QRxPharma Limited
ABN 16 102 254 151
Annual report
for the year ended 30 June 2017
QRxPharma Limited ABN 16 102 254 151
Annual report - 30 June 2017
Contents
Corporate directory
Letter from the Board
Directors' report
Auditor's Independence Declaration
Corporate governance statement
Financial report
Directors' declaration
Independent auditor’s report to the members of QRxPharma Limited
Shareholder information
Page
1
2
3
13
14
21
48
49
53
QRxPharma Limited
30 June 2017
Corporate directory
Directors
Secretary
Timothy P Heesh (appointed 11 October 2016)
John P Rainbow (appointed 11 October 2016)
Richard S Treagus (resigned 11 October 2016)
Bruce A Hancox (resigned 11 October 2016)
Cameron Jones (appointed 19 August 2016)
Chris Campbell (resigned 19 August 2016)
Principal registered office in Australia
Suite 201
697 Burke Road
Camberwell VIC 3124
Share register
Auditor
Bankers
Link Market Services Limited
Level 12
680 George Street
Sydney NSW 2000
Pitcher Partners
Level 22 MLC Centre
19 Martin Place
Sydney
NSW 2000
Westpac Banking Corporation
Level 9 Keycorp Tower
799 Pacific Highway
Chatswood NSW 2067
Silicon Valley Bank
3003 Tasman, Santa Clara
California 95054
U.S.A.
Stock exchange listings
QRxPharma Limited shares are listed on the Australian Securities Exchange.
Listing Code: QRX
QRxPharma Limited American Depositary Receipts are listed on the OTC
Pink Current. Symbol: QRXPY
Website address
www.qrxpharma.com
-1-
QRxPharma Limited
30 June 2017
Letter from the Board
Letter from the Board
Dear Shareholder,
The key events throughout this year have been as follows:
(cid:131)
(cid:131)
(cid:131)
11 October 2016 – Dr Richard Treagus and Mr Bruce Hancox resigned in their positions as Non-Executive
Directors;
11 October 2016 – Mr Timothy Heesh and Mr John Rainbow were appointed as Non-Executive Directors; and
29 November 2016 - the Company held its 2016 Annual General Meeting and Mr Timothy Heesh and Mr John
Rainbow’s appointment as Directors was ratified by shareholders.
The focus of the Company is identifying the business opportunities that will assist the reinstatement of the Company's
securities to official quotation on the Australian Securities Exchange (ASX).
We thank you for your patience and we look forward further updating shareholders.
Sincerely,
Sincerely,
Mr Timothy Heesh
Non-Executive Director
-2-
QRxPharma Limited
Directors' report
30 June 2017
(continued)
Directors' report
Your directors present their report on the consolidated entity (referred to hereafter as the Group) consisting of QRxPharma
Limited (referred to hereafter as the Company) and the entities it controlled at the end of, or during, the year ended 30 June
2017.
Directors
The following persons were directors of QRxPharma Limited during the whole of the financial year and up until the date of
this report, unless otherwise indicated:
Richard S Treagus (resigned 11 October 2016)
Bruce A Hancox (resigned 11 Octoboer 2016)
Timothy P Heesh (appointed 11 October 2016)
John P Rainbow (appointed 11 October 2016)
Principal activities
The principal activities of the Group has been the development and commercialisation of biopharmaceutical products based
on largely Australian research, targeting global markets with the initial efforts being focused on the US and European
markets.
On 22 May 2015 the Board of Directors (Board) formed a view that the Company's circumstances rendered its ongoing
solvency unlikely and that the best possible interests of shareholders may be achieved by placing the Company into
Voluntary Administration. A Deed of Company Arrangement (DOCA) was wholly effectuated on 23 December 2015, thereby
returning the management and control of the Company to the Board. The Board is now in a position where all historic
liabilities have been accounted for including through the DOCA process and the future focus is identifying the business
opportunities that will assist the reinstatement of the Company’s securities to official quotation on the Australian Securities
Exchange.
Results and Review of Operations
The Company reported total comprehensive loss for the year ended 30 June 2017 of $422,282 (30 June 2016: $1,762,120).
The year ended 30 June 2017 operating results are attributed to the following:
o Restructuring expense of $5,639 (2016: $854,409)
o General and administration expense of $374,910 (2016: $695,575); and
o
Employment benefit expense of $44,224 (2016: $379,866).
At 30 June 2017, the Group holds cash and cash equivalents of $626,297 (30 June 2016: $1,193,886). As
detailed in Note 1 (b) of the financial statements have been prepared on a going concern basis.
Certain former Directors of the Company have been sued for damages in a Court class action brought by former and current
shareholders. Whilst the company is not a party to the litigation it has been required to disclose to the litigants a great
number of documents in its possession. This has involved time and expense and required the Company to maintain the
office facility in North Sydney and to retain solicitors to advise on questions of privilege and disclosure of relevant documents
and to keep Chubb Insurance informed at every stage of involvement. Chubb Insurance issued the Directors and Officers
Insurance Policy which has been engaged by the defending Directors.
The Company has negotiated that Chubb meet most of the legal costs involved in complying with requirements for provision
of documents to the litigating parties and asserting privilege claims as advised.
To date the Company has not been joined or threatened to be joined as a party in the class action, and it seems ever less
likely that it will as time passes.
Former directors and agents of QRx are respondents to proceedings commenced in the Federal Court of Australia
Proceeding in 2015 (Proceeding). Subject to the matters referred to below, QRx is not a party to the Proceeding.
On 15 September 2017, the Applicant in the Proceeding made an application seeking orders dealing with, amongst other
things, the form of lists of documents provided on discovery by the Respondents (Application). The relevant lists include
claims for legal professional privilege made on behalf of QRx. Because the Application concerns claims for privilege made
on behalf of QRx, QRx was joined to the Proceeding as a respondent on the basis that it be treated as a party to the
Proceeding but only in respect of the Application and matters incidental thereto. On 18 September 2017, QRx was served
with the Application and, accordingly, QRx is to be treated as a party to the Proceeding but only in respect of that Application.
The Application is listed for hearing on 5 October 2017.
-3-
Loss per share
(a) Basic loss per share
Loss from continuing operations attributable to the ordinary equity holders of the
Company
(b) Diluted loss per share
Loss from continuing operations attributable to the ordinary equity holders of the
Company
Dividends - QRxPharma Limited
No dividends were paid or declared since the start of the financial year (2016: $nil).
QRxPharma Limited
Directors' report
30 June 2017
(continued)
2017
Cents
(0.3)
2016
Cents
(1.1)
(0.3)
(1.1)
Significant changes in the state of affairs
No significant changes in the state of affairs of the Group were noted during the financial year that have not otherwise been
disclosed in this report or in the financial statements.
Matters subsequent to the end of the financial year
No significant events have occurred after the balance date which would have a material impact on the financial results of the
Group.
Business strategies and future prospects
The major focus for the Group during the 2017 financial year was cost minimisation. The focus of the Group has transitioned
to identifying business opportunities that will assist the reinstatement of the Company's securities to official quotation on the
Australian Securities Exchange (ASX).
As at 30 June 2017, the Group holds cash and cash equivalents of $626,297 (2016: $1,193,886). As detailed in note 1 (b) of
the Financial Report the financial statements have been prepared on the going concern basis. This matter has been considered
by the Group’s auditors Pitcher Partners. The Independent auditors’ report to the members of QRxPharma Limited is on pages
49 to 51 of this Annual Report.
Business Risks
The board continues to review all strategic alternatives for the Group and its assets, which will impact on the assessment of
relevant specific risks that have the potential to affect the Group’s achievement of any long term financial success.
Environmental regulation
There are no particular and significant environmental regulations under a law of the Commonwealth or of a State or Territory
of Australia affecting the Group.
Information on directors
Timothy Heesh Non-Executive Director (appointed on 11 October 2016)
Experience and expertise
Mr Heesh, is a Chartered Accountant and Registered and Official Liquidator. Tim is the founding director of TPH Insolvency
and has been providing quality business insolvency advice for over 25 years across Australia. Tim has vast experience in the
insolvency arena and has developed strong expertise across numerous sectors. Tim is a member of the Chartered
Accountants in Australia and New Zealand and the Australian Restructuring, Insolvency and Turnaround Association.
Other current directorships
Nil
Former directorships in last 3 years
Nil.
Special responsibilities
Nil.
Interests in shares and options
Mr Heesh does not hold any shares or options in the Group.
-4-
QRxPharma Limited
Directors' report
30 June 2017
(continued)
John Rainbow Non-Executive Director (joined the board 11 October 2016)
Experience and expertise
Mr Rainbow, is a qualified in New South Wales to practice as a lawyer and holds an unrestricted practicing certificate. John is
a senior consultant at Watson Mangioni Lawyers and has been a legal practitioner for over 25 years both in private practice
and as in house counsel. John is an experienced company director.
Other current directorships
Nil
Former directorships in last 3 years
Nil.
Special responsibilities
Nil.
Interests in shares and options
Mr Rainbow does not hold any shares or options in the Group.
Company Secretary
Cameron Jones is a Chartered Accountant and holds a Certificate in Governance (Practice) from the Governance Institute of
Australia. Cameron is a Director of Bio101Group Pty Ltd, a wholly owned subsidiary of Biotech Capital Limited providing life
science companies with accounting, back office administration and company secretarial solutions.
Meetings of directors
The numbers of meetings of the Company’s board and of each board committee held during the year ended 30 June 2017,
and the numbers of meetings attended by each director were:
Meetings of committees
Full
meetings of
directors
A
B
Meetings of
non -
executive
directors
B
A
Audit and risk Nominations
Remuneration
A
B
A
B
A
B
Bruce A Hancox
Richard S Treagus
Timothy Heesh
John Rainbow
2
2
4
4
2
2
4
4
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
A = Number of meetings attended.
B = Number of meetings held during the time the director held office or was a member of the committee during the year.
-5-
QRxPharma Limited
Directors' report
30 June 2017
(continued)
Remuneration Report
The directors are pleased to present the Group’s 2017 remuneration report which sets out remuneration information for
QRxPharma Limited’s non-executive directors, executive director and other key management personnel.
Directors and key management personnel disclosed in this report
The directors and other key management personnel of the Group during and since the end of the financial year were:
Name
Position
Non-executive and executive directors
Richard S Treagus
Bruce A Hancox
Timothy P Heesh
John P Rainbow
Other key management personnel
Non-Executive Director (Resigned 11 October 2016)
Non-Executive Director (Resigned 11 October 2016)
Non-Executive Director (Appointed 11 October 2016)
Non-Executive Director (Appointed 11 October 2016)
Chris J Campbell
Chief Financial Officer (Terminated 19 August 2016)
Except as noted, the named persons held their current position for the whole of the financial year and since the end of the
financial year.
Role of the remuneration committee
The remuneration committee is a committee of the board. It is primarily responsible for making recommendations to the
board on:
• remuneration levels of executive directors and other key management personnel;
• the over-arching executive remuneration framework and operation of the incentive plan; and
• key performance indicators and performance hurdles for the executive team.
Their objective is to ensure that remuneration policies and structures are fair and competitive and aligned with the long-
term interests of the Group. In doing this, the remuneration committee may seek advice from independent remuneration
consultants. No remuneration consultants were engaged during the current financial year.
The Corporate Governance Statement provides further information on the role of this committee.
Non-executive directors remuneration policy
Fees and payments to non-executive directors reflect the demands which are made on, and the responsibilities of, the
directors.
During the 2017 financial year the non-executive director fees for Bruce A Hancox and Richard S Treagus were $3,000
each per month.
During the 2017 financial year the non-executive director fees for Timothy Heesh and John Rainbow were as follows:
Period
Amount (including
superannuation)
11 October 2016 to 28 February 2017
$3,285 per month
1 March 2017 to 30 June 2017
$5,475 per month
The annual director remuneration at the time of this report for Timothy P Heesh and John P Rainbow is $65,700 each
including superannuation.
Non-executive directors’ fees are determined within an aggregate directors’ fee pool limit, which is periodically
recommended for approval by shareholders. The maximum currently stands at $400,000 per annum and was approved by
shareholders at the Annual General Meeting on 24 April 2007.
Retirement allowances for non-executive directors
There are no retirement allowances for non-executive directors, in line with guidance from the ASX Corporate Governance
Council on non-executive directors’ remuneration. Superannuation contributions required under the Australian
superannuation guarantee legislation continue to be made where applicable.
-6-
QRxPharma Limited
Directors' report
30 June 2017
(continued)
Remuneration report (continued)
Executive remuneration policy and framework
The objective of the Group’s executive reward framework is to ensure reward for performance is competitive and
appropriate for the results delivered. The framework aligns executive reward with achievement of strategic objectives and
the creation of value for shareholders, and conforms with market practice for delivery of reward. The board ensures that
executive reward satisfies the following key criteria for good reward governance practices:
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
competitiveness and reasonableness
acceptability to shareholders
performance linkage / alignment of executive compensation
transparency
capital management
The Group has structured an executive remuneration framework that is market competitive and complementary to the
reward strategy of the organisation.
Executive remuneration policy and framework
Alignment to shareholders’ interests:
(cid:120)
(cid:120)
focuses on sustained growth in share price as well as focusing the executive on key non-financial drivers of value
attracts and retains high calibre executives.
Alignment to program participants’ interests:
rewards capability and experience
(cid:120)
reflects competitive reward for contribution to growth in shareholder wealth
(cid:120)
provides recognition for contribution.
