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NeuroneticsFoR THE YEAR ENDED 30 JuNE 2010
TABLE oF CoNTENTS
Directors’ Report (including Corporate
Governance Statement and Remuneration Report) 14
Statement of comprehensive income 24
Statement of financial position 25
Statement of changes in equity 26
Statement of cash flows 27
Notes to the financial statements 28
Directors’ Declaration 41
Independent Auditor’s Report 42
Lead Auditor’s Independence Declaration 44
13
Steven m Skala ao
BA, LL.B (Hons) (university of qld), BCL (oxford university)
non-executive director
Steven Skala is Vice Chairman, Australia and New Zealand of
Deutsche Bank AG. He retired from legal practice after almost
25 years experience in commercial law. Between 1985 and 2004 he
was a partner of law firm, Arnold Bloch Leibler, and was Head of its
Corporate and Commercial practice for several years.
Mr Skala is a Director of the Australian Broadcasting Corporation,
Deutsche Australia Limited, Wilson HTM Investment Group Limited,
and The Centre for Independent Studies and he is Deputy Chairman
of the General Sir John Monash Foundation. He is also Vice president
of The Walter and Eliza Hall Institute for Medical Research and was
previously Chairman of Film Australia Limited and The Australian
Centre for Contemporary Arts and a director of Max Capital Group
Limited and The Australian Ballet.
Mr Skala has been a Director of the Company since 17 May 2002.
He was Chairman of the Company from 2002 until 30 June 2008.
He was reappointed as Chairman on 2 october 2009 and resigned
as Chairman on 21 July 2010. He is also a member of the Audit and
Risk Management and Remuneration Committees.
Joshua t Hofheimer
AB (Dartmouth College), JD (Harvard Law School)
non-executive director
(formerly Chief executive officer/managing director, resigned
1 July 2010 but continues as non-executive director)
Joshua Hofheimer became CEo and Managing Director of Hexima
in July 2008. He resigned to return to the united States in July 2010.
Mr Hofheimer has extensive experience in the agricultural science
and biotechnology sectors, in structuring and negotiating complex
commercial transactions and joint ventures with both start-ups and
global industry leaders.
Mr Hofheimer’s previous role was partner at Sidley Austin LLp,
a Los Angeles based international law firm. In the last 7 years
with the firm, he specialised in the plant biotechnology sector,
including developing and implementing business strategies for
commercialisation of multiple intellectual property platforms. He also
served as a leader in the firm’s Intellectual property and Commercial
Transactions practice.
Mr Hofheimer was formerly a member of several boards, including
the Jonsson Cancer Center Foundation at uCLA and the Zimmer
Children’s Museum, and is active in charitable foundations such as the
EIF Revlon Run/Walk for Women’s Cancers.
Mr Hofheimer has been a Director of the Company since 1 July 2008.
DIRECToRS’ REpoRT
the directors present their report together with the financial report
of Hexima Limited (‘the Company’ or ‘Hexima’) and of the group,
being the Company and its subsidiaries for the financial year ended
30 June 2010 and the auditor’s report thereon.
directors
The Directors of Hexima at any time during or since the end of the
financial year are:
Ross dobinson
BBus (qld university of Technology)
Chairman
Ross Dobinson has extensive corporate advisory and investment
banking experience. He has taken two highly successful biotechnology
companies from pre-seed stage to listed status with a current market
capitalisation of $400 million. In addition, he has been involved in
venture capital initiatives in Australia, Europe and the united States.
Mr Dobinson is Chairman of Acrux Limited, Micronix pty Ltd,
Diagnotech pty Ltd, Farm By Nature pty Ltd, and TpI Enterprises
Ltd. He is also a Director of Starpharma Holdings Limited, origin
Capital Limited, Sienna Cancer Diagnostics Ltd, pharmaqest pty
Ltd, Healthfarm Fine Foods pty Ltd and Racing Victoria Limited. He
was formerly a director of the listed stockbroking firm of Jacksons
Limited, Head of Corporate Advisory Services at the stockbroking
firm operated by National Australia Bank Limited (A.C. Goode
& Co. Ltd), Director of National Australia Corporate Advisory
Limited, and Director of Corporate Advisory of Dresdner Australia
proprietary Limited.
Mr Dobinson was appointed Chairman on 21 July 2010. He is a
member of the Audit and Risk Management and Remuneration
Committees.
professor adrienne e Clarke aC
FAA, FTSE, BSc (Hons), phD (The university of Melbourne)
non-executive deputy Chairman (formerly Chief Science officer)
professor Adrienne Clarke is a founding member of Hexima,
and served as the Chief Science officer from April 2006 until
30 June 2009. professor Clarke is Laureate professor at The university
of Melbourne. She was appointed to a personal Chair at the School
of Botany (awarded in 1982) and is past Director of the plant Cell
Biology Research Centre, The university of Melbourne (1982-
1999), former Chairman of CSIRo (1991-1996), former Lieutenant
Governor of Victoria (1997-2000) and former Ambassador for
Biotechnology for Victoria (2001-2003). She was made an officer
of the order of Australia in 1991 and a Companion of the order
of Australia in 2004.
professor Clarke was president of the International Society for
plant Molecular Biology (1997-1998). She is a Foreign Member,
American Academy of Arts and Science; Foreign Associate, National
Academy of Sciences, uSA; Companion, The Institute of Engineers,
Australia; Fellow, Australian Academy of Science; and Fellow, Australian
Academy of Technological Sciences and Engineering.
professor Clarke was formerly a Director of WMC Limited,
Woolworths Limited (1994–2007) and Fisher & paykel Healthcare
Limited (2002–2008).
professor Clarke has been a Director of the Company since
15 November 2001. From 1 July 2009, professor Clarke serves
in a non-executive capacity and has become a member of the
Remuneration and Audit and Risk Management Committees.
14 Hexima Limited 2010 ANNuAL REpoRT
G F dan o’brien
BSc, BVMS (Murdoch university), MBA (Harvard university)
Formerly non-executive Chairman, resigned 2 october 2009
Dan o’Brien was appointed a Director of the Company on
17 May 2002 and was appointed Chairman of the Company on
1 July 2008. He was Managing Director and Chief Executive officer
of Hexima from october 2005 until 30 June 2008. Mr o’Brien has
extensive agribusiness experience including farming investments and
executive and non-executive roles with King Island Dairy Limited,
Tasman Agriculture Limited, Colly Farms Cotton Limited, SpC
Ardmona Limited, Coates Hire Limited, Select Harvests Limited
and Thomas and Coffey Limited. His previous roles include Chief
Executive officer positions with BIL Australia, Mattel Asia pacific
and The King Island Company Limited.
Company Secretary
Ms Justine Heath FCA was appointed to the position of Company
Secretary of Hexima Limited in December 2007. Ms Heath has
experience across a range of industries and previously held senior
finance roles with the Faulding Group and Santos Limited.
directors’ meetings
The number of Directors’ meetings (including meetings of
committees of Directors) and the number of meetings attended by
each of the Directors of the Company during the financial year are:
audit and Risk
management
Committee
board meetings
Held(1) attended Held(1) attended Held(1) attended
Remuneration
Committee
GF Dan o’Brien
Adrienne
E Clarke
Joshua T
Hofheimer
Steven M Skala
Hugh M Morgan
Jonathan West
3
10
10
10
10
10
3
10
10
10
9
8
1
2
-
2
2
2
1
2
-
2
2
1
1
1
-
1
1
1
1
1
-
1
1
1
1 Number of meetings held during the time the
Director held office during the year.
2 Mr Dobinson was appointed after the end of the financial year.
Hugh m morgan aC
LLB, BComm (The university of Melbourne)
non-executive director
Hugh Morgan is principal of First Charnock pty Ltd, Chairman
of Biodiem Limited and a member of the Lafarge International
Advisory Board. He is also a Trustee Emeritus of The Asia Society
New York, president of the National Gallery of Victoria Foundation
and Chairman of the order of Australia Association Foundation.
Mr Morgan was a Director of the Board of the Reserve Bank of
Australia until July 2007 and he was president of the Business Council
of Australia from 2003-2005. He is also immediate past president
of the Australia Japan Business Co-operation Committee and
immediate past Co-Chair of the Commonwealth Business Council,
and continuing Director.
Mr Morgan was Chief Executive officer of WMC Limited from 1986
to 2003. He was a Director of Alcoa of Australia from 1977 to 1998
and a Director of Alcoa Inc from 1998 to 2001.
Mr Morgan has been a Director of the Company since 10 May 2007.
He is Chairman of the Audit and Risk Management Committee and
a member of the Remuneration Committee.
professor Jonathan west
BA (university of Sydney), phD (Harvard university)
non-executive director
professor Jonathan West is the Director of the Australian Innovation
Research Centre. prior to assuming his current appointment, he
taught for 18 years at the Harvard university Graduate School of
Business Administration, where he was Associate professor, founding
Director of the Harvard university Life Sciences Initiative, and from
1998-1999 the Novartis Faculty Research Fellow. He has been
Visiting professor at Hitotsubashi university and the Nomura School
of Advanced Management in Tokyo, Japan and Visiting professor at
the university de paris Ix-Dauphine, Sorbonne.
professor West is also Chairman of the Asia Advisory Council of
Bunge Ltd, one of the world’s largest agribusiness processing and
trading companies, and has served as an advisor to other major
corporations and several Governments around the world, including
in the life sciences field, Dupont, Roche, Novartis, Syngenta and the
J.R. Simplot Company, along with the Governments of Singapore,
Japan, Hong Kong and France. He was a member of the Scientific
Advisory Board of the Novartis Agricultural Discovery Institute in
La Jolla, California. In Australia, he has served on the prime Minister’s
Science, Engineering, Innovation Council’s Working Group on Science
and Technology in China and India and in 2006 was ‘Eminent Thinker
in Residence’ with the premier of NSW.
professor West has been a Director of the Company since
7 November 2005. He is Chairman of the Remuneration Committee
and a member of the Audit and Risk Management Committee.
mr dobinson
prof Clarke
mr Skala
mr Hofheimer
mr morgan
prof west
15
CoRpoRATE GoVERNANCE STATEMENT
this statement outlines the main corporate governance practices
in place throughout the financial year, which comply with aSx
Corporate Governance Council recommendations, unless
otherwise stated.
the Board of directors
The Board is responsible for the direction and supervision of
Hexima’s business on behalf of the Shareholders, by whom they
are elected and to whom they are accountable.
The Board’s responsibilities include:
protecting and enhancing the value of Hexima’s assets;
setting strategies and directions, then monitoring and
reviewing progress against these strategic objectives;
reviewing and ratifying internal controls, codes
of conduct and legal compliance;
ensuring the significant risks facing Hexima have
been identified and adequate control, monitoring
and reporting mechanisms are in place;
approving transactions relating to acquisitions, divestments
and capital expenditure above delegated authority limits; and
approving and monitoring financial and other reporting.
The Board has adopted a Board Charter, which sets out values and
business behaviours necessary to maintain confidence in Hexima’s
integrity. It includes a trading policy governing trading in securities by
Directors, officers and employees and details the respective roles and
responsibilities of the Board and management.
The Board has delegated responsibility for operation and
administration of the Company to the Managing Director and
executive management. Responsibilities are delineated by formal
authority delegations.
directors and executive education
Incoming Directors and Executives participate in informal meetings
to increase their understanding of the Company, its key assets and
the competitive market in which it operates. Through these meetings,
Directors and executives review the Company’s policies and
procedures for good corporate governance, including delegations and
reservations of authority and the roles of key personnel and Board
committees. They have access to continuing education to update and
enhance their skills and knowledge. A review of the performance
of the Board will be undertaken annually by the Chairman, in
consultation with the Board.
Composition of the Board
The Constitution of the Company provides that the number
of Directors shall not be less than three. There are currently six
Directors in office at the date of this report and their names and
qualifications are set out on pages 3 to 4 of this Directors’ Report.
