2018 BIONOMICS ANNUAL REPORT 2 0 1 8 B I O N O M I C S A N N U A L R E P O R T 01 CONTENTS 02 VISION 03 CHAIRMAN’S LETTER 04 CEO AND MANAGING DIRECTOR’S REPORT 12 INTELLECTUAL PROPERTY PORTFOLIO 13 BOARD OF DIRECTORS 15 MANAGEMENT 16 DIRECTORS’ REPORT 32 ANNUAL CONSOLIDATED FINANCIAL STATEMENTS 73 INDEPENDENT AUDIT REPORT 78 SHAREHOLDER INFORMATION 80 COMPANY PARTICULARS 02 VISION IMPROVE THE LIVES OF PEOPLE WHO SUFFER FROM ANXIETY, DEPRESSION, PTSD, PAIN & MEMORY LOSS THROUGH EFFECTIVE TREATMENT 03 CHAIRMAN’S LETTER DEAR SHAREHOLDERS Once again I am delighted to report a year of solid progress for Bionomics as it pursues its major programs for neurological and psychiatric disorders, and builds a pipeline of innovative therapies based on our proprietary drug discovery technologies. For patients, our work aims to help those with difficult-to-treat disorders such as anxiety, depression, Post Traumatic Stress Disorder (PTSD) and cognitive dysfunction and agitation linked to Alzheimer’s disease and other conditions. The flagship program of our novel ion channel therapeutics pipeline revolves around our BNC210 program. BNC210 is a first-in-class, proprietary, orally active, negative allosteric modulator of the α7 nicotinic acetylcholine receptor in development for the treatment of anxiety, panic disorder, PTSD and agitation. Among the clinical highlights, in April 2018 we completed recruitment into our Phase 2 clinical trial of BNC210 in PTSD. In May 2018 we commenced a Phase 2 trial in elderly patients suffering from Agitation. In partnership with MSD (Merck Sharpe & Dohme Corp, a subsidiary of Merck & Co. Inc. Kenilworth NJ, USA) we are pursuing a program targeting cognitive dysfunction associated with Alzheimer’s disease and other conditions. In early 2017 MSD dosed the first subject in a Phase 1 clinical trial, triggering a $US10 million milestone payment from MSD. Our CEO, Deborah Rathjen will expand on these programs and our emerging pipeline in her report. In the expensive realm of drug discovery and development, it is tempting to try to be ‘all things to all people’ by pursuing programs across multiple compounds for multiple indications. But capital is never infinite, so we made the difficult decision to seek to monetise our non- core oncology programs BNC101 and BNC105. While both candidates continue to be highly promising, the Bionomics board concluded that further development would best be maximised in the hands of a larger entity and we continue to forge ahead with our divestment plans. While progress on this divestment program has been slower than we would have liked, we are already benefiting from cost savings related to stopping further internal spend on our oncology programs and are happy to report keen interest in the assets and hope to update shareholders in the near future. The company is building on our major strategy review of 2017, which resulted in a more streamlined and focused organisation. We made the difficult decision to close our San Diego office, consolidating our research functions at our Adelaide base. With completion of the Phase 1 BNC101 trial in patients with metastatic colon cancer further reductions in headcount have been made. The resultant cost savings will bolster our financial position but importantly, they have not detracted from our ability to undertake the divestment process. Financially we enter the fiscal year 2019 in a sound position, with cash of $24.93 million. This healthy cash balance partly reflects the receipt of a $6.788 million R&D incentive refund from the Australian government in January 2018. On this note, we were pleased to see the government recognise biotech innovation by excluding clinical trials from a new $4 million a year cap on R&D rebates for companies with turnover below $20 million. The period also saw Bionomics added to the OTCQX Composite and International indices. The OTCQX is the top tier of three markets for over-the-counter (OTC) securities operated by the OTC Markets Group. For companies to qualify to be traded on OTCQX, they must meet high financial standards, follow best practice corporate governance and demonstrate compliance with US security laws. Bionomics’ progress has been recognised by investment banking analysts following the stock, including Bell Potter, Shaw & Partners and Blue Ocean Equity in Australia and H.C. Wainwright, Hardman & Co and Edison Research overseas. Our clinical progress and financial health has not come about by chance. On behalf of the board I extend my thanks to Dr Rathjen and the entire Bionomics team for their tireless work throughout the year. We are also fortunate to have an expert and committed board, with our other directors Peter Turner, David Wilson and Alan Fisher bringing decades of healthcare, investment banking and commercial experience to the table. But most of all, I would like to thank our 5000 or so shareholders large and small for your ongoing support. We look forward to providing a further update on progress at our upcoming AGM. Yours faithfully Errol De Souza Chairman and Non-Executive Director 04 CEO AND MANAGING DIRECTOR’S REPORT DEAR SHAREHOLDERS The 2017-2018 year was a very productive year for the company as we progressed development of our therapeutic candidate BNC210 which is in development for the treatment of anxiety, panic, Post Traumatic Stress Disorder (PTSD) and Agitation associated with anxiety and dementia in elderly patients. We also continued to support our important, validating collaboration with MSD (Merck & Co, Kenilworth, New Jersey) resulting in the successful completion of the research component of the collaboration as MSD now undertakes clinical development of a therapeutic candidate for the treatment of cognitive dysfunction in Alzheimer’s disease and other conditions. Although most investors eyes are on BNC210 and our MSD collaboration, Bionomics did not neglect its robust, emerging pipeline, continuing to work towards the identification of new and truly innovative therapeutic candidates for the treatment of serious Central Nervous System (CNS) disorders. Our CNS focussed pipeline gives Bionomics “multiple shots on goal” as we head towards a number of anticipated value accretive catalysts in fiscal year 2019. These short-term catalysts include: • Phase 2 clinical trial results for BNC210 for the currently recruiting trial in Agitation in hospitalised, elderly patients • The identification of additional CNS therapeutic candidates for partnering and/or internal development. This progress for Bionomics occurred against a back- drop of M&A activity within the industry and a number of acquisitions of companies within the Australian sector by large, global players. For ASX listed companies this highlighted the value gap between market capitalisation and inherent value. Bionomics CNS programs all target areas where there is a significant market opportunity attractive to both large Pharma and specialty CNS Pharma companies. Fiscal year 2018 also marked a year of transition for Bionomics to a pure CNS company. This meant taking some difficult decisions as we closed our San Diego operations and oncology operations in Adelaide. We also downsized in other areas of the business to bring about greater efficiency and reduce expenses. These changes to the business have brought greater focus without impairing our ability to progress our business objectives, including the divestment Anxiety and Depression1 US$20.6b PTSD1 US$4.7b market potential p.a. Merck (MSD) Alzheimer’s disease collaboration US$506m + annual royalties on sales Market Cap. US$184.4m (14 September 2018) 1. Eligible Patient Annual US Market Potential: PTSD+MDD+BP+Panic+SAD+Agitation+GAD: PTSD 3.4-4% prevalence >18 yrs., ~25% of patients diagnosed and treated; MDD 6.7% prevalence, ~50% co-morbid anxiety, ~50% diagnosed and treated; BP 2.9% prevalence, 50% co-morbid anxiety (range in literature 25% to 75%), ~50% diagnosed and treated; Panic 2.7% prevalence, ~50% diagnosed and treated; SAD 6.8% prevalence, 15-20% diagnosed and treated; Agitation 3.1% dementia prevalence >40 yrs., ~9% agitation patients diagnosed and treated; GAD 2. 3.1% prevalence, ~25% diagnosed and treated, ~50% of SSRI patients treated are partial responders or relapsers; 3. 2.7% prevalence, ~50% diagnosed and treated. Assumes 5% premium to Trintellix 2016 AWP for 30-day supply of $380 – compliance adjusted. of our clinical stage oncology assets BNC101 and BNC105. Bionomics is currently engaged in a number of confidential business discussions on these non-core assets which we believe will lead to favourable outcomes, providing funding for their continued development which will benefit Bionomics’ shareholders in the future. 05 CEO AND MANAGING DIRECTOR’S REPORT BIONOMICS’ FOCUS FOR DRUG DISCOVERY, DEVELOPMENT AND PARTNERING We have developed a robust pipeline of therapeutic candidates and drug discovery programs that provide multiple shots on goal focused on CNS disorders where patient care could be improved through innovative medicines that address unmet needs. BIONOMICS’ CNS FOCUSED PIPELINE Program Mechanism of Action Indication Pre-IND Phase 1 / 2a Phase 2b Bionomics’ Commercial Rights US Market Opportunity BNC210 α7 nicotinic acetylcholine receptor NAM PTSD Fully recruited; results reported 2 Oct 2018 Agitation Phase 2 initiated Q2 2018; results expected Q1 2019 GAD Positive Phase 2a data Panic Positive CCK-4 induced panic data MK# α7 nicotinic acetylcholine Alzheimer’s, receptor Parkinson’s PAM Phase 1 ongoing WW WW WW WW • US$4.7B p.a. • 3.4-4% prevalence >18 yrs • ~25% of patients diagnosed and treated • US$1.6B p.a. • ~3.1% dementia prevalence >40 yrs • ~9% agitation patients diagnosed and treated • US$2.7B p.a. • 3.1% GAD prevalence • ~25% diagnosed and treated • ~50% of SSRI patients treated are partial responders or have relapsed • US$4.4B p.a. • 2.7% prevalence • ~50% diagnosed and treated • Assumes 5% premium to Trintellix 2016 AWP for 30-day supply of $380 – compliance adjusted WW Merck Partnership • US$506M total deal value including upfront and milestones payments • Tiered annual royalties PAIN, DEPRESSION, MEMORY ENHANCEMENT undisclosed WW Our pipeline focuses on conditions where we have unique capabilities, through our proprietary technology platform ionX, to identify new approaches and molecules that have the potential to greatly improve the treatment of conditions such as anxiety, PTSD, cognitive dysfunction and pain. 06 CEO AND MANAGING DIRECTOR’S REPORT BNC210: A NEXT GENERATION THERAPEUTIC CANDIDATE WITH THE POTENTIAL TO TREAT ANXIETY, DEPRESSION, PANIC, PTSD AND AGITATION We entered the period with seven completed BNC210 clinical trials all of which have met their primary clinical trial endpoints. These trials established solid foundational data for the PTSD and Agitation clinical trials that will be the most important catalysts for Bionomics in the coming months. In particular, results from the clinical trials undertaken in patients with Generalised Anxiety Disorder (GAD) and in healthy volunteers suffering induced panic attacks, indicate that BNC210 may decrease symptoms within the major symptom clusters of avoidance, intrusive memories, arousal and reactivity, measured by the Clinician Administered PTSD Symptom Scale (CAPS-5), the instrument used to measure efficacy in PTSD trials, including the Bionomics RESTORE trial. On 9 July, Bionomics announced that all 193 patients enrolled in the RESTORE trial had completed their treatment phase of the study. Just to re-cap some of the main features of the trial, the RESTORE trial is a randomised, double-blind, placebo-controlled Phase 2 clinical trial that enrolled adult patients diagnosed with PTSD at 26 sites across the United States and Australia. As previously mentioned, the primary endpoint of the trial is a decrease in PTSD symptoms as measured CAPS-5. Secondary endpoints being measured in the trial include a decrease in symptoms of anxiety as measured by the Hamilton Anxiety Rating Scale (HAM-A) and symptoms of depression as measured by the Montgomery and Asberg Depression Rating Scale (MADRS). It is pleasing to report that both the recruitment and treatment phases of this comprehensive international Phase 2 clinical trial were completed on time, confirming the ability of Bionomics to efficiently undertake large, multi-centre clinical trials in the neuroscience area. With all patients now off the study, attention is focused on ensuring that all patient information has been entered correctly into the database. Once quality control procedures have been completed, the data will be unblinded and analysed and the results will be reported to the company. We anticipate that data will be forthcoming late in third quarter, calendar year 2018. BNC210 works by subtly down-modulating, through an allosteric mechanism, the activity of an ion channel located in the brain - the α7 nicotinic acetylcholine receptor. This normalises the effect of a neurotransmitter (acetylcholine) that has been linked to the symptoms of anxiety and depression, as well as to stress-induced behaviours. One of the important sites in the brain rich in this receptor is the amygdala, the brain’s emotional centre. Through the Phase 2 GAD trial we gained an even greater understanding of the effect of BNC210 on neural circuitry controlling amygdala activation, arousal and reactivity and this deeper understanding of the biology has led to an ever-increasing appreciation of the commercial potential of BNC210. US market research conducted by Bluestar BioAdvisors on behalf of Bionomics supports our enthusiasm for BNC210 which we believe represents a game changer for patients whose treatment is complex and oftentimes ineffective. In layperson’s terms, BNC210 has been shown to be well tolerated and not sedating, while lacking the addiction risks posed by the widely-used benzodiazepine class of drugs. It also doesn’t impair memory and has a rapid onset of action. The non-sedative nature of BNC210 makes it a potential treatment for elderly patients suffering anxiety and during 2018 Bionomics identified agitation in the elderly as the setting for a new Phase 2 clinical trial. • α7 nicotinic acetylcholine receptor • Targeting amygdala hyperactivity • Anxiety, Depression, PTSD, Panic Disorder, Agitation • Wholly owned by Bionomics BIONOMICS’ CNS DISCOVERY ENGINE • Multiple targets within parvalbumin interneurons • Wholly owned by Bionomics Positive Allosteric Modulator (PAM) BNC375 and related molecules Cognition Negative Allosteric Modulator (NAM) BNC210 Depression PTSD Panic Anxiety Agitation • α7 nicotinic acetylcholine receptor • Licensed to Merck • Cognitive dysfunction • Multiple targets within parvalbumin interneurons • Wholly owned by Bionomics 07 CEO AND MANAGING DIRECTOR’S REPORT HUMAN CLINICAL DATA INDICATES BNC210 MAY IMPACT MULTIPLE PTSD SYMPTOM CLUSTERS MEASURED BY CAPS-5 INTRUSION Phase 1 CCK-4 included panic NEGATIVE ALTERATIONS IN COGNITION & MOOD THE MECHANISM AND PHARMACOLOGY OF BNC210 INDICATE ITS THERAPEUTIC POTENTIAL FOR SEVERAL PTSD SYMPTOM CLUSTERS AVOIDANCE GAD Phase 2 trial GAD Phase 2 trial Phase 1 CCK-4 induced panic AROUSAL & REACTIVITY BNC210 TARGETS MULTI-BILLION DOLLAR MARKETS WITH UNMET NEED: US MARKET POTENTIAL 8.7-9M 8-8.5M 17M Assume 5% premium to Trintellix 2016 AWP for 30-day supply of $380 – Compliance Adjusted US Prevelance Eligible Patient Population Estimated Annual US Market Size 6.5-7M 7M 5M 1.7M 1.0M 3-3.5M 0.5M 1.5M 1.0M 0.5M 0.9M US$4.7B US$3.2B US$1.5B US$4.4B US$2.5B US$1.6B US$2.7B PTSD MDD+Anx BP+Anx Panic SAD Agitation GAD • Innovative, first-in-class • Unmet need in large patient population • Advancement in care • Limited branded competition 1 3.4-4% prevalence >18yrs., ~25% of patients diagnosed and treated 2 6.7% prevalence, ~50% co-morbid anxiety, ~50% diagnosed and treated 3~2.9% prevalence, 50% co-morbid anxiety (range in literature 25 to 75%), ~50% diagnosed and treated 4~2.7% prevalence, ~50% diagnosed and treated 5~6.8% prevalence, 15-20% diagnosed and treated 6 ~3.1% dementia prevalence >40yrs., ~9% agitation patients diagnosed and treated • Ability to achieve large market share 7 3.1% GAD prevalence, assumes ~25% diagnosed and treated, ~50% of SSRI patients treated are partial responders or relapsers Major Depressive Disorder (MDD), Bipolar Disorder (BP), Social Anxiety Disorder (SAD), Generalised Anxiety Disorder (GAD), Anxiety (Anx). 