Contents Chairman’s letter Operations review Directors’ report Corporate governance statement Auditor’s independence declaration Consolidated fi nancial statements Consolidated statement of profi t or loss and other comprehensive income Consolidated statement of fi nancial position Consolidated statement of changes in equity Consolidated statement of cash fl ows Notes to the consolidated fi nancial statements Directors’ declaration Independent auditor’s report Corporate directory Shareholder information 2 5 6 21 24 23 23 24 25 26 27 48 49 52 53 ANATARA LIFESCIENCES Annual Report 2018 1 2 Chairman’s letter Dear Shareholders, On behalf of the Anatara Board, I am pleased to present our 2018 Annual Report. A major milestone was achieved in May in signing an exclusive worldwide agreement with Zoetis, a leading global animal health company, for the worldwide development, manufacturing, distribution and marketing of Detach for use in livestock and horses. Licensing Detach to a partner with substantial product development and manufacturing resources as well as a truly global distribution network has been a major achievement. As a result, Anatara no longer has to bear the costs associated with the further development of Detach for other species and other territories, freeing up our resources to focus on human product development. Anatara will now focus on creating high value therapies to augment the treatment of signifi cant unmet needs in the restoration of gut health in humans. Focusing on gut health indications In recent years, there has been intense interest in the gut microbiome and its role in maintaining gastrointestinal (GI) health. As a result, the treatment of many GI disorders is undergoing reassessment. Anatara’s technology is based on decades of research into the biological activities of bromelain. Potential human applications include GI diseases that involve infl ammation and/or diarrhea, including childhood diarrhea, traveller’s diarrhea and diarrhea associated with GI disorders such as Infl ammatory Bowel Disease (IBD) and Irritable Bowel Syndrome (IBS). After conducting a thorough review on each of these opportunities, our preferred indication is IBD/IBS since it provides the highest likelihood of signifi cant commercial returns. It was selected on the criteria of market opportunity, competitive advantage, quality of supporting data, strength of intellectual property protection and speed to market. Signifi cant market opportunity IBD is a global disease with accelerating incidence in newly industrialised countries. There are estimated to be over 5 million suff erers globally. IBS is a functional disorder characterised by abdominal pain, bloating and alternating constipation and diarrhea. It is the most commonly diagnosed gastrointestinal condition, aff ecting an estimated 11% of the global population. Patients have a poor quality of life and many turn to dietary supplements and complementary medicines in an attempt to relieve their symptoms. Scientifi c rationale The gastrointestinal disorders of IBD and IBS share common disease characteristics including an altered microbiome, impaired intestinal function and mucosal damage. IBS has low grade infl ammation while IBD is characterised by chronic infl ammation. These disorders are currently treated with anti-infl ammatories or a range of prescription medications aimed at treating the symptoms. However, these therapies are often inadequate with high treatment failure rates. There is therefore a signifi cant unmet medical need for products that can: • • • re-establish the homeostasis of the microbiome, treat the infl ammation, and repair the mucosal damage. Such products are expected to have the downstream eff ect of reducing disease associated diarrhea. ANATARA LIFESCIENCES Annual Report 2018 3 Gastrointestinal ReProgramming (GaRP) product, a microbiome-targeted dietary supplement Anatara’s GaRP is a microbiome-targeted multi-component dietary supplement that has been designed to address the primary underlying factors associated with gastrointestinal disorders. Our lead product candidate is being positioned as an adjunct to existing therapies, and it will not be replacing current prescription medications. Over the last 20 years the use of dietary supplements as adjuncts to prescription drugs has increased signifi cantly. GI disorders aff ect a signifi cant proportion of the population at some stage of their life. Approximately 50% of IBS and 30-50% of IBD patients seek additional relief of their symptoms through the use of adjunct therapies. This approach is generally precipitated by the high failure rates of current prescription therapies. Increased education and more detailed evaluation of dietary supplements has led to health care providers working with patients to develop individualised programs, which include dietary supplements in the symptom management for GI disorders. Developing a dietary supplement provides several regulatory and commercial advantages as it is less expensive than prescription medicines and has a less risky pathway to market, thereby accelerating market entry. Both the public and health care professionals alike understand the term ‘dietary supplement’ and with the right partner, marketing can be aimed at both the public and professionals. Unlike pharmaceuticals, demonstrating superiority to other products is not necessary. Marketing, sales, and medical aff airs activities encourage health care professionals to recommend products to their patients. Therefore, fi nding and selecting the best marketing partner is critical to the success of a product such as GaRP and consequently this has and will continue to be a major focus for Anatara. The design of GaRP is based on published research in conjunction with the extensive body of knowledge generated in-house at Anatara. Bromelain is one of the main components of GaRP and therefore forms the basis of its acceptability as an eff ective dietary supplement. Over the past year, Anatara has been actively working on the development of GaRP and has conducted a market feasibility study, fi led a provisional patent application and completed the dose selection of each formulation component. The Company is now in the process of generating in vitro data to support the eff ectiveness of GaRP in re-establishing the microbiome, reducing infl ammation and repairing mucosal damage. Additionally, we are conducting formulation development studies. The Company plans to evaluate the GaRP product in pig effi cacy studies during 2019. The pig is an accepted model for human gastrointestinal treatments and these trials will allow extensive testing including optimisation of the dose for humans. Following the effi cacy results, we intend to secure a suitable marketing partner. Corporate There have been a number of changes at the Board and executive level over recent months. In May, Dr. Mel Bridges retired as Executive Chairman and I commenced as Interim Chairman and Dr. Tracie Ramsdale commenced as Interim Chief Executive Offi cer (CEO). It was Mel’s goal to secure a worldwide animal health development partner and he passionately drove this initiative over the last three years. On behalf of the company, I thank Mel for his immense contributions as a founder, Chairman, CEO and substantial shareholder. Post the reporting period, our Chief Scientifi c Offi cer, Dr. Tracey Mynott left the company in August to pursue her long-standing passion to develop Detach technology to control infectious diarrhea in developing countries. Tracey is a co-founder of Anatara and an inventor of the Detach technology. We wish her success in her endeavours. Anatara will license to Tracey the IP necessary for the development of products to treat infectious diarrhea in the developing world and in return will receive a share in any commercial revenues from successful development. 4 As announced on 28th August, two new human healthcare experienced Directors have been appointed to the Board, commencing 1st September 2018. Sue MacLeman will join as Non-Executive Chairman and Dr. Jane Ryan as a Non-Executive Director. We have been very fortunate to attract two such high caliber individuals and I am delighted to be handing over the baton to Sue MacLeman who is well equipped to lead the Board through the next stage of the Company’s development. Paul Grujic will step off the Board at the end of August and I want to thank him for his contribution as a Director since 2014. The recruitment of a new CEO to lead the Company’s strategy and to deploy its resources, technology and expertise in the human healthcare sector is underway. Outlook The Board is committed to continue working towards the long-term success of the Company, leveraging scientifi c excellence and existing IP to build a diversifi ed portfolio of high-quality human healthcare assets, which can be eff ectively partnered and brought to market. We are confi dent that the refocused vision of addressing a signifi cant unmet medical need in gut health in humans will enable the Company to build signifi cant value for shareholders over the short, medium and longer term. It is our belief the right components are in place to build a valuable portfolio of assets for investors and potential partners. Finally, on behalf of my fellow directors, I thank Anatara’s shareholders for their support throughout the year. Thanks also go to the Anatara Board and our small but dedicated team for their continued hard work and ongoing commitment. We look forward to seeing those shareholders who can join us at the Anatara AGM to be held in Melbourne on 12th November 2018. Yours sincerely, Dr Jay Hetzel Interim Chairman ANATARA LIFESCIENCES Annual Report 2018 5 Operations review About Detach Detach is a modifi ed release formulation of a natural extract from pineapple stems. It has been proven to be eff ective in reducing diarrhea in pigs, known as scour, and may also be able to be used in other livestock species. In our 2017 report, a major achievement was the fi ling of the registration application dossier with the APVMA in October 2016. At the time of this report, we are still awaiting a decision on our application. All indications are that approval will be forthcoming. In May 2018 we announced the achievement of a major commercial milestone for the company, with the signing of an exclusive worldwide development, manufacture, distribution and marketing agreement for Detach with leading animal company, Zoetis Inc. The agreement is a major outcome because of the inclusion of all livestock species, not only pigs, thereby off ering the potential to lead to multiple, larger markets for the product over time. Anatara had initially planned to directly serve the Australian market, and during 2017-2018 we spent considerable eff ort in positioning ourselves to enter that market, with brand development and stakeholder engagement. However, the eventual license was structured as a worldwide agreement, which importantly allows for the development of a consistent image for this key product globally. In parallel with our negotiation of the licensing agreement, the team continued to progress the regulatory strategy for Detach, achieving US Food & Drug Administration (FDA) acceptance of the active ingredient ‘human food safety section’, which means that animals treated with the product are considered safe for human consumption. We had previously made similar advances in Europe where we achieved a no maximum residue fi nding in 2017. Whilst Anatara is no longer responsible for the development of the global regulatory strategy for Detach, we believe this progress will assist our partner in their endeavours. Focus on the future... Research activities at our Parkville, Melbourne facility have been divided between supporting Detach and developing the underlying principles for human gut health products. The team have established the systems to investigate and assess the eff ects our development product has on various functions of the gastrointestinal tract. Our collaboration between Anatara, CSIRO and La Trobe University (LIMS) under the Science and Industry Endowment Fund’s (SIEF) STEM+ Business Fellowship Program has continued to bear fruit with signifi cant advances in the understanding of several components of bromelain. The SIEF-STEM+ program supports collaborations between Australian research organisations and SME’s to work together on technical projects that improve the SME’s competitive advantage. As new understandings of bromelain and the development of new products in gastrointestinal health evolve, Anatara keeps a careful eye on new intellectual property of commercial value. Our strategy is to protect this intellectual property through the fi ling of provisional patents which are then managed through the patenting process. This means that individual applications may be refi led or combined to ensure the longest possible patent protection whilst investing in protection that is strong and defensible. In line with our research eff orts over the past 12 months, Anatara has received $1,230,329 in R&D tax reimbursements, which has allowed us to keep tight control of spending whilst focusing on future growth. 