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Appendix 4E
Preliminary final Report
Name of Entity
ABN
Year Ended
Previous Corresponding Reporting Period
PharmAust Limited
35 094 006 023
30 June 2015
30 June 2014
Results for Announcement to the Market
$’000
Percentage
increase/(decrease)
over previous
corresponding
period
Revenue from ordinary activities
(Loss) from ordinary activities after tax attributable to
members
Net (loss) for the period attributable to members
Dividends (distributions)
Final Dividend
Interim Dividend
Record date for determining entitlements to the dividends (if any) Not Applicable
It is not proposed to pay Dividends
It is not proposed to pay Dividends
Amount per security
2,420
(1,925)
(1,925)
21%
(46%)
(46%)
Franked amount per security
Dividends
Date the dividend is payable
Record date to determine entitlement to the
dividend
Amount per security
Total dividend
Amount per security of foreign sourced dividend or
distribution
Details of any dividend reinvestment plans in
operation
The last date for receipt of an election notice for
participation in any dividend reinvestment plans
No dividends
No dividends
-c
-c
-c
No dividends
No dividends
Net Tangible Assets per Security
Current Period
Net tangible asset backing per ordinary security
0.20c
Previous
corresponding
period
0.18c
The 30 June 2015 financial report dated 28 August 2015 forms part of and should be read in
conjunction with the Preliminary Final Report (Appendix 4E).
This report is based on financial statements that have been audited. The audit report is included in
the 30 June 2015 Annual Financial Report.
ABN 35 094 006 023
Annual Report
2015
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2015 ANNUAL REPORT AND STATUTORY FINANCIAL STATEMENTS
PharmAust Limited and its Controlled Entities
CONTENTS
Corporate Directory
Directors' Report
Corporate Governance
Auditor’s Independence Declaration
Independent Auditor’s Report
Directors’ Declaration
Statement of Comprehensive Income
Statement of Financial Position
Statement of Changes in Equity
Statement of Cash Flows
Notes to the Financial Statements
Shareholder Information
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2015 ANNUAL REPORT AND STATUTORY FINANCIAL STATEMENTS
PharmAust Limited and its Controlled Entities
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CORPORATE DIRECTORY
PRINCIPAL PLACE OF BUSINESS
PharmAust Limited
Suite 7,
29 The Avenue
Nedlands, Western Australia 6009
Tel +61 (8) 9386 4787 Fax +61 (8) 9389 1464
www.pharmaust.com
ASX CODE: PAA, PAAO
Epichem Pty Ltd
Suite 5, 3 Brodie-Hall Drive
Bentley WA 6102
REGISTERED OFFICE
Suite 7, 29 The Avenue
Nedlands, Western Australia 6009
Tel +61 (8) 9386 4787 Fax +61 (8) 9389 1464
SYDNEY OFFICE
Level 7/139 Macquarie Street
Sydney, NSW 2000
Tel +61 (2) 9251 1142
DIRECTORS
Dr Roger Aston
Mr Robert Bishop
Professor David Morris
Mr Sam Wright
Dr Wayne Best (Appointed on 24th Oct 2014)
COMPANY SECRETARY
Mr Sam Wright
SHARE REGISTRY
Computershare Investor Services Pty Limited
Level 2, 45 St George’s Terrace
Perth, Western Australia 6000
AUDITORS
RSM Bird Cameron Partners
8 St Georges Terrace
Perth, Western Australia 6000
SOLICITORS
Fairweather Corporate Lawyers
595 Stirling Highway
Cottesloe, Western Australia 6011
STOCK EXCHANGE
Australian Securities Exchange
Exchange Plaza
2 The Esplanade
Perth, Western Australia 6000
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2015 ANNUAL REPORT AND STATUTORY FINANCIAL STATEMENTS
PharmAust Limited and its Controlled Entities
DIRECTORS’ REPORT
Your Directors present their report on the Company and the entities it controlled for the financial year ended 30 June 2015.
Directors
The following persons held office as directors of PharmAust Limited during the financial year and up to the date of this report:
Dr Roger Aston
Robert Bishop
Professor David Morris
Sam Wright
Dr Wayne Best
Executive Chairman
Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director (Appointed on 24 October 2014)
Directors have been in office since the start of the financial period to the date of this report unless otherwise stated.
Principal Activities
Operating Results
Financial Position
The principal continuing activities constituted by PharmAust Limited and the entities it controlled during the year were to develop its
own drug discovery intellectual property, namely three platforms for the treatment of different types of cancers in humans and
animals, as well as providing highly specialised medicinal and synthetic chemistry services on a contract basis to clients.
The results of the consolidated entity for the year ended 30 June 2015 was a loss, after income tax expense, of $1,925,091 (2014: loss of
$1,317,853).
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The net assets of the consolidated entity were $8,839,066 as at 30 June 2015 (2014: $7,764,157).
Review of Operations
PITNEY PHARMACEUTICALS PTY LIMITED – 100% OWNED SUBSIDIARY
PPL-1 CLINICAL TRIAL IN HUMANS
During the year, the Company made significant progress with the development of its key anti-cancer product, PPL-1, and following
the approval to begin a “First in Man” study by the Royal Adelaide Hospital Research Ethics Committee, the Company recruited,
screened and commenced treatment of patients with its anti-cancer drug PPL-1.
The trial was led by Professor Michael Brown (the principal investigator), and managed by Contract Research Organisations for
clinical services (IDT CMAX) and analytical services (CPR Pharma Services). The trial was structured as a rising dose study with the
first three patients being treated at the lowest dose of drug. Subsequent patients received a higher dose of PPL-1 to determine
both safety and drug activity. Each patient received PPL-1 daily, for up to 28 days and was given the option to continue on the
drug past this initial treatment period. Typically, the patients in the trial will have failed all “Standard of Care” for their cancers and
not be taking other medications for treating their cancers.
The trial was conducted to GCP (Good Clinical Practice) enabling the results to be used in submissions to regulators (Therapeutic
Goods Administration, Food and Drug Administration, European Medicines Agency) towards registration. The clinical trial managers
and service providers, IDT-CMAX and CPR Pharma Services, are audited by the Food and Drug Administration.
PharmAust’s Executive Chairman, Dr Roger Aston said, “As a First in Man study, the drug will be potentially administered to patients
suffering from diverse cancers. Recruitment will include selection of patients suffering from lung, pancreas, oesophageal, gastric,
colorectal, ovarian, breast, prostate, liver, sarcoma, lymphoma, and melanoma. PharmAust has reached an exciting stage in its
evolution and we look forward to reporting outcomes on the safety and activity of PPL-1.”
In March 2015, PAA reported that the third and final patient in the lowest dose cohort for the trial at the Royal Adelaide Hospital
had been assessed for reduction in the blood marker, p70S6K, following treatment with PPL-1. The patient, suffering from lung
cancer with metastases to the liver, brain and bone received PPL-1 for 28 days and demonstrated approximately a 50% reduction
of p70S6K levels at both days 3 and 7 of treatment.
Aberrant expression of p70S6K is believed to contribute to aggressive features of cancer such as growth, invasion and metastasis.
p70S6K levels in peripheral blood immune cells are expected to correlate with similar changes in the patient's cancer. Studies in
peer review journals have shown that factors that increase Mammalian Target of Rapamycin (mTOR)/ p70S6K signalling, lead to
increased metastasis in human breast cancer cells. Similarly, activation of p70S6K has been shown to increase viability of colorectal
cancer cells. Published evidence also suggests that some globally used anticancer drugs (Paclitaxel) may operate through
inactivation of p70S6K.
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2015 ANNUAL REPORT AND STATUTORY FINANCIAL STATEMENTS
PharmAust Limited and its Controlled Entities
DIRECTORS' REPORT (Cont.)
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Professor David Morris of the St George Hospital, Sydney said, “We have consistently observed that PPL-1 inhibits the p70S6K blood
marker in patients with different cancers (6 out of 6 patients). The degree of inhibition has was as much as 65% as compared to the
levels of p70S6K in patient’s blood before treatment with the drug (Day 1, pre-treatment). Although only three patients completed
the 28-day treatment regimen, we have managed to determine the levels of p70S6K in a total of 6 patients who have received
the drug for 3 days or more. Thus, despite the delays in completing the treatment of the first cohort due to patient withdrawals
(unrelated to drug), we have managed to obtain p70S6K data from a larger group of patients giving higher statistical significance
to the result (p<0.0005 at day 3).”
Trial results to date show that there is a significant drop in a key cancer marker (p70S6K) in immune white blood cells, even at low
doses of the drug. Inhibition of this marker is extensively correlated in peer review publications with a reduction in malignancy and
the aggressive nature of cancer cells. The trials also confirm that PPL-1 has no adverse side effects, even at high doses.
Professor Michael Brown, Principal Investigator of the study at the Royal Adelaide Hospital said, “The use of surrogate tumour
markers in the diagnosis of cancer and assessment of progression is now ubiquitous in clinical oncology. Although many cancers
have a specific “marker association”, p70S6K appears to be a common indicator of malignancy. Typically, information on drug
efficacy is hard to observe in phase I safety studies, particularly at the lowest doses being tested. The results so far indicate that
PPL-1 is well tolerated at the lowest dose and it appears to be physiologically active in that it reduces a key indicator associated
with malignancy."
The next stage is for clinical trials with PPL-1 and chemotherapy. The Company has shown that PPL-1 can significantly enhance
chemotherapy in model systems without associated enhancement of toxicity commonly seen with chemotherapy drugs. Today, if
one includes palliative therapies, the chemotherapy market has topped US$100 billion1 (1Reuters). If successful, this will be a defining
trial for PharmAust as their drug will need to be initially used on the backdrop of the chemotherapy “Standard of Care”.
The cancer chemotherapy market (estimated at US $42 billion/annum)* is currently the fastest growing sector within the pharma
industry, mainly driven by the identification of new potential therapeutic targets. This growth is further fuelled by the magnitude of
the disease worldwide, currently estimated at more than 25 million people suffering from cancer globally, and an estimated 5
million people dying each year from the disease.
*Reference: Research and Markets.com accessed 14th February 2014:
http://www.researchandmarkets.com/reports/335548/chemotherapy_market_insights_20062016_a
PPL-1 CLINICAL TRIAL IN CANINES
PharmAust in conjunction with Vet Oncology Consultants Pty Ltd at the Animal Referral Hospital (ARH) in Homebush, NSW,
conducted a clinical trial to test the anticancer drug PPL-1 in a small number of pet dogs. The trial tested the safety and efficacy
(Phase I/II) of PPL-1 for treating naturally occurring: superficial soft tissue sarcomas, chemo resistant lymphomas and metastatic
melanomas. All pet dogs admitted to the trial were treated with the drug by their owners at their homes. To determine the safest
and most effective dose, the trial design incorporated incremental increases in drug quantity to different groups of dogs. Groups
of dogs were administered higher doses only after safety and efficacy of the lower dose has been established. All dog owners,
researchers, administrators and sponsors knew what drug and how much drug is being administered to the dogs (it is an open
ended trial).
In June 2015, PAA reported that PPL-1 significantly suppressed a key cancer marker in two dogs evaluated, and has been safe and
well tolerated by all the dogs treated with the drug so far (11 dogs in total). The Company and Veterinary Oncology Consultants
decided to move to the next stage of clinical evaluations which make use of the “synergy” discovery (announced to the market
17th February 2014), which showed that PPL-1 has the potential to significantly enhance the anti-cancer activity of conventional
chemotherapeutics without simultaneously enhancing the associated side-effect profile. In these evaluations dogs will be treated
with a combination of “standard of care” chemotherapy and PPL-1.
Following the trial, PharmAust will evaluate the commercial opportunities with the global animal health company, with which it has
a collaborative research and option agreement.
Cancer is common in pet animals and the incidence increases with age. Cancer accounts for almost half of the deaths of pets
over 10 years of age. Dogs get cancer at roughly the same rate as humans, while cats get fewer cancers. Each type of cancer
requires individual care and may include a combination of treatment therapies such as surgery, chemotherapy, radiation, or
immunotherapy. There are over 130 million dogs and cats in the USA with increasing use of conventional anticancer therapies
being progressively adopted.
The US companion pet market sales (est. 2011) are in the region of US$14 billion whilst cancer therapies are estimated at $550 million
with a price point of around $1500 per treatment.
RESEARCH COLLABORATION AND JOINT PATENT WITH JAPANESE COMPANY
On 18th November 2014, the Company reported that further to signing a Materials Transfer Agreement (MTA) with a yet to be
named Japanese corporation part of a listed Japanese group in July 2013, it has now established a joint intellectual property (IP)
position with this Japanese partner. The joint IP allows PharmAust access to some 80 analogues of PPL-1, which have been
synthesised by the Japanese research partner and tested for anticancer activity by PharmAust. The Joint Patent Application, which
will be published in March 2015, further permits PharmAust to commercialise the analogues subject to other prevailing IP at the
time of commercialisation. This collaboration broadens and strengthens PharmAust’s IP position.
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2015 ANNUAL REPORT AND STATUTORY FINANCIAL STATEMENTS
PharmAust Limited and its Controlled Entities
DIRECTORS' REPORT (Cont.)
SUBSEQUENT EVENTS
On 23rd July, the Company reported the successful closure of its Phase I (Phase IIa) “first in man” trial at the Royal Adelaide Hospital
and confirmation that the last patient, who was treated at the higher dose of PPL-1 (25mg/kg), showed meaningful suppression of
key cancer marker p70S6K. Importantly, during the trial, both principal end points were successfully met, namely:
1.
2.
PPL-1 demonstrated a very good safety profile as compared with many other established anticancer drugs, and
PPL-1 showed activity against cancer through the suppression of a key cancer marker.
In the trial, seven patients were treated with PPL-1 for various time periods and measurements were successfully taken for
anticancer activity through marker suppression (p70S6K). Three patients completed the full 28-day treatment period. One patient
was not included in the cancer marker results as they only received a single dose of the drug. One patient received the higher
dose of PPL-1 (25mg/kg).
PharmAust’s contract research organisations (CPR and CMAX), which have managed the recruitment and implementation of the
trial and have undertaken both pharmacokinetic and pharmacodynamic measurements (cancer markers), will now provide a
report on the trial during September 2015, which will include further data on other cancer-specific markers (in addition to p70S6K)
and levels of PPL-1 and its metabolites in patients’ circulation.
