Exopharm Limited Annual Report 2019

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FY2019 Annual Report · Exopharm Limited

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Annual Report
2019

Corporate Information

ACN 163 765 991

Directors

Mr Jason M Watson

Dr Ian E Dixon

Mr David R Parker

Company Secretary

Mr David R Parker

Registered Office

c/o Haines Muir Hill Pty Ltd

Level 1

888 Doncaster Road

DONCASTER EAST

VIC 3109

Principal Place of Business

Level 1

31 Queen Street

MELBOURNE

VIC 3000

Telephone: (03) 9111 0026

Email: info@exopharm.com

Auditors

William Buck

Level 20

181 William Street

MELBOURNE

VIC 3000

Solicitors

Quinert Rodda & Associates

Level 6

400 Collins Street

MELBOURNE

VIC 3000

Share Register

Automic Registry Services Pty Ltd

Level 5

126 Phillip Street

SYDNEY

NSW 2000

Telephone: 1300 288 664

Email: hello@automic.com.au

Contents

Exopharm Snapshot

Chairman’s Letter

Managing Director’s Letter

Director’s Report

Review of Operations

Remuneration Report (Audited)

Auditor’s Independence Declaration

Statement of Comprehensive Income

Statement of Financial Position

Statement of Changes in Equity

Statement of Cash Flows

Notes to the Financial Statements

Director’s Declaration

Independent Auditor’s Report

Additional Securities Information

EXOPHARM ANNUAL REPORT 2019Exopharm Snapshot

Exopharm is a global leader in the exosome therapeutics
field, with focus on using exosomes as regenerative
medicine products for health span related conditions.

Exopharm is the first company able to mass produce exosomes – also first in clinical trial

Interest in exosome technology is exploding, driven by the role exosomes
play in communicating biological processes and as vehicles that deliver
therapeutic payloads.

Exopharm has developed a proprietary purification step in the manufacturing process
of exosomes. There is no known apparent comparable competition as a developer of
superior, scalable methods for purifying exosomes.

Current and future clinical trials in wound healing, dry AMD and osteo-arthritis.

One of the most important roles of exosomes is slowing the ageing process which has
been shown in various pre-clinical animal studies.

Exopharm’s investment proposition: an early and leading position in a promising new
field of cell free regenerative medicine

Listed on ASX Dec ’18 @20c, ~40c today. Employee numbers from 3 to 19 over this time.

Exopharm’s business plan: prove manufacturing leadership and develop prototype
products for licensing partners.

Small Number of people

Very Large Numbers

Massive Numbers

• Rare conditions
e.g. hereditary
conditions like cyctic
fibrosis

• Common medical

• Increasing health span

ailments
e.g. dry AMD

• Reducing prevalence of
most chronic medical
problems

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EXOPHARM ANNUAL REPORT 2019

Exosomal regenerative
potential in various
tissues and organs

Exopharm’s technology enables
exosomes to solve a range of medical
problems which is being tested by our
clinical studies.

Exosomes could be used to treat many
diseases of tissue and organs.

Exopharm
is the first company
able to mass
produce exosomes
– also first in
clinical trial

Exopharm Snapshot

Neurons, axons

Vessels

Dental pulp

Heart

Liver

Skin

Pancreas

Kidney

Muscle

Cartilage

More regenerative
potential to be explored

Skeleton

Improving health
span and exosomes

Health span is the number
of healthy years a person
experiences. The average
health span is shorter than a
person’s lifespan, so they have
many years of poor health
towards the end.

Exopharm and other companies
are now looking at the science
of health span – treatments
that maximise the healthy
years. Exopharm is exploring
the use of exosomes to extend
health span.

Average Health Span

Extended Health Span

Key:

YEARS OF GOOD HEALTH

YEARS OF POOR HEALTH

EXOPHARM ANNUAL REPORT 2019

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EXOPHARM ANNUAL REPORT 2019Chairman’s Letter

It is my pleasure to open the
financial year 2019 annual
report looking back upon a year
of significant achievements for
Exopharm.

Pre-clinical study
reports that our
products have been
made in sufficient
quantity and quality
for animal testing.

Demonstrated the
LEAP Technology at
increased scale and
making clinical-grade
material.

Commenced our
world-first study
using cell free
exosomes.

Dear Shareholder

This time last year Exopharm was a small unlisted company embarking on a significant journey.

We now have a team of 19 staff, have tested our products in an animal study and are
embarking on our world leading first-in-human PLEXOVAL clinical trial.

We achieved our Initial Public Offering listing in December 2018, raising $7,000,000 at 20
cents, and have recently undertaken a Placement to sophisticated investors and completed
a Share Purchase Plan (SPP), both at 37 cents, raising an additional $5.5 million for our
important activities. All Directors purchased additional shares through the SPP and we thank
our shareholders for their support.

Within less than a year of listing we have:

• Established our Exopharm product manufacturing facility and team, based in Melbourne.

• Undertaken our pre-clinical study, reporting the first time that our products have been made

in sufficient quantity and quality (including sterility) for animal testing.

• Demonstrated the LEAP Technology at increased scale and making clinical-grade material.

• Commenced our world-first study using cell free exosome product manufactured using
Exopharm’s LEAP Technology, with study sites at the Royal Melbourne Hospital and
Australian Red Cross Blood Service and results anticipated by mid-2020.

Earlier this year we highlighted recent publications demonstrating the potential benefits
of exosomes - how stem cell derived exosomes have been shown to reverse cell senescence
and the potential for stem cell derived exosomes to treat aging or age-related conditions.
We also explained how Exopharm’s proprietary LEAP technology can overcome the current
‘purification bottleneck’ problem.

As noted recently by Bioshares (No. 804, 12 August 2019) “The field of exosome research and
its potential as a source of new therapies and diagnostic products is growing, with Pubmed
citations for the search term ‘exosome’, increasing from 287 in 2011 to 2,197 in 2018” and
“Exopharm’s proprietary exosome purification technology has the potential to catalyse the
field of exosome therapy, once it validates the technology with several proof-of-technology
products. The value creation opportunities may be numerous and significant.”

Exopharm’s business model is firstly develop our exosome-based products through clinical
trials and then to leverage this value by establishing significant licensing transactions.

We expect the upcoming year to continue to deliver further newsflow and progress. It is
indeed an exciting time to be a leader in the emerging exosome field.

On behalf of the Board, sincere thanks to all investors who have supported us, and thanks also
to our Managing Director Dr Ian Dixon and the Exopharm team for their ongoing efforts and
dedication throughout the year.

Yours faithfully,

Jason Watson
Chairman

EXOPHARM ANNUAL REPORT 2019Managing Directors’ Letter

Exopharm has a clear purpose –
to bring a new type of potential
regenerative medicine into clinical
use to treat health span related
medical conditions.

Since last year, the
Exopharm team has
grown to 19 people.

Dear Shareholder

In Exopharm we are harnessing our LEAP Technology to purify exosomes/extracellular
vesicles from platelets and adult stem cells to treat conditions such as wound healing, dry
age-related macular degeneration and osteoarthritis.

We now have approvals in place to run our first clinical trial – so our company has made the
transition into a clinical stage business. This is a big step forward and has taken a lot of hard
work.

Since last year, the Exopharm team has grown substantially – now at 19 people. This team
is made up of individuals with impressive expertise and capabilities. Together we operate
across a broad range of activities and are building know-how and further intellectual
property in this emerging field.

Your support has allowed us to progress the Development Program – covering product
manufacture, preclinical testing and then clinical use of exosomes purified using LEAP with
human patients.

Our activities are all directed at attracting partnerships with larger biopharmaceutical
companies and associated financial transactions to benefit shareholders.

Today Exopharm is still the only pure-play exosome company listed on the ASX. Elsewhere
in the world transactions have occurred in the exosome field over the past 12 months –
highlighting the financial value of our position in this emerging field.

I retain a significant long-term shareholding in the Company and continue to play a key
ongoing role in the Company’s growth and development through my role as Managing

Director.

We now have
approvals in place
to run our first
clinical trial – so our
company has made the
transition into
a clinical stage
business.

The Exopharm board of directors has been working very well together since
our IPO in December ’18 and have been working proactively to address
strategic and other issues that will help the company maximise its

leadership position in this field.

We are communicating with shareholders in different ways during
the coming year. Our web site contains statutory but also descriptive
information and articles we write to keep you informed. We are also
sending a Newsletter to shareholders a few times a year.

Many thanks for your ongoing support as a shareholder of Exopharm.

Yours faithfully,

Ian Dixon

Founder and Managing Director

EXOPHARM ANNUAL REPORT 2019Directors’
Report

Your directors submit the annual financial report of
Exopharm Limited for the financial year ended 30 June
2019. In order to comply with the provisions of the
Corporations Act 2001, the directors’ report as follows:

Directors

The names of directors who held office during or since the end of the year and until the
date of this report are as follows. Directors were in office for this entire period unless
otherwise stated.

Mr Jason M Watson

Non-Executive Chairman

Appointed 10 August 2018

Dr Ian E Dixon

Managing Director

Mr David R Parker

Non-Executive Director

Mr David R Parker is also the Company Secretary.

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EXOPHARM ANNUAL REPORT 2019

EXOPHARM ANNUAL REPORT 2019Directors’ Report (continued)

Names, qualifications, experience
and special responsibilities

Mr Jason Watson

Non-Executive Chairman

LL.B, B. Comm

Mr Watson has board and advisory experience acting with small and medium-sized
enterprises, research institutes and listed companies in the life sciences and other sectors.

In particular, Mr Watson has assisted companies in developing, commercialising and
transacting technologies through significant biotechnology licensing deals.

Mr Watson is principal of Elementary Law, a legal practice based in Melbourne, Australia.
His practice focuses on assisting clients achieve the best outcomes for their patents and
innovations, including through corporate fund raising, protection strategies, licensing and
commercialisation.

