More annual reports from Recce Pharmaceuticals:
2023 ReportPeers and competitors of Recce Pharmaceuticals:
Tenax Therapeutics, Inc.ANNUAL REPORT 2018
1
RECCE PHARMACEUTICALS ANNUAL REPORT 2018 1 FY18 HIGHLIGHTS
1 WHO WE ARE
2 MESSAGE FROM THE CHAIRMAN
4 COMPANY PROFILE
8 BOARD OF DIRECTORS & KEY MANAGEMENT PERSONNEL
9 FINANCIAL REPORT
70 CORPORATE DIRECTORY
2
RECCE PHARMACEUTICALS ANNUAL REPORT 2018
FY18 HIGHLIGHTS
Capital
• Secured 43.5% research and development
rebate for product development from the
Australian Government.
• Extended research and development rebate
to include Company's antibiotic development
activities undertaken anywhere in the world.*
• Share Purchase Plan raised double the
targeted amount.
Regulatory
• Invited to meet with a 13-member panel of the
FDA's Division of Anti-Infective Products.
• Additional data submitted to US Food & Drug
Administration under guidance.
• Awarded Qualified Infectious Disease Product
(QIDP) designation under the Generating Antibiotic
Incentives Now (GAIN) Act labelling RECCE® 327
with 10 years of market exclusivity once approved
and fast track regulatory status.
Management
• Appointed Justin Reynolds as independent
Chief Financial Officer, Alistair McKeough
as independent Company Secretary and
Dr John Prendergast US-based
Non-Executive Director.
Manufacturing
• Confirmed intravenous drip dosing
for RECCE® 327 and production volumes
at amounts suitable for Phase I and
Phase II human clinical trials.
WHO WE ARE
An emerging global leader in new
generation antibiotic therapies.
Recce Pharmaceuticals Ltd is an Australian based
globally-focused, biotech company engaged in the
development and commercialisation of a new class
of antibiotics with broad spectrum activity designed
to address the urgent global health issue of antibiotic
resistant superbugs.
Its patented lead candidate known as RECCE® 327
has been developed for the treatment of blood
infections and sepsis derived from E. coli and
S. aureus bacteria – including their superbug forms.
Following recent pre-clinical data submissions to the
US Food and Drug Administration (FDA), RECCE® 327
was awarded Qualified Infectious Disease Product (QIDP)
designation under the Generating Antibiotic Incentives
Now (GAIN) Act, labelling RECCE® 327 with 10 years
of market exclusivity once approved and fast track
regulatory status.
During the reporting period, Recce management was
invited to meet with a 13-member panel of the FDA’s
Division of Anti-Infective Products, where it received
formal guidance on its clinical and regulatory pathways
in the US for its lead antibiotic compound, which the
company is now actively pursuing.
The Company’s wholly owned and patented method
of manufacture was established with capacity at
amounts suitable for Phase I and II clinical trials.
Recce has a manufacturing facility in Sydney, research
and development in Perth and is expanding its
operations in the United States.
recce.com.au
*On the 15th January 2018, the Company was awarded an Advanced Finding from AusIndustry. This secures
a 43.5% rebate against a forecast of AU $5.6 million of overseas drug development expenditure for FY17/18/19.
1
RECCE PHARMACEUTICALS ANNUAL REPORT 2018 MESSAGE FROM THE CHAIRMAN
“We remain focused on
allocating our valuable
resources towards achieving
the key milestones that
will deliver maximum
shareholder value.”
Executive Chairman and Chief Research Officer, Dr Graham Melrose
During the reporting period, Recce continued to
make substantial advances towards its goal of
commercialising its unique synthetic broad spectrum
antibiotic, aimed at addressing the urgent global health
issue of antibiotic resistant superbugs.
At the end of the financial year RECCE® 327, our lead
compound for the treatment of sepsis remained on
track to achieving a major regulatory milestone with
US FDA.
The team has been working hard to collate and prepare
the additional data required by the FDA following a
productive face-to-face guidance meeting in May 2018.
Operations
As we continue in our international advances, we have
remained concurrently active in preparing the business to
support a clinical trial in the US and to initiate the clinical
development of other potential therapies in our product
pipeline.
Additionally, we will seek to actively take advantage
of potential benefits that may be available under the
numerous legislative and regulatory incentives that may
afford avenues to expedite the development of our
technology faster and at less expense than the
traditional path to market.
2
RECCE PHARMACEUTICALS ANNUAL REPORT 2018 These incentives, which include QIDP designation under
the US Generating Antibiotic Incentives Now (GAIN)
Act, have been put in place by farsighted regulators
to expedite the development of new treatments that
help address the very real threat to human health from
antibiotic resistant bacteria.
The continued good results we achieve together will
underpin the creation of significant value for shareholders
over many decades. We remain grateful for the ongoing
support and loyalty from our shareholders and look
forward to updating you on further substantial progress
expected in the coming year.
Dr Graham Melrose
Executive Chairman
We remain focused on allocating our valuable resources
towards achieving the key milestones that will deliver
maximum shareholder value, while at the same time
prudently managing our spend.
Our main focus continues to be investing in building
the foundations for long-term growth. This includes
manufacturing capacity and management capability.
Growing leadership
Our leadership in the development of innovative
antibiotics is underpinned by our team’s commitment
and expertise, our growing intellectual property portfolio
across all major markets and our scalable manufacturing
capabilities. The varied and considerable experience of
the Board is another significant asset for the Company.
This year saw the appointment of a new Non-Executive
board member, Dr John Prendergast, who brings
significant international experience in commercialising
pharmaceuticals in global markets, most notably in the
USA. His insights and guidance will be invaluable as we
advance towards first-in-human clinical trials.
Our new Company Secretary and Chief Financial Officer
support our day-to-day operations. Both work with us
under contract from established groups allowing us to
control our expenses while being able to benefit from
the best advice available.
Outlook
We will continually seek to complement the existing skill
sets with additional international pharmaceutical and
commercial expertise.
I would like to thank Executive Director Michele Dilizia
at our R&D Centre in Perth and Executive Director James
Graham in our Sydney head office, along with the very
talented and dedicated team at our manufacturing
facility in Sydney and Perth, as well as the hardworking
employees and contractors who have collectively
contributed to our progress this year.
The dedication and commitment of all who work with
Recce are the key to our success. Together we are
seeking to transform the antibiotics market and meet
the urgent need for new therapies.
3
RECCE PHARMACEUTICALS ANNUAL REPORT 2018 COMPANY PROFILE
Our lead compound RECCE® 327 in action
These images show the mechanism of action
of our lead compound RECCE® 327.
0 mins
20 mins
3 hours
E. coli cells are healthy,
smooth and intact
Significant cell-membrane
weakening and disruption
Cell lysis and bacteria
are destroyed
This is a high-definition electron microscope image generated in 2017 by Dr Peta Clode and
Lyn Kirilak of the Centre for Microscopy, Characterisation and Analysis, University of Western
Australia. It was taken to demonstrate RECCE® 327’s unique mechanism of action.
Pre-clinical studies to date have confirmed and demonstrated
safety and efficacy of RECCE® 327 in destroying a number
of prevalent antibiotic resistant bacteria.
Efficacy
Safety
• Performs as a broad spectrum antibiotic
• Multiple studies of toxicity in small and large
• Acts against bacteria in both normal and
animals
mutated superbug forms
• Multiple tests of mutagenicity (cancer) are
• Multiple tests demonstrate efficacy against
Gram-Positive and Gram-negative S. aureus
and E. coli including superbug forms
clear
• Numerous studies to date indicate the safety
of RECCE® 327
• Kill Rate and MIC/MKC data demonstrate
• Is suited to administration against sepsis by
potency and broad spectrum activity against
a range of bacteria
• Contains a patented polymeric structure,
intentionally designed to overcome the
traditional challenges of bacterial mutation/
resistance
• In-vivo (mice) study against influenza virus
intra-venous drip
• Indicates a safe therapeutic dosing window
United Kingdom
Unique and highly
economical
manufacturing
process
Applications
(Multi-drug delivery)
Anti-viral
uses
PATENT
FAMILY 1
PATENT
FAMILY 2
PATENT
FAMILY 3
œ2028
œ2029
œ2028
œ2028
œ2028
œ2029
œ2028
œ2028
œ2028
œ2028
œ2028
œ2035
œ2035
œ2035
œ2035
œ2035
œ2035
œ2035
œ2035
œ2035
œ2035
œ2035
œ2035
œ2035
œ2035
œ2035
œ2035
œ2035
œ2035
œ2035
œ2035
œ2035
œ2035
GRANTED
PENDING
œ
EXPIRY DATE
COUNTRIES FILED
Australia
USA
Europe
Germany
Spain
France
Italy
Sweden
Japan
China
4
RECCE PHARMACEUTICALS ANNUAL REPORT 2018 Patent portfolio
We believe our intellectual property position provides us with
substantial competitive advantages for the commercial development of
our antibiotic compounds. It is one of the foundations of our business.
Recce Pharmaceuticals Ltd currently has
three wholly owned patent families including
21 patents or patent applications. We are
constantly expanding, broadening and
developing our intellectual property portfolio.
Recce Pharmaceuticals Ltd is also committed
to protecting its intellectual property estate of
patent rights and trade mark secrets and
the potential commercial and clinical advantages
this protection provides for its proprietary
technology.
The patent portfolio includes issued patents
and patent applications in the world’s leading
antibiotic markets on a dollar basis, including the
United States, Europe, China and Japan.
Unique and highly
economical
manufacturing
process
Applications
(Multi-drug delivery)
Anti-viral
uses
PATENT
FAMILY 1
PATENT
FAMILY 2
PATENT
FAMILY 3
œ2028
œ2029
œ2028
œ2028
œ2028
œ2029
œ2028
œ2028
œ2028
œ2028
œ2028
œ2035
œ2035
œ2035
œ2035
œ2035
œ2035
œ2035
œ2035
œ2035
œ2035
œ2035
œ2035
œ2035
œ2035
œ2035
œ2035
œ2035
œ2035
œ2035
œ2035
œ2035
œ2035
GRANTED
PENDING
œ
EXPIRY DATE
COUNTRIES FILED
Australia
USA
Europe
Germany
Spain
France
United Kingdom
Italy
Sweden
Japan
China
5
RECCE PHARMACEUTICALS ANNUAL REPORT 2018 COMPANY PROFILE CONTINUED
Legislative Support
Our first target is Sepsis
The US Right-to-Try Act was passed in the US during
May/June of 2018, designed to give all patients with life
threatening diseases immediate and direct access to
potentially lifesaving drugs after they have completed
Phase I clinical trials, and years ahead of formal marketing
approval. The new legislation mitigates the possibility of
up to weeks of procedural delay in what was previously
termed ‘Compassionate Use’ cases, potentially resulting
in improved patient outcomes, with reduced risk to those
providing them. Whilst this legislation does not affect
the Company’s business at present, it is nevertheless
further evidence of the evolving favourable regulatory
environment in the US – the largest antibiotic market
in the world, aimed at expediting new drugs with
lifesaving potential.
Sepsis is a life threatening inflammatory response to an
infection that has spread in the body. It currently claims
more lives in the US than prostate, breast and lung cancer
combined1,2. Each year that passes, there are more
than 1.6 million cases of sepsis and 258,000 deaths that
occur in the US3. Sepsis is the leading cause of death in
intensive care units and is one of the top 10 causes of
mortality worldwide. The incidence of severe sepsis is
increasing rapidly, making it to be the most expensive
condition to treat – double the average cost per stay
across all other conditions3.
Market need for sepsis
treatments
1 person
dies from sepsis
every 2 minutes3
$24bn
in annual costs
treated in US
hospitals3
Dr Graham Melrose and Michele Dilizia in the lab inspecting a fresh
bottle of RECCE® 327.
2%
of hospitalisations
are for sepsis but
they make up
17%
of in hospital deaths⁴
Most
expensive condition
to treat – double the
average cost per
stay across all other
conditions3
1 www.cdc.gov/sepsis/datareports/index.html
2 onlinelibrary.wiley.com/doi/pdf/10.3322/caac.21387
3 www.sepsis.org/downloads/2016_sepsis_facts_media.pdf
4 www.cdc.gov/nchs/products/databriefs/db62.htm
6
RECCE PHARMACEUTICALS ANNUAL REPORT 2018 “3 in 4 of the antibiotics under development belong to existing
classes of antibiotics, against which bacterial resistance has
already been observed or could easily develop.”¹
“Only one of the novel antibiotics in development has the
potential to treat Gram-negative bacteria, which cause some
of the hardest-to-treat infections.”¹
Pew’s Charitable Trusts Analysis, 2018.¹
1 www.forbes.com/sites/brucelee/2018/09/22/fda-here-is-the-2019-strategic-
approach-to-combat-antimicrobial-resistance/#6a5f836532102
7
RECCE PHARMACEUTICALS ANNUAL REPORT 2018 BOARD OF DIRECTORS AND
KEY MANAGEMENT PERSONNEL
Dr Graham Melrose
Executive Chairman and
Chief Research Officer
BSc (Hons), PhD, MBA, FRACI,
CChem, FAICD
Founder and inventor. Former
Executive Director and Head of
Research at Johnson & Johnson (Aust)
in Sydney, with global responsibilities,
particularly in Asia-Pacific.
Michele Dilizia
Executive Director (Regulatory
Affairs & Microbiology)
BSc (Med Sci), Grad Dip Bus (Mkting),
BA (Journ), GAICD, MASM
Co-inventor and qualified medical
scientist; specialisation in medical
microbiology and regulatory affairs.
James Graham
Executive Director (Marketing &
Business Development)
BCom (Entrepreneurship), GAICD
Extensive experience in marketing,
business development and
commercialisation of early stage
technologies with global potential.
