Announcement PDF Avecho Biotechnology Limited Appendix 4D Half-year report 1. Company details Name of entity: ABN: Reporting period: Previous period: Avecho Biotechnology Limited 32 056 482 403 For the period ended 30 June 2022 For the period ended 30 June 2021 2. Results for announcement to the market $ Revenues from ordinary activities up 185.2% to 758,239 Loss from ordinary activities after tax attributable to the owners of Avecho Biotechnology Limited down 55.2% to (777,674) Loss for the period attributable to the owners of Avecho Biotechnology Limited down 55.2% to (777,674) Comments The loss for the Consolidated Entity after providing for income tax amounted to $777,674 (30 June 2021: loss of $1,737,551). The losses during the period were consistent with the Consolidated Entity's operations, which was primarily concentrated on the development of pharmaceutical CBD soft-gel product. 3. Net tangible assets Reporting period Cents Net tangible assets per ordinary security 4. Control gained over entities Not applicable. 5. Loss of control over entities Not applicable. 6. Dividends Current period There were no dividends paid, recommended or declared during the current financial period. Previous period There were no dividends paid, recommended or declared during the previous financial period. 7. Dividend reinvestment plans Not applicable. 0.21 Previous period Cents 0.31 Avecho Biotechnology Limited Appendix 4D Half-year report 8. Details of associates and joint venture entities Not applicable. 9. Foreign entities Details of origin of accounting standards used in compiling the report: Not applicable. 10. Audit status The financial statements were subject to a review by the auditors and the review report is attached as part of the Half Year Report. 11. Attachments Details of attachments (if any): The Half Year Report of Avecho Biotechnology Limited for the period ended 30 June 2022 is attached. 12. Signed Signed ___________________________ Dr Gregory Collier Chairman Date: 29 August 2022 Avecho Biotechnology Limited ABN 32 056 482 403 Half Year Report - 30 June 2022 Avecho Biotechnology Limited Contents 30 June 2022 Corporate directory Directors' report Auditor's independence declaration Consolidated statement of profit or loss and other comprehensive income Consolidated statement of financial position Consolidated statement of changes in equity Consolidated statement of cash flows Notes to the consolidated financial statements Directors' declaration Independent auditor's review report to the members of Avecho Biotechnology Limited 1 2 3 5 6 7 8 9 10 16 17 Avecho Biotechnology Limited Corporate directory 30 June 2022 Directors Dr Gregory Collier (Chairman) Dr Ross Murdoch (Non-Executive Director) Mr Matthew McNamara (Non-Executive Director) Chief Executive Officer Dr Paul Gavin Company Secretary Ms Melanie Leydin Registered office and Principal place of business Unit A8, 2A Westall Road Clayton VIC 3168 Australia Telephone: +61 3 9002 5000 Email: info@avecho.com.au Share register Computershare Investor Services Pty Limited Yarra Falls, 452 Johnston Street Abbotsford VIC 3067 Australia Telephone: +61 3 9415 5000 Fax: +61 3 9473 2500 Auditor Grant Thornton Audit Pty Ltd Collins Square Tower 5 727 Collins Street Melbourne VIC 3008 Stock exchange listing Avecho Biotechnology Limited securities are listed on the Australian Securities Exchange. (ASX code: AVE) Website www.avecho.com.au 2 Avecho Biotechnology Limited Directors' report 30 June 2022 The directors present their report, together with the financial statements, on the consolidated entity (referred to hereafter as the 'Consolidated Entity') consisting of Avecho Biotechnology Limited (referred to hereafter as the 'Company' or 'parent entity') and the entities it controlled at the end of, or during, the period ended 30 June 2022. Directors The following persons were directors of Avecho Biotechnology Limited during the whole of the financial period and up to the date of this report, unless otherwise stated: Dr Greg Collier (Chairman) Dr Ross Murdoch (Non-Executive Director) Mr Matthew McNamara (Non-Executive Director) Principal activities Avecho Biotechnology Limited develops and commercialises innovative Human and Animal Health products using its proprietary drug delivery system called TPM® (Tocopherol Phosphate Mixture). TPM® is derived from Vitamin E using unique, proprietary and patented processes and is proven to enhance the solubility and oral, dermal and transdermal absorption of drugs and nutrients. The Consolidated Entity’s major projects include delivering TPM® enhanced injectable, oral and topical products for the human health market, including the recently announced application of TPM® to cannabinoids. The Company is also developing TPM® to enhance feed efficiency and health of livestock. Review of operations Avecho Ltd has a strong development