(cid:120)
The framework provides a blend of fixed pay, and short and long-term incentives.
The executive pay and reward framework has three components:
base pay and benefits, including superannuation
(cid:120)
short-term performance incentives, and
(cid:120)
long-term incentives through participation in the QRxPharma Limited Employee Share Option Plan.
(cid:120)
The combination of these comprises the executive’s total remuneration.
Base pay and benefits
Structured as a total employment package which may be delivered as a combination of cash and prescribed non-financial
benefits at the executives’ discretion.
Executives are offered a competitive base pay that comprises the fixed component of pay and rewards. Base pay for
executives is reviewed annually and every two years a market survey is conducted to ensure the executive’s pay is
competitive with the market. An executive’s pay is also reviewed on promotion.
There are no guaranteed base pay increases included in any executives’ contracts.
Executives receive other incidental benefits.
Superannuation
The Group does not maintain a Group superannuation plan. The Group makes fixed percentage contributions for Australian
resident employees to complying third party superannuation funds and where requested, for US resident employees to
complying pension plans.
Short-term incentives
A variable cash incentive component is payable annually dependent upon achievement of performance targets. Individual
performance targets are set by reference to components of the Group's business plan for which the individual executive is
responsible. Maximum bonuses are available to 50% of base pay.
Each executive has a target short-term incentive opportunity depending on the accountabilities of the role and impact on
the organisation. Each year, the remuneration committee considers the appropriate targets and key performance indicators
(KPI’s) for each executive. For the year ended 30 June 2017, no short-term incentives were set.
Long-term incentives
Long-term incentives are provided to certain executives through participation in the QRxPharma Limited Employee Share
Option Plan, which was approved by shareholders at the extraordinary general meeting of members held on 24 April 2007.
-7-
QRxPharma Limited
Directors' report
30 June 2017
(continued)
Remuneration report (continued)
The QRxPharma Limited Employee Share Option Plan is designed to provide long-term incentives for executives to deliver
long-term shareholder value and as an additional mechanism to attract and retain high calibre executives. Participation in
the plan is at the board’s discretion and no individual has a contractual right to participate in the plan or to receive any
guaranteed benefits. The vesting period for each option issued up to 31 December 2008 is 3 years, or as varied by the
board, one-third vesting 12 months from the date of grant and the balance vesting equally each year over the remaining
two year period. Options issued from 1 January 2009 generally vest over 3 years with the initial vesting on the first
anniversary of the date of the grant and subsequent vestings in 8 equal tranches on the first day of each calendar quarter
over the following 2 years. Most option grants generally have a seven year life, after which time, if they are not exercised,
the options are forfeited. Options are granted under the plan for no consideration.
Details of the remuneration of the directors and the key management personnel (as defined in AASB 124 Related Party
Disclosures) of QRxPharma Limited and the Group are set out in the following tables.
Key management personnel and other executives of QRxPharma Limited and the Group are the same.
2017
Name
Short-term employee benefits
Post-employment
benefits
Cash
salary and
fees
$
Cash
bonus
$
Annual
leave
$
Termination
benefits
$
Super-
annuation
$
Retirement
benefits
Non-executive directors
Richard S Treagus
Bruce A Hancox
Timothy Heesh
John Rainbow
Sub-total non-executive
directors
10,065
10,065
38,325
35,000
93,455
Other key management
personnel (Group)
Chris J Campbell 1
Total key management
personnel
compensation (Group)
34,084
127,539
-
-
-
-
-
-
-
-
-
-
-
-
10,450
10,450
-
-
-
-
-
-
-
-
-
-
3,325
3,325
3,238
6,563
-
-
-
-
-
-
-
1 Chris J Campbell’s employment ceased on 19 August 2016.
Long-
term
benefits
Long
service
leave
$
-
-
-
-
-
5,012
5,012
Share-based
payments
Options
$
Total
$
-
-
-
-
-
-
-
10,065
10,065
38,325
38,325
96,780
52,784
149,564
-8-
Remuneration report (continued)
Key management personnel and other executives of QRxPharma Limited and the Group were the same in 2016.
QRxPharma Limited
Directors' report
30 June 2017
(continued)
2016
Name
Short-term employee benefits
Annual
Leave
paydown
$
Cash
salary and
fees
$
Cash
bonus
$
Post-employment
benefits
Termination
benefits
$
Super-
annuation
$
Retirement
benefits
$
Long-
term
benefits
Long
service
leave
$
Non-executive directors
Richard S Treagus
Bruce A Hancox
Sub-total non-executive
directors
Other key management
personnel (Group)
Chris J Campbell 1, 2
Total key management
personnel compensation
(Group)
72,000
72,000
144,000
241,696
385,696
-
-
-
-
-
-
-
-
7,435
7,435
-
-
-
-
-
-
-
-
22,961
22,961
-
-
-
-
-
-
-
-
-
-
Share-based
payments
Options
$
Total
$
-
-
-
72,000
72,000
144,000
892
892
272,984
416,984
1 Pursuant to the terms of the Deed of Company Arrangement (DOCA) the Voluntary Administrator paid down long service leave entitlement of
$33,140 and annual leave entitlement of $16,329 of Chris J Campbell. The above tables do not include these payments.
2 Chris J Campbell received notice of his termination on 19 May 2016 with his employment to cease on 19 August 2016. The above tables do not
include a severance on termination equivalent to 6 months’ salary of $120,848. This amount has been accrued in the 2016 financial year.
Remuneration report (continued)
The relative proportions of remuneration that are linked to performance and those that are fixed are as follows:
Fixed - Cash
salary and fees
2016
2017
At risk - Cash
bonus
2017
2016
Directors of QRxPharma Limited
Timothy Heesh (from 11 October 2016)
John Rainbow (from 11 October 2016)
Richard S Treagus (to 11 October 2016)
Bruce A Hancox (to 11 October 2016)
Other key management personnel
100%
100%
100%
100%
N/A
N/A
100%
100%
Chris J Campbell (from 19 August 2016)
100%
100%
0%
0%
0%
0%
0%
N/A
N/A
0%
0%
0%
Share-based compensation
Options
Options over shares in QRxPharma Limited are granted under the QRxPharma Limited Employee Share Option Plan (ESOP).
The ESOP is designed to provide long-term incentives for executives to deliver long-term shareholder returns.
The maximum number of options available to be issued under the ESOP is 10% of diluted ordinary share capital in the
Company as at the date of issue of the relevant options. All employees and directors are eligible to participate in the ESOP,
but do so at the invitation of the remuneration committee. The term of option issues are determined by the remuneration
committee.
Details of options over ordinary shares in the Company provided as remuneration to each director of QRxPharma Limited and
each of the key management personnel of the parent entity and the Group are set out below. When exercisable, each option
is convertible into one ordinary share of QRxPharma Limited. Further information on the options is set out in note 24 to the
financial statements. The plan rules contain a restriction on removing the “at risk” aspect of instruments granted to executives.
Plan participants may not enter into any transaction designed to remove the “at risk” aspect of an instrument before it vests.
-9-
QRxPharma Limited
Directors' report
30 June 2017
(continued)
Remuneration report (continued)
Directors of QRxPharma Limited
Timothy Heesh
John Rainbow
Richard S Treagus
Bruce A Hancox
Other key management personnel
Chris J Campbell
Number of
options
granted during
the year
Value of
options at
grant date
$
Number of
options
vested during
the year
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Lapsed options
The following table summarises the number of options that lapsed during the financial year, in relation to options granted to key
management personnel as part of their remuneration:
Other key management personnel
Chris J Campbell
Chris J Campbell
Financial year
in which
options were
granted
Number of
options
lapsed during
the current
year
2013
2014
200,000
400,000
Shares provided on exercise of remuneration options
There were no ordinary shares in the Company provided as a result of the exercise of remuneration options to each director
of QRxPharma Limited and other key management personnel of the Group in the year to 30 June 2017.
Bonus
Share-based compensation benefits (options)
Name
Other key management personnel
Paid
%
Forfeited
%
Year Granted
Chris J Campbell
0%
-
2014
2013
Vested
%
0%
100%
Lapsed
%
100%
100%
Financial
years in
which
options
may vest
-
-
The following tables show the number of:
(i) Options over ordinary shares in the Company
(ii) Ordinary shares in the Company that were held during the financial year by key management personnel of the Group,
including their close family members and entities related to them.
There were no shares granted during the reporting period as compensation.
-10-
QRxPharma Limited
Directors' report
30 June 2017
(continued)
Remuneration report (continued)
(i)
Option holdings
The numbers of options over ordinary shares in the Company held during and since the end of the financial year by each
director of QRxPharma Limited and other key management personnel of the Group, including their personally related parties,
are set out below.
2017
Name
Directors of QRxPharma Limited
Richard S Treagus
Bruce A Hancox
Timothy P Heesh
John P Rainbow
Balance at
start of the
year
Granted as
compensation Exercised
Net other
changes
Balance at
end of the
year
Vested and
exercisable Unvested
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Other key management personnel of the Group
Chris J Campbell
1 All unvested options lapsed on termination date of 19 August 2016 (400,000). The remainder of the unexercised vested options (200,000)
expired 90 days from the date of termination.
(600,000) 1
600,000
-
-
-
-
-
(ii)
Share holdings
The numbers of shares in the Company held during and since the financial year by each director of QRxPharma Limited and
other key management personnel of the Group, including their personally related parties, are set out below. There were no
shares granted during the reporting period as compensation.
2017
Name
Directors of QRxPharma Limited
Ordinary shares
Richard S Treagus
Bruce A Hancox
Timothy P Heesh
John P Rainbow
Balance at
the start of
the year
Received
during the
year on the
exercise of
options
Net other
changes
during the
year
Balance at
the end of
the year/
cessation of
Directorship
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
104,155
Other key management personnel of the Group
Ordinary shares
Chris J Campbell
104,155
Shares under option
Unissued ordinary shares of QRxPharma Limited under option at the date of this report are as follows:
Date options granted
Expiry date
Issue price of shares
24 August 2010
1 January 2011
24 August 2017
1 January 2018
$0.95
$1.40
Number under
option
50,000
20,000
70,000
Shares issued on the exercise of options
No ordinary shares of QRxPharma Limited were issued during the year ended 30 June 2017 on the exercise of options granted
under the QRxPharma Limited Employee Option Plan. No further shares have been issued since that date. No amounts are
unpaid on any of the shares.
-11-
QRxPharma Limited
Directors' report
30 June 2017
(continued)
Indemnification
The Company has entered into Deeds of Indemnity, Access and Insurance with each of the directors and executive officers
of the Group against all liabilities to another person (other than the Company or a related body corporate) that may arise from
their position as directors and executive officers of the Company and its controlled entities, except where the liability arises
out of conduct involving a lack of good faith. Whilst these agreements stipulate that the Company will meet the amount of any
such liabilities, including costs and expenses the DOCA limits any indemnification claims to amounts if and to the extent to
which the Company is paid in relation to those claims pursuant to an insurance policy responding to such claims only. The
Company is obligated to maintain Directors and Officers liability insurance contracts (D&O Policy) except where the insurance
is not readily available as defined in the relevant Deed of Indemnity, Access and Insurance.
Insurance of officers
During the 2016 financial year the Company’ had limited D&O cover being an Extended Reporting option which terminated on
31 May 2016. The directors have not included details of the nature of liabilities covered nor the amount of the premium paid
in respect to D&O Policy (inclusive of the Extended Reporting Option), as such, disclosure is prohibited under the terms of the
contracts. The Company has not yet secured a new D&O Policy.
Proceedings on behalf of the Company
No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf
of the Company, or to intervene in any proceedings to which the Company is a party, for the purpose of taking responsibility
on behalf of the Company for all or part of those proceedings.
No proceedings have been brought or intervened in on behalf of the Company with leave of the Court under section 237 of
the Corporations Act 2001.
Non-audit services
The Company may decide to employ the auditor on assignments additional to their statutory audit duties where the auditor's
expertise and experience with the Company and/or the Group are important.
No non-audit services were provided by the appointed auditor during the year (Pitcher Partners). (2016: $nil by the appointed
auditor of Deloitte Touche Tohmatsu).
Auditor's independence declaration
A copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001 is set out on
page 13.
Auditor
Pitcher Partners was appointed auditor of the Company effective 19 December 2016. Deloitte Touche Tohmatsu resigned
from its position as auditor in accordance with section 327 of the Corporations Act 2001. Ratification of the appointment of
Pitcher Partners will be put forward to shareholders at the Annual General Meeting.
This report is made in accordance with a resolution of directors.
Timoth P Heesh
Director
Sydney
28 September 2017
-12-
• PITCHER PARTNERS
ACCOUNTANTS
• ADVISORS
• AUDITORS
AUDITOR'S INDEPENDENCE DECLARATION
TO THE DIRECTORS OF QRxPHARMA LIMITED
ABN 16 102 254 151
In relation to the independent audit for the year ended 30 June 2017, the best of my knowledge and
belief the re have been :
(i) No contraventions of the auditor independence requirements of the Corporations Act 2001;
and
(ii) No contraventions of any applicable code of professional conduct.
This declaration is in respect of QRxPharma Limited and the entities it controlled during the year.
