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ChromaDex COMPANY PROFILE
MILESTONES ACHIEVED
NEW NON-EXECUTIVE DIRECTORS
INTELLECTUAL PROPERTY ADVANCES
RISK SNAPSHOT
BUILDING MOMENTUM
ACTIVITY & SCHEDULES
CHAIRMAN’S ADDRESS
FINANCIAL REPORT
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TABLE OF
CONTENTS
1
Recce Annual Report 2016recce.com.au COMPANY PROFILE
Recce Ltd (ASX: RCE) is the developer of a new class of patented drugs targeted at antibiotic, anti-cancer and
anti-viral human applications.
As a world-leader in synthetic-polymer antibiotics, RECCE® 327 has shown in pre-clinical studies to have continued activity
against bacteria, including superbugs, even after repeated use. Recce is positioned to achieve milestones in both pre-clinical
trials for FDA purposes, and the development of the manufacture of RECCE® 327.
The discovery of RECCE® 327’s capabilities against cancer and viruses (as well as bacteria-superbugs) has greatly increased
the value of the Company’s technology, especially in view of the synergism between antibiotic/anti-cancer properties and
anti-viral/anti-cancer properties.
Recce’s key partners/facilities continue to expand both in Australia and the USA, supporting Recce’s goal of achieving
Investigational New Drug (IND) status with the world’s largest pharmaceutical regulator - the US Food & Drug
Administration (FDA).
AUSTRALIA
PERTH
(Office & Laboratory)
MACQUARIE PARK
(Office & Laboratory)
SYDNEY
(Head Office)
UNITED STATES
AUSTRALIA Head Office:
Level 34, 50 Bridge Street,
SYDNEY, NSW 2000
Sydney Office & Laboratory:
Unit 8, 64 Talavera Road,
MACQUARIE PARK, NSW 2113
Perth Office & Laboratory:
Suite 10, 3 Brodie Hall Drive,
TECHNOLOGY PARK,
BENTLEY WA 6102
USA Washington Office:
1717 Pennsylvania Avenue NW,
Suite 1025, WASHINGTON DC
20006 USA
CRO’s*
(Philadelphia)
REGULATORY CONSULTANT (FDA)
CRO’s*
(Maryland)
WASHINGTON DC (office)
REGULATORY CONSULTANT (FDA GMP)
(Texas)
CRO*
(Alabama)
*CONTRACT RESEARCH ORGANIZATION
2
Recce Annual Report 2016recce.com.au MILESTONES ACHIEVED
Technical Highlights
Repeated
MRSA test
success
All ten mice infected with MRSA (S. aureus superbug) and
then treated with RECCE® 327 were saved
Nine mice treated with current antibiotic (Oxacillin) survived
Four mice that had no treatment at all, survived
Comparatively low-doses of RECCE® 327 showed
efficacy against Breast, Intestine, Kidney, Leukaemia,
Melanoma, Prostate & Stomach cancers
No toxicity at these doses in normal human
epithelial cells or Vero (monkey) cells
Provisional patent lodged re anti-cancer
Anti-cancer
in-vitro Study
Anti-viral
in-vitro Study
RECCE® 327 used to target viruses located external
to cells - common when the invading virus is located
between a parent cell and a new host-cell – and thus
preventing the virus from spreading
Direct, linear relationship between concentration of
RECCE® 327, and inhibition of the virus hidden internal
to cells – preventative/curative possibilities
Provisional patent expanded to include
anti-viral capabilities
Toxicity testing from 2 registered, independent
Contract Research Organizations in the USA
Wide dosing window confirmed
Green light to progress from mice to larger species
Dose
Ranging
in Mice -
Repeated
Success
3
Recce Annual Report 2016recce.com.au
NEW NON-EXECUTIVE DIRECTORS
Recce’s Board composition advanced over the year with the replacement of two non-executive directors, making way for
new skills and knowledge. With great pleasure we welcome:
Bernadette Murdoch BA Public Relations
Independent Non-Executive Director
•
•
•
Head of Corporate Affairs & Communications, Australasia
for Glaxo Smith Kline (GSK)
Employed in Pharmaceutical Public Relations over 10 years,
through UK, Europe, Middle-East and Africa
Consistent award winner for key media and public
campaigns, introducing new health products
Dr Dominic Barnes MBBS, MMedSc, MBA, FAICD
Independent Non-Executive Director
•
•
•
Practicing medical doctor and supervisor of over 20 human
pharmaceutical trial programs in Australia
Held senior positions in leading pharmaceutical companies:
Shire, AstraZeneca and Johnson & Johnson
Leading member of medical, government and academic
institutions in Australia
4
Recce Annual Report 2016recce.com.au INTELLECTUAL PROPERTY
ADVANCES
Recce’s patent portfolio has continued to strengthen with granted patents in USA, Europe, Japan, China and Australia –
giving Recce monopolies in manufacture and marketing in some 80% of global markets in antibiotics and may be expanded
with future approvals.
Patent Family 1 – Granted – protecting Recce’s unique and highly economical manufacturing process
Filed
Australia
USA
Europe
Japan
China
Status
Granted
Granted
Granted
Granted
Granted
Expiry
2028
2029
2028
2028
2028
Japanese Patent
United States Patent
Australian Patent
European Patent
Chinese Patent
Patent Family 2 – Provisional – protecting Recce’s drug delivery opportunities
Lodged
Application
Status
Expiry
(Pending Granted Status)
January 2016
All PCT Countries
Pending
2036
Patent Family 3 – Provisional – protecting Recce’s anti-viral and anti-cancer applications
Lodged
Application
Status
Expiry
(Pending Granted Status)
March 2016
All PCT Countries
Pending
2036
Trade Marks – Approved and Registered – protecting RECCE® for use on antibiotic and
pharmaceutical products and services
Filed
Australia
USA
Europe
Japan
China
Status
Registered
Registered
Registered
Registered
Registered
Expiry
2026
2026
2026
2026
2026
5
Recce Annual Report 2016recce.com.au RISK SNAPSHOT
KEY RISKS
Following a successful, over-subscribed listing on 15 January 2016, Recce faced a bright but highly speculative future.
Over the following six months the Company set out to tackle these key risks early, to ensure that if unfavourable events
were to come about – it would be at a time of financial strength and opportunity. Pleasingly, not only have these risks
been enormously reduced, further potential market opportunities have also become apparent.
To be addressed January 2016:
i n g
M a n u f a c t u r
D e v e l o p m e n t
T e c h n o l o g y
D e v e l o p m e n t
i a n c e
R e l
o n k e y
p e r s o n n e l
i a l s
T r
i n U S A
t y
T o x i c i
t y
i
S e c u r
P a t e n t s
o f
& T r a d e
M a r k s
Status at June 2016:
Manufacturing
Development
Security
of Patents
& Trade
Marks
Toxicity
Technology
Development
Reliance
on key
personnel
Trials
in USA
6
Recce Annual Report 2016recce.com.au
BUILDING MOMENTUM
NEW OPPORTUNITIES
Compared to the risk of a single opportunity from a one-use product - Recce’s technology potentially
enjoys the added security of multiple market and product opportunities.
January
Antibiotics
2016
Antibiotics
Anti-Cancer
Antibiotics
Anti-Cancer
Anti-Virals
February
March
May
April
June
7
Recce Annual Report 2016recce.com.au 6
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9
Recce Annual Report 2016recce.com.au
A world-leader in
synthetic-polymer
antibiotics
10
Recce Annual Report 2016recce.com.au DIRECTORS’ REPORT
CHAIRMAN’S ADDRESS
Dear Shareholder,
It is with great pleasure that I share an update on our Company following an over-subscribed IPO of $5million in early January
of this year.
In our endeavour to tackle the global health problem of superbugs, Recce quickly set-about its development program and in the
short six months since listing announced:
•
•
•
•
•
Patents have been granted to Recce in the USA, Europe, Japan, China and Australia – giving Recce, fully owned monopolies
in manufacture and marketing in some 80% of global pharmaceutical markets in antibiotics;
Trade Marks were awarded to Recce in USA, Europe and Japan – giving RECCE protection for use on antibiotic and
pharmaceutical products and services;
Efficacy of RECCE® 327 was confirmed against bacteria – even superbugs;
In vitro efficacy was demonstrated against intra and extra cellular flu viruses – as well as seven of the world’s most
common and terrible cancers;
To add further practicality, a favourable therapeutic window of RECCE® 327 was identified between toxicity and
dose-efficacy; and
•
Ultimately, favourable non-genetic toxicity (freedom from cancer-provoking) properties of RECCE® 327 were established.
For this great result - we most warmly thank shareholders, directors and staff.
Yours Faithfully
Dr Graham Melrose
Executive Chairman
Recce Ltd
recce.com.au
Recce Annual Report 2016
11
12
Recce Annual Report 2016
recce.com.au
DIRECTORS’ REPORT
AUDITOR’S INDEPENDENCE
DECLARATION
CORPORATE GOVERNANCE STATEMENT
CONSOLIDATED STATEMENT OF
PROFIT OR LOSS AND OTHER
COMPREHENSIVE INCOME
CONSOLIDATED STATEMENT OF
FINANCIAL POSITION
CONSOLIDATED STATEMENT
OF CASH FLOWS
CONSOLIDATED STATEMENT
OF CHANGES IN EQUITY
14
30
31
40
41
42
43
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
Corporate Information
44
44
Statement of Significant Accounting Policies 44
Segment Reporting
Tax Expense
Revenue and Other Income
Loss for the Year
Earnings per Share
Auditor’s Remuneration
Cash and Cash Equivalents
Trade and Other Receivables
Property, Plant and Equipment
Trade and Other Payables
Other Liabilities
Provisions
Contributed Equity
Reserves
Financial Risk Management
Cash Flow Information
Share Based Payments
Related Party Transactions
Commitments
Parent Entity Information
Interests in Subsidiaries
DIRECTORS’ DECLARATION
INDEPENDENT AUDIT REPORT
TO MEMBERS OF RECCE LTD
ADDITIONAL SHAREHOLDER INFORMATION
CORPORATE DIRECTORY
54
54
55
55
55
56
56
56
57
59
59
60
60
61
61
65
65
67
67
68
68
69
70
72
IBC
FINANCIAL
REPORT
For the year ended
30 June 2016
13
Recce Annual Report 2016recce.com.au
DIRECTORS’ REPORT
YOUR DIRECTORS PRESENT THEIR REPORT ON THE GROUP
FOR THE YEAR ENDED 30 JUNE 2016.
Directors
The names of Directors in office at any time during or since the end of the year are:
Dr Graham Melrose
Mr Ian Brown: Resigned 8 April 2016
Ms Michele Dilizia
Prof Dongke Zhang: Resigned 8 April 2016
Mr James Graham
Dr Dominic Barnes: Appointed 14 May 2016
Ms Bernadette Murdoch: Appointed 26 May 2016
Directors have been in office since the start of the financial year to the date of this report unless otherwise stated.
Company Secretary
The following person held the position of Company Secretary at the end of the financial year:
Mr Peter John Williams — Bachelor of Business, FCPA, MAICD. Mr Williams has worked for Recce Ltd since 19 May 2015
as Chief Financial Officer and Company Secretary. Mr Williams was appointed Company Secretary on 3 June 2015.
1. Principal Activities
The principal activities of the Group during the financial year were related to the research and development of
antibiotic drugs.
2. Operating Results
The loss of the Group amounted to $4,840,358 (2015: $450,166 loss)
3. Dividends Paid or Recommended
No dividends have been paid or declared for payment.
4. Review of Operations
Research & Development Activities
During the year the Company undertook many tests of its antibiotic drug.
•
•
•
•
•
•
On 15 January 2016 it was announced that a test of efficacy, conducted by a Contract Research Organisation (CRO)
in the US, performed equally or better than a commercial antibiotic against the superbug Methicillin Resistant
Staphylococcus aureus (MRSA).
On 27 January 2016 the Company announced that laboratory tests showed that Recce’s antibiotic was able to kill both
Mycobacterium fortuitum (the model for TB disease) and Neisseria gonorrhoeae (causing gonorrhoea).
On 2 February 2016 the Company announced that despite increasing the “normal” dose of Recce antibiotic by a factor
of 8 there was no undue toxicity observed and yet the efficacy of the drug was maintained.
On 14 March 2016 the Company announced that Recce’s antibiotic had demonstrated anticancer activities against
each of 7 human cell lines of cancers: Leukaemia, stomach, intestine, breast, prostate, melanoma and kidney.
On 25 May 2016 the Company announced that no signs of toxicity in mice was observed after repeatedly injecting
them with therapeutic doses of RECCE® 327.
On 21 June 2016 the Company updated the investors with a detailed list of the tests (approximately 20 in total) that
would be undertaken over the next 8 months together with providing an indication of when the results of these tests
would be available.
14
Recce Annual Report 2016recce.com.au DIRECTORS’ REPORT(continued)
Patents/Trademarks
During the year, continued efforts were made to protect the Intellectual Property of the Group.
• On 15 January 2016 the Company announced that its patent for P.R. China Application 200880124515.5 had been
granted for patent Family 1.
•
On 15 January 2016 it was also announced that the Trade Mark for RECCE had been accepted and registered in
Australia and that applications had been made in Europe, USA, Japan and China.
• On 14 March 2016 the Company announced it had lodged provisional patents in relation to its anti-cancer activities.
Administration
This year has been a very busy and exciting year for the Group.
• The Company converted to a public company on 21 August 2015.
• The Company issued its prospectus on 1 September 2015.
• On 24 December 2015 the Company closed the IPO oversubscribed.
• On 15 January 2016 Recce Ltd listed on the ASX at a 50% premium to the offer price of $0.20 per share.
•
In May 2016 two new Independent Directors were appointed.
5. Financial Position
The Directors believe that the Group is in a strong financial position to ensure that it is able to meet all its commitments
as and when they fall due.
6. Significant Changes in State of Affairs
During the year the Company has undergone some significant changes. On 21 August 2015 the Company converted
from a proprietary limited company to a public company. On 31 December 2015 the Company issued 25 million
ordinary shares as part of its successful IPO to raise $5 million. On 5 January 2016 a further 2,550,000 shares were issued
to State One as payment for successfully managing the Company’s IPO. On 16 February 2016, 4,152,423
Class A Performance Shares were converted to ordinary shares as a result of the Company achieving the milestone
applicable to these Performance Shares.
7. Future Developments, Prospects and Business Strategies
The Group continues its strategy of having its antibiotic drug tested for safety, efficacy and chemistry to enable the Group
to lodge its application for Investigational New Drug (IND) status with the Food and Drug Administration (FDA) in the USA.
8. Environmental Issues
The Group is not aware of any environmental issue.
9. Subsequent Events
On 13 July 2016 the Company announced that anti-viral activity was evident during in-vitro tests of RECCE® 327
against influenza.
On 15 July 2016 the Company issued 3,543,000 ordinary shares to Dr Graham Melrose. These shares were issued on
the conversion of 3,543,000 Class A Performance Shares.
On 15 August 2016 the Company announced that test results showed that up to four times the normal dose of
RECCE® 327 could be tolerated by mice without any stress from toxicity.
No other matter or circumstance has arisen since 30 June 2016, which has significantly affected, or may significantly
affect the state of affairs of the Group in subsequent financial years.
15
Recce Annual Report 2016recce.com.au
DIRECTORS’ REPORT(continued)
10. Information on Directors
Dr Graham Melrose
Chairman (Executive)
Qualifications
Experience
BSc(Hons), PhD, MBA, FRACI, CChem, FAICD
Founder of Recce and inventor of RECCE antibiotics
Previously, founded Chemeq Ltd and under his leadership and R&D direction, achieved over
a three-year period, the top capital gain of all companies listed on the ASX, and an average
market capitalisation of approximately $500 million.
Earlier, a senior academic in the University of NSW’s Department of Applied Organic
Chemistry; visiting research scientist at Oxford and Munich universities.
Executive Director and Chief Research Executive of Johnson & Johnson (Aust) Pty Ltd in
Sydney, with global responsibilities, particularly in the Asia-Pacific.
Established and operated for some ten years, an industry-leading marketing consultancy.
