Plains All American Pipeline
Annual Report 2021

Plain-text annual report

ABN 35 094 006 023 Annual Report 2021 2021 ANNUAL REPORT AND STATUTORY FINANCIAL STATEMENTS PharmAust Limited and its Controlled Entities - 2 - CONTENTS Corporate Directory Directors' Report Auditor’s Independence Declaration Independent Auditor’s Report Directors’ Declaration Statement of Profit or Loss and Other Comprehensive Income Statement of Financial Position Statement of Changes in Equity Statement of Cash Flows Notes to the Financial Statements Shareholder Information 3 4 21 22 25 26 27 28 29 30 56 2021 ANNUAL REPORT AND STATUTORY FINANCIAL STATEMENTS PharmAust Limited and its Controlled Entities - 3 - CORPORATE DIRECTORY DIRECTORS Dr Roger Aston Mr Robert Bishop Mr Sam Wright Mr Neville Bassett AM COMPANY SECRETARY Mr Sam Wright REGISTERED OFFICE Suite 116, 1 Kyle Way Claremont, Western Australia 6010 Tel +61 (8) 9202 6814 Fax +61 (8) 9467 6111 PRINCIPAL PLACE OF BUSINESS PharmAust Limited Suite 116, 1 Kyle Way Claremont, Western Australia 6010 Tel +61 (8) 9202 6814 Fax +61 (8) 9467 6111 www.pharmaust.com ASX CODE: PAA Epichem Pty Ltd Suite 5, 3 Brodie-Hall Drive Bentley WA 6102 SHARE REGISTRY Computershare Investor Services Pty Limited Level 11, 172 St George’s Terrace Perth, Western Australia 6000 AUDITORS RSM Australia Partners 2 The Esplanade Perth, Western Australia 6000 SOLICITORS Fairweather Corporate Lawyers Suite 2, 589 Stirling Highway Cottesloe, Western Australia 6011 STOCK EXCHANGE Australian Securities Exchange Central Park 152-158 St Georges Terrace Perth, Western Australia 6000 ASX CODE: PAA 2021 ANNUAL REPORT AND STATUTORY FINANCIAL STATEMENTS PharmAust Limited and its Controlled Entities - 4 - DIRECTORS’ REPORT The Directors present their report, together with the financial statements, on the consolidated entity consisting of PharmAust Limited and the entities it controlled at the end of, or during, the year ended 30 June 2021. Directors The following persons held office as directors of PharmAust Limited during the whole of the financial year and up to the date of this report, unless otherwise stated: Dr Roger Aston Executive Chairman Mr Robert Bishop Executive Director Mr Sam Wright Non-Executive Director & Company Secretary Mr Neville Bassett Non-Executive Director Principal Activities 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 for the treatment of different types of cancers, viral and neurological diseases, as well as providing highly specialised medicinal and synthetic chemistry services on a contract basis to clients.. Operating Results The results of the consolidated entity for the year ended 30 June 2021 was a loss, after income tax expense of $1,337,310 (2020: loss of $1,361,990). Financial Position The net assets of the consolidated entity were $8,880,484 as at 30 June 2021 (2020: $8,526,269). Dividends Since the end of the financial year, no dividend has been paid, declared or recommended. Review of Operations PITNEY PHARMACEUTICALS PTY LIMITED – 100% OWNED SUBSIDIARY PharmAust Limited is focused on developing therapeutics for cancer, neurodegenerative diseases and viral infections in humans and cancer for pet dogs. PharmAust’s lead molecule for this purpose is monepantel (MPL). MPL is a veterinary drug registered for use by a major pharmaceutical company as a wormicide in many global jurisdictions. PharmAust discovered independently that MPL interacts in a previously unrecognized ”off-target” manner with the mTOR (mechanistic Target of Rapamycin) pathway, an important regulatory pathway in mammalian cells. It is apparent that molecules such as MPL that target the mTOR pathway have relevant therapeutic value in a wide range of diseases. PharmAust’s wholly owned subsidiary Pitney Pharmaceuticals Pty Ltd owns a number of granted patents offering protection for the use of MPL in cancer therapy and providing cover for the use of MPL in neurodegenerative diseases such as Motor Neuron Disease, Parkinson’s Disease and Alzheimer’s Disease. Pitney has further recently submitted novel patents to cover the use of MPL in the treatment of COVID-19 and other related viral infections. The fact that MPL is already approved for use in animals in a number of major jurisdictions (EU/UK, Australia) means that the development process for PharmAust is simpler and cheaper than it would be if MPL were a new API (Active Pharmaceutical Ingredient). In line with its strategic objectives, PharmAust signed an agreement with UNSW-NSI, the commercial arm of the University of NSW to acquire all the rights to MPL. PharmAust is therefore in a strong position to license and co-develop MPL with third parties and co- development partners. PharmAust further signed an agreement with Nihon Nohyaku, the original MPL developer, to acquire the rights to a suite of closely related MPL analogues. PharmAust’s additional wholly owned subsidiary Epichem Pty Ltd, a fine chemicals manufacturer, also independently created through its medicinal chemistry arm an alternative and complementary MPL analogue suite. The patent rights to MPL combined with the patent rights to the Nihon Nohyaku and Epichem MPL analogue suites place PharmAust in a strong position to commercialise outcomes of mTOR pathway inhibition by this drug class in cancer, viral infections such as those that lead to COVID-19, and neurodegeneration. In order to further the development of its products and add value for shareholders, PharmAust changed the original liquid monepantel formula to a novel monepantel tablet formula to facilitate administration to both dogs and humans. In the period 2020-2021 financial year, PharmAust successfully completed a number of other key milestones. 2021 ANNUAL REPORT AND STATUTORY FINANCIAL STATEMENTS PharmAust Limited and its Controlled Entities - 5 - DIRECTORS' REPORT (Cont.) Achievements during the 2020 - 2021 financial year include: 1. Completion of the first stage-gate and first primary endpoint demonstrating objective anticancer activity in PharmAust’s Bayesian Phase II trial in pet dogs with treatment naïve cancer (B cell lymphoma). One of the first six dogs enrolled in this first high dose cohort had a Veterinary College Oncology Group (VCOG) partial response to monepantel treatment with a greater than 60% reduction in total tumour burden and with some tumours completely regressing. All six dogs had stable target tumour lesions. Low grade weight loss was observed in three dogs and one dog with the highest plasma levels had higher weight loss. The observation of weight loss was sufficient for the principal investigator to call a pause in the trial to reconcile data and dosing strategy. 2. Submission of a Veterinary Trial Report and a separate Dosing Reconciliation Report to a Veterinary Major Pharmaceutical company under an existing Option Agreement. The exercise of the Option Agreement was declined. 3. Acceptance by the Australian Pesticides and Veterinary Medicines Agency (APVMA) for the addition of two more veterinary sites for participation in the B cell lymphoma trial: Veterinary Specialist Services (VSS) in Underwood, Brisbane with Dr Catherine Chan; and Perth Veterinary Services (PVS) in Osborne Park, Perth with Dr Jessica Finlay. 4. Shipment of GMP tablets from Catalent, USA for use at Veterinary Specialist Services (Queensland) and Perth Veterinary Specialists (Western Australia). 5. Ethics approval by the New South Wales (NSW) Department of Primary Industry’s (DPI’s) Secretary’s Animal Ethics and Welfare Committee and the Queensland Department of Agriculture and Fisheries (DAF) Ethics Committee for two separate and additional dosing changes to the veterinary Bayesian trial design. 6. Enrolment of five dogs at a low monepantel dose arm of the Bayesian trial and four dogs at an intermediary dose arm of the Bayesian trial. 7. Completion of the first stage-gate and second primary endpoint demonstrating objective clinical benefit in PharmAust’s Bayesian Phase II trial in pet dogs with treatment naïve cancer. This considers dosing as an independent variable. Six of 15 dogs attained VCOG stable disease or better, with 11 of 15 dogs having stable target tumour lesions while on trial. Weight loss was either absent or of minimal concern in 13 of 15 dogs, while two of 15 dogs exhibited a higher degree of weight loss, that were both ultimately deemed mild. 8. Ethics approval for inclusion of cytokine profiling to study drug-drug interactions in future combinatorial cancer veterinary work. 9. PharmAust’s successful re-accreditation as a Research Establishment for veterinary work by the NSW DPI, the QLD DAF and the Western Australian Department of Primary Industries and Regional Development (DPIRD). 10. The treatment of 10 dogs at various licenced sites throughout Australia with monepantel for B cell lymphoma under compassionate use. This program was restricted to 10 dogs so that tablets could be conserved for the upcoming Phase III registration trial. 11. The award of $881,085 from FightMND to investigate the effects of monepantel upon individuals living with motor neuron disease. 12. Completion of the Investigator’s Brochure and Protocol for the FightMND trial, with acceptance by the Monash Human Research Ethics Committee to undertake the trial. Acceptance by the Therapeutics Goods Administration (TGA) of Australia, to undertake the trial according to the Clinical Trial Notification (CTN) scheme. Acceptance for trial registration on Clinicaltrials.gov at the United States National Library of Medicine at the National Institutes of Health. 13. Completion and demonstration with Professor Marc Pellegrini and the Walter and Eliza Hall Institute (WEHI) that monepantel and monepantel sulfone show efficiency against SARS-CoV2 infection of Calu-3 human cells in vitro. 2021 ANNUAL REPORT AND STATUTORY FINANCIAL STATEMENTS PharmAust Limited and its Controlled Entities - 6 - DIRECTORS' REPORT (Cont.) 14. Collaboration with the Contract Research Organisation 360biolabs Pty Ltd and confirmation that monepantel and monepantel sulfone show efficiency against SARS-CoV2 infection of non-human primate Vero cells in vitro. 15. Collaboration with Associate Professor Martijn van Hemert and the Leiden University Medical Centre in the Netherlands and confirmation that monepantel sulfone shows efficiency against SARS-CoV2 infection of non-human primate Vero cells in vitro. 16. Execution of an Agreement with Dr Cody Allison, a consultant, and WEHI to investigate the effects of monepantel against Human T leukemia virus-1 (HTLV-1) in vitro. This disease has no cure, can cause serious respiratory illness and cancer and is endemic to certain Indigenous sub-populations in Australia and Japan. 17. Successful collaboration with Associate Professor Doug Fairlie and the Olivia Newton John Cancer Research Institute (ONJCRI) for deconvolution of the monepantel anticancer pathway by RNASeq analysis. 18. Signing of a new Agreement with the ONJCRI to undertake proteomics and target validation by CRISPR to confirm involvement of individual molecules identified by pathway deconvolution. 19. The purification at Epichem of 700g of high grade monepantel for PharmAust’s in-house and collaborative preclinical work. 20. Chemical and physical characterisation of monepantel manufactured to PharmAust’s in-house method by Epichem. Demonstration of exceptionally high purity. In silico toxicology screening clears minor impurity constituents (these impurities fall below limits required for reporting to the TGA and FDA, but were qualified regardless). Demonstration of suitability for PharmAust’s up-and-coming Phase I and II clinical trials in humans investigating monepantel as an anti-cancer, anti-neurodegenerative and anti-viral agent. 21. Agreement with Syngene International Ltd for the manufacture of 10 kg of GMP grade monepantel according to PharmAust’s in-house manufacturing protocol. Receipt of all materials after unforeseen delay related to COVID-19 associated supply chain delays and commencement of 100g to 10 kg scale- up feasibility studies. 22. Agreement with Catalent San Diego, USA, to undertake feasibility analysis and GMP production of a bespoke and modified tablet suitable for the FightMND sponsored trial. 23. Demonstration of high tablet stability in two individual GMP manufactured batches: one batch at 12 months and the other at 18 months to date. Stability testing of longer duration are ongoing. 24. PCT filing of a patent describing the antiviral effects of monepantel upon viruses such as SARS-CoV2, the causal agent of COVID 19, and describing the therapeutic window of monepantel in various diseases. 25. Appointment of Dr Kim Agnew as Principal Investigator for Phase II Bayesian Clinical Trial after the departure of Dr Claire Cannon who departed the U-Vet University of Melbourne Practice for work in a private practice. Dr Kim Agnew brings 25 years of veterinary clinical research experience from working with veterinary majors such as Boehringer-Ingelheim, Merial and Elanco. 26. Appointment of Dr Cody Allison to assist WEHI with the HTLV-1 anti-virus work. Dr Allison first worked with PharmAust during the collaboration with WEHI investigating the effects of monepantel upon SARS-CoV2, the causal agent to COVID-19. 27. CSO Dr Richard Mollard, presented at the “Drug Repurposing Forum” held in Bangalore, India. 28. CSO Dr Richard Mollard, presented at the “Continuing Veterinary Education Symposium” held in Perth, Australia. 29. CSO Dr Richard Mollard, re-appointed Honorary Fellow at the Faculty of Veterinary and Agricultural Sciences, at the University of Melbourne. 30. The receipt of $755 598 through the Australian Government R&D Tax Incentive Scheme. 2021 ANNUAL REPORT AND STATUTORY FINANCIAL STATEMENTS PharmAust Limited and its Controlled Entities - 7 - DIRECTORS' REPORT (Cont.) Research and Development Targets 2021-2022: 1. To have a global animal healthcare company exercise an Agreement relating to the use of MPL as a veterinary anti-cancer drug. It should be noted that Elanco patents on MPL begin to expire in 2023-2024, following such expiration the PharmAust patents are expected to have Freedom to Operate. In the meantime, PharmAust would seek a licence from the expiring licence-holder for any period of sales prior to expiry of composition of matter. 2. To undertake a large “First Line Therapy” Phase III clinical trial, with and without standard of care, mutually agreed upon with a partnering global animal healthcare company, in canines with naturally occurring cancer to build on the positive outcomes of the Phase II trial recently conducted. 3. To complete optimization research on the GMP MPL tablet to create a more tailored human product. The current tablet is sufficient for human work, but further optimization will permit greater flexibility for targeting a wider range of human conditions in addition to cancer, such as viral infections (COVID-19) and neurodegenerative disorders. 