Anatara Lifesciences Limited Annual Report 2022

Plain-text annual report

DDD Annual Report 2022 Anatara Lifesciences Ltd Page 1 Anatara Lifesciences Ltd ABN 41 145 239 872 Annual Report 2022 Annual Report 2022 Anatara Lifesciences Ltd Company Vision Page 2 Our Vision To provide evidence-based solutions for gastrointestinal tract health issues to address a signiﬁcant unmet clinical need. Annual Report 2022 Anatara Lifesciences Ltd Contents Page 3 Contents Vision Statement ..................................................................................................................................................................................... 2 Contents .......................................................................................................................................................................................................... 3 Corporate Directory ............................................................................................................................................................................... 4 Chair’s Letter ................................................................................................................................................................................................ 5 Review of Operations and Activities ....................................................................................................................................... 8 GaRP Trial Overview ............................................................................................................................................................................10 Directors’ Report...................................................................................................................................................................................... 12 Auditor’s Independence Declaration .................................................................................................................................. 29 Corporate Governance Statement ......................................................................................................................................... 30 Financial Report – 30 June 2022 ............................................................................................................................................... 31 Independent Auditor’s Report ................................................................................................................................................... 65 Shareholder Information................................................................................................................................................................. 69 Annual Report 2022 Anatara Lifesciences Ltd Corporate Directory Page 4 Corporate Directory Directors Dr David Brookes Executive Chair Ms Sue MacLeman Non-Executive Director Dr Jane Ryan Non-Executive Director Secretary Mr Stephen Denaro Registered ofﬁce and principal place of business Level 3, 62 Lygon Street Carlton South VIC 3053 Australia Telephone: +61 (0)3 9824 5454 Share register Computershare Investor Services Pty Limited Level 1, 200 Mary Street Brisbane QLD 4000 +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 Annual Report 2022 Anatara Lifesciences Ltd Chairman’s Message Page 5 Chairman’s Message to Shareholders Dear Shareholders, Thank you for your continued support and investment in Anatara Lifesciences. On behalf of the Board of Directors, I am pleased to present Anatara’s 2022 Annual Report. As you are aware, I became Executive Chairman of the Anatara Board in June 2022, upon the resignation of the Chief Executive Ofﬁcer, Steven Lydeamore. This leadership change coincided with a critical assessment of the Company’s assets, arrangements and a review of Anatara’s trials due to the struggling enrolment rates, despite broadening eligibility criteria. Anatara remains focused on the GaRP (Gastrointestinal ReProgramming multicomponent coated complementary medicine) Irritable Bowel Syndrome (IBS) 200 patient clinical trial which the Company continues to prioritise, striving to achieve interim results by Q1CY2023. In line with the Company’s vision, the IBS trial is consistent with developing innovative, evidence-based products for gastrointestinal health. There have been signiﬁcant challenges and delays with the GaRP-IBS trial which we have addressed and will be further explained in the Annual Report and at the AGM presentations. These have been frustrating for all involved at Anatara, our shareholders and the many members of the community who have expressed interest in involvement, particularly those that have enrolled and not been able to further participate. I would like to take this opportunity to thank all those who have been involved or expressed interest and apologise for any inconvenience or frustrations; technical or otherwise. Some of the earlier unforeseen challenges included the COVID-19 impact around the original trial commencement leading to a reorganisation to appoint a new CRO and the many operational and manufacturing disruptive considerations from the pandemic not unique to Anatara. As we all know, emerging from the DELTA wave of the pandemic was far from the end with OMICRON then being a further dynamic that hampered progressing our trials for months. When able to have some consistency and continuity, the need for trial reﬁnements became apparent including eligibility expansion requirements to accommodate the unique issues and challenges that sufferers of IBS deal with. The Company remains optimistic in pursuing the GaRP-IBS study and to realise the commercialisation opportunities. I look forward to updating the GaRP trial progress including enrolments at the AGM, with numbers anticipated to be approaching 50% of the numbers required (90) from Stage 1 for interim analysis. The interim analysis will be a pivotal near milestone for the Company. Annual Report 2022 Anatara Lifesciences Ltd Chairman’s Message Page 6 Completion of the GaRP-IBS interim phase without safety and tolerance concerns, and with an efﬁcacy signal for dose selection into Stage 2, will have the Company well placed to address broader gastrointestinal health (GIT) considerations for the use of GaRP. This will be consistent with our vision to address unmet needs for evidence-based solutions and advice for many sufferers of GIT symptoms and disorders. The GaRP-IBS trial was broadened from including only the IBS-Diarrhoeal subtype to all IBS subtypes that sufferers experience, with the exception of the Constipation subtype. Subsequently, despite the changes to criteria and associated trial modiﬁcations, the improvement in the enrolment rate was not to levels that ensured a viable timeline. The ongoing review process identiﬁed areas for improvement to enhance trial participation including the screening failure rate in a baseline period before assignement to the study (i.e. to product or placebo). On September 1st, the Anatara Advisory Board was reconvened to look at this issue and the inclusion/ exclusion criteria. The Advisory Board’s recommendations to enhance the participation process and assist enrolment were consistent with Anatara’s proposed strategies. We are proceeding with ethics regulatory review for approval of these changes and intend to implement these re-deﬁned criteria as soon as practical. These will accompany new communication methods to further enhance and accelerate recruitment which are anticipated to be in place in December. The last quarter in FY22 saw the completion of the approval process for adding the