6 Directors’ report 30 June 2018 Your directors present their report on the consolidated entity consisting of Anatara Lifesciences Ltd and the entities it controlled at the end of, or during, the year ended 30 June 2018. Throughout the report, the consolidated entity is referred to as the Group or the Company. Directors and company secretary The following persons held offi ce as directors of Anatara Lifesciences Ltd during the fi nancial year1: Dr Jay Hetzel, Interim Chairman (from May 17 2018) Dr Tracie Ramsdale, Executive Director and Interim CEO Mr Iain Ross, Non-Executive Director Mr Paul Grujic, Non-Executive Director Dr Melvyn Bridges, Chairman and CEO (retired 17 May 2018) 1 Eff ective 17 May 2018, Dr Melvyn Bridges retired as Chairman and Chief Executive Offi cer. Dr Jay Hetzel commenced as Interim Chairman, and Dr Tracie Ramsdale commenced as Interim CEO of the Company. Mr Iain Ross and Mr Paul Grujic retain their positions as Non-Executive Directors with Mr Ross taking over the role as independent Chair of the Audit & Risk Committee. Mr Stephen Denaro held offi ce as Company Secretary of Anatara Lifesciences during the fi nancial year. Principal activities The Company is an Australian listed entity that focuses on developing oral solutions for gastrointestinal diseases in production animals and humans and the development and commercialisation of Detach, a non-antibiotic therapy that prevents and treats diarrhea (also known as scour) in piglets. Review of operations Information on the operations of the Group is set out in the Operations review and activities on page 5 of this annual report. Financial results and position The Group reported a loss for the full-year ended 30 June 2018 of $3,569,016 (2017: $1,705,002). The loss is after fully expensing all research and development costs. The Group’s net assets decreased by $3,433,689 (29%) compared with the previous year to $8,587,450. As at 30 June 2018, the Group had cash reserves of $1,447,732 and fi nancial assets (term deposit) of $6,294,339, a total decrease of $3,117,964 on the previous fi nancial year end. ANATARA LIFESCIENCES Annual Report 2018 7 Information on directors Dr Jay Hetzel Non-Executive Director and Interim Chairman* Experience and expertise in Dr Hetzel has a background life sciences research, product development and commercialisation. He had a distinguished research career with CSIRO for more than 20 years in animal genetics and genomics. In 1998 he co-founded Genetic Solutions to commercialise genomics technology in livestock. The company was sold to Pfi zer Animal Health in 2008. He has since worked on commercialising a range of bio-based products in early-stage ventures and is currently Chairman of UniQuest Pty, Ltd, the commercialisation company of the University of Queensland. He is a Fellow of the Australian Academy of Technology and Engineering and a Fellow of the Australian Institute of Company Directors. Date of appointment 4 August 2014 Special responsibilities Member of the Audit and Risk Management Committee, Remuneration Committee and Nominations Committee Interests in shares and options Interest in shares Interest in options 486,109 65,000 * Eff ective 17 May 2018, Dr Jay Hetzel commenced as Interim Chairman of the Company. Dr Tracie Ramsdale Executive Director and Interim CEO* Experience and expertise Tracie holds a PhD in Biochemistry from the University of Queensland, a Master of Pharmacy from the Victorian College of Pharmacy and a Bachelor of Applied Science (Chemistry) from the Royal Melbourne Institute of Technology. Following a successful career as a Principal Investigator and Commercial Manager of the Centre for Drug Design and Development at the University of Queensland, Tracie co-founded Alchemia Limited, a drug discovery and development company and served as the company’s CEO for almost 10 years. During this time, she was responsible for multiple fi nancing transactions and licensing the company’s technology to major international pharmaceutical and manufacturing partners. Dr Ramsdale has served on a number of industry and government advisory groups and provided independent consulting advice to the biotechnology industry, academia and government. Tracie is a Fellow of the Australian Academy of Technological Sciences and Engineering, and a member of the Australian Institute of Company Directors. Date of appointment 4 August 2014 Special responsibilities Member of the Audit and Risk Management Committee and Nominations Committee Interests in shares and options Interest in shares Interest in options 45,614 65,000 * Eff ective 17 May 2018, Dr Tracie Ramsdale commenced as Interim CEO of the Company. 8 Mr Iain Ross Non-Executive Director Experience and expertise Iain is a biochemistry graduate of London University, and is an experienced businessman with more than 30 years’ experience largely in the international life sciences and technology sectors. Following a career with multi-national companies, including Sandoz AG, Fisons plc, Hoff man La Roche, Celltech plc and Reed International plc, for the past 18 years he has undertaken a number of company turnarounds and start-ups as a board member on behalf of banks and private equity groups. Iain’s track record includes multiple fi nancing transactions as well as extensive experience of divestments and strategic restructurings and more than 20 years in cross-border management as a Chairman and CEO. He has led and participated in four initial public off erings and has direct experience of M&A transactions in Europe, USA and Pacifi c Rim. Currently he is Chairman of e-Therapeutics plc and RedX Pharma plc, each of which is listed on the London Stock Exchange. In addition, Iain is Chairman of Biomer Technology Limited, a private UK Company, and Chairman and Non-Executive Director of Kazia Therapeutics (ASX: KZA) which is listed in Australia on the ASX. He is a qualifi ed Chartered Director of the UK Institute of Directors and former Vice-Chairman of the Council of Royal Holloway, University of London. Date of appointment 17 February 2014 Special responsibilities Chair of the Remuneration Committee, Chair of the Audit and Risk Management Committee and member of the Nominations Committee Interests in shares and options Interest in shares Interest in options Mr Paul Grujic Non-Executive Director 1,427,942 65,000 Experience and expertise Paul is a graduate in Applied Biology and in Marketing with more than 30 years’ experience in the Animal Health industry. His roles have included Sales, Marketing, Business Development and General Management in the UK, USA and Australia. He was previously the President of CSL Animal Health with 250 staff and operations in the USA, Australia and New Zealand. He has also held senior positions with Glaxo, Pitman-Moore, Webster Animal Health, American Cyanamid and Fort Dodge(Wyeth). In addition, he has worked as an advisor to several Animal Health companies and was a Non-Executive Director of Catapult Genetics, an Executive Director of Peptech Animal Health and a Director of NOAH the UK Animal Health trade association. Paul has wide experience in acquisition, divestment and integration of companies and played a major role in the sale of CSL Animal Health and Catapult Genetics to Pfi zer and Peptech Animal Health to Virbac, a global Animal Health company. Date of appointment 24 February 2015 Special responsibilities Member of the Audit and Risk Management Committee, Remuneration Committee and Nominations Committee Interests in shares and options Interest in shares Interest in options 71,219 65,000 ANATARA LIFESCIENCES Annual Report 2018 9 Dr Melvyn Bridges Chairman and CEO Experience and expertise Dr Bridges has a Bachelor Degree of Science (Chemistry), Honorary Doctorate from Queensland University of Technology and is a Fellow of the Australian Institute of Company Directors. Dr Bridges has extensive experience as a CEO/Managing Director and Company Director in healthcare, agricultural technology, drug development, pathology, diagnostics and medical devices and related experience in retail. He has successfully raised in excess of $300 million investment capital in the healthcare/biotech sector and been directly involved in over $1 billion in M&A and related transactions. He is the Co-Founder and former Chairman of PanBio Limited and ImpediMed Limited. He has been awarded Australian Export Award, Australian Quality Award, Business Bulletin “Business Star of the Year”, Ernst & Young “Entrepreneur of the Year”, AusBiotech Gold Medal Award and BRW Top 100 Fastest Growing Companies Award. Dr Bridges is currently a director of ASX 100 company ALS Ltd and Oventus Medical Ltd. Dr Bridges was formerly a Director of Tissue Therapies Ltd (March 2009 to December 2015), Benitec BioPharma Limited (October 2007 to June 2014), ImpediMed Limited (September 1999 to November 2013), Alchemia Limited (October 2003 to July 2013), Genetic Technologies Limited (December 2011 to November 2012), and Leaf Energy Limited (August 2010 to September 2012). Appointment: 15 July 2010 Resignation: 17 May 2018 Chairman of the Nominations Committee and Member of the Audit and Risk Management Committee, Remuneration Committee Date of appointment/ resignation Special responsibilities Interests in shares and options Interest in shares Interest in options Mr Stephen Denaro Company Secretary 5,906,870 80,000 Experience and expertise Stephen has extensive experience in mergers and acquisitions, business valuations, accountancy services, and income tax compliance gained from positions as Company Secretary and Chief Financial Offi cer of various public companies and with major chartered accountancy fi rms in Australia and the United Kingdom. He provides company secretarial services for a number of start-up technology and ASX listed and unlisted public companies. Stephen has a Bachelor of Business in accountancy, Graduate Diploma in Applied Corporate Governance and is a member of the institute of Chartered Accountants in Australia and the Australian Institute of Company Directors. Date of appointment 24 February 2014 10 Meetings of directors The numbers of meetings of the Company’s board of directors and of each board committee held during the year ended 30 June 2018, and the numbers of meetings attended by each director were: Full meetings of directors Meetings of committees Audit Nomination Remuneration A 13 14 13 13 9 B 14 14 14 14 9 A 1 2 2 1 - B 2 2 2 2 - A - - - - - B - - - - - A 2 - 2 2 2 B 2 - 2 2 2 Dr Jay Hetzel* Dr Tracie Ramsdale* Mr Iain Ross* Mr Paul Grujic Dr Melvyn Bridges* A = Number of meetings attended B = Number of meetings held during the time the director held offi ce or was a member of the committee during the year * From 17 May 2018, Dr Melvyn Bridges retired as Chairman and Chief Executive Offi cer. As a consequence Dr Jay Hetzel was appointed Interim Chairman, Dr Tracie Ramsdale was appointed Interim CEO and Mr Iain Ross was appointed as Chair of the Audit and Risk Committee. Unissued shares under option Unissued ordinary shares of Anatara Lifesciences Ltd under option at the date of this report are: Expiry date Exercise price of shares ($) Number under option Issue of options to Pork CRC 18 September 2018 Issue of options to Pork CRC 18 September 2018 Issue of options to Directors 11 November 2018 Issue of options under ESOP 14 December 2020 Issue of options under ESOP 23 September 2021 Issue of options under ESOP 17 November 2022 Total 0.50 0.50 1.35 1.45 1.70 2.27 250,000 125,000 340,000 1,265,000 420,000 36,000 2,436,000 During or since the end of the fi nancial year, the Company has not issued ordinary shares as a result of the exercise of options. ANATARA LIFESCIENCES Annual Report 2018 11 Remuneration report The Remuneration report, which has been audited, outlines the key management personnel remuneration arrangements for the Group, in accordance with the requirements of the Corporations Act 2001 and its Regulations. The Remuneration report is set out under the following main headings: A. Principles used to determine the nature and amount of remuneration B. Details of remuneration C. Service agreements D. Share-based compensation E. Relationship between the remuneration policy and Group performance F. Key management personnel disclosures A. Principles used to determine the nature and amount of remuneration Remuneration governance The objective of the remuneration committee is to ensure that pay and rewards are competitive and appropriate for the results delivered. The remuneration committee charter adopted by the Board aims to align rewards with achievement of strategic objectives and the creation of value for shareholders. The remuneration framework applied provides a mix of fi xed and variable pay and a blend of short and long-term incentives as appropriate. Issues of remuneration are considered annually or otherwise as required. Non-Executive Directors Fees and payments to non-executive Directors refl ect the demands which are made on, and the responsibilities of, the Directors. The Company’s policy is to remunerate non-executive Directors at market rates (for comparable companies) for time commitment and responsibilities. Fees for non-executive Directors are not linked to the performance of the Company, however to align Directors’ interests with shareholders’ interests, Directors are encouraged to hold shares in the Company. Non-Executive Directors’ fees and payments are reviewed annually by the Board of Directors. The Board of Directors considers advice from external sources as well as the fees paid to non-executive Directors of comparable companies when undertaking the annual review process. Each director receives a fee for being a director of the company. The level of remuneration for the Non-Executive Directors has remained at the same level since 2016. The Chairman’s fees are determined independently to the fees of other non-executive Directors based on comparative roles in the external market. The chairman is not present at any discussions relating to determination of his own remuneration. Retirement benefi ts and allowances No retirement benefi ts are payable other than statutory superannuation, if applicable to the Directors of the Company. 