4. To commence evaluation of the effects of MPL upon preclinical models of neurodegenerative disease to understand mechanisms of neuroprotection. 5. To continue evaluation of the effects of MPL upon preclinical models of cancer and COVID-19 to understand mechanisms of anti-cancer and anti-viral activity. 6. To commence clinical trials evaluating the use of monepantel for the treatment of individuals living with motor neuron disease. PharmAust has secured a FightMND grant for this purpose and has had ethics approved for this trial design by the Monash Human Research Ethics Committee. The trial will be run by Dr Susan Mathers at Calvary Health in Melbourne and Professor Dominic Rowe at Macquarie in Sydney. 7. To commence clinical trials evaluating the use of monepantel for the treatment of COVID-19 infections. PharmAust has already commenced discussions with several Centres regarding the same and has made good progress to date. Factors Supporting PharmAust’s Focus on MPL as an Anti-Cancer Drug: 1. The successful reformulation of MPL by BRI/Catalent into a robust and suitable tablet formulation. 2. Demonstration of MPL activity against naturally occurring B-cell lymphoma in dogs; especially the demonstration of a > 60% reduction in tumour burden and disappearance of several tumours in one dog. 3. Demonstration of activity against a key cancer marker in humans and canines. 4. Demonstration of and better understanding of the very good safety profile in animals tested to date. as well as the human participants in the clinical trial conducted at the Royal Adelaide Hospital. 5. Extensive preclinical R&D package evaluating MPL in many cancers and in many species. 6. Publications in peer-review journals describing anti-cancer activity of MPL in preclinical models. 7. The fact that MPL is already approved for the treatment of parasitic infections in farm animals, which implies that the drug has received extensive regulatory consideration as it is used in food-chain animals. 8. The provision by Elanco of 25 kg of GMP-quality MP. 9. The independent capacity to produce GMP-quality MPL and the GMP-quality Pitney-owned MPL analogues using an alternative method with an alternative company. 10. The provision of the comprehensive regulatory package by Elanco, enabling data cross reference for successful discussions with regulatory bodies. 2021 ANNUAL REPORT AND STATUTORY FINANCIAL STATEMENTS PharmAust Limited and its Controlled Entities - 8 - DIRECTORS' REPORT (Cont.) Factors Supporting PharmAust’s Focus on MPL as an Anti-COVID-19 Drug: 1. Precedent published literature is mixed, but suggestive that, if targeted appropriately, inhibition of mTOR pathways may act in an anti-viral capacity. 2. Now with more certainty, PharmAust has demonstrated MPL’s activity against virus amplification during infection of African Green Monkey kidney cells in vitro. 3. Now with more certainty, PharmAust has demonstrated MPL’s activity against COVID-19 secondary infectivity in African Green Monkey kidney cells and human Calu cells in vitro. Antiviral activity has been confirmed in three independent laboratories. 4. Demonstration that in vitro, MPL’s anti-viral activity can be attained at blood concentrations that are readily attainable using the tablet. 5. MPL’s strong safety profile in the clinic and in animal models including the veterinary cancer studies will support development through Phase I/II trials for the tablet as a COVID-19 anti-viral therapeutic. Factors Supporting PharmAust’s Focus on MPL as an Anti-Neurodegenerative Disease Drug: 1. Precedent published literature implicates mTOR pathways in the control of neurological diseases. 2. PharmAust has published preclinical research demonstrating that MPL impinges upon molecular cascades relevant to correct induction of autophagic flux relevant to the clearance of misfolded neurodegenerative causing proteins. 3. PharmAust has demonstrated MPL’s capacity to cross the blood brain barrier, making MPL a rare drug that inhibits mTOR signaling while being able to act directly on the brain following oral administration as a tablet. 4. MPL’s strong safety profile in the clinic and in animal models including the veterinary cancer studies will support development through Phase I/II trials for the tablet. 5. PharmAust has secured funding and human research ethics clearance to support this trial. Two clinicians have already been recruited to run this trial in two independent sites. EPICHEM PTY LTD - 100% OWNED SUBSIDIARY Epichem, a fully owned subsidiary of PharmAust, is a profitable and award winning medicinal and synthetic chemistry company with expertise and capability in the field of drug development, discovery and design. Epichem provides specialised products and technical expertise to a worldwide customer base in the pharmaceutical, mining, agriculture and animal health sectors. Epichem also manufactures Pharmaceutical Reference Materials and Fine Chemicals and supports the PharmAust Drug Development Pipeline with Lead Drug Development and Validation, Drug Candidate Pipeline Manufacture and Analysis, Drug reformulation, GMP synthesis and stability support as well as Drug Inventory dispensing to clinical trial centres. Epichem continues to support the PharmAust Drug Development Pipeline with Lead drug development and validation, drug candidate pipeline manufacture and analysis, drug reformulation, GMP synthesis and stability support as well as Drug inventory dispensing to clinical trial centres. Epichem continues to pursue opportunities to create its own IP portfolio with the assignment of specific projects to individual chemists. This will also allow Epichem to maximise the R&D Tax Incentive as well as act as an R&D project incubator for PharmAust. During the financial year, Epichem entered into a licensing agreement with Illinois-based Thermaquatica Inc to research, develop and promote a novel, innovative and disruptive waste to fuels technology. The technology is a world-first because of its potential to turn a wide range of waste and biomass feedstock into valuable fuels, fine chemicals, agricultural growth stimulants and ethanol. The Company sees this as a low cost but high potential initiative in a very scalable and disruptive business that may have multiple uses and customers. Epichem is capitalising on recent Australian policies at national, state and local government levels towards zero organic waste to landfill. Epichem received $200,000 from the WasteSorted e-Waste Grant in April 2021 from the Western Australian Government New Industries Fund. In December 2020, Epichem was awarded another one year extension to its current contract with Drugs for Neglected Diseases initiative (DNDi), extending that relationship to 13 years. The contract renewal will see Epichem continue to provide its synthetic and medicinal chemistry expertise to support DNDi’s drug discovery projects, aimed at developing new treatments for neglected diseases, until 31st December 2021. The extension is expected to generate up to AUD$1.02M in revenues for Epichem during CY 2021. 2021 ANNUAL REPORT AND STATUTORY FINANCIAL STATEMENTS PharmAust Limited and its Controlled Entities - 9 - DIRECTORS' REPORT (Cont.) PHARMAUST LTD – PARENT ENTITY Annual General Meeting The Annual General Meeting of the Shareholders of PharmAust Limited was held on 5 November 2020 as a virtual meeting. All resolutions were passed by a poll. PharmAust receives $750k R&D Tax Incentive Refund Following approval from the ATO of the Company’s application for a Research and Development rebate, an amount of $755,594 was deemed refundable on PharmAust’s 2020 Tax Return and paid to PharmAust in April 2021. COVID-19 pandemic impact The Company was impacted from the COVID-19 pandemic. Epichem was acknowledged as the only consortium Medicinal Chemistry provider that was able to remain open and continue to provide services during the COVID-19 Pandemic as many other partners were more seriously impacted and affected. Recruitment for the Phase II Canine Trial at some clinics was put on hold due to the COVID-19 pandemic and related shutdown measures at State and federal government levels. Following consultation with the trial manager, PharmAust considered it was in the best interests of dogs and their owners to reduce the consultation visits and intensity required for the trial in some circumstances. This meant a pause on recruitment at some centres due to COVID-19. Due to the impact of COVID-19 on global supply chains, Syngene advised PharmAust that the production of 10kg of GMP-grade MPL was delayed. Regrettably, the subsequent commencement of human trials in MND, COVID-19 and cancer were therefore delayed until Q1-Q2 CY 2022. PharmAust Executive Chairman, Dr Roger Aston, said “These are challenging times for our contractors, our partners, our employees and for PharmAust shareholders. Despite the significant challenges ahead, PharmAust is well positioned to work with all parties to address the current challenging environment.” Significant Changes in State of Affairs A review of events during the reporting period can be found in the review of operations. Subsequent Events On 12 July 2021, PharmAust announced it had executed a Research Services Agreement with the Walter and Eliza Hall Institute to investigate the effects of MPL upon human T-lymphotrophic virus-1 (HTLV-1) infections in vitro. On 26 July 2021, PharmAust announced that three independent laboratories (Walter and Eliza Hall Institute of Medical Research (WEHI) in Melbourne, 360biolabs in Melbourne and Leiden University Medical Center (LUMC) in the Netherlands) have demonstrated that both MPS and MPLS protect against cell death in-vitro, following infection with SARS-CoV2. On 3 August 2021, PharmAust confirmed its subsidiary Epichem Pty Ltd, has completed building its benchtop Oxidative Hydrothermal Dissolution (OHD) Flow Reactor to research, develop and promote a novel, innovative and disruptive waste to fuels technology. The impact of the Coronavirus (COVID-19) pandemic is ongoing and while it has had no significant impact on the consolidated entity up to 30 June 2021, it is not practicable to estimate the potential impact, positive or negative, after the reporting date. The situation is rapidly developing and is dependent on measures imposed by the Australian Government and other countries, such as maintaining social distancing requirements, quarantine, travel restrictions and any economic stimulus that may be provided. No other 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. 2021 ANNUAL REPORT AND STATUTORY FINANCIAL STATEMENTS PharmAust Limited and its Controlled Entities - 10 - DIRECTORS' REPORT (Cont.) 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. Environmental Regulation The consolidated entity is subject to a range of environmental regulation. During the year, the consolidated entity met all reporting requirements under any relevant legislation. There were no incidents which required reporting. 2021 ANNUAL REPORT AND STATUTORY FINANCIAL STATEMENTS PharmAust Limited and its Controlled Entities - 11 - DIRECTORS' REPORT (Cont.) Information on Directors Dr Roger Aston – Executive Chairman Qualifications BSc (Hons), Ph.D Experience Dr Aston currently serves as Executive Chairman and Chief Executive Officer of PharmAust Ltd. 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 & Options Dr Aston holds 15,044,815 Fully Paid Ordinary Shares. Contractual rights to shares Nil Other Current Directorships (ASX Listed Companies) Previous Directorships (last 3 years) ASX Listed Companies Immuron Limited (ASX:IMC), Oncosil Limited (ASX: OSL) and ResApp Health Limited (ASX:RAP) Regeneus Limited (ASX:RGS) Special responsibilities: Not applicable Mr Robert C Bishop – Executive Director Qualifications Ll.B (Hons), Solicitor (New South Wales and England & Wales), MAICD Experience Mr Bishop has 35 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 & Options Mr Bishop, via his Company, holds 9,211,060 Fully Paid Ordinary Shares. Contractual rights to shares Nil Other Current Directorships (ASX Listed Companies) Previous Directorships (last 3 years) ASX Listed Companies Nil Nil Special responsibilities: Not applicable Mr Neville Bassett AM – Non-Executive Director Qualifications AM, FCA, B.Bus Experience Mr Bassett has spent more than 35 years working in accounting, finance and stockbroking. During that time, he has had considerable involvement in Australian financial markets including numerous public Company listings and capital raisings, as well as mergers and acquisitions. In 1991, he became a Director/Councillor of the Royal Flying Doctor Service (RFDS) in WA and he was Chairman of RFDS Western Operations for eight years until his retirement in 2017. He also served six years as Western Operations representative on the Board of the Australian Council of the Royal Flying Doctor Service of Australia. In 2015, Mr Bassett’s decades of unwavering dedication to community service were recognised when he was awarded a Member of the Order of Australia (AM) in the Australia Day Honours. Interests in Shares & Options Contractual rights to shares Other Current Directorships (ASX Listed Companies) Previous Directorships (last 3 years) ASX Listed Companies Mr Bassett holds 7,000 ordinary shares in PharmAust Limited. Nil Auris Minerals Limited, Pointerra Limited, and Tennant Minerals NL Metalsearch Ltd and Yowie Group Limited Special responsibilities: Not applicable 2021 ANNUAL REPORT AND STATUTORY FINANCIAL STATEMENTS PharmAust Limited and its Controlled Entities - 12 - DIRECTORS' REPORT (Cont.) Mr Sam Wright – Non-Executive Director & Company Secretary Qualifications AFin DipAcc ACIS MAICD Experience Sam Wright has over fifteen years’ experience in the administration of ASX listed companies, corporate governance and corporate finance. He is a member of the Australian Institute of Company Directors, the Financial Services Institute of Australasia, and the Chartered Secretaries of Australia. Mr Wright joined PharmAust as the Financial Controller in September 2006, was appointed as the Company Secretary in August 2007, and has been a Director of the Company since October 2008. Mr Wright is also Company Secretary for ASX listed companies, Buxton Resources Limited, Structural Monitoring Systems plc and Wide Open Agriculture Limited. Mr Wright has also filled the role of Director and Company Secretary with a number of unlisted companies. Mr Wright is the Managing Director of Perth-based corporate advisory firm Straight Lines Consultancy, specialising in the provision of corporate services to public companies. Mr Wright has extensive experience in relation to public Company responsibilities, including ASX and ASIC compliance, control and implementation of corporate governance, statutory financial reporting, and shareholder relations with both retail and institutional investors. Interests in Shares & Options Other