Royal Melbourne Hospital to the IBS trial as an important new site. This site initiation in 3Q2022 has assisted the Gastrointestinal Reprogramming (GaRP) trial progress and Anatara is in discussion for further sites and services to make participation in the trial easier. A presentation on the GaRP trial will be presented by Anatara’s Clinical Trials Manager, Kylie Wilkie, and our Chief Operating Ofﬁcer, John Michailidis at the AGM. There is strong mainstream support for a product that assists the restoration and functioning of the gut lining and the homeostasis of the microbiome. GaRP has wider potential for medical indications, in particular inﬂammatory bowel disease (IBD), and in general use for relief of common GIT symptoms. The Company is conﬁdent that a positive interim readout in the GaRP-IBS trial will provide the foundation for broadening interest to other mainstream indications for the use of GaRP. Importantly, and as expected, with the use of a coated, combination of GRAS* components, there have been no safety nor tolerance concerns detected with the GaRP formulations including the subset of 3FDC. As announced subsequent to FY2022, the trial with the CSIRO on the use of the 3FDC components of GaRP combination medicine for effect on psychological functioning was halted in September 2022. This study had been in the process of recruiting participants with mild to moderate levels of anxiety, depression or stress symptoms, without having speciﬁc GIT issues. To date, no safety or tolerance concerns have been detected in the study which is an important positive point for the GaRP safety data base. The GaRP complementary medicine includes a subset of 3 components formulated for release in the lower intestinal tract which have been labelled “3FDC”. The GaRP-IBS trial has as secondary endpoints the Hospital Anxiety and Depression Scale (HADS) and Quality of Life (QOL) assessments. These will allow for preliminary analysis of the inﬂuence of the total GaRP components, in participants with gastrointestinal symptoms, on depression and anxiety. This anticipated insight regarding the relationship of anxiety and depressive symptoms with gut disorders (which is in keeping with the general interest in the gut-brain axis) may provide preliminary information about progressing the use of the full GaRP complementary medicine, which includes the 3FDC components, for these indications. * Generally Recognised As Safe – US FDA designation that a substance is considered safe for use in food. Annual Report 2022 Anatara Lifesciences Ltd Chairman’s Message Page 7 Given the broader indication opportunities for GaRP and the size of the gastrointestinal (GIT) health complementary medicine market, we remain committed to the GaRP trial as a project that can add substantially to overall shareholder value following a successful completion of the IBS trial. With conﬁdence around the manufacturing speciﬁcations of GaRP as a complementary medicine, Anatara continues to critically assess other complimentary projects, opportunities and assets predominantly in - or directly related to - gastrointestinal health. Whilst the Company has progressed down the due diligence path on some of these assessments and continues to look at fresh opportunities, a compelling target project or asset has not been found at this point in time. In parallel, the business is establishing a marketing communications plan and customer strategy. This aims to promote interest in trial participation and results and the Company’s activities in general, as we intend to develop a reputation as a trusted source of information and activities in gut health. The use of Anatara’s products in animal health present a promising but challenging potential, particularly in logistics of delivery and the variable efﬁcacy seen so far. This has softened commercial interest from potential partners though we continue to discuss with interested parties the products for use in weanling pigs and poultry production. The global push for meat products free of antibiotics and animal husbandry not contributing to antimicrobial resistance provides an opportunity especially with Europe leading the way with a ban on zinc oxide (ZnO) as an additive being put in place in June 2022. I would like to thank our small team for their dedicated efforts during FY22 particularly given the challenges faced. Mr. John Michailidis has provided important input as Chief Operating Ofﬁcer since joining to coincide with my commencement as executive chair in June of this year. I also thank my fellow Directors for their input, noting Board reviews and transition are part of ongoing governance with Ms. Sue McLeman having signalled her preference to retire from the Anatara Board around the time of the AGM. We all thank Sue for her contribution as a Board member and previous Chair, wishing her well with her future endeavours and many interests. On behalf of the Anatara Board and management team, I offer our sincere thanks to shareholders, the clinical community and participating trial sites for their ongoing support. We remain motivated and inspired to commercialise evidence-based solutions for gastrointestinal health and look forward to updating you on our progress. Yours sincerely, Dr. David Brookes Executive Chair Annual Report 2022 Anatara Lifesciences Ltd Operations Update Page 8 Operations and Activities Update GMP Manufacturing GMP Manufacturing of GaRP as well as matching placebo is now complete. No further product will be required until at least 2024. Stability testing The product has proven to be very stable at room temperature to date. Stability testing will be conducted in Australia from now on bringing this important function back home. Major Manufacturing Milestone achievement Manufacturing enough product for at least 12-18mths to GMP standard is a major milestone in Anatara’s progress toward commercialisation and of course, will alleviate the need for further expenditure on production for the foreseeable future. Once we pass our interim milestone for the GaRP trial in IBS we can begin the tasks for process improvement in manufacturing which will continue to reduce COGS. Three key aspects of manufacturing we can improve are: 1. Alternative vendors for GaRP constituents and back-up vendors 2. Reduce batch cycle time which will signiﬁcantly reduce COGS 3. Finalise packaging of the product for commercial use GaRP Trial The delayed recruitment for this study is comparable to delays seen in all studies during the pandemic. We have identiﬁed all mechanistic bottlenecks that potentially hinder recruitment and improvements are being implemented now. These are in addition to the widening of the IBS disease state criteria already implemented. These include: ▶ Revisions to the inclusion criteria to make screening easier and more streamlined ▶ Revisions to the concomitant medication list to allow for real-world use and provide investigators with the ability to judge the relevance at screening ▶ Greater patient contact with clinical trial staff, particularly during the early phases of the study to help reassure patients as well as assist in guiding them through the screening process ▶ Expanded sites for greater accessibility to the study Importantly, no adverse or serious adverse events have been reported in the study to date, and those in the study have progressed through it smoothly. Annual Report 2022 Anatara Lifesciences Ltd Operations Update Page 9 Royal Melbourne Hospital - new trial site The Royal Melbourne Hospital in now an active site for the study which is an important milestone in assisting with the reach of the