures, that this laboratory would be willing to perform the tests on commercially reasonable terms, or that it would be able to meet our quality standards. In order to establish a redundant clinical reference laboratory facility, we would have to spend considerable time and money securing adequate space, constructing the facility, recruiting and training employees, and establishing the additional operational and administrative infrastructure necessary to support a second facility. We may not be able, or it may take considerable time, to replicate our testing processes or results in a new facility. Additionally, any new clinical reference laboratory facility would be subject to certification under CLIA and licensing by several states, including California and New York, which could take a significant amount of time and result in delays in our ability to begin operations.

 

**The loss of key members of our senior management team or our inability to attract and retain highly skilled scientists, clinicians and salespeople could adversely affect our business.**

 

Our success depends largely on the skills, experience and performance of key members of our executive management team and others in key management positions. The efforts of each of these persons together will be critical as we continue to develop our technologies and testing processes, continue our international expansion and transition to a company with multiple commercialized products on offer. If we were to lose one or more of these key employees, we may experience difficulties in competing effectively, developing our technologies and implementing our business strategies.

 

Our research and development programs and commercial laboratory operations depend on our ability to attract and retain highly skilled scientists and technicians, including licensed laboratory technicians, chemists, biostatisticians and engineers. We may not be able to attract or retain qualified scientists and technicians in the future due to the competition for qualified personnel among life science businesses. In addition, if there were to be a shortage of clinical laboratory scientists in coming years, this would make it more difficult to hire sufficient numbers of qualified personnel. We also face competition from universities and public and private research institutions in recruiting and retaining highly qualified scientific personnel. In addition, our success depends on our ability to attract and retain salespeople with extensive experience in oncology and close relationships with medical oncologists, pathologists and other hospital personnel. We may have difficulties sourcing, recruiting or retaining qualified salespeople, which could cause delays or a decline in the rate of adoption of our tests. If we are not able to attract and retain the necessary personnel to accomplish our business objectives, we may experience constraints

 

9

----

Table of Contents

 

that could adversely affect our ability to support our research and development and sales programs. All of our U.S employees are at-will, which means that either we or the employee may terminate their employment at any time.

 

**FDA regulation of LDTs may result in significant changes, and our business could be adversely impacted if we fail to adapt.**

 

Clinical laboratory tests like ours are regulated under the CLIA, as well as by applicable state laws. Diagnostic kits that are sold and distributed through interstate commerce are regulated as medical devices by the federal Food and Drug Administration (FDA). The FDA has exercised its discretion and has not subjected most Laboratory Developed Tests, or LDTs to FDA regulation, although reagents or software provided by third parties and used to perform LDTs may be subject to regulation.

 

The FDA claims to have regulatory authority over LDTs under the Medical Device Amendments of 1976 and has stated in the past that it would issue guidance to the industry regarding its regulatory approach. In such discussions, the FDA has indicated that it would use a risk-based approach to regulation and would direct more resources to tests with wider distribution and with the highest risk of injury, but that it will be sensitive to the need to not adversely impact patient care or innovation.  In October 2014, the FDA announced its framework and timetable for implementing this guidance.  We cannot predict the ultimate timing or form of any such guidance or regulation and the potential impact on our existing tests. If adopted, such a regulatory approach by the FDA may lead to an increased regulatory burden, including additional costs and delays in introducing new tests or even continuing with our current tests. While the ultimate impact of the FDA’s approach is unknown, it may be extensive and may result in significant changes. Our failure to adapt to these changes could have a material adverse effect on our business.

 

If the FDA decides to regulate our tests, it may require additional pre-market clinical testing prior to submitting a regulatory notification or application for commercial sales. If we are required to conduct pre-market clinical trials, whether using prospectively acquired samples or archival samples, delays in the commencement or completion of clinical testing could significantly increase our test development costs and delay commercialization of any future tests, and interrupt sales of our current tests. Many of the factors that may cause or lead to a delay in the commencement or completion of clinical trials may also ultimately lead to delay or denial of regulatory clearance or approval. The commencement of clinical trials may be delayed due to insufficient patient enrollment, which is a function of many factors, including the size of the patient population, the nature of the protocol, the proximity of patients to clinical sites and the eligibility criteria for the clinical trial.

 

We may find it necessary to engage contract research organizations to perform data collection and analysis and other aspects of our clinical trials, which might increase the cost and complexity of our trials. We may also depend on clinical investigators, medical institutions and contract research organizations to perform the trials. If these parties do not successfully carry out their contractual duties or obligations or meet expected deadlines, or if the quality, completeness or accuracy of the clinical data they obtain is compromised due to the failure to adhere to our clinical protocols or for other reasons, our clinical trials may have to be extended, delayed or terminated. Many of these factors would be beyond our control. We may not be able to enter into replacement arrangements without undue delays or considerable expenditures. If there are delays in testing or approvals as a result of the failure to perform by third parties, our research and development costs would increase, and we may not be able to obtain regulatory clearance or approval for our tests. In addition, we may not be able to establish or maintain relationships with these parties on favorable terms, if at all. Each of these outcomes would harm our ability to market our tests, or to achieve sustained profitability.

 

Even if the clinical trials are timely completed, there is no assurance that the results of those trials will be sufficient to support regulatory clearance or approval for the intended indications.  Failure of the clinical data to support an intended use of given LDT would likely have an adverse impact on the Company.

 

**Our business could be harmed from the loss or suspension of a license or imposition of a fine or penalties under, or future changes in, or changing interpretations of, CLIA or state laboratory licensing laws to which we are subject.**

 

The clinical laboratory testing industry is subject to extensive federal and state regulation, and many of these statutes and regulations have not been interpreted by the courts.  The regulations implementing CLIA set out federal regulatory standards that apply to virtually all clinical laboratories (regardless of the location, size or type of laboratory), including those operated by physicians in their offices, by requiring that they be certified by the federal government or by a federally approved accreditation agency.  CLIA does not preempt state law, which in some cases may be more stringent than federal law and require additional personnel qualifications, quality control, record maintenance and proficiency testing. The sanction for failure to comply with CLIA and state requirements may be suspension, revocation or limitation of a laboratory’s CLIA certificate, which is necessary to conduct business, as well as significant fines and/or criminal penalties. Several states have similar laws and we may be subject to similar penalties. If the certification of one laboratory owned by the Company is suspended or revoked that may preclude the Company from owning or operating any other laboratory in the Country for two years.

 

10

----

Table of Contents

 

We cannot assure you that applicable statutes and regulations and more specifically, the Food, Drug, and Cosmetic Act, will not be interpreted or applied by a prosecutorial, regulatory or judicial authority in a manner that would adversely affect our business. Potential sanctions for violation of these statutes and regulations include significant fines and the suspension or loss of various licenses, certificates and authorizations, which could have a material adverse effect on our business. In addition, compliance with future legislation could impose additional requirements on us, which may be costly.

 

**Failure to establish, and perform to, appropriate quality standards to assure that the highest level of quality is observed in the performance of our testing services and in the design, manufacture and marketing of our products could adversely affect the results of our operations and adversely impact our reputation.**

 

The provision of clinical testing services, and the design, manufacture and marketing of diagnostic products involve certain inherent risks. The services that we provide and the products that we design, manufacture and market are intended to provide information for healthcare providers in providing patient care. Therefore, users of our services and products may have a greater sensitivity to errors than the users of services or products that are intended for other purposes.

 

Similarly, negligence in performing our services can lead to injury or other adverse events. We may be sued under common law, physician liability or other liability law for acts or omissions by our laboratory personnel.  We are subject to the attendant risk of substantial damages awards and risk to our reputation.

 

**Failure to timely or accurately bill for our services could have a material adverse effect on our business.**

 

Billing for clinical testing services is extremely complicated and is subject to extensive and non-uniform rules and administrative requirements. Depending on the billing arrangement and applicable law, we bill various payers, such as patients, insurance companies, Medicare, Medicaid, physicians and hospitals. Changes in laws regulations and contract terms could increase the complexity and cost of our billing process. Additionally, auditing for compliance with applicable laws and regulations as well as internal compliance policies and procedures add further cost and complexity to the billing process.

 

Missing or incorrect information on requisitions adds complexity to and slows the billing process, creates backlogs of unbilled requisitions, and generally increases the aging of accounts receivable and bad debt expense. Failure to timely or correctly bill may lead to us not being reimbursed for our services or an increase in the aging of our accounts receivable, which could adversely affect our results of operations and cash flows. Failure to comply with applicable laws relating to billing government healthcare programs or private healthcare programs that operate under government contract could lead to various penalties, including: (1) exclusion or suspension from participation in federal  health care programs ; (2) asset forfeitures; (3) civil and criminal fines and penalties; (3) possible liability under the federal False Claims Act and state analogs, and (4) the loss of various licenses, certificates and authorizations necessary to operate our business, any of which could have a material adverse effect on our results of operations or cash flows.

 

**Failure to comply with complex federal and state laws and regulations related to submission of claims for clinical laboratory services could result in significant monetary damages and penalties and exclusion from the Medicare and Medicaid programs.**

 

We are subject to extensive federal and state laws and regulations relating to the submission of claims for payment for clinical laboratory services, including those that relate to coverage of our services under Medicare, Medicaid and other governmental health care programs, the amounts that may be billed for our services and to whom claims for services may be submitted. In addition, we are subject to various laws regulating our interactions with other healthcare providers and with patients, such as the Anti-Kickback Statute, the Anti-Inducement Statute, and the Ethics in Patient Referrals Act of 1989, commonly referred to as the Stark law.  These laws are complicated.

 

Our failure to comply with applicable laws and regulations could result in our inability to receive payment for our services or result in attempts by third-party payers, such as Medicare and Medicaid, to recover payments from us that have already been made. Submission of claims in violation of certain statutory or regulatory requirements can result in penalties, including substantial civil penalties for each item or service billed to Medicare in violation of the legal requirement, and exclusion from participation in Medicare, Medicaid and other federal health care programs. Government authorities or whistleblowers may also assert that violations of laws and regulations related to submission or causing the submission of claims violate the federal False Claims Act, or FCA, or other laws related to fraud and abuse, including submission of claims for services that were not medically necessary. Violations of the FCA could result in significant economic liability. The FCA provides that all damages are trebled, and each false claim submitted is subject to a penalty of up

 

11

----

Table of Contents

 

to $21,563 for violations occurring after November 2, 2015 and $11,000 for violations occurring before November 2, 2015.   For example, we could be subject to FCA liability if it were determined that the services we provided were not medically necessary and not reimbursable or if it were determined that we improperly paid physicians who referred patients to our laboratory.  It is also possible that the government could attempt to hold us liable under fraud and abuse laws for improper claims submitted by an entity for services that we performed if we were found to have knowingly participated in the arrangement that resulted in submission of the improper claims.

 

**Failure to comply with HIPAA, including regarding the use of new “standard transactions,” may negatively impact our profitability and cash flows.**

 

Pursuant to the Health Insurance Portability and Accountability Act of 1996, as amended, or HIPAA, we must comply with comprehensive privacy and security standards with respect to the use and disclosure of protected health information, as well as standards for electronic transactions, including specified transaction and code set rules. Under the 2009 HITECH amendments to HIPAA, the law was expanded, including requirements to provide notification of certain identified data breaches, direct patient access to laboratory records, the extension of certain HIPAA privacy and security standards directly to business associates, and heightened penalties for noncompliance, and enforcement efforts.

 

In addition, HIPAA not only seeks to ensure patient privacy, but also requires providers that bill electronically to do so using standard code sets.  These HIPAA transaction standards are complex, and subject to differences in interpretation by payers. For instance, some payers may interpret the standards to require us to provide certain types of information, including demographic information not usually provided to us by physicians. As a result of inconsistent application of transaction standards by payers or our inability to obtain certain billing information not usually provided to us by physicians, we could face increased costs and complexity, a temporary disruption in receipts and ongoing reductions in the timeliness of reimbursement. In addition, new requirements for additional standard transactions, such as claims attachments, Version 5010 of the HIPAA Transaction Standards and the ICD-10-CM Code Set, could prove technically difficult, time-consuming or expensive to implement.

 

**Complying with numerous regulations pertaining to our business is an expensive and time-consuming process, and any failure to comply could result in substantial penalties.**

 

The clinical laboratory testing industry is highly regulated and there can be no assurance that the regulatory environment in which we operate will not change significantly and adversely in the future. Areas of the regulatory environment that may affect our ability to conduct business include, without limitation:

 

·                  federal and state laws applicable to billing and claims payment;

·                  federal and state laboratory anti-mark-up laws;

·                  federal and state anti-kickback laws;

·                  federal and state false claims laws;

·                  federal self-referral and financial inducement prohibition laws, commonly known as the Stark Law, and the state equivalents;

·                  federal and state laws governing laboratory licensing and testing, including CLIA;

·                  federal and state laws governing the LDTs;

·                  HIPAA, along with the revisions to HIPPA as a result of the HITECH Act, and analogous state laws;

·                  federal, state and foreign regulation of privacy, security, electronic transactions and identity theft;

·                  federal, state and local laws governing the handling, transportation and disposal of medical and hazardous waste;

·                  Occupational Safety and Health Administration rules and regulations;

·                  changes to laws, regulations and rules as a result of the Health Care Reform Law; and

·                  changes to other federal, state and local laws, regulations and rules, including tax laws.

 

We have adopted policies and procedures designed to comply with these laws.  In the ordinary course of business, there is an ongoing awareness of the importance of compliance with these laws.  The growth of our business and sales organization may increase the potential for violating these laws or our internal policies and procedures, despite our ongoing vigilance in maintaining and updating our compliance procedures. The risk of being found in violation of these or other laws and regulations is further increased by the fact that many of them are extremely complex and in many instances, there are no significant regulatory or judicial interpretations of these laws and regulations. Any action brought against us for violation of these or other laws or regulations, even if we successfully defend against it, could cause us to incur significant legal expenses and divert management’s attention. Any determination that we have violated these laws or regulations, or a public announcement that we are being investigated for possible violations of these laws or regulations, could harm our reputation, operating results and financial condition. If our operations are found to be in violation of any of these laws and regulations, we

 

12

----

Table of Contents

 

may be subject to any applicable penalty associated with the violation, including civil and criminal penalties, damages and fines, we could be required to refund payments received by us, and we could be required to curtail or cease our operations. In addition, a significant change in any of these laws or regulations may require us to change our business model in order to maintain compliance with these laws or regulations, which could harm our operating results and financial condition.

 

**A failure to comply with any of federal or state laws applicable to our business, particularly laws related to the elimination of healthcare fraud, may adversely impact our business.**

 

Federal officials responsible for administering and enforcing the healthcare laws and regulations have made a priority of eliminating healthcare fraud. For example, the Patient Protection and Affordable Care Act, as amended by the Health Care Education and Reconciliation Act of 2010, jointly the “Affordable Care Act,”  includes significant new fraud and abuse measures, including required disclosures of financial arrangements between drug and device manufacturers, on the one hand, and physicians and teaching hospitals, on the other hand. Federal funding available for combating health care fraud and abuse generally has increased. While we seek to conduct our business in compliance with all applicable laws and regulations, many of the laws and regulations applicable to our business, particularly those relating to billing and reimbursement of tests and those relating to relationships with physicians, hospitals and patients, contain language that has not been interpreted by courts. We must rely on our interpretation of these laws and regulations based on the advice of our counsel and regulatory or law enforcement authorities may not agree with our interpretation of these laws and regulations and may seek to enforce legal remedies or penalties against us for violations. From time to time we may need to change our operations, particularly pricing or billing practices, in response to changing interpretations of these laws and regulations or regulatory or judicial determinations with respect to these laws and regulations. These occurrences, regardless of their outcome, could damage our reputation and harm important business relationships that we have with healthcare providers, payers and others. Furthermore, if a regulatory or judicial authority finds that we have not complied with applicable laws and regulations, we could be required to refund amounts that were billed and collected in violation of such laws and regulations. In addition, we may voluntarily refund amounts that were alleged to have been billed and collected in violation of applicable laws and regulations. In either case, we could suffer civil and criminal damages, fines and penalties, exclusion from participation in governmental healthcare programs and the loss of licenses, certificates and authorizations necessary to operate our business, as well as incur liabilities from third-party claims, all of which could harm our operating results and financial condition. Moreover, regardless of the outcome, if we or physicians or other third parties with whom we do business are investigated by a regulatory or law enforcement authority we could incur substantial costs, including legal fees, and our management may be required to divert a substantial amount of time to an investigation.

 

To enhance compliance with applicable health care laws, and mitigate potential liability in the event of noncompliance, regulatory authorities, such as the United States Department of Health and Human Services’  Office of Inspector General, or OIG, have recommended the adoption and implementation of a comprehensive health care compliance program that generally contains the elements of an effective compliance and ethics program described in Section 8B2.1 of the United States Sentencing Commission Guidelines Manual, and for many years the OIG has made available a model compliance program targeted to the clinical laboratory industry.  In addition, certain states, such as New York, require that health care providers, such as clinical laboratories, that engage in substantial business under the state Medicaid program have a compliance program that generally adheres to the standards set forth in the Model Compliance Program.  Also, under the Affordable Care Act, the U.S. Department of Health and Human Services, or HHS, will require suppliers, such as the Company, to adopt, as a condition of Medicare participation, compliance programs that meet a core set of requirements.

 

**Failure to maintain the security of patient-related information or compliance with security requirements could damage our reputation with customers, cause us to incur substantial additional costs and become subject to litigation.**

 

Pursuant to HIPAA, and certain similar state laws, we must comply with comprehensive privacy and security standards with respect to the use and disclosure of protected health information. Under the HITECH amendments to HIPAA, HIPAA was expanded to require certain data breach notification, to extend certain HIPAA privacy and security standards directly to business associates, to heighten penalties for noncompliance, and enhance enforcement efforts.

 

We receive certain personal and financial information about our clients and their patients. In addition, we depend upon the secure transmission of confidential information over public networks. A compromise in our security systems that results in client or patient personal information being obtained by unauthorized persons or our failure to comply with security requirements for financial transactions could adversely affect our reputation with our clients and result in litigation against us or the imposition of penalties, all of which may adversely affect our operations, financial condition and liquidity.

 

**Changes in regulation and policies, including increasing downward pressure on health care reimbursement, may adversely affect reimbursement for diagnostic services and could have a material adverse impact on our business.**

 

Reimbursement levels for health care services are subject to continuous and often unexpected changes, and we face a variety of efforts by government payers to reduce utilization and reimbursement for diagnostic testing services. Changes in governmental reimbursement

 

13

----

Table of Contents

 

may result from statutory and regulatory changes, retroactive rate adjustments, administrative rulings, competitive bidding initiatives, or other policy changes.

 

The U.S. Congress has considered, at least yearly in conjunction with budgetary legislation, changes to one or both of the Medicare fee schedules under which we receive reimbursement, which include the clinical laboratory fee schedule for our clinical laboratory services. For example, Congress has periodically considered imposing a 20 percent coinsurance on laboratory services. If enacted, this would require us to attempt to collect this amount from patients, although in many cases the costs of collection would exceed the amount actually received.

 

The CMS pays laboratories on the basis of a of a fee schedule that is reviewed and re-calculated on an annual basis.  CMS may change the fee schedule upward or downward on billing codes that we submit for reimbursement on a regular basis. Our revenue and business may be adversely affected if the reimbursement rates associated with such codes are reduced. Even when reimbursement rates are not reduced, policy changes add to our costs by increasing the complexity and volume of administrative requirements. Medicaid reimbursement, which varies by state, is also subject to administrative and billing requirements and budget pressures. Recently, state budget pressures have caused states to consider several policy changes that may impact our financial condition and results of operations, such as delaying payments, reducing reimbursement, restricting coverage eligibility and service coverage, and imposing taxes on our services.

 

**Healthcare policy changes, including recently enacted legislation reforming the U.S. healthcare system, may have a material adverse effect on our financial condition and results of operations.**

 

Fees for most laboratory services reimbursed by Medicare are established in the Clinical Laboratory Fee Schedule (CLFS), and fees for other testing reimbursed by Medicare, primarily related to pathology, are covered by the Physician Fee Schedule (PFS). Over the past several years, the Company has experienced governmental pay reductions as a direct result of the Affordable Care Act (ACA), the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) and the Achieving a Better Life Experience Act of 2014 (ABLE Act). In addition, the Protecting Access to Medicare Act (PAMA), which became law on April 1, 2014, is expected to result in a future net reduction in reimbursement revenue under the CLFS. These laws include provisions designed to control healthcare expenses reimbursed by government programs through a combination of reductions to fee schedules, incentives to providers to participate in alternative payment models such as risk-sharing and new methods to establish and adjust fees.

 

The Affordable Care Act makes changes that are expected to significantly affect clinical laboratories, among others.  Beginning in 2013, each medical device manufacturer must pay a sales tax in an amount equal to 2.3% of the price for which such manufacturer sells its medical devices that are listed with the FDA. The Consolidated Appropriations Act, 2016 (Dec. 18, 2015) imposed a two-year moratorium on this medical device tax so it would not apply to the sale of a taxable medical device by the manufacturer, producer, or importer of the device during the period beginning on Jan. 1, 2016, and ending on Dec. 31, 2017.

 

Although the FDA has contended that LDTs are medical devices, none of our products is currently listed with the FDA. We cannot assure you that the tax, once the moratorium sunsets, will not be extended to services such as ours in the future.  The  Affordable Care Act also mandates a reduction in payments for clinical laboratory services paid under the Medicare Clinical Laboratory Fee Schedule, or CLFS, of 1.75% through 2015 and a productivity adjustment to the CLFS.  Moreover, under Protecting Access to Medicare Act, CMS will be required to set and make adjustments to the CLFS using market-based information that reflects the scope of prices paid across the laboratory industry. On October 1, 2015, CMS issued a proposed rule to implement PAMA that would require applicable laboratories, including the Company, to begin reporting their test-specific private payer payment amounts to CMS during the first quarter of 2016. CMS intends to use that private market data to calculate weighted median prices for each test (based on applicable CPT codes) that would represent the new CLFS rates beginning in 2017, subject to certain phase-in limits. For 2017-2019, a test price cannot be reduced by more than 10.0% per year; for 2020-2022, a test price cannot be reduced by more than 15.0% per year. Reporting and pricing will occur every three years, or annually with respect to certain types of tests, to update the CLFS thereafter.

 

Other significant measures contained in the Affordable Care Act includes, for example, coordination and promotion of research on comparative clinical effectiveness of different technologies and procedures, initiatives to revise Medicare payment methodologies, such as bundling of payments across the continuum of care by providers and physicians, and initiatives to promote quality indicators in payment methodologies. The Affordable Care Act also includes significant new fraud and abuse measures, including required disclosures by drug and device manufacturers and distributors of financial arrangements with physicians and teaching hospitals. In addition, the Health Care Reform Law establishes an Independent Payment Advisory Board, or IPAB, to reduce the per capita rate of growth in Medicare spending. The IPAB has broad discretion to propose policies to reduce expenditures, which may have a negative impact on payment rates for services. The IPAB proposals may impact payments for clinical laboratory services beginning in 2016. We are monitoring the impact of the Health Care Reform Law in order to enable us to determine the trends and changes that may be necessitated by the legislation that may potentially impact on our business over time.

 

In addition to the Affordable Care Act, various healthcare reform proposals have also emerged from federal and state governments. For example, in February 2012, Congress passed the “Middle Class Tax Relief and Job Creation Act of 2012” which in part reduced the potential future cost-based increases to the Medicare Clinical Laboratory Fee Schedule by 2%. Overall the expected total fee cut to the CLFS for 2013 was 2.95% not including a further reduction of 2% from implementation of the automatic expense

 

14

----

Table of Contents

 

reductions (sequester) under the Budget Control Act of 2011 which went into effect for dates of service on or after April 1, 2013.  Reductions made by the Congressional sequester are applied to total claims payments made.  While these reductions did not result in a rebasing of the negotiated or established Medicare or Medicaid reimbursement rates, rebasing could occur as a result of future legislation.  In 2015, the total fee cut to the CLFS was 0.25%.

 

On June 23, 2016, the CMS published a final rule implementing PAMA, which required establishment of a new Medicare reimbursement system for clinical lab tests paid under the CLFS, based on private payer rates, as reported to CMS. Although the new payment system was supposed to go into effect for tests furnished after January 1, 2017, the CMS rulemaking process was delayed, and the new rates will not be effective until January 1, 2018 pursuant to the final rule. Under the new system the Company must collect data on private payer rates and report the data to CMS every three years for most types of tests.  The Company does not expect that the new reporting requirements will have a material impact on its business or results of operations. CMS will use the data reported by all applicable labs to calculate a weighted median of private payer rates for each test performed, and that weighted median will be the new Medicare rate. Rate reductions for existing tests under the new system will be phased in over six years. The Company is still assessing the full impact of the final rule, but has been preparing for it for some time.

 

We cannot be certain that these or future changes will not affect payment rates in the future. We also cannot predict whether future healthcare initiatives will be implemented at the federal or state level, or the effect any future legislation or regulation will have on us. The taxes imposed by the new federal legislation, cost reduction measures and the expansion in government’s role in the U.S. healthcare industry may result in decreased profits to us, lower reimbursements by payers for our products or reduced medical procedure volumes, all of which may adversely affect our business, financial condition and results of operations.

 

**Healthcare plans have taken steps to control the utilization and reimbursement of healthcare services, including clinical test services**.

 

We also face efforts b**y** non-governmental third-party payers, including healthcare plans, to reduce utilization and reimbursement for clinical testing services.

 

The healthcare industry has experienced a trend of consolidation among healthcare insurance plans, resulting in fewer but larger insurance plans with significant bargaining power to negotiate fee arrangements with healthcare providers, including clinical testing providers. These healthcare plans, and independent physician associations, may demand that clinical testing providers accept discounted fee structures or assume all or a portion of the financial risk associated with providing testing services to their members through capped payment arrangements. In addition, some healthcare plans have been willing to limit the PPO or POS laboratory network to only a single national laboratory to obtain improved fee-for-service pricing. There are also an increasing number of patients enrolling in consumer driven products and high deductible plans that involve greater patient cost-sharing.

 

The increased consolidation among healthcare plans also has increased the potential adverse impact of ceasing to be a contracted provider with any such insurer.

 

We expect continuing efforts to reduce reimbursements, to impose more stringent cost controls and to reduce utilization of clinical test services. These efforts, including future changes in third-party payer rules, practices and policies, or ceasing to be a contracted provider to a healthcare plan, may have a material adverse effect on our business.

 

**Government regulation of genetic research or testing may adversely affect the demand for our services and impair our business and operations.**

 

In addition to the regulatory framework governing healthcare, genetic research and testing has been the focus of public attention and regulatory scrutiny.  From time to time, federal, state and/or local governments adopt regulations relating to the conduct of genetic research and genetic testing.  In the future, these regulations could limit or restrict genetic research activities as well as genetic testing for research or clinical purposes.  In addition, if such regulations are adopted, these regulations may be inconsistent with, or in conflict with, regulations adopted by other government bodies.  Regulations relating to genetic research activities could adversely affect our ability to conduct our research and development activities.  Regulations restricting genetic testing could adversely affect our ability to market and sell our products and services.  Accordingly, any regulations of this nature could increase the costs of our operations or restrict our ability to conduct our testing business and might adversely affect our operations and financial condition.

 

15

----

Table of Contents

 

**Our operations may be adversely affected by the effects of extreme weather conditions or other interruptions in the timely transportation of specimens.**

 

We transport specimens from our North Carolina offices in the U.S. to our laboratory located in Melbourne, Australia.  Our operations may be adversely impacted by extreme weather conditions or other interruptions in the timely transportation of such specimens or otherwise to provide our services, from time to time. The occurrence of any such event and/or a disruption to our operations as a result may harm our reputation and adversely impact our results of operations.

 

**Failure in our information technology systems could significantly increase testing turn-around times or impact on the billing processes or otherwise disrupt our operations.**

 

Our laboratory operations depend, in part, on the continued performance of our information technology systems. Our information technology systems are potentially vulnerable to physical or electronic break-ins, computer viruses and similar disruptions. Sustained system failures or interruption of our systems in our laboratory operations could disrupt our ability to process laboratory requisitions, perform testing, and provide test results in a timely manner and/or billing process.  Breaches with respect to protected health information could result in violations of HIPAA and analogous state laws, and risk the imposition of significant fines and penalties.  Failure of our information technology systems could adversely affect our reputation, business, profitability and financial condition.

 

**Failure to demonstrate the clinical utility of our products could have a material adverse effect on our financial condition and results of operations.**

 

In order to assure adequate insurance coverage and favorable insurance reimbursement of our products, we are required to demonstrate the clinical utility of our tests. Clinical utility—which is the usefulness of a test for clinical practice (as contrasted with diagnostic accuracy, which is how well the test can determine the presence, absence, or risk of a specific disease)—may well be the most significant limitation for the widespread acceptance of molecular diagnostic tools such as BREVAGen*plus*.   We are currently undertaking studies intended to demonstrate the clinical utility of our tests in order to assure continued acceptance of the value of our products.  These studies will require us to invest considerable financial and management resources without any assurance of favorable results.  Successful studies are difficult to plan, execute and validate, because of the time involved and variables that are difficult to control and which can impact outcomes.   If we are unable to demonstrate clinical utility, or if our data is deemed insufficient to validate utility, which are required for Medicare coverage, then we may face negative coverage decisions for our products.  The resulting negative coverage decisions could have a material adverse effect on our financial conditions and results of operations.

 

**Ethical and other concerns surrounding the use of genetic information may reduce the demand for our services.**

 

Public opinion regarding ethical issues related to the confidentiality and appropriate use of genetic testing may influence government authorities to call for limits on, or regulation of the use of, genetic testing.  In addition, such authorities could prohibit testing for genetic predisposition to certain conditions, particularly for those that have no known cure.  Furthermore, adverse publicity or public opinion relating to genetic research and testing, even in the absence of any governmental regulation, could reduce the potential markets for our services, which could materially and adversely affect our financial position.

 

We do not however undertake any activities in the contentious areas of cloning, stem cell research or other gene-altering areas.  As such, many of the ethical issues that may be relevant to other participants in the genetics industry are not necessarily applicable to us.

 

**Risks associated with Out-licensing of our intellectual property**

 

The patenting of genes and issues surrounding access to genetic knowledge are the subjects of extensive and ongoing public debate in many countries.  By way of example, the Australian Law Reform Commission has previously conducted two inquiries into the social uses of genetic information.  The patents we hold over uses of “non-coding” DNA have broad scope and have also been the subject of debate and some criticism in the media.  Individuals or organizations, in any one of the countries in which these patents have issued, could take legal action to seek their amendment, revocation or invalidation, something which has happened previously, on several occasions in various jurisdictions, though we have prevailed in all such cases.

 

Furthermore, any time that we initiate legal action against parties that infringe our patents we face a risk that the infringer will defend itself through a counter-claim of patent invalidity or other such claims.  Subsequent legal action could potentially overturn, invalidate or limit the scope of our patents.

 

Under the relevant Patent Acts in most of the countries in which our non-coding patents have issued, the relevant judicial system has rights to impose compulsory licensing.  The relevant governments typically hold “march-in” rights by which they may unilaterally choose to exploit the technology.  To the extent that the Company’s non-coding technology is used in the conduct of research, we also face risks, uncertainty and controversy over the licensing of our technology to those conducting the research.  Whether or not researchers should be exempted from obligations to take licenses to relevant patents was the subject of another government inquiry conducted by the Australian Council for Intellectual Property who recommended the creation of a research exemption.

 

16

----

Table of Contents

 

**Item 4.**           **Information on the Company**

 

**Item 4.A**         **History and Development of the Company**

 

Originally incorporated under the laws of Western Australia on January 5, 1987 as Concord Mining N.L. the Company operated as a mining company.  On August 13, 1991, we changed our name to Consolidated Victorian Gold Mines N.L.  On December 2, 1991, we changed our name to Consolidated Victorian Mines N.L.  On March 15, 1995, we changed our name to Duketon Goldfields N.L.

 

On October 15, 1999, the Company’s corporate status was changed from a No Liability Company to a company limited by shares.  On August 29, 2000, following the acquisition of Swiss company GeneType AG, we changed our name to Genetic Technologies Limited, which is our current name.  At that time, the mining activities were phased out to focus on becoming a  biotechnology company, following which our stock exchange listing was duly transferred from the mining board of the ASX to the industrial board and our shares were thereafter classified under the industry group “Health and Biotechnology”, completing our transformation from a mining company into a biotechnology company.  Our current activities in biotechnology primarily concentrate on one clearly defined area of activity which is covered under Item 4.B “Business Overview”.

 

In October 2009, a new strategic direction was established to focus efforts in creating a portfolio of tests that would be aimed at assisting medical clinicians with cancer management.  This would comprise tests that were created by the Company and in-licensed from third parties which would then be marketed by Genetic Technologies in the Asia-Pacific region.

 

On April 14, 2010, we announced that we had acquired certain assets from Perlegen Sciences, Inc. in California, with the main asset being the BREVAGenTM breast cancer risk assessment test (“BREVAGenTM”).  In addition to the BREVAGenTM test, we also acquired a suite of patents valid to 2022 which augment and extend our current non-coding patent portfolio.  On June 28, 2010, we incorporated a wholly-owned subsidiary named Phenogen Sciences Inc. in the State of Delaware which commenced selling the BREVAGenTM test in the U.S. marketplace in June 2011. In October 2014, the Company released its next generation breast cancer risk assessment test BREVAGen*plus® .*

 

During 2014, the Directors considered an offer by Specialist Diagnostic Services Ltd (SDS), the wholly owned pathology subsidiary of Primary Health Care Ltd., to purchase the assets of the Australian Genetic testing business, which included Paternity, Forensics, Animal and Medical testing for the ANZ region.  In September 2014, the Company signed a binding Sale and Purchase Agreement with SDS.

 

On November 19, 2014, the Company completed the sale of its Heritage Australian Genetics business to SDS.

 

As part of the Company’s strategy to focus on the expansion of its cancer diagnostic franchise, we continue to evaluate opportunities to sell, out-license or co-develop other assets and technologies in which we have an interest, including our legacy non-coding assertion and licensing program.

 

***Corporate Information***

 

Our registered office, headquarters and laboratory is located at 60-66 Hanover Street, Fitzroy, Victoria, 3065, Australia and our telephone number is +-61 3 8412 7000. The offices of our U.S. subsidiary, Phenogen Sciences Inc., are located at 9115 Harris Corners Parkway, Suite 320, Charlotte, North Carolina, 28269 U.S.A.  The telephone number for the Phenogen Sciences office is (877) 992 7382.  Our website address is www.gtglabs.com.  The information in our website is not incorporated by reference into this Annual Report and should not be considered as part of this Annual Report.

 

Our Australian Company Number (ACN) is 009 212 328.  Our Australian Business Number (ABN) is 17 009 212 328.  We operate pursuant to our constitution, the Australian *Corporations Act 2001*, the Listing Rules of the Australian Securities Exchange, the Marketplace Rules of NASDAQ and, where applicable, local, state and federal legislation in the countries in which we operate.

 

**Item 4.B**      **Business Overview**

 

**Description of our Business**

 

Founded in 1989, Genetic Technologies Listed on the ASX (GTG) in 2000 and NASDAQ (GENE) in 2005, Genetic Technologies is today a molecular diagnostics company that offers predictive testing and assessment tools to help physicians proactively

 

17

----

Table of Contents

 

manage women’s health. The Company’s lead product, BREVAGen*plus*, is a clinically validated risk assessment test for non-hereditary breast cancer and is first in its class. BREVAGen*plus* improves upon the predictive power of the first generation BREVAGen test and is designed to facilitate better informed decisions about breast cancer screening and preventive treatment plans. BREVAGen*plus* expands the application of BREVAGen from Caucasian women to include African-Americans and Hispanics, and is directed towards women aged 35 years or above, who have not had breast cancer and have one or more risk factors for developing breast cancer.

 

The Company has successfully launched the first generation BREVAGen test across the U.S. via its U.S. subsidiary Phenogen Sciences Inc. and the addition of BREVAGen*plus*, launched in October 2014, significantly expands the applicable market. The Company markets BREVAGen*plus* to healthcare professionals in comprehensive breast health care and imaging centres, as well as to obstetricians/gynecologists (OBGYNs) and breast cancer risk assessment specialists (such as breast surgeons). For more information, visit www.brevagenplus.com and www.phenogensciences.com.

 

**The Genetic Testing Business**

 

Following the acquisition of Genetype AG in 1999 and the subsequent renaming to Genetic Technologies Limited, the Company focused on establishing a genetic testing business, which over the following decade saw it become the largest provider of paternity and related testing services in Australia.  The Company’s service testing laboratory in Melbourne became the leading non-Government genetic testing service provider in Australia. The genetic testing services of the Company expanded to include at certain times:

 

·                  *Medical testing*

·                  *Animal Testing*

·                  *Forensic Testing*

·                  *Plant Testing*

 

The acquisition of GeneType AG also provided the Company with ownership rights to a potentially significant portfolio of issued patents.  During the intervening years, this portfolio has since been expanded by both organic growth and the acquisition of intellectual property assets from third parties. The patent portfolio is constantly reviewed to ensure that we maintain potentially important patents but at the same time keep costs to a minimum by no longer pursuing less commercially attractive and relevant intellectual property.

 

A strategic alliance with Myriad Genetics Inc. delivered to the Company exclusive rights in Australia and New Zealand to perform DNA testing for susceptibility to a range of cancers.  In April 2003, we established our cancer susceptibility testing facility within our Australian laboratory.  In June 2003, this facility was granted provisional accreditation by the National Association of Testing Authorities, Australia (“NATA”).

 

In November 2003, the Company joined the world-wide genetic testing network GENDIA as the sole reference laboratory for the network in Australia and New Zealand.  GENDIA consists of more than 50 laboratories from around the world, each contributing expertise in their respective disciplines to create a network capable of providing more than 2,000 different genetic tests.  This provided the Company with the ability to offer comprehensive testing services to its customer base in the Asia-Pacific region as well as increasing its exposure to other markets.

 

In December 2009, Genetic Technologies negotiated an exclusive option to investigate the purchase of various assets from Perlegen Sciences, Inc. of Mountain View, California which included a breast cancer non-familial risk assessment test, BREVAGenTM.  Those assets were subsequently purchased by the Company in April 2010.  Work then began on validating the test in the Company’s Australian laboratory as well as initiating the process for obtaining CLIA certification which would enable the Company to undertake the testing of samples received from the U.S. market.  By July 2010, a new U.S. subsidiary named Phenogen Sciences Inc. had been incorporated by the Company in Delaware to market and distribute the BREVAGenTM test across mainland U.S.A.

 

On September 15, 2014 we announced plans to restructure and realign our group activities, in order to focus our strategy on the U.S. molecular diagnostics market and the commercialisation of our lead breast cancer risk test BREVAGen through our U.S. subsidiary Phenogen Sciences, Inc.  In October 2014, we announced the U.S. release of BREVAGen*plus*, an easy-to-use predictive risk test for the millions of women at risk of developing sporadic, or non-hereditary, breast cancer, representing a marked enhancement in accuracy and broader patient applicability, over our first generation BREVAGen product.  We also made a pivotal change of sales and marketing emphasis toward large comprehensive breast treatment and imaging centers, which are more complex entities with a longer sales cycle, but higher potential.

 

As part of this realignment, on November 19, 2014 we completed the sale of our Heritage Australian genetics business to Specialist Diagnostic Services Ltd.  As part of the Company’s strategy to focus on the expansion of its cancer diagnostic franchise, we

 

18

----

Table of Contents

 

continue to evaluate opportunities to sell, out-license or co-develop other assets and technologies in which we have an interest, including our legacy non-coding assertion and licensing program.

 

**BREVAGen*plus is a State-of-the-Art* Breast Cancer Risk Assessment Test designed to enable a more personalized breast cancer risk assessment in a greater number of women**

 

The identification, in 2007, of a number of single nucleotide polymorphisms (SNPs), each with an associated small relative risk of breast cancer, led to the development of the first commercially available genetic risk test for sporadic breast cancer, BREVAGenTM.  The Company launched the product, in the U.S. in June 2011.  In October 2014, Genetic Technologies released its next generation breast cancer risk assessment test, BREVAGen*plus*.  This new version of the test incorporates a 10-fold expanded panel of genetic markers (SNPs), known to be associated with the development of sporadic breast cancer, providing an increase in predictive power relative to its first-generation predecessor test.  In addition, the new test is clinically validated in a broader population of women including, African American and Hispanic women. This increases the applicable market beyond the Caucasian only indication of the first generation test, and simplifies the marketing process in medical clinics and breast health centres in the U.S.

 

The expanded panel of SNPs incorporated into BREVAGen*plus* were identified from multiple large-scale genome-wide association studies and subsequently tested in case-control studies utilising specific Caucasian, African American and Hispanic patient samples.

 

BREVAGen*plus* is a first-in-class, clinically validated, predictive risk test for sporadic breast cancer which examines a woman’s clinical risk factors, combined with seventy seven scientifically validated genetic biomarkers (SNPs), to allow for more personalised breast cancer risk assessment and risk management.

 

Physicians worldwide look largely to family history of breast cancer as an indication of risk in patients for developing this disease. However, 85% of women who develop breast cancer have little or no family history of developing the disease and BREVAGen*plus* is designed to help elucidate risk in this group of women.

 

Targeted towards women over the age of 35 who have little or no family history of breast cancer but harbor one or more known clinical risk factors such as early menstruation, late childbirth, late menopause, a history of atypical or benign breast biopsies, BREVAGen*plus* provides a more accurate tool for assessing a woman’s personal risk of developing breast cancer.

 

In addition, women designated as having ‘dense breasts’ upon mammographic evaluation are recognized as being at elevated risk of developing breast cancer, which makes these patients potential candidates for the BREVAGen*plus* test.  Several U.S. States have enacted legislation, which mandates that breast density be documented on mammogram reports, and encourages physicians to discuss risk profiles and risk reduction strategies with these patients. Recent scientific evidence indicates that BREVAGen*plus* may help to properly identify the high risk women in this category. It is expected that more U.S. jurisdictions will adopt similar legislation in the coming years, increasing awareness of the correlation between dense breast and breast cancer risk amongst healthcare providers, patients and health insurance payers.

 

In April 2011, the Company announced that it had gained certification of its Australian laboratory under the U.S. Clinical Laboratories Improvements Amendments, as regulated by the Centers for Medicare and Medicaid in Baltimore, Maryland.  This certification, which enables the Company to accept and test samples from U.S. residents, was the culmination of preparations required for the U.S. launch of the Company’s BREVAGenTM  test which occurred in June 2011.  Phenogen Sciences has since established an office in Charlotte, North Carolina.

 

In August 2012, the Company announced that it had received European CE Mark approval for BREVAGenTM, which will allow BREVAGenTM to be sold in the EU and other countries that recognize the CE Mark.

 

During the first half of the 2013 financial year, the Company announced that it had received licensure to sell BREVAGenTM into the states of California, Maryland, Pennsylvania, Rhode Island and Florida, bringing the total number of U.S. states in which the BREVAGenTM test can be sold to 49 of the 50 U.S. states.  In July 2013, the Company was inspected by a representative of the New York State Department of Health, Clinical Laboratory Evaluation Program (“CLEP”).  The Company’s laboratory received an inspection result with no deficiencies reported and, on August 30, 2013, the Company announced that it had received its Clinical Laboratory Permit (CLEP) from the New York State Department of Health.  This permit, which allows the Company to offer the BREVAGenTM test to residents of New York State, completed the final out-of-state licensure allowing the Company to provide testing services to all 50 U.S. states.

 

From its headquarters in Melbourne, Victoria, the Company’s laboratory holds a number of accreditations including:

 

**·**                 The Clinical Laboratory Improvement Amendments (CLIA) license required for all laboratories offering testing the U.S.;

 

19

----

Table of Contents

 

**·**                 The Clinical Laboratory Evaluation Program (CLEP) license, an additional certification required to offer tests in New York State;

**·**                 A Medical Device Establishment License (MDEL) required for Canada;

**·**                 The BREVAGen*plus***®** test is CE marked for sale in Europe;

 

Physicians who order clinical tests for their patients represent the primary sources of our testing volume. Fees invoiced to patients and third parties are based on our fee schedule, which may be subject to limitations imposed by third-party payers. The clinical laboratory industry is highly regulated and subject to significant and changing Federal and state laws and regulations. These laws and regulations affect key aspects of our business, including licensure and operations, billing and payment for laboratory services, sales and marketing interactions with ordering physicians, security and confidentiality of health information, and environmental and occupational safety.  Oversight by government officials includes regular inspections and audits.  We seek to and believe that we do conduct our business in compliance with all applicable laws and regulations.

 

The United States Clinical Laboratory Improvement Amendments of 1988, or CLIA, extends Federal licensing requirements to all clinical laboratories (regardless of the location, size or type of laboratory), including those operated by physicians in their offices, based on the complexity of the tests they perform.  CLIA also establishes a stringent proficiency testing program for laboratories and includes substantial sanctions, such as suspension, revocation or limitation of a laboratory’s CLIA certificate (which is necessary to conduct business), and significant fines and/or criminal penalties.