12 Other benefi ts No motor vehicle, health insurance or other similar allowances are made available to Directors (other than through salary-sacrifi ce arrangements). Executive pay Executive pay and reward consists of base pay, short-term performance incentives, long-term performance incentives and other remuneration such as superannuation. Superannuation contributions are paid into the executive’s nominated superannuation fund. Base pay Executives are off ered a competitive level of base pay which comprises the fi xed (unrisked) component of their pay and rewards. Base pay for senior executives is reviewed annually to ensure market competitiveness. There are no guaranteed base pay increases included in any senior executives’ contracts. Short-term and long-term incentives Contractual agreements with key management personnel provide for the provision of incentive arrangements should these be introduced by the Company. There are currently both an STI and LTI scheme in place. The STI component is performance based for Dr Mynott, Dr West and Dr Brown and represents up to 30% of their respective base salaries, and is awarded on the basis of performance to a set of board approved Key Performance Indicators (KPI’s). Long term incentives relate to director share option and executive share option plans put in place in 2014. The options vest up to two to three years with a service requirement. Directors options are subject to the following service conditions: 1/3 of the options will vest immediately on grant date; 1/3 of the options will vest 12 months after the grant date; and 1/3 will vest 24 months after the grant date. If the employment is terminated or the director resigns, unvested options will be considered forfeited. Executive options are subject to the following service conditions: 1/3 of the options will vest 12 months after the date of issue; 1/3 of the options will vest 24 months after the grant date; and 1/3 will vest 36 months after the grant date. If the employment is terminated or the executive resigns, unvested options will be considered forfeited. Both directors and executive options are not subject to additional performance criteria. Given the nature of the Company’s activities and the small management team responsible for its running, the Company considers that the performance of the executives and the performance and value of the Company are closely related. Securities trading policy The trading of Company’s securities by employees and Directors is subject to, and conditional upon, the Policy for Trading in Company Securities which is available on the Company’s website (www.anataralifesciences.com). Voting and comments made at the company’s 2017 Annual General Meeting The Company received 82.57% favourable votes on its Directors’ remuneration report for the 2017 fi nancial year. Use of remuneration consultants If remuneration consultants are to be engaged to provide remuneration recommendations as defi ned under section 9B of the Corporations Act 2001, then they are engaged by, and report directly to, the remuneration committee. No remuneration consultants were engaged to provide remuneration services during the fi nancial year. ANATARA LIFESCIENCES Annual Report 2018 13 B. Details of remuneration Amounts of remuneration Key Management Personnel (KMP) of the Company are defi ned as those persons having authority and responsibility for planning, directing and controlling the major activities of the Company, directly or indirectly, including any director (whether executive or otherwise) of the Company receiving the highest remuneration. Details of the remuneration of the KMP of the Company are set out in the following tables. The key management personnel of the Company consisted of the following Directors of Anatara Lifesciences Ltd: Dr Jay Hetzel Non-Executive Director and Interim Chairman* Dr Tracie Ramsdale Executive Director and Interim CEO* Mr Iain Ross Non-Executive Director Mr Paul Grujic Non-Executive Director And the following persons: Dr Melvyn Bridges Chairman and CEO, retired 17 May 2018* Dr Tracey Mynott Chief Science Offi cer and R&D Director Dr Michael West Chief Operating Offi cer Dr Tracey Brown Chief Development Offi cer * Eff ective 17 May 2018, Dr Melvyn Bridges retired as Chairman and Chief Executive Offi cer. Dr Jay Hetzel commenced as Interim Chairman, and Dr Tracie Ramsdale commenced as Interim CEO of the Company. 14 30 June 2018 Short-term benefi ts Post- employment benefi ts Long- term benefi ts Share- based payments Cash salary and fees Annual leave Non- monetary Bonus (1) Superannuation Long service leave Equity settled shares $ $ $ $ $ $ $ % of total remuneration not related to performance At risk STI At risk LTI % % % Total $ Executive directors: Dr Tracie Ramsdale (i) 156,568 6,029 - 19,615 11,610 Non-Executive directors: Dr Jay Hetzel Mr Iain Ross (i) Mr Paul Grujic Other key management personnel: 84,170 82,581 70,000 Dr Melvyn Bridges (ii) 260,932 - - - - Dr Tracey Mynott 250,000 27,251 - - - - - - - - - 12,500 Dr Michael West 250,000 14,931 - 132,500 Dr Tracey Brown 250,000 17,525 - 132,500 3,879 - 6,650 19,256 24,937 29,212 29,212 Total 1,404,251 65,736 - 297,115 124,756 - - - - - - - - - 581 194,403 90 10 581 581 581 88,630 83,162 77,231 714 280,902 17,318 332,006 43,164 469,807 43,164 472,401 106,684 1,998,542 100 100 100 100 91 63 63 - - - - 9 37 37 - - - - - - - - (1) The bonus includes the amount of cash bonus paid during the fi nancial year or accrued at year end. Details are as follows: • • • • 19.6k bonus (accrued) to Dr Tracie Ramsdale relates to meeting performance KPI in FY2018 which was approved by the Board during FY2018. 12.5k bonus to Dr Tracey Mynott was paid for meeting performance KPI in FY2017 which was approved by the Board during FY2018. 132.5k bonus to Dr Michael West comprised of FY2017 & FY2018 bonus for meeting performance KPI of 57.5k (paid) & 75k (accrued) respectively which was approved by the Board during FY2018. 132.5k bonus to Dr Tracey Brown comprised of FY2017 & FY2018 bonus for meeting performance KPI of 57.5k (paid) & 75k (accrued) respectively which was approved by the Board during FY2018. (i) In addition, Dr Tracie Ramsdale received $129,923 (2017: $147,919) in consultancy fees under an arrangement that has been approved by the Board. Mr Iain Ross received $20,000 (2017: nil) in consultancy fees under an arrangement that has been approved by the Board in May 2018. (ii) Dr Melvyn Bridges retired as Chairman and Chief Executive Offi cer on 17 May 2018. ANATARA LIFESCIENCES Annual Report 2018 15 30 June 2017 Short-term benefi ts Post- employment benefi ts Long- term benefi ts Share- based payments % of total remuneration Cash salary and fees Annual leave Non- monetary Bonus Superannuation Long service leave Equity settled shares $ $ $ $ $ $ $ not related to performance At risk STI At risk LTI % % % Total $ Executive directors: Dr Tracie Ramsdale (i) 75,000 Non-Executive directors: Dr Jay Hetzel Mr Iain Ross Mr Paul Grujic Other key management personnel: 70,000 82,125 71,346 Dr Melvyn Bridges 237,499 Dr Paul Schober (ii) 58,321 - - - - - - Dr Tracey Mynott 314,843 27,305 Dr Michael West 226,461 8,468 Dr Tracey Brown 216,430 15,277 Total 1,352,025 51,050 - - - - - - - - - - - - - - - - - - - - 7,125 6,650 - 6,778 22,708 5,541 25,257 21,093 18,909 114,061 - - - - - - - - - - 2,696 84,821 100 2,696 79,346 2,696 84,821 2,696 80,820 3,318 263,525 19,385 83,247 36,040 403,445 - - 256,022 250,616 69,527 1,586,663 100 100 100 100 70 70 100 100 - - - - - 30 30 - - - - - - - - - - - (i) In addition, Dr Ramsdale received $147,919 (2016: $13,912) in consultancy fees under an arrangement that has been approved by the Board. (ii) Dr Paul Schober retired as Chief Executive Offi cer and Managing Director on 23 September 2016. 16 C. Service agreements Executives The employment conditions of the previous Chairman and Chief Executive Offi cer, Dr Melvyn Bridges were formalised in a contract of employment which commenced on the 1 April 2017. This contract stipulates a salary (inclusive of director fees) of $290,000 pa, exclusive of superannuation and any salary sacrifi ce items with no performance pay or at risk salary. The agreement permits Dr Melvyn Bridges to participate in the Company’s Share and Option Plan. The contract term is continuing, termination benefi ts are as prescribed by statutory entitlements. On 17 May 2018, Dr Melvyn Bridges retired as Chairman and Chief Executive Offi cer. The employment conditions of the current Chief Executive Offi cer, Dr Tracie Ramsdale are formalised in a contract of employment which commenced on the 17th May 2018. This contract stipulates a salary (inclusive of director fees) of $340,000 pa, excluding superannuation and any salary sacrifi ce items. The agreement stipulates that at the absolute discretion of the Board, upon meeting key performance indicators set in accordance with this Agreement, and subject to tax as required by law, the Executive may be paid an additional gross amount up to 50% of the Salary. The agreement permits Dr Tracie Ramsdale to participate in the Company’s Share and Option Plan. The contract term is continuing, termination benefi ts are as prescribed by statutory entitlements. The employment conditions of the Chief Science Offi cer, Dr Tracey Mynott, are formalised in a contract of employment which commenced on the 1 August 2014. The agreement stipulates that at the absolute discretion of the Board, upon meeting key performance indicators set in accordance with this Agreement, and subject to tax as required by law, the Executive may be paid an additional gross amount up to 30% of the Salary, to a maximum of $75,000, for each fi nancial year of this Agreement, commencing from the fi nancial year 2018. The Executive will be permitted to participate in the Company’s Share and Option Plan. The contract term is continuing, termination benefi t are as prescribed by statutory entitlements. The employment conditions of the Chief Operating Offi cer, Dr Michael West, are formalised in a contract of employment which commenced on the 1 July 2016. The agreement stipulates that at the absolute discretion of the Board, upon meeting key performance indicators set in accordance with this Agreement, and subject to tax as required by law, the Executive may be paid an additional gross amount up to 30% of the Salary, to a maximum of $75,000, for each fi nancial year of this Agreement, commencing from the fi nancial year 2018. The Executive will be permitted to participate in the Company’s Share and Option Plan. The contract term is continuing, termination benefi t are as prescribed by statutory entitlements. The employment conditions of the Chief Development Offi cer, Dr Tracey Brown, are formalised in a contract of employment which commenced on the 22 August 2016. The agreement stipulates that at the absolute discretion of the Board, upon meeting key performance indicators set in accordance with this Agreement, and subject to tax as required by law, the Executive may be paid an additional gross amount up to 30% of the Salary, to a maximum of $75,000, for each fi nancial year of this Agreement, commencing from the fi nancial year 2018. The Executive will be permitted to participate in the Company’s Share and Option Plan. The contract term is continuing, termination benefi t are as prescribed by statutory entitlements. Key management personnel are entitled to receive on termination of employment their statutory entitlements of accrued annual and long service leave, together with any superannuation benefi ts. ANATARA LIFESCIENCES Annual Report 2018 17 Non-Executive Directors In accordance with best practice corporate governance, the structure of non-executive Directors and executive remunerations is separate and distinct. Directors’ fees cover all main board activities and committee memberships. The current base fee for each non-executive Director is $70,000 per annum (plus a further $5,000 per annum for acting as chair of a Board committee) plus superannuation and GST (as applicable) in the case of Australian based directors and an equivalent amount for overseas directors. The Chairman’s fee is $140,000 per annum, plus superannuation and GST (as applicable). The maximum amount of fees that can be paid to non-executive Directors is subject to approval by shareholders at a General Meeting and is currently at a maximum aggregate of $500,000 per annum. Director agreements are continuing. Key management personnel have no entitlement to termination payments in the event of removal for misconduct. D. Share-based compensation During the fi nancial year, no options have been issued to the Group’s directors or other key management personnel as part of compensation under the company’s directors and executive option plan (2017: $20,042). E. Relationship between the remuneration policy and group performance As detailed under headings (a) and (b), remuneration of executives consists of an unrisked element (base pay) and cash bonuses based on performance in relation to key strategic, non-fi nancial measures linked to drivers of performance in future reporting periods. As such, remuneration is not linked to the fi nancial performance of the Company in the current or previous reporting periods. Details of the short-term incentive cash bonuses awarded as remuneration to each key management personnel, the percentage of the available bonus that was paid in the fi nancial year, and the percentage that was forfeited because the person did not meet the service and performance criteria is set out below. The FY2018 accrued bonuses disclosed below are estimated based on the maximum entitlement and the actual amount to be paid might vary upon the conclusion of the performance appraisals. Entitled as remuneration % vested during % forfeited during ($) the year the year Executive Directors: Dr Tracie Ramsdale Non-Executive Directors: Dr Jay Hetzel Mr Iain Ross Mr Paul Grujic Other key management personnel: Dr Tracey Mynott Dr Michael West Dr Tracey Brown Dr Melvyn Bridges* 19,615 100% - - - 12,500 132,500 132,500 - -% -% -% 100% 100% 100% -% -% -% -% -% -% -% -% -% * From 17 May 2018, Dr Melvyn Bridges retired as Chairman and Chief Executive Offi cer. 18 F. Key management personnel disclosures Shareholding The number of shares in the parent entity held during the fi nancial year by each director and other members of key management personnel of the Company, including their personally related parties, is set out below: Balance at start of year Balance at date of appointment Received as part of remuneration Additions Disposals/ other Balance at date of resignation Balance at end of year 30 June 2018 Executive directors: Dr Tracie Ramsdale 45,614 Non-Executive directors: Dr Jay Hetzel Mr Iain Ross Mr Paul Grujic Other key management personnel: Dr Melvyn Bridges Dr Tracey Mynott Total 456,109 1,377,942 71,219 5,906,870 4,391,337 12,249,091 - - - - - - - - - - - - - - - 30,000 50,000 - - - 80,000 - - - - - - - - - - - 45,614 486,109 1,427,942 71,219 5,906,870 - - 4,391,337 5,906,870 6,422,221 ANATARA LIFESCIENCES Annual Report 2018 19 Option holding The number of options over ordinary shares in the company held during the year by each Director and other Key Management Personnel, including their personally related parties, are set out below. 30 June 2018 Executive directors: Balance at start of year Granted as compensation Option expired Net change other Balance at end of year Vested & exercisable Escrowed & unvested Dr Tracie Ramsdale (1) 65,000 Non-Executive directors: Dr Jay Hetzel (1) Mr Iain Ross (1) Mr Paul Grujic (1) Other key management personnel: Dr Melvyn Bridges (2) Dr Tracey Mynott (2) Dr Michael West Dr Tracey Brown Total 65,000 65,000 65,000 80,000 500,000 210,000 210,000 1,260,000 - - - - - - - - - - 65,000 65,000 65,000 65,000 65,000 65,000 65,000 65,000 (80,000) - - - - - - - - 500,000 333,333 166,667 210,000 210,000 70,000 70,000 140,000 140,000 - (80,000) 1,180,000 733,333 446,667 - - - - (1) Directors options are subject to the following service conditions: 1/3 of the options will vest immediately on grant date; 1/3 of the options will vest 12 months after the grant date; and 1/3 will vest 24 months after the grant date. If the employment is terminated or the director resigns, unvested options will be considered forfeited. Directors options are not subject to any performance conditions. (2) Executive options are subject to the following service conditions: 1/3 of the options will vest 12 months after the date of issue; 1/3 of the options will vest 24 months after the grant date; and 1/3 will vest 36 months after the grant date. If the employment is terminated or the executive resigns, unvested options will be considered forfeited. Executive options are not subject to any performance conditions. END OF REMUNERATION REPORT Related party transactions Dr Tracie Ramsdale received $129,923 (2017: $147,919) in consultancy fees under an arrangement that has been approved by the Board. Mr Iain Ross received $20,000 (2017: nil) in consultancy fees under an arrangement that has been approved by the Board in May 2018. 