Anatara Lifesciences Limited
Annual Report 2019

Plain-text annual report

ANNUAL REPORT 2019 2 ANATARA LIFESCIENCES Annual Report 2019Contents Chair’s letter Review of operations and activities Directors’ report Directors and company secretary Principal activities Dividends - Anatara Lifesciences Ltd Review of operations Significant changes in the state of affairs Events since the end of the financial year Likely developments and expected results of operations Environmental regulation Information on directors Company secretary Meetings of directors Remuneration report (audited) Shares under option Insurance of officers and indemnities Proceedings on behalf of the company Non-audit services Taxation services Auditor’s independence declaration Rounding of amounts Corporate governance statement Financial statements Independent auditor’s report to the members Corporate directory Shareholder Information 3 4 8 10 10 10 10 10 11 11 11 11 11 15 16 17 26 26 27 27 28 28 28 29 31 65 68 69 4 Chair’s letter Dear Shareholders, On behalf of the Anatara Board, I am pleased to present our 2019 Annual Report. Significant progress has been made this year with value added as we progress our products to market. During FY19 we focused on developing our human product pipeline, and in particular on our Gastrointestinal ReProgramming (GaRP) gut health product, as we edge closer to achieving our goal of commercialisation in 2020. We also refocused our attention on our animal health asset, Detach®, and finding the right partner to take it to market following the retention of rights to the product, announced in June 2019. Human health opportunities Anatara’s lead human health product, GaRP, is being developed to specifically target two human gastrointestinal (GI) disorders, Inflammatory Bowel Disease (IBD) and Irritable Bowel Syndrome (IBS), where there is a significant unmet medical need. IBD is a US$15.9 billion market1. The current treatment approach to IBD is to suppress the inflammation with the goal of inducing and maintaining remission, while in the case of IBS, gastroenterologists primarily treat the symptoms of abdominal pain, bloating and alternating constipation and diarrhoea. These therapeutic approaches have high treatment failure rates. Consequently, there is a significant unmet medical need for products that can i) re-establish the homeostasis of the microbiome, ii) treat the inflammation and iii) repair the mucosal damage which will in turn have the downstream effect of reducing disease-associated diarrhoea. Significant market opportunity GI disorders affect a significant proportion of the population at some stage of their life, with IBS the most commonly diagnosed gastrointestinal condition, affecting an estimated 11% of the global population2. IBD is a global disease with accelerating incidence in newly industrialised countries, with more than 5 million sufferers globally3. “Imagine a day where you fell ill from having eaten too much, then imagine that day lasts months at a time.” Australian IBS patient5 The current therapeutic approaches for both disorders have high treatment failure rates and therefore patients have a poor quality of life. Many turn to dietary supplements and complementary medicines in an attempt to relieve their symptoms. Approximately 50% of IBS4 and 30-50% of IBD6 patients seek additional relief through the use of adjunct 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. Marketing, sales, and medical affairs activities encourage health care professionals to recommend products to their patients. Therefore, finding and selecting the best marketing partner is critical to the success of a product such as GaRP and consequently this will continue to be a major focus for Anatara moving into the new financial year. 1 Grand View Research, https://www.grandviewresearch.com/industry-analysis/inflammatory-bowel-disease-ibd-treatment-market. 2 Clinical Gastroenterology and Hepatology 2012: 10, 712-721. 3 Crohn’s and Colitis Australia, https://www.crohnsandcolitis.com.au/. 4 World J. Gastroenterol 2014: 346-362. 5 https://badgut.org/wp-content/uploads/IBS- Global-Impact-Report.pdf. 6 Gastroenterology 2017: 152:415-429. ANATARA LIFESCIENCES Annual Report 20195 Evidence by design There are more than 200 bromelain-based dietary supplement products on the market used for “improving gut health”, reducing inflammation and general digestive well-being. Despite the extensive use of bromelain-based products there is no definitive clinical data demonstrating its efficacy in pain management and inflammation. This lack of efficacy data may be due to the poor chemical characterisation and amount, type or quality of the bromelain incorporated into these products. With this deficiency in mind, Anatara has characterised the physical and biochemical activity of bromelain, specifying what we believe to be the most effective and safe. Through this process, Anatara developed a bromelain-based oral drench (Detach®) which is approved in Australia as an aid to control diarrhoea in piglets. Anatara is also leveraging its bromelain specification in development of Anatara’s Gastrointestinal ReProgramming (GaRP) dietary supplement. Each GaRP formulation component was selected based on published literature (human or pig studies) or in-house data that supported their use in addressing the key disease characteristics of IBD and IBS. GaRP is a regenerative, multi-component dietary supplement that has been designed to address three of the primary underlying factors that contribute to the symptoms experienced by IBS and IBD patients: microbiome dysbiosis, inflammation and mucosal damage (see Figure 1). Figure 1 GaRP’s point of difference lies within its triple-targeted therapeutic approach (anti-adhesion; anti-inflammatory and mucosal regeneration). With a dual targeted formulation (small intestine and colon), unlike other supplements commonly marketed, GaRP components will be delivered to where they can exert their greatest therapeutic effect. Positioned as an adjunct to existing therapies, GaRP will not be replacing current prescription medications, rather it will work as an adjunct to prescription drugs where needed. Over the last 20 years, the use of dietary supplements as adjuncts to prescription drugs has increased significantly. Grounded in scientific evidence listed with Most complementary medicines regulatory authorities have no requirement to conduct their own safety or efficacy studies7. However, from the outset, Anatara’s approach has been to develop evidence-based products using pre-clinical in-vitro and animal and human in-vivo clinical studies. In February, Anatara was pleased to announce its breakthrough positive efficacy data from its proof-of-concept studies for GaRP in reducing inflammation and restoring gut integrity, using industry-standard in vitro gut models. Anatara was able to demonstrate GaRP components addressed the dysbiosis of the microbiome by inhibiting the attachment and invasion of pro- inflammatory bacteria (obtained from IBD and IBS patients) into healthy gut cells by >95%. The level of inflammation commonly observed in IBD and IBS-D patients was reduced by 85% by significantly reducing the production of pro-inflammatory proteins. By addressing both the microbiome imbalance and the inflammation, specifically selected GaRP components were able to accelerate the regeneration of the mucosal layer which restored gut integrity (see Figure 2). 7 Department of Health, Therapeutic Goods Administration, https://www.tga.gov.au/listed-complementary-medicines, Updated 4 May 2018 InflammationMicrobiomeDysbiosisMucosalDamage6 Figure 2 Buoyed by these results, we believe we are developing a game changing, over-the-counter product for the management of symptoms for IBD and IBS patients. Last year, we informed shareholders of our intent to evaluate GaRP in a larger animal efficacy studies in 2019. After receiving strong pre-clinical in-vitro evidence, and following consultation with our expert Product Development Advisory Board, Anatara moved forward this year with animal studies in a mouse model, representative of moderate IBD and severe IBS. Initial data from this important animal study is expected to be reported in October 2019. At the time of writing, the company is undertaking pre-trial activities with a view to taking GaRP into a human clinical study to demonstrate its ability to induce and maintain remission in patients suffering from gastrointestinal conditions. Initiation of trial activities is expected to commence in late 2019. Detach® Anatara achieved a major milestone during the year, with the Australian Pesticides and Veterinary Medicines Authority (APVMA) registering Detach® for use in piglets in Australia. While the termination of the global licencing agreement with Zoetis in June 2019 was a set-back, we have refocused our attention and remain committed to re-partnering Detach® in 2020. Working off a program of prior business development discussions with more than 10 top multi-national animal health companies, Anatara continues to evaluate potential licencing partners presence in global and regional markets. The threat of global antimicrobial resistance continues to grow, with more than 70% of bacteria now having developed some level of resistance to antibiotics8. Antibiotic use in animal agriculture remains a rapidly evolving issue with growing consumer demand for antibiotic-free meat. Detach® is naturally derived and provides producers with a safe and effective alternative to antibiotics which are traditionally used on farms to minimise illness, such as scour. Given the macro environment, prior discussions with potential partners and the growing need for products like Detach®, we continue to believe it is well positioned to fulfill an unmet need in the global animal health market. 8 US Food and Drug Administration. Battle of the bugs: fighting antibiotic resistance. Updated May 4, 2016 ANATARA LIFESCIENCES Annual Report 2019Pro-inflammatory bacteriaBeneficial bacteriaGaRP regenerated gut> 95%Damaged mucosal layerRegenerated mucosal layerInhibition ofpro-inflammatoryproteins> 85%Inhibition of attachment & invasion of pro-inflammatory bacteriaDiseased gutGaRP gut repair in actionRebalanced microbiomeCompromised gut integrityRestored gut integrityMicrobial imbalance7 Strengthening the team There were several changes at the Board and executive level in FY19 as we transitioned to a human health focus. Anatara announced the appointment of three human health focused directors, with Dr Jane Ryan and Dr David Brookes joining as Non- Executive Directors and I was pleased to join the Board as Non-Executive Chairman. As a result of these appointments, Paul Grujic, Iain Ross and Dr Jay Hetzel stepped off the Board of Directors last year and I want to thank them each for their long- standing commitment and contributions as Directors. We advised shareholders last year that Anatara planned to appoint a new CEO to lead the Company and bring global commercialisation experience from the human healthcare sector, and so we were delighted to announce the appointment of Steven Lydeamore as Chief Executive Officer (CEO) in November 2018. Steve hit the ground running, putting his 26 years of international biopharmaceutical experience to great use. Steve brings a strong track record of successfully commercialising products on a global scale and is actively pursuing partnering opportunities for Detach® and GaRP, as well as potential in- licensing opportunities from the gastrointestinal health sector. “This is a silent tsunami…… if we don’t act now, antimicrobial resistance will have a disastrous impact within a generation.” Dr. Haileyesus Getahun, Director, U.N. Interagency Coordination Group (IACG) on Antimicrobial Resistance, 2019 Outlook The progress we have made in executing on our human health development plans, in parallel with the steps we have taken to deliver on the global value of Detach®, positions us well for the future. Anatara recently completed pre-clinical in vitro and the first phase of in vivo animal studies. Initial results are impressive, significantly decreasing experimental colitis (one form of IBD) as quantitated by endoscopy. Results are being further analysed and will be reported shortly. Anatara anticipates initiation of a human clinical study in IBS in late 2019, with a view to partnering in the second half of calendar 2020. We will also progress discussions for partnering of our animal health assets. We look forward to communicating further regarding these important milestones over the coming year. Finally, on behalf of my fellow directors, I thank shareholders for their continued support. We look forward to seeing those who can join us at the Anatara AGM in Sydney on 11th November 2019. Yours sincerely, Sue MacLeman Chair 8 Review of operations and activities During the year to 30 June 2019, the Company made significant steps towards taking its first human gastrointestinal health product, GaRP (Gastrointestinal ReProgramming dietary supplement), to market. Expenditure in furthering this effort resulted in a loss after tax of $2,868,272 for the period (2018: $3,569,016). Detach® In October 2018, the Australian Pesticides and Veterinary Medicines Authority (APVMA) registered Detach® for use in piglets in Australia. We reported in June 2019 that Zoetis gave notice of termination of the global licencing agreement. An advisory meeting was held with external animal health experts in August 2019 informing our strategy for partnering Detach® in 2020. As Anatara moves forward, the Board believes that a substantial market opportunity for Detach® exists, with more pressure than ever on producers to reduce their antibiotic use and find suitable alternatives which minimise illnesses, such as scour, on farms. Effective, registered alternatives to antibiotics for scour prevention in piglets are limited. Human health In October 2018, the Company formed a Product Development Advisory Board with world-leading scientists and clinicians in gastrointestinal health. The Company reported positive efficacy data from its in vitro Proof of Concept studies of its GaRP dietary supplement product in reducing inflammation and restoring gut integrity. GaRP is a unique, natural dietary supplement designed to restore and maintain a healthy human gut and microbiome. Following these positive results, Anatara has commenced pre-clinical animal studies in IBD and anticipates initiation of a human clinical study in IBS in late 2019, with a view to partnering in the second half of calendar 2020. The human study is anticipated to be funded from existing resources. CEO appointment In November 2018, Anatara announced the appointment of Steven Lydeamore as Chief Executive Officer. Steve has a deep understanding of the human health space and brings a strong track record of success in sales and marketing; research and development, business development, mergers and acquisitions, manufacturing and finance spanning Asia Pacific, Europe, Latin America and North America and is leading the next phase of Anatara’s growth. Board renewal In August 2018, Anatara was pleased to announce the appointment