In this capacity, Mr Watson has been recognised in the Intellectual Asset Magazine Patent
1000 independent list of The World’s 1000 Leading Patent Professionals.

Mr Watson has expertise in relation to complex transactions, including establishing multi-
party engagements, research and consultancy contracts and negotiating and implementing
clinical trial, licensing, assignment, manufacturing, shareholding and other commercial
arrangements.

Mr Watson has a Bachelor of Laws with Honours and a Bachelor of Commerce.

Dr Ian Dixon

Founder and Managing Director

PhD, MBA, MAICD

Dr Dixon has a PhD in biomedical engineering from Monash University, an MBA from
Swinburne University and professional engineering qualifications.

In 2011, Dr Dixon Co-Founded Cynata Inc, a company that is progressing the
commercialisation of what has become the Cymerus technology of ASX-listed Cynata
Therapeutics Ltd (ASX-CYP).

Dr Dixon is a co-inventor of the LEAP Technology owned by Exopharm.

Dr Dixon brings to the Board an extensive technical and entrepreneurial background in
founding, building and running technology-based companies, in recognising the potential
commercial value of early-stage drug development, and in understanding the challenges
involved in drug development.

Dr Dixon is also a Non-Executive Director of Noxopharm Ltd (ASX-NOX), a founder of
Nyrada Inc. and a co-inventor of Nyrada drug NYX-330.

During the last three years, Dr Dixon has served as a director of the following listed
companies: Medigard Ltd (ASX:MGZ); Noxopharm Ltd: ASX:NOX)

EXOPHARM ANNUAL REPORT 2019Directors’ Report (continued)

Mr David R Parker

Non-Executive Director and Company Secretary

B.Comm, SAFin

Mr Parker has over sixteen years’ experience as a corporate advisor and investment manager.
He has served as a director or company secretary of a number of ASX-listed companies, having
taken several companies from private companies to listed entities. Mr Parker is an employee of
Alto Capital, a stockbroking and corporate advisory firm which is licensed to provide financial
advice to retail and wholesale investors. Mr Parker is the Sole Director of Cobblestones
Corporate Pty Ltd that provides company secretarial services.

Mr Parker is a Senior Associate (and member since 2001) of the Financial Services Institute
of Australasia (FINSIA).

Mr Parker has a Bachelor of Commerce from Curtin University and has completed a
Graduate Diploma of Applied Corporate Governance from the Governance Institute.

During the last three years, Mr Parker was a non-executive director and company secretary
of Aurora Labs Ltd (ASX:A3D).

Interests in the shares and options of the Company and related bodies corporate

The following relevant interests in shares and options of the Company or a related body
corporate were held by the directors as at the date of this report:

Directors

Number of options over ordinary shares

Number of fully paid ordinary shares

190,000

27,975,294

1,092,200

29,257,494

As at the date of this report, the Company had 95,372,000 fully paid ordinary shares and no
options on issue.

Mr Jason Watson

Dr Ian Dixon

Mr David Parker

Totals

EXOPHARM ANNUAL REPORT 2019Review of Operations

The principal activity of the Company during the year
was developing regenerative medicine, primarily being
the development and de-risking of exosome technologies,
particularly the LEAP manufacturing process and
development of the PlexarisTM and ExomereTM products.

The Company has
raised equity capital
from investors
through seed
rounds and an IPO.

Exopharm has
established a product
manufacturing
facility and team.

The PLEXOVAL study
gained approval
during the second
half of the year.

Overview

The Company has further progressed its development programs and has increased the
scale of operations during the year. The Company has raised equity capital from investors
through seed rounds and an IPO. This funding has been used to hire additional employees
and consultants and to expand operations.

Importantly, Exopharm has established a product manufacturing facility and team, based
in Fitzroy. Further progress has also been made in product analytics and further testing
of the products. During the year the Development Program has progressed, through the
pre-clinical wound healing study and preparations/approvals for the PLEXOVAL first-in-
human study.

During the period our products have been made in sufficient quantity and quality (including
sterility) for animal testing – see more details below.

The PLEXOVAL study gained approval during the second half of the year. Since the end of
the year, the Company commenced the PLEXOVAL study – see more details below.

The Company has also advanced other research and development activities as part of the
development program to exploit the LEAP Technology.

IP & the LEAP Technology

In October 2018, Exopharm acquired all of the intellectual property rights to the LEAP
Technology, Plexaris, Exomeres and associated know-how from Altnia Operations Pty Ltd
under an IP Assignment Deed. Before that Exopharm had a licence, effective 1 May 2018,
to use and commercialise the LEAP Technology pursuant to a patent & know-how licence
agreement which was terminated by the IP Assignment Deed.

The LEAP IP is covered by a Patent Cooperation Treaty (PCT) application which will soon
enter National Phase in 13 jurisdictions. Exopharm has use of US trademarks Plexaris and
Exomere and others are pending.

Manufacture and Analytics

The Exopharm manufacturing team has extra staff and new equipment to support
manufacture of product for clinical trials and other development activities.

The Exopharm team has made significant progress in exosome product manufacturing
and product analytics over the past 12 months. In-house manufacture of product for the
PLEXOVAL study includes stability formulation and sterile manufacture of clinical grade
material.

Pre-clinical Wound Healing Study

Exopharm completed its early-stage proof of concept (POC) animal study to investigate the
safety, efficacy and biochemistry of treating rodents with either Plexaris or Exomeres in a
model of wound healing.

EXOPHARM ANNUAL REPORT 2019Review of Operations (continued)

This study tested Exopharm’s manufacturing capability and looked at safety and efficacy
end-points.

The key outcomes from this study were positive - i.e. manufacturing using LEAP Technology
was achieved and the exosome products demonstrated safety with no adverse events.

Details of the Study

The study used a total of 20 rodents, including one rat that had treatment with formulation
buffer alone (no exosomes) and one rat that had no treatment.

All animals were treated under Animal Ethics Committee oversight and in conformance
with the Australian Code for the care and use of animals for scientific purposes. At the
conclusion of the 7-day study the animals were euthanised. 7 days was chosen to allow
histological analysis of resolving wounds.

Treatments involved single dosing of three concentrations of the exosome product – either
Plexaris or Exomeres - and a 7-day period for incision healing.

Dosing was well tolerated at each of the concentration levels with no study mortalities or
adverse effects detected.

Comments

This study reported for the first time that Exopharm’s Plexaris and Exomere products had
been made in sufficient quantity and quality (including sterility) for animal testing. Making
these materials has demonstrated the LEAP Technology and the upstream and downstream
process equipment and protocols used by the Exopharm team to make the Plexaris and
Exomeres products.

The Pre-clinical Wound Healing Study supported the proposed PLEXOVAL study.

PLEXOVAL Study

During the year, Exopharm received approval from Melbourne Health Human Research
Ethics Committee to commence the PLEXOVAL wound healing study with its PlexarisTM
product under the Australian Clinical Trials Notification (CTN) arrangement.

This FIH study is an important step forward, making Exopharm a clinical stage company and
a world leader in exosome therapeutics.

The PLEXOVAL study is a Prospective open-Label, single dose proof of concept study to
Evaluate the safety, tolerability and biological activity of Platelet-derived Extracellular
Vesicles, on the augmentation of wound healing and is defined as a Phase I study.

The main readouts of the PLEXOVAL study will be safety, wound closure and scarring.
The PLEXOVAL study involves two sites; the Royal Melbourne Hospital and the Australian
Red Cross Blood Service.

This first-in-human clinical trial will investigate autologous (from the same person) Plexaris
(exosomes from blood platelets and purified with LEAP Technology) administered once and
will track participants over 42 days from dosing. Cohort 1 involves up to 15 participants and
Cohort 2 involves up to 5 participants.

The principal investigator of the study is Associate Professor Johannes Kern MD, PhD,
FEBDV, FACD of the Dermatology Department, Royal Melbourne Hospital. The principal
investigator is a practicing dermatologist and dermatopathologist and a Fellow of
Australasian College of Dermatologists.

The study is being facilitated by Accelagen, a Melbourne based Contract Research
Organisation (CRO).

EXOPHARM ANNUAL REPORT 2019Review of Operations (continued)

Following the end of the year, the Company announced that the two enabling contracts had
been executed and the PLEXOVAL study had started. At the time or writing site initiation
visits had commenced and recruitment was likely to start within a month or so.

Other Core Activities

Exopharm’s core strategy is to develop products made using the LEAP Technology and
then partner these products and technologies through licenses and associated financial
transactions.

To support that strategy, Exopharm is progressing a wider testing program of its Plexaris
and Exomere products – including non-clinical, pre-clinical and clinical testing of its
exosome products for other medical conditions e.g. dry age-related macular degeneration
(AMD) and osteoarthritis (OA).

Exopharm is undertaking this Development Program with the ultimate aim to establish
both Plexaris and Exomeres as leading regenerative medicines to treat a broad range of
health span related medical conditions.

Other Research and Development Activities

‘Engineered exosomes’ are exosomes that have been modified (in one or more ways) to
deliver an active ‘cargo’ as a therapeutic.

The field of engineered exosomes has also attracted recent commercial interest and
delivered some significant financial transactions. Exopharm has some experimental
programs underway in the engineered exosome/extracellular vesicle (EV) field.

The field of exosomes as diagnostics has also attracted recent commercial interest and
some notable financial transactions. Exopharm has some experimental programs underway
in the exosome diagnostic field.

Exopharm is accelerating development activities in areas where its LEAP Technology has
likely particular potential, with the aim to add value and then seek partners for these non-
core applications of the LEAP Technology.

Initial Public Offering

The Company engaged Alto Capital to manage an IPO of the Company in 2018. The
Company was successful in raising $7,000,000 and listing on the ASX in December 2018.

Operating results for the year

The comprehensive loss of the Company for the financial year, after providing for income
tax amounted to $2,282,874 (2018: $174,597).

Dividends

No dividends have been paid or declared since the start of the financial period and the
Board does not recommend the payment of a dividend in respect of the financial period.

