Paradigm Biopharmaceuticals Limited
A B N 9 4 1 6 9 3 4 6 9 6 3
2020 ANNUAL REPORT
PARADIGM BIOPHARMACEUTICALS LIMITED
C O N T E N T S
Corporate Directory
Chairman’s Report
Managing Director’s Review
Directors' Report
Remuneration Report
Auditor’s Independence Declaration
Consolidated Financial Statements & Notes
Directors' Declaration
Independent Auditor’s Report
Shareholder Information
Corporate Governance Statement
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53
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 as part of the
Financial Statements.
The Financial Statements were authorised for issue, in accordance with a resolution of Directors, on 27 August 2020. 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 Paul Rennie
Dr. Donna Skerrett
Mr Christopher Fullerton
Mr John Gaffney
Mr Graeme Kaufman
–
–
–
–
–
Managing & Executive Director
Executive Director (Appointed on 03 July 2020)
Non-Executive Director
Non-Executive Director
Chairman & Non-Executive Director (Resigned on 23 June 2020)
Company Secretary
Mr Kevin Hollingsworth
Principal Place of Business
Level 15, 500 Collins Street
Melbourne, VIC 3000
Registered Office
C/-Hollingsworth & Co Pty Ltd
Level 2, 517 Flinders Lane
Melbourne, VIC 3000
Auditor
RSM Australia Partners
Level 21
55 Collins Street
Melbourne, VIC 3000
Solicitors
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
Stock Exchange
ASX Limited
Level 4, North Tower, 525 Collins Street
Melbourne, VIC 3000
ASX Code: PAR
Website
www.paradigmbiopharma.com
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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 2020 Annual Report for Paradigm Biopharmaceuticals Limited.
The Company listed on the Australian Securities Exchange (ASX: PAR) on 19 August 2015 and today stands as a well-
funded, highly prospective listed drug repurposing company, staffed by talented, dedicated and knowledgeable executives
in Australia and the USA. Our business model has remained unchanged: to repurpose the historic drug injectable pentosan
polysulfate sodium (iPPS) for new clinical indications and the Company will shortly commence critical clinical trials to
establish the safety and clinical effect of iPPS in people with osteoarthritis.
During the last financial year, Paradigm entered into regulatory discussions with the United States of America Food and
Drug Administration (the US FDA) and the European Medicines Agency (the EMA) regarding Paradigm’s lead clinical
indication osteoarthritis and the orphan indication mucopolysaccharidosis (MPS). I am pleased to report that the
meetings with both Agencies have enabled Paradigm to establish the regulatory pathway to registration of iPPS for both
indications ie osteoarthritis and mucopolysaccharidosis (MPS)
I am also pleased to report that, in the USA, Paradigm executed a trial under a US FDA Expanded Access Program (EAP)
Investigational New Drug (IND) application, reporting a reduction of 65% from baseline in the 10 subjects treated for
osteoarthritis knee pain and function. The results were very pleasing, indicating that in subjects with osteoarthritis knee pain,
iPPS was well tolerated and had a clinically meaningful effect.
The Company continues to analyse the clinical data from the Therapeutic Goods Administration (TGA) Special Access
Scheme for our safety database, signals of efficacy and durability of effect which may support the Company’s regulatory
submissions.
Paradigm continues to execute on its drug repurposing business strategy and prudent use of resources with 80% of last
financial year’s expenditure being spent on the clinical trial programs. During the year, the Company’s financial position was
greatly strengthened by two equity raisings, raising in total $112 million; this has resulted in all planned clinical trials for the
next 18 months to be fully funded.
Graeme Kaufman resigned from the Paradigm board in early June, due to health and personal reasons. We thank him for
his contribution to the Company over the past 5 years and wish him well. Further, the executive management team had
been strengthened during the year, with the addition of our new Chief Medical Officer, Dr Donna Skerrett, who is based in
New York, and our new Chief Operations Officer, Jeannie Joughin.
Paradigm is on the cusp of commencing pivotal Phase 3 clinical trials in the USA and EU and we look forward to advising
the market about our progress with the submissions to the EMA, the FDA and the TGA in the coming months. I particularly
wish to thank the Paradigm Board and the Paradigm management team for their dedication, focus and energy and for the
very significant outcomes they have achieved in the past 12 months. Finally, I acknowledge with thanks the outstanding
support of our shareholders which is so important to the continuing success of our Company.
On behalf of the Directors,
Paul Rennie
Interim Chairman
Melbourne, Victoria
27 August 2020
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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 Shareholders,
I am pleased to report on the progress made by the executive management team of Paradigm Biopharmaceuticals Limited
and its controlled entities (“Paradigm”) during the past 12 months.
Paradigm’s business plan is to repurpose the historic drug injectable Pentosan Polysulfate Sodium (iPPS) for new indications
with unmet medical needs. We maintain a high focus on prudently managing shareholders funds while at the same time
rapidly and efficiently executing on our clinical development plans. Over the past 12 months Paradigm has (i) completed
two Phase 2 clinical trials, (ii) in-licensed new intellectual property from the Icahn School of Medicine, Mt Sinai New York,
(iii) filed two new patents and (iv) commenced detailed regulatory discussions with both the US FDA and the EMA. Paradigm
is at an exciting stage of the clinical development of iPPS and is soon to commence the osteoarthritis pivotal study in the
USA and Europe.
Clinical Development
1. Osteoarthritis
Osteoarthritis (OA) is the most prevalent form of joint disease, affecting as much as 13% of the world’s population. An
estimated 33 million people in the USA and over 3 million people in Australia suffer from degenerative osteoarthritis.
In the US alone, the financial burden of OA has been estimated to be $81 billion in medical costs and $128 billion in total
cost, given approximately 30 million people with OA associated limitations, 36 million outpatient visits and 750,000
hospitalizations per year1.
Opioid medicines are used by a large percentage of patients who have advanced knee, hip, or spine osteoarthritis to manage
their chronic pain. Dr Scott Gottlieb, M.D., ex-Commissioner of the U.S. Food and Drug Administration said on 14 May
2018, “The biggest public health crisis facing FDA is opioid addiction. Not a day goes by in my role at FDA without hearing
stories of the emotional, physical, and financial toll this epidemic is taking on Americans”2.
Therein lies the unmet medical need for people suffering from osteoarthritis: a non-opioid treatment for the chronic pain and
joint stiffness of osteoarthritis which is both safe and effective. iPPS is a non-opioid drug which is safe and has potential to
distrupt the pharmaceutical market for the treatment for chronic pain arising from osteoarthritis.
The osteoarthritis Phase 2b clinical trial reached its primary and secondary endpoints. The study demonstrated that iPPS
achieved clinically meaningful and statistically significant results in the primary symptoms of osteoarthritis (pain and joint
function) and also showed improvements in the structural changes of the joint. Paradigm is pleased to report the Phase 2b
clinical trial achieved both symptomatic and radiographic (MRI) improvement.
Given the success of the Phase 2b clinical trial, Paradigm conducted, in Feb 2020, a Pre-IND meeting with the US FDA for
its pivotal Phase 3 clinical trial. Paradigm is currently planning to submit regulatory documents (Type C meeting) to the US
FDA in Q4 CY2020. Regulatory documents, for a scientific advice meeting, have already been submitted to the EMA.
A manuscript of the successful osteoarthritis Phase 2b clinical trial has been submitted for peer-review and publication.
2. Mucopolysaccharidosis (MPS)
During the past 12 months, Paradigm in-licensed patents claiming the use of iPPS to treat the rare disease of
mucopolysaccharidosis (MPS). MPS is a rare genetic disease which is currently treated with enzyme replacement therapy
(ERT). ERT is known to have limited effects on some organs, especially the skeletal system. In MPS animal models PPS
reduces the concentrations of glycosaminoglycans (GAGs) in tissues and body fluids and improves cartilage and bone
pathologies. A Phase 2a clinical trial (Hennermann J et al 2016)2 )3 conducted in Germany demonstrated that MPS patients
had reduced urinary GAG levels, reduced pain and improved joint mobility. In the Phase 2a clinical trial all subjects received
ERT and iPPS. IPPS has the potential to be adjunctive therapy with ERT for MPS sufferers. Orphan drug designation was
received for both types of MPS, ie MPS-1 and MPS-6 in the USA and Europe, which are important regulatory milestones for
the Company.
3. Alphavirus – Ross River virus (RRV) and Chikungunya virus (CHIKV)
Paradigm completed a Phase 2a clinical trial investigating the safety and efficacy of iPPS in people recently infected with
the mosquito transmitted alpha virus, Ross River virus (RRV). The Phase 2a clinical trial was a success and reached all
primary and secondary endpoints. Paradigm has also undertaken a research program (pre-clinical study) with Griffith
University investigating the safety and effect of iPPS in an animal model of CHIK-V.
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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 )
3. Alphavirus – Ross River virus (RRV) and Chikungunya virus (CHIKV) (cont’d)
A manuscript of the successful RRV clinical trial has been submitted for peer-review and publication. A manuscript of the
successful CHIK-V non-clinical work has been prepared and will be submitted for peer-review in the forthcoming financial
year.
The human data on the effects of iPPS in RRV induced arthralgia together with our preclinical work on CHIKV will progress
our commercial discussions with US Department of Defense.
4. Allergic Rhinitis / hay fever
Intranasal corticosteroids and anti-histamines are the current first line therapies used to treat the symptoms of allergic rhinitis.