 

CLIA, and its implementing regulations, includes quality standards (establishing Federal quality standards for all clinical laboratories); application and user fee requirements; and enforcement procedures.  The quality standard regulations establish varying levels of regulatory scrutiny depending upon the complexity of testing performed. The tests on samples provided through our products are processed at our laboratory in Melbourne, Australia.  Our laboratory completed its first CLIA inspection under CLIA guidelines and received its certificate of compliance effective November 17, 2011. A re-certification from CMS i.e. paper survey, was performed in November 2013 and another on-site re-certification followed up in February 2016. Furthermore, our laboratory completed its first CLEP inspection under the NYS DOH CLEP guidelines and received its certificate of compliance effective August 30, 2013. Since the initial survey, the laboratory has been successful in submitting documents via the NYS eCLEP Health Commerce System for each subsequent year to date. The laboratory is expecting an on-site visit in the near future in late 2016 or early 2017.

 

We believe the Company is in compliance with all applicable federal and state laboratory requirements. Under CLIA, the company remains subject to state and local laboratory regulations.   CLIA provides that a state may adopt laboratory regulations that are more stringent than those under federal law, and some states require additional personnel qualifications, quality control, record maintenance and other requirements.

 

BREVAGen and BREVAGen*plus* are laboratory developed tests, or LDTs.  The federal Food and Drug Administration, or FDA, has regulatory responsibility over, among other areas, instruments, test kits, reagents and other medical devices used by clinical laboratories to perform diagnostic testing.  CLIA-certified laboratories, such as ours, frequently develop internal testing procedures to provide diagnostic results to customers. These tests are referred to as laboratory developed tests, or LDTs.  LDT’s are subject to CMS oversight through its enforcement of CLIA.  The FDA has also claimed regulatory authority over all LDTs, but indicates that it has exercised enforcement discretion with regard to most LDTs offered by high complexity CLIA-certified laboratories, and has not subjected these tests to the panoply of FDA rules and regulations governing medical devices.  However, the FDA has stated that it has been considering changes in the way it believes that laboratories ought to be allowed to offer these LDTs, and during 2010 publicly announced that it would be exercising regulatory authority over LDTS, using a risk-based approach that will direct more resources to tests with the highest risk of injury.  In September 2014, the FDA announced its framework and timetable for implementing this guidance.

 

***Test samples received since launch***

 

Since launching its BREVAGen test in the U.S. market in July 2011, followed by the U.S. release of, in October 2014, the number of test samples received up to balance date June 30 2016, was 9,742 tests.

 

During the financial year ended June 30, 2012, the Company generated the first sales of its BREVAGenTM test.  Whilst not material to the overall result, in accordance with revenue recognition principles, due to the relatively limited numbers of tests sold in that first year of launch, the income generated from these sales was recorded on a cash basis. Effective January 1, 2013, significant changes in the US reimbursement system have impacted (positively) on the amounts the Company has since received for the BREVAGen tests it performs. As of June 2014, the Company had enough historical data to use to enable it to determine a reliable estimate of the amount of revenue expected to be received. Accordingly the Group recognises the revenue on the BREVAGen test on an accruals basis.

 

20

----

Table of Contents

 

*Further expansion of the Company’s credentialing program*

 

Credentialing with Preferred Provider Organization (“PPOs”) Networks allows for expedited claim adjudication as “in-network”.  A PPO is a managed care organization of medical doctors, hospitals and other health care providers which has covenanted with insurers or third-party administrators to provide health care, at reduced rates, to the clients of the respective insurer or administrator.  Credentialing is a process whereby provider organizations such as physicians, care facilities and ancillary providers (including testing service providers such as Phenogen Sciences) contract directly with the PPO.  Contracts with PPOs are fundamental to having claims for the BREVAGenTM test adjudicated as “in-network”.

 

Credentialing contracts have been executed between the Company and InterWest Health, FedMed Inc., MultiPlan Network, Three Rivers Provider Network, Prime Health Services, National Preferred Provider Network / PlanCare America / Ohio Preferred Provider Network LLC (NPPN / OPPN), Galaxy Health Network and Fortified Provider Network.

 

The positive impact of this activity is reflected in the fact that the average reimbursement received in respect of claims that were adjudicated as “in-network” was significantly higher than the amounts received in respect of claims that were adjudicated as “out-of-network”, with the time taken to collect the funds also being materially shorter.

 

Once in-network, the Company receives improved cash flow via faster payment while still obtaining an acceptable level of reimbursement and reducing the costs incurred through appealing denials.  Once BREVAGen*plus* sample volumes reach a significant level and Genetic Technologies has gathered the necessary additional clinical utility data, the Company intends to approach insurers directly to contract.

 

*Reimbursement*

 

Up until the end of the 2012 calendar year, insurance claims for BREVAGen were submitted using the so-called “code stack” of CPT methodology codes.  Reimbursement under this regime was positive, with a low percentage of denials and appeals.  However, effective January, 1 2013, the AMA removed the code stack claim process, requiring tests without a specific CPT code to be claimed via an “Unlisted or Miscellaneous Code”.

 

As a result of the above changes the Company now uses a miscellaneous code when submitting claims for reimbursement from insurers. As part of this transition, the list price for the BREVAGen test was increased to enable the Company to receive payment for aspects of the test that were not previously available under the code stack. Importantly, notwithstanding this, the Company did not seek to increase the maximum out-of-pocket amount that a given patient is required to pay for a BREVAGen*plus*test under its “Patient Protection Program.”

 

Though the Company’s reimbursement per test (including write-offs and denials for non-coverage) has increased by more than 30%, the use of a miscellaneous code requires more administration and time by the Insurance Company to adjudicate and process the claim, thus increasing the time taken to receive reimbursement.

 

*Clinical utility studies and peer-review publications to drive reimbursement outcome*

 

The Company has launched an initiative to reinvigorate the pathway to Peer- Review Publication. Attaining such publications in medical journals will help to further strengthen the Company’s commercial position and accelerate reimbursement discussions with private payers.

 

The Company had previously conducted multiple scientific studies to develop and validate the first generation BREVAGen test as well as created two health economic models to demonstrate potential cost savings and health benefits associated with the BREVAGen test. Importantly, due to the nature of the technology and the specific improvements incorporated in BREVAGen*plus*, the research undertaken and published based on the original version of the test remains applicable to the new and improved BREVAGen*plus* test.

 

Following is a list of peer-reviewed publications on the BREVAGen test, to date:

 

1)             “**Cost-effectiveness of a Genetic Test for Breast Cancer Risk**”. *Cancer Prevention Research. 2013 Dec; 6(12):1328-36**.***

 

2)             “**Economic Evaluation of Using a Genetic Test to Direct Breast Cancer Chemoprevention in White Women with a Previous Breast Biopsy**”.*Applied Health Economics and Health Policy*. 2014 Apr; 12(2):203-17.

 

3)             “**Using SNP genotypes to improve the discrimination of a simple breast cancer risk prediction model**”. Breast Cancer Res Treat. 2013 Jun; 139(3):887-96.

 

4)             “**Assessment of clinical validity of a breast cancer risk model combining genetic and clinical information**”. J Natl Cancer Inst. 2010 Nov 3; 102(21):1618-27.

 

21

----

Table of Contents

 

And supporting presentations:

 

1)             Jacoby E, DiCicco, Allman R. (2013). Impact of genomics on the assessment and management of breast cancer risk in a women’s healthcare clinic. Proceedings of the National Consortium of Breast Centers March 2013.

 

2)             Fohlse HJ, Dinh TA, Allman R. (2013). Genetic testing for breast cancer risk estimation — A cost-effectiveness analysis. Presented at The California Pacific Medical Centre Breast Cancer Risk Assessment Workshop June 2013.

 

3)             Fohlse HJ, Dinh TA, Allman R. (2013). Genetic testing for breast cancer risk estimation — A cost-effectiveness analysis. Presented at the San Antonio Breast Cancer Symposium December 2013.

 

While these papers remain relevant to the BREVAGen*plus*test, they:

 

1)             Underestimate its improved performance, due to its inclusion of a greatly expanded single-nucleotide polymorphism (SNP) panel; and

 

2)             Do not capture the performance of BREVAGen*plus* in African American and Hispanic women, two groups for which the first iteration of the test was not validated.

 

A key accomplishment during the current year has been the publication of two new validation studies:

 

1)             **“SNP’s and Breast cancer risk prediction for African-American and Hispanic women**.” Breast Cancer Research & Treatment. 2015 Dec; 4(3): 583-89.

2)             “**Breast cancer risk prediction based on clinical models and 77 independent risk-associated SNPs in women aged under 50 years: Australian Breast Cancer Family Registry”** Cancer, Epidemiology, Biomarkers and Prevention. 2016 Feb; 25(2): 359-65.

 

Even though the BREVAGenTM/ BREVAGen*plus®* concept has already demonstrated market acceptance, the Company recognises that in order to secure wider commercial payer coverage and to improve the level of commercial payer payments currently received, it needs to provide additional evidence that demonstrate the impact of the test on treatment decision-making that is aligned with payer evidence requirements. As such, the Company has commenced a series of clinical utility studies that will provide further evidence to support the product’s value proposition and clinical benefits.

 

The first two of three clinical trials planned commenced in Q4 FY16 with completion expected before the end of H1 FY17. A further longer-term retrospective in design clinical trial that will assess the impact of the test on MRI screening rates is expected to commence in H1 FY17. Combined, these three studies are designed to inform the medical community of the measureable improvement in health outcomes associated with BREVAGen*plus®*testing.

 

***Research & Development Projects***

 

During the year ended June 30, 2016, Genetic Technologies supported one major research program (BREVAGen*plus*), details of which have been provided below.  In previous years, other projects, which have since been terminated or otherwise commercialized, have also been supported by the Company. The Company is constantly seeking new opportunities. Historically some projects have arisen from new inventions made by the Company while some have been made by others who have approached the Company seeking collaboration and support for their activities.

 

By its very nature, research is unpredictable and involves a considerable element of risk.  Such risks may relate to scientific concepts, the implementation of the science, the protection of any inventions made and the success or otherwise in persuading others to respect the intellectual property acquired or created by the Company.  Specifically, patents filed may not issue or may later be challenged by others.  Even if patents issue, the methods described may, with time, be superseded by alternative methods which may prove to be commercially more attractive.  Even if patents issue and the methods developed are successfully reduced to practice and can be shown to be commercially relevant, there is still no assurance that other parties will respect the patents or will take licenses to use the intellectual property.  In such circumstances, it is possible that legal action will be necessary to enforce the Company’s rights.  Such action, in turn, raises a new series of risks including potentially significant legal costs and uncertain outcomes.

 

To the extent that delays are encountered in concluding the research projects, additional costs may be incurred.  Further, the projected revenues from the projects may also be deferred, potentially impacting on the Company’s liquidity.  In such cases, the Company may seek to partner with outside parties, who will contribute to the costs of research in return for an interest in the project, or the Company may seek to raise additional working capital from the Market.  In a worst case scenario, the projects may well be closed down with no valuable intellectual property having been created for the Company.

 

22

----

Table of Contents

 

**BREVAGen*plus*® Project**

 

In June 2011, the Company launched the first iteration of the breast cancer risk assessment test; BREVAGenTM. In October 2014, Genetic Technologies released its next-generation breast cancer risk assessment test, BREVAGen*plus*. This new version of the test incorporates a 10-fold expanded panel of genetic markers (SNPs), known to be associated with the development of sporadic breast cancer, providing an increase in predictive power relative to its first-generation predecessor test. In addition, the new test has been studied in a broader population of women including, African American and Hispanic women. This increases the applicable market beyond the Caucasian only application of the first generation test, and simplifies the marketing process in medical clinics and breast health centres in the U.S. The expanded panel of SNPs incorporated into BREVAGen*plus*were identified from multiple large-scale genome-wide association studies and subsequently tested in case-control studies utilising specific Caucasian, African American and Hispanic patient samples.

 

**Historical Research Projects**

 

Following a significant corporate restructure undertaken during the 2015 fiscal year, a strategic decision was made to focus the Company on the US diagnostics market and all historical research projects were ceased.

 

***Competition***

 

The medical diagnostics and biotechnology industries is subject to intense competition.  As more information regarding cancer genomics and personalized medicine becomes available to the public, we anticipate that more products aimed at identifying cancer risk will be developed and that these products may compete with ours. However, the use of Single Nucleotide Polymorphisms (SNPs), for disease risk prediction is still a relatively new field of medicine.

 

Currently, there are no active direct competitors marketing an assay similar to that of BREVAGEN*plus* in the sporadic breast cancer risk assessment space.   In recent years, a number of organizations, including deCODE (Iceland), 23andMe, Intergenetics, and Navigenics (subsequently acquired by Life Technologies — now ThermoFisher) have attempted to commercialize SNP-based genetic tests, to both physicians and consumers, to assess sporadic breast cancer risk in relevant patient populations.  But, either due to a lack of adequate and compelling scientific validation, and/or sufficient commercial impetus and capability, these efforts have led to lackluster market adoption, resulting in either the dissolution of these businesses or a marked change in their strategy and ultimate competitive posture to genuinely challenge the efforts of the Company to commercialize and grow its BREVAGEN*plus* franchise. New entrants that we are aware of that are in early stages of product development include Counsyl Inc. in the U.S.

 

Nonetheless, there are a number of academic centers and affiliated research and development bodies, in the U.S and in Europe, that are reportedly exploring the validity and clinical viability of SNP-based commercial tests in the clinical setting, but it is unclear to what extent these entities currently represent  a direct or indirect potential competitive liability to the Company.   A number of established, mature laboratory services companies, such as Myriad Genetics, Ambry Genetics, and Laboratory Corporation of America, among others, have the demonstrable product development, marketing skill and resources to enter into this market for sporadic breast cancer risk assessment. Many of these larger potential competitors have already established name and brand recognition and more extensive collaborative relationships, but again, it is unclear to what extent these potential competitive threats could manifest in the near-to-long term.

 

The Company continues to invest in proprietary, differentiating features of its BREVAGEN*plus* test offering to diminish any prospective efforts of a potential competitor, be they an established commercial laboratory provider, a research/academic test development or laboratory services entity.  Therefore, any imminent bona fide risk that any one of these entities represents to the continued success and growth of the Company’s BREVAGEN*plus* commercialization efforts and market-leading position in this area is not clear.

 

The Company’s competitive position in the genetic testing area is based upon, amongst other things, our ability to:

 

23

----

Table of Contents

 

·             maintain first to market advantage;

 

·             continue to strengthen and maintain scientific credibility through the process of obtaining scientific validation and undertaken further clinical trials supported by Peer-reviewed publication in medical journals;

 

·             create and maintain scientifically-advanced technology and offer proprietary products and services

 

·             continue to strengthen and improve the messaging and the importance and value of the breast cancer information that BREVAGen*plus* provides to Physicians

 

·             attract and retain qualified personnel;

 

·             obtain patent or other protection for our products and services;

 

·             obtain required government approvals and other accreditations on a timely basis; and

 

·             successfully market our products and services.

 

If we are not successful in meeting these goals, our business could be adversely affected.  Similarly, our competitors may succeed in developing technologies, products or services that are more effective than any that we are developing or that would render our technology and services obsolete, noncompetitive or uneconomical.

 

**Licensing**

 

**Non-Coding Assertion Program**

 

Our out-licensing business principally covers two families of “non-coding DNA” patents.  As we are the sole owners of these patents there is, by definition, no direct competition in this activity.  However, to some degree, there are alternate technologies in the market place which can be used to perform genetic analysis and genomic mapping and so in this regard we do face indirect competition and a potential risk of technological obsolescence.  A risk of patent invalidation always exists with the possibility of the discovery of previously unknown prior art, as well as the risk of patent re-examination.  Apart from these risks, the aging and expiry of our non-coding family of patents remains, and thus our ability to generate future license revenues from these particular patents may be restricted.  It is anticipated that, over time however, licensing of additional patents filed by the Company in other areas of genetics and our other research projects may replace revenues currently generated from the licensing of these non-coding patents.

 

During the year ended June 30, 2009, we successfully prevailed in legal proceedings with respect to a Nullity Action in the German Patent Court regarding the equivalent to U.S. Patent No. 5,612,179 (the “‘179 patent”).  We subsequently responded to questions raised by the U.S. Patents and Trademarks Office (“USPTO”) in relation to a Request for Re-examination of seven of the thirty six claims contained in ‘179 patent and, on May 10, 2010, we announced that we had received formal notification from the USPTO that it had upheld, without amendment, all of the claims which formed the basis of the re-examination action of the Company’s core non-coding DNA patent.

 

On July 9, 2012, the Company announced that it had received formal notification from the USPTO that it had received and granted a request for a second *ex parte* re-examination of claims 1-18 and 26-32 of the ‘179 patent brought by Merial LLC of Duluth, Georgia (“Merial”).  Requesting re-examination is a common strategy employed by defendants in patent infringement proceedings and, as such, it is not unexpected from Merial who is currently a defendant in the action originally brought by the Company in the U.S. District Court for the District of Colorado for infringement of the ‘179 patent.  On March 15, 2013, the Company announced that the USPTO had issued an action reaffirming the validity of certain claims contained in the Company’s ‘179 patent.  In its formal notification to the Company, the USPTO stated that “claims 1-18 and 26-32 of the ‘179 patent are confirmed and claims 19-25 and 33-36 are not reexamined”.

 

On April 19, 2013, the Company advised that the USPTO had received a third request for an *ex parte* re-examination of the ‘179 patent, again from Merial, and that the request had been granted.  As was the case in all previous challenges, GTG actively defended this matter and had the patent upheld.  On September 30, 2013, the Company announced that it had received an *Ex-Parte Re-examination Certificate* once again confirming the patentability of claims 1-18 and 26-32 of the ‘179 patent.  However, the Company also announced that Merial filed yet another (its third) request with the USPTO for re-examination of the ‘179 patent. This request for re-examination was once again, defended by the Company and again upheld with all claims intact as announced on February 12, 2014.

 

As a further result of our assertion program in the US, three independent but similar motions to dismiss have been brought by defendants in our assertion program. In each case, motions to dismiss were filed arguing the patents were invalid because they covered natural phenomenon or laws of nature and thus not entitled to patent protection. Again the Company actively defended these actions and prevailed in two cases that had been heard as announced by the Company on March 12, 2014 and August 26, 2014.

 

24

----

Table of Contents

 

On October 30, 2014, Judge Stark issued a Memorandum Opinion finding Claim 1 of the Company’s foundation ‘179 patent ineligible and granted that Motion to Dismiss. Legal Counsel has now prepared an appeal to the decision in the Federal Circuit.

 

On December 7, 2015, Genetic Technologies argued before the Federal Circuit Court of Appeals in Washington DC that Claim 1 of the Company’s foundation ‘179 patent is patent eligible under the standards set forth in the Mayo/Alice line of Supreme Court cases, and that Judge Stark’s decision to grant motions to dismiss finding Claim 1 patent ineligible should be reversed.

 

On April 8, 2016, the Federal Circuit affirmed the District Court and found that Claim 1 of the Company’s ‘179 patent is patent-ineligible under 35 U.S.C. § 101.

 

On October 3, 2016, the Company was advised by its U.S. based attorney, Sheridan Ross, that the Supreme Court has declined to hear the Company’s appeal.

 

**Environmental Regulations**

 

The Company’s operations are subject to environmental regulations under Australian State legislation.  In particular, the Company is subject to the requirements of the *Environment Protection Act 1993*.  A license has been obtained under this Act to produce listed waste.

 

**Item 4.C**                        **Corporate Structure**

 

The diagram below shows the corporate structure of the Genetic Technologies group as of the date of this Annual Report:

 

 

Genetic Technologies is the holding company of the Group and is listed on the Australian Securities Exchange, under the code GTG and, via its ADRs, on the NASDAQ Capital Market, under the ticker symbol GENE.

 

**Item 4.D**                                                **Property, Plant and Equipment**

 

As at date of this Report, the Company has executed two leases in respect of premises occupied by the Group.

 

Fitzroy, Victoria

 

Genetic Technologies Limited rents the offices and laboratory premises which are located at 60-66 Hanover Street, Fitzroy, Victoria, Australia (an inner suburb of Melbourne) from Crude Pty. Ltd.  The three year lease is due to expire on August 31, 2018.  The anticipated total rental charge in respect of the year ending June 30, 2017 is approximately $205,340.  Genetic Technologies Limited does not have an option to purchase the leased premises at the expiry of the lease period.

 

Charlotte, North Carolina

 

Phenogen Sciences Inc., a wholly-owned subsidiary of Genetic Technologies Limited, rents office premises which are located at 9115 Harris Corners Parkway, Suite 320, Charlotte, North Carolina, USA from New Boston Harris Corners LLC. This lease will expire on October 31, 2016. Subsequent to June 30, 2016, the lease has been renegotiated for a further 12 months to October 31, 2017.  The anticipated total rental charge in respect of the year ending June 30, 2017 is approximately USD 34,615.  Phenogen Sciences Inc. does not have an option to purchase the leased premises at the expiry of the lease period.

 

25

----

Table of Contents

 

**Item 5.**                                 **Operating and Financial Review and Prospects**

 

You should read the following discussion and analysis in conjunction with Item 3.A “Selected Financial Data” and our financial statements, the notes to the financial statements and other financial information appearing elsewhere in this Annual Report.  In addition to historical information, the following discussion and other parts of this Annual Report contain forward-looking statements that reflect our plans, estimates, intentions, expectations and beliefs.  Our actual results could differ materially from those discussed in the forward-looking statements.  See the “Risk Factors” section of Item 3 and other forward-looking statements in this Annual Report for a discussion of some, but not all, factors that could cause or contribute to such differences.

 

**Item 5.A**                        **Operating Results**

 

**Overview**

 

Founded in 1989, Genetic Technologies is an established Australian-based molecular diagnostics company that offers predictive genetic testing and risk assessment tools, with a current focus on women’s health. During the year ended June 30, 2015 the Company divested its interest in other genetic testing services, which up until then together with licensing of non-coding technology had provided the main source of income to fund operations, to concentrate on the principal activity of the provision of molecular risk assessment for cancer.

 

The operating result for the year ended June 30, 2016 is directly reflective of the Company’s concentrated focus on the expansion of its genetic testing business, with emphasis on the sale and distribution of the BREVAGen*plus®* breast cancer risk test in the U.S. through its wholly-owned U.S. subsidiary, Phenogen Sciences Inc. following the sale of the Australian Heritage business during the previous financial year.

 

Since inception up to June 30, 2016, we have incurred $109,444,248 in accumulated losses.  Our losses have resulted principally from costs incurred in research and development, general and administrative and sales and marketing costs associated with our operations.  Refer to the Consolidated Statements of Operations in Item 18.

 

During the 2016 financial year, Genetic Technologies Limited and its subsidiaries generated consolidated gross revenues from continuing operations, excluding other revenue, of approximately $0.8 million, a decrease from $2.0 million in 2015 and $ 4.6 million in 2014. The comparisons reflect the impact of the substantial restructuring changes that took place during 2015.

 

**Fiscal year**

 

As an Australian company, our fiscal, or financial, year ends on June 30 each year.  We produce audited consolidated accounts at the end of June each year and provide reviewed half-yearly accounts for the periods ending on December 31 each year, both of which are prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board.

 

**Recent Accounting Pronouncements**

 

In respect of the year ended June 30, 2016, the Group has assessed all new accounting standards mandatory for adoption during the current year, noting no new standards which would have a material effect on the disclosure in these financial statements.  There has been no effect on the profit and loss or the financial position of the Group.  Certain new accounting standards and interpretations have been published that are not mandatory for June 30, 2016 reporting periods.  The Group’s and the parent entity’s assessment of the impact of these new standards and interpretations is set out in Note 2(b) of the attached financial statements.

 

**Critical Accounting Policies**

 

The accounting policies which are applicable to the Group and the parent entity are set out in Notes 2(c) to 2(aa) of the attached financial statements.

 

**Comparison of the year ended June 30, 2016 to the year ended June 30, 2015**

 

**Revenues from operations**

 

The operating result for the year is directly reflective of the repositioning of the business involving the divestment of the Australian Heritage business that took place in the previous financial year.  The Groups primary focus during 2016 has been geared

 

26

----

Table of Contents

 

toward establishing the BREVAGen*plus®*test as a leading non-hereditary breast cancer risk assessment test that is affordable to all women who qualify for the test. Attaining Peer-reviewed publication in medical journals, strengthening of the management team in the U.S., an intensified and targeted marketing campaign with national reach, a refreshed BREVAGen*plus®*website and a reinvigorated social media presence have been key elements in the drive to achieve this goal.

 

During the 2016 financial year, Genetic Technologies Limited and its subsidiaries generated consolidated gross revenues from continuing operations, excluding other revenue, of $824,586 compared to $2,011,918 in the preceding year.  $756,354 of this differential is directly attributable to the divested Heritage business with the balance of $430,978 due to a decrease in the overall combined sales of the BREVAGenTM and BREVAGen*plus*® tests. Samples received for BREVAGenTM and BREVAGen*plus*® tests during 2016 were 1,184 compared to 2,659 in the previous financial year. Following changes to the U.S. leadership team as disclosed in 2015, in order to steady the decline in samples received and improve the revenue generated, a new Vice President sales and marketing was employed in November 2015, as well as a Director of Marketing and Senior Medical Director in January and June 2016 respectively.

 

Savings achieved  from the ongoing restructuring activities during the current financial year which are reflective of the divestment of the Heritage business in the prior financial year resulted in a decrease in overheads by $2,945,988 compared with 2015.  The combined areas of selling/ marketing, administration, licensing and operations totaled $9,333,076 for the year compared with $12,279,064 for 2015.  The decreased licensing activities accounted for $331,837 of the decrease with the remaining $2,614,151 million the result of the divestment of the Heritage business in November 2014, benefits derived from restructure activities and better management with overhead spending.

 

There were no significant items reported during the year compared to a $1,396,798 pre-tax profit on the sale of the Heritage business and a write-down of $795,533 against the opening asset value for the Immunaid option disclosed in 2015.

 

**Cost of sales**

 

Our cost of sales from continuing operations decreased by 17% from $891,243 to $743,060. There was a decrease in BREVAGenTM and BREVAGen*plus®* direct materials utilized of $156,927 in line with the reduced tests sold and a $295,355 decrease in direct materials and labour costs directly attributable to the genetic testing services disposed of in November 2014. This overall decrease was partially offset by an increase in inventories written off of $299,669 in 2016, the majority of which (67%) included BREVAGen*plus*® materials that had expired during the year of $ 218,178.

 

**Other revenue**

 

Other revenue which includes the total revenues generated from our licensing activities decreased by $726,603 (71%) in 2016 to $300,548. This decrease was primarily as a result of a decrease in licensing income from Applera Corporation from $781,108 in 2015 to $149,837 in 2016 due to the expiry of the agreement in December 2015. Reflective of the Company’s restructuring activities initiated in 2015, there was also a decrease in royalties and annuities received of $40,839 as well as a decrease in other licensing income of $54,493.

 

Although there was an overall change in focus during 2015 to grow sales revenues of BREVAGenplus® in the U.S, the Company will continue to use Sheridan Ross to assist with its licensing and intellectual property activities.

 

**Selling and marketing expenses**

 

Selling and marketing expenses decreased by $1,317,802 (29%) to $3,186,497 during the 2016 financial year. Personnel related costs decreased by $806,837 (31%) as a direct result of restructuring activities initiated in 2015. A new sales and marketing team in the U.S. has been assembled to increase revenue and drive market development through direct sales to Breast Centers and individual Obstetricians and Gynaecologists. Fees paid for billing services decreased by $106,378 in line with the decrease in test samples in 2016.

 

There were also decreases in peer to peer/ key opinion leader reimbursement costs of $164,506 (54%) and travel related costs of $97,758 (36%).

 

**General and administrative expenses**

 

General and administrative expenses decreased by $793,631 (19%) to $3,429,357 during the financial year.  Included in the general and administrative expenses is a net foreign currency loss of $427,574 (2015; $200,243) which is primarily driven by the translation of US dollar cash reserves to Australian dollars at June 30, 2016.

 

27

----

Table of Contents

 

Share based payment expenses decreased by $ 289,965 (88%) to $40,093. Included in this cost for the year ended June 30, 2015 was an amount of $330,059 associated with the Kentgrove Standby facility which was not recurring in 2016 (refer Item 10A. below for futher details on the Kentgrove Standby Facility). Occupancy related costs associated with the make good of lease fitouts of the Company’s Fitzroy premises that initially commenced in the 2015 year decreased by $336,744.

 

There was also a decrease in personnel related costs of $287,578 to $1,437,731 as the finance and administration team in Australia underwent several changes in order to best support the Company subsequent to the restructuring activities. These changes include a reduction in two full time and one part time finance and administration positions.

 

**Licensing, patent and legal costs**

 

Licensing, patent and legal costs decreased significantly by $331,837 (76%) to $103,581 during the 2016 financial year as further actions as per the Company restructuring announcement of November 2014 to reduce reliance on the previous licensing assertion programme were implemented. Employment related costs decreased by $183,246 as the last of the personnel associated with the Licensing assertion programme left the Company in July 2015. Consulting fees paid in relation to the programme had ceased in November 2014 resulting in a reduction of $75,800 to Nil for 2016.

 

**Laboratory, research and development costs**

 

Laboratory, research and development costs decreased by $266,913 (9%) to $2,584,752 during the 2016 financial year. Similar to 2015 changes, there was a substantial decrease (21%) in employee costs of $237,552 as a result of the suspension of the RareCellect research project and the sale of the Australian Heritage business. These changes implemented in 2015 also lead to a reduction in the laboratory supplies and consumables purchased of $142,045 to $34,842. Patent & legal costs increased by $76,494 as the Company improved its overall global protection of the BREVAGenTM breast cancer risk assessment IP.

 

**Finance costs**

 

Finance costs decreased by $235,805 (89%) to $ 28,889 during the 2016 year. Finance costs incurred in 2015 were primarily associated with the issue of convertible notes of $ 150,500, and secured debt notes of $75,721.

 

**Non Operating income and expenses**

 

Other income and expenses included the following movements:

 

·                      Research and development tax credit of $359,803 in the current financial year increased by $248,615. The research tax credit is recognized on an accrual basis when realizable.  During the year ended June 30, 2016 costs associated with research activities undertaken in the United States were eligible for inclusion for the first time following a successful application to the relevant statutory body in Australia. Eligibility is available for a further 4 years and resulted in an additional credit of $39,191 in the current year.

 

·                      Rental income of $ 58,002 was received from SDS when the Australian Heritage business was sold at the end of November 2014 — this arrangement continued until August 2015 when SDS vacated the premises in Fitzroy.

 

**Comparison of the year ended June 30, 2015 to the year ended June 30, 2014**

 

**Revenues from operations**

 

The operating result for the year was directly reflective of the repositioning of the business.  Non-core business were sold, operations appropriately scaled back and equity was raised to set the Company up for future success.  Critical to this was the release of the much improved 2nd generation BREVAGenplus® test in October 2014.  The Company has purposefully moved focus away from reliance on its past licensing assertion programme as there is now a clear focus on concentrating effort on the Company’s lead product BREVAGenplus® in the U.S.

 

During the 2015 financial year, Genetic Technologies Limited and its subsidiaries generated consolidated gross revenues from continuing operations, excluding other revenue, of $2,011,918 compared to $4,564,280 in the preceding year.  $2,061,878 of this differential is directly attributable to the divested Heritage business with the balance of $490,483 due to a decrease in the overall combined sales of the BREVAGenTM and BREVAGen*plus*® tests.

 

28

----

Table of Contents

 

Overheads decreased by approximately $2,267,165 compared with 2014.  The combined areas of selling/ marketing, administration, licensing and operations totaled $12,279,064 for the year compared with $14,546,229 for 2014.  The decreased licensing activities accounted for approximately $643,781 of the decrease with the remaining $1,623,384 the result of the divestment of the Heritage business in November 2014, benefits derived from restructure activities and better management with overhead spending.

 

With reference to significant “one-off” items, the loss for the year of $8,810,170 included a $1,396,798 pre-tax profit on the sale of the Heritage business and a write-down of $795,533against the opening asset value for the Immunaid option.

 

**Gain on sale of Business**

 

On November 19, 2014, the Company announced the sale of its Heritage Australian Genetics business, which had previously provided diagnostic and sequencing services encompassing Australia only medical, forensic, paternity and animal genomic testing to Specialist Diagnostics Services Limited (SDS) for $2,100,895 in cash. The divestment of the Australian Genetics business followed the Company’s announced plans to sell non-core assets and focus business activities on the commercialization of the BREVANGen*plus®*breast cancer risk test. The company recognized a one-off profit on disposal of $ 1,396,798 as a result of this disposal.

 

**Cost of sales**

 

Our cost of sales from continuing operations (which include direct costs incurred in performing our genetic testing services prior to disposal in November 2014) decreased by $946,486 (51.5%), from the 2014 financial year. The decrease is directly attributable to the divested Heritage business in November 2014.

 

**Other revenue**

 

Other revenue which includes the total revenues generated from our licensing activities increased by $ 163,319 (19%) in 2015 to $1,027,151 primarily as a result of licensing income from Applera Corporation of $781,108 (2014: $291,628 -this agreement ended in December 2015). This is offset by a decrease in royalties and annuities received of $ 146,655 as well as a decrease in other licensing income of $ 179,506. Although the overall focus changed during 2015 to grow sales revenues of BREVAGenplus® in the U.S, the Company will continue to use Sheridan Ross to assist with its licensing and intellectual property activities.

 

**Selling and marketing expenses**

 

Selling and marketing expenses decreased by $1,747,296 (28%) to $4,504,299 during the 2015 financial year. Personnel related costs decreased by $1,010,012 as a direct result of restructuring activities in Australia as well as the USA. There were also significant decreases in peer to peer/ consulting fees paid of $ 391,594 and travel related costs of $ 229,741.

 

**General and administrative expenses**

 

General and administrative expenses increased by $1,049,879 (33%) to $4,222,988 during the financial year.  There was an increase of $ 183,992 in share based payment expense primarily as a result of the Kentgrove Standby facility negotiated in 2015. At year end, an accrual of $200,000 for costs associated with a lease fitouts of the Company’s Fitzroy premises was recognized as part of the restructuring activities. The remaining increase in general & administrative expenses is contributed by an increase in professional service fees of $ 215,330 and travel expenses of $ 53,588. The increase is also contributed by the reversal of a provision for doubtful debts of $ 278,242 recognised in 2014.

 

**Licensing, patent and legal costs**

 

Licensing, patent and legal costs decreased significantly by $643,781 (60%) to $435,418 during the 2015 financial year. The change in focus away from reliance on the previous licensing assertion saw a decrease in legal fees of $ 232,957. Employee related costs decreased by $ 145,450 in line with the change and restructuring initiatives. There was also a decrease in commissions paid on new licenses of $126,950.

 

29

----

Table of Contents

 

**Laboratory, research and development costs**

 

Laboratory, research and development costs decreased by $446,462 (14%) to $2,851,665 during the 2015 financial year. Patent and legal costs decreased by $192,696 (31%) mostly due to the suspension of the RareCellect research project. There was also a substantial decrease in employee costs of $278,449 as a result of this suspension and the sale of the Australian Heritage business. Contract research expenses increased by $ 185,146 as the Company intensified its clinical trial activities associated with the BREVAGenTM breast cancer risk assessment test.

 

**Finance costs**

 

Finance costs decreased by $479,505 (64%) to $ 264,694 during the 2015 year. The costs for 2014 included $691,649 incurred with the establishment of the Iron Ridge convertible note facility. Finance costs associated with the issue of convertible notes in 2015 were $ 150,500.

 

**Non Operating income and expenses**

 

Other income and expenses included the following movements:

 

·                      Research and development tax credit of $111,188 in the current financial year decreased by $247,207. As per 2014, the research tax credit is recognized on an accrual basis when realizable.

 

·                  A net Foreign exchange loss of $ 200,243 was recognized during the financial year compared to a gain of $167,584 in 2014.

 

·                      Rental recoveries of $ 215,575 were received from SDS when the Australian Heritage business was sold at the end of November 2015 — this arrangement continued until August 2015 when SDS vacated the premises in Fitzroy.

 

**Fair value loss on ImmunAid option fee**

 

·                      the loss of $ 795,533 in 2015 resulted from the write down of the options granted by ImmunAid to Nil.

 

**Item 5.B**                        **Liquidity and Capital Resources**

 

**Summary**

 

Since inception, our operations have been financed primarily from capital contributions by our stockholders, proceeds from our licensing activities and revenues from operations, grants, and interest earned on the Company’s cash and cash equivalents. Currently our overall cash position depends on completion of our research & development activities, overall market acceptance of and revenue generated by our BREVAGenplus® test, grants and interest earned on the Company’s cash & cash equivalents. The Company’s cash and cash equivalents were $11,179,687 as of June 30, 2016.

 

During the year ended June 30, 2016, we incurred comprehensive losses of $7,151,746.  During the year ended June 30, 2015, we incurred comprehensive losses of $8,396,165. During the year ended June 30, 2014, we incurred comprehensive losses of $10,283,545.

 

During the year ended June 30, 2016, the Company’s net cash flows used in continuing operations were $7,726,838. During the year ended June 30, 2015, the Company’s net cash flows used in continuing operations were $9,691,528. During the year ended June 30, 2014, the Company’s net cash flows used in continuing operations were $10,987,088.

 

The Directors expect increased cash outflows from operations during the 2017 financial year as the Company continues to invest resources in expanding the research & development and sales & marketing activities in support of BREVAGen*plus* in the U.S. As a result of these expected cash outflows, the Directors intend to raise new equity funding within the next twelve months in order to ensure the Company continues to hold adequate levels of available cash resources to meet creditors and other commitments.

 

***Going Concern***. The continuing viability of the Company and its ability to continue as a going concern and meet its debts and commitments as they fall due is dependent on the satisfactory completion of an equity raising.

 

Due to the uncertainty surrounding the timing, quantum or the ability to raise additional funds via the issuance of new equity, there is a material uncertainty that may cast significant doubt on the Company’s ability to continue as a going concern and therefore, that it may be unable to realise its assets and discharge its liabilities in the normal course of business.  However, the Directors believe that the Company will be successful in the above matters and accordingly, have prepared the attached financial report on a going concern basis.

 

30

----

Table of Contents

 

***Operating Activities.*** Our net cash from / (used in) operating activities was $(7,726,838), $(9,691,528) and $(10,987,088) for the years ended June 30, 2016, 2015 and 2014, respectively.  Cash from / (used in) operating activities for each period consisted primarily of losses incurred in operations reduced by depreciation and amortization expenses, share based payments expenses, foreign exchange movements and unrealized profits and losses relating to investments.  In approximate order of magnitude, cash outflows typically consist of staff-related costs , marketing expenses, service testing expenses, general and administrative expenses, legal/patent fees and research and development costs.

 

***Investing Activities***. Our net cash from / (used in) investing activities was $(296,331), $1,965,422 and $232,375 for the years ended June 30, 2016, 2015 and 2014, respectively.  During the year ended June 30, 2016, $249,025 was used on leasehold improvements at the Company’s Fitzroy premises in Melbourne as the laboratory and offices were consolidated subsequent to the divestment of the Heritage business, which in the prior financial year had accounted for $2,100,895 of the cash generated from investing activities. Apart from the purchase of plant and equipment of $303,462 in 2016, $192,592 in 2015, and $47,917 in 2014, we had no other significant capital expenditures for the years ended June 30, 2016, 2015 and 2014.

 

***Financing Activities***. Our net cash from / (used in) financing activities was $(1,654), $22,867,263 and $11,922,964 for the years ended June 30, 2016, 2015 and 2014, respectively. During the year ended June 30, 2016 no new financing activities were undertaken. In respect of the year ended June 30, 2015, the Company generated gross cash flows of $23,289,927 from the issue of 744,540,728 ordinary shares, $2,150,000 from the issue of convertible notes less costs associated with these transactions of $(2,572,664).  In respect of the year ended June 30, 2014, the Company generated net cash flows of $7,000,000 from the issue of 97,222,302 ordinary shares and $5,581,462 net from the issue of convertible notes.

 

**Future cash requirements**

 

The Directors have undertaken an assessment of the Company’s ability to pay its debts as and when they fall due.  As part of this assessment, the Directors have had regard to the Company’s cash flow forecasts for the twelve month period from the date of the attached Financial Report and the cash balance on hand as of that date.  The Directors recognize that there is uncertainty in the consolidated entity’s cash flow forecasts, and that the continuing viability of the Company and its ability to continue as a going concern and meet its debts and commitments as they fall due is dependent on the satisfactory completion of an equity raising within the next twelve months.

 

We do not have any lines of credit with National Australia Bank Limited (“NAB”) and nominal credit card facilities with NAB and Bank of America, N.A. which, as of June 30, 2016, had total available credit of $279,218.

 

**Operating leases**

 

We are obligated under two operating leases that were in place at June 30, 2016.  These leases relate to the premises occupied by the Company in Fitzroy, Victoria, Australia and by its U.S. subsidiary, Phenogen Sciences Inc., in Charlotte, North Carolina, U.S.A.  The lease for the premises in Charlotte, has subsequent to June 30, 2016 been renewed to October 31, 2017 details of which are located in Item 4.D.

 

The future minimum lease payments in respect of the two operating leases that were in place and had remaining non-cancellable lease terms as of June 30, 2016 were $468,967.

 

**Item 5.C**                            **Research and Development, Patents and Licenses, etc.**

 

Our principal business is biotechnology, with a historical emphasis on genomics and genetics, the licensing of our non-coding patents, reduction to practice of our fetal cell patents and expansion of the related service testing business. Research and development expenditure as below is reflective of the changes implemented during 2015 following the sale of the Australian Heritage business in November 2014, and a focus the BREVAGen*plus®* breast cancer risk test

 

The following table details historic R&D expenditure by project.

 

31

----

Table of Contents

 
| ** **                            | ** ** | **2016**   | ** ** | **2015**   | ** ** | **2014**   | ** ** |
|---------------------------------------|------------|------------|------------|------------|------------|------------|------------|
| ** **                            | ** ** | **$**      | ** ** | **$**      | ** ** | **$**      | ** ** |
| RareCellect (1)                       |       | 59,453     |       | 170,107    |       | 352,478    |       |
| BREVAGen*plus*                        |       | 282,460    |       | 346,792    |       | 13,910     |       |
| Nematode project                      |       | —     |       | —     |       | 1,053      |       |
| Research at C.Y.   O’Connor (2)  |       | —     |       | —     |       | 9,101      |       |
| Other general   R&D               |       | 53,625     |       | 211,693    |       | 235357     |       |
| Total R&D   expense               |       | 395,538    |       | 728,592    |       | 611,899    |       |
| Other   expenditure                   |       | 9,680,597  |       | 12,441,715 |       | 16,783,115 |       |
| Total   expenditure                   |       | 10,076,136 |       | 13,170,307 |       | 17,395,014 |       |
| R&D as a %   of total expenditure |       | 4          | %          | 6          | %          | 3          | %          |

 

----

(1) The RareCellect project ceased during 2014. The costs incurred since then relate to legal fees associated with the patent portfolio.

 

(2) Research by the C.Y. O’Connor ERADE Village Foundation ceased during the 2009 financial year.  The costs incurred since that time relate to impairment charges and legal fees associated with the patent portfolio that was acquired as part of that project.

 

**Item 5.D**                            **Trend Information**

 

**The direction of genetic research and breast cancer**

 

During the 1990s, the two major susceptibility genes for breast cancer, *BRCA1* and *BRCA2*, were identified. Mutations in these genes account for approximately 30% of the familial risk for breast cancer. Following these discoveries, a large number of candidate gene studies were conducted over the following decade, aimed at identifying moderate and low-penetrance alleles believed to be responsible for the remaining familial risk.

 

In 2007, one of the very first large scale genome-wide association studies (GWAS) reported five significant loci associated with breast cancer risk. It was these loci which formed the basis of the Company’s first generation BREVAGen breast cancer risk assessment test. Further GWAS continue to provide additional loci associated with breast cancer risk and these are incorporated into the Company’s second generation BREVAGen*plus* test. The Company continues to monitor developments in the field.

 

Following the success of the initial GWAS for breast cancer and improvements in the technology required to conduct the studies, many international research groups are now investigating genetic associations with different types of cancer and other “multifactorial” diseases. These studies are likely to lead to new genetic tests for disease susceptibility, both in cancer and other diseases.

 

Our ability to produce such tests will depend on our ability to secure licensing agreements to the underlying technology or to take part in the basic research studies.

 

We believe that the demand for genetic risk assessment testing is in its infancy and will continue to grow in the coming years.

 

**Item 5E.**                 **Off-balance sheet arrangements**

 

We are not a party to any material off-balance sheet arrangements.  In addition, we have no unconsolidated special purpose financing or partnership entities that are likely to create any material contingent obligations.

 

**Item 5F.**                  **Information about contractual obligations**

 

The table below shows the contractual obligations and commercial commitments as of June 30, 2016:

 
| ** **                    | ** ** | **0-1 year** | ** ** | **>1-<3 years** | ** ** | **>3-<5 years** | ** ** | **>5 years** | ** ** |
|-------------------------------|------------|-------------------|------------|----------------------------|------------|----------------------------|------------|----------------------|------------|
| Operating lease   commitments |       | **$**             | 220,486    |                       | $          | 248,481                    |       | $                    | —     |   | $ | — |   |
|                               |            |                   |            |                            |            |                            |            |                      |            |  |  |  |  |

 

The above financial obligations are in respect of leases over office and laboratory premises.

