Bionomics Ltd
Annual Report 2011

Plain-text annual report

A LEADING INTERNATIONAL DRUG DISCOVERY AND DEVELOPMENT COMPANY 2011 BIONOMICS ANNUAL REPORT CONTENTSe TABLE OF CONTENTS PG 1 HIGHLIGHTS PG 2 CHAIRMAN’S LETTER PG 3 CEO & MANAGING DIRECTOR’S REPORT PG 10 PIPELINE PG 11 BNC210 OVERVIEW PG 14 BNC105 OVERVIEW PG 16 INTELLECTUAL PROPERTY PORTFOLIO PG 18 BOARD OF DIRECTORS PG 20 MANAGEMENT PG 22 CORPORATE GOVERNANCE STATEMENT PG 27 DIRECTORS’ REPORT PG 41 ANNUAL FINANCIAL STATEMENTS PG 85 INDEPENDENT AUDIT REPORT PG 87 SHAREHOLDER INFORMATION PG 89 COMPANY PARTICULARS FRONT COVER: Brain activity following BNC210 administration to healthy humans measured by EEG. Mapping of measured brain activity indicated BNC210 anxiolytic activity in the absence of sedation. HIGHLIGHTSe 1 MULTIPLE SCLEROSIS COLLABORATION WITH MERCK SERONO EXTENDED PATENT APPLICATIONS FILED ON COMPOUNDS TO TREAT MEMORY LOSS REGISTER REPOSITIONING SUCCESSFULLY COMPLETED IN CONJUNCTION WITH $14.25 MILLION PLACEMENT TO INSTITUTIONAL INVESTORS SALE AND LEASE-BACK OF THEBARTON PREMISES TO FURTHER BOOST CASH RESERVES BIONOMICS ANTI-ANXIETY DRUG BNC210 PHASE Ib CLINICAL TRIALS REPORT SUCCESSFUL RESULTS q BNC210 significantly reduced panic symptoms and faster than placebo q Brain activity in trial subjects measured by EEG indicates anxiolytic activity by BNC210 and no sedation q BNC210 clearly outperformed comparator Lorazepam in tests measuring attention, memory, co-ordination, sedation and addiction q BNC210 administered to 108 healthy subjects with excellent safety profile BNC105 CANCER CLINICAL TRIALS REACH KEY MILESTONES q Data from renal cancer trial supports progression of the trial with the combination of Afinitor and BNC105 being safe and well tolerated q Mesothelioma interim analysis provided encouraging data q Clinical trial program extended with ovarian cancer trial now planned 2 CHAIRMAN'S LETTERe Dear Fellow Shareholder, The substantial increase in your Company’s market capitalization and the significant drug development milestones achieved over the past 12 months provides strong evidence of the sound progress made in achieving our corporate objective of becoming a highly successful and widely admired global drug discovery and development company. We are looking to achieve further, major progress in the coming year. The achievements of 2011 have placed your Company in an enviable position for growth and near term partnering success. The key pillars supporting this solid platform are: q Drug development of our two key compounds is proceeding in line with plans, and active discussions have commenced with prospective partners for our anxiety / depression drug (BNC210). q Additional drug discovery programs have been initiated to ensure a full pipeline and our collaboration with Merck Serono is proceeding satisfactorily. q Your Company’s funding has never been stronger. With substantial contributions from the placement of 25 million new shares and the sale and leaseback of the building, your Company has current cash reserves of approximating $19.5 million, equivalent to approximately 30 month’s cash burn based on budgeted expenditure. q A stronger, more balanced and diverse shareholder profile. The successful placement of the bulk of our previous major shareholder’s stake has expanded and reinvigorated the Company’s share register. Further, a number of European based institutions were introduced, boosting international diversification. q Stronger support, including published research, from key stockbrokers. Your Company’s long time broker supporters, Linwar Securities and Baker Young, have been joined by Bell Potter which, together with Linwar, has commenced covering your Company through dedicated Bionomics research notes. Our management team, under the outstanding leadership of Deborah Rathjen, had a very successful year, outperforming on two out of the five agreed corporate performance goals, namely the production of test data for BNC210 and the investor profile / funding targets. One third of the Group’s staff works at our Strasbourg based contract services subsidiary, Neurofit. Revenue (including intercompany sales) was higher than the previous year and Neurofit continues to carry out important tasks within our drug discovery and development program, in a timely and efficient manner. 2012 will be a watershed year for your Company as we aim to complete our first major partnering deal. This will raise further the profile of Bionomics and should attract further investment from institutions across the globe. More specifically, our key objectives for the next year are: q To partner our anxiety / depression drug BNC210. q To increase the intensity and breadth of our trials on our cancer drug BNC105, with a view to building the most impressive database possible to be used for future partnering discussions. q To expand and continue to develop our drug pipeline. On your behalf, I wish to thank our exceptionally talented, dedicated management team for their continuing efforts in moving Bionomics forward. Conversely, your Board and management wish to thank you, our shareholders, for your continuing belief in Bionomics and for your encouragement and support. Christopher Fullerton Chairman CEO & MANAGING DIRECTOR'S REPORTe 3 Dear Shareholders, It is with great pleasure that I present this report on your Company’s performance for the 2010-2011 financial year. This past year for Bionomics could be called “the year of BNC210” as it has marked a defining step in the development of Bionomics’ treatment for anxiety and depression. This tribute recognises the completion with flying colours of rigorous Phase I studies for BNC210 that open the way for Phase II development and partnering. Other significant progress has included: q Our promising anti-cancer agent, BNC105, forging ahead in its Phase II clinical trials and the decision made to extend its clinical program next year to ovarian cancer, the fifth leading cause of cancer-related death among women, q Further extension of our collaboration with global pharmaceutical company, Merck Serono, to 13 June 2012, q Progress in the discovery of new drug candidates for important diseases such as Alzheimer’s disease and cancer, and q Re-positioning Bionomics’ share register and strengthening the Company’s balance sheet. THE YEAR OF BNC210 BNC210 is a “next generation” compound under development for treatment of anxiety and depression. Anxiety drugs such as Valium and Prozac have been amongst the biggest blockbusters with a market estimated at US$15 billion per annum worldwide. However, most anxiety drugs have major side-effects. The story is similar for drugs to treat depression. In July 2010 the prestigious journal Science published an article “Is Pharma Running out of Brainy Ideas?” In this article Thomas Insel, Director of the US National Institute of Mental Health said in relation to psychiatric drug development “There are very few new molecular entities, very few novel ideas and almost nothing that gives any hope for a transformation in the treatment of mental illness.” Pharmaceutical companies are also facing a significant patent cliff with blockbuster drugs to treat anxiety and depression either about to come off patent or already subject to generic competition. For example, Effexor (2010), Seroquel (2011) and Lexapro (2012). As a new molecular entity, and driven by novel ideas, BNC210 is at the forefront of innovative drug development for anxiety and depression. BNC210 also has a very strong patent position and, with the first patent application filed in 2006, a long period of patent protection ahead of it. 4 CEO & MANAGING DIRECTOR'S REPORTe “BIONOMICS HAS CREATED IN THE FORM OF BNC210 ONE OF AUSTRALIA’S MOST PROMISING THERAPEUTIC PRODUCTS”. BIOSHARES 9 “BNC210 REMAINS ONE OF jUST A HANDFUL OF COMPOUNDS IN DEVELOPMENT FOR THE TREATMENT OF ANxIETY.” EDISON RESEARCH 9 Bionomics is developing BNC210 to address the need for an effective, safe, fast acting, non-sedating, non-addictive drug and so far it is coming up trumps. The cover of this year’s Annual Report features recent EEG data that demonstrate changes in human brain activity after BNC210 administration that are indicative of efficacy. Importantly, we now have the first clinical evidence of the lack of side effects on attention and memory by BNC210 that had previously only been indicated by studies in animal models. Trials have also indicated that BNC210 is safe and well tolerated and drug levels achieved from a single administration support its potential for once a day dosing. The latest European Phase Ib clinical trials, successfully completed in March 2011, confirmed earlier data and provided evidence that BNC210 significantly reduces panic symptoms, acting quickly and with improved recovery in treated subjects. Moreover, BNC210 has none of the key side effects of Lorazepam, a representative of a major drug class (Valium-like) currently used to treat anxiety. BNC210 clearly outperformed Lorazepam in a battery of tests measuring attention, memory, co-ordination, sedation and addiction. These important trial outcomes exceeded expectations and are very encouraging for the future development of BNC210 and for successful licensing. In parallel with the exciting BNC210 program, work progresses steadily for our anti-cancer agent BNC105. THE PREVALENCE OF ANxIETY IN THE US POPULATION IS 18.3%. IN 1990 ANxIETY DISORDERS COST THE US MORE THAN $42 BILLION A YEAR, ALMOST ONE THIRD OF THE $148 BILLION TOTAL MENTAL HEALTH BILL FOR THE US. 5 CEO & MANAGING DIRECTOR’S REPORTe PHASE II CLINICAL PROGRAM FOR BNC105 IS WELL ADVANCED The mechanism of action of BNC105 provides an innovative approach to the treatment of solid tumours by selectively attacking established tumour blood supply. In addition to being an effective Vascular Disrupting Agent (VDA), it also has direct cytotoxic action on cancer cells. BNC105, because of its dual mechanism of action, is likely to be applicable to a wide variety of tumour types. This view was supported by the successful Phase I clinical trial in patients with a range of advanced cancers. The market opportunity for BNC105, if successfully developed, is enormous and our strategy is to progress BNC105 further down the clinical path to optimise its value. The decision was made to focus, in the first instance, on the types of cancer that have been the market entry point for several successful drugs. Multicentre Phase II clinical trials in renal cell cancer and mesothelioma initiated in the first quarter of 2010 have been progressed. The BNC105 clinical program will be extended to a third solid tumour type, ovarian cancer, next year. Our challenge has been to learn as much about BNC105 in cancer patients in the most efficient way. The key objectives are to consolidate the safety profile for the drug and obtain early evidence that the drug is effective. To do this Bionomics adopted a two pronged approach involving the use of BNC105 either in combination with other established methods of cancer treatment or, as a monotherapy. The current renal trial and planned ovarian cancer trial adopt the first approach, combining BNC105 RENAL CELL CARCINOMA ACCOUNTS FOR APPROxIMATELY 85% OF kIDNEY CANCERS, WITH kIDNEY CANCER ACCOUNTING FOR 2-3% OF HUMAN MALIGNANCIES. THE INCIDENCE OF RENAL CELL CANCER HAS BEEN RISING STEADILY. EVERY YEAR APPROxIMATELY 200,000 CASES ARE DIAGNOSED WORLDWIDE, WITH 55,000 PEOPLE DIAGNOSED IN THE US. THE FIVE YEAR SURVIVAL RATE FOR PATIENTS WITH METASTATIC DISEASE IS LESS THAN 2%. OVARIAN CANCER IS THE FIFTH LEADING CAUSE OF CANCER- RELATED DEATH AMONG WOMEN, OFTEN DIAGNOSED AT AN ADVANCED STAGE, AFTER THE CANCER HAS SPREAD BEYOND THE OVARY. THE NUMBER OF OVARIAN CANCER CASES IN AUSTRALIA INCREASED BY 47% BETWEEN 1982 AND 2006 WITH 1,226 NEW DIAGNOSES IN 2006 ALONE. IT IS ESTIMATED THAT APPROxIMATELY $2.2 BILLION IS SPENT IN THE US EACH YEAR ON TREATMENT OF OVARIAN CANCER. with Afinitor treatment in the case of renal cancer and with carboplatin and gemcitabine for ovarian cancer. The second approach, BNC105 alone, was adopted in the mesothelioma trial in patients whose disease had progressed after first line chemotherapy with Alimta and cisplatin. 6 CEO & MANAGING DIRECTOR'S REPORTe From the ongoing renal cancer trial we now know that the combination of BNC105 is safe and well tolerated with individual patients receiving at least 12 cycles of treatment to date. In the mesothelioma clinical trial individual patients received at least nine cycles of treatment with one patient of 24 showing a durable response to BNC105 and 57% reduction in tumour measurements, at least five patients showing stable disease, with three patients still to be evaluated. Against this background Bionomics has decided that the future development path for BNC105 will be in combination with established chemotherapy regimens, with the mesothelioma trial being discontinued. In adopting a combination approach Bionomics is following in the footsteps of successful drugs such as Avastin (US$6 billion in worldwide sales in 2010). An advantage is that BNC105 will rapidly gain access to a broader commercial opportunity, whilst retaining a focus on potential fast track to market. “WHILE BIONOMICS HAS CLEARLY CREATED AN OUTSTANDING DRUG CANDIDATE IN BNC210, WE ARGUE THAT BNC105 IS POTENTIALLY MORE VALUABLE BECAUSE OF THE SIzE OF THE MARkET FOR NEW CANCER DRUGS, THE BROAD APPLICABILITY OF THE DRUG IN A WIDE VARIETY OF SOLID TUMOURS, AND THE UNIqUE qUALITIES OF BNC105 COMPARED TO OTHER DRUGS THAT WORk BY ATTACkING A TUMOUR’S BLOOD SUPPLY.” BELL POTTER 9 “MERCk SERONO IS A STRONG PARTNER TO HAVE.” BELL POTTER 9 MERCk SERONO COLLABORATION IS RENEWED The Kv1.3 program comprises preclinical stage compounds in Bionomics’ pipeline, are targeting inflammatory disorders including Multiple Sclerosis, Rheumatoid Arthritis and Psoriasis. Bionomics partnered its Kv1.3 program in June 2008 with Merck Serono, a leading pharmaceutical company and pioneer of new treatments for Multiple Sclerosis including Rebif® which recorded sales of approximately US$2.3 billion in 2010. MULTIPLE SCLEROSIS IS AN AUTOIMMUNE DISEASE AFFECTING NERVE FUNCTION THAT LEADS TO NUMBNESS, DIFFICULTY IN COORDINATION, MEMORY LOSS AND ULTIMATELY PARALYSIS. ANNUAL REVENUE OF MULTIPLE SCLEROSIS DRUGS WORLD-WIDE WAS APPROxIMATELY US$12 BILLION IN 2010 WITH SIGNIFICANT MARkET GROWTH PROjECTED TO 2025. With Merck Serono funding all clinical development and commercialisation, the collaboration agreement has recently been extended to 13 June 2012. The objective is to select one or more compounds for development as a patient friendly Multiple Sclerosis drug which is highly effective with fewer side effects and orally active (not injected). Bionomics can earn up to US$47m in milestones per compound based on successful development and commercialisation plus undisclosed royalties. The next steps will be for selected compounds to move into pharmacokinetic and toxicology studies and then clinical trials triggering milestone payments at pre-agreed progress points. CEO & MANAGING DIRECTOR’S REPORTe DRUG DISCOVERY PIPELINE Bionomics has a number of discovery programs underway. Our drug discovery platforms generate new drug candidates which we selectively develop to a stage for commercial partnering. Taking a classic portfolio approach, some programs are more advanced than others so that we have multiple programs underway at any one time, spreading our risk and the demands on our finances. Now that the BNC105, BNC210 and Kv1.3 programs, which are focussed on treatments for solid cancers, CNS conditions and immune diseases respectively, are well underway, Bionomics is in a position to add further depth to its pipeline. Funds from the recent capital raising are being dedicated to actively progress some of our other promising early stage programs. The first of these programs is the investigation of novel kinase inhibitory activity for the treatment of melanoma and breast cancer which is currently in discovery phase. This work is being done in partnership with the Cooperative Research Centre for Cancer Therapeutics (CRC-CTx) of which Bionomics is a core member. “BIONOMICS’ PROPRIETARY MULTICORE®, ANGENE® AND IONx® DRUG TARGET AND DISCOVERY PLATFORMS HAVE PROVIDED THE COMPANY WITH AN ENGINE FOR FUTURE GROWTH” BELL POTTER 9 7 Another area we are excited about is the development of a positive allosteric modulator of the alpha-7 nicotinic acetylcholinesterase receptor. Called Alpha 7 in short, the receptor plays a key role in cognition (memory) in Alzheimer’s disease and schizophrenia. In February 2011 Bionomics announced the filing of patent applications covering compounds of interest and signalling good progress towards our goal of a new drug candidate. ALzHEIMER’S DISEASE ATTACkS THE BRAIN RESULTING IN IMPAIRED MEMORY, THINkING AND BEHAVIOUR. THE INCIDENCE RATE RISES WITH AGE. FOR PEOPLE 85 YEARS AND OVER, 1 IN 4 HAVE DEMENTIA. THE MARkET FOR DRUGS TO TREAT THE DISEASE IS ESTIMATED AT US$5BN BY 2012. “THIS IS AN ATTRACTIVE TARGET THAT HAS CLINICAL VALIDATION IN THE TREATMENT OF COGNITION IN PATIENTS WITH SCHIzOPHRENIA AND ALzHEIMER’S DISEASE” EDISON RESEARCH 9 SCHIzOPHRENIA IS ALSO AN ILLNESS THAT AFFECTS THE NORMAL FUNCTIONING OF THE BRAIN. ABOUT ONE IN A HUNDRED PEOPLE WILL DEVELOP SCHIzOPHRENIA AT SOME TIME IN THEIR LIVES. MOST OF THESE WILL BE FIRST AFFECTED IN THEIR LATE TEENS AND EARLY TWENTIES. THE SCHIzOPHRENIA MARkET IS ESTIMATED AT US$4.3BN IN 2011. 8 CEO & MANAGING DIRECTOR'S REPORTe NEUROFIT CORPORATE The operations of our European subsidiary continue to meet expectations. Total revenue in the period was $4.20 million compared to $2.75 million in the previous period with $2.62 million in work performed for Bionomics in FY2011 compared to $887,501 in FY2010. Work performed for Bionomics included research on BNC210 and our Alpha 7 program. During the year Neurofit secured new contracts with major pharmaceutical companies including through Master Service Agreements. One pharmaceutical company has recently extended its Master Service Agreement with Neurofit to 2016. Neurofit also continued to expand its services, and is now offering a range of new oncology models, in response to its customer’s needs. In May 2011, major Bionomics shareholder, Start-up Australia Ventures, reduced its holding from 27.7% to 8.2% in an orderly sell down. Bionomics further catered to strong interest from a number of highly credible new and existing domestic and international institutions with an institutional placement of 25 million new fully paid ordinary shares to raise $14.25 million. These activities have allowed the Company to reposition its register with a range of long term, supportive shareholders, improve liquidity in the Company’s shares and provide a strong financial footing for the future. Bionomics balance sheet was further strengthened by the sale and long term leaseback of the head office and research facility in Thebarton, South Australia which generated net proceeds of $4.1 million in July 2011. The resulting cash position of the Company means that the Company is very well positioned to progress partnership discussions as well as accelerate internal discovery and development initiatives. 9 Bionomics’ impressive portfolio of drug candidates from early to advanced stages of development, productive platform technologies, strategic partnering program and solid financial position are the basis for our reputation as a fully integrated, international drug discovery and development company. None of this would have been possible without the extraordinary dedication and talents of our staff, including our staff at Neurofit who have made a remarkable contribution to our BNC210 program, our scientific and clinical advisors, including members of Bionomics’ Scientific Advisory Board, the participants in our clinical trials and their families, and the support of our shareholders who share our vision of making a difference to sufferers of cancer, anxiety, depression and immune disorders for which I warmly thank you. Deborah Rathjen CEO and Managing Director CEO & MANAGING DIRECTOR’S REPORTe OUTLOOk The next 12 months will see a number of important near term valuation catalysts for Bionomics shareholders. Bionomics is continuing to research the science of BNC210 and key discoveries and clinical data will be presented at major international conferences throughout the year by our scientific team. Based on solid science and excellent clinical data, our licensing strategy is being implemented and is supported by Phase II clinical trial planning. With the development path of BNC105 now delineated, Bionomics has retained a fast track approach in its development of BNC105. The metastatic renal cancer clinical trial has moved to the randomised phase. This will recruit 134 patients and is due for completion in 2012. The new ovarian trial is expected to be initiated 1H, CY 2012. These milestones are directed at expanding the BNC105 data set and position for licensing. The extension of our research agreement has been a vote of confidence from Merck Serono and a tangible sign that the program is making progress towards compound selections and anticipated milestone payments. These developments in our leading three programs, and our strengthened balance sheet, allow for the entry of further drug candidates into our pipeline. Bionomics’ cancer kinase and Alpha 7 programs are anticipated to make solid progress towards the identification of new drug candidates with one compound from our Alpha 7 program ear-marked to enter IND enabling studies by the end of Q3 CY 2012 as a prelude to initiation of clinical trials. 10 PIPELINEe Bionomics has a portfolio of drug candidates in various stages of development, of which BNC105, BNC210 and Kv1.3 are the most advanced with potentially significant end-user markets with unmet needs. DRUG CANDIDATE / PROGRAM CENTRAL NERVOUS SYSTEM BNC210 - ANXIETY + DEPRESSION ALPHA 7 nAChR MODULATORS - ALZHEIMER’S DISEASE GABA-A MODULATORS - EPILEPSY CANCER BNC105 RENAL CANCER BNC105 OVARIAN CANCER UNDISCLOSED KINASE BN069 IMMUNE DISEASE Kv1.3 INHIBITORS - MULTIPLE SCLEROSIS DISCOVERY PRECLINICAL PHASE I PHASE II LICENSEE / PARTNER POTENTIAL MARKET SIZE ANXIETY global sales of US$15bn annually DEPRESSION global sales of US$11bn in 2008 TO BE COMMENCED RENAL Sutent / Pfizer; Nexavar / Bayer & Onyx (US $2bn in 2010) OVARIAN Global sales of US$3.6bn in 2010 MULTIPLE SCLEROSIS Global sales of US$12bn in 2010 BNC210e CLINICAL STAGE PROGRAMS 11 BNC210 BNC210 is a “first in class” compound whose novel mechanism to treat anxiety and depression lacks the side-effects of currently used treatments. Phase Ib trials of the drug were conducted in France by Forenap Pharma and completed in March 2011 with outstanding results. The first trial evaluated the effect of BNC210 on panic symptoms induced by pharmacological means (administration of the peptide CCK-4) in healthy volunteers. 59 subjects were enrolled in the trial and CCK-induced panic was measured in 15 subjects. BNC210 treatment significantly reduced the number and intensity of symptoms. In addition, subjects recovered more quickly from a CCK-induced panic attack returning to a normal emotional state after ten minutes when receiving BNC210 compared with around an hour for those on placebo. % REDUCTION IN TOTAL PANIC SYMPTOMS e “THE DATA ARE VERY ENCOURAGING AND POINT TO BNC210 REDUCING ANxIETY IN A MANNER THAT IS POTENTIALLY BETTER FOR PATIENTS THAN CURRENT TREATMENTS.” PROFESSOR PAUL FITzGERALD OF THE MONASH ALFRED PSYCHIATRY RESEARCH CENTRE 9 % REDUCTION IN PANIC SYMPTOM INTENSITY e 12 BNC210e CLINICAL STAGE PROGRAMS The second trial compared BNC210 with Lorazepam, a Valium-like anti-anxiety drug. BNC210 outperformed its competitor on measures of attention, memory, co-ordination, addiction and sedation. Attention Multiple Choice Reaction Time Visuo-motor Co-ordination Peak Saccadic Eye Movement Sleepiness Karolinska Sleepiness Scale Memory Perceptual Priming Test Addiction ARCI49 BNC210 300 & 2000 mg PRIMARY OBjECTIVE LORAzEPAM 2 mg No Effect Reduced at T+6h, 9h and 12h SECONDARY OBjECTIVES No Effect No Sedation Reduced at T+6h, 9h and 12h Sedation at T+6h and 9h No Effect on Memory Slight Memory Impairment No Association with Drug Groups Association with LSD and Phenobarbital/Alcohol Groups This trial also compared the effects of BNC210 and Lorazepam on the brain using electroencephalography (EEG). 