New horizons

Annual Report

2023

B PolyNovo Limited Annual Report 2023

CONTENTS

Our Vision 1

Our Values 1

Our Performance 2

Chairman and CEO Report 4

A Year in Review: Swami Raote 6

Global Strategy 8

Multiple Options For Global Growth 9

Expanding Global Reach 10

NovoSorb® MTX 12

Clinical Trials 13

Directors’ Report 14

ESG Statement and Corporate Governance 25

Remuneration Report – Audited 28

Auditor’s Independence Declaration 38

Consolidated Statement of Comprehensive Income 39

Consolidated Statement of Financial Position 40

Consolidated Statement of Changes in Equity 41

Consolidated Statement of Cash Flows 42

Notes to the Consolidated Financial Statements 43

Directors’ Declaration 74

Independent Auditor’s Report 75

Shareholder Information 79

Corporate Directory 81

NovoSorb MTX

Received FDA 510(k) clearance

on 19 September 2022. NovoSorb

MTX represents a major product

innovation for so tissue

regeneration.

sponsored clinical trial to assess

the safety and eectiveness

of NovoSorb BTM in subjects

with severe burn skin injuries.

A comparison will be made to the

outcomes resulting from the use

of NovoSorb BTM to FDA-cleared

standard of care, (Integra and

cadaveric Allogra).

Indications

Obtaining additional clinical evidence

to support the use of NovoSorb

BTM as a class III medical device

for the management of deep

dermal/ full thickness burn injury

wounds in the U.S.

Progress

The ﬁrst patient was enrolled

into the trial in September 2021.

A minimum of 120 subjects will

be recruited in a 2:1 ratio of BTM

to standard of care. To date,

64 subjects have been recruited.

Expected completion

Recruitment is expected to be

completed in Q2 2024.

Description

Randomised controlled sponsored

clinical trial comparing the use of

NovoSorb SynPath to clinical

standard of care in subjects with

non-responsive, chronic diabetic

foot ulcers.

Indications

Obtaining additional clinical evidence

to support a reimbursement code

for the use of NovoSorb SynPath for

the management of chronic wounds

in the U.S.

Progress

Trial commenced in July 2022.

A total of 138 subjects will be

recruited, with equal numbers

in each trial group. To date,

25 patients have been enrolled

into the study.

Expected completion

We are looking closely at the

study design to make sure the

Mode of Action of SynPath is not

compromised in any way and the

device is working eectively in the

patient population.

Description

Randomised controlled investigator-

initiated clinical study comparing

the use of NovoSorb BTM combined

with negative pressure wound

therapy (NPWT) to clinical standard

of care (NPWT alone) in subjects

with neuroischemic diabetic

foot wounds.

Indications

Obtaining additional clinical evidence

to support the use of NovoSorb

BTM for the management of chronic

wounds, namely diabetic foot

wounds complicated by vascular

insuciency, in global markets.

Progress

Study commenced in April 2022.

A total of 64 subjects will be

recruited, with equal numbers

in each study group. To date,

35 subjects have been recruited.

Expected completion

Recruitment is expected to be

completed in late 2023.

U.S. Burns Pivotal

Trial (BARDA)

SynPath

DFU Chronic

Wound Trial

Chronic Wound

Study

DIRECTORS’ REPORT

14 PolyNovo Limited Annual Report 2023

Mr David Williams

B.Ec (Hons), M.Ec, FAICD

Non-executive Chairman

Mr Williams was appointed as a Non-Executive

Director on 28 February 2014 and Chairman

on 13 March 2014. Mr Williams is an

experienced Director and investment banker

with a track record in business development

as well as in mergers and acquisitions and

capital raising. He has experience advising

ASX-listed companies in the food, medical

device, and pharmaceutical sectors. Mr

Williams is currently Chairman of RMA Global

Ltd (ASX: RMY) and is Managing Director of

corporate advisory ﬁrm Kidder Williams.

Mr Williams is the Chair of the PolyNovo

Remuneration Committee.

Dr Robyn Elliott

BSc (Hons) Chemistry, PhD Inorganic Chemistry

Non-executive Director

Dr Elliott was appointed a Director of PolyNovo

on 28 October 2019. Dr Elliott is currently

Global Head, Strategic Portfolio Management

at CSL Behring, a role that is responsible for

governance oversight and business value

delivery from a multi-billion-dollar capital

expansion portfolio. Dr Elliott previously held

Strategic Expansion and Quality Senior

Director roles within CSL, was the Managing

Director at IDT Australia and commenced her

career at DBL Faulding. Dr Elliott has a proven

track record in product development, clinical

trials, regulatory aairs, audits, quality

management, project management and

operational strategy. Her worldwide

experience in new facility delivery, production

scale up, strategy, regulatory aairs and audit

will be invaluable to PolyNovo as the company

scales its operations globally. Dr Elliott is a

member of the Audit and Risk Committee.

The Directors of PolyNovo Limited

(PolyNovo) present the Directors’ Report,

together with the Financial Report, of the

Company and its controlled entities (the

Group) for the year ended 30 June 2023

and the related Auditor’s Report.

Board of Directors and

Senior Management

The details of Directors and Senior

Management during the year and until

the date of this report are set out below.

Directors were in oce for the entire

period unless otherwise stated.

15PolyNovo Limited Annual Report 2023

Ms Christine Emmanuel-Donnelly

BSc (Hons) Chemistry, MSc Enterprise,

FIPTA, MAICD

Non-executive Director

Ms Emmanuel-Donnelly was appointed a

Director of PolyNovo on 13 May 2020.

Ms Emmanuel is an accomplished IP and

business development professional with

more than 30 years’ local and international

experience. Ms Emmanuel has a Bachelor of

Science with a major in Economics (Hons:

Chem) from Monash University, Certiﬁcate

in Intellectual Property Law from Queen Mary

College, University of London, Masters of

Enterprise from Melbourne University. She is

a member of the Chartered Institute of Patent

Attorneys UK and has been on the Board of

the Institute of Patent and Trade Mark

Attorneys of Australia for over a decade.

Ms Emmanuel is currently on the Board of

Medical Developments International Ltd and

was previously Executive Manager of Business

Development and Commercial at the CSIRO,

having founded and grown the central IP

management team and led the management

of CSIRO’s IP portfolio for over 10 years and

managed the growth of the CSIRO equity

portfolio for 5 years. Previously she was

in-house IP Counsel for Unilever in the UK and

practised as a patent and trademark attorney

for Wilson Gunn (UK) and Davies Collison Cave

and Grith Hack in Melbourne. Ms Emmanuel-

Donnelly is a member of the PolyNovo

Remuneration Committee.

Mr Leon Hoare

GradDipBus, AssocDipAppSc (Orth), GAICD

Non-executive Director

Mr Hoare was appointed a Director of

PolyNovo on 27 January 2016. He is currently

the Managing Director of Lohmann &

Rauscher, Australia & New Zealand (ANZ),

a private EU based medical device company.

Previously he was Managing Director of Smith

& Nephew ANZ (all divisions) until 2015, one

of Smith & Nephew’s largest global subsidiaries

outside the USA. He served as President of

Smith & Nephew’s Asia-Paciﬁc Advanced

Wound Management (AWM) businesses

for 5 years and was a member of the Global

Executive Management for the AWM Division

(as one of three Regional Presidents). In his

24 years with Smith & Nephew, he also held

roles in marketing, divisional and general

management. His career has also included a

senior role at Bristol-Myers Squibb (medical

devices), and as Vice Chair of the Board of

Australia’s peak medical device industry body,

Medical Technology Association of Australia.

He is currently a Non-Executive Director of

Medical Developments International Ltd

(ASX: MVP). Mr Hoare is a member of the

PolyNovo Remuneration Committee.

Mr Andrew Lumsden

MA (Hons) in Accountancy & Finance,

CA, AGIA ACG, MAICD

Non-executive Director

Mr Lumsden was appointed a Director

of PolyNovo on 4 June 2021. He is an

accomplished Chartered Accountant and

ﬁnance executive with more than 20 years’

experience locally and internationally. He holds

a Master of Arts in Accountancy and Finance

(First Class Hons), is an Associate of The

Chartered Governance Institute and a member

of the Australian Institute of Company

Directors. Mr Lumsden is currently Chief

Executive Ocer of Wellcom Worldwide

Australasia having previously held the roles

of Group Chief Financial Ocer and Group

Chief Operating Ocer. Prior to joining

Wellcom, Mr Lumsden was a Senior Manager

within the Audit and Assurance practice of

PricewaterhouseCoopers. Mr Lumsden is

the Chair of the Audit and Risk Committee.

16 PolyNovo Limited Annual Report 2023

DIRECTORS’ REPORT CONTINUED

Mr Bruce Rathie

B. Comm, LLB, MBA, FIML, FAICD, FGIA

Non-executive Director

Mr Rathie was appointed a Director of

PolyNovo on 18 February 2010. He is an

experienced Company Director with a ﬁnance

and legal background. He practised as a

partner in a large legal ﬁrm and acted as Senior

Corporate Counsel to Bell Resources Limited

in its early years. He then studied for his MBA

in Geneva and embarked on his 15-year

investment banking career. When Head of the

Industrial Franchise Group at Salomon Smith

Barney he led Salomon’s roles in the Federal

Government’s privatisation of Qantas,

Commonwealth Bank (CBA3) and Telstra (T1).

He now has over 20 years’ experience as a

full-time professional Non-executive Director.

During the period he was Chairman of

Capricorn Mutual Limited, Chairman of ASX

listed CleanSpace Holdings Limited (ASX:CSX)

and a Non-executive Director of ASX listed

Cettire Limited (ASX:CTT) and Capricorn

Society Limited. In the medical device space,

he is currently Chairman of ASX listed

4DMedical Limited (ASX: 4DX) and was

previously Chairman of ASX listed Anteo

Diagnostics Limited and a Director of

Compumedics Limited and USCOM Limited.

Mr Rathie is a member of the Audit and

Risk Committee.

Mr Swami Raote

B. Pharmacy, MBA

Chief Executive Ocer

Mr Raote was appointed Chief Executive

Ocer of PolyNovo Limited on 29 July 2022.

Mr Raote held the position of Worldwide

President, Vision Care from 2017 to 2021, a

division of Johnson & Johnson the world’s

largest medical, pharmaceutical and consumer

healthcare company, where Mr Raote had a

30-year career. From 2014 to 2016 Mr Raote

served a dual role as the Area Vice President,

Medical Devices for North Asia and Vice

President for Ethicon, Asia Paciﬁc. From 2009

to 2014 Mr Raote served in a variety of roles

across India for Johnson & Johnson including

Managing Director for Janssen India and Area

Managing Director ASEAN and India. Mr Raote

was also President Director in Indonesia from

2004 to 2008. Mr Raote’s early career

included leadership roles across Johnson &

Johnson Asia Paciﬁc in sales, marketing, supply

chain, ﬁnance, and IT. Mr Raote is currently a

Non-executive Director of EOS Vision in China

and holds several advisory roles to private and

government institutions.

Mr Jan Gielen

CA, Bachelor Bus (Acc)

Chief Financial Ocer and Company Secretary

Mr Gielen joined PolyNovo Limited on

12 December 2018. Mr Gielen holds a

Bachelor of Business (Accounting) degree

from Monash University, is a member of the

Institute of Chartered Accountants and

commenced his career with Pitcher Partners.

Since then, Mr Gielen has held senior ﬁnance

roles for various businesses across a range of

industries such as retail, ICT, logistics (3PL)

& medical, locally and internationally. Mr Gielen

has extensive experience in CFO and Finance

Director roles for fast growing PE and VC

backed businesses and played an important

part in expanding these businesses globally,

both from a ﬁnancial and operational

perspective. Mr Gielen had a long involvement

from inception with ICIX, a leading SaaS

platform supporting global retailers and

manufacturers where he served as Finance

Director in Silicon Valley. Mr Gielen’s most

recent role was CFO of CardioScan for

6 years, Australia’s largest cardiac reporting

provider, which during his tenure expanded

to HK, Singapore & North America.

17PolyNovo Limited Annual Report 2023

Mr Philip Scorgie

Master, Bus Inf Tech

Chief Information Ocer

Mr Scorgie joined PolyNovo Limited as Chief

Information Ocer on the 22 May 2023.

Mr Scorgie holds a Master’s degree in Business

Information Technology from Swinburne

University and is a Non-executive Director

of Wallara, a disability service provider that

focusses on empowering individuals with

dierent abilities. Mr Scorgie held the position

of Global Chief Information Ocer in Chicago

at the top 20 global law ﬁrm, Mayer Brown

from 2012 – 2016. Before working for

PolyNovo Limited Mr Scorgie was an

independent consultant involved in strategic

technology consulting, providing valuable

guidance to diverse businesses ranging from

local manufacturing companies to international

banking and commercial law ﬁrms. Mr Scorgie

has extensive experience in a wide range of

technology industries across the globe

including Germany, South Africa and Hong

Kong. Mr Scorgie was the Regional Chief

Information Ocer at Deacons in Hong Kong

from 1997 to 2005.

Dr David McQuillan

BSc (Hons) Biochemistry, PhD Biochemisty

Chief Technical and Scientiﬁc Ocer

Dr McQuillan was appointed a Director of

PolyNovo on 6 August 2012. He resigned as

Non-Executive Director and was appointed as

Chief Technical and Scientiﬁc Ocer on 1

September 2022. He has extensive technical,

medical, scientiﬁc, and regulatory knowledge.

Previously he was a Fellow at the NIH

(Bethesda, MD), an NH&MRC Fellow at the

University of Melbourne, and Associate

Professor at Texas A&M University (Houston,

TX) where he studied Tissue Engineering,

Regenerative Medicine, and Biochemistry of

the Extracellular Matrix. Dr McQuillan was with

LifeCell Inc/Kinetic Concepts Inc (KCI) for 12

years, holding a number of senior roles,

including Vice President for Research and

Development at LifeCell and Senior Vice

President of Advanced Research and

Technology at KCI. He was Chief Science

Ocer for TELA Bio, a VC-funded

development-stage biotechnology company

from 2013 to 2015.

18 PolyNovo Limited Annual Report 2023

DIRECTORS’ REPORT CONTINUED

Review of Operations

Corporate and Organisational

Structure

PolyNovo Limited, the ultimate parent entity

of the PolyNovo Group, is a public company

listed on the Australian Securities Exchange.

As of 30 June 2023, PolyNovo Limited had

ten wholly owned subsidiaries: PolyNovo

Biomaterials Pty Limited, NovoSkin Pty Ltd,

NovoWound Pty Ltd, PolyNovo NZ Ltd,

PolyNovo UK Ltd, PolyNovo North America LLC

(PNA LLC) PolyNovo Singapore Private Ltd,

PolyNovo Ireland Ltd, PolyNovo Biomaterials

India Private Ltd, and PolyNovo Hong Kong Ltd.

The ﬁrst three subsidiary companies listed

above are Australian proprietary companies

whilst the other entities are the trading and

employment entities for those countries.

Principal Activities and Operations

PolyNovo’s principal activity is the

development of innovative medical devices

for medical applications, utilising the patented

bioabsorbable polymer technology NovoSorb.

NovoSorb is a family of proprietary medical

grade polymers that can be utilised to

manufacture novel medical devices designed

to support tissue repair and which then bio

absorb in a deﬁned fashion in-situ to harmless

by-products. NovoSorb has signiﬁcant

advantages over competitor bioabsorbable

polymers in terms of its design ﬂexibility and

biocompatibility.

PolyNovo can manufacture NovoSorb polymer

devices with the ability to elute drugs,

antimicrobials as well as be expressed in a

variety of physical formats including:

• Films

• Foam

• Coatings/sprays

• Fibres

• Plastic structures

• Biologic carrier

NovoSorb is currently covered by numerous

patents all fully owned by PolyNovo. PolyNovo

has no royalty or licence obligations to any

other parties. Below is a summary of

PolyNovo’s lead projects.

NovoSorb BTM

NovoSorb Biodegradable Temporising Matrix

(BTM) is used in a fully debrided clean surgical

wound to physiologically ‘close the wound’.

With the BTM scaold in place, the dermal

layer is regenerated within the scaold. Once

fully integrated, the outer layer of BTM is

delaminated and the wound closes through

secondary intention (smaller wounds) or with

the application of a split skin gra.

NovoSorb BTM is sold directly by PolyNovo

salesforce Australia, Hong Kong, India, Ireland,

New Zealand, Singapore, United Kingdom,

and the United States. PolyNovo utilises

distributors for sales in Canada, the EU,

Taiwan, and South Africa. The Company is

working on obtaining regulatory approvals

in other markets to quickly expand our

geographical footprint.

Key attributes of the NovoSorb technology

include an unparalleled range of mechanical

properties and bioabsorption times, excellent

biocompatibility and safety proﬁle and

harmless degradants.

NovoSorb BTM continues to feature in major

clinical conference presentations around the

world. Many new clinical papers have been

published in peer review journals and the

surgeon-to-surgeon referral of the beneﬁts

of NovoSorb BTM continues to accelerate.

19PolyNovo Limited Annual Report 2023

Chart 1: NovoSorb BTM Publication Growth

Publications and videos relating to NovoSorb

BTM applications can be found on our website:

www.polynovo.com.

The company is currently working on

expanding the BTM product range of products.

An additional 510(k) submission to further

support the BTM range will be submitted to

the FDA later in 2023. Additional 510(k)

submissions are planned for 2024.

NovoSorb BTM indication

for full thickness burns

NovoSorb BTM is indicated for full thickness/

third degree burns in markets outside of the

U.S. Full thickness burns treatment for a U.S.

FDA regulatory ‘indication’ requires additional

clinical evidence (trials). A pivotal trial is in

progress and funded by BARDA. Successful

completion of this trial will enable PolyNovo

to ﬁle a PMA application for full thickness

burn use and may lead to BARDA stockpiling

NovoSorb BTM for disaster management.

USA Burns Pivotal Trial – BARDA

PolyNovo’s Biomedical Advanced Research

and Development Authority (BARDA) contract

funded by the U.S. Department of Health and

Human Services (Oce of the Assistant

Secretary for Preparedness and Response)

commenced on 28 September 2015. The

feasibility trial concluded in March 2020 and

the Company announced the result for this

trial on 21 April 2020.

PolyNovo completed a swine toxicology

study mapping the full degradation pathway

of NovoSorb BTM during FY20. The data

generated in this study will support our

Premarket Approval (PMA) application and

add to the body of evidence demonstrating

the mode of action of NovoSorb BTM.

The pivotal trial is funded by BARDA to USD

$15 million aer extending the contract in

FY21. The contract is a cost-plus monthly

reimbursement arrangement. PolyNovo will

also contribute to the trial through provision

of product, employee resources and

infrastructure support. The ﬁrst patient was

enrolled into the trial in September 2021,

and we are currently recruiting patients

through 21 U.S. burn centres and 1 site in

Canada. We are in the process of enrolling

an additional 5 U.S. sites, 4 Canadian sites

and 3 Indian sites to participate in the trial.

Currently, 64 patients have been enrolled into

the study out of a target 120, and we expect

the recruitment to be completed in FY24.

Successful completion of the pivotal trial will

lead to a PMA application with the U.S. FDA

and the use of the BTM scaold in full

thickness acute burns.

Dr Marcus Wagsta is PolyNovo Medical

Director overseeing the clinical conduct of

PolyNovo trials and providing valuable clinical

support for our global medical teams. Dr Tina

Palmieri, UC Davis Sacramento, and Dr. Sigrid

Blome Eberwein, Lehigh Valley, are the

co-principal investigators for the pivotal

trial study.

NovoSorb BTM already has the CE Mark,

a requirement for the EU market, which

includes an indication for use in full thickness

burns as well as other surgical wounds and

reconstructive procedures.

Regulatory update for

NovoSorb BTM

Registrations & Certiﬁcations

NovoSorb BTM Medical Device Licence was

issued in October 2022 by Health Canada

in Canada.

NovoSorb MTX 510(k) clearance issued

September 2022 by FDA in U.S.

EU MDR and UK K-CA submissions for

NovoSorb BTM are currently under full

technical review.

Registrations are under review for Bolivia and

Ecuador for NovoSorb BTM and we are in the

initial stages of exploring registration in UAE,

China and Japan.

NovoSorb SynPath

Our NovoSorb SynPath product is being

used in a randomised control trial (RCT)

of 138 patients compared to the Standard of

Care in the treatment of non-healing diabetic

foot ulcers (DFU). The trial commenced on

21 June 2022 and 25 patients have been

enrolled. We are looking closely at the study

design to make sure the Mode of Action of

SynPath is not compromised in any way and

the device is working eectively in the patient

population. The RCT follows the successful

pilot study on 10 patients who presented with

a Wagner Grade 1 or 2 DFU.

The purpose of the study and RCT is to

assess the safety and clinical ecacy of

NovoSorb SynPath to promote wound closure

in non-healing DFU. The data from this study

will be used to submit for insurance

reimbursement coverage for chronic wound

applications in the U.S. outpatient setting.

The market segment has a total addressable

market of USD $400 million.

Chronic Wound Study

This is a randomised controlled study

comparing the use of NovoSorb BTM combined

with negative pressure wound therapy (NPWT)

to the usual standard of care in neuroischemic

diabetic foot wounds. The study will assess

rates and time to complete wound healing and

rates of post-surgical infection, perioperative

complications, and proximal lower limb

amputations. In addition, the impact of

NovoSorb BTM will be explored on a range

of factors including cellular proliferation and

neo-angiogenesis that are known to aect

wound healing, as well as quality of life and

health economics.

The focus of this study is patients with

moderate to high risk of amputation. 35 out

of a total 64 patients have been recruited and

recruitment is expected to be complete late

2023. Data from the trial will provide

additional clinical evidence for its broader

use in patients with diabetic foot wounds

complicated by vascular insuciency.

NovoSorb MTX

MTX has broad applicability for single stage

graing in burns, chronic, surgical, and deep

tunnelling wounds to provide increased

treatment options and better outcomes.

MTX and BTM are complementary, and it

is expected clinicians will use both products

for the treatment of so tissue defects.

MTX comprises BTM foam only without the

temporising ﬁlm. It is supplied in various sizes.