The ASx best practice recommendations require a majority of
the Board to be independent Directors and the chairperson to
be an independent director. Currently, the Board has two directors
who satisfy the ASx guidelines for independence (being Mr Ross
Dobinson and professor Jonathan West). Mr Steven Skala, Mr Hugh
Morgan, professor Adrienne Clarke and Mr Joshua Hofheimer
are Non-Executive Directors but do not qualify as independent
because of their shareholdings in Hexima, and professor Clarke
and Mr Hofheimer’s case, due to their previous executive role with
the Company. The Board considers their significant commitment
as shareholders (which aligns their interests with those of other
shareholders) and broad experience as directors of other companies
provide advantages to the Board which outweigh any disadvantage in
them not satisfying the ASx guidelines for independence. The Board
will review this position at least annually.
Board Committees
To assist in the execution of its responsibilities, the Board has
established a number of board committees including a Nomination
Committee, a Remuneration Committee, an Audit and Risk
Management Committee and a Communications Committee.
These committees have written mandates and operating procedures,
which are reviewed on a regular basis.
The full Board has 12 meetings scheduled for the coming year.
Extraordinary meetings will be convened at such other times as may
be necessary to address any specific significant matters that may arise.
The agenda for meetings is prepared in conjunction with the
Chairman. Submissions are circulated in advance. Executives are
regularly involved in Board discussions.
nomination Committee
The Board has in place a Nomination Committee to assist it
in ensuring the Board has an effective composition, size and
commitment.
The Nomination Committee develops criteria for Board membership,
identifies specific individuals for nomination as Directors and
establishes processes for the review of the performance of individual
Directors and the Board as a whole. In addition, it is the policy of the
Nomination Committee to meet as early as practicable prior to the
expiration of the term of office of a Director to consider suitably
skilled and experienced individuals for nomination as Directors.
Further details of the Nomination Committee’s charter form part
of the Board Charter, which is available on the Company’s website.
Each of the non-executive Directors are currently on the Nomination
Committee. The Board reviewed the structure of the Board and
senior executive teams throughout the current financial year
within existing scheduled Board meetings. Formal meetings of the
Nomination Committee will be scheduled for the coming financial
year as required.
16 Hexima Limited 2010 ANNuAL REpoRT
Remuneration Committee
The Board will review and reward the performance of the senior
management team. In doing so, they will consider recommendations
from the Remuneration Committee.
The Remuneration Committee reviews and makes recommendations
to the Board on remuneration packages and policies applicable to Key
Executives and Directors. The Remuneration Committee Charter forms
part of the Board Charter, which is available on the Company’s website.
The Remuneration Committee will consist of at least three Directors,
a majority of whom are Non-Executive Directors and at least one
of whom is an independent director. This differs from the ASx best
practice recommendations which require a majority of independent
Directors and an independent Chairman. Given the current
composition of the Board, it is not possible for Hexima to satisfy the
ASx recommendations as to independence. The current members
are professor Jonathan West (Chairman), Mr Ross Dobinson,
Mr Steven Skala, Mr Hugh Morgan and professor Adrienne Clarke.
The Remuneration Committee meets at least once a year in order to
review and make recommendations to the Board. The Remuneration
Committee met once during the year and the committee members’
attendance record is disclosed in the table of Directors’ meetings on
page 5. In addition, remuneration issues were addressed at a number
of meetings of the full Board during the year.
The Remuneration Committee may invite any executive management
team members or other individuals to attend meetings of the
Remuneration Committee as it considers appropriate. The
Remuneration Report is set out on pages 20 to 22 and forms part
of the Directors’ Report for the financial year ended 30 June 2010.
audit and Risk management Committee
The Board has in place an Audit and Risk Management Committee to
assist it in verifying and safeguarding the integrity of Hexima’s financial
reporting. The Audit and Risk Management Committee Charter forms
part of the Board Charter, which is available on the Company’s website.
The Audit and Risk Management Committee reviews the financial
information which is provided to shareholders and others, the
systems of internal controls which management and the Board have
established and the audit process.
The Audit and Risk Management Committee also reviews the
performance of the external auditors on an annual basis and normally
meets with them during the year to:
discuss the external audit and internal audit plans, identifying any
significant changes in structure, operations, internal controls or
accounting policies likely to impact the financial statements and
to review the fees proposed for the audit work to be performed;
review the half-year and preliminary final report prior to
lodgment with the ASx, and any significant adjustments required
as a result of the auditor’s findings, and to recommend board
approval of these documents, prior to announcement of results;
review the draft annual and half-year financial report, and
recommend board approval of the financial report; and
review the results and findings of the auditor, the adequacy
of accounting and financial controls, and to monitor the
implementation of any recommendations made.
Audit and Risk Management Committee meetings are to be held
periodically throughout the year. It is the policy of the Board that
the members of the Audit and Risk Management Committee
should be Non-Executive Directors, at least one of whom should
also be independent. This differs from the ASx best practice
recommendations which require a majority of independent Directors
and an independent Chairman. Given the current composition
of the Board, it is not possible for Hexima to satisfy the ASx
recommendations as to independence. The current Audit and Risk
Management Committee comprises Mr Hugh Morgan (Chairman),
Mr Ross Dobinson, Mr Steven Skala, professor Jonathan West and
professor Adrienne Clarke.
audit and Risk management Committee (continued)
The Chief operating officer/ Chief Financial officer and external
auditors will generally attend all Audit and Risk Management
Committee meetings. The Audit and Risk Management Committee
met twice during the year and the committee members’ attendance
record is disclosed in the table of Directors’ meetings on page 5.
The Chief operating officer/ Chief Financial officer has declared in
writing that the records for the year have been properly maintained,
the Company’s financial reports for the year ended 30 June 2010
comply with accounting standards and present a true and fair view
of the Company’s financial condition and operating results. This
statement is required annually.
Communication with Shareholders
Hexima’s policy is to provide timely, open and accurate information
to all stakeholders, including shareholders, regulators and the wider
investment community. The Board Charter includes a continuous
disclosure protocol to ensure compliance with the Corporations
Act 2001 and the Listing Rules disclosure requirements.
In summary, the Company’s continuous disclosure protocol operates
as follows:
the Board has delegated its responsibility for approving public
announcements to the Communications Committee;
the Company Secretary is responsible for ensuring
all communications with the ASx are made
in a timely and appropriate manner;
the full Annual Financial Report and Half-Yearly
results commentary are lodged with the ASx and
are available on the Company’s website and is
sent to all shareholders who request them;
the Annual Financial Report and the Half-Yearly Accounts are
lodged with the ASx and sent to any shareholder on request; and
all media releases and information provided to analysts or
the media during briefings are released to the ASx.
Hexima’s communications strategy is set out in the Board Charter and
is designed to promote effective communication with shareholders
and encourage effective participation at general meetings.
17
Risk management
The Board is responsible for the assessment of risk.
intellectual property
Intellectual property is Hexima’s most important asset and protection
of its Ip portfolio is critical to the Company’s ability to implement its
business strategy. Hexima has consistently invested significant amounts
in the development and maintenance of this Ip portfolio.
Hexima’s Ip Committee, chaired by professor Marilyn Anderson,
meets regularly to identify and monitor the creation of Ip and to
monitor and review claims in the same technical field filed by other
companies. The Committee works closely with Hexima’s uS and
Australian patent attorneys.
The Committee also develops and maintains appropriate protocols
for recording research results and maintaining the confidentiality
of know-how and information associated with Hexima’s trials
and technology.
Regulatory Framework (including environmental Regulation)
The use of ag-biotechnology is regulated in the majority of countries in
which Hexima will seek to commercialise its technology. The regulatory
framework, which varies from country to country, is generally based on
an assessment of the risk associated with the technology.
In Australia, the use of ag-biotechnology is regulated by the Gene
Technology Act 2000. Hexima’s gene technology research at The
university of Melbourne and La Trobe university is overseen by the
office of the Gene Technology Regulator and all field trials conducted
by Hexima have been specifically licensed by the office of the Gene
Technology Regulator.
Financial Reporting
The Chief operating officer/ Chief Financial officer has declared
in writing to the Board that the Company’s financial reports are
founded on a sound system of risk management and internal
compliance and control which implements the policies adopted
by the Board.
Monthly actual results are reported against budgets approved by
Directors and revised forecasts for the year are prepared regularly.
Funds management
The Company has considerable funds on deposit following its
successful Ipo in 2007. The Company’s policy is to invest these
funds in term deposits or bank bills.
ethical Standards
All Directors, executives and employees are expected to act with
the utmost integrity at all times to enhance the reputation and
performance of the Company. Every employee has a supervisor
to whom they may refer any issues arising from their employment.
Conflicts of interest
Directors must keep the Board advised, on an ongoing basis, of any
interest that could potentially conflict with those of the Company.
The Board has procedures to assist Directors to disclose potential
conflicts of interest.
trading in Company Securities by directors and employees
The Company has a policy regarding the trading in Company
securities by Directors and employees. The policy details the insider
trading provisions of the Corporations Act and provides for Directors,
executives and employees to be able to trade at any time except
when there is a ‘black-out’, subject to their having obtained approval
from the Company Secretary. Company-wide ‘black-outs’ will occur
for a period commencing 6 weeks prior to the release of the half-
year and annual results and ending 24 hours after such a release
and for a period commencing 2 weeks prior to the Company’s
annual general meeting and ending 24 hours after the annual general
meeting. Black-outs can occur at any other time for the Company
or for certain individuals prior to any major announcement or when
they are possession of price sensitive information.
All new employees and all existing employees (on an annual basis)
are required to sign an acknowledgement that they are aware of
the Company’s Share Trading policy.
independent advice
Each Director has the right of access to all relevant Company
information and to the Company’s executives and, subject to prior
consultation with the Chairman, may seek independent professional
advice at the Company’s expense. A copy of the advice received by
the Director will be made available to all members of the Board.
18 Hexima Limited 2010 ANNuAL REpoRT
pRINCIpAL ACTIVITIES
The principal activity of the Group during the financial year was the
research, development and commercialisation of technology for the
genetic modification of crops, primarily to enhance their resistance
to insects and fungal pathogens.
Operating and Financial Review of the Group
$000
Revenue
Net loss before financing income/expense
Net financing (costs)/income
Income tax expense
Net loss after tax attributable to members
Dividends
Basic earnings/(loss) per share (cents)
2010
1,135
(7,291)
1,172
-
(6,119)
NIL
(7.7)
2009
1,046
(13,358)
2,082
-
(11,276)
NIL
(14.4)
Summary
The Board is pleased with the progress made by the Group since
listing in 2007:
a) Hexima entered into its first development and
commercialization agreement for one of its major technology
platforms, fungal disease control, with Dupont subsidiary,
pioneer Hi-Bred International. This agreement secures the
commercial path to market for the technology in corn
and soy, the two major GM crops, currently accounting
for more that 80% of the area planted to GM crops.
b) Hexima has advanced the corn program from the laboratory
into the glasshouse. The Company has produced its first GM
corn expressing its proprietary anti-fungal proteins and the
program is now advancing towards the disease bioassay stage.
c) Hexima has entered into second non-exclusive
research collaboration with pioneer, for
Hexima’s MGEV technology platform.
d) Hexima has also entered into a non-exclusive research
license with a commercial option for the MGEV platform
with global biotech market leader, Monsanto.
e) The Group has conserved cash and operated below internal
budgets and publicly announced expenditure estimates.
At 30 June 2010, the Group has $23.1m in cash and interest
receivables, which provides a strong base to fund the Group’s
activities as it advances its technologies to market.
operating and Financial Review
The Group had net cash outflows from operating activities of
$6.866 million for the year ended 30 June 2010 compared with
$7.164 million for the prior period. overall cash expenditure
was largely in line with the prior period and the variance reflects
movements in creditors.
The Group recorded a loss after tax of $6.119 million for the
year ended 30 June 2010. The Group recorded a loss after tax
of $11.276 million for the previous year.