24 subjects were enrolled in the trial with 21 subjects evaluated. An important finding was that EEG data showed for the first time BNC210-related changes in human brain activity indicative of efficacy and that this activity occurs in the absence of sedation. EEG LEADS ARE ATTACHED TO THE SCALP BRAIN MAPS MADE FROM EEG DATA “THE EEG DATA INDICATES THAT BNC210 GETS INTO THE BRAIN AND ExERTS A MORE SUBTLE AND SPECIFIC EFFECT THAN LORAzEPAM.” PROFESSOR PAUL FITzGERALD OF THE MONASH ALFRED PSYCHIATRY RESEARCH CENTRE 9 BRAIN MAPS SHOWING BNC210 EFFECT ON ALPHA AND BETA FREqUENCY BANDS ALPHA BETA 13 EEG data showed BNC210 related changes in β3 brain activity similar to that of Lorazepam indicative of anxiolytic efficacy as shown by the green circle.q Unlike Lorazepam, BNC210 did not increase activity in the δ region (indicated by the red circle) suggesting that BNC210 activity occurs in the absence of sedation. In November 2010, new scientific data on BNC210 was presented at a major US conference, Neuroscience 2010. The data demonstrated the effectiveness of BNC210 in preclinical models of drug-induced anxiety and highlighted its potential to become the therapy of choice. BNC210 modulates molecular pathways that are targeted by several marketed drugs, including selective serotonin reuptake inhibitors (SSRIs) such as Prozac, Lexapro, Effexor and Zoloft which are used to treat chronic forms of anxiety and depression. However, important points of difference indicated by the animal studies include BNC210’s rapid onset of action; it does not require prolonged treatment for its activity to develop; chronic use does not lead to symptoms of physical dependence and it is unlikely to produce withdrawal symptoms. Lastly, BNC210 does not inhibit important drug metabolizing enzymes in the liver, indicating that it is potentially safe to take with other medications. PROjECTED MILESTONES FOR THE BNC210 PROGRAM BNC210 MILESTONE Present BNC210 data at ECNP Present Phase Ib clinical trial data at Neuroscience International patent approvals TIMING 4Q, CY 2011 4Q, CY 2011 1Q, CY 2012 14 BNC105e CLINICAL STAGE PROGRAMS BNC105 BNC105 is a potent anti-tumour agent with a wide window of safety and its multiple points of attack mean less liability for drug resistance to develop. Its highly selective and rapid tumour vascular disruption traps and concentrates BNC105 within tumours for greater duration of action. Preclinical studies showed that BNC105 enhances the effectiveness of radiation treatment, cytotoxic chemotherapy such as cisplatin and biological agents such as Avastin suggesting its potential for incorporation into a variety of solid tumour treatment regimens. Data from Phase II trials currently underway have confirmed this view. MESOTHELIOMA TRIAL BNC105 is being evaluated in patients with mesothelioma, a cancer caused by asbestos exposure. The mesothelioma trial, conducted in Australia, is a single arm Phase II trial in patients whose disease progressed after first line chemotherapy with Alimta and cisplatin. BNC105, at a dose of 16mg/m² was well tolerated, a result consistent with clinical experience in the first clinical trial of BNC105. Analysis of the first 24 patients has revealed one patient demonstrating a 57% reduction in tumour measurement. At least five other patients show stable disease. There will be no further enrolment into the current trial though there is ongoing evaluation of patients continuing on treatment with BNC105. Based on the findings of this trial and on preclinical evidence of encouraging combination data with cisplatin, Bionomics is now considering development of BNC105 for the treatment of mesothelioma as first line therapy in combination with Alimta and cisplatin. 100 l a v i v r u s t n e c r e P 80 60 40 20 0 0 P= 0.011 Control BNC105 10 20 30 40 50 Day 100 l a v i v r u s t n e c r e P 80 60 40 20 0 0 P= 0.029 Control Pemetrexed 10 20 30 40 50 Day 100 l a v i v r u s t n e c r e P 80 60 40 20 0 0 Control Cisplatin 10 20 30 40 50 Day Legend: BNC105 is more effective than pemetrexed (Alimta) and cisplatin in prolonging survival in an animal xenograft model of mesothelioma – PRESENTED AT AACR, April 2011. 9 RENAL CELL CANCER TRIAL A US based multi-centre clinical trial is underway of BNC105 in combination with Afinitor in patients with metastatic renal cell cancer. Treatment options remain limited in progressive metastatic renal cell cancer for patients who no longer respond to Tyrosine Kinase Inhibitors (TKI) such as Sutent, a first line therapy for the disease. The BNC105 trial is being conducted in patients who have failed TKI therapy and are also being treated with Afinitor, an mTOR inhibitor. It is hoped that that the combination of BNC105 with an agent active against mTOR would cut off a tumour “survival” response and improve clinical outcome. The clinical trial design has two stages, the first of which involves dose escalation of BNC105 to assess the safety of combining BNC105 and Afinitor. Interim data has shown that BNC105 is well tolerated at a dose level of 12.6 mg/m2 after at least 12 cycles of treatment in combination with Afinitor. It is known from other studies that this is a key dose level that results in reduced tubulin polymerization, the therapeutic target of BNC105. Based on the tolerance of the 16mg/m² dose achieved in the mesothelioma trial, the renal trial will be continued to the 16mg/m² dose level. The second stage of the trial is an efficacy evaluation where the therapeutic benefit of the combination is compared to the therapeutic benefit of Afinitor monotherapy. A total of 134 patients will be enrolled in this portion of the trial which is due for completion in 2012. On 1 April 2011 Bionomics announced the presentation of preclinical data supporting the current renal cancer trial at the American Association for Cancer Research (AACR). The data demonstrated the potent vascular disrupting effects of BNC105 in two mouse models of renal cancer, including a model in which the cancer spreads to the lungs. BNC105 induced tumour blood vessel shutdown in both the primary tumour and the secondary lung cancer. BNC105 activity was shown to be comparable with the blockbuster drug Sutent which had worldwide sales of US$1.066 billion in 2010. 15 RIGHT kIDNEY SHOWING TUMOUR BURDEN Legend: BNC105 inhibits tumour growth in the RENCA orthotopic renal cancer model comparable to Sutent. q “IT IS PARTICULARLY ExCITING TO BE CONDUCTING A TRIAL WHICH HAS THE POTENTIAL OF CREATING A NEW PARADIGM FOR THE TREATMENT OF RENAL CANCER.” DR THOMAS E HUTSON OF THE TExAS ONCOLOGY- BAYLOR CHARLES A. SAMMONS CANCER CENTER AND PRINCIPAL INVESTIGATOR OF BIONOMICS’ PHASE II RENAL CANCER TRIAL 9 CONTROL BNC105 CONTROL SUTENT n o i t a r e f i l o r p l l e C ) e l c i h e v o t e v i t a l e r ( 1.25 1.00 0.75 0.50 0.25 0.00 A2780cis BNC105 Cis -5 -4 -3 -2 -1 0 1 2 3 4 5 6 Conc nM (Log) BNC105 0.1414 Cis 5021 EC50 Legend: BNC105 is 50,000 times more active than cisplatin in inhibiting the proliferation of cisplatin resistant ovarian cancer cells. 9 OVARIAN CANCER TRIAL Bionomics will evaluate BNC105 in combination with carboplatin and gemcitabine for the treatment of ovarian cancer in a multi-centre randomised Phase I / II trial in Australia and the US which will commence next year. The decision to proceed is based on strong preclinical data which suggests that BNC105 is highly effective against cisplatin resistant ovarian tumours. Moreover, BNC105 both in combination with gemcitabine and in combination with cisplatin resulted in increased therapeutic benefit measured as tumour regression and survival in an animal model. The combination of gemcitabine with a platinum treatment (cisplatin or carboplatin) is standard of care chemotherapy in a number of cancer indications including ovarian cancer. BNC105 PROjECTED MILESTONES FOR THE BNC105 PROGRAM MILESTONE 21 clinical trial sites open in renal cancer trial Initiation of Phase I / II ovarian cancer clinical trial Presentation of clinical data at ASCO Presentation of BNC105 data at AACR Completion of renal trial enrolment TIMING 4Q, CY 2011 1H, CY 2012 2Q, CY 2012 2Q, CY 2012 4Q, CY 2012 16 INTELLECTUAL PROPERTY PORTFOLIOe Bionomics continues to build a strong patent portfolio covering the key elements of its business. Through the worldwide Patent Cooperation Treaty (PCT) mechanism, Bionomics and its related companies were granted 3 patents this financial year, 9 PCT patent applications entered the national and regional phases of examination and 7 provisional patent applications were filed as indicated below. New patent applications granted or filed this financial year: GRANTED PATENT NO. COUNTRIES TITLE GRANT DATE PROGRAM 576036 New Zealand Novel Anxiolytic Compounds 9 February 2011 BNC210 2007202499 Australia Mutations in Ion Channels 3 March 2011 Epilepsy 553126 New Zealand Compositions and Methods for Angiogenesis Related Molecules and Treatments 8 March 2011 Angiogenesis FILED PATENT NO. COUNTRIES TITLE 2011900738 2011201761 Australian Provisional Australian Divisional Novel Small Molecules as Therapeutics Loci for Idiopathic Generalised Epilepsy, Mutations Thereof and Methods of Using Same to Assess, Diagnose, Prognose, or Treat Epilepsy 12/954154 United States of America Combination Therapy for Treating Proliferative Diseases 2011900737 Australian Provisional Methods of Treating a Disease or Condition of the Central Nervous System 2011901791 Australian Provisional Methods for the Kilogram Scale Synthesis of 1,8-naphthyridine Compounds PCT/AU2009/ 000739 61/486536 Australia, Canada, China, Europe, Japan, New Zealand & United States of America United States of America Provisional & Europe Novel (Heteroaromatic Heterocyclic) Potassium Channel Blockers and Uses Thereof Amine Derivatives PROGRAM BNC210 Epilepsy BNC105 BNC210 BNC210 Kv1.3 Kv1.3 17 PROGRAM Alpha 7 Nicotinic Acetylcholine Receptor Alpha 7 Nicotinic Acetylcholine Receptor Positive Allosteric Modulators and Uses Thereof – 1 Positive Allosteric Modulators and Uses Thereof – 2 DNA Sequences for Human Angiogenesis Genes Angiogenesis Method for Identifying Nucleic Acid Molecules Associated with Angiogenesis Angiogenesis FILED PATENT NO. COUNTRIES TITLE Australian Provisional Australian Provisional Japan Divisional United States of America Continuation in Part 2011900319 2011900317 2010-37197 12/861624 PCT/AU2010/ 001097 PCT/AU2010/ 001108 PCT/AU2010/ 001595 Australia Combination Therapy Australia Treatment for Macular Degeneration Australia Tubulin Biomarker Assay 2010903175 Australian Provisional Chemical Processes for the Manufacture of Substituted Benzofurans 12/681763 United States of America Novel Aryl Potassium Channel Blockers and Uses Thereof BNC105 BNC105 BNC105 BNC105 Kv1.3 OVERVIEW OF PATENT PORTFOLIO q 5 patent applications covering BNC105, related molecules and biomarkers q 4 patent applications covering BNC210 and its use in the treatment of anxiety and other disorders q 8 patent applications covering molecules which inhibit the activity of the Kv1.3 ion channel and the use of these molecules in the treatment of Multiple Sclerosis and other autoimmune disorders q 2 patent applications covering Parkinson’s Disease and related disorders q 2 patent applications covering memory enhancement and related disorders q 52 pending patent applications covering discoveries made utilising Bionomics’ ionX® and Angene® platforms 18 BOARD OF DIRECTORSe Chairman Non-Executive Director Mr Fullerton has extensive experience in investment, management and investment banking and is a qualified chartered accountant. He is the Managing Director of Mandalay Capital Pty Limited, an investor in listed securities and private equity. Mr Fullerton was non-executive Chairman of Cordlife Limited and Health Communication Network Limited, and held non-executive directorships with Global Health Limited, The Environmental Group Limited, Standard Chartered Australia Limited, Alliance Properties Limited and Federal Airports Corporation. DR DEBORAH RATHjEN PhD, FTSE, MAICD MR CHRISTOPHER FULLERTON BEc Chief Executive Officer and Managing Director A seasoned biotech executive of almost 20 years, Dr Deborah Rathjen joined Bionomics in June 2000 from Peptech Limited, where she was Manager of Business Development and Licensing. Dr Rathjen was a co-inventor of Peptech’s TNF technology and leader of the company’s successful defence of its key TNF patents against a legal challenge by BASF, providing Peptech with a strong commercial basis for licensing negotiations with BASF, Centocor and other companies with anti- TNF products. Dr Rathjen has significant experience in research, business development and licensing. Dr Rathjen is Chairperson of the AusBiotech Board, and in 2004 was awarded the AusBiotech President’s Medal for her significant contribution to the Australian biotechnology industry. In 2006 she received a Distinguished Alumni Award from Flinders University, in 2009 the BioSingapore Asia Pacific Woman Entrepreneur of the Year, and in 2010 Bio Innovation SA Industry Leader Award. 19 Non-Executive Director Mr Tappenden commenced his career as a Non- Executive Director in 2003 after a career with Ernst & Young spanning 30 years. During his time at Ernst & Young Mr Tappenden held a variety of positions including Managing Partner of the Melbourne Office, member of the Board of Partners, Head of the Victorian Government Services Group and National Director of the Entrepreneurial Services Division. He holds directorships in various private, government and not-for-profit organisations and is the Chairman of the Audit and Risk Management Committees of many of those organisations. DR ERROL DE SOUzA PhD MR TREVOR TAPPENDEN CA, FAICD Non-Executive Director Dr De Souza is a leader in research and development concerning the central nervous system (CNS). He is currently President and CEO of leading US company Biodel Inc (Nasdaq: BIOD) and is the former President and CEO of US biotech companies Archemix Corporation and Synaptic Pharmaceutical Corporation. Dr De Souza formerly held senior management positions at Aventis and its predecessor Hoechst Marion Roussel Pharmaceuticals, Inc. Most recently, he was Senior Vice President and Site Head of US Drug Innovation and Approval (R&D), at Aventis, where he was responsible for the discovery and development of drug candidates through Phase IIa clinical trials for CNS and inflammatory disorders. Prior to Aventis, he was a co-founder and Chief Scientific Officer of Neurocrine Biosciences (Nasdaq: NBIX). Dr De Souza serves on multiple editorial boards, National Institutes of Health (NIH) Committees and is a Director of several public and private companies in the US. 20 MANAGEMENTe Chief Financial Officer and Company Secretary Ms Young has over 12 years experience, with six years in the medical device field, including the last two years as CFO of an ASX- listed company covering all facets of the company’s global finance function. In particular, her considerable commercial experience in listed company reporting requirements, international finances and working capital management will complement the Bionomics team. Ms Young has also gained experience in negotiating distributor agreements, due diligence, cost reduction strategies and improving operating efficiencies. Previously Ms Young worked for Deloitte Touche Tohmatsu in the Growth Solutions Division. Ms Young holds a Bachelor of Commerce from Deakin University and is a Chartered Accountant. DR EMILE ANDRIAMBELOSON PhD Head of Research Neurofit Dr Emile Andriambeloson joined Neurofit in 2002 from Novartis Pharma and has played an important role in the development of Neurofit’s business. In 2005 Dr Andriambeloson became the Head of Research at Neurofit and is the key interface with Neurofit’s international customer base as well as Bionomics’ CNS programs. Dr Andriambeloson has a PhD from the University of Strasbourg in France and is recognised for his expertise in pharmacology. He is the author of 20 articles published in highly regarded peer reviewed scientific journals. Dr Andriambeloson’s previous positions include Novartis Pharma (Basel, Switzerland), Heart Research Institute (Sydney, Australia) and University of New South Wales (Sydney, Australia). MS MELANIE YOUNG BCom, CA Vice President Drug Discovery Dr Andrew Harvey joined the chemistry group at Bionomics in 2007 and has led the group in the Multiple Sclerosis collaboration with European pharmaceutical company, Merck Serono, since the collaboration began in June 2008. He played a leading scientific role in the partnering discussions with Merck Serono and has inventorship on each of Bionomics’ Multiple Sclerosis patents. Dr Harvey became the Vice President of Chemistry in 2009. During his prior employment at The Walter and Eliza Hall Institute for Medical Research, Dr Harvey was awarded a National Health and Medical Research Council Industry Fellowship for his research in identifying new treatments for Multiple Sclerosis. He holds a PhD and a BSc (Honours) from Canterbury University in New Zealand. DR GABRIEL kREMMIDIOTIS BSc (Hons), PhD DR ANDREW HARVEY BSc (Hons), PhD 21 Vice President Research & Development Dr Gabriel Kremmidiotis joined Bionomics in January 2002 and his early work focused on Cancer Biology leading to the establishment of the Angene® platform and the discovery of Bionomics’ oncology molecule BNC105. Dr Kremmidiotis led the efforts of progressing BNC105. He holds a PhD and a Bachelor of Science (Honours) from Flinders University and a Bachelor of Science from The University of Melbourne. Dr Kremmidiotis is an author of 25 articles published in internationally- recognised scientific journals including Clinical Cancer Research, Molecular Cancer Therapeutics, Cell and Proceedings of the National Academy of Sciences. Dr Kremmidiotis is a member of the American Association for Cancer Research (AACR) and American Society of Clinical Oncology (ASCO). 22 CORPORATE GOVERNANCE STATEMENTe Bionomics Limited (the Company) and the Board are committed to achieving and applying a high standard of corporate governance taking into consideration the Company’s size and the industry in which the Company operates. The Company’s framework is consistent with the Australian Securities Exchange (ASX) Corporate Governance Council (ASX CGC) guidelines. The relationship and division of responsibilities between the Board and other key management personnel is critical to the Company’s long-term success. The directors are responsible to the shareholders for the performance of the Company in both the short and the longer term and for seeking an appropriate balance between sometimes competing objectives in determining the best interests of the Company. Their focus is to enhance the interests of shareholders and to ensure the Company is properly governed. Day to day management of the Company’s affairs, including the implementation of its approved strategy and policy initiatives, is delegated by the Board to the Chief Executive Officer and Managing Director and other key management personnel, except for matters expressly required by law to be approved by the Board. This delegation process has been formalised by the documentation of responsibilities between the Chairman and the Chief Executive Officer and Managing Director and incorporated into the Board’s charter. The following corporate governance framework has been implemented to ensure the highest level of corporate governance is achieved: q establishment of an internal control framework focusing on key business risks; q adoption of a code of professional ethics and conduct which applies to all directors, officers and employees; q implementation of strict policies regarding related party transactions and the acquisition and disposal of the Company’s securities by directors, officers and employees; and q adoption of clear reporting and communication policies and procedures. A description of the Company’s main corporate governance practices are following. All these practices, unless otherwise stated, were in place for the entire year. THE BOARD OF DIRECTORS The Board of Directors (the Board) operates in accordance with the broad principles formally set out in its charter (Board Charter) that is available from the corporate governance section of the Company website at www.bionomics.com.au. The Board Charter details the Board’s composition and responsibilities. The Board Charter (inter alia) states: q the Bionomics’ Board will at all times recognise its overriding responsibility to act honestly, fairly, diligently, and in accordance with the law in fulfilling its primary responsibility of looking after the interests of Bionomics’ shareholders. These interests are well served by also taking into consideration the interests of other stakeholders such as employees and affiliated institutions. q the Board is to be comprised of both executive and non- executive directors with a majority of non-executive directors. q in recognition of the importance of independent views and the Board’s role in supervising the activities of management, the majority of the Board must be independent of management and all directors are required to bring independent judgement to bear in their Board decision making. q the Board shall undertake an annual Board performance evaluation to identify any improvements necessary for both its operations and the Board Charter. RESPONSIBILITIES OF THE BOARD The responsibilities of the Board include: q approving the strategic direction, objectives and annual financial budget of Bionomics and monitoring the implementation of those strategies and achievement of those objectives and budget. q monitoring compliance with regulatory requirements and ethical standards. q appointing, and reviewing the performance of the Chief Executive Officer and Managing Director and of the performance of the Chief Executive Officer’s direct reports in achieving corporate goals. q approving announcements to shareholders and the ASX. q approving significant third party agreements. q issuing shares, options, equity instruments or other securities. q developing Bionomics’ corporate governance procedures, systems of risk management and internal compliance and control, codes of conduct (including human resources policies), and legal compliance. q approving and monitoring the progress of major capital expenditure, capital management and acquisitions and divestures. q assessing the composition of the Board and reviewing its processes and performance. 23 COMMITMENT Regular Board meetings and reviews of strategy are held throughout the year to monitor performance against both the Board approved objectives and the Board’s broad strategic plan. The number of meetings of the Company’s Board and of each Board committee held during the year ended 30 June 2011, and the number of meetings attended by each director is disclosed in the Directors’ Report under the heading ‘Meetings of Directors’. It is the Company’s practice to allow its executive directors to accept appointments outside the Company with prior written approval of the Board. Conflict of Interests All Board members are required as a continuing obligation to immediately notify the Board in writing of any actual or potential conflicts of interest or any circumstance that may affect a Board member’s level of independence. Independent Professional Advice Directors may seek independent professional advice, at the expense of the Company, on any matter connected with the discharge of their responsibilities. Prior written approval of the Chairman is required, but this will not be unreasonably withheld. Copies of this advice will be made available to, and for the benefit of, all Board members at the discretion of the Chairman. Performance Assessment In line with the timetables setting out the adoption of the ASX CGC guidelines the Board undertakes an annual self assessment comparing its performance with the requirements of the Board Charter. In this process, the Chairman meets directors individually to assess how Board performance may be improved. BOARD MEMBERS Details of the members of the Board, their experience, expertise, qualifications, term of office and independence status are set out in the Directors’ Report under the heading ‘Information on Directors’. At the date of signing the Directors’ Report there were three non-executive directors (including the Chairman), all of whom are deemed independent under the principles set out below, and one executive director. The Board seeks to ensure that it is cognisant of the state of development of Bionomics as a company: q at any point in time, its membership as a group has expertise in areas of current and future importance to the Company as it grows. q the size of the Board is conducive to effective discussion and efficient decision-making. DIRECTORS’ INDEPENDENCE The Board has adopted specific principles in relation to directors’ independence. These state that to be deemed independent, a director must be independent of management and free of any business or other relationship that could materially interfere with – or could reasonably be perceived to materially interfere with – the exercise of their unfettered and independent judgement. Issues relating to an assessment of the independence of a director will be determined by reference to the guidance provided by the ASX CGC guidelines. The Board shall determine the thresholds of materiality from the perspective of both the Company and its directors in determining whether a director maintains his or her independence of mind. TERM OF OFFICE The Company’s Constitution specifies that all non-executive directors must retire from office no later than the third AGM following their last election, however they may offer themselves for re-election. ROLE OF THE CHAIRMAN AND CHIEF ExECUTIVE OFFICER AND MANAGING DIRECTOR The Chairman is responsible for leading the Board, ensuring directors are properly briefed in all matters relevant to their role and responsibilities, facilitating Board discussions and managing the Board’s relationship with the Company’s key management personnel. The Chief Executive Officer and Managing Director is responsible for implementing the Company strategies and policies. 