PolyNovo announced on 19 September 2022

it had received FDA 510(k) clearance for

NovoSorb® MTX with a 2mm thickness and

a U.S. limited market release commenced in

April 2023. The total addressable U.S. market

comprising in and out-patient settings is

estimated at AUD $500 million. An additional

510(k) submission to further support the

MTX range will be submitted to the FDA later

in 2023 with further product extensions

scheduled in 2024.

100

150

200

250

2018 2019 2020 2021 2022 YTD

2023

108

172

214

20 PolyNovo Limited Annual Report 2023

DIRECTORS’ REPORT CONTINUED

Hernia Repair

PolyNovo has focused its approach to hernia

repair and is developing a targeted solution

for ventral hernia and complex abdominal

wall reconstruction. This comprises a novel

NovoSorb-based textile that will expand

the clinical application of the NovoSorb

polymer technology.

Plastics and Reconstructive

Device Products

PolyNovo previously announced that it has

taken the breast development program

in-house. We envisage this program will

leverage the experience and processes

developed for the hernia devices. The hernia

product development models serve as

eective building blocks for other tissue

reinforcement products in breast,

orthopaedics, and other applications.

We anticipate that manufacturing processes,

technology and equipment will be shared

across a range of new products.

NovoSorb Dermal Beta-Cell

Implant

PolyNovo is supplying NovoSorb BTM in

modiﬁed sizes to Beta-Cell Technologies,

a third-party R&D group. Beta-Cell is

collaborating with a global supplier of stem

cell-derived Islet cells for use in this program.

PolyNovo will be supplying NovoSorb BTM in

unique shapes and sizes for the trial and

Beta-Cell will explore the potential of

integrated NovoSorb BTM to host pancreatic

Islet cells in the skin. This treatment holds

signiﬁcant promise for treating Type 1 diabetes

with reduced reliance on a donor pancreas.

Capital Investment

PolyNovo’s capital expenditure in FY23 was

higher than FY22 due to investing in enhancing

manufacturing capabilities and oce expansion.

This included cleanroom upgrades and new

manufacturing and process equipment.

This capital investment was partly funded

by the Victorian State Governments Medtech

Manufacturing Capability Program in the

amount of $500k.

PolyNovo leased a property in September 2022

located next door to the current facilities which

will more than double the current oce and

manufacturing footprint. The design process

has commenced for the new manufacturing

facility which will service an additional

A$500m in annual sales.

Status of Markets

1H23 demonstrated the unshackling of

Covid-19 impacts with sales up 67.5% on the

prior period and strong customer account

growth. Access to hospitals, surgeons and

logistics capacity is comparable to pre-Covid

era albeit with some remnants remaining.

PolyNovo achieved 58.3% in sales growth for

FY23 including a $7.2m sales month in May

2023 and accelerated customer account

growth with now over 600 accounts in

direct markets.

PolyNovo recorded strong NovoSorb BTM

sales growth in all markets notably in the U.S.

up 34.0% in local USD currency and ROW was

up 133.9%. The ROW increase includes strong

performances in Australia up 84.3%, UK/Ireland

up 168.8%, Germany up 192.8% and also

strong sales in Canada and Hong Kong and

ﬁrst sales in India. Following the completion

of the $53m capital raising in November 2022

a recruitment drive for the U.S. sales and

marketing teams commenced and 28 hires

were completed by Q4 2023. The ecient

onboarding and training of the new employees

has had a positive impact on sales and account

growth but importantly sets up the business

for further growth in FY24. Inﬂation and rising

interest rates have increased some costs in

all markets including wages and salaries.

PolyNovo debt level remains low with an

equipment ﬁnance facility owing $2,802,941

as at 30 June 2023. PolyNovo maximises

interest earned on cash deposits via high

interest term deposits. To manage the impact

of higher inﬂation and interest costs we update

our cash ﬂow forecasts to include the impact

of changes in costs. The Group has a level of

discretion in managing cash outﬂows in response

to changes in the impact of rising costs.

Signiﬁcant Changes in

the State of Aairs

Other than the above and except as otherwise

set out in this report, the Directors are unaware

of any signiﬁcant changes in the principal

activities of PolyNovo during the year ended

30 June 2023.

Strategic Overview and

Likely Developments

PolyNovo’s focus over the next 12 months

will be to:

• Continue to accelerate revenue from

NovoSorb BTM in existing markets and

recently entered markets India, Canada

and Hong Kong

• Expand product range of NovoSorb BTM

and NovoSorb MTX

• Identify potential partners in China and Japan

• Identify potential partners for indication

expansion such as hernia and breast

• Finalise device design options for hernia

and breast

• Complete recruitment of 120 patients in

FY24 for the U.S. BARDA pivotal trial for

full thickness burns

• Near completion of the 138-patient

randomised control trial for diabetic foot

ulcers using NovoSorb SynPath

• Sign additional GPO/IDN agreements in

the U.S. to further accelerate sales

• Support BetaCell with the supply of

NovoSorb BTM for use as a dermal deposit

for Type 1 diabetes

• Finalise design and appoint construction

contractor for new manufacturing facility

at 326 Lorimer Street Port Melbourne

Signiﬁcant Events Aer

the Balance Date

The Directors are not aware of any other

matters or circumstances since the end of the

ﬁnancial year other than those described above,

nor otherwise dealt with in this report, which

have signiﬁcantly aected, or may signiﬁcantly

aect, the operations of the Group, the results

of those operations or the state of aairs of

the Group in subsequent ﬁnancial years.

Announcements released by the Company

aer 30 June 2023 include:

• 11 August 2023 - Webcast Details

FY23 Results

Financial Results

PolyNovo Limited reported revenue for the

year ended 30 June 2023 of $66,535,017 an

increase of $24,644,414 from the prior year’s

$41,890,603. The net loss aer tax (NLAT)

of $4,924,539 for FY23 was an increase of

$3,732,007 from the prior year’s net loss

of $1,192,532.

Excluding non-cash items of share-based

payments $1,113,207, unrealised forex gain

$787,301 and depreciation & amortisation

$2,282,553, the underlying net loss aer tax

is $2,316,080 (2022: net loss $1,996,442).

Several factors contributed to the result

as follows:

• Revenue from the sale of commercial

products for FY23 increased by

58.3% to $59,578,531 from the prior

year’s $37,643,160.

21PolyNovo Limited Annual Report 2023

• Revenue from BARDA for FY23 increased

by 49.2% to $5,662,938 from the prior

year’s $3,796,679. This increase is reﬂective

of the patient enrolment in the pivotal trial

which is currently at 64 patients out of a

target 120 patients.

• Other Income includes $408,000 from

Victorian State Government supporting

our manufacturing development and

commercialisation of new products.

• Employee related expenses increased by

84.1% to $39,438,210 but aer excluding

the reversal of share options and share

awards forfeited by the previous CEO and

COO on their resignations in the prior year of

$4,708,151, the increase for FY23 is 50.9%.

This increase is due to headcount increase

to drive and support growth primarily within

sales, marketing, production, research and

development, and quality.

• Research and development expenses

increased by 29.3% to $7,428,821 due

to increased activity in research and

commercialisation of new products.

• Depreciation and amortisation increased

by $448,446 attributable to property,

plant and equipment acquired for the

manufacturing facility and research

and development.

• Corporate, administrative, and overhead

expenses increased by 67.6% to

$17,415,763 reﬂecting the increased

growth and activity in the business.

R&D Tax Incentives

During the 2023 ﬁnancial year, the Company

received a 38.5% non-refundable tax oset

of $887,721 (non-cash) in relation to the

FY22 R&D tax incentive scheme.

As the Company has exceeded the

$20.0 million R&D cash tax threshold being

the maximum revenue allowable for the

claiming of a cash refund, a deduction is

recognised against taxable income.

Closing Share Price

Date $

30 June 2018 $0.54

30 June 2019 $1.54

30 June 2020 $2.54

30 June 2021 $2.82

30 June 2022 $1.35

30 June 2023 $1.55

A high of $4.01 was reached on

29 December 2020.

Loss Per Share

In Australian dollars $

Cents Basic loss per

share – cents (0.72)

Diluted loss per share (0.72)

As the Group made a loss for the year ended

30 June 2023, potential ordinary shares, being

options or performance rights to acquire

ordinary shares, are considered non-dilutive

and therefore not included in the diluted

earnings per share calculation.

As at 30 June 2023, there are 8,450,000

unvested share options issued and nil

performance rights.

Dividends

No amounts have been recommended by the

Directors to be paid by way of dividend during

the current ﬁnancial year. No cash dividends

have been paid or declared by PolyNovo since

the beginning of the ﬁnancial year.

Indemniﬁcation and Insurance

of Directors and Ocers

During the year ended 30 June 2023, the

Company indemniﬁed its Directors, Company

Secretary and Executive Ocers in respect

of any acts or omissions giving rise to a liability

to another person (other than the Company

or a related party) unless the liability arose

out of conduct involving a lack of good faith.

In addition, the Company indemniﬁed the

Directors and the Company Secretary against

any liability incurred by them in their capacity

as Directors or Company Secretary in

successfully defending civil or criminal

proceedings in relation to the Company.

No monetary restriction was placed on

this indemnity.

The Company has insured its Directors,

Company Secretary and Executive Ocers

for the period under review. Under the

Company’s Directors’ and Ocers’ Liability

Insurance Policy, the Company shall not release

to any third party or otherwise publish details

of the nature of the liabilities insured by the

policy or the amount of the premium.

Accordingly, the Company relies on section

300(9) of the Corporations Act 2001 to

exempt it from the requirement to disclose the

nature of the liability insured against and the

premium amount of the relevant policy.

Indemniﬁcation of Auditors

To the extent permitted by law, the Company

has agreed to indemnify its auditors, Ernst &

Young Australia, as part of the terms of its

engagement agreement against claims by

third parties arising from the audit (for an

unspeciﬁed amount). No payment has been

made to indemnify Ernst & Young Australia

during or since the ﬁnancial year.

Inherent Risks of Investment in

Biotechnology Companies

There are many inherent risks associated

with the development of pharmaceutical and

medical products to a marketable stage. The

clinical trial process is designed to assess the

safety and ecacy of a drug or medical device

prior to commercialisation and a signiﬁcant

proportion of drugs and medical devices fail

one or both of these criteria.

22 PolyNovo Limited Annual Report 2023

DIRECTORS’ REPORT CONTINUED

Board and Committee

Meetings

Details of the number of meetings of the

Board of Directors and Board committees,

and Directors’ attendance at those meetings,

during the year under review are set out in

the table below.

Other risks include uncertainty of patent

protection and proprietary rights, whether

patent applications and issued patents will

oer adequate protection to enable product

development, the obtaining of necessary

regulatory authority approvals and diculties

caused by the rapid advancements

in technology.

Companies such as PolyNovo are dependent

on the success of their research projects and

their ability to attract funding to support

these activities. Investment in research and

development projects cannot be assessed

on the same fundamentals as other trading

enterprises and access to capital and funding

for the Group and its projects going forward

cannot be guaranteed. Investment in

companies specialising in research projects,

such as PolyNovo, should be regarded as highly

speculative. PolyNovo strongly recommends

that professional investment advice be sought

prior to individuals making such investments.

The Company recognises it has an impact on the

environment, directly through its operations,

and indirectly through its value chain. PolyNovo

is committed to minimising the environmental

impact of its operations and its products.

Forward-looking Statements

Certain statements in this Annual Report

contain forward-looking statements regarding

the Company’s business and the therapeutic

and commercial potential of its technologies

and products in development. Any statement

describing the Company’s goals, expectations,

intentions, or beliefs is a forward-looking

statement and should be considered an at-risk

statement. Such statements are subject to

certain risks and uncertainties, particularly

those risks or uncertainties inherent in the

process of discovering, developing and

commercialising drugs and medical devices

that can be proven to be safe and eective for

use in humans, and in the endeavour of building

a business around such products and services.

PolyNovo undertakes no obligation to publicly

update any forward-looking statement,

whether as a result of new information, future

events, or otherwise. Actual results could

dier materially from those discussed in this

Annual Report. As a result, readers of this

report are cautioned not to rely on forward-

looking statements.

Directors’ Shareholdings

and Declared Interests

As at 30 June 2023, the Directors of

PolyNovo collectively hold 26,315,183

shares in the Company.

As at the date of this report the interests of

the Directors in the Company’s shares are:

Name

Directors

Shares held

directly

Shares held

indirectly

Mr David

Williams – 21,421,385

Mr Bruce

Rathie – 3,250,000

Mr Leon

Hoare – 1,180,220

Dr Robyn

Elliott 42,789 –

Ms Christine

Emmanuel-

Donnelly – 270,789

Mr Andrew

Lumsden – 150,000

Total 42,789 26,272,394

As at 30 June 2023 and as at the date of

this report, no Director has an interest in any

contract or proposed contract with PolyNovo

other than disclosed below or in the Group’s

2023 Annual Report. Further details of the

equity interests of Directors can be found in

the Remuneration Report.

Full Board Audit and Risk Committee Remuneration Committee

Directors Role

Meetings

Attended

Meetings

eligible to

attend

Meetings

Attended

Meetings

eligible to

attend

Meetings

Attended

Meetings

eligible to

attend

Total number of

meetings held

12 3 5

Mr David Williams* Non-Executive Director 12 12 – – 5 5

Dr Robyn Elliott Non-Executive Director 12 12 3 3 – –

Ms Christine Emmanuel-Donnelly Non-Executive Director 12 12 – – 5 5

Dr David McQuillan*** Non-Executive Director 1 2 – – – –

Mr Leon Hoare Non-Executive Director 12 12 – – 5 5

Mr Bruce Rathie Non-Executive Director 12 12 3 3 – –

Mr Andrew Lumsden** Non-Executive Director 11 12 3 3 – –

* Mr David Williams is Chair of the Remuneration Committee.

** Mr Andrew Lumsden is Chair of the Audit and Risk Committee.

*** Dr David McQuillan resigned as a director on 1 September 2022.

23PolyNovo Limited Annual Report 2023 23PolyNovo Limited Annual Report 2023

Auditor

Ernst & Young (EY) continues in oce in

accordance with section 327b (2) of the

Corporations Act 2001.

Non-audit Services

During the year ended 30 June 2023, the

amount received, or due and receivable for

non-audit services provided by PolyNovo’s

auditor Ernst & Young were as shown below.

The directors are satisﬁed that the provision

of non-audit services is compatible with the

general standard of independence for auditors

imposed by the Corporations Act 2001.

The nature and scope of each type of

non-audit service provided means that

auditor independence was not compromised.

Non-audit services $

Tax compliance and corporate

secretarial services 149,933

The auditor has provided a written declaration

that no professional engagement for the Group

has been carried out during the ﬁnancial

year that would impair Ernst & Young’s

independence as auditor. The declaration

is set out on Page 38.

24 PolyNovo Limited Annual Report 2023

25PolyNovo Limited Annual Report 2023

ESG STATEMENT AND CORPORATE GOVERNANCE

Apart from saving lives, to our knowledge,

no NovoSorb BTM treated area of our patients

have had to undergo scar revision surgery.

This reduces the social, economic, physiological,

and emotional demands of our patients allowing

them to recover to live their best possible lives.

We strive to improve on all aspects of our

business year on year in line with our

commercial development.

Our Approach to ESG

PolyNovo acknowledges the importance of

an integrated and consistent approach to

Environmental, Social and Governance (ESG)

risk factors. We have added additional

resources dedicated to delivering a holistic and

integrated, robust ESG framework and package.

Environment

PolyNovo acknowledges we have an important

role in protecting the environment and

recognises the contribution we can make

towards transitioning to a low carbon economy.

Our manufacturing process is already low

emitting, with approximately 560 grams of

carbon emitted per batch of NovoSorb BTM.

PolyNovo is carbon neutral certiﬁed for its

business operations for the reporting period

FY2021-22 (projected); the FY2021-22

true-up report is submitted and is currently

under assessment by Climate Active.

PolyNovo only uses environmentally

certiﬁed commercial waste disposal providers,

with minimal waste produced in our

manufacturing process. To further improve our

waste management processes, we engaged a

specialised third-party consultancy to develop

a waste management and reduction plan.

We are committed to reducing our operational

waste and water use. Our recycling programs

will be further enhanced by the ongoing

migration to paperless documentation systems

in our business support functions.

PolyNovo’s Environment Policy can be found on

its website: https://polynovo.com/about-us/

Social

Our People

Every employee plays a role in our success

and by working together, we develop new

opportunities for patients, customers,

our community, and shareholders.

The company has a strong focus on learning

and development, and all employees have

access to an online learning platform.

Employees also have an appraisal and

development program to ensure we continue

to develop our skill base, improve productivity,

and give employees and managers the

opportunity for personal and professional

growth. Training is achieved through targeted

educational programs and mentorship.

PolyNovo’s Gender Diversity Proﬁle

PolyNovo aims to provide an inclusive

workplace where everyone is valued and

treated with respect, without discrimination

or bias. We have developed a company-wide

Diversity Proﬁle, which is monitored to ensure

we are a leading example of a diverse

organisation in our industry. We celebrate

religious and cultural events with our teams

with learnings from these informing our

international operations. Embracing diversity

makes PolyNovo an interesting, exciting, and

dynamic workplace where alternative thinking

provides us with an innovative edge.

PolyNovo brings disruptive, innovative, and

regenerative medical devices to market that

improve clinical, functional and cosmetic

outcomes for patients. Our products oer

signiﬁcant health economic beneﬁts to patients,

surgeons, and health systems.

26 PolyNovo Limited Annual Report 2023

Managers/

Supervisors

Board of

Directors

ESG STATEMENT AND CORPORATE GOVERNANCE CONTINUED

Health & Safety

Safety is central to the responsible operation

of our business, and the health and safety

of our employees and contractors is a top

priority. We maintain a strong focus on

preventing injuries and continuously

improving our practices.

Our Health & Safety Policy arms our

aspiration to avoid harm, empower our people

to perform their tasks safely and responsibly,

and continuously improve our performance.

In FY21, we started measuring our safety

performance monthly to track progress and

enable comparison with published industry

data. Over FY23, there was zero (0) lost time

injury and zero (0) medical treatment injuries

to our employee and contractor workforce.

The company Total Recordable Injury

Frequency Rate (TRIFR) is zero for the year,

unchanged from FY22.

PolyNovo’s Health & Safety Policy can be

found on its website: https://polynovo.com/

about-us/.

Our Community

We support a number of charitable and

community-based programs, whose

principles align with PolyNovo’s, including

organisations that advance the lives of those

in disadvantaged social situations. It is an

honour and obligation of our organisation

to participate and support programs for

rehabilitation of both the body and mind of

patients who have had their lives impacted

by tragedy.

We are committed to engaging with research

and clinical activities that advance the quality

of life for those impacted by burn, trauma,

and tissue loss and are proud to have provided

NovoSorb BTM at no-cost for surgical

applications when surgeons are participating

in charitable or out-reach programs. At the

request of surgeons and medical organisations,

we supplied products for humanitarian needs

during FY23.

Partnership with Interplast

For 40 years, Interplast has worked in

25 countries, providing free reconstructive

surgery for patients who may otherwise

not be able to aord access to such services.

Interplast also empowers local medical

personnel by building their capacity to

independently provide clinical services

without Interplast support.

PolyNovo worked closely with the Interplast

team to assist with life-changing work in Fĳi,

where burns continue to present a signiﬁcant

public health burden. In April 2023, a trial of

NovoSorb BTM commenced, with PolyNovo

providing education to nursing and medical

sta at the Colonial War Memorial Hospital

in Fĳi.

33%

Women

67%

Men

All

Employees

38%

Women

62%

Men

41%

Women

59%

Men

The following graphs and table highlight the

proportion of women and men on the Board,

in senior management positions as well as

all employees across the organisation at

30 June 2023.

Global

Company Sta # Female

Middle

East/

African

Black/

African Hispanic

Asian/

Indian Indigenous Female

Middle

East/

African

Black/

African Hispanic

Asian/

Indian Indigenous

Sales 105 37 0 4 2 7 0 35% 0% 4% 2% 7% 0%

Marketing 14 8 0 0 1 3 0 57% 0% 0% 7% 21% 0%

Rest of

company 99 37 11 2 3 51 0 37% 11% 2% 3% 52% 0%

Total

company 218 82 11 6 6 61 0 38% 5% 3% 3% 28% 0%

Manager 73 30 4 2 2 23 0 41% 5% 3% 3% 32% 0%

C Suite 5 0 0 0 0 2 0 0% 0% 0% 0% 40% 0%

Company Diversity Proﬁle

As an example, NovoSorb BTM was used on

5-year-old Joseph, who in 2021, was playing

at his cousin’s house, when an accident led to

his pants catching ﬁre, resulting in severe burns

to his legs. He was rushed to a local clinic,

and then onto the ICU department at

Labasa Hospital in Fĳi, several hours from

Joseph’s village.

Joseph’s mother Divui initially donated skin

from her own legs to be used to gra his

wounds. Despite the initial care provided

by local surgeons, the scars on Joseph’s legs

contracted and he was unable to straighten

them fully. This meant he had trouble walking

and was at risk of infection.

The surgery using NovoSorb BTM was

successful, and the team have continued

to follow Joseph closely, providing ongoing

education and support to the local team in Fĳi

(Scott Buadromo – surgeon, Mereia Seru

– burns nurse and Akisi Dovibua – physio).

All were thrilled to receive the incredible news

in June that Joseph had returned to his home

village outside of Labasa, where he is now

walking and running around like any little boy

his age, for the ﬁrst time in many years.

Bioethics

PolyNovo is committed to upholding best-

practice bioethics principles and conducts

its operations in accordance with the highest

standards of bioethics, including in the conduct

of clinical trials.

PolyNovo only commissions animal testing

where required for regulatory approval.

Any necessary animal studies required are

conducted externally through specialised

providers and institutes, under ethics

committee approval. Such studies meet

audited GLP standards and have the

appropriate level of oversight in place from

health regulators, including the U.S. Food

and Drug Administration (FDA).

PolyNovo’s Commercial Code of Conduct can

be found on its website: https://polynovo.com/

about-us/

Modern Slavery

PolyNovo respects ethical labour practices

and takes a zero-tolerance approach to any

form of human rights abuses, including modern

slavery in our operations and supply chains.