PharmAust’s Executive Chairman Dr Roger Aston said “We have now completed the “first stage” of studies with PPL-1 in humans
and canines and we have shown that in both cases PPL-1 is well tolerated and importantly is active against cancer. The suppression
of tumour marker, p70S6K, in man was highly significant when the data from 7 patients is combined and analysed (at day 3 of
treatment p<0.0004 and at day 7 of treatment p<0.002). We have furthermore initiated the processes to move to the important
next stage, which will include the treatment of patients with a combination of “Standard of Care” (chemotherapy drugs) in the
presence of PPL-1. For the next stage of human work PharmAust will reformulate the drug into capsules, as the main challenge
faced in both canine and human trials with liquid PPL-1 was the poor palatability of the formulation and nausea from the
unpleasant taste”.
The key activities moving forward following completion of first human and canine trials, are planned to be:
Human:
•
•
•
•
•
Canine:
•
•
•
Completion of further supportive preclinical studies to enable combination therapy with “Standard of Care” in a
Phase II study;
Preparation and submission of the clinical trial report to PharmAust by service providers CMAX Ltd and CPR Ltd;
Preparation of a new clinical trial application for the ethics committee of the Royal Adelaide Hospital and other
centres that may wish to participate in the Phase II trial (currently under discussion);
Initiate discussions for licensing of the human cancer applications of PPL-1; and
Agreement of commercialisation strategy relating to joint patents with a major Japanese group.
Two canines have now received PPL-1 with “Standard of Care” chemotherapy with no observed adverse events;
Canine recruitment will continue and the Company will continue reporting on the outcomes in canine patients; and
The Company will determine the next stages with Option partner (top 5 pharmaceutical company) for the veterinary
applications of PPL-1 and related molecules.
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Dr Aston said “Aberrant expression of p70S6K is believed to contribute to aggressive features of cancer such as growth, invasion
and metastasis. p70S6K levels in peripheral blood immune cells are expected to correlate with similar changes in the patient's
cancer. Studies in peer review journals have shown that factors that increase Mammalian Target of Rapamycin (mTOR)/ p70S6K
signalling lead to increased metastasis in human breast cancer cells. Similarly, activation of p70S6K has been shown to increase
viability of colorectal cancer cells. Published evidence also suggests that some globally used anticancer drugs (Paclitaxel) may
operate through inactivation of p70S6K.”
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On 24th August 2015, Professor David Morris advised the Board that he intends to retire a as a director of the Company, effective
from the close of the Annual General Meeting. Professor Morris plans to concentrate on his work at St George Hospital and research
work with his foundation. PharmAust Limited Executive Chairman, Dr Roger Aston, commented: "David has been a director of
PharmAust since 12 August 2013 and has been a valuable contributor to the Company and the research and development of its
three oncology technology platforms. The Board wishes him well in his future endeavours. With the recent capital raising and
successful closure of its Phase I (Phase IIa) “first in man” trial at the Royal Adelaide Hospital, the path forward for PharmAust is very
promising. The directors thank Professor Morris for his contribution to the Company.”
Other than what is mentioned above, no matters or circumstances have arisen since the end of the financial year which
significantly affected or may significantly affect the operations of the Company, the results of those operations, or the state of
affairs of the Company in future financial years.
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2015 ANNUAL REPORT AND STATUTORY FINANCIAL STATEMENTS
PharmAust Limited and its Controlled Entities
DIRECTORS' REPORT (Cont.)
ALBENDAZOLE
Albendazole is an approved anti-parasitic drug that is being investigated for its used in treating ascites-related malignancy. The
market is estimated at approximately $500 million per annum as defined by the only product on the market (Removab).
PharmAust is focused on developing an intraperitoneal formulation of albendazole to enable localization of the drug in the
abdomen with minimal systemic toxicity and effective reduction of ascites accumulation in the abdomen. In order to successfully
commercialise the product the company will need to:
1.
2.
Phase II study undertaken with a new formulation of albendazole designed to retain the drug in the abdomen. This activity
may be undertaken with a partner specializing in drug formulation and development. The study will be in a rising dose
format in order to identify the optimal therapeutic dose of the new albendazole formulation
Phase III registration trial as a prelude to launching with a partner (this trial may be unnecessary depending on the degree
of clarity and efficacy seen in the Phase II and on whether regulators allow PharmAust to expand the Phase II trial into a
registration trial.
MUCIN
Mucin, a gelatinous secretion of tumours, is associated with poor prognosis and poor responses to chemotherapy. Removal of
tumour-associated mucin has been shown by PharmAust to result in effective killing of cancer cells and increased sensitivity to
chemotherapy.
To achieve dissolution of tumour associated mucin, PharmAust has developed a combination of two agents already available
commercially for other clinical uses outside oncology. As such, PharmAust is accessing toxicology, safety and manufacturing know-
how already developed by third parties.
Currently, mucin is removed manually using surgery and the process can take many hours as the mucin it is often disseminated in
the abdomen. Furthermore, many clinicians are not prepared to undertake such laborious surgical processes. Thus, although
targeting a “niche” market there is little or no competition.
PharmAust is currently optimizing the doses of the combination therapy and will be in a position to initiate clinical studies in early
2016 (Q1/Q2). The clinical programme to registration and launch is expected to take approximately 2.5 years.
The market for such a combination therapy is estimated at around $300 million per annum.
EPICHEM PTY LTD (“Epichem”) – 100% OWNED SUBSIDIARY
Epichem has been delivering synthetic and medicinal chemistry services to the drug discovery and pharmaceutical industries
worldwide for over 10 years. Epichem offers a range of rare and hard to find pharmaceutical impurities, degradants and
metabolites of active ingredients and excipients, particularly for OTC and generic drugs.
Epichem has been at the forefront of synthesizing new and difficult to obtain standards and many of these are exclusive to Epichem
and not available elsewhere. This range is continually expanding in response to customer requests and developments in the
industry. Epichem is globally competitive with clients in 33 countries and is well placed to take advantage of the lower Australian
dollar.
Epichem also excels in custom synthesis and contract drug discovery, boasting a highly skilled team of scientists, most with a PhD
and industry experience. This valuable investment in people allows Epichem to lead drug discovery programs, perform custom
synthesis, conduct optimisation and method development for scale-up and engage in high-level problem solving.
Epichem continued to promote its products and services both within Australia and overseas with staff attending a number of
conferences and tradeshows including, AusBiotech (Gold Coast, 29-31 Oct), ASTMH (New Orleans, 3-7 Nov) and RACI National
Congress (Adelaide 7-11 Dec). Most notably, Epichem was an exhibitor at CPhI WorldWide (Paris, 6-9 Oct), the world's premier
trade show for the pharmaceutical industry attended by 36,000 delegates. Feedback from CPhI was excellent with a number of
new customers and prospects resulting.
Epichem was awarded a 12 month extension to its current contract with Drugs for Neglected Diseases initiative (DNDi) in December
2014. The contract, which is worth $1.16 million to the Company, sees Epichem continue to provide synthetic & medicinal chemistry
support to DNDi's drug discovery projects until 31 December 2015.
DNDi is a not-for-profit product development partnership working to research and develop new treatments for neglected diseases,
in particular human African trypanosomiasis, leishmaniasis, Chagas disease, malaria, paediatric HIV, and specific helminth-related
infections.
Epichem also has a long history of helping pharmaceutical companies identify trace impurities and has produced a range of
pharmaceutical reference standards to aid the industry in detecting and measuring these impurities, ultimately assisting in the
quality assurance and control of its clients’ medicines. Revenues from the sales of Reference Standards were a record $200k in Q4,
which included Epichem's first sale to Belarus.
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2015 ANNUAL REPORT AND STATUTORY FINANCIAL STATEMENTS
PharmAust Limited and its Controlled Entities
DIRECTORS' REPORT (Cont.)
Epichem also began a significant expansion in June. After 12 years at Murdoch University, Epichem is moving to much larger
facilities at WA's Technology Park. The new laboratory, which is being purpose built for Epichem's needs, is expected to be complete
by September. The extra capacity of the new facilities will allow Epichem to rapidly grow its business to our 5-year target of $10
million per annum.
SUBSEQUENT EVENTS
On 7 July 2015 the Group entered into a construction contract with a value of $1,591,634 to construct a laboratory.
On 14th July 2015, Epichem received $411k from DNDi (currently Epichem’s largest client) as an advanced payment for work yet
to be completed on its flagship project on Chagas disease. This payment is not included in these financial statements.
Other than what is mentioned above, no matters or circumstances have arisen since the end of the financial year which
significantly affected or may significantly affect the operations of the Company, the results of those operations, or the state of
affairs of the Company in future financial years.
CORPORATE
On 16th March 2015, The Company advised that it successfully raised $3.14 million through the issue of 400 million new ordinary
shares at $0.00785 per share to sophisticated and professional investors through lead manager, Blue Ocean Equities.
PharmAust’s Executive Chairman Dr Roger Aston said “We are delighted by the overwhelming interest received for the Placement
and appreciate the support from both new and existing shareholders. The placement was targeted to investors and institutions
that recognise the potential of PharmAust’s oncology programmes and, as such, has helped us to build a stronger register.
Furthermore, the strong signal of support from new shareholders reflects the ongoing endorsement of PharmAust’s assets and
business strategy. We look forward to delivering value by expediting our clinical development programmes and by enhancing
revenues from Epichem to our 5-year target of $10 million per annum.”
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PharmAust has sufficient funds to complete its forward program. Consideration will now be given to joining with a major
international pharmaceutical company to shorten the time to market and begin trials in the USA and Europe.
PharmAust shareholders approved the appointment of Dr Wayne Best as a director at the Annual General Meeting. Wayne is the
Managing Director of PharmAust's wholly owned subsidiary, Epichem Pty Ltd.
Board Changes
Annual General Meeting
PharmAust held its Annual General Meeting of Shareholders on 24th October 2014 at 30 The Avenue, Nedlands and all resolutions
that were put were unanimously passed on a show of hands.
PharmAust Receives ATO Research & Development Rebate
On 24th June 2015, the Company advised that the Australian Taxation Office (“ATO”) has recognised the innovation of the
Research and Development being developed by wholly owned subsidiaries, Epichem and Pitney.
The Company had previously lodged an application with Innovation Australia following advice from PharmAust’s consultants that
the R&D may qualify for a Research and Development Tax Rebate on its 2014 tax return.
Following approval from the ATO of the Company’s application for a Research and Development rebate, an amount of
$329,351.25 was deemed refundable on PharmAust’s 2014 Tax Return and a cheque for that amount plus interest has subsequently
been received by PharmAust and banked.
Dividends
Significant Changes in State of Affairs
Since the end of the financial year, no dividend has been paid, declared or recommended.
A review of events during the reporting period can be found in the review of operations.
Future Developments
In the opinion of the Directors disclosure of information regarding likely developments in the Company’s operations and the
expected results of those operations in subsequent financial years could prejudice the Company’s interests. Accordingly, this
information has not been included in this report.
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2015 ANNUAL REPORT AND STATUTORY FINANCIAL STATEMENTS
PharmAust Limited and its Controlled Entities
DIRECTORS' REPORT (Cont.)
Information on Directors
Dr Roger Aston – Executive Chairman
Qualifications
BSc (Hons), Ph.D
Experience
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Dr Aston currently serves as Chief Executive Officer of Pitney. Dr Aston served as Chief Executive
Officer of Mayne Pharma Group until 15 February 2012. During his career, he has been closely
involved in start-up companies and major pharmaceutical companies. Aspects of his
experience include FDA and EU product registration, clinical trials, global licensing agreements,
fundraising through private placements, and a network of contacts within the pharmaceutical,
banking and stock broking sectors. Dr Aston is both a scientist and seasoned biotechnology
entrepreneur, with a successful track record in both fields.
Dr Aston holds a B.Sc. (Hons) and Ph.D. degrees from the University of Manchester from 1975 to
1981.
Interests in Shares and
Options
Dr Aston holds 105,282,951 Fully Paid Ordinary Shares and 528,634 Listed Options.
Other Current Directorships
(ASX Listed Companies)
Immuron Limited (ASX:IMC), Oncosil Limited (ASX: OSL), Regeneus Limited (ASX:RGS) and ResApp
Health Limited (ASX:RAP)
Previous Directorships (last 3
years) ASX Listed Companies
IDT Limited (ASX:IDT); and Polynovo Limited (ASX:PNV) (previously Calzada Limited (ASX:CZD))
Professor David Morris – Non-Executive Director
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Qualifications
MB, ChB, FRCS, MD, Ph.D, FRACS
Experience
Professor Morris is the Head of the UNSW Department of Surgery, St George Hospital,
Sydney. Professor Morris has been Department Head for over 20 years with almost 700 peer
review publications. Professor Morris has maintained a basic cancer research laboratory for over
20 years and has a demonstrable successful track record in commercialising outcomes of
research. Currently, Professor Morris is an active surgical oncologist concentrating on metastatic
diseases of liver, lung and peritoneum.
Interests in Shares and
Options
Professor Morris holds 177,214,206 Fully Paid Ordinary Shares and 528,634 Listed Options.
Other Current Directorships
(ASX Listed Companies)
Previous Directorships (last 3
years) ASX Listed Companies
Nil
Nil
Mr. Robert C Bishop –Executive Director
Qualifications
Ll.B (Hons), Solicitor (New South Wales and England & Wales), MAICD
Experience
Mr Bishop has 30 years’ experience in corporate finance and equity capital markets. Having
worked extensively in London and Sydney, first as a lawyer at Linklaters & Paines and Allen, Allen
& Hemsley; and then as a stockbroker and investment banker at Ord Minnett, Robert Fleming
and, since 1998, at his Sydney based corporate finance business, First Capital Markets. He has
extensive experience in the areas of stock market flotation's, licensing and compliance work.
Interests in Shares and
Options
Mr Bishop, via his company, holds 54,071,824 Fully Paid Ordinary Shares and 1,365,707 Listed
Options.
Other Current Directorships
(ASX Listed Companies)
Previous Directorships (last 3
years) ASX Listed Companies
Nil
Nil
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2015 ANNUAL REPORT AND STATUTORY FINANCIAL STATEMENTS
PharmAust Limited and its Controlled Entities
Mr. Sam Wright – Non-Executive Director & Company Secretary
DIRECTORS' REPORT (Cont.)
Qualifications
Experience
AFin DipAcc ACIS MAICD
Sam Wright is experienced in the administration of ASX listed companies, corporate governance
and corporate finance. He joined the Company as the Financial Controller in September 2006,
was appointed as the Company Secretary in August 2007, and was appointed as a Director in
October 2008.