08 CEO AND MANAGING DIRECTOR’S REPORT BNC210: POTENTIAL IN THE TREATMENT OF AGITATION IN THE ELDERLY In May 2018 we commenced a Phase 2 clinical trial for BNC210, aimed at treating agitation in the elderly in the hospital setting. The randomised, double-blinded, placebo-controlled trial will recruit about 40 patients across Australian geriatric wards in hospitals. Over a short five-day treatment period, the trial will monitor the resolution of agitation as well as the safety and tolerability of BNC210. Agitated behavioural disturbance in elderly patients is a major unmet clinical problem, causing distress to both the patients and other patients and interfering with therapeutic procedures. There are no approved treatments for agitation in the elderly, with the use of benzodiazepines and antipsychotics extremely restricted because of the risks of falls, strokes and even sudden death. In any event, it is estimated that only 9% of patients suffering agitation receive any drug treatment. The trial is designed for rapid recruitment, with first trial results expected in the first quarter of calendar year 2019. Bionomics drew attention, through its social media outreach, to the New York Times article published in March 2018 entitled “A Quiet Drug Problem Among the Elderly” highlighting the addiction problems associated with the use of anti-anxiety treatments by older people and the increase in benzodiazepine associated deaths in this patient population. Articles such as this reinforce our determination to find solutions for the safe treatment of anxiety and agitation. BNC210 rapidly inhibits Amygdala activation in GAD patients during the performance of anxiety provoking tasks. BNC210 rapidly restores emotional stability after a Panic Attack. Higher prevelance of GAD in the elderly. Amygdala activation is associated with Agitation. BNC210 HAS THE POTENTIAL FOR THE TREATMENT OF AGITATION OUR IMPORTANT RELATIONSHIP WITH MSD Amongst the significant achievements of 2017 was the initiation of a first clinical trial of a candidate therapy for the treatment of cognitive dysfunction associated with Alzheimer’s disease by our collaborator MSD (Merck Sharpe & Dohme Corp, a subsidiary of Merck & Co. Inc. Kenilworth NJ, USA). The milestone achievement triggered a US$10 million payment to Bionomics from MSD. This payment further validates Bionomics’ proprietary drug discovery technology and capabilities. Our strong collaboration with MSD, one of the leading pharmaceutical companies in the world, is exemplified on multiple fronts. Of course, the research and license agreement signed in 2014 is an important element. To recap on the details of that agreement – Bionomics received an upfront payment of US$20 million and is eligible to receive up to US$506 million for reaching pre-defined research and clinical development milestones. In addition, our agreement includes eventual undisclosed royalties on product sales. The entry of the therapeutic candidate into a clinical trial is an important advance providing validation of our drug discovery platform to identify high quality therapeutic candidates as well as our strategic approach to partner selected assets within our robust pipeline. The portfolio of products under our collaboration with MSD are designed to address cognitive dysfunction in a number of debilitating CNS conditions, and Alzheimer’s disease is of chief importance amongst these as there remains an urgent need for effective treatments. In addition to our collaboration, MSD have been a shareholder of Bionomics since October 2015. 09 CEO AND MANAGING DIRECTOR’S REPORT Bionomics and MSD have partnered for the last five years to present an Annual Symposium covering new developments in neuroscience research. In October 2017 the Symposium covered topics under the theme of ‘Feelings and Forgetting’ that included Post Traumatic Stress Disorder (PTSD), sleep and Alzheimer’s disease. The Symposium presentations, from a stellar group of Australian and overseas experts, were extremely well received. Presenters included: • Professor Steve Williams, IoPPN Kings College London & Maudsley Hospital on MR Neuroimaging to Facilitate the Drug R&D Process - from Mouse to Man. • Professor Ole Isaacson, Professor of Neurology & Neuroscience, Harvard Medical School on Novel Concepts from Human Cell Biology and Genetics for Neurodegenerative Disease Treatments • Dr Richard Hargreaves, Corporate Vice President Neuroscience & Imaging, Celgene on Seeing the Problems and Devising Solutions for Neurodegenerative Disease. We were very pleased that Ben Thorner, Senior Vice President and Head of Business Development and Licensing for Merck Research Labs at MSD could join us for this event which was held in conjunction with AusBiotech’s national conference. In October 2018 representatives from Bionomics and MSD will again convene for the 6th Annual Frontiers of Neuroscience Symposium. We are delighted that MSD’s Dr Darryle Schoepp, Vice President Neuroscience Discovery is scheduled to be our keynote speaker. A RICH PIPELINE WITH MULTIPLE SHOTS ON GOAL Bionomics is developing a robust pipeline of future therapeutic candidates in its core CNS therapeutic areas and leveraging its proprietary technologies in the drug discovery process. We are far from a “one trick pony”! With recent scientific developments, several new targets from Bionomics’ early discovery efforts are now able to be further investigated. We are working towards the identification of new therapeutic candidates for internal development and/or partnering in 2019. OUR PROPRIETARY PLATFORM TECHNOLOGIES AND CNS THERAPEUTIC FOCUS ionX • Identifies drug candidates targeting both ligand gated and voltage gated ion channels • Proprietary cell lines and screen approaches • Comprehensive in vivo models to validate target biology MultiCore Chemistry • A diversity oreintated chemistry platform for the discovery of small molecule drug candidates • Computer aided pharmacophore modelling • Scaffold hopping synthetic approaches rapidly create diversity in small, focused libraries • Parallel, differentiated chemical series of potential drug candidates Therapeutic Areas • PTSD • Anxiety • Depression • Alzheimer’s disease • Cognitive/Memory Deficits • Pain • Epilepsy 10 CEO AND MANAGING DIRECTOR’S REPORT GETTING THE WORD OUT During the year different ways of delivering our message have provided opportunities to promote BNC210 and our innovative pipeline. PTSD and anxiety continue to be in the news and among the recent news coverage and a report by The Economist on the aftermath of the Grenfell Tower disaster in London, with “the local arm of the National Health indicating that up to 11,000 people may end up suffering from mental health problems. Most will be cases of PTSD, but others will suffer from anxiety and depression….”. This year Channel 9 covered Bionomics’ BNC210 PTSD efforts reporting from the veterans’ perspective. Channel 9 also aired a report on Bionomics’ Agitation clinical trial. Analyst coverage of Bionomics has broadened. We have been active in presenting Bionomics in forums such as the ASX Listed companies Adelaide breakfast in March 2018. We have also taken Bionomics’ story global. In April we hosted two Key Opinion Leader’s events in New York and London. The New York event featured a keynote presentation by Professor Murray Stein, a distinguished professor of psychiatry and family medicine at University of California, San Diego. Prof. Stein has wide involvement in treating patients with PTSD, anxiety and trauma related disorders. The London event was chaired by Professor Allan Young, Director at the Centre for Affective Disorders in the Department of Psychological Medicine, Institute of Psychiatry, Psychology and Neuroscience at King’s College. Prof. Young is rated as one of the world’s leading scientific minds in psychiatry and psychology, according to the respected Thomson Reuters Highly Cited Researchers List in 2014. During 2017 our work on BNC210 was presented to the PTSD State of the Science Summit, hosted by the US Army Medical Research and Materiel Command in West Virginia. The Company was one of the subject matter experts selected to participate in the invitation-only event by a committee of PTSD drug treatment stakeholders. In July 2018, Bionomics presented at the Neurotech session of the 13th Annual Bioshares Biotech Summit in Queenstown New Zealand. 11 CEO AND MANAGING DIRECTOR’S REPORT SHAREHOLDERS CAN EXPECT PROGRESS ON THE “AS WELL AS AGITATION TRIAL RESULTS, MONETISATION OF THE ONCOLOGY ASSETS.“ MONETISING THE ONCOLOGY ASSETS OUTLOOK As we indicated in last year’s report, finite resources mean that it’s not possible to continue to develop our clinical stage cancer assets BNC101 and BNC105. These programs are also no longer part of our core strategy which is focused on CNS disorders. With a 30 June, 2018 cash balance of $24.93 million and with the support of the MSD partnership, Bionomics is well placed to advance its current BNC210 clinical trials in PTSD and Agitation, which build on the positive top-line results from the GAD trial delivered in October 2016. In October 2017, initial data from the Phase 1 clinical trial of BNC101 in patients with metastatic colon cancer became available. The data are very encouraging and strongly supportive of the ongoing monetisation process. As well as Agitation trial results, shareholders can expect progress on the monetisation of the oncology assets. We also anticipate progress in our partnered program by our partner MSD in financial year 2019. Also, new pre-clinical data generated through a grant- funded collaboration with scientists at the University of South Australia demonstrates that BNC105 is more potent than competing products in development in relation to treatment of acute myeloid leukaemia. Both BNC101 and BNC105 data sets were presented at the American Association for Cancer Research (AACR) annual conference in April 2018. As indicated earlier, Bionomics has an ongoing process for the divestment of the two oncology assets with multiple confidential discussions in progress. We anticipate an outcome that will deliver value for shareholders. The rewards are great if we get it right and we look forward to an eventful financial year 2019. Finally, I thank all shareholders for their ongoing support. I also thank Bionomics’ staff who share a determination to achieve success in these programs. 12 INTELLECTUAL PROPERTY PORTFOLIO WE ARE THE OWNER OF RECORD OF 125 ISSUED PATENTS ACROSS 63 FAMILIES AND 102 PENDING PATENT APPLICATIONS ACROSS 38 FAMILIES FILED IN EUROPE, THE UNITED STATES AND ASIA. THE BIONOMICS PATENT PORTFOLIO INCLUDES: Through the worldwide Patent Cooperation Treaty (PCT) mechanism, Bionomics and its related companies were granted 16 patents this financial year, 21 PCT patent applications entered the national and regional phases of examination, 2 PCT patent applications and 11 provisional patent applications were filed. 10 patent families covering BNC210 and congeners and their use in the treatment of anxiety and other disorders 19 patent families covering BNC105 and congeners and their use in the treatment of cancer 12 patent families covering BNC101 and its use in targeting cancer stem cells 7 patent families covering BNC164 and congeners and their use in the treatment of autoimmune disease 3 patent application covering chronic pain 2 patent families covering Parkinson’s Disease and related disorders 10 patent families covering discoveries made utilising Bionomics’ technology platforms 13 BOARD OF DIRECTORS DR ERROL DE SOUZA PhD CHAIRMAN AND NON-EXECUTIVE DIRECTOR Dr De Souza is a leader in the development of therapeutics for treatment of central nervous system (CNS) disorders. He is currently President and CEO of Neuropore Therapies Inc., 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 Pharmaceuticals, Inc. (now Sanofi) 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. DR DEBORAH RATHJEN BSc (Hons), PhD, MAICD, FTSE CEO AND MANAGING DIRECTOR 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 – Entrepreneur of the Year, 2014 Woman Executive of the Year BioPharma Industry Awards. In 2015 Dr Rathjen was included in the Top 50 most influential Australian business women by The Australian newspaper. 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. 14 BOARD OF DIRECTORS MR DAVID WILSON NON-EXECUTIVE DIRECTOR Mr Wilson is Chairman and founding partner of WG Partners and has over 30 years’ experience in investment banking in the City of London. Previously Mr Wilson was CEO of Piper Jaffray Ltd, 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 currently serves as Non-Executive Director of Bionomics Limited and was previously Senior Independent Director of Optos plc prior to its successful sale of Nikon Corporation for c.$400m as well as a Non- Executive Director of BerGenBio AS. MR ALAN FISHER BCom, FCA, MAICD NON-EXECUTIVE DIRECTOR Mr Fisher 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 21 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 IDT Australia Limited and Non-Executive Director and Chair of the Audit and Risk Committees of Thorney Technology Limited. He is also the Managing Director of Fisher Corporate Advisory and DMC Corporate. Mr Fisher holds a Bachelor of Commerce from Melbourne University, is a Fellow of the Institute of Chartered Accountants Australia, a member of the Australian Institute of Company Directors. 15 MANAGEMENT DR DEBORAH RATHJEN BSc (Hons), PhD, MAICD, FTSE CEO AND MANAGING DIRECTOR 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 - Entrepreneur of the Year, 2014 Woman Executive of the Year BioPharma Industry Awards. In 2015 Dr Rathjen was included in the Top 50 most influential Australian business women by The Australian newspaper. MR JACK MOSCHAKIS BEc, DIPLaw (BAB) NSW, GDipBA, FCIS LEGAL COUNSEL AND 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, 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 (BAB-NSW) and Graduate Diploma in Business Administration (Adelaide). He is a Fellow of the Institute of Chartered Secretaries / Governance Institute of Australia, Member of the Law Society of South Australia, the Association of Corporate Counsel and the Licensing Executive Society of Australia & New Zealand. MR STEVEN LYDEAMORE BBus, MBA, CPA, GAICD CHIEF FINANCIAL OFFICER Mr Lydeamore is a Certified Practising Accountant with 25 years’ international pharmaceutical experience. He has senior executive experience spanning Asia Pacific, Europe, Latin America and North America in finance, business development, mergers and acquisitions, sales and marketing, manufacturing and research and development. Mr Lydeamore worked in various finance roles for F.H. Faulding & Co. Limited in Australia over a ten year period followed by four years in the United States at Mayne Pharma (USA) Limited. For the eleven years prior to joining Bionomics, Mr Lydeamore worked for Apotex Inc., the largest Canadian- owned pharmaceutical company, most recently as President, Apobiologix. Mr Lydeamore holds a Bachelor of Business (Applied Economics) (Deakin) and a Master of Business Administration (RMIT). He is a member of CPA Australia and Licensing Executives Society (U.S.A. and Canada), Inc. and a Graduate of the Australian Institute of Company Directors. 