We expect that all our employees, suppliers,

subcontractors, and agents will uphold

these values.

PolyNovo has developed a Modern Slavery

Statement that outlines our process for

complying with local and international Modern

Slavery laws. PolyNovo surveys suppliers for

compliance to this policy and only sources

materials from accredited manufacturers.

PolyNovo’s Modern Slavery Statement can be

found on its website: https://polynovo.com/

about-us/.

Governance

PolyNovo recognises the importance of good

corporate governance and the role it plays in

ensuring business is conducted honestly, fairly,

and legally. PolyNovo is committed to adopting

corporate governance policies to achieve the

objectives of acting ethically and responsibly,

safeguarding the integrity in corporate

reporting, making timely and balanced

disclosures, and recognising and managing risk.

The Board of PolyNovo reviews its policies and governance practices in reference to the eight

Principles of Good Corporate Governance (Principles) established by the ASX Corporate

Governance Council. The policies and governance practices in place are listed under Principles

of Good Corporate Governance below.

Principle PolyNovo Policy

1 Lay solid foundations for

management and oversight

PolyNovo Board Charter

2 Structure the board to be

eective and add value

PolyNovo Board Charter

3 Instill a culture of acting lawfully,

ethically, and responsibly

Commercial Code of Conduct

Whistle-blower Policy

Gender Diversity Policy

Share Trading Policy

Environment Policy

Modern Slavery Statement

4 Safeguard the integrity

of corporate reports

Audit and Risk Committee Charter

5 Make timely and balanced disclosure Market Disclosure Protocol

6 Respect the rights of security holders Communications Policy

7 Recognise and manage risk PolyNovo Risk Management Policy

Health and Safety Policy

8 Remunerate fairly and responsibly Remuneration and Nomination

Committee Charter

PolyNovo’s Corporate Governance Statement and policies can be found on its website

https://polynovo.com/about-us/.

27PolyNovo Limited Annual Report 2023

Joseph, who was

treated using NovoSorb

BTM at the Colonial

War Memorial Hospital

in Fĳi

28 PolyNovo Limited Annual Report 2023

The Directors of PolyNovo present the Remuneration Report prepared in accordance with section 300A of the Corporations Act 2001 for the

Company and its controlled entities (the Group) for the year ended 30 June 2023.

This Remuneration Report is audited. Variable pay arrangements to key management personnel are subject to the governance and approval of the

Remuneration Committee. This Remuneration Report forms part of the Directors’ Report and includes details of the Group’s remuneration strategy

and arrangements for the year ended 30 June 2023.

This report outlines the compensation arrangements for the key management personnel of PolyNovo and explains how these arrangements are linked

to Company performance.

1. Key Management Personnel

Key management personnel are those persons who are responsible for planning, directing and controlling the activities of the Group. The Board has

determined that the key management personnel of the Group are the Non‑executive Directors and Senior Managers (Executives) of PolyNovo,

whose details are set out below. The following are Key Management Personnel during the period unless otherwise stated.

1.1 Non‑executive Directors

• Mr David Williams – Non‑executive Chairman

• Dr Robyn Elliott – Non‑executive Director

• Ms Christine Emmanuel‑Donnelly – Non‑executive Director

• Mr Leon Hoare – Non‑executive Director

• Dr David McQuillan – Non‑executive Director (resigned as Non‑executive Director and was appointed as Chief Technical and Scientiﬁc Ocer

on 1 September 2022)

• Mr Bruce Rathie – Non‑executive Director

• Mr Andrew Lumsden – Non‑executive Director

1.2 Senior Management

• Mr Swami Raote – Chief Executive Ocer (appointed on 29 July 2022)

• Mr Jan Gielen – Chief Financial Ocer/Company Secretary

• Dr David McQuillan – Chief Technical and Scientiﬁc Ocer (appointed on 1 September 2022)

• Mr Philip Scorgie – Chief Information Ocer (appointed on 22 May 2023)

• Mr Max Johnston – Interim Chief Executive Ocer (appointed on 8 November 2021 and employment ended on 31 August 2022)

2. Remuneration Strategy

PolyNovo has designed its compensation policies to ensure signiﬁcant linkage between rewards and speciﬁc achievements that are intended to

improve shareholder wealth. In assessing the link between Group performance and compensation policy, it must be recognised that biotechnology

companies generally do not make a proﬁt until a drug or device is licensed or commercialised, either of which takes a number of years.

Furthermore, the biotechnology sector as a whole is highly volatile, signiﬁcantly driven by market sentiment and inherently high risk. Therefore, the

direct correlation of compensation policy and key ﬁnancial performance measures such as total shareholder return (TSR), net earnings per share or

Company earnings, in the view of the Board, are dicult to apply. As an alternative, key milestones are a more meaningful measure of performance

to correlate levels of compensation. These milestones are discrete achievements that can be used to evaluate PolyNovo’s progress towards

commercialising its various projects.

PolyNovo’s annual expenditure has predominantly been driven by research and development, clinical trials, expansion in direct markets and entering

new markets. The Group has not made a proﬁt and therefore no dividends have been declared, nor has there been a return of capital. The Group’s

performance is based on its key milestones and with more of the Group’s activities slanted towards commercialisation, additional milestones in relation

to the achievement of product sales and production targets will be added to clinical trials and licensing deals milestones. Such milestones are directly

linked to performance conditions set within the short‑term incentives that form a signiﬁcant proportion of Senior Management compensation.

The Board continues to review the Group’s compensation policy to ensure competitive and appropriate rewards against increases in shareholder value.

PolyNovo’s compensation policy for key management personnel is designed to provide competitive and appropriate rewards that are transparent

and fully aligned to shareholder interests. The Company has a compensation policy for Non‑executive Directors and a separate policy for the

CEO and Senior Managers.

REMUNERATION REPORT – AUDITED

29PolyNovo Limited Annual Report 2023

2.1 Non‑executive Director Remuneration

The compensation of Non‑executive Directors is based on market practice, Directors’ duties and the level of Director accountability.

The compensation policy is designed to attract and retain competent and suitably qualiﬁed Non‑executive Directors and aims to align Directors’

interests with the interests of shareholders. Non‑executive Directors are paid a set fee plus statutory superannuation, where appropriate, and are

reimbursed for out‑of‑pocket expenses. In addition, as medium‑and long‑term incentives, Non‑executive Directors may be invited to participate in

the PolyNovo Employee Share Option Plan. Non‑executive Directors are encouraged to own shares in PolyNovo. Non‑executive Directors’ fees are

determined within an aggregate Directors’ fee pool limit, which is approved by shareholders. This limit has been set at $850,000 (2022: $850,000).

Total Non‑executive Directors’ fees (including superannuation but excluding share‑based payments) for the year ended 30 June 2023 were $635,190

(2022: $569,858). The Directors’ fees are considered within the average range for similar sized companies in the biotechnology industry and are

reviewed periodically.

2.2 Senior Management Remuneration

PolyNovo’s compensation policy for its senior managers is determined by the Board and Remuneration Committee and is designed to link performance

and retention strategies to ensure that:

• the balance between ﬁxed and variable (performance) components for each position is appropriate in light of internal and external factors;

• the objectives set for each person will result in sustainable beneﬁcial outcomes for PolyNovo and its shareholders;

• all variable (performance) components are appropriately linked to measurable personal, business unit or Company outcomes; and

• total compensation (the sum of ﬁxed and variable components) for each Senior Manager is fair, reasonable and market competitive.

Generally, there are three components of Senior Management compensation, as follows:

1. Fixed annual compensation comprising salary and beneﬁts, superannuation, and non‑monetary beneﬁts.

2. Short‑term incentives, through a bonus scheme dependent upon performance against objectives and targets which are linked to PolyNovo’s

overall corporate strategy.

3. Long‑term incentives, through participation in the PolyNovo Employee Share Option Plan (the Plan) with share price thresholds to be achieved.

2.2.1 Fixed Annual Compensation

Senior Managers are oered a market competitive base salary, which reﬂects their competencies, job description as well as the size of the Group.

Base salaries are reviewed against market data for comparable positions. Adjustments to base salary are made based on signiﬁcant role responsibility

changes, pay relativities to market and relative performance in the role.

2.2.2 Short Term Incentives

PolyNovo’s short‑term incentive policy for Senior Managers encourages high‑quality performance in achieving key performance indicators during

the current ﬁnancial year. Bonus schemes are widely recognised as an eective way of providing performance incentives.

Short‑term incentives are based on the Company exceeding budgeted total group revenue and EBITDA by at least ten percent (10%). The maximum

incentive is twenty percent (20%) of salary, except for CEO Mr Swami Raote’s incentive which is up to 50% of salary and also includes ESG and

diversity hurdles. CEO Mr Swami Raote’s incentive shall be paid in two halves, being 50% as taxable salary and 50% as free shares calculated at

the 30‑day Volume Weighted Average Price (VWAP) as at the date the annual bonus was awarded. Free shares awarded will be held in escrow

for 12 months.

For bonus entitlement details please refer to Table A.

2.2.3 Long Term Incentives

PolyNovo’s medium‑and long‑term incentive policy for Senior Managers encourages high‑quality performance and long‑term retention. Carefully

designed and performance linked equity incentive plans are widely recognised as an eective way of providing performance incentives. Long‑term

incentive plans are measured over 3 to 5 years.

30 PolyNovo Limited Annual Report 2023

REMUNERATION REPORT – AUDITED CONTINUED

3. Service Contracts

3.1 Chief Executive Ocer (CEO)

Mr Swami Raote was appointed as CEO of PolyNovo Limited on 29 July 2022.

During the year ended 30 June 2023, his employment contract is aligned with executive positions in other similar companies to improve retention

and to reward performance in line with Company strategy.

The key terms of his contract are as follows:

• a salary of USD $450,000 per annum;

• USA pension plan 401(k) of 4% matching employee contributions based on salary;

• a short‑term annual performance bonus of up to 50% of gross base salary, dependent upon the Company’s performance against key targets;

• a long‑term incentive plan in the form of equity interest. Details of the Long‑term incentive plan and the fair value of awards and other

compensation are included in the ‘CEO Performance Incentives’ section of the Remuneration Report and in Tables A, B, C and D below; and

• no ﬁxed employment term.

3.2 Company Secretary and Chief Financial Ocer (CFO)

Mr Jan Gielen was appointed as CFO and Company Secretary on 12 December 2018.

During the year ended 30 June 2023, his employment contract is aligned with executive positions in other similar companies to improve retention

and to reward performance in line with Company strategy.

The terms of his contract are as follows:

• a salary of $247,519 per annum;

• superannuation of 10.5%;

• a long‑term incentive plan in the form of equity interest. Details of the options package and the fair value of options and other compensation

are included in the ‘CFO Performance Incentives’ section of the Remuneration Report and in Tables A, B, C and D below; and

• no ﬁxed employment term.

3.3 Chief Technical and Scientiﬁc Ocer (CTSO)

Dr David McQuillan resigned as Non‑Executive Ocer and was appointed as Chief Technical and Scientiﬁc Ocer on 1 September 2022.

During the year ended 30 June 2023, his employment contract is aligned with executive positions in other similar companies to improve retention

and to reward performance in line with Company strategy.

The terms of his contract are as follows:

• a salary of USD $215,000 per annum;

• a short‑term annual performance bonus of up to 20% of gross base salary, dependent upon the Company’s performance against key targets;

• a long‑term incentive plan in the form of equity interest. Details of the options package and the fair value of options and other compensation

are included in the ‘CTSO Performance Incentives’ section of the Remuneration Report and in Tables A, B, C and D below; and

• no ﬁxed employment term.

3.4 Chief Information Ocer (CIO)

Mr Philip Scorgie was appointed as CIO on 22 May 2023.

During the year ended 30 June 2023, his employment contract is aligned with executive positions in other similar companies to improve retention

and to reward performance in line with Company strategy.

The terms of his contract are as follows:

• a salary of $226,224 per annum;

• superannuation of 10.5%;

• a short‑term annual performance bonus of up to 15% of salary inclusive of superannuation, dependent upon the Company’s performance against

key targets;

• a long‑term incentive plan in the form of equity interest. Details of the options package and the fair value of options and other compensation

are included in the ‘CIO Performance Incentives’ section of the Remuneration Report and in Tables A, B, C and D below; and

• no ﬁxed employment term.

31PolyNovo Limited Annual Report 2023

4. Long Term Incentives

4.1 CEO Incentives

On 29 July 2022, PolyNovo granted 5 million shares options in ﬁve equal tranches to CEO. Details of the ﬁve tranches are set out below.

The vesting hurdle for the options is linked to CEO’s length of employment and the PolyNovo volume weighted average market price. The vesting

hurdles applied to all 5 tranches are as follows and options only vest when both exercise conditions have been satisﬁed:

• First hurdle –each tranche of 1,000,000 options cannot vest or be exercised until aer the anniversary of the commencement of employment

each year, details refer to below table; and

• Second hurdle – shares have been trading 30 continuous days at premium to the exercise price.

Details of the vesting hurdle for the ﬁve tranches are as follows:

• Tranche 1: One Million (1,000,000) Options cannot vest or be exercised until aer the one (1) year anniversary of the commencement of

employment and until such time as shares in PolyNovo have been trading 30 continuous days at 50% greater than the exercise price or above;

• Tranche 2: One Million (1,000,000) Options cannot vest or be exercised until aer the two (2) year anniversary of the commencement of

employment and until such time as shares in PolyNovo have been trading 30 continuous days at 75% greater than the exercise price or above;

• Tranche 3: One Million (1,000,000) Options cannot vest or be exercised until aer the three (3) year anniversary of the commencement of

employment and until such time as shares in PolyNovo have been trading 30 continuous days at 100% greater than the exercise price or above;

• Tranche 4: One Million (1,000,000) Options cannot vest or be exercised until aer the four (4) year anniversary of the commencement of

employment and until such time as shares in PolyNovo have been trading 30 continuous days at 150% greater than the exercise price or above; and

• Tranche 5: One Million (1,000,000) Options cannot vest or be exercised until aer the ﬁve (5) year anniversary of the commencement of

employment and until such time as shares in PolyNovo have been trading 30 continuous days at 200% greater than the exercise price or above.

The exercise price is $1.64 per option tranche.

Sixty percent (60%) of the shares issued on the exercise of options will be restricted shares subject to rule 9 of the Employee Option Plan until the

ﬁrst anniversary of the date of issue of the shares. Shares issued will be in escrow for twelve months and until that time will be unable to be dealt with.

Whether they have vested or not, the options will be cancelled on the date of termination or cessation of employment.

Accumulated share options expense recognised during the year ended 30 June 2023 was $716,338. Details of the options package are included

in the Tables A, B, C and D below.

4.2 CFO Incentives

On 6 March 2019, PolyNovo issued an options package comprising three tranches totalling 1,000,000 options to the CFO, Mr Jan Gielen.

Details of the three tranches are set out below.

The vesting hurdle for the options is linked to Mr Jan Gielen’s length of employment and the PolyNovo volume weighted average market price.

The vesting hurdles are as follows:

• First hurdle – 12 months of employment with the Company; and

• Second hurdle – a share price of 90 cents must be sustained over a period of at least continuous 3 months.

Once vested, the options can be exercised in three tranches as follows:

• Tranche 1: 300,000 options – not to be exercised before 31 December 2020 and not later than 30 June 2021;

• Tranche 2: 300,000 options – not to be exercised before 31 December 2021 and not later than 30 June 2022; and

• Tranche 3: 400,000 options – not to be exercised before 31 December 2022 and not later than 30 June 2023.

The exercise price is $0.60 per option tranche.

All shares issued under the incentive scheme are escrowed for a period of 12 months from date of issue. Sixty percent (60%) of the shares issued

on the exercise of options are restricted shares subject to rule 9 of the Employee Option Plan for a period of 12 months from the date of issue.

Whether they have vested or not, the options will be cancelled on the date of termination or cessation of employment.

Tranche 1 was exercised on 26 February 2021. Tranche 2 was exercised on 21 January 2022. Tranche 3 was exercised on 16 February 2023.

32 PolyNovo Limited Annual Report 2023

REMUNERATION REPORT – AUDITED CONTINUED

4.3 CTSO Incentives

On 2 September 2022, PolyNovo issued an options package comprising three tranches totalling 1,200,000 options to the CTSO. Details of the three

tranches are set out below.

The vesting hurdle for the options is linked to CTSO’s length of employment and the PolyNovo volume weighted average market price. The vesting

hurdles are as follows:

• First hurdle – 6 months of employment with the Company; and

• Second hurdle – shares in PolyNovo have been trading at all times at or above 150% of the exercise price for a continuous three months period.

Once vested, the options can be exercised in three tranches as follows:

• Tranche 1: 400,000 options – not to be exercised until 6 months of employment and not later than 30 May 2025;

• Tranche 2: 400,000 options – not to be exercised until 18 months of employment and not later than 30 May 2025; and

• Tranche 3: 400,000 options – not to be exercised until 24 months of employment and not later than 30 May 2026.

The exercise price is $1.81 per option tranche.

Sixty percent (60%) of the shares issued on the exercise of options will be restricted shares subject to rule 9 of the Employee Option Plan until the

ﬁrst anniversary of the date of issue of the shares. Shares issued will be in escrow for twelve months and until that time will be unable to be dealt with.

Whether they have vested or not, the options will be cancelled on the date of termination or cessation of employment.

Accumulated share rewards expense recognised during the year ended 30 June 2023 was $180,411. Details of the options package are included

in the Tables A, B, C and D below.

4.4 CIO Incentives

On 22 May 2023, PolyNovo issued an options package comprising three tranches totalling 500,000 options to the CIO. Details of the three tranches

are set out below.

The vesting hurdle for the options is linked to CIO’s length of employment and the PolyNovo volume weighted average market price. The vesting

hurdles are as follows:

• First hurdle – 12 months of employment with the Company; and

• Second hurdle – shares in PolyNovo have been trading at all times at or above 150% of the exercise price for a continuous three months period.

Once vested, the options can be exercised in three tranches as follows:

• Tranche 1: 150,000 options – not to be exercised until 12 months of employment and not later than 31 May 2028;

• Tranche 2: 150,000 options – not to be exercised until 24 months of employment and not later than 31 May 2028; and

• Tranche 3: 200,000 options – not to be exercised until 36 months of employment and not later than 31 May 2028.

The exercise price is $1.37 per option tranche.

Sixty percent (60%) of the shares issued on the exercise of options will be restricted shares subject to rule 9 of the Employee Option Plan until the

ﬁrst anniversary of the date of issue of the shares. Shares issued will be in escrow for twelve months and until that time will be unable to be dealt with.

Whether they have vested or not, the options will be cancelled on the date of termination or cessation of employment.

Accumulated share rewards expense recognised during the year ended 30 June 2023 was $10,075.

33PolyNovo Limited Annual Report 2023

5. Key Management Personnel Statutory Remuneration Tables

Details of the remuneration for key management personnel for the years ended 30 June 2023 and 30 June 2022 are set out in Table A, B, C

and D below.

5.1 Key Management Personnel Remuneration 2023 and 2022

Short‑term Long‑term

Table A

Directors

Cash

Salary

& Fees

Cash

Bonus

Options

Super‑

annuation

Leave

Allow‑

ances

Options

& Share

Awards

Termi‑

nation

Benefits

Total

Perfor‑

mance

Based

Mr David Williams

(Chairman/Non‑Executive

Director)

2023 126,697 – – 13,303 – – – 140,000 –

2022 107,161 – – 10,716 – – – 117,877 –

Mr Bruce Rathie

(Non‑Executive Director)

2023 86,364 – – 9,068 – – – 95,432 –

2022 69,536 – – 6,954 – – – 76,489 –

Dr David McQuillan

(Non‑Executive Director)

2023 18,028 – – – – – – 18,028 –

2022 69,536 – – – – – – 69,536 –

Mr Leon Hoare

(Non‑Executive Director)

2023 95,432 – – – – – – 95,432 –

2022 73,293 – – 3,196 – – – 76,489 –

Dr Robyn Elliott

(Non‑Executive Director)

2023 86,364 – – 9,068 – – – 95,432 –

2022 69,536 – – 6,954 – – – 76,489 –

Ms Christine

Emmanuel‑Donnelly

(Non‑Executive Director)

2023 86,364 – – 9,068 – – – 95,432 –

2022 69,536 – – 6,954 – – – 76,489 –

Mr Andrew Lumsden

(Non‑executive Director)

2023 93,165 – – 2,267 – – – 95,432 –

2022 69,536 – – 6,954 – – – 76,489 –

Sub total compensation

for Directors

2023 592,415 – – 42,775 – – – 635,190 –

2022 528,132 – – 41,727 – – – 569,858 –

34 PolyNovo Limited Annual Report 2023

REMUNERATION REPORT – AUDITED CONTINUED

Short‑term Long‑term

Table A

Senior Management

Cash

Salary

& Fees

Cash

Bonus

Options

Super‑

annuation/

USA

Pension

Plan

401(k)

Leave

Allow‑

ances

Options

& Share

Awards

Termin‑

ation

Benefits

Total

Perform‑

ance

Based

Mr Swami Raote

2023 616,680 153,732 153,732 5,374 41,706 716,338 – 1,6 87, 562 52%

2022 – – – – – – – – 0%

Mr Jan Gielen

2023 243,202 – – 25,536 22,896 – – 291,634 0%

2022 217,687 – – 21,769 5,292 – – 244,748 0%

Dr David McQuillan

2023 297, 54 0 53,418 – 2,323 13,390 180,411 – 547, 0 82 43%

2022 – – – – – – – – 0%

Mr Philip Scorgie

2023 25,813 – – 2,710 2,339 10,075 – 40,936 25%

2022 – – – – – – – – 0%

Mr Paul Brennan

2023 – – – – – – – – 0%

2022 254,114 – – 25,411 (76,542) (3,817,982) 73,348 (3,541,650) 108%

Mr Max Johnson

2023 62,525 – – 4,773 (14,340) – 17,071 70,029 0%

2022 176,923 – – 17,692 14,340 – – 208,955 0%

Dr Anthony Kaye

2023 – – – – – – – – 0%

2022 80,023 – – 8,002 (6,688) (211,660) 9,828 (120,494) 176%

Sub total compensation

for Other Key

Management Personnel

2023 1,245,759 207,150 153,732 40,716 65,991 906,824 17,071 2,637,243 42%

2022 728,748 – – 72,875 (63,599) (4,029,641) 83,175 (3,208,442) 126%

Total compensation

for all Key Management

Personnel

2023 1,838,174 207,150 153,732 83,491 65,991 906,824 17, 071 3,272,432 34%

2022 1,256,880 – – 114,6 01 (63,599) (4,029,641) 83,175 (2,638,584) 153%

Notes

1. Dr David McQuillan resigned as Non‑executive Director and was appointed as Chief Technical and Scientiﬁc ocer on 1 September 2022.