MA GODLEWS
Partner
PITCHER PARTNERS
Sydney
28 September 2017
An independent New South Wales Partnership. ABN 35 415 759 892
Level 22 MLC Centre, 19 Martin Place, Sydney NSW 2000
Liability limited by a scheme approved under Professional Standards Legislatio,
Pitcher Partners is an association of independent firms
Melbourne I Sydney \ Perth \ Adelaide \ Brisbane I Newcastle
An independent member of Baker Tilly Internationa l
-13 -
QRxPharma Limited
Corporate governance statement
30 June 2017
Corporate governance statement
QRxPharma Limited (Company) and the board are committed to achieving and demonstrating the highest standards of
corporate governance. The board guides and monitors the Group’s activities on behalf of shareholders. In developing policies
and setting standards, the board considers the Australian Securities Exchange (ASX) Corporate Governance Principles and
Recommendations (3rd Edition). The Company and its controlled entities together are referred to as the Group in this
statement.
During the 2015 financial year, the board was reduced to two non- executive directors and with no executive directors. With
the decision during that financial year to discontinue the development of the Company’s principal asset, the board considered
it prudent not to pursue the appointment of any additional director(s) until it had explored all strategic alternatives for the Group
and its assets. With the board placing the Company into Voluntary Administration on 22 May 2015 the management and
control of the Company vested in Timothy Heesh and Amanda Lott as Joint and Several Administrators (Administrators) to the
Company. This situation prevailed until a Deed of Company Arrangement was wholly effectuated on 23 December 2015,
returning the management and control of the Company to the board. The Company has been suspended from quotation on
the ASX since 22 May 2015.
On 19 May 2016 the only senior executive Chief Financial Officer (CFO) / Company Secretary Chris Campbell received notice
of his termination and his employment ceasing on 19 August 2016. From this point on the Group did not employ any senior
executives. This remained at 30 June 2017.
A description of the Group’s main corporate governance practices is set out below. Given the above circumstances, the Group
could not fully comply with all aspects of the ASX Corporate Governance Principles and Recommendations - 3rd Edition
(Principles) through the 2017 financial year.
Principle 1: Lay solid foundations for management and oversight
The relationship between the board and senior management is critical to the Group’s long-term success. The directors are
responsible to the shareholders for the performance of the Group in both the short and the longer term and seek to balance
sometimes competing objectives in the best interests of the Group as a whole. Their focus is to enhance the interests of
shareholders and other key stakeholders and to ensure the Group is properly managed.
1.1 Responsibilities of the Board
The responsibilities of the board include:
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
facilitating accountability to the Group and its shareholders;
ensuring timely reporting to shareholders;
providing strategic guidance to management including contributing to the development of and approving the corporate
strategy
reviewing and approving business plans, the annual budget and financial plans including available resources and major
capital raising or expenditure initiatives
overseeing and monitoring:
o
o
o
o
organisational performance and the achievement of the Group’s strategic goals and objectives
compliance with the Group’s corporate governance policies and procedures
progress in relation to the Company’s diversity objectives and compliance with its diversity policy
progress of major capital expenditures and other significant corporate projects including any acquisitions or
divestments
monitoring financial performance including approval of the annual and half-year financial reports and liaison with the
Company’s auditors
appointment, performance assessment and, if necessary, removal of the CEO
ratifying the appointment and/or removal and contributing to the performance assessment for the members of the senior
management team
ensuring there are effective management processes in place and approving major corporate initiatives
enhancing and protecting the reputation of the organisation
overseeing the operation of the Group’s system for compliance and risk management reporting to shareholders
ensuring appropriate resources are available to senior management.
Day to day management of the Group’s affairs and the implementation of the corporate strategy and policy initiatives are
formally delegated by the board to the CEO and senior executives. With a significant reduction in headcount, many of
these delegations reverted to the board, particularly as the office of CEO has been vacant since 16 January 2015.
-14-
QRxPharma Limited
Corporate governance statement
30 June 2017
(continued)
Subject to the Administrator being in place through to 23 December 2015 and the limitations of there being only two directors,
the board operated in accordance with the broad principles set in the Board Charter a copy of which is available at
www.qrxpharma.com/corporate-governance.
1.2 Director appointment and election
The Company conducts appropriate background checks before it appoints a person or puts forward to shareholders a new
candidate for election as a director. The Company also provides shareholders with all material information in its possession
relevant to a decision on whether or not to elect or re-elect a director in the notice of meeting provided to shareholders. This
includes information relevant to shareholders to be able to assess the director’s skills and competencies, industry experience,
time commitments and other relevant information in their consideration of that election.
The commitments of non-executive directors are considered by the nomination committee prior to the directors’ appointment
to the board of the Company.
The Company’s Constitution specifies that all directors excluding the Managing Director (if appointed) must retire from office
no later than the third annual general meeting (AGM) following their last election.
1.3 Written Agreements with Directors and Senior Executives
Formal letters of appointment were issued to Timothy Heesh and John Rainbow upon appointment in October 2016.
Senior executives are required to sign employment agreements that set out the key terms of their employment.
1.4 Company Secretary
The Company Secretary supports the effective functioning of the board and its committees. The Company Secretary is
accountable directly to the board, through the Chair, on all matters to do with the proper functioning of the board. The directors
have direct access to the Company Secretary.
1.5 Diversity objectives and achievement
The Company values diversity and recognises the benefits it can bring to the organisation’s ability to achieve its goals.
Accordingly, the Company has a Diversity Policy a copy of which is available at www.qrxpharma.com/corporate-governance.
This policy outlines the establishment of the Company’s diversity objectives in relation to gender, age, cultural background
and ethnicity. It includes requirements for the board to establish measurable objectives for achieving diversity, and for the
board to assess annually both the objectives, and the Company’s progress in achieving them.
With the significant reduction in headcount the board set aside establishing and reviewing measurable objectives to achieve
diversity. At 30 June 2017 there were no females on the board nor holding a senior executive role.
1.6 Board, committee and director performance
The performance of the board and board committees are reviewed periodically. Given the circumstances that prevailed during
the 2017 financial year the board has not undertaken a self-assessment of its collective performance and its committees.
1.7 CEO and senior executive performance
The performance of the CEO and senior executives are reviewed annually. With the significant reduction in headcount the
board set aside the review process. No senior executive roles remained at 30 June 2017. The CFO received notice of
termination on 19 May 2016 with employment ceasing on 19 August 2016.
The office of CEO has been vacant since 16 January 2015.
Principle 2: Structure the board to add value
2.1 Board committees
The board has established a number of committees to assist in the execution of its duties and to allow detailed consideration
of complex issues. Current committees of the board are the Nominations, Remuneration and, Audit and Risk committees.
Details of the composition of each committee are included later in this report. Details of directors’ qualifications and attendance
at committee meetings are set out in the directors’ report on page 5.
Each committee has its own written charter setting out its role and responsibilities, composition, structure, membership
requirements and the manner in which the committee is to operate. Where applicable, matters determined by committees are
submitted to the full board as recommendations for board decisions.
-15-
QRxPharma Limited
Corporate governance statement
30 June 2017
(continued)
2.1.1 Nominations committee
The members of the Nominations Committee are John Rainbow and Timothy Heesh being independent, non-executive
directors.
During the 2017 financial year, the committee’s composition did not comply with the Principles in that it did not include at least
three members but was suitably structured and qualified to fully discharge its responsibilities at the relevant stage of the
Company’s development.
Given the circumstances that prevailed during the year the Nomination Committee did not meet.
The main responsibilities of the committee are to:
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
conduct an annual review of the membership of the board having regard to present and future needs of the Company
and to make recommendations on board composition and appointments
conduct an annual review of and conclude on the independence of each director
propose candidates for board vacancies
oversee the annual performance assessment program
oversee board succession, including the succession of the Chair, and reviewing whether succession plans are in place
to maintain an appropriately balanced mix of skills, experience and diversity on the board
manage the processes in relation to meeting board diversity objectives
assess the effectiveness of the induction process.
Whilst the Nominations Committee may recommend new director candidates, it is the full board that is responsible for the
actual appointment of new directors, and any candidate appointed must stand for election at the next annual general meeting
of the Company. The committee’s nomination of existing directors for reappointment is also not automatic and is contingent
on their past performance, contribution to the Company and the current and future needs of the board and Company.
2.2 Board skills
The board seeks to ensure that:
(cid:120)
at any point in time, its membership represents an appropriate balance between directors with experience and knowledge
of the Group and directors with an external or fresh perspective
the size of the board is conducive to effective discussion and efficient decision-making
the board is giving careful consideration to the composition of the board and the optimum mix of skills and experience
(cid:120)
(cid:120)
required for the Company at this stage.
The board assessed its capabilities against the above and considered that it collectively had the appropriate experience given
the circumstances that prevailed during the 2017 financial year.
2.3 Board members
Details of the members of the board, their experience, expertise, qualifications and term of office are set out in the directors’
report under the heading “Information on directors” on page 4. At the end of the 2017 financial year and up to the date of
signing of the directors’ report there are only two non-executive directors.
Timothy Heesh and John Rainbow are considered independent directors.
The number of meetings of the Company’s board of directors and of each board committee held during the year ended 30
June 2017, and the number of meetings attended by each director is disclosed on page 5 of the Annual Report.
2.4 Directors’ independence
The board has adopted specific principles in relation to directors’ independence. These state that to be deemed independent,
a director must be a non-executive and the board should consider whether the director:
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
is a substantial shareholder of the Company or an officer of, or otherwise associated directly with, a substantial
shareholder of the Company
is or has been employed in an executive capacity by the Company or any other Group member, within three years before
commencing to serve on the board
within the last three years has been a principal of a material professional adviser or a material consultant to the Company
or any other Group member, or an employee materially associated with the service provided
is a material supplier or customer of the Company or any other Group member, or an officer of or otherwise associated
directly or indirectly with a material supplier or customer
has a material contractual relationship with the Company or a controlled entity other than as a director of the Group
is free from any business or other relationship which could, or could reasonably be perceived to, materially interfere with
the director’s ability to act in the best interests of the Group.
The board regularly assesses director independence having regard to the criteria outlined in the Principles. To enable this
-16-
QRxPharma Limited
Corporate governance statement
30 June 2017
(continued)
process, the directors must provide all information that may be relevant to the assessment. During the 2017 financial year
Timothy Heesh and John Rainbow consider themselves to be independent.
2.5 Chairman and Chief Executive Officer (CEO)
The Chair is responsible for leading the board, ensuring directors are properly briefed in all matters relevant to their role and
responsibilities, facilitating board discussions and managing the board’s relationship with the Group’s senior executives. With
the current board of two independent non-executive directors, the Company has yet to appoint a Chair of the board
The CEO is responsible for implementing Group strategies and policies. As part of the headcount reduction, the office of CEO
has been vacant since 16 January 2015.
2.6 Director induction and professional development
All new directors participate in an informal induction programme that covers the operation of the board and its committees,
and an overview of the Group’s core programmes, key strategy, financial and relevant operational documents.
Principle 3: Act ethically and responsibly
3.1 Code of Conduct
The Company adopted a statement of values and a Code of Conduct (the Code) which has been fully endorsed by the board
and applies to all directors and employees. The Code is regularly reviewed and updated as necessary to ensure it reflects the
highest standards of behaviour and professionalism and the practices necessary to maintain confidence in the Group’s integrity
and to take into account legal obligations and reasonable expectations of the Company’s stakeholders.
In summary, the Code requires that at all times all Company personnel act with the utmost integrity, objectivity and in
compliance with the letter and the spirit of the law and Company policies.
A copy of the Code is available on the company’s website at www.qrxpharma.com/corporate-governance.
Principle 4: Safeguard integrity in corporate reporting
4.1 Audit and Risk Committee
The members of the Audit and Risk Committee are Timothy Heesh and John Rainbow, being independent, non-executive
directors.
Details of directors’ qualifications and attendance at audit committee meetings are set out in the directors’ report on pages
4 to 5.
During the 2017 financial year, the committee’s composition did not comply with the Principles in that it did not include at
least three members but was suitably structured and qualified to fully discharge its responsibilities at the relevant stage
of the Company’s development.
The main responsibilities of the committee include:
(cid:120)
effectiveness and efficiency of operations
reliability of financial reporting
compliance with applicable laws and regulations
review, assess and approve the annual full and concise reports, the half-year financial report and all other financial
information published by the Company or released to the market
assist the board in reviewing the effectiveness of the organisation's internal control environment covering:
•
•
•
oversee the effective operation of the risk management framework
recommend to the board the appointment, removal and remuneration of the external auditors, and review the
terms of their engagement, the scope and quality of the audit and assess performance
consider the independence and competence of the external auditor on an ongoing basis
review and approve the level of non-audit services provided by the external auditors and ensure it does not
adversely impact on auditor independence
review and monitor related party transactions and assess their propriety
report to the board on matters relevant to the committee’s role and responsibilities.
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
In fulfilling its responsibilities, the Audit and Risk Committee:
(cid:120)
(cid:120)
(cid:120)
(cid:120)
receives regular reports from management and the external auditors
meets with external auditors at least twice a year, or more frequently if necessary
reviews the processes the CEO and CFO have in place to support their certifications to the board
reviews any significant disagreements between the auditors and management, irrespective of whether they have
been resolved
meets separately with the external auditors at least twice a year without the presence of management
provides the external auditors with a clear line of direct communication at any time to either the Chair of the Audit
and Risk Committee or the Chair of the board.
(cid:120)
(cid:120)
The Audit and Risk Committee has authority, within the scope of its responsibilities, to seek any information it requires
-17-
QRxPharma Limited
Corporate governance statement
30 June 2017
(continued)
from any employee or external party.