Dr John Prendergast
Non-Executive Director
Arthur Kollaras
Principal Engineer
BSc (Hons), MSc (UNSW), PhD (UNSW),
CSS (HU)
BSc, BEng (Chem), PhilEng (Enviro),
MIEAust, MISPE
Dr Justin Ward
Principal Quality Chemist
BSc (Chem), PhD (Chem),
MRACI, CChem
US based, current Chairman and
Co-founder of Palatin Technologies,
Inc. (NYSE: PTN) and Lead Director
of Heat Biologics, Inc. (NASDAQ:
HTBX) – extensive experience in the
international commercialisation of
pharmaceutical technologies.
Highly qualified in chemical engineering
and microbiology, has significant
experience taking a new technology
concept to pilot plant and full-scale
to FDA standards and production
internationally.
A quality control expert who has
worked with leading pharmaceutical
companies according to international
regulatory standards.
Alistair McKeough
Company Secretary
(Whittens & McKeough)
Justin Reynolds
Chief Financial Officer
(Pitcher Partners Sydney)
Alistair is a qualified lawyer and
Principal/Managing Director of
Whittens & McKeough. Alistair has
broad experience as a commercial
litigator and Company Secretary to
ASX Listed companies.
Justin is a qualified accountant and
Partner of Pitcher Partners Sydney.
Justin has broad experience covering
all areas of accounting, taxation and
assurance. Particularly, Justin’s areas
of expertise are business services and
outsourced accounting.
8
RECCE PHARMACEUTICALS ANNUAL REPORT 2018 FINANCIAL REPORT
RECCE PHARMACEUTICALS LTD (FORMERLY RECCE LTD) AND CONTROLLED ENTITIES ABN 73 124 849 065
CONSOLIDATED FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2018
10 DIRECTORS’ REPORT
24 AUDITOR'S INDEPENDENCE DECLARATION
25 CORPORATE GOVERNANCE STATEMENT
36 CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
37 CONSOLIDATED STATEMENT OF FINANCIAL POSITION
38 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
39 CONSOLIDATED STATEMENT OF CASH FLOWS
40 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
63 DIRECTORS’ DECLARATION
64
68 ASX ADDITIONAL INFORMATION
INDEPENDENT AUDITOR’S REPORT
9
RECCE PHARMACEUTICALS ANNUAL REPORT 2018 DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2018
Your Directors present their report on Recce
Pharmaceuticals Ltd (formerly Recce Ltd) (the
‘Company’) and controlled entities (the ‘Group’)
for the year ended 30 June 2018.
Directors
The following persons held office as Directors of
the Company during the year and up to the date
of this report:
Dr Graham Melrose
Ms Michele Dilizia
Mr James Graham
Dr John Prendergast (Appointed on 24 April 2018)
Directors have been in office since the start of
the financial year to the date of this report unless
otherwise stated.
Information on Directors
Dr Graham Melrose
Chairman (Executive)
Qualifications
BSc (Hons), PhD, MBA, FRACI, CChem, FAICD
Experience
Dr Melrose is the founder of Recce Pharmaceuticals Ltd
and inventor of RECCE® antibiotics. He also 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.
Dr Melrose was a former senior academic in the
University of NSW’s Department of Applied Organic
Chemistry; visiting research scientist at Oxford University
and Munich University.
Dr Melrose was the former Executive Director and Chief
Research Executive of Johnson & Johnson (Aust) Pty Ltd
in Sydney, with global responsibilities, particularly in the
Asia-Pacific Region. He also established and operated for
some 10 years, an industry-leading marketing consultancy
firm.
Interest in Shares
30,375,003 Ordinary 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 listed entities during
the last three years
Nil
10
RECCE PHARMACEUTICALS ANNUAL REPORT 2018 Ms Michele Dilizia
Director (Executive)
Qualifications
Mr James Graham
Director (Executive)
Qualifications
BSc (Med Sci), Grad Dip Bus (Mkting), BA (Journ),
GAICD, MASM
BCom (Entrepreneurship), GAICD
Experience
Experience
Ms Dilizia is a qualified Medical Scientist with
specialisation in medical microbiology. Previously, she
had a successful executive career in public relations and
marketing for a leading retail chain.
Ms Dilizia was a 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
Mr Graham previously held a General Manager position
of a start-up marine company with sales in Australia, Asia
and Europe. He was an investor (non-professional) in
ASX-listed technology companies.
Mr Graham was closely involved in the early growth
and direction of Recce Pharmaceuticals Ltd including
initiating and facilitating funding.
Interest in Shares
Direct ownership
1,868,601 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 Nomination and Remuneration Committee
and the Audit and Risk Committee
Indirect ownership
1,781,250 Ordinary Shares
Directorships held in other listed entities during
the last three years
Nil
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
and the Nomination and Remuneration Committee
Directorships held in other listed entities during
the last three years
Nil
11
RECCE PHARMACEUTICALS ANNUAL REPORT 2018 DIRECTORS’ REPORT CONTINUED
FOR THE YEAR ENDED 30 JUNE 2018
Dr John Prendergast
Director (Non-Executive)
Qualifications
BSc (Hons), M.Sc. and Ph.D., C.S.S. (Admin & Mgmt)
Experience
Dr Prendergast is currently Chairman and Co-founder
of Palatin Technologies, Inc. (NYSE: PTN), a US
biotechnology company capitalised at over US$260m,
developing therapeutics for diseases with significant
unmet medical need; Lead Director of Heat Biologics, Inc.
(NASDAQ: HTBX) and Co-founder/Executive Chairman
of Nejo, Inc.
Dr Prendergast held previous US biotechnology Board
positions, most notably Lead Director of MediciNova,
Inc. valued at over US$470m (Nasdaq: MNOV) and
Osaka Securities Exchange (#4875) and Co-founder/
Lead Director of Avigen, Inc., which was acquired by
MediciNova in 2009 for US$37m.
Prior to a career in commercialising pharmaceutical
technologies, Dr Prendergast was Managing Director of
Paramount Capital Investments and The Castle Group.
Dr Prendergast has also served as a member of the
Advisory Board for the Institute for the Biotechnology
of Infectious Diseases (‘IBID’) at the University of
Technology Sydney, now called the ithree Institute.
Interest in Shares
250,000 Ordinary Shares*
*pending AGM approval
Special Responsibilities
Chairman of Audit & Risk Management Committee
Chairman of Nomination & Remuneration Committee
Directorships held in other listed entities during
the last three years
Palatin Technologies, Inc. (NYSE:PTN)
Heat Biologics, Inc. (NASDAQ:HTBX)
Chief Financial Officer
Peter Williams
(Resigned on 29 November 2017)
Justin Reynolds
(Appointed on 29 November 2017)
Justin Reynolds is a Partner at Pitcher Partners Sydney.
Mr Reynolds’ experience with multinational companies
has led to him developing particular expertise as an
Outsourced Financial Controller. He and his team provide
their clients with the peace of mind that comes from high
quality, technically expert outsourced accounting. Mr
Reynolds has a broad range of experience having dealt
with a variety of different sized organisations from small
family businesses to multinational companies and high
net worth individuals.
Company Secretary
Peter Williams
(Resigned on 29 November 2017)
Alistair McKeough
(Appointed on 29 November 2017)
Peter Williams was the Chief Financial Officer and
Company Secretary of the Group until 29 November 2017.
Mr Williams has significant commercial experience both
domestically and internationally. He has been Chief
Financial Officer and Company Secretary in a range of
ASX listed companies having research and manufacturing
programs.
Alistair McKeough is a Partner from Whittens &
McKeough Sydney.
Mr McKeough is an experienced commercial litigator with
an outstanding record of success in contested litigation.
Mr McKeough is trusted by some of Australia’s most
pre-eminent business people to handle their personal
legal affairs. Mr McKeough’s academic work has been
quoted by the Court of Appeal of New South Wales
and in leading Australian text books. He has served as
Company Secretary to several ASX Listed companies and
is a member of the University of New South Wales Law
Advisory Council.
Principal Activities
The Group is a drug discovery and development business
commercialising a new class of synthetic antibiotics
with broad spectrum activity designed to address the
global health challenge of antibiotic resistant superbugs.
Its patented lead candidate known as RECCE® 327 has
been developed for the treatment of blood infections
and sepsis derived from E. coli and S. aureus bacteria –
including their superbug forms.
12
RECCE PHARMACEUTICALS ANNUAL REPORT 2018 Review of Operations
On 7 July 2017, the Company issued a purchase order
in relation to the purchase of an Acquity UPLC – H Class
at $138,301. The equipment was used to analyse the
Group’s lead compound RECCE® 327.
On 20 July 2017, the Company announced that its
manufacturing facility in Sydney was producing at
volumes for Phase I and Phase II purposes in preparation
for human clinical trials.
On 31 July 2017, the Company announced the following:
• it had positive data from additional pre-clinical studies
which confirmed that RECCE® 327 was equally effective
in killing Gram Positive and Gram Negative bacteria
and their superbug forms;
• that the preferred mode of delivery of RECCE® 327
was via an IV drip; and
• that independent experts had reviewed the
Group’s draft Investigational New Drug (‘IND’) and
recommended that the Company should proceed
to a pre-IND meeting with the US Food and Drug
Administration (‘FDA’).
On 7 September 2017, the Company confirmed it had
submitted pre-clinical data and related documentation
to the FDA as part of the process for its application to
enter human clinical trials for its lead candidate antibiotic
RECCE® 327.
On 27 September 2017, the Company launched a Share
Purchase Plan which was offered to eligible shareholders
for an opportunity to purchase up to $15,000 worth of
new ordinary shares in the Company without brokerage
or transaction costs. The Plan was limited to a maximum
of 5,700,000 new shares.
On 23 October 2017, the Company accepted applications
from 171 registered shareholders totalling $946,500,
equivalent to 5,408,487 new shares under the Share
Purchase Plan.
On 16 November 2017, the Company announced that the
US FDA had granted Qualified Infectious Disease Product
(‘QIDP’) designation for its lead compound RECCE® 327.
This designation is an important achievement in the
regulatory path for RECCE® 327 with the FDA and has
significant benefits to the Group’s business.
On 21 November 2017, at the Annual General Meeting,
the shareholders of the Company approved the change
of name from Recce Ltd to Recce Pharmaceuticals Ltd.
On 29 November 2017, the Company announced that
Mr Peter Williams was no longer the Company Secretary
and CFO. Alistair McKeough from Whittens & McKeough
Sydney has been appointed as the new independent
Company Secretary whilst Mr Justin Reynolds from
Pitcher Partners Sydney became the new independent
consultant CFO.
On 15 January 2018, following the release of 42,810,081
unquoted ordinary shares from escrow, the Company
sought for these shares to be quoted on the ASX.
34,928,832 of these shares were held by Executive
Directors.
On 15 January 2018, the Company’s 8,754,423 Class B,
8,754,423 Class C and 8,754,423 Class D performance
shares were released from escrow. The Company will
not seek quotation of these shares unless certain
performance hurdles are achieved.
On 15 January 2018, the Company was awarded an
Advanced Finding from the Australian Government’s
Department of Industry, Innovation and Science
(AusIndustry). This secured a 43.5% rebate against a
forecast of AU$5.6 million of overseas drug development
expenditure for the financial years 30 June 2017,
30 June 2018 and 30 June 2019. This unique award
extends the Australian Government’s support,
traditionally only applicable to locally conducted
Research and Development expenditure, and now
further includes the Company’s antibiotic development
activities undertaken anywhere in the world.
On 17 January 2018 and 16 February 2018, the Company
issued 654,022 ordinary shares with 130,804 options and
328,084 ordinary shares with 65,617 options to
The Australian Special Opportunity Fund LP (‘ASOF’),
a New York institutional investor managed by The Lind
Partners, as part of its Share Purchase and Convertible
Security Agreement signed by the Company and ASOF
on 16 June 2017. The options will expire on 10 January
2021 and 13 February 2021, respectively.
On 15 February 2018, the Company announced the
submission of additional data to the US FDA, including
expanded pre-clinical data and a proposed Phase I
clinical trial program for the Company’s lead compound
RECCE® 327. The submission included a communication
request, leveraging unique opportunities gained under
RECCE® 327’s Qualified Infectious Disease Product
(QIDP) designation.
On 16 February 2018, the Company held a general
meeting in relation to the re-election of Ms Michele
Dilizia and Mr James Graham as Directors of the
Company. This was for the purposes of Section 250V(1)
of the Corporations Act 2001. Both Directors ceased to
hold office as Directors of the Company immediately
before the end of the meeting, and being eligible, were
unanimously re-elected as Directors of the Company. This
occurred because the resolution to adopt the Company’s
Remuneration Report at two consecutive Annual General
Meetings (being 2016 and 2017) had 25% or more of the
votes cast against the resolution; the Spill Resolution
was put to Shareholders at the Company’s 2017 Annual
General Meeting and was passed. Accordingly, and as
required by Section 250V of the Corporations Act 2001,
this meeting of Shareholders, known as a ‘Spill Meeting’,
was held within 90 days after the 2017 Annual General
Meeting dated on 21 November 2017.
13
RECCE PHARMACEUTICALS ANNUAL REPORT 2018 DIRECTORS’ REPORT CONTINUED
FOR THE YEAR ENDED 30 JUNE 2018
On 8 March 2018, the Company announced it had been
officially invited to attend a face-to-face meeting with the
US FDA to discuss its unique technology and proposed
clinical and regulatory pathway for its lead synthetic
antibiotic compound RECCE® 327.
On 28 March 2018, the Company announced that in view
of the Company’s current liquidity and imminent receipt
of a further AU$853,000 from the Federal Government
under its R&D rebate scheme, the Board believed the
Company had sufficient funds to meet its near-term
objectives as it continued to maintain a prudent and
cautious approach to managing its finances.