Interest in Shares
1,472,043 Ordinary Shares*
24,300,960 Ordinary Shares*
4,602,000 Class A Performance Shares*
6,075,000 Class B Performance Shares*
6,075,000 Class C Performance Shares*
6,075,000 Class D Performance Shares*
*held jointly with wife Olga Mary Melrose
Special Responsibilities
Chairman of the Board of Directors
Directorships held in other Nil
listed entities during the
last three years
Mr Ian Brown
Qualifications
Experience
Director (Non-Executive)
MBA, EiR, FAICD, FAIM
Appointed a Director on 23 June 2015 and resigned on 8 April 2016
Has market-developed with big PharmCos – as well as listed PharmCos on NYSE, SGX and
ASX – involving IPOs, fundraising and licensing.
Entrepreneur in Residence at INSEAD.
Has worked in Melbourne, Perth, Gothenburg, Milan and London, playing a lead-role in
significant projects throughout Asia, Japan, Europe and the United States.
Executive Director/Senior Executive experience in companies manufacturing/selling
chemicals, polymers, healthcare products and pharmaceuticals.
Interest in Shares
281,250 Ordinary Shares
56,250 Class B Performance Shares
56,250 Class C Performance Shares
56,250 Class D Performance Shares
Special Responsibilities
Chairman of the Audit and Risk Management Committee and a member of the Nomination
and Remuneration Committee
Directorships held in other Nil
listed entities during the
last three years
16
Recce Annual Report 2016recce.com.au
DIRECTORS’ REPORT(continued)
Prof Dongke Zhang
Director (Non-Executive)
Qualifications
Experience
FTSE, BE, ME, PhD, FIChemE, CEng, CSci, FIEAust, CPEng, FAIE
Appointed a Director on 23 June 2015 and resigned on 8 April 2016
Designed and built the first pilot plant for Chemeq Ltd.
Technical Executive/Director of innovative technology companies.
Consultant to a range of Australia’s top companies.
Awarded the status of Distinguished Professor at Curtin University; now a
Professor in chemical engineering at University of WA.
Voted as among the top 100 most influential engineers in Australia.
Regularly visits China where fellowships have been established in his honour.
Interest in Shares
281,250 Ordinary Shares
56,250 Class B Performance Shares
56,250 Class C Performance Shares
56,250 Class D Performance Shares
Special Responsibilities
Chairman of the Nomination and Remuneration Committee and a member
of the Audit and Risk Management Committee
Directorships held in
other listed entities in the
last three years
Nil
Mr James Graham
Director (Executive)
Qualifications
Experience
BCom (Entrepreneurship), GAICD
Appointed a Director on 23 June 2015
Committee-member of WA Angel Investors; entrepreneurship and marketing.
Previously, General Manager of start-up marine company with sales in Australia,
Asia and Europe.
Investor (Non-professional) in ASX-listed technology companies.
Closely involved in the early growth and direction of Recce – initiated and facilitated funding.
Interest in Shares
Direct
1,948,561 Ordinary Shares
389,712 Class B Performance Shares
389,712 Class C Performance Shares
389,712 Class D Performance Shares
Indirect
345,000 Ordinary Shares
1,436,250 Ordinary Shares
356,250 Class B Performance Shares
356,250 Class C Performance Shares
356,250 Class D Performance Shares
Special Responsibilities
Member of the Audit and Risk Management Committee
Directorships held in other Nil
listed entities during the
last three years
17
Recce Annual Report 2016recce.com.au
DIRECTORS’ REPORT(continued)
Ms Michele Dilizia
Director (Executive)
Qualifications
Experience
BSC (Med Sci), Grad Dip Bus (Mkting), BA (Journ), GAICD
Appointed a Director on 23 June 2015
Qualified Medical Scientist; specialisation is medical microbiology.
Earlier a successful executive career in public relations and marketing for a leading
retail chain.
Began with journalism and then post-graduate qualifications in business.
Market research consultant, which included marketing development of health-care
and pharmaceutical products.
Interest in Shares
2,886,061 Ordinary Shares
577,212 Class B Performance Shares
577,212 Class C Performance Shares
577,212 Class D Performance Shares
Special Responsibilities
Member of the Nomination and Remuneration Committee
Directorships held in other Nil
listed entities during the
last three years
Dr Dominic Barnes
Director (Non-Executive)
Qualifications
Experience
FAICD, MMedSc, MBA, BBS
Appointed a director on 14 May 2016
Has had directorships or senior regulatory appointments with the Australian subsidiary
companies of leading global pharmaceutical companies: Shire, AstraZeneca and Johnson
& Johnson; he is also a leading member of medical, government and academic institutions
in Australia.
Interest in Shares
Nil
Special Responsibilities
Dominic is Chairman of the Nomination and Remuneration Committee and a member of
the Audit and Risk Management Committee
Directorships held in other Nil
listed entities during the
last three years
Ms Bernadette Murdoch
Director (Non-Executive)
Qualifications
Appointed a director on 26 May 2016
Experience
Bachelor Public Relations. Completed a Bachelor of Arts in Public Relations at RMIT
University including an exchange program with Leeds Metropolitan University, UK.
A broad range of skills and experience in leadership; issues and crisis communications;
brand building and product communications; corporate communications; media and blogger
relations; government relations; employee engagement and change management.
Interest in Shares
Nil
Special Responsibilities
Bernadette is Chairperson of the Audit and Risk Management Committee and a member
of the Nomination and Remuneration Committee
Directorships held in other Nil
listed entities during the
last three years
18
Recce Annual Report 2016recce.com.au
DIRECTORS’ REPORT(continued)
REMUNERATION REPORT (AUDITED)
The remuneration report details the key management personnel (“KMP”) remuneration arrangements for the
consolidated entity, in accordance with the requirements of the Corporations Act 2001 and its Regulations.
KMP are those persons having authority and responsibility for planning, directing and controlling the activities
of the entity, directly or indirectly, including all Directors.
For the purposes of this Remuneration Report, KMP includes the following Directors and Senior Executives
who were engaged by the Company at any time during the year ended 30 June 2016:
i) Non-Executive Directors
Ian Brown
Non-Executive Director (appointed 23 June 2015, resigned 8 April 2016)
Dongke Zhang
Non-Executive Director (appointed 23 June 2015, resigned 8 April 2016)
Dominic Barnes
Non-Executive Director (appointed 14 May 2016)
Bernadette Murdoch Non-Executive Director (appointed 26 May 2016)
ii) Executive Directors
Graham Melrose
Executive Chairman (appointed 11 April 2007)
James Graham
Executive Director (appointed 23 June 2015)
Michele Dilizia
Executive Director (appointed 23 June 2015)
iii) Key Management Personnel
Peter Williams
CFO and Company Secretary (appointed 19 May 2015)
The Remuneration Report covers the following matters:
(a) Principles used to determine the nature and amount of remuneration;
(b) Executive service agreements;
(c) Details of remuneration;
(d) Share-based remuneration;
(e) Other transactions with Key Management Personnel; and
(f) Other information.
(A) Principles used to determine the nature and amount of remuneration
In determining competitive remuneration rates, the Board seeks independent advice on local and international trends
among comparative companies and industry generally. It examines terms and conditions for employee incentive schemes,
benefit plans and share plans. Independent advice may also be obtained to confirm that executive remuneration is in line
with market practice and is reasonable in the context of Australian executive reward practices.
Executive Remuneration
The Group’s Remuneration Policy for Executive and Non-Executive Directors is designed to promote superior performance
and long term commitment to the Group. Executives receive a base remuneration which is market related, and may be
entitled to performance based remuneration at the ultimate discretion of the Board.
Overall remuneration policies are subject to the discretion of the Board and can be changed to reflect competitive market
and business conditions where it is in the interests of the Group and shareholders to do so.
19
Recce Annual Report 2016recce.com.au
DIRECTORS’ REPORT(continued)
DIRECTORS’ REPORT(continued)
Executive remuneration and other terms of employment are reviewed annually by the Board having regard to
performance, relevant comparative information and expert advice.
The Group’s reward policy reflects its obligation to align executive’s remuneration with shareholders’ interests and to
retain appropriately qualified executive talent for the benefit of the Group. The principles underpinning the consolidated
entity’s remuneration policy are that:
• Reward reflects the competitive global market in which we operate;
• Rewards to executives are linked to creating value for shareholders;
•
•
Remuneration arrangements are equitable and facilitate the development of senior management across the
consolidated entity; and
Where appropriate senior managers may receive a component of their remuneration in equity securities to align
their interests with those of the shareholders.
The total remuneration of executives and other senior managers consists of the following:
(a) Salary – Executive Directors and senior managers receive a sum payable monthly in cash;
(b) Long term incentives – Executive Directors may participate in share option/performance right schemes with the
prior approval of shareholders. Other senior managers may also participate in employee share option/performance
right schemes, with any option/performance right issues generally being made in accordance with thresholds set in
plans approved by shareholders. The Board however, considers it appropriate to retain the flexibility to issue
options/performance rights to executives outside of approved employee option/performance right plans in
exceptional circumstances; and
(c) Other benefits – Executive Directors and senior managers are eligible to participate in superannuation schemes and
other appropriate additional benefits.
Non-Executive Remuneration
Shareholders approve the maximum aggregate remuneration for Non-Executive Directors. The full Board recommends
the actual payments to Directors and the Board is responsible for ratifying any recommendations, if appropriate.
The maximum aggregate remuneration approved for Non-Executive Directors is currently $180,000.
It is recognised that Non-Executive Directors’ remuneration is ideally structured to exclude equity based remuneration.
However, whilst the Group remains small, and the full Board, including the Non-Executive Directors are included in the
operations of the Group more closely than may be the case with larger companies, the Non-Executive Directors are
entitled to participate in equity based remuneration schemes subject to shareholder approval.
All Directors are entitled to have their indemnity insurance paid by the Group.
(B) Executive Service Agreements
Name
Graham Melrose
James Graham
Michele Dilizia
Peter Williams
Base Salary
$190,000 pa
$123,287 pa
$91,324 pa
$140,000 pa
Performance-
Based
Incentives
Term
Nil
Nil
Nil
Nil
5 years effective from 1 July 2015
2 years effective from 1 February 2015
1 year effective from 1 July 2015
5 years effective from 19 May 2015
Notice
Period
3 months
3 months
3 months
3 months
The appointments of Mr Brown, Prof Zhang, Dr Barnes and Ms Murdoch as Non-Executive Directors were/are subject to the terms and
conditions set out in their respective letters of appointment. Each of the Non-Executive Directors received/receive $45,000 per annum.
None of the Non-Executive Directors are entitled to termination payments.
20
Recce Annual Report 2016recce.com.au DIRECTORS’ REPORT(continued)
DIRECTORS’ REPORT(continued)
(C) Details of Remuneration
Director and other KMP Remuneration
Details of the nature and amount of each element of the remuneration of each KMP of Recce Ltd are shown in the
table below:
Short term
benefits,
cash salary
and fees
($)
Name
Year
Directors
G Melrose
M Dilizia
J Graham
D Zhang1
I Brown1
D Barnes2
B Murdoch 3
Executives
2016
2016
2016
2016
2016
2016
2016
150,733
69,742
118,236
35,601
34,615
-
-
P Williams
2016
135,000
543,927
Super-
annuation
(post-
employment
benefit)
($)
14,320
6,625
11,232
-
-
-
-
12,825
45,002
Termination
payments
($)
Other
benefits
($)
Share-
based
payments
($)
Total
($)
Relevant
to Share-
based
Payments
%
Percentage
Performance
Related
%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2,053,350
2,218,403
372,944
449,311
429,982
559,450
19,013
19,013
3,945
2,959
54,614
53,628
3,945
2,959
93%
83%
77%
35%
35%
100%
100%
19,013
166,838
11%
2,920,218
3,509,147
-
-
-
-
-
-
-
-
1 D Zhang and I Brown resigned from the Board on 8 April 2016
2 D Barnes was appointed to the Board on 14 May 2016
3 B Murdoch was appointed to the Board on 26 May 2016
Super-
annuation
(post-
employment
benefit)
($)
Short term
benefits,
cash salary
and fees
($)
111,400
10,583
48,170
41,067
4,576
3,901
-
-
-
-
-
-
-
-
15,333
215,970
1,457
20,517
Name
Year
Directors
G Melrose
M Dilizia
J Graham
D Zhang 1
I Brown 1
D Barnes 2
2015
2015
2015
2015
2015
2015
B Murdoch 3
2015
Executives
P Williams
2015
1 D Zhang and I Brown resigned from the Board on 8 April 2016
2 D Barnes was appointed to the Board on 14 May 2016
3 B Murdoch was appointed to the Board on 26 May 2016
Termination
payments
($)
Other
benefits
($)
Share-
based
payments
($)
Relevant
to Share-
based
Payments
%
Percentage
Performance
Related
%
Total
($)
121,983
52,746
44,968
30,000
30,000
-
-
-
-
-
30,000
30,000
-
-
100%
100%
30,000
46,790
64%
90,000
326,487
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
21
Recce Annual Report 2016recce.com.au DIRECTORS’ REPORT(continued)
DIRECTORS’ REPORT(continued)
(D) Share-based Remuneration
Details of share based payments in the Group during the year are set out in Note 19.
(i) Issue of ordinary shares
On 1 July 2015 the Company issued 1,778,466 fully paid ordinary shares to 2 of its directors for services provided.
These shares were then split on the ratio 3 for 2. A summary of this event is as follows:
Director
J Graham
M Dilizia
Shares issued
1 July 2015
889,233
889,233
1,778,466
Additional
shares from
Split
444,616
444,616
889,232
Total shares
from this issue
1,333,849
1,333,849
2,667,698
The two Non-Executive Directors, appointed in May 2016 are entitled to receive $30,000 of shares in the Company for
each year of service completed. Accordingly a pro-rata accrual has been expensed for this entitlement.
(ii) Issue of Options
No options were issued to Directors or KMP as part of compensation during the period ended 30 June 2016.
(iii) Issue of Performance Shares
During the year 35,017,692 Performance Shares were issued to Directors and employees. Four classes of Performance
Shares were issued. The details of the terms and conditions of the Performance Shares are as follows:
Terms and Conditions of Performance Shares
The terms and conditions of the Performance Shares are intended to be as follows:
Rights attaching to the Performance Shares
(a) (Performance Shares) Each Performance Share is a share in the capital of the Company.
(b) (General Meetings) Each Performance Share confers on the holder (Holder) the right to receive notices of general
meetings and financial reports and accounts of the Company that are circulated to holders of fully paid ordinary shares
in the capital of the Company (Shareholders). Holders have the right to attend general meetings of Shareholders.
(c) (No Voting Rights) A Performance Share does not entitle the Holder to vote on any resolutions proposed by the
Company except as otherwise required by law.
(d) (No Dividend Rights) A Performance Share does not entitle the Holder to any dividends.
(e) (No rights on return of capital) A Performance Share does not entitle the Holder to a return of capital, whether in a
winding up, upon a reduction of capital or otherwise.
(f) (Rights on Winding Up) A Performance Share does not entitle the Holder to participate in the surplus profits or assets
of the Company upon winding up.
(g) (Not Transferable) A Performance Share is not transferable.
(h) (Reorganisation of Capital) If at any time the issued capital of the Company is reconstructed, all rights of a Holder will
be changed to the extent necessary to comply with the applicable ASX Listing Rules at the time of reorganisation.
(i) (Application to ASX) The Performance Shares will not be quoted on ASX. However, if the Company is listed on ASX at
the time of conversion of the Performance Shares into fully paid ordinary shares (Shares), the Company must within
10 Business Days apply for the official quotation of the Shares arising from the conversion on ASX.
(j) (Participation in entitlements and bonus issues) A Performance Share does not entitle a Holder (in their capacity as
a holder of a Performance Share) to participate in new issues of capital offered to holders of Shares such as bonus
issues and entitlement issues.
(k) (No Other Rights) A Performance Share gives the Holders no rights other than those expressly provided by these
22
Recce Annual Report 2016recce.com.au DIRECTORS’ REPORT(continued)
DIRECTORS’ REPORT(continued)
terms and those provided at law where such rights at law cannot be excluded by these terms.
