More annual reports from Recce Pharmaceuticals:
2023 ReportPeers and competitors of Recce Pharmaceuticals:
Spring Bank Pharmaceuticals, Inc.ANNUAL
REPORT
2021
ASX:RCE FSE:R9Q
CONTENTS
1 HIGHLIGHTS
2 MESSAGE FROM THE CHAIRMAN
4 OVERVIEW OF COMPANY ACTIVITIES
11 BOARD OF DIRECTORS & KEY
MANAGEMENT PERSONNEL
12 CLINICAL ADVISORY COMMITTEE
13 FINANCIAL REPORT
73 CORPORATE DIRECTORY
Recce Pharmaceuticals (ASX:RCE,
FSE:R9Q) is pioneering New Classes of
Synthetic Anti-Infectives designed to
address the urgent global health threat
posed by antibiotic resistant superbugs
and emerging viral pathogens.
Studies of RECCE® 327 have indicated
a universal mechanism of action
(MoA) that targets both bacterial cell
membrane viability and intracellular
energy production. This results in
efficacy against both growing and
non-growing (or stationary) bacterial
cells, including their multi-drug resistant
superbug forms, even after repeated
use – a common failure associated with
existing antibiotics.
RECCE® 327 has been awarded Qualified
Infectious Disease Product (QIDP)
designation by the U.S. Food and Drug
Administration (FDA) – labelling it for
fast-track designation plus 10 years
of market exclusivity from time of
approval. Further to this designation,
RECCE® 327 has been included on
the Pew Charitable Trusts Global New
Antibiotics in Development Pipeline as
the only synthetic polymer and sepsis
drug candidate in development. More
recently, RECCE® 327 has commenced
two human clinical trials, a Phase I
intravenous infusion study to assess
safety and tolerability on healthy
individuals and a Phase I/II topical study
to assess efficacy in topical burn wound
infections.
Expanding upon synthetic polymer
technology, the company has
strengthened their anti-infective pipeline
to include: RECCE® 529, a synthetic
polymer compound formulated for
intravenous and nasal use, which has
demonstrated encouraging anti-viral
activity in animal studies against protein-
based viruses including SARS-CoV-2
(COVID-19); and, RECCE® 435, a broad-
spectrum polymer antibiotic formulated
for oral use currently in preclinical
studies, testing the efficacy against
Helicobacter pylori (H. pylori) infections.
HIGHLIGHTS
Commercial
Delivered opening Research and Development
(R&D) Address at 2020 World Antimicrobial
Resistance (AMR) Congress
Recce awarded grant of A$37,508 plus GST by
the Aus. Govt. Dept. of Industry, Science, Energy
and Resources as part of the Entrepreneurs’
Programme
Raised approximately AU $27.95m at $1.30 per
share from sophisticated and institutional investors
Total R&D rebate received – AU$1,566,030
Awarded Two AusIndustry Advanced Overseas
Findings totalling $26,787,500 for Synthetic
Antibiotic R&D over three years (1 July 2019
to 30 June 2022)
Presented at the World Microbe Forum following
confirmation to publish an Abstract in the 2021
Program
Clinical
R327 selected to be in Australia SARS-CoV-2
Antiviral Screening Program
Leading US Researchers tested R327 and
R529 against SARS-CoV-2
Oral R435 dose-dependent and efficacious
against H. pylori
R327 & R529 demonstrates concentration-
dependent reductions in SARS-CoV-2 in vitro
study using organoids made from human airway
epithelial cells
CMAX Clinical Research chosen as independent
trial facility for Phase I clinical trial
Murdoch Children’s Research Institute to
evaluate in vivo activity of R435 oral formulation
against H. pylori in pre-clinical studies program
Human Research Ethics Committee approval
to start Phase I/II Topical Burns Study
R327 showed encouraging efficacy in an
in vitro screening assay against SARS-CoV-2
R327 showed a reduction in SARS-CoV-2 viral
genome numbers at 4,000ppm with virus
no longer detectable by viral titration
Positive sinusitis animal study data against
Streptococcus pneumoniae
Positive Human Clinical Response in Patient of
R327 under Special Access Scheme Category A
R327 effective against full suite of ESKAPE
pathogens
R327 Advances to Stage 2 of SARS-CoV-2
Australian Anti-Viral Screening Program
R327 Demonstrates World First Multiple
Mechanism of Action
Regulatory
Anti-Viral patent granted in Japan
Recce Dual Lists on Frankfurt Stock Exchange
under ticker R9Q
Pew Charitable Trusts adds R327 to annual list
of: Non-traditional Products in Development to
Combat Bacterial Infections
Anti-Viral patent granted in Europe
R327 registered on Australia New Zealand Clinical
Trial Registry for Topical Burns Study in Humans
Management
Resignation of Dr Graham Melrose as Chief
Research Officer
Board Appointment of U.S. based Dr Alan
Dunton as Non-Executive Director
Appointment of Prof. Philip Sutton to Clinical
Advisory Committee as Head of Helicobacter
pylori (H. pylori) development program
Appointment of James Graham as Chief
Executive Officer
Appointment of Michele Dilizia as Chief
Scientific Officer
1
RECCE PHARMACEUTICALS ANNUAL REPORT 2021 MESSAGE FROM
THE CHAIRMAN
Dr John Prendergast
Non-Executive Chairman
2
Dear Shareholders,
The last 12 months represented
a period of significant growth
and transformation for the
Company. The team has focused
on building our clinical programs,
expanding our product pipeline
and furthering our engagement
with the global medical community
through meaningful research and
commercial partnerships.
At the start of the year, we could not have
anticipated the extent to which the world
would change over the next twelve months.
For Recce Pharmaceuticals, the impact of a
global pandemic presented both challenges and
opportunities. Faced with the prospect of major
disruptions, the Board and management team
responded with effective mitigation strategies to
protect our people, our financial resources, and
our clinical programs. Antibiotic resistance does
not stop for a pandemic and in fact, has only
become a greater threat to global health.
Despite multiple challenges, the Recce team
did not rest and continued to push ahead with
renewed focus on our existing clinical programs
while also initiating several new research
partnerships and clinical programs.
The diligence of the team to pursue multiple
initiatives under challenging circumstances has
greatly enhanced the value of our business and
expanded our promising commercial pipeline of
anti-infective therapies. Under the leadership of
our capable CEO James Graham, the company
has managed to thrive under challenging
conditions.
RECCE PHARMACEUTICALS ANNUAL REPORT 2021 The team is now positioned to deliver on
the next major milestones of the business.
I wish to extend my sincere gratitude to all
of Recce’s people, our CEO, management
team, collaborators and all our shareholders
for the commitment they have demonstrated
throughout the year.
We look forward to keeping you closely
informed of our progress.
Yours sincerely,
Dr John Prendergast
Non-Executive Chairman
The team has shown a high degree of resilience
and operational flexibility which I believe puts
us in a good position as we work to capitalise
on opportunities while scaling our operations.
It is my firm belief Recce is in a stronger position
because of the challenges of the last year.
The Company continues to deliver on its promise
to shareholders and patients. This is evidenced
by the progress of our clinical programs and the
growing interest by global leaders in the field
to collaborate with Recce, as well as several
important new commercial partnerships and
developments.
In addition to the appointment of James
Graham to the role of CEO during the reporting
period, we said farewell to our retiring founder
and board member Dr Graham Melrose. who
we sincerely thank for his contribution to
the company. We also welcomed a highly
experienced US-based biotechnology
executive, Alan Dunton, to the board.
Our dual listing on the Frankfurt Stock Exchange
and new clinical partnerships with Fiona Stanley
Hospital, the Murdoch Children’s Research
Institute, Australia’s Commonwealth Scientific
and Industrial Research Organisation (CSIRO)
as well as leading research groups in the United
States are all evidence of the growing global
interest and value of our work.
Financial stability and the operational resilience
of a well-capitalised enterprise was also an
important focus for the business. We value the
support from existing and new shareholders
for our oversubscribed placement, raising
approximately $27.95 million. Our enhanced
balance sheet puts us in a strong position to
pursue our clinical programs while further
de-risking the future of our business.
3
RECCE PHARMACEUTICALS ANNUAL REPORT 2021 OVERVIEW OF
COMPANY ACTIVITIES
As the COVID-19
pandemic extended
into and throughout the
2020/2021 financial year
(FY20/21), the Company’s
main business activities
broadened to include a
greater focus on all anti-
infective capabilities of
the compounds whilst
continuing to ensure
progression and extension
of existing programs.
The reporting period saw
Recce Pharmaceuticals (‘The
Company’ or ‘Recce’) achieve
numerous milestones and
further expand its clinical
programs.
Lead candidate, RECCE®
327 (R327), has continued
to demonstrate encouraging
efficacy against a range of
Gram-positive and Gram-
negative bacterial pathogens
as well as viral pathogens,
including the SARS-CoV-2
virus, COVID-19.
The Company has completed
various in vitro and in vivo
studies across a broad range
of indications throughout the
year and is excited to progress
their human clinical trials. R327
is not approved for use in
humans and significant further
clinical testing is required to
evaluate the quality, safety and
efficacy of R327.
Key milestones are summarised
on the following pages.
4
RECCE PHARMACEUTICALS ANNUAL REPORT 2021 RECCE® 327
World’s First Multiple Mechanisms of Action
The FY20/21 saw further studies conducted to expand existing knowledge on
R327’s Mechanism of Action (MoA). The independent studies, undertaken by world
leaders in bacterial MoA analysis and antibiotic profiling, highlighted R327 having
a multi-layered MoA.
Key takeaways from the studies:
R327 rapidly and irreversibly
shuts down cellular energetics
(adenosine triphosphate (ATP)
production) – primary MoA
R327 affects the assembly of
bacterial cell division complex,
components that require cellular
energy to remain assembled,
confirming its ability to disrupt
cellular bioenergetics
R327 results in the decreased
formation of the bacterial
cell division complex into
ring-like structures (Z-rings)
in a concentration dependent
manner
R327 permeabilises the cell
membrane/alters the integrity
of the outer membrane of
Escherichia coli (E. coli) cells
– intended activity without
toxicity
At higher concentrations and
subsequent to ATP shut down
cell lysis can occur as a further
MoA (bacterial bursting due
to their uniquely high internal
pressures)
R327 rapidly and irreversibly
bactericidal to slow-growing,
quiescent or stationary phase
E. coli cells in addition to
actively dividing E. coli cells
Within a minute, the highest
concentration of R327
used, 5x minimum inhibitory
concentration (MIC), was
observed to reduce viable
cell counts reported as cell
forming units per millilitre
of culture (CFU/ml) 100-fold
(>1x107 to 1x105 at timepoint 0)
Current antibiotics rarely retain
bactericidal activities against
nondividing or stationary phase
bacterial cells; however, R327
showed remarkable activity
against slow-growing bacteria
thereby indicating potential
antibacterial activity in biofilms
In comparison to ampicillin
and ciprofloxacin, R327 is able
to outperform both of these
antibiotics in bactericidal
activity (as measured by
viable cell counts) against
stationary cells
What is ATP Production?
‘ATP is the fuel of life. It's an energy currency molecule - the most important source of chemical
and mechanical energy in living systems.’
Sunyoung Kim, PhD, Department of Biochemistry and Molecular Biology, Louisiana State University Health Sciences Center, New Orleans.
5
RECCE PHARMACEUTICALS ANNUAL REPORT 2021 OVERVIEW OF COMPANY ACTIVITIES CONTINUED
An independent study was conducted by a contract
research organisation to assess the in vitro efficacy of
R327 against all ESKAPE pathogen bacterial strains.
The results demonstrated R327 to be 99.9% effective
against the full suite of ESKAPE pathogens, within
hours of exposure.
99.9% effective
R327 demonstrated to be 99.9% effective
against the full suite of ESKAPE pathogens,
within hours of exposure.
An ESKAPE Pathogen Company
Antimicrobial resistance (AMR) is rapidly increasing,
threatening our ability to treat common infections and
support modern medicine. Most commonly, hospital-
acquired infections are caused by deadly Gram-positive
and Gram-negative bacterial infections known collectively
as ‘ESKAPE’ pathogens, which are especially dangerous
due to their multi-drug resistant properties.
Dubbed ESKAPE for their propensity of ‘escaping’
the biocidal action of antibiotics, the acronym stands
for six different commonly found multi-drug resistant
pathogens: Enterococcus faecium (E. faecium),
Staphylococcus aureus (S. aureus), Klebsiella
pneumoniae (K. pneumoniae), Acinetobacter
baumannii (A. baumannii), Pseudomonas aeruginosa
(P. aeruginosa) and Enterobacter species.
No ESKAPE
ESKAPE pathogens are responsible for 42% of
the 50 million bloodstream infections recorded
annually.
ESKAPE Pathogens
Standardised and Drug Resistant
CURRENT MACRODILUTION MIC (PPM) R327
HISTORIC (PPM) R327
E
2500
S
K
A
P
E
Enterococcus
faecium
Staphylococcus
Aureus
Klebsiella
pneumoniae
Acinetobacter
baumannii
Pseudomonas
aeruginosa
Enterobacter
cloacae
)
M
P
P
(
I
7
2
3
R
F
O
N
O
T
U
L
D
E
V
T
C
E
F
F
E
I
I
BROAD EFFICACIOUS DOSING RANGE
2000
1500
1000
500
0
Vancomycin-resistant
Enterococci (VRE)
Methicillin-resistant
Staphylococcus
aureus (MRSA)
Carbapenem-resistant
Enterobacteriaceae
(CRE)
Carbapenem-resistant
Acinetobacter
baumannii (CRAB)
Carbapenem-resistant
Pseudomonas
aeruginosa (CRPA)
Carbapenem-resistant
Enterobacteriaceae
(CRE)
6
Vancomycin-resistant
Staphylococcus
aureus (VRSA)
RECCE PHARMACEUTICALS ANNUAL REPORT 2021
E. faecium ATCC 19434 with RECCE® 327
Time-kill curve (average)
S. aureus ATCC 29213 with RECCE® 327
E. faecium ATCC 19434 with RECCE® 327
Time-kill curve (average)
Time-kill curve (average)
S. aureus ATCC 29213 with RECCE® 327
Time-kill curve (average)
10
8
6
4
2
0
L
M
/
U
F
C
0
1
G
O
L
World’s First
R327 is the only known antibiotic in
clinical development efficacious against
all ESKAPE pathogens globally.
Vehicle control
4000 ppm (8X MIC)
2000 ppm (4X MIC)
1000 ppm (2X MIC)
500 ppm (1X MIC)
250 ppm (0.5X MIC)
0
TIME (HR)
0.5
1
3
6
24
K. pneumoniae ATCC 43816 with RECCE® 327
E. faecium ATCC 19434 with RECCE® 327
E. faecium ATCC 19434 with RECCE® 327
Time-kill curve (average)
Time-kill curve (average)
Time-kill curve (average)
10
10
10
10
8
8
6
6
4
4
W.H.O
Vehicle control
Vehicle control
2000 ppm (8X MIC)
World Health Organisation has included ESKAPE
4000 ppm (8X MIC)
1000 ppm (4X MIC)
pathogens in their list of priority pathogens.
