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26 February 2016
Companies Announcements Office
Australian Securities Exchange Limited
Exchange Centre
Level 4
20 Bridge Street
SYDNEY NSW 2000
Dear Sir
Please find attached the Company’s Appendix 4D and the Interim Financial Statements for
the half year ended 31 December 2015, for immediate release to the market.
Yours Faithfully
Peter Williams
CFO and Company Secretary
Att.
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RECCE LTD
Appendix 4D
Current Reporting Period: 31 December 2015
Previous Corresponding Period: 31 December 2014
Results for announcement to the Market
Percentage Change $
Revenue from ordinary activities up 643,950% to 137,054
Loss from ordinary activities after tax attributable to members down (2,038)% to (3,956,257)
Net loss for the period attributable to members down (2,038) to (3,956,257)
Brief explanation of Results
Operational Report
During the period:
Patent applications were granted in USA, Europe, Japan and (a few weeks later) China;
A second family of patent applications were lodged;
A number of additional in-vivo trials were initiated (and successful results announced subsequently); and
The IPO of $5m was closed, oversubscribed and giving all early shareholders at least a 50% gain on their investments.
Financial Report
The operating loss has increased to $3,956,257 (2014: loss of $185,038); this is mainly due to the Company undergoing a transformation from a private company to a public company about to list on the ASX via an IPO to raise $5 million. A summary of the cause of the main reasons for the increased operating loss is as follows:
Recognition of a share based payments expense ($3,314,689) resulting from 1,778,466 shares being issued to employees and the issue of 35,017,692 Performance Shares to employees and non-executive directors;
Costs associated with the IPO ($204,812);
Employing additional staff and non-executive directors;
Insurance related to the Prospectus and Directors and Officers ($27,535);
Consultants fees related to Graphic Design and Communications ($37,454);
Audit fees ($13,362); and
Patent fees ($50,457);
Partially offset by the receipt of a Research & Development Tax Incentive of $132,918.
The loss per share has increased during the period to $9.63 (2014: loss of $0.85).
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Dividends Amount per security Percentage Franked
Final Dividend Nil N/A
Interim Dividend Nil N/A
Date the Dividend is Payable: N/A
Record Date for determining entitlements to the Dividends: N/A The company did not declare a dividend during the financial period and has not declared a dividend since the end of the financial period.
Net Tangible Assets per Security
As at 31 December 2015 $68.88
As at 31 December 2014 $(3.09) The half year report is based on accounts that have been subject to an audit review and there is no dispute or qualification with the auditors in relation to these accounts.
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Financial Statements for the
half year ended 31st December 2015
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Contents 1. Directors’ Report................................................................................................................................... 3
2. Auditor’s Independence Declaration ................................................................................................... 5
3. Statement of Profit or Loss and Other Comprehensive Income for the half-year ended 31
December 2015....................................................................................................................................... 6
4. Statement of Financial Position as at 31 December 2015 ................................................................. 7
5. Statement of Changes in Equity for the half-year ended 31 December 2015 ................................. 8
6. Statement of Cash Flows for the half-year ended 31 December 2015 ............................................. 9
7. Notes to the Financial Statements for the Half-Year Ended 31 December 2015 .......................... 10
a) Basis of Preparation of Half-Year Financial Statements ............................................................. 10
b) Segment information .................................................................................................................... 10
c) Dividends ..................................................................................................................................... 10
d) Equity securities issued ................................................................................................................ 10
e) Related party transactions ............................................................................................................ 11
f) Commitments ............................................................................................................................... 12
g) Contingent liabilities .................................................................................................................... 12
h) Events subsequent to the end of the reporting period .................................................................. 12
8. Declaration by Directors ..................................................................................................................... 13
9. Independent Auditor’s Review Report.............................................................................................. 14
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Recce Ltd (ABN 73 124 849 065)
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1. Directors’ Report
The Directors of Recce Ltd present their Report together with the financial statements of Recce Ltd
(‘the Company’) for the half-year ended 31 December 2015.