(l) (Conversion on Achievement of Milestone) Subject to paragraph (m), a Performance Share in the relevant class
will convert into one Share upon achievement of:
(i)
(ii)
(iii)
(iv)
Class A: the volume weighted average price of Shares as traded on ASX over 20 consecutive trading days on
which the Shares are traded is not less than $0.30 on or before 19 August 2020 (Milestone).
Class B: the Company is awarded the US Food and Drug Administration’s (FDA) Investigational New Drug (IND)
status (or European equivalent – European Medicines Agency (EMEA)) on or before 19 August 2020 (Milestone).
Class C: the volume weighted average price of Shares as traded on ASX over 20 consecutive trading days on
which the Shares are traded is not less than $0.60 on or before 20 August 2020 (Milestone).
Class D: the volume weighted average price of Shares as traded on ASX over 20 consecutive trading days on
which the Shares are traded is not less than $1.20 on or before 20 August 2020 (Milestone).
(m) (Deferral of Conversion if Resulting in a Prohibited Acquisition of Shares) If the conversion of a Performance
Share would result in any person being in contravention of section 606(1) of the Corporations Act 2001 (Cth) (General
Prohibition) then the conversion of that Performance Share shall be deferred until such later time or times that the
conversion would not result in a contravention of the General Prohibition. In assessing whether a conversion of a
Performance Share would result in a contravention of the General Prohibition:
(i)
(ii)
Holders may give written notification to the Company if they consider that the conversion of a Performance
Share may result in the contravention of the General Prohibition. The absence of such written notification from
the Holder will entitle the Company to assume the conversion of a Performance Share will not result in any
person being in contravention of the General Prohibition.
The Company may (but is not obliged to) by written notice to a Holder request a Holder to provide the written
notice referred to in paragraph (m)(i) within seven days if the Company considers that the conversion of a
Performance Share may result in a contravention of the General Prohibition. The absence of such written
notification from the Holder will entitle the Company to assume the conversion of a Performance Share will
not result in any person being in contravention of the General Prohibition.
(n) (Redemption if Milestone not Achieved) If the relevant Milestone is not achieved by the required date, then each
Performance Share in that class will be automatically redeemed by the Company for the sum of $0.00001 within
10 Business days of non-satisfaction of the Milestone.
(o) (Conversion Procedure) The Company will issue the Holder with a new holding statement for any Share issued upon
conversion of a class of Performance Shares within 10 Business Days following the conversion.
(p) (Ranking upon Conversion) The Share into which the Performance Share may convert will rank pari passu in all
respects with existing Shares.
Details of Performance Shares issued
On 19 August 2015 the Company issued to Directors and Key Management Personnel the following Performance Shares:
• 7,566,924 Class A Performance Shares; and
• 7,566,924 Class B Performance Shares
On 20 August 2015 the Company issued to Directors and Key Management Personnel the following Performance Shares:
• 7,566,924 Class C Performance Shares; and
• 7,566,924 Class D Performance Shares
23
Recce Annual Report 2016recce.com.au
DIRECTORS’ REPORT(continued)
DIRECTORS’ REPORT(continued)
A summary of these transactions are as follows:
Directors
G Melrose
J Graham
M Dilizia
I Brown
D Zhang
Key Management
P Williams
Class A
Class B
Class C
Class D
Performance Shares
6,075,000
6,075,000
6,075,000
6,075,000
745,962
577,212
56,250
56,250
745,962
577,212
56,250
56,250
745,962
577,212
56,250
56,250
745,962
577,212
56,250
56,250
56,250
56,250
56,250
56,250
7,566,924
7,566,924
7,566,924
7,566,924
Value1 per performance share
$0.173
Nil
$0.111
$0.054
1 The Trinomial option pricing model has been used to calculate the value of Class A, Class C and Class D performance shares. Class B performance
shares have a non-market vesting condition i.e. the Company is awarded the US Food and Drug Administration’s Investigational New Drug (IND)
status on or before 19 August 2020. The multiplicity of the inter-dependent variables required for the achievement of IND status means there is
no statistical data to support the probability of Class B performance shares vesting. Accordingly a value of zero has been assigned to these shares.
There were also an additional 4,749,996 performance shares issued to employees apportioned across the performance share classes. The following
assumptions were used:
Underlying share price
20-day VWAP barrier
Term
Risk-free rate
Class A
Class C
Class D
$0.20
$0.30
5 Years
2.18%
$0.20
$0.60
5 Years
2.18%
$0.20
$1.20
5 Years
2.18%
Number of Performance Shares
8,754,423
8,754,423
8,754,423
24
Recce Annual Report 2016recce.com.au DIRECTORS’ REPORT(continued)
DIRECTORS’ REPORT(continued)
Equity instrument disclosures relating to key management personnel
Ordinary Shares
The numbers of shares in the Company held during the period by each Director of Recce Ltd and other KMP of the Group,
including their personally related parties, are set out below. There were no shares granted during the reporting period as
compensation.
2016
Directors
G Melrose
I Brown
D Zhang
D Barnes
B Murdoch
J Graham
M Dilizia
Executives
P Williams
Balance at the
Start
of the Period
Share Split
Conversion of
Performance
Shares
Share Based
Payment
Balance at date
of resignation
16,200,002
8,100,001
1,473,000 1
150,000
150,000
-
-
1,100,000
650,000
75,000
75,000
-
-
994,616
769,616
56,250
56,250
-
-
745,962
577,212
-
-
-
-
-
889,233
889,233
150,000
75,000
56,250
-
281,250
281,250
Balance at the
End
of the Period
25,773,003
-
-
-
-
3,729,811
2,886,061
281,250
18,400,002
10,089,233
2,964,924
1,778,466
562,500
32,670,125
1 Although G Melrose was entitled to convert 6,075,000 Class A Performance Shares he was restricted to convert only 1,473,000 Performance Shares
as a result of the application of section 606(1) of the Corporations Act 2001.
Performance Shares
The numbers of performance shares in the Company held during the period by each Director of Recce Ltd and other KMP
of the Group, including their personally related parties, are set out below.
2016
Directors
G Melrose2
I Brown
D Zhang
D Barnes
B Murdoch
J Graham
M Dilizia
Executives
P Williams
Balance at the
Start
of the Period
Granted
Converted to
Shares1
Lapsed
Unexercised
Balance at date
of resignation
Balance at
the End
of the Period
-
-
-
-
-
-
-
-
24,300,000
(1,473,000)
225,000
225,000
-
-
2,983,848
2,308,848
(56,250)
(56,250)
-
-
(745,962)
(577,212)
225,000
(56,250)
30,267,696
(2,964,924)
-
-
-
-
-
-
-
-
-
-
22,827,000
168,750
168,750
-
-
-
-
-
-
-
-
-
2,237,886
1,731,636
168,750
337,500
26,965,272
1 The first milestone associated with Class A Performance Shares was achieved i.e. the volume weighted average price of Shares as traded on ASX over
20 consecutive trading days on which the Shares are traded is not less than $0.30.
2 Although G Melrose was entitled to convert 6,075,000 Class A Performance Shares he was restricted to convert only 1,473,000 Performance Shares
as a result of the application of section 606(1) of the Corporations Act 2001.
25
Recce Annual Report 2016recce.com.au DIRECTORS’ REPORT(continued)
DIRECTORS’ REPORT(continued)
Performance Shares Awarded, Vested and Lapsed During the Year
The tables below discloses the number of performance shares granted to KMP as remuneration during FY2016 as well as
the number of performance shares that vested or lapsed/forfeited during the year.
Performance shares do not carry any voting or dividend rights and will convert once the vesting conditions have been met.
Class A Performance Shares
Year
Granted
No.
Granted
Grant date
value per
share
Exercised
%
Exercised
number
Forfeited
%
Directors
G Melrose1
I Brown
D Zhang
D Barnes
B Murdoch
J Graham
M Dilizia
Executives
2015
2015
2015
-
-
2015
2015
6,075,000
56,250
56,250
-
-
745,962
577,212
$0.173
$0.173
$0.173
-
-
$0.173
$0.173
24
100
100
-
-
100
100
1,473,000
56,250
56,250
-
-
745,962
577,212
P Williams
2015
56,250
$0.173
100
56,250
7,566,924
2,964,924
-
-
-
-
-
-
-
-
-
Financial
years in
which
shares
may vest
*
*
*
*
*
*
Maximum value
yet to exercise
$
796,146
-
-
-
-
-
-
-
796,146
1 Although G Melrose was entitled to convert 6,075,000 Class A Performance Shares he was restricted to convert only 1,473,000 Performance Shares
as a result of the application of section 606(1) of the Corporations Act 2001.
* These performance shares could have vested in any year up until 19 August 2020.
Class B Performance Shares
Year
Granted
No.
Granted
Grant date
value per
share
Vested
%
Vested
number
Forfeited
%
Financial
years in
which
shares
may vest
Maximum value
yet to vest
$
Directors
G Melrose
I Brown
D Zhang
D Barnes
B Murdoch
J Graham
M Dilizia
Executives
2015
2015
2015
-
-
2015
2015
6,075,000
56,250
56,250
-
-
745,962
577,212
P Williams
2015
56,250
7,566,924
Nil
Nil
Nil
-
-
Nil
Nil
Nil
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
*
*
*
*
*
*
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
* These performance shares could vest in any year up until 20 August 2020.
26
Recce Annual Report 2016recce.com.au DIRECTORS’ REPORT(continued)
DIRECTORS’ REPORT(continued)
Class C Performance Shares
Year
Granted
No.
Granted
Grant date
value per
share
Vested
%
Vested
number
Forfeited
%
Financial
years in
which
shares
may vest
Maximum value
yet to vest
$
Directors
G Melrose
I Brown
D Zhang
D Barnes
B Murdoch
J Graham
M Dilizia
Executives
2015
2015
2015
-
-
2015
2015
6,075,000
56,250
56,250
-
-
745,962
577,212
$0.111
$0.111
$0.111
-
-
$0.111
$0.111
P Williams
2015
56,250
$0.111
7,566,924
-
-
-
-
-
-
-
-
* These performance shares could vest in any year up until 20 August 2020.
-
-
-
-
-
-
-
-
-
*
*
*
*
*
*
-
-
-
-
-
-
-
-
-
674,325
6,244
6,244
-
-
82,802
64,071
6,244
839,930
Class D Performance Shares
Year
Granted
No.
Granted
Grant date
value per
share
Vested
%
Vested
number
Forfeited
%
Financial
years in
which
shares
may vest
Maximum value
yet to vest
$
Directors
G Melrose
I Brown
D Zhang
D Barnes
B Murdoch
J Graham
M Dilizia
Executives
2015
2015
2015
-
-
2015
2015
6,075,000
56,250
56,250
-
-
745,962
577,212
$0.054
$0.054
$0.054
-
-
$0.054
$0.054
P Williams
2015
56,250
$0.054
7,566,924
-
-
-
-
-
-
-
-
* These performance shares could vest in any year up until 20 August 2020.
-
-
-
-
-
-
-
-
-
*
*
*
*
*
*
-
-
-
-
-
-
-
-
-
328,050
3,037
3,037
-
-
40,282
31,169
3,037
408,612
27
Recce Annual Report 2016recce.com.au DIRECTORS’ REPORT(continued)
DIRECTORS’ REPORT(continued)
(E) Other transactions with key management personnel
During the reporting period, the Group did not have any other transactions with key management personnel.
(F) Other information
Loans to key management personnel
There were no loans, payables, receivables of other transactions at the end of the period to Directors and other key
management personnel and their related parties of Recce Ltd or the consolidated entity.
Reliance on external remuneration consultants
During the period, there were no external remuneration consultants engaged.
END OF REMUNERATION REPORT (AUDITED)
28
Recce Annual Report 2016recce.com.au DIRECTORS’ REPORT(continued)
11. Meetings of Directors
During the financial year, 13 meetings of Directors (including committees of Directors) were held. Attendances by each
Director during the year were as follows:
Directors’ Meetings
Audit & Risk Management
Committee
Nomination & Remuneration
Committee
Committee Meetings
A
7
5
5
7
7
1
1
B
7
5
5
7
7
1
1
A
-
3
3
-
3
-
-
B
-
3
3
-
3
-
-
A
-
3
3
3
-
-
-
B
-
3
3
3
-
-
-
Dr Graham Melrose
Mr Ian Brown
Prof Dongke Zhang
Ms Michele Dilizia
Mr James Graham
Dr Dominic Barnes
Ms Bernadette Murdoch
A: Number eligible to attend.
B: Number attended.
12. Proceedings on Behalf of Group
No person has applied for leave of Court to bring proceedings on behalf of the Group or intervene in any proceedings
to which the Group is a party for the purpose of taking responsibility on behalf of the Group for all or any part of those
proceedings.
The Group was not a party to any such proceedings during the year.
13. Non-audit Services
During the year $10,200 was paid to BDO for non-audit related services. This payment related to work undertaken to
write the Investigating Accountants report for the Prospectus. No other fees were paid to the auditor of the Group for
non-audit services.
14. Auditor’s Independence Declaration
The lead auditor’s independence declaration for the year ended 30 June 2016 has been received and can be found on
page 30 of the Directors’ Report.
Signed in accordance with a resolution of the Board of Directors.
Dr Graham Melrose
Executive Chairman
Dated: 25 August 2016
29
Recce Annual Report 2016recce.com.au AUDITOR’S INDEPENDENCE
DECLARATION
DIRECTORS’ REPORT(continued)
30
Recce Annual Report 2016recce.com.au CORPORATE GOVERNANCE
STATEMENT
The Board recognises the importance of establishing a comprehensive system of control and accountability as the basis
for the administration of corporate governance.
To the extent applicable, the Group has adopted The Corporate Governance Principles and Recommendations (3rd Edition)
as published by ASX Corporate Governance Council (“Recommendations”).
The Board has adopted the following suite of corporate governance policies and procedures which are contained within the
Company’s Corporate Governance Section on the Company’s website at www.recce.com.au
• Board Charter
• Audit and Risk Management Committee Charter
• Nomination and Remuneration Committee Charter
• Code of Conduct
• Shareholder Communications Strategy
• Corporate Governance Policy – Securities Trading
• Diversity Policy
• Continuous Disclosure Policy
• Policy and Procedure for Selection and Appointment of Directors
• Remuneration Policy for Executives and Non-Executive Directors
• Risk Management Policy
The Board is committed to administering the policies and procedures with openness and integrity, pursuing the true
spirit of corporate governance commensurate with the Group’s needs.
The Group is pleased to report that its practices are largely consistent with the Recommendations of the ASX Corporate
Governance Council and sets out below its compliance and departures from the Recommendations for the period ended
30 June 2016.
In the context of the Company’s size and nature, the Board considers that the current corporate governance regime is
a fit-for-purpose, efficient, practical and cost effective method of directing and managing the Group. As the Group’s
activities develop in size, nature and scope, the implementation of additional corporate governance polices and
structures will be reviewed.
31
Recce Annual Report 2016recce.com.au CORPORATE GOVERNANCE
STATEMENT (continued)
PRINCIPLES AND RECOMMENDATIONS
COMPLY
(YES/NO)
EXPLANATION
Principle 1: Lay solid foundations for management and oversight
Recommendation 1.1
A listed entity should have and disclose a charter which
sets out the respective roles and responsibilities of
the Board, the Chair and management; and includes a
description of those matters expressly reserved to the
Board and those delegated to management.
Recommendation 1.2
A listed entity should:
(a) Undertake appropriate checks before appointing a
person, or putting forward to security holders a
candidate for election, as a Director; and
(b) Provide security holders with all material information
relevant to a decision on whether or not to elect or
re-elect a Director.
YES
The Company has adopted a Board Charter which
complies with the guidelines prescribed by the
ASX Corporate Governance Council.
A copy of the Company’s Board Charter is available on
the Company’s website.
YES
(a) The Nomination and Remuneration Committee is
responsible for recommendations to the Board for the
selection and appointment of members of the Board.
The Company’s Nomination and Remuneration
Committee Charter requires the Nomination and
Remuneration Committee to undertake appropriate
checks before the Board appoints a person, or putting
forward to security holders a candidate for election,
as a Director.
During the financial year the Company undertook
appropriate checks prior to putting forward Dr Dominic
Barnes and Ms Bernadette Murdoch as candidates for
election as Directors of the Company.