Paradigm developed a non-steroid-based intranasal PPS spray and conducted a Phase 1 safety study and a Phase 2a
randomised double-blind placebo cross over clinical study. In May 2017, Paradigm reported the Phase 2 study failed to
meet its primary clinical endpoints. This was an unexpected outcome, and the clinical data was reviewed by industry experts
to determine our next steps with the Allergic Rhinitis program.
Paradigm remains committed to its respiratory asset. Further R&D will be undertaken to identify the reasons for the lack of
translation from the preclinical Allergic Rhinitis results into the Phase 2 human clinical trial. Depending on Paradigm’s
findings the Allergic Rhinitis Phase 2 study could be repeated, or the Allergic Rhinitis program may be terminated in
preference to its Asthma or Chronic Obstructive Pulmonary Disease (COPD) programs.
5. Heart Failure
Paradigm continues to develop the IP which it licensed from the University of Oslo (Norway) for the use of iPPS for the
treatment of heart failure. Significant non-clinical work was undertaken in the past 12 months and Paradigm has plans to
undertake further non-clinical studies in the forthcoming financial year.
Research & Development
A focused Research & Development (R&D) program will be undertaken to identify and develop second generation products
and the pain reducing mechanism of action of iPPS with osteoarthritis. This R&D program will be managed by Paradigm’s
Chief Scientific Officer. Paradigm will continue to outsource its R&D to world-class research laboratories and CRO’s. In line
with Paradigm’s publication policy it will publish the pre-clinical and clinical studies in peer-reviewed scientific journals.
Business Development
Paradigm is planning to appoint a head of business development to ensure that, post the clinical trials, the Company is well
positioned to action resulting commercial transactions.
Intellectual Property
Osteoarthritis Patent (Bone marrow edema): The osteoarthritis patent is granted in all seven major pharmacetuical
markets.
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, China, Canada and Europe.
During the reporting period, Paradigm filed two new patents claiming the use of iPPS in reducing pain. In particular, the
patent relates to use of polysulfated polysaccharides, such as PPS, for the treatment of pain or pain conditions mediated by
mature Nerve Growth Factor (NGF) or its precursor pro-Nerve Growth Factor (pro-NGF) both of which are known pain
mediators in chronic diseases such as osteoarthritis.
Managing shareholder funds and delivering on our clinical milestones continue to be our top corporate priorities. The
significant achievements in the past 12 months have been made possible by our highly talented and productive pharma
executives and consultants. I would also like to acknowledge the outstanding support of Paradigm’s clinical & regulatory
staff, scientific & medical professionals and our manufacturing partners.
Paul Rennie
Managing Director
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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 )
References:
1 National Institute of Health; Emerging drugs for osteoarthritis; Hunter DJ and Matthews G 16(3): 479–491; 2011 September.
2 https://blogs.fda.gov/fdavoice/index.php/2018/05/addressing-needs-of-patients-while-stemming-the-tide-of-the-opioid-
crisis/
3Treatment with pentosan polysulphate in patients with MPS I: results from an open label, randomized, monocentric phase
II study. Hennermann J et al.
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PARADIGM BIOPHARMACEUTICALS LIMITED
D I R E C T O R S ’ R E P O R T
Directors present their report together with the financial report of Paradigm Biopharmaceuticals Limited (referred to hereafter
as the 'company') and the entities it controlled at the end of, or during, the year ended 30 June 2020 (referred to hereafter
as the 'Consolidated Entity')
DIRECTORS
Information on Directors
The Directors of Paradigm at any time during or since the end of the financial year are:
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 6 years, Paul has worked full time at Paradigm
Biopharmaceuticals Limited.
Dr. Donna Skerrett, Executive Director (Appointed on 03 July 2020)
Dr. Donna Skerrett, has more than 30 years’ experience in transfusion medicine, cellular therapy, and transplantation. She
brings a wealth of experience in medical, clinical, and regulatory affairs. Donna served previously as Chief Medical Officer
at Mesoblast. She was Director of Transfusion Medicine and Cellular Therapy at Weill Cornell Medical Center in New York
(2004 – 2011) and prior to that was Associate Director of Transfusion Medicine and Director of Stem Cell Facilities at
Columbia University’s New York-Presbyterian Hospital. She previously chaired the New York State Council on Blood and
Transfusion Services and currently serves on the Board of Directors of the Fox Chase Cancer Center in Philadelphia, Pa.
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. He is currently a Non-Executive Director of XTEK Ltd.
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.
Graeme Kaufman, Chairman and Non-Executive Director (Resigned on 23 June 2020)
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.
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). 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.
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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 Paradigm during the last 3 years immediately before the end of the
financial year are as follows:
Director
Company
Graeme Kaufman
Christopher Fullerton
John Gaffney
IDT Australia Limited
XTEK Ltd
SelfWealth Ltd
DIRECTORS’ MEETINGS
Period of directorship
From
To
01-Jun-13
24-Apr-18
23-Nov-17
18-Nov-19
Current
30-Sep-19
The number of Directors’ meetings (including meetings of committees of Directors) and the number of meetings attended
by each of the Directors of Paradigm 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
Donna Skerrett
7
7
7
7
-
6
7
7
7
-
1
1
1
1
-
-
1
1
1
-
2
2
2
2
-
2
2
2
2
-
Committee membership
As at the date of the report, Paradigm 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
Audit & Risk
Committee
John Gaffney (Chairman)
Christopher Fullerton
Christopher Fullerton (Chairman)
John Gaffney
PRINCIPAL ACTIVITIES
The principal activities of Paradigm 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.
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PARADIGM BIOPHARMACEUTICALS LIMITED
D I R E C T O R S ’ R E P O R T ( C O N T ’ D )
OPERATING REVIEW
Paradigm made a loss for the financial year ended 30 June 2020 of $12,298,887 (2019: Loss of $15,627,544).
Consolidated revenue including other income during the period was $4,695,494 (2019: $3,245,628). This revenue included
interest of $997,647 (2019: $261,710), and an R&D tax incentive of $3,647,847 (2019: $2,983,918).
The consolidated total expenses for the period were $16,994,381 (2019: $18,873,172).
The research and development expenses for the period were $12,793,576 (2019: $7,896,708).
The other operating expenses during the period were $4,200,805 (2019: $4,047,480).
The impairment loss during the period was Nil (2019: $6,928,984).
Basic and diluted net loss per share decreased to 6.12 cents (2019: 10.93 cents) due to a smaller loss and the increased
number of shares.
ENVIRONMENTAL REGULATION
Paradigm’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
In March 2020, 26,923,077 shares were issued and placed with Domestic and International Institutions to raise capital of
$35,000,000. The proceeds from the placement will be applied to costs of the second Phase 3 osteoarthritis (OA) clinical
trial (confirmatory clinical trial). Paradigm is now fully funded to complete its current clinical programs in OA and MPS through
to registration.
There have been no other significant changes in the state of affairs of the entities in Paradigm during the year.
DIVIDENDS
No dividends were declared or paid since the start of the financial year. No recommendation for payment of dividends has
been made.
MATTERS SUBSEQUENT TO THE END OF THE FINANCIAL YEAR
The impact of the Coronavirus (COVID-19) pandemic is ongoing and it is not practicable to estimate the potential impact,
positive or negative, after the reporting date. The situation is rapidly developing and is dependent on measures imposed by
the Australian Government and other countries, such as maintaining social distancing requirements, quarantine, travel
restrictions and any economic stimulus that may be provided.
LIKELY DEVELOPMENTS
There are no likely developments.
CORPORATE GOVERNANCE
The Corporate Governance Statement appears on Paradigm’s website at:
http://www.paradigmbiopharma.com/investors/corporate-governance
DIRECTORS’ INTERESTS
The relevant interest of each Director in the shares and options issued by Paradigm at the date of this report is as follows:
Director
Paul Rennie
Christopher Fullerton
John Gaffney
Donna Skerrett
Ordinary
shares
19,509,222
1,070,000
587,555
219,284
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PARADIGM BIOPHARMACEUTICALS LIMITED
D I R E C T O R S ’ R E P O R T ( C O N T ’ D )
INDEMNIFICATION AND INSURANCE OF OFFICERS
Indemnification
Paradigm has agreed to indemnify the current Directors of Paradigm against all liabilities to another person (other than
Paradigm or a related body corporate) that may arise from their position as Directors of Paradigm, except where the liability
arises out of conduct involving a lack of good faith.
The agreement stipulates that Paradigm will meet to the maximum extent permitted by law, the full amount of any such
liabilities, including costs and expenses.
Insurance premiums
Paradigm paid a premium during the year in respect of a Director and officer liability insurance policy, insuring the Directors
of Paradigm, the Company Secretary, and all Executive Officers of Paradigm 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 PARADIGM
No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf
of Paradigm, or to intervene in any proceedings to which Paradigm is a party for the purpose of taking responsibility on
behalf of Paradigm for all or part of those proceedings.
NON-AUDIT SERVICES
Paradigm’s auditor, RSM Australia, was appointed in July 2014 for audit services and also provided taxation services during
the year.
Details of the amounts paid or payable to the auditor for non-audit services provided during the financial year by the auditor
are outlined in note 27 to the financial statements.
The Directors are satisfied that the provision of non-audit services during the financial year, by the auditor (or by another
person or firm on the auditor's behalf), is compatible with the general standard of independence for auditors imposed by the
Corporations Act 2001.
