Bionomics Ltd
Annual Report 2016

Plain-text annual report

2016 BIONOMICS ANNUAL REPORT 31 DALGLEISH STREET, THEBARTON, SA AUSTRALIA, 5031 WWW.BIONOMICS.COM.AU ABN 53 075 582 740 CONTENTS 01 VISION 02 HIGHLIGHTS 03 CHAIRMAN’S LETTER 04 CEO+MANAGING DIRECTOR’S REPORT 09 PIPELINE 12 INTELLECTUAL PROPERTY PORTFOLIO 13 BOARD OF DIRECTORS 16 MANAGEMENT 18 DIRECTOR’S REPORT 35 ANNUAL FINANCIAL STATEMENTS 81 INDEPENDENT AUDIT REPORT 83 SHAREHOLDER INFORMATION 85 COMPANY PARTICULARS BIONOMICS IS DISCOVERING AND DEVELOPING INNOVATIVE THERAPEUTICS FOR SERIOUS MEDICAL CONDITIONS, WORKING WITH PARTNERS TO ACHIEVE SIGNIFICANT OUTCOMES FOR PATIENTS, SHAREHOLDERS AND EMPLOYEES. Bionomics is a leader in the discovery and development of innovative biopharmaceuticals with operations in Australia, Europe and US. The Company undertakes discovery, development and strategic partnering of first in class and best in class drugs to treat patients with serious medical conditions including cancer and central nervous system disorders. Bionomics utilizes key global, strategic partnerships for the commercialisation of its drugs. BNC210: A NEXT GENERATION TREATMENT FOR ANXIETY DISORDERS BNC210 made strong progress in the clinic: = Positive Phase 1b clinical trial results reported in September 2015 supporting the mechanism of action of BNC210. All primary and secondary endpoints met. = Completion and reporting top line data from the Phase 2 trial in patients with generalized anxiety disorder evaluating the capacity of BNC210 to engage brain systems relevant to anxiety. The clinical trial has been conducted at The Institute of Psychiatry, Psychology & Neuroscience at King’s College in London. BNC210 delivered positive results meeting both primary endpoints and outperforming standard of care, lorazepam. = Commenced multi-centre, placebo controlled, double-blinded Phase 2 clinical trial in patients with Post Traumatic Stress Disorder (PTSD). The clinical trial will be conducted in Australia and New Zealand. BNC101: LGR5 INHIBITOR TARGETING CANCER STEM CELLS IN SOLID TUMOURS Phase 1 clinical trial of Bionomics’ lead cancer stem cell drug candidate BNC101 commenced in patients with metastatic colon cancer, following a successful IND submission to the US FDA . 02 HIGHLIGHTS BNC105: CHANGING THE TUMOUR MICROENVIRONMENT TO STIMULATE TUMOUR IMMUNITY New BNC105 data presented at major international cancer conferences AACR-NCI-EORTC International Conference on Molecular Targets and Cancer Therapeutics and the Annual American Association for Cancer Research (AACR) conference. The data demonstrated that BNC105 synergised with immune-oncology agents by re-activating the immune response to tumours and potentiating their anti-tumour activity. MERCK & CO (MSD) PARTNERSHIP = US$9 million investment at A$0.5938, a 29% premium to market. = Extension of pain partnership targeting treatments for chronic and neuropathic pain. = Well attended 3rd Annual Bionomics MSD Symposium “Drug Discovery and Development for Cognition and Alzheimer’s Disease”. Keynote speaker Dr Darryle Schoepp, VP & Therapeutic Area Head, Neuroscience, Merck & Co. = 4th Annual Bionomics-MSD Symposium “At the Frontiers of Neuroscience: Memory, Movement & Mood” on 7 November 2016. Keynote speaker Dr David Michelson, VP Neuroscience and Ophthalmology Clinical Research, Merck & Co. 03 CHAIRMAN’S REPORT DEAR SHAREHOLDERS Consolidation has been a strong theme for Bionomics during an eventful 2016 as we sought to strengthen your Company’s balance sheet, further globalise the share register and advance our drug pipeline. While the US capital raise completed in December 2015 was criticized by some shareholders, it allowed Bionomics to continue to make major advances in its clinical development programs and to focus on its important partnerships with Merck & Co (known as MSD outside the US and Canada). BNC210, for the treatment of anxiety-related disorders, delivered positive clinical trial results in September 2015 with successful completion of a multiple ascending dose study and demonstration of mechanism of action. More recently we reported extremely encouraging, positive Phase 2 data from our trial in patients with Generalized Anxiety Disorder (GAD). In a patient population which is poorly served by current medications, we are excited that BNC210 may make a positive contribution to treatment options in the future. BNC210 has now advanced into a Phase 2 clinical trials in patients with Post-Traumatic Stress Disorder (PTSD). We also progressed our cancer stem cell targeting drug candidate BNC101 into the clinic following a successful Investigational New Drug (IND) application to the US Food & Drug Administration (FDA) in July 2015. A Phase 1 trial in patients with metastatic colon cancer is underway and reflects further progress in an important asset from our 2012 acquisition of Biogen spin-out, Eclipse Therapeutics. The ongoing clinical trials are indicative of our mission to develop best-in-class treatments for central nervous system disorders and for cancer. Compelling data with any of our clinical programs are major value inflection points giving confidence for both continued development and strategic partnering of our innovative drug candidates. Bionomics’ business model is to secure strategic partnerships for our drug candidates. Your Company has continued to focus on its two major partnerships with MSD in pain and cognition and was delighted to welcome MSD as a shareholder of Bionomics in 2015, a strong endorsement of our technology. In addition to revenue under its agreement with MSD and contract revenue from our subsidiaries Neurofit and Prestwick Chemical, Bionomics received A$8.5 million under the Federal Government’s R&D Tax Incentive. A surprise for many was a more recent payment to Bionomics of US$736,815 as its share of a US$15 million upfront payment from a licensing deal between MSD and the Australian Cooperative Research Centre for Cancer Therapeutics, of which Bionomics is an industry partner. Bionomics may further benefit from future milestone and royalty payments for this program. In 2016 the Board undertook a major renewal program. Following a productive Shareholder Consultation Process we are delighted to welcome David Wilson, Alan Fisher and Peter Turner to the Board. The new Directors bring strong global investment, finance and drug development skills, which were recognised as necessary in the Company’s Board structure and governance review. These appointments came after extensive consultation with shareholders and I thank the Shareholder Working Group representing a cross-section of our major institutional shareholders, for their active participation in the Board appointment process. With these appointments Mr Graeme Kaufman and Mr Trevor Tappenden announced their intention to retire from the Board. We very much value the significant contributions Graeme and Trevor made to Bionomics over a considerable period of time and thank them for their outstanding leadership as Chairman and Chair of the Audit and Risk Committee respectively. This year has also seen the departure of Dr Alan W Dunton from the Board, who we also thank for the considerable contributions he made to the Company during his short tenure on the Board. The renewed Bionomics Board now comprises of well- qualified members operating under a strong governance structure and with the requisite skills and knowledge to drive the development and partnering of Bionomics’ pipeline. In conclusion, Bionomics ends the year with a strong cash balance enabling the Company to build shareholder value through maximisation of its pipeline development. The Board thanks all shareholders for their continued support and constructive feedback over the past year and we look forward to sharing with you news on clinical and partnership progress in the coming year. Yours faithfully Errol De Souza Chairman and Non-Executive Director 04 CEO AND MANAGING DIRECTOR’S REPORT it was safe and well tolerated with no adverse effects on cognition, emotional stability or potential for addiction. Importantly the trial results indicated that BNC210 modulated the activity of its target, the α7 nicotinic acetylcholine receptor, reducing the effects of nicotine on the brain as measured by EEG. This result is consistent with the mechanism of action of BNC210. The data strongly support the continued development of BNC210. BNC210 ENGAGES ITS TARGET IN THE BRAIN INHIBITING THE EFFECT OF NICOTINE Nicotine induces a response in the alpha 2 band of the EEG profile through activation of nicotine receptors in the brain. BNC210 is a negative allosteric modulator of the α7 nicotinic acetylcholine receptor. With these positive results we continued the Phase 2 clinical trial of BNC210 in patients with GAD. GAD is a chronic form of anxiety requiring long term treatment with anti- depressants. On 24 June 2016 we announced the on-time completion of enrolment in the Phase 2 GAD trial and were very pleased to recently report positive data. This clinical trial was a double-blinded study comparing the effects of BNC210 with placebo and with a benzodiazepine, Lorazepam. Patients in this trial suffer from untreated GAD. The capacity of BNC210 to engage brain systems relevant to anxiety was evaluated. Endpoints include both significant changes in cerebral perfusion measured by arterial spin labelling and in emotional task-related brain activity measured by functional Magnetic Resonance Imaging (fMRI). DEAR SHAREHOLDERS Finding better treatments for cancer and disorders of the central nervous system are two of the greatest and most enduring pursuits of modern medicine. It is a pursuit Bionomics is intimately engaged in as a global biopharmaceutical company with a mission to discover and develop innovative treatments in both areas. The way we do that is to use tools such as our proprietary chemistry platform MultiCore in combination with our ionX and CSC platforms so that we can fast track the discovery of novel drug candidates that can significantly improve the lives of patients. Our drug candidates address unmet needs in areas where there are large market opportunities with “blockbuster’’ sales potential. The high performance of our drug discovery has been recognised in our strategic partnerships with Merck & Co (known as MSD outside the US and Canada) for the discovery of new treatments for chronic and neuropathic pain and for cognitive impairment in conditions such as Alzheimer’s disease, schizophrenia, Parkinson’s disease and Attention Deficit Disorder (ADHD or ADD). BNC210: A NOVEL NEGATIVE ALLOSTERIC MODULATOR OF THE α7 NICOTINIC ACETYLCHOLINE RECEPTOR The 2015/16 financial year witnessed strong progress with BNC210, Bionomics’ first-in-class drug candidate that is in clinical development for the treatment of Generalized Anxiety Disorder (GAD) and Post-Traumatic Stress Disorder (PTSD). BNC210 has strong potential in meeting an unmet medical need for fast-acting anxiolytic agents without the side-effects of existing treatments such as sedation, addiction, and impaired memory and co-ordination. The BNC210 program in FY16 was focussed on continuing clinical development across three clinical trials: = Completion and reporting of the multiple ascending dose and target engagement clinical trial = Completion of the Phase 2 GAD clinical trial = Initiation of the Phase 2 PTSD clinical trial. Results of the Phase 1b multiple ascending dose clinical trial assessing the safety of multiple doses of BNC210, with secondary trial endpoints examining impact on cognitive functions and the ability of BNC210 to engage with its target in the brain, were reported in September 2015. Data from this study were very positive with all primary and secondary endpoints met. BNC210 again demonstrated 05 CEO AND MANAGING DIRECTOR’S REPORT ANXIETY AND DEPRESSION MARKET Anxiety and depression have overlapping symptoms: over 40% of those diagnosed with depression are also diagnosed with an anxiety disorder. n19.0M PHOBIAS n 2.2M OBSESSIVE COMPULSIVE DISORDER n 6.8M GENERALIZED ANXIETY DISORDER n 7.7M PTSD n6.0M PANIC DISORDER n15.0M SOCIAL ANXIETY DISORDER ANXIETY MARKET = Projected to reach $18 billion globally by 2020 = Approximately 40 million adults suffer from anxiety in the US = Anxiety patients may have more than one anxiety disorder DEPRESSION MARKET = Approximately 1.82 million people suffer from depression in the US = Sales of top 10 depression drugs reached a total of $8.8bn in 2012 = Major types of depression: - Bipolar depression - Dysthymia - Major Depression = Both primary endpoints were met with a high level of significance, suggesting that BNC210 has potential to bring about a paradigm change for treatment of anxiety disorders. = BNC210 suppressed activation of the amygdala, out-performing standard of care, lorazepam and caused significant changes in cerebral perfusion consistent with anti-anxiety activity. = BNC210 also suppressed anxiety-related defensive behaviour, again outperforming Lorazepam and providing additional evidence of ant-anxiety activity in this patient population. We also examined other potential applications to further leverage the key features of BNC210 that differentiate it from current medications to treat anxiety and depression. Following extensive consultation with global key opinion leaders and reviews of the extensive datasets from pre- clinical studies and Phase I clinical trials, PTSD was identified as a major opportunity for BNC210. PTSD is very common and its societal and economic burden is heavy. It is estimated that approximately 8 million Americans or 3.5% of the US population suffer PTSD in any year, and that 12% of Australians will experience PTSD during their lifetimes. On 30 June 2016 Bionomics announced the initiation of a Phase 2 clinical trial (the RESTORE trial) in adults suffering PTSD. The clinical trial is randomized, double-blinded and placebo controlled. It will enrol 160 patients, male and female. There is a need for further and improved pharmacotherapy options for people with PTSD. Currently, only two drugs, the antidepressants paroxetine (for example, Paxil) and sertraline (for example, Xoloft), are approved for the treatment of PTSD. However, they have not been shown to ameliorate the full range of PTSD symptoms, and complete remission of symptoms is rare. An extensive advertising campaign is to commence to highlight the RESTORE trial and to attract patients suffering from PTSD to participate in the trial. Examples of the RESTORE trial advertising “It begins with a story……” are shown on opposite page. We are cautiously optimistic as BNC210 clinical trial data reported to date suggest the compound possesses a profile that meets the needs of patients and substantial commercial potential across a range of anxiety and stress and trauma. BNC101 may represent a major advance in the treatment of solid tumours – improving responses to cancer treatment and increasing the durability of responses. 06 BULK TUMOUR CELLS CSC CONVENTIONAL CANCER STEM CELL THERAPY TUMOUR RELAPSE TUMOUR REGRESSION BNC101: CANCER STEM CELL INHIBITOR FOR THE TREATMENT OF METASTATIC COLON CANCER AND OTHER SOLID TUMOUR TYPES Bionomics’ first-in-class compound BNC101 reached key milestones over the year: = IND acceptance = Initiation of the first clinical trial. BNC101 aims to prevent or delay tumour recurrence by targeting LRG5, a cancer stem cell (CSC) marker that is over-expressed in metastatic colorectal cancers and other solid tumour types. Inhibition of LGR5 by BNC101 results in the inhibition of a CSC survival pathway, known as the Wnt pathway. CSC’s are resistant to chemotherapy, they suppress the tumour immune system and modulate the tumour micro- environment, requiring CSC targeted approaches. The open label clinical trial aims to demonstrate BNC101 is safe and well tolerated and that it is able to modulate the activity of its target LGR5 in colon cancer patients. It is intended that the trial will then move to the next stage evaluating the combination of BNC101 and chemotherapy in this patient group. Colorectal cancer (CRC) is the second most prevalent cancer type, yet overall survival lags behind other high incidence cancers. In metastatic CRC, five year survival is just 12%. The predicted global market for metastatic colorectal cancer treatments is estimated to reach US$9.4 billion by 2020. We believe that BNC101 also has potential to treat pancreatic, breast and lung cancers. The BNC101 Phase 1 clinical trial followed acceptance of an Investigational New Drug (IND) application by the US Food & Drug Administration (FDA) in August 2015. BNC101 may represent a major advance in the treatment of solid tumours – improving responses to cancer treatment and increasing the durability of responses. This co-hosted Annual Symposium has gone from strength to strength. Last year’s Symposium Drug Discovery and Development for Cognition and Alzheimer’s Disease saw nearly 200 registrations from researchers, medical personnel and patient support groups as well as investors and life science analysts. Of particular note was keynote speaker Dr Darryle Schoepp, VP & Therapeutic Area Head, Neuroscience (Merck) with his presentation “Challenges in Neuroscience Discovery and Development: What has Changed and Where are we Headed”. ...growth in the neuropathic pain market is expected to reach US$3.6 billion pa by 2020 in an overall pain market estimated at US$22 billion pa... 07 CEO AND MANAGING DIRECTOR’S REPORT PARTNERSHIPS WITH MSD: IONX AND MULTICORE COMBINE TO DISCOVER NEW TREATMENTS FOR PAIN AND MEMORY LOSS Bionomics and MSD continue to diligently advance two separate programs in cognition and pain with future combined potential milestone and other payments to Bionomics of up to $US658 million in addition to royalties on net sales. In October 2015 MSD invested US$9 million in Bionomics. This investment was accompanied by the announcement of an extension to the Bionomics-MSD partnership for the discovery and development of novel chronic and neuropathic pain medications. This partnership, first signed in July 2013, is aimed at tapping into the large pain market. For example, growth in the neuropathic pain market is expected to reach US$3.6 billion pa by 2020 in an overall pain market estimated at US$22 billion pa, with current medications on market only providing limited effectiveness. As part of the commercial terms of the option and license agreement that covers the pain program, Bionomics may receive up to US$172 million in option exercise fees, development and regulatory milestone payments as well as future potential royalty payments. Our platforms ionX and MultiCore have been further validated through the Bionomics and MSD partnership in cognition where we are working together to find new treatments for memory loss. The endeavour is to discover and develop small molecule drugs for the treatment of cognitive impairment in ADHD, Alzheimer’s and Parkinson’s diseases, schizophrenia and other conditions. Along with full R&D funding from Merck this partnership included an up- front payment of US$20 million with future milestones and other payments of up to US$486 million as well as additional potential royalties on net sales of licensed products. We are extremely excited about this important program and the progress made during the year. The annual Bionomics & MSD Symposium is in its fourth year in 2016. MSD’s VP Neuroscience and Ophthalmology Clinical Research Dr David Michelson will present as this year’s Keynote Speaker. The event will take place on 7 November 2016 in Adelaide and entitled “At the Frontiers of Neuroscience: Memory, Movement & Mood”. Registration for the event is free and further details can be found on Bionomics’ website. 08 BNC105: INFLUENCING THE TUMOUR MICRO- ENVIRONMENT TO PROMOTE TUMOUR IMMUNITY BNC105, our novel vascular disrupting agent, has now demonstrated multiple modes of action. During the reporting period we released new pre-clinical and clinical data on the effects of BNC105 on tumour immunity at a number of US conferences including at the annual American Association for Cancer Research (AACR) conference in New Orleans in April 2016. These poster presentations highlighted the strong, synergistic anti-tumour activity when BNC105 and checkpoint inhibitors were combined. This synergistic activity is thought to be the result of specific cytokine, T cell and macrophages within tumours. By extending the reach of checkpoint inhibitors to allow for increased immune activity against tumour cells, we believe that BNC105 represents a very good opportunity to provide greater therapeutic support to a wide range of patients. Bionomics continues to work towards partnership opportunities for BNC105 and it is believed that the ability of BNC105 to prime tumours for a more robust immune response and synergy with drugs such as Opdivo (BMS), Keytruda (MSD) and Yervoy (BMS) opens an exciting avenue for development. CEO AND MANAGING DIRECTOR’S REPORT PIPELINE TECHNOLOGIES DELIVER MULTI-PRODUCT PIPELINE Our strengths, and a differentiating feature for Bionomics amongst Australian biotechnology companies, lie in the depth and breadth of our pipeline where a number of proprietary drug candidates are being positioned for development and for selective partnering. These drug candidates are being investigated by our passionate, world-class research teams. DRUG CANDIDATE PRECLINICAL PHASE 1 PHASE 2 MILESTONES (CALENDAR YEAR) CENTRAL NERVOUS SYSTEM (ionX and MultiCore) BNC210 Generalized Anxiety Disorder Post-Traumatic Stress Disorder (PTSD) Other Indications UNDISCLOSED ADHD, Alzheimer’s, Cognition, Parkinson’s, Schizophrenia UNDISCLOSED Chronic and Neuropathic Pain OTHERS Pain, Parkinson’s Dyskinesia, Epilepsy ONCOLOGY BNC105 Renal, Ovarian, Mesothelioma Cancers BNC101 Colorectal Cancer Pancreatic Cancer Other Solid Tumors BNC420 Solid Tumors, Melanoma, Breast MELK Solid Tumors OTHERS Solid Tumors OTHER PROGRAMS BNC164 Psoriasis, Uveitis Results from P2 trial in Q3 2016 P2 trial in PTSD initiated in Q2 2016 P1 trial initiated in Q1 2016 09 FINANCIAL PERFORMANCE Bionomics is in a strong position to execute its clinical and discovery programs with $45,450,382 in cash and cash equivalents at 30 June 2016. Revenue and other income for the period was $21,727,915. Revenue consists of payments under Bionomics’ agreement with MSD and contract services by our wholly owned subsidiaries Neurofit SAS and Prestwick Chemical SAS and sales of chemical libraries by Prestwick. In addition, a recent payment was made to Bionomics of US$736,815 as its share of a US$15 million upfront payment from a licensing agreement between MSD and the Australian Cooperative Research Centre for Cancer Therapeutics, of which Bionomics is an industry partner. Bionomics may further benefit from future milestone and royalty payments for this program which targets PRMT5 (Protein arginine methyltransferase 5), a protein involved in regulating cellular functions including apoptosis. Bionomics also received A$8.5 million under the Federal Government’s R&D Tax Incentive. The after tax loss was $16,608,757, reflecting investment in clinical development of both BNC210 and BNC101 and in research on our other pipeline programs. 1011 CEO AND MANAGING DIRECTOR’S REPORT MANAGING THE EXECUTION RISK: THE BIONOMICS BUSINESS MODEL DRUG DISCOVERY DRUG DEVELOPMENT PARTNERING » Engine room delivering flow of new drug candidates » Build pipeline with multiple shots on goal to manage risk » Adding value through targeted clinical trials » Lay off risk with experienced partners » Generate revenue streams to support discovery programs TECHNOLOGY PLATFORMS: ionX : ion channel drug discovery for CNS conditions CSCRx: cancer stem cell therapies Multicore: chemistry OUTLOOK Bionomics has continued to advance its pipeline in the year to 30 June 2016. We eagerly anticipate announcements on the progress of clinical trials in the year to 30 June 2017, and we are delighted that BNC210 delivered overwhelming positive data from the recently completed Phase 2 clinical trial in patients with GAD. This momentum is anticipated to continue with the first data from the BNC101 trial in patients with colon cancer. We will also continue the ongoing clinical trial of BNC210 in patients with PTSD. Our commercial program is very active. Our global outreach continues with the aim to secure partnerships to validate our drug discovery capabilities and commercialise drug candidates within our rich pipeline. Importantly, we continue to work closely with MSD to achieve milestones as a demonstration of the Company’s strength in drug discovery and development. I thank our dedicated and hard- working staff, the Management team and the Board for their efforts in what has been a challenging year. I also thank all shareholders for your continuing support and I look forwarding to reporting further progress and success across our pipeline in the coming year. Yours faithfully Dr Deborah Rathjen CEO and Managing Director 12 INTELLECTUAL PROPERTY PORTFOLIO 6 Six patent families covering BNC210 and congeners and their use in the treatment of anxiety and other disorders. 