Paradigm Biopharmaceuticals Limited
A BN 9 4 1 69 3 46 9 63
2016 ANNUAL REPORT
PARADIGM BIOPHARMACEUTICALS LIMITED
C O N T E N T S
Corporate Directory
Chairman’s Report
Managing Directors’ Review
Directors' Report
Remuneration Report
Auditor’s Independence Declaration
Consolidated Financial Statements & Notes
Directors' Declaration
Independent Auditor’s Report
Shareholder Information
Appendix A – Corporate Governance Statement
Page
1
3
4
6
10
17
18
41
42
44
46
General Information
The Financial Statements cover Paradigm Biopharmaceuticals Limited as a Consolidated Entity consisting of Paradigm
Biopharmaceuticals Limited and the entities it controlled at the end of, or during the year. The Financial Statements are
presented in Australian dollars, which is Paradigm Biopharmaceuticals Limited's functional and presentation currency.
Paradigm Biopharmaceuticals Limited is a listed public company limited by shares, incorporated and domiciled in
Australia. A description of the nature of the Consolidated Entity's operations and its principal activities are included the
part of the Financial Statements.
The Financial Statements were authorised for issue, in accordance with a resolution of Directors, on 31 August 2016. The
Directors have the power to amend and reissue the Financial Statements.
PARADIGM BIOPHARMACEUTICALS LIMITED
C O R P O R A T E D I R E C T O R Y
Directors
Mr Graeme Kaufman
Mr Paul Rennie
Mr Christopher Fullerton
Mr John Gaffney
–
–
–
–
Chairman & Non-Executive Director
Managing & Executive Director
Non-Executive Director
Non-Executive Director
Company Secretary
Mr Kevin Hollingsworth
Notice of Annual General Meeting
The details of the annual general meeting of Paradigm Biopharmaceuticals Limited are:
K&L Gates
Level 25, South Tower, 525 Collins Street
Melbourne, VIC 3000
11:00am on 10 November 2016
Principal Place of Business and Registered Office
C/-Hollingsworth & Co Pty Ltd
Level 2, 517 Flinders Lane
Melbourne, VIC 3000
Telephone: (61-3) 9629 5566
Facsimile: (61-3) 9629 5466
Auditor
RSM Australia Partners
Level 21
55 Collins Street
Melbourne, VIC 3000
Solicitors (Corporate)
K&L Gates
Level 25, South Tower, 525 Collins Street
Melbourne, VIC 3000
Share Registry
Computershare Limited
Yarra Falls, 452 Johnston Street
Abbotsford, VIC 3067
Telephone: (61-3) 1300 137 328
Bankers
Commonwealth Bank
Level 20, Tower One, Collins Square
727 Collins Street
Melbourne, VIC 3008
1
PARADIGM BIOPHARMACEUTICALS LIMITED
C O R P O R A T E D I R E C T O R Y ( C O N T ’ D )
Stock Exchange
ASX Limited
Level 4, North Tower, 525 Collins Street
Melbourne, VIC 3000
ASX Code: PAR
Website
www.paradigmbiopharma.com
2
PARADIGM BIOPHARMACEUTICALS LIMITED
C H A I R M A N S ’ R E P O R T
Dear Shareholders,
I am pleased to present the 2016 Annual Report for Paradigm Biopharmaceuticals Limited.
Paradigm listed on the Australian Securities Exchange (ASX) on 19 August 2015.
From listing, Paradigm commenced the repurposing of the historic drug Pentosan Polysulfate Sodium (PPS) for two
clinical development programs, namely the treatment of bone marrow edema (bone bruising) and allergic rhinitis (also
known as hay fever).
An unresolved subchondral bone marrow edema following an acute knee injury is strongly associated with the
development of post-traumatic osteoarthritis. With the early intervention of the drug PPS, we aim to demonstrate that bone
marrow edema can be resolved and the cartilage protected from further damage. Paradigm’s open labelled Phase 2 study
commenced in March, 2016 and recruitment is ongoing. The treatment of bone marrow edema is an emerging market with
no pharmaceuticals currently registered to treat this clinical indication. Treatment of bone marrow lesions represents an
addressable market of US$2.5B in the USA.
Intranasal corticosteroids and anti-histamines are the current first line therapies used to treat the symptoms of allergic
rhinitis. Paradigm is developing an intranasal PPS spray which aims to address this US$11B global market but with
significant potential advantages for the sufferer over conventional therapies. The Paradigm product aims to be the first
non-steroid based nasal spray on the market which is dual acting, having both anti-histamine and anti-inflammatory
properties. Since listing, Paradigm has developed the nasal spray formulation, completed a toxicology study and a Phase
1 clinical trial and received clearance from the Safety Data Monitoring Committee to proceed to a Phase 2 clinical trial
scheduled to commence in December, 2016.
In addition to the two lead clinical indications, Paradigm has generated some PPS proof-of-concept, nonclinical and
clinical data in a new indication which expands our pipeline.
Paradigm continues to execute on its drug repurposing business strategy. In the 2015-2016, over 70% of funds were
spent directly on the clinical development plans.
The year ahead will be an exciting time for Paradigm, and I acknowledge the terrific support of our shareholders which is
so important to the company. I also thank our CEO, Paul Rennie, and his management team for the very significant
outcomes they have achieved in the short time since our listing.
On behalf of the Directors,
Graeme Kaufman
Chairman
Melbourne, Victoria
31 August 2016
3
PARADIGM BIOPHARMACEUTICALS LIMITED
M A N A G I N G D I R E C T O R ’ S R E V I E W
Dear Shareholder,
I am pleased to report on the progress made by Paradigm’s executive management team in the past 12 months.
Clinical Development
Bone Marrow Edema: In February 2016 the Company commenced the open labelled Phase 2 clinical trial (up to 40
participants with an interim analysis at 20 participants), investigating the role of the drug pentosan polysulfate sodium
(PPS) in treating traumatic Bone Marrow Lesions. This trial is actively recruiting participants.
Bone marrow edema or bone bruising is the accumulation of interstitial fluid or inflammation within the bone marrow,
typically a consequence of direct trauma to the bone. Currently there are no approved therapeutics for the treatment of
bone marrow edema. Treatment of bone marrow edema is a rapidly growing market opportunity which the Company
estimates to be US$2.5 Billion per annum in the USA.
Allergic Rhinitis / hay fever: Significant progress has been made with the PPS intra-nasal spray to treat the symptoms of
allergic rhinitis / hay fever.
In August, 2016 the Company announce the results of the 28 Day intra-nasal toxicology study in rats. The intra-nasal
toxicology study included in life observations, systemic haematology, biochemistry, coagulation, histopathology of major
organs and nasal tissue. The final toxicology report noted no observed adverse effects at any dose of PPS and the data
supports a safety margin of 20 x the estimated human dose.
The Company was also pleased to announce the treatment of the 18 healthy volunteers in its Phase 1 study was
completed. The Phase 1 study design was a randomised double-blind, placebo-controlled trial with 2 cohorts of 2 dose
levels. Participants had full blood analysis, daily clinical observations and a general and nasal examination. The Company
also announce that the Phase 1 Data and Safety Monitoring Committee had cleared the Company’s PPS intra-nasal
product for the Phase 2 study which is scheduled to commence in Sweden in December, 2016.
4
PARADIGM BIOPHARMACEUTICALS LIMITED
M A N A G I N G D I R E C T O R ’ S R E V I E W ( C O N T ’ D )
The current market for Allergic Rhinitis is about US$ 11 Billion and is dominated by anti-histamines and corticosteroids
with market surveys highlighting patient dissatisfaction and the need for effective therapy. Rhinosul® has unique
properties consisting of both histamine stabilising and anti-inflammatory properties without the known side effects of anti-
histamines and steroids. The company believes its product can meet market needs that are not effectively managed by
current nasal sprays.
2016-2017 Milestones
Over the next 12 months, the Company has an ambitious plan to generate human data with the repurposed drug, PPS,
commence business development activities and continue to develop and prosecute the Company’s IP portfolio. Paradigm
has identified the following milestones for the coming year:
Complete the open label Phase 2 Bone Marrow Edema clinical trial;
Complete the randomised double-blind placebo-controlled Phase 2 challenge study for its intra-nasal spray for
allergic rhinitis; and
Commence a Phase 2 clinical trial treating viral arthritis with PPS.
Business Development: The Company will commence its business development plans by directly approaching potential
commercial partners in Q1 and Q2 CY2017. The Company will present its data packages including toxicology reports,
peer-reviewed pre-clinical data, Phase 1 and Phase 2 clinical data.
Research & Development: A focussed Research & Development (R&D) program will be undertaken to identify and
develop second generation products. This R&D program will be managed by the Company’s Chief Scientific Officer. The
Company will continue to outsource its R&D to world-class research laboratories and CRO’s. In line with the Company’s
publication policy it will publish the pre-clinical studies in peer-reviewed scientific journals.
Intellectual Property (Patents)
BME Patent: The Company announced on 26 August 2015 it had been granted a patent by the United States Patent and
Trademark Office (USPTO) to use the drug Pentosan Polysulfate Sodium (PPS) for treatment of Bone Marrow (o)Edema
(BME). The US granted patent (US 9,101,650 B2) entitled ‘Treatment of bone marrow edema (oedema) with polysulfated
polysaccharides’ provides coverage until February 2032. The BME patent is now granted in Australia, New Zealand, China
and the USA.
Respiratory Patent: Paradigm’s respiratory patent covers the use of PPS for treating Allergic Rhinitis, Allergic Asthma
and COPD. The Respiratory patent is now granted in Australia, New Zealand, China, Canada and Europe.
Thank you: The significant achievement in the past 12 months has been made possible by the highly talented and
productive Paradigm employees and consultants. I would also like to acknowledge the outstanding support of Paradigm’s
shareholders, stockbrokers, clinical & regulatory consultants, scientific & medical professionals and our manufacturing
partners. All Paradigm employees and consultants continue to work hard for our shareholders and other stakeholders and
we will work diligently towards achieving our corporate objectives over the next 12 months.
Paul Rennie
Chief Executive Officer
5
PARADIGM BIOPHARMACEUTICALS LIMITED
D I R E C T O R S ’ R E P O R T
The Directors present their report together with the financial report of Paradigm Biopharmaceuticals Limited (the “Company”)
and its controlled entities (the “Group”), for the financial year ended 30 June 2016, and the Auditor’s Report thereon.
DIRECTORS
Information on Directors
The Directors of the Company at any time during or since the end of the financial year are:
Graeme Kaufman, Chairman and Non-Executive Director (Appointed on 02 May 2014)
Graeme Kaufman BSc, MBA, has wide ranging experience across the biotechnology sector, spanning scientific, commercial
and financial areas. His experience with CSL Limited, Australia’s largest biopharmaceutical company included responsibility
for all of their manufacturing facilities, and the operation of an independent business division operating in the high technology
medical device market. As CSL’s General Manager Finance, Mr Kaufman had global responsibility for finance, strategy
development, human resources and information technology. Mr Kaufman has also served as an executive Director of ASX-
listed Circadian Technologies and a non-executive Director of Amrad Corporation, and held the role of Executive Vice
President Corporate Finance with Mesoblast Limited until 2013. He is currently Chairman of Bionomics Limited and IDT
Australia Limited.
Paul Rennie, Managing and Executive Director (Appointed on 02 May 2014)
Paul Rennie BSc, MBM, Grad Dip Commercial Law, MSTC, has sales, marketing, business development, operational and
IP commercialisation experience in the biopharmaceutical sector. Paul’s experience includes working for Boehringer
Mannheim (now Roche Diagnostics), Merck KGGA as national sales and marketing manager and Soltec (FH Faulding Ltd)
as their Director of business development. Paul also led the commercialisation of Recaldent® a novel biopharmaceutical
arising from research at the dental school, University of Melbourne. Paul took an R&D project from the laboratory bench to
a commercial product now marketed globally as an additive to oral care products. More recently Paul worked in a number
of positions with Mesoblast Ltd. Paul was the inaugural COO and moved into Executive Vice President New Product
Development for the adult stem cell company. For the past year Paul has worked full time at Paradigm BioPharmaceuticals
Limited.
Christopher Fullerton, Non-Executive Director (Appointed on 30 September 2014)
Christopher Fullerton, BEc, has extensive experience in investment, management and investment banking and is a qualified
chartered accountant. He is an investor in listed equities and private equity and his current unlisted company directorships
cover companies in the property investment and agriculture sectors. Mr Fullerton’s exposure to and experience in the fields
of biotechnology and health care technology was gained through his non-executive chairmanships of Bionomics Limited,
Cordlife Limited and Health Communication Network Limited and his non-executive directorship of Global Health Limited.
John Gaffney, Non-Executive Director (Appointed on 30 September 2014)
John Gaffney LL.M is a lawyer with over 30 years’ experience and has undertaken the AICD Company Directors qualification.
He brings to the board a compliance and corporate governance background and is experienced in financial services
compliance. John also has corporate and commercial experience having worked with a major national law firm as a senior
lawyer and also practised as a Barrister at the Victorian Bar. Previously John has been a non-executive Director of a US
based biotechnology company.