24 CORPORATE GOVERNANCE STATEMENTe CORPORATE REPORTING For each of the half year and full year results, the Chief Executive Officer and Managing Director and Chief Financial Officer are required to make the following certifications to the Board: q that the Company’s financial statements are complete and present a true and fair view, in all material respects, of the financial condition and operational results of the Company and are in accordance with relevant accounting standards; and q that the above statement is founded on a sound system of risk management and internal compliance and control which implements the policies adopted by the Board and that the Company’s risk management and internal compliance and control are operating efficiently and effectively in all material respects. BOARD COMMITTEES The Board has established one committee to assist in the execution of its duties and to allow detailed consideration of complex issues. This committee is the Audit and Risk Management Committee, which is comprised entirely of non- executive directors. All matters determined by the committee are submitted to the full Board as recommendations for final Board decision. Minutes of committee meetings are tabled at a subsequent Board meeting. There is no formal nomination committee for the Company. Nominations for the Board are considered by the full Board as part of normal business reviewed by the Board at its regular meetings. Under the Board Charter, in the event that the Board believes a new director should be appointed, the Board shall review the range of skills, experience and expertise currently existing on the Board in relation to areas of current and future importance to the Company as it grows. Candidates are assessed against this review of needs and, where appropriate, advice is sought from independent search consultants. Where the Board appoints a suitable candidate that person must stand for election at the next AGM of the Company. Notices of meeting for the election of directors comply with the ASX CGC guidelines. New directors will be provided with a letter of appointment setting out the Company’s expectations, their responsibilities, rights and the terms and conditions of their appointment. Compensation Committee Due to the size of the Board, all Compensation Committee functions are handled by the full board rather than a subcommittee. In this context, the Board decides on remuneration and incentive policies and practices generally, and makes specific recommendations on remuneration packages and other terms of employment for executive directors and non-executive directors. All key management personnel sign a formal employment contract at the time of their appointment covering a range of matters including their duties, rights, responsibilities and any entitlements on termination. A formal establishment of annual objectives and subsequent evaluation of performance including a half-year review is conducted by the Chief Executive Officer and Managing Director with all key management personnel who report directly to that position. Further information on directors’ and other key management personnel’s remuneration is set out in the Directors’ Report and note 23 to the financial statements. The Compensation Committee previously had responsibility for reviewing any transactions between the Company and the directors, or any interest associated with the directors, to ensure the structure and the terms of the transaction was in compliance with the Corporations Act 2001 and was appropriately disclosed. This is now the responsibility of the full Board. Audit and Risk Management Committee The Audit and Risk Management Committee consists of the following non-executive directors: q Mr Trevor Tappenden (Chairman) q Mr Christopher Fullerton Details of the directors’ qualifications and all attendance at Audit and Risk Management Committee meetings are set out in the Directors’ Report. The Audit and Risk Management Committee has its own charter setting out its role and responsibilities, composition, structure, membership requirements and the manner in which the Committee is to operate. This charter is available on the Company website. 25 The main responsibilities of the Committee are to: q review, assess and recommend to the Board the annual financial statement and the half-year financial statement; and q assist the Board in fulfilling its oversight responsibilities through reviewing: q the financial reporting process, q the system of internal control and management of risks, q the audit process, and q the Company’s process for monitoring compliance with laws and regulations. Included in these responsibilities, the Audit and Risk Management Committee: q reviews the external auditors’ proposed audit scope, approach and their performance; q makes recommendations to the Board regarding the re- appointment of the external auditors; q considers the independence of the external auditors including the range of non-audit related services provided by the external auditors to the Company; and q ensures the Company establishes an effective Risk Management Policy and ensures compliance. In fulfilling its responsibilities, the Audit and Risk Management Committee: q receives regular reports from management and external auditors; q reviews whether management is adopting systems and processes sufficient for a company of Bionomics’ size and stage of development; q reviews any significant disagreements between the external auditors and management, irrespective of whether they have been resolved; q meets separately with external auditors at least twice a year without the presence of management; and q provides external auditors with a clear line of direct communication at any time to either the Chairman of the Audit and Risk Management Committee or the Chairman of the Board. The Audit and Risk Management Committee has authority, within the scope of its responsibilities, to seek any information it requires from any employee or external party and to obtain external legal or other professional advice. ExTERNAL AUDITORS The Board’s policy is to appoint external auditors who clearly demonstrate quality and independence. The performance of the external auditor is reviewed annually by the Audit and Risk Management Committee which also makes recommendations to the Board about the appointment of audit services for subsequent periods, taking into consideration assessment of performance, existing value and costs. Deloitte Touche Tohmatsu were appointed as external auditor in 2007. Deloitte’s policy is to rotate engagement partners every five years in line with the requirements of the Corporations Act 2001. An analysis of fees paid to the external auditors, including a breakdown of fees for non-audit services, is provided in note 26 to the financial statements. It is the policy of the external auditors to provide an annual declaration of their independence to both the Audit and Risk Management Committee and the Board. The external auditor is requested to attend the AGM and be available to answer shareholder questions about the conduct of the audit and the preparation and content of the audit report. RISk ASSESSMENT AND RISk MANAGEMENT The Board, through the Audit and Risk Management Committee, is responsible for ensuring there are adequate policies in relation to risk management, compliance and internal control systems. In summary, Company policies are designed to ensure significant strategic, operational, legal, reputational and financial risks are identified, assessed, and effectively monitored and managed in a manner sufficient for a company of Bionomics’ size and stage of development to enable achievement of the Company’s business strategy and objectives. The Company’s risk management policies are managed by the key management personnel and are reviewed by the Audit and Risk Management Committee according to a timetable of assessment and review proposed by that Committee and approved by the Board. 26 CORPORATE GOVERNANCE STATEMENTe ENVIRONMENTAL AND OCCUPATIONAL HEALTH AND SAFETY MANAGEMENT POLICIES The Company recognises the importance of occupational health and safety (OH&S) and is committed to the highest levels of performance. To help meet this objective, policies have been established to facilitate the systematic identification of OH&S issues and to ensure they are managed in a structured manner. The Chief Executive Officer and Managing Director has been nominated as the person responsible for communications with the ASX. This role includes responsibility for ensuring compliance with the continuous disclosure requirements in the ASX Listing Rules and overseeing and co-ordinating information disclosure to the ASX, analysts, brokers, shareholders, the media and the public. All announcements disclosed to the ASX are posted on the Company’s website as soon as practical after disclosure to the ASX. Procedures have also been established for reviewing whether any price sensitive information has been inadvertently disclosed, and if so, this information is also immediately released to the market. All shareholders are entitled to receive a copy of the Company’s annual report. In addition, the Company seeks to provide opportunities for shareholders to participate through electronic means. Recent initiatives to facilitate this include making all Company announcements, details of Company meetings, press releases for the last three years, and financial statements available on the Company’s website along with transcripts to the Chairman’s and Chief Executive Officer and Managing Director’s addresses to the Company’s AGMs. The website also includes a feedback and information request mechanism for investors and shareholders via the Contact Us page of the website. AUSTRALIAN EqUIVALENTS TO INTERNATIONAL FINANCIAL REPORTING STANDARDS (AIFRS) The financial statements are prepared in accordance with AIFRS. This system allows the Company to: q monitor its compliance with all relevant legislation; and q encourage employees to actively participate in the management of OH&S issues. The Company is in full compliance with all necessary environmental and other licensing requirements required for its research facility in Thebarton (South Australia) and for Neurofit SAS (France). CODE OF CONDUCT In its Board Charter, the Board has recognised its overriding responsibility to act honestly, fairly, diligently, and in accordance with the law in fulfilling its primary responsibility of looking after the interests of Bionomics’ shareholders. The Board believes that the interests of shareholders are best served by also taking into account the interests of other stakeholders such as Bionomics’ employees and individuals engaged in Bionomics’ directed research at Bionomics’ affiliated institutions. The Board will work to promote and maintain an environment within Bionomics that establishes these principles as basic guidelines for all employees. Bionomics has formalised a code of business conduct and ethics. A number of policies that relate to business conduct are in place including harassment prevention and share trading. Copies of the share trading policies for directors and for employees are available on the Company’s website. CONTINUOUS DISCLOSURE AND SHAREHOLDER COMMUNICATION The Company has written policies and procedures that focus on continuous disclosure of any information concerning the Company that a reasonable person would expect to have a material effect on the price of the Company’s securities. These policies and procedures also include the arrangements the Company has in place to promote communication with shareholders and encourage effective participation at AGMs. These policies and procedures are available on the Company’s website. DIRECTORS' REPORTe Your directors present their report on the financial statements of the Group for the year ended 30 June 2011, comprising the parent entity Bionomics Limited (Bionomics) and its subsidiaries. In order to comply with the Corporations Act 2001, the directors report as follows: Directors The following persons were directors of Bionomics during the period and up to the date of this report: q Mr Christopher Fullerton, Non-Executive Chairman q Dr Deborah Rathjen, Chief Executive Officer and Managing Director q Mr Trevor Tappenden, Non-Executive Director q Dr Errol De Souza, Non-Executive Director The above named directors held office during the whole of the financial year and since the end of the financial year. Principal Activities The principal activities of the Group during the period were: q to undertake research and development utilising Bionomics’ proprietary technology platforms with the aim of identifying and developing therapies to treat cancer and conditions of the Central Nervous System (CNS), including anxiety, Multiple Sclerosis and epilepsy; q to commercialise intellectual property assets; and q to identify strategic alliances and project opportunities capable of increasing shareholder value and of enhancing the competitive advantage of Bionomics within the biotechnology industry. Operating Results Consolidated revenue for the year to 30 June 2011 increased by 5.8% to $4,071,798. Grant funding for the period was $64,625. This compared with revenues of $3,848,469 and grant funding of $34,618 for the year to 30 June 2010. The operating loss after tax of the Group for the year to 30 June 2011 was $9,324,214 compared with the prior year after tax loss of $8,214,082. The consolidated group’s Statement of Financial Position was strengthened by a capital raising in May 2011, which raised net $12.26m, and the sale and leaseback of the Thebarton premises which settled on 13 July 2011 giving net cash inflow of $4.1m. Cash at 30 June 2011 was $16.052m. Review of Operations Drug Development BNC210: A “Next Generation” Treatment for Anxiety and Depression On 5 October 2010 Bionomics’ announced that it had obtained approval from the French Medical Agency AFSSAPS (Agence Francaise de Securite Sanitaire des Produits de Santé) and the ethics committee of the Strasbourg Hospital, CPP (Comite de Protection des Personnes), to perform two Phase Ib clinical 27 X trials of BNC210. Both trials were conducted by Forenap Pharma. On 30 March 2011 Bionomics announced the successful conclusion of both trials. The first trial evaluated the effects of BNC210 on panic symptoms induced by the administration of the peptide CCK-4 to 15 healthy male subjects classified as having a panic attack. The severity of panic symptoms was assessed by the Panic Symptom Scale (PSS). BNC210 reduced both the total PSS score (total symptoms) and the intensity of symptoms when measured ten minutes after the induction of the panic attack. With BNC210 treatment the number and intensity of symptoms decreased faster than with placebo and this reduction in symptoms was significant (p<0.05 for both the total symptom score and the intensity of symptoms). There was a strong, positive trend on the emotional stability of subject suffering a panic attack which was associated with BNC210 treatment. When treated with BNC210, subjects returned to normal emotional status within ten minutes of the administration of CCK-4 compared to 60 minutes on placebo. This trend correlated with the statistically significant reduction in panic symptoms by BNC210. The second trial compared BNC210 with Lorazepam (a Valium- like anxiety drug) on measures of attention, memory, co- ordination, addiction and sedation. Data from the 21 subjects evaluated in the trial confirmed the lack of debilitating side- effects of BNC210 relative to Lorazepam across all measures. An important finding from the trial was that EEG data showed BNC210-related changes in human brain activity indicative of efficacy in the absence of sedation. Completion of these trials marked a significant milestone for the future development of BNC210. Previous trials had indicated that BNC210 is safe and well tolerated and that drug levels from a single administration supporting its potential for once a day dosing. With the clinical data obtained over the past 12 months the execution of Bionomics partnership strategy has been strengthened and the Phase II development path for BNC210 clear. If successfully developed BNC210 is a solid candidate to replace current drugs in the market used to treat anxiety and depression, many of which are multi-billion dollar blockbusters. Bionomics continues to expand the science of BNC210 and to present new developments to major international conferences. For example, in November 2010 new BNC210 data was presented at a major US conference, Neuroscience 2010, demonstrating that BNC210 is highly effective in preclinical models of drug-induced anxiety. The new data also showed that BNC210 modulates molecular pathways that are targeted by several marketed drugs, including selective serotonin reuptake inhibitors (SSRI’s) such as Prozac, Lexapro, Effexor and Zoloft which are used to treat chronic forms of anxiety and depression. 28 DIRECTORS' REPORTe BNC105: A Highly Selective and Potent Vascular Disrupting Agent (VDA) for the Treatment of Solid Tumours Bionomics continued to progress its knowledge of the activity of BNC105 through preclinical evaluation in a range of tumour models. In April 2011 Bionomics’ scientists presented data at the American Association of Cancer Research (AACR) on the VDA effects of BNC105 in two mouse models of renal cancer, including a model in which the cancer spreads to the lungs. BNC105 was shown to induce tumour blood vessel shutdown in both the primary tumour and the secondary lung cancer. BNC105 activity was shown to be comparable to that of the blockbuster drug Sutent which had worldwide sales of US$1.066 billion in 2010. Sutent is used in first line therapy of renal cancer. A second poster described the efficacy of BNC105 in combination with cisplatin and gemcitabine. Initial data from Bionomics’ clinical trials of BNC105, released on 3 August 2011, have yielded encouraging data on the safety and tolerability of BNC105 in combination with Afinitor in patients with metastatic renal cancer and at 12.6 mg/m2 when used as a monotherapy in mesothelioma patients who have failed therapy with Alimta and cisplatin. In both clinical trials individual patients have completed > nine cycles of treatment. The interim analysis of the mesothelioma trial showed one patient with an objective response (57% reduction in tumour measurement) and at least five patients with stable disease as measured by RECIST, with the disease status of three patients still to be confirmed as stable disease. Following review of this initial and interim data respectively Bionomics is now pursuing a clinical development strategy which incorporates BNC105 into standard chemotherapy regimens which include platinum based drugs and a trial in women with ovarian cancer is to be initiated in 2012. Enrolment into the mesothelioma trial has now been discontinued. Drug Discovery kv1.3: Collaboration with Merck Serono Extended On 9 June 2011 Bionomics announced the extension of its collaborative Multiple Sclerosis (MS) research program with Merck Serono, a division of Merck KGaA, Darmstadt, Germany. Merck Serono is actively developing potential new treatments for MS and other autoimmune conditions based on compounds from the Bionomics Kv1.3 program. The R&D collaboration brings together Bionomics’ expertise in Kv1.3 biology and Merck Serono’s expertise in MS pharmacology, clinical development and commercialisation. Under the 2008 agreement, Bionomics received an upfront payment of US$2 million and committed research funding that has now been extended under the current amendment. Merck Serono will fund all development, including clinical development of drug candidates. For each compound that is successfully developed and commercialised as a result of the partnership, Bionomics may receive milestone payments of up to US$47 million and will be eligible to receive undisclosed royalties on the net sales of licensed products. The compounds licensed from Bionomics by Merck Serono target the potassium ion channel Kv1.3, a key modulator of the immune system and a target found on human immune cells which are associated with nerve cell damage in patients with MS. Inhibitors of Kv1.3 have been shown to inhibit the proliferation of these immune cells, suggesting they have application in the treatment of MS and potentially other autoimmune conditions, including arthritis. Pipeline Development Bionomics has continued to exploit its core technology platforms MultiCore®, ionX® and Angene® to identify the innovative drug candidates. In cancer Bionomics is working with the CRC for Cancer Therapeutics on an undisclosed kinase target. Bionomics’ CNS drug pipeline is also moving forward. On 4 February 2011 Bionomics announced that it had filed two patent applications covering compounds that are activators of the alpha 7 nicotinic acetylcholine receptor. These compounds restore memory loss caused by the administration of scopolamine to animals. The prevalence of conditions where an effective, memory- improving drug may find clinical application is large, providing a very significant commercial opportunity. Bionomics’ compounds, which have potent activity in restoring memory in animal tests, have the potential to treat Alzheimer’s disease by both improving memory and reducing brain tissue inflammation. Activation of the alpha7 nicotinic acetylcholine receptor may also improve function in a variety of neuropsychiatric diseases that feature memory impairment including schizophrenia, Attention Deficit Hyperactivity Disorder (ADHD) as well as in mood and anxiety disorders. Contract Services Neurofit Continues to Add Significant Value to Bionomics The operations of our European subsidiary continue to meet the expectations of their external customers and to add value to Bionomics R&D, in particular to BNC210 and to the Alpha 7 Alzheimers Disease program. Total revenue in the period was $4.20 million compared to $2.75 million in the previous period with $2.62 million in work performed for Bionomics in FY2011 compared to $887,501 in FY2010. Neurofit secured new contracts with major pharmaceutical companies including through Master Service Agreements, Neurofit also continued to expand its service offering, particularly in oncology, in response to its customer’s needs. 29 Corporate In May 2011 Bionomics’ major shareholder, Start-up Australia Ventures (Start-up), reduced its holding in Bionomics through the sale of shares to Australian and overseas institutional investors. In light of significant excess demand for the Start-up sell-down, Bionomics initiated, and successfully completed, an institutional placement of 25 million fully paid, ordinary shares to raise $14.25 million. This capital raising has provided Bionomics with flexibility in the development of its drug pipeline. In a further corporate development designed to strengthen the Company’s balance sheet, on 4 May 2011 Bionomics announced that it had entered into a contract for the sale of its research facility in Thebarton. As indicated previously this transaction was settled on 13 July 2011, with Bionomics receiving net proceeds of $4.1 million. Concurrent with the sale Bionomics entered into a long term leaseback arrangement with the purchaser for a 10 year period with options to extend for up to 10 years thereafter. Outlook Bionomics has undergone a transformation in FY11 achieving important clinical milestones in the BNC210 program, making progress in the discovery of new drug candidates for important diseases such as Alzheimers Disease, and re-positioning its share register. The results of the clinical trials of BNC210, which is in development for the treatment of anxiety and depression, and since year end, BNC105 which is in development for the treatment of solid tumours, together with the extension of our collaboration with global Pharma company Merck Serono have cemented Bionomics position as a fully integrated, international drug discovery and development company. The capital raising undertaken in May and the sale of Bionomics’ research facility have strengthened the Company’s balance sheet. Consequently the Company is well placed to execute its partnership strategies for BNC210 and BNC105. In addition the Company is moving quickly to commence the clinical trial of BNC105 in women with ovarian cancer. Dividends The directors do not propose to make any recommendation for dividends for the current financial year. There were no dividends declared in respect of the previous financial year. Significant Changes in the State of Affairs There were no significant changes in the state of affairs of the Group during the financial year. Subsequent Events No matters or circumstances have arisen since the end of the financial year which significantly affects or may significantly affect the results of the operations of the Group, except for the settlement of the sale and leaseback of the Thebarton premises on 13 July 2011 in line with the contract executed on 29 April 2011. Likely Developments and Expected Results of Operations The Group will continue to undertake drug discovery and will seek to commercialise the outcomes of its research and development in the form of diagnostic products and drugs for the treatment of disease. Further information on likely developments in the operations of the Group and the expected results of operations have not been included in this report because further disclosure would not be in the Group’s best interests. Environmental Regulation The Group is subject to environmental regulations and other licenses in respect of its research facilities in Thebarton (South Australia) and for Neurofit (France). The Group is subject to regular inspections and audits by responsible State and Federal authorities. The Group was in compliance with all the necessary environmental regulations throughout 2010 - 2011 and no related issues have arisen since the end of the financial year to the date of this report. INFORMATION ON DIRECTORS Mr Christopher Fullerton BEc Chairman – Non-Executive Director since 23 December 2008 Experience and Expertise Mr Fullerton has extensive experience in investment, management and investment banking and is a qualified chartered accountant. He is the Managing Director of Mandalay Capital Pty Limited, an investor in listed securities and private equity. Mr Fullerton was non-executive Chairman of Cordlife Limited and Health Communication Network Limited, and held non-executive directorships with Global Health Limited, The Environmental Group Limited, Standard Chartered Australia Limited, Alliance Properties Limited and Federal Airports Corporation. Current Directorships (in addition to Bionomics Limited) Listed: Nil Other: Mandalay Capital Pty Limited; Kador Group Holdings Pty Limited Former Listed Directorships in Last Three Years Cordlife Limited; Global Health Limited; The Environmental Group Limited Special Responsibilities Member of Audit and Risk