20 Event since the end of the fi nancial year No matter or circumstance has arisen since 30 June 2018 that has signifi cantly aff ected, or may signifi cantly aff ect the Company’s operations, the results of those operations, or the Company’s state of aff airs in future fi nancial years. Signifi cant changes in the state of affairs There have been no signifi cant changes in the state of aff airs of the Group during the period. Likely developments and expected results of operations The likely developments in the Group’s operations, to the extent that such matters can be discussed upon, are covered in the Review of operations of this annual report. Environmental regulation The Group is not aff ected by any signifi cant environmental regulation in respect of its operations. Insurance of offi cers and indemnities (a) Insurance of offi cers The Company has indemnifi ed the Directors and executives of the Company for costs incurred, in their capacity as a director or executive, for which they may be held personally liable, except where there is a lack of good faith. During the fi nancial year, the Company paid a premium in respect of a contract to insure the Directors and executives of the company against a liability to the extent permitted by the Corporations Act 2001. The contract of insurance prohibits disclosure of the nature of liability and the amount of the premium. (b) Indemnity of auditors The Company has not, during or since the fi nancial year, indemnifi ed or agreed to indemnify the auditor of the Company or any related entity against a liability incurred by the auditor. During the fi nancial year, the Company has not paid a premium in respect of a contract to insure the auditor of the company or any related entity. 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. ANATARA LIFESCIENCES Annual Report 2018 21 Non-audit services The following non-audit services were provided by the entity’s auditor, Grant Thornton. The Directors are satisfi ed 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. Taxation services Grant Thornton Audit Pty Ltd fi rm: Tax compliance services Total remuneration for taxation services Consolidated entity year ended 2018 $ 2017 $ 25,650 25,650 36,544 36,544 Auditor’s independence declaration A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 22. Auditor Grant Thornton Audit Pty Ltd, appointed 20 November 2014, continue in offi ce in accordance with section 327 of the Corporations Act 2001. This report is made in accordance with a resolution of Directors, pursuant to section 298(2)(a) of the Corporations Act 2001. Corporate governance statement In accordance with ASX Listing Rule 4.10.3, the Company’s 2018 Corporate Governance Statement can be found on its website at http://anataralifesciences.com/investors/corporate-governance. This report is made in accordance with a resolution of directors. Dr Tracie Ramsdale Executive Director and Interim CEO Date: This Day 31st of August 2018 Brisbane Collins Square, Tower 1 727 Collins Street Melbourne Victoria 3008 Correspondence to: GPO Box 4736 Melbourne Victoria 3001 T +61 3 8320 2222 F +61 3 8320 2200 E info.vic@au.gt.com W www.grantthornton.com.au (cid:36)(cid:88)(cid:71)(cid:76)(cid:87)(cid:82)(cid:85)(cid:182)(cid:86)(cid:3)(cid:44)(cid:81)(cid:71)(cid:72)(cid:83)(cid:72)(cid:81)(cid:71)(cid:72)(cid:81)(cid:70)(cid:72)(cid:3)(cid:39)(cid:72)(cid:70)(cid:79)(cid:68)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3) To the Directors of Anatara Lifesciences Ltd In accordance with the requirements of section 307C of the Corporations Act 2001, as lead auditor for the audit of Anatara Lifesciences Ltd for the year ended 30 June 2018, I declare that, to the best of my knowledge and belief, there have been: a b no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and no contraventions of any applicable code of professional conduct in relation to the audit. Grant Thornton Audit Pty Ltd Chartered Accountants M A Cunningham Partner (cid:177) Audit & Assurance Melbourne, 31 August 2018 Grant Thornton Audit Pty Ltd ACN 130 913 594 a subsidiary or related entity of Grant Thornton Australia Ltd ABN 41 127 556 389 www.grantthornton.com.au (cid:181)(cid:42)(cid:85)(cid:68)(cid:81)(cid:87)(cid:3)(cid:55)(cid:75)(cid:82)(cid:85)(cid:81)(cid:87)(cid:82)(cid:81)(cid:182)(cid:3)(cid:85)(cid:72)(cid:73)(cid:72)(cid:85)(cid:86)(cid:3)(cid:87)(cid:82)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:69)(cid:85)(cid:68)(cid:81)(cid:71)(cid:3)(cid:88)(cid:81)(cid:71)(cid:72)(cid:85)(cid:3)(cid:90)(cid:75)(cid:76)(cid:70)(cid:75)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:42)(cid:85)(cid:68)(cid:81)(cid:87)(cid:3)(cid:55)(cid:75)(cid:82)(cid:85)(cid:81)(cid:87)(cid:82)(cid:81)(cid:3)(cid:80)(cid:72)(cid:80)(cid:69)(cid:72)(cid:85)(cid:3)(cid:73)(cid:76)(cid:85)(cid:80)(cid:86)(cid:3)(cid:83)(cid:85)(cid:82)(cid:89)(cid:76)(cid:71)(cid:72)(cid:3)(cid:68)(cid:86)(cid:86)(cid:88)(cid:85)(cid:68)(cid:81)(cid:70)(cid:72)(cid:15)(cid:3)(cid:87)(cid:68)(cid:91)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:68)(cid:71)(cid:89)(cid:76)(cid:86)(cid:82)(cid:85)(cid:92)(cid:3)(cid:86)(cid:72)(cid:85)(cid:89)(cid:76)(cid:70)(cid:72)(cid:86) to their clients and/or refers to one or more member firms, as the context requires. 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GTIL and its member firms are not agents of, and do not obligate one (cid:68)(cid:81)(cid:82)(cid:87)(cid:75)(cid:72)(cid:85)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:68)(cid:85)(cid:72)(cid:3)(cid:81)(cid:82)(cid:87)(cid:3)(cid:79)(cid:76)(cid:68)(cid:69)(cid:79)(cid:72)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:82)(cid:81)(cid:72)(cid:3)(cid:68)(cid:81)(cid:82)(cid:87)(cid:75)(cid:72)(cid:85)(cid:182)(cid:86)(cid:3)(cid:68)(cid:70)(cid:87)(cid:86)(cid:3)(cid:82)(cid:85)(cid:3)(cid:82)(cid:80)(cid:76)(cid:86)(cid:86)(cid:76)(cid:82)(cid:81)(cid:86)(cid:17)(cid:3)(cid:44)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:36)(cid:88)(cid:86)(cid:87)(cid:85)(cid:68)(cid:79)(cid:76)(cid:68)(cid:81)(cid:3)(cid:70)(cid:82)(cid:81)(cid:87)(cid:72)(cid:91)(cid:87)(cid:3)(cid:82)(cid:81)(cid:79)(cid:92)(cid:15)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:88)(cid:86)(cid:72)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:87)(cid:72)(cid:85)(cid:80)(cid:3)(cid:181)(cid:42)(cid:85)(cid:68)(cid:81)(cid:87)(cid:3)(cid:55)(cid:75)(cid:82)(cid:85)(cid:81)(cid:87)(cid:82)(cid:81)(cid:182)(cid:3)(cid:80)(cid:68)(cid:92)(cid:3)(cid:85)(cid:72)(cid:73)(cid:72)(cid:85)(cid:3)(cid:87)(cid:82)(cid:3) Grant Thornton Australia Limited ABN 41 127 556 389 and its Australian subsidiaries and related entities. 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Liability limited by a scheme approved under Professional Standards Legislation. 23 Consolidated statement of profi t or loss and other comprehensive income For the year ended 30 June 2018 Licensing (evaluation) revenue Interest received R&D tax incentive Other grants Expenses from operating activities Depreciation and amortisation expense Research and development expenses Patent expenses Consultancy expenses Staff expenses Travel and accommodation ASX and share registry fees Other expenses Loss before income tax Income tax expense Loss for the period Other comprehensive income for the period, net of tax Total comprehensive loss for the period Losses per share: Basic loss per share Diluted loss per share Notes 3 Consolidated entity year ended 30 June 2018 $ 6,467 30 June 2017 $ 322,182 220,352 298,488 1,162,620 2,531,562 175,536 - (21,177) (16,941) (785,931) (1,122,370) (77,801) (141,804) (664,082) (796,935) (3,005,625) (2,171,277) (288,084) (299,973) (75,531) (215,760) (80,736) (227,198) (3,569,016) (1,705,002) 4 - - (3,569,016) (1,705,002) - - (3,569,016) (1,705,002) Cents Cents 6(a) 6(a) (0.07) (0.07) (0.03) (0.03) The above consolidated statement of profi t or loss and other comprehensive income should be read in conjunction with the accompanying notes. 24 Consolidated statement of fi nancial position As at 30 June 2018 ASSETS Current assets Cash and cash equivalents Trade and other receivables Financial assets - term deposits Other current assets Total current assets Non-current assets Property, plant and equipment Total non-current assets Total assets LIABILITIES Current liabilities Trade and other payables Employee entitlements Deferred revenue Total current liabilities Non-current liabilities Deferred revenue Total liabilities Net assets EQUITY Share capital Reserves Accumulated losses Total equity Consolidated entity year ended 30 June 2018 $ 30 June 2017 $ Notes 8 9 10 11 12 12 13(a) 13(b) 1,447,732 8,766,869 1,945,905 1,331,684 6,294,339 2,093,166 81,505 83,926 9,769,481 12,275,645 42,924 42,924 40,932 40,932 9,812,405 12,316,577 419,513 142,037 46,281 607,831 197,794 97,644 - 295,438 617,124 - 1,224,955 295,438 8,587,450 12,021,139 16,941,392 16,941,392 583,749 448,422 (8,937,691) (5,368,675) 8,587,450 12,021,139 The above Consolidated statement of fi nancial position should be read in conjunction with the accompanying notes. ANATARA LIFESCIENCES Annual Report 2018 25 Consolidated statement of changes in equity For the year ended 30 June 2018 Consolidated entity Balance at 1 July 2016 Loss for the period Transactions with owners in their capacity as owners: Share-based payment expense 13(b) Balance at 30 June 2017 Balance at 1 July 2017 Loss for the period Transactions with owners in their capacity as owners: Share-based payment expense 13(b) Attributable to owners of Anatara Lifesciences Ltd Notes Share capital $ Share-based payment reserves $ Accumulated losses $ Total equity $ 16,941,392 197,624 (3,663,673) 13,475,343 - - - (1,705,002) (1,705,002) 250,798 - 250,798 16,941,392 448,422 (5,368,675) 12,021,139 16,941,392 448,422 (5,368,675) 12,021,139 - - - (3,569,016) (3,569,016) 135,327 - 135,327 Balance at 30 June 2018 16,941,392 583,749 (8,937,691) 8,587,450 The above Consolidated statement of changes in equity should be read in conjunction with the accompanying notes. 26 Consolidated statement of cash fl ows For the year ended 30 June 2018 Cash fl ows from operating activities Receipts from customers Payments to suppliers and employees Interest received Research and development tax incentive and other grants Net cash (outfl ow) from operating activities Cash fl ows from investing activities Payments for purchases of plant and equipment Withdrawal/(investment) from/(in) term deposits Net cash (outfl ow) infl ow from investing activities Net cash infl ow (outfl ow) from fi nancing activities Net (decrease) increase in cash and cash equivalents Cash and cash equivalents at the beginning of the fi nancial year Notes 18 10 Consolidated entity year ended 30 June 2018 $ 30 June 2017 $ - 327,325 (4,721,011) (4,781,674) 219,179 320,786 1,405,865 1,255,005 (3,095,967) (2,878,558) (23,170) (41,614) (4,200,000) 5,300,000 (4,223,170) 5,258,386 - - (7,319,137) 2,379,828 8,766,869 6,387,041 Cash and cash equivalents at end of period 8 1,447,732 8,766,869 The above Consolidated statement of cash fl ows should be read in conjunction with the accompanying notes. ANATARA LIFESCIENCES Annual Report 2018 27 Notes to the consolidated fi nancial statements 1. Summary of signifi cant accounting policies (a) Corporate information The fi nancial report of Anatara Lifesciences Ltd (the “Company”) and its subsidiaries (together the “Group”) for the year ended 30 June 2018 was authorised for issue in accordance with a resolution of the Directors on 20 August 2018. The fi nancial report is for the Group consisting of Anatara Lifesciences Ltd and its subsidiaries. Anatara Lifesciences Ltd is a listed public company limited by shares incorporated and domiciled in Australia whose shares are publicly traded on the Australian Securities Exchange. The principal activities of the Group are to develop oral solutions for gastro-intestinal diseases in animals and in humans. (b) Basis of preparation The fi nancial report is a general-purpose fi nancial report, which has been prepared in accordance with the requirements of the Corporations Act 2001 and Australian Accounting Standards, required for a for-profi t entity. The fi nancial report has been prepared on an accruals basis and is based on historical costs. The fi nancial report is presented in Australian dollars, which is the Group’s functional and presentation currency. All values are rounded to the nearest dollar unless otherwise stated. Management is required to make judgements, estimates and assumptions about carrying values of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstance, the results of which form the basis of making the judgements. Actual results may diff er from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision aff ects only that period, or in the period of the revision and future periods if the revision aff ects both current and future periods. Judgements made by management in the application of Australian Accounting Standards that have signifi cant eff ects on the fi nancial statements and estimates with a signifi cant risk of material adjustments in the next year are disclosed, where applicable, in the relevant notes to the fi nancial statements. Accounting policies are selected and applied in a manner which ensures that the resulting fi nancial information satisfi es the concepts of relevance and reliability, thereby ensuring that the substance of the underlying transactions or other events is reported. (c) Statement of compliance The fi nancial 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. 