(b) All material information relevant to the decision on
whether or not to elect Dr Dominic Barnes and
Ms Bernadette Murdoch, including information
relating to their qualifications, experience and proposed
roles within the Board will be set out in the Notice of
Meeting which will be sent to all shareholders ahead
of the Annual General Meeting to be held on
22 November 2016.
The Company has written agreements with all Directors
and Senior Executives which sets out the terms of their
appointment.
The Board Charter outlines the role, responsibility and
accountability of the Company Secretary. The Company
Secretary is accountable directly to the Board, through the
Chair, on all matters to do with the proper functioning of
the Board.
Recommendation 1.3
A listed entity should have a written agreement with each
Director and Senior Executive setting out the terms of their
appointment.
Recommendation 1.4
The Company Secretary of a listed entity should be
accountable directly to the Board, through the Chair, on all
matters to do with the proper functioning of the Board.
YES
YES
32
Recce Annual Report 2016recce.com.au CORPORATE GOVERNANCE
STATEMENT (continued)
PRINCIPLES AND RECOMMENDATIONS
COMPLY
(YES/NO)
EXPLANATION
Principle 1: Lay solid foundations for management and oversight
PARTIALLY
Recommendation 1.5
A listed entity should:
(a) Have a diversity policy which includes requirements
for the Board:
(i) to set measurable objectives for achieving gender
diversity; and
(ii) to assess annually both the objectives and the
entity’s progress in achieving them;
(b) Disclose that policy or a summary of it; and
(c) Disclose as at the end of each reporting period:
(i) the measurable objectives for achieving gender
diversity set by the Board in accordance with the
entity’s diversity policy and its progress towards
achieving them; and
(ii) either:
(A) the respective proportions of men and women on
the Board, in Senior Executive positions and across
the whole organisation (including how the entity has
defined “Senior Executive” for these purposes); or
(B) The entity’s “Gender Equality Indicators”, as defined
in the Workplace Gender Equality Act 2012.
(a) The Company has adopted a Diversity Policy which
complies with the guidelines prescribed by the ASX
Corporate Governance Council, including:
(i) the Diversity Policy provides a framework for the
Company to set and achieve measurable objectives
that encompass gender equality.
(ii) the Diversity Policy provides for the monitoring and
evaluation of the scope and currency of the Diversity
Policy. The Company is responsible for implementing,
monitoring and reporting on the measurable
objectives.
(b) The Diversity Policy is available on the Company’s
website.
(c) Given the short time frame since the Company’s
admission to the official list of the ASX, the Company
has yet to formally define the measurable objectives for
achieving gender diversity as required under its Diversity
Policy. With its new Board now in place, the Company
intends to undertake a review of its Diversity Policy in the
coming months and define the measurable objectives for
achieving gender diversity, where appropriate.
As at 30 June 2016, the respective proportions of men
and women on the Board, in Senior Executive positions
and across the whole organisation are set out below.
The Company defines Senior Executives as those
employees who report directly to the Executive
Chairman or the Board.
• 60% of the Company’s Board were male and 40%
were female;
• 100% of the Company’s Senior Executives were
male (excluding members of the Board)
• 25% of the Group’s entire workforce (including Board
members) were female and 75% were male.
Recommendation 1.6
A listed entity should:
(a) Have and disclose a process for periodically evaluating
the performance of the Board, its committees and
individual Directors; and
(b) Disclose in relation to each reporting period, whether a
performance evaluation was undertaken in the reporting
period in accordance with that process.
YES
(a) The Nomination and Remuneration Committee is
responsible for evaluating the performance of the Board
and individual Directors on an annual basis. The process
for this is set out in the Company’s Nomination and
Remuneration Committee Charter which is available on
the Company’s website
(b) Given the short timeframe since listing on the
ASX, the Board did not undertake a performance
evaluation of its Board or its individual Directors during
the reporting period.
Recommendation 1.7
A listed entity should:
(a) Have and disclose a process for periodically
evaluating the performance of its Senior Executives; and
(b) Disclose in relation to each reporting period, whether a
performance evaluation was undertaken in the reporting
period in accordance with that process.
YES
(a) The Nomination and Remuneration Committee is
responsible for evaluating the performance of
Senior Executives on an annual basis in accordance with
the Company’s Nomination and Remuneration
Committee Charter.
(b) The Executive Chairman undertook performance
evaluations following the anniversary of the
commencement of each Executive’s employment
with the Company.
33
Recce Annual Report 2016recce.com.au CORPORATE GOVERNANCE
STATEMENT (continued)
PRINCIPLES AND RECOMMENDATIONS
COMPLY
(YES/NO)
EXPLANATION
Principle 2: Structure the Board to add value
Recommendation 2.1
The Board of a listed entity should:
(a) Have a nomination committee which:
(i) has at least three members, a majority of whom
are Independent Directors; and
(ii) is chaired by an Independent Director, and disclose:
(iii) the charter of the committee;
(iv) the members of the committee; and
(v) as at the end of each reporting period, the number
of times the committee met throughout the period
and the individual attendances of the members at
those meetings; or
(b) If it does not have a nomination committee, disclose
that fact and the processes it employs to address Board
succession issues and to ensure that the Board has the
appropriate balance of skills, experience, independence
and knowledge of the entity to enable it to discharge
its duties and responsibilities effectively.
Recommendation 2.2
A listed entity should have and disclose a board skills matrix
setting out the mix of skills and diversity that the Board
currently has or is looking to achieve in its membership.
Recommendation 2.3
A listed entity should disclose:
(a) The names of the Directors considered by the Board to
be Independent Directors;
(b) If a Director has an interest, position, association or
relationship of the type described in Box 2.3 of the ASX
Corporate Governance Principles and Recommendations
(3rd Edition), but the Board is of the opinion that it does
not compromise the independence of the Director,
the nature of the interest, position, association or
relationship in question and an explanation of why
the Board is of that opinion; and
(c) The length of service of each Director.
YES
(a) The Board has a Nomination and Remuneration
Committee which has three members, the majority of
which are independent and the Chair of the committee
is an Independent Director.
The times and attendance at each committee meeting
is disclosed in section 11 of the Directors’ Report.
A copy of the Nomination and Remuneration Committee
Charter is available on the Company’s website.
(b) The Board will devote time at annual Board meetings
to discuss Board succession issues. All members of the
Board are to be involved in the Company’s nomination
process, to the maximum extent permitted under the
Corporations Act and ASX Listing Rules.
YES
The Board reviews its composition on an annual basis
against a Board skills matrix. The Company’s Board skills
matrix is available on its website.
(a) The Board Charter provides for the disclosure of the
names of Directors considered by the Board to be
independent. The current Independent Directors are
Dr Barnes and Ms Murdoch.
(b) The Board has determined and been assured of the
independence of each of the Company’s Directors in
line with the guidance set out by the ASX’s Corporate
Governance Council.
(c) The length of service of each Director is as follows:
• Dr Barnes was appointed on 14 May 2016 and has
served as a Director for approximately 4 months;
• Ms Murdoch was appointed on 26 May 2016 and has
served as a Director for approximately 4 months;
• Mr Graham and Ms Dilizia were appointed as Directors
on 23 June 2015 and have served as Directors of the
Company for approximately 15 months; and
• Dr Melrose was appointed a Director of the Company
on 11 April 2007 and has served as a Director of the
Company for approximately 9 years and 5 months.
34
Recce Annual Report 2016recce.com.au CORPORATE GOVERNANCE
STATEMENT (continued)
PRINCIPLES AND RECOMMENDATIONS
Principle 2: Structure the Board to add value
Recommendation 2.4
A majority of the Board of a listed entity should be
Independent Directors.
COMPLY
(YES/NO)
NO
Recommendation 2.5
The Chair of the Board of a listed entity should be an
Independent Director and, in particular, should not be the
same person as the CEO of the entity.
NO
Recommendation 2.6
A listed entity should have a program for inducting
new Directors and providing appropriate professional
development opportunities for continuing Directors to
develop and maintain the skills and knowledge needed
to perform their role as a Director effectively.
YES
EXPLANATION
The Board Charter requires that where practical the
majority of the Board will be independent.
The Board currently comprises a total of 5 Directors,
of whom 2 are considered to be independent. As such,
Independent Directors are not currently an independent
majority of the Board.
The Board does not currently consider an independent
majority of the Board to be appropriate given:
(a) The magnitude of the Company’s operations; and
(b) The relevant skills and experience of Dr Melrose,
Ms Dilizia and Mr Graham, together with the two
Independent Directors, mean that the Board is
appropriately skilled at this stage, to further the
progress and development of the Company.
The Company may seek to appoint additional
Independent Directors in the future to address the
lack of independence of its Directors.
The Chairman, Dr Melrose is an Executive Director and is
not considered by the Board to be independent. The Board
does not have an independent Chair because as founder of
Recce and lead-inventor of the RECCE initial and ongoing
technology, the Company considers that Dr Melrose is the
best equipped person to progress the Company’s future
direction.
The Company may seek to appoint an independent Chair
in the future.
The Nomination and Remuneration Committee is
responsible for reviewing and recommending to the
Board induction and professional development programs
and procedures for Directors to ensure that they can
effectively discharge their responsibilities.
As a result, the Company has in place a program for
the induction of new Directors which is tailored to each
new Director depending on their personal requirements,
background skills, qualifications and experience and includes
the provision of a formal letter of appointment and an
induction pack containing sufficient information to allow
the new Director to gain an understanding of the business
of the Company, and the roles, duties and responsibilities
of Directors and the Executive Team.
All Directors are encouraged to undergo continual
professional development and, subject to prior approval
by the Chairman, all Directors have access to numerous
resources and professional development training to
address any skills gaps.
In addition, opportunities to develop the skills and
experience of individual Board members will be considered
as part of the Company’s annual Board performance
review process.
35
Recce Annual Report 2016recce.com.au CORPORATE GOVERNANCE
STATEMENT (continued)
PRINCIPLES AND RECOMMENDATIONS
Principle 3: Act ethically and responsibly
Recommendation 3.1
A listed entity should:
(a) Have a code of conduct for its Directors, Senior
Executives and employees; and
(b) Disclose that code or a summary of it.
Principle 4: Safeguard integrity in financial reporting
Recommendation 4.1
The Board of a listed entity should:
(a) Have an audit committee which:
(i) has at least three members, all of whom are
Non-Executive Directors and a majority of whom
are Independent Directors; and
(ii) is chaired by an Independent Director, who is not the
Chair of the Board.
And disclose:
(i) the charter of the committee;
(ii) the relevant qualifications and experience of the
members of the committee; and
(iii) in relation to each reporting period, the number of
times the committee met throughout the period and
the individual attendances of the members at those
meetings; or
(b) If it does not have an audit committee, disclose that fact
and the processes it employs that independently verify
and safeguard the integrity of its financial reporting,
including the processes for the appointment and removal
of the external auditor and the rotation of the audit
engagement partner.
Recommendation 4.2
The Board of a listed entity should, before it approves the
entity’s financial statements for a financial period, receive
from its CEO and CFO a declaration that 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.
COMPLY
(YES/NO)
EXPLANATION
YES
(a) The Company has a Code of Conduct – the Company’s
Obligations to Stakeholders that applies to its Directors,
employees and contractors (all of whom are referred to
as “employees” under the Code).
(b) The Company’s Code of Conduct – the Company’s
Obligations to Stakeholders is available on the
Company’s website.
PARTIALLY
(a) The Company has an Audit and Risk Management
Committee which has three members, the majority of
whom are independent and the Chair of the committee
is independent.
The Audit and Risk Management Committee Charter is
available on the Company’s website.
(b) The Audit and Risk Management Committee devotes
time on at least an annual basis to consider the
robustness of the various internal control systems it
has in place to safeguard the integrity of the
Company’s financial reporting.
In addition, the Audit and Risk Management Committee
has the opportunity to confer with the Company’s
external auditors on any matters identified during
the course of the audit that have the potential to
increase the Company’s exposure to risks of material
misstatements in its financial reports. To this end, the
Company is pleased to confirm that no such matters
were raised by the Company’s auditors.
The Audit and Risk Management Committee also
assumes responsibility for recommendations to
security holders on the appointment and removal of the
external auditor. Audit partner rotations are enforced in
accordance with the relevant guidelines.
YES
Prior to the execution of the financial statements of the
Company, the Company’s Executive Chairman and CFO
provided the Board with written assurances that the
declaration provided in accordance with section 295A of
the Corporations Act is founded on a sound system of
risk management and internal control which is operating
effectively in all material aspects in relation to the
Company’s financial reporting risks.
Recommendation 4.3
A listed entity that has an AGM should ensure that its
external auditor attends its AGM and is available to answer
questions from security holders relevant to the audit.
YES
The Company intends to hold its first Annual General
Meeting within the coming months. The Board will act so
that the Company’s external auditor attends its AGM and
is available to answer questions from security holders
relevant to the audit.
36
Recce Annual Report 2016recce.com.au CORPORATE GOVERNANCE
STATEMENT (continued)
PRINCIPLES AND RECOMMENDATIONS
Principle 5: Make timely and balanced disclosure
Recommendation 5.1
A listed entity should:
(a) Have a written policy for complying with its continuous
disclosure obligations under the Listing Rules: and
(b) Disclose that policy or a summary of it.
COMPLY
(YES/NO)
YES
EXPLANATION
(a) The Company has adopted a Continuous Disclosure
Policy which details the processes and procedures
which have been adopted by the Company so as to
comply with its continuous disclosure obligations as
required under the ASX Listing Rules and other
relevant legislation.
(b) The Continuous Disclosure Policy is available on the
Company’s website.
Principle 6: Respect the rights of security holders
Recommendation 6.1
A listed entity should provide information about itself and
its governance to investors via its website.
Recommendation 6.2
A listed entity should design and implement an investor
relations program to facilitate effective two-way
communication with investors.
Recommendation 6.4
A listed entity should give security holders the option to
receive communications from, and send communications
to, the entity and its security registry electronically.
YES
YES
YES
Shareholders can access information about the Company
and its governance (including its Constitution and adopted
governance policies) from the Company’s website on the
“Corporate Governance” page.
The Company has adopted a Shareholder Communications
Strategy which aims to promote and facilitate effective
two-way communication with its investors. The Strategy
outlines a range of ways in which information is
communicated to shareholders.
A copy of the Company’s Shareholder Communications
Strategy policy is available on the Company’s website.
Security holders can register with the Company to receive
email notifications when an announcement is made by the
Company to the ASX.
In the first instance, Shareholders’ queries are referred to
the CFO & Company Secretary.
37
Recce Annual Report 2016recce.com.au CORPORATE GOVERNANCE
STATEMENT (continued)
PRINCIPLES AND RECOMMENDATIONS
COMPLY
(YES/NO)
EXPLANATION
Principle 7: Recognise and manage risk
Recommendation 7.1
The Board of a listed entity should:
(a) Have a committee or committees to oversee risk, each
of which:
(i) has at least three members, a majority of whom are
Independent Directors; and
(ii) is chaired by an Independent Director, and disclose:
(iii) the charter of the committee
(iv) the members of the committee; and
(v) as at the end of each reporting period, the number of
times the committee met throughout the period and
the individual attendances of the members at those
meetings; or
(b) If it does not have a risk committee or committees that
satisfy (a) above, disclose that fact and the process it
employs for overseeing the entity’s risk management
framework.
Recommendation 7.2
The Board or a committee of the Board should:
(a) Review the entity’s risk management framework with
management at least annually to satisfy itself that it
continues to be sound, to determine whether there have
been any changes in the material business risks the
entity faces and to ensure that they remain within the
risk appetite set by the Board; and
(b) Disclose in relation to each reporting period, whether
such a review has taken place.
Recommendation 7.3
A listed entity should disclose:
(a) If it has an internal audit function, how the function is
structured and what role it performs; or
(b) If it does not a have an internal audit function, that
fact and the processes it employs for evaluating and
continually improving the effectiveness of its risk
management and internal control processes.
38
YES
(a) The Board has an Audit and Risk Management
Committee which has three members, the majority of
which are independent and the Chair of the committee
is independent.
The time and attendance of each committee is
disclosed in Section II of the Directors’ Report.
The Audit and Risk Management Committee Charter is
available on the Company’s website.
(b) The Board devotes time on at least an annual basis
to fulfil the roles and responsibilities associated with
overseeing risk and maintaining the Company’s risk
management framework.