of two human health focused directors, with Sue MacLeman joining as Non-Executive Chairman and Dr. Jane Ryan as Non-Executive Director. Sue has more than 30 years’ experience as a pharmaceutical, biotechnology and medical technology executive and brings a unique set of experiences in technology commercialisation, strategic planning, capital markets and fund raising, M&A and alliance management. Jane too, has over 30 years of international experience in the pharmaceutical and biotechnology industries where she has managed research and development programs and held key roles in business development and alliance management both in Australia and internationally. ANATARA LIFESCIENCES Annual Report 20199 As a result of these appointments, Paul Grujic and Iain Ross stood down from the Board of Directors in August 2018 and September 2018 respectively, with Dr Jay Hetzel retiring as Chairman and Director in November 2018. In January 2019, Anatara announced the further appointment of Dr David Brookes as Non-Executive Director and Chair of the Company’s Audit and Risk Committee. Dr. Brookes has extensive experience in the health and biotechnology industries, having held Board positions in a number of listed biotechnology companies. Dr. Brookes, MBBS (Adelaide), maintains a role as a clinician and is a Fellow of the Australian College of Rural and Remote Medicine. Together, each new Board member brings a strong background and the relevant human health experience necessary to lead the Company through the next stage of development as it turns its focus to developing a human product pipeline for gastrointestinal health applications. Partnering Anatara participated in the 2019 BIO International Convention (Philadelphia, USA) in June 2019 exploring partnering opportunities for its GaRP dietary supplement and potential new human health projects. Investor outreach Anatara was pleased to continue an active market awareness program during the period, delivering presentations directly to shareholders and investors in Brisbane, Melbourne (December 2018), Brisbane (February 2019), Adelaide, Brisbane, Melbourne, Sydney (March 2019), Sydney (April 2019) and Gold Coast, Perth (June 2019). Financial news media interviews were recorded in April and May 2019. In July 2019, the external equity research teams at PAC Partners and Pitt Street Research independently updated their analyst coverage of Anatara. PAC Partners provided a Buy rating and price target of $0.90/share and Pitt Street Research providing a base case valuation of $1.09/share. Commercial focus Looking ahead, Anatara will continue to execute its human health development plans, and in parallel, the Company has prioritised a strategic review of all options to deliver on the global value of the Company’s animal health assets, including the launch of Detach® in Australia and global licensing. 10 Directors’ report 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 2019. Throughout the report, the consolidated entity is referred to as the group. Directors and company secretary The following persons held office as directors of Anatara Lifesciences Ltd during the whole of the financial year and up to the date of this report, except where otherwise stated: Ms Sue MacLeman, Non-Executive Chair (appointed 1 September 2018) Dr Tracie Ramsdale, Non-Executive Director Dr Jane Ryan, Non-Executive Director (appointed 1 September 2018) Dr David Brookes, Non-Executive Director (appointed 23 January 2019) Dr Jay Hetzel, Interim Chairman (resigned 12 November 2018) Mr Iain Ross, Non-Executive Director (resigned 30 September 2018) Mr Paul Grujic, Non-Executive Director (resigned 31 August 2018) Effective 7 January 2019, Dr Tracie Ramsdale resigned as Interim CEO changing her role from Executive Director to Non-Executive Director. The following persons held office as company secretary of Anatara Lifesciences Ltd during the whole of the financial year and up to the date of this report, except where otherwise stated: Mr Stephen Denaro Principal activities The group is developing non-antibiotic oral solutions for gastrointestinal diseases in animals and humans and continues to develop and commercialise Detach®, a non-antibiotic therapy that prevents and treats diarrhoea (also known as scour) in piglets. Dividends - Anatara Lifesciences Ltd No dividends were declared or paid to members for the year ended 30 June 2019. The directors do not recommend that a dividend be paid in respect of the financial year. Review of operations Information on the operations and financial position of the group and its business strategies and prospects is set out in the review of operations and activities on pages 8 to 9 of this annual report. ANATARA LIFESCIENCES Annual Report 201911 Significant changes in the state of affairs Significant changes in the state of affairs of the group during the financial year were as follows. On 3 December 2018, the company appointed Mr Steven Lydeamore as Chief Executive Officer (CEO). Interim CEO Dr Tracie Ramsdale reverted to her previous role as Non-Executive Director. The remaining Non-Executive Directors all retired in the year ended 30 June 2019, replaced by three new appointments: Ms Sue MacLeman (Chair), Dr Jane Ryan and Dr David Brookes. These board and management changes coincide with the company’s new business strategy in human health, shifting focus towards building a pipeline of gastrointestinal health products. Through a targeted development program, the company is committed to delivering positive outcomes for patients and driving value for shareholders, by developing scientifically innovative and commercially attractive products for gut health in areas needing improved or new therapeutic options. The company’s lead program is focused on the development of a dietary supplement to fill a gap in currently available treatment options for sufferers of gastrointestinal conditions such as irritable bowel syndrome (IBS) and inflammatory bowel disease (IBD), which affects more than 14% of the Australian population. On 14 June 2019, the company announced that Zoetis Inc. has given notice of termination of the exclusive worldwide license of Detach®. The company is currently assessing and closely reviewing all options to unlock the global value of the company’s animal health assets, including Detach®. Discussions are currently in progress with an Australian contract manufacturer and with potential veterinary sales, marketing and distribution partners to investigate sale of Detach® in Australia following regulatory approval from the Australian Pesticides and Veterinary Medicines Authority (APVMA) in October 2018. Prior discussions with multinational animal health companies are being further evaluated for product licensing opportunities and a review is underway of the global regulatory environment for Detach® to determine fastest path to market in other jurisdictions. The company continues to research potential applications for Detach® in areas outside of piglets. Events since the end of the financial year No matter or circumstance has arisen since 30 June 2019 that has significantly affected the group’s operations, results or state of affairs, or may do so in future years. Likely developments and expected results of operations Other than the information disclosed in the review of operations and activities on pages 8 to 9, there are no likely developments or details on the expected results of operations that the group has not disclosed. Environmental regulation The group is not affected by any significant environmental regulation in respect of its operations. Information on directors The following information is current as at the date of this report. 12 Ms Sue MacLeman Non-Executive Chair Experience and expertise Other current public directorships Former public directorships in last 3 years Special responsibilities Sue has more than 30 years’ experience as a pharmaceutical, biotechnology and medical technology executive with senior roles in corporate, medical, commercial and business development. Sue has served as CEO and Board member of several ASX and NASDAQ listed companies in the sector and is currently Chair - Anatara Lifesciences (ASX:ANR), Chair - MTPConnect (Medical Technology and Pharmaceuticals Industry Innovation Growth Centre), Chair of Novita Healthcare Ltd (ASX:NHL), Non-Executive Director of Palla Pharma Ltd (ASX:PAL), Non-Executive Director - Oventus Medical Ltd (ASX: OVN), and Non-Executive Director of veski. Sue is also appointed to a number of academic and government advisory committees. Her broad commercial experience is underpinned by graduate qualifications in pharmacy and post graduate qualifications in corporate governance, commercial law, business administration and marketing. Novita Healthcare Ltd (ASX: NHL), since 6 September 2018 Oventus Medical Ltd (ASX: OVN), since 27 November 2015 Palla Pharma Limited (ASX: PAL), since 27 November 2018 RHS Limited (ASX: RHS), until June 2018 Member of the audit and risk management committee Member of the remuneration and nominations committee Dr Tracie Ramsdale Non-Executive Director* Experience and expertise Other current public directorships Former public directorships in last 3 years Special responsibilities 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 financing 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. None None Member of the audit and risk management committee Member of the remuneration and nominations committee *Effective 7 January 2019, Dr Tracie Ramsdale resigned as Interim CEO changing her role from Executive Director to Non- Executive Director. ANATARA LIFESCIENCES Annual Report 201913 Dr Jane Ryan Non-Executive Director Experience and expertise Jane has over 30 years of international experience in the pharmaceutical and biotechnology industries where she has held executive roles in management of research and development pro- grams as well as business development and alliance management. Jane has worked in Australia, the United States and United Kingdom with companies including Peptech, Roche, Cambridge Antibody Technology and Biota Holdings. Throughout her career, she has led many successful fundraising campaigns and licensing initiatives including the awarding of a $230 million US Gov- ernment contract. Jane currently chairs the Advisory Board at the ithree Institute at the University of Technology Sydney (UTS) which studies how microbes grow, live, adapt and survive. She is also currently a Board Member of unlisted company, Kayban, and Technology Development Investments (TDI), a part time Vice President Research and Development at Reef Pharmaceuticals and strategic advisor to Imunexus and Opal Pharmaceuticals. Jane was previously a Board Member of the Victorian endowment for Science Knowledge and Innovation (veski), Diabetes Victoria, TechIn- SA, and the Diabetes Vaccine Development Centre. Jane is assisting CSIRO with its GMP protein manufacture initiative. Other current pub- lic directorships Former public directorships in last 3 years Special responsibilities None None Member of the audit and risk management committee Chair of the remuneration and nominations committee Dr David Brookes Non-Executive Director Experience and expertise Dr. Brookes has extensive experience in the health and biotechnology industries, first becoming involved in the biotechnology sector in the late 1990’s as an analyst. Dr. Brookes has since held Board positions in numerous ASX listed biotechnology companies, in- cluding Chairman of genomics solutions company, RHS Ltd, which was acquired by PerkinElmer Inc (NYSE:PKI $9B biotech company) in June 2018. He has also Chaired and been a member of a number of risk and audit committees in ASX listed companies. He is currently a Non-Executive Director of Factor Therapeutics (ASX: FTT) as well as Non-Executive Chairman of the Better Medical group(unlisted). Dr. Brookes maintains roles as a clinician and as a biotechnology industry consultant. Dr Brookes, MBBS (Adelaide), is a Fellow of the Australian College of Rural and Remote Medicine and a Fellow of the Australian Institute of Company Directors. Factor Therapeutics Limited (ASX: FTT), since 10 April 2019 AtCor Medical Holdings Limited (ASX: ACG), until 3 April 2018 RHS Limit- ed (ASX: RHS), until 15 June 2018 Chair of the audit and risk management committee Member of the remuneration and nominations committee Other current pub- lic directorships Former public directorships in last 3 years Special responsibilities 14 Dr Jay Hetzel Non-Executive Director and Interim Chairman Experience and expertise Dr Hetzel has a background in life sciences research, product development and commercial- isation. 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 genom- ics technology in livestock. The company was sold to Pfizer 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 resignation 12 November 2018 Special responsibilities Member of the audit and risk management committee Member of remuneration and nominations committee 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, Hoffman La Roche, Celltech plc and Reed International plc, for the past 18 years he has un- dertaken 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 financing 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 offerings and has direct experience of M&A transactions in Europe, USA and Pacific 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 pri- vate UK Company, and Chairman and Non-Executive Director of Kazia Therapeutics (ASX: KZA) which is listed in Australia on the ASX. He is a qualified Chartered Director of the UK Institute of Directors and former Vice-Chairman of the Council of Royal Holloway, University of London. Date of resignation 30 September 2018 Special responsibilities Chair of the remuneration committee Chair of the audit and risk management committee Member of the nominations committee ANATARA LIFESCIENCES Annual Report 201915 Mr Paul Grujic Non-Executive Director 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, Web- ster 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 Ani- mal 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 Pfizer and Peptech Animal Health to Virbac, a global Animal Health company. Date of resignation 31 August 2018 Special responsibilities Member of the audit and risk management committee Member of the remuneration and nominations committee Company secretary The company secretary is Mr Stephen Denaro, appointed to the position on 24 February 2014. 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 Officer of various public companies and with major chartered accountancy firms 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. 