Director details
The following persons were Directors of Recce Ltd during or since the end of the financial half-year:
Dr Graham Melrose
Ms Michele Dilizia
Mr James Graham
Mr Ian Brown
Mr Dongke Zhang
Review of operations and financial results
Operational Report
During the period:
Patent applications were granted in USA, Europe, Japan and (a few weeks later) China;
A second family of patent applications were lodged;
A number of additional in-vivo trials were initiated (and successful results announced
subsequently); and
The IPO of $5m was closed, oversubscribed and giving all early shareholders at least a 50%
gain on their investments.
Financial Report
The operating loss has increased to $3,956,257 (2014: loss of $185,038); this is mainly due to the
Company undergoing a transformation from a private company to a public company about to list on
the ASX via an IPO to raise $5 million. A summary of the cause of the main reasons for the increased
operating loss is as follows:
Recognition of a share based payments expense ($3,314,689) resulting from 1,778,466 shares
being issued to employees and the issue of 35,017,692 Performance Shares to employees and
non-executive directors;
Costs associated with the IPO ($204,812);
Employing additional staff and non-executive directors;
Insurance related to the Prospectus and Directors and Officers ($27,535);
Consultants fees related to Graphic Design and Communications ($37,454);
Audit fees ($13,362); and
Patent fees ($50,457);
Partially offset by the receipt of a Research & Development Tax Incentive of $132,918.
The loss per share has increased during the period to 9.63 cents (2014: loss of 0.85 cents).
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Recce Ltd (ABN 73 124 849 065)
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Auditor’s Independence Declaration
A copy of the Auditor’s Independence Declaration as required under s307C of the Corporations Act
2001 is included on page Error! Bookmark not defined. of this financial report and forms part of this
Directors Report.
This report is made in accordance with a resolution of the Board of Directors and is signed for and on
behalf of the directors by:
Dr Graham Melrose
Executive Chairman
Date: 26 February 2016
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38 Station StreetSubiaco, WA 6008PO Box 700 West Perth WA 6872Australia
Tel: +61 8 6382 4600Fax: +61 8 6382 4601www.bdo.com.au
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 ABN77 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 UKcompany limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved underProfessional Standards Legislation, other than for the acts or omissions of financial services licensees.
DECLARATION OF INDEPENDENCE BY JARRAD PRUE TO THE DIRECTORS OF RECCE LIMITED
As lead auditor for the review of Recce Limited for the half-year ended 31 December 2015, I declarethat, to the best of my knowledge and belief, there have been:
1. No contraventions of the auditor independence requirements of the Corporations Act 2001 inrelation to the review; and
2. No contraventions of any applicable code of professional conduct in relation to the review.
Jarrad Prue
Director
BDO Audit (WA) Pty Ltd
Perth, 26 February 2016
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Recce Ltd (ABN 73 124 849 065)
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2. Statement of Profit or Loss and Other Comprehensive Income
for the half-year ended 31 December 2015
Half-Year
Note 2015 2014
$ $
Revenue from continuing operations 4,136 21
Other Income 132,918 -
Total Revenue 137,054 21
Laboratory equipment & consumables (6,402) (52,457)
Employee benefits expense (330,857) (64,140)
Share based payments expense 7 (e) (3,314,689) -
Depreciation and amortisation expense (5,935) (4,629)
Travel expenses (10,178) -
IPO expenses (204,812) -
Patent related costs (50,457) (30,759)
Rental expenses (55,304) (23,328)
Other expenses (110,703) (9,576)
Finance costs (3,974) (170)
Loss before income tax expense (3,956,257) (185,038)
Income tax (expense)/benefit - -
Loss after tax from continuing operations (3,956,257) (185,038)
Loss attributable to non-controlling interests - -
Loss attributable to owners of Recce Ltd (3,956,257) (185,038)
Cents Cents
Loss per share for loss attributable to
owners of Recce Ltd
Basic and diluted loss per share (9.63) (0.85)
Dividends per share - -
The above Statement of Profit or Loss and Other Comprehensive Income should be read in
conjunction with the accompanying notes.