The Directors are of the opinion that the services as disclosed in note 27 to the financial statements do not compromise the
external auditor's independence requirements of the Corporations Act 2001 for the following reasons:
•
•
all non-audit services have been reviewed and approved to ensure that they do not impact the integrity and
objectivity of the auditor; and
none of the services undermine the general principles relating to auditor independence as set out in APES 110
Code of Ethics for Professional Accountants issued by the Accounting Professional and Ethical Standards Board,
including reviewing or auditing the auditor's own work, acting in a management or decision-making capacity for
Paradigm, acting as advocate for Paradigm or jointly sharing economic risks and rewards.
OFFICERS OF PARADIGM WHO ARE FORMER PARTNERS OF RSM AUSTRALIA
There are no Officers of Paradigm 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.
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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
AUDITED REMUNERATION REPORT
This Remuneration Report outlines the Director and Executive Remuneration arrangements of Paradigm 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 Paradigm are defined as those persons having authority and
responsibility for planning, directing and controlling the major activities of Paradigm, directly or indirectly, including any
Director (whether executive or otherwise) of Paradigm. Paradigm does not presently employ any Executives, other than the
Executive Director.
KEY MANAGEMENT PERSONNEL
The following were Key Management Personnel of Paradigm at any time during the year and unless otherwise indicated
were Key Management Personnel for the entire year:
Name
Position held
Date Appointed
Date Resigned
Graeme Kaufman
Paul Rennie
Christopher Fullerton
John Gaffney
Chairman & Non-Executive Director
Managing & Executive Director
Non-Executive Director
Non-Executive Director
2 May 2014
2 May 2014
30 September 2014
30 September 2014
23 June 2020
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 Paradigm’s constitution.
The Board is responsible to shareholders for ensuring that Paradigm:
•
•
•
•
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 Paradigm, the performance of the
Executive and the general pay environment;
provides disclosure in relation to Paradigm'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 2001.
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 Paradigm’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.
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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 )
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 amount of $500,000 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 Consolidated
Entity or Board activities.
Directors are not required to hold shares in Paradigm 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 Paradigm.
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
Paradigm has a long-term incentive plan being the Employee Share Plan (ESP). Refer to Note 16 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
options
$
Graeme Kaufman
Paul Rennie
29 May 2015
1,200,000
$0.35
$0.208
249,600
29 May 2015
600,000
$0.35
$0.208
124,800
30 November 2016
140,000
$0.33
$0.268
37,553
13 November 2017
210,000
$0.63
$0.198
41,496
26 November 2018
300,000
$1.15
$0.623
186,963
07 November 2019
197,355
$2.93
$1.540
303,927
Christopher Fullerton
29 May 2015
600,000
$0.35
$0.208
124,800
John Gaffney
29 May 2015
600,000
$0.35
$0.208
124,800
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 )
Non-Executive Director Remuneration (cont’d)
Movement in shares
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 is as
follows:
Held at year Purchases Disposals
opening
Issued via
ESP
Held at
year
end
Directors & Key Management
Persons
Graeme Kaufman
Paul Rennie
2,074,250
-
(184,216)
-
1,890,034
23,379,935
63,500
(4,131,568)
197,355
19,509,222
Christopher Fullerton
960,000
110,000
-
John Gaffney
703,250
-
(115,695)
-
-
1,070,000
587,555
EMPLOYMENT AGREEMENTS
The Board has reviewed the remuneration package for the Chief Executive Officer on 09 July 2020. The Remuneration and
other terms of employment for the Chief Executive Officer is formalised in a service agreement. Details of this agreement
are as follows: -
Name:
Title:
Agreement commenced:
Term of agreement:
Details:
Paul Rennie
Managing Director and Chief Executive Officer
7 November 2017
3 years
Base annual package *, Short-term incentives ** and discretionary share based Long-
term incentives ***, subject to annual performance review, 6-month termination notice
by either party, 3-12-month non-solicitation clause after termination depending on the
area. Paradigm may terminate the agreement with cause in certain circumstances such
as gross misconduct.
* Base annual package for financial year 2020/21 - $510,000 per annum plus statutory
Superannuation, to be reviewed annually by the Nomination and Remuneration
Committee
** Short-term incentives paid as a cash bonus to award for financial year 2019/20 –
25% of base ($115,500)
*** Long-term incentives via invitation to participate in Paradigm’s Employee Share
Plan. 197,355 Ordinary Shares was granted as at 07 November 2019 at an exercise
price of $2.93 for the performance for the 2019 financial year. This issue was funded
by a limited recourse loan from Paradigm.
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
Details of the nature and amount of each major element of the remuneration of each Key Management Personnel of Paradigm for the year ended 30 June 2020 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
110,000
55,000
55,000
-
-
-
10,450
5,225
5,225
462,000
115,500
54,863
Total
2020
682,000
115,500
75,763
-
-
-
-
-
-
-
-
-
-
120,450
60,225
60,225
0.0%
0.0%
0.0%
0.00%
0.00%
0.00%
632,363
18.26%
0.00%
873,263
13.23%
0.00%
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)
Details of the nature and amount of each major element of the remuneration of each Key Management Personnel of Paradigm for the year ended 30 June 2019 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
110,000
55,000
55,000
-
-
-
10,450
5,225
5,225
420,000
105,000
49,875
Total
2019
640,000
105,000
70,775
-
-
-
-
-
-
-
-
120,450
60,225
60,225
0.0%
0.0%
0.0%
0.00%
0.00%
0.00%
492,513
1,067,388
9.84%
46.14%
492,513
1,308,288
8.03%
37.65%
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 remuneration linked to performance and the fixed proportion are as follows:
Name
Non-Executive
Graeme Kaufman
Christopher Fullerton
John Gaffney
Executive:
Paul Rennie
Fixed remuneration
At risk - STI
At risk - LTI
2020
2019
2020
2019
2020
2019
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
-
-
-
-
-
-
81.74%
44.02%
18.26%
9.84%
-
-
-
-
-
-
-
46.14%
Cash bonuses are dependent on meeting defined performance measures. The amount of the bonus is determined having regard to the satisfaction of performance measures. The
maximum bonus values are established at the start of each financial year and amounts payable are determined in the final month of the financial year by the Nomination and
Remuneration Committee.
The proportion of the cash bonus paid/payable or forfeited is as follows:
Name
Non-Executive
Graeme Kaufman
Christopher Fullerton
John Gaffney
Executive:
Paul Rennie
Cash bonus paid/payable
Cash bonus forfeited
2020
2019
2020
2019
-
-
-
-
-
-
100%
100%
-
-
-
-
-
-
-
-
16
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)
Additional information
The earnings of Paradigm for the five years to 30 June 2020 are summarised below:-
Income
4,695,494
3,245,628
2,736,400
1,848,924
1,394,161
Profit/(loss) after income tax
(12,298,887)
(15,627,544)
(6,190,232)
(4,275,446)
(2,924,425)
2020
$
2019
$
2018
$
2017
$
2016
$
The factors that are considered to affect total shareholders return (TSR) are summarised below:
Share price at financial year end ($)
Total dividends declared (cents per share)
Basic earnings per share (cents per share)
2020
3.15
-
(6.12)
2019
1.40
-
(10.93)
2018
0.65
-
(5.46)
2017
0.29
-
(4.42)
2016
0.35
-
(3.6)
This is the end of the audited Remuneration Report.
Dated at Melbourne, Victoria this 27th day of August 2020.
Signed in accordance with a resolution of the Directors, pursuant to section 298(2)(a) of the Corporations Act:
Paul Rennie
Interim Chairman
17
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 2020, 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
B Y CHAN
Partner
Dated: 27 August 2020
Melbourne, Victoria
THE POWER OF BEING UNDERSTOOD
AUDIT | TAX | CONSULTING
18
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
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 02 0
Other income
Research and development expenses
Employee expenses
General and administration expenses
Impairment loss
Finance costs
Loss before income tax
Income tax expense / (benefit)
Period from Period from
1-Jul-19 to
30-Jun-20
1-Jul-18 to
30-Jun-19
Notes
$
$
2
3
4,695,494
3,245,628
(12,793,576)
(7,896,708)
(1,226,649)
(2,575,983)
(2,939,988)
-
(1,471,497)
(6,928,984)
(34,168)
-
(12,298,887)
(15,627,544)
-
-
Loss for the year
(12,298,887)
(15,627,544)
Other comprehensive income
-
-
Total comprehensive income attributable to members of the consolidated entity
(12,298,887)
(15,627,544)
Earnings per share (cents)
Basic and diluted earnings per share
19
(6.12) cents
(10.93) cents
The consolidated statement of profit or loss and other comprehensive income 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 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 02 0
Notes
2020
$
2019
$
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Prepaid expenses
Financial assets held at amortised cost
Total current assets
Non-current assets
Intangible assets
Plant and equipment
Right-of-use assets
Security deposits receivable
Total non-current assets
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Employee benefits
Lease liabilities
Total current liabilities
Non-current liabilities
Employee benefits
Lease liabilities
4
5
6
7
8
9
103,922,241
78,836,173
3,509,777
3,532,227
192,380
137,113
746,200
-
108,370,598
82,505,513
2,947,588
2,981,359
109,913
24,029
832,917
102,616
-
-
3,993,034
3,005,388
112,363,632
85,510,901
10
11
12
2,784,324
2,315,992
455,510
388,591
124,731
-
3,364,565
2,704,583
13
14
68,390
748,958
-
-
Total non-current liabilities
817,348
-
Total liabilities
Net assets
EQUITY
Issued capital
Share based payments reserve
Accumulated losses
Total equity
4,181,913
2,704,583
108,181,719
82,806,318
15
16
17
145,865,076
109,468,292
3,585,189
4,072,844
(41,268,546)
(30,734,818)
108,181,719
82,806,318
The consolidated statement of financial position 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 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 2 0
Period from
1-Jul-19 to
Period from
1-Jul-18 to
30-Jun-20
30-Jun-19
$
$
Cash flows from operating activities
Research and development and other tax incentive received
3,621,355
2,318,718
Payments to suppliers and employees (Inclusive of GST)
(14,797,407)
(8,773,072)
Interest received
Interest repayment of lease liabilities
1,120,163
89,259
(34,168)
-
Net cash outflow from operating activities 24
(10,090,057)
(6,365,095)
Cash flows from investing activities
Payments for intangible assets 7
(3,353)
(4,198)
Payments for plant and equipment 8
(127,537)
(17,781)
Proceeds/(Payments) for financial assets held at amortised cost
5,753,800
(6,500,000)
Net cash inflow (outflow) from investing activities
5,622,910
(6,521,979)
Cash flows from financing activities
Proceeds from the issue of share capital 15
35,000,000
86,962,482
Proceeds from exercise of share options 15
1,839,328
1,084,854
Limited recourse loan repayment under ESP
Payments of share issue costs 15
Principal repayment of lease liabilities
1,895,907
-
(2,588,451)
(5,269,719)
(93,569)
-
Net cash inflow from financing activities
36,053,215
82,777,617
Net increase in cash and cash equivalents
31,586,068
69,890,543
Cash at the beginning of the financial period
72,336,173
2,445,630
Cash at the end of the financial period
103,922,241
72,336,173
The consolidated statement of cash flows is to be read in conjunction with the accompanying notes.