Current Directorships (ASX Listed Companies) Previous Directorships (last 3 years) ASX Listed Companies Mr Wright, via his Company, holds 3,000,000 ordinary shares in PharmAust Limited. Structural Monitoring Systems plc (ASX:SMN) Nil Special responsibilities: Not applicable Meetings of Directors The number of meetings of the Company’s directors held during the year ended 30 June 2021, and the number of meetings attended by each director was: Meetings of Directors Directors Eligible to Participate Number Attended Dr Roger Aston 5 5 Mr Neville Bassett 5 5 Mr Robert Bishop 5 5 Mr Sam Wright 5 5 2021 ANNUAL REPORT AND STATUTORY FINANCIAL STATEMENTS PharmAust Limited and its Controlled Entities - 13 - 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. Voting and comments made at the Company's 2020 Annual General Meeting ('AGM'). At the 2020 AGM, held on 5 November 2020, 89.32% of the votes received supported the adoption of the remuneration report for the year ended 30 June 2020. The Company did not receive any specific feedback at the AGM regarding its remuneration practices. Details of remuneration Details of the nature and amount of each element of remuneration of each key management personnel of the consolidated entity are set out in the following tables. The key management personnel of the consolidated entity consisted of the following directors and other key management personnel: Directors Roger Aston Executive Chairman Robert Bishop Executive Director Sam Wright Non-Executive Director & Company Secretary Neville Bassett Non-Executive Director Other Key Management Personnel Richard Mollard Martine Keenan Chief Scientific Officer – PharmAust Ltd Chief Executive Officer – Pitney Pharmaceuticals Pty Ltd Chief Scientific Officer & Executive Director – Epichem Pty Ltd Colin La Galia Chief Executive Officer – Epichem Pty Ltd 2021 ANNUAL REPORT AND STATUTORY FINANCIAL STATEMENTS PharmAust Limited and its Controlled Entities - 14 - DIRECTORS' REPORT (Cont.) Remuneration Report (Audited) 2021 Short-term Benefits Post-employment Benefits Share-based Payments Salary & Fees Cash Bonus Superannuation Options & Performance Rights Total $ $ $ $ $ Directors Roger Aston 260,000 - 24,700 - 284,700 Sam Wright 138,000 - - - 138,000 Robert Bishop 128,000 - 12,160 - 140,160 Neville Bassett 30,000 - - - 30,000 Other Key Management Personnel Richard Mollard 240,000 - 22,800 137,515 400,315 Martine Keenan 144,500 - 13,727 - 158,227 Colin La Galia 241,275 17,500 21,850 17,500 298,125 1,181,775 17,500 95,237 155,015 1,449,527 2020 Short-term Benefits Post-employment Benefits Share-based Payments Salary & Fees Superannuation Options & Performance Rights Total $ $ $ $ Directors Roger Aston 260,000 24,700 - 284,700 Sam Wright 132,200 - - 132,200 Robert Bishop 122,000 11,590 - 133,590 Neville Bassett 30,000 - - 30,000 Other Key Management Personnel Wayne Best* 9,000 - - 9,000 Richard Mollard 240,000 22,800 18,829 281,629 Martine Keenan 175,000 16,482 - 191,482 John Horton 6,000 - - 6,000 Rebecca McCrackan 5,400 513 - 5,913 Colin La Galia** 173,089 14,482 - 187,571 1,152,689 90,567 18,829 1,262,085 * Resigned on 1/07/2020. ** Appointed on 7/10/2019. 2021 ANNUAL REPORT AND STATUTORY FINANCIAL STATEMENTS PharmAust Limited and its Controlled Entities - 15 - DIRECTORS' REPORT (Cont.) Remuneration Report (Audited) The proportion of remuneration linked to performance and the fixed proportion Service agreements Remuneration and other terms of employment for key management personnel are formalised in service agreements. Details of these agreements are as follows: Remuneration of 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% 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 $128,000 per year plus superannuation of 9.5% 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 Sam Wright (Non-Executive Director and Company Secretary – PharmAust Limited) Term of the agreement – permanent and no specific term. Consultancy fees of $13,000 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 Neville Bassett (Non-Executive Director – PharmAust Limited) Term of the agreement – permanent and no specific term. Directors fees of $30,000 per year. Remuneration of Richard Mollard (Chief Scientific Officer – PharmAust Ltd & Chief Executive Officer – Pitney Pharmaceuticals Pty Ltd) Term of the agreement – permanent and no specific term. Base salary of $240,000 per year plus superannuation of 9.5% 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 Martine Keenan (Chief Executive Officer – Epichem Pty Ltd) Term of the agreement –Non-executive director of Epichem Pty Ltd with a base salary of $1,500 per month for 3 months. Base salary of $140,000 per annum plus superannuation of 9.5% of base salary for period while CEO of Epichem. Payment of termination benefit on termination by the employer, other than for gross misconduct, is equal to three (3) months base salary and superannuation. Fixed remuneration At risk – STI At risk – LTI 2021 2020 2021 2020 2021 2020 Directors Roger Aston 100% 100% - - - - Sam Wright 100% 100% - - - - Robert Bishop 100% 100% - - - - Neville Bassett 100% 100% - - - - Other Key Management Personnel Richard Mollard 66% 93.4% 34% 6.6% - - Martine Keenan 100% 100% - - - - Colin La Galia 88% 100% 12% - - - 2021 ANNUAL REPORT AND STATUTORY FINANCIAL STATEMENTS PharmAust Limited and its Controlled Entities - 16 - DIRECTORS' REPORT (Cont.) Remuneration Report (Audited) Remuneration of Colin La Galia (Chief Executive Officer – Epichem Pty Ltd) Commencement date is 7 October 2019. Term of the agreement – permanent and no specific term. Base salary of $212,500 per annum plus superannuation of 9.5% of base salary. Car allowance with value of $28,775 p.a. Bonus set out below depending on the relevant band in the event of the satisfaction of Bonus milestones for any one financial year that Epichem Pty Ltd makes an after tax profit of: (a) $100,000 – $200,000 - bonus of $10,000 plus $10,000 worth of PAA shares; or (b) $200,001 - $320,000 - bonus of $17,500 plus $17,500 worth of PAA shares; or (c) $320,001 - $400,000 - bonus of $25,000 plus $25,000 worth of PAA shares; or (d) $400,001 - $525,000 - bonus of $30,000 plus $30,000 worth of PAA shares; or (e) $525,001 - $650,000 - bonus of $35,000 plus $35,000 worth of PAA shares; or (f) $650,001 - $750,000 - bonus of $40,000 plus $40,000 worth of PAA shares; or (g) $750,001 - $1,000,000 - bonus of $45,000 plus $45,000 worth of PAA shares; or (h) $1,000,001 plus - bonus of $50,000 plus $50,000 worth of PAA shares; or (i) for any after tax profit above $1,250,000 – additional bonus of $5,000 plus $5,000 worth of PAA shares in addition to the amount in (h) above for each additional $250,000 profit figure above $1,250,000. Payment of termination benefit on termination by the employer, other than for gross misconduct, is equal to three (3) months base salary and superannuation. Payment of the bonus and grant of shares will be made in the following year after the completion of the annual audit. Share-based compensation Shares On 12 October 2020, 133,867 fully paid ordinary shares were issued to Colin La Galia as part of compensation during the year ended 30 June 2021, with a total value of $17,500. Options There were no options issued to directors and other KMP as part of compensation during the year ended 30 June2021. Performance Rights(PR) On 8 October 2020, 1,000,000 performance rights were granted to Richard Mollard as part of compensation during the year ended 30 June 2021. The performance rights have vesting conditions attached. These performance rights expire on 31 March 2022. Performance condition: Upon the Group entering into a binding licensing agreement with an Australian or overseas pharmaceutical or veterinary company to commercialise monepantel and/or monepantel sulphone for use in the commercial anti-cancer treatment of one or more canine or feline cancers on terms approved by the Board. Number of Fair value PR per PR Name granted Grant date Expiry date Exercise price at grant date Richard Mollard 1,000,000 8/10/2020 31/3/2022 $nil $0.12 Options and performance rights granted as part of remuneration All options and performance rights have been granted and issued. The amount allocated to remuneration is allocated over the vesting period. Other transactions with key management personnel and their related parties CONSOLIDATED 2021 $ Transactions with related parties: The following transactions occurred with related parties: Payment for services to – Straight Lines Consultancy [1] 18,000 [1] Sam Wright is director of Straight Lines Consultancy. Balance with related parties: The following balances occurred with related parties: Due to Mandevilla Pty Ltd [1] 16,500 [1] Neville Bassett is director of Mandevilla Pty Ltd. All transactions were made on normal commercial terms and conditions and at market rates. 2021 ANNUAL REPORT AND STATUTORY FINANCIAL STATEMENTS PharmAust Limited and its Controlled Entities - 17 - DIRECTORS' REPORT (Cont.) Remuneration Report (Audited) Additional information The earnings of the consolidated entity for the five years to 30 June 2021 are summarised below: 2021 2020 2019 2018 2017 $ $ $ $ $ Revenue 3,671,645 4,123,411 4,364,554 3,295,904 3,333,505 EBITDA (loss) (960,061) (968,857) (1,330,970) (2,374,722) (1,161,152) EBIT (loss) (1,258,324) (1,243,494) (1,503,400) (2,493,327) (1,343,614) Loss after income tax (1,337,310) (1,361,990) (1,551,222) (2,521,679) (1,343,614) The factors that are considered to affect total shareholders return ('TSR') are summarised below: 2021 2020 2019 2018 2017 Share price at financial year end ($) 0.09 0.16 0.04 0.04 0.06 Total dividends declared (cents per share) - - - - - Basic earnings per share (cents per share) (0.42) (0.46) (0.71) (1.72) (1.08) Additional disclosures relating to key management personnel 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: 2021 Balance 1 July 2020 Exercise of options Received as Compensation At date of Appointment and/or Resignation On-market trade Balance 30 June 2021 No. No. No. No. No. No. Directors Roger Aston 15,044,815 - - - - 15,044,815 Robert Bishop 9,211,060 - - - - 9,211,060 Sam Wright 3,000,000 - - - - 3,000,000 Neville Bassett 7,000 - - - - 7,000 Other Key Management Personnel Colin La Galia - - 133,867 - (133,867) - Richard Mollard 625,000 - - - - 625,000 Martine Keenan - 750,000 - - (750,000) - 27,887,875 750,000 133,867 - (883,867) 27,887,875 2021 ANNUAL REPORT AND STATUTORY FINANCIAL STATEMENTS PharmAust Limited and its Controlled Entities - 18 - DIRECTORS' REPORT (Cont.) Remuneration Report (Audited) 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: 2021 Balance 1 July 2020 Granted as Compensation Options Exercised At date of Appointment and/or Resignation Net Change Other* Balance 30 June 2021 Total Vested No. No. No. No. No. No. Directors Roger Aston - - - - - - - Robert Bishop - - - - - - - Sam Wright - - - - - - - Neville Bassett - - - - - - - Other Key Management Personnel Colin La Galia - - - - - - - Richard Mollard - - - - - - - Martine Keenan 750,000 - (750,000) - - - - 750,000 - (750,000) - - - - *The net change other column above includes those options that have expired during the year. Performance Rights holding The number performance rights 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: 2021 Balance 1 July 2020 Granted as Compensation Options Exercised At date of Appointment and/or Resignation Net Change Other* Balance 30 June 2021 Total Vested No. No. No. No. No. No. Directors Roger Aston - - - - - - - Robert Bishop - - - - - - - Sam Wright - - - - - - - Neville Bassett - - - - - - - Other Key Management Personnel Colin La Galia - - - - - - - Richard Mollard 4,000,000 1,000,000 - - - 5,000,000 - Martine Keenan - - - - - - - 4,000,000 1,000,000 - - - 5,000,000 - *The net change other column above includes those options that have expired during the year. [This concludes the remuneration report, which has been audited.] 2021 ANNUAL REPORT AND STATUTORY FINANCIAL STATEMENTS PharmAust Limited and its Controlled Entities - 19 - DIRECTORS' REPORT (Cont.) Shares under option The details of unissued ordinary shares under option at the date of this report are as follows: Number Exercise Price Expiry Date Unlisted 250,000 $0.15 30 June 2022 Unlisted 50,000 $0.12 31 January 2022 Shares under Performance Rights The details of unissued ordinary shares under performance rights at the date of this report are as follows: Number Exercise Price Expiry Date Unlisted 2,000,000 $nil 30/4/2022 2,000,000 $nil 31/10/2022 Unlisted 1,000,000 $nil 31/3/2022 Shares Issued on Exercise of Compensation Options No options were exercised last financial year, this financial year or up to the date of this report. 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. Indemnification and Insurance of Auditor The Company has not, during or since the end of the financial year, indemnified or agreed to indemnify the auditor of the Company or any related entity against a liability incurred by the auditor. During the financial year, the Company has not paid a premium in respect of a contract to insure the auditor of the Company or any related entity. Proceedings on Behalf of the Company 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. 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. 2021 ANNUAL REPORT AND STATUTORY FINANCIAL STATEMENTS PharmAust Limited and its Controlled Entities - 20 - DIRECTORS' REPORT (Cont.) Non-Audit Services Details of the amounts paid or payable to the auditor for non-audit services provided during the financial year by the auditor are outlined in Note 27 to the financial statements. The directors are satisfied that the provision of non-audit services during the financial year, by the auditor (or by another person or firm on the auditor's behalf), is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The directors are of the opinion that the services as disclosed in Note 27 to the financial statements do not compromise the external auditor's independence requirements of the Corporations Act 2001 for the following reasons: ● all non-audit services have been reviewed and approved to ensure that they do not impact the integrity and objectivity of the auditor; and ● none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants issued by the Accounting Professional and Ethical Standards Board, including reviewing or auditing the auditor's own work, acting in a management or decision-making capacity for the Company, acting as advocate for the Company or jointly sharing economic risks and rewards. Officers of the Company who are former partners of RSM Australia Partners There are no officers of the Company who are former partners of RSM Australia Partners. 