Mr Wright has over fifteen years’ experience in the pharmaceutical, biotech and healthcare
industry and is a member of the Australian Institute of Company Directors, the Financial Services
Institute of Australasia, and the Chartered Secretaries of Australia.
Mr Wright is currently Company Secretary of ASX listed companies, Buxton Resources Limited and
Structural Monitoring Systems plc. Mr Wright also has filled the role of Director and Company
Secretary with a number of unlisted companies.
He is the Managing Director of Perth-based corporate advisory firm Straight Lines Consultancy,
specialising in the provision of corporate services to public companies.
Interests in Shares and
Options
Mr Wright, via his company, holds 6,500,000 ordinary shares and 375,000 listed options in
PharmAust Limited.
Other Current Directorships
(ASX Listed Companies)
Nil
Previous Directorships (last 3
years) ASX Listed Companies
Buxton Resources Limited (ASX: BUX) and Structural Monitoring Systems plc (ASX: SMN)
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Dr. Wayne Best – Non-Executive Director
Qualifications
Experience
BSc (Hons), PhD, DIC, FRACI, GAICD
Wayne has almost 30 years’ experience in synthetic and medicinal chemistry both in academia,
government and industry. Wayne obtained his BSc (Hons) and PhD in Organic Chemistry from The
University of Western Australia. He then spent two years at Imperial College in the UK where he
obtained a DIC, followed by a year at the Australian National University in Canberra.
Wayne then took up a position with ICI Australia's Research Group in Melbourne where he spent
over four years designing and synthesizing a range of biologically active compounds, particularly
agrochemicals. During this time Wayne was seconded for six months to ICI Agrochemicals'
Jealott's Hill Research Station in the UK to work on the rational design of a novel herbicide target.
Following ICI, Wayne returned to Western Australia and spent the ten years preceding Epichem
at the Chemistry Centre (WA) where he was responsible for the formation and running of the
Medicinal & Biological Chemistry Section which undertook collaborative R&D into drug discovery
and contract synthesis for the drug discovery and pharmaceutical industries.
Wayne is a Fellow of the Royal Australian Chemical Institute and has held appointments as an
Adjunct Associate Professor at both Murdoch University and The University of Western Australia.
He is also a Director of Epichem's parent company, PharmAust Ltd, and a Graduate Member of
the Australian Institute of Company Directors.
Interests in Shares and
Options
Dr Best holds 2,874,290 ordinary shares and Nil listed options in PharmAust Limited.
Other Current Directorships
(ASX Listed Companies)
Previous Directorships (last 3
years) ASX Listed Companies
Nil
Nil
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2015 ANNUAL REPORT AND STATUTORY FINANCIAL STATEMENTS
PharmAust Limited and its Controlled Entities
Meetings of Directors
DIRECTORS’ REPORT (Cont.)
The number of meetings of the Company’s directors held during the year ended 30 June 2015, and the number of meetings attended
by each director was:
Directors
Dr Roger Aston
Robert Bishop
Professor David Morris
Sam Wright
Dr Wayne Best
Meetings of Directors
Eligible to
Participate
11
11
11
11
9
Number
Attended
9
10
7
11
9
Indemnification and Insurance of Directors and Officers
During the year, the Company held Directors and Officers Indemnity insurance.
The Company’s Constitution provides that except as may be prohibited by Sections 199A and 199B of the Corporations Act every
Officer, auditor or agent of the Company shall be indemnified out of the property of the Company against any liability incurred by
him in his capacity as Officer, auditor or agent of the Company or any related corporation in respect of any act or omission whatsoever
and howsoever occurring or in defending any proceedings whether civil or criminal.
Share Options
The details of unissued ordinary shares under option at the date of this report are as follows:
Number
Exercise Price
Expiry Date
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Quoted
139,500,000
2 cents
31 August 2015
During the year, no options were exercised. There have been no further options exercised since the end of the financial year to
the date of this report.
Environmental Regulation
Proceedings on Behalf of the Company
Non-audit Services
The Company is subject to a range of environmental regulation. During the year, the Company met all reporting requirements
under any relevant legislation. There were no incidents which required reporting.
No person has applied for leave of Court to bring proceedings on behalf of the Company or intervene in any proceedings to which
the Company is a party for the purpose of taking responsibility on behalf of the Company for all or any part of these proceedings.
The Company may decide to employ the auditor on assignments additional to their statutory audit duties where the auditor’s
expertise and experience with the Company and the consolidated entity are important.
Details of the amounts paid or payable to the auditor, RSM Bird Cameron Partners, for non-audit services provided during the year
are set out below.
The Board of Directors has considered the position and is satisfied that the provision of the non-audit services is compatible with
the general standard of independence for auditors imposed by the Corporations Act 2001. The directors are satisfied that the
provision of non-audit services by the auditor, as set out below, did not compromise the auditor independence requirements of
the Corporations Act 2001 because none of the services undermine the general principles relating to auditor independence as set
out in APES 110 Code of Ethics for Professional Accountants, including reviewing or auditing the auditor’s own work, acting in a
management or a decision-making capacity for the Company, acting as advocate for the Company or jointly sharing economic
risk and rewards.
Details of the amount paid or payable to the auditor of PharmAust Limited in relation to the provision on non-audit services are set
out below:
Tax compliance services
- 11 -
2015
$
2014
$
27,650
17,350
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2015 ANNUAL REPORT AND STATUTORY FINANCIAL STATEMENTS
PharmAust Limited and its Controlled Entities
DIRECTORS' REPORT (Cont.)
Remuneration Report (Audited)
The remuneration report, which has been audited, outlines the key management personnel (KMP) remuneration arrangements for
the consolidated entity, in accordance with the requirements of the Corporations Act 2001 and its Regulations.
This report details the nature and amount of remuneration for each director and executive of PharmAust Limited.
Remuneration Policy
The remuneration of directors and executives of PharmAust Limited has been designed to align director and executive objectives with
shareholder and business objectives by providing a fixed remuneration component and offering specific long-term incentives based
on key performance areas affecting the Company’s financial results. The Board of PharmAust Limited believes the remuneration policy
to be appropriate and effective in its ability to attract and retain the best executives and directors to run and manage the Company,
as well as create goal congruence between directors, executives and shareholders.
All executives receive a base salary (which is based on factors such as length of service and experience) and superannuation whilst
some executives receive fringe benefits. The Board reviews executive packages periodically by reference to the Company’s
performance, executive performance and comparable information from industry sectors and other listed companies in similar
industries.
The performance of executives is measured against criteria agreed regularly with each executive and is based on factors including
the forecast growth of profits and shareholders’ value.
The remuneration is designed to attract the highest calibre of executives and reward them for performance that results in long-term
growth in shareholder wealth. The goal of the remuneration structures it to align the remuneration packages of the executives with
the Company’s performance and specifically the Company’s earnings and the consequences of the Company’s performance on
shareholder wealth including dividends, returns of capital and capital appreciation.
The executive directors and executives receive a superannuation guarantee contribution required by the government and do not
receive any other retirement benefits. Individuals, however, have the option to sacrifice part of their salary to increase payments
towards superannuation.
All remuneration paid to directors and executives is valued at the cost to the Company and expensed. Any shares given to directors
and executives will be valued as the difference between the market price of those shares and the amount paid by the director or
executive. Any options granted will be valued by an independent expert using the Black-Scholes, Binomial or any other methodologies
that the independent expert deems appropriate.
The Board policy is to remunerate non-executive directors at market rates for comparable companies for time, commitment and
responsibilities. The Board (excluding the relevant director) determines payments to the directors and reviews their remuneration
regularly, based on market practice, duties and accountability. Independent external advice is sought when required. The maximum
aggregate amount of fees that can be paid to non-executive directors is subject to approval by shareholders at the Annual General
Meeting. Fees for non-executive directors are not linked to the performance of the Company.
Service agreements:
Remuneration of Dr Roger Aston (Executive Chairman - PharmAust Limited)
Term of the agreement – permanent and no specific term.
Base salary of $260,000 per year plus superannuation of 9.5% (2014:9.25%) of base salary.
Payment of termination benefit on termination by the employer, other than for gross misconduct, is equal to six (6) months base salary
and superannuation.
Remuneration of Robert Bishop (Executive Director - PharmAust Limited)
Term of the agreement – permanent and no specific term.
Base salary of $104,000 per year plus superannuation of 9.5%(2014:9.25%) of base salary.
Payment of termination benefit on termination by the employer, other than for gross misconduct, is equal to three (3) months base
salary and superannuation.
Remuneration of Professor David Morris (Non-Executive Director – PharmAust Limited)
Directors fee of $60,000 per annum plus superannuation of 9.5%(2014:9.25%).
Remuneration of Sam Wright (Non-Executive director and company secretary – PharmAust Limited)
Term of the agreement – permanent and no specific term.
Consultancy fee of $7,500 plus GST per month, payable in arrears.
Payment of termination benefit on termination by the employer, other than for gross misconduct, is equal to six (6) months consultancy
fee.
Remuneration of Colette Sims (Directors – Epichem Pty Ltd)
Base salary of $96,900 per year plus superannuation of 9.5% (2014:9.25%) of base salary
Payment of termination benefit on termination by the employer, other than for gross misconduct, is equal to four (4) weeks base salary
and superannuation.
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2015 ANNUAL REPORT AND STATUTORY FINANCIAL STATEMENTS
PharmAust Limited and its Controlled Entities
DIRECTORS' REPORT (Cont.)
Remuneration Report (Audited)
Remuneration of Wayne Best (Non-Executive director – PharmAust Limited, Managing Director – Epichem Pty Ltd)
Base salary of $150,000 per year plus superannuation of 9.5% (2014:9.25%) of base salary
Payment of termination benefit on termination by the employer, other than for gross misconduct, is equal to six (6) months base salary
and superannuation.
Bonus of up to a maximum of $30,000 in the event of the satisfaction of Bonus milestones for any one financial year that Epichem Pty
Ltd makes an after tax profit of:
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$100,000 – bonus of $5,000; or
$200,000- bonus of $10,000; or
$350,000- bonus of $20,000; or
$500,000- bonus of $30,000.
Remuneration of John Horton (Director – Epichem Pty Ltd)
Consultancy fee of $10,000 per annum.
Remuneration of Directors and Specified Executives
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Names and positions of key management personnel(KMP) in office at any time during the financial year are:
Person
Dr Roger Aston
Robert Bishop
Professor David Morris
Sam Wright
Dr Wayne Best
Position
Executive Chairman
Executive Director
Non-Executive Director
Non- Executive Director and Company Secretary
Non-Executive Director (appointed on 24th October 2014) and Managing
Director – Epichem Pty Ltd
Director – Epichem Pty Ltd
Director – Epichem Pty Ltd
Dr John Horton
Dr Colette Sims
Details of the nature and amount of each element of remuneration of each key management personnel for the financial year are
as follows:
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Short-term
Post-
employment
Share based
payment
Directors
Dr Roger Aston
Dr Wayne Best *
Robert Bishop
Sam Wright
Professor David Morris
Executives
Dr Colette Sims
Dr John Horton
Salary
& Fees
$
260,000
188,000
104,000
90,000
60,000
126,230
10,000
838,230
Other
$
Superannuation
$
Options
$
Termination
benefits
$
Total
$
-
-
-
-
-
-
-
-
24,700
17,385
9,880
-
5,700
11,991
-
69,656
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
284,700
205,385
113,880
90,000
65,700
138,221
10,000
907,886
* Appointed on 24th October 2014.
2014
Short-term
Post-
employment
Share based
payment
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Directors
Dr Roger Aston
Sam Wright
Robert Bishop
Professor David Morris
Henry Gulev**
Bryant Mclarty*
Executives
Dr Wayne Best
Dr John Horton
Dr Colette Sims
Salary
& Fees
$
231,667
90,000
69,333
50,000
7,500
-
137,000
10,000
5,000
600,500
Other
$
Superannuation
$
Options
$
Termination
benefits
$
-
-
-
-
-
-
-
-
-
-
21,429
-
6,413
4,624
-
-
12,673
-
-
45,139
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Total
$
253,096
90,000
75,746
54,624
7,500
-
149,673
10,000
5,000
645,639
*Resigned on 12 August 2013.
**Resigned on 29 October 2013.
- 13 -
2015 ANNUAL REPORT AND STATUTORY FINANCIAL STATEMENTS
PharmAust Limited and its Controlled Entities
DIRECTORS' REPORT (Cont.)
Remuneration Report (Audited)
Additional disclosures relating to key management personnel
Option holding
The number options over ordinary shares in the company held during the financial year by each director and other members of
key management personnel of the consolidated entity, including their personally related parties, is set out below:
Granted
as
Compen-
sation
No.
2015 -
Number
Balance
1 July 2014
Sam Wright
Roger Aston
No.
375,000
528,634
Robert Bishop
1,365,707
David Morris
528,634
Wayne Best
John Horton
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-
Options
Exercise
d
Net
Change
Other*
Balance
30 June
2015
Total
Vested
Total
Exercisable
Total
Unexercisable
No.
No.
No.
No.
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
375,000
375,000
528,634
528,634
1,365,707
1,365,707
1,365,707
528,634
528,634
528,634
-
-
-
-
-
-
No.
No.
375,000
528,634
Collette Sims
*The net change other column above includes those options that have been disposed or acquired by holders during the
year.
No other key management personnel held options in the Company.
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Shareholding
The number of shares in the company held during the financial year by each director and other members of key management
personnel of the consolidated entity, including their personally related parties, is set out below:
2015–
Number
Sam Wright
John Horton
Roger Aston
Robert Bishop
David Morris
Wayne Best
John Horton
Collette Sims
Balance
1 July 2014
Received as
Compensation
No.
5,000,000
25,000
104,782,951
53,571,824
176,678,197
2,374,290
-
-
No.
-
-
-
-
-
-
-
-
At date of
appointment
and/or
resignation
No.
-
-
-
-
-
-
-
-
Net Change
Other**
Balance
30 June 2015
No.
500,000
-
500,000
500,000
536,009
500,000
-
-
No.
5,500,000
25,000
105,282,951
54,071,824
177,214,206
2,874,290
-
-
Share-based compensation
Issue of shares
There were no shares issued to directors and other KMP as part of compensation during the year ended 30 June 2015.
Option
There were no options over ordinary shares granted to or vested by directors and other KMP as part of compensation during the
year ended 30 June 2015.
Options granted as part of remuneration
There were no options issued as part of remuneration for the year ended 30 June 2015 and 30 June 2014.
No options expired during the year.