Net finance income for the Group for the financial year ended
30 June 2010 was $1.172 million (2009:$2.082 million), reflecting
lower cash balances as cash is utilised and lower interest rates in
the current reporting period.
outlook
Hexima’s lead technology targets fungal disease in major crops. This
technology is being developed for corn and soy in collaboration with
Dupont subsidiary, pioneer Hi-Bred International, under an agreement
which provides for the development and commercialisation of the
technology and sets out milestone payments and royalties.
The initial target is broad-spectrum fungal disease resistance in corn,
the market dominant GM crop by value. Fungal pathogens cause
extensive damage to corn and the problem is growing as intensive
farming techniques and reduced crop rotations combine to encourage
fungal growth. It is estimated that fungal disease causes yield losses
worth approximately uS$8 billion each year in the Americas alone.
As well as establishing a clear path to market, the agreement
represents a significant validation of the Group’s technology
and scientific expertise.
over the past year, Hexima’s discovery team has built upon the
Company’s valuable gene library, with the goal of identifying a range of
anti-fungal proteins needed to create a robust, sustainable trait for the
control of the major diseases of corn. over the same period, Hexima’s
development teams have honed their corn transformation expertise
using skills and technology transferred from pioneer and the Company
has completed the construction of significant new glasshouse and
tissue culture facilities to house the next stage of the program.
Transgenic corn plants expressing Hexima’s anti-fungal proteins are now
growing in the new facility. As the program generates a sufficient number
of plants over the coming months, glasshouse testing to measure the
transgenic plants’ resistance to fungal disease will commence.
The Group also continues to progress the development and
commercialisation of its insect resistance technology and the
Multi-Gene Expression Vehicle (MGEV). The Group’s insect resistance
technology is partially funded by the Federal Government’s Climate
Ready program.
During the financial year, the Group announced a number of non-
exclusive research licences with major seed companies. The Group
entered into a non-exclusive research licence with Dupont subsidiary,
pioneer, for the evaluation of the MGEV technology in corn and soy
using pioneer genes. This licence enables pioneer to use the MGEV
technology outside of the current fungal disease collaboration, thus
extending the partnership into new areas of co-operation.
These relationships validate the Group’s scientific platforms
and provide for the extension of its commercial relationships.
Significant Changes in the State of affairs
In the opinion of Directors the following significant changes in the
state of affairs of the Group occurred during and since the end of
the financial year under review:
In February 2010, Mr Joshua Hofheimer, who was then Chief
Executive officer and Managing Director, announced his intention
to resign, effective 1 July 2010, and return to the united States.
Mr Hofheimer has since resigned effective 1 July 2010 and will
continue to serve as a non-executive director of the Company.
dividends
The Company has not paid or declared any dividends during or since
the end of the financial year ended 30 June 2010.
Likely developments
Further disclosure of information regarding likely developments in
the operations of the Company and the expected results of those
operations in future financial years has not been included in this
report because, in the opinion of the Directors, disclosure of the
information may prejudice the interests of the Company.
19
professor marilyn a anderson
professor Anderson was appointed Chief Science officer from
1 July 2009. She was formerly Senior Vice president Research and
Discovery. professor Anderson is an employee of La Trobe university
and Hexima contracts her services through a Research Agreement
with the university. In addition to her employment by the university,
professor Anderson also has an employment contract with the
Group. This employment contract has a term of two years from
1 January 2010 and may be terminated with six months’ notice
by the employee.
dr Robyn L Heath
Dr Heath, Senior Vice president product Development, is an
employee of The university of Melbourne, and Hexima contracts
her services through a Research Agreement with the university. In
addition to her employment by the university, Dr Heath also has an
employment contract with the Group. This employment contract has
a term of two years from 1 January 2010 and may be terminated
with three months’ notice by the employee.
Justine C Heath
Ms Heath, Company Secretary, Chief operating officer and Chief
Financial officer, has an employment contract with the Company
for an unlimited term. This employment contract may be terminated
with two months’ notice by the employee. The Company is required
to provide six months notice of termination and retains the right to
terminate the contract immediately, by making payment equal to six
months’ pay in lieu of notice.
Non-executive directors
The Constitution provides that Non-Executive Directors may be
paid or provided fees or other remuneration for their services as
a Director of Hexima (including as a member of any Directors’
committee). The total amount or value of this remuneration must not
exceed $500,000 (including mandatory superannuation) per annum
or such other maximum amount determined by the Company in a
general meeting.
A Non-Executive Director may be paid remuneration for services
outside the scope of ordinary duties of the Director. Non-Executive
Directors may also be paid expenses properly incurred in attending
meetings or otherwise in connection with the Company’s business.
Fees payable to Non-Executive Directors for the financial year ended
30 June 2010 were set at $55,000 per annum for Non-Executive
Directors and $110,000 per annum for the Chairman. Additional
‘per diem’ fees are paid where services rendered are above normal
requirements. There has been no change to fees paid to non-
executive Directors since the Company listed in 2007.
Details of the nature and amount of each major element of the
remuneration of each Director of the Company and each of the
named officers of the Company, which is consistent with that of the
consolidated entity, (including key management personnel) receiving
the highest remuneration are included in the table following.
REMuNERATIoN REpoRT – AuDITED
Principles of Remuneration – audited
Key management personnel (including Directors of the Company
and other executives) have authority and responsibility for planning
and controlling the activities of the Group. For the financial year
ended 30 June 2010, key management personnel comprises all
Directors, executives and the Company Secretary, being Mr Joshua
Hofheimer (resigned as Chief Executive officer/Managing Director
as of 1 July 2010, ongoing non-executive Director), professor
Adrienne Clarke, Mr Steven Skala, professor Jonathan West,
Mr Hugh Morgan, professor Marilyn Anderson, Dr Robyn Heath and
Ms Justine Heath. Since year end, Mr Ross Dobinson has joined the
key management group. Remuneration levels for key management
personnel are set to attract and retain appropriately qualified and
experienced directors and executives. The Remuneration Committee
obtains independent advice on remuneration packages and reviews
remuneration at least on an annual basis.
Remuneration structures take into account the capability and
experience of key management personnel. Remuneration includes
a mix of fixed and variable remuneration as well as short and long
term incentives.
Fixed Remuneration
Fixed remuneration consists of base remuneration, which is
calculated on a total cost basis and includes any FBT charges
related to employee benefits, as well as employer contributions
to superannuation funds.
Performance Linked Remuneration
performance linked remuneration may include short and
long term incentives.
Short term incentive bonuses are based on the satisfaction of
specified performance criteria, which may include financial or non-
financial objectives. The Remuneration Committee approves the offer
and payment of short term incentive bonuses to key management
personnel and to other employees.
Long term incentives may be provided as options over the
Company’s ordinary shares and other securities. No options were
issued to employees during the financial year. Details are provided
on page 16 of the Directors’ Report.
Consequences of Performance on Shareholder Wealth
Hexima is a development stage company and the remuneration
of key management personnel is not determined by the level of
revenue, profit or dividends. Instead, consideration is given to the
progress of scientific programs, the commercialisation of those
programs, the development of the Company’s intellectual property
and asset base and long-term share price performance.
Service Contracts
The Group has entered into service contracts with key management
personnel, which outline the components of compensation paid to key
management personnel, but do not prescribe how compensation levels
are modified from year to year. Compensation levels are reviewed each
year to take into account cost-of-living changes, any change in scope of
the role performed by the senior executive and any changes required
to meet the principles of the compensation policy.
All employment contracts may be terminated immediately for cause
or for material underperformance.
20 Hexima Limited 2010 ANNuAL REpoRT
directors’ and executive Officers’ Remuneration (Company and Consolidated) – audited
Details of the nature and amount of each major element of remuneration of each Director of the Company and
each key management personnel are:
Short term employee benefits
Short Term
Incentive
(cash)
Fixed
Remuneration
(Salary & Fees)
Total
Short-term
employee
benefits
Share based payments
Share
Options
Issued (7)
Converting
Notes Issued
Post
Employment
Benefits –
Superannuation
Proportion of
remuneration
performance
related
Value of
Options as
proportion of
Remuneration
Total
Remuneration
non-executive directors
Steven M Skala (2)
(Chairman for part of year)
Jonathan West
Hugh M Morgan
Adrienne E Clarke (3)
GF Dan o’Brien (1)
(Chairman, until 2 october 2009)
executive directors
Joshua T Hofheimer (4) (7)
(CEo until 1 July 2010)
executives
Marilyn A Anderson (5)
(Chief Science officer)
Robyn L Heath (6)
(Senior Vice president
product Development)
Justine C Heath(7)
(Coo, CFo, Co. Secretary)
Total
Total
2010
2009
2010
2009
2010
2009
2010
2009
2010
2009
2010
2009
2010
2009
2010
2009
2010
2009
2010
2009
75,688
-
50,458
50,458
50,458
50,458
5,000
205,864
25,229
155,962
585,576
585,576
133,582
126,162
52,257
38,724
222,125
185,000
1,200,373
1,398,204
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
75,688
-
50,458
50,458
50,458
50,458
5,000
205,864
25,229
155,962
-
-
-
-
-
-
-
-
-
-
585,576
585,576
266,793
212,606
133,582
126,162
52,257
38,724
-
-
-
-
222,125
185,000
1,200,373
1,398,204
-
7,680
266,793
220,286
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
18,291
55,000
4,542
4,542
4,542
4,542
50,000
60,327
4,541
14,038
93,979
55,000
55,000
55,000
55,000
55,000
55,000
266,191
29,770
170,000
14,424
14,424
866,793
812,606
12,022
11,354
37,000
37,000
19,991
16,648
165,353
217,875
145,604
137,516
89,257
75,724
242,116
209,328
1,632,519
1,836,365
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
31%
26%
-
-
-
-
-
4%
16%
12%
notes in relation to the table of directors’ and executive officers’ remuneration – audited
1. Mr o’Brien resigned as Chairman and director on 2 october 2009. Mr o’Brien
was paid a pro rata of the agreed Chairman’s fee of $110,000 for the period he
was Chairman.
2. Mr Skala was the Chairman of the Company from 2 october 2009 until
21 July 2010. He continues to serve as a Non-Executive Director.
3. professor Clarke serves as a Non-Executive Director and Deputy Chairman. She
was previously an Executive Director of the Company and Chief Science officer.
4. As part of his remuneration, Mr Hofheimer received allowances for rent and
health benefits. Rental expenses totalled $67,596 (2009: $58,157) and health
benefits amounted to $25,355 (2009: $46,341) for the year ended 2010.
5. professor Anderson is employed by La Trobe university. The Company engages
her services through a Research Agreement with the university and through a
separate direct employment agreement. professor Anderson’s total remuneration
from the Company and La Trobe university (in relation to services performed for
Hexima) was $279,470, comprising $145,604 paid directly by the Company and
$133,866 paid by La Trobe university (for the services performed for Hexima).
The amount shown in the table above represents payments made directly to
professor Anderson by the Group only.
6. Dr Heath is employed by The university of Melbourne. The Company engages
her services through a Research Agreement with the university and through a
separate direct employment agreement. Dr Heath’s total remuneration from the
Company and The university of Melbourne was $212,431, comprising $89,257 paid
directly by the Company and $123,174 paid by The university of Melbourne. The
amount shown in the table above represents payments made directly to Dr Heath
by the Group only.
7. The fair value of options is calculated at grant date using the Binomial
Approximation option pricing model and allocated to each period evenly over the
period from grant date to vesting date. The value disclosed is the portion of the fair
value of the options recognized in this reporting period.
21
equity instruments – audited
All options refer to options over ordinary shares of Hexima Limited,
which are exercisable on a one-for-one basis under the employee
share option plan.
exercise of options granted as compensation – audited
1,483,162 employee options with various exercise prices were
exercised during the financial year and 1,000,000 options were
exercised subsequent to year end on 1 July 2010.
directors’ interests
Set out below are details of the interests of the Directors at the date
of this report in the shares of the Company, rights or options over
such instruments. Interests include those held directly and indirectly.
auditors
non-audit Services
During the year KpMG, the Company’s auditor, has performed
certain services in addition to their statutory duties.