study to the many IBS sufferers wishing to participate but also to the credibility of the evidence base the study will add to. Given the paucity of reliable treatment options for IBS, it is no wonder that many IBS sufferers want to participate and the interest from key gastroenterologists is very high. Partnering: We have a long list of potential partner companies that have indicated interest in GaRP and await trial results. It is our intention to progress partnering discussion at the earliest inﬂection point which will be the interim analysis stage after the ﬁrst 90 patients in CYQ1 2023. Animal Health: The company is still pursuing relevant application of its products in both weanling piglets and broiler chickens. The worldwide push to eliminate feed additives like antibiotics and zinc oxide provide Anatara with an interesting option for the development of alternative preventative feed additives. We are currently in discussion with key players in the ﬁeld and although this is not the main area of development for Anatara, it reﬂects the manifold possibilities for Anatara’s products. Annual Report 2022 Anatara Lifesciences Ltd GaRP Overview Page 10 GaRP Trial Presentation GaRP Background and Clinical Trial Overview Anatara is conducting a randomized, double-blind, placebo-controlled clinical trial to determined osage and evaluate efﬁcacy of the Gastrointestinal ReProgramming (GaRP) Dietary supplement in IBS patients. IBS and IBD patients, clinicians, and researchers are paying more attention to complementary and alternative medicine (CAM). It is estimate up to 50% of IBS/IBD patients turn to dietary supplements, complementary and alternative medicines1,2 with healthcare professionals increasingly recommending the use of such supportive treatments3 Irritable Bowel Syndrome - Key Statistics IBS is a complex disorder of multifactorial aetiology, with symptoms including abdominal pain, bloating, gas, nausea and alternating constipation and diarrhoea. Current treatment options for IBS are limited due to the complex pathophysiology of this condition, and as such, there is a severe unmet clinical need for products that can treat each of these primary underlying factors and induce sustained remission in patients. Irritable Bowel Syndrome (IBS) affects around 11% of the global population4. In Australia: approximately 30% of Australians will experience symptoms of IBS in their lifetime5. What is GaRP? GaRP is a microbiome-targeted, multi-component dietary supplement that has been designed to address the primary underlying factors associated with chronic gastrointestinal conditions such as IBS. 1 Gastroenterology 2017: 152:415-429 2 World J. Gastroenterolg 2014: 346 – 362 3 Michelfelder, Lee, & Bading 2010 4 Clinical Gastroenterology and Hepatology 2012: 10, 712-721 5 Dieticians Australia 2022, dieticiansaustralia.org.au, Accessed 10 October 2022 Annual Report 2022 Anatara Lifesciences Ltd GaRP Overview Page 11 Gastrointestinal RePrograming (GaRP) - A potential breakthrough for gut health GaRP – Irritable Bowel Syndrome (IBS) – Clinical Trial Design GaRP-IBS Trial The GaRP IBS trial is powered to deliver results that, if successful, will validate clinical claims. Furthermore, if successful, the high prevalence of digestive disorders requiring relief from both symptoms and the disease process, including irritable bowel syndrome (IBS), present a signiﬁcant market opportunity for Anatara. Pictured below is the Clinical Trial Design.continue to reduce COGS. As mentioned earlier, The GaRP clinical study is a randomized, double blind placebo controlled study. This represents the highest level of evidence for clinical trials and will support Anatara's pursuit of evidence based products in this important disease state with a high unmet need. Annual Report 2022 Anatara Lifesciences Ltd Director’s Report Page 12 Director’s 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 2022. 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: ▶ Dr David Brookes, Executive Chair ▶ Ms Sue MacLeman, Non-Executive Director ▶ Dr Jane Ryan, 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 and commercialising innovative, evidence-based products for gastrointestinal health where there is signiﬁcant unmet need. Anatara is a life sciences company with expertise in developing products for human and animal health. Dividends - Anatara Lifesciences Ltd No dividends were declared or paid to members for the year ended 30 June 2022. 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. Financial position Anatara had cash at bank as at 30 June 2022 of $1.12 million (down from $3.43 million on 30 June 2021). The Company’s cash position will be bolstered by an anticipated R&D tax incentive of approximately $480,000 due in September 2022. Our balance sheet provides scope for us to progress both human trials and pursue initiatives to partner both our human and animal health assets. In part, this will be determined early in the ﬁnancial year by the poultry trial results, which will perhaps provide the ﬁnal conclusion on the commercial reality for bromelain-based products in animal husbandry/rearing. Expenditure in furthering this effort resulted in a loss after tax of $2,532,293 for the year (2021: $1,995,874). Annual Report 2022 Anatara Lifesciences Ltd Director’s Report Page 13 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 5 May 2022, the group announced a leadership change where Mr Steven Lydeamore has resigned his position as the Chief Executive Ofﬁcer, effective 24 June 2022 and Dr David Brookes, the group's Chair, was appointed as the interim Executive Chair. Events since the end of the ﬁnancial year No matter or circumstance has arisen since 30 June 2022 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, 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. Annual Report 2022 Anatara Lifesciences Ltd Information on Directors Page 14 Information on directors The following information is current as at the date of this report: Dr David Brookes Executive Chair Experience and expertise Other current public directorships Former public directorships in last 3 years Special responsibilities 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 a number of ASX listed biotechnology companies, including as Chairman of genomics solutions company, RHS Ltd, which was acquired by Perkin Elmer Inc (NYSE: PKI) in June 2018. He has also Chaired the risk and audit committees in ASX listed companies. He is currently a Non-Executive Chairman of Dominion Minerals Limited (ASX:DLM) and a Non-Executive Director of Island Pharmacuticals (ASX:ILA) and TALI Digital (ASX:TD1). He was Non-Executive Chairman of the Better Medical group (unlisted) until the sale of that company to private equity ﬁrm Livingbridge in January 2021. 