YES
(a) The Audit and Risk Management Committee Charter
sets out a requirement for the Audit and Risk
Management Committee to review the Company’s risk
management framework on an annual basis.
The Company monitors, evaluates and seeks to improve
its risk management and internal control processes in
line with the processes set out in its Risk Management
Policy, a copy of which is available on the Company’s
website.
In addition, the Company has a number of other
policies that directly or indirectly serve to reduce
and/or manage risk, including:
• Continuous Disclosure Policy
• Code of Conduct
• Trading Policy
(b) The Company formulated its risk management
framework in preparation for the Company’s admission
to the official list of the ASX. Whilst a formal review
of its risk management framework has not been
undertaken since listing, the Board regularly considers
risk on a formal basis and is satisfied that the
Company’s risk management framework continues to
be sound, and that the material business risks remain
within the risk appetite set by the Board.
YES
(a) The Audit and Risk Management Committee Charter
provides for the Audit and Risk Management Committee
to monitor the need for an internal audit function.
At this stage, due to the current size and nature of the
existing Board and the magnitude of the Company’s
operations the Company does not have an internal
audit function.
(b) The Company has adopted a Risk Management Policy
which the Company follows. The Audit and Risk
Management Committee reviews on a regular basis
the reports prepared by management in relation to
the Company’s risk profile.
Recce Annual Report 2016recce.com.au CORPORATE GOVERNANCE
STATEMENT (continued)
DIRECTORS’ REPORT(continued)
PRINCIPLES AND RECOMMENDATIONS
Recommendation 7.4
A listed entity should disclose whether, and if so how, it has
regard to economic, environmental and social sustainability
risks and, if it does, how it manages or intends to manage
those risks.
COMPLY
(YES/NO)
YES
EXPLANATION
Prior to the Company’s admission to the official list of
the ASX, the Board undertook a thorough review of the
Company’s exposures to economic, environmental and
social sustainability risks and disclosed these risks in its
Prospectus dated 21 September 2015. A copy of this
Prospectus is available on the Company’s website at:
www.recce.com.au
Principle 8: Remunerate fairly and responsibly
Recommendation 8.1
The Board of a listed entity should:
(a) Have a remuneration committee which:
(i) has at least three members, a majority of whom are
Independent Directors; and
(ii) is chaired by an Independent Director,
and disclose;
(iii) the charter of the committee;
(iv) the members of the committee; and
(v) as at the end of each reporting period, the number of
times the committee met throughout the period and
the individual attendances of the members at those
meetings; or
(b) If it does not have a remuneration committee, disclose
that fact and the processes it employs for setting the
level and composition of remuneration for Directors and
Senior Executives and ensuring that such remuneration
is appropriate and not excessive.
Recommendation 8.2
A listed entity should separately disclose its policies and
practices regarding the remuneration of Non-Executive
Directors and the remuneration of Executive Directors and
other Senior Executives and ensure that the different roles
and responsibilities of Non-Executive Directors compared
to Executive Directors and other Senior Executives are
reflected in the level and composition of their remuneration.
Recommendation 8.3
A listed entity which has an equity-based remuneration
scheme should:
(a) Have a policy on whether participants are permitted
to enter into transactions (whether through the use of
derivatives or otherwise) which limit the economic risk
of participating in the scheme; and
(b) Disclose that policy or a summary of it.
YES
(a) The Board has a Nomination and Remuneration
Committee which has three members, the majority of
whom are independent, and the Chair of the committee
is an Independent Director.
The times and attendance at each committee meeting
is disclosed in Section II of the Directors’ Report.
The Nomination and Remuneration Committee Charter
is available on the Company’s website.
(b) The Board ensures the roles and responsibilities
associated with setting the level and composition of
remuneration for Directors and Senior Executives and
ensuring that such remuneration is appropriate and
not excessive.
YES
YES
The Company’s Corporate Governance Plan requires the
Board to disclose its policies and practices regarding the
remuneration of Non-Executive and Executive Directors
and other senior employees. This disclosure is set out in
the Remuneration Report section of the Directors’ Report.
(a) The Company’s Nomination and Remuneration
Committee is responsible for the review and
recommendation to the Board of any equity-based
remuneration schemes offered to Directors and
employees of the Company. Further, in accordance
with the Nomination and Remuneration Committee
Charter, the Nomination and Remuneration Committee
is also responsible for recommending, on a case by
case basis, for scheme participants to enter into
transactions (whether through the use of derivatives
or otherwise) which limit the economic risk of
participating in the Scheme.
(b) The Company’s policy in this regard is set out in
the Company’s Nomination and Remuneration
Committee Charter, a copy of which is available
on the Company’s website.
39
Recce Annual Report 2016recce.com.au CONSOLIDATED STATEMENT OF
PROFIT OR LOSS & OTHER
COMPREHENSIVE INCOME
Revenue from continuing operations
Other income
Total revenue
Employee benefits expense
Laboratory expenses
Share based payments expense
Rental expenses
Depreciation and amortisation expenses
Travel expenses
IPO expenses
Patent related costs
Other expenses
Finance costs
Loss before income tax
Income tax (expense)/benefit
Loss after income tax
Other comprehensive income
Other comprehensive income for the year net of income tax
Total comprehensive loss for the year
Earnings per share for loss from continuing operations
attributable to owners of Recce Ltd
Basic and diluted loss per share (cents)
Earnings per share for loss attributable to owners of Recce Ltd
Basic and diluted loss per share (cents)
Dividends per share (cents)
NOTE
5
5
19
6
6
4
7
7
2016
$
44,102
136,518
180,620
(757,135)
(142,249)
(3,321,593)
(108,625)
(16,658)
(92,671)
(190,614)
(78,332)
(304,062)
(9,039)
(4,840,358)
-
2015
$
370
113,484
113,854
(256,741)
(53,880)
(91,319)
(61,441)
(10,300)
-
-
(46,126)
(43,962)
(251)
(450,166)
-
(4,840,358)
(450,166)
-
-
(4,840,358)
(450,166)
(8.61)
(8.61)
-
(1.35)
(1.35)
-
The above Consolidated Statement of Profit or Loss and Other Comprehensive Income should be read in conjunction with the accompanying notes.
40
Recce Annual Report 2016recce.com.au CONSOLIDATED STATEMENT OF
FINANCIAL POSITION
AS AT 30 JUNE 2016
NOTE
2016
$
2015
$
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Other
Total current assets
Non-current assets
Property, plant and equipment
Total non-current assets
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Borrowings
Other payables
Total current liabilities
Non-current liabilities
Provisions
Total non-current liabilities
Total liabilities
Net assets
EQUITY
Contributed equity
Reserves
Retained earnings (accumulated losses)
Capital and reserves attributable to owners of Recce Ltd
Total equity
9
10
11
12
13
14
15
16
3,591,382
39,565
6,432
3,637,379
83,280
83,280
3,720,659
95,885
6,978
92,197
195,060
11,738
11,738
206,798
3,513,861
7,418,863
2,247,531
(6,152,533)
3,513,861
3,513,861
451,711
15,805
-
467,516
78,919
78,919
546,435
239,023
-
26,761
265,784
6,687
6,687
272,471
273,964
1,586,139
-
(1,312,175)
273,964
273,964
The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes.
41
Recce Annual Report 2016recce.com.au CONSOLIDATED STATEMENT OF
CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2016
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from ATO
Payments to suppliers and employees
Interest received
Interest and other costs of finance paid
Net cash outflow from operating activities
CASH FLOWS FROM INVESTING ACTIVITIES
Payments for property, plant and equipment
Proceeds from sale of property, plant and equipment
Net cash outflow from investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings
Repayment of borrowings
Proceeds from issue of shares – net of costs
Net cash inflow from financing activities
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
NOTE
2016
$
135,849
(1,758,604)
24,186
(9,039)
2015
$
113,484
(409,740)
370
(251)
18
(1,607,608)
(296,137)
(78,061)
59,700
(18,361)
126,390
(119,412)
4,758,662
4,765,640
3,139,671
451,711
3,591,382
(35,249)
-
(35,249)
-
-
689,000
689,000
357,614
94,097
451,711
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
9
The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes.
42
Recce Annual Report 2016recce.com.au CONSOLIDATED STATEMENT OF
CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2016
Contributed
Equity
$
Accumulated
Losses
$
Share-Based
Payments
Reserve
$
Performance
Share Reserve
$
Total
Equity
$
At 1 July 2014
Total comprehensive income
for the year
Loss for the year
Transactions with owners
in their capacity as owners
Contributions of equity, net of
transaction costs
At 30 June 2015
At 1 July 2015
Total comprehensive income
for the year
Loss for the year
Transactions with owners in
their capacity as owners
Issue of Performance Shares
Conversion of Performance Shares
Shares to be issued to
Non-Executive Directors
Shares allotted per resolution
Shares allotted as per IPO
(net of transaction costs)
805,820
(862,009)
-
(450,166)
780,319
-
1,586,139
(1,312,175)
1,586,139
(1,312,175)
-
-
718,369
-
355,693
4,758,662
(4,840,358)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(56,189)
-
(450,166)
780,319
273,964
273,964
(4,840,358)
2,958,996
2,958,996
(718,369)
-
6,904
-
-
-
-
-
At 30 June 2016
7,418,863
(6,152,533)
6,904
2,240,627
The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes.
6,904
355,693
4,758,662
3,513,861
43
Recce Annual Report 2016recce.com.au NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 30 JUNE 2016
NOTE 1: Corporate Information
The consolidated financial statements of Recce Ltd for the year ended 30 June 2016 were authorised for issue in accor-
dance with a resolution of the Directors on 25 August 2016 of Recce Ltd. Recce Ltd is a for-profit entity for the purpose of
preparing these financial statements.
The financial statements are presented in Australian dollars.
Recce Ltd is a Company limited by shares incorporated in Australia whose shares are publicly traded on the Australian
Securities Exchange.
The address of the registered office and principal place of business is Suite 10, 3 Brodie Hall Drive, Bentley WA 6102.
NOTE 2: Statement of Significant Accounting Policies
(A) Basis of Preparation
The financial statements are general purpose financial statements which have been prepared in accordance with
Australian Accounting Standards, other authoritative pronouncements of the Australian Accounting Standards Board
and the Corporations Act 2001.
The financial statements also comply with International Financial Reporting Standards (IFRS) as issued by the
International Accounting Standards Board.
The financial statements have been prepared in accordance with the significant accounting policies disclosed below which
the Directors have determined are appropriate to meet the needs of members. Such accounting policies are consistent
with the previous period unless stated otherwise.
The financial statements have been prepared on an accrual basis and are based on historical costs, modified, where
applicable, by the measurement at fair value of selected non-current assets, financial assets and financial liabilities.
(B) Principles of Consolidation
(i) Subsidiaries
Subsidiaries are all entities (including structured entities) over which the Group has control. The Group controls an entity
when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability
to affect those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated from the
date on which control is transferred to the Group. They are de-consolidated from the date that control ceases.
Intercompany transactions, balances and unrealised gains on transactions between Group companies are eliminated.
Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the transferred asset.
Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted
by the Group.
(C) 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 full Board of Directors.
(D) Foreign Currency Translation
The functional and presentation currency of Recce Ltd and its Australian subsidiaries is Australian dollars (A$).
Foreign currency transactions are translated into the functional currency using the exchange rates ruling at the date of
the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of exchange
ruling at the end of the reporting period. Foreign exchange gains and losses resulting from settling foreign currency
transactions, as well as from restating foreign currency denominated monetary assets and liabilities, are recognised in
profit or loss.
Foreign exchange gains and losses are presented in profit or loss on a net basis within other income or other expenses,
unless they relate to borrowings, in which case they are presented as part of finance costs.
Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date
when fair value was measured.
44
Recce Annual Report 2016recce.com.au NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 30 JUNE 2016
The functional currency of the overseas subsidiaries is US$ and British pounds. At the end of the reporting period,
the assets and liabilities of these overseas subsidiaries are translated into the presentation currency of Recce Ltd at
the closing rate at the end of the reporting period and income and expenses are translated at the weighted average
exchange rates for the year. All resulting exchange difference are recognised in other comprehensive income as a separate
component of equity (foreign currency translation reserve). On disposal of a foreign entity, the cumulative exchange
differences recognised in foreign currency translation reserves relating to that particular foreign operation is recognised
in profit or loss.
(E) Revenue Recognition
Revenue is recognised at the fair value of consideration received or receivable. Amounts disclosed as revenue are net of
returns, trade allowances and duties and taxes paid.
Interest
Revenue is recognised as interest accrues using the effective interest method. The effective interest method uses the
effective interest rate which is the rate that exactly discounts the estimated future cash receipts over the expected life
of the financial asset.
Government Grants
Grants from the government are recognised at their fair value where there is reasonable assurance that the grant will be
received and the Group will comply with all the attached conditions. Government grants relating to costs are deferred and
recognised in profit or loss over the period necessary to match them with the costs that they are intended to compensate.
Government grants relating to the purchase of property, plant and equipment are included in non-current liabilities as
deferred income and credited to profit or loss on a straight line basis over the expected lives of the related assets.
(F) Income Tax
The income tax expense for the period is the tax payable 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 between the tax base of assets and liabilities and their carrying amounts in the financial statements, and to
unused tax losses.
Deferred tax assets and liabilities are recognised for all temporary differences, between carrying amounts of assets and
liabilities for financial reporting purposes and their respective tax bases, at the tax rates expected to apply when the
assets are recovered or liabilities settled, based on those tax rates which are enacted or substantively enacted for each
jurisdiction. Exceptions are made for certain temporary differences arising on initial recognition of an asset or a liability
if they arose in a transaction, other than a business combination, that at the time of the transaction did not affect either
accounting profit or taxable profit.
Deferred tax assets are only recognised for deductible temporary differences and unused tax losses if it is probable that
future taxable amounts will be available to utilise those temporary differences and losses.
Deferred tax assets and liabilities are not recognised for temporary differences between the carrying amount and tax
bases of investments in subsidiaries, associates and joint ventures 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.
Current and deferred tax balances relating to amounts recognised directly in other comprehensive income and equity are
also recognised directly in other comprehensive income and equity, respectively.
Recce Ltd and its wholly-owned subsidiaries have implemented the tax consolidation legislation for the whole of the
financial year. Recce Ltd is the head entity in the tax consolidated group. These entities are taxed as a single entity and
deferred tax assets and liabilities have been offset in these consolidated financial statements.
(G) Impairment of Assets
At the end of each reporting period the Group assesses whether there is any indication that individual assets are impaired.
Where impairment indicators exist, recoverable amount is determined and impairment losses are recognised in profit or
loss where the asset’s carrying value exceeds its recoverable amount. Recoverable amount is the higher of an asset’s fair
value less costs of disposal and value in use. For the purpose of assessing value in use, the estimated future cash flows
are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time
value of money and the risks specific to the asset.
45
Recce Annual Report 2016recce.com.au NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 30 JUNE 2016
Where it is not possible to estimate recoverable amount for an individual asset, recoverable amount is determined for the
cash-generating unit to which the asset belongs.
(H) Cash and Cash Equivalents
For the purposes of the Statement of Cash Flows, cash and cash equivalents includes cash on hand and at bank, deposits
held at call with financial institutions, other short term, highly liquid investments with 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.
(I) Fair Values
Fair values may be used for financial asset and liability measurement and well as for sundry disclosures.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between
market participants at the measurement date. It is based on the presumption that the transaction takes place either in the
principal market for the asset or liability or, in the absence of a principal market, in the most advantageous market.
The principal or most advantageous market must be accessible to, or by, the group.
Fair value is measured using the assumptions that market participants would use when pricing the asset or liability,
assuming that market participants act in their best economic interest.
The fair value measurement of a non-financial asset takes into account the market participant’s ability to generate
economic benefits by using the asset at its highest and best use or by selling it to another market participant that would
use the asset at its highest and best use.
In measuring fair value, the group uses valuation techniques that maximise the use of observable inputs and minimise
the use of unobservable inputs.
(J) Trade and Other receivables
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective
interest method, less provision for impairment. Trade receivables are generally due for settlement within 30 days.
They are presented as current assets unless collection is not expected for more than 12 months after the reporting date.