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Recce Ltd (ABN 73 124 849 065)
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3. Statement of Financial Position
as at 31 December 2015
Half-Year
Note 31 December 2015 30 June 2015
$ $
CURRENT ASSETS
Cash and cash equivalents 5,000,945 451,711
Trade and other receivables 14,966 15,805
Other 40,906 -
Total current assets 5,056,817 467,516
NON-CURRENT ASSETS
Property, plant and equipment 16,289 78,919
Total non-current assets 16,289 78,919
TOTAL ASSETS 5,073,106 546,435
CURRENT LIABILITIES
Trade and other payables 370,821 239,023
Interest-bearing liabilities 95,582 -
Other 47,896 26,761
Total Current Liabilities 514,299 265,784
NON-CURRENT LIABILITIES
Provisions 16,948 6,687
Total non-current liabilities 16,948 6,687
TOTAL LIABILITIES 531,247 272,471
NET ASSETS 4,541,859 273,964
EQUITY
Contributed equity 7(d) 6,851,295 1,586,139
Reserves 2,958,996 -
Retained earnings (Accumulated losses) (5,268,432) (1,312,175)
Capital and reserves attributable to owners of
Recce Ltd
4,541,859
273,964
Non-controlling interests - -
TOTAL EQUITY 4,541,859 273,964
The above Statement of Financial Position should be read in conjunction with the accompanying
notes.
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4. Statement of Changes in Equity
for the half-year ended 31 December 2015
Note Contributed
Equity
Retained
Earnings
Performance
Share
Reserve
Total Equity
$ $ $ $
At 1 July 2014 805,820 (862,009) - (56,189)
Total comprehensive income for the half-year
Loss for the half-year - (185,038) - (185,038)
Transactions with owners in their capacity as owners
Contributions of equity, net of transaction costs 105,000 - - 105,000
At 31 December 2014 910,820 (1,047,047) - (136,227)
At January 2015 910,820 (1,047,047) - (136,227)
Total comprehensive income for the half-year
Loss for the half year - (265,128) - (265,128)
Transactions with owners in their capacity as owners
Contributions of equity, net of transaction costs 675,319 - - 675,319
At 30 June 2015 1,586,139 (1,312,175) - 273,964
At 1 July 2015 1,586,139 (1,312,175) - 273,964
Total comprehensive income for the half-year
Loss for the half year - (3,956,257) - (3,956,257)
Transactions with owners in their capacity as owners
Issue of Performance Shares - - 2,958,996 2,958,996
Shares allotted per resolution 355,693 - - 355,693
Shares allotted as per IPO (net of costs) 4,909,463 - - 4,909,463
At 31 December 2015 6,851,295 (5,268,432) 2,958,996 4,541,859
The above Statement of Changes in Equity should be read in conjunction with the accompanying notes. For
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5. Statement of Cash Flows
for the half-year ended 31 December 2015
Half-Year
Note 2015 2014
$ $
Cash flows from operating activities
Receipts from ATO 132,918 -
Payments to suppliers and employees (644,644) (164,794)
Interest received 552 21
Interest and other costs of finance paid (3,974) (170)
Net cash outflow from operating activities (515,148) (164,943)
Cash flows from investing activities
Payments for property, plant and equipment (363) (1,185)
Proceeds from sale of property,
plant and equipment
59,700
-
Net cash inflow/(outflow) from investing activities 59,337 (1,185)
Cash flows from financing activities
Proceeds from borrowings 126,208 -
Repayment of borrowings (30,626) -
Proceeds from issue of shares (net of costs) 4,909,463 105,000
Net cash inflow from financing activities 5,005,045 105,000
Net increase in cash held 4,549,234 (61,128)
Net cash at beginning of period 451,711 94,097
Net cash at end of period 5,000,945 32,969
The Statement of Cash Flows should be read in conjunction with the accompanying notes.
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6. Notes to the Financial Statements
for the Half-Year Ended 31 December 2015
a) Basis of Preparation of Half-Year Financial Statements
These interim financial statements for the half-year reporting period ended 31 December 2015 have
been prepared in accordance with Australian Accounting Standard 134 Interim Financial Reporting
and the Corporations Act 2001.
The historical cost basis has been used, except for investment properties, land and buildings,
derivatives and available-for-sale financial assets which have been measured at fair value.