4.2 CEO and CFO Declarations for financial statements
Before the board approves the Company’s financial statements, the CEO and CFO/or CFO equivalent are required to
provide a declaration that, in their opinion, the financial records of the entity have been properly maintained and that the
financial statements comply with the appropriate accounting standards and give a true and fair view of the financial
position and performance of the entity and that the opinion has been formed on the basis of a sound system of risk
management and internal control which is operating effectively.
As the office of CEO has been vacant since 16 January 2015, and the office of CFO vacant from 19 August 2017 the
current Company Secretary, Cameron Jones provided a declaration to the board in respect of the financial statements
for the year ended 30 June 2017.
4.3 External auditors
The Company and Audit and Risk Committee policy is to appoint external auditors who clearly demonstrate quality and
independence. The performance of the external auditor is reviewed annually. The current external auditors, Pitcher
Partners were appointed in December 2016. It is Pitcher Partners’ policy to rotate audit engagement partners on listed
companies at least every five years.
An analysis of fees paid to the external auditors, including a breakdown of fees for non-audit services, is provided in the
directors’ report and in note 18 to the financial statements. It is the policy of the external auditors to provide an annual
declaration of their independence to the Audit and Risk Committee.
The external auditor attends each annual general meeting (AGM) and is available to answer shareholder questions about
the conduct of the audit and the preparation and content of the Auditor’s Report.
Principles 5: Make timely and balanced disclosure
5.1 Continuous disclosure
The Company has a Continuous Disclosure Policy that focuses on continuous disclosure of any information concerning
the Group that a reasonable person would expect to have a material effect on the price of the Company’s securities.
The Company Secretary has been nominated as the person responsible for communications with the ASX. This role
includes responsibility for ensuring compliance with the continuous disclosure requirements in the ASX Listing Rules and
overseeing and co-ordinating information disclosure to the ASX, analysts, brokers, shareholders, the media and the public.
All disclosures made to the ASX, and all information provided to analysts or the media during briefings are promptly posted
on the Company’s website. Procedures have also been established for reviewing whether any price sensitive information
has been inadvertently disclosed and, if so, this information is also immediately released to the market. A copy of the
Continuous Disclosure Policy is available on the Company’s website at www.qrxpharma.com/corporate-governance.
Principle 6: Respect the rights of security holders
6.1 Information on website
The Company provides information about itself and its governance on its website at www.qrxpharma.com.
6.2 Communication with investors
The Company has a Shareholder Communication Policy to promote communication with shareholders. The Company
recognises that shareholders may not be aware of all company developments at all times, notwithstanding the release of
information to the ASX in accordance the Company’s continuous disclosure policy and the law. A copy of the Shareholder
Communication Policy is available on the Company’s website at www.qrxpharma.com/corporate-governance.
6.3 Participation at Annual General Meeting (AGM)
The board encourages full participation by shareholders at the AGM to ensure high level of director accountability to
shareholders and to enhance shareholders’ identification with the Group’s strategy and goals. The AGM provides an
opportunity for the board to communicate with shareholders through both the Chairman’s and CEO address. Shareholders
are given the opportunity, through the Chairman, to ask general questions of the board.
The AGM is generally held in November each year. The Notice of Meeting and related Explanatory Notes are distributed
to shareholders in accordance with the requirements of the Corporations Act.
-18-
QRxPharma Limited
Corporate governance statement
30 June 2017
(continued)
6.4 Electronic communication with the company and its share registry
The Company gives shareholders the option to receive communications from, and send communications to the Company
and its share registry. All shareholders have the option to receive a copy of the Company’s annual report electronically. In
addition, the Company seeks to provide opportunities for shareholders to participate through electronic means. All
Company announcements, details of Company meetings and financial reports for the last three years are available on the
Company’s website. Where possible, the Company arranges for advance notification of significant Group briefings and
makes them widely accessible, including through the use of mass communication mechanisms as may be practical.
Principle 7: Recognise and manage risk
7.1 Audit and Risk Committee
The board is responsible for satisfying itself annually, or more frequently as required, that management has developed
and implemented a sound system of risk management and internal control. Detailed work on this task is delegated to the
Audit and Risk Committee and reviewed by the full board as detailed in the Risk Management Policy. A copy of the Risk
Management Policy is available on the Company’s website at www.qrxpharma.com/corporate-governance.
7.2 Risk assessment and management
The Audit and Risk Committee is responsible for ensuring there is an adequate framework in relation to risk
management, compliance and internal control systems. In providing this oversight, the committee:
(cid:120)
reviews the framework and methodology for risk identification, the degree of risk the Company is willing to
accept, the management of risk and the processes for auditing and evaluating the Company’s risk management
system
reviews Group-wide objectives in the context of the abovementioned categories of corporate risk
reviews and, where necessary, approves guidelines and policies governing the identification, assessment and
management of the Company’s exposure to risk
reviews and approves the delegations of financial authorities and addresses any need to update these
authorities on an annual basis, and
reviews compliance with agreed policies.
(cid:120)
(cid:120)
(cid:120)
(cid:120)
The committee recommends any actions it deems appropriate to the board for its consideration.
Management is responsible for designing, implementing and reporting on the adequacy of the Company’s risk
management and internal control system and has to report to the Audit and Risk Committee and the board on the
effectiveness of:
(cid:120)
(cid:120)
the risk management and internal control system during the year, and
the Company’s management of its material business risks.
No formal review was undertaken in the financial year ending 30 June 2017.
7.3 Internal audit function
Given the size of the Company, there is no internal audit function. As detailed in section 7.2 detailed risk assessments
are carried out in respect of a wide range of items, and where appropriate and possible, risk mitigation strategies are
implemented to minimise the chance of the risks occurring, and to minimise any impact where a risk eventuates.
7.4 Sustainability risks and management
The Company monitors its exposure to risks, including economic, environmental and social sustainability risks. Material
risks identified for the Company, including economic risk, are set out in the Directors’ Report at page 4.
Principle 8: Remunerate fairly and responsibly
8.1 Remuneration Committee
The members of the Remuneration Committee are Timothy Heesh and John Rainbow, being independent, non-executive
directors. Given the circumstances that prevailed during the year the Remuneration Committee did not meet.
The Remuneration Committee assists the board to discharge its responsibilities to attract and retain senior executives and
directors who will create value for shareholders. The Remuneration Committee advises the board on remuneration and
incentive policies and practices generally, and makes specific recommendations on remuneration packages and other
terms of employment for senior executives and directors.
-19-
QRxPharma Limited
Corporate governance statement
30 June 2017
(continued)
8.2 Non-executive and executive remuneration
Each member of the senior executive team signs a formal employment contract at the time of their appointment covering
a range of matters including their duties, rights, responsibilities and any entitlements on termination. Each role has a
position description which is reviewed by the CEO (or the committee in the case of the CEO) and the relevant executive.
Further information on directors’ and executives’ remuneration is set out in the Directors’ Report under the heading
''Remuneration Report''.
Executive directors and senior management receive a mix of fixed pay, performance based remuneration and stock
options.
Non-executive director remuneration consists of director fees and does not include any bonus payments. No stock options
have been issued to the current board members. Non-executive directors do not receive termination/retirement benefits,
whereas executive directors and senior management are entitled to termination payments in accordance with the terms of
their contracts.
8.3 Prohibition on hedging of unvested/restricted entitlements
Participants in the Company’s equity based remuneration plan (QRxPharma Limited Employee Share Option Plan) are not
permitted to enter into any transactions that would limit the economic risk of issued Options. This prohibition is specifically
addressed in the rules of the Share Option Plan (rather than in the Company’s Securities Trading Policy). Pursuant to
these rules an Option holder may not assign, transfer or encumber in any way issued Options. This does not prevent the
exercise in accordance with the terms and conditions of this Share Option Plan of Options by the estate of a deceased
Option holder. The Company has not issued any other unvested entitlements that could be subject to hedging.
-20-
QRxPharma Limited ABN 16 102 254 151
Annual report - 30 June 2017
Contents
Financial report
Consolidated statement of profit or loss and other comprehensive income
Consolidated statement of financial position
Consolidated statement of changes in equity
Consolidated statement of cash flows
Notes to the consolidated financial statements
Directors' declaration
Independent auditor’s report to the members of QRxPharma Limited
Shareholder information
Page
22
23
24
25
26
48
49
52
These financial statements are the consolidated financial statements of the consolidated entity consisting of QRxPharma Limited
and its subsidiaries. The financial statements are presented in the Australian currency.
QRxPharma Limited is a company limited by shares, incorporated and domiciled in Australia. Its registered office and principal
place of business is:
Suite 201, 697 Burke Road
Camberwell VIC 3124.
The financial statements were authorised for issue by the directors on 28 September 2017. The directors have the power to amend
and reissue the financial statements.
Through the use of the internet, we have ensured that our corporate reporting is timely and complete. All press releases, financial
reports and other information are available at the Investor Relations tab on our website: www.qrxpharma.com.
-21-
QRxPharma Limited
Consolidated statement of profit or loss and other comprehensive income
For the year ended 30 June 2017
Notes
5
6
6
6
7
2017
$
8,141
-
(44,224)
(731)
(5,639)
(374,910)
(4,919)
(422,282)
-
(422,282)
2016
$
15,846
(78,251)
(379,866)
(1,783)
(854,409)
(695,575)
231,918
(1,762,120)
-
(1,762,120)
Revenue from continuing operations
Research and development expense
Employee benefits expense
Depreciation and amortisation
Restructuring expense
General and Administration expense
Net foreign exchange (loss) / gain
Loss before income tax
Income tax benefit
Loss from continuing operations
Loss for the year
(422,282)
(1,762,120)
Other comprehensive income
Items that may be reclassified subsequently to profit or loss
Exchange differences on translation of foreign operations
Other comprehensive income for the year, net of tax
(292)
(292)
8,596
8,596
Total comprehensive (loss) for the year
(422,574)
(1,753,524)
Loss for the year is attributable to:
Owners of QRxPharma Limited
Non-controlling interests
Total comprehensive (loss) is attributable to:
Owners of QRxPharma Limited
Non-controlling interests
Earnings per share for loss attributable to the ordinary equity
holders of the Company:
Basic loss per share
Diluted loss per share
22
22
(422,574)
-
(422,574)
(422,574)
-
(422,574)
Cents
(0.3)
(0.3)
(1,753,524)
-
(1,753,524)
(1,753,524)
-
(1,753,524)
Cents
(1.1)
(1.1)
The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the
accompanying notes.
-22-
QRxPharma Limited
Consolidated statement of financial position
As at 30 June 2017
2017
$
626,297
11,930
-
638,227
365
-
14,806
15,171
653,398
36,476
-
36,476
-
36,476
616,922
2016
$
1,193,886
77,836
2,006
1,273,728
1,096
-
-
1,096
1,274,824
102,194
133,134
235,328
-
235,328
1,039,496
155,341,513
13,494,133
(168,154,192)
681,454
(64,532)
616,922
155,341,513
13,494,425
(167,731,910)
1,104,028
(64,532)
1,039,496
Notes
8
9
10
11
12
8
13
14
15
16(a)
16(b)
17
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Other current assets
Total current assets
Non-current assets
Plant and equipment
Intangible assets
Other financial assets
Total non-current assets
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Provisions
Total current liabilities
Non-current liabilities
Total non-current liabilities
Total liabilities
Net assets
EQUITY
Contributed equity
Reserves
Accumulated losses
Capital and reserves attributable to owners of QRxPharma Limited
Non-controlling interests
Total equity
The above consolidated statement of financial position should be read in conjunction with the accompanying notes.
-23-
QRxPharma Limited
Consolidated statement of changes in equity
For the year ended 30 June 2017
Attributable to the owners of
QRxPharma Limited
Share-
based
Payments
Reserve
$
Foreign
Currency
Translation
Reserve
$
Contributed
Equity
$
Transactions
with Non-
Controlling
Interest
Reserve
$
Accumulated
Losses
$
Non-
controlling
Total
$
Interests Total Equity
$
$
Balance at 30 June 2015
155,341,513 12,652,643
395,003
455,548(165,969,790)
2,874,917
(64,532)
2,810,385
Loss for the year
Other comprehensive income
Total comprehensive loss for the year
Transactions with owners in their
capacity as owners:
Contributions of equity, net of transaction costs
Employee share scheme
-
-
-
-
-
-
-
-
-
-
(17,365)
(17,365)
-
8,596
8,596
-
-
8,596
-
-
-
-
-
-
(1,762,120) (1,762,120)
8,596
-
(1,762,120) (1,753,524)
-
-
-
(17,365)
(1,762,120) (1,770,889)
-
-
-
-
-
-
(1,762,120)
8,596
(1,753,524)
-
(17,365)
(1,770,889)
Balance at 30 June 2016
155,341,513 12,635,278
403,599
455,548(167,731,910)
1,104,028
(64,532)
1,039,496
Loss for the year
Other comprehensive income
Total comprehensive loss for the year
Transactions with owners in their
capacity as owners:
Contributions of equity, net of transaction costs
Employee share scheme
-
-
-
-
-
-
-
-
-
-
-
-
-
(292)
(292)
-
-
-
-
-
-
-
-
-
(422,282)
-
(422,282)
(422,282)
(292)
(422,574)
-
-
(422,282)
-
-
(422,574)
-
-
-
-
-
-
(422,282)
(292)
(422,574)
-
-
(422,574)
Balance at 30 June 2017
155,341,513 12,635,278
403,307
455,548(168,154,192)
681,454
(64,532)
616,922
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
-24-
Cash flows from operating activities
Payments to suppliers and employees (inclusive of goods and
services tax)
Interest received
Net cash (outflows) from operating activities
Cash flows from investing activities
Net cash (outflows) from investing activities
Net cash inflows from financing activities
QRxPharma Limited
Consolidated statement of cash flows
For the year ended 30 June 2017
Notes
2017
$
2016
$
(555,777)
(555,777)
8,141
(2,436,283)
(2,436,283)
15,846
(547,636)
(2,420,437)
5
21
-
-
-
-
Net increase/ (decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
Effects of exchange rate changes on cash and cash equivalents
(547,636)
1,193,886
(5,147)
(2,420,437)
3,382,405
231,918
Cash and cash equivalents at end of year
8
641,103
1,193,886
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
-25-
QRxPharma Limited
Notes to the consolidated financial statements
For the year ended 30 June 2017
Contents of the notes to the consolidated financial statements
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
Summary of significant accounting policies
Financial risk management
Critical accounting estimates and judgements
Segment information
Revenue
Expenses
Income tax benefit
Cash and cash equivalents
Trade and other receivables
Other current assets
Plant and equipment
Intangible assets
Trade and other payables
Provisions
Contributed equity
Reserves and accumulated losses
Non-controlling interests
Remuneration of auditors
Commitments
Related party transactions
Reconciliation of loss after income tax to net cash outflow from operating activities
Loss per share
Parent entity financial information
Share-based payments
Events occurring after the balance sheet date
Page
27
34
36
36
36
36
37
37
38
38
38
39
39
40
40
41
42
42
42
43
44
44
45
45
47
-26-
QRxPharma Limited
Notes to the consolidated financial statements
30 June 2017
(continued)
1 Summary of significant accounting policies
The principal accounting policies adopted in the preparation of the consolidated financial statements are set out below. These
policies have been consistently applied to all the years presented, unless otherwise stated. The financial statements are for
the consolidated entity consisting of QRxPharma Limited and its subsidiaries. QRxPharma is a company domiciled in Australia.