(K) Property, Plant and Equipment
All other plant and equipment is stated at historical cost, including costs directly attributable to bringing the asset to
the location and condition necessary for it to be capable of operating in the manner intended by management, less
depreciation and any impairments.
Depreciation on other assets is calculated on a reducing balance basis over the estimated useful life, or in the case of
leasehold improvements and certain leased plant and equipment, the shorter lease term, as follows:
• Machinery: 10 - 15 years
• Furniture, fittings and equipment: 3-8 years
Each class of plant and equipment is stated at historical cost, including costs directly attributable to bringing the asset
to the location and condition necessary for it to be capable of operating in the manner intended by management, less
depreciation and any impairments.
Depreciation
Depreciation is calculated on a diminishing value basis over the estimated useful life as follows:
Class of Fixed Asset
Depreciation Rate
• Plant and equipment:
5-20%
• Furniture, fittings and equipment
5-20%
The asset’s residual values and useful lives are reviewed and adjusted, if appropriate, at the end of each reporting period.
Gains and losses on disposals are calculated as the difference between the net disposal proceeds and the asset’s carrying
amount and are included in profit or loss in the year that the item is derecognised.
(L) Research and Development
Research costs are expensed as incurred.
46
Recce Annual Report 2016recce.com.au NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 30 JUNE 2016
(M) Trade and Other Payables
Trade and other payables represent liabilities for goods and services provided to the Group prior to the year end and which
are unpaid. These amounts are unsecured and have 30-60 day payment terms. They are recognised initially at fair value
and subsequently measured at amortised cost using the effective interest method.
(N) Borrowings
All loans and borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are
subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the
redemption amount is recognised in profit or loss over the period of the loans and borrowings using the effective interest
method.
Borrowings are derecognised from the statement of financial position when the obligation specified in the contract has
been discharged, cancelled or expires. The difference between the carrying amount of the borrowing derecognised and the
consideration paid is recognised in profit or loss as other income or finance costs.
All borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the
liability for at least 12 months after the end of the reporting period.
(O) Other Liabilities
Other liabilities comprises non-current amounts due to related parties that do not bear interest and are repayable within
366 days of the end of the reporting period. As these are non-interest bearing, fair value at initial recognition requires an
adjustment to discount these loans using a market-rate of interest for a similar instrument with a similar credit rating
(Group’s incremental borrowing rate). The discount is credited to profit or loss immediately and amortised using the
effective interest method.
(P) Employee Benefit Provisions
Short-term employee benefit obligations
Liabilities for wages and salaries, including non-monetary benefits, annual leave and accumulating sick leave expected
to be settled wholly within 12 months after the end of the reporting period are recognised in other liabilities in respect
of employees’ services rendered up to the end of the reporting period and are measured at amounts expected to be
paid when the liabilities are settled. Liabilities for non-accumulating sick leave are recognised when leave is taken and
measured at the actual rates paid or payable.
Other long-term employee benefit obligations
Liabilities for long service leave and annual leave are not expected to be settled wholly within 12 months after the end
of the reporting period. They are recognised as part of 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 to the end of the reporting
period using the projected unit credit method. Consideration is given to expected future salaries and wages levels,
experience of employee departures and periods of service. Expected future payments are discounted using national
government corporate bond rates at the end of the reporting period with terms to maturity and currency that match,
as closely as possible, the estimated future cash outflows.
Regardless of when settlement is expected to occur, liabilities for long service leave and annual leave are presented
as current liabilities in the statement of financial position if the entity does not have an unconditional right to defer
settlement for at least 12 months after the end of the reporting period.
(Q) Contributed Equity
Ordinary shares are classified as equity.
Costs directly attributable to the issue of new shares are shown as a deduction from the equity proceeds, net of any
income tax benefit. Costs directly attributable to the issue of new shares or options associated with the acquisition of
a business are included as part of the purchase consideration.
(R) Share-Based Payments
The Group provides benefits to employees (including Directors) of the Group in the form of share-based payment
transactions, whereby employees render services in exchange for shares or options over shares (“equity-settled
transactions”).
47
Recce Annual Report 2016recce.com.au NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 30 JUNE 2016
(S) Earnings Per Share
Basic earnings per share
Basic earnings per share is calculated by dividing the profit attributable to owners of Recce Ltd, adjusted for the after-
tax effect of preference dividends on preference shares classified as equity, by the weighted average number of ordinary
shares outstanding during the financial year, adjusted for bonus elements in ordinary shares during the year.
Diluted earnings per share
Earnings used to calculate diluted earnings per share are calculated by adjusting the basic earnings by the after-tax effect
of dividends and interest associated with dilutive potential ordinary shares. The weighted average number of shares used
is adjusted for the weighted average number of ordinary shares that would be issued on the conversion of all the dilutive
potential ordinary shares into ordinary shares.
(T) GST
Revenues, expenses are recognised net of GST except where GST incurred on a purchase of goods and services is not
recoverable from the taxation authority, in which case the GST is recognised as part of the cost of acquisition of the asset
or as part of the expense item.
Receivables and payables are stated with the amount of GST included. The net amount of GST recoverable from, or
payable to, the taxation authority is included as part of receivables or payables in the statement of financial position.
Cash flows are included in the statement of cash flows on a gross basis and the GST component of cash flows arising
from investing and financing activities, which is recoverable from, or payable to, the taxation authority are classified as
operating cash flows.
Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation
authority.
(U) Leases
Leases where a significant portion of the risks and rewards of ownership are not transferred to the Group as lessee are
classified as operating leases (note 21). Payments made under operating leases (net of any incentives received from the
lessor) are charged to profit or loss on a straight-line basis over the period of the lease.
(V) Derivatives and Hedging Activities
Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently
remeasured to their fair value at the end of each reporting period. The accounting for subsequent changes in fair value
depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged.
The group designates certain derivatives as either:
• Hedges of the fair value of recognised assets or liabilities or a firm commitment (fair value hedges);
• Hedges of a particular risk associated with the cash flows of recognised assets and liabilities and highly probable
forecast transactions (cash flow hedges); or
• Hedges of a net investment in a foreign operation (net investment hedges).
The Group documents at the inception of the hedging transaction the relationship between hedging instruments and
hedged items, as well as its risk management objective and strategy for undertaking various hedge transactions.
The Group also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives
that are used in hedging transactions have been and will continue to be highly effective in offsetting changes in fair
values or cash flows of hedged items.
The fair values of various derivative financial instruments used for hedging purposes are disclosed in note 17. The full fair
value of a hedging derivative is classified as a non-current asset or liability when the remaining maturity of the hedged
item is more than 12 months; it is classified as a current asset or liability when the remaining maturity of the hedged item
is less than 12 months. Trading derivatives are classified as a current asset or liability.
When a hedging instrument expires or is sold or is terminated, or when a hedge no longer meets the criteria for hedge
accounting, any cumulative gain or loss existing in equity at that time remains in equity and is recognised when the
forecast transaction is ultimately recognised in profit or loss. When a forecast transaction is no longer expected to occur,
the cumulative gain or loss that was reported in equity is immediately reclassified to profit or loss.
48
Recce Annual Report 2016recce.com.au NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 30 JUNE 2016
Derivatives that do not qualify for hedge accounting
Certain derivative instruments do not qualify for hedge accounting. Changes in the fair value of any derivative instrument
that does not qualify for hedge accounting are recognised immediately in profit or loss and are included in other income or
other expenses.
(W) Going Concern
Recce Ltd listed on the ASX on 15 January 2016, and at that time it had raised $5 million to meet its projected
commitments, with the ultimate aim of being granted IND status by the U.S. Food and Drug Administration, which was
outlined in the prospectus. Subsequent to the issue of the prospectus, Recce Ltd has updated its cash flow forecast
using more reliable and/or more accurate information, and based on the updated cash flow forecast Recce Ltd may not
have sufficient funds to complete all work required to submit its application for IND status. In isolation this indicates
the existence of a material uncertainty that may cast significant doubt about the Group’s ability to continue as a going
concern. Accordingly, the Group may have to seek additional funding; if as presently projected, schedules are earlier than
perhaps inferred in the prospectus, this re-financing may occur approximately May-June 2017. Based on the success of
current progress in the Group, it is considered that the re-financing would be well-supported.
As required by AASB 101 Presentation of Financial Statements the directors are required to make an assessment as to
whether the Group is able to continue as a going concern which contemplates the continuity of normal business activity
and the realisation of assets and settlement of liabilities in the ordinary course of business.
The Directors have undertaken such an assessment and do believe that the Group has the ability to continue as a going
concern. Accordingly, the financial report does not include any adjustments relating to the recoverability and classification
of recorded asset amounts, nor to amounts or classifications of liabilities that might be necessary should the Group not
be able to continue as a going concern. In the event that the Group is unable to continue as a going concern, it may be
required to realise its assets and discharge its liabilities other than in the normal course of business and at amounts
different to those stated in the financial report.
49
Recce Annual Report 2016recce.com.au NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 30 JUNE 2016
(X) Accounting Standards Issued But Not Yet Effective
Effective date
(annual reporting
periods beginning
on or after…)
1 January 2018
Likely impact
on initial application
The entity is yet to
undertake a detailed
assessment of the
impact of AASB 9.
However, based on
the entity’s preliminary
assessment, the
Standard is not
expected to have a
material impact on
the transactions and
balances recognised
in the financial
statements when it is
first adopted for the
year ending 30 June
2019.
New/revised
pronouncement
Superseded
pronouncement Nature of change
AASB 9
Financial
Instruments
(December 2014)
AASB 139
Financial
Instruments:
Recognition and
Measurement
AASB 9 introduces new requirements for the
classification and measurement of financial
assets and liabilities and includes a forward-
looking ‘expected loss’ impairment model and
a substantially-changed approach to hedge
accounting.
These requirements improve and simplify the
approach for classification and measurement of
financial assets compared with the requirements
of AASB 139.
The main changes are:
a)
b)
c)
d)
e)
Financial assets that are debt instruments
will be classified based on: (i) the objective of
the entity’s business model for managing the
financial assets; and (ii) the characteristics of the
contractual cash flows.
Allows an irrevocable election on initial
recognition to present gains and losses on
investments in equity instruments that are
not held for trading in other comprehensive
income (instead of in profit or loss). Dividends in
respect of these investments that are a return
on investment can be recognised in profit or
loss and there is no impairment or recycling on
disposal of the instrument.
Introduces a ‘fair value through other
comprehensive income’ measurement category
for particular simple debt instruments.
Financial assets can be designated and
measured at fair value through profit or loss
at initial recognition if doing so eliminates
or significantly reduces a measurement or
recognition inconsistency that would arise from
measuring assets or liabilities, or recognising the
gains and losses on them, on different bases.
Where the fair value option is used for financial
liabilities the change in fair value is to be
accounted for as follows:
• the change attributable to changes in credit
risk are presented in Other Comprehensive
Income (OCI)
• the remaining change is presented in profit
or loss
If this approach creates or enlarges an
accounting mismatch in the profit or loss, the
effect of the changes in credit risk are also
presented in profit or loss.
Otherwise, the following requirements have
generally been carried forward unchanged from
AASB 139 into AASB 9:
• classification and measurement of financial
liabilities; and
• derecognition requirements for financial
assets and liabilities.
50
Recce Annual Report 2016recce.com.au NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 30 JUNE 2016
(X) Accounting Standards Issued But Not Yet Effective (continued)
New/revised
pronouncement
Superseded
pronouncement Nature of change
Effective date
(annual reporting
periods beginning on
or after…)
Likely impact
on initial application
(As above)
AASB 9
Financial
Instruments
(December 2014)
continued
None
AASB 1057
Application
of Australian
Accounting
Standards
AASB 9 requirements regarding hedge accounting
represent a substantial overhaul of hedge
accounting that enable entities to better reflect
their risk management activities in the financial
statements. Furthermore, AASB 9 introduces a new
impairment model based on expected credit losses.
This model makes use of more forward-looking
information and applies to all financial instruments
that are subject to impairment accounting.
In May 2015, the AASB decided to revise Australian
Accounting Standards that incorporate IFRSs
to minimise Australian-specific wording even
further. The AASB noted that IFRSs do not contain
application paragraphs that identify the entities
and financial reports to which the Standards
(and Interpretations) apply. As a result, the AASB
decided to move the application paragraphs
previously contained in each Australian Accounting
Standard (or Interpretation), unchanged, into a
new Standard AASB 1057 Application of Australian
Accounting Standards.
1 January 2018
When this Standard is
first adopted for the
year ending 30 June
2019, there will be no
impact on the financial
statements.
1 January 2019
AASB 16
Leases
AASB 117
Leases Int. 4
Determining
whether an
Arrangement
contains a Lease
Int. 115 Operating
Leases – Lease
Incentives
Int. 127
Evaluating the
Substance of
Transactions
Involving the Legal
Form of a Lease
AASB 16:
• replaces AASB 117 Leases and some
lease-related interpretations
• requires all leases to be accounted for
‘on-balance sheet’ by lessees, other than
short-term and low value asset leases
• provides new guidance on the application of
the definition of lease and on sale and lease
back accounting
• largely retains the existing lessor accounting
requirements in AASB 117
• requires new and different disclosures
about leases.
None
Part D of AASB 2014-1 makes consequential
amendments arising from the issuance of AASB 14.
1 January 2016
AASB 2014-1
Amendments
to Australian
Accounting
Standards (Part
D: Consequential
Amendments
arising from AASB
14)
The entity is yet to
undertake a detailed
assessment of the
impact of AASB 16.
However, based on the
entity’s preliminary
assessment, the
Standard is not
expected to have a
material impact on
the transactions and
balances recognised
in the financial
statements when it
is first adopted for
the year ending
30 June 2020.
When these
amendments become
effective for the first
time for the year
ending 30 June 2017,
they will not have any
impact on the entity.
51
Recce Annual Report 2016recce.com.au NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 30 JUNE 2016
(X) Accounting Standards Issued But Not Yet Effective (continued)
New/revised
pronouncement
Superseded
pronouncement Nature of change
None
AASB 2014-4
Amendments
to Australian
Accounting
Standards –
Clarification
of Acceptable
Methods of
Depreciation and
Amortisation
None
AASB 2015-1
Amendments
to Australian
Accounting
Standards
– Annual
improvements
to Australian
Accounting
Standards 2012-
2014 Cycle
The amendments to AASB 116 prohibit the use of a
revenue-based depreciation method for property,
plant and equipment. Additionally, the amendments
provide guidance in the application of the
diminishing balance method for property, plant and
equipment.
The amendments to AASB 138 present a rebuttable
presumption that a revenue-based amortisation
method for intangible assets is inappropriate.
This rebuttable presumption can be overcome
(ie a revenue-based amortisation method might be
appropriate) only in two (2) limited circumstances:
1. The intangible asset is expressed as a measure
of revenue, for example when the predominant
limiting factor inherent in an intangible asset is
the achievement of a revenue threshold (for
instance, the right to operate a toll road could be
based on a fixed total amount of revenue to be
generated from cumulative tolls charged); or
2. When it can be demonstrated that revenue and
the consumption of the economic benefits of the
intangible asset are highly correlated.
These amendments arise from the issuance of
Annual improvements to IFRSs 2012-2014 Cycle in
September 2014 by the IASB.
Among other improvements, the amendments
clarify that when an entity reclassifies an asset
(or disposal group) directly from being held for sale
to being held for distribution (or vice-versa), the
accounting guidance in paragraphs 27-29 of
AASB 5 Non-current Assets Held for Sale and
Discontinued Operations does not apply.
The amendments also state that when an entity
determines that the asset (or disposal group) is
no longer available for immediate distribution or
that the distribution is no longer highly probable, it
should cease held-for-distribution accounting and
apply the guidance in paragraphs 27-29 of AASB 5.
Effective date
(annual reporting
periods beginning on
or after…)
1 January 2016
Likely impact
on initial application
When these
amendments are
first adopted for the
year ending 30 June
2017, there will be no
material impact on
the transactions and
balances recognised
in the financial
statements.
1 January 2016
When these
amendments are
first adopted for the
year ending 30 June
2017, there will be no
material impact on the
financial statements.