Other transactions with key management personnel and their related parties
There were no other transactions with key management personnel and their related parties during the year.
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[END OF REMUNERATION REPORT]
- 14 -
2015 ANNUAL REPORT AND STATUTORY FINANCIAL STATEMENTS
PharmAust Limited and its Controlled Entities
DIRECTORS' REPORT (Cont.)
Annual Report Disclosure on Corporate Governance
PharmAust Limited is a drug discovery and development company. The Company has established, and continues to refine and
improve procedures to ensure a culture of good corporate governance exists and is respected across the consolidated entity.
The Company has a written policy designed to ensure compliance with ASX Listing Rules and all other regulatory requirements for
disclosures. Additionally the Company has adopted a policy designed to ensure procedures to implement the policy are suitable
and effective.
The Board wishes to acknowledge that nothing has come to its attention that would lead it to conclude that its current practices
and procedures are not appropriate for an organisation of the size and maturity of the Company. The Corporate Governance
Policy and the Company’s corporate governance practices is set out on the Company’s web site at www.pharmaust.com
Shares Issued on Exercise of Compensation Options
No options were exercised last financial year, this financial year or since.
Auditor’s Independence Declaration
A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is included within
these financial statements.
Signed in accordance with the Board of Directors.
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Dr ROGER ASTON
Executive Chairman
Signed at Perth, Western Australia this 28th day of August 2015
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2015 ANNUAL REPORT AND STATUTORY FINANCIAL STATEMENTS
PharmAust Limited and its Controlled Entities
DIRECTORS’ DECLARATION
In accordance with a resolution of the Directors of PharmAust Limited, I state that:
1.
In the opinion of the directors:
(a)
(b)
(c)
the financial statements and notes of the consolidated entity are in accordance with the Corporations Act 2001, including:
(i)
(ii)
giving a true and fair view of the financial position of the consolidated entity as at 30 June 2015 and of its
performance, for the year ended on that date; and
complying with Accounting Standards (including the Australian Accounting Interpretations) and the
Corporations Regulations 2001;
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 financial statements and notes also comply with International Financial Reporting Standards as disclosed in note 1;
2. This declaration has been made after receiving the declarations required to be made by the directors in accordance with
sections of 295A of the Corporations Act 2001 for the financial year ending 30 June 2015.
On behalf of the Board
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Dr ROGER ASTON
Executive Chairman
Signed at Perth, Western Australia this 28th day of August 2015
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- 19 -
2015 ANNUAL REPORT AND STATUTORY FINANCIAL STATEMENTS
PharmAust Limited and its Controlled Entities
STATEMENT OF COMPREHENSIVE INCOME
For the year ended 30 June 2015
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Revenue
Other income
Raw materials and consumables used
Employee benefits expense
Depreciation expense
Finance costs
Research and development expenses
Administration expenses
Other expenses
NOTE
2
2
CONSOLIDATED
2015
$
2014
$
1,869,204
550,816
2,420,020
(207,780)
(2,180,341)
(77,146)
(3,555)
(629,147)
(1,247,142)
-
1,880,793
126,293
2,007,086
(222,672)
(1,724,836)
(53,365)
(2,666)
(211,642)
(1,108,657)
(1,101)
(Loss) before income tax expense
(1,925,091)
(1,317,853)
Income tax expense
(Loss) after income tax expense
Other comprehensive income
3a
-
-
(1,925,091)
(1,317,853)
-
-
Total comprehensive (loss) for the year
(1,925,091)
(1,317,853)
Basic and diluted loss per share (cents per share)
16
(0.13)
(0.1)
The accompanying notes form part of these financial statements.
- 20 -
2015 ANNUAL REPORT AND STATUTORY FINANCIAL STATEMENTS
PharmAust Limited and its Controlled Entities
STATEMENT OF FINANCIAL POSITION
As at 30 June 2015
CONSOLIDATED
NOTE
2015
$
2014
$
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CURRENT ASSETS
Cash and cash equivalents
Trade and other receivables
Other current assets
Financial assets
TOTAL CURRENT ASSETS
NON-CURRENT ASSETS
Intangible assets
Plant and equipment
TOTAL NON-CURRENT ASSETS
TOTAL ASSETS
CURRENT LIABILITIES
Trade and other payables
Borrowings
Provisions
TOTAL CURRENT LIABILITIES
NON-CURRENT LIABILITIES
Borrowings
Provisions
TOTAL NON-CURRENT LIABILITIES
TOTAL LIABILITIES
NET ASSETS
EQUITY
Issued capital
Reserves
Accumulated losses
TOTAL EQUITY
4
5a
6
7
8
9
10
11
12
11
12
3,411,767
223,271
89,910
7,200
3,732,148
5,179,128
611,009
5,790,137
2,304,323
98,246
42,513
7,000
2,452,082
5,179,128
578,423
5,757,551
9,522,285
8,209,633
459,610
31,596
172,630
663,836
7,899
11,484
19,383
230,436
31,596
143,949
405,981
39,495
-
39,495
683,219
445,476
8,839,066
7,764,157
13
14
27
44,393,484
941,629
(36,496,047)
41,393,484
941,629
(34,570,956)
8,839,066
7,764,157
The accompanying notes form part of these financial statements.
- 21 -
2015 ANNUAL REPORT AND STATUTORY FINANCIAL STATEMENTS
PharmAust Limited and its Controlled Entities
STATEMENT OF CHANGES IN EQUITY
For the year ended 30 June 2015
Issued
Capital
$
Accumulated
Losses
$
Options
Reserve
$
Total Equity
$
As at 1 July 2013
Loss for the year
Total comprehensive (Ioss) for the year
Shares issued (net)
Options issued
32,941,890
-
-
8,451,594
-
(33,253,103)
(1,317,853)
(1,317,853)
-
-
622,090
-
-
-
319,539
310,877
(1,317,853)
(1,317,853)
8,451,594
319,539
As at 30 June 2014
41,393,484
(34,570,956)
941,629
7,764,157
As at 1 July 2014
Loss for the year
Total comprehensive (Ioss) for the year
Shares issued (net)
41,393,484
-
-
3,000,000
(34,570,956)
(1,925,091)
(1,925,091)
-
941,629
-
-
-
7,764,157
(1,925,091)
(1,925,091)
3,000,000
As at 30 June 2015
44,393,484
(36,496,047)
941,629
8,839,066
The accompanying notes form part of these financial statements.
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2015 ANNUAL REPORT AND STATUTORY FINANCIAL STATEMENTS
PharmAust Limited and its Controlled Entities
STATEMENT OF CASH FLOWS
For the year ended 30 June 2015
Cash Flows From Operating Activities
Receipts from customers
Payments to suppliers and employees
Other income
Interest received
Interest and other costs of finance
Net cash used in operating activities
Cash Flows From Investing Activities
Payments for plant and equipment
Acquisition of subsidiary, net of cash received
Net cash (used in) / provided by investing activities
Cash Flows From Financing Activities
Proceeds from share and option issues (net)
Repayment of borrowing
Net cash provided by financing activities
Net increase in cash held
Cash at the beginning of the financial year
CONSOLIDATED
NOTE
2015
$
2014
$
20b
20c
1,744,177
(4,042,684)
502,122
48,694
(3,555)
(1,751,246)
1,895,138
(3,548,524)
-
67,697
(2,666)
(1,588,355)
(109,732)
-
(109,732)
3,000,000
(31,578)
2,968,422
(73,304)
372,711
299,407
3,254,094
(23,697)
3,230,397
1,107,444
1,941,449
2,304,323
362,874
Cash at the end of the financial year
20a
3,411,767
2,304,323
The accompanying notes form an integral part of these financial statements.
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- 23 -
2015 ANNUAL REPORT AND STATUTORY FINANCIAL STATEMENTS
PharmAust Limited and its Controlled Entities
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2015
These consolidated financial statements and notes represent those of PharmAust Limited and its Controlled Entities (the
“consolidated entity” or “group”).
The separate financial statements of the parent entity, PharmAust Limited, have not been presented within this financial report
as permitted by the Corporations Act 2001. Supplementary information about the parent entity is disclosed within this financial
statements.
SIGNIFICANT ACCOUNTING POLICIES
The financial statements are general purpose financial statements that have been prepared in accordance with Australian
Accounting Standards, Australian Accounting Interpretations, other authoritative pronouncements of the Australian
Accounting Standards Board and the Corporations Act 2001. The Group is a for-profit entity for financial reporting purposes
under Australian Accounting Standards.
Australian Accounting Standards set out accounting policies that the Australian Accounting Standards Board has
concluded would result in financial statements containing relevant and reliable information about transactions, events and
conditions. Compliance with Australian Accounting Standards ensures that the financial statements and notes also comply
with International Financial Reporting Standards as issued by the IASB. Material accounting policies adopted in the
preparation of these financial statements are presented below and have been consistently applied unless stated otherwise.
Except for cash flow information, the financial statements have been prepared on an accruals basis and are based on
historical costs, modified, where applicable, by the measurement at fair value of selected non-current assets, financial assets
and financial liabilities.
The financial report was authorised for issue on 28 August 2015 by the Directors of the Company.
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(a) Principles of Consolidation
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The consolidated financial statements incorporate all of the assets, liabilities and results of the PharmAust Limited and all of
the subsidiaries (including any structured entities). Subsidiaries are entities the parent controls. The parent controls an entity
when it 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 over the entity.
The assets, liabilities and results of all subsidiaries are fully consolidated into the financial statements of the Group from the
date on which control is obtained by the Group. The consolidation of a subsidiary is discontinued from the date that control
ceases. Intercompany transactions, balances and unrealised gains or losses on transactions between group entities are fully
eliminated on consolidation. Accounting policies of subsidiaries have been changed and adjustments made where
necessary to ensure uniformity of the accounting policies adopted by the Group.
Equity interests in a subsidiary not attributable, directly or indirectly, to the Group are presented as “non-controlling interests”.
The Group initially recognises non-controlling interests that are present ownership interests in subsidiaries and are entitled to
a proportionate share of the subsidiary’s net assets on liquidation at either fair value or at the non-controlling interests’
proportionate share of the subsidiary’s net assets. Subsequent to initial recognition, non-controlling interests are attributed
their share of profit or loss and each component of other comprehensive income. Non-controlling interests are shown
separately within the equity section of the statement of financial position and statement of comprehensive income.
The consolidated financial statements incorporate the assets, liabilities and results of entities controlled by PharmAust Limited
at the end of the reporting period. A controlled entity is any entity over which PharmAust Limited has the ability and right to
govern the financial and operating policies so as to obtain benefits from the entity’s activities.
Where controlled entities have entered or left the Group during the year, the financial performance of those entities is
included only for the period of the year that they were controlled.
Non-controlling interests, being the equity in a subsidiary not attributable, directly or indirectly, to a parent, are reported
separately within the equity section of the consolidated statement of financial position and statements showing profit or loss
and other comprehensive income. The non-controlling interests in the net assets comprise their interests at the date of the
original business combination and their share of changes in equity since that date.
Business combinations
Business combinations occur where an acquirer obtains control over one or more businesses.
A business combination is accounted for by applying the acquisition method, unless it is a combination involving entities or
businesses under common control. The business combination will be accounted for from the date that control is attained,
whereby the fair value of the identifiable assets acquired and liabilities (including contingent liabilities) assumed is
recognised (subject to certain limited exemptions).
- 24 -
2015 ANNUAL REPORT AND STATUTORY FINANCIAL STATEMENTS
PharmAust Limited and its Controlled Entities
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2015
1
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
(a) Principles of Consolidation (Cont.)
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(b) Income Tax
When measuring the consideration transferred in the business combination, any asset or liability resulting from a contingent
consideration arrangement is also included. Subsequent to initial recognition, contingent consideration classified as equity
is not remeasured and its subsequent settlement is accounted for within equity. Contingent consideration classified as an
asset or liability is remeasured in each reporting period to fair value, recognising any change to fair value in profit or loss,
unless the change in value can be identified as existing at acquisition date.
All transaction costs incurred in relation to business combinations are recognised as expenses in profit or loss when incurred.
The acquisition of a business may result in the recognition of goodwill or a gain from a bargain purchase.
The income tax expense/(income) for the year comprises current income tax expense/(income) and deferred tax
expense/(income).
Current income tax expense charged to profit or loss is the tax payable on taxable income. Current tax liabilities/(assets)
are measured at the amounts expected to be paid to/(recovered from) the relevant taxation authority.
Deferred income tax expense reflects movements in deferred tax asset and deferred tax liability balances during the year
as well as unused tax losses.
Current and deferred income tax expense/(income) is charged or credited outside profit or loss when the tax relates to
items that are recognised outside profit or loss.
Except for business combinations, no deferred income tax is recognised from the initial recognition of an asset or liability,
where there is no effect on accounting or taxable profit or loss.
Deferred tax assets and liabilities are calculated at the tax rates that are expected to apply to the period when the asset is
realised or the liability is settled and their measurement also reflects the manner in which management expects to recover
or settle the carrying amount of the related asset or liability. With respect to non-depreciable items of property, plant and
equipment measured at fair value and items of investment property measured at fair value, the related deferred tax liability
or deferred tax asset is measured on the basis that the carrying amount of the asset will be recovered entirely through sale.
Deferred tax assets relating to temporary differences and unused tax losses are recognised only to the extent that it is
probable that future taxable profit will be available against which the benefits of the deferred tax asset can be utilised.
Where temporary differences exist in relation to investments in subsidiaries, branches, associates, and joint ventures, deferred
tax assets and liabilities are not recognised where the timing of the reversal of the temporary difference can be controlled
and it is not probable that the reversal will occur in the foreseeable future.
Current tax assets and liabilities are offset where a legally enforceable right of set-off exists and it is intended that net
settlement or simultaneous realisation and settlement of the respective asset and liability will occur. Deferred tax assets and
liabilities are offset where: (a) a legally enforceable right of set-off exists; and (b) the deferred tax assets and liabilities relate
to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where
it is intended that net settlement or simultaneous realisation and settlement of the respective asset and liability will occur in
future periods in which significant amounts of deferred tax assets or liabilities are expected to be recovered or settled.
(c) Plant and Equipment
Plant and equipment are measured on the cost basis and therefore carried at cost less accumulated depreciation and any
accumulated impairment. In the event the carrying amount of plant and equipment is greater than the estimated
recoverable amount, the carrying amount is written down immediately to the estimated recoverable amount and
impairment losses are recognised either in profit or loss or as a revaluation decrease if the impairment losses relate to a
revalued asset.