2. Mr Swami Raote was appointed as Chief Executive Ocer on 29 July 2022.

3. Mr Philip Scorgie was appointed as Chief Information Ocer on 22 May 2023.

4. Mr Paul Brennan resigned as Managing Director on 5 November 2021.

5. Mr Max Johnston was appointed as interim CEO on 8 November 2021 and his employment ended on 31 August 2022.

6. Dr Anthony Kaye resigned as Chief Operating Ocer on 6 October 2021.

7. The annual bonus is determined aer the annual audited ﬁnancial report has been signed of and is subject to change following Board approval.

35PolyNovo Limited Annual Report 2023

5.2 Share options and awards granted or exercised in FY2023

During the year ended 30 June 2023, 6,700,000 share options (2022: nil) were granted to key management personnel. 400,000 share options

were exercised by CFO in FY2023. The options exercised are pursuant to the PolyNovo Employee Share Option Plan.

Details of the share‑based payment component included in total remuneration in Table B are set out below.

Table B

KMP

Grant

Date

Grant

Number

Average

Fair Value

per Option

at Grant

Date

Fair Value

of Options

Granted

During the

Year

Number

of Options

Exercised

During the

Year

Value

of Options

Exercised

During the

Year

Value

of Options

Received

Upon

Exercise

Mr Jan Gielen

Options 06/03/2019 300,000 0.236 – – – –

Options 06/03/2019 300,000 0.311 – – – –

Options 06/03/2019 400,000 0.394 – 400,000 476,000 716,000

Total 1,000,000 – 400,000 476,000 716,000

Mr Swami Raote

Options 29/07/2022 1,000,000 0.702 702,000 – – –

Options 29/07/2022 1,000,000 0.778 778,000 – – –

Options 29/07/2022 1,000,000 0.889 889,000 – – –

Options 22/07/2022 1,000,000 0.940 940,000 – – –

Options 29/07/2022 1,000,000 1.062 1,062,000 – – –

Total 5,000,000 4,371,000 – – –

Dr David McQuillan

Options 02/09/2022 400,000 0.408 163,200 – – –

Options 02/09/2022 400,000 0.423 169,200 – – –

Options 02/09/2022 400,000 0.502 200,800 – – –

Total 1,200,000 533,200 – – –

Mr. Philip Scorgie

Options 15/05/2023 150,000 0.682 102,300 – – –

Options 15/05/2023 150,000 0.621 93,150 – – –

Options 15/05/2023 200,000 0.541 108,200 – – –

Total 500,000 303,650 – – –

Mr Max Johnston – – – – – –

Total – – – – – –

Notes

1. Determined at the time of grant per AASB 2. For details on the valuation of the options, including models and assumptions used, please refer to note 35.

2. Determined at the time of exercise at the intrinsic value. Exercise price was $0.60, market price was $1.79, intrinsic value was $1.19 per share.

3. Determined at the time of exercise at the market value.

36 PolyNovo Limited Annual Report 2023

REMUNERATION REPORT – AUDITED CONTINUED

5.3 Share options and awards vested or forfeited in 2023

The share options and awards of key management personnel for the year ended 30 June 2023 are set out in the following table:

Table C

KMP

Balance

at 1 July

2022

Options

Granted

During

Year

Options

Exercised

During

Year

Options

Forfeited

During

Year

Total

Vested

at End of

Year

Total

Exercisable

at End of

Year

Total Not

Exercisable

at End of

Year

Balance

at 30 June

2023

Mr Swami Raote – 5,000,000 – – – – 5,000,000 5,000,000

Mr Jan Gielen 400,000 – (400,000) – – – – –

Dr David McQuillan – 1,200,000 – – – – 1,200,000 1,200,000

Mr Philip Scorgie – 500,000 – – – – 500,000 500,000

Mr Max Johnston – – – – – – – –

Total 400,000 6,700,000 (400,000) – – – 6,700,000 6,700,000

5.4 Movements in shares of the Company

The movement during the reporting period in the number of shares in the Company held either directly or indirectly by each of the key management

personnel, including their related parties, is set out in the table below:

Table D

Balance

at 1 July

2022

Granted as

Compen‑

sation

Exercise of

Options

Net

Change

Other

Balance

at 30 June

2023

Balance

at End

of Year –

Directly

Held

Balance

at End

of Year –

Indirectly

Held

Directors

Mr David Williams 24,592,087 – – (3,170,702) 21,421,385 – 21,421,385

Mr Bruce Rathie 3,050,000 – – 200,000 3,250,000 – 3,250,000

Mr Leon Hoare 1,180,220 – – – 1,180,220 – 1,180,220

Dr Robyn Elliott – – – 42,789 42,789 42,789 –

Ms Christine Emmanuel‑Donnelly 115,000 – – 155,789 270,789 – 270,789

Mr Andrew Lumsden 100,000 – – 50,000 150,000 – 150,000

Dr David McQuillan

608,313 – – – 608,313 608,313 –

Other key Management personnel

Mr Jan Gielen 600,000 – 400,000 (90,000) 910,000 610,000 300,000

Dr David McQuillan

608,313 – – 59,880 668,193 668,193 –

Mr Swami Raote – – – – – – –

Mr Philip Scorgie – – – – – – –

Mr Max Johnston – – – – – – –

Notes

1. Dr David McQuillan resigned as Non‑executive Director and appointed as Chief Technical and Scientiﬁc Ocer on 1 September 2022.

His ending balance date in Directors table and beginning balance date in KMP table is 1 September 2022.

2. Opening balance excludes shares held by closely related parties where there is no control or signiﬁcant inﬂuence by the KMP.

3. ‘Net Change Other’ reﬂects shares privately acquired or disposed during the year and shares held by resigned KMP on the date of their

cessation of employment.

37PolyNovo Limited Annual Report 2023

6. Loans to Key Management Personnel

No loans have been made to Directors of PolyNovo or to any other key management personnel, including their personally related entities.

7. Other Key Management Personnel Transactions

Kidder Williams Ltd, an entity associated with David Williams, received payment in the amount of $110,000, GST inclusive. The payment was

in respect to consulting services provided to PolyNovo Limited at standard commercial terms and conditions in relation to the capital raising.

Other than as noted above, there were no transactions with key management personnel during the year ended 30 June 2023.

End of Remuneration Report – Audited.

This Directors’ Report, incorporating the Corporate Governance Statement and Remuneration Report, has been signed in accordance with

a Resolution of the Directors made on 23 August 2023.

Proceedings on behalf of the company

No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the company,

or to intervene in any proceedings to which the company is a party for the purpose of taking responsibility on behalf of the company for all or

part of those proceedings.

This report is made in accordance with a resolution of directors, pursuant to section 298(2)(a) of the Corporations Act 2001.

On behalf of the directors

Mr David Williams

Chairman

23 August 2023

38 PolyNovo Limited Annual Report 2023

AUDITOR’S INDEPENDENCE DECLARATION

A member firm of Ernst & Young Global Limited

Liability limited by a scheme approved under Professional Standards Legislation

Ernst & Young

8 Exhibition Street

Melbourne VIC 3000 Australia

GPO Box 67 Melbourne VIC 3001

Tel: +61 3 9288 8000

Fax: +61 3 8650 7777

ey.com/au

Auditor’s independence declaration to the directors of

PolyNovo Limited

As lead auditor for the audit of the financial report of PolyNovo Limited for the financial year ended

30 June 2023, I declare 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 audit;

b. No contraventions of any applicable code of professional conduct in relation to the audit; and

c. No non-audit services provided that contravene any applicable code of professional conduct in

relation to the audit.

This declaration is in respect of PolyNovo Limited and the entities it controlled during the financial

year.

Ernst & Young

Ashley Butler

Partner

23 August 2023

39PolyNovo Limited Annual Report 2023

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the year ended 30June2023

Consolidated

Note

30 June 2023

30 June 2022

Revenue

Revenue from contracts with customers 4 65,241,469 41,439,839

Interest income 869,625 671

Other income 5 423,923 450,093

66,535,017 41,890,603

Expenses

Changes in inventories of ﬁnished goods and work in progress (4,433,696) (2,202,686)

Employee‑related expenses 6 (39,438,210) (21,419,312)

Research and development expenses (7,428, 821) (5,747,156)

Depreciation and amortisation expenses 7 (2,037,462) (1,589,016)

Corporate, administrative and overhead expenses 8 (17,415,763) (10,392,159)

Interest expenses 9 (528,044) (95,216)

Finance costs 10 (186,119) (220,150)

Impairment loss 11 – (1,375,832)

Loss before income tax (expense)/beneﬁt (4,933,098) (1,150,924)

Income tax (expense)/beneﬁt 12 8,559 (41,608)

Loss aer income tax (expense)/beneﬁt for the year

attributable to the owners of PolyNovo Limited (4,924,539) (1,192,532)

Other comprehensive income/ (loss)

Items that may be reclassiﬁed subsequently to proﬁt or loss

Loss on translation of foreign operation (681,421) (144,458)

Other comprehensive income/ (loss) for the year, net of tax (681,421) (144,458)

Total comprehensive income/ (loss) for the year

attributable to the owners of PolyNovo Limited (5,605,960) (1,336,990)

Cents Cents

Loss per share for loss attributable to the owners of PolyNovo Limited

Basic loss per share 34 (0.72) (0.18)

Diluted loss per share 34 (0.72) (0.18)

The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.

40 PolyNovo Limited Annual Report 2023

Consolidated

Note

30 June 2023

30 June 2022

Assets

Current assets

Cash and cash equivalents 13 46,846,946 6,102,192

Trade and other receivables 14 13,692,791 6,089,442

Contract cost assets 15 306,834 146,315

Inventories 16 4,530,285 2,535,293

Other ﬁnancial assets 26 50,000 50,000

Prepayments 18 1,903,339 1,261,988

Income tax receivables 12 24,030 4,279

Total current assets 67,354,225 16,189,509

Non‑current assets

Contract cost assets 15 182,893 329,208

Property, plant and equipment 19 11,115,326 9,946,085

Right‑of‑use assets 17 12,252,318 6,805,460

Intangibles 20 1,156,624 1,404,472

Prepayments 18 559,263 296,796

Total non‑current assets 25,266,424 18,782,021

Total assets 92,620,649 34,971,530

Liabilities

Current liabilities

Trade and other payables 21 9,134,930 4,967,879

Interest‑bearing loans and borrowings 22 1,398,158 1,330,058

Lease liabilities 23 491,979 457,750

Provisions 24 1,642,287 1,000,606

Total current liabilities 12,667,354 7,756,293

Non‑current liabilities

Interest‑bearing loans and borrowings 22 1,788,769 2,802,940

Lease liabilities 23 12,364,776 6,403,721

Provisions 24 416,608 293,490

Total non‑current liabilities 14,570,153 9,500,151

Total liabilities 27,237, 507 17,256,444

Net assets 65,383,142 17,715, 086

Equity

Issued capital 25 191,591,311 139,430,502

Reserves 25 (4,829,857) (5,261,643)

Accumulated losses 25 (121,378,312) (116,453,773)

Total equity 65,383,142 17,715, 086

The above consolidated statement of ﬁnancial position should be read in conjunction with the accompanying notes.

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 30June2023

41PolyNovo Limited Annual Report 2023

Consolidated

Contributed

Equity

Other

Reserves

Acquisition

of Non‑

Controlling

Interest

Reserves

Accumulated

Losses

Total

Equity

Balance at 1 July 2021 139,250,502 7,656,740 (9,293,956) (115,261,241) 22,352,045

Loss aer income tax expense for the year – – – (1,192,532) (1,192,532)

Other comprehensive income for the year, net of tax – (144,458) – – (144,458)

Total comprehensive income for the year – (144,458) – (1,192,532) (1,336,990)

Exercise of options 180,000 – – – 180,000

Share‑based payments (note 35) – (3,479,969) – – (3,479,969)

Balance at 30 June 2022 139,430,502 4,032,313 (9,293,956) (116,453,773) 17,715, 086

Consolidated

Contributed

Equity

Other

Reserves

Acquisition

of Non‑

Controlling

Interest

Reserves

Accumulated

Losses

Total

equity

Balance at 1 July 2022 139,430,502 4,032,313 (9,293,956) (116,453,773) 17,715, 0 86

Loss aer income tax beneﬁt for the year – – – (4,924,539) (4,924,539)

Other comprehensive income for the year, net of tax – (681,421) – – (681,421)

Total comprehensive income for the year – (681,421) – (4,924,539) (5,605,960)

Issue of share capital 53,000,835 – – – 53,000,835

Capital raising costs (1,467, 526) – – – (1,46 7, 526)

Exercise of options 627, 50 0 – – – 627, 50 0

Share‑based payments (note 35) – 1,113,207 – – 1,113,207

Balance at 30 June 2023 191,591,311 4,464,099 (9,293,956) (121,378,312) 65,383,142

The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the year ended 30June2023

42 PolyNovo Limited Annual Report 2023

Consolidated

Note

30 June 2023

30 June 2022

Cash ﬂows from operating activities

Receipts from customers 55,333,642 36,884,778

Receipt from BARDA reimbursements and advances 3,676,431 4,220,005

Receipt from grant income 404,800 247,720

Receipt from other revenue 72,290 –

Payment of interest on borrowings (186,119) (220,150)

Payment of interest on lease liabilities (528,044) (95,216)

Payments to suppliers and employees (65,385,528) (43,094,171)

Net cash used in operating activities (6,612,528) (2,057,034)

Cash ﬂows from investing activities

Payments for property, plant and equipment (1,528,229) (491,929)

Interest received 679,461 400

Receipts from sale and leaseback of property 11 – 6,350,000

Net cash from/(used in) investing activities (848,768) 5,858,471

Cash ﬂows from ﬁnancing activities

Proceeds from borrowings – 1,860,780

Proceeds from the issue of share capital (net of equity raising costs) 51,423,489 –

Proceeds from the exercise of options 627, 50 0 180,000

Repayment of principal on borrowings (3,159,849) (7,095,469)

Repayment of principal on lease liabilities (826,759) (333,625)

Net cash from/(used in) ﬁnancing activities 48,064,381 (5,388,314)

Net increase/(decrease) in cash and cash equivalents 40,603,085 (1,586,877)

Cash and cash equivalents at the beginning of the ﬁnancial year 6,102,192 7,688,554

Eects of exchange rate changes on cash and cash equivalents 141,669 515

Cash and cash equivalents at the end of the ﬁnancial year 13 46,846,946 6,102,192

The above consolidated statement of cash ﬂows should be read in conjunction with the accompanying notes

CONSOLIDATED STATEMENT OF CASH FLOWS

For the year ended 30June2023

43PolyNovo Limited Annual Report 2023

Note 1. Corporate information

The Financial Report of PolyNovo Limited (the Company) and its controlled entities (the Group) for the year ended 30 June 2023 was authorised

for issue in accordance with a resolution of the Directors on 23 August 2023.

PolyNovo Limited, a for‑proﬁt entity, is a Company incorporated in Australia, whose shares are publicly traded on ASX Limited (ASX code: PNV).

The Company operates predominantly in the medical device and healthcare industry and has operations in Australia, New Zealand, United Kingdom,

Ireland, Singapore and the USA. During the year ended 30 June 2023, the Group has incorporated two additional 100% owned subsidiaries in India

and Hong Kong, China, as well as a branch in Canada.

Note 2. Summary of signiﬁcant accounting policies

(a) Basis of preparation

The general purpose ﬁnancial report has been prepared in accordance with Australian Accounting Standards, other authoritative pronouncements

of the Australian Accounting Standards Board, International Financial Reporting Standards (IFRS) and the Corporations Act 2001.

The Financial Report has been prepared on a historical cost basis. The Financial Report is presented in Australian dollars.

The ﬁnancial statements have been prepared in compliance with Legislative Instrument 2016/191 ‘ASIC Corporations (Rounding in Financial/Directors’

Reports)’ and rounded to the nearest dollar.

The consolidated ﬁnancial statements provide comparative information in respect of the previous period. Where necessary, comparatives have been

reclassiﬁed and repositioned for consistency with current year disclosures.

(b) Going concern

The ﬁnancial statements of the Group have been prepared on a going concern basis. The Group’s operations are subject to major risks due primarily

to the nature of the research, development and commercialisation to be undertaken. These risks may materially impact the ﬁnancial performance

and position of the Group, including the value of recorded assets and the future value of its shares, options and performance rights. The ﬁnancial

statements take no account of the consequences, if any, of the eects of unsuccessful research, development and commercialisation of the Group’s

projects. The Group considered its ability to meet its debts and obligations taking into account all available information about the future. The Group

has a level of discretion in managing cash outﬂows in a response to any changes or unexpected demands on working capital or operating conditions.

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.

The Group has adopted all applicable new and amended Australian Accounting Standards and AASB Interpretations that apply as of 1 July 2022.

Those Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet eective, have not

been adopted.

(d) Changes in accounting policy, disclosures, standards and interpretations

The preparation of the Group’s consolidated ﬁnancial statements requires management to make judgements, estimates and assumptions that aect

the reported amounts of revenue, expenses, assets and liabilities, and the accompanying disclosures, and the disclosure of contingent liabilities.

In preparing the consolidated ﬁnancial statements, the signiﬁcant estimates, judgements and assumptions made by management in applying the

Group’s accounting policies and the key sources of estimation uncertainty are disclosed in note 2 (v).

(e) Basis of consolidation

The consolidated ﬁnancial statements comprise the ﬁnancial statements of the Group and its subsidiaries as at 30 June 2023. The Group controls

an investee if and only if the Group has:

• power over the investee (that is, rights that give it the ability to direct the relevant activities of the investee);

• exposure, or rights, to variable returns from its involvement with the investee; and

• the ability to use its power over the investee to aect its returns.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

30June2023

44 PolyNovo Limited Annual Report 2023

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

(f) Revenue from Contracts with Customers

The Group is in the business of designing, manufacturing and selling biomedical devices. Revenue from contracts with customers is recognised

when performance obligations pursuant to that contract are satisﬁed by the Group.

The Group has identiﬁed the following main categories of revenue:

Commercial product sales

The group revenue primarily consists of the sale of its Biodegradable Temporising Matrix (NovoSorb BTM) product. Revenue is recorded when the

customer takes possession of the product. All contracts with customers are standardised and satisfy the criteria of transaction approval, identiﬁcation

of each party’s rights, payment terms, commercial substance, and probable collection based on the customer’s ability and intention to pay. Revenue is

recognised at a point in time when control over the product transfers to the customer, which is assessed to be at the time of receipt of goods by

the customer.

The group also sells its NovoSorb BTM product in certain overseas territories via a distributor model. The sales are made direct to a distributor

being the customer of PolyNovo Limited, with the distributor permitted to resell the NovoSorb BTM product to an end user. The group has assessed

these arrangements to consider that control passes to the distributor at the point the distributor takes possession of the product. The group consider

themselves to be acting as principal in the sale of goods to distributors and recognise revenue on a gross basis.

All contracts with distributors are standardised, and satisfy the criteria of transaction approval, identiﬁcation of each party’s rights, payment terms,

commercial substance, and probable collection based on the customer’s ability and intention to pay. Revenue is recognised at a point in time when

control over the product transfers to the distributor as the customer, which is assessed to be at the time of receipt of goods by the distributor.

Biomedical Advanced Research and Development Authority (BARDA) revenue

The BARDA arrangement requires the group to provide to BARDA a solution for severe thermal burns, with the performance obligation as deﬁned

in the terms of the arrangement being to perform research and development for speciﬁc clinical and trial tasks to support the product development

of BTM for severe thermal burns. Judgement has been applied to consider that the license of intellectual property and research and development

activities are not distinct. Revenue is recognised over time based on input measures of speciﬁed costs, with the performance obligations being

achieved through delivery to BARDA of the contracted clinical studies and trial tasks to support the development of the BTM product for severe

thermal burns.

BARDA is considered a customer in accordance with AASB 15 as the nature of services performed by PolyNovo are considered part of the group’s

licence of intellectual property and normal research and development operating activities and in exchange, consideration is to be paid as the group

progresses with its research and development of a mass scalable severe thermal burns product.

(g) Costs to fulﬁll contracts

Costs to fulﬁl a contract include set‑up costs and prepaid costs of a service provider related to goods and services which will be transferred in the

future reporting periods.

The Group capitalise costs to fulﬁl a contract if:

• the costs relate directly to a contract or a speciﬁcally identiﬁed anticipated contract;

• the cost generate or enhance resources that we control and will use when transferring further goods and services; and

• the Group expect to recover the costs.

The Group amortise contract cost assets over the term that reﬂects the expected period of beneﬁt of the expense.

(h) Trade and other receivables and contract cost assets

Trade and other receivables and contract assets are initially recorded at fair value and subsequently measured at amortised cost.

Trade and other receivables and contract cost assets are written o against their carrying amounts and expensed in the income statement when

all collection eorts have been exhausted and the asset is considered uncollectable. Factors indicating there is no reasonable expectation of recovery

include insolvency and signiﬁcant time period since the last invoice was issued.

(i) Intangible Assets

Intangible assets acquired separately or in a business combination are initially measured at cost. The cost of an intangible asset acquired in a business

combination is its fair value as at the date of acquisition. The intangible assets carried by the Group, being intellectual property assets had a deﬁnite

useful life on acquisition.

Internally generated intangible assets are capitalised if the product is at development phase. Costs that are directly attributable to a product’s

development phase are recognised as intangible assets, provided all of the following recognition requirements are met:

• the product is technically and commercially feasible;

• the Group intends to and has sucient resources to execute a commercial outcome from the product;

• the Group has the ability to derive income from the product and will generate probable future economic beneﬁts from the product; and

• the development costs can be measured reliably.