 

**Item 6.**                                 **Directors, Senior Management and Employees**

 

**Item 6.A**                        **Directors and Senior Management**

 

The Directors of the Company as of the date of this Annual Report are:

 

**Dr. Malcolm R. Brandon**, BScAgr, PhD*(Non-Executive)*

 

Dr. Brandon was appointed to the Board on October 5, 2009 and as its Chairman on November 28, 2012.  He has over 39 years’ experience in commercially focused research and development and in building successful companies which have commercialized a wide range of Australian and international technologies. Dr. Brandon is currently Managing Director of genetics and artificial animal breeding company Clone International which uses cloning technologies to preserve the genetics of elite animals.

 

32

----

Table of Contents

 

**Eutillio Buccilli**, *(Executive Director and Chief Executive Officer)*

 

Mr. Buccilli was appointed to the Board in June 2015. He joined the Company in June 2014 as Chief Financial Officer. In November 2014, he was appointed to the position of Chief Operating Officer and Chief Financial Officer and was subsequently appointed Chief Executive Officer in February 2015.

 

Mr. Buccilli has more than 35 years of senior management experience in the financial services, contracting and recruitment, property and retail industries in Australia and the U.S. He has held senior management positions with blue chip corporations such as General Electric (“GE”), Computer Science Corporation, Coles Myer and Challenger Limited. Whilst at GE, Mr. Buccilli was seconded to the U.S., where he worked at the GE Capital Headquarters located in Stamford Connecticut. He brings to the Board extensive financial, corporate governance, commercial and fund raising experience.

 

**Dr Paul A. Kasian**, AM**,**PhD, MBA, GAICD*(Non-Executive)*

 

Dr. Kasian was appointed to the Board on December 12, 2013. He brings to the Board a combination of expertise in strategic business leadership and biotech investment giving him a deep understanding on key value drivers for companies in generating shareholder value. He is an experienced executive director with demonstrated domestic and international success in funds management, encompassing senior leadership, investment and risk roles.

 

Dr. Kasian has held senior leadership positions in a number of investment groups, and has significant funds management experience in Australia leading investment in the healthcare and life sciences sector. He holds a PhD in Microbiology and a Master of Business Administration, both from the University of Melbourne, and is a Graduate Member of the Australian Institute of Company Directors. Dr. Kasian is also a non-executive director of IODM Limited (ASX: IOD) and Blockchain Global Limited.

 

**Mr Grahame Leonard AM**, BA (Hons), LLB, CA, CPA, FAICD (Dip), AFAIM*(Non-Executive)*

 

Mr. Leonard was appointed to the Board on November 29, 2013 and also serves as Chairman of the Company’s Audit Committee. He is a qualified Lawyer and Chartered Accountant. He brings over 35 years’ experience in the corporate world including Lysaght (BHP), BTR Nylex and The Thompson Corporation. His numerous community positions include Commissioner, Victorian Multicultural Commission, Chair, Victorian Government Multifaith Advisory Group and former Director of Transparency International Australia, (the Australian arm of the international anti-corruption watchdog).

 

**Dr. Lindsay Wakefield,**M.B.B.S

 

Dr. Wakefield was appointed to the Board on September 24, 2014.  Dr. Wakefield started Safetech in 1985. In 1993 he left medicine to become the fulltime CEO of the Company. Over the next 25 years, Safetech became a force in the Australian material handling and lifting equipment market, designing and manufacturing a wide range of industrial products. In 2006, Safetech was awarded the Telstra Australian National Business of the Year.

 

In 2013, Safetech merged to become STS (Safetech Tieman Solutions) which is Australia’s largest manufacturer and supplier of dock equipment, freight hoists and custom lifting solutions. Dr. Wakefield continues as Managing Director of STS and has been a keen Biotech investor for past 20 years, often at a mezzanine level.

 

Prof. Ian McKenzie and Dr. Mervyn Cass served as Directors of the Company from the beginning of the financial year until they resigned on November 25, 2014.

 

**Senior Management**

 

We have a professional team of qualified and experienced personnel, including a number of research and development scientists and technicians.  The Group currently has 25 full-time-equivalent employees in addition to the four Non-executive Directors listed above.  Of the total number of personnel, two have Doctorate qualifications.  In addition to the Chief Executive Office, Mr. Buccilli whose details are noted above, the members of the Company’s Senior Leadership Team as of the date of this Report, and a brief summary of their relevant experience, are as follows:

 

**Kevin Fischer**, CPA, AGIA, ACIS, B. Com. *(Chief Financial Officer)*

 

Mr. Fischer was appointed Company Secretary on January 13, 2016 following his appointment as Chief Financial Officer on November 2, 2015. He has over ten years’ experience in senior finance roles with successful diagnostic companies, such as QIAGEN and Cellestis. Mr. Fischer is a CPA and Chartered Secretary who has significant experience in the financial management and reporting for international operations.

 

33

----

Table of Contents

 

**Dr. Richard Allman**, PhD *(Scientific Director)*

 

Dr. Allman joined the Company in 2004 and was appointed as Scientific Director in December 2012.  He has over 20 years of scientific and research experience in both the academic arena in the UK and the commercial sector in Australia. He has wide experience in research leadership, innovation management, and intellectual property strategy, covering oncology, diagnostics, and product development. Prior to entering the biotech sector, Dr. Allman’s academic career encompassed oncology research, drug development, and assay design.

 

**Diana Newport**, *(Quality and Business Operations Director)*

 

Ms. Newport was appointed as Quality and Business Operations Director in September 2013. She comes to the Company with extensive international Quality Systems and operational experience in the highly regulated industries of food and pharmaceutical. The Company will benefit from her recent senior roles within the CSL quality control laboratories.

 

**Chris Saunders**, MBA, B.S.*(Vice President Sales & Marketing — Phenogen Sciences Inc.)*

 

Mr. Saunders brings more than 15 years of experience in senior sales, operations and marketing roles for start-up, publicly held and multi-national companies in the pharmaceutical and biotech sectors. He served as National Sales Director at Cbr Systems, a cord blood stem cell bank that serves customers in the United States and internationally. Most recently, he served as an early sales management leader at Natera, a genetic testing company that develops and commercializes non-invasive methods for analyzing DNA. During his tenure, he successfully launched new products and product expansions through multiple channels including private practice, hospital, health system and distribution partnerships. Areas of expertise include business development, sales operations, training and management strategies focused on sales growth and market expansion.

 

**Susan J Gross,** MD, FRCSC, FACOG, FACMG (S*enior Medical Director — Phenogen Sciences Inc.)*

 

Dr Gross was appointed to the role of Senior Medical Director in June 2016.Dr. Gross received her medical degree from the University of Toronto, Ontario, Canada, where she completed her residency in Obstetrics and Gynaecology, as well as a fellowship in Maternal Fetal Medicine and a second residency/fellowship in Medical Genetics at the University of Tennessee (Memphis). She is board certified in both Obstetrics and Gynaecology and Medical Genetics and is a Professor of Clinical Obstetrics & Gynaecology, Women’s Health, Paediatrics and Genetics at the Albert Einstein College of Medicine. She served as past division director for the division of Reproductive Genetics at Montefiore Medical Center as well as Chairperson of the Department of Obstetrics and Gynaecology and founder of the Human Genetics Laboratory at Jacobi Medical Center. Dr. Gross has spent decades not only in research and medical education, but also direct patient care, overseeing both large and small practice systems. She has worked on national and international guideline committees and lectured and published extensively on screening and genetic testing with a focus on new technologies and public health policy. She was previously the Chief Medical Officer of Natera Inc., a public genomic diagnostics company and is now President of SJG Advisors LLC, a company that provides comprehensive medical affairs and digital media expertise to the diagnostics industry.

 

**Item 6.B**                 **Compensation**

 

Details of the nature and amount of each major element of the compensation of each director of the Company and each of the named officers of the Company and its subsidiaries, for services in all capacities during the financial year ended June 30, 2016 and 2015 are listed below.  All figures are stated in Australian dollars (AUD).

 

34

----

Table of Contents

 
| **Name and title of** |   |       |   | **Short-term**  |   |      |   | **Post-employment** |   | **Other long-**   |   | **Share-based** |   |       |   |
|--------------------------------------|--------|------------|--------|-----------------|--------|-----------|--------|---------------------|--------|------------------------|--------|-----------------|--------|------------|--------|
| **Non-Executive Directors**     |   | **Year**   |   | **Salary/fees** |   | **Other** |   | **Superannuation*** |   | **term benefits** |   | **Options**     |   | **Totals** |   |
|                                 |   | ** ** |   | **$**           |   | **$**     |   | **$**               |   | **$**                  |   | **$**           |   | **$**      |   |
| Dr Malcolm R.   Brandon              |   | 2016       |   | 89,303          |   | —    |   | 8,484               |   | —                 |   | —          |   | 97,787     |   |
| Non-Executive   Chairman             |   | 2015       |   | 87,125          |   | —    |   | 8,277               |   | —                 |   | —          |   | 95,402     |   |
|                                 |   |       |   |            |   |      |   |                |   |                   |   |            |   |       |   |
| Grahame Leonard   AM                 |   | 2016       |   | 54,967          |   | —    |   | 5,222               |   | —                 |   | —          |   | 60,189     |   |
|                                 |   | 2015       |   | 53,626          |   | —    |   | 5,094               |   | —                 |   | —          |   | 58,720     |   |
|                                 |   |       |   |            |   |      |   |                |   |                   |   |            |   |       |   |
| Dr Paul Kasian                       |   | 2016       |   | 54,967          |   | —    |   | 5,222               |   | —                 |   | —          |   | 60,189     |   |
|                                 |   | 2015       |   | 53,626          |   | —    |   | 5,094               |   | —                 |   | —          |   | 58,720     |   |
|                                 |   |       |   |            |   |      |   |                |   |                   |   |            |   |       |   |
| Dr Lindsay   Wakefield (1)           |   | 2016       |   | 54,967          |   | —    |   | 5,222               |   | —                 |   | —          |   | 60,189     |   |
|                                 |   | 2015       |   | 41,251          |   | —    |   | 3,919               |   | —                 |   | —          |   | 45,170     |   |
|                                 |   |       |   |            |   |      |   |                |   |                   |   |            |   |       |   |
| David Carter (2)                     |   | 2016       |   | —          |   | —    |   | —              |   | —                 |   | —          |   | —     |   |
|                                 |   | 2015       |   | 18,907          |   | —    |   | 1,796               |   | —                 |   | —          |   | 20,703     |   |
|                                 |   |       |   |            |   |      |   |                |   |                   |   |            |   |       |   |
| Dr Mervyn Cass   (3)                 |   | 2016       |   | —          |   | —    |   | —              |   | —                 |   | —          |   | —     |   |
|                                 |   | 2015       |   | 22,344          |   | —    |   | 2,123               |   | —                 |   | —          |   | 24,467     |   |
|                                 |   |       |   |            |   |      |   |                |   |                   |   |            |   |       |   |
| Prof Ian   McKenzie (3)              |   | 2016       |   | —          |   | —    |   | —              |   | —                 |   | —          |   | —     |   |
|                                 |   | 2015       |   | 21,554          |   | —    |   | 2,048               |   | —                 |   | —          |   | 23,602     |   |
|                                 |   |       |   |            |   |      |   |                |   |                   |   |            |   |       |   |
| Totals                               |   | 2016       |   | 254,204         |   | —    |   | 24,150              |   | —                 |   | —          |   | 278,354    |   |
|                                 |   | 2015       |   | 298,433         |   | —    |   | 28,351              |   | —                 |   | —          |   | 326,784    |   |

 

----

Notes pertaining to changes during the year:

 

(1)         Appointed to the Board in September 2014.

 

(2)         Appointed to the Board in September 2014 subsequently ceased to be a Director in January 2015.

 

(3)         Resigned from the Board effective November 2014

 

35

----

Table of Contents

 

**Executives**

 
| **Name and title of**                                          | ** ** | ** ** | ** ** | **Short-term**  | ** ** | **Post-employment** | ** ** | **Other   long-term** | ** ** | **Share-based** | ** ** | **Termination**      | ** ** | ** **   | ** ** |
|-------------------------------------------------------------------------------|------------|------------|------------|-----------------|------------|---------------------|------------|-----------------------|------------|-----------------|------------|----------------------|------------|--------------|------------|
| **Executives**                                                                | ** ** | **Year**   | ** ** | **Salary/fees** | ** ** | **Other**           | ** ** | **Superannuation***   | ** ** | **benefits****  | ** ** | **Options ***** | ** ** | **benefits** | ** ** | **Totals** | ** ** |
| ** **                                                                    | ** ** | ** ** | ** ** | **$**           | ** ** | **$**               | ** ** | **$**                 | ** ** | **$**           | ** ** | ** **           | ** ** | **$**        | ** ** | **$** | ** ** |
| Eutillio   Buccilli (4) Executive Director & Chief Executive Officer |       | 2016       |       | 307,500         |       | 83,800              |       | 32,062                |       | 15,519          |       | 26,623               |       | —       |       | 465,504 |   |
|                                                                          | 2015       |       | 238,090    |            | 80,000     |                | 27,369     |                  | 8,085      |            | —     |                 | —     |         | 353,544    |   |
|                                                                          |       |       |       |            |       |                |       |                  |       |            |       |                 |       |         |       |   |   |
| Luisa Ashdown   (5) Director, Licensing & IP                         |       | 2016       |       | 6,856           |       | —              |       | 2,964                 |       | (16,980         | )          | —               |       | 53,795       |       | 46,635 |   |
|                                                                          | 2015       |       | 163,947    |            | —     |                | 15,575     |                  | (20,672    | )               | 2,927      |                 | —     |         | 161,777    |   |
|                                                                          |       |       |       |            |       |                |       |                  |       |            |       |                 |       |         |       |   |   |
| Diana Newport Quality &   Ops. Director                              |       | 2016       |       | 103,343         |       | —              |       | 11,242                |       | (298            | )          | 1,373                |       | —       |       | 115,660 |   |
|                                                                          | 2015       |       | 154,350    |            | 20,000     |                | 16,088     |                  | 2,793      |            | —     |                 | —     |         | 193,231    |   |
|                                                                          |       |       |       |            |       |                |       |                  |       |            |       |                 |       |         |       |   |   |
| Dr Richard   Allman (6) Scientific Director                                   |       | 2016       |       | 158,875         |       | 11,900              |       | 16,518                |       | 8,317           |       | 2,747                |       | —       |       | 198,357 |   |
|                                                                          | 2015       |       | 145,965    |            | 15,812     |                | 15,084     |                  | 19,908     |            | —     |                 | —     |         | 196,769    |   |
|                                                                          |       |       |       |            |       |                |       |                  |       |            |       |                 |       |         |       |   |   |
| Brian Manuel (7)   Chief Financial Officer                                    |       | 2016       |       | 66,667          |       | —              |       | 6,333                 |       | 4,263           |       | —               |       | —       |       | 77,263 |   |
|                                                                          | 2015       |       | 8,333      |            | —     |                | 792        |                  | 737        |            | —     |                 | —     |         | 9,862      |   |
|                                                                          |       |       |       |            |       |                |       |                  |       |            |       |                 |       |         |       |   |   |
| Alison J. Mew   (8) Ex-Chief Executive Officer                                |       | 2016       |       | —          |       | —              |       | —                |       | —          |       | —               |       | —       |       | — |   |
|                                                                          | 2015       |       | 137,164    |            | 25,000     |                | 15,401     |                  | (20,757    | )               | —     |                 | —     |         | 156,808    |   |
|                                                                          |       |       |       |            |       |                |       |                  |       |            |       |                 |       |         |       |   |   |
| Mark J.   Ostrowski (9) Ex-US Senior VP Sales and Marketing                   |       | 2016       |       | —          |       | —              |       | —                |       | —          |       | —               |       | —       |       | — |   |
|                                                                          | 2015       |       | 170,631    |            | —     |                | —     |                  | 1,052      |            | (28,886    | )                    | —     |         | 142,797    |   |
|                                                                          |       |       |       |            |       |                |       |                  |       |            |       |                 |       |         |       |   |   |
| Kevin Fischer   (10) Chief Financial Officer                                  |       | 2016       |       | 113,808         |       | 16,700              |       | 10,812                |       | 5,454           |       | 9,351                |       | —       |       | 156,125 |   |
|                                                                          | 2015       |       | —     |            | —     |                | —     |                  | —     |            | —     |                 | —     |         | —     |   |
|                                                                          |       |       |       |            |       |                |       |                  |       |            |       |                 |       |         |       |   |   |
| Chris Saunders   (11) US-VP Sales & Marketing                        |       | 2016       |       | 183,760         |       | 37,629              |       | —                |       | 12,277          |       | 9,351                |       | —       |       | 243,017 |   |
|                                                                          | 2015       |       | —     |            | —     |                | —     |                  | —     |            | —     |                 | —     |         | —     |   |
|                                                                          |       |       |       |            |       |                |       |                  |       |            |       |                 |       |         |       |   |   |
| Susan Gross (12)   US-Senior Medical Director                                 |       | 2016       |       | 5,944           |       | —              |       | —                |       | —          |       | —               |       | —       |       | 5,944 |   |
|                                                                          | 2015       |       | —     |            | —     |                | —     |                  | —     |            | —     |                 | —     |         | —     |   |
|                                                                          |       |       |       |            |       |                |       |                  |       |            |       |                 |       |         |       |   |   |
| Sub-totals for   Executives                                                   |       | 2016       |       | 946,753         |       | 150,029             |       | 79,931                |       | 28,552          |       | 49,445               |       | 53,795       |       | 1,308,505 |   |
|                                                                          | 2015       |       | 1,018,480  |            | 140,812    |                | 90,309     |                  | (8,854     | )               | (25,959    | )                    | —     |         | 1,214,788  |   |
|                                                                          |       |       |       |            |       |                |       |                  |       |            |       |                 |       |         |       |   |   |
| Total   remuneration of Key Management Personnel                              |       | 2016       |       | 1,200,957       |       | 150,029             |       | 104,081               |       | 28,552          |       | 49,445               |       | 53,795       |       | 1,586,859 |   |
|                                                                          | 2015       |       | 1,316,913  |            | 140,812    |                | 118,660    |                  | (8,854     | )               | (25,959    | )                    | —     |         | 1,541,572  |   |

 

----

Notes pertaining to changes during the year:

 

(4)         Mr. Buccilli was appointed to the Chief Executive Officer role in February 2015 prior to which he was the Chief Financial Officer.  “Other” includes a bonus paid or payable in the amount of $83,800 at the discretion of the Board.

 

(5)         Ms Ashdown ceased to be an executive with effect from July 2015.

 

(6)         “Other” includes a bonus paid or payable to Dr Allman in the amount of $11,900 at the discretion of the Board.

 

(7)         Mr. Manuel held the role of Chief Financial Officer until his resignation in October 2015.

 

(8)         Ms Mew held the role of Chief Executive Officer until her resignation in December 2014.

 

(9)         Mr. Ostrowski held the role of US Senior Vice President Sales and Marketing until his resignation in January 2015.

 

(10)  Mr. Fischer was appointed to role of Chief Financial Officer in November 2015. “Other” includes a bonus payable in the amount of $ 16,700 at the discretion of the board.

 

(11)  Mr. Saunders was appointed to the role of Vice President Sales & Marketing in November 2015. “Other” includes a bonus payable in the amount of $ 37,629 at the discretion of the board.

 

(12)  Dr Gross was engaged under a consulting agreement to perform the role of Senior Medical Director for Phenogen Sciences Inc (USA) in June 2016. Remuneration is by way of a fixed monthly consultancy fee for service provided on a part time basis.

 

Referencing the previous two tables:

 

*                 Post-employment benefits as per Corporations Regulation 2M.3.03 (1) Item 7

 

**          Other long-term benefits as per Corporations Regulation 2M.3.03 (1) Item 8

 

***   Equity settled share-based payments as per Corporations Regulation 2M.3.03 (1) Item 11

 

The details of those Executives nominated as Key Management Personnel under section 300A of the *Corporations Act 2001* have been disclosed in this Report.  No other employees of the Company meet the definition of “Key Management Personnel” as defined in *IAS 24 / (AASB 124) Related Party Disclosures*, or “senior manager” as defined in the *Corporations Act*

 

Executive officers are those officers who were involved during the year in the strategic direction, general management or control of the business at a company or operating division level.  The remuneration paid to Executives is set with reference to prevailing market levels and comprises a fixed salary, various short term incentives (which are linked to agreed key performance indicators), and an option component.  Options are granted to Executives in line with their respective levels of experience and responsibility.

 

**Options exercised, granted and forfeited as part of remuneration during the year ended June 30, 2016**

 

Details of the options held by the Executives nominated as Key Management Personnel during the year ended June 30, 2016 are set out below. As of June 30, 2016, there were 5 executives and 5 employees who held options that had been granted under the Company’s respective option plans.

 

36

----

Table of Contents

 

***Options Exercised***

 

No options granted as equity compensation benefits to Executives were exercised during the year.

 

***Options Granted***

 

During the 2016 financial year 31,736,111 options were granted as equity compensation benefits to Executives.

 
| ** **                          | ** ** | **Options** | ** ** | **Exercise** | ** ** | **Fair value** | ** ** | **Final**             | ** ** |
|-------------------------------------|------------|-------------|------------|--------------|------------|---------------------|------------|-----------------------|------------|
| **Name of Executive**     | ** ** | **Granted** | ** ** | **price**    | ** ** | **per option** | ** ** | **vesting date** | ** ** |
| Eutillio   Buccilli (1)             |       | 8,328,125   |       | $            | 0.02       |                | $          | 0.0161                |       | Nov 24, 2020 |   |
|                                |       | 3,131,944   |       | $            | 0.02       |                | $          | 0.0139                |       | Nov 24, 2020 |   |
|                                |       | 2,776,042   |       | $            | 0.02       |                | $          | 0.0100                |       | Nov 24, 2020 |   |
|                                |       |        |       |         |       |                |       |                  |       |
| Dr. Richard   Allman (2)  |       | 2,925,000   |       | $            | 0.02       |                | $          | 0.0112                |       | Mar 31, 2021 |   |
|                                |       | 1,100,000   |       | $            | 0.02       |                | $          | 0.0094                |       | Mar 31, 2021 |   |
|                                |       | 975,000     |       | $            | 0.02       |                | $          | 0.0065                |       | Mar 31, 2021 |   |
|                                |       |        |       |         |       |                |       |                  |       |
| Diana Newport   (3)                 |       | 1,462,500   |       | $            | 0.02       |                | $          | 0.0112                |       | Mar 31, 2021 |   |
|                                |       | 550,000     |       | $            | 0.02       |                | $          | 0.0094                |       | Mar 31, 2021 |   |
|                                |       | 487,500     |       | $            | 0.02       |                | $          | 0.0065                |       | Mar 31, 2021 |   |
|                                |       |        |       |         |       |                |       |                  |       |
| Kevin Fischer   (4)                 |       | 2,925,000   |       | $            | 0.02       |                | $          | 0.0161                |       | Nov 24, 2020 |   |
|                                |       | 1,100,000   |       | $            | 0.02       |                | $          | 0.0139                |       | Nov 24, 2020 |   |
|                                |       | 975,000     |       | $            | 0.02       |                | $          | 0.0100                |       | Nov 24, 2020 |   |
|                                |       |        |       |         |       |                |       |                  |       |
| Chris Saunders   (5)                |       | 2,925,000   |       | $            | 0.02       |                | $          | 0.0161                |       | Nov 24, 2020 |   |
|                                |       | 1,100,000   |       | $            | 0.02       |                | $          | 0.0139                |       | Nov 24, 2020 |   |
|                                |       | 975,000     |       | $            | 0.02       |                | $          | 0.0100                |       | Nov 24, 2020 |   |
|                                |       |        |       |         |       |                |       |                  |       |
| Totals                              |       | 31,736,111  |       |         |       |                |       |                  |       |

 

----

(1)         Total of 14,236,111 options granted in November 2015 vesting in 3 tranches

 

(2)         Total of 5,000,000 options Granted in March 2016 vesting in 3 tranches

 

 

(3)         Total of 2,500,000 options Granted in March 2016 vesting in 3 tranches

 

(4)         Total of 5,000,000 options Granted in November 2015 vesting in 3 tranches

 

(5)         Total of 5,000,000 options Granted in November 2015 vesting in 3 tranches

 

The options granted to Executives during 2016 are exercisable at any time after the date on which the Option meets its vesting conditions, namely the 3 month volume weighted average price (VWAP) of shares as traded on the ASX as follows (subject to any adjustments in the vesting conditions as contained in the option terms):

 
| **Tranche Number** | ** ** | **Vesting Condition — VWAP Price** | ** ** |
|-------------------------|------------|-------------------------------------------------------------|------------|
| 1                       |       | $                                                           | 0.05       |   |
| 2                       |       | $                                                           | 0.10       |   |
| 3                       |       | $                                                           | 0.20       |   |

 

Fair values at grant date have been determined independently using a Monte Carlo Simulation method that takes into account the exercise price, the VWAP hurdle (preceding 3 month price), the term of the option, the share price at grant date and expected price volatility of the underlying share, the expected divided yield and the risk-free interest rate for the term of the option.

 

***Options Forfeited***

 

During the 2016 financial year 1,500,000 options previously granted as equity compensation benefits to Executives were forfeited. These options were forfeited due to resignation.

 

37

----

Table of Contents

 
| ** **                      | ** ** | **Number**    | ** ** | **Fair value** | ** ** | **Final**             | ** **          |
|---------------------------------|------------|---------------|------------|---------------------|------------|-----------------------|---------------------|
| **Name of Executive** | ** ** | **forfeited** | ** ** | **per option** | ** ** | **vesting date** | ** **          |
| Luisa Ashdown   (6)             |       | (500,000      | )          | $                   | 0.1010     |                  | March 31, 2016 |   |
|                            |       | (1,000,000    | )          | $                   | 0.1053     |                  | July 31, 2016  |   |
| Totals                          |       | (1,500,000    | )          |                |       |                  |                |

 

----

(6)         Granted in April & September 2011 respectively

 

The options that were forfeited during the year were issued under the Employee Share plan and vested in three equal tranches after 12 months, 24 months and 36 months from the date of grant, respectively.  Fair values of these options at grant date were independently determined using a Black-Scholes option pricing model that takes into account the exercise price, the term of the option, the share price at grant date and expected price volatility of the underlying share, the expected divided yield and the risk-free interest rate for the term of the option.

 

**Options exercised, granted and forfeited as part of remuneration during the year ended June 30, 2015**

 

During the 2015 financial year 2,500,000 options were granted as equity compensation benefits to Executives, all of which were subsequently forfeited due to resignation.

 

**Option holdings of Key Management Personnel**

 

**June 30, 2016**

 
| ** **                   | ** ** | ** **  | ** ** | ** **                      | ** ** | ** **    | ** ** | ** ** | ** ** | ** **  | ** ** | **Vesting as of year end** | ** ** | **Financial   year   in which** | ** ** | **Fair   Value yet** | ** ** |
|------------------------------|------------|-------------|------------|---------------------------------|------------|---------------|------------|------------|------------|-------------|------------|------------------------------------------------|------------|--------------------------------------|------------|---------------------------|------------|
| **Name of option** | ** ** | **Opening** | ** ** | **Number of options** | ** ** | **Closing**   | ** ** | ** ** | ** ** | **Not**     | ** ** | **options**                                    | ** ** | **to vest**                     | ** ** |
| **holder**                   | ** ** | **balance** | ** ** | **Granted**                     | ** ** | **Exercised** | ** ** | **Lapsed** | ** ** | **balance** | ** ** | **Exercisable**                                | ** ** | **exercisable**                      | ** ** | **vest**                  | ** ** | **$** | ** ** |
| **Executive**                | ** ** | ** **  | ** ** | ** **                      | ** ** | ** **    | ** ** | ** ** | ** ** | ** **  | ** ** | ** **                                     | ** ** | ** **                           | ** ** | ** **                | ** ** | ** ** | ** ** |
| Eutillio Buccilli            |       | —      |       | 14,236,111                      |       | —        |       | —     |       | 14,236,111  |       | —                                         |       | 14,236,111                           |       | *                         |       | 205,377 |   |
| Luisa Ashdown                |       | 1,000,000   |       | —                          |       | —        |       | (1,000,000 | )          | —      |       | —                                         |       | —                               |       | —                    |       | — |   |
| Luisa Ashdown                |       | 500,000     |       | —                          |       | —        |       | (500,000   | )          | —      |       | —                                         |       | —                               |       | —                    |       | — |   |
| Diana Newport                |       | —      |       | 2,500,000                       |       | —        |       | —     |       | 2,500,000   |       | —                                         |       | 2,500,000                            |       | *                         |       | 24,719 |   |
| Richard Allman               |       | —      |       | 5,000,000                       |       | —        |       | —     |       | 5,000,000   |       | —                                         |       | 5,000,000                            |       | *                         |       | 49,438 |   |
| Kevin Fischer                |       | —      |       | 5,000,000                       |       | —        |       | —     |       | 5,000,000   |       | —                                         |       | 5,000,000                            |       | *                         |       | 72,133 |   |
| Chris Saunders               |       | —      |       | 5,000,000                       |       | —        |       | —     |       | 5,000,000   |       | —                                         |       | 5,000,000                            |       | *                         |       | 72,133 |   |
|                         |       |        |       |                            |       |          |       |       |       |        |       |                                           |       |                                 |       |                      |       |   |   |
| Totals                       |       | 1,500,000   |       | 31,736,111                      |       | —        |       | (1,500,000 | )          | 31,736,111  |       | —                                         |       | 31,736,111                           |       |                      |       | 423,800 |   |

 

----

* Options vest and are exercisable at any time after the date on which they meet the vesting conditions as described above

 

**Option holdings of Key Management Personnel****June 30, 2015**

 
| ** **                               | ** ** | ** **  | ** ** | ** **                      | ** ** | ** **    | ** ** | ** ** | ** ** | ** **  | ** ** | **Vesting as of year end** | ** ** | **Financial   year   in which** | ** ** | **Fair   Value yet** | ** ** |
|------------------------------------------|------------|-------------|------------|---------------------------------|------------|---------------|------------|------------|------------|-------------|------------|------------------------------------------------|------------|--------------------------------------|------------|---------------------------|------------|
| ** **                               | ** ** | **Opening** | ** ** | **Number of options** | ** ** | **Closing**   | ** ** | ** ** | ** ** | **Not**     | ** ** | **options**                                    | ** ** | **to vest**                     | ** ** |
| **Name of option holder** | ** ** | **balance** | ** ** | **Granted**                     | ** ** | **Exercised** | ** ** | **Lapsed** | ** ** | **balance** | ** ** | **Exercisable**                                | ** ** | **exercisable**                      | ** ** | **vest**                  | ** ** | **$** | ** ** |
| **Executive**                            |       |        |       |                            |       |          |       |       |       |        |       |                                           |       |                                 |       |                      |       |   |   |
| Mark J. Ostrowski   **                   |       | 2,400,000   |       | —                          |       | —        |       | (2,400,000 | )          | —      |       | —                                         |       | —                               |       | —                    |       | — |   |
| Mark J. Ostrowski                        |       | —      |       | 2,500,000                       |       | —        |       | (2,500,000 | )          | —      |       | —                                         |       | —                               |       | —                    |       | — |   |
| Luisa Ashdown                            |       | 1,000,000   |       | —                          |       | —        |       | —     |       | 1,000,000   |       | 1,000,000                                      |       | —                               |       | 2015                      |       | — |   |
| Luisa Ashdown                            |       | 500,000     |       | —                          |       | —        |       | —     |       | 500,000     |       | 500,000                                        |       | —                               |       | 2014                      |       | — |   |
|                                     |       |        |       |                            |       |          |       |       |       |        |       |                                           |       |                                 |       |                      |       |   |   |
| Totals                                   |       | 3,900,000   |       | 2,500,000                       |       | —        |       | (4,900,000 | )          | 1,500,000   |       | 1,500,000                                      |       | —                               |       |                      |       | — |   |

 

----

** Mr. Ostrowski held the role of KMP until his resignation in January 15

 

**Options**

 

We introduced a Staff Share Plan on November 30, 2001.  On November 19, 2008, the shareholders of the Company approved the introduction of a new Employee Option Plan.  Collectively, these Plans establish the eligibility of our employees and those of any subsidiaries, and of consultants and independent contractors to a participating company who are declared by the Board to be eligible, to participate.  Broadly speaking, the respective Plans permits us, at the discretion of the Board, to issue traditional options (with an exercise price).  The Plans conform to the IFSA Executive Share and Option Scheme Guidelines and, where participation is to be made

 

38

----

Table of Contents

 

available to staff who reside outside Australia, there may have to be modifications to the terms of grant to meet or better comply with local laws or practice.

 

As of June 30, 2016, there were 5 executives and 5 employees who held options that had been granted under the Company’s respective option plans.  Options issued under the Plan carry no rights to dividends and no voting rights.

 

Options issued under the Plans during the following financial years are as follows:

 

Year ended June 30, 2014:

 

During the year ended June 30, 2014, a total of 1,250,000 options over the Company’s ordinary shares were issued to certain employees of the Group.  Each option, which was issued at no charge, entitles the holder to acquire one ordinary share in the Company at exercise of $0.11 cents each up to, and including, July 11, 2018, unless exercised before that date.  The options vest in three equal tranches after 12 months, 24 months and 36 months from the date of grant, respectively.

 

During the 2014 financial year, there were no shares issued as a result of the exercise of options. During the 2014 financial year, a total of 3,000,000 options that had been issued to employees were forfeited.  Option holders do not have any right, by virtue of their options, to participate in any share issue of the Company or any related body corporate

 

Year ended June 30, 2015:

 

During the year ended June 30, 2015, a total of 6,875,000 options over the Company’s ordinary shares were issued to certain employees of the Group.  Each option, which was issued at no charge, entitles the holder to acquire one ordinary share in the Company at exercise price of $0.04 each up to, and including, May 31, 2019, unless exercised before that date.  The options vest in three equal tranches after 12 months, 24 months and 36 months from the date of grant, respectively.

 

Also during the 2015 financial year, no options were exercised and 10,775,000 options that had previously been issued to employees were forfeited.  Option holders do not have any right, by virtue of their options, to participate in any share issue of the Company or any related body corporate.

 

Year ended June 30, 2016:

 

During the year ended June 30, 2016, a total of 33,736,111 options over the Company’s ordinary shares were issued to certain employees of the Group as follows;

 

***Key Management Personnel (KMP)- see above for more details***;  During the year there were two issues of options to KMP — the first being 24,236,111 options that were issued at no charge, and entitle the holder to acquire one ordinary share in the Company at an exercise price of $0.02 each up to, and including, November 24, 2020. The second issue was of 7,500,000 options that were issued at no charge, and entitle the holder to acquire one ordinary share in the Company at an exercise price of $0.02 each up to, and including, March 31, 2021.  All options granted to KMP during 2016 are exercisable at any time after the date on which the Option meets its vesting conditions, namely the 3 month volume weighted average price (VWAP) of shares as traded on the ASX as follows (subject to any adjustments in the vesting conditions as contained in the option terms) - further details as described in the preceding section.

 

***Other — employees of Phenogen Sciences Inc.:***During the year there were two issues of options to other employees of the Group — the first being 1,500,000 options that were issued at no charge, and entitle the holder to acquire one ordinary share in the Company at an exercise price of $0.058 each up to, and including, September 14, 2020. The second issue was of 500,000 options that were issued at no charge, and entitle the holder to acquire one ordinary share in the Company at an exercise price of $0.039 each up to, and including, January 31, 2021.  All options granted to these employees during 2016 are exercisable in three equal tranches after 12 months, 24 months and 36 months from the date of grant, respectively.

 

During the 2016 financial year, no options were exercised and 4,125,000 options that had previously been issued to employees were forfeited.  Option holders do not have any right, by virtue of their options, to participate in any share issue of the Company or any related body corporate.

 

As of the date of this Annual Report, there was a total of 33,486,111 unlisted employee options outstanding.

 

Options granted under the Employee Option Plan carry no rights to dividends and no voting rights and generally have an expiry date of nearly five years from the date of grant.

 

39

----

Table of Contents

 

During the years ended June 30, 2016, 2015 and 2014, the Company recorded a share-based payments expense in respect of the options granted of $ 50,239, $(26,536) and $119,531.

 

This share based payment expense is included within selling and marketing costs, general and administrative costs, licensing, patent and legal costs, and laboratory research and development costs in the statement of comprehensive income/ (loss).

 

40

----

Table of Contents

 

The following is additional information relating to the options granted under the respective Plans as of June 30, 2016:

 
| ** **            | ** ** | **Options outstanding** | ** ** | **Options exercisable**      | ** ** |
|-----------------------|------------|------------------------------|------------|-----------------------------------|------------|
| **Range of**     | ** ** | ** **                   | ** ** | **Weighted**                      | ** ** | **Remaining weighted** | ** ** | ** ** | ** ** | ** ** | ** ** |
| **exercise   prices** | ** ** | **Number of   options** | ** ** | **average exercise   price** | ** ** | **average contractual   life (years)** | ** ** | **Number of   options** | ** ** | **Weighted average   exercise price** | ** ** |
| $0.01 - $0.10         |       | 33,486,111                   |       | $                                 | 0.022      |   | 4.47 |   | 83,333 |   | $ | 0.040 |   |
| $0.11 - $0.20         |       | —                       |       | $                                 | —     |   | — |   | — |   | $ | — |   |
|                  |       | 33,486,111                   |       | $                                 | 0.022      |   | 4.47 |   | 83,333 |   | $ | 0.040 |   |

 

The following is additional information relating to the options granted under the respective Plans as of June 30, 2015:

 
| ** **            | ** ** | **Options outstanding** | ** ** | **Options exercisable**      | ** ** |
|-----------------------|------------|------------------------------|------------|-----------------------------------|------------|
| **Range of**     | ** ** | ** **                   | ** ** | **Weighted**                      | ** ** | **Remaining weighted** | ** ** | ** ** | ** ** | ** ** | ** ** |
| **exercise   prices** | ** ** | **Number of   options** | ** ** | **average exercise   price** | ** ** | **average contractual   life (years)** | ** ** | **Number of   options** | ** ** | **Weighted average   exercise price** | ** ** |
| $0.01 - $0.10         |       | 1,125,000                    |       | $                                 | 0.040      |   | 3.92 |   | — |   | $ | — |   |
| $0.11 - $0.20         |       | 2,750,000                    |       | $                                 | 0.182      |   | 1.21 |   | 2,666,667 |   | $ | 0.183 |   |
|                  |       | 3,875,000                    |       | $                                 | 0.140      |   | 2.00 |   | 2,666,667 |   | $ | 0.183 |   |

 

The following is additional information relating to the options granted under the respective Plans as of June 30, 2014:

 
| ** **            | ** ** | **Options outstanding** | ** ** | **Options exercisable**      | ** ** |
|-----------------------|------------|------------------------------|------------|-----------------------------------|------------|
| **Range of**     | ** ** | ** **                   | ** ** | **Weighted**                      | ** ** | **Remaining weighted** | ** ** | ** ** | ** ** | ** ** | ** ** |
| **exercise   prices** | ** ** | **Number of   options** | ** ** | **average exercise   price** | ** ** | **average contractual   life (years)** | ** ** | **Number of   options** | ** ** | **Weighted average   exercise price** | ** ** |
| $0.01 - $0.10         |       | 750,000                      |       | $                                 | 0.100      |   | 3.52 |   | 250,000 |   | $ | 0.100 |   |
| $0.11 - $0.20         |       | 7,025,000                    |       | $                                 | 0.156      |   | 2.67 |   | 3,925,000 |   | $ | 0.172 |   |
|                  |       | 7,775,000                    |       | $                                 | 0.151      |   | 2.75 |   | 4,175,000 |   | $ | 0.167 |   |

 

The fair value for the options issued to employees was estimated at the date of grant using either of the following valuation models;

 

***Key Management Personnel (KMP) — Monte Carlo simulation analysis*** with the following range of assumptions for June 30:

 
| ** **                         | ** ** | **2016**       | ** ** | **2015** | ** ** | **2014** | ** ** |
|------------------------------------|------------|----------------|------------|----------|------------|----------|------------|
| Risk Free   Interest Rate          |       | 1.93% to 2.22% |       | —   |       | —   |       |
| Expected   Dividend Yield          |       | —         |       | —   |       | —   |       |
| Historic and   Expected Volatility |       | 80%            |       | —   |       | —   |       |
| Option Exercise   Prices           |       | $0.020         |       | —   |       | —   |       |
| Weighted Average   Exercise Price  |       | $0.020         |       | —   |       | —   |       |
| Expected Lives                     |       | 4.50 years     |       | —   |       | —   |       |

 

***Other — employees of Phenogen Sciences Inc.: Black-Scholes option-pricing model*** with the following range of assumptions for June 30:

 
| ** **                         | ** ** | **2016**         | ** ** | **2015**   | ** ** | **2014**   | ** ** |
|------------------------------------|------------|------------------|------------|------------|------------|------------|------------|
| Risk Free   Interest Rate          |       | 1.93% to 2.22%   |       | 2.81%      |       | 3.13%      |       |
| Expected   Dividend Yield          |       | —           |       | —     |       | —     |       |
| Historic and   Expected Volatility |       | 80%              |       | 80%        |       | 80%        |       |
| Option Exercise   Prices           |       | $0.039 to $0.058 |       | $0.040     |       | $0.105     |       |
| Weighted Average   Exercise Price  |       | $0.053           |       | $0.040     |       | $0.105     |       |
| Expected Lives                     |       | 4.40 years       |       | 3.83 years |       | 3.82 years |       |

 

41

----

Table of Contents

 

**Indemnification and Insurance with respect to Directors**

 

We are obligated pursuant to an indemnity agreement, to indemnify the current Directors and executive officers and former Directors against all liabilities to third parties that may arise from their position as Directors or officers of the Company and our controlled entities, except where to do so would be prohibited by law.  In addition, we currently carry insurance in respect of Directors’ and officers’ liabilities for current and former Directors, Company Secretary and executive officers or employees.

 

**Item 6.C**        **Board Practices**

 

**The Board of Directors**

 

Under our Constitution, our Board of Directors is required to comprise at least three Directors.  As of the date of this Annual Report, our Board comprised five Directors.

 

The role of the Board includes:

 

(a)                 Reviewing and making recommendations in remuneration packages and policies applicable to directors, senior executives and consultants.

 

(b)                 Nomination of external auditors and reviewing the adequacy of external audit arrangements.

 

(c)                  Establishing the overall internal control framework over financial reporting, quality and integrity of personnel and investment appraisal.  In establishing an appropriate framework, the board recognized that no cost effective internal control systems will preclude all errors and irregularities.

 

(d)                 Establishing and maintaining appropriate ethical standards in dealings with business associates, suppliers, advisers and regulators, competitors, the community and other employees.

 

(e)                  Identifying areas of significant business risk and implementing corrective action as soon as practicable after a risk is identified.

 

(f)                   Nominating of audit and remuneration committee members.

 

The Board meets to discuss business regularly throughout the year, with additional meetings being held when circumstances warrant.  Included in the table below are details of the meetings of the Board and the sub-committees of the Board that were held during the 2016 financial year.

 
| ** **                      | ** ** | **Directors’ meetings** | ** ** | **Audit Committee meetings** | ** ** | **Remuneration Committee   meetings** | ** ** |
|---------------------------------|------------|-----------------------------------|------------|----------------------------------------|------------|--------------------------------------------|------------|
| ** **                      | ** ** | **Attended**                      | ** ** | **Eligible**                           | ** ** | **Attended**                               | ** ** | **Eligible** | ** ** | **Attended** | ** ** | **Eligible** | ** ** |
| Dr Malcolm   Brandon            |       | 12                                |       | 13                                     |       | —                                     |       | — |   | — |   | — |   |
| Mr. Eutillio   Buccilli    |       | 12                                |       | 13                                     |       | —                                     |       | — |   | 2 |   | 2 |   |
| Mr. Grahame   Leonard A.M. |       | 12                                |       | 13                                     |       | 4                                          |       | 4 |   | — |   | — |   |
| Dr Paul Kasian                  |       | 13                                |       | 13                                     |       | 4                                          |       | 4 |   | 2 |   | 2 |   |
| Dr Lindsay   Wakefield          |       | 12                                |       | 13                                     |       | 4                                          |       | 4 |   | 2 |   | 2 |   |

 

**Committees of the Board**

 

The Board has established an Audit Committee which operates under a specific Charter approved by the Board.  It is the Board’s responsibility to ensure that an effective internal control framework exists within the entity.  This includes internal controls to deal with both the effectiveness and efficiency of significant business processes, the safeguarding of assets, the maintenance of proper accounting records, and the reliability of financial information as well as non-financial considerations such as the benchmarking of operational key performance indicators.

 

42

----

Table of Contents

 

The Board has delegated the responsibility for the establishment and maintenance of a framework of internal control and ethical standards for the management of the Group to the Audit Committee.  The Audit Committee also provides the Board with assurance regarding the reliability of financial information for inclusion in the financial reports.  All members of the Audit Committee are independent Non-Executive Directors.