The carrying amount of plant and equipment is reviewed annually by directors to ensure it is not in excess of the recoverable
amount from these assets. The recoverable amount is assessed on the basis of the expected net cash flows that will be
received from the asset’s employment and subsequent disposal. The expected net cash flows have been discounted to
their present values in determining recoverable amounts.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when
it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be
measured reliably. All other repairs and maintenance are recognised as expenses in profit or loss during the financial period
in which they are incurred.
- 25 -
2015 ANNUAL REPORT AND STATUTORY FINANCIAL STATEMENTS
PharmAust Limited and its Controlled Entities
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2015
1
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
(d) Plant and Equipment(Cont.)
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Depreciation
The depreciable amount of all plant and is depreciated on a straight line basis over their useful lives to the consolidated
entity commencing from the time the asset is held ready for use.
The depreciation rates used for each class of depreciable assets are:
Class of Fixed Asset
Plant and equipment
Depreciation Rate
2.5-33%
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.
An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater
than its estimated recoverable amount.
Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These gains and losses are
recognised in profit or loss in the period in which they arise. When revalued assets are sold, amounts included in the
revaluation surplus relating to that asset are transferred to retained earnings.
(d) Leases
Leases of fixed assets, where substantially all the risks and benefits incidental to the ownership of the asset – but not the legal
ownership – are transferred to entities in the consolidated group, are classified as finance leases.
Finance leases are capitalised by recognising an asset and a liability at the lower of the amounts equal to the fair value of
the leased property or the present value of the minimum lease payments, including any guaranteed residual values. Lease
payments are allocated between the reduction of the lease liability and the lease interest expense for the period.
Leased assets are depreciated on a straight-line basis over the shorter of their estimated useful lives or the lease term.
Lease payments for operating leases, where substantially all the risks and benefits remain with the lessor, are charged as
expenses in the periods in which they are incurred.
Lease incentives under operating leases are recognised as a liability and amortised on a straight-line basis over the lease
term.
(e) Financial Instruments
Recognition and initial measurement
Financial assets and financial liabilities are recognised when the entity becomes a party to the contractual provisions to the
instrument. For financial assets, this is equivalent to the date that the company commits itself to either the purchase or sale
of the asset (i.e. trade date accounting is adopted).
Financial instruments are initially measured at fair value plus transaction costs, except where the instrument is classified “at
fair value through profit or loss”, in which case transaction costs are expensed to profit or loss immediately.
Classification and subsequent measurement
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Financial instruments are subsequently measured at fair value, amortised cost using the effective interest method, or cost.
Amortised cost is calculated as the amount at which the financial asset or financial liability is measured at initial recognition
less principal repayments and any reduction for impairment, and adjusted for any cumulative amortisation of the difference
between that initial amount and the maturity amount calculated using the effective interest method.
Fair value is determined based on current bid prices for all quoted investments. Valuation techniques are applied to
determine the fair value for all unlisted securities, including recent arm’s length transactions, reference to similar instruments
and option pricing models.
The effective interest method is used to allocate interest income or interest expense over the relevant period and is
equivalent to the rate that discounts estimated future cash payments or receipts (including fees, transaction costs and other
premiums or discounts) over the expected life (or when this cannot be reliably predicted, the contractual term) of the
financial instrument to the net carrying amount of the financial asset or financial liability. Revisions to expected future net
cash flows will necessitate an adjustment to the carrying amount with a consequential recognition of an income or expense
item in profit or loss.
- 26 -
2015 ANNUAL REPORT AND STATUTORY FINANCIAL STATEMENTS
PharmAust Limited and its Controlled Entities
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2015
1
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
(e) Financial Instruments (Cont.)
The Group does not designate any interests in subsidiaries, associates or joint venture entities as being subject to the
requirements of Accounting Standards specifically applicable to financial instruments.
(i)
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not
quoted in an active market and are subsequently measured at amortised cost. Gains or losses are recognised
in profit or loss through the amortisation process and when the financial asset is derecognised.
(ii)
Financial assets at fair value through profit or loss
Financial assets are classified at “fair value through profit or loss” when they are held for trading for the purpose
of short-term profit taking, derivatives not held for hedging purposes, or when they are designated as such to
avoid an accounting mismatch or to enable performance evaluation where a Group of financial assets is
managed by key management personnel on a fair value basis in accordance with a documented risk
management or investment strategy. Such assets are subsequently measured at fair value with changes in
carrying amount being included in profit or loss.
(iii)
Financial liabilities
Non-derivative financial liabilities other than financial guarantees are subsequently measured at amortised
cost. Gains or losses are recognised in profit or loss through the amortisation process and when the financial
liability is derecognised.
Impairment
At the end of each reporting period, the Group assesses whether there is objective evidence that a financial asset has been
impaired. A financial asset (or a group of financial assets) is deemed to be impaired if, and only if, there is objective evidence
of impairment as a result of one or more events (a “loss event”) having occurred, which has an impact on the estimated
future cash flows of the financial asset(s).
In the case of available-for-sale financial assets, a significant or prolonged decline in the market value of the instrument is
considered to constitute a loss event. Impairment losses are recognised in profit or loss immediately. Also, any cumulative
decline in fair value previously recognised in other comprehensive income is reclassified to profit or loss at this point.
In the case of financial assets carried at amortised cost, loss events may include: indications that the debtors or a group of
debtors are experiencing significant financial difficulty, default or delinquency in interest or principal payments; indications
that they will enter bankruptcy or other financial reorganisation; and changes in arrears or economic conditions that
correlate with defaults.
For financial assets carried at amortised cost (including loans and receivables), a separate allowance account is used to
reduce the carrying amount of financial assets impaired by credit losses. After having taken all possible measures of
recovery, if management establishes that the carrying amount cannot be recovered by any means, at that point the
written-off amounts are charged to the allowance account or the carrying amount of impaired financial assets is reduced
directly if no impairment amount was previously recognised in the allowance account.
When the terms of financial assets that would otherwise have been past due or impaired have been renegotiated, the
Group recognises the impairment for such financial assets by taking into account the original terms as if the terms have not
been renegotiated so that the loss events that have occurred are duly considered.
Derecognition
Financial assets are derecognised when the contractual rights to receipt of cash flows expire or the asset is transferred to
another party whereby the entity no longer has any significant continuing involvement in the risks and benefits associated
with the asset. Financial liabilities are derecognised when the related obligations are discharged, cancelled or have expired.
The difference between the carrying amount of the financial liability extinguished or transferred to another party and the
fair value of consideration paid, including the transfer of non-cash assets or liabilities assumed, is recognised in profit or loss.
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- 27 -
2015 ANNUAL REPORT AND STATUTORY FINANCIAL STATEMENTS
PharmAust Limited and its Controlled Entities
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2015
1
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
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Foreign Currency Transactions and Balances
The functional currency of each of the entities in the consolidated entity is measured using the currency of the primary
economic environment in which that entity operates. The consolidated financial statements are presented in Australian
dollars which is the parent entity’s functional currency.
Transaction and balances
Foreign currency transactions are translated into functional currency using the exchange rates prevailing at the date of the
transaction. Foreign currency monetary items are translated at the year-end exchange rate. Non-monetary items measured
at historical cost continue to be carried at the exchange rate at the date of the transaction. Non-monetary items measured
at fair value are reported at the exchange rate at the date when fair values were determined.
Exchange differences arising on the translation of non-monetary items are recognised directly in other comprehensive
income to the extent that the underlying gain or loss is recognised in other comprehensive income; otherwise the exchange
difference is recognised in profit or loss.
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(g) Impairment of Assets
At the end of each reporting period, the Group assesses whether there is any indication that an asset may be impaired. The
assessment will include the consideration of external and internal sources of information including dividends received from
subsidiaries, associates or jointly controlled entities deemed to be out of pre-acquisition profits. 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 amount. Any excess of the asset’s carrying amount
over its recoverable amount is recognised immediately in profit or loss, unless the asset is carried at a revalued amount in
accordance with another Standard (e.g. in accordance with the revaluation model in AASB 116: Property, Plant and
Equipment). Any impairment loss of a revalued asset is treated as a revaluation decrease in accordance with that other
Standard.
Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable
amount of the cash-generating unit to which the asset belongs.
Impairment testing is performed annually for goodwill, intangible assets with indefinite lives and intangible assets not yet
available for use.
Investments in associate companies are recognised in the financial statements by applying the equity method of
accounting.
(h) Investments in Associates
(i) Employee Benefits
Short-term employee benefits
Provision is made for the group’s obligation for short-term employee benefits. Short-term employee benefits are benefits
(other than termination benefits) that are expected to be settled wholly before 12 months after the end of the annual
reporting period in which the employees render the related service, including wages and salaries. Short-term employee
benefits are measured at the (undiscounted) amounts expected to be paid when the obligation is settled.
The group’s obligations for short-term employee benefits such as wages and salaries are recognised as a part of current
trade and other payables in the statement of financial position. The Group’s obligations for employees’ annual leave and
long service leave entitlements are recognised as provisions in the statement of financial position.
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Other long-term employee benefits
Provision is made for employees’ long service leave and annual leave entitlements not expected to be settled wholly within
12 months after the end of the annual reporting period in which the employees render the related service. Other long-term
employee benefits are measured at the present value of the expected future payments to be made to employees.
Expected future payments incorporate anticipated future wage and salary levels, durations of service and employee
departures and are discounted at rates determined by reference to market yields at the end of the reporting period on
government bonds that have maturity dates that approximate the terms of the obligations. Any remeasurements for
changes in assumptions of obligations for other long-term employee benefits are recognised in profit or loss in the periods in
which the changes occur.
The group’s obligations for long-term employee benefits are presented as non-current provisions in its statement of financial
position, except where the Group does not have an unconditional right to defer settlement for at least 12 months after the
end of the reporting period, in which case the obligations are presented as current provisions.
- 28 -
2015 ANNUAL REPORT AND STATUTORY FINANCIAL STATEMENTS
PharmAust Limited and its Controlled Entities
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2015
1 SIGNIFICANT ACCOUNTING POLICIES (Cont.)
(j) Provisions
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Provisions are recognised when the consolidated entity has a legal or constructive obligation, as a result of past events, for
which it is probable that an outflow of economic benefits will result and that outflow can be reliably measured.
Provisions are measured using the best estimate of the amounts required to settle the obligation at the end of the reporting
period.
(k) Cash and Cash Equivalents
(l)
Cash and cash equivalents includes cash on hand, deposits held at call with banks and other short-term highly liquid
investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are reported within short-
term borrowings in current liabilities in the statement of financial position.
Trade and other receivables
Trade and other receivables include amounts due from customers for goods sold and services performed in the ordinary
course of business. Receivables expected to be collected within 12 months of the end of the reporting period are classified
as current assets. All other receivables are classified as non-current assets.
Trade and other receivables are initially recognised at fair value and subsequently measured at amortised cost using the
effective interest method, less any provision for impairment.
(m) Revenue
Revenue is measured at the fair value of the consideration received or receivable after taking into account any trade
discounts and volume rebates allowed. When the inflow of consideration is deferred, it is treated as the provision of
financing and is discounted at a rate of interest that is generally accepted in the market for similar arrangements. The
difference between the amount initially recognised and the amount ultimately received is interest revenue.
Revenue from the sale of goods is recognised at the point of delivery as this corresponds to the transfer of significant risks
and rewards of ownership of the goods and the cessation of all involvement in those goods.
Interest revenue is recognised using the effective interest method.
All revenue is stated net of the amount of goods and services tax.
(n) Goods and services tax
Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is not
recoverable from the Australian Taxation Office (ATO).
Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST
recoverable from, or payable to, the ATO is included with other receivables or payables in the statement of financial
position.
Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities
which are recoverable from, or payable to, the ATO are presented as operating cash flows included in receipts from
customers or payments to suppliers.
(o) Equity-settled compensation
The Group operates an employee share and option plan. Share-based payments to employees are measured at the fair
value of the instruments issued and amortised over the vesting periods. Share-based payments to non-employees are
measured at the fair value of goods or services received or the fair value of the equity instruments issued, if it is determined
the fair value of the goods or services cannot be reliably measured, and are recorded at the date the goods or services are
received. The corresponding amount is recorded to the option reserve. The fair value of options is determined using the
Black-Scholes pricing model. The number of shares and options expected to vest is reviewed and adjusted at the end of
each reporting period such that the amount recognised for services received as consideration for the equity instruments
granted is based on the number of equity instruments that eventually vest.
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown
in equity as a deduction, net of tax, from the proceeds.
(p) Contributed equity
(q) Earnings per share
Basic earnings per share is calculated as net profit attributable to members of the Company, adjusted to exclude any costs
of servicing equity (other than dividends) and preference share dividends, divided by the weighted average number of
ordinary shares, adjusted for any bonus element.
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2015 ANNUAL REPORT AND STATUTORY FINANCIAL STATEMENTS
PharmAust Limited and its Controlled Entities
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2015
1. SIGNIFICANT ACCOUNTING POLICIES (Cont.)
(r) Borrowing Costs
Borrowing costs directly attributable to the acquisition, construction or production of assets that necessarily take a substantial
period of time to prepare for their intended use or sale are added to the cost of those assets, until such time as the assets
are substantially ready for their intended use or sale.
All other borrowing costs are recognised in profit or loss in the period in which they are incurred.
Intangibles Assets
Intellectual property rights- three oncology technology platforms
Intellectual property rights are recognised at cost of acquisition less accumulated amortisation and any impairment losses.
For intellectual property rights not yet in use, they are tested for impairment annually or more frequently if events or changes
in circumstances indicate that they might be impaired, and are carried at cost less accumulated impairment losses.
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 is expected to deliver future economic benefits
and these benefits can be measured reliably.
Intangible assets have a finite useful life and are amortised on a systematic basis based on the future economic benefits
over the useful life of the project following commercialisation of the assets.
(t) 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.
When required by Accounting Standards, comparative figures have been adjusted to conform to changes in
presentation for the current financial year.
(u) Comparative Figures
(v) Operating segments
Operating segments are presented using the 'management approach', where the information presented is on the same
basis as the internal reports provided to the Chief Operating Decision Makers ('CODM'). The CODM is responsible for the
allocation of resources to operating segments and assessing their performance.
- 30 -
2015 ANNUAL REPORT AND STATUTORY FINANCIAL STATEMENTS
PharmAust Limited and its Controlled Entities
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2015
1. SIGNIFICANT ACCOUNTING POLICIES (Cont.)
(w) Current and non-current classification
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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 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 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.
Deferred tax assets and liabilities are always classified as non-current.