Management Committee Interests in Shares and Options 4,825,020 ordinary shares in Bionomics Limited 1,000,000 unlisted options over ordinary shares in Bionomics Limited 30 DIRECTORS' REPORTe Dr Deborah Rathjen BSc (Hons), MAICD, PhD Chief Executive Officer and Managing Director Director since 18 May 2000 Dr Errol De Souza PhD Non-Executive Director Director since 28 February 2008 Experience and Expertise Dr Rathjen joined Bionomics in June 2000 from Peptech Limited, where she was general manager of business development and licensing. Dr Rathjen was a co-inventor of Peptech’s TNF technology and leader of the company’s successful defence of its key TNF patents against a legal challenge by BASF. Dr Rathjen has significant experience in research, business development and licensing and specific expertise in inflammation and cancer. Dr Rathjen is Chairperson of the AusBiotech Board. Current Directorship (in addition to Bionomics Limited) Listed: Nil Other: Director and Chairperson of AusBiotech Limited (since 2008) Former Listed Directorships in Last Three Years None Special Responsibilities Chief Executive Officer and Managing Director Interests in Shares and Options 1,343,689 ordinary shares in Bionomics Limited 1,965,000 unlisted options over ordinary shares in Bionomics Limited Mr Trevor Tappenden CA, FAICD Non-Executive Director Director since 15 September 2006 Experience and Expertise Mr Tappenden was a partner of Ernst & Young between 1982 and 2003, holding a variety of positions including Managing Partner of the Melbourne office, member of the Board of Partners, head of the Victorian Government Services Group and National Director of the Entrepreneurial Services Division. Mr Tappenden is a director of public, private, government and not-for-profit organisations. He is the Chairman of the Audit and Risk Management Committees of many of those organisations. Current Directorships (in addition to Bionomics Limited) Listed companies: Director, Metal Storm Limited Other: Chairman, Heide Museum of Modern Art; Director, Buckfast Pty Ltd; Director, Dairy Food Safety Victoria; Director, Advanced Manufacturing CRC; Councillor, RMIT University Former Listed Directorships in Last Three Years None Special Responsibilities Chairman of Audit and Risk Management Committee Interests in Shares and Options 245,899 ordinary shares in Bionomics Limited 500,000 unlisted options over ordinary shares in Bionomics Limited Experience and Expertise Dr De Souza is a leader in research and development concerning the central nervous system (CNS). He is currently President and CEO of leading US company Biodel Inc (Nasdaq: BIOD) and is the former President and CEO of US biotech companies Archemix Corporation and Synaptic Pharmaceutical Corporation. Dr De Souza formerly held senior management positions at Aventis and its predecessor Hoechst Marion Roussel Pharmaceuticals, Inc. Most recently, he was Senior Vice President and Site Head of US Drug Innovation and Approval (R&D), at Aventis, where he was responsible for the discovery and development of drug candidates through Phase IIa clinical trials for CNS and inflammatory disorders. Prior to Aventis, he was a co-founder and Chief Scientific Officer of Neurocrine Biosciences (Nasdaq: NBIX). Dr De Souza serves on multiple editorial boards, National Institutes of Health (NIH) Committees and is a director of several public and private companies. Current Directorships (in addition to Bionomics Limited) Listed companies: Nil Other: Director of Biodel Inc (Nasdaq: BIOD); Director of Targacept, Inc (Nasdaq: TRGT); Massachusetts Biotechnology Council Former Listed Directorships in Last Three Years Director of IDEXX Laboratories, Inc (Nasdaq: IDXX); Director of Palatin Technologies, Inc (Amex: PTN) Special Responsibilities None Interests in Shares and Options 116,698 ordinary shares in Bionomics Limited 500,000 unlisted options over ordinary shares in Bionomics Limited Company Secretary The Company Secretary is Ms Melanie Young. Ms Young was appointed to the position of Company Secretary and Chief Financial Officer in May 2011. Ms Young has over 12 years experience, with six years in the medical device field, including the last two years as CFO of an ASX-listed company covering all facets of the company’s global finance function. Ms Young has considerable commercial experience in listed company reporting requirements, international finances and working capital management. Ms Young has also gained experience in negotiating distributor agreements, due diligence, cost reduction strategies and improving operating efficiencies. Previously Ms Young worked for Deloitte Touche Tohmatsu in the Growth Solutions Division. Ms Young holds a Bachelor of Commerce from Deakin University and is a Chartered Accountant. 31 Meetings of Directors The numbers of meetings of the Company’s Board and of each Board committee held during the year ended 30 June 2011, and the numbers of meetings attended by each director were: Meetings of Audit and Risk Management Committee A 3 ** 3 ** B 3 ** 3 ** Full meetings of directors A 16 16 16 16 B 16 16 16 16 Mr Christopher Fullerton Dr Deborah Rathjen* Mr Trevor Tappenden Dr Errol De Souza A = Number of meetings held during the time the director held office or was a member of the committee during the year and was entitled to attend. B = Number of meetings attended. * = Not a non-executive director. ** = Not a member of the relevant committee, may attend by invitation. REMUNERATION REPORT The remuneration report is set out under the following main headings: 1. Principles used to determine the nature and amount of remuneration 2. Details of remuneration 3. Service agreements 4. Share-based compensation 5. Additional information 1. Principles Used to Determine the Nature and Amount of Remuneration The objective of the Group’s key management personnel remuneration framework is to ensure that reward for performance is competitive and appropriate for the results delivered. The framework aligns key management personnel rewards with achievement of strategic objectives and the creation of value for shareholders. Key management personnel remuneration and other terms of employment are determined by the Board having regard to performance, relevant comparative information and the Group’s financial performance. to attract and retain first class key management personnel capable of managing the Group’s operations and achieving the Group’s strategic objectives. The framework provides a mix of base cash remuneration and performance-based remuneration through the Bionomics Limited Employee Share Option Plan (the Bionomics ESOP) in order to align the interests of key management personnel with those of shareholders. Non-Executive Directors Fees and payments to non-executive directors reflect the demands that are made on and the responsibilities of the directors. To preserve the cash resources of the Group, all non-executive directors opted up until 30 June 2010 to receive approximately one third of their remuneration in Bionomics shares, which were issued following shareholder approval at an AGM. The non-executive directors did not opt for this during the year ended 30 June 2011. Non-executive directors may receive share options at the time of their initial appointment to the Board or at other such times as approved by shareholders. Directors’ Fees Non-executive directors’ fees are determined within an aggregate directors’ fee pool limit that is periodically recommended for approval by shareholders under the Constitution. The current aggregate non-executive directors’ fee pool limit is $400,000 per annum. The Chairman and non-executive directors’ fees are $110,000 per annum and $65,000 per annum respectively, inclusive of superannuation. The Chairman of the Audit and Risk Management Committee, Mr Trevor Tappenden, received an additional $10,000 per annum inclusive of superannuation for services relating to his Audit and Risk Management Committee duties. Dr Errol De Souza received an additional $10,000 per annum inclusive of superannuation for being a member of the Scientific Advisory Board. Any value that may be attributed to options issued to non- executive directors is not included in the shareholder approved aggregate limit of directors’ fees applying from time to time. Retirement Allowance for Directors The Group does not provide retirement allowances for its non-executive directors. key Management Personnel Remuneration The key management personnel pay and reward framework has three components: q a cash remuneration package, including superannuation and other entitlements; q longer-term incentives through participation in the Remuneration packages are set at levels that are intended Bionomics ESOP; and 32 DIRECTORS’ REPORTe q in exceptional circumstances, a cash bonus may be paid. 2. Details of Remuneration The combination of these comprises the key management personnel’s total remuneration. Base Remuneration Details of the remuneration of each director of Bionomics and each of the other key management personnel (as defined in the Corporations Act, 2001) are set out in the following tables. The cash remuneration package of key management personnel is structured as a total employment cost package that may be delivered as a mix of cash and prescribed salary sacrifice benefits at the key management personnel’s discretion, inclusive of superannuation. Remuneration levels are reviewed annually and an assessment made against market comparable roles balanced with individual key management personnel’s performance and the Group’s financial position. The key management personnel’s remuneration may also be reviewed on promotion. The Board reviews and approves the salary of the Chief Executive Officer and Managing Director and key management personnel directly reporting to the Chief Executive Officer and Managing Director. There is no policy or monitoring of other key management personnel limiting their risk in relation to issued options. There is no link between the Company’s performance and the setting of remuneration except as discussed on page 36 in relation to options for certain executives. There are no guaranteed base pay increases for key management personnel. Retirement Benefits Retirement benefits through superannuation are paid for all Group employees in line with relevant superannuation legislative requirements into funds nominated by the individual employee. The Group does not have any on-going responsibility for the individual employee superannuation and does not have in place a defined benefits plan for employees. The Bionomics ESOP Information on the Bionomics ESOP is set out in section 4 of this Remuneration Report. Non-Executive Chairman Mr Christopher Fullerton Executive Director Dr Deborah Rathjen, Chief Executive Officer and Managing Director Non-Executive Directors Mr Trevor Tappenden Dr Errol De Souza The following persons were the highest paid key Company and Group executives and those with greatest authority for the strategic direction and management of the Group (key management personnel) during the financial year and the prior year unless otherwise stated: Name Dr Emile Andriambeloson Dr Andrew Harvey Dr Gabriel Kremmidiotis Ms Melanie Young (appointed 9 May 2011) Mr Trevor Thiele (resigned 13 May 2011) Position Director of Research (Neurofit SAS) Vice President Drug Discovery Vice President Research and Development Chief Financial Officer and Company Secretary Chief Financial Officer and Company Secretary Details of options granted by Bionomics to and exercised by directors and key management personnel during the year ended 30 June 2011 are set out further in this note. 33 TOTAL $ 154,517 463,647 78,935 83,469 176,186 184,091 225,436 SHARE-BASED PAYMENTS SHARES $ OPTIONS $ OPTIONS % OF TOTAL 44,517 13,647 3,935 8,469 1,087 14,091 5,436 28.81 2.94 4.99 10.15 0.62 7.65 2.41 – – – – – – – – – – – – 23,975 32,942 124,124 14.31 7.66 230,222 1,620,478 Directors and Other key Management Personnel – 2011 SHORT-TERM BENEFITS CASH SALARY AND FEES $ NON- MONETARY BENEFITS $ 100,917 363,188 68,807 75,000 175,099 155,963 195,000 – 71,613 – – – – 9,801 POST EMPLOY- MENT SUPERAN- NUATION $ 9,083 15,199 6,193 – – 14,037 15,199 20,999 996 1,980 151,893 1,306,866 31,735 114,145 13,652 75,343 NAME Mr Christopher Fullerton Dr Deborah Rathjen Mr Trevor Tappenden Dr Errol De Souza Dr Emile Andriambeloson Dr Andrew Harvey Dr Gabriel Kremmidiotis Ms Melanie Young (appointed 9 May 2011) Mr Trevor Thiele (resigned 13 May 2011) TOTALS In lieu of cash bonuses Dr Harvey and Dr Kremmidiotis received options valued at $5,436 each during the year. Bonuses paid as options in July 2010 were dependent on the satisfaction of the individual’s performance criteria. Dr Andriambeloson’s cash salary includes a bonus payable of $12,556 relating to the agreed performance objectives of the Neurofit business unit for the year ended 30 June 2011. Mr Trevor Thiele was granted options valued at $32,942 in July 2010. These options lapsed upon resignation and the vesting conditions were not met. Executive managers are able to package their salaries into cash and non-monetary benefits. Directors and Other key Management Personnel – 2010 SHORT-TERM BENEFITS CASH SALARY AND FEES $ NON- MONETARY BENEFITS $ 41,515 294,061 34,250 37,333 17,275 146,229 103,028 146,139 - 51,478 - - – – – 2,400 POST EMPLOY- MENT SUPERAN- NUATION $ 3,736 14,461 3,083 - 1,555 – 11,972 14,461 SHARE-BASED PAYMENTS SHARES $ OPTIONS $ OPTIONS % OF TOTAL 29,692 45,600 13,667 18,272 9,436 – 30,000 38,000 16,200 10,271 59,080 7,562 11,088 4,926 2,377 14,784 – – – 12.05 12.71 12.91 16.63 14.84 1.60 9.25 – – – TOTAL $ 85,214 464,680 58,562 66,693 33,192 148,606 159,784 201,000 115,357 100,137 104,175 2,800 7,582 – 67,543 992,348 9,507 66,185 6,887 63,737 200,867 110,088 7.68 1,433,225 NAME Mr Christopher Fullerton Dr Deborah Rathjen Mr Trevor Tappenden Dr Errol De Souza Dr Peter Jonson (retired 4 November 2009) Dr Emile Andriambeloson Dr Andrew Harvey Dr Gabriel Kremmidiotis Mr Trevor Thiele (appointed 14 December 2009) Mr Stephen Birrell (resigned 18 December 2009) TOTALS 34 DIRECTORS’ REPORTe In 2010, approximately one third of non-executive directors’ fees were paid via the issuance of shares to these directors as a direct measure to conserve cash for the Group. Issuance of these shares was subject to the approval by shareholders at the AGM. In 2010, Dr Rathjen, Dr Harvey, Dr Kremmidiotis and Mr Birrell received $45,600, $30,000, $38,000 and $16,200 respectively of shares in lieu of salary in order to conserve the Group’s cash reserves. In 2010, cash salary for Dr Andriambeloson included a cash bonus of $19,157. Options are granted to directors and other key management personnel under the Bionomics ESOP, details of which are set out in section 4 of this Remuneration Report. No director or senior management person appointed during the period received a payment as part of their consideration for agreeing to hold the position. 3. Service Agreements Remuneration and other terms of employment for the Chief Executive Officer and Managing Director and the other key management personnel are formalised in service agreements. Major provisions of the agreements relating to remuneration are set out below: Dr Deborah Rathjen Chief Executive Officer and Managing Director q Term of agreement – five years commencing 15 October 2010. q Total remuneration package for the year ended 30 June 2011 of $450,000 per annum (excluding options), to be reviewed annually by the Board. q Payment of termination benefit on early termination by the employer without cause equal to six months’ salary. In the event of redundancy, purchase or merger of Bionomics by a third party resulting in a material diminution in duties, an additional six months’ salary will be paid. Dr Emile Andriambeloson Director of Research Neurofit SAS q Term of agreement – open commencing 1 March 2005. q Total remuneration package for the year ended 30 June 2011 of $162,543 per annum (excluding options and cash bonus), to be reviewed annually by the Chief Executive Officer and Managing Director and approved by the Board. q Payment of termination benefit on early termination by the employer without cause equal to three months’ salary. Dr Andrew Harvey Vice President Drug Discovery q Term of agreement – open commencing 5 January 2009. q Total remuneration package for the year ended 30 June 2011 of $170,000 per annum (excluding options), to be reviewed annually by the Chief Executive Officer and Managing Director and approved by the Board. q Payment of termination benefit on early termination by the employer without cause equal to one month’s salary. Dr Gabriel kremmidiotis Vice President Research and Development q Term of agreement – open commencing 1 January 2002. q Total remuneration package for the year ended 30 June 2011 of $220,000 per annum (excluding options), to be reviewed annually by the Chief Executive Officer and Managing Director and approved by the Board. q Payment of termination benefit on early termination by the employer without cause equal to one month’s salary. Ms Melanie Young Chief Financial Officer and Company Secretary q Term of agreement – open commencing 9 May 2011. q Total remuneration package for the year ended 30 June 2011 of $170,000 per annum to be reviewed annually by the Chief Executive Officer and Managing Director and approved by the Board. q Payment of termination benefit on early termination by the employer without cause equal to three months’ salary. In the event of redundancy, purchase or merger of Bionomics by a third party resulting in a material diminution in duties, six months’ salary will be paid. 4. Share-based Compensation Share-based compensation benefits are provided to employees via the Bionomics ESOP and an Employee Share Plan. The market value of shares issued to employees for no cash consideration under the Employee Share Plan is recognised as an employee benefits expense with a corresponding increase in equity when the employees become unconditionally entitled to the shares. The Bionomics ESOP was approved by the Board and Shareholders in 2008. Staff eligible to participate in the plan are those who have been a full time or part time employee of the Group for a period of not less than six months or a director of the Company. 35 Options are granted under the plan for no consideration and vest equally over five years, unless they are bonus options which vest immediately. Share Options Granted Before 7 November 2002 and / or Vested Before 1 january 2005 No expense is recognised in respect of these options. The shares are recognised when the options are exercised and the proceeds received allocated to share capital. Share Options Granted After 7 November 2002 and Vested After 1 january 2005 The fair value of options granted under the Bionomics ESOP is recognised as an employee benefit expense with a corresponding increase in equity. The fair value is measured at grant date and recognised over the period during which the employees become unconditionally entitled to the options. The amounts disclosed as remuneration relating to options are the assessed fair values at grant date of those options allocated equally over the period from grant date to vesting date. Fair values at grant date are independently determined using a Black-Scholes option pricing model that takes into account the exercise price, the term of the option, the vesting and performance criteria, the impact of dilution, the non- tradeable nature of the option, the share price at grant date, expected price volatility of the underlying share, the expected dividend yield and the risk-free interest rate for the term of the option. The terms and conditions of each grant of options affecting remuneration of directors and other key management personnel in this or future reporting periods are as follows: GRANT DATE GRANTED IN PRIOR PERIODS ExPIRY DATE ExERCISE PRICE FAIR VALUE PER OPTION AT GRANT DATE VESTING DATE june 2002 October 2004 january 2005 May 2006 November 2006 january 2007 October 2007 january 2008 july 2008 14 June 2012 10 June 2012 19 June 2012 19 June 2013 17 February 2013 17 February 2014 17 February 2015 7 July 2012 8 July 2013 9 July 2014 10 July 2015 11 July 2016 16 November 2012 16 November 2013 16 November 2014 16 November 2015 16 November 2016 $0.81 $0.81 $0.13 $0.13 $0.30 $0.30 $0.30 $0.22 $0.22 $0.22 $0.22 $0.22 $0.30 $0.30 $0.30 $0.30 $0.30 12 January 2012 $0.2150 4 October 2012 11 January 2013 1 July 2013 $0.29 $0.38 $0.36 $0.4078 $0.4390 $0.1668 $0.1704 $0.1234 $0.1289 $0.1335 $0.1205 $0.1260 $0.1306 $0.1343 $0.1373 $0.1147 $0.1211 $0.1264 $0.1307 $0.1343 $0.1453 $0.2140 $0.1879 $0.1579 14 June 2007 10 June 2007 19 June 2007 19 June 2008 18 February 2008 18 February 2009 18 February 2010 7 July 2007 7 July 2008 7 July 2009 7 July 2010 7 July 2011 16 November 2007 16 November 2008 16 November 2009 16 November 2010 16 November 2011 12 January 2007 4 October 2007 11 January 2008 1 July 2008 36 DIRECTORS’ REPORTe GRANT DATE GRANTED IN PRIOR PERIODS cont. November 2008 january 2009 june 2009 November 2009 GRANTED IN CURRENT PERIOD july 2010 November 2010 ExPIRY DATE ExERCISE PRICE FAIR VALUE PER OPTION AT GRANT DATE VESTING DATE 5 November 2013 5 November 2014 5 November 2015 5 November 2016 5 November 2017 5 November 2013 7 August 2014 7 August 2015 7 August 2016 $0.30 $0.30 $0.30 $0.30 $0.30 $0.3716 $0.3716 $0.3716 $0.3716 12 January 2014 $0.2976 15 June 2014 15 June 2015 15 June 2016 15 June 2017 15 June 2018 15 June 2019 4 November 2015 4 November 2016 4 November 2017 4 November 2018 4 November 2019 22 July 2015 4 November 2015 4 November 2016 4 November 2017 4 November 2018 4 November 2019 $0.25 $0.25 $0.25 $0.25 $0.25 $0.25 $0.30 $0.30 $0.30 $0.30 $0.30 $0.32 $0.31 $0.31 $0.31 $0.31 $0.31 $0.0875 $0.0963 $0.1042 $0.1114 $0.1178 $0.0737 $0.0828 $0.0915 $0.0993 $0.0520 $0.1173 $0.1250 $0.1315 $0.1370 $0.1415 $0.1455 $0.1147 $0.1229 $0.1301 $0.1367 $0.1427 $0.1208 $0.0916 $0.1007 $0.1088 $0.1160 $0.1224 5 November 2008 5 November 2009 5 November 2010 5 November 2011 5 November 2012 5 November 2008 7 August 2009 7 August 2010 7 August 2011 12 January 2009 15 June 2009 15 June 2010 15 June 2011 15 June 2012 15 June 2013 15 June 2014 4 November 2010 4 November 2011 4 November 2012 4 November 2013 4 November 2014 22 July 2010 4 November 2010 4 November 2011 4 November 2012 4 November 2013 4 November 2014 Options granted under the plan carry no dividend or voting rights. Options Provided as Remuneration under the ESOP in the Current Year Details of options over ordinary shares in the Company provided as remuneration to each director and each of the other key management personnel are set out below. When exercisable, each option is convertible into one ordinary share of Bionomics. During the year, options were issued to the following directors and other key management personnel: NAME NUMBER GRANTED DATE GRANTED TOTAL FAIR VALUE $ NUMBER VESTED % OF GRANT VESTED % OF GRANT FORFEITED Mr Christopher Fullerton1 500,000 4 Nov 2010 Dr Andrew Harvey2 Dr Gabriel Kremmidiotis2 Mr Trevor Thiele1 45,000 45,000 22 Jul 2010 22 Jul 2010 500,000 12 Jul 2010 53,949 5,436 5,436 63,377 100,000 45,000 45,000 – 20% 100% 100% – – – – – 1 the options vest after completion of a specified service period. 2 the options vested immediately. 37 Options Exercised in the Current Year During the year, the following directors and key management personnel exercised options that were granted to them as part of their compensation. Each option converts into one ordinary share of Bionomics NAME Dr Deborah Rathjen NUMBER OF OPTIONS ExERCISED NUMBER OF ORDINARY SHARES ISSUED 437,300 437,300 AMOUNT PAID $ 58,357 AMOUNT UNPAID $ – The following table summarises the value of options granted, exercised or lapsed during the financial year to directors and key management personnel: NAME Mr Christopher Fullerton Dr Andrew Harvey Dr Gabriel Kremmidiotis Dr Deborah Rathjen Mr Trevor Thiele VALUE OPTIONS GRANT AT THE GRANT DATE $ VALUE OF OPTIONS ExER- CISED AT THE ExERCISE DATE $ VALUE OF OPTIONS LAPSED AT THE DATE OF LAPSE $ 53,949 5,436 5,436 – 63,377 – – – 58,357 – – – (6,485) – (63,377) (i) the value of options granted during the period is recognised in compensation over the vesting period of the grant, in accordance with Australian Accounting Standards. (ii) the value of options lapsing during the period due to the failure to satisfy a vesting condition is determined assuming the vesting condition has been satisfied. 5. Additional Information Principles used to determine the nature and amount of remuneration; relationship between remuneration and company performance Base salary amounts are determined based on market information for similar roles in comparable companies. Other than market information, there is no link between the base salary determination and company performance. The calculation of the key management personnel annual bonus is set against the achievement of specified milestones and targets approved by the Board. Milestones and targets generally relate to achieving developmental milestones for each pipeline project, such as achieving IND registrations by particular dates or project related milestones by particular dates. These milestones are established to support the Company achieving its overall objectives. The tables below set out summary information about the consolidated entity’s earnings and movements in shareholder wealth for the five years to 30 June 2011. 