 

The Remuneration Committee is, amongst other things, responsible for determining and reviewing remuneration arrangements for the Directors, the Chief Executive Officer and the Senior Leadership Team.  The majority of the Committee is comprised of independent directors.

 

The Remuneration Committee assesses the appropriateness of the nature and amount of remuneration paid to Directors and Executives on a periodic basis by reference to relevant employment market conditions, with the overall objective of ensuring maximum shareholder benefit from the retention of a high quality Board and Senior Leadership Team.

 

**Committee membership**

 
| As at   the date of this Report, the composition of these two Sub-Committees are: |
|-----------------------------------------------------------------------------------|
|                                                                              |   |
| Audit   Committee:                                                                | Mr. Grahame Leonard AM —   Chairman of the Committee |
|                                                                              | Dr Paul Kasian |
|                                                                              | Dr Lindsay Wakefield |
|                                                                              |   |
| Remuneration   Committee:                                                         | Dr Lindsay Wakefield — Chairman   of the Committee |
|                                                                              | Dr Paul Kasian |
|                                                                              | Mr. Eutillio Buccilli |

 

As an executive, Mr. Buccilli does not take part in deliberations pertaining to his own remuneration.

 

**Compliance with NASDAQ Rules**

 

NASDAQ listing rules require that we disclose the home country practices that we will follow in lieu of compliance with NASDAQ corporate governance rules.  The following describes the home country practices and the related NASDAQ rule:

 

Majority of Independent Directors:  We follow home country practice rather than NASDAQ’s requirement in Marketplace Rule 4350(c) (1) that the majority of the Board of each issuer be comprised of independent directors as defined in Marketplace Rule 4200.  As of the date of this Annual Report, our Board of Directors comprises of a majority of independent directors.

 

Compensation of Officers:  We follow home country practice rather than NASDAQ’s requirement in Marketplace Rule 4350(c)(3) that chief executive compensation be determined or recommended to the Board by the majority of independent directors or a compensation committee of independent directors.  Similarly, compensation of other officers is not determined or recommended to the Board by a majority of the independent directors or a compensation committee comprised solely of independent directors.  These decisions are made by our remuneration committee which is comprised of a majority of independent directors.

 

Nomination:  We follow home country practice rather than NASDAQ’s requirement in Marketplace Rule 4350(c)(4) that director nominees be selected or recommended by a majority of the independent directors or by a nominations committee comprised of independent directors.  These decisions are made by our full Board which is comprised of a majority of independent directors.  The ASX does not have a requirement that each listed issuer have a nominations committee or otherwise follow the procedures embodied in NASDAQ’s Marketplace Rule.  Furthermore, no law, rule or regulation of the ASIC has such a requirement nor does the applicable corporate law legislation.  Accordingly, selections or recommendations of director nominees by a committee that is not comprised of a majority of directors that are not independent is not prohibited by the laws of Australia.

 

Quorum:  We follow home country practice rather than NASDAQ’s requirement in Marketplace Rule 4350(f) that each issuer provide for a quorum of at least 33 1/3 percent of the outstanding shares of the issuer’s ordinary stock (voting stock).  Pursuant to our Constitution we are currently required to have a quorum for a general meeting of three persons.  The practice followed by us is not prohibited by Australian law.

 

Shareholder Approval for Capital Issuance: We have elected to follow certain home country practices in lieu of NASDAQ Marketplace Rule 5635.  For example, the Company is entitled to an annual 15% of capital placement capacity under ASX Listing Rule 7.1 without shareholder approval.  If this amount of annual entitlement is aggregated with an additional placement of ordinary shares, including through the grant of options over ordinary shares, that exceeds 20% of the outstanding share capital, only the excess over the 15% annual allowance requires shareholder approval under Australian law. Such home country practice is not prohibited by the laws of Australia.

 

43

----

Table of Contents

 

**Item 6.D**        **Employees**

 

As of the date of this Annual Report, the Group comprising the Company and its subsidiaries, employed 22 full-time equivalent employees.  The number of full-time equivalent employees as of the end of each respective financial year ended June 30 are as follows:

 
| 2016 |   | 25 |   |
|------|--------|----|--------|
| 2015 |   | 23 |   |
| 2014 |   | 64 |   |

 

**Item 6.E**        **Share Ownership**

 

The relevant interest of the directors in the share capital of the Company as notified by them to the Australian Securities Exchange in accordance with section 205G(1) of the *Corporations Act 2001* as of the date of this Annual Report is as follows:

 
| **Director**                  | ** ** | **Ordinary shares** | ** ** | **Percentage of Capital held** | ** ** |
|-------------------------------|------------|--------------------------|------------|-----------------------------------------------|------------|
| Dr. Malcolm   R. Brandon |       | —                   |       | N/A                                           |       |
| Eutillio   Buccilli           |       | —                   |       | N/A                                           |       |
| Dr. Paul   Kasian        |       | 256,410                  |       | 0.015                                         | %          |
| Grahame Leonard   A.M.        |       | 6,000,000                |       | 0.350                                         | %          |
| Dr. Lindsay   Wakefield  |       | 15,325,263               |       | 0.894                                         | %          |

 

Notes:             As of the date of this Annual Report, no options over Ordinary Shares are held by the Directors.

 

**Item 7.**            **Major Shareholders and Related Party Transactions**

 

**Item 7.A**        **Major Shareholders**

 

As at the date of this Annual Report, there were no shareholders who is the beneficial owner of 5% or more of our voting securities.

 

The number of Ordinary Shares on issue in Genetic Technologies as of the date of this Annual Report was 1,715,282,724.  The number of holders of Ordinary Shares in Genetic Technologies as of the date of this Annual Report was approximately 3,013.

 

The Company is not aware of any direct or indirect ownership or control of it by another corporation(s), by any foreign government or by any other natural or legal person(s) severally or jointly.  Principal shareholders do not enjoy any special or different voting rights from those to which other holders of Ordinary Shares are entitled.  The Company does not know of any arrangements, the operation of which may at a subsequent date result in a change in control of the Company.

 

**Item 7.B**        **Related Party Transactions**

 

During the year ended June 30, 2016, the only transactions between entities within the Group and other related parties occurred, are as listed below.  Except where noted, all amounts were charged on similar to market terms and at commercial rates.

 

*Phenogen Sciences Inc.*

 

During the year ended June 30, 2016, Phenogen Sciences Inc, a subsidiary, purchased testing services from Genetic Technologies Corporation Pty. Ltd., another subsidiary at a cost of $91,676 (2015: $153,581). This transaction is eliminated on consolidation of the Company’s accounts

 

*Debt convertible notes*

 

As described in Note 20 of the Financial Report, during the previous year the Company finalised the raising of $2,150,000 via the issue of unlisted secured (debt) notes to existing and new Australian institutional and wholesale investors. The debt notes carried a 10.0% coupon rate, and as approved at the Annual General Meeting, held on November 25, 2014, became convertible notes which could convert into ordinary shares (at a 10.0% discount to the 5 day VWAP). These convertible notes also carry free attached options to purchase further shares in the Company.

 

$125,000 of these convertible notes were issued to a holder associated with Dr Lindsay Wakefield, a Company director at the time of issue, on the same terms and conditions as other note holders.  All of these convertible notes were converted during the year.  The 8,333,333 share options attached to these convertible notes remain unexercised at the end of the year.

 

There were no transactions with parties related to Key Management Personnel during the year other than that disclosed above.

 

44

----

Table of Contents

 

**Item 7.C**        **Interests of Experts and Counsel**

 

Not applicable.

 

**Item 8.**           **Financial Information**

 

**Item 8.A**        **Consolidated Statements and Other Financial Information**

 

The information included in Item 18 of this Annual Report is referred to and referenced into this Item 8.A.

 

**Litigation and other legal proceedings**

 

*Australian Federal Court Patent Proceeding*

 

In June 2010, a group of Australian plaintiffs initiated litigation in the Australian Federal Court challenging the validity of certain claims of an Australian patent owned by Myriad Genetics Inc. (Australian patent 686004 - “‘004”).  Genetic Technologies was named as a respondent to this matter by virtue of the fact that Genetic Technologies was the exclusive licensee of the BRCA patents in Australia (which includes the ‘004 patent).

 

This matter bears a striking resemblance to the US litigation filed by the American Civil Liberties Union against Myriad’s US patent equivalent in which a US Federal District Court ruled that isolated DNA sequences are not eligible for patent protection because of the fact that they are “products of nature”.  On July 29, 2011, Myriad successfully appealed this decision with the Federal Circuit Court of Appeals reversing the decision of the United States District Court for the Southern District of New York.  On March 26, 2012 the U.S. Supreme Court remanded the case back to the US Court of Appeals for the Federal Circuit for reconsideration.  On August 16, 2012, the U.S. Court of Appeals for the Federal Circuit ruled on the Myriad in the U.S., upholding the patentability of gene patents. On June 13, 2013, the U.S. Supreme Court allowed an appeal, and found that claims for isolated genomic DNA were invalid.

 

On September 30, 2011, Genetic Technologies filed documents with the Australian Federal Court to the effect that the Company submits to the orders of the Court and takes no further part in the proceedings.  On February 15, 2013, the Australian Federal Court ruled in favour of Myriad Genetics in this matter.

 

Myriad Genetics argued that by virtue of the process of extracting the gene from the body, it had satisfied the requirements of an “invention” according to section 18(1) (a) of the Patents Act which states that an invention must be a “manner of manufacture”. Based on previous case law, the Court held that a “manner of manufacture” requires an “artificial state of affairs” of some discernible effect that is of economic significance.

 

That decision was subsequently appealed by one of the plaintiffs on March 4, 2013. The Full Federal Court again ruled in favour of Myriad Genetics on September 5, 2014. The decision by the court leaves intact its earlier ruling that isolated gene sequences, even if they contain the same information as DNA sequences in the body, become a manufactured object as a result of the isolation process, conferring on them an “artificial state”, and making them patentable.

 

On September 16, 2014, the plaintiff sought special leave to appeal from the Full Federal Court’s decision to the High Court of Australia, which was granted on February 13, 2015. The plaintiff filed a formal appeal to the High Court shortly thereafter, on February 27, 2015. Genetic Technologies did not contest the special leave application or the appeal to the High Court.

 

On October 7, 2015 the High Court found claims 1 to 3 (directed to isolated gene sequences) of the ‘004 patent invalid. The High Court held that whether or not an invention is an “artificial state of affairs” is not the only factor relevant to whether a patent defines a manner of manufacture. The High Court took into account a number of other policy considerations, including:

 

a.              whether patentability of the invention is consistent with the overarching purposes of the Patents Act (i.e., stimulating, rather than chilling, innovation);

b.              whether patentability of the invention would enhance or detract from the coherence of the law relating to inherent patentability;

c.               whether patentability of the invention is consistent with Australia’s international obligations and the patent laws of other countries; and

d.              whether patentability of the class of invention as claimed would involve law-making of a kind that should be done by the legislature;

 

before concluding that claims 1 to 3 of the ‘004 patent did not define a manner of manufacture.

 

The challenge by the plaintiffs did not affect the validity of the remaining claims (4-30) of the ‘004 Patent. While the ‘004 patent reached the end of its 20 year term and therefore expired on August 11, 2015, similar claims in other, subsisting patents (including those directed to probes and methods for diagnostic testing relating to specific genes) remain enforceable, affording a monopoly over many uses of gene sequences.

 

45

----

Table of Contents

 

Although there are no more avenues for appeal available in the *D’Arcy v Myriad* case, it is likely that further administrative hearings will be required before the proceedings can be disposed of. The next steps are largely in the hands of the Applicant, and the Company is seeking clarification from the Applicant’s lawyers on how they intend to proceed with this case.

 

**Dividends**

 

Until our businesses are profitable beyond our expected research and development needs, our Directors are unlikely to be able to recommend that any dividend be paid to our shareholders.  Our Directors will not resolve a formal dividend policy until we generate profits.  Our current intention is to reinvest our income in the continued development and expansion of our businesses.

 

**Item 8.B**      **Significant Changes to Financial Information**

 

Our consolidated financial statements are set out on pages F1 to F41 of this Annual Report (refer to Item 18).

 

**Significant other changes**

 

*Executive Moves and Appointments*

 

Mr. Kevin Fischer was appointed Chief Financial Officer and joint Company Secretary, effective November 2, 2015. Mr. Fischer has subsequently been appointed as sole Company Secretary effective January 13, 2016.

 

Mr. Chris Saunders was appointed Senior VP Sales and Marketing, Phenogen Sciences Inc. on November 2, 2015, replacing Mr. Mark Ostrowski.

 

On June 22, 2016, Dr Susan Gross was appointed Senior Medical Director, Phenogen Sciences Inc.

 

*Options*

 

On November 25, 2015, the Company granted the following options over ordinary shares in the Company;

 

·                  As approved by shareholders at the Company’s Annual General Meeting held on November 25, 2015, 14,236,111 options to the CEO, Mr. Eutillio Buccilli. The options, which were granted at nil consideration, entitle Mr. Buccilli to acquire one ordinary share, at a strike price of $0.02 at any time up to, and including November 24, 2020, subject to certain vesting conditions.

 

·                  10,000,000 options to Key Management Personnel.  The options, which were granted at nil consideration, entitle the holders to acquire one ordinary share, at a strike price of $0.02 at any time up to, and including November 24, 2020, subject to certain vesting conditions.

 

·                  1,500,000 options to US based employees. The options, which were granted at nil consideration, entitle the holders to acquire one ordinary share, at a strike price of $0.058 at any time up to, and including September 24, 2020, subject to certain vesting conditions.

 

On March 31, 2016, the Company granted the following options over ordinary shares of the Company;

 

·                  7,500,000 options to Key Management Personnel.  The options, which were granted at nil consideration, entitle the holders to acquire one ordinary share, at a strike price of $0.02 at any time up to, and including March 31, 2021, subject to certain vesting conditions.

 

·                  500,000 options to a US based employee. The options, which were granted at nil consideration, entitle the holder to acquire one ordinary share, at a strike price of $0.039 at any time up to, and including January 31, 2021, subject to certain vesting conditions.

 

46

----

Table of Contents

 

*Changes to the Board of Directors*

 

There were no changes to the Board of Directors during the year ended June 30, 2016.

 

**Significant events after balance date**

 

There have been no significant events which have occurred after balance date.

 

**Item 9.**            **The Offer and Listing**

 

**Item 9.A**        **Offer and Listing Details**

 

The Company’s Ordinary Shares were listed on the Australian Securities Exchange (the “ASX”) in July 1987.  Set out below is the highest and lowest market quotations for the Ordinary Shares reported on the Daily Official List of the ASX since July 1, 2011.

 
| **Financial Year** | ** ** | **Period Covered**               | ** ** | **High**       | ** ** | **Low** | ** ** |
|-------------------------|------------|---------------------------------------|------------|----------------|------------|---------|------------|
|                    |       |                                  |       | **(in $0.00)** |       |
| **Yearly data** 2012    |       | Year ended June 30, 2012         |       | 0.350          |       | 0.080   |       |
| 2013                    |       | Year ended June 30, 2013         |       | 0.150          |       | 0.060   |       |
| 2014                    |       | Year ended June 30, 2014         |       | 0.105          |       | 0.035   |       |
| 2015                    |       | Year ended June 30, 2015         |       | 0.087          |       | 0.012   |       |
| 2016                    |       | Year ended June 30, 2016         |       | 0.039          |       | 0.016   |       |
|                    |       |                                  |       |           |       |    |       |
| **Quarterly data** 2015 |       | Quarter ended September 30, 2014 |       | 0.044          |       | 0.022   |       |
|                    |       | Quarter ended December 31, 2014  |       | 0.026          |       | 0.013   |       |
|                    |       | Quarter ended March 31, 2015     |       | 0.087          |       | 0.012   |       |
|                    |       | Quarter ended June 30, 2015      |       | 0.045          |       | 0.028   |       |
|                    |       |                                  |       |           |       |    |       |
| 2016                    |       | Quarter ended September 30, 2015 |       | 0.035          |       | 0.019   |       |
|                    |       | Quarter ended December 31, 2015  |       | 0.039          |       | 0.016   |       |
|                    |       | Quarter ended March 31, 2016     |       | 0.027          |       | 0.018   |       |
|                    |       | Quarter ended June 30, 2016      |       | 0.024          |       | 0.017   |       |
|                    |       |                                  |       |           |       |    |       |
| **Monthly data** 2016   |       | Month ended May 31, 2016         |       | 0.022          |       | 0.019   |       |
|                    |       | Month ended June 30, 2016        |       | 0.021          |       | 0.017   |       |
|                    |       | Month ended July 31, 2016        |       | 0.020          |       | 0.017   |       |
|                    |       | Month ended August 31, 2016      |       | 0.019          |       | 0.014   |       |
|                    |       | Month ended September 30, 2016   |       | 0.017          |       | 0.015   |       |
|                    |       | Period ended October 20, 2016    |       | 0.016          |       | 0.013   |       |

 

As of the date of this Annual Report, we had 1,715,282,724 Ordinary Shares on issue, without par value.  See Item 10B “Our Constitution” for a detailed description of the rights attaching to our shares and Item 12D “American Depositary Receipts” for a description of the rights attaching to the American Depositary Shares.

 

The Company’s securities are also listed on NASDAQ Capital Market (under the ticker GENE) in the form of American Depositary Shares.  During January 2015, the Company undertook a reverse stock split (consolidation) which had the effect of resetting the ratio of 1 ADS representing 30 Ordinary shares to 1 ADS representing 150 Ordinary shares. Since listing on the NASDAQ Global Market on September 2, 2005, the ADSs have traded in a range from a low of USD 0.31 to a high of USD 13.85.  The most recent sale of the Company’s ADSs, as recorded on October 20, 2016, occurred at a price of USD 1.53.

 

Following the listing of the Company’s ADRs in September 2005, our Ordinary Shares are registered under Section 12 of the Securities Exchange Act of 1934 and we file an Annual Report with the Securities and Exchange Commission on Form 20-F.  As a foreign private issuer, we are not be subject to the proxy rules under Section 14 of the Securities Exchange Act of 1934, and our officers, Directors and principal stockholders are not subject to the insider short-swing profit disclosure and recovery provisions of Section 16 of that Act.

 

Starting in January 14, 2002, the ADSs traded in the USA over-the-counter market under the symbol “GNTLY” and dealers’ prices for the ADSs were been quoted in the “pink sheets” published by the National Quotations Bureau, Inc.  Commencing on

 

47

----

Table of Contents

 

September 2, 2005, our ADSs were listed on the NASDAQ Global Market and, subsequently, the NASDAQ Capital Market, under the ticker “GENE”.

 

The Company has registered one class of American Depositary Shares (ADSs) on Form F-6 pursuant to the U.S. Securities Act of 1933, as amended.  One ADS represents 150 Ordinary Shares without par value.  As of June 30, 2016 there was a total of 8,584,180 ADSs outstanding, representing approximately 75.27% of the Company’s total issued capital as of that date.

 

The table below sets forth the high and low sales prices in United States dollars for the ADSs during the periods indicated:

 
| **Financial Year** | ** ** | **Period Covered**               | ** ** | **High**     | ** ** | **Low** | ** ** |
|-------------------------|------------|---------------------------------------|------------|--------------|------------|---------|------------|
|                    |       |                                  |       | **(in USD)** |       |
| **Yearly data** 2012    |       | Year ended June 30, 2012         |       | 11.06        |       | 2.29    |       |
| 2013                    |       | Year ended June 30, 2013         |       | 4.79         |       | 2.00    |       |
| 2014                    |       | Year ended June 30, 2014         |       | 1.24         |       | 1.00    |       |
| 2015                    |       | Year ended   June 30, 2015       |       | 11.00        |       | 0.31    |       |
| 2016                    |       | Year ended June 30, 2016         |       | 4.27         |       | 1.62    |       |
|                    |       |                                  |       |         |       |    |       |
| **Quarterly data** 2015 |       | Quarter ended September 30, 2014 |       | 1.31         |       | 0.50    |       |
|                    |       | Quarter ended December 31, 2014  |       | 0.61         |       | 0.31    |       |
|                    |       | Quarter ended March 31, 2015     |       | 11.00        |       | 0.35    |       |
|                    |       | Quarter ended June 30, 2015      |       | 6.00         |       | 3.00    |       |
|                    |       |                                  |       |         |       |    |       |
| 2016                    |       | Quarter ended September 30, 2015 |       | 3.77         |       | 1.72    |       |
|                    |       | Quarter ended December 31, 2015  |       | 4.27         |       | 1.76    |       |
|                    |       | Quarter ended March 31, 2016     |       | 2.62         |       | 1.62    |       |
|                    |       | Quarter ended June 30, 2016      |       | 2.76         |       | 1.99    |       |
|                    |       |                                  |       |         |       |    |       |
| **Monthly data** 2016   |       | Month ended May 31, 2016         |       | 2.49         |       | 2.09    |       |
|                    |       | Month ended June 30, 2016        |       | 2.45         |       | 1.99    |       |
|                    |       | Month ended July 31, 2016        |       | 2.27         |       | 2.06    |       |
|                    |       | Month ended August 31, 2016      |       | 2.14         |       | 1.89    |       |
|                    |       | Month ended September 30, 2016   |       | 1.99         |       | 1.70    |       |
|                    |       | Period ended October 20, 2016    |       | 1.78         |       | 1.49    |       |

 

**Item 9.B**        **Plan of Distribution**

 

Not applicable.

 

**Item 9.C**        **Markets**

 

Effective September 2, 2005, our ADSs were listed on the NASDAQ Global Market under the ticker “GENE”.  Effective July 1, 2010, the ADSs were transferred to the NASDAQ Capital Market.  The ticker remained unchanged.  Our Ordinary Shares are listed and trade on the Australian Securities Exchange under the code “GTG”.

 

**Item 9.D**        **Selling Shareholders**

 

Not applicable.

 

**Item 9.E**      **Dilution**

 

Not applicable.

 

**Item 9.F**        **Expenses of the Issue**

 

Not applicable.

 

48

----

Table of Contents

 

**Item 10.**                                  **Additional Information**

 

**Item 10.A**                 **Share Capital**

 

As of June 30, 2016, we had a total of 1,715,282,724 Ordinary Shares on issue.  None of these shares were subject to any form of escrow as of that date and, as such, all of the shares were listed on the Australian Securities Exchange and were freely tradable.

 

Based on our review of shareholder records (based solely on the addresses), as of June 30, 2016 there were 35 U.S. resident shareholders of our Ordinary Shares holding 11,688,595 shares representing 1.14% of the total issued and outstanding Ordinary Shares.  Our Ordinary Shares do not have a par value.  These figures do not include any Ordinary Shares which may be held by U.S. residents in the form of American Depositary Receipts (ADRs).

 

During the last five years, the number of Ordinary Shares on issue has increased as follows:

 
| **Date**                       | ** ** | **Nature of issue**                                                                                              | ** ** | **Number of Ordinary   Shares issued / outstanding** | ** ** | **Movement in share   capital / balance   $** | ** ** |
|--------------------------------|------------|----------------------------------------------------------------------------------------------------------------------------|------------|-------------------------------------------------------------------------------|------------|-------------------------------------------------------------------|------------|
| **As of   June 30, 2011** |       |                                                                                                                       |       | **404,605,152**                                                               |       | **72,378,105**                                                    |       |
| July 27,   2011           |       | Placement of Ordinary Shares as part of capital   raising                                                                  |       | 60,000,000                                                                    |       | 10,894,537                                                        |       |
| January 25,   2012        |       | Exercise of 166,667 options @ $0.045 each                                                                                  |       | 166,667                                                                       |       | 7,500                                                             |       |
| **As of   June 30, 2012** |       |                                                                                                                       |       | **464,771,819**                                                               |       | **83,280,142**                                                    |       |
| October 19,   2012        |       | Exercise of 10,200,000 options @ $0.045 each                                                                               |       | 10,200,000                                                                    |       | 459,000                                                           |       |
| January 24,   2013        |       | Exercise of 500,000 options @ $0.045 each                                                                                  |       | 500,000                                                                       |       | 22,500                                                            |       |
| April 10,   2013          |       | Other transaction costs                                                                                                    |       | —                                                                        |       | (25,797                                                           | )          |
| **As of   June 30, 2013** |       |                                                                                                                       |       | **475,471,819**                                                               |       | **83,735,845**                                                    |       |
| August 9,   2013          |       | Issue of shares as part of private placements @   $0.072                                                                   |       | 14,555,576                                                                    |       | 1,048,001                                                         |       |
| August 14,   2013         |       | Issue of shares as part of private placements @   $0.072                                                                   |       | 15,999,980                                                                    |       | 1,151,999                                                         |       |
| August 30,   2013         |       | Issue of shares as part of private placements @   $0.072                                                                   |       | 11,111,111                                                                    |       | 800,000                                                           |       |
| October 8,   2013         |       | Issue of shares as part of private placements @   $0.072                                                                   |       | 19,277,837                                                                    |       | 1,388,000                                                         |       |
| October 9,   2013         |       | Issue of shares as part of private placements @   $0.072                                                                   |       | 24,333,333                                                                    |       | 1,752,000                                                         |       |
| October 14,   2013        |       | Issue of shares as part of private placements @   $0.072                                                                   |       | 5,000,000                                                                     |       | 360,000                                                           |       |
| November 18,   2013       |       | Issue of shares as part of private placements @   $0.072                                                                   |       | 6,944,445                                                                     |       | 500,000                                                           |       |
| December 31,   2013       |       | Issue of shares as part of the conversion of   convertible notes                                                           |       | 8,714,541                                                                     |       | 281,722                                                           |       |
| January 20,   2014        |       | Issue of shares as part of the conversion of   convertible notes                                                           |       | 16,517,440                                                                    |       | 569,022                                                           |       |
| February 12,   2014       |       | Issue of shares as part of the conversion of   convertible notes                                                           |       | 17,645,870                                                                    |       | 554,939                                                           |       |
| February 19,   2014       |       | Issue of shares as part of the conversion of   convertible notes                                                           |       | 16,379,660                                                                    |       | 552,975                                                           |       |
| March 3,   2014           |       | Issue of shares as part of the conversion of   convertible notes                                                           |       | 15,388,290                                                                    |       | 548,968                                                           |       |
| April 10,   2014          |       | Issue of shares as part of the conversion of   convertible notes                                                           |       | 17,429,100                                                                    |       | 533,732                                                           |       |
| May 16,   2014            |       | Shares cancelled as part of the swap deal                                                                                  |       | (75,937,500                                                                   | )          | (3,569,702                                                        | )          |
| June 3,   2014            |       | Issue of shares in respect of interest rate true up   adjustment relating to March and April, under convertible notes |       | 2,117,250                                                                     |       | —                                                            |       |
| June 27,   2014           |       | Issue of shares as part of the conversion of   convertible notes                                                           |       | 22,969,740                                                                    |       | 531,519                                                           |       |
| To November,   2013            |       | Other transaction costs arising on share issue                                                                             |       | —                                                                        |       | (658,528                                                          | )          |
| **As of   June 30, 2014** |       |                                                                                                                       |       | **613,918,492**                                                               |       | **90,080,492**                                                    |       |

 

49

----

Table of Contents

 
| July 9,   2014            |   | Issue of shares as part of the conversion of   convertible notes plus capitalised interest |   | 23,227,950        |   | 721,403         |   |
|--------------------------------|--------|--------------------------------------------------------------------------------------------|--------|-------------------|--------|-----------------|--------|
| August 12,   2014         |   | Issue of shares for capitalised interest on   convertible notes                            |   | 5,142,450         |   | —          |   |
| August 20,   2014         |   | Issue of shares as part of the conversion of   convertible notes plus capitalised interest |   | 25,817,550        |   | 580,783         |   |
| October 2,   2014         |   | Issue of shares as part of the conversion of convertible   notes plus capitalised interest |   | 31,637,640        |   | 621,139         |   |
| October 20,   2014        |   | Issue of shares for capitalised interest on   convertible notes                            |   | 4,787,190         |   | —          |   |
| October 31,   2014        |   | Issue of shares as part of the conversion of   convertible notes plus capitalised interest |   | 46,503,360        |   | 306,619         |   |
| November 28,   2014       |   | Issue of shares as part of the conversion of   convertible notes plus capitalised interest |   | 27,655,230        |   | 234,192         |   |
| December 5,   2014        |   | Issue of shares as part of the conversion of   convertible notes plus capitalised interest |   | 34,100,456        |   | 78,546          |   |
| December 19,   2014       |   | Issue of shares as part of the conversion of   convertible notes plus capitalised interest |   | 8,059,599         |   | 102,685         |   |
| December 29,   2014       |   | Issue of shares as part of the conversion of   convertible notes plus capitalised interest |   | 8,677,729         |   | 102,849         |   |
| December 30,   2014       |   | Issue of shares as part of private placements @   $0.0135                                  |   | 19,074,112        |   | 257,500         |   |
| January 9,   2015         |   | Issue of shares as part of the conversion of   convertible notes plus capitalised interest |   | 8,258,496         |   | 113,474         |   |
| January 22,   2015        |   | Facility fee pursuant to a standby equity placement   facility                             |   | 35,876,392        |   | —          |   |
| January 30,   2015        |   | Issue of shares as part of private placements @   $0.01407                                 |   | 41,933,191        |   | 621,450         |   |
| January 30,   2015        |   | Exercise of 26,666,667 options @ $0.015 each                                               |   | 26,666,667        |   | 400,000         |   |
| February 2,   2015        |   | Issue of shares as part of private placements @   $0.02447                                 |   | 34,066,809        |   | 877,561         |   |
| February 2,   2015        |   | Issue of shares as part of the conversion of   convertible notes                           |   | 78,181,336        |   | 889,000         |   |
| February 2,   2015        |   | Issue of shares for capitalised interest on   convertible notes                            |   | 2,939,998         |   | 33,431          |   |
| February 9,   2015        |   | Issue of shares as part of private placements @   $0.020                                   |   | 16,000,000        |   | 337,600         |   |
| February 9,   2015        |   | Exercise of 27,499,999 options @ $0.015 each                                               |   | 27,499,999        |   | 412,500         |   |
| February 13,   2015       |   | Issue of shares as part of the conversion of   convertible notes                           |   | 1,712,663         |   | 51,000          |   |
| February 13,   2015       |   | Issue of shares for capitalised interest on   convertible notes                            |   | 72,260            |   | 2,152           |   |
| February 13,   2015       |   | Exercise of 37,666,666 options @ $0.015 each                                               |   | 37,666,666        |   | 565,000         |   |
| February 18,   2015       |   | Issue of shares as part of private placements @   $0.0695                                  |   | 10,500,000        |   | 729,750         |   |
| February 18,   2015       |   | Exercise of 8,666,667 options @ $0.015 each                                                |   | 8,666,667         |   | 130,000         |   |
| February 19,   2015       |   | Issue of shares as part of the conversion of   convertible notes                           |   | 5,868,122         |   | 275,000         |   |
| February 19,   2015       |   | Issue of shares for capitalised interest on   convertible notes                            |   | 257,233           |   | 12,054          |   |
| February 19,   2015       |   | Exercise of 13,133,333 options @ $0.015 each                                               |   | 13,133,333        |   | 197,000         |   |
| February 20,   2015       |   | Issue of shares as part of the conversion of   convertible notes                           |   | 2,713,459         |   | 150,000         |   |
| February 20,   2015       |   | Issue of shares for capitalised interest on   convertible notes                            |   | 119,690           |   | 6,616           |   |
| February 20,   2015       |   | Exercise of 2,000,000 options @ $0.015 each                                                |   | 2,000,000         |   | 30,000          |   |
| February 20,   2015       |   | Exercise of 7,333,334 options @ $0.015 each                                                |   | 7,333,334         |   | 110,000         |   |
| March 11,2015             |   | Issue of shares as part of private placements @   $0.0382                                  |   | 392,670,150       |   | 15,000,000      |   |
| March 11,   2015          |   | Issue of shares as part of private placements @   $0.0334                                  |   | 107,329,800       |   | 3,584,815       |   |
| To   March 2015           |   | Other transaction costs arising on share issue                                             |   | —            |   | (2,572,664      | )      |
| To   March 2015           |   | Other transaction costs on placement of shares                                             |   | 4,123,608         |   | (57,736         | )      |
| **As of   June 30, 2015** |   |                                                                                       |   | **1,714,191,631** |   | **115,247,128** |   |
| July 23,   2015           |   | Issue of shares as part of the conversion of   convertible notes                           |   | 1,006,441         |   | 25,000          |   |
| July 23,   2015           |   | Issue of shares for capitalised interest on   convertible notes                            |   | 84,652            |   | 2,102           |   |
| July 27,   2015           |   | Other transaction costs arising on share issue                                             |   | —            |   | (1,654          | )      |
|                           |   |                                                                                       |   |              |   |            |   |
| **As of   June 30, 2016** |   |                                                                                       |   | **1,715,282,724** |   | **115,272,576** |   |

 

50

----

Table of Contents

 

During August 2013, the Company completed the placement of 41,666,667 ordinary shares at an issue price of $0.072 per share, raising a total of $3,000,000, prior to the payment of one-off transaction costs.  A further $4,000,000 was received by the Company under its Share Purchase Plan (“SPP”), during October and November 2013, before the payment of associated costs.  At the same issue price of $0.072 per share (and after allowing for rounding), this resulted in the issue of a further 55,555,635 ordinary shares in the Company.

 

On September 10, 2013, the Company announced that it had executed documents with Ironridge BioPharma Co., a division of institutional investor Ironridge Global IV, Ltd. (“Ironridge”), in respect of redeemable convertible notes to raise USD 5,000,000 (the “Notes”).  The details of the Notes were provided to all shareholders in a Notice of Extraordinary General Meeting at which approval for the issue of the Notes was sought from shareholders.  This approval was subsequently received on November 29, 2013.

 

On December 23, 2013, the Notes were drawn down and the Company received $5,627,462 (being the Australian dollar equivalent of USD 5,000,000) from Ironridge, before the payment of associated costs.

 

As at June 30, 2014, Notes with a face value of USD 3,250,000 had been converted by Ironridge in return for which Ironridge received 117,161,871 ordinary shares (including ordinary shares issued in lieu of interest payment and an interest true-up adjustment). The balance of the notes were fully converted during 2015 in return for which Ironridge received 164,771,370 ordinary shares (including ordinary shares issued in lieu of interest payment).

 

During September 2014 the Company finalized the raising of $2,150,000 via the issue of unlisted secured (debt) notes to existing and new Australian institutional and wholesale investors. The debt notes carried a 10.0% coupon rate, and as approved at the Annual General Meeting, held on November 25, 2014, became convertible notes which could convert into ordinary shares (at a 10.0% discount to the 5 day VWAP). These convertible notes also carry free attached options to purchase further shares in the Company.

 

$2,125,000 of the convertible notes, together with the capitalized interest, had been converted into 150,961,041 ordinary shares in the Company at June 30, 2015.

 

On July 23, 2015 the balance of $25,000 convertible notes plus capitalized interest was converted into 1,091,093 ordinary shares in the Company.

 

On December 2, 2014, the Company granted a total of 143,333,333 fully vested options over ordinary shares in the Company to the holders of convertible notes. The options, which were granted at no cost, entitle the holders to acquire one ordinary share at a price of $0.015 at any time up to, and including December 2, 2018.  At June 30, 2015, 122,966,666 options had been exercised for an increase in capital of $ 1,844,500. As at the date of this report, 20,366,667 of these options remain unexercised.

 

During December 2014, the Company raised $ 257,500 from existing shareholders through the issue of 19,074,112 new shares as part of a Share Purchase Plan.

 

In March 2015 an additional $ 18,354,815 capital was raised at a weighted average issue price of $ 0.0372 per share from professional and sophisticated investors in the United States through an offer of 499,999,950 fully paid ordinary shares, represented by 3,333,333 ADS’s (with each ADS representing 150 ordinary shares).

 

During January 2015 year the Company entered into a standby equity placement facility with Kentgrove, an investment fund managed by Kentgrove Capital Pty Ltd.

 

Key terms of the Standby Equity Placement Facility:

 

·                 Standby equity placement facility of up to A$24,000,000 with a maturity date January 21, 2017.

 

·                 Multiple placements permitted.

 

·                 For each placement, shares are issued at a 5% discount to a volume weighted average price (VWAP) over the period of the placement.

 

·                 A facility fee of 2.33% of the facility amount is payable, to be satisfied by the issue of shares. The facility fee, less 20%, will be rebated at termination or at maturity, pro rata for any amount of the facility that is unutilized.

 

·                 The commencement fee rebate may be paid by cash or shares.

 

As at June 30, 2016, the Company has issued 142,500,000 shares to Kentgrove under the standby facility for $ 2,566,361.

 

As of June 30, 2016 and 2015, the following outstanding unlisted options, together with their respective ASX codes and expiry dates, were convertible into Ordinary Shares.  The exercise prices are quoted in Australian dollars.

 

51

----

Table of Contents

 
| **Option description**                          | ** ** | **2016**   | ** ** | **Weighted ave.    exercise price** | ** ** | **2015**  | ** ** | **Weighted ave.    exercise price** | ** ** |
|------------------------------------------------------|------------|------------|------------|----------------------------------------------------|------------|-----------|------------|----------------------------------------------------|------------|
| **Unlisted   employee options**                      |       |       |       |                                               |       |      |       |                                               |       |
| GTGAM (expiring   July 31, 2016)                |       | —     |       | —                                             |       | 1,000,000 |       | $                                                  | 0.200      |   |
| GTGAO (expiring   August 29, 2017)              |       | —     |       | —                                             |       | 250,000   |       | $                                                  | 0.140      |   |
| GTGAW (expiring   March 31, 2016)               |       | —     |       | —                                             |       | 1,250,000 |       | $                                                  | 0.190      |   |
| GTGAY (expiring   July 11, 2018)                |       | —     |       | —                                             |       | 250,000   |       | $                                                  | 0.110      |   |
| GTGAA (expiring   May 31, 2019)                 |       | 250,000    |       | $                                                  | 0.040      |      | 1,125,000  |                                               | $          | 0.040 |   |
| GTGAD (expiring   September 14, 2020)           |       | 1,000,000  |       | $                                                  | 0.058      |      | —     |                                               | —     |   |
| GTGAD (expiring   November 24, 2020)            |       | 24,236,111 |       | $                                                  | 0.020      |      | —     |                                               | —     |   |
| GTGAD (expiring   January 31, 2021)             |       | 500,000    |       | $                                                  | 0.039      |      | —     |                                               | —     |   |
| GTGAD (expiring   March 31, 2021)               |       | 7,500,000  |       | $                                                  | 0.020      |      | —     |                                               | —     |   |
|                                                 |       | 33,486,111 |       | $                                                  | 0.022      |      | 3,875,000  |                                               | $          | 0.140 |   |
|                                                 |       |       |       |                                               |       |      |       |                                               |       |
| **Unlisted   options attached to convertible notes** |       |       |       |                                               |       |      |       |                                               |       |
| GTGAC (expiring   December 2, 2018)             |       | 20,366,667 |       | $                                                  | 0.015      |      | 20,366,667 |                                               | $          | 0.015 |   |
| Balance at the   end of the financial year           |       | 53,852,778 |       | $                                                  | 0.019      |      | 24,241,667 |                                               | $          | 0.035 |   |
| Exercisable at   the end of the financial year       |       | 20,450,000 |       | $                                                  | 0.015      |      | 23,033,334 |                                               | $          | 0.034 |   |

 

**Item 10.B**                 **Our Constitution**

 

At the Annual General Meeting of the Company held on November 23, 2005, the shareholders resolved to replace the existing Constitution with a revised version.  A copy of the Constitution has been posted on the Company’s website: www.gtglabs.com.  The principal changes which have been implemented in the new Constitution may be summarized as follows:

 

·                  General changes — general changes are proposed to make the Constitution consistent with best practice, update legal matters under the existing Constitution consistent with legislative and regulatory developments and to address certain content and language aspects.

 

·                  ASX Listing Rules — it provides that the Listing Rules prevail in the event of any inconsistency.

 

·                  Shares — it allows the Directors to issue shares subject to the *Corporations Act 2001* and the Listing Rules.

 

·                  Proportionate takeover power — the existing Constitution has a clause in it requiring shareholder approval to be obtained before any proportionate takeover is made.  However, that clause is ineffective because it needs to have been renewed at least every three years in accordance with the requirements of the Corporations Act.  The new Constitution does not include this clause on the basis that it offers no real benefit.

 

·                  Unmarketable parcels — the new Constitution permits the Company to sell holdings of less than a marketable parcel in accordance with the procedural and timing requirements of the Listing Rules.  This only applies if a shareholder has an opportunity to opt out of any proposed sale arrangement and does not do so.

 

·                  Notice of shareholders’ meetings — the new Constitution enables notice of shareholders’ meetings to be given by electronic means.

 

·                  Changes to general meetings — the new Constitution enables the Directors to change the venue for, and postpone or cancel a general meeting if such meeting is unnecessary, in the interests of shareholders, if the venue would be unreasonable or impractical, or for reasons of efficiency.  This does not apply in the event of a meeting requisitioned by shareholders.

 

·                  Quorum for shareholders’ meetings — a quorum of three shareholders represents a quorum for shareholders’ meetings, whether by way of being personally present, attorney, proxy or corporate representative.

 

·                  Casting vote — the Chairman of a shareholders’ meeting does not have a casting vote.

 

52

----

Table of Contents

 

·                  Number of Directors — it contemplates that the number of Directors need to be not less than three nor more than the number determined by the Directors which, until otherwise determined, is ten.

 

·                  Share qualification — a Director need not hold any shares in the Company in order to be a Director.

 

·                  Alternate directors — there are no provisions entitling the Directors to appoint alternate directors, on the basis that this is an outdated and undesirable approach.

 

·                  Directors’ tenure of office — a Director must retire from office or seek re-election by no later than the third Annual General Meeting following his or her appointment or re-election or three years, whichever is longer (other than the Managing Director).

 

·                  Vacation of office — the office of a Director is automatically vacated if the Director is an Executive Director under an employment agreement and that agreement terminates, unless the Board otherwise determines.

 

·                  Powers of Directors — the Directors have a general power to manage the Company’s business.

 

·                  Meetings of Directors — the Directors may meet in person or by electronic means.

 

·                  Quorum for Directors’ meetings — the quorum for Directors’ meetings is three, unless otherwise determined.

 

·                  Casting vote — the Chairman has a casting vote at Directors’ meetings.

 

·                  Indemnity — the new Constitution contains an updated indemnity clause in favor of the current and former Directors, Secretaries indemnifying them from liability consistent with the Corporations Act provisions and to the maximum extent permitted by law.

 

·                  Insurance — the Company must maintain and pay insurance premiums with respect to its current and former Directors, Secretaries and other officers to the extent permitted by law.

 

·                  Access — current and former Directors may access the financial and other records of the Company for the purposes of legal proceedings involving the person.

 

**Item 10.C**                     **Material Contracts**

 

There were no material contracts entered into during the year preceding the date of this Annual Report which were outside the ordinary course of business.

 

**Item 10.D**                 **Exchange Controls and Other Limitations Affecting Security Holders**

 

Under existing Australian legislation, the Reserve Bank of Australia does not inhibit the import and export of funds, and, generally, no permission is required to be given to Genetic Technologies for the movement of funds in and out of Australia.  However, payments to or from (or relating to) Iraq, its agencies or nationals, the government or a public authority of Libya, or certain Libyan undertakings, the authorities in the Federal Republic of Yugoslavia (Serbia and Montenegro) or their agencies, the Taliban (also referred to as the Islamic Emirate of Afghanistan), or the National Union for the Total Independence of Angola (also known as UNITA), its senior officials or the adult members of their immediate families, may not be made without the specific approval of the Reserve Bank of Australia.

 

Accordingly, at the present time, remittances of any dividends, interest or other payment by Genetic Technologies to non-resident holders of Genetic Technologies’ securities in the U.S. are not, subject to the above, restricted by exchange controls or other limitations.

 

**Takeovers Act**

 

There are no limitations, either under the laws of Australia or under the Company’s Constitution, to the right of non-residents to hold or vote Genetic Technologies Ordinary Shares other than the Commonwealth Foreign Acquisitions and Takeovers Act 1975 (the “Takeovers Act”).  The Takeovers Act may affect the right of non-Australian residents, including U.S. residents, to hold Ordinary Shares but does not affect the right to vote, or any other rights associated with, any Ordinary Shares held in compliance with its provisions.  Acquisitions of shares in Australian companies by foreign interests are subject to review and approval by the Treasurer of the

 

53

----

Table of Contents

 

Commonwealth of Australia under the Takeovers Act.  The Takeovers Act applies to any acquisition of outstanding shares of an Australian company that exceeds, or results in a foreign person or persons controlling the voting power of more than a certain percentage of those shares.  The thresholds are 15% where the shares are acquired by a foreign person, or group of associated foreign persons, or 40% in aggregate in the case of foreign persons who are not associated.  Any proposed acquisition that would result in an individual foreign person (with associates) holding more than 15% must be notified to the Treasurer in advance of the acquisition.  There are statutory limitations in Australia on foreign ownership of certain businesses, such as banks and airlines, not relevant to the Company.  However, there are no other statutory or regulatory provisions of Australian law or Australian Securities Exchange requirements that restrict foreign ownership or control of Genetic Technologies.