(x) New, revised or amending accounting standards and interpretations adopted
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In the current year, the Group has adopted all of the new and revised Standards and Interpretations issued by the
Australian Accounting Standards Board (the AASB) that are relevant to its operations and effective for the current annual
reporting period.
Any new, revised or amending Accounting Standards or Interpretations that are not yet mandatory have not been early
adopted.
Any significant impact on the accounting policies of the consolidated entity from the adoption of these Accounting
Standards and Interpretations are disclosed below. The adoption of these Accounting Standards and Interpretations did
not have any significant impact on the financial performance or position of the consolidated entity.
The following Accounting Standards and Interpretations are most relevant to the consolidated entity:
AASB 2012-3 Amendments to Australian Accounting Standards - Offsetting Financial Assets and Financial Liabilities
The consolidated entity has applied AASB 2012-3 from 1 July 2014. The amendments add application guidance to
address inconsistencies in the application of the offsetting criteria in AASB 132 'Financial Instruments: Presentation', by
clarifying the meaning of 'currently has a legally enforceable right of set-off'; and clarifies that some gross settlement
systems may be considered to be equivalent to net settlement.
AASB 2013-3 Amendments to AASB 136 - Recoverable Amount Disclosures for Non-Financial Assets
The consolidated entity has applied AASB 2013-3 from 1 July 2014. The disclosure requirements of AASB 136 'Impairment
of Assets' have been enhanced to require additional information about the fair value measurement when the
recoverable amount of impaired assets is based on fair value less costs of disposals. Additionally, if measured using a
present value technique, the discount rate is required to be disclosed.
AASB 2014-1 Amendments to Australian Accounting Standards (Parts A to C)
The consolidated entity has applied Parts A to C of AASB 2014-1 from 1 July 2014. These amendments affect the following
standards: AASB 2 'Share-based Payment': clarifies the definition of 'vesting condition' by separately defining a
'performance condition' and a 'service condition' and amends the definition of 'market condition'; AASB 3 'Business
Combinations': clarifies that contingent consideration in a business combination is subsequently measured at fair value
with changes in fair value recognised in profit or loss irrespective of whether the contingent consideration is within the
scope of AASB 9; AASB 8 'Operating Segments': amended to require disclosures of judgements made in applying the
aggregation criteria and clarifies that a reconciliation of the total reportable segment assets to the entity's assets is
required only if segment assets are reported regularly to the chief operating decision maker; AASB 13 'Fair Value
Measurement': clarifies that the portfolio exemption applies to the valuation of contracts within the scope of AASB 9 and
AASB 139; AASB 116 'Property, Plant and Equipment' and AASB 138 'Intangible Assets': clarifies that on revaluation,
restatement of accumulated depreciation will not necessarily be in the same proportion to the change in the gross
carrying value of the asset; AASB 124 'Related Party Disclosures': extends the definition of 'related party' to include a
management entity that provides KMP services to the entity or its parent and requires disclosure of the fees paid to the
management entity; AASB 140 'Investment Property': clarifies that the acquisition of an investment property may
constitute a business combination.
- 31 -
2015 ANNUAL REPORT AND STATUTORY FINANCIAL STATEMENTS
PharmAust Limited and its Controlled Entities
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2015
(y) Critical Accounting Estimates and Judgements
Estimates and assumptions are continually evaluated and are based on historical experience and other factors, including
expectations of future events that are believed to be reasonable under the circumstances. Equally, the Group continually
employs judgement in the application of its accounting policies.
Management has identified the following critical accounting policies for which significant judgements, estimates and
assumptions are made. Actual results may differ from these estimates under different assumptions and conditions. Those
which may materially affect the carrying amounts of assets and liabilities reported in future periods 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.
Impairment of non-financial assets other than goodwill and other indefinite life intangible assets
The consolidated entity assesses impairment of non-financial assets other than goodwill and other indefinite life intangible
assets at each reporting date by evaluating conditions specific to the consolidated entity and to the particular asset that
may lead to impairment. If an impairment trigger exists, the recoverable amount of the asset is determined. This involves fair
value less costs of disposal or value-in-use calculations, which incorporate a number of key estimates and assumptions.
Provision for impairment of receivables
The provision for impairment of receivables assessment requires a degree of estimation and judgement. The level of provision
is assessed by taking into account the recent sales experience, the ageing of receivables, historical collection rates and
specific knowledge of the individual debtor financial position.
Estimation of useful lives of assets
The consolidated entity determines the estimated useful lives and related depreciation and amortisation charges for its
property, 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.
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2015 ANNUAL REPORT AND STATUTORY FINANCIAL STATEMENTS
PharmAust Limited and its Controlled Entities
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2015
2
REVENUE
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Sales
OTHER INCOME
Interest received
Other revenue
INCOME TAX EXPENSE
3a
No income tax is payable as a tax loss has been incurred for income tax purposes.
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Loss before income tax
Prima facie tax benefit at 30% (2014:30%)
Tax effect of:
- Other non-allowable items
- Deferred tax asset not brought to account
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3b
Deferred tax asset
CONSOLIDATED
2015
$
2014
$
1,869,204
1,880,793
48,694
502,122
550,816
67,696
58,597
126,293
(1,925,091)
(1,317,853)
(577,527)
(395,355)
203,745
373,782
-
119,867
275,488
-
The potential deferred tax assets have not been recognised in the statement of financial position because their recovery is
not considered probable.
-
Tax losses at 30% tax rate (not recognised)
6,549,019
6,265,615
PharmAust Limited and its wholly-owned Australian subsidiary have formed an income tax consolidated group under the Tax
Consolidation Regime. PharmAust Limited is responsible for recognising the current and deferred tax assets and liabilities for
the tax consolidated group. The tax consolidated group has entered a tax sharing agreement whereby each company in
the consolidated entity contributes to the income tax payable in proportion to their contribution to the net profit before tax
of the tax consolidated group.
4
CASH AND CASH EQUIVALENTS
Cash at bank
3,411,767
2,304,323
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2015 ANNUAL REPORT AND STATUTORY FINANCIAL STATEMENTS
PharmAust Limited and its Controlled Entities
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2015
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5 TRADE AND OTHER RECEIVABLES
5a
CURRENT
Trade receivables
Less: provision for doubtful debts
CONSOLIDATED
2015
$
2014
$
223,271
-
223,271
104,061
(5,815)
98,246
Trade receivables: Payment terms are 30 days from the date of recognition.
5b Provision for impairment of receivables
Current trade and term receivables are non-interest bearing and generally on 30-day terms. Non-current trade and term
receivables are assessed for recoverability based on the underlying terms of the contract. A provision for impairment is
recognised when there is objective evidence that an individual trade or term receivable is impaired.
Movement in provision:
Balance brought forward
Provision provided for during the year
Bad debts written off
Balance carried forward
5c Past due but not impaired
(5,815)
-
5,815
-
-
(5,815)
-
(5,815)
As of 30 June 2015, trade receivables of $28,398 (2014:$ 36,768) were past due but not impaired. These relate to a number of
independent customers for whom there is no recent history of default. The ageing analysis of these trade receivables is as
follows:
31 to 60 days
61 days and above
24,425
3,973
28,398
36,519
249
36,768
Based on the credit history of these other classes, it is expected that these amounts will be received when due. The Group
does not hold any collateral in relation to these receivables.
5d Fair value and credit risk
The Group has no significant concentration of credit risk with respect to any single counterparty or group of counterparties
other than those receivables specifically provided for and mentioned within Note 5. The class of assets described as “trade
and other receivables” is considered to be the main source of credit risk related to the Group.
6
OTHER CURRENT ASSETS
GST receivables
Bond
Prepayments
7 FINANCIAL ASSETS
Financial assets held for trading
Shares in listed securities - fair value
7a Movements in Carrying Amounts
Carrying amount at beginning of the year
Disposals
Movement in fair value
Carrying amount at end of the year
Refer to Note 18 for further information on fair value measurement.
- 34 -
64,210
4,291
21,409
89,910
5,315
1,575
35,623
42,513
7,200
7,000
7,000
-
200
7,200
2,050
-
4,950
7,000
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2015 ANNUAL REPORT AND STATUTORY FINANCIAL STATEMENTS
PharmAust Limited and its Controlled Entities
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2015
8. Intangible Assets
Intellectual property rights – at cost
Amortisation
Accumulated impairment losses
Movements in Carrying Amounts:
Balance at the beginning of the year
Addition
Balance at the end of the year
9. PLANT AND EQUIPMENT
Cost
Accumulated depreciation
Movements in Carrying Amounts:
Carrying amount at beginning of the year
Additions
Depreciation expense
Carrying amount at end of the year
10 TRADE AND OTHER PAYABLES
Trade creditors and accruals
Payment terms are 30 days from receipt of goods and/or services rendered.
11
BORROWINGS
CURRENT
Lease liability*
NON CURRENT
Lease Liability*
CONSOLIDATED
2015
$
2014
$
5,179,128
-
-
5,179,128
5,179,128
-
-
5,179,128
5,179,128
-
5,179,128
-
5,179,128
5,179,128
1,236,021
(625,012)
611,009
1,126,304
(547,881)
578,423
578,423
109,732
(77,146)
611,009
463,713
168,075
(53,365)
578,423
459,610
230,436
31,596
31,596
7,899
39,495
Terms and conditions:
*The finance lease liability is secured. Interest is charged at is 11.25%p.a (2014: 11.25%).
Financing arrangements
The consolidated entity entered into a loan agreement to gain access to a loan facility of $750,000.
Interests: 3 month AFMA Bank Bill Average Bid Rate fix plus 5% margin.
Security: The parent entity is the guarantor of the loan facility.
Loan facility:
Total facility limit
Amount utilised
Total unused facility at 30 June
750,000
-
750,000
-
-
-
- 35 -
2015 ANNUAL REPORT AND STATUTORY FINANCIAL STATEMENTS
PharmAust Limited and its Controlled Entities
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2015
12
PROVISIONS
CURRENT
Employee entitlements
NON CURRENT
Employee entitlements
CONSOLIDATED
2015
$
2014
$
172,630
143,949
11,484
-
Amounts not expected to be settled within the next 12 months
The current provision for employee benefits includes all unconditional entitlements where employees have completed the
required period of service and also those where employees are entitled to pro-rata payments in certain circumstances. The entire
amount is presented as current, since the consolidated entity does not have an unconditional right to defer settlement. However,
based on past experience, the consolidated entity does not expect all employees to take the full amount of accrued leave or
require payment within the next 12 months.
The following amounts reflect leave that is not expected to be taken within the next 12 months:
Employee benefits obligation expected to be settled after 12 months
86,315
71,975
13
ISSUED CAPITAL
Issued and paid up ordinary shares
44,393,484
41,393,484
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13a Movement in fully paid ordinary shares
Share issued as consideration of acquisition of subsidiary
Share placement (net)- for cash
Ordinary Shares
At 1 July
At 30 June
13b
2015
2014
Number of shares
2015
$
2014
$
1,440,006,606
617,506,606
41,393,484
32,941,890
-
472,500,000
-
5,197,500
400,000,000
350,000,000
3,000,000
3,254,094
1,840,006,606
1,440,006,606
44,393,484
41,393,484
Terms and Conditions
Holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per
share at shareholders’ meetings.
In the event of winding up the Company, ordinary shares rank after all other shareholders and creditors and are fully entitled
to any proceeds from liquidation.
Ordinary shares issued as a result of the exercise of options, will rank equally and on the same terms and conditions as all
other shareholders.
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13c Share options
At 30 June 2015, there were 139,500,000 (2014: 139,500,000) unissued ordinary shares under options.
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2015 ANNUAL REPORT AND STATUTORY FINANCIAL STATEMENTS
PharmAust Limited and its Controlled Entities
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2015
13
ISSUED CAPITAL (Cont.)
13d Capital Management
Management controls the capital of the Group in order to maintain a good debt to equity ratio, provide the shareholders
with adequate returns and ensure that the Group can fund its operations and continue as a going concern.
The Group’s debt and capital includes ordinary share capital and financial liabilities, supported by financial assets.
There are no externally imposed capital requirements.
Management effectively manages the Group’s capital by assessing its financial risks and adjusting its capital structure in
response to changes in these risks and in the market. These responses include the management of debt levels, distributions
to shareholders and share issues.
There have been no changes in the strategy adopted by management to control the capital of the Group since the prior
year. The gearing ratios for the year ended 30 June 15 and 30 June 2014 are as follows:
Total borrowings
10,11
Less: cash and cash equivalents
Net debt
Total equity
Total capital
Gearing ratio
RESERVES
Options reserve
14
Movement in options issued as follow:
2015
At 1 July
At 30 June
2014
At 1 July
Capital raising- free attached options
Share base payment- acquisition of subsidiary
Share base payment- supplier
At 30 June
All the options are exercisable as at 30 June 2015 and 30 June 2014.
CONSOLIDATED
2015
$
2014
$
499,105
(3,411,767)
(2,912,662)
8,839,066
5,926,404
301,527
(2,304,323)
(2,002,796)
7,764,157
5,761,361
-
-
941,629
941,629
No.
139,500,000
139,500,000
No.
-
87,500,000
50,000,000
2,000,000
139,500,000
Weighted
Average
Exercise Price
$
0.02
0.02
Weighted
Average
Exercise Price
$
-
0.02
0.02
0.02
0.02
As at the date of exercise, the weighted average share price of options exercised during the year was $0.02
(2014:$0.02).
The weighted average remaining contractual life of options outstanding at year-end was 0.16 years (2014: 1.16 years).
The exercise price of outstanding shares at the end of the reporting period was $0.02 (2014: $0.02).
- 37 -
2015 ANNUAL REPORT AND STATUTORY FINANCIAL STATEMENTS
PharmAust Limited and its Controlled Entities
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2015
15 RELATED PARTY TRANSACTIONS
Aggregate amounts of each type of transaction with directors other
than directors fees are as follows:
Re-imbursement of rental and variable outgoings expenses for the
Company’s principal place of business – Bryant Mclarty
Amount payable to related parties:
Trade and other payables
CONSOLIDATED
2015
$
2014
$
-
-
12,000
-
Transactions between related parties are on normal commercial terms and conditions which are no more favourable than
those available to other parties. There were no related party transactions other than those transactions identified above and
key management personnel remuneration.
16
EARNINGS PER SHARE
Net (loss) attributable to members of the Company
(1,925,091)
(1,317,853)
Weighted average number of ordinary shares outstanding during
the year used in calculating basic earnings per share.
No.