6 Six patent families covering BNC375 and congeners and their use in the treatment of memory enhancement and related disorders. 1 One patent application covering chronic pain. We are the owner on record of 112 issued patents across 38 families and 88 pending patent applications across 30 families filed in Europe, the United States and Asia. The Bionomics patent portfolio includes: 7 Seven patent families covering BNC101 and its use in targeting cancer stem cells. 8 Eight patent families covering BNC164 and congeners and their use in the treatment of autoimmune disease. 14 Fourteen patent families covering discoveries made utilising Bionomics’ technology platforms. 17 Seventeen patent families covering BNC105 and congeners and their use in the treatment of cancer. 3 Three patent families covering BNC420 and congeners and their use in the treatment of melanoma, breast cancer and other cancers. 2 Two patent families covering Parkinson’s Disease and related disorders. Through the worldwide Patent Cooperation Treaty (PCT) mechanism, Bionomics and its related companies were granted 18 patents this financial year, 22 PCT patent applications entered the national and regional phases of examination, 4 PCT patent applications and 1 provisional patent applications were filed. 13 BOARD OF DIRECTORS DR ERROL DE SOUZA PHD Chairman and Non-Executive Director DR DEBORAH RATHJEN BSC (HONS), PHD, MAICD, FTSE CEO and Managing Director Dr De Souza is a leader in the development of therapeutics for treatment of central nervous system (CNS) disorders. He is currently Executive Chairman of nLife Therapeutics and is the former President and CEO of US biotech companies Biodel Inc. (NASDAQ:BIOD), Archemix Corporation and Synaptic Pharmaceutical Corporation (NASDAQ:SNAP). 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 has served on multiple editorial boards, National Institutes of Health (NIH) Committees and is currently a Director of several public and private companies. Dr Rathjen joined Bionomics in 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 company building and financing, mergers and acquisitions, therapeutic product research and development, business development, licensing and commercialisation. Dr Rathjen has been recognised both in Australia and internationally through awards and honours including the 2004 AusBiotech President’s Medal, 2006 Flinders University Distinguished Alumni Aware, 2009 BioSingapore Asia Pacific Biotechnology Woman Entrepreneur of the Year, 2009 Regional Finalist Ernst & Young, Young Entrepreneur of the Year, 2014 Woman Executive of the Year BioPharm Industry Awards. In 2015 Dr Rathjen was included in the Top 50 most influential Australia business women by The Australian newspaper. 14 MR PETER TURNER BSC, MBA, GAICD Non-Executive Director Mr Turner is a former senior executive with global experience in CSL, a large multinational organisation in the biopharmaceutical industry. He has been an executive director and COO of CSL and was the founding President of CSL Behring working in Europe and the United States from 2000 to 2011. Mr Turner provided strategic, technical and commercial leadership and was responsible for the integration of large company acquisitions in Europe, the United States and Japan. He has been responsible for significant company re-structuring and turnaround and has overseen thirteen new product launches in the United States and Europe and more in other jurisdictions. During his tenure overseas sales grew from US$140 million to $3.4 billion. Mr Turner is a non-executive director of Virtus Health and the Chair of NPS MedicineWise. He is a former Chair of Ashley Services Group. MR DAVID WILSON Non-Executive Director David is Chairman and founding partner of WG Partners and has over 30 years’ experience in the City of London. Previously David was CEO of Piper Jaffray Ltd, where he also served as Global Chairman of Healthcare and on the Group Leadership Team. David has held senior positions at ING Barings as Joint Head of UK Investment Banking Group, Deutsche Bank as Head of Small Companies Corporate Finance and UBS as Head of Small Companies Corporate Broking. David was previously Senior Independent Director of Optos plc prior to its successful sale to Nikon Corporation for c.$400m as well as a Non-Executive director of BerGenCio AS. He is currently on the Board of Governors of Harris Academy Bromley. MR ALAN FISHER BCOM, FCA, MAICD Non-Executive Director Alan has extensive and proven experience in restoring and enhancing shareholder value. He spent 24 years at world-leading accounting firm Coopers & Lybrand as Lead Advisory Partner where he headed and grew the Melbourne Corporate Finance Division. Following this tenure Alan developed his own business as a corporate advisor and for the past 19 years has specialised in M&A, business restructurings, strategic advice and capital raisings for small cap companies. He is currently Non- Executive Chairman of Centrepoint Alliance Limited and Non-Executive Director and Chair of the Audit and Risk Committee of IDT Australia Limited. He is also the Managing Director of DMC Corporate. Alan holds a Bachelor of Commerce from Melbourne University, is a Fellow of the Institute of Chartered Accountants Australia and a member of the Australian Institute of Company Directors. 15 BOARD OF DIRECTORS MR TREVOR TAPPENDEN CA, FAICD Non-Executive Director Mr Tappenden commenced a 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 directorship 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. MR GRAEME KAUFMAN BSC, MBA Chairman and Non-Executive Director Mr Kaufman has wide ranging experience across the biotechnology sector, spanning scientific, commercial and financial areas. His experience with CSL Limited, Australia’s largest biopharmaceutical company included responsibility for all of their manufacturing facilities, and the operation of an independent business division operating in the high technology medical device market. As CSL’s General Manager Finance, Mr Kaufman had global responsibility for finance, strategy development, human resources and information technology. Mr Kaufman has also served as an executive director of ASX-listed Circadian Technologies and a non-executive director of Amrad Corporation. He was previously Executive Vice President Corporate Finance with Mesoblast Limited and is currently non-executive Chairman of IDT Australia Limited and non-executive Chairman of Paradigm Biopharma Limited. 16 MANAGEMENT DR DEBORAH RATHJEN BSC (HONS), PHD, MAICD, FTSE CEO and Managing Director DR ROBERT CORRINGHAM MBBS Chief Medical Officer DR JENS MIKKELSEN MD, PHD Chief Scientific Officer Dr Rathjen joined Bionomics in 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 company building and financing, mergers and acquisitions, therapeutic product research and development, business development, licensing and commercialisation. Dr Rathjen has been recognised both in Australia and internationally through awards and honours including the 2004 AusBiotech President’s Medal, 2006 Flinders University Distinguished Alumni Aware, 2009 BioSingapore Asia Pacific Biotechnology Woman Entrepreneur of the Year, 2009 Regional Finalist Ernst & Young, Young Entrepreneur of the Year, 2014 Woman Executive of the Year BioPharm Industry Awards. In 2015 Dr Rathjen was included in the Top 50 most influential Australia business women by The Australian newspaper. Dr. Robert Corringham joined Bionomics as Chief Medical Officer in 2016, and prior to that he worked for 20 years in key positions in the pharmaceutical industry developing oncology drugs including Group Director, SmithKlineBeecham (GlaxoSmithKline); Vice President, Centocor (Janssen); Chief Medical Officer, Ambit Biosciences; Vice President, Astex Pharmaceuticals; Founder and Chief Medical Officer, Triphase Accelerator. Dr. Corringham has worked in all phases of drug development globally from pre-IND to Phase 3 and marketing approval. He had a long academic career and was on the faculty as a Professor in haematology and oncology at the Universities of Toronto, Ottawa and California at San Diego (UCSD). At USCD he was Deputy Director of the Cancer Center. He has published many original papers in the fields of haematology and oncology. Dr. Corringham earned his medical degree from the University of London, where he did his postgraduate training. Dr Jens D Mikkelsen joined Bionomics as Chief Scientific Officer in 2015, and prior to that he worked more than 15 years in key positions within the pharmaceutical industry such as Head of Neurobiology, H. Lundbeck; Founder and Director, Zealand Pharma; CSO/ CEO, Azign Bioscience, and Head of Translational Neuroscience, NeuroSearch. Dr. Mikkelsen has a long academic career and worked as a Professor in translational neuropharmacology at the University Hospital in Copenhagen. He has published more than 275 original papers in the fields of neuroscience and pharmacology. Dr. Mikkelsen earned his medical degree from the University of Copenhagen and a PhD in neuroscience, and post-doctoral training from Cambridge and Stanford Universities. 17 MANAGEMENT MR TONY COLASIN MBA Chief Business Officer Mr. Colasin brings over 20 years’ of experience in senior business development, product commercialisation, and corporate finance roles at major biopharmaceutical companies, contributing to the success of key brands including EPOGEN® and Cialis. He joins Bionomics from Ironwood Pharmaceuticals, where he served as Vice President of Corporate Development and was responsible for strategy and tactical oversight of in-licensing, and mergers and acquisitions. Previously he was Senior Director of Business Development for ICOS Corporation for six years and before that, he held positions at Amgen in various marketing, corporate finance and corporate development roles. Mr. Colasin holds a B.S. from the University of Southern California and a M.B.A. from the Anderson School of Management at the University of California, Los Angeles. Mr. Colasin also served in the U.S. Marine Corps. MR JACK MOSCHAKIS B.Ec, DipLaw Legal Counsel & Company Secretary Mr Moschakis brings a depth of legal knowledge with over 25 years’ experience as a legal practitioner. He has worked in senior legal/ company secretary roles in the South Australian electricity industry for over 10 years and has expertise in energy law and energy related commercial and contractual matters. His most recent position was at mining company Rex Minerals Ltd where he worked as a legal consultant. Prior to this, Mr Moschakis worked at Thomsons Lawyers, a top tier Adelaide law firm that is now part of the national law firm of Thomson Geer, as an energy and infrastructure consultant. Mr Moschakis holds a Bachelor of Economics (Adel), Diploma in Law (NSW) and Graduate Diploma in Business Administration (Adel). He is a Fellow of the Institute of Chartered Secretaries and Member of the Law Society of South Australia. MS MELANIE YOUNG BCOM, CA Chief Financial Officer Ms Young has over 15 years’ experience, with six years in the medical device field, including 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 complements 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. 18 DIRECTOR’S REPORT Your Directors present their report on the financial statements of the Group for the year ended 30 June 2016, 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: = Mr Graeme Kaufman, Non-Executive Chairman = Dr Deborah Rathjen, Chief Executive Officer and Managing Director = Mr Trevor Tappenden, Non-Executive Director = Dr Errol De Souza, Non-Executive Director = Dr Alan W Dunton, Non-Executive Director (appointed 29 September 2015 and retired 4 July 2016) = Mr David Wilson, Non-Executive Director (appointed 16 June 2016) = Mr Peter Turner, Non-Executive Director (appointed 16 June 2016) = Dr Jonathan Lim, Non-Executive Director (retired 18 November 2015) Except where noted, the Directors held office during the whole of the financial year and since the end of the financial year ended 30 June 2016. PRINCIPAL ACTIVITIES The principal activities of the Company and its controlled entities (the Group) during the period include the discovery and development of novel drug candidates focused on the treatment of central nervous system disorders and cancer by leveraging our proprietary platform technologies. OPERATING RESULTS Consolidated revenue for the year to 30 June 2016 increased by 19% to $8,143,288. Other income for the year to 30 June 2016 increased by 39% to $13,584,627 and primarily relates to the Research and Development (R&D) Tax Incentive, foreign government grants and revaluation of financial liability. This compared with revenue of $6,827,277 and other income of $9,789,128 for the year to 30 June 2015. The operating loss after tax of the Group for the year to 30 June 2016 was $16,608,757 compared with the prior year after tax loss of $16,949,405. The cash position at 30 June 2016 was $45,450,382 with restricted cash of $550,000 and $384,000 classified as current and non- current other financial assets (2015: $26,558,006 with restricted cash of $550,000 and $384,000 classified as current and non- current other financial assets). The financial performance of key operating segments of Drug discovery and development and Contract services are included in Note 4. REVIEW OF OPERATIONS Bionomics is a global, clinical-stage biopharmaceutical company, leveraging our proprietary platform technologies to discover and develop a deep pipeline of best-in-class, novel drug candidates focused on the treatment of serious Central Nervous System, or CNS, disorders and cancer. Our ionX and MultiCore drug discovery platforms are validated through two partnerships with Merck & Co., or MSD, in cognition and pain with combined development, regulatory and sales based milestone payments of potentially up to US$678 million in addition to royalties on net sales. In 2013, MSD entered into an option to exclusively license the development and commercialisation of certain small molecule drug candidates for the treatment of chronic and neuropathic pain. Under this agreement, we may receive up to US$172 million in exercise fees and milestone payments in addition to royalties on net sales. This agreement was extended in October 2015. In 2014, we entered into another collaboration agreement with MSD to develop compounds targeting cognitive impairment in conditions such as ADHD, Alzheimer’s disease, Parkinson’s disease and schizophrenia. Under this agreement, we received US$20 million in upfront payments and are eligible for up to US$486 million in additional research, development and commercialisation milestone payments in addition to royalties on net sales. In October 2015 the relationship between Bionomics and MSD was further strengthened when MSD became a shareholder in Bionomics following a US$9 million equity investment. In November 2015 MSD and Bionomics hosted a joint Symposium in Adelaide, Australia. The meeting included renowned speakers from the field of cognition research and Alzheimer’s disease. Planning is already advanced for the 4th Annual Symposium which will focus on Frontiers in Neuroscience: Memory, Mood and Movement, with US-based MSD scientists and management anticipated to attend. During the period Bionomics continued the development of BNC210 reporting positive clinical trial results in September 2015 which supported the mechanism of action of BNC210 and continued to indicate that BNC210 was safe and well tolerated. BNC210 is a novel, proprietary negative allosteric modulator of the alpha-7 nicotinic acetylcholine receptor, or the α7 receptor. In six completed Phase 1 clinical trials, BNC210 has demonstrated safety and tolerability in over 190 healthy subjects and shown initial indications of efficacy in the absence of side effects such as sedation, memory loss, impairment of motor co-ordination and potential for addiction. The α7 receptor is highly expressed in the amygdala which forms part of the emotional centre of the brain and it can be considered a key driver of emotional responses. Bionomics has announced the completion of dosing in a Phase 2 trial in patients with generalized anxiety disorder which, is evaluating the capacity of BNC210 to engage brain systems relevant to anxiety using functional magnetic resonance imaging (fMRI). The endpoints of the trial include both significant changes 19 DIRECTOR’S REPORT in cerebral perfusion and in task-related brain activity using the emotional faces task. The clinical trial is being conducted at The Institute of Psychiatry, Psychology & Neuroscience at King’s College in London and data is anticipated by 30 September 2016. Bionomics has also commenced a multi-centre, placebo controlled, double-blinded Phase 2 clinical trial in patients with Post Traumatic Stress Disorder (PTSD). The clinical trial is being conducted in Australia and New Zealand. Anxiety is a condition which places a considerable burden on our society. Approximately 40 million people suffer from anxiety disorders in the United States and patients with anxiety can have one or more anxiety disorders. There are six broad categories of anxiety disorders: generalized anxiety disorder, PTSD, panic disorder, social anxiety disorder, obsessive compulsive disorder and phobias. Generalized anxiety disorder is characterised by persistent, excessive and unrealistic worrying about everyday things. Approximately 6.8 million people suffer from generalized anxiety disorder in the United States. The world-wide anxiety market is projected to reach US$18.2 billion by 2020. There are a number of drugs used to treat anxiety with the mainstay being benzodiazepines. Generalized anxiety disorder is commonly treated with SSRIs and SNRIs which are antidepressants that enhance either serotonin or norepinephrine. The key limitations with SSRIs and SNRIs are a modest efficacy and late onset of action, discontinuation or withdrawal syndrome, changes in weight, sexual dysfunction and suicide ideation in adolescents, while benzodiazepines such as Valium display side-effects including sedation, addiction, tolerance and cognitive disturbances, and are therefore not recommended for long-term treatment despite short-term efficacy. Anxiety and depression are mood disorders with overlapping symptoms. Over 40% of patients diagnosed with depression are also diagnosed with an anxiety disorder. In addition to the successes of its neuroscience programs, Bionomics continues to develop its cancer drug pipeline including compounds focused on cancer stem cells. During the year Bionomics progressed its lead cancer stem cell drug candidate BNC101 through initiation of a Phase 1 clinical trial in patients with metastatic colon cancer. This followed a successful IND submission to the US FDA in July 2015. In FY16 new BNC105 data were presented at major international cancer conferences including the American Association for Cancer Research (AACR) Annual Meeting in April 2016 demonstrating that BNC105 synergised with immune-oncology agents in re-activating the immune’s response to tumours. In June 2016 Bionomics received its share (US$736,815) of the upfront payment under a licensing agreement for the PRMT5 project with MSD under its collaborative arrangements with the Co-operative Research Centre for Cancer Therapeutics. OUTLOOK Bionomics is in a strong position to progress its development programs and the Company continues to focus on its important relationship with Merck in pain and cognition to bring new treatments to patients suffering chronic pain and sufferers of memory impairment including those with ADHD, Alzheimer’s disease, Parkinson’s disease and schizophrenia. We are advancing the development of BNC210 to treat anxiety and PTSD. We have an ongoing Phase 2 clinical trial of BNC210 in patients with PTSD and anticipate reporting data from a Phase 2 clinical trial of BNC210 in patients with generalized anxiety disorder by 30 September 2016. We also intend to advance the development of BNC101 to treat solid tumors by targeting cancer stem cells. First data from the ongoing BNC101 clinical trial in patients with colon cancer is anticipated in 2017. Bionomics will seek further opportunities to execute its partnership strategy through new licensing agreements for assets across its portfolio of drug candidates. 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 other matters or circumstances have arisen since the end of the financial year which significantly affect or may significantly affect the results of the operations of the Group. 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 drug candidates for the treatment of CNS disorders and cancer. ENVIRONMENTAL REGULATION The Group is subject to environmental regulations and other licenses in respect of its facilities in Australia, USA and 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 the year ended 30 June 2016 and no related issues have arisen since the end of the financial year to the date of this report. 20 INFORMATION ON DIRECTORS MR GRAEME KAUFMAN BSc, MBA Chairman – Non-Executive Director since 18 September 2012 Experience and Expertise Mr Kaufman has wide ranging experience across the biotechnology sector, spanning across scientific, commercial and financial areas. His experience with CSL Limited, Australia’s largest biopharmaceutical company included responsibility for all of their manufacturing facilities and the operation of an independent business division in the high technology medical device market. As CSL’s General Manager Finance, Mr Kaufman had global responsibility for finance, strategy development, human resources and information technology. Mr Kaufman has also served as an Executive Director of ASX-listed Circadian Technologies and a Non-Executive Director of Amrad Corporation. He was previously Executive Vice President Corporate Finance with Mesoblast Limited and is currently Non-Executive Chairman of IDT Australia Limited and Non-Executive Chairman of Paradigm Biopharmaceuticals Limited. Current Directorships (in addition to Bionomics Limited) Listed: Chairman, IDT Australia Limited (ASX:IDT) (since June 2013); Paradigm Biopharmaceuticals Limited (ASX:PAR) (since August 2014) Former Listed Directorships in Last Three Years Non-Executive Director, Cellmid Limited (ASX:CDY) (from August 2012 until June 2015) Special Responsibilities Member of Audit and Risk Management Committee Member of Nomination Committee Member of Remuneration Committee Interests in Shares and Options at Date of Report 178,750 ordinary shares in Bionomics Limited 1,000,000 unlisted options over ordinary shares in Bionomics Limited DR DEBORAH RATHJEN BSc (Hons), MAICD, PhD Chief Executive Officer and Managing Director Director since 18 May 2000 Experience and Expertise Dr Rathjen joined Bionomics in 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 company building and financing, mergers and acquisitions, therapeutic product research and development, business development, licensing and commercialisation. Dr Rathjen has been recognised both in Australia and internationally through awards and honours including the 2004 AusBiotech President’s Medal, 2006 Flinders University Distinguished Alumni Award, 2009 BioSingapore Asia Pacific Biotechnology Woman Entrepreneur of the Year, 2009 Regional Finalist Ernst & Young, Young Entrepreneur of the Year, and 2014 Woman Executive of the Year BioPharm Industry Awards. In 2015 Dr Rathjen was included in the Top 50 Most Influential Australian Business Women by The Australian newspaper. Current Directorship (in addition to Bionomics Limited) Listed: Nil Other: Director of CTX CRC Limited, ANFF Limited Former Listed Directorships in Last Three Years Nil Special Responsibilities Chief Executive Officer and Managing Director Interests in Shares and Options at Date of Report 2,385,901 ordinary shares in Bionomics Limited 2,180,000 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 commenced a 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 directorship 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. Current Directorships (in addition to Bionomics Limited) Listed: Nil Other: Director, Buckfast Pty Ltd; Director & Chairman, Intellicomms Pty Ltd; Director & Chairman, RMIT University Foundation; Director, Museum Victoria Former Listed Directorships in Last Three Years Nil Special Responsibilities Chairman of Audit and Risk Management Committee Member of Nomination Committee Member of Remuneration Committee Interests in Shares and Options at Date of Report 379,924 ordinary shares in Bionomics Limited 100,000 unlisted options over ordinary shares in Bionomics Limited 21 DIRECTOR’S REPORT DR ERROL DE SOUZA PhD Non-Executive Director Director since 28 February 2008 Experience and Expertise Dr De Souza is a leader in the development of therapeutics for treatment of CNS disorders. He is currently Executive Chairman of nLife Therapeutics and is the former President and CEO of US biotech companies Biodel Inc. (NASDAQ:BIOD), Archemix Corporation and Synaptic Pharmaceutical Corporation (NASDAQ:SNAP). 