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. Auditor RSM Australia Partners continues in office in accordance with section 327 of the Corporations Act 2001. This report is made in accordance with a resolution of directors, pursuant to section 298(2)(a) of the Corporations Act 2001. On behalf of the directors Dr ROGER ASTON Executive Chairman 18 August 2021 Perth, Western Australia AUDITOR’S INDEPENDENCE DECLARATION As lead auditor for the audit of the financial report of PharmAust Limited for the year ended 30 June 2021, I declare that, to the best of my knowledge and belief, there have been no contraventions of: (i) the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and (ii) any applicable code of professional conduct in relation to the audit. RSM AUSTRALIA PARTNERS Perth, WA TUTU PHONG Dated: 18 August 2021 Partner INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF PHARMAUST LIMITED Opinion We have audited the financial report of PharmAust Limited (Company) and its subsidiaries (Group), which comprises the consolidated statement of financial position as at 30 June 2021, the consolidated statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies, and the directors' declaration. In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001, including: (i) Giving a true and fair view of the Group's financial position as at 30 June 2021 and of its financial performance for the year then ended; and (ii) Complying with Australian Accounting Standards and the Corporations Regulations 2001. Basis for opinion We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial report section of our report. We are independent of the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board's APES 110 Code of Ethics for Professional Accountants (Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. We confirm that the independence declaration required by the Corporations Act 2001, which has been given to the directors of the Company, would be in the same terms if given to the directors as at the time of this auditor's report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report of the current period. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Key audit matter How our audit addressed this matter Intangible Assets Refer to Note 8 in the financial statements As at 30 June 2021, the Group has intangible asset relating to the intellectual property rights for the monepantel oncology platform (MPL) with a carrying value of $3,107,476. The asset is not yet available for use and is required to be tested annually for impairment by comparing its carrying amount with its recoverable amount. Management’s assessment determined that the recoverable amount of this asset exceeded its carrying value at the reporting date. Management’s assessment involved: • Reviewing the key assumptions for the MPL value-in-use model to determine whether there were any significant changes during the current financial year; and • Evaluating whether any events have occurred to indicate the MPL asset’s recoverable amount may be less than its carrying amount. Management’s assessment is subject to estimation uncertainty and requires significant management judgement. We determined this to be a key audit matter due the risk that the outcome of the impairment assessment could vary significantly if different assumptions are applied. Our audit procedures included: • Assessing whether there are any indicators of impairment of the MPL asset, including enquiring with management on the current and planned commercialisation activities; • Assessing the reasonableness of management’s assumptions used in the value-in-use model and whether there are any indicators that would require the re-estimation of the asset’s recoverable amount; and • Assessing the adequacy of the disclosures in the financial statements. Other information The directors are responsible for the other information. The other information comprises the information included in the Group's annual report for the year ended 30 June 2021 but does not include the financial report and the auditor's report thereon. Our opinion on the financial report does not cover the other information and accordingly we do not express any form of assurance conclusion thereon. In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of the directors for the financial report The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In preparing the financial report, the directors are responsible for assessing the ability of the Group to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so. Auditor's responsibilities for the audit of the financial report Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report. A further description of our responsibilities for the audit of the financial report is located at the Auditing and Assurance Standards Board website at: https://www.auasb.gov.au/auditors_responsibilities/ar2.pdf. This description forms part of our auditor's report. Report on the Remuneration Report Opinion on the Remuneration Report We have audited the Remuneration Report included within the directors' report for the year ended 30 June 2021. In our opinion, the Remuneration Report of PharmAust Limited, for the year ended 30 June 2021, complies with section 300A of the Corporations Act 2001. Responsibilities The directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. RSM AUSTRALIA PARTNERS Perth, WA TUTU PHONG Dated: 18 August 2021 Partner 2021 ANNUAL REPORT AND STATUTORY FINANCIAL STATEMENTS PharmAust Limited and its Controlled Entities - 25 - DIRECTORS’ DECLARATION In the directors' opinion: ● the attached financial statements and notes comply with the Corporations Act 2001, the Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements; ● the attached financial statements and notes comply with International Financial Reporting Standards as issued by the International Accounting Standards Board as described in note 1 to the financial statements; ● the attached financial statements and notes give a true and fair view of the consolidated entity's financial position as at 30 June 2021 and of its performance for the financial year ended on that date; ● there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable; and The directors have been given the declarations required by section 295A of the Corporations Act 2001. Signed in accordance with a resolution of directors made pursuant to section 295(5)(a) of the Corporations Act 2001. On behalf of the directors Dr ROGER ASTON Executive Chairman 18 August 2021 Perth, Western Australia 2021 ANNUAL REPORT AND STATUTORY FINANCIAL STATEMENTS PharmAust Limited and its Controlled Entities - 26 - STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME For the year ended 30 June 2021 CONSOLIDATED NOTE 2021 $ 2020 $ Revenue 2 2,140,320 3,195,892 Other income 2 1,531,325 927,519 3,671,645 4,123,411 Raw materials and consumables used (225,318) (246,157) Employee benefits expense (2,388,269) (3,099,119) Depreciation expense (298,263) (274,637) Finance costs (78,986) (118,495) Research and development expenses (554,144) (605,351) Administration expenses (1,463,975) (1,141,642) (5,008,955) (5,485,401) (Loss) before income tax expense (1,337,310) (1,361,990) Income tax expense 3a - - (Loss) after income tax expense (1,337,310) (1,361,990) Other comprehensive income - - Total comprehensive (loss) for the year (1,337,310) (1,361,990) Basic and diluted loss per share (cents per share) 16 (0.42) (0.46) The accompanying notes form part of these financial statements. 2021 ANNUAL REPORT AND STATUTORY FINANCIAL STATEMENTS PharmAust Limited and its Controlled Entities - 27 - STATEMENT OF FINANCIAL POSITION As at 30 June 2021 CONSOLIDATED NOTE 2021 $ 2020 $ CURRENT ASSETS Cash and cash equivalents 4 3,020,268 2,880,496 Trade and other receivables 5a 241,949 297,683 Other current assets 6 86,342 34,359 Inventory 7 1,008,071 857,570 TOTAL CURRENT ASSETS 4,356,630 4,070,108 NON-CURRENT ASSETS Intangible assets 8 3,142,089 3,107,476 Plant and equipment 9 3,454,879 3,568,717 TOTAL NON-CURRENT ASSETS 6,596,968 6,676,193 TOTAL ASSETS 10,953,598 10,746,301 CURRENT LIABILITIES Trade and other payables 10 559,007 557,002 Borrowings 11 38,206 179,230 Employee benefits 12 205,720 146,672 Lease liabilities 17 108,433 175,407 TOTAL CURRENT LIABILITIES 911,366 1,058,311 NON-CURRENT LIABILITIES Borrowings 11 - 38,206 Employee benefits 12 30,381 44,507 Lease liabilities 17 1,131,367 1,079,008 TOTAL NON-CURRENT LIABILITIES 1,161,748 1,161,721 TOTAL LIABILITIES 2,073,114 2,220,032 NET ASSETS 8,880,484 8,526,269 EQUITY Issued capital 13 55,326,441 53,772,433 Reserves 14 2,093,161 1,955,644 Accumulated losses 25 (48,539,118) (47,201,808) TOTAL EQUITY 8,880,484 8,526,269 The accompanying notes form part of these financial statements. 2021 ANNUAL REPORT AND STATUTORY FINANCIAL STATEMENTS PharmAust Limited and its Controlled Entities - 28 - STATEMENT OF CHANGES IN EQUITY For the year ended 30 June 2021 Issued Capital Accumulated Losses Share-Based Payments Reserve Total Equity $ $ $ $ As at 1 July 2019 51,388,306 (45,839,818) 1,907,392 7,455,880 (Loss) for the year - (1,361,990) - (1,361,990) Total comprehensive (loss) for the year - (1,361,990) - (1,361,990) Transactions with owners in their capacity as owners: Shares issued (net of costs) 2,223,144 - - 2,223,144 Exercise of options 160,983 - - 160,983 Share-based payment - - 48,252 48,252 As at 30 June 2020 53,772,433 (47,201,808) 1,955,644 8,526,269 As at 1 July 2020 53,772,433 (47,201,808) 1,955,644 8,526,269 (Loss) for the year - (1,337,310) - (1,337,310) Total comprehensive (loss) for the year (1,337,310) - (1,337,310) Transactions with owners in their capacity as owners: Shares issued (net of costs) 1,554,008 - - 1,554,008 Share-based payment - - 137,517 137,517 As at 30 June 2021 55,326,441 (48,539,118) 2,093,161 8,880,484 The accompanying notes form part of these financial statements. 2021 ANNUAL REPORT AND STATUTORY FINANCIAL STATEMENTS PharmAust Limited and its Controlled Entities - 29 - STATEMENT OF CASH FLOWS For the year ended 30 June 2021 CONSOLIDATED NOTE 2021 $ 2020 $ Cash Flows from Operating Activities Receipts from customers 2,191,105 3,133,673 Payments to suppliers and employees (4,627,296) (5,332,663) Other income 1,516,607 927,519 Interest received 14,718 23,378 Interest and other costs of finance (33,099) (21,909) Net cash used in operating activities 19b (937,965) (1,270,002) Cash Flows from Investing Activities Payments for plant and equipment (101,718) (30,229) Payments for intangible assets (36,319) - Net cash used in investing activities (138,037) (30,229) Cash Flows from Financing Activities Proceeds from share issues (net) 1,536,508 2,384,127 Repayment of borrowing and leases (320,734) (294,025) Net cash generated from financing activities 1,215,774 2,090,102 Net increase in cash held 139,772 789,871 Cash at the beginning of the financial year 2,880,496 2,090,625 Cash at the end of the financial year 19a 3,020,268 2,880,496 The accompanying notes form an integral part of these financial statements. 2021 ANNUAL REPORT AND STATUTORY FINANCIAL STATEMENTS PharmAust Limited and its Controlled Entities - 30 - NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2021 These consolidated financial statements and notes represent those of PharmAust Limited and its Controlled Entities (the “consolidated entity” or “Group”). 1 SIGNIFICANT ACCOUNTING POLICIES The principal accounting policies adopted in the preparation of the financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. New or amended Accounting Standards and Interpretations adopted The consolidated entity has adopted all of the new or amended Accounting Standards and Interpretations issued by the Australian Accounting Standards Board ('AASB') that are mandatory for the current reporting period. Any new or amended Accounting Standards or Interpretations that are not yet mandatory have not been early adopted. The following Accounting Standards and Interpretations are most relevant to the consolidated entity: Conceptual Framework for Financial Reporting (Conceptual Framework) The consolidated entity has adopted the revised Conceptual Framework from 1 July 2020. The Conceptual Framework contains new definition and recognition criteria as well as new guidance on measurement that affects several Accounting Standards, but it has not had a material impact on the consolidated entity's financial statements. Basis of preparation These general purpose financial statements have been prepared in accordance with Australian Accounting Standards and Interpretations issued by the Australian Accounting Standards Board ('AASB') and the Corporations Act 2001, as appropriate for for-profit oriented entities. These financial statements also comply with International Financial Reporting Standards as issued by the International Accounting Standards Board ('IASB'). Historical cost convention The financial statements have been prepared under the historical cost convention, except for, where applicable, the revaluation of financial assets and liabilities at fair value through profit or loss, financial assets at fair value through other comprehensive income, investment properties, certain classes of property, plant and equipment and derivative financial instruments. Critical accounting estimates The preparation of the financial statements requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the consolidated entity's accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements, are disclosed within Note 1. Parent entity information In accordance with the Corporations Act 2001, these financial statements present the results of the consolidated entity only. Supplementary information about the parent entity is disclosed in Note 24. Principles of consolidation The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of PharmAust Limited as at 30 June 2021 and the results of all subsidiaries for the year then ended. PharmAust Limited and its subsidiaries together are referred to in these financial statements as the 'consolidated entity'. Subsidiaries are all those entities over which the parent has control. The consolidated entity controls an entity when the parent entity is exposed to, or has rights to, variable returns from its involvement with the subsidiary and has the ability to affect those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the consolidated entity. They are de-consolidated from the date that control ceases. Intercompany transactions, balances and unrealised gains on transactions between entities in the consolidated entity are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the consolidated entity. The acquisition of subsidiaries is accounted for using the acquisition method of accounting. A change in ownership interest, without the loss of control, is accounted for as an equity transaction, where the difference between the consideration transferred and the book value of the share of the non-controlling interest acquired is recognised directly in equity attributable to the parent. Non-controlling interest in the results and equity of subsidiaries are shown separately in the statement of profit or loss and other comprehensive income, statement of financial position and statement of changes in equity of the consolidated entity. Losses incurred by the consolidated entity are attributed to the non-controlling interest in full, even if that results in a deficit balance. Where the consolidated entity loses control over a subsidiary, it derecognises the assets including goodwill, liabilities and non-controlling interest in the subsidiary together with any cumulative translation differences recognised in equity. The consolidated entity recognises the fair value of the consideration received and the fair value of any investment retained together with any gain or loss in profit or loss. 2021 ANNUAL REPORT AND STATUTORY FINANCIAL STATEMENTS PharmAust Limited and its Controlled Entities - 31 - NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2021 1 SIGNIFICANT ACCOUNTING POLICIES (Cont.) Income tax The income tax expense or benefit for the period is the tax payable on that period's taxable income based on the applicable income tax rate for each jurisdiction, adjusted by the changes in deferred tax assets and liabilities attributable to temporary differences, unused tax losses and the adjustment recognised for prior periods, where applicable. Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to be applied when the assets are recovered or liabilities are settled, based on those tax rates that are enacted or substantively enacted, except for: • When the deferred income tax asset or liability arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and that, at the time of the transaction, affects neither the accounting nor taxable profits; or • When the taxable temporary difference is associated with interests in subsidiaries, associates or joint ventures, and the timing of the reversal can be controlled, and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses. The carrying amount of recognised and unrecognised deferred tax assets are reviewed at each reporting date. Deferred tax assets recognised are reduced to the extent that it is no longer probable that future taxable profits will be available for the carrying amount to be recovered. Previously unrecognised deferred tax assets are recognised to the extent that it is probable that there are future taxable profits available to recover the asset. Deferred tax assets and liabilities are offset only where there is a legally enforceable right to offset current tax assets against current tax liabilities and deferred tax assets against deferred tax liabilities; and they relate to the same taxable authority on either the same taxable entity or different taxable entities which intend to settle simultaneously. PharmAust Limited and its wholly-owned Australian subsidiaries have formed an income tax consolidated group under the tax consolidation regime. The head entity and each subsidiary in the tax consolidated group continue to account for their own current and deferred tax amounts. The tax consolidated group has applied the 'separate taxpayer within group' approach in determining the appropriate amount of taxes to allocate to members of the tax consolidated group. In addition to its own current and deferred tax amounts, the head entity also recognises the current tax liabilities (or assets) and the deferred tax assets arising from unused tax losses and unused tax credits assumed from each subsidiary in the tax consolidated group. Assets or liabilities arising under tax funding agreements with the tax consolidated entities are recognised as amounts receivable from or payable to other entities in the tax consolidated group. The tax funding arrangement ensures that the intercompany charge equals the current tax liability or benefit of each tax consolidated group member, resulting in neither a contribution by the head entity to the subsidiaries nor a distribution by the subsidiaries to the head entity. 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. 2021 ANNUAL REPORT AND STATUTORY FINANCIAL STATEMENTS PharmAust Limited and its Controlled Entities - 32 - NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2021 1 SIGNIFICANT ACCOUNTING POLICIES (Cont.) Plant and Equipment (Cont.) Depreciation The depreciable amount of all plant 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 Depreciation rate Plant and equipment 3-20 years The residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each reporting date. Leasehold improvements and plant and equipment under lease are depreciated over the unexpired period of the lease or the estimated useful life of the assets, whichever is shorter. An item of plant and equipment is derecognised upon disposal or when there is no future economic benefit to the consolidated entity. Gains and losses between the carrying amount and the disposal proceeds are taken to profit or loss. Any revaluation surplus reserve relating to the item disposed of is transferred directly to retained profits. Right-of-use assets A right-of-use asset is recognised at the commencement date of a lease. The right-of-use asset is measured at cost, which comprises the initial amount of the lease liability, adjusted for, as applicable, any lease payments made at or before the commencement date net of any lease incentives received, any initial direct costs incurred, and, except where included in the cost of inventories, an estimate of costs expected to be incurred for dismantling and removing the underlying asset, and restoring the site or asset. Right-of-use assets are depreciated on a straight-line basis over the unexpired period of the lease or the estimated useful life of the asset, whichever is the shorter. Where the consolidated entity expects to obtain ownership of the leased asset at the end of the lease term, the depreciation is over its estimated useful life. Right-of use assets are subject to impairment or adjusted for any remeasurement of lease liabilities. The consolidated entity has elected not to recognise a right-of-use asset and corresponding lease liability for short-term leases with terms of 12 months or less and leases of low-value assets. Lease payments on these assets are expensed to profit or loss as incurred. Lease liabilities A lease liability is recognised at the commencement date of a lease. The lease liability is initially recognised at the present value of the lease payments to be made over the term of the lease, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the consolidated entity's incremental borrowing rate. Lease payments comprise of fixed payments less any lease incentives receivable, variable lease payments that depend on an index or a rate, amounts expected to be paid under residual value guarantees, exercise price of a purchase option when the exercise of the option is reasonably certain to occur, and any anticipated termination penalties. The variable lease payments that do not depend on an index or a rate are expensed in the period in which they are incurred. Lease liabilities are measured at amortised cost using the effective interest method. The carrying amounts are remeasured if there is a change in the following: future lease payments arising from a change in an index or a rate used; residual guarantee; lease term; certainty of a purchase option and termination penalties. When a lease liability is remeasured, an adjustment is made to the corresponding right-of use asset, or to profit or loss if the carrying amount of the right-of-use asset is fully written down. 2021 ANNUAL REPORT AND STATUTORY FINANCIAL STATEMENTS PharmAust Limited and its Controlled Entities - 33 - NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2021 1 SIGNIFICANT ACCOUNTING POLICIES (Cont.) Investments and other financial assets Investments and other financial assets are initially measured at fair value. Transaction costs are included as part of the initial measurement, except for financial assets at fair value through profit or loss. Such assets are subsequently measured at either amortised cost or fair value depending on their classification. Classification is determined based on both the business model within which such assets are held and the contractual cash flow characteristics of the financial asset unless an accounting mismatch is being avoided. Financial assets are derecognised when the rights to receive cash flows have expired or have been transferred and the consolidated entity has transferred substantially all the risks and rewards of ownership. When there is no reasonable expectation of recovering part or all of a financial asset, its carrying value is written off. Financial assets at fair value through profit or loss Financial assets not measured at amortised cost or at fair value through other comprehensive income are classified as financial assets at fair value through profit or loss. Typically, such financial assets will be either: (i) held for trading, where they are acquired for the purpose of selling in the short-term with an intention of making a profit, or a derivative; or (ii) designated as such upon initial recognition where permitted. Fair value movements are recognised in profit or loss. Financial assets at fair value through other comprehensive income Financial assets at fair value through other comprehensive income include equity investments which the consolidated entity intends to hold for the foreseeable future and has irrevocably elected to classify them as such upon initial recognition. Impairment of financial assets The consolidated entity recognises a loss allowance for expected credit losses on financial assets which are either measured at amortised cost or fair value through other comprehensive income. The measurement of the loss allowance depends upon the consolidated entity's assessment at the end of each reporting period as to whether the financial instrument's credit risk has increased significantly since initial recognition, based on reasonable and supportable information that is available, without undue cost or effort to obtain. Where there has not been a significant increase in exposure to credit risk since initial recognition, a 12-month expected credit loss allowance is estimated. This represents a portion of the asset's lifetime expected credit losses that is attributable to a default event that is possible within the next 12 months. Where a financial asset has become credit impaired or where it is determined that credit risk has increased significantly, the loss allowance is based on the asset's lifetime expected credit losses. The amount of expected credit loss recognised is measured on the basis of the probability weighted present value of anticipated cash shortfalls over the life of the instrument discounted at the original effective interest rate. For financial assets mandatorily measured at fair value through other comprehensive income, the loss allowance is recognised in other comprehensive income with a corresponding expense through profit or loss. In all other cases, the loss allowance reduces the asset's carrying value with a corresponding expense through profit or loss. Foreign currency transactions and balances The financial statements are presented in Australian dollars, which is the Group’s functional and presentation currency. Foreign currency transactions Foreign currency transactions are translated into Australian dollars using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at financial year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss. 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. 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. 2021 ANNUAL REPORT AND STATUTORY FINANCIAL STATEMENTS PharmAust Limited and its Controlled Entities - 34 - NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2021 1 SIGNIFICANT ACCOUNTING POLICIES (Cont.) Provisions Provisions are recognised when the consolidated entity has a present (legal or constructive) obligation as a result of a past event, it is probable the consolidated entity will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the reporting date, taking into account the risks and uncertainties surrounding the obligation. If the time value of money is material, provisions are discounted using a current pre-tax rate specific to the liability. The increase in the provision resulting from the passage of time is recognised as a finance cost. Government grants Government grants relating to costs are deferred and recognised in profit or loss over the period necessary to match them with the costs that they are intended to compensate. Employee benefits Short-term employee benefits Liabilities for wages and salaries, including non-monetary benefits, annual leave and long service leave expected to be settled wholly within 12 months of the reporting date are measured at the amounts expected to be paid when the liabilities are settled. Other long-term employee benefits The liability for annual leave and long service leave not expected to be settled within 12 months of the reporting date are measured as the present value of expected future payments to be made in respect of services provided by employees up to the reporting date using the projected unit credit method. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. Expected future payments are discounted using market yields at the reporting date on corporate bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows. Defined contribution superannuation expense Contributions to defined contribution superannuation plans are expensed in the period in which they are incurred. Share-based payments Equity-settled and cash-settled share-based compensation benefits are provided to employees. Equity-settled transactions are awards of shares, or options over shares, that are provided to employees in exchange for the rendering of services. Cash-settled transactions are awards of cash for the exchange of services, where the amount of cash is determined by reference to the share price. The cost of equity-settled transactions are measured at fair value on grant date. Fair value is independently determined using either the Binomial or Black-Scholes option pricing model that takes into account the exercise price, the term of the option, the impact of dilution, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk free interest rate for the term of the option, together with non-vesting conditions that do not determine whether the consolidated entity receives the services that entitle the employees to receive payment. No account is taken of any other vesting conditions. The cost of equity-settled transactions are recognised as an expense with a corresponding increase in equity over the vesting period. The cumulative charge to profit or loss is calculated based on the grant date fair value of the award, the best estimate of the number of awards that are likely to vest and the expired portion of the vesting period. The amount recognised in profit or loss for the period is the cumulative amount calculated at each reporting date less amounts already recognised in previous periods. Cash and cash equivalents Cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. For the statement of cash flows presentation purposes, cash and cash equivalents also includes bank overdrafts, which are shown within borrowings in current liabilities on the statement of financial position. Trade and other receivables Trade receivables are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method, less any allowance for expected credit losses. Trade receivables are generally due for settlement within 30 days. The consolidated entity has applied the simplified approach to measuring expected credit losses, which uses a lifetime expected loss allowance. To measure the expected credit losses, trade receivables have been grouped based on days overdue. Other receivables are recognised at amortised cost, less any allowance for expected credit losses. 