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. Dominion Minerals Limited (ASX: DLM), previously known as Factor Therapeutics Limited (ASX: FTT), since 10 April 2019. Tali Digital Ltd (ASX: TD1), since 29 June 2020 Island Pharmaceuticals Limited (ASX:ILA) since October 2020. None Chair of Board Member of the audit and risk management committee Member of the remuneration and nominations committee Annual Report 2022 Anatara Lifesciences Ltd Information on Directors Page 15 Ms Sue McLeman Non-Executive Director Experience and expertise Other current public directorships Former public directorships in last 3 years Special responsibilities Sue MacLeman has more than 30 years’ experience as a pharmaceutical, biotechnology and medical technology executive having held senior roles in corporate, medical, commercial and business development. Sue has served as CEO and Board member of several ASX, AIM and NASDAQ listed companies in the healthtech sector. She is current Chair of MTPConnect a not-for-proﬁt industry growth centre for the medtech, biotech and pharmaceutical sectors. She is also Chair TALi Digital Ltd (ASX:TDI), and a non-executive director of Planet Innovation Holdings and Omico. Sue is appointed to several academic and government advisory boards. Her broad commercial and technical experience is underpinned by a Bachelor of Pharmacy from the University of Queensland, a Master of Laws from Deakin University and a Master of Marketing from Melbourne Business School. She is also a Fellow and Chair of the Health Forum at the Australian Academy of Technology and Engineering (ATSE) and Fellow/Graduate of Australian Institute of Company Directors (AICD). Tali Digital Ltd (ASX: TD1), since 6 September 2018 Palla Pharma Limited (ASX: PAL), until 21 April 2022 Oventus Medical Ltd (ASX: OVN), until 14 June 2022 Chair of the audit and risk management committee. Member of the remuneration and nominations committee. Annual Report 2022 Anatara Lifesciences Ltd Information on Directors Page 16 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 programs 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 winning of a $230 million US Government contract. Jane was Chair of the Advisory Board at the ithree Institute at the University of Technology Sydney (UTS) which studies how microbes grow, live, adapt and survive. Jane has been a Board Member of the government and not for proﬁt organisations and is currently Non-Executive Director of Bionomics Limited (ASX: BNO). Since November 2021, Jane was appointed Non-Executive Director of Robotic Surgery Evolution Ltd. Other current public directorships Bionomics Ltd (ASX:BNO), since 1 October 2020 IDT Australia Limited (ASX: IDT), since 28 January 2022 Former public directorships in last 3 years None Special responsibilities Member of the audit and risk management committee Chair of the remuneration and nominations committee. Annual Report 2022 Anatara Lifesciences Ltd Information on Directors Page 17 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. 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 2022, and the numbers of meetings attended by each director were: 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 Annual Report 2022 Anatara Lifesciences Ltd Remuneration Report Page 18 Remuneration report (audited) The directors present the Anatara Lifesciences Ltd 2022 remuneration report, outlining key aspects of our remuneration policy and framework, and remuneration awarded this year. The report is structured as follows: (a) (b) (c) (d) (e) (f) (g) (h) Key management personnel (KMP) covered in this report Remuneration policy and link to performance Elements of remuneration Link between remuneration and performance Remuneration expenses Contractual arrangements with executive KMPs Non-executive director arrangements Additional statutory information (a) Key management personnel covered in this report Dr David Brookes, Executive Chair Ms Sue MacLeman, Non-Executive Director Dr Jane Ryan, Non-Executive Director Mr Steven Lydeamore, Chief Executive Ofﬁcer (resigned on 24 June 2022) Dr Michael West, Chief Operating Ofﬁcer (resigned on 9 November 2021) Annual Report 2022 Anatara Lifesciences Ltd Remuneration Report Page 19 (b) Remuneration policy and link to performance Our remuneration and nominations committee is mainly 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 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. (b) Remuneration policy and link to performance (continued) Assessing performance (continued) Performance is monitored on an informal basis throughout the year and a formal evaluation is per- formed 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. ▶ Product development and commercialisation. Annual Report 2022 Anatara Lifesciences Ltd Remuneration Report Page 20 (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. The company’s CEO and COO are entitled to short-term incentives in the form of cash bonus up to 40% 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. (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 26 November 2020. 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. 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. Annual Report 2022 Anatara Lifesciences Ltd Remuneration Report Page 21 (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. Notes 1. Cash salary and fees includes estimation of net annual leave entitlement incurred during the current year. 2. Dr David Brookes transitioned from Non-Executive Chair to Executive Chair on 24 June 2022. 3. Mr Steven Lydeamore resigned on 24 June 2022. 4. Dr Michael West resigned on 9 November 2021. Annual Report 2022 Anatara Lifesciences Ltd Remuneration Report Page 22 (e) Remuneration expenses (continued) Notes 1. Cash salary and fees includes estimation of net annual leave entitlement incurred during the year. 2. Due to COVID-19, Anatara Board resolved to reduce their directors’ fees temporarily from May 2020 to September 2020. On 22 June 2020, Anatara Board resolved to grant 761,912 options (subject to approval by shareholders at November 2020 AGM) to KMP and Company Secretary. However, only a total of 617,704 options were subsequently issued on 3 December 2020 given the shareholders’ approval in the 2020 annual general meeting. 3. Dr Tracie Ramsdale resigned on 26 November 2020 and 68,766 options (total share-based payment expenses of $258 recognised in prior year) were forfeited during the year. 4. Subsequent to year end, 297,489 performance rights have been issued to Dr Michael West, as part of his performance bonus of $45,000. These performance rights have nil exercise price and expiring on 23 August 2024. (f) Contractual arrangements with executive KMPs Name: Position: Contract duration: Notice period: Fixed remuneration: $110,000 per annum, plus 10% superannuation Dr David Brookes Non-Executive Chair (transitioned to Executive Chair on 24 June 2022) Unspeciﬁed Unspeciﬁed Mr Steven Lydeamore (resigned on 24 June 2022) Name: Chief Executive Ofﬁcer Position: Unspeciﬁed Contract duration: Notice period: 6 months by either party Fixed remuneration: $395,000 per annum, plus 10% superannuation Dr Michael West (resigned on 9 November 2021) Name: Chief Operating Ofﬁcer Position: Unspeciﬁed Contract duration: Notice period: 3 months by either party Fixed remuneration: $250,000 per annum, plus 10% superannuation Annual Report 2022 Anatara Lifesciences Ltd Remuneration Report Page 23 (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 $110,000 $60,000 (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 22 above: Notes 1. Dr Tracie Ramsdale resigned on 26 November 2020. 2. Mr Steven Lydeamore resigned on 24 June 2022. 3. Dr Michael West resigned on 9 November 2021. Annual Report 2022 Anatara Lifesciences Ltd Remuneration Report Page 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 year are as follows: (ii) Terms and conditions of the share-based payment arrangements (iii) Reconciliation of ordinary shares, performance rights and options held by KMP Share holdings Share holdings Notes 1. Balance may include shares held prior to individuals becoming a KMP. For individuals who became a KMP during the year, the balance is as at the date they became a KMP. 2. Other changes incorporates changes resulting from the acquisition of shares. 