28 (d) New and amended standards adopted by the group The were no adoptions of new standards that had a material impact on the Group. (e) New standards and interpretations not yet adopted Certain new accounting standards and interpretations have been published that are not mandatory for 30 June 2018 reporting periods and have not been early adopted by the Group. The Group’s assessment of the impact of these new standards and interpretations is set out below. There are no other standards that are not yet eff ective and that would be expected to have a material impact on the Group in the current or future reporting periods and on foreseeable future transactions. Title Nature of change Impact Application date Accounting periods beginning on or after 1 January 2018 The Group has performed a preliminary assessment on the impact of AASB 15 and concluded that there would have been immaterial impacts during the fi rst period on which the accounting policies apply. Accounting periods beginning on or after 1 January 2018 The Group is yet to undertake a detailed assessment of the impact of AASB 9. However, based on the Group’s preliminary assessment, the Standard is not expected to have a material impact on the measurement of transactions and balances recognised in the fi nancial statements when it is fi rst adopted for the year ending 30 June 2019. AASB 15 Revenue from Contracts with Customers AASB 9 Financial Instruments • • • • • replaces AASB 118 Revenue, AASB 111 Construction Contracts and some revenue-related Interpretations establishes a new revenue recognition model changes the basis for deciding whether revenue is to be recognised over time or at a point in time provides new and more detailed guidance on specifi c topics (e.g. multiple element arrangements, variable pricing, rights of return, warranties and licensing) expands and improves disclosures about revenue. AASB 9 introduces new requirements for the classifi cation and measurement of fi nancial assets and liabilities and includes a forward-looking ‘expected loss’ impairment model and a substantially-changed approach to hedge accounting. These requirements improve and simplify the approach for classifi cation and measurement of fi nancial assets compared with the requirements of AASB 139. ANATARA LIFESCIENCES Annual Report 2018 29 Application date Accounting periods beginning on or after 1 January 2018 Title AASB 16 Leases Nature of change Impact • • • • • replaces AASB 117 Leases and some lease-related Interpretations requires all leases to be accounted for ‘on-balance sheet’ by lessees, other than short-term and low value asset leases provides new guidance on the application of the defi nition of lease and on sale and lease back accounting largely retains the existing lessor accounting requirements in AASB 117 requires new and diff erent disclosures about leases The company is yet to undertake a detailed assessment of the impact of AASB16. However based on the Company’s preliminary assessment, the likely impact on the fi rst time adoption for the year ending 30 June 2020 includes: • There will be a signifi cant increase in lease assets and fi nancial liabilities recognised on the statement of fi nancial position. The reported equity will reduce as the carrying amount of lease assets will reduce more quickly than the carrying amount of lease liabilities. • • Operating cash outfl ows will be lower and fi nancing cashfl ows will be higher in the statement of cash fl ows as principal repayments on all lease liabilities will now be included in fi nancing activities rather than operating activities. Interest can also be included within fi nancing activities Finance costs will be higher and lease costs will be lower as the implicit interest in lease payments for former off balance sheet leases will be presented as part of fi nance costs rather than being included in opera rating expenses. • (f) Principles of consolidation The consolidated fi nancial statements incorporate the assets and liabilities of all subsidiaries of Anatara Lifesciences Ltd as at 30 June 2018 and the results of all subsidiaries for the year ended. Subsidiaries are all those entities over which the Group has control. The Group controls an entity when they are exposed to, or have rights to, variable returns from its involvement with the entity and has the ability to aff ect those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases. Intercompany transactions, balances and unrealised gains on transactions between entities in the Group are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group. 30 (g) Segment reporting Identifi cation and measurement of segments - The Group uses the “management approach” to the identifi cation, measurement and disclosure of operating segments. The “management approach” requires that operating segments be identifi ed on the basis of internal reports that are regularly reviewed by the entity’s chief operating decision maker (comprising the Board of Directors), for the purpose of allocating resources and assessing performance. (h) Revenue recognition Revenue is recognised to the extent that it is probable that the economic benefi ts will fl ow to the Group and the revenue can be reliably measured. The following specifi c recognition criteria must also be met before revenue is recognised. Interest revenue is recognised as interest accrues using the eff ective interest method. Grant income is recognised when the Group determines that it will comply with the conditions attached to the grant and that the grant will be received. The funding is recognised on a systematic basis over periods in which the entity recognises as expenses the costs related to the grant. Revenue arising from intangible asset licensing agreements shall be recognised on an accrual basis in accordance with the substance of the relevant licence agreement when it is probable that the economic benefi ts associated with the transaction will fl ow to the entity and the amount of revenue can be measured reliably. The substance of the agreement might involve: • • a right of use over a specifi ed period of time; or a sale of the underlying rights. When an agreement confers rights over a period of time it will often be appropriate to recognise revenue over that time period. (i) Research and development costs Research costs are expensed as incurred. An intangible asset arising from development expenditure on an internal project is recognised only when the Group can demonstrate the technical feasibility of completing the intangible asset so that it will be available for use or sale, its intention to complete and its ability to use or sell the asset, how the asset will generate future economic benefi ts, the availability of resources to complete the development and the ability to measure reliably the expenditure attributable to the intangible asset during its development. (j) Income tax Deferred income tax is provided on all temporary diff erences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for fi nancial reporting purposes. Deferred income tax liabilities are recognised for all taxable temporary diff erences except where the deferred income tax liability arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, aff ects neither the accounting loss nor taxable profi t or loss. Deferred income tax assets are recognised for all deductible temporary diff erences, carry-forward of unused tax assets and unused tax losses, to the extent that it is probable that taxable profi t will be available against which the deductible temporary diff erences, and the carry-forward of unused tax assets and unused tax losses can be utilised except where the deferred income tax asset relating to the deductible temporary diff erences arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of transaction, aff ects neither the accounting loss nor taxable profi t or loss. ANATARA LIFESCIENCES Annual Report 2018 31 The carrying amount of deferred income tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that suffi cient taxable profi t will be available to allow all or part of the deferred income tax asset to be utilised. Income taxes relating to items recognised directly in equity are recognised in equity and not in profi t or loss. The Company and its wholly-owned Australian resident entities are members of a tax consolidated Group under Australian taxation law. The Company is the head entity in the tax consolidated Group. Entities within the tax consolidated Group have entered into a tax funding agreement and a tax-sharing agreement with the head entity. Under the terms of the tax funding arrangement, the Company and each of the entities in the tax consolidated Group have agreed to pay a tax equivalent payment to or from the head entity, based on the current tax liability or current tax asset of the head entity. (k) Earnings per share Basic earnings per share is calculated as net loss attributable to members, adjusted to exclude costs of servicing equity (other than dividends), divided by the weighted average number of ordinary shares, adjusted for any bonus element. Diluted earnings per share is calculated as net loss attributable to members, adjusted for: • • costs of servicing equity (other than dividends); the after tax eff 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; divided by the weighted average number of ordinary shares and dilutive potential ordinary shares, adjusted for any bonus element. (l) Cash and cash equivalents Cash and short-term deposits in the Consolidated statement of fi nancial position comprise cash at bank and in hand and short-term deposits with an original maturity of three months or less. For the purposes of the Statement of Cash Flows, cash and cash equivalents consist of cash and cash equivalents as defi ned above. (m) Trade receivables Trade and other receivables are recognised initially at fair value and subsequently measured at amortised cost using the eff ective interest method, less an allowance for impairment, once they become over due by more than 60 days. A separate account records the impairment. An allowance for a doubtful debt is made when there is objective evidence that the Group will not be able to collect the debts. The criteria used to determine that there is objective evidence that an impairment loss has occurred include whether the fi nancial asset is past due and whether there is any other information regarding increased credit risk associated with the fi nancial asset. Bad debts which are known to be uncollectible are written off when identifi ed. (n) Goods and Services Tax (GST) Revenues, expenses and assets are recognised net of the amount of GST, except: • where the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the GST is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and • receivables and payables are stated with the amount of GST included. 32 Cash fl ows arising from operating activities are included in the Statement of cash fl ows on a gross basis (i.e. including GST) and the GST component of cash fl ows arising from investing and fi nancing activities, which is recoverable from, or payable to, the taxation authority are classifi ed as operating cash fl ows. Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation authority. The net amount of GST recoverable from or payable to, the taxation authority is included as part of the receivables or payables in the Consolidated statement of fi nancial position. (o) Financial instruments Financial assets and fi nancial liabilities are recognised when the Group becomes a party to the contractual provisions of the fi nancial instrument, and are measured initially at fair value adjusted by transactions costs, except for those carried at fair value through profi t or loss, which are measured initially at fair value. Subsequent measurement of fi nancial assets and fi nancial liabilities are described below. Financial assets are derecognised when the contractual rights to the cash fl ows from the fi nancial asset expire, or when the fi nancial asset and all substantial risks and rewards are transferred. A fi nancial liability is derecognised when it is extinguished, discharged, cancelled or expires. (p) Held to maturity investments Held to maturity investments are non-derivative fi nancial assets with fi xed or determinable payments and fi xed maturities that the Group’s management has the positive intention and ability to hold to maturity. If the Group were to sell other than an insignifi cant amount of held to maturity fi nancial assets, the whole category would be tainted and reclassifi ed as available-for-sale. Held to maturity fi nancial assets are included in non-current assets, except for those maturities less than 12 months from the end of the year, which are classifi ed as current assets. (q) Plant and equipment Plant and equipment are measured at cost or fair value less any accumulated depreciation and any impairment losses. Such assets are depreciated over their useful economic lives as follows: Plant and equipment Life 3-5 years Method Straight line (r) Intangible assets Internally generated intangible assets, excluding capitalised development costs, are not capitalised and expenditure is charged against profi ts in the year in which the expenditure is incurred. (s) Intellectual property costs Amounts incurred for rights to or for acquisition of intellectual property are expensed in the year in which they are incurred to the extent that such intellectual property is used for research and development activities. (t) Impairment of assets The carrying values of non-fi nancial assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. Recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifi able cash infl ows that are largely independent of the cash infl ows from other assets or groups of assets (cash-generating units). Non- fi nancial assets that suff er impairment are tested for possible reversal of the impairment whenever events or changes in circumstances indicate that the impairment may have reversed. ANATARA LIFESCIENCES Annual Report 2018 33 Impairment exists when the carrying value of an asset exceeds its estimated recoverable amount. The asset is then written down to its recoverable amount. (u) Trade and other payables Trade and other payables are carried at amortised cost and represent liabilities for goods and services provided to the Group prior to the end of the fi nancial year that are unpaid and arise when the Group becomes obliged to make future payments in respect of the purchase of these goods and services. (v) Employee benefi ts (i) Short term employee benefi ts Provision is made for the Group’s obligation for short-term employee benefi ts. Short-term employee benefi ts are benefi ts (other than termination benefi ts) that are expected to be settled wholly before 12 months after the end of the annual reporting period in which the employees render the related service, including wages, salaries and sick leave. Short-term employee benefi ts are measured at the (undiscounted) amounts expected to be paid when the obligation is settled. The Group’s obligations for short-term employee benefi ts such as wages, salaries and sick leave are recognised as a part of current trade and other payables in the statement of fi nancial position. The Group’s obligations for employees’ annual leave entitlements are recognised as provisions in the Statement of fi nancial position. (ii) Long service leave The liability for long service leave is recognised for employee benefi ts and measured as the present value of expected future payments to be made in respect of services provided by employees up to the reporting date. Consideration is given to expected future wage and salary levels, experience of employee departures, and periods of service. Expected future payments are discounted using market yields at the reporting date on high quality corporate bonds with terms to maturity and currencies that match, as closely as possible, to the estimated future cash outfl ows. (iii) Share-based payments Equity-settled and cash-settled share-based compensation benefi ts are provided to employees. Equity-settled transactions are awards of shares, or options over shares, that are provided to employees in exchange for the rendering of services. The cost of equity-settled transactions are measured at fair value on grant date. Fair value is independently determined using the Black-Scholes option pricing model that takes into account the exercise price, the term of the option, the impact of dilution, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk free interest rate for the term of the option, together with non-vesting conditions that do not determine whether the consolidated entity receives the services that entitle the employees to receive payment. No account is taken of any other vesting conditions. The cost of equity-settled transactions are recognised as an expense with a corresponding increase in equity over the vesting period. The cumulative charge to profi t or loss is calculated based on the grant date fair value of the award, the best estimate of the number of awards that are likely to vest and the expired portion of the vesting period. The amount recognised in profi t or loss for the period is the cumulative amount calculated at each reporting date less amounts already recognised in previous periods. (w) Contributed equity Ordinary shares are classifi ed as equity. Any transaction costs arising on the issue of ordinary shares are recognised directly in equity as a reduction (net of tax) of the share proceeds received. 