2021 ANNUAL REPORT AND STATUTORY FINANCIAL STATEMENTS PharmAust Limited and its Controlled Entities - 35 - NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2021 1 SIGNIFICANT ACCOUNTING POLICIES (Cont.) Comparative figures When required by Accounting Standards, comparative figures have been adjusted to conform to changes in presentation for the current financial year. 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. Revenue recognition The consolidated entity recognises revenue as follows: Revenue from contracts with customers Revenue is recognised at an amount that reflects the consideration to which the consolidated entity is expected to be entitled in exchange for transferring goods or services to a customer. For each contract with a customer, the consolidated entity: identifies the contract with a customer; identifies the performance obligations in the contract; determines the transaction price which takes into account estimates of variable consideration and the time value of money; allocates the transaction price to the separate performance obligations on the basis of the relative stand-alone selling price of each distinct good or service to be delivered; and recognises revenue when or as each performance obligation is satisfied in a manner that depicts the transfer to the customer of the goods or services promised. Variable consideration within the transaction price, if any, reflects concessions provided to the customer such as discounts, rebates and refunds, any potential bonuses receivable from the customer and any other contingent events. Such estimates are determined using either the 'expected value' or 'most likely amount' method. The measurement of variable consideration is subject to a constraining principle whereby revenue will only be recognised to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue recognised will not occur. The measurement constraint continues until the uncertainty associated with the variable consideration is subsequently resolved. Amounts received that are subject to the constraining principle are recognised as a refund liability. Sale of goods Revenue from the sale of goods is recognised at the point in time when the customer obtains control of the goods, which is generally at the time of delivery. Rendering of services Revenue from a contract to provide services is recognised over time as the services are rendered based on either a fixed price or an hourly rate. Interest Interest revenue is recognised as interest accrues using the effective interest method. This is a method of calculating the amortised cost of a financial asset and allocating the interest income over the relevant period using the effective interest rate, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the net carrying amount of the financial asset. Other revenue Other revenue is recognised when it is received or when the right to receive payment is established. All revenue is stated net of the amount of goods and services tax. Goods and services tax (‘GST”) and other similar taxes Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable from the tax authority. In this case it is recognised as part of the cost of the acquisition of the asset or as part of the expense. 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 tax authority is included in other receivables or other 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 tax authority, are presented as operating cash flows. 2021 ANNUAL REPORT AND STATUTORY FINANCIAL STATEMENTS PharmAust Limited and its Controlled Entities - 36 - NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2021 2 SIGNIFICANT ACCOUNTING POLICIES (Cont.) Inventories Raw materials, work in progress and finished goods are stated at the lower of cost and net realisable value on a 'first in first out' basis. Cost comprises of direct materials and delivery costs, direct labour, import duties and other taxes, an appropriate proportion of variable and fixed overhead expenditure based on normal operating capacity, and, where applicable, transfers from cash flow hedging reserves in equity. Costs of purchased inventory are determined after deducting rebates and discounts received or receivable. Stock in transit is stated at the lower of cost and net realisable value. Cost comprises of purchase and delivery costs, net of rebates and discounts received or receivable. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale. Issued capital Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. Earnings per share Basic earnings per share is calculated by dividing the profit attributable to the owners of PharmAust Limited, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the financial year. 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. Intangible 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 available for use, they are reviewed 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. Impairment of non-financial assets Goodwill and other intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Other non-financial assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. Recoverable amount is the higher of an asset's fair value less costs of disposal and value-in-use. The value-in-use is the present value of the estimated future cash flows relating to the asset using a pre-tax discount rate specific to the asset or cash-generating unit to which the asset belongs. Assets that do not have independent cash flows are grouped together to form a cash-generating unit. 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. 2021 ANNUAL REPORT AND STATUTORY FINANCIAL STATEMENTS PharmAust Limited and its Controlled Entities - 37 - NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2021 1 SIGNIFICANT ACCOUNTING POLICIES (Cont.) 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. Current and non-current classification Assets and liabilities are presented in the statement of financial position based on current and non-current classification. An asset is classified as current when: it is either expected to be realised or intended to be sold or consumed in 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. Trade and other payables These amounts represent liabilities for goods and services provided to the consolidated entity prior to the end of the financial year and which are unpaid. Due to their short-term nature they are measured at amortised cost and are not discounted. The amounts are unsecured and are usually paid within 30 days of recognition. Borrowings Loans and borrowings are initially recognised at the fair value of the consideration received, net of transaction costs. They are subsequently measured at amortised cost using the effective interest method. The component of the convertible notes that exhibits characteristics of a liability is recognised as a liability in the statement of financial position, net of transaction costs. On the issue of the convertible notes the fair value of the liability component is determined using a market rate for an equivalent non-convertible bond and this amount is carried as a non-current liability on the amortised cost basis until extinguished on conversion or redemption. The increase in the liability due to the passage of time is recognised as a finance cost. The remainder of the proceeds are allocated to the conversion option that is recognised and included in shareholders equity as a convertible note reserve, net of transaction costs. The carrying amount of the conversion option is not remeasured in the subsequent years. The corresponding interest on convertible notes is expensed to profit or loss. Business combinations The acquisition method of accounting is used to account for business combinations regardless of whether equity instruments or other assets are acquired. The consideration transferred is the sum of the acquisition-date fair values of the assets transferred, equity instruments issued or liabilities incurred by the acquirer to former owners of the acquiree and the amount of any non-controlling interest in the acquiree. For each business combination, the non-controlling interest in the acquiree is measured at either fair value or at the proportionate share of the acquiree's identifiable net assets. All acquisition costs are expensed as incurred to profit or loss. On the acquisition of a business, the consolidated entity assesses the financial assets acquired and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic conditions, the consolidated entity's operating or accounting policies and other pertinent conditions in existence at the acquisition-date. Where the business combination is achieved in stages, the consolidated entity remeasures its previously held equity interest in the acquiree at the acquisition-date fair value and the difference between the fair value and the previous carrying amount is recognised in profit or loss. Contingent consideration to be transferred by the acquirer is recognised at the acquisition-date fair value. Subsequent changes in the fair value of the contingent consideration classified as an asset or liability is recognised in profit or loss. Contingent consideration classified as equity is not remeasured and its subsequent settlement is accounted for within equity. 2021 ANNUAL REPORT AND STATUTORY FINANCIAL STATEMENTS PharmAust Limited and its Controlled Entities - 38 - NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2021 1 SIGNIFICANT ACCOUNTING POLICIES (Cont.) The difference between the acquisition-date fair value of assets acquired, liabilities assumed and any non-controlling interest in the acquiree and the fair value of the consideration transferred and the fair value of any pre-existing investment in the acquiree is recognised as goodwill. If the consideration transferred and the pre-existing fair value is less than the fair value of the identifiable net assets acquired, being a bargain purchase to the acquirer, the difference is recognised as a gain directly in profit or loss by the acquirer on the acquisition-date, but only after a reassessment of the identification and measurement of the net assets acquired, the non-controlling interest in the acquiree, if any, the consideration transferred and the acquirer's previously held equity interest in the acquirer. Business combinations are initially accounted for on a provisional basis. The acquirer retrospectively adjusts the provisional amounts recognised and also recognises additional assets or liabilities during the measurement period, based on new information obtained about the facts and circumstances that existed at the acquisition-date. The measurement period ends on either the earlier of (i) 12 months from the date of the acquisition or (ii) when the acquirer receives all the information possible to determine fair value. 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 2021. The consolidated entity has not yet assessed the impact of these new or amended Accounting Standards and Interpretations. Critical accounting estimates and judgements The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts in the financial statements. Management continually evaluates its judgements and estimates in relation to assets, liabilities, contingent liabilities, revenue and expenses. Management bases its judgements, estimates and assumptions on historical experience and on other various factors, including expectations of future events, management believes to be reasonable under the circumstances. The resulting accounting judgements and estimates will seldom equal the related actual results. The judgements estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities (refer to the respective notes) within the next financial year are discussed below. Other finite life intangible assets not yet in use The consolidated entity tests annually, or more frequently if events or changes in circumstances indicate impairment, whether other finite life intangible assets have suffered any impairment, in accordance with the accounting policy stated in Note 1. The recoverable amounts of cash-generating units have been determined based on value-in-use calculations. These calculations require the use of assumptions, including estimated discount rates based on the current cost of capital, royalty rates and growth rates of the estimated future cash flows. Coronavirus (COVID-19) pandemic Judgement has been exercised in considering the impacts that the Coronavirus (COVID-19) pandemic has had, or may have, on the consolidated entity based on known information. This consideration extends to the nature of the supply chain, staffing and geographic regions in which the consolidated entity operates. Other than as addressed in specific notes, there does not currently appear to be either any significant impact upon the financial statements or any significant uncertainties with respect to events or conditions which may impact the consolidated entity unfavourably as at the reporting date or subsequently as a result of the Coronavirus (COVID-19) pandemic. Share-based payment transactions The consolidated entity measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined by using either the Binomial or Black-Scholes model taking into account the terms and conditions upon which the instruments were granted. The accounting estimates and assumptions relating to equity-settled share-based payments would have no impact on the carrying amounts of assets and liabilities within the next annual reporting period but may impact profit or loss and equity. Refer to Note 20 for further information. 2021 ANNUAL REPORT AND STATUTORY FINANCIAL STATEMENTS PharmAust Limited and its Controlled Entities - 39 - NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2021 CONSOLIDATED 2021 $ 2020 $ 2 REVENUE Sales 2,140,320 3,195,892 OTHER INCOME Interest received 14,718 3,290 Other revenue 1,516,607 924,229 1,531,325 927,519 3,671,645 4,123,411 Timing of revenue recognition Goods transferred at a point in time 2,140,320 3,195,892 Services transferred over time - - 2,140,320 3,195,892 Refer to Note 22 Segment Reporting for further information with respect to disaggregated revenue. 