3. For a former KMP, the balance is as at the date they cease being a KMP. 4. Dr Michael West resigned on 9 November 2021 and Mr Steven Lydeamore resigned on 24 June 2022 Annual Report 2022 Anatara Lifesciences Ltd Remuneration Report Page 25 Option holdings Notes 1. Balance may include shares held prior to individuals becoming KMP. For individuals who became KMP during the year, the balance is as at the date they became KMP. 2. Other changes incorporate changes resulting from the expiration/forfeiture of options. 3. For a former KMP, the balance is as at the date they cease being a KMP. 4. Mr Steven Lydeamore resigned on 24 June 2022. Subsequent to the year end, his options have been forfeited on 24 July 2022. 5. Dr Michael West resigned on 9 November 2021. His options were subsequently forfeited 60 days after the resignation date. Performance rights Notes 1. Mr Steven Lydeamore resigned on 24 June 2022. 2. Dr Michael West resigned on 9 November 2021. (iv) Other transactions with key management personnel There are no other transactions with key management personnel of Anatara Lifesciences Ltd. (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 2021 ﬁnancial year. The company did not receive any speciﬁc feedback at the 2021 annual general meeting or throughout the year on its remuneration practices. This concludes the remuneration report, which has been audited. Annual Report 2022 Anatara Lifesciences Ltd Remuneration Report Page 26 Shares under options and performance rights (a) Unissued ordinary shares There are no unissued ordinary shares of Anatara Lifesciences Ltd under performance rights at the date of this report. Unissued ordinary shares of Anatara Lifesciences Ltd under options at the date of this report are as follows: No option holder or performance rights holder has any right under the options or performance rights to participate in any other share issue of the company or any other entity. (b) Shares issued on the exercise of options or performance rights No ordinary shares of Anatara Lifesciences Ltd were issued during the year ended 30 June 2022 on the exercise of options granted. Ordinary shares of Anatara Lifesciences Ltd were issued during the year ended 30 June 2022 on the exercise of performance rights granted as follows: Annual Report 2022 Anatara Lifesciences Ltd Insurance & Indemnities Page 27 Insurance of ofﬁcers and indemnities (a) Insurance of ofﬁcers During the ﬁnancial year, Anatara Lifesciences Ltd paid a premium of $27,500 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. (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. Annual Report 2022 Anatara Lifesciences Ltd Insurance & Indemnities Page 28 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: Annual Report 2022 Anatara Lifesciences Ltd Auditor’s independance declaration Page 29 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 pages 66-68. 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. Dr David Brookes Executive Chair Melbourne 29 August 2022. Annual Report 2022 Anatara Lifesciences Ltd Corporate Governance statement Page 30 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 (4th edition) published by the ASX Corporate Governance Council. The 2022 corporate governance statement is dated as at 30 June 2022 and reﬂects the corporate governance practices in place throughout the 2022 ﬁnancial year. 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/ Annual Report 2022 Anatara Lifesciences Ltd Financial Statements Page 31 Financial Statements Consolidated statement of proﬁt or loss and other comprehensive income ____________ 32 Consolidated statement of ﬁnancial position _________________________________________ 33 Consolidated statement of changes in equity ________________________________________ 34 Consolidated statement of cash ﬂows (direct method) _______________________________ 35 Notes to the ﬁnancial statements _____________________________________________________36 Directors’ declaration_________________________________________________________________ 65 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: Level 3, 62 Lygon Street Carlton South VIC 3053 The ﬁnancial statements were authorised for issue by the directors on 29 August 2022. The directors have the power to amend and reissue the ﬁnancial statements. Annual Report 2022 Anatara Lifesciences Ltd Financial Statements Page 32 Consolidated statement of proﬁt or loss and other comprehensive income For the year ended 30 June 2022 The above consolidated statement of proﬁt or loss should be read in conjunction with the accompanying notes. Annual Report 2022 Anatara Lifesciences Ltd Financial Statements Page 33 Consolidated statement of ﬁnancial position As at 30 June 2022 The above consolidated statement of ﬁnancial position should be read in conjunction with the accompanying notes. Annual Report 2022 Anatara Lifesciences Ltd Financial Statements Page 34 Consolidated statement of changes in equity For the year ended 30 June 2022 Attributable to the owners of Anatara Lifesciences Ltd Attributable to the owners of Anatara Lifesciences Ltd The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes. Annual Report 2022 Anatara Lifesciences Ltd Financial Statements Page 35 Consolidated statement of cash ﬂows The above consolidated statement of cash ﬂows should be read in conjunction with the accompanying notes. Annual Report 2022 Anatara Lifesciences Ltd Contents Financial Statements Page 36 Contents of the notes to the ﬁnancial statements Page 1 2 3 4 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 Segment information Other income and expense items Income tax expense Financial assets and ﬁnancial liabilities Equity Cash ﬂow information Critical estimates, judgements and errors Financial risk management Capital management Interests in other entities Contingent liabilities COVID-19 impact on business Events occurring after the reporting period Related party transactions Share-based payments Remuneration of auditors Loss per share Parent entity ﬁnancial information Summary of signiﬁcant accounting policies 37 38 43 45 46 49 49 50 50 51 53 54 37 39 46 50 50 55 56 Annual Report 2022 Anatara Lifesciences Ltd Financial Statements Page 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 and Executive Chair 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® diarrhea treatment for piglets. The segment details are therefore fully reﬂected in the body of the ﬁnancial statements. 2. Other income and expense items (a) Other income (i) 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 2022, the group has recognised a receivable of $479,984 offset by an over- estimation from the prior period of $11,469 (2021: $1,023,028). (ii) Fair value of EMDG and COVID-19 government assistance 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 2022, the group has not recognised other grant income (2021: $85,000). The Group has not recognised Export Market Development Grant (EMDG) (2021: $47,500) in other income. This is a key Australian Government ﬁnancial assistance program for aspiring current exporters. No further COVID-19 government assistance was recognised in other income for current ﬁnancial year (2021: $37,500). This was mainly “Cashﬂow boost for employers” measure announced as part of the Australian Government’s economic stimulus package. Annual Report 2022 Anatara Lifesciences Ltd Financial Statements Page 38 2. Other income and expense items (continued) (b) Breakdown of expenss by nature 3. Income tax expense (a) Numerical reconciliation of income tax expense to prima facie tax payable Annual Report 2022 Anatara Lifesciences Ltd Financial Statements Page 39 3. Income tax expense (continued) (b) Tax losses Unused tax losses can be carried forward indeﬁnitely subject to continuity of ownership and same business test rules. 