34 (x) Foreign currency translation The functional currency of the Group is based on the primary economic environment in which the Group operates. The functional currency of the Group is Australian dollars. Transactions in foreign currencies are converted to local currency at the rate of exchange at the date of the transaction. Amounts payable to and by the Group outstanding at reporting date and denominated in foreign currencies have been converted to local currency using rates prevailing at the end of the fi nancial year. All exchange diff erences are taken to profi t or loss. (y) Leases The minimum lease payments of operating leases, where the lessor eff ectively retains substantially all of the risks and benefi ts of ownership of the leased item, are recognised as an expense on a straight-line basis. (z) Parent entity fi nancial information The fi nancial information for the parent entity, Anatara Lifesciences Ltd, disclosed in note 19 has been prepared on the same basis as the consolidated statement. (aa) Signifi cant accounting estimates and assumptions The carrying amounts of certain assets and liabilities are often determined based on estimates and assumptions of future events. The key estimates and assumptions that have a signifi cant risk of causing a material adjustment to the carrying amounts of certain assets and liabilities within the next annual reporting period are: (i) Share-based payment transactions The Group measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined by using the Black-Scholes model taking into account the terms and conditions upon which the instruments were granted. The accounting estimates and assumptions relating to equity-settled share-based payments would have no impact on the carrying amounts of assets and liabilities within the next annual reporting period but may impact profi t or loss and equity. (ii) Recognition of deferred tax assets The extent to which deferred tax assets can be recognised is based on an assessment of the probability of the Group’s future taxable income against which the deferred tax assets can be utilised. (iii) Capitalised development costs Development costs are only capitalised by the Group when it can be demonstrated that the technical feasibility of completing the intangible asset is valid so that the asset will be available for use or sale. No development costs were capitalised during the current year. (iv) Licence revenue recognition The Group recognises license revenue based on a license, development and commercialisation agreement signed with Zoetis Services LLC (“Zoetis”) on 10 May 2018. The conditions of the fi rst Milestone payment has been met. In accordance with revenue recognition as having been disclosed in note 1(h), a part of which the Group derives the licensing revenue during the current fi nancial year, and the remaining amount was deferred back for future years straight-lined over the term of the license agreement in order to refl ect the right to access license over a period of time as set out on the license agreement. ANATARA LIFESCIENCES Annual Report 2018 35 (v) R&D tax incentive income Where it can demonstrate a history of successfully receiving R&D tax incentive payments from the Australian Taxation Offi ce, the Group makes an estimate of such amounts to be received during a fi nancial period, and recognises these amounts as an accrual at reporting date. The Group’s estimate takes into account: prior successful returns that are based on registered R&D projects, prevailing R&D tax rates and general eligibility rules, and analysis of current period R&D expenditures. This estimate is performed by the Company’s Chief Scientifi c Offi cer. 2. Segment information Operating segments are reported in a manner consistent with the internal reporting provided to the Board of Directors (Chief Operating Decision Makers), which make strategic decisions for the Group. The Chief Operating Decision Maker evaluates the results on a Group wide basis and as such does not have specifi c operating segments. 3. Revenue The Group derives the following types of revenue: Licensing revenue1 Evaluation revenue Total revenue from continuing operations Consolidated entity year ended 30 June 2018 $ 6,467 - 6,467 30 June 2017 $ - 322,182 322,182 1 The Group signed with Zoetis Services LLC (“Zoetis”) a license, development and commercialisation agreement on 10 May 2018. In consideration of the rights granted and subject to the terms and conditions of the agreement, the fi rst Milestone payment of US$2,500,000 is payable upfront at the eff ective date of the agreement dated 10 May 2018. In which, US$2million was credited against the previously paid option and evaluation agreement entered into in 2016. The balance of US$500,000 was recognised payable in the current fi nancial year. However, the Group decided to recognise revenue as having been disclosed in note 1(h). Thus, this amount of US$500,000 (equivalent to $669,872) was deferred back for future years straight-lined over the term of the license agreement in order to refl ect the right to access license over a period of time as set out on the license agreement. As a result, the Group derives the licensing revenue of $6,467 during the current fi nancial year, and the remaining amount was recognised as deferred revenue in note 12. 36 4. Income tax expense (a) Income tax expense Income tax expense Consolidated entity year ended 30 June 2018 $ - 30 June 2017 $ - (b) Numerical reconciliation of income tax expense to prima facie tax payable Loss from continuing operations before income tax expense (3,569,016) (1,705,002) Tax at the Australian tax rate of 27.5% (2017 - 27.5%) (981,479) (468,876) Consolidated entity year ended 30 June 2018 $ 30 June 2017 $ Tax eff ect of amounts which are not deductible (taxable) in calculating taxable income: Non-assessable income Other temporary diff erences Non-assessable grant income Share based payments Non-deductible research & development expenses Tax losses not recognised as deferred tax assets Income tax expense (c) Tax losses (1,779) (109,286) (319,720) 37,215 764,214 610,835 - (88,600) (63,565) (696,179) 68,969 807,018 441,233 - Consolidated entity year ended 30 June 2018 $ 30 June 2017 $ Unused tax losses for which no deferred tax asset has been recognised 4,783,451 2,562,237 (d) Deferred income tax benefi t Deferred tax assets arising from tax losses are, to the extent noted above, not recognised at reporting date as realisation of the benefi t is not regarded as probable. This deferred income tax benefi t will only be obtained if: • • future assessable income is derived of a nature and of an amount suffi cient to enable the benefi t to be realised; the conditions for deductibility imposed by tax legislation is complied with, including Continuity of Ownership and/ or Same Business Tests; and • no changes in tax legislation adversely aff ect the Group in realising the benefi t. ANATARA LIFESCIENCES Annual Report 2018 37 5. Remuneration of auditors During the year the following fees were paid or payable for services provided by the auditor of the parent entity, its related practices and non-related audit fi rms: Grant Thornton Audit Pty Ltd (i) Audit and other assurance services Audit and other assurance services Audit and review of fi nancial statements Total remuneration for audit and other assurance services (ii) Taxation services Taxation services Tax compliance services Total auditors remuneration 6. Loss per share Consolidated entity year ended 30 June 2018 $ 30 June 2017 $ 59,968 59,968 25,650 85,618 51,000 51,000 36,544 87,544 Both the basic and diluted loss per share have been calculated using the loss attributable to shareholders of Anatara Lifesciences Ltd as the numerator, i.e. no adjustments to loss were necessary during the year ended 30 June 2018 and 2017. (a) Basic loss per share Basic loss per share Diluted loss per share (b) Reconciliation of loss used in calculating earnings per share Consolidated entity year ended 30 June 2018 Cents (0.07) (0.07) 30 June 2017 Cents (0.03) (0.03) Consolidated entity year ended 30 June 2018 $ 30 June 2017 $ Net loss used in the calculation of basic and diluted loss per share (3,569,016) (1,705,002) 38 (c) Weighted average number of shares used as the denominator Consolidated entity year ended 2018 Number 2017 Number Weighted average number of ordinary shares used as the denominator in calculating basic and diluted loss per share 49,413,236 49,413,236 There have been no other conversions to, call of, or subscriptions for ordinary shares, or issues of potential ordinary shares since the reporting date and before the completion of this fi nancial report. 7. Dividends No dividends were paid and no dividends are expected to be paid during the year ended in 30 June 2018 (2017: Nil). 8. Cash and cash equivalents Current assets Cash at bank and in hand Term deposits1 Consolidated entity 30 June 2018 $ 947,732 500,000 1,447,732 30 June 2017 $ 966,869 7,800,000 8,766,869 1 As at 30 June 2018, $4,200,000 term deposits with the initial term of greater than 3 months has been re-classifi ed to Financial assets - term deposits. (i) Reconciliation to cash fl ow statement The above fi gures reconcile to the amount of cash shown in the statement of cash fl ows at the end of the fi nancial year as follows: Balances as above Balances per Consolidated statement of cash fl ows Consolidated entity 30 June 2018 $ 1,447,732 1,447,732 30 June 2017 $ 8,766,869 8,766,869 (ii) Classifi cation as cash equivalents Term deposits are presented as cash equivalents if they have a maturity of three months or less from the date of acquisition and are repayable with 24 hours notice with no loss of interest. See note 1(l) for the Group’s other accounting policies on cash and cash equivalents. ANATARA LIFESCIENCES Annual Report 2018 9. Trade and other receivables Trade receivables R&D rebate receivable Other receivables 10. Property, plant and equipment Year ended 30 June 2018 Opening net book amount Additions Depreciation charge Closing net book amount Year ended 30 June 2017 Opening net book amount Additions Depreciation charge Closing net book amount 39 Consolidated entity 30 June 2018 $ 669,872 30 June 2017 $ - 1,208,848 1,276,556 67,185 55,128 1,945,905 1,331,684 Consolidated entity Total $ 40,932 23,170 (21,178) 42,924 Consolidated entity Total $ 16,259 41,614 (16,941) 40,932 Plant and equipment $ 40,932 23,170 (21,178) 42,924 Plant and equipment $ 16,259 41,614 (16,941) 40,932 40 11. Trade and other payables Trade payables Accrued expenses Payroll tax and other statutory liabilities Consolidated entity 30 June 2018 $ 80,661 290,000 48,852 419,513 30 June 2017 $ 44,728 68,618 84,448 197,794 Trade payables are unsecured and are usually paid within 30 days of recognition. The carrying amounts of trade and other payables are considered to be the same as their fair value, due to their short-term nature. 12. Deferred revenue Current portion Non-current portion Consolidated entity 30 June 2018 $ 46,281 617,124 663,405 30 June 2017 $ - - - The Group signed with Zoetis a license, development and commercialisation agreement, and achieved an upfront Milestone payment at the eff ective date of the agreement dated 10 May 2018. However, as per disclosure in note 3, the amount of US$500,000 (equivalent to $669,872) was deferred back for future years straight-lined over the term of the license agreement in order to refl ect the right to access license over a period of time as set out on the license agreement. 