30 jUNE 2011 $ 30 jUNE 2010 $ 30 jUNE 2009 $ 30 jUNE 2008 $ 30 jUNE 2007 $ Revenue Net Loss before tax Net Loss after tax 4,071,798 (10,106,903) (9,356,497) 3,848,469 (8,214,082) (8,214,082) 4,296,496 (6,899,183) (6,862,299) 5,256,963 (5,142,954) (4,783,917) 1,412,882 (7,898,735) (5,449,798) 38 DIRECTORS’ REPORTe 30 jUNE 2011 CENTS 30 jUNE 2010 CENTS 30 jUNE 2009 CENTS 30 jUNE 2008 CENTS 30 jUNE 2007 CENTS Share price at start of year Share price at end of year Dividends paid Basic earnings per share Diluted earnings per share 27.0 55.5 – (2.9) (2.9) 21.0 27.0 – (2.7) (2.7) 34.0 21.0 – (2.8) (2.7) 37.0 34.0 – (2.1) (2.1) 17.0 37.0 – (3.0) (3.0) Other Transactions with Directors and Other key Management Personnel There were no other transactions with directors or other key management personnel during the financial year. OTHER INFORMATION Shares Under Option Information relating to shares under option is set out in section 4 of the Remuneration Report. Shares Issued on the Exercise of Options 1,377,500 ordinary shares of Bionomics were issued during the year ended 30 June 2011 on the exercise of options granted under the Bionomics ESOP. Insurance of Officers During the financial year, the Company paid a premium to insure the Directors and Officers (D&O) of the Company. Under the terms of this policy the premium paid by the Company is not permitted to be disclosed. The liabilities insured are legal costs that may be incurred in defending civil or criminal proceedings that may be brought against the D&O in their capacity as D&O of the Company, and any other payments arising from liabilities incurred by the D&O in connection with such proceedings, other than where such liabilities arise out of conduct involving a wilful breach of duty by the D&O or the improper use by the D&O 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. The Company has not otherwise, during or since the end of the financial year, except to the extent permitted by law, indemnified or agreed to indemnify an officer or auditor of the Company or of any related body corporate against a liability incurred as such an officer or auditor. Non-audit Services The Company may decide to employ the external auditor on assignments additional to their statutory audit duties where the external auditor’s expertise and experience with the Group are important. Details of the amounts paid to the external auditor for audit and non-audit services provided during the year are set out in note 26 to the financial statements. The Board has considered the position and, in accordance with the advice received from the Audit and Risk Management Committee, is satisfied that the provision of the non-audit services is compatible with the general standard of independence for external auditors imposed by the Corporations Act 2001. The directors are satisfied that the provision of non-audit services by the external auditor, as set out in note 26 to the financial statements, did not compromise the external auditor independence requirements of the Corporations Act 2001 for the following reasons: q All non-audit services have been reviewed by the Audit and Risk Management Committee to ensure they do not impact the integrity, impartiality and objectivity of the external auditor, and q None of the services undermine the general principles relating to auditor independence as set out in Code of Conduct APES 110, Code of Ethics for Professional Accountants, issued by the Accounting Professional & Ethical Standards Board, including reviewing or auditing the external auditor’s own work, acting in a management or a decision-making capacity for the Company, acting as advocate for the Company or jointly sharing economic risk and rewards. 39 External Auditor Deloitte Touche Tohmatsu continues in office in accordance with section 327 of the Corporations Act 2001. A copy of the auditors’ independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 40. This Directors’ Report is signed in accordance with a resolution of directors made pursuant to Section 298(2) of the Corporations Act 2001. Christopher Fullerton Deborah Rathjen Chairman Adelaide 17 August 2011 Chief Executive Officer and Managing Director Adelaide 17 August 2011 40 DIRECTORS’ REPORTe 41 ANNUAL FINANCIAL STATEMENTSe FOR THE YEAR ENDED 30 jUNE 2011 TABLE OF CONTENTS PG 41 PG 42 PG 43 PG 44 PG 45 PG 46 PG 84 PG 85 PG 87 ANNUAL FINANCIAL STATEMENTS CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME CONSOLIDATED STATEMENT OF FINANCIAL POSITION CONSOLIDATED STATEMENT OF CHANGES IN EQUITY CONSOLIDATED STATEMENT OF CASH FLOWS NOTES TO THE FINANCIAL STATEMENTS DIRECTORS’ DECLARATION INDEPENDENT AUDIT REPORT SHAREHOLDER INFORMATION This financial statement covers both Bionomics Limited (“Bionomics”) as an individual entity (note 31) and the Group consisting of Bionomics and its subsidiaries. A description of the nature of the Group’s operations and its principal activities is included throughout the Annual Report and the Directors’ Report. The financial statement is presented in Australian dollars. Bionomics is a company limited by shares, incorporated and domiciled in Australia. It is listed on the ASX (ASX code: BNO) and its registered office is 31 Dalgleish Street, Thebarton, SA 5031. Through the internet, we have ensured that our corporate reporting is timely, complete and available globally at minimum cost to the company. All press releases, financial statements and other information are available on our website www.bionomics.com.au. 42 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOMEe FOR THE FINANCIAL YEAR ENDED 30 jUNE 2011 CONTINUING OPERATIONS Revenue Other income Expenses Administrative Financing costs Occupancy Compliance Loss on disposal of assets Research and development Loss before tax Income tax benefit NOTE 4 4 5 5 6 Loss for the year after income tax from continuing operations Other comprehensive income Exchange differences on translation of foreign operations Total comprehensive income for the year from continuing operations Loss attributable to: Owners of the Company 2011 $ 4,071,798 64,625 4,136,423 2,203,258 305,925 920,906 900,456 816,121 9,096,660 (10,106,903) 750,406 (9,356,497) (69,203) (9,425,700) 2010 $ 3,848,469 34,618 3,883,087 1,818,544 247,850 958,512 477,334 8,474 8,586,455 (8,214,082) – (8,214,082) (294,756) (8,508,838) (9,425,700) (8,508,838) EARNINGS PER SHARE FROM CONTINUING OPERATIONS Basic loss per share Diluted loss per share NOTE 29 29 2011 CENTS (2.9) (2.9) 2010 CENTS (2.7) (2.7) The above statement of comprehensive income should be read in conjunction with the accompanying notes. CONSOLIDATED STATEMENT OF FINANCIAL POSITIONe AS AT 30 jUNE 2011 43 NOTE 2011 $ 2010 $ CURRENT ASSETS Cash and cash equivalents Trade and other receivables Inventories Other assets TOTAL CURRENT ASSETS NON-CURRENT ASSETS Property, plant and equipment Intangible assets TOTAL NON-CURRENT ASSETS TOTAL ASSETS CURRENT LIABILITIES Trade and other payables Borrowings Provisions Other liabilities TOTAL CURRENT LIABILITIES NON-CURRENT LIABILITIES Other payables Borrowings Provisions TOTAL NON-CURRENT LIABILITIES TOTAL LIABILITIES NET ASSETS EqUITY Issued capital Reserves Accumulated losses TOTAL EqUITY 7 8 9 10 12 13 14 15 16 17 14 15 16 18 19 20 16,052,230 8,448,810 42,646 342,329 24,886,015 302,704 9,120,180 9,422,884 34,308,899 1,876,625 2,827,622 728,077 47,774 5,480,098 50,000 7,402 72,219 129,621 5,609,719 28,699,180 87,690,990 694,861 (59,686,671) 28,699,180 12,612,244 847,104 113,075 323,640 13,896,063 7,907,530 9,710,878 17,618,408 31,514,471 1,937,712 626,944 600,642 70,396 3,235,694 50,000 2,692,209 70,680 2,812,889 6,048,583 25,465,888 75,114,469 3,187,102 (52,835,683) 25,465,888 The above statement of financial position should be read in conjunction with the accompanying notes. 44 CONSOLIDATED STATEMENT OF CHANGES IN EQUITYe FOR THE FINANCIAL YEAR ENDED 30 jUNE 2011 FOREIGN CURRENCY TRANS- LATION RESERVE $ SHARE- BASED PAYMENTS RESERVE $ ISSUED CAPITAL $ ASSET RE- VALUATION RESERVE $ ACCUMU- LATED LOSSES $ TOTAL $ Balance at 1 july 2009 59,969,571 (188,315) 1,029,404 2,505,509 (44,621,601) 18,694,568 Loss for the period Exchange differences on translation of foreign operations Total comprehensive income for the period Recognition of share–based payments Issue of ordinary shares under Employee Share Option Plan Issue of ordinary shares, net of transaction costs – – – – 464,898 14,680,000 – (294,756) (294,756) – – – – – – 135,260 – – – – – – – – (8,214,082) (8,214,082) – (294,756) (8,214,082) (8,508,838) – – – 135,260 464,898 14,680,000 Balance at 30 june 2010 75,114,469 (483,071) 1,164,664 2,505,509 (52,835,683) 25,465,888 Balance at 1 july 2010 75,114,469 (483,071) 1,164,664 2,505,509 (52,835,683) 25,465,888 Loss for the period Exchange differences on translation of foreign operations Total comprehensive income for the period Transfer to accumulated losses Recognition of share–based payments Issue of ordinary shares under Employee Share Option Plan Issue of ordinary shares, net of transaction costs – – – – – 314,733 12,261,788 – (69,203) (69,203) – – – – – – – – 82,471 – – Balance at 30 june 2011 87,690,990 (552,274) 1,247,135 – – – (9,356,497) (9,356,497) – (69,203) (9,356,497) (9,425,700) (2,505,509) 2,505,509 – 82,471 314,733 12,261,788 – – – (59,686,671) 28,699,180 – – – – The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes. CONSOLIDATED STATEMENT OF CASH FLOWSe FOR THE FINANCIAL YEAR ENDED 30 jUNE 2011 45 NOTE Cash flows from operating activities Grants received Receipts from customers Payments to suppliers and employees Financing costs Net cash outflow from operating activities 27 Cash flows from investing activities Interest received Payments for purchases of property, plant & equipment Payments for purchases of intangibles Net cash inflow from investing activities Cash flows from financing activities Repayment of borrowings Proceeds from borrowings Net proceeds from share issues Net cash inflow from financing activities Net increase in cash and cash equivalents Cash at the beginning of the financial year Effect of exchange rate changes on the balances of cash held in foreign currency 2011 $ 64,625 3,669,691 (12,407,799) (8,673,483) (305,925) (8,979,408) 407,748 (75,886) - 331,862 (484,128) - 12,576,521 12,092,393 3,444,847 12,612,244 (4,861) 2010 $ 34,618 3,273,698 (10,160,091) (6,851,775) (247,850) (7,099,625) 467,869 (42,911) (2,992) 421,966 (400,430) 25,698 14,944,030 14,569,298 7,891,639 4,757,200 (36,595) Cash and cash equivalents at the end of the year 7 16,052,230 12,612,244 The above statement of cash flows should be read in conjunction with the accompanying notes. 46 NOTES TO THE FINANCIAL STATEMENTSe FOR THE FINANCIAL YEAR ENDED 30 jUNE 2011 TABLE OF CONTENTS PG 47 PG 54 PG 54 PG 57 PG 57 PG 58 PG 60 PG 60 PG 61 PG 61 PG 61 PG 62 PG 63 PG 65 PG 65 PG 65 PG 66 PG 66 PG 71 PG 71 PG 72 PG 72 PG 76 PG 77 PG 78 PG 78 PG 78 PG 79 PG 79 PG 80 PG 83 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES NOTE 2 CRITICAL ACCOUNTING ESTIMATES AND jUDGEMENTS NOTE 3 NOTE 4 SEGMENT INFORMATION REVENUE AND OTHER INCOME NOTE 5 ExPENSES NOTE 6 INCOME TAxES NOTE 7 NOTE 8 CASH AND CASH EQUIVALENTS TRADE AND OTHER RECEIVABLES NOTE 9 INVENTORIES NOTE 10 OTHER ASSETS NOTE 11 SUBSIDIARIES NOTE 12 PROPERTY, PLANT AND EQUIPMENT NOTE 13 INTANGIBLE ASSETS NOTE 14 TRADE AND OTHER PAYABLES NOTE 15 BORROWINGS NOTE 16 PROVISIONS NOTE 17 OTHER LIABILITIES NOTE 18 ISSUED CAPITAL NOTE 19 RESERVES NOTE 20 ACCUMULATED LOSSES NOTE 21 CONTINGENCIES NOTE 22 FINANCIAL INSTRUMENTS NOTE 23 kEY MANAGEMENT PERSONNEL DISCLOSURES NOTE 24 COMMITMENTS FOR ExPENDITURE NOTE 25 EVENTS OCCURRING AFTER REPORTING DATE NOTE 26 REMUNERATION OF AUDITORS NOTE 27 CASH FLOW INFORMATION NOTE 28 NON-CASH FINANCING ACTIVITIES NOTE 29 LOSS PER SHARE NOTE 30 RELATED PARTY TRANSACTIONS NOTE 31 PARENT ENTITY INFORMATION 47 NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES This financial report includes the consolidated financial statements and notes of Bionomics Limited and its controlled entities, the Group. Statement of Compliance These financial statements are general purpose financial statements which have been prepared in accordance with the Corporations Act 2001, Accounting Standards and Interpretations, and comply with other requirements of the law. These financial statements comprise the consolidated financial statements of the Group. Accounting Standards include Australian Accounting Standards. Compliance with Australian Accounting Standards ensures that the financial statements and notes of the Company and the Group comply with International Financial Reporting Standards (IFRS). The financial statements were authorised for issue by the directors on 17 August 2011. Basis of Preparation The consolidated financial statements have been prepared on the basis of historical cost, except for certain non-current assets and financial instruments that are measured at revalued amounts or fair values, as explained in the following accounting policies. Historical cost is generally based on the fair values of the consideration given in exchange for assets. All amounts are presented in Australian dollars unless otherwise noted. Adoption of New and Revised Accounting Standards In the current year, the Group has adopted all of the new and revised Standards and Interpretations issued by the Australian Accounting Standards Board (the AASB) that are relevant to its operations and effective for the current annual reporting period. Standards and Interpretations Adopted with No Effect on Financial Statements The following new and revised Standards and Interpretations have also been adopted in these financial statements. Their adoption has not had any significant impact on the amounts reported in these financial statements but may affect the accounting for future transactions or arrangements. AASB 2009-5 ‘Further Amendments to Australian Accounting Standards arising from the Annual Improvements Project’ The application of AASB 2009-5 has not had any material effect on amounts reported in the financial statements. AASB 2009-8 ‘Amendments to Australian Accounting Standards – Group Cash-Settled Share-based Payment Transactions’ AASB 2009-10 ‘Amendments to Australian Accounting Standards – Classification of Rights Issues’ The application of AASB 2009-8 makes amendments to AASB 2 ‘Share-based Payment’ to clarify the scope of AASB 2, as well as the accounting for group cash-settled share-based payment transactions in the separate (or individual) financial statements of an entity receiving the goods or services when another group entity or shareholder has the obligation to settle the award. To date, the Group has not entered into any arrangements that would fall within the scope of the amendments. The application of AASB 2009-10 makes amendments to AASB 132 ‘Financial Instruments: Presentation’ to address the classification of certain rights issues denominated in a foreign currency as either an equity instrument or as a financial liability. To date, the Group has not entered into any arrangements that would fall within the scope of the amendments AASB 2010-4 ‘Further Amendments to Australian Accounting Standards arising from the Annual Improvements Project’ The application of AASB 2010-4 has not had any material effect on amounts reported in the financial statements. 48 NOTES TO THE FINANCIAL STATEMENTSe Standards and Interpretations in Issue Not Yet Adopted At the date of the financial statements, the Standards and Interpretations listed below were in issue but not yet effective. Accounting Policies The following significant accounting policies have been adopted in the preparation and presentation of the financial report. EFFECTIVE FOR ANNUAL REPORTING PERIODS BEGINNING ON OR AFTER 1 January 2011 ExPECTED TO BE INITIALLY APPLIED IN THE FINANCIAL YEAR ENDING 30 June 2012 1 January 2013 30 June 2014 1 January 2011 30 June 2012 1 January 2011 1 July 2011 30 June 2012 30 June 2012 1 January 2012 30 June 2013 STANDARD / INTERPRETATION AASB124 ‘Related Party Disclosures’ (revised December 2009), AASB 2009- 12 ‘Amendments to Australian Accounting Standards’ AASB 9 ‘Financial Instru- ments’, AASB 2009-11 ‘Amendments to Australian Accounting Standards arising from AASB 9’ and AASB 2010- 7 ‘Amendments to Australian Accounting Standards arising from AASB 9 (December 2010)’ AASB 2009-14 ‘Amendments to Australian Interpretation – Prepayments of a Minimum Funding Requirement’ AASB 2010-5 ‘Amendments to Australian Accounting Standards’ AASB 2010-6 ‘Amendments to Australian Accounting Standards – Disclosures on Transfers of Financial Assets’ AASB 2010-8 ‘Amendments to Australian Accounting Stand- ards – Deferred Tax: Recovery of Underlying Assets’ (a) Principles of Consolidation The consolidated financial statements comprise the financial statements of Bionomics and its subsidiaries as at 30 June 2011. The financial statements of the subsidiaries are prepared for the same reporting period as the parent entity, using consistent accounting policies where possible. Adjustments are made to bring into line any dissimilar accounting policies that may exist. All intercompany balances and transactions, including unrealised profits arising from intra-group transactions, have been eliminated in full. Subsidiaries are consolidated from the date on which control is obtained and cease to be consolidated from the date on which control ceases. Where there is loss of control of a subsidiary, the consolidated financial statements include the results for the part of the reporting period during which the Company has control. (b) Foreign Currency (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 dollars which is Bionomics’ functional and presentation currency. (ii) Transactions and Balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at period- end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit and loss. Exchange differences on monetary items are recognised in profit or loss in the period in which they arise except for: q exchange differences on transactions entered into in order to hedge certain foreign currency risks; and q exchange differences on monetary items receivable from or payable to a foreign operation for which settlement is neither planned nor likely to occur (therefore forming part of the net investment in the foreign operation), which are recognised initially in other comprehensive income and reclassified from equity to profit or loss on repayment of the monetary items. 49 (iii) Group Companies (e) Income Tax The results and financial position of all the Group entities that have a functional currency different from the presentation currency (Australian dollars) are translated into the presentation currency as follows: q assets and liabilities for each statement of financial position presented are translated at the closing rate at the date of that statement; q income and expenses for each statement of comprehensive income are translated at the average exchange rate for the period; and q all resulting exchange differences are recognised in other comprehensive income and accumulated in equity. Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate. (c) Revenue Recognition Interest revenue is recognised on an accruals basis using the effective interest rate method. License and service income is recognised in accordance with the underlying agreement. Rental income is recognised on a straight line basis over the term of the lease. Where a license agreement has a fixed fee in a non- cancellable contract which permits the licensee to exploit those rights freely and the Group has no remaining obligations to perform, the fee is treated as a sale. Where these conditions have not been met, the license fee is amortised over the life of the licensing agreement. License revenues received in respect of future accounting periods are deferred until the Group has fulfilled its obligations under the terms of the agreement. Unamortised license fee revenue is recognised in the statement of financial position as deferred income. Research and development work performed for a fee is recognised based on the stage of completion of the research and development. Revenue from a contract to provide services is recognised by reference to the stage of completion of the contract. (d) 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. Grants relating to cost reimbursement are recognised in the profit or loss in the period when the costs were incurred. Grants relating to asset purchases are recognised as deferred income on the statement of financial position and transferred to the profit or loss evenly over the expected life of those assets. The income tax expense or revenue for the period is the tax payable on the current period’s taxable income based on the national income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences between the tax bases of assets and liabilities and their carrying amounts in the financial statements, and to unused tax losses. Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to apply when the assets are recovered or liabilities are settled, based on those tax rates which are enacted or substantively enacted for each jurisdiction. The relevant tax rates are applied to the cumulative amounts of deductible and taxable temporary differences to measure the deferred tax asset or liability. An exception is made for certain temporary differences arising from the initial recognition of an asset or a liability. No deferred tax asset or liability is recognised in relation to these temporary differences if they arose in a transaction, other than a business combination, that at the time of the transaction did not affect either accounting profit or taxable profit or loss. Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses. Current and deferred tax balances attributable to amounts recognised directly in equity are also recognised directly in equity. (i) Tax Consolidation Legislation Bionomics and its wholly-owned Australian controlled entities have implemented the tax consolidation legislation effective 31 December 2005. The head entity, Bionomics, 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, Bionomics 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. Assets or liabilities arising under tax funding agreements with the tax consolidated entities are recognised as 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. 50 NOTES TO THE FINANCIAL STATEMENTSe (f) Acquisitions of Assets The acquisition method of accounting is used for all acquisitions of assets (including business combinations) regardless of whether equity instruments or other assets are acquired. Cost is measured as the fair value of the assets given up, shares issued or liabilities undertaken at the date of acquisition plus incidental costs directly attributable to the acquisition. Where equity instruments are issued in an acquisition, the value of the instruments is their market price as at the acquisition date, unless the notional price at which they could be placed in the market is a better indicator of fair value. Transaction costs arising on the issue of equity instruments are recognised directly in equity. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. The excess of the cost of acquisition over the fair value of the identifiable net assets acquired is recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognised directly in the income statement, but only after a reassessment of the identification and measurement of the net assets acquired. Where some future payment that is contingent on certain events happening is a part of the purchase agreement, the additional consideration is brought to account when it is probable that those events will occur. Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to their present value as at the date of the acquisition. The discount rate used is the entity’s incremental borrowing rate, being the rate at which a similar borrowing could be obtained from an independent financier under comparable terms and conditions. (g) Impairment of Tangible and Intangible Assets Other Than Goodwill At the end of each reporting period, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. Where a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified. Intangible assets with indefinite useful lives are tested for impairment at least annually, and whenever there is an indication that the asset may be impaired. Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted. If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease. Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash- generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase. (h) Cash and Cash Equivalents 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 on the statement of financial position. (i) Trade Receivables All trade debtors are recognised at the fair value of amounts receivable as they are due for settlement no more than 30 days from the date of recognition. Collectability of trade debtors is reviewed on an ongoing basis. Debts which are known to be uncollectible are written off. A provision for doubtful debts is raised when some doubt as to collection exists. The amount of the provision is the difference between the carrying amount and the present value of future cash flows, discounted at the effective interest rate. The amount of the provision is recognised in profit or loss. 51 (j) Inventories (l) Financial Assets Raw materials and stores are stated at the lower of cost and net realisable value. (k) Property, Plant and Equipment Land and buildings are shown at fair value, based on periodic, valuations by external independent valuers, less subsequent depreciation for buildings. Any accumulated depreciation at the date of revaluation is eliminated against the gross carrying amount of the asset and the net amount is restated to the revalued amount of the asset. All other plant and equipment are brought to account at cost less any accumulated depreciation or any recognised impairment losses, where applicable. The directors have taken reasonable steps to ensure that property, plant and equipment are not carried at amounts that are in excess of their recoverable amounts at balance date. Increases in the carrying amounts arising on revaluation of land and buildings are credited, net of tax, to other comprehensive income. To the extent that the increase reverses a decrease previously recognised in profit or loss, the increase is first recognised in profit or loss. Decreases that reverse previous increases of the same asset are first charged against revaluation reserves directly in equity to the extent of the remaining reserve attributable to the asset; all other decreases are charged to profit or loss. Depreciation on revalued buildings is charged to profit and loss. On the subsequent sale or retirement of a revalued property, the attributable revaluation surplus remaining in the revaluation reserve, net of tax, is transferred directly to retained earnings. Land is not depreciated. The depreciable amount of all fixed assets is depreciated over their useful lives commencing from the time the asset is held ready for use, on either a prime or diminishing value basis depending on the type of asset. The gain or loss on disposal of all fixed assets is determined as the difference between the carrying amount of the asset at the time of disposal and the proceeds of disposal, and is included in profit or loss in the year of disposal. The depreciation rates for each class of depreciable assets are: q administrative plant & equipment q scientific plant & equipment q refrigeration plant and equipment q building q building fit out 20 – 40 % 20 – 40 % 33% 2.50 % 3 – 20 % Financial assets are classified into the following specified categories: financial assets ‘at a fair value through profit or loss’ (FVTPL), ‘held-to-maturity’ investments, ‘available- for-sale’ (AFS) financial assets and ‘loans and receivables’. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition. All regular way purchases or sales of financial assets are recognised and derecognised on a trade date basis. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame established by regulation or convention in the marketplace. (i) Loans and Receivables Trade receivables, loans, and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as ‘loans and receivables’. Loans and receivables are measured at amortised cost using the effective interest method less impairment. Interest income is recognised by applying the effective interest rate. (ii) Impairment of Financial Assets Financial assets, other than those at fair value through profit or loss, are assessed for indicators of impairment at each reporting date. Financial assets are impaired where there is objective evidence that as a result of one or more events that occurred after the initial recognition of the financial asset the estimated future cash flows of the investment have been impacted. For financial assets carried at amortised cost, the amount of the impairment is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. The carrying amount of financial assets including uncollectible trade receivables is reduced by the impairment loss through the use of an allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognised in profit or loss. 52 NOTES TO THE FINANCIAL STATEMENTSe (m) Intangible Assets (i) Intellectual Property Acquired intellectual property is recognised as an asset at cost and amortised over its useful life. Intellectual property with a finite life is amortised on a straight line basis over that life. Intellectual property with an indefinite useful life is subjected to an annual impairment review. There is currently no intellectual property with an indefinite life. Current useful life of all existing intellectual property is in the range of five to 15 years. The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance date. (ii) Goodwill Goodwill is initially recorded at the amount by which the purchase price for a business or for an ownership interest in a controlled entity exceeds the fair value attributed to its net identifiable assets, including any associated deferred tax assets and liabilities, at date of acquisition. Goodwill on acquisitions of subsidiaries is included in intangible assets. Goodwill acquired in business combinations is not amortised. Instead, goodwill is tested for impairment annually and is carried at cost less accumulated impairment losses. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold. Goodwill is allocated to cash generating units for the purpose of impairment testing. (n) Research and Development Expenditure on research activities, undertaken with the prospect of obtaining new scientific or technical knowledge and understanding, is recognised as an expense when it is incurred. (o) Trade and Other Payables These amounts represent liabilities for goods and services provided to the Group prior to the end of financial year which are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition. (p) Employee Benefits (i) Wages and Salaries, Annual Leave and Sick Leave Liabilities for wages and salaries, including non- monetary benefits and annual leave in respect of employees’ services up to the reporting date and expected to be settled within 12 months of the reporting date are recognised in liabilities and are measured at the amounts expected to be paid when the liabilities are settled. Liabilities for non-accumulating sick leave are recognised when the leave is taken at the rates paid. (ii) Long Service Leave The liability for long service leave is recognised in the provision for employee benefits in respect of services provided by employees up to the reporting date and measured as the present value of expected future payments to be made. (iii)Superannuation Contributions are made to employee superannuation funds and are charged as expenses when incurred. These contributions are made to external superannuation funds and are not defined benefits programs. Consequently there is no exposure to market movements on employee superannuation liabilities or entitlements. (iv)Share-based Payments Share-based compensation benefits are provided to employees via the Bionomics ESOP and an Employee Share Plan. The fair value of shares issued to employees for no cash consideration under the Employee Share Plan is recognised as an employee benefits expense with a corresponding increase in equity. The fair value is measured at grant date and recognised over the period during which the employees become unconditionally entitled to the shares. The Bionomics ESOP was approved by the Board and shareholders in 2008. Staff eligible to participate in the plan are those who have been a full-time or part-time employee of the Company for a period of not less than six months or a director of the Company. Options are granted under the plan for no consideration and vest equally over five years, unless they are bonus options which vest immediately. Share Options Granted Before 7 November 2002 and / or Vested Before 1 january 2005 No expense is recognised in respect of these options. The shares are recognised when the options are exercised and the proceeds received allocated to share capital. Share Options Granted After 7 November 2002 and Vested After 1 january 2005 The fair value of options granted under the Bionomics ESOP is recognised as an employee benefit expense with a corresponding increase in equity. The fair value is measured at grant date and recognised over the period during which the employees become unconditionally entitled to the options. The amounts disclosed as remuneration relating to options are the assessed fair values at grant date of those options allocated equally over the period from grant date to vesting date. Fair values at grant date are independently determined using a Black-Scholes option pricing model that takes into account the exercise price, 53 (u) Earnings / (loss) per Share (i) Basic Earnings / (loss) per Share Basic earnings / (loss) per share is calculated by dividing the profit / (loss) after income tax attributable to equity holders of the company, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the year, adjusted for bonus elements in ordinary shares issued during the year. (ii) Diluted Earnings / (loss) per Share Diluted earnings / (loss) per share adjusts the figures used in the determination of basic earnings 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 shares assumed to have been issued for no consideration in relation to options. (v) 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 statement of financial position. Cash flows are presented on a gross basis. The GST component of cash flow arising from investing or financing activities which are recoverable from, or payable to the taxation authority, are presented as operating cash flow. the term of the option, the vesting and performance criteria, the impact of dilution, the non-tradeable nature of the option, the share price at grant date, expected price volatility of the underlying share, the expected dividend yield and the risk-free interest rate for the term of the option. (q) Borrowings (other financial liabilities) Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in profit or loss over the period of the borrowings using the effective interest method. Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date. (r) Borrowing Costs Borrowing costs incurred for the construction of any qualifying asset are capitalised during the period of time that is required to complete and prepare the asset for its intended use or sale. Other borrowing costs are expensed. (s) Leases Leases of property, plant and equipment where the Group has substantially all the risks and rewards of ownership are classified as finance leases. Finance leases are capitalised at the lease’s inception at the lower of the fair value of the leased property and the present value of the minimum lease payments. The corresponding rental obligations, net of finance charges, are included in other long term payables. Each lease payment is allocated between the liability and finance charges so as to achieve a constant rate on the finance balance outstanding. The interest element of the finance cost is charged to the profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The property, plant and equipment acquired under finance leases is depreciated over the shorter of the asset’s useful life and the lease term. Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to profit or loss on a straight-line basis over the period of the lease. Lease income from operating leases is recognised in income on a straight-line basis over the lease term. (t) Contributed Equity Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options, or for the acquisition of a business, are deducted directly from equity. 54 NOTES TO THE FINANCIAL STATEMENTSe NOTE 2: CRITICAL ACCOUNTING ESTIMATES AND jUDGEMENTS In the application of the Group’s accounting policies, which are described in note 1, the directors are required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. (a) Critical Accounting Estimates and judgements The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities are discussed below. Estimated Impairment of Goodwill and Intangibles Determining whether goodwill and intangibles are impaired requires an estimation of the value in use of the cash-generating units to which goodwill has been allocated. The value in use calculation requires the entity to estimate the future cash flows expected to arise from the cash-generating units and a suitable discount rate in order to calculate present value. The carrying amount of goodwill at balance date was $5,147,990 (2010: $5,147,990). The total carrying amount of intangibles at balance date was $9,120,180 (2010: $9,710,878). No impairment costs have been recognised in the current or previous financial years. NOTE 3: SEGMENT INFORMATION Information reported to the chief operating decision maker for the purposes of resource allocation and assessment of segment performance focuses on the nature of work processes performed. The Group’s reportable segments under AASB 8 are: q drug discovery q drug development q contract services Drug discovery is the creation and ongoing testing of compounds to determine the best compound that matches the product profile. Drug development is defined as the ongoing testing including clinical trials of the best compound with a view to commercialisation of the compound. Contract services is the provision of scientific services on a fee for service basis to both external and internal customers. Information regarding these segments is presented below. (a) Segment Revenues and Results The following is an analysis of the Group’s revenue and results by reportable operating segment for the periods under review: Drug discovery Drug development Contract services SEGMENT REVENUE YEAR ENDED SEGMENT RESULT YEAR ENDED 30 june 2011 $ 30 june 2010 $ 30 june 2011 $ 30 june 2010 $ 1,712,195 1,162,406 (1,553,818) (2,012,001) 130,399 136,810 (5,111,842) (4,650,747) 4,198,817 2,747,803 323,920 486,117 6,041,411 4,047,019 (6,341,740) (6,176,631) Less: intercompany revenue included in contract services (2,620,550) (887,501) – – Investment & other revenue 650,937 688,951 650,937 688,951 4,071,798 3,848,469 (5,690,803) (5,487,680) 55 NOTE 3: SEGMENT INFORMATION (CONT.) Unallocated financing costs Central administration costs Loss before income tax SEGMENT REVENUE YEAR ENDED SEGMENT RESULT YEAR ENDED 30 june 2011 $ 30 june 2010 $ 30 june 2011 $ 30 june 2010 $ (109,623) (90,934) (4,306,477) (2,635,468) (10,106,903) (8,214,082) Revenue reported above for Contract services includes intersegment sales. There were no intersegment sales for the other reportable segments. Segment profit represents the result for each segment without allocation of central administration costs and investment and other revenue. Financing costs are allocated to segments with a residual amount being unallocated financing costs. (b) Segment Assets and Liabilities The following is an analysis of the Group’s assets and liabilities by reportable operating segment: ASSETS Drug discovery Drug development Contract services Unallocated assets Total assets LIABILITIES Contract services (excluding intercompany liabilities) Unallocated liabilities Total liabilities 30 june 2011 $ 30 june 2010 $ 1,858,722 2,038,222 6,958,258 7,112,259 2,197,506 2,089,494 11,014,486 11,239,975 23,294,413 20,274,496 34,308,899 31,514,471 30 june 2011 $ 30 june 2010 $ 550,941 967,564 5,058,778 5,081,019 5,609,719 6,048,583 Assets used jointly by reporting segments are allocated on the basis of employee numbers of the individual reportable segment. The Board of Directors receive information on liabilities for the Group as a whole as well as liability information for the Contract services segment. The Board of Directors receive information on non-current assets for the Group as a whole as well as non-current asset information for the Contract services segment. Additions to non-current assets: Contract services Unallocated 30 june 2011 $ 30 june 2010 $ 11,141 64,745 75,886 20,735 22,176 42,911 56 NOTES TO THE FINANCIAL STATEMENTSe NOTE 3: SEGMENT INFORMATION (CONT.) (c) Other Segment Information The segment result above has been determined after including the following items: Drug discovery Drug development Contract services Unallocated INTEREST ExPENSE YEAR ENDED DEPRECIATION & AMORTISATION YEAR ENDED 30 june 2011 $ 30 june 2010 $ 30 june 2011 $ 30 june 2010 $ 115,007 66,039 15,256 109,623 305,925 85,563 61,722 9,631 90,934 312,969 299,893 232,996 96,648 320,526 329,407 170,576 133,912 247,850 942,506 954,421 (d) Revenue from Major Products and Services The following is an analysis of the Group’s external revenue from its major products and services: Contract services Collaboration income Other 30 june 2011 $ 30 june 2010 $ 1,578,267 1,860,302 1,495,414 1,115,940 998,117 872,227 4,071,798 3,848,469 (e) Geographical Information The Group operates in two geographical areas, Australia and France. The Group’s external revenue and information about its non-current assets* by geographical segment are detailed below: Australia France REVENUE FROM ExTERNAL CUSTOMERS YEAR ENDED NON-CURRENT ASSETS YEAR ENDED 30 june 2011 $ 30 june 2010 $ 30 june 2011 $ 30 june 2010 $ 2,493,531 1,988,167 8,437,682 16,354,786 1,578,267 1,860,302 985,202 1,263,622 4,071,798 3,848,469 9,422,884 17,618,408 * Non-current assets excluding financial instruments and deferred tax assets. Included in revenues for Drug discovery are revenues of $1,495,414 (2010: $1,115,940) from one party. NOTE 4: REVENUE AND OTHER INCOME REVENUE Revenue from rendering of services Royalties Collaboration income Interest received / receivable on bank deposits Rent received or receivable Other revenue OTHER INCOME Government EMDG grant Foreign Government grant There are no unfulfilled conditions or other contingencies attaching to these grants. NOTE 5: ExPENSES Loss before income tax benefit includes the following specific expenses: Financing costs: – Interest paid / payable on bank and other loans – Interest obligations under finance leases Depreciation: – Administrative plant and equipment – Scientific plant and equipment – Building fitouts – Building Amortisation of non-current assets: – Intellectual property Rental expense on operating leases: – Minimum lease payments Employment benefit expenses of: – Wages and salaries – Superannuation – Share-based payments 57 2011 $ 2010 $ 1,560,868 1,632,078 130,399 136,810 1,495,414 1,115,940 477,516 280,704 126,897 487,386 230,965 245,290 4,071,798 3,848,469 45,574 19,051 64,625 – 34,618 34,618 2011 $ 2010 $ 301,775 241,319 4,150 6,531 305,925 247,850 38,025 72,323 121,831 168,722 39,622 81,083 158,085 201,870 400,901 480,660 541,605 473,761 227,134 195,552 3,261,810 2,768,043 435,467 82,471 424,640 336,128 3,779,748 3,528,811 58 NOTES TO THE FINANCIAL STATEMENTSe NOTE 5: ExPENSES (CONT.) Loss before income tax benefit includes the following specific expenses: Foreign currency loss / (gain) Loss on disposal of assets – Plant and equipment – Land and building NOTE 6: INCOME TAxES (a) Income tax recognised in profit or loss Current tax Current tax benefit in respect of the current year Deferred tax Deferred tax recognised in current year (b) Reconciliation to accounting loss Loss from continuing operations Tax at the Australian tax rate of 30% (2010: 30%) Tax effect of non-deductible / non-assessable amounts: – Amortisation of intangibles – Foreign exchange reversed on consolidation – Elimination of accrued income on consolidation – Exempt income from government funding – Entertainment – Share-based payments – Research and development expenditure – Effect of unused tax losses and tax offsets not recognised as deferred tax assets – Tax benefit of research and development credit in France 2011 $ 2010 $ 413,125 (11,492) 16,539 799,582 816,121 8,474 – 8,474 2011 $ 2010 $ (750,406) – (750,406) – – – (10,106,903) (8,214,082) (3,032,071) (2,464,225) 101,893 101,893 (17,826) (103,282) – – 1,373 24,741 (28,325) (56,076) 848 40,579 (711,039) (394,891) 3,632,929 2,903,479 (750,406) (750,406) – – 59 OPENING BALANCE CHARGED TO INCOME CHARGED TO EqUITY OTHER COMPRE- HENSIVE INCOME CLOSING BALANCE 179,664 79,193 (7,871) (20,930) (1,105,375) 1,077,162 303,415 (80,678) 58,933 197,560 218,383 12,450 172,264 – 48,137 32,409 (168,137) 1,332,853 18,873,843 2,623,130 213,015 – 19,086,858 2,623,130 18,918,721 3,955,983 – – 196,974 (17,310) (2,218) (5,653) (1,105,375) 288,092 58,933 218,383 12,147 – – – – 303 161,069 11,195 – – – – – – – – – – – – – – – – – 15,323 – – – – (171,995) (11,465) 15,323 16,336,226 2,537,617 213,015 – 16,549,241 2,537,617 16,377,246 2,526,152 – – – – – 15,323 – – – – – – – – – – – – – – – – – – – – – – – – – – – – – 258,857 (28,801) (28,213) 222,737 256,493 218,383 60,587 204,673 1,164,716 21,496,973 213,015 21,709,988 22,874,704 – 179,664 (7,871) (1,105,375) 303,415 58,933 218,383 12,450 172,264 (168,137) 18,873,843 213,015 19,086,858 18,918,721 – NOTE 6: INCOME TAxES (CONT.) (c) Deferred tax balances 2011 Loans and receivables Prepayments / accrued income PP & E Share issue expenses Intangible patents and trademarks Other intangibles Accrued expenses Employee entitlements Unused tax losses Revenue Withholding tax Not recognised in current year Net balance 2010 Loans and receivables Prepayments / accrued income PP & E Share issue expenses Intangible patents and trademarks Other intangibles Accrued expenses Employee entitlements Unused tax losses Revenue Withholding tax Not recognised in current year Net balance 60 NOTES TO THE FINANCIAL STATEMENTSe NOTE 6: INCOME TAxES (CONT.) (d) Unrecognised temporary differences (including tax losses) The following deferred tax assets have not been brought to account as assets: Unused revenue tax losses (no set expiry period) Deductible temporary differences (no set expiry period) Unused foreign withholding tax credits (expire July 2013) 2011 $ 2011 $ 21,496,973 18,705,706 1,164,716 – 213,015 213,015 22,874,704 18,918,721 (e) Tax consolidation Relevance of tax consolidation to the Group The Company and all its wholly-owned Australian resident entities are part of a tax-consolidated group under Australian taxation law. Bionomics is the head entity in the tax-consolidated group. Tax expense/benefit, deferred tax liabilities and deferred tax assets arising from temporary differences of the members of the tax-consolidated group are recognised in the separate financial statements of the members of the tax-consolidated group using the ‘separate taxpayer within group’ approach by reference to the carrying amounts in the separate financial statements of each entity and the tax values applying under tax consolidation. Current tax liabilities and assets and deferred tax assets arising from unused tax losses and relevant tax credits of the members of the tax- consolidated group are recognised by the Company (as head entity in the tax-consolidated group). NOTE 7: CASH AND CASH EqUIVALENTS 2011 $ 2010 $ Current Cash at the end of the financial year as shown in the statement of cash flows is reconciled to items in the balance sheet as follows Cash at bank and on hand Deposits at call 15,058,319 2,695,380 993,911 9,916,864 16,052,230 12,612,244 A restricted deposit at call is held as security over a commercial bill line of $550,000 (see note 15 iii) and is not available for use. NOTE 8: TRADE AND OTHER RECEIVABLES Current Trade receivables Allowance for doubtful debts Other receivables Sale of building receivable (i) (i) The sale of building proceeds were received at settlement on 13 July 2011. 2011 $ 2010 $ 473,289 562,226 - (3,039) 473,289 830,783 7,144,738 559,187 287,917 - 8,448,810 847,104 NOTE 8: TRADE AND OTHER RECEIVABLES (CONT.) Movement in the allowance for doubtful debts Balance at the beginning of the year Impairment losses recognised on receivables Amounts written off during the year as uncollectible Balance at the end of the year 61 2010 $ – 3,039 – 3,039 2011 $ 3,039 – (3,039) – In determining the recoverability of a trade receivable, the Group considers any change in the credit quality of the trade receivable from the date credit was initially granted up to the reporting date. The directors believe that there is no credit provision required at 30 June 2011. NOTE 9: INVENTORIES Current Raw materials and stores – at cost NOTE 10: OTHER ASSETS Current Prepayments Accrued interest and grants receivable 2011 $ 2010 $ 42,646 113,075 2011 $ 2010 $ 246,325 96,004 342,329 297,404 26,236 323,640 NOTE 11: SUBSIDIARIES Details of the Group’s subsidiaries at the end of the reporting period are as follows: PERCENTAGE OWNED (%) ENTITY Head entity PRINCIPAL ACTIVITY COUNTRY OF INCORPORATION 2011 2010 Bionomics Limited Research & Development Australia Subsidiaries of Bionomics Limited: Neurofit SAS Contract Research Organisation Iliad Chemicals Pty Limited Asset owner France Australia Bionomics Inc Non-trading United States N/A 100 100 100 N/A 100 100 100 62 NOTES TO THE FINANCIAL STATEMENTSe NOTE 12: PROPERTY, PLANT AND EqUIPMENT Gross carrying amount at 1 july 2009 Additions Disposals Revaluations Foreign currency exchange differences Gross carrying amount at 1 july 2010 Additions Disposals Foreign currency exchange differences Gross carrying amount at 30 june 2011 Accumulated depreciation amount at 1 july 2009 Disposals Revaluations Foreign currency exchange differences Accumulated depreciation amount at 1 july 2010 Disposals Foreign currency exchange differences ADMINISTRATIVE PLANT & EqUIPMENT $ SCIENTIFIC PLANT & EqUIPMENT $ BUILDING FITOUTS $ FREEHOLD LAND & BUILDING AT FAIR VALUE $ REFRIGERATION PLANT & EqUIPMENT $ TOTAL $ 445,443 2,159,437 2,244,258 6,690,592 87,500 11,627,230 39,282 3,629 – (36,310) (418,640) (7,755) – – (29,988) (18,819) – – – – (201,870) – – – – – 42,911 (462,705) (201,870) (48,807) 418,427 1,725,607 2,236,503 6,488,722 87,500 10,956,759 21,956 42,745 11,185 – (26,145) (51,355) (2,247,688) (6,488,722) 763 (11,688) 415,001 1,705,309 – – (306,736) (1,824,431) (1,029,383) 35,108 411,570 7,490 – – – – – – 16,937 6,506 – – 201,870 – – – – 75,886 (8,813,910) (10,925) 87,500 2,207,810 (87,500) (3,248,050) – – – – 454,168 201,870 23,443 (480,660) – – – 1,540,170 4,854 (400,901) Depreciation (note 5) (39,622) (81,083) (158,085) (201,870) (294,313) (1,487,438) (1,179,978) – (87,500) (3,049,229) 24,492 45,147 1,301,809 168,722 (4,041) 8,895 – – Depreciation (note 5) (38,025) (72,323) (121,831) (168,722) Accumulated depreciation amount at 30 june 2011 Net carrying amounts 30 june 2010 Net carrying amounts 30 june 2011 (311,887) (1,505,719) – – (87,500) (1,905,106) 124,114 238,169 1,056,525 6,488,722 103,114 199,590 – – – – 7,907,530 302,704 Effective from the adoption of AIFRS, the Group adopted the fair value basis for land and buildings as outlined in note 1(k). There was no depreciation during the period that was capitalised as part of the cost of other assets. 