2000 ppm (4X MIC)
500 ppm (2X MIC)
1000 ppm (2X MIC)
https://statics.teams.cdn.office.net/evergreen-assets/
250 ppm (1X MIC)
safelinks/1/atp-safelinks.html
500 ppm (1X MIC)
125 ppm (0.5X MIC)
250 ppm (0.5X MIC)
0
0
2
2
L
M
L
/
M
U
/
F
U
C
F
0
C
1
G
0
O
1
G
L
O
L
1
1
3
3
6
6
24
24
0
0
TIME (HR)
TIME (HR)
0.5
0.5
A. baumannii ATCC 17978 with RECCE® 327
S. aureus ATCC 29213 with RECCE® 327
K. pneumoniae ATCC 43816 with RECCE® 327
S. aureus ATCC 29213 with RECCE® 327
Time-kill curve (average)
Time-kill curve (average)
Time-kill curve (average)
Time-kill curve (average)
10
8
8
6
6
4
L
M
4
/
U
2
F
C
0
2
1
G
O
0
L
8
6
4
2
0
0
0.5
0
0
TIME (HR)
TIME (HR)
0
0.5
TIME (HR)
L
M
/
L
U
M
F
/
C
U
0
1
F
G
C
O
0
L
1
G
O
L
Vehicle control
Vehicle control
8000 ppm (8X MIC)
Vehicle control
4000 ppm (8X MIC)
4000 ppm (4X MIC)
4000 ppm (8X MIC)
2000 ppm (4X MIC)
2000 ppm (2X MIC)
2000 ppm (4X MIC)
1000 ppm (2X MIC)
1000 ppm (1X MIC)
1000 ppm (2X MIC)
500 ppm (1X MIC)
500 ppm (0.5X MIC)
500 ppm (1X MIC)
250 ppm (0.5X MIC)
0.5
1
1
1
3
3
3
6
6
6
24
24
250 ppm (0.5X MIC)
24
L
M
L
/
M
L
U
M
/
F
U
/
C
U
F
0
C
1
F
G
0
C
O
1
G
0
L
1
G
O
O
L
L
2000 ppm (8X MIC)
1000 ppm (4X MIC)
Vehicle control
Vehicle control
Vehicle control
8000 ppm (8X MIC)
Vehicle control
8000 ppm (8X MIC)
4000 ppm (4X MIC)
2000 ppm (8X MIC)
4000 ppm (4X MIC)
2000 ppm (2X MIC)
1000 ppm (4X MIC)
2000 ppm (2X MIC)
1000 ppm (1X MIC)
500 ppm (2X MIC)
1000 ppm (1X MIC)
500 ppm (0.5X MIC)
250 ppm (1X MIC)
500 ppm (0.5X MIC)
125 ppm (0.5X MIC)
250 ppm (1X MIC)
500 ppm (2X MIC)
125 ppm (0.5X MIC)
0.5
1
1
1
1
3
3
3
3
6
6
6
6
24
24
24
24
0.5
0
0
0.5
0
TIME (HR)
TIME (HR)
0.5
0
TIME (HR)
TIME (HR)
P. aeruginosa ATCC 27853 with RECCE® 327
K. pneumoniae ATCC 43816 with RECCE® 327
S. aureus ATCC 29213 with RECCE® 327
K. pneumoniae ATCC 43816 with RECCE® 327
E. faecium ATCC 19434 with RECCE® 327
Time-kill curve (average)
Time-kill curve (average)
Time-kill curve (average)
Time-kill curve (average)
10
Time-kill curve (average)
A. baumannii ATCC 17978 with RECCE® 327
E. cloacae ATCC 13047 with RECCE® 327
P. aeruginosa ATCC 27853 with RECCE® 327
A. baumannii ATCC 17978 with RECCE® 327
S. aureus ATCC 29213 with RECCE® 327
Time-kill curve (average)
Time-kill curve (average)
Time-kill curve (average)
Time-kill curve (average)
10
Time-kill curve (average)
10
10
10
8
6
10
8
10
10
10
8
8
8
6
6
6
6
4
4
L
4
M
4
4
L
/
M
L
U
2
2
M
/
F
U
/
C
2
F
U
0
2
2
C
1
F
G
0
C
O
1
0
0
G
0
L
1
O
G
0
O
L
0
0
0
0
L
0
TIME (HR)
TIME (HR)
0
0.5
0
TIME (HR)
TIME (HR)
TIME (HR)
0.5
10
10
10
8
8
8
6
6
6
4
4
4
2
2
2
0
0
0
10
8
6
L
M
4
L
/
M
L
U
M
/
F
U
/
C
F
U
0
2
C
1
F
G
0
C
O
1
G
0
L
1
O
G
O
L
0
L
0
0
TIME (HR)
0
0.5
0
TIME (HR)
TIME (HR)
TIME (HR)
Vehicle control
4000 ppm (8X MIC)
2000 ppm (4X MIC)
1000 ppm (2X MIC)
500 ppm (1X MIC)
250 ppm (0.5X MIC)
L
M
/
L
U
M
F
/
C
U
0
F
1
G
C
O
0
1
L
G
O
L
Vehicle control
2000 ppm (2X MIC)
4000 ppm (4X MIC)
4000 ppm (4X MIC)
8000 ppm (8X MIC)
Vehicle control
Vehicle control
8000 ppm (8X MIC)
Vehicle control
8000 ppm (8X MIC)
Vehicle control
2000 ppm (8X MIC)
4000 ppm (4X MIC)
4000 ppm (8X MIC)
1000 ppm (4X MIC)
2000 ppm (2X MIC)
2000 ppm (4X MIC)
500 ppm (2X MIC)
1000 ppm (1X MIC)
1000 ppm (2X MIC)
250 ppm (1X MIC)
500 ppm (0.5X MIC)
500 ppm (1X MIC)
125 ppm (0.5X MIC)
250 ppm (0.5X MIC)
500 ppm (0.5X MIC)
1000 ppm (1X MIC)
500 ppm (0.5X MIC)
1000 ppm (1X MIC)
2000 ppm (2X MIC)
L
M
L
/
M
L
U
M
/
F
U
/
C
U
F
0
C
F
1
G
C
0
O
1
G
0
1
L
G
O
O
L
L
0.5
0.5
0.5
1
1
1
1
1
3
3
3
3
3
6
6
6
6
6
24
24
24
24
24
Vehicle control
4000 ppm (4X MIC)
2000 ppm (8X MIC)
Vehicle control
Vehicle control
Vehicle control
8000 ppm (8X MIC)
8000 ppm (8X MIC)
Vehicle control
8000 ppm (8X MIC)
8000 ppm (8X MIC)
4000 ppm (4X MIC)
4000 ppm (4X MIC)
4000 ppm (4X MIC)
2000 ppm (2X MIC)
2000 ppm (2X MIC)
2000 ppm (2X MIC)
1000 ppm (1X MIC)
1000 ppm (1X MIC)
1000 ppm (1X MIC)
500 ppm (0.5X MIC)
500 ppm (0.5X MIC)
500 ppm (0.5X MIC)
2000 ppm (2X MIC)
1000 ppm (4X MIC)
1000 ppm (1X MIC)
500 ppm (2X MIC)
500 ppm (0.5X MIC)
250 ppm (1X MIC)
125 ppm (0.5X MIC)
0.5
0.5
1
1
1
1
1
3
3
3
3
3
6
6
6
6
6
24
24
24
24
24
0
0
0.5
0
0.5
0
TIME (HR)
TIME (HR)
0
0.5
0
TIME (HR)
TIME (HR)
TIME (HR)
P. aeruginosa ATCC 27853 with RECCE® 327
P. aeruginosa ATCC 27853 with RECCE® 327
A. baumannii ATCC 17978 with RECCE® 327
K. pneumoniae ATCC 43816 with RECCE® 327
Time-kill curve (average)
Time-kill curve (average)
Time-kill curve (average)
Time-kill curve (average)
E. cloacae ATCC 13047 with RECCE® 327
A. baumannii ATCC 17978 with RECCE® 327
Time-kill curve (average)
E. cloacae ATCC 13047 with RECCE® 327
Time-kill curve (average)
Time-kill curve (average)
10
Vehicle control
8000 ppm (8X MIC)
4000 ppm (4X MIC)
Vehicle control
Vehicle control
8000 ppm (8X MIC)
Vehicle control
8000 ppm (8X MIC)
4000 ppm (4X MIC)
8000 ppm (8X MIC)
4000 ppm (4X MIC)
2000 ppm (2X MIC)
4000 ppm (4X MIC)
2000 ppm (2X MIC)
1000 ppm (1X MIC)
2000 ppm (2X MIC)
1000 ppm (1X MIC)
500 ppm (0.5X MIC)
1000 ppm (1X MIC)
500 ppm (0.5X MIC)
500 ppm (0.5X MIC)
500 ppm (0.5X MIC)
2000 ppm (2X MIC)
1000 ppm (1X MIC)
L
M
/
U
F
C
0
1
G
O
L
0.5
0.5
0.5
1
1
1
1
3
3
3
3
6
6
6
6
24
24
24
24
10
8
6
L
M
4
/
L
U
M
F
/
C
U
0
2
F
1
G
C
O
0
L
1
G
O
0
L
10
8
8
6
6
4
4
2
2
0
0
0
TIME (HR)
0
0.5
0
TIME (HR)
TIME (HR)
Vehicle control
Vehicle control
8000 ppm (8X MIC)
Vehicle control
8000 ppm (8X MIC)
4000 ppm (4X MIC)
8000 ppm (8X MIC)
4000 ppm (4X MIC)
2000 ppm (2X MIC)
4000 ppm (4X MIC)
2000 ppm (2X MIC)
1000 ppm (1X MIC)
2000 ppm (2X MIC)
1000 ppm (1X MIC)
500 ppm (0.5X MIC)
1000 ppm (1X MIC)
500 ppm (0.5X MIC)
500 ppm (0.5X MIC)
0.5
0.5
1
1
1
3
3
3
6
6
6
24
24
24
10
8
6
4
2
0
10
8
8
6
6
4
4
2
2
0
10
10
10
8
8
8
6
6
6
4
L
4
M
4
/
U
2
F
C
2
0
2
1
G
O
0
L
0
0
8
8
8
6
6
6
4
L
4
M
4
/
L
U
2
M
F
/
C
2
U
0
2
1
F
G
C
O
0
0
L
1
G
0
O
0
L
10
8
6
4
2
0
L
M
/
U
F
C
0
1
G
O
L
0
TIME (HR)
0.5
1
3
6
24
A. baumannii ATCC 17978 with RECCE® 327
Time-kill curve (average)
10
8
6
4
2
0
L
M
/
U
F
C
0
1
G
O
L
0
TIME (HR)
0.5
1
3
6
24
E. cloacae ATCC 13047 with RECCE® 327
Time-kill curve (average)
10
8
6
4
2
0
L
M
/
U
F
C
0
1
G
O
L
0
TIME (HR)
0.5
1
3
6
24
Vehicle control
2000 ppm (8X MIC)
1000 ppm (4X MIC)
500 ppm (2X MIC)
250 ppm (1X MIC)
125 ppm (0.5X MIC)
Vehicle control
8000 ppm (8X MIC)
4000 ppm (4X MIC)
2000 ppm (2X MIC)
1000 ppm (1X MIC)
500 ppm (0.5X MIC)
Vehicle control
8000 ppm (8X MIC)
4000 ppm (4X MIC)
2000 ppm (2X MIC)
1000 ppm (1X MIC)
500 ppm (0.5X MIC)
E. faecium ATCC 19434 with RECCE® 327
Time-kill curve (average)
0
0.5
1
3
6
24
TIME (HR)
K. pneumoniae ATCC 43816 with RECCE® 327
Time-kill curve (average)
10
8
6
4
2
0
10
8
6
4
2
0
10
8
6
4
2
0
L
M
/
U
F
C
G
O
L
0
1
L
M
/
U
F
C
G
O
L
0
1
L
M
/
U
F
C
G
O
L
0
1
Vehicle control
8000 ppm (8X MIC)
4000 ppm (4X MIC)
2000 ppm (2X MIC)
1000 ppm (1X MIC)
500 ppm (0.5X MIC)
L
M
/
U
F
C
0
1
G
O
L
0
0.5
1
3
6
24
TIME (HR)
P. aeruginosa ATCC 27853 with RECCE® 327
Time-kill curve (average)
E. cloacae ATCC 13047 with RECCE® 327
P. aeruginosa ATCC 27853 with RECCE® 327
Time-kill curve (average)
Time-kill curve (average)
E. cloacae ATCC 13047 with RECCE® 327
Time-kill curve (average)
10
10
8
8
6
6
4
4
2
2
0
0
L
M
L
/
M
U
/
F
U
C
F
0
C
1
G
0
1
G
O
L
O
L
Vehicle control
8000 ppm (8X MIC)
4000 ppm (4X MIC)
2000 ppm (2X MIC)
1000 ppm (1X MIC)
500 ppm (0.5X MIC)
10
8
6
4
2
0
L
M
/
U
F
C
G
O
L
0
1
Vehicle control
Vehicle control
8000 ppm (8X MIC)
8000 ppm (8X MIC)
4000 ppm (4X MIC)
4000 ppm (4X MIC)
2000 ppm (2X MIC)
2000 ppm (2X MIC)
1000 ppm (1X MIC)
1000 ppm (1X MIC)
500 ppm (0.5X MIC)
500 ppm (0.5X MIC)
7
Vehicle control
8000 ppm (8X MIC)
4000 ppm (4X MIC)
2000 ppm (2X MIC)
1000 ppm (1X MIC)
500 ppm (0.5X MIC)
0
0.5
1
3
6
24
TIME (HR)
0
0
0.5
0.5
TIME (HR)
TIME (HR)
1
1
3
3
6
6
24
24
0
0.5
1
3
6
24
TIME (HR)
RECCE PHARMACEUTICALS ANNUAL REPORT 2021 OVERVIEW OF COMPANY ACTIVITIES CONTINUED
Human Clinical Trials
A well-designed clinical trial is the gold standard for proving that a treatment or
medical approach works.
Phase I looks to identify if the drug is safe in healthy
patients and determine the appropriate doses. Phase
II looks to test whether the compound is efficacious
in unwell patients. Phase III of testing compares the
compound against marketed therapeutics with a much
larger patient group. Upon reaching Phase IV, the
compound is then marketed; however, still monitored
for its effects.
Phase I Clinical Trial
R327 has continued to progress through the drug
development pathway, showing great promise for a
new class of broad-spectrum antibiotics.
Recce’s Phase I human clinical trial is designed to assess
the intravenous (IV) infusion of R327 in 80 healthy male
subjects as a single ascending dose. The clinical trial
is being conducted at South Australia’s CMAX Clinical
Research facility, which has maintained world-class
standards and meets international regulatory authority
data entry and quality requirements, including those set
out by the European Medicines Agency (EMA) and U.S.
Food and Drug Administration (FDA).
What is a Phase I/II
Clinical Trial?
A Phase I/II clinical trial combines the first two
phases in a single protocol to assess both a safe
and active dose. This expedites the trial process
enabling promising drugs to reach patients in
need faster.
https://pubmed.ncbi.nlm.nih.gov/31538815/
Recce’s IV Phase I clinical trial continues to progress
with clinicians appointed, independent facility audits
complete, third-party R327 plasma level assay lab ready,
and hundreds of vials dispatched to an intermediary
clinical storage facility in South Australia.
Phase I/II Topical Clinical Trial
Parallel to the Phase I IV safety study, Recce is
conducting a topical Phase I/II study of R327 as a
spray-on, broad spectrum antibiotic for the treatment
of infected burn wounds. Approval has been granted
by the Human Research Ethics committee in late 2020,
with the trial taking place at Fiona Stanley Hospital in
Western Australia.
Trial investigators include burn wound specialists,
Dr Edward Raby (Clinical Microbiologist and Infectious
Diseases expert at Royal Perth and Fiona Stanley
Hospitals), Dr Chris Heath (Head of Infectious Diseases
at Fiona Stanley Hospital) and Professor Fiona Wood
(Director of State Adult Burns Unit at Fiona Stanley
Hospital), internationally renowned burns surgeon, known
for pioneering the development of ‘spray-on skin’.
More information on this trial can be found on the
Australian New Zealand Clinical Trials Registry under the
trial ID ACTRN12621000412831 – Proof of concept study
of RECCE® 327 topical antibiotic therapy for infected burn
wounds in adults.
Post financial year, the Company announced it had dosed
multiple patients with R327 in this Phase I/II clinical trial,
showing no adverse symptoms. Please visit Recce’s
website for the full announcement.
8
FIONA STANLEY HOSPITAL, PERTH. Photo: Peter Bennetts
RECCE PHARMACEUTICALS ANNUAL REPORT 2021 COVID-19
Over one year on from the initial global outbreak of SARS-CoV- 2 (COVID-19),
we have learned the critical need for and importance of new therapies to help reduce
the spread and mortality rate of the disease, including its emerging variant strains.
In addition to the recent focus on vaccines, anti-infective treatments for COVID-19
are needed now more than ever to help treat patients with the virus and subsequent
bacterial co-infections.