Options

No options over issued shares or interests in the company were granted during or since the
end of the financial year.

Review of financial conditions

The Company has cash in bank of $4,418,955 as at 30 June 2019. The Directors are of the
opinion that the Company is a going concern.

EXOPHARM ANNUAL REPORT 2019Review of Operations (continued)

Significant
events during
the year

6,934,167 fully
paid ordinary shares at
$0.12 per share and on
10 August 2018, 3,065,833
fully paid ordinary shares
at $0.12 per share to raise
$1,200,000 in total.

The company type was
changed to a public
limited company,
and the name of the
Company was amended
to Exopharm Limited.

23 July

10 August

2018

The Company issued
and allotted 35,000,000
shares at $0.20 to raise
$7,000,000 and was
admitted to the Official
List of the ASX.

10 December

10 August

6 November

The Company appointed
Mr Jason Watson as
a Director of the Company.

The Company lodged a Prospectus
for an Initial Public Offering
of securities on the Australian
Securities Exchange (ASX), to raise
up to $7,000,000 via the issue of
35,000,000 shares at $0.20.

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EXOPHARM ANNUAL REPORT 2019

EXOPHARM ANNUAL REPORT 2019Review of Operations (continued)

Significant events after balance date

On 1 August 2019, the Company issued 11,900,000 fully paid ordinary shares at $0.37
each pursuant to the Share Placement as announced on 24 July 2019 to raise $4,403,000
before costs.

On 19 August 2019, the Company issued 2,972,000 fully paid ordinary shares at $0.37
each through a Share Purchase Plan to raise $1,099,640 before costs.

Employees

The Company had 18 employees as at 30 June 2019 (2018: 3 employees).

Likely developments and expected results

Disclosure of information regarding likely developments in the operations of the Company
in future financial years and the expected results of those operations is likely to result
in unreasonable prejudice to the Company. Therefore, this information has not been
presented in this report.

Environmental legislation

The Company is not subject to any environmental legislation requirements other than
statutory legislation.

Indemnification and insurance of Directors and officers:

The Company has agreed to indemnify all the directors of the Company for any liabilities
(other than the company or related body corporate) that may arise from their position as
directors of the Company, except where the liability arises out of conduct involving a lack of
good faith.

The Company has paid a premium for contract of insuring the directors and officers of the
Company against any liability incurred in the course of their duties to the extent permitted
by the Corporations Act 2001.

Company Secretary

Mr David Parker is the registered Company Secretary and has been in office for the
full year.

Proceedings on behalf of the Company

There are no proceedings on behalf of the Company.

Auditor Independence

Section 307C of the Corporations Act 2001 requires our auditors, William

Buck Audit (Vic) Pty Ltd, to provide the directors of the Company with an
Independence Declaration in relation to the audit of the annual report.
This Independence Declaration is set out on page 7 and forms part of

this directors’ report for the year ended 30 June 2019.

On 19 August,
the Company issued
2,972,000 fully paid
ordinary shares at
$0.37 each through
a Share Purchase Plan
to raise $1,099,640
before costs.

EXOPHARM ANNUAL REPORT 2019Remuneration Report (Audited)

A. Introduction

This report, which form part of the Directors’ report, outlines the remuneration
arrangements in place for the key management personnel (“KMP”) of Exopharm Limited
for the financial year ended 30 June 2019. The information provided in this remuneration
report has been audited as required by Section 308(3C) of the Corporations Act of 2001.

The remuneration report details the remuneration arrangements for KMP who are defined
as those persons having authority and responsibility for planning, directing and controlling
the major activities of the Company, directly or indirectly, including any Director (whether
executive or otherwise) of the Company.

Key Management Personnel

The KMP of the Company during or since the end of the financial year were as follows:

Directors

Position

Period of Employment (to present)

Dr Ian Dixon

Managing Director & CEO

1 May 2018

Mr David Parker

Non-Executive Director, Company
Secretary and acting CFO

26 June 2018

Mr Jason Watson

Non-Executive Chairman

10 August 2018

Executives

Position

Period of Employment (to present)

Dr Gregory Lichtfuss

Chief Operating Officer

1 May 2018

Comments on Remuneration Report at Exopharm’s most recent AGM

This is the first Remuneration Report for Exopharm.

B. Remuneration Policy

The Board of Directors is committed to transparent disclosure of its remuneration strategy
and this report details the Company’s remuneration objectives, practices and outcomes
for KMP, which includes Directors and senior executives, for the year ended 30 June 2019.
Any reference to “Executives” in this report refers to KMPs who are not Non-Executive
Directors.

B.1 Remuneration Policy Framework

The Company’s remuneration policy is to assist the Company to attract and retain key
people to assist the development of its products and entering into partnership transactions.
It has been designed to reward key management and employees fairly and responsibly in
accordance with the market in which the Company operates, and to ensure that Exopharm:

• Provides competitive remuneration that attracts, retains and motivates executives and

employees;

• Benchmarks remuneration against appropriate peer groups;

• Provides a level of remuneration structure to reflect each executive’s respective duties

and responsibilities;

• Aligns executive incentive rewards with the creation of value for shareholders; and

• Complies with legal requirements and appropriate standards of governance.

EXOPHARM ANNUAL REPORT 2019Remuneration Report (continued)

B.2 Remuneration Committee

The Board has not implemented a separate Remuneration Committee during the year.
Due to the size of the Company and the fact there are only three directors on the board,
this has been the responsibility of the whole Board.

B.3 Remuneration Structure

In accordance with best practice corporate governance, the structure of non-executive
Director and executive remuneration is separate and distinct.

B.4 Policy for Executive Remuneration

The Company maintains its existing performance management procedures for key
management personnel by having each key manager undertake an annual performance
appraisal with the Managing Director based on individual and business performance
expectations and other circumstances. The Chief Executive Officer’s performance is in turn
reviewed by the Board of Directors.

The Company’s remuneration policy is to provide a fixed remuneration component and
a short-term and long-term performance based component. The Board believes that this
remuneration policy is appropriate in aligning executives’ objectives with shareholder and
business objectives.

Executive Remuneration consisted of only Fixed Remuneration during the year.

C. Remuneration Components

C.1 Fixed Remuneration

Fixed remuneration consists of based salaries, as well as employer contributions to
superannuation funds and other non-cash benefits. Fixed remuneration was reviewed
by Board of Directors having regard to remuneration paid to executives of relevant
comparable peer group of companies taking into account company and individual
performance. The Company sought to position its fixed remuneration in line with
comparably sized ASX listed companies within the same sector. Size is determined by
market capitalisation at the time of comparison.

Executives receive an employer superannuation contribution made into a complying
superannuation fund at the required Superannuation Guarantee rate (Currently 9.5%) of
base salary. Executives may receive other benefits including vehicle benefits and provision
of a mobile telephone. During the year no vehicle benefits were provided.

C.2 Variable Remuneration

There was no variable remuneration for the Executives during the year.

Variable remuneration includes cash bonus’ which are linked to Key Performance
Indicators. As at 30 June 2019, only the COO had a cash bonus structure incorporated into
his employment contract.

C.3 Policy for and Components of Non-Executive Remuneration During the
Reporting Period

Remuneration Policy

Non-Executive Director Fees

The overall level of annual Non-Executive Director fees was approved by shareholders in
accordance with the requirements of the Company’s Constitution and the Corporation
Act. The maximum aggregate pool of Directors’ fees payable to all of the Company’s
Non-Executive Directors is $350,000 per annum. This aggregate amount was approved
by shareholders at a General Meeting of Shareholders 26 June 2018.

EXOPHARM ANNUAL REPORT 2019Remuneration Report (continued)

Equity Compensation

In accordance with Australian Practice and shareholder preference, the Company’s current
policy is not to grant any further equity-based compensation to Non-Executive Directors.
Accordingly, no equity incentives were offered ton Non-Executive Directors in the
reporting period to 30 June 2019.

Remuneration Structure

Non-Executive Directors receive a fixed remuneration of base fees plus statutory
superannuation. The Chairman receives $96,000 per annum and the only non-executive
Director receives $30,000 per annum, which includes statutory superannuation.
These fees cover main board activities only. Non-Executive Directors may receive
additional remuneration for other services provided to the Company. In addition to
these fees, Non-Executive Directors are entitled to reimbursement of reasonable
travel, accommodation and other expenses incurred in attending meetings of the Board,
committee or shareholder meetings whilst engaged by Exopharm. Non-Executive
Directors do not earn retirement benefits other than superannuation and are not
entitled to any compensation on termination of their directorships.

The annual Board and committee fees were reviewed during the reporting period to
30 June 2019 and have remained unchanged since this review. A further review will be
conducted in the next financial period in accordance with the annual review of salaries
performed by the Board of Directors.

The current Board and additional committee fee structure for Non-Executive Directors is
as per the table below:

Board

Remuneration Committee

Chair

96,000

Member

30,000

Chair

Member

Fees for Non-Executive Directors are not linked to the performance of the Company,
however, to align directors’ interests with shareholder interests, the directors may hold
shares in the Company as governed by the Company’s Securities Trading Policy.

C.4 Remuneration Governance Including Use of Remuneration Consultants

The Board is responsible for ensuring Exopharm’s remuneration strategy is aligned with
Company’s performance and shareholder interests and is equitable for participants.
The Board is responsible for reviewing and making decisions on remunerations matters.