COMPANY SECRETARY
Kevin Hollingsworth, Company Secretary (Appointed on 02 May 2014)
Kevin Hollingsworth, FCPA, FCMA, CGMA, in addition to his duties at Paradigm, serves as Principal of Hollingsworth
Financial Services. Prior to that he served as Chief Financial Officer and Company Secretary of Mesoblast Limited (ASX:
MSB), before which he held the same positions at Patrys Limited (ASX: PAB). At Alpha Technologies Corporation Limited
(ASX: ASU), Kevin Hollingsworth served as a Non-Executive Director. He has served as National President of CIMA
Australia, State Councillor for CPA Australia and Chairman of the National and Victorian Industry and Commerce
Accountants Committees. He is a Chartered Global Management Accountant and Fellow of CPA Australia and Chartered
Management Accountants.
6
PARADIGM BIOPHARMACEUTICALS LIMITED
D I R E C T O R S ’ R E P O R T ( C O N T ’ D )
DIRECTORSHIPS IN OTHER LISTED ENTITIES
Directorships of other listed entities held by Directors of the Company during the last 3 years immediately before the end of
the financial year are as follows:
Director
Company
Graeme Kaufman
Bionomics Limited
IDT Australia Limited
Cellmid Limited
Period of directorship
From
To
18-Sep-12
01-Jun-13
27-Aug-12
Current
Current
30-Jun-15
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:
Board
Nomination &
Remuneration
Committee
Audit & Risk
Committee
Director
Held
Attended
Held
Attended
Held
Attended
Graeme Kaufman
Paul Rennie
Christopher
Fullerton
John Gaffney
7
7
7
7
7
7
7
6
-
-
-
-
-
-
-
-
2
2
2
2
2
2
2
2
Committee membership
As at the date of the report, the Company had a Nomination and Remuneration Committee and an Audit and Risk Committee
of the Board of Directors. Members acting on the committees of the Board during the financial year were:
Nomination &
Remuneration
Committee
Graeme Kaufman
Paul Rennie
Christopher Fullerton
John Gaffney
Audit & Risk
Committee
Graeme Kaufman
Christopher Fullerton
John Gaffney
7
PARADIGM BIOPHARMACEUTICALS LIMITED
D I R E C T O R S ’ R E P O R T ( C O N T ’ D )
PRINCIPAL ACTIVITIES
The principal activities of the Group are researching and developing therapeutic products for human use. It is a drug
repurposing company which seeks to find new uses for old drugs, thereby reducing the cost and time to bring therapeutics
to market.
OPERATING REVIEW
The Group made a loss for the financial year ended 30 June 2016 of $2,924,425 (2015: Loss of $1,565,305).
Consolidated revenue including other income during the period was $1,394,161 (2015: $7,331). This revenue included
interest of $103,568 (2015: $7,331), and an R&D tax incentive of $1,290,593 (2015: Nil).
The consolidated total expenses for the period were $4,318,586 (2015: $1,572,636).
The research and development expenses for the period were $2,867,985 (2015: $157,710).
The other operating expenses during the period were $1,450,601 (2015: $1,414,926).
Basic and diluted net loss per share decreased to 3.60 cents (2015: 4.68 cents) due to the increased number of shares.
ENVIRONMENTAL REGULATION
The Group’s operations are not regulated by any significant environmental law of the Commonwealth or of a state or territory
of Australia.
SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
On the 5 August 2015, Paradigm completed its Asset Purchase Agreement with Glycan Biosciences LLC with the final
payment of $410,228 (US$300,000).
On the 7 August 2015, having obtained conditional approval from the ASX for the admission of Paradigm to the ASX
Official List and having raised $8,000,000 as part of its Initial Public Offer, Paradigm completed the acquisition of Xosoma
Pty Ltd.
Paradigm now owns 100% of Xosoma Pty Ltd and the Xosoma vendors have received 19,495,238 Paradigm shares.
On the 7 August 2015, the Series 1 Preference Shareholders holding 1,235,000 Preference Shares converted to
7,057,143 Ordinary Shares.
On the 7 August 2015, the Series 2 Preference Shareholders holding 600,000 Preference Shares converted to 2,637,363
Ordinary Shares.
On the 19 August 2015, having raised the maximum subscription of $8,000,000 as part of its Initial Public Offer, Paradigm
shares were quoted on the Official List of the ASX.
On the 27 January 2016, Xosoma Pty Ltd completed the acquisition of C4M Pharmaceuticals Pty Ltd.
DIVIDENDS
No dividends were declared or paid since the start of the financial year. No recommendation for payment of dividends has
been made.
EVENTS SUBSEQUENT TO BALANCE DATE
No other matters or circumstances have arisen since balance date which have impacted or are likely to impact the
Consolidated Entity’s operations, results and state of affairs in future financial years.
LIKELY DEVELOPMENTS
There no likely developments.
8
PARADIGM BIOPHARMACEUTICALS LIMITED
D I R E C T O R S ’ R E P O R T ( C O N T ’ D )
CORPORATE GOVERNANCE
The Company’s Corporate Governance Statement can be found in Appendix A.
DIRECTORS’ INTERESTS
The relevant interest of each Director in the shares and options issued by the Company at the date of this report is as
follows:
Director
Graeme Kaufman
Paul Rennie
Christopher Fullerton
John Gaffney
Ordinary
shares
2,043,000
21,547,876
617,145
632,000
INDEMNIFICATION AND INSURANCE OF OFFICERS
Indemnification
The Company has agreed to indemnify the current Directors of the Company against all liabilities to another person (other
than the Company or a related body corporate) that may arise from their position as Directors of the Company, except where
the liability arises out of conduct involving a lack of good faith.
The agreement stipulates that the Company will meet to the maximum extent permitted by law, the full amount of any such
liabilities, including costs and expenses.
Insurance Premiums
The Company paid a premium during the year in respect of a Director and officer liability insurance policy, insuring the
Directors of the Company, the Company Secretary, and all Executive Officers of the Company against a liability incurred as
such a Director, Secretary or Executive Officer to the extent permitted by the Corporations Act 2001. The Directors have not
included details of the nature of the liabilities covered or the amount of the premium paid in respect of the Directors’ and
Officers’ liability and legal expenses insurance contracts, as such disclosure is prohibited under the terms of the contract.
Proceedings on behalf of the Company
No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf
of the Company, or to intervene in any proceedings to which the Company is a party for the purpose of taking responsibility
on behalf of the Company for all or part of those proceedings.
Non-audit services
The Company’s auditor, RSM Australia, was appointed in July 2014 for audit services and also provided taxation services
during the year.
Officers of the Company who are former partners of RSM Australia
There are no Officers of the Company who are former partners of RSM Australia.
Auditor’s Independence Declaration
The Auditor’s Independence Declaration as required under section 307C of the Corporations Act 2001 is set out on page
17 of the financial report.
Auditor
RSM Australia Partners continues in office in accordance with section 327 of the Corporations Act 2001.
9
PARADIGM BIOPHARMACEUTICALS LIMITED
R E M U N E R A T I O N R E P O R T
AUDITED REMUNERATION REPORT
This Remuneration Report outlines the Director and Executive Remuneration arrangements of the Company and the Group
in accordance with the requirements of the Corporations Act 2001 and the Corporations Regulations 2001.
For the purposes of this report, Key Management Personnel of the Group are defined as those persons having authority
and responsibility for planning, directing and controlling the major activities of the Company and the Group, directly or
indirectly, including any Director (whether executive or otherwise) of the Company. The Group does not presently employ
any Executives, other than the Executive Director.
KEY MANAGEMENT PERSONNEL
The following were Key Management Personnel of the Group at any time during the year and unless otherwise indicated
were Key Management Personnel for the entire year:
Name
Position held
Date Appointed
Date Ceased
Graeme Kaufman
Paul Rennie
Christopher Fullerton
John Gaffney
Kevin Hollingsworth
Chairman & Non-Executive Director
Managing & Executive Director
Non-Executive Director
Non-Executive Director
Chief Financial Officer & Company Secretary
2 May 2014
2 May 2014
30 September 2014
30 September 2014
2 May 2014
REMUNERATION COMMITTEE
The Nomination and Remuneration Committee proposes candidates for Director appointment for the Board's consideration,
reviews the fees payable to both Executive and Non-Executive Directors and reviews and advises the Board in relation to
Chief Executive Officer succession planning. The Nomination and Remuneration Committee has the authority to consult
any independent professional adviser it considers appropriate to assist it in meeting its responsibilities.
The Nomination and Remuneration Committee is a committee of the Board and is established in accordance with the
authority provided in the Company’s constitution.
The Board is responsible to shareholders for ensuring that the Company:
has coherent remuneration policies and practices which are observed and which enable it to attract and retain
Executives and Directors who will create value for shareholders;
fairly and responsibly rewards executives having regard to the performance of the Company, the performance of
the Executive and the general pay environment;
provides disclosure in relation to the Company's remuneration policies to enable investors to understand the costs
and benefits of those policies and the link between remuneration paid to Directors and key Executives and
corporate performance; and
complies with the provisions of the ASX Listing Rules and the Corporations Act.
PRINCIPLES OF REMUNERATION
The primary purpose of the Nomination and Remuneration Committee is to support and advise the Board in fulfilling its
responsibilities to shareholders in ensuring that the Board is appropriately remunerated, structured and comprised of
individuals who are best able to discharge the responsibilities of Directors by:
assessing the size, composition, diversity and skills required by the Board to enable it to fulfil its responsibilities to
shareholders, having regard to the Company’s current and proposed scope of activities;
assessing the extent to which the required knowledge, experience and skills are represented on the Board;
establishing processes for the identification of suitable candidates for appointment to the Board;
overseeing succession planning for the Board and CEO;
establishing processes for the review of the performance of individual Directors and the Board as a whole;
assessing the terms of appointment and remuneration arrangements for Non-Executive Directors; and
assessment and reporting to the Board
Remuneration structure
In accordance with best practice Corporate Governance, the structure of Non-Executive Directors’ Remuneration is clearly
distinguished from that of Executives.
10
PARADIGM BIOPHARMACEUTICALS LIMITED
R E M U N E R A T I O N R E P O R T ( C O N T ’ D )
Non-Executive Director Remuneration
The Constitution and the ASX Listing Rules specify that the aggregate remuneration of Non-Executive Directors shall be
determined from time to time by a general meeting. Remuneration of Non-Executive Directors is determined in maximum
aggregate by the shareholders, and is allocated by the Board on the recommendation of the Remuneration Committee. The
Remuneration Committee will take independent advice in respect to Directors' fees on an as needed basis.
There is no separate payment made for attendance at Board committee meetings or for other attendances to Company or
Board activities.
Directors are not required to hold shares in the Company as part of their appointment.
There is to be no plan to provide remuneration, reward or other benefits to Non-Executive Directors upon the cessation of
them holding office as a Director.
Executive remuneration
Executive Directors receive no extra remuneration for their service on the Board beyond their executive salary package.
Fixed compensation
Fixed compensation consists of base compensation, as well as employer contributions to superannuation funds.
Compensation levels are reviewed annually by the remuneration committee through a process that considers individual,
segment and overall performance of the Group.
Short-term incentives
Executive Key Management Personnel may receive short-term incentives.
Long-term incentives
Share-based compensation - Options granted to Directors and key management personnel
The Company has a long-term incentive plan being the Employee Share Plan (ESP). Refer to Note 11 for further information
on the Plan. The shares issued under the ESP are considered to be options under the Australian Accounting standards.
Issue of shares
Details of shares issued to Directors and other Key Management Personnel as part of the ESP compensation:
Name
Date
Shares
Issue price
Fair value of
issued shares
$
Graeme Kaufman
Paul Rennie
Christopher Fullerton
John Gaffney
Kevin Hollingsworth
Movement in shares
29 May 2015
1,200,000
29 May 2015
600,000
29 May 2015
600,000
29 May 2015
600,000
29 May 2015
600,000
$0.35
$0.35
$0.35
$0.35
$0.35
$0.208
249,600
$0.208
124,800
$0.208
124,800
$0.208
124,800
$0.208
124,800
The movement during the reporting period in the number of ordinary shares in Paradigm Biopharmaceuticals Limited held
directly, indirectly or beneficially by each Director and Key Management Personnel, including their related entities in as
follows:
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PARADIGM BIOPHARMACEUTICALS LIMITED
R E M U N E R A T I O N R E P O R T ( C O N T ’ D )
Held at year Purchases
Disposals
opening
Issued via
ESP Held at year
end
1,200,000
843,000
21,214,543
333,333
600,000
17,145
600,000
32,000
600,000
2,971,871
-
-
-
-
-
-
2,043,000
-
21,547,876
-
-
617,145
632,000
-
3,571,871
Movement in shares (cont’d)
Directors & Key Management
Persons
Graeme Kaufman
Paul Rennie
Christopher Fullerton
John Gaffney
Kevin Hollingsworth
EMPLOYMENT AGREEMENTS
The Board has reviewed the remuneration package for the Chief Executive Officer in July 2016. The Remuneration and
other terms of employment for the Chief Executive Officer is formalised in a service agreement. Details of this agreement is
as follows:-
Name:
Title:
Agreement commenced:
Term of agreement:
Details:
Paul Rennie
Managing Director and Chief Executive Officer
7 November 2014
3 years
Base annual package *, STI ** and discretionary share based LTI remuneration ***,
subject to annual performance review, 6 month termination notice by either party,
3-12 month non-solicitation clause after termination depending on the area. The
Company may terminate the agreement with cause in certain circumstances such
as gross misconduct.