portfolio in targeted human health indications, anchored by its novel TPM® drug delivery technology and revenue-generating manufacturing activity. The Company’s Cannabinoid program, in particular, is shaping up to be a promising base for commercial and clinical partnership activity. In the past year alone, Avecho has completed a Phase I Clinical Trial characterising the absorption profile of cannabidiol from its CBD soft-gel product and secured its first licensing deal for this product with Perland Pharmaceuticals (previously Medterra Pharma), for clinical development targeting an arthritis indication. The Company’s key focus remains on the development of its CBD soft-gel capsule for over-the-counter registration with the TGA for an insomnia-related indication. In collaboration with its team of associated sleep and regulatory experts, Avecho has now completed the Phase III study design which will shortly be submitted for ethics approval. The Company has identified and engaged the suite of service providers that will drive the study, which will commence within the next six months. Avecho has also cultivated a successful collaboration with the Lambert Initiative, Australia’s leading research group for the discovery, development, and optimisation of safe cannabinoid therapeutics. This relationship was initially focused on conducting a Phase II clinical trial to examine how topically-applied CBD can relieve osteoarthritis of the hand. The Trial was run by Principal Investigator, Dr Daniel Lewis, from the Daniel Lewis Rheumatology Centre, and Co-Investigator, Professor Iain McGregor, from the Lambert. This world-first research produced outstanding results, attracting top tier media coverage and inclusion in a presentation for the International Cannabis Research Society (ICRS) Conference in Galway. As part of its commitment to pursuing focused clinical research while exploring commercial opportunities for oral cannabinoid products, Avecho entered into a licensing and supply agreement with Team SAAS LLC (SAAS) for the use of TPM® in recreational products in the US. SAAS will develop and commercialise a unique cannabis distillate that will be sold to recreational cannabis companies as a raw material for the manufacture of their own recreational cannabis products. This is a potential source of imminent revenue and differentiation for Avecho in this market. Avecho will shortly commence broader planned outreach with cannabis companies in North America to increase its potential partner network and applications for TPM® in this space. The Company’s widespread experience in biotechnology, clinical trials and manufacturing, has supported methodical collection of clinical data and astute commercial partnerships for its CBD program. It is now in an excellent position to scale up manufacturing; support the necessary regulatory submissions and requirements; and to pursue product development opportunities for more than one indication, concurrently. This is a unique point of difference, setting Avecho apart from its peers in this space. Review of financial results The loss for the Consolidated Entity after providing for income tax amounted to $777,674 (30 June 2021: loss of $1,737,551). 3 Avecho Biotechnology Limited Directors' report 30 June 2022 ● ● ● Total revenue increased by 185.2% for the period to $758,239 (30 June 2021: $265,898), mainly attributable Vital ET® sales made to Ashland during the period. Other income decreased by 33.3% to $306,346 (30 June 2021: $459,458), attributed to R&D tax incentives of $254,032 (30 June 2021: $453,201). Expenses from continuing operations decreased by 30.7% to $1,641,162 (30 June 2021: $2,366,558), largely due to lower research and development cost of $476,166 (30 June 2021: $842,333). As at 30 June 2022, the Consolidated Entity held $3,129,213 in cash and cash equivalents (31 December 2021: $3,264,764). The net assets of the Consolidated Entity decreased by $657,470 to $3,879,120 as at 30 June 2022 (31 December 2021: $4,536,590). Working capital, being current assets less current liabilities, was $3,519,078 (31 December 2021: $4,112,078). The net operating cash outflow for the period was $47,598 (30 June 2021: outflow $1,788,929). Significant changes in the state of affairs On 10 January 2022, the Company has issued 1,696,000 Fully Paid Ordinary Shares (Shares) to employees under the Company’s Equity Incentive Plan. There were no other significant changes in the state of affairs of the Consolidated Entity during the financial period. Matters subsequent to the end of the financial period No matter or circumstance has arisen since 30 June 2022 that has significantly affected, or may significantly affect the Consolidated Entity's operations, the results of those operations, or the Consolidated Entity's state of affairs in future financial years. Auditor's independence declaration A copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001 is set out immediately after this directors' report. This report is made in accordance with a resolution of directors, pursuant to section 306(3)(a) of the Corporations Act 2001. On behalf of the directors ___________________________ Dr Gregory Collier Chairman 29 August 2022 4 Grant Thornton Audit Pty Ltd Level 22 Tower 5 Collins Square 727 Collins Street Melbourne VIC 3008 GPO Box 4736 Melbourne VIC 3001 T +61 3 8320 2222 Auditor’s Independence Declaration To the Directors of Avecho Biotechnology Limited In accordance with the requirements of section 307C of the Corporations Act 2001, as lead auditor for the review of Avecho Biotechnology Limited for the period ended 30 June 2022, I declare that, to the best of my knowledge and belief, there have been: a no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the review; and b no contraventions of any applicable code of professional conduct in relation to the review. Grant Thornton Audit Pty Ltd Chartered Accountants M A Cunningham Partner – Audit & Assurance Melbourne, 29 August 2022 www.grantthornton.com.au ACN-130 913 594 Grant Thornton Audit Pty Ltd ACN 130 913 594 a subsidiary or related entity of Grant Thornton Australia Limited ABN 41 127 556 389 ACN 127 556 389. ‘Grant Thornton’ refers to the brand under which the Grant Thornton member firms provide assurance, tax and advisory services to their clients and/or refers to one or more member firms, as the context requires. Grant Thornton Australia Limited is a member firm of Grant Thornton International Ltd (GTIL). GTIL and the member firms are not a worldwide partnership. GTIL and each member firm is a separate legal entity. Services are delivered by the member firms. GTIL does not provide services to clients. GTIL and its member firms are not agents of, and do not obligate one another and are not liable for one another’s acts or omissions. In the Australian context only, the use of the term ‘Grant Thornton’ may refer to Grant Thornton Australia Limited ABN 41 127 556 389 ACN 127 556 389 and its Australian subsidiaries and related entities. Liability limited by a scheme approved under Professional Standards Legislation. w Avecho Biotechnology Limited Consolidated statement of profit or loss and other comprehensive income For the period ended 30 June 2022 Consolidated Note 30 June 2022 30 June 2021 $ $ Revenue from contracts with customers Cost of sales 4 Gross profit 758,239 (201,097) 265,898 (96,349) 557,142 169,549 Research and development tax incentive and other income 5 306,346 459,458 Research and development expenses Administration and corporate expenses Finance costs 6 7 (476,166) (1,161,335) (3,661) (842,333) (1,518,576) (5,649) (777,674) (1,737,551) - - (777,674) (1,737,551) - - (777,674) (1,737,551) Cents Cents Loss before income tax expense Income tax expense Loss after income tax expense for the period attributable to the owners of Avecho Biotechnology Limited Other comprehensive income for the period, net of tax Total comprehensive income for the period attributable to the owners of Avecho Biotechnology Limited Basic loss per share Diluted loss per share 12 12 (0.04) (0.04) (0.10) (0.10) The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes 6 Avecho Biotechnology Limited Consolidated statement of financial position As at 30 June 2022 Consolidated 31 December Note 30 June 2022 2021 $ $ Assets Current assets Cash and cash equivalents Trade and other receivables Inventories Prepayments Total current assets 3,129,213 427,404 475,600 82,538 4,114,755 3,264,764 1,126,994 196,732 219,244 4,807,734 256,925 50,793 52,324 360,042 247,327 88,888 102,000 438,215 4,474,797 5,245,949 Current liabilities Trade and other payables Lease liabilities Provisions Total current liabilities 163,466 54,085 378,126 595,677 275,134 80,211 340,311 695,656 Non-current liabilities Lease liabilities Total non-current liabilities - 13,703 13,703 595,677 709,359 3,879,120 4,536,590 Non-current assets Plant and equipment Right-of-use assets Intangibles Total non-current assets Total assets Liabilities Total liabilities Net assets Equity Issued capital Reserves Accumulated losses 8 9 Total equity 237,627,311 237,601,871 28,791,422 29,001,981 (262,539,613) (262,067,262) 3,879,120 4,536,590 The above consolidated statement of financial position should be read in conjunction with the accompanying notes 7 Avecho Biotechnology Limited Consolidated statement of changes in equity For the period ended 30 June 2022 Issued capital $ Consolidated Balance at 1 January 2021 Accumulated losses Total equity $ $ Reserves $ 232,778,295 28,537,271 (258,661,146) 2,654,420 Loss after income tax expense for the period Other comprehensive income for the period, net of tax - - (1,737,551) - (1,737,551) - Total comprehensive income for the period - - (1,737,551) (1,737,551) 5,060,000 (294,200) 269,553 - - 269,553 5,060,000 (294,200) 28,806,824 (260,398,697) 5,952,222 Transactions with owners in their capacity as owners: Share-based payments Issue of share capital Transaction costs Balance at 30 June 2021 237,544,095 Issued capital $ Consolidated Balance at 1 January 2022 Accumulated losses Total equity $ $ Reserves $ 237,601,871 29,001,981 (262,067,262) 4,536,590 Loss after income tax expense for the period Other comprehensive income for the period, net of tax - - (777,674) - (777,674) - Total comprehensive income for the period - - (777,674) (777,674) 25,440 - 92,775 (305,323) 1,989 305,323 - 25,440 92,775 1,989 28,791,422 (262,539,613) 3,879,120 Transactions with owners in their capacity as owners: Contributions of equity, net of transaction costs (note 8) Share-based payments Transfer Contributions received on exercise of options Balance at 30 June 2022 237,627,311 The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes 8 Avecho Biotechnology Limited Consolidated statement of cash flows For the period ended 30 June 2022 Consolidated Note 30 June 2022 30 June 2021 $ $ Cash flows from operating activities Receipts from customers (inclusive of GST) Receipt of government grants and subsidy Payments to suppliers and employees (inclusive of GST) 763,654 1,028,323 (1,838,702) 58,273 (1,847,500) Interest received Interest and other finance costs paid (46,725) 299 (1,172) (1,789,227) 298 - Net cash used in operating activities (47,598) (1,788,929) Cash flows from investing activities Payments for plant and equipment (48,124) (56,735) Net cash used in investing activities (48,124) (56,735) (39,829) 5,060,000 (294,200) (39,107) (39,829) 4,726,693 Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at the beginning of the financial period (135,551) 3,264,764 2,881,029 1,872,776 Cash and cash equivalents at the end of the financial period 3,129,213 4,753,805 Cash flows from financing activities Proceeds from issue of shares Cost of issue of shares net of GST Principal and interest element of lease payments 8 Net cash from/(used in) financing activities The above consolidated statement of cash flows should be read in conjunction with the accompanying notes 9 Avecho Biotechnology Limited Notes to the consolidated financial statements 30 June 2022 Note 1. General information The financial statements cover Avecho Biotechnology Limited as a consolidated entity consisting of Avecho Biotechnology Limited and the entities it controlled at the end of, or during, the period. The financial statements are presented in Australian dollars, which is Avecho Biotechnology Limited's functional and presentation currency. Avecho Biotechnology Limited is a listed public company limited by shares, incorporated and domiciled in Australia. Its registered office and principal place of business is: Unit A8, 2A Westall Road Clayton VIC 3168 Australia A description of the nature of the Consolidated Entity's operations and its principal activities are included in the directors' report, which is not part of the financial statements. The financial statements were authorised for issue, in accordance with a resolution of directors, on 29 August 2022. Note 2. Significant accounting policies These general purpose financial statements for the interim half-year reporting period ended 30 June 2022 have been prepared in accordance with Australian Accounting Standard AASB 134 'Interim Financial Reporting' and the Corporations Act 2001, as appropriate for for-profit oriented entities. Compliance with AASB 134 ensures compliance with International Financial Reporting Standard IAS 34 'Interim Financial Reporting'. These general purpose financial statements do not include all the notes of the type normally included in annual financial statements. Accordingly, these financial statements are to be read in conjunction with the annual report for the year ended 31 December 2021 and any public announcements made by the Company during the interim reporting period in accordance with the continuous disclosure requirements of the Corporations Act 2001. The principal accounting policies adopted are consistent with those of the previous financial year and corresponding interim reporting period, unless otherwise stated. Going concern The 2022 half-year report has been prepared on the going concern basis, which assumes continuity of normal business activities and the realization of assets and the settlement of liabilities in the ordinary course of business. The working capital position as at 30 June 2022 of the Group was a surplus of $3,519,078 (31 December 2021: surplus of $4,112,078). The Group made a loss after tax of $777,674 (June 2021: loss of $1,737,551). The net operating cash outflow was $47,598 (June 2021: outflow of $1,788,929). Cash and cash equivalents as at 30 June 2022 were $3,129,213 (31 December 2021: $3,264,764). The continuing