16 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 2019, and the numbers of meetings attended by each director were : Ms Sue MacLeman Dr Tracie Ramsdale Dr Jane Ryan Dr David Brookes Dr Jay Hetzel Mr Iain Ross Mr Paul Grujic Full meetings of directors Meetings of committees Audit Remuneration A 7 10 7 4 5 4 3 B 7 10 7 4 5 4 3 A 1 1 1 1 1 1 1 B 1 1 1 1 1 1 1 A 2 1 1 1 1 1 - B 2 1 1 1 1 1 - A= Number of meetings attended B= Number of meetings held during the time the director held office or was a member of the committee during the year ANATARA LIFESCIENCES Annual Report 201917 Remuneration report (audited) The directors present the Anatara Lifesciences Ltd 2019 remuneration report, outlining key aspects of our remuneration policy and framework, and remuneration awarded this year. The report is structured as follows: A. Key management personnel (KMP) covered in this report B. Remuneration policy and link to performance C. Elements of remuneration D. Link between remuneration and performance E. Remuneration expenses F. Contractual arrangements with executive KMPs G. Non-executive director arrangements H. Additional statutory information A. Key management personnel covered in this report Ms Sue MacLeman, Non-Executive Chair (appointed 1 September 2018) Dr Tracie Ramsdale, Non-Executive Director* Dr Jane Ryan, Non-Executive Director (appointed 1 September 2018) Dr David Brookes, Non-Executive Director (appointed 23 January 2019) Dr Melvyn Bridges, Executive Chairman and Chief Executive Officer (resigned 17 May 2018) Dr Jay Hetzel, Non-Executive Director and Interim Chairman (resigned 12 November 2018) Mr Paul Grujic, Non-Executive Director (resigned 31 August 2018) Mr Iain Ross, Non-Executive Director (resigned 30 September 2018) Other key management personnel Mr Steven Lydeamore, Chief Executive Officer (appointed 3 December 2018) Dr Michael West, Chief Operating Officer Dr Tracey Mynott, Chief Scientific Officer and R&D Director (resigned 24 August 2018) Dr Tracey Brown, Chief Development Officer *Effective 7 January 2019, Dr Tracie Ramsdale resigned as Interim CEO changing her role from Executive Director to Non-Executive Director. B. Remuneration policy and link to performance Our remuneration and nominations committee is made up of independent non-executive directors. The committee reviews and determines our remuneration policy and structure annually to ensure it remains aligned to business needs, and meets our remuneration principles. In particular, the board aims to ensure that remuneration practices are: • competitive and reasonable, enabling the company to attract and retain key talent • aligned to the company’s strategic and business objectives and the creation of shareholder value • transparent and easily understood, and • acceptable to shareholders. 18 Element Purpose Performance metrics Potential value Fixed remuneration (FR) Provide competitive market remuneration Nil STI LTI Reward for in-year performance and retention Alignment to long- term shareholder value KPI achievement, determined by remuneration and nominations committee KPI achievement, determined by remuneration and nominations committee Positioned at the market rate CEO: 40% of FR COO: 30% of FR CDO: 30% of FR CEO: 600,000 unlisted 5-year options at $0.736 exercise price COO: 210,000 unlisted 5-year options at $1.70 exercise price CDO: 210,000 unlisted 5-year options at $1.70 exercise price Assessing performance The remuneration and nominations committee is responsible for assessing performance against KPIs and determining the STI and LTI to be paid. To assist in this assessment, the committee receives data from independently run surveys. Performance is monitored on an informal basis throughout the year and a formal evaluation is performed annually. Securities trading policy Anatara Lifesciences Ltd’s securities trading policy applies to all directors and executives, see https://anataralifesciences. com/investors/corporate-governance/. It only permits the purchase or sale of company securities during certain periods. C. Elements of remuneration (i) Fixed annual remuneration (FR) Key management personnel may receive their fixed remuneration as cash, or cash with non-monetary benefits such as health insurance and car allowances. FR is reviewed annually, or on promotion. It is benchmarked against market data for comparable roles in companies in a similar industry and with similar market capitalisation. The committee aims to position executives at or near the median, with flexibility to take into account capability, experience, value to the organisation and performance of the individual. (ii) Short-term incentives All executives are entitled to participate in a short-term incentive scheme which provides for executive employees to receive a combination of short-term incentive (STI) as part of their total remuneration if they achieve certain performance indicators as set by the board. The STI can be paid either by cash, or a combination of cash and the issue of equity in the company, at the determination of the remuneration and nominations committee and board. ANATARA LIFESCIENCES Annual Report 201919 The company’s CEO, COO and CDO are entitled to short-term incentives in the form of cash bonus up to 40%, 30% and 30% of FR, respectively, against agreed various key performance indicators (KPIs), including target EBITDA, appreciation in share price value, retention of key talent, and achievement of major project milestones. On an annual basis, KPIs are reviewed and agreed in advance of each financial year and include financial and non-financial company and individual performance goals that relate to: • Operational management • Investor relations and shareholder value creation • R&D activities • Product development and commercialisation (iii) Long-term incentives Executives may also be provided with longer-term incentives through the company’s ‘executive option plan’ (EOP), that was approved by shareholders at the annual general meeting held on 13 November 2017. The aim of the EOP is to allow executives to participate in, and benefit from, the growth of the company as a result of their efforts and to assist in motivating and retaining those key employees over the long-term. Continued service is the condition attached to the vesting of the options. The board at its discretion determines the total number of options granted to each executive. D. Link between remuneration and performance Statutory performance indicators We aim to align our executive remuneration to our strategic and business objectives and the creation of shareholder wealth. The table below shows measures of the group’s financial performance over the last five years as required by the Corporations Act 2001. However, these are not necessarily consistent with the measures used in determining the variable amounts of remuneration to be awarded to KMPs. As a consequence, there may not always be a direct correlation between the statutory key performance measures and the variable remuneration awarded. 2019 2018 2017 2016 2015 Loss for the year attributable to owners ($) 2,868,272 3,569,016 1,705,002 723,934 1,795,228 Basic loss per share (cents) Share price at year end ($) 5.80 0.255 7.22 0.635 3.5 1.00 1.4 1.26 5.3 1.00 The company’s earnings have remained negative since inception due to the nature of the business. Shareholder wealth reflects this speculative and volatile market sector. No dividends have ever been declared by Anatara Lifesciences Ltd. The company continues to focus on revenue growth with the objective of achieving key commercial milestones in order to add further shareholder value. E. Remuneration expenses The following tables show details of the remuneration expense recognised for the group’s key management personnel for the current and previous financial year measured in accordance with the requirements of the accounting standards. 20 The following table shows details of remuneration expenses of each director or other key management personnel recognised for the year ended 30 June 2019. 2019 Short-term benefits Post- employment benefits Cash salary and fees Cash bonus Other* Superannu- ation Long term benefits Long service leave* Share-based payments Options Total Termi- nation benefits Non-executive directors $ Ms Sue MacLeman 115,769 $ - $ - Dr Tracie Ramsdale 232,407 46,073 16,579 Dr Jane Ryan Dr David Brookes Dr Jay Hetzel Mr Iain Ross Mr Paul Grujic Other KMP 62,019 32,347 37,692 21,900 12,114 - - - - - - - - - - $ 10,998 23,885 5,892 3,073 3,581 - 1,151 $ - - - - - - - Mr Steven Lydeamore 257,190 67,853 13,537 21,649 259 $ - - - - - - - - - $ - - - - - - - $ 126,767 318,944 67,911 35,420 41,273 21,900 13,265 75,216 435,704 18,201 298,063 Dr Michael West Dr Tracey Mynott 250,000 38,463 - - (42) 1,032 27,312 2,592 12,284 - 125,000 - 176,779 Dr Tracey Brown 250,000 28,500 8,612 29,094 2,504 - 18,201 336,911 Total KMP compensation 1,309,901 142,426 39,718 138,919 5,355 125,000 111,618 1,872,937 *The amount disclosed in this column represent the movements in the associated provisions. Notes • Cash bonus includes estimation of the bonus for the current year and any adjustments to the bonus for prior years. ANATARA LIFESCIENCES Annual Report 201921 The following table shows details of remuneration expenses of each director or other key management personnel recognised for the year ended 30 June 2018. 2018 Short-term benefits Post- employment benefits Cash salary and fees Cash bonus Other* Superannu- ation Long term benefits Long service leave* Share-based payments Termi- nation benefits Options Total Non-executive directors $ $ $ Dr Tracie Ramsdale 156,568 19,615 6,029 Dr Jay Hetzel Mr Iain Ross Mr Paul Grujic Executive directors 84,170 82,581 70,000 Dr Melvyn Bridges 260,932 Other KMP - - - - - - - - $ 11,610 3,879 - 6,650 19,256 $ 59 - - - - Dr Michael West 250,000 132,500 14,931 29,212 1,255 Dr Tracey Mynott 250,000 12,500 27,251 24,937 10,030 Dr Tracey Brown 250,000 132,500 17,525 29,212 1,171 $ - - - - - - - - $ 581 581 581 581 $ 194,462 88,630 83,162 77,231 714 280,902 43,164 471,062 17,318 342,036 43,164 473,572 Total KMP compensation 1,404,251 297,115 65,736 124,756 12,515 - 106,684 2,011,057 Notes • Cash bonus includes estimation of the bonus for the current year and any adjustments to the bonus for prior years. F. Contractual arrangements with executive KMPs Name: Position: Contract duration: Notice period: Dr Tracie Ramsdale Interim Chief Executive Officer 17 May 2018 - 7 January 2019 3 months by either party Fixed remuneration: $340,000 per annum, plus 9.5% superannuation Name: Position: Contract duration: Notice period: Fixed remuneration: Name: Position: Contract duration: Notice period: Fixed remuneration: Mr Steven Lydeamore Chief Executive Officer Unspecified 6 months by either party $395,000 per annum, plus 9.5% superannuation Dr Michael West Chief Operating Officer Unspecified 3 months by either party $250,000 per annum, plus 9.5% superannuation 22 Name: Position: Contract duration: Notice period: Fixed remuneration: Dr Tracey Brown Chief Development Officer Unspecified 3 months by either party $250,000 per annum, plus 9.5% superannuation G. Non-executive director arrangements Non-executive directors receive a board fee and fees for chairing but not participating on board committees, see table below. They do not receive performance-based pay or retirement allowances. The fees are exclusive of superannuation. The chair receives double the base fee of other non-executive directors, reflective of the additional demands and responsibilities of this role. Fees are reviewed annually by the board taking into account comparable roles and market data provided by the board’s independent remuneration adviser. The maximum annual aggregate directors’ fee pool limit is $500,000, adopted on initial public offering of Anatara Lifesciences Ltd on 14 October 2014. Base fees Chair Other non-executive directors Additional fees Audit and risk management committee-chair Audit and risk management committee-member Remuneration and nominations committee-chair Remuneration and nominations committee-member $140,000 $70,000 $5,000 $0 $5,000 $0 ANATARA LIFESCIENCES Annual Report 201923 H. Additional statutory information (i) Relative proportions of fixed vs variable remuneration expense The following table shows the relative proportions of remuneration that are linked to performance and those that are fixed, based on the amounts disclosed as statutory remuneration expense on page 20 above: Name Fixed remuneration At risk- STI At risk -LTI 2019 2018 2019 2018 2019 2018 % % % % % % Non-executive director Ms Sue MacLeman Dr Tracie Ramsdale Dr Jane Ryan Dr David Brookes Dr Jay Hetzel Mr Iain Ross Mr Paul Grujic Executive directors Dr Melvyn Bridges Other KMP Mr Steven Lydeamore Dr Michael West Dr Tracey Mynott Dr Tracey Brown 100 86 100 100 100 100 100 - 90 - - 99 99 99 - 100 67 94 100 86 - 63 91 63 - 14 - - - - - - 16 - - 8 - 10 - - - - - - - 28 4 28 - - - - - - - - 17 6 - 5 - - - - 1 1 1 - - 9 5 9 24 (ii) Terms and conditions of the share-based payment arrangements Options The terms and conditions of each grant of options affecting remuneration in the current or a future reporting period are as follows: Grant date Vesting and exercise date Expiry date Exercise price ($) Value per option at grant date ($) Vested (%) 2016-09-23 2019-04-10 2019-04-10 2019-04-10 2019-09-23 2021-09-23 2019-02-18 2024-02-17 2020-02-18 2024-02-17 2021-02-18 2024-02-17 1.700 0.736 0.736 0.736 0.5796 0.2731 0.2731 0.2731 0.0% 100.0% 0.0% 0.0% For detailed disclosures please refer to note 17 on page 50. (iii) Reconciliation of options and ordinary shares held by KMP Balance at start of the period1 Granted as remuneration Exercised Other changes2 Balance at end of the period3 Vested and exercisable Option holdings 2019 Options Ms Sue MacLeman Dr Tracie Ramsdale Dr Jane Ryan Dr David Brookes Dr Jay Hetzel Mr Iain Ross Mr Paul Grujic - 65,000 - - 65,000 65,000 65,000 - - - - - - - Mr Steven Lydeamore - 600,000 Dr Michael West Dr Tracey Mynott Dr Tracey Brown 210,000 500,000 210,000 - - - 1,180,000 600,000 Notes - - - - - - - - - - - - - - - - - - - - - - - - - - - 600,000 200,000 - (65,000) - - (65,000) (65,000) (65,000) - - 210,000 (500,000) - - 210,000 - - - (760,000) 1,020,000 200,000 1. Balance may include shares held prior to individuals becoming KMP. For individuals who became KMP during the period, the balance is as at the date they became KMP. 2. Other changes incorporates changes resulting from the expiration/forfeiture of options. 3. For former KMP, the balance is as at the date they cease being KMP. ANATARA LIFESCIENCES Annual Report 201925 Balance at the start of the period1 Granted as remuneration Received on exercise of options Other changes2 Balance at the end of the period3 - - - - - - - - - - - - - - - - - - - - - - - - 12,477 - - 50,000 - - - 50,000 - - - 12,477 45,614 - 50,000 486,109 1,427,942 71,219 50,000 - 4,391,337 - 112,477 6,534,698 Share holdings 2019 Ordinary shares Ms Sue MacLeman Dr Tracie Ramsdale Dr Jane Ryan Dr David Brookes Dr Jay Hetzel Mr Iain Ross Mr Paul Grujic Mr Steven Lydeamore Dr Michael West - 45,614 - - 486,109 1,427,942 71,219 - - Dr Tracey Mynott 4,391,337 Dr Tracey Brown - 6,422,221 Notes 1. Balance may include shares held prior to individuals becoming KMP. For individuals who became KMP during the period, the balance is as at the date they became KMP. 2. Other changes incorporates changes resulting from the acquisition of shares. 