a)
Basis of preparation
These general purpose financial statements have been prepared in accordance with Australian Accounting Standards,
Interpretations and other authoritative pronouncements issued by the Australian Accounting Standards Board and the
Corporations Act 2001. QRxPharma Limited is a for-profit entity for the purpose of preparing the financial statements.
New and amended standards adopted by the Group
(i)
None of the new standards and amendments to standards that are mandatory for the first time for the financial year beginning
1 July 2016 affected any of the amounts recognised in the current period or any prior period and are not likely to affect future
periods.
(ii) Compliance with IFRS
The consolidated financial statements of QRxPharma Limited also comply with International Financial Reporting Standards
(IFRS) as issued by the International Accounting Standards Board (IASB). The consolidated financial statements were
authorised for issue by the Board of Directors on 28 September 2017.
(iii) Historical cost convention
These financial statements have been prepared under the historical cost convention, as modified by the revaluation of
available-for-sale financial assets and liabilities (including derivative instruments) at fair value through profit or loss.
(iv) Critical accounting estimates
The preparation of financial statements in conformity with Australian International Financial Reporting Standards (AIFRS)
requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process
of applying the Group’s accounting policies. The areas involving a higher degree of judgment or complexity, or areas where
assumptions and estimates are significant to the financial statements are disclosed in note 3.
(v) Early adoption of standards
The Group has elected not to apply any pronouncement before their operative date in the annual reporting period beginning
1 July 2016.
b) Going concern
The financial statements have been prepared on the going concern basis, which contemplates the continuity of normal
business activities and the realisation of assets and the settlement of liabilities in the ordinary course of business.
During the year ended 30 June 2017, the Group incurred a net loss of $422,282 (2016: $1,762,120) and had net cash outflows
from operating activities of $547,636 (2016: $2,420,437). As at 30 June 2017, the Group holds cash and cash equivalents of
$626,297 (2016: $1,193,886).
The going concern assessment has been made on the assumption that the Group will continue to settle its liabilities arising in
the ordinary course of its existing business with minimal operations.
The Board will continue to review potential opportunities for the Group and consider additional strategies to be undertaken by
the Group. In the event that the Group commences any due diligence activities associated with any of the opportunities
identified, then the Group is likely to incur additional costs for which it is likely to seek funding. At the date of this report no
such opportunities have been identified. The cash flow forecast prepared by the Company does not include the costs
associated with any due diligence activities.
In the event the potential opportunities are identified and the Company is unable to obtain funding to pursue such opportunities,
significant uncertainty would exist as to the ability of the Company and the Group to continue as going concerns and therefore
whether they will realise its assets and extinguish its liabilities in the normal course of business.
The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset
amounts or to the amounts and classification of liabilities that might be necessary should the Company and the Group not
continue as going concerns.
-27-
QRxPharma Limited
Notes to the consolidated financial statements
30 June 2017
(continued)
c)
Principles of consolidation
Subsidiaries
(i)
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of QRxPharma Limited
(''Company'' or ''parent entity'') as at 30 June 2017 and the results of all subsidiaries for the year then ended. QRxPharma
Limited and its subsidiaries together are referred to in this financial report as the Group or the consolidated entity.
Subsidiaries are all those entities (including special purpose entities) which are controlled by the Company. Control is achieved
when the Company is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to
affect those returns through its power over the investee. Specifically, the Company controls an investee if and only if the
Company has all the following:
(cid:120)
(cid:120)
(cid:120)
power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities of the
investee);
exposure, or rights, to variable returns from its involvement with the investee; and
the ability to use its power over the investee to affect its returns.
The Company reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to
one or more of the three elements of control listed above.
(ii) Changes in ownership interests
The Group treats transactions with non-controlling interests that do not result in a loss of control as transactions with equity
owners of the Group. A change in ownership interest results in an adjustment between the carrying amounts of the controlling
and non-controlling interests to reflect their relative interests in the subsidiary. Any difference between the amount of the
adjustment to non-controlling interests and any consideration paid or received is recognised in a separate reserve within equity
attributable to owners of QRxPharma Limited.
When the Group ceases to have control, joint control or significant influence, any retained interest in the entity is remeasured
to its fair value with the change in carrying amount recognised in profit or loss. The fair value is the initial carrying amount for
the purposes of subsequently accounting for the retained interest as an associate, jointly controlled entity or financial asset.
In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as
if the Group had directly disposed of the related assets and liabilities. This may mean that amounts previously recognised in
other comprehensive income are reclassified to profit or loss.
If the ownership interest in a jointly-controlled entity or an associate is reduced but joint control or significant influence is
retained, only a proportionate share of the amounts previously recognised in other comprehensive income are reclassified to
profit or loss.
d)
Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision
maker. The chief operating decision maker who is responsible for allocating resources and assessing performance of the
operating segments, has been identified as the board of directors.
e)
(i)
Foreign currency translations
Functional and presentation currency
Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary
economic environment in which the entity operates (‘the functional currency’). The consolidated financial statements are
presented in Australian dollars, which is QRxPharma Limited’s functional and presentation currency.
(ii)
Transactions and balances
Foreign currency transactions are translated into the functional currency 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 year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in
the statement of comprehensive income, except when they are deferred in equity as qualifying cash flow hedges and qualifying
net investment hedges or are attributable to part of the net investment in a foreign operation.
Foreign exchange gains and losses are presented in the income statement on a net basis within other income or net foreign
exchange loss.
Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date
when the fair value was determined. Translation differences on assets and liabilities carried at fair value are reported as part
of the fair value gain or loss. For example, translation differences on non-monetary assets and liabilities such as equities held
at fair value through profit or loss are recognised in profit or loss as part of the fair value gain or loss and translation differences
on non-monetary assets such as equities classified as available-for-sale financial assets are recognised in other
comprehensive income.
-28-
QRxPharma Limited
Notes to the consolidated financial statements
30 June 2017
(continued)
(iii) Group companies
The results and financial position of all the Group entities (none of which has the currency of a hyperinflationary economy)
that have a functional currency different from the presentation currency are translated into the presentation currency as follows:
Assets and liabilities for each statement of financial position presented are translated at the closing rate at the date
of that statement of financial position
(cid:120)
(cid:120)
(cid:120)
income and expenses for each profit and loss item are translated at the exchange rate on the date of the transactions,
and
all resulting exchange differences are recognised in other comprehensive income.
On consolidation, exchange differences arising from the translation of any net investment in foreign entities, and of borrowings
and other financial instruments designated as hedges of such investments, are taken to other comprehensive income. When
a foreign operation is sold or any borrowings forming part of the net investment are repaid, a proportionate share of such
exchange differences are recognised in the profit and loss as part of the gain or loss on sale where applicable.
f)
Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable. Amounts disclosed as revenue are net of
returns and trade allowances. The Group recognises revenue when the amount of revenue can be reliably measured, it is
probable that future economic benefits will flow to the entity and specific criteria have been met for each of the Group's
activities as described below. The Group bases its estimates on current available information, taking into consideration the
type of customer, the type of transaction and the specifics of each arrangement.
Interest income
Interest income is recognised on a time proportion basis using the effective interest method.
g)
Income tax
The income tax expense or revenue for the period is the tax payable/receivable on the current period’s taxable income based
on the national income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to
temporary differences and to unused tax losses.
Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of
assets and liabilities and their carrying amounts in the consolidated financial statements. However, the deferred income tax is
not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination
that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using
tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply
when the related deferred income tax asset is realised or the deferred income tax liability is settled.
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.
Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax bases
of investments in controlled entities where the parent entity is able to control the timing of the reversal of the temporary
differences and it is probable that the differences will not reverse in the foreseeable future.
Tax consolidation legislation
QRxPharma Limited and its wholly-owned Australian controlled entities have implemented the tax consolidation legislation.
The head entity, QRxPharma Limited, and the controlled entities in the tax consolidated group account for their own current
and deferred tax amounts. These tax amounts are measured as if each entity in the tax consolidated group continues to be a
stand-alone taxpayer in its own right.
h)
Impairment of assets
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. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of
assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which
are largely independent of the cash inflows from other assets or groups of assets (cash-generating units).
Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at
each reporting date.
i)
Cash and cash equivalents
For the statement of cashflows presentation purposes, 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, and bank
overdrafts. Bank overdrafts are shown within borrowings in current liabilities on the balance sheet.
-29-
QRxPharma Limited
Notes to the consolidated financial statements
30 June 2017
(continued)
j)
Investments and other financial assets
Classification
The Group classifies its investments in the following categories: financial assets at fair value through profit or loss, loans and
receivables, held-to-maturity investments and available-for-sale financial assets. The classification depends on the purpose
for which the investments were acquired. Management determines the classification of its investments at initial recognition
and, in the case of assets classified as held-to-maturity, re-evaluates this designation at each reporting date.
Financial assets at fair value through profit or loss
(i)
Financial assets at fair value through profit or loss are financial assets held for trading. A financial asset is classified in this
category if acquired principally for the purpose of selling in the short term. Derivatives are classified as held for trading unless
they are designated as hedges.
Loans and receivables
(ii)
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active
market. They are included in current assets, except for those with maturities greater than 12 months after the balance sheet
date which are classified as non-current assets. Loans and receivables are included in trade and other receivables in the
balance sheet (note 9).
(iii) Held-to-maturity investments
Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturities that
the Group’s management has the positive intention and ability to hold to maturity. If the Group were to sell other than an
insignificant amount of held-to-maturity financial assets, the whole category would be tainted and reclassified as
available-for-sale. Held-to-maturity financial assets are included in non-current assets, except for those with maturities less
than 12 months from the reporting date, which are classified as current assets.
(iv) Available-for-sale financial assets
Available-for-sale financial assets, comprising principally equity securities, are non-derivatives that are either designated in
this category or not classified in any of the other categories. They are included in non-current assets unless the investment
matures or management intends to dispose of the investment within 12 months of the end of the reporting period. Investments
are designated as available-for-sale if they do not have fixed maturities and fixed or determinable payments and management
intends to hold them for the medium to long term.
Measurement
At initial recognition, the Group measures a financial asset at its fair value plus, in the case of a financial asset not at fair value
through profit or loss, transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs
of financial assets carried at fair value through profit or loss are expensed in profit or loss.
Loans and receivables and held-to-maturity investments are carried at amortised cost using the effective interest method.
Available-for-sale financial assets and financial assets at fair value through profit or loss are subsequently carried at fair value.
Gains or losses arising from changes in the fair value of the “financial assets at fair value through profit or loss” category are
presented in profit or loss within other income or other expenses in the period in which they arise.
Impairment
The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset or group of
financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred
only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of
the asset (a ‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset
or group of financial assets that can be reliably estimated. In the case of equity investments classified as available-for-sale, a
significant or prolonged decline in the fair value of the security below its cost is considered an indicator that the assets are
impaired.
(i) Assets carried at amortised cost
For loans and receivables, the amount of the loss is measured as the difference between the asset’s carrying amount and the
present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the
financial asset’s original effective interest rate. The carrying amount of the asset is reduced and the amount of the loss is
recognised in the consolidated income statement. If a loan or held-to-maturity investment has a variable interest rate, the
discount rate for measuring any impairment loss is the current effective interest rate determined under the contract. As a
practical expedient, the Group may measure impairment on the basis of an instrument’s fair value using an observable market
price.
If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an
event occurring after the impairment was recognised (such as an improvement in the debtor’s credit rating), the reversal of
the previously recognised impairment loss is recognised in the consolidated income statement.