16 DIRECTORS’ REPORT Your Directors present their report on the financial statements of the Group for the year ended 30 June 2018, comprising the parent entity Bionomics Limited (Bionomics) and its subsidiaries. In compliance 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: • Dr Errol De Souza, Non-Executive Director and Chairman • Dr Deborah Rathjen, Chief Executive Officer and Managing Director • Mr David Wilson, Non-Executive Director • Mr Peter Turner, Non-Executive Director • Mr Alan Fisher, Non-Executive Director The Directors held office during the whole of the financial year and since the end of the financial year. Principal Activities The principal activities of the 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 (CNS) disorders. Operating Results Consolidated revenue for the year to 30 June 2018 decreased by 79% to $3,953,990. Other income for the year to 30 June 2018 decreased by 12% to $8,502,456 and primarily relates to the Research and Development (R&D) Tax Incentive, foreign government grants and interest income. This compared with revenue of $18,606,356 and other income of $9,645,501 for the year to 30 June 2017. The operating loss after tax of the Group for the year to 30 June 2018 was $25,085,564 compared with the prior year after tax loss of $6,749,615. The cash position at 30 June 2018 was $24,930,461 with restricted cash of $550,000 and $384,000 classified as current and non-current other financial assets respectively (2017: $42,873,656 with restricted cash of $550,000 and $384,000 classified as current and non-current other financial assets respectively). 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 ion channel mediated disorders of the Central Nervous System (CNS). Ion Channel Expertise to Drive Growth Our ionX and MultiCore drug discovery platforms are validated through our partnership with Merck & Co., or MSD as it is known outside the US and Canada and both platforms serve as a source of significant competitive advantage in addressing underserved therapeutic areas including anxiety, PTSD, agitation, depression, pain and Alzheimer’s disease. Our Important Relationship with MSD Continues to Make Progress During FY18 Bionomics successfully completed its collaborative research activities with MSD (known as Merck & Co., Inc., Kenilworth NJ, USA in the US and Canada). MSD is presently progressing a candidate therapy for the treatment of cognitive dysfunction in Alzheimer’s disease through a Phase 1 clinical program. The next milestone is anticipated to be initiation of a Phase 2 clinical trial. The portfolio of products under our collaboration with MSD are designed to address cognitive dysfunction in important CNS indications, and Alzheimer’s disease is of chief importance among these as there remains an urgent need for new treatments. Under the 2014 agreement, MSD funds all early-stage and clinical development of any candidate within the collaboration and is responsible for worldwide commercialisation. Bionomics previously received US$20 million in upfront payments, a US$10 million Phase 1 initiation milestone payment and additional research payments and is eligible to receive up to an additional US$465 million for MSD reaching predefined milestones, plus eventual undisclosed royalties on any product sales. In October 2017 MSD and Bionomics hosted its annual joint Symposium in Adelaide, Australia focused on Frontiers in Neuroscience Research: Feelings and Forgetting. Symposium speakers included some of the world’s most respected experts in the fields of brain imaging and neurodegenerative disease. Attendees also benefited from reports on latest advances in the science and treatment options for PTSD, including an update on Bionomics’ therapeutic candidate BNC210. Presentations from MSD focused on the discovery and development of treatments for Sleep Disorders and Alzheimer’s disease. The successful Symposium was well attended by researchers, medical personnel and patient support groups as well as investors and life science analysts. The symposium was closed by Mr Ben Thorner, Senior Vice President, Global Business Development & Licensing at MSD. The 6th Annual Symposium will again be held in October 2018 in Adelaide. Recent Clinical Developments Have Progressed BNC210 to Near-term Catalysts with a Phase 2 Trial in Agitation Commenced and the Treatment Phase in the Phase 2 PTSD Trial Completed. BNC210, is a novel, orally-administered, first-in-class, negative allosteric modulator of the α7 nicotinic acetylcholine receptor, in development for the treatment of anxiety, panic, agitation, and PTSD with a rapid onset of action and improved safety and 17 DIRECTORS’ REPORT tolerability compared to currently marketed products including benzodiazepines, anti-depressants and anti-psychotics, providing a compelling therapeutic profile in areas of significant unmet clinical need. To date BNC210 has been evaluated in 7 completed clinical trials that investigated efficacy, safety and tolerability, target engagement and proof of biology. BNC210 has demonstrated efficacy in suppressing panic attack symptoms and in Generalised Anxiety Disorder (GAD) patients BNC210 demonstrated rapid onset of anxiolytic activity following a single administration. In the 7 completed clinical trials BNC210 has met all primary endpoints. The Phase 2 PTSD trial, which was conducted in Australia and the US, completed enrolment in April 2018 and in July 2018 Bionomics reported that all patients had completed the treatment phase of the trial. The trial is anticipated to read-out data in late third quarter of calendar year 2018. In May 2018 Bionomics initiated a Phase 2 clinical trial of BNC210 in elderly patients with agitation in the hospital setting. The trial, designed for short treatment and rapid recruitment, will evaluate the effect of BNC210 on the resolution of agitation in hospitalised elderly patients and assess the safety and tolerability of BNC210 in this patient population. It will recruit approximately 40 elderly patients in specialist geriatric hospital wards across Australia, and is a randomised, double-blind, placebo-controlled design with a 5-day treatment period. Recruitment is ongoing with read-out of data anticipated in the first quarter of calendar year 2019. If successfully developed BNC210 represents a paradigm shift in the treatment of anxiety disorders including GAD and Panic Disorder, conditions characterised by high levels of co-morbid anxiety such as bipolar disorder and major depressive disorder as well as trauma and stress-related disorders such as PTSD and Agitation in the elderly. Strong Market Opportunity for BNC210 Market research commissioned by Bionomics and conducted by market research firm Bluestar BioAdvisors indicates that the US market opportunity for BNC210 in PTSD is estimated to be US$4.7 billion p.a. and that the US market for treatment of Agitation in Alzheimer’s disease is estimated to be US$1.6 billion p.a. Bluestar BioAdvisors is continuing its work for Bionomics on the broader US market opportunity in Agitation in the elderly, beyond Alzheimer’s disease which may result from other forms of dementia as well as anxiety. PTSD and Agitation are anticipated to provide a more rapid path to market for BNC210 than either GAD or Panic Disorder, with the potential for FDA Fast Track or Breakthrough designations with positive Phase 2 data. Strategic Realignment to Focus on Ion Channel Assets In FY18 the decision was made to divest our clinical stage oncology drugs BNC105 and BNC101 and these assets are undergoing a formal monetisation process. Numerous parties are in active due diligence and we anticipate a value accretive outcome. Several developments and new data have contributed to interest. On October 31, 2017 Bionomics announced that the BNC101 Phase 1 clinical trial in patients with metastatic colon cancer was fully recruited. BNC101 is an anti-LGR5 humanised monoclonal antibody being developed to treat solid cancers. It aims to prevent or delay tumour recurrence by targeting LGR5, a cancer stem cell marker that is over-expressed in metastatic colorectal cancers and other solid tumour types. LGR5 is also thought to regulate cancer cell adhesion. The recommended Phase 2 dose level of 15 mg/kg was confirmed. New data on both programs were presented to the American Association for Cancer Research (AACR) in Chicago on 16 and 17 April 2018. In the case of BNC101, Bionomics reported evidence of target engagement and pharmacodynamic markers of activity in patients enrolled in the Phase 1 clinical trial. New preclinical data generated through a grant funded collaboration with scientists at the University of South Australia demonstrate that BNC105 is more potent than competing products in development, for the treatment of acute myeloid leukaemia a potential new indication for BNC105. Outlook With Bionomics’ transition to a pure CNS company, BNC210 and our robust pipeline of preclinical programs are our major areas of focus. Bionomics is in a strong position to fund its current BNC210 clinical trials and to support our important relationship with MSD. Progress over FY18 has led to important near-term milestone catalysts for the Company. BNC210 Phase 2 PTSD clinical trial data are anticipated in late third quarter CY2018. BNC210 Phase 2 Agitation in the Elderly clinical trial data are anticipated in the first quarter of CY2019. In addition to evaluating BNC210 partnering, we continue to evaluate opportunities to broaden the development of BNC210. Bionomics also continues to progress a number of early stage ion channel programs targeting pain, depression, cognition, PTSD and epilepsy, with identification of a potential therapeutic candidate anticipated in the second half of CY2018. Bionomics has an ongoing process to monetise its oncology programs, BNC101 and BNC105, as the company completes its transition to a focused CNS disorders company and anticipate that the outcomes will be value accretive for shareholders. 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. 18 DIRECTORS’ REPORT Significant Changes in the State of Affairs There were no significant changes in 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 clinical development and will seek to commercialise the outcomes. Environmental Regulation The Group is subject to environmental regulations and other licenses in respect of its facilities in Australia 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 2018 and no related issues have arisen since the end of the financial year to the date of this report. INFORMATION ON DIRECTORS Dr ERROL DE SOUZA PhD Chairman – Non-Executive Director since 28 February 2008 and Non-Executive Chairman from 1 September 2016 Experience and Expertise Dr De Souza is a leader in the development of therapeutics for treatment of CNS disorders. He is currently President and CEO of Neuropore Therapies Inc. 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 Pharmaceuticals, Inc. (now Sanofi) 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) and Head of CNS Diseases at DuPont Merck Pharmaceuticals. 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 of Catalyst Biosciences Inc. (NASDAQ:CBIO) Former Listed Directorships in Last Three Years Biodel Inc. (NASDAQ:BIOD) Special Responsibilities Member of Audit and Risk Management Committee Member of the Nomination and Remuneration Committee Interests in Shares and Options at Date of Report 366,698 ordinary shares in Bionomics Limited 500,000 unlisted options over ordinary shares in Bionomics Limited Dr DEBORAH RATHJEN BSc (Hons), PhD, MAICD, FTSE 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 19 DIRECTORS’ REPORT Special Responsibilities Member of Audit and Risk Management Committee Member of the Nomination and Remuneration Committee Interests in Shares and Options at Date of Report 200,000 ordinary shares in Bionomics Limited 500,000 unlisted options over ordinary shares in Bionomics Limited Mr PETER TURNER BSc, 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 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. 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 Chair of Nomination and Remuneration Committee Interests in Shares and Options at Date of Report 200,000 ordinary shares in Bionomics Limited 400,000 unlisted options over ordinary shares in Bionomics Limited 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 BioPharma Industry Awards. In 2015 Dr Rathjen was included in the Top 50 most influential Australia business women by The Australian newspaper. Current Directorship (in addition to Bionomics Limited) Listed: Chair of BiOasis Technologies, Inc. (TSX.V:BTI). Former Listed Directorships in Last Three Years None Special Responsibilities Chief Executive Officer and Managing Director Interests in Shares and Options at Date of Report 2,550,901 ordinary shares in Bionomics Limited 1,265,000 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 investment banking in the City of London. Previously Mr Wilson was CEO of Piper Jaffray Ltd, 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 currently serves as Non-Executive Director of Bionomics Limited and was previously Senior Independent Director of Optos plc prior to its successful sale of Nikon Corporation for c.$400m as well as a Non-Executive Director of BerGenBio AS. Current Directorships (in addition to Bionomics Limited) Listed: Nil Former Listed Directorships in Last Three Years Optos plc 20 DIRECTORS’ REPORT Mr ALAN FISHER BCom, FCA, MAICD Non-Executive Director Director since 1 September 2016 of Australia, Member of the Law Society of South Australia, Member of the Association of Corporate Counsel and member of the Licensing Executives Society of Australia & New Zealand. Experience and Expertise Mr Fisher 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, he has spent the last 21 years acting independently as a corporate advisor and professional director specialising in M&A, strategic advice, business restructurings and capital raisings. Mr Fisher holds a Bachelor of Commerce from Melbourne University, is a Fellow of the Institute of Chartered Accountants Australia, a member of the Australian Institute of Company Directors. Current Directorships (in addition to Bionomics Limited) Listed: Non-Executive Chair of Centrepoint Alliance Limited (ASX:CAF) and IDT Australia Limited (ASX:IDT), Non-Executive Director and Chairman of the Audit and Risk Committee of Thorney Technologies Limited (ASX:TEK). Former Listed Directorships in Last Three Years Nil Special Responsibilities Chair of Audit and Risk Management Committee Member of Nomination and 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 JACK MOSCHAKIS BEc, Dip Law (BAB) NSW, GDipBA, FCIS Legal Counsel and Company Secretary Experience and Expertise 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, 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 (BAB) NSW and Graduate Diploma in Business Administration (Adelaide). He is a Fellow of the Institute of Chartered Secretaries / Governance Institute 21 DIRECTORS’ REPORT 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). Dr Errol De Souza Dr Deborah Rathjen 1 Mr David Wilson Mr Peter Turner 2 Mr Alan Fisher MEETINGS OF DIRECTORS MEETINGS OF AUDIT AND RISK MANAGEMENT (ARM) COMMITTEE MEETINGS OF THE NOMINATION AND REMUNERATION COMMITTEE Held Attended Held Attended Held Attended 8 8 8 8 8 8 8 8 8 8 4 4 4 4 4 4 4 4 4 4 5 5 5 5 5 5 4 5 5 5 1 Attends ARM Committee, Nomination and Remuneration Committee by invitation 2 Attends ARM Committee by invitation 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 2018. 