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 2a 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 has served on multiple editorial boards, National Institutes of Health (NIH) Committees and is currently a Director of several public and private companies. Current Directorships (in addition to Bionomics Limited) Listed: Director, Catalyst Biosciences Inc. (NASDAQ:CBIO) Former Listed Directorships in Last Three Years Biodel Inc. (NASDAQ:BIOD), Targacept, Inc. (NASDAQ: TRGT) Special Responsibilities Chairman of Nomination Committee Chairman of Independent Board Committee Member of Audit and Risk Management Committee Interests in Shares and Options at Date of Report 166,698 ordinary shares in Bionomics Limited 300,000 unlisted options over ordinary shares in Bionomics Limited DR ALAN W DUNTON MD Non-Executive Director Director since 29 September 2015 and retired 4 July 2016 Experience and Expertise Dr Dunton is a seasoned pharmaceutical/biotechnology industry executive, with extensive product and company leadership experience. Dr Dunton’s career has ranged from responsibility for overall leadership of large pharma R&D organisations to private biotechnology companies. Dr Dunton is currently Senior Vice President, Research and Development at Purdue Pharma, LLP and has discovery, development and regulatory experience across all functional areas for the complete life cycle management of products as well as raising capital to create shareholder value. Dr Dunton created Danerius, LLC, a pharma/biotech consulting company covering the industry, venture capital groups and government agencies. Dr. Dunton has played a key role in the development of more than 20 products to regulatory approval. Dr. Dunton holds a MD degree from New York University School of Medicine, where he completed his residency in internal medicine. Current Directorships (in addition to Bionomics Limited) Listed: Director, Palatin Technologies, Inc. (NYSE:PTN); Director, Oragenics, Inc. (NYSE: OGEN) Former Listed Directorships in Last Three Years Targacept, Inc. (NASDAQ: TRGT) Special Responsibilities Member of Nomination Committee Member of Remuneration Committee Interests in Shares and Options at Date of Report Nil ordinary shares in Bionomics Limited 500,000 unlisted options over ordinary shares in Bionomics Limited MR DAVID WILSON Non-Executive Director Director since 16 June 2016 Experience and Expertise Mr Wilson is Chairman and Founding Partner of WG Partners and has over 30 years experience in the City of London. Previously Mr Wilson was CEO of Piper Jaffrey Limited where he also served as Global Chairman of Healthcare and on the Group Leadership Team. Mr Wilson has held senior positions at ING Barings as Joint Head of UK Investment Banking Group, Deutsche Bank as Head of Small Companies Corporate Finance and UBS as Head of Small Companies Corporate Broking. Mr Wilson was previously Senior Independent Director of Optos plc prior to its successful sale to Nikon Corporation for $400 million as well as a Non-Executive Director of BerGenBio AS. He is currently on the Board of Governors of Harris Academy Bromley. Current Directorships (in addition to Bionomics Limited) Listed: Nil Former Listed Directorships in Last Three Years Optos plc Special Responsibilities Member of Independent Board Committee Interests in Shares and Options at Date of Report Nil ordinary shares in Bionomics Limited Nil unlisted options over ordinary shares in Bionomics Limited 22 MR JACK MOSCHAKIS BEc, DipLaw(BAB), GDipBA, FCIS Legal Counsel and Company Secretary Mr Moschakis brings a depth of legal knowledge with over 25 experience as a legal practitioner. He has worked in senior legal/company secretary roles in the South Australian electricity industry for over 10 years’, and has expertise in energy law and energy related commercial and contractual matters. His most recent position was at mining company Rex Minerals Ltd where he worked as a legal consultant. Prior to this, Mr Moschakis worked at Thomsons Lawyers, a top tier Adelaide law firm that is now part of the national law firm of Thomson Geer, as an energy and infrastructure consultant. Mr Moschakis holds a Bachelor of Economics (Adelaide), Diploma in Law (NSW) and Graduate Diploma in Business Administration (Adelaide). He is a Fellow of the Institute of Chartered Secretaries / Governance Institute of Australia and Member of the Law Society of South Australia. MR PETER TURNER B.Sc, MBA, GAICD Non-Executive Director Director since 16 June 2016 Experience and Expertise Mr Turner is a former Senior Executive with global experience in CSL, a large multinational organisation in the biopharmaceutical industry. He has been an Executive Director and COO of CSL and was the Founding President of CSL Behring working in Europe and the United States from 2000 to 2011. Mr Turner provided strategic, technical and commercial leadership and was responsible for the integration of large company acquisitions in Europe, the United States and Japan. He has been responsible for significant company re-structuring and turnaround and has overseen thirteen new product launches in the United States, Europe and more in other jurisdictions. During his tenure overseas, sales grew from US$140 million to US$3.4 billion. Mr Turner is a Non-Executive Director of Virtus Health and the Chair of NPS MedicineWise. He is a former Chair of Ashley Services Group. Current Directorships (in addition to Bionomics Limited) Listed: Director, Virtus Health Limited (ASX: VRT) (since June 2013) Former Listed Directorships in Last Three Years Chair, Ashley Services Group Limited (ASX: ASH) (July 2014 to October 2015) Special Responsibilities Member of Independent Board Committee Interests in Shares and Options at Date of Report Nil ordinary shares in Bionomics Limited Nil unlisted options over ordinary shares in Bionomics Limited 23 MEETINGS OF DIRECTORS The following table sets out the number of Directors’ meetings (including meetings of committees of Directors) held during the financial year and the number of meetings attended by each Director (while they were a Director or committee member). MEETINGS OF DIRECTORS MEETINGS OF AUDIT AND RISK MANAGEMENT (ARM) COMMITTEE MEETINGS OF THE NOMINATION COMMITTEE 1 INDEPENDENT BOARD COMMITTEE 2 Held Eligible to Attend Attended Held Eligible to Attend Attended Held Attended Held Attended Mr Graeme Kaufman Dr Deborah Rathjen 3 Mr Trevor Tappenden Dr Errol De Souza 4 Dr Alan W Dunton 5 Mr David Wilson 6 Mr Peter Turner 7 Dr Jonathan Lim 8 8 8 8 8 8 8 8 8 8 8 8 8 6 1 1 3 8 8 8 8 3 1 1 2 4 4 4 4 - - - - 4 4 4 3 - - - - 4 4 4 3 - - - - 4 4 4 4 4 - - - 4 4 3 4 1 - - - - 2 - 2 2 - - - - 2 - 2 2 - - - The Board established a Remuneration Committee on 22 September 2015 which did not meet during the year. No Chair has been appointed of the Remuneration Committee and the members during the year ended 30 June 2016 were: Mr Graeme Kaufman, Mr Trevor Tappenden and Dr Alan W Dunton. 1 Nomination Committee established 6 April 2016 2 Independent Board Committee established 21 March 2016 to deal with the Sec 203D Notice 3 Attends ARM Committee, Remuneration Committee and Nomination Committee by invitation 4 Appointed Member of ARM Committee on 6 August 2015, Chair of the Nomination Committee, Chair of the Independent Board Committee 5 Appointed a Non-Executive Director on 24 September 2015 and retired 4 July 2016 6 Appointed Non-Executive Director on 16 June 2016 7 Appointed Non-Executive Director on 16 June 2016 8 Retired at 2015 AGM (18 November 2015) REMUNERATION REPORT This remuneration report, which forms part of the Directors’ Report, sets out information about the remuneration of the Company’s Key Management Personnel (KMP) for the financial year ended 30 June 2016. The term ‘KMP’ refers to those persons having authority and responsibility for planning, directing and controlling the activities of the consolidated entity (the Group), directly or indirectly, including any Director (whether executive or otherwise) of the Group. The prescribed details for each person covered by this report are detailed under the following headings: 1. Key Management Personnel 2. Remuneration Policy 3. Relationship Between the Remuneration Policy and Company Performance 4. Remuneration of Key Management Personnel 5. Key Terms of Service Agreements. DIRECTOR’S REPORT 24 1. Key Management Personnel (KMP) NON-EXECUTIVE DIRECTORS POSITION Mr Graeme Kaufman Mr Trevor Tappenden Dr Errol De Souza Dr Alan W Dunton Mr David Wilson Mr Peter Turner Dr Jonathan Lim EXECUTIVE DIRECTOR Dr Deborah Rathjen OTHER KEY MANAGEMENT PERSONNEL Ms Melanie Young Dr Jens Mikkelsen Mr Jack Moschakis Mr Anthony Colasin Dr José Iglesias Chairman, Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director (appointed 29 September 2015 and retired 4 July 2016) Non-Executive Director (appointed 16 June 2016) Non-Executive Director (appointed 16 June 2016) Non-Executive Director (retired 18 November 2015) Chief Executive Officer and Managing Director Chief Financial Officer Chief Scientific Officer Legal Counsel and Company Secretary Chief Business Officer (appointed 1 August 2015) Chief Medical Officer (ceased full time employment 15 October 2015, retained under consulting agreement) Except as noted, the above persons held their current position for the whole of the financial year and since the end of the financial year. 2.Remuneration Policy Non-Executive Director Remuneration Policy Non-Executive Directors’ fees are reviewed regularly, taking into account comparable remuneration data from the biotechnology sector, with the most recent increase having taken effect in 2012. Non-Executive Directors’ fees are determined within an aggregate directors’ fee pool limit that is approved by shareholders. The current aggregate Non-Executive Directors’ fee pool limit is $500,000 per annum and was approved by shareholders on 14 November 2012. This amount (or some part of it) is to be divided among the Non-Executive Directors as determined by the Board and reflecting the time and responsibility related to the Board and committees. The Group does not provide for retirement allowances to its Non-Executive Directors. The Chairman and Non-Executive Directors’ base board fees are $120,000 per annum and $65,000 per annum respectively, inclusive of any statutory Australian superannuation contributions. The Chairman of the Audit and Risk Management Committee, Mr Trevor Tappenden, received an additional $15,000 per annum inclusive of superannuation for services relating to his Audit and Risk Management Committee duties. Dr Errol De Souza received an additional $15,000 per annum for being the Chair of the Scientific Advisory Board during the year and $3,544 as a pro rata payment of $15,000 per annum for being Chairman of both the Nomination and Independent Board Committees. The total fees paid to Non- Executive Directors for the year ended 30 June 2016 was $362,567 compared to the aggregate directors’ fee pool limit of $500,000. Non-Executive Directors may receive share options on their initial appointment to the Board or at other such times, as approved by shareholders. 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. There were 500,000 share options granted to Non-Executive Director Dr Alan W Dunton during the year. In accordance with the Company’s Employee Share Option Plan (ESOP), Non-Executive Directors retire and remain an eligible participant of the ESOP. Dr Dunton’s options continue to vest in accordance with the issuance as approved at the 2015 Annual General Meeting. Executive Remuneration Policy and Framework The objective of the Group’s executive remuneration policy and framework is to ensure that the Group can attract and retain high calibre executives capable of managing the Group’s operations and achieving the Group’s strategic objectives, and focus these executives on outcomes necessary for success. 25 The executives total remuneration package framework comprises: further KPI achievement resulting in improved shareholder value. = Base pay and benefits, including superannuation and other entitlements; = Performance incentives paid as share options or cash; and = Equity awards through participation in the Bionomics employee equity plans. The combination of these comprises the executive KMP’s total remuneration. The Board reviews and approves the base pay, benefits, incentive payments and equity awards of the Chief Executive Officer and Managing Director and other executives reporting directly to the Chief Executive Officer and Managing Director. In exceptional circumstances, the Board will consider cash payment instead of or in addition to an option award if the executive: = Already has significant shareholdings; and / or = Resides in a country where an option award is inappropriate due to local regulation or taxes; and / or = Is likely to be in a position whereby the executive may be unable to exercise options because of insider knowledge and / or an extended blackout period; and / or = The KPI achievement is, in the judgement of the Board, of such significance to materially position the Company for further shareholder value enhancement. Base Pay and Benefits Executives receive their base pay and benefits structured as a Total Fixed Remuneration (TFR) package which may be delivered as a combination of cash and prescribed non-financial benefits at the executives’ discretion. Superannuation (or local equivalent) is included in TFR. There are no guaranteed base pay increases in any executive contract. Performance incentives as practised by Bionomics are best characterised as a hybrid short-term and long-term incentive. That is, it has a look back element on what was achieved in the financial year, and a look forward element requiring enhanced shareholder value beyond market expectations at the time of the award. The Board considers this to be the right approach for a company of Bionomics’ size and nature and at this stage in its life cycle. Base pay and benefit levels are reviewed annually and an assessment made against market comparable positions. Factors taken into account in determining remuneration include levels of remuneration in other biotechnology companies, a demonstrated record of performance, internal relativities and the Company’s capacity to pay. An executive’s base pay and benefit levels may also be reviewed if the position’s accountabilities increase in scope and impact. During the year there were increases provided to the Chief Executive Officer and Managing Director, and Chief Financial Officer of 2% and 8% respectively. Performance Incentives Executive positions have no pre-determined bonus or equity opportunity, however performance incentives in the form of cash or share options may be awarded at the end of the performance review cycle upon achievement of specific Board approved (i) individual, and (ii) company-related key performance indicators (KPIs) with a weighting of 50% each. Following a performance evaluation against these KPIs, the amount of possible incentive payable to each executive is determined by the Board based on the CEO’s recommendation, and to the CEO by the Board based on the Board’s assessment of her performance. The Board determines whether the incentive award should be in share options or cash. The default award is in share options, as this is in accord with the Company’s philosophy that a continuum of KPI achievement pre and post any award is required to progressively improve shareholder value, and that options are an appropriate payment vehicle because a reward is only realised if there is The Board continues to review the performance assessment and incentive structure to ensure it remains effective. Equity Awards Equity awards for executives and employees are provided by a combination of equity plans that may include: = An Employee Share Plan; = An Employee Share Plan ($1,000 Plan); and = An Employee Share Option Plan. Participation in these plans is at the Board’s discretion and no individual has an ongoing contractual right to participate in a plan or to receive any guaranteed benefits. For key appointments, an initial allocation of equity may be offered as a component of their initial employment agreement. The structure of equity awards is under the active review of the remuneration committee to ensure it meets good corporate practice for a company of Bionomics’ size, nature and company life cycle. Employee Share Plan The Bionomics Employee Share Plan (ESP) was approved by shareholders at the November 2014 Annual General Meeting. It may involve the Company providing an interest-free limited recourse loan to eligible employees to purchase shares under this ESP. The Company takes security over the shares to secure repayment of the loan. The purpose of this ESP is to provide eligible employees with an incentive to remain with the Company and to improve the longer-term performance of the Company and its returns to shareholders. The issue price will be determined by the Board at its sole discretion, with the intention to base it on market value at the time. DIRECTOR’S REPORT26 Employee Share Plan ($1,000 Plan) All executives and staff, excluding directors, are eligible to participate in the Bionomics Employee Share Plan ($1,000 Plan). The objective of the $1,000 Plan is to assist in the attraction and retention of employees of the Company, and to provide encouragement to become shareholders. An annual allocation of up to $1,000 of shares may be granted and taxed on a concessional basis. Shares are granted under the $1,000 Plan for no consideration and are escrowed for 3 years while participants are employed by the Company. None were issued during the year ended 30 June 2016 or since that date. Employee Share Option Plan Options may be granted under the Bionomics Limited Employee Share Option Plan (ESOP) which was re-approved by shareholders at the 2014 Annual General Meeting. All executives and staff are eligible to participate in the Plan. The objective of the Plan is to assist in the recruitment, reward, retention and motivation of employees of the Company. Options are granted under the Plan for no consideration. More particularly, the Plan is utilised to award options to executives if they achieve specified KPIs. It may also be used for shareholder approved Non-Executive Director grants at the time of their appointment. The exercise price of options granted under the Plan must be not less than the market price at the time the decision is made to invite a participant to apply for options. The exercise price is calculated as the volume-weighted average price (VWAP) of the shares in the 7 days preceding the approval to grant the options. 3. Relationship Between the Remuneration Policy and Company Performance The Company’s remuneration policy aligns executive reward with the interests of shareholders. The primary focus is on growth in shareholder value through the achievement of research, development, regulatory and commercial milestones. The performance goals are not necessarily linked to financial performance measures typical of companies operating in other market segments. Share options and/or cash bonuses are granted to executive KMP’s based on their level of KPI achievement. Achievement of KPIs should result in increases in shareholder value. However, the Company provides share options rather than a cash award for KPI achievement (unless there are exceptional circumstances). This is because share options only have realisable value if there is an increase in shareholder value. That is, further improvement beyond the KPI achievement on which the award is based is required for the executives to realise value. The incentive framework, therefore, combines a “look back” element to reward the achievement of KPIs necessary to enhance value, with a “look forward” element requiring improvement beyond this level of achievement for the executive to actually realise value. This is typical of a biotechnology company at Bionomics’ stage of its life cycle. Bionomics’ approach to its remuneration framework ensures: = Executives focus on meaningful KPIs; = The best performers receive higher reward; = Cash is conserved through the use of options; = There is relatively less dilution from option grants because they are selectively granted rather than universally granted; = Executives must continue to perform to realise value; and = Executive reward is aligned with shareholder interests. KPIs may include (but are not limited to) successful negotiations of commercial contracts, achieving key research, development and regulatory milestones and ensuring the availability of adequate capital to achieve stated objectives. There is no direct link between the determination of fixed pay and the Company’s financial performance (specifically, revenue and net (loss)/profit included in the table following) or share price. The calculation of the annual incentive award for executive KMP is by reference to the achievement of specific milestones and targets approved by the Board. Milestones and targets generally relate to: = Efficiently conducting the Company’s development programs; = Executing Bionomics’ partnership strategy, both new and existing; = Demonstrating the power of Bionomics’ discovery capabilities; and = Maintaining adequate capital reserves. These KPIs have been established to support the Company achieving its overall objectives. Executive KMP have 50% of their performance incentives tied to the achievement of corporate goals and the remaining 50% is tied to the achievement of individual goals. Important milestones directly related to Board approved FY16 KPIs achieved by Bionomics’ executives included: = Continued development of BNC210: = Successful completion of Phase 1 multiple ascending dose clinical trial showing evidence of target engagement in September 2015; = Completion of enrolment in Phase 2 Generalized Anxiety Disorder clinical trial in June 2016; and = Achieved funding for a Phase 2 clinical trial in patients with Post-Traumatic Stress Disorder. This trial was initiated on 30 June 2016. = Progressed development of lead cancer stem cell drug candidate BNC101: = Successful IND acceptance in August 2015; and = Initiation of Phase I clinical trial in April 2016. 27 = Extension of Pain partnership with MSD and ongoing successful collaboration with MSD in the cognition program. = Secured investment from MSD. = Expanded Bionomics’ access to US investors and analysts. As at the date of this Remuneration Report, the incentive remuneration applicable to the levels of achievement on these KPIs for Bionomics’ executives for the year ended 30 June 2016 has not been finalised and approved. Full disclosure will be provided in next year’s Remuneration Report. 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 2016. 