45PolyNovo Limited Annual Report 2023

Development costs not meeting these criteria for capitalisation are expensed as incurred. Directly attributable costs include employee costs incurred

on development along with an appropriate portion of relevant overheads.

Expenditure on the research phase of projects is recognised as an expense as incurred and is recognised in the Statement of Comprehensive Income

(proﬁt or loss) in the year in which the expenditure is incurred.

(j) Impairment of intangible and other assets

Intangible assets that have an indeﬁnite useful life are not subject to amortisation. They are tested annually for impairment or more frequently

if events or changes in circumstances indicate that they might be impaired. Other assets including deﬁnite lived intangible assets are tested for

impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

The Group conducts an annual impairment assessment review of asset values, which is used as a source of information to assess for any indicators

of impairment. External factors, such as changes in expected future processes, technology and economic conditions, are also monitored to assess for

indicators of impairment. If any indication of impairment exists, an estimate of the asset’s recoverable amount is calculated which is based on – higher

of its fair value less cost of disposal and its ‘value‑in‑use’. Value‑in‑use is calculated by discounting, the estimated future cash ﬂows derived from use

of the asset, using a pre‑tax discount rate that reﬂects current market assessments of the time value of money and the risks speciﬁc to the asset.

(k) Share‑based payments

The Group provides beneﬁts to employees in the form of share‑based payment transactions, whereby employees render services in exchange

for shares or rights over shares.

The PolyNovo Employee Share Option Plan was in place for the year ended 30 June 2023. Information relating to this Plan is set out in note 35 and

in the Remuneration Report section of the Directors’ Report.

The cost of share‑based payments under the terms of the Share Option Plan is measured by reference to the fair value of options at the date at which

they are granted. The fair value of options granted is determined by using the Monte Carlo simulation model or the binomial option valuation model.

The assumptions and models used for estimating fair value for share‑based payment transactions are disclosed in the Remuneration Report, and/or

note 35. All option and performance right arrangements are settled in equity.

The fair value of options is recognised as an employee beneﬁt expense with a corresponding increase in equity. The fair value is measured at grant date

and recognised over the vesting period. The employee beneﬁt expense recognised each period takes into account the most recent estimate of the

number of options that are expected to vest.

(l) Group as a lessee

The Group applies a single recognition and measurement approach for all leases, except for short‑term leases and leases of low‑value assets.

The Group recognises lease liabilities to make lease payments and right‑of‑use assets representing the right to use the underlying assets.

Right of use assets

The Group recognises right of use assets at the commencement of a lease. Right of use assets cost comprises the initial measurement of the

corresponding lease liability, lease payments made at or before the commencement date and any initial direct costs.

Right of use assets are subsequently measured at cost less accumulated depreciation and impairment losses. Right of use assets are reviewed for

impairment under the same policy as our property, plant and equipment assets.

Right of use assets are depreciated on a straight‑line basis over the shorter of the lease term and the estimated useful life of the assets as follows:

Property 4 to 20 years

Oce equipment 4 to 5 years

Manufacturing Equipment 3 years

Lease liabilities

At the commencement date of the lease, the Group recognises lease liabilities measured at the present value of lease payments to be made over

the lease term.

In calculating the present value of lease payments, the Group uses its incremental borrowing rate at the lease commencement date if the interest

rate implicit in the lease is not readily determinable. The lease payments include ﬁxed payments (including in‑substance ﬁxed payments) less any lease

incentives receivable, variable lease payments that depend on an index or a rate and amounts expected to be paid under residual value guarantees.

Lease payments on short‑term leases and leases of low‑value assets are recognised as an expense on a straight‑line basis over the lease term.

46 PolyNovo Limited Annual Report 2023

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

(m) Plant and equipment

Construction in progress is stated at cost, net of accumulated impairment losses. Plant and equipment is stated at cost, net of accumulated depreciation

and accumulated impairment losses. Depreciation is calculated on a straight‑line basis over the estimated useful life of the asset, as follows:

Property 25 to 40 years

Oce equipment 3 to 10 years

Laboratory plant and equipment 3 to 13.33 years

Leasehold improvements 3 to 20 years

Impairment

The carrying values of plant and equipment are reviewed for impairment at each reporting date, when events or changes in circumstances indicate

that the carrying value may be impaired. An asset is impaired when its carrying value exceeds its estimated recoverable amount. In this instance,

the asset is written down to its recoverable amount and the impairment loss recognised in the Statement of Comprehensive Income.

For impairment testing purposes, the recoverable amount of an asset is estimated as the higher of its fair value less cost of disposal and its

‘value‑in‑use’. Value‑in‑use is calculated by discounting, the estimated future cash ﬂows derived from use of the asset, using a pre‑tax discount

rate that reﬂects current market assessments of the time value of money and the risks speciﬁc to the asset.

Disposal

Plant and equipment is de‑recognised upon disposal or when no future economic beneﬁts are expected to arise from the continued use of the asset.

Any gain or loss arising on de‑recognition of the asset (calculated as the dierence between the net disposal proceeds and the carrying amount

of the item) is recognised in the Statement of Comprehensive Income.

(n) Research and development costs

Research and development costs are expensed as incurred. An intangible asset arising from development expenditure on an individual 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.

No development expenditure has been capitalised.

(o) Cash and cash equivalents

Cash at bank and short‑term deposits are stated at nominal value. Cash at bank and short‑term deposits are amounts with a maturity of three months

or less. If greater than three months, these amounts are recognised within ‘other ﬁnancial assets’.

(p) Employee leave beneﬁts

Liabilities for wages, salaries and annual leave expected to be settled within 12 months of the reporting date and pro‑rata long service leave for

employees with over seven years of service, are recognised in current liabilities. Wages, salaries, annual leave and long service leave are measured

at the amounts expected to be paid when the liabilities are settled.

Liabilities for pro‑rata long service leave for employees with less than seven years of service are recognised in non‑current liabilities and are measured

as the present value of the expected future payments to be made.

(q) Interest income

Interest income is recognised when the Group has the right to receive the interest payment using the eective interest rate method.

(r) Inventory

Inventory is measured at cost for raw materials and packaging materials. A standard cost has been derived for ﬁnished goods and semi‑ﬁnished goods.

The standard cost includes an allocation of materials, direct labour, freight expenses to third party logistics and manufacturing overheads. The value of

ﬁnished goods and semi‑ﬁnished goods may include an allocation of manufacturing variances incurred during the period if it is determined that the

relevant production remains in inventory at balance date.

(s) Government grants

Government grants are recognised at their fair value when the grant is received and all attaching conditions have been complied with. Research and

development income tax revenue is recognised when there is reasonable assurance of receipt.

47PolyNovo Limited Annual Report 2023

(t) Trade and other payables

Trade and other payables are carried at amortised cost. They represent liabilities for goods and services provided to the Group prior to the end

of the ﬁnancial year that are unpaid. The amounts are unsecured and are normally settled on 30‑day terms. Due to the short‑term nature of these

payables amortised cost equates to fair value.

(u) Income tax

Deferred income tax is provided on all temporary dierences at balance date, calculated as the dierence between the tax cost base of assets and

liabilities and their carrying amounts for ﬁnancial reporting purposes.

Deferred income tax assets are recognised for all deductible temporary dierences to the extent that it is probable that taxable proﬁt will be available

against which the deductible temporary dierences can be utilised. The same criteria apply for recognition of tax assets relating to unused tax losses.

Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability

is settled, based on tax rates (and tax laws) eective at balance date.

Income taxes relating to items recognised directly in equity are recognised in Other Comprehensive Income (equity) and not in the Statement

of Comprehensive Income (proﬁt and loss).

(v) Signiﬁcant accounting estimates and assumptions

Deferred taxes

The deferred tax liability (DTL) arising from the carrying value of PolyNovo’s intangible assets is oset by deferred tax assets (DTAs) recognised

for unused tax losses, where the continuity of ownership test is satisﬁed. Signiﬁcant management judgement is required to determine the amount

of deferred tax assets that can be recognised on unused tax losses based on expectation of proﬁt generated in the future. Judgment is also required

in assessing whether any deferred tax assets can be recorded for unbooked tax losses and other timing dierences. Further details on deferred taxes

are disclosed in note 12.

Share‑based payments

Estimating fair value for share‑based payment transactions requires selection of the most appropriate valuation model, which in turn is dependent

on the terms and conditions of the share‑based payment granted. Determination of the most appropriate inputs to the valuation model, including the

expected life of the share option, volatility and dividend yield, is also required. The models and related assumptions used for estimating the fair value

of share‑based payment transactions are disclosed in note 35 and in the Remuneration Report.

Contract cost assets

Estimating the utilisation of contract cost assets requires selection of an appropriate amortisation method. The Group adopted straight line

method to amortise contract cost assets over the period of BARDA study, consistently with the transfer of the services to which the asset relates.

Further details on contract cost assets are disclosed in note 15.

Impairment of intangibles

Impairment exists when the carrying value of an asset exceeds its recoverable amount. For the intangible assets that have ﬁnite economic lives,

PolyNovo considers indicators of impairment and if an indicator exists, will determine the recoverable amount of the intangible asset. For the indeﬁnite

life intangibles and goodwill, the recoverable amount is determined every year. An estimate is provided on the useful life of the current intangible asset

based on the existing patent period. The assessment for the current period is further explained in note 20.

Expected Credit Loss

Estimating the expected credit loss (ECL) for trade receivables and contract assets requires selection of an appropriate method and signiﬁcant

judgement to determine the amount. The method applied categorises trade receivables and BARDA income receivables into various customer

segments, then to determine the ECL amount, an assessment of the correlation between historical observed default rates and forecast economic

conditions is applied. Further details on expected credit loss are disclosed in note 14.

Lease term

PolyNovo applies judgement to determine a lease term for leases with extension, termination or purchase options. PolyNovo also considers lease

modiﬁcations where we continue to use the same underlying asset for an extended term. Our lease terms are negotiated on an individual basis and

contain a range of dierent terms and conditions, with ﬁxed term period between 3 to 20 years. The lease term assessment is reviewed if a signiﬁcant

event or change in circumstances occurs which aects this assessment and that is within our control as a lessee.

Incremental borrowing rate for property lease

PolyNovo applies judgement to determine incremental borrowing rate for property lease because the interest rate implicit in lease is not readily

determinable for the arrangement. The incremental borrowing rate is determined based on the interest that the lessee would have to pay to borrow

over a similar term, the funds necessary to obtain an asset of a similar value to the right‑of‑use asset in a similar economic environment, and

observable inputs such as market interest rates are used as applicable. In the lease transaction of 322‑326 Lorimer Street, Port Melbourne,

the incremental borrowing rate is determined to be 5.62% per annum. Further details on incremental borrowing rate are disclosed in note 23.

48 PolyNovo Limited Annual Report 2023

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

(w) Goods and services tax (GST)

Revenues, expenses and assets are recognised net of GST except:

• where the GST incurred on 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, which are stated with the amount of GST (if any) included.

The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the Statement of

Financial Position. Cash ﬂows are included in the Cash Flow Statement on a gross basis (that is, including GST) and the GST component of cash ﬂows

arising from investing and ﬁnancing activities, which is recoverable from, or payable to, the taxation authority are classiﬁed as operating cash ﬂows.

Commitments and contingencies are disclosed exclusive of the amount of GST recoverable from, or payable to, the taxation authority.

(x) Earnings per share (EPS)

Basic EPS is calculated as the net proﬁt/(loss) attributable to shareholders, adjusted to exclude costs of servicing equity (other than dividends),

divided by the weighted average number of ordinary shares.

Diluted EPS is calculated as the net proﬁt/(loss) attributable to members, adjusted for:

• the costs of servicing equity (other than dividends);

• the aer‑tax eect of dividends and interest associated with dilutive potential ordinary shares that have been recognised as expenses; and

• other non‑discretionary changes in revenues or expenses during the period that would result from the dilution of potential ordinary shares.

The resultant net proﬁt/(loss) is divided by the weighted average number of ordinary shares and dilutive potential ordinary shares.

(y) Contributed equity

Ordinary shares are classiﬁed as equity and recognised at the fair value of the consideration received by the Company. Any transaction costs

arising on the issue of ordinary shares are recognised directly in equity as a reduction of the share proceeds received.

(z) Foreign currency translation

The functional currency of each of the entities in the Group must reﬂect the primary economic environment in which the entity operates.

Accordingly, the relevant functional currencies are Australian dollars for Australian entities, US dollars for the US entity, Canadian dollars for

Canada entity, Singapore dollars for Singapore entity, New Zealand dollars for New Zealand entity, Rupees for India entity, Hong Kong dollars

for Hong Kong entity, British pound sterling for UK entity and Euro for European entities. Foreign currency items are translated to Australian

currency on the following basis:

• Transactions are converted at exchange rates approximating those in eect at the date of the transaction.

• On consolidation, the assets and liabilities of the foreign operation are translated into Australian dollars at the rate of exchange prevailing at the

reporting date except for retained earnings which is translated at a historic rate of exchange pertaining to the relevant ﬁnancial year. The Statement

of Comprehensive Income is translated at an average exchange rate over the ﬁnancial year.

• The exchange dierence arising on translation for consolidation are recognised in the balance sheet as a foreign currency translation reserve.

On disposal of a foreign operation, the reserve is reclassiﬁed to proﬁt or loss.

(aa) Security deposits

Security deposits are recorded at amortised cost in the Statement of Financial Position.

(ab) Financial Instruments

A ﬁnancial instrument is any contract that gives rise to a ﬁnancial asset of one entity and a ﬁnancial liability or equity instrument of another entity.

Financial Assets

Classiﬁcation and measurement

Except for certain trade receivables, the group initially measures a ﬁnancial asset at its fair value. Financial assets are subsequently measured at fair

value through proﬁt or loss (FVPL), amortised cost, or fair value through other comprehensive income (FVOCI). The classiﬁcation is based on two

criteria: The Group’s business model for managing the assets; and whether the instruments’ contractual cash ﬂows represent ‘solely payments of

principal and interest’ on the principal amount outstanding (the SPPI criterion).

Impairment

The Group recognises an allowance for expected credit losses (ECLs). ECLs are based on the dierence between the contractual cash ﬂows due in

accordance with the contract and all the cash ﬂows that the Group expects to receive. The shortfall is then discounted at an approximation to the

asset’s original eective interest rate. For trade receivables, the Group has applied the standards simpliﬁed approach and has calculated ECLs based

on lifetime expected credit losses. The Group has established a provision matrix that is based on the Group’s historical credit loss experience,

adjusted for forward looking factors speciﬁc to the debtors and the economic environment.

49PolyNovo Limited Annual Report 2023

The provision matrix is initially based on the Group’s historical observed default rates. At every reporting date, the historical observed default rates

are updated and changes in the forward‑looking estimates are analysed. Generally, trade receivables are written o if past due for more than one year.

The total expected credit loss is disclosed in note 14.

The assessment of the correlation between historical observed default rates, forecast economic conditions and ECLs is a signiﬁcant estimate.

The amount of ECLs is sensitive to changes in circumstances and of forecast economic conditions. The Group has assessed forecast economic

conditions in all regions. This assessment is reﬂected in the application of the provision matrix to calculate ECL’s. The Group’s historical credit loss

experience and forecast of economic conditions may also not be representative of customer’s actual default in the future.

Financial Liabilities

Classiﬁcation and measurement

The Group’s ﬁnancial liabilities include loans and borrowings and payables that are classiﬁed at fair value through proﬁt or loss as appropriate.

All ﬁnancial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable

transaction costs.

For the purposes of subsequent measurement, aer initial recognition, interest‑bearing loans and borrowings are subsequently measured at amortised

cost using the EIR method. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an

integral part of the EIR. The EIR amortisation is included as ﬁnance costs in the statement of proﬁt and loss. For more information, refer to note 22.

Note 3. Segment information

Operating Segment

PolyNovo has only one reporting segment being the development of the NovoSorb technology for use in a range of biodegradable medical devices.

The chief operating decision‑maker is the Chief Executive Ocer of PolyNovo Limited.

The chief operating decision‑maker reviews the results of the business on a single entity basis and assesses business performance in order to

make decisions about resource allocation. Performance assessment is based on EBITDA (earnings before interest, tax, depreciation and amortisation).

These measures are dierent from the proﬁt or loss reported in the consolidated ﬁnancial statements which is shown aer net interest and tax expense.

Consolidated

30 June 2023

30 June 2022

Net Loss Aer Tax (4,924,539) (1,192,532)

Interest income (869,625) (671)

Interest expense 714,163 315,366

Depreciation and amortisation 2,282,553 1,797,488

Tax (8,559) 41,608

EBITDA (2,806,007) 961,259

The chief operating decision maker monitors the operating results of the Group for the purpose of making decisions about resource allocation

in order to progress the commercialisation of the PolyNovo technology.

During the year ended 30 June 2023, sales to BARDA in the United States of America, represented 9% (2022: 9%) of total sales revenue from

contracts with customers.

Consolidated

30 June 2023

30 June 2022

Revenue from contracts with customers

Geographical areas

United States of America 51,763,960 35,857,273

Australia and New Zealand 4,769,010 3,206,724

Other countries 8,708,499 2,375,842

65,241,469 41,439,839

50 PolyNovo Limited Annual Report 2023

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

Consolidated

30 June 2023

30 June 2022

Non‑current assets

Geographical areas

United States of America 343,947 519,061

Australia and New Zealand 24,787,524 19,210,150

Other countries 134,953 13,778

25,266,424 19,742,989

Note 4. Revenue from contracts with customers

Consolidated

30 June 2023

30 June 2022

BARDA revenue 5,662,938 3,796,679

Commercial product sales 59,578,531 37,643,160

65,241,469 41,439,839

Note 5. Other income

Consolidated

30 June 2023

30 June 2022

Other income 423,923 450,093

Majority of the other income is generated from government grants.

Government grants are recognised at their fair value where there is reasonable assurance that the grant will be received and the Group will comply

with all attached conditions.

During the year ended 30 June 2023, the Group continued to receive two government grants from the Victorian Government:

• The Victorian Government’s Medtech Manufacturing Capacity Program is to help expand manufacturing for the production of new devices.

In this year, PolyNovo has completed this grant program and received grant income of $300,000;

• Another Victorian Government grant is up to $252,000, which is to support the purchase of equipment and the development of the new

cleanroom at PolyNovo’s Port Melbourne facility. In this year, PolyNovo received grant income of $108,000.

The remainder is generated from the sale of raw materials to customers in U.S.

Note 6. Employee‑related expenses

Consolidated

30 June 2023

30 June 2022

Wages and salaries (including sales commission) 31,804,940 20,699,554

Superannuation 1,345,041 978,683

Share‑based payments expense 1,113,207 (3,479,582)

Other 5,175,022 3,220,657

39,438,210 21,419,312

A net share‑based income of $3,479,582 was recognised during the year ended 30 June 2022, as the share option expenses of $4,708,151

recognised for the Managing Director and Chief Operating Ocer were reversed at the time of their resignation.

51PolyNovo Limited Annual Report 2023

Note 7. Depreciation and amortisation expenses

Consolidated

30 June 2023

30 June 2022

Depreciation – property – 330,636

Depreciation – laboratory equipment 415,992 410,094

Depreciation – oce equipment 320,571 247,018

Depreciation – leasehold improvements 194,582 14,206

Subtotal 931,145 1,001,954

Depreciation – Right of use assets 858,469 339,214

Amortisation – intangible assets 247, 8 4 8 247, 848

Subtotal 1,106,317 587, 062

Total 2,037,462 1,589,016

In addition to the depreciation and amortisation expenses listed above, depreciation relating to manufacturing of $245,091 ($169,566 for depreciation

of ﬁxed assets and $75,525 for depreciation of lease assets) is included in the cost of inventory.

Total depreciation and amortisation expenses amount in 2023 is $2,282,553 (2022: $1,797,488).

Refer to note 19 for property, plant and equipment reconciliation and note 17 for right‑of‑use assets reconciliation.

Note 8. Corporate, administrative and overhead expenses

Consolidated

30 June 2023

30 June 2022

Insurances 2,517,447 2,011,584

Professional fees 770,119 562,007

Investor relations and share registry expenses 360,529 445,167

Consultants and contractors 3,553,876 1,759,264

Communication expenses 784,680 521,295

Travel 4,332,769 1,519,925

Marketing costs 2,357,593 1,260,822

Realised foreign exchange loss 114,762 151,483

Unrealised foreign exchange (gain)/ loss (787, 301) (497,648)

Other* 3,411,289 2,658,260

17,415,763 10, 392,159

* Included in other administrative expenses are mainly third‑party logistic fees of $631,574 (2022: $407,090), dues and subscriptions of $481,509

(2022: $332,946) and IT soware licences of $441,174 (2022: $289,013).

Note 9. Interest expenses

Consolidated

30 June 2023

30 June 2022

Lease liability interest expenses 528,044 95,216

The Group has lease contracts for various items of property, oce equipment and lease equipment used in its operation. Further details on leases

are disclosed in note 17.

The Group has secured equipment ﬁnance facilities and short term loan, further details on loan facility are disclosed in note 22.

52 PolyNovo Limited Annual Report 2023

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

Note 10. Finance costs

Consolidated

30 June 2023

30 June 2022

Interest expense 16,480 –

Interest expense – equipment ﬁnance loan 110, 504 190,721

Interest expense – short term loan 59,135 29,429

186,119 220,150

Note 11. Impairment loss

In June 2022, the Group sold the property located at Unit 1/316‑320 Lorimer Street, Port Melbourne, as a funding option, which was owned by

PolyNovo and includes part of PolyNovo’s corporate head oce and manufacturing facility. The adjacent Unit 2 is currently leased by PolyNovo

through to April 2029 with no options to extend.

A non‑binding purchase proposal for $6,350,000 was signed on 21 Feb 2022. The property met assets held for sale criteria when the purchase

proposal was signed, therefore the value of the property was written down to the fair value ($6,350,000) and an impairment loss of $1,375,832

was recognised.