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 below 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 1. Key Management Personnel (KMP) NON-EXECUTIVE DIRECTORS Dr Errol De Souza Mr David Wilson Mr Peter Turner Mr Alan Fisher EXECUTIVE DIRECTOR Dr Deborah Rathjen OTHER KMP Dr Jens Mikkelsen Dr Paul Rolan Mr Jack Moschakis Mr Steven Lydeamore Mr Stephen Birrell POSITION Chairman Non-Executive Director Non-Executive Director Non-Executive Director Chief Executive Officer and Managing Director Chief Scientific Officer (to 31 July 2018) Consultant Medical Officer Clinical Neuroscience Legal Counsel & Company Secretary Chief Financial Officer (from 10 August 2017) Interim Chief Financial Officer (from 22 May 2017 to 9 August 2017) 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. 22 DIRECTORS’ REPORT 1. Remuneration Policy Non-Executive Director Remuneration Policy The Non-Executive Directors’ fee pool is reviewed from time to time, taking into account comparable remuneration data for the biotechnology sector provided by an independent remuneration consultancy. 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. Base board fees increased in September 2017 from $120,000 to $140,000 per annum for the Chairman, the first increase since 2013, and from $65,000 to $70,000 per annum for the other Non-Executive Directors being the first increase since 2011. The fees are inclusive of any statutory Australian superannuation contributions. The additional fee for the Chair of the Audit and Risk Management Committee and the Chair of the Nomination and Remuneration Committee respectively was reduced from $15,000 to $10,000 per annum. The total fees paid to Non-Executive Directors for the year ended 30 June 2018 was $363,186 compared to the aggregate directors’ fee pool limit of $500,000. From 1 July 2018, fees for the Chairman are $154,000 per annum and $77,000 per annum for the other Non-Executive Directors (inclusive of superannuation), with no change in Committee Chair fees. The executives total remuneration package framework comprises: • Base pay and benefits, including superannuation and other entitlements; • Performance incentives paid as shares, share options, cash or a combination thereof; 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. The Board took advice on executive remuneration from an independent remuneration consultancy during the year. 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. 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. The reason for the increases was to bring directors fees into line with biotechnology market practice. Survey data was provided by an independent remuneration consultancy. During the year there were no increases in Total Fixed Remuneration provided to the Chief Executive Officer and Managing Director or KMP. 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 no share options granted to Non-Executive Directors during the year. 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. Performance Incentives Executive positions have no pre-determined bonus or equity opportunity; however, performance incentives may be awarded at the end of the performance review cycle upon achievement of specific Board approved (i) individual, and (ii) company-related 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 Chief Executive Officer’s recommendation, and to the Chief Executive Officer by the Board based on the Board’s assessment of her performance. The Board determines whether the incentive award should be in share options, shares and/or cash. In this financial year the Board determined that the maximum short-term incentive (STI) 23 DIRECTORS’ REPORT potential should be 22.5% for the Chief Executive Officer and Managing Director and 15% for KMP as listed below, 50% paid in cash and 50% in shares. The number of shares to be awarded will be calculated by multiplying the executive’s fixed pay by the incentive award percentage, multiplying this by 50% to determine the value to be paid in shares, and dividing this by the 5-day volume weighted average price (VWAP) of shares prior to the grant date of 14 August 2018. Details are below. KMP POSITION Deborah Rathjen Jack Moschakis Steven Lydeamore Chief Executive Officer & Managing Director Legal Counsel & Company Secretary Chief Financial Officer NUMBER OF ORDINARY SHARES SHARE VALUE ($) CASH VALUE ($) REMUNERATION % PERFORMANCE RELATED REMUNERATION % NOT PERFORMANCE RELATED 64,444 30,482 30,482 12.46 87.54 35,518 16,800 16,800 34,091 16,125 16,125 9.72 8.34 90.28 91.66 The allocation of bonus shares to the Chief Executive Officer and Managing Director is subject to shareholder approval at the 2018 AGM. 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 include the: • Employee Share Plan; • Employee Share Plan ($1,000 Plan); • Employee Share Option Plan; and • Employee Equity 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 Nomination & Remuneration Committee to ensure it meets good corporate practice for a company of Bionomics’ size, nature and company lifecycle. Employee Share Plan (ESP) The 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. No shares were issued to employees under the ESP during this financial year or to the date of this report. 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 this financial year or to the date of this report. Employee Share Option Plan (ESOP) Options may have been granted under the ESOP which was last approved by shareholders at the 2014 Annual General Meeting. This has now been superseded by the Employee Equity Plan (see page 24). All executives and staff were eligible to participate in the ESOP. The objective of the ESOP was to assist in the recruitment, reward, retention and motivation of employees of the company. Options are granted under the ESOP for no consideration. More particularly, the ESOP was utilised to award options to executives if they achieve specified KPIs. It may also be used for shareholder approved Non-Executive Director grants in addition to cash fees. The exercise price of options granted under the ESOP 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. 24 DIRECTORS’ REPORT Employee Equity Plan (EEP) The EEP replaces the Employee Share Option Plan that was previously approved by shareholders at the Company’s Annual General Meeting in 2014. The EEP was approved by shareholders at the 2017 Annual General Meeting and was drafted to reflect changes to the income tax legislation governing employee share schemes, governance changes in respect of the type of equity instruments that are granted to employees and directors, the circumstances in which they are granted, and to provide administrative flexibility. The underlying purpose of the EEP is to align employees’ and directors’ interests with shareholders’ interests by providing them with equity as part of their remuneration arrangements. This will enable the Company to attract and retain top-level employees and directors. The procurement and retention of first class executives and employees capable of managing the Company’s operations and achieving the Company’s strategic objectives is always a difficult task for a relatively young company, without an earnings history, such as Bionomics. In order to compete with well-established companies, the Board considers the Company essentially has one of two choices: either offer higher cash remuneration or issue equity under a plan such as the EEP. The EEP enables the Board to award different types of equity instruments tailored to specific application. These can include Rights to acquire shares contingent on meeting specified performance metrics, Options to acquire shares on payment of an exercise price, Rights and/or Options that are contingent on remaining in employment, among others. 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, shares and/or cash bonuses are granted to executive KMP based on their level of key performance indicator (KPI) achievement. Achievement of KPIs should result in increases in shareholder value. KMP POSITION Deborah Rathjen* Chief Executive Officer & Managing Director Jack Moschakis Legal Counsel & Company Secretary Stephen Birrell Interim Chief Financial Officer * Approved by Shareholders at the 2017 AGM Bionomics’ approach to its remuneration framework ensures: • Executives focus on meaningful KPIs; • The best performers receive higher reward; • 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 below) 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. In last year’s Remuneration Report, it was reported that incentive remuneration for the 2017 Financial Year was not finalised during the year and therefore the results would be reported this year. The Board determined that for FY2017 executive KMP incentive payments would be settled through the issue of Options under the ESOP rather than cash. The number of options granted are below. NUMBER OF OPTIONS 75,000* 41,750 20,000 25 DIRECTORS’ REPORT Important milestones directly related to Board approved FY18 key performance indicators achieved by Bionomics’ executives included: 1. 2. 3. Completion of enrolment in a BNC210 Phase 2 Clinical Trial for PTSD; Achieving Board specified scientific targets; Achieving Board specified corporate targets. The Board determined that for FY2018 executive KMP incentive payments would be settled through the issue of 50% Shares under the ESOP and 50% cash, the details of which are shown in the table on page 23. 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 2018. 30 JUNE 2018 $ 30 JUNE 2017 $ 30 JUNE 2016 $ 30 JUNE 2015 $ 30 JUNE 2014 $ Revenue Net (Loss) / Profit before tax Net (Loss) / Profit after tax 3,953,990 18,806,356 (26,246,699) (25,085,564) (6,227,039) (6,749,615) 8,143,288 (17,324,118) (16,592,410) 6,827,277 (17,277,206) (16,949,405) 19,921,506 3,946,945 3,206,616 Share price at start of year Share price at end of year Dividends paid Basic earnings per share Diluted earnings per share 30 JUNE 2018 CENTS 30 JUNE 2017 CENTS 30 JUNE 2016 CENTS 30 JUNE 2015 CENTS 30 JUNE 2014 CENTS 40.0 53.0 - (5.0) (5.0) 28.0 40.0 - (1.0) (1.0) 41.5 28.0 - (3.0) (3.0) 55.0 41.5 - (4.0) (4.0) 34.0 55.0 - 1.0 1.0 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 – 2018 SHORT-TERM BENEFITS POST- EMPLOYMENT CASH SALARY AND FEES $ NON- MONETARY BENEFITS $ SUPER- ANNUATION $ LONG-TERM EMPLOYEE BENEFITS ANNUAL AND LONG SERVICE LEAVE $ 135,815 498,222 68,954 71,614 73,059 382,979 325,314 80,000 62,063 20,901 1,718,921 - - - - - - - - - - - - 21,719 - 6,803 6,941 19,910 21,645 - - 1,986 79,004 - 61,181 - - - 42,400 28,079 - - 1,470 133,130 SHARE-BASED PAYMENTS OPTIONS $ - 10,620 - - - - 11,853 - - 5,678 28,151 TOTAL $ 135,815 591,742 68,954 78,417 80,000 445,289 386,891 80,000 62,063 30,035 1,959,206 NAME Dr Errol De Souza Dr Deborah Rathjen Mr David Wilson Mr Peter Turner Mr Alan Fisher Mr Steven Lydeamore Mr Jack Moschakis Dr Paul Rolan Dr Jens Mikkelsen Mr Stephen Birrell 26 DIRECTORS’ REPORT Directors and Other Key Management Personnel – 2017 SHORT-TERM BENEFITS POST- EMPLOYMENT CASH SALARY AND FEES $ 122,878 441,523 65,000 65,749 58,333 25,977 282,694 262,868 401,299 254,631 17,843 1,998,795 NON- MONETARY BENEFITS $ - 64,980 - - - - - 15,029 - 10,122 - 90,131 SUPER- ANNUATION $ - 19,616 - 6,246 5,542 2,468 19,616 16,346 - 16,701 1,695 88,230 LONG-TERM EMPLOYEE BENEFITS ANNUAL AND LONG SERVICE LEAVE $ - 12,790 - - - - 2,426 - - - - SHARE-BASED PAYMENTS OPTIONS $ 35,191 30,866 33,653 33,653 35,191 - 16,324 - 21,121 3,635 6,088 TOTAL $ 158,069 569,775 98,653 105,648 99,066 28,445 321,060 294,243 422,420 285,089 25,626 15,216 215,722 2,408,094 NAME Dr Errol De Souza Dr Deborah Rathjen Mr David Wilson Mr Peter Turner Mr Alan Fisher Mr Trevor Tappenden Mr Jack Moschakis Dr Jens Mikkelsen Mr Anthony Colasin Ms Melanie Young Mr Stephen Birrell 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: 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 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 Steven Lydeamore, Chief Financial Officer • Term of agreement – open, commencing 10 August 2017 • 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 purchase or merger of Bionomics by a third party resulting in a material diminution in duties, six months’ salary will be paid Dr Paul Rolan, Consultant Medical Officer Clinical Neuroscience • Term of agreement - From 1 February 2017 – 30 June 2018 (through the University of Adelaide) and directly from 1 July 2018 to 30 October 2018 • Part-time Consulting Dr Jens Mikkelsen, Chief Scientific Officer • Term of agreement - Consultancy Agreement up to 31 July 2018 • Part-time Consulting Mr Stephen Birrell, Interim Chief Financial Officer • Term of agreement - from 22 May 2017 to 10 August 2017 (otherwise employed as Group Financial Controller). • Total Remuneration package increased for this period. • Payment of termination benefit on early termination by the employer without cause equal to three months’ salary. 27 DIRECTORS’ REPORT Share-Based Payments Share-based payment benefits are provided to employees via the Bionomics ESOP, EEP and the ESP. There were no share-based payments under the ESP during the financial year. The market value of shares issued to employees for no cash consideration under the ESP and the EEP is recognised as an employee benefits expense with a corresponding increase in equity when the employees become unconditionally entitled to the shares. The Bionomics EEP was approved by the Board and Shareholders in 2017. 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 ESOP (prior to approval of the EEP by shareholders at the 2017 AGM) and Options under the EEP are issued for no consideration and vest equally over five years, provided a person remains employed subject to good leaver provisions (death, retrenchment or retirement). Equities issued under the EEP vest at the time of grant or upon satisfaction of conditions stipulated by the Board at that time, if any. 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 incentive options. 