3 INCOME TAX EXPENSE 3a No income tax is payable as a tax loss has been incurred for income tax purposes. (Loss) before income tax (1,337,310) (1,361,990) Prima facie tax benefit at 27.5% (2020: 27.5%) (367,760) (374,547) Tax effect of: - Other non-allowable items (25,849) 219,455 - Tax losses not brought to account 393,609 155,092 - - 3b Deferred tax asset 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 27.5% tax rate (not recognised) (2020: 27.5%) 6,888,804 6,495,195 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 3,020,268 2,880,496 2021 ANNUAL REPORT AND STATUTORY FINANCIAL STATEMENTS PharmAust Limited and its Controlled Entities - 40 - NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2021 CONSOLIDATED 2021 $ 2020 $ 5 TRADE AND OTHER RECEIVABLES 5a CURRENT Trade receivables 241,949 297,683 Less: Allowance for expected credit losses - - 241,949 297,683 Trade receivables: Payment terms are 30 days from the date of recognition and carried at fair value. 5b Allowance for expected credit losses 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. The consolidated entity has recognised a loss of $nil (2020: $nil) in profit or loss in respect of the expected credit losses for the year ended 30 June 2021. 5c Past due but not impaired As of 30 June 2020, trade receivables of $10,278 (2020: $7,738) 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 3,632 561 61 days and above 6,646 7,177 10,278 7,738 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 19,576 12,966 Bond 4,225 4,291 Prepayments 62,541 17,102 86,342 34,359 7 Inventories Finished Goods 944,626 857,570 Raw Materials 10,569 - Work in Progress 52,876 - 1,008,071 857,570 8 Intangible Assets Intellectual property 3,107,476 3,107,476 Licensing rights 34,613 - 3,142,089 3,107,476 2021 ANNUAL REPORT AND STATUTORY FINANCIAL STATEMENTS PharmAust Limited and its Controlled Entities - 41 - NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2021 CONSOLIDATED 2021 $ 2020 $ 8a. Intangible Assets – Intellectual Property Intellectual property rights – at cost 5,179,128 5,179,128 Amortisation - - Accumulated impairment losses (2,071,652) (2,071,652) 3,107,476 3,107,476 Movements in Carrying Amounts: Balance at the beginning of the year 3,107,476 3,107,476 Addition - - Impairment - - Balance at the end of the year 3,107,476 3,107,476 No amortisation has been recognised as these intellectual property rights are not yet at the commercialisation stage. The Group has assessed the recoverability of the carrying amount of the Intangible Asset based on a 16-year value in use calculation using a discounted cash flow model for the intellectual property rights to the monepantel (MPL) oncology platform. The calculation is based on budgets approved by management, assuming commercialisation through a royalty revenue stream for both human and animal patents. The key assumptions used in the discounted cash flow model include: - Royalty rate of 10% (2020: 10%). - Post-tax discount rate of 30% (2020: 30%). The discount rate of 30% post-tax reflects management’s estimate of the time value of money and the Group’s weighted average cost of capital. Based on the results of the value in use calculation using a discounted cash flow model, there is no impairment required to be recognised. 8b. Intangible Assets – Licencing Licencing rights – at cost 36,319 - Amortisation (1,706) - 34,613 - Movements in Carrying Amounts: Balance at the beginning of the year - - Addition 36,319 - Amortisation (1,706) - Balance at the end of the year 34,613 - 9. PLANT AND EQUIPMENT Plant and Equipment - Cost 3,635,491 3,526,015 Less: Accumulated depreciation (1,349,686) (1,179,731) 2,285,805 2,346,284 Right of Use Asset – Cost 1,425,678 1,344,676 Less: Accumulated depreciation (256,604) (122,243) 1,169,074 1,222,433 3,454,879 3,568,717 Movements in Carrying Amounts: Plant and Equipment $ Right of Use Asset $ Total $ Balance at 1 July 2019 2,468,449 - 2,468,449 Additions 30,229 1,344,676 1,374,905 Depreciation expense (152,394) (122,243) (274,637) Balance at 30 June 2020 2,346,284 1,222,433 3,568,717 Additions 103,762 81,001 184,763 Disposals (338) - (338) Depreciation expense (163,903) (134,360) (298,263) Balance at 30 June 2021 2,285,805 1,169,074 3,454,879 2021 ANNUAL REPORT AND STATUTORY FINANCIAL STATEMENTS PharmAust Limited and its Controlled Entities - 42 - NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2021 CONSOLIDATED 2021 $ 2020 $ 10 TRADE AND OTHER PAYABLES Trade creditors and accruals 559,007 557,002 Payment terms are 30 days from receipt of goods and/or services rendered. 11 BORROWINGS CURRENT EFIC Loan Facility 38,206 179,230 38,206 179,230 NON CURRENT EFIC Loan Facility - 38,206 - 38,206 Terms and conditions: The EFIC Loan Facility has a variable interest rate charged at the AFMA Bank Bill Average Bid Rate fix + 6.05% margin. At 30 June 2021 this rate was 6.13% (2020:6.195%). Financing arrangements Loan Facility 1: The consolidated entity entered into a loan agreement to gain access to an original loan facility of $466,000. Security: First charge over the laboratory equipment. Loan facility 1 (formerly known as Loan Facility 2): Total facility limit 466,000 466,000 Amount utilised (466,000) (466,000) Total unused facility at 30 June - - 12 EMPLOYEE BENEFITS CURRENT Employee entitlements 205,720 146,672 NON-CURRENT Employee entitlements 30,381 44,507 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 expect all employees to take the full amount of accrued leave or require payment within the next 12 months. 2021 ANNUAL REPORT AND STATUTORY FINANCIAL STATEMENTS PharmAust Limited and its Controlled Entities - 43 - NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2021 CONSOLIDATED 2021 $ 2020 $ 13 ISSUED CAPITAL Issued and paid up ordinary shares 55,326,441 53,772,433 13a Movement in fully paid ordinary shares 2021 2020 2021 2020 Ordinary Shares Number of shares $ $ 1 July 302,021,053 280,221,192 53,772,433 51,388,306 Shares issued 133,867 19,999,999 17,500 2,400,000 Costs of share issues - - (44,992) (176,856) Share issued upon the exercise of options 14,575,000 1,799,862 1,581,500 160,983 30 June 316,729,920 302,021,053 55,326,441 53,772,433 13b 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. 13c Capital Risk Management The consolidated entity's objectives when managing capital is to safeguard its ability to continue as a going concern, so that it can provide returns for shareholders and benefits for other stakeholders and to maintain an optimum capital structure to reduce the cost of capital. Capital is regarded as total equity, as recognised in the statement of financial position, plus net debt. Net debt is calculated as total borrowings less cash and cash equivalents. In order to maintain or adjust the capital structure, the consolidated entity may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt. The consolidated entity would look to raise capital when an opportunity to invest in a business or company was seen as value adding relative to the current company's share price at the time of the investment. The consolidated entity is not actively pursuing additional investments in the short term as it continues to integrate and grow its existing businesses in order to maximise synergies. The consolidated entity is subject to certain financing arrangements covenants and meeting these is given priority in all capital risk management decisions. There have been no events of default on the financing arrangements during the financial year. The capital risk management policy remains unchanged from the 30 June 2020 Annual Report. 14 RESERVES Share-based payments reserve 2,093,161 1,955,644 The share-based payments reserve is used to accumulate the fair value of the issue of options and performance rights. The movement in the share-based payments reserve was as follows: Opening balance 1,955,644 1,907,392 Share based payment 137,517 48,252 Ending balance 2,093,161 1,955,644 2021 ANNUAL REPORT AND STATUTORY FINANCIAL STATEMENTS PharmAust Limited and its Controlled Entities - 44 - NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2021 Transactions between related parties are on normal commercial terms and conditions which are no more favourable than those available to other parties. The following transactions occurred with related parties: CONSOLIDATED 2021 $ 2020 $ Transactions with related parties: The following transactions occurred with related parties: Payment for services to – Straight Lines Consultancy [1] 18,000 18,000 [1] Sam Wright is director of Straight Lines Consultancy. Balance with related parties: The following balances occurred with related parties: Due to Mandevilla Pty Ltd [1] 16,500 - [1] Neville Bassett is director of Mandevilla Pty Ltd. 16 EARNINGS PER SHARE Net (loss) attributable to members of the Company 1,337,310 1,361,990 No. No. Weighted average number of ordinary shares outstanding during the year used in calculating basic earnings per share. 315,740,339 296,032,074 16a 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. 16b Diluted Earnings per Share Diluted earnings per share is the same as basic earnings, due to the Group incurring a loss for the year ending 30 June 2021. 15 RELATED PARTY TRANSACTIONS 2021 ANNUAL REPORT AND STATUTORY FINANCIAL STATEMENTS PharmAust Limited and its Controlled Entities - 45 - NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2021 17 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES 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 9 as detailed in the accounting policies to these financial statements, are as follows: Note Consolidated 2021 $ 2020 $ Financial assets Cash and cash equivalents 4 3,020,268 2,880,496 Loans and receivables (excluding GST) 5a 241,949 297,683 Total financial assets 3,262,217 3,178,179 Financial liabilities Trade and other payables(excluding GST) 10 559,007 557,002 Borrowings 11 38,206 217,436 Total financial liabilities 597,213 774,438 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. 2021 Weighted Average Interest Rate Floating Interest Rate Fixed Interest Rate Within 1 Year Fixed Interest Rate Within 1-5 Years Non-Interest Bearing Total $ $ $ $ $ Financial Assets Cash and cash equivalents 0.08% 3,012,247 8,021 - - 3,020,268 Trade and other receivables 241,949 241,949 Total Financial Assets 3,012,247 8,021 - 241,949 3,262,217 Financial liabilities Trade and other payables - - - (559,007) (559,007) Borrowings 6.13% (38,206) - - - (38,206) Lease labilities 7.5% - (108,433) (1,131,367) - (1,239,800) Total Financial Liabilities (38,206) (108,433) (1,131,367) (559,007) (1,837,013) Net Financial Assets/(Liabilities) 2,974,041 (100,412) (1,131,367) (317,058) 1,425,204 2021 ANNUAL REPORT AND STATUTORY FINANCIAL STATEMENTS PharmAust Limited and its Controlled Entities - 46 - NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2021 17 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (Cont.) 2020 Weighted Average Interest Rate Floating Interest Rate Fixed Interest Rate Within 1 Year Fixed Interest Rate Within 1-5 Years Non-Interest Bearing Total $ $ $ $ $ Financial Assets Cash and cash equivalents 0.58% 604,964 2,275,532 - - 2,880,496 Trade and other receivables - - - 297,683 297,683 Total Financial Assets 604,964 2,275,532 - 297,683 3,178,179 Financial liabilities Trade and other payables - - - (557,002) (557,002) Borrowings 6.2% (217,436) - - - (217,436) Lease liabilities 7.5% - (175,407) (1,079,008) (1,254,415) Total Financial Liabilities (217,436) (175,407) (1,079,008) (557,002) (2,028,853) Net Financial Assets/(Liabilities) 387,528 2,100,125 (1,079,008) (259,319) 1,149,326 Interest rate sensitivity analysis At 30 June 2021 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 $30,505 (2020: $3,875) 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. CONSOLIDATED 2021 $ 2020 $ Contracted maturities Payables - within 1 year 578,256 557,002 Borrowings - within 1 year 38,206 179,230 Price risk The Group is not exposed to price risk. 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: 2021 2020 USD EUR SEK USD EUR SEK $ $ $ $ $ $ Trade receivables 37,748 2,318 - 140,157 556 - Trade payables 45,818 - - 26,478 - 925 2021 ANNUAL REPORT AND STATUTORY FINANCIAL STATEMENTS PharmAust Limited and its Controlled Entities - 47 - NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2021 17 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (Cont.) Foreign currency risk sensitivity analysis 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: 2021 2020 Change in profit and equity with a +/- 10% in AUD to Change in profit and equity with a +/- 10% in AUD to USD EUR SEK USD EUR SEK $ $ $ $ $ $ Trade receivables 3,603 227 - 13,379 53 - Trade payables 4,374 - - 2,527 - 88 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 profit or loss and other comprehensive income and in the notes to the financial statements. 18 INTERESTS IN SUBSIDIARIES The consolidated financial statements incorporate the assets, liabilities and results of the following wholly-owned subsidiaries in accordance with the accounting policy described in Note 1: EQUITY HOLDING EQUITY HOLDING COUNTRY OF CORPORATION CLASS OF SHARES 2021 % 2020 % Name: Epichem Pty Ltd Australia Ordinary 100 100 Pitney Pharmaceuticals Pty Ltd Australia Ordinary 100 100 Epichem OHD Pty Ltd* Australia Ordinary 100 - *Newly incorporated entity during the year. 19 NOTES TO THE STATEMENT OF CASH FLOWS 19a Reconciliation of Cash CONSOLIDATED 2021 $ 2020 $ Cash at bank 3,020,268 2,880,496 19b Reconciliation of net cash used in operating activities to (loss) after income tax (Loss) after income tax (1,337,310) (1,361,990) Depreciation 298,263 274,637 Share based payment expense 155,015 48,252 Interest on lease 45,888 96,586 Movement in assets and liabilities: Inventory (150,501) (245,753) Receivables 55,734 (38,841) Other assets (51,982) 24,150 Payables 2,006 (116,019) Provisions 44,922 48,976 Net cash used in operating activities (937,965) (1,270,002) 2021 ANNUAL REPORT AND STATUTORY FINANCIAL STATEMENTS PharmAust Limited and its Controlled Entities - 48 - NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2021 19 NOTES TO THE STATEMENT OF CASH FLOWS 19c Non-cash Financing and Investing Activities During the year, the Group received COVID-19 related rent relief, resulting in waived lease payments totalling $43,887 (2020: $nil). 