Australia
International
FY20/21 saw R327 selected as a Priority 1 candidate
for testing in a SARS-CoV-2 Antiviral Program led
by the leading Australian scientific research institution.
Stage 1A
Stage 1A found encouraging virucidal activity of R327
against the SARS-CoV-2 virus. R327 showed a reduction
in SARS-CoV-2 viral genome numbers at 4,000ppm
and found the virus was no longer detectable by viral
titration; the RT-PCR detected a 99.9% reduction in
viral genome copies.
Antiviral testing was conducted in triplicate with a very
small variance bar above the 4,000ppm data point.
Minimal toxicity was observed at 4,000ppm of R327;
however, there was no cytotoxicity at or below 1,333ppm.
Stage 1B
Upon successful completion of Stage 1A, Stage 1B was
conducted to calculate R327’s half maximal inhibitory
concentration (IC50) and cytotoxicity. R327 reduced
SARS-CoV-2 viral genome copy numbers at 4,444ppm
and was accompanied by reduced infectious virus titres,
allowing a half maximum Inhibitory Concentration (IC50)
calculation of 2,046ppm.
Recommendation Received to Proceed to Stage 2
With results demonstrating efficacy of R327 and minimal
toxicity at small windows of concentrations in the in vitro
testing in Vero cells, the Company received a qualified
recommendation to proceed to Stage 2 of the Program
for further testing in normal human bronchial epithelial
(NHBE) cells grown at the air-liquid interface.
Parallel to the COVID-19 studies in Australia, multiple
contract research organisations in the United States
have advanced studies of R327 and RECCE® 529 (R529)
against SARS-CoV-2.
In vitro
Both R327 and R529 compounds demonstrated
concentration-dependent reductions in the SARS-CoV-2
(COVID-19) virus titre in an in vitro study using organoids
made from human airway epithelial cells. In a separate but
related study, various concentrations of R327 and R529,
further indicated an excellent toxicity profile (<0.25%) on
Vero cells. Encouraging results prompted progression to
an in-vivo study.
In vivo
R327 and R529 demonstrated dose-dependent activity
in vivo against the SARS-CoV-2 virus in Syrian golden
hamsters, a well-accepted model of infection. Intranasal
administration of both compounds supports multiple
potential modes of administration against the virus.
This hamster study demonstrated the potential for nasal
administration of Recce’s anti-infective compounds,
specifically when used against viruses.
Moving Forward…
Expanded international animal studies are underway,
seeking to build upon encouraging indications against
COVID in studies to date.
9
RECCE PHARMACEUTICALS ANNUAL REPORT 2021 ONGOING VIRTUAL ENGAGEMENT WITH THE
GLOBAL INFECTIOUS DISEASE COMMUNITY,
INVESTORS AND KEY OPINION LEADERS
During the COVID-19 pandemic, Recce continued its communication and active engagement as a critical operational
priority, albeit virtually, with key opinion leaders, investors, shareholders and stakeholders. The Company also
presented and participated at various biotech and investor conferences, including but not limited to:
10
RECCE PHARMACEUTICALS ANNUAL REPORT 2021DATEEVENTPRESENCE2020JulyFresh Equities, A fresh Investment UpdateVirtualJulySwitzer TV Investing, Recce PresentationVirtualAugustStockPal Biotech and Healthcare WebinarVirtualSeptemberThe Capital Network TV: Recce InterviewVirtualSeptemberAusbiz InterviewVirtualOctoberWorld SuperBug CongressVirtualOctoberID WeekVirtualOctoberSwitzer Virtual Event VirtualNovemberMarket Herald InterviewVirtualNovemberGenetic Engineering and Biotechnology News InterviewVirtualDecemberTechKnow PerthVirtualDecemberBioSpace InterviewVirtual2021FebruarySpark Plus NDRVirtualMarchH.C Wainwright Global Life Sciences ConferenceVirtualMarchFinance News Network Online Investor EventVirtualMarchSpark Plus Biotech DayVirtualMayThe Market Herald InterviewPerth, WAMayWholesale Investor, Small Cap Event- Keynote SpeechVirtualMay6PR InterviewRadioJuneMST Access Australian Micro and Small Caps ConferenceVirtualJuneWorld Microbe ForumVirtualJuneSepsis Tech and InnovationVirtualJuneGold Coast Investment ShowcaseSurfers Paradise, QLD BOARD OF DIRECTORS AND
KEY MANAGEMENT PERSONNEL
Dr John Prendergast
Non-Executive Chairman
BSc (Hons), MSc (UNSW), PhD (UNSW), CSS (HU)
Dr Prendergast is currently Chairman and
Co-founder of Palatin Technologies, Inc.
(NYSE: PTH), a US biotechnology company
capitalised at over US$260m, developing
therapeutics for diseases with significant
unmet medical need. He is also lead director
of Heat Biologics, Inc. (NASDAQ: HTBX).
Michele Dilizia
Executive Director and
Chief Scientific Officer
BSc (Med Sci), Grad Dip Bus (Mkting),
BA (Journ), GAICD, MASM
Ms Dilizia is a qualified Medical Scientist
with a specialisation in medical
microbiology. Ms Dilizia successfully co-led
the research and development of Recce’s
suite of anti-infective compounds, resulting
in a portfolio of granted patents across
the globe, including a Qualified Infectious
Disease Product designation with the U.S.
Food and Drug Administration (FDA).
Arthur Kollaras
Principal Engineer & Head of
Manufacturing
BSc, BEng (Chem), PhilEng (Enviro),
MIEAust, MISPE
Mr Kollaras is highly qualified in chemical
engineering and microbiology. He has
significant experience taking a new
technology concept from pilot plant to
full-scale international production under
FDA standards.
Justin Reynolds
Chief Financial Officer (Pitcher Partners)
Mr Reynolds is a Partner at Pitcher Partners
Sydney. Mr Reynolds’ experience with
multinational companies has led him to
developing expertise as an Outsourced
Financial Controller.
Daniel Astudillo
Head of Marketing
BCom (Marketing), BA (Spanish), MBA
Mr Astudillo is an experienced Marketing
Specialist in the pharmaceutical and
clinical trial sector with expertise in digital
marketing campaigns and targeting key
investors in the healthcare industry.
James Graham
Managing Director and
Chief Executive Officer
BCom (Entrepreneurship), GAICD
Mr Graham is the Chief Executive Officer
of Recce Pharmaceuticals. Mr Graham has
extensive experience in marketing, business
development and commercialisation of
early-stage technologies with global
potential. Mr Graham has served on
Recce’s Board of Directors for six years;
and has previously held roles of leadership
including Co-Founder & General Manager
(from start-up to commercialisation) of a
multi-award-winning marine company and
Committee Member of the West Australian
Business Angels, honing his expertise in
growing companies with global reach.
Dr Justin Ward
Executive Director and
Principal Quality Chemist
BSc (Chem), PhD (Chem), MRACI, CChem
Dr Ward is a qualified Chemist who
specialises in pharmaceutical quality
management and product development.
He previously held a technical role with
Pfizer, involving providing data for the
regulatory submissions to the FDA
and TGA.
Dr Alan Dunton
Non-Executive Director
BSc (BioChem) Hons, M.D. (NYU)
Dr Dunton is a veteran within the Biotech
industry with over three decades of senior
pharmaceutical experience, where he
has held leadership positions at various
biotechnology and pharmaceutical
companies. Dr Dunton has advanced
numerous blockbuster antibiotics through
regulatory review and commercialisation
at Fortune 500 companies including J&J
and Roche.
Alistair McKeough
Company Secretary (Automic Group)
Mr McKeough is a Principal at Automic
Legal. He specialises in complex commercial
matters that require careful and strategic
planning. Mr McKeough has extensive
experience advising ASX-listed companies
and their directors and is a member of
the University of New South Wales Law
Advisory Council.
11
RECCE PHARMACEUTICALS ANNUAL REPORT 2021 THANK YOU TO
DR GRAHAM MELROSE
In July 2020, Dr Graham Melrose completed his
Executive Service Agreement as Chief Research
Officer and resigned from his position as Executive
Director of the Board.
He concluded a distinguished career of significant
contributions to the fields of Polymer Chemistry
and Infectious Disease, advancing a number of
transformative medical technologies.
A recognised pioneer and veteran in the Biotech
Industry, Dr Melrose’s decades of research and peer
reviewed journal articles on synthetic chemistry,
including some eight years as Head of Research at
Johnson & Johnson (Australia) led him to co-found
Recce Pharmaceuticals in 2008. He established Recce
with the mission to address the global health threat
of Antibiotic Resistance.
Dr Melrose’s 12 years with the Company saw a new
suite of polymeric pioneers that will continue his
journey over the time ahead. We thank Dr Melrose
for his contribution to Recce Pharmaceuticals and
global health as we build upon and advance his
foundations today.
CLINICAL ADVISORY
COMMITTEE
Professor Philip Sutton
Head of Helicobacter pylori
Development Program
Professor Sutton brings more than 30
years of research and industry experience
in immunology, inflammatory disease, and
H. pylori bacteria, having served as the
former Head of Immunology at CSL Limited
in Melbourne. He was Chief Editor of a
textbook on the subject titled Helicobacter
pylori in the 21st Century’ and has co-
authored 92 manuscripts published in peer-
reviewed journals. Professor Sutton currently
leads the Mucosal Immunology Group at
the Murdoch Children’s Research Institute in
Victoria, Australia with a specific interest in
infections caused by the H. pylori bacterium
due to its prominence and link to stomach
ulcers and gastric cancer.
Dr David Bowers 1960 – 2021
Chair of Clinical Advisory Committee
Dr Bowers was a leading Spinal Injury
Physician at Royal North Shore Hospital.
Dr Bowers had a special interest in the
treatment of complex and life-threatening
antibiotic-resistant infections, particularly
among patients with severe spinal cord
injuries.
In Remembrance
It is with much sadness we share the passing
of Dr David Bowers, a medical pioneer, patient
advocate, colleague and dear friend who died
suddenly doing what he loved (skiing) on a
holiday with his family in July 2021.
David was one of the first doctors to see
the potential of our work and contacted the
company in his on-going pursuit to help past,
present and future patients under his care
at Royal North Shore Hospital.
David played an important role in
spearheading use of our lead antibiotic
under the Therapeutic Goods Administration
(TGA) Special Access Scheme Category A
(individualised patient circumstances), often
taking it upon himself to get all the necessary
paperwork completed to help those in need
of medical care.
Whilst his many accomplishments as a
leading spinal injury physician speak for
themselves, his determination to make a
difference to the lives of patients in need and
their families was a major factor driving all he
did. He used his considerable talents, skills,
knowledge and capability to help others.
All of us at Recce extend our deepest
sympathies to his family. It was a privilege
to work with David; his legacy serves as a
source of inspiration, pushing us to see our
breakthrough antibiotics are available to all
those who need them.
12
RECCE PHARMACEUTICALS ANNUAL REPORT 2021 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 2021
14 DIRECTORS’ REPORT
28 AUDITOR'S INDEPENDENCE DECLARATION
29 CORPORATE GOVERNANCE STATEMENT
40 CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND
OTHER COMPREHENSIVE INCOME
41 CONSOLIDATED STATEMENT OF FINANCIAL POSITION
42 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
43 CONSOLIDATED STATEMENT OF CASH FLOWS
44 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
66 DIRECTORS’ DECLARATION
67 INDEPENDENT AUDITOR’S REPORT
71 ASX ADDITIONAL INFORMATION
13
RECCE PHARMACEUTICALS ANNUAL REPORT 2021
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2021
Your Directors present their report on Recce
Pharmaceuticals Ltd (the ‘Company’) and
controlled entities (the ‘Group’) for the year
ended 30 June 2021.
Directors
The following persons held office as Directors of
the Company during the year and up to the date
of this report:
Dr John Prendergast
Non-Executive Chairman
Dr Graham Melrose
Executive Director (resigned 3 July 2020)
Dr Alan Dunton
Non-Executive Director (appointed 12 July 2020)
Mr James Graham
Executive Director & Chief Executive Officer
(appointed 28 August 2020)
Ms Michele Dilizia
Chief Scientific Officer and Executive Director
Dr Justin Ward
Executive Director
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 John Prendergast
Chairman (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; and Lead Director of Heat Biologics,
Inc. (NASDAQ: HTBX).
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
Special Responsibilities
Chairman of Audit & Risk Management Committee
Member 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)
14
RECCE PHARMACEUTICALS ANNUAL REPORT 2021 Dr Graham Melrose
Ms Michele Dilizia
Director (Executive) – resigned 3 July 2020
Director (Executive) and Chief Scientific Officer
Qualifications
Qualifications
BSc (Med Sci), Grad Dip Bus (Mkting), BA (Journ),
GAICD, MASM
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 and Options
3,543,485 Ordinary Shares
1,500,000 Unlisted Options
Special Responsibilities
Nil
Directorships held in other listed entities during
the last three years
Nil
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
40,948,079 Ordinary Shares*
*held jointly with wife Olga Mary Melrose
Special Responsibilities
Nil
Directorships held in other listed entities during
the last three years
Nil
15
RECCE PHARMACEUTICALS ANNUAL REPORT 2021 Mr James Graham
Dr Justin Ward
Director (Executive) and Chief Executive Officer
Director (Executive)
Qualifications
Qualifications
BCom (Entrepreneurship), GAICD
BSc (Chem), PhD (Chem), MRACI, Chartered Chemist
Experience
Experience
Mr Graham is Chief Executive Officer and Executive
Director of the Company.
Mr Graham has a background in marketing, business
development and commercialisation of early stage
technology with global potential.
Mr Graham continues to work closely with the growth
and direction of Company, routinely investing alongside
shareholders in capital rounds to date.
Interest in Shares and Options
Direct ownership
2,840,332 Ordinary Shares
2,250,000 Unlisted Options
Indirect ownership
3,191,600 Ordinary Shares
Special Responsibilities
Dr Ward is qualified chemist with specialisation in
pharmaceutical quality management and product
development.
Before Recce Pharmaceuticals, he held a technical
speciality and special project leadership role with
Pfizer Pharmaceuticals, involving providing data for
the regulatory submissions to the FDA and TGA.
After Pfizer, he was the Laboratory Manager for Solbec,
involving, again as presently, drug specifications and
pharmaceutical trials for the ASX-Listed company.
Interest in Shares and Options
Direct ownership
158,966 Ordinary Shares
600,000 Unlisted Options
Special Responsibilities
Nil
Member of the Audit and Risk Management Committee
Directorships held in other listed entities during
the last three years
Directorships held in other listed entities during
the last three years
Nil
Nil
16
RECCE PHARMACEUTICALS ANNUAL REPORT 2021DIRECTORS’ REPORT CONTINUEDFOR THE YEAR ENDED 30 JUNE 2021 Dr Alan Dunton
Director (Non-Executive) – appointed 14 July 2020
Qualifications
M.D. New York University School of Medicine
B.S. Biochemistry. (Magna cum laude) State University
School of New York at Buffalo
Experience
Dr Dunton has held leadership positions at various
biotechnology and pharmaceutical companies
including serving as president and chief executive
officer at Panacos Pharmaceuticals, Inc., Metaphore
Pharmaceuticals, Inc., and chief operating officer at
Emisphere Technologies, Inc.
Dr Dunton served in several positions at Johnson and
Johnson including president and managing director at the
Janssen Research Foundation where he was responsible
for leading over 2,000 professionals worldwide and
prior to this as vice president of global clinical research
and development at the R.W. Johnson Pharmaceutical
Research Institute.
Dr Dunton earned his medical degree from New York
University School of Medicine following his bachelor’s
degree in biochemistry from the State University of
New York at Buffalo. Dr Dunton then completed his
fellowship in clinical pharmacology at New York Hospital/
Cornell University Medical Center and, in 1987, was
awarded The Nellie Westerman Prize from the American
Federation for Clinical Research (AFCR) for his work in
medical ethics.
Interest in Shares and Options
Indirect ownership
60,000 Ordinary Shares
1,125,000 Unlisted Options
Special Responsibilities
Chairman of Nomination & Remuneration Committee
Member of the Audit & Risk Management Committee
Directorships held in other listed entities during
the last three years
Palatin Technologies, Inc. (NYSE: PTN) Oragenics, Inc.