On 23 April 2018, the Company confirmed that it had
received an additional $861,590 from the Australian
Government for its overseas Advanced Drug
Development Expenditure in FY2017 under the Australian
Government’s Research and Development (R&D) Tax
Incentive which brought the total amount received in
FY18 to $1,288,518.
On 24 April 2018, the Company announced the
appointment of Dr John Prendergast to its Board as an
Independent Non-Executive Director.
On 16 May 2018, the Company presented to a 13-member
panel of the US FDA Division of Anti-Infective Products
for its lead synthetic antibiotic compound RECCE® 327.
On 5 June 2018, the Company received clear formal
guidance around the design of a planned Phase I trial
following its meeting in May with the US FDA’s Division of
Anti-Infective Products, Office of Antimicrobial Products.
ASOF invested an additional $400,000 in four tranches
and converted $300,000 of the convertible notes
to equity in accordance with Share Purchase and
Convertible Security Agreement signed on 16 June 2017.
Results of Operations
The operating loss has reduced to $1,674,288 (2017:
loss of $3,025,504). The major item that impacted on
the reduction of the loss was the receipt of a $1,288,518
R&D tax incentive during the year.
The R&D campaign for the Group’s new antibiotic
technology was largely finalised early in the period
resulting in the overall decrease of laboratory costs
by $627,186 compared to the prior year.
Other expenses increased by $398,101 which were
primarily attributable to the increase in consultancy
fees for legal, taxation and regulatory requirements.
Finance costs increased by $51,900 due to the fair
value movement of the convertible notes and the
impact of the early conversion of the convertible
notes to equity.
The loss per share decreased during the year to
1.98 cents (2017: 3.95 cents).
The Group’s current focus is on progressing
RECCE® 327 into human clinical trials.
Dividends Paid or Recommended
No dividends have been paid or declared for payment
during the year and at the date of this report.
Options
During the financial year, the Company issued 721,576
(2017: 641,000) options to acquire ordinary shares
in the Company at various exercise prices and dates
as disclosed in Note 16 to the consolidated financial
statements. There were no options exercised during
the year (2017: nil).
Significant Changes in State of Affairs
There were no significant changes in the Group's state
of affairs that occurred during the year.
Environment Issues
The Group’s operations are not subject to significant
environmental regulations under the law of the
Commonwealth or of a State or Territory. The policy
is to comply with or exceed its environmental obligations
in each jurisdiction in which it operates. No known
environmental breaches have occurred.
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.
Events Subsequent to Reporting Period
No matters or circumstances have arisen since the end
of the financial year, which significantly affected, or may
significantly affect, the operations of the Group, the
results of those operations, or state of affairs of
the Group in future financial years.
Going Concern
The Directors believe that the Group is in a position to
meet all its commitments as and when they fall due. Refer
to Note 3 to the consolidated financial statements for
further details.
Insurance of Officers
During the financial year, the Company paid a premium
for an insurance policy insuring all Directors and Officers
against liabilities for costs and expenses incurred by
them in defending any legal proceedings arising out of
their conduct while acting in their capacity as Director
or Officer of the Company, other than conduct involving
a wilful breach of duty in relation to the Company. In
accordance with common commercial practice, the
insurance policy prohibits disclosure of the nature of
the liability insured against the amount of the premium.
14
RECCE PHARMACEUTICALS ANNUAL REPORT 2018 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.
Remuneration Report (Audited)
The remuneration report details the Key Management
Personnel (‘KMP’) remuneration arrangements for
the Group, 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 2018:
(i) Executive Directors
Dr Graham Melrose
Executive Chairman
Ms Michele Dilizia
Executive Director
Mr James Graham
Executive Director
Dr John Prendergast Non-Executive Director
(appointed on 24 April 2018)
(ii) Key Management Personnel
Mr Peter Williams
CFO and Company Secretary
(resigned on 29 November 2017)
Mr Justin Ward
Principal Quality Chemist
Mr Arthur Kollaras
Principal Engineer
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.
Executive remuneration and other terms of employment
are normally 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
executives’ remuneration with shareholders’ interests and
to retain appropriately qualified executive talent for the
benefit of the Group. The principles underpinning the
Group’s remuneration policy are that:
• Reward reflects the competitive global market in
which the Group operates;
• 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.
15
RECCE PHARMACEUTICALS ANNUAL REPORT 2018
DIRECTORS’ REPORT CONTINUED
FOR THE YEAR ENDED 30 JUNE 2018
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 rights 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 shareholders
approval.
The Directors believe that as at this stage, there is no
relationship between the remunerations policy and
performance.
All Directors are entitled to have their indemnity
insurance paid by the Group.
(B) Executive Service Agreements
Name
Base Salary
up to
December
2017 (pa)
Base Salary
up to
December
2018 (pa)
Performance-
Based
Incentives
Term
Dr Graham Melrose
$220,000
$220,000
Ms Michele Dilizia
$101,000
$128,000
Mr James Graham
$138,000
$146,500
Mr Peter Williams*
$165,000
n/a
Mr Justin Ward
$100,460
$130,460
Mr Arthur Kollaras
$159,820
$170,000
Nil
Nil
Nil
Nil
Nil
Nil
*Peter Williams resigned as CFO and CO-SEC on 29 November 2017.
Notice Period
3 months
3 months
5 years effective from 1 July 2015
2 years effective from 1 July 2016
2 years effective from 1 February 2017
3 months
5 years effective from 19 May 2015
3 months
No fixed term
No fixed term
4 weeks
4 weeks
The appointment of Dr John Prendergast as Non-Executive Director was subject to the terms and conditions set out
in his letter of appointment. Under the terms contained in the letter of appointment with the Company, Dr Prendergast
receives AUD$50,000 per annum (plus applicable superannuation). Dr Prendergast will also receive an allocation of
250,000 fully paid ordinary shares, which will be subject to shareholder approval at the next Annual General Meeting.
The shares will be allocated to Dr Prendergast within one month of the Annual General Meeting.
16
RECCE PHARMACEUTICALS ANNUAL REPORT 2018 (C) Details of Remuneration
Director and other KMP Remuneration
Details of the nature and amount of each element of the remuneration of each KMP are shown in the table below:
Year ended 30 June 2018
Name
Directors
G Melrose
M Dilizia
J Graham
J Prendergast1
Executives
P Williams²
J Ward
A Kollaras
Short-term
benefits,
cash salary and
fees
$
Accrued
Long
Service
Leave
$
Superannuation
(post-
employment
benefit)
$
Termination
payments
$
Other
benefits
$
Share-
based
payments
$
Percentage
Performance
Related
%
Total
$
220,000
114,500
142,250
12,500
67,058
115,460
164,910
17,516
6,858
3,831
–
–
720
1,119
836,678
30,044
20,900
10,877
13,514
–
–
–
–
–
6,371
21,263
10,969
15,666
78,297
–
–
21,263
–
–
–
–
–
–
–
–
–
–
–
258,416
132,235
159,595
46,250
58,750
–
94,692
10,000
137,149
15,000
196,695
71,250 1,037,532
–
–
–
–
–
–
–
1 J Prendergast was appointed to the Board on 24 April 2018.
2 P Williams resigned as CFO and Co-Sec on 29 November 2017.
Year ended 30 June 2017
Name
Directors
G Melrose
M Dilizia
J Graham
D Barnes3
B Murdoch4
Executives
P Williams
J Ward5
A Kollaras6
Short-term
benefits,
cash salary and
fees
$
Accrued
Long
Service
Leave
$
Superannuation
(post-
employment
benefit)
$
Termination
payments
$
Other
benefits
$
Share-
based
payments
$
Percentage
Performance
Related
%
Total
$
220,000
101,000
145,431
30,870
22,108
176,250
72,644
112,561
880,864
–
–
–
–
–
–
–
–
–
20,900
9,595
13,816
2,932
2,100
16,743
6,901
10,693
83,680
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
240,900
110,595
159,247
33,802
24,208
192,993
10,000
89,545
10,000
133,254
20,000 984,544
–
–
–
–
–
–
–
–
3 D Barnes was appointed to the Board on 14 May 2016 and resigned on 20 January 2017.
4 B Murdoch was appointed to the Board on 26 May 2016 and resigned on 21 November 2016.
5 J Ward commenced employment on 10 October 2016.
6 A Kollaras commenced employment on 17 October 2016.
17
RECCE PHARMACEUTICALS ANNUAL REPORT 2018 DIRECTORS’ REPORT CONTINUED
FOR THE YEAR ENDED 30 JUNE 2018
(D) Share-based Remuneration
Year Ended 30 June 2018
(i) Issue of ordinary shares
There were no shares issued to Directors or KMP as part
of their compensation during the year ended 30 June
2018. However, entitlements were given to the following
KMPs during the year but shares were not yet issued as
at 30 June 2018 and at the date of this report.
(iii) Issue of performance shares
There were no performance shares issued to Directors
or KMP as part of their compensation during the year
ended 30 June 2017.
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
Employee Name
Shares to be issued
(a) (Performance Shares) Each Performance Share is a
No.
$
share in the capital of the Company.
Director – Non-Executive
J Prendergast1
250,000
46,250
Executives
J Ward2
A Kollaras2
57,143
85,714
392,857
10,000
15,000
71,250
1 Pertained to a sign-on bonus of J Prendergast after joining
as a Non-Executive Director of the Company. The allocation
of shares will be subject to shareholder approval at the next
Annual General Meeting.
2 The share entitlement was given as part of their compensation.
(ii) Issue of options
There were no options issued to Directors or KMP as part
of their compensation during the year ended 30 June
2018.
(iii) Issue of performance shares
(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.
There were no performance shares issued to Directors or
KMP as part of their compensation during the year ended
30 June 2018.
(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.
Year Ended 30 June 2017
(i) Issue of ordinary shares
On 25 November 2016 the Company issued 103,913 fully
paid ordinary shares to two new employees as a ‘sign-on’
bonus. A summary of this event is as follows:
Employee Name
Shares issued
(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.
No.
$
(i) (Application to ASX) The Performance Shares will not
Executives
J Ward
A Kollaras
52,631
51,282
103,913
10,000
10,000
20,000
(ii) Issue of options
There were no options issued to Directors or KMP as part
of their compensation during the year ended 30 June
2017.
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.
18
RECCE PHARMACEUTICALS ANNUAL REPORT 2018 (ii) 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.
(k) (No Other Rights) A Performance Share gives the
Holders no rights other than those expressly provided
by these 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) 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).
(ii) 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).
(iii) 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).
(iv) 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) 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.
19
RECCE PHARMACEUTICALS ANNUAL REPORT 2018 DIRECTORS’ REPORT CONTINUED
FOR THE YEAR ENDED 30 JUNE 2018
Details of Performance Shares issued
There were no new performance shares issued for the years ended 30 June 2018 and 2017.
A summary of performance shares issued are as follows:
Name
Directors
G Melrose
M Dilizia
J Graham
Performance Shares
Class A
Class B
Class C
Class D
6,075,000
6,075,000
6,075,000
6,075,000
577,212
745,962
577,212
745,962
577,212
745,962
577,212
745,962
7,566,924
7,566,924
7,566,924
7,566,924
Value per performance share
$0.173
$0.201
$0.111
$0.054
1 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, the calculated value of $0.20 per share was not recognised as it is unlikely the shares will vest.
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
$0.20
$0.30
5 Years
2.18%
Class B
$0.20
N/A
5 Years
2.18%
Class C
$0.20
$0.60
5 Years
2.18%
Class D
$0.20
$1.20
5 Years
2.18%
Number of Initial Performance Shares Issued
8,754,423
8,754,423
8,754,423
8,754,423
Probability of reaching milestone
N/A
0%
N/A
N/A
The Trinomial option pricing model has been used to calculate the value of Class A, Class C and Class D performance
shares.
Equity Instrument Disclosures Relating to KMP
(a) Ordinary Shares
The movement of the numbers of shares in the Company for the year ended 30 June 2018 held by the Directors
of the Company and other KMP of the Group, including their personally related parties, are set out below. There were
no shares granted during the financial year as compensation.
Balance at
1 July 2017
Net Change
Other
Conversion of
Performance
Shares
Share-based
Payment
Balance at
Date of
Resignation
Balance at
30 June 2018
Name
Directors
G Melrose1
30,375,003
M Dilizia
J Graham
2,886,061
3,649,851
J Prendergast
–
Executives
P Williams
J Ward
A Kollaras
281,250
52,631
51,282
37,296,078
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
281,250
–
–
30,375,003
2,886,061
3,649,851
–
–
52,631
51,282
281,250
37,014,828
1 Although G Melrose was entitled to convert 6,075,000 Class A Performance Shares on 16 February 2016 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.
20
RECCE PHARMACEUTICALS ANNUAL REPORT 2018 (b) Performance Shares
The movement of the numbers of performance shares in the Company for the year ended 30 June 2018 held by the
Directors of the Company and other KMP of the Group, including their personally related parties, are set out below.
Balance at
1 July 2017
Granted
Converted to
Shares
Lapsed
Unexercised
Balance at
Date of
Resignation
Balance at
30 June 2018
Name
Directors
G Melrose1
18,225,000
M Dilizia
J Graham
1,731,636
2,237,886
J Prendergast
–
Executives
P Williams2
J Ward
A Kollaras
168,750
–
–
22,363,272
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
168,750
–
–
18,225,000
1,731,636
2,237,886
–
–
–
–
168,750
22,194,522
1 Although G Melrose was entitled to convert 6,075,000 Class A Performance Shares on 16 February 2016 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.