* Base annual package for financial year 2016/17 - $350,000 per annum plus statutory
superannuation.
** STI to award for financial year 2015/2016 – 25% of base ($70,000)
12
PARADIGM BIOPHARMACEUTICALS LIMITED
R E M U N E R A T I O N R E P O R T ( C O N T ’ D )
REMUNERATION OF KEY MANAGEMENT PERSONNEL
Details of the nature and amount of each major element of the remuneration of each Key Management Personnel of the Group for the year ended 30 June 2016 are:
Short-term
Post-
employment
Long-term
Share-
based
payments
Salary &
fees
Cash
Bonus
Superannuation
benefits
Long
service
leave
Options
Total
Proportion of
remuneration
performance
related
Value of
options as
proportion of
remuneration
$
$
$
$
$
$
%
%
Directors & Key Management
Personnel
Non-executive
Graeme Kaufman
Christopher Fullerton
John Gaffney
Executive
Paul Rennie
Kevin Hollingsworth
105,667
45,833
45,833
-
-
-
10,038
4,354
4,354
253,333
70,000
58,833
-
30,717
5,589
Total
2016
509,499
70,000
55,052
-
-
-
-
-
-
-
-
-
-
-
-
115,705
50,187
50,187
0.0%
0.0%
0.0%
0.00%
0.00%
0.00%
354,050
21.65%
64,422
0.0%
0.00%
0.00%
634,551
21.65%
0.00%
13
PARADIGM BIOPHARMACEUTICALS LIMITED
R E M U N E R A T I O N R E P O R T ( C O N T ’ D )
REMUNERATION OF KEY MANAGEMENT PERSONNEL (cont’d)
Details of the nature and amount of each major element of the remuneration of each Key Management Personnel of the Group for the year ended 30 June 2015 are:
Short-term
Post-
employment
Long-term
Share-
based
payments
Salary &
fees
Cash
Bonus
Superannuation
benefits
Long
service
leave
Options
Total
$
$
$
$
$
$
Proportion of
remuneration
performance
related
%
Value of
options as
proportion of
remuneration
%
Directors & Key Management
Personnel
Non-executive
Graeme Kaufman
Christopher Fullerton
John Gaffney
Executive
Paul Rennie
Kevin Hollingsworth
84,000
-
-
120,000
78,000
Total
2015
282,000
-
-
-
-
-
-
7,980
-
-
11,400
7,410
26,790
-
-
-
-
-
-
249,600
124,800
124,800
341,580
124,800
124,800
0.0%
0.0%
0.0%
73.07%
100.00%
100.00%
124,800
124,800
256,200
210,210
0.0%
0.0%
48.71%
59.37%
748,800
1,057,590
-
70.80%
14
PARADIGM BIOPHARMACEUTICALS LIMITED
R E M U N E R A T I O N R E P O R T ( C O N T ’ D )
REMUNERATION OF KEY MANAGEMENT PERSONNEL (cont’d)
The proportion of remuneration linked to performance and the fixed proportion are as follows:
Name
Non-executive
Graeme Kaufman
Christopher Fullerton
John Gaffney
Executive:
Paul Rennie
Kevin Hollingsworth
Fixed remuneration
At risk - STI
At risk - LTI
2016
2015
2016
2015
2016
2015
100.00%
100.00%
100.00%
26.93%
-
-
-
-
-
78.35%
100.00%
51.29%
40.63%
21.65%
-
-
-
-
-
-
-
-
-
-
-
73.07%
100.00%
100.00%
48.71%
59.37%
15
PARADIGM BIOPHARMACEUTICALS LIMITED
R E M U N E R A T I O N R E P O R T ( C O N T ’ D )
REMUNERATION OF KEY MANAGEMENT PERSONNEL (cont’d)
The proportion of the cash bonus payable is as follows:
Name
Non-executive
Graeme Kaufman
Christopher Fullerton
John Gaffney
Executive:
Paul Rennie
Kevin Hollingsworth
Cash bonus payable
2016
2015
-
-
-
70,000
-
-
-
-
-
-
This is the end of the audited Remuneration Report.
Dated at Melbourne, Victoria this 31st day of August 2016.
Signed in accordance with a resolution of the Directors:
Graeme Kaufman
Chairman
16
RSM Australia Partners
Level 21, 55 Collins Street Melbourne VIC 3000
PO Box 248 Collins Street West VIC 8007
T +61 (0) 3 9286 8000
F +61 (0) 3 9286 8199
www.rsm.com.au
AUDITOR’S INDEPENDENCE DECLARATION
As lead auditor for the audit of the financial report of Paradigm Biopharmaceuticals Limited for the year ended
30 June 2016 I declare that, to the best of my knowledge and belief, there have been no contraventions of:
(i)
(ii)
the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
any applicable code of professional conduct in relation to the audit.
RSM AUSTRALIA PARTNERS
J S CROALL
Partner
31 August 2016
Melbourne, Victoria
THE POWER OF BEING UNDERSTOOD
AUDIT | TAX | CONSULTING
RSM Australia Partners is a member of the RSM network and trades as RSM. RSM is the trading name used by the members of the RSM network. Each member of the
RSM network is an independent accounting and consulting firm which practices in its own right. The RSM network is not itself a separate legal entity in any jurisdiction.
RSM Australia Partners ABN 36 965 185 036
Liability limited by a scheme approved under Professional Standards Legislation
17
PARADIGM BIOPHARMACEUTICALS LIMITED
C O N S O L I D A T E D S T A T E M E N T O F P R O F I T O R L O S S A N D
O T H E R C O M P R E H E N S I V E I N C O M E
f o r t h e y e a r e n d e d 3 0 J u n e 2 0 1 6
Period
from
1-Jul-15 to
30-Jun-16
Period
from
1-Jul-14 to
30-Jun-15
Notes
$
$
2
3
1,394,161
(2,867,985)
(700,625)
(749,976)
7,331
(157,710)
(1,195,029)
(219,897)
(2,924,425)
(1,565,305)
-
-
(2,924,425)
(1,565,305)
-
-
(2,924,425)
(1,565,305)
Other income
Research and development
Employee expenses
General and administration expenses
Loss before income tax
Income tax expense / (benefit)
Loss for the year
Other comprehensive income
Total comprehensive income attributable to members of the
Consolidated Entity
Earnings per share (cents)
Basic and diluted earnings per share
15
(3.60) cents (4.68) cents
The consolidated statement of profit or loss is to be read in conjunction with the accompanying notes.
18
PARADIGM BIOPHARMACEUTICALS LIMITED
C O N S O L I D A T E D S T A T E M E N T O F F I N A N C I A L P O S I T I O N
a s a t 3 0 J u n e 2 0 1 6
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Prepaid capital raising costs
Prepaid insurance
Total current assets
Non-current assets
Intangible assets
Plant and equipment
Notes
2016
$
2015
$
4
5
6
7
2,998,352
124,857
1,342,224
15,741
-
697,527
8,040
-
4,348,616
838,125
7,987,552
356,288
10,635
-
Total non-current assets
7,998,187
356,288
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Employee benefits
12,346,803
1,194,413
8
9
1,026,308
90,376
556,078
29,209
Total current liabilities
1,116,684
585,287
Net assets
EQUITY
Issued capital
Share options reserve
Accumulated losses
Total equity
11,230,119
609,126
10
11
12
15,071,813
1,577,497
799,902
748,800
(4,641,596)
(1,717,171)
11,230,119
609,126
The consolidated statement of financial position is to be read in conjunction with the accompanying notes.
19
PARADIGM BIOPHARMACEUTICALS LIMITED
C O N S O L I D A T E D S T A T E M E N T O F C A S H F L O W S
f o r t h e y e a r e n d e d 3 0 J u n e 2 0 1 6
Cash flows from operating activities
Payments to suppliers and employees (Inclusive of GST)
Interest received
Net cash outflow from operating activities
Cash flows from investing activities
Payments for intangible assets
Payments for plant and equipment
Net cash outflow from investing activities
Cash flows from financing activities
Period from
1-Jul-15 to
30-Jun-16
$
Period from
1-Jul-14 to
30-Jun-15
$
(3,689,020)
(1,210,614)
101,442
7,331
(3,587,578)
(1,203,283)
(752,581)
(237,977)
(12,968)
-
(765,549)
(237,977)
Proceeds from the issue of share capital
8,000,000
1,582,345
Payment of share issue costs
Movement in related party loans
(631,490)
(24,000)
(141,388)
-
Net cash inflow from financing activities
7,227,122
1,558,345
Net increase in cash and cash equivalents
2,873,495
117,085
Cash at the beginning of the financial period
124,857
7,772
Cash at the end of the financial period
2,998,352
124,857
The consolidated statement of cash flows is to be read in conjunction with the accompanying notes.
20
PARADIGM BIOPHARMACEUTICALS LIMITED
C O N S O L I D A T E D S T A T E M E N T O F C H A N G E S I N E Q U I T Y
f o r t h e y e a r e n d e d 3 0 J u n e 2 0 1 6
Issued
Capital
$
Share
Option
Reserve
$
Accumulated
Losses
$
Total
$
Balance at 31 July 2014
1
-
(151,866)
(151,865)
Loss for the period
Shares issued
Costs in relation to shares issued
Fair value of shares issued to eligible employees under the plan
-
1,835,000
(257,504)
-
-
-
-
748,800
(1,565,305)
-
-
(1,565,305)
1,835,000
(257,504)
748,800
Balance at 30 June 2015
1,577,497
748,800
(1,717,171)
609,126
Loss for the period
Shares issued (Notes 10 & 21)
Costs in relation to shares issued
Fair value of shares issued to eligible employees under the plan
-
14,823,334
(1,329,018)
-
-
-
-
51,102
(2,924,425)
-
-
(2,924,425)
14,823,334
(1,329,018)
51,102
Balance at 30 June 2016
15,071,813
799,902
(4,641,596)
11,230,119
The consolidated statement of changes in equity is to be read in conjunction with the accompanying notes.
21
PARADIGM BIOPHARMACEUTICALS LIMITED
N O T E S T O T H E C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
f o r t h e y e a r e n d e d 3 0 J u n e 2 0 1 6
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The principal accounting policies adopted in the preparation of the Financial Statements are set out below. These policies
have been consistently applied to all the years presented, unless otherwise stated.
New, revised or amending Accounting Standards and Interpretations adopted
The Consolidated Entity has adopted all of the new, revised or amending Accounting Standards and Interpretations issued
by the Australian Accounting Standards Board ('AASB') that are mandatory for the current reporting period.
Any new, revised or amending Accounting Standards or Interpretations that are not yet mandatory have not been early
adopted.
(a) Reporting entity
Paradigm Biopharmaceuticals Limited (the “Company”) is a company incorporated and domiciled in Australia. Paradigm
Biopharmaceuticals Limited is a company limited by shares which are publicly traded on the Australian Securities Exchange
from 19 August 2015. The consolidated financial report of the Company for the year ended 30 June 2016 comprises the
Company and controlled entities (together referred to as the “Group”).
The nature of the operations and principal activities of the Group are described in the Directors’ Report.
For the purposes of preparing the Financial Statements the Company is a for-profit entity.
(b) Basis of preparation
Statement of Compliance
This financial report is a general purpose financial report prepared in accordance with the Australian Accounting Standards
(“AASs”) (including Australian Accounting Interpretations) adopted by the Australian Accounting Standards Board and the
Corporations Act 2001. This Consolidated Financial Report complies with the International Financial Reporting Standards
(”IFRSs”) and interpretations adopted by the International Accounting Standards Board (IASB).
Basis of measurement
Historical cost convention
The Financial Statements have been prepared under the historical cost convention, except for, where applicable, the
revaluation of available-for-sale financial assets, financial assets and liabilities at fair value through profit or loss, investment
properties, certain classes of property, plant and equipment and derivative financial instruments.
Critical accounting estimates
The preparation of the Financial Statements requires the use of certain critical accounting estimates. It also requires
management to exercise its judgement in the process of applying the Consolidated Entity's accounting policies. The areas
involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the
Financial Statements, are disclosed in note 1 (c).
Significant accounting policies
The accounting policies set out below have been applied consistently by the Group to all periods presented in these Financial
Statements.
New and amended standards adopted by the entity.
The Group has reviewed and applied all new accounting standards and amendments applicable for the first time in their
annual reporting period commencing 1 July 2015, and determined that there was no material impact on the Group’s Financial
Statements in the current reporting year.
(c) Significant accounting estimates, assumptions and judgements
The preparation of the Financial Statements requires management to make judgements, estimates and assumptions that
affect the reported amounts in the Financial Statements. Management continually evaluates its judgements and estimates
in relation to assets, liabilities, contingent liabilities, revenue and expenses. Management bases its judgements and estimates
on historical experience and on other various factors it believes to be reasonable under the circumstances. The resulting
accounting judgements and estimates will seldom equal the related actual results. The judgements, estimates and
22
PARADIGM BIOPHARMACEUTICALS LIMITED
N O T E S T O T H E C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
f o r t h e y e a r e n d e d 3 0 J u n e 2 0 1 6
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)
(c) Significant accounting estimates, assumptions and judgements (cont’d)
assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities
(refer to the respective notes) within the next financial year are discussed below.