 

**Corporations Act 2001**

 

As applied to Genetic Technologies Limited, the *Corporations Act 2001* (the “*Corporations Act 2001*”) prohibits any legal person (including a corporation) from acquiring a relevant interest in Ordinary Shares if after the acquisition that person or any other person’s voting power in Genetic Technologies Limited increases from 20% or below to more than 20%, or from a starting point that is above 20% and below 90%.

 

This prohibition is subject to a number of specific exceptions set out in section 611 of the *Corporations Act 2001* which must be strictly complied with to be applicable.

 

In general terms, a person is considered to have a “relevant interest” in a share in Genetic Technologies if that person is the holder of that share, has the power to exercise, or control the exercise of, a right to vote attached to that share, or has the power to dispose of, or to control the exercise of a power to dispose of that share.

 

It does not matter how remote the relevant interest is or how it arises.  The concepts of “power” and “control” are given wide and extended meanings in this context in order to deem certain persons to hold a relevant interest.  For example, each person who has voting power above 20% in a company or a managed investment scheme which in turn holds shares in Genetic Technologies is deemed to have a relevant interest in those Genetic Technologies shares.  Certain situations (set out in section 609 of the *Corporations Act 2001*) which would otherwise constitute the holding of a relevant interest are excluded from the definition.

 

A person’s voting power in Genetic Technologies Limited is that percentage of the total votes attached to Ordinary Shares in which that person and its associates (as defined in the *Corporations Act 2001*) holds a relevant interest.

 

**Item 10.E**                     **Taxation**

 

This summary of material tax consequences is based on the tax laws of the United States (including the Internal Revenue Code of 1986, as amended, its legislative history, existing and proposed regulations thereunder, published rulings and court decisions) and on the Australian tax law and practice as in effect on the date hereof.  In addition, this summary is based on the income tax convention between the United States and Australia (the “Treaty”).  The foregoing laws and legal authorities as well as the Treaty are subject to change (or changes in interpretation), possibly with retroactive effect.  Finally, this summary is based in part upon the representations of our ADR Depositary and the assumption that each obligation in the Deposit Agreement and any related agreement will be performed in accordance with its terms.

 

The discussion does not address any aspects of U.S. taxation other than federal income taxation or any aspects of Australian taxation other than federal income taxation, stamp duty and goods and services tax.  This discussion does not necessarily address all aspects of U.S. or Australian federal tax considerations that may be important to particular investors in light of their individual investment circumstances or investors subject to special tax regimes, like broker-dealers, insurance companies, banks or other financial institutions, tax-exempt organizations, regulated investment companies, real estate investment trusts or financial asset securitization investment trusts, persons who actually or constructively own 10% or more of our ADRs or Ordinary Shares, persons who hold ADRs or Ordinary Shares as part of a straddle, hedge, conversion or constructive sale transaction or other integrated transaction, persons who have elected mark-to-market accounting, U.S. holders whose functional currency is not the U.S. dollar, U.S. expatriates, investors liable for the alternative minimum tax, partnerships and other pass-through entities, or persons who acquired their ADRs or Ordinary Shares through the exercise of options or similar derivative securities or otherwise as compensation.  Prospective investors are urged to consult their tax advisers regarding the U.S. and Australian federal, state and local tax consequences and any other tax consequences of owning and disposing of ADRs and shares.

 

54

----

Table of Contents

 

**Australian Tax Consequences**

 

In this section, we discuss Australian tax considerations that apply to non-Australian tax residents who are residents of the United States with respect to the ownership and disposal by the absolute beneficial owners of ADRs.  This summary does not discuss any foreign or state tax considerations, other than stamp duty.

 

**Nature of ADRs for Australian Taxation Purposes**

 

ADRs held by a U.S. holder will be treated for Australian taxation purposes as being held under a “bare trust” for that holder.  Consequently, the underlying Ordinary Shares will be regarded as owned by the ADR holder for Australian income tax and capital gains tax purposes.  Dividends paid on the underlying Ordinary Shares will also be treated as dividends paid to the ADR holder, as the person beneficially entitled to those dividends.  Therefore, in the following analysis, we discuss the tax consequences to non-Australian resident holders of Ordinary Shares which, for Australian taxation purposes, will be the same as to U.S. holders of ADRs.

 

**Taxation of Dividends**

 

Australia operates a dividend imputation system under which dividends may be declared to be “franked” to the extent of tax paid on company profits.  Fully franked dividends are not subject to dividend withholding tax.  Dividends payable by our company to non-Australian resident stockholders will be subject to dividend withholding tax, to the extent the dividends are unfranked.  Dividend withholding tax will be imposed at 30%, unless a stockholder is a resident of a country with which Australia has a double taxation agreement.  Under the provisions of the Treaty, the Australian tax withheld on unfranked dividends paid by us to which a resident of the United States is beneficially entitled is generally limited to 15% if the U.S. resident holds less than 10% of the voting rights of our company, unless the shares are effectively connected to a permanent establishment or fixed base in Australia through which the stockholder carries on business or provides independent personal services, respectively.  Where a U.S. corporate resident holds 10% or more of the voting rights of our company, the withholding tax rate is reduced to 5%.

 

**Tax on Sales or other Dispositions of Shares - Capital Gains Tax**

 

Non-Australian resident stockholders who hold their shares in us on capital account will not be subject to Australian capital gains tax on any gain made on a sale or other disposal of our shares, unless they hold 10% or more of our issued capital and the Company holds real property situated in Australia, the market value of which is 50% or more of the market value of the Company.  The Australian Taxation Office maintains the view that the Treaty does not limit Australian capital gains tax.  Australian capital gains tax applies to net capital gains charged at a taxpayer’s marginal tax rate but, for certain stockholders, a discount of the capital gain may apply if the shares have been held for 12 months or more.  For individuals, this discount is 50%.  For superannuation funds, the discount is 33%.  There is no discount for a company that derives a net capital gain.  Net capital gains are calculated after deducting capital losses, which may only be offset against such gains.

 

**Tax on Sales or other Dispositions of Shares - Stockholders Holding Shares on Revenue Account**

 

Some non-Australian resident stockholders may hold shares on revenue rather than on capital account, for example, share traders.  These stockholders may have the gains made on the sale or other disposal of the shares included in their assessable income under the ordinary income provisions of the income tax law, if the gains are sourced in Australia.  Non-Australian resident stockholders assessable under these ordinary income provisions in respect of gains made on shares held on revenue account would be assessed for those gains at the Australian tax rates for non-Australian residents, which start at a marginal rate of 32.5%.  Some relief from the Australian income tax may be available to non-Australian resident stockholders under the Treaty, for example, because the stockholder derives business profits not through a permanent establishment in Australia.  To the extent an amount would be included in a non-Australian resident stockholder’s assessable income under both the capital gains tax provisions and the ordinary income provisions, the capital gain amount would generally be reduced, so that the stockholder would not be subject to double tax on any part of the income gain or capital gain.

 

**Dual Residency**

 

If a stockholder were a resident of both Australia and the United States under the respective domestic taxation laws of those countries, that stockholder may be subject to tax as an Australian resident.  If, however, the stockholder is determined to be a U.S. resident for the purposes of the Treaty, the Australian tax would be subject to limitation by the Treaty.  Stockholders should obtain specialist taxation advice in these circumstances.

 

**Stamp Duty**

 

Any transfer of shares through trading on the Australian Securities Exchange, whether by Australian residents or foreign residents, is not subject to stamp duty within Australia.

 

55

----

Table of Contents

 

**Australian Death Duty**

 

Australia does not have estate or death duties.  Further, no capital gains tax liability is realized upon the inheritance of a deceased person’s shares.  However, the subsequent disposal of the shares by beneficiaries may give rise to a capital gains tax liability.

 

**Goods and Services Tax**

 

The issue or transfer of shares will not incur Australian goods and services tax and does not require a stockholder to register for Australian goods and services tax purposes.

 

**United States Federal Income Taxation**

 

As used below, a “U.S. holder” is a beneficial owner of an ADR that is, for U.S. federal income tax purposes, (i) a citizen or resident alien individual of the United States, (ii) a corporation (or an entity treated as a corporation) created or organized under the law of the United States, any State thereof or the District of Columbia, (iii) an estate the income of which is subject to U.S. federal income tax without regard to its source or (iv) a trust if (1) a court within the United States is able to exercise primary supervision over the administration of the trust, and one or more United States persons have the authority to control all substantial decisions of the trust, or (2) the trust has a valid election in effect under applicable U.S. Treasury Regulations to be treated as a United States person.  For purposes of this discussion, a “non-U.S. holder” is a beneficial owner of an ADR that is (i) a nonresident alien individual, (ii) a corporation (or an entity treated as a corporation) created or organized in or under the law of a country other than the United States or a political subdivision thereof or (iii) an estate or trust that is not a U.S. Holder.  If a partnership (including for this purpose any entity treated as a partnership for U.S. federal tax purposes) is a beneficial owner of an ADR, the U.S. federal tax treatment of a partner in the partnership generally will depend on the status of the partner and the activities of the partnership.  A holder of an ADR that is a partnership and partners in that partnership should consult their own tax advisers regarding the U.S. federal income tax consequences of holding and disposing of ADRs.  We have not sought a ruling from the Internal Revenue Service (“IRS”) or an opinion of counsel as to any U.S. federal income tax consequence described herein.  The IRS may disagree with the description herein, and its determination may be upheld by a court.

 

GIVEN THE COMPLEXITY OF THE TAX LAWS AND BECAUSE THE TAX CONSEQUENCES TO ANY PARTICULAR INVESTOR MAY BE AFFECTED BY MATTERS NOT DISCUSSED HEREIN, PROSPECTIVE INVESTORS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THE SPECIFIC TAX CONSEQUENCES OF THE ACQUISITION, OWNERSHIP AND DISPOSITION OF ADRs, INCLUDING THE APPLICABILITY AND EFFECT OF STATE, LOCAL AND NON-U.S. TAX LAWS, AS WELL AS U.S. FEDERAL TAX LAWS.

 

**Nature of ADRs for U.S. Federal Income Tax Purposes**

 

In general, for U.S. federal income tax purposes, a holder of an ADR will be treated as the owner of the underlying shares.  Accordingly, except as specifically noted below, the tax consequences discussed below with respect to ADRs will be the same as for shares in the Company, and exchanges of shares for ADRs, and ADRs for shares, generally will not be subject to U.S. federal income tax.

 

**Taxation of Dividends**

 

U.S. holders.  In general, subject to the passive foreign investment company rules discussed below, a distribution on an ADR will constitute a dividend for U.S. federal income tax purposes to the extent that it is made from our current or accumulated earnings and profits as determined under U.S. federal income tax principles.  If a distribution exceeds our current and accumulated earnings and profits, it is generally treated as a non-taxable reduction of basis to the extent of the U.S. holder’s tax basis in the ADR on which it is paid, and to the extent it exceeds that basis it will be treated as capital gain.  For purposes of this discussion, the term “dividend” means a distribution that constitutes a dividend for U.S. federal income tax purposes. The Company has not maintained and does not plan to maintain calculations of earnings and profits under U.S. federal income tax principles. Accordingly, it is unlikely that U.S. Holders will be able to establish that a distribution by the Company is in excess of its current and accumulated earnings and profits (as computed under U.S. federal income tax principles). Therefore, a U.S. Holder should expect that a distribution by the Company will generally be treated as taxable in its entirety as a dividend to U.S. Holders for U.S. federal income tax purposes even though the distribution may be treated in whole or in part as a non-taxable distribution for Australian tax purposes.

 

The gross amount of any dividend on an ADR (which will include the amount of any Australian taxes withheld) generally will be subject to U.S. federal income tax as foreign source dividend income, and will not be eligible for the corporate dividends received deduction.  The amount of a dividend paid in Australian dollars will be its value in U.S. dollars based on the prevailing spot market exchange rate in effect on the day the U.S. holder receives the dividend or, in the case of a dividend received in respect of an ADR, on the date the Depositary receives it, whether or not the dividend is converted into U.S. dollars.  A U.S. holder will have a tax basis in any distributed Australian dollars equal to its U.S. dollar amount on the date of receipt, and any gain or loss realized on a subsequent

 

56

----

Table of Contents

 

conversion or other disposition of Australian dollars generally will be treated as U.S. source ordinary income or loss.  If dividends paid in Australian dollars are converted into U.S. dollars on the date they are received by a U.S. holder, the U.S. holder generally should not be required to recognize foreign currency gain or loss in respect of the dividend income.

 

Subject to certain exceptions for short-term and hedged positions, a dividend that a non-corporate holder receives on an ADR will be subject to a maximum federal income tax rate of 20% if the dividend is a “qualified dividend”.  A dividend on an ADR will be a qualified dividend if (i) either (a) the ADRs are readily tradable on an established market in the United States or (b) we are eligible for the benefits of a comprehensive income tax treaty with the United States that the Secretary of the Treasury determines is satisfactory for purposes of these rules and that includes an exchange of information program, and (ii) we were not, in the year prior to the year the dividend was paid, and are not, in the year the dividend is paid, a passive foreign investment company (“PFIC”).  The ADRs are listed on the NASDAQ Capital Market, which should qualify them as readily tradable on an established securities market in the United States.  In any event, the Treaty satisfies the requirements of clause (i) (b), and we are a resident of Australia entitled to the benefits of the Treaty.  However, based on our audited financial statements and relevant market and shareholder data, we believe we were a PFIC for U.S. federal income tax purposes for our taxable year ended June 30, 2015 and June 30, 2016, respectively, and expect to be classified as a PFIC in the current taxable year.  Given that the determination of PFIC status involves the application of complex tax rules, and that it is based on the nature of our income and assets from time to time, no assurances can be provided that we will or will not be considered a PFIC for any past or future taxable years.  In addition, as described in the section below entitled “Passive Foreign Investment Company Rules,” if we were a PFIC in a year while a U.S. holder held an ADR, and if the U.S. holder has not made a qualified electing fund election effective for the first year the U.S. holder held the ADR, the ordinary share underlying the ADR remains an interest in a PFIC for all future years or until such an election is made. The IRS takes the position that such rule will apply for purposes of determining whether an ADR is an interest in a PFIC in the year a dividend is paid or in the prior year, even if we do not satisfy the tests to be a PFIC in either of those years.  Even if dividends on the ADRs would otherwise be eligible for qualified dividend treatment, in order to qualify for the reduced qualified dividend tax rates, a non-corporate holder must hold the ordinary share on which a dividend is paid for more than 60 days during the 120-day period beginning 60 days before the ex-dividend date, disregarding for this purpose any period during which the non-corporate holder has an option to sell, is under a contractual obligation to sell or has made (and not closed) a short sale of substantially identical stock or securities, is the grantor of an option to buy substantially identical stock or securities or, pursuant to Treasury regulations, has diminished their risk of loss by holding one or more other positions with respect to substantially similar or related property.  In addition, to qualify for the reduced qualified dividend tax rates, the non-corporate holder must not be obligated to make related payments with respect to positions in substantially similar or related property.  Payments in lieu of dividends from short sales or other similar transactions will not qualify for the reduced qualified dividend tax rates.

 

A non-corporate holder that receives an extraordinary dividend eligible for the reduced qualified dividend rates must treat any loss on the sale of the stock as a long-term capital loss to the extent of the dividend.  For purposes of determining the amount of a non-corporate holder’s deductible investment interest expense, a dividend is treated as investment income only if the non-corporate holder elects to treat the dividend as not eligible for the reduced qualified dividend tax rates.  Special limitations on foreign tax credits with respect to dividends subject to the reduced qualified dividend tax rates apply to reflect the reduced rates of tax.

 

The U.S. Treasury has announced its intention to promulgate rules pursuant to which non-corporate holders of stock of non-U.S. corporations, and intermediaries through whom the stock is held, will be permitted to rely on certifications from issuers to establish that dividends are treated as qualified dividends.  Because those procedures have not yet been issued, it is not clear whether we will be able to comply with them.

 

Non-corporate holders of ordinary shares are urged to consult their own tax advisers regarding the availability of the reduced qualified dividend tax rates with respect to dividends received on the ADRs in the light of their own particular circumstances.

 

Any Australian withholding tax imposed on dividends received with respect to the ADRs will be treated as a foreign income tax eligible for credit against a U.S. holder’s U.S. federal income tax liability, subject to generally applicable limitations under U.S. federal income tax law.  For purposes of computing those limitations separately under current law for specific categories of income, a dividend generally will constitute foreign source “passive category income” or, in the case of certain holders, “general category income.”  A U.S. holder will be denied a foreign tax credit with respect to Australian income tax withheld from dividends received with respect to the ADRs to the extent the U.S. holder has not held the ADRs for at least 16 days of the 30-day period beginning on the date which is 15 days before the ex-dividend date or to the extent the U.S. holder is under an obligation to make related payments with respect to substantially similar or related property.  Any days during which a U.S. holder has substantially diminished its risk of loss on the ADRs are not counted toward meeting the 16-day holding period required by the statute. The rules relating to the determination of the foreign tax credit are complex, and U.S. holders are urged to consult with their own tax advisers to determine whether and to what extent they will be entitled to foreign tax credits as well as with respect to the determination of the foreign tax credit limitation.  Alternatively, any Australian withholding tax may be taken as a deduction against taxable income, provided the U.S. holder takes a deduction and not a credit for all foreign income taxes paid or accrued in the same taxable year.  In general, special rules will apply to the calculation of foreign tax credits in respect of dividend income that is subject to preferential rates of U.S. federal income tax.

 

57

----

Table of Contents

 

Non-U.S. holders.  A dividend paid to a non-U.S. holder of an ADR will not be subject to U.S. federal income tax unless the dividend is effectively connected with the conduct of trade or business by the non-U.S. holder within the United States (and is attributable to a permanent establishment or fixed base the non-U.S. holder maintains in the United States if an applicable income tax treaty so requires as a condition for the non-U.S. holder to be subject to U.S. taxation on a net income basis on income from the ADR).  A non-U.S. holder generally will be subject to tax on an effectively connected dividend in the same manner as a U.S. holder.  A corporate non-U.S. holder under certain circumstances may also be subject to an additional “branch profits tax,” the rate of which may be reduced pursuant to an applicable income tax treaty.

 

**Taxation of Capital Gains**

 

U.S. holders.  Subject to the passive foreign investment company rules discussed below, on a sale or other taxable disposition of an ADR, a U.S. holder will recognize capital gain or loss in an amount equal to the difference between the U.S. holder’s adjusted basis in the ADR and the amount realized on the sale or other disposition, each determined in U.S. dollars.  Such capital gain or loss will be long-term capital gain or loss if at the time of the sale or other taxable disposition the ADR has been held for more than one year.  In general, any adjusted net capital gain of an individual is subject to a maximum federal income tax rate of 20%.  Capital gains recognized by corporate U.S. holders generally are subject to U.S. federal income tax at the same rate as ordinary income.  The deductibility of capital losses is subject to limitations.

 

Any gain a U.S. holder recognizes generally will be U.S. source income for U.S. foreign tax credit purposes, and, subject to certain exceptions, any loss will generally be a U.S. source loss.  If an Australian tax is paid on a sale or other disposition of an ADR, the amount realized will include the gross amount of the proceeds of that sale or disposition before deduction of the Australian tax.  The generally applicable limitations under U.S. federal income tax law on crediting foreign income taxes may preclude a U.S. holder from obtaining a foreign tax credit for any Australian tax paid on a sale or other disposition of an ADR.  The rules relating to the determination of the foreign tax credit are complex, and U.S. holders are urged to consult with their own tax advisers regarding the application of such rules.  Alternatively, any Australian tax paid on the sale or other disposition of an ADR may be taken as a deduction against taxable income, provided the U.S. holder takes a deduction and not a credit for all foreign income taxes paid or accrued in the same taxable year.

 

Non-U.S. holders.  A non-U.S. holder will not be subject to U.S. federal income tax on gain recognized on a sale or other disposition of an ADR unless (i) the gain is effectively connected with the conduct of trade or business by the non-U.S. holder within the United States (and is attributable to a permanent establishment or fixed base the non-U.S. holder maintains in the United States if an applicable income tax treaty so requires as a condition for the non-U.S. holder to be subject to U.S. taxation on a net income basis on income from the ADR), or (ii) in the case of a non-U.S. holder who is an individual, the holder is present in the United States for 183 or more days in the taxable year of the sale or other disposition and certain other conditions apply.  Any effectively connected gain of a corporate non-U.S. holder may also be subject under certain circumstances to an additional “branch profits tax,” the rate of which may be reduced pursuant to an applicable income tax treaty.

 

**Passive Foreign Investment Company Rules**

 

A special set of U.S. federal income tax rules applies to a foreign corporation that is a PFIC for U.S. federal income tax purposes.  As noted above, based on our audited financial statements and relevant market and shareholder data, we believe that we were a PFIC for U.S. federal income tax purposes for our taxable year ended June 30, 2015 and June 30, 2016, respectively, and expect to be classified as a PFIC in our current taxable year.  In addition, given that the determination of PFIC status involves the application of complex tax rules, and that it is based on the nature of our income and assets from time to time, no assurances can be provided that we will or will not be considered a PFIC for any past or future taxable years.

 

In general, a foreign corporation is a PFIC if at least 75% of its gross income for the taxable year is passive income or if at least 50% of its assets for the taxable year produce passive income or are held for the production of passive income.  In general, passive income for this purpose means, with certain designated exceptions, dividends, interest, rents, royalties (other than certain rents and royalties derived in the active conduct of trade or business), annuities, net gains from dispositions of certain assets, net foreign currency gains, income equivalent to interest, income from notional principal contracts and payments in lieu of dividends. Passive assets are those assets that are held for production of passive income or do not produce income at all. Thus cash will be a passive asset. Interest, including interest on working capital, is treated as passive income for purposes of the income test.  The determination of whether a foreign corporation is a PFIC is a factual determination made annually and is therefore subject to change.  Subject to exceptions pursuant to certain elections that generally require the payment of tax, once stock in a foreign corporation is stock in a PFIC in the hands of a particular shareholder that is a United States person, it remains stock in a PFIC in the hands of that shareholder.

 

If we are treated as a PFIC, contrary to the tax consequences described in “U.S. Federal Income Tax Considerations—Taxation of Dividends” and “U.S. Federal Income Tax Considerations—Taxation of Capital Gains” above, a U.S. holder that does not make an

 

58

----

Table of Contents

 

election described in the succeeding two paragraphs would be subject to special rules with respect to (i) any gain realized on a sale or other disposition of an ADR (for purposes of these rules, a disposition of an ADR includes many transactions on which gain or loss is not realized under general U.S. federal income tax rules) and (ii) any “excess distribution” by the Company to the U.S. holder (generally, any distribution during a taxable year in which distributions to the U.S. holder on the ADR exceed 125% of the average annual taxable distributions (whether actual or constructive and whether or not out of earnings and profits) the U.S. holder received on the ADR during the preceding three taxable years or, if shorter, the U.S. holder’s holding period for the ADR).  Under those rules, (i) the gain or excess distribution would be allocated ratably over the U.S. holder’s holding period for the ADR, (ii) the amount allocated to the taxable year in which the gain or excess distribution is realized would be taxable as ordinary income in its entirety and not as capital gain, would be ineligible for the reduced qualified dividend rates, and could not be offset by any deductions or losses, and (iii) the amount allocated to each prior year, with certain exceptions, would be subject to tax at the highest tax rate in effect for that year, and the interest charge generally applicable to underpayments of tax would be imposed in respect of the tax attributable to each of those years.  A U.S. holder who owns an ADR during any year we are a PFIC will generally have to file IRS Form 8621. A failure to file this return will suspend the statute of limitations with respect to any tax return, event, or period to which such report relates (potentially including with respect to items that do not relate to a U.S. Holder’s investment in the ADRs).

 

The special PFIC rules described above will not apply to a U.S. holder if the U.S. holder makes a timely election, which remains in effect, to treat the Company as a “qualified electing fund” (“QEF”) in the first taxable year in which the U.S. holder owns an ADR and the Company is a PFIC and if the Company complies with certain reporting requirements.  Instead, a shareholder of a QEF generally is currently taxable on a pro rata share of the Company’s ordinary earnings and net capital gain as ordinary income and long-term capital gain, respectively.  Neither that ordinary income nor any actual dividend from the Company would qualify for the 20% maximum tax rate on dividends described above if the Company is a PFIC in the taxable year the ordinary income is realized or the dividend is paid or in the preceding taxable year.  We have not yet determined whether we would make the computations necessary to supply U.S. holders with the information needed to report income and gain pursuant to a QEF election.  It is, therefore, possible that U.S. holders would not be able to make or retain that election in any year we are a PFIC.  Although a QEF election generally cannot be revoked, if a U.S. holder made a timely QEF election for the first taxable year it owned an ADR and the Company is a PFIC (or is treated as having done so pursuant to any of certain elections), the QEF election will not apply during any later taxable year in which the Company does not satisfy the tests to be a PFIC.  If a QEF election is not made in that first taxable year, an election in a later year generally will require the payment of tax and interest.

 

In lieu of a QEF election, a U.S. holder of stock in a PFIC that is considered marketable stock could elect to mark the stock to market annually, recognizing as ordinary income or loss each year an amount equal to the difference as of the close of the taxable year between the fair market value of the stock and the U.S. holder’s adjusted basis in the stock.  Losses would be allowed only to the extent of net mark-to-market gain previously included in income by the U.S. holder under the election for prior taxable years.  A U.S. holder’s adjusted basis in the ADRs will be adjusted to reflect the amounts included or deducted with respect to the mark-to-market election.  If the mark-to-market election were made, the rules set forth in the second preceding paragraph would not apply for periods covered by the election.  A mark-to-market election will not apply during any later taxable year in which the Company does not satisfy the tests to be a PFIC.  In general, the ADRs will be marketable stock if the ADRs are traded, other than in de minimis quantities, on at least 15 days during each calendar quarter on a national securities exchange that is registered with the SEC or on a designated national market system or on any exchange or market that the Treasury Department determines to have rules sufficient to ensure that the market price accurately represents the fair market value of the stock.  Under current law, the mark-to-market election may be available to U.S. holders of ADRs because the ADRs are listed on the Nasdaq Capital Market, which constitutes a qualified exchange, although there can be no assurance that the ADRs will be “regularly traded” for purposes of the mark-to-market election or that the ADRs will continue to be listed on the Nasdaq Capital Market.

 

Given the complexities of the PFIC rules and their potentially adverse tax consequences, U.S. holders of ADRs are urged to consult their tax advisers about the PFIC rules, including the availability of, and consequences to them of making a QEF election or a mark-to-market election with respect to the ordinary shares in the event that the Company is classified as a PFIC for any taxable year.

 

**Medicare surtax on net investment income**

 

Non-corporate US Holders whose income exceeds certain thresholds generally will be subject to 3.8% Surtax on their “Net Investment Income” (which generally includes, among other things, dividends on, and capital gain from the sale or other taxable disposition of, the ADRs). Absent an election to the contrary, if a QEF election is available and made, QEF inclusions will not be included in net investment income at the time a US Holder includes such amounts in income, but rather will be included at the time distributions are received or gains are recognized. Non-corporate US Holders should consult their own tax advisors regarding the possible effect of such tax on their ownership and disposition of the Common Shares, in particular the applicability of this surtax with respect to a non-corporate US Holder that makes a QEF or mark-to-market election in respect of their Common Shares.

 

59

----

Table of Contents

 

**Information Reporting and Backup Withholding**

 

Dividends paid on, and proceeds from the sale or other disposition of, an ADR to a U.S. holder generally may be subject to information reporting requirements and may be subject to backup withholding unless the U.S. holder provides an accurate taxpayer identification number or otherwise establishes an exemption.  The amount of any backup withholding collected from a payment to a U.S. holder will be allowed as a credit against the U.S. holder’s U.S. federal income tax liability and may entitle the U.S. holder to a refund, provided certain required information is furnished to the Internal Revenue Service.  A non-U.S. holder generally will be exempt from these information reporting requirements and backup withholding tax but may be required to comply with certain certification and identification procedures in order to establish its eligibility for exemption.

 

Under U.S. federal income tax law and U.S. Treasury Regulations, certain categories of U.S. holders must file information returns with respect to their investment in, or involvement in, a foreign corporation.  For example, all U.S. holders of PFIC stock are generally required to make annual return filings reporting their PFIC ownership and certain other information that the IRS may require.  U.S. holders are urged to consult with their own tax advisors concerning such reporting requirements.

 

**Reporting Obligations of Individual Owners of Foreign Financial Assets**

 

Section 6038D of the Code generally requires U.S. individuals (and possibly certain entities that have U.S. individual owners) to file IRS Form 8938 if they hold certain “specified foreign financial assets,” the aggregate value of which exceeds $50,000.  The definition of specified foreign financial assets includes not only financial accounts maintained in foreign financial institutions, but also, unless held in accounts maintained by a financial institution, any stock or security issued by a non-US. person, any financial instrument or contract held for investment that has an issuer or counterparty other than a U.S. person and any interest in a foreign entity.

 

THE DISCUSSION ABOVE IS NOT INTENDED TO CONSTITUTE A COMPLETE ANALYSIS OF ALL TAX CONSIDERATIONS APPLICABLE TO AN INVESTMENT IN ADRs.  HOLDERS AND POTENTIAL HOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISERS CONCERNING THE TAX CONSEQUENCES RELEVANT TO THEM IN THEIR PARTICULAR SITUATION.

 

**Item 10.F**                      **Dividends and Paying Agents**

 

No dividends have been paid by the Company or recommended by the directors since the end of the previous financial year.

 

**Item 10.G**                    **Statement by Experts**

 

Not applicable.

 

**Item 10.H**                    **Documents on Display**

 

The documents concerning the Company which are referred to in this Annual Report may be inspected at the offices of the Company at 60-66 Hanover Street, Fitzroy, Victoria 3065 Australia.  Following our listing on NASDAQ Global Market in September 2005, we are now subject to the information requirements of the U.S. Securities Exchange Act of 1934, as amended, and, in accordance therewith, we are required to file reports, including annual reports on Form 20-F, and other information with the U.S. Securities and Exchange Commission in electronic form.  These materials, including this Annual Report and the exhibits thereto, may be inspected and copied at the Commission’s public reference room in Washington, D.C.  Please call the Commission at 1-800-SEC-0330 for further information regarding the public reference rooms.  As a foreign private issuer, we are required to make filings with the Commission by electronic means.  Any filings we make electronically will be available to the public over the Internet at the Commission’s website at http://www.sec.gov.  We also maintain a website at www.gtglabs.com.  Information on our website and websites linked to it do not constitute a part of this Annual Report.

 

60

----

Table of Contents

 

**Item 10.I**                     **Subsidiary Information**

 

The following is a list of the Company’s subsidiaries as of the date of this Annual Report:

 
| **Name of subsidiary**             | ** ** | **Place of incorporation** | ** ** | **Interest held** | ** ** |
|----------------------------------------------|------------|--------------------------------------|------------|------------------------|------------|
| GeneType AG                                  |       | Zug, Switzerland                     |       | 100                    | %          |
| GeneType   Corporation                       |       | California, U.S.A.                   |       | 100                    | %          |
| GeneType Pty.   Ltd.                         |       | Victoria, Australia                  |       | 100                    | %          |
| Genetic   Technologies Corporation Pty. Ltd. |       | New South Wales,   Australia         |       | 100                    | %          |
| RareCellect Pty.   Ltd.                      |       | New South Wales,   Australia         |       | 100                    | %          |
| Phenogen   Sciences Inc.                     |       | Delaware, U.S.A.                     |       | 100                    | %          |

 

**Item 11.**                          **Quantitative and Qualitative Disclosures about Market Risk**

 

Our market risk relates primarily to exposure to changes in foreign currency exchange rates and interest rates.  Refer Note 31 of the attached financial statements for further analysis surrounding market risk.

 

***Interest Rate Risk***. As of June 30, 2016 we had $11,179,687 in cash & cash equivalents of which $3,952,078 was subject to interest rate risk. Interest income earned on the cash balances is affected by changes in the levels of market interest rates. We invest excess cash in interest-bearing, investment-grade securities and time deposits in high-quality institutions.  We do not utilize derivative financial instruments, derivative commodity instruments, positions or transactions in any material matter.

 

Accordingly, we believe that, while the investment-grade securities and time-deposits we hold are subject to changes in financial standing of the issuer of such securities, the principal is not subject to any material risks arising from changes in interest rates, foreign currency exchange rates, commodity prices, equity prices or other market changes that affect market risk sensitive instruments.  Since we hold cash and cash equivalents in Banks which are located outside Australia, we are subject to certain cross-border risks, though due to the size of the holdings these risks are not generally significant.

 

***Foreign Currency Exchange Rate Risk***. We operate in Australia with active operations in the U.S.A., and are accordingly subject to certain foreign currency exposure.  This includes foreign-currency denominated receivables, payables, debt, and other balance sheet positions as well as future cash flows resulting from anticipated transactions including intra-group transactions.  Historically, currency translation gains and losses have been reflected as adjustments to stockholders’ equity, while transaction gains and losses have been reflected as components of income and loss.  Transaction gains and losses could be material depending upon changes in the exchange rates between the Australian dollar and the U.S. dollar.  A significant amount of our current revenue is denominated in U.S. dollars which provides us with a limited natural hedge against exchange rate movements.

 

**Item 12.**                          **Description of Securities Other Than Equity Securities**

 

**Item 12.A**                 **Debt Securities**

 

Not applicable.

 

**Item 12.B**                 **Warrants and Rights**

 

Not applicable.

 

**Item 12.C**                 **Other Securities**

 

Not applicable

 

**Item 12.D**                 **American Depositary Shares**

 

Not applicable.

 

61

----

Table of Contents

 

**PART II**

 

**Item 13.**                          **Defaults, Dividend Arrearages and Delinquencies**

 

Not applicable.

 

**Item 14.**                          **Material Modifications to the Rights of Security Holders and Use of Proceeds**

 

Not applicable.

 

**Item 15.**                              **Controls and Procedures**

 

**Item 15.A**                     **Disclosure controls and procedures**

 

We maintain disclosure controls and procedures as such term is defined in Rules 13(a) - 15(e) and 15(d) - 15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”), as amended, that are designed to ensure that information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission.  Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934 is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.  Disclosure controls and procedures, no matter how well designed and operated, can only provide reasonable assurance of achieving the desired control objectives.

 

Our Management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal control over financial reporting will provide absolute assurance that all appropriate information will, in fact, be communicated to Management to allow timely decisions to be made or prevent all error and fraud.  A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.  Additionally, the design of a control system must reflect the fact that there are resource constraints, and the benefit of controls must be considered relative to their costs.  Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the company have been detected or that our control system will operate effectively under all circumstances.  Moreover, the design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

 

Our Management has carried out an evaluation, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures as of June 30, 2016.  Based on that evaluation, including the material weakness noted below in Item 15.B, the Chief Executive Officer and the Chief Financial Officer concluded that the Company’s disclosure controls and procedures were ineffective as of June 30, 2016.

 

**Item 15.B**                     **Management’s annual report on internal control over financial reporting**

 

Our Management is responsible for establishing and maintaining adequate internal control over financial reporting.  The Securities Exchange Act of 1934 defines internal control over financial reporting in Rules 13(a) -15(f) and Rules 15(d) - 15(f) as a process designed by, or under the supervision of, the Company’s principal executive and principal financial officers and effected by the Company’s Board of Directors, Management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:

 

·                      Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company;

 

·                      Provide reasonable assurance that transactions are recorded as necessary to permit the preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of Management and directors of the Company; and

 

·                      Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the consolidated financial statements.

 

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the annual financial statements will not be prevented or detected on a timely basis.

 

62

----

Table of Contents

 

Our Management, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, have assessed the effectiveness of the Company’s internal control over financial reporting as of June 30, 2016.  In making this assessment, Management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission, or COSO, in Internal Control-Integrated Framework (2013).  As a result of that assessment, Management identified the following material weakness as of June 30, 2016.

 

***The Company did not maintain an adequate segregation of duties with respect to internal control over financial reporting***.

 

·                  We have limited accounting personnel to enable effective review of complex financial reporting matters across all significant accounts and critical accounting estimates.

·                  The Admin & Payroll manager had payment processing rights in addition to edit rights in the supplier masterfile of the accounting system. In addition, there was a generic accounting system user account/ ID with full access authorization, and user accounts for several individuals that had left the organisation that had not been deactivated from the accounting system.

·                  Further, there was a lack of evidence of independent review and approval of some journal entries processed in the accounting system throughout the year.

 

These control deficiencies are pervasive in nature and impact all significant accounts and critical accounting estimates. These control deficiencies did not result in material adjustments to the financial statements, however there is a reasonable possibility that a material misstatement of the annual financial statements would not have been prevented or detected on a timely basis due to the failure to design and implement appropriate segregation of duty controls.

 

Based upon its assessment, because of the material weakness described above our Management has concluded that, as of June 30, 2016, our internal control over financial reporting is not effective based upon the abovementioned criteria.

 

This Annual Report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting.  Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit the Company to provide only Management’s report in this Annual Report.

 

**Item 15.C**                     **Attestation report of the registered public accounting firm**

 

Not applicable.

 

**Item 15.D Changes in Internal Control over Financial Reporting**

 

The continuity of key management personnel provided a platform that allowed the Company to actively implement changes in improving overall internal control over financial reporting during the year ended June 30, 2016.

 

**Remediation efforts**

 

**Segregation of duties**.  We are committed to remediating the material weakness over the segregation of duties by implementing changes to our internal control over financial reporting. We have taken certain steps in an effort to correct certain control deficiencies that were identified for the year ended June 30, 2015, including:

 

·                  Appointment of full time Chief Financial Officer (CFO) in June 2015, and subsequently replaced by another CFO in November 2015. Both the previous and current CFO have performed their responsibilities as the CFO separate to the CEO’s role throughout the current financial year,

·                  Changed online banking roles previously held by the Financial Controller to separate the payment processing rights from payment authorisation/signatory rights since July 2015, and

·                  Implemented review procedures through the introduction of month end, half year and full year accounting checklists since November 2015 whereby the CFO performs an independent review of reconciliations prepared by the financial accountant.

 

Additional controls were also implemented during the year ended June 30, 2016 to remediate certain control deficiencies identified, and subsequent to the year- end we have implemented further changes, including:

 

·                  Segregating the system access of the Payroll & Admin manager by removing payment processing rights in addition to edit rights in the supplier masterfile,

·                  De-activating user accounts of terminated employees and we are working on removing redundant accounting system users, and

·                  Independent review by the CFO of all manual journals posted by the financial accountant and payroll and admin manager

 

63

----

Table of Contents

 

Although these changes are an important step towards improving the segregation of duties, additional time is still required to fully re-assess the design of the controls and implement additional internal controls procedures over financial reporting and test their operating effectiveness.

 

Other than as described in Remediation efforts section above, there have been no changes in internal control over financial reporting during the year ended June 30, 2016 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

**Item 16.A**                     **Audit Committee Financial Expert**

 

The chairman of the Audit Committee since November 29, 2013 has been Mr. Grahame Leonard A.M. and we believe that Mr. Leonard A.M. would meet the criteria of a financial expert.

 

**Item 16.B**                                         **Code of Ethics**

 

We have adopted a Code of Ethics (styled “Code of Conduct”) that applies to all of our Directors and employees, including our principal executive officer, principal financial officer and principal accounting officer or controller.  The Code can be downloaded at our website (www.gtglabs.com).  Additionally, any person, upon request, can ask for a hard copy or electronic file of the Code.  If we make any substantive amendment to the Code or grant any waivers, including any implicit waiver, from a provision of the Code, we will disclose the nature of such amendment or waiver on our website.  During the year ended June 30, 2016, no such amendment was made or waiver granted.

 

Our Board of Directors is responsible for the corporate governance of the consolidated entity and guides and monitors the business and affairs of Genetic Technologies on behalf of the shareholders by whom they are elected and to whom they are accountable.

 

We are committed to achieving the leading standards of corporate governance.

 

Reference is made to the revised Corporate Governance Principles and Recommendations issued and revised from time to time by the ASX Corporate Governance Council.  The Board believes that all concepts of the revised Principles and Recommendations have been satisfied, however the Board is realistic with respect to the relative size and nature of the Company and have implemented the Recommendations accordingly.  The Company endeavors to ensure exceptions to the guidelines do not have negative impact on the best interests of shareholders.

 

While in most respects the Company complies with the Recommendations, it is recognised that the development and implementation of policies and practices is an ongoing process that evolves with the needs of the business and its stakeholders. ASX Listing Rule 4.10.3 requires an entity that is included in the official list as an ASX Listing to include in its annual report either a corporate governance statement that meets the requirements of that rule or the URL of the page on its website where such a statement is located.

 

The Company therefore advises that the current corporate governance statement and a summary of its main corporate governance practices may be found via the following link on the Company’s website:

http://www.gtgcorporate.com/investor-centre/corporate-governance

 

We are therefore also required to publish an Appendix 4G Key to Disclosures Corporate Governance Council Principles and Recommendations annually that describes our adherence to the revised Corporate Governance Principles and Recommendations.  This Appendix 4G with respect to the year ended June 30, 2016 was filed with the U.S. Securities and Exchange Commission on August 31, 2016.

 

In accordance with the Council’s recommendations, the Corporate Governance Statement must now contain certain specific information and must disclose the extent to which we have followed the guidelines during the period.  Where a recommendation has not been followed, that fact must be disclosed, together with the reasons for the departure.  The Company’s Corporate Governance Statement is now structured with reference to the Corporate Governance Council’s principles and recommendations.  Below is an extract from the Company’s most recent Corporate Governance Statement.

 

As at the date of this Annual Report, the following twelve Corporate Governance documents had been adopted by the Board, in addition to the Company’s Constitution which was completely revised and subsequently approved by the Company’s shareholders in November 2005.  All significant policies are published on the Company’s website (www.gtglabs.com).

 

·                  Board Charter, which defines the role of the Board and that of Management;

 

64

----

Table of Contents

 

·                  Audit Committee Charter;

·                  Remuneration Committee Charter;

·                  Board Protocol, which clarifies the responsibilities of Directors and the Company’s expectations of them;

·                  Code of Conduct, including a Document Retention Policy;

·                  Board Performance Evaluation Policy;

·                  Risk and Compliance Policy;

·                  Continuous Disclosure Policy;

·                  Securities Trading Policy;

·                  Diversity Policy;

·                  Shareholder Communications Policy; and

·                  Whistleblower Policy.

 

**Item 16.C**                 **Principal Accountant Fees and Services**

 

The following table sets forth the fees billed to us by our Independent Registered Public Accounting Firm, PricewaterhouseCoopers, during the financial years ended June 30, 2016 and 2015, respectively:

 
| ** **                              | ** ** | **Consolidated** | ** ** |
|-----------------------------------------|------------|------------------|------------|
| ** **                              | ** ** | **2016**         | ** ** | **2015** | ** ** |
| ** **                              | ** ** | **$**            | ** ** | **$** | ** ** |
| **Services   rendered**                 |       |             |       |   |   |
| PricewaterhouseCoopers   in respect of: |       |             |       |   |   |
| Audit fees (1)                          |       | 334,560          |       | 558,360 |   |

 

----

*(1)  Audit fees consist of services that would normally be provided in connection with statutory and regulatory filings or engagements, including services that generally only the independent accountant can reasonably provide such as comfort letters.*

 

*Audit Committee Pre-Approval Policies and Procedures*

 

Our Board of Directors has established pre-approval and procedures for the engagement of its Independent Registered Public Accounting Firm for audit and non-audit services.  The Board of Directors reviews the scope of the services to be provided, before their commencement, in order to ensure that there are no independence issues and the services are not prohibited services, as defined by the Sarbanes-Oxley Act of 2002.

 

**Item 16.D**                 **Exemptions from the Listing Standards for Audit Committees**

 

Not applicable.

 

**Item 16.E**                 **Purchases Of Equity Securities by the Issuer and Affiliated Purchasers**

 

Not applicable.

 

**Item 16.F**                  **Change in Registrant’s Certifying Accountant**

 

Not applicable.

 

**Item 16.G**                **Corporate Governance**

 

Refer to Item 6C regarding the Company’s Corporate Governance practices and the key differences between the Listing Rules of the Australian Securities Exchange and the Marketplace Rules of NASDAQ as they apply to us.

 

**Item 16.H**                **Mine Safety Disclosure**

 

Not applicable.

 

**PART III**

 

**Item 17.**                          **Financial Statements**

 

The Company has responded to Item 18 in lieu of responding to this Item.