21
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 02 0
Balance at 30 June 2018
Loss for the period
Shares issued (Note 14)
Costs in relation to shares issued
Fair value of shares issued to eligible employees under the plan
Fair values of options issued to third party under the share-based payment arrangement
Exercise of options
Balance at 30 June 2019
Loss for the period
Shares issued (Note 15)
Costs in relation to shares issued
Fair value of shares issued to eligible employees under the plan (Note 16)
Fair values of options issued to third party under the share-based payment arrangement (Note 16)
Transfer from share reserve
Shares issued relating to repayment of limited recourse loan for ESP
Exercise of options
Balance at 30 June 2020
Issued
Capital
$
26,940,674
Share
Option
Reserve
$
2,030,669
Accumulated
Losses
$
(15,107,274)
Total
$
13,864,069
-
86,962,483
(5,519,719)
-
-
-
1,728,963
313,212
-
-
1,084,854
-
(15,627,544)
(15,627,544)
86,962,483
(5,519,719)
1,728,963
313,212
1,084,854
-
-
-
-
-
109,468,292
4,072,844
(30,734,818)
82,806,318
-
35,000,000
(2,338,451)
-
-
-
(12,298,887)
(12,298,887)
-
-
35,000,000
(2,338,451)
-
-
-
490,936
786,568
-
(1,765,159)
1,765,159
-
490,936
1,895,907
1,839,328
-
-
-
-
786,568
-
1,895,907
1,839,328
The consolidated statement of changes in equity is to be read in conjunction with the accompanying note
145,865,076
3,585,189
(41,268,546)
108,181,719
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 2 0
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.
(a) Reporting entity
Paradigm Biopharmaceuticals Limited (the “Consolidated Entity”) 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 Consolidated Entity for the year ended 30 June
2020 comprises the company and controlled entities (together referred to as the “Consolidated Entity”).
The nature of the operations and principal activities of the Consolidated Entity are described in the Directors’ Report.
For the purposes of preparing the Financial Statements the Consolidated Entity 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 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 Consolidated Entity to all periods presented in
these Financial Statements.
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.
The following Accounting Standards and Interpretations are most relevant to the Consolidated Entity:
AASB 16 Leases
The Consolidated Entity has adopted AASB 16 from 1 July 2019. The standard replaces AASB 117 'Leases' and for lessees
eliminates the classifications of operating leases and finance leases. Except for short-term leases and leases of low-value
assets, right-of-use assets and corresponding lease liabilities are recognised in the statement of financial position. Straight-
line operating lease expense recognition is replaced with a depreciation charge for the right-of-use assets (included in
operating costs) and an interest expense on the recognised lease liabilities (included in finance costs). In the earlier periods
of the lease, the expenses associated with the lease under AASB 16 will be higher when compared to lease expenses under
AASB 117. However, EBITDA (Earnings Before Interest, Tax, Depreciation and Amortisation) results improve as the
operating expense is now replaced by interest expense and depreciation in profit or loss. For classification within the
statement of cash flows, the interest portion is disclosed in operating activities and the principal portion of the lease payments
are separately disclosed in financing activities. For lessor accounting, the standard does not substantially change how a
lessor accounts for leases.
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 2 0
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)
New, revised or amending Accounting Standards and Interpretations adopted (cont’d)
There were no lease liability commitments as at 1 July 2019, however a lease was entered during the 12-month period in
relation to the leased office space. This has now been accounted for in line with AASB 16 using an incremental borrowing
rate of 4.7%.
(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
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.
Other indefinite life intangible assets
The Consolidated Entity tests annually, or more frequently if events or changes in circumstances indicate impairment,
whether other indefinite life intangible assets have suffered any impairment, in accordance with the accounting policy stated
in note 1. The recoverable amounts of cash-generating units have been determined based on value-in-use calculations.
These calculations require the use of assumptions, including estimated discount rates based on the current cost of capital
and growth rates of the estimated future cash flows. Refer to note 7 for further information.
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 considered.
Coronavirus (COVID-19) pandemic
Judgement has been exercised in considering the impacts that the Coronavirus (COVID-19) pandemic has had, or may
have, on the consolidated entity based on known information. This consideration extends to the nature of the products and
services offered, customers, supply chain, staffing and geographic regions in which the consolidated entity operates. Other
than as addressed in specific notes, there does not currently appear to be either any significant impact upon the financial
statements or any significant uncertainties with respect to events or conditions which may impact the Consolidated Entity
unfavourably as at the reporting date or subsequently as a result of the Coronavirus (COVID-19) pandemic.
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 2 0
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)
(c) Significant accounting estimates, assumptions and judgements (cont’d)
Incremental borrowing rate
Where the interest rate implicit in a lease cannot be readily determined, an incremental borrowing rate is estimated to
discount future lease payments to measure the present value of the lease liability at the lease commencement date. Such a
rate is based on what the Consolidated Entity estimates it would have to pay a third party to borrow the funds necessary to
obtain an asset of a similar value to the right-of-use asset, with similar terms, security and economic environment.
(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 22.
Subsidiaries
The consolidated Financial Statements comprise those of the Consolidated Entity, 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 Consolidated Entity. Control exists when the Consolidated Entity 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 Consolidated Entity until the date that control ceases.
Transactions eliminated on consolidation
Intra-company balances and all gains and losses or income and expenses arising from intra-company transactions are
eliminated in preparing the consolidated Financial Statements.
(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 purpose 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 allowance for expected credit losses. Trade receivables are generally due for settlement within 30
days.
The Consolidated Entity has applied the simplified approach to measuring expected credit losses, which uses a lifetime
expected loss allowance. To measure the expected credit losses, trade receivables have been grouped based on days
overdue.
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.
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1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)
(v)
Intangible assets
Intangible assets acquired as part of a business combination, other than goodwill, are initially measured at their fair value at
the date of the acquisition. Intangible assets acquired separately are initially recognised at cost. Indefinite life intangible
assets are not amortised and are subsequently measured at cost less any impairment. Finite life intangible assets are
subsequently measured at cost less amortisation and any impairment. The gains or losses recognised in profit or loss arising
from the derecognition of intangible assets are measured as the difference between net disposal proceeds and the carrying
amount of the intangible asset. The method and useful lives of finite life intangible assets are reviewed annually. Changes
in the expected pattern of consumption or useful life are accounted for prospectively by changing the amortisation method
or period.
(a) Patents and trademarks
Patents have a finite useful life and are carried at cost less accumulated amortisation and impairment losses once the patents
are considered held ready for use. Intellectual property and licences are amortised on a systematic basis matched to the
future economic benefits over the useful life of the project once the patents are considered held ready for use.
Significant costs associated with trademarks are deferred and amortised on a straight-line basis over the period of their
expected benefit, being their finite life of 10 years.
(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 Consolidated Entity 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 Consolidated Entity 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.
In assessing value-in-use, the estimated future cash flows are discounted to their present value using a pre-tax discount
rate that reflects current market assessments of the time value of the money and risks specific to the asset. In determining
fair value less costs of disposal, recent market transactions are taken into account. If no such transactions can be identified,
an appropriate valuation model is used. These calculations are corroborated by valuation multiples, quoted share prices for
publicly traded companies or other available fair value indicators.
The Consolidated Entity bases its impairment calculation on detailed budgets and forecast calculations, which are prepared
separately for each of the Consolidated Entity’s projects to which the individual assets are allocated. These budgets and
forecast calculations generally cover a period of five years.
Impairment losses of continuing operations are recognised in the statement of profit or loss in expense categories consistent
with the function of the impaired asset.