52
Recce Annual Report 2016recce.com.au NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 30 JUNE 2016
(X) Accounting Standards Issued But Not Yet Effective (continued)
New/revised
pronouncement
Superseded
pronouncement Nature of change
None
AASB 2015-2
Amendments
to Australian
Accounting
Standards
– Disclosure
Initiative:
Amendments to
AASB 101
None
AASB 2015-9
Amendments
to Australian
Accounting
Standards – Scope
and Application
Paragraphs
None
AASB 2016-2
Amendments
to Australian
Accounting
Standards
– Disclosure
Initiative:
Amendments to
AASB 107
The standard makes amendments to AASB 101
Presentation of Financial Statements arising from the
IASB’s Disclosure Initiative project.
The amendments:
• clarify the materiality requirements in AASB
101, including an emphasis on the potentially
detrimental effect of obscuring useful
information with immaterial information;
• clarify that AASB 101’s specified line items
in the statement(s) of profit or loss and other
comprehensive income and the statement of
financial position can be disaggregated;
• add requirements for how an entity should
present subtotals in the statement(s) of profit
and loss and other comprehensive income and
the statement of financial position;
• clarify that entities have flexibility as to the
order in which they present the notes, but
also emphasise that understandability and
comparability should be considered by an entity
when deciding that order; and
• remove potentially unhelpful guidance in AASB
101 for identifying a significant accounting policy.
AASB 2015-9 inserts scope paragraphs into
AASB 8 Operating Segments and AASB 133 Earnings
per Share in place of application paragraph text in
AASB 1057. In July and August 2015, the AASB
reissued AASB 8, AASB 133 and most of the
Australian Accounting Standards that incorporate
IFRSs to make editorial changes. The application
paragraphs in the previous versions of AASB 8 and
AASB 133 covered scope paragraphs that appear
separately in the corresponding IFRS 8 and IAS 33.
In moving those application paragraphs to AASB
1057 when AASB 8 and AASB 133 were reissued in
August, the AASB inadvertently deleted the scope
details from AASB 8 and AASB 133. This amending
Standard puts the scope details into those
Standards, and removes the related text from AASB
1057. There is no change to the requirements or
the applicability of AASB 8 and AASB 133.
AASB 2016-2 amends AASB 107 Statement of
Cash Flows to require entities preparing financial
statements in accordance with Tier 1 reporting
requirements to provide disclosures that enable
users of financial statements to evaluate changes
in liabilities arising from financing activities,
including both changes arising from cash flows and
non-cash changes.
Effective date
(annual reporting
periods beginning on
or after…)
1 January 2016
Likely impact
on initial application
When these
amendments are
first adopted for the
year ending 30 June
2017, there will be no
material impact on the
financial statements.
1 January 2016
When this Standard is
first adopted for the
year ending 30 June
2017, there will be no
impact on the financial
statements.
1 January 2017
When these
amendments are
first adopted for the
year ending 30 June
2018, there will be no
material impact on the
financial statements.
53
Recce Annual Report 2016recce.com.au NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 30 JUNE 2016
(Y) Critical accounting judgements, estimates and assumptions
The preparation of the financial statements requires management to make judgements, estimates and assumptions
that affect the reported amounts in the financial statements. Management continually evaluates its judgements and
estimates in relation to assets, liabilities, contingent liabilities, revenue and expenses. Management bases its judgements,
estimates and assumptions on historical experience and on other various factors, including expectations of future events,
management believes to be reasonable under the circumstances. The resulting accounting judgements and estimates will
seldom equal the related actual results. The judgements, estimates and assumptions that have a significant risk of causing
a material adjustment to the carrying amounts of assets and liabilities (refer to the respective notes) within the next
financial year are discussed below.
Share-based payment transactions
The consolidated entity measures the cost of equity-settled transactions with employees by reference to the fair value
of the equity instruments at the date at which they are granted. The fair value is determined by using either the Trinomial
or Black-Scholes model taking into account the terms and conditions upon which the instruments were granted.
The accounting estimates and assumptions relating to equity-settled share-based payments would have no impact on the
carrying amounts of assets and liabilities within the next annual reporting period but may impact profit or loss and equity.
For details of share based payments made during the year, see Note 19.
Impairment of non-financial assets
The consolidated entity assesses impairment of non-financial assets at each reporting date by evaluating conditions
specific to the consolidated entity and to the particular asset that may lead to impairment. If an impairment trigger
exists, the recoverable amount of the asset is determined. This involves fair value less costs of disposal or value-in-use
calculations, which incorporate a number of key estimates and assumptions.
NOTE 3: Segment Reporting
During the year the consolidated entity operated in one business segment, that being research and development of phar-
maceutical drugs. It also operated in one geographic segment which was Australia.
NOTE 4: Tax Expense
Loss from continuing operations before income tax benefit
(4,840,358)
(450,166)
The prima facie tax on loss from ordinary activities
before income tax is reconciled to income tax as follows:
Prima facie tax payable on loss from ordinary activities before income tax at 30%
(2015: 30%)
(1,452,107)
(135,050)
2016
$
2015
$
Add:
Non-allowable items
- Share-based payments expense
- IPO expenses
- Other non-allowable items
- Overseas laboratory testing
Less:
- Tax losses and deferred tax not recognised
Income tax attributable to entity
Deferred tax Assets (at 30%)
Net deferred tax assets have not been brought to account as it is not probable within
the immediate future that tax profits will be available against which deductible
temporary differences and tax losses can be utilised. The Group’s ability to use losses
in the future is subject to the companies in the Group satisfying the relevant tax
authority’s criteria for using these losses.
54
996,478
57,184
97
40,153
358,195
-
27,396
-
-
-
107,654
-
Recce Annual Report 2016recce.com.au NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 30 JUNE 2016
NOTE 5: Revenue and Other Income
(a) Revenue
- Interest received – from other persons
Total revenue
(b) Other income
- Research & Development Grant
- Sale of assets
Total other income
NOTE 6: Loss for the Year
Expenses
Finance costs:
- external
Total finance costs
Other expenses:
- Consulting fees
- Computer maintenance & consumables
- Insurance costs
- Communication expenses
- Audit fees
- Legal expenses
- Printing & stationery expenses
- ASIC/ASX fees
- Other
NOTE 7: Earnings per Share
Reconciliation of earnings used in calculating
earnings per share
Basic earnings per share
Profit attributable to owners of Recce Ltd used
to calculate basic earnings per share:
Loss from continuing operations
Diluted earnings per share
2016
$
2015
$
44,102
44,102
132,918
3,600
136,518
9,039
9,039
103,455
12,453
61,937
8,835
32,403
22,029
5,720
18,914
38,316
304,062
370
370
113,484
-
113,484
251
251
-
11,118
2,619
5,858
2,040
-
1,355
5,243
15,729
43,962
(4,840,358)
(4,840,358)
(450,166)
(450,166)
Loss used to calculate basic earnings per share
(4,840,358)
(450,166)
Weighted average number of ordinary shares used as the denominator
in calculating basic and diluted loss per share
56,224,590
33,309,143
55
Recce Annual Report 2016recce.com.au NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 30 JUNE 2016
NOTE 8: Auditor’s Remuneration
During the year, the following fees were paid or payable for services to BDO Audit
(WA) Pty Ltd (BDO), its related practices (also referred to hereafter as BDO, network
firms of BDO and non BDO firms:
Audit services
BDO for audit or review of the financial statements for the entity or any entity
in the group
Non-Audit-related services
BDO for non-audit-related services for the entity
or any entity in the group:
- Investigating Accountant’s Report for Prospectus
Taxation services
Non BDO firms for non-audit taxation services for the entity or any entity
in the group:
- review of income tax return
NOTE 9: Cash and Cash Equivalents
Cash at bank and in hand
Cash at bank and in hand bear floating interest rates between 0% and 3.05%
depending on the amount on deposit.
NOTE 10: Trade and Other Receivables
Current
Other receivables
2016
$
2015
$
32,403
2,040
10,200
42,403
1,850
1,850
-
2,040
1,630
1,630
3,591,382
3,591,382
451,711
451,711
39,565
39,565
15,805
15,805
56
Recce Annual Report 2016recce.com.au NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 30 JUNE 2016
NOTE 11: Property, Plant and Equipment
2016
$
2015
$
Plant & equipment
- at cost
- accumulated depreciation
Office furniture & equipment
- at cost
- accumulated depreciation
Computer equipment
- at cost
- accumulated depreciation
Office improvements
- at capitalised cost
- accumulated depreciation
Library
- at cost
- accumulated depreciation
Website development
- at cost
- accumulated amortisation
Total plant & equipment
41,903
(10,948)
30,955
19,339
(2,637)
16,702
16,078
(5,189)
10,889
22,835
(390)
22,445
2,334
(757)
1,577
2,797
(2,085)
712
83,280
86,468
(49,175)
37,293
19,220
(3,154)
16,066
17,372
(686)
16,686
5,863
(147)
5,716
2,334
(362)
1,972
2,797
(1,611)
1,186
78,919
57
Recce Annual Report 2016recce.com.au NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 30 JUNE 2016
2016
$
2015
$
NOTE 11: Property, Plant and Equipment (continued)
Reconciliations
Reconciliations of the carrying amounts of each class of property, plant & equipment
at the beginning and end of the current and previous financial year are set out below:
Plant & equipment
Carrying amount at beginning of financial year
Transfers
Additions
Disposals
Depreciation
Carrying amount at end of financial year
Office furniture & equipment
Carrying amount at beginning of financial year
Transfers
Additions
Disposals
Depreciation
Carrying amount at end of financial year
Computer equipment
Carrying amount at beginning of financial year
Transfers
Additions
Disposals
Depreciation
Carrying amount at end of financial year
Office improvements
Carrying amount at beginning of financial year
Additions
Depreciation
Carrying amount at end of financial year
Library
Carrying amount at beginning of financial year
Additions
Depreciation
Carrying amount at end of financial year
Website development
Carrying amount at beginning of financial year
Depreciation
Carrying amount at end of financial year
58
37,293
(278)
36,100
(33,612)
(8,548)
30,955
16,066
239
11,561
(9,973)
(1,191)
16,702
16,686
39
12,486
(12,514)
(5,808)
10,889
5,716
16,971
(242)
22,445
1,972
-
(395)
1,577
1,186
(474)
712
44,706
-
314
-
(7,727)
37,293
3,948
-
12,916
-
(798)
16,066
-
-
17,372
-
(686)
16,686
3,340
2,484
(107)
5,716
-
2,163
(191)
1,972
1,977
(791)
1,186
Recce Annual Report 2016recce.com.au NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 30 JUNE 2016
NOTE 12: Trade and Other Payables
Current
Unsecured liabilities
Trade payables
Other payables
NOTE 13: Other Liabilities
Current
Unsecured liabilities
Annual leave
Personal leave
2016
$
2015
$
18,768
77,117
95,885
58,371
33,826
92,197
22,142
216,881
239,023
17,841
8,920
26,761
59
Recce Annual Report 2016recce.com.au NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 30 JUNE 2016
NOTE 14: Provisions
Non-Current
Long Service Leave
Balance at beginning of the year
Provisions made during the year
Balance at end of year
NOTE 15: Contributed Equity
Share capital
Ordinary shares - no par value
Fully paid
Total contributed equity
Ordinary shares
1 July 2015
Shares issued during the year
- Shares issued to J Graham & M Dilizia
- Share split 3:2
- IPO
- Broker fee 1
- Success fee 2
- Conversion of Performance Shares – Class A 3
- Less share issue costs 4
30 June 2016
2016
$
2015
$
11,738
11,738
Long Service Leave
6,687
5,051
11,738
6,687
6,687
453
6,234
6,687
2016
Shares
2016
$
72,643,872
72,643,872
7,418,863
7,418,863
Number
$
25,515,834
1,586,139
1,778,466
13,647,149
25,000,000
1,500,000
1,050,000
4,152,423
-
72,643,872
355,693
-
5,000,000
300,000
210,000
718,369
(751,338)
7,418,863
Ordinary shares participate in dividends and the proceeds on winding up of the parent entity in proportion
to the number of shares held.
1 State One, the Company’s broker for the IPO, had the option of being paid in cash or shares.
The invoice received from State One included their election to receive the total of the broker fee in ordinary shares in the Company.
2 State One, the Company’s broker for the IPO, had the option of being paid in cash or shares.
The invoice received from State One included their election to receive $210,000 of the success fee in ordinary shares in the Company,
the balance of $90,000 in cash.
3 The milestone attributable to the Class A Performance Shares was achieved on 16 February 2016 i.e. the 20 day
VWAP was $0.30 or higher over 20 consecutive trading days. However, 4,602,000 Performance Shares granted to
G Melrose could not be converted as a result of the application of section 606(1) of the Corporations Act 2001.
4 Included in this amount is the value of both the Success Fee and the Broker Fee paid to State One.
60
Recce Annual Report 2016recce.com.au NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 30 JUNE 2016
NOTE 16: Reserves
Performance Share Reserve
The Performance Share reserve is used to recognise the fair value of Performance Shares issued to Executives
and Non-Executive Directors.
Share-based Payment Reserve
The share-based payments reserve is used to recognise the fair value of ordinary shares to be issued to
Non-Executive Directors after completion of 12 months service.
NOTE 17: Financial Risk Management
The group’s activities expose it to a variety of financial risks: market risk (including foreign exchange risk and interest rate
risk), credit risk and liquidity risk. The Group’s overall risk management programme focuses on the unpredictability of the
financial markets and seeks to minimise potential adverse effects on the financial performance of the Group. The Group
uses different methods to measure and manage different types of risks to which it is exposed. These include monitoring
levels of exposure to interest rate and foreign exchange risk and assessments of market forecasts for interest rate and
foreign exchange prices. Liquidity risk is monitored through the development of future cash flow forecasts.
Risk management is carried out by Management and overseen by the Board of Directors.
The main risks arising for the Group are foreign exchange risk, interest rate risk, credit risk and liquidity risk.
The carrying values of the Group’s financial instruments are as follows:
Financial Assets
Cash and cash equivalents
Trade and other receivables
Financial Liabilities
Trade and other payables
Borrowings
Net exposure
2016
$
3,591,382
39,565
3,630,947
95,885
6,978
102,863
3,528,084
2015
$
451,711
15,805
467,516
239,023
-
239,023
228,493
61
Recce Annual Report 2016recce.com.au NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 30 JUNE 2016
NOTE 17: Financial Risk Management (continued)
(a) Derivatives
Derivatives are only used for economic hedging purposes and not as speculative investments. However, where derivatives
do not meet the hedging criteria, they are classified as “held for trading” accounting purposes below. The Group has the
following derivative financial instruments:
Current Assets
Forward foreign exchange contracts – cash flow hedges
Total current derivative financial instrument assets
Current Liabilities
Forward foreign exchange contracts – held for trading
Total current derivative financial instrument liabilities
2016
$
2015
$
-
-
-
-
-
-
-
-
On 30 June 2016 the Company entered into a Forward Foreign Currency contract with Western Union Business Solutions. The Company
bought US$1 million at an average US$/A$ exchange rate of 0.7329.
This contract matures on 31 January 2017.
(b) Market Risk
(i) Foreign exchange risk
The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures,
primarily with respect to the US dollar.
Foreign exchange risk arises from future commercial transactions denominated in a currency that is not the entity’s
functional currency. Over the next 12 months the Group will enter into contracts with Contract Research Organisations
in the USA to perform numerous laboratory tests as well as use the services of an expert consultant in the USA that will
result in approximately US$1.1 million in expenditure.
(ii) Interest rate risk
The Group is exposed to interest rate risk due to variable interest being earned on its interest-bearing bank accounts.
At the end of the reporting period, the Group had the following interest-bearing financial instruments:
Cash and cash equivalents
2.61%
Weighted average
interest rate
Balance
$
3,591,382
Weighted average
interest rate
1.90%
Balance
$
451,711
30 June 16
30 June 15
62
Recce Annual Report 2016recce.com.au
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 30 JUNE 2016
NOTE 17: Financial Risk Management (continued)
Sensitivity
Within this analysis, consideration is given to potential renewals of existing positions and the mix of fixed and variable
interest rates. The following sensitivity analysis is based on the interest rate risk exposures in existence at the reporting
date. The 1% increase and 1% decrease in rates is based on reasonably expected possible changes over a financial year,
using the observed range of historical rates for the preceding five year period.