 

**Item 18.**                          **Financial Statements**

 

65

----

Table of Contents

 

**GENETIC TECHNOLOGIES LIMITED**

 

**INDEX TO CONSOLIDATED FINANCIAL STATEMENTS**

 
| ** **                                                                                                                                        | **Page** |
|---------------------------------------------------------------------------------------------------------------------------------------------------|----------|
|                                                                                                                                              |     |
| Genetic Technologies   Limited - Report of Independent Registered Public Accounting Firm.                                                         | F1       |
|                                                                                                                                              |     |
| Genetic Technologies Limited - Consolidated Statements   of Comprehensive Income/ (Loss) for the years ended June 30, 2016, 2015   and 2014. | F2       |
|                                                                                                                                              |     |
| Genetic Technologies Limited - Consolidated Balance   Sheets as of June 30, 2016 and 2015.                                                   | F3       |
|                                                                                                                                              |     |
| Genetic Technologies Limited - Consolidated Statements   of Changes in Equity for the years ended June 30, 2016, 2015 and 2014.              | F5       |
|                                                                                                                                              |     |
| Genetic Technologies Limited - Consolidated Statements   of Cash Flows for the years ended June 30, 2016, 2015 and 2014.                     | F4       |
|                                                                                                                                              |     |
| Genetic Technologies Limited - Notes to Consolidated   Financial Statements.                                                                      | F6       |

 

**Item 19.**                          **Exhibits**

 
|   |   | The following documents   are filed as exhibits to this Annual Report on Form 20-F:                                                                                                                                                                                                                                                                                                                                   |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 1.1    |   | Constitution of the   Registrant.++                                                                                                                                                                                                                                                                                                                                                                                        |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 2.1    |   | Deposit Agreement,   dated as of January 14, 2002, by and among Genetic Technologies Limited,   The Bank of New York Mellon, as Depositary, and the Owners and Holders of   American Depositary Receipts (such agreement is incorporated herein by   reference to the Registration Statement on Form F-6 relating to the ADSs   (File No. 333-14270) filed with the Commission on January 14,   2002). |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 2.2.   |   | The total indebtedness   authorized under any instrument relating to long term debt of the Company   does not exceed 10% of our total consolidated assets. Any instrument relating   to indebtedness will be supplied to the Commission upon its request.                                                                                                                                                                  |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 4(A).1 |   | Staff Share Plan 2001   dated November 30, 2001. +                                                                                                                                                                                                                                                                                                                                                                    |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 4(B).1 |   | Lease over premises in   Fitzroy, Victoria, Australia with an effective date of September 1,   2015+++                                                                                                                                                                                                                                                                                                                |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 4(B).2 |   | Amendment to lease over   premises in Charlotte, North Carolina, USA with an effective date of   November 1, 2016                                                                                                                                                                                                                                                                                                     |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 12.01  |   | Section 302   Certification                                                                                                                                                                                                                                                                                                                                                                                           |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 12.02  |   | Section 302   Certification                                                                                                                                                                                                                                                                                                                                                                                           |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 13.01  |   | Section 1350   Certification                                                                                                                                                                                                                                                                                                                                                                                          |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 13.02  |   | Section 1350   Certification                                                                                                                                                                                                                                                                                                                                                                                          |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 23.01  |   | Consent of   PricewaterhouseCoopers                                                                                                                                                                                                                                                                                                                                                                                        |

 

----

+ Previously filed with the Company’s Registration Statement on Form 20-F (File No. 0-51504), filed with the Commission on August 19, 2005 and incorporated herein by reference.

 

++  Previously filed with the Company’s Registration Statement on Form 20-F (File No. 0-51504), filed with the Commission on December 21, 2010 and incorporated herein by reference.

 

+++ Previously filed with the Company’s Registration Statement on Form 20-F (File No. 0-51504), filed with the Commission on November 13, 2015 and incorporated herein by reference.

 

66

----

Table of Contents

 

**SIGNATURES**

 

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this Annual Report on its behalf.

 
|                               | GENETIC TECHNOLOGIES LIMITED |
|------------------------------------|------------------------------|
|                               |                         |   |
|                               |                         |   |
| Dated: **October 28,   2016** | By:                          | /s/ Mr. Eutillio Buccilli |
|                               |                         | Name: | Mr. Eutillio Buccilli |
|                               |                         | Title: | Chief Executive Officer |

 

67

----

Table of Contents

 

2016 Financial Report

 

**GENETIC TECHNOLOGIES LIMITED**

 

----

Table of Contents

 

**Report of Independent Registered Public Accounting Firm**

 

**To the Board of Directors and Shareholders of Genetic Technologies Limited**

 

In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of comprehensive income/(loss), consolidated statements of cash flows, and consolidated statements of changes in equity present fairly, in all material respects, the financial position of Genetic Technologies Limited (the “Company”) and its subsidiaries at June 30, 2016 and June 30, 2015, and the results of their operations and their cash flows for each of the three years in the period ended June 30, 2016 in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has suffered recurring losses from operations that raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

 

/s/ PricewaterhouseCoopers

PricewaterhouseCoopers

Melbourne, Australia 

October 28, 2016

 

F 1

----

Table of Contents

 

**CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME/ (LOSS)**

**FOR 2016, 2015 and 2014**

 
| ** **                                                                              | ** ** | **Note**   | ** ** | **Year ended   June 30, 2016** | ** ** | **Year ended   June 30, 2015** | ** ** | **Year ended   June 30, 2014** | ** ** |
|-----------------------------------------------------------------------------------------|------------|------------|------------|-----------------------------------------------|------------|-----------------------------------------------|------------|-----------------------------------------------|------------|
| ** **                                                                              | ** ** | ** ** | ** ** | **$**                                         | ** ** | **$**                                         | ** ** | **$**                                         | ** ** |
| **Revenue   from operations**                                                           |       |       |       |                                          |       |                                          |       |                                          |       |
| Genetic testing   services                                                              |       |       |       | 824,586                                       |       | 2,011,918                                     |       | 4,564,280                                     |       |
| Less: cost of   sales                                                                   |       | 4          |       | (743,060                                      | )          | (891,243                                      | )          | (1,837,729                                    | )          |
| Gross profit   from operations                                                          |       |       |       | 81,526                                        |       | 1,120,675                                     |       | 2,726,551                                     |       |
| Other revenue                                                                           |       | 5          |       | 300,548                                       |       | 1,027,151                                     |       | 863,832                                       |       |
| Gain on   deconsolidation of subsidiary                                                 |       |       |       | —                                        |       | —                                        |       | 761,361                                       |       |
| Selling and   marketing expenses                                                        |       |       |       | (3,186,497                                    | )          | (4,504,299                                    | )          | (6,251,595                                    | )          |
| General and administrative   expenses                                                   |       |       |       | (3,429,357                                    | )          | (4,222,988                                    | )          | (3,173,109                                    | )          |
| Licensing,   patent and legal costs                                                     |       |       |       | (103,581                                      | )          | (435,418                                      | )          | (1,079,199                                    | )          |
| Laboratory,   research and development costs                                            |       |       |       | (2,584,752                                    | )          | (2,851,665                                    | )          | (3,298,127                                    | )          |
| Finance costs                                                                           |       |       |       | (28,889                                       | )          | (264,694                                      | )          | (744,199                                      | )          |
| Gain on disposal   of business                                                          |       | 7          |       | —                                        |       | 1,396,798                                     |       | —                                        |       |
| Fair value loss   on ImmunAid option fee                                                |       |       |       | —                                        |       | (795,533                                      | )          | —                                        |       |
| Share of net   loss of associates accounted for using the equity method                 |       |       |       | —                                        |       | —                                        |       | (362,682                                      | )          |
| Fair value gain/   (loss) on financial liabilities at fair value through profit or loss |       |       |       | —                                        |       | 349,246                                       |       | (648,374                                      | )          |
| Non-operating   income and expenses                                                     |       | 6          |       | 492,037                                       |       | 370,557                                       |       | 1,071,072                                     |       |
| **Profit/(loss)   from operations before income tax**                                   |       |       |       | (8,458,965                                    | )          | (8,810,170                                    | )          | (10,134,469                                   | )          |
| Income tax   expense                                                                    |       | 9          |       | —                                        |       | —                                        |       | —                                        |       |
| **Profit/(loss)   for the year**                                                        |       |       |       | (8,458,965                                    | )          | (8,810,170                                    | )          | (10,134,469                                   | )          |
| **Other   comprehensive income/(loss)**                                                 |       |       |       |                                          |       |                                          |       |                                          |       |
| Exchange   gains/(losses) on translation of controlled foreign operations               |       |       |       | 1,307,219                                     |       | 414,005                                       |       | (149,162                                      | )          |
| Exchange gains/(losses)   on translation of non-controlled foreign operations           |       |       |       | —                                        |       | —                                        |       | 86                                            |       |
| **Other   comprehensive income/(loss) for the year, net of tax**                        |       |       |       | 1,307,219                                     |       | 414,005                                       |       | (149,076                                      | )          |
| **Total   comprehensive profit/(loss) for the year**                                    |       |       |       | (7,151,746                                    | )          | (8,396,165                                    | )          | (10,283,545                                   | )          |
| **Profit/(loss)   for the year is attributable to:**                                    |       |       |       |                                          |       |                                          |       |                                          |       |
| Owners of   Genetic Technologies Limited                                                |       |       |       | (8,458,965                                    | )          | (8,810,170                                    | )          | (10,125,197                                   | )          |
| Non-controlling   interests                                                             |       |       |       | —                                        |       | —                                        |       | (9,272                                        | )          |
| **Total   profit/(loss) for the year**                                                  |       |       |       | (8,458,965                                    | )          | (8,810,170                                    | )          | (10,134,469                                   | )          |
| **Total   comprehensive profit/(loss) for the year is attributable to:**                |       |       |       |                                          |       |                                          |       |                                          |       |
| Owners of   Genetic Technologies Limited                                                |       |       |       | (7,151,746                                    | )          | (8,396,165                                    | )          | (10,274,359                                   | )          |
| Non-controlling   interests                                                             |       |       |       | —                                        |       | —                                        |       | (9,186                                        | )          |
| **Total   profit/(loss) for the year**                                                  |       |       |       | (7,151,746                                    | )          | (8,396,165                                    | )          | (10,283,545                                   | )          |
| ** **                                                                              |       |       |       |                                          |       |                                          |       |                                          |       |
| **Earnings/(loss) per share (cents per share)**                                         |       |       |       |                                          |       |                                          |       |                                          |       |
| Basic and   diluted net profit/(loss) per ordinary share                                |       | 10         |       | (0.49                                         | )          | (0.82                                         | )          | (1.76                                         | )          |
| Weighted-average   shares outstanding                                                   |       | 10         |       | 1,715,214,158                                 |       | 1,072,803,358                                 |       | 574,557,747                                   |       |

 

*The above consolidated statements of comprehensive income/(loss) should be read in conjunction with the accompanying notes.*

 

F 2

----

Table of Contents

 

**CONSOLIDATED BALANCE SHEETS**

As at June 30, 2016

 
| ** **                                                   | ** ** | ** ** | ** ** | **Consolidated** | ** ** |
|--------------------------------------------------------------|------------|------------|------------|------------------|------------|
| ** **                                                   | ** ** | ** ** | ** ** | **2016**         | ** ** | **2015** | ** ** |
| ** **                                                   | ** ** | **Notes**  | ** ** | **$**            | ** ** | **$** | ** ** |
| **ASSETS**                                                   |       |       |       |             |       |   |   |
| **Current   assets**                                         |       |       |       |             |       |   |   |
| Cash and cash equivalents                                    |       | 11         |       | 11,179,687       |       | 18,341,357 |   |
| Trade and other   receivables                                |       | 12         |       | 630,773          |       | 714,951 |   |
| Prepayments and   other assets                               |       | 13         |       | 320,610          |       | 509,788 |   |
| **Total   current assets**                                   |       |       |       | 12,131,070       |       | 19,566,096 |   |
|                                                         |       |       |       |             |       |   |   |
| **Non-current   assets**                                     |       |       |       |             |       |   |   |
| Property, plant   and equipment                              |       | 14         |       | 550,139          |       | 417,595 |   |
| Intangible   assets and goodwill                             |       | 15         |       | 608,477          |       | 736,041 |   |
| **Total   non-current assets**                               |       |       |       | 1,158,616        |       | 1,153,636 |   |
| **Total   assets**                                           |       |       |       | 13,289,686       |       | 20,719,732 |   |
| ** **                                                   |       |       |       |             |       |   |   |
| **LIABILITIES**                                              |       |       |       |             |       |   |   |
| **Current   liabilities**                                    |       |       |       |             |       |   |   |
| Trade and other payables                                     |       | 16         |       | 837,983          |       | 1,180,256 |   |
| Financial   liabilities at fair value through profit or loss |       | 19         |       | —           |       | 25,000 |   |
| Provisions                                                   |       | 17         |       | 494,206          |       | 529,907 |   |
| **Total   current liabilities**                              |       |       |       | 1,332,189        |       | 1,735,163 |   |
|                                                         |       |       |       |             |       |   |   |
| **Non-current   liabilities**                                |       |       |       |             |       |   |   |
| Provisions                                                   |       | 17         |       | 74,308           |       | 25,321 |   |
| **Total   non-current liabilities**                          |       |       |       | 74,308           |       | 25,321 |   |
| **Total   liabilities**                                      |       |       |       | 1,406,497        |       | 1,760,484 |   |
| **Net   assets**                                             |       |       |       | 11,883,189       |       | 18,959,248 |   |
|                                                         |       |       |       |             |       |   |   |
| **EQUITY**                                                   |       |       |       |             |       |   |   |
| Contributed   equity                                         |       | 20         |       | 115,272,576      |       | 115,247,128 |   |
| Reserves                                                     |       | 21         |       | 6,054,861        |       | 4,697,403 |   |
| Accumulated   losses                                         |       | 22         |       | (109,444,248     | )          | (100,985,283 | ) |
| **Total   equity**                                           |       |       |       | 11,883,189       |       | 18,959,248 |   |

 

*The above consolidated balance sheets should be read in conjunction with the accompanying notes.*

 

F 3

----

Table of Contents

 

**CONSOLIDATED STATEMENTS OF CASH FLOWS**

For the year ended June 30, 2016

 
| ** **                                                          | ** ** | ** ** | ** ** | **Consolidated** | ** ** |
|---------------------------------------------------------------------|------------|------------|------------|------------------|------------|
| ** **                                                          | ** ** | ** ** | ** ** | **2016**         | ** ** | **2015** | ** ** | **2014** | ** ** |
| ** **                                                          | ** ** | **Notes**  | ** ** | **$**            | ** ** | **$** | ** ** | **$** | ** ** |
| **Cash   flows from / (used in) operating activities**              |       |       |       |             |       |   |   |   |   |
| Receipts from   customers                                           |       |       |       | 1,482,970        |       | 2,855,599 |   | 4,007,591 |   |
| Payments to   suppliers and employees                               |       |       |       | (9,276,907       | )          | (12,583,957 | ) | (15,058,176 | ) |
| Interest received                                                   |       |       |       | 67,099           |       | 39,951 |   | 116,047 |   |
| Interest and   finance charges paid                                 |       |       |       | —           |       | (3,121 | ) | (52,550 | ) |
| **Net   cash flows from / (used in) operating activities**          |       | 11         |       | (7,726,838       | )          | (9,691,528 | ) | (10,987,088 | ) |
| ** **                                                          |       |       |       |             |       |   |   |   |   |
| **Cash   flows (used in)/ from investing activities**               |       |       |       |             |       |   |   |   |   |
| Proceeds from   the sale of plant and equipment                     |       |       |       | 7,131            |       | 57,119 |   | — |   |
| Purchases of   plant and equipment                                  |       |       |       | (303,462         | )          | (192,592 | ) | (47,917 | ) |
| Proceeds from   the sale of business                                |       |       |       | —           |       | 2,100,895 |   | — |   |
| Proceeds from   the sale of available-for-sale financial assets     |       |       |       | —           |       | — |   | 577,497 |   |
| Cash disposed on   loss of control of subsidiary                    |       |       |       | —           |       | — |   | (162,576 | ) |
| Advances to   associates                                            |       |       |       | —           |       | — |   | (20,470 | ) |
| Payment for   financial assets at fair value through profit or loss |       |       |       | —           |       | — |   | (114,159 | ) |
| **Net   cash flows (used in)/ from investing activities**           |       |       |       | (296,331         | )          | 1,965,422 |   | 232,375 |   |
| ** **                                                          |       |       |       |             |       |   |   |   |   |
| **Cash   flows (used in)/ from financing activities**               |       |       |       |             |       |   |   |   |   |
| Proceeds from   the issue of shares                                 |       |       |       | —           |       | 23,289,927 |   | 7,000,000 |   |
| Equity   transaction costs                                          |       |       |       | (1,654           | )          | (2,572,664 | ) | (658,498 | ) |
| Proceeds from   borrowings                                          |       |       |       | —           |       | 2,150,000 |   | 5,581,462 |   |
| **Net   cash flows (used in)/ from financing activities**           |       |       |       | (1,654           | )          | 22,867,263 |   | 11,922,964 |   |
| **Net   (decrease)/ increase in cash and cash equivalents**         |       |       |       | (8,024,823       | )          | 15,141,157 |   | 1,168,251 |   |
| Cash and cash   equivalents at beginning of year                    |       |       |       | 18,341,357       |       | 2,831,085 |   | 1,721,293 |   |
| Net foreign   exchange difference                                   |       |       |       | 863,153          |       | 369,115 |   | (58,459 | ) |
| **Cash   and cash equivalents at end of year**                      |       | 11         |       | 11,179,687       |       | 18,341,357 |   | 2,831,085 |   |

 

*The above consolidated statements of cash flows should be read in conjunction with the accompanying notes.*

 

F 4

----

Table of Contents

 

**CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY**

 
| ** **                                                  | ** ** | **Attributable to Members of Genetic Technologies Limited** | ** ** | ** **   | ** ** | ** **                     | ** ** |
|-------------------------------------------------------------|------------|-------------------------------------------------------------------------------------------|------------|--------------|------------|--------------------------------|------------|
| ** **                                                  | ** ** | **Contributed    equity**                                                            | ** ** | **Reserves** | ** ** | **Accumulated    losses** | ** ** | **Parent   interests** | ** ** | **Non-controlling    interests** | ** ** | **Total   equity** | ** ** |
| **Consolidated**                                            | ** ** | **$**                                                                                     | ** ** | **$**        | ** ** | **$**                          | ** ** | **$** | ** ** | **$** | ** ** | **$** | ** ** |
| **Balance   at June 30, 2013**                         |       | 83,735,845                                                                                |       | 3,951,771    |       | (82,049,916                    | )          | 5,637,700 |   | 120,587 |   | 5,758,287 |   |
| Loss for the   year                                         |       | —                                                                                    |       | —       |       | (10,125,197                    | )          | (10,125,197 | ) | (9,272 | ) | (10,134,469 | ) |
| Other   comprehensive loss                                  |       | —                                                                                    |       | (149,162     | )          | —                         |       | (149,162 | ) | 86 |   | (149,076 | ) |
| **Total comprehensive   loss**                              |       | —                                                                                    |       | (149,162     | )          | (10,125,197                    | )          | (10,274,359 | ) | (9,186 | ) | (10,283,545 | ) |
| **Transactions   with owners in their capacity as owners**  |       |                                                                                      |       |         |       |                           |       |   |   |   |   |   |   |
| Contributions of   equity (net of transaction costs)        |       | 6,341,472                                                                                 |       | —       |       | —                         |       | 6,341,472 |   | — |   | 6,341,472 |   |
| Value of shares   issued on conversion of convertible notes |       | 3,572,877                                                                                 |       | —       |       | —                         |       | 3,572,877 |   | — |   | 3,572,877 |   |
| Value of shares   cancelled as part of the swap deal        |       | (3,569,702                                                                                | )          | —       |       | —                         |       | (3,569,702 | ) | — |   | (3,569,702 | ) |
| Share-based   payments                                      |       | —                                                                                    |       | 119,531      |       | —                         |       | 119,531 |   | — |   | 119,531 |   |
| Removal of   non-controlling interests on de-consolidation  |       | —                                                                                    |       | —       |       | —                         |       | — |   | (111,401 | ) | (111,401 | ) |
|                                                        |       | 6,344,647                                                                                 |       | 119,531      |       | —                         |       | 6,464,178 |   | (111,401 | ) | 6,352,777 |   |
| **Balance   at June 30, 2014**                         |       | 90,080,492                                                                                |       | 3,922,140    |       | (92,175,113                    | )          | 1,827,519 |   | — |   | 1,827,519 |   |
| Loss for the year                                           |       | —                                                                                    |       | —       |       | (8,810,170                     | )          | (8,810,170 | ) | — |   | (8,810,170 | ) |
| Other   comprehensive profit                                |       | —                                                                                    |       | 414,005      |       | —                         |       | 414,005 |   | — |   | 414,005 |   |
| **Total   comprehensive loss**                              |       | —                                                                                    |       | 414,005      |       | (8,810,170                     | )          | (8,396,165 | ) | — |   | (8,396,165 | ) |
| **Transactions   with owners in their capacity as owners**  |       |                                                                                      |       |         |       |                           |       |   |   |   |   |   |   |
| Contributions of   equity (net of transaction costs)        |       | 20,659,527                                                                                |       | —       |       | —                         |       | 20,659,527 |   | — |   | 20,659,527 |   |
| Value of shares   issued on conversion of convertible notes |       | 4,507,109                                                                                 |       | —       |       | —                         |       | 4,507,109 |   | — |   | 4,507,109 |   |
| Share-based   payments                                      |       | —                                                                                    |       | 303,522      |       | —                         |       | 303,522 |   | — |   | 303,522 |   |
| Transaction   costs on placement of shares                  |       | —                                                                                    |       | 57,736       |       | —                         |       | 57,736 |   | — |   | 57,736 |   |
|                                                        |       | 25,166,636                                                                                |       | 361,258      |       | —                         |       | 25,527,894 |   | — |   | 25,527,894 |   |
| **Balance   at June 30, 2015**                         |       | 115,247,128                                                                               |       | 4,697,403    |       | (100,985,283                   | )          | 18,959,248 |   | — |   | 18,959,248 |   |
| Loss for the   year                                         |       | —                                                                                    |       | —       |       | (8,458,965                     | )          | (8,458,965 | ) | — |   | (8,458,965 | ) |
| Other   comprehensive profit                                |       | —                                                                                    |       | 1,307,219    |       | —                         |       | 1,307,219 |   | — |   | 1,307,219 |   |
| **Total   comprehensive loss**                              |       | —                                                                                    |       | 1,307,219    |       | (8,458,965                     | )          | (7,151,746 | ) | — |   | (7,151,746 | ) |
| **Transactions   with owners in their capacity as owners**  |       |                                                                                      |       |         |       |                           |       |   |   |   |   |   |   |
| Value of shares   issued on conversion of convertible notes |       | 25,448                                                                                    |       | —       |       | —                         |       | 25,448 |   | — |   | 25,448 |   |
| Share-based   payments                                      |       | —                                                                                    |       | 50,239       |       | —                         |       | 50,239 |   | — |   | 50,239 |   |
|                                                        |       | 25,448                                                                                    |       | 50,239       |       | —                         |       | 75,687 |   | — |   | 75,687 |   |
| **Balance   at June 30, 2016**                         |       | 115,272,576                                                                               |       | 6,054,861    |       | (109,444,248                   | )          | 11,883,189 |   | — |   | 11,883,189 |   |

For the year ended June 30, 2016

 

*The above consolidated statements of changes in equity should be read in conjunction with the accompanying notes.*

 

F 5

----

Table of Contents

 

**NOTES TO THE FINANCIAL STATEMENTS**

 

For the year ended June 30, 2016

 

**1.**                  **CORPORATE INFORMATION**

 

The Financial Report of Genetic Technologies Limited (the “Company”) for the year ended June 30, 2016 was authorised for issue in accordance with a resolution of the Directors dated October 28, 2016.  Genetic Technologies Limited is incorporated in Australia and is a company limited by shares.  The Directors have the power to amend and reissue the financial statements.

 

The Company’s ordinary shares are publicly traded on the Australian Securities Exchange under the symbol GTG and, via Level II American Depositary Receipts, on the NASDAQ Capital Market under the ticker GENE.

 

**2.**                  **SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**

 

(a)             **Basis of preparation**

 

This general purpose Financial Report has been prepared in accordance with Australian Accounting Standards, other authoritative pronouncements of the Australian Accounting Standards Board and the *Corporations Act 2001.*

 

*Compliance with IFRS*

 

The Financial Report complies with Australian Accounting Standards as issued by the Australian Accounting Standards Board and International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board.

 

*Historical cost convention*

 

These financial statements have been prepared under the historical cost convention except for financial assets and liabilities (including derivative instruments) which are measured at fair value.

 

*Critical accounting estimates*

 

The preparation of financial statements requires the use of certain critical accounting estimates.  It also requires Management to exercise its judgement in the process of applying the Group’s accounting policies.  The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are critical to the financial statements, are disclosed in Note 3.

 

**Going concern**

 

For the year ending June 30, 2016, the Group incurred a total comprehensive loss of $7,151,746 (2015: $8,396,165) and net cash outflow from operations of $7,726,838 (2015: $9,691,528). As at June 30, 2016 the Company held total cash and cash equivalents of $11,179,687.

 

During the 2017 financial year, the Directors expect increased cash outflows from operations as the Company continues to invest resources in expanding the research & development and sales & marketing activities in support of BREVAGen*plus®* in the U.S. As a result of these expected cash outflows, the Directors intend to raise new equity funding within the next twelve months in order to ensure the Company continues to hold adequate levels of available cash resources to meet creditors and other commitments.

 

The continuing viability of the Company and its ability to continue as a going concern and meet its debts and commitments as they fall due is dependent on the satisfactory completion of the planned equity raising.

 

Due to the uncertainty surrounding the timing, quantum or the ability to raise additional funds via the issuance of new equity, there is a material uncertainty that may cast significant doubt on the Company’s ability to continue as a going concern and therefore, that it may be unable to realise its assets and discharge its liabilities in the normal course of business.  However, the Directors believe that the Company will be successful in the above matters and accordingly, have prepared the financial report on a going concern basis. As such no adjustments have been made to the financial statements relating to the recoverability and classification of the asset carrying amounts or classification of liabilities that might be necessary should the Company not be able to continue as a going concern.

 

F 6

----

Table of Contents

 

**2****.     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)**

 

**(a)**              **Basis of preparation (cont.)**

 

**Going Concern (cont.)**

 

As a U.S. SEC registrant, the Company is required to have its financial statements audited in accordance with Public Company Oversight Board (“PCAOB”) standards.  References in these IFRS financial statements to matters that may cast significant doubt about the Company’s ability to continue as a going concern also raise substantial doubt as contemplated by the PCAOB standards.

 

**(b)**             **New accounting standards and interpretations**

 

(i)                                     **Standards and Interpretations affecting amounts reported in the current period (and/or prior period)**

 

The group has not applied any new standards or amendments for the first time for their annual reporting period commencing July 1,  2015.

 

(ii)                                  **Standards and Interpretations in issue but not yet adopted**

 

In respect of the year ended June 30, 2016, the Group has assessed all new Australian accounting standards, and the IFRS equivalent, mandatory for adoption during the current year, noting no new standards which would have a material effect on the disclosure in these financial statements.  There has been no effect on the profit and loss or the financial position of the Group.  Certain new accounting standards and interpretations have been published that are not mandatory for June 30, 2016 reporting periods.

 

The Group’s and the parent entity’s assessment of the impact of these new standards and interpretations is set out below.

 
| **Title of Standard**               | ** ** | **Summary and impact on Group’s financial statements**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   | ** ** | **Application date    of the standard** | ** ** | **Application date    for Group for    financial year    ending** |
|-----------------------------------------------|------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------------------------------------------------------|------------|------------------------------------------------------------------------------------------------------|
| IFRS 9 Financial Instruments                  |       | IFRS 9 Financial Instruments replaces IFRS 139 and addresses   and classification, measurement and derecognition of financial assets and   liabilities. It also addresses the new hedge accounting requirements,   including changes to hedge effectiveness, treatment of hedging costs and risk   components that can be hedged.   IFRS 9 introduces a new expected loss impairment model that will require   entities to account for expected credit losses at the time of recognising the   asset. The Group does not expect the adoption of the new standard to have a   material impact on its classification and measurement of the financial assets   and liabilities or its results on adoption of the new impairment model.   The new standard will result in extended disclosures in the financial   statements. The Group has decided not to early adopt AASB 9. |       | January 1, 2018                                        |       | June 30, 2019                                                                                   |
| IFRS 15 Revenue from Contracts with Customers |       | IFRS 15 provides a single, principles based   five-step model to be applied to all contracts with customers. The five steps   in the model are as follows:

 

1. identify contracts   with customers

2. identify the   separate performance obligations

3. determine the   transaction price of the contract

4. allocate the   transaction price to each of the separate performance obligations, and

5. recognise the   revenue as each performance obligation is satisfied.

 

Guidance is provided on   topics such as the point in which revenue is recognised, accounting for   variable consideration, costs of                                                                                                                                                                                                                                       |       | January 1, 2018                                        |       | June 30, 2019                                                                                   |

 

F 7

----

Table of Contents

 
|           |   | fulfilling and   obtaining a contract and various related matters. The Group is assessing the   impact of the new standard on its revenue recognition policy.                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |                 |   |               |
|----------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------|--------|--------------------|
| IFRS 16 Leases |   | IFRS 16 will primarily affect the accounting by   lessees and will result in the recognition of almost all leases on the   balance sheet. The standard removes the current distinction between   operating & financing leases and requires recognition of an asset   (the right to use the leased item) and financial liability to pay rentals for   almost all of the lease contracts. The accounting by lessors, however, will   not significantly change   The new standard will result in extended disclosures in the financial   statements. The Group has decided not to early adopt IFRS 16 |   | January 1, 2019 |   | June 30, 2020 |

 

There are no other standards that are not yet effective and that are expected to have a material impact on the entity in the current or future reporting periods and on foreseeable future transactions.

 

**(c)**              **Principles of consolidation**

 

*Subsidiaries*

 

The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Genetic Technologies Limited (the “Company” or “Parent Entity”) as at June 30, 2016 and the results of all subsidiaries for the year then ended.  Genetic Technologies Limited and its subsidiaries together are referred to in this Financial Report as the “Group” or the “Consolidated Entity”.

 

Subsidiaries are all entities (including structured entities) over which the group has control.  The group controls an entity when the group is exposed to, or has rights to, variable returns from its involvement within the entity and has the ability to affect those returns through its power to direct the activities of the entity.  Subsidiaries are fully consolidated from the date on which control is transferred to the Group.  They are de-consolidated from the date that control ceases.

 

Intercompany transactions, balances and unrealised gains / losses on transactions between Group companies are eliminated.  Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred.  Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the Group’s policies.  Non-controlling interests in the results and equity of subsidiaries are shown separately in the consolidated statement of comprehensive income, consolidated balance sheet and consolidated statements of changes in equity, respectively.

 

*Associates*

 

Associates are all entities over which the Group has significant influence but not control or joint control, generally accompanying a shareholding of between 20% and 50% of the voting rights.  Investments in associates are accounted for using the equity method of accounting, after initially being recognised at cost.

 

The Group’s share of its associate’s post-acquisition profits or losses is recognised in profit or loss and its share of post-acquisition other comprehensive income is recognised in other comprehensive income.  The cumulative post-acquisition movements are adjusted against the carrying amount of the investment.  Dividends receivable from associates are recognised as a reduction in the carrying amount of the investment.

 

When the Group’s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured long-term receivables, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate.

 

Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Group’s interest in the associates.  Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.  Accounting policies of associates have been changed where necessary to ensure consistency with the policies adopted by the Group.

 

*Changes in ownership interests*

 

The Group treats transactions with non-controlling interests that do not result in a loss of control as transactions with equity owners of the Group.  A change in ownership interest results in an adjustment between the carrying amounts of the controlling and

 

F 8

----

Table of Contents

 

**2****.     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)**

 

**(c)**                        **Principles of consolidation (cont.)**

 

non-ontrolling interests to reflect their relative interests in the subsidiary.  Any difference between the amount of the adjustment to non-controlling interests and any consideration paid or received is recognised in a separate reserve within equity attributable to owners of Genetic Technologies Limited.

 

When the Group ceases to have control, joint control or significant influence, any retained interest in the entity is remeasured to its fair value with the change in carrying amount recognised in profit or loss.  The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset.  In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities.  This may mean that amounts previously recognised in other comprehensive income are reclassified to profit or loss.  If the ownership interest in a joint venture or an associate is reduced but joint control or significant influence is retained, only a proportionate share of the amounts previously recognised in other comprehensive income are reclassified to profit or loss where appropriate.

 

**(d)**             **Segment reporting**

 

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker.  The chief operating decision maker, who is responsible for allocating resources and assessing the performance of the operating segments, has been identified as the Chief Executive Officer.

 

**(e)**              **Parent entity financial information**

 

The financial information for the parent entity, Genetic Technologies Limited has been prepared on the same basis as the consolidated financial statements, except that investments in subsidiaries are accounted for at cost in the financial statements of Genetic Technologies Limited.  Loans to subsidiaries are written down to their recoverable value as at balance date.

 

**(f)**               **Foreign currency translation**

 

The functional and presentation currency of Genetic Technologies Limited and its Australian subsidiaries is the Australian dollar (AUD).  Transactions in foreign currencies are initially recorded in the functional currency at the exchange rates ruling at the date of the transaction.  Monetary assets and liabilities which are denominated in foreign currencies are retranslated at the rate of exchange ruling at the balance sheet date.  All differences are taken to the statement of comprehensive income.

 

Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate ruling at the date of the initial transaction.  Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates ruling at the date when the fair value was determined.  The functional currencies of the Company’s three overseas subsidiaries are as follows:

 

GeneType AG — Swiss francs (CHF)

GeneType Corporation — United States dollars (USD)

Phenogen Sciences Inc. — United States dollars (USD)

 

As at the reporting date, the assets and liabilities of these subsidiaries are translated into the presentation currency of Genetic Technologies Limited at the rate of exchange ruling at the balance sheet date and the statement of comprehensive income is translated at the weighted average exchange rates for the period unless this is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions.  The exchange differences arising on the retranslation are recognised in other comprehensive income and taken directly to a separate component of equity.  On disposal of a foreign entity, the deferred cumulative amount recognised in equity relating to that particular foreign operation is recognised in the statement of comprehensive income.

 

**(g)**             **Earnings per share (“EPS”)**

 

Basic EPS is calculated by dividing the profit attributable to owners of the Company, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial year.  Diluted EPS adjusts the figures used in the determination of basic EPS to take into account the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average number of ordinary shares that would have been outstanding assuming the conversion of all dilutive potential ordinary shares.

 

F 9

----

Table of Contents

 

**2.**                  **SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)**

 

**(h)**             **Revenue recognition**

 

Revenues are recognised to the extent that it is probable that the economic benefits will flow to the entity and the revenues can be reliably measured.  Revenues are recognised at the fair value of the consideration received or receivable net of the amounts of Goods and Services Tax.  The following recognition criteria must also be met before revenue is recognised:

 

*Genetic testing revenues*

 

The Company operates facilities which provide genetic testing services.  The Company recognises revenue from the provision of these services when the services have been completed.

 

*License**fees, royalties and annuities received*

 

The Company licenses the use of its patented genetic technologies.  License fee income is recorded either upfront where the Group has no future obligations or over the license term where the Group has future obligations based on the execution of a binding agreement.  The Group does not grant refunds to its customers.  Royalties and annuities arising from the above licenses are recognised when earned in accordance with the substance of the agreement, in cases where no future performance is required by the Company and collection is reasonably assured.

 

*Interest received*

 

Revenue is recognised as the interest accrues using the effective interest method.

 

*Research and development tax incentive*

 

The Australian government replaced the research and development tax concession with research and development (R&D) tax incentive from July 1,  2011. The R&D tax incentive applies to expenditure incurred and the use of depreciating assets in an income year commencing on or after July 1, 2011. A refundable tax offset is available to eligible companies with an annual aggregate turnover of less than $20 million. Management has assessed the Group’s activities and expenditure to determine which are likely to be eligible under the incentive scheme. The Group accounts for the R&D tax incentive as a government grant. The grant is recognised as other income over the period in which the R&D expense is recognised.

 

**(i)**                **Share-based payment transactions**

 

The fair value of options granted under an Employee Option Plan is recognised as an employee benefit expense with a corresponding increase in equity.  The fair value is measured at grant date and recognized over the vesting period over which all of the specified vesting conditions are to be satisfied. The fair value at grant date is determined by management with the assistance of an independent valuer, using a Black-Scholes option pricing model or a Monte Carlo simulation analysis.   The total amount to be expensed is determined by reference to the fair value of the options granted;

 

·                  including any market performance conditions (e.g. the entities share price)

 

·                  excluding the impact of any service and non-market performance vesting conditions (e.g. remaining an employee over a specified time period)

 

The cumulative employee benefits expense recognised at each reporting date until vesting date reflects (i) the extent to which the vesting period has expired; and (ii) the number of awards that, in the opinion of the Directors of the Group, will ultimately vest.  This opinion is formed based on the best information available at balance date.

 

Where the terms of an equity-settled award are modified, as a minimum an expense is recognised as if the terms had not been modified.  In addition, an expense is recognised for any increase in the value of the transaction as a result of the modification, as at the date of modification.  Where appropriate, the dilutive effect of outstanding options is reflected as additional share dilution in the computation of diluted earnings per share.  The Company’s policy is to treat the options of terminated employees as forfeitures.

 

**(j)**                **Income tax**

 

The income tax expense or revenue for the period is the tax payable on the current period’s taxable income based on the national income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and unused tax losses.

 

The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting period in the countries where the company’s subsidiaries and associates operate and generate taxable income.

 

F 10

----

Table of Contents

 

**2.**                  **SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)**

 

**(j)     Income tax (cont.)**

 

Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.

 

Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements.  However, the deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that, at the time of the transaction, affects neither accounting nor taxable profit or loss.  Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.  Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses.

 

Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses.  Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax bases of investments in controlled entities where the parent entity is able to control the timing of the reversal of the temporary differences and it is probable that the differences will not reverse in the foreseeable future.  Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority.  Current tax assets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.  Current and deferred tax balances attributable to amounts recognised directly in equity are also recognised directly in equity.  Current and deferred tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or directly in equity.  In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively.

 

*Tax consolidation legislation*

 

Genetic Technologies Limited (“GTG”) and its wholly-owned Australian-resident subsidiaries have implemented the tax consolidation legislation.  The head entity, GTG, and the subsidiaries in the tax consolidated group account for their own current and deferred tax amounts.  These tax amounts are measured as if each entity in the tax consolidated group continues to be a stand-alone taxpayer in its own right.

 

In addition to its own current and deferred tax amounts, GTG also recognises the current tax assets / liabilities and the deferred tax assets arising from unused tax losses and tax credits assumed from subsidiaries in the tax consolidated group.  Assets or liabilities arising under tax funding agreements with the tax consolidated entities are recognised as amounts receivable from or payable to other entities in the Group.  Any difference between the amounts assumed and amounts receivable or payable under the tax funding agreements are recognised as a contribution to (or distribution from) wholly-owned tax subsidiaries.

 

**(k)**             **Other taxes**

 

Revenues, expenses and assets are recognised net of the amount of Goods and Services Tax (GST) except where the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the GST is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and receivables and payables are stated with the amount of GST included.  The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the balance sheet.  Cash flows are included in the cash flow statement on a gross basis and the GST component arising from investing and financing activities, which is recoverable from / payable to the taxation authority, are classified as operating cash flows.

 

**(l)**                **Withholding tax**

 

The Group generates revenues from the granting of licenses to parties resident in overseas countries.  Such revenues may, in certain circumstances, be subject to the deduction of local withholding tax.  In such cases, revenues are recorded net of any withholding tax deducted.

 

**(m)**         **Finance costs**

 

Finance costs are recognised using the effective interest rate method.

 

F 11

----

Table of Contents

 

**2.**                  **SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)**

 

**(n)**             **Cash and cash equivalents**

 

Cash and cash equivalents in the balance sheet comprise cash at bank and in hand and short-term deposits with an original maturity of 3 months or less.  For the purposes of the cash flow statement, cash and cash equivalents consist of cash and cash equivalents as defined above.  Cash at bank earns interest at floating rates based on daily bank deposit rates.  Short-term deposits are made for varying periods, depending on the immediate cash requirements of the Group, and earn interest at the respective short-term deposit rates.

 

**(o)**             **Trade and other receivables**

 

Trade receivables, which are non-interest bearing and generally have terms of between 30 to 90 days, are recognised and carried at original invoice amount less an allowance for any uncollectible amounts.  An allowance for doubtful debts is made when there is objective evidence that a receivable is impaired.  Such evidence includes an assessment of the debtor’s ability and willingness to pay the amount due.  The amount of the allowance/impairment loss is measured as the difference between the carrying amount of the trade receivables and the estimated future cash flows expected to be received from the relevant debtors.

 

**(p)**             **Inventories**

 

Inventories principally comprise laboratory and other supplies and are valued at the lower of cost and net realisable value.  Inventory costs are recognised as the purchase price of items from suppliers plus freight inwards and any applicable landing charges.  Costs are assigned on the basis of weighted average cost.

 

**(q)**             **Performance bonds and deposits**

 

Performance bonds and deposits include cash deposits held as security for the performance of certain contractual obligations.

 

**(r)**              **Property, plant and equipment**

 

Plant and equipment is stated at cost less accumulated depreciation and any impairment in value.  Depreciation is calculated on a straight-line basis over the estimated useful life of the respective asset as follows:

 

Laboratory equipment — 3 to 5 years

Computer equipment — 3 years

Office equipment — 3 to 5 years

Leasehold improvements — lease term, being between 1 and 3 years

 

Costs relating to day-to-day servicing of any item of property, plant and equipment are recognised in profit or loss as incurred.  The cost of replacing larger parts of some items of property, plant and equipment are capitalised when incurred and depreciated over the period until their next scheduled replacement, with the replacement parts being subsequently written off.

 

**(s)**               **Intangible assets**

 

*Patents*

 

Patents held by the Group are used in the licensing, testing and research areas and are carried at cost and amortised on a straight-line basis over their useful lives, being 10 years.  External costs incurred in filing and protecting patent applications, for which no future benefit is reasonably assured, are expensed as incurred.

 

*Research and development costs*

 

Costs relating to research activities are expensed as incurred.  An intangible asset arising from development expenditure on an internal project is recognised only when the Group can demonstrate the technical feasibility of completing the intangible asset so that it will be available for use or sale, its intention to complete and its ability to use or sell the asset, how the asset will generate future economic benefits, the availability of resources to complete the development and the ability to measure reliably the expenditure attributable to the intangible asset during its development.  To date, all development costs have been expensed as incurred as their recoverability cannot be regarded as assured.

 

**(t)**                **Impairment of assets**

 

The Group assesses at each reporting date whether there is an indication that an asset may be impaired.  If any such indication exists, the Group makes an estimate of the asset’s recoverable amount.  An asset’s recoverable amount is the higher of its fair value less costs of disposal or its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets and the asset’s value-in-use cannot be

 

F 12

----

Table of Contents

 

**2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)**

 

**(t)    Impairment of assets (cont.)**

 

estimated to be close to its fair value.  In such cases, the asset is tested for impairment as part of the cash-generating unit to which it belongs.  When the carrying amount of an asset or cash-generating unit exceeds its recoverable amount, the asset or cash-generating unit is considered impaired and is written down to its recoverable amount.

 

In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.  Impairment losses relating to operations are recognised in those expense categories consistent with the function of the impaired asset unless the asset is carried at its revalued amount, in which case the impairment loss is treated as a revaluation decrease.

 

An assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased.  If such indication exists, the recoverable amount is estimated.  A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognised.  If so, the carrying amount of the asset is increased to its recoverable amount.  The increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years.  Such reversal is recognised in profit or loss unless it reverses a decrement previously charged to equity, in which case the reversal is treated as a revaluation increase.  After such a reversal, the depreciation charge is adjusted in future periods to allocate the asset’s revised carrying amount, less any residual value, on a systematic basis over its remaining useful life.

 

**(u)**             **Leases and hire purchase agreements**

 

Finance leases and hire purchase agreements, which transfer to the Group substantially all the risks and benefits incidental to ownership of the financed item, are capitalised at the inception of the lease at the fair value of the leased property or, if lower, at the present value of the minimum lease payments.

 

Lease and hire purchase payments are apportioned between finance charges and a reduction of the associated liability so as to achieve a constant rate of interest on the remaining balance of the liability.  Finance charges are recognised as an expense in profit or loss.  Capitalised leased assets and assets under hire purchase are depreciated over the shorter of the estimated useful life of the asset or the term of the agreement.  Leases where the lessor retains substantially all the risks and benefits of ownership of the asset are classified as operating leases.  Operating lease payments are recognised as an expense in the statement of comprehensive income on a straight-line basis over the lease term.

 

**(v)**             **Employee benefits**

 

*(i) Short-term obligations*

 

Provision is made for employee benefits accumulated as a result of employees rendering services up to the reporting date.  These benefits include wages and salaries, annual leave and long service leave.  Liabilities arising in respect of wages and salaries, expected to be settled within twelve months of the reporting date are measured at their nominal amounts based on remuneration rates which are expected to be paid when the liability is settled.  Expenses for non-accumulating sick leave are recognised when the leave is taken during the year and are measured at rates paid or payable.