63 NOTE 12: PROPERTY, PLANT AND EqUIPMENT (CONT.) An independent valuation of the Group’s land and buildings was performed by Savills (SA) Pty Ltd to determine the fair value of the land and buildings. The valuation, which was prepared in accordance with Australian Property Institute’s current valuation standard, was determined using the capitalisation of market net income approach. The effective date of the valuation was 30 June 2010. The land and buildings were subsequently sold on 29 April 2011 with settlement occurring on 13 July 2011. Had the Group’s land and buildings been measured on an historical cost basis, their carrying amount would have been as follows: Land Buildings Non-current assets pledged as security Refer to note 15 for information on non-current assets pledged as security by the Company. 2011 $ – – – 2010 $ 125,000 3,145,145 3,270,145 NOTE 13: INTANGIBLE ASSETS Gross carrying amount at 1 july 2009 Additions Foreign currency exchange differences GOODWILL $ 5,147,990 – – INTELLECTUAL PROPERTY $ TOTAL $ 7,282,798 12,430,788 2,992 (395,498) 2,992 (395,498) Gross carrying amount at 1 july 2010 5,147,990 6,890,292 12,038,282 Foreign currency exchange differences – (83,660) (83,660) Gross carrying amount at 30 june 2011 5,147,990 6,806,632 11,954,622 Accumulated amortisation amount at 1 july 2009 Foreign currency exchange differences Amortisation (note 5) Accumulated amortisation amount at 1 july 2010 Foreign currency exchange differences Amortisation (note 5) Accumulated amortisation amount at 30 june 2011 Net carrying amounts 30 june 2010 Net carrying amounts 30 june 2011 All intangible assets are held in the consolidated entity. (a) Intellectual Property – – – – – – – (1,972,787) (1,972,787) 119,144 (473,761) 119,144 (473,761) (2,327,404) (2,327,404) 34,567 (541,605) 34,567 (541,605) (2,834,442) (2,834,442) 5,147,990 5,147,990 4,562,888 3,972,190 9,710,878 9,120,180 The intellectual property includes the company’s Multicore® technology, its BNC105 compound and its Kv1.3 compound with carrying amounts ranging from $0.8m to $1.4m. Each item is carried at its fair value as at its date of acquisition, less accumulated amortisation charges. The remaining amortisation periods for each item is between five and ten years. (b) Impairment Tests Management tests annually whether goodwill or indefinite life intangibles have suffered any impairment, in accordance with the accounting policy stated in note 1(m)(ii). Impairment testing is performed on each of the cash generating units identified in note 3. 64 NOTES TO THE FINANCIAL STATEMENTSe NOTE 13: INTANGIBLE ASSETS (CONT.) Determining whether goodwill or indefinite life intangibles are impaired requires an estimation of the value in use of the cash generating units to which goodwill or indefinite life intangible have been allocated. The value in use calculation requires the entity to estimate the future cash flows expected to arise from the cash generating unit and a suitable discount rate in order to calculate present value. These discount rates range between 15% for certain cash flows and 60% for less certain cash flows. Allocation of Goodwill to CGU’s The carrying amount of goodwill was allocated to the following CGU’s: Drug discovery Drug development Contract services 2011 $ – 2010 $ – 5,147,990 5,147,990 – – 5,147,990 5,147,990 Drug Discovery The recoverable amount of this CGU is determined based on a value in use calculation which uses cash flow projections based on a recent contract agreement for drug compounds within the cash generating unit covering a ten year period with an appropriate terminal value, and a discount rate ranging from 15% to 60% per annum (2010: 15% to 60% per annum). The ten year period is based on industry comparables taking into account the lifecycle of the development of compounds. Management believes that application of discounted cash flows of such a contract for one drug compound is reasonable to be applied to other compounds within the CGU at their respective development phases. Management believes that any reasonably possible change in the key assumptions on which recoverable amount is based would not cause the aggregate carrying amount to exceed the aggregate recoverable amount of the CGU. No growth rates have been included in the forecast. Drug Development The recoverable amount of this CGU is also determined based on a value in use calculation which uses cash flow projections based on the same contract agreement for drug compounds within the segment covering a ten year period with an appropriate terminal value, and a discount rate ranging from 15% to 60% per annum (2010: 15% to 60% per annum). The ten year period is based on industry comparables taking into account the lifecycle of the development of components. Management believes that application of discounted cash flows of such a contract for one drug compound is reasonable to be applied to other compounds within the CGU at their respective development phases. Management believes that any reasonably possible change in the key assumptions on which recoverable amount is based would not cause the aggregate carrying amount to exceed the aggregate recoverable amount of the CGU. No growth rates have been included in the forecast. Contract Services The recoverable amount of this CGU is determined based on a value in use calculation which uses cash flow projections prepared by management over a five year period with an appropriate terminal value using a discount rate of 15%. Annual growth rates of 2.5% per annum have been assumed in determining the cash flow projections. Management believes that any reasonably possible change in the key assumptions on which recoverable amount is based would not cause the aggregate carrying amount to exceed the aggregate recoverable amount of the CGU. NOTE 14: TRADE AND OTHER PAYABLES Current Trade payables Accrued expenses Non-current Other payables 65 2011 $ 2010 $ 1,357,489 1,384,482 519,136 553,230 1,876,625 1,937,712 50,000 50,000 The average credit period on purchases of goods is 45 days. No interest is paid on the trade payables. The Group has financial risk management policies in place to ensure that all payables are paid within the credit timeframe. NOTE 15: BORROWINGS Secured – at amortised cost Finance lease liabilities (i) Building loan agreement (ii) Bank loan (iii) Disclosed in the financial statements as: Current liabilities Non-current liabilities 2011 $ 2010 $ 20,836 67,970 2,264,188 2,700,620 550,000 550,563 2,835,024 3,319,153 2,827,622 626,944 7,402 2,692,209 2,835,024 3,319,153 (i) the three year lease line is secured by the leased scientific equipment (refer note 12) and has an average interest rate of 9.60% per annum (2010: 8.51% per annum). (ii) the ten year building loan agreement with Land Management Corporation was secured by the land and building (refer note 12) and had interest charged on a quarterly basis at a fixed rate of 6.97% per annum until final settlement on the sale and leaseback of the Thebarton building occurred on 13 July 2011. (iii) the rolling commercial bill line is secured by a restricted deposit at call. The unused facilities available at 30 June 2011 of the Group’s bank overdraft is $54,333 (2010: $56,988). There is no unused facility in relation to the building loan agreement or the commercial bill line. Interest rate risk The Group’s exposure to interest rates and the effective weighted average interest rate by maturity period is set out in note 22. NOTE 16: PROVISIONS Current Employee benefits Non-current Employee benefits 2011 $ 2010 $ 728,077 600,642 72,219 70,680 66 NOTES TO THE FINANCIAL STATEMENTSe NOTE 17: OTHER LIABILITIES Current Unearned income NOTE 18: ISSUED CAPITAL (a) Issued and paid-up capital Ordinary shares – fully paid Movements in ordinary shares of the Company during the past two years were as follows: DATE DETAILS 1 july 2009 Opening balance Share issue – directors’ fees in lieu of cash Share issue – management salary in lieu of cash Share issue – placements Share issue – share purchase plan Share issue – ESOP option exercise Share issue – ESOP option exercise Share issue – ESOP option exercise Share issue – ESOP option exercise Share issue – ESOP option exercise Share issue – ESOP option exercise Share issue – ESOP option exercise Share issue – unlisted options Less capital raising costs – share placements 30 june 2010 Closing balance Share issue – ESOP option exercise Share issue – ESOP option exercise Share issue – ESOP option exercise Share issue – ESOP option exercise Share issue – ESOP option exercise Share issue – ESOP option exercise Share issue – ESOP option exercise Share issue – placements Less cost of placements Share issue – ESOP option exercise Share issue – ESOP option exercise Share issue – ESOP option exercise Share issue – ESOP option exercise Share issue – ESOP option exercise 30 june 2011 Closing balance NUMBER OF SHARES 253,799,591 491,228 354,526 53,333,332 9,166,602 75,000 100,000 380,000 130,000 96,000 78,000 300,000 50,000 – 318,354,279 105,000 200,000 300,000 50,000 15,000 7,200 5,000 25,000,000 – 40,000 18,000 97,300 340,000 200,000 344,731,779 2011 $ 2010 $ 47,774 47,774 70,396 70,396 2011 SHARES 2010 SHARES 344,731,779 318,354,279 ISSUE PRICE $0.2375 $0.2375 $0.24 $0.24 $0.21 $0.11 $0.24 $0.27 $0.16 $0.29 $0.20 $0.26 – – $0.24 $0.30 $0.24 $0.34 $0.2976 $0.36 $0.22 $0.57 – $0.22 $0.29 $0.1455 $0.13 $0.30 $ 59,969,571 116,667 84,200 12,800,000 2,199,984 15,750 11,000 91,200 35,100 15,360 22,620 60,000 13,000 (319,983) 75,114,469 25,200 60,000 72,000 17,000 4,464 2,592 1,100 14,250,000 (1,988,212) 8,800 5,220 14,157 44,200 60,000 87,690,990 Changes to the then Corporations Law abolished the authorised capital and par value concept in relation to share capital from 1 July 1998. Therefore, the Company does not have a limited amount of authorised capital and issued shares do not have a par value. 67 NOTE 18: ISSUED CAPITAL (CONT.) (b) Ordinary Shares Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of 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. (c) Share Options When exercised, each option is convertible into one ordinary share. The exercise price is based on the weighted average price at which the Company’s shares traded on the ASX during the seven trading days immediately before the options are granted. (i) The Bionomics ESOP The terms and conditions of the Bionomics ESOP are summarised in note 1(p)(iv). The options listed below are outstanding at reporting date. GRANT DATE ExPIRY DATE ExERCISE PRICE Jun-02 Feb-03 Jan-04 Mar-04 Sept-04 Oct-04 Jan-05 Jan-06 May-06 Nov-06 Jun-12 Feb-12 Feb-13 Jan-12 Jan-13 Jan-14 Mar-12 Mar-13 Mar-14 Mar-12 Mar-13 Mar-14 Nov-11 Nov-12 Nov-13 Jun-12 Jun-13 Feb-13 Feb-14 Feb-15 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jul-12 Jul-13 Jul-14 Jul-15 Jul-16 Nov-12 Nov-13 Nov-14 Nov-15 Nov-16 $0.81 $0.43 $0.43 $0.30 $0.30 $0.30 $0.37 $0.37 $0.37 $0.38 $0.38 $0.38 $0.24 $0.24 $0.24 $0.13 $0.13 $0.30 $0.30 $0.30 $0.24 $0.24 $0.24 $0.24 $0.24 $0.22 $0.22 $0.22 $0.22 $0.22 $0.30 $0.30 $0.30 $0.30 $0.30 NUMBER 293,665 10,000 10,000 5,000 5,000 5,000 7,000 7,000 7,000 5,000 5,000 5,000 120,000 200,000 200,000 340,000 340,000 200,000 200,000 200,000 50,000 50,000 50,000 50,000 50,000 80,000 80,000 100,000 100,000 100,000 100,000 100,000 100,000 100,000 100,000 FAIR VALUE AT GRANT DATE $0.41 $0.18 $0.19 $0.20 $0.21 $0.21 $0.15 $0.15 $0.16 $0.15 $0.15 $0.16 $0.13 $0.13 $0.14 $0.17 $0.17 $0.12 $0.13 $0.13 $0.13 $0.14 $0.14 $0.15 $0.15 $0.12 $0.13 $0.13 $0.13 $0.14 $0.11 $0.12 $0.13 $0.13 $0.13 68 NOTES TO THE FINANCIAL STATEMENTSe NOTE 18: ISSUED CAPITAL (CONT.) GRANT DATE ExPIRY DATE ExERCISE PRICE NUMBER FAIR VALUE AT GRANT DATE Jan-07 Oct-07 Jan-08 Jul-08 Sep-08 Nov-08 Jan-09 Mar-09 Jan-12 Oct-12 Oct-13 Oct-14 Oct-15 Oct-16 Oct-17 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Jul-13 Jul-14 Jul-15 Jul-16 Jul-17 Jul-18 Sep-14 Sep-15 Sep-16 Sep-17 Sep-18 Nov-13 Nov-14 Nov-15 Nov-16 Nov-17 Nov-13 Aug-14 Aug-15 Aug-16 Nov-14 Nov-15 Nov-16 Nov-17 Nov-18 Jan-14 Mar-15 Mar-16 Mar-17 Mar-18 Mar-19 $0.22 $0.29 $0.29 $0.29 $0.29 $0.29 $0.29 $0.38 $0.38 $0.38 $0.38 $0.38 $0.38 $0.36 $0.36 $0.36 $0.36 $0.36 $0.36 $0.34 $0.34 $0.34 $0.34 $0.34 $0.30 $0.30 $0.30 $0.30 $0.30 $0.37 $0.37 $0.37 $0.37 $0.28 $0.28 $0.28 $0.28 $0.28 $0.30 $0.29 $0.29 $0.29 $0.29 $0.29 150,000 171,250 5,000 5,000 5,000 5,000 5,000 130,000 4,000 4,000 4,000 4,000 4,000 105,000 22,000 22,000 22,000 22,000 22,000 4,000 54,000 54,000 54,000 54,000 100,000 100,000 100,000 100,000 100,000 95,000 340,000 330,000 330,000 20,000 20,000 20,000 20,000 20,000 180,000 12,120 12,120 12,120 12,120 12,120 $0.15 $0.21 $0.21 $0.23 $0.23 $0.24 $0.25 $0.19 $0.19 $0.20 $0.21 $0.22 $0.23 $0.16 $0.17 $0.18 $0.19 $0.19 $0.20 $0.17 $0.18 $0.19 $0.19 $0.20 $0.09 $0.10 $0.10 $0.11 $0.12 $0.02 $0.08 $0.09 $0.10 $0.06 $0.05 $0.06 $0.06 $0.07 $0.01 $0.06 $0.07 $0.07 $0.08 $0.08 69 NOTE 18: ISSUED CAPITAL (CONT.) GRANT DATE ExPIRY DATE ExERCISE PRICE NUMBER FAIR VALUE AT GRANT DATE Jun-09 Nov-09 Jul-10 Nov-10 Jun-14 Jun-15 Jun-16 Jun-17 Jun-18 Jun-19 Nov-15 Nov-16 Nov-17 Nov-18 Nov-19 July-15 Jul-16 Jul-17 Jul-18 Jul-19 Jul-20 Nov-15 Nov-15 Nov-17 Nov-18 Nov-19 $0.25 $0.25 $0.25 $0.25 $0.25 $0.25 $0.30 $0.30 $0.30 $0.30 $0.30 $0.32 $0.32 $0.32 $0.32 $0.32 $0.32 $0.31 $0.31 $0.31 $0.31 $0.31 115,200 54,000 54,000 54,000 54,000 54,000 100,000 100,000 100,000 100,000 100,000 90,000 10,000 10,000 10,000 10,000 10,000 100,000 100,000 100,000 100,000 100,000 7,766,715 $0.06 $0.13 $0.13 $0.14 $0.14 $0.15 $0.05 $0.07 $0.08 $0.09 $0.10 $0.05 $0.04 $0.06 $0.08 $0.09 $0.10 $0.03 $0.03 $0.05 $0.07 $0.08 Reconciliation of ESOP: 2011 2010 NUMBER OF OPTIONS WEIGHTED AVERAGE ExERCISE PRICE Opening balance at beginning of financial year Granted during the financial year Forfeited during the financial year Exercised during the financial year Expired during the financial year Closing balance at 30 june 8,900,682 1,140,000 (510,800) (1,372,500) (390,667) 7,766,715 $0.31 $0.32 $0.32 $0.23 $0.68 $0.31 NUMBER OF OPTIONS 10,802,349 500,000 (200,000) (1,159,000) (1,042,667) 8,900,682 WEIGHTED AVERAGE ExERCISE PRICE $0.35 $0.30 $0.20 $0.22 $1.16 $0.31 70 NOTES TO THE FINANCIAL STATEMENTSe NOTE 18: ISSUED CAPITAL (CONT.) Reconciliation of other unlisted options: Opening balance at beginning of financial year Exercised during the financial year Expired during the financial year Closing balance at 30 june ESOP options exercised during the financial year: SERIES 1-Sep-04 18-Oct-04 21-Jan-05 13-Jan-06 1-May-06 16-Nov-06 4-Oct-07 1-Jul-08 26-Sep-08 12-Jan-09 2011 2010 NUMBER OF OPTIONS WEIGHTED AVERAGE ExERCISE PRICE NUMBER OF OPTIONS WEIGHTED AVERAGE ExERCISE PRICE 5,000 (5,000) – – $0.22 $0.22 – – 355,000 (50,000) (300,000) 5,000 $1.22 $0.26 $1.40 $0.22 NUMBER ExERCISED ExERCISE DATE SHARE PRICE AT ExERCISE DATE 100,000 100,000 100,000 100,000 340,000 200,000 200,000 5,000 5,000 20,000 20,000 97,300 18,000 3,600 3,600 50,000 10,000 5,000 1,377,500 Nov-10 Apr-11 Apr-11 Apr-11 Jun-11 Feb-11 Jun-11 Jan-11 May-11 May-11 May-11 Jun-11 May-11 Apr-11 Apr-11 Apr-11 Apr-11 Apr-11 $0.260 $0.500 $0.500 $0.500 $0.640 $0.380 $0.640 $0.325 $0.720 $0.690 $0.690 $0.640 $0.690 $0.500 $0.500 $0.500 $0.500 $0.500 Unlisted options vested and exercisable at the reporting date (iii) Weighted averages 2011 NUMBER 2010 NUMBER 5,682,355 6,305,802 The weighted average remaining contractual life of any unlisted share options outstanding at the end of the year is 5.5 years (2010: 3.8 years). The assessed fair value at grant date of options granted during the year ended 30 June 2011 is outlined in the Remuneration Report on page 31. The share price at grant date of these options ranged between $0.26 and $0.31 (2010: $0.32). The expected average price volatility of the Company shares was 57.02% (2010: 44.8%). Expected dividend yield was 0% (2010: 0%) and the average risk free interest rate used was 5.18% (2010: 4.37%). Additional details on options granted in prior years are available in those year’s Annual Reports. 71 NOTE 19: RESERVES (a) Foreign Currency Translation Reserve Exchange differences arising on translation of the foreign controlled entity are taken to the foreign currency translation reserve, as described in note 1(b). The reserve is recognised in profit or loss when the investment is disposed of. Opening balance Adjustment arising from the translation of foreign controlled entity’s financial statements Closing balance (b) Share-based Payments Reserve 2011 $ 2010 $ (483,071) (188,315) (69,203) (294,756) (552,274) (483,071) The share-based payments reserve is used to recognise the fair value of options issued to the extent that they have vested. Opening balance Option expense Closing balance (c) Asset Revaluation Reserve The asset revaluation reserve is used to recognise the fair value of land and buildings as per note 1(k). 2011 $ 2010 $ 1,164,664 1,029,404 82,471 135,260 1,247,135 1,164,664 Opening balance Sale of revalued building transferred to accumulated losses Deferred tax attributable to sale of revalued building transferred to accumulated losses Net movement for the year Closing balance Total reserves NOTE 20: ACCUMULATED LOSSES Balance at the beginning of the year Net loss for the year Transfer from asset revaluation reserve Balance at the end of the year 2011 $ 2010 $ 2,505,509 2,505,509 (3,579,298) 1,073,789 (2,505,509) – – – – 2,505,509 694,861 3,187,102 2011 $ 2010 $ (52,835,683) (44,621,601) (9,356,497) (8,214,082) 2,505,509 – (59,686,671) (52,835,683) 72 NOTES TO THE FINANCIAL STATEMENTSe NOTE 21: CONTINGENCIES Service Commitments Pursuant to the terms and agreements entered into by the Company with both the Women’s and Children’s Hospital (WCH) and the University of Melbourne (U of M) to acquire the license for the epilepsy project from the WCH and the U of M and the breast cancer project from the WCH, the Company is liable to make further payments to the WCH and the U of M upon the achievement of certain conditions. Pursuant to the terms and agreement entered into by the Company with Medvet Science Pty Ltd (Medvet), for the angiogenesis project, the Company is liable to make further payments to Medvet upon the achievement of certain conditions. NOTE 22: FINANCIAL INSTRUMENTS (a) Capital Risk Management The Group manages its capital to ensure that entities in the Group will be able to continue as going concerns whilst maximising the return to stakeholders through the optimisation of the debt and equity balance. The Group’s overall strategy remains unchanged from 2010. The capital structure of the Group consists of debt, which includes borrowings (note 15), cash and cash equivalents (note 7) and equity attributable to equity holders of the parent, comprising issued capital, reserves and retained earnings (disclosed in notes 18, 19 and 20 respectively). The Group has global operations, primarily conducted through subsidiary companies established in the markets in which the Group trades. None of the Group’s entities is subject to externally imposed capital requirements. The Group’s policy is to fund the research and development activities and operations through the issue of equity and the commercialisation of Intellectual Property assets. Minor borrowings for operational assets are utilised, as appropriate. Categories of financial instruments Financial assets Loans and receivables Cash and cash equivalents Financial liabilities at amortised costs Reconciliation to total assets Financial assets (as above) Non-financial assets Reconciliation to total liabilities Financial liabilities (as above) Non-financial liabilities 2011 $ 2010 $ 8,448,810 847,104 16,052,230 12,612,244 24,501,040 13,459,348 4,504,773 5,067,090 24,501,040 13,459,348 9,807,859 18,055,123 34,308,899 31,514,471 4,504,773 5,067,090 1,104,946 981,493 5,609,719 6,048,583 73 NOTE 22: FINANCIAL INSTRUMENTS (CONT.) (b) Financial Risk Management Objectives The Board, through the Audit and Risk Management (ARM) Committee, is responsible for ensuring there are adequate policies in relation to risk management, compliance and internal control systems. In summary, Company policies are designed to ensure significant strategic, operational, legal, reputational and financial risks are identified, assessed, and effectively monitored and managed in a manner sufficient for a company of Bionomics’ size and stage of development to enable achievement of the Company’s business strategy and objectives. The Company’s risk management policies are managed by the key management personnel and are reviewed by the ARM Committee according to a timetable of assessment and review proposed by that Committee and approved by the Board. (c) Market Risk The Group’s activities do not expose it to significant financial risks of changes in foreign currency exchange rates or interest rates. The Group uses derivative financial instruments to manage its exposure to foreign currency risk including: q forward foreign exchange contracts and currency swaps to hedge the exchange rate risk arising on the payments for clinical trials in non-Australian dollar denominated contracts. The Group measures market risk exposures using sensitivity analysis. There has been no material change to the Group’s exposure to market risks or the manner in which these risks are managed and measured. Unless approved by the Chief Executive Office and Managing Director, interest rate derivatives are not entered into. (d) Foreign Currency Risk Management The Group undertakes certain transactions denominated in foreign currencies; consequently exposures to exchange rate fluctuations arise. Exchange rate exposures are managed in accordance with established policies. The carrying amounts of the Group’s foreign currency denominated monetary assets and liabilities at the end of the reporting date are as follows: Euro USD Foreign Currency Sensitivity Analysis The Group is mainly exposed to Euros and US dollars. LIABILITIES 2011 $ 557,992 242,250 2010 $ 975,236 181,065 ASSETS 2011 $ 2010 $ 2,198,595 2,089,494 398,013 1,487,930 The following table details the Group’s sensitivity to a 10% increase and decrease in the Australian dollar against the relevant foreign currencies. 10% is the sensitivity rate used when reporting foreign currency risk internally to key management personnel and represents management’s assessment of the reasonably possible change in foreign currency rates. The sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjusts their translation at the year end for a 10% change in foreign currency rates. A positive number below indicates an increase in profit or equity where the Australian dollar strengthens 10% against the relevant currency. For a 10% weakening of the Australian dollar against the relevant currency, there would be a comparable impact on the profit or equity with the balances being the opposite. Profit or loss Equity EURO IMPACT USD IMPACT 2011 $ 542 2010 $ 2011 $ 2010 $ 697 (i) (14,160) (118,806 (ii) (149,688) (101,994) (iii) – – (i) this is mainly attributable to the exposure outstanding on Euro payables and forward contracts in the Group at the end of the reporting period. (ii) this is mainly attributable to the exposure to outstanding USD net assets and forward contracts at the end of the reporting period. (iii) this is as a result of the changes in fair value of the net investment in a subsidiary denominated in Euros, reflected in the foreign currency translation reserve. 74 NOTES TO THE FINANCIAL STATEMENTSe NOTE 22: FINANCIAL INSTRUMENTS (CONT.) The Group’s sensitivity to foreign currency has decreased during the current year mainly due to the mix of net assets held in non- Australian dollar denominated currencies. In management’s opinion, the sensitivity analysis is unrepresentative of the inherent foreign exchange risk because the exposure at the end of the reporting period does not reflect the exposure during the year. Requirements change during the financial year depending on research and development activities being undertaken and contract research service financial performance. Forward Foreign Exchange Contracts It is the policy of the Group to enter into forward foreign currency contracts to cover specific foreign currency payments and receipts when there is a legal commitment to pay or receive foreign currency or the CEO has a high degree of confidence (>90%) that a foreign currency exposure will arise. Under the Group’s Treasury Policy, the Chief Financial Officer (CFO) will manage the foreign exchange transaction risk adopting the following guidelines: q generally hedge foreign exchange exposure identified above by entering into a forward currency contract. q the duration of any forward currency contract(s) will approximate the period in which the net currency exposure arise. q recognising the uncertainty that exists in the projecting forward foreign currency flows, a maximum net foreign currency exposure position may be held at any point in time. Due to the long-term nature of the net investment in the Euro denominated wholly owned subsidiary, the investment will not be hedged into Australian dollars, with the result that the Australian dollar value of the investment will fluctuate with the market rate through the foreign currency translation reserve. The following table details the forward foreign currency (FC) contracts outstanding at the end of the reporting period: Cash flow hedges EURO (Sell) 3 – 6 months US (Buy) Less than 3 months 3 – 6 months AVERAGE RATE FOREIGN CURRENCY CONTRACT VALUE FAIR VALUE 2011 2010 2011 FC 2010 FC 2011 $ 2010 $ 2011 $ 2010 $ 0.7295 – (400,000) – (548,321) 0.9633 1.0336 – – 1,500,000 500,000 – – 1,557,190 483,746 – – – 1,089 (157,430) (7,143) (163,484) – – – – The table above provides an example of summary quantitative data about exposure to foreign exchange risks at the end of the reporting period that an entity may provide internally to key management personnel. The Group has entered into contracts to conduct clinical trials in US dollars over a period of time and has hedged US dollars to cover these commitments. In addition, the Group will receive a Euro cash receipt and has hedged this refund. (e) Interest Rate Risk Management The Group is exposed to interest rate risk as entities in the Group borrow funds at both fixed and variable interest rates and lend funds at variable rates. The Group does not use interest rate swap contracts or forward interest rate contracts. 