2 Mr Williams performance shares were cancelled following his resignation on 29 November 2017.
Performance Shares Awarded, Vested and Lapsed During the Year
The tables below disclose the number of performance shares granted to KMP as remuneration 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.
Year ended 30 June 2018
Class A Performance Shares
All Class A Performance shares vested and converted to ordinary shares in the financial year ended 30 June 2017 and
30 June 2016.
Performance Shares Outstanding at 30 June 2018
Class B Performance Shares
Year
Granted
Number
Granted
Grant Date
Value Per
Share
Vested
%
Number
of Vested
Shares1
Forfeited
%
Financial
Years in
which Shares
May Vest
Maximum
Value Yet
to Vest
$
Name
Directors
G Melrose
2015
6,075,000
M Dilizia
J Graham
2015
2015
577,212
745,962
7,454,424
$0.20
$0.20
$0.20
–
–
–
–
–
–
–
–
–
–
–
–
1
1
1
1,215,000
115,442
149,192
1,479,634
1 These performance shares may vest in any year up until 19 August 2020.
21
RECCE PHARMACEUTICALS ANNUAL REPORT 2018 DIRECTORS’ REPORT CONTINUED
FOR THE YEAR ENDED 30 JUNE 2018
Class C Performance Shares
Year
Granted
Number
Granted
Grant Date
Value Per
Share
Vested
%
Number
of Vested
Shares
Forfeited
%
Financial
Years in
which Shares
May Vest
Maximum
Value Yet
to Vest
$
Name
Directors
G Melrose
2015
6,075,000
M Dilizia
J Graham
2015
2015
577,212
745,962
7,454,424
$0.111
$0.111
$0.111
–
–
–
–
–
–
–
–
–
–
–
–
1
1
1
674,325
64,071
82,802
821,198
1 These performance shares may vest in any year up until 20 August 2020.
Class D Performance Shares
Year
Granted
Number
Granted
Grant Date
Value Per
Share
Vested
%
Number
of Vested
Shares
Forfeited
%
Financial
Years in
which Shares
May Vest
Maximum
Value Yet
to Vest
$
Name
Directors
G Melrose
2015
6,075,000
M Dilizia
J Graham
2015
2015
577,212
745,962
7,454,424
$0.054
$0.054
$0.054
–
–
–
–
–
–
–
–
–
–
–
–
2
2
2
328,050
31,169
40,282
399,501
2 These performance shares may vest in any year up until 20 August 2020.
The share based payments expenses on the Class C and D Performance shares were recognised during the year ended
30 June 2016.
(E) Other Transactions with KMP
During the financial year, 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 or other transactions at the end of the financial year to Directors and other
KMP and their related parties of the Company or the Group.
Two strikes Rule in Respect to the Adoption of the Remuneration Report
The Corporations Act 2001 includes a ‘two strikes’ rule with regard to the adoption of Remuneration Reports. The
‘two strikes’ rule provides that if 25% or more of the votes cast on the resolution to adopt the Remuneration Report at
two consecutive Annual General Meetings are against the resolution, the Company must at the later Annual General
Meeting put a resolution to the shareholders proposing to convene another shareholder meeting to consider the spill of
the Board (‘Spill Resolution’).
The resolution to adopt the Company’s Remuneration Report at two consecutive Annual General Meetings (being
2016 and 2017) had 25% or more of the votes cast against the resolution, the Spill Resolution was put to shareholders
at the Company’s 2017 Annual General Meeting and was passed. Accordingly, and as required by Section 250V of
Corporations Act 2001, this meeting of shareholders, known as a ‘Spill Meeting’ was held on 16 February 2018 which
was within 90 days after the 2017 Annual General Meeting.
As required by Corporations Act 2001, Ms Dilizia and Mr Graham ceased to hold office at the end of the Spill Meeting
but were eligible for re-election.
There is no voting exclusion applicable to the Resolutions.
Under the Corporations Act 2001, the Company must have a minimum of three Directors at all times. The Corporations
Act 2001, provides guidance in circumstances where either or both of the Directors are not re-elected by way of
ordinary resolution, then they will be taken to have been appointed as Directors by resolutions passed at the Spill
Meeting so that the Company maintains the required three Directors.
22
RECCE PHARMACEUTICALS ANNUAL REPORT 2018 For the purposes of determining the length of time in office for future retirements by rotation, each Director who
is re-elected at the Spill Meeting is considered to have been in office from the time of their previous rotation.
Both Ms Dilizia and Mr Graham were unanimously re-elected as Directors of the Company at the Spill Meeting
on 16 February 2018.
END OF REMUNERATION REPORT (AUDITED)
Meetings of Directors
During the financial year, 8 meetings of Directors (including committees of Directors) were held. Attendances by each
Director during the year were as follows:
Committee Meetings
Directors’ Meetings
Audit & Risk
Management Committee
Nomination &
Remuneration Committee
A
6
6
6
2
B
6
6
6
2
A
–
1
1
1
B
–
0
1
1
A
–
1
1
1
B
–
0
1
1
Dr Graham Melrose
Ms Michele Dilizia
Mr James Graham
Dr John Prendergast
A = Number eligible to attend
B = Number attended
Non-Audit Services
During the year no payments were made to BDO Audit (WA) Pty Ltd, the auditor of the Group, for non-audit related
services.
Corporate Governance
In recognising the need for the highest standards of corporate behaviour and accountability, the Directors of the
Company support the principal of corporate governance. The Company’s corporate governance statement is available
on the Company’s website: www.recce.com.au.
Rounding of Amounts
In accordance with ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191, the amounts
in the Directors’ Report have been rounded to the nearest dollar, unless otherwise stated.
Auditor’s Independence Declaration
The lead auditor’s independence declaration for the year ended 30 June 2018 has been received and can be found
on page 24.
Signed in accordance with a resolution of the Board of Directors.
Dr Graham Melrose
Executive Chairman
28 September, 2018
23
RECCE PHARMACEUTICALS ANNUAL REPORT 2018 AUDITOR’S INDEPENDENCE DECLARATION
Tel: +61 8 6382 4600
Fax: +61 8 6382 4601
www.bdo.com.au
38 Station Street
Subiaco, WA 6008
PO Box 700 West Perth WA 6872
Australia
DECLARATION OF INDEPENDENCE BY MATTHEW CUTT TO THE DIRECTORS OF RECCE
PHARMACEUTICALS LTD
As lead auditor of Recce Pharmaceuticals Ltd for the year ended 30 June 2018, I declare that, to the
best of my knowledge and belief, there have been:
1. No contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
2. No contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Recce Pharmaceuticals Ltd and the entities it controlled during the
period.
Matthew Cutt
Director
BDO Audit (WA) Pty Ltd
Perth, 28 September 2018
BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050 110 275,
an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited by guarantee, and
form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation other than for
the acts or omissions of financial services licensees
24
RECCE PHARMACEUTICALS ANNUAL REPORT 2018 CORPORATE GOVERNANCE STATEMENT
This corporate governance statement sets out Recce
Pharmaceuticals Limited’s (Company) current compliance
with the ASX Corporate Governance Council’s Corporate
Governance Principles and Recommendations (ASX
Principles and Recommendations). The ASX Principles
and Recommendations are not mandatory. However, this
corporate governance statement discloses the extent to
which the Company has followed the ASX Principles and
Recommendations. This corporate governance statement
is current as at 27 September 2018 and has been
approved by the Board of the Company (Board).
ASX PRINCIPLES AND RECOMMENDATIONS
COMPLY
(Yes/No)
EXPLANATION
1: Lay solid foundations for management and oversight
1.1 A listed entity should have and disclose a
YES
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.
1.2 A listed entity should:
(a) undertake appropriate checks before
YES
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 in its possession 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 at https://recce.com.au/
index.php/company/corporate-governance.
(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.
(b) All material information relevant to the
decision on whether or not to re-elect Dr John
Prendergast (and any other potential Directors,
as the case may be), including information
relating to his 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 20 November 2018.
25
RECCE PHARMACEUTICALS ANNUAL REPORT 2018
CORPORATE GOVERNANCE STATEMENT CONTINUED
ASX PRINCIPLES AND RECOMMENDATIONS
1.3 A listed entity should have a written
agreement with each Director and Senior
Executive setting out the terms of their
appointment.
COMPLY
(Yes/No)
YES
EXPLANATION
The Company has written agreements with all
Directors and Senior Executives which sets out
the terms of their appointment.
1.4 The Company Secretary of a listed entity
YES
should be accountable directly to the Board,
through the Chair, on all matters to do with the
proper functioning of the Board.
The Company Secretary has been appointed
by and is responsible to the Board through the
Chairman. The Company Secretary is accessible
to all Directors.
1.5 A listed entity should:
(a) Have a diversity policy which includes
YES
(a) The Company has adopted a Diversity Policy
requirements for the Board:
(1) to set measurable objectives for achieving
gender diversity; and
(2) to assess annually both the objectives and
the entity’s progress in achieving them;
(b) Disclose that policy or a summary of it; and
YES
which complies with the guidelines prescribed
by the ASX Corporate Governance Council,
including:
(1) the Diversity Policy provides a framework
for the Company to set and achieve
measurable objectives that encompass
gender equality.
(c) Disclose as at the end of each reporting
(2) the Diversity Policy provides for the
period:
(1) 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
(2) 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.
YES
YES
N/A
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 at https://recce.com.au/
index.php/company/corporate-governance.
(c) The Company strives to achieve the
measurable objectives for achieving gender
diversity as set out in the Diversity Policy.
As at 30 June 2018, 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.
• 75% of the Company’s Board were male and
25% were female;
• 100% of the Company’s Senior Executives
were male (excluding members of the Board)
22% of the Group’s entire workforce (including
Board members) were female and 78% were
male.
26
RECCE PHARMACEUTICALS ANNUAL REPORT 2018
ASX PRINCIPLES AND RECOMMENDATIONS
COMPLY
(Yes/No)
EXPLANATION
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
YES
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 at https://recce.com.au/
index.php/company/corporate-governance.
(b) During the period to 30 June 2018, the
Nomination and Remuneration Committee
did not undertake a performance evaluation
of its board or its individual Directors as the
Nomination and Remuneration Committee was
only re-established following the appointment
of a Non-Executive Director to the Board. The
Company expects that the Nomination and
Remuneration Committee will undertake such
an evaluation during the 18/19 financial year.
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
YES
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) During the period to 30 June 2018, the
Nomination and Remuneration Committee
did not undertake a performance evaluation
of Senior Executives as the Nomination and
Remuneration Committee was only re-
established following the appointment of a
Non-Executive Director to the Board. The
Company expects that the Nomination and
Remuneration Committee will undertake such
an evaluation during the 18/19 financial year.
27
RECCE PHARMACEUTICALS ANNUAL REPORT 2018
CORPORATE GOVERNANCE STATEMENT CONTINUED
ASX PRINCIPLES AND RECOMMENDATIONS
COMPLY
(Yes/No)
EXPLANATION
2: Structure the board to add value
2.1 The board of a listed entity should:
(a) have a nomination committee which:
(a) Following the appointment of Dr John
(1) has at least three members, a majority
of whom are independent directors; and
(2) is chaired by an Independent Director,
and disclose:
(3) the charter of the committee;
(4) the members of the committee; and
(5) 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
NO
YES
YES
YES
YES
(b) If it does not have a nomination committee,
N/A
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 to enable it to discharge its duties
and responsibilities effectively.
Prendergast to the Board during the period, the
Company re-established the Nomination and
Remuneration Committee with Dr Prendergast
as Chair of the Committee. The Committee has
three members, but due to the current size
and structure of the Board of the Company,
the majority of the committee members are
not Independent. The times and attendance
at each committee meeting is disclosed in
section 23 of the Directors’ Report. A copy of
the Nomination and Remuneration Committee
Charter is available on the Company's website
at https://recce.com.au/index.php/company/
corporate-governance.
2.2 A listed entity should have and disclose a
YES
Board skills matrix setting out the mix of skills
and diversity that the Board currently has or
is looking to achieve in its membership.
The Company has a skills matrix which is disclosed
on the Company's website at https://recce.com.au/
index.php/company/corporate-governance.
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,
YES
YES
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) Page 10 – 12 of the Directors Report discloses
which Directors were considered independent
during the year.
(b) Dr John Prendergast, the only Director of
the Company considered independent, has
not had an interest, position, association or
relationship of the type described in Box 2.3 of
the ASX Corporate Governance Principles and
recommendations (3rd Edition).
(c) The length of service of each Director is as
follows:
Mr Graham and Ms Dilizia were appointed as
Directors on 23 June 2015.
Dr Melrose was appointed a Director of the
Company on 11 April 2007.
Dr John Prendergast was appointed as a
Non- Executive Director of the Company on
24 April 2018.
28
RECCE PHARMACEUTICALS ANNUAL REPORT 2018
ASX PRINCIPLES AND RECOMMENDATIONS
COMPLY
(Yes/No)
EXPLANATION
2.4 A majority of the Board of a listed entity
NO
should be Independent Directors.
2.5 The Chair of the Board of a listed entity should
NO
be an Independent Director and, in particular,
should not be the same person as the CEO of
the entity.
The Board Charter requires that where practical
the majority of the Board will be independent. The
Board currently comprises a total of four Directors,
of whom one is considered to be independent,
being Dr John Prendergast.
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, Mr Graham and
Dr Prendergast, mean that the Board is
appropriately skilled at this stage, to further
the progress and development of the
Company. The Company is seeking to appoint
Independent Directors in the future.
The Board does not have an independent Chair
because as founder of Recce and lead-inventor
of RECCE® 327, 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.
2.6 A listed entity should have a program for
inducting new Directors and providing
appropriate professional development
opportunities for Directors to develop and
maintain the skills and knowledge needed to
perform their role as Directors effectively.