 

*(ii) Other long-term employee benefit obligations*

 

The liabilities for long service leave and annual leave are not expected to be settled wholly within 12 months after the end of the reporting period in which the employee renders the related service.  They are therefore recognised in the provision for employee benefits and measured as the present value of expected future payments to be made in respect of services provided by employees up to the end of the reporting period using the projected unit credit method.  Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service.  Expected future payments are discounted using market yields at the end of the reporting period of corporate bonds with terms and currencies that match, as closely as possible, the estimated future cash outflows.

 

The obligations are presented as current liabilities in the balance sheet if the entity does not have an unconditional right to defer settlement for at least twelve months after the reporting period, regardless of when the actual settlement is expected to occur.

 

F 13

----

Table of Contents

 

**2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)**

 

**(v)**             **Employee benefits (cont.)**

 

*(iii) Retirement benefit obligations*

 

The Group does not have any defined benefit funds.  Statutory contributions to defined contribution superannuation funds are recognised as an expense as they become payable. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in the future payments is available.  Statutory contributions are legally enforceable in Australia.

 

**(w)**           **Provisions**

 

Provisions for legal claims, service claims and make good obligations are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.  Where the Group expects some or all of a provision to be reimbursed, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain.  The expense relating to any provision is presented in the statement of comprehensive income net of any reimbursement.

 

If the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects market assessments of the time value of money and, where appropriate, the risks specific to the liability.  Where discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.

 

**(x)**             **Trade and other payables**

 

Trade payables and other payables are carried at amortised cost and represent liabilities for goods and services provided to the Group prior to the end of the financial year that are unpaid and arise when the Group becomes obliged to make future payments in respect of the purchase of these goods and services.  Trade payables and other payables generally have terms of between 30 and 60 days.

 

**(y)**             **Contributed equity**

 

Issued and paid up capital is recognised at the fair value of the consideration received by the Company.  Transaction costs arising on the issue of ordinary shares are recognised directly in equity as a deduction, net of tax, of the proceeds received.  The Company has a share-based payment option plan under which options to subscribe for the Company’s shares have been granted to certain executives and other employees.

 

**(z)**              **Financial assets and liabilities**

 

During the year ended June 30, 2015, the Group acquired both a financial asset and liability at fair value through profit or loss.  Financial assets and liabilities at fair value through profit or loss are initially recognised at fair value on the date a contract is entered into and are subsequently remeasured to their fair value and at the end of each reporting period.  The accounting for subsequent changes in fair value is recognised in profit or loss.

 

**(aa) Business combinations**

 

The acquisition method of accounting is used to account for all business combinations, including business combinations involving entities or businesses under common control, regardless of whether equity instruments or other assets are acquired.  The consideration transferred for the acquisition of a subsidiary comprises the fair values of the assets transferred, the liabilities incurred and the equity interests issued by the Group.  The consideration transferred also includes the fair value of any contingent consideration arrangement and the fair value of any pre-existing equity interest in the subsidiary.  All costs relating to acquisitions are expensed as incurred.

 

Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are, with limited exceptions, measured initially at their fair values at the acquisition date.  On an acquisition-by-acquisition basis, the Group recognises any non-controlling interest in the acquiree either at fair value or at the non-controlling interest’s proportionate share of the acquiree’s net identifiable assets.

 

The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition-date fair value of any previous equity interest in the acquiree over the fair value of the Group’s share of the net identifiable assets acquired is recorded as goodwill.  If those amounts are less than the fair value of the net identifiable assets of the subsidiary acquired and the measurement of all amounts has been reviewed, the difference is recognised directly in profit or loss as a bargain purchase.

 

F 14

----

Table of Contents

 

**2.**                  **SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)**

 

**(aa) Business combinations (cont.)**

 

Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to their present value as at the date of exchange.  The discount rate used is the entity’s incremental borrowing rate, being the rate at which a similar borrowing could be obtained from an independent financier under comparable terms and conditions.

 

**3.     CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS**

 

Estimates and judgements are evaluated and based on historical experience and other factors, including expectations of future events that may have a financial impact on the Company and that are believed to be reasonable under the circumstances.

 

**Critical accounting estimates and assumptions**

 

The carrying amounts of certain assets and liabilities are often determined based on estimates and assumptions of future events.  The key estimates and assumptions that have a significant risk of causing a material adjustment to the carrying value of certain assets and liabilities within the next annual reporting period are set out below.

 

*Impairment of intangible assets*

 

The Group determines whether intangible assets are impaired on at least an annual basis, in accordance with the accounting policies stated in Note 2(s).  This process requires an estimation to be made of the recoverable amount of the cash-generating units to which the respective assets are allocated.

 

*Share-based payments transactions*

 

The Group measures the cost of equity-settled transactions with employees by reference to the value of the equity instruments at the date on which they are granted.  Management determined the fair value by engaging an independent valuer using a Black-Scholes and Monte Carlo simulation options pricing model.

 

*Useful lives of assets*

 

The estimation of the useful lives of assets has been based on historical experience as well as lease terms (for leased equipment) and patent terms (for patents).  In addition, the condition of the assets is assessed at least annually and considered against the remaining useful life and adjustments to useful lives are made when considered necessary.

 

*Revenue from the sale of BREVAGen tests*

 

In accordance with revenue recognition principles, the Group recognises the revenue from the sale of BREVAGenTM and BREVAGen*plus*® test on an accruals basis. This requires the Group to estimate the amount of revenue expected to be received based on the historical data of amounts received from tests sold since the launch of BREVAGenTM and BREVAGen*plus*®. The accrual estimate may be impacted by the recoverability of the amounts via the U.S. healthcare reimbursement system.

 

F 15

----

Table of Contents

 

**4.**              **COST OF SALES**

 
| ** **                    | ** ** | **Consolidated** | ** ** |
|-------------------------------|------------|------------------|------------|
| ** **                    | ** ** | **2016**         | ** ** | **2015** | ** ** | **2014** | ** ** |
| ** **                    | ** ** | **$**            | ** ** | **$** | ** ** | **$** | ** ** |
|                          |       |             |       |   |   |   |   |
| Inventories used              |       | 159,256          |       | 462,908 |   | 929,538 |   |
| Direct labour   costs         |       | 199,114          |       | 347,745 |   | 716,731 |   |
| Depreciation   expense        |       | 60,249           |       | 55,818 |   | 126,942 |   |
| Inventories   written off (1) |       | 324,441          |       | 24,772 |   | 64,518 |   |
| Total cost of   sales         |       | 743,060          |       | 891,243 |   | 1,837,729 |   |

 

----

*(1)*         *Inventories written off include $218,178 (2015 and 2014: $nil) of items that expired during the year.*

 

**5.**              **OTHER REVENUE**

 
| License fees   received (2)        |   | 252,707 |   | 938,471   |   | 628,497 |   |
|------------------------------------|--------|---------|--------|-----------|--------|---------|--------|
| Royalties and   annuities received |   | 47,841  |   | 88,680    |   | 235,335 |   |
| Total other   revenue              |   | 300,548 |   | 1,027,151 |   | 863,832 |   |

 

----

*(2)*         *License fees received includes $149,837 (2015: $781,108 and 2014: $291,628) of licensing income from Applera Corporation This agreement ended in December 2015.*

 

**6.**              **NON OPERATING INCOME AND EXPENDITURE**

 
| Net profit on   disposal of plant and equipment                             |   | 7,132   |   | 3,843   |   | 53,277    |   |
|-----------------------------------------------------------------------------|--------|---------|--------|---------|--------|-----------|--------|
| Net foreign   exchange gains                                                |   | —  |   | —  |   | 167,584   |   |
| Management fees   received                                                  |   | —  |   | —  |   | 38,267    |   |
| Fair value gains   on financial assets at fair value through profit or loss |   | —  |   | —  |   | 295,533   |   |
| Research and   development tax incentive                                    |   | 359,803 |   | 111,188 |   | 358,395   |   |
| Interest income                                                             |   | 67,100  |   | 39,951  |   | 116,047   |   |
| Net gain on sale   of available for sale financial assets                   |   | —  |   | —  |   | 41,969    |   |
| Rental income                                                               |   | 58,002  |   | 215,575 |   | —    |   |
| Total other   income and expenses                                           |   | 492,037 |   | 370,557 |   | 1,071,072 |   |

 

**7.**              **GAIN ON SALE OF BUSINESS**

 
| Proceeds from sale of business   |   | 2,100,895 |   |
|----------------------------------|--------|-----------|--------|
| Trade and other   receivables    |   | (190,990  | )      |
| Prepayments and   other assets   |   | (220,785  | )      |
| Net value of   fixed assets      |   | (176,065  | )      |
| Goodwill                         |   | (315,388  | )      |
| Deferred revenue                 |   | 51,952    |   |
| Current provisions               |   | 120,989   |   |
| Long term   provisions           |   | 26,190    |   |
| Total gain on   sale of business |   | 1,396,798 |   |

 

On November 19, 2014, the Company announced that it had completed the sale of its Heritage Australian Genetics business to Specialist Diagnostics Services Ltd (“SDS”), the wholly owned pathology subsidiary of Primary Health Care Ltd. Under the terms of sale, SDS acquired the Australian Genetics business for $2,100,895 (net of employee entitlements and inclusive of GST) in cash. The gain on disposal as recognised in the Consolidated Statement of Comprehensive Income is $1,396,798 the details of which are noted above.

 

F 16

----

Table of Contents

** **

**8.**              **EXPENSES**

 
| ** **                          | ** ** | **Consolidated** | ** ** |
|-------------------------------------|------------|------------------|------------|
| ** **                          | ** ** | **2016**         | ** ** | **2015** | ** ** | **2014** | ** ** |
| ** **                          | ** ** | **$**            | ** ** | **$** | ** ** | **$** | ** ** |
| Amortisation of   intangible assets |       | 127,564          |       | 127,564 |   | 127,566 |   |
| Depreciation of   fixed assets      |       | 262,510          |       | 104,639 |   | 83,937 |   |
| Net foreign   currency losses       |       | 427,574          |       | 200,243 |   | — |   |
| Employee   benefits expenses        |       | 3,774,770        |       | 5,470,007 |   | 6,247,731 |   |
| Operating lease   expenses          |       | 312,586          |       | 404,638 |   | 386,694 |   |
| Research and   development expenses |       | 395,539          |       | 728,592 |   | 652,994 |   |

 

F 17

----

Table of Contents

 

**9.**                  **INCOME TAX**

 
| ** **                                                                               | ** ** | **Consolidated** | ** ** |
|------------------------------------------------------------------------------------------|------------|------------------|------------|
| ** **                                                                               | ** ** | **2016**         | ** ** | **2015** | ** ** | **2014** | ** ** |
| ** **                                                                               | ** ** | **$**            | ** ** | **$** | ** ** | **$** | ** ** |
| **Reconciliation   of income tax expense to prima facie tax payable**                    |       |             |       |   |   |   |   |
| Loss before   income tax expense                                                         |       | (8,458,965       | )          | (8,810,170 | ) | (10,134,469 | ) |
| Tax at the   Australian tax rate of 28.50% (2015 and 2014: 30%)                          |       | (2,410,805       | )          | (2,643,051 | ) | (3,040,341 | ) |
| Tax effect   amounts which are not deductible / (taxable) in calculating taxable income  |       |             |       |   |   |   |   |
| Net impairment   losses and other write-downs                                            |       | —           |       | 98 |   | (83,376 | ) |
| Share-based   payments expense                                                           |       | 14,318           |       | 91,057 |   | 35,859 |   |
| Share of net   loss of associate accounted for using the equity method                   |       | —           |       | — |   | 108,805 |   |
| Capital raising   expenses                                                               |       | —           |       | — |   | 92,194 |   |
| Disposal of   associate accounted for using the equity method                            |       | —           |       | — |   | 1,100,195 |   |
| Gain on disposal   of subsidiary                                                         |       | —           |       | — |   | (216,056 | ) |
| Fair value gains   on financial assets at fair value through profit or loss              |       | —           |       | — |   | (88,660 | ) |
| Non-assessable   forgiveness of debt                                                     |       | —           |       | — |   | (111,203 | ) |
| Fair value   (gains)/ loss on financial liabilities at fair value through profit or loss |       | —           |       | (104,774 | ) | 194,512 |   |
| Research and   development tax incentive                                                 |       | 116,800          |       | 78,673 |   | 113,360 |   |
| Disposal of   Heritage business                                                          |       | —           |       | 41,091 |   | — |   |
| Tax effect of inter-company   transactions                                               |       | —           |       | 5,370 |   | (81,909 | ) |
| Withholding tax   expense                                                                |       | 849              |       | 5,484 |   | 5,606 |   |
| Other   non-deductible items                                                             |       | 1,450            |       | 2,032 |   | 2,869 |   |
|                                                                                     |       | (2,277,388       | )          | (2,524,020 | ) | (1,968,145 | ) |
|                                                                                     |       |             |       |   |   |   |   |
| Difference in   overseas tax rates                                                       |       | (225,070         | )          | (138,687 | ) | — |   |
| Under /(over)   provision                                                                |       | 10,583           |       | (7,849 | ) | (1,424,354 | ) |
| Research and   development tax credit                                                    |       | (102,544         | )          | (33,356 | ) | (107,518 | ) |
| Tax losses not   recognised                                                              |       | 2,594,419        |       | 2,703,912 |   | 3,500,017 |   |
| Income tax   expense                                                                     |       | —           |       | — |   | — |   |
| **Net   deferred tax assets**                                                            |       |             |       |   |   |   |   |
| **Deferred   tax assets not recognised**                                                 |       |             |       |   |   |   |   |
| ImmunAid option   fee                                                                    |       | —           |       | 150,000 |   | — |   |
| Property,   plant & equipment                                                   |       | 3,517            |       | 9,067 |   | — |   |
| Capital raising   costs                                                                  |       | 531,646          |       | 849,649 |   | 481,459 |   |
| Applera   settlement                                                                     |       | —           |       | 44,945 |   | 279,285 |   |
| Intangible   assets                                                                      |       | 1,978,065        |       | 2,185,263 |   | 2,170,487 |   |
| Provisions                                                                               |       | 209,643          |       | 226,568 |   | 239,065 |   |
| Doubtful debts                                                                           |       | —           |       | — |   | 32,677 |   |
| Other                                                                                    |       | —           |       | 86,830 |   | 64,755 |   |
| Total deferred   tax assets                                                              |       | 2,722,871        |       | 3,552,322 |   | 3,267,728 |   |
| **Deferred   tax liabilities not recognised**                                            |       |             |       |   |   |   |   |
| Prepayments                                                                              |       | —           |       | 355 |   | — |   |
| ImmunAid Option                                                                          |       | —           |       | — |   | 88,660 |   |
| Total deferred   tax liabilities                                                         |       | —           |       | 355 |   | 88,660 |   |
| Net deferred tax   assets on temporary differences not brought to account                |       | (2,722,871       | )          | (3,551,967 | ) | (3,179,068 | ) |
| Total net   deferred tax assets                                                          |       | —           |       | **—** |   | **—** |   |

 

F 18

----

Table of Contents

 

**9.**              **INCOME TAX (cont.)**

 
| ** **                                                              | ** ** | **Consolidated** | ** ** |
|-------------------------------------------------------------------------|------------|------------------|------------|
| ** **                                                              | ** ** | **2016**         | ** ** | **2015** | ** ** | **2014** | ** ** |
| ** **                                                              | ** ** | **$**            | ** ** | **$** | ** ** | **$** | ** ** |
| **Tax   losses**                                                        |       |             |       |   |   |   |   |
| Unused tax   losses for which no deferred tax asset has been recognised |       | 74,107,688       |       | 63,780,030 |   | 52,645,184 |   |
| Potential tax   benefit @ 28.50% (2015: 30%)                            |       | 21,120,691       |       | 19,134,010 |   | 15,793,555 |   |

 

Subject to the Group continuing to meet the relevant statutory tests, the tax losses are available for offset against future taxable income.

 

At June 30,  2016, the group had a potential tax benefit related to tax losses carried forward of $21,120,691. Such amount includes net losses of $ 6,970,091 related to subsidiaries in the United States (U.S.) which would expire after 20 years starting in 2030. The remaining tax losses carried forward of $ 14,150,600 are indefinite and are attributable to the Group’s operations in Australia. As such the total unused tax losses available to the Group, equal $21,120,691.

 

As at balance date, there are unrecognised tax losses with a benefit of approximately $21,120,691 (2015: $19,134,010 and 2014: $15,793,555) that have not been recognised as a deferred tax asset to the Group.  These unrecognised deferred tax assets will only be obtained if:

 

(a)         The Group companies derive future assessable income of a nature and amount sufficient to enable the benefits to be realised;

 

(b)         The Group companies continue to comply with the conditions for deductibility imposed by the law; and

 

(c)          No changes in tax legislation adversely affect the Group companies from realising the benefit.

 

**Tax consolidation legislation**

 

Genetic Technologies Limited and its wholly-owned Australian subsidiaries implemented the tax consolidation legislation as from July 1, 2003.  The accounting policy in relation to this legislation is set out in Note 2(j).

 

The entities in the tax consolidated group have entered into a Tax Sharing Agreement which, in the opinion of the Directors, limits the joint and several liabilities of the wholly-owned entities in the case of a default by the head entity, Genetic Technologies Limited.

 

The entities have also entered into a Tax Funding Agreement under which the wholly-owned entities fully compensate Genetic Technologies Limited for any current tax payable assumed and are compensated by Genetic Technologies Limited for any current tax receivable and deferred tax assets relating to unused tax losses or unused tax credits that are transferred to Genetic Technologies Limited under the tax consolidation legislation.  The funding amounts are determined by reference to the amounts recognised in the respective subsidiaries’ financial statements.

 

The amounts receivable or payable under the Tax Funding Agreement are due upon receipt of the funding advice from the head entity, which is issued as soon as practicable after the end of each financial year.

 

As at June 30, 2016, there are no unrecognised temporary differences associated with the Group’s investments in subsidiaries, as the Group has no liability for additional taxation should unremitted earnings be remitted (2015: $nil).

 

**10.**       **LOSS PER SHARE**

 

The following reflects the income and share data used in the calculations of basic and diluted loss per share:

 
| Loss for the   year attributable to the owners of Genetic Technologies Limited  |   | (8,458,965    | )      | (8,810,170    | )      | (10,125,197 | )      |
|---------------------------------------------------------------------------------|--------|---------------|--------|---------------|--------|-------------|--------|
| Weighted average   number of ordinary shares used in calculating loss per share |   | 1,715,214,158 |   | 1,072,803,358 |   | 574,557,747 |   |

 

*Note:*        *None of the 53,852,778 (2015: 24,241,667) options over the Company’s ordinary shares that were outstanding as at the reporting date are considered to be dilutive for the purposes of calculating diluted earnings per share.*

 

F 19

----

Table of Contents

 

**11.**       **CASH AND CASH EQUIVALENTS**

 
| ** **                                                                                                             | ** ** | **Consolidated** | ** ** |
|------------------------------------------------------------------------------------------------------------------------|------------|------------------|------------|
| ** **                                                                                                             | ** ** | **2016**         | ** ** | **2015** | ** ** | **2014** | ** ** |
| ** **                                                                                                             | ** ** | **$**            | ** ** | **$** | ** ** | **$** | ** ** |
| **Reconciliation   of cash and cash equivalents**                                                                      |       |             |       |   |   |   |   |
| Cash at bank and   on hand                                                                                             |       | 11,179,687       |       | 18,341,357 |   | 2,831,085 |   |
| Total cash and   cash equivalents                                                                                      |       | 11,179,687       |       | 18,341,357 |   | 2,831,085 |   |
| ** **                                                                                                             |       |             |       |   |   |   |   |
| **Reconciliation   of loss for the year**                                                                              |       |             |       |   |   |   |   |
| Reconciliation   of loss for the year after income tax to net cash flows used in operating   activities is as follows: |       |             |       |   |   |   |   |
| Loss for the   year after income tax                                                                                   |       | (8,458,965       | )          | (8,810,170 | ) | (10,134,469 | ) |
| *Adjust   for non-cash items*                                                                                          |       |             |       |   |   |   |   |
| Amortisation and   depreciation expenses                                                                               |       | 390,074          |       | 232,203 |   | 338,445 |   |
| Interest on   convertible notes converted to shares                                                                    |       | —           |       | 73,618 |   | — |   |
| Share-based   payments expense                                                                                         |       | 50,239           |       | 303,522 |   | 119,531 |   |
| Share of loss of   associate                                                                                           |       | —           |       | — |   | 362,682 |   |
| Non-cash   licensing revenue                                                                                           |       | —           |       | (245,500 | ) |   |   |
| Fair value gain on   deconsolidation of subsidiary                                                                     |       | —           |       | — |   | (225,833 | ) |
| Non-cash rental   income                                                                                               |       | (58,002          | )          | — |   |   |   |
| Net (gain)/loss   on sale of business                                                                                  |       | —           |       | (1,396,798 | ) | — |   |
| Net (gain)/ loss   on sale of available for sale financial assets                                                      |       | —           |       | — |   | (41,969 | ) |
| Fair value gains   on financial assets at fair value through profit or loss                                            |       | —           |       | (349,246 | ) | (295,533 | ) |
| Fair value   losses on financial liabilities at fair value through profit or loss                                      |       | —           |       | — |   | 447,769 |   |
| Net (profit) /   loss on disposal of plant and equipment                                                               |       | (7,132           | )          | (3,843 | ) | (53,277 | ) |
| Net foreign   exchange (gains) / losses                                                                                |       | 412,579          |       | 200,243 |   | 46,344 |   |
| *Adjust   for changes in assets and liabilities*                                                                       |       |             |       |   |   |   |   |
| (Increase) /   decrease in trade and other receivables                                                                 |       | 84,178           |       | 152,348 |   | (782,923 | ) |
| (Increase) /   decrease in prepayments and other assets                                                                |       | 189,178          |       | (312,714 | ) | 189,622 |   |
| Increase /   (decrease) in financial assets at fair value through profit or loss                                       |       | —           |       | 795,533 |   | (795,533 | ) |
| Increase /   (decrease) in trade and other payables                                                                    |       | (342,273         | )          | (436,249 | ) | (93,904 | ) |
| Increase /   (decrease) in provisions                                                                                  |       | 13,286           |       | 105,525 |   | (68,040 | ) |
| Net cash flows   from / (used in) operating activities                                                                 |       | (7,726,838       | )          | (9,691,528 | ) | (10,987,088 | ) |
| ** **                                                                                                             |       |             |       |   |   |   |   |
| **Financing   facilities available**                                                                                   |       |             |       |   |   |   |   |
| As at   June 30, 2016, the following financing facilities had been negotiated   and were available:               |       |             |       |   |   |   |   |
| *Total   facilities*                                                                                                   |       |             |       |   |   |   |   |
| Credit cards                                                                                                           |       | 311,269          |       | 306,750 |   | 277,298 |   |
| *Facilities   used as at reporting date*                                                                               |       |             |       |   |   |   |   |
| Credit cards                                                                                                           |       | (32,051          | )          | (25,708 | ) | (26,577 | ) |
| *Facilities   unused as at reporting date*                                                                             |       |             |       |   |   |   |   |
| Credit cards                                                                                                           |       | 279,218          |       | 281,042 |   | (250,721 | ) |

 

F 20

----

Table of Contents

** **

**12.**       **TRADE AND OTHER RECEIVABLES****(CURRENT)**

 
| ** **                                      | ** ** | **Consolidated** | ** ** |
|-------------------------------------------------|------------|------------------|------------|
| ** **                                      | ** ** | **2016**         | ** ** | **2015** | ** ** |
| ** **                                      | ** ** | **$**            | ** ** | **$** | ** ** |
| Trade   receivables                             |       | 392,521          |       | 524,580 |   |
| Less: provision   for doubtful debts            |       | —           |       | — |   |
| Net trade   receivables                         |       | 392,521          |       | 524,580 |   |
| Other   receivables                             |       | 238,252          |       | 190,371 |   |
| Total net   current trade and other receivables |       | 630,773          |       | 714,951 |   |

 

*Note: Trade and other receivables for the Group include amounts due in US dollars of USD 291,540 (2015: USD 373,137).*

 

Refer Note 31 for details of aging, interest rate and credit risks applicable to trade and other receivables for which, due to their short-term nature, their carrying value approximates their fair value.

 

**13.**       **PREPAYMENTS AND OTHER ASSETS****(CURRENT)**

 
| Prepayments                                                 |   | 149,459 |   | 188,701 |   |
|-------------------------------------------------------------|--------|---------|--------|---------|--------|
| Inventories at   the lower of cost and net realisable value |   | 166,942 |   | 317,497 |   |
| Performance bond   and deposits                             |   | 4,209   |   | 3,590   |   |
| Total current   prepayments and other assets                |   | 320,610 |   | 509,788 |   |

 

F 21

----

Table of Contents

 

**14.**       **PROPERTY, PLANT AND EQUIPMENT**

 
| ** **                                               | ** ** | **Consolidated** | ** ** |
|----------------------------------------------------------|------------|------------------|------------|
| ** **                                               | ** ** | **2016**         | ** ** | **2015** | ** ** |
| ** **                                               | ** ** | **$**            | ** ** | **$** | ** ** |
| Laboratory   equipment, at cost                          |       | 1,287,609        |       | 1,277,651 |   |
| Less:   accumulated depreciation                         |       | (1,056,124       | )          | (914,050 | ) |
| Net laboratory   equipment                               |       | 231,485          |       | 363,601 |   |
| Computer   equipment, at cost                            |       | 547,176          |       | 502,695 |   |
| Less:   accumulated depreciation                         |       | (487,574         | )          | (456,902 | ) |
| Net computer   equipment                                 |       | 59,602           |       | 45,793 |   |
| Office   equipment, at cost                              |       | 167,564          |       | 167,564 |   |
| Less:   accumulated depreciation                         |       | (164,527         | )          | (160,539 | ) |
| Net office   equipment                                   |       | 3,037            |       | 7,025 |   |
| Equipment under   hire purchase, at cost                 |       | 594,626          |       | 594,626 |   |
| Less:   accumulated depreciation                         |       | (594,626         | )          | (594,626 | ) |
| Net equipment   under hire purchase                      |       | —           |       | — |   |
| Leasehold   improvements, at cost                        |       | 452,487          |       | 111,873 |   |
| Less:   accumulated depreciation                         |       | (196,472         | )          | (110,697 | ) |
| Net leasehold   improvements                             |       | 256,015          |       | 1,176 |   |
| Total net   property, plant and equipment                |       | 550,139          |       | 417,595 |   |
| **Reconciliation   of property, plant and equipment**    |       |             |       |   |   |
| Opening gross   carrying amount                          |       | 2,654,408        |       | 5,799,559 |   |
| Add: additions   purchased during the year               |       | 395,054          |       | 304,135 |   |
| Less: disposals   made during the year                   |       | —           |       | (31,789 | ) |
| Less: disposals   due to sale of business                |       | —           |       | (3,417,497 | ) |
| Closing gross   carrying amount                          |       | 3,049,462        |       | 2,654,408 |   |
| Opening   accumulated depreciation and impairment losses |       | (2,236,813       | )          | (5,405,395 | ) |
| Add: disposals   made during the year                    |       | —           |       | 31,789 |   |
| Add: disposals   due to sale of business                 |       | —           |       | 3,241,432 |   |
| Less:   depreciation expense charged                     |       | (262,510         | )          | (104,639 | ) |
| Closing   accumulated depreciation and impairment losses |       | (2,499,323       | )          | (2,236,813 | ) |
| Total net   property, plant and equipment                |       | 550,139          |       | 417,595 |   |

 

**Reconciliation of movements in property, plant and equipment by asset category**

 
| ** **               | ** ** | **Opening**           | ** ** | ** **           | ** ** | ** **       | ** ** | **Closing**           | ** ** |
|--------------------------|------------|-----------------------|------------|----------------------|------------|------------------|------------|-----------------------|------------|
| ** **               | ** ** | **net carrying** | ** ** | **Additions**        | ** ** | **Depreciation** | ** ** | **net carrying** | ** ** |
| ** **               | ** ** | **amount**            | ** ** | **during year** | ** ** | **expense**      | ** ** | **amount**            | ** ** |
| **Asset category**  | ** ** | **$**                 | ** ** | **$**                | ** ** | **$**            | ** ** | **$**                 | ** ** |
| Laboratory   equipment   |       | 363,601               |       | 9,958                |       | (142,074         | )          | 231,485               |       |
| Computer   equipment     |       | 45,793                |       | 44,481               |       | (30,672          | )          | 59,602                |       |
| Office equipment         |       | 7,025                 |       | —               |       | (3,988           | )          | 3,037                 |       |
| Leasehold   improvements |       | 1,176                 |       | 340,615              |       | (85,776          | )          | 256,015               |       |
| Totals                   |       | 417,595               |       | 395,054              |       | (262,510         | )          | 550,139               |       |

 

F 22

----

Table of Contents

 

**15.**       **INTANGIBLE ASSETS**

 
| ** **                                                                  | ** ** | **Consolidated** | ** ** |
|-----------------------------------------------------------------------------|------------|------------------|------------|
| ** **                                                                  | ** ** | **2016**         | ** ** | **2015** | ** ** |
| ** **                                                                  | ** ** | **$**            | ** ** | **$** | ** ** |
| **Patents**                                                                 |       |             |       |   |   |
| Patents, at cost                                                            |       | 36,662,592       |       | 36,662,592 |   |
| Less:   accumulated amortisation                                            |       | (32,938,414      | )          | (32,914,177 | ) |
| Less: impairment   losses                                                   |       | (3,632,338       | )          | (3,632,338 | ) |
| Total net   patents                                                         |       | 91,840           |       | 116,077 |   |
| **Other   intangible assets**                                               |       |             |       |   |   |
| Assets   associated with BREVAGenTM breast cancer   risk test, at cost |       | 1,033,273        |       | 1,033,273 |   |
| Less:   accumulated amortisation                                            |       | (516,636         | )          | (413,309 | ) |
| Total net other   intangible assets                                         |       | 516,637          |       | 619,964 |   |
| Total net intangible   assets                                               |       | 608,477          |       | 736,041 |   |
| **Reconciliation   of patents**                                             |       |             |       |   |   |
| Opening net   carrying amount                                               |       | 116,077          |       | 140,314 |   |
| Less:   amortisation expense charged (refer below)                          |       | (24,237          | )          | (24,237 | ) |
| Total net   patents                                                         |       | 91,840           |       | 116,077 |   |
| **Reconciliation   of other intangible assets**                             |       |             |       |   |   |
| Opening net   carrying amount                                               |       | 619,964          |       | 723,291 |   |
| Less:   amortisation expense charged (refer below)                          |       | (103,327         | )          | (103,327 | ) |
| Total net other   intangible assets                                         |       | 516,637          |       | 619,964 |   |

 

**Remaining useful lives**

 

The assets associated with the BREVAGenTM breast cancer risk test have a remaining useful life of 5 years as at June 30, 2016.

 

**Disclosure of expenses**

 

The total amortisation expense charged during the year in respect of intangible assets of $127,564 is disclosed in the consolidated statement of comprehensive income under the headings of laboratory and research and development costs ($103,327) and licensing, patent and legal costs ($24,237).

 

F 23

----

Table of Contents

 

**16.**            **TRADE AND OTHER PAYABLES****(CURRENT)**

** **
| ** **                               | ** ** | **Consolidated** | ** ** |
|------------------------------------------|------------|------------------|------------|
| ** **                               | ** ** | **2016**         | ** ** | **2015** | ** ** |
| ** **                               | ** ** | **$**            | ** ** | **$** | ** ** |
| Trade payables                           |       | 392,322          |       | 517,079 |   |
| Other payables                           |       | 270,504          |       | 232,497 |   |
| Accrued expenses                         |       | 175,157          |       | 430,680 |   |
|                                     |       |             |       |   |   |
| Total current   trade and other payables |       | 837,983          |       | 1,180,256 |   |

 

*Note: Trade payables for the Group include amounts due in US dollars of USD 178,679 (2015: USD 232,733) and Swiss francs of CHF 2,702 (2015: CHF 2,082).*

 

Refer Note 31 for details of contractual maturity and management of interest rate, foreign exchange and liquidity risks applicable to trade and other payables for which, due to their short-term nature, their carrying value approximates their fair value.

 

**17.**            **PROVISIONS****(CURRENT AND NON-CURRENT)**

 
| **Current   provisions**       |   |    |   |    |   |
|--------------------------------|--------|---------|--------|---------|--------|
| Annual leave                   |   | 223,100 |   | 200,957 |   |
| Long service   leave           |   | 217,679 |   | 328,950 |   |
| Make good *                    |   | 53,427  |   | —  |   |
| Total current provisions       |   | 494,206 |   | 529,907 |   |
| **Non-current   provisions**   |   |    |   |    |   |
| Long service   leave           |   | 36,145  |   | 25,321  |   |
| Make good *                    |   | 38,163  |   | —  |   |
| Total   non-current provisions |   | 74,308  |   | 25,321  |   |
| Total provisions               |   | 568,514 |   | 555,228 |   |

 

----

* Make good provision

 

Genetic Technologies Limited is required to restore the leased premises situated in Fitzroy, Melbourne to their original condition at the end of the lease terms. A provision has been recognised for the present value of the estimated expenditure required to remove any leasehold improvements. These costs have been capitalised as part of the cost of leasehold improvements and are amortised over the shorter of the term of the lease or the useful life of the assets. See Note 2 (w) for the Group’s other accounting policies relevant to provisions.

 

F 24

----

Table of Contents

 

**17.**           **PROVISIONS****(CURRENT AND NON-CURRENT)****(cont.)**

 
| ** **                                           | ** ** | **Consolidated** | ** ** |
|------------------------------------------------------|------------|------------------|------------|
| ** **                                           | ** ** | **2016**         | ** ** | **2015** | ** ** |
| ** **                                           | ** ** | **$**            | ** ** | **$** | ** ** |
| **Reconciliation   of annual leave provision**       |       |             |       |   |   |
| Balance at the   beginning of the financial year     |       | 200,957          |       | 370,327 |   |
| Add: obligation   accrued during the year            |       | 260,434          |       | 380,804 |   |
| Less: amount   transferred on disposal of business   |       | —           |       | (66,623 | ) |
| Less: utilised   during the year                     |       | (238,291         | )          | (483,551 | ) |
| Balance at the   end of the financial year           |       | 223,100          |       | 200,957 |   |
| **Reconciliation   of long service leave provision** |       |             |       |   |   |
| Balance at the   beginning of the financial year     |       | 354,271          |       | 426,556 |   |
| (Less)/ Add: obligation   accrued during the year    |       | (16,904          | )          | 42,949 |   |
| Less: amount   transferred due to sale of business   |       | —           |       | (80,558 | ) |
| Less: utilised   during the year                     |       | (83,543          | )          | (34,676 | ) |
| Balance at the   end of the financial year           |       | 253,824          |       | 354,271 |   |

 

*Note: The current provisions for annual leave and long service leave include a total amount of $298,846 (2015: $381,683) in respect of obligations which, based on historical evidence, the Company estimates will be settled more than 12 months from balance date.*

 

**18.**           **FINANCIAL LIABILITIES AT FAIR VALUE THROUGH THE PROFIT OR LOSS****(CURRENT AND NON-CURRENT)**

 
| Debt convertible   notes at fair value - current                   |   | — |   | 25,000 |   |
|--------------------------------------------------------------------|--------|--------|--------|--------|--------|
| Total financial   liabilities at fair value through profit or loss |   | — |   | 25,000 |   |

 

*Debt convertible notes*

 

During the year ended  June 30,  2015 the Company finalised the raising of $2,150,000 via the issue of unlisted secured (debt) notes to existing and new Australian institutional and wholesale investors. The debt notes carried a 10.0% coupon rate, and as approved at the Annual General Meeting, held on November 25, 2014, became convertible notes which could convert into ordinary shares (at a 10.0% discount to the 5 day VWAP). These convertible notes carried free attached options to purchase further shares in the Company.

 

During the current financial year $25,000 (2015: $ 2,125,000) convertible notes plus capitalised interest were converted into 1,091,093 (2015: 150,961,041) ordinary shares of the Company.

 

F 25

----

Table of Contents

 

**19.**           **FAIR VALUE MEASUREMENT OF FINANCIAL INSTRUMENTS**

 

**(i) Fair value hierarchy**

 

This section explains the judgements and estimates made in determining the fair values of the financial instruments that are recognised and measured at fair value in the financial statements. To provide an indication about the reliability of the inputs used in determining fair value, the group has classified its financial instruments into the three levels prescribed under the Accounting Standards. An explanation of each level follows:

 

(a)             quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1);

 

(b)             inputs other than prices included within level 1 that are observable for the asset or liability, either directly or indirectly (level 2); and

 

(c)              inputs for the asset or liability that are not based on observable market data (unobservable inputs) (level 3).

 

The following table presents the Group’s financial assets and financial liabilities measured and recognised at fair value as at June 30, 2016 and 2015.  No level 1 or level 2 financial assets or liabilities were held by the Group as at June 30, 2016 and 2015.

 
| ** **                                                   | ** ** | **ImmunAid option   financial asset   $** | ** ** | **Convertible note   (financial liabilities)   $** | ** ** |
|--------------------------------------------------------------|------------|-----------------------------------------------------|------------|--------------------------------------------------------------|------------|
| **Opening   balance July 1, 2014**                      |       | 795,533                                             |       | (2,502,384                                                   | )          |
| Additions                                                    |       | —                                              |       | (2,150,000                                                   | )          |
| Conversions to   equity                                      |       | —                                              |       | 4,433,491                                                    |       |
| Exchange   differences                                       |       | —                                              |       | (155,353                                                     | )          |
| Fair value gain/   (loss) recognized through profit and loss |       | (795,533                                            | )          | 349,246                                                      |       |
| **Closing   balance June 30, 2015**                     |       | —                                              | (1)        | (25,000                                                      | )          |
| Conversions to   equity                                      |       | —                                              |       | 25,000                                                       |       |
| **Closing   balance June 30, 2016**                     |       | —                                              | (1)        | —                                                       |       |

 

----

(1)         Management has recognised a fair value of $Nil for the ImmunAid financial asset as at June 30, 2016 (2015: $nil). The complete write down to $Nil this asset was recorded as a fair value loss on financial assets at fair value through profit or loss in the Comprehensive Income Statement for the year ended June 30, 2015.

 

The Group’s policy is to recognise transfers into and transfers out of fair value hierarchy levels as at the end of the reporting period.

 

There were no transfers between levels 1 and 2 for recurring fair value measurements during the year, as the Company did not have any fair value assets or liabilities at June 30, 2016.

 

F 26

----

Table of Contents

 

**19****.**                               **FAIR VALUE MEASUREMENT OF FINANCIAL INSTRUMENTS****(cont.)**

 

**(ii) Valuation techniques used to derive level 2 and level 3 fair values**

 

The Group obtains independent valuations for its financial assets and financial liabilities at least annually.

 

At the end of each reporting period, the directors update their assessment of the fair value of each asset and liability, taking into account the most recent independent valuations. The directors determine an assets or liabilities value range within a range of reasonable fair value estimates.

 

The fair value of financial instruments that are not traded in an active market is determined using valuation techniques.  These valuation techniques maximise the use of observable market data where it is available and rely as little as possible on entity specific estimates.  If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2.  If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3.

 

**(iii) Valuation processes**

 

*Convertible note*

 

The value of the Convertible Note outstanding as at June 30, 2015 was calculated with reference to its face value, which approximates its fair value.

 

**20.**                               **CONTRIBUTED EQUITY**

 
| ** **                       | ** ** | **Consolidated** | ** ** |
|----------------------------------|------------|------------------|------------|
| ** **                       | ** ** | **2016**         | ** ** | **2015** | ** ** |
| ** **                       | ** ** | **$**            | ** ** | **$** | ** ** |
| **Issued   and paid-up capital** |       |             |       |   |   |
| Fully paid   ordinary shares     |       | **115,272,576**  |       | 115,247,128 |   |
| Total   contributed equity       |       | **115,272,576**  |       | 115,247,128 |   |

 

**Movements in shares on issue**

 
| **Year ended June 30, 2015**                    | ** ** | **Shares**    | ** ** | **$**       | ** ** |
|---------------------------------------------------------------------|------------|---------------|------------|-------------|------------|
| Balance at the   beginning of the financial year                    |       | 613,918,492   |       | 90,080,492  |       |
| Add: shares   issued as part of private placements                  |       | 621,574,062   |       | 21,445,427  |       |
| Add: shares   issued as part of the conversion of convertible notes |       | 315,732,411   |       | 4,507,109   |       |
| Add: shares   issued on exercise of options                         |       | 122,966,666   |       | 1,844,500   |       |
| Less:   transaction costs arising on share issue                    |       | —        |       | (2,572,664  | )          |
| Add: shares   issued in relation to a share-based payment (Note 25) |       | 35,876,392    |       | —      |       |
| Add/ (less):   transaction costs on placement of shares (Note 25)   |       | 4,123,608     |       | (57,736     | )          |
| Balance at the   end of the financial year                          |       | 1,714,191,631 |       | 115,247,128 |       |

 
| **Year ended June 30, 2016**                    | ** ** | **Shares**    | ** ** | **$**       | ** ** |
|---------------------------------------------------------------------|------------|---------------|------------|-------------|------------|
| Balance at the   beginning of the financial year                    |       | 1,714,191,631 |       | 115,247,128 |       |
| Add: shares   issued as part of the conversion of convertible notes |       | 1,091,093     |       | 27,102      |       |
| Less:   transaction costs arising on share issue                    |       | —        |       | (1,654      | )          |
| Balance at the   end of the financial year                          |       | 1,715,282,724 |       | 115,272,576 |       |

 

**Terms and conditions of contributed equity**

 

Ordinary shares have the right to receive dividends as declared and, in the event of winding up the Company, to participate in the proceeds from the sale of all surplus assets in proportion to the number of and amounts paid up on shares held.  Ordinary shares, which have no par value, entitle their holder to one vote, either in person or by proxy, at a meeting of the Company.

 

F 27

----

Table of Contents

 

**20.**           **CONTRIBUTED EQUITY (cont.)**

 

**Capital management**

 

When managing capital, Management’s objective is to ensure that the Group continues as a going concern as well as to provide returns for shareholders and benefits for other stakeholders.  Management also aims to maintain a capital structure to reduce the entity’s cost of capital.

** **

**21.**           **RESERVES**

 
| ** **                                                   | ** ** | **Consolidated** | ** ** |
|--------------------------------------------------------------|------------|------------------|------------|
| ** **                                                   | ** ** | **2016**         | ** ** | **2015** | ** ** |
| ** **                                                   | ** ** | **$**            | ** ** | **$** | ** ** |
| Foreign currency   translation                               |       | 1,419,551        |       | 112,332 |   |
| Share-based   payments                                       |       | 4,635,310        |       | 4,585,071 |   |
| Total reserves                                               |       | 6,054,861        |       | 4,697,403 |   |
| **Reconciliation   of foreign currency translation reserve** |       |             |       |   |   |
| Balance at the   beginning of the financial year             |       | 112,332          |       | (301,673 | ) |
| Add: net   currency translation gain / (loss)                |       | 1,307,219        |       | 414,005 |   |
| Balance at the   end of the financial year                   |       | 1,419,551        |       | 112,332 |   |
| **Reconciliation   of share-based payments reserve**         |       |             |       |   |   |
| Balance at the   beginning of the financial year             |       | 4,585,071        |       | 4,223,813 |   |
| Add: share-based   payments expense                          |       | 50,239           |       | 303,522 |   |
| Add: transaction   costs on placement of shares              |       | —           |       | 57,736 |   |
| Balance at the   end of the financial year                   |       | 4,635,310        |       | 4,585,071 |   |

 

**Nature and purpose of reserves**

 

*Foreign currency translation reserve*

 

This reserve is used to record exchange differences arising from the translation of the financial statements of foreign subsidiaries.

 

*Share-based payments reserve*

 

This reserve is used to record the value of share-based payments provided to employees and others providing similar services as part of their remuneration.

 

**22.**           **ACCUMULATED LOSSES**

 
| Balance at the   beginning of the financial year                       |   | (100,985,283 | ) | (92,175,113  | ) |
|------------------------------------------------------------------------|--------|--------------|---|--------------|---|
| Add: net loss   attributable to owners of Genetic Technologies Limited |   | (8,458,965   | ) | (8,810,170   | ) |
| Balance at the   end of the financial year                             |   | (109,444,248 | ) | (100,985,283 | ) |

 

F 28

----

Table of Contents

 

**23.**           **OPTIONS**

 

As at June 30, 2016, the following options over ordinary shares in the Company were outstanding.

 
| ** **                                       | ** ** | **2016**   | ** ** | **Weighted ave.   exercise price** | ** ** | **2015** | ** ** | **Weighted ave.   exercise price** | ** ** |
|--------------------------------------------------|------------|------------|------------|----------------------------------------------|------------|----------|------------|----------------------------------------------|------------|
| Unlisted   employee options (refer below)        |       | 33,486,111 |       | $                                            | 0.022      |     | 3,875,000  |                                         | $          | 0.140 |   |
| Unlisted options   attached to convertible notes |       | 20,366,667 |       | $                                            | 0.015      |     | 20,366,667 |                                         | $          | 0.015 |   |
|                                             |       | 53,852,778 |       | $                                            | 0.019      |     | 24,241,667 |                                         | $          | 0.035 |   |

 

On November 30, 2001, the Directors of the Company established a Staff Share Plan.  On November 19, 2008, the shareholders of the Company approved the introduction of a new Employee Option Plan.  Under the terms of the respective Plans, the Directors of the Company may grant options over ordinary shares in Genetic Technologies Limited to executives, consultants and employees of the Group.  The options, which are granted at nil cost, are not transferable and are not quoted on the ASX.  As at June 30, 2016, there was 5 executive and 5 employees who held options that had been granted under the Plans.  Options granted under the Plans carry no rights to dividends and no voting rights.