(NYSE: OGEN) CorMedix, Inc. (NYSE: GRMD) Regeneus
Ltd (ASX: RGS)
Chief Financial Officer
Justin Reynolds
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.
Company Secretary
Alistair McKeough
Alistair McKeough is a Partner at Automic Legal.
Mr Alistair specialises in complex commercial matters
that require careful strategic planning. An experienced
commercial litigator with an outstanding record of
success in contested litigation, Alistair also applied his
exceptional back letter knowledge and analytical skills in
transactional work. He is trusted by some of Australia’s
most preeminent business people to handle their
personal legal affairs.
Alistair is regularly engaged in matters involving serious
risk to personal and corporate reputations and he has
extensive experience in media sensitive matters. Prior
to founding Automic Legal in 2010, Alistair worked at
Freehills and was an associate to a Judge of the Federal
Court of Australia.
Alistair’s academic work has been quoted by the Court
of Appeal of New South Wales and in leading Australian
text books. Alistair has extensive experience advising ASX
listed companies and their directors and is a member of
the University of New South Wales Law Advisory Council.
Principal Activity
The Group is pioneering the development and
commercialisation of a drug discovery and development
business commercialising new Classes of synthetic
anti–infectives with broad spectrum activity designed
to address the urgent global health threat of antibiotic
resistant superbugs and emerging viral pathogens.
Its patented lead candidate, 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.
17
RECCE PHARMACEUTICALS ANNUAL REPORT 2021 Review of Operations
On 3 July 2020, the Company announced the completion
of Dr. Graham Melrose’s executive service agreement as
Chief Research Officer and his resignation as Executive
Director from the Board.
On 8 July 2020, the Company announced it had entered
into an Antiviral SARS-CoV-2 Screening Program
Agreement, with a scientific Australian Government
agency and a world Class institute focused on infection
and immunity following their selection of RECCE® 327
and RECCE® 529 in the Priority 1 candidate group. This
was subsequently amended on 20 July 2020 to exclude
RECCE® 529.
On 14 July 2020, the Company announced the
appointment of Alan W. Dunton, M.D., to its Board of
Directors as an independent Non-Executive Director
and as a member of the Company’s Audit & Risk and
Remuneration & Nomination Committees.
On 16 July 2020, the Company announced it had entered
into an agreement with Path BioAnalytics Inc, a precision
medicine company based in Durham, North Carolina,
USA, for the study of RECCE® 327 and RECCE® 529
against SARS-CoV-2.
On 23 July 2020, the Company announced that it was
delivering the Opening R&D Address at the World Anti-
Microbial Resistance Congress on the 8th – 9th October
2020. Due to the global pandemic, the conference was
held virtually.
On 4 August 2020, the Company announced positive
efficacy activity against Helicobacter pylori (H. pylori)
bacteria in rats treated with new anti-infective RECCE®
435, including a favourable toxicity profile in a related
study. RECCE® 435 is a synthetic polymer anti-infective
formulated for oral use.
On 17 August 2020, the Company announced that the
milestone associated with 7,398,174 of the Company’s
Class D Unquoted Performance Shares (Eligible Shares)
had been achieved.
On 21 August 2020, the Company announced the
appointment of Professor Philip Sutton to their Clinical
Advisory Committee and Head of the Helicobacter pylori
stomach bacteria development program.
On 28 August 2020, the Company announced that the
Board of Directors has unanimously appointed James
Graham to the role of Chief Executive Officer.
On 1 September 2020, the Company announced that
it had received an Innovation Connections grant of
A$37,508 plus GST, under the Australian Government’s
Entrepreneurs’ Programme.
On 8 September 2020, the Company announced
an update on its international SARS-CoV-2 in-vitro
(organoid) studies undertaken by Path BioAnalytics
and The University of Tennessee Health Science Centre.
Data indicated concentration-dependent reductions
from baseline of the SARS-CoV-2 virus by RECCE® 327
and RECCE® 529 as compared to a control group. The
SARS-CoV-2 virus is the cause of the global COVID-19
pandemic. The concentrations utilised were far lower than
the suite of pre-clinical data on RECCE® 327 intravenous
infusion program.
On 10 September 2020, the Company announced
selection of South Australia’s CMAX Clinical Research as
the independent trial facility which will conduct a Phase I
clinical study of its lead compound RECCE® 327.
On 23 September 2020, the Company announced it had
raised A$27,950,000 (before costs) in a placement to
institutional, professional and sophisticated investors that
resulted in 21,500,000 fully paid ordinary shares being
issued at A$1.30 per share.
On 30 September 2020, the Company announced it had
entered into an agreement with the Murdoch Children’s
Research Institute to conduct pre-clinical studies
assessing the potential of RECCE® 435 for the treatment
of Helicobacter pylori infections.
On 30 September 2020, the Company announced that
the Board of Directors had unanimously appointed
Michele Dilizia to the role of Chief Scientific Officer.
Ms Dilizia will also continue her role as Executive
Director and as member of the Board of Directors.
On 5 October 2020, the Company announced the cash
receipt of A$640,049 Research and Development Tax
Incentive rebate from the Australian Tax Office for the
year ending 30 June 2020.
On 16 October 2020, the Company announced it had
received Human Research Ethics Committee approval
to start a Phase I/II topical clinical trial of its synthetic
anti-infective RECCE® 327 for patients with infected
burn wounds.
On 10 November 2020, the Company announced
encouraging results from their domestically based
Antiviral SARS-CoV-2 Screening Program showing
RECCE® 327 had encouraging inhibition of the SARS-
CoV-2 virus.
On 23 November 2020, the Company announced the
Japan Patent Office had granted Patent Family 3 titled
‘Anti-virus Agent and Method for Treatment of Viral
Infection’, furthering marketing and manufacturing
monopolies to February 2037.
18
RECCE PHARMACEUTICALS ANNUAL REPORT 2021DIRECTORS’ REPORT CONTINUEDFOR THE YEAR ENDED 30 JUNE 2021 On 26 November 2020, the Company announced
the award of an Advanced Overseas Finding for
AU$17,150,000 of Synthetic Antibiotic Research &
Development applicable expenditure by AusIndustry
(a division of the Australian Government’s Department
of Industry, Innovation and Science).
On 8 December 2020, the Company announced
the award of an Advanced Overseas Finding for
AU$9,637,500 of Synthetic Anti-Viral Research
& Development (R&D) applicable expenditure by
AusIndustry (a division of the Australian Government’s
Department of Industry, Innovation and Science) –
AU$26,787,500 across infectious disease portfolio.
On 23 December 2020, the Company announced
results from its international SARS-CoV-2 in-vivo studies,
demonstrating positive activity of RECCE® 327 and
RECCE® 529 against the SARS-CoV-2 virus in Syrian
golden hamsters.
On 3 February 2021, the Company announced a further
cash receipt of A$925,981 Research and Development Tax
Incentive rebate from the Australian Tax Office, bringing
the total R&D rebate to $1,566,030 for the year ending
30 June 2020.
On 12 February 2021, the Company announced results of
RECCE® 327 (R327) demonstrating encouraging virucidal
activity against the SARS-CoV-2 virus with a positive
safety profile.
On 16 February 2021, the Company announced it had
formalised an agreement with Fiona Stanley Hospital for
a Phase I/II clinical trial to assess the potential of RECCE®
327’s new spray-on, broad-spectrum antibiotic for the
treatment of topical burn wound infections.
On 24 February 2021, the Company announced it had
commenced the application process to dual list its stock
on the Frankfurt Stock Exchange (FSE).
On 8 March 2021, the Company announced that the
Company’s shares were now Dual Listed on the Frankfurt
Stock Exchange (FSE), with trading commencing Monday
8 March at 8:00am (CET) under the code R9Q.
On 10 March 2021, the Company announced that Chief
Executive Officer James Graham was presenting an
overview of the Company’s business, pipeline and recent
corporate updates at the H.C Wainwright Global Life
Sciences Conference. The virtual conference was held
from March 9 – 10, 2021 (US Eastern Standard Time).
On 15 March 2021, the Company announced its lead
compound RECCE® 327 (R327) had been added to
The Pew Charitable Trusts’ annual list of Non-traditional
Products in Development to Combat Bacterial Infections
identifying new antibiotic treatments in development
worldwide.
On 30 March 2021, the Company announced the
European Patent Office had granted Patent Family 3
‘Anti-Virus Agent for Treatment Of Viral Infections’,
furthering marketing and manufacturing monopolies
to February 2037.
On 1 April 2021, the Company announced animal study
data showing positive efficacy of a new anti-infective
formulation RECCE® 111 (R111) against Streptococcus
pneumoniae (S. pneumoniae) bacterial sinusitis in mice.
RECCE® 111 is a non-descript title for an experimental
compound, developed inhouse, building upon the
unique Mechanisms of Action of RECCE® 327.
On 7 April 2021, the Company announced that a Special
Access Scheme (SAS) Category A notification had been
made to the Therapeutic Goods Administration (TGA) by
a medical practitioner following the successful treatment
of a patient with RECCE® 327 (R327), via nasal passage,
against multidrug-resistant Pseudomonas aeruginosa
(P. aeruginosa) sinusitis infection.
On 17 June 2021, the Company announced that it has
been invited to present at the MST Access Australian
Micro & Small Caps Conference 2021.
On 18 June 2021, the Company announced it had
accepted an invitation to present at the World Microbe
Forum following confirmation to publish a recent
Abstract in the 2021 program.
Results of Operations
The operating loss has increased to $13,513,366 (2020:
loss of $4,316,737) as a result of the increased focus on
its R&D activities and share-based payments. The annual
loss was after a R&D tax incentive of $1,566,031 (2020:
$1,071,727).
The loss per share has increased during the year to
8.70 cents (2020: 3.39 cents). The Group’s 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 12,165,000
(2020: 2,500,000) options to acquire ordinary shares
in the Company at various exercise prices and dates
as disclosed in Note 17 to the consolidated financial
statements. 1,331,440 options were exercised for $255,249
during the financial year (2020: 1,963,736 options were
exercised for $558,653).
19
RECCE PHARMACEUTICALS ANNUAL REPORT 2021 Significant Changes in State of Affairs
No significant changes in the Group's state of affairs
occurred during the year other than the dual listing on
the Frankfurt Stock Exchange.
Environmental 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 Date
For any potential impacts of COVID-19 (both pre and
post reporting date), refer to Note 2(w).
Other than the above, no matters or circumstances
have arisen since the end of the financial year, which
significantly affected, or may significantly affect, the
operations of the 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.
Proceedings on Behalf of Group
Other than those matters referred to in Note 26,
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 other 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 2021:
(i) Directors
Dr John Prendergast Non-Executive Chairman
Dr Graham Melrose
Dr Alan Dunton
Mr James Graham
Ms Michele Dilizia
Executive Director
(resigned 3 July 2020)
Non-Executive Director
(appointed 12 July 2020)
Chief Executive Officer and
Executive Director
(appointed 28 August 2020)
Chief Scientific Officer and
Executive Director
Dr Justin Ward
Executive Director
(ii) Key Management Personnel
Mr Arthur Kollaras1
Principal Engineer
1 Entered into a consultancy agreement with the Company
effective 1 August 2019.
20
RECCE PHARMACEUTICALS ANNUAL REPORT 2021DIRECTORS’ REPORT CONTINUEDFOR THE YEAR ENDED 30 JUNE 2021 The Remuneration Report covers the following matters:
– Where appropriate senior managers may receive a
(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
executive’s 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:
component of their remuneration in equity securities
to align their interests with those of the shareholders.
The total remuneration of executives and other senior
managers consists of the following:
(a) Salary – Executive Directors and senior managers
receive a sum payable fortnightly in cash;
(b) Long-term incentives – Executive Directors may
participate in share option/performance right
schemes with the prior approval of shareholders.
Other senior managers may also participate in
employee share option/performance right schemes,
with any option/performance right scheme, 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 approved 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’ believed that as at this stage, there is
no relationship between the remunerations policy and
performance.
– Reward reflects the competitive global market in
which we operate;
All Directors are entitled to have their indemnity
insurance paid by the Group.
– 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
21
RECCE PHARMACEUTICALS ANNUAL REPORT 2021 (B) Executive Service Agreements
Name
Base Salary
Dr John Prendergast $120,000 pa
Ms Michele Dilizia
$230,000 pa
Mr James Graham
$300,000 pa
Mr Justin Ward¹
Mr Arthur Kollaras²
–
–
Mr Alan Dunton
$60,000 pa
Performance-
Based Incentives
Term
Nil
Nil
Nil
Nil
Nil
Nil
No fixed term
No fixed term
No fixed term
No fixed term
No fixed term
No fixed term
Notice Period
3 months
3 months
3 months
4 weeks
4 weeks
4 weeks
1 Entered into an employment agreement with the Company effective 1 January 2020. Remunerated at $170 per hour plus 9.5%
Superannuation based on a one-day per week basis. Overtime pay of $250 per hour plus 9.5% Superannuation.
2 Entered into a consultancy agreement with the Company effective 1 August 2019. Remunerated at the rate of $450 per hour.
(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 2021
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
$
Name
Directors
G Melrose
M Dilizia
J Graham
2,538
216,346
294,314
J Prendergast
120,000
J Ward
A Dunton
Executives
A Kollaras
139,123
60,000
131,200
–
35,646
27,539
–
8,858
–
–
240
99,805
20,553
27,960
–
13,217
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
102,584
914,739
1,187,284
1,372,109
1,721,922
1,326,372 1,446,372
365,896
527,093
752,954
812,954
243,930
375,130
–
–
–
–
–
–
–
963,521
72,043
61,969
99,805
– 4,976,000 6,173,340
Year ended 30 June 2020
Name
Directors
G Melrose
M Dilizia
J Graham
J Prendergast
J Ward
Executives
A Kollaras¹
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
177,500
186,646
120,000
144,989
29,356
23,010
11,544
–
5,714
153,774
–
1,002,909
69,624
20,900
16,862
17,731
–
13,774
1,540
70,807
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
270,256
217,372
215,921
120,000
10,000
174,477
9,999
165,313
19,999 1,163,339
–
–
–
–
–
–
1 Entered into a consultancy agreement with the Company effective 1 August 2019.
22
RECCE PHARMACEUTICALS ANNUAL REPORT 2021DIRECTORS’ REPORT CONTINUEDFOR THE YEAR ENDED 30 JUNE 2021 (D) Share-Based Remuneration
Year ended 30 June 2021
(i) Issue of ordinary shares
The following shares were issued on 4 December 2020 after approval at the Annual General Meeting on 30 November
2020 as part of remuneration under a share-based payment.
Name
Executives
A Dunton
(ii) Issue of options
Shares issued
No.
$
60,000
60,000
66,900
66,900
The following options were issued on 22 February 2021 after approval at the Annual General Meeting on 30 November
2020 as part of remuneration under a share-based payment.
Name
Directors
J Graham
M Dilizia
A Dunton
J Prendergast
J Ward
Executives
A Kollaras
Options Issued
No.
$
2,250,000
1,500,000
1,125,000
2,175,000
600,000
1,372,109
914,739
686,054
1,326,372
365,896
400,000
243,930
8,050,000
4,909,100
The terms and conditions of each grant of options affecting remuneration in the current reporting period are as follows:
– exercise price: $1.56;
– grant date 9 October 2020;
– grant date share price: $1.115;
– value per option at grant date: $0.6098;
– issue date: 22 February 2021;
– dividend yield: 0.0%;
– risk-free rate based on the Australian Treasury bond rate for five years, to align with the term of the options: 0.32%;
– expected volatility derived from the share volatility of compatible listed companies over five years, to align with the
term of the options: 77.0%; and
– expected life of the Share Option: five years.
(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 2021.
23
RECCE PHARMACEUTICALS ANNUAL REPORT 2021 Year ended 30 June 2020
(i) Issue of ordinary shares
The following shares were issued on 19 December 2019 after approval at the Annual General Meeting in November 2019
as part of remuneration under a share-based payment.
Name
Executives
J Ward
A Kollaras¹
Shares issued
No.