YES
The Nomination and Remuneration Committee
is responsible to the Board 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.
29
RECCE PHARMACEUTICALS ANNUAL REPORT 2018 CORPORATE GOVERNANCE STATEMENT CONTINUED
ASX PRINCIPLES AND RECOMMENDATIONS
COMPLY
(Yes/No)
EXPLANATION
3: Promote ethical and responsible decision-making
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.
YES
YES
(a) The Company has a Code of Conduct – the
Company’s Obligations to Stakeholders that
applies to all.
(b) The Company’s Code of Conduct – the
Company’s Obligations to Stakeholders is
available on the Company’s website at
https://recce.com.au/index.php/company/
corporate-governance.
Following the appointment of Dr John Prendergast
to the Board during the period, the Company
re-established the Audit and Risk Management
Committee with Dr Prendergast, an Independent
Director of the Company, as Chair of the
Committee. The Committee has three members,
but due to the current size and structure of
the Board of the Company, the majority of the
committee members are not independent. The
times and attendance at each committee meeting
is disclosed in section 23 of the Directors’ Report.
A copy of the Audit and Risk Management
Committee Charter is available on the Company's
website at https://recce.com.au/index.php/
company/corporate-governance.
Prior to the execution of the Financial
Statements of the Company, the Company’s
Executive Director 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.
4: Safeguard integrity in financial reporting
4.1 The Board of a listed entity should:
(a) have an audit committee which:
(1) has at least three members, all of whom
NO
are Non-Executive Directors and a majority
of whom are Independent Directors; and
(2) is chaired by an Independent Director,
who is not the Chair of the Board,
and disclose:
(3) the charter of the committee;
(4) the relevant qualifications and experience
of the members of the committee; and
(5) 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
YES
YES
YES
YES
(b) If it does not have an audit committee,
N/A
disclose that fact and the processes it employs
that independently verify and safeguard
the integrity of its corporate reporting,
including the processes for the appointment
and removal of the external auditor and the
rotation of the audit engagement partner.
4.2 The board of a listed entity should, before it
YES
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.
30
RECCE PHARMACEUTICALS ANNUAL REPORT 2018
ASX PRINCIPLES AND RECOMMENDATIONS
COMPLY
(Yes/No)
EXPLANATION
4.3 A listed entity that has an AGM should ensure
YES
that its external auditor attends its AGM and
is available to answer questions from security
holders relevant to the audit.
At the last AGM of the company, held on
21 November 2017 the external auditor of the
Company attended this meeting and it is expected
that the Company’s external auditor will attend
future AGMs and is available to answer questions
from security holders relevant to the audit.
5: Make timely and balanced disclosure
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.
YES
6: Respect the rights of shareholders
6.1 A listed entity should provide information
YES
about itself and its governance to investors via
its website.
6.2 A listed entity should design and implement an
investor relations program to facilitate effective
two-way communication with investors.
YES
6.3 A listed entity should disclose the policies
YES
and processes it has in place to facilitate
and encourage participation at meetings of
security holders.
YES
(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 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 at https://recce.com.au/
index.php/company/corporate-governance.
Shareholders can access information about
the Company and its governance (including its
Constitution and adopted governance policies)
from the Company's website at https://recce.com.
au/index.php/company/corporate-governance.
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 at https://recce.com.au/
index.php/company/corporate-governance.
Security holders have the ability to communicate
with Directors through various means including:
• having the opportunity to ask questions of
Directors at all general meetings;
• the presence of the Auditor at AGMs to take
shareholder questions on any issue relevant
to their capacity as Auditor; and
• the Company having Directors available to answer
shareholder questions submitted by telephone,
email and other means (where appropriate).
Traditionally, the key forum for two-way
communication between the Company and its
Security holders is its AGM.
31
RECCE PHARMACEUTICALS ANNUAL REPORT 2018
CORPORATE GOVERNANCE STATEMENT CONTINUED
ASX PRINCIPLES AND RECOMMENDATIONS
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.
COMPLY
(Yes/No)
YES
EXPLANATION
Security holders can register with the Company to
receive email notifications when an announcement
is made by the Company to the ASX.
Security holders can also elect to receive electronic
communications via the Company’s registry,
Automic Registry Services.
7: Recognise and manage risk
7.1 The Board of a listed entity should:
(a) have a committee or committees to oversee
risk, each of which:
(1) has at least three members, a majority
of whom are Independent Directors; and
(2) is chaired by an Independent Director,
and disclose:
(3) the charter of the committee;
(4) the members of the committee; and
(5) 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
NO
YES
YES
YES
YES
Following the appointment of Dr John Prendergast
to the Board during the period, the Company
re-established the Audit and Risk Management
Committee with Dr Prendergast, an Independent
Director of the Company, as Chair of the
Committee. The Committee has three members,
but due to the current size and structure of
the Board of the Company, the majority of the
committee members are not independent. The
times and attendance at each committee meeting
is disclosed in section 23 of the Directors’ Report.
A copy of the Audit and Risk Management
Committee Charter is available on the
Company's website at https://recce.com.au/index.
php/company/corporate-governance.
(b) If it does not have a risk committee or
N/A
committees that satisfy (a) above, disclose
that fact and the processes it employs for
overseeing the entity’s risk management
framework.
32
RECCE PHARMACEUTICALS ANNUAL REPORT 2018
ASX PRINCIPLES AND RECOMMENDATIONS
COMPLY
(Yes/No)
EXPLANATION
7.2 The Board or a committee of the board should:
(a) Review the entity’s risk management
YES
framework 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
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.
YES
7.3 A listed entity should disclose:
(a) If it has an internal audit function, how
N/A
the function is structured and what role it
performs; or
(b) If it does not 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.
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. At every Board meeting the
Directors review the Company’s Risk Register
and related mitigation strategies.
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
at https://recce.com.au/index.php/company/
corporate-governance.
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. A copy
of the Risk Management Policy is available on
the Company's website at https://recce.com.
au/index.php/company/corporate-governance.
At every Board meeting the directors review
the Company’s Risk Register and related
mitigation strategies.
(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. Throughout
the period, the Board of the Company and
the Audit and Risk Management Committee
the Board have been reviewing the reports
prepared by management in relation to the
Company’s risk profile.
33
RECCE PHARMACEUTICALS ANNUAL REPORT 2018
CORPORATE GOVERNANCE STATEMENT CONTINUED
ASX PRINCIPLES AND RECOMMENDATIONS
COMPLY
(Yes/No)
EXPLANATION
7.4 A listed entity should disclose whether,
YES
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.
All material risks were announced to the market,
in accordance with its continuous and other
disclosure obligations pursuant to the ASX Listing
Rules and the Corporations Act 2001.
Also, 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
8: Remunerate fairly and responsibly
8.1
(a) The Board of a listed entity should have a
remuneration committee which:
(1) has at least three members, a majority
of whom are Independent Directors; and
(2) is chaired by an independent director,
and disclose;
(3) the charter of the committee;
(4) the members of the committee; and
(5) 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
NO
YES
YES
YES
YES
Following the appointment of Dr John Prendergast
to the board during the period, the Company
re-established the Nomination and Remuneration
Committee with Dr Prendergast, an Independent
Director of the Company, as Chair of the
Committee. The Committee has three members,
but due to the current size and structure of
the Board of the Company, the majority of the
committee members are not independent. The
times and attendance at each committee meeting
is disclosed in section 23 of the Directors’ Report.
A copy of the Nomination and Remuneration
Committee Charter is available on the Company's
website at https://recce.com.au/index.php/
company/corporate-governance.
(b) if it does not have a remuneration committee,
N/A
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.
8.2 A listed entity should separately disclose
its policies and practices regarding the
Remuneration of Non-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 at the level and composition of their
remuneration.
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 Company’s
Annual Report.
34
RECCE PHARMACEUTICALS ANNUAL REPORT 2018
ASX PRINCIPLES AND RECOMMENDATIONS
COMPLY
(Yes/No)
EXPLANATION
8.3 A listed entity which has an equity-based
remuneration scheme should:
(a) Have a policy on whether participants are
YES
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 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
at https://recce.com.au/index.php/company/
corporate-governance.
35
RECCE PHARMACEUTICALS ANNUAL REPORT 2018
CONSOLIDATED STATEMENT OF
PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2018
Revenue
Other income
Expenses
Laboratory expenses
Employee benefits expenses
Share based payments expense
Depreciation and amortisation expenses
Net foreign exchange gains/(losses)
Travel expenses
Patent related costs
Rental expenses
Finance costs
Other expenses
Loss before income tax
Income tax expense
Loss for the year
Other comprehensive income for the year
Total comprehensive loss for the year
Loss per share:
Basic loss per share for the year
Diluted loss per share for the period
Dividends per share for the year
Note
5
5
6
20
6
6
8
9
9
2018
$
–
1,300,533
(372,171)
(1,085,550)
(71,250)
(53,119)
–
(185,051)
(65,145)
(179,979)
(54,306)
(908,250)
(2,974,821)
2017
$
–
189,921
(999,357)
(1,344,960)
(13,096)
(25,514)
(28,416)
(48,915)
(60,635)
(181,977)
(2,406)
(510,149)
(3,215,425)
(1,674,288)
(3,025,504)
–
–
(1,674,288)
(3,025,504)
–
–
(1,674,288)
(3,025,504)
Cents
Cents
(1.98)
(1.98)
–
(3.95)
(3.95)
–
The accompanying notes form part of these consolidated financial statements.
36
RECCE PHARMACEUTICALS ANNUAL REPORT 2018
CONSOLIDATED STATEMENT OF
FINANCIAL POSITION
AS AT 30 JUNE 2018
ASSETS
CURRENT ASSETS
Cash and cash equivalents
Trade and other receivables
Other current assets
TOTAL CURRENT ASSETS
NON-CURRENT ASSETS
Plant and equipment
TOTAL NON-CURRENT ASSETS
TOTAL ASSETS
LIABILITIES
CURRENT LIABILITIES
Trade and other payables
Financial liabilities
Provisions for employee benefits
TOTAL CURRENT LIABILITIES
NON-CURRENT LIABILITIES
Financial liabilities
Provisions for employee benefits
TOTAL NON-CURRENT LIABILITIES
TOTAL LIABILITIES
NET ASSETS
EQUITY
Share capital
Reserves
Accumulated losses
TOTAL EQUITY
Note
30 June 2018
$
30 June 2017
$
10
11
12
13
14
15
14
15
16
17
679,719
20,957
7,821
708,497
435,240
435,240
1,090,438
60,185
3,365
1,153,988
310,598
310,598
1,143,737
1,464,586
229,404
2,859
184,128
416,391
–
32,431
32,431
448,822
694,915
530,475
–
159,820
690,295
161,289
22,858
184,147
874,442
590,144
10,031,509
1,515,731
(10,852,325)
8,235,009
1,533,172
(9,178,037)
694,915
590,144
The accompanying notes form part of these consolidated financial statements.
37
RECCE PHARMACEUTICALS ANNUAL REPORT 2018
CONSOLIDATED STATEMENT OF
CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2018
BALANCE AT 1 JULY 2016
7,418,863
2,247,531
(6,152,533)
3,513,861
Share
Capital
$
Reserves
$
Accumulated
Losses
$
Total
$
COMPREHENSIVE INCOME:
Loss for the year
Other comprehensive income
TRANSACTIONS WITH OWNERS IN THEIR
CAPACITY AS OWNERS:
Conversion of performance shares
Issuance of shares
Option issued related to convertible notes
Share based payments
–
–
–
–
(3,025,504)
(3,025,504)
–
–
7,418,863
2,247,531
(9,178,037)
488,357
796,146
20,000
–
–
(796,146)
–
88,691
(6,904)
816,146
(714,359)
–
–
–
–
–
–
20,000
88,691
(6,904)
101,787
BALANCE AT 30 JUNE 2017
8,235,009
1 ,533,172
(9,178,037)
590,144
BALANCE AT 1 JULY 2017
8,235,009
1,533,172
(9,178,037)
590,144
COMPREHENSIVE INCOME:
Loss for the year
Other comprehensive income
TRANSACTIONS WITH OWNERS IN THEIR
CAPACITY AS OWNERS:
Issuance of shares
Reversal of option reserve
Share-based payments
–
–
–
1,796,500
–
–
1,796,500
–
–
–
–
(88,691)
71,250
(17,441)
(1,674,288)
(1,674,288)
–
–
(1,674,288)
(1,674,288)
–
–
–
–
1,796,500
(88,691)
71,250
1,779,059
BALANCE AT 30 JUNE 2018
10,031,509
1 ,5315,731
(10,852,325)
694,915
The accompanying notes form part of these consolidated financial statements.
38
RECCE PHARMACEUTICALS ANNUAL REPORT 2018
CONSOLIDATED STATEMENT OF
CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2018
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from Australian Taxation Office
Payments to suppliers and employees
Interest received
Interest and other costs of finance paid
Note
2018
$
2017
$
1,288,518
139,295
(3,028,564)
(2,705,298)
12,015
(4,286)
70,542
(2,406)
NET CASH USED IN OPERATING ACTIVITIES
18(a)
(1,732,317)
(2,497,867)
CASH FLOWS FROM INVESTING ACTIVITIES
Payments for plant and equipment
NET CASH USED IN INVESTING ACTIVITIES
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings
Repayments of borrowings
Advances from a shareholder
Proceeds from issue of shares (net of costs)
NET CASH PROVIDED BY FINANCING ACTIVITIES
(177,761)
(177,761)
(246,079)
(246,079)
34,310
(31,451)
50,000
1,446,500
1,499,359
249,980
(6,978)
–
–
243,002
Net decrease in cash and cash equivalents held
(410,719)
(2,500,944)
Cash and cash equivalent at the beginning of the year
1,090,438
3,591,382
CASH AND CASH EQUIVALENTS AT END OF THE YEAR
10
679,719
1,090,438
NON-CASH INVESTING AND FINANCING ACTIVITIES
Investing activities
Financing activities
18(b)
18(b)
–
300,000
300,000
–
816,146
816,146
The accompanying notes form part of these consolidated financial statements.