 

The movements in the number of options granted under the Plans are as follows:

 
| ** **                                       | ** ** | **2016**   | ** ** | **Weighted ave.   exercise price** | ** ** | **2015**   | ** **  | **Weighted ave.   exercise price** | ** ** |
|--------------------------------------------------|------------|------------|------------|----------------------------------------------|------------|------------|-------------|----------------------------------------------|------------|
| **Unlisted   employee options**                  |       |       |       |                                         |       |       |        |                                         |       |
| Balance at the   beginning of the financial year |       | 3,875,000  |       | $                                            | 0.140      |       | 7,775,000   |                                         | $          | 0.151 |   |
| Add: options   granted during the year           |       | 33,736,111 |       | $                                            | 0.022      |       | 6,875,000   |                                         | $          | 0.040 |   |
| Less: options   exercised during the year        |       | —     |       | —                                       |       | **—** |        | **—**                                   |       |
| Less: options   forfeited during the year        |       | (4,125,000 | )          | $                                            | 0.136      |       | (10,775,000 | )                                            | $          | 0.084 |   |
| Less: options expired   during the year          |       | —     |       | —                                       |       | **—** |        | **—**                                   |       |
| Balance at the   end of the financial year       |       | 33,486,111 |       | $                                            | 0.022      |       | 3,875,000   |                                         | $          | 0.140 |   |

 

There were no options exercised under the Employee Option Plan during the year ended June 30, 2016 (2015: Nil).

 

The numbers of options outstanding as at June 30, 2016 by ASX code, including the respective dates of expiry and exercise prices, are tabled below (refer Note 26 for further information).  The options tabled below are not listed on ASX.

 
| **Option description**                          | ** ** | **2016**   | ** ** | **Weighted ave.   exercise price** | ** ** | **2015**  | ** ** | **Weighted ave.   exercise price** | ** ** |
|------------------------------------------------------|------------|------------|------------|----------------------------------------------|------------|-----------|------------|----------------------------------------------|------------|
| **Unlisted   employee options**                      |       |       |       |                                         |       |      |       |                                         |       |
| GTGAM (expiring   July 31, 2016)                |       | —     |       | —                                       |       | 1,000,000 |       | $                                            | 0.200      |   |
| GTGAO (expiring   August 29, 2017)              |       | —     |       | —                                       |       | 250,000   |       | $                                            | 0.140      |   |
| GTGAW (expiring   March 31, 2016)               |       | —     |       | —                                       |       | 1,250,000 |       | $                                            | 0.190      |   |
| GTGAY (expiring   July 11, 2018)                |       | —     |       | —                                       |       | 250,000   |       | $                                            | 0.110      |   |
| GTGAA (expiring   May 3, 2019)                  |       | 250,000    |       | $                                            | 0.040      |      | 1,125,000  |                                         | $          | 0.040 |   |
| GTGAD (expiring   September 14, 2020)           |       | 1,000,000  |       | $                                            | 0.058      |      | —     |                                         | —     |   |
| GTGAD (expiring   November 24, 2020)            |       | 24,236,111 |       | $                                            | 0.020      |      | —     |                                         | —     |   |
| GTGAD (expiring   January 31, 2021)             |       | 500,000    |       | $                                            | 0.039      |      | —     |                                         | —     |   |
| GTGAD (expiring   March 31, 2021)               |       | 7,500,000  |       | $                                            | 0.020      |      | —     |                                         | —     |   |
|                                                 |       | 33,486,111 |       | $                                            | 0.022      |      | 3,875,000  |                                         | $          | 0.140 |   |
|                                                 |       |       |       |                                         |       |      |       |                                         |       |
| **Unlisted   options attached to convertible notes** |       |       |       |                                         |       |      |       |                                         |       |
| GTGAC (expiring   December 2, 2018)             |       | 20,366,667 |       | $                                            | 0.015      |      | 20,366,667 |                                         | $          | 0.015 |   |
| Balance at the   end of the financial year           |       | 53,852,778 |       | $                                            | 0.019      |      | 24,241,667 |                                         | $          | 0.035 |   |
| Exercisable at   the end of the financial year       |       | 20,450,000 |       | $                                            | 0.015      |      | 23,033,334 |                                         | $          | 0.034 |   |

 

The weighted average remaining contractual life of options outstanding as at June 30, 2016 was 3.70 years (2015: 3.20 years).

 

F 29

----

Table of Contents

 

**24.**           **SEGMENT INFORMATION**

 

**Identification of reportable segments**

 

The Group has identified a sole operating segment as reported that is consistent with the internal reporting provided to the chief operating decision maker and is aligned to the one major revenue stream.

 

The Groups operating segment is summarised as follows:

 

**Business segments**

 
| ** **  | ** ** | ** ** | ** ** | **Revenues and income** | ** ** | ** ** | ** ** |
|-------------|------------|------------|------------|-----------------------------------|------------|------------|------------|
| ** **  | ** ** | ** ** | ** ** | **Sales**                         | ** ** | **Other**  | ** ** | **Totals** | ** ** | **Profit / (loss)** | ** ** |
| **Segment** | ** ** | ** ** | ** ** | **$**                             | ** ** | **$**      | ** ** | **$** | ** ** | **$** | ** ** |
| Operations  |       | 2016       |       | 824,586                           |       | 792,585    |       | 1,617,171 |   | (8,458,965 | ) |
|        |       | 2015       |       | 2,011,918                         |       | 2,794,506  |       | 4,806,424 |   | (8,810,170 | ) |
|        |       | 2014       |       | 4,564,280                         |       | 2,696,265  |       | 7,260,545 |   | (10,134,469 | ) |

 
| ** **  | ** ** | ** ** | ** ** | ** ** | ** ** | ** **      | ** ** | **Amortisation**  | ** ** | **Purchases of** | ** ** |
|-------------|------------|------------|------------|------------|------------|-----------------|------------|-------------------|------------|-----------------------|------------|
| ** **  | ** ** | ** ** | ** ** | **Assets** | ** ** | **Liabilities** | ** ** | **/depreciation** | ** ** | **equipment**         | ** ** |
| **Segment** | ** ** | ** ** | ** ** | **$**      | ** ** | **$**           | ** ** | **$**             | ** ** | **$**                 | ** ** |
| Operations  |       | 2016       |       | 13,289,686 |       | (1,406,497      | )          | (390,074          | )          | 395,054               |       |
|        |       | 2015       |       | 20,719,732 |       | (1,760,484      | )          | (232,203          | )          | 304,135               |       |
|        |       | 2014       |       | 6,729,199  |       | (4,901,680      | )          | (338,445          | )          | 181,875               |       |

 

**Geographic information**

 

*Australia* — is the home country of the parent entity and the location of the Company’s genetic testing and licensing operations.

 

*USA*— is the home of Phenogen Sciences Inc. and GeneType Corporation.

* *

*Switzerland*— is the home of GeneType AG.

 

**Geographic information**

 
| ** ** | ** ** | ** ** | ** ** | **Revenues and income** | ** ** | ** ** | ** ** |
|------------|------------|------------|------------|-----------------------------------|------------|------------|------------|
| ** ** | ** ** | ** ** | ** ** | **Sales**                         | ** ** | **Other**  | ** ** | **Totals** | ** ** | **Profit/(Loss)** | ** ** |
| ** ** | ** ** | ** ** | ** ** | **$**                             | ** ** | **$**      | ** ** | **$** | ** ** | **$** | ** ** |
| Australia  |       | 2016       |       | 220                               |       | 792,585    |       | 792,805 |   | (4,241,451 | ) |
|       |       | 2015       |       | 910,740                           |       | 2,794,358  |       | 3,705,098 |   | (1,519,192 | ) |
|       |       | 2014       |       | 2,867,665                         |       | 2,273,473  |       | 5,141,138 |   | (6,470,068 | ) |
| USA        |       | 2016       |       | 824,366                           |       | —     |       | 824,366 |   | (4,197,368 | ) |
|       |       | 2015       |       | 1,101,178                         |       | 148        |       | 1,101,326 |   | (7,276,878 | ) |
|       |       | 2014       |       | 1,696,615                         |       | 422,157    |       | 2,118,772 |   | (3,974,981 | ) |
| Other      |       | 2016       |       | —                            |       | —     |       | — |   | (20,146 | ) |
|       |       | 2015       |       | —                            |       | —     |       | — |   | (14,100 | ) |
|       |       | 2014       |       | —                            |       | 635        |       | 635 |   | 310,580 |   |
| Totals     |       | 2016       |       | 824,586                           |       | 792,585    |       | 1,617,171 |   | (8,458,965 | ) |
|       |       | 2015       |       | 2,011,918                         |       | 2,794,506  |       | 4,806,424 |   | (8,810,170 | ) |
|       |       | 2014       |       | 4,564,280                         |       | 2,696,265  |       | 7,260,545 |   | (10,134,469 | ) |

 

F 30

----

Table of Contents

 

**24.**                               **SEGMENT INFORMATION (cont.)**

 
| ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** **      | ** ** | **Amortisation**  | ** ** | **Purchases of** | ** ** |
|------------|------------|------------|------------|------------|------------|-----------------|------------|-------------------|------------|-----------------------|------------|
| ** ** | ** ** | ** ** | ** ** | **Assets** | ** ** | **Liabilities** | ** ** | **/depreciation** | ** ** | **Equipment**         | ** ** |
| ** ** | ** ** | ** ** | ** ** | **$**      | ** ** | **$**           | ** ** | **$**             | ** ** | **$**                 | ** ** |
| Australia  |       | 2016       |       | 12,553,539 |       | (1,199,257      | )          | (379,944          | )          | 382,893               |       |
|       |       | 2015       |       | 3,139,778  |       | (1,532,911      | )          | (219,784          | )          | 304,135               |       |
|       |       | 2014       |       | 5,939,694  |       | 9,336,251       |       | (320,476          | )          | 162,934               |       |
| USA        |       | 2016       |       | 733,168    |       | (202,200        | )          | (10,130           | )          | 12,161                |       |
|       |       | 2015       |       | 17,576,978 |       | (224,917        | )          | (12,419           | )          | —                |       |
|       |       | 2014       |       | 784,829    |       | (14,091,395     | )          | (17,969           | )          | 18,941                |       |
| Other      |       | 2016       |       | 2,979      |       | (5,040          | )          | —            |       | —                |       |
|       |       | 2015       |       | 2,976      |       | (2,656          | )          | —            |       | —                |       |
|       |       | 2014       |       | 4,676      |       | (146,536        | )          | —            |       | —                |       |
| Totals     |       | 2016       |       | 13,289,686 |       | (1,406,497      | )          | (390,074          | )          | 395,054               |       |
|       |       | 2015       |       | 20,719,732 |       | (1,760,484      | )          | (232,203          | )          | 304,135               |       |
|       |       | 2014       |       | 6,729,199  |       | (4,901,680      | )          | (338,445          | )          | 181,875               |       |

 

**Additional segment disclosures**

 

*Other revenues and income*includes interest received of $67,099 (2015: $39,951 and 2014: $116,047).

 

*Expenses* includes employee benefits expenses of $3,774,770 (2015: $5,470,007 and 2014: $6,247,731).

 

*Assets -*includes cash of $11,179,687 (2015: $18,341,357 and 2014: $2,831,085).

 

*Liabilities* includes trade and other payables of $812,457 (2015: $1,102,974 and 2014: $1,449,187) and provisions of $568,514 (2015: $555,228 and 2014: $796,883).

 

Included in the above figures are the following intersegment balances and transactions:

 
| ** **                                                          | ** ** | **Consolidated** | ** ** |
|---------------------------------------------------------------------|------------|------------------|------------|
| ** **                                                          | ** ** | **2016**         | ** ** | **2015** | ** ** | **2014** | ** ** |
| ** **                                                          | ** ** | **$**            | ** ** | **$** | ** ** | **$** | ** ** |
| Loan payable   (USA) and loan receivable (Australia)                |       | 512,816          |       | 16,948,601 |   | 346,315 |   |
| Foreign exchange   gain (USA) and foreign exchange loss (Australia) |       | 1,750,759        |       | 3,823,791 |   | 422,157 |   |
| Cost of sales   (USA) and sales (Australia)                         |       | 91,896           |       | 153,581 |   | 154,555 |   |

 

**Segment products and locations**

 

The principal geographic segment is Australia, with the Company’s headquarters being located in Melbourne in the State of Victoria however the key sales activities take place in the USA.

 

**Major customers**

 

During the years ended June 30, 2016 & June 30, 2015 there was no customer from whom the Group generated revenues representing more than 10% of the total consolidated revenue from operations.

 

F 31

----

Table of Contents

 

**25.**                               **SHARE BASED PAYMENTS**

 

**(a) Employee option plan**

 

On November 30, 2001, the Directors of the Company established a Staff Share Plan.  On November 19, 2008, the shareholders of the Company approved the introduction of a new Employee Option Plan.  Under the terms of the respective Plans, the Directors may, at their discretion, grant options over the ordinary shares in the Genetic Technologies Limited to executives, consultants, employees, and former Non-Executive Directors, of the Group.

 

During the year the following options over ordinary shares were granted pursuant the Employee Option Plan at no cost;

 

i.                  2,000,000 options (2015: 6,875,000 options) to a number of employees of the Company’s US Subsidiary, Phenogen Sciences Inc. The options vest based on non-market performance conditions (requirement to remain employed by the Company) in three equal tranches after 12 months, 24 months, and 36 months from date of grant, respectively. The fair value of each option granted is estimated by an external valuer using a Black-Scholes option-pricing model, with assumptions as follows

 
| ** **                                    | ** ** | **2016**                    | ** ** | **2016**                        | ** ** |
|-----------------------------------------------|------------|-----------------------------|------------|---------------------------------|------------|
| **Grant Date**                           | ** ** | **April 1, 2016** | ** ** | **November 25, 2015** | ** ** |
| Options issued                                |       | 500,000                     |       | 1,500,000                       |       |
| Dividend yield                                |       | —                      |       | —                          |       |
| Historic   volatility and expected volatility |       | 80%                         |       | 80%                             |       |
| Option exercise   price                       |       | $0.039                      |       | $0.058                          |       |
| Weighted average   exercise price             |       | $0.039                      |       | $0.058                          |       |
| Risk-free   interest rate                     |       | 1.93%                       |       | 2.22%                           |       |
| Expected life of   an option                  |       | 4.3 years                   |       | 4.5 years                       |       |
| Model used                                    |       | Black-Scholes               |       | Black-Scholes                   |       |

 

As at 30, 2016, there were 5 employees who held options that had been granted under the Plan.

 

**(a) Employee option plan (cont.)**

 

The expected price volatility is based on the historic volatility (based on the remaining life of the options), adjusted for any expected changes to future volatility due to publicly available information.

 

ii.               31,736,111 options (2015: nil) to a number of KMP with a market related vesting condition of share price growth. The options are exercisable at any time after the vesting conditions are met for a period of up to 5 years after granting. The vesting conditions that must be met before a tranche of Options shall vest, namely the 3 month VWAP at which the shares of the Company must be trading on the ASX, are $0.05, $ 0.10 and $0.20. The fair value of each option granted is estimated by an external valuer using a Monte Carlo simulation analysis as detailed in the table below,

 
| ** **                                    | ** ** | **2016**                    | ** ** | **2016**                        | ** ** |
|-----------------------------------------------|------------|-----------------------------|------------|---------------------------------|------------|
| **Grant Date**                           | ** ** | **April 1, 2016** | ** ** | **November 25, 2015** | ** ** |
| Options issued                                |       | 7,500,000                   |       | 24,236,111                      |       |
| Dividend yield                                |       | —                      |       | —                          |       |
| Historic   volatility and expected volatility |       | 80%                         |       | 80%                             |       |
| Option exercise   price                       |       | $0.020                      |       | $0.020                          |       |
| Weighted average   exercise price             |       | $0.020                      |       | $0.020                          |       |
| Risk-free   interest rate                     |       | 1.93%                       |       | 2.22%                           |       |
| Expected life of   an option                  |       | 4.3 years                   |       | 4.5 years                       |       |
| Model used                                    |       | Monte Carlo                 |       | Monte Carlo                     |       |

 

As at June 30, 2016, there were 5 executives who held options that had been granted under the Plan.

 

The expected price volatility is based on the historic volatility (based on the remaining life of the options), adjusted for any expected changes to future volatility due to publicly available information.

 

F 32

----

Table of Contents

 

**25.**                               **SHARE BASED PAYMENTS (cont.)**

 

**(b) Other share based payments**

 

During the previous financial year the Company entered into a Standby Equity Placement Facility Agreement with the Kentgrove Capital Growth Fund (“Kentgrove Capital”), an investment fund managed by Kentgrove Capital Pty Ltd, a Melbourne-based investment and advisory firm.

 

Key terms of the Standby Equity Placement Facility

 

·                 Standby equity placement facility of up to A$24,000,000 with a maturity date January 21, 2017

·                 Multiple placements permitted

·                 For each placement, shares are issued at a 5% discount to a volume weighted average price (VWAP) over the period of the placement

·                 A facility fee of 2.33% of the facility amount is payable, to be satisfied by the issue of shares. The facility fee, less 20%, will be rebated at termination or at maturity, pro rata for any amount of the facility that is unutilised.

·                 The commencement fee rebate may be paid by cash or shares.

 

A total of 40,000,000 shares have been issued to Kentgrove Capital on commencement date of the facility agreement in January 2015. As at June 30, 2015, 10.31% of the facility has been utilised. There was no movement in this amount during the year ended June 30, 2016. Hence, 10.31% of 40,000,000 shares which amounted to $57,736 has been accounted for as transaction costs for the placements made by Kentgrove Capital. The remaining 89.69% of the 40,000,000 shares is accounted for as shares issued in relation to a share-based payment. This represents an option for Kentgrove Capital to acquire shares that the Company has granted to Kentgrove Capital. The option value has been determined through the use of a Black-Scholes option pricing model and the fair value of consideration paid and expensed for the 2015 year was $330,059. (2016: Nil)

 

**(c) Expenses arising from share-based payment transactions**

 

Total expenses arising from share-based payment transactions recognised during the period as part of employee benefit expense were as follows:

 
| ** **                                                             | ** ** | **Consolidated** | ** ** |
|------------------------------------------------------------------------|------------|------------------|------------|
| ** **                                                             | ** ** | **2016**         | ** ** | **2015** | ** ** | **2014** | ** ** |
| ** **                                                             | ** ** | **$**            | ** ** | **$** | ** ** | **$** | ** ** |
| Options issued   under employee option plan                            |       | 50,239           |       | (26,536 | ) | 119,531 |   |
| Shares issued as   consideration for standby equity placement facility |       | —           |       | 330,059 |   | — |   |
| Total                                                                  |       | 50,239           |       | 303,523 |   | 119,531 |   |

 

F 33

----

Table of Contents

 

**26.**            **COMMITMENTS AND CONTINGENCIES**

 
| ** **                                            | ** ** | **Consolidated** | ** ** |
|-------------------------------------------------------|------------|------------------|------------|
| ** **                                            | ** ** | **2016**         | ** ** | **2015** | ** ** | **2014** | ** ** |
| ** **                                            | ** ** | **$**            | ** ** | **$** | ** ** | **$** | ** ** |
| **Operating   lease expenditure commitments**         |       |             |       |   |   |   |   |
| Minimum   operating lease payments                    |       |             |       |   |   |   |   |
| - not later than   one year                           |       | 220,486          |       | 75,536 |   | 373,379 |   |
| - later than one   year but not later than five years |       | 248,481          |       | — |   | 60,585 |   |
| - later than   five years                             |       | —           |       | — |   | — |   |
| Total minimum   operating lease payments              |       | 468,967          |       | 75,536 |   | 433,964 |   |

 

As at June 30, 2016, the above operating leases related to the following premises that are currently occupied by the Group both of which are being renegotiated since balance date:

 
| **Location**                                                                         | ** ** | **Landlord**                    | ** ** | **Use**             | ** ** | **Date of expiry   of lease** | ** ** | **Minimum   payments   ($)** | ** ** |
|--------------------------------------------------------------------------------------|------------|---------------------------------|------------|---------------------|------------|----------------------------------------------|------------|------------------------------|------------|
| 60-66 Hanover   Street

Fitzroy,   Victoria 3065 Australia                           |       | Crude Pty. Ltd.                 |       | Office / laboratory |       | August 31, 2018                         |       | 453,821                      |       |
| 9115 Harris   Corners Parkway, Suite 320

Charlotte, North   Carolina 28269 USA |       | New Boston Harris   Corners LLC |       | Office              |       | October 31, 2016                        |       | 15,146                       |       |
|                                                                                 |       |                            |       |                |       | Total                                        |       | 468,967                      |       |

 

Apart from the above, there were no other commitments or contingencies as at June 30, 2016.

 

**27.**            **AUDITORS’ REMUNERATION**

 
| ** **                              | ** ** | **Consolidated** | ** ** |
|-----------------------------------------|------------|------------------|------------|
| ** **                              | ** ** | **2016**         | ** ** | **2015** | ** ** | **2014** | ** ** |
| ** **                              | ** ** | **$**            | ** ** | **$** | ** ** | **$** | ** ** |
| **Audit   and assurance services**      |       |             |       |   |   |   |   |
| PricewaterhouseCoopers   in respect of: |       |             |       |   |   |   |   |
| Audit(1)                                |       | 334,560          |       | 558,360 |   | 340,500 |   |

 

----

*(1) Audit fees consist of services that would normally be provided in connection with statutory & regulatory filings or engagements, including services that generally only the independent accountant can reasonably provide such as comfort letters*

 

**28.**           **RELATED PARTY DISCLOSURES**

 

**Ultimate parent**

 

Genetic Technologies Limited is the ultimate Australian parent company.  As at the date of this Report, no shareholder controls more than 50% of the issued capital of the Company.

 

**Transactions within the Group and with other related parties**

 

During the year ended June 30, 2016, the only transactions between entities within the Group and other related parties occurred, are as listed below.  Except where noted, all amounts were charged on similar to market terms and at commercial rates.

 

*Phenogen Sciences Inc.*

 

During the year ended June 30, 2016, Phenogen Sciences Inc, a subsidiary, purchased testing services from Genetic Technologies Corporation Pty. Ltd., another subsidiary at a cost of $91,676 (2015: $153,581 and 2014: $154,555). This transaction is eliminated on consolidation.

 

F 34

----

Table of Contents

 

**28.**           **RELATED PARTY DISCLOSURES (cont.)**

 

*Debt convertible notes*

 

As described in Note 20, during the previous year the Company finalised the raising of $2,150,000 via the issue of unlisted secured (debt) notes to existing and new Australian institutional and wholesale investors. The debt notes carried a 10.0% coupon rate, and as approved at the Annual General Meeting, held on November 25, 2014, became convertible notes which could convert into ordinary shares (at a 10.0% discount to the 5 day VWAP). These convertible notes also carry free attached options to purchase further shares in the Company.

 

$125,000 of these convertible notes were issued to a holder associated with Dr Lindsay Wakefield, a Company director at the time of issue, on the same terms and conditions as other note holders.  All of these convertible notes were converted during the year.  The 8,333,333 share options attached to these convertible notes remain unexercised at the end of the year.

 

There were no transactions with parties related to Key Management Personnel during the year other than that disclosed above.

 

**Details of Directors and Key Management Personnel as at balance date**

 
| *Directors*                                                                     | *Executives*                                                                                             |
|---------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------|
| * *                                                                        | * *                                                                                                 |
| Dr Malcolm R. Brandon *(Non-Executive Chairman)*                                | Mr. Kevin Fischer*(Chief Financial Officer)*                                                        |
| Mr. Eutillio Buccilli *(Executive Director & Chief Executive Officer)* | Ms Diana Newport *(Quality and Business Operations Director)*

Dr Richard Allman *(Scientific Director)* |
| Mr. Grahame Leonard AM *(Non-Executive)*                                   | Mr. Chris Saunders *(Vice President, Sales and Marketing — Phenogen)*                          |
| Dr Lindsay Wakefield *(Non-Executive)*                                          | Dr Susan Gross *(Senior Medical Director — Phenogen)*                                               |
| Dr Paul Kasian *(Non-Executive)*                                                |                                                                                                     |

 
| ** **                                     | ** ** | **Consolidated** | ** ** |
|------------------------------------------------|------------|------------------|------------|
| ** **                                     | ** ** | **2016**         | ** ** | **2015** | ** ** | **2014** | ** ** |
| ** **                                     | ** ** | **$**            | ** ** | **$** | ** ** | **$** | ** ** |
| **Remuneration of Key Management Personnel**   |       |             |       |   |   |   |   |
| Short-term employee benefits                   |       | 1,350,986        |       | 1,457,725 |   | 1,414,247 |   |
| Post-employment benefits                       |       | 104,081          |       | 118,660 |   | 121,727 |   |
| Share-based payments                           |       | 49,445           |       | (25,959 | ) | 69,266 |   |
| Other long-term benefits                       |       | 28,552           |       | (8,854 | ) | 35,651 |   |
| Termination benefits                           |       | 53,795           |       | — |   | — |   |
| Total remuneration of Key Management Personnel |       | 1,586,859        |       | 1,541,572 |   | 1,640,891 |   |

 

F 35

----

Table of Contents

 

**29****.**           **SUBSIDIARIES**

 

The following diagram is a depiction of the Group structure as at June 30, 2016.

 

 
| ** **                                                       | ** ** | ** **                                   | ** ** | **Group interest (%)** | ** ** | **Net carrying value ($)** | ** ** |
|------------------------------------------------------------------|------------|----------------------------------------------|------------|----------------------------------|------------|-------------------------------------------|------------|
| **Name of Group company**                         | ** ** | **Incorporation details**               | ** ** | **2016**                         | ** ** | **2015**                                  | ** ** | **2016** | ** ** | **2015** | ** ** |
| *Entities   held directly by parent*                             |       |                                         |       |                             |       |                                      |       |   |   |   |   |
| GeneType Pty. Ltd.   (Dormant)                                   |       | September 5, 1990   Victoria, Australia |       | 100                              | %          | 100                                       | %          | — |   | — |   |
| Genetic Technologies   Corporation Pty. Ltd.   (Genetic testing) |       | October 11, 1996   N.S.W., Australia    |       | 100                              | %          | 100                                       | %          | 2 |   | 2 |   |
| RareCellect Pty. Ltd.   (Dormant)                                |       | March 7, 2001   N.S.W., Australia       |       | 100                              | %          | 100                                       | %          | 10 |   | 10 |   |
| GeneType AG   (Dormant)                                          |       | February 13, 1989   Zug, Switzerland    |       | 100                              | %          | 100                                       | %          | 1,350 |   | 1,350 |   |
| GeneType Corporation   (Dormant)                                 |       | December 18, 1989   California, U.S.A.  |       | 100                              | %          | 100                                       | %          | — |   | — |   |
| Phenogen Sciences Inc.   (BREVAGenTM )                      |       | June 28, 2010   Delaware, U.S.A.        |       | 100                              | %          | 100                                       | %          | 11,006 |   | 11,006 |   |
| Total carrying value                                             |       |                                         |       |                             |       |                                      |       | 12,368 |   | 12,368 |   |

 

F 36

----

Table of Contents

 

**30.**           **FINANCIAL RISK MANAGEMENT**

 

The Group’s activities expose it to a variety of financial risks such as credit risk, market risk (including foreign currency risk and interest rate risk) and liquidity risk.  The Group’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the Group.  The Group uses different methods to measure the different types of risk to which it is exposed.  These methods include sensitivity analysis in the case of foreign exchange, interest rate and aging analysis for credit risk.

 

Risk management is managed by the Executive under guidance provided by the Board of Directors via its Audit Committee, which provides guidance for overall risk management, as well as policies covering specific areas, such as credit risk, foreign exchange risk and interest rate risk.  The Committee identifies and evaluates financial risks in close cooperation with the Group’s executive management.

 

The Group’s principal financial instruments comprise cash and cash equivalents.  The Group also has other financial assets and liabilities, such as trade receivables and payables, which arise directly from its operations.

 

The Group does not typically enter into derivative transactions, such as interest rate swaps or forward currency contracts.  It is, and has been throughout the period under review, the Group’s policy that no trading in financial instruments shall be undertaken.  The main risks arising from the Group’s financial instruments are credit risk exposures, foreign currency risk, interest rate risk and liquidity risk.  The policies for managing each of these risks are summarised below.

 

Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and the basis on which income and expenses are recognised, in respect of each class of financial asset, financial liability and equity instrument are disclosed in Note 2.

 

The Group holds the following financial instruments:

 
| ** **                                                   | ** ** | **Consolidated** | ** ** |
|--------------------------------------------------------------|------------|------------------|------------|
| ** **                                                   | ** ** | **2016**         | ** ** | **2015** | ** ** |
| ** **                                                   | ** ** | **$**            | ** ** | **$** | ** ** |
| **Financial   assets**                                       |       |             |       |   |   |
| Cash at bank /   on hand                                     |       | 11,179,687       |       | 18,341,357 |   |
| Trade and other   receivables                                |       | 630,773          |       | 714,951 |   |
| Performance bond   and deposits                              |       | 4,209            |       | 3,590 |   |
| Financial assets   at fair value through profit or loss      |       | —           |       | — |   |
| Total financial   assets                                     |       | 11,814,669       |       | 19,059,898 |   |
| **Financial   liabilities**                                  |       |             |       |   |   |
| Trade and other   payables                                   |       | 812,457          |       | 1,102,974 |   |
| Financial   liabilities at fair value through profit or loss |       | —           |       | 25,000 |   |
| Total financial   liabilities                                |       | 812,457          |       | 1,127,974 |   |

 

**Credit risk**

 

The Group’s credit risk is managed on a Group basis.  Credit risk arises from cash and cash equivalents and deposits with banks and financial institutions, as well as credit exposures to customers, including outstanding receivables and committed transactions. The trade & other receivables balance at year end includes an accrual estimate of revenue to be collected from the sale of BREVAGenTM and BREVAGen*plus®* tests. This estimate is calculated based on historical data of amounts received from tests sold and is sensitive to/ may be impacted by the recoverability of the amounts through the U.S. healthcare reimbursement system. Recoverability of accrued revenues for tests performed is regularly monitored by management.  Other receivables represent amounts accrued for which reimbursement will be applied for from the Australian Taxation Authority under the Governments Research & Development grant. The maximum exposures to credit risk at June 30, 2016 in relation to each class of recognsied financial asset is the carrying amount of those assets, as indicated in the balance sheet.

 

F 37

----

Table of Contents

 

**30.**           **FINANCIAL RISK MANAGEMENT (cont.)**

 

**Credit risk (cont.)**

 

Financial assets included on the balance sheet that potentially subject the Group to concentration of credit risk consist principally of cash and cash equivalents and trade receivables.  In accordance with the guidelines of the Group’s Short Term Investment Policy, the Group minimises this concentration of risk by placing its cash and cash equivalents with financial institutions that maintain superior credit ratings in order to limit the degree of credit exposure.  For banks and financial institutions, only independently-rated parties with a minimum rating of “A-1” are accepted.  The Group has also established guidelines relative to credit ratings, diversification and maturities that seek to maintain safety and liquidity.  The Group does not require collateral to provide credit to its customers. Once a BREVAGenTM or BREVAGen*plus®* test has been performed, the patient elects to self-pay or where applicable seek healthcare provider payment on receipt of the outcome of the test. The nature of this revenue recognition cycle increases the risk of credit exposure.  The Group has not entered into any transactions that qualify as a financial derivative instrument.

 

The trade receivables balance is reflective of historical collection rates which are monitored on an ongoing basis and adjusted accordingly based on changing collection and test data. As at June 30, 2016, the balance of the Group’s total accrued net trade receivables was $630,773 (2015: $714,951 (refer Note 12).

 

Credit risk further arises in relation to financial guarantees given by the Group to certain parties in respect of obligations of its subsidiaries.  Such guarantees are only provided in exceptional circumstances.

 

An analysis of the aging of trade and other receivables s is provided below:

 
| ** **                                        | ** ** | **Consolidated** | ** ** |
|---------------------------------------------------|------------|------------------|------------|
| ** **                                        | ** ** | **2016**         | ** ** | **2015** | ** ** |
| ** **                                        | ** ** | **$**            | ** ** | **$** | ** ** |
| **Net   trade and other receivables**             |       |             |       |   |   |
| Current (less   than 30 days)                     |       | 630,773          |       | 714,951 |   |
| 31 days to 60   days                              |       | —           |       | — |   |
| 61 days to 90   days (note)                       |       | —           |       | — |   |
| Greater than 90   days (note)                     |       | —           |       | — |   |
| Total net trade   and other receivables (Note 12) |       | 630,773          |       | 714,951 |   |

 

Note:        Given the nature of the trade receivables for the remaining business all amounts are considered to be current.

 

F 38

----

Table of Contents

 

**30.**           **FINANCIAL RISK MANAGEMENT (cont.)**

 

**Market risk**

 

*Foreign currency risk*

 

The Group operates internationally and is exposed to foreign currency exchange risk, primarily with respect to the US dollar, through financial assets and liabilities.  It is the Group’s policy not to hedge these transactions as the exposure is considered to be minimal from a consolidated operations perspective.  Further, as the Group incurs expenses which are payable in US dollars, the financial assets that are held in US dollars provide a natural hedge for the Group.

 

Foreign exchange risk arises from planned future commercial transactions and recognised assets and liabilities denominated in a currency that is not the entity’s functional currency and net investments in foreign operations.  The risk is measured using sensitivity analysis and cash flow forecasting.

 

The Group has a Foreign Exchange Management Policy which was developed to establish a formal framework and procedures for the efficient management of the financial risks that impact on Genetic Technologies Limited through its activities outside of Australia, predominantly in the United States.  The policy governs the way in which the financial assets and liabilities of the Group that are denominated in foreign currencies are managed and any risks associated with that management are identified and addressed.  Under the policy, which is updated on a regular basis as circumstances dictate, the Group generally retains in foreign currency only sufficient funds to meet the expected expenditures in that currency.  Surplus funds are converted into Australian dollars as and when deemed appropriate by the Board in consultation with the CFO.

 

As at June 30, 2016, the Group held the following financial assets and liabilities that were denominated in foreign currencies:

 
| **Consolidated**              | ** ** | **Year** | ** ** | **USD**   | ** ** | **EUR** | ** ** | **CHF** | ** ** |
|-------------------------------|------------|----------|------------|-----------|------------|---------|------------|---------|------------|
| **Financial   assets**        |       |     |       |      |       |    |       |    |       |
| Cash at bank /   on hand      |       | 2016     |       | 5,108,964 |       | 32,767  |       | —  |       |
|                          |       | 2015     |       | 28,231    |       | 100,535 |       | —  |       |
|                          |       |     |       |      |       |    |       |    |       |
| Total financial   assets      |       | 2016     |       | 5,108,964 |       | 32,767  |       | —  |       |
|                          |       | 2015     |       | 28,231    |       | 100,535 |       | —  |       |
| **Financial   liabilities**   |       |     |       |      |       |    |       |    |       |
| Trade and other   payables    |       | 2016     |       | 96,069    |       | —  |       | —  |       |
|                          |       | 2015     |       | 108,380   |       | —  |       | 2,082   |       |
|                          |       |     |       |      |       |    |       |    |       |
| Total financial   liabilities |       | 2016     |       | 96,069    |       | —  |       | —  |       |
|                          |       | 2015     |       | 108,380   |       | —  |       | 2,082   |       |

 

Notes:            **USD** — United States dollars               **EUR** — European euros                                       **CHF** — Swiss francs

 

During the year ended June 30, 2016, the Australian dollar / US dollar exchange rate weakened by 2.8%, from 0.7655 at the beginning of the year to 0.7441 at the end of the year.

 

Based on the financial instruments held at June 30, 2016, had the Australian dollar weakened/ strengthened by 10% against the US dollar with all other variables held constant, the Group’s loss for the year would have been $748,000 lower/ $612,000 higher (2015: loss $10,000 lower / loss $12,000 higher), mainly as a result of changes in the values of cash and cash equivalents which are denominated in US dollars, as detailed in the above tables.

 

F 39

----

Table of Contents

 

**30.**           **FINANCIAL RISK MANAGEMENT (cont.)**

 

**Market risk (cont.)**

 

*Interest rate risk*

 

The Group’s main interest rate risk arises in relation to its short-term deposits with various financial institutions.  If rates were to decrease, the Group may generate less interest revenue from such deposits.  However, given the relatively short duration of such deposits, the associate risk is relatively minimal.

 

The Group has a Short Term Investment Policy which was developed to manage the Group’s surplus cash and cash equivalents.  In this context, the Group adopts a prudent approach that is tailored to cash forecasts rather than seeking high returns that may compromise access to funds as and when they are required.  Under the policy, the Group deposits its surplus cash in a range of deposits / securities over different time frames and with different institutions in order to diversify its portfolio and minimise risk.

 

On a monthly basis, Management provides the Board with a detailed list of all cash and cash equivalents, showing the periods over which the cash has been deposited, the name and credit rating of the institution holding the deposit and the interest rate at which the funds have been deposited.

 

At June 30, 2016, if interest rates had changed by +/- 50 basis points from the year-end rates, with all other variables held constant, the Group’s loss for the year would have been $20,000 lower / higher (2015: loss $5,000 lower / higher), as a result of higher / lower interest income from cash and cash equivalents.  Consolidated equity for the Group would have been $20,000 higher / lower (2015: $5,000 higher / lower) mainly as a result of an increase / decrease in the fair value of cash and cash equivalents.

 

The exposure to interest rate risks and the effective interest rates of financial assets and liabilities, both recognised and unrealised, for the Group is as follows:

 
| ** **                                                   | ** ** | ** ** | ** ** | **Floating rate** | ** ** | **Fixed rate** | ** ** | **Carrying   amount** | ** ** | **Weighted ave.   effective rate** | ** ** | **Ave. maturity   Period** | ** ** |
|--------------------------------------------------------------|------------|------------|------------|------------------------|------------|---------------------|------------|-----------------------|------------|----------------------------------------------|------------|---------------------------------|------------|
| **Consolidated**                                             | ** ** | **Year**   | ** ** | **$**                  | ** ** | **$**               | ** ** | **$**                 | ** ** | **%**                                        | ** ** | **Days**                        | ** ** |
| **Financial   assets**                                       |       |       |       |                   |       |                |       |                  |       |                                         |       |                            |       |
| Cash at bank /   on hand                                     |       | 2016       |       | 3,952,078              |       | —              |       | 3,952,078             |       | 1.98                                         | %          | At call                         |       |
|                                                         |       | 2015       |       | 1,108,297              |       | —              |       | 1,108,297             |       | 2.25                                         | %          | At call                         |       |
|                                                         |       |       |       |                   |       |                |       |                  |       |                                         |       |                            |       |
| Performance bond   / deposits                                |       | 2016       |       | —                 |       | 4,209               |       | 4,209                 |       | —                                       |       | At call                         |       |
|                                                         |       | 2015       |       | —                 |       | 3,950               |       | 3,950                 |       | —                                       |       | At call                         |       |
|                                                         |       |       |       |                   |       |                |       |                  |       |                                         |       |                            |       |
| Totals                                                       |       | 2016       |       | 3,952,078              |       | 4,209               |       | 3,956,287             |       |                                         |       |                            |       |
|                                                         |       | 2015       |       | 1,108,297              |       | 3,950               |       | 1,112,247             |       |                                         |       |                            |       |
| **Financial   liabilities**                                  |       |       |       |                   |       |                |       |                  |       |                                         |       |                            |       |
| Financial   liabilities at fair value through profit or loss |       | 2016       |       | —                 |       | —              |       | —                |       | —                                       |       | —                          |       |
|                                                         |       | 2015       |       | —                 |       | 25,000              |       | 25,000                |       | 10.00                                        | %          | At call                         |       |
|                                                         |       |       |       |                   |       |                |       |                  |       |                                         |       |                            |       |
| Totals                                                       |       | 2016       |       | —                 |       | —              |       | —                |       |                                         |       |                            |       |
|                                                         |       | 2015       |       | —                 |       | 25,000              |       | 25,000                |       |                                         |       |                            |       |

 

Note   The Company holds the balance of its cash in non-interest bearing bank accounts.

 

**Liquidity risk**

 

Prudent liquidity risk management implies maintaining sufficient cash and cash equivalents and the availability of funding through an adequate amount of committed credit facilities, such as its hire purchase and credit card facilities.  The Group manages liquidity risk by continuously monitoring forecast and actual cash flows and, wherever possible, matching the maturity profiles of financial assets and liabilities.  Due to the dynamic nature of the underlying businesses, Management aims to maintain flexibility in funding by keeping committed credit lines available.  Surplus funds are generally only invested in instruments that are tradeable in highly liquid markets. Refer note 2(a) for further information on the material uncertainty that may cast significant doubt on the Company’s ability to continue as a going concern.

 

F 40

----

Table of Contents

 

**30.**           **FINANCIAL RISK MANAGEMENT (cont.)**

 

**Liquidity risk (cont.)**

 

A balanced view of cash inflows and outflows affecting the Group is summarised in the table below:

 
| ** **                      | ** ** | ** ** | ** ** | **< 6 months** | ** ** | **6 to 12 months** | ** ** | **1 to 5 years** | ** ** | **> 5 years** | ** ** | **Totals** | ** ** |
|---------------------------------|------------|------------|------------|-----------------------------|------------|-----------------------------------|------------|---------------------------------|------------|----------------------------|------------|------------|------------|
| **Consolidated**                | ** ** | **Year**   | ** ** | **$**                       | ** ** | **$**                             | ** ** | **$**                           | ** ** | **$**                      | ** ** | **$**      | ** ** |
| **Financial   assets**          |       |       |       |                        |       |                              |       |                            |       |                       |       |       |       |
| Cash at bank /   on hand        |       | 2016       |       | 11,179,687                  |       | —                            |       | —                          |       | —                     |       | 11,179,687 |       |
|                            |       | 2015       |       | 18,341,357                  |       | —                            |       | —                          |       | —                     |       | 18,341,357 |       |
|                            |       |       |       |                        |       |                              |       |                            |       |                       |       |       |       |
| Trade and other   receivables   |       | 2016       |       | 630,773                     |       | —                            |       | —                          |       | —                     |       | 630,773    |       |
|                            |       | 2015       |       | 714,951                     |       | —                            |       | —                          |       | —                     |       | 714,951    |       |
|                            |       |       |       |                        |       |                              |       |                            |       |                       |       |       |       |
| Performance bond   and deposits |       | 2016       |       | 4,209                       |       | —                            |       | —                          |       | —                     |       | 4,209      |       |
|                            |       | 2015       |       | 3,590                       |       | —                            |       | —                          |       | —                     |       | 3,590      |       |
|                            |       |       |       |                        |       |                              |       |                            |       |                       |       |       |       |
| Total financial   assets        |       | 2016       |       | 11,814,669                  |       | —                            |       | —                          |       | —                     |       | 11,814,669 |       |
|                            |       | 2015       |       | 19,059,898                  |       | —                            |       | —                          |       | —                     |       | 19,059,898 |       |
| **Financial   liabilities**     |       |       |       |                        |       |                              |       |                            |       |                       |       |       |       |
| Trade and other   payables      |       | 2016       |       | 812,457                     |       | —                            |       | —                          |       | —                     |       | 812,457    |       |
|                            |       | 2015       |       | 1,102,974                   |       | —                            |       | —                          |       | —                     |       | 1,102,974  |       |
|                            |       |       |       |                        |       |                              |       |                            |       |                       |       |       |       |
| Total financial   liabilities   |       | 2016       |       | 812,457                     |       | —                            |       | —                          |       | —                     |       | 812,457    |       |
|                            |       | 2015       |       | 1,102,974                   |       | —                            |       | —                          |       | —                     |       | 1,102,974  |       |
|                            |       |       |       |                        |       |                              |       |                            |       |                       |       |       |       |
| Net maturity                    |       | 2016       |       | 11,002,212                  |       | —                            |       | —                          |       | —                     |       | 11,002,212 |       |
|                            |       | 2015       |       | 17,956,924                  |       | —                            |       | —                          |       | —                     |       | 17,956,924 |       |

 

The Group had access to the following undrawn borrowing facility as at June 30, 2016:

 
| ** **                       | ** ** | **Facility limit** | ** ** | **Amount used** | ** ** | **Amount available** | ** ** |
|----------------------------------|------------|-------------------------|------------|----------------------|------------|---------------------------|------------|
| **Nature of facility** | ** ** | **$**                   | ** ** | **$**                | ** ** | **$**                     | ** ** |
| Credit card   facility           |       | 311,269                 |       | (32,051              | )          | 279,218                   |       |

 

**32.**           **SUBSEQUENT EVENTS**

 

There have been no significant events which have occurred after balance date.

 

F 41

----