No.
1,517,091,538
1,332,236,058
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Basic Earnings per Share
Basic earnings per share is determined by dividing the loss after income tax attributable to members of the Company by the
weighted average number of ordinary shares outstanding during the financial period, adjusted for any bonus elements in
ordinary shares issued during the year.
Diluted Earnings per Share
Diluted earnings per share is the same as basic earnings per share as there were no options on issue which would be
potential ordinary shares.
16b
17 AUDITOR’S REMUNERATION
Remuneration of RSM Bird Cameron Partners as auditor for:
- auditing or reviewing the financial report
- taxation services
60,000
27,650
87,650
59,000
17,350
76,350
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- 38 -
2015 ANNUAL REPORT AND STATUTORY FINANCIAL STATEMENTS
PharmAust Limited and its Controlled Entities
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2015
18
FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
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The Group’s financial instruments consist mainly of deposits with banks, local money market instruments, short-term
investments, accounts receivable and payable, loans to and from subsidiaries, borrowings and leases.
The totals for each category of financial instruments, measured in accordance with AASB 139 as detailed in the accounting
policies to these financial statements, are as follows:
Financial assets
Cash and cash equivalents
Financial assets at fair value through profit or loss:
– held for trading
Note
Consolidated
2015
$
2014
$
4
7
3,411,767
2,304,323
7,200
7,000
Loans and receivables (excluding GST)
5a,6
248,971
135,444
Total financial assets
Financial liabilities
Financial liabilities at amortised cost:
–
trade and other payables
– borrowings
Total financial liabilities
3,667,938
2,446,767
10
11
459,610
230,436
39,495
71,091
499,105
301,527
Specific Financial Risk Exposures and Management
The main risks arising from the Group’s financial instruments are cash flow interest rate risk, liquidity risk and foreign exchange
risk. Other minor risks are either summarised below or disclosed at Note 5 in the case of credit risk and Note 13 in the case of
capital risk management. The Board reviews and agrees policies for managing each of these risks.
Cash Flow Interest Rate Risk
The Group’s exposure to the risks of changes in market interest rates relates primarily to the Group’s short-term deposits with a
floating interest rate. These financial assets with variable rates expose the Group to cash flow interest rate risk. All other
financial assets and liabilities in the form of receivables and payables are non-interest bearing. The Group does not engage
in any hedging or derivative transactions to manage interest rate risk.
The following tables set out the carrying amount by maturity of the Group’s exposure to interest rate risk and the effective
weighted average interest rate for each class of these financial instruments.
The Group has not entered into any hedging activities to cover interest rate risk. In regard to its interest rate risk, the Group
does not have a formal policy in place to mitigate such risks.
2015
Financial Assets
Cash and cash equivalents
Trade and other receivables
Other financial assets
Total financial assets
Financial liabilities
Trade and other payables
Borrowings
Total financial liabilities
Net Financial
Assets/(Liabilities)
Weighted
Average
Interest
Rate
2.38%
-
-
-
11.25%
Fixed Interest
Rate
Within 1 Year
$
2,513,871
-
-
2,513,871
Floating
Interest
Rate
$
897,896
-
-
897,896
Fixed
Interest
Rate
Within 1-5
Years
$
-
-
-
-
Non-Interest
Bearing
$
-
248,971
7,200
256,171
Total
$
3,411,767
248,971
7,200
3,667,938
-
-
-
-
(31,596)
(31,596)
-
(7,899)
(7,899)
(459,610)
-
(459,610)
(459,610)
(39,495)
(499,105)
897,896
2,482,275
(7,899)
(203,439)
3,168,833
- 39 -
2015 ANNUAL REPORT AND STATUTORY FINANCIAL STATEMENTS
PharmAust Limited and its Controlled Entities
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2015
18
FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (Cont.)
Cash Flow Interest Rate Risk (Cont.)
2014
Financial Assets
Cash and cash equivalents
Trade and other receivables
Other financial assets
Total financial assets
Financial liabilities
Trade and other payables
Borrowings
Total financial liabilities
Net Financial
Assets/(Liabilities)
Interest rate sensitivity analysis
Weighted
Average
Interest
Rate
2.9%
-
-
-
11.25%
Fixed Interest
Rate
Within 1 Year
$
Fixed
Interest
Rate
Within 1-5
Years
$
-
-
-
-
-
-
-
-
Floating
Interest
Rate
$
2,304,323
-
-
2,304,323
Non-Interest
Bearing
$
-
135,444
7,000
142,444
Total
$
2,304,323
135,444
7,000
2,446,767
-
-
-
-
(31,596)
(31,596)
-
(39,495)
(39,495)
(230,437)
-
(230,437)
(230,437)
(71,091)
(301,528)
2,304,323
(31,596)
(39,495)
(87,993)
2,145,239
At 30 June 2015, if interest rates had changed by 100 basis points during the entire year with all other variables held constant,
profit for the year and equity would have been $8,979 (2014:$ 23,043) lower/higher, mainly as a result of lower/higher interest
income from cash and cash equivalents.
Based on the sensitivity analysis only interest revenue from variable rate deposits and cash balances are impacted resulting
in a decrease or increase in overall income.
Liquidity risk
The Group manages liquidity risk by maintaining sufficient cash reserves and marketable securities and through the continuous
monitoring of budgeted and actual cash flows.
Contracted maturities
Payables
- within 1 year
Borrowings
- within 1 year
Price risk
The Group is not exposed to price risk.
CONSOLIDATED
2015
$
2014
$
459,610
230,436
31,596
31,596
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2015 ANNUAL REPORT AND STATUTORY FINANCIAL STATEMENTS
PharmAust Limited and its Controlled Entities
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2015
18
FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (Cont.)
Foreign exchange risk
The Group is exposed to foreign exchange rate arising from various currency exposures. Foreign exchange risk arises from
future commercial transactions and recognised assets and liabilities denominated in a currency that is not the Group’s
functional currency.
The Group’s exposure to foreign currency risk at the reporting date was as follows:
USD
$
2015
EUR
$
2014
GBP
$
USD
$
EUR
$
Trade receivables
Trade payables
121,738
5,964
5,680
694
-
-
21,986
2,950
3,422
14,243
Foreign currency risk sensitivity analysis
GBP
$
2,040
-
At 30 June, the effect on profit and equity as a result of changes in the value of the Australian Dollar to the foreign
currencies, with all other variables remaining constant is as follows:
2015
Change in profit and equity with a +/-
10% in AUD to
EUR
$
GBP
$
USD
$
2014
Change in profit and equity with a +/-
10% in AUD to
USD
$
EUR
$
GBP
$
910
-
Trade receivables
Trade payables
11,620
569
542
66
-
-
1,231
165
1,057
4,398
Net fair values
For assets and other liabilities the net fair value approximates their carrying value. The Group has no financial assets where
the carrying amount exceeds net fair values at reporting date.
The aggregate net fair values and carrying amounts of financial assets and financial liabilities are disclosed in the statement
of comprehensive income and in the notes to the financial statements.
Financial instruments at fair value
The financial instruments recognised at fair value in the statement of financial position have been analysed and classified
using the fair value hierarchy reflecting the significance of the inputs used in making the measurements. The fair value
hierarchy consists of the following levels:
-
- inputs other than quoted prices included with Level 1 that are observable for the asset or liability, either directly (as
quoted prices in active markets for identical assets and liabilities (Level 1);
prices) or indirectly (derived from prices) (Level 2); and
- inputs for the asset or liability that are not based on observable market data (unobservable inputs) (Level 3).
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19
2015
Financial assets held for trading
2014
Financial assets held for trading
INVESTMENT IN CONTROLLED ENTITIES
Parent Entity:
PharmAust Limited
Name of Controlled Entity:
Epichem Pty Ltd
Pitney Pharmaceuticals Pty Ltd
LEVEL 1
LEVEL 2
LEVEL 3
$
$
$
7,200
7,200
7,000
7,000
-
-
-
-
TOTAL
$
7,200
7,200
7,000
7,000
-
-
-
-
COUNTRY OF
CORPORATION
CLASS OF SHARES
EQUITY HOLDING
2015
%
EQUITY HOLDING
2014
%
Australia
-
Australia
Australia
Ordinary
Ordinary
-
100
100
-
100
100
- 41 -
2015 ANNUAL REPORT AND STATUTORY FINANCIAL STATEMENTS
PharmAust Limited and its Controlled Entities
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2015
20
NOTES TO THE STATEMENT OF CASH FLOWS
20a
Reconciliation of Cash
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20b
Reconciliation of net cash used in operating activities to loss after
income tax
CONSOLIDATED
2015
$
2014
$
3,411,767
2,304,323
Loss after income tax
(1,925,091)
(1,317,853)
Depreciation
Provision for doubtful debt
Unrealised loss/(gain) on financial assets
Share Based Payment
Movement in assets and liabilities:
Receivables
Other assets
Payables
Provisions
77,146
(18)
(200)
-
(125,025)
(47,397)
229,174
40,165
53,365
6,051
(4,950)
8,039
(44,252)
(16,381)
(242,130)
(30,244)
Net cash used in operating activities
(1,751,246)
(1,588,355)
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20c Acquisition of subsidiary- Pitney Pharmaceuticals Pty Ltd
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During the previous year, the consolidated entity acquired 100% of the voting share of Pitney Pharmaceuticals Pty Ltd.
The acquisition provides the company the exclusive rights to the licences of three technology platforms in the field of
oncology.
Total consideration for the acquisition was $5,509,000 and comprised an issue of shares and options. The acquisition does
not constitute a business combination but rather an acquisition of assets.
The fair value of the identifiable assets and liabilities as at the date of acquisition are:
Cash and cash equivalents
Trade and other receivables
Trade and other payables
Intangible assets on consolidation
Cost of the acquisition:
Securities issued (shares and options), at fair value
Total cost of the acquisition
Recognised on
acquisition
$
372,711
9,377
(52,216)
5,179,128
5,509,000
5,509,000
5,509,000
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Revenue of Pitney Pharmaceuticals Pty Ltd included in the consolidated revenue of the Group since the acquisition date on 12
August 2013 amounted to $8,287. Loss of Pitney Pharmaceuticals Pty Ltd included in consolidated loss of the Group since the
acquisition date amounted to $25,189.
20e Non-cash Financing and Investing Activities
i. The consolidated entity acquired plant and equipment with an aggregate value of Nil (2014: $94,787) by means of
finance leases. These acquisitions are not reflected in the statement of cash flows.
ii. During the previous year, shares and options were issued at $0.011 and $0.00632 respectively as part of the consideration
for the purchase of Pitney Pharmaceuticals Pty Ltd. The shares and options issue were based on the fair value of the
company which was determined by quoted active market prices price and appropriate valuation technique used.
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2015 ANNUAL REPORT AND STATUTORY FINANCIAL STATEMENTS
PharmAust Limited and its Controlled Entities
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2015
21
SHARE BASED PAYMENTS
Share granted as share based payments are as follows:
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Grant Date
12 August 2013
2015
2014
Number
-
Number
472,500,000
The weighted average fair value of those equity instruments was determined by reference to the market price which was
$0.011 (2014: $0.011).
In 2015, there were no share based payments.
In 2014, these shares were issued as part of the consideration for the acquisition of Pitney Pharmaceuticals Pty Ltd. Refer
to Note 20c for further details of the acquisition of subsidiary.
Options granted as share based payments are as follows:
2014
Grant date
Expiry date
Exercise
price
Number
05/08/2013*
31/08/2015
16/10/2013**
31/08/2015
$0.02
$0.02
50,000,000
2,000,000
52,000,000
* The options are issued as part of the consideration for acquisition of Pitney Pharmaceuticals Pty Ltd.
**The options are issued to Peloton Capital Pty Ltd as part of corporate advisory service provided.
The fair values were calculated using the Black-Scholes option pricing model applying the following input:
Share price
Exercise
Expected
Dividend
Risk-free
Fair value
Options
at grant
date
50,000,000
2,000,000
$0.012
$0.01
KEY MANAGEMENT PERSONNEL
price
volatility
yield
interest rate
at grant date
$0.02
$0.02
120.00%
110.00%
0%
0%
2.37%
2.82%
$0.00623
$0.00402
22
22a Remuneration of Key Management Personnel
Refer to the remuneration report contained in the directors’ report for details of the remuneration paid or payable to each
member of the consolidated entity’s key management personnel for the year ended 30 June 2015 and 30 June 2014.
The totals of remuneration paid to key management personnel of the consolidated entity during the year are as follows:
Short term employee benefits
Post-employment benefits
838,230
69,656
907,886
600,500
45,139
645,639
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2015 ANNUAL REPORT AND STATUTORY FINANCIAL STATEMENTS
PharmAust Limited and its Controlled Entities
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2015
23 COMMITMENTS
23a Corporate advisory fees
- Not later than 12 months
- Between 12 months and 5 years
Minimum payments
23b Office lease commitments
- Later than 5 years
Minimum lease payments
24 SEGMENT REPORTING
Segment Information
Non-cancellable operating leases contracted for but not recognised in the financial statements:
Payable – minimum lease payments
- Not later than 12 months
- Between 12 months and 5 years
CONSOLIDATED
2015
$
2014
$
-
-
-
37,500
-
37,500
140,450
530,000
651,459
1,321,909
6,300
-
-
6,300
Identification of reportable segments
The Group has identified its operating segments based on the internal reports that are reviewed and used by the Directors (chief
operating decision makers) in assessing performance and determining the allocation of resources.
Descriptions of segments
i.
ii.
Corporate
The corporate segment covers all the corporate overhead expenses.
Pharmaceutical
The pharmaceutical segment provides products and services in synthetic and medicinal chemistry to the drug
discovery and pharmaceutical industries.
Basis of accounting for purposes of reporting by operating segments
a.
Accounting policies adopted
All amounts reported to the Directors, being the chief decision makers with respect to operating segments, are
determined in accordance with accounting policies that are consistent to those adopted in these financial
statements.
b.
Intersegment transactions
There are no intersegment sales and purchase within the consolidated entity.
Intersegment loans payable and receivable are initially recognised at the consideration received/to be received net
of transaction costs.
c.
Segment assets
Where an asset is used across multiple segments, the asset is allocated to the segment that receives majority
economic value from the asset. In the majority of instances, segment assets are clearly identifiable on the basis of
their nature and physical location.
d.
Segment liabilities
Liabilities are allocated to segments where there is a direct nexus between the incurrence of the liability and the
operations of the segment.