39
RECCE PHARMACEUTICALS ANNUAL REPORT 2018
NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
1. Corporate Information
The consolidated financial statements of Recce
Pharmaceuticals Ltd (formerly Recce Ltd) (‘the
Company’) and together with its controlled entities
(‘the Group’) for the year ended 30 June 2018 were
authorised for issue in accordance with a resolution
of the Directors on 28 September 2018.
The Company is a company limited by shares
incorporated in Australia whose shares are publicly
traded on the Australian Securities Exchange (ASX).
The nature of operations and principal activities of
the Group are disclosed in the Directors' Report.
2. Significant Accounting Policies
(a) Basis of Preparation of the Financial Report
The consolidated 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 comprise the consolidated
financial statements of the Group. For the purposes
of preparing the consolidated financial statements,
the Group is a for profit entity.
Accounting Standards include Australian Accounting
Standards. Compliance with Australian Accounting
Standards ensures that the consolidated financial
statements and notes of the Company and the
Group comply with International Financial Reporting
Standards (IFRS).
The consolidated financial statements have been
prepared in accordance with the significant accounting
policies disclosed below as adopted by the Group. 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.
Historical cost is generally based on the fair values of the
consideration given in exchange for goods and services.
All amounts are presented in Australian dollars, unless
otherwise stated.
(b) Basis of Consolidation
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 the Group 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) Foreign Currency Translation
The individual financial statements of each Group entity
are presented in the currency of the primary economic
environment in which the entity operates (its functional
currency). For the purpose of the consolidated financial
statements, the results and financial position of the Group
are expressed in Australian dollars, which is the functional
currency of the Company and the presentation currency
for the consolidated financial statements.
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.
The functional currency of the subsidiaries is United
States Dollars 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 Pharmaceuticals 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
differences 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.
(d) 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.
40
RECCE PHARMACEUTICALS ANNUAL REPORT 2018 Interest Income
(f) Impairment of Assets
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.
Research and Development (R&D) Tax Incentive
R&D tax incentive from the government are recognised
when it is received or when the right to receive payment
is established.
(e) 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.
The Company and its wholly-owned subsidiaries have
implemented the tax consolidation legislation for the
whole of the financial year. The Company 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.
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.
(g) 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.
(h) Fair Values
Fair values may be used for financial asset and liability
measurement as 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.
(i) Trade and Other Receivables
Trade and other 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.
41
RECCE PHARMACEUTICALS ANNUAL REPORT 2018 NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
(j) Plant and Equipment
All 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.
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.
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:
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.
– Certain laboratory machinery
and equipment
– Office improvements
10 – 15 years
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
– Laboratory machinery and
equipment
8% – 40%
– Office furniture and equipment
5% – 33%
– Computer equipment
– Library and website costs
33% – 67%
20% – 40%
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.
(k) Research Expenditure
Research costs are expensed as incurred.
(l) 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.
(m) 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.
(n) 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.
(o) 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 benefits 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. Consideration is given to
expected future salaries and wages levels, experience of
employee departures and periods of service. Expected
future payments are discounted using Australian
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.
42
RECCE PHARMACEUTICALS ANNUAL REPORT 2018 (p) Contributed Equity
(t) Leases
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.
(q) 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’).
(r) Earnings/(Loss) Per Share
Basic earnings/(loss) per share
Basic earnings/(loss) per share is calculated by dividing
the profit/(loss) attributable to owners of the Company,
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/(loss) per share
Earnings/(loss) used to calculate diluted earnings/(loss)
per share are calculated by adjusting the basic earnings/
(loss) 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.
(s) Goods and Services Tax (GST)
Revenues and 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.
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. 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.
(u) Convertible Notes and Embedded Derivatives
A convertible note was issued by the Group as part of
a share purchase agreement, which includes embedded
derivatives (option to convert the security to variable
number of shares in the Group). This convertible note
is initially recognised as financial liabilities at fair value.
On initial recognition, the fair value of the convertible
note and value of the equity components (options issued
at commencement of facility) will equate to the proceeds
received and subsequently the convertible note is
measured at fair value. The movements are recognised
on the profit or loss as finance costs.
(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 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.
43
RECCE PHARMACEUTICALS ANNUAL REPORT 2018 NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
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.
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) Amendments to Accounting Standards and the
New Interpretation that are Mandatorily Effective
for the Current Year
The following new and revised accounting standards
that are mandatorily effective for the current year have
been adopted by the Group:
– AASB 2016-2 Amendments to Australian Accounting
Standards – Disclosure Initiative: Amendments to
AASB 107; and
– AASB 2017 2 Amendments to Australian Accounting
Standards – Further Annual Improvements 2014 2016
Cycle.
Adoption of the above new and revised accounting
standards had no material impact on the Group.
(x) Accounting Standards Issued But Not Yet Effective
The AASB has issued a number of new and amended
Accounting Standards and Interpretations that have
mandatory application dates for future reporting periods,
some of which are relevant to the Group. The Group
has decided not to early adopt any of these new and
amended pronouncements.
At the date of authorisation of the consolidated financial
statements, the Standards and Interpretations that were
issued but not yet effective that are applicable to the
Group is summarised below. Their adoption may affect
the accounting for future transactions or arrangements.
– AASB 9 Financial Instruments, AASB 2014-7
Amendments to Australian Accounting Standards
arising from AASB 9, and AASB 2014-8 Amendments
to Australian Accounting Standards arising from
AASB 9 (effective date to the Group on financial
year 2019).
These Standards will replace AASB 139: Financial
Instruments: Recognition and Measurement. The key
changes that may affect the Group on initial application
of AASB 9 and associated amending Standards include:
• simplifying the general classifications of financial
assets into those carried at amortised cost and
those carried at fair value;
• permitting entities to irrevocably elect on initial
recognition to present gains and losses on an equity
instrument that is not held for trading in other
comprehensive income (OCI);
• requiring financial assets with embedded derivatives
to be measured at fair value through profit or loss
and not permitting embedded derivatives to be
separated;
• requiring an entity that chooses to measure a
financial liability at fair value to present the portion
of the change in its fair value due to changes in the
entity's own credit risk in OCI, except when it would
create an 'accounting mismatch';
• introducing a new model for hedge accounting that
permits greater flexibility in the ability to hedge risk,
particularly with respect to non-financial items; and
• requiring impairment of financial assets carried at
amortised cost to be based on an expected loss
approach.
The Group is yet to undertake a detailed assessment of
the impact of AASB 9. However, based on the Group's
preliminary assessment, the Standard is not expected to
have a material impact on the transactions and balances
recognised in the consolidated financial statements when
it is first adopted for the year ending 30 June 2019.
– AASB 16: Leases (effective date to the Group on
financial year 2020).
AASB 16 will replace AASB 117: Leases and introduces a
single lessee accounting model that will require a lessee
to recognise right-of-use assets and lease liabilities for
all leases with a term of more than 12 months, unless
the underlying asset is of low value. Right-of-use
assets are initially measured at their cost and lease
liabilities are initially measured on a present value basis.
Subsequent to initial recognition:
• right-of-use assets are accounted for on a similar
basis to non-financial assets, whereby the right-of-
use asset is accounted for in accordance with a cost
model unless the underlying asset is accounted for
on a revaluation basis, in which case if the underlying
asset is:
(a) investment property, the lessee applies the fair
value model in AASB 140: Investment Property
to the right-of-use asset; or
44
RECCE PHARMACEUTICALS ANNUAL REPORT 2018
(b) property, plant or equipment, the lessee can
Share-based payment transactions
elect to apply the revaluation model in AASB 116:
Property, Plant and Equipment to all of the right-
of-use assets that relate to that class of property,
plant and equipment; and
• lease liabilities are accounted for on a similar basis
as other financial liabilities, whereby interest expense
is recognised in respect of the liability and the
carrying amount of the liability is reduced to
reflect lease payments made.
AASB 16 substantially carries forward the lessor
accounting requirements in AASB 117. Accordingly, under
AASB 16 a lessor would continue to classify its leases as
operating leases or finance leases subject to whether the
lease transfers to the lessee substantially all of the risks
and rewards incidental to ownership of the underlying
asset, and would account for each type of lease in a
manner consistent with the current approach under
AASB 117.
The Group is yet to undertake a detailed assessment of
the impact of AASB 16. However, based on the Group'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.
(y) Rounding of Amounts to Nearest Dollar
In accordance with ASIC Corporations (Rounding of
Financial/Directors' Reports) Instrument 2016/191, the
amounts in the consolidated financial statements have
been rounded to the nearest dollar.
(z) Critical Accounting Judgements and Key Sources
of Estimation Uncertainty
The preparation of the consolidated financial statements
requires management to make judgements, estimates
and assumptions that affect the reported amounts in
the consolidated 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.
The Group 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 20.
Impairment of non-financial assets
The Group assesses impairment of non-financial assets
at each reporting date by evaluating conditions specific
to the Group 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.
Share purchase facility carried at fair value through profit
or loss and convertible notes carried at fair value
On initial recognition the value of the convertible note
was calculated based on the difference between the
proceeds received under the share purchase agreement
and the fair value of the equity component (being the
options issued at the commencement of the facility).
The Options were valued using a Black Scholes option
pricing model which takes into account the share price
of the group and share price volatility (see details in Note
14). Subsequently the fair value of the convertible note is
accreted up to its face value by taking into account the
discount on the conversion of the shares in the future
and share price, see details of the term of the convertible
security and funding facility in Note 14 and its fair value
disclosures in Note 19.
The other components within the instruments (which
are the derivatives relating to the collateral shares and
the conversion option) were assessed to be nil at
reporting date.
45
RECCE PHARMACEUTICALS ANNUAL REPORT 2018 NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
3. Going Concern
For the year ended 30 June 2018, the Group recorded
a loss of $1,674,288 and had net cash outflows from
operating activities of $1,732,317. The ability of the
Group to continue as a going concern and being able to
continue to fund its operating activities is dependent on
securing additional funding through a share placement
to new or existing investors together with receiving a
substantially increased R&D tax rebate.
These conditions indicate a material uncertainty that
may cast significant doubt about the Group’s ability to
continue as a going concern and, therefore, that it may
be unable to realise its assets and discharge its liabilities
in the normal course of business.
The Directors have budgeted on a conservative basis and
believe there are sufficient funds to meet the Group’s
working capital requirements as at the date of this report.
Based on the success of current progress in the Group,
it is considered that re-financing through equity funds
would be well supported. Subsequent to period end the
Group expects to receive further funds via both equity
and R&D tax rebates.
The financial statements have been prepared on the basis
that the Group is a going concern, which contemplates
the continuity of normal business activity, realisation of
assets and settlement of liabilities in the normal course
of business. This is due to the Group continuing to receive
its Australian R&D tax rebates for R&D expenditure in
Australia and overseas incurred by the Group as awarded
by AusIndustry, a division of the Australian Government's
Department of Industry, Innovation and Science and
advance payments of its R&D tax incentive via the
Group's agreement with Radium Capital and the ability
of the company to raise funds through equity.
Should the Group not be able to continue as a going
concern, it may be required to realise its assets and
discharge its liabilities other than in the ordinary course
of business, and at amounts that differ from those
stated in the financial statements and that the financial
report does not include any adjustments relating to
the recoverability and classification of recorded asset
amounts or liabilities that might be necessary should
the Group not continue as a going concern.
46
RECCE PHARMACEUTICALS ANNUAL REPORT 2018 4. Segment Reporting
(a) Reportable segments
The Directors have considered the requirements of AASB 8 Operating Segments and the internal reports that are
reviewed by the chief operating decision maker (the Board of Directors) in allocating resources and have concluded
that at this time there are no separate identifiable segments as the Group operates in only one business segment being
research and development of pharmaceutical drugs. However, the Group operates in two geographic segment being
Australia and USA.
(b) Segment results
The following is an analysis of the Group’s results by reportable segments:
Australia
USA
Central Administration
Segment revenue and other
income for the year
Segment loss after tax
for the year
2018
$
876,275
412,243
12,015
1,300,533
2017
$
139,295
–
50,626
189,921
2018
$
(145,230)
(68,323)
2017
$
(645,385)
(996,913)
(1,460,735)
(1,383,206)
(1,674,288)
(3,025,504)
The accounting policies of the reportable segments are the same as the Group’s accounting policies described in
Note 2. Segment loss represents the loss after tax incurred by each segment. This is the measure reported to the
Board of Directors for the purposes of resource allocation and assessment of segment performance.