30 JUNE 2016 $ 30 JUNE 2015 $ 30 JUNE 2014 $ 30 JUNE 2013 $ 30 JUNE 2012 $ Revenue Net Profit/(Loss) before tax Net Profit/(Loss) after tax 8,143,288 (17,324,118) (16,608,757) 6,827,277 (17,277,206) (16,949,405) 19,921,506 3,946,945 3,206,616 3,724,169 (9,963,175) (10,001,350) 6,834,709 (3,328,896) (3,136,238) Share price at start of year Share price at end of year Dividends paid Basic earnings per share Diluted earnings per share 30 JUNE 2016 CENTS 30 JUNE 2015 CENTS 30 JUNE 2014 CENTS 30 JUNE 2013 CENTS 30 JUNE 2012 CENTS 41.5 28.0 - (3.0) (3.0) 55.0 41.5 - (4.0) (4.0) 34.0 55.0 - 1.0 1.0 30.0 34.0 - (2.7) (2.7) 55.5 30.0 - (0.9) (0.9) 4. Remuneration of Key Management Personnel The following tables show details of the remuneration received by the Directors, and the executive KMP of the Group for the current and previous financial years. DIRECTORS AND OTHER KEY MANAGEMENT PERSONNEL – 2016 SHORT-TERM BENEFITS POST- EMPLOYMENT CASH SALARY AND FEES $ NON- MONETARY BENEFITS $ LONG-TERM EMPLOYEE BENEFITS ANNUAL AND LONG SERVICE LEAVE $ - - - - - - - 70,395 - SUPER- ANNUATION $ 10,411 6,941 - - - - 217 19,308 - SHARE-BASED PAYMENTS OPTIONS $ TOTAL $ 45,867 165,867 - - - - 12,464 - 9,402 - 26,712 80,000 83,544 49,106 2,500 37,381 2,500 605,916 151,145 251,055 11,042 18,219 14,343 109,589 73,059 83,544 49,106 2,500 24,917 2,283 436,468 151,145 180,739 - - - - - - - 70,343 - NAME Mr Graeme Kaufman Mr Trevor Tappenden Dr Errol De Souza Dr Alan W Dunton 2 Mr David Wilson 3 Dr Jonathan Lim 1 Mr Peter Turner 3 Dr Deborah Rathjen Dr José Iglesias 4 Ms Melanie Young DIRECTOR’S REPORT 28 DIRECTORS AND OTHER KEY MANAGEMENT PERSONNEL – 2016 CONT. SHORT-TERM BENEFITS POST- EMPLOYMENT CASH SALARY AND FEES $ 308,559 280,692 351,985 NON- MONETARY BENEFITS $ 5,917 - - SUPER- ANNUATION $ 16,461 19,308 - LONG-TERM EMPLOYEE BENEFITS ANNUAL AND LONG SERVICE LEAVE $ 19,347 21,702 5,384 SHARE-BASED PAYMENTS OPTIONS $ 10,211 10,211 3,391 TOTAL $ 360,495 331,913 360,760 2,054,586 87,302 90,865 131,171 118,258 2,482,182 NAME Dr Jens Mikkelsen Mr Jack Moschakis Mr Anthony Colasin 5 1 Dr Jonathan Lim retired 18 November 2015. 2 Dr Alan Dunton was appointed 29 September 2015 and retired 4 July 2016. 3 Mr David Wilson and Mr Peter Turner were appointed 16 June 2016. 4 Dr José Iglesias’ remuneration package is in Canadian dollars and the above has been translated into Australian dollars. Dr Iglesias ceased full time employment 15 October 2015, retained under consulting agreement. 5 Mr Anthony Colasin commenced 1 August 2015. Mr Colasin’s remuneration package is in United States dollars and the above has been translated into Australian dollars. DIRECTORS AND OTHER KEY MANAGEMENT PERSONNEL – 2015 SHORT-TERM BENEFITS POST- EMPLOYMENT CASH SALARY AND FEES $ NON- MONETARY BENEFITS $ SUPER- ANNUATION $ LONG-TERM EMPLOYEE BENEFITS ANNUAL AND LONG SERVICE LEAVE $ 109,589 73,059 104,000 65,000 483,799 433,530 165,721 47,247 45,788 - - - - 73,221 - 12,126 - - 1,527,733 85,347 10,411 6,941 - - 18,783 - 16,895 - 3,131 56,161 - - - - 17,483 5,496 6,780 - 3,960 33,719 SHARE-BASED PAYMENTS OPTIONS $ 80,774 - - 20,269 20,288 51,302 45,735 - - TOTAL $ 200,774 80,000 104,000 85,269 613,574 490,328 247,257 47,247 52,879 218,368 1,921,328 NAME Mr Graeme Kaufman Mr Trevor Tappenden Dr Errol De Souza Dr Jonathan Lim Dr Deborah Rathjen 1 Dr José Iglesias 4 Ms Melanie Young Dr Jens Mikkelsen 2 Mr Jack Moschakis 3 1 Included in Dr Rathjen’s cash salary and fees is a cash incentive of $60,000 received on 11 September 2014 having met agreed performance criteria including execution of the Merck Option and License Agreement for the pain program and the Merck Research Collaboration and Licensing Agreement for the cognition program. 2 Dr Mikkelsen has been a Scientific Advisory Board consultant since 4 December 2012 and commenced consulting as the Group’s Chief Scientific Officer on 11 May 2015. 3 Mr Moschakis commenced on 4 May 2015. 4 Dr Iglesias’ remuneration package is in Canadian dollars and the above has been translated into Australian dollars. 29 5. Key Terms of Service Agreements Remuneration and other terms of employment for the Chief Executive Officer and Managing Director, and the other executive KMP are formalised in service agreements. Major provisions of the agreements relating to remuneration are set out below: = 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, six months’ salary will be paid. Dr Deborah Rathjen, Chief Executive Officer and Managing Director = Term of agreement – 5 years commencing 15 August 2015. = Total remuneration package, to be reviewed annually by the Board. = 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. Ms Melanie Young, Chief Financial Officer = Term of agreement – open, commencing 9 May 2011. = Total remuneration package to be reviewed annually by the Chief Executive Officer and Managing Director, and approved by the Board. = 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. Dr Jens Mikkelsen, Chief Scientific Officer = Term of agreement – open, commencing 11 May 2015. = Total remuneration package to be reviewed annually by the Chief Executive Officer and Managing Director, and approved by the Board. = 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, six months’ salary will be paid. Mr Jack Moschakis, Legal Counsel and Company Secretary = Term of agreement – open, commencing 4 May 2015. = Total remuneration package to be reviewed annually by the Chief Executive Officer and Managing Director, and approved by the Board. = 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, six months’ salary will be paid. Mr Anthony Colasin, Chief Business Officer = Term of agreement – open, commencing 1 August 2015. = Total remuneration package to be reviewed annually by the Chief Executive Officer and Managing Director, and approved by the Board. Share-based Payments Share-based payment benefits are provided to employees via the Bionomics ESOP and the Bionomics ESP. The market value of shares issued to employees for no cash consideration under the ESP 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 and ESP were approved by the Board and Shareholders in 2014. Employees 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. Options are granted under the plan for no consideration and vest equally over five years, (other than options for incentive awards – see below), provided a person remains employed subject to good leaver provisions (death, retrenchment or retirement). 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 determined using a Black-Scholes option pricing model that takes into account the exercise price, the term of the option, the vesting criteria, the impact of dilution, 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. Incentive options are issued at the discretion of the Board and vest immediately. There are no subsequent performance conditions attached to the options. The incentive payable to each executive is determined by the Board based on the CEO’s recommendation. The incentive calculation is based 50% on the Company meeting corporate objectives and 50% on the achievement of individual annual KPIs. The Company’s assessment of milestone performance achievements are outlined in 3 above. The executives’ KPIs are established with reference to their contribution to achieving the Company’s overall objectives. DIRECTOR’S REPORT30 The terms and conditions of each grant of options affecting remuneration of Directors and other KMP in this or future reporting periods are as follows: GRANT DATE EXPIRY DATE REVISED EXERCISE PRICE FAIR VALUE PER OPTION AT GRANT DATE VESTING DATE Granted in Prior Periods November 2006 November 2008 November 2011 December 2012 December 2012 March 2013 December 2013 October 2014 December 2014 Granted in Current Period December 2015 November 2016 November 2016 November 2017 August 2016 November 2016 November 2016 August 2017 December 2018 December 2019 December 2020 December 2021 December 2022 December 2017 March 2019 March 2020 March 2021 March 2022 March 2023 December 2018 December 2018 December 2020 December 2021 December 2022 October 2019 December 2019 December 2021 December 2022 December 2023 December 2024 December 2025 December 2020 December 2021 December 2022 December 2023 $0.2976 $0.2976 $0.2976 $0.3692 $0.6116 $0.6116 $0.9186 $0.3176 $0.3176 $0.3176 $0.3176 $0.3176 $0.2846 $0.4176 $0.4176 $0.4176 $0.4176 $0.4176 $0.3301 $0.7224 $0.7224 $0.7224 $0.7224 $0.5643 $0.5643 $0.5389 $0.5389 $0.5389 $0.5389 $0.5389 $0.4211 $0.5102 $0.5102 $0.5102 $0.1919 $0.1591 $0.1591 $0.1419 $0.2181 $0.2181 $0.0475 $0.1751 $0.1751 $0.1751 $0.1751 $0.1751 $0.1614 $0.2001 $0.2001 $0.2001 $0.2001 $0.2001 $0.4647 $0.3291 $0.3291 $0.3291 $0.3291 $0.3523 $0.2705 $0.1502 $0.1502 $0.1502 $0.1502 $0.1502 $0.1567 $0.1617 $0.1617 $0.1617 16-Nov-11 05-Nov-11 05-Nov-12 07-Aug-11 25-Nov-11 25-Nov-11 15-Aug-12 11-Dec-13 11-Dec-14 11-Dec-15 11-Dec-16 11-Dec-17 11-Dec-12 19-Mar-14 19-Mar-15 19-Mar-16 19-Mar-17 19-Mar-18 17-Dec-13 11-Dec-13 11-Dec-15 11-Dec-16 11-Dec-17 15-Oct-14 04-Dec-14 24-Dec-16 24-Dec-17 24-Dec-18 24-Dec-19 24-Dec-20 24-Dec-15 30-Dec-16 30-Dec-17 30-Dec-18 31 DIRECTOR’S REPORT Share-based Payments cont. GRANT DATE EXPIRY DATE REVISED EXERCISE PRICE FAIR VALUE PER OPTION AT GRANT DATE VESTING DATE Granted in Current Period December 2015 May 2016 December 2024 December 2025 May 2022 May 2023 May 2024 May 2025 May 2026 $0.5102 $0.5102 $0.3200 $0.3200 $0.3200 $0.3200 $0.3200 $0.1617 $0.1617 $0.1841 $0.1841 $0.1841 $0.1841 $0.1841 30-Dec-19 30-Dec-20 06-May-17 06-May-18 06-May-19 06-May-20 06-May-21 Options granted under the plan carry no dividend or voting rights. When exercisable, each option is convertible into one ordinary share of Bionomics. During the year, and since the end of the year, incentive options were issued to the following Directors and other KMP for the achievement in the prior year of board-approved KPIs: NAME NUMBER GRANTED DATE GRANTED TOTAL FAIR VALUE $ Dr Deborah Rathjen1 60,000 2 Dec 2015 Dr Alan W Dunton Dr Jens Mikkelsen Mr Jack Moschakis Ms Melanie Young1 500,000 24 Dec 2015 250,000 30 Dec 2015 250,000 30 Dec 2015 50,000 28 Oct 2015 9,402 89,106 47,396 47,396 10,125 NUMBER VESTED 60,000 - - - 100% - - - 50,000 100% % OF GRANT VESTED % OF GRANT FORFEITED - - - - - 1 The options vested immediately and were awarded following the achievement of performance objectives. During the year, the following Directors and other KMP exercised options that were granted to them as part of their compensation: NAME Dr Errol De Souza Mr Trevor Tappenden NUMBER OF OPTIONS EXERCISED NUMBER OF ORDINARY SHARES ISSUED AMOUNT PAID $ AMOUNT UNPAID $ 100,000 100,000 100,000 100,000 29,760 29,760 - - Fully Paid Ordinary Shares of Bionomics Limited BALANCE AT 1 JULY 2015 NUMBER GRANTED AS COMPENSATION NUMBER Mr Graeme Kaufman Mr Trevor Tappenden Dr Errol De Souza Dr Jonathan Lim1 Dr Alan W Dunton 178,750 352,500 146,698 5,091,828 - - - - - - RECEIVED ON EXERCISE OF OPTIONS NUMBER - 100,000 100,000 NET OTHER CHANGES NUMBER BALANCE AT 30 JUNE 2016 NUMBER - (72,576) (80,000) - - (5,091,828) - 178,750 379,924 166,698 - - BALANCE HELD NOMINALLY NUMBER - 79,924 - - - 32 BALANCE HELD NOMINALLY NUMBER - - Fully Paid Ordinary Shares of Bionomics Limited cont. BALANCE AT 1 JULY 2015 NUMBER GRANTED AS COMPENSATION NUMBER RECEIVED ON EXERCISE OF OPTIONS NUMBER NET OTHER CHANGES NUMBER BALANCE AT 30 JUNE 2016 NUMBER Mr Peter Turner2 Mr David Wilson2 - - Dr Deborah Rathjen 2,280,401 Dr José Iglesias3 Mr Jack Moschakis Dr Jens Mikkelsen Mr Anthony Colasin Ms Melanie Young - - - - 76,549 - - - - - - - - - - - 265,000 - - - - - - 105,500 (265,000) - - - - - - 2,385,901 1,240,000 - - - - 76,549 - - - - - 1 Dr Jonathan Lim retired 18 November 2015 and his shareholding and options have been removed from the tables. 2 Mr Peter Turner and Mr David Wilson were appointed 16 June 2016. 3 Dr José Iglesias ceased full time employment 15 October 2015, retained under consulting agreement. Share Options of Bionomics Limited BALANCE AT 1 JULY 2015 NUMBER 1,000,000 200,000 300,000 500,000 GRANTED AS COMPEN- SATION NUMBER - - - - - - - 500,000 - - Mr Graeme Kaufman Mr Trevor Tappenden Dr Errol De Souza Dr Jonathan Lim1 Dr Alan W Dunton Mr Peter Turner2 Mr David Wilson2 Dr Deborah Rathjen 2,120,000 60,000 EXERCISED NUMBER - (100,000) (100,000) - - - - - NET OTHER CHANGES NUMBER BALANCE AT 30 JUNE 2016 NUMBER BALANCE VESTED AND EXERCISABLE AT 30 JUNE 2016 NUMBER OPTIONS VESTED DURING YEAR NUMBER 1,000,000 600,000 400,000 - - - (500,000) - - - - 100,000 100,000 200,000 200,000 - 500,000 - - - - - - 2,180,000 2,180,000 - - - 500,000 - - - - 250,000 250,000 250,000 Dr José Iglesias3 Mr Jack Moschakis Dr Jens Mikkelsen Mr Anthony Colasin Ms Melanie Young 628,500 - (265,000) (363,500) - - - - 250,000 250,000 250,000 661,000 50,000 - - - - - - - - 250,000 250,000 250,000 - - - - 711,000 611,000 100,000 All share options issued to KMP were made in accordance with the provisions of the ESOP. The number granted in the above table and in total during the year was 0.05% and 0.5% respectively of common shares outstanding. During the financial year, 465,000 options were exercised by KMP at a weighted average exercise price of $0.34 per option for 465,000 ordinary shares in Bionomics Limited. No amounts remain unpaid on the options exercised during the financial year at year end. 33 DIRECTOR’S REPORT Further details of the ESOP and of share options granted during the 2016 and 2015 financial years are contained in Note 22 of Notes to the Financial Statements. Other Transactions with Directors and Other Key Management Personnel There were no other transactions with Directors or other KMP 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. The total number of shares under option at 30 June 2016 was 9,698,860. This is 2.0% of common shares outstanding. Shares Issued on the Exercise of Options 921,250 ordinary shares of Bionomics were issued during the year ended 30 June 2016 on the exercise of options granted under the Bionomics ESOP. Warrants During the year the Company issued warrants in connection with the USD loan which are currently exercisable at the discretion of the holder and exchangeable for either 988,843 (2015: 643,611) ordinary shares at a fixed price (345,232 at $0.5288 and 643,611 at $0.54) or a lower number of shares for nil consideration, with the number of shares calculated on the basis of a formula which takes into account the movement in the share price of the Company from the date of issue to date of exercise of the warrant. In addition, the Company issued warrants in connection with a private placement as set out in Note 22 which are currently exercisable at the discretion of the holder and exchangeable for 24,124,484 ordinary shares at a fixed price ($0.5938). 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 28 of Notes 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. 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 34. This Directors’ Report is signed in accordance with a resolution of Directors made pursuant to Section 298(2) of the Corporations Act 2001. Graeme Kaufman Deborah Rathjen Chairman Chief Executive Officer and Managing Director 9 August 2016 9 August 2016 34 AUDITOR’S INDEPENDENCE DECLARATION This financial statement covers both Bionomics Limited (“Bionomics”) as an individual entity (Note 32) 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 Australian Securities Exchange (ASX) (ASX: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. 35 ANNUAL CONSOLIDATED FINANCIAL STATEMENTS FOR FINANCIAL YEAR ENDED 30 JUNE 2016 TABLE OF CONTENTS FINANCIAL STATEMENTS 36 37 38 39 40 80 81 CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME CONSOLIDATED STATEMENT OF FINANCIAL POSITION CONSOLIDATED STATEMENT OF CHANGES IN EQUITY CONSOLIDATED STATEMENT OF CASH FLOWS NOTES TO THE FINANCIAL STATEMENTS DIRECTORS’ DECLARATION INDEPENDENT AUDIT REPORT 36 CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE FINANCIAL YEAR ENDED 30 JUNE 2016 NOTE 30 JUNE 2016 $ 30 JUNE 2015 $ CONTINUING OPERATIONS Revenue Other income EXPENSES Research and development expenses Administration expenses Occupancy expenses Compliance expenses Loss on disposal of assets Finance expenses LOSS BEFORE TAX Income tax benefit LOSS AFTER TAX 5 5 6 7 Other Comprehensive Income, Net of Income Tax Items that may be reclassified subsequently to profit or loss: Exchange differences on translating foreign operations Total Comprehensive Loss for the Year Loss attributable to: Owners of the Company LOSS PER SHARE FROM CONTINUING OPERATIONS NOTE Basic Loss per share Diluted Loss per share 30 30 8,143,288 13,584,627 (24,770,876) (7,526,831) (3,033,209) (1,686,703) (140,159) (1,894,255) (17,324,118) 715,361 (16,608,757) 968,418 (15,640,339) 6,827,277 9,789,128 (23,181,790) (5,730,169) (2,922,779) (1,186,978) (8,063) (863,832) (17,277,206) 327,801 (16,949,405) 3,312,600 (13,636,805) (15,640,339) (13,636,805) 2016 ($0.03) (3 cents) ($0.03) (3 cents) 2015 ($0.04) (4 cents) ($0.04) (4 cents) THE ABOVE CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME SHOULD BE READ IN CONJUNCTION WITH THE ACCOMPANYING NOTES. 37 CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2016 CURRENT ASSETS Cash and cash equivalents Trade and other receivables Other financial assets Inventories Research and development incentives receivable Other assets Total Current Assets NON-CURRENT ASSETS Property, plant and equipment Goodwill Other intangible assets Other financial assets Total Non-Current Assets TOTAL ASSETS CURRENT LIABILITIES Trade and other payables Borrowings Provisions Other financial liabilities Other liabilities Total Current Liabilities NON-CURRENT LIABILITIES Other payables Borrowings Provisions Deferred tax liability Contingent consideration Total Non-Current Liabilities TOTAL LIABILITIES NET ASSETS EQUITY Capital Reserves Accumulated losses Equity Attributable to Owners of the Company NOTE 30 JUNE 2016 $ 30 JUNE 2015 $ 8 10 9 11 12 14 15 16 9 17 18 19 21 20 17 18 19 7 33 22 23 45,450,382 1,401,594 550,000 438,856 9,601,355 643,582 58,085,769 2,835,066 10,642,229 16,062,954 384,000 29,924,249 88,010,018 5,855,143 2,731,837 1,590,979 1,142,320 65,811 11,386,090 144,938 18,436,717 61,928 5,057,861 10,489,438 34,190,882 45,576,972 42,433,046 134,392,813 11,216,038 (103,175,805) 42,433,046 26,558,006 1,063,680 550,000 409,891 8,005,399 1,293,932 37,880,908 3,450,555 10,488,633 16,927,619 384,000 31,250,807 69,131,715 6,465,626 5,460,133 1,582,239 122,544 75,362 13,705,904 140,758 9,317,373 91,168 5,634,395 8,276,292 23,459,986 37,165,890 31,965,825 111,990,220 6,542,653 (86,567,048) 31,965,825 THE ABOVE CONSOLIDATED STATEMENT OF FINANCIAL POSITION SHOULD BE READ IN CONJUNCTION WITH THE ACCOMPANYING NOTES. 38 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE FINANCIAL YEAR ENDED 30 JUNE 2016 FOREIGN CURRENCY TRANSLATION RESERVE $ SHARE-BASED PAYMENTS RESERVE $ ISSUED CAPITAL $ ACCUMU- LATED LOSSES $ TOTAL EQUITY $ BALANCE AT 1 JULY 2014 111,721,671 893,614 1,820,965 (69,617,643) 44,818,607 Loss for the period Exchange differences on translation of foreign operations Total comprehensive income Recognition of share-based payments Issue of ordinary shares under Employee Share Option Plan BALANCE AT 30 JUNE 2015 Loss for the period Exchange differences on translation of foreign operations Total comprehensive income Recognition of share-based payments Issue of ordinary shares and warrants, net of transaction costs Issue of ordinary shares under Employee Share Option Plan BALANCE AT 30 JUNE 2016 - - - - 268,549 - 3,312,600 3,312,600 - - - (16,949,405) (16,949,405) - 3,312,600 (16,949,405) (13,636,805) - - 515,474 - - - 515,474 268,549 111,990,220 4,206,214 2,336,439 (86,567,048) 31,965,825 - - - - 22,113,875 288,718 - 968,418 968,418 - - - - - - 399,913 3,305,054 - (16,608,757) (16,608,757) - 968,418 (16,608,757) (15,640,339) - - - 399,913 25,418,929 288,718 134,392,813 5,174,632 6,041,406 (103,175,805) 42,433,046 THE ABOVE CONSOLIDATED STATEMENT OF CHANGES IN EQUITY SHOULD BE READ IN CONJUNCTION WITH THE ACCOMPANYING NOTES. 39 CONSOLIDATED STATEMENT OF CASH FLOWS NOTE CASH FLOWS FROM OPERATING ACTIVITIES Research and development incentives received Receipts from customers Payments to suppliers and employees Interest paid Net Cash (Used In)/Generated By Operating Activities 29(b) CASH FLOWS FROM INVESTING ACTIVITIES Interest received Payments for purchases of property, plant and equipment Proceeds from disposals Acquisition of Prestwick business 34 Net Cash Generated By/(Used In) Investing Activities CASH FLOWS FROM FINANCING ACTIVITIES Repayment of borrowings Proceeds from borrowings Net proceeds from share issues Net Cash Generated By Financing Activities 2016 $ 9,491,378 8,079,976 (31,229,508) (1,701,400) (15,359,554) 1,232,377 (196,707) 68,586 - 1,104,256 (808,025) 5,787,968 28,222,099 33,202,042 2015 $ 7,796,611 27,502,747 (29,620,018) (743,222) 4,936,118 940,607 (846,258) - (391,136) (296,787) (667,620) 12,688,036 268,549 12,288,965 Net Increase/Decrease in Cash and Cash Equivalents 18,946,744 16,928,296 Cash and cash equivalents at the beginning of the financial year Effects of exchange rate changes on the balance of cash held in foreign currencies CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR 29(a) 26,512,533 9,567,307 (8,895) 45,450,382 16,930 26,512,533 THE ABOVE CONSOLIDATED STATEMENT OF CASH FLOWS SHOULD BE READ IN CONJUNCTION WITH THE ACCOMPANYING NOTES. FOR THE FINANCIAL YEAR ENDED 30 JUNE 201640 NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2016 62 62 62 63 69 69 73 74 75 75 75 76 77 77 78 78 79 NOTE 19: PROVISIONS NOTE 20: OTHER LIABILITIES NOTE 21: OTHER FINANCIAL LIABILITIES NOTE 22: ISSUED CAPITAL NOTE 23: RESERVES NOTE 24: FINANCIAL INSTRUMENTS NOTE 25: KEY MANAGEMENT PERSONNEL COMPENSATION NOTE 26: COMMITMENTS FOR EXPENDITURE NOTE 27: EVENTS OCCURRING AFTER REPORTING DATE NOTE 28: REMUNERATION OF AUDITORS NOTE 29: CASH FLOW INFORMATION NOTE 30: EARNINGS PER SHARE NOTE 31: RELATED PARTY TRANSACTIONS NOTE 32: PARENT ENTITY INFORMATION NOTE 33: CONTINGENT CONSIDERATION NOTE 34: BUSINESS COMBINATIONS - ACQUISITION OF PRESTWICK CHEMICAL NOTE 35: CONTINGENT LIABILITIES TABLE OF CONTENTS NOTE 1: GENERAL INFORMATION NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES NOTE 3: CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS NOTE 4: SEGMENT INFORMATION NOTE 5: REVENUE AND OTHER INCOME NOTE 6: EXPENSES NOTE 7: INCOME TAXES NOTE 8: CASH AND CASH EQUIVALENTS NOTE 9: OTHER FINANCIAL ASSETS NOTE 10: TRADE AND OTHER RECEIVABLES NOTE 11: INVENTORIES NOTE 12: OTHER ASSETS NOTE 13: SUBSIDIARIES NOTE 14: PROPERTY, PLANT AND EQUIPMENT NOTE 15: GOODWILL NOTE 16: OTHER INTANGIBLE ASSETS NOTE 17: TRADE AND OTHER PAYABLES NOTE 18: BORROWINGS 41 41 50 51 54 54 55 57 57 57 58 58 58 59 59 60 61 61 41 NOTES TO THE FINANCIAL STATEMENTS NOTE 1: GENERAL INFORMATION Bionomics Limited (the Company) is a listed public company incorporated in Australia. The address of its registered office and principal place of business is as follows: 31 Dalgleish Street Thebarton, South Australia, 5031 Tel: 08 8354 6100 Principal Activities The principal activities of the Company and its controlled entities (the Group) during the period include the discovery and development of novel drug candidates focused on the treatment of serious central nervous system disorders and cancer by leveraging proprietary platform technologies. NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES This financial report includes the consolidated financial statements and notes of 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. The financial statements comprise the consolidated financial statements of the Group. For the purposes of preparing the consolidated financial statements, the Company is a for-profit entity. Accounting Standards include Australian Accounting Standards (AASB). Compliance with AASB 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 9 August 2016. 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 at the end of each reporting period, as explained in the accounting policies below. 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. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability, the Group takes into account the characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at measurement date. Fair value for measurement and/or disclosure purposes in these consolidated financial statements is determined on such a basis, except for share-based payment transactions that are within the scope of AASB 2 (IFRS 2), leasing transactions that are within the scope of AASB 117 (IAS 17), and measurements that have some similarities to fair value but are not fair value, such as net realisable value in AASB 2 (IFRS 2) or value in use in AASB 136 (IAS 36). In addition, for financial reporting purposes, fair value measurements are categorised into Level 1, 2 or 3 based on the degree to which inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows: = Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at measurement date; = Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for that asset or liability, either directly or indirectly; and = Level 3 inputs are unobservable inputs for the asset or liability. Application 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. The adoption of these new and revised Standards and Interpretations has resulted in no significant changes to the consolidated entity’s accounting policies. Standards and Interpretations in issue not yet adopted At the date of authorisation of the financial report, a number of Standards and Interpretations were in issue but not yet effective. FOR THE FINANCIAL YEAR ENDED 30 JUNE 201642 EFFECTIVE FOR ANNUAL REPORTING PERIODS BEGINNING ON OR AFTER EXPECTED TO BE INITIALLY APPLIED IN THE FINANCIAL YEAR ENDING STANDARD AASB 9 ‘Financial Instruments’, and the relevant amending standards 1 January 2018 30 June 2019 AASB 2014-4 ‘Amendments to Australian Accounting Standards – Clarification of Acceptable Methods of Depreciation and Amortisation’ AASB 15 ‘Revenue from Contracts with Customers’ and AASB 2014-5 ‘Amendments to Australian Accounting Standards arising from AASB 15’ AASB 2015-1 ‘Amendments to Australian Accounting Standards – Annual Improvements to Australian Accounting Standards 2012-2014 Cycle’ AASB 2015-2 ‘Amendments to Australian Accounting Standards – Disclosure Initiative: Amendments to AASB 101’ AASB 16 ‘Leases’ AASB 2016-1 ‘Amendments to Australian Accounting Standards – Recognition of Deferred Tax Assets for Unrealised Losses’ AASB 2016-2 ‘Amendments to Australian Accounting Standards – Disclosure Initiative: Amendments to AASB 107’ 1 January 2016 30 June 2017 1 January 2018 30 June 2019 1 January 2016 30 June 2017 1 January 2016 30 June 2017 1 January 2019 30 June 2020 1 January 2017 30 June 2018 1 January 2017 30 June 2018 At the date of authorisation of the financial statements, the following IASB Standards and IFRIC Interpretations (for which Australian Equivalent Standards and Interpretations have not yet been issued) were in issue but not yet effective: STANDARD/INTERPRETATION EFFECTIVE FOR ANNUAL REPORTING PERIODS BEGINNING ON OR AFTER EXPECTED TO BE INITIALLY APPLIED IN THE FINANCIAL YEAR ENDING Clarifications to IFRS 15 ‘Revenue from Contracts with Customers’ 1 January 2018 30 June 2019 Impact of new and revised requirements Management is currently assessing the potential impact of the following standards: AASB 9 (IFRS 9) ‘Financial Instruments’ (December 2009), and the relevant amending standards AASB 9 (IFRS 9) introduces new requirements for classifying and measuring financial assets, as follows: = Debt instruments meeting both a ‘business model’ test and a ‘cash flow characteristics’ test are measured at amortised cost (the use of fair value is optional in some limited circumstances). = Investments in equity instruments can be designated as ‘fair value through other comprehensive income’ with only dividends being recognised in profit or loss. = All other instruments (including all derivatives) are measured at fair value with changes recognised in the profit or loss. = The concept of ‘embedded derivatives’ does not apply to financial assets within the scope of the Standard and the entire instrument must be classified and measured in accordance with the above guidelines. Through AASB 2013-9, (IFRS 9) a new hedge accounting model has been put in place that is designed to be more closely aligned with how entities undertake risk management activities when hedging financial and non-financial risk exposures. 43 NOTES TO THE FINANCIAL STATEMENTS AASB 9 (IFRS 9) applies to annual periods beginning on or after 1 January 2018. The directors of the Company anticipate that the application of AASB 9 (IFRS 9) in the future may have a material impact on amounts reported in respect of the Group’s financial assets and financial liabilities. However, it is not practicable to provide a reasonable estimate of the effect of AASB 9 (IFRS 9) until the Group undertakes a detailed review. AASB 9 (IFRS 9) ‘Financial Instruments’ (December 2010), and the relevant amending standards A revised version of AASB 9 (IFRS 9) incorporating revised requirements for the classification and measurement of financial liabilities, and carrying over of the existing de-recognition requirements from AASB 139 (IAS 39) Financial Instruments: Recognition and Measurement. The revised financial liability provisions maintain the existing amortised cost measurement basis for most liabilities. New requirements apply where an entity chooses to measure a liability at fair value through profit or loss – in these cases, the portion of the change in fair value related to changes in the entity’s own credit risk is presented in other comprehensive income rather than within profit or loss. Through AASB 2013-9 (IFRS 9), a new hedge accounting model has been put in place that is designed to be more closely aligned with how entities undertake risk management activities when hedging financial and non-financial risk exposures. AASB 9 (IFRS 9) ‘Financial Instruments’ (December 2014), and the relevant amending standards The final version of AASB 9 (IFRS 9) brings together the classification and measurement, impairment and hedge accounting phases of the IASB’s project to replace AASB 139 (IAS 39) Financial Instruments: Recognition and Measurement. This version adds a new expected loss impairment model and limited amendments to classification and measurement for financial assets. This new version supersedes AASB 9 (IFRS 9) (December 2009) and AASB 9 (IFRS 9) (December 2010). The new version of AASB 9 (IFRS 9) includes: = Requirements for impairment of financial assets; and = Limited amendments to classification and measurement of financial assets, including introduction of a measurement category of ‘fair value through other comprehensive income’ for debt instruments. Note: Several versions of AASB 9 (IFRS 9) currently exist due to the issuance of the Standard over several years. In summary: = The mandatory effective date of AASB 9 (IFRS 9) (all versions) and the related consequential amendments is annual periods beginning on or after 1 January 2018; and = Either AASB 9 (IFRS 9) (December 2009) or AASB 9 (IFRS 9) (December 2010) can be early adopted if adopted with an initial application date before 1 February 2015, however after this period only AASB 9 (IFRS 9) (December 2014) can be early adopted. AASB 15 (IFRS 15) ‘Revenue from Contracts with Customers’ and AASB 2014-5 ‘Amendments to Australian Accounting Standards arising from AASB 15’ AASB 15 (IFRS 15) outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers; and replaces AASB 111 (IAS 11) Construction Contracts, AASB 118 (IAS 18) Revenue, Interpretation 13 Customer Loyalty Programmes, Interpretation 15 Agreements for the Construction of Real Estate, Interpretation 18 Transfers of Assets from Customers, and Interpretation 131 Revenue-Barter Transactions Involving Advertising Services. The core principle is that an entity recognises revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. AASB 15 (IFRS 15) applies to annual periods beginning on or after 1 January 2018. The Directors of the Company anticipate that the application of AASB 15 (IFRS 15) in the future may have a material impact on amounts reported in respect of the Group’s consolidated financial statements. However, it is not practicable to provide a reasonable estimate of the effect of AASB 15 (IFRS 15) until the Group undertakes a detailed review. AASB 2014-4 Amendments to Australian Accounting Standards – Clarification of Acceptable Methods of Depreciation and Amortisation Amends AASB 116 (IAS 16) Property, Plant and Equipment and AASB 138 (IAS 38) Intangible Assets to provide additional guidance on how the depreciation or amortisation of property, plant and equipment and intangible assets should be calculated. The amendments apply to annual periods beginning on or after 1 January 2016. The Directors of the Company do not anticipate that the application of these amendments will have a material impact on the Group’s consolidated financial statements. AASB 2015-1 ‘Amendments to Australian Accounting Standards – Annual Improvements to Australian Accounting Standards 2012- 2014 Cycle’ (‘Annual Improvements to IFRSs 2012-2014 Cycle’) Amends a number of pronouncements as a result of the IASB’s 2012-2014 annual improvements cycle. Key amendments include: = AASB 5 (IFRS 5) – Change in methods of disposal; = AASB 7 (IFRS 7) – Servicing contracts and applicability of the amendments to AASB 7 to condensed interim financial statements; = AASB 119 (IAS 19) – Discount rate: regional market issue; and = AASB 134 (IAS 34) – Disclosure of information ‘elsewhere in the interim financial report’. The amendments apply to annual periods beginning on or after 1 January 2016. The Directors of the Company do not anticipate that the application of these amendments will have a material impact on the Group’s consolidated financial statements. FOR THE FINANCIAL YEAR ENDED 30 JUNE 201644 AASB 2015-2 Amendments to Australian Accounting Standards – Disclosure Initiative: Amendments to AASB 101 Amends AASB 101 Presentation of Financial Statements to provide clarification regarding the disclosure requirements in AASB 101. Includes narrow-focus amendments to address concerns about existing presentation and disclosure requirements and to ensure entities are able to use judgements when applying a Standard in determining what information to disclose in their financial statements. The amendments apply to annual periods beginning on or after 1 January 2016. The Directors of the Company do not anticipate that the application of these amendments will have a material impact on the Group’s consolidated financial statements. AASB 16 (IFRS 16) ‘Leases’ AASB 16 (IFRS 16) provides a comprehensive model for the identification of lease arrangements and their treatment in the financial statements of both lessees and lessors. The accounting model for lessees will require lessees to recognise all leases on balance sheet, except for short-term leases and leases of low value assets. AASB 16 (IFRS 16) applies to annual periods beginning on or after 1 January 2019. The Directors of the Company anticipate that the application of AASB 16 (IFRS 16) in the future may have a material impact on the amounts reported and disclosures made in the Group’s consolidated financial statements. However, it is not practicable to provide a reasonable estimate of the effect of AASB 16 (IFRS 16) until the Group performs a detailed review. AASB 2016-1 ‘Amendments to Australian Accounting Standards – Recognition of Deferred Tax Assets for Unrealised Losses’ Amends AASB 112 ‘Income Taxes’ to clarify the requirements on recognition of deferred tax assets for unrealised losses on debt instruments measured at fair value. The amendments apply to annual periods beginning on or after 1 January 2017. The Directors of the Company do not anticipate that the application of these amendments will have a material impact on the Group’s consolidated financial statements. AASB 2016-2 ‘Amendments to Australian Accounting Standards – Disclosure Initiative: Amendments to AASB 107’ Amends AASB 107 ‘Statement of Cashflows’ to require entities to provide disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities, including both changes arising from cash flows and non-cash changes. The amendments apply to annual periods beginning on or after 1 January 2017. The Directors of the Company do not anticipate that the application of these amendments will have a material impact on the Group’s consolidated financial statements. Accounting Policies The following significant accounting policies have been adopted in the preparation and presentation of the financial report. (a) Basis of Consolidation The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company and its subsidiaries. Control is achieved when the Company: = Has power over the investee; = Is exposed, or has rights, to variable returns from its involvement with the investee; and = Has the ability to use its power to affect its returns. Consolidation of a subsidiary begins when the Company obtains control over the subsidiary and ceases when the Company loses control of the subsidiary. Specifically, income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated statement of profit or loss and other comprehensive income from the date the Company gains control until the date when the Company ceases to control the subsidiary. When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with the Group’s accounting policies. All intragroup assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation. (b) Foreign Currencies The individual financial statements of each group entity are presented in the currency of the primary economic environment in which the entity operates (its functional currency). For the purpose of the consolidated financial statements, the results and financial position of each group entity are expressed in Australian dollars (‘$’), which is the functional currency of the Company and the presentation currency for the consolidated financial statements. In preparing the financial statements of each individual group entity, transactions in currencies other than the entity’s functional currency (foreign currencies) are recognised at the rates of exchange prevailing at the dates of the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined. Non- monetary items that are measured in terms of historical cost in a foreign currency are not retranslated. 45 NOTES TO THE FINANCIAL STATEMENTS Exchange differences on monetary items are recognised in profit or loss in the period in which they arise except for 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. For the purpose of presenting these consolidated financial statements, the assets and liabilities of the Group’s foreign operations are translated into Australian dollars using exchange rates prevailing at the end of the reporting period. Income and expense items are translated at the average exchange rates for the period. Exchange differences arising, if any, are recognised in other comprehensive income and accumulated in equity. Goodwill and fair value adjustments to identifiable assets acquired and liabilities assumed through acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and translated at the rate of exchange prevailing at the end of each reporting period. Exchange differences arising are recognised in other comprehensive income and accumulated in equity. (c) Revenue Recognition Revenue is recognised when the amounts of the revenue can be measured reliably, it is probable that economic benefits associated with the transaction will flow to the entity and specific criteria related to the type of revenues has been satisfied. The Group enters into collaboration agreements that comprise of up front payments in connection with out-licensing activities and research funding, milestone payments based on development achieved by our collaborators, sales and royalties based on net sales. For these agreements, the Group applies revenue recognition criteria to the separately identifiable components of a single transaction. The total arrangement consideration is allocated to separately identifiable components by reference to their fair values. Revenue for the periods presented included license revenues, contract services revenues, and rental income. (i) License revenues in connection with out-licensing of the Group’s patents and other intellectual property to our collaborators are recognised when the following criteria have been met: = The Group has transferred to the buyer the significant risks and rewards of ownership of the patents and intellectual property, and = The Group does not retain either the continuing managerial involvement to the degree usually associated with ownership or the effective control over the patent and intellectual property. Where the above criteria are not met, up-front payments received in connection with out-licensing activities would be deferred. All up-front license payments so far received have been recognised upon receipt. (ii) For milestone receipts the Group’s collaboration partners may be obligated to make certain payments as they achieve certain specified milestones in the further development of the licensed property. To date no such milestone receipts have been received. (iii) Contract service revenue relates to the provision of scientific services for a fee and is recognised when the services are rendered. The Group’s collaboration agreements contemplate its involvement in the ongoing research and development of its partnered drug candidates, for which the Group is paid fees for the services rendered. Revenue from such contracts to provide services is recognised as services are being rendered. In addition, the Group may enter into separate arrangements to undertake certain contract services work for a fee and such fees are recognised by reference to the proportion of the total cost of performing the services to the total fee. (iv) Rental income is recognised on a straight line basis over the term of the lease. (d) Government Research and Development Incentives Government grants, including Research and Development incentives, are recognised at fair value where there is reasonable assurance that the grant will be received and all grant conditions will be met. Grants relating to cost reimbursements are recognised as other income in profit or loss in the period when the costs were incurred or when the incentive meets the recognition requirements (if later). (e) Income Tax Income tax expense represents the sum of the tax currently payable and deferred tax. Current Tax The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit before tax as reported in the consolidated statement of profit or loss and other comprehensive income because of items of income or expense that are taxable or deductible in other years and items that are never taxable or deductible. The Group’s current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period. Deferred Tax Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the consolidated financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences. FOR THE FINANCIAL YEAR ENDED 30 JUNE 201646 Deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised. Such deferred tax assets and liabilities are not recognised if the temporary difference arises from the initial recognition (other than in a business combination) of assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit. In addition, deferred tax liabilities are not recognised if the temporary difference arises from the initial recognition of goodwill. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realised, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities. Deferred tax liabilities and assets are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis. Current and Deferred Tax for the Year Current and deferred tax are recognised in profit or loss, except when they relate to items that are recognised in other comprehensive income or directly in equity, in which case the current and deferred tax are also recognised in other comprehensive income or directly in equity, respectively. Where current tax or deferred tax arises from the initial accounting for a business combination, the tax effect is included in the accounting for the business combination. (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. (f) Business Combinations Acquisitions of businesses are accounted for using the acquisition method. The consideration transferred in a business combination is measured at fair value which is calculated as the sum of the acquisition-date fair values of assets transferred by the Group, liabilities incurred by the Group to the former owners of the acquiree and the equity instruments issued by the Group in exchange for control of the acquiree. Acquisition- related costs are recognised in profit or loss as incurred. At the acquisition date, the identifiable assets acquired and the liabilities assumed are recognised at their fair value, except that: = Deferred tax assets or liabilities and assets or liabilities related to employee benefit arrangements are recognised and measured in accordance with AASB 112 (IAS 12) ‘Income Taxes’ and AASB 119 (IAS 19) ‘Employee Benefits’ respectively; = Liabilities or equity instruments related to share-based payment arrangements of the acquiree or share-based payment arrangements of the Group entered into to replace share-based payment arrangements of the acquiree are measured in accordance with AASB 2 (IFRS 2) ‘Share-based Payment’ at the acquisition date; and = Assets (or disposal groups) that are classified as held for sale in accordance with AASB 5 (IFRS 5) ‘Non-current Assets Held for Sale and Discontinued Operations’ are measured in accordance with that Standard. Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree, and the fair value of the acquirer’s previously held equity interest in the acquiree (if any) over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed. If, after reassessment, the net of the acquisition-date amounts of the identifiable assets acquired and liabilities assumed exceeds the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree and the fair value of the acquirer’s previously held interest in the acquiree (if any), the excess is recognised immediately in profit or loss as a gain on bargain purchase. Where the consideration transferred by the Group in a business combination includes assets or liabilities resulting from a contingent consideration arrangement, the contingent consideration is measured at its acquisition-date fair value. Changes in the fair value of the contingent consideration that qualify as measurement period adjustments are adjusted 47 NOTES TO THE FINANCIAL STATEMENTS retrospectively, with corresponding adjustments against goodwill. Measurement period adjustments are adjustments that arise from additional information obtained during the ‘measurement period’ (which cannot exceed one year from the acquisition date) about facts and circumstances that existed at the acquisition date. The subsequent accounting for changes in the fair value of contingent consideration that do not qualify as measurement period adjustments depends on how the contingent consideration is classified. Contingent consideration that is classified as equity is not remeasured at subsequent reporting dates and its subsequent settlement is accounted for within equity. Contingent consideration that is classified as an asset or liability is remeasured at subsequent reporting dates in accordance with AASB 139 (IFRS 39), or AASB 137 (IFRS 37) ‘Provisions, Contingent Liabilities and Contingent Assets’ respectively, as appropriate, with the corresponding gain or loss being recognised in profit or loss, respectively. If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the Group reports provisional amounts for the items for which the accounting is incomplete. Those provisional amounts are adjusted during the measurement period (see above), or additional assets or liabilities are recognised, to reflect new information obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the amounts recognised as of that date. (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). When it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the Cash Generating Unit (CGU) to which the asset belongs. When a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual CGUs, or otherwise they are allocated to the smallest group of CGUs for which a reasonable and consistent allocation basis can be identified. A CGU is the smallest identifiable group of assets that generates cash flow that are largely independent of cash flows from other assets or group of assets. The CGUs are defined as a research program that has the potential to be commercialised at some point in the future. Achievement of certain milestones within the research program will determine when a CGU comes into existence. 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 CGU is estimated to be less than its carrying amount, the carrying amount of the asset or CGU 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 CGU 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 CGU 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 consolidated statement of financial position. (i) Inventories Consumables are stated at the lower of cost and net realisable value. (j) Property, Plant and Equipment Land is stated at cost less any impairment losses if applicable and is not depreciated. Building, plant and equipment are stated at cost less accumulated depreciation or accumulated impairment losses, where applicable. Depreciation is recognised so as to write off the cost of assets less their residual values over their useful lives, using the diminishing value or straight-line methods, depending on the type of asset. The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period. FOR THE FINANCIAL YEAR ENDED 30 JUNE 201648 The depreciation rates for each class of depreciable assets are: = Buildings = Plant and equipment = Equipment under lease 25 years 20 – 40% 3 – 5 years An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in profit or loss. (k) Financial Assets Financial assets are classified into the following specified categories: ‘held-to-maturity’ investments 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) Held-to-Maturity Investments Bills of exchange and debentures with fixed or determinable payments and fixed maturity dates that the Group has the positive intent and ability to hold to maturity are classified as held-to-maturity investments. Held-to- maturity investments are measured at amortised cost using the effective interest method less any impairment. (ii) Receivables Trade receivables and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as ‘receivables’. Interest income is recognised by applying the effective interest rate, except for short term receivables when the effect of discounting is immaterial. (iii) 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. (l) Intangible Assets (i) Intellectual Property Acquired intellectual property is recognised as an asset at cost and amortised over its useful life. There is currently no internally generated intellectual property that has been capitalised. 