(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 plant and equipment over their
expected useful lives of 2-15 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.
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1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)
(vii) Plant and equipment (cont’d)
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 Consolidated Entity 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 offset receivables 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.
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 Consolidated Entity 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.
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1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)
(xii) Employee benefits (cont’d)
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 Consolidated Entity 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 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 Consolidated Entity provides benefits to employees (including Directors) of the Consolidated Entity 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 Consolidated Entity, 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)
Lease liabilities
A lease liability is recognised at the commencement date of a lease. The lease liability is initially recognised at the present
value of the lease payments to be made over the term of the lease, discounted using the interest rate implicit in the lease
or, if that rate cannot be readily determined, the Consolidated Entity's incremental borrowing rate. Lease payments
comprise of fixed payments less any lease incentives receivable, variable lease payments that depend on an index or a
rate, amounts expected to be paid under residual value guarantees, exercise price of a purchase option when the exercise
of the option is reasonably certain to occur, and any anticipated termination penalties. The variable lease payments that do
not depend on an index or a rate are expensed in the period in which they are incurred.
Lease liabilities are measured at amortised cost using the effective interest method. The carrying amounts are remeasured
if there is a change in the following: future lease payments arising from a change in an index or a rate used; residual
guarantee; lease term; certainty of a purchase option and termination penalties. When a lease liability is remeasured, an
adjustment is made to the corresponding right-of use asset, or to profit or loss if the carrying amount of the right-of-use
asset is fully written down.
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1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)
(xiv) Income tax
The income tax expense or benefit for the period is the tax payable on that period's taxable income based on the applicable
income tax rate for each jurisdiction, adjusted by the changes in deferred tax assets and liabilities attributable to temporary
differences, unused tax losses and the adjustment recognised for prior periods, where applicable.
Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to be applied when the
assets are recovered or liabilities are settled, based on those tax rates that are enacted or substantively enacted, except for:
• when the deferred income tax asset or liability arises from the initial recognition of goodwill or an asset or liability in
a transaction that is not a business combination and that, at the time of the transaction, affects neither the
accounting nor taxable profits; or
• when the taxable temporary difference is associated with interests in subsidiaries, associates or joint ventures,
and the timing of the reversal can be controlled and it is probable that the temporary difference will not reverse in
the foreseeable future.
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that
future taxable amounts will be available to utilise those temporary differences and losses.
The carrying amount of recognised and unrecognised deferred tax assets are reviewed at each reporting date. Deferred tax
assets recognised are reduced to the extent that it is no longer probable that future taxable profits will be available for the
carrying amount to be recovered. Previously unrecognised deferred tax assets are recognised to the extent that it is probable
that there are future taxable profits available to recover the asset.
Deferred tax assets and liabilities are offset only where there is a legally enforceable right to offset current tax assets against
current tax liabilities and deferred tax assets against deferred tax liabilities; and they relate to the same taxable authority on
either the same taxable entity or different taxable entities which intend to settle simultaneously.
The Consolidated Entity 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 Consolidated
Entity as an equity contribution or distribution.
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.
Assets or liabilities arising under tax funding agreements with the tax consolidated entities are recognised as amounts
receivable from or payable to other entities in the tax consolidated group. The tax funding arrangement ensures that the
intercompany charge equals the current tax liability or benefit of each tax consolidated group member, resulting in neither a
contribution by the head entity to the subsidiaries nor a distribution by the subsidiaries to the head entity.
(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.
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1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)
(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 Consolidated Entity 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 Consolidated Entity 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) Fair value measurement
When an asset or liability, financial or non-financial, is measured at fair value for recognition or disclosure purposes, the fair
value is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date; and assumes that the transaction will take place either: in the principal
market; or in the absence of a principal market, in the most advantageous market.
Fair value is measured using the assumptions that market participants would use when pricing the asset or liability, assuming
they act in their economic best interests. For non-financial assets, the fair value measurement is based on its highest and
best use. Valuation techniques that are appropriate in the circumstances and for which sufficient data are available to
measure fair value, are used, maximising the use of relevant observable inputs and minimising the use of unobservable
inputs.
Assets and liabilities measured at fair value are classified, into three levels, using a fair value hierarchy that reflects the
significance of the inputs used in making the measurements. Classifications are reviewed at each reporting date and
transfers between levels are determined based on a reassessment of the lowest level of input that is significant to the fair
value measurement.
For recurring and non-recurring fair value measurements, external valuers may be used when internal expertise is either not
available or when the valuation is deemed to be significant. External valuers are selected based on market knowledge and
reputation. Where there is a significant change in fair value of an asset or liability from one period to another, an analysis is
undertaken, which includes a verification of the major inputs applied in the latest valuation and a comparison, where
applicable, with external sources of data.
The Consolidated Entity does not have any assets or liabilities held at fair value on a recurring or non-recurring basis.
(xix) Operating segment
Identification of reportable operating segments
The Consolidated Entity is organised into one operating segment based on the research and development of pharmaceutical
drugs. The operating segment is based on the internal reports that are reviewed and used by the Board of Directors (who
are identified as the Chief Operating Decision Makers ('CODM')) in assessing performance and in determining the allocation
of resources.
The CODM reviews EBITDA (earnings before interest, tax, depreciation and amortisation). The accounting policies adopted
for internal reporting to the CODM are consistent with those adopted in the financial statements.
The information reported to the CODM is on a monthly basis.
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1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)
New standards and interpretations not yet effective or early adopted
Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet mandatory,
have not been early adopted by the Consolidated Entity for the annual reporting period ended 30 June 2020. The
Consolidated Entity's assessment of the impact of these new or amended Accounting Standards and Interpretations, most
relevant to the Consolidated Entity, are set out below:
Conceptual Framework for Financial Reporting (Conceptual Framework)
The revised Conceptual Framework is applicable to annual reporting periods beginning on or after 1 January 2020 and early
adoption is permitted. The Conceptual Framework contains new definition and recognition criteria as well as new guidance
on measurement that affects several Accounting Standards. Where the Consolidated Entity has relied on the existing
framework in determining its accounting policies for transactions, events or conditions that are not otherwise dealt with under
the Australian Accounting Standards, the Consolidated Entity may need to review such policies under the revised framework.
At this time, the application of the Conceptual Framework is not expected to have a material impact on the Consolidated
Entity's financial statements.
31
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2. OTHER INCOME
R&D tax incentive
Interest received
ATO Cashflow boost payment
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 be issued to eligible employees under the ESP
Workcover
Payroll tax
2020
$
2019
$
3,647,847
997,647
50,000
2,983,918
261,710
-
4,695,494
3,245,628
398,422
27,093
58,750
172,302
220,000
490,936
1,504
(142,358)
254,000
18,900
46,826
91,228
220,000
1,728,963
2,894
213,172
1,226,649
2,575,984
4. CASH AND CASH EQUIVALENTS
Cash at bank and in hand
103,922,241
78,836,173
5. TRADE AND OTHER RECEIVABLES
GST receivable
Interest receivable
R&D tax incentive receivable
6. PREPAID EXPENSES
Prepaid insurance
Other prepaid expenses
7. INTANGIBLE ASSETS
Patents
Less: Accumulated amortisation
32
103,922,241
78,836,173
34,070
51,513
10,497
174,029
3,424,194
3,347,701
3,509,777
3,532,227
25,554
166,826
16,247
120,866
192,380
137,113
9,925,516
(6,977,928)
9,922,163
(6,940,804)
2,947,588
2,981,359
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 9
7. INTANGIBLE ASSETS (cont’d)
Reconciliation
Carrying amount at the beginning of the period
Additions during the period
Disposals
Amortisation expense
Impairment loss
2020
$
2019
$
2,981,359
3,353
-
(37,124)
-
9,910,242
4,198
-
(4,097)
(6,928,984)
Balance at the end of the financial year
2,947,588
2,981,359
The Consolidated Entity performed its annual impairment test in June 2020. There was a particular focus on the respiratory
asset due to the unexpected outcome of Phase 2a Allergic Rhinitis clinical trial which failed to meet its primary clinical
endpoints in June 2017. The Consolidated Entity remains committed to its respiratory asset. The Allergic Rhinitis Phase 2
study could be repeated or the Allergic Rhinitis program may be terminated in preference to its Asthma or Chronic Obstructive
Pulmonary Disease (COPD) programs depending on the findings of the potential reasons for the lack of translation of the
preclinical Allergic Rhinitis results into the Phase 2 human clinical trial.
Respiratory patent
The 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.
The recoverable amount of the respiratory patent as at 30 June 2020 has been determined based on a value-in-use
calculation using a 5-year cash flow projection approved by senior management. The after-tax discount rate applied to cash
flow projections is in the range of 20-25%. It was concluded that the value-in-use exceeds the carrying amount of the cash
generating unit. As a result of this analysis, management has not recognized an impairment charge.
Based on the above, the recoverable amount of intangible asset exceeded the carrying amount by $49.1m.
Key assumptions used in value-in-use calculations and sensitivity to changes in assumptions
The calculation of value-in-use for both respiratory and anti-inflammatory/autoimmune patents is most sensitive to the
following assumptions:
• Projected revenue
• Discount rate
Projected revenue has been forecast based on the proportion of the total addressable market in which Paradigm can
reasonably capture. Projected revenue would need to decline by an amount greater than 26.3% per annum in order for the
cash generating unit to be deemed impaired.