(c) Segment assets and liabilities
Australia
USA
Central Administration
(d) Segment net assets
Australia
USA
Central Administration
Segment assets
at end of the financial year
Segment liabilities
at end of the financial year
2018
$
2017
$
384,503
220,139
–
759,234
1,143,737
–
1,244,447
1,464,586
2018
$
–
–
2017
$
–
–
448,822
448,822
874,442
874,442
2018
$
2017
$
384,503
220,139
–
310,412
694,915
–
370,005
590,144
47
RECCE PHARMACEUTICALS ANNUAL REPORT 2018
NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
5: Revenue and Other Income
Revenue
Other Income:
Research and Development (‘R&D’) tax incentive
Interest income
Total other income
6: Expenses
Employee Benefits Expenses:
Salaries and wages
Superannuation expenses
Long service leave expenses
Payroll taxes
Other employee related costs
Total finance costs
Finance Costs:
Fair value movement of convertible notes
Interest from short-term borrowings
Bank fees and charges
Total finance costs
Other Expenses:
Audit fees
Communication expenses
Computer maintenance and consumables
Consulting fees
Insurance expenses
Legal expenses
Listing and regulatory fees
Printing and stationery expenses
Sundry expenses
Total other expenses
2018
$
2017
$
–
–
1,288,518
12,015
1,300,533
139,295
50,626
189,921
1,042,077
1,036,797
94,330
9,573
(64,488)
4,058
92,651
11,120
195,868
8,524
1,085,550
1,344,960
50,020
2,520
1,766
54,306
40,348
7,032
15,540
421,548
34,776
141,401
71,285
9,938
166,382
908,250
–
537
1,869
2,406
33,564
9,122
11,020
178,592
31,974
146,510
34,850
8,753
55,764
510,149
48
RECCE PHARMACEUTICALS ANNUAL REPORT 2018
7: Auditor's Remuneration
During the year, the following fees were paid or payable for services to BDO Audit (WA) Pty Ltd (BDO) and its related
practices (also referred to hereafter as BDO, network firms of BDO and non BDO firms):
Audit services
– BDO for audit and review of the consolidated financial statements
40,348
33,564
2018
$
2017
$
Non-Audit-related services
– BDO for Investigating Accountant’s Report for Prospectus
8: Income Tax Expense
Loss before income tax
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 27.5% (2017: 27.5%)
Add:
Non-allowable items:
– Share-based payments expense
– Expenses subject to R&D tax incentive
– Other non-allowable items
Less:
– Non assessable income
– Tax losses and deferred tax not recognised
–
40,348
10,200
43,764
(1,674,288)
(3,025,504)
(460,429)
(832,014)
19,594
495,027
26,202
(354,342)
273,948
3,601
68
–
828,345
Income tax attributable to the Group
–
–
Deferred tax assets not recognised by the Group:
Tax losses carried forward
Accruals and provisions
Blackhole expenses
Patents
1,794,001
60,507
41,931
10,710
1,520,053
50,716
43,364
10,842
1,907,149
1,624,975
The above 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.
49
RECCE PHARMACEUTICALS ANNUAL REPORT 2018
NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
9: Loss Per Share
The following reflects the loss and share data used in the
calculations of basic and diluted losses per share:
Loss attributable to the members of the Company
(1,674,288)
(3,025,504)
2018
$
2017
$
Weighted average number of shares
Weighted average number of ordinary shares used in
calculating basic losses per share
Effect of dilutive securities:
– Adjusted weighted average number of ordinary shares
used in calculating diluted losses per share
Loss per share (cents per share):
Basic loss for the year attributable to the members of the Company
Diluted loss for the year attributable to the members of the Company
10: Cash and Cash Equivalents
Cash at bank
Cash on hand
No.
No.
84,724,249
76,612,604
–
–
84,724,249
76,612,604
(1.98)
(1.98)
2018
$
(3.95)
(3.95)
2017
$
679,677
42
679,719
1,089,954
484
1,090,438
Cash at bank and in hand bear floating interest rates between 1.50% and 2.65% depending on the amount on deposit.
Refer Note 19 for additional risk exposure analysis.
11: Trade and Other Receivables
CURRENT
Sundry debtors
Net GST receivable
Refer Note 19 for additional risk exposure analysis.
–
20,957
20,957
22,329
37,856
60,185
50
RECCE PHARMACEUTICALS ANNUAL REPORT 2018
12: Plant and Equipment
Laboratory machinery and equipment
– at cost
– accumulated depreciation
Office furniture and equipment
– at cost
– accumulated depreciation
Computer equipment
– at cost
– accumulated depreciation
Office improvements
– at capitalised cost
– accumulated depreciation
Library and website costs
– at cost
– accumulated depreciation/amortisation
Total plant and equipment
Reconciliations
2018
$
2017
$
420,258
(69,594)
350,664
27,609
(6,309)
21,300
24,000
(16,155)
7,845
56,835
(4,242)
52,593
7,176
(4,338)
2,838
247,376
(27,237)
220,139
25,339
(4,304)
21,035
21,392
(11,298)
10,094
56,835
(1,160)
55,675
7,176
(3,521)
3,655
435,240
310,598
Reconciliations of the carrying amounts of each class of plant and equipment at the beginning and end of the current
and previous financial year are set out below:
Laboratory
machinery
and
equipment
$
Office
furniture
and
equipment
$
Computer
equipment
Office
improve-
ments
$
$
Library
and
website
costs
$
Total
$
220,139
172,882
–
(42,357)
350,664
30,955
205,472
(16,288)
220,139
21,035
2,270
–
(2,005)
21,300
16,702
6,000
(1,667)
21,035
10,094
2,609
–
(4,858)
7,845
10,889
5,313
(6,108)
10,094
55,675
3,655
–
–
–
–
310,598
177,761
–
(3,082)
52,593
(817)
(53,119)
2,838
435,240
22,445
34,001
(771)
55,675
2,289
2,046
(680)
3,655
83,280
252,832
(25,514)
310,598
2018
Beginning of the year
Additions
Disposals
Depreciation
End of the year
2017
Beginning of the year
Additions
Depreciation
End of the year
51
RECCE PHARMACEUTICALS ANNUAL REPORT 2018
NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
13: Trade and Other Payables
CURRENT
Unsecured liabilities
Trade payables
Employee related payables
Sundry creditors
14: Financial Liabilities
CURRENT
Loans payable
NON-CURRENT
Convertible notes
(a) Loans payable
Note
2018
$
2017
$
125,378
54,026
50,000
229,404
255,353
224,871
50,251
530,475
14(a)
14(b)
2,859
–
–
161,289
The loans payable relate to funding obtained by the Group which is payable in 12 monthly instalments from August
2017. The loan was obtained to pay for the Directors and Officers insurance.
(b) Convertible notes
On 16 June 2017 the Company signed a Share Purchase and Convertible Security Agreement, whereby the Company
could receive over a 24 month period, up to $6.05 million from a US institutional investor, the Australian Special
Opportunity Fund LP (ASOF). ASOF made an initial upfront investment of $300,000 by way of a $250,000 24-month
interest free unsecured convertible security (with a face value of $300,000) and a $50,000 equity investment that
was satisfied by the issue of ordinary shares. Subsequent investments, subject to certain conditions, can be made in
monthly equity tranches of $50,000 that can be increased up to $250,000 by mutual consent between the Company
and ASOF.
On execution and in accordance with the funding agreement, the Company issued the following securities to ASOF:
– 178,715 shares at $0.1958 in satisfaction of the commitment fee of $35,000;
– 476,000 Collateral Shares to be held as security for funds advanced in monthly tranches; and
– 641,000 options, exercise price of $0.2593, expiry 21 June 2021. Refer to Note 17 for the model inputs used under
the Black-Scholes option pricing model.
The Convertible Security and future tranches under the agreement will be convertible into new Ordinary Shares of the
Company at the ‘Conversion price’, being the lesser of:
– 90% of the average 5 days consecutive daily VWAPs per Company Share during the 20 consecutive trading days
immediately prior to the relevant conversion notice date selected by ASOF; and
– 130% of the average of each of the daily VWAPs during the 20 trading days immediately prior to 16 June 2017
calculated as 26 cents.
In addition to the above, should the conversion price at date of conversion of the note or tranche amounts to shares
falls below the floor price (which is $0.15), then the Company has the option to repay in cash at 105% of the tranche
amount or convertible security liability.
ASOF has the discretion to convert the convertible notes into ordinary shares or use the Conversion Collateral
Capitalisation Election based on a calculation model to determine the price at conversion. The Conversion Collateral
Capitalisation Election pertains to the conversion amount that will be constituted in whole or in part by a reduction in
the Collateral Shareholding Number which will be applied to satisfy some or all of the Conversion Amount.
52
RECCE PHARMACEUTICALS ANNUAL REPORT 2018
In the instance where a Conversion Collateral Capitalisation Election has been made, the convertible notes will be
converted by way of a reduction in the 476,000 Collateral Shares issued on 16 June 2017.
On 22 September 2017, ASOF exercised 40% of its option to convert the convertible notes to 730,460 ordinary shares
at 13.69 cents per share with a value of $100,000. On 1 May 2018, the remaining 60% was exercised to convert to
1,591,090 ordinary shares at 12.57 cents per share.
15: Provisions for Employee Benefits
CURRENT
Unsecured liabilities
Annual leave
Personal leave
NON-CURRENT
Long service leave
Movement of long service leave provision:
At beginning of the year
Provisions made during the year
At end of the year
2018
$
2017
$
117,645
66,483
184,128
100,008
59,812
159,820
32,431
22,858
22,858
9,573
32,431
2018
$
11,738
11,120
22,858
2017
$
16: Share Capital
Issued and fully paid ordinary shares
10,031,509
8,235,009
Ordinary shares participated in dividends and the proceeds on winding up of the Company in proportion to the
number of shares held.
53
RECCE PHARMACEUTICALS ANNUAL REPORT 2018
NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
Movements in ordinary shares on issue:
Opening balance
Shares issued during the period:
2018
2017
No.
$
No.
$
78,004,500
8,235,009
72,643,872
7,418,863
– shares issued through Share Purchase Plan1
5,408,487
– shares issued to ASOF2
– shares issued to employees
3,607,881
–
946,500
550,000
–
9,016,368
1,496,500
–
654,715
103,913
758,628
Conversions during the period:
– Convertible notes2
– Class A performance shares3
2,321,550
300,000
–
–
–
4,602,000
2,321,550
300,000
4,602,000
–
–
20,000
20,000
–
796,146
796,146
Total4
89,342,418
10,031,509
78,004,500
8,235,009
1 On 23 October 2017, the Company accepted applications from 171 registered shareholders under the Share Purchase Plan.
2 The issue of shares and conversion of convertible notes pertained to the Share Purchase and Convertible Security Agreement
signed by the Company and ASOF on 16 June 2017, whereby the Company could receive over a 24-month period up to $6.05 million
from ASOF, a US institutional investor.
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 At 30 June 2018, 43,959,141 ordinary shares on issue were quoted in the ASX whilst 42,810,081 ordinary shares were unquoted.
Options from shares issued
The Company issued the following options to ASOF as part of its Share Purchase and Convertible Security Agreement
signed on 16 June 2017.
Issue
Date
Exercise
Date
Exercise
Price
cents
2018
2017
No.
No.
16-Jun-17
21-Jun-21
25.93
641,000
641,000
19-Jul-17
19-Jul-20
06-Sep-17
25-Aug-20
29-Sep-17 2
9-Sep-20
02-Nov-17
01-Nov-20
01-Dec-17
30-Nov-20
17-Jan-18
10-Jan-21
16-Feb-18
13-Feb-21
21.71
18.72
17.80
20.40
20.96
19.88
19.81
59,880
104,167
109,569
127,470
124,069
130,804
65,617
–
–
–
–
–
–
–
1,362,576
641,000
Particulars
Options
Tranche 1
Tranche 2
Tranche 3
Tranche 4
Tranche 5
Tranche 6
Tranche 7
54
RECCE PHARMACEUTICALS ANNUAL REPORT 2018
17: Reserves
Performance shares reserve
Option reserve
Share-based payments reserve
(a) Performance shares reserve
Note
17(a)
17(b)
17(c)
2018
$
2017
$
1,444,481
–
71,250
1,515,731
1,444,481
88,691
–
1,533,172
The performance shares reserve is used to recognise the fair value of Performance Shares issued to Executives and
Non-Executive Directors.
Movements of performance shares reserve:
At beginning of year
Conversion to ordinary shares (refer to Note 16)
At end of year
(b) Option reserve
1,444,481
–
1,444,481
2,240,627
(796,146)
1,444,481
The option reserve is used to recognise the fair value of options issued on 21 June 2017 to ASOF as per the terms and
conditions of the Share Purchase and Convertible Security Agreement.
641,000 options were issued to ASOF during the financial year ended 30 June 2017 as per the terms and conditions
of the Share Purchase and Convertible Security Agreement. The options are exercisable at $0.259 each on or before
21 June 2020. These options have been assessed in value at $88,691. The value of the options was calculated using
the Black and Scholes model.
Model inputs used to value the options granted included:
• Exercise price is $0.259;
• Market price of the shares at grant date is $0.230;
• Expected volatility of the Group’s shares is 100%;
• Risk-free interest rate used is 1.50%;
• Time to maturity, 3 years; and
• A dividend yield of 0%.
Movements of option shares reserve:
At beginning of year
Reversal of the option reserve
Fair value of the options on the convertible notes (refer to Note 14(b))
At end of year
(c) Share-based payments reserve
2018
$
88,691
(88,691)
–
–
2017
$
–
–
88,691
88,691
The share-based payments reserve is used to recognise the fair value of ordinary shares to be issued to KMPs and
Non-Executive Directors.
Movements of share-based payments reserve:
At beginning of year
Additions
Reversals
At end of year
Refer to Note 20 for details of the share-based payments.