$
43,478
44,444
87,922
10,000
9,999
19,999
1 Entered into a consultancy agreement with the Company effective 1 August 2019.
(ii) Issue of options
There were no options issued to Directors or KMP as part of their compensation during the year ended 30 June 2020.
(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 2020.
Details of Performance Shares issued
There were no new performance shares issued during the year ended 30 June 2021. The Class B performance shares
lapsed whilst the Class C and Class D performance shares were converted to ordinary shares.
A summary of performance shares which were on issue is as follows:
Name
Directors
G Melrose
M Dilizia
J Graham
Value per performance share
Performance Shares
Class B
Class C
Class D
6,075,000
6,075,000
6,075,000
577,212
745,962
7,398,174
0.00¹
577,212
745,962
7,398,174
0.111²
577,212
745,962
7,398,174
$0.054²
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. These shares lapsed during the year.
2 The Class C and Class D performance shares were expensed in full during the 30 June 2016 financial year. These were converted to
ordinary shares during the current financial year.
The Trinomial option pricing model has been used to calculate the value of the performance shares.
The following assumptions were used:
Underlying share price
20-day VWAP barrier
Term
Risk-free rate
Number of Initial Performance Shares Issued
Probability of reaching milestone
24
Class C
$0.20
$0.60
5 Years
2.18%
Class D
$0.20
$1.20
5 Years
2.18%
8,754,423
8,754,423
N/A
N/A
RECCE PHARMACEUTICALS ANNUAL REPORT 2021DIRECTORS’ REPORT CONTINUEDFOR THE YEAR ENDED 30 JUNE 2021 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 2021 held by the Directors
of the Company and other KMP of the Group, including their personally related parties, are set out below:
Name
Directors
G Melrose
M Dilizia
J Graham
J Prendergast
J Ward
A Dunton
Executives
A Kollaras
Balance at
1 July 2020
Net Change
Other2
Share-based
Payment1
Conversion of
Class C and D
Performance Shares
Balance at
30 June 2021
30,375,003
2,564,061
4,492,158
250,000
158,966
–
67,155
(1,576,924)
(175,000)
47,850
–
–
–
–
–
–
–
–
–
60,000
–
12,150,000
40,948,079
1,154,424
1,491,924
–
–
–
–
3,543,485
6,031,932
250,000
158,966
60,000
67,155
37,907,343
(1,704,074)
60,000
14,796,348
51,059,617
1 Issued 4 December 2020.
2 Ms Michele Dilizia sold on-market 175,000 shares between 16 and 21 June 2021. Mr James Graham acquired 47,850 shares on market
on 16 June 2021. Mr Graham Melrose sold on-market 1,576,924 shares during September 2020.
(b) Performance Shares
The movement of the numbers of performance shares in the Company for the year ended 30 June 2021 held by the
Directors of the Company and other KMP of the Group, including their personally related parties, are set out below:
Name
Directors
G Melrose
M Dilizia
J Graham
J Prendergast
J Ward
Executives
A Kollaras
Balance at
1 July 2020
Class C & D
Performance
Shares Converted
to Ordinary Shares
Class B
Performance
Shares Lapsed/
Unexcercised
Balance at Date
of Resignation
Balance at
30 June 2021
18,225,000
(12,150,000)
(6,075,000)
1,731,636
2,237,886
(1,154,424)
(1,491,924)
(577,212)
(745,962)
–
–
–
–
–
–
–
–
–
22,194,522
(14,796,348)
(7,398,174)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
25
RECCE PHARMACEUTICALS ANNUAL REPORT 2021 Performance Shares Outstanding at 30 June 2021
There are no performance shares outstanding as at 30 June 2021.
(c) Options
The movement of the numbers of options in the Company for the year ended 30 June 2021 held by the Directors
of the Company and other KMP of the Group, including their personally related parties, are set out below:
Directors
J Graham
M Dilizia
A Dunton
J Prendergast
J Ward
Executives
A Kollaras
Balance at
1 July 2020
Share-based
payments
Balance at
30 June 2021
–
–
–
–
–
–
–
2,250,000
2,250,000
1,500,000
1,500,000
1,125,000
2,175,000
600,000
1,125,000
2,175,000
600,000
400,000
400,000
8,050,000
8,050,000
(E) Other Transactions with KMP
During the financial year, consulting fees for technical services totalling $406,770 (2020:$nil) were paid to an entity
associated with Mr A Dunton. All payments were made on normal commercial terms and conditions.
(F) Other Information
Loans to key management personnel
At year end, expense advances repayable by Mr James Graham totalled $40,193 (2020: Nil).
There were no other loans, payables, receivables or other transactions at the end of the financial year with 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’).
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.
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.
At the Annual General Meeting held in November 2019, the Company received a ‘Yes’ vote of more than 96.3% on its
Remuneration Report for the 2019 financial year. No such vote was received in the November 2020 Annual General
Meeting for the 2020 financial year. The group did not receive any specific remuneration related feedback from
shareholders at either meeting.
No remuneration consultants were engaged during the year.
26
RECCE PHARMACEUTICALS ANNUAL REPORT 2021DIRECTORS’ REPORT CONTINUEDFOR THE YEAR ENDED 30 JUNE 2021 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
A copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001
is set out on page 28.
This report is made in accordance with a resolution of the Board of Directors.
Dr John Prendergast
Non-Executive Chairman
31 August 2021
27
RECCE PHARMACEUTICALS ANNUAL REPORT 2021 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 NEIL SMITH TO THE DIRECTORS OF RECCE PHARMACEUTICALS
LTD
As lead auditor of Recce Pharmaceuticals Ltd for the year ended 30 June 2021, 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.
Neil Smith
Director
BDO Audit (WA) Pty Ltd
Perth, 31 August 2021
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.
28
RECCE PHARMACEUTICALS ANNUAL REPORT 2021
CORPORATE GOVERNANCE STATEMENT
This corporate governance statement sets out Recce
Pharmaceutical Limited’s (Company) current compliance
with the ASX Corporate Governance Council’s Corporate
Governance Principles and Recommendations (Fourth
Edition) (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 31 August 2021
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
board charter setting out:
(a) the respective roles and responsibilities
of the board and management; and
(b) those matters expressly reserved to the
board and those delegated to management.
1.2 A listed entity should:
YES
(a) undertake appropriate checks before
appointing a director or senior executive
or putting someone forward for election
as a director; and
(b) provide security holders with all material
information in the Company’s possession
relevant to a decision on whether or not
to elect or re-elect a director.
The Company has adopted a Board Charter which
sets out the respective roles and responsibilities
of the Board and management, and 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 puts forward a candidate to
security holders for election as a director.
(b) All material information relevant to the decision
on whether or not to elect any potential
directors, including information relating to their
qualifications, experience and proposed roles
within the Board are provided to shareholders
in the Company’s notices of meetings.
29
RECCE PHARMACEUTICALS ANNUAL REPORT 2021 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:
NO
(a) The Company has adopted a Diversity Policy
(a) have and disclose a diversity policy;
(b) through its board or a committee of the board
set measurable objectives for achieving gender
diversity in the composition of its board, senior
executives and workforce generally; and
(c) disclose in relation to each reporting period:
(1) the measurable objectives set for that
period to achieve gender diversity;
(2) the entity's progress towards achieving
those objectives; and
(3) either:
(A) the respective proportions of men
and women on the board, in senior
executive positions and across the
whole workforce (including how the
entity has defined ‘senior executive’
for these purposes); or
(B) if the Company is a relevant employer
under the Workplace Gender Equality
Act 2012 (Cth), the Company's most
recent ‘Gender Equality Indicators’,
as defined in and published under
that Act.
which complies with the guidelines prescribed
by the ASX Corporate Governance Council.
The Diversity Policy is available on the
Company’s website at https://recce.com.au/
index.php/company/corporate-governance.
(b) The Diversity Policy:
(i) provides a framework for the Company
to set and achieve measurable objectives
for achieving diversity;
(ii) provides for the monitoring and evaluation
of the scope and currency of the Diversity
Policy. The Company is responsible for
implementing, monitoring and reporting
on the measurable objectives.
(c) As of 30 June 2021, the respective proportions
of men and women on the Board, in Senior
Executive positions and across the whole
organisation are set out below.
(i) 80% of the Company’s Board were male
and 20% were female;
(ii) 80% of the Company’s Senior Executives
were male and 20% were female;
36% of the Group’s entire workforce (including
Board members) were female and 64% were
male.
30
RECCE PHARMACEUTICALS ANNUAL REPORT 2021CORPORATE GOVERNANCE STATEMENT CONTINUED
ASX PRINCIPLES AND RECOMMENDATIONS
COMPLY
(Yes/No)
EXPLANATION
1.6 A listed entity should:
YES
(a) The Nomination and Remuneration Committee
(a) have and disclose a process for periodically
evaluating the performance of the board, its
committees and individual directors; and
(b) disclose for each reporting period whether a
performance evaluation has been undertaken
in accordance with that process during or in
respect of that period.
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) An evaluation of the performance of the board,
its committees and its individual Directors was
conducted during FY21.
1.7 A listed entity should:
YES
(a) The Nomination and Remuneration Committee
(a) have and disclose a process for evaluating the
performance of its senior executives at least
once every reporting period; and
(b) disclose for each reporting period whether a
performance evaluation has been undertaken
in accordance with that process during or in
respect of that period.
is responsible for evaluating the performance
of Senior Executives on an annual basis in
accordance with 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) An evaluation of the Company’s board,
committee and its individual Directors was
conducted during FY21.
31
RECCE PHARMACEUTICALS ANNUAL REPORT 2021
ASX PRINCIPLES AND RECOMMENDATIONS
COMPLY
(Yes/No)
EXPLANATION
2: Structure the Board to be effective and add value
2.1 The board of a listed entity should:
YES
(a) have a nomination committee which:
(1) has at least three members, a majority of
whom are independent directors; and
The Company has established a Nomination and
Remuneration Committee with Dr Alan Dunton, an
independent Director, as Chair of the Committee.
The Committee has three members, who are:
(a) Dr Alan Dunton – Independent Non-executive
(2) is chaired by an independent director;
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
(b) if it does not have a nomination committee,
disclose that fact and the processes it employs
to address board succession issues and to
ensure that the board has the appropriate
balance of skills, knowledge, experience,
independence and diversity to enable it
to discharge its duties and responsibilities
effectively.
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.
2.3 A listed entity should disclose:
YES
(a) the names of the directors considered by the
board to be independent directors;
(b) if a director has an interest, position, affiliation,
or relationship of the type described in Box 2.3
of the ASX Principles and Recommendations
but the board is of the opinion that it does
not compromise the independence of the
director, the nature of the interest, position or
relationship in question and an explanation of
why the board is of that opinion; and
(c) the length of service of each director.
(b) Dr John Prendergast – Independent Non-
executive Director; and
(c) Mr James Graham – Managing Director and
CEO.
The attendance at each committee meeting is
disclosed in the Company’s Annual 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.
The Board strives to ensure that it is comprised
of Directors with a blend of skills, experience and
attributes appropriate for the Company and its
business. The Company’s Board Skills Matrix is
disclosed on the Company’s website at
https://recce.com.au/index.php/company/
corporate-governance.
(a) Dr John Prendergast and Dr Alan Dunton,
are the only Directors of the Company
considered independent.
(b) Dr John Prendergast and Dr Alan Dunton,
are the only two Directors of the Company
considered independent and does not have
an interest, position, association or relationship
of the type described in Box 2.3 of the ASX
Principles and Recommendations.
(c) Details of each Director (including their length
of service) is disclosed in the Company’s
Annual Report.
32
RECCE PHARMACEUTICALS ANNUAL REPORT 2021CORPORATE GOVERNANCE STATEMENT CONTINUED
ASX PRINCIPLES AND RECOMMENDATIONS
COMPLY
(Yes/No)
EXPLANATION
2.4 A majority of the board of a listed entity
NO
should be independent directors.
The Board Charter requires that where practical
the majority of the Board will be independent.
The Board currently comprises a total of five
Directors, of whom two are considered to be
independent, being Dr John Prendergast and
Dr Alan Dunton.
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 Ms Dilizia,
Mr Graham Dr Ward, Dr Prendergast and Dr
Dunton mean that the Board is appropriately
skilled at this stage, to further the progress and
development of the Company.
2.5 The chair of the board of a listed entity should
YES
be an independent director and, in particular,
should not be the same person as the CEO of
the entity.
The Company’s Independent, Non-Executive
Chairman is Dr John Prendergast, who is not the
CEO of the Company.
2.6 A listed entity should have a program for
YES
inducting new directors and for periodically
reviewing whether there is a need for
existing directors to undertake professional
development to maintain the skills and
knowledge needed to perform their role as
directors effectively.
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.
33
RECCE PHARMACEUTICALS ANNUAL REPORT 2021 ASX PRINCIPLES AND RECOMMENDATIONS
COMPLY
(Yes/No)
EXPLANATION
3: Instill a culture of acting lawfully, ethically and responsibly
3.1 A listed entity should articulate and disclose
YES
The Company’s values are:
its values.
3.2 A listed entity should:
YES
(a) have and disclose a code of conduct for its
directors, senior executives and employees;
and
(b) ensure that the board or a committee of the
board is informed of any material breaches
of that code.
3.3 A listed entity should:
YES
(a) have and disclose a Whistleblower Policy; and
(b) ensure that the board or a committee of the
board is informed of any material incidents
reported under that policy.
3.4 A listed entity should:
YES
(a) have and disclose an anti-bribery and
corruption policy; and
(b) ensure that the board or a committee of the
board is informed of any material breaches
of that policy.
(a) Integrity;
(b) Inclusivity;
(c) Innovation;
(d) Respect; and
(e) Accountability.
The Company’s values are available on the
Company’s website at https://recce.com.au/index.
php/company/corporate-governance.
(a) The Company has a Code of Conduct which
applies to all Directors, senior executives and
employees, available on the Company’s website
at https://recce.com.au/index.php/company/
corporate-governance.
(b) The Company ensures that the Board is
informed of any material breaches under the
Whistleblower Policy.
(a) The Company has adopted a Whistleblower
Policy which establishes a system for the
reporting, investigation and rectification of
wrongdoing. The Whistleblower Policy is
available on the Company’s website at
https://recce.com.au/index.php/company/
corporate-governance.
(b) The Company ensures that the Board is
informed of any material breaches under
the Code of Conduct.
(a) The Company has adopted an Anti-bribery
and Corruption Policy which sets out the
Company’s policy in relation to bribery,
corruption and related improper conduct and
establishes a process for the reporting of such
conduct. The Anti-bribery and Corruption
Policy is available on the Company’s website
at https://recce.com.au/index.php/company/
corporate-governance.
(b) The Company ensures that the Board is
informed of any material breaches under the
Anti-bribery and Corruption Policy.
34
RECCE PHARMACEUTICALS ANNUAL REPORT 2021CORPORATE GOVERNANCE STATEMENT CONTINUED
ASX PRINCIPLES AND RECOMMENDATIONS
COMPLY
(Yes/No)
EXPLANATION
4: Safeguard the integrity of corporate reports
4.1 The board of a listed entity should:
YES
(a) have an audit committee which:
(1) has at least three members, all of whom
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:
The Company has established an Audit and Risk
Management Committee with Dr Alan Dunton, an
independent Director, as Chair of the Committee.
The Committee has three members, who are:
(a) Dr Alan Dunton – Independent Non-executive
Director;
(b) Dr John Prendergast – Independent
Non-executive Director; and
(c) Mr James Graham – Managing Director
(3) the charter of the committee;
and CEO.
(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
(b) if it does not have an audit committee, disclose
that fact and the processes it employs that
independently verify and safeguard the
integrity of its 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
YES
it approves the entity’s financial statements
for a financial period, receive from its CEO
and CFO a declaration that, in their opinion,
the financial records of the entity have been
properly maintained and that the financial
statements comply with the appropriate
accounting standards and give a true and fair
view of the financial position and performance
of the entity and that the opinion has been
formed on the basis of a sound system of risk
management and internal control which is
operating effectively.
The attendance at each committee meeting is
disclosed in the Company’s Annual 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 controls which
is operating effectively in all material aspects in
relation to the Company’s financial reporting risks.