75 NOTE 22: FINANCIAL INSTRUMENTS (CONT.) Interest Rate Sensitivity Analysis The sensitivity analysis below has been determined based on the exposure to interest rates at the end of the reporting period and the stipulated change taking place at the beginning of the financial year and held constant throughout the reporting period. If interest rates had been 50 basis points higher / (lower) and all other variables were held constant, the Group’s: q profit for the year ended 30 June 2011 would increase / (decrease) by $56,276 (2010: increase / (decrease) by $25,891). This is mainly attributable to the Group’s exposure to interest rates on its variable rate deposits. The Group’s sensitivity to interest rates has increased during the current year mainly due to the increase in cash and cash equivalent balances and reduction in debt. (f) Credit Risk Management Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. The Group has adopted a policy of only dealing with creditworthy counterparties and obtaining sufficient collateral, where appropriate, as a means of mitigating the risk of financial loss from defaults. The Group does not have any significant credit risk exposure to any single counterparty or any group of counterparties having similar characteristics. The credit risk on liquid funds is limited because the counterparties are banks with high credit ratings assigned by international credit rating agencies. The carrying amount of financial assets recorded in the financial statements, net of any allowances for losses, represents the Group’s maximum exposure to credit risk. (g) Liquidity Risk Management Ultimate responsibility for liquidity risk management rests with the Board of Directors, who have built an appropriate liquidity risk management framework for management of the Group’s short, medium and long term funding. The Group manages liquidity risk by continuously monitoring forecast and actual cash flows and matching maturity profiles of financial assets and liabilities. Included in note 15 is a listing of additional undrawn facilities that the group has at its disposal to further reduce liquidity risk. (h) Liquidity and Interest Rate Risk The following tables detail the Group’s remaining contractual maturity for its financial liabilities. The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Group can be required to pay. The tables include both interest and principal cash flows. INTEREST RATE MATURITY WEIGHTED AVERAGE EFFECTIVE INTEREST RATE % LESS THAN 1 MONTH $ 1–3 MONTHS $ 3–12 MONTHS $ 1–5 YEARS $ 5+ YEARS $ TOTAL $ 2011 Non–interest bearing Forward exchange contracts (payable) Forward exchange contracts (receivable) 1,669,747 1,557,190 (1,399,760) – – – – 1,030,978 (1,024,924) – – – Finance lease liability 8.43 2,274 3,813 7,347 9,032 Fixed interest rate instruments TOTAL 6.97 2,814,188 – – – 4,643,639 3,813 13,401 9,032 – – – – – – 1,669,747 2,588,168 (2,424,684) 22,466 2,814,188 4,669,885 76 NOTES TO THE FINANCIAL STATEMENTSe NOTE 22: FINANCIAL INSTRUMENTS (CONT.) INTEREST RATE MATURITY WEIGHTED AVERAGE EFFECTIVE INTEREST RATE % LESS THAN 1 MONTH $ 1–3 MONTHS $ 3–12 MONTHS $ 1–5 YEARS $ 5+ YEARS $ TOTAL $ 2010 Non–interest bearing Finance lease liability Fixed interest rate instruments 1,747,937 – – – 8.51 6.97 4,253 8,506 36,297 22,414 168,187 80,562 504,560 2,992,801 TOTAL 1,920,377 89,068 540,857 3,015,215 – – – – 1,747,937 71,470 3,746,110 5,565,517 NOTE 23: kEY MANAGEMENT PERSONNEL DISCLOSURES (a) Directors The following persons were directors of Bionomics during the financial year and prior year unless otherwise stated: Non-Executive Chairman Mr Christopher Fullerton Executive Director Dr Deborah Rathjen, Chief Executive Officer and Managing Director Non-Executive Directors Mr Trevor Tappenden Dr Errol De Souza (b) Other key Management Personnel The following persons also had authority and responsibility for planning, directing and controlling the activities of the Group directly or indirectly during the financial year: Name Dr Emile Andriambeloson Dr Andrew Harvey Dr Gabriel Kremmidiotis Ms Melanie Young Mr Trevor Thiele Position Director of Research, Neurofit SAS Vice President Drug Discovery Vice President Research and Development Chief Financial Officer and Company Secretary (appointed 9 May 2011) Chief Financial Officer and Company Secretary (resigned 13 May 2011) (c) key Management Personnel Compensation The aggregate compensation made to key management personnel of the Group is set out below: Short-term employee benefits Post employment benefits Share-based payments Total key management personnel compensation 2011 $ 2010 $ 1,421,011 1,058,533 75,343 124,124 63,737 310,955 1,620,478 1,433,225 77 NOTE 24: COMMITMENTS FOR ExPENDITURE (a) Finance Leases The Group leases scientific equipment under finance leases. The average lease term is three years (2010: three years). Under the terms of the lease, the Group retains ownership at the completion of the agreed term. Interest rates underlying all obligations under finance leases are fixed at the respective contract dates ranging from 8.9% to 9.8% (2010: 8.9% to 9.8%) per annum. MINIMUM LEASE PAYMENTS PRESENT VALUE OF LEASE PAYMENTS Finance lease liabilities Within one year Later than one year but not greater than five Future finance charges Present value of minimum lease payments 2011 $ 13,434 9,032 22,466 (1,630) 20,836 2010 $ 49,056 22,414 71,470 (3,500) 67,970 Represented in the financial statements (note 15) by: Current borrowings Non-current borrowings (b) Operating Leases Operating leases relate to business premises with lease terms of between two and ten years. The building premise leases have options of +2 and +5+5 year terms respectively. Payments recognised as an expense Minimum lease payments Non-cancellable operating lease commitments Within one year Later than one year but not greater than five Later than five years Minimum lease payments 2011 $ 2010 $ 13,434 7,402 20,836 49,056 18,914 67,970 – – 20,836 67,970 2011 $ 2010 $ 13,434 7,402 20,836 49,056 18,914 67,970 2011 $ 2010 $ 227,134 195,552 785,826 165,230 2,987,702 20,569 4,246,773 – 8,020,301 185,799 The non-cancellable lease commitments include the rent payable under the sale and leaseback of the headquarters. The sale occurred on 29 April 2011, with settlement occurring on 13 July 2011. The total lease commitments are expected to be $7,910,077 (2010: nil), and are considered market related. 78 NOTES TO THE FINANCIAL STATEMENTSe NOTE 24: COMMITMENTS FOR ExPENDITURE (CONT.) (c) Rental Agreements The Group sub-lets areas of its facility under agreements that are renewed annually. Rent received from these agreements is treated according to the accounting policy outlined in note 1(c). Future rental income receivable Within one year Later than one year but not greater than five 2011 $ 2010 $ 219,264 – 219,264 219,264 219,264 438,528 NOTE 25: EVENTS OCCURRING AFTER REPORTING DATE No matters or circumstances have arisen since the end of the financial year which significantly affects or may significantly affect the results of the operations of the Group. NOTE 26: REMUNERATION OF AUDITORS During the financial year the following services were paid and payable to the external auditor: Auditor of the parent entity Audit or review of the financial report Tax compliance including preparation of the income tax return 2011 $ 2010 $ 119,920 22,457 113,497 36,776 142,377 150,273 The auditor of Bionomics Limited is Deloitte Touche Tohmatsu. It is the Group’s practice to employ Deloitte Touche Tohmatsu on assignments additional to their statutory audit duties where their expertise and experience with the Group are important. NOTE 27: CASH FLOW INFORMATION Reconciliation of operating loss after income tax to net cash outflow from operating activities Loss after income tax Items in loss – Depreciation and amortisation – Directors’ fees and share based payments – Income tax benefit – Net unrealised foreign exchange differences – Interest received and receivable 2011 $ 2010 $ (9,356,497) (8,214,082) 942,506 82,471 (750,406) 954,421 336,128 – 9,241 52,768 (477,516) (487,386) NOTE 27: CASH FLOW INFORMATION (CONT.) Changes in operating assets and liabilities – Decrease / (Increase) in debtors and other assets – Decrease / (Increase) in other operating assets – Decrease / (Increase) in inventory – Movement in provisions – Increase / (Decrease) in unearned income – Increase / (Decrease) in creditors and accruals Net cash outflows from operating activities NOTE 28: NON-CASH FINANCING ACTIVITIES Directors’ fees and management salaries satisfied by the issue of shares NOTE 29: LOSS PER SHARE Basic loss per share Diluted loss per share 79 2011 $ 2010 $ 265,073 (151,559) 51,079 70,429 – 9,325 128,974 129,260 (22,622) (33,990) 77,860 305,490 (8,979,408) (7,099,625) 2011 $ – – 2011 CENTS (2.9) (2.9) 2010 $ 200,867 200,867 2010 CENTS (2.7) (2.7) The basic and diluted loss per share amounts have been calculated using the ‘Loss after income tax’ figure in the consolidated statement of comprehensive income. Loss per share (Basic and Diluted): Loss after tax for the year 2011 $ 2010 $ (9,356,497) (8,214,082) 2011 NUMBER 2010 NUMBER Weighted average number of shares - Basic Weighted average number of ordinary shares used in calculating basic loss per share 321,578,330 300,798,854 Weighted average number of shares – Diluted Weighted average number of ordinary shares used in calculating basic loss per share – Employee options Weighted average number of ordinary shares used in the calculation of diluted earnings per share 321,578,330 300,798,854 2,262,295 563,520 323,840,625 301,362,374 80 NOTES TO THE FINANCIAL STATEMENTSe NOTE 29: LOSS PER SHARE (CONT.) The following potential ordinary shares are anti-dilutive and are therefore excluded from the weighted average number of ordinary shares for the purposes of diluted earnings per share. Employee options NOTE 30: RELATED PARTY TRANSACTIONS (a) Parent Entity 2011 NUMBER 2010 NUMBER 313,665 5,888,382 The immediate parent and ultimate controlling party of the Group is Bionomics Limited. Interests in subsidiaries are set out in note 11. (b) key Management Personnel Disclosures relating to compensation of key management personnel are set out in note 23 and the Directors’ Report. (c) Other Transactions with Related Parties Transactions between the Group and its related parties During the financial year ended 30 June 2011, the following transactions occurred between the Group and its other related parties: q research and development services between the parent and subsidiary entities totalled $2,620,550 (2010: $887,501). q corporate support fees were charged between the Group’s entities of $369,985 (2010: $299,197) for management and accounting support. The following balances arising from transactions between the Group and its other related parties are outstanding at reporting date: q loan receivables totalling $1,509,067 (2010: $1,804,479) are payable by the subsidiaries to the Parent entity. All amounts advanced to or payable to related parties are unsecured and are subordinate to other liabilities. Interest has been waived since 2010. The amounts outstanding will be settled in cash. No guarantees have been given or received. No expense has been recognised in the period for bad or doubtful debts in respect of the amounts owed by related parties. Transactions between the Group and its associates were eliminated in the preparation of the consolidated financial statements of the Group to the extent of the Group’s share in profits and losses of the associate resulting from these transactions. (d) Loans To and From Related Parties No loans to or from related parties have occurred in the current or previous financial year. (e) key Management Personnel Equity Holdings (i) Options provided as remuneration and shares issued on the exercise of such options are outlined below, and the terms and conditions of the options can be found in note 1(p)(iv). (ii) The number of unlisted options over ordinary shares in the company held by each director of the Company and other key management personnel (including related parties) of the Group are set out below. All options that are vested are exercisable. 81 NOTE 30: RELATED PARTY TRANSACTIONS (CONT.] 2011 OPTIONS NAME BALANCE AT THE START OF THE YEAR GRANTED DURING THE YEAR AS COMPENSA- TION ExERCISED DURING THE YEAR OTHER CHANGES DURING THE YEAR* BALANCE AT YEAR END VESTED AND ExERCISABLE AT YEAR END Mr Christopher Fullerton 500,000 500,000 – – 1,000,000 200,000 Dr Deborah Rathjen 2,502,300 Mr Trevor Tappenden1 Dr Errol De Souza Dr Emile Andriambeloson Dr Andrew Harvey Dr Gabriel Kremmidiotis Ms Melanie Young (appointed 9 May 2011) Mr Trevor Thiele (resigned 13 May 2011) 500,000 500,000 325,800 250,000 290,000 – – – – – – 45,000 45,000 – 500,000 (437,300) (100,000) 1,965,000 1,635,000 – – – – – – – – – – – (90,000) – (500,000) 500,000 500,000 325,800 295,000 245,000 – – 400,000 300,000 285,800 145,000 245,000 – – 4,868,100 1,090,000 (437,300) (690,000) 4,830,800 3,210,800 2010 OPTIONS NAME BALANCE AT THE START OF THE YEAR GRANTED DURING THE YEAR AS COMPENSA- TION ExERCISED DURING THE YEAR OTHER CHANGES DURING THE YEAR* BALANCE AT YEAR END VESTED AND ExERCISABLE AT YEAR END Mr Christopher Fullerton – 500,000 – – 500,000 – Dr Deborah Rathjen Mr Trevor Tappenden1 Dr Errol De Souza Dr Peter Jonson (retired 4 November 2009)2 Dr Emile Andriambeloson Dr Andrew Harvey Dr Gabriel Kremmidiotis Mr Trevor Thiele (appointed 14 December 2009) Mr Stephen Birrell (resigned 18 December 2009) 3,457,300 500,000 500,000 1,000,000 325,800 250,000 350,000 – 674,000 7,057,100 – – – – – – – – – (175,000) (780,000) 2,502,300 1,842,300 – – – – – – – (1,000,000) – – (20,000) (40,000) – – (474,000) (200,000) 500,000 500,000 – 325,800 250,000 290,000 – – 300,000 200,000 – 245,800 50,000 290,000 – – 500,000 (669,000) (2,020,000) 4,868,100 2,928,100 Held by Kelso Investments Australia Pty Ltd Held by Sandhurst Trustees Limited 1 2 * Includes removal from table at date person resigned 82 NOTES TO THE FINANCIAL STATEMENTSe NOTE 30: RELATED PARTY TRANSACTIONS (CONT.] (iii) The number of shares in the company held by each director of the company and other key management personnel (including personally related parties) of the Group are set out below: 2011 SHARES NAME Mr Christopher Fullerton3 Dr Deborah Rathjen Mr Trevor Tappenden4 Dr Errol De Souza Dr Emile Andriambeloson Dr Andrew Harvey Dr Gabriel Kremmidiotis Mr Trevor Thiele6 (resigned 13 May 2011) Ms Melanie Young (appointed 9 May 2011) BALANCE AT THE START OF THE YEAR GRANTED DURING THE YEAR AS COMPENSATION RECEIVED DUR- ING THE YEAR UPON ExERCISE OF OPTIONS OTHER CHANGES DURING THE YEAR* BALANCE AT YEAR END 4,825,020 1,188,889 245,899 116,698 2,889 126,315 112,577 100,000 – 6,718,287 – – – – – – – – – – – – 437,300 (282,500) – – – – – – – – – – – – (100,000) – 4,825,020 1,343,689 245,899 116,698 2,889 126,315 112,577 – – 437,300 (382,500) 6,773,087 2010 SHARES NAME BALANCE AT THE START OF THE YEAR GRANTED DURING THE YEAR AS COMPENSATION RECEIVED DUR- ING THE YEAR UPON ExERCISE OF OPTIONS OTHER CHANGES DURING THE YEAR* BALANCE AT YEAR END Mr Christopher Fullerton3 4,700,000 Dr Deborah Rathjen Mr Trevor Tappenden4 Dr Errol De Souza Dr Peter Jonson (retired 4 November 2009)5 Dr Emile Andriambeloson Dr Andrew Harvey Dr Gabriel Kremmidiotis Mr Trevor Thiele (appointed 14 December 2009) 6 Mr Stephen Birrell (resigned 18 December 2009) 996,889 188,355 39,763 716,539 2,889 – 103,197 125,020 192,000 57,544 76,935 39,729 – 126,315 160,000 – – 175,000 (175,000) – – – – – – – (756,268) – – 20,000 (170,620) 4,825,020 1,188,889 245,899 116,698 – 2,889 126,315 112,577 – – – 100,000 100,000 100,846 6,848,478 68,211 845,754 474,000 669,000 (643,057) (1,644,945) – 6,718,287 3 Held by Mandalay Capital Pty Ltd 4 Held by Kelso Investments Australia Pty Ltd 5 Held by Sandhurst Trustees Limited 6 Held by Thiele Investments Pty Ltd * Includes removal from table at date person resigned (f) Loans to Directors and Other key Management Personnel There were no loans to any directors of the Company or other key management personnel of the Group during the financial year ended 30 June 2011. BALANCE AT THE ING THE YEAR OTHER CHANGES GRANTED DURING RECEIVED DUR- THE YEAR AS UPON ExERCISE DURING THE COMPENSATION OF OPTIONS YEAR* BALANCE AT YEAR END 437,300 (282,500) 2011 SHARES NAME Mr Christopher Fullerton3 Dr Deborah Rathjen Mr Trevor Tappenden4 Dr Errol De Souza Dr Emile Andriambeloson Dr Andrew Harvey Dr Gabriel Kremmidiotis Mr Trevor Thiele6 (resigned 13 May 2011) Ms Melanie Young (appointed 9 May 2011) 2010 SHARES NAME Mr Christopher Fullerton3 Dr Deborah Rathjen Mr Trevor Tappenden4 Dr Errol De Souza Dr Peter Jonson (retired 4 November 2009)5 Dr Emile Andriambeloson Dr Andrew Harvey Mr Trevor Thiele (appointed 14 December 2009) 6 Mr Stephen Birrell (resigned 18 December 2009) START OF THE YEAR 4,825,020 1,188,889 245,899 116,698 2,889 126,315 112,577 100,000 – 6,718,287 START OF THE YEAR 4,700,000 996,889 188,355 39,763 716,539 2,889 – – 100,846 6,848,478 – – – – – – – – – – 125,020 192,000 57,544 76,935 39,729 126,315 160,000 – – 68,211 845,754 (100,000) 437,300 (382,500) 6,773,087 BALANCE AT THE ING THE YEAR OTHER CHANGES GRANTED DURING RECEIVED DUR- THE YEAR AS UPON ExERCISE DURING THE COMPENSATION OF OPTIONS YEAR* BALANCE AT YEAR END 175,000 (175,000) (756,268) – – – – – – – – – – – – – – – – – – – – – – – – – – – 4,825,020 1,343,689 245,899 116,698 2,889 126,315 112,577 – – – – 4,825,020 1,188,889 245,899 116,698 2,889 126,315 112,577 Dr Gabriel Kremmidiotis 103,197 20,000 (170,620) 83 NOTE 30: RELATED PARTY TRANSACTIONS (CONT.] (g) Other Transactions with Directors and Other key Management Personnel There were no other transactions with directors of the Company or other key management personnel of the Group during the financial year. NOTE 31: PARENT ENTITY INFORMATION The accounting policies of the parent entity, which have been applied in determining the financial information shown below, are the same as those applied in the consolidated financial statements. Refer to note 1 for a summary of the significant accounting polices relating to the Group. FINANCIAL POSITION Assets Current assets Non-current assets Total assets Liabilities Current liabilities Non-current liabilities Total liabilities Net Assets Equity Issued capital Accumulated losses Reserves: Share based payments reserve Asset revaluation reserve Total equity 100,000 100,000 474,000 669,000 (643,057) (1,644,945) FINANCIAL PERFORMANCE 6,718,287 Loss for the year Other comprehensive income Total comprehensive income YEAR ENDED 30 jUNE 2011 YEAR ENDED 30 jUNE 2010 25,171,780 14,864,038 8,964,844 16,521,723 34,136,624 31,385,761 4,929,156 2,362,544 129,621 2,812,889 5,058,777 5,175,433 29,077,847 26,210,328 87,690,990 75,114,469 (59,860,278) (52,574,314) 1,247,135 1,164,664 - 2,505,509 29,077,847 26,210,328 YEAR ENDED 30 jUNE 2011 YEAR ENDED 30 jUNE 2010 9,791,471 8,475,117 - - 9,791,471 8,475,117 (a) Property, Plant and Equipment Commitments There are no contractual commitments for the acquisition of property, plant or equipment as at 30 June 2011 (2010: Nil). (b) Contingent Liabilities and Guarantees There are no contingent liabilities or guarantees as at 30 June 2011 (2010: Nil). 84 DIRECTORS DECLARATIONe THE DIRECTORS DECLARE THAT: a) in the directors’ opinion, there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable; b) the attached financial statements are in compliance with International Financial Reporting Standards issued by the International Accounting Standards Board, as stated in note 1 to the financial statements; c) in the directors’ opinion, the attached financial statements and notes thereto are in accordance with the Corporations Act 2001, including compliance with accounting standards and giving a true and fair view of the financial position and performance of the consolidated entity; and d) the directors have been given the declarations required by section 295A of the Corporations Act 2001. Signed in accordance with a resolution of the directors made pursuant to section 295(5) of the Corporations Act 2001. On behalf of the directors Christopher Fullerton Chairman Dated this 17th day of August 2011 Deborah Rathjen Chief Executive Officer and Managing Director INDEPENDENT AUDIT REPORTe 85 86 INDEPENDENT AUDIT REPORTe 87 SHAREHOLDER INFORMATIONe NUMBER OF HOLDERS OF EqUITY Ordinary Share Capital 344,731,779 fully paid ordinary shares are held by 3,671 individual shareholders. Voting Rights There is one class of quoted equity securities issued by the Company, ordinary, with voting rights attached to the ordinary shares. One share equates to one vote. Unlisted options 7,766,715 options are held by 44 individual option holders. DISTRIBUTION OF SHAREHOLDERS OF EqUITY SECURITIES Category (size of holding) Ordinary shares Unlisted options NUMBER OF SECURITY HOLDERS 1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 – and over Holding less than a marketable parcel - 1 - 29 14 44 401 1,138 666 1,213 253 3,671 406 SUBSTANTIAL SHAREHOLDERS Substantial holders in the Company are set out below: Ordinary Shares National Nominees Limited Link Traders (Aust) Pty Ltd Start-Up Australia Ventures The Australian National University HSBC Custody Nominees Number held 45,867,644 37,000,000 28,364,866 23,278,583 22,700,340 88 SHAREHOLDER INFORMATIONe TWENTY LARGEST HOLDERS OF EACH CLASS OF qUOTED EqUITY SECURITIES The names of the 20 largest holders of each class of quoted equity securities are listed below: Name National Nominees Limited Link Traders (Aust) Pty Ltd Start-Up Australia Ventures The Australian National University HSBC Custody Nominees J P Morgan Nominees Australia Limited Pagodatree Investments Limited Balzac Investments Pty Ltd Boom Australia Pty Limited HSBC Custody Nominees (Australia) Limited – GSCO ECA CVC Limited Mandalay Capital Pty Ltd JBW Investments Pty Ltd Mark & Rebecca Potter UBS Nominees Pty Ltd Stephen Rattray & Peta Rattray Credit Suisse Securities (Europe) Ltd AW & JE Wilks UBS Wealth Management Australia Nominees Pty Ltd JP Morgan Nominees Australia Limited 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 ORDINARY SHARES Number held Percentage of issued shares 45,867,644 37,000,000 28,364,866 23,278,583 22,700,340 12,234,675 8,014,030 7,744,223 6,933,100 5,950,840 5,000,000 4,825,020 3,950,000 2,881,250 2,694,650 2,500,192 2,500,000 2,150,000 1,822,481 1,713,552 13.31 10.74 8.23 6.75 6.58 3.55 2.32 2.25 2.01 1.73 1.45 1.40 1.15 0.84 0.78 0.73 0.73 0.62 0.53 0.50 228,125,446 66.20 Unquoted equity securities Number on issue Number of holders Options issued pursuant to Bionomics Limited Employee Share Option Plan 7,766,715 7,766,715 44 44 COMPANY PARTICULARSe Bionomics, a listed public Company, is domiciled and incorporated in Australia. DIRECTORS Bionomics shares are listed on the Australian Securities Exchange under the code BNO. REGISTERED OFFICE 31 Dalgleish Street Thebarton SA Australia 5031 Telephone: 61 8 8354 6100 ADMINISTRATIVE OFFICE 31 Dalgleish Street Thebarton SA Australia 5031 Telephone: +61 8 8354 6100 Facsimile: +61 8 8354 6199 E-mail: info@bionomics.com.au Web Address: www.bionomics.com.au SHARE REGISTRY Computershare Investor Services Pty Limited Level 5, 115 Grenfell Street Adelaide SA Australia 5000 Telephone: 1300 556 161 (within Australia) +61 3 9415 4000 (outside Australia) E-mail: web.queries@computershare.com.au Web Address: www.computershare.com SOLICITORS Johnson Winter & Slattery 211 Victoria Square Adelaide SA Australia 5000 AUDITORS Deloitte Touche Tohmatsu 11 Waymouth Street Adelaide SA Australia 5000 PATENT ATTORNEYS Griffith Hack 167 Eagle Street Brisbane QLD Australia 4000 Davies Collison Cave 1 Nicholson Street Melbourne VIC Australia 3000 Bionomics is not listed on any other stock exchanges other than the ASX. Mr Christopher Fullerton Chairman Dr Deborah Rathjen Mr Trevor Tappenden Dr Errol De Souza Chief Executive Officer and Managing Director Non-Executive Director Non-Executive Director SENIOR MANAGEMENT Dr Deborah Rathjen Dr Emile Andriambeloson Dr Andrew Harvey Dr Gabriel Kremmidiotis Ms Melanie Young Chief Executive Officer and Managing Director Head of Research, Neurofit Vice President Drug Discovery Vice President Research and Development Chief Financial Officer and Company Secretary SCIENTIFIC ADVISORS Dr Simon Campbell CBE BSc PhD Dr Jayesh Desai MBBS Dr Errol De Souza PhD Professor Paul Fitzgerald PhD MSc Dr Tim Harris PhD MSc BSc Dr Ann Hayes BSc Mr Richard Morgan C Biol, MI Biol Dip RC Path Dr Christopher J Sweeney MBBS Bionomics has an American Depositary Receipts program (ADRs) sponsored by BNY Mellon, under the ticker code ‘BMICY’. For further details about this program, please contact: UNITED STATES BNY Mellon Shareowner Services PO Box 358516, Pittsburgh, PA 15252-8516 Telephone: +1 201 680 6825 Toll Free Number for Domestic Calls: +1 888 BNY ADRA or +1 1888 269 2377 Number for International Calls: +1 201 680 6825 E-mail: shrrelations@bnymellon.com or visit BNY Mellon Shareowner Services’ website at www.bnymellon.com/shareowner AUSTRALIA Ms Donna Kiely, Vice President BNY Mellon Depositary Receipts, Australia & New Zealand The Bank of New York Level 5,350 Collins Street, Melbourne VIC 3000 Telephone: +61 3 9640 3908 Facsimile: +61 3 9602 1236 E-mail: donna.kiely@bnhmellon.com 31 DALGLEISH STREET, THEBARTON, SA AUSTRALIA, 5031 WWW.BIONOMICS.COM.AU ABN 53 075 582 740 

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