Employment Contracts

As of the date of this report, remuneration and other terms of employment of Directors and
Other Key Management Personnel are formalised in employment contracts and service
agreements. The major provisions of the agreements related to remuneration are set out
below (amounts below include statutory superannuation):

EXOPHARM ANNUAL REPORT 2019Remuneration Report (continued)

Executive Directors

Dr Ian Dixon

Base salary/fee

Terms of agreement

Notice period

$220,000 per annum from
1 November 2018 (including
Super) ($150,000 per annum
from 1 May 2018 to
31 October 2018)

Commencement date –
1 May 2018 for a maximum
term of 2 years unless
extended by mutual
agreement

6 months in writing by
either party

Non-Executive Directors

Mr David Parker

$30,000 per annum
(inc Super)

Commencement date –
26 June 2018

Mr Jason Watson

$96,000 per annum
(inc Super)

Commencement date –
10 August 2018

Upon written advice of
intention or in accordance
with the Constitution
of the Company or the
Corporations Act 2001

Other KMP

Dr Gregor Lichtfuss

$159,432 per annum from
1 July 2019 (inc Super);

Commencement date –
1 May 2018

3 months in writing by
either party

$155,000 per annum from
1 April 2019 – 30 June 2018
(inc Super); $144,000 per
annum from 1 July 2018 to
31 March 2019 (inc Super).

EXOPHARM ANNUAL REPORT 2019Remuneration Report (continued)

E.1 Remuneration of Key Management Personnel

Details of the nature and amount of each element of the emoluments received by or
payable to each of the Key Management Personnel (KMP) of Exopharm Limited for the
financial years specified are as follows:

Short-term benefits

Salary &
fees
$

Bonus
Payments
$

Super-
annuation
$

Share-based
payments
$

78,244

180,764

27,397

135,164

421,570

7,433

17,173

2,603

12,841

40,049

Short-term benefits

Salary &
fees
$

Bonus
Payments
$

Super-
annuation
S

Share-based
payments
$

22,831

20,092

42,923

2,169

954

3,123

Total
$

85,677

197,937

30,000

148,005

461,619

Total
$

25,000

21,046

46,046

No member of key management personnel appointed during the period received a payment
as part of his or her consideration for agreeing to hold the position

2019

Directors

Mr Jason Watson

Dr Ian Dixon

Mr David Parker

Other KMP

Dr Gregor Lichtfuss

2018

Directors

Mr Jason Watson

Dr Ian Dixon

Mr David R Parker

Other KMP

Dr Gregor Lichtfuss

EXOPHARM ANNUAL REPORT 2019Remuneration Report (continued)

Key Management Personnel Equity Holdings

Fully paid ordinary shares

Balance at
beginning
of year
Number

Granted as
compensation
Number

Received
on exercise
of options
Number

Net change
– other
Number

Balance at
end of year
Number

Balance
held
nominally
Number

30 June 2019

Directors

Dr Ian Dixon

27,935,294

Mr David Parker

390,000

Mr Jason Watson

Other KMP

Dr Gregor Lichtfuss

588,235

27,935,294

682,200

1,072,200

150,000

588,235

Balance at
beginning
of year
Number

Granted as
compensation
Number

Received
on exercise
of options
Number

Net change
– other
Number

Balance at
end of year
Number

Balance
held
nominally
Number

30 June 2018

Directors

Dr Ian Dixon

96,000

Mr David Parker

Mr Jason Watson

Other KMP

Dr Gregor Lichtfuss

27,839,294

27,935,294

390,000

588,235

EXOPHARM ANNUAL REPORT 2019Remuneration Report (continued)

Director

Mr Jason Watson

Dr Ian Dixon

Mr David Parker

Directors’ Meetings

The number of resolutions passed by the Directors during the year as shown by the
number of meetings attended was as follows:

Director / Board Meetings

Attended

Eligible to Attend

In addition to the above board meetings, 11 circular resolutions of the Board of
Directors were passed.

Signed in accordance with a resolution of the directors.

Dr Ian Dixon
Managing Director
Exopharm Limited

Dated 30th August 2019

EXOPHARM ANNUAL REPORT 2019
Auditor’s Independence Declaration

AUDITOR’S INDEPENDENCE DECLARATION UNDER SECTION 307C
OF THE CORPORATIONS ACT 2001 TO THE DIRECTORS OF
EXOPHARM LIMITED

I declare that, to the best of my knowledge and belief during the year ended 30 June 2019
there have been:

— no contraventions of the auditor independence requirements as set out in the

Corporations Act 2001 in relation to the audit; and

— no contraventions of any applicable code of professional conduct in relation to the

audit.

William Buck Audit (Vic) Pty Ltd
ABN 59 116 151 136

J.C. Luckins
Director

Dated 30 August 2019

EXOPHARM ANNUAL REPORT 2019

Statement Of Comprehensive Income

For The Year Ended 30 June 2019

Notes

2019
$

2018
$

Other Income

Research and development refund claim

Interest income

Expenses

Research and development

Corporate expenses

Employee costs

Other expenses

28,789

(496,688)

(315,022)

(1,048,672)

(451,281)

43,919

(79,164)

(66,908)

(56,165)

(16,349)

Loss before income tax expense

(2,282,874)

(174,597)

Income tax expense

Loss for the year

Other comprehensive income, net of income tax

Total comprehensive loss for the year

Loss attributable to members of the Company

Basic and diluted loss per share (cents per share)

(2,282,874)

(174,597)

(2,282,874)

(174,597)

(2,282,874)

(174,597)

(4.03)

(1.40)

The accompanying notes form part of these financial statements.

EXOPHARM ANNUAL REPORT 2019
Statement Of Financial Position

As At 30 June 2019

Assets

Current Assets

Cash and cash equivalents

Other current assets

Total Current Assets

Non-current Assets

Plant and Equipment

Intangible assets

Total Non-current Assets

Total Assets

Liabilities

Current Liabilities

Accounts payable and other current liabilities

Total Current Liabilities

Non-current Liabilities

Other non-current liabilities

Total Non-current Liabilities

Total Liabilities

Net Assets / (Liabilities)

Equity

Issued capital

Accumulated losses

Total Equity

The accompanying notes form part of these financial statements.

Notes

2019
$

2018
$

4,418,955

162,508

52,401

60,380

4,581,463

112,781

494,122

325,000

819,122

5,400,585

281,002

5,119,583

20,478

175,000

195,478

308,259

215,527

100,000

315,527

(7,268)

7,578,815

169,090

(2,459,232)

(176,358)

5,119,583

(7,268)

EXOPHARM ANNUAL REPORT 2019Statement Of Changes In Equity

For The Year Ended 30 June 2019

Issued Capital
$

Accumulated
Losses
$

Total Equity
$

Balance as at 1 July 2017

1,000

(1,761)

(761)

Loss for the year

Other comprehensive income, net of income tax

Total comprehensive loss for the year

(174,597)

(176,358)

(174,597)

Shares issued during the year
(net of share issue costs)

Balance as at 30 June 2018

168,090

169,090

(176,358)

168,090

(7,268)

Issued Capital
$

Accumulated
Losses
$

Total Equity
$

Balance as at 1 July 2018

169,090

(176,358)

(7,268)

Loss for the year

Other comprehensive income, net of income tax

Total comprehensive loss for the year

Shares issued during the year
(net of share issue costs)

(2,282,874)

7,409,725

Balance as at 30 June 2019

7,578,815

(2,549,232)

5,119,583

The accompanying notes form part of these financial statements.

EXOPHARM ANNUAL REPORT 2019Statement Of Cash Flows

For The Year Ended 30 June 2019

Notes

2019
$

2018
$

Cash flows from operating activities

Payments to suppliers and employees

(2,213,308)

(94,002)

Interest received

28,789

Net cash (used in) operating activities

(2,184,519)

(93,932)

Cash flows from investing activities

Purchase of plant and equipment

Additions to intangible asset

Net cash (used in) investing activities

Cash flows from financing activities

(533,652)

(20,996)

(325,000)

(858,652)

(20,996)

Proceeds from issue of shares – net of issue costs

7,409,725

168,090

Repayment of funds loaned by a shareholder

(761)

Net cash provided by financing activities

7,409,725

167,329

Net increase in cash and cash equivalents

4,366,554

52,401

Cash and cash equivalents at the beginning of the year

52,401

Cash and cash equivalents at the end of the year

4,418,955

52,401

The accompanying notes form part of these financial statements.

EXOPHARM ANNUAL REPORT 2019Notes To The Financial Statements

For The Year Ended 30 June 2019

Note 1: Statement Of Significant Accounting Policies

a. Basis of Preparation

These general purpose financial statements have been prepared in accordance with
Australian Accounting Standards and Interpretations issued by the Australian Accounting
Standards Board (‘AASB’) and the Corporations Act 2001, as appropriate for for-profit
oriented entities. These financial statements also comply with International Financial
Reporting Standards as issued by the International Accounting Standards Board (‘IASB’).

The financial statements comprise the financial statements of the Company. For the
purposes of preparing the financial statements, the Company is a for-profit entity.

The accounting policies detailed below have been consistently applied to all of the years
presented unless otherwise stated. The financial statements are for Exopharm Limited.
Exopharm Limited does not have any subsidiaries.

The financial report has also been prepared on a historical cost basis. Historical cost is
based on the fair values of the consideration given in exchange for goods and services.

The financial report is presented in Australian dollars.

The Company is a listed public company, incorporated in and operating in Australia.
The principal activity of the Company during the year was investment in biopharmaceutical
drug development.

b. Adoption of new and revised standards

Changes in accounting policies on initial application of Accounting Standards

In the year ended 30 June 2019, the Board has reviewed all new and revised standards and
interpretations issued by the AASB that are relevant to the Company and effective for the
current annual reporting period.

As a result of this review, the Board has determined that there is no material impact of the
new and revised standards and interpretations on the Company and, therefore, no material
change is necessary to the Company accounting policies.

The Board has also reviewed all new Standards and Interpretations that have been issued
but are not yet effective for the period ended 30 June 2019. As a result of this review the
Board has determined that there is no impact, material or otherwise, of the new and revised
Standards and Interpretations on its business and, therefore, no change necessary to
Company accounting policies.

c. Statement of compliance

The financial report was authorised for issue on 30 August 2019. The financial report
complies with Australian Accounting Standards, which include Australian equivalents to
International Financial Reporting Standards (AIFRS). Compliance with AIFRS ensures that
the financial report, comprising the financial statements and notes thereto, complies with
International Financial Reporting Standards (IFRS).

d. Critical accounting judgements and key sources of estimation uncertainty

The application of accounting policies requires the use of judgements, estimates and
assumptions about carrying values of assets and liabilities that are not readily apparent
from other sources. The estimates and associated assumptions are based on historical
experience and other factors that are considered to be relevant. Actual results may differ
from these estimates.