viability of the Consolidated Entity and its ability to continue as a going concern is dependent upon the Consolidated Entity being successful in its continuing efforts in R&D activities, the Vital ET sales with Ashland and accessing additional sources of capital to meet the commitments. To meet the Group’s funding requirements as and when they fall due the Consolidated Entity will need to take appropriate steps, including a combination of: ● ● ● Raising capital by one of or a combination of the following: placement of shares, rights issue, share purchase plan, etc; Potential debt financing of the R&D tax incentive so the Group can receive the money in advance; and Defer certain R&D expenditure to the future to reduce the cash outflows. The Directors will continue to monitor the ongoing funding requirements of the Consolidated Entity. As a consequence of the above, the directors believe that, notwithstanding the Consolidated Entity's operating results for the year, the Consolidated Entity will be able to continue as a going concern and therefore, these financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or to the amounts and classification of liabilities that might be necessary should the Consolidated Entity not continue as a going concern. 10 Avecho Biotechnology Limited Notes to the consolidated financial statements 30 June 2022 Note 2. Significant accounting policies (continued) Having assessed the potential uncertainties relating to the Consolidated Entity’s ability to effectively fund research and operating expenditures, the Directors believe that the Consolidated Entity will continue to operate as a going concern for the foreseeable future. Therefore, the Directors consider it is appropriate to prepare the financial statements on a going concern basis. New Accounting Standards and Interpretations adopted The consolidated entity has adopted all of the new or amended Accounting Standards and Interpretations issued by the Australian Accounting Standards Board ('AASB') that are mandatory for the current reporting period. Any new or amended Accounting Standards or Interpretations that are not yet mandatory have not been early adopted. Note 3. Operating segments Identification of reportable operating segments The operating segments are identified by management based on the Consolidated Entity’s risks and returns that are affected predominantly by differences in the products and services provided. The reportable segments are based on aggregated operating segments determined according to the nature of the products and services provided, with each reportable segment representing a strategic business unit that offers different products and serves different markets. Production Production portfolio manufactures and sells TPM® and Vital ET® for the use in drug delivery and cosmetic formulations. Human Health The Consolidated Entity’s Human Health portfolio covers delivery of pharmaceutical products through gels, injectables and patches. All other segments The Animal Health and Nutrition segment did not meet materiality levels and is included under along with Corporate, which predominantly a cost centre. Operating segment information Production $ Consolidated - 30 June 2022 Sales, Licences and Royalties Cost of sales Interest income Research and development tax incentive and other income Research expenses Employee and directors benefits expenses Other operating expenses from continuing operations Depreciation and amortisation Profit/(loss) before income tax expense Income tax expense Loss after income tax expense Assets Segment assets Total assets Liabilities Segment liabilities Total liabilities 11 Human Health $ Other segments $ Total $ 688,976 (201,097) (46,786) (25,115) (49,676) 366,302 69,263 254,032 (303,472) (212,128) (192,305) 299 52,015 (450,619) (476,745) (76,621) (951,671) 758,239 (201,097) 299 306,047 (303,472) (709,533) (501,860) (126,297) (777,674) (777,674) 1,382,499 274,076 2,818,222 4,474,797 4,474,797 6,448 53,058 536,171 595,677 595,677 Avecho Biotechnology Limited Notes to the consolidated financial statements 30 June 2022 Note 3. Operating segments (continued) Human Health $ Other segments $ 265,898 (96,349) 5,262 (18,279) (40,343) 34,770 150,959 437,122 (536,576) (266,789) (3,833) (370,076) 298 16,776 (19,066) (563,801) (714,997) (237,644) (1,518,434) 265,898 (96,349) 298 459,160 (573,921) (870,933) (684,060) (237,644) (1,737,551) (1,737,551) Assets Segment assets Total assets 1,066,863 1,017,120 3,161,966 5,245,949 5,245,949 Liabilities Segment liabilities Total liabilities 31,369 10,200 667,790 709,359 709,359 Production $ Consolidated - 30 June 2021 Sales, Licences and Royalties Cost of sales Interest income Research and development tax incentive and other income Research expenses Employee and directors benefit expense Other operating expenses from continuing operations Depreciation