Share-based payment transactions
The consolidated entity measures the cost of equity-settled transactions with employees by reference to the fair value of the
equity instruments at the date at which they are granted. The fair value is determined by using either the Binomial or Black-
Scholes model taking into account the terms and conditions upon which the instruments were granted. The accounting
estimates and assumptions relating to equity-settled share-based payments would have no impact on the carrying amounts
of assets and liabilities within the next annual reporting period but may impact profit or loss and equity.
Estimation of useful lives of assets
The Consolidated Entity determines the estimated useful lives and related depreciation and amortisation charges for its plant
and equipment and finite life intangible assets. The useful lives could change significantly as a result of technical innovations
or some other event. The depreciation and amortisation charge will increase where the useful lives are less than previously
estimated lives, or technically obsolete or non-strategic assets that have been abandoned or sold will be written off or written
down.
Impairment of non-financial assets other than goodwill and other indefinite life intangible assets
The Consolidated Entity assesses impairment of non-financial assets other than goodwill and other indefinite life intangible
assets at each reporting date by evaluating conditions specific to the Consolidated Entity and to the particular asset that may
lead to impairment. If an impairment trigger exists, the recoverable amount of the asset is determined. This involves fair value
less costs of disposal or value-in-use calculations, which incorporate a number of key estimates and assumptions.
Provision for annual leave and long service leave
The calculation of annual leave and long service leave has been based on estimates and judgements made by the Directors.
Should any of these estimates or judgements significantly change this could have a material effect on the amount recognised.
Employee benefits provision
As discussed in note 1, the liability for employee benefits expected to be settled more than 12 months from the reporting
date are recognised and measured at the present value of the estimated future cash flows to be made in respect of all
employees at the reporting date. In determining the present value of the liability, estimates of attrition rates and pay increases
through promotion and inflation have been taken into account.
(d) Summary of Significant Accounting Policies
(i)
Basis of consolidation
Parent entity
In accordance with the Corporations Act 2001, these Financial Statements present the results of the Consolidated Entity
only. Supplementary information about the parent entity is disclosed in note 18.
Subsidiaries
The consolidated Financial Statements comprise those of the Company, and the entities it controlled at the end of, or during,
the financial year. The balances and effects of transactions between entities in the Consolidated Entity included in the
Financial Statements have been eliminated. Where an entity either began or ceased to be controlled during the year, the
results are included only from the date control commenced or up to the date control ceased.
Subsidiaries are entities controlled by the Group. Control exists when the Group is exposed to, or has rights to variable
returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities
of the entity. The Financial Statements of subsidiaries are included in the consolidated Financial Statements from the date
control is transferred to the Group until the date that control ceases.
Transactions eliminated on consolidation
Intra-Group balances and all gains and losses or income and expenses arising from intra-group transactions are eliminated
in preparing the consolidated Financial Statements.
23
PARADIGM BIOPHARMACEUTICALS LIMITED
N O T E S T O T H E C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
f o r t h e y e a r e n d e d 3 0 J u n e 2 0 1 6
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)
(ii)
Cash and cash equivalents
Cash and cash equivalents in the statement of financial position comprise cash at bank and in hand and short-term deposits
with an original maturity of three months or less that are readily convertible to known amounts of cash and which are subject
to an insignificant risk of changes in value.
For the purposes of the statement of cash flows, cash and cash equivalents consist of cash and cash equivalents as defined
above but also include as a component of cash and cash equivalents bank overdrafts (if any), which are included as
borrowings on the statement of financial position.
(iii)
Trade and other receivables
Trade receivables are initially recognised at fair value and subsequently measured at amortised cost using the effective
interest method, less any provision for impairment. Trade receivables are generally due for settlement within 30 days.
Collectability of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectable are written off
by reducing the carrying amount directly. A provision for impairment of trade receivables is raised when there is objective
evidence that the Consolidated Entity will not be able to collect all amounts due according to the original terms of the
receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial
reorganisation and default or delinquency in payments (more than 60 days overdue) are considered indicators that the trade
receivable may be impaired. The amount of the impairment allowance is the difference between the asset's carrying amount
and the present value of estimated future cash flows, discounted at the original effective interest rate. Cash flows relating to
short-term receivables are not discounted if the effect of discounting is immaterial.
Other receivables are recognised at amortised cost, less any provision for impairment.
(iv)
Investments
Investments are initially measured at cost. Transaction costs are included as part of the initial measurement. They are
subsequently measured at either amortised cost or fair value depending on their classification. Classification is determined
based on the purpose of the acquisition and subsequent reclassification to other categories is restricted.
(v)
Intangible assets
(a) Intellectual property and licences ‘Patents’
Patents have a finite useful life and are carried at cost less accumulated amortisation and impairment losses. Intellectual
property and licences are amortised on a systematic basis matched to the future economic benefits over the useful life of
the project.
(b) Research and development
Expenditure during the research phase of a project is recognised as an expense when incurred. Development costs are
capitalised only when technical feasibility studies identify that the project will deliver future economic benefits and these
benefits can be measured reliably.
(vi)
Impairment
At the end of each reporting period, the Company assesses whether there is any indication that an asset may be impaired.
The assessment will include considering external sources of information and internal sources of information. If such an
indication exists, an impairment test is carried out on the asset by comparing the recoverable amount of the asset, being the
higher of the asset’s fair value less costs to sell and value in use, to the asset’s carrying value. Any excess of the asset’s
carrying value over its recoverable amount is expensed to the statement of comprehensive income.
Where it is not possible to estimate the recoverable amount of an individual asset, the Company estimates the recoverable
amount of the cash-generating unit to which the asset belongs.
Impairment testing is performed annually for goodwill and intangible assets with indefinite lives.
(vii)
Plant and equipment
Plant and equipment is stated at historical cost less accumulated depreciation and impairment. Historical cost includes
expenditure that is directly attributable to the acquisition of the items.
Depreciation is calculated on a straight-line basis to write off the net cost of each item of property, plant and equipment
24
PARADIGM BIOPHARMACEUTICALS LIMITED
N O T E S T O T H E C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
f o r t h e y e a r e n d e d 3 0 J u n e 2 0 1 6
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)
(vii) Plant and equipment (cont’d)
(excluding land) over their expected useful lives as follows:
Plant and equipment
3-7 years
The residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each reporting date.
Leasehold improvements and plant and equipment under lease are depreciated over the unexpired period of the lease or
the estimated useful life of the assets, whichever is shorter.
An item of plant and equipment is derecognised upon disposal or when there is no future economic benefit to the
Consolidated Entity. Gains and losses between the carrying amount and the disposal proceeds are taken to profit or loss.
Any revaluation surplus reserve relating to the item disposed of is transferred directly to retained profits.
(viii)
Trade and other payables
Trade and other payables represent the liability outstanding at the end of the reporting period for goods and services received
by the entity during the reporting period which remain unpaid. The balance is recognised as a current liability with the amounts
normally paid within the requisite terms specified by the supplier.
(ix) Share capital
Ordinary and preference shares are classified as equity.
Any incremental costs directly attributable to the issue of new shares or options are recognised in equity as a deduction,
net of tax, from the proceeds.
(x)
Provisions
Provisions are recognised when the Consolidated Entity has a present (legal or constructive) obligation as a result of a past
event, it is probable the Consolidated Entity will be required to settle the obligation, and a reliable estimate can be made of
the amount of the obligation. The amount recognised as a provision is the best estimate of the consideration required to
settle the present obligation at the reporting date, taking into account the risks and uncertainties surrounding the obligation.
If the time value of money is material, provisions are discounted using a current pre-tax rate specific to the liability. The
increase in the provision resulting from the passage of time is recognised as a finance cost.
(xi) Revenue
Interest income
Interest income is recognised on a time proportion basis using the effective interest rate method.
Other revenue
Other revenue is recognised when it is received or when the right to receive payment is established.
Government grants
Grants that compensate the Group for expenditures incurred are recognised in profit or loss on a systematic basis in the
periods in which the expenditures are recognised.
R&D tax offsets received will be recognised in profit before tax (in EBIT) over the periods necessary to match the benefit of
the credit with the costs for which it is intended to compensate. Such periods will depend on whether the R&D costs are
capitalised or expensed as incurred
(xii) Employee Benefits
Wages and salaries, cash bonus, annual leave and long service leave
Provision is made for benefits accruing to employees in respect of wages and salaries, annual leave and long service leave
when it is probable that settlement will be required and they are capable of being measured reliably.
Provisions made in respect of employee benefits are measured based on an assessment of the existing benefits to determine
the appropriate classification under the definition of short-term and long-term benefits, placing emphasis on when the benefit
is expected to be settled.
25
PARADIGM BIOPHARMACEUTICALS LIMITED
N O T E S T O T H E C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
f o r t h e y e a r e n d e d 3 0 J u n e 2 0 1 6
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)
(xii) Employee Benefits (cont’d)
Short-term benefits provisions that are expected to be settled within 12 months are measured at their nominal values using
the remuneration rate expected to apply at the time of settlement.
Long term benefits provisions that are not expected to be settled within 12 months, and are measured as the present value
of the estimated future cash outflows to be made by the Group in respect of services provided by employees up to reporting
date. Consideration is given to the expected future wage and salary levels, experience of employee departures and periods
of service. Expected future payments are discounted using market yields at the reporting date to estimate the future cash
flows at a pre-tax rate that reflects current market assessments of the time value of money.
Regardless of the expected timing of settlement, provisions made in respect of employee benefits are classified as a current
liability unless there is an unconditional right to defer the settlement of the liability for at least 12 months after the reporting
date, in which case it would be classified as a non-current liability. Provisions made for annual leave and unconditional long
service leave are classified as a current liability where the employee has a present entitlement to the benefit. Provisions for
conditional long service are classified as non-current liability.
Share-based payments
The Company operates an incentive scheme to provide these benefits, known as the Paradigm Biopharmaceuticals Limited
Employee Share Plan (“ESP”) approved on 22 October 2014. Issues of shares to employees with limited recourse loans
under the ESP are considered to be share based payments in the form of options.
The fair value of options granted under the ESP is recognised as an employee benefit expense with a corresponding increase
in equity. The fair value is measured at grant date and recognised over the period during which the employees become
unconditionally entitled to the options. The fair value at grant date is determined using a binomial pricing model that takes
into account the exercise price, the term of the option, the vesting and performance criteria, the share price at grant date and
expected price volatility of the underlying share, the expected dividend yield and the risk-free interest rate for the term of the
limited recourse loan. In valuing share-based payment transactions, no account is taken of any non-market performance
conditions.
The Group provides benefits to employees (including Directors) of the Group in the form of share-based payment
transactions, whereby employees render services in exchange for shares or rights over shares.
The cost of share-based payment transactions is recognised, together with a corresponding increase in equity, over the
period in which the performance conditions are fulfilled, ending on the date on which the relevant employees become fully
entitled to the award (‘vesting date’). The cumulative expense recognised for equity-settled transactions at each reporting
date until vesting date reflects (i) the extent to which the vesting period has expired and (ii) the number of awards that, in the
opinion of the Directors of the Company, will ultimately vest. This opinion is formed based on the best available information
at balance date. No adjustment is made for the likelihood of market performance conditions being met as the effect of these
conditions is included in the determination of fair value at grant date.
No expense is recognised for awards that do not ultimately vest, except for awards where vesting is conditional upon a
market condition.
Where the terms of an equity-settled award are modified, as a minimum an expense is recognised as if the terms had not
been modified. In addition, an expense is recognised for any increase in the value of the transaction as a result of the
modification, as measured at the date of modification.
Where an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not
yet recognised for the award is recognised immediately. However, if a new award is substituted for the cancelled award, and
designated as a replacement award on the date that it is granted, the cancelled and new award are treated as if they were
a modification of the original award, as described in the previous paragraph.
(xiii) Income tax
Income tax expense comprises current and deferred tax. Income tax expense is recognised in profit or loss except to the
extent that it relates to items recognised directly in equity, in which case it is recognised 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 reporting date, and
any adjustment to tax payable in respect of previous years.
A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which
the temporary difference 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.
26
PARADIGM BIOPHARMACEUTICALS LIMITED
N O T E S T O T H E C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
f o r t h e y e a r e n d e d 3 0 J u n e 2 0 1 6
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)
(xiv) Tax consolidation
The Company and its wholly-owned Australian resident entities are part of a tax-consolidated entity. As a consequence, all
members of the tax-consolidated entity are taxed as a single entity. The head entity within the tax-consolidated entity is
Paradigm Biopharmaceuticals Limited.
Current tax expense/income, deferred tax liabilities and deferred tax assets arising from temporary differences of the
members of the tax-consolidated entity are recognised in the separate Financial Statements of the members of the tax-
consolidated entity using the ‘separate taxpayer within Consolidated Entity’ approach by reference to the carrying amount of
assets and liabilities in the separate Financial Statements of each entity and the tax values applying under tax consolidation.