-30-
QRxPharma Limited
Notes to the consolidated financial statements
30 June 2017
(continued)
(ii) Assets classified as available-for-sale
If there is objective evidence of impairment for available-for-sale financial assets, the cumulative loss – measured as the
difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously
recognised in profit or loss – is removed from equity and recognised in profit or loss.
Impairment losses on equity instruments that were recognised in profit or loss are not reversed through profit or loss in a
subsequent period.
If the fair value of a debt instrument classified as available-for-sale increases in a subsequent period and the increase can be
objectively related to an event occurring after the impairment loss was recognised in profit or loss, the impairment loss is
reversed through profit or loss.
k)
Plant and equipment
Plant and equipment are stated at historical costs less accumulated depreciation.
Depreciation on plant and equipment is calculated using the straight line method to allocate their cost, net of their residual
values, over their estimated useful lives, as follows:
- Plant and equipment
4-5 years
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance date.
l)
Intangible assets
Intellectual property
(i)
Costs incurred in acquiring intellectual property are capitalised and amortised on a straight line basis of the period of the
expected benefit.
Costs include only those costs directly attributable to the acquisition of the intellectual property.
An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater
than its estimated recoverable amount (note 1(h)).
(ii) Research and development
Research expenditure on internal development projects is recognised as an expense as incurred. Costs incurred on
development projects (relating to the design and testing of new or improved products) are recognised as intangible assets
when it is probable that the project will, after considering its commercial and technical feasibility, be completed and generate
future economic benefits and its costs can be measured reliably. The expenditure capitalised comprises all directly attributable
costs, including costs of materials, services, direct labour and an appropriate proportion of overheads. Other development
expenditures that do not meet these criteria are recognised as an expense as incurred. Development costs previously
recognised as an expense are not recognised as an asset in a subsequent period. Capitalised development costs are recorded
as intangible assets and amortised from the point at which the asset is ready for use on a straight-line basis over its useful
life.
m) Trade and other payables
These amounts represent liabilities for goods and services provided to the Group prior to the end of financial year which are
unpaid. The amounts are unsecured and are usually paid within 30 days of recognition.
Trade and other payables are presented as current liabilities unless payment is not due within 12 months from the reporting
date.
n)
Leases
Leases in which a significant portion of the risks and rewards of ownership are not transferred to the Group as lessee are
classified as operating leases (note 19). Payments made under operating leases (net of any incentive received from the lessor)
are charged to the income statement on a straight-line basis over the period of the lease.
o)
Employee benefits
(i) Wages and salaries
Liabilities for wages and salaries, including non-monetary benefits expected to be settled wholly within 12 months of the
reporting date are recognised in other payables in respect of employees’ services up to the reporting date and are measured
at the amounts expected to be paid when the liabilities are settled.
-31-
QRxPharma Limited
Notes to the consolidated financial statements
30 June 2017
(continued)
(ii) Annual leave and long service leave
The liability for long service leave and annual leave is recognised in the provision for employee benefits and measured as the
present value of expected future payments to be made in respect of services provided by employees up to the reporting date.
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 national government bonds with terms
to maturity and currency that match, as closely as possible, the estimated future cash outflows.
(iii) Retirement benefit obligations
The Group does not maintain a Group superannuation plan. The Group makes fixed percentage contributions for all Australian
resident employees to complying third party superannuation funds. The Group's legal or constructive obligation is limited to
these contributions.
Contributions to complying third party superannuation funds are recognised as an expense as they become payable. Prepaid
contributions are recognised as an asset to the extent that a cash refund or a reduction in the future payments is available.
(iv) Share-based payments
Share-based compensation benefits are provided to employees via the QRxPharma Limited Employee Share Option Plan.
Information relating to this scheme is set out in note 24.
The fair value of options granted under the QRxPharma Limited Employee Share Option Plan is recognised as an employee
benefit expense with a corresponding increase in equity. The fair value is measured at grant date and recognised over the
period during which the employees become unconditionally entitled to the options.
The fair value at grant date is independently determined using 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.
The fair value of the options granted is adjusted to reflect market vesting conditions, but excludes the impact of any non-market
vesting conditions (for example, profitability and sales growth targets). Non-market vesting conditions are included in
assumptions about the number of options that are expected to become exercisable. At each balance sheet date, the entity
revises its estimate of the number of options that are expected to become exercisable. The employee benefit expense
recognised each period takes into account the most recent estimate. The impact of the revision to original estimates, if any,
is recognised in the income statement with a corresponding adjustment to equity.
(v) Bonus plans
The Group recognises a liability and an expense for bonuses in accordance with the terms of employment contracts. The
Group recognises a provision where contractually obliged or where there is a past practice that has created a constructive
obligation.
(vi) Employee benefit on-costs
Employee benefit on-costs, are recognised and included in the employee benefit liabilities and costs when the employee
benefits to which they relate are recognised.
(vii) Termination benefits
Termination benefits are payable when employment is terminated before the normal retirement date, or when an employee
accepts voluntary redundancy in exchange for these benefits. The Group recognises termination benefits when it is
demonstrably committed to either terminating the employment of current employees according to a detailed formal plan without
possibility of withdrawal or to providing termination benefits as a result of an offer made to encourage voluntary redundancy.
Benefits falling due more than 12 months after the end of the reporting period are discounted to present value.
p) Contributed Equity
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.
q)
Earnings per share
Basic earnings per share
(i)
Basic earnings per share is calculated by dividing the profit attributable to equity holders of the Company, 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 year.
(ii) Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account:
(cid:120)
(cid:120)
the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares, and
the weighted average number of additional ordinary shares that would have been outstanding assuming the conversion
of all dilutive potential ordinary shares.
-32-
QRxPharma Limited
Notes to the consolidated financial statements
30 June 2017
(continued)
r)
Goods and Services Tax (GST)
Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not
recoverable from the taxation authority. In this case it is recognised as part of the cost of 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 taxation authority is included with other receivables or payables in the balance sheet.
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 taxation authority, are presented as operating cash flow.
s)
Rounding of amounts
In accordance with ASIC Corporations (Rounding in Financial / Director’s Reports) Instrument 2016/191, the amounts in the
directors’ report and in the financial report have been rounded to the nearest dollar (where indicated).
t)
Parent entity financial information
The financial information for the parent entity, QRxPharma Limited, disclosed in note 23 has been prepared on the same basis
as the consolidated financial statements, except as set out below.
Investments in subsidiaries, associates and joint venture entities
(i)
Investments in subsidiaries are accounted for at cost in the financial statements of QRxPharma Limited.
Tax consolidation legislation
(ii)
QRxPharma Limited and its wholly-owned Australian controlled entities have implemented the tax consolidation legislation.
The head entity, QRxPharma Limited, and the controlled entities in the tax consolidated group account for their own current
and deferred tax amounts. These tax amounts are measured as if each entity in the tax consolidated group continues to be a
stand-alone taxpayer in its own right.
(iii) Share-based payments
The grant by the Company of options over its equity instruments to the employees of subsidiary undertakings in the Group is
treated as a capital contribution to that subsidiary undertaking. The fair value of employee services received, measured by
reference to the grant date fair value, is recognised over the vesting period as an increase to investment in subsidiary
undertakings, with a corresponding credit to equity.
u) New accounting standards and interpretations
In the current year, the Group has adopted all of the new and revised Standards and Interpretations issued by the Australian
Accounting Standards Board (the AASB) that are relevant to its operations and effective for the current annual reporting
period, resulting in no changes to accounting policy changes and no changes to recognition and measurement.
Various other Standards and Interpretations were on issue but were not yet effective at the date of authorisation of the
financial report. The issue of these Standards and Interpretations does not affect the Group’s present policies and
operations. The Directors anticipate that the adoption of these Standards and Interpretations in future periods will not
materially affect the amounts recognised in the financial statements of the Group but may change the disclosure presently
made in the financial statements of the Group.
-33-
QRxPharma Limited
Notes to the consolidated financial statements
30 June 2017
(continued)
v)
Prior period error
During the year, certain prior period errors were discovered in the historical accounting treatment. The comparative financial
information has been retrospectively restated in accordance with AASB 108 ‘Accounting Policies, Changes in Accounting
Estimates and Errors’.
The Company provides staff with the opportunity to invest in the shares of the Company under an Employee Share Option
Plan agreement. The options were granted to staff with an expiry date of four years and a non-market performance condition
linked to the successful approval of the MoxDuo product by the United States Food and Drug Administration. As at August
2014 the MoxDuo program was halted and the Company was placed in Administration from 22 May 2015. It is at the date
that the Company entered Administration that the options were considered to have expired.
The effect of the prior period error is a decrease in the Accumulated Losses and a decrease in the share based payment
reserve of $131,976 for the period ended 30 June 2015 and subsequent periods.
The impact of these errors is summarized below:
Statement of financial position (extract)
Share-based payments reserve
Accumulated losses
Impact on net assets and retained earnings
Statement of profit or loss and other
comprehensive income (extract)
Employee benefits expense
Impact on loss for the year
2016
(as reported)
Adjustments
2016
(Restated)
12,767,254
(167,863,886)
1,039,496
(131,976)
131,976
-
12,635,278
(167,731,910)
1,039,496
379,866
(1,753,524)
-
-
379,866
(1,753,524)
2 Financial risk management
The Group's activities expose it to a variety of financial risks: market risk (including currency risk and interest rate risk), credit
risk and liquidity risk. The Group's overall risk management programme focuses on the unpredictability of financial markets
and seeks to minimise potential adverse effects on the financial performance of the Group. The Group uses derivative financial
instruments such as foreign exchange contracts to hedge certain risk exposures from time to time. Derivatives are exclusively
used for hedging purposes, not as trading or other speculative instruments. Cash and cash equivalents are invested
exclusively with ‘A’ rated financial institutions, at a minimum, with capital preservation being the stated investment objective.
Risk management is carried out under policies approved by the board of directors.
The Group holds the following financial instruments:
Financial assets
Cash and cash equivalents
Trade and other receivables
Other financial assets
Financial liabilities
Trade and other payables
2017
$
626,297
11,930
14,806
653,033
36,476
36,476
2016
$
1,193,886
77,836
-
1,271,722
102,194
102,194
-34-
QRxPharma Limited
Notes to the consolidated financial statements
30 June 2017
(continued)
(a) Market risk
(i) Foreign exchange risk
The Group is currently exposed to foreign exchange risk arising from currency exposure to the US dollar. Foreign exchange
risk arises from future commercial transactions and recognised assets and liabilities denominated in a currency that is not
the entity’s functional currency.
The Group’s exposure to foreign currency risk at the reporting date was as follows:
Cash at bank
Other financial asset
Group sensitivity
The Group’s exposure to foreign exchange movements is not material.
2017
$
102,451
14,806
2016
$
154,630
-
(ii) Price risk
The Group and the parent entity are not exposed to equity securities price risk or commodity price risk.
(iii) Cash flow and interest rate risk
The Group’s main interest rate risk arises from the holding of cash and cash equivalents. During the year, the Group held its
funds at bank which limited the exposure of the Group’s income and operating cash flows to changes in market interest rates.
The value of borrowings at 30 June 2017 was $nil (2016: $nil), thus limiting the Group’s exposure to any cash flow risk in
relation to liabilities.
Group sensitivity
The Group’s exposure to interest rate movements is not material.
(b) Credit risk
Credit risk is managed on a Group basis. Credit risk arises from cash and cash equivalents and deposits with banks and
financial institutions. For banks and financial institutions, only independently rated parties with a minimum rating of ‘A’ are
acceptable. At 30 June 2017, cash equivalents were held with financial institutions rated Aa2 / A2 by Moody’s.
(c) Liquidity risk
Prudent liquidity risk management implies maintaining sufficient cash and marketable securities.
The Group has experienced recurring operating losses and operating cash outflows since inception to 30 June 2017. Due to
negative operating cash flow position, the Group has not committed to any credit facilities and relied upon equity financing
through private and public equity investors.
Management monitors rolling forecasts of the Group’s liquidity reserve and cash and cash equivalents on the basis of expected
cash flows. The Group’s liquidity management policy involves projecting cash flows in major currencies and considering the
level of liquid assets necessary to meet these.
(d) Fair value measurements
The fair value of financial assets and financial liabilities must be estimated for recognition and measurement or for disclosure
purposes.
AASB 7 Financial Instruments: Disclosures requires disclosure of fair value measurements by level of the following fair value
measurement hierarchy:
(a) quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1)
(b)
inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (as
prices) or indirectly (derived from prices) (level 2), and
inputs for the asset or liability that are not based on observable market data (unobservable inputs) (level 3).
(c)
The fair value of financial instruments that are not traded in an active market is determined using valuation techniques. The
Group uses a variety of methods and makes assumptions that are based on market conditions existing at the end of each
reporting period. Quoted market prices for similar instruments and recent transactions are used to estimate fair value.
The carrying value of trade and other payables and receivables are assumed to approximate their fair values due to their
short-term nature.
-35-
QRxPharma Limited
Notes to the consolidated financial statements
30 June 2017
(continued)
3 Critical accounting estimates and judgements
Estimates and judgements are continually evaluated and are based on historical experience and other factors, including
expectations of future events that may have a financial impact on the entity and that are believed to be reasonable under the
circumstances.
4 Segment information
Based on the internal reports that are reviewed and used by the board of directors (the chief operating decision makers) in
assessing performance and in determining the allocation of resources, the Group has determined that it operates within a
single operating segment. The operating segment is that of the research and development of biopharmaceutical products for
commercial sale.