The Board has considered the non-audit services provided during
the year by the auditor and is satisfied that the provision of those
services during the year by the auditor is compatible with, and did
not compromise, the auditor independence requirements of the
Corporations Act 2001 for the following reasons:
all non-audit services were subject to the corporate
governance procedures adopted by the Company and have
been reviewed by the audit committee to ensure they do
not impact the integrity and objectivity of the auditor; and
options over shares
the non-audit services provided by the auditor do not undermine
the general principles relating to auditor independence
as set out in ApES 110 Code of Ethics for professional
Accountants, as they did not involve reviewing or auditing
the auditor’s own work, acting in a management or decision
making capacity for the Company, acting as an advocate
for the Company or jointly sharing risks and rewards.
Details of the amount paid or payable to the auditor of the Company,
KpMG, and its related practices for audit and non-audit services
provided during the year are set out below.
audit Services ($)
Audit of the annual financial report
Review of half year financial report
Services other than statutory audit
Special grant audit
Tax compliance services
Migration services
2010
51,000
23,900
3,100
-
-
78,000
2009
48,600
23,000
6,000
1,200
3,226
82,026
indemnification and insurance of Officers and auditors
No indemnities were given or insurance premiums paid during the
financial year for any person who was an auditor of the Company.
The Company has not indemnified any Directors. During the
financial year ended 30 June 2010, the Company paid insurance
premiums of $56,155 (including taxes) in respect of Directors’ and
officers’ liability and legal expenses insurance contracts, for current
and former Directors and officers of the Company. The insurance
premiums relate to:
costs and expenses incurred by the relevant
officers in defending proceedings, whether civil
or criminal and whatever their outcome; and
other liabilities that may arise from their position, with the
exception of conduct involving a willful breach of duty or improper
use of information or position to gain personal advantage.
There have been no events subsequent to balance date which
would have a material effect on the Group’s financial statements as
at 30 June 2010, other than those changes in the leadership of the
company, which have already been disclosed.
director
Steven M Skala
Adrienne E Clarke
Jonathan West
Hugh M Morgan
Joshua Hofheimer
Total
total shares
4,167,467
5,417,919
2,000,000
6,454,503
1,050,000
19,089,889
-
-
-
-
-
Share Options
No options have been granted during or since the end of the
financial year.
unissued shares under option
At the date of this report, unissued ordinary shares of the Company
under option are:
expiry date
30 June 2012
16 May 2013
24 November 2018
exercise price
$2.00
$0.00
$0.00
number of Shares
1,600,000
112,000
20,000
1,732,000
The following options were exercised by Directors or key
management personnel or lapsed either during or after the end of
the financial year ended 30 June 2010.
options
over shares
1 July 2009
1,057,768
1,096,971
300,000
303,031
3,000,000
exercised
154,737
-
-
-
1,000,000*
Lapsed
903,031
1,096,971
300,000
303,031
2,000,000*
options
over shares
at date of
this report
-
-
-
-
-
1,231,456
6,989,226
928,425
2,083,162
303,031
4,906,064
-
-
Steven M Skala
Adrienne E Clarke
Jonathan West
Hugh M Morgan
Joshua Hofheimer
GF Dan o’Brien
(resigned
2 october 2009)
(*) Transactions occurred after the end of the financial year ended 30 June 2010.
The Group’s policies prohibit those that are granted share-based
payments as part of their remuneration from entering into other
arrangements that limit their exposure to losses that would result
from share price decreases. The Group requires all executives and
Directors to sign annual declarations of compliance with this policy
throughout the period.
22 Hexima Limited 2010 ANNuAL REpoRT
INDEpENDENCE DECLARATIoN
Lead auditors’ independence declaration Under
Section 370C of the Corporations act 2001
The Lead Auditor’s Independence Declaration is set out on page 44 and forms part
of the Directors’ Report for the year ended 30 June 2010.
This report is made pursuant to a resolution of the Directors.
mr Ross dobinson
Director
Dated this 27th day of August 2010
mr Steven m Skala ao
Director
23
STATEMENT oF CoMpREHENSIVE INCoME
for the year ended 30 June 2010
Revenue
Contracted research expenditure
other research & development expenditure
patent and legal expenses
Field trial expenses
Marketing & business development expenses
Employee benefits expense
Depreciation expense
other expenses
Results from operating activities
Financial income
net financing income/(expenses)
Loss before income tax
Income tax expense
Loss for the period
other comprehensive income for the period, net of income tax
total comprehensive income/(loss) for the period
Loss attributable to:
owners of the Company
Loss for the period
total comprehensive loss attributable to:
owners of the Company
total comprehensive loss for the period
earnings per share
Basic earnings/(loss) per share
Diluted earnings/(loss) per share
notes
($) 2010
Consolidated
($) 2009
6
7
8
9
10(a)
1,135,422
1,045,544
(4,025,142)
(344,403)
(418,141)
(68,872)
(478,681)
(2,568,129)
(135,291)
(387,298)
(8,425,957)
(3,408,634)
(6,314,857)
(555,079)
(170,610)
(477,551)
(2,978,357)
(81,482)
(417,264)
(14,403,834)
(7,290,535)
(13,358,290)
1,171,557
1,171,557
(6,118,978)
-
(6,118,978)
-
(6,118,978)
2,082,267
2,082,267
(11,276,023)
-
(11,276,023)
-
(11,276,023)
(6,118,978)
(6,118,978)
(11,276,023)
(11,276,023)
(6,118,978)
(6,118,978)
(11,276,023)
(11,276,023)
23
23
(0.077)
(0.077)
(0.144)
(0.144)
The accompanying notes form part of these financial statements
24 Hexima Limited 2010 ANNuAL REpoRT
STATEMENT oF FINANCIAL poSITIoN
as at 30 June 2010
Current assets
Cash and cash equivalents
Receivables
total Current assets
non-Current assets
plant and equipment
prepaid expenses
total non-Current assets
total assets
Current Liabilities
Trade and other payables
Deferred income
Employee benefits
total Current Liabilities
total Liabilities
net assets
equity
Share capital
Reserves
Accumulated losses
total equity
notes
($) 2010
Consolidated
($) 2009
11
12
13
14
15
16
17
17
22,686,174
485,808
23,171,982
2,906,278
-
2,906,278
30,200,685
333,865
30,534,550
858,814
25,000
883,814
26,078,260
31,418,364
2,432,591
-
198,564
2,631,155
2,631,155
1,897,439
600,000
83,430
2,580,869
2,580,869
23,447,105
28,837,495
57,659,830
885,768
(35,098,493)
23,447,105
57,198,035
618,975
(28,979,515)
28,837,495
The accompanying notes form part of these financial statements
25
STATEMENTS oF CHANGES IN EquITY
for the year ended 30 June 2010
Consolidated
($) 2010
opening balance at 1 July 2009
total comprehensive
income for the period
Net (loss) for the period
other comprehensive income
Total comprehensive income/
(loss) for the period
transactions with owners recorded directly in equity
Contributions by and distributions to owners
Issue of ordinary shares on
exercise of share options
Share based payment expenses
Total contributions by and
distributions to owners
Closing balance at 30 June 2010
17
17
($) 2009
opening balance at 1 July 2008
total comprehensive
income for the period
Net (loss) for the period
other comprehensive income
Total comprehensive income/
(loss) for the period
transactions with owners recorded directly in equity
Contributions by and distributions to owners
Issue of ordinary shares
Share based payment expenses
Total contributions by and
distributions to owners
Closing balance at 30 June 2009
17
17
note
ordinary
Shares
equity
option
reserve
equity
compensation
reserve
accumulated
Losses
total
equity
57,198,035
200,000
418,975
(28,979,515)
28,837,495
-
-
-
461,795
-
-
-
-
-
-
-
-
-
(6,118,978)
-
(6,118,978)
-
(6,118,978)
(6,118,978)
-
266,793
-
-
461,795
266,793
461,795
57,659,830
-
200,000
266,793
685,768
-
(35,098,493)
728,588
23,447,105
51,198,035
200,000
54,155
(17,703,492)
33,748,698
-
-
-
6,000,000
-
-
-
-
-
-
-
-
-
(11,276,023)
-
(11,276,023)
-
(11,276,023)
(11,276,023)
-
364,820
-
-
6,000,000
364,820
6,000,000
57,198,035
-
200,000
364,820
418,975
-
(28,979,515)
6,266,793
28,837,495
The accompanying notes form part of these financial statements
26 Hexima Limited 2010 ANNuAL REpoRT
STATEMENTS oF CASH FLoWS
for the year ended 30 June 2010
Cash Flows from operating activities
Cash receipts from government grants
& collaboration agreements
Cash paid to suppliers and employees
Net cash (used in) operating activities
Cash Flows from investing activities
Interest received
payments for plant and equipment
Net cash ( used in ) investing activities
Cash Flows from Financing activities
proceeds from exercise of share options
Net cash from financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at 1 July
Cash and cash equivalents at 30 June
notes
($) 2010
Consolidated
($) 2009
535,422
(7,401,708)
(6,866,286)
1,073,831
(2,183,851)
(1,110,020)
461,795
461,795
(7,514,511)
30,200,685
22,686,174
487,927
(7,651,784)
(7,163,857)
2,534,228
(783,739)
1,750,489
-
-
(5,413,368)
35,614,053
30,200,685
19(b)
17
19(a)
The accompanying notes form part of these financial statements
27
NoTES To THE FINANCIAL STATEMENTS
For the year ended 30 June 2010
1. Reporting entity
Hexima Limited (the ‘Company’) is a Company domiciled in
Australia. The address of the Company’s registered office is Level
5, 114 William Street, Melbourne, Victoria, 3000. The consolidated
financial statements of the Company as at and for the year ended
30 June 2010 comprises the Company and its subsidiaries (together
referred to as the ‘Group’ and individually as ‘Group’ entities). The
Group is actively engaged in the research and development of
technology for the protection and enhancement of commercial crops,
primarily to enhance their resistance to insects and fungal pathogens.
2. Basis of Preparation
(a) Statement of compliance
The financial report is a general purpose financial report which has
been prepared in accordance with Australian Accounting Standards
(AASBs) (including Australian Interpretations) adopted by the
Australian Accounting Standards Board (AASB) and the Corporations
Act 2001. The consolidated financial report of the Group complies
with International Financial Reporting Standards (IFRSs) and
interpretations adopted by the International Accounting Standards
Board (IASB).
The financial statements were approved by the Board of Directors
on 26 August 2010.
(b) basis of measurement
The financial report has been prepared on the basis of historical cost.
(c) Functional and presentation currency
The financial statements are presented in Australian dollars, which
is the Group’s functional currency.
(d) use of estimates and judgements
The preparation of financial statements requires management
to make judgements, estimates and assumptions that affect the
application of policies and reported amounts of assets, liabilities,
income and expenses. The estimates and associated assumptions
are based on historical experience and various other factors that
are believed to be reasonable under the circumstances, the results
of which form the basis of making the judgements about carrying
values of assets and liabilities that are not readily apparent from other
sources. Actual results may differ from these estimates. The estimates
and underlying assumptions are reviewed on an ongoing basis.
Revisions to accounting estimates are recognised in the period in
which the estimate is revised and in any future periods affected.
In particular, information about significant areas of estimation,
uncertainty and critical judgements in applying accounting policies
that have the most significant effect on the amounts recognised in
the financial statements are described in the following notes:
Note 19 – measurement of share-based payments.
3. Significant accounting Policies
The accounting policies set out below have been applied consistently
to all periods by Group entities.
Certain comparative amounts have been reclassified to conform with
the current year’s presentation.