EXOPHARM ANNUAL REPORT 2019Notes To The Financial Statements

For The Year Ended 30 June 2019

Note 1: Statement Of Significant Accounting Policies Cont.

Useful lives of depreciable assets

Management reviews its estimate of the useful lives of depreciable assets at each reporting
date, based on the expected utility of the assets.

Impairment of plant and equipment of intangible assets

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions are
recognised in the period in which the estimate is revised if it affects only that period or in
the period of the revision and future periods if the revision affects both current and future
periods.

e. Segment reporting

Operating segments are reported in a manner consistent with the internal reporting
provided to the chief operating decision maker. The chief operating decision maker, who is
responsible for allocating resources and assessing performance of the operating segments,
has been identified as the board of Directors of Exopharm.

h. Foreign currency translation

Both the functional and presentation currency of Exopharm is Australian dollars.

Transactions in foreign currencies are initially recorded in the functional currency by
applying the exchange rates ruling at the date of the transaction. Monetary assets and
liabilities denominated in foreign currencies are retranslated at the rate of exchange ruling
at the balance date. All exchange differences in the financial report are taken to profit or
loss with the exception of differences on foreign currency borrowings that provide a hedge
against a net investment in a foreign entity. These are taken directly to equity until the
disposal of the net investment, at which time they are recognised in profit or loss.

Tax charges and credits attributable to exchange differences on those borrowings are also
recognised in equity.

Non-monetary items that are measured in terms of historical cost in a foreign currency are
translated using the exchange rate as at the date of the initial transaction.

Non-monetary items measured at fair value in a foreign currency are translated using the
exchange rates at the date when the fair value was determined. Translation differences on
assets and liabilities carried at fair value are reported as part of the fair value gain or loss.

g. Other Income

Interest income

Interest income is recognised as interest accrues using the effective interest method.
This is a method of calculating the amortised cost of a financial asset and allocating the
interest income over the relevant period using the effective interest rate, which is the
rate that exactly discounts estimated future cash receipts through the expected life of
the financial asset to the net carrying amount of the financial asset.

Research and Development Refund

Income from a research and development refund as a financial asset is recognised when it is
probable that the grant will be received, which is determined in reference to when a refund
has been verified by a suitably qualified third party and lodged with the Australian Taxation
Office. No estimates of any potential research and development refunds or grants are
recognised until such time as they are probable.

EXOPHARM ANNUAL REPORT 2019Notes To The Financial Statements

For The Year Ended 30 June 2019

Note 1: Statement Of Significant Accounting Policies Cont.

h. Leases

Operating lease payments are recognised as an expense on a straight line basis over the
lease term, except where another systematic basis is more representative of the time
pattern in which economic benefits from the leased asset are consumed. In the event
that lease incentives are received to enter into operating leases, such incentives are
recognised as a liability. The aggregate benefit of incentives is recognised as a reduction
of rental expense on a straight-line basis, except where another systematic basis is more
representative of the time pattern in which economic benefits from the leased asset are
consumed.

i. Income tax

The income tax expense or benefit for the period is the tax payable on the current period’s
taxable income based on the applicable income tax rate for each jurisdiction adjusted by
changes in deferred tax assets and liabilities attributable to temporary difference and to
unused tax losses.

The current income tax charge is calculated on the basis of the tax laws enacted or
substantively enacted at the end of the reporting period. Management periodically
evaluates positions taken in tax returns with respect to situations in which applicable tax
regulation is subject to interpretation. It establishes provisions where appropriate on the
basis of amounts expected to be paid to the tax authorities.

Current tax assets and liabilities for the current and prior periods are measured at the
amount expected to be recovered from or paid to the taxation authorities. The tax rates and
tax laws used to compute the amount are those that are enacted or substantively enacted
by the balance date.

Deferred tax assets and deferred tax liabilities are provided on all temporary differences at
the balance date between the tax bases of assets and liabilities and their carrying amounts
for financial reporting purposes.

Deferred tax liabilities are recognised for all taxable temporary differences except:

• when the deferred tax liability arises from the initial recognition of goodwill or of an asset
or liability in a transaction that is not a business combination and that, at the time of the
transaction, affects neither the accounting profit nor taxable profit or loss; or

• when the taxable temporary difference is associated with investments in subsidiaries,

associates or interests in joint ventures, and the timing of the reversal of the temporary
difference can be controlled and it is probable that the temporary difference will not
reverse in the foreseeable future.

Deferred tax assets are recognised for all deductible temporary differences, carry-forward
of unused tax assets and unused tax losses, to the extent that it is probable that taxable
profit will be available against which the deductible temporary differences and the carry-
forward of unused tax credits and unused tax losses can be utilised, except:

• when the deferred tax asset relating to the deductible temporary difference arises

from the initial recognition of an asset or liability in a transaction that is not a business
combination and, at the time of the transaction, affects neither the accounting profit nor
taxable profit or loss; or

EXOPHARM ANNUAL REPORT 2019Notes To The Financial Statements

For The Year Ended 30 June 2019

Note 1: Statement Of Significant Accounting Policies Cont.

• when the deductible temporary difference is associated with investments in subsidiaries,

associates or interests in joint ventures, in which case a deferred tax asset is only
recognised to the extent that it is probable that the temporary difference will reverse in
the foreseeable future and taxable profit will be available against which the temporary
difference can be utilised.

The carrying amount of deferred tax assets is reviewed at each balance date and reduced
to the extent that it is no longer probable that sufficient taxable profit will be available to
allow all or part of the deferred tax asset to be utilised.

Unrecognised deferred tax assets are reassessed at each balance date and are recognised
to the extent that it has become probable that future taxable profit will allow the deferred
tax asset to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply
to the year when the asset is realised or the liability is settled, based on tax rates (and tax
laws) that have been enacted or substantively enacted at the balance date.

Income taxes relating to items recognised directly in equity are recognised in equity and
not in profit or loss.

Deferred tax assets and deferred tax liabilities are offset only if a legally enforceable right
exists to set off current tax assets against current tax liabilities and the deferred tax assets
and liabilities relate to the same taxable entity and the same taxation authority.

j. Other taxes

Revenues, expenses and assets are recognised net of the amount of GST except:

• when the GST incurred on a purchase of goods and services is not recoverable from the

taxation authority, in which case the GST is recognised as part of the cost of acquisition of
the asset or as part of the expense item as applicable; and

• receivables and payables, which are stated with the amount of GST included.

The net amount of GST recoverable from, or payable to, the taxation authority is included
as part of receivables or payables in the statement of financial position.

Cash flows are included in the statement of cash flows on a gross basis and the GST
component of cash flows arising from investing and financing activities, which is
recoverable from, or payable to, the taxation authority are classified as operating cash
flows.

Commitments and contingencies are disclosed net of the amount of GST recoverable from,
or payable to, the taxation authority.

k. Impairment of tangible and intangible assets other than goodwill

The Company assesses at each balance date whether there is an indication that an asset
may be impaired. If any such indication exists, or when annual impairment testing for an
asset is required, the Company makes an estimate of the asset’s recoverable amount.
An asset’s recoverable amount is the higher of its fair value less costs to sell and its value
in use and is determined for an individual asset, unless the asset does not generate cash
inflows that are largely independent of those from other assets or groups of assets and
the asset’s value in use cannot be estimated to be close to its fair value. In such cases the
asset is tested for impairment as part of the cash-generating unit to which it belongs.
When the carrying amount of an asset or cash-generating unit exceeds its recoverable
amount, the asset or cash-generating unit is considered impaired and is written down to
its recoverable amount.

EXOPHARM ANNUAL REPORT 2019Notes To The Financial Statements

For The Year Ended 30 June 2019

Note 1: Statement Of Significant Accounting Policies Cont.

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. Impairment losses relating to continuing
operations are recognised in those expense categories consistent with the function of the
impaired asset unless the asset is carried at revalued amount (in which case the impairment
loss is treated as a revaluation decrease).

An assessment is also made at each balance date as to whether there is any indication that
previously recognised impairment losses may no longer exist or may have decreased. If such
indication exists, the recoverable amount is estimated. A previously recognised impairment
loss is reversed only if there has been a change in the estimates used to determine the
asset’s recoverable amount since the last impairment loss was recognised. If that is
the case the carrying amount of the asset is increased to its recoverable amount. That
increased amount cannot exceed the carrying amount that would have been determined,
net of depreciation, had no impairment loss been recognised for the asset in prior years.
Such reversal is recognised in profit or loss unless the asset is carried at revalued amount,
in which case the reversal is treated as a revaluation increase. After such a reversal the
depreciation charge is adjusted in future periods to allocate the asset’s revised carrying
amount, less any residual value, on a systematic basis over its remaining useful life.

l. Cash and cash equivalents

Cash comprises cash at bank and on hand. Cash equivalents are short term, highly liquid
investments that are readily convertible to known amounts of cash and which are subject to
an insignificant risk of changes in value.

m. Trade and other receivables

Trade receivables are recognised initially at fair value and subsequently measured at
amortised cost using the effective interest method, less provisions for impairment, doubtful
debts and rebates. Trade receivables are generally due for settlement within 30 – 90 days.

In relation to the financial assets carried at amortised cost, AASB 9 requires an expected
credit loss model to be applied as opposed to an incurred credit loss model under AASB
139. The expected credit loss model requires the Company to account for expected credit
losses and changes in those expected credit losses at each reporting date to reflect changes
in credit risk since initial recognition of the financial asset. AASB 9 requires the Company
to measure the loss allowance at an amount equal to lifetime expected credit loss (“ECL”)
if the credit risk on the instrument has increased significantly since initial recognition.
If the credit risk on the financial instrument has not increased significantly since initial
recognition the Company is required to measure the loss allowance for that financial
instrument at an amount equal to the ECL within the next 12 months.