4.3 A listed entity should disclose its process to
verify the integrity of any periodic corporate
report it releases to the market that is not
audited or reviewed by an external auditor.
YES
The Board ensures that any periodic corporate
report the Company releases to the market that
has not been subject to audit or review by an
external auditor discloses the process taken to
verify the integrity of its content.
35
RECCE PHARMACEUTICALS ANNUAL REPORT 2021 ASX PRINCIPLES AND RECOMMENDATIONS
COMPLY
(Yes/No)
EXPLANATION
5: Make timely and balanced disclosure
5.1 A listed entity should have and disclose
YES
a written policy for complying with its
continuous disclosure obligations under
ASX Listing Rule 3.1.
5.2 A listed entity should ensure that its board
receives copies of all material market
announcements promptly after they have
been made.
5.3 A listed entity that gives a new and substantive
investor or analyst presentation should release
a copy of the presentation materials on the
ASX Market Announcements Platform ahead
of the presentation.
YES
YES
6: Respect the rights of security holders
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 have an investor relations
program that facilitates effective two-way
communication with investors.
YES
The Company has adopted a Continuous Disclosure
Policy which details the processes and procedures
which have been adopted by the Company to
comply with its continuous disclosure obligations
as required under the ASX Listing Rules and other
relevant legislation. The Continuous Disclosure
Policy is available on the Company’s website
at https://recce.com.au/index.php/company/
corporate-governance.
The Company ensure that the Board receives
copies of all material market announcements
promptly after they have been made.
The Company ensure that ahead of any new and
substantive investor or analyst presentations, a
copy of the presentations materials are released to
ASX Announcement Platform.
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.
36
RECCE PHARMACEUTICALS ANNUAL REPORT 2021CORPORATE GOVERNANCE STATEMENT CONTINUED ASX PRINCIPLES AND RECOMMENDATIONS
6.3 A listed entity should disclose how it facilitates
and encourages participation at meetings of
security holders.
COMPLY
(Yes/No)
YES
EXPLANATION
The Company encourages shareholder participate
at the Company’s general meetings through
various manes including:
(a) having the opportunity to ask questions of
Directors at all general meetings;
(b) ensuring that the auditor is present at AGMs
to take shareholder questions on any issue
relevant to their capacity as auditor;
(c) ensuring that Directors are available to answer
shareholder questions submitted by telephone,
email and other means (where appropriate);
and
(d) providing Shareholders with the option of
appointing a proxy to vote on their behalf.
Traditionally, the key forum for two-way
communication between the Company and its
shareholders is its AGM.
6.4 A listed entity should ensure that all
YES
substantive resolutions at a meeting of
security holders are decided by a poll
rather than by a show of hands.
All substantive resolutions at a meeting of security
holders are decided by a poll rather than by a
show of hands.
6.5 A listed entity should give security holders
the option to receive communications from,
and send communications to, the entity
and its security registry electronically.
YES
Shareholders can register with the Company to
receive email notifications when an announcement
is made by the Company to the ASX.
Shareholders 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:
YES
(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
The Company has established an Audit and Risk
Management Committee with Dr Alan Dunton, an
independent Director, as Chair of the Committee.
The Committee has three members, who are:
(a) Dr Alan Dunton – Independent Non-executive
Director;
(b) Dr John Prendergast – Independent
Non-executive Director; and
(3) the charter of the committee;
(c) Mr James Graham – Managing Director
(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
(b) if it does not have a risk committee or
committees that satisfy (a) above, disclose that
fact and the processes it employs for overseeing
the entity’s risk management framework.
and CEO.
The attendance at each committee meeting is
disclosed in the Company’s Annual 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.
37
RECCE PHARMACEUTICALS ANNUAL REPORT 2021 ASX PRINCIPLES AND RECOMMENDATIONS
COMPLY
(Yes/No)
EXPLANATION
7.2 The board or a committee of the board should:
YES
(a) review the entity’s risk management framework
at least annually to satisfy itself that it
continues to be sound and that the entity is
operating with due regard to the risk appetite
set by the board; and
(b) disclose, in relation to each reporting period,
whether such a review has taken place.
7.3 A listed entity should disclose:
YES
(a) if it has an internal audit function, how
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 governance, risk
management and internal control processes.
(a) The Audit and Risk Management Committee
Charter sets out a requirement for the Audit
and Risk Management Committee to review the
Company’s risk management framework on an
annual basis.
The Company monitors, evaluates and seeks
to improve its risk management and internal
control processes in line with the processes set
out in its Risk Management Policy, a copy of
which is available on the Company’s website
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:
(i) Continuous Disclosure Policy
(ii) Code of Conduct
(iii) Trading Policy
(b) The Audit and Risk Management Committee
completed such a review during the current
reporting period.
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.
The Company has adopted a Risk Management
Policy which the Company follows. The Board of
the Company and the Audit and Risk Management
Committee will periodically review the Company’s
operations to evaluate the effectiveness of risk
management and internal control processes of
the Company.
7.4 A listed entity should disclose whether it has
any material exposure to environmental or
social risks and if it does, how it manages or
intends to manage those risks.
YES
All material risks to economic, environmental and
social sustainability risks will be announced to
the market, in accordance with the requirements
of the ASX Listing Rules and otherwise.
38
RECCE PHARMACEUTICALS ANNUAL REPORT 2021CORPORATE GOVERNANCE STATEMENT CONTINUED
ASX PRINCIPLES AND RECOMMENDATIONS
COMPLY
(Yes/No)
EXPLANATION
8: Remunerate fairly and responsibly
8.1 The board of a listed entity should:
YES
(a) have a remuneration committee which:
(1) has at least three members, a majority of
whom are independent directors; and
The Company has established a Nomination and
Remuneration Committee with Dr Alan Dunton, an
independent Director, as Chair of the Committee.
The Committee has three members, who are:
(a) Dr Alan Dunton – Independent Non-executive
(2) is chaired by an independent director;
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
(b) if it does not have a remuneration
committee, disclose that fact and the
processes it employs for setting the level and
composition of remuneration for directors
and senior executives and ensuring that such
remuneration is appropriate and not excessive.
8.2 A listed entity should separately disclose
its policies and practices regarding the
remuneration of non-executive directors
and the remuneration of executive directors
and other senior executives.
YES
8.3 A listed entity which has an equity-based
YES
remuneration scheme should:
(a) have a policy on whether participants are
permitted to enter into transactions (whether
through 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.
(b) Dr John Prendergast – Independent Non-
executive Director; and
(c) Mr James Graham – Managing Director
and CEO.
The attendance at each committee meeting is
disclosed in the Company’s Annual 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.
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.
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.
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.
39
RECCE PHARMACEUTICALS ANNUAL REPORT 2021
CONSOLIDATED STATEMENT OF
PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2021
OTHER INCOME
EXPENSES
Laboratory expenses
Employee benefits expenses
Share-based payments expense
Depreciation and amortisation expenses
Travel expenses
Patent related costs
Rental outgoings expenses
Finance costs
Other expenses
Amortisation: Leases
Interest expense: Leases
Advertising and marketing
Donations
Note
5
6
21
12, 13
6
6
13
2021
$
2020
$
1,963,254
1,147,530
(5,556,647)
(1,553,387)
(5,217,955)
(120,926)
(14,520)
(100,703)
(41,979)
(2,107)
(1,888,147)
(174,704)
(10,034)
(695,511)
(100,000)
(1,985,286)
(1,478,668)
(55,204)
(50,711)
(191,488)
(85,620)
(52,780)
(45,847)
(1,167,605)
(150,107)
(10,596)
(190,355)
–
(15,476,620)
(5,464,267)
LOSS BEFORE INCOME TAX
(13,513,366)
(4,316,737)
Income tax expense
LOSS FOR THE YEAR
8
–
–
(13,513,366)
(4,316,737)
Other comprehensive income for the year
–
–
TOTAL COMPREHENSIVE LOSS FOR THE YEAR
(13,513,366)
(4,316,737)
LOSS PER SHARE ATTRIBUTABLE TO THE OWNERS OF RECCE PHARMACEUTICALS:
Basic loss per share for the year
Diluted loss per share for the year
9
9
(8.70)
(8.70)
(3.39)
(3.39)
Cents
Cents
The above consolidated Statement of Profit or Loss and Other Comprehensive Income should be read in conjunction
with the accompanying notes.
40
RECCE PHARMACEUTICALS ANNUAL REPORT 2021
CONSOLIDATED STATEMENT OF
FINANCIAL POSITION
AS AT 30 JUNE 2021
ASSETS
CURRENT ASSETS
Cash and cash equivalents
Trade and other receivables
Other current assets
TOTAL CURRENT ASSETS
NON-CURRENT ASSETS
Plant and equipment
Right of use asset
TOTAL NON-CURRENT ASSETS
TOTAL ASSETS
LIABILITIES
CURRENT LIABILITIES
Trade and other payables
Provisions for employee benefits
Lease Liabilities
TOTAL CURRENT LIABILITIES
NON-CURRENT LIABILITIES
Provisions for employee benefits
Lease Liabilities
TOTAL NON-CURRENT LIABILITIES
TOTAL LIABILITIES
NET ASSETS
EQUITY
Share capital
Reserves
Accumulated losses
TOTAL EQUITY
Note
2021
$
2020
$
10
11
12
13
14
15
16
15
16
17
18
20,873,040
2,682,192
245,484
62,399
41,364
15,848
21,180,923
2,739,404
379,397
121,235
500,632
424,316
80,388
504,704
21,681,555
3,244,107
627,903
337,747
112,585
1,078,235
85,215
14,364
99,579
495,499
306,492
83,235
885,226
46,301
–
46,301
1,177,814
931,527
20,503,741
2,312,580
43,297,309
8,678,057
18,466,336
1,804,503
(31,471,625)
(17,958,259)
20,503,741
2,312,580
The above consolidated Statement of Financial Position should be read in conjunction with the accompanying notes.
41
RECCE PHARMACEUTICALS ANNUAL REPORT 2021
CONSOLIDATED STATEMENT OF
CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2021
Share
Capital
$
Reserves
$
Accumulated
Losses
$
Total
$
BALANCE AT 1 JULY 2019
11,573,369
1,662,549
(13,641,522)
(405,604)
COMPREHENSIVE INCOME:
Loss for the year
Other comprehensive loss
–
–
–
TRANSACTIONS WITH OWNERS IN THEIR
CAPACITY AS OWNERS:
Issuance of shares (net of cash-settled share issue costs)
6,271,063
Issuance of shares – Acuity Placement Deed
150,000
–
–
–
–
–
Options issued to lead manager as capital raising cost
(426,407)
426,407
Conversion of option into ordinary shares
Share-based payments
Transfer from reserve to share capital
558,653
55,204
–
–
284,454
(284,454)
6,892,967
141,953
(4,316,737)
(4,316,737)
–
–
(4,316,737)
(4,316,737)
–
–
–
–
–
–
–
6,271,063
150,000
–
558,653
55,204
–
7,034,920
BALANCE AT 30 JUNE 2020
18,466,336
1,804,502
(17,958,259)
2,312,580
BALANCE AT 1 JULY 2020
18,466,336
1,804,502
(17,958,259)
2,312,580
COMPREHENSIVE INCOME:
Loss for the year
Other comprehensive loss
–
–
–
TRANSACTIONS WITH OWNERS IN THEIR
CAPACITY AS OWNERS:
Issuance of shares (net of cash-settled share issue costs) 26,231,325
–
–
–
–
Options issued to KMPs and employees
Options issued to lead manager
Conversion of options into ordinary shares
Share-based payments
Transfer from reserve to share capital
–
5,131,685
(3,018,244)
3,018,244
255,249
86,268
–
–
1,276,375
(1,276,375)
24,830,973
6,873,555
(13,513,366)
(13,513,366)
–
–
(13,513,366)
(13,513,366)
–
–
–
–
–
–
–
26,231,325
5,131,685
–
255,249
86,268
–
31,704,528
BALANCE AT 30 JUNE 2021
43,297,309
8,678,057
(31,471,625)
20,503,741
The above consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes.
42
RECCE PHARMACEUTICALS ANNUAL REPORT 2021
CONSOLIDATED STATEMENT OF
CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2021
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from Australian Taxation Office
Payments to suppliers and employees
Interest received
Other income
Interest and other costs of finance paid
Note
2021
$
2020
$
1,566,031
(9,636,495)
105,757
108,858
–
1,284,670
(5,061,480)
25,803
–
(56,443)
NET CASH USED IN OPERATING ACTIVITIES
19
(7,855,849)
(3,807,450)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of plant and equipment
NET CASH USED IN INVESTING ACTIVITIES
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings
Repayments of loans
Advances to directors
Repayment of lease liabilities
Proceeds from issue of equity securities
Proceeds from exercise of options
Transaction costs related to issues of equity or convertible securities
NET CASH PROVIDED BY FINANCING ACTIVITIES
(76,007)
(76,007)
(5,944)
(5,944)
–
–
(40,193)
(174,704)
27,950,000
106,276
(1,718,675)
26,122,704
612,463
(1,349,870)
–
(150,107)
6,979,716
–
–
6,092,202
Net increase/decrease in cash and cash equivalents held
18,190,848
2,278,808
Cash and cash equivalent at the beginning of the year
2,682,192
403,384
CASH AND CASH EQUIVALENTS AT END OF THE YEAR
10
20,873,040
2,682,192
The above consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes.
43
RECCE PHARMACEUTICALS ANNUAL REPORT 2021
1: Corporate Information
The consolidated financial statements of Recce
Pharmaceuticals Ltd (‘the Company’) and together
with its controlled entities (‘the Group’) for the year
ended 30 June 2021.
The Company is a company limited by shares
incorporated in Australia whose shares are publicly
traded on the Australian Securities Exchange (ASX)
and the Frankfurt Stock Exchange (FSE).
2: Significant Accounting Policies
(a) New or amended Accounting Standards and
Interpretations adopted
The Company has adopted all of the new or amended
Accounting Standards and Interpretations issued by the
Australian Accounting Standards Board (AASB) that
are mandatory for the current reporting period.
Any new or amended Accounting Standards or
Interpretations that are not yet mandatory have not
been early adopted.
(b) 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
Company 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 year
unless stated otherwise.
The consolidated financial statements have been
prepared on an accrual basis and are based on historical
costs, except for the Consolidated Statement of Cash
Flows.
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.
(c) 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.
(d) 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 year.
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 year, 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 year 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.
44
RECCE PHARMACEUTICALS ANNUAL REPORT 2021NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2021 (e) Revenue Recognition
Interest Income
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 incentives from the government (both Australian
and overseas) are recognised when received or when the
right to receive payment is established.
(f) Income Tax
The income tax expense for the year is the tax payable
on the current year'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.
(g) Impairment of Non-Financial Assets
At the end of each reporting year 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.
(h) Cash and Cash Equivalents
For the purposes of the Statement of Cash Flows, cash
and cash equivalents includes cash on hand and at bank,
deposits held at call with financial institutions, other
short-term, highly liquid investments with maturities
of three months or less, that are readily convertible to
known amounts of cash and which are subject to an
insignificant risk of changes in value and bank overdrafts.
(i) Fair Values
Fair values may be used for financial asset and liability
measurement 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.
(j) Trade and Other Receivables
The Group makes use of a simplified approach in
accounting for trade and other receivables as well as
contract assets and records the loss allowance at the
amount equal to the expected lifetime credit losses.
In using this practical expedient, the Group uses its
historical experience, external indicators and forward
looking information to calculate the expected credit
losses using a provision matrix.
45
RECCE PHARMACEUTICALS ANNUAL REPORT 2021 The Group has determined that the application of
AASB 9 – Financial Instrument's impairment requirements
does not have a material impact on receivables.
(k) 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.
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.
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:
– 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 assets’ residual values and useful lives are reviewed
and adjusted, if appropriate, at the end of each
reporting year.
Gains and losses on disposals are calculated as the
difference between the net disposal proceeds and the
assets' carrying amount and are included in profit or
loss in the year that the item is derecognised.
(l) Research Expenditure
Research costs are expensed as incurred.