At 30 June 2016, if interest rates had moved, as illustrated in the table below, with all other variables held constant,
post-tax losses would have been affected as follows:
Judgements of reasonably
possible movements:
+1.0% (100 basis points)
-1.0% (100 basis points)
Post tax profit
higher/(lower)
Other comprehensive income
higher/(lower)
2016
$
35,870
(35,870)
2015
$
(4,065)
(4,065)
2016
$
-
-
2015
$
-
-
The other financial instruments of the Group that are not included in the above tables are non-interest bearing and are
therefore not subject to interest rate risk.
(c) Credit risk
Credit risk is the risk of financial loss to the Group if a counter party to a financial instrument fails to meet its contractual
obligations. During the year credit risk has principally arisen from the financial assets of the Group, which comprise cash
and cash equivalents and trade and other receivables. The Group’s exposure to credit risk arises from potential default of
the counter party, with the maximum exposure equal to the carrying amount of these instruments.
The carrying amount of financial assets included in the Consolidated Statement of Financial Position represents the
Group’s maximum exposure to credit risk in relation to those assets. The Group does not hold any credit derivatives to
offset its credit exposure. The Group trades only with recognised, credit worthy third parties and as such collateral is not
requested nor is it the Group’s policy to securitise its trade and other receivables. Receivable balances are monitored on
an ongoing basis with the result that the Group does not have a significant exposure to bad debts.
The Group has no significant concentrations of credit risk within the Group except for the following:
• Cash held with BankWest Bank
(i) Cash
The Group’s primary banker is BankWest. The Board considers the use of this financial institution, which has a rating of
AA- from Standards and Poors, respectively, to be sufficient in the management of credit risk with regards to these funds.
Cash at bank and short-term bank deposits:
Standard & Poors rating
AA-
2016
$
2015
$
3,591,832
451,711
63
Recce Annual Report 2016recce.com.au NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 30 JUNE 2016
(d) Liquidity risk
Prudent liquidity risk management implies maintaining sufficient cash and the availability of funding through an adequate
amount of committed credit facilities to meet obligations when due and to close out market positions.
The Directors and Management monitor the cash outflow of the Group on an on-going basis against budget and the
maturity profiles of financial assets and liabilities to manage its liquidity risk.
The financial liabilities the Group had at reporting date were trade payables incurred in the normal course of the business.
Trade payables were non-interest bearing and were deducted within the normal 30-60 day terms of creditor payments.
The table below reflects the respective undiscounted cash flows for financial liabilities existing at 30 June 2016.
Contractual maturities of
financial liabilities
<6 months
$
>6-12 months
$
>12 months
$
30 June 16
Trade and payables
Borrowings
30 June 15
Trade and other payables
(e) Fair value hierarchy
95,885
6,978
102,863
239,023
239,023
-
-
-
-
-
-
-
-
-
-
Total
contractual
cash flows
$
95,885
6,978
102,863
239,023
239,023
Carrying
amount
$
95,885
6,978
102,863
239,023
239,023
AASB 13 requires disclosure of fair value measurements by level of the following fair value measurement hierarchy:
(i) Level 1 – the instrument has quoted prices (unadjusted) in active markets for identical assets and liabilities;
(ii) Level 2 – a valuation technique using inputs other than quoted prices within Level 1 that are observable for the
financial instrument, either directly (ie as prices), or indirectly (ie derived from prices); or
(iii) Level 3 – a valuation technique using inputs that are not based on observable market data (unobservable inputs).
At 30 June 2016 and 30 June 2015 the Group did not have financial liabilities measured and recognised at fair value.
Due to their short term nature, the carrying amount of the current receivables and payables is assumed to approximate
their fair value.
64
Recce Annual Report 2016recce.com.au NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 30 JUNE 2016
NOTE 18: Cash Flow Information
Reconciliation of profit after income tax to net cash flow from operating activities
Loss for the year
Depreciation and amortisation
Non-cash share-based payments expense
Net (gain)/loss on sale of property, plant and equipment
Other
Change in operating assets
- (increase)/decrease in other assets
- (increase)/decrease in receivables
- increase/(decrease) in creditors and accruals
- increase/(decrease) in provisions
Net cash outflow from operating activities
NOTE 19: Share Based Payments
Share-based payments expense recognised during
the financial year
Shares issued under Performance Share Scheme
Shares issued to executive directors
Shares not issued to non-executive directors
during the year 1
2016
$
2015
$
(4,840,358)
16,658
3,321,593
(3,600)
942
(6,432)
(23,760)
(143,138)
70,487
(1,607,608)
(450,166)
10,300
91,319
-
-
-
(15,800)
42,114
26,096
(296,137)
2016
$
2015
$
2,958,996
355,693
6,904
3,321,593
-
91,319
-
91,319
1 The two new non-executive directors are entitled to receive $30,000 of shares in the Company for each year of service.
Accordingly a pro-rata accrual has been expensed for this entitlement.
Issue of Ordinary Shares
On 1 July 2015 the Company issued 1,778,466 fully paid ordinary shares to 2 of its directors for services provided. These shares were
then split on the ratio 3 for 2.
A summary of this event is as follows:
Director
J Graham
M Dilizia
Shares issued
1 July 2015
Additional shares
from Split
Total shares from
this issue
889,233
889,233
1,778,466
444,616
444,616
889,232
1,333,849
1,333,849
2,667,698
The value assigned to this transaction was based on the price of shares issued to “seed” investors who invested in the Company
around the time that these shares were issued i.e. $0.20 per share.
65
Recce Annual Report 2016recce.com.au NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 30 JUNE 2016
NOTE 19: Share Based Payments (continued)
Issue of Performance Shares
On 19 August 2015 the Company issued the following Performance Shares:
• 8,754,423 Class A Performance Shares; and
• 8,754,423 Class B Performance Shares
On 20 August 2015 the Company issued the following Performance Shares:
• 8,754,423 Class C Performance Shares; and
• 8,754,423 Class D Performance Shares
A summary of these transactions are as follows:
Directors
G Melrose
J Graham
M Dilizia
I Brown
D Zhang
Key Management
P Williams
Other employees
Value1 per performance share
Class A
Class B
Class C
Class D
Performance Shares
6,075,000
6,075,000
6,075,000
6,075,000
745,962
577,212
56,250
56,250
56,250
7,566,924
1,187,499
8,754,423
$0.173
745,962
577,212
56,250
56,250
56,250
7,566,924
1,187,499
8,754,423
Nil
745,962
577,212
56,250
56,250
56,250
7,566,924
1,187,499
8,754,423
$0.111
745,962
577,212
56,250
56,250
56,250
7,566,924
1,187,499
8,754,423
$0.054
1 The Trinomial option pricing model has been used to calculate the value of Class A, Class C and Class D performance shares. Class B performance
shares have a non-market vesting condition i.e. the Company is awarded the US Food and Drug Administration’s Investigational New Drug (IND)
status on or before 19 August 2020. For details of the vesting conditions see the Remuneration Report. The multiplicity of the inter-dependent
variables required for the achievement of IND status means there are no statistical data to support the probability of Class B performance shares
vesting. Accordingly a value of zero has been assigned to these shares. There were also an additional 4,749,996 performance shares issued to
employees apportioned across the performance share classes. The following assumptions were used:
Underlying share price
20-day VWAP barrier
Term
Risk-free rate
Performance Shares
Class A
Class C
Class D
$0.20
$0.30
5 Years
2.18%
$0.20
$0.60
5 Years
2.18%
$0.20
$1.20
5 Years
2.18%
Number of Performance Shares
8,754,423
8,754,423
8,754,423
The full terms and conditions of the Performance Shares are disclosed in section D of the audited Remuneration Report
in the Directors’ Report.
The above transactions relate to the share-based payment expense as disclosed in the Statement of Profit or Loss and
Other Comprehensive Income. 2016 $3,321,593 (2015: $91,319).
66
Recce Annual Report 2016recce.com.au NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 30 JUNE 2016
NOTE 20: Related Party Transactions
Parent entity
The ultimate parent entity within the Group is Recce Ltd.
Subsidiaries
Interests in subsidiaries are disclosed in 23.
Key management personnel compensation
Short-term employee benefits
Post-employment benefits
Share-based payments
Detailed remuneration disclosures are provided in
the Remuneration Report on pages 19 to 28.
The following transactions occurred with related parties:
Superannuation contributions
2016
$
2015
$
543,927
45,002
2,920,218
3,509,147
215,970
20,517
90,000
326,487
Contributions to superannuation funds on behalf of employees
45,002
20,517
Note: There were no other related party transactions
NOTE 21: Commitments
(a) Lease Commitments
Non-cancellable operating leases - future minimum lease payments
Payable:
Within one year
Later than one year but not later than 5 years
Later than 5 years
The Group leases various premises under non-cancellable operating leases expiring
between 1 and 2 years. All leases have annual CPI escalation clauses. Lease terms
usually run for 2 years with a 2 year renewal option. Lease conditions do not impose
any restrictions on the ability of Recce Ltd and its subsidiaries from borrowing further
funds or paying dividends.
The Group issued a purchase order to update the HPLC
Payable – within one year
105,505
42,108
-
147,613
11,000
11,000
11,000
59,660
66,906
-
126,566
-
-
-
67
Recce Annual Report 2016recce.com.au NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 30 JUNE 2016
NOTE 22: Parent Entity Information
The following information relates to the parent entity, Recce Ltd, as at 30 June 2016.
The information presented hereto has been prepared using accounting policies
consistent with those presented in Note. 1.
Parent entity
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Contributed equity
Reserves
Accumulated losses
Net Assets
Loss for the year
Total comprehensive loss for the year
The parent entity has no contingent liabilities as at 30 June 2016.
NOTE 23: Interests in Subsidiaries
Set out below are details of the subsidiaries held directly by the Group.
2016
$
2015
$
3,637,379
83,280
3,720,659
195,060
11,738
206,798
7,418,863
2,247,531
(6,152,533)
3,513,861
(4,840,358)
(4,840,358)
467,516
78,919
546,435
265,784
6,687
272,471
1,586,139
-
(1,312,175)
273,964
(450,166)
(450,166)
Name of
the Subsidiary
Recce (USA) LLP
Recce (UK) Limited
Country of incorporation of and
principle place of business
Group proportion of
ownership interests
Principal Activity
30 June 2016
30 June 2015
United States
United Kingdom
Research and Development
Research and Development
100%
100%
-
-
NOTE 24: Contingent Liabilities and Contingent Assets
The Group is not aware of any contingent liabilities or contingent assets as at 30 June 2016.
NOTE 25: Subsequent Events
On 13 July 2016 the Company announced that anti-viral activity was evident during in-vitro tests of RECCE® 327
against influenza.
On 15 July 2016 the Company issued 3,543,000 ordinary shares to Dr Graham Melrose. These shares were issued
on the conversion of 3,543,000 Class A Performance Shares.
On 15 August 2016 the Company announced that test results showed that up to four times the normal dose of
RECCE® 327 could be tolerated by mice without any stress from toxicity.
No other matter or circumstance has arisen since 30 June 2016, which has significantly affected, or may significantly
affect the state of affairs of the Group in subsequent financial years.
68
Recce Annual Report 2016recce.com.au DIRECTORS’ DECLARATION
The Directors of the Company declare that:
1. The financial statements comprising the statements of profit or loss and other comprehensive income, statements of
financial position, statements of changes in equity, statements of cash flows and accompanying notes, as set out on
pages 40 to 68, are in accordance with the Corporations Act 2001, including:
a. complying with Accounting Standards and the Corporations Regulations 2001; and other mandatory reporting
requirements; and
b. give a true and fair view of the financial position as at 30 June 2016 and of the performance for the year ended on
that date of the Company;
2. The Executive Chairman and Chief Financial Officer have each declared that:
a. the financial records of the Company for the financial year have been properly maintained in accordance with section
286 of the Corporations Act 2001;
b. The financial statements and notes for the financial year comply with the Accounting Standards; and
c. The financial statements and notes for the financial year give a true and fair view;
3. In the Director’s opinion there are reasonable grounds to believe that the Company will be able to pay its debts as and
when they become due and payable.
This declaration is made in accordance with a resolution of the Board of Directors.
Graham Melrose
Executive Chairman
Dated: 25 August 2016
69
Recce Annual Report 2016recce.com.au
INDEPENDENT AUDITOR’S REPORT
70
Recce Annual Report 2016recce.com.au INDEPENDENT AUDITOR’S REPORT
71
Recce Annual Report 2016recce.com.au ADDITIONAL
SHAREHOLDER INFORMATION
Additional information included in accordance with the Listing Rules of the Australian Securities Exchange Limited.
The information is current as at 30 September 2016.
1. Quotation
Listed fully paid ordinary securities in Recce Limited are quoted on the Australian Securities Exchange under
ASX code RCE.
2. Voting Rights
The voting rights attached to the Fully Paid Ordinary shares of the Company are:
(a) at a meeting of members or classes of members each member entitled to vote may vote in person or by
proxy or by attorney; and
(b) on a show of hands every person present who is a member has one vote, and on a poll every person present
in person or by proxy or attorney has one vote for each ordinary share held.
There are no voting rights attached to any Options or Performance Rights on issue.
3. Unmarketable Parcels
As at 30 September 2016, there were 48 holders of unmarketable parcels of less than 2,500 ordinary shares
(based on the closing share price of $0.20).
4. On-market Buy Backs
There is no on-market buy back currently in place.
5. Distribution of Share and Option Holders
The voting rights attached to the Fully Paid Ordinary shares of the Company are:
i) Fully Paid Ordinary Shares
Shares Range
Holders
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and above
Total
9
114
155
269
61
608
Units
2,377
355,070
1,409,520
9,609,554
64,810,351
76,186,872
ii) Class A Performance Shares (Escrow Exp. 15/1/2018)
Shares Range
Holders
Units
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and above
Total
-
-
-
-
1
1
-
-
-
-
1,059,000
1,059,000
%
0.00
0.47
1.85
12.61
85.07
100.00
%
-
-
-
-
100.00
100.00
72
Recce Annual Report 2016recce.com.au
ADDITIONAL
SHAREHOLDER INFORMATION
iii) Class B Performance Shares (Escrow Exp. 15/1/2018)
Shares Range
Holders
Units
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and above
Total
-
-
-
3
7
10
-
-
-
168,750
8,585,6731
8,754,423
1 Holders who hold more than 20% of the above securities are Graham John Hamilton Melrose and Olga Mary Melrose
(6,075,000 Class B Performance Shares).
iv) Class C Performance Shares (Escrow Exp. 15/1/2018)
Shares Range
Holders
Units
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and above
Total
-
-
-
3
7
10
-
-
-
168,750
8,585,6731
8,754,423
1 Holders who hold more than 20% of the above securities are Graham John Hamilton Melrose and Olga Mary Melrose
(6,075,000 Class C Performance Shares).
v) Class D Performance Shares (Escrow Exp. 15/1/2018)
Shares Range
Holders
Units
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and above
Total
-
-
-
3
7
10
-
-
-
168,750
8,585,6731
8,754,423
1 Holders who hold more than 20% of the above securities are Graham John Hamilton Melrose and Olga Mary Melrose
(6,075,000 Class D Performance Shares).
%
-
-
-
1.93
98.07
100.00
%
-
-
-
1.93
98.07
100.00
%
-
-
-
1.93
98.07
100.00
73
Recce Annual Report 2016recce.com.au
ADDITIONAL
SHAREHOLDER INFORMATION
6. Substantial Shareholders
The names of the substantial shareholders listed on the Company’s register as at 30 September 2016 are:
• Graham Melrose and Olga Melrose
Holder of:
Notice Received:
29,316,003
1 August 2016
• Alan Hill
Holder of:
Notice Received:
4,159,000
27 January 2016
• Michael Aarons
Holder of:
Notice Received:
6,099,999
25 January 2016
• James Hamilton Bray Graham
3,729,811
16 February 2016
Holder of:
Notice Received:
7. Twenty Largest Shareholders
The twenty largest shareholders of the Company’s quoted securities as at 30 September 2016 are as follows:
Name
MR GRAHAM MELROSE & MRS OLGA MELROSE
MR DAVID FOORD
MR MICHAEL AARONS
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