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 Granted in Prior Periods REVISED EXERCISE PRICE FAIR VALUE PER OPTION AT GRANT DATE VESTING DATE 17-Dec-13 04-Dec-14 27-Apr-15 27-Apr-15 27-Apr-15 27-Apr-15 27-Apr-15 24-Dec-15 30-Dec-15 30-Dec-15 30-Dec-15 30-Dec-15 30-Dec-15 28-Nov-16 28-Nov-16 28-Nov-16 28-Nov-16 28-Nov-16 28-Nov-16 28-Nov-16 28-Nov-16 17-Dec-18 04-Dec-19 27-Apr-21 27-Apr-22 27-Apr-23 27-Apr-24 27-Apr-25 24-Dec-20 30-Dec-21 30-Dec-22 30-Dec-23 30-Dec-24 30-Dec-25 28-Nov-21 28-Nov-22 28-Nov-23 28-Nov-24 28-Nov-25 28-Nov-26 28-Nov-22 28-Nov-23 $0.3301 $0.5643 $0.5029 $0.5029 $0.5029 $0.5029 $0.5029 $0.4211 $0.5102 $0.5102 $0.5102 $0.5102 $0.5102 $0.3743 $0.2613 $0.2613 $0.2613 $0.2613 $0.2613 $0.6000 $0.6000 $0.4647 $0.2705 $0.2146 $0.2315 $0.2466 $0.2601 $0.2722 $0.1567 $0.1617 $0.1772 $0.1912 $0.2038 $0.2152 $0.2080 $0.2505 $0.2621 $0.2721 $0.2810 $0.2890 $0.1166 $0.1166 17-Dec-13 04-Dec-14 27-Apr-16 27-Apr-17 27-Apr-18 27-Apr-19 27-Apr-20 24-Dec-15 30-Dec-16 30-Dec-17 30-Dec-18 30-Dec-19 30-Dec-20 28-Nov-16 28-Nov-17 28-Nov-18 28-Nov-19 28-Nov-20 28-Nov-21 28 DIRECTORS’ REPORT GRANT DATE EXPIRY DATE Granted in Prior Periods (cont.) 28-Nov-16 28-Nov-16 28-Nov-16 Granted in Current Period 05-Sep-17 24-Nov-17 29-Mar-18 29-Mar-18 29-Mar-18 29-Mar-18 29-Mar-18 29-Mar-18 28-Nov-24 28-Nov-25 28-Nov-26 05-Sep-22 24-Nov-22 29-Mar-24 29-Mar-25 29-Mar-26 29-Mar-27 29-Mar-28 29-Mar-24* REVISED EXERCISE PRICE FAIR VALUE PER OPTION AT GRANT DATE VESTING DATE $0.6000 $0.6000 $0.6000 $0.4400 $0.4400 $0.7549 $0.7549 $0.7549 $0.7549 $0.7549 $0.7549 $0.1166 $0.1166 $0.1166 $0.2839 $0.1416 $ 0.2300 $ 0.2525 $ 0.2758 $ 0.2945 $ 0.3114 $ 0.2300 05-Sep-17 24-Nov-17 29-Mar-19 29-Mar-20 29-Mar-21 29-Mar-22 29-Mar-23 29-Mar-19 * Dependent on fulfillment of the performance criteria Options granted under the EEP or ESOP 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 to the date of this report, Options were issued to the following KMP under the EEP. Directors and Other Key Management Personnel – 2018 NAME NUMBER GRANTED DATE GRANTED Mr Steven Lydeamore 400,000 29 Mar 2018 Mr Steven Lydeamore** 400,000 29 Mar 2018 Dr Deborah Rathjen 75,000 24 Nov 2017 TOTAL FAIR VALUE* $ 109,136 92,000 10,620 NUMBER VESTED - - 75,000 % OF GRANT VESTED % OF GRANT FORFEITED - - 100 - - - * Dependent on the date the Options were issued and the exercise price ** Dependent on fulfillment of the performance criteria During the year the following key management personnel exercised options that were granted to them as part of their compensation. NAME Dr Errol De Souza Dr Deborah Rathjen Mr Peter Turner NUMBER OF OPTIONS EXERCISED NUMBER OF ORDINARY SHARES ISSUED AMOUNT PAID $ AMOUNT UNPAID $ 100,000 65,000 100,000 100,000 65,000 100,000 29,760 18,499 31,300 - - - Dr Errol De Souza Dr Deborah Rathjen Mr David Wilson Mr Peter Turner Mr Alan Fisher Mr Jack Moschakis Mr Steven Lydeamore 266,698 2,485,901 200,000 100,000 - - - Share options of Bionomics Limited BALANCE AT 1 JULY 2017 NUMBER 600,000 Dr Errol De Souza 29 DIRECTORS’ REPORT Fully Paid Ordinary Shares of Bionomics Limited BALANCE AT 1 JULY 2017 NUMBER GRANTED AS COMPENSATION NUMBER RECEIVED ON EXERCISE OF OPTIONS NUMBER NET OTHER CHANGE NUMBER BALANCE AT 30 JUNE 2018 NUMBER BALANCE HELD NOMINALLY NUMBER 366,698 - 2,550,901 1,065,000 - - - - - - - 100,000 65,000 - 100,000 - - - - - - - - - 200,000 200,000 - - 100,000 100,000 GRANTED AS COMPENS- ATION NUMBER EXERCISED NUMBER NET OTHER CHANGE NUMBER BALANCE AT 30 JUNE NUMBER - (100,000) BALANCE VESTED AND EXERCISABLE AT 30 JUNE 2018 NUMBER 100,000 315,000 100,000 - 100,000 141,750 - - - - - - - - 500,000 1,265,500 500,000 400,000 500,000 291,750 800,000 Dr Deborah Rathjen 1,255,000 75,000 (65,000) Mr David Wilson Mr Peter Turner Mr Alan Fisher Mr Jack Moschakis Mr Steven Lydeamore 500,000 500,000 500,000 250,000 - - - 41,750 - 800,000 - (100,000) - - - All share options issued to KMP during the financial year were made in accordance with the provisions of the ESOP or the EEP. The number granted to KMP in the above table and in total during the year was 0.18% and 0.32% respectively of common shares outstanding. During the financial year, 265,000 options were exercised by KMP at a weighted average exercise price of $0.30 per option for 265,000 ordinary shares in Bionomics Limited. No amounts remain unpaid on the options exercised during the financial year at year end. Further details of the employee share option plan and of share options granted during the 2018 and 2017 financial years are contained in Note 22 to the financial statements. Other Transactions with Directors and Other Key Management Personnel Bionomics has strong disciplines to avoid any real or perceived conflict of interest with respect to related party transactions. Prospective related party transactions are reviewed by the Board excluding directors associated with the prospective transaction. Related party directors must have no involvement in the evaluation, negotiation or management of transactions in which they have an interest. Full disclosure is made in the Annual Report. The Company will continue to assess any prospective agreements on an arm’s length basis. During the year the Company contracted with WG Partners LP (“WG Partners”), related party to Mr David Wilson. This transaction is arm’s length within the meaning of Section 210 of the Corporations Act 2001 and therefore shareholder approval is not required. Under the contract between the Company and WG Partners, WG Partners provides Bionomics with general financial advisory services in Europe and the US for a retainer of A$10,000 per month (plus GST), terminable on one months’ notice. 200,000 - - - - OPTIONS VESTED DURING YEAR NUMBER 100,000 200,000 100,000 100,000 100,000 91,750 - 30 DIRECTORS’ REPORT 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 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 327B 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 31. This Directors’ report is signed in accordance with a resolution of directors made pursuant to Section 298(2) of the Corporations Act 2001. Errol De Souza Chairman Deborah Rathjen Chief Executive Officer and Managing Director 16 August 2018 16 August 2018 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 2018 was 9,512,920 under the Employee Share Option Plan and 800,000 under the Employee Equity Plan, a total of 10,312,920. This is a total of 2.13% of common shares outstanding as at 30 June 2018. Shares Issued on the Exercise of Options 1,296,870 ordinary shares of Bionomics were issued during the year ended 30 June 2018 on the exercise of options granted under the Bionomics ESOP. Warrants In December 2016 the Company issued 16,082,988 warrants at an exercise price of $0.5938, being the second tranche in connection with a private placement to US equity holders. These warrants are exercisable at the discretion of the holder and exchangeable for 16,082,988 ordinary shares. The Company issued 24,124,484 warrants in December 2015 being the first tranche in connection with the private placement to US equity holders, exchangeable for 24,124,484 ordinary shares at a fixed price of $0.5938. The company previously issued 988,843 warrants exchangeable for 988,843 ordinary shares at a fixed price (345,232 at $0.5288 and 643,611 at $0.54) in connection with a USD Loan or a lower number of shares for nil consideration, with the number of shares calculated based on 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. 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. 31 AUDITOR’S INDEPENDENCE DECLARATION 32 ANNUAL CONSOLIDATED FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018 TABLE OF CONTENTS FINANCIAL STATEMENTS PG 33 CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME PG 34 CONSOLIDATED STATEMENT OF FINANCIAL POSITION PG 35 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY PG 36 CONSOLIDATED STATEMENT OF CASH FLOWS PG 37 NOTES TO THE FINANCIAL STATEMENTS PG 72 DIRECTORS’ DECLARATION PG 73 INDEPENDENT AUDIT REPORT 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. 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. Bionomics is a company limited by shares, incorporated and domiciled in Australia. It is listed on the Australian Securities CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018 33 NOTE 30 JUNE 2018 $ 30 JUNE 2017 $ CONTINUING OPERATIONS Revenue Other income EXPENSES Research and development expenses Administration expenses Unrealised foreign currency (loss)/gain Occupancy expenses Compliance expenses Gain/(loss) on disposal of assets Finance expenses LOSS BEFORE TAX Income tax (expense)/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 PER SHARE FROM CONTINUING OPERATIONS NOTE Basic Loss per share Diluted Loss per share 30 30 3,953,990 8,502,456 18,606,356 9,645,501 (25,246,525) (5,345,287) (3,903,945) (1,416,637) (712,746) (20,206) (2,057,799) (26,246,699) 1,161,135 (25,085,564) 502,141 (24,583,423) 2018 ($0.05) (5 cents) ($0.05) (5 cents) (24,223,275) (5,725,863) 874,223 (2,594,778) (838,976) - (1,970,227) (6,227,039) (522,576) (6,749,615) (114,093) (6,863,708) 2017 ($0.01) (1 cent) ($0.01) (1 cent) THE ABOVE CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME SHOULD BE READ IN CONJUNCTION WITH THE ACCOMPANYING NOTES. 34 CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2018 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 liabilities Contingent consideration TOTAL NON-CURRENT LIABILITIES TOTAL LIABILITIES NET ASSETS EQUITY Issued capital Reserves Accumulated losses Equity Attributable to Owners of the Company NOTE 8 10 9 11 12 14 15 16 9 17 18 19 21 20 17 18 19 7 33 22 23 30 JUNE 2018 $ 24,930,461 712,643 550,000 490,090 8,269,118 968,011 35,920,323 2,744,155 12,469,535 13,547,816 384,000 29,145,506 65,065,829 5,859,857 5,696,255 1,503,562 137,600 87,351 30 JUNE 2017 $ 42,873,656 1,354,809 550,000 425,742 8,537,919 736,295 54,478,421 2,617,675 12,264,122 14,330,844 384,000 29,596,641 84,075,062 3,672,573 8,495,873 1,594,410 106,441 19,509 13,284,625 13,888,806 363,636 15,736,333 37,882 3,003,389 15,682,109 34,823,349 48,107,974 16,957,855 135,211,955 13,098,497 (131,352,597) 16,957,855 341,703 10,013,645 47,545 4,771,162 14,558,628 29,732,683 43,621,489 40,453,573 134,536,428 14,112,877 (108,195,732) 40,453,573 THE ABOVE CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME SHOULD BE READ IN CONJUNCTION WITH THE ACCOMPANYING NOTES. 35 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018 FOREIGN CURRENCY TRANSLATION RESERVE $ SHARE-BASED PAYMENTS RESERVE $ ISSUED CAPITAL $ ACCUMU- LATED LOSSES $ TOTAL EQUITY $ BALANCE AT 30 JUNE 2016 134,392,813 5,174,632 6,041,406 (101,446,117) 44,162,734 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 143,615 - (114,093) (114,093) - - - - - - 503,652 2,507,280 - (6,749,615) (6,749,615) - (114,093) (6,749,615) (6,863,708) - - - 503,652 2,507,280 143,615 BALANCE AT 30 JUNE 2017 134,536,428 5,060,539 9,052,338 (108,195,732) 40,453,573 Loss for the period Exchange differences on translation of foreign operations Total Comprehensive Income Recognition of share-based payments SBP cost of exercised options Recognition of cancelled options Prior year tax entries Issue of ordinary shares under Employee Share Option Plan - - - - 264,373 - - 411,154 - 502,141 502,141 - - - - - - - - (25,085,564) (25,085,564) - 502,141 (25,085,564) (24,583,423) 537,259 (264,373) - - (1,789,407) 1,789,407 537,259 - - - - 139,292 139,292 - 411,154 BALANCE AT 30 JUNE 2018 135,211,955 5,562,680 7,535,817 (131,352,597) 16,957,855 THE ABOVE CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME SHOULD BE READ IN CONJUNCTION WITH THE ACCOMPANYING NOTES. 36 CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018 NOTE 30 JUNE 2018 $ 30 JUNE 2017 $ CASH FLOWS FROM OPERATING ACTIVITIES Research and development incentives received Receipts from customers Payments to suppliers and employees Tax paid 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 Net Cash Generated By Investing Activities CASH FLOWS FROM FINANCING ACTIVITIES Repayment of borrowings Proceeds from borrowings Net proceeds from share issues Net Cash Generated By/(Used In) Financing Activities Net (Decrease)/Increase In Cash and Cash Equivalents 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) 8,196,353 5,498,757 (32,218,600) - (1,929,303) (20,452,793) 568,741 (487,495) - 81,246 (154,584) 2,377,649 411,154 2,634,219 (17,737,328) 42,873,656 (205,867) 24,930,461 9,505,189 19,907,614 (28,836,986) (65,677) (1,949,982) (1,439,842) 1,201,451 (247,511) - 953,940 (2,324,659) 100,000 143,615 (2,081,044) (2,566,946) 45,450,382 (9,780) 42,873,656 THE ABOVE CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME SHOULD BE READ IN CONJUNCTION WITH THE ACCOMPANYING NOTES. 37 NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018 TABLE OF CONTENTS 38 38 46 46 48 48 49 51 51 51 52 52 52 53 53 54 55 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 55 56 56 56 57 62 62 67 67 68 68 68 69 69 70 71 71 NOTE 18: BORROWINGS 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: LOSS PER SHARE NOTE 31: RELATED PARTY TRANSACTIONS NOTE 32: PARENT ENTITY INFORMATION NOTE 33: CONTINGENT CONSIDERATION NOTE 34: CONTINGENT LIABILITIES 38 NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018 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. (iii) 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. New and revised Australian Accounting Standards in issue but not yet effective At the date of authorisation of the financial statements, the Group has not applied the following new and revised Australian Accounting Standards, Interpretations and amendments that have been issued but are not yet effective. 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. 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. (i) 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 14 August 2018 (ii) 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/ 39 NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018 STANDARD AASB 9 Financial Instruments AASB 15 Revenue from Contracts with Customers, 2014-5 Amendments to Australian Accounting Standards arising from AASB 15, 2015-8 Amendments to Australian Accounting Standards – Effective date of AASB 15, 2016-3 Amendments to Australian Accounting Standards Clarifications to AASB 15 EFFECTIVE FOR ANNUAL REPORTING PERIODS BEGINNING ON OR AFTER EXPECTED TO BE INITIALLY APPLIED IN THE FINANCIAL YEAR ENDING 1 January 2018 30 June 2019 1 January 2018 30 June 2019 AASB 16 ‘Leases’ 1 January 2019 30 June 2020 Impact of New and Revised Requirements Management is currently assessing the potential impact of the following standards: AASB 9 ‘Financial Instruments’ (December 2009), and the relevant amending standards AASB 9 applies to annual periods beginning on or after 1 January 2018. The Directors of the Company anticipate that the application of AASB 9 in the future is not anticipated to have a material impact on amounts reported, based on current transactions, in respect of the Group’s financial assets and financial liabilities, but will affect disclosures made in the Group’s consolidated financial statements. AASB 15 Revenue from Contracts with Customers, AASB 2014-5 Amendments to Australian Accounting Standards arising from AASB 15, AASB 2015-8 Amendments to Australian Accounting Standards – Effective Date of AASB 15, and AASB 2016-3 Amendments to Australian Accounting Standards –Clarifications to AASB 15 AASB 15 applies to annual periods beginning on or after 1 January 2018. The Directors of the Company anticipate that the application of AASB 15 in the future will not have a material impact on the amounts reported, based on current transactions, but will affect disclosures made in the Group’s consolidated financial statements. AASB 16 ‘Leases’ AASB 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 applies to annual periods beginning on or after 1 January 2019. The Directors of the Company anticipate that the application of AASB 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 until the Group performs a detailed review. (iv) 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 40 NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018 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. 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. (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. 41 NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018 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. 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. 42 NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018 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 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. 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 cash generating units 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 cash generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease. Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase. (g) Impairment of Tangible and Intangible Assets Other than (h) Cash and Cash Equivalents 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 to which the asset belongs. When a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash generating units, or otherwise they are allocated to the smallest group of cash generating units for which a reasonable and consistent allocation basis can be identified. 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. 43 NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018 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. 