5 Revenue
From continuing operations
Interest
6 Expenses
Loss before income tax includes the following specific expenses:
Research and development
Research and development expense
Employee benefits expense
Employee benefits expense
Termination benefits expense
Defined contribution superannuation expense
Share-based payments charge / (write-back)
Depreciation and amortisation
Plant and equipment
2017
$
8,141
8,141
2016
$
15,846
15,846
2017
$
2016
$
-
78,251
37,661
-
6,563
-
44,224
253,435
120,848
22,948
(17,365)
379,866
731
1,783
-36-
QRxPharma Limited
Notes to the consolidated financial statements
30 June 2017
(continued)
7 Income tax benefit
(a) Numerical reconciliation of income tax expense to prima facie
tax payable
Loss from continuing operations before income tax expense
Tax at the Australian tax rate of 27.50% (2016 – 30%)
Tax effect of amounts which are not deductible (taxable) in calculating
taxable income:
Share-based payments
Adjustment for current tax of prior periods
Income tax losses not recognised
Income tax expense
(b) Tax losses
Unused tax losses for which no deferred tax asset has
been recognised
2017
$
2016
$
(422,282)
(116,128)
(1,762,120)
(528,636)
-
-
15,132
100,996
-
2017
$
(5,209)
(534,845)
(364,800)
898,645
-
2016
$
130,345,717
133,813,460
Potential tax benefit @ 27.5% (2016: 30%)
35,845,072
40,144,038
During the year unused tax losses of subsidiary QRxPharma Inc amounting to approximately $3,835,000 were cancelled as
QRxPharma Inc lodged its final tax return in the United Sates of America.
the Group derives future assessable income of a nature and of an amount sufficient to enable the benefit from the
No deferred tax asset has been recognised for the tax losses and timing differences generated from operations in both
Australia and the USA, as the benefit for tax losses will only be obtained if:
(i)
deductions for the losses to be realised
(ii) the Group continues to comply with the conditions for deductibility imposed by tax legislation, and
(iii) no changes in tax legislation adversely affect the Group in realising the benefit from the deduction for the losses.
(c) Tax consolidation legislation
QRxPharma Limited and its wholly-owned Australian controlled entities have implemented the tax consolidation legislation as
of 7 December 2002. The accounting policy in relation to this legislation is set out in note 1(g).
8 Current assets – Cash and cash equivalents
Current
Cash at bank
Non-current
Other financial assets
2017
$
626,297
14,806
641,103
2016
$
1,193,886
1,193,886
The other financial assets include a USD bank account that has been set aside for the purposes of the liquidation
and dissolution of QRxPharma, Inc.
-37-
QRxPharma Limited
Notes to the consolidated financial statements
30 June 2017
(continued)
9 Current assets – Trade and other receivables
Other receivables
2017
$
11,930
11,930
2016
$
77,836
77,836
Information about the Group’s exposure to credit risk, foreign currency and interest rate risk in relation to other receivables
is provided in note 2.
Due to the short term nature of these receivables, their carrying amount is assumed to approximate their fair value and at
30 June 2017 no receivables were impaired or past due (30 June 2016: $nil).
10 Current assets – Other current assets
Prepayments
11 Non-current assets – Plant and equipment
2017
$
-
2016
$
2,006
At 1 July 2015
Cost
Accumulated depreciation
Net book amount
Year ended 30 June 2016
Opening net book amount
Additions
Disposals / retirements
Depreciation charge
Closing net book amount
At 30 June 2016
Cost
Accumulated depreciation
Net book amount
Year ended 30 June 2017
Opening net book amount
Additions
Disposals / retirements
Depreciation charge
Closing net book amount
At 30 June 2017
Cost
Accumulated depreciation
Net book amount
$
39,279
(36,400)
2,879
2,879
-
-
(1,783)
1,096
39,279
(38,183)
1,096
1,096
-
-
(731)
365
39,279
(38,914)
365
-38-
QRxPharma Limited
Notes to the consolidated financial statements
30 June 2017
(continued)
12 Non-current assets – Intangible assets
At 30 June 2016
Cost
Accumulated amortisation and impairment
Net book amount
At 30 June 2017
Cost
Accumulated amortisation and impairment
Net book amount
Patents, trademarks
and other rights
$
Other intangible
assets
$
Total
$
15,501,496
(15,501,496)
-
889,307
(889,307)
-
16,390,803
(16,390,803)
-
15,501,496
(15,501,496)
-
889,307
(889,307)
-
16,390,803
(16,390,803)
-
13 Current liabilities – Trade and other payables
Trade payables
Other payables and accruals
2017
$
10,818
25,658
36,476
2016
$
40,757
61,437
102,194
-39-
14 Provisions
Employee Benefits
Current
15 Contributed equity
(a) Share capital
QRxPharma Limited
Notes to the consolidated financial statements
30 June 2017
(continued)
2017
$
-
-
2016
$
133,134
133,134
2017
No. Shares
2016
Shares
2017
$
2016
$
Ordinary shares - fully paid
164,190,969
164,190,969
155,341,513
155,341,513
(b) Movements in ordinary share capital:
Date
Details
Number of shares
30 June 2016
30 June 2017
Balance
Balance
(c) Ordinary shares
164,190,969
164,190,969
$
155,341,513
155,341,513
Each ordinary shareholder maintains, when present in person or by proxy or by attorney at any general meeting of the
Company, the right to cast one vote for each ordinary share held.
Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the Company in proportion to
the number of and amounts paid on the shares held.
(d) Options
Information relating to the QRxPharma Limited Employee Share Option Plan, including details of options issued, exercised
and lapsed during the financial year and options outstanding at the end of the financial year are set out in note 24. Ordinary
shares have no par value and the Company does not have a limited amount of authorised capital.
(e) Capital risk management
The Group’s objectives when managing capital are to safeguard their ability to continue as a going concern, so they can
continue to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to
reduce the cost of capital.
The Group predominantly uses equity to finance its operations. In order to maintain or adjust the capital structure, the
Group may return capital to shareholders, issue new shares or sell assets.
-40-
QRxPharma Limited
Notes to the consolidated financial statements
30 June 2017
(continued)
2017
$
12,635,278
403,307
455,548
13,494,133
12,635,278
-
12,635,278
403,599
(292)
403,307
455,548
455,548
2016
$
12,635,278
403,599
455,548
13,494,425
12,652,643
(17,365)
12,635,278
395,003
8,596
403,599
455,548
455,548
2017
$
2016
$
(167,731,910)
(422,282)
(168,154,192)
(165,969,790)
(1,762,120)
(167,731,910)
16 Reserves and accumulated losses
(a) Reserves
Share-based payments reserve
Foreign currency translation reserve
Transactions with non-controlling interest reserve
Movements:
Share-based payments reserve
Balance 1 July 2016
Option expense / (write-back)
Balance 30 June 2017
Foreign currency translation reserve
Balance 1 July 2016
Currency translation differences arising during the year
Balance 30 June 2017
Transactions with non-controlling interest reserve
Balance 1 July 2016
Balance 30 June 2017
(b) Accumulated losses
Movements in accumulated losses were as follows:
Balance at 1 July 2016
Net loss for the year
Balance 30 June 2017
(c) Nature and purpose of reserves
(i)
Share-based payments reserve
The share-based payment reserve is used to recognise:
(cid:120)
(cid:120)
the fair value of options issued to employees
the fair value of shares issued to employees
(ii)
Foreign currency translation reserve
Exchange differences arising on translation of the foreign controlled entity are taken to the foreign currency translation
reserve, as described in note 1(e). The reserve will be recognised in profit and loss when the net investment is disposed.
(iii) Transactions with non-controlling interests
This reserve is used to record amounts which may arise as a result of transactions with non-controlling interests that do not
result in a loss of control.
-41-
17 Non-controlling interests
Interests in:
Share capital
Reserves
Retained earnings
18 Remuneration of auditors
Auditor of the Group
Audit
Audit of the financial statements
Deloitte Touche Tohmatsu Australia
Pitcher Partners Advisors
Total remuneration for audit and other assurance services
QRxPharma Limited
Notes to the consolidated financial statements
30 June 2017
(continued)
2017
$
2016
$
122,122
122,122
(308,776)
(64,532)
2017
$
-
22,861
22,861
122,122
122,122
(308,776)
(64,532)
2016
$
129,6021
-
129,602
1 Includes $53,102 of additional fees associated with the audit of the financial statements for the 2015 financial year.
19 Commitments
Operating Leases
The Group leases office premises in Sydney, Australia which from January 2015 was renewed on a month-to-month basis.
Commitments for minimum lease payments in relation to non-cancellable
operating leases are payable as follows:
Within one year
Later than one year but not later than five years
2017
$
2016
$
-
-
-
-
-
-
-42-
QRxPharma Limited
Notes to the consolidated financial statements
30 June 2017
(continued)
20 Related party transactions
(a) Subsidiaries
The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in
accordance with the accounting policy described in note 1(c):
Name of entity
Country of
incorporation Class of shares
Equity holding
2016
2017
The Lynx Project Pty Limited
Australia
Ordinary
%
100
Haempatch Pty Limited
QRxPharma, Inc.
Venomics Pty Limited
Stealthguard Pty Limited
Safeguard Therapeutics Pty Limited
Australia
Ordinary /Preference
100
USA
Australia
Australia
Australia
Ordinary
Ordinary
Ordinary
Ordinary
100
87.4
100
100
%
100
100
100
87.4
100
100
QRxPharma Inc prepared a plan of complete liquidation and dissolution dated 12 September 2016. Based on legal
advice a nominal amount of cash is required to be maintained for a minimum period of two years in order to pay
any debts that may arise. Upon completion of the two years the Directors of QRxPharma Ltd along with the
Authorized Officer of QRxPharma Inc will authorise the transfer of any remaining funds to QRxPharma Ltd and the
shares held in QRxPharma Inc will be cancelled at this time.
(b) Key management personnel
Short-term employee benefits
Post-employment benefits
Share-based payments
(c) Outstanding balances
2017
$
137,989
11,575
-
149,564
2016
$
393,131
22,961
892
416,984
There are no outstanding balances at the reporting date in relation to transactions with related parties.
-43-
21 Reconciliation of loss after income tax to net cash outflow from operating activities
QRxPharma Limited
Notes to the consolidated financial statements
30 June 2017
(continued)
Loss for the year
Depreciation and amortisation
Non-cash employee benefits expense / (write-back) - share-based
payments
Net exchange differences on cash and cash equivalents
(Gain)/ Loss on disposal / retirement of fixed assets
Change in operating assets and liabilities
(Increase)/decrease in other receivables and prepayments
(Decrease)/increase in trade creditors, accruals and provisions
Net cash outflow from operating activities
22 Loss per share
(a) Basic loss per share
2017
$
(422,282)
731
-
4,853
-
67,912
(198,850)
(547,636)
2016
$
(1,762,120)
1,783
(17,365)
(224,840)
-
90,533
(508,428)
(2,420,437)
2017
Cents
2016
Cents
Loss from continuing operations attributable to the ordinary equity holders of the Company
(0.3)
(1.1)
(b) Diluted loss per share
Loss from continuing operations attributable to the ordinary equity holders of the Company
(0.3)
(1.1)
(c) Reconciliations of earnings used in calculating earnings per share
Basic loss per share
Loss attributable to the ordinary equity holders of the Company used in calculating basic
earnings per share
Diluted loss per share
Loss attributable to the ordinary equity holders of the Company used in calculating diluted
earnings per share
(d) Weighted average number of shares used as the denominator
2017
$
2016
$
(422,282)
(1,762,120)
(422,282)
(1,762,120)
2017
Number
2016
Number
Weighted average number of ordinary shares used as the denominator in calculating basic
loss per share
164,190,969
164,190,969
Weighted average number of ordinary shares and potential ordinary shares used as the
denominator in calculating diluted loss per share
164,190,969
164,190,969
(e)
Information concerning the classification of securities
Options
Options are considered to be potential ordinary shares. The options are not included in the calculation of diluted earnings per
share because they are anti-dilutive. These options could potentially dilute basic earnings per share in the future. Details
relating to the options are set out in note 24.
-44-
QRxPharma Limited
Notes to the consolidated financial statements
30 June 2017
(continued)
23 Parent entity financial information
(a) Summary financial information
The individual financial statements for the parent entity show the following aggregate amounts:
Statement of Financial Position
Current assets
Non-Current assets
Total assets
Current liabilities
Non-Current liabilities
Total liabilities
Shareholders’ equity
Issued capital
Share based payment reserve
Accumulated losses
Loss for the year
Total comprehensive loss
2017
$
636,031
17,367
653,398
64,178
-
64,178
2016
$
1,271,370
1,096
1,272,466
260,672
-
260,672
155,341,514
12,172,315
(166,924,609)
(589,220)
155,341,514
12,172,315
(166,502,035)
(1,011,794)
2017
$
2016
$
(422,574)
(1,747,948)
(422,574)
(1,747,948)
(b) Guarantees entered into by the parent entity
There are no guarantees entered into by the parent entity.
(c) Contingent liabilities of the parent entity
The parent entity did not have any contingent liabilities as at 30 June 2017 or 30 June 2016.
(d) Commitments of the parent entity
The parent entity leases office premises in Sydney, Australia which from January 2015 were renewed on a month-to-month
basis. It previously leased this property on a longer term basis.
Commitments for minimum lease payments in relation to non-cancellable
operating leases are payable as follows:
Within one year
Later than one year but not later than five years
24 Share-based payments
(a) QRxPharma Employee Share Option Plan (ESOP)
2017
$
-
-
-
2016
$
-
-
-
The QRxPharma Limited Employee Share Option Plan (Limited ESOP) was approved by shareholders at the extraordinary
general meeting of members held on 24 April 2007.