On 14 June 2022, the sale was settled. Following the sale, the Group leased back the building with a lease term of 10 years, plus two 5‑year renewal

options. The $6,350,000 sales proceeds were received in instalments, with 10% deposit received in May 2022 and the remainder in June 2022.

$3,052,890 of the sale proceeds was used to repay in full two outstanding equipment ﬁnance leases. The net cash received from the sale and

leaseback of property was $3,050,092, aer deducting the two equipment ﬁnance leases paid out and real estate commission fee.

Note 12. Income tax expense/(beneﬁt)

(a) Income tax expense

Consolidated

30 June 2023

30 June 2022

Current income tax charge/ (beneﬁt) (8,559) 41,608

Deferred income tax – –

Relating to origination and reversal of temporary dierences – –

Aggregate income tax expense/(beneﬁt) (8,559) 41,608

Reconciliation of income tax expense to prima facie tax payable

Loss before income tax (expense)/beneﬁt (4,933,098) (1,150,924)

Tax at the statutory tax rate of 30% (2022: 25%) (1,479,929) (287,731)

Tax eect amounts which are not deductible/(taxable) in calculating taxable income:

Non‑assessable R&D income tax credit 691,509 614,325

Share‑based payments 249,128 (869,896)

Meals and entertainment 333,962 89,415

(205,330) (453,887)

Current year tax losses not recognised (1,295,857) 128,515

Current year temporary dierences not recognised 1,492,628 366,980

Income tax expense/(beneﬁt) (8,559) 41,608

53PolyNovo Limited Annual Report 2023

(b) Deferred tax assets and liabilities

Consolidated

30 June 2023

30 June 2022

Deferred tax assets 766,242 488,561

Deferred tax liabilities (766,242) (488,561)

– –

Deferred tax balance reﬂects temporary dierences attributable to:

Amounts recognised in proﬁt and loss

Recognised on temporary dierences (766,242) (488,561)

Consolidated

30 June 2023

30 June 2022

Deferred tax assets not recognised

Deferred tax assets not recognised comprises temporary dierences attributable to:

Unrecognised, unconﬁrmed tax losses for which no deferred tax asset has been recognised 93,493,336 95,205,088

Deductible temporary dierences – no deferred tax asset has been recognised 2,258,869 855,541

Unrecognised, unconﬁrmed R&D osets for which no deferred tax asset has been recognised – 146,288

Total 95,752,205 96,206,917

Consolidated

30 June 2023

30 June 2022

Potential tax beneﬁt at 30% (2022: 25%) 23,938,051 24,161,445

Deferred tax assets and liabilities are recognised for temporary dierences at the rates expected to be applied when the assets are recovered,

or liabilities are settled, based on those tax rates that are enacted or substantively enacted, except for when the deferred income tax asset or liability

arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and that, at the time of the

transaction, aects neither the accounting nor taxable proﬁts.

Deferred tax assets are recognised for deductible temporary dierences including leases, provision for employee entitlements, other provisions and

accrued expenses.

Deferred tax liabilities are recognised for taxable temporary dierences including prepayments, dierences in accounting and tax base of intangible

assets and depreciable assets, and the deferred recognition of income for tax purposes.

The availability of the tax losses in future periods is uncertain and will be dependent on the Group satisfying strict requirements with respect to

continuity of ownership and the same business test, imposed by income tax legislation. The recoupment of available tax losses as at 30 June 2023

is contingent upon the following:

• the Group deriving future assessable income of a nature and of an amount sucient to enable the beneﬁt from the losses to be realised; and

• the conditions for deductibility imposed by tax legislation continuing to be complied with; and there being no changes in tax legislation that would

adversely aect the Group from realising the beneﬁt from the losses.

Given the Group’s history of recent losses, the Group has not recognised a net deferred tax asset with regard to unused tax losses, as it has not been

determined that the Group will generate sucient taxable proﬁt against which the unused tax losses can be utilised.

(d) Current tax liability

Consolidated

30 June 2023

30 June 2022

Income tax receivable 24,030 4,279

PolyNovo New Zealand overpaid income tax provision instalments in 2022 and 2023, which led to a tax receivable position as at 30 June 2023 and

30 June 2022.

54 PolyNovo Limited Annual Report 2023

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

Note 13. Cash and cash equivalents

Cash and cash equivalents are denominated in:

Consolidated

30 June 2023

30 June 2022

AUD 37,379,970 1,849,255

USD 7,115,544 3,176,383

NZD 414,091 71,440

GBP 751,267 789,280

EUR 299,715 215,834

CAD 411,223 –

INR 475,136 –

SGD – –

Total 46,846,946 6,102,192

Cash at bank earns interest at ﬂoating rates based on daily bank deposit rates, except for the term deposit of $35,000,000. As at 30 June 2023,

PolyNovo Limited holds a 90‑day term deposit of $35,000,000, at the weighted average interest rate of 4.28%.

Reconciliation of net loss before income tax to net cash ﬂow from operating activities

Consolidated

30 June 2023

30 June 2022

Net loss before income tax (4,933,098) (1,150,924)

Adjustments for non‑cash items:

Depreciation and amortisation 2,282,553 1,797,488

Share‑based payment expense 1,113,207 (3,479,582)

Interest 10,431 12,985

Loss on inventory write‑o 105,039 31,671

Doubtful debts expense 34,170 –

Unrealised foreign exchange rate dierences (74,034) (303,264)

Impairment loss – 1,375,832

Change in assets and liabilities during the ﬁnancial year:

(Increase) in trade receivables (7, 412,949) (422,387)

(Increase)/decrease in prepayments (378,283) 565,691

(Increase)/decrease in contract assets (14,204) 146,314

(Increase) in inventory (1,994,992) (575,458)

(Increase) in other assets (262,467) (152,659)

Increase/(decrease) in payables 4,167,051 (142,328)

Increase in provisions 764,799 264,127

(Increase)/ decrease in other receivables (19,751) (24,540)

Net cash outﬂows from operating activities (6,612,528) (2,057,034)

55PolyNovo Limited Annual Report 2023

Note 14. Trade and other receivables

Consolidated

30 June 2023

30 June 2022

Current assets

Trade receivables 12,366,229 5,527,852

BARDA income receivables 683,373 248,174

Sundry receivables

452,789

313,093

Interest receivable

190,400

323

Total trade and other receivables 13,692,791 6,089,442

Consolidated

30 June 2023

30 June 2022

Financial assets and non‑ﬁnancial assets

Trade receivables 12,366,229 5,527,852

BARDA Income Receivables 683,373 248,174

Sundry receivables 93,940 52,925

Interest receivable 190,400 323

Total ﬁnancial assets 13,333,942 5,829,274

Sundry receivables 358,849 260,168

Total non‑ﬁnancial assets 358,849 260,168

Total trade and other receivables 13,692,791 6,089,442

Trade receivables relates to invoices to customers for sale of goods and PolyNovo’s BARDA project representing invoiced and un‑invoiced services

for labour and sub‑contractor expenses.

The changes in the balance of trade receivables and the information about the credit exposure are disclosed in note 26.

BARDA income receivables

BARDA income receivables are initially recognised for revenue earned from the provision of research and development services as receipt of

consideration is conditional on the acceptance by the customer. Upon completion of the milestone and acceptance by the customer, the amounts

recognised as BARDA income receivables are reclassiﬁed to trade receivables. As at 30 June 2023, the Group has BARDA income receivables of

$683,373 (2022: $248,174). Amounts are invoiced in the month following satisfaction of the performance obligation. There are no signiﬁcant

expected credit losses related to the BARDA income receivables, as the credit risk of US Federal Government Agency is low. The Group has an

agreement with BARDA to provide research and development services which was extended during the year ended 30 June 2023 until August 2025

for the Pivotal Trial. BARDA has committed funding of USD $15 million for the Pivotal Trial.

Expected credit loss

Based on the business failure rates by class of customers and Dun & Bradstreet credit score the Expected Credit Losses relating to trade receivables and

contract assets the Group has recognised $44,127 as at 30 June 2023 (2022: $9,957). $Nil trade and other receivables were written o during the year.

The Group uses a provision matrix to measure its expected credit loss. Set out below is information about the credit risk exposure on the Group’s trade

receivables and BARDA income receivables using a provision matrix as at 30 June 2023:

Trade and other receivables

Not due

0 Days

June

1‑30 Days

May

30‑60 Days

April

60‑90 Days

March+

90+ Days Total

Gross carrying amount ($) 8,003,882 1,695,213 1,398,098 644,030 669,133 12,410,356

Expected credit loss ($) – (4,615) (2,691) (3,957) (32,864) (44,127)

Net balance 8,003,882 1,690,598 1,395,407 640,073 636,269 12,366,229

Trade and other receivables which are not due as at 30 June 2023 was $8,003,882, which was not expected to have any credit loss. Trade receivables

and BARDA income receivables due in less than 30 days and other ﬁnancial assets have an expected credit loss which are not signiﬁcant.

56 PolyNovo Limited Annual Report 2023

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

Note 15. Contract cost assets

Consolidated

30 June 2023

30 June 2022

Contract cost assets (Current) 306,834 146,315

Contract cost assets (Non‑current) 182,893 329,208

489,727 475,523

The Group engaged subcontractors to fulﬁl speciﬁc performance obligations with regards to the Group’s BARDA arrangement since the year ended

30 June 2021. The Group was required to prepay speciﬁc amount to the subcontractor upfront to support the delivery of the BARDA contract.

Amortisation is calculated on a straight‑line basis over the life of the BARDA contract from the FY2021 to FY2025.

Note 16. Inventories

Consolidated

30 June 2023

30 June 2022

Current assets

Raw materials 222,036 106,218

Work in progress 1,617,299 854,189

Finished goods 2,721,987 1,605,737

Provision for ﬁnished goods (31,037) (30,851)

2,690,950 1,574,886

4,530,285 2,535,293

The total of inventory is held at lower of cost or net realisable value (NRV). During the year ended 30 June 2023, the loss on inventory write o

was $105,039.

Note 17. Right‑of‑use assets

Consolidated

30 June 2023

30 June 2022

Non‑current assets

Right‑of‑use assets 14,380,539 8,002,374

Accum Depn – Right of use assets (2,128,221) (1,196,914)

12,252,318 6,805,460

The Group has lease contracts for various items of property, oce equipment and lease equipment used in its operations. Leases of property

generally have lease terms between 3 and 10 years, while oce and manufacturing equipment generally have lease terms between 3 and 5 years.

On 1 September 2022, the Group leased the building located at 322‑326 Lorimer Street, Port Melbourne with a lease term of 9.5 years, plus four

5‑year renewal options. It is expected that the Group will renew the lease in line with the Group strategy, thus lease term is expected to be 20 years.

A right‑of‑use asset of $6,279,494 was recognised on 1 September 2022 and it will be amortised on straight line basis over the next 20 years.

In addition, PolyNovo India leased the oce building on 3 January 2023 and PolyNovo UK terminated the car lease for a sales representative who

resigned in March 2023.

57PolyNovo Limited Annual Report 2023

Set out below are the carrying amounts of right‑of‑use assets recognised and the movements during the period.

Property

Office

Equipment

Manufacturing

Equipment

Motor

Vehicle

Total

Carrying amount as at 1 July 2022 6,785,301 – 6,382 13,776 6,805,459

Additions 6, 387,166 – – – 6, 387,166

Depreciation expense (929,799) – (5,253) (7, 928) (942,980)

Termination – – – (6,167) (6,167)

Foreign currency exchange dierences 8,521 – – 319 8,840

Carrying amount as at 30 June 2023 12,251,189 – 1,129 – 12,252,318

Property

Office

Equipment

Manufacturing

Equipment

Motor

Vehicle

Total

Carrying amount as at 1 July 2021 2,193,284 1,265 19,093 25,117 2,238,759

Additions 4,957,639 – – – 4, 957,639

Depreciation expense (388,303) (1,265) (12,711) (10,560) (412,839)

Foreign currency exchange dierences 22,684 – – (780) 21,904

Carrying amount as at 30 June 2022 6,785,304 – 6,382 13,777 6,805,463

The following are the amounts recognised in proﬁt or loss in addition to low value and short term leases of $9,366 recognised during the year.

Consolidated

30 June 2023

30 June 2022

Depreciation expense of right‑of‑use assets 933,994 412,984

Interest expense on lease liabilities 528,044 95,216

Total amount recognised in proﬁt or loss 1,462,038 508,200

The Group had total cash outﬂows for leases of $835,614 in 2023 ($461,590 in 2022).

Group as lessor

The Group has not entered into any leases as lessor.

Note 18. Prepayments

Consolidated

30 June 2023

30 June 2022

Current assets

Prepayments 1,903,339 1,261,988

Non‑current assets

Security deposits 559,263 296,796

The non‑current security deposit relates predominantly to PolyNovo’s long‑term lease of oce premises in Port Melbourne and San Diego, USA,

including the security deposit of $151,500 due to the leaseback of oce premises at Unit 1/316‑320 Lorimer Street, Port Melbourne.

Included in current prepayment are prepaid insurance of $862,893 (2022: $715,025) and other prepaid expenses.

58 PolyNovo Limited Annual Report 2023

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

Note 19. Property, plant and equipment

Reconciliations of the carrying amount at the beginning and end of the current and previous ﬁnancial year are set out below:

Land and

Buildings

Laboratory

Plant &

Equipment

Office

Equipment

Leasehold

Improvements

Construction

in Progress

Total

As at 30 June 2022

Cost – 4,530,253 1,807,126 5,884,094 2,294,406 14,515,879

Accumulated depreciation – (1,950,245) (927,800) (1,691,749) – (4,569,794)

Impairment – – – – – –

Carrying amount at 30 June 2022 – 2,580,008 879,326 4,192,345 2,294,406 9,946,085

Carrying amount at 1 July 2021 5,125,786 537,021 737,472 438,781 10,745,338 17,58 4, 398

Additions – 141,831 369,648 14,826 678,733 1,205,038

Transfer to/ (from) CIP to FA (at cost) 6,725,630 2,404,036 – – (9,129,666) –

Transfer (at cost) (3,834,887) – – 3,834,887 – –

Impairment (1,372,153) – – (3,679) – (1,375,832)

Disposals (6,332,467) – – (17,533) – (6,350,000)

Depreciation expense (311, 909) (502,880) (245,906) (74,938) – (1,135,633)

Foreign exchange dierence – – 18,114 – – 18,114

Carrying amount at 30 June 2022 – 2,580,008 879,328 4,192,344 2,294,405 9,946,085

Land and

Buildings

Laboratory

Plant &

Equipment

Office

Equipment

Leasehold

Improvements

Construction

in Progress

Total

As at 30 June 2023

Cost – 5,658,377 2,399,681 6,637, 991 2,096,381 16,792,430

Accumulated depreciation – (2,488,203) (1,254,970) (1,933,931) – (5,677,10 4)

Carrying amount at 30 June 2023 – 3,170,174 1,144,711 4,704,060 2,096,381 11,115,326

Carrying amount at 1 July 2022 – 2,580,008 879,328 4,192,343 2,294,405 9,946,084

Additions (at cost) – 276,621 563,446 753,897 664,916 2,258,880

Transfer from CIP to FA (at cost) – 851,503 11,437 – (862,940) –

Depreciation expense – (537, 958) (320,524) (242,180) – (1,100,662)

Foreign exchange dierence – – 11,024 – – 11,024

Carrying amount at 30 June 2023 – 3,170,174 1,144,711 4,704,060 2,096,381 11,115,326

In June 2022, the Group sold the property located at Unit 1/316‑320 Lorimer Street, Port Melbourne. Following the sale, the Group leased back

the building sold with a lease term of 10 years, plus two 5‑year renewal options. Details refer to note 11.

The Group derecognised the land and building assets and two leasehold improvement assets on the settlement date and reversed the accumulated

depreciation expenses. According to the contract of sale, the Group would retain a portion of the building assets ($3,834,887), thus the Group

transferred the assets to leasehold improvements. The Group sold and derecognised the remaining portion of building assets and land ($8,229,065).

59PolyNovo Limited Annual Report 2023

Note 20. Intangibles

Intangible assets, comprising intellectual property, were acquired through the business combination with PolyNovo Biomaterials Pty Ltd

on 17 December 2008. The acquired intangible assets were initially recognised at fair value.

Following the consistent commercial sales of NovoSorb BTM, amortisation of intangible assets commenced in FY2018 over the remaining ﬁnite

life through to March 2028 being the remaining patent life period over which economic beneﬁts will be consumed. No indicators of impairment

related to the NovoSorb technology have been identiﬁed as at 30 June 2023.

Consolidated

30 June 2023

30 June 2022

Non‑current assets

Intangibles

(i) Cost

Opening balance 2,519,788 2,519,788

Additions – –

Closing balance 2,519,788 2,519,788

(ii) Accumulated amortisation

Opening balance (1,115,316) (867,468)

Amortisation for the year (247, 8 4 8) (247,848)

Closing balance (1,363,164) (1,115, 316)

Net book value 1,156,624 1,404,472

Note 21. Trade and other payables

Consolidated

30 June 2023

30 June 2022

Current liabilities

Trade payables 2,737,976 1,870,809

Other payables 6,396,954 3,097,070

Total trade and other payables 9,134,930 4, 967, 879

Consolidated

30 June 2023

30 June 2022

Financial liabilities and non‑ﬁnancial liabilities

Trade payables 2,737,976 1,824,432

Other payables 5,386,296 2,168,810

Total ﬁnancial liabilities 8,124,272 3,993,242

Other payables 1,010,658 974,637

Total non‑ﬁnancial liabilities 1,010,658 974,637

Total trade and other payables 9,134,930 4, 967, 879

Trade payables are non‑interest bearing and are normally settled on 30‑day terms.

Included in other payables are deferred income on upfront fees paid under BARDA contract of $523,710 (2022: $668,213), accrued commission

of $2,095,315 (2022: $906,320), accrued other liabilities of $1,019,851 (2022: $276,801). BARDA contract liability will be recognised over the

period of the contract.

60 PolyNovo Limited Annual Report 2023

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

Note 22. Interest‑bearing loans and borrowings

Consolidated

30 June 2023

30 June 2022

Current liabilities

Equipment Finance – current 1,014,172 981,573

Short term loan – current 383,986 348,485

1, 398,158 1,330,058

Non‑current liabilities

Equipment Finance – non current 1,788,769 2,802,940

Refer to note 26 for further information on ﬁnancial risk management objectives and policies.

(a) Interest bearing facility details

Financing Facilities

Facility

Amount

$ Maturity Date

Interest

Rate

FY23 Interest

Expense

Equipment ﬁnance 3,800,000 June 2025 – May 2027 3.24% 126,966

Short term loan 2,346,650 Jul – Oct 2023 2.89% 59,135

Equipment ﬁnance facility

The purpose of this facility is to fund the purchase of capital expenditure items such as manufacturing equipment and construction of the cleanroom.

As a requirement from NAB, due to the sale and leaseback of Unit 1/320 Lorimer Street, Port Melbourne, which was previously used as a security for

the debt facilities, NAB required $3,052,890 in the sale proceeds to be applied against the outstanding equipment ﬁnance facility. The new arrangement

was eective when the settlement of the sale transaction took place on 14 June 2022.

The new facility is a $5.2 million revolving equipment ﬁnance facility with repayments over 5 years on each ﬁnancial lease drawn at an interest rate

between 2.5% to 6.0% (average rate of 3.24%). A total of $5,038,093 was drawn down in June 2022. Interest is calculated daily and payable on

the last business day of each month. The current limit as at 30 June 2023 is $3.8 million.

The security over Unit 1/320 Lorimer Street, Port Melbourne was released on settlement of the sale transaction in return for General Security

Agreement over PolyNovo Ltd, PolyNovo Biomaterials Pty Ltd, NovoSkin Pty Ltd and NovoWound Pty Ltd.

No additional covenant requirements, except that PolyNovo needs to maintain a minimum cash balance of $1,285,000 at all times, reﬂective

of 12 months interest payable and principal repayments of the facility.

61PolyNovo Limited Annual Report 2023

Note 23. Lease liabilities

Consolidated

30 June 2023

30 June 2022

Current liabilities

Lease liability – current 491,979 457,750

Non‑current liabilities

Lease liability – non current 12,364,776 6,403,721

Accounting policy for lease liabilities

At the commencement date of the lease, the Group recognises lease liabilities measured at the present value of lease payments to be made

over the lease term. In calculating the present value of lease payments, the Group uses the incremental borrowing rate of the lessee at the lease

commencement date if the interest rate implicit in the lease is not readily determinable. The Group exercises judgement when determining the

incremental borrowing rate based on the interest that the lessee would have to pay to borrow over a similar term, the funds necessary to obtain

an asset of a similar value to the right‑of‑use asset in a similar economic environment, and observable inputs such as market interest rates are

used as applicable.

The lease payments include ﬁxed payments (including in‑substance ﬁxed payments) less any lease incentives receivable, variable lease payments

that depend on an index or a rate, and amounts expected to be paid under residual value guarantees.

Subsequent to initial recognition, lease liabilities are measured at amortised cost. Lease liabilities are remeasured if there is a modiﬁcation, such

as a change in the lease term, a change in the in‑substance ﬁxed lease payments or a change in the assessment to purchase the underlying asset.

The Group’s lease liabilities are inclusive of extension options the Group is reasonably certain to exercise based upon our judgement as of the

reporting date. Lease extension options that the Group is not reasonably certain to exercise as of the reporting date are appropriately excluded

from the lease liabilities.

The Group applies judgement in evaluating whether it is reasonably certain to exercise the option to renew. That is, it considers all relevant factors

that create an economic incentive for it to exercise the renewal. Aer the commencement date, the Group reassesses the lease term if there is a

signiﬁcant event or change in circumstances that is within its control and aects its ability to exercise (or not to exercise) the option to renew

(e.g., a change in business strategy).

The Group leased the building located at 322‑326 Lorimer Street, Port Melbourne on 1 September 2022. Further details please refer to note 17.