and amortisation Profit/(loss) before income tax expense Income tax expense Loss after income tax expense Total $ Consolidated - 31 December 2021 Understanding segment results Revenues from external customers comes from the sale of TPM® and Vital ET® products on a wholesale basis as well as royalties and licences. Revenues of approximately $666,957 are derived from a single external customer group (30 June 2021: $213,357). These revenues are attributed to the Production segment. The Consolidated Entity is domiciled in Australia. The amount of its revenue from external customers broken down by location of customers is shown below. Geographical information Sales, Licences and Royalties Geographical non-current assets 31 December 30 June 2022 30 June 2021 30 June 2022 2021 $ $ $ $ Australia Switzerland India USA 16,967 649,990 22,019 69,263 11,533 201,824 52,541 - 360,042 - 438,215 - 758,239 265,898 360,042 438,215 The geographical non-current assets above are measured in the same way as the financial statements. These assets are allocated based on the operations of the segments and physical location of assets. 12 Avecho Biotechnology Limited Notes to the consolidated financial statements 30 June 2022 Note 4. Revenue from contracts with customers Consolidated 30 June 2022 30 June 2021 $ $ From continuing operations Sale of goods and services transferred at a point in time Royalties and licence revenue recognised over time 686,957 71,282 250,857 15,041 Total revenue from contracts with customers 758,239 265,898 Disaggregation of revenue The disaggregation of revenue from contracts with customers is as follows: Consolidated 30 June 2022 30 June 2021 $ $ Major product lines TPM® Vital ET® Royalty fees License fees 20,000 666,957 2,019 69,263 37,500 213,357 15,041 - 758,239 265,898 Note 5. Research and development tax incentive and other income Consolidated 30 June 2022 30 June 2021 $ $ Net foreign exchange gain Research and development tax incentive Export Market Development Grants (EMDG) Interest income 31,683 254,032 20,332 299 5,959 453,201 298 Research and development tax incentive and other income 306,346 459,458 Note 6. Research and development expenses Consolidated 30 June 2022 30 June 2021 $ $ Clinical development, consultancy and laboratory consumables Employment expenses associated with research and development 13 274,971 201,195 573,921 268,412 476,166 842,333 Avecho Biotechnology Limited Notes to the consolidated financial statements 30 June 2022 Note 7. Administration and corporate expenses Consolidated 30 June 2022 30 June 2021 $ $ Director fees Share based payments expenses Salaries and other employee expenses (non - R&D) Insurance Shareholder and listing expenses Patent portfolio expenses Occupancy expenses Allowance for credit losses and uncollectable debtors written-off Professional and consultancy fees Depreciation of right-of-use assets and plant and equipment Amortisation of intangible assets Other sundry expenses 105,251 92,775 250,676 127,511 89,721 108,358 27,184 2,663 219,591 76,621 49,676 11,308 131,083 269,553 201,885 136,475 136,353 80,888 42,561 20,087 236,446 49,644 188,000 25,601 1,161,335 1,518,576 Note 8. Equity - issued capital Consolidated 31 December 31 December 30 June 2022 2021 30 June 2022 2021 Shares Shares $ $ Ordinary shares - fully paid 1,837,812,526 1,836,116,526 237,627,311 237,601,871 Shares Issue price $ Movements in ordinary share capital Details Date Balance Issue of shares to key management personnel 1 January 2022 10 January 2022 1,836,116,526 1,696,000 Balance 30 June 2022 1,837,812,526 $0.015 237,601,871 25,440 237,627,311 Note 9. Equity - reserves Consolidated 31 December 30 June 2022 2021 $ $ Business combination reserve Other equity-settled benefits Foreign currency reserve Employee equity-settled benefits reserve 27,812,871 1,989 24,626 951,936 27,812,871 305,323 24,626 859,161 28,791,422 29,001,981 Foreign currency reserve The reserve is used to record the translation from Phosphagenics Inc.’s functional currency into Phosphagenics Limited’s reporting currency. Business combinations reserve The reserve is used to record fair value adjustments relating to the business combination. 14 Avecho Biotechnology Limited Notes to the consolidated financial statements 30 June 2022 Note 9. Equity - reserves (continued) Other equity-settled benefits reserve The reserve is used to record the value of equity benefits provided to suppliers as part of their remuneration. Employee share option and share plan reserve The reserve is used to record the value of equity benefits provided to employees and Directors as part of their remuneration. For further details refer to note 16 in the Financial Statements. Note 10. Contingent asset and liabilities There were no contingent asset and liabilities for the period ended 30 June 2022 (30 June 2021: nil). Note 11. Events after the