–
71,250
–
71,250
6,904
–
(6,904)
–
55
RECCE PHARMACEUTICALS ANNUAL REPORT 2018
NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
18: Cash Flow Information
(a) Reconciliation of loss after income tax to net cash flow from operating activities:
2018
$
2017
$
Loss for the year
Adjustments and non-cash items:
– Depreciation and amortisation
– Fair value movement of convertible notes
– Share-based payments expense
Change in operating assets and liabilities
– Decrease/(Increase) in trade and other receivables
– (Increase)/Decrease in other current assets
– (Decrease)/Increase in trade and other payables
– Increase in provisions for employee benefits
Net cash outflow from operating activities
(b) Non-cash investing and financing activities:
– Investing activities
– Financing activities
Conversion of convertible notes to ordinary shares
Conversion of Class A performance shares to ordinary shares
Issuance of shares to employees
(1,674,288)
(3,025,504)
53,119
50,020
71,250
39,228
(4,456)
(301,071)
33,881
25,514
–
13,096
(20,620)
3,067
427,837
78,743
(1,732,317)
( 2,497,867)
–
300,000
–
–
300,000
–
–
796,146
20,000
816,146
56
RECCE PHARMACEUTICALS ANNUAL REPORT 2018
19: 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 program 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
At amortised cost
Cash and cash equivalents
Trade and other recievables
Financial Liabilities
At amortised cost
Trade payables and sundry creditors
Loans payable
Convertible notes
Net exposure
(a) Derivatives
2018
$
2017
$
679,719
20,957
700,676
1,090,438
60,185
1,150,623
175,378
2,859
–
178,237
305,604
–
161,289
466,893
522,439
683,730
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.
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 matured
on 30 June 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 Group’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.
57
RECCE PHARMACEUTICALS ANNUAL REPORT 2018
NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
(i) 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:
2018
2017
Weighted
average
Balance
$
Weighted
average
Balance
$
Cash and cash equivalents
2.56%
679,677
1.31%
1,089,954
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 2018, 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 loss
higher/(lower)
Other comprehensive loss
higher/(lower)
2018
$
(120)
120
2017
$
(9,552)
9,552
2018
$
(120)
120
2017
$
(9,552)
9,552
The other financial instruments of the Group that are not included in the above tables are fixed interest and 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
Rating
AA-
2018
$
2017
$
679,677
1,089,954
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, to be sufficient in the management of credit risk with regards to these funds.
58
RECCE PHARMACEUTICALS ANNUAL REPORT 2018
(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 end of reporting
period:
Contractual maturities of
financial liabilities
<6
months
>6 – 12
months
>12 months
30 June 2018
Trade payables
Employee related payables
Sundry creditors
Loan payable
30 June 2017
Trade payables
Employee related payables
Sundry creditors
Convertible notes
$
125,378
54,026
50,000
2,859
232,263
255,353
224,871
50,251
–
530,475
$
–
–
–
–
–
–
–
–
–
–
Total
contractual
cash flows
$
Carrying
amount
$
125,378
54,026
50,000
2,859
125,378
54,026
50,000
2,859
232,263
232,263
$
–
–
–
–
–
–
–
–
255,353
224,871
50,251
255,353
224,871
50,251
161,289
166,289
166,289
166,289
696,764
691,764
At 30 June 2018, the Group had sufficient cash to meet the financial liabilities as and when they are due and payable.
(e) Recurring Fair Value Measurements
The following financial instruments are subject to recurring value measurements:
Level 3 – Convertible security
–
161,289
Due to their short term nature, the carrying amounts of the current receivables and payables are assumed to
approximate their fair value.
2018
$
2017
$
59
RECCE PHARMACEUTICALS ANNUAL REPORT 2018
NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
(f) Fair Value Hierarchy
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).
Valuation Techniques to Derive Level 3 Fair Values
Convertible security at fair value through profit or loss
The fair value of the convertible security is determined based on the accretion of its carrying amount recognised
at inception up to its face value by taking into account the discount on the conversion of the shares in the future and
share price. During the financial year, the security was converted to equity.
20: Share-Based Payments
Share-based payments expense recognised during the financial year:
Shares issued to Key Management Personnel (KMP)1
Shares issued to KMP as ‘sign-on’ bonus2
Shares not issued to non-executive directors during the year3
2018
$
2017
$
25,000
46,250
–
71,250
–
20,000
(6,904)
13,096
1 The amount pertained to the entitlement of the Executives of the Company, J Ward and A Kollaras as part of their compensation.
The shares were not yet issued as at 30 June 2018 totaling to 142,857 shares valued at$0.175 per share.
2 Pertained to a sign-on bonus of J Prendergast after joining as a Non-Executive Director of the Company. The allocation of 250,000
shares will be subject to shareholder approval at the next Annual General Meeting.
3 The amount pertained to the pro-rata accrual that was expensed for this entitlement in financial year 2016 which was reversed in
financial year 2017 due to the resignation of the Non-Executive Directors.
Detailed share-based payment disclosures are provided in the Remuneration Report on pages 15 to 23.
21: Related Party Transactions
Parent entity
The ultimate parent entity within the Group is Recce Pharmaceuticals Ltd.
Subsidiaries
Interests in subsidiaries are disclosed in Note 23.
Key management personnel compensation
Short-term employee benefits
Post-employment benefits
Termination payments
Share-based payments
2018
$
836,678
108,341
21,263
71,250
1,037,532
2017
$
880,864
83,680
–
20,000
984,544
Detailed remuneration disclosures are provided in the Remuneration Report on pages 15 to 23.
The following transactions occurred with related parties:
Superannuation contributions
Contributions to superannuation funds on behalf of employees
108,341
83,680
There were no other related party transactions during the financial year.
60
RECCE PHARMACEUTICALS ANNUAL REPORT 2018
22: Parent Entity Information
The following information relates to the parent entity, Recce Pharmaceuticals Ltd, as at 30 June 2018. The information
presented hereto has been prepared using accounting policies consistent with those presented in Note 2.
(a) Summarised statement of financial position
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Share capital
Reserves
Accumulated losses
Net Assets
2018
$
708,497
435,240
1,143,737
416,391
32,431
448,822
10,031,509
1,515,731
(10,852,325)
694,915
2017
$
1,153,988
310,598
1,464,586
690,295
184,147
874,442
8,235,009
1,533,172
(9,178,037)
590,144
(b) Summarised consolidated statement of profit or loss and other comprehensive income
Loss for the year
Other comprehensive income
Total comprehensive loss for the year
(1,674,288)
(3,025,504)
–
–
(1,674,288)
(3,025,504)
The parent entity has no contingent liabilities as at 30 June 2018.
23: Interest in Subsidiaries
Country of Incorporation
Parent entity
Recce Pharmaceuticals Ltd
Australia
Subsidiaries
Recce (USA) LLP
Recce (UK) Limited
United States
United Kingdom
Percentage Owned
2018
%
–
100
100
2017
%
–
100
100
24: Contingent Liabilities and Contingent Assets
The Group is not aware of any contingent liabilities or contingent assets as at 30 June 2018.
61
RECCE PHARMACEUTICALS ANNUAL REPORT 2018
NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018
2018
$
2017
$
25: Commitments
The Group is not aware of any contingent liabilities or contingent assets as at 30 June 2018.
(a) Lease Commitments
Non-cancellable operating leases – future minimum lease payments, payable:
Within one year
Later than one year but not later than five years
Later than five years
173,116
71,934
–
245,050
166,661
232,526
–
399,187
The Group leases various premises under non-cancellable operating leases expiring between one and two years.
All leases have annual CPI escalation clauses. Lease terms usually run for two years with a two-year renewal option.
Lease conditions do not impose any restrictions on the ability of Group from borrowing further funds or paying
dividends.
(b) Capital Expenditure Commitments
The Group issued a purchase order to update the HPLC
Payable – within one year
26: Subsequent Events
–
–
11,000
11,000
No other matter or circumstance has arisen since 30 June 2018, which has significantly affected, or may significantly
affect the state of affairs of the Group in subsequent financial years.
62
RECCE PHARMACEUTICALS ANNUAL REPORT 2018
DIRECTORS’ DECLARATION
The Directors of the Company declare that:
1. The consolidated financial statements comprising the consolidated statement of profit or loss and other
comprehensive income, consolidated statement of financial position, consolidated statement of changes in equity,
consolidated statement of cash flows and accompanying notes, as set out on pages 36 to 62, 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 2018 and of the performance for the year
ended on that date of the Group;
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 Group 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.
Dr Graham Melrose
Executive Chairman
28 September, 2018
63
RECCE PHARMACEUTICALS ANNUAL REPORT 2018 INDEPENDENT AUDITOR’S REPORT
Tel: +61 8 6382 4600
Fax: +61 8 6382 4601
www.bdo.com.au
38 Station Street
Subiaco, WA 6008
PO Box 700 West Perth WA 6872
Australia
INDEPENDENT AUDITOR'S REPORT
To the members of Recce Pharmaceuticals Ltd
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of Recce Pharmaceuticals Ltd (the Company) and its subsidiaries
(the Group), which comprises the consolidated statement of financial position as at 30 June 2018, the
consolidated statement of profit or loss and other comprehensive income, the consolidated statement
of changes in equity and the consolidated statement of cash flows for the year then ended, and notes
to the financial report, including a summary of significant accounting policies and the directors’
declaration.
In our opinion the accompanying financial report of the Group, is in accordance with the Corporations
Act 2001, including:
(i)
Giving a true and fair view of the Group’s financial position as at 30 June 2018 and of its
financial performance for the year ended on that date; and
(ii)
Complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s responsibilities for the audit of the Financial
Report section of our report. We are independent of the Group in accordance with the Corporations
Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s
APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the
financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance
with the Code.
We confirm that the independence declaration required by the Corporations Act 2001, which has been
given to the directors of the Company, would be in the same terms if given to the directors as at the
time of this auditor’s report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our opinion.
Material uncertainty related to going concern
We draw attention to Note 3 in the financial report which describes the events and/or conditions which
give rise to the existence of a material uncertainty that may cast significant doubt about the group’s
ability to continue as a going concern and therefore the group may be unable to realise its assets and
discharge its liabilities in the normal course of business. Our opinion is not modified in respect of this
matter.
BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050 110 275,
an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited by guarantee, and
form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation other than for
the acts or omissions of financial services licensees
64
RECCE PHARMACEUTICALS ANNUAL REPORT 2018 Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in
our audit of the financial report of the current period. These matters were addressed in the context of
our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide
a separate opinion on these matters. In addition to the matter described in the Material uncertainty
related to going concern section, we have determined the matters described below to be the key audit
matters to be communicated in our report.
Accounting for Settlement of the Convertible Security Agreement
Key audit matter
How the matter was addressed in our audit
On 16 June 2017 the company signed a Share
Our audit procedures in this area included, but were not
Purchase and Convertible Security Agreement
limited to:
which was converted into shares in the current
year and has been disclosed in Note 14 of the
financial report.
Accounting for settlement of the convertible
notes was considered a key audit matter due to
the complexity and judgements involved in
determining the impact of the settlement due to
the various conversion features embedded within
the term of the note.
•
•
•
•
Holding discussions with management and
reviewing the share purchase and convertible
security agreement to understand the key terms
and conditions of the transaction;
Inspecting Board minutes and other appropriate
documentation of authorisation to assess whether
the conversions were appropriately authorised;
Checking management’s calculations carried out in
respect of the valuation of each conversion and
the settlement of the convertible note liability;
and
Assessing the adequacy of the related disclosures
in the financial report.
65
RECCE PHARMACEUTICALS ANNUAL REPORT 2018 INDEPENDENT AUDITOR’S REPORT CONTINUED
Other information
The directors are responsible for the other information. The other information comprises the
information in the Group’s annual report for the year ended 30 June 2018, but does not include the
financial report and the auditor’s report thereon.
Our opinion on the financial report does not cover the other information and we do not express any
form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial
report or our knowledge obtained in the audit or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this
other information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of the directors for the Financial Report
The directors of the Company are responsible for the preparation of the financial report that gives a
true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
and for such internal control as the directors determine is necessary to enable the preparation of the
financial report that gives a true and fair view and is free from material misstatement, whether due to
fraud or error.
In preparing the financial report, the directors are responsible for assessing the ability of the group to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to liquidate the Group or to cease
operations, or has no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of this financial report.
A further description of our responsibilities for the audit of the financial report is located at the
Auditing and Assurance Standards Board website (http://www.auasb.gov.au/Home.aspx) at:
http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf
This description forms part of our auditor’s report.
66
RECCE PHARMACEUTICALS ANNUAL REPORT 2018 Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 15 to 23 of the Annual report for the year
ended 30 June 2018.
In our opinion, the Remuneration Report of Recce Pharmaceuticals Ltd, for the year ended 30 June
2018, complies with section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the
Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility
is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with
Australian Auditing Standards.
BDO Audit (WA) Pty Ltd
Matthew Cutt
Director
Perth, 28 September 2018
67
RECCE PHARMACEUTICALS ANNUAL REPORT 2018 ASX ADDITIONAL INFORMATION
Shareholder Information as at 14 September 2018
Additional information required by the Australian Securities Exchange listing rules and not shown elsewhere in this
report is as follows:
(a) Distribution of equity securities (as at 14 September 2018)
The number of shareholders by size of holding for fully paid ordinary shares are:
Holding
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
Total
Number of shareholders
Number of shares
26
183
203
512
100
1,024
4,330
599,160
1,790,888
18,682,279
68,265,761
89,342,418
%
0.01
0.67
2.00
20.91
76.41
100.00
(b) Twenty largest shareholders (as at 14 September 2018)
The names of the twenty largest holders of quoted shares are:
Name
1 Mr Graham Melrose and Ms Olga Melrose
2 Mr David Foord
3 Mr James Graham
4 Ms Michele Keryn Dilizia
5 Querion Pty Ltd
6 The Australian Special Opportunity Fund LP
7 Code Nominees Pty Ltd <22371 A/C>
8 State One Stockbroking Ltd
9 Ms Fiona Elizabeth Graham
10 Golden Rivers Mining Pty Ltd
11 Mr Nikolai Shirobokov & Mrs Svetlana Shirobokov
12 Arthur Deryck Bray Graham & Nanette Graham
13 McCray Investments Pty Ltd
Continue reading text version or see original annual report in PDF format above