(a) basis of Consolidation
Subsidiaries
Subsidiaries are entities controlled by the Group. Control exists
when the Group has the power to govern the financial and operating
policies of an entity so as to obtain benefits from its activities. In
assessing control, potential voting rights that currently are exercisable
are taken into account. The financial statements of subsidiaries are
included in the consolidated financial statements from the date that
control commences until the date that control ceases. The accounting
policies of subsidiaries have been changed when necessary to align
them with the policies adopted by the Group.
transactions eliminated on consolidation
Intra-group balances and transactions, and any unrealised income
and expenses arising from intra-group transactions, are eliminated
in preparing the consolidated financial statements.
(b) Financial instruments
(i) Non-derivative financial instruments
The Group initially recognises receivables and deposits on the date
that they are originated. All other financial assets (including assets
designated at fair value through profit or loss) are recognised initially
on the trade date at which the Group becomes a party to the
contractual provisions of the instrument.
The Group derecognises a financial asset when the contractual
rights to the cash flows from the asset expire, or it transfers the
rights to receive the contractual cash flows on the financial asset
in a transaction in which substantially all the risks and rewards of
ownership of the financial asset are transferred. Any interest in
transferred financial assets that is created or retained by the Group
is recognised as a separate asset or liability.
Financial assets and liabilities are offset and the net amount presented
in the statement of financial position when, and only when, the Group
has a legal right to offset the amounts and intends either to settle on
a net basis or to realise the asset and settle the liability simultaneously.
Non-derivative financial instruments comprise trade and other
receivables, cash and cash equivalents, trade and other payables.
Non-derivative financial instruments are recognised initially at fair
value plus any directly attributable transaction costs. Subsequent to
initial recognition non-derivative financial instruments are measured
at amortised cost using the effective interest method, less any
impairment losses.
Cash and cash equivalents comprise cash balances and call term
deposits. Term deposits are classified as cash as the Group can
convert the deposits as available cash in reasonable time with minimal
break costs to the Group.
28 Hexima Limited 2010 ANNuAL REpoRT
(ii) non-derivative financial liabilities
Financial liabilities are recognised initially on the trade date at which
the Group becomes a party to the contractual provisions of the
instrument. The Group derecognises a financial liability when its
contractual obligations are discharged or cancelled or expire. Financial
assets and liabilities are offset and the net amount presented in the
statement of financial position when, and only when, the Group has a
legal right to offset the amounts and intends either to settle on a net
basis or to realise the asset and settle the liability simultaneously.
The Group has the following non-derivative financial liabilities: trade
and other payables.
Such financial liabilities are recognised initially at fair value plus any
directly attributable transaction costs. Subsequent to initial recognition
these financial liabilities are measured at amortised cost using the
effective interest rate method.
(iii) Share capital
Ordinary shares
ordinary shares are classified as equity. Incremental costs directly
attributable to the issue of ordinary shares and share options are
recognised as a deduction from equity, net of any related income
tax benefit.
Dividends
Dividends are recognised as a liability in the period in which they
are declared.
(c) plant and equipment
(i) Recognition and measurement
Items of plant and equipment are measured at cost less accumulated
depreciation and accumulated impairment losses. Where parts of
an item of plant and equipment have different useful lives, they
are accounted for as separate items of plant and equipment. Cost
includes expenditures that are directly attributable to the acquisition
of the asset.
(ii) Subsequent costs
The Company recognises in the carrying amount of an item of plant
and equipment the cost of replacing part of such an item when that
cost is incurred if it is probable that the future economic benefits
embodied within the item will flow to the Group and the cost of the
item can be measured reliably. All other costs are recognised in the
income statement as an expense as incurred. The carrying amount
of the replaced part is derecognised. The costs of the day-to-day
servicing of property, plant and equipment are recognised in profit
or loss as incurred.
(iii) depreciation
Depreciation is calculated over the depreciable amount, which is
the cost of an asset.
Depreciation is recognised in profit or loss on a straight-line basis
over the estimated useful lives of each part of an item of property,
plant and equipment, since this most closely reflects the expected
pattern of consumption of the future economic benefits embodied in
the asset. The estimated useful lives for the current and comparative
periods are as follows:
plant and equipment
office equipment
plant and equipment -Building
2010
15% – 37.5%
33% – 66.7%
5%
2009
15% – 37.5%
33% – 66.7%
-
Depreciation methods, useful lives and residual values are reassessed
at the reporting date.
(d) Foreign Currency
Transactions in foreign currencies are translated to the functional
currency of Group entities at exchange rates at the dates of the
transactions.
(e) impairment
(i) Financial assets
A financial asset is assessed at each reporting date to determine
whether there is any objective evidence that it is impaired. A financial
asset is considered to be impaired if objective evidence indicates
that one or more events have had a negative effect on the estimated
future cash flows of that asset.
An impairment loss in respect of a financial asset measured at
amortised cost is calculated as the difference between its carrying
amount, and the present value of the estimated future cash flows
discounted at the original effective interest rate.
Individually significant financial assets are tested for impairment on a
individual basis. The remaining financial assets are assessed collectively
in groups that share similar credit risk characteristics.
All impairment losses are recognised in profit or loss.
An impairment loss is reversed if the reversal can be related
objectively to an event occurring after the impairment loss was
recognised. For financial assets measured at amortised cost, the
reversal is recognised in profit or loss.
(ii) non-financial assets
The carrying amounts of the Group’s non-financial assets, other than
deferred tax assets, are reviewed at each reporting date to determine
whether there is any indication of impairment. If any such indication
exists then the asset’s recoverable amount is estimated.
An impairment loss is recognised if the carrying amount of an asset or
its cash-generating unit exceeds its recoverable amount. Impairment
losses are recognised in profit or loss. Impairment losses recognised
in respect of cash-generating units reduce the carrying amount of the
other assets in the unit (group of units) on a pro rata basis.
In respect of assets, impairment losses recognised in prior periods
are assessed at each reporting date for any indications that the loss
has decreased or no longer exists. An impairment loss is reversed
if there has been a change in the estimates used to determine the
recoverable amount. An impairment loss is reversed only to the
extent that the asset’s carrying amount does not exceed the carrying
amount that would have been determined, net of depreciation or
amortisation, if no impairment loss had been recognised.
The recoverable amount of an asset or cost generating unit is the
greater of its fair value and its fair value less costs to sell. 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 the purpose of impairment testing assets are grouped
together into the smallest group of assets that generates cash inflows
from continuing use that are largely independent of the cash inflows of
other assets or group of assets (the ‘cash generating unit’).
29
(f ) Revenue
Grant revenue
Government grant income that compensates the Group for expenses
incurred is recognised as revenue in the income statement on a
systematic basis in the same periods in which the expenses are incurred.
Research grants and collaboration fees
Research grants and collaboration fees represents revenue received
from entities who fund and/or participate in the collaborative
research initiatives of the Group. When services in respect of
collaborative research activities are performed by an indeterminate
number of acts over a specified period of time, revenue is recognised
on a straight line basis over the period of the collaborative research
agreement. unrecognised revenue, representing payments received
during the year for services to be provided in the future, is recognised
as deferred income.
(g) Research and development expenditure
Expenditure on research activities undertaken with the prospect
of gaining new scientific or technical knowledge and understanding is
recognised in the income statement as an expense as incurred. patent
costs relating to research activities are expensed as incurred. plant
and equipment acquired to perform research activities are capitalised
where the plant and equipment are not specific in nature to the
Group’s research activities and can be sold or leased to third parties.
plant and equipment specific to the research activities of the Group
are expensed on acquisition.
Development expenditure is capitalised only if development costs
can be measured reliably, the product or process is technically and
commercially feasible, future economic benefits are probable, and
the Group intends to and has sufficient resources to complete
development and to use or sell the asset. The expenditure capitalised
includes the cost of materials, direct labour and overhead costs that
are directly attributable to preparing the asset for its intended use.
No costs were capitalised during the period. other development
expenditure is recognized in the profit and loss as incurred.
(h) Finance income and expenses
Finance income comprises interest income on term deposits. Interest
income is recognised as it accrues in profit or loss, using the effective
interest method.
income tax
(i)
Income tax expense comprises current and deferred tax. Income
tax expense is recognised in the profit or loss except to the extent
that it relates to items recognised directly in equity, in which case it is
recognised directly in equity.
Current tax is the expected tax payable on the taxable income
for the year, using tax rates enacted or substantively enacted at
the balance sheet date, and any adjustment to tax payable in respect
of previous years.
Deferred tax is recognised in respect of temporary differences
between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for taxation purposes.
Deferred tax is not recognised for temporary differences where the
initial recognition of assets and liabilities in a transaction that is not a
business combination and that affects neither accounting nor taxable
profit. Deferred tax is measured at the tax rates that are expected
to be applied to the temporary differences when they reverse, based
on the laws that have been enacted or substantively enacted by the
reporting date. Deferred tax assets and liabilities are offset if there
is a legally enforceable right to offset current tax liabilities and assets,
and they relate to income taxes levied by the same tax authority on
the same taxable entity.
A deferred tax asset is recognised to the extent that it is probable
that future taxable profits will be available against which the asset can
be utilised. Deferred tax assets are reviewed at each reporting date
and are reduced to the extent that it is no longer probable that the
related tax benefit will be realised.
(j) Goods and services tax
Revenue, expenses and assets are recognised net of the amount
of goods and services tax (GST), except where the amount of GST
incurred is not recoverable from the taxation authority. In these
circumstances, the GST is recognised as part of the cost of acquisition
of the asset or as part of the expense.
Receivables and payables are stated with the amount of GST
included. The net amount of GST recoverable from, or payable to,
the ATo is included as a current asset or liability in the balance sheet.
Cash flows are included in the statements of cash flows on a gross
basis. The GST components of cash flows arising from investing and
financing activities which are recoverable from, or payable to, the
ATo are classified as operating cash flows.
(k) Segment Reporting
As of 1 July 2009 the Group determines and presents operating
segments based on the information that internally is provided to the
CEo, who is the Group’s chief operating decision maker. This change
in accounting policy is due to the adoption of AASB 8 operating
Segments. previously operating segments were determined and
presented in accordance with AASB 114 Segment Reporting. The
new accounting policy in respect of segment operating disclosures
has not resulted in any change in segment information disclosure
from the prior year.
An operating segment is a component of the Group that engages
in business activities from which it may earn revenues and incur
expenses, including revenues and expenses that relate to transactions
with any of the Group’s other components.
The Group primarily operates in one sector, being the agricultural
biotechnology industry, developing and/or commercialising agricultural
biotechnology research. The majority of operations are in Australia. All
assets are located in Australia. All revenue in 2010 and 2009 has been
derived from Australia.
30 Hexima Limited 2010 ANNuAL REpoRT
(l) employee benefits
defined contribution plans
A defined contribution plan is a post-employment benefit under
which the an entity pays fixed contributions into a separate entity
and will have no legal or constructive obligation to pay further
amounts. obligations for contributions to defined contribution plans
are recognised as a personnel expense in profit or loss when they are
due. prepaid contributions are recognised as an asset to the extent
that a cash refund or a reduction in future payments is available.
Short term benefits
Short-term employee benefit obligations are measured on an
undiscounted basis and are expensed as the related service is provided.
A liability is recognised for the amount expected to be paid under
short-term cash bonus or profit-sharing plans if the Group has a
present legal or constructive obligation to pay this amount as a result
of past service provided by the employee and the obligation can be
estimated reliably.
Long term employee benefits
The Company’s net obligation in respect of long-term employee
benefits is the amount of future benefit that employees have earned
in return for their service in the current and prior periods plus
related on costs; that benefit is discounted to determine its present
value, and the fair value of any related assets is deducted. The
maturity discount rate is the yield at the reporting date on AA credit-
rated or government bonds that have dates approximating the terms
of the Group’s obligations.
(m) Share based payment transactions
The grant date fair value of share-based payment awards granted
to employees is recognised as an employee expense, with a
corresponding increase in equity, over the period that the employees
unconditionally become entitled to the awards. The amount
recognised as an expense is adjusted to reflect the number of awards
for which the related service and non-market vesting conditions are
expected to be met, such that the amount ultimately recognised as
an expense is based on the number of awards that do not meet the
related service and non-market performance conditions at the vesting
date. For share-based payment awards with non-vesting conditions,
the grant date fair value of the share-based payment is measured
to reflect such conditions and there is no true-up for differences
between expected and actual outcomes.