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 5 to 20 years. The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance date. (ii) Goodwill Goodwill arising on an acquisition of a business is carried at cost as established at the date of the acquisition of the business (see Note 2(f) above) less accumulated impairment losses, if any. For the purposes of impairment testing, goodwill is allocated to each of the Group’s CGUs that is expected to benefit from the synergies of the combination. A CGU to which goodwill has been allocated is tested for impairment annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the CGU is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro rata based on the carrying amount of each asset in the unit. Any impairment loss for goodwill is recognised directly in profit or loss. An impairment loss recognised for goodwill is not reversed in subsequent periods. On disposal of the relevant CGU, the attributable amount of goodwill is included in the determination of the profit or loss on disposal. (iii) Intangible Assets Acquired in a Business Combination Intangible assets acquired in a business combination and recognised separately from goodwill are initially recognised at their fair value at the acquisition date (which is regarded as their cost). 49 NOTES TO THE FINANCIAL STATEMENTS Subsequent to initial recognition, intangible assets acquired in a business combination are reported at cost less accumulated amortisation and accumulated impairment losses, on the same basis as intangible assets that are acquired separately. (m) 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. Expenditure on development activities are capitalised only when technical feasibility studies identify that the project will deliver future economic benefits and these benefits can be measured reliably. Development costs have a finite life and are amortised on a systematic basis matched to the future economic benefits over the useful life of the project. At year end there are currently no capitalised development costs. (n) 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 45 days of recognition. is recognised as an employee benefits expense with a corresponding increase in equity. The fair value is measured at grant date and recognised on a straight line basis over the vesting period, based on the Group’s estimate of equity instruments that will eventually vest. The Employee Share Plan is currently not active. The disclosure in the Remuneration Reports and Note 22 relates to the EOSP. The Bionomics ESOP was approved by the Board and shareholders in 2014. 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 Group. Options are granted under the plan for no consideration and vest equally over five years, unless they are bonus options which vest immediately. 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 and the vesting criteria. (o) Employee Benefits (p) Borrowings (Other Financial Liabilities) (i) Short-term and Long-term Employee Benefits (i) Warrants A liability is recognised for benefits accruing to employees in respect of wages and salaries, annual leave, long service leave and sick leave when it is probable that settlement will be required and they are capable of being measured reliably. Liabilities recognised in respect of short-term employee benefits, are measured at their nominal values using the remuneration rate expected to apply at the time of settlement. Liabilities recognised in respect of long term employee benefits are measured as the present value of the estimated future cash outflows to be made by the Group in respect of services provided by employees up to reporting date. (ii) Retirement Benefits Costs Retirement benefits are contributions 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. (iii) 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 Warrants issued by the Group in connection with bank loans or issued capital are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangement. Where the warrants do not meet the definition of equity, they are initially measured at fair value with a corresponding reduction to the associated borrowings if associated with bank loans or as an allocation of proceeds received if associated with a share issue. Subsequent to initial recognition, the liability is fair valued with gains or losses recognised in the profit or loss. See Note 21 for further details. (ii) Other Borrowings 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. (iii) Classification 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. (q) Borrowing Costs All borrowing costs are recognised in profit or loss in the period in which they are incurred. FOR THE FINANCIAL YEAR ENDED 30 JUNE 201650 (r) 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. (s) Issued Capital 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. (t) 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. (u) Goods and Services Tax (GST) Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable from the taxation authority. In this case it is recognised as part of the cost of acquisition of the asset or as part of the expense. Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable to, the taxation authority is included with other receivables or payables in the consolidated statement of financial position. Cash flows are presented on a gross basis. The GST 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. NOTE 3: CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS The preparation of our consolidated financial statements requires the Group to make estimates and judgements that can affect the reported amounts of assets, liabilities, revenues and expenses, as well as the disclosure of contingent assets and liabilities at the date of the financial statements. The Group analyses the estimates and judgements and base estimates and judgements on historical experience and various other assumptions that are believed to be reasonable under the circumstances. Actual results may vary from the estimates. The significant accounting policies are detailed in Note 2 for the year ended 30 June 2016. Summarised below are the accounting policies of particular importance to the portrayal of the financial position and results of operations and that require the application of significant judgements or estimates by management. Impairment of Goodwill and Other Intangible Assets The Group assesses annually, or whenever there is a change in circumstances, whether goodwill or other intangible assets may be impaired. Determining whether goodwill and other intangible assets are impaired requires an estimation of the value in use of the CGUs to which goodwill or other intangible assets have been allocated. The value in use calculation is judgemental in nature and requires the Group to make a number of estimates including the future cash flows expected to arise from the CGUs based on observable market comparables for drug compounds within the CGU and over a period covering drug discovery, development, approval and marketing as well as, a suitable discount rate in order to calculate present value. The cash flow projections are further weighted based on the observable market comparables probability of realising projected milestone and royalty payments. When the carrying value of the CGU exceeds its recoverable amount, the CGU is considered impaired and is written down to its recoverable amount. Impairment losses are further recognised in the consolidated statement of profit or loss and other comprehensive income. A detailed valuation was performed as of 30 June 2016 and each computed fair value of our CGU was in excess of the carrying amount respectively. As a result of this evaluation, it was determined that no impairment of goodwill or other intangible assets existed at 30 June 2016. 51 NOTES TO THE FINANCIAL STATEMENTS Contingent Consideration As a result of the acquisition of Eclipse Therapeutic, Inc. (Eclipse) during the year ended 30 June 2013, the Group determines and recognises at each reporting date the fair value of the additional consideration that may be payable to Eclipse security holders due to potential royalty payments based on achieving late-stage development success or partnering outcomes based on Eclipse assets. Such potential earn-out payments are recorded at fair value and include a number of significant estimates including adjusted revenue projections and expenses, probability of such projections and a suitable discount rate to calculate present value. Share-based Payment Transactions The Group measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined by using the Black-Scholes model taking into account the terms and conditions upon which the instruments were granted and are disclosed in Note 22(d)(ii). The accounting estimates and assumptions relating to equity-settled share-based payments would have no impact on the carrying amounts of assets and liabilities within the next annual reporting period but may impact profit or loss and equity. Gain on Bargain Purchase The purchase price of acquisitions is allocated to identifiable assets acquired and liabilities assumed at their acquisition date fair values based on established valuation techniques. Goodwill represents the residual value as of the acquisition date, which in most cases is measured as the excess of the purchase consideration transferred over the net of the acquisition date fair values of the assets acquired and liabilities assumed. In cases of a bargain purchase, a gain is recognised in the consolidated statement of profit or loss and other comprehensive income. During the fiscal year ended 30 June 2015, the Company recorded a gain on bargain purchase resulting from the acquisition of Prestwick. As the predecessor company was in administration, the administrator sought bids for the assets of the company and the Group was the sole bidder. Revenue Recognition From time to time the Group enters into license and collaboration arrangements for licensing and research activities, for which the Group may receive payments in connection with out-licensing and research funding activities, milestone payments based on developments achieved by our collaborators and royalties based on net sales. For these agreements, the Group applies the revenue recognition criteria to the separately identifiable component and the total arrangement consideration is allocated to separately identifiable components by reference to their fair values. License revenue is further recognised once the Group has transferred to the buyer the significant risks and rewards of ownership of the patent and intellectual property and the Group does not retain involvement to the degree associated with ownership or effective control over the patent and intellectual property. Any provision of scientific services included in those license and collaboration agreements is further recognised as contract services revenue when the services are rendered. In addition, our wholly-owned subsidiaries, Neurofit and Prestwick, provide third party contract services which are recognised by reference to the proportion of the total cost of the contract. The Group has not received any payment and has not recognised any revenues related to milestone payments. Tax Losses Given the Group’s history of recent losses, a deferred tax asset has not been recognised with regard to unused tax losses and other temporary differences, as it has not been determined whether the Company, or its subsidiaries will generate sufficient taxable income against which the unused tax losses and other temporary differences can be utilised. The availability of tax losses is subject to the Australian continuity of ownership test or, if that test is failed, the same business test. If funding is continued to be obtained from new shareholders, then the continuity of ownership test may not be complied with, which may impact the availability of unutilised losses in future periods. Other Financial Liabilities – Conditional Warrants The Group issues warrants from time to time which have been in connection with either the bank loan or issued capital as detailed in Note 21. During the year ended 30 June 2016, a derivative was recognised in relation to the conditional warrants issued by the Group in connection with the private placement of shares in December 2015. The conditional warrants were initially measured at fair value in accordance with AASB 139 (IAS 39) and then revalued at each balance date with any movement in valuations recognised in the profit or loss. The conditional warrants were valued using a Black-Scholes methodology taking into account the terms and conditions under the relevant agreement as disclosed in Note 22(e). NOTE 4: 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 (IFRS 8) are: = Drug discovery and development is the discovery, development and commercialisation of compounds to match a target product profile; and = 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 in the following tables: FOR THE FINANCIAL YEAR ENDED 30 JUNE 201652 (a) Segment Revenues and Results The following is an analysis of the Group’s revenue and results by reportable operating segment for the following periods: Drug discovery and development Contract services SEGMENT REVENUE YEAR ENDED SEGMENT PROFIT YEAR ENDED 30 JUNE 2016 $ 30 JUNE 2015 $ 30 JUNE 2016 $ 30 JUNE 2015 $ 5,482,777 6,633,847 3,709,057 6,144,954 (9,808,151) (11,109,659) 483,527 607,070 12,116,624 9,854,011 (9,324,624) (10,502,589) Less: Intercompany revenue included in contract services (4,129,972) (3,183,791) - - Corporate Interest income Gain on bargain purchase Corporate financing expenses Corporate administration expenses Loss Before Income Tax (Continuing Operations) 156,636 157,057 156,636 157,057 8,143,288 6,827,277 (9,167,988) (10,345,532) 1,226,530 - 948,456 539,917 (1,855,829) (852,776) (7,526,831) (7,567,271) (17,324,118) (17,277,206) Revenue reported above for Contract services includes intersegment sales. There were no inter segment sales for the other reportable segment. Segment profit represents the result for each segment without allocation of central administration expenses and investment and other revenue. (b) Segment Assets and Liabilities The following is an analysis of the Group’s assets and liabilities by reportable operating segment: ASSETS Drug discovery and development Contract services Corporate Total Assets LIABILITIES Drug discovery and development Contract services (excluding intercompany liabilities) Corporate Total Liabilities 30 JUNE 2016 $ 30 JUNE 2015 $ 38,644,359 35,397,049 5,145,211 5,487,569 43,789,570 40,884,618 44,220,448 28,247,097 88,010,018 69,131,715 4,085,898 2,631,311 3,164,293 2,160,652 38,859,763 31,840,945 45,576,972 37,165,890 53 NOTES TO THE FINANCIAL STATEMENTS The Board receive information on liabilities for the Group as a whole as well as liability information for the Contract services segment. The Board 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 are: Contract services Drug discovery and development (c) Other Segment Information The segment result above has been determined after including the following items: DEPRECIATION AND AMORTISATION Drug discovery and development Contract services (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 Other (e) Geographical Information 30 JUNE 2016 $ 30 JUNE 2015 $ 56,366 90,841 2,212,081 846,258 147,207 3,058,339 30 JUNE 2016 $ 30 JUNE 2015 $ 1,797,975 139,637 1,937,612 1,603,365 110,127 1,713,492 30 JUNE 2016 $ 30 JUNE 2015 $ 7,986,652 156,636 8,143,288 6,629,113 198,164 6,827,277 The Group operates in three geographical areas; Australia, France and the United States of America. The Group’s external revenue and information about its non-current assets by geographical segment are detailed below: Australia France USA REVENUE FROM EXTERNAL CUSTOMERS YEAR ENDED NON-CURRENT ASSETS YEAR ENDED 30 JUNE 2016 $ 30 JUNE 2015 $ 30 JUNE 2016 $ 30 JUNE 2015 $ 5,184,589 2,958,699 - 3,866,113 2,961,164 - 27,573,371 28,251,420 2,315,926 34,952 2,606,024 393,363 8,143,288 6,827,277 29,924,249 31,250,807 (f) Information about Major Customers Included in revenues for the Drug discovery and development segment is $4,017,825 (2015: $3,667,949) from one party. No other customer contributed 10% or more to the Group’s revenue for both 2016 and 2015. FOR THE FINANCIAL YEAR ENDED 30 JUNE 2016 NOTE 5: REVENUE AND OTHER INCOME Revenue Contract services Royalties Rent income Other Income from Continuing Operations Gain on bargain purchase (Note 34) Gain on revaluation of warrants Interest income Foreign Government grants Government Research and Development Incentives (i) 54 2016 $ 6,983,198 1,003,454 156,636 2015 $ 6,629,113 41,108 157,056 8,143,288 6,827,277 - 539,917 1,270,763 1,226,530 1,590,917 9,496,417 13,584,627 - 948,456 1,311,303 6,989,452 9,789,128 (i) The Government Research and Development Incentives include cash refunds provided by the Australian Government for 45% of eligible research and development expenditures by Australian entities having a tax loss and less than A$20 million in revenue. The grants are calculated at the end of the fiscal year to which they relate, based on the expenses incurred in and included in the fiscal year’s Australian income tax return after registration of the research and development activities with the relevant authorities. There are no unfulfilled conditions or other contingencies attaching to the government Research and Development Incentive. Potentially eligible overseas expenditure awaiting government approval pending review of applications submitted during the year ended 30 June 2016 has been excluded from the calculation of the Research and Development Incentive and if approved, will result in an additional receipt of approximately $87 thousand (2015: $1.5m). NOTE 6: EXPENSES Loss before income tax benefit includes the following specific expenses: Finance Expenses - Interest expense on bank and other loans - Interest expense on contingent consideration - Interest obligations under finance leases Depreciation and Amortisation - Building - Plant and equipment - Equipment under lease Amortisation of Non-Current Assets - Intellectual property Rental Expense on Operating Leases - Minimum lease payments 2016 $ 1,699,818 158,399 36,038 1,894,255 153,116 254,896 213,205 621,217 2015 $ 689,049 156,362 18,421 863,832 56,763 397,259 56,898 510,920 1,316,395 1,202,572 1,159,792 1,019,393 55 NOTES TO THE FINANCIAL STATEMENTS NOTE 6: EXPENSES CONT. Employment Benefit Expenseses of: - Wages and salaries - Superannuation - Share-based payments Unrealised foreign currency loss Loss on Disposal of Assets - Plant and equipment NOTE 7: INCOME TAXES (a) Income Tax Recognised in Profit or Loss Current Tax In respect of the current year Deferred Tax Recognised in current year Total income tax (benefit)/expense b) Reconciliation to Accounting Loss Loss from continuing operations Tax at the Australian tax rate of 30% (2015: 30%) Tax Effect of Non-Deductible / Non-Assessable Amounts Amortisation of intangibles Foreign exchange reversed on consolidation Exempt income from government assistance Entertainment Contingent consideration Share-based payments Research and development expenditure Other non-assessable income Temporary differences not recorded as an asset Tax losses not recorded Effect of different tax rates in other jurisdictions Effect of unused tax losses, in the current period 2016 $ 2015 $ 8,654,851 7,058,953 464,904 399,913 9,519,668 2,148,737 423,895 515,474 7,998,322 2,213,872 140,159 8,063 2016 $ 32,293 32,293 2015 $ - - (747,654) (747,654) (715,361) (327,801) (327,801) (327,801) 2016 $ 2015 $ (17,324,118) (17,277,206) (5,197,235) (5,183,162) 120,786 59,220 380,389 161,022 (3,145,028) (2,096,836) 3,054 601,292 119,974 5,352,657 (340,445) 1,235,965 710,145 (40,641) (195,105) (715,361) 702 515,763 154,642 4,818,254 - 286,962 650,944 (16,481) - (327,801) FOR THE FINANCIAL YEAR ENDED 30 JUNE 201656 CLOSING BALANCE $ 326,259 (100) (541,894) 1,243,147 (3,382,750) - 615,739 (1,739,599) (3,318,262) (5,057,861) 315,655 (6,211) - - - - - - - - - - - - OPENING BALANCE $ CREDIT/ (CHARGED) TO INCOME $ OTHER COMPRE- HENSIVE INCOME $ ACQUIRED THROUGH BUSINESS COMBINATION $ 315,655 (6,211) (617,479) 10,604 6,111 92,081 - - (16,496) 212,983 645,819 384,345 (4,247,616) 1,019,490 (154,624) 35,947 (35,947) 370,278 245,461 - - (3,936,443) 1,983,619 213,225 (5,634,395) 747,654 (171,120) 44,483 271,172 (3,856) (2,355) - - 216 (115) 3,889 (621,469) (617,479) 350,236 (137,253) - (3,662,751) 419,308 (1,004,173) 32,902 309,317 3,045 60,961 - - - - - - 212,983 (4,247,616) 35,947 370,278 (2,929,453) 614,763 (1,000,284) (621,469) (3,936,443) NOTE 7: INCOME TAXES CONT. (c) Deferred Tax Assets/Liabilities 2016 Borrowings Trade & other receivables Property, plant and equipment Capital expenditure Other intangibles Trade & other payables Provisions Net Balance 2015 Borrowings Trade & other receivables Property, plant and equipment Capital expenditure Other intangibles Trade & other payables Provisions Temporary differences not recognised (1,697,952) (1,235,965) (384,345) Temporary differences not recognised (1,410,990) (286,962) - - (1,697,952) Net Balance (4,340,443) 327,801 (1,000,284) (621,469) (5,634,395) (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) 2016 $ 2015 $ 17,003,704 15,660,645 3,318,262 1,697,952 20,321,966 17,358,597 57 NOTES TO THE FINANCIAL STATEMENTS NOTE 7: INCOME TAXES CONT. (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 8: CASH AND CASH EQUIVALENTS Cash at the end of the financial year as shown in the statements of cash flows is reconciled to items in the Consolidated Statement of Financial Position as follows: CURRENT Cash at bank and on hand Deposits at call 2016 $ 2015 $ 19,664,774 5,075,104 25,785,608 21,482,902 45,450,382 26,558 006 The weighted average interest rate on these deposits is 2.8% per annum (2015: 2.9% per annum). The maturity dates range between 1 and 7 months from the end of the reporting period. NOTE 9: OTHER FINANCIAL ASSETS Restricted deposits held as security and not available for use Disclosed in the financial statement as: Current assets Non-current assets 2016 $ 2015 $ 934,000 934,000 550,000 384,000 934,000 550,000 384,000 934,000 The Group holds two restricted term deposits of $550,000 and $384,000 as security for a loan (Note 18(i)) and as security for a bank guarantee respectively that are not available for use. The interest rate on these deposits is 2.7% (2015: 2.7%) and maturity dates are 2 January 2017 and 23 September 2016 respectively (2015: 30 September and 23 September 2015 respectively). NOTE 10: TRADE AND OTHER RECEIVABLES CURRENT Trade receivables GST and Value Added Tax (VAT) receivables Other 2016 $ 1,238,028 141,097 22,469 2015 $ 289,604 756,996 17,080 1,401,594 1,063,680 The average credit period on sales of services is 60 days. No interest is charged on trade receivables for the first 60 days from the date of the invoice. Thereafter, interest is charged at 2% per annum on the outstanding balance. Allowances for doubtful debts are recognised against trade receivables based on estimated irrecoverable amounts determined by reference to past default experience of the counterparty and an analysis of the counterparty’s current financial position. The Group has not recognised an allowance for doubtful debts. Before accepting any new customer, the Group reviews the quality of the customer. This is also reviewed prior to commencing any new major work. Of the trade receivables balance at the end of the 2016 financial year, the Group’s largest customer, Merck, represented 79% of the total balance of trade receivables (2015: no customer representing more