An after-tax discount rate of between 20-25% has been applied to the projected free cash flow of the cash generating unit.
The discount rate reflects the Consolidated Entity’s estimated cost of capital based on the risk-free rate, market risk premium,
volatility of the share price relative to market movements, and company specific risk factors.
8. PLANT AND EQUIPMENT
Computer equipment
Less: Accumulated depreciation
73,740
(43,341)
40,282
(22,618)
30,399
17,663
33
PARADIGM BIOPHARMACEUTICALS LIMITED
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8. PLANT AND EQUIPMENT (cont’d)
Reconciliation
Carrying amount at the beginning of the period
Additions during the period
Disposals
Depreciation expense
2020
$
2019
$
17,663
33,458
-
(20,722)
385
19,737
-
(2,459)
Balance at the end of the financial year
30,399
17,663
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
Office 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
Leasehold improvements
Less: Accumulated amortisation
Reconciliation
Carrying amount at the beginning of the period
Additions during the period
Disposals
Amortisation expense
Balance at the end of the financial year
34
9,419
(7,750)
9,419
(6,807)
1,669
2,613
2,613
-
-
(944)
1,669
78,038
(14,185)
63,853
3,753
73,648
-
(13,548)
63,853
20,431
(6,439)
13,992
-
20,431
-
(6,439)
13,992
109,913
4,136
-
-
(1,523)
2,613
4,390
(637)
3,753
4,021
-
-
(268)
3,753
-
-
-
-
-
-
-
-
24,029
PARADIGM BIOPHARMACEUTICALS LIMITED
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9. RIGHT-OF-USE ASSETS
Land and buildings - right-of-use
Less: Accumulated depreciation
2020
$
2019
$
967,258
(134,341)
832,917
-
-
-
The Consolidated Entity leases land and buildings for its office under agreement of three years with option to extend. On
renewal, the extension will be on the same conditions as this lease subject to the terms applicable to extension.
The total additions in relation to this office during the period is $967,258.
The Consolidated Entity has a sub-tenancy agreement for one year. This is short-term and has been expensed as incurred
and not capitalised as the right-of-use asset.
10. TRADE AND OTHER PAYABLES
Trade and other creditors
Shareholder loans
11. EMPLOYEE BENEFITS
Annual leave and on-costs
2,747,735
36,589
2,279,403
36,589
2,784,324
2,315,992
455,510
388,591
455,510
388,591
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-rate payments in certain circumstances. The
entire amount is presented as current since the Consolidated Entity does not have an unconditional right to defer settlement.
12. CURRENT LIABILITIES - LEASE LIABILITIES
Lease liabilities
13. NON-CURRENT LIABILITY - EMPLOYEE BENEFITS
Long-service leave provision
14. NON-CURRENT LIABILITY - LEASE LIABILITIES
Lease liabilities
Make good provision
Make good provision
124,731
124,731
68,390
68,390
660,730
88,228
748,958
-
-
-
-
-
-
-
The provision represents the present value of the estimated costs to make good the premises leased by the Consolidated
Entity at the end of the respective lease terms.
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14. NON-CURRENT LIABILITY - LEASE LIABILITIES (cont’d)
Movements in provisions
Movements in each class of provision during the current financial year, other than employee benefits, are set out below:
Consolidated - 2020
Carrying amount at the start of the year
Additional provisions recognised
Amounts transferred to current
Unwinding of discount
Carrying amount at the end of the year
15. ISSUED CAPITAL
Lease
make good
$
-
87,463
-
765
88,228
2020
Number of
Shares
2019
Number of
Shares
2020
$
2019
$
Ordinary shares Fully paid
224,747,176
192,207,761
145,865,076
109,468,292
The following movements in issued capital occurred during the year:
Ordinary Shares
Number of
Shares
Number of
Shares
$
$
Balance as at the beginning of the period
192,207,761
123,963,792
109,468,292
26,940,674
Ordinary shares issued
26,923,077
65,476,945
35,000,000
86,962,483
Ordinary shares issue costs (Net of GST)
-
-
(2,338,451)
(5,519,719)
Shares issued under ESP
1,320,088
300,000
-
Limited recourse loan repaid under ESP
-
-
1,895,907
-
-
Exercise of unlisted options
4,296,250
2,467,024
1,839,328
1,084,854
Balance as at the end of the period
224,747,176
192,207,761
145,865,076 109,468,292
Ordinary shares
Ordinary shares entitle the holder to participate in dividends and the proceeds on the winding up of the Consolidated Entity
in proportion to the number of and amounts paid on the shares held. The fully paid ordinary shares have no par value and
the Consolidated Entity 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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15. 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 number 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 Consolidated Entity'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 2019 Annual Report.
2020
$
2019
$
16. SHARE BASED PAYMENT RESERVE
Balance as at the beginning of the period
4,072,844
2,030,669
Fair values of shares issued/to be issued to eligible employees under the ESP
490,936
1,728,963
Fair values of options issued to third party under the share-based payment
arrangement
Transfer from share reserve
786,568
313,212
(1,765,159)
-
3,585,189
4,072,844
Once approved by the Board, monies are loaned by the Consolidated Entity 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.
On 10 July 2020, a further invitation of ESP shares of 2,215,000 based on 2020 performance were approved and issued on
at a price of $3.24 per share. These shares were issued on vesting conditions. Each trance of shares will vest in 12 months,
24 months and 36 months.
Fair values at loan date are determined using a Binomial Hedley 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.
The weighted average share price during the financial year was $2.58. Throughout the period a number of share options
were issued in the period in relation to services rendered by third parties. These predominantly relate to services provided
around capital raising.
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16. SHARE OPTIONS RESERVE (cont’d)
Set out below are summaries of options granted under the Employee Share plan:
2020
Grant date
Expiry date
Exercise
price
Balance at
the start of
the year
Granted
Exercised
Balance at
the end of
the year
7/11/2019
7/11/2024
$2.93
5,805,000
1,320,088
(4,211,570)
2,913,518
5,805,000
1,320,088
(4,211,570)
2,913,518
2019
Grant date
Expiry date
Exercise
price
Balance at
the start of
the year
Granted
Exercised
Balance at
the end of
the year
26/11/2018
26/11/2023
$1.15
5,505,000
300,000
5,505,000
300,000
-
-
5,805,000
5,805,000
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:
Grant date
Expiry date
Share price
at
grant date
Exercise
price
Expected
volatility
Dividend
yield
Fair value at
grant date
7/11/2019
7/11/2024
$2.93
$2.93
82.00%
0.00%
$1.54
In addition, the Consolidated Entity has the following unlisted options as at 30 June 2020: -
(i)
(ii)
(iii)
(iv)
(v)
1,000,000 unlisted options exercisable at $0.45 each on or before 27 September 2020 in accordance with
existing corporate services mandate; the weighted average remaining contractual life of options outstanding at
the end of the financial year was 0.24 years;
35,000 unlisted options exercisable at $0.312 each on or before 15 November 2020 in accordance with existing
corporate services mandate; the weighted average remaining contractual life of options outstanding at the end
of the financial year was 0.38 years;
861,250 unlisted options exercisable at $0.65 each on or before 18 May 2021 in accordance with existing
corporate services mandate; the weighted average remaining contractual life of options outstanding at the end
of the financial year was 0.88 years:
275,000 unlisted options exercisable at $1.75 each on or before 28 February 2023 in accordance with existing
corporate services mandate the weighted average remaining contractual life of options outstanding at the end
of the financial year was 2.67 years; and
550,000 unlisted options exercisable at $1.75 each on or before 24 March 2023 in accordance with existing
corporate services mandate the weighted average remaining contractual life of options outstanding at the end
of the financial year was 2.73 years.
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16. SHARE OPTIONS RESERVE (cont’d)
Set out below are summaries of options granted to external companies for services rendered in the period:
2020
Grant date
Expiry date
Exercise
price
7/09/2019
7/09/2019
18/05/2018
7/05/2018
16/11/2017
27/09/2017
19/01/2017
24/03/2023
28/02/2023
18/05/2021
7/05/2021
15/11/2020
27/09/2020
19/01/2020
$1.75
$1.75
$0.65
$0.45
$0.31
$0.45
$0.40
Balance at
the start of
the year
-
-
1,000,000
1,000,000
192,500
2,000,000
2,000,000
Granted
Exercised
550,000
275,000
-
-
-
-
-
-
-
(138,750)
(1,000,000)
(157,500)
(1,000,000)
(2,000,000)
Balance at
the end of
the year
550,000
275,000
861,250
-
35,000
1,000,000
-
6,192,500
825,000
(4,296,250)
2,721,250
2019
Grant date
Expiry date
Exercise
price
18/05/2018
7/05/2018
16/11/2017
27/09/2017
19/01/2017
7/08/2015
7/08/2015
18/05/2021
7/05/2021
15/11/2020
27/09/2020
19/01/2020
7/08/2018
7/08/2018
$0.65
$0.45
$0.31
$0.45
$0.40
$0.375
$0.50
Balance at
the start of
the year
1,000,000
1,000,000
350,000
2,000,000
2,000,000
952,382
1,357,142
8,659,524
Granted
Exercised
-
-
-
-
-
-
-
-
-
(157,500)
-
-
(952,382)
(1,357,142)
Balance at
the end of
the year
1,000,000
1,000,000
192,500
2,000,000
2,000,000
-
-
-
(2,467,024)
6,192,500
For the options granted during the current financial year, the valuation model inputs used to determine the fair value at the
the grant date, are as follow:
Grant date
Expiry date
7/09/2019
7/09/2019
18/05/2018
16/11/2017
27/09/2017
24/03/2023
28/02/2023
18/05/2021
15/11/2020
27/09/2020
Share price
at
grant date
$1.95
$1.95
$0.53
$0.28
$0.32
Exercise
price
Expected
volatility
Dividend
yield
$1.75
$1.75
$0.65
$0.31
$0.45
82.00%
82.00%
90.00%
90.00%
90.00%
0.00%
0.00%
0.00%
0.00%
0.00%
Fair value
at
grant date
$0.95
$0.95
$0.24
$0.15
$0.13
During the reporting period, the Company issued a number of options in relation to work undertaken around the clinical trials.