4. Financial assets and ﬁnancial liabilities (a) Cash and cash equivalents (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: (ii) Classiﬁcation as cash equivalents Term deposits are presented as cash equivalents if they have a maturity of three months or less from the date of acquisition and are repayable with 24 hours notice with no loss of interest. See note 21(i) 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. Annual Report 2022 Anatara Lifesciences Ltd Financial Statements Page 40 4. Financial assets and ﬁnancial liabilities (continued) (b) Trade and other receivables (i) Accrued receivables Accrued receivables include $479,984 from the Australian Taxation Ofﬁce in relation to the R&D tax incentive (2021: $747,946). In prior year, accrued receivables also included $570 in relation to interest income. (ii) 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. (c) Trade and other payables 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. Annual Report 2022 Anatara Lifesciences Ltd Financial Statements Page 41 5. Employee beneﬁt obligations (i) Leave obligations 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(m). 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 year of service and also for those employees that are entitled to pro-rata payments in certain circumstances. The majority of leave provision is presented as current, being $35,534 (2021: $53,037), 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. 6. Leases (i) Amounts recognised in the balance sheet The balance sheet shows the following amounts relating to leases: Annual Report 2022 Anatara Lifesciences Ltd Financial Statements Page 42 (ii) Amounts recognised in the statement of proﬁt or loss The statement of proﬁt or loss shows the following amounts relating to leases: (iii) The group’s leasing activities and how these are accounted for In June 2021 the group entered into a two-year commercial lease in North Melbourne. The lease is for the use of ofﬁce facilities. This lease includes an extension option for a further 2 years. Leases are recognised as a right-of-use asset and a corresponding liability at the date at which the leased asset is available for use by the group. Each lease payment is allocated between the liability and ﬁnance cost. The ﬁnance cost is charged to proﬁt or loss over the lease year so as to produce a constant periodic rate of interest on the remaining balance of the liability for each year. The right-of-use asset is depreciated over the shorter of the asset’s useful life and the lease term on a straight-line basis. Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the following lease payments: ▶ Fixed payments (including in-substance ﬁxed payments), less any lease incentives receivable ▶ Variable lease payment that are based on an index or a rate ▶ Amounts expected to be payable by the lessee under residual value guarantees ▶ The exercise price of a purchase option if the lessee is reasonably certain to exercise that option, and ▶ Payments of penalties for terminating the lease, if the lease term reﬂects the lessee exercising that option The lease payments are discounted using the interest rate implicit in the lease, if that rate can be determined, or the group’s incremental borrowing rate. Right-of-use assets are measured at cost or fair value, comprising the following: ▶ The amount of the initial measurement of lease liability ▶ Any lease payments made at or before the commencement date, less any lease incentives received ▶ Any initial direct costs, and ▶ Restoration costs Payments associated with short-term leases are recognised on a straight-line basis as an expense in proﬁt or loss. Short-term leases are leases with a lease term of 12 months or less. Annual Report 2022 Anatara Lifesciences Ltd Financial Statements Page 43 7. Equity (a) Share capital (i) Movements in ordinary shares: Below is the movement in ordinary shares in the year ended 30 June 2022: Annual Report 2022 Anatara Lifesciences Ltd Financial Statements Page 44 7. Equity (continued) (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 and performance rights Information relating to options and performance rights, including details of those issued, exercised and lapsed during the ﬁnancial year and the outstanding balance as at the end of the reporting year is set out in note 7(b). (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 and performance rights issued to key management personnel, other employees and eligible contractors. (ii) Movement in options and performance rights Annual Report 2022 Anatara Lifesciences Ltd Financial Statements Page 45 8. Cash ﬂow information (a) Reconciliation of proﬁt/(loss) after income tax to net cash inﬂow from operating activities (b) Non-cash investing and ﬁnancing activities Non-cash investing and ﬁnancing activities disclosed in other notes are: ▶ Options/performance rights 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 2(a)(i). Management has used judgements to assess the group’s eligible research and development (R&D) activities and eligible expenditure under the incentive scheme. The determination of the eligible R&D activities and eligible expenditure would affect the expected amounts recognised for R&D tax incentive. The R&D tax incentive refund would provide an important source of funding and enables the group to progress the development and commercialisation of our GaRP product. Annual Report 2022 Anatara Lifesciences Ltd Financial Statements Page 46 9. Critical estimates, judgements and errors (continued) (a) Signiﬁcant estimates and judgements (continued) ▶ Estimation of share-based payments - note 17. Management has used judgements to assess the group’s share-based payments by determining the choice of option pricing model. The choice of model would result in option valuation that requires various underlying assumptions to determine the fair value of options at grant date. Management used 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 prob- ability assumptions as all these inputs would affect the share-based payments valuation. The share- based payments are long-term incentives which allow executives to participate in, and beneﬁt from, the growth of the group as a result of their efforts and to assist in motivating and retaining those key employees over the long-term. 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. (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 2022 and 2021, 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 year, expressed in Australian dollars, was as follows: Annual Report 2022 Anatara Lifesciences Ltd Financial Statements Page 47 10. Financial risk management (continued) (a) Market risk (continued) Sensitivity Proﬁt or loss is sensitive to higher/lower interest income from cash and cash equivalents as a result of changes in interest rates. The use of 1.21 percent (2021: 0.31 percent) was determined based on analysis of the Reserve Bank of Australia cash rate change, on an absolute value basis, at 30 June 2022 and the previous four balance dates. The average cash rate at these balance dates was 0.77 percent (2021: 0.93 percent). The average change to the cash rate between balance dates was 157.03 percent (2021: 33.88 percent). By multiplying these two values, the interest rate risk was derived. Loss is more sensitive to movements in interest rates in 2022 than 2021 due to increased cash and cash equivalents and deposits at call as well as low interest rate. 