(n) earnings per share
The Group presents basic and diluted earnings per share (EpS) data
for its ordinary shares. Basic EpS is calculated by dividing the profit
or loss attributable to ordinary shareholders of the Company by
the weighted average number of ordinary shares outstanding during
the period. Diluted EpS is determined by adjusting the profit or loss
attributable to ordinary shareholders and the weighted average
number of ordinary shares outstanding for the effects of all dilutive
potential ordinary shares, which comprise convertible notes and
share options issued.
(o) Lease payments
payments made under operating leases are recognised in profit
or loss on a straight-line basis over the term of the lease. Lease
incentives received are recognised as an integral part of the total
lease expense, over the term of the lease.
(p) determination of fair values
A number of the Group’s accounting policies and disclosures
require the determination of fair value for both financial and non-
financial assets and liabilities. Fair values have been determined for
measurement and/or disclosure purposes based on the following
methods. Where applicable, further information about the
assumptions made in determining fair values is disclosed in
the notes specific to that asset or liability.
Share-based payment transactions
The fair value of employee share options at grant date is measured
using the Binomial Approximation option pricing method.
Measurement inputs include share price on measurement date,
exercise price of the instrument, expected volatility (based on
weighted average historic volatility adjusted for changes expected due
to publicly available information), weighted average expected life of
the instruments (based on historical experience and general option
holder behaviour), expected dividends, and the risk-free interest rate
(based on government bonds). Service and non-market performance
conditions attached to the transactions are not taken into account in
determining fair value.
Research expenses
The fair value of research expenses (Note 7,17) has been measured
at the Directors’ estimate of the fair value of intellectual property
rights acquired from an independent party dealing at arm’s length.
(q) new standards and interpretations not yet adopted
The following standards, amendments to standards and
interpretations have been identified as those which may impact the
entity in the period of initial application. They are available for early
adoption at 30 June 2010, but have not been applied in preparing
this financial report:
AASB 9 Financial Instruments includes requirements for the
classification and measurement of financial assets resulting
from the first part of phase 1 of the project to replace AASB
139 Financial Instruments: Recognition and Measurement.
AASB 9 will become mandatory for the Group’s 30 June 2014
financial statements. Retrospective application is generally
required, although there are exceptions, particularly if the
entity adopts the standard for the year ended 30 June 2012
or earlier. The adoption of the standard is not expected to
have a significant impact on the financial statements.
AASB 2009-5 Further amendments to Australian Accounting
Standards arising from the Annual Improvements process affect
various AASBs resulting in minor changes for presentation,
disclosure, recognition and measurement purposes. The
amendments, which become mandatory for the Group’s
30 June 2011 financial statements, are not expected to
have a significant impact on the financial statements.
(r) presentation of financial statements
The Group applies revised AASB 101 presentation of Financial
Statements (2007), which became effective as of 1 July 2009.
As a result, the Group presents in the consolidated statement of
changes in equity all owner changes in equity, whereas all non-owner
changes in equity are presented in the consolidated statement of
comprehensive income.
Comparative information has been re-presented so that it also is in
conformity with the revised standard. Since the change in accounting
policy only impacts presentation aspects, there is no impact on
earnings per share.
31
The primary responsibility for the development and implementation
of controls to address operational risk is assigned to senior
management of the Group. This responsibility is supported by the
development of overall Group standards for the management of
operational risk in the following areas:
requirements for appropriate segregation of duties,
including the independent authorisation of transactions
requirements for the reconciliation and monitoring of transactions
compliance with regulatory and other legal requirements
documentation of controls and procedures
requirements for the periodic assessment of
operational risks faced, and the adequacy of controls
and procedures to address the risks identified
requirements for the reporting of operational
losses and proposed remedial action
development of contingency plans
training and professional development
ethical and business standards
risk mitigation, including insurance where this is effective.
Capital management
The Board’s policy is to maintain a strong capital base so as to
maintain investor, creditor and market confidence and to sustain
future development of the business. As the Group is a development
stage business, the Board of Directors monitors the Group’s
performance with particular regard to the progress of scientific
programs, the commercialisation of those programs, the development
of the Group’s intellectual property and asset base and long-term
share price performance. There were no changes in the Group’s
approach to capital management during the year. The Group is not
subject to externally imposed capital requirements.
5. Segment Reporting
The Group primarily operates in one sector and therefore the Group’s
financial information is the same as the operating segment information.
The Group’s operations is the one segment being the agricultural
biotechnology industry developing and/or commercialising agricultural
biotechnology research. The majority of operations are in Australia.
6. Revenue
Government grants
Research grants and collaboration fees
note
15
Consolidated
($) 2009
277,659
767,885
1,045,544
($) 2010
535,422
600,000
1,135,422
7. Other Research and development expenditure
other research and
development expenditure
Research intellectual property rights
acquired in 2009 - expensed
8. Other expenses
Administration & compliance costs
other expenses
344,403
314,857
17
-
344,403
6,000,000
6,314,857
211,548
175,750
387,298
224,738
192,526
417,264
4. Financial Risk management
overview
The Group has exposure to the following risks from their use of
financial instruments:
credit risk
liquidity risk
market risk
operational risk.
This note presents information about the Group’s exposure to
each of the above risks, their objectives, policies and processes for
measuring and managing risk, and the management of capital. Further
quantitative disclosures are included throughout this financial report.
The Board of Directors has overall responsibility for the oversight
of risks. The Group maintains a control environment in which all
employees understand their roles and obligations.
Credit risk
Credit risk is the risk of financial loss to the Group if a customer or
counterparty to a financial instrument fails to meet its contractual
obligations, and arises principally from the Group’s receivable from
the Government in respect of research grants accrued interest
receivable from the banks.
Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet
its financial obligations as they fall due. The Group’s approach to
managing liquidity is to ensure, as far as possible, that it will always
have sufficient liquidity to meet its liabilities when due, under both
normal and stressed conditions, without incurring unacceptable losses
or risking damage to the Group’s reputation.
The Group prepares and monitors budgets to manage its liquidity
for the short and long term.
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 Group’s
income or the value of its holdings of financial instruments. The Board
of Directors oversee market risk exposures to optimise returns.
Currency risk
The Group’s currency risk is limited to trade and other payables that
are denominated in a currency other than the functional currency
of the Group entities, primarily uS dollar (uSD). Given the minimal
value of foreign currency transactions the Group does not enter into
contracts to hedge currency risk. At 30 June 2010, there were no
receivables denominated in foreign currencies (2009: $NIL), however
there were amounts payable of uSD $27,478.76 (2009: $11,636).
interest rate risk
The Group does not have any interest expenses. Interest income
is earned on term deposits and cash at bank, which are based on
prevailing market rates.
operational risk
operational risk is the risk of direct or indirect loss arising from
a wide variety of causes associated with the Group’s processes,
personnel, technology and infrastructure, and from external factors
other than credit, market and liquidity risks such as those arising from
legal and regulatory requirements and generally accepted standards
of corporate behaviour. operational risks arise from all of the
Group’s operations.
The Group’s objective is to manage operational risk so as to
balance the avoidance of financial losses and damage to the Group’s
reputation with overall cost effectiveness and to avoid control
procedures that restrict initiative and creativity.
32 Hexima Limited 2010 ANNuAL REpoRT
9. Finance income and expense
13. Plant and equipment
Interest income on term
deposit and cash at bank
Finance income
10. income tax
(a) income tax expense
Loss before tax
Income tax using the domestic
corporation tax rate of 30% (2009: 30%)
Increase/(decrease) in income
tax expense due to:
R & D concessional increment
Non-deductible share based payment
Non-deductible research expenses arising
from shares issued as consideration
for intellectual property rights
Temporary differences not
brought to account
Tax losses not brought to account
Income tax expense/(benefit)
on pre-tax net profit
1,171,557
1,171,557
2,082,267
2,082,267
Consolidated
($) 2009
(6,118,978) (11,276,023)
($) 2010
(1,835,693)
(3,382,807)
(326,923)
80,037
(296,528)
109,446
-
1,800,000
(155,955)
2,238,534
49,692
1,720,197
-
-
Consolidated
Cost
Balance at 1 July 2009
Additions
Balance at 30 June 2010
Balance at 1 July 2008
Additions
Balance at 30 June 2009
Accumulated depreciation
Balance at 1 July 2009
Depreciation for the year
Balance at 30 June 2010
Balance at 1 July 2008
Depreciation for the year
Balance at 30 June 2009
Carrying amounts
At 1 July 2009
At 30 June 2010
plant and
equipment
$
942,230
2,182,755
3,124,985
office
equipment
$
77,191
-
77,191
266,423
675,807
942,230
108,373
123,999
232,372
48,765
59,608
108,373
74,173
3,018
77,191
52,234
11,292
63,526
30,361
21,873
52,234
total
$
1,019,421
2,182,755
3,202,176
340,596
678,825
1,019,421
160,607
135,291
295,898
79,126
81,481
160,607
833,857
2,892,613
24,957
13,665
858,814
2,906,278
(b) unrecognised deferred tax assets
Deferred tax assets have not been recognised in respect of the
following items:
Temporary differences
Tax losses
Total
699,735
6,071,248
6,770,983
855,690
3,832,714
4,688,404
The deductible temporary differences and tax losses do not expire
under current tax legislation. Deferred tax assets have not been
recognised in respect of these items because it is not probable that
future taxable profit will be available against which the Group could
utilise the benefits therefrom. Comparative amounts have been
restated to reflect assessed balances.
11. Cash and Cash equivalents
Cash on hand
Cash at bank
Term deposits
12. Receivables
Current
Trade receivables
Accrued Interest
prepayments
($) 2010
5,279
480,895
22,200,000
22,686,174
Consolidated
($) 2009
2,467
631,218
29,567,000
30,200,685
Consolidated
($) 2009
($) 2010
7,915
389,776
88,117
485,808
2,875
292,050
38,940
333,865
The Group’s exposure to credit and currency risks and impairment
losses related to trade receivables is disclosed in note 21.
14. trade and Other Payables
Current
Trade payables
other payables & accrued expenses
Consolidated
($) 2009
1,441,794
455,645
1,897,439
($) 2010
875,479
1,557,112
2,432,591
The Company’s exposure to currency and liquidity risk related to
trade and other payables is disclosed in Note 21.
15. deferred income
Hexima entered into a Research and Development Agreement with
Balmoral Australia pty Limited (‘Balmoral’), whereby Balmoral paid
Hexima $1,800,000 to conduct research on its behalf for three years
commencing 1 July 2007 and expiring on 30 June 2010. In accordance
with the Group’s accounting policy in respect of collaborative
research agreements, the $1,800,000 has been recognised as income
over the three year collaborative research period. Accordingly,
$600,000 has been recognised as income in the year ended
30 June 2010.
16. employee Benefits
Current
other employee benefit accruals
Superannuation
Liability for annual leave
Consolidated
($) 2009
-
37,963
45,467
83,430
($) 2010
81,422
40,079
77,063
198,564
33
17. Capital and Reserves
Reconciliation of movement in capital and reserves
ordinary Shares
on issue at 1 July
Issued at $1.50 per share as
consideration for intellectual property
acquired for research purposes
Issued at $0.50 per share
on exercise of options
Issued at $0.31 per share
on exercise of options
Issued at $0.155 per share
on exercise of options
Issued at $0.00 per share
on exercise of options
on issue at 30 June – fully paid
number of shares
2009
2010
78,576,307 74,576,307
($) 2010
57,198,035
amount
($) 2009
51,198,035
-
4,000,000
-
6,000,0001
300,000
928,425
154,737
-
-
-
150,000
287,811
23,984
-
-
-
100,000
80,059,469
-
78,576,307
-
57,659,830
-
57,198,035
Consolidated and the parent entity
(1) The $6.0 million increase in share capital for 2008/09 was a result of the co-
development and commercialisation agreement the Company entered into on
7 August 2008 with Dupont agricultural business, pioneer Hi-Bred International, Inc.
(Dupont/pioneer), for the commercialisation of fungal resistance technology. As part
of this agreement, Hexima acquired intellectual property rights valued at $6.0 million.