Note 24. Provisions

Consolidated

30 June 2023

30 June 2022

Current provisions

Annual leave 1,474,769 906,780

Long service leave 167,518 93,826

Total current provisions 1,642,287 1,000,606

Non‑current provisions

Long service leave 184,306 143,490

Make good 232,302 150,000

Total non‑current provisions 416,608 293,490

Provisions are recognised when all three of the following conditions are met:

• The Group has a present or constructive obligation arising from a past transaction or event;

• It is probable that an outﬂow of resources will be required to settle the obligation; and

• A reliable estimate can be made of the obligation.

Provisions recognised reﬂect our best estimate of the expenditure required to settle the present obligation at the reporting date.

62 PolyNovo Limited Annual Report 2023

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

Note 25. Reserves

(a) Movement in contributed equity

Consolidated

30 June 2023

30 June 2022

Contributed equity at beginning of year 139,430,502 139,250,502

Issue of share capital 53,000,835 –

Capital raising costs (1,467, 526) –

Exercise of options 627, 50 0 180,000

Contributed equity at end of year 191,591,311 139,430,502

Number of shares authorised and fully paid

On issue at start of year 661,688,044 661,388,044

Exercise of options 650,000 300,000

Issue of share capital – Institutional placement 15,789,474 –

Issue of share capital – Share purchase plan 10,526,285 –

Issue of share capital – Director placement 1,578,948 –

On issue at end of year 690,232,751 661,688,044

(b) Reserves

Consolidated

30 June 2023

30 June 2022

Share‑based payments reserve (i) 5,479,893 4,366,686

Foreign currency translation reserve (ii) (1,015,794) (334,373)

Acquisition of non‑controlling interest reserve (iii) (9,293,956) (9,293,956)

Balance at end of period (4,829,857) (5,261,643)

Consolidated

30 June 2023

30 June 2022

(i) Share‑based payments reserve

Balance at beginning of period 4,366,686 7,846,655

Share‑based payments movement* 1,113,207 (3,479,969)

Balance at end of period 5,479,893 4,366,686

* Details of share‑based payment movement refer to note 6 Employee‑related expenses.

Consolidated

30 June 2023

30 June 2022

(ii) Foreign currency translation reserve

Opening balance (334,373) (189,915)

Translation of foreign operations (681,421) (144,458)

Balance at end of period (1,015,794) (334,373)

This reserve represents on consolidation, the translation of the foreign operation into Australian dollars. The exchange dierence is recognised

in the balance sheet as a reserve.

63PolyNovo Limited Annual Report 2023

Consolidated

30 June 2023

30 June 2022

(iii) Acquisition of non‑controlling interest reserve

Opening balance (9,293,956) (9,293,956)

Balance at end of year (9,293,956) (9,293,956)

This reserve represents the premium paid by PolyNovo Limited for the non‑controlling interest in a previous period in subsidiary entities PolyNovo

Biomaterials Pty Ltd, NovoSkin Pty Ltd and NovoWound Pty Ltd.

Consolidated

30 June 2023

30 June 2022

Accumulated losses at beginning of year (116,453,773) (115,261,241)

Net loss attributable to members of the parent (4,924,539) (1,192,532)

Accumulated losses at end of ﬁnancial year (121,378,312) (116,453,773)

Note 26. Financial risk management objectives and policies

(a) Financial instruments

The Group’s ﬁnancial instruments comprise cash and cash equivalents, trade and other receivables, trade and other payables and other ﬁnancial liabilities.

Consolidated

30 June 2023

30 June 2022

Cash and cash equivalents* 46,846,946 6,102,192

Trade and other receivables 13,333,942 5,829,275

Other ﬁnancial assets** 50,000 50,000

Trade and other payables 8,124,272 3,993,242

Lease liabilities 12,856,755 6,861,471

Equipment ﬁnance facility 2,802,941 3,784,513

Short term loan 383,986 348,485

* As at 30 June 2023, PolyNovo Limited holds a 90‑day term deposit of $35,000,000, at the weighted average interest rate of 4.28%.

** As at 30 June 2023, $50,000 is held in a term deposit maturing on 16 March 2024 at an interest rate of 4.5%.

(b) Risk management policy

The Group has a formal risk management policy and framework. The Group’s approach to risk management involves identifying, assessing and

managing risk, including consideration of identiﬁed risks, in the context of the Group’s values, objectives and strategies. The Board is responsible

for overseeing the implementation of the risk management system and reviews and assesses the eectiveness of the Group’s implementation of

that system.

The Group seeks to ensure that its exposure to risks that are likely to impact its ﬁnancial performance, continued growth and survival are minimised

in a cost‑eective manner.

Details of the signiﬁcant accounting policies and methodologies adopted in respect of each class of ﬁnancial asset, ﬁnancial liability and equity

instrument are disclosed in note 2.

64 PolyNovo Limited Annual Report 2023

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

(d) Capital risk management

The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern and to maintain an optimal capital

structure so as to maximise shareholder value. In order to maintain an optimal capital structure, the Group may issue new shares or reduce its capital,

subject to the provisions of the Company’s Constitution and any relevant regulatory requirements. The capital structure of the Group consists of

debt and equity attributed to equity holders of the Group comprising contributed equity, reserves and accumulated losses as disclosed in note 25.

The Board monitors the need to raise additional equity from the equity markets based on its ongoing review of PolyNovo’s actual and forecast

cash ﬂows, which are provided by management.

(e) Financial risk management

The key ﬁnancial risks the Group is exposed to through its operations are:

• interest rate risk;

• credit risk;

• liquidity risk; and

• foreign currency risk

Interest rate risk

Interest rate risk arises when the value of a ﬁnancial instrument ﬂuctuates as a result of changes in market interest rates.

The Group is exposed to interest rate risks in relation to its holdings in cash and cash equivalents and equipment ﬁnance facilities. The objective of

managing interest rate risk is to minimise the Group’s exposure to ﬂuctuations in interest rates. To manage this risk, the Group locks a portion of the

Group’s cash and cash equivalents into term deposits. The required maturity period of term deposits is determined based on the Group’s cash ﬂow

forecast with particular focus on the timing of cash requirements. In addition, the Group considers the lower interest rate received on cash held in the

Group’s operating account compared to placing funds on term deposit. Account is also taken of the costs associated with early withdrawal of a term

deposit should access to cash and cash equivalents be required.

The Group’s exposure to interest rate risk and the interest rates (current at the end of each year) on the Group’s ﬁnancial assets and ﬁnancial liabilities

as at 30 June 2023, along with prior year comparatives, was as follows:

Fixed interest rate

2023

Interest

Rate

Floating

Interest

Rate

0 to 90

Days

91 to 365

Days

1 to 5

Years

Over 5

Years

Non‑

interest

Bearing

Total

Financial assets

Cash and cash equivalents

(Note) 3.25% 11,846,946 35,000,000 – – – – 46,846,946

Other ﬁnancial assets 4.50% – – 50,000 – – – 50,000

Trade and other

receivables – – – – – – 13,333,942 13,333,942

Total ﬁnancial assets 11,846,946 35,000,000 50,000 – – 13,333,942 60,230,888

Financial liabilities

Trade and other payables – – – – – – 8,124,272 8,124,272

Short term loan 2.89% 383,986 – – – – – 383,986

Equipment Finance Facility 3.24% 2,802,941 – – – – – 2,802,941

Lease liabilities 4.51% – 110,665 388,521 2, 8 67,075 9,490,494 – 12,856,755

Total ﬁnancial liabilities 3,186,927 110,665 388,521 2,8 67,075 9,490,494 8,124,272 24,167,954

Note: As at 30 June 2023, PolyNovo Limited holds a 90‑day term deposit of $35,000,000, at the weighted average interest rate of 4.28%.

65PolyNovo Limited Annual Report 2023

Fixed interest rate

2022

Interest

Rate

Floating

Interest

Rate

0 to 90

Days

91 to 365

Days

1 to 5

Years

Over 5

Years

Non‑

interest

Bearing

Total

Financial assets

Cash and cash equivalents 0.16% 6,102,192 – – – – – 6,102,192

Other ﬁnancial assets 1.09% – – 50,000 – – – 50,000

Trade and other

receivables – – – – – 5,829,275 5,829,275

Total ﬁnancial assets 6,102,192 – 50,000 – – 5,829,275 11,981,467

Financial liabilities

Trade and other payables – – – – – 3,993,242 3,993,242

Short term loan 2.51% 348,485 – – – – – 348,485

Equipment Finance Facility 3.24% 3,784,513 – – – – – 3,784,513

Leases liabilities 3.90% 6,861,471 – – – – – 6,861,471

Total ﬁnancial liabilities 10,994,469 – – – – 3,993,242 14,987,711

As noted above, cash is invested in term deposits of varying maturity terms to maximise interest income as well as to meet the timing of operational cash ﬂow

requirements. All term deposits are with the NAB, to ensure market interest rates are achieved without compromising the security of funds on deposit.

The analysis below details the impact on the Group’s loss aer tax and equity if the interest rate associated with the closing balance of ﬁnancial assets

was to ﬂuctuate by the margins below, assuming all other variables had remained constant:

Loss (higher)/

lower Equity

higher/(lower)

2023

Loss (higher)/

lower Equity

higher/(lower)

2022

+ 1% (100 basis points) 118,969 61,552

‑ 1% (100 basis points) (118,969) (61,552)

The range of +1%/‑1% as an assumption is based on current macro‑market economic conditions in which the group holds its cash and cash

equivalent balances.

Credit risk

Credit risk arises when a counterparty defaults on its contractual obligations, resulting in a ﬁnancial loss to the Group.

The Group is exposed to credit risk via its cash and cash equivalents and receivables. To reduce risk exposure in relation to its holdings of cash and

cash equivalents, they are placed on deposit with the Group’s main bankers, the National Australia Bank (S&P Rating AA/A‑1+, Moody’s rating Aa1/P‑1).

A change to the Group’s bankers requires Board approval. BARDA income receivables have low credit risk as it is a project with USA government.

In 2023, trade receivables has grown and this is expected to continue as commercial product sales to hospitals and distributors increase.

The ageing analysis of trade and other receivables is as follows.

0‑30 days

30‑60 days

60‑90 days

90+ days

Total

2023

Trade and other receivables 10,629,148 1,428,366 640,159 636,269 13,333,942

2022 – – – – –

Trade and other receivables 5,336,119 379,296 10,871 102,989 5,829,275

The Group considers the maximum credit risk from potential default of the counter party to be equal to the carrying amount of the asset.

Receivable balances are monitored on an ongoing basis with the result that the Group’s exposure to credit loss is not signiﬁcant.

Liquidity risk

Liquidity risk arises if the Group encounters diculty in raising funds to meet its ﬁnancial liabilities.

66 PolyNovo Limited Annual Report 2023

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

The Group is exposed to liquidity risk via its trade and other payables and its trade ﬁnance and equipment ﬁnance facilities. Responsibility for managing

liquidity risk rests with the Board, who regularly review liquidity risk by monitoring the undiscounted cash ﬂow forecasts and actual cash ﬂows provided to

them by management. This process is undertaken to ensure that the Group continues to be able to meet its debts as and when they fall due. Contracts are

not entered into unless the Board is satisﬁed that there is sucient cash ﬂow to fund the additional commitment. The Board determines when reviewing

the undiscounted cash ﬂow forecasts whether the Group needs to raise additional working capital from its existing shareholders, the equity capital

markets or other available external sources. The Board may also review the timing of internal programs if necessary to moderate cash requirements.

A maturity analysis of trade and other payables is set out below:

30 June 2023

Less than

3 months

3 to 12

months

1 to 5

years

Over 5

years

Total

Trade and other Payables 7,992, 433 121,910 9,929 – 8,124,272

Interest‑bearing loans and borrowings* 644,818 763,897 1,778,212 – 3,186,927

Lease Liabilities 110,665 388,521 2,867,075 9,490,494 12,856,755

Total 8,747,916 1,274,328 4,655,216 9,490,494 24,167,954

30 June 2022

Less than

3 months

3 to 12

months

1 to 5

years

Over

5 years

Total

Trade and other payables 3,626, 811 246,801 18,157 101,473 3,993,242

Interest‑bearing loans and borrowings* 590,836 739,222 2,802,940 – 4,132,998

Lease Liabilities 111,924 345,826 1,575,784 4, 827, 937 6,861,471

Total 4,329,571 1,331,849 4,396,881 4,929,410 14,987,711

* Interest‑bearing loans and borrowings include short term loan and equipment ﬁnance loan facility.

Foreign currency risk

Foreign currency risk arises when foreign currency exchange rates ﬂuctuate against the Australian dollar, resulting in a foreign currency exchange

loss or gain to the Group.

The Group is exposed to foreign currency risk via its cash and cash equivalents, trade receivables and trade payables as part of its normal business.

The Group incurs foreign currency expenses predominantly in USD, NZD, EUR, CAD and INR. To reduce foreign currency risk exposure, the Group

maintains an amount of cash and cash equivalents in USD, NZD, GBP, EUR, CAD and INR. The Group receives payment from its overseas customers

in USD, NZD, GBP, EUR, INR and pays USA, NZD, GBP, EURO and INR trade payables from its funds. GBP and SGD denominated payable balances carry

some foreign currency risk, however these payable balances are typically infrequent and low in value and are therefore considered to expose the

Group to minimal risk. The Company had opened CAD and INR bank account given the new incorporation of India subsidiary and Canada branch

and will open an HKD bank account in near future.

The holdings of cash and cash equivalents, trade receivables and trade payables analysed by nominated currency at 30 June 2023, along with prior

year comparatives, were as follows. These are amounts in foreign sub with same functional currency as foreign currency stated.

30 June 2023

Denominated

in AUD

Denominated

in USD

Denominated

in NZD

Denominated

in GBP

Denominated

in EURO

Denominated

in SGD

Denominated

in CAD

Denominated

in INR

Total

Financial assets

Cash and cash equivalents

37,379,970 7,115,546 414,091 751,267 299,715 – 411,223 475,134 46,846,946

Trade and other

receivables

4,763,235 7, 252, 592 4,405 1,116,675 146,967 49,635 – 433 13,333,942

Other ﬁnancial assets

50,000 – – – – – – – 50,000

Total ﬁnancial assets

42,193,205 14,368,138 418,496 1,867,942 446,682 49,635 411,223 475,568 60,230,888

Financial liabilities

Trade and other payables

‑3,370,741 ‑4,252,973 ‑19,818 ‑228,369 ‑43,972 ‑37,733 – ‑170,666 ‑8,124,272

Total ﬁnancial liabilities

‑3,370,741 ‑4,252,973 ‑19,818 ‑228,369 ‑43,972 ‑37,733 – ‑170,666 ‑8,124,272

Total

38,822,464 10,115,165 398,678 1,639,573 402,710 11,902 411,223 304,902 52,106,617

67PolyNovo Limited Annual Report 2023

30 June 2022

Denominated

in AUD

Denominated

in USD

Denominated

in NZD

Denominated

in GBP

Denominated

in EURO

Denominated

in SGD

Total

Financial assets

Cash and cash equivalents 2,615,989 2,548,706 70,217 789,280 78,000 – 6,102,192

Receivables 924,280 3,888,211 288,857 591,661 108,552 27,714 5,829,275

Other ﬁnancial assets 50,000 – – – – – 50,000

Total ﬁnancial assets 3,590,269 6,436,917 359,074 1,380,941 186,552 27,714 11,981,467

Financial liabilities

Trade and other payables (2,056,858) (1,612,329) (42,025) (214,598) (34,104) (33,328) (3,993,242)

Total headroom/ (shortfall) 1, 533,411 4,824,588 317,0 49 1,166,343 152,448 (5,614) 7,988 ,225

A hypothetical 10% strengthening in the exchange rate of the Australian dollar against the local currencies of the Parents’ overseas subsidiaries

(as at 30 June 2023) with all other variables held constant would have the following eect on the loss and equity for the year ended 30 June 2023

for the Group:

Country

2023

United States of America (56,543) Unfavourable

United Kingdom (22,718) Unfavourable

New Zealand (2,502) Unfavourable

Singapore (7,114) Unfavourable

Ireland (1,905) Unfavourable

India (1,177) Unfavourable

Total (91,959)

A 10% strengthening in the exchange rate has been applied based on current market economic conditions.

Note 27. Key management personnel disclosures

The key management personnel compensation disclosures required by the Corporations Act 2001 are provided in the Remuneration Report in the

Directors’ Report.

(a) Details of key management personnel

The key management personnel of the Group are those persons having the authority and responsibility for planning, directing and controlling the

activities of the Group, directly or indirectly, during the 2022 and 2023 ﬁnancial years.

PolyNovo’s key management personnel are its Directors’ and members of the Senior Management team. Details of each Director and Senior Executive,

who are classiﬁed as key management personnel, are provided in the Remuneration Report.

(b) Compensation by category: key management personnel

Consolidated

30 June 2023

30 June 2022

Short term 1,838,174 1,256,880

Post‑employment – superannuation 83,491 114,601

Leave allowances 65,991 (63,599)

Share‑based payments 906,824 (4,029,641)

2,894,480 (2,721,759)

68 PolyNovo Limited Annual Report 2023

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

Share options held by key management personnel to purchase ordinary shares have the following expiry dates and exercise prices:

Issue Date Expiry date Exercise price

2023 number

outstanding

2022 number

outstanding

Jan Gielen

6/03/2019 30/06/2021 $0.60 – –

6/03/2019 30/06/2022 $0.60 – –

6/03/2019 30/06/2023 $0.60 – 400,000

Subtotal – 400,000

Swami Raote

29/07/2022 29/07/2025 $1.64 1,000,000 –

29/07/2022 29/07/2026 $1.64 1,000,000 –

29/07/2022 29/07/2027 $1.64 1,000,000 –

29/07/2022 29/07/2028 $1.64 1,000,000 –

29/07/2022 29/07/2029 $1.64 1,000,000 –

Subtotal 5,000,000 –

David McQuillan

2/09/2022 30/05/2025 $1.81 400,000 –

2/09/2022 30/05/2026 $1.81 400,000 –

Subtotal 1,200,000 –

Philip Scorgie

22/05/2023 31/05/2028 $1.37 150,000 –

22/05/2023 31/05/2028 $1.37 200,000 –

Subtotal 500,000 –

(d) Loans to key management personnel

No loans have been made to Directors of PolyNovo or to any other key management personnel, including their personally related entities.

(e) Other transactions with Directors

Kidder Williams Ltd, an entity associated with David Williams, received payment in the amount of $110,000, GST inclusive. The payment was

at standard commercial terms and conditions in respect to consulting services provided to PolyNovo Limited in relation to the capital raising.

Other than as noted above, there were no transactions with related parties during the year ended 30 June 2023.

69PolyNovo Limited Annual Report 2023

Note 28. Auditor’s remuneration

The auditor of PolyNovo Limited is Ernst & Young. The amounts received or due and receivable by Ernst & Young for audit and other services were

as follows:

During the year end 30 June 2023, the following fees were paid or payable for services provided by Ernst & Young, the auditor of the company,

and its network ﬁrms:

Consolidated

30 June 2023

30 June 2022

Audit Services – Ernst & Young (Australia)

Fees for auditing the statutory ﬁnancial report of the parent covering the group and auditing the statutory

ﬁnancial reports of any controlled entities 386,520 295,285

Fees for other assurance and agreed‑upon‑procedures services under other legislation or contractual

arrangements where there is discretion as to whether the service is provided by the auditor or another ﬁrm

– Agreed‑upon procedures and other audit engagements – –

Fees for other services – –

Total fees to Ernst & Young (Australia) 386,520 295,285

Audit Services – Ernst & Young Overseas Member Firms

Fees for assurance services that are required by legislation to be provided by the auditor 27,821 26,057

Fees for other assurance and agreed‑upon‑procedures services under other legislation or contractual

arrangements where there is discretion as to whether the service is provided by the auditor or another ﬁrm

– Agreed‑upon procedures and other audit engagements – –

Fees for other services – –

Total fees to overseas member ﬁrms of Ernst & Young (Australia) 27,821 26,057

Total audit and other assurance services 414,341 321,342

Total non‑audit services* 149,933 177, 358

Total auditor’s remuneration 564,274 498,700

* Non‑audit services include taxation services and company secretary services.

The Directors are satisﬁed that the provision of non‑audit services during the current period is compatible with the general standard of independence

for auditors imposed by the Corporations Act 2001. The nature and scope of each type of non‑audit service provided means that auditor’s

independence was not compromised.

Note 29. Commitments and contingencies

The Directors are not aware of any contingent liabilities or contingent assets at 30 June 2023. There has been no change in this assessment up to the

date of this report.

Note 30. Related party transactions

Related party transactions are disclosed under note 27 Key management personnel.

70 PolyNovo Limited Annual Report 2023

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

Note 31. Parent entity information

Parent

30 June 2023

30 June 2022

Proﬁt/(loss) aer income tax (2,364,644) 1,511,500

Total comprehensive income (2,364,644) 1,511,500

Statement of ﬁnancial position

Parent

30 June 2023

30 June 2022

Total current assets 101,115,691 49,344,921

Total assets 107,147,252 55,376,482

Total current liabilities 8,759,078 7,897,680

Total liabilities 8,759,078 7, 897,680

Equity

Issued capital 191,591,311 139,430,502

General reserve (484,326) (1,597,533)

Accumulated losses (92,718,811) (90,354,167)

Total equity 98,388,174 47,478,802

In accordance with the terms and conditions of the NAB facility arrangements disclosed in note 22, the parent entity, PolyNovo Limited, has provided

a cross‑guarantee in conjunction with wholly owned subsidiaries NovoSkin Pty Ltd and NovoWound Pty Ltd. The aggregate amount payable by the

cross‑guarantors is limited to $15,300,000 excluding interest and penalties.

Note 32. Controlled entities

The consolidated ﬁnancial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance with the accounting

policy described in note 2:

Ownership interest

Name

Principal place of business/

Country of incorporation

30 June 2023

30 June 2022

PolyNovo Limited Australia 100% 100%

PolyNovo North America LLC United States 100% 100%

PolyNovo Biomaterials Pty Ltd Australia 100% 100%

NovoSkin Pty Ltd Australia 100% 100%

NovoWound Pty Ltd Australia 100% 100%

PolyNovo NZ Limited New Zealand 100% 100%

PolyNovo Singapore Private Ltd Singapore 100% 100%

PolyNovo UK Limited United Kingdom 100% 100%

PolyNovo Ireland Ltd Ireland 100% 100%

PolyNovo Hong Kong Limited Hong Kong special administrative Region, China 100% –

PolyNovo Biomaterials India Private Limited India 100% –

71PolyNovo Limited Annual Report 2023

Note 33. Events aer the reporting period

No matter or circumstance has arisen since 30 June 2023 that has signiﬁcantly aected, or may signiﬁcantly aect the consolidated entity’s

operations, the results of those operations, or the consolidated entity’s state of aairs in future ﬁnancial years.