The amount of the impairment loss is recognised in the Statement of Profit or Loss and
Other Comprehensive Income within other expenses.

When a trade receivable, for which an impairment allowance had been recognised,
becomes uncollectible in a subsequent period, it is written off against the allowance
account. Subsequent recoveries of amounts previously written off are credited against
other expenses in the Statement of Profit or Loss and Other Comprehensive Income.

EXOPHARM ANNUAL REPORT 2019Notes To The Financial Statements

For The Year Ended 30 June 2019

Note 1: Statement Of Significant Accounting Policies Cont.

n. Plant and equipment

Plant and equipment is stated at cost less accumulated depreciation and any accumulated
impairment losses. Such cost includes the cost of replacing parts that are eligible for
capitalisation when the cost of replacing the parts is incurred. Similarly, when each major
inspection is performed, its cost is recognised in the carrying amount of the plant and
equipment as a replacement only if it is eligible for capitalisation.

Depreciation is calculated on diminishing value basis using the following useful lives:

Plant equipment

Office equipment

Computer equipment

3 to 10 years

3 years

The assets’ residual values, useful lives and amortisation methods are reviewed, and
adjusted if appropriate, at each financial year end.

Impairment

The carrying values of plant and equipment are reviewed for impairment at each
reporting date, with recoverable amount being estimated when events or changes
in circumstances indicate that the carrying value may be impaired. The recoverable
amount of plant and equipment 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 an asset that does not
generate largely independent cash inflows, recoverable amount is determined for the
cash-generating unit to which the asset belongs, unless the asset’s value in use can be
estimated to approximate fair value. An impairment exists when the carrying value of
an asset or cash-generating unit exceeds its estimated recoverable amount. The asset
or cash-generating unit is then written down to its recoverable amount. For plant and
equipment, impairment losses are recognised in the statement of comprehensive income
in the cost of sales line item. However, because land and buildings are measured at
revalued amounts, impairment losses on land and buildings are treated as a revaluation
decrement.

Derecognition and disposal

An item of plant and equipment is derecognised upon disposal or when no further future
economic benefits are expected from its use or disposal. Any gain or loss arising on
derecognition of the asset (calculated as the difference between the net disposal proceeds
and the carrying amount of the asset) is included in profit or loss in the year the asset is
derecognised.

o. Intangible assets

Intangible assets acquired separately

Intangible assets acquired separately are recorded at cost less accumulated amortisation
and impairment. Amortisation is charged on a straight-line basis over their estimated
useful lives. Amortisation starts following the grant of a patent and assets are held at cost
until such time as the patent has been granted or impaired. The estimated useful life and
amortisation method is reviewed at the end of each annual reporting period, with any
changes in these accounting estimates being accounted for on a prospective basis.

EXOPHARM ANNUAL REPORT 2019Notes To The Financial Statements

For The Year Ended 30 June 2019

Note 1: Statement Of Significant Accounting Policies Cont.

Internally generated intangible assets – research and development expenditure

Expenditure on research activities is recognised as an expense in the period in which it is
incurred. Where no internally-generated intangible asset can be recognised, development
expenditure is recognised as an expense in the period as incurred.

An intangible asset arising from development (or from the development phase of an
internal project) is recognised if, and only if, all of the following have been demonstrated:

• The technical feasibility of completing the intangible asset so that it will be available for

use or sale;

• The intention to complete the intangible asset and use or sell it;

• The ability to use or sell the intangible asset;

• How the intangible asset will generate probable future economic benefits;

• The availability of adequate technical, financial and other resources to complete

development and to use or sell the intangible asset; and

• The ability to measure reliably the expenditure attributable to the intangible asset during

its development.

The amount initially recognised for internally-generated intangible assets is the sum of the
expenditure incurred from the date when the intangible asset first meets the recognition
criteria listed above. Subsequent to initial recognition, internally-generated intangible
assets are reported at cost less accumulated amortisation and accumulated impairment
losses, on the same basis as intangible assets acquired separately.

The following useful lives are used in the calculation of amortisation:

IP asset

8 years following grant of patent

p. Trade and other payables

Trade payables and other payables are carried at amortised costs and represent liabilities
for goods and services provided to the Company prior to the end of the financial year
that are unpaid and arise when the Company becomes obliged to make future payments
in respect of the purchase of these goods and services. Trade and other payables are
presented as current liabilities unless payment is not due within 12 months.

q. Provisions

Provisions are recognised when the Company has a present obligation (legal or
constructive) as a result of a past event, it is probable that an outflow of resources
embodying economic benefits will be required to settle the obligation and a reliable
estimate can be made of the amount of the obligation.

When the Company expects some or all of a provision to be reimbursed, for example under
an insurance contract, the reimbursement is recognised as a separate assets but only when
the reimbursement is virtually certain. The expense relating to any provision is presented in
the statement of comprehensive income net of any reimbursement.

If the effect of the time value of money is material, provisions are discounted using a
current pre-tax rate that reflects the risks specific to the liability.

When discounting is used, the increase in the provision due to the passage of time is
recognised as a borrowing cost.

EXOPHARM ANNUAL REPORT 2019Notes To The Financial Statements

For The Year Ended 30 June 2019

Note 1: Statement Of Significant Accounting Policies Cont.

r. Issued capital

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue
of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.

s. Loss per share

Basic loss per share is calculated as net loss attributable to members of the Company,
adjusted to exclude any costs of servicing equity (other than dividends) and preference
share dividends, divided by the weighted average number of ordinary shares, adjusted for
any bonus element.

Diluted loss per share is calculated as net loss attributable to members of the Company,
adjusted for:

• costs of servicing equity (other than dividends) and preference share dividends;

• the after tax effect of dividends and interest associated with dilutive potential ordinary

shares that have been recognised as expenses; and

• other non-discretionary changes in revenues or expenses during the period that would
result from the dilution of potential ordinary shares; divided by the weighted average
number of ordinary shares and dilutive potential ordinary shares, adjusted for any bonus
element.

t. New Standard adopted

AASB 9 Financial Instruments (‘AASB 9’)

The entity has adopted AASB 9 as issued in July 2014 with the date of initial application
being 1 July 2018. In accordance with the transitional provisions in AASB 9, comparative
figures have not been restated. AASB 9 replaces AASB 139 Financial Instruments: Recognition
and Measurement (‘AASB 139’), bringing together all three aspects of the accounting for
financial instruments: clarification and measurement; impairment; and hedge accounting.
The accounting policies have been updated to reflect the application of AASB 9 below.

Measurement and classification

At the date of initial application, existing financial assets and liabilities of the entity were
assessed in terms of the requirements of AASB 9. The assessment was conducted on
instruments that had not been de-recognised as at 1 July 2018. In this regard the entity
has determined that the adoption of AASB 9 has impacted the classification of financial
instruments at 1 July 2018 as follows:

Class of financial instrument
presented in the statement of
financial position

Original measurement category
under AASB 139
(i.e. prior to 1 July 2018)

New Measurement
category under AASB 9
(i.e. from 1 July 2018)

Cash and cash equivalents

Loans and receivables

Financial asset at amortised cost

Trade and other receivables

Loans and receivables

Financial asset at amortised cost

Trade and other payables

Financial liability at amortised cost

The change in classification has not resulted in any re-measurement adjustments at 1 July
2018.

EXOPHARM ANNUAL REPORT 2019Notes To The Financial Statements

For The Year Ended 30 June 2019

Note 1: Statement Of Significant Accounting Policies Cont.

Impairment of financial assets

In relation to the financial assets carried at amortised cost, AASB 9 requires an expected
credit loss model to be applied as opposed to an incurred credit loss model under AASB
139. The expected credit loss model requires the entity to account for expected credit
losses and changes in those expected credit losses at each reporting date to reflect changes
in credit risk since initial recognition of the financial asset. AASB 9 requires the entity
to measure the loss allowance at an amount equal to lifetime expected credit loss (‘ECL’)
if the credit risk on the instrument has increased significantly since initial recognition.
If the credit risk on the financial instrument has not increased significantly since initial
recognition the entity is required to measure the loss allowance for that financial
instrument at an amount equal to the ECL within the next 12 months.

At 1 July 2018, the entity reviewed and assessed the existing financial assets for
impairment using reasonable and supportable information. In accordance with AASB 9,
where the entity concluded that it would require undue cost and effort to determine the
credit risk of a financial asset on initial recognition, the entity recognises lifetime ECL.
The result of the assessment is as follows;

Items existing at 1 July 2018 that
are subject to the impairment
provisions of AASB 9

Cash and cash equivalents

Trade receivables

Cumulative additional loss
allowance required on 1 July
2018

Credit risk attributes

All bank balances are assessed to have
low credit risk at each reporting date as
they are held with reputable financial
institutions.

The entity applied the simplified approach
and concluded that the lifetime ECL would
be negligible on receivable balances not
already provided for and therefore no loss
allowance was required at 1 July 2018.

Note 2: Segment Reporting

The Company only operated in one segment, being investment in research and
development of biopharmaceutical drugs.