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 cash generating units (or groups of cash generating units) 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 cash generating unit 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 44 NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018 profit or loss. An impairment loss recognised for goodwill is not reversed in subsequent periods. On disposal of the relevant cash generating unit, 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). 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. (o) Employee Benefits (i) Short-term and Long-term Employee Benefits 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 Employee Equity Plan (EEP). The fair value of shares issued to employees for no cash consideration under the EEP 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 disclosure in the Remuneration Reports and Note 22 relates to the former ESOP and the EEP. The Bionomics EEP was approved by the Board and shareholders in 2017. 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. (p) Borrowings (Other Financial Liabilities) (i) Warrants 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 until the warrant is issued, 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. 45 NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018 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. (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. (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 46 NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018 NOTE 3: CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS The preparation of our consolidated financial statements requires the Group to make estimates and judgments 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 judgments and base estimates and judgments 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 2018. 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 judgment 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 cash generating units to which goodwill or other intangible assets have been allocated. The value in use calculation is judgmental in nature and requires the Group to make a number of estimates including the future cash flows expected to arise from the cash generating units based on actual current market deals for drug compounds within the cash generating unit 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 cash generating unit exceeds its recoverable amount, the cash generating unit is considered impaired and the assets in the cash generating unit are written down to their recoverable amount. Impairment losses are recognised in the consolidated statement of profit or loss and other comprehensive income. A detailed valuation was performed as of 30 June 2018 and each computed fair value (based on a value-in-use model) of our cash generating unit 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 2018. 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. 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 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 below. (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: SEGMENT REVENUE YEAR ENDED SEGMENT PROFIT YEAR ENDED 30 JUNE 2018 $ 30 JUNE 2017 $ 30 JUNE 2018 $ 30 JUNE 2017 $ Drug discovery and development Contract services 1,195,238 7,088,515 16,417,428 (17,706,864) (1,128,304) 5,754,121 1,854,721 Less: Intercompany revenue included in contract services (4,530,295) (3,722,308) - 8,283,753 22,171,549 (15,852,143) Corporate Interest income Corporate financing expenses Corporate administration expenses 200,532 157,115 200,532 3,953,990 18,606,356 (15,651,611) 574,904 (2,031,784) (9,138,208) 325,019 (803,285) - 157,115 (646,170) 1,203,748 (1,931,235) (4,853,382) Loss Before Income Tax (Continuing Operations) (26,246,699) (6,227,039) Revenue reported above for Contract services includes intersegment sales. There were no intersegment 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. 47 NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018 NOTE 4: SEGMENT INFORMATION CONT (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 2018 $ 30 JUNE 2017 $ 20,636,193 42,279,000 7,469,574 5,760,733 28,105,767 48,039,733 36,960,062 36,035,329 65,065,829 84,075,062 3,597,172 2,917,952 2,267,126 2,753,546 41,592,850 38,600,817 48,107,974 43,621,489 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: 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 YEAR ENDED 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 Drug discovery and development Corporate 30 JUNE 2018 $ 30 JUNE 2017 $ 87,649 399,846 487,495 87,096 160,415 247,511 30 JUNE 2018 $ 30 JUNE 2017 $ 1,412,840 254,970 1,511,247 231,383 1,667,810 1,742,630 30 JUNE 2018 $ 30 JUNE 2017 $ 2,558,220 1,195,238 200,532 5,375,625 13,073,615 157,116 3,953,990 18,606,356 48 NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018 NOTE 4: SEGMENT INFORMATION CONT (e) Geographical Information The Group operates in three geographical areas, Australia, France and 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 2018 $ 30 JUNE 2017 $ 30 JUNE 2018 $ 30 JUNE 2017 $ 1,395,770 15,628,250 26,946,189 27,274,500 2,558,220 2,978,106 2,199,317 2,297,886 - - - 24,255 3,953,990 18,606,356 29,145,506 29,596,641 (f) Information about Major Customers Included in revenues for the drug discovery and development segment is $1,119,163 (2017: $13,066,771) from one party. No other customer contributed 10% or more to the Group’s revenue for both 2018 and 2017. NOTE 5: REVENUE AND OTHER INCOME Revenue Contract services Royalties Rent income Other Income from Continuing Operations Interest income Foreign government grants Government Research and Development Incentives (i) 2018 $ 2017 $ 3,753,458 5,375,625 - 13,073,615 200,532 157,116 3,953,990 18,606,356 574,904 1,358,745 6,568,807 8,502,456 1,203,748 1,542,463 6,899,290 9,645,501 (i) The Government Research and Development Incentives include cash refunds provided by the Australian Government for 43.5% (2017: 43.5%) 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 2018 has been excluded from the calculation of the Research and Development Incentive and if approved, will result in an additional receipt of approximately $1.3m (2017: $5k). 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 2018 $ 2017 $ 1,725,937 331,862 - 1,810,388 158,992 847 2,057,799 1,970,227 49 NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018 NOTE 6: EXPENSES CONT. 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 Employment Benefit Expenses of: - Wages and salaries - Superannuation - Share-based payments Unrealised foreign currency loss/(gain) Gain/(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 * In respect of the prior year Deferred Tax Recognised in current year Total Income Tax (Benefit)/Expense 2018 $ 2017 $ 133,926 254,534 20,017 408,477 121,383 162,609 172,605 456,597 1,259,333 1,286,033 996,957 1,110,502 7,895,161 6,873,276 515,365 537,259 8,947,785 3,903,945 434,791 503,652 7,811,719 (874,223) 20,206 - 2018 $ 2017 $ 467,343 - 467,343 (1,628,478) (1,628,478) (1,161,135) 670,133 65,677 735,810 (213,234) (213,234) 522,576 *In the current year this liability has been reduced by the withholding tax ($650,613) associated with the milestone payment received. (b) Reconciliation to Accounting Loss Loss from continuing operations Tax at the Australian tax rate of 30% (2017: 30%) Tax Effect of Non-Deductible / Non-Assessable Amounts Foreign exchange reversed on consolidation Amortisation of intangibles Exempt income from government assistance Entertainment Contingent consideration Share-based payments 2018 $ 2017 $ (26,246,699) (6,227,039) (7,873,725) (1,868,111) 216,127 101,893 (127,606) - (1,970,642) (2,440,421) 2,942 120,917 161,178 3,915 1,349,224 151,095 50 NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018 NOTE 7: INCOME TAXES CONT. (b) Reconciliation to Accounting Loss cont. Research and development expenditure Warrant revaluation loss/(gain) 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 (c) Net Deferred Tax Liability Recognised Net deferred tax liability is attributable to the following deferred tax asset/(liability) items: Property, plant & equipment denominated in EUR Intangibles denominated in EUR Intangibles denominated in USD Tax losses denominated in USD (d) Movement in Net Deferred Tax Liability Opening balance Recognised in income Recognised in equity Closing Balance (e) Net Deferred Tax Asset Not Recognised Revenue tax losses Net timing difference 2018 $ 2017 $ 4,530,212 4,704,800 - - 954,289 2,457,708 137,967 431,329 (1,547) (54,667) 416,281 (64,362) - (1,977,354) (1,161,135) 522,576 2018 $ (526,612) (37,191) 2017 $ (514,543) (56,293) (2,678,943) (4,600,501) 239,357 400,175 (3,003,389) (4,771,162) 2018 $ 2017 $ (4,771,162) (5,127,277) 1,628,478 139,295 213,234 142,881 (3,003,389) (4,771,162) 2018 $ 2017 $ 19,744,914 15,460,023 4,166,589 3,156,007 23,911,503 18,616,030 Deferred tax assets have not been recognised in respect to these items as it is not probable at this time that future taxable profits will be available against which the Group can utilise the benefit. (f) 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). 51 NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018 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 The weighted average interest rate on these deposits is 2.42% per annum (2017: 2.4% per annum). 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 2018 $ 2017 $ 24,697,755 42,450,973 232,706 422,683 24,930,461 42,873,656 2018 $ 2017 $ 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 2.54% (2017: 2.7%) and maturity dates are 2 July 2018 and 18 March 2019 respectively (2017: 2 January 2018 and 23 September 2017 respectively). NOTE 10: TRADE AND OTHER RECEIVABLES Current Trade receivables GST and Value Added Tax (VAT) receivables Other 2018 $ 2017 $ 563,716 129,588 19,339 712,643 825,312 133,954 395,543 1,354,809 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, and this is reviewed prior to commencing new major work. Of the trade receivables balance at the end of the 2018 year, the Group’s largest customer measured by revenue, Merck, represented 0% of the total balance of trade receivables (2017: Merck 43% of the total balances). 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. 52 NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018 NOTE 10: TRADE AND OTHER RECEIVABLES CONT. Age of receivables that are past due but not impaired 60-90 days 90-120 days Total Average age (days) 2018 $ 102,252 24,675 126,927 45 2017 $ - 226 226 48 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 2018 $ 2017 $ 490,090 425,742 2018 $ 2017 $ 953,288 14,723 968,011 733,665 2,630 736,295 NOTE 13: SUBSIDIARIES Details of the Group’s subsidiaries at the end of the reporting period are as follows: ENTITY Head Entity Bionomics Limited Subsidiaries of Bionomics Limited Neurofit SAS Iliad Chemicals Pty Limited Bionomics, Inc. PC SAS PRINCIPAL ACTIVITY COUNTRY OF INCORPORATION 2018 2017 PERCENTAGE OWNED (%) Research and Development Australia Contract Research Organisation Asset owner France Australia Research and Development United States Contract Research Organisation France N/A 100 100 100 100 N/A 100 100 100 100 53 NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018 NOTE 14: PROPERTY, PLANT AND EQUIPMENT FREEHOLD LAND AT COST $ BUILDING AT COST $ PLANT AND EQUIPMENT AT COST $ EQUIPMENT UNDER FINANCE LEASE AT COST $ TOTAL $ Cost at 30 June 2016 264,140 1,921,066 3,087,886 592,387 5,865,479 Additions Disposals Foreign currency exchange differences - - (1,176) 53,484 194,027 - (8,562) - (2,516) - - - 247,511 - (12,254) Cost at 30 June 2017 262,964 1,965,988 3,279,397 592,387 6,100,736 Additions Disposals Foreign currency exchange differences Cost at 30 June 2018 Accumulated Depreciation at 30 June 2016 Depreciation (Note 6) Disposals Foreign currency exchange differences Accumulated Depreciation at 30 June 2017 Depreciation (Note 6) Disposals Foreign currency exchange differences Accumulated Depreciation at 30 June 2018 Net Carrying Amounts at 30 June 2017 Net Carrying Amounts at 30 June 2018 - - 16,879 279,843 - - - - - - - - - 5,141 - 126,197 482,354 (106,402) 35,324 - - - 487,495 (106,402) 159 2,097,325 3,690,672 592,387 6,660,227 (203,409) (2,427,239) (399,765) (3,030,413) (121,383) (162,609) (172,605) (456,597) - 738 - 3,211 - - - 3,949 (324,054) (2,586,637) (572,370) (3,483,061) (133,926) (254,534) (20,017) (408,477) - (10,806) 66,281 (80,009) - - 66,281 (90,815) (468,786) (2,854,899) (592,387) (3,916,072) 262,964 279,843 1,641,934 1,628,540 692,760 835,773 20,017 - 2,617,675 2,744,155 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 2016 Additions Foreign currency exchange differences Carrying Amount at 30 June 2017 Additions Foreign currency exchange differences Carrying Amount at 30 June 2018 a) Impairment Tests $ 12,441,333 - (177,211) 12,264,122 - 205,413 12,469,535 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), Note 2(g) respectively. For the purpose of impairment testing all goodwill is allocated to the Drug discovery and development CGU. 54 NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018 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 post-tax discount rate of 15% 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 2018 $ 2017 $ 12,469,535 12,264,122 - - 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 post-tax discount rate of 15% per annum (2017: 15% 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 lifecycle 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 2016 Additions Foreign currency exchange differences Gross Carrying Amount at 30 June 2017 Additions Foreign currency exchange differences Gross Carrying Amount at 30 June 2018 Accumulated Amortisation Amount at 30 June 2016 Amortisation (Note 6) Foreign currency exchange differences Accumulated Amortisation Amount at 30 June 2017 Amortisation (Note 6) Foreign currency exchange differences Accumulated Amortisation Amount at 30 June 2018 Net Carrying Amount 30 June 2017 Net Carrying Amount 30 June 2018 $ 24,796,588 - (582,956) 24,213,632 - 786,684 25,000,316 (8,733,633) (1,286,033) 136,878 (9,882,788) (1,259,333) (310,379) (11,452,500) 14,330,844 13,547,816 55 NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018 NOTE 17: TRADE AND OTHER PAYABLES Current Trade payables Accrued expenses Non-Current Other payables 2018 $ 2017 $ 3,607,199 2,252,658 5,859,857 1,900,212 1,772,361 3,672,573 363,636 341,703 The average credit period on purchases of goods is 45 days. No interest is paid on the trade payables. The Group has financial risk management policies in place to ensure that all payables are paid within the credit timeframe. NOTE 18: BORROWINGS Unsecured – at Amortised Cost Commercial bill (i) Bank Overdraft Secured – at Amortised Cost Equipment mortgage (ii) Bank loan (iii) Loan Movement Schedule Opening Balance – 1 July Drawdown on Bank Loan Equipment mortgages Repayments FX Movements Closing Balance – 30 June Disclosed in the financial statements as: - Current liabilities - Non-current liabilities 2018 $ 2017 $ 550,000 23,052 550,000 - 597,480 404,138 20,262,056 17,555,380 21,432,588 18,509,518 18,509,518 21,168,554 2,026,206 351,443 - - (154,584) (2,027,027) 700,005 (632,009) 21,432,588 18,509,518 5,696,255 8,495,873 15,736,333 10,013,645 21,432,588 18,509,518 (i) The rolling commercial bill line is secured by a restricted deposit of $550,000 (2017: $550,000) and shown in Note 9. (ii) The equipment mortgage loans are for equipment (which secure the loans) and have an interest rate of 5.53% and have terms of three to five years (2017: three to five years). (iii) Bank loan is a secured US $15.0 million (2017: US$13.5 million) borrowing. The loan bears interest at a rate of 9.0% (2017: 8.9%) and repayable in equal instalments over 33 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 covenants as of 30 June 2018. The unused facilities available at 30 June 2018 of the Group’s bank overdraft is $25,612 (2017: $57,712) and equipment finance facility is $119,966 (2017: $295,857) 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. 