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 counterparties 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. Annual Report 2022 Anatara Lifesciences Ltd Financial Statements Page 48 (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. Annual Report 2022 Anatara Lifesciences Ltd Financial Statements Page 49 11. Capital management (a) Risk management The group’s objectives when managing capital are to: ▶ safeguard 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. As at 30 June 2022, the group held cash and equivalents of $1,120,204. The group has put in place measures to reduce all non-critical expenditure. (b) Dividends No dividends were declared or paid to members for the year ended 30 June 2022 (2021: nil). The group’s franking account balance was nil at 30 June 2022 (2021: nil). 12. Interests in other entities (a) Subsidiaries The group’s principal subsidiaries at 30 June 2022 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. Annual Report 2022 Anatara Lifesciences Ltd Financial Statements Page 50 13. Contingent liabilities The group had no contingent liabilities at 30 June 2022 (2021: nil). 14. COVID Impact on Business Anatara Lifesciences remains committed to its corporate strategy and focused on delivering on its anticipated milestones during the year ahead. However, the Company is actively planning for disruptions that may lead to delays in meeting some of these objectives. Anatara employees have been able to continue laboratory-based activities and as a result have advanced GaRP to being clinical trial ready. In addition, new bromelain-based formulations were developed for challenge trials in piglets (in-feed) and in poultry. 15. Events occurring after the reporting period No matter or circumstance has occurred subsequent to year 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 (c) Transactions with other related parties During the current ﬁnancial year, the group engaged a related party (Planet Innovation) for consulting services which amounted to $28,340 (2021: nil). These transactions were conducted at arm’s length. Annual Report 2022 Anatara Lifesciences Ltd Financial Statements Page 51 17. Share-based payments (a) Executive option plan The establishment of the ‘executive option plan’ (EOP) was approved by shareholders at the 2020 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: The forfeited/lapsed options were fully vested before they forfeited/lapsed. Share options outstanding at the end of the year have the following expiry date and exercise prices: Annual Report 2022 Anatara Lifesciences Ltd Financial Statements Page 52 (i) Vesting conditions Vesting condition apply to options granted under the executive option plan (EOP). Shares are not be issued unless the vesting condition is met. The vesting condition generally depends on service periods of the employees or directors. If the vesting condition is not met on the relevant vesting date, the options lapse and the option holders are not issued any shares. The vesting condition that apply to the options offered are set out in the options offer letter and the EOP. (ii) Fair value of options granted The value attributed to options issued is an estimate calculated using an appropriate mathematical formula based on an option pricing model. The choice of models and the resultant option value require assumptions to be made in relation to the likelihood and timing of the conversion of the options to shares and the value and volatility of the price of the underlying shares. Management has assessed the fair value of options determined at grant date, 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 2022 included: (b) Expenses arising from share-based payment transactions Total expenses arising from share-based payment transactions re cognised during the year were as follows: 1It was agreed that performance pay for selected employees for the year ended 30 June 2022 would be paid in performance rights rather than cash. Performance rights to be issued to employees are long-term incentives under the Executive Option Plan (EOP). However, the performance rights for the current ﬁnancial year have not been granted as at 30 June 2022. Annual Report 2022 Anatara Lifesciences Ltd Financial Statements Page 53 18. Remuneration of auditors During the year the following fees were paid or payable for services provided by the auditor of the parent entity, its related practices and non-related audit ﬁrms: (a) Grant Thornton Audit Pty Ltd (i) Audit and other assurance services 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. Annual Report 2022 Anatara Lifesciences Ltd Financial Statements Page 54 19. Loss per share On the basis of the group's losses, the outstanding options as at 30 June 2022 are considered to be anti-dilutive and therefore were excluded from the diluted weighted average number of ordinary shares calculation. Annual Report 2022 Anatara Lifesciences Ltd Financial Statements Page 55 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. (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 2022 (2021: nil). (c) Contingent liabilities of the parent entity The parent entity did not have any contingent liabilities as at 30 June 2022 or 30 June 2021. (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 2022 (2021: 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. Annual Report 2022 Anatara Lifesciences Ltd Contents summary of accounting policies Page 56 Contents of the summary of signiﬁcant accounting policies Page (a) (b) (c) (d) (e) (f) (g) (h) (i) (j) (k) (l) (m) (n) (o) (p) (q) (r) 59 59 57 58 58 58 58 Basis of preparation Principles of consolidation Segment reporting Foreign currency translation Government grants Income tax Leases Impairment of non-ﬁnancial assets 59 60 Cash and cash equivalents 60 Trade receivables 60 Financial assets 61 Trade and other payables 63 Employee beneﬁts Contributed equity 64 Dividends Loss per share Rounding of amounts Goods and services tax (GST) 64 64 64 64 Annual Report 2022 Anatara Lifesciences Ltd Accounting policies Page 57 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. (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) Going concern The ﬁnancial statements have been prepared on the going concern basis, which contemplates continuity of normal business activities and the realisation of assets and settlement of liabilities in the normal course of business. As disclosed in the ﬁnancial statements, the group incurred a loss of $2,532,293 and had operating cash outﬂows of $2,232,876 for the year ended 30 June 2022. As at 30 June 2022, the group’s held cash and cash equivalents of $1,120,204. In the process of approving the group’s internal forecast and business plan for upcoming ﬁnancial years, the board has considered the cash position of the group within the next 12 months from the date of this report. The group’s internal forecast and business plan for the upcoming ﬁnancial year includes capital raising. The directors are conﬁdent that the company could raise additional capital to meet the group’s contractual commitments and working capital requirements. Notwithstanding the uncertainty over either of these events occurring, based on the above considerations the board has assessed the resources and opportunities available to the group, and consequently believe that the group will be able to repay its debts as and when they fall due and are of the opinion that the ﬁnancial statements have been appropriately prepared on a going concern basis. In the event that these measures are unsuccessful, there would be a material uncertainty which may cast signiﬁcant doubt as to whether the consolidated entity will continue as a going concern and therefore whether it will realise its assets and extinguish its