These are subject to the achievement of specific milestones been met. Two tranches of 275,000 and 550,000 options were
issued on the first 10 patents been successfully treated in which the milestones were met in the current financial year. A
further 825,000 options will be issue on the 40th patient successfully completing the treatment.
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17. ACCUMULATED LOSSES
Balance as at the beginning of the period
Loss for the accounting period
Transfer from share reserve
2020
$
2019
$
(30,734,818)
(12,298,887)
1,765,159
(15,107,274)
(15,627,544)
-
(41,268,546)
(30,734,818)
18. COMMITMENTS
The Consolidated Entity had no capital commitments as at 30 June 2020 and 30 June 2019.
19. CONTINGENCIES
The Consolidated Entity had no contingent liabilities as at 30 June 2020 and 30 June 2019.
20. EARNINGS PER SHARE
Net loss for the year attributable to ordinary shareholders
(12,298,887)
(15,627,544)
Weighted average number of ordinary shares used in calculating basic
earnings per share
Adjustments for calculation of diluted earnings per share:
Options over ordinary shares
Weighted average number of ordinary shares used in calculating diluted
earnings per share
Basic earnings per share
Diluted earnings per share
21. FINANCIAL INSTRUMENTS DISCLOSURE
Number
Number
201,106,450
143,042,225
2,721,250
6,192,500
203,827,700
149,234,725
Cents
Cents
(0.0612)
(0.0612)
(0.1093)
(0.1093)
The Consolidated Entity’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 9 as detailed in the accounting
policies of these Financial Statements, are as follows:
Financial assets
Current
Cash and cash equivalents
Trade and other receivables
Term deposits
103,922,241
3,509,777
746,200
78,836,173
3,532,227
-
108,178,218
82,368,400
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21. FINANCIAL INSTRUMENTS DISCLOSURE (cont’d)
2020
$
2019
$
Financial liabilities
Current
Trade and other payables
Lease liabilities
Non-current
Lease liabilities
2,784,324
124,731
2,315,992
-
2,909,055
2,315,992
748,958
748,958
-
-
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 Consolidated Entity’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 Consolidated Entity 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 Consolidated Entity 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 Consolidated Entity had no variable rate interest bearing liability.
It is the Consolidated Entity'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 Consolidated Entity if a customer or counterparty to a financial instrument fails
to meet its contractual obligations and arises principally from the Consolidated Entity’s receivables from customers and
investment securities.
The Consolidated Entity 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.
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21. FINANCIAL INSTRUMENTS DISCLOSURE (cont’d)
Liquidity risk
Liquidity risk is the risk that the Consolidated Entity will not be able to meet its financial obligations as they fall due. The
Consolidated Entity’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 Consolidated Entity’s reputation.
The Consolidated Entity’s objective is to maintain a balance between continuity of funding and flexibility. The Consolidated
Entity’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.
Remaining contractual maturities
The following tables detail the consolidated entity's remaining contractual maturity for its financial instrument liabilities. The
tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which
the financial liabilities are required to be paid. The tables include both interest and principal cash flows disclosed as remaining
contractual maturities and therefore these totals may differ from their carrying amount in the statement of financial position.
Consolidated - 2020
Non-derivatives
Non-interest bearing
Trade payables
Other payables
Interest-bearing - fixed rate
Lease liability
Total non-derivatives
Weighted
average
interest rate
%
1 year or less
$
Between 1
and 2 years
$
Between 2
and 5 years
$
Over 5 years
$
Remaining
contractual
maturities
$
-
-
2,747,735
36,589
-
-
-
-
4.70%
124,731
2,909,055
124,731
124,731
624,227
624,227
-
-
-
-
2,747,735
36,589
873,689
3,658,013
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
Consolidated Entity is equal to their carrying value.
Foreign currency risk
The Consolidated Entity’s exposure to currency risk is minimal at this stage of the operations.
Commodity price risk
The Consolidated Entity’s exposure to price risk is minimal at this stage of the operations.
22. 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. The
Consolidated Entity also established Paradigm Biopharmaceuticals (Ireland) Limited in July 2019 and Paradigm
Biopharmaceuticals (USA) Inc. in March 2020.
In the Financial Statements of the Consolidated Entity, 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:
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22. RELATED PARTIES (cont’d)
Name
Paradigm Health Sciences Pty Ltd
Xosoma Pty Ltd
C4M Pharmaceuticals Pty Ltd
Paradigm Biopharmaceuticals (Ireland) Limited
Paradigm Biopharmaceuticals (USA) Inc.
Subsidiaries
Ownership interest
Principal
place of
business
Australia
Australia
Australia
Ireland
USA
2020
2019
%
100.00%
100.00%
100.00%
100.00%
100.00%
%
100.00%
100.00%
100.00%
-
-
An inter-company loan exists between Paradigm Biopharmaceuticals Limited (Parent) and Paradigm Health Sciences
(Subsidiary) of amounts owing to Paradigm Biopharmaceuticals Limited $334,061 (2019: $334,061).
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.
23. 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
Statement of financial position
Total current assets
Total Assets
Total current liabilities
Total Liabilities
Total Equity
2020
$
2019
$
(12,298,887)
(15,627,544)
108,807,266
82,839,565
112,573,536
85,720,805
3,396,366
2,667,994
4,145,324
2,667,994
108,428,212
83,052,811
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 2020 and 30 June 2019.
Capital commitments
The parent entity had no capital commitments as at 30 June 2020 and 30 June 2019.
Significant accounting policies
The accounting policies of the parent entity are consistent with those of the Consolidated Entity.
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24. RECONCILIATION OF CASH FLOWS PROVIDED BY OPERATING
ACTIVITIES
Loss for the year
(12,298,887)
(15,627,544)
2020
$
2019
$
Depreciation and amortisation
Impairment loss
Share-based payment
Change in operating assets and liabilities
(Increase)/decrease in receivables
(Increase)/decrease in prepayments
Increase/(decrease) in trade creditors and accruals
213,118
-
1,277,504
22,450
(55,267)
751,025
8,348
6,928,984
2,042,175
(797,448)
(45,140)
1,125,530
Net cash used in operating activities
(10,090,057)
(6,365,095)
25. NON- CASH INVESTING AND FINANCING ACTIVITIES
Additions to the right-of-use assets
Leasehold improvements - lease make good
Shares issued/to be issued under employee share plan
options issued to third party under the share-based payment arrangement
26. CHANGED IN LIABILITES ARISING FROM FINANCIAL ACTIVITIES
Consolidated
Balance at 30 June 2019
Net cash from/(used in) financing activities
Acquisition of leases
Other changes
967,258
88,228
490,936
786,568
-
-
1,728,963
313,212
2,332,990
2,042,175
Lease
liability
$
-
(93,569)
967,257
-
Total
$
-
(93,569)
967,257
-
Balance at 30 June 2020
873,688
873,688
27. EVENTS SUBSEQUENT TO REPORTING DATE
The impact of the Coronavirus (COVID-19) pandemic is ongoing, and it is not practicable to estimate the potential impact,
positive or negative, after the reporting date. The situation is rapidly developing and is dependent on measures imposed by
the Australian Government and other countries, such as maintaining social distancing requirements, quarantine, travel
restrictions and any economic stimulus that may be provided.
28. KEY MANAGEMENT PERSONNEL REMUNERATION DISCLOSURES
The aggregate remuneration made to directors and other members of key management personnel of the Consolidated Entity
is set out below:
Short-term employee benefits
Post-employment benefits
Share-based payments
797,500
75,763
-
745,000
70,775
492,513
873,263
1,308,288
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29. AUDITOR’S 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
2020
$
2019
$
Audit services - RSM Australia Partners
Audit or review of the financial statements
Other services - RSM Australia Partners
Preparation of the tax return and other tax matters
R&D Tax incentive claim
64,162
62,672
64,162
62,672
21,821
104,437
126,258
10,000
59,212
69,212
190,420
131,884
45
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 Directors opinion
(a)
(b)
(c)
(d)
the Financial Statements and notes thereto and the Remuneration Report contained in the Directors’ Report are in
accordance with the Corporations Act 2001 and other mandatory professional reporting requirements:
the attached financial statements and notes comply with International Financial Reporting Standards as issued by the
International Accounting Standards Board as described in note 1 to the financial statements;
the attached financial statements and notes give a true and fair view of the consolidated entity’s financial position as
at 30 June 2020 and of its performance for the financial year ended on that date;
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 2020.
Signed in accordance with a resolution of the Directors made pursuant to section 295(5)(a) of the Corporations Act 2001.
On behalf of the Directors
___________________________
Paul Rennie
Interim Chairman
Dated at Melbourne, Victoria this 27th day of August 2020.