- 44 -
2015 ANNUAL REPORT AND STATUTORY FINANCIAL STATEMENTS
PharmAust Limited and its Controlled Entities
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2015
24 SEGMENT REPORTING (Cont.)
The consolidated entity operates in three business segments as disclosed below:
i)
Segment Performance
Consolidated
2015
Revenue
External sales
Other external revenue
Inter-segment sales
Total segment revenue
Inter-segment elimination
Total revenue per statement of
comprehensive income
Results
Segment result from continuing
operations before tax
Consolidated
2014
Revenue
External sales
Other external revenue
Inter-segment sales
Total segment revenue
Inter-segment elimination
Total revenue per statement of
comprehensive income
Results
Segment result from continuing
operations before tax
Corporate
Pharmaceutical
$
$
Total
$
-
318,872
-
318,872
1,869,204
231,944
46,415
2,147,563
1,869,204
550,816
46,415
2,466,435
(46,415)
2,420,020
(1,917,693)
(7,398)
(1,925,091)
Corporate
Pharmaceutical
$
$
Total
$
-
98,318
-
98,318
1,908,768
-
-
1,908,768
1,908,768
98,318
-
2,007,086
-
2,007,086
(1,412,667)
94,814
(1,317,853)
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- 45 -
2015 ANNUAL REPORT AND STATUTORY FINANCIAL STATEMENTS
PharmAust Limited and its Controlled Entities
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2015
24 SEGMENT REPORTING (Cont.)
ii) Segment assets and liabilities
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Consolidated
2015
Segment assets
Segment assets
Total assets of the consolidated entity:
Segment liabilities
Segment operating liabilities
Total liabilities of the consolidated entity:
Consolidated
2014
Segment assets
Segment assets
Total assets of the consolidated entity:
Segment liabilities
Segment operating liabilities
Total liabilities of the consolidated entity:
ii) Revenue by geographical region
Corporate
$
Pharmaceutical
$
Total
$
2,914,168
6,608,117
(330,711)
(352,508)
9,522,285
9,522,285
(683,219)
(683,219)
Corporate
$
Pharmaceutical
$
Total
$
1,774,435
6,435,198
(118,867)
(326,610)
8,209,633
8,209,633
(445,477)
(445,477)
Revenue by geographical region
Revenue attributable to external customers is disclosed
below, based on the location of the external customer:
Switzerland
Australia
Others
Total revenue
Assets by geographical region
The location of segment assets by geographical location of
the assets is disclosed below:
Australia
Total assets
Major customers
CONSOLIDATED
2015
$
2014
$
931,538
1,228,137
260,345
2,420,020
1,167,529
358,141
481,416
2,007,086
9,522,285
9,522,285
8,209,633
8,209,633
The consolidated entity has a number or customers to which it provides both products and services. The consolidated
entity supplies a single external customer within the pharmaceutical segment who accounts for 62% of external revenue
(2014: 72%). The next most significant customer accounts for less than 10% of external revenue.
- 46 -
2015 ANNUAL REPORT AND STATUTORY FINANCIAL STATEMENTS
PharmAust Limited and its Controlled Entities
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2015
25
CONTINGENT LIABILITIES
The consolidated entity has the following contingent liabilities at reporting date:
Issue of additional shares
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As part of Share Sale Agreement to acquire Pitney Pharmaceuticals Pty Ltd, the consolidated entity will issue additional shares
of 50 million each to the seller upon meeting the three milestones.
The three milestones are:
Milestone 1 - One of the consolidated entity’s products being granted investigational new drug (IND) status from the US
Food and Drug Administration and the Company receiving an IND number issued by the US Food and Drug Administration
within 5 years of the Settlement Date and provided this is no later than 31 October 2018;
Milestone 2 - Commencement of treatment of the first patient under a Phase II Trial with the product Albendazole within 5
years of the Settlement Date and provided this is no later than 31 October 2018; and
Milestone 3 - Commencement of treatment of the first patient under a Phase II Trial using the product Monepantel within 5
years of the Settlement Date and provided this is no later than 31 October 2018.
Issue of options
As part of the corporate advisory mandate signed with Peloton Capital Pty Ltd whom is to provide advisory services to the
company in relation to the placement of any further current capital raising and increase the consolidated entity’s profile and
share price by way of investor relations initiatives, the consolidated entity will issue three trenches of 2.5 million options each
at exercise price of $0.02 and expire on 31 August 2015 upon the consolidated entity’s share prices reaching weighted
average of $0.02, $0.03 and $0.04 respectively for a 30 day period. No such options have been issued to date.
Other than the above, there were no other material contingent liabilities or contingent assets.
26 PARENT INFORMATION
Statement of Financial Position
Assets
Current assets
Non-current assets
Total assets
Liabilities
Current liabilities
Non -current liabilities
Total liabilities
Equity
Issued capital
Reserves
Accumulated losses
Total equity
Statement of comprehensive income
(Loss) for the year
Other comprehensive income
Total comprehensive loss for the year
2015
$
2014
$
8,413,567
385,003
8,798,570
7,266,967
16,468
7,283,435
337,632
214,063
551,695
118,867
-
118,867
44,393,484
941,629
(37,088,238)
8,246,875
41,393,484
941,629
(35,170,545)
7,164,568
(1,917,693)
-
(1,917,693)
(1,412,667)
-
(1,412,667)
Guarantees
PharmAust Limited is a guarantor of a debt facility for its fully owned subsidiary during the year as disclosed in Note 11.
Other Commitments and Contingencies
PharmAust Limited has no commitments to acquire property, plant and equipment and has no contingent liabilities other
than disclosed in Note 25.
- 47 -
2015 ANNUAL REPORT AND STATUTORY FINANCIAL STATEMENTS
PharmAust Limited and its Controlled Entities
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2015
27
28
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EQUITY- ACCUMULATED LOSSES
Accumulated losses at beginning of the financial year
(Loss)after income tax for the year
Accumulated losses at the end of the financial year
EVENTS AFTER THE REPORTING PERIOD
CONSOLIDATED
2015
$
2014
$
(34,570,956)
(1,925,091)
(36,496,047)
(33,253,103)
(1,317,853)
(34,570,956)
On 7 July 2015 the Group entered into a construction contract with a value of $1,591,634 to construct a laboratory.
On 14th July 2015, the group received $411,000 from DNDi (currently the group’s largest client) as an advanced payment
for work yet to be completed on its flagship project on Chagas disease.
Other than the above, the directors are not aware of any significant events since the end of the reporting period.
NEW ACCOUNTING STANDARDS AND INTERPRETATIONS NOT YET MANDATORY 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
2015. 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.
AASB 9 Financial Instruments
This standard is applicable to annual reporting periods beginning on or after 1 January 2018. The standard replaces all
previous versions of AASB 9 and completes the project to replace IAS 39 'Financial Instruments: Recognition and
Measurement'. AASB 9 introduces new classification and measurement models for financial assets. A financial asset
shall be measured at amortised cost, if it is held within a business model whose objective is to hold assets in order to
collect contractual cash flows, which arise on specified dates and solely principal and interest. All other financial
instrument assets are to be classified and measured at fair value through profit or loss unless the entity makes an
irrevocable election on initial recognition to present gains and losses on equity instruments (that are not held-for-
trading) in other comprehensive income ('OCI'). For financial liabilities, the standard requires the portion of the change
in fair value that relates to the entity's own credit risk to be presented in OCI (unless it would create an accounting
mismatch). New simpler hedge accounting requirements are intended to more closely align the accounting treatment
with the risk management activities of the entity. New impairment requirements will use an 'expected credit loss' ('ECL')
model to recognise an allowance. Impairment will be measured under a 12-month ECL method unless the credit risk
on a financial instrument has increased significantly since initial recognition in which case the lifetime ECL method is
adopted. The standard introduces additional new disclosures. The consolidated entity will adopt this standard from 1
July 2018 but the impact of its adoption is yet to be assessed by the consolidated entity.
AASB 15 Revenue from Contracts with Customers
This standard is applicable to annual reporting periods beginning on or after 1 January 2017. The standard provides a
single standard for revenue recognition. The core principle of the standard is that an entity will recognise revenue to
depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which
the entity expects to be entitled in exchange for those goods or services. The standard will require: contracts (either
written, verbal or implied) to be identified, together with the separate performance obligations within the contract;
determine the transaction price, adjusted for the time value of money excluding credit risk; allocation of the transaction
price to the separate performance obligations on a basis of relative stand-alone selling price of each distinct good or
service, or estimation approach if no distinct observable prices exist; and recognition of revenue when each
performance obligation is satisfied. Credit risk will be presented separately as an expense rather than adjusted to
revenue. For goods, the performance obligation would be satisfied when the customer obtains control of the goods.
For services, the performance obligation is satisfied when the service has been provided, typically for promises to
transfer services to customers. For performance obligations satisfied over time, an entity would select an appropriate
measure of progress to determine how much revenue should be recognised as the performance obligation is satisfied.
Contracts with customers will be presented in an entity's statement of financial position as a contract liability, a contract
asset, or a receivable, depending on the relationship between the entity's performance and the customer's payment.
Sufficient quantitative and qualitative disclosure is required to enable users to understand the contracts with customers;
the significant judgments made in applying the guidance to those contracts; and any assets recognised from the costs
to obtain or fulfil a contract with a customer. The consolidated entity will adopt this standard from 1 July 2017 but the
impact of its adoption is yet to be assessed by the consolidated entity.
- 48 -
2015 ANNUAL REPORT AND STATUTORY FINANCIAL STATEMENTS
PharmAust Limited and its Controlled Entities
SHAREHOLDER INFORMATION
Additional information required by the Australian Stock Exchange Limited Listing Rules, and not disclosed elsewhere in this report.
SHAREHOLDINGS
At the date of this report two shareholders had lodged substantial shareholder notices with the Company.
a) Professor David Morris is a substantial shareholder holding a relevant interest in 177,214,206 shares representing 9.63% of
the voting power.
b) Dr Roger Aston is a substantial shareholder holding a relevant interest in 105,282,951 shares representing 5.72% of the
voting power.
CLASS OF SHARES AND VOTING RIGHTS
The voting rights attached to the Fully Paid Ordinary shares of the Company are:
(a)
(b)
at a meeting of members or classes of members each member entitled to vote may vote
in person or by proxy or by attorney; and
on a show of hands every person present who is a member has one vote, and on a poll
every person present in person or by proxy or attorney has one vote for each ordinary share held.
There are no voting rights attached to any Options on issue.
ORDINARY FULLY PAID SHARES (TOTAL) As of 21 August 2015
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LISTED OPTIONS EXPIRE 31/08/15 @ $0.02 As of 21 August 2015
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There is no current on-market buy back taking place.
During the reporting period the Company used its cash and assets in a manner consistent with its business objectives.
- 49 -
2015 ANNUAL REPORT AND STATUTORY FINANCIAL STATEMENTS
PharmAust Limited and its Controlled Entities
SHAREHOLDER INFORMATION (Cont.)
TWENTY LARGEST SHAREHOLDERS (as at 21 Aug 2015)
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Rank Name
Units
% of Units
1.
2.
3.
4.
5.
6.
7.
8.
9.
PROFESSOR DAVID LAWSON MORRIS
DR ROGER ASTON
PERSHING AUSTRALIA NOMINEES PTY LTD
MYALL RESOURCES PTY LTD
ONMELL PTY LTD
LONGBOW CROFT CAPITAL PTY LTD
ZACHARIAH INVESTMENTS PTY LTD
ABN AMRO CLEARING SYDNEY NOMINEES PTY LTD
DR PAUL ANTHONY PORTER + DR TI-WAN NG
10. MR GRAHAM JAMES DARCY + MRS LYNNE CHRISTINE DARCY
11. WEBINVEST PTY LTD
12. MR ZHONGSHI WU
13. MR GREGORY PAUL YEATMAN
14.
OMNIOFFICES PTY LIMITED
15. MR GERALD JAMES VAN BLOMMESTEIN + MRS GILLIAN VAN BLOMMESTEIN
16.
17.
18.
19.
20.
GRANDLODGE PTY LTD
DASH CORP PTY LIMITED
DEPOFO PTY LTD
LINWIERIK SUPER PTY LTD
PLANE SAILING TRAILS PTY LTD
Totals: Top 20 holders
Total Remaining Holders Balance
173,116,590
104,282,951
101,646,496
86,000,000
57,556,052
52,571,824
44,000,000
34,741,150
34,634,099
27,000,000
26,495,749
25,000,000
25,000,000
24,712,305
23,735,705
19,108,280
15,923,566
12,754,141
12,738,853
12,602,793
9.41
5.67
5.52
4.67
3.13
2.86
2.39
1.89
1.88
1.47
1.44
1.36
1.36
1.34
1.29
1.04
0.87
0.69
0.69
0.68
913,620,554
926,386,052
49.65
50.35
TWENTY LARGEST OPTIONHOLDERS (as at 21 Aug 2015)
Rank Name
Units % of Units
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
FIRST INVESTMENT PARTNERS PTY LTD
MR STEVEN GARY HIRST
MR GRANTLAND LLOYD PEARCE
JYZ SUPER PTY LTD
MR EMAD ABDULHADI MALAEKAH
NTJ INVESTMENTS PTY LTD
ELHKAN PTY LTD
MISS LEONIE JANE AKGOZ
MR DEVAKA SANATH HATTHOTUWA
TOCAROLY PTY LTD
VASTE DEVELOPMENTS PTY LTD
MAGEE HOLDINGS PTY LTD
RBM NOMINEES PTY LTD
MYALL RESOURCES PTY LTD
MR GEORGE CATSAROS
MR ANDREW JAMES MITCHELL + MRS CAROLYN ANNE MITCHELL
NABIL GREGE PTY PTD
MR RUSSELL WILLIAM OWEN + MR RICHARD STEWART OWEN
UBS WEALTH MANAGEMENT AUSTRALIA NOMINEES PTY LTD
CHIMAERA CAPITAL LIMITED
19,085,241
10,333,333
6,000,000
5,978,000
4,000,000
4,000,000
3,000,000
2,500,000
2,500,000
2,500,000
2,500,000
2,300,000
2,062,500
2,025,000
2,000,000
2,000,000
2,000,000
2,000,000
1,900,000
1,843,750
13.68
7.41
4.30
4.29
2.87
2.87
2.15
1.79
1.79
1.79
1.79
1.65
1.48
1.45
1.43
1.43
1.43
1.43
1.36
1.32
Totals: Top 20 holders
Total Remaining Holders Balance
80,527,824
58,972,178
57.73
42.27
- 50 -