Any current tax liabilities (or assets) and deferred tax assets arising from unused tax losses of the subsidiaries are assumed
by the head entity in the tax-consolidated entity. Any difference between these amounts is recognised by the Company as
an equity contribution or distribution.
The Company recognises deferred tax assets arising from unused tax losses of the tax-consolidated entity to the extent that
it is probable that future taxable profits of the tax-consolidated entity will be available against which the asset can be utilised.
Any subsequent period adjustments to deferred tax assets arising from unused tax losses as a result of revised assessments
of the probability of recoverability is recognised by the head entity only.
(xv) Current and non-current classification
Assets and liabilities are presented in the statement of financial position based on current and non-current classification.
An asset is classified as current when: it is either expected to be realised or intended to be sold or consumed in the
Consolidated Entity's normal operating cycle; it is held primarily for the purpose of trading; it is expected to be realised within
12 months after the reporting period; or the asset is cash or cash equivalent unless restricted from being exchanged or used
to settle a liability for at least 12 months after the reporting period. All other assets are classified as non-current.
A liability is classified as current when: it is either expected to be settled in the Consolidated Entity's normal operating cycle;
it is held primarily for the purpose of trading; it is due to be settled within 12 months after the reporting period; or there is no
unconditional right to defer the settlement of the liability for at least 12 months after the reporting period. All other liabilities
are classified as non-current.
(xvi) Goods and Services Tax
Revenues, 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 Australian Tax Office (ATO). In these circumstances the GST is
recognised as part of the cost of acquisition of the asset or as part of an item 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 statement
of financial position.
Cash flows are included in the statement of cash flows at their nominal value inclusive of GST.
(xvii) Earnings per share
The Group presents basic and, when applicable, diluted earnings per share (“EPS”) data for its ordinary shares.
Basic EPS is calculated by dividing the profit or loss attributable to the ordinary shareholders of the Company by the weighted
average number of ordinary shares outstanding during the period.
Diluted EPS is calculated by adjusting basic earnings for the impact of the after tax effect of costs associated with dilutive
ordinary shares and the weighted average number of additional ordinary shares that would be outstanding assuming the
conversion of all dilutive potential ordinary shares. The dilutive effect, if any, of outstanding options is reflected as additional
share dilution in the computation of earnings per share.
(xviii) 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
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1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)
(xviii) Determination of fair values (cont’d)
Trade and other payables
The fair value of trade and other payables recognised as a result of a business combination is estimated as the present
value of future cash flows, discounted at the market rate of interest at the reporting date.
Share-based payment transactions
Service and non-market performance conditions attached to the transactions are not taken into account in determining fair
value.
Foreign currency translation
The Financial Statements are presented in Australian dollars, which is Pinnacle Unlisted Public General Purpose Limited's
functional and presentation currency.
Foreign operations
The assets and liabilities of foreign operations are translated into Australian dollars using the exchange rates at the reporting
date. The revenues and expenses of foreign operations are translated into Australian dollars using the average exchange
rates, which approximate the rates at the dates of the transactions, for the period. All resulting foreign exchange differences
are recognised in other comprehensive income through the foreign currency reserve in equity.
(xix) New accounting standards and interpretations applicable to the Company in future periods
The AASB has issued a number of new and amended Accounting Standards and Interpretations that have mandatory
application dates for future reporting periods, some of which are relevant to the Group. The Group has decided not to early
adopt any of the new and amended pronouncements. The Group’s assessment of the new and amended pronouncements
that are relevant to the Group but applicable in future reporting periods is set out below.
The following are applicable for annual reporting periods commencing on or after the indicated date but are not
considered to materially impact on the Group;
Applicable after 1 July 2015
AASB 2015-3
Amendments to Australian Accounting Standards arising from the Withdrawal of AASB 1031 Materiality
New standards and interpretations issued but not yet effective
At the date of this financial report the following standards and interpretations, which may impact the entity in the period of
initial application, have been issued but are not yet effective:
Reference
Title
Summary
AASB 2010-7
AASB 2015-8
Amendments
to Australian
Accounting
Standards
arising from
AASB 9
(December
2010)
Amendments
to Australian
Accounting
Standards –
Effective Date
of AASB 15
Application
date (financial
years
beginning)
1 January
2018
Expected
Impact
No impact
Amends AASB 1, 3, 4, 5, 7, 101, 102,
108, 112, 118, 120, 121, 127, 128,
131, 132, 136, 137, 139, 1023 & 1038
and Interpretations 2, 5, 10, 12, 16,
19, 107 & 127 for issuance of AASB
9.
This Standard defers the effective
date of AASB 15 Revenue from
Contracts with Customers to 1
January 2018.
1 January
2017
No impact
28
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New standards and interpretations issued but not yet effective (cont’d)
AASB 15
Revenue from
Contracts with
Customers
It contains a single model for contracts
with customers based on a five-step
analysis of transactions for revenue
recognition, and two approach, a single
time or over time, for revenue recognition.
1 January
2018
No impact
AASB 2014-5
AASB 9
Amendments to
Australian
Accounting
Standards
arising from
AASB 15
Financial
Instruments
AASB 2014-7
AASB 16
Amendments to
Australian
Accounting
Standards
arising from
AASB 9
(December
2014)
Leases
2016-3
Amendments to
Australian
Accounting
Standards ––
Clarifications to
AASB 15
Consequential amendments arising from
the issuance of AASB 15.
1 January
2018
No impact
This Standard supersedes both AASB 9
(December 2010) and AASB 9 (December
2009) when applied. It introduces a “fair
value through other comprehensive
income” category for debt instruments,
contains requirements for impairment of
financial assets, etc.
1 January
2018
No impact
Consequential amendments arising from
the issuance of AASB 9
1 January
2018
No impact
1 January
2019
No impact
1 January
2018
No impact
AASB 16 sets out the principles for the
recognition, measurement, presentation
and disclosure of leases.
This standard removes the current
distinction between operating and
financing leases and requires recognition
of an asset (the right to use the leased
item) and a financial liability to pay rentals
for almost all lease contracts, effectively
resulting in the recognition of almost all
leases on the statement of financial
position.
The accounting by lessors, however, will
not significantly change.
2016- 3 amends AASB 15 to clarify the
requirements on identifying performance
obligations, principal versus agent
considerations and the timing of
recognising revenue from granting a
licence. In addition, it provides further
practical expedients on transition to AASB
15.
29
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2. OTHER INCOME
R&D tax incentive
Interest received
3. EMPLOYEE EXPENSES
Wages, salaries and self-employed contractors expenses
Performance bonus
Defined contribution superannuation expenses
Increase in liability for employee benefits expenses
Non-Executive Directors fees
Fair values of shares issued to eligible employees under the Employee Share
Plan
Workcover
Payroll Tax
2016
$
2015
$
1,290,593
103,568
1,394,161
151,506
163,600
47,731
61,167
197,333
51,102
2,330
25,856
-
7,331
7,331
294,000
-
35,910
29,209
84,000
748,800
3,109
-
700,625
1,195,029
4. CASH AND CASH EQUIVALENTS
Cash at bank and in hand
2,998,352
124,857
5. TRADE AND OTHER RECEIVABLES
GST receivable
Interest receivable
R&D tax incentive receivable
6. INTANGIBLE ASSETS
Patents
Less: Accumulated amortisation
Reconciliation
Carrying amount at the beginning of the period
Additions during the period
Disposals
Amortisation expense
2,998,352
124,857
49,505
2,126
1,290,593
15,741
-
-
1,342,224
15,741
7,987,552
-
356,288
-
7,987,552
356,288
356,288
7,631,264
-
-
88,921
267,367
-
-
Balance at the end of the financial year
7,987,552
356,288
30
PARADIGM BIOPHARMACEUTICALS LIMITED
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2016
$
2015
$
7. PLANT AND EQUIPMENT
Computer equipment
Less: Accumulated depreciation
Reconciliation
Carrying amount at the beginning of the period
Additions during the period
Disposals
Depreciation expense
Balance at the end of the financial year
Clinical trial equipment
Less: Accumulated depreciation
Reconciliation
Carrying amount at the beginning of the period
Additions during the period
Disposals
Depreciation expense
Balance at the end of the financial year
8. TRADE AND OTHER PAYABLES
Trade and other creditors
Shareholder loans
9. EMPLOYEE BENEFIT PROVISION
Annual leave and on-costs
4,814
(1,531)
3,283
-
4,814
-
(1,531)
3,283
8,154
(802)
7,352
-
8,154
-
(802)
7,352
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
989,719
36,589
384,295
171,783
1,026,308
556,078
90,376
29,209
90,376
29,209
The current provision for employee benefits includes all unconditional entitlements where employees have completed the
required period of service and also those where employees are entitled to pro-rata payments in certain circumstances. The
entire amount is presented as current, since the Consolidated Entity does not have an unconditional right to defer settlement.
31
PARADIGM BIOPHARMACEUTICALS LIMITED
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10. ISSUED CAPITAL
2016
Number of
Shares
2015
Number of
Shares
2016
$
2015
$
Ordinary shares Fully paid
87,580,220
37,368,333
15,071,813
1,577,497
The following movements in issued capital occurred during the year:
Ordinary Shares
2016
2015
Number of
Shares
$
Number of
Shares
$
Balance as at the beginning of the period
37,368,333
1,577,497
Ordinary shares issued
42,352,381
14,823,334
Ordinary shares issue costs (Net of GST)
(1,329,018)
Ordinary shares issued
Shares issued under ESP
Preference shares issued during the period
Preference shares issue costs (Net of GST)
-
-
-
-
-
-
-
-
Cancellation of Preference shares
(1,835,000)
(1,835,000)
Preference shares conversion to Ordinary shares
9,694,506
1,835,000
1
-
-
31,933,332
3,600,000
1
-
-
-
-
1,835,000
1,835,000
-
-
-
(257,504)
-
-
Balance as at the end of the period
87,580,220
15,071,813
37,368,333
1,577,497
In addition the Company has granted various options which expire 3 years from ASX listing of the Company with (i)
3,023,812 unlisted options at an exercise price of $0.375 per option; and (ii) 1,714,285 unlisted options at an exercise price
of $0.50 per option and otherwise on the terms specified in the ASX Listing Rules.
Ordinary shares
Ordinary shares entitle the holder to participate in dividends and the proceeds on the winding up of the company in proportion
to the number of and amounts paid on the shares held. The fully paid ordinary shares have no par value and the company
does not have a limited amount of authorised capital.
On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each
share shall have one vote.
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PARADIGM BIOPHARMACEUTICALS LIMITED
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10. ISSUED CAPITAL (cont’d)
Capital risk management
The Consolidated Entity's objectives when managing capital is to safeguard its ability to continue as a going concern, so that
it can provide returns for shareholders and benefits for other stakeholders and to maintain an optimum capital structure to
reduce the cost of capital.
Capital is regarded as total equity, as recognised in the statement of financial position, plus net debt. Net debt is calculated
as total borrowings less cash and cash equivalents.
In order to maintain or adjust the capital structure, the Consolidated Entity may adjust the amount of dividends paid to
shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.
The Consolidated Entity would look to raise capital when an opportunity to invest in a business or company was seen as
value adding relative to the current company's share price at the time of the investment. The Consolidated Entity is not
actively pursuing additional investments in the short-term as it continues to integrate and grow its existing businesses in
order to maximise synergies.
The Consolidated Entity is subject to certain financing arrangements covenants and meeting these is given priority in all
capital risk management decisions. There have been no events of default on the financing arrangements during the financial
year.
The capital risk management policy remains unchanged from the 30 June 2015 Annual Report.
2016
$
2015
$
11. SHARE OPTIONS RESERVE
Balance as at the beginning of the period
Fair values of shares issued to eligible employees under the Employee Share Plan
748,800
51,102
-
748,800
799,902
748,800
The establishment of the ESP was approved on 22 October 2014. Under the ESP, participating employees were invited to
purchase shares in the Company at a price of $0.35 per share to participate in the Plan.
A total of 1,800,000 were purchased. A further invitation of ESP shares of 230,000 based on the 2016 performance were
issued in July 2016.
Once approved by the Board, monies are loaned by the Company interest free and on a non-recourse basis to
Participants to finance the purchase of shares in the Company. The ESP shares are registered in the name of
Participants but are subject to a restriction on disposal for a period of five years (from date of issue) and for further
Periods whilst they remain financed. On cessation of employment, the entitlement to any shares held for less than three
years is pro-rated.
The shares issued under the ESP are treated as options for accounting purposes. They do not expire, and vest immediately
on grant date.
Fair values at loan date are determined using a binomial pricing model that takes into account the issue price, the term of
the loan, the share price at loan date and expected price volatility of the underlying share, the expected dividend yield and
the risk-free interest rate for the term of the loan."