Under the Limited ESOP shares may be issued by the Company to eligible employees at an exercise price as determined
by the remuneration committee, being not less than the share price on the grant date of the options. Any person who is
employed by, or is a director, officer, executive or consultant of the Company or any related body corporate of the Company
and whom the remuneration committee determines is eligible to participate in the option plan are eligible to participate in
the plan. Employees may elect not to participate in the scheme.
-45-
QRxPharma Limited
Notes to the consolidated financial statements
30 June 2017
(continued)
The total number of shares that shall be reserved for issuance under the option plan shall not exceed ten per cent (10%)
of the Diluted Ordinary Share Capital in the Company as at the date of issue of the relevant options under the option plan,
subject to changes in capitalisation as provided in clause 16.3 of the option plan. The approval of the Company’s
shareholders must be obtained for any amendment to the option plan in relation to:
(a) increasing the maximum aggregate number of shares that may be issued under the option plan;
(b) any change in the class of employees eligible to receive options under the option plan;
(c) any change in the shares reserved for issuance under the option plan; and
(d) substitution of another entity in place of the Company as the issuer of shares under the option plan.
Options will lapse if they are not exercised before the expiration date or if the option holder leaves the employment of the
Group.
Options granted under the plan carry no dividend or voting rights. The vesting period for each option issued up to 31
December 2008 is 3 years, or as varied by the board, one-third vesting 12 months from the date of grant and the balance
vesting equally each year over the remaining two year period. Options issued from 1 January 2009 generally vest over 3
years with the initial vesting on the first anniversary of the date of the grant and subsequent vestings in 8 equal tranches
on the first day of each calendar quarter over the following 2 years. When exercisable, each option is convertible into one
ordinary share and entitles the holder to the same ordinary share rights as set out in note 15. Shares issued under the
scheme may be sold at the expiration of any Restriction Agreement between the eligible employee and the Company. Such
restrictions may be imposed by the remuneration committee upon the grant of options under the option plan and such
restrictions will be contained in the Option Agreement between the eligible employee and the Company. In all other respects
the shares rank equally with other fully paid ordinary shares on issue (refer to note 15(c)).
-46-
QRxPharma Limited
Notes to the consolidated financial statements
30 June 2017
(continued)
(b) Set out below are summaries of options granted under the plans:
Year ended 30
June 2017
Grant Date
Expiry date
24 August 2017
1 January 2018
7 November 2016
13 November 2017
24 August 2010
1 January 2011
7 November 2012
13 November 2013
Total
Weighted average exercise price
Exercise
price
$0.95
$1.40
$1.03
$0.91
Balance at
start of the
year
Number
Granted
during the
year
Number
Exercised
during the
year
Number
50,000
20,000
200,000
400,000
670,000
0.96
-
-
-
-
-
-
-
-
-
-
-
-
Net other
changes
during the
year
Number1
Balance at
end of the
year
Number
Vested and
exercisable
at end of
the year
Number
-
-
(200,000)
(400,000)
(600,000)
0.95
50,000
20,000
-
-
70,000
1.08
50,000
20,000
-
-
70,000
1.08
1 Theses options lapsed during the year ended 30 June 2017
2016
Grant Date
Expiry date
31 August 2016
17 February 2017
24 August 2017
1 January 2018
23 January 2019
23 January 2016
7 November 2019
7 November 2016
13 November 2017
31 August 2009
17 February 2010
24 August 2010
1 January 2011
23 January 2012
23 January 2012
7 November 2012
7 November 2012
13 November 2013
Total
Weighted average exercise price
Balance at
start of the
year
Number
Granted
during the
year
Number
Exercised
during the
year
Number
Exercise
price
$0.65
$0.84
$0.95
$1.40
$1.50
$2.15
$0.72
$1.03
$0.91
250,000
100,000
50,000
170,000
200,000
240,000
150,000
230,000
450,000
1,840,000
$1.14
-
-
-
-
-
-
-
-
-
-
$0.00
-
-
-
-
-
-
-
-
-
-
$0.00
Net other
changes
during the
year
Number1
Balance at
end of the
year
Number
Vested and
exercisable
at end of
the year
Number
(250,000)
(100,000)
-
(150,000)
(200,000)
(240,000)
(150,000)
(30,000)
(50,000)
(1,170,000)
$1.25
-
-
50,000
20,000
-
-
-
200,000
400,000
670,000
$0.96
-
-
50,000
20,000
-
-
-
200,000
-
270,000
$1.04
1 Theses options lapsed during the year ended 30 June 2016
There were no share options exercised during the year ended 30 June 2017 (2016 – Nil).
The weighted average remaining contractual life of the share options outstanding at the end of the period was 0.25 years.
(2016 – 1.03 years)
Fair value of options granted
There were no options granted during the year ended 30 June 2017 (2016 – Nil).
(c) Expenses / (write-back) arising from share-based payment transactions
Total expenses / (write-back) arising from share-based payment transactions recognised during the period as part of employee
benefit expense were as follows:
Options issued under employee option plan
25
Events occurring after the balance date
2017
$
-
2016
$
17,365
No significant events have occurred after the balance date which would have a material impact on the financial results of
the Group.
-47-
Directors' declaration
In the directors’ opinion:
QRxPharma Limited
Directors’declaration
30 June 2017
(a)
(b)
the financial statements and notes set out on pages 22 to 47 are in accordance with the Corporations Act 2001,
including:
(i)
complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional
reporting requirements; and
giving a true and fair view of the consolidated entity's financial position as at 30 June 2017 and of their
performance for the financial year ended on that date; and
(ii)
there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become
due and payable.
Note 1 (a) confirms that the financial statements also comply with International Financial Reporting Standards as issued by
the International Accounting Standards Board.
The directors have been given a declaration by the chief financial officer required by section 295A of the Corporations Act
2001.
This declaration is made in accordance with a resolution of the directors.
On behalf of the directors.
Timothy P Heesh
Director
Sydney
28 September 2017
-48-
• PITCHER PARTNERS
ACCOUNTANTS
• AUDITORS
• ADVISORS
QRxPHARMA LIMITED
ABN 16 102 254 151
INDEPENDENT AUDITOR'S REPORT
TO THE MEMBERS OF QRxPHARMA LIMITED
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of QRxPharma Limited "the Company" and its controlled entities "the Group",
which comprises the consolidated statement of financial position as at 30 June 2017, the consolidated statement
of profit or loss and other comp rehensive 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 :
(a)
(b)
giving a true and fair view of the Group' s financial position as at 30 June 2017 and of its financial
performance for the year then ended ; and
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 furthe r descri bed in the Auditor's Responsibilities fo r the Audit of the Financial Report section of our
report. We are independent of the Group in accordance w ith the auditor independence requirements of the
Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board' s
APES 110 Code of Ethics for Professional Accountants "the Code" that are relevant to our audit of the financial
report in Australia . We have also fulfilled our othe r ethical responsibilities in accordance w ith the Code .
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
An independe nt New Sou th Wales Pa rtners hip AB N 17 795 780 962
Level 22 M LC Centre, 19 Martin Place, Sydney NSW 2000
Liability li mited by a sc heme approve d und er Profess ional Sta ndards Legis lati on
Pitc her Pa rt ners is an associat ion of independent firms
Sydney I Melbo urn e I Perth I Adelaide I Brisba ne I Newcast le
An in depen dent member of Baker Tilly Int erna t ion al
- 49 -
+ PITCHER PARTNERS
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 year. 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
Going Concern
Refer to Note l(b) of the summary of
significant accounting policies.
How our audit addressed the Key Audit Matter
The Directors have determined that the use if Our procedures included, amongst others:
the going concern basis of accounting
is
appropriate in preparing the financial report
taking into consideration the forecast cash
flows for the following twelve months.
• Reviewing and challenging the judgements, assumptions
and estimates used in the cash flow forecast for the year
ending 30 June 2018, approved by the directors;
Note l(b) discloses that for the year ended 30
June 2017, the Group reported a net loss of
$422,282 and had net cash outflows from
operating activities $547,636 for the year
ended 30 June 2017 . As at 30 June 2017, the
Group had cash assets of $626,297 and net
assets of $616,922.
The cash flow forecast includes significant
judgements, assumptions and estimates such
as future revenue and expenditure.
In assessing this key audit matter, we involved
senior audit team members who understand
the Group's structure.
• Checking the mathematical accuracy of the cash flow
forecast for the year ending 30 June 2018 and agreed
opening cash balances to third party reports;
• Performing sensitivity analysis on the cash flow forecast to
determine the extent of changes necessary to result in the
Group not having sufficient resources to meet its forecast
liabilities as they fall due for a period of 12 months from the
date of the report;
• Assessing the ability of the Group to curtail expenditure as
required in order to manage cash outflows within the
existing levels of available funding;
• Considering the adequacy of the disclosures in Note l(b) .
Other Information - The annual report is not complete at the date of the audit report.
The directors are responsible for the other information. The other information comprises the information
included in the Corporate Directory, Directors Report, Shareholders Information and Corporate Governance
Statement, which was obtained as at the date of our audit report, and any other information included in the
Group's annual report for the year ended 30 June 2017, but does not include the financial report and our
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 above 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.
- 50 -
+ PITCHER PARTNERS
When we read the other information not yet received as identified above, if we conclude that there is a material
misstatement therein, we are required to communicate the matter to the directors and use our professional
judgment to determine the appropriate action to take.
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 has 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.
As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgement and
maintain professional scepticism throughout the audit. We also:
•
Identify and assess the risks of material misstatement of the financial report, whether due to fraud or error,
design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient
and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement
resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery,
intentional omissions, misrepresentations, or the override of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of
the Group's internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates
and related disclosures made by the directors.
• Conclude on the appropriateness of the directors' use of the going concern basis of accounting and, based on
the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may
cast significant doubt on the Group's ability to continue as a going concern. If we conclude that a material
uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the
financial report or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the
audit evidence obtained up to the date of our auditor's report . However, future events or conditions may cause
the Group to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the financial report, including the disclosures, and
whether the financial report represents the underlying transactions and events in a manner that achieves fair
presentation.
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business
activities within the Group to express an opinion on the financial report. We are responsible for the direction,
supervision and performance of the Group audit. We remain solely responsible for our audit opinion.
- 51 -
+ PITCHER PARTNERS
We communicate with the directors regarding, among other matters, the planned scope and timing of the audit
and significant audit findings, including any significant deficiencies in internal control that we identify during our
audit.
We also provide the directors with a statement that we have complied with relevant ethical requirements regarding
independence, and to communicate with them all relationships and other matters that may reasonably be thought
to bear on our independence, and where applicable, related safeguards.
From the matters communicated with the directors, we determine those matters that were of most significance in
the audit of the financial report of the current period and are therefore the key audit matters. We describe these
matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in
extremely rare circumstances, we determine that a matter should not be communicated in our report because the
adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such
communication.
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 6 to 11 of the directors' report for the year ended 30
June 2017 . In our opinion, the Remuneration Report of QRxPharma Limited, for the year ended 30 June 2017,
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.
Partner
28 September 2017
PITCHER PARTNERS SYDNEY
Sydney
- 52 -
QRxPharma Limited
Shareholder information
30 June 2017
Shareholder information
The shareholder information set out below was applicable as at 27 September 2017.
A. Distribution of equity securities
Analysis of numbers of equity security holders by size of holding:
1
1,001
5,001
10,001
100,001
1,000
5,000
10,000
100,000
-
-
-
-
and over
Ordinary Shares
378
488
360
846
187
2,259
There are 1,436 holders of less than a marketable parcel of ordinary shares.
B.
Equity security holders
Twenty largest quoted equity security holders
The names of the twenty largest holders of quoted equity securities are listed below:
Name
Ordinary shares
Number held
Percentage of issued
shares
J P MORGAN NOMINEES AUSTRALIA LIMITED
CITI CORP NOMINEES PTY LIMITED
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
WERFT PTY LIMITED
BNP PARIBAS NOMINEES PTY LTD HUB24 CUSTODIAL SERV LTD DRP
MCNEIL NOMINEES PTY LIMITED
MACQUARIE SECURITIES (AUSTRALIA) LIMITED
AUCKLAND TRUST COMPANY LTD
DR GARY WILLIAM PACE & MRS JINNY HAMILTON PACE
MRS SUHUA WU
NATIONAL NOMINEES LIMITED
SPRING RIDGE VENTURES I LP
MR JOHN WALDRON HOLADAY
AUCKLAND TRUST COMPANY LIMITED
AUCKLAND TRUST COMPANY LIMITED
FIRST INVESTMENT PARTNERS PTY LTD
PHYKAT PTY LTD
TESROFF PTY LTD
UIIT PTY LIMITED
GROZIER PTY LTD
14,380,360
7,791,012
6,176,410
4,481,149
4,279,750
4,277,224
4,129,927
3,694,250
3,500,365
3,046,491
2,275,606
2,128,673
2,031,000
1,800,000
1,794,500
1,757,234
1,510,627
1,495,055
1,451,621
1,393,608
73,394,862
8.76%
4.75%
3.76%
2.73%
2.61%
2.61%
2.52%
2.25%
2.13%
1.86%
1.39%
1.30%
1.24%
1.10%
1.09%
1.07%
0.92%
0.91%
0.88%
0.85%
44.70%
-53-
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