3. For former KMP, the balance is as at the date they cease being KMP. (iv) Other transactions with key management personnel Aggregate amounts of other transactions with key management personnel of Anatara Lifesciences Ltd: Amounts recognised as expense Consultancy fees paid to Dr Tracie Ramsdale Consultancy fees paid to Mr lain Ross 2019 $ - 20,000 20,000 2018 $ 129,923 20,000 149,923 26 (v) Voting of shareholders at last year’s annual general meeting Anatara Lifesciences Ltd received more than 75 percent of favourable votes on its remuneration report for the 2018 financial year. The company did not receive any specific feedback at the 2018 annual general meeting or throughout the year on its remuneration practices. [This concludes the remuneration report, which has been audited] Shares under option A. Unissued ordinary shares Unissued ordinary shares of Anatara Lifesciences Ltd under option at the date of this report are as follows: Date options granted 2015-12-14 2016-09-23 2017-11-28 2018-09-10 2019-04-10 Total Expiry date 2020-12-14 2021-09-23 2022-11-17 2020-12-14 2024-02-17 Issue price of shares ($) Number under option 1.450 1.700 2.270 1.450 0.736 765,000 420,000 36,000 750,000 600,000 2,571,000 No option holder has any right under the options to participate in any other share issue of the company or any other entity. B. Shares issued on the exercise of options No ordinary shares of Anatara Lifesciences Ltd were issued during the year ended 30 June 2019 on the exercise of options granted. Insurance of officers and indemnities A. Insurance of officers During the financial year, Anatara Lifesciences Ltd paid a premium of $44,788 to insure the directors and secretaries of the company and its Australian-based controlled entities, and the general managers of each of the divisions of the group. The liabilities insured are legal costs that may be incurred in defending civil or criminal proceedings that may be brought against the officers in their capacity as officers of entities in the group, and any other payments arising from liabilities incurred by the officers in connection with such proceedings. This does not include such liabilities that arise from conduct involving a wilful breach of duty by the officers or the improper use by the officers of their position or of information to gain advantage for themselves or someone else or to cause detriment to the company. It is not possible to apportion the premium between amounts relating to the insurance against legal costs and those relating to other liabilities. ANATARA LIFESCIENCES Annual Report 201927 B. Indemnity of auditors Anatara Lifesciences Ltd has agreed to indemnify their auditors, Grant Thornton Audit Pty Ltd, to the extent permitted by law, against any claim by a third party arising from Anatara Lifesciences Ltd’s breach of their agreement. The indemnity stipulates that Anatara Lifesciences Ltd will meet the full amount of any such liabilities including a reasonable amount of legal costs. 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. No proceedings have been brought or intervened in on behalf of the company with leave of the Court under section 237 of the Corporations Act 2001. Non-audit services The company may decide to employ the auditor on assignments additional to their statutory audit duties where the auditor’s expertise and experience with the company and/or the group are important. Details of the amounts paid or payable to the auditor (Grant Thornton Audit Pty Ltd) for audit and non-audit services provided during the year are set out below. The board of directors has considered the position and, in accordance with advice received from the audit committee, is satisfied that the provision of the non-audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The directors are satisfied that the provision of non-audit services by the auditor, as set out below, did not compromise the auditor independence requirements of the Corporations Act 2001 for the following reasons: • all non-audit services have been reviewed by the audit committee to ensure they do not impact the impartiality and objectivity of the auditor • none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants. During the year the following fees were paid or payable for non-audit services provided by the auditor of the parent entity, its related practices and non-related audit firms: 28 Taxation services Grant Thornton Audit Pty Ltd and its related entities and other Grant Thornton network firms: Taxation services Grant Thornton Audit Pty Ltd and its related entities and other Grant Thornton network firms: Tax compliance services Total remuneration for taxation services Total remuneration for non-audit services 2019 $ 2018 $ 24,000 25,650 24,000 25,650 24,000 25,650 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 30. Rounding of amounts The company is of a kind referred to in ASIC Legislative Instrument 2016/191, relating to the ‘rounding off’ of amounts in the directors’ report. Amounts in the directors’ report have been rounded off in accordance with the instrument to the nearest dollar. This report is made in accordance with a resolution of directors. Ms Sue MacLeman Non-Executive Chair Melbourne 27 August 2019 ANATARA LIFESCIENCES Annual Report 201929 Corporate governance statement Anatara Lifesciences Ltd and the board are committed to achieving and demonstrating the highest standards of corporate governance. Anatara Lifesciences Ltd has reviewed its corporate governance practices against the Corporate Governance Principles and Recommendations (3rd edition) published by the ASX Corporate Governance Council. The 2019 corporate governance statement is dated as at 30 June 2019 and reflects the corporate governance practices in place throughout the 2019 financial year. The 2019 corporate governance statement was approved by the board on 27 August 2019. A description of the group’s current corporate governance practices is set out in the group’s corporate governance statement which can be viewed at https://anataralifesciences.com/investors/corporate-governance/. 30 Level 22, Tower 5 Collins Square 727 Collins Street Melbourne VIC 3008 GPO Box 4736 Melbourne VIC 3001 T +61 3 8320 2222 F +61 3 8320 2200 E info.vic@au.gt.com W www.grantthornton.com.au Auditor’s Independence Declaration 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 2019, 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 T S Jackman Partner – Audit & Assurance Melbourne, 27 August 2019 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 ‘Grant Thornton’ refers to the brand under which the Grant Thornton member firms provide assurance, tax and advisory services to their clients and/or refers to one or more member firms, as the context requires. Grant Thornton Australia 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 another and are not liable for one another’s acts or omissions. In the Australian context only, the use of the term ‘Grant Thornton’ may refer to Grant Thornton Australia Limited ABN 41 127 556 389 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. ANATARA LIFESCIENCES Annual Report 2019 Financial statements Consolidated statement of profit or loss and other comprehensive income Consolidated statement of financial position Consolidated statement of changes in equity Consolidated statement of cash flows (direct method) Notes to the financial statements Directors’ declaration 31 32 33 34 35 36 64 These financial statements are consolidated financial statements for the group consisting of Anatara Lifesciences Ltd and its subsidiaries. A list of major subsidiaries is included in note 12. The financial statements are presented in the Australian currency. Anatara Lifesciences Ltd is a company limited by shares, incorporated and domiciled in Australia. Its registered office and principal place of business is: 433 Logan Road, Brisbane QLD 4120 The financial statements were authorised for issue by the directors on 27 August 2019. The directors have the power to amend and reissue the financial statements. 32 Consolidated statement of profit or loss and other comprehensive income For the year ended 30 June 2019 Revenue from contracts with customers Gross profit Other income General and administrative expenses Research and development expenses Operating loss Finance income Loss before income tax Income tax expense Loss for the period Other comprehensive income Items that may be reclassified to profit or loss: Other comprehensive income for the period, net of tax Total comprehensive loss for the period Total comprehensive income for the period is attributable to: Owners of Anatara Lifesciences Ltd Loss per share for loss attributable to the ordinary equity holders of the company: Notes 2 3(a) 3(b) 2019 $ 663,405 663,405 877,573 2018 $ 6,467 6,467 1,338,156 (3,775,495) (4,348,060) (776,256) (785,931) (3,010,773) (3,789,368) 142,501 220,352 (2,868,272) (3,569,016) 4 - - (2,868,272) (3,569,016) - - (2,868,272) (3,569,016) (2,868,272) (3,569,016) Cents Cents Basic and diluted loss per share 19 (5.80) (7.22) The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes. ANATARA LIFESCIENCES Annual Report 2019Consolidated statement of financial position 33 As at 30 June 2019 ASSETS Current assets Cash and cash equivalents Trade and other receivables Term Deposits Other current assets Total current assets Non-current assets Property, plant and equipment Intangible assets Total non-current assets Total assets LIABILITIES Current liabilities Trade and other payables Employee benefit obligations Contract liability Total current liabilities Non-current liabilities Contract liability Employee benefit obligations Total non-current liabilities Total liabilities Net assets EQUITY Share capital Other reserves Accumulated losses Total equity Notes 5(a) 5(b) 5(c) 6(a) 6(b) 6(b) 6(a) 7(a) 7(b) 2019 $ 2018 $ 1,360,077 895,986 4,050,000 49,021 6,355,084 20,196 7,046 27,242 1,447,732 2,040,244 6,200,000 74,459 9,762,435 42,924 7,046 49,970 6,382,326 9,812,405 364,551 88,269 - 452,820 - 13,939 13,939 466,759 5,915,567 16,941,392 499,070 (11,524,895) 5,915,567 419,513 120,604 46,281 586,398 617,124 21,433 638,557 1,224,955 8,587,450 16,941,392 583,749 (8,937,691) 8,587,450 The above consolidated statement of financial position should be read in conjunction with the accompanying 34 Consolidated statement of changes in equity For the year ended 30 June 2019 Attributable to owners of Anatara Lifesciences Ltd Notes Share capital $ Other reserves $ Accumulated losses $ Total equity $ 16,941,392 448,422 (5,368,675) 12,021,139 - - - - - (3,569,016) (3,569,016) (3,569,016) (3,569,016) 135,327 - 135,327 Balance at 1 July 2017 Loss for the period Total comprehensive loss for the period Transactions with owners in their capacity as owners: Options issued/expensed 7(b) Balance at 30 June 2018 16,941,392 583,749 (8,937,691) 8,587,450 Balance at 1 July 2018 Loss for the period Total comprehensive loss for the period Transactions with owners in their capacity as owners: Options issued/expensed Options forteited/lapsed 7(b) 7(b) Attributable to owners of Anatara Lifesciences Ltd Notes Share capital $ Other reserves $ Accumulated losses $ Total equity $ 16,941,392 583,749 (8,937,691) 8,587,450 - - - - - - - (2,868,272) (2,868,272) (2,868,272) (2,868,272) 196,389 (281,068) (84,679) - 196,389 281,068 281,068 - 196,389 Balance at 30 June 2019 16,941,392 499,070 (11,524,895) 5,915,567 ANATARA LIFESCIENCES Annual Report 201935 Consolidated statement of cash flows For the year ended 30 June 2019 Notes 2019 $ 2018 $ Cash flows from operating activities Receipts from customers (inclusive of GST) Payments to suppliers and employees (inclusive of GST) Research and development tax incentive and other grants received Net cash (outflow) from operating activities 8(a) Cash flows from investing activities 669,872 (4,397,727) 1,301,538 (2,426,317) - (4,721,011) 1,405,865 (3,315,146) Payments for investment in term deposits (7,050,000) (4,200,000) Payments for property, plant and equipment Proceeds from withdrawal from term deposits Interest received Net cash inflow (outflow) from investing activities Net cash inflow (outflow) from financing activities Net (decrease) in cash and cash equivalents Cash and cash equivalents at the beginning of the financial year Cash and cash equivalents at end of year 5(a) - 9,200,000 188,662 2,338,662 - (87,655) 1,447,732 1,360,077 (23,170) - 219,179 (4,003,991) - (7,319,137) 8,766,869 1,447,732 36 Contents of the notes to the financial statements 1. Segment information 2. Revenue from contract with customers 3. Other income and expense items 4. 5. Income tax expense Financial assets and financial liabilities 6. Non-financial assets and liabilities 7. Equity 8. Cash flow information 9. Critical estimates, judgements and errors 10. Financial risk management 11. Capital management 12. Interests in other entities 13. Contingent liabilities 14. Commitments 15. Events occurring after the reporting period 16. Related party transactions 17. Share-based payments 18. Remuneration of auditors 19. Loss per share 20. Parent entity financial information 21. Summary of significant accounting policies 22. Changes in accounting policies 37 37 37 39 40 42 43 44 45 45 47 48 48 48 49 49 50 51 52 52 54 63 ANATARA LIFESCIENCES Annual Report 2019 37 1. Segment information Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Chief Executive Officer of Anatara Lifesciences Ltd. The group has identified one reportable segment; that is, the research, development of oral solutions for gastrointestinal diseases and the commercialisation of the Detach® diarrhoea treatment for piglets. The segment details are therefore fully reflected in the body of the financial statements. 2. Revenue from contract with customers A. Disaggregation of revenue from contracts with customers The group derives revenue from the licensing of its intellectual property over time: Licensing fees B. Accounting policies (i) Licensing revenue 2019 $ 663,405 663,405 2018 $ 6,467 6,467 The group signed a license, development and commercialisation agreement with Zoetis Services LLC (Zoetis) on 10 May 2018 for the group’s Detach® product. The first milestone payment of US$2,500,000 was payable upfront at the effective date of the agreement signed 10 May 2018 (funds were received in July 2018). This comprised consideration for the rights granted, subject to the terms and conditions of the agreement. Of this amount, US$2,000,000 offset the previously paid option and evaluation agreement entered into in 2016. The balance of US$500,000 (equivalent to A$669,872) was be recognised as revenue over time to 26 October 2032 to reflect the license access rights transferred to Zoetis over the term of the license agreement. The unearned revenue was recognised as deferred revenue as disclosed in note6(b). On 14 June 2019, the group announced Zoetis had given notice of termination of the Detach® licensing agreement. Under the terms of the original agreement, the first milestone payment is non-refundable. Accordingly, the $663,405 deferred revenue amount recognised at 30 June 2018 was recognised as revenue in the year ended 30 June 2019. 