Set out below are summaries of options granted under the plan:
33
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11. SHARE OPTIONS RESERVE (cont’d)
2016
Grant date
Expiry date
Exercise
price
Balance at
the start of
the year
Granted
Exercised
Balance at
the end of
the year
28/07/2016
29/05/2015
N/A
N/A
$0.33
$0.35
-
230,000
3,600,000
3,600,000
-
-
230,000
3,600,000
3,600,000
3,830,000
-
3,830,000
2015
Grant date
Expiry date
price
the year
Granted
Exercised
the year
Balance at
Exercise
the start of
Balance at
the end of
29/05/2015
N/A
$0.35
3,600,000
3,600,000
-
3,600,000
For the options granted during the current financial year, the valuation model inputs used to determine the fair value at
the grant date, are as follow:
3,600,000
3,600,000
-
3,600,000
Grant date
Expiry date
Share price
at
grant date
Exercise
price
Expected
volatility
Dividend
yield
Fair value
at
grant date
28/07/2016
N/A
$0.37
$0.33
90.00%
0.00%
$0.22
12. ACCUMULATED LOSSES
Balance as at the beginning of the period
Loss for the accounting period
2016
$ $
2015
(1,717,171)
(2,924,425)
(151,866)
(1,565,305)
(4,641,596)
(1,717,171)
13. COMMITMENTS
The Consolidated Entity had no capital commitments as at 30 June 2016 and 30 June 2015.
14. CONTINGENCIES
The Consolidated Entity had no contingent liabilities as at 30 June 2016 and 30 June 2015
34
PARADIGM BIOPHARMACEUTICALS LIMITED
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15. EARNINGS PER SHARE
Net loss for the year attributable to ordinary shareholders
(2,924,425)
(1,565,305)
Basic earnings per share
Basic number of ordinary shares
Number
Number
2016
$
2015
$
Balance at the beginning of the year
Subdivision and issue of shares
Issue of shares - Xosoma share swap
Preference shares conversion
IPO Offer
35,533,333
-
17,519,008
8,393,052
19,788,650
1
33,418,811
-
-
-
81,234,043
33,418,812
Basic and diluted earnings per share
(3.60) cents
(4.68) cents
There is no material difference between basic and diluted earnings per share.
16. FINANCIAL INSTRUMENTS DISCLOSURE
The Group’s financial instruments consist mainly of deposits with banks, short-term investments, accounts receivable and
accounts payable.
The totals for each category of financial instruments, measured in accordance with AASB 139 as detailed in the accounting
policies of these Financial Statements, are as follows;
Financial assets
Current
Cash and cash equivalents
Trade and other receivables
Financial liabilities
Current
2,998,352
1,342,224
124,586
15,741
4,340,576
140,327
Trade and other payables at amortised cost
1,026,308
556,078
35
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16. FINANCIAL INSTRUMENTS DISCLOSURE (cont’d)
Financial risk management objectives
The Consolidated Entity's activities expose it to a variety of financial risks: market risk (including foreign currency risk),
credit risk and liquidity risk. The Consolidated Entity's overall risk management program focuses on the unpredictability of
financial markets and seeks to minimise potential adverse effects on the financial performance of the Consolidated Entity.
The Consolidated Entity uses different methods to measure different types of risk to which it is exposed. These methods
include sensitivity analysis in the case of interest rate, foreign exchange and other price risks, ageing analysis for credit
risk.
Risk management is carried out by senior finance executives ('finance') under policies approved by the Board of Directors
('the Board'). These policies include identification and analysis of the risk exposure of the Consolidated Entity and
appropriate procedures, controls and risk limits. Finance identifies, evaluates and hedges financial risks within the
Consolidated Entity's operating units. Finance reports to the Board on a monthly basis.
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 and expenses or the value of its holdings of financial instruments. The objective of market risk
management is to manage and control market risk exposures within acceptable parameters, while optimising the return.
Equity price risk
The Group is currently not subject to equity price risk movement.
Interest rate risk
Interest rate risk is the risk that the value of a financial instrument or cash flows associated with the instrument will fluctuate
due to changes in market interest rates. Interest rate risk arises from fluctuations in interest bearing financial assets and
liabilities that the Group uses. Interest bearing assets comprise cash and cash equivalents which are considered to be short-
term liquid assets and investment decisions are governed by the monetary policy.
During the year, the Group had no variable rate interest bearing liability.
It is the Group's policy to settle trade payables within the credit terms allowed and therefore not incur interest on overdue
balances
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 receivables from customers and investment securities.
The Group does not presently have customers and consequently does not have credit exposure to outstanding receivables.
Trade and other receivables represent GST refundable from the Australian Taxation Office and R&D Tax incentive claims.
Trade and other receivables are neither past due nor impaired.
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’s objective is to maintain a balance between continuity of funding and flexibility. The Group’s exposure to financial
obligations relating to corporate administration and projects expenditure, are subject to budgeting and reporting controls, to
ensure that such obligations do not exceed cash held and known cash inflows for a period of at least 1 year.
Fair value of financial assets and liabilities
The fair value of cash and cash equivalents and non-interest bearing financial assets and financial liabilities of the Group is
equal to their carrying value.
Foreign currency risk
The Group’s exposure to currency risk is minimal at this stage of the operations.
Commodity price risk
The Group’s exposure to price risk is minimal at this stage of the operations.
36
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17. RELATED PARTIES
Parent entity
The Parent Entity is Paradigm Biopharmaceuticals Limited.
Controlled entities
The controlled entities are Paradigm Health Sciences Pty Ltd, Xosoma Pty Ltd and C4M Pharmaceuticals Pty Ltd.
In the Financial Statements of the Company investments in subsidiaries are measured at cost. All entity interests held
are fully paid ordinary shares or units.
The consolidated Financial Statements incorporate the assets, liabilities and results of the following wholly-owned
subsidiaries in accordance with the accounting policy described in note 1:
Name
Paradigm Health Sciences Pty Ltd
Xosoma Pty Ltd
C4M Pharmaceuticals Pty Ltd
Subsidiaries
Ownership interest
Principal
place of
business
Australia
Australia
Australia
2016
2015
%
%
100.00%
100.00%
100.00%
100.00%
-
-
An inter-company loan exists between Paradigm (parent) and:
Paradigm Health Sciences (subsidiary) of $334,061 (2015: $142,563).
Receivable from and payable to related parties
There were no transactions that took place to or from related parties at the current and previous reporting date.
Key Management Personnel remuneration
Short-term employee benefits
Post-employment benefits
Long-term benefits
Share-based payments
2016
$
579,499
55,052
-
-
634,551
2015
$
282,000
26,790
-
748,800
1,057,590
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PARADIGM BIOPHARMACEUTICALS LIMITED
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f o r t h e y e a r e n d e d 3 0 J u n e 2 0 1 6
2016
$
2015
$
18. PARENT ENTITY DISCLOSURES
Set out below is the supplementary information about the parent entity
Statement of profit or loss and other comprehensive income
Loss after income tax
(2,922,948)
(1,572,185)
Statement of financial position
Total current Assets
Total Assets
Total current Liabilities
Total Liabilities
Equity
Issued capital
Preference shares
Share issue expenses
Share options reserve
Retained earnings
Current (losses)
Total Equity
4,682,667
945,602
12,556,707
1,212,969
1,080,095
379,725
1,080,095
379,725
16,658,334
-
(1,476,348)
799,902
(1,582,328)
(2,922,948)
1
1,835,000
(168,229)
748,800
(10,143)
(1,572,185)
11,476,612
833,244
There are no guarantees entered into by the parent entity in relation to the debts of its subsidiaries
Contingent liabilities
The parent entity had no contingent liabilities as at 30 June 2016 and 30 June 2015.
Capital commitments
The parent entity had no capital commitments as at 30 June 2016 and 30 June 2015.
Significant accounting policies
The accounting policies of the parent entity are consistent with those of the Consolidated Entity.
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2016
$
2015
$
19. RECONCILIATION OF CASH FLOWS PROVIDED BY OPERATING ACTIVITIES
Loss for the year
(2,924,425)
(1,565,305)
(Increase)/Decrease in receivables
Depreciation
Increase in trade creditors and accruals
(1,334,523)
2,535
668,835
4,209
-
357,813
Net cash used in operating activities
(3,587,578)
(1,203,283)
20. NON CASH AND INVESTING ACTIVITIES
Intangible assets included in trade payables
Share issue costs included in trade payables
Acquisition of intangible assets through share swap agreement
48,657
29,390
550
6,817,209
4,849
-
6,866,416
34,239
21. SHARE-BASED PAYMENTS
Purchase of Xosoma Pty Limited and C4M Pharmaceuticals Pty Ltd
On 7 August 2015 The Consolidated Entity entered into a Share Swap agreement to acquire 100% of the issued equity
of Xosoma Pty Limited in consideration for issue of 19,495,238 ordinary shares in the Company.
Xosoma owns a significant patent application.
As Xosoma is not a business, as defined in AASB 3 – Business Combinations, this acquisition has been accounted for as
an asset acquisition.
At the acquisition date, the only material assets owned by Xosoma related to its patent application and related intellectual
property.
As part of the original agreement between the Consolidated Entity and Xosoma, it was agreed that Xosoma would acquire
IP from a third party to be included in the acquisition price of $6,823,333. Xosoma acquired 100% of the issued equity of
C4M Pharmaceuticals Pty Ltd.
In accordance with AASB 2 – Share Based Payment, the value of the patent application and related intellectual
Property has been valued indirectly by reference to the value of the equity issued as consideration for the acquisition.
The equity issued has been valued at $0.35 per share based on the Offer price and consequently, the value
of the patent application and related intellectual property of Xosoma has been recognised upon acquisition
at $6,823,333 (19,495,238 x $0.35).
39
PARADIGM BIOPHARMACEUTICALS LIMITED
N O T E S T O T H E C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S
f o r t h e y e a r e n d e d 3 0 J u n e 2 0 1 6
22. EVENTS SUBSEQUENT TO REPORTING DATE
No other matters or circumstances have arisen since balance date which have impacted or are likely to impact the
Consolidated Entity’s operations, results and state of affairs in future financial years.
2016
$
2015
$
23. AUDITOR REMUNERATION NOTE
During the financial year the following fees were paid or payable for services provided by RSM Australia Partners,
the auditor of the company
Audit services - RSM Australia Partners
Audit or review of the Financial Statements
Other services - RSM Australia Partners
Preparation of the tax return
R&D Tax incentive claim
40,000
25,000
40,000
25,000
2,350
6,000
8,350
12,400
5,000
17,400
48,350
42,400
40
PARADIGM BIOPHARMACEUTICALS LIMITED
D I R E C T O R S ’ D E C L A R A T I O N
In the opinion of the Directors of Paradigm Biopharmaceuticals Limited and Controlled Entities:
(a)
the Financial Statements and notes thereto and the Remuneration Report contained in the Directors’ Report are in
accordance with the Corporations Act 2001, including:
(i)
(ii)
giving a true and fair view of the Company’s and the Group’s financial position as at 30 June 2016 and their
performance for the financial year ended on that date; and
complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the
Corporations Regulations 2001; and
(b)
the financial report also complies with International Financial Reporting Standards;
(c)
there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due
and payable.
The Directors have been given the declarations required by Section 295A of the Corporations Act for the financial year
ending 30 June 2016.
Signed in accordance with a resolution of the Directors.
____________________________
Graeme Kaufman
Chairman
Dated at Melbourne, Victoria this 31st day of August 2016.
41
RSM Australia Partners
Level 21, 55 Collins Street Melbourne VIC 3000
PO Box 248 Collins Street West VIC 8007
T +61 (0) 3 9286 8000
F +61 (0) 3 9286 8199
www.rsm.com.au
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF
PARADIGM BIOPHARMACEUTICALS LIMITED
We have audited the accompanying financial report of Paradigm Biopharmaceuticals Limited (“the consolidated
entity”), which comprises the consolidated statement of financial position as at 30 June 2016, and the
consolidated statement of profit or loss, consolidated statement of changes in equity and consolidated
statement of cash flows for the year then ended, a summary of significant accounting policies, other explanatory
notes and the directors' declaration of the consolidated entity comprising the company and the entities it
controlled at the year’s end or from time to time during the financial year.
Directors’ Responsibility for the Financial Report
The directors of the company are responsible for the preparation of the financial report that gives a true and fair
view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal
control as the directors determine is necessary to enable the preparation of the financial report that is free from
material misstatement, whether due to fraud or error. In Note 1(b), the directors also state, in accordance with
Accounting Standard AASB 101 Presentation of Financial Statements, that the financial statements comply with
International Financial Reporting Standards.
Auditor’s Responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in
accordance with Australian Auditing Standards. These Auditing Standards require that we comply with relevant
ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance
about whether the financial report is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
financial report. The procedures selected depend on the auditor's judgement, including the assessment of the
risks of material misstatement of the financial report, whether due to fraud or error. In making those risk
assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the
financial report in order to design audit procedures that are appropriate in the circumstances, but not for the
purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes
evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made
by the directors, as well as evaluating the overall presentation of the financial report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit
opinions.
THE POWER OF BEING UNDERSTOOD
AUDIT | TAX | CONSULTING
RSM Australia Partners is a member of the RSM network and trades as RSM. RSM is the trading name used by the members of the RSM network. Each member of the
RSM network is an independent accounting and consulting firm which practices in its own right. The RSM network is not itself a separate legal entity in any jurisdiction.