56 NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018 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 Balance at Beginning of Period Warrants value at date of issue Conditional warrants initial value Change in value recognised in profit or loss Balance at End of Period Refer Note 22(e) for details about the fair value of the warrant. 2018 $ 2017 $ 1,503,562 1,594,410 37,882 47,545 2018 $ 2017 $ 87,351 19,509 2018 $ 137,600 137,600 106,441 - - 31,159 137,600 2017 $ 106,441 106,441 1,142,320 - (2,507,280) 1,471,401 106,441 Warrants A derivative was recognised in relation to the warrants issued by the Group in connection with the USD loan included in Note 18(iii). These warrants are currently exercisable at the discretion of the holder and exchangeable for either 988,843 (2017: 988,843) 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. The warrants expiry dates are as follows: NUMBER EXPIRY DATE 345,232 643,611 Oct-20 Nov-19 The warrants were initially measured at fair value in accordance with AASB 139 (IAS 39). The value of the warrants liability is remeasured at each balance date with any movement in valuations recognised in the profit or loss. 57 NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018 NOTE 22: ISSUED CAPITAL (a) Issued and Paid-Up Capital Ordinary shares – fully paid Treasury stock Total 2018 SHARES 2017 SHARES 482,753,311 481,456,441 38,125 38,125 482,791,436 481,494,566 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 2016 Closing Balance Share issue – Employee Share Option Plan option exercise 30 June 2017 Closing Balance Share issue – Employee Share Option Plan option exercise 30 June 2018 Closing Balance Treasury Stock 30 June 2016 Closing Balance Share issue – Employee Share Plan Loan Agreements 30 June 2017 Closing Balance Share issue – Employee Share Plan Loan Agreements 30 June 2018 Closing Balance Total Issued Capital NUMBER OF SHARES $ 481,024,321 134,392,813 432,120 143,615 481,456,441 134,536,428 1,296,870 675,527 482,753,311 135,211,955 75,625 (37,500) 38,125 - 38,125 - - - - - 482,791,436 135,211,955 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 and Employee Equity Plan The terms and conditions of the Bionomics Employee Share Option Plan and Employee Equity Plan are summarised in Note 2(o)(iii). The following options listed are outstanding at reporting date. 58 NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018 NOTE 22: ISSUED CAPITAL CONT. GRANT DATE EXPIRY DATE REVISED EXERCISE PRICE NUMBER FAIR VALUE AT GRANT DATE Mar-09 Jun-09 Nov-09 Jul-10 Nov-10 Dec-11 Mar-12 Jun-12 Dec-12 May-13 Aug-13 Oct-13 Dec-13 Mar-19 Mar-19 Jun-18 Jun-19 Nov-18 Nov-19 Jul-19 Jul-20 Nov-18 Nov-19 Dec-18 Dec-19 Dec-20 Dec-21 Mar-19 Mar-20 Mar-21 Mar-22 Jun-19 Jun-20 Jun-21 Jun-22 Dec-19 Dec-20 Dec-21 Dec-22 Dec-18 Dec-19 Dec-20 Dec-21 Dec-22 May-19 May-20 May-21 May-22 May-23 Aug-18 Oct-19 Oct-20 Oct-21 Oct-22 Oct-23 Dec-18 Dec-18 Dec-19 Dec-19 Dec-20 Dec-20 $0.2876 $0.2876 $0.2476 $0.2476 $0.2976 $0.2976 $0.3176 $0.3176 $0.3076 $0.3076 $0.5156 $0.5156 $0.5156 $0.5156 $0.5026 $0.5026 $0.5026 $0.5026 $0.3356 $0.3356 $0.3356 $0.3356 $0.3176 $0.3176 $0.3176 $0.3176 $0.3176 $0.3176 $0.3176 $0.3176 $0.3176 $0.3745 $0.3745 $0.3745 $0.3745 $0.3745 $0.3301 $0.6014 $0.6014 $0.6014 $0.6014 $0.6014 $0.7224 $0.3301 $0.7224 $0.6875 $0.7224 $0.6875 10,000 2,120 4,000 4,000 100,000 100,000 10,000 10,000 100,000 100,000 80,000 100,000 100,000 100,000 5,000 5,000 5,000 5,000 8,000 8,000 8,000 8,000 100,000 100,000 100,000 100,000 5,000 5,000 5,000 5,000 5,000 64,000 64,000 64,000 64,000 64,000 31,250 15,000 15,000 15,000 15,000 15,000 100,000 55,000 100,000 4,000 100,000 4,000 $0.12 $0.12 $0.20 $0.21 $0.20 $0.20 $0.19 $0.20 $0.17 $0.17 $0.36 $0.37 $0.39 $0.40 $0.30 $0.32 $0.34 $0.35 $0.17 $0.18 $0.19 $0.20 $0.19 $0.20 $0.21 $0.22 $0.21 $0.22 $0.23 $0.24 $0.25 $0.22 $0.24 $0.25 $0.26 $0.27 $0.38 $0.46 $0.48 $0.50 $0.52 $0.54 $0.33 $0.46 $0.36 $0.37 $0.39 $0.39 59 NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018 EXPIRY DATE REVISED EXERCISE PRICE NUMBER FAIR VALUE AT GRANT DATE 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 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 $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 $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 100,000 4,000 100,000 4,000 4,000 128,500 75,000 19,000 19,000 19,000 19,000 19,000 288,600 288,600 288,600 288,600 288,600 131,000 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 60,000 100,000 100,000 100,000 100,000 100,000 50,000 50,000 50,000 50,000 50,000 58,000 58,000 58,000 $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 $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 NOTE 22: ISSUED CAPITAL CONT. GRANT DATE Dec-13 (cont.) Oct-14 Dec-14 Apr-15 May-15 Jul-15 Oct-15 Dec-15 May-16 60 NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018 EXPIRY DATE REVISED EXERCISE PRICE NUMBER FAIR VALUE AT GRANT DATE May-25 May-26 Nov-23 Nov-24 Nov-25 Nov-26 Nov-21 Nov-22 Nov-23 Nov-24 Nov-25 Nov-26 Nov-22 Nov-23 Nov-24 Nov-25 Nov-26 Nov-22 Nov-23 Nov-24 Nov-25 Nov-26 Nov-22 Nov-23 Nov-24 Nov-25 Nov-26 Dec-21 Sep-22 Sep-23 Sep-24 Sep-25 Sep-26 Sep-27 Oct-23 Oct-24 Oct-25 Oct-26 Oct-27 Nov-22 Mar-24 Mar-25 Mar-26 Mar-27 Mar-28 Mar-24* $0.3200 $0.3200 $0.2600 $0.2600 $0.2600 $0.2600 $0.3743 $0.2613 $0.2613 $0.2613 $0.2613 $0.2613 $0.3130 $0.3130 $0.3130 $0.3130 $0.3130 $0.3820 $0.3820 $0.3820 $0.3820 $0.3820 $0.6000 $0.6000 $0.6000 $0.6000 $0.6000 $0.3743 $0.4400 $0.4400 $0.4400 $0.4400 $0.4400 $0.4400 $0.4691 $0.4691 $0.4691 $0.4691 $0.4691 $0.4400 $0.7549 $0.7549 $0.7549 $0.7549 $0.7549 $0.7549 58,000 58,000 4,000 4,000 4,000 4,000 290,000 200,000 200,000 200,000 200,000 200,000 100,000 200,000 200,000 200,000 200,000 5,000 5,000 5,000 5,000 5,000 225,000 225,000 225,000 225,000 100,000 35,000 450,550 10,000 10,000 10,000 10,000 10,000 40,000 40,000 40,000 40,000 40,000 75,000 80,000 80,000 80,000 80,000 80,000 400,000 10,312,920 $0.22 $0.23 $0.24 $0.25 $0.26 $0.27 $0.21 $0.25 $0.26 $0.27 $0.28 $0.29 $0.25 $0.27 $0.27 $0.28 $0.28 $0.22 $0.24 $0.25 $0.26 $0.27 $0.19 $0.20 $0.22 $0.23 $0.23 $0.19 $0.28 $0.31 $0.32 $0.34 $0.35 $0.36 $0.22 $0.24 $0.26 $0.27 $0.28 $0.14 $0.23 $0.25 $0.28 $0.29 $0.31 $0.23 NOTE 22: ISSUED CAPITAL CONT. GRANT DATE May-16 (cont.) Nov-16 Dec-16 Sep-17 Oct-17 Nov-17 Mar-18 * Dependent on fulfillment of the performance criteria 61 NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018 NOTE 22: ISSUED CAPITAL CONT. Reconciliation of Employee Share Option Plan: Opening Balance at Beginning of Financial Year Granted during the financial year Forfeited during the financial year Exercised during the financial year Expired during the financial year Closing Balance at 30 June 2018 2017 NUMBER OF OPTIONS 11,139,740 1,588,050 (10,000) (1,276,870) (1,128,000) 10,312,920 WEIGHTED AVERAGE EXERCISE PRICE $0.43 $0.60 $0.43 $0.31 $0.87 $0.46 NUMBER OF OPTIONS 9,698,860 3,382,500 (542,500) (432,120) (967,000) 11,139,740 WEIGHTED AVERAGE EXERCISE PRICE $0.49 $0.39 $0.47 $0.30 $0.52 $0.43 Employee Share Option Plan options exercised during the financial year: SERIES NUMBER EXERCISED EXERCISE PRICE EXERCISE DATE SHARE PRICE AT EXERCISE DATE Jul-08 Jul-08 Nov-08 Nov-08 Nov-08 Mar-09 Nov-09 Nov-10 Jun-12 Jun-12 Aug-12 Dec-12 Dec-12 Dec-12 Dec-12 Dec-12 Aug-13 Aug-13 Jul-15 Jul-15 Nov-16 Nov-16 Nov-16 Nov-16 Sep-17 Sep-17 TOTAL 10,000 4,000 100,000 10,000 10,000 2,120 100,000 100,000 4,000 4,000 37,500 65,000 100,000 50,000 50,000 400,000 60,000 31,250 5,000 5,000 4,000 100,000 5,000 7,500 5,000 7,500 1,276,870 $0.3576 $0.3576 $0.2976 $0.2776 $0.2776 $0.2876 $0.2976 $0.3076 $0.3356 $0.3356 $0.2876 $0.2846 $0.3176 $0.3176 $0.3176 $0.3176 $0.3301 $0.3301 $0.4341 $0.4341 $0.2591 $0.3130 $0.3743 $0.3743 $0.4400 $0.4400 28-Jun-18 29-Jun-18 03-Oct-17 05-Sep-17 05-Sep-17 13-Mar-18 27-Oct-17 27-Oct-17 05-Jun-18 07-Jun-18 14-Jul-17 08-Dec-17 22-Mar-18 27-Mar-18 17-Apr-18 21-Aug-17 22-Mar-18 03-Apr-18 29-Mar-18 07-May-18 22-Mar-18 28-Nov-17 01-May-18 07-May-18 29-Mar-18 07-May-18 $0.5200 $0.5300 $0.4700 $0.4700 $0.4700 $0.4750 $0.4350 $0.4350 $0.5650 $0.5600 $0.4550 $0.3950 $0.5600 $0.5800 $0.6050 $0.4400 $0.5600 $0.5700 $0.5600 $0.6000 $0.5600 $0.4000 $0.6050 $0.6000 $0.5600 $0.6000 Unlisted Options Vested and Exercisable at the Reporting Date 2017 NUMBER 2016 NUMBER 5,924,720 5,840,940 62 NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018 NOTE 22: ISSUED CAPITAL CONT. (ii) Weighted averages The weighted average remaining contractual life of any unlisted share options outstanding at the end of the year is 2.90 years (2017: 4.02 years). The assessed fair value at grant date of options granted during the year ended 30 June 2018 is outlined in the Remuneration Report. The share price at grant date of these options was between $0.395 and $0.60 (2017: between $0.34 and $0.54). The expected average price volatility of the Company’s shares was between 44.2% and 70.0% (2017: between 51.4% and 54%). Expected dividend yield was 0% (2017: 0%) and the average risk-free interest rate used was between 2.23% and 2.6% (2017: between 2.29% and 2.92%). (e) Warrants The weighted average remaining contractual life of the unlisted warrants outstanding at the end of the year is 3.2 years (2017: 4.2 years) Warrants recorded in equity Details of outstanding warrants as at 30 June 2018 are as follows: GRANT DATE EXPIRY DATE EXERCISE PRICE Dec-15 Dec-16 Dec-20 Dec-20 $0.5938 $0.5938 NUMBER 24,124,484 16,082,988 FAIR VALUE AT GRANT DATE $0.1370 $0.1370 Warrants recorded in Other Financial Liabilities (Note 21) The assessed fair value at 30 June 2018 of warrants granted is $137,600 (2017: $106,441). The share price as at 30 June 2018 was $0.53 (2017: $0.40). The expected average price volatility of the Company’s shares was 50.22% (2017: 67.63%). Expected dividend yield was 0% (2017: 0%) and the average risk free interest rate as at 30 June 2018 was 2.0% (2017: 2.24%). NOTE 23: RESERVES Foreign Currency Translation Reserve (a) Share-based Payments Reserve (b) Total Reserves (a) Foreign Currency Translation Reserve 2018 $ 5,562,680 7,535,817 2017 $ 5,060,539 9,052,338 13,098,497 14,112,877 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 2017. 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. 63 NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018 NOTE 24: FINANCIAL INSTRUMENTS CONT. 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 Reconciliation to Total Liabilities Financial liabilities (as above) Non-financial liabilities 2018 $ 2017 $ 8,981,761 934,000 9,892,637 934,000 24,930,461 42,873,656 38,846,222 53,700,293 24,619,183 22,649,744 15,682,109 14,558,628 40,301,292 37,208,372 38,846,222 53,700,293 26,219,607 30,374,769 65,065,829 84,075,062 40,301,292 37,208,372 7,806,682 6,413,117 48,107,974 43,621,489 (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 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) page 64) and interest rates (see (f) page 65). 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 2018 (2017: nil). 64 NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018 NOTE 24: FINANCIAL INSTRUMENTS CONT. (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 2018 $ 2017 $ ASSETS 2018 $ 2017 $ 2,917,953 2,783,829 5,357,899 5,760,733 21,989,949 17,902,620 10,934,417 13,292,465 446,189 69,644 - - Foreign Currency Sensitivity Analysis The Group is mainly exposed to Euros, US dollars 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 key management personnel and represents management’s assessment of the reasonably possible change in foreign currency rates. The sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjusts their translation at the year-end for a 10% change in foreign currency rates. A positive number below indicates an increase in profit or equity where the Australian dollar strengthens 10% against the relevant currency. For a 10% weakening of the Australian dollar against the relevant currency, there would be a comparable impact on the profit or equity with the balances being the opposite. Profit or loss Equity EUR IMPACT USD IMPACT GBP IMPACT 2018 $ - 2017 $ 2018 $ 2017 $ 2,753 (i) 1,016,883 417,322 (ii) (221,813) (273,381) (iii) (11,834) 1,783 (v) 2018 $ 40,563 - 2017 $ 6,331 (iv) - (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 Euros, 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: 65 NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018 NOTE 24: FINANCIAL INSTRUMENTS CONT. • 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 Euro 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 2018 (2017: 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 2018 would increase / (decrease) by $71,611 (2017: increase / (decrease) by $120,338). 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. (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 2018, Merck represented 0% of the Group’s trade and other receivables (2017: Merck 43%). 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. 66 NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018 NOTE 24: FINANCIAL INSTRUMENTS CONT. 2018 Non-interest bearing Variable interest rate instruments Fixed interest rate instruments 2017 Non-interest bearing Variable interest rate instruments Fixed interest rate instruments WEIGHTED AVERAGE EFFECTIVE INTEREST RATE % INTEREST RATE MATURITY LESS THAN 1 MONTH $ 1 – 3 MONTHS $ 3 – 12 MONTHS $ 1 TO 5 YEARS $ 5 + YEARS $ 5,859,857 148,307 569,109 9.0 4.11 - - 363,636 291,830 1,306,058 25,025,686 28,044 126,198 236,004 6,577,273 319,874 1,432,256 25,625,326 3,672,573 142,791 569,109 8.90 4.11 - - 341,703 280,975 1,257,478 24,094,830 28,044 126,198 236,004 4,384,473 309,019 1,383,676 24,672,537 - - - - - - - - TOTAL $ 6,223,493 26,771,881 959,355 33,954,729 4,014,276 25,776,074 959,355 30,749,705 (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. FINANCIAL LIABILITIES FAIR VALUE AS AT 30 JUNE 2018 $ 30 JUNE 2017 $ FAIR VALUE HIERARCHY VALUATION TECHNIQUE SIGNIFICANT UNOBSERVABLE INPUTS RELATIONSHIP OF UNOBSERVABLE INPUTS TO FAIR VALUE Contingent consideration in a business combination (Note 34) $15,682,109 $14,558,628 Level 3 Warrant (Note 21) $137,600 $106,441 Level 2 Discount rate of 25% (pre-tax) and probability adjusted revenue projections. The higher the discount rate, the lower the value. The higher the possible revenue the higher value. N/A N/A Discounted cash flow Black Scholes model The significant inputs used for Level 3 and disclosed above and the inputs used for Level 2 are disclosed in Note 22(e). 