liabilities in the normal course of business and at the amounts stated in the ﬁnancial report. The ﬁnancial report does not include any adjustments related to the amounts or classiﬁcation of recorded assets or liabilities that might be necessary if the consolidated entity does not continue as a going concern. However, Anatara employees have been able to continue laboratory-based activities and as a result have advanced GaRP to being clinical trial ready. In addition, new bromelain-based formulations were developed for challenge trials in piglets (in-feed) and in poultry. Annual Report 2022 Anatara Lifesciences Ltd Accounting policies Page 58 (a) Basis of preparation (continued) (iv) New and amended standards adopted by the group The group has adopted all of the new or amended Accounting Standards and Interpretations issued by the Australian Accounting Standards Board (‘AASB’) that are mandatory for the current reporting period. Any new or amended Accounting Standards or Interpretations that are not yet mandatory have not been early adopted. (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 and executive chair. (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 income statement, within ﬁnance costs. All other foreign exchange gains and losses are presented in the consolidated income statement on a net basis within other gains/(losses). (e) Government grants Transactions involving government grants received are accounted for by applying AASB 120 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 2 provides further information on how the group accounts for government grants. Annual Report 2022 Anatara Lifesciences Ltd Accounting policies Page 59 (f) Income tax The income tax expense or credit for the year is the tax payable on the current year’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 year 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 year 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 direct- ly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively. (g) Leases With the exception of short-term, low value and immaterial leases, right-of-use assets and corresponding lease liabilities are recognised in the statement of ﬁnancial position. Straight-line operating lease expense recognition is replaced with a depreciation charge for the right-of-use assets (included in operating costs) and an interest expense on the recognised lease liabilities (included in ﬁnance costs). Payments associated with short-term leases, low value and immaterial leases are recognised on a straight-line basis as an expense in proﬁt or loss. Short-term leases are leases with a lease term of 12 months or less. (h) 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 goodwill that suffered an impairment are reviewed for possible reversal of the impairment at the end of each reporting year. Annual Report 2022 Anatara Lifesciences Ltd Accounting policies Page 60 (i) 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. (j) 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 4(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. (k) Financial assets (i) Classiﬁcation 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. Annual Report 2022 Anatara Lifesciences Ltd Accounting policies Page 61 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 income statement. ▶ 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 income statement. ▶ 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 year in which it arises. (k) Financial assets (continued) (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 dis- count as interest income. Interest income on impaired loans is recognised using the original effective interest rate. (l) 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 year. They are recognised initially at their fair value and subsequently measured at amortised cost using the effective interest method. Annual Report 2022 Anatara Lifesciences Ltd Accounting policies Page 62 (m) 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 year in which the employees render the related service are recognised in respect of employees’ services up to the end of the reporting year 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 year 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 year using the projected unit credit method. Consideration is given to expected future wage and salary levels, experience of employee departures and years of service. Expected future payments are discounted using market yields at the end of the reporting year 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 year, 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. Annual Report 2022 Anatara Lifesciences Ltd Accounting policies Page 63 (m) Employee beneﬁts (continued) 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 year), and ▶ including the impact of any non-vesting conditions (e.g. the requirement for employees to save or holdings shares for a speciﬁc year of time). The total expense is recognised over the vesting year, which is the year over which all of the speciﬁed vesting conditions are to be satisﬁed. At the end of each year, 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. Annual Report 2022 Anatara Lifesciences Ltd Accounting policies Page 64 Performance rights Performance pay for selected employees of the group would be paid in performance rights rather than cash, subject to board approval. Performance rights to be issued to employees are long-term incentives under the Executive Option Plan (EOP). (n) 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. (o) 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 year but not distributed at the end of the reporting year. (p) 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. (q) 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. (r) 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. Annual Report 2022 Anatara Lifesciences Ltd Director’s Declaration Page 65 In the directors’ opinion: (a) the ﬁnancial statements and notes set out on pages 32 to 56 are in accordance with the Corporations Act 2001, including: (i) complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements, and (ii) giving a true and fair view of the consolidated entity’s ﬁnancial position as at 30 June 2022 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. Dr David Brookes Executive Chair Melbourne 29 August 2022 Annual Report 2022 Anatara Lifesciences Ltd Independant Auditor’s Report Page 66 Annual Report 2022 Anatara Lifesciences Ltd Independant Auditor’s Report Page 67 Annual Report 2022 Anatara Lifesciences Ltd Independant Auditor’s Report Page 68 Annual Report 2022 Anatara Lifesciences Ltd Shareholder Information Page 69 The shareholder information set out below was applicable as at 13 September 2022. There were 301 holders of less than a marketable parcel of ordinary shares. B. Equity security holders Twenty largest quoted equity security holders The names of the twenty largest holders of quoted equity securities are listed below: Annual Report 2022 Anatara Lifesciences Ltd Shareholder Information Page 70 B. Equity security holders (continued) Unquoted equity securities C. Voting rights The voting rights attaching to each class of equity securities are set out below: (a) Ordinary shares: On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each share shall have one vote. (b) Options: No voting rights. (c) Performance rights: No voting rights. There are no other classes of equity securities. Annual Report 2022 Anatara Lifesciences Ltd Page 71 Annual Report 2022 Anatara Lifesciences Ltd Page 72

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