RSM Australia Partners ABN 36 965 185 036
Liability limited by a scheme approved under Professional Standards Legislation
42
Independence
In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001. We
confirm that the independence declaration required by the Corporations Act 2001, which has been given to the
directors of Paradigm Biopharmaceuticals Limited, would be in the same terms if given to the directors as at the
time of this auditor's report.
Opinion
In our opinion:
(a)
the financial report of Paradigm Biopharmaceuticals Limited is in accordance with the Corporations Act
2001, including:
(i)
giving a true and fair view of the consolidated entity’s financial position as at 30 June 2016 and
of its performance for the year then ended; and
(ii)
complying with Australian Accounting Standards and the Corporations Regulations 2001; and
(b)
the financial report also complies with International Financial Reporting Standards as disclosed in Note
1(b).
Report on the Remuneration Report
We have audited the Remuneration Report included in pages 10 to 16 of the directors’ report for the financial year
ended 30 June 2016. The directors of the company are responsible for the preparation and presentation of the
Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to
express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian
Auditing Standards.
Auditor’s Opinion
In our opinion the Remuneration Report of Paradigm Biopharmaceuticals Limited for the financial year ended 30
June 2016 complies with section 300A of the Corporations Act 2001.
RSM AUSTRALIA PARTNERS
J S CROALL
Partner
31 August 2016
Melbourne, Victoria
43
PARADIGM BIOPHARMACEUTICALS LIMITED
S H A R E H O L D E R I N F O R M A T I O N
Details of shares and options as at 24 August 2016:
Top holders
The 20 largest holders of each class of equity security as at 24 August 2016 were:
Fully paid ordinary shares
Name
PAUL JOHN RENNIE
KZEE PTY LTD
MJGD NOMINEES PTY LTD
IRWIN BIOTECH NOMINEES PTY LTD
PETER MILONAS
BILL PASPALIARIS
NANCY EDITH WILSON-GHOSH
V REDFORD PTY LTD
JGM INVESTMENT GROUP PTY LTD
GRAEME ROY KAUFMAN
TREVOR MAUNDRELL
KANNE HOLDINGS PTY LTD
TASS INVESTMENTS PTY LTD
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
LESLEY LODGE
ADMIRAL RIDGE PTY LTD
DAVSAM PTY LTD
DAVID ANDREW RIDLEY
MONTCLAIR PTY LTD
WAKKO ENTERPRISES PTY LTD
Totals: Top 20 holders of ORDINARY FULLY PAID SHARES
Total Remaining Holders Balance
Distribution schedules
A distribution of each class of equity security as at 31July 2016:
No. of Shares
%
10,313,468
10,301,075
6,915,809
6,310,313
4,873,810
4,873,810
3,910,935
2,505,419
2,285,715
2,043,000
1,072,007
1,043,592
1,020,000
1,011,544
824,086
780,027
714,286
710,156
653,835
653,835
62,816,722
24,993,498
11.75
11.73
7.88
7.19
5.55
5.55
4.45
2.85
2.60
2.32
1.22
1.19
1.16
1.15
0.94
0.89
0.81
0.81
0.74
0.74
71.54
28.46
Fully paid ordinary shares
Range
1 - 100
101 - 1,000
1,001 - 10,000
10,001 - 100,000
100,001 - 500,000
500,001 - 1,000,000
1,000,001 - 9,999,999,999
Total
Total
holders
Units
% of Issued
Capital
0
0
178
224
58
10
14
484
0
0
1,254,658
7,991,339
12,851,809
6,756,225
58,956,189
87,810,220
0
0
1.43
9.10
14.64
7.69
67.14
100
44
PARADIGM BIOPHARMACEUTICALS LIMITED
S H A R E H O L D E R I N F O R M A T I O N ( C O N T ’ D )
Substantial shareholders
The names of substantial shareholders and the number of shares to which each substantial shareholder and their associates
have a relevant interest, as disclosed in substantial shareholding notices given to the Company, are set out below:
Substantial shareholder
Paul Rennie and related companies
MJGD Nominees Pty Ltd
Irwin Biotech Nominees Pty Ltd
Peter Milonas
Bill Paspaliaris
Number of
Shares
21,547,876
6,915,809
6,310,313
4,873,810
4,873,810
Unmarketable parcels
Holdings less than a marketable parcel of ordinary shares (being 1,389 shares at 31 July 2016):
Holders
0
Voting Rights
Units
0
The voting rights attaching to ordinary shares are:
On a show of hands every member present in person or by proxy shall have one vote and upon a poll each share shall have
one vote.
Options do not carry any voting rights.
On-Market Buy Back
There is no current on-market buy-back.
45
PARADIGM BIOPHARMACEUTICALS LIMITED
APPENDIX A
Corporate Governance Statement
The Board and management of Paradigm Biopharmaceuticals Limited (Company) are committed to conducting the
business of the Company in an ethical manner and in accordance with the highest standards of corporate
governance. The Company has adopted and has substantially complied with the ASX Corporate Governance Principles
and Recommendations (Third Edition) to the extent appropriate to the size and nature of the Company's operations.
This Corporate Governance Statement is accurate and up to date as at 30 June 2016 and has been approved by the
Board.
Principle 1 - Lay solid foundations for management and oversight
Responsibilities and functions of the Board and Management
The Board of Paradigm Biopharmaceuticals Limited (Company) maintains the following responsibilities and functions:
setting overall goals for the Company;
approving strategies, objectives and plans for the Company's businesses to achieve these goals;
ensuring that business risks are identified and approving systems and controls to manage those risks and monitor
compliance;
approving the Company's major human resources policies and overseeing the development strategies for senior and
high performing executives;
approving financial plans and annual budgets;
monitoring executive management and business performance in the implementation and achievement of strategic and
business objectives;
approving key management recommendations (such as major capital expenditure, acquisitions, divestments,
restructuring and funding);
appointing and removing the Managing Director and ratifying the appointment and removal of executives reporting
directly to the Managing Director (senior executives);
reporting to shareholders on the Company’s strategic direction and performance including constructive engagement in
the development, execution and modification of the Company's strategies;
overseeing the management of occupational health and safety and environmental performance;
determining that satisfactory arrangements are in place for auditing the Company’s financial affairs;
meeting statutory and regulatory requirements and overseeing the way in which the business risks and the assets of
the Company are managed.
The Board has delegated the day-to-day management of the Company to the Managing Director, CEO and other senior
executives (Management). The Company’s Management is responsible for the following:
implementing the strategic objectives set by the Board;
operating within the risk parameters set by the Board;
operational and business management of the Company;
managing the Company’s reputation and operating performance in accordance parameters set by the Board;
day-to-day running of the Company;
providing the Board with accurate, timely and clear information to enable the Board to perform its responsibilities; and
approving capital expenditure (except acquisitions) within delegated authority levels.
Senior executives have their roles and responsibilities defined in specific position descriptions.
Director Appointment and Election
Before appointing a Director, or putting forward to shareholders a Director for appointment, the Company undertakes
comprehensive reference checks that cover elements such as the person’s character, experience, employment history,
qualifications, criminal history, bankruptcy history, and disqualified officer status.
An election of Directors is held each year. A Director that has been appointed during the year must stand for election at the
next Annual General Meeting (AGM). No Director except the Managing Director may hold office for a period in excess of 3
years, or beyond the third annual general meeting (AGM) following the Director’s election, whichever is the longer, without
submitting himself or herself for re-election. One third of all Directors, except the Managing Director, will retire by rotation
each year but may offer themselves for re-election for a further 3-year period.
The Company provides to shareholders for their consideration information about each candidate standing for election or re-
election as a Director that the Board considers necessary for shareholders to make a fully informed decision. Such
information includes the person’s biography, which include experience and qualifications, details of other directorships,
adverse information about the person that the Board is aware of including material that may affect the person’s ability to act
independently on matters before the Board, and whether the Board supports the appointment or re-election.
46
PARADIGM BIOPHARMACEUTICALS LIMITED
APPENDIX A ( C O N T ’ D )
The terms of the appointment of a non-executive Director are set out in writing and cover matters such as the term of
appointment, time commitment envisaged, required committee work and other special duties, requirements to disclose their
relevant interests which may affect independence, corporate policies and procedures, indemnities, and remuneration
entitlements.
Executive Directors and senior executives are issued with service contracts which detail the above matters as well as the
person or body to whom they report, the circumstances in which their service may be terminated (with or without notice), and
any entitlements upon termination.
Company Secretary
The Company Secretary reports directly to the Board through the Chairman and is accessible to all Directors. The Company
Secretary’s role, in respect of matters relating to the proper functioning of the Board, includes:
advising the Board and its Committees on governance matters;
monitoring compliance of the Board and associated committees with policies and procedures;
coordinating all Board business;
retaining independent professional advisors;
ensuring that the business at Board and committee meetings is accurately captured in the minutes; and
helping to organise and facilitate the induction and professional development of Directors.
Diversity Policy
The Company has a diversity policy which requires the Board to set measurable objectives for achieving gender diversity and to
assess the objectives and the Company’s progress towards achieving them on an annual basis.
The policy aims to provide a work environment where employees have equal access to career opportunities, training and benefits.
It also aims to ensure that employees are treated with fairness and respect, and are not judged by unlawful or irrelevant reference
to gender, age, ethnicity, race, cultural background, disability, religion, sexual orientation or caring responsibilities. This
commitment enables the Company to attract and retain employees with the best skills and abilities.
As Board and employee positions become available, attention will be given to identifying opportunities for improving gender
diversity across the organisation.
The respective proportion of women and men in the Company including its subsidiaries (Consolidated Entity) as at 30 June
2016 are as follows:
On the Board
Across the whole organisation
Portion of
women
0%
29%
Proportion
of men
100%
71%
As no entity within the Consolidated Entity is a ‘relevant employer’ for the purposes of the Workplace Gender Equality Act 2012
on the basis that no entity employs 100 or more employees in Australia, there are no Gender Equality Indicators to be disclosed.
Performance Assessment
The Board reviews its performance annually, as well as the performance of individual Committees and individual Directors
(including the performance of the Chairman as Chairman of the Board). The use of an external facilitator may be utilised
periodically to assist in the review process. The review for the current financial year ended on 30 June 2016 are performed
by the Chairman. The process includes collective Board discussions to capture observations for where improvements could
be made and where processes worked well, individual interviews with each Director conducted by the Chairman, and
provision of anonymous feedback collected from individual Board members. The review of the Chairman’s role is
conducted by the Chair of the Audit and Risk Committee after obtaining feedback from each individual Director.
The Board conducts an annual performance assessment of the CEO against agreed performance measures determined at
the start of the year. The CEO undertakes the same assessments of senior executives. In assessing the performance of
the individual, the review includes consideration of the senior executive’s function, individual targets, group targets, and the
overall performance of the Company.
The CEO provides a report to the Board on the performance of senior executives together with remuneration
recommendations which must be approved by the Board after consultation with the Nomination and Remuneration
Committee. The review of senior executives in accordance with this process are undertaken for financial year ended 30
June 2016.
47
PARADIGM BIOPHARMACEUTICALS LIMITED
APPENDIX A ( C O N T ’ D )
Principle 2 - Structure the board to add value
Nomination and Remuneration Committee
The Board maintains a combined Nomination and Remuneration Committee, whose members during the financial year
were as follows:
Names
Position
Graeme Kaufman
Chairman & Non-Executive Director
Paul Rennie
Managing and Executive Director
Christopher Fullerton
Non-Executive Director
John Gaffney
Non-Executive Director
Independence
status
Yes
No
Yes
Yes
During the period ended 30 June 2016, the Company complies with the ASX recommendation to have a Nomination and
Remuneration Committee with a majority of independent Directors.
The Nomination and Remuneration Committee met once during the year.
Skills Matrix
The Board regularly evaluates the mix of its skills, experience and diversity. The Board considers that collectively its
Directors have a level of skill, knowledge and experience that enables the Board to effectively discharge its responsibilities
and duties (including the activities and industries outlined below). The mix of skills the Board is seeking to maintain, and to
build upon, includes:
Finance and Tax (e.g. financial management capability including accounting or related financial management
qualifications);
Research and development;
Executive leadership;
Pharmaceutical and Medical Devices;
Biomedical science;
Risk management understanding and experience;
Commercial acumen;
Product development; and
Strategic capabilities.
The Company does not have a formal induction or professional development program for Directors. To date, such
programs have been considered unnecessary as the current Board has satisfactory experience and skill set.
Consideration will be given to implementing such programs should it be proposed that any new Directors join the Board.
Composition of the Board
The Board assesses annually the independence of each Director to ensure that those designated as independent do not
have any alliance to the interests of Management, substantial shareholders or other relevant stakeholders. They must be
free of any interest, position, association or relationship that might influence, or reasonably be perceived to influence, in a
material respect, their capacity to bring an independent judgment to bear on issues before the Board and to act in the best
interests of the Company and its security holders generally.
Details of the Board of Directors, their appointment dates, and independence status is as follows:
Names
Position
Independence status
Tenure
Graeme Kaufman
Paul Rennie
Chairman & Non-
Executive Director
Managing and Executive
Director
Christopher Fullerton Non-Executive Director
John Gaffney
Non-Executive Director
Yes
No
Yes
Yes
02 May 2014 to current
02 May 2014 to current
30 September 2014 to current
30 September 2014 to current
Graeme Kaufman is Non-Executive Chair of the Board and is considered to be an independent Director of the Company. Paul
Rennie is the Managing Director and Chief Executive Officer.