As consideration, and pursuant to a placement agreement, Hexima issued 4,000,000
ordinary shares at $1.50 per share. The financial effects of this transaction have
been recorded as a research and development expenditure of $6.0 million with
a corresponding increase in share capital.
The Company does not have authorised capital or par value in respect of its issued
shares. The holders of ordinary shares are entitled to receive dividends as declared from
time to time and are entitled to one vote per share at meetings of the Company
equity option reserve
on issue at 1 July
Lapse of share options
on issue at 30 June – fully paid
equity compensation reserve
on issue at 1 July
Issued as compensation
Exercise of share options
Lapse of share options
on issue at 30 June – fully paid
Total reserve at 30 June 2010
number of options
2009
2010
($) 2010
amount
($) 2009
2,400,000
800,000
1,600,000
2,400,000
-
2,400,000
9,284,864
-
1,483,162
4,669,702
3,132,000
4,732,000
6,164,864
3,120,000
-
-
9,284,864
11,684,864
200,000
-
200,000
418,975
266,793
-
-
685,768
885,768
200,000
-
200,000
54,155
364,820
-
-
418,975
618,975
equity option Reserve
The equity option reserve comprises the accumulated amount of share options issued
to other parties.
equity Compensation Reserve
The equity compensation reserve represents the accumulated amount of share
options granted to key management personnel and other personnel under
compensation schemes.
34 Hexima Limited 2010 ANNuAL REpoRT
18. Share-Based Payments
The terms and conditions of the grants for options outstanding at 30 June 2010 are as
follows. All options are to be settled by physical delivery of shares.
Grant date / parties entitled
option granted to third parties for
R&D Collaboration on 29 June 2007
option granted to
non-key management
personnel on 16 May 2008
option grant to key management
personnel on 24 November 2008
number of
instruments
1,600,000
Vesting conditions
past services, immediate vesting
112,000
3 months service
2,000,000 1
4 tranches of 500,000 options vesting at 1 July 2010,
1 July 2011, 1 July 2012, 1 July 2013.
Contractual
life of options
5 years
5 years
10 years
Termination of employment (other than for cause) or resignation at the request by
Hexima for resignation (other than for cause) before the First exercise Date of Tranche
1 will result in 500,000 options (Tranche 1) vesting immediately. These options must
be exercised within 12 months of termination of employment. For the avoidance of
doubt, the remaining unvested options will lapse at the time of the termination.
Termination of employment (other than for cause) or resignation at the request
by Hexima for resignation (other than for cause) after the First exercise Date of
Tranche 1 will result in the next Trance of unvested options vesting immediately.
All vested options must be exercised within 12 months of termination of
employment. For the avoidance of doubt, the remaining options which have not
been accelerated and have not vested at the time of the termination will lapse.
1,000,000 2 Vests on second anniversary (June 2010) of commencement of employment.
Termination of employment (other than for cause) or resignation as a result
of a request by Hexima for resignation (other than for cause) before the First
Exercise Date of 1 July 2010 will result in the options vesting immediately. The
options must be exercised within 12 months of termination of employment
past Services, immediate vesting
20,000
10 years
10 years
4,732,000
option granted to key management
on 24 November 2008
option granted to key management
on 24 November 2008
Total share options
1 Cancelled since year end as vesting condition being employment has not been met.
2 Exercised on 1 July 2010, being the first exercise date
The number and weighted average exercise prices of share options is as follows:
outstanding at 1 July
Exercised during the period
Lapsed during period
Granted during the period
outstanding at 30 June
weighted average
exercise price
2010
$0.86
$0.33
$0.72
-
$1.20
number
of options
2010
11,684,864
1,483,162
5,469,702
-
4,732,000
weighted average
exercise price
2009
$0.89
$nil
-
$0.80
$0.86
number
of options
2009
8,564,864
-
-
3,120,000
11,684,864
The options outstanding at 30 June 2010 have an exercise price in the range of $nil to
$2 and a weighted average remaining contractual life of 7.2 years.
The fair value of services received in return for share options granted is based on the fair
value of share options granted, measured using a binomial approximation option pricing
model, incorporating the probability of the relative total shareholder return vesting
condition being met, with the following inputs. No share options were granted in 2010,
however, share options were granted in 2009.
Fair value of share options and assumptions
Key management personnel and employees
Fair value at grant date (weighted average)
Share price (weighted average)
Exercise price (weighted average)
Expected volatility (weighted average volatility)
option life (expected weighted average life)
Expected dividends
Risk-free interest rate (weighted average based on government bonds)
2010
2009
-
-
-
-
-
-
-
$0.3199
$0.3199
$0.8013
78.89%
9.76 years
0.00%
3.09%
35
employee expenses
21. Financial instruments
note
($) 2010
Consolidated
($) 2009
Credit Risk
The carrying amount of the Group’s financial assets represents the
maximum credit exposure. The Group’s maximum exposure to credit
risk at 30 June was:
Current
Share options granted in
2008 – equity settled
Share options granted in
2009 – equity settled
Total expense recognised
as employee costs
-
54,333
266,793
310,487
266,793
364,820
19. Notes to the Statement of Cashflow
19a. Reconciliation of Cash
Reconciliation of cash at the end of the period
(as shown in the statement of cash flows) to the
related items in the accounts is as follows:
Cash on hand and at bank
11
22,686,174
30,200,685
19b. Reconciliation of Cash Flows From operating activities
note
($) 2010
Consolidated
($) 2009
(6,118,978) (11,276,023)
(1,073,831)
135,291
(2,534,228)
81,482
266,793
-
364,820
6,000,000
(6,790,725)
(7,363,949)
(126,943)
430,600
651,382
(600,000)
369,492
(600,000)
(6,866,286)
(7,163,857)
Cash flows from operating activities
Loss for the period
adjustments for:
Interest received – classified
as investing activity
Depreciation
Equity settled share based
payment expense
Equity issued to Dupont
operating loss before changes
to working capital
(Increase)/decrease in trade and
other receivables and prepayments
Increase/(decrease) in payables
and employee benefits
Increase/(decrease) in deferred income
Net cash from/(used in)
operating activities
20. auditors’ Remuneration
audit Services
Auditors of the Company
KpMG Australia
- Audit of the annual financial report
- Review of half year
financial statements
51,000
48,600
23,900
23,000
other Services
Auditors of the Company
KpMG Australia
- Research grant audit
- Tax compliance services
- Migration services
36 Hexima Limited 2010 ANNuAL REpoRT
Trade receivables
Accrued interest on bank term deposits
Cash on hand and at bank
note
12
12
11
($) 2010
7,915
389,776
22,686,174
23,083,865
Consolidated
($) 2009
2,875
292,050
30,200,685
30,495,610
Cash on hand and at bank and accrued interest are with the National
Australia Bank and the Westpac Banking Corporation.
impairment Losses
None of the Group’s receivables are past due (2009: $NIL) and
no impairment losses have been recognised (2009: $NIL).
The Group is in the development phase of its research and
development programme. The Group’s income is currently limited
to interest on cash and term deposits, Australian government grants
and collaborative research agreements where income is received in
advance. Accordingly, risk of impairment losses is minimal.
Liquidity Risk
The Group has no financial liabilities except for trade and other
payables with a carrying value of $2,464,010 (note 15), which are
payable in cash and have a maturity of less than 6 months.
Term deposits included in cash at bank above have maturities as
follows: $4.7M – maturity date 13 July 10, $3.8M – maturity date
13 Sept 10, $12.6M – maturity date 14 oct 10 and $1.1M – maturity
date 11 Nov 10.
Currency risk
At 30 June 2010, there were no receivables denominated in foreign
currencies, however there were amounts payable of uSD $27,479
(2009: $11,636).
Sensitivity analysis
A 10% strengthening of the Australian dollar against the following
currencies at 30 June would have increased equity and decreased the
loss for the year by the amounts shown below. This analysis assumes
that all other variables, in particular interest rates, remain constant.
The analysis is performed on the same basis for 2009.
30 June 2010
30 June 2009
Loss reduction (uSd$)
2,860
1,058
A 10% weakening of the Australian dollar would have increased
the loss for the year and decreased equity by $3,496 in 2010
(2009: $1,293)
3,100
-
-
78,000
6,000
1,200
3,226
82,026
interest Risk
Exposure to interest rate risks arises in the normal course of the
Group’s business in respect of interest income on term deposit (note
11) and cash at bank (note 11). The weighted average interest rate in
respect of interest income in 2010 was 4.87% (2009:6.7%).
Fixed rate instruments
In respect of term deposits a 100 basis points increase in interest
rates would have decreased the loss by $279,602 (2009: $313,575).
A 100 basis points decrease in interest rates would have increased
the loss by $279,602 (2009: $313,575).
Variable rate instruments
In respect of cash at bank a 100 basis points increase in interest rates
would have decreased the loss by $4,571 (2009: $8,163). A 100 basis
points decrease in interest rates would have increased the loss by
$4,571 (2009: $8,163).
estimation of fair values
The fair value of a financial asset or a financial liability is the amount
at which the asset could be exchanged, or liability settled in a current
transaction between willing parties after allowing for transaction costs.
The carrying value of financial assets and liabilities approximates their
fair value at 30 June 2009 and 30 June 2010.
Fair value hierarchy
No financial instruments are carried at fair value at 30 June 2010,
however, as noted above the carrying amounts approximate fair
value in respect of financial assets and liabilities
22. Contingencies
The Directors are of the opinion that provisions are not required in
respect of these matters, as it is not probable that a future sacrifice of
economic benefits will be required or the amount is not capable of
reliable measure.
Guarantee and indemnification
The Company has an Institutional Biosafety Committee (IBC)
to advise on certain aspects of the Group’s field trial applications.
The Group has agreed to indemnify, release and forever discharge
the members of the IBC from and against any claim or liability,
incurred by the members, arising in connection with the conduct of
field trials and related applications being undertaken by the Group.
The financial exposure from this arrangement is expected to be nil.
23. earnings per Share
Consolidated and the Company basic and diluted earnings per share
The calculation of basic and diluted earnings per share at 30 June 2010
was based on a loss attributable to ordinary shareholders of
$6,118,978 (2009: $11,276,023) and a weighted average number
of ordinary shares of 79,375,582, calculated as follows:
($) 2010
($) 2009
Loss attributable to ordinary shareholders
Loss for the period after income tax
6,118,978
11,276,023
weighted average number of
shares used as a denominator
number for basic earnings per share
ordinary shares
number for diluted earnings per share
ordinary shares
79,375,582
78,159,869
79,375,582
78,159,869
Instruments not included in diluted earnings per share due to anti-
dilutionary effect
Converting notes
Share options
number of shares
2009
2010
-
-
11,684,864
4,732,000
11,684,864
4,732,000
24. Related Parties
directors
The following were key management personnel of the Group and
the Company at any time during the reporting period and unless
otherwise indicated were Directors for the entire period:
executive directors
Mr Joshua T Hofheimer
(Former CEo/Managing Director, resigned 1/07/2010,
now Non-Executive Director)
non-executive directors
Mr Steven M Skala
(Former Chairman resigned 21/07/2010
ongoing Non-Executive Director)
Mr GF Dan O’Brien
(Former Chairman resigned 2/10/2010)
Professor Jonathan West
Mr Hugh M Morgan
Professor Adrienne E Clarke
executives
Professor Marilyn A Anderson
Dr Robyn L Heath
Ms Justine C Heath
The key management personnel compensation included in ‘employee
benefits expense’ is as follows:
Short term employee benefits
post employment benefits
Share based payments
Consolidated
($) 2010
1,200,373
165,353
266,793
1,632,519
($) 2009
1,398,208
217,871
220,286
1,836,365
individual directors and executive compensation disclosures
Information regarding individual directors and executives
compensation disclosures as permitted by Corporations Regulation
2M.3.03 is provided in the remuneration report section of the
Directors’ Report.