3. Other income and expense items A. Other income Research and development tax incentive Other grants 2019 $ 840,932 36,641 877,573 2018 $ 1,162,620 175,536 1,338,156 38 (i) Fair value of R&D tax incentive The group’s research and development (R&D) activities are eligible under an Australian government tax incentive for eligible expenditure. Management has assessed these activities and expenditure to determine which are likely to be eligible under the incentive scheme. Amounts are recognised when it has been established that the conditions of the tax incentive have been met and that the expected amount can be reliably measured. For the year ended 30 June 2019, the group has included an item in other income of $840,932 (2018: $1,162,620) to recognise income over the period necessary to match the grant on a systematic basis with the costs that they are intended to compensate. (ii) Fair value of other grants The group’s other grant income is recognised when compliance with the conditions attached to the grant have been determined and the group has ascertained the grant will be received. For the year ended 30 June 2019, the group has included an item in other income of $36,641 (2018: $175,536) to recognise income over the period necessary to match the grant on a systematic basis with the costs that they are intended to compensate. B. Breakdown of expenses by nature General and administrative expenses Accounting and audit Consulting Depreciation Employee benefits Insurance Investor relations Legal Listing and share registry Occupancy Share-based payments Superannuation Travel and entertainment Other Notes 17(b) 2019 $ 247,998 233,469 22,728 2018 $ 238,815 219,000 21,177 2,044,647 2,683,854 59,046 280,739 92,205 69,607 25,215 196,389 170,281 210,178 122,993 35,198 158,439 102,233 75,531 68,459 135,327 196,971 291,108 121,948 3,775,495 4,348,060 ANATARA LIFESCIENCES Annual Report 201939 4. Income tax expense A. Numerical reconciliation of income tax expense to prima facie tax payable Loss from continuing operations before income tax expense Tax at the Australian tax rate of 27.5% (2018: 27.5%) Tax effect of amounts which are not deductible (taxable) in calculating taxable income: R&D tax incentive Accounting expenditure subject to R&D tax incentive Blackhole expenditure (Section 40-880, ITAA 1997) Deferred revenue Share-based payments Other items Subtotal Tax losses and other timing differences for which no deferred tax asset is recognised Income tax expense B. Tax losses Unused tax losses for which no deferred tax asset has been recognised Potential tax benefit @ 27.5% 2019 $ (2,868,272) (788,775) 2018 Represented $ (3,569,016) (981,479) (231,256) 531,624 (73,819) (182,436) 54,007 (18,354) (709,009) 709,009 - (319,721) 789,787 (86,827) 182,436 37,215 94,155 (284,434) 284,434 - 2019 $ 2018 Represented $ 6,168,136 1,696,237 3,589,914 987,226 The numerical reconciliation of income tax expense to prima facie tax payable and unused tax losses for the year ended 30 June 2018 have been represented to reflect the income tax return lodged for the same period. 40 5. Financial assets and financial liabilities A. Cash and cash equivalents Current assets Cash at bank and in hand Deposits at call 2019 $ 1,360,077 - 1,360,077 2018 $ 947,732 500,000 1,447,732 (i) Reconciliation to cash flow statement The above figures reconcile to the amount of cash shown in the consolidated statement of cash flows at the end of the financial year as follows: Balances as above Balances per statement of cash flows (ii) Classification as cash equivalents 2019 $ 1,360,077 1,360,077 2018 $ 1,447,732 1,447,732 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 21(j) for the group’s other accounting policies on cash and cash equivalents. (iii) Risk exposure The group’s exposure to interest rate risk is discussed in note 10. The maximum exposure to credit risk at the end of the reporting period is the carrying amount of each class of cash and cash equivalents mentioned above. ANATARA LIFESCIENCES Annual Report 201941 B. Trade and other receivables 2019 Current $ Non-current $ Trade receivables - - Accrued receivables (ii) 848,659 Other receivables Total trade and other receivables 47,327 895,986 895,986 - - - - - - Total $ - - Current $ 669,872 669,872 848,659 1,318,785 47,327 51,587 895,986 1,370,372 895,986 2,040,244 2018 Non-current $ - - - - - - Total $ 669,872 669,872 1,318,785 51,587 1,370,372 2,040,244 (i) Classification as trade receivables Trade receivables are amounts due from customers for goods sold or services performed in the ordinary course of business. They are generally due for settlement within 30 days and therefore are all classified as current. Trade receivables are recognised initially at the amount of consideration that is unconditional unless they contain significant financing components, when they are recognised at fair value. The group holds the trade receivables with the objective to collect the contractual cash flows and therefore measures them subsequently at amortised cost using the effective interest method. (ii) Accrued receivables Accrued receivables include $800,481 from the Australian Taxation Office in relation to the R&D tax incentive (2018: $1,208,848) and $48,178 interest income from deposits at call with terms greater than three months (2018: $94,339). (iii) Fair value of trade and other receivables Due to the short-term nature of the current receivables, their carrying amount is considered to be the same as their fair value. Trade payables Accrued expenses Other payables 2019 2018 Current $ Non-current $ Total $ Current $ Non-current $ 116,764 214,617 33,170 364,551 - - - - 116,764 80,661 214,617 290,000 33,170 48,852 364,551 419,513 - - - - Total $ 80,661 290,000 48,852 419,513 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 values, due to their short- term nature. 42 6. Non-financial assets and liabilities A. Employee benefit obligations 2019 2018 Current $ Non-current $ Total $ Current $ Non-current $ Total $ Leave obligations (i) 88,269 13,939 102,208 104,484 21,433 125,917 Superannuation payables - - - 16,120 - 16,120 Total employee benefit obligations (i) Leave obligations 88,269 13,939 102,208 120,604 21,433 142,037 The leave obligations cover the group’s liabilities for long service leave and annual leave which are classified as either other long-term benefits or short-term benefits, as explained in note 21(p). The current portion of this liability includes all of the accrued annual leave, the unconditional entitlements to long service leave where employees have completed the required period of service and also for those employees that are entitled to pro-rata payments in certain circumstances. The entire amount of the provision of $88,269 (2018: $104,484) is presented as current, since the group does not have an unconditional right to defer settlement for any of these obligations. However, based on past experience, the group does not expect all employees to take the full amount of accrued leave or require payment within the next 12 months. B. Contract liability Deferred revenue 2019 Current $ Non-current $ - - - - Total $ - - Current $ 46,281 46,281 2018 Non-current $ Total $ 617,124 663,405 617,124 663,405 The group signed a license, development and commercialisation agreement with Zoetis Services LLC (Zoetis) on 10 May 2018 for the group’s Detach® product. The first milestone payment of US$2,500,000 was payable upfront at the effective date of the agreement signed 10 May 2018 (funds were received in July 2018). This comprised consideration for the rights granted, subject to the terms and conditions of the agreement. Of this amount, US$2,000,000 offset the previously paid option and evaluation agreement entered into in 2016. The balance of US$500,000 (equivalent to A$669,872) was be recognised as revenue over time to 26 October 2032 to reflect the license access rights transferred to Zoetis over the term of the license agreement. The unearned revenue was recognised as deferred revenue. On 14 June 2019, the group announced Zoetis had given notice of termination of the Detach® licensing agreement. Under the terms of the original agreement, the first milestone payment is non-refundable. Accordingly, the $663,405 deferred revenue amount recognised at 30 June 2018 was recognised as revenue in the year ended 30 June 2019. ANATARA LIFESCIENCES Annual Report 201943 7. Equity A. Share capital Notes 7(a)(ii) Ordinary shares Fully paid 2019 Shares 2018 Shares 2019 $ 2018 $ 49,413,236 49,413,236 16,941,392 16,941,392 7(a)(i) 49,413,236 49,413,236 16,941,392 16,941,392 (i) Movements in ordinary shares: There has been no movement in ordinary shares in the year ended 30 June 2019 (2018: nil). (ii) Ordinary shares Ordinary shares entitle the holder to participate in dividends, and to share in the proceeds of winding up the company in proportion to the number of and amounts paid on the shares held. On a show of hands every holder of ordinary shares present at a meeting in person or by proxy, is entitled to one vote, and upon a poll each share is entitled to one vote. Ordinary shares have no par value and the company does not have a limited amount of authorised capital. (iii) Options Information relating to options, including details of options issued, exercised and lapsed during the financial year and options outstanding at the end of the reporting period is set out in notes 7(b)(ii) and 17. B. Other reserves The consolidated statement of financial position line item ‘other reserves’ comprises the ‘share-based payments reserve’. (i) Nature and purpose of other reserves Share-based payments The share-based payment reserve records items recognised as expenses on valuation of share options issued to key management personnel, other employees and eligible contractors. 44 Details Balance at 1 July 2017 Issue of EOP unlisted options at $2.27 (2017-11-28) Amortisation of share-based payments for options issued in prior periods Balance 30 June 2018 Forfeiture of EOP unlisted options at $1.45 (2018-08-24) Issue of unlisted options at $1.45 in lieu of payment for services (2018- 09-10) Lapse of Pork CRC unlisted options at $0.50 (2018-09-18) Issue of Pork CRC unlisted options at $0.50 (2018-10-29) Lapse of EOP unlisted options at $0.50 (2018-11-11) Issue of EOP unlisted options at $0.736 (2019-04-10) Lapse of Pork CRC unlisted options at $0.50 (2019-04-29) Amortisation of share-based payments for options issued in prior periods Balance 30 June 2019 Number of options 2,400,000 36,000 - 2,436,000 (500,000) 750,000 (375,000) 375,000 (340,000) 600,000 (375,000) - 2,571,000 Total $ 448,422 11,253 124,074 583,749 (85,616) 31,557 (115,710) 36,703 (48,297) 75,216 (36,703) 58,171 499,070 8. Cash flow information A. Reconciliation of profit/(loss) after income tax to net cash inflow from operating activities Notes 3(b) 17(b) Loss for the period Adjustments for Depreciation and amortisation Finance income Share-based payments Change in operating assets and liabilities: Movement in trade and other receivables Movement in other operating assets Movement in trade and other payables Movement in other operating liabilities Net cash inflow (outflow) from operating activities 2019 $ 2018 $ (2,868,272) (3,569,016) 22,728 (142,501) 196,389 21,177 (219,178) 135,327 1,098,097 (615,393) 25,438 (54,962) (703,234) (2,426,317) 2,421 885,123 44,393 (3,315,146) ANATARA LIFESCIENCES Annual Report 201945 B. Non-cash investing and financing activities Non-cash investing and financing activities disclosed in other notes are: • options issued for no cash consideration - note 17. 9. Critical estimates, judgements and errors The preparation of financial statements requires the use of accounting estimates which, by definition, will seldom equal the actual results. Management also needs to exercise judgement in applying the group’s accounting policies. This note provides an overview of the areas that involved a higher degree of judgement or complexity, and of items which are more likely to be materially adjusted due to estimates and assumptions turning out to be wrong. Detailed information about each of these estimates and judgements is included in other notes together with information about the basis of calculation for each affected line item in the financial statements. In addition, this note also explains where there have been actual adjustments this year as a result of an error and of changes to previous estimates. A. Significant estimates and judgements The areas involving significant estimates or judgements are: • Estimation of R&D tax incentive income accrual - note 3 (a) (i) • Estimation of other grants income accrual - note 3 (a) (ii) • Estimation of employee benefit obligations - note 6 (a) (i) • Estimation of share-based payments - note 17 (a) (i) Estimates and judgements are continually evaluated. They are based on historical experience and other factors,including expectations of future events that may have a financial impact on the entity and that are believed to be reasonable under the circumstances. 10. Financial risk management This note explains the group’s exposure to financial risks and how these risks could affect the group’s future financial performance. The group’s risk management is predominantly controlled by the board. The board monitors the group’s financial risk management policies and exposures and approves substantial financial transactions. It also reviews the effectiveness of internal controls relating to market risk, credit risk and liquidity risk. A. Market risk (i) Foreign exchange risk The majority of the company’s operations are denominated in Australian dollars, with the few exceptions on services acquired from overseas suppliers but at a marginally insignificant amount and frequency. Therefore, management has concluded that market risk from foreign exchange fluctuation is not material. 