EXOPHARM ANNUAL REPORT 2019Notes To The Financial Statements

For The Year Ended 30 June 2019

Note 3: Expenses

Research and development

Consumables

Consulting

Others

Note 4: Income Tax

a. Income tax benefit

2019
$

2018
$

313,369

115,229

68,090

496,688

45,343

4,095

29,726

79,164

2019
$

2018
$

b. Numerical reconciliation between tax-expense and pre-tax net loss

(Loss) from ordinary activities

(2,282,874)

(174,597)

Income tax (benefit) using the Company’s domestic tax rate of 27.5%
(2018: 27.5%)

(627,790)

(48,014)

Temporary differences not recognised

Current period (loss) for which no deferred tax asset was recognised

627,790

48,014

Income tax benefit attributable to entity

c. Unrecognised deferred tax

Tax losses for which no deferred tax asset has been recognised

Losses available for offset against future taxable income

Total

Potential tax benefits at 27.5%

2019
$

2,457,471

675,804

2018
$

174,597

48,014

The benefit of deferred tax assets not brought to account will only be brought to account if:

• future assessable income is derived of a nature and of an amount sufficient to enable the

benefit to be realised;

• the conditions for deductibility imposed by tax legislation continue to be complied with;

and

• no changes in tax legislation adversely affect the Company in realising the benefit.

EXOPHARM ANNUAL REPORT 2019Notes To The Financial Statements

For The Year Ended 30 June 2019

Note 5: Issued Capital

Ordinary shares

Balance at beginning of year

Shares issued

Less share issue costs

Balance at end of year

2019
$

2018
$

169,090

8,200,000

(790,275)

7,578,815

1,000

177,990

(9,900)

169,090

Movements in ordinary shares on issue

No.

Balance at beginning of year

Shares issued

Balance at end of year

35,500,000

100,000

45,000,000

35,400,000

80,500,000

35,500,000

Ordinary shareholders 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 proxy,
is entitled to one vote, and upon a poll each share is entitled to one vote.

Ordinary shares have no par value and the Company does not have a limited amount of
authorised capital.

Note 6: Loss Per Share

Basic and diluted loss per share

Basic loss per share (cents per share)

(4.03)

(1.40)

30 June 2019
Cents per share

30 June 2018
Cents per share

Loss

Losses used in the calculation of basic and diluted loss per share is as follows:

30 June 2019
$

30 June 2018
$

(2,282,874)

(174,597)

Losses

EXOPHARM ANNUAL REPORT 2019Notes To The Financial Statements

For The Year Ended 30 June 2019

Note 6: Loss Per Share Cont.

Weighted average number of ordinary shares

The weighted average number of ordinary shares used in the calculation of basic and
diluted loss per share is as follows:

30 June 2019
Number

30 June 2018
Number

Weighted average number of ordinary shares for the purpose of
basic and diluted loss per share

56,710,951

12,439,674

Note 7: Cash And Cash Equivalents

Reconciliation to the Statement of Cash Flows:

For the purposes of the statement of cash flows, cash and cash equivalents comprise cash
at bank. Cash and cash equivalents as shown in the statement of cash flows is reconciled to
the related items in the statement of financial position as follows:

Cash in bank

Short term deposit

2019
$

1,918,955

2,500,000

4,418,955

2018
$

52,401

Term deposits are taken for periods between one and three months, depending on
the immediate cash requirements of the Company, and earn interest at the respective
short-term deposit rates.

Reconciliation of loss after tax to net cash outflow from operating activities:

Loss for the year

Adjustment for non-cash income and expense items

Depreciation and amortisation

Research and development refund claim

Changes in assets and liabilities

Other current assets

Accounts payable and accruals

Net cash outflow from operating activities

2019
$

2018
$

(2,282,874)

(174,597)

60,008

518

(43,919)

(27,128)

65,475

(2,184,519)

(16,461)

140,527

(93,932)

EXOPHARM ANNUAL REPORT 2019Notes To The Financial Statements

For The Year Ended 30 June 2019

Note 8: Other Current Assets

GST receivable

Research and development refund claim

Other receivables

Prepayments

2019
$

36,209

14,925

111,374

162,508

Note 9: Plant And Equipment

Plant
equipment
$

Computer
equipment
$

Office
equipment
$

Balance at 1 July 2018

Additions

Depreciation charge for the year

Balance at 30 June 2019

Balance at 1 July 2017

Additions

Depreciation charge for the year

Balance at 30 June 2018

20,478

470,078

(52,089)

438,467

20,996

(518)

20,478

49,962

(6,089)

43,873

13,612

(1,830)

11,782

Note 10: Intangible Assets

2018
$

16,461

43,919

60,380

Total
$

20,478

533,652

(60,008)

494,122

20,996

(518)

20,478

Balance at 1 July 2018

Terminated/Cancelled

Additions

Balance at 30 June 2019

Balance at 1 July 2017

Additions

Balance at 30 June 2018

IP asset

License asset
$

325,000

175,000

(175,000)

175,000

EXOPHARM ANNUAL REPORT 2019Notes To The Financial Statements

For The Year Ended 30 June 2019

Note 10: Intangible Assets Cont.

As at 30 June 2018, the Company is a party to a Patent & Know-How License Agreement
(the “License Agreement”) with Altnia Operations Pty Ltd (the “Licensor”) (a company
owned by a KMP). The Licensor has rights to certain patents (the “Technology”).
The Licensor has agreed to license the Technology to the Company. The Company has
recognised a Licensed Asset for an amount of $175,000 as at 30 June 2018.

On 5 October 2018, the Company and Altnia (Licensor) signed an Intellectual Property
Assignment and License Termination Deed (the “Deed”). Altnia has agreed to assign and
the Company agreed to accept the assignment of, all of Altnia’s rights, titles, estate and
interest in the Assignment Rights. Assignment rights includes patents, documentation,
confidential material, know-how, inventions and for avoidance of doubt, all Intellectual
Property Rights in the LEAP Technology, including:

a. LEAP Ligand know-how and rights of use;

b. All current and future applications of the LEAP Ligand; and

c. Other technologies and discoveries made that are associated with the LEAP process.

In addition, Altnia and the Company agreed to terminate the License Agreement above
subject to and in accordance with the terms and conditions of the Deed.

As consideration for the assignment of the Assignment Rights, Exopharm must:

a. grant royalties to Altnia; and

b. provide the Reimbursement Payments to Altnia in accordance with Clause 7 of

the Deed.

Clause 7 of the Deed, mandates that Exopharm must pay to Altnia the Reimbursement
Payments, as partial reimbursement of the costs incurred by Altnia in developing and
protecting the Assignment Rights, as follows:

a. $75,000 on or before 1 September 2018 (Initial Reimbursement Payment); and

b. $250,000 within 7 business days on which each of the following have been satisfied:

c. ASX notifies Exopharm that it has decided to admit Exopharm to the official list of ASX
and to quote its securities, subject to the satisfaction of certain conditions precedent
(Decision Letter); and

d. The Exopharm Board resolves to do all things necessary to satisfy the conditions

precedent in the Decision Letter, including issuing securities under its initial public
offering.

The parties also acknowledged and agree that, prior to the commencement date of the
Deed, Exopharm has made full payment of the Initial Reimbursement Payment amounting
to $75,000.

The Company has fully paid the $325,000 cost of the IP asset as at 30 June 2019.

EXOPHARM ANNUAL REPORT 2019Notes To The Financial Statements

For The Year Ended 30 June 2019

Note 11: Accounts Payable And Other Current Liabilities

Accounts payable

Accruals

Accrued payroll costs

Superannuation payable

PAYG payable

Other current liabilities

Note 12: Non-Current Liabilities

Liability for license asset

Less classified as current liabilities

Classified as non-current liabilities

Note 13: Financial Instruments

Financial assets

Cash in bank

Other receivables

Financial liabilities

Accounts payable and other current liabilities

Other non-current liabilities

2019
$

36,527

53,115

71,075

12,628

107,657

281,002

2019
$

4,418,955

51,134

2018
$

63,452

66,945

2,704

7,426

75,000

215,527

2018
$

175,000

(75,000)

100,000

2018
$

52,401

60,380

4,470,089

112,781

281,002

215,527

100,000

315,527

The Company’s principal financial instruments comprise of cash and cash equivalents,
payables and other current/non-current liabilities. The main purpose of the financial
instruments is to provide working capital for the operations of the business. The Company
also has other financial instruments such as trade creditors which arise directly from its
operations. For the year ended 30 June 2019, it has been the Company’s policy not to trade
in financial instruments.

EXOPHARM ANNUAL REPORT 2019Notes To The Financial Statements

For The Year Ended 30 June 2019

Note 13: Financial Instruments Cont.

Financial risk management objectives and policies:

The Company has exposure to the following risks from their use of financial instruments:

• Credit risk

• Liquidity risk

• Interest rate risk

• Market risk

• Foreign exchange risk

• Capital risk

This note presents information about the Company’s exposure to each of the above
risks, their objectives, policies and processes for measuring and managing risk, and the
management of capital. The Board has overall responsibility for the establishment and
oversight of the risk management framework. The Board reviews and agrees policies for
managing each of these risks and they are summarised below.

a. Credit risk management

Credit risk refers to the risk that a counter-party will default on its contractual obligations
resulting in financial loss to the Company. The Company has adopted a policy of only
dealing with creditworthy counterparties and obtaining sufficient collateral where
appropriate, as a means of mitigating the risk of financial loss from defaults. The Company
only transacts with entities that are rated the equivalent of investment grade and above.
This information is supplied by independent rating agencies where available and, if not
available, the Company uses publicly available financial information and its own trading
record to rate its major customers and suppliers.

The Company’s exposure and the credit ratings of its counter-parties are continuously
monitored. Credit exposure is controlled by counterparty limits that are reviewed and
approved by the Board annually.

The Company does not have any significant credit risk exposure. The carrying amount
of financial assets recorded in the financial statements, net of any allowance for losses,
represents the Company’s maximum exposure to credit risk without taking account of the
value of any collateral obtained.

b. Liquidity risk management

Ultimate responsibility for liquidity risk management rests with the Board, who have
built an appropriate liquidity risk management framework for the management of the
Company’s short, medium and long-term funding and liquidity management requirements.
The Company manages liquidity risk by maintaining adequate reserves and banking
facilities and by continuously monitoring forecast and actual cash flows and matching the
maturity profiles of financial assets and liabilities. The Company did not have any undrawn
facilities at its disposal as at balance date.