Note 34. Loss per share

Consolidated

30 June 2023

30 June 2022

Loss aer income tax attributable to the owners of PolyNovo Limited (4,924,539) (1,192,532)

Number Number

Weighted average number of ordinary shares used in calculating loss per share 684,454,164 660,874,406

684,454,164 660,874,406

Cents Cents

Basic loss per share (0.72) (0.18)

Diluted loss per share (0.72) (0.18)

Basic loss per share

Basic loss per share is calculated by dividing the proﬁt attributable to the owners of PolyNovo Limited, excluding any costs of servicing equity

other than ordinary shares, by the weighted average number of ordinary shares outstanding during the ﬁnancial year, adjusted for bonus elements

in ordinary shares issued during the ﬁnancial year.

Diluted loss per share

Diluted loss per share adjusts the ﬁgures used in the determination of basic earnings per share to take into account the aer income tax eect

of interest and other ﬁnancing costs associated with dilutive potential ordinary shares and the weighted average number of shares assumed to

have been issued for no consideration in relation to dilutive potential ordinary shares.

At 30 June 2023 there existed share options that if vested, would result in the issue of additional ordinary shares over the period to FY2028.

In the current period, these potential ordinary shares are considered antidilutive as their conversion to ordinary shares would reduce the loss per share.

Accordingly, they have been excluded from the dilutive loss per share calculation. There were no further transactions involving ordinary shares or

potential ordinary shares between the reporting date and the date of completion of these ﬁnancial statements.

Between the reporting date and the issue date of the 23 August 2023 Financial Report, there have been no transactions involving ordinary shares

or potential ordinary shares that would impact the calculation of EPS disclosed in the table above.

72 PolyNovo Limited Annual Report 2023

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

Note 35. Share‑based payments

(a) Employee share‑based payment plans

The Group provides beneﬁts to employees and Non‑executive Directors in the form of share‑based payment transactions, whereby employees and

Non‑executive Directors render services in exchange for shares or rights over shares. The expense recognised in the Statement of Comprehensive

Income for the years ended 30 June 2022 and 30 June 2023 are ($3,479,969) and $1,113,207 respectively.

During the year ended 30 June 2022, previous CEO and COO resigned thus their share options and awards were forfeited.

(b) Employee share‑based payment details

Employee share‑based payment details are summarised in below table.

2023

Balance

at 1 July

2022

Options

granted

Options

exercised

Options

forfeited

Balance

at 30 June

2023

Total

vested at

end of

year

Share‑based

payments

expense

($)

Key management personnel

Mr Jan Gielen 400,000 – 400,000 – – – –

Mr Swami Raote – 5,000,000 – – 5,000,000 – 716,338

Dr David McQuillan – 1,200,000 – – 1,200,000 – 180,411

Mr Philip Scorgie – 500,000 – – 500,000 – 10,075

Subtotal 400,000 6,700,000 400,000 – 6,700,000 – 906,824

Other employees

Mr Ed Graubart 1,000,000 250,000 250,000 250,000 750,000 – (58,261)

Mr Joshua Cheetham 500,000 – – – 500,000 – 134,561

Mr Ahmed Hassan 500,000 – – – 500,000 150,000 130,083

Subtotal 2,000,000 250,000 250,000 250,000 1,750,000 150,000 206,383

Total 2,400,000 6,950,000 650,000 250,000 8,450,000 150,000 1,113,207

During the year ended 30 June 2023, share options were issued to below 3 key management personnel and 1 employee.

Details of 3 key management personnel are summarised in below table. Exercise price, vesting hurdle and expiry dates please refer to Remuneration Report.

Tranche Grant date

Number

of Options

Risk‑free

rate

Volatility

Average

fair value

per option

Swami Raote

Tranche 1 29/07/2022 1,000,000 2.83% 59.15% 0.702

Tranche 2 29/07/2022 1,000,000 2.88% 57.96% 0.778

Tranche 3 29/07/2022 1,000,000 2.93% 62.82% 0.889

Tranche 4 29/07/2022 1,000,000 2.98% 64.11% 0.940

Tranche 5 29/07/2022 1,000,000 3.03% 65.80% 1.062

Subtotal 5,000,000

David McQuillan

Tranche 1 02/09/2022 400,000 3.25% 69.58% 0.408

Tranche 2 02/09/2022 400,000 3.25% 69.58% 0.423

Tranche 3 02/09/2022 400,000 3.33% 65.31% 0.502

Subtotal 1,200,000

Philip Scorgie

Tranche 1 22/05/2023 150,000 3.15% 62.47% 0.682

Tranche 2 22/05/2023 150,000 3.15% 62.47% 0.621

Tranche 3 22/05/2023 200,000 3.15% 62.47% 0.541

Subtotal 500,000

73PolyNovo Limited Annual Report 2023

Details of the employee that was granted share options during the year ended 30 June 2023 are summarised in below table.

Tranche Grant date

Number

of options

Exercise

price

$ Vesting hurdle

Risk‑free

interest

rate

Volatility

% Expiry

Average

fair

value per

option

Ed Graubart

Tranche 5 01/07/2022 250,000 $1.21 The options cannot vest or be

exercised until aer the two‑year

anniversary of employment and

until such time as shares in

PolyNovo have been trading at all

times above $1.21 per option for

a continuous 3‑month period.

3.17% 60.46% 13/08/2026 $0.597

Key valuation assumptions for the Employee Share Options:

The fair value of options granted during the year ended 30 June 2023 were determined using a Monte Carlo simulation‑based model. A Monte Carlo

simulation‑based model simulates the path of the share price according to a probability distribution assumption. Aer a large number of simulations,

the arithmetic average of the outcomes, discounted to the valuation date, is calculated to represent the option value. This model can accommodate

complex exercise conditions when the number of options exercised depends on some function of the whole path followed by the share price.

Parameters Assumptions

Valuation date Grant Date.

Share price Closing share price as at the valuation Date.

Expected life Assumed that the share appreciation rights will be exercised at the average exercise date which is the average

midpoint between vesting date and option expiry date.

Risk‑free interest rate The risk free interest rates are derived from the Australian Government Bonds as at Valuation Date.

The terms to maturity have been selected to align with the expected life of the options.

Dividend yield The dividend yield is the rate of dividend expressed as a continually compounded percentage of the share price.

In determining an appropriate dividend yield, forecasted dividend information provided by the management

of PolyNovo Limited has been relied upon.

Expected volatility A share’s volatility measure captures the characteristics of ﬂuctuations in the share’s price.

The value of options is extremely sensitive to the volatility measure and as a result great care should be

taken in determining the appropriate volatility percentage. To accurately value options, a volatility measure

should be selected that is most likely to represent the future volatility of the shares during the life of the

options: the implied volatility.

Accordingly, in determining the expected volatility, the historical market price volatility has been taken into account.

Other Other assumptions that have not been incorporated into our valuation model include:

(i) any change of control events and reorganisation of capital during the relevant performance periods

or service periods.

(ii) any dilution eect from the issue of options noting that they will not likely have a material impact

on the PolyNovo Limited security price.

74 PolyNovo Limited Annual Report 2023

In accordance with a resolution of the Directors of PolyNovo Limited, I state that:

In the opinion of the Directors:

The Financial Report and the Remuneration Report included in the Directors’ Report, of the Company and of the Group are in accordance

with the Corporations Act 2001, including:

• giving a true and fair view of the Company and the Group’s ﬁnancial position as at 30 June 2023 and of their performance for the year

ended on that date;

• complying with Australian Accounting Standards and Corporations Regulations 2001; and

There are reasonable grounds to believe that the Company and the Group will be able to pay their debts as and when they become due and payable.

This declaration has been made aer receiving the declarations required to be made to Directors in accordance with section 295A of the

Corporations Act 2001 for the ﬁnancial period ended 30 June 2023.

On behalf of the directors

Mr David Williams

Chairman

23 August 2023

DIRECTORS’ DECLARATION

30June2023

75PolyNovo Limited Annual Report 2023

INDEPENDENT AUDITOR’S REPORT

A member firm of Ernst & Young Global Limited

Liability limited by a scheme approved under Professional Standards Legislation

Ernst & Young

8 Exhibition Street

Melbourne VIC 3000 Australia

GPO Box 67 Melbourne VIC 3001

Tel: +61 3 9288 8000

Fax: +61 3 8650 7777

ey.com/au

Independent auditor’s report to the members of PolyNovo Limited

Report on the audit of the financial report

Opinion

We have audited the financial report of PolyNovo Limited (the Company) and its subsidiaries

(collectively the Group), which comprises the consolidated statement of financial position as at 30

June 2023, the consolidated statement of comprehensive income, consolidated statement of changes

in equity and consolidated statement of cash flows for the year then ended, notes to the financial

statements, including a summary of significant accounting policies, and the directors’ declaration.

In our opinion, the accompanying financial report of the Group is in accordance with the Corporations

Act 2001, including:

a. Giving a true and fair view of the consolidated financial position of the Group as at 30 June 2023

and of its consolidated financial performance for the year ended on that date; and

b. Complying with Australian Accounting Standards and the Corporations Regulations 2001.

Basis for opinion

We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under

those standards are further described in the Auditor’s responsibilities for the audit of the financial

report section of our report. We are independent of the Group in accordance with the auditor

independence requirements of the Corporations Act 2001 and the ethical requirements of the

Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional

Accountants (including Independence Standards) (the Code) that are relevant to our audit of the

financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with

the Code.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis

for our opinion.

Key audit matter

Key audit matters are those matters that, in our professional judgment, were of most significance in

our audit of the financial report of the current year. The matter was addressed in the context of our

audit of the financial report as a whole, and in forming our opinion thereon, but we do not provide a

separate opinion on the matter. For the matter below, our description of how our audit addressed the

matter is provided in that context.

We have fulfilled the responsibilities described in the Auditor’s responsibilities for the audit of the

financial report section of our report, including in relation to the matter. Accordingly, our audit

included the performance of procedures designed to respond to our assessment of the risks of

material misstatement of the financial report. The results of our audit procedures, including the

procedures performed to address the matter below, provide the basis for our audit opinion on the

accompanying financial report.

76 PolyNovo Limited Annual Report 2023

INDEPENDENT AUDITOR’S REPORT CONTINUED

A member firm of Ernst & Young Global Limited

Liability limited by a scheme

approved under Professional Standards Legislation

Recognition of Revenue

Why significant How our audit addressed the key audit matter

The Group has recognised revenue from the sale of

commercial products and revenue from services

performed in respect of research and development

activities. Revenue from contracts with customers

for the year ended 30 June 2023 was $65.2 million.

For sales of commercial products, revenue is

recognised upon delivery of the product to the

customer. The Group sells to customers in various

geographical territories. Commercial product sales

have significantly increased this financial year.

Services revenue is recognised as the services are

delivered.

Notes 2, 3 and 4 of the financial statements outline

the Company’s accounting policies with respect to

revenue recognition and revenue disclosures.

Revenue recognition was considered a key audit

matter due to the sales volumes and diversity of

customer arrangements entered into by the Group.

Our audit procedures with respect to the Group’s

revenue recognition included:

► Assessed new contracts with customers for terms

and conditions that could impact the timing of

recognition and measurement of revenue.

► Assessed the operating effectiveness of the

Group’s revenue controls by testing a sample of

controls with respect to the initiation and

recording of commercial sales transactions.

► Assessed on a sample basis, whether revenue was

correctly recognised based on the products

delivered as at 30 June 2023 with reference to

supporting documentation including contracts,

purchase orders proof of delivery, cash receipts

and credit notes.

► Assessed the Group’s performance obligations

under the services contracts to check that

revenue is recognised only for services provided

during the year and at the contracted rate.

► Assessed the appropriateness the disclosures in

relation to the Group’s revenue recognition and

disaggregation of revenue in accordance with

AASB 15 Revenues from Contracts with

Customers as outlined in Notes 2, 3 and 4 of the

financial statements.

Information other than the financial report and auditor’s report thereon

The directors are responsible for the other information. The other information comprises the

information included in the Company’s 2023 annual report other than the financial report and our

auditor’s report thereon. We obtained the directors’ report that is to be included in the annual report,

prior to the date of this auditor’s report, and we expect to obtain the remaining sections of the annual

report after the date of this auditor’s report.

Our opinion on the financial report does not cover the other information and we do not and will not

express any form of assurance conclusion thereon, with the exception of the Remuneration Report

and our related assurance opinion.

In connection with our audit of the financial report, our responsibility is to read the other information

and, in doing so, consider whether the other information is materially inconsistent with the financial

report or our knowledge obtained in the audit or otherwise appears to be materially misstated.

If, based on the work we have performed on the other information obtained prior to the date of this

auditor’s report, we conclude that there is a material misstatement of this other information, we are

required to report that fact. We have nothing to report in this regard.

77PolyNovo Limited Annual Report 2023

A member firm of Ernst & Young Global Limited

Liability limited by a scheme

approved under Professional Standards Legislation

Responsibilities of the directors for the financial report

The directors of the Company are responsible for the preparation of the financial report that gives a

true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001

and for such internal control as the directors determine is necessary to enable the preparation of the

financial report that gives a true and fair view and is free from material misstatement, whether due to

fraud or error.

In preparing the financial report, the directors are responsible for assessing the Group’s ability to

continue as a going concern, disclosing, as applicable, matters relating to going concern and using the

going concern basis of accounting unless the directors either intend to liquidate the Group or to cease

operations, or have no realistic alternative but to do so.

Auditor’s responsibilities for the audit of the financial report

Our objectives are to obtain reasonable assurance about whether the financial report as a whole is

free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that

includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an

audit conducted in accordance with the Australian Auditing Standards will always detect a material

misstatement when it exists. Misstatements can arise from fraud or error and are considered material

if, individually or in the aggregate, they could reasonably be expected to influence the economic

decisions of users taken on the basis of this financial report.

As part of an audit in accordance with the Australian Auditing Standards, we exercise professional

judgment and maintain professional scepticism throughout the audit. We also:

► Identify and assess the risks of material misstatement of the financial report, whether due to

fraud or error, design and perform audit procedures responsive to those risks, and obtain audit

evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not

detecting a material misstatement resulting from fraud is higher than for one resulting from

error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the

override of internal control.

► Obtain an understanding of internal control relevant to the audit in order to design audit

procedures that are appropriate in the circumstances, but not for the purpose of expressing an

opinion on the effectiveness of the Group’s internal control.

► Evaluate the appropriateness of accounting policies used and the reasonableness of accounting

estimates and related disclosures made by the directors.

► Conclude on the appropriateness of the directors’ use of the going concern basis of accounting

and, based on the audit evidence obtained, whether a material uncertainty exists related to

events or conditions that may cast significant doubt on the Group’s ability to continue as a going

concern. If we conclude that a material uncertainty exists, we are required to draw attention in

our auditor’s report to the related disclosures in the financial report or, if such disclosures are

inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up

to the date of our auditor’s report. However, future events or conditions may cause the Group to

cease to continue as a going concern.

► Evaluate the overall presentation, structure and content of the financial report, including the

disclosures, and whether the financial report represents the underlying transactions and events

in a manner that achieves fair presentation.

78 PolyNovo Limited Annual Report 2023

INDEPENDENT AUDITOR’S REPORT CONTINUED

A member firm of Ernst & Young Global Limited

Liability limited by a scheme

approved under Professional Standards Legislation

► Obtain sufficient appropriate audit evidence regarding the financial information of the entities or

business activities within the Group to express an opinion on the financial report. We are

responsible for the direction, supervision and performance of the Group audit. We remain solely

responsible for our audit opinion.

We communicate with the directors regarding, among other matters, the planned scope and timing of

the audit and significant audit findings, including any significant deficiencies in internal control that we

identify during our audit.

We also provide the directors with a statement that we have complied with relevant ethical

requirements regarding independence, and to communicate with them all relationships and other

matters that may reasonably be thought to bear on our independence, and where applicable, actions

taken to eliminate threats or safeguards applied.

From the matters communicated to the directors, we determine those matters that were of most

significance in the audit of the financial report of the current year and are therefore the key audit

matters. We describe these matters in our auditor’s report unless law or regulation precludes public

disclosure about the matter or when, in extremely rare circumstances, we determine that a matter

should not be communicated in our report because the adverse consequences of doing so would

reasonably be expected to outweigh the public interest benefits of such communication.

Report on the audit of the Remuneration Report

Opinion on the Remuneration Report

We have audited the Remuneration Report included in pages 28 to 37 of the directors’ report for the

year ended 30 June 2023.

In our opinion, the Remuneration Report of PolyNovo Limited for the year ended 30 June 2023,

complies with section 300A of the Corporations Act 2001.

Responsibilities

The directors of the Company are responsible for the preparation and presentation of the

Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our

responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in

accordance with Australian Auditing Standards.

Ernst & Young

Ashley Butler

Partner

Melbourne

23 August 2023

79PolyNovo Limited Annual Report 2023

Additional Information Required by ASX

For the year ended 30 June 2023.

Ordinary Shares

As at 7 August 2023 there were 690,232,751 ordinary shares on issue held by 19,999 shareholders.

Each ordinary share carries one vote per share.

Top 20 Shareholders as at 7 August 2023

Shareholder

Number

of shares % Units

HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED 94,468,202 13.69

J P MORGAN NOMINEES AUSTRALIA PTY LIMITED 58,519,477 8.48

CITICORP NOMINEES PTY LIMITED 26,811,635 3.88

MOGGS CREEK PTY LTD (MOGGS CREEK SUPER A/C) 19,010,112 2.75

BNP PARIBAS NOMS PTY LTD (DRP) 12,383,050 1.79

LATERAL INNOVATIONS PTY LTD (TRUST A/C) 10,924,103 1.58

NATIONAL NOMINEES LIMITED 8,413,960 1.22

MR ANTHONY SHANE KITTEL + MRS MICHELE THERESE KITTEL (KITTEL FAMILY SUPER A/C) 8,055,789 1.17

BNP PARIBAS NOMINEES PTY LTD (IB AU NOMS RETAILCLIENT DRP) 5,909,896 0.86

SANDHURST TRUSTEES LTD (ENDEAVOR ASSET MGMT MDA A/C) 5,739,049 0.83

NETWEALTH INVESTMENTS LIMITED (WRAP SERVICES A/C) 4,276,587 0.62

MS SIMONE MAREE BEKS 4,185,095 0.61

MR PAUL GERARD BRENNAN 4,185,095 0.61

COMMONWEALTH SCIENTIFIC AND INDUSTRIAL RESEARCH ORGANISATION 4,081,250 0.59

MR MATTHEW JAMES AVERY 3,631,338 0.53

MRS LI‑HSIEN TSAI 3,292,698 0.48

MR DAVID KENLEY 3,139,855 0.45

DR MARCUS JAMES DERMOT WAGSTAFF + MRS LARA KATE WAGSTAFF 3,072,166 0.45

MR LAURENT FOSSAERT 2,929,961 0.42

MR CHRIS DAWBORN (HASKALI SUPER FUND A/C) 2,870,271 0.42

Total 285,899,589 41.43

SHAREHOLDER INFORMATION

30June2023

80 PolyNovo Limited Annual Report 2023

Unquoted Securities

Share options over unissued shares

As at 30 June 2023, a total of 8,450,000 share options over ordinary shares are on issue held by 6 employees. Share options do not carry

a right to vote.

PolyNovo issued 6,700,000 share options during the year ended 30 June 2023. Details of the share options issued are included in note 35.

Share awards over unissued shares

As at 30 June 2023, nil share awards over ordinary shares are on issue. Share awards do not carry a right to vote.

The range of shareholders based on number of shares held as at 7 August 2023 is as follows:

Range of Units As at 7 August 2023

Number

of holders

Number

of shares

1 to 1,000 5,784 3,132,030

1,001 to 5,000 6,727 18,475,646

5,001 to 10,000 2,636 20,461,479

10,001 to 100,000 4,153 128,533,048

100,001 and over 699 519,630,548

19,999 690,232,751

Holding less than a marketable parcel 1,668 311,562

Voting rights

Clauses 45 to 54 of the Company’s Constitution stipulate the voting rights of members. In summary but without prejudice to the provisions of the

Constitution, every member present in person or by representative, proxy or attorney shall have one vote on a show of hands and on a poll have one

vote for each share held by the member.

Shareholder

Number

of shares %

HSBC Custody Nominees (Australia) Limited 94,468,202 13.69

JP Morgan Nominees Australia Pty Ltd 58,519,477 8.48

152, 987,679 22.17

Quotation of the Company’s Shares

PolyNovo has been granted ocial quotation for its shares on the Australian Securities Exchange (ASX Code: PNV).

SHAREHOLDER INFORMATION CONTINUED

CORPORATE DIRECTORY

Non‑executive Chairman Mr David Williams

Non‑executive Directors Dr Robyn Elliott

Ms Christine Emmanuel‑Donnelly

Mr Leon Hoare

Mr Bruce Rathie

Mr Andrew Lumsden

Chief Executive Ocer Mr Swami Raote

Company secretary Mr Jan Gielen

Registered oce Unit 2/ 320 Lorimer Street

Port Melbourne, Victoria 3207

T (03) 8681 4050

F (03) 8681 4099

Share register Computershare Investor Services Pty Ltd

Yarra Falls

452 Johnson Street

Abbotsford, Victoria 3067

T 1300 850 505

Auditor Ernst & Young

8 Exhibition Street

Melbourne, Victoria 3000

Stock exchange listing PolyNovo Limited shares are listed on the Australian Securities Exchange (ASX code: PNV)

Website www.polynovo.com

PolyNovo Limited Annual Report 2023

2/320 Lorimer Street

Port Melbourne

Victoria Australia 3207

T +61 3 8681 4050

F +61 3 8681 4099

polynovo.com