These half-year financial statements do not include all the notes of the type normally included in
annual financial statements and therefore cannot be expected to provide as full an understanding of the
financial performance, financial position and financing and investing activities of the Company as the
full financial statements. Accordingly, these half-year financial statements are to be read in
conjunction with the annual financial report for the year ended 30 June 2015 and any public
announcements made by Recce Ltd during the half-year reporting period in accordance with the
continuous disclosure requirements of the Corporations Act 2001.
The same accounting policies and methods of computation have generally been followed in these half-
year financial statements as compared with the most recent annual financial statements.
Estimates
The preparation of the half-year financial statements requires management to make judgements,
estimates and assumptions that affect the application of accounting policies and the reported amounts
of assets and liabilities, income and expense. Actual results may differ from these estimates.
Share based payments to employees and directors
Share-based payments transactions, in the form of performance shares, are valued using the pricing
models as outlined in Note (e). Models use assumptions and estimates as inputs.
b) Segment information
The Company operates in only one segment being the development of pharmaceutical products.
c) Dividends
The Company has not declared any dividends either during or since the end of the half-year.
d) Equity securities issued
Half-Year Half-Year
2015 2014 2015 2014
Shares Shares $ $
On issue 1 July 2014 25,515,834 21,770,002 1,586,139 805,820
Shares issued to employees 1,778,466 - 355,693 -
Shares split 3:2 1 13,647,149 - - -
Shares issued (net of transaction costs) 25,000,000 337,499 4,909,463 105,000
As at 31 December 2015 65,941,449 22,107,501 6,851,295 910,820
1 Existing shares were split on the ratio 3 for 2 pursuant to a resolution of shareholders.
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e) Related party transactions
Issue of Ordinary Shares
On 1 July 2015 the Company issued 1,778,466 fully paid ordinary shares to 2 of its directors for
services provided. These shares were then split on the ratio 3 for 2. A summary of this event is as
follows:
Director Shares issued
1 July 2015
Additional shares
from Split
Total shares from this
issue
J Graham 889,233 444,616 1,333,849
M Dilizia 889,233 444,616 1,333,849
1,778,466 889,232 2,667,698
Issue of Performance Shares
On 19 August 2015 the Company issued to Directors and Key Management Personnel the following
Performance Shares:
7,566,924 Class A Performance Shares; and
7,566,924 Class B Performance Shares
On 20 August 2015 the Company issued to Directors and Key Management Personnel the following
Performance Shares:
7,566,924 Class C Performance Shares; and
7,566,924 Class D Performance Shares
A summary of this transaction is as follows: Performance Shares
Class A Class B Class C Class D
Directors
G Melrose 6,075,000 6,075,000 6,075,000 6,075,000
J Graham 745,962 745,962 745,962 745,962
M Dilizia 577,212 577,212 577,212 577,212
I Brown 56,250 56,250 56,250 56,250
D Zhang 56,250 56,250 56,250 56,250
Key Management
P Williams 56,250 56,250 56,250 56,250
7,566,924 7,566,924 7,566,924 7,566,924
Value1 per performance share $0.173 Nil $0.111 $0.054
1 The Trinomial option pricing model has been used to calculate the value of Class A, Class C and Class D performance
shares. Class B performance shares have a non-market vesting condition i.e. the Company is awarded the US Food and Drug
Administration’s Investigational New Drug (IND) status on or before 19 August 2020. The multiplicity of the inter-
dependent variables required for the achievement of IND status means there are no statistical data to support the probability
of Class B performance shares vesting. Accordingly a value of zero has been assigned to these shares. There were also an
additional 4,749,996 performance shares issued to employees apportioned across the performance share classes. The
following assumptions were used:
Class A Class C Class D
Underlying share price $0.20 $0.20 $0.20
20-day VWAP barrier $0.30 $0.60 $1.20
Term 5 Years 5 Years 5 Years
Risk-free rate 2.18% 2.18% 2.18%
Number of Performance Shares 8,754,423 8,754,423 8,754,423
The above transactions relate to the share-based payment expense as disclosed in the Statement of
Profit or Loss and Other Comprehensive Income. 2015 $3,314,689 (2014: $Nil).