Apart from the details disclosed in this note, no Director has entered
into a material contract with the Group and the Company since
the end of the previous financial year and there were no material
contracts involving Directors’ interests existing at year end.
37
options and rights over equity instruments
The movement during the reporting period in the number of options over ordinary shares in the Company held, directly, indirectly or beneficially,
by each key management person, including their related parties, is as follows:
2010
directors
Steven M Skala
Jonathan West
Hugh M Morgan
Adrienne E Clarke
GF Dan o’Brien
Joshua T Hofheimer
executives
Marilyn A Anderson
Robyn L Heath
Justine C Heath
2009
directors
Steven M Skala
Jonathan West
Hugh M Morgan
Adrienne E Clarke
GF Dan o’Brien
Joshua T Hofheimer
executives
Marilyn A Anderson
Robyn L Heath
Justine C Heath
Held at
1 July 2009
exercised
expired
30 June 2010
Held at
30 June 2010
Vested
1 July 2010
exercised
1 July 2010
expired since
year end
Vested and
exercisable at
reporting date
1,057,768
300,000
303,031
1,096,971
1,231,456
3,000,000
500,000
500,000
20,000
8,009,226
154,737
-
-
-
928,425
-
-
-
-
1,083,162
903,031
300,000
303,031
1,096,971
303,031
-
500,000
500,000
3,906,064
-
-
-
-
-
3,000,000
-
-
20,000
3,020,000
-
-
-
-
-
1,500,000
-
-
-
1,500,000
-
-
-
-
-
1,000,000
-
-
-
1,000,000
-
-
-
-
-
2,000,000
-
-
-
2,000,000
Held at
1 July 2008
Granted as
compensation
exercised
Held at
30 June 2009
Vested during
the year
1,057,768
300,000
303,031
1,096,971
1,231,456
-
500,000
500,000
-
4,989,226
-
-
-
-
-
3,000,000
-
-
20,000
3,020,000
-
-
-
-
-
-
-
-
-
1,057,768
300,000
303,031
1,096,971
1,231,456
3,000,000
500,000
500,000
20,000
8,009,226
-
-
-
-
-
-
-
-
20,000
20,000
-
-
-
-
-
-
-
-
20,000
20,000
Vested and
exercisable at
30 June 2009
1,057,768
300,000
303,031
1,096,971
1,231,456
-
500,000
500,000
20,000
5,009,226
38 Hexima Limited 2010 ANNuAL REpoRT
movement in shares
The movement during the reporting period in the number of ordinary shares in
the Company held, directly, indirectly or beneficially, by each key management person,
including their related parties, is as follows:
2010
directors
Steven M Skala
Jonathan West
Hugh M Morgan
Adrienne E Clarke
GF Dan o’Brien 1
Joshua T Hofheimer 2
executives
Marilyn A Anderson
Robyn L Heath
Held at
1 July 2009
Shares from
converting
notes
Shares issued
under offer
purchases
Received on
exercise of
options
Sales
Held at
30 June 2010
4,012,730
1,611,702
6,454,503
5,417,919
4,844,768
50,000
2,381,935
2,381,935
27,155,492
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
26,807
-
-
-
26,807
154,737
-
-
-
928,425
-
-
-
1,083,162
-
-
-
-
800,000
-
-
-
800,000
4,167,467
1,611,702
6,454,503
5,417,919
5,000,000
50,000
2,381,935
2,381,935
27,465,461
1 GF Dan o’Brien resigned as Director on 2 october 2009
2 Joshua Hofheimer resigned as CEo and managing Director 1 July 2010 and continues as a non-
executive Director.
2009
directors
Steven M Skala
Jonathan West
Hugh M Morgan
Adrienne E Clarke
GF Dan o’Brien
Joshua T Hofheimer
executives
Marilyn A Anderson
Robyn L Heath
Held at
1 July 2008
Shares from
converting
notes
Shares issued
under offer
purchases
Received on
exercise of
options
Sales
Held at
30 June 2009
4,012,730
1,611,702
6,454,503
5,417,919
4,844,768
-
2,381,935
2,381,935
27,105,492
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
50,000
-
-
50,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
4,012,730
1,611,702
6,454,503
5,417,919
4,844,768
50,000
2,381,935
2,381,935
27,155,492
Changes in key management personnel in the period, after the reporting date and prior
to the date when the financial report is authorised for issue
Mr Joshua Hofheimer resigned as Chief Executive officer and Managing Director,
effective 1 July 2010. He continues to serve as a non-executive director. GF Dan o’Brien
resigned as Director on 2 october 2009.
Key management personnel and directors’ transactions
a) Dr Heath was an employee of The university of Melbourne during the financial
year ended 30 June 2010. During the course of the financial year ended
30 June 2010, amounts (including GST) totaling $2,591,494 (2009: $2,548,580)
were paid or payable by Hexima to The university of Melbourne for research
work carried out on behalf of Hexima. These transactions were conducted
on normal commercial terms. Trade accounts and/or accruals payable to The
university of Melbourne at 30 June 2010 were $1,088,944 (2009: $454,233).
b) Mr o’Brien is the sole director of Dromoland Capital pty Limited. An amount
(including GST) of $27,752 (2009: $171,889) was paid or provided to be paid
to this entity during the financial year ended 30 June 2010 for the provision
of Mr o’Brien’s services as Chairman of the Company until 2 october 2009.
These transactions were conducted on normal commercial terms.
39
c) professor Anderson is an employee of La Trobe university.
27. Group entities
parent entity
Hexima Limited
Significant subsidiaries
Hexima Holdings Limited
pharmagra pty Ltd
Country of
incorporation
ownership
interest
2010
2009
Australia
Australia
Australia
100
100
100
100
pharmagra pty Ltd is incorporated in Australia and is a 100% owned
subsidiary of the Company. pharmagra pty Ltd has total assets and
net assets of $2.00 at 30 June 2010.
Hexima Holdings pty Ltd is incorporated in Australia and is a 100%
owned subsidiary of the Company. Hexima Holdings pty Ltd has total
assets of $2,204,485 at 30 June 2010, which comprises the Hexima
glasshouse located at La Trobe university.
28. Parent entity disclosures
Result of the parent Entity
Loss for the period
other Comprehensive income
Total Comprehensive
income for the period
Financial position of the
parent entity at year end
Current assets
Total assets
Current liabilities
Total liabilities
total equity of the parent
entity comprising of:
Share capital
Reserves
(Accumulated losses)
Total Equity
($) 2010
Company
($) 2009
(6,081,614)
-
(11,276,023)
-
(6,081,614)
(11,276,023)
23,171,982
26,115,624
30,534,550
31,418,364
2,631,153
2,631,153
2,580,869
2,580,869
57,659,830
885,768
(35,061,128)
23,484,470
57,198,035
618,975
(28,979,515)
28,837,495
29. Subsequent event
There have been no events subsequent to balance date which
would have a material effect on the Group’s financial statements as
at 30 June 2010, other than those changes in the leadership of the
company, which have already been disclosed.
During the course of the financial year ended 30 June 2010,
amounts (including GST) totaling $2,387,693 (2009: $1,436,424)
were paid or payable by Hexima to La Trobe university for
research work carried out on behalf of the Group. These
transactions were conducted on normal commercial terms.
Trade accounts and/or accruals payable to La Trobe university
at 30 June 2010 were $1,389,211 (2009: $1,432,199).
f) Mr Skala is a consultant to Arnold Bloch Leibler. Mr Skala retired
as a partner of Arnold Bloch Leibler in 2004. An amount (including
GST) of $35,476 (2009: $62,816) was paid to Arnold Bloch
Leibler during the financial year ended 30 June 2010 for legal
services (and expenses associated therewith) provided to Hexima.
These services were provided and expenses incurred on normal
commercial terms. Trade accounts and/or accruals payable to
Arnold Bloch Leibler at 30 June 2010 were $NIL (2009: $NIL).
g) Mr Hofheimer was previously a partner of Sidley Austin LLp
before joining Hexima in June 2008. An amount of $27,054
(2009: $128,317) was paid or payable to Sidley Austin
during the year ended 30 June 2010 for legal services (and
expenses associated therewith) provided to Group and the
Company. These transactions were on normal commercial
terms. Trade accounts and/or accruals payable to Sidley
Austin at 30 June 2010 were $NIL (2009: $2,467).
Related party transactions
During the year, the Company provided an interest free loan of
$2,241,850 to its subsidiary Hexima Holdings pty Ltd. This loan
is outstanding at 30 June 2010 in the Company’s statement of
financial position.
25. Capital Commitments
Capital expenditure commitments
plant and equipment
Contracted but not provided for and payable
Within one year
Consolidated
($) 2009
($) 2010
-
-
1,764,052
1,764,052
The capital commitment is in relation to the construction of a corn
transformation facility, incorporating glasshouse and laboratory space,
by the Group.
26. Operating Leases
Leases as lessee
Non-cancellable operating lease rentals are payable as follows:
Less than one year
Between one and five years
89,699
4,712
94,411
95,442
3,800
99,242
The group leases office premises and a glass house under an
operating lease. The lease is negotiated on an annual basis.
40 Hexima Limited 2010 ANNuAL REpoRT
DIRECToRS’ DECLARATIoN
1. In the opinion of the Directors of Hexima Limited (‘the Company’):
(a) the financial statements and notes, and the Remuneration
Report in the Directors’ Report, set out on pages 14 to 40, are
in accordance with the Corporations Act 2001, including:
(i) giving a true and fair view of the Company’s and the Group’s
financial position as at 30 June 2010 and of their performance,
for the financial year ended on that date; and
(ii) complying with Australian Accounting Standards (including the Australian
Accounting Interpretations) and the Corporations Regulations 2001;
(b) there are reasonable grounds to believe that the Company will be
able pay its debts as and when they become due and payable.
2. The Directors have been given the declarations required by Section
295A of the Corporations Act 2001 from the Chief Financial officer/
Chief operating officer for the financial year ended 30 June 2010.
3. The Directors draw attention to Note 2(a) to the financial statements, which
includes a statement of compliance with International Financial Reporting Standards.
Signed in accordance with a resolution of the Directors:
Dated at Melbourne 27th day of August 2010.
mr Ross dobinson
Director
mr Steven m Skala ao
Director
41
INDEpENDENT AuDIToR’S REpoRT
42 Hexima Limited 2010 ANNuAL REpoRT
43
44 Hexima Limited 2010 ANNuAL REpoRT
SHAREHoLDER INFoRMATIoN
Shareholder information set out below was applicable
as at 5 october 2010
1. distribution of equity Securities
3. Unquoted equity securities
options issued
4. Substantial Shareholders
name
Hugh Morgan
Robert oatley
Adrienne Clarke
Geoffrey Frederick o’Brien
Clianth pty Ltd
Steven Skala
number
on issue
1,732,000
number of
holders
21
number Held
6,454,503
6,102,180
5,417,919
5,000,000
4,213,510
4,167,467
%
7.96%
7.53%
6.68%
6.17%
5.20%
5.14%
5. Voting Rights
on a show of hands each person as a member, proxy, attorney or
representative has one vote, and on a poll each member present or
by proxy, attorney or representative has one vote for each share held.
Range
1 to 1,000
1,001 to 5,000
5,001 to 10,000
10,001 to 100,000
100,001 and over
Total
no of Holders
37
218
146
306
72
779
ordinary
Shares
28,207
707,352
1,240,693
10,364,992
68,718,226
81,059,470
%
0.03
0.87
1.53
12.79
84.78
100.00
There were 63 holders of less than a marketable parcel of shares
2. twenty largest equity security holders
name
1 Balmoral Australia pty Ltd
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