67 NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018 NOTE 24: FINANCIAL INSTRUMENTS CONT. RECONCILIATION OF LEVEL 3 FAIR VALUE MEASUREMENTS Opening Balance Total gains or losses: - in profit or loss Closing Balance 2018 CONTINGENT CONSIDERATION IN A BUSINESS COMBINATION 2017 CONTINGENT CONSIDERATION IN A BUSINESS COMBINATION 14,558,628 10,489,438 1,123,481 15,682,109 4,069,190 14,558,628 The carrying value of all other financial assets and liabilities approximate their fair value. NOTE 25: KEY MANAGEMENT PERSONNEL COMPENSATION The aggregate compensation made to Directors and other members of key management personnel 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 NOTE 26: COMMITMENTS FOR EXPENDITURE (a) Operating Leases 2018 $ 2017 $ 1,718,921 2,107,898 79,004 133,130 28,151 89,965 15,216 269,735 1,959,206 2,482,814 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 (b) Rental Agreements 2018 $ 1,005,780 1,853,214 - 2017 $ 996,957 2,675,088 - 2,858,994 3,672,045 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 2018 $ 156,834 156,834 313,668 2017 $ 153,009 - 153,009 68 NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018 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 financial reports The auditor of Bionomics Limited is Deloitte Touche Tohmatsu. NOTE 29: CASH FLOW INFORMATION (a) Cash and Cash Equivalents 2018 $ 2017 $ 206,388 162,994 For the purposes of the consolidated statement of cash flows, cash and cash equivalents include cash on hand and in banks, 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) (b) Reconciliation of Operating (Loss)/Profit to Net Cash Outflow From Operating Activities (Loss)/Profit for the Year Items in (loss)/profit Depreciation and amortisation Share-based payments Gain 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 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)/Increase in other liabilities (Decrease)/Increase in payables Decrease in deferred tax liability Net Cash (Outflows)/Inflows from Operating Activities 2018 $ 2017 $ 24,930,461 42,873,656 2018 $ 2017 $ (25,085,564) (6,749,615) 1,667,810 537,259 - 331,862 - - 2,126,120 1,742,630 503,652 - 158,992 4,338,422 28,659 (504,907) (482,590) (1,203,748) (31,159) 1,471,401 642,166 (268,801) (231,716) (64,348) (81,185) 67,842 41,152 1,063,436 (96,014) 11,500 (6,219) (43,332) 2,187,284 (1,982,617) (1,767,773) (213,234) (20,452,793) (1,439,842) 69 NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018 NOTE 30: LOSS PER SHARE Basic Loss per share Diluted Loss per share 2018 ($0.05) (5 cents) ($0.05) (5 cents) 2017 ($0.01) (1 cent) ($0.01) (1 cent) 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 2018 $ 2017 $ (25,085,564) (6,749,615) 2018 NUMBER 2017 NUMBER Weighted Average Number of Ordinary Shares - Basic Weighted average number of ordinary shares used in calculating basic loss per share: 482,286,644 481,350,312 Weighted Average Number of Ordinary Shares – Diluted Weighted average number of ordinary shares used in calculating basic loss per share 482,286,644 481,350,312 Shares deemed to be issued for no consideration in respect of: - Employee options 10,312,920 11,139,740 Weighted Average Number of Ordinary Shares Used in the Calculation of Diluted Loss Per Share 491,113,244 488,067,812 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. Employee options 2018 NUMBER 1,486,340 2017 NUMBER 4,422,240 The warrants issued by the Company (see Note 21) have been excluded from the weighted average number of ordinary shares. 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 key management personnel of the Group during the financial year ended 30 June 2018 (2017: $0). 70 NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018 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 Reserves Total Equity Financial Performance Loss for the year Other comprehensive income Total Comprehensive Income YEAR ENDED 30 JUNE 2018 $ YEAR ENDED 30 JUNE 2017 $ 31,560,803 51,332,869 22,039,448 20,450,466 53,600,251 71,783,335 10,176,568 11,321,680 31,191,646 24,355,139 41,368,214 35,656,819 12,232,037 36,126,516 135,211,955 134,536,429 (130,475,788) (107,411,637) 7,495,870 9,001,724 12,232,037 36,126,516 (26,207,236) (5,464,127) - - (26,207,236) (5,464,127) (a) Property, Plant and Equipment Commitments There are no contractual commitments for the acquisition of property, plant or equipment as at 30 June 2018 (2017: Nil). (b) Contingent Liabilities and Guarantees The contingent liabilities and guarantees of the parent are the same as disclosed in Note 34 and Note 9 respectively. 71 NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2018 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 2018 this was $15,682,109 (30 June 2017: $14,558,628). Opening Balance Accretion interest Adjustment for changes in timing of expected revenue projections FX movement Closing Balance 2018 $ 2017 $ 14,558,628 10,489,438 331,862 158,992 - 4,338,422 791,619 (428,224) 15,682,109 14,558,628 NOTE 34: CONTINGENT LIABILITIES 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. 72 DIRECTOR’S 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 Errol De Souza Chairman Deborah Rathjen Chief Executive Officer and Managing Director Dated this 16th day of August 2018 73 INDEPENDENT AUDIT REPORT Deloitte Touche Tohmatsu ABN 74 490 121 060 11 Waymouth Street Adelaide, SA, 5000 Australia Phone: +61 8 8407 7000 www.deloitte.com.au Independent Auditor’s Report to the members of Bionomics Limited Report on the Audit of the Financial Report Opinion We have audited the financial report of Bionomics Limited (the “Company”) and its subsidiaries (the “Group”) which comprises the consolidated statement of financial position as at 30 June 2018, the consolidated statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies and other explanatory information, and the directors’ declaration. In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001, including: 1) giving a true and fair view of the Group’s financial position as at 30 June 2018 and of its financial performance for the year then ended; and 2) complying with Australian Accounting Standards and the Corporations Regulations 2001. Basis for Opinion We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report. We are independent of the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. We confirm that the independence declaration required by the Corporations Act 2001, which has been given to the directors of the Company, would be in the same terms if given to the directors as at the time of this auditor’s report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Key Audit Matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report for the current period. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Liability limited by a scheme approved under Professional Standards Legislation. Member of Deloitte Touche Tohmatsu Limited 74 INDEPENDENT AUDIT REPORT Key Audit Matter Carrying value of goodwill, intangible assets and contingent consideration Refer to notes 15, 16 and 33 At 30 June 2018, the Group has goodwill of $12,469,535, other intangible assets of $13,547,816 and a contingent consideration of $15,682,109. Management uses significant judgements and estimates in determining the recoverable amounts of the assets and the fair value of the contingent consideration (which is dependent upon the recoverable amount of the assets). The key assumptions adopted by management in determining the recoverable amounts of the assets and the fair value of the contingent consideration include: • • the forecast probabilities of achieving the various phases in the lifecycle of the development of the drug compounds; and the likelihood of the Group being able to identify partnership opportunities with Pharma companies to further develop their compounds under licencing agreements and the value of anticipated milestones under those agreements. How the scope of our audit responded to the Key Audit Matter Our procedures included, but were not limited to: • • • • • • • obtaining an understanding of the key controls associated with the preparation of the models used to assess the recoverable amount of the assets and valuation of the contingent consideration; agreeing forecast expenditure to Board approved budgets; assessing in conjunction with our valuations specialists, the forecast probabilities of achieving projected milestones at the various phases in the lifecycle of drug compounds against industry data; obtaining an understanding of how the Group structures and prices its licencing agreements and benchmarks against other industry participants; evaluating management’s assessment of the current timing of the phases of each of the drug compounds in line with market announcements made by the Group; assessing the historical accuracy of forecasting by management; in addition, where current contractual arrangements exist: • assessing the key assumptions for the value of milestones and royalty payments at the various phases against current contractual arrangements; and; • performing sensitivity analysis on the key assumptions; and • assessing the appropriateness of the disclosures included in notes 15, 16 and 33 to the financial statements. Other Information The directors are responsible for the other information. The other information comprises the Directors’ Report, which we obtained prior to the date of this auditor’s report, the other information also includes the following documents which will be included in the annual report (but does not include the financial report and our auditor’s report thereon): Highlights, Chairman’s Report, CEO & Managing Directors report, Intellectual property portfolio, Board of Directors, Management, Corporate Governance Statement and Shareholders’ Information which are expected to be made available to us after that date. 75 INDEPENDENT AUDIT REPORT Our opinion on the financial report does not cover the other information and accordingly we do not and will not express any form of assurance conclusion thereon. In connection with our audit of the financial report, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed on the other information that we obtained prior to the date of this auditor’s report, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. When we read the Highlights, Chairman’s Report, CEO & Managing Directors report, Intellectual property portfolio, Board of Directors, Management, Corporate Governance Statement and Shareholders’ Information, if we conclude that there is a material misstatement therein, we are required to communicate the matter to the directors and use our professional judgement to determine the appropriate action. Responsibilities of the Directors for the Financial Report The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In preparing the financial report, the directors are responsible for assessing the ability of the Group to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or has no realistic alternative but to do so. Auditor’s Responsibilities for the Audit of the Financial Report Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report. As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgement and maintain professional scepticism throughout the audit. We also: • • • Identify and assess the risks of material misstatement of the financial report, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors. 76 INDEPENDENT AUDIT REPORT • • • • Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial report or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern. Evaluate the overall presentation, structure and content of the financial report, including the disclosures, and whether the financial report represents the underlying transactions and events in a manner that achieves fair presentation. Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the financial report. We are responsible for the direction, supervision and performance of the Group’s audit. We remain solely responsible for our audit opinion. We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with the directors, we determine those matters that were of most significance in the audit of the financial report of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. Report on the Remuneration Report Opinion on the Remuneration Report We have audited the Remuneration Report included in pages 7 to 16 of the Directors’ Report for the year ended 30 June 2018. In our opinion, the Remuneration Report of Bionomics Limited, for the year ended 30 June 2018, complies with section 300A of the Corporations Act 2001. 77 INDEPENDENT AUDIT REPORT Responsibilities The directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. DELOITTE TOUCHE TOHMATSU Penny Woods Partner Chartered Accountants Adelaide, 16 August 2018 78 CORPORATE GOVERNANCE STATEMENT CORPORATE GOVERNANCE STATEMENT The Corporate Governance Statement for the 2017/2018 financial year is located on the Company’s website under the “About” tab then “Corporate Governance” 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 17 September 2018. Substantial Shareholders Substantial holders in the Company are set out below: ORDINARY SHARES BVF Partners L.P, BVFINC. and Mark N. Lampert Ausbil Investment Management Ltd Equity Securities There are 5,899 holders of ordinary shares in Bionomics. The number of shareholdings held in less than marketable parcels is 387. NUMBER HELD 49,147,193 39,115,389 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. Distribution of Holders of Equity Securities CATEGORY (SIZE OF HOLDING) ORDINARY SHARES UNLISTED OPTIONS WARRANTS NUMBER OF SECURITY HOLDERS 1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 – and over 529 1,859 954 2,141 416 5,899 0 4 3 56 20 83 5 5 79 SHAREHOLDER INFORMATION CONT. SHAREHOLDER INFORMATION CONT. 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 US REGISTER CONTROL A/C 4 BELL POTTER NOMINEES LTD (BB NOMINEES A/C) 5 JP MORGAN NOMINEES AUSTRALIA LIMITED 6 BNP PARIBAS NOMINEES PTY LTD HUB24 CUSTODIAL SERV LTD DRP 7 CITICORP NOMINEES PTY LIMITED 8 CVC LIMITED 9 LINK 405 PTY LTD 10 CITICORP NOMINEES PTY LIMITED (COLONIAL FIRST STATE INV A/C) 11 NEWECONOMY COM AU NOMINEES PTY LIMITED (900 ACCOUNT) 12 MR MARK RICHARD POTTER + MRS REBECCA AMY POTTER (MARK & REBECCA POTTER A/C) 13 WELAS PTY LTD (THE WALES FAMILY SUPER A/C) 14 CHARMED5 PTY LTD 15 PROVENDORE PTY LTD (THE WILKS SUPER FUND A/C) 16 BNP PARIBAS NOMINEES PTY LTD (BNPP NYB CLEARING ACC DRP) 17 LONGFELLOW NOMINEES PTY LTD (NORGARD SUPER FUND A/C) 18 PLUTEUS (NO 164) PTY LIMITED (FRANK WOLF FAMILY A/C) 19 LGL TRUSTEES LIMITED (THE KONDA FAMILY A/C) 20 LEE SANDS NOMINEES PTY LTD (WAYMOUTH PROP NO 1 A/C) ORDINARY SHARES NUMBER HELD PERCENTAGE OF ISSUED SHARES 69,014,731 65,714,018 21,695,080 18,656,750 16,853,532 14,169,541 13,101,194 10,037,131 7,918,873 6,616,891 4,877,306 4,225,000 3,455,357 3,050,000 3,000,000 2,896,640 2,650,000 2,300,000 2,185,000 1,650,000 14.29 13.61 4.49 3.86 3.49 2.93 2.71 2.08 1.64 1.37 1.01 0.87 0.72 0.63 0.62 0.60 0.55 0.48 0.45 0.34 UNQUOTED EQUITY SECURITIES NUMBER ON ISSUE NUMBER OF HOLDERS Options issued pursuant to Bionomics Limited Employee Share Option Plan Options issued pursuant to Bionomics Limited Employee Equity Plan Warrants exchangeable into Bionomics Limited ordinary shares 9,477,670 800,000 41,196,315 83 1 5 274,067,044 56.75 80 COMPANY PARTICULARS Bionomics, a listed public Company, is domiciled and incorporated in Australia. Bionomics’ primary listing is on the Australia Securities Exchange (ASX). Bionomics shares are listed on the Australian Securities Exchange under the code BNO. DIRECTORS Dr Errol De Souza Chairman 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 Deborah Rathjen Mr Peter Turner Mr David Wilson Mr Alan Fisher SENIOR MANAGEMENT Dr Deborah Rathjen Mr Jack Moschakis Chief Executive Officer and Managing Director Non-Executive Director Non-Executive Director Non-Executive Director Chief Executive Officer and Managing Director Legal Counsel and Company Secretary Mr Steven Lydeamore Chief Financial Officer SCIENTIFIC ADVISORS Dr Philippe Danjou MD, PhD Professor Paul Fitzgerald PhD , MSc Dr Richard Hargreaves PhD Dr Tim Harris PhD, D.Sc Dr Ann Hayes PhD, BSc Dr Ole Isacson MD Dr Jose Iglesias MD Dr Fiona McLaughlin PhD, FSB Professor Marina Picciotto PhD Professor Murray B. Stein MD, MPH, FRCPC Dr Fiona Thomson PhD Professor Steven Williams Dr Frank Yocca PhD Professor Allan Young Bionomics ordinary shares commenced trading on the OTCQX marketplace in 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.octmarkets.com For more information, please visit www.otcmarkets.com 31 DALGLEISH STREET, THEBARTON, SA AUSTRALIA, 5031 WWW.BIONOMICS.COM.AU ABN 53 075 582 740 2 0 1 8 B I O N O M I C S A N N U A L R E P O R T