(m) Trade and Other Payables
Trade and other payables represent liabilities for goods
and services provided to the Group prior to the year end
and which are unpaid. These amounts are unsecured and
have 30-60 day payment terms. They are recognised
initially at fair value and subsequently measured at
amortised cost using the effective interest method.
(n) Borrowings
All loans and borrowings are initially recognised at fair
value, net of transaction costs incurred. Borrowings are
subsequently measured at amortised cost. Any difference
between the proceeds (net of transaction costs) and the
redemption amount is recognised in profit or loss over
the year of the loans and borrowings using the effective
interest method.
Borrowings are derecognised from the statement of
financial position when the obligation specified in the
contract has been discharged, cancelled or expires. The
difference between the carrying amount of the borrowing
derecognised and the consideration paid is recognised in
profit or loss as other income or finance costs.
All borrowings are classified as current liabilities unless
the Group has an unconditional right to defer settlement
of the liability for at least 12 months after the end of the
reporting year.
(o) Other Liabilities
Other liabilities comprises non-current amounts due to
related parties that do not bear interest and are repayable
within 366 days of the end of the reporting year. As these
are non-interest bearing, fair value at initial recognition
requires an adjustment to discount these loans using a
market-rate of interest for a similar instrument with a
similar credit rating (Group's incremental borrowing rate).
The discount is credited to profit or loss immediately and
amortised using the effective interest method.
(p) Employee Benefit Provisions
Short-term employee benefit obligations
Liabilities for wages and salaries, including non-monetary
benefits, annual leave and accumulating sick leave
expected to be settled wholly within 12 months after the
end of the reporting year are recognised in other liabilities
in respect of employees' services rendered up to the
end of the reporting year 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.
46
RECCE PHARMACEUTICALS ANNUAL REPORT 2021NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2021 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 year. 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 year. Consideration is given to
expected future salaries and wages levels, experience
of employee departures and years of service. Expected
future payments are discounted using Australian
corporate bond rates at the end of the reporting year
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 year.
(q) Contributed Equity
Ordinary shares are classified as equity.
Costs directly attributable to the issue of new shares are
shown as a deduction from the equity proceeds,
net of any income tax benefit. Costs directly attributable
to the issue of new shares or options associated with
the acquisition of a business are included as part of the
purchase consideration.
(r) Share-Based Payments
Equity-settled and cash-settled share-based
compensation benefits are provided to employees.
Equity-settled transactions are awards of shares, or
options over shares, that are provided to employees in
exchange for the rendering of services. Cash-settled
transactions are awards of cash for the exchange of
services, where the amount of cash is determined by
reference to the share price.
The cost of equity-settled transactions are measured
at fair value on grant date. Fair value is independently
determined using either the Binomial or Black-Scholes
option pricing model that takes into account the exercise
price, the term of the option, the impact of dilution, the
share price at grant date and expected price volatility of
the underlying share, the expected dividend yield and the
risk free interest rate for the term of the option, together
with non-vesting conditions that do not determine
whether the consolidated entity receives the services that
entitle the employees to receive payment. No account is
taken of any other vesting conditions.
The cost of equity-settled transactions are recognised
as an expense with a corresponding increase in equity
over the vesting period. The cumulative charge to profit
or loss is calculated based on the grant date fair value
of the award, the best estimate of the number of awards
that are likely to vest and the expired portion of the
vesting period. The amount recognised in profit or loss
for the period is the cumulative amount calculated at
each reporting date less amounts already recognised in
previous periods.
The cost of cash-settled transactions is initially, and at
each reporting date until vested, determined by applying
either the Binomial or Black-Scholes option pricing
model, taking into consideration the terms and conditions
on which the award was granted. The cumulative
charge to profit or loss until settlement of the liability
is calculated as follows:
– during the vesting period, the liability at each reporting
date is the fair value of the award at that date
multiplied by the expired portion of the vesting period.
– from the end of the vesting period until settlement of
the award, the liability is the full fair value of the liability
at the reporting date.
All changes in the liability are recognised in profit or loss.
The ultimate cost of cash-settled transactions is the cash
paid to settle the liability.
Market conditions are taken into consideration in
determining fair value. Therefore any awards subject
to market conditions are considered to vest irrespective
of whether or not that market condition has been met,
provided all other conditions are satisfied.
If equity-settled awards are modified, as a minimum
an expense is recognised as if the modification has
not been made. An additional expense is recognised,
over the remaining vesting period, for any modification
that increases the total fair value of the share-based
compensation benefit as at the date of modification.
If the non-vesting condition is within the control of the
consolidated entity or employee, the failure to satisfy
the condition is treated as a cancellation. If the condition
is not within the control of the consolidated entity or
employee and is not satisfied during the vesting period,
any remaining expense for the award is recognised
over the remaining vesting period, unless the award
is forfeited.
If equity-settled awards are cancelled, it is treated as
if it has vested on the date of cancellation, and any
remaining expense is recognised immediately. If a new
replacement award is substituted for the cancelled award,
the cancelled and new award is treated as if they were a
modification.
47
RECCE PHARMACEUTICALS ANNUAL REPORT 2021 (s) 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.
(t) 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.
(u) 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 years,
some of which are relevant to the Group. The Group has
decided not to early adopt any of the new and amended
pronouncements.
(v) 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.
(w) 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.
Share-based payment transactions
The Company 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 year but may
impact profit or loss and equity.
Impairment of non-financial assets
The Company 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.
Lease term
The lease term is a significant component in the
measurement of both the right-of-use asset and
lease liability. Judgement is exercised in determining
whether there is reasonable certainty that an option to
extend the lease or purchase the underlying asset will
be exercised, or an option to terminate the lease will
not be exercised, when ascertaining the periods to be
included in the lease term. In determining the lease term,
all facts and circumstances that create an economical
incentive to exercise an extension option, or not to
exercise a termination option, are considered at the lease
commencement date. Factors considered may include
the importance of the asset to the consolidated entity's
operations; comparison of terms and conditions to
48
RECCE PHARMACEUTICALS ANNUAL REPORT 2021NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2021 prevailing market rates; incurrence of significant penalties;
existence of significant leasehold improvements; and the
costs and disruption to replace the asset. The Company
reassesses whether it is reasonably certain to exercise an
extension option, or not exercise a termination option,
if there is a significant event or significant change in
circumstances.
Recovery of deferred tax assets
The deferred tax assets as calculated under Note 8 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.
Coronavirus (COVID-19) pandemic
Judgement has been exercised in considering the impacts
that the Coronavirus (COVID-19) pandemic has had, or
may have, on the Group based on known information.
This consideration extends to the nature of the products
and services offered, customers, supply chain, staffing
and geographic regions in which the Group operates.
Other than as addressed in specific notes, there does not
currently appear to be either any significant impact upon
the financial statements or any significant uncertainties
with respect to events or conditions which may impact
the consolidated entity unfavourably as at the reporting
date or subsequently as a result of the Coronavirus
(COVID-19) pandemic.
3: Going Concern
For the year ended 30 June 2021 the Group recorded a
loss of $13,513,366 (2020: $4,316,737) and had net cash
outflows from operating activities of $7,855,849 (2020:
$3,807,450). On 30 September 2020 the Company raised
$27.95 million before costs from the issue of 21.5 million
ordinary shares at $1.30 (before capital raising costs).
The Group currently has sufficient cash resources to fund
its operations for the foreseeable future. The directors
have reviewed the Group’s financial position and are of
the opinion that there are sufficient funds to meet the
Group’s working capital requirements and as at the date
of this report.
49
RECCE PHARMACEUTICALS ANNUAL REPORT 2021 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 three geographic segments being
Australia, UK and USA.
(b) Segment results
The following is an analysis of the Group’s results by reportable segments:
Australia
USA
UK
Central Administration
Segment revenue and other
income for the year
Segment loss after tax
for the year
2021
$
1,803,747
134,174
25,333
–
2020
$
798,666
348,095
769
–
2021
$
(4,523,537)
(336,488)
(63,532)
2020
$
(1,470,516)
(640,917)
(1,417)
(8,589,810)
(2,203,886)
1,963,254
1,147,530
(13,513,366)
(4,316,737)
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
Segment assets
at end of the financial year
Segment liabilities
at end of the financial year
Australia
Central Administration
(d) Segment net assets/(liabilities)
Australia
Central Administration
2021
$
357,577
21,323,978
21,681,555
2020
$
398,271
2,845,835
3,244,107
2021
$
–
1,177,814
1,177,814
2021
$
357,577
20,146,164
20,503,741
2020
$
–
931,528
931,528
2020
$
398,272
1,914,308
2,312,580
50
RECCE PHARMACEUTICALS ANNUAL REPORT 2021NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2021
5: Revenue and Other Income
Other Income:
Research and Development (R&D) tax incentive
Interest income
Other income
Other grants
Project Reimbursements – Canadian Government
Total other income
6: Expenses
Employee Benefits Expenses:
Salaries and wages
Superannuation expenses
Long service leave expenses
Payroll taxes
Total employee benefit expenses
Finance Costs:
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
Overseas listing and regulatory fees
Printing and stationery expenses
Roadshows and conferences
Sundry expenses
Total other expenses
2021
$
2020
$
1,566,031
105,757
71,351
37,507
182,608
1,963,254
1,071,727
25,803
50,000
–
–
1,147,530
1,434,177
1,328,040
97,167
9,557
12,486
99,576
21,209
29,843
1,553,387
1,478,668
–
2,107
2,107
48,806
8,019
47,244
466,829
63,929
193,969
123,786
88,865
35,475
134,616
676,609
1,888,147
44,448
1,399
45,847
46,197
8,225
28,165
231,743
61,877
106,176
65,219
–
36,537
115,274
468,192
1,167,605
51
RECCE PHARMACEUTICALS ANNUAL REPORT 2021
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
48,806
46,197
2021
$
2020
$
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% (2020: 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
(13,513,366)
(4,316,737)
(3,716,176)
(1,187,103)
1,431,288
2,169,886
14,439
(451,770)
552,333
15,181
1,171,418
29,437
(308,475)
279,542
Income tax attributable to the Group
–
–
Deferred tax attributable to the Group
Tax losses carried forward
Accruals and provisions
Blackhole expenses
Patents
2,249,758
124,427
490,960
–
2,545,594
105,304
144,327
–
2,865,145
2,795,225
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.
52
RECCE PHARMACEUTICALS ANNUAL REPORT 2021NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2021
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
(13,513,366)
(4,316,737)
2021
$
2020
$
Weighted average number of shares
Weighted average number of ordinary shares used in
calculating basic 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.
155,404,474
155,404,474
127,208,104
127,208,104
(8.70)
(8.70)
2021
$
(3.39)
(3.39)
2020
$
20,873,023
17
2,682,152
40
20,873,040
2,682,192
Cash at bank and in hand bear floating interest rates between 0.51% and 1.30% depending on the amount on deposit.
Refer to Note 20 for additional risk exposure analysis.
11: Trade and Other Receivables
CURRENT
Rebates receivable from Canadian Government
Sundry debtors
Net GST receivable
Refer to Note 20 for additional risk exposure analysis.
183,444
4,325
57,715
245,484
–
5,378
35,986
41,364
53
RECCE PHARMACEUTICALS ANNUAL REPORT 2021
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 cost
– accumulated depreciation
Library
– at cost
– accumulated depreciation/amortisation
Website Development
– at cost
– accumulated depreciation/amortisation
2021
$
2020
$
530,462
(218,722)
311,740
49,497
(32,697)
16,800
40,853
(35,887)
4,966
78,646
(34,132)
44,514
4,379
(3,057)
1,322
2,797
(2,742)
55
507,449
(157,857)
349,592
28,537
(10,020)
18,517
30,630
(23,195)
7,435
56,835
(9,808)
47,027
4,379
(2,726)
1,653
2,797
(2,705)
92
Total plant and equipment
379,397
424,316
54
RECCE PHARMACEUTICALS ANNUAL REPORT 2021NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2021
Reconciliations
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
improvements
$
$
Library and
website
costs
$
Total
$
349,592
23,013
18,517
20,960
7,435
10,223
47,027
21,811
1,745
–
424,316
76,007
(60,865)
(22,677)
(12,692)
(24,324)
(368)
(120,926)
311,740
16,800
4,966
44,514
1,377
379,397
388,442
3,375
19,533
784
(42,225)
(1,800)
349,592
18,517
9,172
1,785
(3,522)
7,435
49,716
2,220
469,083
–
(2,689)
47,027
–
(475)
1,745
5,944
(50,711)
424,316
2021
Beginning of the year
Additions
Depreciation
End of the year
2020
Beginning of the year
Additions
Depreciation
End of the year
13: Right of Use Assets
Land and buildings – right-of-use
Less: Current year amortisation
2021
$
2020
$
295,939
(174,704)
121,235
230,495
(150,107)
80,388
The Company leases land and buildings for its offices under agreements of between one to five years. On renewal, the
terms of the leases are renegotiated.
14: Trade and Other Payables
CURRENT
Unsecured liabilities
Trade payables
Employee related payables
Sundry creditors
487,321
52,582
88,000
627,903
159,486
101,940
234,073
495,499
55
RECCE PHARMACEUTICALS ANNUAL REPORT 2021
15: Provisions for Employee Benefits
CURRENT
Unsecured liabilities
Annual leave
Sick leave
Long service leave
NON-CURRENT
Long service leave
16: Lease Liabilities
CURRENT
Lease liability
NON-CURRENT
Lease liability
2021
$
2020
$
153,765
183,982
–
337,747
139,804
137,332
29,356
306,492
85,215
46,301
112,585
83,235
14,364
–
56
RECCE PHARMACEUTICALS ANNUAL REPORT 2021NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2021
17: Share Capital
Movements in ordinary shares on issue:
Opening balance
Shares issued during the year:
– shares issued to KMP1 and consultants
– conversion of performance shares2
– Acuity Placement Deed3
2021
2020
No.
$
No.
$
136,071,787
18,466,336
107,129,919
11,573,369
78,272
86,268
195,655
55,204
14,796,348
1,220,699
–
–
–
–
750,000
150,000
– new shares issued from placement (net costs)4
21,500,000
23,213,081 26,032,477
5,844,656
– new shares issued on options exercised
1,331,440
255,249
1,963,736
558,653
– Transfer from reserves to share capital
37,706,060
24,775,297 28,941,868
6,608,513
–
–
55,676
55,676
–
–
284,454
284,454
Total5
173,777,847 43,297,309 136,071,787
18,466,336
1 Refer to Note 21 for a summary of shares issued to consultants, employees and KMP during the period.
2 The milestones associated with 7,398,174 of the Company's Class C Performance Shares and 7,398,174 of the Company's Class D
Performance Shares were met resulting in the issue of 14,796,348 ordinary fully paid shares.
3 During the year ended 30 June 2019, the Company entered into a Controlled Placement Deed ('CPD') with Acuity Capital Investment
Management Pty Ltd as trustee for The Acuity Capital Holdings Trust ('Acuity'). The CPD grants an option to Acuity to issue Recce shares
at the discretion of Recce, and which Acuity has the discretion to either accept or decline. Recce may at any time cancel the CPD and buy
back the collateral shares for no consideration. On 15 February 2019, 4,500,000 Ordinary shares were issued to Acuity Capital as collateral
shares pursuant to the Controlled Placement Deed, however as at 30 June 2019 none of the options available under this facility had been
exercised, and no accounting recognition was required. During financial year ended 30 June 2020, 750,000 ordinary shares were issued at
20 cents per share. There were no changes during the year ended 30 June 2021.
4 On 30 September 2020, the Company issued 21,500,000 ordinary shares raising $27,950,000 (before capital raising costs). Total capital
raising costs were $4,736,919 comprising cash component of $1,718,675 and options fee component of $3,018,244 (refer Note 21).
5 At 30 June 2021, 173,777,847 ordinary shares on issue were quoted on the ASX.
Options from shares issued
The following options remain outstanding at each respective reporting date:
Particulars
Issue Date
Exercise Date
Exercise Price
cents
2021
No.