19d Changes in liabilities arising from financing activities Bank Lease loans liability Total Consolidated $ $ $ Balance at 1 July 2019 324,614 1,344,676 1,669,290 Net cash used in financing activities (107,178) (90,261) (197,439) Acquisition of plant and equipment by means of leases - - - Balance at 30 June 2020 217,436 1,254,415 1,471,851 Net cash from/(used in) financing activities (179,230) (75,037) (254,267) Impact of COVID-19 rent relief (non-cash) - (20,579) (20,579) Acquisition of leases - 81,001 81,001 Balance at 30 June 2021 38,206 1,239,800 1,278,006 20 SHARE-BASED PAYMENTS The Company has recognised the following amounts as expenses relating to share-based payments for the year. 2021 $ 2020 $ Share-based payments to non-KMP – options - 29,423 Share-based payments to KMP – shares 17,500 - Share-based payments to KMP – performance rights 137,515 18,829 Total 155,015 48,252 Share-based payments -options There are no options issued during the year. During the prior year the following options were issued to non-KMP Name Grant Date Expiry Date Exercise Price Number Expense $ Advisor-Alto Capital 26-Jul-19 1-Jul-22 $0.065 1,000,000 11,954 Advisor-JP Equity 28-Aug-19 30-Jun-22 $0.15 500,000 17,469 29,423 The fair values of the options granted in prior year were calculated using the Black-Scholes option pricing model applying the following inputs: Grant Date Options Share Price at Grant Date Exercise Price Expected Volatility Dividend Yield Risk-free Interest Rate Expiry Date Fair Value at Grant Date 26/7/2019 1,000,000 $0.04 $0.065 71% 0% 0.975% 1/7/2022 $0.012 28/8/2019 500,000 $0.10 $0.15 71% 0% 0.955% 30/6/2022 $0.0349 The valuation of these options was recognised as share-based payment expense immediately as options vest immediately. 2021 ANNUAL REPORT AND STATUTORY FINANCIAL STATEMENTS PharmAust Limited and its Controlled Entities - 49 - NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2021 20 SHARE-BASED PAYMENTS(CONT.) Share-based payments -Performance rights During the current year, 1,000,000 performance rights were issued to KMP. The performance rights have no exercise price and performance based vesting conditions. These performance rights expire on 31 March 2022. $137,515 has been recognised in employee benefits expense with respect to 1 million performance rights issued to KMP during the year ended 30 June 2021 as well as continue amortisation of prior year performance rights issued. During prior year, 4,000,000 performance rights were issued to KMP. The performance rights have no exercise price and a number of vesting conditions. 2,000,000 of the performance rights expire 30 April 2022 and 2 000,000 expire 31 October 2022. $18,829 has been recognised in employee benefits expense with respect to these performance rights. The fair values of the performance rights granted in current year were as follows: Performance rights Share Price at Grant Date Exercise Price Fair Value at Grant Date 1,000,000 $0.12 $nil $0.12 The fair values of the performance rights granted in prior year were as follows: Performance rights Share Price at Grant Date Exercise Price Fair Value at Grant Date 4,000,000 $0.098 $nil $0.098 Set out below are summaries of options and performance rights: Options 2021 Balance at Expired/ Balance at Exercise the start of forfeited/ the end of Grant date Expiry date price the year Granted Exercised other the year No. No. No. No. No. 26/2/2018 31/12/2020 $0.08 5,000,000 - (4,375,000) (625,000) - 16/3/2018 31/1/2022 $0.12 10,000,000 - (9,950,000) - 50,000 28/8/2019 30/6/2022 $0.15 500,000 - (250,000) - 250,000 15,500,000 - (14,575,000) (625,000) 300,000 Weighted average exercise price $0.11 $0 $0.06 $0.08 $0.15 Options 2020 Balance at Expired/ Balance at Exercise the start of forfeited/ the end of Grant date Expiry date price the year Granted Exercised other the year No. No. No. No. No. 30/6/2017 30/11/2019 $0.12 21,645,412 - (799,862) (20,845,550) - 6/6/2017 31/3/2020 $0.075 3,750,000 - (3,750,000) - 6/6/2017 31/3/2020 $0.15 7,500,000 - (7,500,000) - 6/6/2017 31/3/2020 $0.23 9,000,000 - (9,000,000) - 26/2/2018 31/12/2020 $0.08 5,000,000 - - - 5,000,000 16/3/2018 31/1/2022 $0.12 10,000,000 - - - 10,000,000 26/7/2019 1/7/2022 $0.065 - 1,000,000 (1,000,000) - - 28/8/2019 30/6/2022 $0.15 - 500,000 - - 500,000 56,895,412 1,500,000 (1,799,862) (41,095,550) 15,500,000 Weighted average exercise price $0.13 $0.09 $0.09 $0.15 $0.11 The weighted average remaining contractual life of options outstanding at the end of the financial year was 0.93 years (2020: 1.25 years). 2021 ANNUAL REPORT AND STATUTORY FINANCIAL STATEMENTS PharmAust Limited and its Controlled Entities - 50 - NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2021 20 SHARE-BASED PAYMENTS(CONT.) Performance rights 2021 Balance at Expired/ Balance at Exercise the start of forfeited/ the end of Grant date Expiry date price the year Granted Exercised other the year No. No. No. No. No. 26/4/2020 30/4/2022 $nil 2,000,000* - - - 2,000,000 26/4/2020 31/10/2022 $nil 2,000,000** - - - 2,000,000 8/10/2020 31/3/2022 $nil - 1,000,000*** - - 1,000,000 4,000,000 1,000,000 - - 5,000,000 *** Vest upon the entry by the Company into a binding commercial licensing agreement with a global pharma or veterinary company covering the use of MPL in anti-cancer applications in canine or feline patients. Performance rights 2020 Balance at Expired/ Balance at Exercise the start of forfeited/ the end of Grant date Expiry date price the year Granted Exercised other the year No. No. No. No. No. 26/4/2020 30/4/2022 $nil - 2,000,000* - - 2,000,000 26/4/2020 31/10/2022 $nil - 2,000,000** - - 2,000,000 - 4,000,000 - - 4,000,000 * 1 million performance rights vest upon Elanco US Inc exercising its Option under the Option Agreement with PharmAust Limited dated 12 April 2018 on terms that the boards of directors of PharmAust Limited and Elanco both formally approve and 1 million vest upon the formal commencement by PharmAust Limited or by an organisation working in collaboration with PharmAust Limited of a Phase I/II trial in humans of monepantel as an anti-COVID-19 treatment either alone or in combination with other drugs by one or more approved centres in Australia or the United States or United Kingdom following commencement of all formal approvals from relevant regulators and entities and the recruitment of the first patient. ** 1 million performance rights vest upon the formal commencement by PharmAust Limited of a Phase II trial in humans of monepantel as a treatment in neuro-degenerative disease either alone or in combination with other drugs at one or more approved centres in Australia or the United States or United Kingdom following commencement of all formal approvals from relevant regulators and entities and the recruitment of the first patient and 1 million vest upon the formal commencement by PharmAust Limited of a Phase II trial in humans of monepantel as an anti-cancer treatment either alone or in combination with other drugs either at one or more approved centres in Australia or the United States or United Kingdom following commencement of all formal approvals from relevant regulators and entities and the recruitment of the first patient. 2021 ANNUAL REPORT AND STATUTORY FINANCIAL STATEMENTS PharmAust Limited and its Controlled Entities - 51 - NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2021 21 KEY MANAGEMENT PERSONNEL 21a Remuneration of Key Management Personnel Compensation The aggregate compensation made to directors and other members of key management personnel of the consolidated entity is set out below: CONSOLIDATED 2021 $ 2020 $ Short term employee benefits 1,199,275 1,152,689 Post-employment benefits 95,237 90,567 Share based payment 155,015 18,829 1,449,527 1,262,085 22 SEGMENT REPORTING Segment Information 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. Corporate The corporate segment covers all the corporate overhead expenses. ii. 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 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. 2021 ANNUAL REPORT AND STATUTORY FINANCIAL STATEMENTS PharmAust Limited and its Controlled Entities - 52 - NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2021 22 SEGMENT REPORTING(Cont'd) The consolidated entity operates in two business segments as disclosed below: i) Segment Performance Consolidated 2021 Corporate Pharmaceutical Total $ $ $ Revenue External sales - 2,189,824 2,189,824 Other external revenue 606,613 946,521 1,553,134 Total segment revenue 606,613 3,136,345 3,742,958 Inter-segment elimination (71,313) Total revenue per statement of profit or loss and other comprehensive income 3,671,645 Results Segment result from continuing operations before tax (1,639,487) 302,177 (1,337,310) Consolidated 2020 Corporate Pharmaceutical Total $ $ $ Revenue External sales - 3,221,414 3,221,414 Other external revenue 807,683 228,194 1,035,877 Total segment revenue 807,683 3,449,608 4,257,291 Inter-segment elimination (133,880) Total revenue per statement of profit or loss and other comprehensive income 4,123,411 Results Segment result from continuing operations before tax (1,575,668) 213,678 (1,361,990) 2021 ANNUAL REPORT AND STATUTORY FINANCIAL STATEMENTS PharmAust Limited and its Controlled Entities - 53 - NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2021 22 SEGMENT REPORTING (Cont.) ii) Segment assets and liabilities Consolidated Corporate Pharmaceutical Total $ $ $ 2021 Segment assets Segment assets 2,902,715 8,050,883 10,953,598 Total assets of the consolidated entity: 2,902,715 8,050,883 10,953,598 Segment liabilities Segment operating liabilities (318,089) (1,755,025) (2,073,114) Total liabilities of the consolidated entity: (318,089) (1,755,025) (2,073,114) Consolidated Corporate Pharmaceutical Total $ $ $ 2020 Segment assets Segment assets 2,757,269 7,989,033 10,746,302 Total assets of the consolidated entity: 2,757,269 7,989,033 10,746,302 Segment liabilities Segment operating liabilities (257,327) (1,962,705) (2,220,032) Total liabilities of the consolidated entity: (257,327) (1,962,705) (2,220,032) ii) Revenue by geographical region CONSOLIDATED 2021 $ 2020 $ Revenue by geographical region Revenue attributable to external customers is disclosed below, based on the location of the external customer: Switzerland 1,130,475 1,240,000 Australia 685,014 863,871 USA 114,240 870,978 Others 210,591 221,043 Total revenue (exclude other income) 2,140,320 3,195,892 Assets by geographical region The location of segment assets by geographical location of the assets is disclosed below: Australia 10,953,598 10,746,301 Total assets 10,953,598 10,746,301 Major customers 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 54% of external revenue (2020: 39%). 2021 ANNUAL REPORT AND STATUTORY FINANCIAL STATEMENTS PharmAust Limited and its Controlled Entities - 54 - NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2021 23 CONTINGENT LIABILITIES The consolidated entity has no contingent liabilities as at 30 June 2021. 24 PARENT INFORMATION Statement of Financial Position 2021 $ 2020 $ Assets Total current assets 4,061,113 4,182,377 Non-current assets 3,438,990 3,438,990 Total assets 7,500,103 7,621,367 Liabilities Current liabilities 318,089 491,390 Non -current liabilities - - Total liabilities 318,089 491,390 Equity Issued capital 55,326,441 53,772,433 Reserves 2,093,159 1,955,644 Accumulated losses (50,237,587) (48,598,100) Total equity 7,182,014 7,129,977 Statement of profit or loss and other comprehensive income Loss for the year (1,639,487) (1,575,669) Other comprehensive income - - Total comprehensive loss for the year (1,639,487) (1,575,669) Guarantees PharmAust Limited is a guarantor of a debt facility for its fully owned subsidiary Epichem Pty Ltd during the year. Other Commitments and Contingencies PharmAust Limited has no commitments to acquire property, plant and equipment and has no contingent liabilities other than those disclosed in Note 23. CONSOLIDATED 2021 $ 2020 $ 25 ACCUMULATED LOSSES Accumulated losses at beginning of the financial year (47,201,808) (45,839,818) (Loss)after income tax for the year (1,337,310) (1,361,990) Accumulated losses at the end of the financial year (48,539,118) (47,201,808) 26 EVENTS AFTER THE REPORTING PERIOD Subsequent to year end the following transactions took place: On 12 July 2021, PharmAust announced it had executed a Research Services Agreement with the Walter and Eliza Hall Institute to investigate the effects of MPL upon human T-lymphotrophic virus-1 (HTLV-1) infections in vitro. On 26 July 2021, PharmAust announced that three independent laboratories (Walter and Eliza Hall Institute of Medical Research (WEHI) in Melbourne, 360biolabs in Melbourne and Leiden University Medical Center (LUMC) in the Netherlands) have demonstrated that both MPS and MPLS protect against cell death in-vitro, following infection with SARS-CoV2. On 3 August 2021, PharmAust confirmed its subsidiary Epichem Pty Ltd, has completed building its benchtop Oxidative Hydrothermal Dissolution (OHD) Flow Reactor to research, develop and promote a novel, innovative and disruptive waste to fuels technology. The impact of the Coronavirus (COVID-19) pandemic is ongoing and while it has had no significant impact on the consolidated entity up to 30 June 2021, it is not practicable to estimate the potential impact, positive or negative, after the reporting date. The situation is rapidly developing and is dependent on measures imposed by the Australian Government and other countries, such as maintaining social distancing requirements, quarantine, travel restrictions and any economic stimulus that may be provided. No other matters or circumstances have arisen since the end of the financial year which significantly affected or may significantly affect the operations of the consolidated entity, the results of those operations, or the state of affairs of the consolidated entity in future financial years. 2021 ANNUAL REPORT AND STATUTORY FINANCIAL STATEMENTS PharmAust Limited and its Controlled Entities - 55 - NOTES TO THE FINANCIAL STATEMENTS For the year ended 30 June 2021 CONSOLIDATED 2021 $ 2020 $ 27 AUDITOR’S REMUNERATION Remuneration of RSM Australia Partners as auditor for: - auditing or reviewing the financial report 73,000 73,000 - taxation services 13,500 14,250 86,500 87,250 2021 ANNUAL REPORT AND STATUTORY FINANCIAL STATEMENTS PharmAust Limited and its Controlled Entities - 56 - SHAREHOLDER INFORMATION Additional information required by ASX Limited Listing Rules, and not disclosed elsewhere in this report. SHAREHOLDINGS Mr Graham Darcy is a substantial shareholder holding a relevant interest in 22,000,000 shares representing 6.97% of voting power and has notified the Company in accordance with section 671B of the Corporations Act 2001. CLASS OF SHARES AND VOTING RIGHTS The voting rights attached to the Fully Paid Ordinary shares of the Company are: (a) 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 (b) 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 (as at 21 July 2021) 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. 2021 ANNUAL REPORT AND STATUTORY FINANCIAL STATEMENTS PharmAust Limited and its Controlled Entities - 57 - SHAREHOLDER INFORMATION (CONT.) TWENTY LARGEST SHAREHOLDERS (as at 21 July 2021)

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