46 (ii) Cash flow and fair value interest rate risk The group’s main interest rate risk arises from cash and cash equivalents and other financial assets at amortised cost (deposits at call) held, which expose the group to cash flow interest rate risk. During 2019 and 2018, the group’s cash and cash equivalents and deposits at call at variable rates were denominated in Australian dollars. The group’s exposure to interest rate risk at the end of the reporting period, expressed in Australian dollars, was as follows: Financial instruments with cash flow risk Cash and cash equivalents Financial assets at amortised cost Sensitivity 2019 $ 1,360,077 4,050,000 5,410,077 2018 $ 1,447,732 6,200,000 7,647,732 Profit or loss is sensitive to higher/lower interest income from cash and cash equivalents as a result of changes in interest rates. Impact on loss for the period Impact on other components of equity 2019 $ 2018 $ 10,820 16,060 2019 $ - 2018 $ - Interest rates - change by 20 basis points (2018: 21 basis points)* * Holding all other variables constant The use of 0.20 percent (2018: 0.21 percent) was determined based on analysis of the Reserve Bank of Australia cash rate change, on an absolute value basis, at 30 June 2019 and the previous four balance dates. The average cash rate at these balance dates was 1.60 percent (2018: 1.85 percent). The average change to the cash rate between balance dates was 12.69 percent (2018: 11.18 percent). By multiplying these two values, the interest rate risk was derived. Profit is less sensitive to movements in interest rates in 2019 than 2018 due to decreased cash and cash equivalents and deposits at call. The group’s exposure to other classes of financial instruments with cash flow risk is not material. B. Credit risk Exposure to credit risk relating to financial assets arises from the potential non-performance by counter parties of contract obligations that could lead to a financial loss to the group. (i) Risk management The company manages credit risk and the losses which could arise from default by ensuring that financial assets such as cash at bank and deposits at call are held with reputable organisations. (ii) Impairment of financial assets While cash and cash equivalents and term deposits are subject to the impairment requirements of AASB 9, the identified impairment loss was immaterial. ANATARA LIFESCIENCES Annual Report 2019 47 C. Liquidity risk Liquidity risk arises from the possibility that the group might encounter difficulty in settling its debts or otherwise meeting its obligations related to financial liabilities. The group manages this risk through the following mechanisms: • preparing forward looking cash flow analyses in relation to its operating, investing and financing activities; • obtaining funding from a variety of sources; • maintaining a reputable credit profile; • managing credit risk related to financial assets; • investing cash and cash equivalents and deposits at call with major financial institutions; and • comparing the maturity profile of financial liabilities with the realisation profile of financial assets. (i) Maturities of financial liabilities The tables below analyse the group’s financial liabilities into relevant maturity groupings based on their contractual maturities. The amounts disclosed in the table are the contractual undiscounted cash flows. Contractual maturities of financial liabilities Less than 6 months 6 - 12 months Between 1 and 2 years Between 2 and 5 years Over 5 years At 30 June 2019 $ Trade and other payables Total At 30 June 2018 Trade and other payables Total 364,551 364,551 419,513 419,513 $ - - - - $ - - - - $ - - - - $ - - - - Total contractual cash flows Carrying amount (assets)/ liabilities $ $ 364,551 364,551 364,551 364,551 419,513 419,513 419,513 419,513 11. Capital management A. Risk management The group’s objectives when managing capital are to • safe guard their ability to continue as a going concern, so that they can continue to provide returns for shareholders and benefits for other stakeholders, and • maintain an optimal capital structure to reduce the cost of capital In order to maintain or adjust the capital structure, the group may issue new shares or reduce its capital, subject to the provisions of the group’s constitution. The capital structure of the group consists of equity attributed to equity holders of the group, comprising contributed equity, reserves and accumulated losses. By monitoring undiscounted cash flow forecasts and actual cash flows provided to the board by the group’s management, the board monitors the need to raise additional equity from the equity markets. 48 B. Dividends No dividends were declared or paid to members for the year ended 30 June 2019 (2018: nil). The group’s franking account balance was nil at 30 June 2019 (2018: nil). 12. Interests in other entities A. Subsidiaries The group’s principal subsidiaries at 30 June 2019 are set out below. Unless otherwise stated, they have share capital consisting solely of ordinary shares that are held directly by the group, and the proportion of ownership interests held equals the voting rights held by the group. The country of incorporation or registration is also their principal place of business. Name of entity Place of business/ country of incorporation Ownership interest held by the group 2019 % 2018 % 100 100 Sarantis Pty Ltd Australia 13. Contingent liabilities The group had no contingent liabilities at 30 June 2019 (2018: nil). 14. Commitments A. Non-cancellable operating leases The company leases an office and a laboratory under non-cancellable operating leases expiring on 30 August 2019 and 30 November 2020, respectively. On renewal, the terms of the leases are renegotiated. Commitments for minimum lease payments in relation to non-cancellable operating leases are payable as follows: Within one year Later than one year but not later than five years 2019 $ 2018 $ 80,761 32,402 113,163 72,156 64,550 136,706 ANATARA LIFESCIENCES Annual Report 201949 15. Events occurring after the reporting period No matter or circumstance has occurred subsequent to period end that has significantly affected, or may significantly affect, the operations of the group, the results of those operations or the state of affairs of the group or economic entity in subsequent financial years. 16. Related party transactions A. Subsidiaries Interests in subsidiaries are set out in note 12(a). B. Key management personnel compensation Short-term employee benefits Post-employment benefits Long-term benefits Termination benefits Share-based payments 2019 $ 1,492,045 138,919 5,355 125,000 111,618 1,872,937 2018 $ 1,767,102 124,756 12,515 - 106,684 2,011,057 Detailed remuneration disclosures are provided in the remuneration report on pages 17 to 26. C. Transactions with other related parties The following transactions occurred with related parties: Sales and purchases of goods and services 2019 $ 2018 $ Purchases of various goods and services from entities controlled by key management personnel (i) 20,000 149,923 (i) Purchases from entities controlled by key management personnel The group acquired the following goods and services from entities that are controlled by members of the group’s key management personnel: • Consultancy fees For detailed disclosures please refer to the remuneration report on page 17. 50 17. Share-based payments A. Executive option plan The establishment of the ‘executive option plan’ (EOP) was approved by shareholders at the 2017 annual general meeting. The plan is designed to provide long-term incentives for executives (including directors) to deliver long-term shareholder returns. Participation in the plan is at the board’s discretion and no individual has a contractual right to participate in the plan or to receive any guaranteed benefits. Set out below are summaries of options granted under the plan: 2019 2018 Average exercise price per share option Number of options Average exercise price per share option Number of options $1.35 $1.00 2,436,000 1,725,000 $0.98 (1,590,000) $1.41 $1.37 2,571,000 1,727,000 $1.33 $2.27 - $1.35 $1.30 2,400,000 36,000 - 2,436,000 1,573,333 As at 1 July Granted during the year Forfeited/lapsed during the year As at 30 June Vested and exercisable at 30 June Share options outstanding at the end of the year have the following expiry date and exercise prices: Grant date Expiry date Exercise price Share options Share options 2015-09-18 2015-11-11 2015-12-14 2016-09-23 2017-11-28 2018-09-10 2019-04-10 Total 2018-09-18 2018-11-11 2020-12-14 2021-09-23 2022-11-17 2020-12-14 2024-02-17 ($) 30 June 2019 30 June 2018 0.500 1.350 1.450 1.700 2.270 1.450 0.736 - - 375,000 340,000 765,000 1,265,000 420,000 420,000 36,000 36,000 750,000 600,000 - - 2,571,000 2,436,000 Weighted average remaining contractual life of options outstanding at end of period 2.36 1.81 ANATARA LIFESCIENCES Annual Report 201951 (i) Fair value of options granted The assessed fair value of options at grant date was determined using the Black-Scholes option pricing model that takes into account the exercise price, term of the option, security price at grant date and expected price volatility of the underlying security, the expected dividend yield, the risk-free interest rate for the term of the security and certain probability assumptions. The model inputs for options granted under EOP during the year ended 30 June 2019 included: Grant date Expiry date Exercise price ($) No. of options Share price at grant date ($) Expected volatility Dividend yield Risk- free interest rate Fair value at grant date per option ($) 2018-09-10 2020-12-14 1.450 750,000 2018-10-29 2019-04-29 0.500 375,000 2019-04-10 2024-02-17 0.736 600,000 0.57 0.46 0.49 57.76% 88.67% 80.00% 0.00% 0.00% 0.00% 1.99% 0.0421 1.97% 1.51% 0.0979 0.2731 1,725,000 B. Expenses arising from share-based payment transactions Total expenses arising from share-based payment transactions recognised during the period were as follows: Options issued under EOP 18. Remuneration of auditors 2019 $ 196,389 2018 $ 135,327 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 firms: A. Grant Thornton Audit Pty Ltd (i) Audit and other assurance services Audit and review of financial statements Total remuneration for audit and other assurance services 2019 $ 56,031 56,031 2018 $ 59,968 59,968 52 (ii) Taxation services Tax compliance services Total remuneration for taxation services Total auditor’s remuneration 2019 $ 24,000 24,000 80,031 2018 $ 25,650 25,650 85,618 It is the group’s policy to employ Grant Thornton Audit Pty Ltd on assignments additional to their statutory audit duties where Grant Thornton Audit Pty Ltd’s expertise and experience with the group are important. These assignments are principally tax advice. 19. Loss per share A. Reconciliation of loss used in calculating loss per share Basic and diluted loss per share Loss attributable to the ordinary equity holders of the company used in calculating loss per share: From continuing operations 2,868,272 3,569,016 2019 $ 2018 $ B. Weighted average number of shares used as the denominator Weighted average number of ordinary shares used as the denominator in calculating basic and diluted loss per share 49,413,236 49,413,236 On the basis of the group’s losses, the outstanding options as at 30 June 2019 are considered to be anti-dilutive and therefore were excluded from the diluted weighted average number of ordinary shares calculation. 2019 Number 2018 Number 20. Parent entity financial information A. Summary financial information The individual financial statements for the parent resemble the consolidated financial statements as the company’s subsidiary, Sarantis Pty Ltd is a dormant entity. ANATARA LIFESCIENCES Annual Report 201953 B. Guarantees entered into by the parent entity The parent entity has not entered into any guarantees in relation to debts of its subsidiaries in the year ended 30 June 2019 (2018: nil). C. Contingent liabilities of the parent entity The parent entity did not have any contingent liabilities as at 30 June 2019 or 30 June 2018. D. Contractual commitments for the acquisition of property, plant or equipment The parent entity has not entered into any contractual commitments for the acquisition of property, plant or equipment in the year ended 30 June 2019 (2018: nil). E. Determining the parent entity financial information The financial information for the parent entity has been prepared on the same basis as the consolidated financial statements, except as set out below. (i) Investments in subsidiaries Investments in subsidiaries are accounted for at cost in the financial statements of Anatara Lifesciences Ltd. (ii) Tax consolidation legislation Anatara Lifesciences Ltd and its wholly-owned Australian controlled entities have implemented the tax consolidation legislation. The head entity, Anatara Lifesciences Ltd, and the controlled entities in the tax consolidated group account for their own current and deferred tax amounts. These tax amounts are measured as if each entity in the tax consolidated group continues to be a stand-alone taxpayer in its own right. In addition to its own current and deferred tax amounts, Anatara Lifesciences Ltd also recognises the current tax liabilities (or assets) and the deferred tax assets arising from unused tax losses and unused tax credits assumed from controlled entities in the tax consolidated group. The entities have also entered into a tax funding agreement under which the wholly-owned entities fully compensate Anatara Lifesciences Ltd for any current tax payable assumed and are compensated by Anatara Lifesciences Ltd for any current tax receivable and deferred tax assets relating to unused tax losses or unused tax credits that are transferred to Anatara Lifesciences Ltd under the tax consolidation legislation. The funding amounts are determined by reference to the amounts recognised in the wholly-owned entities’ financial statements. The amounts receivable/payable under the tax funding agreement are due upon receipt of the funding advice from the head entity, which is issued as soon as practicable after the end of each financial year. The head entity may also require payment of interim funding amounts to assist with its obligations to pay tax instalments. Assets or liabilities arising under tax funding agreements with the tax consolidated entities are recognised as current amounts receivable from or payable to other entities in the group. Any difference between the amounts assumed and amounts receivable or payable under the tax funding agreement are recognised as a contribution to (or distribution from) wholly-owned tax consolidated entities. 54 Contents of the summary of significant accounting policies A. Basis of preparation B. Principles of consolidation C. Segment reporting D. Foreign currency translation E. Revenue recognition F. Government grants G. Income tax H. Leases I. Impairment of non-financial assets J. Cash and cash equivalents K. Trade receivables L. Investments and other financial assets M. Property, plant and equipment N. Intangible assets O. Trade and other payables P. Employee benefits Q. Contributed equity R. Dividends S. Loss per share T. Rounding of amounts U. Goods and services tax (GST) 56 58 58 58 58 58 59 59 59 60 60 60 62 62 62 62 63 63 63 64 64 21. Summary of significant accounting policies This note provides a list of the significant accounting policies adopted in the preparation of these consolidated financial statements to the extent they have not already been disclosed in the other notes above. These policies have been consistently applied to all the years presented, unless otherwise stated. The financial statements are for the group consisting of Anatara Lifesciences Ltd and its subsidiaries. ANATARA LIFESCIENCES Annual Report 2019 55 A. Basis of preparation These general purpose financial statements have been prepared in accordance with Australian Accounting Standards and Interpretations issued by the Australian Accounting Standards Board and the Corporations Act 2001. Anatara Lifesciences Ltd is a for-profit entity for the purpose of preparing the financial statements. (i) Compliance with IFRS The consolidated financial statements of the Anatara Lifesciences Ltd group also comply with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). (ii) Historical cost convention The financial statements have been prepared on a historical cost basis. (iii) New and amended standards adopted by the group The group has applied the following standards and amendments for the first time for their annual reporting period commencing 1 July 2018: • AASB 9 Financial Instruments • AASB 15 Revenue from Contracts with Customers • AASB 2016-5 Amendments to Australian Accounting Standards - Classification and Measurement of Share-based Payment Transactions • AASB 2017-1 Amendments to Australian Accounting Standards - Transfers to Investment Property, Annual Improvements 2014-2016 Cycle and Other Amendments • Interpretation 22 Foreign Currency Transactions and Advance Consideration. The group also elected to adopt the following amendments early: • AASB 2018-1 Amendments to Australian Accounting Standards - Annual Improvements 2015-2017 Cycle. The group had to change its accounting policies without making retrospective adjustments following the adoption of AASB 9 and AASB 15. This is disclosed in note 22. Most of the other amendments listed above did not have any impact on the amounts recognised in prior periods and are not expected to significantly affect the current or future periods. (iv) New standards and interpretations not yet adopted Certain new accounting standards and interpretations have been published that are not mandatory for 30 June 2019 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. 