13. Equity (a) Share capital Ordinary shares 30 June 2018 Shares 30 June 2018 $ 30 June 2017 Shares 30 June 2017 $ Ordinary shares - fully paid 49,413,236 16,941,392 49,413,236 16,941,392 Total share capital 49,413,236 16,941,392 49,413,236 16,941,392 ANATARA LIFESCIENCES Annual Report 2018 41 Movements in ordinary share: No shares have been issued during the current reporting period. Ordinary shares participate in dividends and the proceeds on winding up the Company in proportion to the number of shares held. At shareholder meetings each ordinary share is entitled to one vote when a poll is called, otherwise each shareholder has one vote on a show of hands. The ordinary shares have no par value. (b) Share-based payment reserve Shared-based payment reserve Balance at 1 July 2017 Transactions with owners in their capacity as owners Options issued during the period Share-based payment expenses of previously issued options At 30 June 2018 Notes 2018 Options 2018 $ 2,400,000 448,422 36,000 - 2,436,000 11,253 124,074 583,749 As at 30 June 2018, the Company maintained two (2) share-based payment scheme, Executive Option Plan and Directors Option Plan. It also issued options under a collaboration agreement with Pork CRC. Executive Option Plan The Executive Option Plan is part of the remuneration package of the Company’s Senior Management. The maximum term of the options granted under the plan ends on 14 December 2020. The options will vest as follows: • • • 1/3 of the options will vest and be exercisable at any time from the date that is 12 months after the date of issue of the options; 1/3 of the options will vest and be exercisable at any time from the date that is 24 months after the date of issue of the options; and 1/3 of the options will vest and be exercisable at any time from the date that is 36 months after the date of issue of the options. The Executive Options are subject to service conditions and no specifi c performance attached. Directors Option Plan The Directors Option Plan is part of the remuneration package of the Company’s Directors. The maximum term of the options granted under the plan ends on 11 November 2018. The options will vest as follows: • • • 1/3 of the options will vest immediately; 1/3 of the options will vest and be exercisable at any time from the date that is 12 months after the date of issue of the options; and 1/3 of the options will vest and be exercisable at any time from the date that is 24 months after the date of issue of the options. The Directors Options are subject to service conditions and no specifi c performance attached. 42 Pork CRC The maximum term of the options issued to Pork CRC on 18 September 2015 ends on 18 September 2018. The options have the following vesting terms: • • 250,000 options have been fully exercised in FY18; and 125,000 options will vest on 18 September 2018. Upon vesting, each option allows the holder to purchase one ordinary share at the exercise price. The weighted fair value of the options granted during the year was $0.10. The fair value of the options issued in the current year were calculated by using a Black-Scholes model applying the following inputs: Expected volatility Risk-free interest rate Expected life of option (years) Option exercise price Share price at grant date Executive Options 65% 2.11% 5 $2.27 $0.86 The expected price volatility is estimated based on the volatility of comparable publicly traded companies. Set out below are summaries of option movements for the year: Opening balance at 1 July 2017 Granted Exercised Closing balance at 30 June 2018 Exercisable at the end of 30 June 2018 Number of options 2,400,000 36,000 2,436,000 1,573,333 Fair value per option Weighted Average Exercise price ($) - 0.86 - - - 1.33 2.27 1.35 1.30 The options outstanding at 30 June 2018 had an exercise price range from $0.50 to $2.27, and weighted average remaining contractual life of 1.81 years. Share options at the end of the year had the following features: Grant date Expiry date Number of options Exercise price 18 September 2015 18 September 2018 18 September 2015 18 September 2018 13 November 2015 11 November 2018 14 December 2015 14 December 2020 23 September 2016 23 September 2021 28 November 2017 17 November 2022 250,000 125,000 340,000 1,265,000 420,000 36,000 2,436,000 0.50 0.50 1.35 1.45 1.70 2.27 ANATARA LIFESCIENCES Annual Report 2018 43 14. Related party transactions Dr Tracie Ramsdale received $129,923 (2017: $147,919) in consultancy fees under an arrangement that has been approved by the Board. Mr Iain Ross received $20,000 (2017: nil) in consultancy fees under an arrangement that has been approved by the Board in May 2018. 15. Key management personnel compensation Short-term employee benefi ts Post-employment benefi ts Share-based payments 16. Commitments (a) Capital commitments Consolidated entity year ended 30 June 2018 $ 30 June 2017 $ 1,767,102 1,403,075 124,756 106,684 114,061 69,527 1,998,542 1,586,663 The Group has no signifi cant capital expenditure contracted for at the end of the reporting period but not recognised as liabilities. (b) Non-cancellable operating leases Signifi cant non-cancellable operating leases at the end of the reporting period but not recognised as liabilities is as follows: Within one year Later than one year but not later than fi ve years Consolidated entity 30 June 2018 $ 72,156 64,550 136,706 30 June 2017 $ 66,000 41,800 107,800 17. Contingent liabilities and contingent assets The Group had no contingent assets or liabilities at 30 June 2018 (2017: nil). 44 18. Cash fl ow information Reconciliation of profi t after income tax to net cash infl ow from operating activities Loss for the period Adjustment for Depreciation and amortisation Share-based payment expense Change in operating assets and liabilities: Movements in accounts receivable Movements in other current assets Movements in accounts payable Movements in employee entitlements Net cash fl ow from operating activities Consolidated entity year ended 30 June 2018 $ 30 June 2017 $ (3,569,016) (1,705,002) 21,178 135,327 16,941 250,798 (615,393) (1,050,591) 2,421 885,123 44,393 (65,206) (406,577) 81,079 (3,095,967) (2,878,558) 19. Parent entity fi nancial information (a) Summary fi nancial information The parent entity fi nancial statements resemble the consolidated fi nancial statements as the Company’s subsidiary, Sarantis Pty Ltd, is a dormant entity. (b) Guarantees entered into by the parent entity The parent entity has not entered into any guarantees in the current or prior fi nancial year in relation to debts of its subsidiaries. (c) Signifi cant accounting policies The accounting policies of the parent entity are consistent with those of the Group as disclosed in note 1. 20. Subsidiaries Name of entity Place of business/ country of incorporation Ownership interest held by the group Sarantis Pty Limited Australia 2018 % 100 2017 % 100 ANATARA LIFESCIENCES Annual Report 2018 45 21. Financial risk management The Group’s principal fi nancial instrument is cash and cash equivalents and fi nancial assets - term deposits. The main purpose of these fi nancial instruments is to fi nance the Group’s operations. The Group has various other fi nancial assets and liabilities such as receivables and trade payables, which arise directly from its operations. It is, and has been throughout the entire period, the Group’s policy that no trading in fi nancial instruments shall be undertaken. The main risk arising from the Group’s fi nancial instruments is liquidity risk. Other minor risks are summarised below. The Board reviews and agrees policies for managing each of these risks. (a) Liquidity risk Liquidity risk is the risk that the Group might be unable to meet its obligations. The Group manages its liquidity needs by monitoring forecast cash infl ows and outfl ows due in day-to-day business. The data used for analysing these cash fl ows is consistent with that used in the contractual maturity analysis below. Liquidity needs are monitored in various time bands. Long-term liquidity needs for a 180-day and a 360-day lookout period are identifi ed monthly. Net cash requirements are compared to available funding in order to determine headroom or any shortfalls. The Group’s non-derivative fi nancial liabilities have contractual maturities as summarised below: Maturities of fi nancial liabilities Contractual maturities of fi nancial liabilities Less than 6 months 6 - 12 months Between 1 and 2 years Between 2 and 5 years Over 5 years Total contractual cash fl ows Carrying amount (assets)/ liabilities $ At 30 June 2018 Non-derivatives Trade payables 419,513 At 30 June 2017 Non-derivatives Trade payables 197,794 $ - - $ - - $ - - $ - - $ $ 419,513 419,513 197,794 197,794 (b) Interest rate risk The Group’s exposure to the risk of changes in market interest rates relates primarily to the Group’s cash deposits with fl oating interest rates which expose the Group to interest rate risk. All other fi nancial assets and liabilities in the form of receivables and payables are non-interest bearing. The Group does not engage in any hedging or derivative transactions to manage interest rate risk. In regard to its interest rate risk, the Group continuously analyses its exposure. Within this analysis consideration is given to potential renewals of existing positions, alternative investments and the mix of fi xed and variable interest rates. The following tables set out the Group’s fi nancial instruments and its exposure to the type of interest rate risk and the eff ective weighted average interest rate for each class of these fi nancial instruments. Also included is the eff ect on profi t and equity after tax if interest rates at that date had been 10% higher or lower with all other variables held constant as a sensitivity analysis. 46 Non-interest bearing $ Floating interest rates $ Fixed interest rates $ +10% of current rate $ -10% of current rate $ Eff ect on profi t / equity - 2,369 - 2,369 - - - (2,369) - (2,369) - - - 2,417 - 2,417 - - - (2,417) - (2,417) - - At 30 June 2018 Financial assets Other receivables 1,945,905 - - Cash and cash equivalents Financial assets - term deposits - - 947,732 500,000 - 6,294,339 Total 1,945,905 947,732 6,794,339 Financial liabilities, amortised cost Trade and other payables Total Total (419,513) (419,513) - - - - 1,526,392 947,732 6,794,339 2,369 (2,369) Non-interest bearing $ Floating interest rates $ Fixed interest rates $ +10% of current rate $ -10% of current rate $ Eff ect on profi t / equity At 30 June 2017 Financial assets Other receivables 1,331,684 - - Cash and cash equivalents Financial assets - term deposits - - 966,869 7,800,000 - 2,093,166 Total 1,331,684 966,869 9,893,166 Financial liabilities, amortised cost Trade and other payables Total Total (197,794) (197,794) - - - - 1,133,890 966,869 9,893,166 2,417 (2,417) A sensitivity of 10% of current prevailing interest rates has been selected as this is considered conservative and reasonable given the current level of both short term and long term Australian interest rates. A 10% sensitivity would move short term rates from 2.50% to approximately 2.75% representing a 25 basis points shift. This would represent an interest rate increase, which are reasonably possible in the current environment. Based on the sensitivity analysis only interest revenue from variable rate deposits and cash balances is impacted resulting in a decrease or increase in overall income. (c) Foreign exchange risk Foreign exchange risk arises when future commercial transactions and recognised assets and liabilities are denominated in a currency that is not the Group’s functional currency. Payments under the license agreement are denominated in USD. There are no USD amounts receivable at year end. ANATARA LIFESCIENCES Annual Report 2018 47 (d) Credit risk Credit risk arises from cash and cash equivalents and outstanding trade and other receivables. The cash balances are held in fi nancial institutions with high ratings. The Group has assessed that there is minimal risk that the cash and trade and other receivables balances are impaired. 22. Events occurring after the reporting period No matter or circumstance has occurred subsequent to period end that has signifi cantly aff ected, or may signifi cantly aff ect, the operations of the Group, the results of those operations or the state of aff airs of the Group or economic entity in subsequent fi nancial years. 23. Capital management The Group’s objectives when managing capital are to ensure that the Group has suffi cient funds to be a going concern. This is achieved by ensuring that the Board is focussed on cash fl ow management through periodic Board reporting. The Board reviews fi nancial accounts on a monthly basis and reviews actual expenditure against budget on a monthly basis. The Group could also raise additional capital if necessary by issuing new shares so as to fund the development of its key products. The total capital is shown as the equity in the Statement of Financial Position. There is expected to be no debt in the next 12 months and there are no external restrictive agreements on the Group for the use of its capital. Management also maintains a capital structure that ensures the lowest cost of capital available to the entity. The Group does not have a defi ned share buy-back plan. No dividends were paid in 2018. There is no current intention to incur debt funding on behalf of the Group as on-going development expenditure is expected to be funded via equity or partnerships with other companies. The Group is not subject to any externally imposed capital requirements. 48 Directors’ declaration 30 June 2018 The Directors’ of the Company declare that; • • • • the attached fi nancial statements and notes thereto comply with the Corporations Act 2001, the Australian Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements; the attached fi nancial statements and notes thereto comply with International Financial Reporting Standards as issued by the International Accounting Standards Board as described in note 1 to the fi nancial statements; the attached fi nancial statements and notes thereto give a true and fair view of the Group’s fi nancial position as at 30 June 2018 and of its performance for the fi nancial year ended on that date; and there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable. The Directors have been given the declarations required by section 295A of the Corporations Act 2001. Signed in accordance with a resolution of Directors made pursuant to section 295(5)(a) of the Corporations Act 2001. On behalf of the Directors Dr Tracie Ramsdale Executive Director and Interim CEO Date: This Day 31st of August 2018 Brisbane ANATARA LIFESCIENCES Annual Report 2018 Collins Square, Tower 1 727 Collins Street Melbourne Victoria 3008 Correspondence to: GPO Box 4736 Melbourne Victoria 3001 T +61 3 8320 2222 F +61 3 8320 2200 E info.vic@au.gt.com W www.grantthornton.com.au (cid:44)(cid:81)(cid:71)(cid:72)(cid:83)(cid:72)(cid:81)(cid:71)(cid:72)(cid:81)(cid:87)(cid:3)(cid:36)(cid:88)(cid:71)(cid:76)(cid:87)(cid:82)(cid:85)(cid:182)(cid:86)(cid:3)(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87) To the Members of Anatara Lifesciences Limited Report on the audit of the financial report Opinion We have audited the financial report of Anatara Lifesciences Limited (the Company) and its subsidiaries (the Group), which comprises the consolidated statement of financial position as at 30 June 2018, the consolidated statement of profit or loss and other comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies, and the d(cid:76)(cid:85)(cid:72)(cid:70)(cid:87)(cid:82)(cid:85)(cid:86)(cid:182)(cid:3)(cid:71)(cid:72)(cid:70)(cid:79)(cid:68)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:17)(cid:3) In our opinion, the accompanying financial report of the Company is in accordance with the Corporations Act 2001, including: a Giving a true and fair view of the (cid:42)(cid:85)(cid:82)(cid:88)(cid:83)(cid:182)(cid:86) financial position as at 30 June 2018 and of its 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 Company in accordance with the auditor independence requirements of the Corporations Act 2001 and (cid:87)(cid:75)(cid:72)(cid:3)(cid:72)(cid:87)(cid:75)(cid:76)(cid:70)(cid:68)(cid:79)(cid:3)(cid:85)(cid:72)(cid:84)(cid:88)(cid:76)(cid:85)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:36)(cid:70)(cid:70)(cid:82)(cid:88)(cid:81)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:51)(cid:85)(cid:82)(cid:73)(cid:72)(cid:86)(cid:86)(cid:76)(cid:82)(cid:81)(cid:68)(cid:79)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:40)(cid:87)(cid:75)(cid:76)(cid:70)(cid:68)(cid:79)(cid:3)(cid:54)(cid:87)(cid:68)(cid:81)(cid:71)(cid:68)(cid:85)(cid:71)(cid:86)(cid:3)(cid:37)(cid:82)(cid:68)(cid:85)(cid:71)(cid:182)(cid:86)(cid:3)(cid:36)(cid:51)(cid:40)(cid:54)(cid:3)(cid:20)(cid:20)(cid:19)(cid:3)Code of Ethics for Professional Accountants (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 matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report of the current period. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Grant Thornton Audit Pty Ltd ACN 130 913 594 a subsidiary or related entity of Grant Thornton Australia Ltd ABN 41 127 556 389 www.grantthornton.com.au (cid:181)(cid:42)(cid:85)(cid:68)(cid:81)(cid:87)(cid:3)(cid:55)(cid:75)(cid:82)(cid:85)(cid:81)(cid:87)(cid:82)(cid:81)(cid:182)(cid:3)(cid:85)(cid:72)(cid:73)(cid:72)(cid:85)(cid:86)(cid:3)(cid:87)(cid:82)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:69)(cid:85)(cid:68)(cid:81)(cid:71)(cid:3)(cid:88)(cid:81)(cid:71)(cid:72)(cid:85)(cid:3)(cid:90)(cid:75)(cid:76)(cid:70)(cid:75)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:42)(cid:85)(cid:68)(cid:81)(cid:87)(cid:3)(cid:55)(cid:75)(cid:82)(cid:85)(cid:81)(cid:87)(cid:82)(cid:81)(cid:3)(cid:80)(cid:72)(cid:80)(cid:69)(cid:72)(cid:85)(cid:3)(cid:73)(cid:76)(cid:85)(cid:80)(cid:86)(cid:3)(cid:83)(cid:85)(cid:82)(cid:89)(cid:76)(cid:71)(cid:72)(cid:3)(cid:68)(cid:86)(cid:86)(cid:88)(cid:85)(cid:68)(cid:81)(cid:70)(cid:72)(cid:15)(cid:3)(cid:87)(cid:68)(cid:91)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:68)(cid:71)(cid:89)(cid:76)(cid:86)(cid:82)(cid:85)(cid:92)(cid:3)(cid:86)(cid:72)(cid:85)(cid:89)(cid:76)(cid:70)(cid:72)(cid:86) to their clients and/or refers to one or more member firms, as the context requires. Grant Thornton Australia Ltd is a member firm of Grant Thornton International Ltd (GTIL). GTIL and the member firms are not a worldwide partnership. GTIL and each member firm is a separate legal entity. Services are delivered by the member firms. GTIL does not provide services to clients. GTIL and its member firms are not agents of, and do not obligate one (cid:68)(cid:81)(cid:82)(cid:87)(cid:75)(cid:72)(cid:85)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:68)(cid:85)(cid:72)(cid:3)(cid:81)(cid:82)(cid:87)(cid:3)(cid:79)(cid:76)(cid:68)(cid:69)(cid:79)(cid:72)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:82)(cid:81)(cid:72)(cid:3)(cid:68)(cid:81)(cid:82)(cid:87)(cid:75)(cid:72)(cid:85)(cid:182)(cid:86)(cid:3)(cid:68)(cid:70)(cid:87)(cid:86)(cid:3)(cid:82)(cid:85)(cid:3)(cid:82)(cid:80)(cid:76)(cid:86)(cid:86)(cid:76)(cid:82)(cid:81)(cid:86)(cid:17)(cid:3)(cid:44)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:36)(cid:88)(cid:86)(cid:87)(cid:85)(cid:68)(cid:79)(cid:76)(cid:68)(cid:81)(cid:3)(cid:70)(cid:82)(cid:81)(cid:87)(cid:72)(cid:91)(cid:87)(cid:3)(cid:82)(cid:81)(cid:79)(cid:92)(cid:15)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:88)(cid:86)(cid:72)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:87)(cid:72)(cid:85)(cid:80)(cid:3)(cid:181)(cid:42)(cid:85)(cid:68)(cid:81)(cid:87)(cid:3)(cid:55)(cid:75)(cid:82)(cid:85)(cid:81)(cid:87)(cid:82)(cid:81)(cid:182)(cid:3)(cid:80)(cid:68)(cid:92)(cid:3)(cid:85)(cid:72)(cid:73)(cid:72)(cid:85)(cid:3)(cid:87)(cid:82)(cid:3) Grant Thornton Australia Limited ABN 41 127 556 389 and its Australian subsidiaries and related entities. GTIL is not an Australian related entity to Grant Thornton Australia Limited. Liability limited by a scheme approved under Professional Standards Legislation. Key audit matter How our audit addressed the key audit matter Measurement of Research and Development tax incentive rebate accrual (cid:177) refer to summary of significant accounting policy Note 1(aa) (v). The Group receives a 43.5% refundable tax offset (2017: 43.5%) of eligible expenditure under the research and development (R&D) tax incentive scheme. An R&D plan is filed with AusIndustry in the following financial year and, based on this filing, the Group receives the incentive in cash. (cid:48)(cid:68)(cid:81)(cid:68)(cid:74)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:83)(cid:72)(cid:85)(cid:73)(cid:82)(cid:85)(cid:80)(cid:3)(cid:68)(cid:3)(cid:71)(cid:72)(cid:87)(cid:68)(cid:76)(cid:79)(cid:72)(cid:71)(cid:3)(cid:85)(cid:72)(cid:89)(cid:76)(cid:72)(cid:90)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:42)(cid:85)(cid:82)(cid:88)(cid:83)(cid:182)(cid:86)(cid:3)(cid:87)(cid:82)(cid:87)(cid:68)(cid:79)(cid:3) research and development expenditure to determine the potential claim under the R&D tax incentive legislation. The Group recognises R&D tax incentive rebate income on an accruals basis, meaning that a receivable is recorded at the balance date based on the estimated claim that is yet to be received from the Australian Taxation Office. The receivable at year end for the incentive was $1,208,848. This represents an estimated claim for the period 1 July 2017 to 30 June 2018. The R&D tax incentive scheme represent the highest level of income and asset in the 2018 financial report. This area is a key audit matter due to the size of the accrual and because there is a degree of judgement and interpretation of the R&D tax legislation required by management to assess the eligibility of the R&D expenditure under the scheme. Our procedures included, amongst others: (cid:120) Obtaining the R&D incentive calculations prepared by management and engaging an internal R&D Tax Expert to assist the engagement team in assessing the reasonableness of the estimate; (cid:120) Comparing the nature of the R&D expenditure included in the current year estimate to the prior year approved claim; (cid:120) Comparing the estimates made in previous years to the amount of cash actually received after lodgement of the R&D tax claim; (cid:120) Considering the nature of the expenses against the eligibility criteria of the R&D tax incentive scheme to form a view about whether the expenses included in the estimate were likely to meet the eligibility criteria; (cid:120) Assessing the eligible expenditure used to calculate the estimate to ensure it is in accordance with expenditure recorded in the general ledger; (cid:120) Agreeing a sample of individual expenditure items included in the estimate to underlying supporting documentation to ensure that they have been appropriately recognised in the accounting records and that they are eligible expenditures; (cid:120) Inspecting copies of relevant correspondence with AusIndustry and the ATO related to the claims; and (cid:120) Reviewing the appropriateness of the relevant disclosures in the financial statements. Information other than the (cid:73)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:85)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:68)(cid:88)(cid:71)(cid:76)(cid:87)(cid:82)(cid:85)(cid:182)(cid:86)(cid:3)(cid:85)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3)(cid:87)hereon The Directors are responsible for the other information. The other information comprises the information included in the (cid:38)(cid:75)(cid:68)(cid:76)(cid:85)(cid:80)(cid:68)(cid:81)(cid:182)(cid:86)(cid:3)(cid:79)(cid:72)(cid:87)(cid:87)(cid:72)(cid:85)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:53)(cid:72)(cid:89)(cid:76)(cid:72)(cid:90)(cid:3)(cid:82)(cid:73)(cid:3)(cid:82)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:68)(cid:70)(cid:87)(cid:76)(cid:89)(cid:76)(cid:87)(cid:76)(cid:72)(cid:86), but does not include the finan(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:85)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)(cid:68)(cid:88)(cid:71)(cid:76)(cid:87)(cid:82)(cid:85)(cid:182)(cid:86)(cid:3)(cid:85)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3) thereon. Our opinion on the financial report does not cover the other information and we do not express any form of assurance conclusion thereon. 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, 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. Responsibilities of the D(cid:76)(cid:85)(cid:72)(cid:70)(cid:87)(cid:82)(cid:85)(cid:86)(cid:182)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:73)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:85)eport 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(cid:182)(cid:86)(cid:3)(cid:68)(cid:69)(cid:76)(cid:79)(cid:76)(cid:87)(cid:92)(cid:3)(cid:87)(cid:82)(cid:3)(cid:70)(cid:82)(cid:81)(cid:87)(cid:76)(cid:81)(cid:88)(cid:72)(cid:3)(cid:68)(cid:86)(cid:3)(cid:68)(cid:3)(cid:74)(cid:82)(cid:76)(cid:81)(cid:74)(cid:3)(cid:70)(cid:82)(cid:81)(cid:70)(cid:72)(cid:85)(cid:81)(cid:15)(cid:3) disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so. (cid:36)(cid:88)(cid:71)(cid:76)(cid:87)(cid:82)(cid:85)(cid:182)(cid:86)(cid:3)(cid:85)(cid:72)(cid:86)(cid:83)(cid:82)(cid:81)(cid:86)(cid:76)(cid:69)(cid:76)(cid:79)(cid:76)(cid:87)(cid:76)(cid:72)(cid:86)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:68)(cid:88)(cid:71)(cid:76)(cid:87)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:73)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:85)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3)(cid:3) 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, (cid:68)(cid:81)(cid:71)(cid:3)(cid:87)(cid:82)(cid:3)(cid:76)(cid:86)(cid:86)(cid:88)(cid:72)(cid:3)(cid:68)(cid:81)(cid:3)(cid:68)(cid:88)(cid:71)(cid:76)(cid:87)(cid:82)(cid:85)(cid:182)(cid:86)(cid:3)(cid:85)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3)(cid:87)(cid:75)(cid:68)(cid:87)(cid:3)(cid:76)(cid:81)(cid:70)(cid:79)(cid:88)(cid:71)(cid:72)(cid:86)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)(cid:82)(cid:83)(cid:76)(cid:81)(cid:76)(cid:82)(cid:81)(cid:17)(cid:3)(cid:53)(cid:72)(cid:68)(cid:86)(cid:82)(cid:81)(cid:68)(cid:69)(cid:79)(cid:72)(cid:3)(cid:68)(cid:86)(cid:86)(cid:88)(cid:85)(cid:68)(cid:81)(cid:70)(cid:72)(cid:3) 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. A further description of our responsibilities for the audit of the financial report is located at the Auditing and Assurance Standards Board website at: http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf. This description forms part of our (cid:68)(cid:88)(cid:71)(cid:76)(cid:87)(cid:82)(cid:85)(cid:182)(cid:86)(cid:3)(cid:85)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:17) (cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3)(cid:82)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:85)(cid:72)(cid:80)(cid:88)(cid:81)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:85)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3) (cid:50)(cid:83)(cid:76)(cid:81)(cid:76)(cid:82)(cid:81)(cid:3)(cid:82)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:85)(cid:72)(cid:80)(cid:88)(cid:81)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:85)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3) We have audited the Remuneration Report included in pages (cid:20)(cid:20) to (cid:20)(cid:28) of the D(cid:76)(cid:85)(cid:72)(cid:70)(cid:87)(cid:82)(cid:85)(cid:86)(cid:182)(cid:3)(cid:85)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3)for the year ended 30 June 2018. In our opinion, the Remuneration Report of Anatara Lifesciences Limited, for the year ended 30 June 2018 complies with section 300A of the Corporations Act 2001. (cid:53)(cid:72)(cid:86)(cid:83)(cid:82)(cid:81)(cid:86)(cid:76)(cid:69)(cid:76)(cid:79)(cid:76)(cid:87)(cid:76)(cid:72)(cid:86)(cid:3) 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. Grant Thornton Audit Pty Ltd Chartered Accountants M A Cunningham Partner (cid:177) Audit & Assurance Melbourne, 31 August 2018 52 Corporate directory Solicitors McCullough Robertson Level 11, Central Plaza Two, 66 Eagle Street, Brisbane, Queensland, Australia 4000 Bankers CBA Melbourne Victoria Website www.anataralifesciences.com Company Anatara Lifesciences Ltd ACN 145 239 872 ABN 41 145 239 872 Directors Dr Jay Hetzel Interim Chairman Dr Tracie Ramsdale Executive Director and Interim CEO Mr Iain Ross Non-Executive Director Mr Paul Grujic Non-Executive Director Secretary Mr Stephen Denaro Company Secretary Principal registered offi ce in Australia 433 Logan Road, Stones Corner, Brisbane, Queensland, Australia 4120 Telephone +61 (0)7 3394 8202 Share and debenture register Computershare Investor Services Pty Ltd Level 1, 200 Mary Street, Brisbane, Queensland, Australia 4000 Telephone +61 (0)7 3237 2100 Auditors Grant Thornton Audit Pty Ltd The Rialto, Level 30, 525 Collins Street Melbourne, Victoria, Australia 3000 Telephone +61 (0)3 8320 2222 ANATARA LIFESCIENCES Annual Report 2018 53 Shareholder information Below is the current shareholder information at 21 September 2018 based on available information: Top 20 Security Holders Rank Name No of Shares % Issued Capital 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 19. PARMA CORPORATION MYENG PTY LTD HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED UBS NOMINEES PTY LTD IAIN ROSS JACOBY MANAGEMENT SERVICES MR JAMES PETER KALOKERINOS + MRS MARY-ANNE ELIZABETH KALOKERINOSDAVID CHARLES VENABLES BEEBEE HOLDINGS PTY LTD GENETIC HORIZONS PTY LTD NAVIGATOR AUSTRALIA LTD MATTHEW TURNER TULIP SUPER PTY LTD NATIONAL NOMINEES LIMITED JK PASTORAL PTY LTD JONTRA HOLDINGS PTY LTD WOTS IN THERE PTY LTD MR JOHN DUGALD MACTAGGART BUDUVA PTY LTD JOHN SIEBERT 5,789,128 4,391,337 4,356,776 2,583,123 1,427,942 940,731 748,833 719,750 614,218 486,109 471,327 464,102 450,000 422,000 400,000 355,614 330,000 311,614 300,000 300,000 11.72 8.89 8.82 5.23 2.89 1.90 1.52 1.46 1.24 0.98 0.95 0.94 0.91 0.85 0.81 0.72 0.67 0.63 0.61 0.61 Totals: Top 20 Holders - GROUPED Total Remaining Holders Balance Distribution of Security Holders No of Securities Held 1 - 1,000 1,001 - 5,000 5,001 - 10,000 10,001 - 100,000 100,001 – (max) 25,862,604 23,550,632 49,413,236 Total 52.34 47.66 100.00 No of Shareholders No of Securities 147 325 188 414 70 1,144 86,062 1,000,959 1,506,180 13,077,283 33,742,752 49,413,236 Total Unmarketable Parcels Minimum $500.00 parcel at $0.4850 per unit Minimum Parcel Size 1,031 Holders 148 Securities 87,082