The following tables detail the Company’s remaining contractual maturities for its
non-derivative financial liabilities. These are based on the undiscounted cash flows of
financial liabilities based on the earliest date on which the Company can be required to
pay. The table includes both interest and principal cash flows.

EXOPHARM ANNUAL REPORT 2019Notes To The Financial Statements

For The Year Ended 30 June 2019

Note 13: Financial Instruments Cont.

Weighted
average
effective
interest rate

Less than
1 month

1 – 3
Months

3 months
– 1 year

1 – 5
years

2019

Non-interest bearing

Variable interest rate instruments

Fixed interest rate instruments

2018

Non-interest bearing

Variable interest rate instruments

Fixed interest rate instruments

281,002

140,527

75,000

100,000

140,527

75,000

100,000

5+
years

c. Interest rate risk management

The Company is not exposed to significant interest rate risk.

d. Market risk

Market risk is the risk that changes in market prices such as foreign exchange rates, interest
rates and equity prices will affect the Company’s income or the value of its holdings of
financial instruments. The Company is not exposed to market risk as at reporting date.

e. Foreign Exchange Risk

The Company has an exposure to foreign exchange rates fluctuations given that the
Company purchases plant equipment, consumables and services from overseas suppliers
as part of the research and development activities of the Company. As at 30 June 2019, the
Company has no material foreign currency denominated monetary liabilities.

f. Capital Risk Management

The Company’s objectives when managing capital are to safeguard its ability to continue
as a going concern, so that it may continue to provide returns for shareholders and
benefits for other stakeholders. The primary source of Company funding is equity raisings.
Accordingly, the objective of the Company’s capital risk management is to balance the
current working capital position against the requirements to meet exploration programmes
and corporate overheads. This is achieved by maintaining appropriate liquidity to meet
anticipated operating requirements, with a view to initiating appropriate capital raisings
as required.

EXOPHARM ANNUAL REPORT 2019Notes To The Financial Statements

For The Year Ended 30 June 2019

Note 14: Related Party Disclosures

The Company’s related parties include Key Management and others as described below:

Transactions with Key Management Personnel (KMP)

The aggregate compensation made to Directors and other Key Management Personnel of
the Company is set out below:

Short-term employee benefits

Total

2019
$

461,619

Transactions with Entities Related to KMP

The aggregate transactions with entities related to KMP are as follows:

Corporate and other expenses

Research and development

Plant and equipment

Licensed asset terminated/cancelled

New IP asset

Total

2019
$

101,702

59,035

(175,000)

325,000

310,737

2018
$

46,046

2018
$

57,848

20,996

175,000

253,844

In addition to the above, ACNS Capital Markets Pty Ltd T/A Alto Capital was paid
$761,319.75 for services as Lead Manager and Corporate Advisor to the Company during
the year. Mr Parker is an employee of Alto Capital.

Note 15: Auditors’ Remuneration

The auditor of Exopharm Limited is William Buck

Audit or review of the financial statements

Total

2019
$

30,030

2018
$

6,500

EXOPHARM ANNUAL REPORT 2019Notes To The Financial Statements

For The Year Ended 30 June 2019

Note 16: Events After The Balance Date

On 1 August 2019, the Company issued 11,900,000 fully paid ordinary shares at $0.37
each pursuant to the Share Placement as announced on 24 July 2019 to raise $4,403,000
before costs.

On 19 August 2019, the Company issued 2,972,000 fully paid ordinary shares at $0.37
each through a Share Purchase Plan to raise $1,099,640 before costs.

Note 17: Dividends

The directors of the Company have not declared any dividend for the year ended 30 June
2019.

Note 18: Committments And Contingencies

As at 30 June 2019, the Company has no other material commitments except as disclosed
below:

Altnia Royalty Deed Commitments

On 5 October 2018, the Company and Altnia Operations Pty Ltd (Altnia or Licensor)
signed an Intellectual Property Assignment and License Termination Deed (the “Deed”).
As consideration for the assignment of the Assignment Rights, Exopharm must:

a. grant royalties to Altnia; and

b. provide the Reimbursement Payments to Altnia in accordance with Clause 7 of the

Deed.

The Reimbursement Payments were fully paid during the year.

As at 30 June 2019, The Company is a party to a Royalty Deed with Altnia Operations Pty
Ltd (a company owned by a KMP). As at 30 June 2019, the Company has the following
financial commitments pursuant to the Royalty Deed:

1. Royalties on net sales – 3% of net sales;

2. License Royalty – 10% of license revenue.

Lease Commitments

There are no lease commitments as at 30 June 2019.

Employee Commitments

The Company currently has 19 employees and a current annualised total annual
remuneration of $1,953,606 including statutory superannuation. The Company pays
statutory superannuation on a monthly basis.

EXOPHARM ANNUAL REPORT 2019Directors’ Declaration

In the opinion of the Board of Exopharm Limited (‘the Company’):

1. The financial statements and notes thereto, as set out on pages 17 to 36, are in

accordance with the Corporations Act 2001 including:

a. giving a true and fair view of the Company’s financial position as at 30 June 2018 and

its performance for the year then ended; and

b. complying with Australian Accounting Standards, the Corporations Regulations 2001,
and International Standards (IFRS) as disclosed in Note 1 of the Financial Statements;
and

2. There are reasonable grounds to believe that the company will be able to pay its debts as

and when they become due and payable.

This declaration is signed in accordance with a resolution of the Board of Directors made
pursuant to S.295(5) of the Corporations Act 2001. On behalf of the Directors:

Dr Ian E Dixon
Managing Director
Exopharm Limited

Dated this 30th August 2019

Mr Jason Watson
Chairman
Exopharm Limited

EXOPHARM ANNUAL REPORT 2019Independent Auditor’s Report

Exopharm Limited

Independent auditor’s report to members

Report on the Audit of the Financial Report

Opinion
We have audited the financial report of Exopharm Limited. (the Company), which
comprises the statement of financial position as at 30 June 2019, the statement of
comprehensive income, the statement of changes in equity and the 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 Company, is in accordance with
the Corporations Act 2001, including:
(i)

giving a true and fair view of the Company’s financial position as at 30 June 2019 and
of its financial performance for the year ended on that date; and
complying with Australian Accounting Standards and the Corporations Regulations
2001.

(ii)

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 Company 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 of the current period. These matters were
addressed in the context of our audit of the financial report as a whole, and in forming our
opinion thereon, and we do not provide a separate opinion on these matters.

EXOPHARM ANNUAL REPORT 2019Independent Auditor’s Report

RELATED PARTY TRANSACTIONS

Area of focus

Refer also to Remuneration report on pages 14 to 20

and Note 14
The Company conducted material related party
transactions with entities where key
management personnel have interests and/or
are directors. As such, there is a risk that not all
related party transactions are disclosed in the
financial report or that related party transactions
have been made on non-arm’s length basis.
This could result in insufficient information being
provided in order to enable the reader to
understand the nature and effect of the various
related party relationships and transactions.

CARRYING VALUE OF INTANGIBLES

Area of focus

Note 10
Valuation, capitalisation and impairment testing
of the original licenced asset and the intellectual
property asset acquired during the year required
critical estimations and judgements of those
charged with governance to accurately account
for the intangible assets of the company.

How our audit addressed it

Our audit procedures included:

⎯ Assessment of the Company’s controls to

identify and disclose related party
transactions and transactions in accordance
with the relevant accounting standards and
the Corporations Act 2001;

⎯ Comparing the list of related parties

provided by the directors with internal
sources;

⎯ Conducting an ASIC search for external

directorships held by the Board members to
evaluate whether all related party
relationships and transactions had been
appropriately identified and disclosed; and

⎯ Assessing whether related party

transactions were conducted at arms-length
by comparing the basis of the transactions
to external sources.

For each class of related party transaction, we
compared the financial statement disclosures
against the underlying transactions and the
accounting and Corporations Act 2001
requirements

How our audit addressed it

Our audit procedures included:

⎯ Assessing whether intangible assets were
eligible for capitalisation by reviewing the
term and condition of the IP contract as well
as the nature of the asset and assessing the
extent of impairment of intangible assets.

We also assessed the adequacy of the Group’s
financial statement disclosures..

EXOPHARM ANNUAL REPORT 2019Independent Auditor’s Report

Other Information
The directors are responsible for the other information. The other information comprises the information in
the Company’s annual report for the year ended 30 June 2019 but does not include the financial report and
the auditor’s report thereon.

Our opinion on the financial report does not cover the other information and we do not express any form of
assurance conclusion thereon.

In connection with our audit of the financial report, our responsibility is to read the other information and, in
doing so, consider whether the other information is materially inconsistent with the financial report or our
knowledge obtained in the audit or otherwise appears to be materially misstated.

If, based on the work we have performed, we conclude that there is a material misstatement of this other
information, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of the Directors for the Financial Report
The directors of the 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 Company 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 Company 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.

A further description of our responsibilities for the audit of these financial statements is located at the
Auditing and Assurance Standards Board website at:

http://www.auasb.gov.au/auditors_responsibilities/ar2.pdf

This description forms part of our independent auditor’s report.

EXOPHARM ANNUAL REPORT 2019Independent Auditor’s Report

Report on the Remuneration Report

Opinion on the Remuneration Report
We have audited the Remuneration Report included in the directors’ report for the year ended 30 June
2019.

In our opinion, the Remuneration Report of Connexion Telematics Limited, for the year ended 30 June
2019, complies with section 300A of the Corporations Act 2001.

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.

William Buck Audit (Vic) Pty Ltd
ABN: 59 116 151 136

J. C. Luckins
Director

Melbourne, 30 August 2019

EXOPHARM ANNUAL REPORT 2019Additional Securities Information

Shareholder Information

The security holder information set out below was applicable as at 26 August 2019 unless
stated.

There is one class of quoted securities, fully paid ordinary shares.

1. Quoted Securities – Fully Paid Ordinary Shares

a. Distribution of Security Number