46
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
Opinion
We have audited the financial report of Paradigm Biopharmaceuticals Limited (the Company), and its subsidiaries
(the Group), which comprises the consolidated statement of financial position as at 30 June 2020, the
consolidated statement of profit or loss and other comprehensive income, the consolidated statement of changes
in equity and the consolidated statement of cash flows for the year then ended, and notes to the financial
statements, including a summary of significant accounting policies, and the directors' declaration.
In our opinion the accompanying financial report of the Group is in accordance with the Corporations Act 2001,
including:
(i) giving a true and fair view of the Group's financial position as at 30 June 2020 and of its financial
performance for the year then ended; and
(ii) complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for Opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those
standards are further described in the Auditor's Responsibilities for the Audit of the Financial Report section of
our report. We are independent of the Group in accordance with the auditor independence requirements of the
Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board's
APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the financial
report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code.
We confirm that the independence declaration required by the Corporations Act 2001, which has been given to
the directors of the Company, would be in the same terms if given to the directors as at the time of this auditor's
report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of
the financial report of the current period. These matters were addressed in the context of our audit of the financial
report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
THE POWER OF BEING UNDERSTOOD
AUDIT | TAX | CONSULTING
47
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
Key Audit Matters (continued.)
Key Audit Matter
How our audit addressed this matter
Impairment of Intangible Assets
Refer to Note 7 in the financial statements
The Group has intangible assets of $2,947,588
relating to Patent costs for ongoing projects in the
development of numerous biopharmaceutical drugs.
These are subject to an annual impairment test, as
they are not yet available for use.
We identified this area as a key audit matter due to
the size of the intangible assets balance and because
the directors’ assessment of the ‘value in use’ of the
cash generating unit (“CGU”) involves judgements
about the future underlying cash flows of the business
and the discount rates applied to them.
For the year ended 30 June 2020 management have
the
performed an
intangible assets balance by:
impairment assessment over
Assessing for each project the success to date in
line with agreed milestones including any clinical
trial data; and other statistical test results;
Assessing additional funding to be spent on the
projects and the plan going forward including the
use of the Patent for other purposes; and
Calculating the value in use for the Respiratory
project using a discounted cash flow model. The
model used cash flows (revenues and expenses)
for the project for 5 years, with a terminal growth
rate applied to the 5th year. These cash flows
were then discounted to net present value using
the Group’s weighted average cost of capital
(WACC).
Our audit procedures in relation to management’s
impairment assessment included:
Reviewing announcements to date in relation to
the details of current developments and results of
testing for each project;
Consideration of the market capitalisation of the
company compared to the total net assets;
Reviewing historical milestones in line with current
progress including future projected spending on
each project to assess the viability and continuity
of each of these; and
Reviewing the cash flow model for the Respiratory
project, including:
– Challenging the reasonableness of key
assumptions, including the cash flow
and
discount
projections,
sensitivities used; and
rates,
– Checking the mathematical accuracy of
the cash flow model, and reconciling input
data to supporting evidence, such as
approved budgets and considering the
reasonableness of these budgets.
48
Key Audit Matters (continued.)
Key Audit Matter
How our audit addressed this matter
Share based payments
Refer to Note 16 in the financial statements
The Group has an employee share plan (“ESP”) as
part of the remuneration packages of directors and
employees.
Share options with performance-based vesting
conditions have also been issued to consultants for
services provided to the Group.
We identified share-based payments as a key risk due
the complexity in the valuation of the options issued,
and the estimates made by management in relation to
the achievement of vesting conditions.
Our audit procedures in relation to share based
payments included:
Reviewing the reasonableness of option valuation
inputs into the Binomial Options Pricing Model
including assessment of the share volatility rates
applied in comparison to entities in the similar
industry; and
Performing a recalculation of the Binomial Options
Pricing Model for a sample of options issued;
Testing a sample of options issued to signed ESP
contracts with
signed
and
agreements
consultants;
Reviewing the accounting for the share-based
payments in accordance with AASB 2 Share-
based Payments; and
Reviewing the reasonableness of management’s
estimates of the likelihood of the achievement of
vesting conditions for the options issued.
Other Information
The directors are responsible for the other information. The other information comprises the information included
in the Group's annual report for the year ended 30 June 2020, but does not include the financial report and the
auditor's report thereon.
Our opinion on the financial report does not cover the other information and accordingly we do not express any
form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information and, in doing
so, consider whether the other information is materially inconsistent with the financial report or our knowledge
obtained in the audit or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this other
information, we are required to report that fact. We have nothing to report in this regard.
49
Responsibilities of the Directors for the Financial Report
The directors of the Company are responsible for the preparation of the financial report that gives a true and fair
view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal
control as the directors determine is necessary to enable the preparation of the financial report that gives a true
and fair view and is free from material misstatement, whether due to fraud or error.
In preparing the financial report, the directors are responsible for assessing the ability of the Group's to continue
as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis
of accounting unless the directors either intend to liquidate the Group's or to cease operations, or have no realistic
alternative but to do so.
Auditor's Responsibilities for the Audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from
material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance
with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements
can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably
be expected to influence the economic decisions of users taken on the basis of this financial report.
A further description of our responsibilities for the audit of the financial report is located at the Auditing and
Assurance Standards Board website at: www.auasb.gov.au/auditors_responsibilities/ar2.pdf. This description
forms part of our auditor's report.
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in the directors' report for the year ended 30 June 2020.
In our opinion, the Remuneration Report of Paradigm Biopharmaceuticals Limited, for the year ended 30 June
2020, complies with section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the Remuneration Report
in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the
Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards.
RSM AUSTRALIA PARTNERS
B Y CHAN
Partner
Dated: 28 August 2020
Melbourne, Victoria
50
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 17 August 2020:
Top holders
The 20 largest holders of each class of equity security as at 17 August 2020 were:
Fully paid ordinary shares
Name
No. of Shares
%
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
KZEE PTY LTD
J P MORGAN NOMINEES AUSTRALIA PTY LIMITED
PAUL JOHN RENNIE
CS THIRD NOMINEES PTY LIMITED
CITICORP NOMINEES PTY LIMITED
NANCY EDITH WILSON-GHOSH
MJGD NOMINEES PTY LTD
BNP PARIBAS NOMINEES PTY LTD
V REDFORD PTY LTD
MR EVAN PHILIP CLUCAS + MS LEANNE JANE WESTON
MR BRETT LANGAN
JGM INVESTMENT GROUP PTY LTD
SANDHURST TRUSTEES LTD
HIMSTEDT & CO PTY LTD
BNP PARIBAS NOMS PTY LTD
IRWIN BIOTECH NOMINEES PTY LTD
VIEW 26 PTY LTD
MS LENNA YU LING TYE
AUSTRALIAN EXECUTOR TRUSTEES LIMITED
13,293,732
10,781,467
7,966,450
7,630,400
5,106,723
5,010,176
3,860,835
2,768,232
2,700,323
2,505,419
2,427,913
2,403,432
2,185,715
2,177,947
1,921,871
1,820,100
1,802,490
1,650,000
1,521,631
1,492,100
5.86%
4.75%
3.51%
3.36%
2.25%
2.21%
1.70%
1.22%
1.19%
1.10%
1.07%
1.06%
0.96%
0.96%
0.85%
0.80%
0.79%
0.73%
0.67%
0.66%
Totals: Top 20 holders of ORDINARY FULLY PAID SHARES
Total Remaining Holders Balance
81,026,956
145,935,220
35.70%
64.30%
Distribution schedules
A distribution of each class of equity security as at 17 August 2020:
Fully paid ordinary shares
Range
Total holders
Units
% of Issued
Capital
1 - 1,000
1,001 - 10,000
10,001 - 100,000
100,001 - 500,000
500,001 - 1,000,000
1,000,001 - 20,000,000
Total
5,546
7,106
1,998
183
19
29
2,922,949
27,261,929
55,402,696
37,260,089
13,576,296
90,538,217
1.29
12.01
24.41
16.42
5.98
39.89
14,881
226,962,176
100.00
51
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 Consolidated Entity, are set out below:
Substantial shareholder
Number of Shares
PAUL RENNIE AND RELATED COMPANIES
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
J P MORGAN NOMINEES AUSTRALIA PTY LIMITED
CS THIRD NOMINEES PTY LIMITED
CITICORP NOMINEES PTY LIMITED
Unmarketable parcels
Holdings less than a marketable parcel of ordinary shares (being 500 shares at 17 August 2020):
Holders
570
Voting Rights
19,509,222
13,293,732
7,966,450
5,106,723
5,010,176
Units
73,785
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.
52
PARADIGM BIOPHARMACEUTICALS LIMITED
C O R P O R A T E G O V E R N A N C E S T A T E M E N T
The Board and management of Paradigm Biopharmaceuticals Limited (Consolidated Entity) are committed to conducting
the business of the Consolidated Entity in an ethical manner and in accordance with the highest standards of corporate
governance. The Consolidated Entity 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 Consolidated Entity's
operations.
This Corporate Governance Statement is accurate and up to date as at 30 June 2020 and has been approved by the Board
on 27 August 2020.
The Corporate Governance Statement is available on the Consolidated Entity’s website at:
http://www.paradigmbiopharma.com/investors/corporate-governance
53
PARADIGM BIOPHARMACEUTICALS LIMITED
END OF REPORT
54