than 5% of the total balances). FOR THE FINANCIAL YEAR ENDED 30 JUNE 2016NOTE 8: CASH AND CASH EQUIVALENTS Financial Position as follows: Cash at the end of the financial year as shown in the statements of cash flows is reconciled to items in the Consolidated Statement of 58 NOTE 10: TRADE AND OTHER RECEIVABLES CONT. Trade receivables disclosed above include amounts (see below for aged analysis) that are past due at the end of the reporting period for which the Group has not recognised an allowance for doubtful debts because there has not been a significant change in credit quality and the amounts (which include interest accrued after the receivable is more than 60 days outstanding) are still considered recoverable. Age of Receivables That Are Past Due but Not Impaired 60-90 days 90-120 days Total Average age (days) 2016 $ 660 2,241 2,901 56 2015 $ 11,200 - 11,200 61 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 end of the reporting period. Typically, the concentration of credit risk is limited due to the fact that the customer base is large and unrelated, except as noted above. NOTE 11: INVENTORIES CURRENT Consumables NOTE 12: OTHER ASSETS CURRENT Prepayments Accrued income NOTE 13: SUBSIDIARIES Details of the Group’s subsidiaries at the end of the reporting period are as follows: 2016 $ 2015 $ 438,856 409,891 2016 $ 2015 $ 643,249 1,194,038 333 99,894 643,582 1,293,932 ENTITY HEAD ENTITY Bionomics Limited SUBSIDIARIES OF BIONOMICS LIMITED PRINCIPAL ACTIVITY COUNTRY OF INCORPORATION 2016 2015 PERCENTAGE OWNED % Research and Development Australia N/A Neurofit SAS Contract Research Organisation Iliad Chemicals Pty Limited Asset Owner France Australia Bionomics, Inc. PC SAS Research and Development United States Contract Research Organisation France 100 100 100 100 N/A 100 100 100 100 59 NOTES TO THE FINANCIAL STATEMENTS NOTE 14: PROPERTY, PLANT AND EQUIPMENT Cost at 30 June 2014 Additions Additions from business acquisitions Disposals FREEHOLD LAND AT COST $ BUILDING AT COST $ PLANT AND EQUIPMENT AT COST $ EQUIPMENT UNDER FINANCE LEASE AT COST $ TOTAL $ 2,581,935 600,507 3,182,442 - - - - 256,790 1,882,859 - - 846,258 72,432 (70,872) - - - - 846,258 2,212,081 (70,872) 104,575 Foreign currency exchange differences (268) (1,963) 106,806 Cost at 30 June 2015 256,522 1,880,896 3,536,559 600,507 6,274,484 Additions Disposals - - 14,797 132,410 - 147,207 (30,484) (644,930) (8,120) (683,534) Foreign currency exchange differences 7,618 55,857 63,847 - 127,322 Cost at 30 June 2016 264,140 1,921,066 3,087,886 592,387 5,865,479 Accumulated depreciation at 30 June 2014 Depreciation (Note 6) Disposals Foreign currency exchange differences Accumulated Depreciation at 30 June 2015 Depreciation (Note 6) Disposals Foreign currency exchange differences Accumulated Depreciation at 30 June 2016 - - - - - - - - - - (2,216,299) (137,782) (2,354,081) (56,763) (397,259) (56,898) (510,920) - - 62,809 (21,737) - - 62,809 (21,737) (56,763) (2,572,486) (194,680) (2,823,929) (153,116) (254,896) (213,205) (621,217) 5,039 1,431 461,630 (61,487) 8,120 474,789 - (60,059) (203,409) (2,427,239) (399,765) (3,030,413) Net Carrying Amounts at 30 June 2015 256,522 1,824,133 964,073 405,827 3,450,555 Net Carrying Amounts at 30 June 2016 264,140 1,717,657 660,647 192,622 2,835,066 Non-Current Assets Pledged as Security Refer to Note 18 for information on non-current assets pledged as security by the Group. NOTE 15: GOODWILL Carrying Amount at 30 June 2014 Foreign currency exchange differences Carrying Amount at 30 June 2015 Foreign currency exchange differences Carrying Amount at 30 June 2016 $ 9,488,432 1,000,201 10,488,633 153,596 10,642,229 FOR THE FINANCIAL YEAR ENDED 30 JUNE 201660 NOTE 15: GOODWILL CONT. (a) Impairment Tests There are two Cash Generating Units (CGUs), Drug discovery and development, and Contract services. These are the same as the operating segments identified in Note 4. Management tests annually whether goodwill or indefinite life intangibles have suffered any impairment, in accordance with the accounting policy stated in Note 2(l)(i) and (l)(ii). For the purpose of impairment testing all goodwill is allocated to the Drug discovery and development CGU. Determining whether goodwill or intangibles are impaired requires an estimation of the value in use of the CGUs to which goodwill or indefinite life intangibles have been allocated. The value in use calculation requires the entity to estimate the future cash flows expected to arise from the CGU and a suitable discount rate in order to calculate present value over the expected life cycle of the commercialisation of the assets - in line with the average patent life and development cycle of the drug compound. A pre-tax discount rate of 25% has been used. Allocation of Goodwill to Group CGU’s The carrying amount of goodwill was allocated to the following CGU’s: Drug discovery and development Contract services 2016 $ 2015 $ 10,642,229 10,488,633 - - Drug Discovery and Development The recoverable amount of this CGU is determined based on a value in use calculation which uses cash flow projections based on observable market comparables for drug compounds within the CGU over a period of twenty years covering drug discovery, development, approval and marketing, and a discount rate of 25% per annum (2015: 25% per annum). The cash flow projections are weighted based on the observable market comparables probability of realising projected milestone and royalties payments. Management believes that the application of discounted cash flows of observable market comparables 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. As the full discovery and development life cycle has been taken into account with the cashflows, no terminal value has been used. NOTE 16: OTHER INTANGIBLE ASSETS Intellectual Property The acquired intellectual property includes the Company’s Multicore technology, its BNC101 drug candidate and its BNC105 drug candidate. 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 are between 5 and 20 years. There is currently no internally generated intellectual property capitalised. Gross Carrying Amount at 30 June 2014 Additions Foreign currency exchange differences Gross Carrying Amount at 30 June 2015 Foreign currency exchange differences Gross Carrying Amount at 30 June 2016 Accumulated Amortisation Amount at 30 June 2014 Amortisation (Note 6) Foreign currency exchange differences $ 20,992,946 12,705 3,243,297 24,248,948 547,640 24,796,588 (5,767,190) (1,202,572) (351,567) 61 NOTES TO THE FINANCIAL STATEMENTS NOTE 16: OTHER INTANGIBLE ASSETS CONT. Intellectual Property Accumulated Amortisation Amount at 30 June 2015 Amortisation (Note 6) Foreign currency exchange differences Accumulated Amortisation Amount at 30 June 2016 Net Carrying Amount 30 June 2015 Net Carrying Amount 30 June 2016 NOTE 17: TRADE AND OTHER PAYABLES CURRENT Trade payables Accrued expenses NON-CURRENT Other payables $ (7,321,329) (1,316,395) (95,910) (8,733,633) 16,927,619 16,062,954 2016 $ 2015 $ 2,633,103 3,222,040 5,855,143 3,933,232 2,532,394 6,465,626 144,938 140,758 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 time frame. NOTE 18: BORROWINGS Unsecured – at Amortised Cost Commercial bill (i) Bank overdraft (ii) Secured – at Amortised Cost Finance lease liabilities (iii) Equipment mortgage (iv) Bank loan (v) Commercial bill (vi) Disclosed in the Financial Statements as: Current liabilities Non-current liabilities 2016 $ 550,000 - 57,611 431,021 2015 $ 550,000 45,473 200,405 546,252 20,129,922 12,885,376 - 550,000 21,168,554 14,777,506 2,731,837 18,436,717 5,460,133 9,317,373 21,168,554 14,777,506 (i) the rolling commercial bill line is secured by a restricted deposit of $550,000 (2015: $550,000) and shown in Note 9. (ii) the overdraft had an interest rate of 2.985% and matures on 30 June 2017. (iii) lease lines are secured by the leased plant and equipment (refer Note 14) and have an average interest rate of per annum 7.05% (2015: 7.17% per annum) and terms of three to five years. (iv) the equipment mortgage loans are for equipment (which secure the loans) and have an interest rate of 5.61% and have terms of three to five years (2015: three to five years). (v) bank loan is a secured US $15 million (2015: US$10 million) borrowing. The loan bears interest at a rate of 8.15% (2015: 6.86%) FOR THE FINANCIAL YEAR ENDED 30 JUNE 201662 and is interest only up to and including March 2017 and subsequently repayable in equal instalments over 30 months. The loan is collateralised by substantially all of the Group’s assets, other than intellectual property. The loan further contains customary conditions of borrowing, events of default and covenants, including covenants that restrict the ability to dispose of assets, merge with or acquire other entities, incur indebtedness and make distributions to holders of capital stock. Should an event of default occur, including the occurrence of a material adverse change, the Group could be liable for immediate repayment of all obligations under the loan agreement. There were no breaches of financial covenants as of 30 June 2016. (vi) the commercial bill had an interest rate of 3.7% and matured on 30 July 2015. The unused facilities available at 30 June 2016 of the Group’s bank overdraft is $59,693 (2015: $70,469) and equipment finance facility is $269,080 (2015: $153,330). There is no unused facility in relation to 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 24. NOTE 19: PROVISIONS CURRENT Employee benefits NON-CURRENT Employee benefits NOTE 20: OTHER LIABILITIES CURRENT Unearned services income NOTE 21: OTHER FINANCIAL LIABILITIES CURRENT Warrants Conditional warrants Total warrants Balance at beginning of period Warrants value at date of issue Conditional warrants initial value Change in value recognised in profit or loss (Note 5) Balance at End of Period Refer Note 22(e) for details about the fair value of the warrant. 2016 $ 2015 $ 1,590,979 1,582,239 61,928 91,168 2016 $ 2015 $ 65,811 75,362 2016 $ 2015 $ 72,802 122,544 1,069,518 1,142,320 122,544 - 122,544 - 87,170 223,912 2,203,369 - (1,270,763) (101,368) 1,142,320 122,544 Warrants A derivative was recognised in relation to the warrants issued by the Group in connection with the USD loan included in Note 18(v). These warrants are currently exercisable at the discretion of the holder and exchangeable for either 988,843 (2015: 643,611) ordinary shares at a fixed price (345,232 at $0.5288 and 643,611 at $0.54) or a lower number of shares for nil consideration, with the number of shares calculated on the basis of a formula which takes into account the movement in the share price of the Company from the date of issue to date of exercise of the warrant. 63 NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2016 NOTE 21: OTHER FINANCIAL LIABILITIES CONT. Warrants Cont. The warrants expiry dates are as follows: NUMBER 345,232 643,611 EXPIRY DATE Oct-20 Nov-19 A derivative was recognised in relation to the conditional warrants issued by the Group in connection with the private placement of shares in December 2015 (see Note 22(a)). Under the Share Placement Agreement, 16,082,988 warrants for 16,082,988 ordinary shares at a fixed price ($0.5938) are required to be issued at the earlier of the approval of shareholders for the issue of the warrants and the passage of 12 months from the date of the agreement. As at 30 June 2016 the warrants are currently expected to be issued in December 2016. In the event that the warrants are not issued, the Company would be required to make a payment to the private placement participants. The Directors currently expect to issue the warrants in December 2016. Once the warrants are issued, their expiry date would be December 2021. The warrants and conditional warrants were initially measured at fair value in accordance with AASB 139 (IAS 39). The value of the warrants and conditional warrants liability is remeasured at each balance date with any movement in valuations recognised in the profit or loss. NOTE 22: ISSUED CAPITAL (a) Issued and Paid-Up Capital Ordinary shares – fully paid Treasury stock TOTAL 2016 SHARES 2015 SHARES 480,986,821 418,198,869 75,625 - 481,062,446 418,198,869 Movements in Ordinary Shares and Treasury Stock (restricted shares issued subject to Employee Share Plan Loan Agreements) respectively, of the Company during the past two years were as follows: DATE DETAILS Ordinary Shares 30 June 2014 Closing Balance Share issue – Employee Share Plan Loan Agreements 30 June 2015 Closing Balance Share issue – Employee Share Plan Loan Agreements Placements (net of warrants) 1 30 June 2016 Closing Balance Treasury Stock 30 June 2014 Closing Balance Share issue – Employee Share Option Plan option exercise 30 June 2015 Closing Balance Share issue – Employee Share Option Plan option exercise 30 June 2016 Closing Balance TOTAL ISSUED CAPITAL NUMBER OF SHARES $ 417,356,567 111,721,671 842,302 268,549 418,198,869 111,990,220 921,250 288,718 61,866,702 22,113,875 480,986,821 134,392,813 - - - 75,625 75,625 - - - - - 481,062,446 134,392,813 1 The placements are net of the warrants issued in December 2015 for 24,124,484 ordinary shares at a fixed price ($0.5938), valued at $3,305,054 and conditional warrants for 16,082,988 ordinary shares at a fixed price ($0.5938), valued at $2,203,369, as at issue date. The warrants and conditional warrants were valued using a Black-Scholes methodology. As at 30 June 2016, the conditional warrants have not been issued and are disclosed under “Other financial liability (current)” in Note 21. 64 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. (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) Option Modification The terms of the options under the Bionomics Employee Share Option Plan were modified at 30 June 2014 for all options on issue prior to the fully underwritten 1:8 non-renounceable rights issue announced on 4 March 2013. The exercise price for all outstanding options were adjusted under ASX Listing Rule 6.22 and are shown in the table below in this Note 22(d)(i). (d) 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 issued. (i) The Bionomics Employee Share Option Plan The terms and conditions of the Bionomics Employee Share Option Plan are summarised in Note 2(o)(iii). The following options listed are outstanding at reporting date: GRANT DATE EXPIRY DATE EXERCISE PRICE May-06 Nov-06 Oct-07 Jan-08 Jul-08 Nov-08 Mar-09 Jun-09 Nov-09 Jul-16 Nov-16 Oct-16 Oct-17 Jan-17 Jan-18 Jul-16 Jul-17 Jul-18 Aug-16 Nov-16 Nov-17 Nov-16 Nov-17 Nov-18 Mar-17 Mar-18 Mar-19 Mar-19 Jun-17 Jun-18 Jun-19 Nov-16 Nov-17 Nov-18 Nov-19 $0.2176 $0.2976 $0.2876 $0.2876 $0.3776 $0.3776 $0.3576 $0.3576 $0.3576 $0.3692 $0.2976 $0.2976 $0.2776 $0.2776 $0.2776 $0.2876 $0.2876 $0.2876 $0.2876 $0.2476 $0.2476 $0.2476 $0.2976 $0.2976 $0.2976 $0.2976 NUMBER 25,000 100,000 5,000 5,000 4,000 4,000 14,000 14,000 14,000 330,000 100,000 100,000 10,000 10,000 10,000 2,120 2,120 10,000 2,120 4,000 4,000 4,000 100,000 100,000 100,000 100,000 FAIR VALUE AT GRANT DATE $0.20 $0.19 $0.35 $0.36 $0.32 $0.33 $0.27 $0.28 $0.29 $0.14 $0.16 $0.17 $0.08 $0.09 $0.10 $0.10 $0.11 $0.12 $0.12 $0.20 $0.20 $0.21 $0.18 $0.19 $0.20 $0.20 65 NOTES TO THE FINANCIAL STATEMENTS NOTE 22: ISSUED CAPITAL CONT. GRANT DATE EXPIRY DATE EXERCISE PRICE NUMBER FAIR VALUE AT GRANT DATE Jul-10 Nov-10 Nov-11 Dec-11 Mar-12 Jun-12 Aug-12 Dec-12 Mar-13 May-13 Jul-19 Jul-20 Nov-16 Nov-17 Nov-18 Nov-19 Nov-16 Nov-16 Aug-17 Dec-17 Dec-18 Dec-19 Dec-20 Dec-21 Mar-18 Mar-19 Mar-20 Mar-21 Mar-22 Jun-18 Jun-19 Jun-20 Jun-21 Jun-22 Aug-17 Dec-17 Dec-18 Dec-19 Dec-20 Dec-21 Dec-22 Dec-18 Dec-19 Dec-20 Dec-21 Dec-22 Mar-19 Mar-20 Mar-21 Mar-22 Mar-23 May-19 May-20 May-21 May-22 May-23 $0.3176 $0.3176 $0.3076 $0.3076 $0.3076 $0.3076 $0.6116 $0.6116 $0.9186 $0.5156 $0.5156 $0.5156 $0.5156 $0.5156 $0.5026 $0.5026 $0.5026 $0.5026 $0.5026 $0.3356 $0.3356 $0.3356 $0.3356 $0.3356 $0.2846 $0.2846 $0.3176 $0.3176 $0.3176 $0.3176 $0.3176 $0.3176 $0.3176 $0.3176 $0.3176 $0.3176 $0.4176 $0.4176 $0.4176 $0.4176 $0.4176 $0.3745 $0.3745 $0.3745 $0.3745 $0.3745 10,000 10,000 100,000 100,000 100,000 100,000 95,000 500,000 1,000,000 100,000 100,000 100,000 100,000 100,000 5,000 5,000 5,000 5,000 5,000 8,000 8,000 8,000 8,000 8,000 37,500 65,000 200,000 200,000 200,000 200,000 200,000 5,000 5,000 5,000 5,000 5,000 50,000 50,000 50,000 50,000 50,000 64,000 64,000 64,000 64,000 64,000 $0.19 $0.20 $0.14 $0.16 $0.17 $0.17 $0.22 $0.22 $0.05 $0.33 $0.36 $0.37 $0.39 $0.40 $0.29 $0.30 $0.32 $0.34 $0.35 $0.16 $0.17 $0.18 $0.19 $0.20 $0.13 $0.16 $0.18 $0.19 $0.20 $0.21 $0.22 $0.21 $0.22 $0.23 $0.24 $0.25 $0.20 $0.22 $0.23 $0.24 $0.25 $0.22 $0.24 $0.25 $0.26 $0.27 FOR THE FINANCIAL YEAR ENDED 30 JUNE 2016NOTE 22: ISSUED CAPITAL CONT. GRANT DATE EXPIRY DATE EXERCISE PRICE Aug-13 Oct-13 Dec-13 Oct-14 Dec-14 Apr-15 May-15 Jul-15 Oct-15 Aug-18 Oct-19 Oct-20 Oct-21 Oct-22 Oct-23 Dec-18 Dec-18 Dec-19 Dec-19 Dec-20 Dec-20 Dec-21 Dec-21 Dec-22 Dec-22 Dec-23 Oct-19 Dec-19 Apr-21 Apr-22 Apr-23 Apr-24 Apr-25 May-21 May-22 May-23 May-24 May-25 Jul-20 Jul-21 Jul-21 Jul-22 Jul-22 Jul-23 Jul-23 Jul-24 Jul-24 Jul-25 Jul-25 Oct-21 Oct-22 Oct-23 Oct-24 Oct-25 Oct-20 $0.3301 $0.6014 $0.6014 $0.6014 $0.6014 $0.6014 $0.7224 $0.3301 $0.7224 $0.6875 $0.7224 $0.6875 $0.7224 $0.6875 $0.7224 $0.6875 $0.6875 $0.5643 $0.5643 $0.5029 $0.5029 $0.5029 $0.5029 $0.5029 $0.4246 $0.4246 $0.4246 $0.4246 $0.4246 $0.4341 $0.4341 $0.4152 $0.4341 $0.4152 $0.4341 $0.4152 $0.4341 $0.4152 $0.4341 $0.4152 $0.4575 $0.4575 $0.4575 $0.4575 $0.4575 $0.4211 66 FAIR VALUE AT GRANT DATE $0.38 $0.46 $0.48 $0.50 $0.52 $0.54 $0.33 $0.46 $0.36 $0.37 $0.39 $0.39 $0.41 $0.42 $0.43 $0.44 $0.46 $0.35 $0.27 $0.21 $0.23 $0.25 $0.26 $0.27 $0.24 $0.25 $0.27 $0.28 $0.29 $0.20 $0.22 $0.23 $0.24 $0.24 $0.25 $0.26 $0.26 $0.27 $0.28 $0.28 $0.30 $0.32 $0.34 $0.35 $0.37 $0.29 NUMBER 122,500 15,000 15,000 15,000 15,000 15,000 100,000 55,000 100,000 4,000 100,000 4,000 100,000 4,000 100,000 4,000 4,000 161,000 75,000 19,000 19,000 19,000 19,000 19,000 288,600 288,600 288,600 288,600 288,600 151,000 15,000 3,000 15,000 3,000 15,000 3,000 15,000 3,000 15,000 3,000 5,000 5,000 5,000 5,000 5,000 85,500 67 NOTES TO THE FINANCIAL STATEMENTS NOTE 22: ISSUED CAPITAL CONT. GRANT DATE EXPIRY DATE EXERCISE PRICE NUMBER FAIR VALUE AT GRANT DATE Dec-15 May-16 Dec-20 Dec-21 Dec-22 Dec-23 Dec-24 Dec-25 Dec-21 Dec-22 Dec-23 Dec-24 Dec-25 May-22 May-23 May-24 May-25 May-26 $0.4211 $0.5389 $0.5389 $0.5389 $0.5389 $0.5389 $0.5102 $0.5102 $0.5102 $0.5102 $0.5102 $0.3200 $0.3200 $0.3200 $0.3200 $0.3200 60,000 100,000 100,000 100,000 100,000 100,000 100,000 100,000 100,000 100,000 100,000 58,000 58,000 58,000 58,000 58,000 9,698,860 $0.16 $0.15 $0.17 $0.18 $0.19 $0.20 $0.16 $0.18 $0.19 $0.20 $0.22 $0.18 $0.20 $0.21 $0.22 $0.23 Reconciliation of Employee Share Option Plan: Opening Balance at Beginning of the 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 2016 2015 NUMBER OF OPTIONS 9,798,480 1,716,500 (576,550) (921,250) (318,320) 9,698,860 WEIGHTED AVERAGE EXERCISE PRICE $0.47 $0.47 $0.40 $0.31 $0.39 $0.49 NUMBER OF OPTIONS 9,458,782 1,930,500 (298,500) (842,302) (450,000) 9,798,480 WEIGHTED AVERAGE EXERCISE PRICE $0.45 $0.45 $0.40 $0.32 $0.35 $0.47 FOR THE FINANCIAL YEAR ENDED 30 JUNE 2016 68 Employee Share Option Plan options exercised during the financial year: SERIES NUMBER EXERCISED EXERCISE PRICE EXERCISE DATE SHARE PRICE AT EXERCISE DATE 01-Aug-12 12-Aug-13 12-Aug-13 16-Nov-06 12-Aug-13 04-Nov-09 04-Nov-10 05-Jun-13 05-Jun-13 21-Nov-08 15-Jun-09 15-Jun-09 15-Jun-09 12-Aug-13 01-May-06 TOTAL 30,000 32,500 100,000 100,000 65,000 100,000 100,000 100,000 100,000 10,000 50,000 50,000 50,000 28,750 5,000 921,250 $0.2846 $0.3301 $0.2976 $0.2976 $0.3301 $0.2976 $0.3076 $0.3873 $0.3873 $0.2776 $0.2476 $0.2476 $0.2476 $0.3301 $0.2176 23-Sep-15 23-Sep-15 23-Sep-15 21-Oct-15 03-Nov-15 04-Nov-15 04-Nov-15 11-Nov-15 11-Nov-15 30-Nov-15 10-Mar-16 10-Mar-16 10-Mar-16 15-Jun-16 30-Jun-16 $0.515 $0.515 $0.515 $0.510 $0.520 $0.515 $0.515 $0.520 $0.520 $0.490 $0.300 $0.300 $0.300 $0.295 $0.280 Unlisted Options Vested and Exercisable at the Reporting Date 2015 NUMBER 2014 NUMBER 6,055,460 6,184,080 (ii) Weighted Averages The weighted average remaining contractual life of any unlisted share options outstanding at the end of the year is 4.02 years (2015: 4.28 years). The assessed fair value at grant date of options granted during the year ended 30 June 2016 is outlined in the Remuneration Report. The share price at grant date of these options ranged between $0.34 and $0.54 (2015: $0.415 and $0.565). The expected average price volatility of the Company’s shares ranged between 51.4% and 54.0% (2015: 56.5% and 73.6%). Expected dividend yield was 0% (2015: 0%) and the average risk free interest rate used ranged between 2.29% and 2.92% (2015: 2.5% and 3.4%). (e) Warrants During the year, the Company issued warrants and conditional warrants, see Note 21. The weighted average remaining contractual life of the unlisted warrants and conditional warrants outstanding at the end of the year is 4.4 years (2015: 4.6 years) The assessed fair value at grant date of the warrants and conditional warrants granted during the year ended 30 June 2016 was $5,820,226 (2015: $223,912). The share price at the grant dates of these warrants and conditional warrants ranged between $0.38 to $0.53 (2015: $0.555). The expected average price volatility of the Company’s shares ranged between 53.18% and 53.45% (2015: 72.1%). Expected average dividend yield was 0% (2015: 0%) and the risk free interest rate used ranged between 2.02% and 2.36% ( 2015: 3.28%). Warrants Recorded in Equity Details of outstanding warrants as at 30 June 2016 are as follows: GRANT DATE EXPIRY DATE EXERCISE PRICE Dec-15 Dec-20 $0.5938 NUMBER 24,124,484 FAIR VALUE AT GRANT DATE $0.1370 69 NOTES TO THE FINANCIAL STATEMENTS NOTE 22: ISSUED CAPITAL CONT. Warrants recorded in Other Financial Liabilities (Note 21) The assessed fair value at 30 June 2016 of warrants and conditional warrants granted is $1,142,320 (2015: $122,544). The share price as at 30 June 2016 was $0.28 (2015: $0.415). The expected average price volatility of the Company’s shares was 55.73% (2015: 58.6%). Expected dividend yield was 0% (2015: 0%) and the average risk free interest rate as at 30 June 2016 was 1.65% (2015: 3.01%). NOTE 23: RESERVES Foreign Currency Translation Reserve (a) Share-based Payments Reserve (b) Total Reserves (a) Foreign Currency Translation Reserve 2016 $ 5,174,632 6,041,406 2015 $ 4,206,214 2,336,439 11,216,038 6,542,653 Exchange differences arising on translation of the foreign controlled entities are taken to the foreign currency translation reserve, as described in Note 2(b). The reserve is recognised in profit or loss when the investment is disposed of. (b) Share-based Payments Reserve The share-based payments reserve is used to recognise the fair value of options and warrants issued over the vesting period. Further information about share-based payments is set out in Note 22. NOTE 24: 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 2015. The capital structure of the Group consists of debt, which includes borrowings (Note 18), cash and cash equivalents (Note 8) and equity attributable to equity holders of the parent, comprising issued capital (Note 22), reserves (Note 23) and retained earnings. 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. Project specific borrowings are utilised where appropriate and also minor borrowings for operational assets, as required. (b) Categories of Financial Instruments Financial Assets Receivables Other financial assets Cash and cash equivalents Financial Liabilities Amortised cost Contingent consideration at fair value Reconciliation to Total Assets Financial assets (as above) Non-financial assets 2016 $ 2015 $ 1,401,594 1,063,680 934,000 934,000 45,450,382 26,558,006 47,785,976 28,555,686 27,168,635 21,383,890 10,489,438 8,276,292 37,658,073 29,660,182 47,785,976 28,555,686 40,224,042 40,576,029 88,010,018 69,131,715 FOR THE FINANCIAL YEAR ENDED 30 JUNE 2016 NOTE 24: FINANCIAL INSTRUMENTS CONT. (b) Categories of Financial Instruments Reconciliation to Total Liabilities Financial liabilities (as above) Non-financial liabilities 70 2016 $ 2015 $ 37,658,073 29,660,182 7,918,899 7,505,708 45,576,972 37,165,890 (c) 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, Group 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 Group’s business strategy and objectives. The Group’s risk management policies are managed by the key management personnel (KMP) and are reviewed by the ARM Committee according to a timetable of assessment and review proposed by that committee and approved by the Board. (d) Market Risk The Group’s activities expose it primarily to the financial risks of changes in foreign currency exchange rates (see (e) below) and interest rates (see (f) below). The Group uses derivative financial instruments to manage its exposure to foreign currency risk, if and when appropriate. Unless approved by the Chief Executive Officer and Managing Director, and ARM Committee, interest rate derivatives are not entered into. 