56 Title of standard Nature of change AASB 16 Leases AASB 16 was issued in February 2016. It will result in almost all leases being recognised on the balance sheet by lessees, as the distinction between operating and finance leases is removed. Under the new standard, an asset (the right to use the leased item) and a financial liability to pay rentals are recognised. The only exceptions are short-term and low-value leases. Impact The group has reviewed all leasing arrangements in light of the new lease accounting rules in AASB 16. The standard will affect the accounting for the group’s operating leases. As at the reporting date, the group has non-cancellable operating lease commitments of $113,163, see note 14(a). The group expects to recognise right-of-use assets of approximately $107,962 on 1 July 2019 and lease liabilities of $109,438 (after adjustments for prepayments and accrued lease payments recognised as at 30 June 2019). Overall net assets will be approximately $1,746 lower, and net current assets will be $28,678 lower due to the presentation of a portion of the liability as a current liability. The group expects that net profit after tax will increase by approximately $314 for the year end- ed 30 June 2020 as a result of adopting the new rules. Operating cash flows will increase and financing cash flows decrease by approximately $80,761 as repayment of the principal portion of the lease liabilities will be classified as cash flows from financing activities. The group does not act in the capacity as a lessor and hence the group does not expect any lessor impact on the financial statements. Mandatory application date/ Date of adoption by group The group will apply the standard from its mandatory adoption date of 1 July 2019. The group intends to apply the modified retrospective transition approach and will not restate comparative amounts for the year prior to first adoption. Right-of-use assets will be measured at the amount of the lease liability on adoption (adjusted for any prepaid or accrued lease expenses). There are no other new standards and interpretations that are not yet effective 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. (e) Changes to presentation - classification of expenses Anatara Lifesciences Ltd decided in the current financial year to change the classification of its expenses in the consolidated statement of profit or loss from a classification by nature to a functional classification. We believe that this will provide more relevant information to our stakeholders as it is more in line with common practice in the industries Anatara Lifesciences Ltd is operating in. The comparative information has been reclassified accordingly. ANATARA LIFESCIENCES Annual Report 201957 B. Principles of consolidation (i) Subsidiaries Subsidiaries are all entities (including structured entities) over which the group has control. The group controls an entity when the group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the group. They are deconsolidated from the date that control ceases. The acquisition method of accounting is used to account for business combinations by the group. Intercompany transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the transferred asset. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the group. C. Segment reporting Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. This has been identified as the chief executive officer. D. Foreign currency translation (i) Functional and presentation currency Items included in the financial statements of each of the group’s entities are measured using the currency of the primary economic environment in which the entity operates (‘the functional currency’). The consolidated financial statements are presented in Australian dollar ($), which is Anatara Lifesciences Ltd’s functional and presentation currency. (ii) Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies at year end exchange rates are generally recognised in profit or loss. Foreign exchange gains and losses that relate to borrowings are presented in the consolidated statement of profit or loss, within finance costs. All other foreign exchange gains and losses are presented in the consolidated statement of profit or loss on a net basis within other gains/(losses). E. Revenue recognition The accounting policies for the group’s revenue from contracts with customers are explained in note 2. F. Government grants Grants from the government are recognised at their fair value where there is a reasonable assurance that the grant will be received and the group will comply with all attached conditions. Note 3 provides further information on how the group accounts for government grants. 58 G. Income tax The income tax expense or credit for the period is the tax payable on the current period’s taxable income based on the applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused tax losses. The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting period in the countries where the company and its subsidiaries and associates operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities. Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, deferred tax liabilities are not recognised if they arise from the initial recognition of goodwill. Deferred income tax is also not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the end of the reporting period and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled. Deferred tax assets are recognised only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses. Current and deferred tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively. H. Leases Leases in which a significant portion of the risks and rewards of ownership are not transferred to the group as lessee are classified as operating leases (note 14). Payments made under operating leases (net of any incentives received from the lessor) are charged to profit or loss on a straight-line basis over the period of the lease. I. Impairment of non-financial assets Intangible 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. The recoverable amount is the higher of an asset’s fair value less costs of disposal and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of assets (cash- generating units). Non-financial assets other than good will that suffered an impairment are reviewed for possible reversal of the impairment at the end of each reporting period. J. Cash and cash equivalents For the purpose of presentation in the consolidated statement of cash flows, cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities in the consolidated statement of financial position. ANATARA LIFESCIENCES Annual Report 201959 K. Trade receivables Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less loss allowance. See note 5(b) for further information about the group’s accounting for trade receivables and note 10(b) for a description of the group’s impairment policies. L. Investments and other financial assets (i) Classification From 1 July 2018, the group classifies its financial assets in the following measurement categories: • • those to be measured subsequently at fair value (either through OCI or through profit or loss), and those to be measured at amortised cost. The classification depends on the entity’s business model for managing the financial assets and the contractual terms of the cash flows. For assets measured at fair value, gains and losses will either be recorded in profit or loss or OCI. For investments in equity instruments that are not held for trading, this will depend on whether the group has made an irrevocable election at the time of initial recognition to account for the equity investment at fair value through other comprehensive income (FVOCI). (ii) Recognition and derecognition Regular way purchases and sales of financial assets are recognised on trade-date, the date on which the group commits to purchase or sell the asset. Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the group has transferred substantially all the risks and rewards of ownership. (iii) Measurement At initial recognition, the group measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss (FVPL), transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at FVPL are expensed in profit or loss. Debt instruments Subsequent measurement of debt instruments depends on the group’s business model for managing the asset and the cash flow characteristics of the asset. There are three measurement categories into which the group classifies its debt instruments: • Amortised cost: Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest are measured at amortised cost. Interest income from these financial assets is included in finance income using the effective interest rate method. Any gain or loss arising on derecognition is recognised directly in profit or loss and presented in other gains/(losses) together with foreign exchange gains and losses. Impairment losses are presented as separate line item in the consolidated statement of profit or loss. • FVOCI: Assets that are held for collection of contractual cash flows and for selling the financial assets, where the assets’ cash flows represent solely payments of principal and interest, are measured at FVOCI. Movements in the carrying amount are taken through OCI, except for the recognition of impairment gains or losses, interest income and foreign exchange gains and losses which are recognised in profit or loss. When the financial asset is derecognised, the cumulative gain or loss previously recognised in OCI is reclassified from equity to profit or loss and recognised in other gains/(losses). Interest income from these financial assets is included in finance income using the effective interest rate method. Foreign exchange gains and losses are presented in other gains/(losses) and impairment expenses are presented as separate line item in the consolidated statement of profit or loss. 60 • FVPL: Assets that do not meet the criteria for amortised cost or FVOCI are measured at FVPL. A gain or loss on a debt investment that is subsequently measured at FVPL is recognised in profit or loss and presented net within other gains/ (losses) in the period in which it arises. (iv) Impairment The group assesses on a forward looking basis the expected credit losses associated with its debt instruments carried at amortised cost and FVOCI. The impairment methodology applied depends on whether there has been a significant increase in credit risk. (v) Income recognition Interest income Interest income is recognised using the effective interest method. When a receivable is impaired, the group reduces the carrying amount to its recoverable amount, being the estimated future cash flow discounted at the original effective interest rate of the instrument, and continues unwinding the discount as interest income. Interest income on impaired loans is recognised using the original effective interest rate. M. Property, plant and equipment Property, plant and equipment is stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the group and the cost of the item can be measured reliably. The carrying amount of any component accounted for as a separate asset is derecognised when replaced. All other repairs and maintenance are charged to profit or loss during the reporting period in which they are incurred. The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount (note 21(i)). N. Intangible assets (i) Research and development Expenditure on research activities, undertaken with the prospect of obtaining new scientific or technical knowledge and understanding, is recognised in the consolidated statement of profit or loss and other comprehensive income as an expense when it is incurred. Expenditure on development activities, being the application of research findings or other knowledge to a plan or design for the production of new or substantially improved products or services before the start of commercial production or use, and other development expenditure, is recognised in the consolidated statement of profit or loss and other comprehensive income as an expense as incurred. ANATARA LIFESCIENCES Annual Report 201961 O. Trade and other payables These amounts represent liabilities for goods and services provided to the group prior to the end of financial year which are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition. Trade and other payables are presented as current liabilities unless payment is not due within 12 months after the reporting period. They are recognised initially at their fair value and subsequently measured at amortised cost using the effective interest method. P. Employee benefits (i) Short-term obligations Liabilities for wages and salaries, including non-monetary benefits, annual leave and accumulating sick leave that are expected to be settled wholly within 12 months after the end of the period in which the employees render the related service are recognised in respect of employees’ services up to the end of the reporting period and are measured at the amounts expected to be paid when the liabilities are settled. The liabilities are presented as current employee benefit obligations in the balance sheet. (ii) Other long-term employee benefit obligations The group also has liabilities for long service leave and annual leave that are not expected to be settled wholly within 12 months after the end of the period in which the employees render the related service. These obligations are therefore measured as the present value of expected future payments to be made in respect of services provided by employees up to the end of the reporting period using the projected unit credit method. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. Expected future payments are discounted using market yields at the end of the reporting period of high-quality corporate bonds with terms and currencies that match, as closely as possible, the estimated future cash outflows. Remeasurements as a result of experience adjustments and changes in actuarial assumptions are recognised in profit or loss. The obligations are presented as current liabilities in the balance sheet if the entity does not have an unconditional right to defer settlement for at least twelve months after the reporting period, regardless of when the actual settlement is expected to occur. (iii) Share-based payments Share-based compensation benefits are provided to employees via the ‘employee option plan’ (EOP). Information relating to these schemes is set out in note 17. Employee options The fair value of options granted under the EOP is recognised as a share-based payment expense with a corresponding increase in equity. The total amount to be expensed is determined by reference to the fair value of the options granted: • including any market performance conditions (e.g. the company’s share price) • excluding the impact of any service and non-market performance vesting conditions (e.g. profitability, sales growth targets and remaining an employee of the company over a specified time period), and • including the impact of any non-vesting conditions (e.g. the requirement for employees to save or holdings shares for a specific period of time). The total expense is recognised over the vesting period, which is the period over which all of the specified vesting conditions are to be satisfied. At the end of each period, the entity revises its estimates of the number of options that are expected to vest based on the non-market vesting and service conditions. It recognises the impact of the revision to original estimates, if any, in profit or loss, with a corresponding adjustment to equity. 62 Q. Contributed equity Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. R. Dividends Provision is made for the amount of any dividend declared, being appropriately authorised and no longer at the discretion of the entity, on or before the end of the reporting period but not distributed at the end of the reporting period. S. Loss per share (i) Basic loss per share Basic loss per share is calculated by dividing: • the loss attributable to owners of the company, excluding any costs of servicing equity other than ordinary shares • by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the year. (ii) Diluted loss per share Diluted loss per share adjusts the figures used in the determination of basic loss per share to take into account: • • the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares,and the weighted average number of additional ordinary shares that would have been outstanding assuming the conversion of all dilutive potential ordinary shares. T. Rounding of amounts The company is of a kind referred to in ASIC Legislative Instrument 2016/191, relating to the ‘rounding off’ of amounts in the financial statements. Amounts in the financial statements have been rounded off in accordance with the instrument to the nearest dollar. U. Goods and services tax (GST) Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable from the taxation authority. In this case it is recognised as part of the cost of acquisition of the asset or as part of the expense. Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable to, the taxation authority is included with other receivables or payables in the consolidated statement of financial position. Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities which are recoverable from, or payable to the taxation authority, are presented as operating cash flows. ANATARA LIFESCIENCES Annual Report 201963 22. Changes in accounting policies This note explains the impact of the adoption of AASB 9 Financial Instruments on the group’s financial statements. A. AASB 9 Financial Instruments – impact of adoption AASB 9 Financial Instruments replaces AASB 139 Financial Instruments: Recognition and Measurement for annual periods beginning on or after 1 January 2018, bringing together all three aspects of the accounting for financial instruments: classification and measurement, impairment and hedge accounting. The adoption of this standard has not materially impacted the amounts disclosed in these financial statements. (i) Classification and measurement Except for certain trade receivables, under AASB 9, the group initially measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs. Under AASB 9, debt financial instruments are subsequently measured at fair value through profit or loss (FVPL), amortised cost, or fair value through other comprehensive income (FVOCI). The classification is based on two criteria: the group’s business model for managing the assets; and whether the instruments’ contractual cash flows represent ‘solely payments of principal and interest’ on the principal amount outstanding (the ‘SPPI criterion’). The new classification and measurement of the group’s debt financial assets are as follows: • Debt instruments at amortised cost for financial assets that are held within a business model with the objective to hold the financial assets in order to collect contractual cash flows that meet the SPPI criterion. This category comprises other financial assets at amortised cost (deposits at call). The assessment of the group’s business models was made as of the date of initial application, 1 July 2018 and then applied retrospectively to those financial assets that were not derecognised before 1 July 2018. The assessment of whether contractual cash flows on debt instruments are solely comprised of principal and interest was made based on the facts and circumstances as at the initial recognition of the assets. There has been no adjustment made to the amounts disclosed as a result of the application of this standard. (ii) Impairment of financial assets The adoption of AASB 9 has altered the group’s accounting for impairment losses for financial assets by replacing AASB 139’s incurred loss approach with a forward-looking expected credit loss (ECL) approach. AASB 9 requires the group to record an allowance for ECLs for all loans and other debt financial assets not held at FVPL. ECLs are based on the difference between the contractual cash flows due in accordance with the contract and all the cash flows that the group expects to receive. The shortfall is then discounted at an approximation to the asset’s original effective interest rate. The adoption of the ECL requirements of AASB 9 has not resulted in any material change in impairment allowances of the group’s debt financial assets. 64 B. AASB 9 Financial Instruments – accounting policies applied from 1 July 2018 Investments and other financial assets The accounting policies applied by the group from 1 July 2018 are set out in note 21(l). C. AASB 15 Revenue from Contracts with Customers – impact of adoption AASB 15 supersedes AASB 111 Construction Contracts, AASB 118 Revenue and related interpretations and it applies to all revenue arising from contracts with customers, unless those contracts are in the scope of other standards. The new standard establishes a five-step model to account for revenue arising from contracts with customers. Under AASB 15, revenue is recognised at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring goods or services to a customer. The standard requires entities to exercise judgement, taking into consideration all of the relevant facts and circumstances when applying each step of the model to contracts with their customers. The standard also specifies the accounting for the incremental costs of obtaining a contract and the costs directly related to fulfilling a contract. The adoption of AASB 15 has not impacted the amounts and the accounting policies disclosed within the financial statements. In the directors’ opinion: a) the financial statements and notes set out on pages 31 to 64 are in accordance with the Corporations Act 2001, including: ii) complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements, and iii) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2019 and of its performance for the financial year ended on that date, and b) there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable. Note 21(a) confirms that the financial statements also comply with International Financial Reporting Standards as issued by the International Accounting Standards Board. The directors have been given the declarations by the chief executive officer and chief financial officer required by section 295A of the Corporations Act 2001. This declaration is made in accordance with a resolution of directors. Ms Sue MacLeman Non-Executive Chair Melbourne 27 August 2019 ANATARA LIFESCIENCES Annual Report 2019 65 Level 22, Tower 5 Collins Square 727 Collins Street Melbourne VIC 3008 GPO Box 4736 Melbourne VIC 3001 T +61 3 8320 2222 F +61 3 8320 2200 E info.vic@au.gt.com W www.grantthornton.com.au Independent Auditor’s Report To the Members of Anatara Lifesciences Ltd Report on the audit of the financial report Opinion We have audited the financial report of Anatara Lifesciences Ltd (the Company) and its subsidiaries (the Group), which comprises the consolidated statement of financial position as at 30 June 2019, 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 consolidated financial statements, including a summary of significant accounting policies, and the Directors’ declaration. In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001, including: a giving a true and fair view of the Group’s financial position as at 30 June 2019 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 Group in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (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 ‘Grant Thornton’ refers to the brand under which the Grant Thornton member firms provide assurance, tax and advisory services to their clients and/or refers to one or more member firms, as the context requires. Grant Thornton Australia 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 another and are not liable for one another’s acts or omissions. In the Australian context only, the use of the term ‘Grant Thornton’ may refer to Grant Thornton Australia Limited ABN 41 127 556 389 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 Recognition of research and development tax incentive – Notes 3(a)(i), 5(b)(ii), and 9(a) The Group receives a 43.5% refundable tax offset (2018: 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. Management perform a detailed review of the Group’s total 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 $800,481. This represents an estimated claim for the period 1 July 2018 to 30 June 2019. This area is a key audit matter due to the 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:  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;  Comparing the nature of the R&D expenditure included in the current year estimate to the prior year approved claim;  Comparing the estimates made in previous years to the amount of cash actually received after lodgement of the R&D tax claim;  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;  Assessing the eligible expenditure used to calculate the estimate to ensure it is in accordance with expenditure recorded in the general ledger;  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; Inspecting copies of relevant correspondence with AusIndustry and the ATO related to the claims; and   Reviewing the appropriateness of the relevant disclosures in the financial statements. Information other than the financial report and auditor’s report thereon The Directors are responsible for the other information. The other information comprises the information included in the Chairman’s letter and Review of operations and activities, but does not include the financial report and our auditor’s report 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 Directors for the financial report The Directors of the Group are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the Directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In preparing the financial report, the Directors are responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so. Auditor’s responsibilities for the audit of the financial report Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report. 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 auditor’s report. Report on the remuneration report Opinion on the remuneration report We have audited the Remuneration Report included in pages 17 to 26 of the Directors’ report for the year ended 30 June 2019. In our opinion, the Remuneration Report of Anatara Lifesciences Ltd, for the year ended 30 June 2019 complies with section 300A of the Corporations Act 2001. Responsibilities The Directors of the Group 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 T S Jackman Partner – Audit & Assurance Melbourne, 27 August 2019 68 Corporate directory Directors Ms Sue MacLeman Non-Executive Chair Dr Tracie Ramsdale Non-Executive Director Dr Jane Ryan Non-Executive Director Dr David Brookes Non-Executive Director Secretary Mr Stephen Denaro Registered office and principal place of business 433 Logan Road Brisbane QLD 4120 Australia Telephone: +61 (0)7 3394 8202 Share register Computershare Investor Services Pty Limited Level 1, 200 Mary Street Brisbane QLD 4000 Telephone: +61 (0)7 3237 2100 Auditor Grant Thornton Audit Pty Ltd Collins Square Tower 5, 727 Collins Street Melbourne VIC 3008 Telephone: +61 (0)3 8320 2222 Solicitors Thomson Geer Level 16, Waterfront Place 1 Eagle Street Brisbane QLD 4000 Bankers Commonwealth Bank of Australia Melbourne VIC 3000 Stock exchange listings Anatara Lifesciences Ltd shares are listed on the Australian Securities Exchange (ASX code: ANR) Website www.anataralifesciences.com ANATARA LIFESCIENCES Annual Report 2019 69 Shareholder Information Below is the current shareholder information at 20 September 2019 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. HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED PARMA CORPORATION MYENG PTY LTD UBS NOMINEES PTY LTD IAIN ROSS JACOBY MANAGEMENT SERVICES KALOKERY PTY LTD DAVID CHARLES VENABLES BEEBEE HOLDINGS PTY LTD MR BRENDAN PHYLAND NAVIGATOR AUSTRALIA LTD GENETIC HORIZONS PTY LTD MATTHEW TURNER TULIP SUPER PTY LTD BNP PARIBAS NOMINEES PTY LTD JONTRA HOLDINGS PTY LTD MRS BARBARA GREY WOTS IN THERE PTY LTD , DR MARK DANIEL REEVES 20. MR JOHN DUGALD MACTAGGART Totals: Top 20 holders of FULLY PAID ORDINARY SHARES Total Remaining Holders Balance Distribution of Security Holders No of Securities Held Total holders 1 - 1,000 1,001 - 5,000 5,001 - 10,000 10,001 - 100,000 100,001 Over 126 310 182 381 71 5,457,668 5,442,839 4,310,011 2,583,123 1,260,000 920,731 748,833 719,750 614,218 598,082 571,327 486,109 464,102 450,000 417,673 355,614 354,255 330,000 320,614 311,614 26,716,563 22,696,673 Total 49,413,236 Units 69,853 931,432 1,438,559 12,186,310 34,787,082 11.04 11.01 8.72 5.23 2.55 1.86 1.52 1.46 1.24 1.21 1.16 0.98 0.94 0.91 0.85 0.72 0.72 0.67 0.65 0.63 54.07 45.93 100.00 % Units 0.14 1.88 2.91 24.66 70.40 0.01 Rounding Total 1,070 49,413,236 100.00 70 ANATARA LIFESCIENCES Annual Report 201971 ANNUAL REPORT 2019 Anatara Lifesciences Ltd ABN 41 145 239 872 433 Logan Road, Stones Corner, Brisbane, Queensland, Australia, 4120 + 61 (0)7 3394 8202 

Continue reading text version or see original annual report in PDF format above