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f) Commitments
Lease commitments Half-Year
Operating leases: 2015 2014
Minimum lease payments
Within one year 2,737 -
Later than one year but not later than five years - -
Aggregate lease expenditure contracted for at reporting date but not
recognised as liabilities 2,737 -
The Assets Lease is a lease with a 12 month term, with rent payable monthly in arrears. The rent
payable is fixed for the duration of the term. An option exists for the lease to be cancelled with 2
weeks written notice.
g) Contingent liabilities
There are no contingent liabilities or contingent assets as at the date of this report.
h) Events subsequent to the end of the reporting period
Since the end of the half-year the company has converted 4,152,423 Class A Performance Shares into
ordinary shares (escrowed until 15 January 2018) upon achievement of the first milestone, i.e. the
volume weighted average price of shares as traded on ASX over 20 consecutive trading days on which
the shares are traded is not less than $0.30.
No other events have occurred.
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7. Declaration by Directors
a) The financial statements and notes set out on pages 6 to 12 are in accordance with the
Corporations Act 2001 and:
i. comply with Accounting Standard AASB 134 Interim Financial Reporting and the
Corporations Regulations 2001; and
ii. give a true and fair view of the consolidated entity's financial position as at 31 December
2015 and of its performance for the half-year ended on that date.
b) In the directors' opinion, there are reasonable grounds to believe that the company will be able
to pay its debts as and when they become due and payable.
This declaration is made in accordance with a resolution of the Board of Directors and is signed for
and behalf of the directors by:
Dr Graham Melrose
Executive Chairman
Dated the 26th day of February 2016
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38 Station StreetSubiaco, WA 6008PO Box 700 West Perth WA 6872Australia
Tel: +61 8 6382 4600Fax: +61 8 6382 4601www.bdo.com.au
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 ABN77 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 UKcompany limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved underProfessional Standards Legislation, other than for the acts or omissions of financial services licensees.
INDEPENDENT AUDITOR’S REVIEW REPORT
To the members of Recce Limited
Report on the Half-Year Financial Report
We have reviewed the accompanying half-year financial report of Recce Limited, which comprises thestatement of financial position as at 31 December 2015, the statement of profit or loss and othercomprehensive income, statement of changes in equity and statement of cash flows for the half-yearended on that date, notes comprising a statement of significant accounting policies and otherexplanatory information, and the directors’ declaration.
Directors’ Responsibility for the Half-Year Financial Report
The directors of the company are responsible for the preparation of the half-year financial report thatgives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act2001 and for such internal control as the directors determine is necessary to enable the preparation ofthe half-year financial report that is free from material misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express a conclusion on the half-year financial report based on our review. Weconducted our review in accordance with Auditing Standard on Review Engagements ASRE 2410 Reviewof a Financial Report Performed by the Independent Auditor of the Entity, in order to state whether,on the basis of the procedures described, we have become aware of any matter that makes us believethat the half-year financial report is not in accordance with the Corporations Act 2001 including: givinga true and fair view of the company’s financial position as at 31 December 2015 and its performancefor the half-year ended on that date; and complying with Accounting Standard AASB 134 InterimFinancial Reporting and the Corporations Regulations 2001. As the auditor of Recce Limited, ASRE 2410requires that we comply with the ethical requirements relevant to the audit of the annual financialreport.
A review of a half-year financial report consists of making enquiries, primarily of persons responsiblefor financial and accounting matters, and applying analytical and other review procedures. A review issubstantially less in scope than an audit conducted in accordance with Australian Auditing Standardsand consequently does not enable us to obtain assurance that we would become aware of all significantmatters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Independence
In conducting our review, we have complied with the independence requirements of the CorporationsAct 2001. We confirm that the independence declaration required by the Corporations Act 2001, whichhas been given to the directors of Recce Limited, would be in the same terms if given to the directorsas at the time of this auditor’s review report.F
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Conclusion
Based on our review, which is not an audit, we have not become aware of any matter that makes usbelieve that the half-year financial report of Recce Limited is not in accordance with the CorporationsAct 2001 including:
(a) giving a true and fair view of the company’s financial position as at 31 December 2015 and of itsperformance for the half-year ended on that date; and
(b) complying with Accounting Standard AASB 134 Interim Financial Reporting and CorporationsRegulations 2001.
BDO Audit (WA) Pty Ltd
Jarrad Prue
Director
Perth, 26 February 2016
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