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. There were no derivative financial instruments outstanding as at 30 June 2016 (2015: nil). (e) 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: EUR USD GBP LIABILITIES 2016 $ 2015 $ ASSETS 2016 $ 2015 $ 2,697,299 2,655,101 5,551,524 3,832,179 20,518,217 14,629,101 11,980,244 523,597 617,234 298,297 - - Foreign Currency Sensitivity Analysis The Group is mainly exposed to Euros (EUR), US dollars (USD) and Pound Sterling (GBP). 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 KMP 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. 71 NOTES TO THE FINANCIAL STATEMENTS NOTE 24: FINANCIAL INSTRUMENTS CONT. EUR IMPACT USD IMPACT GBP IMPACT Foreign Currency Sensitivity Analysis CONT. 2016 $ 2015 $ 2016 $ 2015 $ 2016 $ 2015 $ Profit or loss Equity 5,999 44,950 (i) 796,036 1,214,933 (ii) 56,112 27,118 (iv) (265,474) (151,957) (iii) (19,857) (13,679) (v) - - - (i) this is mainly attributable to the exposure outstanding on EUR payables in the Group at the end of the reporting period. (ii) this is mainly attributable to the exposure to outstanding USD net assets at the end of the reporting period. (iii) this is as a result of the changes in fair value of the net investment in subsidiaries denominated in EUR, reflected in the foreign currency translation reserve. (iv) this is mainly attributable to the exposure outstanding on GBP payables in the Group at the end of the reporting period. (v) this is as a result of the changes in fair value of the net investment in subsidiaries denominated in USD, reflected in the foreign currency translation reserve. 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 particular, the USD net borrowings valued through the profit or loss. The sensitivity analysis may not represent the quantum of 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 appropriate (such as when there is a legal commitment to pay or receive foreign currency or the Chief Executive Officer and Managing Director 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: = Generally hedge foreign exchange exposure identified above by entering into a forward currency contract. = The duration of any forward currency contract(s) will approximate the period in which the net currency exposure arises. = Recognising the uncertainty that exists in 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 EUR and USD denominated wholly owned subsidiaries, the investments will not be hedged into Australian dollars, with the result that the Australia dollar value of the investments will fluctuate with the market rate through the foreign currency translation reserve. There were no forward foreign currency contracts outstanding as at 30 June 2016 (2015: nil). (f) Interest Rate Risk Management The Group is exposed to interest rate risk, only in relation to the cash and cash equivalent balance, as entities in the Group invest funds in both fixed and variable interest rates with various maturities. The Group does not use interest rate swap contracts or forward interest rate contracts. 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: = loss for the year ended 30 June 2016 would increase / (decrease) by $83,722 (2015: increase / (decrease) by $52,469). 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 decreased during the current year mainly due to the reduction in interest rates. FOR THE FINANCIAL YEAR ENDED 30 JUNE 201672 NOTE 24: FINANCIAL INSTRUMENTS CONT. (g) 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. As of 30 June 2016, Merck represented 79% of the Group’s trade and other receivables (2015: no customer representing more than 5% of the total balances). 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. (h) Liquidity Risk Management Ultimate responsibility for liquidity risk management rests with the Board, which has approved 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 18 is a listing of additional undrawn facilities that the group has at its disposal to further reduce liquidity risk. (i) 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 $ 7.05 8.15 4.62 7.17 5.61 5,855,143 - - 144,938 9,743 19,486 28,382 - 136,910 567,026 282,948 3,247,747 19,892,894 23,878 107,451 330,268 6,568,822 326,312 3,383,580 20,368,100 6,465,626 - - 140,758 12,571 25,142 110,311 61,927 - 1,760,558 4,325,018 10,313,815 6,478,197 1,785,700 4,435,329 10,516,500 - - - - - - - - - 6,000,081 57,611 23,560,499 1,028,623 30,646,814 6,606,384 209,951 16,399,391 23,215,726 2016 Non-interest bearing Finance lease liability Variable interest rate instruments Fixed interest rate instruments TOTAL 2015 Non-interest bearing Finance lease liability Fixed interest rate instruments TOTAL (j) Fair Value of Financial Instruments Some of the Group’s financial assets and liabilities are measured at fair value at the end of each reporting period. The value of other financial assets and liabilities approximate their fair value. The following table gives information about how the fair values of these financial assets and liabilities are determined. 73 NOTES TO THE FINANCIAL STATEMENTS NOTE 24: FINANCIAL INSTRUMENTS CONT. (j) Fair Value of Financial Instruments cont. FINANCIAL ASSETS/ FINANCIAL LIABILITIES FAIR VALUE AS AT 30 JUNE 2016 $ 30 JUNE 2015 $ FAIR VALUE HIERARCHY VALUATION TECHNIQUE SIGNIFICANT UNOBSERVABLE INPUTS RELATIONSHIP OF UNOBSERVABLE INPUTS TO FAIR VALUE Contingent consideration in a business combination (Note 34) Liabilities - $10,489,438 Liabilities - $8,276,292 Level 3 Discounted cash flow Warrant (Note 21) Liabilities - $1,142,320 Liabilities - $122,544 Level 2 Black Scholes model Discount rate of 25% and probability revenue projections The higher the discount rate, the lower the value. The higher the possible revenue the higher value N/A N/A The significant inputs used for Level 3 are disclosed above and the inputs used for Level 2 are disclosed in Note 22(e). RECONCILIATION OF LEVEL 3 FAIR VALUE MEASUREMENTS Opening Balance Total gains or losses: - in profit or loss Closing Balance The carrying value of all other financial assets and liabilities approximate their fair value. 2016 CONTINGENT CONSIDERATION IN A BUSINESS COMBINATION 2015 CONTINGENT CONSIDERATION IN A BUSINESS COMBINATION 8,276,292 5,696,087 2,213,146 10,489,438 2,580,205 8,276,292 NOTE 25: KEY MANAGEMENT PERSONNEL COMPENSATION The aggregate compensation made to Directors and other members of KMP of the Group is set out below: Short-term employee benefits Post-employment benefits Other long-term benefits Share-based payments Total Key Management Personnel Compensation 2016 $ 2,141,888 90,865 131,170 118,258 2,482,181 2015 $ 1,613,080 56,161 33,719 218,368 1,921,328 FOR THE FINANCIAL YEAR ENDED 30 JUNE 2016 74 NOTE 26: COMMITMENTS FOR EXPENDITURE (a) Finance Leases The Group leases scientific equipment under finance leases. The average lease term is three years (2015: 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 with the current rate of 7.05% (2015: 5.22% to 7.37%) 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 Represented in the financial statements (Note 18) by: Current borrowings Non-current borrowings (b) Operating Leases 2016 $ 58,458 - 58,458 (847) 57,611 2015 $ 148,024 61,927 209,951 (9,546) 200,405 2016 $ 57,611 - 57,611 - 2015 $ 147,177 53,228 200,405 - 57,611 200,405 2016 $ 57,611 - 57,611 2015 $ 147,177 53,228 200,405 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. Non-Cancellable Operating Lease Commitments Within one year Later than one year but not greater than five Later than five years Minimum Lease Payments 2016 $ 2015 $ 1,110,502 3,587,894 - 1,111,500 4,003,550 889,714 4,698,396 6,004,764 (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 2(c). Future Rental Income Receivable Within one year Later than one year but not greater than five 2016 $ 324,698 240,122 564,820 2015 $ 152,335 152,335 304,670 75 NOTES TO THE FINANCIAL STATEMENTS NOTE 27: EVENTS OCCURRING AFTER REPORTING DATE No matters or circumstances have arisen since the end of the financial year which significantly affect or may significantly affect the results of the operations of the Group. NOTE 28: REMUNERATION OF AUDITORS During the financial year the following services were paid and payable to the external auditor: Auditor of the Group Audit or review of the financial report The auditor of Bionomics Limited is Deloitte Touche Tohmatsu. NOTE 29: CASH FLOW INFORMATION (a) Cash and Cash Equivalents 2016 $ 2015 $ 719,343 719,343 281,170 281,170 For the purposes of the consolidated statement of cash flows, cash and cash equivalents include cash on hand and in banks, and net of outstanding bank overdrafts. Cash and cash equivalents at the end of the reporting period as shown in the consolidated statement of cash flows can be reconciled to the related items in the consolidated statement of financial position as follows: Cash and cash equivalents (Note 8) Bank overdraft (Note 18) (b) Reconciliation of Operating (Loss)/Profit to Net Cash Outflow from Operating Activities Loss for the Year Items in (loss)/profit: Depreciation and amortisation Share-based payments Gain on bargain purchase Loss on asset disposals Contingent consideration – accretion interest Contingent consideration – adjustment to inputs Amortisation of borrowing costs Net unrealised foreign exchange differences Interest received Warrant mark-to-market 2016 $ 2015 $ 45,450,382 26,558,006 - (45,473) 45,450,382 26,512,533 2016 $ 2015 $ (16,608,757) (16,949,405) 1,937,612 399,913 - 140,159 158,399 1,845,907 130,624 1,698,619 (1,240,226) (1,494,676) 1,713,492 515,474 (539,917) 8,063 156,362 945,804 45,931 3,631,726 (948,456) (101,368) FOR THE FINANCIAL YEAR ENDED 30 JUNE 2016NOTE 29: CASH FLOW INFORMATION CONT. (b) Reconciliation of Operating (Loss)/Profit to Net Cash Outflow from Operating Activities Changes in operating assets and liabilities (Increase)/Decrease in receivables Increase in research and development incentive receivables Decrease/(Increase) in other assets Increase in inventory Decrease in provisions Decrease in other liabilities (Decrease)/Increase in payables Decrease in deferred tax liability 76 2016 $ 2015 $ (378,983) 19,992,314 (1,595,956) 635,357 (42,157) (35,835) (36,870) (468,209) (404,475) (504,143) (822,082) (147,713) (359,647) (3,380,095) 2,007,496 (327,718) Net cash (Outflows)/Inflows from Operating Activities (15,359,554) 4,936,118 NOTE 30: LOSS PER SHARE Basic Loss per share Diluted Loss per share 2016 ($0.03) (3 cents) ($0.03) (3 cents) 2015 ($0.04) (4 cents) ($0.04) (4 cents) 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 2016 $ 2015 $ (16,608,757) (16,949,405) 2016 NUMBER 2015 NUMBER Weighted Average Number of Ordinary Shares - Basic Weighted average number of ordinary shares used in calculating basic loss per share: 457,258,616 417,606,873 Weighted Average Number of Ordinary Shares - Diluted Weighted average number of ordinary shares used in calculating basic loss per share: 457,258,616 417,606,873 Shares deemed to be issued for no consideration in respect of: - Employee options 4,046,000 - Weighted average number of ordinary shares used in the calculation of diluted loss per share 461,304,616 417,606,873 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 loss per share. 2016 NUMBER 2015 NUMBER Employee Options 2,905,005 9,798,480 The warrants issued by the Company (see Note 21) have been excluded from the weighted average number of ordinary shares. 77 NOTES TO THE FINANCIAL STATEMENTS NOTE 31: RELATED PARTY TRANSACTIONS (a) Parent Entity The immediate parent and ultimate controlling party of the Group is Bionomics Limited. Interests in subsidiaries are set out in Note 13. (b) Key Management Personnel Disclosures relating to compensation of key management personnel are set out in Note 25 and the Directors’ Report. (c) Loans to Directors and Other Key Management Personnel There were no loans to any Directors of the Company or other KMP of the Group during the financial year ended 30 June 2016 (2015: $0). NOTE 32: 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 2 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 Share-based payments reserve Total Equity FINANCIAL PERFORMANCE Loss for the year Other comprehensive income Total Comprehensive Income YEAR ENDED 30 JUNE 2016 $ YEAR ENDED 30 JUNE 2015 $ 56,063,216 38,090,327 19,569,636 19,472,317 75,632,852 57,562,644 9,390,149 11,140,329 28,723,403 17,734,833 38,113,552 28,875,162 37,519,300 28,687,482 134,392,813 111,990,221 (102,914,920) (85,639,178) 6,041,407 2,336,439 37,519,300 28,687,482 YEAR ENDED 30 JUNE 2016 YEAR ENDED 30 JUNE 2015 (17,275,742) (19,406,078) - - (17,275,742) (19,406,078) (a) Property, Plant and Equipment Commitments There are no contractual commitments for the acquisition of property, plant or equipment as at 30 June 2016 (2015: Nil). (b) Contingent Liabilities and Guarantees The contingent liabilities and guarantees of the parent are the same as disclosed in Note 35 and Note 9 respectively. FOR THE FINANCIAL YEAR ENDED 30 JUNE 201678 NOTE 33: CONTINGENT CONSIDERATION During the year ended 30 June 2013, the Company acquired Eclipse Therapeutics, Inc. (Eclipse) into the wholly owned subsidiary Bionomics, Inc. Part of the consideration are potential cash earn-outs to Eclipse security holders based on achieving late stage development success or partnering outcomes based on Eclipse assets. Due to the movement in the US dollar, change in projected inputs and unwinding of interest, at 30 June 2016 this was $10,489,438 (30 June 2015: $8,276,292). Dr Jonathan Lim retired as a Director of Bionomics on 18 November 2015 and was the Chairman and Chief Executive Officer of Eclipse at the time of the acquisition of Eclipse, and joined the Board of Directors of Bionomics (14 September 2014). As a shareholder of Eclipse at the time of the acquisition, Dr Lim is therefore eligible to receive his pro rata share of any potential contingent consideration to Eclipse security holders. As at 30 June 2015, Dr Lim’s pro rata share of the contingent consideration was $1,763,926, assuming the contingent consideration was fully earned. Opening Balance Accretion interest Adjustment for changes in timing of expected revenue projections FX movement Closing Balance 2016 $ 2015 $ 8,276,292 5,696,087 158,399 1,845,907 156,362 945,804 208,840 1,478,039 10,489,438 8,276,292 NOTE 34: BUSINESS COMBINATIONS - ACQUISITION OF PRESTWICK CHEMICAL On 23 September 2014, the Company announced the acquisition of Prestwick Chemical (Prestwick) into a new wholly owned subsidiary PC SAS with effect from 1 October 2014. Prestwick is a premium provider of medicinal chemistry services and screening libraries. It specialises in research and development services in early drug discovery based on its expertise and state-of-the-art computational technology. The acquisition of Prestwick vertically integrates key functions within Bionomics in early stage drug discovery and development in neuroscience and oncology. Consideration Transferred Cash $ 391,136 Acquisition-related costs amounting to $66,596 in 2015 have been excluded from the consideration transferred and have been recognised as an expense in profit or loss in the prior year, within the “administration expenses” line item. Assets acquired and liabilities assumed at the date of acquisition Current Assets Inventory Non-Current Assets Property, plant and equipment Current Liabilities Employee provisions Other payables Non-Current Liabilities Deferred tax liability $ 159,350 2,212,081 (552,403) (266,506) (621,469) 931,053 79 NOTES TO THE FINANCIAL STATEMENTS NOTE 34: BUSINESS COMBINATIONS - ACQUISITION OF PRESTWICK CHEMICAL CONT. GAIN ON BARGAIN PURCHASE Fair value of identifiable net asset acquired Less: consideration transferred Gain on Bargain Purchase Arising on Acquisition (Note 5) $ 931,053 (391,136) 539,917 The gain on bargain purchase has been recognised as other income in the Consolidated Statement of Profit or Loss and Other Comprehensive Income in 2015. As the predecessor company was in administration, the administrator sought bids for the assets of the company and the Group was the only bidder. Impact of acquisition on the results of the Group for the year ended 30 June 2015 Included in the loss for the 2015 full-year is $72,335 attributable to this acquisition. Revenue for the full-year included $1,652,233 in respect of this acquisition. Had the acquisition been effected at 1 July 2014, the revenue of the Group from continuing operations for the twelve months ended 30 June 2015 would have been $8,326,477, and the loss from continuing operations for the twelve months ended 30 June 2015 would have been $16,704,964. The Directors of the Group considered these ‘pro-forma’ numbers to represent an approximate measure of the performance of the combined group on a yearly basis. This may provide a reference point for comparison in future years, but will depend on the revenue and profit derived from external customers versus internal customers. In determining the ‘pro-forma’ loss of the Group had Prestwick been acquired at the beginning of the prior year: = Depreciation has been calculated for plant and equipment acquired on the basis of the fair values arising in the initial accounting for the business combination rather than the carrying amounts recognised in the pre-acquisition financial statements; and = An assumption of a similar level of contract research work and chemical library sales has been made. NOTE 35: CONTINGENT LIABILITIES A contingent liability exists in relation to employee contracts of up to $871,206 (2015: $887,038) in the event of redundancy, purchase or merger of the Company by a third party resulting in a material diminution in the employee’s duties. In January 2012, the Company entered into a research and license agreement with Ironwood Pharmaceuticals, Inc., or Ironwood, pursuant to which Ironwood was granted worldwide development and commercialisation rights for BNC210. In November 2014, the parties mutually agreed to terminate this license agreement, reverting all rights to BNC210 back to the Company. Our sole obligation to Ironwood is to pay Ironwood low, single digit royalties on the net sales of BNC210, if commercialised. It is not practicable to estimate the future payments of any such royalties that may arise due to the stage of development of BNC210. FOR THE FINANCIAL YEAR ENDED 30 JUNE 201680 DIRECTORS’ DECLARATION 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) In the Directors’ opinion, the attached financial statements are in compliance with International Financial Reporting Standards issued by the International Financial Reporting Standards, as stated in Note 2 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 Graeme Kaufman Chairman Deborah Rathjen Chief Executive Officer and Managing Director Dated this 9th day of August 2016 81 INDEPENDENT AUDIT REPORT 82 83 CORPORATE GOVERNANCE STATEMENT The Corporate Governance Statement for the 2015/2016 financial year is located on the Company’s website under the “About” tab or by copying the following to a web browser http://www.bionomics.com.au/about/corporate-governance SHAREHOLDER INFORMATION All shareholder information provided is current as at 16 September 2016. Substantial Shareholders Substantial holders in the Company are set out below: ORDINARY SHARES Link Traders (Aust) Pty Ltd CVC Limited Ausbil Dexia Ltd Equity Securities There are 5,376 holders of ordinary shares in Bionomics. The number of shareholders with unmarketable share parcels is 889 NUMBER HELD 37,537,873 24,901,120 27,449,999 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. CATEGORY (SIZE OF HOLDING) 1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 – and over NUMBER OF SECURITY HOLDERS ORDINARY SHARES UNLISTED OPTIONS WARRANTS 492 1,554 893 2,029 408 5,376 - 5 5 54 15 79 - - - - 5 5 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 1 NATIONAL NOMINEES LIMITED 2 HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED 3 LINK 405 PTY LTD 4 CVC LIMITED 5 US REGISTER CONTROL A/C 6 J P MORGAN NOMINEES AUSTRALIA LIMITED 7 WENOLA PTY LIMITED 8 THE AUSTRALIAN NATIONAL UNIVERSITY 9 CITICORP NOMINEES PTY LIMITED 10 MERRILL LYNCH (AUSTRALIA) NOMINEES PTY LIMITED 11 LONGFELLOW NOMINEES PTY LTD 12 MR MARK RICHARD POTTER + MRS REBECCA AMY POTTER 13 CITICORP NOMINEES PTY LIMITED (COLONIAL FIRST STATE INV A/C) 14 PROVENDORE PTY LTD 15 MR CHRISTOPHER REYES 16 CHARMED5 PTY LTD 17 STINOC PTY LIMITED 18 LEE SANDS NOMINEES PTY LTD 19 PLUTEUS (NO 164) PTY LIMITED 20 F M WOLF PTY LIMITED UNQUOTED EQUITY SECURITIES Options issued pursuant to Bionomics Limited Employee Share Option Plan Warrants exchangeable into Bionomics Limited ordinary shares 84 SHAREHOLDER INFORMATION CONT. ORDINARY SHARES NUMBER HELD 84,679,639 37,920,889 36,928,873 24,901,120 21,691,830 16,897,017 10,000,000 9,142,425 8,401,967 6,253,927 4,500,000 4,100,000 3,805,928 3,250,000 2,529,205 2,400,000 2,167,423 2,110,000 2,000,000 1,634,099 PERCENTAGE OF ISSUED SHARES 17.60 7.88 7.68 5.18 4.51 3.51 2.08 1.90 1.75 1.30 0.94 0.85 0.79 0.68 0.53 0.50 0.45 0.44 0.42 0.34 285,314,342 59.31 NUMBER ON ISSUE NUMBER OF HOLDERS 9,338,860 25,113,327 79 5 85 COMPANY PARTICULARS Bionomics, a listed public Company, is domiciled and incorporated in Australia. Bionomics’ primary listing is on the Australian Securities Exchange (ASX). Bionomics shares are listed on the Australian Securities Exchange under the code BNO. DIRECTORS REGISTERED AND 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 Latham & Watkins LLP 12670 High Bluff Drive San Diego CA 92130 USA AUDITORS Deloitte Touche Tohmatsu 11 Waymouth Street Adelaide SA Australia 5000 PATENT ATTORNEYS Griffith Hack Level 10, 161 Collins Street Melbourne VIC Australia 3000 Davies Collison Cave 1 Nicholson Street Melbourne VIC Australia 3000 Knobbe Martens Intellectual Property Law 12790 El Camino Real San Diego CA 92130 USA Dr Errol DeSouza Chairman Dr Deborah Rathjen Chief Executive Officer and Managing Director Mr Trevor Tappenden Non-Executive Director Mr David Wilson Mr Peter Turner Mr Alan Fisher SENIOR MANAGEMENT Dr Deborah Rathjen Mr Jack Moschakis Dr Jens Mikkelsen Ms Melanie Young Dr Robert (Bob) Corringham Mr Anthony Colasin Non-Executive Director Non-Executive Director Non-Executive Director Chief Executive Officer and Managing Director Legal Counsel and Company Secretary Chief Scientific Officer Chief Financial Officer Chief Medical Officer Chief Business Officer SCIENTIFIC ADVISORS Dr Glenn Begley MBBS, PhD, FRACP Prof Jonathon Cebon MBBS, PhD, FRACP Dr Philippe Danjou MD PhD Dr Jayesh Desai FRACP Dr Tim Harris Dr José Iglesias MD Prof Paul Fitzgerald PhD MSc Dr Richard Hargreaves PhD Dr Ann Hayes PhD Bsc Dr Fiona McLaughlin PhD FSB Prof Danny Rischin MBBS, FRACP, MD Prof Paul Rolan MBBS, MD Dr Fiona Thomson PhD Dr Frank Yocca PhD Bionomics ordinary shares commenced trading on the OTCQX marketplace n the US effective 2 March 2015 under the ticker code “BNOEF”. Investors can find current financial disclosure and real-time level 2 quotes for Bionomics on www.otcmarkets.com For more information, please visit www.otcmarkets.com CONTENTS 01 VISION 02 HIGHLIGHTS 03 CHAIRMAN’S LETTER 04 CEO+MANAGING DIRECTOR’S REPORT 09 PIPELINE 12 INTELLECTUAL PROPERTY PORTFOLIO 13 BOARD OF DIRECTORS 16 MANAGEMENT 18 DIRECTOR’S REPORT 35 ANNUAL FINANCIAL STATEMENTS 81 INDEPENDENT AUDIT REPORT 83 SHAREHOLDER INFORMATION 85 COMPANY PARTICULARS BIONOMICS IS DISCOVERING AND DEVELOPING INNOVATIVE THERAPEUTICS FOR SERIOUS MEDICAL CONDITIONS, WORKING WITH PARTNERS TO ACHIEVE SIGNIFICANT OUTCOMES FOR PATIENTS, SHAREHOLDERS AND EMPLOYEES. Bionomics is a leader in the discovery and development of innovative biopharmaceuticals with operations in Australia, Europe and US. The Company undertakes discovery, development and strategic partnering of first in class and best in class drugs to treat patients with serious medical conditions including cancer and central nervous system disorders. Bionomics utilizes key global, strategic partnerships for the commercialisation of its drugs. 2016 BIONOMICS ANNUAL REPORT 31 DALGLEISH STREET, THEBARTON, SA AUSTRALIA, 5031 WWW.BIONOMICS.COM.AU ABN 53 075 582 740 

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