48
PARADIGM BIOPHARMACEUTICALS LIMITED
APPENDIX A ( C O N T ’ D )
Principle 3 - Act ethically and responsibly
Code of Conduct
The Company maintains a code of conduct for its Directors, senior executives and employees. In summary, the code requires
the following of each relevant person:
act honestly, in good faith and in the best interests of the Company as a whole;
exercise a duty to use care and diligence in fulfilling the functions of office or position and exercising the powers attached
to that office or position;
use the powers of office for a proper purpose and in the best interests of the Company as a whole;
recognise that the primary responsibility is to the Company as a whole but may, where appropriate, have regard for the
interest of other stakeholders of the Company;
not to make improper use of information acquired as a Director or employee;
not take improper advantage of their position as a member of the Board or employee;
properly manage and declare any conflict of interest with the Company;
Directors to be independent in judgement and actions and to take all reasonable steps to be satisfied as to the
soundness of all decisions taken by the Board;
confidential information received in the course of the exercise of their duties remains the property of the Company and,
unless appropriate authority granted, it is improper to disclose it, or allow it to be disclosed;
not to engage in conduct likely to affect the reputation of Company; and
to comply with the spirit, as well as the letter, of the law and with the principles of this Code.
Principle 4 - Safeguard integrity in corporate reporting
Audit and Risk Committee
The Board has an Audit and Risk Committee consisting of 3 independent Directors of the Board. At the date of this Corporate
Governance Statement, it comprises Christopher Fullerton, John Gaffney and Graeme Kaufman,
Details of each member’s qualifications and experience is detailed in the ‘Directors’ Report” section of the Company’s annual
report.
The Charter of the Committee is available at the Company’s website. It provides details in relation to its role, confers on it all
necessary powers to perform that role, and explains how the Committee achieves its main objectives, which are to carry out
the following functions:
reporting of financial information to users of financial reports, in particular the quality and reliability of such
information;
assessing the consistency of disclosures in the Financial Statements with other disclosures made by the Company
to the financial markets, governmental and other public bodies;
review and application of accounting policies;
financial management;
review of internal and external audit reports to ensure that where weaknesses in controls or procedures have been
identified, appropriate and prompt remedial action is taken by management;
evaluation of the Company's compliance and risk management structure and procedures, internal controls and
ethical standards;
review of business policies and practices;
conduct of any investigation relating to financial matters, records or accounts, and reporting those matters to the
Board;
protection of the Company’s assets;
compliance with applicable laws, regulations, standards and best practice guidelines; and
review of the Company's corporate governance policy.
Financial Reporting
In relation to the Financial Statements for the financial year ended 30 June 2016 and the period ended 31 December 2015, the
Company’s CEO and CFO have provided the Board with declarations, that in their option:
the financial records of the Company have been properly maintained;
the Financial Statements comply with the appropriate accounting standards and give a true and fair view of the financial
position and performance of the Company; and
has been formed on the basis of a sound system of risk management and internal control which is operating effectively.
External Auditor
The engagement partner for the Company’s audit attends the AGM and is available to answer shareholder questions from
shareholders relevant to the audit.
49
PARADIGM BIOPHARMACEUTICALS LIMITED
APPENDIX A ( C O N T ’ D )
Principle 5 - Make timely balanced disclosure
Listing Rule 3.1 requires a listed entity, subject to certain exceptions, to disclose to ASX immediately any information
concerning it that a reasonable person would expect to have a material effect on the price or value of its securities. The
Company is committed to providing the market with complete and timely information about disclosure events in compliance
with its continuous disclosure obligations and the Corporations Act 2001.
The Company maintains a written policy that outlines the responsibilities relating to the Directors, officers and employees
in complying with the Company’s disclosure obligations. Where any such person is of any doubt as to whether they
possess information that could be classified as market sensitive, they are required to notify the Company Secretary
immediately, in the first instance, so that appropriate analysis and internal consultation can be conducted. Legal advice
may also be sought internally or from the Company’s external counsel.
The Company Secretary is required to consult with the CEO in relation to matters brought to his or her attention for
Chairman is not contactable, the Company Secretary may decide whether an announcement is made, or whether a trading
halt is warranted.
Generally, the CEO is ultimately responsible for decisions relating to the making of market announcements. The Company
Secretary is responsible for ensuring that the Board is aware of items of business that could result in an announcement.
The Board is required to authorise announcements of significance to the Company such as significant acquisitions,
disposals and closures, material profit upgrades or downgrades, dividend declarations and buybacks, and any other
transaction flagged by the Chairman as being fundamentally significant.
The Company Secretary is responsible for advising when announcements are not required due to either circumstances
such as where the information relates to matters of supposition or is insufficiently definite, it concerns an incomplete
proposal or negotiation, the information is confidential or would represent a breach of law if disclosed, and where a
reasonable person would not expect the disclosure of the information.
No member of the Company shall disclose market sensitive information to any person unless they have received
acknowledgement from the ASX that the information has been released to the market.
Principle 6 - Respect the rights of security shareholders
The Company maintains information in relation to governance documents, Directors and senior executives, Board and
committee charters, annual reports, ASX announcements and contact details on the Company’s website.
In order for the investors to gain a greater understanding of the Company’s business, governance practices, financial
performance and future prospects, the Company schedules interactions during the year where it engages with institutional
and private investors, analysts and the financial media.
Meetings and discussions with analysts must be approved by the CEO and are generally conducted by the CEO/ Managing
Director. The discussions are restricted to explanations of information already within the market or which deal with non-
price sensitive information. These meetings are not held within a four week blackout period in advance of the release of
interim or full-year results.
Shareholder Participation and Correspondence
The Company encourages shareholders to attend the Company’s AGM and to send in questions prior to the AGM so that
they may be responded to during the meeting. It also encourages ad hoc enquiry via email which are responded to.
The 2016 Notice of AGM will be provided to all shareholders and made available on the Company's website.
The external auditor is required to attend the AGM of the Company and is available to answer shareholder questions about
the conduct of the audit and the preparation and content of the auditor’s report.
The Company engages its share registry to manage the majority of communications with shareholders.
Shareholders are encouraged to receive correspondence from the Company electronically, thereby facilitating a more
effective, efficient and environmentally friendly communication mechanism with shareholders.
Principle 7 - Recognise and Manage Risk
The Board maintains a combined Audit and Risk Committee. The members of the Committee are detailed in Principle 4
above. The Company has complied with the ASX recommendation of having an Audit and Risk Committee made up of at
least three members, all of whom are Non-Executive Directors and a majority of whom are independent Directors.
The Charter of the Committee is available at the Company’s website. The charter outlines the Committee’s responsibilities
which include procedures for general risk oversight and monitoring, internal control and risk management, risk transfer and
insurance and other responsibilities. The key aspects of the charter follow.
50
PARADIGM BIOPHARMACEUTICALS LIMITED
APPENDIX A ( C O N T ’ D )
Principle 7 - Recognise and Manage Risk (cont’d)
The Committee assists the Board by providing independent and objective review, advice and assistance in developing
Board policy and monitoring corporate activity within the scope of its remit, making recommendations to the Board for
resolution, and assisting the Board understand risks which may:
impede the Company from achieving its goals and objectives;
impact on the Company’s performance;
affect the health, safety or welfare of employees, visitors and others in relation to the Company’s operations;
threaten compliance with the Company’s regulatory and legal obligations;
impact on the community and the environment in which the Company operates;
impact on the Company’s reputation, or that of its people; and
result in personal liability for Company officers arising from the Company’s operations.
Its responsibilities include review of the following elements:
Company risk appetite and risk tolerance, as determined by the Board across the Company and within specific
operational segments;
the likelihood of occurrence, severity of impact, and any mitigating measures affecting those risks;
responsibility for risk oversight and management of specific risks to ensure a common understanding of
accountabilities and roles;
procedures for periodic and critical reporting of matters to the Board and the risk committee;
communication of risk management policies and strategies throughout the Company to ensure it is embedded as part
of the Company’s corporate culture;
internal communication and control systems to encourage the timely flow of risk-related information to personnel;
reports from management, external auditors, internal auditors, legal counsel, regulators, and consultants as appropriate,
regarding risks the Company faces and the Company’s Management of those risks;
assessment of the internal processes for determining and managing key risk areas, with particular focus on compliance
with laws, regulations, standards and best practice guidelines, important judgments and accounting estimates, litigation
and claims, and fraud and theft;
assessment of effectiveness of the internal controls, risk management and performance management systems after
consultation with Management and the internal and external auditors;
assessment of effectiveness of, and compliance with, the corporate code of ethical conduct and compliance with internal
plans, policies and procedures;
obtaining regular updates from Management and Company lawyers about compliance matters;
ensuring the chief executive officer (or equivalent) and the chief financial officer (or equivalent) are reasonably able to
state that their declarations under section 295A of the Corporations Act 2001 relating to Financial Statements and reports
of the Company are founded on a sound system of risk management and internal control, and that the system is
operating effectively in all material respects, in relation to the financial reporting risks;
how certain risks of the Company have been mitigated by risk transfer strategies;
the scope, adequacy and cost of the Company’s insurance arrangements;
ensure appropriate corporate governance is in place within the scope of its remit; and
confirm annually that all responsibilities outlined in this charter have been carried out.
The Audit and Risk Committee reviews the Company’s risk management framework at least annually to ensure that it is still
suitable to the Company’s operations and objectives and that the Company is operating within the risk parameters set by the
Board. A review is undertaken for the year ended 30 June 2016.
Internal Audit
The internal audit function is to provide an independent assessment of risk and compliance with internal controls. The results of
internal audits are reported to senior management and to the Audit and Risk Committee on a regular basis. In addition,
processes have been put in place to ensure that appropriate follow up actions are taken in relation to significant audit findings
and identified areas of risk.
External Audit
The Board and management need to ensure that the statutory auditor is both independent and seen to be independent.
The purpose of an independent statutory audit is to provide shareholders and investors with reliable and clear financial
reports on which to base investment decisions.
Economic, Environmental and Social Sustainability Risks
The Company has no material exposure to environmental or social sustainability risks.
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PARADIGM BIOPHARMACEUTICALS LIMITED
APPENDIX A ( C O N T ’ D )
Economic, Environmental and Social Sustainability Risks (cont’d)
As the Company's main activity is clinically developing its lead product, it still operates at clinical trial levels. Accordingly, the
Board is of the view that the Company, as with other companies at such a stage of development, is subject to exposure for
economic sustainability, including the risk that its clinical trials may not be successful or become too expensive to conclude.
The Directors believe that the Company has adequate systems in place to monitor the costs, risks and progress of its trials to
manage those economic sustainability risks as they apply to the Company. For further information on the Company’s risk
management framework, refer to the above Principle 7 responses.
Principle 8 - Remunerate fairly and responsibly
The Board maintains a combined Nomination and Remuneration Committee. The members of the Committee are detailed in the
Principle 2 commentary above. The Company complies with the ASX recommendation to have a Nomination and Remuneration
Committee with a majority of independent Directors. The independence of the Nomination and Remuneration Committee is
subject to continual evaluation.
Details of the qualifications and experience of the members of the Committee are found in the Directors’ report within the annual
report.
The Remuneration Committee oversees remuneration policy and monitors remuneration outcomes to promote the interests of
shareholders by rewarding, motivating and retaining employees.
The Charter of the Committee is available at the Company’s website. The Committee’s charter sets out the roles and
responsibilities, composition and structure of the Committee.
In summary, the charter provides for the committee to monitor and advise upon the following matters:
the Company’s remuneration structure including long-term incentives and superannuation arrangements;
remuneration and incentives of the Board, CEO and Company Secretary;
performance and remuneration of senior management;
remuneration strategies, practices and disclosures generally;
workplace health and safety;
workplace diversity;
management succession, capability and talent development; and
the Remuneration Report, contained within the Directors’ report.
employee share payment plans;
recruitment, retention and termination strategies;
When considered necessary, the Committee may obtain external advice from independent consultants in determining the
Company’s remuneration practices including remuneration levels.
Remuneration of Non-Executive Directors is determined in maximum aggregate by the shareholders, and is allocated by
the Board on the recommendation of the Remuneration Committee.
Executive Directors and other senior executives are remunerated using combinations of fixed and performance based
remuneration. Fees and salaries are set at levels reflecting market rates having regard to the individual’s performance and
responsibilities. Performance based remuneration is linked directly to specific performance targets that are aligned to both short
and long-term objectives. Share options and rights are aligned to longer term performance hurdles. Termination payments are
detailed in individual contracts and payable on early termination with the exclusion of termination in the event of misconduct.
Further details in relation to the Company’s remuneration policies are contained in the Remuneration Report, within the Directors’
report.
Employee Share Plan
The Company has an employee share plan with accompanying limited recourse loan made available to certain employees. Details
of this plan can be found in the Company’s annual report.
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PARADIGM BIOPHARMACEUTICALS LIMITED
END OF REPORT
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