Options
Tranche 1
Tranche 2
Tranche 3
Tranche 4
Tranche 5
Tranche 6
Tranche 7
Options
Options
Options
Options
16-Jun-17
19-Jul-17
21-Jun-21
19-Jul-20
06-Sep-17
25-Aug-20
29-Sep-17
29-Sep-20
02-Nov-17
01-Nov-20
01-Dec-17
30-Nov-20
17-Jan-18
16-Feb-18
15-Feb-19
13-Dec-19
10-Jan-21
13-Feb-21
15-Feb-23
19-Feb-23
30-Sep-20
30-Sep-23
22-Feb-21
22-Feb-26
25.93
21.71
18.72
17.80
20.40
20.96
19.88
19.81
16.80
31.20
156.00
156.00
2020
No.
141,000
59,880
–
–
127,470
124,069
130,804
65,617
–
–
–
–
–
–
–
–
1,117,400
1,800,000
1,250,000
1,250,000
3,750,000
8,415,000
–
–
14,532,400
3,698,840
57
RECCE PHARMACEUTICALS ANNUAL REPORT 2021
18: Reserves
Performance shares reserve
Options reserve
(a) Performance shares reserve
Note
18(a)
18(b)
2021
$
2020
$
223,782
8,454,275
8,678,057
1,444,481
360,022
1,804,503
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 of Class C performance shares
Conversion of Class D performance shares
At end of year
(b) Options reserve
The options reserve is used to recognise the fair vale of options issued.
Movements of options reserve
At beginning of year
Options issued to KMPs and employees¹
Options issued to lead manager²
Conversion of options into ordinary shares
At end of year
1 Refer to Note 21.
2 Refer to Note 17.
19: Cash Flow Information
Reconciliation of loss after income tax to net cash flow from operating activities:
Loss for the year
Adjustments and non-cash items:
– Depreciation and amortisation
– Share-based payments expense
– Accounting for lease assets and liabilities
Change in operating assets and liabilities
– Increase in trade and other receivables
– Increase in other current assets
– Increase in trade and other payables
– Increase in provisions for employee benefits
– Increase in other liabilities
1,444,481
(821,198)
(399,501)
223,782
1,444,481
–
–
1,444,481
360,022
5,131,685
3,018,244
(55,676)
8,454,275
146,818
–
426,407
(213,203)
360,022
(13,513,366)
(4,316,737)
120,926
5,217,955
174,704
(204,120)
(6,538)
284,421
70,169
–
50,711
55,204
150,107
(4,847)
(2,648)
177,825
82,935
–
Net cash outflow from operating activities
(7,855,849)
(3,807,450)
58
RECCE PHARMACEUTICALS ANNUAL REPORT 2021NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2021
20: 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 markets 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 receivables
Financial Liabilities
At amortised cost
2021
$
2020
$
20,873,040
245,484
21,118,524
2,682,192
41,364
2,723,556
Trade payables and sundry creditors
575,321
393,559
Loans payable
R&D Advance
–
–
–
–
575,321
393,559
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.
(a) 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 various research organisations
in the USA, Canada and Netherlands to perform numerous laboratory tests as well as use the services of an expert
consultants in the USA, Canada and The Netherlands that will result in approximately US$1.175 million, CDN$0.091 &
EUR$0.076 million in expenditure.
(ii) Interest Rate Risk
The Group is exposed to interest rate risk due to variable interest being earned on its interest-bearing bank accounts.
At the end of the reporting year, the Group had the following interest-bearing financial instruments:
Cash and cash equivalents
0.58%
20,873,023
1.03%
2,682,152
2021
2020
Weighted
average
Balance
$
Weighted
average
Balance
$
59
RECCE PHARMACEUTICALS ANNUAL REPORT 2021
(b) 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
comprises 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 the 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 held any credit derivatives to
offset its credit exposure. The Group trades only with recognised, credit worthy third parties and such collateral is not
requested nor is it the Group's policy to securities 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
Cash held with National Australian Bank
Cash held with ME Bank
Cash held with American Express
Rating
AA-
AA-
BBB
N/A
2021
$
1,299,443
2
19,573,478
100
20,873,023
2020
$
2,162,547
250,021
250,529
19,055
2,682,152
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.
(c) 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, employee related payables, sundry
creditors, loan payables, R&D advance and lease liability incurred in the normal course of the business. Trade payables
were non-interest bearing and were deducted within the normal 30-60 day term of creditor payments.
60
RECCE PHARMACEUTICALS ANNUAL REPORT 2021NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2021
The table below reflects the respective undiscounted cash flows for financial liabilities existing at end of reporting year:
Contractual maturities of
financial liabilities
<6
months
>6-12
months
>12 months
30 June 2021
Trade payables
Employee related payables
Sundry creditors
Lease liability
30 June 2020
Trade payables
Employee related payables
Sundry creditors
Lease liability
$
487,321
52,582
88,000
112,585
740,488
159,486
101,940
234,073
83,235
578,734
$
–
–
–
–
–
–
–
–
–
–
$
–
–
–
–
–
–
–
–
–
–
Total
contractual
cash flows
$
Carrying
amount
$
487,321
52,582
88,000
112,585
487,321
52,582
88,000
112,585
740,488
740,488
159,486
101,940
234,073
83,235
578,734
159,486
101,940
234,073
83,235
578,734
At 30 June 2021, the Group had sufficient cash to meet the financial liabilities as and when they are due and payables.
(d) 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 (i.e. as prices), or indirectly (i.e. derived from prices); or
(iii) Level 3 – a valuation technique using inputs that are not based on observable market data (unobservable inputs).
61
RECCE PHARMACEUTICALS ANNUAL REPORT 2021
21: Share-Based Payments
Share-based payments expense recognised during the financial year:
Issue of 44,444 shares to Arthur Kollaras
Issue of 43,478 shares to Justin Ward
Issue of 107,733 shares to Spark Plus
Issue of 18,272 shares to Spark Plus
Issue of 60,000 shares to Alan Dunton1
Issue of 2,250,000 options to James Graham²
Issue of 1,500,000 options to Michele Dilizia²
Issue of 1,125,000 options to Alan Dunton²
Issue of 2,175,000 options to John Prendergast²
Issue of 600,000 options to Justin Ward²
Issue of 400,000 options to Arthur Kollaras²
Issue of 365,000 options to other employees²
Total share-based payments recognised through P&L
Issue of 3,750,000 Corporate Advisor Options³
Total share-based payments recognised through equity
2021
$
2020
$
–
–
–
19,368
66,900
1,372,109
914,739
686,054
1,326,372
365,896
243,930
222,587
5,217,955
3,018,244
3,018,244
9,999
10,000
35,205
–
–
–
–
–
–
–
–
–
55,204
426,407
426,407
1 Issued 60,000 shares on 4 December 2020 as part of remuneration for his services.
Fair value of share options granted to executive and employees
2 The fair value of the 8,415,000 Share Options was calculated using the Black-Scholes model. The assumptions used
in calculating the fair value of Share Options, were:
– exercise price: $1.56;
– grant date: 9 October 2020;
– grant date share price: $1.115;
– value per option at grant date: $0.6098;
– issue date: 22 February 2021;
– dividend yield: 0.0%;
– risk-free rate based on the Australian Treasury bond rate for five years, to align with the term of the options: 0.32%;
– expected volatility derived from the share volatility of compatible listed companies over five years, to align with the
term of the options: 77.0%; and
– expected life of the Share Option: five years.
62
RECCE PHARMACEUTICALS ANNUAL REPORT 2021NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2021
Fair value of share options granted to corporate advisors
3 Where the fair value of services rendered by consultant during the period could not be realiably measured, these are
measured by reference to the fair value of equity instruments granted. The estimate of the fair value of the services
is measured based on a Black-Scholes option valuation methodology, The fair value of the 3,750,000 Share Options
was calculated using the Black-Scholes model. The assumptions used in calculating the fair value of share Options,
were:
– exercise price: $1.56;
– grant date share price: $1.115;
– grant date: 23 October 2020;
– issue date: 30 September 2020;
– dividend yield: 0.0%;
– 3,750,000 options issued to Shaw and Partners as part of payment for capital raising fee;
– risk-free rate based on the Australian Treasury bond rate for three years, to align with the term of the options:
0.19%;
– expected volatility derived from the share volatility of compatible listed companies over three years, to align with
the term of the options: 81.0%; and
– expected life of the Share Option: three years.
The value brought to account as share-based payment expenses in the year ended 30 June 2021 was $5,217,955
relating to the fair value of options granted to the executive and employees was expensed to the profit and loss.
The fair value of options granted to the Corporate Advisors for the capital raising amounting to $3,018,244 has been
recognised as transaction costs on share issue.
22: Related Party Transactions
Parent entity
The ultimate parent entity within the Group is Recce Pharmaceuticals Ltd.
Subsidiaries
Interests in subsidiaries are disclosed in Note 24.
Key management personnel compensation
Short-term employee benefits
Post-employment benefits
Termination payments
Share-based payments
2021
$
963,521
134,013
99,805
4,976,000
6,173,340
2020
$
1,002,908
140,432
–
19,999
1,163,339
The following transactions occurred with related parties:
Superannuation contributions
Contributions to superannuation funds on behalf of employees
73,012
70,808
Loans to key management personnel
At year end, expense advances repayable by Mr James Graham totalled $40,193 (2020: Nil).
Other transactions with key management personnel
During the financial year, consulting fees for technical services totalling $406,770 (2020: Nil) were paid to an entity
associated with Mr A Dunton. All payments were made on normal commercial terms and conditions. There were no
other related party transactions during the financial year.
63
RECCE PHARMACEUTICALS ANNUAL REPORT 2021
23: Parent Entity Information
The following information relates to the parent entity, Recce Pharmaceuticals Ltd, as at 30 June 2021. 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/(Liabilities)
2021
$
21,180,923
500,632
21,681,555
1,078,235
99,579
1,177,814
43,297,309
8,678,057
(31,471,625)
20,503,741
2020
$
2,739,404
504,704
3,244,107
885,226
46,301
931,527
18,466,336
1,804,503
(17,958,259)
2,312,580
(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
(13,513,366)
(4,316,737)
–
–
(13,513,366)
(4,316,737)
The parent entity has no contingent liabilities as at 30 June 2021.
24: 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
2021
%
–
100
100
2020
%
–
100
100
64
RECCE PHARMACEUTICALS ANNUAL REPORT 2021NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2021
25: Events Subsequent to Reporting Date
For any potential impacts of COVID-19 (both pre and post reporting date), refer to Note 2(w).
Other than the above, no matters or circumstances have arisen since the end of the financial year, which significantly
affected, or may significantly affect, the operations of the Group, the results of those operations, or state of affairs
of the Group in future financial years.
26: Contingent Liabilities
On 20 August 2015 the Company issued 8,754,423 class C Performance Shares and 8,754,423 class D Performance
Shares to directors and key management personnel of the Company. On 26 June 2020 the Company announced
that milestones for conversion of 7,398,174 of the Class C Performance Shares into fully paid ordinary shares had
been achieved, but that the Company had determined that the remaining 1,356,249 Class C Performance Shares were
ineligible for conversion. On 17 August 2020 the Company announced that milestones for conversion of 7,398,174 of the
Class D Performance Shares into fully paid ordinary shares had been achieved, but that the Company had determined
that the remaining 1,356,249 Class D Performance Shares were ineligible for conversion.
The holders of the 1,356,249 class C Performance Shares and 1,356,249 Class D Performance Shares that the Company
determined to be ineligible contest the Company's decision of ineligibility for conversion and have commenced
proceedings, seeking orders that the Class C and Class D Performance Shares held by them be converted into fully
paid ordinary shares in the Company. If those holders are successful in that litigation then the Company expects that
it will be ordered to convert the 1,356,249 Class C Performance Shares and 1,356,249 Class D Performance Shares
held by them into fully paid ordinary shares in the Company.
There were no other contingent liabilities as at 30 June 2021.
65
RECCE PHARMACEUTICALS ANNUAL REPORT 2021 DIRECTOR’S 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 44 to 65, 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 2021 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 Directors’ 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.
John Prendergast
Non-Executive Chairman
31 August 2021
66
RECCE PHARMACEUTICALS ANNUAL REPORT 2021 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 2021, the
consolidated statement of profit or loss and other comprehensive income, the consolidated statement
of changes in equity and the consolidated statement of cash flows for the year then ended, and notes
to the financial 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)
(ii)
Giving a true and fair view of the Group’s financial position as at 30 June 2021 and of its
financial performance for the year ended on that date; and
Complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s responsibilities for the audit of the Financial
Report section of our report. We are independent of the Company 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 (including Independence
Standards) (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.
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.
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.
67
RECCE PHARMACEUTICALS ANNUAL REPORT 2021
INDEPENDENT AUDITOR’S REPORT CONTINUED
Accounting of share-based payments
Key audit matter
How the matter was addressed in our audit
During the financial year ended 30 June 2021, the
Our audit procedures in respect of this area included but
Group issued equity instruments, in the form of
were not limited to the following:
shares and options to key management personnel,
employees and other consultants as detailed in
Note 2(w), Note 17 and Note 21.
Reviewing relevant supporting documentation to
obtain an understanding of the contractual nature
and terms and conditions of the share-based
The Group performed valuations of the options
payment arrangements;
and recorded the related share-based payment
expense or share capital costs in accordance with
the relevant accounting standard.
Reviewing market announcements made by the
entity and board minutes to ensure all new share-
based payments granted during the year have
Due to the judgemental estimates used in
been accounted for;
determining the value of the fair value of the
share-based payments, we consider the
accounting for the share-based payments to be a
key audit matter.
Holding discussion with management to
understand the share-based payment transactions
in place;
Reviewing management’s determination of the fair
value of the share-based payments granted,
considering the appropriateness of the valuation
models used and assessing the valuation inputs;
Assessing management’s determination of
achieving non-market vesting conditions of the
performance shares issued in prior periods;
Involving our internal valuation specialists to
assess the assumptions and inputs used in the
valuation;
Assessing the allocation of the share-based
payment expense over management's expected
vesting period; and
Assessing the adequacy of the disclosure in Note
2(w), Note 17 and Note 21 in the financial report.
68
RECCE PHARMACEUTICALS ANNUAL REPORT 2021
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 2021, but does not include the
financial report and our auditor’s report thereon.
Our opinion on the financial report does not cover the other information and 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 Company’s ability 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 Company 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:
https://www.auasb.gov.au/admin/file/content102/c3/ar1_2020.pdf
This description forms part of our auditor’s report.
69
RECCE PHARMACEUTICALS ANNUAL REPORT 2021
INDEPENDENT AUDITOR’S REPORT CONTINUED
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 20 to 27 of the directors’ report for the
year ended 30 June 2021.
In our opinion, the Remuneration Report of Recce Pharmaceuticals Ltd, for the year ended 30 June
2021, complies with section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the
Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility
is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with
Australian Auditing Standards.
BDO Audit (WA) Pty Ltd
Neil Smith
Director
Perth, 31 August 2021
70
RECCE PHARMACEUTICALS ANNUAL REPORT 2021
ASX ADDITIONAL INFORMATION
Shareholder Information as at 27 August 2021
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 27 August 2021)
The number of shareholders, option holders and performance right holders by size of holding are:
Holding
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
Total
Holding
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
Total
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
% Issued Share Capital
1,187
1,592
695
1,221
198
4,893
775,123
4,662,475
5,760,154
39,456,167
123,123,928
173,777,847
0.45
2.68
3.31
22.70
70.85
100.00
Option Holders
Number of Options
% Issued Share Capital
–
–
1
7
13
21
–
–
10,000
475,000
14,047,400
14,532,400
–
–
0.07
3.27
96.66
100.00
Performance Right Holders
Number of Shares
% Issued Share Capital
–
–
–
–
10
10
–
–
–
–
11,466,921
11,466,921
–
–
–
–
100.00
100.00
71
RECCE PHARMACEUTICALS ANNUAL REPORT 2021
ASX ADDITIONAL INFORMATION CONTINUED
(b) Twenty largest shareholders (as at 27 August 2021)
The names of the twenty largest holders of quoted shares are:
Name
1 Graham Melrose and Olga Melrose
2 LDU Pty Ltd
3 HSBC Custody Nominees (Australia) Limited
4 Mr James Graham
5 Acuity Capital Investment Mangement Pty Ltd
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